Law on Obligations and Contract

Essential Elements of Contracts

Civil Code Art. 1318 – 1355

Three essential requisites of contracts:

 Consent
 Object
 Cause

 Essential elements of contract

o Essential elements
 Elements that are required in order for a contract to exist
o Natural elements
 Initially existing in some certain contracts
 Can be removed by parties
o Accidental elements
 Stipulations of the parties

Essential Elements (Art. 1318)

There is no contract unless the following requisites concur:

1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established

 There is no contracts
o Kapag wala ang isa

Consent

Requisites:
1. It must be manifested by the concurrence of the offer and acceptance (Arts. 1319 – 1326)
2. The contracting parties must possess the necessary legal capacity (Arts. 1327 – 1329)
3. It must be intelligent, free, spontaneous, and real (not vitiated) (Arts. 1330 – 1346)

 1. It must be manifested by the concurrence of the offer and acceptance (Arts. 1319 – 1326)
o Dapat may offer AT
o Acceptance ng offer
 2. The contracting parties must possess the necessary legal capacity (Arts. 1327 – 1329)
o May capacity to enter the contract
o Walang capacity
 Minors, usually
 3. It must be intelligent, free, spontaneous, and real (not vitiated) (Arts. 1330 – 1346)
o Voidable contracts – hindi muna detailed masyadon
o Different vices of consent

Consent

1. It must be manifested by the concurrence of the offer and acceptance (Arts. 1319 – 1326)
 Offer – a specific proposal to enter into an agreement with another.
 Acceptance – agreeing verbally or in writing to the terms of a contract, which is one of the requirements
to show there was a contract.
  Offer
o Agreement = contract
o Offer – proposal
 Initiated by one party to another
 To enter a contract
o Example:
 Offer na bilhin ang phone mo
 Nasa sa iyo kung ia-accept ang offer
 Unless magkakaroon ng acceptance – hindi magkakaroon ng consent
o Offer
 Initiated by other party
o Acceptance
 Done / accepted by the other party
 Thus, both parties, have a say
o on the perfection of the contract
o Or in gaining the consent
 Acceptance
o Agreeing
 verbally
 writing
o same as to offer
 contracts – can be written and verbally too
 some contracts – required na writing siya dapat

 Requisites
o Na offer ang offer
o At acceptance and isang acceptance

Offer
 Note: an offer must be intentional certain (Art. 1319 par. 1)
 Example:
o When offering to sell something, you should specify the object being sold.

 Offer
o Intentional
 Gustung mag-offer na isang party
 Deliberate
o Certain
 Ano ‘yng ofer?
 ‘Yung offer ba ay certain as to its necessarily information para readily ma-accept natin
 When offering to sell something, you should specify the object being sold.
o Aside from this, dapat certain as to amount or price
o Certain ka kung magkano mo siya gustong ibenta
o Paano iaaccept ni buer kung walang iaaccept na information si buyer?

Offer

Special cases of offers:

1. The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied
with (Art. 1321)
2. An offer made through an agent is accepted from the time acceptance is communicated to him (Art. 1322)
3. An offer becomes ineffective upon the death, civil interdiction, insanity or insolvency of either party before
acceptance is conveyed (Art. 1323)
 4. Advertisement for bidders are simple invitations to make offers. (Art. 1326)

 1321
o P’wede niyang i-specify kung paano iaaccept ng kabilang party ang kaniyang offer
o Kung hindi masusunod o susundin ng kabilang party doon sa manner ng acceptance na gusto niya
 May chance na hindi magkakaroon ng valid consent
 Kung walang consent, walang contract
o All of which must be complied with
 Kung ano ang manner of acceptance na gusto ng nag-offer, dapat sundin ng other party
 Kung hindi = walang valid consent | no consent = no contract
 1322
o Agent – extension of your personality, acts on your behalf
 Separate topic, law on sales
o An agent is accepted from the time acceptance is communicated to him (agent)
 General rule: in making an offer, ‘yung acceptance, is dapat i-communicate sa iyo na nag-offer
 Kung wala, walang consent
 Hindi ibig sabihin na nagoffer ka, inaaccept niya
o Pero hindi mo alam na ina-accept niya = hindi pa nagkakaroon ng consent
o No perfected contract
o Perfected contract = kapag nai-communicate na ang acceptance sa nag-offer
o EXCEMPTION
 Naginitiate ka ng offer using an agent
 It is sufficient na maicommunicate sa agent ang acceptance para magkaroon ng consent
 Exception to the general rule
 1323
o “Either” parties
o “Before” acceptance is conveyed
o Nag-offer si seller kay buyer
 Benta lupa , 1M
 Given enough day
 Seller – namatay, nang hindi naico-communicate ni buyer na inaaccept na, bibilhin niya na
 At that moment – before acceptance is conveyed
 VOID
 Ineffective na ang offer
 No chance to have consent
 Kasi patay na isang party
 NO CONTRACT
 1326
o Advertisement for bidders are simple invitations to make offers.

 Example:
Offer

Advertisement for bidders

 S sell a public auction a specific land. The starting bid is P1,000,000. A placed a P1,100,000 bid; B placed
P1,150,000; and C placed a P1,300,000.

 In this case, automatically ban a magkakaroon ng contract between S and C?

o NO
 In this case, may option pa rin si S na tanggihan si C
 Advertisement for bidders are simple invitations to make offers.
o Basically—hindi si S ang nago-offer
o Nag offeror ay si A, B, and C
 o Nakasalalay kay S kung kaninong offer ang tatanggapin
 Though, usually in auctions – granted to the highest bidder

Acceptance

Note:
1. An acceptance must be absolute (Art. 1319)
2. Communicated to the offeror (Art. 1319 par. 2 & 1322)
3. May be express/implied

 1319 - Absolute
o Inaccept MO lahat ng inooffer
 Basta hindi 100% - hindi absolute
 No consent = no perfected contract
 1319 – communicated to the offeror
o SHOULD be
o General rule
o Consent = kapag may communication na na inaccept
 Normally, usap, harap-harapan, communicated
 May consent
 Expressed or implied
o Expressed – expressly sinabi
o Implied – actions that implies acceptance
o Example:
 May nagbebenta ng saging
 Hindi ka umimik, pero kumuha ka na at kinain
o Through actions – acceptance of offer
o We have already a perfected sale in that case

Acceptance
 S offers B to sell his specific house and lot in Quezon City for P1,500,000. B accepted the offer but is only willing
to buy the land.
 Counter-offer

Acceptance must be absolute

 B accepted
o Only willing to buy the land
o Inaccept pero hindi lahat
 Still no consent pa = no contract pa
 Counter-offer (not-absolute acceptance)
o If okay lang kay S
o Counter-offer is accepted
 If counter-offer is accepted
 There is CONSENT = there is a perfected contract
 Counter-offer (not-absolute acceptance)
o Pwede pa iaccept ng offeror yung counter-offer
o Para magkaroong ng consent
Acceptance
How acceptance is communicated to offeror:
1. S, during an “in-person” conversation with B, offered B to sell his land for P1,000,000.
2. S, through letter, offered B to sell his land for P1,000,000.
 S sends a letter to offer on Jan. 1
 B receives the letter on Jan. 15
 B sends a letter of acceptance on Jan. 16
 S receives the letter of acceptance on Jan. 31

 In person
o Usually, immediately kapag in person, nag-uusap
o Immediately, once na i-accept, napupunta agad sa knowledge mo o naicocommunicate kaagad sa iyo ang
acceptance
o At that moment nagkakaroon ng acceptance at consent at that moment
o Not always, time that hindi agad=agad naicocommunicate kaagad ang acceptance
 2.
o Jan. 16
 Hindi pa
 Dapat mapunta sa knowledge ni offeror nan a-accept na ang kaniyang offer
o Jan, 31
 May consent na
 If okay ang cause at object = perfected contract
o What if, before Jan. 1, either S or B, nabaliw?
 Rule – before acceptance is conveyed, offer become ineffective
 No consent na = thus, contract
o Jan. 31 – receives knowledge that his offer is accepted by the oferree
 Perfected contract na

Promises in offer and acceptance

Promise Binding Perfected contract

Unilateral Promise
unaccepted No. None
Binding if promise is
 Unilateral Promise supported by
accepted consideration Option contract only
Binding contract of
promise to enter into
 Bilateral promise Yes an contract

 In contract – there were promises

 Unilateral promise UNACCEPTED

o Binding? NO.
  0%
o Perfected Contract
 No binding, walang mabubuong contract
 NONE
 Unilateral promise accepted – isang party nagpromise
o Binding?
 If promise is supported by a consideration
o Ano ang mape-perfect na contract?
 Option contract only
 Bilateral promise – both parties, made a promise to each other
o Binding? YES
 Without the need for consideration—YES
o Perfected contract
 Contract of promise to enter into an contract

Promises in offer and acceptance

 S offers to sell his land to B for P1,000,000. B refused. However, S still insist that he is willing to give B thirty
(30) days to decide. However, B still refuse. Again, S still stand with his promise.
 Policitacion

Unilateral promise unaccepted

 S offers
o B refused
 S still insist that he is willing to give B thirty (30) days to decide
o THIS IS A PROMISE
 B refused – UNACCEPTANCE
o S still stand with his promise
 Nandiyan pa rin
 Kung gusto bilhin, ghost
 POLICITACION
o Aka
o No instance of binding
 No parties have been bind
 No commitment
 No contract
 Promise hindi inaccept
o After 15 days, sabi ni B, bilhin niya n a
o Hindi pdeng ma-bind
o ‘yung promise hindi inaccept ng other party

Promises in offer and acceptance

 S offers to sell his land to B for P1,000,000. B refused. However, S still insist that he is willing to give B 30 days
to decide. B accepted the promise.
 Unilateral Promise Accepted

Unilateral promise accepted

 Difference: B accepted the promise
 Q.: Within 30 days, magiging binding ba itong unilateral promise?
o NO
o Binding if the promise is supported by consideration
o In this case, walang consideration
 >>>
 o Example, within 30 days
o B, “nasaan na ang lupa?”
o S, hindi na willing na ibenta
o P’wede bang i-compel ni B si S dahil nag-promise si S?
 NO
 Hindi p’wedeng i-compel
 IT IS not supported by a consideration
 Consideration
o Option money

Promises in offer and acceptance

 S offers to sell his land to B for P1,000,000. B refused. However, S still insist that he is willing to give B thirty
(30) days to decide. B accepted the promise and gave S P1,000 as option money.
 Unilateral Promise Accepted

Unilateral Promise Accepted

 Difference: may option money
o May valuable consideration that will support the money
 Maba-bind ba si S sa kaniyang promise?
o YES
o May option money to support the money
 Contract
o May mabubuo – not contract of sale
o OPTION contract
 B – may option whether to purchase the said land within 30 days
 Kapag nag-lapse na ang 30 days
 Mawawala na ang kaniyang right doon sa option contract
 Check first if may consideration

Promises in offer and acceptance

 S promised to sell his land to B for P1,000,000 after 1 month. Likewise, B promise to buy S’ land for P1,000,000
after 1 month.
 Bilateral Promise

Bilateral Promise
 Bothe have a promise
o To purchase
o To buy
 Bilateral
o BINDING
o YES
 Without the need of valuable consideration
 Thus, converts to perfected contract
 Perfected contract (not contract of sale)
o Contract
o Binding contract
 That will bind them to sell the property in the future (1 month)
 Contract na contract to make a sale
o May perfected contract na—bound na sila sa kanilang promises

Consent
 2. The contracting parties must possess the necessary legal capacity (Arts. 1327 – 1329)
 Two (2) kinds of incapacity
i. Absolute incapacity
ii. Relative incapacity

 Capacitated
o P’wede siyang pumasok sa isang contract
 Incapacitated
o Hindi p’wedeng mag-enter sa isang contract

Consent

Absolutely incapacitated [VOIDABLE]

1. Unemancipated minors
a. Except for contracts involving necessary
b. Where minor misrepresented his age
2. Insane of demented person
a. Lucid interval
3. Deaf-muted who do not know how to write

Absolutely incapacity
 Person that are incapacitated to enter ANY kind of contracts—GENERALLY (may exceptions)

 Minors
o Kahit ano in general
o Exception
 Ex.: bumili ng pagkain, damit, needs
 Contract is binding
 Involves necessary
 Misrepresented his age
 Nagloko – binds him into the contract
 Estoppel
 As if may capacity to enter a contract, but in reality hindi pala
 Liable – kasi hindi known sa isang party
 Insane or demented
o Alzheimer
o Exceptions: LUCID INTERVAL
 Time na ‘yung baliw, nasa katinuan
 Matino ang pag-iisip at that moment/time
 Deaf-muted who DO NOT KNOW HOW TO WRITE
o Very specific

Consent

Relatively incapacitated [VOID]

1. Those under Civil interdiction for transaction inter vivos (RPC Art. 24)
2. Undischarged insovents (Insolvency Law, Sec. 24)
3. Husband and wife: cannot donate (Art. 123 FC) to each other, nor sell if the marriage is under ACP (Art. 1490)

Relative incapacity
  Persons who are generally capacitated to enter a contract
 However, they are not capacitated to enter CERTAIN contracts

 Civil interdiction for transaction

 Undischarged insolvents – mga may utang
 Husband and wife –
o Nagpakasal, generally capacitated to enter contracts
o However, in some certain contracts
 I.e., contract of donation between each other
 HINDI P’WEDE
 So incapacitated with this contract lang

 DIFFERENCE absolute / relative

o Absolute
 Kapag pumasok sa contract ang isang absolutely incapacitated person
 Status ng contract is: VOIDABLE contract
o Relative
 Kapag pumasok sa contract ang isang relatively incapacitated person
 Status ng contract is: VOID contract
 Totally/immediately void?

Consent

3. It must be intelligent, free, spontaneous, and real [not vitiated] (Arts. 1330-1346)
 Vices of consent
i. Violence
ii. Intimidation
iii. Mistake
iv. Fraud
v. Undue Influence

 Vices of contract
o Doesn’t necessarily hinders the perfection of the contract
o Mape-perfect pa rin ang contract in the presence of these vices
o STATUS of the contract – VOIDABLE
 Can be invalidated
 Violence
o May physical force
o Sinuntok, binugbog, sinampal – cause kaya napapirma sa contract
 Intimidation
o No physical force
o Though may pagbabanta
 Sa iyo
 Sa mga kamag-anak mo
 Sa properties mo
 Mistake
o Substantial dapat
o ‘kung sanang alam mong may mistake, hindi mo papasukan iyong kontrata siguro’
o Mistake that will vitiate constent
 Will make the status of the contract VOIDABLE
 Fraud
 o Fraud in obtaining consent
o Fraud during the performance of the obligation
 Undue Influence
o Teacher binentahan ka ng ganito, nahihiya ka, undue influence
o Can be a ground to the annulment of the contract

Object vs. Cause

 Contract of Sale
o S sell his land to B for P1,000,000.
 Contract of lease
o S leases his land to B for P10,000 per year.

Object and Cause

 Cause
o Depends on the perspective
 Object – can be prestation or subject mater

 Contract of sale
o Object – land
o Cause –
 S – price of the land (cause for entering of the contract)
 B – delivery of the land (cause for entering of the contract)
 Contract of lease
o Object – land
o Cause –
 S – as a leasor, the yearly rent of 10,000
 B – the right to use the land (limited to use)

Object
1. Lawful: Not contrary to law, morals, good customs, public order of public policy
2. Actual or possible
3. Transmissible: Within the commerce of man
4. Determinate or determinable

 Lawful
o Not contrary to unlawful things
o Unlawful, example: sale of shabu, organs, fetus (contrary to law, morals, etc.)
 Actual or possible
o Object is stars in the sky – NOT POSSILE
 Transmissible: within the commerce of man
o Object – your right to vote during elections
o Personal, not transmissible
 Determinate or determinable
o Not generic
o Must be determinate or capable or being made determinate

Object
 Future inheritance:
o X is the son of Y. while Y is still alive, X sold his inheritance to Z. [VOID]
  Special case: future inheritance
o Can this be an object of a contract? NO
 X is the son of Y. while Y is still alive, X sold his inheritance to Z. [VOID]
o Contract of sale between X and Z – nonexistent, not valid
o Because: the object is future inheritance
 Paano masasabing future inheritance?
o Y is still alive – future inheritance
o Kapag namatay – hindi na future inheritance
o Can be an object of contract na

Cause
Onerous Gratuitous Remuneratory
As to each of the
contracting parties is
understood to be the
undertaking or the
promise of the thing The service or
or service by the Mere liberality of the benefit which
other party. benefactor. remunerated.

Cause
 Depending to the type of contract

 Onerous
o Usually, each parties receive valuable consideration
o Ex.
 Contract of sale
 S – the price of the thing
 B – promise of the thing, the delivery
 Gratuitous
o Kabilang party – walangng igi-give up
o Cause: pure liberality/generosity of the donor
 Remuneratory
o Services or benefit already acquired
o Ex. Contract of employment
 If the employees have already rendered their services
 That is the cause kung bakit magbibigay or magpapasahod

Cause
1. Existing
2. Lawful
3. True

Requisites
 Existing
o Actual existence
 Lawful
 True
o True, not false
o Kung ano ang nabanggit sa contract, it is actually the true cause in the contract
  Existing and true
o Almost synonymous

 Example
o X will deliver sugar to Y. Cause, nagbayad si Y ng P100 per kilo.
 Cause: dapat nag-eexist, nakapagbayad si Y kay X
 If hindi, the cause is not existing
 If it is not existing, there is no cause
 No cause = no perfected contract
 Lawful
 If kapalit is shabu, mistress, anything illegal
 No perfected contract
 True
 Referring to the statement in the contract.
 Example: X will deliver sugar to Y.
 Y will give rice.
o Stated cause is not true
o Contract of sale, will be invalidated
o It will be converted into a contract of barter

Cause
 Cause vs. Motive
o X buys a gun from an arms dealer and procured the necessary permit.

Motive
 Motibo

 X buys a gun from an arms dealer and procured the necessary permit.
o Personal reason: assassination
 Motive
o Motive
 Does not affect the status of the contract
 Doesn’t matter if the motive is illegal
o Cause
 Still lawful
 Permit
 Arms dealer – legal

 Cause
o Known by both parties
 Motive
o Known by one party only (who has the motive)
o DOES NOT affect the validity of the contract
o NOT AN essential requisite of a contract but IS a part of the contract