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March 21, 2023 2

March 28, 2023 15

FINALS NOTES
March 21, 2023
PROPOSED ANSWERS MTQ2 LAW 421 AND
MIDTERM EXAMS
Question No. 1
A. Candy, Danica, and Ethel are solidary
debtors of Fathma for P100,000.00. The
period for collection has already
prescribed. If Candy nevertheless pays
Fathma the P100,000.00, is the payment
still valid? Can Candy ask for the return
of what she has paid to Fathma? Explain.
(5)
This is an application of natural obligation to
solidary obligations.
PROPOSED ANSWER:
The payment is valid and Candy can no longer ask
for its return. This is based on Art. 1413 of the NCC
which provides that natural obligations, not being
based on positive law but on equity and natural law,
do not grant a right of action to enforce their
performance, but after voluntary fulfillment by the
obligor, they authorize the retention of what has
been delivered or rendered by reason thereof.
B. If Candy can no longer ask for the return
of what has been paid, may she then ask
for reimbursement of Danica and Ethel’s
proportional share? Why or why not? (5)
The obligation is solidary as to Fathma but among
the solidary debtors you know that the obligation is
joint.
PROPOSED ANSWER:
No she cannot. Payment made by a solidary debtor
shall not entitle her to reimbursement from her co-
debtors if such payment is made after the obligation
has prescribed or become illegal. (Art. 1218, NCC)
Question No. 2
A. Mica owes Oliver P100,000.00 secured by
a mortgage on Mica’s land. If Patty pays
the P100,000.00 to Oliver without the
knowledge of Mica, can Patty now be the
creditor with all the rights of Oliver
including the right to foreclose on the
mortgage if Mica defaults in payment?
Explain. (5)
PROPOSED ANSWER:
No. Patty cannot be subrogated to all the rights of
Oliver as a creditor. Art. 1237 provides that
whoever pays on behalf of the debtor without
knowledge or against the debtor’s will, cannot
compel the creditor to subrogate him in his rights,
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such as those arising from mortgage, guaranty, or
penalty. In this case, Patty paid without Mica’s
knowledge.
B. Is Patty entitled to any right? Explain. (5)
PROPOSED ANSWER:
Yes. Patty’s right is limited to beneficial
reimbursement.
Question No. 3
Odin owed Pia the following:
● P100,000.00 with a mortgage on Odin’s real
property in Baguio City. The debt is already
due.
● P100,000.00 with Odin’s car as collateral.
Debt is already due.
● A bicycle worth P100,000.00. Also, already
due.
● P100,000.00. This is not yet due but is
payable on or before due date.
If Odin pays P100,000.00 to Pia, to what debt
should the payment be applied? Briefly explain. (5)
This is your rules on application of payment.
PROPOSED ANSWER:
Odin may declare at the time of making the
payment, whether to apply the same to the
P100,000.00 with mortgage on his real property or
the P100,000 with his car as collateral, or the
P100,000 which is not yet due but is payable on or
before the due date. In the latter case, the term has
been constituted in favor of the debtor. Odin may
not apply the same payment to the payment of the
bicycle, unless the parties stipulate, as this date is
not of the same kind as the other two. (Art. 1252)
Cash yung isa yung isa deliver of a thing.
Question No. 4
Jon owes Kelsey P200,000.00. Lara signed as a
surety for the loan while Manny signed as a
guarantor. Upon tendering the amount og
P200,000.00 on the due date, Kelsey refused to
accept which led Jon to consign the amount in
court. The judge already ruled that the
consignation was properly made but Jon and
Kelsey compromised and they agreed that Jon
should withdraw the thing consigned. What is
the effect of such withdrawal on the liabilities of
Lara and Manny? Explain.
This is the last portion of tender of payment and
consignation. If there is a compromise agreement
between the parties in a petition for consignation,
the effect of compromise will release the liabilities
of obligations of Lara and Manny.
PROPOSED ANSWER:
They shall be both released from their obligation as
surety and guarantor respectively. (Art. 1261, NCC)
Question No. 5
Rosa agreed with Sugar that Rosa will build a
traveler's inn on Sugar's property. In their

agreement, they stipulated that they will also
build the fence between the properties of Sugar
and Tatum as this has been a long overdue
deliverable of Sugar to Tatum. Tatum was
informed about the stipulation and happily
thanked Rosa and Sugar. Later however, Rosa
and Sugar changed their agreement and agreed
to venture into the food business instead.
Should they still build Tatum's fence? Explain.
(5)
PROPOSED ANSWER:
Yes. Normally, accessory obligations are
extinguished when the principal obligation is
extinguished by novation. However, in this case,
the accessory obligation to build the fence will
subsist as it will benefit Tatum, a third person, who
did not give consent to the novation. (Art. 1296,
NCC)
Ma’am: Clearly, there is novation in this case.
Novation affects only the parties in a contract. It will
not affect third persons. However, there are
exceptions to the rule wherein, the provisions would
remain if it will affect the interest of a third person,
in this case, it is Tatum. Clearly, this involves a
stipulation pour autrui (stipulation in favor of a third
person).
You may approach it by using accessory
obligations and principal obligations in novation.
You may also approach it with the existence of
stipulation pour autrui. So normally, accessory
obligation, which is the building of the fence, is
extinguished when the principal obligation is
extinguished by novation. However, in this case,
the accessory obligation to build the fence will
subsist as it benefits the third person who did not
give consent to the novation (Art 1296, NCC).
Question No. 6
Imee owes Jackie P150,000.00 payable in Cebu
City. Jackie owes Imee P50,000.00 payable in
Cagayan de Oro City. Do the parties need to
agree first that the debt of one compensates the
other? Explain. (5)
PROPOSED ANSWER:
No more. Compensation takes place by operation
of law as long as all the requisites for compensation
are present. In this case, there will be
compensation to the extent of P50,000.00.
Alternative Answer by Ma’am: You qualify,
because it is not provided in the facts that the debt
is due and demandable which is one of the
elements of legal compensation. But argue it based
on the missing element which is not provided for
under the facts.
Question No. 7
Warlita owes Xenia P40,000.00. Instead of
paying the P40,000.00, they agreed that Warlita
will provide five (5) videoke machines for use
on Xenia's birthday at the latter's house. They
weren't aware though if they can use the
machines as it was a relatively quiet
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neighborhood. They agreed though that the
original obligation will be extinguished whether
the machines can be used or not. When the
machines were being transported by Warlita,
she was stopped by the guards at the entrance
of the subdivision and she was informed that
there was an ordinance prohibiting videoke
machines in that barangay. Is the original
obligation of Warlita to pay Xenia the
P40,000.00 revived? Explain. (5)
PROPOSED ANSWER: No. While the new
obligation is void, the parties beforehand agreed
that the old obligation will be extinguished in any
event. (Art. 1297, NCC)
Note: As a general rule, the first obligation is
revived. An exception under Article 1297, NCC, is if
beforehand they agree that the first obligation will
be extinguished. The proposed answer is the
exception to the rule.
Question No. 8
Duno owes Kirk P10,000.00. Through fraud,
Duno entered into a contract of sale with Kirk
for the sale of a fake watch for P10,000.00. Will
there be compensation in this case? Explain. (5)
PROPOSED ANSWER: Yes. Both parties are
debtors and creditors of each other. The fraudulent
sale of Kirk to Duno is still valid until it is annulled.
(Art. 1284, NCC)
Note: Vitiation of consent such as fraud will only
render the sale voidable. Voidable sale is valid until
annulled.
PROPOSED ANSWERS FOR MIDTERM
EXAMINATION (OBLIGATIONS)
QUESTION 1: TOPIC: NOVATION
PAMPI Corporation entered into a Contract of
Loan with MASAGANA Bank secured by a
Chattel Mortgage. PAMPI Corporation
experienced financial reverses and requested
from MASAGANA Bank an extension of
payment for the loan. The extension was
granted with a condition that PAMPI
Corporation would execute a real estate
mortgage. When PAMPI corporation failed to
pay, the bank foreclosed the Chattel Mortgage.
PAMPI Corporation interpose an objection
contending that there was a novation of the
contract when it executed a real estate
mortgage when an extension of the loan was
granted by the bank. Is the contention of PAMPI
Corporation correct? Explain. (5)
ANSWER: No. Novation takes place where the
object or principal condition of an obligation is
changed or altered. Novation is never presumed; it
must be explicitly stated or there must be manifest
incompatibility between the old and the new
obligations in every aspect. There is no
incompatibility between the two contracts especially
so that the new contract was executed as an

additional security to the chattel mortgage as a
condition for the extension of the loan.
Note: From the facts, there is no change. The first
obligation is not extinguished, there was only a
request for reconstruction or extension and in order
to grant that extension, as a condition, aside from
the chattel mortgage, you have to execute a real
estate mortgage.
Since there is no incompatibility with the two
contracts it's still the same contract of loan it's just
that there is an extension and as a condition for the
extension a Real Estate Mortgage (REM) was
executed. So the REM is to be considered as an
additional security to the chattel mortgage as a
condition for the extension of the loan. It did not
extinguish the first contract.
SOLUTIO INDEBITI
QUESTION: The debtors entered into a Contract
of Loan with the bank in the amount of 3 Million
secured by a mortgage of certain properties.
Since there was under valuation of the
properties, the debtors were required to put up
additional security in the amount of P300,000.00
by opening a time deposit. When there was
non-payment, there was foreclosure of the
mortgage and the amount of P750,000.00
(representing the time deposit and its interest)
was collected from the debtors. The debtors
contended that the collection of the P750,000.00
would result in unjust enrichment. Are the
debtors correct? Explain. (5pts)
ANSWER: No, because the amount was applied as
payment of the loan together with the interest, The
fundamental doctrine of unjust enrichment is the
transfer of value without just cause or
consideration. The elements of the doctrine are: (a)
enrichment on the part of the defendants; (b)
impoverishment on the part of the plaintiff; and, (c )
lack of cause.
The main objective is to prevent one to enrich
himself at the expense of another. It is commonly
accepted that this doctrine simply means that a
person shall not be allowed to profit or enrich
himself inequitably at another’s expense. In the
instant case, there is no unjust enrichment to speak
of.
GENUS NEVER PERISHES
QUESTION: Pierce is obliged to deliver Bronson
a 12-inch Apple Macbook laptop. While on the
way to Bronson, the vehicle Pierce was riding
was held-up by five armed men who took away
all the possessions of the passengers,
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including the laptop. Is the obligation of Pierce
to deliver the laptop extinguished? Briefly
explain. (3pts)
ANSWER: No. The obligation is to deliver a generic
thing. The loss or destruction of anything of the
same kind does not extinguish the obligation. It
may still be replaced.
PARTIAL LOSS
QUESTION: Marcus is obliged to construct a
house on Sigmund’s property in San Carlos
Heights, Baguio City. On the first two (2)
months of the construction, a sinkhole ate a
part of the house. Sigmund wanted the
construction to resume but Marcus does not
want to. What should be done in case the
parties could not agree as to whether the
construction should still proceed? Explain
(3pts)
ANSWER: In this case, the courts shall be the one
to determine whether the partial loss is so important
as to extinguish the whole obligation. (Article 1264,
NCC)
ASSIGNMENT OF RIGHTS BY THE CREDITOR
TO 3RD PERSONS; EFFECT IN
COMPENSATION
QUESTION: Kirol owes Kiray P50,000.00. Kiray
owes Kirol P100,000.00. Both debts are already
due. Kirol informed Kiray that he will assign his
rights to the extent of P80,000.00 which Kiray
owes him to Kirei. Kiray consented. May Kiray
invoke compensation? Explain. (3pts)
ANSWER: It depends. If she reserved her right to
the compensation, she may invoke it. If she did not,
she may not invoke it as she is deemed to have
waived his right thereto. She would then have to
pay Kirei the P80,000.00 and claim the excess of
P30,000.00 from Kirol. (Art. 1285, NCC)
NEGOTIORUM GESTIO
QUESTION: How does the relationship of
negotiorum gestio exist? (3pts)
ANSWER: It exist whenever a person voluntarily
takes charge of the agency or management of the
business or property of another, without any power
from the latter, is obliged to continue the same until
the termination of the affair and its incidents, or to
require the person concerned to substitute him, if
the owner is in a position to do so. (Article 2144,
NCC)

INFLATION
QUESTION: In a contract of lease, the lessor
contended that the lessees failed to pay the
increased rent despite the supervening inflation
or devaluation of the Philippine peso. Is the
contention proper? Explain (3pts).
ANSWER: No, Article 1250, NCC requires for its
application a declaration of inflation by the Central
Bank. Without such declaration, creditors cannot
demand an increase of what is due them.
OBLIGATION WITH A PERIOD
QUESTION:
Lala and Melinda entered into a contract of loan
whereby Lala extended to Melinda the amount
of 1 million secured by a mortgage. The
contract does not provide when payment shall
be made. After a period of 1 year, Lala
foreclosed the mortgage. Melinda filed an
action to nullify the foreclosure contending that
there was no basis for the foreclosure since the
obligation has not yet become due and
demandable. Decide.
ANSWER: The foreclosure is void because there
was no basis as the contract did not provide for the
period of payment. In that case, as of the time of
the foreclosure, the obligation has not yet become
due and demandable. If there is no period for the
contract, there can be no demand, there can be no
default.
Note:
You may add that Lala and Melinda should have
asked the court to provide their contract with the
period.
OBLIGATION WITH A PENAL CLAUSE
QUESTION:
Pampam borrowed money from Cael with
interest and penalty charges imposed in the
contract. Pampam failed to pay his obligation;
hence, Cael sued Pampam for collection of sum
of money. A compromise agreement was
entered into and approved by the court, with a
stipulation that in case Pampam fails to pay, he
would pay a penalty of 4% per month. Pampam
failed to pay, hence, a motion for execution was
filed. Pampam opposed the motion on the
ground that the penalty is excessive or
iniquitous. Rule on the motion.
ANSWER: The motion should be granted. While it
is true that the court can reduce the penalty if it is
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iniquitous, the same rule is applicable only in
contracts that are subjects of litigation, not to a
case where there has already been a judgment
rendered and the same has already become final
and executory. Under the facts, therefore, Pampam
cannot invoke the power of the court to reduce the
penalty.
SUBSTANTIAL COMPLIANCE IN PAYMENT OR
PERFORMANCE
QUESTION:
Carla entered into 2 written contracts entitled
“Conformity of Agreement” whereby Carla
authorized Dhang to negotiate with the Land
Bank of the Philippines (LBP) and the DAR for
the sale of 270 hectares of agricultural land, to
be done in 120 days. Carla bound herself to pay
Dhang at least 25% of the gross sales of said
property which was later reduced to 17.5%.
Dhang shall prepare, process and file the
necessary documents needed to effect the
recovery of proceeds from the LBP. The sale
was approved, thus, there was a partial release
of the proceeds. But Carla did not pay Dhang
her share, hence, a suit for collection of sum of
money was filed before the RTC. The RTC
decided for Dhang and it was affirmed by the
CA. Carla contended that Dhang is not entitled
to a share because there was no full payment
yet, therefore, there has been no compliance
with the terms and conditions of the contracts.
Is the contention proper? Explain.
ANSWER: NO, because there has been substantial
compliance in good faith; hence, the obligor may
recover as though there had been a strict and
complete fulfillment (Art. 1234, NCC). When the
obligee accepts the performance, knowing its
incompleteness or irregularity, and without
expressing any protest or objection, the obligation
is deemed fully complied with (Art. 1235, NCC).
From the facts, Dhang's obligation was to prepare,
process and file the necessary documents needed
to effect recovery of the proceeds from the LBP.
The collection of the full amount from the LBP was
not among the matters contemplated by the parties
in their agreements.
Note: Since there was partial release, it seems that
there is already substantial compliance of the
obligation of Dhang as provided for under the
conformity of agreements.
You may apply your knowledge in Agra. Usually or
it has always been a practice na hindi cash and

nirerelease. So may cash, may stocks. So it is not
full cash and binibigay ng DAR thru the LBP.
DACION EN PAGO
QUESTION:
A loan was granted to the debtor who, however,
failed to pay the loan, hence, a suit was filed to
collect the debt. In his answer, the defendant
(debtor) contended that there was already an
arrangement as to the full payment of the loan
by way of sale of the 9 unit taxis which the
debtor surrendered to the creditor for it to sell
the same. The proceeds of which will be
credited against the loan amount as full
payment. The RTC dismissed the complaint due
to the extinguishment of the obligation. The CA
reversed the decision. Was there dacion en
pago between the parties upon the surrender or
transfer of the mortgaged taxis to the creditor?
Explain.
ANSWER: There was no dacion en pago. In dacion
en pago, the property is alienated to the creditor in
satisfaction of a debt in money. (Art 1245, NCC). It
is the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted
equivalent of the performance of the obligation. In
this case, there was no meeting of the minds
between the parties on whether the loan of the
debtor would be extinguished by dacion en pago.
Rather, the creditor was the agent in the sale of the
vehicles whereby the proceeds thereof would be
applied in payment of debtor’s indebtedness to the
creditor. Such an agreement negates transfer of
absolute ownership over the property to the
creditor, as in sale.
You just made the creditor an agent for you to sell
now the 9 unit taxis and apply the payment now or
apply the per piece price of the taxis to the loan, so
is there dacion en pago?
There was none, there was no dacion en pago, so
in dacion en pago under Art 1245, property is
alienated to the creditor in satisfaction of the debt in
money, so it is the delivery and transmission of
ownership of the thing by the debtor to creditor as
an accepted equivalent in the performance of the
obligation, so in this case there was no meeting of
the mind of whether the loan will be extinguished by
dacion en pago.
Diba may tintatawag tau na real dacionen pago,
rather the creditor was the agent in the sale of the
vehicles, whereby the proceeds thereof will be
applied in the payment of the debtors
indebtedness, to the creditor, such an agreement
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now negates the transfer of absolute ownership of
teh property over to the creditor as in a sale.
PAYMENT BY CESSION
QUESTION:
Tito owes Ulysses, Vannie and Wanda
P1,000,000.00 each, which debts are all due.
Tito’s only properties not exempt from
attachment or execution are his car worth
P500,000.00, his house worth P1,500,000.00,
and his grand piano worth P400,000.00. If he
opts to cede or assign all of these properties to
his debtors, should he now be released from
his obligations to them? Explain.
A: The answer is no because what we are applying
is only the net. Net lang at kahit sumahin mo lahat
yan wala pa yang 3M pesos.
Tito should only be released from the obligation
amounting to the net proceeds of the things he
assigned, if the properties will be sold at their
current value, then Tito shall only be released up to
the amount of 2.4M pesos.
QUESTIONS RAISED
Question 1: Regarding the question in stipulations
pour autroui in favor of Tatum, would it be that the
stipulation benefitted to the third person and not
incidentally benefitted, mam kasi inargue ko na
incidentally benefitted lang si Tatum dun sa
compromise agreement.
Answer: The contracting parties must have clearly
and deliberately conferred a favor to a third person,
not a mere incidental benefit or interest, so how did
you judge it as an incidental benefit and that was a
long overdue deliverable by the other contracting
party, where in the facts that it is mere incidental?
Student: Ma’am nothing in the facts state that he is
a party to the contract.
Mam: Yes, but all the requisites of stipulation por
atrui was present, there was acceptance on the 3rd
person now.
Question 2: What if instead of using the contract
por atrui, I used divisible obligations, like the
obligation to construct the inn and the fence was
divisible hence when one of the obligations were
novated the other is still capable of fulfillment.
Ma’am: 2 obligations, but I think I worded the
question that the fence is merely an accessory
obligation, kasi nga may principal obligation siya na
mag papatatyo ng travelers inn tas accessory
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contract yung to build a fence, kaya nung chinange
nila yung principal obligation, kasi diba sa novation,
when the principal obligation is extinguished it
follows the extinguishment of the accessory but not
when there is a stipulation por atrui.

Question 3: Ma’am in the midterm exam question

regarding lease on inflation, I mixed it with the
discussion on the contract of lease that the lessor
cannot demand an increase hanggat di pa
natatapos yung lease term and since wla period di
sha pwedi magdemand.

Answer: But one pertinent fact is inflation, sabi

ngaun ni lessor, so san mo siningit yun, kasi kung
yung basis mo would be the period of the lease
then you did not cover the entire problem, what
about the allegation of the other party, diba issue
spotting.

Question 4: Ma’am, dun sa isang Q regarding sa

foreclosure kung saan loan is walang period, ang
nilagay ko ma’am doon, although hindi valid yung
foreclosure, ang nilagay ko na reason is there was
no demand. Since the obligation had no period, it
would have been one agreed upon by the parties
as something that can be demanded anytime.
Since wala namang siyang demand, parang yung
situation after one year, so hindi na nagdemand,
basta pinaforeclose niya agad, doon na ako
nagbase na yung foreclosure is invalid, kasi hindi
naman siya nagsabi or nagdemand.

Ma’am: I can consider that kasi that is still in line

with foreclosure. Sa foreclosure naman, kailangan
may demand. You should be in default. You can
use also ordinary default and extraordinary default.
Since bumigla siya, pwede nating gamitin yan.

(For agency and compromise agreement, Ma’am

will be preparing a video presentation)

CONTRACTS
IN GENERAL
Definition: (Art. 1305, NCC)
- A meeting of the minds between two
persons whereby one binds himself with
respect to the other, to give something or to
render some service.
- An agreement of two or more persons for
the purpose of creating, modifying, or
extinguishing a juridical relation between
them.
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Example: Donation Inter Vivos- There is a
special form and it must be accepted by the donee.
According to cause or equivalence of the value
of the prestation/s:
a. Onerous Contract;
-Those in which each of the parties aspires
to procure for himself a benefit through the
giving of an equivalent or compensation.
Both parties must give an equivalent of
prestation.

Contract is a meeting of the minds, once the minds
of the contracting parties meet, then a valid
contract exists even if it is not reduced into writing,
especially into consensual contracts.
It also involves two persons. There can be no
contract if the contracting party falls on one person.
You cannot have a contract with yourself. That
cannot be considered within the statutory definition
of a contract. There must be at least two persons to
a contract.
Example: Contract of sale: The obligation as the
vendor is to deliver the thing; and the buyer, as an
equivalent of the prestation, has to give the price.
b. Gratuitous or Lucrative Contract;
-One party receives no equivalent prestation
except a feeling that one has been
generous or liberal.
Example: Contract of Commodatum- You allow a
party to use your property or a thing without
equivalent.

It may also be multilateral, meaning there are more c. Remunerative Contract

than two parties, however, in line with this, we will -Where one prestation is given for a benefit
be discussing Auto-contracts as an exception to or service that has been rendered
“between two persons”. previously.
Example: Bonus given to employees.
CONTRACT vs OBLIGATION
According to importance or dependence of one
upon the other:
Contract Obligation
a. Principal Contract;
One of the sources of The legal tie or relation -A contract that can stand alone and it is not
obligation. There is no to give, to do, or not to dependent on other contracts.
contract if there is no do. Obligation may
obligation. exist without a contract b. Accessory Contract; and,
because there are
-Its existence depends on the existence of a
other sources of
obligations. principal contract.
Example: Contract of Mortgage- A real estate
mortgage is dependent on the principal contract of
CLASSIFICATIONS OF CONTRACTS
loan.
According to Perfection or Formation:
A. Consensual Contract
c. Preparatory contract
- Perfected by mere consent.
-It is not the end but the means through
- Example: Sale
which future transactions or contracts may
be made.
B. Real Contract
Example: Contract of agency or partnership- The
Perfected by consent but includes delivery.
principal executed an SPA in favor of the attorney-
Example: deposit or pledge- You can only perfect a
in-fact or agent for the sale for a future transaction
contract of pledge or deposit if you deliver the thing
or sale or mortgage of his/her property. It is a
subject of deposit or pledge.
preparatory contract because the intention of the
contract is not the end but a means through which
C. Formal or Solemn Contract
future transactions or contracts may be made.
Special formalities are essential for
purposes of enforceability. Hence, before a contract
According to the parties obligated:
is perfected, it must be in special form or
a. Unilateral Contract; and,
solemnities must be observed.
-Only one party has an obligation.

Example: A contract of Commodatum.
b. Bilateral or Synallagmatic Contract
-Both parties are required to render
reciprocal prestations.
Example: Contract of sale.
According to their name or designation:
a. Nominate Contract; and,
-Those which have their own individuality
and are regulated by the provision or
special provisions of law.
Example: In a contract of sale, you have the
provisions of sale under the Civil Code. In a
contract of agency, you have a specific provision.
b. Innominate Contract
-Those not given any special name.
Examples:
(a) do ut des (I give and you give)
(b) do ut facias (I give and you do).
(c) facio ut des (I do and you give)
(d) facio ut facias (I do and you do)
According to the risk of fulfillment:
a. Commutative; and,
-Parties contemplate a real fulfillment,
meaning, equivalent values are given.
Example: Contract of sale or contract of lease- The
lessor had to deliver possession of property which
is the subject matter of the lease and the lessee
has to pay the amount of rent or any other
stipulated amount in the contract of lease.
b. Aleatory.
-Fulfillment is dependent on chance. The
value varies because of the risk or chance
involved.
Example: Insurance contract.
According to the time of performance or
fulfillment:
a. Executed;
-One completed at the time the contract is
entered into. Obligations are complied with
at this time.
Example: Sale of real property that is already
delivered. If there is already delivery on the part of
the seller and there is full payment of the purchase
price on the part of the buyer, there is an executed
contract.
b. Executory
-One where the prestrations are to be
complied with, with some future time.
Example: Conditional Deed of Sale- It is perfected
if the property has not been delivered or the
9
payment has not yet been made, it is merely an
executory contract.
According to the subject matter:
Go back to the definition of contracts under
Article 1305.
A. Things
Example: Contract of sale, deposit, pledge
B. Rights or credit
Example: Usufruct, assignment rights ir credits
C. Services
Example: Contract of agency, lease of service and
contract of common carriers
According to the Obligations Imposed and
Regarded by Law
A. Ordinary Contract
-It involves at least 2 contracting parties and
it binds the parties.
Example: Sale and Lease
B. Institutional Contract
-Impressed with Public Interest
Example: Marriage, employment contract and CBA
According to the evidence required for its proof
A. Those requiring mere oral or parol
evidence
-Oral contracts are binding unless form is essential
for its validity.
Example: A sale is perfected by mere consent. But
for the purpose of enforceability, we follow the
Statute of Frauds. In other oral contracts, it may be
proven by parol evidence.
B. Those requiring written proof
Example: Those enumerated under the Statutes of
Frauds which requires written proof.
According to the number of persons actually
and physically entering into contracts
A. Ordinary Contracts
-There are only 2 parties which are
represented by different persons
Example: Sale (vendor and vendee)
B. Auto-contracts
- It is not a violation to the definition of
contracts which provides that contract is
meeting of the minds between 2 persons
whereby one binds himself with respect to

the other to give something or to render
service.
- It must involve 2 persons. Meaning, there
must be at least 2 parties to the contract.
The only exception is AUTO-CONTRACTS.
There is only one person who represents
two opposite persons but in different
capacities.
Example: SPA (Special Power of Attorney)
Q: A authorized B to sell his phone. Can B buy the
phone?
A: Yes. It is an example of an auto contract. In the
first contract, where B has an SPA, his personality
is as an agent. B is an agent of A but there is
nothing precluding B from buying the phone of A.
There is only one person who represents 2
opposite persons but in different capacities (in this
case, as an agent to A and as a buyer to A).
According to the number of persons who
participated in the drafting of a contract
A. Ordinary
Example: In sale, there is participation of the
vendor and the vendee in drafting the contract of
sale.
B. Contract of Adhesion
-Almost all of the provisions are drafted by
only one party to the contract.
Example: Insurance Contract where it is drafted by
one party and the participation of the other party is
merely by affixing his signature.
STAGES OF CONTRACT
A. PREPARATION/NEGOTIATION (Conception
or Generacion)
- Covers the period from the time the
prospective contracting parties indicates
interest in the contract to the time the
contract is concluded (perfected)
- It means that parties are progressing in the
negotiation or preparation. In the
negotiation stage, the parties did not yet
arrive at any definite agreement. Usually,
there is an offer and then counter-offer and
counter to the counter-offer and counter
against to the counter to the counter-offer.
- The parties are actively participating on the
preliminary offer and counter-offer and the
like.
B. PERFECTION (Birth)
- Takes place upon the concurrence of the
essential elements of contracts.
10
- Once the parties arrive at a definite
agreement, then there is perfection of
contract.
- There is definite subject matter, valid cause,
and acceptance or mutual consent of
parties.
Effect of Perfection:
(a) Parties are bound to the FULFILLMENT of
what has been expressly stipulated; and
- Example: In a contract of sale, if you are
the seller, you are bound to deliver the
property in good condition (if it is stated
in the contract) to surrender possession
as well as ownership to the buyer. And
as the buyer, once the contract is
perfected, you are obliged to pay in full
the contract price agreed upon.
(b) Parties are bound to ALL the consequences
which according to their nature, may be in
keeping with good faith, usage, and law.
- Example: In a contract of sale, the
consequences are the price, the
delivery, the time of delivery, the time of
payment, responsibilities of the seller
(transfer, payment of capital gains tax,
warranties, preparation of deed of sale)
as stated in the contract of sale. So you
are responsible for all of that in case the
contract is perfected.
C. CONSUMMATION (death or extinguishment)
- begins when the parties perform their
respective undertakings under the contract
culminating in the extinguishment thereof.
- It is called death or extinguishment of the
contract since there is already fulfillment of
all the terms and conditions of the
contracts, the contracts are already
performed, and the contracts may be said
to be fully executed.
The stages of contract are important when you are
asked a question particularly on the enforcement of
the contract – when can you enforce fulfillment of
obligation? If it is still in the preparation or
negotiation stage, the contract is not yet perfected.
What if it is already in the perfection stage?
Then you enforce the terms and conditions of the
contract.
Characteristics of a Contract
A. CONSENSUALITY (Art. 1315 & 1316) -
Contracts are generally perfected by mere
consent (Art. 1315). No special form is
necessary. (Art. 1316)

- This is the general rule. However, take note
that there are limitations to the
characteristic of consensuality.
Exceptions:
1. Formal/Solemn Contracts - compliance
with special formalities or solemnities of the
contract for purposes of validity and
enforceability;
- Example: donation inter vivos have
specific form for it to be considered
valid, as well as it requires acceptance
on the part of the donee
2. Real Contracts - requires not only the
consent of the parties but delivery of the
object is also required.
- Example: pledge or deposit
B. AUTONOMY OR FREEDOM TO STIPULATE
(Art. 1306, NCC)
- Take note also of the Constitution,
particularly Section 10, Article III (Bill of
Rights) as a supporting provision for
autonomy or freedom to stipulate.
- Freedom of the party to stipulate the terms
of their contract. But the freedom to
stipulate only covers valid contracts. Valid
contracts meet the legal requirements and
limitations provided for by law.
Limitations on Contractual Stipulations:
Contracts, in order to be valid, should not be
contrary to the following:
a) Law - Law is always superior to a contract.
- If an act or stipulation is executed
against provisions which are
mandatory or prohibitory laws, they
are considered invalid stipulations.
- Example: Employment contracts
wherein the stipulations are below
the standards provided for under the
Labor Code of the Philippines is
considered as invalid stipulation for
the very reason that it is contrary to
law.
b) Morals - refers to norms of good and right
conduct and human conscience.
- Example: A contract of separation of
husband and wife with waiver to
their right to file or prosecute any
future acts of infidelity is considered
contrary to morals.
c) Good customs - habits and practices which
through long usage have been followed and
enforced by society or some part of it as
binding rules of conduct. It has the force of
law when recognized and enforced by law.
11
- Example: (a) any stipulation or
contract which encourages or shows
disrespect to elders or parents, (b)
employment contracts which are
discriminatory to women, or (c)
contracts which disrespect religious
freedom
d) Public order - deals with public health and
public safety.
- Example: (a) surrendering right to
vote as well as right to run for public
office, or (b) lowering the liability of
common carriers from extraordinary
diligence to ordinary diligence
e) Public policy - a stipulation which has a
tendency to be injurious to the public or
against public good.
- Example: stipulations in labor such
as (a) non-disclosure policies, or (b)
non-involvement clauses or a clause
prohibiting an employee from
working in any company or business
in the Philippines for a period of 5
years from the termination or
separation from the employer. It is
considered void since it has no
limitations.
C. OBLIGATORINESS (Art. 1159, NCC) -
Obligations arising from contracts have the
force of law between the contracting parties
and should be complied with in good faith.
- Art. 1159 provides for the binding force of
obligations arising from contracts and
compliance in good faith (element of
sincerity and honesty to prevent one party
from taking advantage).
D. MUTUALITY (Art. 1308-1310, NCC) - The
contract must bind both contracting parties; its
validity or compliance cannot be left to the will
of one of them.
- Art. 1308-1310 are co-dependent from each
other
- It is based on the essential equality between
the parties.
CONSEQUENCES OF MUTUALITY:
1. A party cannot revoke or renounce a
contract without the consent of the other,
nor can it have it set aside on the ground
that he made a bad bargain; and,
- The court cannot interfere with the
terms and stipulations of the
contract, it cannot even replace it
with its judgment.
 12
2. Validity or compliance cannot be left to the transmissible, anyway, this is a source of
will of one of them. obligation.

GENERAL RULE: Compliance with a contract Exceptions:

cannot be left to the will of one of the contracting
party. (Art. 1308)
EXCEPTION:
Art. 1309, NCC- Determination of its performance
may be left to a third person which shall bind the
parties only after it has been made known to
both of them.
Example 1: For example you entered into a
construction contract, compliance with the contract
cannot be left to the will of one of the contracting
parties. However, if there is a clear stipulation,
particularly a stipulation of arbitration, that in case
of differences in the interpretation of the contract,
the parties will submit any conflict to an arbiter and
will follow the opinion of the arbiter.
Example 2: In a contract of sale, when you cannot
decide on the price of the property, and it is
stipulated in the contract which is made known to
both of them that they will follow the determination
of an appraiser to fix the price.
1. Contracts are not transmissible by their
nature;
Example: Contracts involving personal
qualifications like singing, painting,
designing; or those personal in nature, or
what we call intuitu personae; contracts
relating to family relations, parental
authority, action for nullity or annulment of
marriage, legal separation, cohabitation
2. Contracts are not transmissible by
stipulation; or
If it is clearly stipulated in the contract that it
is not transmissible, it ends with the parties,
then follow what is stated because of
obligatoriness or force of law.
3. Contracts are not transmissible by
provision of law.
Example: Criminal responsibility under Art
89 of the RPC, contract of agency (hindi
pwede na principal gave an authority to an
agent, then the agent will give that authority
to another sub-agent), partnership,
commodatum

-The determination by a third person must be
known by both parties.
Qualification to Art. 1309: Art. 1310- A contracting
party is not bound by the determination if it is
evidently inequitable or unjust as when the third
person acted in bad faith or by mistake.
- For example, there is a stipulation by
arbitration, however the ruling of the arbiter
to settle clearly shows bad faith in his
decision or bias in his decision then the
parties are not bound to the determination
of the third person.
N.B. The courts will decide what is equitable.
E. RELATIVITY (Arts. 1311, 1312, 1313, 1314
and 1317, NCC) - Contracts take effect only
between the parties, their assigns and heirs.
- Also called privity of contracts
- Art 1317: unauthorized contracts
- This is the general rule
Principle of Relativity of Contracts (Art 1311)
Take note of the principle of relativity of contracts or
the principle of transmissibility of rights
Example:
A is indebted to B for P300,000. If B dies, then A is
indebted to the heirs of B. If B assigns his rights to
C, then A has to pay C P300,000. So, it is
FOUR (4) EXCEPTIONAL CASES WHEN
STRANGERS OR 3RD PERSONS ARE
AFFECTED BY A CONTRACT
General Rule: A third person who has not taken
part in a contract is a stranger to the contract. So,
he has no standing in law to demand enforcement
of the contract, or question the validity of the
contract.
Exceptions:
A. Contract containing a stipulation in favor of
a third person (Stipulation Pour Autrui) -
Art 1311, par. 2
Stipulation Pour Autrui - a stipulation in a contract
which clearly and deliberately confers a favor upon
a third person who has the right to demand its
fulfillment.
Requisites of a Stipulation Pour Autrui:
1. There must be a stipulation in favor of a
third person;
2. The stipulation must be a part, not the
whole of the contract;
3. The contracting parties must have clearly
and deliberately conferred a favor upon a
third person, not a mere incidental benefit or
interest;

4. The third person must have communicated
his acceptance to the obligor before its
revocation; and
5. Neither of the contracting parties bear the
legal representation or authorization of the
third person.
Example:
A is indebted to B for P150,000 with 10%. Stated in
the promissory note is that the interest of 10% or
P15,000 will go to C, a third person. So, A is
obliged to deliver P15,000 to C. If C communicates
his acceptance, then we have a stipulation pour
autrui.
If A fails to give the P15,000 to C, C has the right to
enforce the contract of A and B.
Example:
A and B entered into a construction contract where
A is obliged to construct a house in the property of
B. C has an adjoining property and building the
house will be beneficial to C kasi magkakaroon
siya ng daan. Thereafter, A and B changed their
contract. May C sue A and B for breach of
contract?
No. The fact that C only has incidental benefit or he
only derives some kind of benefit from the contract
gives him no right to sue A and B. That is not a
stipulation pour autrui.
B. In contract creating real rights (Art 1312,
NCC)
Third persons who come into possession of the
object of a contract over which there is a real right,
are bound thereby even if they were not parties to
the contract.
Example:
A entered into a contract of B for the sale of his
agricultural land. C is a tenant. Under the Agrarian
Reform Law, B must respect the rights of C.
Example:
A is indebted to B for P1 million with an accessory
obligation of real estate mortgage. A sold the land
to C which is the subject matter of REM (it is merely
a collateral and ownership still belongs to the
mortgagor). C must be bound by the REM. That is
contracts creating real rights.
C. In contracts entered into to defraud creditors
(Art. 1313, NCC)
The creditor is given the right to impugn the
contracts of his debtors to defraud him.
Example:
13
A owes B 500K. A owes C 1 Million and A owes D
300K. All due and demandable. A donated all his
properties to E. B, C, and D may seek the
rescission on the contract of donation because it is
entered clearly to defraud the creditors.
D. In contracts which have been violated at the
inducement of third person (Tortious
Interference, Art. 1314, NCC)
Any third person who induces another person to
violate his contract shall be liable for damages to
the other contracting party.
- Interference is penalized because it violates
the property rights of the party in a contract
to reap the benefits that should result
therefrom.
Requisites of Unlawful or Tortious Interference
a. Existence of a valid contract;
b. Knowledge on the part of the third
person of the existence of the contract;
and,
c. Interference of the third person is
without legal justification or excuse.
Example:
A and B entered into a contract of sale of a parcel
of land. C, who has knowledge of the existence of
the contract induces A “wag mo na ituloy yung
contract ninyo ni B. Ibigay mo nalang sakin yan”. B
now, may sue C for damages.
Example:
A entered into a contract of lease with B (sa
palengke). C now, induces A to lease it to him
rather than to B. There is already existence of a
valid contract, there is knowledge on the part of C
and there is interference without justifiable excuse.
B may sue C for damages.
REMEDIES:
1. The wronged party is entitled to damages,
but the liability for damages of the meddler
cannot be worse than the liability of the
contracting party who breached the
contract; or
- Take note: under Art 1314 medyo
may discrepancy between the third
party and the party who breach the
contract because of tortious
interference.
2. Injunction is also a proper remedy to
restrain such unlawful interference.
UNAUTHORIZED CONTRACTS
● Art. 1317, NCC
 14
● General Rule: No one may contract in the
name of another

● Effect of Unauthorized Contract: Contract

is unenforceable

● Exceptions:
a. The person entering into a contract in
the name of another has been
authorized by the latter;

Example: There is SPA to sell the property. In the

contract of sale, you enter the name of the seller
represented by the agent. That is considered as
authorized.

b. He must have by law a right to

represent him;

Example: A legal guardian of a minor child or

administrator of property.

c. The contract was subsequently

ratified.

Note: The effect of ratification is generally

retroactive. But, the ratification must be clear and
express so as not to admit any doubt or vagueness.

Example: C, without any authority sold the property

of A to B. C acted without any authority. However, if
A will ratify the sale, it may be expressly by making
a document ratifying the act or impliedly if A will
receive the purchase price of the sale. That is
ratification which has a retroactive effect.

What if C has authority but acted beyond his

authority? For example, C has the authority to
mortgage the property but instead he sold it. That is
already beyond his authority. That is considered an
unauthorized contract. But, with ratification from the
owner or seller then it also has a retroactive effect.

Ratification has retroactive effect as if the authority

was previously given before the act and the only
exception here is if it affects the right of the third
person.

March 28, 2023
A. ESSENTIAL ELEMENT-
So it is called essential because without
which there is no contract. The essential
elements is also subdivided into three
classifications:
1. Common Essential Elements- the three
essential elements, meaning it is common
to all contracts. It must have CONSENT,
OBJECT, CAUSE/CONSIDERATION.
2. Special Essential Elements- it is present in
specific contracts. For example, in donation,
for purposes of validity, it must have an
acceptance. There are contracts, for
purposes of validity, it must follow a certain
form or formality or solemnity.
Real contracts- one essential element is
delivery
3. Extra-ordinary or Peculiar Essential
Elements- peculiar elements which are
present in specific contract.
For example:
In sale, there is no sale if there is no price.
The price is the peculiar essential element
in the contract of sale.
In a lease, the peculiar essential element is
rent or in a REM or Chattel Mortgage, there
must be a principal loan or principal
contract.
B. NATURAL ELEMENT- it is present, it is inherent
unless there is a stipulation to the contrary.
For example: in a contract of sale there are
warranties against eviction and warranties against
hidden defects.
C. ACCIDENTAL ELEMENTS-
Go back to the characteristics of contracts
particularly on autonomy or the freedom to
stipulate. There are certain elements that should be
complied with because it was mutually agreed by
the parties.
For example: A contract that carries with it a
penalty. A contract that carries with it conditions. A
contract that carries with it periods or a contract
that carries with it interest.
Note: Speaking of interest may MR yong Lara
Case. The Lara case states the rule concerning
interest. The MR was September 2022 but the
decision came out on March 13, 2022. Ma’am will
dissect it first before sharing it with the class.
15
For purposes of this review, we will review the
common elements of a contract.
Why common essential elements? Because without
which there is no contract. Art. 1318 of NCC
provides the essential elements of a contract.
IN GENERAL
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; and
3. CAUSE of the obligation which is
established. (Art. 1318, NCC)
CONSENT
Concept. Consent is the conformity of the parties
to the terms of the contract; the acceptance by one
of the offer made by the other; the concurrence of
the minds of the parties on the object and the
cause which shall constitute the contract.
It begins with an offer. There is also acceptance on
the part of the other party, not only as to the
principal object of the contract but it also includes
all stipulation/ conditions provided for or mutually
agreed upon by the parties.
Note: Consent is the meeting of the minds between
the parties to a contract.
How is consent manifested?
MANIFESTATION. Consent is manifested by the
meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the
contract. (Art. 1319)
You have the offerer making an offer and the
offeree accepting the offer made by the offeror.
REQUISITES:
a. An OFFER that must be CERTAIN;
b. An ACCEPTANCE that must be
UNQUALIFIED and ABSOLUTE; and
Note: In some books tama na itong
requisites na ito, iyong OFFER at
ACCEPTANCE. However, as we go along
with the provisions of consent, there is a 3rd
requisite.
c. In addition to the subject matter and the
consideration, the area of agreement must
extend to ALL that the parties deem
material.

Illustration 1:
Is this a definite offer? I am selling my 300 sq m
parcel of land located at Pugo, La Union for 500K.
Do you find that definite or a certain offer?
Answer: Yes.
Illustration 2:
I might sell my land in Pugo for 500 K. That is not a
definite offer.
Acceptance must be unqualified and absolute.
Illustration:
I am selling my parcel of land located at Pugo, La
Union for 300K. B stated that “I am willing to buy it
for 250K”. Is that acceptance?
Answer: NO. It is qualified. So the acceptance or
terms of B or the offeree becomes a counter-offer.
Question: Is there a perfected contract?
Answer: None because there is no acceptance.
OFFER
DEFINITION. “Offer” means a unilateral proposition
which one party makes to the other for the
celebration of the contract.
The OFFER must be CERTAIN.
EFFECTIVITY. An offer is effective until either party
becomes incapacitated, or until the offer is
withdrawn by the offerer.
Note: The offer remains effective unless either
party becomes incapacitated or until the offer is
withdrawn by the offerer.
a. INCAPACITY- an offer becomes ineffective
upon the death, civil interdiction, insanity, or
insolvency of either party BEFORE
acceptance. (Art. 1332, NCC)
Note the qualification before acceptance is
conveyed, conveyed is the time when the offeror
learns of the acceptance of the offeree
Ex: A (inaudible) to B in the amount of 300K the
offer was made on May 1 2019, let's say B now
accepted it in the afternoon of May 1 2019, on the
same day in the afternoon however it was not
communicated to A the offeror, before it was
communicated to him, A died, the offeror died. May
B now communicate his acceptance to the heirs of
A?
A: No, because of incapacity. An offer becomes
ineffective upon the death, civil interdiction,
insanity, insolvency of either party before
acceptance is made known to the party.
16
B. WITHDRAWAL- As a general rule the
offeror may withdraw the offer at any time BEFORE
he learns the acceptance by the offeree.
In our example: sa sulat, the offer was made thru a
letter and it was sent May 1 2019, a reply for
acceptance thru a letter was also sent to the offeror
on may 1 2019 by the offeree, before it was
received or it was communicated, before the offeror
learns of the acceptance, can he withdraw?
A: Yes, as a general rule the offeror can withdraw
the offer at any time before he learns of the
acceptance, however an exception to the rule is in
case the offer has a period.
Ex: Offeror made an offer with a period, GR: if a
period is given go back to the basic provision that
you can withdraw it before you learn about the
acceptance of the offeree, offer may be withdrawn
at any time before acceptance by communicating
such withdrawal. Exception: The offer may not be
withdrawn when it is founded upon a consideration
as something paid or promised. (Art. 1324, NC).
Note: The consideration must be a separate and
distinct contract from the principal contract or
obligation.
Option contract- grants a person the choice for a
distinct and separate consideration, to purchase a
determinate thing at a predetermined fixed price.
Ex: Mam made an offer for you to buy her property
and she is giving you 10 days to decide and you
give an option money so within 10 days Mam
cannot offer that for any sale or she cannot
withdraw the offer. Q: Let us say on the 7th day,
mam withdraw the offer, what is the remedy of the
offeree?
A: In case of breach of an option contract, file for
damages, cannot ask for specific performance with
damages because this contract is separate and
distinct from the principal contract. All that you can
ask is for damages based on breach of the
contract.
Earnest money- consideration for breach of
contract. This is different from option money
because earnest money is part of the principal
contract. If earnest money is given, such is
evidence that a contract is already perfected
because it is part of the purchase price, so if
earnest money is given and the contract is
perfected and you withdraw the offer, there are
consequences now for breach of contract.
Right of First refusal:
Ex: Mam is an owner of the property, she has a
tenant and she gave the tenant the right of first
refusal, she gave him the right to buy the property
in case she will decide to sell the property. Q: Is the
Rights of First refusal an option contract?
A: Right of First refusal is not an option contract
because the instance of the right of the first refusal
came from the offeror, and it is considered as a
separate contract, and one important requirement
is a definite or certain offer from the offeror.

A: No, because it depends on whether the
offerer will decide to sell the property and on
terms that are not yet determinate.
You cannot consider this as a contract because
you cannot yet determine the offer. It depends on
whether the offerer will decide to sell the property
and on terms that are not yet determinate.
If for example, Ma’am removes that right of first
refusal, Ma’am is not in breach of any option
contract.
ADVERTISEMENTS
a. Unless it appears otherwise, business
advertisements of things for sale are not
definite offers, but mere invitation to make
an offer. (Article 1325, NCC)
Example:
In a newspaper or magazine, “House and lot for
sale located at Richville Subdivision, Baguio City.
Please contact Caloy.” A contact number is
indicated therein. Can that be considered as a
definite offer? NO. Because business
advertisments of things for sale are not definite
offers, but mere invitation to make an offer.
b. Advertisements for bidders are simply
invitations to make proposals, and the
advertiser is not bound to accept the
highest or lowest bidder, unless the
contrary appears. (Art. 1326, NCC)
Example:
In an advertisement in a newspaper, commercial
building here in Baguio City is open for bidding. A
submitted his bid of P5M, B submitted P6M, C
submitted P7M. Should the owner always choose
the P7M bid. NO. Advertisements for bidders are
simply invitations to make proposals. You cannot
compel the advertiser to choose the highest or
lowest bid.
However, there is an exception to the rule: Public
auctions in line with executions of judgment.
EXCEPT: Rule 39, ROC: “By express provision
of law in sale of properties under execution, it
must be sold to the highest bidder.”
c. Public advertisements offering rewards or
prizes, such as in contest or competitions,
constitute unilateral promise. When a
member of the public performs an act
pursuant to the offer, such action constitutes
an acceptance which converts the promise
into a contract binding on the advertiser.
Example:
Manalo ng P1M, motor, sasakyan, maglagay ka
lang ng 5 sachets of shampoo, ilagay ang address,
pangalan, edad, contact no. then there are drop
boxes on groceries and other public institutions. Or
may paraffle. If the public participated or performs
the act or instructions provided, it creates a binding
contract with the advertiser. From a promise, it
converts it into a contract.
ACCEPTANCE
● Another requisite of consent
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● If offer is a unilateral preposition coming
from the offerer, an acceptance must come
from the offerree
DEFINITION: Acceptance is the conformity by
the offeree to the proposition of the offerer.
Note: ACCEPTANCE must be ABSOLUTE and
UNQUALIFIED.
● If your acceptance carries with it certain
qualifications, that is not an acceptance but
merely a counteroffer.
● An offer with a counteroffer did not create a
perfected contract. There is no consent,
there is no meeting of the minds.
KNOWLEDGE OF THE ACCEPTANCE. The
acceptance of an offer must be made known to
the offerer. The contract is perfected only from the
time the acceptance of the offer is made known to
the offerer. Unless and until the offerer knows of
the acceptance, there is no meeting of the minds of
the parties, no real concurrence of offer and
acceptance.
● The acceptance of the offer must be made
known to the offerer for it to be binding.
Note:
● In case of incapacity, it may render the offer
ineffective if incapacity occurs before
acceptance.
● Or withdrawal of the offer: the offer may
withdraw anytime before the offerer has
knowledge of the acceptance of the offeree.
● The most important factor: KNOWLEDGE.
ACCEPTANCE MADE BY LETTER OR
TELEGRAM does not bind the offerer except from
the time it came to his knowledge. (Art. 1319,
NCC)
A letter containing the offer was given by A to B. B
also in a letter (snail mail - post office which may
take months), sinubmit niya yung kanyang
acceptance in its entirety of the entire proposition.
However, it was only made known to the offerer 3
months after the offer was made. When is it
binding? After 3 months, when the offer was now
made known to the offerer.
- The contract, in such a case (acceptance by
letter or telegram), is presumend to have
been entered into the place where the
offer is made.
An OFFER THROUGH AN AGENT is accepted
from the time acceptance is communicated to him.
The principal executed an SPA in favor of the
agent to sell the property. The agent on March 1,
2023, offered the sale of the property to A. On that
same day, it was accepted by A. Not knowing that
the principal also offered the same property for sale
to B on March 5, 2023. It was also accepted by B,
who has the better right?
It does not matter if the principal was the
one who also looked for a buyer.

NOTE: If an offer is made through an agent, then it
will be from the time it was communicated to him.
Who has better right?
It will be A when he communicated his
acceptance through the agent on March 1, 2023.
KINDS OF ACCEPTANCE:
a. Express; or,
-written or oral
b. Implied
-e.g The tale of the Girl selling
Hamburgers.(example ng Prof ni Ma’am sa
oblicon)
A Girl was selling hamburgers for P100.00
each. If one party took a Hamburger and said that I
will buy this, there is an express acceptance.
Implied acceptance- If one took a Hamburger-
sumenyas lang sya- there is an implied acceptance
that a contract is perfected.
In implied, there is still an overt act because
when it comes to acceptance, silence is not a
general rule.
SILENCE. In general, the offeree is not bound to
answer a proposal, and his silence per se cannot
be construed as an acceptance.
Exception. Acceptance may be implied from
silence if clearly warranted by the circumstances.
(Art. 1870, NCC).
If the offeree requires express acceptance, it
should be done expressly. (Art. 1321, NCC)
In Implied acceptance, there must always be an
OVERT ACT that would clearly manifest
acceptance and the only exception is Art, 1870,
NCC.
Comply with the express acceptance. Why?
Because of the third requisite that all other terms
agreed upon, you should comply with.
TIME, PLACE AND MANNER
RULE. The person making the offer may fix the
TIME, PLACE AND MANNER of acceptance, all
of which must be complied with. (Art. 1321,
NCC)
Example: I am selling my car here in Baguio for
P500,000.00 with a condition that it can only be
picked at a particular day. A communicated his
acceptance by saying that I will buy it but deliver it
in Mindoro. Is there acceptance?
NO, that is still qualified and it did not
comply with the time, place and manner that the
offeror is making.
a. An acceptance which is not made in the
manner, palace or period prescribed by the
offeror is not effective but constitutes a
counter-offer, which the offerer may accept
or reject.
An offer, then counter-offer, then an
offer again to counter the counter-offer, that
is how negotiation.
What if the offeror did not state the time of
acceptance?
18
If the time is not stated and the person and the
offeree is present, it means that there is
presumption that acceptance be made
immediately.
b. In general, when the offerer has not fixed a
period for the offeree to accept the offer,
and the offer is made to a person
present, the acceptance must be made
immediately.
REVOCATION OF ACCEPTANCE. Acceptance
may be revoked, but the revocation must be
made known to the offerer before he learns of
the acceptance.
Acceptance can be revoked provided you
have not yet communicated your acceptance to the
offerer.
ILLUSTRATION:
Question:
A offered 50 identical mobile phones to B for P
7,500.00 each. B answered that he (B) is willing
to purchase 70 identical mobile phones at the
same price each. Is the contract perfected?
(**I did not include the answers from the class)
What you have here is a general question. How do
you answer general questions? The facts are not
sufficient. Qualify your answer.
Answer: It depends. If B wanted 70 mobile phones
and not less, the contract is NOT perfected.
However, if B is contented with the 50 mobile
phones but desires an addition, the contract is
perfected for the 50 mobile phones and an offer for
the 20, if accepted, also warrants a perfected
contract.
CAPACITY TO GIVE CONSENT
Capacity- As a general rule, any person of LEGAL
AGE can give consent to a contract unless there is
a ground for his incapacity provided by law.
Note: Capacity is presumed. So the burden of
proof that one party is incapacitated to enter into a
contract is with the person alleging the
incapacity. It is not merely a preponderance of
evidence. Incapacity shall be proven by clear and
convincing evidence.
Incapacity: The following cannot give consent to a
contract:
a) Unemancipated minors;
All minors whether married or not, are
incapacitated to give consent to contract.
b) Insane or Demented Persons;
i) Contracts entered into during the lucid
interval are VALID. (Art. 1328, NCC)
If the insane person/party gave consent
during a lucid interval, the consent is valid
and the contract is perfected.

If you are not in your lucid interval but you
are on a manic stage, then the contract is
VOID because there is no consent.
ii) Contracts agreed to in a state of
drunkenness or during a hypnotic spell are
VOIDABLE. (Art. 1328, NCC)
It is merely voidable. It is valid until
annulled.
c) Deaf-Mutes who do not know how to
write; (Art. 1327, NCC)
- So deaf-mutes who do not know how to
write cannot give consent.
But note that this incapacity listed in the Civil Code
of the Philippines on incapacity to give consent are
already modified by certain rules. We have a
modification where a child/minor buys foods or
necessaries from a department store or fast food, it
creates a perfected contracted because this is
already modified by other rules and regulations.
Special Disqualifications
● Sec. 2, Rule 92 of the ROC – Incompetents
a. Those under civil interdiction;
b. Hospitalized lepers;
c. Prodigals or spendthrifts;
d. Deaf and dumb who are unable to read and
write;
e. Those of unsound mind even though they
have lucid intervals; and,
f. Persons not of unsound mind, but by reason
of age, disease, weak mind and other
similar causes cannot, without outside aid,
take care of themselves and manage their
property, becoming thereby an easy prey for
deceit and exploitation.
You have to read the above together with the
provisions under the Civil Code of the Philippines.
We also have relative disqualifications, these are
provisions scattered in the Civil Code.
Effect of Incapacity
- It depends if one party is incapacitated or
both parties are incapacitated and the other
party is disqualified.
a. If one of the parties to a contract is
incapacitated, the contract is voidable. (Art.
1390, NCC)
- Meaning, it is valid until annulled. In fact,
under voidable contracts, you can actually
ratify it. So if a minor enters into a contract,
the contract is merely voidable. When the
minor reaches age, s/he can ratify the
contract. Then the contract becomes valid.
b. If both parties to a contract are incapacitated,
the contract is unenforceable. (Art. 1403 and
1407, NCC); and,
c. If a party is disqualified by law, the contract is
void.
VICES OF CONSENT
19
- For purposes of emphasis, consent is an
essential element of a contract.
● Consent is essential to the existence of a
contract. If consent is absent, the contract is
non-existent.
● If consent is present, but it was given through
mistake, violence, intimidation, undue influence,
or fraud, the contract is voidable
Requisites of Consent
- Consent, in order to warrant a perfected
contract:
1. It should be intelligent or with an exact notion of
the matter to which it refers (INTELLIGENCE);
- If your consent is elicited through mistake,
then intelligence is missing or lacking.
2. It should be free (FREEDOM); and,
- There must be freedom to give consent.
- If your consent is elicited through violence,
intimidation, or undue influence, then there
is absence of freedom.
3. It should be spontaneous (SPONTANEITY).
- If your consent is elicited through fraud,
then there is absence of this particular
requisite.
Let’s now discuss the different grounds for vices
of consent. Let’s start with mistake or error.
Mistake or Error
- It is a false belief on something.
- Not all mistake or error is automatically
equivalent to vitiation of consent. There are
certain requisites that you should observe.
1. In order to invalidate consent, error or
mistake, it must be substantial regarding:
a. The object of the contract;
- Example: You thought you were
entering into a mortgage, it turned
out to be a contract of sale. Or you
are buying pesticide from another
person because your purpose is to
kill mosquitoes or insects in your
household. But it turns out that what
was given to you was air freshener.
There is now a substantial mistake
or error in the object of the contract.
b. The condition which principally moved one
or both parties to enter into the contract (it
may be error in quality or quantity); or,
- Error in quality: you thought you
were buying authentic clothes but it
turns out to be merely an imitation.
- Error in quantity: you were made to
believe that you are actually buying
a 600 sqm lot, but it turns out that it
is only 300 sqm.
c. Identity or qualifications but only if such was
the principal cause of the contract.
- Example: You hired a person for a
particular service. You thought that
he was an expert in International
Law to give a lecture. But it turns out
that he is not.

- Example: You hired a painter
specific to the qualification, but it
turns out that he is a singer or a
dancer and not a painter.
- Example: You took an advice
thinking that he is a doctor. You
bought a lot of vials of vaccine from
him. It turns out that he is actually a
medical representative.
Mistake of Account (a mathematical error)
a. Simple - contract is valid; remedy is
correction.
- Example: A bought P500,000 car;
P75,000 jewelry, and P60,000
appliances. Total is P635,000. But the
contract that they entered only states
P600,000. Can A annul the contract
because of a mistake as to the
accounting?
The law says that if it is only a simple
mistake of account, that cannot be
considered as vitiation of consent. If it is
merely a simple mistake of account,
your only remedy is to correct it.
b. Gross
● If it is not apparent - ground for
rescission;
● If it is apparent - liability
2. Error must be the causal, not merely
incidental factor that induced the
complaining party to enter into the contract.
For example, you bought a DVD copy of a movie,
when you watched it, you got bored. Can you ask
for the annulment of the contract because of a
mistake? No. Because when you get bored by the
movie that is merely an incidental factor but not the
causal factor that induced you to give consent.
3. Error must be a mistake of fact and not of
law.
If it is a mistake of law, Article 3 of the NCC will be
applied, ignorantia legis non excusat.
Mistake of fact, there shall be a substantial
mistake as to the object or as to the conclusion
that induced tha party to give its consent or to the
identity or qualification.
NOT ERROR OR MISTAKE
1. Mistake as to the designation will not vitiate
consent, as long as the intended object is
clear.
For example, you bought a parcel of land, in the
Deed of Sale, there is a typographical error in the
TCT No. Both the buyer and the seller refer to the
same parcel of land, it will not vitiate the consent.
2. There is no mistake if the party alleging it
knew the doubt, contingency or risk
affecting the object of the contract. (Art.
1333, NCC)
20
For example, you bought “gayuma” in Quiapo,
doubting the effectivity of this gayuma. If it is not
effective, will you ask for the annulment of the
contract? No.
RULE IN CASE OF INABILITY TO READ OR
UNDERSTAND
Art. 1332, NCC
PRESUMPTION: MISTAKE or FRAUD if (1) one of
the parties is unable to read; or (2) the contract is in
a language not understood by him.
Burden of proof is with the party alleging that the
contract is duly explained to the party and the party
understands the contents, stipulations, terms and
conditions even if it is not in the language
understood.
RATIONALE: Art. 24, NCC- In all contractual,
property or other relations, when one of the parties
is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental
weakness, tender age or other handicap, the courts
must be vigilant for his protection.
MUTUAL ERROR
Can be considered as vitiation of consent if the
following requisites are present:
ART. 1334, NCC
a. There must be mutual error;
b. The error must refer to the legal effects of
the agreement; and,
c. The real purpose of the parties is frustrated.
For example, A and B are buyers of a party (50-50
in the purchase price), C is the seller. It turns out na
hindi lang 50-50 but they have to pay back taxes,
capital gains, transfer taxes, which are not made
known to them. Can A and B back out from the
contract? Yes. Because there is mutual error.
There is an error which refers to the legal effects of
the agreement and the real purpose of the parties
is frustrated. So, all along what they know is that
they are going to share in the purchase price. They
are not aware that they have to pay/do the
following:
1. If the property is subject to loan, they will
pay for that
2. Pay the other expenses in line with the sale
3. The squatters have to be ejected
So, the real purpose of the parties is frustrated.
How if only A knows? Is there vitiation of
consent?
None. Because under Art 1334, there must be
mutual error or mistake.
Note: Do not confuse this with reformation of
contracts.
DISTINGUISH FROM REFORMATION:
Real agreement is not disclosed.

This has something to do with the interpretation of
the contract. Here, the contract does not state or
does not present the real intention of the parties.
So, you agreed on a mortgage. However, the
contract seems like it is worded that it is already a
sale. The real agreement is not disclosed.
Remedy: Ask for the reformation of the contract.
Do not ask for its annulment.
VIOLENCE & INTIMIDATION or THREAT
Violence - refers to physical coercion
Example: B is poking A continuously so that the
latter will sell his land to the former. A was
annoyed. Because of annoyance, he signed the
contract or was compelled to sell his land to B. Is
there violence?
Intimidation or Threat - moral coercion
Requisites for violence to vitiate consent:
a. Employment of a serious or irresistible
force; and
- Continuously poking someone cannot
be considered a serious or irresistible
force
- It would be different if you are being
beaten up or a gun is pointed at you for
you to sign the contract
b. It must have been the reason why the
contract was entered into.
- This is present in all vices of consent
- If there are other reasons, then the
contract is valid.
Requisites for intimidation or threat to vitiate
consent:
a. Reasonable and well-grounded fear of an
evil;
b. Evil must be imminent and grave;
c. Evil must be upon his person or property, or
that of his spouse, descendants or
ascendants;
- Example: When a gun is pointed at
your family if you will not sign the
contract
d. It is the reason or the determining cause
why he enters into the contract; and
e. The threat must be an unjust act or an
actionable wrong.
- If it is just act, for example, “ I will sign
this pero ‘pag niloko mo ako, I will file a
case of estafa against you” - this
cannot be considered an intimidation or
threat
- Another, in compromise agreement,
“Pirmahan mo na ‘yan para
makpagbayad ka, ‘pag hindi, magfafile
ako ng criminal case against you” - this
is not an intimidation or threat because
it is a just act available to the other
contracting party
Reverential fear - fear of displeasing a person to
whom respect and obedience are due (Art 1336)
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Note: When it comes to violence or intimidation,
even undue influence, it may be committed by a
third person, not necessarily the contracting parties.
So, if you have a reverential fear over another
person, that other person not being a party to the
contract, but because of reverential fear (more on
the category of undue influence), and that is the
determining cause why you entered into a contract,
you can annul the contract because of the act of a
third person.
UNDUE INFLUENCE
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.
The following circumstances shall be
considered:
a. The confidential, family, spiritual and other
relations between the parties; or
- This is always present
- That is why reverential fear is more
applicable here
b. The fact that the person alleged to have
been unduly influenced was suffering from
mental weakness, or was ignorant or in
financial distress
- Financial distress per se cannot always
automatically be considered as a factor
of undue influence.
NB: Undue influence shall annul the obligation,
although it may have been employed by a third
person who did not take part in the contract (Art
1336)
- If undue influence, violence or intimidation is
made by a third person, you can actually
annul a contract even if violence, undue
influence, intimidation or threat is not made
by the contracting party but by a third
person
CONTRACTS OF ADHESION
Definition:
One wherein almost all of the provisions are
drafted by one party. The participation of the
other party is limited to affixing his signature or
his “adhesion” to the contract.
Kaya nga eto adhesion to the contracts.
Note: This contract is common to insurance
contracts. In insurance contract, meaning it is
human nature that you don’t want t be reading a
booklet. A booklet of a contract with a font size of 9
or 8 and with certain terms that you cannot even
understand. You only have to listen to the gist from
your agent. Almost all of the terms are prepared by
the other party and you, as the insured, all you
have to do is to signify or affix your signature.
RULES:

1. Any ambiguity, obscurity or doubt in a contract
of adhesion is construed or resolved strictly
against the party who prepared it.
- Go back to Art. 24 of the NCC wherein the
courts should be vigilant, should take care
or should protect the party especially if the
other party who enters into contract of
adhesion are those which are at a
disadvantage.
- Any ambiguity, obscurity or in doubt should
be construed or interpreted strictly against
the party who prepared it.
2. In some exceptional cases, the court may even
set aside prejudicial stipulations in an
adhesion contract.
- Example:
1. Yung mga ticket sa bus. Usually,
you get your ticket which is actually
a contract of adhesion because at
the back of the ticket it states the
limited liability of a common carrier.
In case of accidents, that cannot be
used by the bus company. That is a
contract of adhesion. Limiting liability
is against the law and these are
prejudicial stipulations which can be
set aside by the courts.
2. Yung mga inconvenient venues. You
entered into a contract and you are
in Mindanao. Ang nakalagay doon in
case of litigation only the courts in
Manila is the proper venue. These
are prejudicial stipulations or
contracts of adhesion.
Another vices of consent:
FRAUD OR DOLO
In general: There is fraud, 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, NCC)
There are two kinds of dolo:
1. Dolo insidente
2. Dolo causante
Under Art. 1338, you are referring to dolo
causante.
DOLO CAUSANTE - fraud employed prior or
simultaneous to the creation of the contract.
Or fraud employed to elicit consent from the other
party. In dolo insidente, there is already a valid
contract. However, there is dolo insidente in the
performance of the obligation or the terms and
conditions of the contract.
REQUISITES OF FRAUD TO VITIATE CONSENT:
22
a. It must have been employed by one of the
contracting party upon the other;
- It is an exception to Art. 1336.
- Note: violence, intimidation and
undue influence can be considered
vices of consent even if it is
committed by 3rd person and not a
party to the contract. BUT for fraud,
it must only be committed by the
contracting party.
b. It must have induced the other party to enter
into a contract;
- Kaya nga these are frauds
simultaneous to the creation of the
contract.
c. It must have been serious; and,
d. It must have resulted in damage and injury
to the party seeking annulment.
DETERMINATION OF FRAUD
1. Failure to disclose facts, when there is
duty to reveal them, as when the parties
are bound by confidential relations,
constitutes fraud. (Art. 1339, NCC)
Example:
You have here a seller of a land and then a
buyer. The buyer consults A “Balita ko
magpapatayo ang SM dito from residential,
it will become a commercial land, when I
buy this land from you in the future, it will
have a higher price, is that true?” Is there an
obligation on the part of the seller to
disclose those facts? Assume that the seller
knows those facts. There is no obligation
on the part of the seller. This cannot
constitute fraud if the buyer buys the
property.
However, if A, aside from being the seller is
also the financial adviser of B. There is a
confidential relations or duty to disclose
such facts and there was failure on the part
of A to disclose it, therefore, there is now
fraud that vitiates consent.
Sa corporation din, you can apply this.
2. The usual exaggerations in trade, when
the other party had an opportunity to know
the facts are not in themselves fraudulent.
(Art. 1240, NCC)
Example:
I am the seller. Etong car ko is faster than
the speed of sound. Those are
exaggerations in order for sale.
Meron din naman kayong the buyer beware. So the
other party had the opportunity to know the facts,
that cannot be considered as fraudulent.

3. A mere expression of an opinion does not
signify fraud. (Art.1341, NCC)
Example: You’re buying kitchen ware and asked
the seller and the latter said “I think antique mga
ito”. You bought the plates and it turns out that it
wasn’t antique. Does it signify fraud? No.
EXCEPT: (1) made by an expert; and (2) the
other party has relied on the former’s special
knowledge
If it falls on the exception then there is now fraud.
Example: The seller is an antique enthusiast and
you relied on the special knowledge of the other
party and it turns out it was not antique then there
will be fraud.
23
REQUISITES OF SIMULATION:
a. An outward declaration of will different from
the will of the parties;
b. The false appearance must have been
intended by mutual agreement; and,
c. The purpose is to deceive third persons.
TYPES OF SIMULATION
A. ABSOLUTE SIMULATION - when the
parties do not intend to be bound at all.
Example: You agreed to a contract of sale but there
was no delivery, there was no payment of the
purchase price.
i. An absolute simulated or fictitious contract is void
(Art. 1346, NCC), because consent is totally
absent.

4. Misrepresentations by a third person does ii. Absolutely Simulated Contract v. Fraudulent

not vitiate consent. (Art. 1341, NCC) Contract

EXCEPT: (1) Such misrepresentation has

created substantial mistake; and (2) the same is
ABSOLUTELY FRAUDULENT
mutual. (Art. 1342, NCC)
SIMULATED CONTRACT
5. Misrepresentation in good faith is not No contract really exist A contract exist and
fraudulent but may constitute error. or was intended; it may was intended to take
thus be attacked by effect (for a fraudulent
Misrepresentation in good faith is not fraudulent but any creditor, at any purpose). If intended to
may constitute a vice of consent under mistake or time, and even if the defraud a creditor, it
error. debtor is not insolvent. may be rescinded by
the creditors prior to
Pero kung simple mistake or error lang yan that can Example: Binenta ko the contract, upon
be remedied not by annulment. Note for mistake property ko pero showing that the debtor
and error there must be substantial consideration naglabas ako Deed of is insolvent, and within
as to the object, identity or qualifications, and even Sale between me and a prescription period of
the conditions which is the principal force of my brother but that four years.
entering into a contract. Deed of Sale has no
consideration at all and Example: I have failed
EFFECTS OF FRAUD no delivery was made, to pay all due and
A. DOLO CAUSANTE - makes the contract it was not transferred to demandable
voidable, provided that it is (a) serious and my brother. The obligations and they
(b) has not been employed by both creditors may attack it are going after my
contracting parties (Art. 1344, NCC) any time. property. So what I did
is that I executed a
Dolo Causante makes the contract voidable Deed of Donation in
because it vitiates consent. If it is employed by both favor of my brother with
parties then we apply the pari delicto doctrine. the purpose na di ako
habulin ng creditors.
B. DOLO INCIDENTE - only obliges the
person employing it to pay damages. (Art.
1344/1171, NCC) B. RELATIVE SIMULATION - when the
parties conceal their true agreement.
SIMULATED CONTRACTS
DEFINITION: Simulation occurs when an apparent Example: We agreed on a sale but really our
contract is a declaration of a fictitious will, intention is an equitable mortgage; Even if we
deliberately made by the agreement of the partes, agreed on a sale what we executed is a donation in
on order to produce, for the purpose of deception, order to pay lesser tax.
the appearance of a juridical act which does not
exist or is different from that which was really The real and true agreement is binding on the
executed. parties, provided that:
1. It does not prejudice third person; and
In other words a simulated contract is where you 2. It is not intended for any purpose contrary to
don’t really intend to be vowed by the terms and law, morals, good customs, public order or
conditions. public policy.

OBJECT OF CONTRACTS
DEFINITION. Object is the thing, right or service
which is the subject matter of the contract. (Arts.
1318 and 1347, NCC)
REQUISITES FOR A THING, RIGHT OR
SERVICE TO BE AN OBJECT OF CONTRACTS:
1. WITHIN THE COMMERCE OF MAN - All things
which are not outside the commerce of man,
including future things, may be the object of
contracts.
“Within the commerce of men ''-meaning it can
be appropriated or can be subject to private
ownership. Matters not within the commerce of men
include political rights, purely personal rights arising
from family relations (support), public office or
property of public dominion.
a) All rights which are not intransmissible may also
be the object of contracts. (Art. 1347, NCC)
Note: All rights are transmissible except if it
expressly provided for by law, nature, or stipulation
of the parties.
b) All services which are not contrary to law,
morals, good customs, public order or public policy
may likewise be the object of a contract
c) GENERAL RULE: Future things can be the
object of contracts.
Illustration: At the time the contract was executed,
the object or thing is not yet owned or in existence
(i.e crops,puppies) but if the time comes, it is
determinable, the contract is perfected.
EXCEPTION: No contract may be entered into
upon future inheritance, except in cases expressly
authorized by law (Art 1347, NCC)
Example: Partition inter vivos. During the lifetime of
the decedent, he or she can distribute or partition
his or her properties, however, such partition shall
take effect only upon death and is revocable during
the lifetime of the decedent.
2. POSSIBLE- Impossible things or services cannot
be the object of the contract. (Art. 1348, NCC)
It can be physically (i.e. make my dog talk) or
legally impossible (to sell drugs at school, to build a
prostitution den)
3. CERTAIN
i. AS TO KIND. The object of every contract must
be determinate as to its kind.
ii. AS TO QUANTITY. The fact that the quantity is
not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to
determine the same, without the need of a new
contract between the parties. (Art. 1349, NCC)
Illustration (as to the quantity): A has 500
sheeps. The contract states that B may own all the
black sheeps that A has. At that time it cannot be
determined, however, there is a possibility to
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determine all black sheeps without a need of a new
contract between the parties.
CAUSE or CONSIDERATION OF CONTRACTS
IN GENERAL. The essential reason which moves
the contracting parties to enter into it. In other
words, the cause is the immediate, direct and
proximate reason which justifies the creation of an
obligation through the will of the contracting parties.
Note: Do not confuse this with the OBJECT of the
contract. The object is the things, right or service;
while the cause is the essential reason why the
parties entered into a contract.
CAUSE OF CONTRACTS:
1. In ONEROUS CONTRACTS the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the
other. (Art. 1350, NCC)
Ex. In a contract of sale of a parcel of land. The
object is the parcel of land. The cause, as to the
seller, is the payment that will be given by the
buyer; while for the buyer, the cause is the delivery
of the land to his or her name.
2. In REMUNERATORY CONTRACTS - the cause
is the service or benefit which is remunerated. (Art.
1350, NCC)
This is not pure liberality. For example, giving
bonuses to employees by the employer. The bonus
is an award for loyalty or efficiency on the part of
the employees. The cause on the part of the
employer is the service of benefit which is
remunerated
3. In GRATUITOUS CONTRACTS the cause is the
mere liberality of the benefactor (Art. 1350, NCC)
Ex. Donation of land. The land is the object and the
liberality is the cause of the contract.
CAUSE v. MOTIVE
Cause is the essential reason for the contract,
motive is the particular reason of a party entering
into a contract and which does not affect the other
party.
Example: In a contract of sale of a laptop (onerous
contract). The cause is the undertaking on the part
of the buyer to pay the purchase price and the
undertaking on the part of the seller to deliver the
object of the contract.
Q: Is the reason by the buyer for buying the
laptop important?
A: NO, it is immaterial and is not an essential
element of the contract.
GENERAL RULE: A party's motives for entering
into the contract do not affect the contract. A party's
motive does not even have to be known to the
other party.
EXCEPTION: The motive may be regarded as the
cause "when the motive predetermines the cause"

Example: The National Housing Authority (NHA) is
buying lands. What is their purpose in buying the
lands? Because it will be used for socialized
housing. If their motive in buying the land is to use
for socialized housing. But if they bought lands
outside or not suitable for socialized housing then
their motive now becomes the cause. So They
rescind or annul the contract because of their
motive which is also the cause of the contract.
EXISTENCE OF A CAUSE
RULE: Contract MUST have a cause, as it is an
essential requisite. Contracts without cause
produce no effect whatever. (Art. 1352, NCC)
PRESUMPTION: Although the cause is not stated
in the contract, it is presumed that it exists (and is
lawful), unless the debtor proves the contrary. (Art.
1354, NCC)
LEGALITY OF CAUSE
RULE: The cause MUST be legal. Contracts with
unlawful cause produce no effect whatever. (Art.
1352, NCC)
PRESUMPTION: The cause is presumed lawful.
Although the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the
debtor proves otherwise.
UNLAWFUL CAUSE: The cause is unlawful if it is
contrary to lawn morals, good customs, public order
or public policy.
***if it is contrary to law the contract is considered
unlawful.
Example 1: You contracted with a person to build a
drug den within a residential area. This is contrary
to law.
Example 2: You donated a land for the purpose of
sexual relations. Or donations in favor of the
mistress.
FALSE CAUSE: The statement of a false cause in
contracts shall render them void, unless it should
be proved that they were founded upon another
cause which is true and lawful.
Example: You are the seller and you believe a
theme park will be built within your vicinity where
your land is located. Then the adjacent lands will
follow the zonal value from a residential area to a
commercial land ( this was what you said to the
buyer). You know that it is true that a theme park
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will be built. Then the buyer bought the land ,
however, the owners of the theme park chose to
open it to another land or place. Thus a statement
of false cause in a contract shall render them void
but with an exception wherein if you can prove it
that it is founded upon another cause which is true
and lawful at the time that the contract was entered
into.
You have that true and lawful cause that the theme
park will be established then that is no longer your
fault if the theme park now chooses to build in
another place. Then, that will not affect the validity
of the contract.
ADEQUACY OF CAUSE
GENERAL RULE: Lesion (Injury) or inadequacy of
cause shall not invalidate a contract. (Art. 1355,
NCC)
EXCEPTIONS:
1. In cases specified by law: and
Example 1: Article 1602, You entered into a
contract of sale but the price is inadequate which is
evidence that you are not entering into a contract of
sale but into an equitable mortgage.
Example 2: Rescissible contracts concerning the
sale of the property of the ward by the guardian and
the purchase price is lesser than ¼ of the value of
the property.
2. If there has been fraud, mistake or undue
influence.
Example: If there was fraud, mistake or undue
influence in the sale of the property that constitutes
inadequacy of cost or price ( go back to Art. 24)
wherein the courts will fix the price.