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Art. 1305. A contract is a meeting of minds between remedy available is to action for legal separation
two persons whereby one binds himself, with respect institute an action against or a criminal action for
to the other, to give something or to render some the other party for adultery or concubinage
service. damages.

From the book of Jurado, contract was derived Both Jurado and Tolentino explained the
from the word “cum traho” which means an agreement or difference between a contract and a perfected and an
convention. However, do not be misled that contract is imperfect promises. Perfected promise merely tends to
synonymous with convention because the latter is broad insure and pave the way for the celebration of a future
enough to include any kind of agreement which may contract while an imperfect promise is a mere unaccepted
create, extinguish or modify patrimonial and even family offer.
relations while contract is limited to only those which
create patrimonial obligations.
❖ Auto-Contract
Class Notes: It is a kind of contract in which only one person acted in
The definition of contract provided in the above behalf of the other party and himself or another person in
article seems to be incomplete. This is so because: another capacity to establish a contract. Tolentino said that
1. It only covers consensual contracts in order that a contract be existing, it requires two parties
2. It does not deal with the concept of formal and not two persons, two declaration of wills and not two
contracts wills.
3. It only refers to unilateral contracts ➔ Ex. Art. 18901 in Agency
4. It refers to contracts that only create obligations
and not those that extinguish Elements of contract:
a. Essential – are those without which there can be
Sanchez Roman, on the other hand, defined no contract
contract as “a juridical convention manifested in legal form, • Common – the consent of the
by virtue of which one or more persons bind themselves in contracting parties, object or the
favor of another or others, reciprocally, to the fulfilment of a subject of the contract and cause of the
prestation to give, to do, or not to do.” obligation
• Special – this is only present in certain
Note: Not all agreements constitute contracts. But all contracts such as delivery in real
contracts constitute an agreement. contracts or form in solemn ones.
• Extraordinary – peculiar to a specific
In order to further understand the concept of contract, such as the price in a contract
contract, Jurado distinguished an ordinary contract from a of sale.
marriage contract:
b. Natural – those which are derived from the
ORDINARY CONTRACT CONTRACT OF nature of the contract and ordinarily accompany
MARRIAGE the same. It is presumed by law, but it also be
Parties may be two or more Necessary that the parties excluded by the contracting parties if they so
persons of the same or must be one man and one desire.
different sexes. woman.
The nature, consequences Nature, consequences and c. Accidental – are those which only exist when the
and incidents of the contract incidents are governed by parties expressly provide for them for the
are primarily governed by law purpose of limiting or modifying the normal
the agreement of the effects of the contract. (ex. Conditions, terms or
parties. modes)
Once executed, the result is Once executed the result is
a contract. a status.
It can be terminated or It cannot be terminated by
dissolved by mere mere agreement.
1
Art. 1890: If the agent has been empowered to borrow
money, he may himself be the lender at the current rate of
agreement of the parties. interest. If he has been authorized to lend money at interest,
In case of breach, the The usual remedy is a civil he cannot borrow it without the consent of the principal.
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CHARACTERISTICS OF A CONTRACT celebration of another subsequent contract

1. Obligatory force / character of contracts – b. Principal – those which can subsist
(Arts. 1159, 1308, 1315 and 1356) independently from the other contracts and
- It refers to the rule that once the contract is whose purpose can be fulfilled by themselves.
perfected, it shall be of obligatory force upon both c. Accessory – those which can exist only as a
parties. They are bound not only to the fulfilment consequence of, o in relation with, another prior
of obligations but also to all the consequences. contract.

2. Mutuality of contracts – (Art. 1308 and the 2. According to their perfection:

nature of contract) a. Consensual – those which are perfected by the
- It refers to the position of essential equality that is mere agreement of the parties.
occupied by both contracting parties. The b. Real – those which are require not only the
contract must be binding upon both parties and consent of the parties for their perfection, but
its validity or compliance cannot be left to the will also the delivery of the object by one party to the
of only one party.2 other.
3. Autonomy of contracts – (Art. 1306)
- The contracting parties may establish 3. According to their form:
agreements provided it is not contrary to law, a. Common – those which require no particular
public order, morals, good customs or public form
policy.3 b. Special – those which require some particular
form
4. Relativity of contracts – (First paragraph of Art.
1311) 4. According to their purpose:
- Contracts take effect only between parties, their a. Transfer of ownership
assigns and heirs. b. Conveyance of use
- Exception: c. Rendition of services
a. In case where the rights and obligations
arising from the contract are not transmissible by 5. According to their subject matter:
their nature or by stipulation or by provision of a. Things
law. b. Services

STAGES OF CONTRACTS 6. According to the nature of the vinculum which

1. Generation – it comprehends the preliminary or they produce:
preparation or conception. It is the period of a. Unilateral – those which give rise to an
negotiation and bargaining. obligation for only one party
2. Perfection – it is the moment when parties come to b. Bilateral – those which give rise to reciprocal
agree on the terms of the contract obligations for both parties
3. Consummation – it is the fulfilment or performance of
the terms agreed upon in the contract. 7. According to their cause:
a. Onerous – those in which each of the parties
CLASSIFICATION OF CONTRACTS aspires to procure for himself a benefit through
the giving of an equivalent or compensation
1. According to their relation to other contracts: b. Gratuitous – those in which one of the parties
a. Preparatory – those which have for their object proposes to give to the other a benefit without
the establishment of a condition in law which is any equivalent or compensation.
necessary as a preliminary step towards the
8. According to the risk involved:
2 a. Commutative – those where each of
Art. 1308: The contracts must bind both contracting parties;
its validity or compliance cannot be left to the will of one of
the parties acquires an equivalent of
them. his prestation and such equivalent is
3
Art. 1306: The contracting parties may establish such pecuniarily appreciable and already
stipulations, clauses, terms and conditions as they may determined from the moment of the
deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
celebration of contract.
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Contracts || General Provisions

b. Aleatory – those where each of the health of the community.

parties has to his account the e. Public Policy – broader in scope than public
acquisition of an equivalent of his order; it is defined as a principle of law which holds that
prestation, but such equivalent is not no person can lawfully do that which has a tendency to
yet determined at the moment of be injurious to the public or against the public good; all
celebrationj of contract. It depends those considerations which are moved by the common
upon the happening of an uncertain good.
event.

9. According to their names or norms regulating 2. In cases of social legislation in relation to pursuance
them: of social justice
a. Nominate – those which have their own ➔ E.g. in labor contracts; that which is more
individuality and are regulated by special favoured to those who are needy are more
provisions of law. favoured in the pursuit of social justice
b. Innominate – those which lack individuality and 3. Contract of adhesion: where only one of the parties
not regulated by special provisions of law. prepared the contract and would favour the other party
who did not prepare
➔ In case of doubts in the interpretation of the
Art. 1306. The contracting parties may establish such provisions, that which is more favourable to the
stipulations, clauses, terms and conditions as they party who may not have the position to impose
deem convenient, provided they are not contrary to agreement is more appreciated
law, morals, good customs, public order, or public
policy.

➔ Autonomy characteristic of contracts Art. 1307. Innominate contracts shall be regulated by

– the right of the contracting parties to establish the stipulations of the parties, by the provisions of
any stipulation, clause, term or condition as they deem Titles I and II of this Book, by the rules governing the
convenient. most analogous nominate contracts, and by the
customs of the place.
Limitations:
1. Stipulations must not be contrary to law, morals, Kinds of innominate contracts:
good customs, public order, public policy a. Do ut des – I give and you give. (Illustration – A
a. Law will give one thing to B, so that B will give another
▪ those which are mandatory or prohibitive in thing to A)
character b. Do ut facias – I give and you do (Illustration – A
▪ those which impose essential requisites will give something to B, in order that B may do
without which the contract cannot exist. something for A)
▪ those, without being mandatory, are c. Facio ut des – I do and you give (A binds himself
expressive of fundamental principles of justice to do something for B, so that B will give
▪ only serve as suppletory to the stipulations something to A)
or the will of the parties. d. Facio ut facias – I do and you do (A will do
b. Morals – Tolentino said that it means those something for B, so that B will do something for
generally accepted principles of morality which have A)
received some kind of social and practical confirmation; What rules govern innominate contracts?
synonymous to good customs. 1. stipulation of the parties
c. Good customs – Jurado acknowledged the 2. provisions of Title I (Obligations) and II (Contracts) of
possible overlapping of the concept of good customs Obligations and Contracts
and good morals. But he gave a distinction, he said that 3. rules governing the most analogous nominate contracts
if a moral precept or custom is not recognized 4. customs of the place
universally but is sanctioned by the practice of a certain
community, then it shall be included within the scope of
good customs. Art. 1308. The contract must bind both contracting
d. Public Order – public weal, peace, safety, and parties; its validity or compliance cannot be left to the
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will of one of them. Exceptions:

• Mutuality characteristic of contracts 1. According to the first paragraph, the rule is not
The binding effect of the contract on both parties is applicable if the rights and obligations arising from the
based on the principle that obligations arising from contract are not transmissible:
contracts have the force of law between the contracting • By their nature
parties and that there must be mutuality between the • By stipulation
parties based on their essential equality. • By provision of the law
Rationale: to maintain the enforceability of contracts Examples:
Purpose: To render void a contract containing a condition • Agency, which is based on the confidence
which makes its fulfilment dependent exclusively upon the reposed by the principal on the agent, is not
uncontrolled will of one of the contracting parties. transmissible to the heirs of the agent.
• When a person by agreement is required to do
General Rule on Unilateral Cancellation: No one may be something personally
permitted to change his mind or disavow and go back upon
his own acts, or to proceed contrary thereto, to the Cases when contract may affect third persons:
prejudice of the other party. a. when the parties transfer to third persons the rights
they acquired under the contracts
* The termination of the contract may be left to the will of b. when the contract contains a stipulation in favor of a
one of the parties in the negative form of rescission is that third person
is so expressly stated in the contract. Reason: Since the c. when third persons exercise the subrogatory action or
termination is in the contract, then it would not be a rescissory action
violation but it would be in the fulfilment of the agreement d. in suspension of payments and compositions under the
of the parties to the contract. Insolvency Law
e. In labor contracts of collective bargaining under RA
Art. 1309. The determination of the performance may No.875
be left to a third person, whose decision shall not be f. In contracts creating real right
binding until it has been made known to both
contracting parties.
Stipulation pour autrui – it is a stipulation in a contract
Art. 1310. The determination shall not be obligatory if it clearly and deliberately conferring a favor upon a third
is evidently inequitable. In such case, the courts shall person who has a right to demand its fulfilment provided he
decide what is equitable under the circumstances. communicates his acceptance to the obligor prior to its
revocation.
Art. 1311. Contracts take effect only between the
parties, their assigns and heirs, except in case where Kinds:
the rights and obligations arising from the contracts 1. Those where the stipulation is intended for the
are not transmissible by their nature, or by stipulation sole benefit of a third person
or by provision of law. Their heir is not liable beyond 2. Those where an obligation is due from the
the value of the property he received from the promise to the third person which the former
decedent. seeks to discharge by means of such stipulation.

If a contract should contain some stipulation Requisites:

in favor of a third person, he may demand its fulfilment • There must be a stipulation in favor of third
provided he communicated his acceptance to the persons
obligor before its revocation. A mere incidental benefit • That the stipulation in favor of a third person
or interest of a person is not sufficient. The contracting should be a part of the contract and not the entire
parties must have clearly and deliberately conferred a contract
favor upon a third person. • That the contracting parties must have clearly and
deliberately conferred a favor upon a third person
General Rule: The contract is only binding between the
• The favourable stipulation should not be
contracting parties, their assigns and heirs. (relativity
conditioned or compensated by any kind of
characteristic of contracts)
obligation
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• That the person must have communicated his → is considered an exception to the relativity of contracts
acceptance to the obligor prior its revocation. → creditors, who are not parties to the contract, may
• Neither of the contracting parties bears a legal interfere in the same through a rescissory action when
representation or authorization of the third party. such contract should prejudice their rights.

Test of Beneficial Stipulation

To constitute a valid stipulation pour autrui, it Art. 1314. Any third person who induces another to
must be the purpose and intent of the stipulating parties to violate his contract shall be liable for damages to the
benefit the third person, and it is not sufficient that the third other contracting parties.
person be incidentally benefited by the stipulation. So in
order to determine whether or not such stipulation exists, Interference in Contracts by third persons
one needs to rely upon the intention of the parties as - an injured party may recover damages for unlawful
disclosed by their contract. interference with the contract by a third party who has
induced one of the parties of the contract to violate the
terms thereof.
Rights of the parties
*The third person after acceptance has the rights of a party Requisites:
to the contract, and therefore may sue either for specific 1. Existence of a valid contract
performance or resolution, with indemnity for damages. 2. Knowledge on the part of the third person of the
existence of the contract
Art. 1312. In contracts creating real rights, third person 3. Interference by the third person without legal
who come into possession of the object of the contract justification or excuse
are bound thereby, subject to the provisions of the
Mortgage Law and the Land Registration Laws. Liability of the contracting party & third person → joint
and solidary
Contracts creating real rights – the right created directly
affects the object of the contract and it follows the same
who ever comes into the possession of such property Art. 1315. Contracts are perfected by mere consent,
Example: a mortgage to the property follows the property and from that moment the parties are bound not only
wherever it goes, and whether the party is aware of the to the fulfilment of what has been expressly stipulated
mortgage or not. but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage
*Although the contract may create a real right, it may not and law.
affect a third person who comes into possession of the ➔ Consensual contracts
property if the land and affected by such real right is
registered under the Mortgage Law or the Land Consensual contracts – perfected by mere consent and
Registration Laws, and the real right in question is not that from that moment on the juridical ties between the
recorded in the Registry of Property. parties arises.

Real contracts – those which are perfected by the delivery

of the property in question. Art. 1316. Real contracts, such as deposit, pledge and
commodatum, are not perfected until the delivery of
Real right – a right belonging to a person over a specific the object of the obligation.
thing, without a passive subject individually determined, ➔ Real contracts
against whom such right may be personally enforced.
Perfection of contract - refers to that moment in the life
of a contract when there is finally a concurrence of the wills
of the contracting parties with respect to the object and the
Art. 1313. Creditors are protected in cases of contracts cause of the contract.
intended to defraud them.

Real contracts, when perfected – by the delivery of the

thing or object of the obligation Art. 1317. No one may contract in the name of another
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without being authorized by the latter, or unless he has CHAPTER 2

by law a right to represent him. ESSENTIAL REQUISITES OF CONTRACTS
A contract entered into in the name of another
by one who has no authority or legal representation, or General Provisions
who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or Art. 1318. There is no contract unless the following
impliedly, by the persons in whose behalf has been requisites concur:
executed, before it is revoked by the other contracting (1) Consent of the contracting parties;
party. (2) Object certain which is the subject matter of
the contract;
Rule: No person may enter into a contract in the name of (3) Cause of the obligation which is established.
another unless he has been duly authorized by the
person represented or he has by law a right to represent
him. • Consent
• Object essential common elements
Effect if the contract entered into in the name of • Cause
another is without the authority of the latter either
given by law or by the person involved essential common elements → those elements which
= contract is NOT ENFORCEABLE are found in all contracts, otherwise there can be NO
= exception: unless it is ratified, expressly or impliedly, by contract.
the person in whose behalf it has been executed before it
is revoked by the other contracting party Essential elements of a contract:
1. Essential common – those which are found in all
Unenforceable contracts → cannot be sued upon before contracts
ratification; the defects therein are permanent in nature and 2. Essential special or essential proper – those which
will exist as long as it has not been ratified. exist only in certain classes or groups of classes
- E.g. delivery in real contracts; form in formal
Effects of Ratification contracts
Once ratified, the contract can be sued upon. Effects 3. Essential very special – those which are necessary for
retroact to the time of its celebration. a particular contract
→ Act is validated from the moment of the celebration of - E.g. price in contracts of sale
the contract and not merely from the time of its ratification.

*The unauthorized contract produces a state of suspense;

Section 1. – Consent
its effectivity depends upon its ratification. If the contract is
not ratified by the person represented, the representative Art. 1319. Consent is manifested by the meeting of the
becomes liable in damages to the other party, if he did not offer and the acceptance upon the thing and the cause
give notice of the absence or deficiency of his power. This which are to constitute the contract. The offer must be
liability is based on the fact that having represented himself certain and the acceptance absolute. A qualified
as having authority to act for another, he is responsible for acceptance constitutes a counter-offer.
the truth of such affirmation. 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.

Consent
➔ from the Latin word cum sentire meaning to feel
together or the convergence of two wills over the
same point
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➔ essence: conformity of the parties to the terms of the determinate effects by virtue of a certain
contract situation; basis of quasi-contracts; e.g. lapse of
➔ definition: the concurrence of the offer and the time given to repudiate an inheritance
acceptance over the thing and the cause which
constitute the contract.
➔ Requisites:4(Castan as cited by Caguioa) ✓ Concurrence between the intention of the
(1) Plurality of subjects parties and its manifestation
(2) Capacity of the contracting parties - an absolute concurrence between what is
(3) Intention of the parties intended and what is expressed.
(4) Manifestation of the intention of the parties *Divergence of intention – when there is NO
(5) Concurrence between the intention of the parties concurrence
and its manifestation 2 types:
o conscious – when there is jovandi
✓ Plurality of subjects causa or mental reservation or when
- There must be at least two parties (not two there is a simulation
persons) and two declarations of will (not o unconscious – when there is an error in
two wills)5 the declaration or error substantibo
✓ Capacity of the contracting parties
- Refers to the legal capacity (i.e. age, mental ➔ 2 elements of consent:
disposition) of the contracting parties to (1) Offer
contract (2) Acceptance
- A valid consent presupposes legal capacity.
✓ Intention of the parties * Manifestation of consent → the meeting of the offer
- Must be formed and manifested in a manner and the acceptance
that is rational and conscious and should not
be vitiated by any vice which may destroy its General Rule: There must be a concurrence of the offer
character. and acceptance with respect to the object and the cause of
- 4 traditional vices of consent: the contract.
o Error Exception: Not applicable to cases where other matters
o Fraud beside the thing and the cause are considered material by
o Violence the parties, in which case, the area of agreement must
o Intimidation include those other things which are considered material by
✓ Manifestation of the intention of the parties the parties. (Magsaysay v. Cebu Portland Cement Co. as
- May be express, tacit, or may be presumed. cited in Caguioa)
Express consent – exists when the same is
manifested by words or by writing; the normal ✓ Offer – a unilateral proposition which one party makes
way of manifesting consent. to the other for the celebration of a contract; or simply
Implied consent – exists when certain acts are put, a proposal to make a contract.
performed which do not directly manifest the - requisites:
consent but where the consent can be inferred 1. definite
from the conduct of the person. 2. complete
Presumed consent – is a fiction which produces 3. made with the intention to be bound
4. directed to person or persons with whom the offeror
intends to enter into a contract
4
According to Clarin vs. Rulona, as cited in Tolentino, the
following are the requisites of consent: (1) plurality of a. it must be definite
subjects; (2) capacity; (3) intelligent and free will; (4) express
or tacit manifestation of the will; (5) conformity of the internal
→ offer is definite when an acceptance thereof will
will and its manifestation. create a valid and subsisting contract.
Jurado, on the other hand, enumerates the following as → not affected where the determination thereof is left
requisites of consent: (1) consent must be manifested by the to the will of the other party.
concurrence of the offer and the acceptance; (2) contracting
parties must possess the necessary legal capacity; and (3)
→ e.g. “I am in a position and willing to entertain the
consent must be intelligent, free, spontaneous and real purchase of a yacht.” >>> not an offer but a mere
5
This thus gives way to the validity of auto-contracts
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invitation to make an offer.6 person or persons with whom the offeror wishes to enter
into a contract.
Note: Definiteness is not affected where the → Exception: definite offers which are not directed to a
determination thereof is left to the will of the other party. particular person but to the public in general (examples:
Example: An offer to sell as many sacks of rice as the promises of reward, public auction)
buyer is willing to purchase but not exceeding 500 • In order for unilateral promises publicly made be
sacks at P50 per sack is a valid offer. enforced, there must be an acceptance that shall
convert it into a contract. The performance of the
b. it must be complete act for which a reward or prize is promised can
→ when it indicates with sufficient clearness the kind of be considered as an acceptance.7
contract intended and definitely stating the essential
conditions of the proposed contract, as well as the non- ✓ Acceptance – the unconditional and unqualified
essential ones desired by the offeror agreement to the offer.
→ example: in a contract of sale, offer must specify the - requisites: (ADICT)
object, price and terms
1. absolute
2. directed to the offeror
c. it must be made with the intention to be bound 3. made with the intention to be bound
→ the offer must be made seriously 4. made within the proper time
→ examples of offers with NO intention to be bound: 5. communicated to the offeror and learned by him
▪ Those made for fun or jest
▪ Those made jocandi causa or as an a. it must be absolute
expression of courtesy - there is no variation whatsoever between the terms of
General Rule: Offers not seriously made and accepted by the offer and the acceptance.
the other party, aware of the non-seriousness of the offer, • It is necessary that the acceptance be
is null and void and cannot give rise to a contract. unequivocal and unconditional, and the
acceptance and the proposition shall be without
*If the offeree is induced to take it seriously or he any variation whatsoever; and any modification
was not aware that offer was not intentional, or variation from the terms of the offer annuls the
→ act is VOID; hence there is NO CONTRACT; but he latter and frees the offeror.
may recover for damages which he has suffered by ➔ means that the offeree should NOT desire
reason of his belief that the offer was seriously made. anything exactly than the proposed offer; his
acceptance must be for the totality of the
Exception: offer, nothing more, nothing less. Should the
*In cases of mental reservations (when a party acceptance be qualified (for example
makes a declaration but secretly and without informing the when a pure obligation is accepted with a
other party does not intend to be bound by such condition, or when a term is established or
declaration; exists when the manifestation of the will is changed, or when a simple obligation is
made by one party for the purpose of inducing the other to converted into an alternative one), the
believe that the former intends to be bound, when in fact he acceptance constitutes a counter-offer
does not) and a counter-offer has the effect of
→ act is VALID; and hence may give birth to a extinguishing the offer.
contract. This is in line with the principle of estoppel b. it must be directed to the offeror
(Caguioa and Tolentino). Exception to the exception: But c. it must be made with the intention to be bound
when the other party is aware of such mental reservation, it d. it must be made within the proper time, i.e. within
will not bind the offeror. the period expressly or tacitly given
e. it must be communicated to the offeror and
d. it must be directed to the person or persons with learned by him
whom the offeror intends to enter into a contract → Unless the offeror knows of the acceptance, there
→ General rule: The offer must be directed to a particular is no meeting of the minds of the parties, no real

6
Rosentoch v. Burke as cited in Caguioa, Tolentino &
7
Jurado Tolentino, 2002, p. 459.
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concurrence of offer and acceptance.8 acquire such knowledge by reason of

absence, sickness or some other cause.
❖ Withdrawal of offer d. Cognition theory – contract is perfected from
→ Rule: Both the offer and the acceptance can be the moment the acceptance comes to the
revoked before the contract is perfected. Offeror may knowledge of the offeror; theory followed by
withdraw his offer at any time before he learns of the the Spanish Code and have been retained by
acceptance, even if such acceptance has already been our Civil Code
made, but not made known to him.9 ➔ Presumption: Contract has been entered
into the place where the offer was made.
❖ Lapse of Time ➔ If the offeror delays in bad faith (by not
→ An offer without a period must be considered as reading or opening the letter of acceptance
becoming ineffective after the lapse of more than the time although he can do so), contract must be
necessary for its acceptance, taking into account the deemed perfected. [ Reason: It cannot
circumstances and social conditions. have been the intention of the law to leave
the perfection of the contract to the caprice
Media by which the acceptance has been made known of the offeror.]
to the offeror: ➔ Exception: Art.54 of the Code of
1. acceptance through intermediaries10 Commerce → can be applied only to purely
• If the intermediary is a true agent who has the commercial contracts which are still
power of binding the offeror, governed by the Code of Commerce such
➔ Acceptance by the offeree made known to as joint accounts and maritime contracts.12
the agent is binding on the offeror.
• If the intermediary has no power to bind either 3. acceptance by telephone or telegram
the offeror or the offeree, ➔ is deemed to have been made by two
➔ Acceptance is not binding on the offeror until persons present and is considered to have
the intermediary actually informs him of the been entered at the place where the offer
same. was made.
2. acceptance by correspondence
❖ 4 different theories in pinpointing the exact 4. acceptance by silence
moment of perfection: • Rule: Whether or not silence can be considered
a. Manifestation theory – contract is perfected as an expression of the will depends upon the
from the moment the acceptance is declared circumstances for silence is in itself ambiguous.
or made. (theory followed by the Code of • When circumstances imply a duty to speak on
Commerce)11 the part of the person for whom an obligation is
b. Expedition theory – contract is perfected from proposed, his silence can be construed as
the moment the offeree transmits the consent.
notification of acceptance to the offeror, as ➔ Requisites:
when the latter is placed in the mailbox a. that there is a duty on the part of the offeree
c. Reception theory – contract is perfected from to express his refusal
the moment that the notification of b. that the silence on the part of the offeree
acceptance is in the hand of the offeror in cannot be interpreted in any other way
such a manner that he can, under ordinary c. that there is a concurrence between the
conditions, procure the knowledge of its effect of silence and the undisclosed will of
contents, even if he is not able actually to the offeree
➔ Art. 1870-1873 – on agency; cases when
8
Art. 1319, par.2: Acceptance made by letter or telegram acceptance of the agency may be implied
does not bind the offerer except from the time it came to his from silence of the agent under certain
knowledge. (This rule should also apply in case of circumstances
acceptance by cable or telephone according to Tolentino.)
9
Art. 1324
10
Art. 1322: An offer made through an agent is accepted
from the time acceptance is communicated to him.
11
Art. 54: Contracts entered into by correspondence shall be
perfected from the moment an answer is made accepting the
12
offer or the condition by which the latter may be modified. Jurado, 2002, p.399
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➔ Applicable Doctrines13 • If the offeror fixes a period within which the

a. As between persons present acceptance must be made in order to become
- If the silence is entirely unconnected with effective,
any fact, there can be no contract. >>> acceptance must be made known to the offeror
before the period lapses; one made after the lapse of
b. As between persons absent the period is NOT considered an acceptance of the
- If there has been no antecedent relation offer.
between the parties, silence will not give rise • Any variation whatsoever between the manner of
to a contract. acceptance prescribed by the offeror and that offered
by the offeree constitutes a counter-offer = invalidates
❖ Revocation of Acceptance the offer = NO CONTRACT
→ The acceptance may be revoked before it comes to
the knowledge of the offeror.
Art. 1322. An offer made through an agent is accepted
❖ New Contract Before Acceptance from the time acceptance is communicated to him.
→ Pending the acceptance of an offer, the offeror can - See acceptance through intermediaries
perfect a contract over the same thing with another
person.
→ If the first offer is not revoked by him before it is Art. 1323. An offer becomes ineffective upon the death,
accepted, he becomes liable for damages to the first civil interdiction, insanity or insolvency of either party
offeree for culpable impossibility of performance. before acceptance is conveyed.
→ As between the two offerees, the one whose
acceptance perfected a contract first is given priority; the General Rule: Offer is extinguished upon the death, civil
other party has only an action for damages. interdiction, insanity or insolvency (CIDI) of either party
before acceptance is conveyed.
Art. 1320. An acceptance may be express or implied.
Cases where offer is extinguished:
Manner of acceptance 1. upon the death, civil interdiction, insanity or insolvency of
Express consent – exists when the same is manifested by either party (Art. 1323)
words or by writing; the normal way of manifesting consent. 2. upon the rejection of the offeree (Batangan v.
Implied consent – exists when certain acts are performed Cojuangco)
which do not directly manifest the consent but where the 3. upon the lapse of the period stated in the offer without
consent can be inferred from the conduct of the person. acceptance being conveyed
Presumed consent – is a fiction which produces 4. upon qualified or conditional acceptance, i.e. counter-
determinate effects by virtue of a certain situation; basis of offer (Logan v. Phil. Acetylene Co.)
quasi-contracts; e.g. failure on the part of the heir to reject 5. upon revocation of the offer before knowledge of
the inheritance within 30 days from notice of the order of acceptance (Art. 1324)
the court distributing the estate

Art. 1324. When the offerer has allowed the offeree a

Art. 1321. The person making the offer may fix the certain period to accept, the offer may be withdrawn at
time, place, and manner of acceptance, all of which any time before acceptance by communicating such
must be complied with. withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
Contents of the offer
→ offeror must make the offer complete and definite in Rule: The offeror may always withdraw the offer before
order that acceptance of the same may constitute a binding acceptance
agreement • In cases of arbitrary revocation, i.e. revoking
the offer without just cause, offeror may be held
liable for damages.14 But still, there will be NO
13
Above principles have been developed in French
14
jurisprudence and have been recognized as acceptable Based on the principle of abuse of right; Art. 19, NCC:
doctrines according to Tolentino (Tolentino, 2002, p.456) Every person must, in the exercise of his rights and in the
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BINDING agreement between parties as there (1) Unemancipated minors;

was NO LEGAL OFFER upon withdrawal. (2) Insane or demented persons, and deaf-mutes
who do not know how to write.
Option Contracts
- an agreement whereby one party concedes to Legal Effects of entering into contracts by parties
the other, for a determinate period, and under fixed without legal capacity:
conditions, the power, which is left to his sole will, to • If both parties cannot give consent = CONTRACT
decide whether a principal contract will be celebrated. IS UNENFORCEABLE16
- Where the offeror grants to the other party a • If only one of the parties is incapable of giving
period within which to accept the offer or not consent = CONTRACT IS VOIDABLE17
- Requisites:
a. concession by one party in favour of the other of the
power to decide whether a contract will be celebrated Art. 1330. A contract where consent is given through
or not, without any obligation on the part of the latter mistake, violence, intimidation, undue influence, or
b. concession is exclusive fraud is voidable.
c. concession is for a fixed period
d. there is no other condition but the sole will of the Characteristics of consent:
other • Intelligent
• Free and voluntary
→ General Rule: Offeror still have the right to withdraw
• Spontaneous
offer before knowledge of acceptance. If acceptance has
• Real
been communicated and learned by the offeror, then there
is meeting of the minds and therefore offer CANNOT be
Vices of consent:
withdrawn.
✓ Mistake
Exception: In case of option contracts where the same are
- should refer to mistake of fact and not of law.
not supported by an independent consideration distinct
- must refer to the very substance of the thing (if error
from the price.
refers to the nature of the contract, contract is VOID)
Illustration: Art. 147915 (Even though the unilateral
- must refer to the essential or substantial conditions of the
promise to buy or to sell has already been accepted, it can
contract in order to vitiate consent
still be withdrawn by the offeror if the accepted unilateral
- requisites:
promise (option contract) is not supported by any
1. it must be of a past or present fact
consideration distinct form the price.)
2. mistake must have induced the consent
3. mistake must not be imputable to the party mistaken, i.e.
mistake is not inadvertent and excusable
Art. 1325. Unless it appears otherwise, business
4. mistake must be of fact and not of law
advertisements of things for sale are not definite
offers, but mere invitations to make an offer.
✓ Violence
- refers to physical force or compulsion
Art. 1326. Advertisements for bidders are simply
- there is violence when in order to wrest consent, serious
invitations to make proposals, and the advertiser is not
or irresistible force is employed
bound to accept the highest or lowest bidder, unless
- requisites:
the contrary appears.
1. force employed is serious or irresistible
2. it is the determining cause of consent
Art. 1327. The following cannot give consent to a
3. it is not justified
contract:
4. it is sufficient

performance of his duties, act with justice, give everyone his ✓ Intimidation
due, and observe honesty and good faith. - when one of the contracting parties is compelled by a
15
Art. 1479: A promise to buy or to sell a determinate thing reasonable and well-grounded fear of an imminent and
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
16
promissor if the promise is supported by a consideration Art. 1403:
distinct from the price. 17 Art. 1407
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grave evil upon his person or property, or upon the person 3. it must be employed by one of the contracting parties
or property of his spouse, descendants or ascendants to and not by a third person
give his consent 4. it must not be employed by both contracting parties
- requisites: 5. it must have induced the consent of the other party
1. it must produce a reasonable and well-grounded fear 6. it must be made in bad faith, i.e. with knowledge of its
→ when the person issuing the threat appears able to falsity
inflict the harm threatened
→ in order to determine this, it is required that the age, sex Non-fraudulent cases:
and condition of the persons be borne in mind. • Not every silence or concealment will constitute fraud. If
2. fear must produce the consent the concealment does not refer to material facts, i.e.
→ the fear produced by the same must be the direct and those that induce consent, it will not be fraudulent.
the determining cause which compelled the consent to be (Art.1339)
given. • The usual exaggerations in trade (are said to be lawful
3. fear is of imminent and grave evil upon person and misrepresentations known as dolus bonus), when the
property other party had an opportunity to know the facts, are not
→ evil threatened must be serious or grave and imminent. in themselves fraudulent. (Art. 1340)
4. threat must be unjust • A mere expression of opinion does not signify fraud,
→ if the means threatened to be used to inflict the evil or unless made by an expert and the other party has relied
harm is unlawful or illegal or there is no right to inflict the on the former’s knowledge. (Art. 1341)
injury feared
Art. 1345. Simulation of a contract may be absolute or
✓ Undue Influence relative. The former takes place when the parties do
- when a person takes advantage of his power over the will not intend to be bound at all; the latter, when the
of another, depriving the latter of a reasonable freedom of parties conceal their true agreement.
choice
- to determine whether the influence exerted is SIMULATION → is the declaration of a fictitious intent
unreasonable, the following circumstances shall be manifested deliberately and in accordance with the
considered: agreement of the parties in order to produce for the
1. confidential relations purpose of deceiving others the appearance of a transation
2. family relations which does not exist or which is different from their true
3. spiritual relations agreement.
4. other relations between the parties → requisites:
1. A deliberate declration contrary to the will of the
✓ Fraud parties
- when through insidious words or machinations of one of 2. Agreement of the parties to the apparently valid
the contracting parties, the other is induced to enter in to a act
contract which, without them, he would not have agree to. 3. The purpose is to deceive or to hide from third
- refers to deceit or fraud in the celebration of contract persons although it is not necessary that the
- any kind of deception and includes words, machinations, purpose be illicit or for purposes of fraud
false promises, exaggerations of hope and benefits, abuse
of confidence, fictitious names, qualifications or authority. → 2 types:
- 2 kinds of deceit: a. absolute – when the parties do not intend to be
a. dolo causante (substantial fraud) – that which affects the bound at all
substance of the agreement so that without it the party b. relative – when the parties conceal their true
would not have consented agreement
b. dolo incidente (incidental fraud) – that which affects, not
the substance but the incidentals of the agreement, so that Effects of Simulation
without it the party would have consented but under If simulation is absolute = NO CONTRACT
different terms. If simulation is relative = VALID CONTRACT unless it
- requisites: prejudices a third person or has an illicit purpose
1. there must be a misrepresentation or concealment of a
fact Section 2 – Object of Contracts
2. it must be serious
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Object of a contract → the subject matter; the

prestation which is the subject matter of the obligation
arising from the contract
→ requisites:
a. object must be real or possible (it exists at the
moment of the celebration of the contract, or at least
capable of existing thereafter)
b. it is licit (it is not contrary to law, morals, good
customs, public order, public policy)
c. it must be determinate or susceptible of
determination (the kind and quantity may be
determined without the aid of a new contract between
the parties)

Section 3 – Cause of Contracts

Cause → the essential or more proximate purpose
which the contracting parties have in view at the time
of entering into the contract (Manresa); the fact which
explains and justifies the creation of an obligation by
the will of the parties (Castan);
→ the reason, end or purpose of the obligation
→ requisites:
1. it must exist
2. it must be real
3. it must be lawful

Art. 1354. Although the cause is not stated in the

contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary.

Presumption: Even if the contract does not state a cause,

the law presumes that one exists and that the same is
lawful and hence it is incumbent on the party impugning the
contract to prove the contrary.

Art. 1355. Except in cases specified by law, lesion or

inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue
influence.

Lesion → any damage caused by the fact that the price is

unjust or inadequate.

General Rule: The mere fact the cause is unjust or

inadequate does not invalidate the contract.
Exception: Unless there is fraud, mistake or undue
influence.
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