Essential elements - Those without which there will be no contract a. Conseni of the contracting parties. b. Object certain which is the subject matter of the contract. _ Cause of the obligation which must be established. (art. 1318) — a \Naturalelements; - Those found in certain contracts unless set aside or suppressed by the parties (such as warranty against eviction and warranty against hidden defects in a contract of sale). (Art. 1547) ents - Those that refer to particular stipulations of the parties (such as terms of payment, interest rate, place of payment). : ‘Aeeording to perfection or formation i - a jal"! Those that are perfected by mere “consent (such as sale and lease). b eee that are perfected by the delivery of ‘of the contract (such as depositum, pledge, and commodatum). (Art. 1316). © ‘RermalGr"solémn’= Those which must be in the form provided by law for their perfection (such as the donation of an immovable which, together withCON’ 194 the acceptance by the danee must Pe ig instrument (o be valid). 2. According to cause — a, Onerous - Those where valuable considerations For each contracting | prestation or the promise the other. (Art. 1350) b. _ Gratutitous or lucrative - Those Where one receives no equivalent consideration (such donation and commodatum). These contracts referred to as contracts of pure beneficence, cause of which is the liberality of the ben (Art. 1350) c. Remuneratory - Those where the cause is service or benefit remunerated. (Art. 1350) 3. Recording to importance, or dependence “of he up a. Principal - One that can stand by itself sale, loan). er ae there is an exchange (such as sale and party, the cause is of athing or service b. Accessory - One whose existence depends | ee contract (such as pledge or mot which is dependent upon a princi neni pon a principal contract c. Preparatory - One which serves as a means which other contracts may be i ent agency and partnership). Ms tered ine a ‘*\ -Aecording to name’ of designation | a. Nominate ~ Those which ha d which hi law (such as sale, loan Bs a Sal under b. —_Innominate — si Those without any name under law. Authorities i law. 4 ies in. Civil f innominate cotta Law, list the following 1) Do ut des (I gi , (give that you may give) * Do ut facias (I give that you may do)cts beneficenc, 7 the benes;, | I€ Cause i; t. 1350) Of he uy itself (such 1 contract s# is a means d into (su ame und’ ame ul he follo” ay 195 3) Facio ut des (I do that you may give) 4) Facio ut facias (I do that you may do) “This may actually be barter, hence, a nominate contract. (See Art. 1636,) Rules that govern innominate contracts 1) The stipulations of the parties; 2) The provisions of Obligations and Contracts; 3) The rules governing the most analogous nominate contracts; and 4) The customs of the place. (Art. 1307) According to risk or fulfillment a. Commutative - Those where the parties give equivalent values (such as sale and barter); hence, there is real fulfillment. Aleatory - Those whose fulfillment depends upon chance (such as an insurance contract). According to the parties obligated Unilateral - Those where only one of the parties is obligated to give or do something (such as commodatum and gratuitous deposit). Bilateral (or synalagmatic) - Those where both parties are required to give or do something (such as sale and barter). They may be reciprocal or non-reciprocal. According to subject matter Contracts involving things (such as sale or barter). Contracts involving rights or credits (such as usufruct or assignment of credits). Contracts involving services (such as agency or lease of service). According to the time of fulfillmentCONTRag * ay hn has been performed, hic! cuted One has not yet been perfoy ae ne that o grecutory ~ 0 b. Other classifications nly one person reprege; ~ Where 0 Auto-contrac i to the contract (such , osite parties contract a na een lends money to his principal wh when ie represents as borrower). sion ~ Where only one 4 Sanat tbe ae (such as insurance). It is so-called because ies a a prepared by only one party, Di. a te merely affixes his er ee Coe ri vs. People, G.R. i Cente a 2008) A contract of adhesion gh no room for negotiation and deprives the latter opportunity to bargain on equal footing. presupposes that the party adhering to contract is a weaker party. (Saludo, Jr,, Security Bank Corporation, G.R. No. 1 a. is reduced to the alternative to take it or to leave Thus, contracts of adhesion are viewed as traps ft the weaker party whom the courts of justice mu protect. (ACI Philippines, Inc. vs. Coquia, G.RN 174466, July 14, 2008) q Stages of a contract 1 ne involves prelimin i 7 ‘Scussion of terms » with no Negotiation arrivell ye i t of defini en ¢ begins from the 4:7, “elinite agreemél seattacting parti mai : time the prospect and ends y es manifest th prospt eir ing 7 fk 2 the moment of their terest in the cof Petfection or birth i eee meeting of min ‘hi iS is the po; a ds bet) ‘¢ point when there matter and valid cane the parties on a definite cull ation or ¢ Parties fui Consumm, when th ath or’ tern’ : Mil oF perigernation — ‘This ocd the terms agreed up ‘WE mpor NBE> srPen.Son», _ crs PeHTOrM «4 tt been Perfo, in the contract, culminating in the extinguishment thy thereof, (See Navarra vs. Planters Development Bank, G.R. No, 172674, July 12, 2007; XYST Corporation vs. DMC Person ,, Urban Properties Development, Inc., G.R. No. 171968, contrac, Pf Sly 31, 2009.) Be Principay principles of contract Liberty of contract or freedom to stipulate The contracting parties may establish such stipulations, clauses, terms and conditions as they may Beoty one Urance), ° % e its . terms deem convenient, provided they are not contrary to law, / i the othe; »' Sora, geod customs, public order or public policy. (Art. | fing his aj," 1306) ; es No. 1744 The freedom to enter into a contract is, one of the Of adhesion », fives the latte; qual footing liberties guaranteed by the State subject only to the five limitations. (People vs. Pomar, 46 Phil 440) The following are some stipulations that have been held to be void: adhering to ‘The stipulation that the creditor automatically (Saludo, J. becomes the owner of the property pledged or AR. No. 18404 t mortgaged if the debtor defaults in his payment. rty’s participati (Declaro vs. Alpha Insurance, 58564-R, June 16, ke it or to jewed as tra) ts of justic Coquia, C 1978) Such stipulation, known as pactum commissorium, is void for being contrary to law. (Art, 2088) A stipulation in a mortgage contract providing for a p specified price (known as “tipo” or upset. price) below which the mortgaged property is not Supposed to be sold at the foreclosure sale is void ? for being contrary to law. (Warner, Barnes and Co. a os vs, Jaucian, 13 Phil 4) z Bite agret © An agreement to pay an unconscionable rate of | the pros! _ interest is void for being contrary to morals. t in the ~ (Spouses Albos vs. Spouses Embisan, G.R. No. E a 210831, November 26, 2014, and various cases.) -, ‘An agreement by the debtor to work without pay : pent” ~ until he could find money to pay the debt is void r a defini! ‘ for being contrary to morals as this amounts to involuntary servitude, (Delos Reyes vs. Alojado, 16 3 Phil, 499) i ea. if os cont; as to wy ponent 198 crime, Pp it hide 7. prosecution of toe greement 10 a the Pp! : to to public pg di * idence and being contrary sea is un Stender is void for 33 Phil 476; Arroyo vs. Be any ché (Hibberd vs. ‘ otherwi 36 Phil 386) contrac j : tracts ; interes! Mutuality of con! bind both contracting par Ce resp The contract must OO pe left to the will of on PE its validity or compliance Wer thea. Ut. 1508) effect of a contract on both : Pe igeieitications acini bp. ‘Deter esopidoaph c Pe Ee fetween the cond ae tay between thal heer essentially on their equality under which it is repugr haeiy have one party bound by the contract while leaving Syn other free therefrom. The ultimate purpose is to pirat void a contract containing a condition which ma ‘termi fulfillment dependent solely upon the uncontrolled ; evident! one of the contracting parties. (Manila Interna‘ shall c Airport Authority vs, Ding Velayo Sports Center, Ine. 6 circums No, 161718, December 14, 2011) Thus, if the fulfill of the suspensive condition of an obligation depends uj Relativity of cor the sole will of the debtor, the obligation and the cond : are void (See Art. 1182.) since compliance is depen . Contrac contrars' jtlone. Also, after a party has entered i their obligations are e: re Any contract w! in favor of one unconscionable hich appears of the parti or the Monet Philippines,” Unrestrain than that Stipulation S Not give th itor freedom eg © credit ‘© charge any rate 9 Which was $ agreed upon. Sranting the creditor ank to ® =pacts 199 monthly upward/downward adjustment of interest rate violates the essence of mutuality of contract. (Floirendo, Jr. vs. Metrobank, G. R. No. 148325, September 3, 2007) In loan contracts, the interest is undeniably always a vital component, so that any change thereof must be mutually agreed upon; otherwise, it produces no binding effect. x x x A contracting party’s assent to the modifications in interest rates cannot be implied from his/her lack of response to the means sent by the other party. (Philippine Savings Bank vs, Sps. Castillo, G.R. No. 193178, May 30, 2011) b, _ Determination of performance by a third person The determination of the performance may be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties. (Art. 1309) However, such determination shall not be obligatory if it is evidently inequitable. In such a case, the courts shall decide what is equitable under the circumstances. (Art. 1310) Relativity of contracts Contracts take ‘effect only between the parties, their assigns and heirs, except where the rights and obligations are not transmissible: a by law, b. by stipulation, or = by nature. (Art. 1311) Note: With respect to the heir, he shall not be liable ved from the Beyond the value of the pror decedent. (Art. 1311) rty he 1 Mlustrative case Lienado vs. Lienado G.R. No. 145736, March 4, 2009 Facts: 0, the owner of a lot, leased it to T for a Period of 6 years and 9 months. ‘The lease contract Provides that T, the tenant, shall have the option to ren:rights heirs of Held: Yes missible to the trans! involves does not © rights and obligations pass to and heirs of the deceased lessor period of the lease. option to renew the le renew a lease are not personal Consequently, the successor entitled to the benefits, ¥ burdened with the duties and obligations, which covenants conferred and imposed on the original parties When a contract may be enforced by or against a th § person a. ( b. the lease few mon' to enjoy 9 jon of the lease. T qj the expiration © dig nai expiration of the lease. Arg on or befor and to renew it transmitted to. ‘ths before ¢ the lease A contract of lease is gen heirs of the lessor oi Be lessee, a property right and, as such, the death of a P -performance of the contract, xcuse non peter the heirs of the de are bound to respect ‘The same principle applies to ase. As a general rule, covenantsj but will run with the lang interest of the lessee while that of the lessor Where there is a stipulation in the contract ff clearly and deliberately confers a favor upd third person (stipulation pour autrui). Such th person may demand its fulfillment provided he eas his acceptance to the obligor befe ee (Art. 1311) A mere incidet interest of a person is not sufficient. hird person j ract, ‘8On ij held liable te wi case, yet’ another to violate Party. (Art. 13,48™geS by third person may " the other contra201 CONTR act Example: D has a contract for 5 years se. T digit with XYZ Broadcasting Company. During the se. second year of the contract, RST Radio Company, mitted to with knowledge of the existing contract between D and XYZ, induced D to sign a contract as radio is_gen talent of RST. XYZ may sue RST (and also D) for e lessee. damages under the contract between D and XYZ th of a although RST is not a party thereto, ontract, ‘ he decea ; _ Incontracts creating real rights, third persons who respect th come into possession of the object of the contract plies to 4 are bound thereby, subject to the Provisions of the ovenants, Mortgage Law and the Land Registration laws. (Art. th the la 1312) ae Example: D obtained a Joan of which il P200,000-00 from C. The toan is secured by a al pari mortgage of D’s lot, which C recorded with the Register of Deeds. Later, D sold the lot to X who was not aware of the mortgage. When D could not pay the loan on due date, C foreclosed the nitract mortgage on the lot. Here, X would be bound by the mortgage although he was not a party thereto because the mortgage created a real right in favor nied a ofC. This is true even if X was not aware of it ligor | Since the registration of the mortgage operates as a ‘cient hotice to the whole world of the existence thereof. in from: In contracts intended to defraud creditors, the law ties agt Ses them protection. (Art. 1313) This is true if of 1% the ‘third person acted in bad faith. (See Art. princip 1388,) cca Example: _D owed C P100,000.00. "fo he conti Eee ©, D sold his only lot to X who knew of D's receive saudulent intent, ie., in bad faith. Here, C may " inf the rescission of the sale between DandX » violate Although he was Not a party to it. son J “Maly of contract Sig Gomtracts are perfected by mere consent (Art PY wig. the following contrac’s which need to BSAditional requirementsS Conny Sh on the e deposit, tipula real contracts such as deposit, picay, as stipul ‘emmodatum, which are perfected ups als? ie. require delivery of the object of the obligation. (art 194 of plete In formal or solemn contracts, which are reg e to be in the form provided by law, to be per TIA such as the donation of an immovable which pSSE! be in a public instrument together with acceptance thereof (Art. 749); otherwises contract is void. Consen Obligatory force of contract and compliance in 00d fail at, meaning Obligations arising from contracts shall have force of law between the contracting parties and sho complied with in good faith. (Art. 1159) Upon perfection of the contract, the parties are bound to following: Consent is the the acceptance U itute the contract on offer a. The fulfillment of what has been exp iracioitae tian stipulated. be no meeting b. All the consequences which, according to must be “defin nature, may be in keeping with good faith, i Co., Ltd. vs. Yu and law. (Art. 1315) niuieeit Example: ‘0B without de On June 1, S and B entered into a contract df ca is not cert; involving the horse of S for P10,000.00. The terms lature contract provide that $ must deliver the horse on Juni < @/ @dlver while B must pay the price on June 25. In the pla Busines, and B, it is the usage that when one sells a horse, he definite Place a horseshoe on its hooves, However, this # offer uni Stated in the contract. To what consequences af parties bound? "Tor. = Answer: S§ must deliver the horse on lot wae Stipulated. Before delivery, he must take care of 'M@ whigie with the diligence of a good father of a family «ih an Offer” heey! stipulated because this is provided by Ia! 200 5.” feeping with good faith. He must place a horsesh™ Street” hooves of the hor ? although this was not also 54 ca, = 1 Poccuse\the eamelie required by the cage 0! an 4 where they re: Re hall the 4 reside. ™;‘On the other hand, D must pay the June 25 E price on June ee aor © must pay the whole amount because requirement oj law that payment must be complete. ESSENTIAL REQUISITES OF CONTRACTS | ___ Consent of the Contracting Parties , meaning it is the manifestation of the meeting of the offer acceptance upon the thing and the cause which are to the contract. (Art. 1319) “The offer must be certain (Art. 1319) because there could ‘be no meeting of minds if it is vague or not definite, It be “definite, complete and intentional.” (Korean Air Ltd. vs. Yuson, G.R. No. 170369, June 16, 2010) Thus, if S, who has several lots, offers to sell his lot to B without designating which of the lots he is selling, the is not certain. Nature of advertisements Business advertisements of things for sale are not definite offers, but mere invitations to make an offer unless it appears otherwise. (Art. 1325) Examples: (1) An advertisement reads: “For sale: residential house on a 200 square mieter Jot at Green Valley Village for P3M. Call 723-4567" This is not an offer but a mere invitation to make an offer. (2) “For sale: 3 bedroom bungalow on a 200 square meter lot located at No. 123 Molave Street, Bgy. Mayamoi, Antipolo City, for P2M fash.” This is a definite offer because it contains all the mat!«rs required of a contract, x bidders ar’ ‘nerely invitations rd the advertiser is not boundSON J lowest bidde to accept the highest or Pa contrary appears. (Art. 1326) * offer becomes ineffective upon the dear, iabriictiany anally of Jneolvehcy at either party acceptance is conveyed. (Art. 1323) 4 When the offerer has allowed the offeree a certain, to accept, the offer may be withdrawn at any time j] acceptance by communicating such withdraw) when the option is founded upon a Considerati something paid or promised. (Art. 1324) Option, concept Option is a contract whereby the offeror gia offeree a certain period within which to buy or not, @ certain object for a fixed price. It may or may not, a valuable consideration. Right of the offeror to withdraw the offer a. If there is no consideration for the option offerer may withdraw the offer at anytime the option period provided there has not any acceptance. b. If there is a consideration, the offerer may withdraw the offer before the lapse of the 74 agreed upon.) (Tuason vs. Del Rosario-Suart2 No. 168325, December 8, 2010). Otherwi will be liable for damages to the offeree for of contract. Note: In both cases, the option is extinguished U4 lapse of the period, unless in the meantime, th has accepted the offer, S promised to sell his , B 30 days to decide. B ac") Promise. |S May Withdraw his promise even lapse of the 30-day period by informing } ° withdrawal However tt 8 had given to S opti Say, P1,000.00, S cannot withdraw the off¢t Plion period because the opti? was founded upon a considerationConn, idder, the death, ther party’, @ certain | Any time jn thdrawaj .. Ponsideration offeror gives my OT not to the option, - anytime 1as not yet offerer may se of the srio-Suared, Otherwists fferee for on acceptance qhe acceptance must be absolute. (Art. 1319). If the piance varies the offer, there is no contract since there is no meeting of minds, a ‘If the acceptance is qualified, it constitutes a counter-offer; (Art. 1319) and has the effect of rejecting the offer. (XYST Corporation vs. DMC Urban Properties Development, Inc., supra) Example: S offers to sell his car for P100,000.00 to B. B accepts the offer but is willing to pay the price of P95,000.60 only. The acceptance made by B is a qualified acceptance which constitutes a counter-offer. Accordingly, no contract is perfected. However, If S accepts the counter-offer, then there will be a perfected contract at the price of P95,000.00. b If the offer fixes the time, place and manner of acceptance, all must be complied with. (Art. 1321) Otherwise, there will no meeting of minds. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract in such a case is presumed to have been entered into the place where the offer was made. (Art. 1319) The second sentence is important because a contract is governed by the law of the place where it was entered into. Acceptance may be express or implied. (Art. 1320) i i rally or “in The acceptance is express if made o Writing. It is implied if it can be inferred from the conduct of the parties. i toB Thus, if S offers to sell a kilo of his mangoes to See ae Taran et and begins to eat one an Blind B ie dcemed to have impliedly accepted the offer of s, =¢ s Cs ae +NCONTRA : m. the h an agent is 66 pted from the ser nade enroush Tae nee “4 4 an 0 unicated a he + is binding hu aithough the i aithang his, is 80. becee to Melon of the personally extemyance by the agent is 4 principal. » agent is merely a, of the principal. Therefg icemed an acceptance by be Rules on consent cy» he capa anata onsent to @ contra 1 Th yarties . ae following cannot give © contract. The a. Unemancipated minors by Emancipation _ place by attainment of the age of majority which is eight years. (Art. 234, Family Code, as amended) b. __ Insane or demented persons However, contracts entered into di lucid intervals are valid. (Art. 1328) Lucid int refers to the period of temporary sanity of insane person. ©. Deaf-mutes who do not know how te write. A contract entered into by the above-ni incapacitated persons is voidable. (Art. 1300) He when both parties are incapable of giving \ naa contract, the contract is unenforceable. (Art. 1403) The incapacity afor i 1 ementioned i i modifications determined by law, ae ‘cane without prejudice to speci in the laws, (See art. 1399, “Sd¥Alifcations establ Thus, an j + Teasonable price fo sePacitated — per; im. The me for food and Sie ne pay and, a person marsala saries (See Art. 14 ae ee Art. 1409.) On the tee esPacitated but ie decal Wite pitch as in the caseldll 8 a general rule407 4 te sell to each other (Art 1490) or donate to en Art, 8F, Family Code) agreed’ (© In @ state of drunkenness or during @ acts Semone spell are voidable, (Art, 128) ‘Thia fe #0 pemee consent given in wuch state Ox not freely and e Senay HEN Eq contract where consent is given through miatake, “sence, intimidation, undue influence, or fraud is Maan. (Att, 1830) These five are referred to as the qquses that vitiate consent or the vices of consent, a Mistake » When mistake will invalidate consent a) Wf the mistake refers to the substance of the thing which is the object of the contract, (Art, 1331) Example: If B bought a lot on which he wanted to construct a factory believing that it was situated in an industrial area, he can have the contract annulled if the lot was actually situated in a residential area bd) If the mistake refers to those conditions which have principally moved one or both parties to enter into the contract. (Art. 1331) Example: $ sold his car to B for P100,000.00 cash because “he j needed the money to settle a debt. The deed of sale signed by him showed, however, that the price would be paid in 4 equal installments. S can have the sale annulled because of a mistake as to / the condition of the contract. ©) If the mistake refers to the identity or qualifications of one of the parties if such identity or qualificationscol nthe pe cau pee! 331 have etd contract: ae D donated a Exal ; Cc was pelieving ae found out la illegitimate ** + C was not his n was material to ae fers to th mistake refers fo the oe an agreement when the) purpose of the parties is frustr and the same is‘mutual. (Art. 13 This refers to mistake 9 which does not generally consent because of the rule ignorance of the law excuses no from compliance the: However, the contract shall voidable if the mistake as to legal effect of the agreemen mutual and frustrates the Purpose of the parties Example: § and ; 5 8 oe & contract of sale with a ct ing Gere, at ates € same effect - of loan 3) oan P tl jc doe: bie “S NOt vitiate consent3) ) P5,678.00, the mistake 10 computation will not render the contract voidable but will only: be corrected, b) If the party alleging it knew the doubt, contingency or risk affecting the object of the contract. (Art. 1333) Thus, if B buys a brand new car stereo for P500,00 when. he knows that the price of one is P5,000.00, he cannot allege mistake if the car stereo later turns out to have been stolen. The fact that the car stereo was offered to him at a very low price should have put him on guard that it might have come from an illegal source. Rule when one party is unable to read or does not understand the language of the contract If mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. (Art. 1332) This is an exception to the rule that he who alleges fraud or mistake must prove the same. Violence or physical coercion When violence vitiates consent There is violence when in order to wrest consent, serious or irresistible force is employed. (Art. 1335) This is true although it may have been employed by a third person who did not take part in the contract. (Art. 1336) ‘ Example: S signed a deed of sale of his land to B because B twisted and threatened to break his arm if he refused to PET = pees A V4 of h \210 sign, Consent here i# Biven becall violence ation or moral coercion Intimide jates consent ly When intimidation viti ’ ‘there is intimidation nae ; 5 ting parties is Co) le th ae rrell-grounded fear of. imminent and grave evil upon his per property, or upon the person or prop his spouse, descendants or ascendant give his consent. (Art. 1335) intimidation exists although it may been employed by a third person who not take part in the contract. (Art. 1336) Example: In the example above, signed the deed of sale because B point gun on his head and threatened to him if he did not sign the deed of consent here is given by reason intimidation. There is likewise intimid if B threatened to burn the house of S$} shoot S’s spouse, parent or child, if $ not sign the deed of sale. 2) Factors to be considered in determining degree of intimidation a) age, b) sex, and °) condition of the person. (Art. 138 3) When no intimidation exists ea No intimidation exists in case i ae enforce one’s claim thrd leat (ant authority, if the claim is jul fal. (Art, 1335) C threatened to sué Pay his debt to him. , afrall » thus made a dacion en debt. Here me his lot to c to scttlé ere, the Contract (dacion en pa 4 2) CmeeaoorrteyuyD ee ee a eeail not voidable as there is no intimlgaHer when one seeks the aid of the courts to enforce his rights. undue influence 1) When undue influence vitiates consent There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. (Art. 1337) For it to be present, the influence exerted must have 80 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. (Naranja vs. Court of Appeals, G.R. No. 160132, April 17, 2009) Example: If a church minister improperly takes advantage of his power over a member of his congregation who regularly confides in him by persistently telling the member to sell his property to him, the contract if entered into will be voidable at the instance of the member on the ground of undue influence. 2) Factors to be considered in determining the existence of undue influence: a) Confidential, family, spiritual and other relations of the parties, b) Mental weakness, ¢) Ignorance, or d) Financial distress of the person alleged to have been unduly influenced. (Art. 1337) ly When fraud exists (dolo causante) a) When, through the insidious words or machinations of one of the212 2) b) Requisites t Teason of fraud a) ‘ rties, the oth contracting Per into a cong is a without them, he would which greed to. (Art. 1338) fad here is active fraud. Examples: i, S induoed a ring whic! claimed ae pure gold. Howevep, knew all along that the ring only gold-plated. B can have contract annulled on the ground fraud. When there is a failure to dise| facts, when there is a duty to them, as when the parties bound by confidential relati (Art. 1339) The fraud here is passit fraud. Example: A and B partners in a real estate busin During the existence of ff partnership, A met X who told that he was interested in buying large tract of land. A did not infol B about X’s proposal. Instead, persuaded B to sell his-share in Partnership to him. After A be the sole owner of the business, sold real Property to X realizing huge profit. The contract betweefl and B for the sale of B’s interest Vodable on the ground of frauds Was duty bound to disclose Proposal of x Partners, they; ; ‘Y are b by @ and confidence. ound by © make a contract voidable Tl ‘he fraud should be serious 3) b) whe a) b)b) 213 Incidental fraud only obliges the person employing it to pay damages. The fraud should not have been employed by both — contracting parties, (1344) If both parties employed fraud, the bad faith of one will negate the bad faith of the other. ‘The law will consider both of them in good faith; hence, the contract will be valid. When no fraud exists a) In case of the usual exaggerations in trade, when the other party had an opportunity to know the facts. (Art. 1340) This is to give allowance to dealer’s talk or sales talk such as “The liquid soap that can wash a thousand plates” or “The fuel that can give you the extra mile.” In case of a mere expression of an opinion, unless made by an expert and the other party has relied on the former's special knowledge. (Art. 1341) Example: S, a farmer, who knows nothing about gems, tells B that in his (S’s) opinion, his ring is embellished with diamond and that he is selling it. 6 buys the ring believing that the ring is adorned with diamond. Later, he discovers that the gemstone is really emerald ‘There is no misrepresentation here because $ is not an expert in gems However, B can have the contract 4pnulled on the ground of mistake. But if S is a gemologist (an expert ind) gems), B can annul the contr the ground of fraud. In case of misrepresentation ” third person, unless misrepresentation has er substantial mistake and the mutual, (Art. 1342) Consent will “li vitiated if the third person ¢o with a party to the contrac making the misrepresentation, Example: B wants t ) the land of S because | interested in putting up a However, S and B do not classification of the area ¥ land is located. So they coi third person, who tells area. S and B thus proceed sale. Later, however, B finds that he could not put up a fa because the land is situated) residential area. Is the between S and B voidable? Answer: Although g misrepresentation by @ third does not affect the validity: contract, the contract in this’@ voidable because the misrep ation by T, @ third created a substantial mi: mutual. If the misrepresentation in good faith However, may constitute error. (Art. Example: s Which he i» on kinds of d 4) ) th sie 4h 2)215 gemstone is diamond. B buys ing ring believing it to be so. Later, discovers that the gemstone is emerald, No fraud exists . here because S was in good faith. However, B may annul the contract on the ground of mistake. 4) _ Kinds of doto or fraud a) _ Fraud in obtaining consent 1) Causal fraud or dolo causante ~ Fraud without which consent would not have been given. It renders the contract voidable. 2) Incidental fraud or dolo incidente - Fraud without which consent would have still been given but the person giving it would have agreed on different terms. The contract is valid but the party employing it shall be liable for damages. Example: S sold his lot for P100,000.00 to B who stated in the deed of sale that he was married. The price was fixed by S at the said amount in consideration of B’s having a family to support. In reality, how- ever, B was single. If S would have sold the lot to B whether B was married or single but that he would have given a higher price, / say P105,000.00, had he known that B was single, the fraud here is only incidental The contract is not vitiated