Title II: Contracts

(Articles 1305 1422, Civil Code)

GROUP 1:
Abug, Joey
Cabrera, Jian Patrick
Cristobal, John Paul
Silangcruz, Roberto Antonio
Soledad, Amando Rey
 CONTRACT

A contract in a sense is synonymous to an agreement or convention but it

must be noted that a contract cater to a much more specific party.
 Contract

Definition
ARTICLE 1305, Civil Code
A contract is a meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or to
render some service. (1254a)
In a contract, one or more persons bind himself or themselves
with respect to another or others, or reciprocally, to the fulfillment
of a prestation to give, to do, or not to do.
In a contract, there must be at least two persons or parties,
because it is impossible for one to contract with himself.
 Autonomy of Contract

ARTICLE 1306

The contracting parties may establish such stipulations, clauses,

terms and conditions as they may deem convenient provided they are
not contrary to law, morals, good customs, public order, or public
policy.
 Limitations on contractual stipulations

Law it is a fundamental requirements that the contract entered into

must be in accordance with, and not repugnant to, an applicable
statute.
Police Power All contractual obligations are subjected as implied
reservation therein to the possible exercise of the police power of the
state.
 Mutuality

ARTICLE 1308

The contract must bind both contracting parties, its validity or

compliance cannot be left to the will of one of them.
 MUTUALITY OF CONTRACT

This refers to the principle of essential equality that is occupied by both

contracting parties in relation to the contract. The contract must be
binding upon both contracting parties and its validity and compliance
cannot be left to the will of one of them.
 Mutuality

Contract binds both contracting parties.

A contract is an agreement which gives rise to obligations. It must
bind both parties in order that it can be enforced against either.
Without this equality between the parties, it cannot be said that the
contract has the force of law between them
 Mutuality

It is fundamental rule that no party can renounce or violate the law of

the contract without the consent of the other. Hence, its validity or
compliance cannot be left to the will of one of them.
 Obligatory Force

ARTICLE 1315

Contracts are perfected by mere consent, and from that moment

the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which,
according to their nature, may be keeping with good faith, usage
and law.
 Obligatory Force

ARTICLE 1316

Real contracts, such as deposit, pledge and commodatum, are not

perfected until the delivery of the object of the obligation.
 Obligatory Force

This refers to the rule so fundamental in all contracts that once the
contract is perfected, it shall be of obligatory force upon both contracting
parties.
 CONSENSUALITY

Contracts are perfected by mere consent, and from that moment the
parties are bound not only by the fulfillment of what has been
expressly stipulated but also to all the consequences which, according
to their nature, may be in keeping with good faith, usage and law (Art.
1315)
 Classification of Contract
According to Perfection
According to Dependence to other contract
According to Name or designation
According to Nature of obligation
According to Risk involved
According to Cause
According to Form
Classification of Contract According to Perfection

Consensual
perfected by mere consent of the parties without need of other
formalities
Contracts of sale & partnership
Article 1315. Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to
their nature, may be keeping with good faith, usage and law.
For example in a contract of sale, it is perfected from the moment the seller
and the buyer agree that the buyer will take a particular item in exchange for a
certain price.
 Classification of Contract According to Perfection

Real
require not only the consent of the parties, but also the delivery of
the object of the contract
Deposit, pledge
Article 1316. Real contracts, such as deposit, pledge and
commodatum, are not perfected until the delivery of the object of the
obligation.
Classification of Contract According to Dependence
to Other Contract
Principal
exist independently from other contracts
Contracts of lease & sale
Accessory
those which cannot exist without another prior contract
Contracts of Mortgage, pledge of guaranty
Preparatory
Those which is created in order a future transaction or contract may be entered
into by the parties
Contracts of Partnership
 Classification of Contract According to Name or
Designation

Nominate
one with a particular name or designation
purchase and sale, hiring, partnership, loan for use, deposit
Innominate
not classifiable under any particular name
 Classification of Contract According to Nature of
Obligation

Unilateral
where only one has an obligation to perform
Contract of donation
Bilateral
where both parties have reciprocal obligation to perform
Sale
Classification of Contract According to Risk Involved

Commutative
where there is an exchange of values such as lease
Aleatory
A mutual agreement between two parties in which the performance
of the contractual obligations of one or both parties depends upon
a fortuitous event.
Contract of insurance
 Classification of Contract According to Cause

Onerous
one which imposes valuable consideration
Sale, mortgage
Gratuitous
one which one of the parties does not receive any valuable
consideration.
Commodatum
 Classification of Contract According to Form

Informal or Common
one which may be entered into in whatever form provided all the
essential requisites for their validity are present. May be oral or
written.
Formal or Solemn
one which is required by law for its efficacy to be in a certain
specified form.
 ELEMENTS OF A CONTRACT

Essential Element
Natural Element
Accidental Element
 ELEMENTS OF A CONTRACT
General Provision Essential Elements (Art. 1318)
Art. 1318. There is no contract Also known as essential
unless the following requisites requisites of a contract
concur: Those without which no
Consent of the contracting contract can validly exist
parties; regardless of the intention of
Object certain which is the the parties.
subject matter of the
contract
Cause of the obligation
which is established. (Art.
 ESSENTIAL ELEMENT

Types of Essential Element

Common
Special
 ESSENTIAL ELEMENT

Types of Essential Element

Common those present in all contracts
Special
 ESSENTIAL ELEMENT
Special
Those not common to all contracts
Those which must be present only in, or peculiar to, certain
specified contracts, and such peculiarity may be:
As regards to forms (public instrument in donation of
immovable property, delivery in real contract, registration in
real estate mortgage, etc.)
As regards the subject matter (personal property in pledge,
etc)
As regards the consideration or cause (price in sale and in
lease, liberality in commodatum, etc)
 ELEMENT OF A CONTRACT

Natural Elements
Those that are presumed to exist in certain contracts unless the
contrary is expressly stipulated by the parties.
Warranty against eviction or warranty against hidden defects in
sale
Accidental Elements
The particular stipulations, clauses, terms, or conditions
established by the parties in their contract like conditions,
period, interest, penalty, etc.
They exist only when they are expressly provided by the parties
 CHAPTER 2
ESSENTIAL REQUISITES TO CONTRACTS
 ARTICLE 1318

There is no contract unless the following requisites concur:

Consent of the contracting parties
Object certain which is the subject matter of the contract
Cause of the obligation which is established
 CLASSES OF ELEMENTS OF A CONTRACT
1. Essential elements - those without which no contract can validly exist
regardless of the intentions of the parties.
Common or those present in all contracts namely, consent, object,
and cause
Special or those not common to all contracts
As regards to form
As regards the subject matter
As regards the consideration or cause
 2. Natural elements- those that are presumed to exist in certain
contracts

3. Accidental elements- the particular stipulations, clauses, terms, or

conditions established by the parties in their contract.
CONSENT

SECTION 1
 ARTICLE 1319
Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain
and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the
time it came to his knowledge. The contract, in such a case, is presumed to have
been entered into in the place where the offer was made.
*Consent-is the conformity or concurrence of wills.
*Offer-is a proposal made by one part to another , indicating a willingness to enter
into a contract.
 ARTICLE 1320

An acceptance may be express or implied.

FORMS OF ACCEPTANCE OFFER:

Express acceptance
Implied acceptance
 ARTICLE 1321

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

ARTICLE 1321
An offer made through an agent is accepted from the time
acceptance is communicated to him.
 ARTICLE 1323

An offer becomes ineffective upon the death, civil interdiction,

insanity, or insolvency of either party before acceptance is conveyed.
 ARTICLE 1324
When the offerer has allowed the offeree a certain period to accept,
the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded
upon a consideration, as something paid or promised.
Ex:
X offers to construct the house of Y for a very reasonable price of
P1,000,000.00 giving the latter 10 days within which to make up his
mind
 ARTICLE 1325
Unless it appears otherwise, business advertisements of things for sale
are not definite offers, but mere invitations to make an offer
Ex:
Not a definite offer- For sale: 200 sq.m. lot at Green Plains Village, Q.C
for Php1,000,000.00 Tel. No. 884-1284
Definite offer-. For sale: 200 sq.m. lot at Green Plains Village, Q.C.
located at the corner of Geronimo and Magallanes St. for
Php1,000,000.00 Tel. No. 884-1284
 ARTICLE 1326

Advertisements for bidders are simply invitations to make proposals,

and the advertiser is not bound to accept the highest or lowest bidder,
unless the contrary appears.
 ARTICLE 1327

The following cannot give consent to a contract:

(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know
how to write.
 Despite Their Minority.
1.When the minor, in entering into a contract actively
However, if there is merely silence in the contract as to the
age of the minor, the fraud is not actual but only constructive,
the minor is not bound by his signature. He is guilty only of
passive misrepresentation.
2.When the contract involves the sale and delivery of
necessaries to the minor, he is bound thereby (Art. 1489).
3. When the minor, upon reaching the age of majority ratifies
the contract he becomes bound thereby.
4. When the contract is in the form of savings account in the
Postal Savings Bank, provided the minor is at least 7 years of
age, the same is valid.
 ARTICLE 1328

Contracts entered into during a lucid interval are valid. Contracts

agreed to in a state of drunkenness or during a hypnotic spell are
voidable.
*Lucid interval- is a temporary period of sanity

ARTICLE 1329
The incapacity declared in Article 1327 is subject to the
modifications determined by law, and is understood to be without
prejudice to special disqualifications established in the laws.
 ARTICLE 1330

A contract where consent is given through mistake, violence,

intimidation, undue influence, or fraud is voidable.
CHARACTERISTICS OF CONSENT
1. It is intelligent
2. It is free and voluntary
3. It is conscious and spontaneous
 ARTICLE 1331
In order that mistake may invalidate consent, it should refer to the
substance of the thing which is the object of the contract, or to those
conditions which have principally moved one or both parties to enter
into the contract.
Mistake as to the identity or qualifications of one of the parties will
vitiate consent only when such identity or qualifications have been the
principal cause of the contract.
A simple mistake of account shall give rise to its correction.
 MISTAKE OF FACT WHICH NOT VITIATE CONSENT:
Mistake regarding an object
Mistake regarding the condition of the contract
Mistake regarding the identity or qualification
Mistake which could have been avoided
 ARTICLE 1332

When one of the parties is unable to read, or if the contract is in a

language not understood by him, and mistake or fraud is alleged,
the person enforcing the contract must show that the terms
thereof have been fully explained to the former.
 ARTICLE 1333
There is no mistake if the party alleging it knew the doubt, contingency or
risk affecting the object of the contract.
Ex:
A bought a parcel of land from B who informed him before the contract
was perfected that the land was involved in a court case in which C is the
claimant. In case the land is recovered later on by C, cannot allege
mistake in his contract because he knew the risk that the land might later
on be recovered by C.
 ARTICLE 1334

Mutual error as to the legal effect on an agreement when the real

purpose of the parties is frustrated, may vitiate consent.
Ex:
If the parties really agreed on a document as written discloses a
mortgage, there is a meeting of the minds but the document does not
show their intentions.
 ARTICLE 1335
There is violence when in order to wrest consent, serious or irresistible force is
employed.
There is intimidation when one of the contracting parties is compelled by a
reasonable and well-grounded fear of an imminent and grave evil upon his person
or property, or upon the person or property of his spouse, descendants or
ascendants, to give his consent.
To determine the degree of intimidation, the age, sex and condition of the person
shall be borne in mind.
A threat to enforce ones claim through competent authority, if the claim is just or
legal, does not vitiate consent.
 Violence an external and physical force or compulsion
exerted upon a person to prevent him from doing something
or compelling him to do an act.
ELEMENTS OF VIOLENCE
There is physical force employed which is serious or irresistible
such that the victim is left without any choice but to submit
The physical force employed is the determining cause in the
giving of the consent
Intimidation an internal moral force operating in the will and
inducing the performance of an act.
-There is a brief space of time between the threat and the
actual act, giving the victim a chance to choose between two
evils: (a) to do what is being pressed upon him; or (b) to suffer
 ELEMENTS OF INTIMIDATION:

The threat is real, serious and imminent endangering the person and
property of the victim or those of his spouse, descendants or
ascendants if he does not give his consent.
The threatened act be unjust or unlawful for if it is, there is no
intimidation.
The threatened act is aimed to secure the consent of the victim.
 ARTICLE 1336

Violence or intimidation shall annul the obligation, although it may

have been employed by a third person who did not take part in the
contract.
 ARTICLE 1337

There is undue influence when a person takes improper advantage of

his power over the will of another, depriving the latter of a reasonable
freedom of choice.
The following circumstances shall be considered: the confidential,
family, spiritual and other relations between the parties, or the fact
that the person alleged to have been unduly influenced was suffering
from mental weakness, or was ignorant or in financial distress.
 ARTICLE 1338

There is fraud when, through insidious words or machinations of one of

the contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed to.
 KINDS OF FRAUD
Dolo Causante/Casual Fraud

-refers to fraud without which consent would not have been

given.
-renders the contract voidable
-Requisites:
There must be misrepresentation or concealment of a material fact
The fraud must be serious
The fraud must have been employed by only one of the contracting parties upon the other
There must a deliberate intent to deceive the other party
The fraud must have induced the party to enter into the contract
Dolo Incidente/Incidental Fraud

-refers to fraud without which consent would have still been

given but the person giving it would have not agreed
 ARTICLE 1339

Failure to disclose facts, when there is a duty to reveal them, as

when the parties are bound by confidential relations, constitutes
fraud.

ARTICLE 1340
The usual exaggerations in trade, when the other party had an
opportunity to know the facts, are not in themselves fraudulent.
 ARTICLE 1341

A mere expression of an opinion does not signify fraud, unless

made by an expert and the other party has relied on the formers
special knowledge.

ARTICLE 1342
Misrepresentation by a third person does not vitiate consent, unless
such misrepresentation has created substantial mistake and the
same is mutual.
 ARTICLE 1343

Misrepresentation made in good faith is not fraudulent but may

constitute error.

ARTICLE 1344
In order that fraud may make a contract voidable, it should be
serious and should not have been employed by both contracting
parties.
Incidental fraud only obliges the person employing it to pay
damages.
 ARTICLE 1345

Simulation of a contract may be absolute or relative. The former takes place

when the parties do not intend to be bound at all; the latter, when the
parties conceal their true agreement.
*Simulation of a contract act of deliberately deceiving others by pretending
by agreement the appearance of contract which is either non- existent or
concealed
KINDS OF SIMULATION
Absolute Simulation- when the parties intend the contract to produce no
effects between them.
Relative Simulation-when the parties intend that their contract shall produce
effects between them, though different from those recited in their contract.
 ARTICLE 1346

An absolutely simulated or fictitious contract is void. A relative

simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real agreement.
Section 2
Section 3
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