CONTRACTS: ESSENTIAL ELEMENTS

Obli-Con

I. Consent
3 Essential elements of a contract (Art. 1318): 1. Consent of the contracting parties 2. Object certain 3. Cause of the obligation Consent, defined (Art. 1319): Consent is the absolute acceptance by one party of the definite offer made by another party. Qualified acceptance is a counter-offer Acceptance by letter, phone, e-mail, SMS binds offeror from time it came to his knowledge

I. Consent
Requisites for valid consent: 1. Plurality of parties 2. Capacity 3. Intelligent and free will 4. Express or tacit manifestation of the will 5. Conformity of the internal will and its manifestation Forms of consent (Art. 1320): 1. Express 2. Implied * Presumptive consent, as in quasi-contracts

I. Consent
Silence may be considered consent if: 1. As between persons present, the silence is in face of acts implying execution of contract. Example: You offer to buy 3 cupcakes but the seller hands you 5 cupcakes, which you accept. 2. As between persons absent, if there has been antecedent relations between the parties. Example: You send by facsimile a purchase order for fruit cakes to your regular supplier.

I. Consent
Offer must be definite, complete and intentional Withdrawal of offer an offer may be withdrawn anytime before offeror learns of the acceptance, even if such acceptance has already been made Revocation of acceptance an acceptance may be revoked before it comes to the knowledge of offeror Public offers these are public offers of reward or compensation for any person who performs or executes a particular act. There must be acceptance to convert it into a contract. Performance of the act can be considered as acceptance.

I. Consent
Offeror has the right to prescribe the time, place, and manner of acceptance (Art. 1321). In offers with a certain period to accept, offer may be withdrawn before acceptance, provided withdrawal is communicated (Art. 1324). - exception: option contract with consideration which 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 Option to Purchase Real Property.doc - crossing of acceptance and revocation: that which arrives first at its destination is effective

I. Consent
An offer made through an agent is deemed accepted from the time acceptance is communicated to such agent (Art. 1322). Distinguish agent from a mere intermediary. Offer is ineffective upon: 1. Death 2. Civil interdiction 3. Insanity 4. Insolvency of either party before acceptance is conveyed.

I. Consent
Business advertisements of things for sale are not definite offers, but mere invitations to make an offer (Art. 1325). 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).

I. Consent
Incapacity to give consent (Art. 1327): The following cannot give consent to a contract: 1. Unemancipated minors 2. Insane or demented persons 3. Deaf-mutes who do not know how to write

I. Consent
Unemancipated minors: Contracts entered into by minors are generally voidable. Exceptions: 1. Necessaries sold and delivered to minor should be paid for by such minor with a reasonable price; or 2. Upon reaching age of majority, the minor ratifies the contract; or 3. Contract is entered into by guardian and approved by the court.

I. Consent
Insane persons: The insanity should exist at the time the contract was made. Contracts entered into during a lucid interval are valid (Art. 1328). Contracts entered into in a state of drunkenness or during a hypnotic spell are voidable (Art. 1328). A person, through superabundance of alcoholic drinks or use of drugs, may become so mentally obscured that he is, for the time being, comparable to an insane person in lack of understanding.

I. Consent
Other incompetents (Art. 1329):

The Rules of Court provide for other incompetents who may be under guardianship, as follows: 1. Persons suffering from penalty of civil interdiction 2. Prodigals 3. Persons, not being of unsound mind, but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves and manage their property, thereby an easy prey for deceit and exploitation.

I. Consent
Contracts with defects of the will (Art. 1330): Contracts where consent is given through: 1. Mistake intelligence in giving consent is lacking 2. Violence, intimidation, undue influence freedom in giving consent is lacking 3. Fraud spontaneity in giving consent is lacking The foregoing contracts are voidable.

Distinguish between a) void contracts, b) voidable contracts, and c) unenforceable contracts.

I. Consent
Mistake: ground for invalidity of consent (Art. 1331): Consent is invalid if the mistake refers to: 1. Substance of the object of the contract; or 2. Conditions which have principally moved one or both parties to enter into the contract; or 3. Identity or qualifications of one of the parties and such identity or qualifications have been the principal cause of the contract.

Mistake of account: shall be corrected

Mistake in Art. 1331 includes the concept of ignorance.

I. Consent
Mistake due to inability to read or understand language (Art. 1332): the party enforcing the contract should show that the terms of the contract was fully explained to the party alleging mistake Inexcusable error (Art. 1333): the party who knew the doubt, contingency, or risk affecting the object of the contract cannot invoke mistake to invalidate the contract Mutual error/mistake of law (Art. 1334): a contract may be invalidated if both parties are mistaken about the legal effect of their agreement which leads to the frustration of the real purpose of their agreement

I. Consent
Violence and intimidation as grounds for invalidity of consent (Art. 1335): Violence (physical force): in order to wrest consent, serious or irresistible force is used Intimidation (moral force): when one of the contracting parties is compelled by a reasonable and wellgrounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent. There is unlawful act threatened. Threat to enforce ones valid claim through competent authority does not invalidate consent.

I. Consent
Violence or intimidation by a 3rd person annuls the obligation (Art. 1336). Undue influence (Art. 1337): when a person takes improper advantage of his power over the will of another. Circumstances to be considered: a. family, spiritual, and other relations between parties b. person unduly influenced was suffering from mental weakness c. person unduly influenced was ignorant or in financial distress There need not be an unlawful act threatened.

I. Consent
Fraud as ground to invalidate consent (Art. 1338 and 1344): To invalidate consent, fraud should be 1) serious, and 2) not employed by both parties 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. Insidious words or machinations: includes false promises, exaggeration of hopes or benefits, abuse of confidence, fictitious names, qualifications or authority, concealing or omitting material facts with intent to deceive Distinguish between fraud that annuls obligation and fraud that invalidates consent.

I. Consent
Failure to disclose material facts is fraud (Art. 1339).

Usual exaggeration in trade are not necessarily fraudulent (Art. 1340). Expression of opinion does not constitute fraud, unless made by an expert, and the other party relied on such experts special knowledge (Art. 1341). Misrepresentation by a 3rd party does not invalidate consent, except if such misrepresentation resulted in substantial mistake of both parties (Art. 1342). Misrepresentation made in good faith may not constitute fraud but may constitute error (Art. 1343).

I. Consent
Simulation of contract (Art. 1345):

1. Absolute simulation: the parties do not intend to be bound at all 2. Relative simulation: the parties conceal their true agreement; e.g. a deed of sale is executed but the true agreement is a donation Simulation, defined: the declaration of a fictitious will, deliberately made by the agreement of the parties to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is different from what was actually executed.

I. Consent
Effects of simulated contracts (Art. 1346):

1. Absolute simulation: the contract is void 2. Relative simulation: the contract is valid, except when it prejudices third persons or has an illicit purpose

II. Object of Contracts

Object of contract, defined (Art. 1347):

It is the a) thing, b) right, or c) service which is the subject matter of the obligation arising from the contract. Requisites of object of a contract (Art. 1347): 1. Object is within the commerce of man, meaning things which are susceptible of appropriation or of private ownership, and which are transmissible. 2. Object must be licit, or not contrary to law, morals, good customs, public policy, or public order. 3. Object must be possible (Art. 1348). 4. Object must be determinate as to its kind (Art. 1349).

II. Object of Contracts

Future things as objects of contract (Art. 1347): The object must be in existence at the time of perfection of the contract or that it has the possibility of coming into existence at some future time. Future things as objects of contracts may also include future rights. Generally, no contract may be entered into upon future inheritance. Impossible things as objects of contract (Art. 1348): Things are impossible when they are not susceptible of existing, or they are outside the commerce of man.

II. Object of Contracts

Objects of contract must be determinate as to its kind (Art. 1349). Determinable quantity: the fact that quantity is not determinate will only make the contract invalid if it is not possible to determine the same.

III. Cause of Contracts

Cause of contracts, defined (Art. 1350): The cause of the contract is the why of the contract, the essential reason which moves the parties to enter into the contract. Onerous contracts: cause is prestation or promise of a thing or service by the other Remuneratory contracts: the cause is the service or benefit remunerated Gratuitous contracts/contracts of pure liberality: the cause is the generosity or liberality of the benefactor

III. Cause of Contracts

Motive vs. cause (Art. 1351):
The cause of the contract is the objective, intrinsic, and juridical reason for the existence of the contract. The motive is the psychological, individual, or personal purpose of a party to the contract. As a rule, motives do not affect the validity of a contract, except: 1) When the motive of debtor in alienating property is to defraud creditors; 2) When motive of a person in giving consent is to avoid injury; 3) When the motive of the person is due to fraud or misrepresentation by the other party.

III. Cause of Contracts

Contracts without cause or with illegal cause (Art. 1352): Contracts without cause or with unlawful or illegal cause produce no effect. Statement of a false cause in contracts (Art. 1353): makes the contracts void. If the cause is not stated in the contract, it is presumed that the contract has a good and sufficient cause unless the debtor proves the contrary (Art. 1354). Inadequacy of cause shall not invalidate a contract, unless there is fraud, mistake or undue influence (Art. 1355).