Week 2

I. Essential Requisites

Art 1318

A. Consent

1. When Consent Present

Art 1319

Insular Life v Asset Builders Corp

Facts:

Insular Life Insurance Company, Limited invited companies to participate in the bidding of the proposed
Insular Life building. The Instruction to Bidders prepared by Insular Life expressly required a formal
acceptance and a period within which such acceptance was to be made known to the winner. Asset Builders
Corporation submitted a bid proposal secured by bid bonds valid for 60 days. Under its proposal form, Asset
Builders bound and obliged itself to enter into a contract with Insular Life within 10 days from the notice of
the award, with good and sufficient securities. The project was awarded to the Asset Builders and a notice to
proceed with the construction was sent by Insular Life to the former. However, Asset Builders did not affix
its conformity to any notice of award. Neither did it execute any construction agreement. It informed Insular
Life that it will not proceed with the project.

Issue: ​Whether or not there is a perfected contract between Insular Life and Asset Builders.

Held: (​Answer​) ​No. ​There was indeed no acceptance of the offer by Asset Builders.

(​Legal Basis​) ​Such failure to comply with the condition imposed for the perfection of the contract resulted in
the failure of the contract. It is elementary that, being consensual, a contract is perfected by mere consent.
From the moment of a meeting of the offer and the acceptance upon the object and the cause that would
constitute the contract, consent arises. However, "the offer must be certain" and "the acceptance seasonable
and absolute; if qualified, the acceptance would merely constitute a counter-offer."
There are three distinct stages of a contract- preparation or negotiation, perfection or consummation.
Negotiation begins when the prospective contracting parties manifest their interest in the contract and ends at
the moment of their agreement. Perfection occurs when they agree upon the essential elements thereof. The
last stage is the consummation where they fulfill the terms agreed upon culminating in the extinguishment of
the contract.

(​Application of facts​) ​In the case at bar, the parties did not get past the negotiation stage. In fact, there was
only an offer and a counteroffer that did not sum up to any final arrangement containing the elements of a
contract.
(​Conclusion​) ​Clearly, no meeting of minds was established.

Sps Paderes v C.A GREG

Facts: ​Manila International Construction Corporation executed an ​in rem (lawsuit against an item) over 21
parcels of land including the improvements in favor of Banco Filipino Savings and Mortgage Bank to secure a
loan of P1,885,000. The 21 registered mortgaged properties included two lots in Paranaque. MICC sold a
house a lotto the Paderes spouses. Later, MICC sold another house and lot the Bergado spouses. Neither sale
was registered. For failure of MICC to settle its obligations, Banco Filipino filed a petition for the extrajudicial
foreclosure of MICC’s mortgage.

At the auction sale Banco Filipino was declared the highest bidder and a certificate of sale was issued in its
favor. Since there was no redemption within the reglementary period. Carlota Valenzuela, the liquidator of
Banco Filipino filed a petition for the issuance of a writ of possession of the foreclosed properties with the
RTC. The petition was granted. A notice to vacate was served on the spouses. However, instead of vacating,
petitioners filed before the CA. The CA dismissed the petitions for lack of merit and upheld the validity of
the writ of possession.

Issue: ​Whether consent was present between the contract of Paderes and Banco Filipino

Held: (​Answer​) ​No. A valid contract does not exist because consent is absent for there was no offer and
acceptance between the two parties.

(​Legal Basis​) ​To produce a contract, an offer must be complete, definite and intentional. Acceptance, on the
other hand, must not qualify the terms of the offer. Acceptance must be unequivocal and unconditional, and
must be without any variation or counteroffer. Any modification or variation from the terms of the offer
frees the offeror.

(​Application of facts​) ​In the case, there was no definite offer and absolute acceptance made by the parties.
The letters, signed by petitioners’ counsel, proposing to redeem the foreclosed properties and requesting
Banco Filipino to suggest a price for their repurchase, made it clear that any proposal by the bank would be
subject to further action on the part of petitioners. Another letter invited petitioners to engage in further
negotiations and does not contain a recognition of petitioners’ claimed right of redemption or a definite offer
to sell the subject properties back to them.

A third letter by petitioner does not contain the concurrence of any other authorized agent of Banco Filipino.
Where the alleged contract document was signed by only one party and the record shows that the other party
did not execute or sign the same, there is no perfected contract.
(​Conclusion​) Hence, there was no valid contract between the two parties for offer and acceptance was
absent.

a. Offer

i. Requisites of a Valid Offer

Art 1319

ii. Offer made through an agent

Art 1322

iii. Death, Civil Interdiction, Insanity or Insolvency

Art 1323

Villanueva v. Court of Appeals GREG

Facts: ​2 parcels of land belonging to Philippine Veterans’ Bank (PVB) are being disputed in Muntinlupa City
by Villanueva and Ong. PVB was placed under receivership on April 1984.

Villanueva’s offered to pay 110,417 pesos on June 1985 to buy the property. The Central Bank liquidator of
the PVB moved the disposal of the lots as a public auction must be done. She averred that she is the lawful
and registered owner of the subject lots which were mortgaged in favor of the PVB thru the falsification
committed by Jose Viudez, the manager of the PVB Makati Branch that upon discovering this fraudulent
transaction, she offered to purchase the property from the ban. However, she was not able to buy the
properties.

On 31 October 1991, the trial court rendered judgment holding that while the board resolution approving
Ong’s offer, a vested right which may be enforced against the PVB at the time the bank was placed under
liquidation proceedings, the said right was unenforceable. Court of Appeals gravely erred in holding that Ong
is better entitled to purchase the disputed lots, the petitioners maintain that Ong is a disqualified bidder, his
bid of P110,000.00 being lower than the starting price of P110,417.00 and his deposit of P10,000.00 being
less than the required 10% of the bid price.

Issue: ​Whether the insolvency (placed under receivership) of PVB invalidates the offer it made to Ong with
regards to the sale of its land
Held: (​Answer​) ​Yes. Said offer is invalidated as PVB is insolvent by the time an offer was made to Ong.
Bank became insolvent before its acceptance of an offer came to the knowledge of the offeror, the offer
became ineffective.

(​Legal Basis​) Under Article 1323 of the Civil Code, an offer becomes ineffective upon the death, civil
interdiction, insanity, or insolvency of either party before acceptance is conveyed.

The contract is not perfected except by the concurrence of two wills which exist and continue until the
moment that they occur. The contract is not yet perfected at any time before acceptance is conveyed.
Disappearance of either party or his loss of capacity before perfection prevents the contractual tie from being
formed.

(​Application of facts​) ​Insolvency of a bank and the consequent appointment of a receiver restrict the bank’s
capacity to act, especially in relation to its property. Applying Article 1323 of the Civil Code, Ong’s offer to
purchase the subject lots became ineffective because the PVB became insolvent before the bank’s acceptance
of the offer came to his knowledge. Contract of sale did not reach the stage of perfection. Corollarily, he
cannot invoke the resolution of the bank approving his bid as basis for his alleged right to buy the disputed
properties.

(​Conclusion​) ​Hence, sale of land to Ong is invalid as PVB was insolvent when the offer was made to Ong.

iv. Withdrawal of Consent

Art 1324

Sanchez vs Rigos

Facts: ​In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant
Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum
of P1,510.00 within two (2) years from said date, a parcel of land situated in the barrios of Abar and Sibot,
San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated and elapsed," if “Sanchez
shall fail to exercise his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez
deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific performance and
damages against Rigos for the latter’s refusal to accept several tenders of payment that Sanchez made to
purchase the subject land. Defendant Rigos contended that the contract between them was only “a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil
Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in his complaint that, by virtue of the
option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and
committed to buy" the land described in the option. The lower court rendered judgment in favor of Sanchez

Issue: ​Was there a contract to buy and sell between the parties or only a unilateral promise to sell?
Held: (​Answer​) ​NO. The Supreme Court affirmed the lower court’s decision. The instrument executed in
1961 is not a "contract to buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its
own title "Option to Purchase."

(​Legal Basis​) ​"ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may
be withdrawn any time before acceptance by communicating such withdrawal, except when the option is
founded upon consideration as something paid or promised."

This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, ​even if accepted​,
is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a
binding effect if supported by a consideration which means that the option can still be withdrawn, ​even if
accepted​, if the same is not supported by any consideration. It is not disputed that the option is without
consideration. ​It can therefore be withdrawn notwithstanding the acceptance of it by appellee​. It is true that under article
1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to
the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except
when the option is founded upon consideration, but this general rule must be interpreted as ​modified by the
provision of article 1479 above referred to, which applies to "a promise to buy and sell" ​specifically​. As already
stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from
the price.

(​Application of facts​) In the case at bar, Rigos "agreed, promised and committed" herself to sell the land to
Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement,
promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of
the land.

(​Conclusion​) ​Therefore, the option did not impose upon plaintiff Sanchez the obligation to purchase
defendant Rigos' property since its undertaking is not supported by a consideration.

Serra vs Court of Appeals and RCBC (PIA)

Facts: ​Respondent bank, RCBC, filed a complaint for specific performance and damages against petitioner
Frederico Serra after the latter refused to sell a property subject of a Contract of Lease with Option to Buy.
Under the said Contract, Sierra shall lease to RCBC his land from 1975 to 2000 with an option to buy for
Php210.00/sqm within 10 years from 1975. In 1984, RCBC communicated to Serra its desire to buy the
property, but the latter refused saying that since the option to buy given to respondent was not supported by
a consideration distinct from the price, the option to buy is not binding upon him. RTC and CA ruled in
favor of RCBC. Hence, this appeal.

Issue: ​Whether the Option to Buy in the Contract of Lease can be withdrawn since there is no consideration
distinct from the price

Held: (​Answer​) ​No, it cannot be withdrawn.

(​Legal Basis​) Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time before the acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as something paid or promised.
Further, ​Article 1479 provides that an accepted unilateral promise to buy and sell a determinate thing for a
price certain is binding upon the promisor if the promise is supported by a consideration distinct from the
price. A unilateral promise to sell becomes a demandable bilateral contract if the debtor fails to withdraw the
promise before the creditor accepts because upon such acceptance of the offer, there is already a meeting of
the minds of the parties as to the determinate thing and the price.

(​Application of facts​) ​In this case, the option to buy was accepted by RCBC within the 10-year period as
agreed in the contract. Further, there is also a consideration distinct from the price in the form of a promise
when the parties stipulated in the contract that if RCBC failed to exercise its option to buy, it shall transfer all
improvements made on the land in favor of Serra.

(​Conclusion​) ​The SC ruled that the contract is valid and enforceable whereby Serra cannot refuse to sell the
subject property since the offer to sell was accepted within the stipulated period, and there is a consideration
in the form of a promise.

Tuazon vs Del Rosario- Suarez

Facts: ​Respondent Lourdes Q. Del Rosario-Suarez was the owner of a parcel of land. Petitioner Roberto D.
Tuazon and Lourdes executed a Contract of Lease over the parcel of land for a period of three years. During
the effectivity of the lease,Lourdes sent a letter to Roberto where she offered to sell to the latter subject parcel
of land. She gave him two years from January 2, 1995 to decide on the said offer. On June 19, 1997, or more
than four months after the expiration of the Contract of Lease, Lourdes sold subject parcel of land to her
only child, Catalina Suarez-De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis
S. De Leon and Rommel S. De Leon as evidenced by a Deed of Absolute Sale executed by the parties. The
new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises.
Roberto refused hence, the De Leons filed a complaint for Unlawful Detainer before the MeTC against him.
The MeTC rendered a Decision ordering Roberto to vacate the property for non-payment of rentals and
expiration of the contract. While the ejectment case was on appeal, Roberto filed with the RTC a Complaint
for Annulment of Deed of Absolute Sale, Reconveyance, Damages and Application for Preliminary
Injunction against Lourdes and the De Leons. On November 13, 2000, Roberto filed a Notice of Lis Pendens
with the Registry of Deeds of Quezon City. The RTC rendered a Decision declaring the Deed of Absolute
Sale made by Lourdes in favor of the De Leons as valid and binding. On appeal, the CA affirmed the
Decision of the RTC.

Issue: ​Whether or not Lourdes violated Robertos right to buy the subject property under the principle of
right of first refusal by not giving him notice and the opportunity to buy the property under the same terms
and conditions.

Held: ​No.
(​Legal Basis​) ​It is clear from the provision of Article 1324 that there is a great difference between the effect
of an option which is without a consideration from one which is founded upon a consideration. If the option
is without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the
offeree at anytime before acceptance; if it is founded upon a consideration, the offeror cannot withdraw his
offer before the lapse of the period agreed upon.

(​Application of facts​) ​In this case, it is undisputed that Roberto did not accept the terms stated in the letter of
Lourdes as he negotiated for a much lower price. Robertos act of negotiating for a much lower price was a
counter-offer and is therefore not an acceptance of the offer of Lourdes. The counter-offer of Roberto for a
much lower price was not accepted by Lourdes.

(​Conclusion​) Therefore, no contract that was perfected between them with regard to the sale of subject
property. Roberto, thus, does not have any right to demand that the property be sold to him at the price for
which it was sold to the De Leons neither does he have the right to demand that said sale to the De Leons be
annulled. Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not bound
thereby because of the absence of a consideration distinct and separate from the price.

v. Advertisements

Art 1325-1326

Jardine Davies v. CA (GREG)

Facts: ​During the 1992 National Power Crisis, Purefoods Corp., decided to install two (2) 1500 KW
generators in its food processing plant in San Roque, Marikina City to remedy further losses due to the series
of power failures.

Sometime in November 1992, bidding for the supply and installation of the generators was held. Several
suppliers and dealers were invited to attend a pre-bidding conference to discuss the conditions, propose
scheme and specifications that would best suit the needs of PUREFOODS. Out of the eight (8) prospective
bidders, FAR EAST MILLS SUPPLY CORPORATION (FEMSCO) won the bid. Thereafter, in a letter
dated 12 December 1992 addressed to FEMSCO President Alfonso Po, PUREFOODS confirmed the award
of the contract to FEMSCO. Later, however, in a letter dated 22 December 1992, PUREFOODS unilaterally
canceled the award due to alleged "significant factors” and re-bid of the project."

Consequently, FEMSCO protested the cancellation of the award. However, on 26 March 1993, before the
matter could be resolved, PUREFOODS awarded the project and entered into a contract with JARDINE
NELL, a division of Jardine Davies, Inc. (JARDINE). On 27 June 1994 the Pasig RTC, granted among others
the award for moral damages in the amount of P2,000,000.00 each for JARDINE and PUREFOODS.
Issue: ​Whether the acceptance of the advertisement by FEMSCO already constitutes a valid contract
Held: (​Answer) ​No. A valid contract was not yet formed by FEMSCO and Purefoods due to absence of
acceptance.

(​Legal Basis) Even if a letter accepting an offer enumerates certain “basic terms and conditions,” if these
conditions are prescriptions on how the obligation is to be performed and implemented, they are not to be
considered as conditions for the perfection of the contract.

(​Analysis) ​PUREFOODS started the process of entering into the contract by conducting a bidding, Art.
1326 of the Civil Code, which provides that “[advertisements for bidders are simply invitations to make
proposals,” applies.

Accordingly, the ​Terms and Conditions of the Bidding disseminated by petitioner PUREFOODS constitutes the
“advertisement” to bid on the project. The bid proposals or quotations submitted by the prospective
suppliers including respondent FEMSCO, are the offers. And, the reply of petitioner PUREFOODS, the
acceptance or rejection of the respective offers.

These conditions were imposed on the performance of the obligation rather than on the perfection of the
contract.

First “condition” was merely a reiteration of the contract price and billing scheme based on the ​Terms and
Conditions of Bidding​ and the bid or previous offer of respondent FEMSCO.

The second and third “conditions” were nothing more than general statements that all items and materials
including those excluded in the list but necessary to complete the project shall be deemed included and
should be brand new.

The fourth “condition” concerned the completion of the work to be done, ​i.e., within twenty (20) days from
the delivery of the generator set, the purchase of which was part of the contract.

The fifth “condition” had to do with the putting up of a performance bond and an all-risk insurance, both of
which should be given upon commencement of the project.

The sixth “condition” related to the standard warranty of one (1) year. The enumerated “basic terms and
conditions” were prescriptions on how the obligation was to be performed were far from being conditions
imposed on the perfection of the contract.

(​Conclusion) Hence, a valid contract was not formed by Purefoods and FEMSCO due to absence of
acceptance.

b. Acceptance
 i. Requisites for a Valid Acceptance

Art 1319

Malbarosa vs CA

FACTS: Philtectic Corporation and Commonwealth Insurance Co., Inc. were only two of the group of
companies wholly-owned and controlled by respondent S.E.A. Development Corporation (SEADC).
Petitioner Malbarosa was the president and general manager of Philtectic, and an officer of other
corporations belonging to the SEADC group of companies. The respondent assigned to the petitioner one of
its vehicles (Mitsubishi Gallant) for his use.

Sometime in the first week of January 1990, petitioner intimated to Senen Valero his desire to retire from the
SEADC group of companies and requested that his 1989 incentive compensation as president of Philtectic
Corporation be paid to him. On January 8, 1990, the petitioner sent a letter to Valero tendering his
resignation, effective February 28, 1990 from all his positions in the SEADC group of companies, and
reiterating his request for the payment of his incentive compensation for 1989.

Louis Da Costa met with the petitioner on two occasions to discuss the amount of the 1989 incentive
compensation petitioner was entitled to, and the mode of payment thereof. Da Costa ventured that the
petitioner would be entitled to an incentive compensation in the amount of around P395,000. On March 14,
1990, the respondent, through Senen Valero, signed a letter-offer addressed to the petitioner stating therein
that petitioners resignation from all the positions in the SEADC group of companies had been accepted by
the respondent, and that he was entitled to an incentive compensation in the amount of P251,057.67, and
proposing that the amount be satisfied.

The respondent required that if the petitioner agreed to the offer, he had to affix his conformity on the space
provided and the date thereof.

On March 16, 1990, Da Costa met with the petitioner and handed to him the original copy of the March 14,
1990 Letter-offer for his consideration and conformity. The petitioner was dismayed when he read the letter
and learned that he was being offered an incentive compensation of only P251,057.67. He told Da Costa that
he was entitled to no less than P395,000 as incentive compensation. The petitioner refused to sign the
letter-offer on the space provided therefor. He received the original of the letter and wrote on the duplicate
copy of the letter-offer retained by Da Costa, the words: Recd original for review purposes.

Despite the lapse of more than two weeks, the respondent had not received the original of the March 14,
1990 Letter-offer of the respondent with the conformity of the petitioner on the space provided therefor. The
respondent decided to withdraw its March 14, 1990 Offer.
On April 4, 1990, Philtectic Corporation, through its counsel, wrote the petitioner withdrawing the March 14,
1990 Letter-offer of the respondent and demanding that the petitioner return the car and his membership
certificate in the Architectural Center, Inc. within 24 hours from his receipt thereof. The petitioner received
the original copy of the letter on the same day.
On April 7, 1990, the petitioner wrote the counsel of Philtectic Corporation informing the latter that he
cannot comply with said demand as he already accepted the March 14, 1990 Letter-offer of the respondent
when he affixed on March 28, 1990 his signature on the original document.

ISSUE: Whether or not there was a valid acceptance on his part of the March 14, 1990 Letter-offer of the
respondent

HELD: No. Under Article 1319 of the New Civil Code, the consent by a party is manifested by the meeting
of the offer and the acceptance upon the thing and the cause which are to constitute the contract. An offer
may be reached at any time until it is accepted. An offer that is not accepted does not give rise to a consent.
The contract does not come into existence. To produce a contract, there must be acceptance of the offer
which may be express or implied but must not qualify the terms of the offer.

The acceptance must be absolute, unconditional and without variance of any sort from the offer. The
acceptance of an offer must be made known to the offeror. Unless the offeror knows of the acceptance, there
is no meeting of the minds of the parties, no real concurrence of offer and acceptance. The offeror may
withdraw its offer and revoke the same before acceptance thereof by the offeree. The contract is perfected
only from the time an acceptance of an offer is made known to the offeror.If an offeror prescribes the
exclusive manner in which acceptance of his offer shall be indicated by the offeree, an acceptance of the offer
in the manner prescribed will bind the offeror. On the other hand, an attempt on the part of the offeree to
accept the offer in a different manner does not bind the offeror as the absence of the meeting of the minds
on the altered type of acceptance. An offer made inter praesentes must be accepted immediately. If the parties
intended that there should be an express acceptance, the contract will be perfected only upon knowledge by
the offeror of the express acceptance by the offeree of the offer. An acceptance which is not made in the
manner prescribed by the offeror is not effective but constitutes a counter-offer which the offeror may accept
or reject. The contract is not perfected if the offeror revokes or withdraws its offer and the revocation or
withdrawal of the offeror is the first to reach the offeree. The acceptance by the offeree of the offer after
knowledge of the revocation or withdrawal of the offer is inefficacious. The termination of the contract when
the negotiations of the parties terminate and the offer and acceptance concur, is largely a question of fact to
be determined by the trial court.

In this case, the respondent made its offer through its Vice-Chairman of the Board of Directors, Senen
Valero. On March 16, 1990, Da Costa handed over the original of the March 14, 1990 Letter-offer of the
respondent to the petitioner. The respondent required the petitioner to accept the offer by affixing his
signature on the space provided in said letter-offer and writing the date of said acceptance, thus foreclosing an
implied acceptance or any other mode of acceptance by the petitioner. However, when the letter-offer of the
respondent was delivered to the petitioner on March 16, 1990, he did not accept or reject the same for the
reason that he needed time to decide whether to reject or accept the same. There was no contract perfected
between the petitioner and the respondent corporation. Although the petitioner claims that he had affixed his
conformity to the letter-offer on March 28, 1990, the petitioner failed to transmit the said copy to the
respondent. It was only on April 7, 1990 when the petitioner appended to his letter to the respondent a copy
of the said March 14, 1990 Letter-offer bearing his conformity that he notified the respondent of his
acceptance to said offer. But then, the respondent, through Philtectic Corporation, had already withdrawn its
offer and had already notified the petitioner of said withdrawal via respondents letter dated April 4, 1990
which was delivered to the petitioner on the same day. Indubitably, there was no contract perfected by the
parties on the March 14, 1990 Letter-offer of the respondent. The petitioners plaint that he was not accorded
by the respondent reasonable time to accept or reject its offer does not persuade. It must be underscored that
there was no time frame fixed by the respondent for the petitioner to accept or reject its offer. When the
offeror has not fixed a period for the offeree to accept the offer, and the offer is made to a person present,
the acceptance must be made immediately.

In this case, the respondent made its offer to the petitioner when Da Costa handed over on March 16, 1990
to the petitioner its March 14, 1990 Letter-offer but that the petitioner did not accept the offer. The
respondent, thus, had the option to withdraw or revoke the offer, which the respondent did on April 4, 1990.

Even if it is assumed that the petitioner was given a reasonable period to accept or reject the offer of the
respondent, the evidence on record shows that from March 16, 1990 to April 3, 1990, the petitioner had more
than two weeks which was more than sufficient for the petitioner to accept the offer of the respondent.
Although the petitioner avers that he had accepted the offer of the respondent on March 28, 1990, however,
he failed to transmit to the respondent the copy of the March 14, 1990 Letter-offer bearing his conformity
thereto. Unless and until the respondent received said copy of the letter-offer, it cannot be argued that a
contract had already been perfected between the petitioner and the respondent​.

ii. Manner of Acceptance

Art 1320

iii. Right of Offeror to Fix Acceptance

Art 1321

2. Capacity to Give Consent

Art 1327-1329

Francisco v Herrera PIA

Facts: ​Eligio Herrera, Sr., father of respondent, sold two parcels of land to petitioner Julian Francisco. The
children of Eligio contended that the contract price for the two lots was grossly inadequate, thus, they tried to
negotiate with the petitioner. When the petitioner refused, herein respondent filed a Complaint for
Annulment of Sale before the RTC. Among other grounds, he alleged that the sale of the lots was null and
void since Eligio Sr. was already incapacitated to consent to a contract at the time of the sale because he was
afflicted with senile dementia. The RTC and CA ruled in favor of respondent, hence, this petition.
Issue: ​Whether the Contracts of Sale are void because the creditor had dementia at the time of sale.

Held: (​Answer​) ​No, the assailed contracts are not void, rather, they are valid and binding unless annulled.

(​Legal Basis​) ​Art. 1318 states that no contract exists unless there is consent of the parties, while Art. 1327
provides that insane or demented persons cannot give consent to a contract. But, if an insane or demented
person does enter into a contract, the legal effect is the contract is voidable or annullable as provided in Art.
1390.

(​Application of facts​) ​The vendor, Eligio Sr. entered into a contract but his capacity to consent was affected
by senile dementia. The SC ruled that the contracts are not void per se, rather, they are valid and binding
unless annulled through an action filed in the court. Likewise, an annullable contract may be valid by express
or implied ratification. In this case, the respondent impliedly ratified the contract when he accepted the
payments on behalf of his father. If he did not agree with the contract, he could have prevented petitioner
from delivering payments or instituted an action for reconveyance and have payments consigned in court. He
also did not offer to return such payments. Further, he impliedly agreed to it when he also negotiated for a
price increase. One cannot negotiate an increase and content that said contract is void.

(​Conclusion​) ​The Contracts of Sale are both valid and enforceable.

3. Vices of Consent

Art 1330

a. Mistake

i Kinds

Art 1331

Spouses Theis v. CA DOS

Facts: ​Private respondent Calsons Development Corporation is the owner of three (3) adjacent parcels of
land covered by: Transfer Certificate of Title (TCT) Nos. 15515 (parcel no. 1); 15516 (parcel no. 2); and
15684 (parcel no. 3). Adjacent to parcel no. 3, which is the lot covered by TCT No. 15684, is a vacant lot
denominated as parcel no. 4 ( a lot not owned by the private respondent). In 1985, private respondent
constructed a two-storey house on TCT No. 15684 (parcel no. 3). The lots covered by TCT No. 15515
(parcel no. 1) and TCT No. 15516 (parcel no. 2) remained idle. However, in a survey conducted in 1985,
parcel no. 3, where the two-storey house stands, was erroneously indicated to be covered not by TCT No.
15684 but by TCT No. 15515. While the two idle lands (parcel nos. 1 and 2) were mistakenly surveyed to be
located on parcel no. 4 instead (which was not owned by private respondent) and covered by TCT Nos.
15516 and 15684. Unaware of the mistake by which private respondent appeared to be the owner of parcel
no. 4 as indicated in the erroneous survey, and based on the erroneous information given by the surveyor that
parcel no. 4 is covered by TCT No. 15516 and 15684, private respondent sold said parcel no. 4 to petitioners.
Petitioners discovered that the lots actually sold to them were parcel nos. 2 and 3 covered by TCT Nos.
15516 and 15684, respectively. To remedy the mistake, private respondent offered parcel nos. 1 and 2
covered by TCT Nos. 15515 and 15516, respectively, as these two were precisely the two vacant lots which
private respondent owned and intended to sell when it entered into the transaction with petitioners.
Petitioners adamantly rejected the good faith offer. Private respondent was then compelled to file an action
for annulment of deed of sale and reconveyance of the properties subject thereof.

Issue: ​Whether or not the contract of sale between petitioners and private respondent is voidable on the
ground of mistake.

Held: (​Answer​): ​Yes. In the case at bar, the private respondent obviously committed an honest mistake in
selling parcel no. 4. As correctly noted by the Court of Appeals, it is quite impossible for said private
respondent to sell the lot in question as the same is not owned by it. The good faith of the private respondent
is evident in the fact that when the mistake was discovered, it immediately offered two other vacant lots to
the petitioners or to reimburse them with twice the amount paid. That petitioners refused either option left
the private respondent with no other choice but to file an action for the annulment of the deed of sale on the
ground of mistake.

(​Legal Basis​): ​Art. 1331 of the New Civil Code provides for the situations whereby mistake may invalidate
consent. It states: “Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract.

(​Application of facts​): ​The facts obtaining in the case at bar undoubtedly show that when defendants bought
the properties of plaintiff, they intended to buy the vacant lots owned by the latter.

(​Conclusion​): ​Thus, to allow the petitioners to take parcel no. 3 would be to countenance unjust enrichment.
Considering that petitioners intended at the outset to purchase a vacant lot, their refusal to accept the offer of
the private respondent to give them two (2) other vacant lots in exchange, as well as their insistence on parcel
no. 3, which is a house and lot, is manifestly unreasonable.

ii. Illiteracy/ Unknown Knowledge

Art 1332
Hemedes vs CA DOS

Facts: ​Jose Hemedes executed a document entitled “Donation Inter Vivos With Resolutory Conditions”
conveying ownership a parcel of land, together with all its improvements, in favor of his third wife, Justa
Kauapin, subject to the resolutory condition that upon the latter’s death or remarriage, the title to the
property donated shall revert to any of the children, or heirs, of the DONOR expressly designated by the
DONEE. Pursuant to said condition, Justa Kausapin executed a “Deed of Conveyance of Unregistered Real
Property by Reversion” conveying to Maxima Hemedes the subject property. Maxima Hemedes and her
husband Raul Rodriguez constituted a real estate mortgage over the subject property in favor of R & B
Insurance to serve as security for a loan which they obtained. R & B Insurance extrajudicially foreclosed the
mortgage since Maxima Hemedes failed to pay the loan even. The land was sold at a public auction with R &
B Insurance as the highest bidder. A new title was subsequently issued in favor the R&B. The annotation of
usufruct in favor of Justa Kausapin was maintained in the new title. Despite the earlier conveyance of the
subject land in favor of Maxima Hemedes, Justa Kausapin executed a “Kasunduan” whereby she transferred
the same land to her stepson Enrique D. Hemedes, pursuant to the resolutory condition in the deed of
donation executed in her favor by her late husband Jose Hemedes. Enrique D. Hemedes obtained two
declarations of real property, when the assessed value of the property was raised. Also, he has been paying
the realty taxes on the property from the time Justa Kausapin conveyed the property to him. In the cadastral
survey, the property was assigned in the name of Enrique Hemedes. Enrique Hemedes is also the named
owner of the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna. Enriques
D. Hemedes sold the property to Dominium Realty and Construction Corporation (Dominium). Dominium
and Enrique D. Hemedes filed a complaint with the CFI for the annulment of TCT issued in favor of R & B
Insurance and/or the reconveyance to Dominium of the subject property alleging that Dominion was the
absolute owner of the land.

Issue: Whether or not the Deed of Conveyance in favor of Maxima is null.

Held: (​Answer​): ​In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly
rule that Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over the subject
property. Justa Kausapin sought to transfer to her stepson exactly what she had earlier transferred to Maxima
Hemedes the ownership of the subject property pursuant to the first condition stipulated in the deed of
donation executed by her husband. Thus, the donation in favor of Enrique D. Hemedes is null and void for
the purported object thereof did not exist at the time of the transfer, having already been transferred to his
sister.​[30]

(​Legal Basis​): ​Article 1332 of the Civil Code, which states: When one of the parties is unable to read, or if
the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully explained to the former.

(​Application of facts​): ​In this case, Justa Kausapin disclaims any knowledge of the Deed of Conveyance of
Unregistered Real Property by Reversion in favor of Maxima Hemedes. In fact, she asserts that it was only
during the hearing conducted on December 7, 1981 before the trial court that she first caught a glimpse of
the deed of conveyance and thus, she could not have possibly affixed her thumbmark thereto.​[28]

(​Conclusion​): ​Hence, the Deed of Conveyance in favor of Maxima is valid. The Court ​uphold petitioner R
& B Insurances assertion of ownership over the property in dispute, as evidenced by TCT No.
41985, subject to the usufructuary rights of Justa Kausapin, which encumbrance has been properly
annotated upon the said certificate of title.
 Leonardo vs CA DOS

Facts: ​Petitioner alleged that private respondent Corazon Sebastian came to petitioner’s house to persuade
her to sign a deed of extrajudicial partition of the estate of Tomasina Paul and Jose Sebastian. Before signing
the document, petitioner allegedly insisted that they wait for her husband Jose Ramos so he could translate
the document which was written in English. Petitioner, however, proceeded to sign the document even
without her husband and without reading the document, on the assurance of private respondent Corazon
Sebastian that petitioners share as a legitimate daughter of Tomasina Paul was provided for in the extrajudicial
partition.. Petitioner claims that her consent was vitiated because she was deceived into signing the
extrajudicial settlement. She further denied having appeared before Judge Juan Austria of the Municipal Trial
Court (MTC) of Urbiztondo, Pangasinan on July 27, 1988 to acknowledge the execution of the extrajudicial
partition. Private respondent insisted that the document in question was valid and binding between the
parties.

Issue: ​Whether the consent given by petitioner to the extrajudicial settlement of estate was given voluntarily.

Held: (​Answer​): ​The Court holds that it was not given voluntarily.

(​Legal Basis​): ​Art. 1332 of the Civil Code states that: [w]hen one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully explained to the former.

(​Application of facts​): ​In this case, the presumption of mistake or error on the part of petitioner was not
sufficiently rebutted by private respondents. Private respondents failed to offer any evidence to prove that the
extrajudicial settlement of estate was explained in a language known to the petitioner, i.e. the Pangasinan
dialect. Clearly, petitioner, who only finished Grade 3, was not in a position to give her free, voluntary and
spontaneous consent without having the document, which was in English, explained to her in the Pangasinan
dialect. She stated in open court that she did not understand English.

(​Conclusion​): ​Hence, the extrajudicial settlement of the estate of Tomasina Paul and Jose Sebastian is hereby
ANNULLED and SET ASIDE.

ii No Mistake

Art 1333

Domingo Realty vs CA

Facts: ​The Petitioner, Domingo Realty, filed a complaint for recovery of three parcels of land against private
respondent acero, who had constructed a factory building on a portion of said lots. During the pendency of
the case, both petitioner and Acero executed a compromise agreement in which the latter admitted that the
property he is occupying by way of lease is encroaching on a portion of the property of the petitioner and
undertakes to clear all the structures within the period of 60 days. The Regional Trial Court rendered a
decision based on the Compromise Agreement. Acero filed a Motion to nullify the Compromise Agreement
on the ground of vagueness and mistake. (Hi! Nakakaantok ‘no? - Xhavier) (Oo sobra. - Greg) Acero avers
that the Compromise Agreement is vague as there is still a need to determine the exact metes and bounds of
the encroachment on the petitioner’s lot. Further, the agreement is mistaken as it is anchored on his belief
that the encroachment on the property of the petitioners are only a portion and not the entire lot he is
occupying.

Issue: ​Whether there was a mistake in the agreement as it is anchored on his belief that the encroachment on
the property of the petitioners are only a portion and not the entire lot he is occupying.

Held: (​Answer​) ​None, there was no mistake in the agreement.

(​Legal Basis​) ​Article 1333 of the Civil Code of the Philippines however states that there is no mistake if the
party alleging it knew the doubt, contingency or risk affecting the object of the contract. Under this provision
of law, it is presumed that the parties to a contract know and understand the import of their agreement. Thus,
civil law expert Arturo M. Tolentino opined that: To invalidate consent, the error must be excusable. It must
be real error, and not one that could have been avoided by the party alleging it. The error must arise from
facts unknown to him. He cannot allege an error which refers to a fact known to him, or which he should
have known by ordinary diligent examination of the facts. An error so patent and obvious that nobody could
have made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one
who made it in order to annul his contract. A mistake that is caused by manifest negligence cannot invalidate
a juridical act.

(​Application of facts​) ​In the case at bar, prior to the execution of the Compromise Agreement, respondent
Acero was already aware of the technical description of the titled lots of petitioner Domingo Realty and more
so, of the boundaries and area of the lot he leased from David Victorio. Respondent Aceros failure to have
the said stipulation incorporated in the Compromise Agreement is negligence on his part and insufficient to
abrogate said agreement.

(​Conclusion​) ​Thus, there was no mistake in the agreement since respondent acero was already aware of the
technical description of the titled lots of petitioner Domingo Realty and more so, of the boundaries and area
of the lot he leased from David Victorio.

iv. In case of Mutual Error

Art 1334

b. Voidable/ Intimidation

i. Definition

Art 1335
 De Leon vs CA DOS

Facts: ​Private respondent Jose Vicente De Leon and petitioner Sylvia Lichauco De Leon were united in
wedlock. Sometime in October, 1972, a de facto separation between the spouses occured due to irreconcilable
marital differences, with Sylvia leaving the conjugal home. Sometime in March, 1973, Sylvia went to the
United States where she obtained American citizenship. On November 23, 1973, Sylvia filed with the
Superior Court of California, County of San Francisco, a petition for dissolution of marriage against Jose
Vicente. In the said divorce proceedings, Sylvia also filed claims for support and distribution of properties. It
appears, however, that since Jose Vicente was then a Philippine resident and did not have any assets in the
United States, Sylvia chose to hold in abeyance the divorce proceedings, and in the meantime, concentrated
her efforts to obtain some sort of property settlements with Jose Vicente in the Philippines. Thus, on March
16, 1977, Sylvia succeeded in entering into a Letter-Agreement with her mother-in-law, private respondent
Macaria De Leon. On the same date, Macaria made cash payments to Sylvia in the amount of P100,000 and
US$35,000.00 or P280,000.00, in compliance with her obligations as stipulated in the aforestated
Letter-Agreement. On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First Instance
of Rizal a joint petition for judicial approval of dissolution of their conjugal partnership. After ex-parte
hearings, the trial court issued an Order dated February 19, 1980 approving the petition. On March 17, 1980,
Sylvia moved for the execution of the above-mentioned order. However, Jose Vicente moved for a
reconsideration of the order alleging that Sylvia made a verbal reformation of the petition as there was no
such agreement for the payment of P4,500.00 monthly support to commence from the alleged date of
separation in April, 1973 and that there was no notice given to him that Sylvia would attempt verbal
reformation of the agreement contained in the joint petition. Macaria filed with the trial court a motion for
leave to intervene and she raises the defenses of intimidation and mistake which led her to execute the
Letter-Agreement.

Issue: Whether or not the letter-agreement is valid.

Held: (​Answer​): ​NO, the letter-agreement is not valid.

(​Legal Basis​): ​Article 1335 of the Civil Code provides: xxx xxx xxx There is intimidation when one of the
contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon
his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his
consent. To determine the degree of the intimidation, the age, sex and condition of the person shall be borne
in mind. A threat to enforce one's claim through competent authority, if the claim is just or legal, does not
vitiate consent.

(​Application of facts​): ​Applying the foregoing to the present case, the claim of Macaria that Sylvia threatened
her to bring Jose Vicente to court for support, to scandalize their family by baseless suits and that Sylvia
would pardon Jose Vicente for possible crimes of adultery and/or concubinage subject to the transfer of
certain properties to her, is obviously not the intimidation referred to by law.
(​Conclusion​): ​Since the Letter-Agreement was repudiated before the purpose has been accomplished and to
adhere to the pari delicto rule in this case is to put a premium to the circumvention of the laws, positive relief
should be granted to Macaria.

Callanta vs NLRC DOS

Facts: ​From June 18, 1986 to December 31, 1986, petitioner was appointed as sub-agent by respondent
company under supervision of Edgar Rodriguez with specific assignment at Iligan City and Lanao Province.
In October of 1986, or before the expiration his appointment, petitioner was promoted to the position of
national promoter salesman of respondent company for Iligan City, Lanao del Norte and Lanao del Sur
(Rollo, p. 29). On 28 April 1987, a however, a "spot audit" was conducted and petitioner was found to have a
tentative shortage in amount of P49,005.59 (Rollo, p. 30). On 30 April 1987, petitioner rendered his
resignation to private respondent Julius T. Limpe, effective on the same date. Seven months thereafter,
petitioner wrote a letter to private respondent Limpe complaining about his false resignation and demanding
for the refund of the amount of P76,465.81 as well as reinstatement to his former position. Respondent
company ignored above demands and on March 21, 1988, petitioner filed a complaint against, respondent
company before the NLRC Regional Arbitration Branch No. X for illegal dismissal. The Labor Arbiter
rendered a decision declaring termination of petitioner's services illegal. Public respondent NRLC decided the
appeal on September 10, 1991, which as aforesaid, set aside the decision of the Labor Arbiter and dismissed
the complaint of petitioner for lack of merit. Petitioner claims that private respondent company thru private
respondent Julius Limpe showed him am alleged "spot audit" report wherein petitioner appeared to be short
of P49,005.59. He was then handed a ready made resignation letter and ordered to sign the same otherwise an
estafa case will be filed against him. The only evidence presented by petitioner to support his contention of
coercion was a letter written by himself and addressed to private respondent Limpe.

Issue: Whether or not the resignation made by petitioner is valid on the ground that there was
intimidation employed by the private respondent.

Held: (​Answer​): ​YES, It is valid. The Court believes and so holds that the resignation tendered by petitioner
was voluntary, and therefore valid, in the absence of any evidence of coercion and intimidation on the part of
private respondent company.

(​Legal Basis​): ​It is a well-settled principle that for intimidation to vitiate consent, petitioner must have been
compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or
property, or upon the person or property of his spouse, descendants or ascendants (Article 1335, par. 2 New
Civil Code).

(​Application of facts​): ​In present case, what allegedly constituted the "intimidation" was the threat by private
respondent company to file a case for estafa against petitioner unless the latter resigns. In asserting that the
above-described circumstance constituted intimidation, petitioner missed altogether the essential ingredient
that would qualify the act complained of as intimidation, i.e. that the threat must be of an ​unjust act​. In the
present case, the threat to prosecute for estafa not being an unjust act (P.P. Agustinos vs. Del Rey, 56 Phil.
512 [1932]), but rather a valid and legal act to enforce a claim, cannot at all be considered as intimidation.
(​Conclusion​): ​Therefore, the Court believes was tendered voluntarily by him.

ii. If committed by third Person

Art 1336

c. Undue Influence

Art 1337

Alcasid bs CA

FACTS​: Petitioner Alcasid is one of the co-owners of two parcels of land located in Calamba, Laguna.
Private respondent Lim offered to purchase from petitioner and her co-owners the said property. Petitioner
was willing to sell her share for P4,500,000.00 and only if all her co-owners would sell their respective shares
of the said land.

Petitioner engaged the services of Atty. Antonio A. Fernandez for negotiation of sale, not knowing that he
was also representing private respondent.

In March 1990, Atty. Fernandez confirmed to petitioner that all her co-owners were already amenable to sell
their shares for P1,500,000.00.

On March 4, 1990, petitioner signed a Deed of Sale drafted by Atty. Fernandez. Subsequently, petitioner
learned that the other co-owners did not agree to sell their shares over the subject property.

ISSUE​: Whether or not petitioner's complaint for annulment of contract is based upon undue influence
which vitiated her consent

HELD​: No. As to undue influence, Article 1337 of the Civil Code of the Philippines provides:
There is undue influence when a person takes improper advantage of his power over the will of another,
depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the
confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to
have been unduly influenced was suffering from mental weakness or was ignorant or in financial distress.

Undue influence is any means employed upon a party which, under the circumstances, he could not well resist
and which controlled his volition and induced him to give his consent to the contract, which otherwise he
would not have entered into. It must in some measure destroy the free agency of a party and interfere with
the exercise of that independent discretion which is necessary for determining the advantages or
disadvantages of a proposed contract. If a competent person has once assented to a contract freely and fairly,
he is bound thereby.

The finding of the Court of Appeals that petitioner executed the contract of her own free will and choice and
not from duress is fully supported by the evidence. Such finding should not be disturbed. Private respondent
did not commit any wrongful act or omission which violated the primary right of petitioner. Hence, petitioner
did not have a cause of action.

Loyola vs CA

FACTS​: In dispute is a parcel of land in Binan, originally owned in common by siblings Mariano and
Gaudencia Zarraga. Mariano predeceased her sister, who died without offspring on August 5, 1983, at the age
of 97. Victorina and Cecilia, sisters of Mariano and Gaudencia, are the original plaintiffs in this case, and
when they died, they were substituted by the petitioners who are heirs of Victorina. Cecilia died childless.
Private respondents, some are children of Mariano and some are heirs of Jose Zarraga, are first cousins of
petitioners. Repondents allege that they are the lawful owners of the land, the one-half share inherited by their
father, and the other half purchased from their aunt Gaudencia.

On August 24, 1980, Gaudencia allegedly sold her share to private respondents, evidenced by a notarised
document entitled “Bilihang Tuluyan ng Kalahati ng Isang Lagay na Lupa”. A TCT was eventually issued. On
January 31, 1985, Victorina and Cecilia filed a complaint for the purpose of annulling the sale and the TCT.
The trial court rendered judgment in their favor, but such was reversed by the Court of Appeals.

ISSUE​: Whether or not Gaudencia was under the undue influence of the private respondents

HELD​: No. Undue influence depends upon the circumstances of each case and not on bare academic rules.
For undue influence to be established to justify the cancellation of an instrument, three elements must be
present:
(a) a person who can be influenced;
(b) the fact that improper influence was exerted;
(c) submission to the overwhelming effect of such unlawful conduct.
In the absence of a confidential or fiduciary relationship between the parties, the law does not presume that
one person exercised undue influence upon the other. A confidential or fiduciary relationship may include any
relation between persons, which allows one to dominate the other, with the opportunity to use that
superiority to the others disadvantage. Included are those of attorney and client, physician and patient, nurse
and invalid, parent and child, guardian and ward, member of a church or sect and spiritual adviser, a person
and his confidential adviser, or whenever a confidential relationship exists as a fact.

That Gaudencia looked after Romana in her old age is not sufficient to show that the relationship was
confidential. To prove a confidential relationship from which undue influence may arise, the relationship
must reflect a dominant, overmastering influence which controls over the dependent person.

In the present case, petitioners failed to show that Romana used her aunts reliance upon her to take
advantage or dominate her and dictate that she sell her land. Undue influence is not to be inferred from age,
sickness, or debility of body, if sufficient intelligence remains. Petitioners never rebutted the testimony of the
notary public that he observed Gaudencia still alert and sharp.

D. Fraud/ Misreresentation

i. Definition
Art 1338

CU VS CA PIA

Facts: ​Petitoner Vicente Cu sold his rights and interests over his business, Camaro Enterprises, to
respondent Braulio Abad for Php150,000. After declaration of Martial Law, all business where required to
prove foreign tie-ups. Thus, Abad sought Cu for a copy of contract with Meek and Associates and
registration papers, otherwise, Abad would not remit the 1% royalty stipulated in the contract. Meanwhile,
with SPA from Cu, Mauro Castro, filed a complaint against Abad praying for the payment of 1% royalty due
for the years 1971 to 1973. The trial court ruled in favor of Cu. Abad filed an MR asserting that Cu was not
entitled to the 1% royalty because his consent to the contract was obtained through fraud and false
representation. CA reversed the lower court’s decision and ruled in favor of Abad. Hence, this instant petition
for review of certiorari.

Issue: ​Whether there was fraudulent machinations that vitiated the consent of private respondent, and
therefore causes of the annulment of contract

Held: (​Answer​) ​No, there was no fraudulent machinations.

(​Legal Basis​) ​Article 1338 states that there is fraud when, through insidious words or machinations of one of
the contracting parties, the other is induced to enter into a contract which, without them, he would not have
agreed to. However, allegations of fraud must be established by convincing evidence.

(​Application of facts​) ​In this case, the respondents failed to present clear and convincing evidence of
petitioner Cu’s fraudulent machinations to entice Abad to sign the contract. The “evidence” submitted by
respondents such as Philippine Vice-Consul in Chicago’s indorsement that John Meek & Associates was a
non-entity insofar as Association of Commerce and Industry was concerned, and the Quezon City Mayor’s
certification that Cu did not secure a permit for manufacture and sale of paint products did not show
fraudulent intent of Cu. Likewise, respondent even admitted that he did not see the “necessity” of the
contract between Cu and Meek & Associates until the Martial Law was declared. Further, had respondents
really intend to nullify the stipulation on said royalty, they could have initiated an action to annul the same
when they learned of the inexistence of contract between Cu and Meek & Associates, and not wait for Cu to
file an action for enforcement of such stipulation. Finally, the SC ruled that respondent’s allegations of fraud
were devices meant to avoid paying 1% royalty to Cu.

(​Conclusion​) ​Petition granted; the SC reversed the decision with costs against private respondent.
 *NOTE: While parol evidence is admissible to explain the meaning of written contracts, it cannot
incorporate into the contract additional contemporaneous conditions which are not mentioned at all in
writing, unless there has been fraud or mistake.

Spouse Tiongson vs Emergency Pawnshop

Facts​: In May 1992, Napala offered to purchase from the spouses Tongson their 364-square meter parcel of
land, situated in Davao City for P3,000,000.00. The spouses found the offer acceptable and executed with
Napala a Memorandum of Agreement on May 8, 1992.

Upong signing the Deed of Absolute Sale, Napala paid the spouses P200,000.00 in cash and issued a
post-dated check in the amount of P2,800,000.00 representing the remaining balance of the purchase price of
the subject property. When presented for payment, the PNB check was dishonored for insufficient funds.
Despite the spouses Tongson’s repeated demands to either pay the full value of the check or to return the
land, Napala failed to do either.

The trial court found that the purchase price of the subject property has not been fully paid and that Napala’s
assurance to the Spouses Tongson that the PNB check would not bounce constituted fraud that induced the
Spouses Tongson to enter into the sale. Without such assurance, the Spouses Tongson would not have agreed
to the contract of sale. Accordingly, there was fraud within the ambit of Article 1338 of the Civil Code.
Respondent appealed to the Court of Appeals.

The Court of Appeals agreed with the trial court’s finding that Napala employed fraud when he
misrepresented to the Spouses Tongson that the PNB check in the amount of P2,800,000 would be properly
funded at its maturity. However, the Court of Appeals found that the issuance and delivery of the PNB check
and fraudulent representation made by Napala could not be considered as the determining cause for the sale
of the subject parcel of land. Hence, such fraud could not be made the basis for annulling the contract of sale.
Nevertheless, the fraud employed by Napala is a proper and valid basis for the entitlement of the Spouses
Tongson to the balance of the purchase price in the amount of P2,800,000 plus interest at the legal rate of 6%
per annum computed from the date of filing of the complaint on 11 February 1993.

Issue​: Whether or not the contract of sale can be annulled based on the fraud employed by Napala.

Held​: No. Under Article 1338 of the Civil Code, there is fraud when, through insidious words or
machinations of one of the contracting parties, the other is induced to enter into a contract which, without
them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo
causante), not merely the incidental (dolo incidente), inducement to the making of the contract. Additionally,
the fraud must be serious.

We find no causal fraud in this case to justify the annulment of the contract of sale between the parties. It is
clear from the records that the Spouses Tongson agreed to sell their 364-square meter Davao property to
Napala who offered to pay P3,000,000 as purchase price therefor. Contrary to the Spouses Tongson’s belief
that the fraud employed by Napala was “already operational at the time of the perfection of the contract of
sale,” the misrepresentation by Napala that the postdated PNB check would not bounce on its maturity
hardly equates to dolo causante. Napala’s assurance that the check he issued was fully funded was not the
principal inducement for the Spouses Tongson to sign the Deed of Absolute Sale. Even before Napala issued
the check, the parties had already consented and agreed to the sale transaction. The Spouses Tongson were
never tricked into selling their property to Napala. On the contrary, they willingly accepted Napala’s offer to
purchase the property at P3,000,000. In short, there was a meeting of the minds as to the object of the sale as
well as the consideration therefor.

Some of the instances where this Court found the existence of causal fraud include:
(1) when the seller, who had no intention to part with her property, was “tricked into believing” that what she
signed were papers pertinent to her application for the reconstitution of her burned certificate of title, not a
deed of sale;
(2) when the signature of the authorized corporate officer was forged; or
(3) when the seller was seriously ill, and died a week after signing the deed of sale raising doubts on whether
the seller could have read, or fully understood, the contents of the documents he signed or of the
consequences of his act. Suffice it to state that nothing analogous to these badges of causal fraud exists in this
case.

ii. Requisities

Art 1334

Tankeh vs DBP
FACTS​: Private respondent Ruperto V. Tankeh was the president of Sterling Shipping Lines, which was
incorporated way back in 1979. In 1980, petitioner Dr. Alejandro V. Tankeh, the older brother of Ruperto
Tankeh, alleged that the latter approached him wherein the former informed the latter that he was operating a
new shipping line business and offered petitioner one thousand (1,000) shares worth P1,000,000.00 to be a
director of the business. Petitioner accepted his brother’s offer and he became a member of the corporation’s
board.

In 1981, petitioner signed the Assignment of Shares of Stock with Voting Rights and promissory note where
he bound himself solidarily liable with the other corporate officers as regards the loan obtained by Ruperto
for the purchase of a vessel in order to commence their business. However, the corporation failed to meet
their obligations. Sometime in 1987, the DBP sold the vessel to a Singaporean enterprise. DBP then informed
petitioner that it would still pursue its claim over the unpaid liabilities of the corporation. Hence, petitioner
filed a Complaint for the annulment of the contracts he signed in 1981 on the ground that he was
fraudulently deceived by Ruperto, the other corporate officers and DBP into signing the said contracts.

ISSUE​: Whether or not the fraud perpetrated by Ruperto is serious enough to warrant annulment of the
contract
HELD​: No. Only incidental fraud exists in this case. Therefore it is not sufficient to warrant the annulment
of the contracts petitioner entered into but respondent Ruperto is liable to pay him damages. The distinction
between fraud as a ground for rendering a contract voidable or as basis for an award of damages is provided
in Article 1344.

There are two types of fraud contemplated in the performance of contracts: dolo incidente or incidental fraud
and dolo causante or fraud serious enough to render a contract voidable. If there is fraud in the performance
of the contract, then this fraud will give rise to damages. If the fraud did not compel the imputing party to
give his or her consent, it may not serve as the basis to annul the contract, which exhibits dolo causante.
However, the party alleging the existence of fraud may prove the existence of dolo incidente. This may make
the party against whom fraud is alleged liable for damages.

Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfill
two conditions. First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the
party. Second, this fraud must be proven by clear and convincing evidence. In this case, it cannot be said that
fraud was serious enough to warrant the annulment of the contract because petitioner knew of the contents
of the contracts that he signed. The required standard of proof – clear and convincing evidence – was not
met. There was no dolo causante or fraud used to obtain the petitioner’s consent to enter into the contract.
Petitioner had the opportunity to become aware of the facts that attended the signing of the promissory note.
He even admitted that he has a lawyer-son who the petitioner had hoped would assist him in the
administration of Sterling Shipping Lines, Inc. The totality of the facts on record belies petitioner’s claim that
fraud was used to obtain his consent to the contract given his personal circumstances and the applicable law.

However, in refusing to allow petitioner to participate in the management of the business, respondent
Ruperto V. Tankeh was liable for the commission of incidental fraud. The Court, in a previous case, defined
incidental fraud as "those which are not serious in character and without which the other party would still
have entered into the contract." Although there was no fraud that had been undertaken to obtain petitioner’s
consent, there was fraud in the performance of the contract. The records showed that petitioner had been
unjustly excluded from participating in the management of the affairs of the corporation. This exclusion from
the management in the affairs of Sterling Shipping Lines, Inc. constituted fraud incidental to the performance
of the obligation. Respondent Ruperto V. Tankeh’s bare assertion that petitioner had access to the records
cannot discredit the fact that the petitioner had been effectively deprived of the opportunity to actually
engage in the operations of Sterling Shipping Lines, Inc. Petitioner had a reasonable expectation that the same
level of engagement would be present for the duration of their working relationship. This would include an
undertaking in good faith by respondent Ruperto V. Tankeh to be transparent with his brother that he would
not automatically be made part of the company’s administration.

ECE Realty vs Mandap

FACTS​: Petitioner ECE Realty is a corporation engaged in the building and development of condominium
units. Sometime in 1995, it started the construction of a condominium project called Central Park
Condominium (Pasay City). However, printed advertisements were made indicating that the said project was
to be built in Makati City.
In December 1995, respondent, agreed to buy a unit from the above project by paying a reservation fee,
downpayment and monthly installments. On June 18, 1996, respondent and the representatives of petitioner
executed a Contract to Sell. In the said Contract, it was indicated that the condominium project is located in
Pasay City.

More than two years after the execution of the Contract to Sell, respondent demanded the return of the
payments she made, on the ground that she subsequently discovered that the condominium project was being
built in Pasay City and not in Makati City as indicated in its printed advertisements.

Treating the letter as a form of denial of her demand, respondent filed a complaint with the Expanded
National Capital Region Field Office (ENCRFO) of the Housing and Land Use Regulatory Board (HLURB)
seeking the annulment of her contract with petitioner, the return of her payments, and damages.

On September 30, 2005, the ENCRFO dismissed respondent's complaint for lack of merit and directed the
parties to resume the fulfillment of the terms and conditions of their sales contract. The ENCRFO held that
respondent “failed to show or substantiate the legal grounds that consist of a fraudulent or malicious dealing
with her by the [petitioner], such as, the latter's employment of insidious words or machinations which
induced or entrapped her into the contract and which, without them, would not have encouraged her to buy
the unit."

ISSUE​: Whether or not ECE Realty was guilty of fraud and if so whether such fraud is sufficient ground to
nullify the contract with Mandap

HELD​: No. Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts,
it must fulfill two conditions.

First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the party. This is
referred to as causal fraud. The deceit must be serious. The fraud is serious when it is sufficient to impress, or
to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a
ground for nullity.The circumstances of each case should be considered, taking into account the personal
conditions of the victim.

Second, the fraud must be proven by clear and convincing evidence and not merely by a preponderance
thereof.

In the present case, this Court finds that petitioner is guilty of false representation of a fact. This is evidenced
by its printed advertisements indicating that its subject condominium project is located in Makati City when,
in fact, it is in Pasay City. The Court agrees with the Housing and Land Use Arbiter, the HLURB Board of
Commissioners, and the Office of the President, in condemning petitioner's deplorable act of making
misrepresentations in its advertisements and in issuing a stern warning that a repetition of this act shall be
dealt with more severely.
However, insofar as the present case is concerned, the Court agrees with the Housing and Land Use Arbiter,
the HLURB Board of Commissioners, and the Office of the President, that the misrepresentation made by
petitioner in its advertisements does not constitute causal fraud which would have been a valid basis in
annulling the Contract to Sell between petitioner and respondent.

In his decision, the Housing and Land Use Arbiter found that respondent failed to show that “the essential
and/or moving factor that led the [respondent] to give her consent and agree to buy the unit was precisely the
project's advantageous or unique location in Makati [City] – to the exclusion of other places or city x x x.”
Both the HLURB Board of Commissioners and the Office of the President affirmed the finding of the
Arbiter and unanimously held that respondent failed to prove that the location of the said project was the
causal consideration or the principal inducement which led her into buying her unit in the said condominium
project. The Court finds no cogent reason to depart from the foregoing findings and conclusion of the above
agencies.

Indeed, evidence shows that respondent proceeded to sign the Contract to Sell despite information contained
therein that the condominium is located in Pasay City. This only means that she still agreed to buy the subject
property regardless of the fact that it is located in a place different from what she was originally informed. If
she had a problem with the property's location, she should not have signed the Contract to Sell and, instead,
immediately raised this issue with petitioner. But she did not. As correctly observed by the Office of the
President, it took respondent more than two years from the execution of the Contract to Sell to demand the
return of the amount she paid on the ground that she was misled into believing that the subject property is
located in Makati City. In the meantime, she continued to make payments​.

iii. Failure to Disclose

Art 1339

Rural Bank of Sta. Maria Pangasinan vs CA

Facts: ​On January 9, 1985 Manuel Behis mortgaged a parcel of land in favor of the Rural Bank of Sta. Maria,
Pangasinan. After being delinquent in paying his debts, Manuel sold the land to plaintiffs Rosario Rayandayan
and Carmen Arceo in a Deed of Absolute Sale with Assumption of Mortgage. On the same date, they
executed another agreement whereby the plaintiffs were indebted to Manuel in the amount of P2,400,000.00,
which was the real consideration of the sale. The title to the land, remained in the name of Manuel Behis.
After Manuel Behis died, plaintiffs Rayandayan and Arceo negotiated with the rural bank for the assumption
of the indebtedness of Manuel Behis and the subsequent release of the mortgage on the property by the bank.
The bank was not informed of the real consideration of the sale.Subsequently, the bank consented to the
substitution of Rayandayan and Arceo as mortgage debtors in place of Behis in a Memorandum of
Agreement with restructured and liberalized terms for the payment of the mortgage debt. When the bank
came to know the real consideration of the agreement, the bank changed heart and transacted the Behis
mortgage with Halsema, Inc.. The bank considered its contract with Rayandayan and Arceo as cancelled.
Hence, Rayandayan and Arceo instituted a civil case against the Rural Bank and Halsema, Inc. for specific
performance, declaration of nullity and/or annulment of mortgage and damages. The lower court declared
that the Deed of Sale with Assumption of Mortgage and the Agreement between the bank and plaintiffs was
valid until annulled or cancelled. However, the plaintiffs were ordered to pay the bank damages as litigation
expenses because of plaintiffs bad faith in deceiving the bank to enter into the Memorandum of Agreement
by concealing the real purchase price of the land sold to them by Manuel Behis. The plaintiffs and defendant
Halsema, Inc. appealed. The Court of Appeals affirmed the validity of the Memorandum of Agreement
between the parties, but reversed the finding that there was bad faith on the part of the plaintiffs when the
bank entered into the Memorandum of Agreement.

Issue: ​Whether Rayandan and Arceo committed fraud and acted in bad faith in failing to disclose the real
consideration of the sale between them and Manuel Behis.

Held: (​Answer​) ​No, Rayandayan and Arceo did not commit fraud.

(​Legal Basis​) ​Pursuant to Article 1339 of the Civil Code, silence or concealment, by itself, does not constitute
fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages
of commerce the communication should be made.

(​Application of facts​) ​Here, Rayandayan and Arceo had no duty to disclose the real consideration of the sale
between them and Manuel Behis

(​Conclusion​) ​Hence, Rayandayan did not commit fraud since they had no duty to disclose the real
consideration of the sale between them and Manuel Behis.

Usual Exaggeration in Trade

Art 1340

Expression of Opinion

Art 1341

Committed by Third Person

Art 1342

Good Faith

Art 1343

4. Simulated Consent

a. Types
 Art 1345

Spouses lopez vs.Spouses lopez

Facts: ​Respondents, spouses Eduardo and Marcelina Lopez, are the owners and occupants of an
80-square-meter residential lot situated in San Pascual, Hagonoy, Bulacan which they acquired by donation
inter vivos​. In November 1992, respondents discovered that Victor Villadares was granted a free patent over an
885-sq-m land, which included respondents lot, and was subsequently issued Original Certificate of Title
(OCT) where he sold Lot 9954-B (273 sqm) to petitioners, spouses Eusebia and Exequiel Lopez, and Lot
9954-A (337sqm) to Filomena Caparas. Respondents filed an action for reconveyance, declaration of nullity
of a deed of absolute sale, cancellation of titles, and damages against Villadares and petitioners. The action
was filed only against the two parties because respondents property is situated between their properties, Lots
9954-A and 9954-B.

Issue: ​Whether the contract of sale between the petitioners and Victor Villadares was simulated thus making
the sale void

Held: (​Answer​) ​No, the contract between the petitioners and Victor Villadares was not simulated. The deed
of sale is valid subject to the reconveyance of respondent’s 80 sqm portion of the land.

(​Legal Basis​) ​The Supreme Court ruled that simulation takes place when the parties do not really want the
contract they have executed to produce the legal effects expressed by its wordings. The primary consideration
in determining the true nature of a contract is the intention of the parties. Such intention is determined not
only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of
the parties.

(​Application of facts​) ​Petitioners opposition in the land registration case does not necessarily mean that
petitioners did not really intend to purchase the property. Petitioners could have accepted or acquiesced to
Villadares title and entered into the agreement to finally settle their claim over the property.

(​Conclusion​) ​Thus, the contract between petitioners and Victor Villadares was not simulated since the parties
intended the contract they have executed to produce legal effects.

b. Effect

Art 1346

Manila Banking v. silverion

Facts: ​The petitioner, The Manila Banking Corporation (TMBC) filed with the RTC of Makati City for
collection of sum of money with application for the issuance of writ of preliminary attachment against
Ricardo Silverio, Sr., (Ricardo, Sr.) and Delta Motors Corp. A notice of levy on attachment of real property
and writ of attachment were inscribed on the property of Ricardo, Sr. by virtue of an order by the RTC
Makati City. Eventually, the RTC rendered its decision in favor or TMBC and against Ricardo, Sr. and Delta
Motors Corp. Herein respondent, Edmundo Silvero, the nephew of debtor Ricardo Sr., requested TMBC to
have the annotations on the subject properties cancelled as the properties were no longer owned by Ricardo,
Sr. Edmundo averred that the properties were already sold to him by Ricardo, Sr. thus, a petition in the RTC
of Makati City for Cancellation of Notice of Levy on Attachment and Writ of Attachment on the properties
of Ricardo, Sr., as it was already sold to him even before that.

Issue: ​Whether there was a simulation of a contract between Edmundo Silverio and Ricardo Sr.,

Held: (​Answer​) ​Yes, there was a simulation of contract between Edmundo Silverio and Ricardo Sr.,. The
sale is therefore void

(​Legal Basis​) ​The Supreme Court ruled that an absolutely simulated contract, under Article 1346 of the Civil
Code, is void. It takes place when the parties do not intend to be bound at all. The characteristic of simulation
is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way
alter the juridical situation of the parties. Thus, where a person, in order to place his property beyond the
reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his
title and control of the property; hence, the deed of transfer is but a sham. Lacking, therefore, in a fictitious
and simulated contract is consent which is essential to a valid and enforceable contract. (absence of dominum
over said property)

(​Application of facts​) ​Here, there is no proof that the said sale took place prior to the date of the attachment.

(​Conclusion​) ​In conclusion, there was a simulation of contract between Edmundo Silverio and Ricardo Sr.
since there was no proof that the said sale took place prior to the date of the attachment.

Valerio vs Refresca PIA

Facts: ​Spouses Narciso and Nieves Valerio entered into a Contract of Lease with tenant Alejandro Refresca,
husband of respondent, Vicenta, whereby the latter was allowed to till the 6.5-hectare in exchange for rentals.
Thereafter, Narciso executed a Deed of Sale whereby he sold his 6.5-hectare land to his heirs (herein
petitioners) and Alejandro in favor of his long service. 7 years later, the petitioners and Alejandro, as
co-owners, subdivided the 6.5-hectare land. Sometime later, Nieves Valerio entered into another lease
contract to till the land with the Refrescas in exchange for rentals. When Nieves died, petitioners demanded
respondents to vacate the land saying that the lot apportioned to Alejandro was given on the condition that
the Refrescas will surrender their tenancy rights over the entire land but failed to do so. However,
respondents refused. Petitioners filed a complaint before RTC for the annulment of documents of transfer
and title of Alejandro. During the pre-trial conference, the parties stipulated that the transfer of lot to
Alejandro was without monetary consideration; and that respondents did not pay anything for the transfer
(considering that it was a Deed of Sale). RTC ruled in favor of petitioners saying that the Deed of Sale was
absolutely simulated. CA reversed the decision saying that the Deed of Sale was relatively simulated. Hence,
this petition.
 Issue: ​Whether the Deed of Sale was absolutely simulated and fictitious because there was no monetary
consideration

Held: (​Answer​) ​No, the Deed of Sale was not absolutely simulated, rather, it was relatively simulated.

(​Legal Basis​) ​Article 1345 states that in absolute simulation, the apparent contract is not really intended to
produce a legal effect, thus it is void, and the parties may recover from each other what they may have given
under contract. On the other hand, a relatively simulated contract is when the parties state a false cause to
conceal their real agreement, and such parties are bound by the real agreement. Hence, where the essential
requisites of a contract are present and the simulation only refers to the content or terms of contract, the
agreement is absolutely binding and enforceable to the parties and their successors.

(​Application of facts​) ​In this case, records reveal that the clear intent of Narcisco Valerio was to transfer
ownership of apportioned areas of his 6.5-hectare land to petitioners and Alejandro. Although no monetary
consideration was received from any of the vendees, it cannot be said that Narcisco never intended to
transfer ownership. The transfer of the apportioned lots to Alejandro and to the petitioners was out of
liberality as neither petitioners nor Alejandro paid monetary consideration. Likewise, Narciso, during his
lifetime, never exerted effort to evict respondents when they allegedly failed to comply with the condition to
surrender their tenancy rights after the sale. Further, the subsequent partitioning of the 6.5-hectare lot
between petitioners and Alejandro, as co-owners, show that petitioners clearly intended to be bound by the
Deed of Sale. Finally, although what was executed was a Deed of Sale, the SC is convinced that
circumstances show the contract was in reality a donation inter vivos (the true agreement) which binds the
parties and the successors (petitioners).

(​Conclusion​) ​Petition is dismissed. The SC ruled that the Deed of Sale between parties is a relatively
simulated contract.

B. Object

Art 1347-1349

JLT Agro v Balansag

Facts: ​The present controversy involves a parcel of land covering nine hundred and fifty-four (954) square
meters, known as Lot No. 63 of the Bais Cadastre, which was originally registered in the name of the conjugal
partnership of Don Julian and Antonia, the first wife which he had two children namely; Emilio and Josefa.
After Antonia died, Don Julian got remarried to Milagros which he had four children with namely; Maria
Evelyn, Jose Catalino, Milagros Reyes and Pedro Reyes. On 16 November 1972, Don Julian, Emelio and
Josefa executed an instrument which constitutes an assignment transferred ownership over Lot no. 63 and
other properties to the petitioner and it was named eventually to the petitioner. On 14 April 1974, Don Julian
died intestate. The parties entered into a Compromise Agreement.
Par. 13 of Compromise Agreement states:
“ ​the properties now selected and adjudicated to Julian L. Teves (not including his share in the Hacienda
Medalla Milagrosa) shall exclusively be adjudicated ​to the wife in second marriage of Julian L. Teves and his four
minor children, namely, Milagros Donio Teves, his two acknowledged natural children Milagros Reyes Teves and Pedro Reyes
Teves and his two legitimated children Maria Evelyn Donio Teves and Jose Catalino Donio Teves. ”

Unaware that the subject lot was already registered in the name of petitioner in 1979, respondents bought Lot
No. 63 from Milagros Donio(the 2nd wife). At the Register of Deeds while trying to register the deed of
absolute sale, respondents discovered that the lot was already titled in the name of petitioner. Thus, they
failed to register the deed. (Mukha lang ‘to mahaba dahil ng Compromise Agreement part - Xhavier ^_^)

Issue: ​Whether the future legitime can be determined, adjudicated and reserved prior to the death of Don
Julian.

Held: (​Answer​) ​As a general rule, No, the future legitime cannot be determined, adjudicated and reserved
prior to the death of Don Julian.

(​Legal Basis​) ​ART. 1347 implicitly states that ​well-entrenched is the rule that all things, even future ones,
which are not outside the commerce of man may be the object of a contract. The exception is that no
contract may be entered into with respect to future inheritance, and the exception to the exception is the
partition inter vivos referred to in Article 1080. In the case of Blas v. Santos, the Supreme Court defined
defined future inheritance as any property or right ​not in existence or capable of determination at the time of
the contract​, that a person may in the future acquire by succession. ​The partition inter vivos of the properties
of Don Julian is undoubtedly valid pursuant to Article 1347. However, considering that it would become
legally operative only upon the death of Don Julian, the right of his heirs from the second marriage to the
properties adjudicated to him under the compromise agreement was but a mere expectancy. It was a bare
hope of succession to the property of their father. Being the prospect of a future acquisition, the interest by
its nature was inchoate. It had no attribute of property, and the interest to which it related was at the time
nonexistent and might never exist.

(​Application of facts​) ​In the case at bar, Don Julian did not execute a will since what he resorted to was a
partition ​inter vivos of his properties, as evidenced by the court approved ​Compromise Agreement​. Thus, it is
premature if not irrelevant to speak of preterition prior to the death of Don Julian in the absence of a will
depriving a legal heir of his legitime. Besides, there are other properties which the heirs from the second
marriage could inherit from Don Julian upon his death. A couple of provisions in the ​Compromise Agreement ​are
indicative of Don Julians desire along this line.

(​Conclusion​) ​Hence, the future legitime cannot be determined, adjudicated and reserved prior to the death of
Don Julian since i​t had no attribute of property, and the interest to which it related was at the time
nonexistent and might never exist.

Domingo Realty v CA
 Facts: ​The Petitioner, Domingo Realty, filed a complaint for recovery of three parcels of land against private
respondent acero, who had constructed a factory building on a portion of said lots. During the pendency of
the case, both petitioner and Acero executed a compromise agreement in which the latter admitted that the
property he is occupying by way of lease is encroaching on a portion of the property of the petitioner and
undertakes to clear all the structures within the period of 60 days. The Regional Trial Court rendered a
decision based on the Compromise Agreement. Acero filed a Motion to nullify the Compromise Agreement
on the ground of vagueness and mistake. (Hi! Nakakaantok ‘no? - Xhavier) Acero avers that the Compromise
Agreement is vague as there is still a need to determine the exact metes and bounds of the encroachment on
the petitioner’s lot. Further, the agreement is mistaken as it is anchored on his belief that the encroachment
on the property of the petitioners are only a portion and not the entire lot he is occupying.

Issue: ​Whether the Compromise Agreement is void on the ground of vagueness as there is still a need to
determine the exact metes and bounds of the encroachment on the petitioners lot.

Held: (​Answer​) ​No, the Compromise Agreement is valid.

(​Legal Basis​) ​The Supreme Court ruled that the object of a contract, in order to be considered as certain,
need not specify such object with absolute certainty. It is enough that the object is determinable in order for it
to be considered as certain. Article 1349 of the Civil Code provides that the object of every contract must be
determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to determine the same, without the need of a new contract
between the parties.

(​Application of Facts​) ​Here, the title over the subject property contains a technical description that provides
the metes and bounds of the property of petitioners. Such technical description is the final determinant of the
extent of the property of petitioners.

(​Conclusion​) Thus, the Compromise Agreement is valid and the area of petitioners property is determinable
based on the technical descriptions contained in the TCTs.

C. Cause
1. Kinds

Art 1350

2. Distinguished from Motive

Art 1351

3. Want of Cause

Art 1352
4. Statement of False Cause

Art 1353

5. Lawful cause presumed

Art 1354

6. Inadequacy of Cause

Art 1355