CHAPTER 2 ESSENTIAL REQUISITES OF - lease (Art.

1643, 1644)
CONTRACTS (GENERAL PROVISIONS)
- liberality in commodatum (Art. 1935)
ART. 1318 - There is no contract unless the
following requisites concur: A valid contract is one that manifests all the
essential elements of a contract.
(1) Consent of the contracting parties;
2) NATURAL ELEMENTS or those that are
(2) Object certain which is the subject matter presumed to exist in certain contracts unless the
of the contract; contrary is expressly stipulated by the parties, like
warranty against eviction (Art. 1548) or warranty
(3) Cause of the obligation which is
against hidden defects in sale (Art. 1561)
established. (1261)
3) ACCIDENTAL ELEMENTS or particular
CLASSES OF ELEMENTS OF A stipulations, clauses, terms or conditions
CONTRACT established by the parties in their contract (Art.
1) ESSENTIAL ELEMENTS or those without 1306) like conditions, period, interest, penalty
which no contract can validly exist regardless of etc. and therefore, they exist only when they are
the intentions of the parties. expressly provided by the parties.

They are also known as REQUISITES OF A GonziNotes:

CONTRACT. They are subdivided into:
PARTIES TO CONTRACT
- There must be at least 2 parties to every contract
a) COMMON or those present in all contracts
and their capacity and consent are essential to the
namely, (i) consent, (ii) object and (iii) cause
existence.
b) SPECIAL or those not common to all contracts
- The number of parties, however, should not be
or those which must be present only in, or
confused with the number of persons.
peculiar to, certain specified contracts and such
peculiarity may be: - A single person can represent 2 parties and one
party can be composed of 2 or more persons.
(i) as regards to FORM
CAPACITY OF PARTIES
EX. - Public instrument in donation of
immovable property (Art. 749) - The legal capacity of the parties is an essential
element for the existence of the contract.
- delivery in real contracts (Art. 1316)
- It is an indispensable condition for the existence
- registration in real estate mortgage (Art. 2125)
of consent because there is no effective consent
- chattel mortgage (Art. 2140) in law without the capacity to give such consent.

(ii) As regards the SUBJECT MATTER - Because of this connection of cause and effect
between the capacity and consent, the law does
EX. real property in antichresis (Art. 2132) not expressly enumerate the former as a separate
- personal property in pledge (Art. 2094) requisite for the validity of contracts.

(iii) As regards the CONSIDERATION or - Legal consent presupposes capacity.

CAUSE
EX. price in sale (Art. 1458)
 WANT OF CONSENT
- Consent is essential for the existence of a
contract and where it is wanting, the contract is
non-existent.
SECTION 1- CONSENT
ART. 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)
CONCEPT OF CONSENT
- The essence of consent is the conformity of the
parties on the terms of the contract, the
acceptance by one of the offer made by the other.
- It is the concurrence of the minds of the parties
on the object and the cause which shall constitute
the contract,
- The area of agreement must extend to all points
that the parties deem material or there is no
consent.
- Where there is merely an offer by one party
without an acceptance by the other, there is no
consent.
CONSENT is the conformity or
concurrence of wills (offer and acceptance)
and with respect to contracts, it is the
agreement of the will of one contracting party
with that of another or others, upon the object
and terms of the contract.
- It is the meeting of minds or mutual assent
between the parties on the subject matter and the
cause which are to constitute the contract even if
neither has been delivered.
- Mutual assent or agreement takes place when
there is an offer and acceptance of the offer.
ELEMENTS: Consent presupposes the
following requisites
(1) plurality of subjects
(2) capacity
(3) intelligent and free will
(4) express or tacit manifestation of the will and
(5) conformity of the internal will and its
manifestation
FORMS OF CONSENT
- The consent may either be express or implied.
- Not only is there an EXPRESS and an IMPLIED
OR TACIT CONSENT which produce true
contracts, but there is also a PRESUMPTIVE
CONSENT which is the BASIS OF QUASI-
CONTRACTS, thus giving rise to the multiple
juridical relations which results in obligations for
the delivery of a thing or the rendition of a
service.
MANIFESTATION OF CONSENT
- Consent is manifested by the concurrence of
offer and acceptance with respect to the object
and the cause of the contract.
OFFER BY ONE PARTY
* OFFER- is a proposal made by one party
(offeror) to another (offeree), indicating a
willingness to enter into a contract.
- It is more than an expression if desire or hope.
It is really a promise to act or to refrain from
acting on condition that the terms thereof are
accepted by the person to whom it is made.
* OFFER is a unilateral proposition which one
party makes to the other for the celebration of a
contract.
- It exists only if the contract can come into
existence by the mere acceptance by the offeree,
without any further act on the part of the offeror.
- It must therefore be (1) definite, (2) complete
and (3) intentional.
(1) DEFINITE the offer must be definite, so that
upon acceptance an agreement can be reached on
the whole contract.
- The offer must be distinguished from mere
communications indicating that a party is
disposed to enter into a certain contract or
inviting the other to make an offer.
- The offer must be certain and definite so that the
liability (or rights) of the parties may be exactly
fixed because it is necessary that the acceptance
be identical with the offer to create a contract
without any further act on the part of the offeror.
(2) COMPLETE The offer must be complete,
indicating with sufficient clearness the kind of
contract intended and definitely stating the
essential conditions of the proposed contract, as
well as the non-essential ones desired by the
offeror.
- Thus, in a contract of sale, the offer must specify
the object and the price.
(3) INTENTIONAL- An offer without
seriousness, made in such a manner that the other
party would not fail to notice such lack of
seriousness, is absolutely without juridical effects
and cannot give rise to a contract.
- But if by reason of the form or the circumstances
surrounding it or because of the fault of the
offeror, the offeree is induced to take it seriously,
it becomes necessary to determine whether the
real intention or the manifested intention should
prevail.
- In other legislations, like the German (Art. 118),
such declaration of will is considered void.
- In our code, there is no provision on the matter
but applying general principles, the rule is
acceptable in our law and the act must be held
void, although the other party who has been led
to believe it to be serious and intentional should
be indemnified for the damages he may suffer
thereby.
- An offer made in jest or in anger, or while
emotionally upset or in other ways indicating that
the same was not seriously intended is not a valid
offer.
- But lack of serious intent to enter into a contract
where such a condition was not apparent to the
offeree who honestly believed that the offer was
seriously intended, does not invalidate the offer.
MENTAL RESERVATION There is
mental reservation when a party makes a
declaration but secretly does not desire the
effects of such declaration.
- It exists when the manifestation of the will is
made by one party for the purpose of inducing the
other to believe that the former intends to be
bound, when in fact he does not.
- The mental reservation of the offeror, unknown
to the other, cannot affect the validity of the offer.
ACCEPTANCE BY OFFEREE
An offer that is not accepted does not give rise
to consent and the contract does not come into
existence.
- Thus, where it appears that the offeree not only
did not accept but rejected the offer, no contract
was created.
- To produce a contract, the acceptance must not
qualify the terms of the offer.
- It is necessary that the acceptance be
unequivocal and unconditional, and the
acceptance and the proposition shall be without
any variation whatsoever; and any modification
or variation from the terms of the offer annuls the
latter and frees the offeror.
* ACCEPTANCE is the manifestation by the
offeree of his assent to all the terms of the offer. -
- Without acceptance, there can be no meeting of
the minds between the parties.
- A contract consists of an offer and an acceptance
of that offer.
- The acceptance of an offer must not only be
clear; it must be absolute, unconditional or
unqualified, that is, it must be identical in all
respects with that of the offer so as to produce
consent or meeting of the minds.
- If the acceptance is qualified, as when it is
subject to a condition, it merely constitutes a
counter-offer which, in law, is considered a
rejection of the original offer and an attempt by
the parties to enter into a contract on a different
basis.
- A qualified acceptance must be accepted
absolutely in order that there will be a contract.
AMPLIFIED ACCEPTANCE
- Under certain circumstances, a mere
amplification on the offer must not be understood
as an acceptance of the original offer, plus a new
offer which is contained in the amplification.
- The intent of the offeree, however, controls.
COMPLEX OFFERS
- In cases where a single offer involves 2 or more
contracts, the perfection where there is only
partial acceptance will depend upon the relation
of the contracts between themselves, whether due
to their nature or due to the intent of the offeror.
SIMULTANEOUS OFFERS
- As a rule, the offer and the acceptance must be
successive in order that a contract may arise.
- One of the parties to the future contract should
take the initiative in making an offer.
- Although there is opinion to the contrary, when
there are crossed offers, no contract is formed
unless one of the parties accepts the offer
received by him.
- The acceptance may be inferred from the failure
of either party to immediately reject the offer of
the other.
- Before acceptance, either party may still revoke
his own offer.
SUCCESSIVE AGREEMENTS
- A contract may be so complicated that the
parties come to agreement on certain points at
different successive stages.
- it should be noted that the present article of the
code requires the concurrence of offer and
acceptance only as to the thing and the cause
which are to constitute the contract and not as to
all matters. We believe that intention of the
parties should control.
- if the intention of one or both parties is that there
be concurrence on all points, the contract is not
perfected if there is a point of disagreement, even
if there is already agreement on the essential
elements of the contract.
- Thus, in a contract of sale, the parties may have
already agreed on the thing and the price but not
on who should bear the expenses of
transportation of the thing upon delivery. If either
or both parties have declared that there must be
agreement on this point, the contract is not yet
perfected.
- If theres no declaration that agreement on an
accessory or subordinate matter is necessary , the
contract will be perfected as soon as there is
concurrence on the object and the cause.
- The regulation of the accessory points will then
be determined by future agreement and if there is
no agreement, by the general rules established by
law for the particular case in the absence of
agreement, such as the place of performance,
expenses for the delivery of the thing etc.
KNOWLEDGE OF OFFEROR
- Even if there has been an unconditional
acceptance of the offer by the offeree, no contract
will arise unless that acceptance is made known
to the offeror.
- Unless the offeror knows of the acceptance,
there is no meeting of the minds of the parties, no
real concurrence of offer and acceptance.
- This rule is expressly recognized in the second
paragraph of the article respect to acceptance by
letter.
- The same rule shall apply in case of acceptance
by telegram, cable or even by telephone, although
in the last case, the contract may be generally be
considered as between persons present.
THROUGH INTERMEDIARIES
- An intermediary who has no authority to
contract, but is limited to the transmittal of the
offer, the acceptance or both, may be treated in
the same light as the mail service.
- If he carries the offer and the acceptance in
written form, the rule applicable to acceptance by
letter will apply.
- If he carries the offer verbally and the
acceptance is also verbal, the perfection of the
contract will be at the moment he makes the
acceptance known to the offeror.
BY CORRESPONDENCE
- When the offer to buy was written or prepare in
Tokyo, Japana and the acceptance thereof in
Manila was sent by the offeree by airmail to and
received by the offeror in Tokyo, the contract is
presumed to have been entered into in Tokyo.
- Where the offeror delays in bad faith taking
cognizance of the acceptance, by not reading or
opening the letter of acceptance although he can
do so, the contract must be considered perfected.
- It cannot have been the intention of the law to
leave the perfection of the contract to the caprice
of the offeror.
- The perfection must take place as soon as the
will of the parties concur.
BY TELEPHONE
- A contract entered into by telephone is deemed
to have been made between persons present.
- It is considered as entered into at the place
where the offer was made.
EFFECT OF SILENCE
- Whether or not silence can be considered as an
expression of the will, depends upon the
circumstances.
- Modern jurists require the following in order
that silence produce the effect of TACIT
ACCEPTANCE:
(1) that there is a duty or the possibility to express
oneself
(2) That the manifestation of the will cannot be
interpreted in any other way.
(3) that there is a clear identity in the effect of the
silence and the undisclosed will.
- Our code does not have an express provision on
the juridical effect of silence. Hence, it depends
upon what has been stipulated or on specific legal
provision or on mercantile usage.
- In the code, theres an express provisions on
consent deduced from silence,. Thus, under Art.
1670, a contract of lease may be renewed by the
acquiescence of the lessor to the continuation of
the enjoyment of the thing leased for 15 days after
the expiration of the original period of lease.
- Under arts. 1870-1873, acceptance of an agency
may be implied from the silence of the agent
under certain circumstances.
APPLICABLE DOCTRINES
- The following principles have been developed
in French jurisprudence and with slight variations
by writers have been recognized as acceptable
doctrines:
(1) As between persons present: If the silence is
entirely unconnected with any fact, there can be
no contract
(2) As between persons absent: If there has been
no antecedent relation between the parties,
silence will not give rise to a contract.
WITHDRAWAL OF OFFER
- Both the offer and the acceptance can be
revoked before the contract is perfected.
- Since the contract is perfected only from the
time the acceptance is known to the offeror, it is
clear that said offeror may withdraw his offer at
any time before he learns of the acceptance, even
if such acceptance has already been made, but not
made known to him.
- At that time there is as yet no contract and the
withdrawal of the offer cannot legally give rise to
any injury or damage which he would be bound
to repair.
- If the revocation is made in abuse of right, the
other party may recover damages he may have
suffered, in the belief that the contract would be
perfected.
LAPSE OF TIME
- An offer without a period must be considered
as becoming ineffective after the lapse of more
than the time necessary for its acceptance, taking
into account the circumstances and social
conditions.
REVOCATION OF ACCEPTANCE
- The acceptance may be revoked before it comes
to the knowledge of the offeror.
- Thus, where the offeree has sent his acceptance,
but then sends a rejection or a revocation of the
acceptance, there is no meeting of the minds,
because the revocation has cancelled or nullified
the acceptance which thereby ceased to have any
legal effect.
NEW CONTRACT BEFORE
ACCEPTANCE
- Pending the acceptance of an offer, the offeror
can perfect a new contract over the same thing
with another person.
- If the first offer is not revoked by him before it
is accepted, then he becomes liable for damages
to the first offeree for culpable impossibility of
performance.
- As between the 2 offerees, the one whose
acceptance is perfected a contract first is given
priority; the other party is only an action for
damages.
PUBLIC OFFERS
- A promise may be made publicly by advertising
a reward, compensation or prize for any person
who performs or executes a particular act or
obtains a particular result, such as the making of
a scientific discovery, the perfection of an
invention, the discovery of a crime, the
apprehension of a criminal, the return of a lost
object, the winning of a contest or the giving of
information about the missing person.
TWO THEORIES AS TO THE
JURIDICAL NATURE OF SUCH
PROMISE
(1) that of an obligatory unilateral promise
sufficient to create a valid legal tie
(2) that of an offer which gives rise to a contract
upon acceptance
- Under the first theory, the reward can be
recovered by one who performs the desired act,
even when he did not do it in consideration of the
promise
- Under the second theory, a binding obligation
arises only when the act is done with the intention
of accepting the promise.
- There are only 5 sources of obligations
enumerated in Art. 1157.
- A unilateral promise is not recognized by our
Code as having obligatory force.
- In order that such promise can be enforced, there
must be an acceptance that will convert it into a
contract.
- The performance of the act for which a reward
or prize is promised can be considered as an
acceptance.
- This is the rule in this jurisdiction, except as to
things for sale.
- A REVOCATION must be made with the same
publicity as the offer itself and expenses after
such revocation are not recoverable against the
offeror.
- But when the act has already been
accomplished, a subsequent revocation is
ineffective, because the contract would already
have been formed.
CASE: SERRA V. CA
- Art. 1324 of the Civil Code provides that when
an offeror has allowed the offeree a certain period
to accept, the offer maybe withdrawn at anytime
before acceptance by communicating such
withdrawal EXCEPT when the option is founded
upon consideration, as something paid or
promised.
- On the other hand, Art. 1479 provides that an
accepted unilateral promise to buy and 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.
- In a unilateral promise to sell, where the debtor
fails to withdraw the promise before the
acceptance by the creditor, the transaction
becomes bilateral contract to sell and buy because
upon acceptance by the creditor of the offer to sell
by the debtor, there is already a meeting of the
minds of the parties as to the thing which is
determinate and the price which is certain.
- In which case, the parties may then reciprocally
demand performance.
- Jurisprudence taught us that an optional contract
is a privilege existing only in one party the
buyer.
- for a separate consideration paid, he is given the
right to decide to purchase or not, a certain
merchandise or property, at any time within the
agreed period, at fixed price.
- This being his prerogative, he may not be
compelled to exercise the option to buy before the
time expires.
CASE: ANG YU ASUNCION VS. CA
- Until the contract is perfected, it cannot, as an
independent source of obligation, serve as a
binding juridical relation.
- In sales, to which the topic for discussion about
the case at bench belongs, the contract is
perfected when a person called the seller,
obligates himself, for a price certain, to deliver
and to transfer ownership of a thing or right to
another, called the buyer, over which the latter
agrees.
- When the sale is not absolute but conditional
such as in a Contract to sell where invariably
the ownership of the thing sold is retained until
the fulfillment of a positive suspensive condition,
the breach of the condition will prevent the obli
to convey title from acquiring obligatory force
DIGNOS VS. CA
- Although denominated a deed of conditional
sale, a sale is still absolute where the contract is
devoid of any proviso that title is reserved or the
right to unilaterally rescind is stipulated.
- Ownership will then be transferred to the buyer
upon actual or constructive delivery of the
property sold.
- Where the condition is imposed upon the
perfection of the contract itself, the failure of the
condition would prevent such perfection.
- If the condition is imposed on the obligation of
a party which is not fulfilled, the other party may
either waive the condition or refuse to proceed
with the sale.
Where a period is given to the offeree within
which to accept the offer, the following rules
generally govern:
(1) If the period is not itself founded upon or
supported by a consideration, the offeror is still
free and has the right to withdraw the offer before
its acceptance or if an acceptance has been made,
before the offerors coming to know of such fact,
by communicating that withdrawal to the offeree.
- The right to withdraw must not be exercised
whimsically or arbitrarily otherwise, it could give
rise to a damage claim under Art. 19 of the Civil
Code.
(2) If the period has a separate consideration, a
contract of option is deemed perfected and it
would be a breach of that contract to withdraw the
offer during the agreed period.
- The option is an independent contract by itself
and it is to be distinguished from the projected
main agreement (subject matter of the option)
which is obviously yet to be concluded/
- If the optioner-offeror withdraws the offer
before its acceptance by the optionee-offeree, the
latter may not sue for specific performance on the
proposed contract (object of the option) since it
has failed to reach its own stage of perfection.
- The optioner-offeror renders himself liable for
damages for breach of the option.
- In these cases, care should be taken of the real
nature of the consideration given for in fact it has
been intended to be part of the consideration for
the main contract could be deemed perfected.
- A similar instance would be an earnest money
in a contract of sale that can evidence its
perfection.
ART. 1320 - An acceptance may be express or
implied.
FORM OF ACCEPTANCE OF OFFER
- An EXPRESS ACCEPTANCE in the form of a
promise to pay a certain amount or to do
something, may be oral or written.
- An IMPLIED ACCEPTANCE is one that is
inferred from act or conduct.
IMPLIED ACCEPTANCE may arise
from acts or facts which reveal the intent to
accept such as the consumption of the things
sent to the offeree or the facts of immediately
carrying out the contract offered.
- If the offeror asks for the immediate
performance of the contract and does not ask for
a previous answer of acceptance (the necessity of
which may sometimes be excluded by general
commercial usage), the contract is perfected as
soon as the other party begins to carry it out.
WAIVER OF ACCEPTANCE
- The German Code (Art. 151) permits the offeror
to waive the declaration of acceptance and in such
case, as well as when according to usage of
commerce such declaration need not be expected,
- the contract is perfected from the moment the
intention to accept can be inferred from the
conduct of the offeree and according to the usages
of commerce. This rule can be accepted under our
code.
EFFECT OF SILENCE
- As a rule, silence is not equivalent to consent
but there are specific legal provisions which
make silence, under certain circumstances,
amount to consent.
- Silence of a party may constitute a manifestation
of the will. But this cannot be accepted without
qualification in law.
- Silence, because of its ambiguity, lends itself to
error, but there may be circumstances where
silence may be as eloquent as the express
manifestation of the will.
ART. 1321 - The person making the offer may
fix the time, place, and manner of acceptance,
all of which must be complied with. (n)
MATTERS THAT MAY BE FIXED BY
THE OFFEROR
- The person making the offer has the right to
prescribe the time, the place and the manner of
acceptance, all of which must be complied with.
- An acceptance departing from the terms of the
offer constitutes a counter-offer.
- Take note that a counte-offer has the effect of
extinguishing the offer. It, in effect, constitutes a
new offer which the original offeror may accept
or reject.
COMMUNICATION OF THE OFFER
- The offer must be communicated and received
by the offeree.
- It may be by letter, telephone, e-mail or the like.
- It may be express or implied by the language or
acts of the offerer understood as such by the other
party.
RIGHT OF OFFEROR
- The owner of the property offered for sale at
auction has the right to prescribe the manner,
conditions and terms of sale and where these are
reasonable and are made known to the buyer, they
are binding upon him and he cannot acquire a title
in opposition to them and against the consent of
the owner.
PERIOD OF ACCEPTANCE
- The offer with a period lapses upon the
termination of the period, Hence, the acceptance
to become effective, must be known to the offeror
before the period lapses.
- An acceptance made beyond the time fixed in
the offer is not legally an acceptance, but
constitutes a new offer and may be accepted or
rejected by the original offeror.
MANNER OF ACCEPTANCE
- The offeror may require that the acceptance be
communicated to him personally or to a
representative of his or that a certain condition be
first fulfilled before the offeree can accept or
where 2 offers are made simultaneously, that only
one must be accepted (as the offer of a thing for
sale or for lease) or that not must be accepted.
- An acceptance which is not made in the manner
prescribed by the offeror is not effective, but
constitutes a counter-offer which the offeror may
accept.
ART. 1322 - An offer made through an agent
is accepted from the time acceptance is
communicated to him. (n)
COMMUNICATION OF ACCEPTANCE
(1) To offerer The acceptance of the offer must
be absolute.
- The other requisite is that the acceptance must
be communicated to the offerer.
- The acceptance may be either express or implied
subject to the terms of the offer.
(2) To agent by legal fiction, an agent is
considered an extension of the personality of his
principal.
- If duly authorized, the act of the agent is, in law,
the act of the principal.
- Art. 1322 applies only if the offer is made
through the agent and the acceptance is
communicated through him.
- Hence, there would be no meeting of the minds
if the principal himself made the offer and the
acceptance is communicated to the agent unless,
of course, the latter is authorized to receive the
acceptance.
CONTRACT THROUGH
INTERMEDIARY
- An intermediary who has no power to bind
either the offeror or the offeree is not an agent.
- His situation is similar to that of the carrier. The
communication of the acceptance to him does not
perfect the contract.
- This occurs only when he in turn communicates
such acceptance to the offeror.
ART. 1323 - An offer becomes ineffective upon
the death, civil interdiction, insanity, or
insolvency of either party before acceptance is
conveyed. (n)
WHEN OFFER BECOMES
INEFFECTIVE
- An offer may be revoked or withdrawn at any
time before it is accepted merely by
communicating such intentions to the other party.
- After acceptance, the contract is already
perfected.
- Under Art. 1323, even if the offer is not
withdrawn, its acceptance will not produce a
meeting of the minds in case the offer has already
become ineffective because of the death, civil
interdiction, insanity or insolvency of either party
before the conveyance of the acceptance of the
offer.
- it must be observed that the law refers to either
party.
- This means that at the time the acceptance is
communicated, both parties, offerer and offeree,
must be living and capacitated.
OTHER GROUNDS WHICH RENDER
OFFER INEFFECTIVE
- The grounds are not exclusive.
- Thus, failure to comply with the condition of the
offer as to the time, place, and the manner of the
payment (Art. 1321), the expiration of the period
fixed in the offer for acceptance (Art. 1324), the
destruction of the thing due before acceptance
(Art. 1262), rejection of the offer etc., will also
render the offer ineffective and prevent the
creation of a contract.
REASON FOR ARTICLE
- It is fundamental in our law that the contract is
not perfected except by the concurrence of two
wills which exist and continue until the moment
that they occur.
- The contract is not yet perfected at any time
before acceptance is conveyed, Hence, the
disappearance of either party or his loss of
capacity before perfection prevents the
contractual tie from being formed.
ART. 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)
MEANING OF CONTRACT OF
OPTION; OPTION PERIOD; OPTION
MONEY
(1) OPTION CONTRACT is one giving a
person for a consideration a certain period within
which to accept the offer of the offerer.
- It is separate and distinct from the contract
which will be perfected upon the acceptance of
the offer.
*OPTION may also refer to the privilege itself
given to the offeree to accept an offer within a
certain period.
(2) OPTION PERIOD is the period given
within which the offeree must accept the offer.
(3) OPTION MONEY is the money paid or
promised to be paid in consideration for the
option.
- It is not to be confused with earnest money
which is actually a partial payment of the
purchase price and is considered as proof of the
perfection of the contract.
WITHDRAWAL OF OFFER WHERE
PERIOD STIPULATED FOR
ACCEPTANCE
- When the offerer gives to the offeree a certain
period within which to accept the offer
- the GENERAL RULE is that the offer may be
withdrawn as a matter of right at any time before
acceptance.
- EXCEPTION: is when the option is founded
upon a consideration as something paid or
promised.
ARTICLES 1324 & 1479 COMPARED
- ART 1324- lays down the general rule regarding
offer and acceptance.
- It has been interpreted as modified by the
provision of Art. 1479 of the CC which applies
specifically to a promise to buy or sell.
- A unilateral promise to buy or sell a determinate
thing not supported by any consideration distinct
from the price for which that thing was intended
to be sold by or to the promise (offeree) does not
bind the promisor (offerer), even if accepted and
may be withdrawn at any time.
PERIOD OF ACCEPTANCE
- When the offeror has stated a fixed period for
acceptance, the offeree may accept any time until
such period expires.
- When the offeror has not fixed a period, and the
offer is made to a person present, the acceptance
must be made immediately.
- But when the offer is made to a person absent,
the acceptance may be made within such time
that, under normal circumstance, an answer can
be received from him.
- There is deemed to be a reasonable tacit period,
which is the time normally necessary to enable
the offeree to know of the time normally
necessary to enable the offeree to know of the
proposal and to make known his reaction.
* To determine this period, 3 points must be
considered:
(1) Under normal circumstances, how long will it
take the letter of the offeror to reach the offeree?
(2) How long will a person of ordinary prudence
take to answer such an offer?
(3) How long will the answer normally reach the
offeror?
- This period will vary according to the
circumstance.
WITHDRAWAL OF OFFER
- the law permits the offeror to withdraw the offer
at any time before acceptance, even before the
period for acceptance has expired.
- The fact that the offeror has the right to
withdraw his offer before it is accepted, does not
mean that he can exercise this right absolutely
without regard to the rights of the others.
- He cannot abuse this right without incurring
liability.
- An offer implies an obli on the part of the offeror
to maintain it for such a length of time as to
permit the offeree to decide whether to accept or
not.
- If the offeror disregards this right of the offeree
and arbitrarily revokes the offer, he must be liable
for the damages which the offeree may suffer.
- Although the offeror may be held liable for
damages because of abuse of right, the
withdrawal of the offer will cause it to cease in
law.
- hence, notwithstanding a subsequent
acceptance, there will be no contract because
there can be no concurrence of wills.
CROSSING REVOCATION AND
ACCEPTANCE
- GEN. RULE: the expression of the will of a
person, addressed to another, does not become
effective
EXCEPT: from the time it is received by the
latter.
- The following distinction may be made:
(1) If the intention of the parties is note to demand
an express acceptance, the tacit acceptance
perfects the contract and the subsequent receipt of
a letter of revocation is ineffective.
(2) If the parties intended that there should be an
express acceptance, the contract will be perfected
if the acceptance is the first to reach the offeror
and it will not be perfected, if the revocation is
the first and the acceptance cross, that which
arrives first as its destination is effective.
EFFECT OF DELAY
- it is not the moment of sending but the time of
receipt of the revocation or acceptance which is
controlling.
CONTRACT OF OPTION
- This is a preparatory contract in which one party
grants to the other, for a fixed period and under
specified conditions, the power to decide whether
or not to enter into a principal contract.
- It must be supported by an independent
consideration and the grant must be exclusive.
- It binds the party who has given the option not
to enter into the principal contract with any other
person designated and within that period, to enter
into such contract with the one to whom the
option was granted if the latter should decide to
use the option.
- If the option is not supported by an independent
consideration, the offeror can withdraw the
privilege at any time by communicating the
withdrawal to the other party, even if the option
had already been accepted.
- This is particularly so in a promise to buy or to
sell, for under art. 1279.
- An accepted unilateral promise to buy or to sell
a determinate thing for a price is binding upon the
promissor if the promise is supported by a
consideration distinct from the price.
- This means that the option can still be
withdrawn, even if accepted, if the same is not
supported by any consideration.
ART. 1325 - Unless it appears otherwise,
business advertisements of things for sale are
not definite offers, but mere invitations to
make an offer. (n)
BUSINESS ADVERTISEMENTS
GENERALLY NOT DEFINITE OFFERS
- Business advertisements of the things for sale
are not definite offers acceptance of which will
perfect a contract but are merely invitations to the
reader to make an offer.
- However, if the advertisements is complete in
all the particulars necessary in a contract, it may
amount to a definite offer which, if accepted, will
produce a perfected contract.
- A business advertisement of things for sale may
or may not constitute a definite offer. It is not a
definite offer when the object is not determinate.
- When the advertisement does not have the
necessary specification of essential elements of
the future contract, it cannot constitute an offer.
- Thus, an advertisement of things for sale,
specifying prices but without stating the quantity
of things to be sold, is not an offer but a mere
invitation to make an offer.
- The advertiser is free to reject any offer that may
be made.
DEFINITE OFFERS TO PUBLIC
- Generally, an offer must be made to the person
with whom a contract is desired
- it is not necessary, that the offeror should know
the person who receives his offer.
- A valid offer to the public can be made. One
who installs a slot machine makes an offer to the
public, and the offer becomes a contract with any
person who puts in the necessary coin.
- A merchant who places articles for sale in his party taking part in the auction and if his bid is
store, with a price tag on each, makes an offer to rejected, he cannot compel the party who called
the public and anyone can accept the offer by for bids to accept his bid or execute a deed of sale
paying the price fixed. in his favor.
ART. 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) JUDICIAL SALES
ADVERTISEMENTS FOR BIDDERS - This provision is not applicable to bids in
GENERALLY NOT DEFINITE OFFERS judicial sales, where the highest bid must be
necessarily be accepted.
- In an advertisement for bidders, the advertiser is
not the one making the offer.
- In reality, the bidder is the one making the offer
which the advertiser is free to accept or reject.
- Acceptance by the advertiser of a given bid is
necessary for a contract to exist between the
advertiser and the bidder, regardless of the terms
and conditions of his bid.
- As a GENERAL RULE, the advertiser is not
bound to accept the highest bidder (as when the
offer is to buy) or the lowest bidder (as when the
offer is to construct a building) unless the
contrary appears.
- In judicial sales (ie, sales ordered by a court)
however, the sheriff or the auctioneer is bound to
accept the highest bid.

EFFECT OF BIDDING
- When in the advertisement it can be inferred
with the certainty that the best bid will be
considered as giving rise to a binding contract,
each bid will imply the perfection of a contract,
although subject to the condition that no better
bid is made.
- If this is not especially provided in the
advertisement, then each bid is merely an offer,
which the advertiser is free to reject.
- thus, where the notice calling for bids a public
auction indicated that the party offering the
property at an auction expressly reserved the right
to reject any and all bids, it was held that any