001 1.

Definite

-identified, it should be clear what you are offering. Terms

Chapter 2 must be sufficient to identify the type of contract

- covers essential requisites

2. Intentional

(Art 1318) Essential requisites of a contract:

- Principle of Objective Theory(?): the intention of the parties
1. Consent
to enter in to a contract is to be judged by their outward or
2. Object
objective manifestation or intent and not the parties own
3. Cause
secret or subjective intentions

CONSENT * US Jurisprudence (Leonard vs Pepsi Company): Pepsi

Requisites of Consent: came out with a gimmick, points equated to amount of
1. Manifested by the concurrence of the offer and money and from this points you could actually purchase
acceptance
things.

2. Parties must posses necessary legal capacity

* In one commercial of Pepsi, a child arrived in the school
3. Must be intelligent, free, spontaneous, real
campus in a private jet plane (indicated 7M points for
(1330-1346)
this jet plane) Obviously, there was no intention that 7M
million points would be enough to buy a jet plane.
* One millionaire put up 10K dollars pepsi points and
Elements of Consent: purchased additional points by paying check to Pepsi to
1. Offer
acquire 7M pepsi points. He now insists that Pepsi has a
2. Acceptance
definite offer and he is accepting it.

* Supreme Court: Pepsi had NO intention

002
3. Complete

Offer- unilateral proposition which one party makes to another - all aspects of a proposal must have been expressed already
for the celebration of a contract (offerer)
and made known to the particular intended offeree to a person
with whom the offeror would want to enter into an agreement
Requisites of valid offer: with

1. Must be define
- offeree should only accept or reject

2. Must be intentional

3. Must be complete
4. Directed to person/s with whom the other party intends
4. Must be directed to person/s with whom the other party to enter into a contract

intends to enter into a contract (ex. definite offers which - (Art 1325) Advertisement is not an offer, except if expressly
are directed to a specific person but to public in general)
and clearly provided therein. Advertisement is an invitation
to make an offer

- (Art 1326) Advertisement for bidders are private actions, 006

bidder is merely inviting for proposals EXCEPT if it is a
public bidding, because they are offers.
This right to withdraw would be subject to two exceptions:

1. Application of Article 19 - Abuse of Right

005 2. 1324 - When there is option contract that actually was

entered into together with the principal contract.

Complex Offer - refers to a single offer where it involves 2 or

more contracts. The perfection, where there is only partial Article 19
acceptance, will depend upon the relation of the contracts - Should not be exercised in a manner that is abusive and
between themselves whether due to their nature or due to the would result to damages

intent of the offeror

- Ex. I offer to you my H&L in Anaheim, California. You
wanted to see the property in the US so you bought a plane
Illustration:
ticket. Upon your arrival at the airport, I suddenly decided
I am offering to you my house and also the cars that are found that I will withdraw the offer.

in the garage. Two contracts: (1) house (2) cars

Option Contract (will go back later - 014)

Acceptance would depend:

a. Nature (and In this case, it is separate); or

008
b. Intent of parties

Acceptance - It must be certain/definite and absolute in

Withdrawal of the offer: character. (Art 1319)

Can the offer still be withdrawn?

This is the moment that a juridical tie is created. (executory

General Rule: Yes, as long as the acceptance has not been stage)

made known to the offeror.

Example: I offer to you my house, I communicated it to you.

Requisites of valid acceptance:

You agreed to it but such has not been communicated to the
1. It must be absolute

offeror yet. I decided to withdraw. Is that binding on the

2. Directed to the offeror

offeree, as it has not been communicated to you yet?

3. Made with the intention to be bound

4. Made within a reasonable time

SC: Yes. It is not required that withdrawal should be

5. Communicated to the offeror and learned by him unless
communicated to the offeree.

the offeror knows of the acceptance

1. It must be absolute • ex. Seller offers to sell his grazing land. This land has
• It should totally accept the offer in its entirety. If subject to livestock. The buyer accepts the offer but adds his
condition/qualification (deviation), it would be a counter offer to also acquire the livestock.

offer.
• The amplification is not an acceptance but it is an
• MIRROR IMAG RULE - necessity of acceptance being offer but it constitutes as acceptance of the
absolute not being subject to any condition or ORIGINAL offer.

qualification.

D. Complex Offers (The mirror image of an acceptance

ex. I offer car for 500k to be paid on delivery. Buyer manifests would be to accept BOTH contracts offered)

his acceptance but mentioned that he would pay in 2 monthly • What if offeree only accepted one? = Not a mirror
installments. - Here, there is no juridical tie as there was a image.

deviation.
• Would that be a contract?

• Exceptions to mirror image rule (even if appears that the • If the offers are interrelated, partial acceptance
acceptance does not exactly look like the offer, it would would not result to a juridical tie.

still create a juridical tie):

• Offers are not interrelated, single acceptance of
A. Facultative (An acceptance of obligation in regard each offer results in a perfected contract unless the
to accepting the prestation but allowing the D to offer has made it clear the one is dependent on the
substitute it with another)
other.

B. Clarificatory Issues (There’s acceptance but

appears not to be a mirror image because of some
discrepancies, the discrepancy is brought about 010
merely by the need of the offeree of some
clarifications as to how, what and extent of the Manner of Acceptance
offer will be)

• Jardin-Davis Inc vs. CA 333 SCRA 684 General Rule: Acceptance must be strictly in accordance with
• There was a contract of loan that was proposed, how it is prescribed by the offeror. Otherwise, an attempt of
it stipulated payment of interest at 12%. The offer the offeree to deviate the form of acceptance as prescribe
did not make clear in regard to the frequency of would not create a juridical tie.

the interest rate payment.

• When this was proposed, offeree accepted but What if offerror/law did not prescribe form?

added “12% per annum”

- Acceptance may be in any and it must just be expressed or
• SC said that it was not a deviation but a even could be implied. It may be formal/informal. May be
clarification.
shown by acts, conduct, words of accepting party.

C. Amplified Acceptance (The mere amplification on - Principle of Objective Theory(?) applies.

the offer must be understood as an acceptance of - However, in cases of special contracts where law requires a
the original offer PLUS a new offer which is form for its validity then the form prescribed must be
contained in the amplification)
adhered to.

Luzon Development Bank vs. Angeles 497 SCRA 264 3. Reception Theory - perfection is from the moment that
- SC declared that acceptance may be express or implied the notification is in the hands of the offeror, in such a
unless laws specifically requires a particular format or manner manner that he can, under ordinary circumstances,
of expressing such consent.
procure the knowledge of the contents even if he is not
able to actually acquire such knowledge yet.

Withdrawal of Acceptance • Involves two steps: Manifestation + Expedition +

Reception (natanggap na nung offeror, although hindi pa
Reminder in withdrawal of offer. So long as the offeror has no niya nabubuksan yung sulat kaya hindi pa niya nababasa
knowledge of acceptance, he can withdraw the offer.
yung acceptance)

• If it is already in the possession of the offeror where he

Two schools of thought:
could read it and acquire knowledge of it at anytime.

1. Manresa 4. Cognition Theory - perfection is from the moment the

• Offeree cannot withdraw the acceptance anymore even if it acceptance comes to the knowledge of the offeror.

has not yet been made known to the offeror. At that very • Involves all four steps: Manifestation, Expedition,
moment, a juridical tie exists. (Expedition Theory)
Reception and Cognition.

2. Tolentino 013
• Acceptance may be revoked before it comes to the
knowledge of the offeror because in such case there is still General rule: we use the Cognition Theory

no meeting of minds. (Cognition Theory)

Exception: unless, in very special contracts still governed by
the commercial code, it is Manifestation

Theories that determine the exact moment of perfection

when acceptance is made by letter or telegram: Issue: Is it possible for the parties to agree in regard to when
such perfection be effected or established? - YES, through a
1. Manifestation Theory - perfected from the moment the preparatory contract.

acceptance is declared or made. Kapag yung offer

nakarating sa offeree and he accepts it, even if he hasn’t Is acceptance through silence possible? Would it create a
communicated, it there is already a perfection.
contract?

2. Expedition Theory - perfected from the moment the Tolentino: Yes. If the following requisites are present:

offeree transmits the acceptance to the offeror. When the 1. There is a duty or possibility to express one’s self. There’s
offeree receives the offer, the offeree decides he will an opportunity to manifest acceptance but chose to
accepts but he would have to write down his acceptance remain silence.

and would just have to mail it.

2. Manifestation of the will cannot be interpreted in any other
• Involves two steps: Manifestation (writing) + Expedition way. Silence cannot be interpreted as refusal but only as
(sending of the document where the acceptance was acceptance.

expressed)

3. There is a clear identity in the effect of the silence and the consideration in the option contract entered into by the offeror
undisclosed will.
and offeree that is different from the consideration in the
principal contract being proposed.

This is recognized by Article 1870-1873 (Contracts of Agency).

These provisions provide that the agent is deemed to have Requisites of option contract:
accepted the proposal of the principal to create a contract of 1. It is supported by an independent consideration.
agency between them. It is presumed by the silence of the • The usual consideration is a sum of money. (Option
agent.
Money)

• ex. I propose to you that I am going to sell my house.

Also in Article1670. Silence on the part of the lessor to You ask for time decide. In order to bind your offeror to
terminate lease within 15 days prior to the expiration there is respect the time within which you are provided for an
deemed to be a renewal of the term.
opportunity to think on whether to accept it or not - you
pay for that time.

014 • If the offeror withdraws, in breach of the option

contract, there is liability for damages and NOT to
Option Contracts - one of the exceptions to the rule where insist specific performance.

the offeror may withdraw without liability his offer as long as • Exception: In cases of contract of sale, Article 1479. A
he has not acquired knowledge of the acceptance. (Abuse of promise to buy and sell a determinate thing for a price certain
Right + Option Contract)
is reciprocally demandable. An accepted unilateral promise to
buy or to sell a determinate thing for a price certain is binding
• If there exists an option contract. The offeror can no longer upon the promissor if the promise is supported by a
withdraw the offer until the expiration of the option contract
consideration distinct from the price. 
itself because if the offeror withdraw while this option - In this case, the offeree has the right to sue for
contract exists, there is liability for damages.
breach of contract but ALSO to insist on the
• The action of the offeree against the offeror is not to insist on contract of sale.
the contract proposed but merely for damages for breach of
the option contract.
• Option Money vs. Earnest Money

A. Earnest Money (Art 1482) - It is already a partial

payment of the principal/partial fulfillment of the
Concept of option contract: This is an example of a proposed sale.

preparatory contract. It is in preparation of subsequent

contracts. You have an option contract agreement in
B. Option Money - It Is not yet payment of the
anticipation of the parties agreeing finally to enter into the
consideration of the principal contract.

principal or main contract as the moment is being proposed.

Definition: A preparatory contract in which one party grants to

the other for a fixed period under specified condition to decide
whether or not to enter into a principal contract. The most
important characteristic of an option contract is the
consideration. There has to be a distinct separate
 OPTION MONEY EARNEST MONEY
A distinct consideration. It is It is already part/ payment of the
different from the principal contract. price of the consideration of the
principal contract.
No sale perfected yet. It is still at A contract of sale is already
negotiation stage. perfected.
There is no requirement to buy. Once it is paid, you would have to
Offeree need not proceed with the pay for the balance.
sale.
017
• Consideration need not be monetary, it could consist of
other things or undertakings. When it is not monetary, such
must be clearly specified as such in the option contract or
clauses.
option money.
Bible Baptist Church vs CA 444 SCRA 396
• There’s a property that was constituted as a real estate
mortgage by the lessor-owner. Unfortunately, he was
unable to pay off the obligation to the creditor thus the
latter moved to have the property sold at a public
auction.
Difference:
• Note: Whoever acquired the property through public action
would not have ownership immediately because he would have
to wait for the expiration of the redemption period
• Within the 1 year redemption period, the lessee
redeemed the property for the lessor-owner.
In Teodoro, there is no existing obligation to pay rentals as
• This lessee who paid for the redemption alleged that the
money paid was the option money or the consideration
for the option contract and hence he be given an
opportunity to renew the lease.
• SC did not agree because there was no express mention
that the money paid by the lessee to redeem the
property was to be considered as the consideration for
the option contract. SC merely declared that such
payment to redeem was to be considered as advanced
rentals. In effect, there was no option contract.
019
Compare it with Teodoro vs CA 155 SCRA 547
• Lessor-owner leased his property to Lessee and the latter
was given the option to acquire ownership over the leased
property. The lessee sub-leased the property to sub-lessee.
• Lessee needed money to acquire ownership from lessor
owner.
• Sub-lessee paid for the property, in order for Lessee to
acquire ownership.
• Sub-lesses insists that the amount paid by him was the
• This time, SC agreed that the money paid by sub-lessee was
considered to be an option money and therefore the sub-
lessee has the right to the period to decided on whether to
renew the contract or not.
In Bible baptist, may utang pa yung lessee kaya yung binayad
nung lessee to redeem the property was merely considered to
be as payment for the rentals.
everything had been already paid off. Clearly, the money that
Sub lessee used to redeem the property was considered as an
option money.
020

Continuation of requisites of option contract

2. It is exclusive.
• If the option is not supported by a consideration which is
distinct from the purchase price, the offer may still be
withdrawn even if the offeree has already accepted it as long
as such acceptance has not yet been received and offerror
acquring the knowledge of the same (COGNITION THEORY)