Principle of Authonomy if contracts - There will be the settlement of the estate of the

deceased and the properties will be paid by his

Title II CONTRACTS Chapter 1 General Provisions properties. If there are no properties, then the heir
ART. 1311. Relates to the Principle of Relativity of is not liable.
Contracts.
Exceptions: The cases, when a contract are effective
only between the parties are when the rights and
General rule - As a general rule, a party’s rights and
obligations arising from the contract are not
obligations derived from a contract are transmissible to
transmissible:
the successors.

a. by their nature (like a contract involving personal

- Contracts take effect only between the parties their
qualifications, as painting, singing, etc.); or
assigns and heirs (par 1)
EXAMPLE:
- A contract is generally effective only between the
(1) A is obliged to paint the last supper for B. If A died,
parties, their assigns, and their heirs.
he cannot transmit his obligation to his
- Only the parties can maintain an action to enforce
successors/heirs because of the nature of the
these rights and obligations arising from a contract.
contract which involves the personal qualification of
- A contract cannot be enforced by/against a person
the debtor A.
whom which he is not a party.
(2) A was granted a scholarship grant for the degree of
- REASON: Contracts take effect only between the
Business Administration after A would pass the
parties their successors and heirs (can be
qualifying exam, interview, and other requirements.
transmitted)
However, after one year, A died and he was left
EXAMPLE:
with B, his son as his heir. The rights of the
1) A borrowed P1,000,000 from B with A executing a
scholarship grant cannot be transmitted to his son
promissory note to evidence his debt to B. B,
because the contract involves the personal
however, dies, leaving C as the heir of B with the
qualifications of A.
debt of A which has not been collected yet. The
right to collect the debt is transmitted to C, the heir
b. by stipulation (in accordance with the principle of
of B.
freedom to contract); or (by agreement)
2) If C was assigned by B to collect the credit from A,
EXAMPLE:
then the credit right is now transmitted to the
(1) A who owed B, P100,000. They agreed and
assignee, C.
stipulated that if either of them will die before the
3) If A died before he paid the debt, he was survived
debt is paid, the heirs of A shall not be liable for
by his son, the only heir, who inherited the property
the debt, and the heirs of B shall no longer have
worth P1,000,000 from the debtor. In this case, the
the right to collect the debt.
son will be liable for the debt of A only with
respect to what is a part of the inheritance. (if the
c. by the provision of law (as in agency, partnership,
inheritance of the son/heir is not enough to pay for
and commodatum (loan), when death extinguishes the
the debt of A then the heir is not obliged to pay for
legal relationships).
the debt beyond the value of the inheritance, only
(Art. 1178.)
the extent of the inheritance.)
EXAMPLE:
4) If he inherited a property of P300,000 and the debt
(1) In a contract of partnership, the rights of the
of A is P1,000,000. The son would be liable for A’s
general partner cannot be transmitted to his heirs
debt only to the extent of P300,000.
upon the death of the partner because it is
prohibited by law on partnership.
- Whatever money claims that would be claimed in
(2) An agent in a contract of agency, wherein if one of
the proceedings for the settlement of the estate of
them is dead, it would extinguish the contract of
the deceased must be filed in court.
agency and the rights cannot be passed on to their
- After a person dies, there must be settlement of the
respective heirs
estate of the deceased. Whatever loans and claims
must be claimed in the proceedings for the
Cases When Strangers or Third Persons Affected by a
settlement of the estate of the deceased.
Contract.
- If the liabilities of the deceased exceed the value of
A third person is one who has not taken part in a
the properties of the estate, the heirs will not be
contract and is, therefore, a stranger to the contract.
liable for the excess of the liabilities of the
GENERAL RULE: a third person who is considered a
deceased debtor.
stranger to the contract and who has not taken part in a
- If a person dies, he has compulsory heirs like
contract has no rights and obligations under a contract
children and spouse, and if none, the ascendants,
to which he is a stranger (par 3).
the credit is not automatically transmitted to
them.
 He has no legal standing in law to demand the 4. The favorable stipulation should not be conditioned
enforcement of a contract or question its validity. or compensated by any kind of obligation
EXAMPLE: whatever; and
(1) A owes B, P2,000. C, who approached the two of there should no be condition, compensation or by
them, a stranger to a contract. C as a stranger any kind of obligation
cannot be a part of the contract and he could not 5. Neither of the contracting parties bears the legal
demand the enforcement of the contract/ representation or authorization of the third party
question the validity of the contract. for otherwise, the rules on agency will apply.
It is considered as a contract of agency
EXCEPTIONS: Neither the obligor/obligee would have the
There are cases, however, when third persons may be representation/authorization of the third party in a
affected by a contract. Among such cases are the contract.
following: EXEMPTIONS EXAMPLE:
1. In contracts containing a stipulation in favor of a 1. A owes B P20,000 payable after one year at 12%
third person (stipulation pour autrui) (Art. 1311, interest. It was agreed that the interest of P2,400
par.2); would be given to C to whom B is indebted in the
2. In contracts creating real rights (Art. 1312.); same amount.
3. In contracts entered into to defraud creditors (Art. In this case, C must communicate his acceptance to
1313.); and A before the revocation of the stipulation by the
4. In contracts which have been violated at the parties in order that the same shall be effective.
inducement of a third person. (Art. 1314.) From the moment communication of acceptance is
duly made, C becomes a party to the contract. The
1. In contracts containing a stipulation in favor of a promisee, B is entitled to bring an action for its
third person (stipulation pour autrui) (Art. 1311, par.2); enforcement or to prevent its breach in the same
Stipulation pour autrui - a stipulation in a contract manner as the beneficiary, C, thereof.
clearly and deliberately conferring a favor upon a
third person who has a right to demand its ART. 1312.
fulfillment provided he communicates his
There are cases, however, when third persons may be
acceptance to the obligor before its revocation by
affected by a contract. Among such cases are the
the obligee or the original parties
following: (#1 located in art. 1311)
In order that the third person can demand the
This article is an exemption to the general rule that
fulfillment of the stipulation, he must communicate
a contract binds only the parties. (isa sa mga
the acceptance to the obligor before its execution.
exemption lang itong art. na ito)
Also, a mere incidental benefit/interest of a person
is not sufficient.
2. In contracts creating real rights (Art. 1312.);
- Third persons who come into possession of the object
Classes of stipulations pour autrui (2):
of a contract over which there is a real right are bound
(1) Those where the stipulation is intended for the
thereby, subject to the provisions of the Mortgage Law
sole benefit of such persons.
and the Land Registration laws.
(2) Those where an obligation is due from the
- (even if they were not parties to the contract)
promise to the third person which the former
A real right - is binding against whole world and
seeks to discharge by means of such stipulation.
attaches to the property over which it is exercise
wherever it goes.
REQUISITES:
(Definite active subject and no definite passive subject)
1. The contracting parties by their stipulation must
have clearly and deliberately conferred a favor
EXAMPLE:
upon a third person;
* mortgage (interest)
2. The third person must have communicated his
* duly (properly)
acceptance to the obligor before its revocation by
(1) A mortgaged his land to B as a security of his debt.
the obligee or the original parties;
The principal obligation is a contract of loan. The
After the third person was conferred of a favor by
mortgage is duly registered in the Registry of
the two contracting parties, the third person must
Property. Later on, A and the mortgagor sold the
accept the favor upon him before the obligee/
same land to C.
original parties would revoke such stipulation.
- In this case, C bought the land subject to the
3. The stipulation in favor of the third person should
mortgage constituted thereon. Therefore, C is
be a part, not the whole, of the contract;
bound by the contract between A and B, although
not the whole/entire contract itself
he is a stranger to said contract because the right of
B to the said mortgage being a real right, follows
the property wherever it goes.
- The registration of the property/ the contract of induced A to sever ( to cut off/ break off/ end) his
mortgage operates as a constructive notice to the contract with GMA 7 by offering him a more
whole world that there is a contract of mortgage lucrative contract. In that case, GMA 7 can sue ABS
executed by A and B. CBN for damages even if ABS CBN is not a party in
- A mortgaged the same land to C, so the registration the contract of A and GMA 7. He can now be bound
of the real estate of mortgage is a notice to the by the contract because of the inducement of the
whole world including C initially a stranger to the third person.
contract of A and B because the registration creates
a real right. ART. 1315.
- Although, C is initially a stranger to the contract of A Principle of Consensuality.
and B, C then after he bought the land from A, he is * Consensuality (involving or based on mutual consent)
already bound by the contract between A and B.
GENERAL RULE: Contracts are perfected by mere
ART. 1313. consent of the parties and from that moment, they are
3. In contracts entered into to defraud creditors (Art. bound not only to the fulfillment of what has been
1313.); and expressly stipulated but also to all the consequences
- Creditors are protected in cases of contracts intended which, according to their nature, may be in keeping
to defraud them. with good faith, usage, and law.
* defraud (deceive)
* impugn (question) EXAMPLE:
Right of creditor to impugn contracts intended to 1. On March 1, A sold his radio to B for P400. The
defraud them. parties agreed that the delivery of the radio and the
This article is another qualification or exemption to payment of the price will be made the following
the general rule that contracts take effect only day.
between the parties. When is the contract perfected?
EXAMPLE: - It is on March 1, where the parties agreed on the
1. A is indebted to B in the amount of P20,000. A sells subject matter (radio) and the cause (price of
his land to C in order that B may not attach the P400). Although, the radio has not been delivered
land in payment of his debt and A has no other and the price is not yet paid.
property. (Ibinenta ni A ang kanyang lupa kay C
upang hindi ilakip ni B ang lupa ni A bilang bayad sa A contract of sale is a consensual contract because
kanyang utang at si A ay wala ng ibang ari-arian.) it is perfected by the mere consent of the parties,
- B, who is a stranger to the contract of sale between and perfected by the meeting of the minds of the
A and C, B is given by law the right to ask for the parties on the subject matter and the cause of the
rescission or cancellation of the sale in order that contract.
he may be paid in his claim. * consensual contract (mere consent; doesn't need to
(since A has no other property maliban on his land be implemented through an official procedure.)
B, the stranger has the right to ask for the * real contracts (those which are perfected by the
cancellation para may pambayad si A sakanya, kasi delivery of the object of the obligation.)
nga wala ng ibang pwedeng pambayad si A sa
utang niya sakanya.) ART. 1316.
Principle of Consensuality.
Real contracts such as deposit, pledge and
ART. 1314. commodatum are not perfected until the delivery of
4. In contracts which have been violated at the the object of the obligation.
inducement of a third person. (Art. 1314.)
* induces (persuades) (A) Contract of Deposit
- Any person who induces another to violate his - A contract which is constituted when a person
contract shall be liable for damages to the other receives a thing belonging to another
contracting party. - OBLIGATION OF THE PERSON WHO RECEIVED-
- BASIS FOR LIABILITY: A stranger to a contract can be safely keep it and return the same
sued for damages for his unwarranted interference - There is no perfected contract of deposit if the
with the contract thing has not been delivered to the other person.
- The third person cannot be liable for more than Example
the liability for damages of the party induced to - A rents a safety deposit box at a bank to store her
violate his contract. valuable jewelry and signs a contract deposit that
EXAMPLE: outlines the terms of the agreement, including the
1. A, a talent of GMA 7 with a 5-year contract, there rental fee, the duration of the rental, and the
is still two years remaining. A rival station, ABS CBN, conditions for accessing the safety deposit box. A
 deposits her jewelry in the safety deposit box and object/subject matter (lease premise-the
returns the key to the bank. delivery of the key of the building) or the lessee
has not yet paid the rent.
(B) Contract of Pledge
- It is where one delivers a movable property/ real In the absence of delivery, perfection does not transfer
property as a security for the payment of a principal title or create real right yet, yet it gives rise to
obligation. obligations binding upon parties.
- Contract of Real Estate Mortgage - Even if there is no delivery yet, there is already
- It is not perfected until the movable/personal the perfection of the contract
property has been delivered by the debtor to the - But since there is no delivery of the object of
creditor as a security for the payment of his debt. the contract, there is no transfer of title or real
Example right to the other person
- A needs to borrow money to purchase a car, - The perfection of the contract will give rise to
and pledges the car as collateral for the loan. the obligations.
A Signs a contract of pledge with B, agreeing to EXAMPLE:
give up ownership of the car if A fails to repay - In a contract of sale, it is perfected by the mere
the loan. consent of the parties and the meeting of
minds according to the subject matter and the
(C) Contract of Commodatum purchase price.
- A contract whereby one of the parties delivers to Can there be already the transfer of real rights/title
another something not consumable for the over the property?
purpose of use for a certain time and return it later. - None, because the thing is not yet delivered,
- It cannot be perfected until the thing which will be but even if there is no real right yet over the
returned has not been delivered. part of the vendee, it will already give rise to
- Only perfected from the moment that the thing the obligations that are binding to the parties
which is not consumable has been delivered to the which is for the vendor to deliver the subject
other party for his use, after which he would return matter and for the vendee to pay the purchase
the same thing. price.
Example
- Samuel borrows his friend's camera for a 2. Real contract or that which is perfected by the
photography project and signs a contract of delivery, actual or constructive, of the thing which is
commodatum with his friend, outlining the the subject matter of the contract (e.g., deposition,
terms of the loan, including the duration of the pledge, commodatum, loan)
loan, and the condition in which the camera
must be returned. He is responsible for - not the mere consent of the parties but the
returning the camera in the same condition it delivery of the subject matter
was received and for any damages incurred - Actual Delivery- hand to hand delivery of the
during the loan period. thing from one party to another
- Constructive Delivery- delivery of a real
These are Real Contracts because they are not just property, if the vendor will now deliver the title
perfected by the mere consent of the parties but on of the land/house (key)
the delivery of the object of the obligation.
3. Solemn contract or that which requires compliance
Classification of Contracts According to Perfection and with certain formalities prescribed by law, such
How They Are Perfected. prescribed form being thereby an essential element
1. Consensual contract or that which is perfected by thereof (e.g. donation of real property which must be in
mere consent (e.g. sale, lease, agency) (Art. 1315.) a public instrument), (see Art. 1356.)
- Perfected by mere consent - Contracts that must be in a form provided by
- As a general rule, contracts are perfected by the law for the perfection
mere consent of the parties regarding the - Such form is an essential element of the
subject matter and the cause of the contract. contract
(Arts. 1315, 1319.) - In law, if the value of the movable property
- They are obligatory in whatever form being donated exceeds P5,000, it must be in
(oral/writing) they may have been entered into, writing together with the acceptance of the
provided, all the essential requisites for their donee
validity are present. (Art. 1356.) - Perfected only after the required form has been
Example: Contract of Sale/Lease/Barter made
- A Contract of Lease is a consensual contract
even if the lessor has not yet delivered the Stages in the Life of a Contract.
1. Preparation or negotiation - If a person enters into a contract on behalf of
- includes all the steps taken by the prospective another person and that another person has no
parties from the time they manifest interest in knowledge that a person has been representing
entering into a contract, leading to the him or he has given his consent, the contract is
perfection of the contract. unenforceable.
- At this stage, the parties have not yet arrived - No way may contract in the name of another.
at any definite agreement. - If a person acted beyond his powers= contract
- Process of talking/negotiating about the steps cannot be enforced by the person who entered
EXAMPLE: into the contract to a person who has no
1. A offers to sell his house to B for 500,000. A, now authority/legal representation/ acted beyond
approaches B and said he could come over and see his powers.
the house that he is offering him to buy. - Cannot enforce the contract in the court of law

2. Perfection or birth A contract entered into in the name of another by one

- parties have come to a definite agreement or who has no authority/legal representation is
meeting of the minds regarding the terms, that unenforceable against the former (person that has no
is, the subject matter and cause of the knowledge/has not given his consent) unless it is
(consensual) contract (i.e., upon concurrence of ratified by him before it is revoked by the other
the essential elements of the contract) contracting party.
- A person who enters into a contract with no
EXAMPLE: authority or legal representation/ he acted
1. If A offered his house to B for 500,000 and B beyond his powers. The contract is
accepted after he has inspected the house and unenforceable by the person in whose behalf it
seen the house of A. He has agreed that he is has been executed.
amenable to the purchase price of the house. - EXCEPTION: Ratification
There is now the perfection or birth of the
contract, if B accepted the offer and A accepted the An unauthorized contract can be cured only by
purchase price of 500,000. subsequent ratification of the person whose name the
contract was entered into or by his duly authorized
A contract of sale is a consensual contract, agent and not by any other person not so empowered
therefore, since there is meeting of minds on the such that a mere lapse of time cannot give effect to
subject matter and the cause of the contract, there such contract.
is already perfection of the contract even if the - It is only cured by the subsequent ratification of
parties has not yet fulfilled their obligations. the person whose name the contract was
entered into.
3. Consummation or termination - It could not be cured even for lapse of time. It is
- parties have fulfilled or performed their only through ratification.
respective obligations or undertakings under
the contract and the contract may be said to Ratification- refers to the adaption of an act performed
have been fully accomplished or executed, by another. It cleanses the contracts from all its defects
resulting in the extinguishment thereof. from the moment the contract was entered into.
EXAMPLE:
1. After A has delivered the house to B by turning In order that a person may be bound by the contract of
over the key as a symbolic delivery and after, B has another, there are requisites:
paid the purchase price. There is the stage of 1. The person entering into the contract must be duly
consummation or termination, thus, the parties authorized, expressly, or impliedly by the person in
have already fulfilled or performed their respective whose name he contracts, or he must have a right
obligations/undertakings. The contract is already to represent him.
completed and terminated. 2. He must act within his power.

ART. 1317. A contract entered into by an agent in excess of his

Unauthorized Contracts which are Unenforceable. authority is unenforceable against the principal, but the
As a general rule, a person is not bound by the agent is personally liable to the party with whom he
contract of another of which he has no knowledge or contracted where such party was not given sufficient
to which he has not given his consent. notice of the limits of the powers granted by the
- A contract involves the free will of the parties principal.
and only he who enters into the contract can EXAMPLE:
be bound thereby. (1) A person enters into a contract with another
person. He said that he is representing another
 person in the contract. However, he does not have There is no contract unless the following requisites
authority to enter into the contract, or he may have concur:
authority, but he exceeded/acted beyond his (1) Consent of the contracting parties;
authority. The consequence is the contract is (2) Object certain which is the subject matter
unenforceable. The third person or the person of the contract;
whom he contracted cannot enforce the same to (3) Cause of the obligation which is established.
the person for whom the authority has not been (1261)
given.
Only if there is ratification. Classes of Elements of a Contract:
1. Essential Elements- also known as requisites of a
(2) A is an owner of a delivery truck, B without any contract without which no contract can validly exists.
authority from A sold the delivery truck in the They may be subdivided into:
name of A to C. B went to C that he is selling the A. Common
delivery truck and he is authorized by A to sell his - Those present in all contracts
delivery truck. - Enumerated in Art. 1318
- C, the buyer of the delivery truck, cannot - There is no contract unless the following
enforce the sale of the delivery truck against A, requisites concur: CONSENT, OBJECT certain
the owner of the delivery truck which is the subject matter of the contract, and
- C cannot go to court and ask for specific the CAUSE of the obligation which is
performance of the contract between A and B, established.
because B has no authority to enter into the - In the absence of any of them, there would be
contract of sale. no contract at all.
- Therefore, C, the buyer, cannot enforce the B. Special
sale to the owner of the truck. - Those not common to all contracts or which
- If B told A that he sold his delivery truck and the must be present only in, or peculiar to, certain
purchase price of 500,000 and A accepted the purchase specified contracts and such peculiarity- maybe
price. as regards to form, as regards to subject matter;
Can C enforce the contract against A even if B has no as regards to the consideration or cause
authority to sell the delivery truck?
- EXCEPTION: Unless A would ratify the contract. 2. Natural elements
- Yes, because there is ratification on the part of - those that are presumed to exist in certain
A and there is already the cure of such firstly contracts unless the contrary is expressly
unenforceable contract. stipulated by the parties
In the first instance, it is unenforceable wherein C could - even if they are not included/ have not been
not ask A to deliver his delivery truck to him by the contained in the contract, they are presumed
virtue of the sale which was entered into by B and him. to exist unless it is expressly excluded by the
But if there is ratification, on the part of A, like parties in the contract.
accepting the purchase price, C can now enforce the EXAMPLES:
contract. (1) Warranty against hidden defects in a contract
of sale
(3) A (principal), an owner of Toyota corolla car and a - Considered as a natural element because it is
Honda car, authorized B (agent) to sell the Toyota presumed to exist in a contract of sale even if it
car. It is a contract of agency, because A, the is not expressly stipulated by the parties
principal, authorized B, the agent, to sell the Toyota - The vendor warrants that the thing he is selling
car. However, B sold the Honda car in the name of is free from any hidden defects even if it is not
the owner to C. said in the contract of sale.
- It is evident that B was authorized to sell the - EXCEPTION: if the parties stipulate that it will
Toyota car, but he acted beyond his power not be included in the contract
when what he sold is the Honda car.
- In this case, C cannot enforce the sale of the (2) Warranty Against Eviction
Honda car unless A ratifies the contract. - In the case of a sale of a land, the vendor warrants
that the title of the land is clean and free from
encumbrances.
Title II CONTRACTS - The vendor warrants that the vendee will not be
Chapter 2 Essential Requisites of Contracts evicted from the land.
Section I Consent
3. Accidental elements
ART. 1318. - or the particular stipulations, clauses, terms, or
conditions established by the parties in their
 contract (Art. 1306.), for the purpose of clarifying, - It is really a promise to act or refrain from
restricting, or modifying its legal effects, like acting on condition that the terms thereof are
conditions, period, interest, penalty, etc., and, accepted by the person (offeree) to whom it is
therefore, they exist only when they are expressly made
provided by the parties - Must be certain or definite (complete and
- In the absence of these elements, they do not exist intentional) so that the liability or rights of the
and are not binding parties maybe exactly fixed
EXAMPLE: - Signification by one person to another of his
(1) In a contract of loan, in order that the interest of willingness to enter into a contract with him in
the loan may be paid by the debtor, the payment of one the terms specified in the offer
interest must be expressly stipulated/established in - A mere statement of willingness to enter into a
the contract. Otherwise, the creditor cannot ask for negotiation, it is not considered an offer
the payment of the interest of the loan. - If the offer is indefinite, it will not give rise to a
contract
Art. 1319. * offeror (the party who makes the offer)
First Essential Element of a Contract which is Consent * offeree (person who either accepts or does not accept
the offer)
CONSENT is the conformity or concurrence of wills EXAMPLE:
(offer and acceptance of the subject matter and cause) 1. I will sell you my car.
and with respect to contracts, it is the agreement of the Is the offer definite?
will of one contracting party with that of another or - No, because it is uncertain since the price of the
others, upon the object and terms of the contract. car is not stated.
- The meeting of minds between the parties on the 2. I will try to consider the purchase of your car with
subject matter and the cause which are to a price of P500,000.
constitute the contract even if neither has been Is that a definite offer?
delivered - No, because there is no resolution yet to
- Manifested by the meeting of the offer and perform the act.
acceptance upon the thing and the cause which are 3. I will buy your cellphone for 20,000 cash.
to constitute the contract Is the offer certain?
- The area of the agreement must extend to all points - Yes, and it will now give rise to a contract if the
that the parties deem important or material or else other party would accept.
there is no consent at all
ACCEPTANCE
Characteristics of Consent. - Manifestation of the offeree of his assent to the
(1) must be given by two or more parties terms of the offer
(2) must be intelligently given - He agrees either expressly or by his conduct to
- the parties must be capable or capacitated to the offer of another so that a contract is
give consent concluded, and the parties become legally
- therefore, if one party is incapicated, it is bound.
voidable because they do not have reason/full - The offeree would agree and manifest that he is
understanding of their acts, and there is assenting to the terms of the offer
complete absence to discern or power to - must be absolute or unqualified
analyze
(3) The consent must be freely, voluntarily, and QUALIFIED ACCEPTANCE
consciously given - if it is qualified, as when it is subject to a
- Thus, if the consent is given because of condition, it merely constitutes as a COUNTER-
violence, intimidation, and undue influence, the OFFER which in law is considered as a
contract is now voidable because there is REJECTION of the original offer and an attempt
defect in the consent of one of the contracting by the parties to enter into a contract on a
parties. different basis
- In fraud and mistake, it could also cause the - if it is qualified, there is no complete
defect of the consent of one of the contracting acceptance
parties. - In order to conclude the agreement, the
acceptance of the offeree in all legal intent and
OFFER purposes must meet and correspond with
- A proposal made by one (1) party to another terms and conditions of the offer.
(offeree) to enter into a contract - If the acceptance
- More than an expression of desire or hope differentiates/varies/modifies the terms and
conditions of the offer, it becomes a qualified
 acceptance, and it is not absolute since there is - Acceptance by letter/telegram binds the offeror
no concurrence of the minds of the parties. from the time it already has come to his
- If this counter-offer is accepted, the acceptance knowledge
of the counteroffer, will produce a contract with - Knowledge may be actual/constructive
terms and conditions not based on the original - Constructive knowledge- the letter/telegram
offer, but the counteroffer. was received in the house/office of the offeror
- a qualified acceptance must, in turn, be by person of age/reasonable discernment
accepted absolutely in order that there will be - Actual Knowledge- offeror has already known it
a contract and has knowledge of the acceptance of the
EXAMPLE: offeree
1. A offered to sell his car to B for 500,000 in cash. B
accepted the offer but said that he would just give a Revocation of Offer and Acceptance.
down payment of 400,000 and to pay the balance of - If the offer was revoked before the offeror
100,000 after 30 days. came to know the acceptance, no contract is
Is the acceptance made by B absolute/unqualified? perfected.
- No, the acceptance is not absolute/unqualified - REASON: At the time of the alleged meeting of
because it varies/modifies the offer made by A, the minds, the parties were no longer of one
concerning the payment of the price because A mind.
offered to accept payment for 500,000 in cash. EXAMPLE:
However, B accepted the offer on the condition 1. On March 1, A wrote a letter to B offering the lease
that he will just give a down payment of of his lot. On March 5, B wrote a letter of complete
400,000 and to pay the balance of 100,000 after acceptance and has accepted the offer in writing. It
30 days. was received by A on March 10. It appeared,
Qualified acceptance= equivalent to however, that on March 7, A had written a letter to
another offer and would come from the B revoking the offer. The letter of revocation was
original offeree, B received by B on March 11.
In the first offer given by A, it does not Is there a perfected contract?
give rise to any contract because the None, because the revocation by A of the offer was
acceptance made by B is qualified and made before/prior to his knowledge of the acceptance
not absolute. made by B. On March 10, when there should have been
If A accepts the counter-offer, a a meeting of the minds of A and B, the parties were no
contract results with the payment of longer of one mind because there has been revocation
the price according to the terms set by made by A of his offer.
B.
If the acceptance was also given but revoked by the
offeree before the acceptance came to the knowledge
Art. 1320. of the offeror, no contract is perfected. Because, at the
Form of Acceptance of offer which may either EXPRESS time of the meeting of the minds of the parties, they
or IMPLIED were no longer in one mind.
 Express acceptance – a form of a promise to pay a EXAMPLE:
certain amount or to do something, may be ORAL or 1. On February 2, A wrote a letter to B offering the
WRITTEN sale of his car for 500,000 in cash. On February 6, B
 Implied acceptance - is one that is inferred from act wrote a letter of complete acceptance which was
or conduct of the offeree received by A on February 11. It appeared,
however, that on February 8, B had written a letter
EXAMPLE: to A and changed his mind and revoking his
(A) Implied Acceptance acceptance. The letter of revocation was received
by A on February 12.
1. In a certain mall where A operates a fruit juice
stand, A offers B a glass of apple juice for P70, and Art. 1321. The person making the offer may fix the
B gets the glass and drinks its contents without time, place, and the manner of acceptance, and all of
saying anything. which must be complied with.
Is there acceptance? Matters that may be fixed by the offerer:
- Yes, an implied acceptance, by the conduct of B - The offerer has the right to prescribe the time,
through drinking and getting the glass could be place and manner of acceptance.
inferred that he has accepted the offer of A. - An acceptance departing from the terms of the
offer constitutes a counter-offer.
(B) Acceptance by letter/telegram - Take note: counter-offer has the effect of
extinguishing the offer. In effect, constitutes a
 new offer which the original offer may accept or where the agent came to know of the
reject. acceptance. It is the knowledge of B of the
- Not mandatory/ it is discretionary (optional) acceptance is now considered the knowledge of
- If the stipulation is silent, it would be the person A because B is considered as the extension of
making the offer (offeror) who will fix the time, the personality of the principal. - Not on March
place, and the manner of acceptance and all of 9 when he relied the acceptance to A.
which must be complied with
Example: 2 Kinds of Power of Attorney:
1. A (the offerer), may not tell B (the offeree), that 1. Special Power of Attorney- allows a person
the latter must accept the offer personally on April (the principal) to authorize another
30, before 6:00 pm in the office of A, all of which individual (the agent) to make legal
must be complied with B to create a contract. decisions on their behalf.
2. General Power of Attorney - allows a
Communication of the offer: person (the “agent”) to act and decide on
- The offer must be communicated and received another person's behalf (the “principal”)
by the offeree. It may be by letter, telephone,
email, or the like. (2) If the Principal made the offer
- It may be express or implied by language or acts
of the offeror understood as such by the other 1. If C accepted the offer and communicated his
party. acceptance to A, in that case, there is no
Example: perfected contract. It is only when the time B
1. If A tells B he will fix his roof for five thousand has communicated the acceptance made by C
rupees, the communication is complete as to A and the time when A has the knowledge of
soon as the words are spoken by A and the acceptance will the perfection of the
received and agreed by B, the offeree. contract set in.

Art. 1322. An offer made through an agent is Applies only if the offer is made through an agent
and acceptance is communicated through him.
accepted from the time acceptance is communicated
The knowledge of the agent is also considered the
to him.
knowledge of the principal, because the agent is
Communication of acceptance:
the extension of personality of the principal
(1) To offerer
Hence, there would be no meeting of the minds if
– the acceptance of the offer must be
the principal himself made the offer and the
absolute. (supra)
acceptance is communicated to the agent, unless
– Requisite: the acceptance must be
the latter is authorized to receive acceptance
communicated to the offerer, either
When can you reckon the acceptance of the offer?
express or implied subject to the terms of
- It is from the time the acceptance has been
the offer.
communicated to him (agent)
(2) To agent
- If the principal authorized the agent to offer a
- By legal fiction, an agent is considered an
thing that he would sell to a third person, the
extension if the personality of his proposal. If
acceptance of the third person of the offer will
duly (properly) authorized, the act of the agent
be effective from the time that the agent has
is, in law, the act of the principal.
accepted the offer.
- An offer is made by an agent considering that
EXAMPLE:
there is an authority coming from the principal,
(1) Principal has given authority to the agent
and the offer has already been accepted from
1. A has given special power of attorney, the
the time that the acceptance of the offeree has
document that would evidence the authority given
been communicated to the agent.
by him to B, so that B can sell A’s car for 500,000 in
- It is not necessary that the acceptance would be
cash.
communicated to the principal.
- On March 1, the agent offered to sell the car to
If the principal made the offer, this provision is not
C for 500,000 in cash since he is given authority
applicable. In this case, if the acceptance of the third
to sell and he looked for a buyer. On March 5, C
person (offeree) was communicated through the agent,
accepted the offer of B by sending his letter of
there would be no perfected contract because the offer
acceptance on the same day. The agent
was made by the principal.
received the letter on March 7 and he notified A
- It was not the agent who made the offer
about the acceptance of C on March 9.
- UNLESS: the agent has been authorized to
- When was the contract perfected in the given
receive the acceptance
situation? On March 7, because this is the date
 - Such knowledge by the agent results in the when there is a crime and there is a penalty given by
perfection of the contract if the agent was duly the judgement of the court.
authorized by the principal to receive the - It constitutes the deprivation of the offender
acceptance, otherwise, there is no perfection of during the time of his sentence of the rights of
the contract. parental authority, guardianship, marital
- Therefore, in this case, there is no perfected authority, the right to manage his property and
contract unless the agent communicated the the right to dispose of such property by any act
acceptance to the principal. or conveyance.
- It means he can no longer sell, mortgage, or
CONTRACT OF AGENCY- A principal who is authorizing a encumber the property that he has
person called an agent to perform an act on behalf of
him. EXAMPLE:
AGENT- considered as an extension of the personality of (1) A who offered to sell a specific car for 500,000 in
the principal. If duly authorized by the principal, his acts cash to B on March 1. On March 5, B sent his letter
are also considered the acts of the latter. of acceptance, which was received at the office of A
on March 10. However, A had already died/became
insolvent/civilly interdicted/insane on March 7.
ART. 1323. When Offer Becomes Ineffective - The offer now became ineffective and there is
no offer to speak of upon the death of A
An offer becomes ineffective upon the death, civil
because it has now prevented the meeting of
interdiction, insanity, or insolvency of either party
the minds of the parties.
before acceptance is conveyed.
- On March 10, when A was supposed to learn of
- The offer by the offeror becomes ineffective
the acceptance of the offeree B, he was
when at a time upon the death, at the time
already dead.
offeree/offeror is in civil interdiction, at the
time either party is insane/insolvent before the
(2) On February 1, A offered to sell a specific
acceptance is conveyed/communicate.
cellphone for 50,000 in cash to B. On February 4, B
sent his letter of acceptance which was received at
When offers becomes ineffective.
the house of A on February 9. However, B had
- An offer may be revoked or withdrawn at any
become insane/insolvent/civilly interdicted/died on
time before it is accepted merely by
February 6.
communicating such intentions to the other
- In this case, the offer became ineffective on
party. After acceptance, the contract is already
such date at the time that B became insane
perfected.
preventing now the meeting of the minds on
- Even if the offer is not withdrawn, its
February 9 when A had come to know the
acceptance will produce a meeting of the minds
acceptance.
in case the offer has already become ineffective
because of the death, civil interdiction, insanity,
Hence, in this provision of the law, the offer
or insolvency of either party before the
becomes ineffective at the time either party had
conveyance of the acceptance of the offer. It
died, become insane/insolvent, or civilly interdicted.
must be observed that the law refers to “either
party.” This means that at the time the
acceptance is communicated, both parties, the Art. 1324. When the offeror has allowed the
offerer the and offeree, must be living and offeree a certain period to accept, the offer maybe
capacitated. withdrawn at any time before acceptance by
Other grounds which render offer ineffective. communicating such withdrawal, except when the
- the above grounds are not exclusive (not option is founded upon a consideration, as something
limited to only one person) paid or promised.
- Thus, the failure to comply with the condition of
the offer as to the time, place and the manner Meaning of contract of option; option period; option
of payment, the expiration of the period fixed in money
the offer for the acceptance, the destruction of (A) Option contract
the thing due before acceptance rejection of - is one giving a person for a consideration a
the offer etc., will also render the offer certain period within which to accept the offer
ineffective and prevent the creation of a of the offeror.
contract. - It is separate and distinct from the contract
which will be perfected upon the acceptance of
CIVIL INTERDICTION - an accessory penalty as the offer.
punishment for the commission of an offense. Given
 - Option may also refer to the privilege itself - If there is option money, the offeror may no
given to the offeree to accept an offer within a longer withdraw his offer because there is
certain period. already an option contract.
- a contract wherein the offeror grants the
offeree the privilege to accept the offer within NOTE: Article 1479 (general rule on offer and
a certain period of time acceptance) has modified Art. 1324, which now
specifically applies to unilateral “promise to buy/sell” a
(B) Option period determinate thing.
- the period given within which the offeree must - If not supported by any consideration distinct
accept the offer. from the price for which that thing was
intended to be sold by/to the promise, does not
(C) Option money bind the promise, even if accepted and maybe
- the money paid or promised to be paid by the withdrawn any time.
offeree in consideration for the option. - "an accepted unilateral promise" can only have
- Separate and distinct from the purchase price a binding effect if supported by a consideration,
- It is not to be confused with Earnest Money which means that the option can still be
(serious about purchasing) which is actually a withdrawn, even if accepted, if the same is not
partial payment of the purchase price and is supported by any consideration.
considered as proof of the perfection of the - Buy and sell= withdraw anytime even after
contract acceptance
- Services= withdraw anytime before acceptance
Withdrawal of the offer where period stipulated for
acceptance. EXAMPLE:
- When the offerer gives to the offeree a certain (1) A offered to buy the house of B, giving B ten
period within which to accept the offer days within which to accept the offer. In this
- General rule: the offer may be withdrawn as a case, A may withdraw his offer anytime even
matter of right at any time before acceptance. after acceptance by B if B has not
- Exemption: when the option is founded upon a paid/promised to pay a consideration to A for
consideration, as something paid or promise. giving B the ten-day period within which to
When can an offer be withdrawn? make up his mind.
- It depends if the option is not founded upon a On January 1, A wrote to B offering 1000
valuable consideration, the offer may be shares of stocks in SM Corp. which he owns
withdrawn any time before acceptance by for 70 per share, with a total of 70,000. In
communicating such withdrawal to the other A’s letter, he is giving B up to January 20 to
party. In this case the offer may be withdrawn decide to sell or not.
at any time before the acceptance has been Before January 20, can A withdraw the offer to sell the
communicated to him. shares of stock?
- However, if the option is founded upon a Yes, A can withdraw the offer by
valuable consideration (ex. Option money communicating such withdrawal to B
promised to be paid by the offeree/any amount provided that B has not yet communicated his
promised by the offeree given for him to think acceptance to sell the shares of A since it is
whether to accept the offer), the offer may not not founded on any consideration such as an
be withdrawn anymore before the lapse of the option money.
option period. Otherwise, the offeror may be If B gave A, 1000 to hold A to promise to sell the shares,
held liable for damages for breach of contract. can A withdraw the offer before January 20?
EXAMPLE: - No, because the option is now founded on a
1. A offers to paint the house of B for 30,000 giving B valuable consideration of the payment of the
ten (10) days within which to make up his mind. option money of 1,000.
- Under this article, A may withdraw the offer
even before the lapse of ten days unless B has If B gave an option money of 1,000, B accepted the offer
already accepted the offer. A to sell the shares, how much must be paid to A,
- Even before acceptance, A may not withdraw 69,000 or 70,000?
the offer if the option is covered by a - 70,000, because the option money is separate
consideration as when B paid or promised to and distinct from the purchase price.
pay a sum of money to A for giving him 10 day - The giving of the option money does not
period. necessarily result to a contract of sale because
the offeree may decide not to accept the offer.

EXAMPLE (EARNEST MONEY):

(1) A is interested in buying the car of B for 1M pesos. bidder is the one making the offer which the
To show that he is earnest (serious), he gives B, an advertiser is free to accept or reject
earnest money (serious about purchasing) of - Just mere invitations to make proposals, and if
200,000, which B accepts. The acceptance of B of these proposals are submitted, the advertiser is
the earnest money results to a contract of sale and not bound to accept whether it be the highest
there is a perfected contract. or lowest or only bidder.
How much will A pay? - Because the advertiser can also consider other
- He will need to pay 800,000 at the time agreed factors like the financial capability, reputation,
upon. The 200,000 as an earnest money is and experience of each of the bidder.
deducted from the purchase price. There is - When the advertiser describes the manner,
already a proof of perfection of contract. terms and conditions of the sale, anybody
participating in the bidding at public auction are
bound by the conditions set forth at such sale.
ART. 1325. - However, the advertiser is not the one making
the offer. Hence, the advertiser can reject or
Unless it appears otherwise, business advertisements
accept the offer made by the bidder.
of things for sale are not definite offers, but mere
invitations to make an offer.
EXAMPLES:
(1) Saint Louis College who wants a contracted
Business Advertisements Generally Not Definite Offers
security agency to be deployed at the school. SLC
- Business advertisements of things for sale are
hosted on the website that those security agencies
not definite offers, acceptance of which will
who are interested to bid for contract of security
perfect a contract but are merely invitations to
services for a period of 2 years.
the reader to make an offer.
- This is just an invitation for bidders to make
- However, if the advertisement is complete in all
proposal.
the particulars necessary in a contract, it may
- Here comes, ABC security, who cast its bid to
amount to a definite offer which, if accepted,
SLC for 1M, DEF cast its bid for 2M, and we
will produce a perfected contract.
have GHI who cast its bid for 3M. The most
EXAMPLES:
advantageous to SLC is ABC which is the lowest
1. For sale: 100 square meters lot at Bakakeng, Baguio
bid, but SLC may consider the reputation and
City for P500,000. Call Cellphone No.
experience of the bidder. If SLC has chosen the
09999999999.
bidder which has the highest bid, GHI, the
- This is not a definite offer.
bidders cannot question the decision of SLC,
- It is just a mere invitation for the reader to
because SLC is free to accept/reject any offer
make an offer.
from bidders.
- Thus, any offer made by the reader of the
- In this case, it is not SLC who is making the
advertisement may be accepted or not by the
offer.
advertiser.
- The bidders are now making the offer which the
offeree can free to accept/reject them.
2. For sale: 100 square meters lot at Bakakeng, Baguio
City located at No. 1 Block 1, Lot 1, Ciudad Grande
Phase 1, Baguio City for P500,000 cash. Call
Cellphone No. 09999999999.
- This is a definite offer.
- Thus, the advertiser can no longer withdraw it
once it is accepted by another person.

ART. 1326. Advertisements for Bidders, Not

Definite Offers 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.

Advertisements for bidders generally Not Definite

Offers
- In an advertisement for bidders, the advertiser
is not the one making the offer. In reality, the