- RESULT the contract is unenforceable. [Art. 1403, No.
3,
CONTRACTS
CHAPTER 2 Essential Requisites of
Contracts
SECTION 1 Consent
---------------------------------------------------------
DEFINITION: (1) Essential —
- are those “There
is no contract unless” such
requisites concur.
- common elements: present in all contracts
MEANING: WHEN Consent, an essential requisite, IS ABSENT /
impaired:
- There is no contract
---------------------------------------------------------
B. WHAT VITIATES Consent?
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. (1263a)
---------------------------------------------------------
CONSENT
LEGAL INCAPACITY OF CONTRACTING PARTIES
DEFINITION: LEGAL CAPACITY
- The capacity of the contracting parties is, in effect, an
essential element of a contract,
- or to be more exact, it is an indispensable requisite of
consent.
- WHY NOT MENTIONED AS REQUISITE: since it is impossible
in law to speak of an effective consent without
presupposing the capacity to give it, it is perfectly
understandable why the Code does not expressly
mention capacity as one of the essential elements.40
RULE: the only way by which any one of those enumerated
above can enter into a contract is
- to act through a parent or guardian.
- If this requirement is not complied with,
- RESULT is a defective contract
RULE: If only one of the contracting parties is incapacitated to
give consent to a contract
- RESULT the contract is voidable. [Art. 1390, No. 1, Civil
Code.]
RULE: If both of them are incapacitated to give their consenthe
contracting parties is incapacitated to give consent to a
contract
Civil Code.]
INCAPACITATED PERSONS who cannot give consent to a
contract
(1) Unemancipated minors;
RULE: Be that as it may, it is now well settled that
- misrepresentation by unemancipated minors with
regard to their age when entering into a contract
- shall bind them in the sense that they are estopped
subsequently from impugning the validity of the
contract on the ground of minority.
- It is, however, necessary that the misrepresentation
must be active, not merely constructive. [Braganza
vs. Villa Abrille, 106 Phil. 456]
RULE: These are the minors who have not been emancipated
by:
- marriage,
- attainment of the age of majority, or
- by parental or judicial authority. (Art. 1397, Civil
Code).
LATEST RULE: Age of minority is now 18. Not anymore 21.
In general, the contracts which they enter into are
VOIDABLE except:
1) Upon reaching the age of majority, they ratify the same.
(Ibanez v. Rodriguez, 47 Phil. 554).
2) They were entered into thru a guardian, and the court
having jurisdiction had approved the same. (Roa v. Roa, 52
Phil. 879).
3) They were contracts of life insurance in favor of their
parents, spouse, children, brothers, sisters, and provided,
furthermore, that the minor is 18 years old or above. (See
Act No. 3870).
4) They were in the form of savings account in the Postal
Savings Bank, provided furthermore that the minor was at
least seven years old. (See Sec. 2007, Rev. Adm. Code).
5) They were contracts for necessities such as food, but
here the people who are legally bound to give them
support should pay therefor. (See Arts. 1489, 2164, Civil
Code).
6) They were contracts where the minor misrepresented his
age, and pretended to be one of major age and is, thus, in
ESTOPPEL. (Marcelo v. Espiritu, 37 Phil. 37; Sia Suan v.
Alcantara, 47 O.G. 4561; and Hermosa v. Zobel, L-11835,
Oct. 30, 1958). It is, however, essential here that the other
party must have been MISLED. (Bambalan v. Maramba, 51
Phil. 417).
(2) Insane or demented persons, and deaf-mutes
• __
who do not know how to write
RULE: The second is broad enough to cover all cases where
one or both of the contracting parties are
- unable to understand the nature and consequences
of the contract at the time of its execution,
- such as
- those in a state of drunkenness
- or under a hypnotic spell
- or who are suffering from any kind of
mental incapacity whatsoever.
Insane or demented persons [who do not know
how to write]
RULE: IT is well established that “insane or demented
persons” include any person, who, at the time of the
celebration of the contract,
- cannot understand the nature and
consequences of the act or transaction by reason
of any cause affecting his intellectual or sensitive
faculties, whether permanent or temporary.
EXCEPTION: Art. 1328, however, provides that a contract
entered into during a lucid interval is valid.
deaf-mutes [who knows how to write]
- RESULT: Contract is perfectly valid,
deaf-mutes [who do not know how to write]
- RESULT: is either voidable or unenforceable,
depending upon whether one or both of the
parties are incapacitated.
---------------------------------------------------------
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.
(n)
---------------------------------------------------------
CONSENT
EXCEPTION TO LEGAL INCAPACITY
GENERAL RULE:
Insane or demented persons [who do not know how
to write]
RULE: IT is well established that “insane or demented persons”
include any person, who, at the time of the celebration of the
contract,
- cannot understand the nature and consequences
of the act or transaction by reason of any cause
affecting his intellectual or sensitive faculties,
whether permanent or temporary.
- such as
- those in a state of drunkenness
- or under a hypnotic spell
- or who are suffering from any kind of
mental incapacity whatsoever.
Contracts agreed to by [Insane or
RULE: (PARAS)
demented persons ]
- RESULT: are voidable.
- (unless they acted during a lucid interval);
RULE: Contracts agreed to in a state
- in a state of drunkenness
- RULE: Those in the state of drunkenness
(which temporarily results in complete loss
of understanding, and may therefore be
equivalent to temporary insanity). (TS, Nov.
6, 1858 and TS, Apr. 21, 1911);
- or during a hypnotic spell
- RULE: (induced by drugs, or by deliberate
or unintentional hypnotism) or while a
person walks during his sleep,
somnambulism, for in these cases, a person
is incapable of intelligent consent. (See 8
Manresa 660-661).
- RESULT: are voidable.
EXCEPTION: Art. 1328, however, provides that a contract
entered into during a lucid interval are valid
---------------------------------------------------------
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. (1264)
---------------------------------------------------------
CONSENT
LATEST MODIFICATIONS ON LEGAL INCAPACITY
determined by law. [SPECIAL LAWS?]
RULE: incapacity declared in article 1327
- are subject to the modifications determined by
law [FUTURE LAWS?]
- and
- shall be without prejudice to special
disqualifications established in the laws. [PAST
LAWS?]
RULE: Regarding contracts entered into by non-Christians,
approval by the officials concerned is required even if BOTH
parties are non-Christians, because both imposition and fraud
are still possible in this case. (Madale, et al. v. Raya, et al., 92 Phil.
558).
OTHER INCAPACITATED PERSONS
2
• __

women of age in cases specified by law, OTHER CAUSES OF VITIATED CONSENT:

- It must be noted that under Art 1263 of the Spanish
Civil Code, among the persons incapacitated to
give their consent to a contract are “married
women in the cases specifi ed by law,” whereas
under the present Civil Code, they are not included.
This is, of course, in conformity with the rule that a
married woman, twenty-one years of age or over, is
qualifi ed for all acts of civil life except in cases
specifi ed by law.62
- In spite of its elimination from the list, it cannot be
denied that there are still cases, although much
more limited in extent than under the old Code,
- where married women cannot give their
consent to a contract without first securing
their husband’s consent.
- The most evident example of this is that
contemplated by Art. 114 of the Code
regarding acquisition by a wife of property
by gratuitous title. According to this article,
the husband’s consent is necessary, unless
the property is acquired from her
ascendants, descendants, parentsin-law
and relatives within the fourth degree.63
-
persons suffering from civil interdiction,[Art. 34, Revised Penal
Code.]
VICES OF CONSENT
DEFINITION: A voidable contract
- is binding and valid, unless annulled by a proper action
in court.
- It is, however, susceptible of ratification before
annulment. (Art. 1390, Civil Code).
- Annulment may be had even if there be NO damage
to the contracting parties. (Art. 1390, 1st paragraph,
Civil Code).
OTHER CAUSES OF VITIATED CONSENT
Aside from “incapacity to give consent,” the following are
causes of vitiated consent: (They are also referred to as “vices
of consent.”)
VICES OF CONSENT
(defects of intelligence)
RULE: affect the INTELLECT (which is the faculty in the mind of
man, the proper object of which is the TRUTH. They thus affect
COGNITION.) Cognition must be intelligent.
(a) mistake (or error) [ART. 1331-1334]

incompetents who are under guardianship. [Rules 92-93, New

(b) fraud (or deceit) [ART. 1338-1341]
Rules of Court.]
- RULE: it must be noted that the mere fact that a
person is classifi ed as an “incompetent” in
accordance with the New Rules of Court does not VICES OF CONSENT
necessarily mean that he cannot give his consent to (defects of will)
a contract, nor does the mere fact that he is not
under guardianship necessarily mean that he can
RULE: affect the WILL (which is the faculty in the mind of man,
give his consent to a contract.
the proper object of which is the GOOD. They thus affect
VOLITION.) Volition must be free
RULE: Under Sec. 2 of Rule 92 of the New Rules of Court, the
word “incompetent’’ includes: (c) violence [ART. 1335, ART 1336]
- (1) persons suffering from civil interdiction;
- (2) hospitalized lepers; (d) intimidation [ART. 1335, ART 1336]
- (3) prodigals;
- (4) deaf and dumb who are unable to read and (e) undue influence [ART. 1337]
write;
- (5) those who are of unsound mind, even though
they have lucid intervals; and
VICES OF CONSENT
- (6) those who by reason of age, weak mind, and
other similar causes, cannot, without outside aid, vices of declaration (vicios de la declaracion)
take care of themselves and manage their property
becoming thereby an easy prey for deceit and RULE: comprehends all forms of simulated contracts
exploitation.
(f) simulation of contracts. [Arts. 1345-1346, Civil Code. See
--------------------------------------------------------- also 3 Castan, 7th Ed., p. 330; 8 Manresa, 5th Ed., Bk. 2, p.
Article 1330. A contract where consent is given 393.]
through mistake, violence, intimidation, undue
---------------------------------------------------------
influence, or fraud is voidable. (1265a)
--------------------------------------------------------- REQUISITES OF CONSENT (MANRESA)

CONSENT (1) consent must be intelligent

3
• __

RULE: Intelligent consent is vitiated by (defects of intelligence)

- (a) mistake or error
RULE: absence of which = the contract is voidable;
(2) consent must be free
RULE: free consent is vitiated by
- (c) violence,
- (d) intimidation and
- (e) undue influence
RULE: absence of which = the contract is voidable;
(3) consent must be spontaneous.
RULE: spontaneous consent is vitiated by
- (b) fraud (or deceit)
RULE: absence of which = the contract is voidable;
(JURADO)
(3) consent must be real.
RULE: Because of the inclusion of simulation of contracts as
one of the vices which vitiate consent, we might add a fourth
requisite — that the consent must be real
RULE: spontaneous consent is vitiated by
- (f) simulation of contracts.
(a) mistake (or error)
Mistake OF FACT.
REMINDER: [Article 1330] contract where consent is
given through (a) mistake [is voidable]
DEFINITION: Mistake. —
- The Code does not distinguish between mistake as
such and ignorance. Consequently, as it is understood
in the Civil Code,
- mistake may be defined
- not only as the wrong conception of a thing,
- but also as the lack of knowledge with
respect to a thing.78
DEFINITION: Mistake OF LAW. —
- when one or both of the contracting parties
- arrive at an erroneous conclusion
- regarding the interpretation of
- a question of law
- or
- the legal effects of
- a certain act or transaction.
- GENERAL RULE: does not render the contract voidable
because of the wellknown principle that ignorance of
the law does not excuse anyone from compliance
therewith.79

RULE: absence of which = the contract is either void ab initio DEFINITION: Mistake OF FACT. —
or valid - when one or both of the contracting parties believe
- as far as the real agreement is concerned - that a fact exists
- depending upon whether the simulation is absolute - when in reality it does not,
or relative. - or that such
- fact does not exist
--------------------------------------------------------- - when in reality it does.

Article 1331. In order that mistake may invalidate GENERAL RULE: it is only a mistake of fact which will vitiate
consent thus rendering the contract voidable
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 OF FACT

Mistake as to the identity or qualifications of one of (1) Mistake as to the [object]

the parties will vitiate consent only when such identity
or qualifications have been the principal cause of the (1) Mistake as to [object] (error in re):
contract. - This is the mistake which is referred to in the first
paragraph of Art. 1331 of the Code.
A simple mistake of account shall give rise to its - it should refer to the substance of the thing
correction. (1266a) which is the object of the contract
--------------------------------------------------------- - or
- to those conditions which have principally
CONSENT
moved one or both parties to enter into the
contract.
CAUSES OF VITIATED CONSENT
(a) Mistake as to the identity of the thing (error in corpore),
VICES OF CONSENT - as when the thing

4
• __

- which constitutes the object of the secondary qualities (error in qualitate),

contract
- is confused with another thing; - RESULT: the contract is not rendered voidable.82

(b) mistake as to the substance of the thing (error in

substantia); mistake of quantity (error in mistake of account or
quantitate), calculation
- includes mistake regarding the nature of the
contract, there is a real mistake there is only an apparent
- as when the contracting parties believe that the mistake,
other is selling, when in truth and in fact, both are
buying. (see Madrigal & Co. vs. Stevenson & Co., 15 as to the extent of the a mere mistake in
Phil. 38 [1910].) object of the contract; mathematical
computation.

RULE: The mistake contemplated by law is substantial mistake contract is voidable; contract is not voidable;
of fact, that is,
REMEDY: ANNULMENT REMEDY: correction
- the party would not have given his consent had he
known of the mistake.
EXAMPLE: if the parties enter EXAMPLE: If, on the other
- NOTE: not every mistake will vitiate consent into a contract with respect hand, they enter into a
and make a contract voidable to a parcel of land which contract in which it is
they believe has an area of agreed that a parcel of
100 hectares, when in reality land consisting of 10
(c) mistake as to the conditions of the thing,
it has an area of only 50 hectares shall be sold for
- provided such conditions have which have
hectares, there is mistake as P1,000 per hectare, and
principally moved one or both parties to
to the quantity of the thing; they thought that the total
enter into the contract.
price is only P5,000, there is
a mistake of account; the
EXCEPTION: Error as regards the motives of the contract (see
mistake in this case can only
Art. 1351.) does not vitiate consent
be corrected.83
- unless the motives constitute

- a condition/cause of the contract.

- CAUSE = moved one or both parties Mistake OF FACT

to enter into the contract.
(2) Mistake as to the identity

(d) mistake as to the principal or primary

quantity/identity/qualification (error in quantitate), DEFINITION: Mistake as to person (error in persona):
- principally moved one or both
REQUISITE: that it - This kind of mistake or error
parties to enter into the contract. - may refer either to
- the name or
RULE: In order that a contract is rendered voidable because - BASED ON THIS ARTICLE: mistake with
of mistake regarding the quantity of the thing which regard to the name of one or
constitutes the object thereof, both of the contracting parties
- REQUISITE: it is necessary that such mistake will not invalidate the contract.
- should refer not only to the material out of -
which the thing is made, - to the identity or
- but also to the nature which distinguishes it, - to the qualifications
generically or specifically, from all others, - of a person.
- such as when a person purchases a thing made of
silver believing that it is made of gold. RULE: It is evident from the provision of the second paragraph
of Art. 1331 that
- the only mistake with regard to persons which will
EXCEPTION RULE: A simple mistake of account shall
vitiate consent
give rise to its correction.
- REQUISITE: are mistakes with regard to the identity
Consequently, if the mistake refers only to accidental or or qualifications
- of one of the parties

5
• __
- REQUISITE: only when such identity or
qualifications
- have been the principal cause of the
contract.
RULE: Generally, this kind of mistake occurs in obligations to
do
- which require special qualifications of the parties or
- which are based on confidence.
- Examples of these obligations are those arising from
- remuneratory contracts,
- partnership,
- agency,
- deposit,
- commodatum,
- and lease of services.
EXCEPTION RULE: Hence, mistake with regard to the name of
one or both of the contracting parties will not invalidate the
contract.
EXCEPTION RULE: Mistake as regards the identity or
qualifications of a party does not vitiate consent, UNLESS they
have been the principal cause of the contract.
- for the reason that contracts are entered into
- more in consideration of
- the things or services
- which form their subject matter
- rather than of persons.
---------------------------------------------------------
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.
(n)
---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT:
VICES OF CONSENT
(defects of intelligence)
(a) mistake (or error) or (b) fraud
Mistake OF FACT [EXCEPTION]?
RULE WHEN A PARTY IS ILLITERATE
REMINDER: [Article 1330] contract where consent is
given through (a) mistake (or error), (b) fraud
voidable]
RULE: WHEN ONE OF THE PARTY IS ILLITERATE, CONSENT is not
completely absent or me:impaired.
- Clearly, Article 1332 assumes that the consent of the
contracting party imputing the mistake or fraud was
given, although vitiated, and does not cover a
situation where there is a complete absence of
consent. (Hemedes vs. Court of Appeals, supra.)
REASON: The rule stated in the above article was declared by
the codifiers as “especially necessary in the Philippines where
unfortunately there is still a fairly large number of illiterates and
where documents are usually drawn up in English and
Spanish.”86
REASON: Article 1332 was intended for the protection of a party
to a contract who is at a disadvantage due to his illiteracy,
ignorance, mental weakness or other handicap
REASON: This article contemplates a situation wherein a contract
has been entered into, but the consent of one of the parties is
vitiated by mistake or fraud
- committed by the other contracting party.
PRESUMPTION:
The natural presumption, of course, is that one always acts
with due care and signs with full knowledge of all the
contents of a document.
RULE: And this is true even if the mind of the party signing was
confused at the time of signing, as long as he still knew what
he was doing. He, thus, cannot repudiate the transaction.
(Abaya v. Standard Vacuum Oil Co., L-9511, Aug. 30, 1957;
Javier v. Javier, 7 Phil. 261; and Tan Tua v. Jy Liao Sontua, 56
Phil. 70).
EXCEPTION 1: [When one of the parties] [is unable to
read]
- (including a blind person) (Transporte v. Beltran,
[C.A.] 51 O.G. 1434);
EXCEPTION 2:[if the contract is in a language not
understood by him,]
RULE: SHOULD the party disadvantage due to his illiteracy
alleged [mistake or fraud ]
- the person enforcing the contract must show
that the terms thereof have been fully
explained to the former.
mistake fraud
it should refer to the through insidious words or
substance of the thing which machinations of one of the
is the object of the contract, contracting parties, the other
is induced to enter into a
or to those conditions which contract which, without
have principally moved one them, he would not have
or both parties to enter into agreed to
[is the contract.
---------------------------------------------------------
6
• __

- Here, A cannot allege mistake

- since he knew beforehand of the doubt, risk,
or contingency
- affecting the object of the contract.

DE LEON EXAMPLE: B bought a parcel of land from S

- who informed him before the contract was perfected
- that the land was involved in a litigation in
which C is the claimant.
- In case the land is recovered later on by C,
- B cannot allege mistake in his contract
- because he knew the risk that the land might later on
be recovered by C.

Article 1333. There is no mistake if the party alleging Mistake OF FACT [EXCEPTION]
it knew the doubt, contingency or risk affecting the [ERRORS THAT WILL NOT VITIATE CONSENT]

object of the contract. (n) 1. Error which could have been avoided by the party alleging
--------------------------------------------------------- it, or which refers to a fact known to him, or which he should
have known by the exercise of ordinary diligence, or which is
CONSENT
so patent and obvious that nobody could have made it, will
not invalidate consent. (Alcasid vs. Court of Appeals, 237
CAUSES OF VITIATED CONSENT SCRA 419 [1994]; see Domingo Realty, Inc. vs. Court of
Appeals, 513 SCRA 40 [2007].)
VICES OF CONSENT
2. Error as regards the incidents of a thing or accidental
(defects of intelligence) qualities thereof (e.g., accessibility of a residential house to
(a) mistake (or error) means of transportation; maximum speed of a car), not taken
Mistake OF FACT [EXCEPTION] as the principal consideration of the contract, does not vitiate
consent (Art. 1331, par. 1.), unless the error is caused by fraud
KNOWLEDGE OF RISK of the other party. (see Art. 1338.)

---------------------------------------------------------
GENERAL RULE: The mistake contemplated by law is
substantial mistake of fact, that is,
Article 1334. Mutual error as to the legal effect of an
- the party would not have given his consent had he agreement when the real purpose of the parties is
known of the mistake. frustrated, may vitiate consent. (n)
- NOTE: not every mistake will vitiate consent ---------------------------------------------------------
and make a contract voidable
CONSENT
EXCEPTION RULE: There is no mistake OF FACT (1) CAUSES OF VITIATED CONSENT
Mistake as to the [object]
- IF the party alleging it VICES OF CONSENT
- knew
(defects of intelligence)
- the doubt
- the contingency
(a) mistake (or error)
Mistake OF LAW [EXCEPTION]
- the risk
- affecting the object of the contract
REMINDER: [Article 1330] contract where consent is
given through (a) mistake (or error) [is voidable]
RULE: [Paras] It is to be assumed here that the party was willing to
take the risk.
DEFINITION: Mistake OF LAW. —
RULE: This is particularly true in contracts which are evidently - when one or both of the contracting parties
aleatory in nature. - arrive at an erroneous conclusion
- regarding the interpretation of
RULE: [Paras] If mistake is caused by inexcusable negligence, the - a question of law
contract cannot be annulled. - or
- the legal effect of
PARAS EXAMPLE: A bought a fountain pen - a certain act or transaction.
- which was represented as possibly being able to write - GENERAL RULE: does not render the contract
even underwater. voidable because of the well known principle that
- A also knew that the pen’s ability was questionable, ignorance of the law does not excuse anyone from
- and yet A bought said pen.

7
• __

compliance therewith. [ignorantia legis neminem If on the other hand, both A and B agreed on a sale
excusat] agreed on a sale [intention is [intention is sale]
sale]
RESULT:
and as written, but as written,
EXCEPTION RULE: For contract where consent is given through - the document is - the document
mistake of law to be voidable, following requisites must one of sale, shows a mortgage.
conquer: , Here,
- REQUISITE 1: mistake as to the legal effect of an
agreement there is no meeting of the there was a meeting of the
minds, minds (mutual consent?)
- [the mistake must be with respect to the
legal effect of an agreement]
- REQUISITE 2: Mutual error / Mutual [Mistake]?
mutual mistake as to the mutual mistake on the use
- [the mistake must be mutual]
legal effect of the of “instrument”
- REQUISITE 3: when the real purpose of the instrument]
parties is frustrated - mistakenly - the instrument does
- [the real purpose of the parties must have interpreted that an not disclose the real
been frustrated.] instrument of [sale] intention of [sale]
- DEFINITION: FRUSTRATED - has legal - meaning:
effect instrument to
EXAMPLE: A and B entered into a contract, effect of disclose
- REAL PURPOSE: which they intended should result mortgage [mortgage], but the
- in a co-ownership between them, real intention is
- FRUSTRATED: but which turned out later [sale]
- to be a mortgage,
THE REMEDY IS ANNULMENT REMEDY IS REFORMATION.
- MUTUAL: as a result of their mutual error
- LEGAL EFFECT: as to the legal effect of the ---------------------------------------------------------
agreement. Article 1335. There is violence when in order to wrest
- RESULT: Here the contract is voidable.
consent, serious or irresistible force is employed.
RESULT: CONSENT is vitiated
RESULT: [Article1330] contract where consent is There is intimidation when one of the contracting
given through (a) mistake (or error) [is voidable] 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
REASON FOR THE ARTICLE: Explaining the reason for the insertion
of Art. 1334 in the Civil Code, the Code Commissioners stated in
his spouse, descendants or ascendants, to give his
their report: consent.
- “Mistake of law does not generally vitiate consent.
- But when there is mistake To determine the degree of intimidation, the age, sex
- on a doubtful question of law, or
and condition of the person shall be borne in mind.
- on the construction or application of law,
- this is analogous to a mistake of fact, and the maxim of A threat to enforce one's claim through competent
ignorantia legis neminem excusat should have no authority, if the claim is just or legal, does not vitiate
proper application. consent. (1267a)
- When even the highest courts are sometimes divided
---------------------------------------------------------
upon difficult legal questions, and when one-half of the
lawyers in all controversies on a legal question are CONSENT
wrong, why should a layman be held accountable for
his honest mistake on a doubtful legal issue?”
CAUSES OF VITIATED CONSENT

Article 1334 Art. 1361 VICES OF CONSENT

Art. 1361 of the Civil Code reads: “When a mutual mistake of
(defects of will)
the parties causes the failure of the instrument to disclose (c) violence / (d) intimidation/threat
their real agreement, said instrument may be reformed.” “DURESS”

Art. 1334, the error is as to the Art. 1361, the real agreement
legal effect of the is not disclosed;
agreement.

8
• __

REMINDER: [Article
1330] contract where consent is
REQUISITES OF intimidation/threat
given through (c) violence / (d) intimidation [is
voidable] first, one of the contracting parties is
- compelled by a reasonable and well-
DEFINITION: “DURESS” grounded fear of an evil;
- Because of the similarity between violence and
intimidation, especially with regard to their effects both second, the evil must be imminent and grave;
upon the will of the person upon whom they are
exercised and upon the contract which is produced third, the evil must be unjust; and
thereby, the two are sometimes known as duress.
fourth, the evil must be the determining cause for the party
upon whom it is employed in entering into the contract.99
VIOLENCE INTIMIDATION
(presupposes) that the “threat or intimidation”
is external is internal; - must be actual, serious and possible of realization,
and
the first prevents the influences the operation of - that the actor
expression of the will the will, - can and
- still will
substituting it with a material inhibiting it in such a way that - carry out his threat.
act dictated by another the expression thereof is
apparently that of a person SOURCE: This rule, which is taken from Manresa (Vol. 8, Bk. 2,
who has freely given his 5th Ed., p. 411), is enunciated in the cases of Alarcon vs.
consent Kasilag, CA, 40 Off. Gaz. 11th S, p. 203; De Asis vs. Buenviaje,
CA, 45 Off. Gaz. 317; Mirano vs. Mossessgeld Santiago, CA, 45
CASTAN: CASTAN: Off. Gaz. 343; Derequito vs. Dolutan, CA, 45 Off. Gaz. 1351;
Valdeabella vs. Marquez, CA, 48 Off. Gaz. 719
violence is physical intimidation is moral
compulsion compulsion. EXAMPLE: The best illustrations of the application of this rule
are those contracts entered into during the Japanese
occupation
DEFINITION: there is violence when: - involving payments in Japanese military notes,
- in order to wrest consent, one employed - where it is established that one of the contracting
- serious or irresistible force parties was compelled to give his consent to the
payment
- by reason of a threat to report his non-acceptance
REQUISITES OF violence of the military notes to the Japanese authorities.
- Thus, it has been held:
first, the force employed to wrest consent - that the threat to deliver anyone to the
- must be serious or irresistible force ; Kempetai or to the now infamous Fort
Santiago, for refusal to accept Japanese
second, it must be the determining cause military notes, or for any cause, even to
- for the party intelligent persons of ordinary firmness
- upon whom it is employed would surely infuse just fear of great bodily
- in entering into the contract.98 harm, should there be a refusal considering
the inquisitorial methods employed by the
invaders and what they had done.
- But the mere knowledge of the severe penalties
DEFINITION: there is intimidation/threat when:
imposed by the invaders upon a violation of their
- to give his consent one of the contracting proclamations and orders regarding non-
parties [is compelled] acceptance of military notes,
- by a reasonable and well-grounded - which was common and applicable to all,
fear - without any proof of direct acts showing the
imminence and gravity of any injury,
- of an imminent and grave evil
- does not in itself establish intimidation,
- upon his person or property - since according to the law, such intimidation exists
only when one of the contracting parties is inspired
- upon the person or property of with a reasonable and well grounded fear of
suffering an imminent and grave injury to his person
his spouse, descendants or
or property, or to the person or property of his
ascendants spouse, descendants or ascendants.
[102Valdeabella vs. Marquez, CA, 48 Off. Gaz. 719.

9
• __

To the same effect: Mirano vs. Mossessgeld
Santiago, CA, 45 Off. Gaz. 343; Phil. Trust Co. vs.
Araneta, 46 Off. Gaz. 4254; Laraga vs. Bañez, 47 Off.
Gaz. 696; Fernandez vs. Brownell, 51 Off. Gaz. 713.]
not it gives him a chance to thwart the danger
- his financial condition, because while a certain
amount may mean nothing to some, to others it may
mean economic ruin [8 Manresa, 5th Ed., Bk. 2, p.
418; Rodriguez vs. De Leon, CA, 47 Off. Gaz. 6296.]

consent given through consent given reluctantly

intimidation and even against good sense EXCEPTION TO intimidation/threat
and judgment
EXCEPTION RULE: just or legal threat
a person gives no consent at a person gives his consent - threat to enforce
REQUISITE one’s claim through
all reluctantly
competent authority
- even if it can be established that the
even against his good sense
reason or motive of a party in entering into
and judgment
a contract
- was the threat of the other to proceed
In this case, In such case where the
against him through the courts
payment of an additional
- REQUISITE: claim is just or legal
he executes a contract or sum as a means of escape
performs an act against his - is not necessarily a
- RESULT: Such threat does not vitiate consent.
will under a pressure which payment for duress.
he cannot resist
EXAMPLE: Thus, where it is established that a demand for the
His judgment, operating
settlement of an obligation made by the creditor upon the
upon this condition, told him
debtor was accompanied by the threat that upon failure of
to pay the additional sum
the latter to do so, an action would be instituted against him
rather than to suffer the
in court, it was held that such threat is proper within the realm
inconvenience and expense
of the law as a means to enforce collection of the obligation,
of an action in court.
and therefore, cannot constitute intimidation which would
invalidate any settlement entered into even if the claim
A payment made under such
proves to be unfounded so long as the creditor who made
conditions is not voidable
the threat believed that it was his right to do so. [Berg vs. Nat.
City Bank of New York, G.R. No. L-9312, Oct. 31, 1957]
Courts operate: Courts cannot constitute
themselves guardians of ---------------------------------------------------------
persons who are not legally
incompetent

but ONLY because he has Courts operate not because

been defeated or overcome one person has been
illegally. defeated or overcome by
another,

DETERMINATION OF DEGREE OF INTIMIDATION

(of the intimated contracting party)
(or of the intimidated spouse, descendant or ascendant of the
contracting party)

RULE: the following shall be borne in mind:

age (of the person intimated)

sex (of the person intimated)
condition (of the person intimated), includes:
- the resolute or weak character of the person
intimidated,
- his capacity or culture, which permits him to
appreciate whether or not there is an imminent
danger
- his position, by which he can determine whether or
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.
(1268)
---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT

10
• __

VICES OF CONSENT (b) power over the will of another

(defects of will) - (reflected for example in a superior bargaining
(c) violence / (d) intimidation power). (See Martinez v. Hongkong and Shanghai
Bank, 15 Phil. 252).
“DURESS”
[by third person] (c) deprivation of the latter’s will of a reasonable freedom of
choice
REMINDER: [Article 1330] contract where consent is - (The influence exerted must be of a kind that
given through (c) violence / (d) intimidation [is overpowers the mind as to destroy the party’s free
agency) (Coso v. Fernandez Deza, 42 Phil. 596).
voidable]

ADDITIONAL RULE: Consent is still vitiated, Contract is voidable,

due influence undue influence
even if (c) violence or (d) intimidation it may have been:
- employed by a [by third person] Solicitation, importunity,
argument, and persuasion
- REASON: This is because the consent is still vitiated. (De are not undue influence
Asis v. Buenviaje, [C.A.] 45 O.G. 317).
a contract is not to be set
---------------------------------------------------------
aside merely because one
Article 1337. There is undue influence when a party used these means to
person takes improper advantage of his power over obtain the consent of the
the will of another, depriving the latter of a reasonable other
freedom of choice. The following circumstances shall
Influence obtained by
be considered: the confidential, family, spiritual and persuasion or argument or by
other relations between the parties, or the fact that appeals to the affections is
the person alleged to have been unduly influenced not prohibited either in law or
was suffering from mental weakness, or was ignorant morals and is not obnoxious
even in courts of equity.
or in financial distress. (n)
--------------------------------------------------------- even if it can be established
CONSENT that

a person entered into a

CAUSES OF VITIATED CONSENT contract

VICES OF CONSENT through the importunity or

persuasion of another against
(defects of will)
his better judgment,
(e) undue influence
if the deprivation of his free deprivation of his free
REMINDER: [Article 1330] contract where consent is agency is not proved, agency
given through (e) undue influence [is voidable]
there is no undue influence
DEFINITION: there is (e) undue influence when: which will invalidate the
- when a person takes improper advantage of his contract
power
- over the will of another, Mere general or reasonable The influence must be undue
- depriving the latter of a reasonable freedom infl uence is not suffi cient. If or improper (Art. 1337.) to
of choice. gained by kindness and avoid a contract.
affection or argument and
persuasion, the infl uence will
DEFINITION: (JURADO) undue influence invalidating a contract is
not vitiate consent. (Coso vs.
that which substitutes the wishes of another for those of a party Fernandez-Daza, supra;
to the contract or that which deprives the latter of his free Martinez vs. Hongkong &
agency Shanghai Bank, 15 Phil. 252
[1910].)
REQUISITES OF (e) undue influence
DUE INFLUENCE EXAMPLE: Contract to sell was awarded to
(a) improper advantage another person after intercession of a member of the
legislative body. the approval of the transfer was due to the

11
• __
intercession of Senator F who sent a letter to the Board of
Directors of PHHC requesting approval of sasid transfer.
Issue: Upon the facts, may it be said that the approval of the
transfer was vitiated by undue infl uence?
Held: No. The transfer could not have been approved solely
on the strenght of such letter, for the approval was
recommended as “extremely meritorious” by the Head
Executive Assistant and the Homesite Sales Supervisor of the
PHHC. The letter could not destroy the free agency of the
PHHC Board of Directors, and could not have interfered with
the exercise of the Board’s independent discretion. (Bañez vs.
Court of Appeals, supra.)
DETERMINATION OF (e) undue influence
TEST: determine whether or not the influence exerted
- has so overpowered or subjugated the mind of a
contracting party
- as to destroy his free agency,
- making him express the will of another rather than his
own
NOTE: Article 24 of the Civil Code enjoins courts to be vigilant
for the protection of a party to a contract who is placed at a
disadvantage on account of his ignorance, mental weakness
or other handicap. (see Katipunan vs. Katipunan, Jr., 375
SCRA 200 [2002].)
RULE: the following circumstances shall be considered
(a) confidential, family, spiritual and other relations
- between the parties
(b) suffering from mental weakness
- the person alleged to have been unduly
influenced
(c) was ignorant
- the person alleged to have been unduly
influenced
(d) in financial distress
- the person alleged to have been unduly
influenced
RULE [by third person]: Undue influence exercised by a third
party vitiates consent, just like in the case of violence and
intimidation. (See Memorandum to the Joint Congressional
Committee on Codifi cation, Mar. 8, 1951).
CONTRACTS OF ADHESION
RULE CONTRACTS OF ADHESION [should be strictly interpreted
against the company, and liberally in favor of the individual]
- Contracts where one party merely signs carefully
prepared contracts by big companies (adhesion
contracts or contracts of adherence, like insurance
or transportation contracts) should be strictly
interpreted against the company, and liberally in
favor of the individual, because the individual is
“usually helpless to bargain for better terms.” (J.B.L.
Reyes)
DEFINITION
- In the case of Spouses Ermitano vs. Court of Appeals,
April 21, 1999, G.R. No. 127246, the Supreme Court
ruled that the contract between the parties is
indeed a contract of adhesion, so-called because
its terms are prepared by only one party while the
other party merely affi xes his signature signifying his
adhesion thereto.
Such contracts are not void in themselves. They are as
binding as ordinary contracts.
RIGHTS OF THE WEAKER PARTY
Parties who enter into such contracts are free to reject the
stipulations entirely.
- This Court will not hesitate to rule out blind
adherence to such contracts if they prove to be too
one-sided under the attendant facts and
circumstances.
- Because of the peculiar nature of contracts of
adhesion, the validity thereof must be determined in
the light of the circumstances under which the
stipulation is intended to apply.
CONTRACTS OF CREDIT CARDS
RIGHT OF THE WEAKER: Cardholder
IN CASE OF LOST OR STOLEN CARD
For the cardholder to be absolved from liability for
unauthorized purchases made through his lost or stolen
card, two steps must be followed:
(1) the cardholder must give written notice to the credit
card company, [NOTIFICATION PROCEDURE]
- In this case, the cardholder has complied with
what was required of her under the contract with
credit card company. Having thus performed her
part of the notifi cation procedure, it was
reasonable for the cardholder to expect that the
credit card company would perform its part of
the procedure, which is to forthwith notify its
member-establishments.
RIGHT: Prompt notice by the cardholder to the credit card
company of the loss or theft of her card should be enough
to relieve the former of any liability occasioned by the
unauthorized use of her lost or stolen card.
- To require the cardholder to still pay for
unauthorized purchases after he has given
prompt notice of the loss or theft of her card to
the credit card company would simply be unfair
and unjust. The Court cannot give its assent to
such a stipulation that could clearly run against
public policy
12
• __

- the other is induced to enter into a contract

- through insidious words or
machinations of one of the contracting
(2) the credit card company must notify its member
parties
establishments of such loss or theft, which, naturally, it may
- without them
only do upon receipt of a notice from the cardholder.
- he would not have agreed

FRAUD IN THE CELEBRATION OF THE CONTRACT

IN CASE CARD IS DECLINED
RULE: IT CANNOT BE GIVEN blanket freedom from liability if
its card is dishonoured by any merchant affiliate for any
reason.
- In this case, paragraph 7 of the terms and
conditions states that Citibank is not responsible if
the card is not honoured by any merchant
affiliate for any reason.
- While it is true that Citibank may have no control
of all the actions of its merchant affi liates, and
should not be held liable therefor, it is incorrect,
however, to give it blanket freedom from liability if
its card is dishonoured by any merchant affi liate
for any reason.
- Citibank also invokes paragraph 15 of its terms
and conditions which limits its liability to P1,000.00
or the actual damage proven, whichever is lesser.
Again, such stipulation cannot be considered as
valid for being unconscionable as it precludes
payment of a larger amount even though
damage may be clearly proven
(THIS IS FRAUD PROPER):
1) Dolo causante (or causal fraud):
- Here, were it not for the fraud,
- the other party would not have consented.
- (This is the fraud referred to in Art. 1338, Civil Code.)
RESULT: The contract is VOIDABLE.
2) Dolo incidente (or incidental fraud):
- Here, even without the fraud
- the parties would have agreed just the same,
- hence the fraud was only incidental in causing
consent.
- Very likely though, different terms would have been
agreed upon.
RESULT: The contract is valid,
- but there can be an action for damages. (See
Woodhouse v. Halili, 93 Phil. 526).
- [Article1344] [Incidental fraud only obliges
the person employing it to pay damages ]

RULE: The Supreme Court is not precluded from ruling out

blind adherence to the terms of a contract if the attendant
facts and circumstances show that they should be ignored Dolo causante Dolo incidente
for being obviously too one-sided
serious in character not serious.
---------------------------------------------------------
the cause which induces is not the cause.
Article 1338. There is fraud when, through insidious
the party upon whom it is
words or machinations of one of the contracting employed in entering into
parties, the other is induced to enter into a contract the contract
which, without them, he would not have agreed to.
effect of the first is to render effect of the second is to
(1269)
the contract voidable render the party who
--------------------------------------------------------- employed it liable for
CONSENT damages

CAUSES OF VITIATED CONSENT

FRAUD IN THE PERFORMANCE of the obligations stipulated in
the CONTRACT
VICES OF CONSENT
(defects of intelligence) (NOTE: This kind of fraud presupposes the existence of an
(b) fraud (or deceit) already perfected contract.)
[Dolo causante]
EXAMPLE: Although real vinegar was sold, what was really
delivered was diluted vinegar
REMINDER: [Article 1330] contract where consent is
given through (b) fraud (or deceit) [is voidable]
It is evident from the provisions of Arts. 1338 and 1344 of the
DEFINITION: there is (b) fraud (or deceit) when:

13
• __
Code that in order that the consent of a party to a contract is
vitiated by fraud,
it is essential that the following requisites must concur:
(1) [Dolo causante] or insidious words or machinations
- must have been employed by one of the
contracting parties;
(2) [Dolo causante] or insidious words or machinations
- must have been serious; [it should be serious]
[Article 1344]
(3) [Dolo causante] or insidious words or machinations
- of the other party must have induced him to
enter into a contract ; and
(4) [Dolo causante] should not have been employed
- by both of the contracting parties or by third
persons.
- [should not have been employed by both
contracting parties] [Article 1344]
RULE: Before a contract can be invalidated because of fraud, it
is, however, essential that there must be proof of concrete facts
constituting the fraud or insidious words or machinations
employed by one of the contracting parties by virtue of which
the other party was induced to enter into the contract, which,
without them, he would not have agreed to.[Ramos vs.
Valencia, 47 Off. Gaz. 1978.]
---------------------------------------------------------
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. (n)
---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT
VICES OF CONSENT
(defects of intelligence)
(b) fraud (or deceit)
[Dolo causante]
REMINDER: [Article 1330] contract where consent is
given through (b) fraud (or deceit) [is voidable]
DEFINITION: there is (b)
fraud (or deceit) when there is:
- Failure to disclose facts
- when: there is a duty to reveal them
- thatis: when the parties are bound by
confidential relations
- The duty to reveal in parties bound by
confidential relations is:
- as in the case of partners. (Poss v.
Gottlieb, 118 Misc. 318).
EXAMPLE: Thus, where the defendant, who is the manager of a
certain corporation as well as the owner of about 3/4 of the
shares of capital stock thereof, bought through an agent 800
shares of capital stock from the plaintiff, without disclosing the
fact that he had just negotiated the sale of valuable properties
to the government thus enhancing the value of the capital
stocks of the company, such nondisclosure is clearly fraudulent;
therefore, the sale can be annulled.
EXCEPTION NOTE: However, the innocent nondisclosure of a
fact, when there is no duty to reveal it, does not constitute fraud;
consequently, such nondisclosure does not affect the formation
of the contract or operate to discharge the parties from their
agreement.125
---------------------------------------------------------
Article 1340. The usual exaggerations in trade, when
the other party had an opportunity to know the facts,
are not in themselves fraudulent. (n)
---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT
VICES OF CONSENT
(defects of intelligence)
(b) fraud (or deceit)
14
• __

EXCEPTION: usual exaggerations in trade NOT: (b) fraud (or deceit)

EXCEPTION: mere expression of an opinion

RULE:usual exaggerations in trade ARE not in
themselves fraudulent. REMINDER: [Article 1330] contract where consent is
- when the other party had an opportunity to
given through (b) fraud (or deceit) [is voidable]
know the facts

RULE: This Article stresses the rule of “caveat emptor” (let the
buyer beware).
RULE: The “usual exaggerations in trade” (dealer’s talk)
constitute tolerated fraud, when the other party had an
opportunity to know the facts.
RULE: A man who relies upon an affi rmation made by a person
whose interest might so readily prompt him to exaggerate the
value of his property, does so at his own risk. He must therefore
take the consequences of his own imprudence.
RULE: Ordinarily, what does not appear on the face of the
written contract should be regarded as “trader’s talk” or
“dealer’s talk.” (Puyat v. Arco Amusements Co., 72 Phil. 402).
---------------------------------------------------------
GENERAL RULE: mere expression of an opinion does
not signify fraud
EXAMPLE: A, on buying a watch,
- was assured by the seller that it was a good watch,
- and could run without rewinding for one week, in
the opinion of the seller.
- This is a mere expression of opinion that is not
fraudulent
EXCEPTION RULE: When made by an expert
- REQUISITE:the other party has relied on the
former's special knowledge.
EXAMPLE: SAME AS ABOVE BUT:
- But if the seller was a watch expert,
- and the only reason why A bought the watch
- was this opinion of the seller,
- the contract is voidable on the ground of fraud.

---------------------------------------------------------

Article 1341. A mere expression of an opinion does

not signify fraud, unless made by an expert and the Article 1342. Misrepresentation by a third person
other party has relied on the former's special does not vitiate consent, unless such
knowledge. (n) misrepresentation has created substantial mistake
--------------------------------------------------------- and the same is mutual. (n)
CONSENT ---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT
CAUSES OF VITIATED CONSENT
VICES OF CONSENT
(defects of intelligence) NOT: (b) fraud (or deceit)

15
• __

[misrepresentation by a third person] - The article was needed for A’s radio.
- B honestly but mistakenly assured A
EXCEPTION: (may still annul based on:) - that the article was the proper object.
- May the contract be annulled?
substantial, mutual (a) mistake (or error)
- EFECT:.: Yes, not on the ground of fraud, for the
misrepresentation was honest,
GENERAL RULE: - but on the ground of substantial error.
---------------------------------------------------------
“Misrepresentation by a third person does not
vitiate consent”

EXAMPLE:
- A and B entered into a contract with X.
- A’s consent was obtained only because B had
deceived or defrauded him.
- May A ask for annulment of the contract with X?
- HELD: No, because X was not a party to the fraud.
- Hill v. Veloso 31 Phil. 160 FACTS:

Force or intimidation fraud (or deceit)

by a third person by a third person

makes the contract voidable. does not make the contract

voidable

EXCEPTION RULE:
- REQUISITE 1: the representation has created
substantial mistake,
- REQUISITE 2: the mistake is mutual. (Art. 1342).

RESULT: In this case,

- the contract may be annulled,
- not principally on the ground of fraud,
- but on the ground of error or mistake
RULE: In this case, the contract may be annulled, not
principally on the ground of fraud, but on the ground of error
or mistake
---------------------------------------------------------
Article 1343. Misrepresentation made in good faith is
not fraudulent but may constitute error. (n)
---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT
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. (1270)
---------------------------------------------------------
CONSENT
CAUSES OF VITIATED CONSENT
NOT: (b) fraud (or deceit) [Dolo causante]
[MUTUAL FRAUD, won’t annul contract]

NOT: (b) fraud (or deceit)

INCIDENTAL: (b) fraud (or deceit)
[misrepresentation by a party?] [Dolo incidente]

EXCEPTION: (may still annul but based on)

REMINDER: [Article 1330] contract where consent is
(a) mistake (or error)
given through (b) fraud (or deceit) [is voidable]

RULE: Misrepresentation made in good faith It is evident from the provisions of Arts. 1338 and 1344 of the
- It is not fraudulent. Code that in order that the consent of a party to a contract is
- BUT will be annulled on the ground of substantial error. vitiated by fraud,

EXAMPLE: A bought a certain article from B. it is essential that the following requisites must concur:

16
• __

- when the parties do not really want the contract they

(1) [Dolo causante] or insidious words or machinations
have executed
- must have been employed by only one of the
- to produce the legal effects expressed by its
contracting parties;
wordings.
- should not have been employed
- (Villafl or v. CA, 280 SCRA 297 [1997]; Tongoy v. CA, 123
SCRA 99 [1983], and Rodriguez v. Rodriguez, 20 SCRA
- by both of the contracting parties or by third
908 [1967])
persons.

- [should not have been employed by both absolute relative

contracting parties] [Article 1344] Simulation Simulation

(2) [Dolo causante] or insidious words or machinations takes place when the when the parties
- must have been serious; [it should be serious] parties do not intend to conceal their true
[Article 1344] be bound at all agreement.

(3) [Dolo causante] or insidious words or machinations producing the appearance producing the appearance
- of the other party must have induced him to of a contract of a contract
enter into a contract ; and
that really does not exist which is different from the
true agreement
2) Dolo incidente (or incidental fraud):
contract is not really desired contracting parties state a
- Here, even without the fraud
or intended to produce legal false cause in the contract to
- the parties would have agreed just the same,
effects or in any way alter the conceal their true agreement
- hence the fraud was only incidental in causing
juridical situation of the
consent.
parties.
- Very likely though, different terms would have been
agreed upon.
me: parties are not bound? me: parties are bound, but
for a different legal effect
RESULT: The contract is valid,
than their real intention?
- but there can be an action for damages. (See
Woodhouse v. Halili, 93 Phil. 526).
EXAMPLE: as when a debtor EXAMPLE: as when a person
- [Article1344] [Incidental fraud only obliges
the person employing it to pay damages ] simulates the sale of his conceals a donation
properties to a friend
by simulating a sale of the
---------------------------------------------------------
in order to prevent their property to the beneficiary
Article 1345. Simulation of a contract may be possible attachment by for a fictitious consideration.
absolute or relative. The former takes place when the creditors.
parties do not intend to be bound at all; the latter,
---------------------------------------------------------
when the parties conceal their true agreement. (n)
Article 1346. An absolutely simulated or fictitious
---------------------------------------------------------
contract is void. A relative simulation, when it does
CONSENT not prejudice a third person and is not intended for
any purpose contrary to law, morals, good customs,
VITIATED CONSENT (BUT VOID CONTRACT) public order or public policy binds the parties to their
real agreement. (n)
DEFINTIION: ---------------------------------------------------------
(f) simulation of contracts CONSENT
vices of declaration (vicios de la declaracion)
VITIATED CONSENT (BUT VOID CONTRACT)
DEFINITION: Simulation of a contract
- It is the process of intentionally deceiving others
- by producing the appearance of a contract VICES OF CONSENT
- that really does not exist (absolute simulation) (f) simulation of contracts
- or (vicios de la declaracion)
- which is different from the true agreement
(relative simulation). (See TS, Dec. 19, 1951).
REMINDER: [Article 1346] absolutely simulated or
DEFINITION: Upon the other hand, simulation takes place fictitious contract [is void]

17
• __

absolute relative
Simulation Simulation

takes place when the when the parties

parties do not intend to conceal their true
be bound at all agreement.

absolutely simulated or when it does not

fictitious prejudice a third person

and is not intended for

any purpose contrary to
law, morals, good
customs, public order or
public policy

RESULT: contract is void. GENERAL RULE: binds the

parties to their real
agreement.

EXCEPTION RULE: when

relative simulation:
(1) prejudice a third
person
(2) is intended for any
purpose contrary to law,
morals, good customs,
public order or public
policy
---------------------------------------------------------

18