ESSENTIAL REQUISITES OF CONTRACTS

Classes of Elements of Contract

1. Essential Elements
a. Common – cause, object and cause.
b. Special – form, subject matter and consideration or cause.
2. Natural Elements – presumed to exist unless contrary is expressly stipulated by the parties.
3. Accidental Elements – exist only when they are expressly provided by parties.

Consent
 Consent is the conformity or concurrence of wills and with respect to contracts. It is the meeting
of minds or mutual assent between the parties on the subject matter and the cause which
constitute the contract.
 Characteristic of consent;
o It is intelligent.
o It is free and voluntary.
o It is conscious and spontaneous.

OFFER – proposal made by one party to another, indicating willingness to enter contract. Offer must be
certain or definite so that the liability of the parties may be exactly fixed.
 The person making the offer may fix the time, place and the manner of acceptance.
 Offer must be communicated.
 An offer becomes ineffective upon death, civil interdiction, insanity or insolvency of either party
before acceptance is conveyed.
 The offer may be withdrawn as a matter of right at any time before acceptance except when the
option is founded upon a consideration, as something paid or promised and a unilateral promise
to buy or sell a determinate thing.
 Business advertisements and advertisements for bidders are not definite offers.

COUNTER-OFFER – considered a rejection of the original offer and an attempt by the partners to enter
into a contract on a different basis.

ACCEPTANCE – manifestation by the offeree of his assent to all the terms of the offer.
 Acceptance of an offer must not only be clear, it must be identical in all respects with that of the
offer so as to produce consent. It may be expressed or implied.
 If the offer is made through an agent, the acceptance must be communicated to him.

EXAMPLE: S asked B this question: “Will you buy my red Toyota car for P200,000?” If B answers “yes, I
accept your offer” or “yes, I agree” or just “yes” the acceptance of B is absolute or unconditional. But if B
proposes to pay only P160,000 for the car or to buy instead another car or a land of S for P200,000, his
acceptance is qualified and becomes a counter-offer. In this case, B is now the new offerer and S, who
has the original offerer, the new offeree
Persons Who Cannot Give Consent
1. Unemancipated minor – person who has not yet reached the age of majority and is still subject
to parent authority.
2. Insane or demented persons – must exist at the time of contracting.
3. Deaf-mutes – those who do not know how to write.

Note:
 Deaf-mute who knows how to read is valid, although he cannot write because of some physical
reasons.
 Contracts entered into during lucid intervals are valid. Contracts agreed to in a state of
drunkenness or during a hypnotic spell are voidable.

Modifications by law:

 When necessaries such as food, are sold to a minor or other person without capacity to act, he
must pay a reasonable price thereof.
 A minor 18 years old or above may contract for life, health and accidental insurance, provided
the insurance is taken on his life and the beneficiary appointed is the minor’s estate or the
minor’s father, mother, husband, wife, child, brother or sister.
 A contract is valid if entered into through a guardian or legal representative.
 A contract is valid where the minor misinterpreted his age and convincingly led the other party
to believe in his legal capacity.
 A contract is valid where a minor between 18 and 21 years of age voluntarily pays a sum of
money or delivers a fungible thing in fulfillment of his obligation

Other disqualifications:

 person suffering from accessory penalty in civil interdiction

 hospitalized lepers
 prodigals
 those who are unsound mind even though they have lucid intervals
 by reason of age, disease and weak mind

Vices of Consent
1. Error or mistake
2. Violence or force
3. Intimidation or threat or duress
4. Undue influence
5. Fraud or deceit

MISTAKE OR ERROR – is a false notion of a thing or a fact material to the contract. Mistake must refer
to;
1. The substance of the thing which is the object of the contract.
2. Those conditions which have principally moved one or both parties to enter into the contract.
 3. The identity of qualifications of one of the parties provided by the same was the principal cause
of the contract.

EXAMPLE: S sold to B a parcel of land. The purchase price agreed upon is for a lump sum of P235,305 for
an area of 567 square meters but with an actual area of only 467 square meters, B has the right to ask
for the rescission or cancellation of the contract.

Mistake of fact which does not vitiate consent:

1. Error as regards the incidents of a thing or accidental qualities thereof unless or accidental
qualities thereof unless caused by fraud.
2. Mistake as to quantity or amount.
3. Error as regards to motives constitutes a condition or cause of the contract.
4. Mistake as regards the identity or qualifications of a person.
5. Error which could have been avoided by the party alleging it.

Note:
1. If a party knew beforehand the doubt, contingency, or risk affecting the object of the contract,
the party cannot claim mistake.
2. If there is mistake of law, consent is not invalidated.
3. Regarding mutual mistake, Art. 1334 states that mutual error as to the legal effect of an
agreement when the real purpose of the parties is frustrated, may vitiate consent.

VIOLENCE / INTIMIDATION / THREAT

Requisites:
1. It must produce reasonable and well-grounded fear of an evil.
2. The evil must be imminent and grave.
3. The evil must be upon his person or property, or that of his spouse, descendants or ascendants.
4. It is the reason why he enters into the contract.

Note:
1. If contract is signed mere out of reverential fear, then it is valid.
2. Threat to enforce just and legal claim does not vitiate consent.
3. Violence made by third person may also vitiate consent.

EXAMPLES:
 If X signs a document because every time he refuses he is hit by the butt of a gun which causes
blood to flow his head, there is violence because serious or irresistible force is employed to
wrest consent.
 If X signs the document because a gun is pointed at him by Y who threatens to kill him, the
intimidation would vitiate consent.
 If X was merely intimidated that he would be shot by Y and the latter had no gun at the time, the
there is no intimidation.
  Suppose X signs the contract because of a threat to the life of his brother, the threat amounts to
intimidation.

UNDUE INFLUENCE - Influence of a kind that so overpowers the mind of a party as to prevent him from
acting understandingly and voluntarily to do what he would have done if he had been left to exercise
freely his own judgement and discretion. If gained by kindness and affection or argument and
persuasion, the influence will not vitiate consent.

Examples:
1. Confidential, family and spirit.
2. Mental weakness
3. Ignorance
4. Financial distress of the person alleged to have been unduly influenced.

CAUSAL FRAUD – Fraud omitted by one party before or at the time of the perfection of contract. It may
be committed through insidious words or machinations or by concealment.

Requisites:
1. There must be misinterpretation or concealment of a material fact with knowledge of its falsity.
2. It must have been employed by only one of the contracting parties.
3. It must be in bad faith.
4. It must be serious.
5. It must induce the consent of the other.
6. It must allege and proved by clear and conducing evidence.

EXAMPLE: S offered to sell B a ring, claiming that the store on the ring is diamond. S knows that it is not
diamond but ordinary glass. If B buys the ring, relying on the truth of the representation of S, the sale
may be annulled on the ground of fraud.

Rules on Causal Fraud That Vitiate Consent:

 Usual exaggerations in trade are not in themselves fraudulent.
 A mere expression of opinion does not signify fraud, unless;
o made by an expert
o other contracting parties has relied on expert’s opinion
o the opinion turned out to be false
 Misinterpretation by a third person does not vitiate consent, unless such misinterpretation has
created substantial mistake and the same is mutual.
 Misinterpretation made in good faith is not fraudulent but may constitute error.
SIMULATION OF CONTRACT – act of deliberately deceiving others, by feigning or pretending by
agreement, the appearance of a contract which is non-existent or concealed.

Kind of Simulation:
1. Absolute – contract does not exist and the parties does not intend to be bound at all = VOID.
EXAMPLE: D is indebted to C. Upon learning that C is going to enforce his credit, D pretended to
sell his land to B, his father-in-law. D did not receive a single centavo for the transaction and he
continued in possession of the land as the contract was merely simulated or fictitious.
2. Relative – contract is different from their true agreement, if it does not prejudice a third person
or not contrary to law then the real agreement = VALID.
EXAMPLE: D and C entered into a contract of mortgage. But wanting to hide the mortgage, it
was made to appear in the form of a deed of sale. Consequently, if C is the mortgage but is
made to appear as the buyer and C sells the land to B, the latter will acquire ownership. D and C
are estopped from claiming that the real agreement entered into by them is a contract of
mortgage.

Object of a Contract
 The object of contract is its subject matter.
 The object of every contract is the obligation created.

Requisites of things as object of contract:

1. The thing must be within the commerce of men, that is, it can legally be the subject of
commercial transaction.
2. It must not be impossible, legally or physically.
3. It must not be inexistence or capable of coming into existence.
4. It must be determinate or determinate without the need of a new contract between the parties.

Requisites of services as object of contract:

1. The service must be within the commerce of men.
2. It must not be impossible, physically or legally.
3. It must be determinate or capable of being made determinate.

Rules on Object of a Contract

1. All rights may be object of a contract except;
a. outside the commerce of men – bridges, streets, air, sunlight, etc.
b. impossible, physically or legally – soil from Jupiter, construct building in one day, etc.
c. determinable things – all eggs in the basket, all canvas of rice in a bodega, etc.
d. future things – young animals not yet in existence, wine expected to produce, etc.
e. intransmissible rights – right to vote, parental rights, etc.
2. A contract concerning future inheritance is void except;
a. in case of donations by reason of marriage between future spouses with respect to their
future property to take effect, only in the event of death, to the extent laid down by law
in testamentary succession.
 b. in case of partition of property by act inter vivos by a person to take upon his death.
3. The object of every contract must be determinate as to its kind. The fact that the quantity is not
determinate shall not be an obstacle to the existence of contract provided it is possible to
determine the same, without the need of a new contract between the parties.

Cause of Contracts
 The essential reason or purpose which the contracting parties have in view the time of entering
into the contract.

EXAMPLE: S sells a watch to B for P10,000. As far as S is concerned, the subject matter or object is the
watch and the cause is the price. As regards to B, the subject matter or object is the price and the cause
is the watch.

Requisites:
1. It must exist at the time the contract is entered into.
2. It must be lawful.
3. It must be true or real.

Effect of absence of cause:

1. A contract which is absolutely simulated or fictitious is inexistent and void.
2. Where there is, in fact, no considerations the statement of one in the contract will not suffice.
3. Promises to make a gift or to render some gratuitous service in the future are not enforceable.

Rules on Cause of Contract:

1. Absence, failure, illegality and falsity of cause make the contract void.
2. Cause is not necessary expressly stated.
3. Lesion or inadequacy of cause does not itself invalidate a contract except;
a. when there has been fraud, mistake or undue influence.
b. in cases specified by law.
SAMPLE PROBLEMS
A. Analyze the following cases and answer the corresponding questions with justifications.

1. Tiro is a holder of an ordinary timber license issued by the Bureau of Forestry. He executed a
deed of assignment in favor of the Javiers. At the time the said deed of assignment was
executed, Tiro had a pending application for an additional forest concession. Hence, they
entered into another agreement. Afterwards, the Javiers, now acting as timber license holders
by virtue of the deed of assignment entered into a forest consolidation agreement with other
ordinary timber license holders. For failure of the Javiers to pay the balance due under the two
deeds of assignment, Tiro filed an action against them. Are the deeds of assignment null and
void for total absence of consideration and non‐fulfillment of the conditions?
2. Sarah sold to Bastille a commercial land for P1,000,000. Sarah assured Bastille that it is certain
that in two years time, the land would increase in market value by 50% or P1,500,000. It turned
out that the market value of the land even decreased to about P800,000. Is Sarah liable to
Bastille for misinterpretation?
3. Sensei sold to Berlin, hardware owner, are 500 bags of cement. Sensei had every reason to
believe that the price of cement would go down. After two weeks, it did go down. Has Berlin the
right to have the sale annulled?
4. Sam sold to Bruce for P100,000 a parcel of land belonging to Sam located in his hometown
without specifying its exact location and area. Is the sale valid?
Answer Key
A.

1. The contemporaneous and subsequent acts of Tiro and the Javiers reveal that the cause stated
in the first deed of assignment is false. It is settled that the previous and simultaneous and
subsequent acts of the parties are properly cognizable indicia of their true intention. Where the
parties to a contract have given it a practical construction by their conduct as by acts in partial
performance, such construction may be considered by the court in construing the contract,
determining its meaning and ascertaining the mutualss intention of the parties at the time of
contracting. The first deed of assignment is a relatively simulated contract which states a false
cause or consideration, or one where the parties conceal their true agreement. A contract with a
false consideration is not null and void per se. Under Article 1346 of the Civil Code, a relatively
simulated contract, 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.
2. It is natural tendency for merchants and traders to resort to exaggerations in their attempt to
make a sale at the highest price possible. When the person dealing with them had an
opportunity to know the facts, the usual exaggerations in trade are not in themselves
fraudulent.
3. A neglect or failure to communicate or disclose that which property to a contract knows and
ought to communicate constitutes concealment. In this case, concealment is equivalent to
misinterpretation or false representation. The injured party is entitled to rescind or annul the
contract whether the failure to disclose the material facts is intentional or unintentional as long
as there is duty to reveal them and the party misled or deceived in entering the contract.
4. The object of every contract must be determinate as to its kind. The fact that the quantity is not
determinate shall not be an obstacle to the existence of contract provided it is possible to
determine the same, without the need of a new contract between the parties.