Law on Contracts: ConsentArt. 1319- Art.

1346

• 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 (Art. 1318, CC)

• CONSENT

A. In its derivative sense, it means agreement of wills. As applied to contracts, consent refers to the concurrence of wills
of contracting parties with respect to the object and the cause which shall constitute the contract.
B. Requisites:

i. must be manifested by the concurrence of offer and acceptance (Art. 1319-1326, CC)

ii. parties must possess the necessary legal capacity (Art. 1327-1329, CC)

iii. must be intelligent, free, spontaneous and real (Art. 1330-1346, CC)

• OFFER

A. Unilateral proposition which one party makes to the other for the celebration of a contract. It exists only if the contract
can come into existence by the mere acceptance by the offeree, without any further act on the offeror.
B. Requisites:

i. it must be definite

ii. it must be intentional

iii. it must be complete

iv. it must be directed to person or persons with whom the offeror intends to enter into a contract except definite offers
which are not directed to a particular person but to the public in general (i.e. public auction)

C. Withdrawal of Offer. The offer or proposal may be withdrawn so long as the offeror has no knowldege of acceptance
by the offeree. The exception to this rule is in case of option contracts. (Art. 1324, CC)
D. Counter-offer. This refers to a qualified acceptance; involves a new proposal; a rejection of the original offer.

• ACCEPTANCE

A. Must be certain and absolute in character.

B. A qualified acceptance constitutes a counter-offer.
C. It may be express or implied.
D. Requisites:

i. absolute

ii. directed to the offeror

iii. made with the intention to be bound

iv. made within the proper time

v. communicated to the offeror and learned by him

E. Withdrawal of Acceptance. There are two views. Some authorities believe that it can be withdRawn before it comes to
the knowledge of the offeror. On the other hand, some authorities believe that when acceptance is made it is
irrevocable.
F. Offer Through an Agent. An offer made through an agent is accepted from the time acceptance is communicated to
him. (Art. 1322, CC)
G. An offer becomes ineffective upon the death, civil interdiction, insanity or insolvency of either party before acceptance
is conveyed. (Art. 1323, CC)
• Business Advertisements

A. They are mere invitations to make an offer, and not definite offers, unless it appears otherwise.
B. Advertisement for Bidders is simply an invitation to make proposals. The advertiser is not bound to accept the highest
or lowest bidder, unless it appears otherwise.
C. In judicial sale, the highest bid must necessarily be accepted.

• Option Contract

A. An option contract is one giving a person for a consideration a certain period within which to accept the offer of the
offeror. It is separate and distinct from the contract which will be perfected upon the acceptance of the offer.
B. Option period is the period given within which the offeree must accept the offer.
C. Option money is the money paid or promised to be paid in consideration for the option.
D. Earnest Money- actually a partial payment of the purchase price and is considered as proof of perfection of the contract.
(Art. 1482, CC)
E. The general rule is when the offeror gives the offeree a certain period within which to accept the offer, the offer may be
withdrawn as a matter of right at any time before acceptance.
F. The exception is when the option is founded upon a consideration.

• Persons Incapacitated to Give Consent (Art. 1327, CC)

A. Minors

Exceptions:

i. When a minor misrepresents his age. (Active misrepresentation)

ii. Contracts involving the sale and delivery of necessaries to minor (Art.1489, CC)
iii. Contracts by guardians or legal representatives (Art.1381 [1,2], CC)
iv. Upon reaching the age of majority, they ratify the same

B. Insane or Demented Persons, unless the contract was entered into during a lucid interval. (Art. 1328, CC)

i. An insane or demented person includes any person who, at the time of 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. (Jurado, Obligations and Contracts)
ii. State of Drunkenness or Hypnotic Spell- Take note that contracts agreed to in a state of drunkenness or during a
hypnotic spell are voidable. (Art. 1328, CC). But the same must be of a degree that obscures completely the faculties
and almost extinguishes the consciousness of acts. (JURADO, Obligations and Contracts)
iii. Lucid Interval- A person under guardianship for insanity may still enter into a valid contract and even convey property,
provided it is proven that at the time of entering into said contract, he was not insane or that he is in a temporary period
of sanity.
iv. Presumption of Capacity- There is prima facie presumption that every person of legal age possesses the necessary
capacity to execute a contract.

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

i. Being deaf-mute is not by itself alone a disqualification for giving consent.

ii. If deaf-mute, but knows how to write: Contract is VALID.
iii. If dead-mute who knows how to read, but not write- Contract is still VALID. Because reading means that the person is
capable of understanding.

• Vices of Consent (Art.1330, CC)

A. Vices of will

i. violence
ii. intimidation
iii. mistake
iv. fraud
v. undue influence

B. Vices of declaration- simulation of contracts

 i. Absolute simulation
ii. Relative simulation

• Requisites of Consent

A. It must be intelligent
B. Free and Voluntary
C. Conscious or Spontaneous

• Mistake

A. Requisites:

i. The error must be substantial regarding:

• identity of the thing/object of contract

• substance of the thing

• conditions of the thing provided

• nature of the thing

• conditions which primarily moved or induced one of the parties

• identity or qualifications (error in persona), but only if such was the principal cause of the contract

ii. The error must not be excusable

iii. The error must be a mistake of fact, and not of law

B. Mistake of Fact- In general, the mistake to which Article 1331 refers is mistake of fact. The mistake must be substantial, that
is, the party would not have given his consent had he known of the mistake. Mistake of fact vitiates consent.

C. Mistake of Law

1. Definition- Mistake of law arises from ignorance of some provision of law, or from an erroneous interpretation of its
meaning, or from an erroneous conclusion as to the legal effect of the agreement.
2. Effect: As a rule, mistake of law does not invalidate consent.
3. Exception: For mistake of law to vitiate consent it should involve mutual error as to the effect of an agreement when
the real purpose is frustrated. (mistake as to doubtful question of law)

Requisites:

i. The error must be mutual

ii. it must be as to the legal effect of an agreement
iii. it must frustrate the real purpose of the parties

• Violence

A. When in order to wrest consent, serious or irresistible force is employed (Art. 1335, CC)

B. Requisites:

i. must be serious or irresistible

ii. must be the determining cause for the party upon whom it is employed in entering into the contract
iii. it is not justified
iv. it is sufficient

• Intimidation

A. Requisites

i. one party is compelled to give his consent by a reasonable and well-grounded fear of an evil
ii. the evil must be imminent and grave
 iii. the evil must be upon his person or property, spouse, descendants or ascendants
iv. it is the reason why he enters the contract
v. the evil must be unjust

Note: To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind (Art. 1335, par. 3,
CC)

• Fear of Displeasing

If a contract is signed merely because of “fear of displeasing persons to whom obedience and respect are due”, the contract is still
valid, for by itself, reverential fear is not wrong (PARAS, Civil Code, p. 639)

• Threat to enforce just or legal claim

The threat of a court action as a means to enforce a just or legal claim is justified and does not vitiate consent.

Supposing, X committed a violation of law. Y threatens to report X to the police unless the latter gives him P5,000. Is the threat
justified?

NOTE: 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. (Art. 1336, CC)

• Undue Influence

A. 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, CC)

B. Requisites:

i. improper advantage
ii. power over the will of another
iii. deprivation of the latter’s will of a reasonable freedom of choice

C. Test of Undue Influence: 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 (Coso vs. Fernandez Deza, G.R.
No. L-16763, December 22, 1921)

By analogy, undue influence employed by a third person may annul the contract.

D. Circumstances Considered in Determining whether the Influence Exerted is Unreasonable

1. Confidential relations
2. Family Relations
3. Spiritual Relations
4. Other relations between the parties
 5. The person alleged to be unduly influenced was suffering from mental weakness, or was ignorant or in financial
distress

• Fraud

A. When, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed to (Art. 1338, CC)

B. Kinds of Fraud:

b.1 Fraud in the perfection of contract

i. Causal Fraud (Dolo Causante)

ii. Incidental Fraud (Dolo Incidente)

b.2 Fraud in the performance of obligation

Note: Fraud in the performance of obligation gives rise to a right of the creditor or obligee to recover damages from the debtor of
the obligor, while fraud in the perfection of the contract gives rise to a right of the innocent party to ask for the annulment of the
contract if fraud is casual or to recover damages if it is incidental.

C. Requisites of Causal Fraud (Art. 1338, CC)

1. One party must have employed fraud or insidious words or machinations or by concealment

2. It must have been serious

3. It induced the other party to enter into a contract

4. It must have been employed by one of the contracting party upon the other and not employed by both contracting parties or by
third persons (E: conspiracy with third person)

5. Damage or injury resulted to the other party

6. It must be made in bad faith, i.e., with knowledge of its falsity

D. Failure to disclose facts, when there is duty to reveal them, constitutes fraud (Art. 1339, CC)

E. Principle of Tolerated Fraud: The usual exaggerations in trade, when the other party had the opportunity to know the facts, are
not in themselves fraudulent (Art. 1340, CC) This is known as “tolerated fraud” which includes minimizing the defects of the
thing, exaggerating its good qualities, and giving it qualities that it does not have (TOLENTINO, Civil Code, p. 510)
F. Expression of an Opinion: A mere expression of an opinion does not signify fraud unless made by an expert and the other
party relied on the former’s special knowledge (Art. 1341, CC)

G. Misrepresentation made in good faith is not fraudulent but may constitute error (Art. 1343, CC)

H. Fraud by Third Person: Fraud by third person does not vitiate consent and merely gives rise to an action for damages by the
party injured against such third person unless:

i. It has created a substantial mistake and the same is mutual

ii. The third person makes the representation with the complicity, or at least with the knowledge but without the objection, of the
contracting party who is favored (JURADO, Obligation and Contracts, p. 449)

• Simulation of Contracts

A. It is the process of intentionally deceiving others by producing the appearance of contract that really does not exist or which is
different from the true agreement (Art. 1345-1346, CC)

B. Requisites: (DAP)

i. A Deliberate declaration contrary to the will of the parties

ii. Agreement of the parties to the apparently valid act; and

iii. The Purpose is to deceive or to hide from third persons although it is not necessary that the purpose be illicit or for purposes
of fraud

C. Kinds of Simulation of Contract:

i. Absolute (simulados)- parties do not intend to be bound by the contract at all. It is void.

ii. Relative (disimulados)- parties conceal their true agreement. It is binding as to the real agreement of the parties, 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.

NOTE: With respect to a third person acting in good faith, the apparent contract must be considered as the true contract.