2.

Vices of Consent
Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a)
Article 1338. There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would
not have agreed to. (1269)
Article 1331. In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally moved
one or both parties to enter into the contract.
Mistake as to the identity or qualifications of one of the parties will vitiate consent only when
such identity or qualifications have been the principal cause of the contract.
A simple mistake of account shall give rise to its correction. (1266a)
3. Option Contract
Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.

Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to
his knowledge. The contract, in such a case, is presumed to have been entered into in the place
where the offer was made. (1262a)
Article 1325. Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer. (n)
Article 1326. 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. (n)
Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a)
Article 1338. There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would
not have agreed to. (1269)
Article 1476. In the case of a sale by auction:

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price. (1451a)

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a
separate contract of sale.

Article 1324. When the offerer has allowed the offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by communicating such withdrawal, except when
the option is founded upon a consideration, as something paid or promised. (n)

(2) A sale by auction is perfected when the auctioneer announces its perfection by the
fall of the hammer, or in other customary manner. Until such announcement is made,
any bidder may retract his bid; and the auctioneer may withdraw the goods from the
sale unless the auction has been announced to be without reserve.

a.

Meaning of Consideration

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation.

4. Right of First Refusal

(4) Where notice has not been given that a sale by auction is subject to a right to bid
on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or
induce any person to bid at such sale on his behalf or for the auctioneer, to employ or
induce any person to bid at such sale on behalf of the seller or knowingly to take any
bid from the seller or any person employed by him. Any sale contravening this rule

5. Mutual Promise to Buy and Sell

Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price. (1451a)
B. PERFECTION
Article 1475. The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions
of the law governing the form of contracts. (1450a)

Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price. (1451a)
1.

When deviation allowed

2.

Sale by Auction

Article 1476. In the case of a sale by auction:

( f ) A representation as to the credit of a third person.

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a
separate contract of sale.
(2) A sale by auction is perfected when the auctioneer announces its perfection by the
fall of the hammer, or in other customary manner. Until such announcement is made,
any bidder may retract his bid; and the auctioneer may withdraw the goods from the
sale unless the auction has been announced to be without reserve.

(3) Those where both parties are incapable of giving consent to a contract.
Article 1326. 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. (n)
3.

Article 1482. Whenever earnest money is given in a contract of sale, it shall be

considered as part of the price and as proof of the perfection of the contract. (1454a)

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
(4) Where notice has not been given that a sale by auction is subject to a right to bid
on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or
induce any person to bid at such sale on his behalf or for the auctioneer, to employ or
induce any person to bid at such sale on behalf of the seller or knowingly to take any
bid from the seller or any person employed by him. Any sale contravening this rule
may be treated as fraudulent by the buyer. (n)
Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In
the following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum, thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from
the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of
another;
(c) An agreement made in consideration of marriage, other than a mutual
promise to marry;
**(d) An agreement for the sale of goods, chattels or things in action, at a
price not less than five hundred pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or some of them, of such
things in action or pay at the time some part of the purchase money; but
when a sale is made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of property sold,
terms of sale, price, names of the purchasers and person on whose account
the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the
sale of real property or of an interest therein;

Earnest Money vs Option Money

4.

Place of Perfection

Article 1391. The action for annulment shall be brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent
ceases.
In case of mistake or fraud, from the time of the discovery of the same.
And when the action refers to contracts entered into by minors or other incapacitated persons,
from the time the guardianship ceases. (1301a)
C. Formalities of the Contract
1. General Rule: Form Not Important
Article 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in
writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n)
Article 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of real
property or of an interest therein are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the
conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an
act appearing or which should appear in a public document, or should prejudice a third
person;

(4) The cession of actions or rights proceeding from an act appearing in a public
document.
All other contracts where the amount involved exceeds five hundred pesos must
appear in writing, even a private one. But sales of goods, chattels or things in action
are governed by articles, 1403, No. 2 and 1405. (1280a)

Article 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article
1403, are ratified by the failure to object to the presentation of oral evidence to prove the same,
or by the acceptance of benefit under them.

b.

Form Important for Validity

1. Sale of Realty through an Agent

2. Exception: When Form Important

Article 1874. When a sale of a piece of land or any interest therein is

through an agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void. (n)

a. Form Important for Enforceability

1. Statute of Frauds

2.

Article 1581. The form of sale of large cattle shall be governed by special
laws. (n)

Article 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;

Section 529 of the Revised Administrative Code provides:

Registration necessary to validity of transfer. No transfer shall be valid
unless the same is registered and a certificate of transfer obtained as herein
provided, but the large cattle under two years of age may be registered and
branded gratis for the purpose of effecting a valid transfer, if the registration
and transfer are made at the same time.

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In
the following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum, thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from
the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of
another;
(c) An agreement made in consideration of marriage, other than a mutual
promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a
price not less than five hundred pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or some of them, of such
things in action or pay at the time some part of the purchase money; but
when a sale is made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of property sold,
terms of sale, price, names of the purchasers and person on whose account
the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the
sale of real property or of an interest therein;

Sale of Large Cattle

3.

Electronic Commerce Act

Section 7. Legal Recognition of Electronic Documents - Electronic documents shall have the
legal effect, validity or enforceability as any other document or legal writing, and (a) Where the law requires a document to be in writing, that requirement is met by an
electronic document if the said electronic document maintains its integrity and
reliability and can be authenticated so as to be usable for subsequent reference, in
that i. The electronic document has remained complete and unaltered, apart
from the addition of any endorsement and any authorized change, or any
change which arises in the normal course of communication, storage and
display; and
ii. The electronic document is reliable in the light of the purpose for which it
was generated and in the light of all relevant circumstances.
(b) Paragraph (a) applies whether the requirement therein is in the form of an
obligation or whether the law simply provides consequences for the document not
being presented or retained in its original from.

( f ) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract.

(c) Where the law requires that a document be presented or retained in its original
form, that requirement is met by an electronic document if i. There exists a reliable assurance as to the integrity of the document from
the time when it was first generated in its final form; and

ii. That document is capable of being displayed to the person to whom it is

to be presented: Provided, That no provision of this Act shall apply to vary
any and all requirements of existing laws on formalities required in the
execution of documents for their validity.
For evidentiary purposes, an electronic document shall be the functional equivalent of a written
document under existing laws.
This Act does not modify any statutory rule relating to admissibility of electronic data massages
or electronic documents, except the rules relating to authentication and best evidence.
Section 8. Legal Recognition of Electronic Signatures. - An electronic signature on the
electronic document shall be equivalent to the signature of a person on a written document if
that signature is proved by showing that a prescribed procedure, not alterable by the parties
interested in the electronic document, existed under which (a) A method is used to identify the party sought to be bound and to indicate said
party's access to the electronic document necessary for his consent or approval
through the electronic signature;
(b) Said method is reliable and appropriate for the purpose for which the electronic
document was generated or communicated, in the light of all circumstances, including
any relevant agreement;
(c) It is necessary for the party sought to be bound, in or order to proceed further with
the transaction, to have executed or provided the electronic signature; and
(d) The other party is authorized and enabled to verify the electronic signature and to
make the decision to proceed with the transaction authenticated by the same.
Section 11. Authentication of Electronic Data Messages and Electronic Documents. - Until the
Supreme Court by appropriate rules shall have so provided, electronic documents, electronic
data messages and electronic signatures, shall be authenticated by demonstrating,
substantiating and validating a claimed identity of a user, device, or another entity is an
information or communication system, among other ways, as follows;
(a) The electronic signature shall be authenticated by proof than a letter , character,
number or other symbol in electronic form representing the persons named in and
attached to or logically associated with an electronic data message, electronic
document, or that the appropriate methodology or security procedures, when
applicable, were employed or adopted by such person, with the intention of
authenticating or approving in an electronic data message or electronic document;
(b) The electronic data message or electronic document shall be authenticated by
proof that an appropriate security procedure, when applicable was adopted and
employed for the purpose of verifying the originator of an electronic data message
and/or electronic document, or detecting error or alteration in the communication,
content or storage of an electronic document or electronic data message from a
specific point, which, using algorithm or codes, identifying words or numbers,
encryptions, answers back or acknowledgement procedures, or similar security
devices.

The supreme court may adopt such other authentication procedures, including the use of
electronic notarization systems as necessary and advisable, as well as the certificate of
authentication on printed or hard copies of the electronic document or electronic data messages
by electronic notaries, service providers and other duly recognized or appointed certification
authorities.
The person seeking to introduce an electronic data message or electronic document in any legal
proceeding has the burden of proving its authenticity by evidence capable of supporting a finding
that the electronic data message or electronic document is what the person claims it be.
In the absence of evidence to the contrary, the integrity of the information and communication
system in which an electronic data message or electronic document is recorded or stored may
be established in any legal proceeding a.) By evidence that at all material times the information and communication system or
other similar device was operating in a manner that did not affect the integrity of the
electronic data message and/or electronic document, and there are no other
reasonable grounds to doubt the integrity of the information and communication
system,
b.) By showing that the electronic data message and/or electronic document was
recorded or stored by a party to the proceedings who is adverse in interest to the party
using it; or
c.) By showing that the electronic data message and/or electronic document was
recorded or stored in the usual and ordinary course of business by a person who is
not a party to the proceedings and who did not act under the control of the party using
the record.