Art. 1318.

There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

Elements of a Contract

1. Essential Elements - The essential elements are those without which there can be no
contract.
a. Common elements – Present in all contracts
b. Special elements – present only in certain contracts. E.g. delivery in real contracts
c. Extraordinary elements – peculiar to specific contract. E.g. price in a contract of
sale.
2. Natural Elements - those which are derived from the nature of the contract and ordinarily
accompany the same. They are presumed by the law, although they can be excluded by the
contracting parties if they so desire.
3. Accidental Elements – those which exist only when the party expressly provide for them for
the purpose of limiting or modifying the normal effect of the contract.

ESSENTIAL REQUISITES OF A CONTRACT

The following are the essential requisites of contracts (COC):

1. Consent;

2. Object or subject matter; and

3. Cause or consideration

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from
the time it came to his knowledge. The contract, in such a case, is presumed to have
been entered into in the place where the offer was made.

Consent - is the conformity of wills and with respect to contracts, it is the agreement of the will of
one contracting party with that of another or others, upon the object and terms of the
contract.

Requisites of Consent:

1. the consent must be manifested by the concurrence of the offer and the acceptance
 2. the contracting parties must possess the necessary legal capacity
3. the consent must be intelligent, free, spontaneous, and real

When Contracts are Perfected:

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 counteroffer. [Insular Life v. Asset Builders
Corp., 2004]

Exceptions:

1. Real contracts, such as deposit, pledge and commodatum, are not perfected until
the delivery of the object of the obligation [Art. 1316]
2. Formal contracts, where the law requires that a contract be in some form or be
proved in a certain way; the intent of the parties have to be accompanied by the
requisite formality [Art. 1356]

Offer - is a proposal made by one party (offerer) to another to enter into a contract. It is more
than an expression of desire or hope. It is really a promise to act or to refrain from
acting on condition that the terms thereof are accepted by the person (offeree) to
whom it is made.

Offer must be CERTAIN:

The offer must be certain or definite and clear, and not vague or speculative so
that the liability (or the rights) of the parties may be exactly fixed because it is necessary
that the acceptance be identical with the offer to create a contract without any further
act on the part of the offeror.

Requisite (DIC):

1. It must be Definite
2. It must be Intentional
3. It must be Complete

Withdrawal of Offer:

Offer/Proposal may be withdrawn so long as the offeror has no knowledge of

acceptance by offeree.

Rule on Complex offers:

1. Offers are interrelated – contract is perfected if all the offers are accepted.
 2. Offers are not interrelated – single acceptance of each offer results in a perfected
contract unless the offeror has made in clear that one is dependent upon the other
and acceptance of both is necessary.

Acceptance- is the manifestation by the offeree of his assent to the terms of the offer. Without
acceptance, there can be no meeting of the minds between the parties.

Acceptance of offer must be ABSOLUTE:

The acceptance of an offer must be absolute, unconditional or unqualified, that

is, it must be identical in all respects with that of the offer so as to produce the consent
or meeting of the minds necessary to perfect a contract.

Amplified Acceptance:

Under certain circumstances, a mere amplification on the offer must be

understood as an acceptance of the original offer, plus a new offer which is contained in
the amplification.

Withdrawal of Acceptance

Acceptance may be revoked before it comes to the knowledge of the offeror

because in such case there is still no meeting of the minds, since the revocation has
cancelled or nullified the acceptance which thereby ceased to have any legal effect.

Theories that determine the exact moment of perfection when acceptance is made by letter or
telegram:

1. Manifestation Theory – perfected from the moment the acceptance is declared or made.
2. Expedition Theory – perfected from the moment the offeree transmits the notification of
acceptance to the offeror.
3. Reception Theory – perfected from the moment that the notification is in the hands of
offeror in such a manner that he can, under ordinary condition, procure the knowledge of
its contents, even if he is not able actually to acquire such knowledge.
4. Cognition Theory – perfected from the moment the acceptance comes to the knowledge of
the offeror.

Art. 1320. An acceptance may be express or implied.

Art. 1321. The person making the offer may fix the time, place, and manner of acceptance, all of
which must be complied with.

Things that May Be Fixed by the Offerer:

(a) the time

(b) the place

 (c) the manner of acceptance

Any act contrary to the prescribed terms really constitutes a counter-offer or

counter-proposal.

Art. 1322. An offer made through an agent is accepted from the time acceptance is communicated
to him.

QUESTION: Suppose the principal himself made the offer, and acceptance is
communicated to the agent, would the Article apply? In other words, would there
already be a meeting of the minds?

ANSWER: It is submitted that as a general rule, there would as yet be no meeting of the
minds, for the agent may be an ordinary one, not authorized to receive the acceptance
for the PARTICULAR transaction. However, if the agent was expressly authorized to
receive the acceptance, or if the offeree had been told that acceptance could be made
direct with the agent, who would then be given freedom to act or to proceed, there can
be a meeting of the minds and a perfection of the contract.

Art. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of
either party before acceptance is conveyed

Effect of Death, Civil Interdiction, Insanity, or Insolvency:

An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of
either party before acceptance is conveyed. The word “conveyed” refers to that moment when the
offeror has knowledge of the acceptance by the offeree. Hence, the article merely means that an offer
becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before the
offeror has knowledge of the acceptance by the offeree.

ILLUSTRATION: A makes an offer to B on Jan. 1. B makes known his acceptance in a letter

received at the house of A on Jan. 5. However, on Jan. 4, A had died. Here, the offer is
ineffective because there was no meeting of the minds.

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

Option Contract - A preparatory contract in which one party grants to the other, for a fixed
period, the option to decide whether or not to enter into a principal contract
[Art. 1324]

Option - may also refer to the privilege itself given to the offeree to accept an offer
within a certain period.
Option period - is the period given within which the offeree must decide whether or not to
enter into the principal contract.

Option money - is the money paid or promised to be paid as a distinct consideration for an
option contract. It is not to be confused with earnest money which is actually a
partial payment of the purchase price and is considered as proof of the
perfection of the contract.

GENERAL RULE: when the offerer gives to the offeree a certain period to accept, "the offer may
be withdrawn at any time before acceptance"

EXCEPTION: when the option is founded upon consideration.

*MODIFICATION OF GR: Art. 1479 modifies the general rule, which applies to "a promise
to buy and sell" specifically. This rule requires that a promise to
sell to be valid must be supported by a consideration distinct
from the price. The option can still be withdrawn, even if
accepted, if the same is not supported by any consideration.

ART. 1325. Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer.

QUESTION: Are business advertisements of things for sale definite offers?

ANSWER: If appears to be a definite offer containing all the specific particulars

needed in a contract, it really is a definite offer.

If important details are left out, the advertisement is not a definite

offer, but a mere invitation to make an offer.

Art. 1326. Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the
contrary appears.

Art. 1327. The following cannot give consent to a contract:

(1) Unemancipated minors;

(2) Insane or demented persons, and deaf-mutes who do not know how to
write.

Persons incapacitated to give Consent:

1. Minors

Exception:
 a. When minor misrepresents his age. (it must be an active not merely constructive
representation);
b. Contracts involving the sale and delivery of necessaries to minors
c. Contracts by guardians or legal representatives.
2. Insane or demented persons, unless the contract was entered into during a lucid interval,