2012-feb-15 lecture.elements of contracts

7/31/2019 2012-Feb-15 Lecture.elements of Contracts

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CONTRACTS:ESSENTIAL ELEMENTS

Obli-Con


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I. Consent

3 Essential elements of a contract (Art. 1318):

1. Consent of the contracting parties

2. Object certain

3. Cause of the obligation

Consent, defined (Art. 1319):

Consent is the absolute acceptance by one party of

the definite offer made by another party.

Qualified acceptance is a counter-offer

Acceptance by letter, phone, e-mail, SMS binds

offeror from time it came to his knowledge


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I. Consent

Requisites for valid consent:1. Plurality of parties

2. Capacity

3. Intelligent and free will4. Express or tacit manifestation of the will

5. Conformity of the internal will and its manifestation

Forms of consent (Art. 1320):

1. Express

2. Implied

* Presumptive consent, as in quasi-contracts


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5/27

I. Consent

Offer must be definite, complete and intentional

Withdrawal of offer an offer may be withdrawn anytime

before offeror learns of the acceptance, even if such

acceptance has already been made

Revocation of acceptance an acceptance may berevoked before it comes to the knowledge of offeror

Public offers these are public offers of reward or

compensation for any person who performs orexecutes a particular act. There must be acceptance

to convert it into a contract. Performance of the act

can be considered as acceptance.


6/27

I. Consent

Offeror has the right to prescribe the time, place, andmanner of acceptance (Art. 1321).

In offers with a certain period to accept, offer may be

withdrawn before acceptance, provided withdrawal is

communicated (Art. 1324).- exception: option contract with consideration which is a

preparatory contract in which one party grants to the

other, for a fixed period and under specified conditions,

the power to decide whether or not to enter into aprincipal contract Option to Purchase Real Property.doc

- crossing of acceptance and revocation: that which

arrives first at its destination is effective
http://localhost/var/www/apps/conversion/current/tmp/scratch2147/Option%20to%20Purchase%20Real%20Property.dochttp://localhost/var/www/apps/conversion/current/tmp/scratch2147/Option%20to%20Purchase%20Real%20Property.doc


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I. Consent

An offer made through an agent is deemed acceptedfrom the time acceptance is communicated to such

agent (Art. 1322). Distinguish agent from a mere

intermediary.

Offer is ineffective upon:1. Death

2. Civil interdiction

3. Insanity

4. Insolvency of either party before acceptance is

conveyed.


8/27

I. Consent

Business advertisements of things for sale are notdefinite offers, but mere invitations to make an offer

(Art. 1325).

Advertisements for bidders are simply invitations to makeproposals and the advertiser is not bound to accept the

highest or lowest bidder, unless the contrary appears

(Art. 1326).


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I. Consent

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

1. Unemancipated minors

2. Insane or demented persons

3. Deaf-mutes who do not know how to write


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I. Consent

Unemancipated minors:Contracts entered into by minors are generally voidable.

Exceptions:

1. Necessaries sold and delivered to minor should be

paid for by such minor with a reasonable price; or

2. Upon reaching age of majority, the minor ratifies the

contract; or

3. Contract is entered into by guardian and approved by

the court.


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I. Consent

Insane persons:The insanity should exist at the time the contract was

made.

Contracts entered into during a lucid interval are valid

(Art. 1328).Contracts entered into in a state of drunkenness or during

a hypnotic spell are voidable (Art. 1328). A person,

through superabundance of alcoholic drinks or use of

drugs, may become so mentally obscured that he is,for the time being, comparable to an insane person in

lack of understanding.


12/27

I. Consent

Other incompetents (Art. 1329):The Rules of Court provide for other incompetents

who may be under guardianship, as follows:

1. Persons suffering from penalty of civil interdiction

2. Prodigals

3. Persons, not being of unsound mind, but by

reason of age, disease, weak mind, and other

similar causes, cannot take care of themselves andmanage their property, thereby an easy prey for

deceit and exploitation.


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I. Consent

Contracts with defects of the will (Art. 1330):Contracts where consent is given through:

1. Mistake intelligence in giving consent is lacking

2. Violence, intimidation, undue influence freedom

in giving consent is lacking

3. Fraud spontaneity in giving consent is lacking

The foregoing contracts are voidable.

Distinguish between a) void contracts, b) voidable

contracts, and c) unenforceable contracts.


14/27

I. Consent

Mistake: ground for invalidity of consent (Art. 1331):Consent is invalid if the mistake refers to:

1. Substance of the object of the contract; or

2. Conditions which have principally moved one or both

parties to enter into the contract; or

3. Identity or qualifications of one of the parties and such

identity or qualifications have been the principal cause

of the contract.

Mistake of account: shall be corrected

Mistake in Art. 1331 includes the concept of ignorance.


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I. Consent

Mistake due to inability to read or understand language(Art. 1332): the party enforcing the contract should

show that the terms of the contract was fully explained

to the party alleging mistake

Inexcusable error (Art. 1333): the party who knew thedoubt, contingency, or risk affecting the object of the

contract cannot invoke mistake to invalidate the

contract

Mutual error/mistake of law (Art. 1334): a contract may beinvalidated if both parties are mistaken about the legal

effect of their agreement which leads to the frustration

of the real purpose of their agreement


16/27

I. Consent

Violence and intimidation as grounds for invalidity ofconsent (Art. 1335):

Violence (physical force): in order to wrest consent,

serious or irresistible force is used

Intimidation (moral force): when one of the contractingparties 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 hisconsent. There is unlawful act threatened.

Threat to enforce ones valid claim through competent

authority does not invalidate consent.


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I. Consent

Violence or intimidation by a 3rd

person annuls theobligation (Art. 1336).

Undue influence (Art. 1337): when a person takes

improper advantage of his power over the will of

another. Circumstances to be considered:a. family, spiritual, and other relations between parties

b. person unduly influenced was suffering from mental

weakness

c. person unduly influenced was ignorant or in financialdistress

There need not be an unlawful act threatened.


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I. ConsentFraud as ground to invalidate consent (Art. 1338 and 1344):

To invalidate consent, fraud should be 1) serious, and 2) notemployed by both parties

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 nothave agreed to.

Insidious words or machinations: includes false promises,

exaggeration of hopes or benefits, abuse of confidence,

fictitious names, qualifications or authority, concealing oromitting material facts with intent to deceive

Distinguish between fraud that annuls obligation and fraud

that invalidates consent.


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I. Consent

Failure to disclose material facts is fraud (Art. 1339).

Usual exaggeration in trade are not necessarily

fraudulent (Art. 1340).

Expression of opinion does not constitute fraud, unless

made by an expert, and the other party relied on such

experts special knowledge (Art. 1341).

Misrepresentation by a 3rd party does not invalidate

consent, except if such misrepresentation resulted in

substantial mistake of both parties (Art. 1342).

Misrepresentation made in good faith may not constitute

fraud but may constitute error (Art. 1343).


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I. Consent

Simulation of contract (Art. 1345):

1. Absolute simulation: the parties do not intend to be

bound at all

2. Relative simulation: the parties conceal their true

agreement; e.g. a deed of sale is executed but the true

agreement is a donation

Simulation, defined: the declaration of a fictitious will,

deliberately made by the agreement of the parties to

produce, for the purpose of deception, the appearanceof a juridical act which does not exist or is different

from what was actually executed.


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I. Consent

Effects of simulated contracts (Art. 1346):

1. Absolute simulation: the contract is void

2. Relative simulation: the contract is valid, except when

it prejudices third persons or has an illicit purpose


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II. Object of Contracts

Object of contract, defined (Art. 1347):

It is the a) thing, b) right, or c) service which is the subject

matter of the obligation arising from the contract.

Requisites of object of a contract (Art. 1347):

1. Object is within the commerce of man, meaning things

which are susceptible of appropriation or of private

ownership, and which are transmissible.

2. Object must be licit, or not contrary to law, morals,

good customs, public policy, or public order.

3. Object must be possible (Art. 1348).

4. Object must be determinate as to its kind (Art. 1349).


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Future things as objects of contract (Art. 1347):The object must be in existence at the time of perfection

of the contract or that it has the possibility of coming

into existence at some future time.

Future things as objects of contracts may also includefuture rights.

Generally, no contract may be entered into upon future

inheritance.

Impossible things as objects of contract (Art. 1348):Things are impossible when they are not susceptible of

existing, or they are outside the commerce of man.


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Objects of contract must be determinate as to its kind(Art. 1349).

Determinable quantity: the fact that quantity is not

determinate will only make the contract invalid if it is

not possible to determine the same.


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III. Cause of Contracts

Cause of contracts, defined (Art. 1350):The cause of the contract is the why of the contract, the

essential reason which moves the parties to enter into

the contract.

Onerous contracts: cause is prestation or promise of athing or service by the other

Remuneratory contracts: the cause is the service or

benefit remunerated

Gratuitous contracts/contracts of pure liberality: the causeis the generosity or liberality of the benefactor


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Motive vs. cause (Art. 1351):The cause of the contract is the objective, intrinsic, and

juridical reason for the existence of the contract.

The motive is the psychological, individual, or personal

purpose of a party to the contract.As a rule, motives do not affect the validity of a contract,

except:

1) When the motive of debtor in alienating property is to

defraud creditors;

2) When motive of a person in giving consent is to avoid injury;

3) When the motive of the person is due to fraud or

misrepresentation by the other party.


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Contracts without cause or with illegal cause (Art. 1352):Contracts without cause or with unlawful or illegal cause

produce no effect.

Statement of a false cause in contracts (Art. 1353):

makes the contracts void.If the cause is not stated in the contract, it is presumed

that the contract has a good and sufficient cause

unless the debtor proves the contrary (Art. 1354).

Inadequacy of cause shall not invalidate a contract,unless there is fraud, mistake or undue influence (Art.

1355).

2012-feb-15 lecture.elements of contracts

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