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March 21, 2023 2

March 28, 2023 15
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FINALS NOTES such as those arising from mortgage, guaranty, or
penalty. In this case, Patty paid without Mica’s
knowledge.
March 21, 2023
B. Is Patty entitled to any right? Explain. (5)
PROPOSED ANSWERS MTQ2 LAW 421 AND
PROPOSED ANSWER:
MIDTERM EXAMS
Yes. Patty’s right is limited to beneficial
reimbursement.
Question No. 1
A. Candy, Danica, and Ethel are solidary Question No. 3
debtors of Fathma for P100,000.00. The Odin owed Pia the following:
period for collection has already ● P100,000.00 with a mortgage on Odin’s real
prescribed. If Candy nevertheless pays property in Baguio City. The debt is already
due.
Fathma the P100,000.00, is the payment
● P100,000.00 with Odin’s car as collateral.
still valid? Can Candy ask for the return Debt is already due.
of what she has paid to Fathma? Explain. ● A bicycle worth P100,000.00. Also, already
(5) due.
● P100,000.00. This is not yet due but is
This is an application of natural obligation to payable on or before due date.
solidary obligations. If Odin pays P100,000.00 to Pia, to what debt
should the payment be applied? Briefly explain. (5)
PROPOSED ANSWER: This is your rules on application of payment.
The payment is valid and Candy can no longer ask
for its return. This is based on Art. 1413 of the NCC PROPOSED ANSWER:
which provides that natural obligations, not being Odin may declare at the time of making the
based on positive law but on equity and natural law, payment, whether to apply the same to the
do not grant a right of action to enforce their P100,000.00 with mortgage on his real property or
performance, but after voluntary fulfillment by the the P100,000 with his car as collateral, or the
obligor, they authorize the retention of what has P100,000 which is not yet due but is payable on or
been delivered or rendered by reason thereof. before the due date. In the latter case, the term has
been constituted in favor of the debtor. Odin may
B. If Candy can no longer ask for the return not apply the same payment to the payment of the
of what has been paid, may she then ask bicycle, unless the parties stipulate, as this date is
for reimbursement of Danica and Ethel’s not of the same kind as the other two. (Art. 1252)
proportional share? Why or why not? (5)
Cash yung isa yung isa deliver of a thing.
The obligation is solidary as to Fathma but among
the solidary debtors you know that the obligation is
Question No. 4
joint.
Jon owes Kelsey P200,000.00. Lara signed as a
surety for the loan while Manny signed as a
PROPOSED ANSWER:
guarantor. Upon tendering the amount og
No she cannot. Payment made by a solidary debtor
P200,000.00 on the due date, Kelsey refused to
shall not entitle her to reimbursement from her co-
accept which led Jon to consign the amount in
debtors if such payment is made after the obligation
court. The judge already ruled that the
has prescribed or become illegal. (Art. 1218, NCC)
consignation was properly made but Jon and
Kelsey compromised and they agreed that Jon
Question No. 2 should withdraw the thing consigned. What is
A. Mica owes Oliver P100,000.00 secured by the effect of such withdrawal on the liabilities of
a mortgage on Mica’s land. If Patty pays Lara and Manny? Explain.
the P100,000.00 to Oliver without the
knowledge of Mica, can Patty now be the This is the last portion of tender of payment and
creditor with all the rights of Oliver consignation. If there is a compromise agreement
between the parties in a petition for consignation,
including the right to foreclose on the the effect of compromise will release the liabilities
mortgage if Mica defaults in payment? of obligations of Lara and Manny.
Explain. (5)
PROPOSED ANSWER:
PROPOSED ANSWER: They shall be both released from their obligation as
No. Patty cannot be subrogated to all the rights of surety and guarantor respectively. (Art. 1261, NCC)
Oliver as a creditor. Art. 1237 provides that
whoever pays on behalf of the debtor without Question No. 5
knowledge or against the debtor’s will, cannot Rosa agreed with Sugar that Rosa will build a
compel the creditor to subrogate him in his rights, traveler's inn on Sugar's property. In their
 3
agreement, they stipulated that they will also neighborhood. They agreed though that the
build the fence between the properties of Sugar original obligation will be extinguished whether
and Tatum as this has been a long overdue the machines can be used or not. When the
deliverable of Sugar to Tatum. Tatum was machines were being transported by Warlita,
informed about the stipulation and happily she was stopped by the guards at the entrance
thanked Rosa and Sugar. Later however, Rosa of the subdivision and she was informed that
and Sugar changed their agreement and agreed there was an ordinance prohibiting videoke
to venture into the food business instead. machines in that barangay. Is the original
Should they still build Tatum's fence? Explain. obligation of Warlita to pay Xenia the
(5) P40,000.00 revived? Explain. (5)

PROPOSED ANSWER: PROPOSED ANSWER: No. While the new

Yes. Normally, accessory obligations are obligation is void, the parties beforehand agreed
extinguished when the principal obligation is that the old obligation will be extinguished in any
extinguished by novation. However, in this case, event. (Art. 1297, NCC)
the accessory obligation to build the fence will
subsist as it will benefit Tatum, a third person, who Note: As a general rule, the first obligation is
did not give consent to the novation. (Art. 1296, revived. An exception under Article 1297, NCC, is if
NCC) beforehand they agree that the first obligation will
be extinguished. The proposed answer is the
Ma’am: Clearly, there is novation in this case. exception to the rule.
Novation affects only the parties in a contract. It will
not affect third persons. However, there are Question No. 8
exceptions to the rule wherein, the provisions would Duno owes Kirk P10,000.00. Through fraud,
remain if it will affect the interest of a third person, Duno entered into a contract of sale with Kirk
in this case, it is Tatum. Clearly, this involves a for the sale of a fake watch for P10,000.00. Will
stipulation pour autrui (stipulation in favor of a third there be compensation in this case? Explain. (5)
person).
PROPOSED ANSWER: Yes. Both parties are
You may approach it by using accessory debtors and creditors of each other. The fraudulent
obligations and principal obligations in novation. sale of Kirk to Duno is still valid until it is annulled.
You may also approach it with the existence of (Art. 1284, NCC)
stipulation pour autrui. So normally, accessory
obligation, which is the building of the fence, is Note: Vitiation of consent such as fraud will only
extinguished when the principal obligation is render the sale voidable. Voidable sale is valid until
extinguished by novation. However, in this case, annulled.
the accessory obligation to build the fence will
subsist as it benefits the third person who did not
give consent to the novation (Art 1296, NCC). PROPOSED ANSWERS FOR MIDTERM
EXAMINATION (OBLIGATIONS)
Question No. 6
Imee owes Jackie P150,000.00 payable in Cebu QUESTION 1: TOPIC: NOVATION
City. Jackie owes Imee P50,000.00 payable in PAMPI Corporation entered into a Contract of
Cagayan de Oro City. Do the parties need to Loan with MASAGANA Bank secured by a
agree first that the debt of one compensates the Chattel Mortgage. PAMPI Corporation
other? Explain. (5) experienced financial reverses and requested
from MASAGANA Bank an extension of
PROPOSED ANSWER: payment for the loan. The extension was
No more. Compensation takes place by operation granted with a condition that PAMPI
of law as long as all the requisites for compensation Corporation would execute a real estate
are present. In this case, there will be mortgage. When PAMPI corporation failed to
compensation to the extent of P50,000.00. pay, the bank foreclosed the Chattel Mortgage.
PAMPI Corporation interpose an objection
Alternative Answer by Ma’am: You qualify, contending that there was a novation of the
because it is not provided in the facts that the debt contract when it executed a real estate
is due and demandable which is one of the mortgage when an extension of the loan was
elements of legal compensation. But argue it based granted by the bank. Is the contention of PAMPI
on the missing element which is not provided for Corporation correct? Explain. (5)
under the facts.
ANSWER: No. Novation takes place where the
Question No. 7 object or principal condition of an obligation is
Warlita owes Xenia P40,000.00. Instead of changed or altered. Novation is never presumed; it
paying the P40,000.00, they agreed that Warlita must be explicitly stated or there must be manifest
will provide five (5) videoke machines for use incompatibility between the old and the new
on Xenia's birthday at the latter's house. They obligations in every aspect. There is no
weren't aware though if they can use the incompatibility between the two contracts especially
machines as it was a relatively quiet so that the new contract was executed as an
 4
additional security to the chattel mortgage as a including the laptop. Is the obligation of Pierce
condition for the extension of the loan. to deliver the laptop extinguished? Briefly
explain. (3pts)
Note: From the facts, there is no change. The first
obligation is not extinguished, there was only a
request for reconstruction or extension and in order ANSWER: No. The obligation is to deliver a generic
to grant that extension, as a condition, aside from thing. The loss or destruction of anything of the
the chattel mortgage, you have to execute a real same kind does not extinguish the obligation. It
estate mortgage. may still be replaced.

Since there is no incompatibility with the two PARTIAL LOSS

contracts it's still the same contract of loan it's just
that there is an extension and as a condition for the QUESTION: Marcus is obliged to construct a
extension a Real Estate Mortgage (REM) was house on Sigmund’s property in San Carlos
executed. So the REM is to be considered as an Heights, Baguio City. On the first two (2)
additional security to the chattel mortgage as a months of the construction, a sinkhole ate a
condition for the extension of the loan. It did not part of the house. Sigmund wanted the
extinguish the first contract. construction to resume but Marcus does not
want to. What should be done in case the
SOLUTIO INDEBITI parties could not agree as to whether the
construction should still proceed? Explain
QUESTION: The debtors entered into a Contract (3pts)
of Loan with the bank in the amount of 3 Million
secured by a mortgage of certain properties. ANSWER: In this case, the courts shall be the one
Since there was under valuation of the to determine whether the partial loss is so important
properties, the debtors were required to put up as to extinguish the whole obligation. (Article 1264,
additional security in the amount of P300,000.00 NCC)
by opening a time deposit. When there was
non-payment, there was foreclosure of the ASSIGNMENT OF RIGHTS BY THE CREDITOR
mortgage and the amount of P750,000.00 TO 3RD PERSONS; EFFECT IN
(representing the time deposit and its interest) COMPENSATION
was collected from the debtors. The debtors
contended that the collection of the P750,000.00 QUESTION: Kirol owes Kiray P50,000.00. Kiray
would result in unjust enrichment. Are the owes Kirol P100,000.00. Both debts are already
debtors correct? Explain. (5pts) due. Kirol informed Kiray that he will assign his
rights to the extent of P80,000.00 which Kiray
ANSWER: No, because the amount was applied as owes him to Kirei. Kiray consented. May Kiray
payment of the loan together with the interest, The invoke compensation? Explain. (3pts)
fundamental doctrine of unjust enrichment is the
transfer of value without just cause or ANSWER: It depends. If she reserved her right to
consideration. The elements of the doctrine are: (a) the compensation, she may invoke it. If she did not,
enrichment on the part of the defendants; (b) she may not invoke it as she is deemed to have
impoverishment on the part of the plaintiff; and, (c ) waived his right thereto. She would then have to
lack of cause. pay Kirei the P80,000.00 and claim the excess of
P30,000.00 from Kirol. (Art. 1285, NCC)
The main objective is to prevent one to enrich
himself at the expense of another. It is commonly NEGOTIORUM GESTIO
accepted that this doctrine simply means that a
person shall not be allowed to profit or enrich QUESTION: How does the relationship of
himself inequitably at another’s expense. In the negotiorum gestio exist? (3pts)
instant case, there is no unjust enrichment to speak
of. ANSWER: It exist whenever a person voluntarily
takes charge of the agency or management of the
GENUS NEVER PERISHES business or property of another, without any power
from the latter, is obliged to continue the same until
QUESTION: Pierce is obliged to deliver Bronson the termination of the affair and its incidents, or to
a 12-inch Apple Macbook laptop. While on the require the person concerned to substitute him, if
way to Bronson, the vehicle Pierce was riding the owner is in a position to do so. (Article 2144,
was held-up by five armed men who took away NCC)
all the possessions of the passengers,
 5
iniquitous, the same rule is applicable only in
INFLATION contracts that are subjects of litigation, not to a
case where there has already been a judgment
QUESTION: In a contract of lease, the lessor rendered and the same has already become final
contended that the lessees failed to pay the and executory. Under the facts, therefore, Pampam
increased rent despite the supervening inflation cannot invoke the power of the court to reduce the
or devaluation of the Philippine peso. Is the penalty.
contention proper? Explain (3pts).

ANSWER: No, Article 1250, NCC requires for its SUBSTANTIAL COMPLIANCE IN PAYMENT OR
application a declaration of inflation by the Central PERFORMANCE
Bank. Without such declaration, creditors cannot
demand an increase of what is due them. QUESTION:
Carla entered into 2 written contracts entitled
OBLIGATION WITH A PERIOD “Conformity of Agreement” whereby Carla
authorized Dhang to negotiate with the Land
QUESTION: Bank of the Philippines (LBP) and the DAR for
Lala and Melinda entered into a contract of loan the sale of 270 hectares of agricultural land, to
whereby Lala extended to Melinda the amount be done in 120 days. Carla bound herself to pay
of 1 million secured by a mortgage. The Dhang at least 25% of the gross sales of said
contract does not provide when payment shall property which was later reduced to 17.5%.
be made. After a period of 1 year, Lala Dhang shall prepare, process and file the
foreclosed the mortgage. Melinda filed an necessary documents needed to effect the
action to nullify the foreclosure contending that recovery of proceeds from the LBP. The sale
there was no basis for the foreclosure since the was approved, thus, there was a partial release
obligation has not yet become due and of the proceeds. But Carla did not pay Dhang
demandable. Decide. her share, hence, a suit for collection of sum of
money was filed before the RTC. The RTC
ANSWER: The foreclosure is void because there decided for Dhang and it was affirmed by the
was no basis as the contract did not provide for the CA. Carla contended that Dhang is not entitled
period of payment. In that case, as of the time of to a share because there was no full payment
the foreclosure, the obligation has not yet become yet, therefore, there has been no compliance
due and demandable. If there is no period for the with the terms and conditions of the contracts.
contract, there can be no demand, there can be no Is the contention proper? Explain.
default.
ANSWER: NO, because there has been substantial
Note: compliance in good faith; hence, the obligor may
You may add that Lala and Melinda should have recover as though there had been a strict and
asked the court to provide their contract with the complete fulfillment (Art. 1234, NCC). When the
period. obligee accepts the performance, knowing its
incompleteness or irregularity, and without
OBLIGATION WITH A PENAL CLAUSE expressing any protest or objection, the obligation
is deemed fully complied with (Art. 1235, NCC).
QUESTION: From the facts, Dhang's obligation was to prepare,
Pampam borrowed money from Cael with process and file the necessary documents needed
interest and penalty charges imposed in the to effect recovery of the proceeds from the LBP.
contract. Pampam failed to pay his obligation; The collection of the full amount from the LBP was
hence, Cael sued Pampam for collection of sum not among the matters contemplated by the parties
of money. A compromise agreement was in their agreements.
entered into and approved by the court, with a
stipulation that in case Pampam fails to pay, he Note: Since there was partial release, it seems that
would pay a penalty of 4% per month. Pampam there is already substantial compliance of the
failed to pay, hence, a motion for execution was obligation of Dhang as provided for under the
filed. Pampam opposed the motion on the conformity of agreements.
ground that the penalty is excessive or
iniquitous. Rule on the motion. You may apply your knowledge in Agra. Usually or
ANSWER: The motion should be granted. While it it has always been a practice na hindi cash and
is true that the court can reduce the penalty if it is
 6
nirerelease. So may cash, may stocks. So it is not now negates the transfer of absolute ownership of
full cash and binibigay ng DAR thru the LBP. teh property over to the creditor as in a sale.

DACION EN PAGO PAYMENT BY CESSION

QUESTION: QUESTION:
A loan was granted to the debtor who, however, Tito owes Ulysses, Vannie and Wanda
failed to pay the loan, hence, a suit was filed to P1,000,000.00 each, which debts are all due.
collect the debt. In his answer, the defendant Tito’s only properties not exempt from
(debtor) contended that there was already an attachment or execution are his car worth
arrangement as to the full payment of the loan P500,000.00, his house worth P1,500,000.00,
by way of sale of the 9 unit taxis which the and his grand piano worth P400,000.00. If he
debtor surrendered to the creditor for it to sell opts to cede or assign all of these properties to
the same. The proceeds of which will be his debtors, should he now be released from
credited against the loan amount as full his obligations to them? Explain.
payment. The RTC dismissed the complaint due
to the extinguishment of the obligation. The CA A: The answer is no because what we are applying
reversed the decision. Was there dacion en is only the net. Net lang at kahit sumahin mo lahat
pago between the parties upon the surrender or yan wala pa yang 3M pesos.
transfer of the mortgaged taxis to the creditor?
Explain. Tito should only be released from the obligation
amounting to the net proceeds of the things he
ANSWER: There was no dacion en pago. In dacion assigned, if the properties will be sold at their
en pago, the property is alienated to the creditor in current value, then Tito shall only be released up to
satisfaction of a debt in money. (Art 1245, NCC). It the amount of 2.4M pesos.
is the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted QUESTIONS RAISED
equivalent of the performance of the obligation. In
this case, there was no meeting of the minds Question 1: Regarding the question in stipulations
between the parties on whether the loan of the pour autroui in favor of Tatum, would it be that the
debtor would be extinguished by dacion en pago. stipulation benefitted to the third person and not
Rather, the creditor was the agent in the sale of the incidentally benefitted, mam kasi inargue ko na
vehicles whereby the proceeds thereof would be incidentally benefitted lang si Tatum dun sa
applied in payment of debtor’s indebtedness to the compromise agreement.
creditor. Such an agreement negates transfer of
absolute ownership over the property to the Answer: The contracting parties must have clearly
creditor, as in sale. and deliberately conferred a favor to a third person,
not a mere incidental benefit or interest, so how did
You just made the creditor an agent for you to sell you judge it as an incidental benefit and that was a
now the 9 unit taxis and apply the payment now or long overdue deliverable by the other contracting
apply the per piece price of the taxis to the loan, so party, where in the facts that it is mere incidental?
is there dacion en pago?
There was none, there was no dacion en pago, so Student: Ma’am nothing in the facts state that he is
in dacion en pago under Art 1245, property is a party to the contract.
alienated to the creditor in satisfaction of the debt in Mam: Yes, but all the requisites of stipulation por
money, so it is the delivery and transmission of atrui was present, there was acceptance on the 3rd
ownership of the thing by the debtor to creditor as person now.
an accepted equivalent in the performance of the
obligation, so in this case there was no meeting of Question 2: What if instead of using the contract
the mind of whether the loan will be extinguished by por atrui, I used divisible obligations, like the
dacion en pago. obligation to construct the inn and the fence was
divisible hence when one of the obligations were
Diba may tintatawag tau na real dacionen pago, novated the other is still capable of fulfillment.
rather the creditor was the agent in the sale of the
vehicles, whereby the proceeds thereof will be Ma’am: 2 obligations, but I think I worded the
applied in the payment of the debtors question that the fence is merely an accessory
indebtedness, to the creditor, such an agreement obligation, kasi nga may principal obligation siya na
mag papatatyo ng travelers inn tas accessory
 7
contract yung to build a fence, kaya nung chinange
nila yung principal obligation, kasi diba sa novation,
when the principal obligation is extinguished it
follows the extinguishment of the accessory but not
when there is a stipulation por atrui.

Question 3: Ma’am in the midterm exam question

regarding lease on inflation, I mixed it with the
discussion on the contract of lease that the lessor
cannot demand an increase hanggat di pa
natatapos yung lease term and since wla period di
sha pwedi magdemand.

Answer: But one pertinent fact is inflation, sabi

ngaun ni lessor, so san mo siningit yun, kasi kung
yung basis mo would be the period of the lease
then you did not cover the entire problem, what
about the allegation of the other party, diba issue
spotting.

Question 4: Ma’am, dun sa isang Q regarding sa

foreclosure kung saan loan is walang period, ang
nilagay ko ma’am doon, although hindi valid yung
foreclosure, ang nilagay ko na reason is there was
no demand. Since the obligation had no period, it
would have been one agreed upon by the parties
as something that can be demanded anytime.
Since wala namang siyang demand, parang yung
situation after one year, so hindi na nagdemand,
basta pinaforeclose niya agad, doon na ako
nagbase na yung foreclosure is invalid, kasi hindi
naman siya nagsabi or nagdemand.

Ma’am: I can consider that kasi that is still in line

with foreclosure. Sa foreclosure naman, kailangan
may demand. You should be in default. You can
use also ordinary default and extraordinary default.
Since bumigla siya, pwede nating gamitin yan.

(For agency and compromise agreement, Ma’am

will be preparing a video presentation)
 8
CONTRACTS Example: Donation Inter Vivos- There is a
IN GENERAL special form and it must be accepted by the donee.
Definition: (Art. 1305, NCC)
- A meeting of the minds between two According to cause or equivalence of the value
persons whereby one binds himself with of the prestation/s:
respect to the other, to give something or to a. Onerous Contract;
render some service. -Those in which each of the parties aspires
- An agreement of two or more persons for to procure for himself a benefit through the
the purpose of creating, modifying, or giving of an equivalent or compensation.
extinguishing a juridical relation between Both parties must give an equivalent of
them. prestation.

Contract is a meeting of the minds, once the minds Example: Contract of sale: The obligation as the
of the contracting parties meet, then a valid vendor is to deliver the thing; and the buyer, as an
contract exists even if it is not reduced into writing, equivalent of the prestation, has to give the price.
especially into consensual contracts.
b. Gratuitous or Lucrative Contract;
It also involves two persons. There can be no -One party receives no equivalent prestation
contract if the contracting party falls on one person. except a feeling that one has been
You cannot have a contract with yourself. That generous or liberal.
cannot be considered within the statutory definition Example: Contract of Commodatum- You allow a
of a contract. There must be at least two persons to party to use your property or a thing without
a contract. equivalent.

It may also be multilateral, meaning there are more c. Remunerative Contract

than two parties, however, in line with this, we will -Where one prestation is given for a benefit
be discussing Auto-contracts as an exception to or service that has been rendered
“between two persons”. previously.
Example: Bonus given to employees.
CONTRACT vs OBLIGATION
According to importance or dependence of one
upon the other:
Contract Obligation
a. Principal Contract;
One of the sources of The legal tie or relation -A contract that can stand alone and it is not
obligation. There is no to give, to do, or not to dependent on other contracts.
contract if there is no do. Obligation may
obligation. exist without a contract b. Accessory Contract; and,
because there are
-Its existence depends on the existence of a
other sources of
obligations. principal contract.
Example: Contract of Mortgage- A real estate
mortgage is dependent on the principal contract of
CLASSIFICATIONS OF CONTRACTS
loan.
According to Perfection or Formation:
A. Consensual Contract
c. Preparatory contract
- Perfected by mere consent.
-It is not the end but the means through
- Example: Sale
which future transactions or contracts may
be made.
B. Real Contract
Example: Contract of agency or partnership- The
Perfected by consent but includes delivery.
principal executed an SPA in favor of the attorney-
Example: deposit or pledge- You can only perfect a
in-fact or agent for the sale for a future transaction
contract of pledge or deposit if you deliver the thing
or sale or mortgage of his/her property. It is a
subject of deposit or pledge.
preparatory contract because the intention of the
contract is not the end but a means through which
C. Formal or Solemn Contract
future transactions or contracts may be made.
Special formalities are essential for
purposes of enforceability. Hence, before a contract
According to the parties obligated:
is perfected, it must be in special form or
a. Unilateral Contract; and,
solemnities must be observed.
-Only one party has an obligation.
 9
Example: A contract of Commodatum. payment has not yet been made, it is merely an
executory contract.
b. Bilateral or Synallagmatic Contract
-Both parties are required to render According to the subject matter:
reciprocal prestations. Go back to the definition of contracts under
Example: Contract of sale. Article 1305.

According to their name or designation: A. Things

a. Nominate Contract; and, Example: Contract of sale, deposit, pledge
-Those which have their own individuality
and are regulated by the provision or B. Rights or credit
special provisions of law. Example: Usufruct, assignment rights ir credits
Example: In a contract of sale, you have the
provisions of sale under the Civil Code. In a C. Services
contract of agency, you have a specific provision. Example: Contract of agency, lease of service and
contract of common carriers
b. Innominate Contract
-Those not given any special name. According to the Obligations Imposed and
Examples: Regarded by Law
(a) do ut des (I give and you give)
(b) do ut facias (I give and you do). A. Ordinary Contract
(c) facio ut des (I do and you give) -It involves at least 2 contracting parties and
(d) facio ut facias (I do and you do) it binds the parties.
Example: Sale and Lease
According to the risk of fulfillment:
a. Commutative; and, B. Institutional Contract
-Parties contemplate a real fulfillment, -Impressed with Public Interest
meaning, equivalent values are given. Example: Marriage, employment contract and CBA
Example: Contract of sale or contract of lease- The
lessor had to deliver possession of property which According to the evidence required for its proof
is the subject matter of the lease and the lessee A. Those requiring mere oral or parol
has to pay the amount of rent or any other evidence
stipulated amount in the contract of lease. -Oral contracts are binding unless form is essential
for its validity.
b. Aleatory.
-Fulfillment is dependent on chance. The Example: A sale is perfected by mere consent. But
value varies because of the risk or chance for the purpose of enforceability, we follow the
involved. Statute of Frauds. In other oral contracts, it may be
Example: Insurance contract. proven by parol evidence.

According to the time of performance or B. Those requiring written proof

fulfillment: Example: Those enumerated under the Statutes of
a. Executed; Frauds which requires written proof.
-One completed at the time the contract is
entered into. Obligations are complied with According to the number of persons actually
at this time. and physically entering into contracts
Example: Sale of real property that is already
delivered. If there is already delivery on the part of A. Ordinary Contracts
the seller and there is full payment of the purchase -There are only 2 parties which are
price on the part of the buyer, there is an executed represented by different persons
contract. Example: Sale (vendor and vendee)

b. Executory B. Auto-contracts
-One where the prestrations are to be - It is not a violation to the definition of
complied with, with some future time. contracts which provides that contract is
Example: Conditional Deed of Sale- It is perfected meeting of the minds between 2 persons
if the property has not been delivered or the whereby one binds himself with respect to
 10
the other to give something or to render - Once the parties arrive at a definite
service. agreement, then there is perfection of
- It must involve 2 persons. Meaning, there contract.
must be at least 2 parties to the contract. - There is definite subject matter, valid cause,
The only exception is AUTO-CONTRACTS. and acceptance or mutual consent of
There is only one person who represents parties.
two opposite persons but in different
capacities. Effect of Perfection:
Example: SPA (Special Power of Attorney) (a) Parties are bound to the FULFILLMENT of
Q: A authorized B to sell his phone. Can B buy the what has been expressly stipulated; and
phone? - Example: In a contract of sale, if you are
A: Yes. It is an example of an auto contract. In the the seller, you are bound to deliver the
first contract, where B has an SPA, his personality property in good condition (if it is stated
is as an agent. B is an agent of A but there is in the contract) to surrender possession
nothing precluding B from buying the phone of A. as well as ownership to the buyer. And
There is only one person who represents 2 as the buyer, once the contract is
opposite persons but in different capacities (in this perfected, you are obliged to pay in full
case, as an agent to A and as a buyer to A). the contract price agreed upon.

According to the number of persons who (b) Parties are bound to ALL the consequences
participated in the drafting of a contract which according to their nature, may be in
keeping with good faith, usage, and law.
A. Ordinary - Example: In a contract of sale, the
Example: In sale, there is participation of the consequences are the price, the
vendor and the vendee in drafting the contract of delivery, the time of delivery, the time of
sale. payment, responsibilities of the seller
(transfer, payment of capital gains tax,
B. Contract of Adhesion warranties, preparation of deed of sale)
-Almost all of the provisions are drafted by as stated in the contract of sale. So you
only one party to the contract. are responsible for all of that in case the
Example: Insurance Contract where it is drafted by contract is perfected.
one party and the participation of the other party is
merely by affixing his signature. C. CONSUMMATION (death or extinguishment)
- begins when the parties perform their
STAGES OF CONTRACT respective undertakings under the contract
culminating in the extinguishment thereof.
A. PREPARATION/NEGOTIATION (Conception - It is called death or extinguishment of the
or Generacion) contract since there is already fulfillment of
- Covers the period from the time the all the terms and conditions of the
prospective contracting parties indicates contracts, the contracts are already
interest in the contract to the time the performed, and the contracts may be said
contract is concluded (perfected) to be fully executed.
- It means that parties are progressing in the
negotiation or preparation. In the The stages of contract are important when you are
negotiation stage, the parties did not yet asked a question particularly on the enforcement of
arrive at any definite agreement. Usually, the contract – when can you enforce fulfillment of
there is an offer and then counter-offer and obligation? If it is still in the preparation or
counter to the counter-offer and counter negotiation stage, the contract is not yet perfected.
against to the counter to the counter-offer.
- The parties are actively participating on the What if it is already in the perfection stage?
preliminary offer and counter-offer and the Then you enforce the terms and conditions of the
like. contract.

B. PERFECTION (Birth) Characteristics of a Contract

- Takes place upon the concurrence of the A. CONSENSUALITY (Art. 1315 & 1316) -
essential elements of contracts. Contracts are generally perfected by mere
consent (Art. 1315). No special form is
necessary. (Art. 1316)
 11
- This is the general rule. However, take note - Example: (a) any stipulation or
that there are limitations to the contract which encourages or shows
characteristic of consensuality. disrespect to elders or parents, (b)
employment contracts which are
Exceptions: discriminatory to women, or (c)
1. Formal/Solemn Contracts - compliance contracts which disrespect religious
with special formalities or solemnities of the freedom
contract for purposes of validity and d) Public order - deals with public health and
enforceability; public safety.
- Example: donation inter vivos have - Example: (a) surrendering right to
specific form for it to be considered vote as well as right to run for public
valid, as well as it requires acceptance office, or (b) lowering the liability of
on the part of the donee common carriers from extraordinary
2. Real Contracts - requires not only the diligence to ordinary diligence
consent of the parties but delivery of the
object is also required. e) Public policy - a stipulation which has a
- Example: pledge or deposit tendency to be injurious to the public or
against public good.
B. AUTONOMY OR FREEDOM TO STIPULATE
(Art. 1306, NCC) - Example: stipulations in labor such
- Take note also of the Constitution, as (a) non-disclosure policies, or (b)
particularly Section 10, Article III (Bill of non-involvement clauses or a clause
Rights) as a supporting provision for prohibiting an employee from
autonomy or freedom to stipulate. working in any company or business
- Freedom of the party to stipulate the terms in the Philippines for a period of 5
of their contract. But the freedom to years from the termination or
stipulate only covers valid contracts. Valid separation from the employer. It is
contracts meet the legal requirements and considered void since it has no
limitations provided for by law. limitations.

Limitations on Contractual Stipulations: C. OBLIGATORINESS (Art. 1159, NCC) -

Contracts, in order to be valid, should not be Obligations arising from contracts have the
contrary to the following: force of law between the contracting parties
a) Law - Law is always superior to a contract. and should be complied with in good faith.
- If an act or stipulation is executed - Art. 1159 provides for the binding force of
against provisions which are obligations arising from contracts and
mandatory or prohibitory laws, they compliance in good faith (element of
are considered invalid stipulations. sincerity and honesty to prevent one party
- Example: Employment contracts from taking advantage).
wherein the stipulations are below
the standards provided for under the D. MUTUALITY (Art. 1308-1310, NCC) - The
Labor Code of the Philippines is contract must bind both contracting parties; its
considered as invalid stipulation for validity or compliance cannot be left to the will
the very reason that it is contrary to of one of them.
law. - Art. 1308-1310 are co-dependent from each
b) Morals - refers to norms of good and right other
conduct and human conscience. - It is based on the essential equality between
- Example: A contract of separation of the parties.
husband and wife with waiver to
their right to file or prosecute any CONSEQUENCES OF MUTUALITY:
future acts of infidelity is considered 1. A party cannot revoke or renounce a
contrary to morals. contract without the consent of the other,
c) Good customs - habits and practices which nor can it have it set aside on the ground
through long usage have been followed and that he made a bad bargain; and,
enforced by society or some part of it as - The court cannot interfere with the
binding rules of conduct. It has the force of terms and stipulations of the
law when recognized and enforced by law. contract, it cannot even replace it
with its judgment.
 12
2. Validity or compliance cannot be left to the transmissible, anyway, this is a source of
will of one of them. obligation.

GENERAL RULE: Compliance with a contract Exceptions:

cannot be left to the will of one of the contracting 1. Contracts are not transmissible by their
party. (Art. 1308) nature;
Example: Contracts involving personal
EXCEPTION: qualifications like singing, painting,
Art. 1309, NCC- Determination of its performance designing; or those personal in nature, or
may be left to a third person which shall bind the what we call intuitu personae; contracts
parties only after it has been made known to relating to family relations, parental
both of them. authority, action for nullity or annulment of
marriage, legal separation, cohabitation
Example 1: For example you entered into a 2. Contracts are not transmissible by
construction contract, compliance with the contract stipulation; or
cannot be left to the will of one of the contracting If it is clearly stipulated in the contract that it
parties. However, if there is a clear stipulation, is not transmissible, it ends with the parties,
particularly a stipulation of arbitration, that in case then follow what is stated because of
of differences in the interpretation of the contract, obligatoriness or force of law.
the parties will submit any conflict to an arbiter and 3. Contracts are not transmissible by
will follow the opinion of the arbiter. provision of law.
Example: Criminal responsibility under Art
Example 2: In a contract of sale, when you cannot 89 of the RPC, contract of agency (hindi
decide on the price of the property, and it is pwede na principal gave an authority to an
stipulated in the contract which is made known to agent, then the agent will give that authority
both of them that they will follow the determination to another sub-agent), partnership,
of an appraiser to fix the price. commodatum

-The determination by a third person must be FOUR (4) EXCEPTIONAL CASES WHEN
known by both parties. STRANGERS OR 3RD PERSONS ARE
AFFECTED BY A CONTRACT
Qualification to Art. 1309: Art. 1310- A contracting General Rule: A third person who has not taken
party is not bound by the determination if it is part in a contract is a stranger to the contract. So,
evidently inequitable or unjust as when the third he has no standing in law to demand enforcement
person acted in bad faith or by mistake. of the contract, or question the validity of the
- For example, there is a stipulation by contract.
arbitration, however the ruling of the arbiter
to settle clearly shows bad faith in his Exceptions:
decision or bias in his decision then the A. Contract containing a stipulation in favor of
parties are not bound to the determination a third person (Stipulation Pour Autrui) -
of the third person. Art 1311, par. 2
N.B. The courts will decide what is equitable.
Stipulation Pour Autrui - a stipulation in a contract
E. RELATIVITY (Arts. 1311, 1312, 1313, 1314 which clearly and deliberately confers a favor upon
and 1317, NCC) - Contracts take effect only a third person who has the right to demand its
between the parties, their assigns and heirs. fulfillment.
- Also called privity of contracts
- Art 1317: unauthorized contracts Requisites of a Stipulation Pour Autrui:
- This is the general rule 1. There must be a stipulation in favor of a
third person;
Principle of Relativity of Contracts (Art 1311) 2. The stipulation must be a part, not the
Take note of the principle of relativity of contracts or whole of the contract;
the principle of transmissibility of rights 3. The contracting parties must have clearly
and deliberately conferred a favor upon a
Example: third person, not a mere incidental benefit or
A is indebted to B for P300,000. If B dies, then A is interest;
indebted to the heirs of B. If B assigns his rights to
C, then A has to pay C P300,000. So, it is
 13
4. The third person must have communicated A owes B 500K. A owes C 1 Million and A owes D
his acceptance to the obligor before its 300K. All due and demandable. A donated all his
revocation; and properties to E. B, C, and D may seek the
5. Neither of the contracting parties bear the rescission on the contract of donation because it is
legal representation or authorization of the entered clearly to defraud the creditors.
third person.
D. In contracts which have been violated at the
Example: inducement of third person (Tortious
A is indebted to B for P150,000 with 10%. Stated in Interference, Art. 1314, NCC)
the promissory note is that the interest of 10% or Any third person who induces another person to
P15,000 will go to C, a third person. So, A is violate his contract shall be liable for damages to
obliged to deliver P15,000 to C. If C communicates the other contracting party.
his acceptance, then we have a stipulation pour
autrui. - Interference is penalized because it violates
the property rights of the party in a contract
If A fails to give the P15,000 to C, C has the right to to reap the benefits that should result
enforce the contract of A and B. therefrom.

Example: Requisites of Unlawful or Tortious Interference

A and B entered into a construction contract where a. Existence of a valid contract;
A is obliged to construct a house in the property of b. Knowledge on the part of the third
B. C has an adjoining property and building the person of the existence of the contract;
house will be beneficial to C kasi magkakaroon and,
siya ng daan. Thereafter, A and B changed their c. Interference of the third person is
contract. May C sue A and B for breach of without legal justification or excuse.
contract?
No. The fact that C only has incidental benefit or he Example:
only derives some kind of benefit from the contract A and B entered into a contract of sale of a parcel
gives him no right to sue A and B. That is not a of land. C, who has knowledge of the existence of
stipulation pour autrui. the contract induces A “wag mo na ituloy yung
contract ninyo ni B. Ibigay mo nalang sakin yan”. B
B. In contract creating real rights (Art 1312, now, may sue C for damages.
NCC)
Third persons who come into possession of the Example:
object of a contract over which there is a real right, A entered into a contract of lease with B (sa
are bound thereby even if they were not parties to palengke). C now, induces A to lease it to him
the contract. rather than to B. There is already existence of a
valid contract, there is knowledge on the part of C
Example: and there is interference without justifiable excuse.
A entered into a contract of B for the sale of his B may sue C for damages.
agricultural land. C is a tenant. Under the Agrarian
Reform Law, B must respect the rights of C. REMEDIES:
1. The wronged party is entitled to damages,
Example: but the liability for damages of the meddler
A is indebted to B for P1 million with an accessory cannot be worse than the liability of the
obligation of real estate mortgage. A sold the land contracting party who breached the
to C which is the subject matter of REM (it is merely contract; or
a collateral and ownership still belongs to the - Take note: under Art 1314 medyo
mortgagor). C must be bound by the REM. That is may discrepancy between the third
contracts creating real rights. party and the party who breach the
contract because of tortious
C. In contracts entered into to defraud creditors interference.
(Art. 1313, NCC)
The creditor is given the right to impugn the 2. Injunction is also a proper remedy to
contracts of his debtors to defraud him. restrain such unlawful interference.

Example: UNAUTHORIZED CONTRACTS

● Art. 1317, NCC
 14
● General Rule: No one may contract in the
name of another

● Effect of Unauthorized Contract: Contract

is unenforceable

● Exceptions:
a. The person entering into a contract in
the name of another has been
authorized by the latter;

Example: There is SPA to sell the property. In the

contract of sale, you enter the name of the seller
represented by the agent. That is considered as
authorized.

b. He must have by law a right to

represent him;

Example: A legal guardian of a minor child or

administrator of property.

c. The contract was subsequently

ratified.

Note: The effect of ratification is generally

retroactive. But, the ratification must be clear and
express so as not to admit any doubt or vagueness.

Example: C, without any authority sold the property

of A to B. C acted without any authority. However, if
A will ratify the sale, it may be expressly by making
a document ratifying the act or impliedly if A will
receive the purchase price of the sale. That is
ratification which has a retroactive effect.

What if C has authority but acted beyond his

authority? For example, C has the authority to
mortgage the property but instead he sold it. That is
already beyond his authority. That is considered an
unauthorized contract. But, with ratification from the
owner or seller then it also has a retroactive effect.

Ratification has retroactive effect as if the authority

was previously given before the act and the only
exception here is if it affects the right of the third
person.
 15

March 28, 2023

For purposes of this review, we will review the
A. ESSENTIAL ELEMENT- common elements of a contract.
So it is called essential because without
which there is no contract. The essential Why common essential elements? Because without
elements is also subdivided into three which there is no contract. Art. 1318 of NCC
classifications: provides the essential elements of a contract.
1. Common Essential Elements- the three
essential elements, meaning it is common IN GENERAL
to all contracts. It must have CONSENT, There is no contract unless the following requisites
OBJECT, CAUSE/CONSIDERATION. concur:
2. Special Essential Elements- it is present in 1. CONSENT of the contracting parties.
specific contracts. For example, in donation, 2. OBJECT certain which is the subject matter
for purposes of validity, it must have an of the contract; and
acceptance. There are contracts, for 3. CAUSE of the obligation which is
purposes of validity, it must follow a certain established. (Art. 1318, NCC)
form or formality or solemnity.
Real contracts- one essential element is CONSENT
delivery Concept. Consent is the conformity of the parties
3. Extra-ordinary or Peculiar Essential to the terms of the contract; the acceptance by one
Elements- peculiar elements which are of the offer made by the other; the concurrence of
present in specific contract. the minds of the parties on the object and the
cause which shall constitute the contract.
For example:
In sale, there is no sale if there is no price. It begins with an offer. There is also acceptance on
The price is the peculiar essential element the part of the other party, not only as to the
in the contract of sale. principal object of the contract but it also includes
all stipulation/ conditions provided for or mutually
In a lease, the peculiar essential element is agreed upon by the parties.
rent or in a REM or Chattel Mortgage, there
must be a principal loan or principal Note: Consent is the meeting of the minds between
contract. the parties to a contract.

B. NATURAL ELEMENT- it is present, it is inherent How is consent manifested?

unless there is a stipulation to the contrary. MANIFESTATION. Consent is manifested by the
meeting of the offer and the acceptance upon the
For example: in a contract of sale there are thing and the cause which are to constitute the
warranties against eviction and warranties against contract. (Art. 1319)
hidden defects.
You have the offerer making an offer and the
C. ACCIDENTAL ELEMENTS- offeree accepting the offer made by the offeror.
Go back to the characteristics of contracts
particularly on autonomy or the freedom to REQUISITES:
stipulate. There are certain elements that should be a. An OFFER that must be CERTAIN;
complied with because it was mutually agreed by b. An ACCEPTANCE that must be
the parties. UNQUALIFIED and ABSOLUTE; and

For example: A contract that carries with it a Note: In some books tama na itong
penalty. A contract that carries with it conditions. A requisites na ito, iyong OFFER at
contract that carries with it periods or a contract ACCEPTANCE. However, as we go along
that carries with it interest. with the provisions of consent, there is a 3rd
requisite.
Note: Speaking of interest may MR yong Lara
Case. The Lara case states the rule concerning c. In addition to the subject matter and the
interest. The MR was September 2022 but the consideration, the area of agreement must
decision came out on March 13, 2022. Ma’am will extend to ALL that the parties deem
dissect it first before sharing it with the class. material.
 16
B. WITHDRAWAL- As a general rule the
offeror may withdraw the offer at any time BEFORE
Illustration 1: he learns the acceptance by the offeree.
In our example: sa sulat, the offer was made thru a
letter and it was sent May 1 2019, a reply for
Is this a definite offer? I am selling my 300 sq m acceptance thru a letter was also sent to the offeror
parcel of land located at Pugo, La Union for 500K. on may 1 2019 by the offeree, before it was
Do you find that definite or a certain offer? received or it was communicated, before the offeror
Answer: Yes. learns of the acceptance, can he withdraw?
A: Yes, as a general rule the offeror can withdraw
Illustration 2: the offer at any time before he learns of the
acceptance, however an exception to the rule is in
I might sell my land in Pugo for 500 K. That is not a
case the offer has a period.
definite offer. Ex: Offeror made an offer with a period, GR: if a
Acceptance must be unqualified and absolute. period is given go back to the basic provision that
Illustration: you can withdraw it before you learn about the
I am selling my parcel of land located at Pugo, La acceptance of the offeree, offer may be withdrawn
Union for 300K. B stated that “I am willing to buy it at any time before acceptance by communicating
for 250K”. Is that acceptance? such withdrawal. Exception: The offer may not be
withdrawn when it is founded upon a consideration
Answer: NO. It is qualified. So the acceptance or
as something paid or promised. (Art. 1324, NC).
terms of B or the offeree becomes a counter-offer.
Note: The consideration must be a separate and
Question: Is there a perfected contract? distinct contract from the principal contract or
Answer: None because there is no acceptance. obligation.

OFFER Option contract- grants a person the choice for a

distinct and separate consideration, to purchase a
DEFINITION. “Offer” means a unilateral proposition
determinate thing at a predetermined fixed price.
which one party makes to the other for the Ex: Mam made an offer for you to buy her property
celebration of the contract. and she is giving you 10 days to decide and you
give an option money so within 10 days Mam
The OFFER must be CERTAIN. cannot offer that for any sale or she cannot
withdraw the offer. Q: Let us say on the 7th day,
EFFECTIVITY. An offer is effective until either party mam withdraw the offer, what is the remedy of the
offeree?
becomes incapacitated, or until the offer is
A: In case of breach of an option contract, file for
withdrawn by the offerer. damages, cannot ask for specific performance with
damages because this contract is separate and
Note: The offer remains effective unless either distinct from the principal contract. All that you can
party becomes incapacitated or until the offer is ask is for damages based on breach of the
withdrawn by the offerer. contract.

Earnest money- consideration for breach of

a. INCAPACITY- an offer becomes ineffective
contract. This is different from option money
upon the death, civil interdiction, insanity, or because earnest money is part of the principal
insolvency of either party BEFORE contract. If earnest money is given, such is
acceptance. (Art. 1332, NCC) evidence that a contract is already perfected
because it is part of the purchase price, so if
Note the qualification before acceptance is earnest money is given and the contract is
conveyed, conveyed is the time when the offeror perfected and you withdraw the offer, there are
learns of the acceptance of the offeree consequences now for breach of contract.
Ex: A (inaudible) to B in the amount of 300K the
offer was made on May 1 2019, let's say B now Right of First refusal:
accepted it in the afternoon of May 1 2019, on the Ex: Mam is an owner of the property, she has a
same day in the afternoon however it was not tenant and she gave the tenant the right of first
communicated to A the offeror, before it was refusal, she gave him the right to buy the property
communicated to him, A died, the offeror died. May in case she will decide to sell the property. Q: Is the
B now communicate his acceptance to the heirs of Rights of First refusal an option contract?
A? A: Right of First refusal is not an option contract
A: No, because of incapacity. An offer becomes because the instance of the right of the first refusal
ineffective upon the death, civil interdiction, came from the offeror, and it is considered as a
insanity, insolvency of either party before separate contract, and one important requirement
acceptance is made known to the party. is a definite or certain offer from the offeror.
 17
A: No, because it depends on whether the ● If offer is a unilateral preposition coming
offerer will decide to sell the property and on from the offerer, an acceptance must come
terms that are not yet determinate. from the offerree
DEFINITION: Acceptance is the conformity by
You cannot consider this as a contract because the offeree to the proposition of the offerer.
you cannot yet determine the offer. It depends on
whether the offerer will decide to sell the property Note: ACCEPTANCE must be ABSOLUTE and
and on terms that are not yet determinate. UNQUALIFIED.

If for example, Ma’am removes that right of first ● If your acceptance carries with it certain
refusal, Ma’am is not in breach of any option qualifications, that is not an acceptance but
contract. merely a counteroffer.
● An offer with a counteroffer did not create a
ADVERTISEMENTS perfected contract. There is no consent,
a. Unless it appears otherwise, business there is no meeting of the minds.
advertisements of things for sale are not
definite offers, but mere invitation to make KNOWLEDGE OF THE ACCEPTANCE. The
an offer. (Article 1325, NCC) acceptance of an offer must be made known to
Example: the offerer. The contract is perfected only from the
In a newspaper or magazine, “House and lot for time the acceptance of the offer is made known to
sale located at Richville Subdivision, Baguio City. the offerer. Unless and until the offerer knows of
Please contact Caloy.” A contact number is the acceptance, there is no meeting of the minds of
indicated therein. Can that be considered as a the parties, no real concurrence of offer and
definite offer? NO. Because business acceptance.
advertisments of things for sale are not definite ● The acceptance of the offer must be made
offers, but mere invitation to make an offer. known to the offerer for it to be binding.
Note:
b. Advertisements for bidders are simply ● In case of incapacity, it may render the offer
invitations to make proposals, and the ineffective if incapacity occurs before
advertiser is not bound to accept the acceptance.
highest or lowest bidder, unless the ● Or withdrawal of the offer: the offer may
contrary appears. (Art. 1326, NCC) withdraw anytime before the offerer has
Example: knowledge of the acceptance of the offeree.
In an advertisement in a newspaper, commercial ● The most important factor: KNOWLEDGE.
building here in Baguio City is open for bidding. A
submitted his bid of P5M, B submitted P6M, C ACCEPTANCE MADE BY LETTER OR
submitted P7M. Should the owner always choose TELEGRAM does not bind the offerer except from
the P7M bid. NO. Advertisements for bidders are the time it came to his knowledge. (Art. 1319,
simply invitations to make proposals. You cannot NCC)
compel the advertiser to choose the highest or
lowest bid. A letter containing the offer was given by A to B. B
also in a letter (snail mail - post office which may
However, there is an exception to the rule: Public take months), sinubmit niya yung kanyang
auctions in line with executions of judgment. acceptance in its entirety of the entire proposition.
EXCEPT: Rule 39, ROC: “By express provision However, it was only made known to the offerer 3
of law in sale of properties under execution, it months after the offer was made. When is it
must be sold to the highest bidder.” binding? After 3 months, when the offer was now
c. Public advertisements offering rewards or made known to the offerer.
prizes, such as in contest or competitions,
constitute unilateral promise. When a - The contract, in such a case (acceptance by
member of the public performs an act letter or telegram), is presumend to have
pursuant to the offer, such action constitutes been entered into the place where the
an acceptance which converts the promise offer is made.
into a contract binding on the advertiser.
Example: An OFFER THROUGH AN AGENT is accepted
Manalo ng P1M, motor, sasakyan, maglagay ka from the time acceptance is communicated to him.
lang ng 5 sachets of shampoo, ilagay ang address,
pangalan, edad, contact no. then there are drop The principal executed an SPA in favor of the
boxes on groceries and other public institutions. Or agent to sell the property. The agent on March 1,
may paraffle. If the public participated or performs 2023, offered the sale of the property to A. On that
the act or instructions provided, it creates a binding same day, it was accepted by A. Not knowing that
contract with the advertiser. From a promise, it the principal also offered the same property for sale
converts it into a contract. to B on March 5, 2023. It was also accepted by B,
who has the better right?
ACCEPTANCE It does not matter if the principal was the
● Another requisite of consent one who also looked for a buyer.
 18
NOTE: If an offer is made through an agent, then it If the time is not stated and the person and the
will be from the time it was communicated to him. offeree is present, it means that there is
presumption that acceptance be made
Who has better right? immediately.
It will be A when he communicated his
acceptance through the agent on March 1, 2023. b. In general, when the offerer has not fixed a
period for the offeree to accept the offer,
KINDS OF ACCEPTANCE: and the offer is made to a person
a. Express; or, present, the acceptance must be made
-written or oral immediately.
b. Implied
-e.g The tale of the Girl selling REVOCATION OF ACCEPTANCE. Acceptance
Hamburgers.(example ng Prof ni Ma’am sa may be revoked, but the revocation must be
oblicon) made known to the offerer before he learns of
A Girl was selling hamburgers for P100.00 the acceptance.
each. If one party took a Hamburger and said that I Acceptance can be revoked provided you
will buy this, there is an express acceptance. have not yet communicated your acceptance to the
offerer.
Implied acceptance- If one took a Hamburger-
sumenyas lang sya- there is an implied acceptance ILLUSTRATION:
that a contract is perfected. Question:
In implied, there is still an overt act because A offered 50 identical mobile phones to B for P
when it comes to acceptance, silence is not a 7,500.00 each. B answered that he (B) is willing
general rule. to purchase 70 identical mobile phones at the
same price each. Is the contract perfected?
SILENCE. In general, the offeree is not bound to (**I did not include the answers from the class)
answer a proposal, and his silence per se cannot
be construed as an acceptance. What you have here is a general question. How do
Exception. Acceptance may be implied from you answer general questions? The facts are not
silence if clearly warranted by the circumstances. sufficient. Qualify your answer.
(Art. 1870, NCC).
If the offeree requires express acceptance, it Answer: It depends. If B wanted 70 mobile phones
should be done expressly. (Art. 1321, NCC) and not less, the contract is NOT perfected.
However, if B is contented with the 50 mobile
In Implied acceptance, there must always be an phones but desires an addition, the contract is
OVERT ACT that would clearly manifest perfected for the 50 mobile phones and an offer for
acceptance and the only exception is Art, 1870, the 20, if accepted, also warrants a perfected
NCC. contract.
Comply with the express acceptance. Why?
Because of the third requisite that all other terms CAPACITY TO GIVE CONSENT
agreed upon, you should comply with.
Capacity- As a general rule, any person of LEGAL
TIME, PLACE AND MANNER AGE can give consent to a contract unless there is
RULE. The person making the offer may fix the a ground for his incapacity provided by law.
TIME, PLACE AND MANNER of acceptance, all
of which must be complied with. (Art. 1321, Note: Capacity is presumed. So the burden of
NCC) proof that one party is incapacitated to enter into a
Example: I am selling my car here in Baguio for contract is with the person alleging the
P500,000.00 with a condition that it can only be incapacity. It is not merely a preponderance of
picked at a particular day. A communicated his evidence. Incapacity shall be proven by clear and
acceptance by saying that I will buy it but deliver it convincing evidence.
in Mindoro. Is there acceptance?
NO, that is still qualified and it did not Incapacity: The following cannot give consent to a
comply with the time, place and manner that the contract:
offeror is making. a) Unemancipated minors;
All minors whether married or not, are
a. An acceptance which is not made in the incapacitated to give consent to contract.
manner, palace or period prescribed by the
offeror is not effective but constitutes a b) Insane or Demented Persons;
counter-offer, which the offerer may accept i) Contracts entered into during the lucid
or reject. interval are VALID. (Art. 1328, NCC)
An offer, then counter-offer, then an
offer again to counter the counter-offer, that If the insane person/party gave consent
is how negotiation. during a lucid interval, the consent is valid
and the contract is perfected.
What if the offeror did not state the time of
acceptance?
 19
If you are not in your lucid interval but you - For purposes of emphasis, consent is an
are on a manic stage, then the contract is essential element of a contract.
VOID because there is no consent. ● Consent is essential to the existence of a
contract. If consent is absent, the contract is
ii) Contracts agreed to in a state of non-existent.
drunkenness or during a hypnotic spell are ● If consent is present, but it was given through
VOIDABLE. (Art. 1328, NCC) mistake, violence, intimidation, undue influence,
or fraud, the contract is voidable
It is merely voidable. It is valid until
annulled. Requisites of Consent
- Consent, in order to warrant a perfected
c) Deaf-Mutes who do not know how to contract:
write; (Art. 1327, NCC) 1. It should be intelligent or with an exact notion of
- So deaf-mutes who do not know how to the matter to which it refers (INTELLIGENCE);
write cannot give consent. - If your consent is elicited through mistake,
then intelligence is missing or lacking.
But note that this incapacity listed in the Civil Code
of the Philippines on incapacity to give consent are 2. It should be free (FREEDOM); and,
already modified by certain rules. We have a - There must be freedom to give consent.
modification where a child/minor buys foods or - If your consent is elicited through violence,
necessaries from a department store or fast food, it intimidation, or undue influence, then there
creates a perfected contracted because this is is absence of freedom.
already modified by other rules and regulations.
3. It should be spontaneous (SPONTANEITY).
Special Disqualifications - If your consent is elicited through fraud,
● Sec. 2, Rule 92 of the ROC – Incompetents then there is absence of this particular
a. Those under civil interdiction; requisite.
b. Hospitalized lepers;
c. Prodigals or spendthrifts; Let’s now discuss the different grounds for vices
d. Deaf and dumb who are unable to read and of consent. Let’s start with mistake or error.
write;
e. Those of unsound mind even though they Mistake or Error
have lucid intervals; and, - It is a false belief on something.
f. Persons not of unsound mind, but by reason - Not all mistake or error is automatically
of age, disease, weak mind and other equivalent to vitiation of consent. There are
similar causes cannot, without outside aid, certain requisites that you should observe.
take care of themselves and manage their
property, becoming thereby an easy prey for 1. In order to invalidate consent, error or
deceit and exploitation. mistake, it must be substantial regarding:
a. The object of the contract;
You have to read the above together with the - Example: You thought you were
provisions under the Civil Code of the Philippines. entering into a mortgage, it turned
We also have relative disqualifications, these are out to be a contract of sale. Or you
provisions scattered in the Civil Code. are buying pesticide from another
person because your purpose is to
Effect of Incapacity kill mosquitoes or insects in your
- It depends if one party is incapacitated or household. But it turns out that what
both parties are incapacitated and the other was given to you was air freshener.
party is disqualified. There is now a substantial mistake
a. If one of the parties to a contract is or error in the object of the contract.
incapacitated, the contract is voidable. (Art. b. The condition which principally moved one
1390, NCC) or both parties to enter into the contract (it
- Meaning, it is valid until annulled. In fact, may be error in quality or quantity); or,
under voidable contracts, you can actually - Error in quality: you thought you
ratify it. So if a minor enters into a contract, were buying authentic clothes but it
the contract is merely voidable. When the turns out to be merely an imitation.
minor reaches age, s/he can ratify the - Error in quantity: you were made to
contract. Then the contract becomes valid. believe that you are actually buying
a 600 sqm lot, but it turns out that it
b. If both parties to a contract are incapacitated, is only 300 sqm.
the contract is unenforceable. (Art. 1403 and c. Identity or qualifications but only if such was
1407, NCC); and, the principal cause of the contract.
- Example: You hired a person for a
c. If a party is disqualified by law, the contract is particular service. You thought that
void. he was an expert in International
Law to give a lecture. But it turns out
VICES OF CONSENT that he is not.
 20
- Example: You hired a painter
specific to the qualification, but it For example, you bought “gayuma” in Quiapo,
turns out that he is a singer or a doubting the effectivity of this gayuma. If it is not
dancer and not a painter. effective, will you ask for the annulment of the
- Example: You took an advice contract? No.
thinking that he is a doctor. You
bought a lot of vials of vaccine from RULE IN CASE OF INABILITY TO READ OR
him. It turns out that he is actually a UNDERSTAND
medical representative. Art. 1332, NCC
PRESUMPTION: MISTAKE or FRAUD if (1) one of
Mistake of Account (a mathematical error) the parties is unable to read; or (2) the contract is in
a. Simple - contract is valid; remedy is a language not understood by him.
correction.
- Example: A bought P500,000 car; Burden of proof is with the party alleging that the
P75,000 jewelry, and P60,000 contract is duly explained to the party and the party
appliances. Total is P635,000. But the understands the contents, stipulations, terms and
contract that they entered only states conditions even if it is not in the language
P600,000. Can A annul the contract understood.
because of a mistake as to the
accounting? RATIONALE: Art. 24, NCC- In all contractual,
The law says that if it is only a simple property or other relations, when one of the parties
mistake of account, that cannot be is at a disadvantage on account of his moral
considered as vitiation of consent. If it is dependence, ignorance, indigence, mental
merely a simple mistake of account, weakness, tender age or other handicap, the courts
your only remedy is to correct it. must be vigilant for his protection.

b. Gross MUTUAL ERROR

● If it is not apparent - ground for Can be considered as vitiation of consent if the
rescission; following requisites are present:
● If it is apparent - liability
ART. 1334, NCC
2. Error must be the causal, not merely a. There must be mutual error;
incidental factor that induced the b. The error must refer to the legal effects of
complaining party to enter into the contract. the agreement; and,
c. The real purpose of the parties is frustrated.
For example, you bought a DVD copy of a movie,
when you watched it, you got bored. Can you ask For example, A and B are buyers of a party (50-50
for the annulment of the contract because of a in the purchase price), C is the seller. It turns out na
mistake? No. Because when you get bored by the hindi lang 50-50 but they have to pay back taxes,
movie that is merely an incidental factor but not the capital gains, transfer taxes, which are not made
causal factor that induced you to give consent. known to them. Can A and B back out from the
contract? Yes. Because there is mutual error.
3. Error must be a mistake of fact and not of There is an error which refers to the legal effects of
law. the agreement and the real purpose of the parties
is frustrated. So, all along what they know is that
If it is a mistake of law, Article 3 of the NCC will be they are going to share in the purchase price. They
applied, ignorantia legis non excusat. are not aware that they have to pay/do the
following:
Mistake of fact, there shall be a substantial 1. If the property is subject to loan, they will
mistake as to the object or as to the conclusion pay for that
that induced tha party to give its consent or to the 2. Pay the other expenses in line with the sale
identity or qualification. 3. The squatters have to be ejected

NOT ERROR OR MISTAKE So, the real purpose of the parties is frustrated.
1. Mistake as to the designation will not vitiate
consent, as long as the intended object is How if only A knows? Is there vitiation of
clear. consent?
None. Because under Art 1334, there must be
For example, you bought a parcel of land, in the mutual error or mistake.
Deed of Sale, there is a typographical error in the
TCT No. Both the buyer and the seller refer to the Note: Do not confuse this with reformation of
same parcel of land, it will not vitiate the consent. contracts.

2. There is no mistake if the party alleging it DISTINGUISH FROM REFORMATION:

knew the doubt, contingency or risk Real agreement is not disclosed.
affecting the object of the contract. (Art.
1333, NCC)
 21
This has something to do with the interpretation of
the contract. Here, the contract does not state or Note: When it comes to violence or intimidation,
does not present the real intention of the parties. even undue influence, it may be committed by a
third person, not necessarily the contracting parties.
So, you agreed on a mortgage. However, the
contract seems like it is worded that it is already a So, if you have a reverential fear over another
sale. The real agreement is not disclosed. person, that other person not being a party to the
contract, but because of reverential fear (more on
Remedy: Ask for the reformation of the contract. the category of undue influence), and that is the
Do not ask for its annulment. determining cause why you entered into a contract,
you can annul the contract because of the act of a
VIOLENCE & INTIMIDATION or THREAT third person.
Violence - refers to physical coercion
UNDUE INFLUENCE
Example: B is poking A continuously so that the There is undue influence when a person takes
latter will sell his land to the former. A was improper advantage of his power over the will of
annoyed. Because of annoyance, he signed the another depriving the latter of a reasonable
contract or was compelled to sell his land to B. Is freedom of choice.
there violence?
The following circumstances shall be
Intimidation or Threat - moral coercion considered:
a. The confidential, family, spiritual and other
Requisites for violence to vitiate consent: relations between the parties; or
a. Employment of a serious or irresistible - This is always present
force; and - That is why reverential fear is more
- Continuously poking someone cannot applicable here
be considered a serious or irresistible b. The fact that the person alleged to have
force been unduly influenced was suffering from
- It would be different if you are being mental weakness, or was ignorant or in
beaten up or a gun is pointed at you for financial distress
you to sign the contract - Financial distress per se cannot always
b. It must have been the reason why the automatically be considered as a factor
contract was entered into. of undue influence.
- This is present in all vices of consent
- If there are other reasons, then the NB: Undue influence shall annul the obligation,
contract is valid. although it may have been employed by a third
person who did not take part in the contract (Art
Requisites for intimidation or threat to vitiate 1336)
consent: - If undue influence, violence or intimidation is
a. Reasonable and well-grounded fear of an made by a third person, you can actually
evil; annul a contract even if violence, undue
b. Evil must be imminent and grave; influence, intimidation or threat is not made
c. Evil must be upon his person or property, or by the contracting party but by a third
that of his spouse, descendants or person
ascendants;
- Example: When a gun is pointed at CONTRACTS OF ADHESION
your family if you will not sign the
contract Definition:
d. It is the reason or the determining cause One wherein almost all of the provisions are
why he enters into the contract; and drafted by one party. The participation of the
e. The threat must be an unjust act or an other party is limited to affixing his signature or
actionable wrong. his “adhesion” to the contract.
- If it is just act, for example, “ I will sign
this pero ‘pag niloko mo ako, I will file a Kaya nga eto adhesion to the contracts.
case of estafa against you” - this Note: This contract is common to insurance
cannot be considered an intimidation or contracts. In insurance contract, meaning it is
threat human nature that you don’t want t be reading a
- Another, in compromise agreement, booklet. A booklet of a contract with a font size of 9
“Pirmahan mo na ‘yan para or 8 and with certain terms that you cannot even
makpagbayad ka, ‘pag hindi, magfafile understand. You only have to listen to the gist from
ako ng criminal case against you” - this your agent. Almost all of the terms are prepared by
is not an intimidation or threat because the other party and you, as the insured, all you
it is a just act available to the other have to do is to signify or affix your signature.
contracting party
RULES:
Reverential fear - fear of displeasing a person to
whom respect and obedience are due (Art 1336)
 22
1. Any ambiguity, obscurity or doubt in a contract a. It must have been employed by one of the
of adhesion is construed or resolved strictly contracting party upon the other;
against the party who prepared it. - It is an exception to Art. 1336.
- Note: violence, intimidation and
- Go back to Art. 24 of the NCC wherein the undue influence can be considered
courts should be vigilant, should take care vices of consent even if it is
or should protect the party especially if the committed by 3rd person and not a
other party who enters into contract of party to the contract. BUT for fraud,
adhesion are those which are at a it must only be committed by the
disadvantage. contracting party.

- Any ambiguity, obscurity or in doubt should b. It must have induced the other party to enter
be construed or interpreted strictly against into a contract;
the party who prepared it. - Kaya nga these are frauds
simultaneous to the creation of the
2. In some exceptional cases, the court may even contract.
set aside prejudicial stipulations in an
adhesion contract. c. It must have been serious; and,

- Example: d. It must have resulted in damage and injury

1. Yung mga ticket sa bus. Usually, to the party seeking annulment.
you get your ticket which is actually
a contract of adhesion because at DETERMINATION OF FRAUD
the back of the ticket it states the
limited liability of a common carrier. 1. Failure to disclose facts, when there is
In case of accidents, that cannot be duty to reveal them, as when the parties
used by the bus company. That is a are bound by confidential relations,
contract of adhesion. Limiting liability constitutes fraud. (Art. 1339, NCC)
is against the law and these are
prejudicial stipulations which can be Example:
set aside by the courts. You have here a seller of a land and then a
buyer. The buyer consults A “Balita ko
2. Yung mga inconvenient venues. You magpapatayo ang SM dito from residential,
entered into a contract and you are it will become a commercial land, when I
in Mindanao. Ang nakalagay doon in buy this land from you in the future, it will
case of litigation only the courts in have a higher price, is that true?” Is there an
Manila is the proper venue. These obligation on the part of the seller to
are prejudicial stipulations or disclose those facts? Assume that the seller
contracts of adhesion. knows those facts. There is no obligation
on the part of the seller. This cannot
Another vices of consent: constitute fraud if the buyer buys the
property.
FRAUD OR DOLO
However, if A, aside from being the seller is
In general: There is fraud, through insidious words also the financial adviser of B. There is a
or machinations of one of the contracting parties, confidential relations or duty to disclose
the other is induced to enter into a contract which, such facts and there was failure on the part
without them, he would not have agreed to. (Art. of A to disclose it, therefore, there is now
1338, NCC) fraud that vitiates consent.

There are two kinds of dolo: Sa corporation din, you can apply this.
1. Dolo insidente
2. Dolo causante 2. The usual exaggerations in trade, when
the other party had an opportunity to know
Under Art. 1338, you are referring to dolo the facts are not in themselves fraudulent.
causante. (Art. 1240, NCC)

DOLO CAUSANTE - fraud employed prior or Example:

simultaneous to the creation of the contract. I am the seller. Etong car ko is faster than
the speed of sound. Those are
Or fraud employed to elicit consent from the other exaggerations in order for sale.
party. In dolo insidente, there is already a valid
contract. However, there is dolo insidente in the Meron din naman kayong the buyer beware. So the
performance of the obligation or the terms and other party had the opportunity to know the facts,
conditions of the contract. that cannot be considered as fraudulent.

REQUISITES OF FRAUD TO VITIATE CONSENT:

 23
3. A mere expression of an opinion does not REQUISITES OF SIMULATION:
signify fraud. (Art.1341, NCC) a. An outward declaration of will different from
the will of the parties;
Example: You’re buying kitchen ware and asked b. The false appearance must have been
the seller and the latter said “I think antique mga intended by mutual agreement; and,
ito”. You bought the plates and it turns out that it c. The purpose is to deceive third persons.
wasn’t antique. Does it signify fraud? No.
TYPES OF SIMULATION
EXCEPT: (1) made by an expert; and (2) the A. ABSOLUTE SIMULATION - when the
other party has relied on the former’s special parties do not intend to be bound at all.
knowledge
Example: You agreed to a contract of sale but there
If it falls on the exception then there is now fraud. was no delivery, there was no payment of the
purchase price.
Example: The seller is an antique enthusiast and
you relied on the special knowledge of the other i. An absolute simulated or fictitious contract is void
party and it turns out it was not antique then there (Art. 1346, NCC), because consent is totally
will be fraud. absent.

4. Misrepresentations by a third person does ii. Absolutely Simulated Contract v. Fraudulent

not vitiate consent. (Art. 1341, NCC) Contract

EXCEPT: (1) Such misrepresentation has

created substantial mistake; and (2) the same is
ABSOLUTELY FRAUDULENT
mutual. (Art. 1342, NCC)
SIMULATED CONTRACT
5. Misrepresentation in good faith is not No contract really exist A contract exist and
fraudulent but may constitute error. or was intended; it may was intended to take
thus be attacked by effect (for a fraudulent
Misrepresentation in good faith is not fraudulent but any creditor, at any purpose). If intended to
may constitute a vice of consent under mistake or time, and even if the defraud a creditor, it
error. debtor is not insolvent. may be rescinded by
the creditors prior to
Pero kung simple mistake or error lang yan that can Example: Binenta ko the contract, upon
be remedied not by annulment. Note for mistake property ko pero showing that the debtor
and error there must be substantial consideration naglabas ako Deed of is insolvent, and within
as to the object, identity or qualifications, and even Sale between me and a prescription period of
the conditions which is the principal force of my brother but that four years.
entering into a contract. Deed of Sale has no
consideration at all and Example: I have failed
EFFECTS OF FRAUD no delivery was made, to pay all due and
A. DOLO CAUSANTE - makes the contract it was not transferred to demandable
voidable, provided that it is (a) serious and my brother. The obligations and they
(b) has not been employed by both creditors may attack it are going after my
contracting parties (Art. 1344, NCC) any time. property. So what I did
is that I executed a
Dolo Causante makes the contract voidable Deed of Donation in
because it vitiates consent. If it is employed by both favor of my brother with
parties then we apply the pari delicto doctrine. the purpose na di ako
habulin ng creditors.
B. DOLO INCIDENTE - only obliges the
person employing it to pay damages. (Art.
1344/1171, NCC) B. RELATIVE SIMULATION - when the
parties conceal their true agreement.
SIMULATED CONTRACTS
DEFINITION: Simulation occurs when an apparent Example: We agreed on a sale but really our
contract is a declaration of a fictitious will, intention is an equitable mortgage; Even if we
deliberately made by the agreement of the partes, agreed on a sale what we executed is a donation in
on order to produce, for the purpose of deception, order to pay lesser tax.
the appearance of a juridical act which does not
exist or is different from that which was really The real and true agreement is binding on the
executed. parties, provided that:
1. It does not prejudice third person; and
In other words a simulated contract is where you 2. It is not intended for any purpose contrary to
don’t really intend to be vowed by the terms and law, morals, good customs, public order or
conditions. public policy.
 24
OBJECT OF CONTRACTS determine all black sheeps without a need of a new
DEFINITION. Object is the thing, right or service contract between the parties.
which is the subject matter of the contract. (Arts.
1318 and 1347, NCC) CAUSE or CONSIDERATION OF CONTRACTS
IN GENERAL. The essential reason which moves
REQUISITES FOR A THING, RIGHT OR the contracting parties to enter into it. In other
SERVICE TO BE AN OBJECT OF CONTRACTS: words, the cause is the immediate, direct and
1. WITHIN THE COMMERCE OF MAN - All things proximate reason which justifies the creation of an
which are not outside the commerce of man, obligation through the will of the contracting parties.
including future things, may be the object of
contracts. Note: Do not confuse this with the OBJECT of the
contract. The object is the things, right or service;
“Within the commerce of men ''-meaning it can while the cause is the essential reason why the
be appropriated or can be subject to private parties entered into a contract.
ownership. Matters not within the commerce of men
include political rights, purely personal rights arising CAUSE OF CONTRACTS:
from family relations (support), public office or 1. In ONEROUS CONTRACTS the cause is
property of public dominion. understood to be, for each contracting party, the
prestation or promise of a thing or service by the
a) All rights which are not intransmissible may also other. (Art. 1350, NCC)
be the object of contracts. (Art. 1347, NCC)
Note: All rights are transmissible except if it Ex. In a contract of sale of a parcel of land. The
expressly provided for by law, nature, or stipulation object is the parcel of land. The cause, as to the
of the parties. seller, is the payment that will be given by the
buyer; while for the buyer, the cause is the delivery
b) All services which are not contrary to law, of the land to his or her name.
morals, good customs, public order or public policy
may likewise be the object of a contract 2. In REMUNERATORY CONTRACTS - the cause
is the service or benefit which is remunerated. (Art.
c) GENERAL RULE: Future things can be the 1350, NCC)
object of contracts.
This is not pure liberality. For example, giving
Illustration: At the time the contract was executed, bonuses to employees by the employer. The bonus
the object or thing is not yet owned or in existence is an award for loyalty or efficiency on the part of
(i.e crops,puppies) but if the time comes, it is the employees. The cause on the part of the
determinable, the contract is perfected. employer is the service of benefit which is
remunerated
EXCEPTION: No contract may be entered into
upon future inheritance, except in cases expressly 3. In GRATUITOUS CONTRACTS the cause is the
authorized by law (Art 1347, NCC) mere liberality of the benefactor (Art. 1350, NCC)
Ex. Donation of land. The land is the object and the
Example: Partition inter vivos. During the lifetime of liberality is the cause of the contract.
the decedent, he or she can distribute or partition
his or her properties, however, such partition shall CAUSE v. MOTIVE
take effect only upon death and is revocable during Cause is the essential reason for the contract,
the lifetime of the decedent. motive is the particular reason of a party entering
into a contract and which does not affect the other
2. POSSIBLE- Impossible things or services cannot party.
be the object of the contract. (Art. 1348, NCC) Example: In a contract of sale of a laptop (onerous
It can be physically (i.e. make my dog talk) or contract). The cause is the undertaking on the part
legally impossible (to sell drugs at school, to build a of the buyer to pay the purchase price and the
prostitution den) undertaking on the part of the seller to deliver the
object of the contract.
3. CERTAIN
i. AS TO KIND. The object of every contract must Q: Is the reason by the buyer for buying the
be determinate as to its kind. laptop important?
A: NO, it is immaterial and is not an essential
ii. AS TO QUANTITY. The fact that the quantity is element of the contract.
not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to GENERAL RULE: A party's motives for entering
determine the same, without the need of a new into the contract do not affect the contract. A party's
contract between the parties. (Art. 1349, NCC) motive does not even have to be known to the
other party.
Illustration (as to the quantity): A has 500
sheeps. The contract states that B may own all the EXCEPTION: The motive may be regarded as the
black sheeps that A has. At that time it cannot be cause "when the motive predetermines the cause"
determined, however, there is a possibility to
 25
Example: The National Housing Authority (NHA) is will be built. Then the buyer bought the land ,
buying lands. What is their purpose in buying the however, the owners of the theme park chose to
lands? Because it will be used for socialized open it to another land or place. Thus a statement
housing. If their motive in buying the land is to use of false cause in a contract shall render them void
for socialized housing. But if they bought lands but with an exception wherein if you can prove it
outside or not suitable for socialized housing then that it is founded upon another cause which is true
their motive now becomes the cause. So They and lawful at the time that the contract was entered
rescind or annul the contract because of their into.
motive which is also the cause of the contract.
You have that true and lawful cause that the theme
EXISTENCE OF A CAUSE park will be established then that is no longer your
fault if the theme park now chooses to build in
RULE: Contract MUST have a cause, as it is an another place. Then, that will not affect the validity
essential requisite. Contracts without cause of the contract.
produce no effect whatever. (Art. 1352, NCC)
ADEQUACY OF CAUSE
PRESUMPTION: Although the cause is not stated
in the contract, it is presumed that it exists (and is GENERAL RULE: Lesion (Injury) or inadequacy of
lawful), unless the debtor proves the contrary. (Art. cause shall not invalidate a contract. (Art. 1355,
1354, NCC) NCC)

LEGALITY OF CAUSE EXCEPTIONS:

RULE: The cause MUST be legal. Contracts with 1. In cases specified by law: and
unlawful cause produce no effect whatever. (Art.
1352, NCC) Example 1: Article 1602, You entered into a
contract of sale but the price is inadequate which is
PRESUMPTION: The cause is presumed lawful. evidence that you are not entering into a contract of
Although the cause is not stated in the contract, it is sale but into an equitable mortgage.
presumed that it exists and is lawful, unless the
debtor proves otherwise. Example 2: Rescissible contracts concerning the
sale of the property of the ward by the guardian and
UNLAWFUL CAUSE: The cause is unlawful if it is the purchase price is lesser than ¼ of the value of
contrary to lawn morals, good customs, public order the property.
or public policy.
2. If there has been fraud, mistake or undue
***if it is contrary to law the contract is considered influence.
unlawful.
Example: If there was fraud, mistake or undue
Example 1: You contracted with a person to build a influence in the sale of the property that constitutes
drug den within a residential area. This is contrary inadequacy of cost or price ( go back to Art. 24)
to law. wherein the courts will fix the price.

Example 2: You donated a land for the purpose of

sexual relations. Or donations in favor of the
mistress.

FALSE CAUSE: The statement of a false cause in

contracts shall render them void, unless it should
be proved that they were founded upon another
cause which is true and lawful.

Example: You are the seller and you believe a

theme park will be built within your vicinity where
your land is located. Then the adjacent lands will
follow the zonal value from a residential area to a
commercial land ( this was what you said to the
buyer). You know that it is true that a theme park