I.
Consent
Consent
-It is the meeting of the minds between the parties on the subject matter and
the cause of the contract, even if neither one has been delivered.
-Consent is manifested by the meeting of the offer and acceptance upon the
thing and the cause which are to constitute the contract (Art. 1319 [1]
-Thus, an offer that is not accepted does not give rise to consent, and the
contract does not come into existence.
Requisites of Consent
1. There must be two or more parties
2. The parties must be capable or capacitated (hence, if one party is
insane, the contract is merely voidable).
3. There must be no vitiation of consent. There must be no fraud or
intimidation, otherwise the contract is voidable.
4. There must be no conflict between what was expressly declared and
what was really intended. Otherwise, the remedy may be reformation,
as when the parties really intended to be bound, or else the contract is
VOID, as when the contract is fictitious or absolutely simulated.
5. The intent must be declared properly (that is, whatever legal
formalities are required must be complied with).
Note:
-Consent may either be expressed or implied.
-Acceptance of the offer may either be express or implied.
Meeting of the Minds
1. An offer that must be CERTAIN;
2. An acceptance that must be UNQUALIFIED and ABSOLUTE (Art. 1319,
NCC).
If the acceptance is qualified, e.g., by a condition, this merely constitutes
a COUNTER-OFFER.
Offer
-An offer is a proposal to enter into a contract. It must be one which is
intended of itself to create legal relations on acceptance, and must be
capable of creating a definite obligation and not a mere expression of desire
or hope.
-A mere statement of willingness to enter into negotiations or a mere inquiry
as to whether a person could make specified articles is not an offer.
Requisites of an effective offer
1. The terms of the offer must be reasonably certain or definite (Art.
1319, NCC) and there is an offer in the context of Article 1319 of the
Civil Code only if the contract can come into existence by the mere
acceptance of the offer without any further act on the part of the
offeror (Paredes vs. CA, G.R. No. 112115, March 9, 2001);
2. The offeror must have a serious intention to become bound by his
offer; and
3. The offer must be communicated by the offeror to the offeree,
resulting in the offeree’s knowledge of the offer.
Termination of offer:
1. Thru the action of the offeree by rejecting the offer; or
2. Thru the action of the offeror by rejecting the offer;
3. Thru operation of law by supervening illegality of the proposed
contract, by lapse of time, by destruction of the subject matter of the
offer, or by death, civil interdiction, insanity or insolvency of the offeror
or offeree.
Revocation of the offer:
General Rule: The offer may be revoked at any time prior to the perfection
of the contract.
Exception: in case of an option contract
Option Contract
-A contract where one party promises to the other to keep an offer open to
accept within a period of time.
-It binds the party who has given the option, not to enter into the principal
contract with any other person during the period designated
Acceptance
-Acceptance must be absolute or unqualified
Effect of qualified acceptance
-A qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer
Legal Capacity of Contracting Parties
There is no effective consent in law without the capacity to give such
consent. In other words, legal consent presupposes capacity (Delos Reyes vs.
CA, G.R. No. 129103, September 9, 1999).
Persons Incapable of Giving Consent
1. Minors
2. Insane or demented persons
3. Deaf-mutes who do not know how to read and write
4. Persons suffering from civil interdiction
5. Incompetents under guardianship
6. Other persons specially disqualified by law
Vitiation of Consent
A contract where consent is procured thru:
1. Mistake
2. Violence or Intimidation
3. Intimidation
4. Undue Influence
5. Fraud
Note: A contract procured thru vitiated consent is voidable.
Mistake:
-Wrong conception and lack of knowledge with respect to a thing.
-The mistake must be substantial
-A simple mistake of account, however, shall only give rise to its correction
-The error must be a mistake of fact, and not of law.
Violence
-There is Violence when in order to wrest consent, serious or irresistible force
is employed.
-Requisites of Violence
a. Force employed to wrest consent must be serious and irresistible
b. It must be the determining cause for the party upon whom it is
employed in entering into the contract
Intimidation
-There is Intimidation when one of the contracting parties is compelled by a
reasonable and well-grounded fear of an imminent and grave evil upon his
person or property, or upon the person or property of his spouse,
descendants or ascendants, to give his consent.
-Requisites of Intimidation
a. Reasonable and well-grounded fear of an imminent and grave evil
upon his person, property, or upon the person or property of his
spouse, descendants, or ascendants
b. It must have been the reason why the contract was entered into
Undue Influence
When a person takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of choice.
Requisites of Undue Influence
a. Improper advantage
b. Power over the will of another
c. Deprivation of the latter’s will of a reasonable freedom of choice (The
influence exerted must be of a kind that overpowers the mind as to
destroy the party’s free agency)
Circumstances to be considered for the Existence of Undue Influence
1. Confidential, family, spiritual and other relations between the parties;
2. Mental weakness;
3. Ignorance; and
4. Financial distress (Art. 1337, NCC).
Fraud
-Use of insidious words or machinations employed by one of the contracting
parties in order to induce the other to enter into a contract, without them, he
would not have agreed to.
-Failure to disclose facts, when there is a duty to reveal them, as when the
parties are bound by confidential relations, constitutes fraud.
Kinds of Fraud
1. Casual Fraud (dolo causante)- Here, if it were not for the fraud, the
other party would not have consented. In effect, the contract is
VOIDABLE
2. Incidental Fraud (dolo incidente)- Here, even without the fraud, the
parties would have agreed just the same, hence the fraud was only
incidental in causing consent. Contract is VALID but there can an action
for damages.
Simulation of a Contract
It is the act of intentionally deceiving others by producing the appearance of
a contract that really does not exist (absolute simulation) or which is
different from the true agreement (relative simulation) (Art. 1345-1346, NCC)
Kinds of Simulated Contract
1. Absolutely simulated- the parties do not intend to be bound by the
contract. In effect, the contract is void
2. Relatively Simulated- the parties conceal their true agreement. The
contract is valid but the parties are bound to the true agreement.
Reformation of Contract
It is a remedy to conform to the real intention of the parties due to mistake,
fraud, inequitable conduct, accident (NCC, Art. 1359).
Requisites in reformation of instruments
1. Meeting of the minds to the contract;
2. True intention is not expressed in the instrument;
3. By reason of: (MARFI)
a. Mistake;
b. Accident;
c. Relative simulation;
d. Fraud; or
e. Inequitable conduct
4. Clear and convincing proof of MARFI.
Absolute Simulation vs. Relative Simulation
1. Absolute Simulation- the apparent contract is not really desired or
intended to produce legal effect or in any way alter the juridical
situation of the parties. In effect, the contract is void
2. Relative Simulation- when the parties state a false cause in the
contract to conceal their real agreement, the contract is relatively
simulated and the parties are still bound by their real agreement. The
contract is still valid.
NOTE: When there is no meeting of the minds, the proper remedy is
annulment and not reformation (Pineda, 2000).
Annulment vs. Reformation
The fundamental distinction between reformation of instrument and
annulment of a contract is that the first presupposes a perfectly valid
contract in which there has been a valid meeting of the minds of the
contracting parties while the second is based on a defective contract in
which there has been no meeting of the minds because the consent is
vitiated (Jurado, 2010).
Prescriptive period in reformation of instruments
10 years from the date of the execution of the instrument
Persons who can ask for the reformation of the instrument
It may be ordered at the instance of:
1. Either party or his successors in interest (if the mistake is mutual);
2. Upon petition of the injured party; or
3. His heirs and assigns.
I. Object
Object
It is the subject matter of the contract. It can be a thing, right or service
arising from a contract.
Requisites of an object:
1. Determinate as to kind (even if not determinate, provided it is possible to
determine the same without the need of a new contract);
2. Existing or the potentiality to exist subsequent to the contract;
3. Must be Licit;
4. Within the Commerce of man; and
5. Transmissible.
NOTE: The most evident and fundamental requisite in order that a thing,
right or service may be the object of a contract, is that it should be in
existence at the moment of the celebration of the contract, or at least, it can
exist subsequently or in the future (De Leon, 2010).
Object of contracts
General Rule: All things or services may be the object of contracts.
Exceptions:
1. Things outside the commerce of men (NCC, Art. 1347);
2. Intransmissible rights;
3. Future inheritance, except in cases expressly authorized by law;
4. Services which are contrary to law, morals, good customs, public order or
public policy;
5. Impossible things or services; and 6. Objects which are not possible of
determination as to their kind.
Exceptions to the rule that no person can enter into a contract with regard to
future inheritance:
1. Under Art. 130 of the Family Code, which allows the future spouses to give
or donate to each other in their marriage settlement their future property to
take effect upon the death of the donor and to the extent laid down by the
provisions of the NCC relating to testamentary succession; and
2. Under Art. 1080 of the NCC, which allows a person to make a partition of
his estate among his heirs by an act inter vivos, provided that the legitime of
the compulsory heirs is not prejudiced (Jurado,2009; De Leon 2010).
II. Cause or Consideration
Concept
Cause is the essential reason which moves the contracting parties to enter
into it. The cause is the immediate, direct and proximate reason which
justifies the creation of an obligation through the will of the contracting
parties (Uy vs. CA, G.R. No. 120465, Sept. 9, 1999).
Requisites for Cause:
1. Cause must be lawful or not contrary to law, morals, good customs, public
order or public policy (Art. 1352, NCC). A contract whose cause is contrary to
law, morals, good customs, public order or public is void (Art. 1409 [1], NCC).
2. Cause must be true, otherwise the contract is without cause and produces
no effect whatever. The statement of a false cause in contracts shall render
them void, if it should not be proved that they were founded upon another
cause which is true and lawful (Art. 1353, NCC).
Presumption in favor of existence of cause:
Although the cause is not stated in the contract, it is presumed that it exists
and is lawful, unless the debtor proves the contrary (Art. 1354, NCC).
Effect of inadequacy of cause:
Unless specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence (Art. 1355,
NCC).
III. Statute of Frauds
Statute of Frauds
This law provides that the following agreement shall be unenforceable by
action, unless the same, or some note or memorandum thereof, be in
writing, and subscribed by the party charged, or by his agent:
1. Agreement that by its terms is not to be performed within a year from the
making thereof;
-The test to determine whether an oral contract is enforceable under the
one-year rule of the Statute of Frauds is whether, under its own term,
performance is possible within a year from the making thereof. If so, the
contract is outside of the Statute of Frauds and need not be in writing to be
enforceable.
2. Special promise to answer for the debt, default or miscarriage of another;
-Whether an oral promise to pay the debt of another is enforceable under the
Statute of Frauds depends on whether such promise is an original one or
collateral promise. The Statute applies only to a collateral promise, one
which is made by a third party to answer for the debt or obligation of a
primary party to a contract if that party does not perform. If the promise is
an original or an independent one, that is, if the promissory becomes
primarily liable for the payment of the debt, the promise is not within the
Statute (Jurado, Comments and Jurisprudence on Obligations and Contracts,
2010 ed., p. 546).
3. Agreement made in consideration of marriage, other than a mutual
promise to marry;
-A marriage settlement is an agreement made in consideration of marriage
covered by the Statute of Frauds. Hence, it must be in writing (Art. 77, FC) in
order to be enforceable.
4. Agreement for the sale of goods, chattels or things in action, at a price not
less than P500.00;
5. Agreement for the leasing for a longer period than one year, or for the sale
of real property or of an interest therein;
6. A representation as to the credit of a third person.
Fundamental principles governing Statute of Frauds:
1. The statute simply provides the method by which the contracts
enumerated therein may be proved, but does not declare them invalid
because they are not reduced to writing.
2. The statute applies only to executory contracts and not to contracts
which are either partially or totally performed;
3. Stated otherwise, the defense is applicable only if the action is either
for specific performance of the oral contract or for recovery of damages
arising from a violation thereof (Asia Productions Co., Inc. vs. Paño, G.R. No.
510518, January 27, 1992; citing Facturan vs. Sabanal, G.R. No. L-2090,
September 27, 1948 and Eusebio v. Sociedad Agricola de Balarin, G.R. No.
21519, March 31, 1966).
4. The defense of the Statute of Frauds is personal to the contracting
parties and may not be raised by strangers to the contract (Art. 1408, NCC;
Ayson vs. CA, G.R. No. 223254, December 1, 2016).
5. The defense of the Statute of Frauds may be waived either by: (a)
failing to object to the presentation of oral evidence to prove the contract, or
(b) accepting benefits therefrom (Art. 1405, NCC).
6. The Statute of Frauds refers to specific kinds of transactions and
cannot apply to any other transaction that is not enumerated in Article 1403,
paragraph 2, of the Civil Code (Cruz vs. J.M. Tuason & Co., Inc., G.R. No. L-
23749, April 29, 1977; Western Mindanao Lumber Co., Inc. vs. Medalle, G.R.
No. L-23213, October 28, 1977; Rosencor Development Corp. vs. Inquing, G.
R. No. 140479, March 8, 2011).