essential and dispositive part, as

distinguished from the exposition

ART. 1305
of the facts and antecedents
upon which it is based.
Article 1305 CONTRACTS Number of Parties: The Code states
Contracts is the meeting of minds “two persons”; what is meant actually is
between two persons whereby one binds “two parties”. For a contract to exist,
himself, with respect to the other, to there must be two parties. A party can
give something or render something. be one or more persons.

Contracts are OBLIGATORY Husband & Wife:

-​ A contract, once perfected, has a -​ Husbands and wives cannot sell
force of law between the parties, to each other as a protection of
which they are bound to comply the conjugal partnership.
with in good faith, and neither -​ They can however enter into a
one may without the consent of contract with the agency.
the other. (ART. 1159 CC)
Auto-contracts:
Sanchez Roman – a juridical It means one person contracts himself.
convention manifested in legal form, by
virtue of which one or more persons As a general rule, it is accepted in our
bind themselves in favor of another or law. The existence of a contract does
others, or reciprocally, to the fulfillment not depend on the number of persons
of a prestation to give, to do or not to but on the number of parties.
do.
There is no general prohibition against
Other Terms: auto-contracts; hence, it should be held
-​ Perfect promise – distinguished valid.
from a contract, in that the latter
establishes and determines the Contracts of Adhesion:
obligations arising therefrom; Contracts prepared by another,
while the former tends only to containing provisions that he desires,
assure and pave the way for the and asks the other party to agree to
celebration of a contract in the them if he wants to enter into a
future. contract.
-​ Imperfect Promise – mere Example: transportation tickets
unaccepted offer
-​ Pact – a special part of the It is a valid contract according to
contract, sometimes incidental Tolentino because the other party can
and separable for the principal reject it entirely.
agreement.
-​ Stipulation – similar to a pact; Characteristics of Contracts:
when the contract is an 3 elements:
instrument, it refers to the
 -​ Essential elements – without MORALS- deal with norms of good and
which there is no contract; they right conduct
are a) consent, b) subject matter GOOD CUSTOMS
and c) cause PUBLIC ORDER- refers principally to
-​ Natural elements – exist as public safety although it has been
part of the contract even if the considered to mean also the public weal.
parties do not provide for them, PUBLIC POLICY- is broader than
because the law, as suppletory to public order, as the former may refer
the contract, creates them not only to public safety but also to
-​ Accidental elements – those considerations which are moved by the
which are agreed by the parties common good.
and which cannot exist without
stipulated Contracts have Autonomy
-​ Any person has the liberty to
Stages of a Contract: enter into a contract so long as
they are not contrary to law,
1. Preparation, conception, or morals, good customs, public
generation – period of negotiation and order or public policy
bargaining, ending at the moment of -​ The legislature, under the
agreement of the parties. constitution, is prohibited from
2. Perfection or birth of the contract – enacting laws to prescribe the
the moment when the parties come to terms of a legal contract.
agree on the terms of the contract.
3. Consummation or death – the
fulfillment or performance of the terms
ART. 1307
agreed upon in any contract.

Art. 1307. Innominate contracts

Art. 1306 shall be regulated by the
stipulations of the parties, by the
Article 1306- The contracting provisions of Titles I & II of this
parties may establish such Book, by the rules governing the
stipulations, clauses, terms & most analogous nominate contracts,
conditions as they may deem and by the customs of the place.
convenient, provided they are not
contrary to law, morals, good Valid Contracts- are those that meet
customs, public order, or public all the legal requirements and
policy. limitations for the type of agreement
involved and are, therefore, legally
LIMITATIONS OF CONTRACTS binding and enforceable.

CONTRARY TO LAW - the fundamental

requirements
CLASSIFICATIONS OF CONTRACTS 3. UNILATERAL- when it creates an
obligations on the part of only one of
1. NOMINATE- contracts with specific the parties
names or designation in law 4. BILATERAL- when it give rise to
reciprocal obligations for both parties
2. INNOMINATES- contracts with no 5. ACCESSORY- when it is dependent
specific names or designation in law upon another contract it secures or
guarantees for its existence and validity
those which lack individuality and are 6. PRINCIPAL- when it does not depend
not regulated by special provisions of for its existence and validity upon
law. another contract but is an indispensable
condition for existence of an accessory
contract.
KINDS OF INNOMINATE 7. INDIVISIBLE- when each part of the
CONTRACTS contract is dependent upon the others
parts for satisfactory performance
●​ do ut des- I gave that you may 8. DIVISIBLE- when one part of the
give contracts may be satisfactory performed
-​ An agreement in which A will give independently of the other parts.
one thing to B, so that B will give
another thing to A Analogous contracts:
Innominate contracts, in the absence of
●​ do ut facias- I gave that you stipulations and specific provisions of
may do law on the matter, are to be governed
-​ An agreement under which A will by rules applicable to the most
give something to B, so that B analogous contracts.
may do something for A.

●​ facto ut des- I do that you may

ART. 1308
give
-​ An agreement under which A
does something for B, so that B Art. 1308. The contract must bind
may give something to A both contracting parties; its validity
or compliance cannot be left to the
●​ facto ut facias- I do that you will of one of them.
may do
-​ An agreement under which A Otherwise, the contract is void. Eg.
does something for B, so that B undetermined lease.
may render some other service
for A. The obligations arising from contracts
have the force of law between the
contracting parties that there must be
mutuality between the parties based on
their essential equality, to which it is
repugnant to have one party bound by binding until it has been made
the contract leaving the other free known to both contracting parties
therefrom.
Exception to Art. 1308 (Mutuality of
Unilateral Cancellation: Contract) A third person may be called
Just as nobody can be forced to enter upon to decide whether or not
into a contract, in the same manner performance has been done for the
once a contract is entered into, no party fulfillment of the contract. Such a
can renounce it unilaterally or without decision becomes binding when the
the consent of the other.Nobody is contracting parties have been informed
allowed to enter into a contract, and of it.
while the contract is in effect, leaves,
denounces or disavows the contract to
the prejudice of the other.
ART. 1310

Contracts have Mutuality

-​ Must bind both parties, Art. 1310. The determination shall
Compliance cannot be left to the be obligatory if it is evidently
will of only one party. inequitable. In such cases, the
-​ The contract in the angle of courts shall decide what is equitable
crafting, execution, and under the circumstances.
fulfillment must be determined by
all parties. Exception to Art. 1308 (Mutuality of
Contract) However, when the decision
cannot be arrived at due to inequity, the
courts shall decide what is equitable for
CAN I THIRD PARTY CONTROL the parties involved.
PERFORMANCE? (YES) But not if the
determination is inequitable (Art. 1309) ART. 1311
There needs to be a consent of the
parties whom they agreed to be
involved.
Article 1311 Contracts shall take
WHAT IF IT IS? The parties can ask the
effect only between the contracting
court to determine what is inequitable
parties, their assigns and heirs
(Art. 1310).
except in any case where the right
and obligations arising from a
contract are not transmissible by
ART. 1309 their nature, by the stipulation or by
the provision of law.
Art. 1309. The determination of the
performance may be left to a third
person, whose decision shall not be
Contracts have Relativity contract are bound thereby, subject
-​ They have the force of law, but to the provisions of the Mortgage
this force of law is relative. Ei., Law and the Land Registration laws.
takes effect only between the
parties and their assigned heirs. Real Rights in Property
-​ Contract relates/binds only to the A real right directly affects property
parties in the contract and not subject to it; hence, whoever is in
anyone else. possession of such property must
-​ Assigned Parties, heirs outside respect that real right.
the contract can collect the
benefit in the contract but cannot
be liable if there is debt involved.
ART. 1313
-​ A contract in nature that is not
transmissible also has an
exception. ARTICLE 1313. Creditors are
-​ Personal Obligations cannot protected in case of contracts
exercise those rights. intended to defraud them.

The heir is not liable beyond the value Contracts in Fraud of Creditors
of the property he received from the When a debtor enters into a contract in
descent. If the contract should contain fraud of his creditors, such as when he
some stipulation in favor of a third alienated property gratuitously without
person, he may demand its fulfillment leaving enough for his creditors (article
provided that he communicates its 1387), the creditor may ask for its
acceptance to the obligor before the rescission.
revocation.
CONTRACTS ARE CHARACTERIZED
A mere incidental benefit or interest of a BY:
person is not sufficient. The contract
must be clearly and deliberately (1)​Consensuality - Agreement of
conferred in favor upon a third person. both parties
(2)​Obligatory Force - Valid contracts
Pour Autrui (For others) - A contract must be performed as agreed.
that benefits a third party. There must (3)​Autonomy - Freedom to contract
be a clear indication that a benefit is to (4)​Mutuality - Mutual effects and
be given to the third party without any benefit of the contract to both
reasonable doubt. parties
(5)​Relativity - Relates only to the
original parties or assigned third
ART. 1312 pastries.

Art 1312. In contracts creating real

rights, third persons who come into
possession of the object of the
 fulfillment of what has been expressly
ART. 1314
stipulated but also to all the
consequences which, according to their
ARTICLE 1314. Any person who nature, may be kept with good faith,
induces another to violate his usage and law.
contract shall be liable for the
damages to the other contracting STAGES OF CONTRACT
parties. (never ever induced
another to violate a contract.) ●​ Negotiation - Indication of
interest, discussion. steps taken
If a third person induced a party to by the parties leading to the
violate his side of the contract, the other perfection of the contracts.
party may sue the third person for ●​ Perfection - Concurrence of the
damages. elements. When parties have
come to definite agreement or
Requisites: meeting of minds regarding the
(1)​the existence of a valid contract subject matter and cause of the
(2)​knowledge by the third person of contract
the existence of a contract ❖​ Note: consensual, real,
(3)​interference by the third person solemn situations.
in the contractual relation without ●​ Consummation - Performance
legal justification resulting in extinguishment.

ART. 1315
CLASSIFICATIONS OF PERFECTION
OF CONTRACTS
Art 1315. Contracts are perfected by
mere consent, and from that
1. Consensual Contracts- contracts
moment the parties are bound not
that are perfected by mere consent of
only to the fulfillment of what has
the parties regarding the subject matter
been expressly stipulated but also
and the cause of the contracts. e.g
to all the consequences which,
sales, lease, agency
according to their nature, may be in
keeping with good faith, usage and
Consensual contracts are perfected at
law.
the meeting of the parties’ mind.
Simple agreement that does not require
PERFECTION
special forms or rituals (written
Birth of the contract
agreement).
PERFECTION OF CONTRACTS
Regarding what? The object and the
Contracts are perfected by mere
cause.
consent, and from that moment the
parties are bound not only to the
 unless he has by law a right to
represent him.
ART. 1316

A contracts entered into in the name of

Art 1316. Real contracts, such as another by one who has no authority or
deposit, pledge or commodatum, legal representation, or who has acted
are not perfected until the delivery beyond his powers, shall be
of the object of the obligation. unenforceable, unless it is ratified,
expressly or impliedly, by the person on
Real contract is not perfect by mere whose behalf it has been executed,
consent. The delivery of the thing is before it is revoked by the other
required. Delivery is demanded, neither contracting party.
arbitrary nor formalistic.
UNAUTHORIZED CONTRACTS ARE
2. Real Contracts – perfected by the ENFORCEABLE.
delivery of subject matter of the
contract. e.g depositum, pledge, UNAUTHORIZED CONTRACTS CAN
commodatum. BE CURED ONLY BY RATIFICATION
-​ Deposit - Entrusting property to Ratification necessary: A contract
the care of another. entered into on behalf of another who
-​ Pledge - Delivering property to has not authorized it is not valid or
another for a purpose. binding on him unless he ratifies the
-​ Commodatum - Loan of a thing, transaction. When ratified, he is
estopped to question the legality of the
3. Solemn Contracts (Formal transaction.
Contracts) - which requires compliance
with certain formalities prescribed by Kinds of ratification:
law, such prescribed from being thereby 1. express
an essential element thereof. 2. Implied

It is perfected upon the execution of The ratification has a retroactive effect

formalities. from the moment of its celebration, not
from its ratification.
E.g Anything involving real property,
marriage, and donations. Before ratification, the contract is in a
state of suspense; its effectivity
depends on its ratification. The other
ART. 1317 party must not do anything prior to
ratification that shall prejudice the rights
of the other party.
ARTICLE 1317. No one may contract
in the name of another without
When not ratified, the person who
being authorized by the latter, or
entered into a contract on behalf of
another without authority becomes
liable to the other party, if he did not -​ Common or those present in all
inform the latter that he does not have contracts, namely, consent,
any representation or authority. object, and cause.
-​ Special or those not common to
When such deficiency or lack of all contracts or those may be
authority has been relayed to the other, present only in, or peculiar,
he cannot claim for damages against the certain specified contracts, and
person without authority. such peculiarity may be: form,
subject matter, considerations.

●​ NATURAL ELEMENTS-presumed
ART. 1318
exist in contracts. Derived from
the nature of the contract, and as
Art. 1318. There is no contract a consequence, ordinarily
unless the following requisites accompany the same, although
concur: they can be excluded by the
(1) Consent of the contracting contracting parties if they so
parties; desire
(2) Object certain which is the
subject matter of the ●​ ACCIDENTAL ELEMENTS-
contract; particular stipulations, clauses,
(3) Cause of the obligation which is terms etc. Those which exist only
established. (1261) when the contracting parties
expressly provide for them for
There must be at least 2 parties to the purpose of limiting or
every contract. The number of parties, modifying the normal effects of
however, should not be confused with the contract.
the number of persons.

ESSENTIAL ELEMENTS OF A
CONTRACTS ART. 1319

●​ CONSENT of contracting parties Art. 1319. Consent is manifested by

●​ OBJECT certain w/c is the subject the meeting of the offer and the
matter of a contracts acceptance upon the thing and the
●​ CAUSE OF OBLIGATION which is cause which are to constitute the
established contract. The offer must be certain
and the acceptance absolute. A
CLASSES OF ELEMENTS OF THE qualified acceptance constitutes a
CONTRACT counter-offer. Acceptance made by
letter or telegram does not bind the
●​ ESSENTIAL ELEMENTS OR THE offerer except from the time it came
REQUISITES OF CONTRACTS to his knowledge. The contract, in
such a case, is presumed to have
been entered into in the place CERTAIN AND SERIOUSLY
where the offer was made. (1262a) INTENDED

CONSENT (cum sentire) : agreement of ACCEPTANCE- is the manifestation by

wills. the offeree by his assent to all terms of
CONSENT (as applied to contracts) : the offer. ACCEPTANCE OF OFFER MUST
concurrence of the wills of the BE CLEAR AND ABSOLUTE.
contracting parties with respect to the
object and the cause which shall
constitute the contract.
NEGOTIATION
HOW CONSENT IS MANIFESTED? Offer period (Advertisements are not
-​ Consent is manifested by the offers), it can be withdrawn.
meeting of the offer
-​ Acceptance upon the thing and What if there is a period? Withdrawal
the cause which are to constitute can be done before the acceptance of
the contract. the offer, except if there is a separate
-​ The offer must be certain and the consideration (1324, 1319, 1482).
acceptance is absolute.
-​ In addition, the offer can fix the
ART. 1320
time, place, and the manner of
acceptance (1321)
ARTICLE 1320. An acceptance may
What happens if there is an be express or implied.
acceptance? The contract is perfected.
The acceptance must be absolute Implied acceptance may arise from acts
(1319) or facts which reveal the intent to
accept, such as the consumption of the
If there is a qualification to the things sent to the offeree, or the fact of
acceptance, this is a counter-offer immediately carrying out of the contract
(ibid), which means the original offer offered.
was rejected.
HOW DOES ONE ACCEPT?
CONSENT- is the conformity or Expressly or Impliedly.
concurrence of wills (offer and But whatever you do, the offeror must
acceptance) and with respect to KNOW of the acceptance.
contracts, it is the agreement of the will
of one contracting parties with that of If by letter or telegram - it has to be
another upon the object and terms of received.
the contract. If by agent - his knowledge binds the
principal.
OFFER-is a proposal made by one party
to another, indicating a willingness to
enter into a contract. OFFER MUST BE
 ART. 1321 ART. 1323
Article 1321. The person making the
offer may fix the time, place, and Article 1323 An offer becomes
the manner of acceptance, all of ineffective upon the death, civil
which must be complied with. interdiction, insanity, or insolvency
of either party before acceptance is
The offer with a period lapses upon the conveyed.
termination of the period. Thus the
acceptance, to become effective, must The disappearance of either party or his
be known to the offeror before the loss of capacity before perfection
period lapses. prevents the contractual tie from being
formed.
WHO CAN MAKE AN OFFER?
(1)​A principal Option contract- is one giving a
(2)​An Agent (1322) person for a consideration a certain
(3)​A responder to an ad (1325) period to the offer of the offerer.
-​ Distinguish between ordinary sale Option period- period given within
and bidding (1326) which the offeree to accept an offer.
Option money- is the money paid or
promised to be paid in consideration for
ART. 1322
the option.

Article 1322. An offer made through WHAT IF THERE IS INCAPACITY?

an agent is accepted from the time
acceptance is communicated to him. One party: The contract is voidable
Both parties: The contract is
An intermediary who has no power to unenforceable.
bind either the offeror or the offeree is
not an agent; his situation is similar to What if there is capacity, but want of
that of a letter carrier. authority? The contract is also
unenforceable.

WHEN SHOULD ACCEPTANCE BE ART. 1324

COMMUNICATED?
Art. 1324. When the offerer has
(1)​When the offer is made allowed the offeree a certain period
(2)​If there is a period, before the to accept, the offer may be
lapse thereof withdrawn at any time before
(3)​Before withdrawal of the offer acceptance by communicating such
(4)​Before death, civil interdiction, withdrawal, except when the option
insanity, or insolvency of either is founded upon a consideration, as
party. something paid or promised.
It is not the moment of sending but the
ART. 1326
time of receipt of the revocation or
acceptance which is controlling.
Art. 1326. Advertisements for
The delay in transmission is at the risk bidders are simply invitations to
of the sender, because he is the one make proposals, and the advertiser
who selects the time and the manner of is not bound to accept the highest
making the transmission. or lowest bidder, unless the
contrary appears.
Contract of Option: This is a preparatory
contract in which one party grants to In judicial sales, however, the highest
the other, for a fixed period and under bid must necessarily be accepted.
specified conditions, the power to decide
whether or not to enter into a principal ART. 1327
contract. It must be supported by an
independent consideration, and the
Art. 1327. The following cannot give
grant must be exclusive.
consent to a contract: (1)
Unemancipated minors; (2) Insane
ART. 1325 or demented persons, and
deaf-mutes who do not know how
Article 1325. Unless it appears to write. (1263)
otherwise, business advertisements
of things for sale are not definite PERSONS WHO CANNOT GIVE
offers, but mere invitations to make CONSENT (1327)
an offer. Business advertisements
are generally not definite offers. ●​ Unemancipated minors- they
refer to those persons who have
Sales advertisements: A business not reached the age of majority
advertisement of things for sale may or (18 years old) and are still
may not constitute a definite offer. It is subjected to parental consent.
not a definite offer when the object is ●​ Insane or demented persons-
not determinate. (Epso jure) insanity must exist at
the time of contracting unless
When the advertisement does not have proved otherwise, a person is
the necessary specification of essential presumed sane.
elements of the future contract, it -​ It is not necessary that there be
cannot constitute an offer. The a previous declaration of mental
advertiser is free to reject any offer that incapacity in order that a contract
may be made. entered into by a mentally
defective person may be
annulled; it is enough that the
insanity existed at the time the
contract was made.
 ●​ Deaf-mutes- persons who are
ART. 1329
deaf and dumb.
-​ It is not by itself a
disqualification for giving Art. 1329. The incapacity declared
consent. The law refers to in Article 1327 is subject to the
the deaf-mute who does modifications determined by law,
not know how to write and is understood to be without
prejudice to special disqualifications
HOWEVER deaf-mutes who can able to established in the laws. (1264)
write can give consent. Ensure that they
are illiterate. Parents is an EPSO JURE- ●​ The Rules of Court provide a list
the guardian of their children. of incompetents who need
guardianship: persons suffering
from the penalty of civil
ART. 1328 interdiction, hospitalized lepers,
prodigals, deaf and dumb who
Article 1328. Contracts entered into are unable to write and read,
during a lucid interval are valid. those of unsound mind (even
Contracts agreed to in a state of though they have lucid intervals),
drunkenness or during a hypnotic and persons not being of
spell are voidable. unsound mind but by reason of
age, disease, weak mind, and
The use of intoxicants does not other similar causes cannot,
necessarily mean a complete loss of without outside aid, take care of
understanding. The same may be said themselves and manage their
of drugs. But a person, under the property—becoming an easy prey
influence of superabundance of alcoholic for deceit and exploitation.
drinks or excessive use of drugs, may ●​ Special disqualification: Persons
have no capacity to contract. declared insolvent or bankrupt,
husband and wife (incapacity to
In hypnotism and somnambulism, the sell property to each other).
utter want of understanding is a ●​ The incapacity to give consent to
common element. contracts renders the contract
merely voidable, while special
LUCID INTERVAL- a temporary period disqualification makes it void.
of sanity.

There is a presumption that they have a

ART. 1330
moment of clarity during their lucid
interval. But the law acknowledges that
they might not be in their right mind so ARTICLE 1330. A contract where
contracts can be voidable. consent is given through mistake,
violence, intimidation, undue
influence, or fraud is voidable.
WHAT KIND OF CONSENT MUST BE refer to the substance of the thing
GIVEN? which is the object of the contract,
-​ Aside from being absolute and or to those conditions which have
unequivocal, it must be free from principally moved one or both
mistake, violence, intimidation, parties to enter into the contract.
undue influence, fraud. Mistakes as to the identity or
qualifications of one of the parties
They need to prove first that they suffer will vitiate consent only when such
from such inconvenience to make the identity or qualification have been
contract voidable. the principal cause of a contract.

Requisites of consent: ●​ Ignorance and error are 2

1) It should be intelligent or with an different states of mind.
exact notion of the matter to which it Ignorance means the complete
refers; absence of any notion about a
2) It should be free; and particular matter, while error or
3) It should be spontaneous. mistake means a wrong or false
notion about such matter.
Defects of the will: intelligence is ●​ Annulment of contract on the
vitiated by error; freedom by violence, ground of error is limited to cases
intimidation, or undue influence; and in which it may reasonably be
spontaneity by fraud. said that without such error the
consent would not have been
given.
●​ An error as to the person will
Characteristics of consent invalidate consent when the
1. It is intelligent consideration of the person has
2. It is free and voluntary been the principal cause of the
3. It is conscious or spontaneous same.
●​ Mistake as to qualifications, even
GROUNDS OF ANNULMENT OF when there is no error as to
VOIDABLE CONTRACTS/ VICES OF person, is a cause vitiating
CONSENT consent, if such qualifications
1. Error or mistake have been the principal cause of
2. Violence or force the contract.
3. Intimidation or threat or duress ●​ A mistake as to the motive of a
4. Undue influence party does not affect the
5. Fraud or deceit contract; to give it such effect
would destroy the stability of
contractual relations. When the
ART. 1331
motive has, however, been
expressed and was a condition of
Article 1331 In order that mistake the consent given, annulment is
may invalidate consent, it should proper—because an accidental
 element is, by the will of the person enforcing the contract must
parties, converted into a show that the terms
substantial element. thereof have been fully explained to
the former. (Read and understand
the contract.)

Mistake or error- is the false notion of MISTAKES OF LAW is that which arises
a thing or a fact material to the from the ignorance of some provision of
contracts. law, or from an erroneous interpretation
of its meaning or from the erroneous
MISTAKES OF FACTS WHICH DOES conclusion as to the legal effect of an
NOT VITIATE A CONTRACT. agreement, on the part of the parties.
1. Error as regard the incidents of a
thing or accidental qualities. EFFECT OF MISTAKES OF LAW-
2. Mistakes as to quantity or amount “ignorance of the law excuses no one
3. Error as regards to the motives of the from compliance therewith”.
contract
4. Mistake as regard the identity or
ART. 1333
qualifications of a party
5. Error which could have been avoided
Art. 1333. There is no mistake if the
MISTAKE party alleging it knew the doubt,
Rule: The mistake must refer to contingency or risk affecting the
(1)​The substance of the thing which object of the contract.
is the object of the contract.
(2)​Those conditions which have To invalidate consent, the error must be
principally moved one or both excusable. It must be a real error and
parties to enter into a contract. not one that could have been avoided
by the party alleging it. The error must
Note: Mistake in accounting only gives arise from facts unknown to him.
rise to correction (1331)
A mistake that is caused by manifest
The mistake must be serious to negligence cannot invalidate a juridical
invalidate the contract. act.
Small mistakes can be corrected
ART. 1334
ART. 1332
Art. 1334. Mutual error as to the
ARTICLE 1332. When one of the legal effect of an agreement when
contracting parties is unable to the real purpose of the parties is
read, or if the contracts is in frustrated, may vitiate consent.
language not understood by him,
and mistake or fraud is alleged, the Three requisites under this article:
1) the error must be as to the legal property of his spouse, descendants
effect of an agreement; or ascendants, to give his consent.
2) it must be mutual; and To determine the degree of the
3) The real purpose of the parties is intimidation, the age, sex and
frustrated. condition of the person shall be
borne in mind.
The legal effects include the rights and
obligations of the parties, not as “Violence and intimidation will vitiate
stipulated in the contract, but as the contract”
provided by the law. The mistake as to
these effects, therefore, means an error “Violence and intimidation shall annul
as to what the law provides should the obligation, although it may have
spring as consequences from the been employed by a third person who
contract in question. An error as to the did not take part in the contract.”
nature or character is always essential,
and makes the act juridically inexistent. UNDUE INFLUENCE or the grounds
to vitiate a contract- is the influence
of a kind that so overpowers the mind of
Notes: a party as to prevent him from acting
-​ Mutual error is also fine as long understandingly and voluntarily to do
as the real intention of the what he would have done if he had been
parties is not frustrated (1334). left to exercise freely his own judgment
-​ Either of the parties should not and discretion. (Article 1337)
know the truth (1333).
-​ An illiterate must be proven to
have understood the contract if
ART. 1336
there is an allegation of mistake
(1332).
Art. 1336. Violence or intimidation
shall annul the obligation, although
it may have been employed by a
third person who did not take part
ART. 1335 in the contract.
(1268)
ARTICLE 1335. There is violence
when in order to wrest consent, When is there VIOLENCE?
serious or irresistible force is Physical threat
employed. There is intimidation When, in order to get consent, serious
when one of the contracting parties or irresistible force is employed.
is compelled by a reasonable and
well-grounded fear of imminent and When is there INTIMIDATION?
grave evil upon his person or Implied fear,
property, or upon the person or When, one of the parties is forced by a
reasonable and well-grounded fear of an
imminent and grave evil upon his
ART. 1338
person, or the person or property of his
spouse, descendants, or ascendants.
ARTICLE 1338. There is fraud when,
Real threat of an unjust and unlawful through insidious words or
act. Ex. Pointing a gun at you. Bomb in machinations of one of the
your house, or intimidation that involved contracting parties, the other is
his immediate family. induced to enter into a contract
which, without them, he would not
What if the person allegedly being have agreed to. (form of daya
intimidated is more intimidating? through insidious words that cause
There is no vice of consent. The age, a person to believe in it.)
sex and condition of a person should be
borne in mind. Fraud is every kind of deception,
whether in the form of insidious
machinations, manipulations,
ART. 1337 concealments, or misrepresentations,
for the purpose of leading another party
Art. 1337. There is undue influence into error and thus executing a
when a person takes improper particular act.
advantage of his power over the will
of another, depriving the latter of a CAUSAL FRAUD- is the fraud
reasonable freedom of choice. The committed by one party before or the
following circumstances shall be time of the celebration of the contract to
considered: the confidential, family, secure the consent of the other. It may
spiritual and other relations be committed through insidious words
between the parties, or the fact that or machinations or by concealment.
the person alleged to have been
unduly influenced was suffering FRAUD (Deceit or Dolo)
from mental weakness, or was -​ This requires insidious words or
ignorant or in financial distress. machinations to induce another
to enter into a contract when,
UNDUE INFLUENCE without them, he would not have
There is undue influence when a person done (1338).
takes improper advantage of his power -​ Ex. Failure to disclose facts when
over the will of another, depriving the there is a duty to reveal them
latter of a reasonable freedom of choice. (1339.

To be considered: confidential, family, In order for fraud to make a

spiritual, and other relations between contract voidable
the parties.
- It must be serious (Dolo causante)
Consider also: Mental weakness, - It must not be caused by both parties
ignorance, or financial distress (1337)
 -​ Dolo incidente only gives rise to The parties did not intend to be bound
damages. The parties hide their true intentions.

Effects: the first is void, the second

Notes: binds the parties to their real agreement
(1)​Sales talk is not fraudulent (1346, 1359, 1369, 1409).
(1340).
(2)​Professional opinion is not
ART. 1340
fraudulent (1341).
(3)​Third party misrepresentation
must create substantial mistakes ARTICLE 1340. The usual
first before it can be considered exaggerations in trade, when the
fraudulent (1342). other party had an opportunity to
(4)​Misrepresentation in good faith is know the facts, are not in
only a correctable error (1343) themselves fraudulent.

Tolerated fraud includes minimizing the

defects of the thing, exaggeration of its
good qualities, and giving it qualities
ART. 1339 that it does not have. This is a lawful
misrepresentation known as dolus
ARTICLE 1339. Failure to disclose bonus. This is also called lawful
facts, when there is a duty to reveal astuteness.
them, as when the parties are
bound by confidential relations, These misrepresentations are usually
constitutes fraud. encountered in fairs, markets, and
almost all commercial transactions.
CONCEALMENT- false representation. They do not give rise to an action for
damages, either because of their
Silence or concealment, by itself, does insignificance or because the stupidity of
not constitute fraud, unless there is a the victim is the real cause of his loss.
special duty to disclose certain facts, or
unless according to good faith and the The thinking is that where the means of
usages of commerce, the knowledge are at hand and equally
communication should be made. available to both parties, one will not be
heard to say that he has been deceived.
Thus, the innocent non-disclosure of a
fact does not affect the formation of the
ART. 1341
contract or operate to discharge the
parties from their agreement.
ARTICLE 1341. A mere expression
What is a simulated contract? of an opinion does not signify fraud
unless made by an expert and other
It is a “pretend” contract. So either:
party has relied on the former’s REQUISITES OF CAUSAL FRAUD
special knowledge. -​ It should be serious
-​ It should not have been
employed by both contracting
parties.
ART. 1342
-​ It should not have been known
by the other contracting parties
ARTICLE 1342. Misrepresentation
by a third person does not vitiate 2. INCIDENTAL FRAUD- which only
consent, unless such renders the party who employs it liable
misrepresentation has created for damages because the fraud was not
substantial mistakes and the same the principal inducement that led the
is mutual. other to give his consent.

SIMULATION OF A CONTRACT is the

ART. 1343 act of deliberately deceiving others, by
feigning or pretending by agreement,
the appearance of a contract which is
ARTICLE 1343. Misrepresentation
either non-existent or concealed.
made in good faith is not fraudulent
but may constitute error.
KINDS OF SIMULATION
1. ABSOLUTE SIMULATION- when the
contract does not really exist and the
ART. 1344 parties do not intend to be bound at all.
2. RELATIVE SIMULATION- when the
contract entered
ART. 1345
into by the parties is different from their
true agreement. The parties are bound
ARTICLE 1345. In order that fraud by their real agreement. In other words
may make a contract voidable, it there is a concealment of the real
should be serious and should not amounts.
have been employed by both
contracting parties. Incidental fraud
only obliges the person employing it ART. 1346
to pay damages
SECTION 2 OBJECTS OF CONTRACTS
TWO KINDS OF FRAUD IN MAKING
OF CONTRACT ART. 1347

1. CAUSAL FRAUD- which is ground for

ARTICLE 1347 All things which are
the annulment of a contract, although it
not outside the commerce of men,
may also give rise to an action for
including future things, may be the
damages.
object of a contract. All rights which
are not intransmissible may also be
the object of contracts. No contracts Absolute- when the act cannot be done
may be entered into upon future in any case so that nobody can perform
inheritance except in cases it.
expressly authorize by law. All
services which are not contrary to Relative- when it arises from the special
law, morals, good customs, public circumstances of case or other special
order, or public policy may likewise conditions or qualifications of the
be the object of a contract. obligor.

“OBJECT OF THE CONTRACT is its 2. LEGAL- when the thing or service is

subject matter.” But since a contract contrary to law, morals, good customs,
cannot exist without an obligation, it public order, or public policy.
may be said that the things, service or
right which is the object of the SECTION 3 CAUSE OF CONTRACTS
obligation is also the object of contract
CAUSE (causa) - is the essential reason
CAN A FUTURE THING BE VALID? or purpose which the contracting parties
FUTURE THINGS may be valid contract have in view at the time of entering into
provided they have a potentiality to the contracts.
happen in the future.
CLASSIFICATIONS OF CONTRACTS
ARTICLE 1348- Impossible things or ACCORDING TO CAUSE
services cannot be the object of
contracts. 1. ONEROUS- or one the cause of
which, for each contracting party is the
FUTURE INHERITANCE- is any prestations or promise of a thing or a
property or right, nit in existence or service by the other. In other words, the
capable of determination at the time of parties are reciprocally obligated to each
the contract, that a person may inherit other.
in the future. Inheritance ceases to be
future upon the death of the decedent Example: Sales, lease of thing;
or deceased. partnership

INCHOATE RIGHTS- a right of 2. REMUNERATORY OR

expectancy REMUNERATIVE- or one the cause
which is the service or benefit which is
remunerated. The purpose of the
ART. 1348
contract is to reward the service that
had been previously rendered by the
KINDS OF IMPOSSIBILITY party remunerated. Example paying
1. PHYSICAL- when the things or service defense counsel for the agreed money
in the very nature of things cannot exist
or be performed.
3. GRATUITOUS- or one the cause of Absence is want of cause means there is
which is the liberality of the benefactor total lack of any valid consideration for
or giver. the contract. It should be distinguished
from inadequacy of cause which, as a
Examples: pure donation general rule, is not ground for relief and
from failure of cause which does not
MOTIVES- is the purely personal or render a contract void.
private reason which a party has
entering into a contract.

ILLEGALITY OF CAUSE implies that

ART. 1349
there is cause but the same is unlawful
or illegal.
ART. 1350
FALSITY OF CAUSE is meant that the
contract states a valid consideration but
ART. 1351 such statements are not true.
LESION is any damage caused by the
ARTICLE 1351. The particular fact that the price is unjust or
motives of the parties in entering inadequate.
into a contract are different from
the cause thereof. FORM OF CONTRACTS

ART. 1352 ART. 1356

ARTICLE 1352. Contracts without ARTICLE 1356. Contract shall be

cause, or with unlawful cause, obligatory in whatever form they
produce no effect whatsoever. The may have been entered into,
cause is unlawful if it is contrary to provided all the essential requisites
law, morals, good customs, public from their validity are present.
order or public policy.
However, when the law requires that a
contract be in some form in order that it
may be valid or enforceable, or that a
ART. 1353
contract be proven in a certain way, that
requirement is ABSOLUTE and
ARTICLE 1353. The statement of a indispensable.
false cause in contracts shall render
them void, if it should not be proved In such case, the right of the parties
that they were founded upon stated in the following article cannot be
another cause which is true and exercised.
lawful.
THE FORM OF CONTRACTS REFERS -​ Special intent prevails over a
TO THE MANNER IN WHICH A general intent. 1372
CONTRACT IS EXECUTED OR -​ Interpretations of stipulation with
MANIFESTED. several meanings one of which
would render it effectual, it
CLASSIFICATION ACCORDING TO should be given that obligation.
FORM 1373
1. INFORMAL OR COMMON SIMPLE -​ Various interpretations of
CONTRACT or that which may be contracts shall be interpreted
entered into in whatever from provided together, attributing to the
all the essential requisites for their doubtful ones that sense which
validity are present. may result from all of them taken
jointly. 1374
2. FORMAL OR SOLEMN CONTRACT -​ Words which may have different
or that which is required by law for its significations shall be understood
efficacy to be in certain specified form. in that which is most in keeping
with the nature and object of
contract. 1375

RULES FOR INTERPRETATION OF A KINDS OF DEFECTIVE CONTRACTS

CONTRACT
1. Rescissible Contracts- are those
ARTICLE 1370. If the terms of a validly agreed upon because all the
contract are clear and leave no doubt essential elements exist, and therefore,
upon the intention of the contracting legally effective, but in the cases
parties, the literal meaning of its established by law, the remedy of
stipulations shall control. If the words rescission is granted in the interest of
appear to be contrary to the evident equity.
intention of the parties, the latter shall 2. Voidable Contracts- are those
prevail over the former. which possess all the essential requisite
of a valid contract but one of the parties
INTERPRETATIONS OF A CONTRACT is are incapable of giving consent, or
the determination of the meaning of the consent is vitiated by mistakes,
terms or words used by the parties in violence, fraud etc.
their written contract. 3. Unenforceable Contracts- cannot
be sued or enforced unless they are
-​ Literal meaning controls when ratified.
language clear 4. Void or inexistent contracts- they
-​ Evident intention of parties are absolutely void or null.
prevails over terms of a contract
-​ Contemporaneous and
subsequent acts relevant in the
determination of intention. 1371