bsu lecture on contracts

8/4/2019 BSU Lecture on Contracts

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CONTRACTS


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What is a contract?

A contract is a meeting of the minds between

two persons whereby one binds himself, with

respect to the other, to give something or to

render some service.

A contract is a juridical convention manifested

in legal form, by virtue of which, one or morepersons bind themselves in favor of another

or others, or reciprocally, to the fulfillment of

a prestation to give, to do, or not to do.


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Art. 1318. There is no contract

unless the following requisitesconcur:

(1) Consent of the contracting parties;(2) Object certain which is the subject

matter of the contract;

(3) Cause of the obligation which isestablished.


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Stages in the Life of a Contract

1. Preparation or conception bargaining

point.

2. Perfection or birth the meeting ofminds regarding the subject matter and

the cause of the contract.

3. Consummation or death parties haveperformed their respective obligations and

the contract is put to an end.


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Kinds of Innominate Contracts

1. do ut des(I give that you may give)

2. do ut facias(I give that you may do)

3. facio ut facias

(I do that you may do)

4. facio ut des

(I do that you may give)


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What are the principal characteristics of a

contract?

AMOR = love

1. Autonomy2. Mutuality

3. Obligatory Force andConsensuality

4. Relativity


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What is autonomy of contracts?

GR: The parties are free to stipulate anything they may deemconvenient.

XPN:

As long as the stipulation are not contrary to:1. Law

2. Morals

3. Good Customs

4. Public Order

5. Public Policy (Art. 1306)


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What is relativity of contracts?

GR: A contract is binding not onlybetween parties butextendsto the heirs, successors in interest, and assignees of the

parties,providedthat the contract involves transmissible rights

by their nature, or by stipulation or by provision of law

XPN:

1.Stipulation pour autrui(stipulation in favor of a 3rd person)

benefits deliberately conferred by parties to a contract upon 3rd

persons;

2.When a 3rd person induces a party to violate the contract;

3.3rd persons coming into possession of the object of the

contract creating real rights;

4.Contracts entered into in fraud of CRs.


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REQUISITES OF STIPULATION POUR ATRUI:

1. The stipulation must bepart, not whole of thecontract

2. Contracting parties must have clearly &

deliberately conferreda favor upon 3rd person

3. 3rd person must have communicatedhis

acceptance

4. Neitherof the contracting parties bears the legal

representation of the 3rd person


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Distinguish consensual from real contracts and name

at least four (4) kinds of real contracts under the present

law.SUGGESTED ANSWER:

CONSENSUAL CONTRACTS are those which are

perfected by mere consent (Art. 1315. Civil Code).

CONTRACTS are those which are perfected by the

delivery of the object of the obligation. (Art. 1316, Civil

Code)

Examples of real contracts are deposit,

pledge, commodatum and simple loan (mutuum).


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Essential Requisites of a Contract

(Always COCa-Cola)1. Consent of the contracting

parties;

2. Object certain which is the

subject matter of the contract;

3. Cause of the obligation which is

established.


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I. CONSENT

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 theacceptance absolute. A qualified

acceptance constitutes a counter-

offer. (1319)


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REQUISITES OF CONSENT:

1. Plurality of subject

2. Capacity

3. Intelligence and free will4. Manifestation of intent of

parties

5. Cognition by the other party6. Conformity of manifestation

and cognition


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Theories on Consent

We follow the theory ofcognition and not the theory of

manifestation.

Under our civil law, the offer and

acceptance concur only when the

offeror comes to know, and notwhen the offeree merely

manifests his acceptance.


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Certain offer = Absolute acceptance;

If qualified, counter-offer.Consent is manifested by the meeting of

the offer and the acceptance upon the

thing and the cause which are toconstitute the contract.

The offer must be certain and the

acceptance absolute.

A qualified acceptance constitutes a

counter-offer. (1319)


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Offer & Acceptance

Mode of acceptance as stipulation.The person making the offer may fix the time,

place, and manner of acceptance, all of

which must be complied with. (1321)

Agent as offerer

An offer made through an agent is acceptedfrom the time acceptance is communicated to

him. (1322)


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Offer & Acceptance

Withdrawal of Offer (1324)General Rule: An offer or proposal may be

withdrawn as long as the offeror has no

knowledge that the offeree has alreadyaccepted the offer.

Exception: When the option is founded upona consideration, as something paid or

promised, the offer cannot be withdrawn.


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When does the offer become ineffective?

1. Death, civil interdiction, insanity orinsolvency of either party before acceptance

is conveyed;

2. Express or implied revocation of the offerby the offeree;

3. Qualified or conditional acceptance of the

offer;4. Subject matter becomes illegal or

impossible before acceptance is

communicated.


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Rule on Complex Offers

1. When offers are interrelated thecontracted can only be perfected if all the

offers are accepted.

2. When offers are not interrelated

the single acceptance of each offer

results in a perfected contract unless the

offeror has made it clear that one is

dependent upon the other and

acceptance of both is necessary.


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Rule on Complex Offers

*An Offer inter praesentes must be acceptedimmediately.

If the parties intended that there should be an

express acceptance, the contract will be perfected

only upon knowledge by the offeror of the express

acceptance by the offeree of the offer.

An acceptance which is not made in the manner

prescribed by the offeror is not effective, but it takesthe form of a counter-offer which the offeror may

accept or reject. (Malbarosa vs. CA, G.R. No.

12576, 2003)


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Advertisements as Offers

Business advertisements of things forsale are not definite offers, but mere

invitations to make an offer, unless it

appears otherwise.(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. (1326)


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ACCEPTANCE

The manifestation by the offeree ofhis assent to the terms of the offer.

Elements of Valid Acceptance1. Unequivocal

2. Unconditional

*If qualified, it constitutes a counter-

offer.


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ACCEPTANCE

a) offer is made to a person present acceptance must be

made immediately

b) offer is made to a person absent acceptance may be

made within such time that, under normal circumstances, an

answer can be received from him;

*Acceptance may be revoked before the offeror finds out

about it.

*Amplified Acceptance - under certain circumstances, a

mere amplification on the offer must be understood as an

acceptance of the original offer, plus a new offer which is

contained in the amplification.


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WITHDRAWAL OF ACCEPTANCE

1. First View (Manresa): It is to be observedthat although the

offeror is not bound until he learns of the acceptance, the

same thing can not be said of the offeree who, from the

moment he accepts, loses the power to retract such

acceptance since the right to withdraw between the time of the

acceptance and its communication is a right which isexpressly limited by law to the offeror;

*To justify the inequality between the contracting parties,

Manresa said that since the offeree is the first to know aboutthe concurrence of will if the parties, as a consequence, the

obligation, as far as he is concerned, must also commence

earlier.


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WITHDRAWAL OF ACCEPTANCE

2. Second View (Tolentino):Acceptance may be revoked before it

comes to the knowledge of the offeror

because in such a case, there is still nomeeting of minds, since the revocation

has cancelled or nullified the

acceptance which thereby ceased tohave any legal effect.


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Acceptance by Letter or Telegram

When is it binding?Acceptance is binding only from the time

the offerer had knowledge of it.

Where is it binding?

The contract is presumed to have beenentered into in the place where the offer

was made.


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Revocation of Acceptance

The acceptance by the offeree may berevoked before reaching the knowledge of

the offeror.

If it is revoked, the contract is not perfected ifthe notice of revocation reaches the offeror

before the letter of acceptance is received.

*In unilateral promises, when offer is made tothe public, specific acceptance is not required

to bind the obligor.


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WHAT IS AN OPTION?

It is a preparatory contract in which oneparty grants to the other, for a fixed period

to decide whether or not to enter into a

principal contract.*An option may be withdrawn anytime

before acceptance is communicated but

not when supported by a considerationother than purchase price: option

money


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RULES ON OPTIONS

*A unilateral promise to buy or sell, if not supported by a

distinct consideration, may be withdrawn but may not be done

whimsically or arbitrarily; the right of the grantee here is

damages and not specific performance. (Ang Yu v. CA, 1994)

*An option clause in order to be valid and enforceable must

indicate the definite price at which the person granting the

option is willing to sell, contract can be enforced and not only

damages. (Equatorial v. Mayfair, 24 SCRA 483)

*The right of first refusal may be enforced by specific

performance. (Paranaque Kings v. CA, 1997)


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Persons Who Cannot Give Valid Consent

1. Unemancipated Minors2. Insane or demented persons

3. Deaf-mutes or illiterates who do not know how

to write

4. Intoxicated persons and hypnotized persons

5. A person underMistake -- since a mistake may

deprive one of intelligence. (1331)

6. A person induced by Fraud (dolo causante)(1338)

Note:*Dolus bonus (usual exaggerations in trade)

are not in themselves fraudulent


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Rule on Contracts Entered into By Minors

General Rule: These contracts are considered voidable.

Exceptions

1. Minor is Estopped for having misrepresented his age and misled the

other party (when age is close to age of majority as in the Mercado v.

Espiritu & Sia Suan v. Alcantara cases)

2. They were contracts for necessities such as food, but here thepersons who are bound to give them support should pay therefor upon

reaching age of majority they ratify the same;

3. They were entered unto by a guardian and the court having jurisdiction

had approved the same right of first refusal may be enforced by specific

performance;4. Voluntary fulfillment of a natural obligation provided that the minor is

between 18-21 years of age;

5. Contracts of Life, health or accident insurance taken on the life of the

minor.

R l C E d i b I


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Rule on Contracts Entered into by Insane or

Demented Persons or Those Who Were

Intoxicated or Hypnotized

Contracts entered into during a lucid interval

are valid.

Contracts agreed to in a state of drunkennessor during a hypnotic spell are voidable. (1328)

The incapacity declared in article 1327 is

subject to the modifications determined by law,and is understood to be without prejudice to

special disqualifications established in the

laws. (1329)


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Rule on Contracts Entered into under Mistake

In order that mistake may invalidate consent, it should refer to

the substance of the thing which is the object of the contract, orto those conditions which have principally moved one or both

parties to enter into the contract. (1331)

As to identity or qualifications: Mistake as to the identity or

qualifications of one of the parties will vitiate consent only whensuch identity or qualifications have been the principal cause of

the contract.

Correction only if: A simple mistake ofaccount shall give rise

to its correction. (1331)

- Error must be excusable, not caused by negligence

- Error must be a mistake of fact, not of law


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Rule on Contracts Entered into under Mistake

Exceptions on Mistake:

1. Illiterate party (1332)

2. Knowledge of doubt, contingency,

risk affecting the object of the

contract (1333)3. Mutual error (1334)


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Disqualified to Enter into Contracts

Contracts consented into by the following are

void:1. those undercivil interdiction

2. hospitalized lepers

3.prodigals4. deaf and dumb who are unable to readand write

5. those who by reason of age, disease, weak mind

and other similar causes, cannot without outside aid,

take care of themselves and manage their property,

becoming an easy prey for deceit and exploitation.

bsu lecture on contracts

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