Contracts....................................................................................................................

4
Essential Requisites Of Contracts (Article 1318)......................................................... 4
Consent: Meaning & Requisites (Art. 1319)............................................................. 4
Requisites of Consent........................................................................................... 5
Perfection Of Contract: Offer And Acceptance...................................................... 5
Offer.................................................................................................................. 6
Must Be Certain (Art. 1319)........................................................................... 6
What May Be Fixed By The Offeror (Article 1321).......................................... 7
When Made Through An Agent...................................................................... 7
When Offer Becomes Ineffective.................................................................... 7
Business Advertisements For Things For Sale (Article 1325)......................... 7
Advertisements For Bidders........................................................................... 8
Acceptance....................................................................................................... 8
(I.A.1.a.1)Must Be Absolute............................................................................ 8
Kinds.............................................................................................................. 9
Express (Article 1320)................................................................................. 9
Implied (Article 1320)................................................................................. 9
Qualified (Article 1319)............................................................................... 9
Manner of Acceptance................................................................................... 9
By letter or telegram.................................................................................. 9
Acceptance by promise............................................................................... 9
Acceptance by act.................................................................................... 10
Acceptance by silence or inaction............................................................ 10
Period Of Acceptance................................................................................... 10
Option Contract........................................................................................... 10
Termination Of Offer........................................................................................ 10
Four Theories When Contract Is Perfected...................................................... 10
(I.A.1.a.1)Manifestation Theory.................................................................... 10
Expedition Theory........................................................................................ 11
Reception Theory......................................................................................... 11
Cognition Theory.......................................................................................... 11
Legal Capacity Of The Parties............................................................................. 11
a)Minors, Insane Or Demented Persons And Deaf-Mutes Who Do Not Know
How To Write................................................................................................... 11
When Offer Or Acceptance Is Made During A Lucid Interval, Intoxication,
During Hypnotic Spell..................................................................................... 11
Corporations................................................................................................... 11
VICES OF CONSENT............................................................................................ 11
1
 a)MISTAKE....................................................................................................... 11
Kinds of Mistake........................................................................................... 11
MUTUAL ERROR........................................................................................... 12
INSTANCES WHEN MISTAKE DOES NOT VITIATE CONSENT ........................... 12
VIOLENCE........................................................................................................ 13
INTIMIDATION.................................................................................................. 13
(I.A.1.a.1)Determination of the degree of intimidation (Article 1335)..........14
UNDUE INFLUENCE.......................................................................................... 14
(I.A.1.a.1)Requisites..................................................................................... 14
FRAUD............................................................................................................. 14
(I.A.1.a.1)requisites...................................................................................... 14
FRAUD BY CONCEALMENT............................................................................ 15
INSTANCES NOT CONSIDERED FRAUDULENT............................................... 15
SIMULATIONS..................................................................................................... 16
Second Requisite: Object....................................................................................... 16
Object: Requisites.............................................................................................. 17
Not Objects of Contracts.................................................................................... 18
Third requisite: Cause........................................................................................... 19
Statement of False Cause................................................................................... 25
ERRONEOUS.................................................................................................... 26
SIMULATED...................................................................................................... 26
Presumtion of Cause.......................................................................................... 26
Lesion................................................................................................................. 26
a)Rules on Lesion53......................................................................................... 27
What is the effect of error of cause on contracts?.............................................. 27
Forms of Contracts................................................................................................ 28
General Rule:...................................................................................................... 28
a)Exception:.................................................................................................... 28
Importance of form............................................................................................ 28
References................................................................................................................ 31

Contracts
What are contracts?
The Civil Code defines a contract as a meeting of minds between two persons in which
one binds himself to give something or render some service to another.1
It is an agreement of two or more parties for the purpose of creating, modifying, or

1
Civil Code, Art. 1305
2
extinguishing a juridical relation between them.2
A contract is one of the five exclusive sources of obligations under the Civil Code3 It has
the force of law between the parties, and should be complied with in good faith4.

ESSENTIAL REQUISITES OF CONTRACTS (ARTICLE 1318)

There is no contract unless the following requisites concur:
(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.5

Those are the essential requisites for consensual contracts. With regard to real contracts, delivery
is also required and deemed as the fourth requisite.6

CONSENT: MEANING & REQUISITES (ART. 1319)

Meaning of Consent

The meeting of the minds between the parties on the subject matter and the cause of the
contract, even if neither one has been delivered. It most essential requisite of a contract.
The manifestation of the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract

Consent = Meeting of Minds = Certain Offer + Absolute Acceptance

Illustration:
A offered B a particular car for P1,000,000.00 Before B could
consent, A withdrew the offer. Was A allowed to do so?
ANSWER: Yes, because there was no meeting of the minds
yet, hence no contract had been perfected.

The minds of the parties must meet as to all the terms and nothing is left open for
further arrangement. Similarly, contract changes must be made with the assent or consent
of the contracting parties. If this assent or consent is wanting on the part of one who
contracts, his act has no more efficacy than if it had been done under duress or by a
person of unsound mind. (Phil. National Bank vs. Court of Appeals, 238 SCRA 20
[1994]; Luxuria Homes, Inc. vs. Court of Appeals, 302 SCRA 315 [1999].)

REQUISITES OF CONSENT

According to De Leon, in order for consent to be valid, the following must concur:
2
2 Castan 184, as quoted in Paras
3
Art 1157
4
Art 1159
5
Art 1319
6
Paras
3
 1. It must be intelligent. The parties giving their consent must have the capacity to act.
2. It must be free and voluntary. There must be no vitiation of consent through violence or
intimidation.
3. It must be conscious or spontaneous. There must be no vitiation of consent by mistake,
undue influence or fraud.7

Paras enumerated the following as requisites of consent:

1. There must be two parties. One person may represent two or more parties, as long as
there are no contradictory or prejudicial interests involved.
2. The parties must be capable or capacitated. If one party is insane, the contract is merely
voidable.
3. There must be no vitiation of consent. Otherwise, the contract is voidable.
4. There must be no conflict between what was expressly declared and what was really
intended.
5. The intent must be properly declared. Whenever required, legal formalities must be
complied with.

Jurado:
Under the Civil Code, in order that there is consent, the following requisites must concur:
1. The consent must be manifested by the concurrence of the offer and the acceptance (Arts.
1319-1326);
2. The contracting parties must possess the necessary legal capacity (Arts. 1327-1327); and
3. Third, the consent must be intelligent, free, spontaneous, and real (Arts. 1330-1346).
The first is expressly stated in the Code, the second and the third are implied.

According to Castan, consent presupposes the following elements or conditions:

1. Plurality of subjects;
2. Legal capacity;
3. Intelligent and voluntary;
4. Express or implied manifestation; and
5. Concurrence of the internal and declared will

PERFECTION OF CONTRACT: OFFER AND ACCEPTANCE

Requisites For The Meeting Of The Mind (Manifestation of Consent)

Before there is consent, it is essential that it must be manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to constitute the contract. Once
there is such a manifestation of the concurrence of the wills of the contracting parties, the period
or stage of negotiation is terminated. The contract, if consensual, is finally perfected

Thus, the following are the requisites for the perfection of a contract:
1. An offer must be certain
7
De Leon, 2014
4
 2. An acceptance that must be unqualified and absolute
Whether there has been a meeting of the minds and acceptance depends on the
circumstances surrounding the case
Both the offer and the acceptance may be revoked before the contract is
perfected which takes place from the time the acceptance comes to the
offerors knowledge.

OFFER
Meaning of Offer

A proposal made by one party (offeror) to another to enter into a contract

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 (oferree)

MUST BE CERTAIN (ART. 1319)

It must not be vague, misleading, or made as a joke.
1. Definite- so that on acceptance an agreement can be reached on the whole contract;
not definite if object is not determinate
2. 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
3. Intentional- should be serious and not made for fun or in jest

Must be certain or definite and clear and not vague or speculative so that the liability 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
A declaration of a person of his intention to enter into a contract is not an offer that is
certain. (Rosenstock v. Burk, 46 Phil. 217)
If the offer is withdrawn before it is accepted, there is no meeting of the minds.
If two contracts are offered, but they are independent of each other, acceptance of one
does not imply acceptance of the other (e.g. sale of a parcel of land and lease of an
automobile). But if one contract depends upon another, like a contract of load provided it
is secured by a contract of mortgage it is essential that there be an agreement on both
transactions.

Illustration:
A letter that says I am in position and am willing to entertain the
purchase of... was held to have not met the certainty requirement.8
Instead, clear and simple words that convey the idea of a resolution to
purchase must be used, such as I offer to purchase or I want to
purchase.
The word entertain only meant that the sender of the letter was in a
position to deliberate, but no certain offer was communicated.

8
Rosenstock v. Burke
5
WHAT MAY BE FIXED BY THE OFFEROR (ARTICLE 1321)

Article 1321. The person making the offer may fix the time, place and
manner of acceptance, all of which must be complied with.
Acceptance not made in the manner provided by the offeror is ineffective
Any act contrary to the prescribed terms really constitute a counter-offer or
counter-proposal.

WHEN MADE THROUGH AN AGENT

Article 1322 an offer made through an agent is accepted from the time
acceptance is communicated to him.
Applies when both the offer and the acceptance are made thru an agent
(extension of the personality of the principal.
No meeting of the minds if the principal himself made the offer and the
acceptance is communicated to the agent unless of course he is authorized to receive
the acceptance
o Any other intermediary/ messenger- must be communicated to the person who
sends him.
o If duly authorized, the act of the agent is in law, the act of the principal

WHEN OFFER BECOMES INEFFECTIVE

Article 1323. An offer becomes ineffective upon the death, civil interdiction,
insanity or insolvency of either party before acceptance is conveyed.
Other instances:
o When the offeree expressly or impliedly rejects the offer
o When the offer is accepted with a qualification or condition (counter-offer)
o When before acceptance is communicated, the subject matter has become illegal
or impossible
o When the period of time given to the offerree within which he must signify his
acceptance has already lapsed
o When the offer is revoked in due time (before the offeror has learned of its
acceptance by the offeree)
o
BUSINESS ADVERTISEMENTS FOR THINGS FOR SALE (ARTICLE 1325)
Article 1325. Unless it appears otherwise, business advertisements of things
for sale are not definite offers, but mere invitation to make an offer.

ADVERTISEMENTS FOR BIDDERS

Advertisement 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

6
 Not applicable to judicial sale wherein the highest bid must necessarily
accepted.

ACCEPTANCE
Manifestation of the offerree of his assent to the terms of the offer
Without acceptance there can be no meeting of the minds
A mere offer produces no obligation
Must be identical in all respects with that of the offer so as to produce the consent/
meeting of the minds
At the time is communicated, both parties must be living and capacitated (in relation to when an
offer becomes ineffective)

(I.A.1.A.1) MUST BE ABSOLUTE

Acceptance should be unqualified or unconditional and absolute.

Illustration:
The seller offered to sell a thing for P1,000,000, either for cash or on a
three-year installment basis. The buyer wrote to the seller that he will
be giving P100,000 or 1/10 of the price as downpayment, the balance
to be paid in some other way.9
Was there meeting of minds?
There was no meeting of minds yet. This was only a qualified
acceptance. The seller did not specify how much the initial payment
should be.

There is no meeting of the minds:

1. If there is completely no acceptance or if the offer is expressly rejected
2. If the acceptance be qualified or not absolute, there is no concurrence of minds. There
merely is a counter-offer.
3. If one promises to act as surety for anothers obligation as an agent, he does not answer
for the latters obligation as a purchaser

On Acceptance of Complex offers

1. Two or more contracts
There may be a single offer involving 2 or more contracts and it will depend upon
the connection which may exist between the different contracts or the intent of the
person making the offer whether partial acceptance will create a contract.
2. Single contract conveying various things
Depends on their relation to one another or the intent of the offerer
Rule: Partial acceptance will not give rise to perfection of the contract where the
things are inter-related themselves.

9
Zayco v. Serra
7
KINDS
EXPRESS (ARTICLE 1320)
Maybe oral or written.
IMPLIED (ARTICLE 1320)
Arise from acts or facts which reveal the intent to accept such as the consumption of
things sent to the offeree , or the fact of immediately carrying out the contract offered

Illustration:
An offer by the Army to reward persons giving information
that would lead to the apprehension of certain unlawful elements may
be considered implicitly accepted when the act referred to is
performed by the members of the public.

Also, implied rejection can be inferred from the acts of the parties as by one or both
acting on it as though it were a completed agreement

Illustration:
An offer to remit interest, provided the principal is pad, is
deemed rejected when the debtor fails to pay the debt, and the creditor
was constrained to sue for collection thereof. (Gamboa vs. Gonzales,
17 Phil. 381)

QUALIFIED (ARTICLE 1319)

Not an acceptance but constitutes a counter-offer
If the acceptance is qualified, or modifies or varies the terms of the offer, it merely
constitutes a counter-offer or a new proposal (which must be accepted absolutely)

MANNER OF ACCEPTANCE
BY LETTER OR TELEGRAM
The contract is perfected not from the time the letter or telegram is sent but from the time
of the offerers knowledge, actual or constructive of the acceptance
Presumption: the offerer read the contents or came to now of the acceptance
General Rule: acceptance made by letter/ telegram does not bind the offerrer except from
the time it came to his knowledge

ACCEPTANCE BY PROMISE
Need not be in words but may be inferred from the acts of the parties as by one o both
acting on it as though it were a completed agreement

8
ACCEPTANCE BY ACT
Manifested by the performance

ACCEPTANCE BY SILENCE OR INACTION

General Rule: silence cannot be construed as acceptance
Exceptions
1. Where the parties agree expressly or impliedly that it shall amount to acceptance
2. Where specified rovisions of law so declare
3. Where under the circumstances such silence constitutes estoppels

PERIOD OF ACCEPTANCE
Article 1324. When the offerer has allowed the offeree a certain period to accept
Offeree may accept any time until such period expires
Acceptance beyond the time fixed is not legally an acceptance but constitutes a new offer
Acceptance not made in the manner provided by the offer is ineffective
If offeror has not fixed the period, the offeree must accept immediately within a
reasonable tacit period
Offer implies an obligation on the part of the offeror to maintain it for such a length of
time as to permit the offerree to decide whether to accept it or not

OPTION CONTRACT
Option is a contract whereby the offeror gives the offeree a certain period to accept within which
to buy or not a certain object for a fixed price. It may or may not be for a valuable consideration.
RIGHTS OF THE OFFEROR TO WITHDRAW OFFER:
If offer is with a consideration, the offerer cannot withdraw the offer before the lapse of
the period agreed upon (Tuason vs. Del-Rosario-Suarez [2010]). Otherwise, liable for
damages. In essence, the option is a different contract in itself.
If the option is with no consideration, he may withdraw the offer at any time before
acceptance.
TERMINATION OF OFFER
Extinguishment or annulment of offer
o Withdrawal by the offerro
o Lapse of the time for option period
o Legally incapacitated to act
o Offeree makes counter-offer
o Contract becomes illegal

FOUR THEORIES WHEN CONTRACT IS PERFECTED

(I.A.1.A.1) MANIFESTATION THEORY

Counterofferree manifests his acceptance

9
EXPEDITION THEORY
o Sending or mailing by letter
RECEPTION THEORY
o Receipt of the message of acceptance
COGNITION THEORY
o Counter-offerree manifests his acceptance

LEGAL CAPACITY OF THE PARTIES

A) MINORS, INSANE OR DEMENTED PERSONS AND DEAF-MUTES WHO DO

NOT KNOW HOW TO WRITE
WHEN OFFER OR ACCEPTANCE IS MADE DURING A LUCID
INTERVAL, INTOXICATION, DURING HYPNOTIC SPELL
CORPORATIONS

VICES OF CONSENT

Vices of consent are the causes that vitiate consent or render it defective so as to make the
contract voidable10. Under Article 1330 of the NCC, the following are vices of consent:
1. Error or Mistake
2. Violence or intimidation
3. Intimidation, threats or duress
4. Undue influence
5. Fraud or deceit.

A) MISTAKE
A mistake is an inadvertent and excusable disregard of a circumstance material to the
contract (Reyes, 1964). In other words, it is a false notion of a thing or fact material to the
contract (De Leon, 2014).
In order to invalidate consent a mistake must:
a. refer to the substance of the thing which is the object of the contract or
b. refer to the conditions which have principally moved one or both the parties to enter
into the contract.11
KINDS OF MISTAKE
De Leon enumerates three kinds of mistakes, namely:
1. Mistake of fact mistakes about the object or conditions of the contract or the
qualifications and identity of the contracting parties which have been the principal cause
of the contract.
2. Mistake of Law erroneous o interpretation of the law and its legal effects
10
ibid
11
Art 1131
10
 3. Mutual mistake mutual error as to the legal effect of an agreement when the real
purpose of the parties is frustrated.

MUTUAL ERROR
Article 1134 illustrates a situation wherein there is a mutual error as to the legal effects of
an agreement. This refers to a mistake on the part of both parties arising from ignorance of or
erroneous interpretation of the law and its legal effects. As a rule mistake of law does not
invalidate consent because ignorance of the law excuses no one from compliance therewith
(Article 3). But mistake of the law may vitiate consent when the mistake refers to a doubtful
question of the law or on its applications, in which case it is considered as analogous to mistake
of fact (De Leon, 2014).

According to De Leon (2014), the following are the requisites for the application of Article 1134:
1. The error must be mutual.
2. It must be as to the legal effects of an agreement.
3. It must frustrate real purpose of the parties

Illustration:
D borrows 10,000 Php from C. As security for the debt, it was agreed
that D should mortgage his parcel of land to C. However the
document as written is one of antichresis, the parties erroneously
believing that it has the same effect as a mortgage. In this case the
contract is voidable.

INSTANCES WHEN MISTAKE DOES NOT VITIATE CONSENT

In certain cases, mistake does not vitiate consent12:

1. Error is about the incidents of a thing (accidental qualities which are not taken as
principal considerations of the contract) unless caused by fraud of the other party.

Example: distance of a residential house to grocery stores, if not taken as principal

considerations of the contract.
2. Mistake as to quantity or amount which gives rise to its correction unless it goes to the
essence of the contract
3. Error as regards the motive of the contract unless it constitutes a condition or cause of the
contract.

Example: A is selling his parcel of land to for 200,000 Php cash but B is buying the land thinking
that the price is payable by installments.
4. Mistake as to the identity or qualifications of a party unless such identity or qualifications
are the principal cause of the contract.

12
De Leon
11
Example:
A sold his car to B. A thought that B was a doctor but B is a lawyer. Mistake in this
case is immaterial.
A donated his car to B thinking that B is his half-brother, but it turns out that they are
not related. The mistake as to the identity of one party in this case is material because
it was the principal reason or consideration for the donation.
1. Error which could have been avoided.

Example: S was willing to sell his share of two parcels of land, provided his co-owners would
also sell their respective shares on said land. S learns from his lawyer that his co-owners were
amendable to sell their shares. After signing the deed of sale S learned that his co-owners did not
agree to sell their share. S cannot invoke mistake as it could have been avoided if only S exerted
effort to verify that his co-owners were willing to sell their shares.
2. When the party alleging the mistake knew the doubt, contingency or risk affecting the
object of the contract (Article 1333). There is an assumption that if a person who knew
the doubt, contingency or risk affecting the object of the contract, gives his consent, he
was willing to take chances. So he cannot claim mistake (De Leon, 2014).

Example: B bought a parcel of land from S who informed him before the contract was perfected
that the land was involved in a litigation in which C is the claimant. If C recovers the land B
cannot claim mistake.

There is a presumption that when a person signs a document, he knows its contents, with
full knowledge and understanding ( De Leon, 2014).Article 1132 presents situations wherein one
of the parties is unable to read or where the contract is in a language not understood by one of the
parties. In these situations when mistake or fraud is alleged, the person enforcing the contract
must show that the terms of the contract have been fully explained to the other party (Article
1132).

VIOLENCE
Violence refers to the employment of serious irresistible force to extort consent (Article
1135).In order to make consent defective, it must be either serious or irresistible. In either case,
consent is not free (De Leon, 2014). Violence employed by a third person who did not take part
in the contract, may also annul the obligation (Article 1136).

Illustration:
X signs document because every time he refuses he is hit by the butt of
a gun which causes blood to flow from his head. In this case serious
irresistible force is employed.

INTIMIDATION
There is intimidation when one of the contracting parties is compelled by a reasonable
and well-grounded fear of an imminent and grave evil upon his person or property or the person
or property of his spouse, ascendant or descendant, to give his consent (Article 1135).
Intimidation is internal and need not resort to physical force (De Leon, 2014).

Illustration:
X signs a document because a gun is pointed at him by Y who
12
 threatens to kill him. In this case one of the contracting parties is
compelled by a reasonable and well-grounded fear of an imminent and
grave evil upon his person or property or the person.
But if X was merely intimidated that he would be shot by Y but Y has
no gun at the time of the threat, there is no intimidation as the fear is
not reasonable and well-grounded as Y is in no position to carry out
his threat.

(I.A.1.A.1) DETERMINATION OF THE DEGREE OF INTIMIDATION

(ARTICLE 1335)
To determine the degree of intimidation, the following factors must be considered (Article 1335):
1. Age;
2. Sex; and
3. Condition of the person.

UNDUE INFLUENCE
There is undue influence when one takes improper advantage of ones power over the
will of another, depriving him of a reasonable freedom of choice (Article 1137).Undue influence
overpowers the mind of a party as to prevent him from acting understandingly and voluntarily to
do what he would have not done if he had been left to exercise freely his own judgment and
discretion (De Leon, 2014). Undue influence is different from the kind of influence gained by
kindness, affection or persuasion (De Leon, 2014).

(I.A.1.A.1) REQUISITES
According to De Leon (2014) the following circumstances must be considered:
1. Confidential, family, spiritual and other relations between the parties
2. Mental weakness
3. Ignorance
4. Financial distress of the person alleged to have been unduly influenced.

Illustration:
X is in need to 10, 000 Php to pay his rent. X tries to borrow from Y
but Y tells X to sell his piano to him. X does not want to sell his piano
but was compelled to sell it because of his financial condition. The
sale may be avoided on the ground of undue influence.

FRAUD
There is fraud when a party is induces to enter into a contract through insidious words or
machinations (Article 1337). Article 1137 refers to a causal fraud. It must be distinguished from
an incidental fraud which refers to a fraud which is not the principal inducement that led the
other to give his consent (De Leon, 2014).

(I.A.1.A.1) REQUISITES
According to De Leon (2014), in order that fraud may annul consent, the following requisites
must concur:
1. It must pertain to a misrepresentation or concealment of a material fact by one party who
13
 knows its falsity.
2. It must be serious. It does not include slight deviations from the truth.
3. It must be employed by one of the parties only, not by both parties (fraud by one of the
parties neutralizes the fraud by the other) or by a third person, unless in connivance with
one of the contracting parties.
4. It must be made in bad faith and is intentional
5. It must have induced the consent of the other party
6. It must be proved by clear and convincing evidence
Example: S offered to sell B a ring, claiming that the stone on the ring was a diamond. S knows
that it is not diamond but an ordinary glass. If B buys the ring, relying on the truth of the
representation of S, the sale may be annulled on the ground of fraud.

FRAUD BY CONCEALMENT
Concealment may be considered as misrepresentations (De Leon, 2014). This pertains to
the intentional or unintentional failure of one party to disclose facts which he ought to
communicate to the other party (Article 1139).

Illustration:
X and Y are real estate business partners bound by confidential
relations. X learns that C is interested in buying a certain parcel of
land owned by the partnership even for a high price. Without
informing Y, X was able to make Y sell his share to him. X sold the
land to C for a big profit. X is guilty of fraudulent concealment a s he
had the duty to disclose facts having bearing on the value of the
interests of Y in the partnership.

INSTANCES NOT CONSIDERED FRAUDULENT

1. Usual exaggerations in trade when the other party had the opportunity to know the facts
(1340)
Merchants/Traders have the natural tendency to exaggerate in their attempt to make sale at the
highest price possible so customers are expected to know how to take care of their concerns and
rely on their own independent judgment (De Leon, 2014).
Example: This X pen will help your child obtain high grades I class!

2. Mere expressions of an opinion, unless made by an expert and the other party has relied on the
formers special knowledge (Article 1341) and it turns out that the opinion is false or erroneous.
Example: X found a ring. He sells ring to Y honestly believing and telling Y that it is a diamond
ring. There is no fraud because Ys statement is merely an opinion. But if X is an expert in
precious stones and he sells the ring to Y saying that he believes that the ring is a diamond ring
even if it is not, and Y relying on his special knowledge buys the ring, the contract is voidable on
the ground of fraud.

3. Misrepresentation by a third person, unless it created substantial mistake affecting both parties
or unless the third person is in connivance with one of the contracting parties (Article 1342).
According to De Leon (2014), a party should not be made to suffer from the imprudence of
another in believing in the fraud of a third person.
Example: B bought the land of S for 2,000 Php per sq. m. The reasonable price of the land in the
14
same vicinity is 2500 Php per sq m but S sold it for only 2000 Php per sq m. because C had
deceived him regarding its market value. There is no fraud in this case unless it is proved that B
was a party to the fraud.

4. Misrepresentation in good faith is considered as a mere mistake or error (Article 1343)

Example: S sold a ring to B. S honestly believed that what he sold to B was a diamond ring but it
turns out that it was not. The misrepresentation of S was a mere mistake. So the contract is
voidable of that ground and not on the ground of fraud.

SIMULATIONS
Simulation of a contract may be absolute or relative (Article 1345). According to Article
1345, an absolute simulation exists when a contract does not really exist or is fictitious and the
parties do not intend to be bound at all and there is relative simulation when a contract is
different from the true agreement of the parties. An absolute simulation is void while in relative
simulation, the parties become bound to their real agreement provided their real agreement does
not prejudice third persons and is not contrary to law, morals, good customs, public order and
public policy (Article 1135).

Absolute simulation
D is indebted to C. Upon learning that C is going to enforce hi credit,
d pretended to sell his land to B, his father-in-law. D did not receive a
single centavo for the transaction and continued in possession of the
land as the contract was merely simulated or is fictitious. There is no
contract of sale in this case as the parties do not intend to be bound at
all.

Relative simulation
D and C entered into a contract of mortgage. But wanting to hide the
mortgage, it was made to appear in the form of a deed of sale. As far
as D and C are concerned the contract entered into between them is a
contract of mortgage.

SECOND REQUISITE: OBJECT

Meaning of Object

The object is the thing, right, or service which is the subject matter of the obligation
arising from the contract.13

OBJECT: REQUISITES
What are the requisites of an object?14

1. It must be licit or lawful, that is, not contrary to law, morals, good customs, public order
or public policy.
13
Tolentino
14
Paras, 655

15
 For contracts of sale, Art. 1459 provides that the thing must be "licit and the vendor
must have a right to transfer the ownership thereof at the time it is delivered".

1. It must be possible.
Art. 1348: Impossible things or services cannot be the object of contracts

1. It must be transmissible.

2. It must be within the commerce of man.

Art. 1347 states "All things which are not outside the commerce of men, including
future things, may be the object of a contract."

1. It must be determinate or determinable.

Art. 1349 states "The object of every contract must be determinate as to its kind. The
fact that the quantity is not determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the need of a new
contract between the parties."
Art. 1460 reiterates the meaning of determinate ("A thing is determinate when it is
particularly designated or physical segregated from all other of the same class") and
determinable ("...if at the time the contract is entered into, the thing is capable of
being made determinate without the necessity of a new or further agreement between
the parties").

For things, it should be in existence or capable of coming into existence when the
contract was entered into.
Art. 1461 expounds on future things as those "having a potential existence".
The efficacy of the sale of a mere hope or expectancy is deemed subject to the
condition that the thing will come into existence.
For contracts of sale, Art. 1462 states that the goods which form the subject of a
contract of sale may be either (a) existing goods, owned or possessed by the seller, or
goods to be manufactured, raised; or (b) future goods or those acquired by the seller
after the perfection of the contract of sale.
There may also be a contract of sale of goods "whose acquisition by the seller
depends upon a contingency which may or may not happen".

NOT OBJECTS OF CONTRACTS

Conversely, the following may not be objects of contracts15:

1. Things outside the commerce of men

Examples:
a) Sidewalks, public plazas, or public bridges cannot be the object for contracts of
alienation. They may, however, be the object of a contract of repair.
b) Taxes are not subject to contract between taxpayer and tax officer, except when
there is an actual compromise.
c) The right to present one's candidacy for a public office cannot be the object of a
contract, such that when a candidate for a party convention, who previously
15
Paras, 655-659.

16
 agreed to not run for public office if he is defeated in the convention, cannot be
subsequently sued for breach of agreement if he decides to run.
d) Human blood and other parts of the human body cannot be objects of contracts
(Art. 1347) because they are outside the commerce of men, which is why the
extraction, collecting, and selling of human blood by an individual or agency is an
aspect of medical profession and should not be considered a taxable entity for
business tax purposes.

2. Intransmissible rights
Examples:
a) Political rights, like the right to vote
b) Strictly personal rights, like parental authority

3. Future inheritance, the source of which is still alive, except in cases authorized by law:
Examples of exceptions:
a) in the case of marriage settlements (Art. 130)
b) in the case of partitions of properties inter vivos by the deceased (Art. 1080)

Future inheritance is any property or right not in existence or capable of determination, at

at the time of contract, that a person may in the furture acquire by succession.16

Illustrations:

When a son sold his share of the property, after his

father died, but before the delivery of the property to him, the sale is
valid. An inheritance already existing, which is no longer future from
the moment of death of the predecessor, may legally be the object of
contracts.17

When a son sold a property he expected to receive from

his father, who was still alive, the contract is not valid. 18

If future heirs divided the property they expected to

inherit from their mother, at the time when she was still alive, the
partition is not valid. 19

1. Impossible things or services, which may be:

a) because of the nature of the transaction
b) because of the law
c) absolute; obectively impossible, which means no one can do it
16
Blas v. Santos (1961).

17
Osorio v Osorio and Inchausti Steamship, 41 Phil 513.

18
Tordilla v Tordilla, 60 Phil 162.

19
Arroyo v Gerona, 58 Phil 226.

17
 d) relative; subjectively impossible, which means the debtor cannot comply and the
impossibility is not merely temporary
Example: a blind man enters into a contract which requres the use of his eyesight

A showing of mere inconvenience, unexpected impediments, or increased expenses is not

enough. Mere difficulty is not impossibility.20

2. Objects which are indeterminable as to their kind

3. Services which are contrary to law, morals, good customs, public order, or public policy

THIRD REQUISITE: CAUSE

Meaning of Cause
It is the essential and impelling reason why a party assumes an obligation.21
It is the essential or more proximate purpose or reason which the contracting parties have
in view at the time of entering into the contract.22

Cause and Subject Matter

The distinction between cause and subject matter is a matter of viewpoint. What may be
the subject matter for one party will be the cause or consideration for the other party.23

Example: Bilateral or Reciprocal Contracts

S sells a watch to B for P2,000. As far as S (vendor) is concerned, the subject matter or object is
the watch and the cause is the price. As regards B (vendee), the subject matter or object is the
price and the cause is the watch.

Classification of Contracts as to Cause24

In onerous contracts the cause is understood to be, for each contracting party, the prestation or
promise of a thing or service by the other; in remuneratory ones, the service or benefit which is
remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor.25

a. Onerous contracts
Here the cause is, for each contracting party, the prestation or promise of a thing or
service by the other.
Example: Reciprocal obligations
20
Castro v Longa, 89 Phil 581.

21
Paras, 660.
22
De Leon. 607.
23
Paras, 661.
24
Paras, 662; De Leon, 608-611 .
25
Article 1350
18
b. Remuneratory contracts
The cause is the past service or benefit which by itself is a recoverable debt.
The purpose is to reward the service that was previously rendered by the party
remunerated.

c. Contracts of pure beneficence (Gratuitous)

The cause is the mere liberality of the benefactor.

These are contracts designed solely and exclusively to procure the welfare of the
beneficiary, without any intent of producing any satisfaction for the donor.
There is no idea of self-interest on the part of the transferor

Example: pure donations

Cause in other cases26
1. In Accessory Contracts like Mortgage and Pledge
The cause in accessory contracts of Mortgage or Pledge is the same as the cause for the
principal contract of loan.
B. In Accessory Contracts of Personal Guaranty (Guaranty and Suretyship)
The cause is pure liberality. In a contract of guaranty, the Cause is gratuitous, unless there
is a stipulation to the contrary.
Material consideration may be given sometimes.

C. In Natural or Civil Obligations

The cause may be a moral obligation. However, if the moral obligation does not exist,
there is no valid cause, as when the promise was made on the erroneous belief that the
one was morally responsible for the failure of a certain particular enterprise
Example: A promise to make reimbursement was prompted by feeling of moral responsibility

Case: Fisher v Robb 69 Phil 101 [1939]

FACTS:
The enterprise Philippine Greyhound Club, Inc., which was formed to introduce dog racing in
the Philippines did not succeed. X, one of the organizers, wrote a letter to Y one of those who
invested money in the venture, stating that he felt a moral responsibility for the stockholders
and that he will see to it that those who had made the second payment of P2,000 of their
subscription shall be reimbursed such amount as soon as possible out of his own personal
funds.
X brought an action against Y to enforce the promise

ISSUE: Is there a sufficient cause to support the promise of A?

HELD:

26
Paras, 663.
19
None. X is required to pay P2,000 but Y has not given or promised any thing or service to X
which may compel him to make such payment. The promise of X was prompted by a feeling of
pity which X had for Y as a result of the loss which the latter had suffered because of the failure
of the enterprise The obligation which X had contracted with Y is, therefore, purely moral, and,
as such, is not demandable in law but only in conscience over which human judges have no
jurisdiction.

Requisites for Cause

Contracts without cause, or with unlawful cause, produce no effect whatever. The cause
is unlawful if it is contrary to law, morals, good customs, public order or public policy.27

The following are the requisites for cause:

1-It must be present at the time the contract was entered into;
2-It must be true or real; and
3-It must be lawful. 28

1. EXISTING CAUSE
The absence or want of cause means that there is a total lack of any valid consideration
for the contract.
If there is no cause whatsoever, the contract is void and confer no right and produce no
legal effect whatever.
The cause must exist at the time of the perfection of the contact
A fictitious sale is VOID29

BAR PROBLEM
On January 5, A sold and delivered his truck together with the corresponding certificate of
public convenience to B for the sum of 1.6 million, payable within 60 days. Two weeks after the
sale, and while the certificate of public convenience was still in the name of A, the certificate
was revoked by the Land Transportation Commission thru no fault of A. Upon the expiration of
the 60-day period. A demanded the payment of the price from B. B refused to pay, alleging that
the certificate of public convenience which was the main consideration of the sale no longer
existed. Is the contention of B tenable?
ANSWER: No, for the certificate was in existence at the time of the perfection of the
contract. Its subsequent revocation is of no consequence insofar as the validity of the
contract is concerned. Besides, B was negligent in not having caused the immediate transfer
of the certificate to his name. After all, it had already been delivered to him.30
2. TRUE CAUSE

27
Article 1352
28
Paras, 666.
29
Navarro v Diego 40 OG 2106
30
See Juan Serrano v Federico Miave, et al., L-14678, March 31, 1965
20
 If the cause is false, the contract is not valid unless some other cause really exists.

Example: A contract of sale is void if the price is simulated, but the act may be shown to have
been in reality a donation or some other act or contract31

3. LAWFUL CAUSE
If the cause is unlawful, the transaction is null and void.
The one who claims that some parts of the contract are illegal but the rest are valid has
the burden of showing which parts are supported by lawful cause.

Examples
1. When the motive is to stifle a criminal prosecution, the contract is void32.

A contract whereby a person accused of a crime obliges himself to give a sum of money in
consideration of the promise on the part of the oblige to refrain from testifying against him is
void.

Reason: This is manifestly contrary to public policy and the due administration of justice.33
2. A promissory note to cover a gambling debt34 or to cover accumulated usurious debts, is
VOID 35

3. A promise of marriage based on sexual intercourse36

Case: Liguez v Court of Appeals December 18, 1957

FACTS:
Salvador P. Lopez, a married man, gave Conchita Liguez, a 15-year-old girl, a donation of land
so that she would have sexual relations with him and so her parents allow them to live together.
After Lopezs death, Conchita sought to get the land from his heirs, but said heirs refused on the
ground that the cause or consideration of the donation ws illegal, and that therefore the donation
should be considered null and void. Conchita contended that while the motive might have been
immoral, still the cause-liberality-was proper, and that therefore the donation should be
considered valid

HELD:
The donation was null and void. While it is true that the motive differs from cause, still a
contract that is conditioned upon the attainment of an immoral motive should be considered void,
for here motive may be regarded as cause when it predetermines the purposes of the contract.
31
Article 1471
32
Reyes v Gonzales 45 OG 831 and 8 Manresa 627
33
Arroyo v Berwin 36 Phil 386
34
Palma v Canizares 1 Phil 602
35
Mulet v People 73 Phil 63
36
Batarra v Marcos 7 Phil 156
21
Here, Lopez would not have conveyed the property in question had he known that Liquez would
not cohabit with him; it follows that the cohabitation was an implied condition to the donation,
and being unlawful, the donation itself must be considered unlawful.
Moreover, it cannot be said here that the donation was a contract of pure beneficence or a
contract designed solely and exclusively for the welfare of the beneficiary. The donation was
made both to benefit Conchita and to gratify his own sexual desires. We have thus seen that the
donation was immoral.

Note: SHOCKING CAUSE or CONSIDERATION

A supposed sale by a dying man of a parcel of land consisting of more than 18 hectares to
his houseboy for only P700.00 is shocking to the conscience and void.37

An Illegal Cause
The effect is that the contract is null and void.
If one party is innocent he cannot be compelled to perform his obligation and may
recover what he has already given.
If both parties are guilty, in general, neither can sue the other, the law leaving them as
they are. 38

Exceptions

Art 1414. When money is paid or property delivered for an illegal purpose, the contract may be
repudiated by one of the parties before the purpose has been accomplished, or before any
damage has been caused to a third person. In such case, the courts may, if the public interest will
thus be subserved, allow the party repudiating the contract to recover the money or property.

Art 1416. When the agreement is not illegal per se but is merely prohibited, and the prohibition
by the law is designated for the protection of the plaintiff, he may, if public policy is thereby
enhanced, recover what he has paid or delivered.

Motives

The particular motives of the parties in entering into a contract are different from the
cause thereof.39

Meaning

It is the purely personal or private reason which a party has in entering into a contract.40

Motive does not affect the validity of a contract.

Motives do not enter at all in the validity or invalidity of cause or consideration. It does
not affect the other party.
37
Javier v Vda. De Cruz
38
Paras, 670.
39
Article 1351
40
De Leon, 612.
22
 One may purchase an article not because it is cheap, for in fact, it may be dear, but
because he may have some particular use to which it may be put because of a particular
quality which the article has or the relation to which it will be associated41

Example:
I buy a puppy from a store for P5,000 because I want to give it to my sister. The cause of the
contract is the puppy (for me); the money for the seller. My motive, however, is the giving of the
puppy. Motives do not enter at all in the validity or invalidity of cause or consideration

When motives may be considered the cause of the contract

This applies when the motive predetermines the cause of the contract. That is, it is made
the condition for the efficacy of the contract, or is founded on a fraudulent purpose to
prejudice third persons42

Cause and Motive Distinguished

Motive is the condition of the mind which incites to action, includes the inference as to
the existence of such conditions from an external fact of a nature to produce such
condition, while cause is the essential reason which moves the contracting parties to enter
into it and justifies the creation of an obligation through their will;
The latter is a remote or indirect reason, the former is an immediate or direct reason for
the parties to enter into the contract.
The latter is not an essential element of a contract, but cause is an essential element.43
The latter may vary even though parties enters into the same kind of contract, while the
former is always the same
The latter may be unknown to the other contracting party, but the former is always known
The law cannot deal with ones motives; but the law is always concerned with the cause
or consideration.44
The presence of motive cannot cure the absence of cause.45

Illegal Cause and Illegal Motives Distinguished

The former makes a contract void, while the latter does not necessarily render the
transaction void.46

Example: If I buy a knife to kill X, the purchase is still valid.47

41
De Jesus v G. Urrutia & Co., 33 Phil. 717
42
De Leon, 612-613.
43
De Leon, 612.
44
De Jesus v G. Urrutia & Co., 33 Phil. 717
45
Paras, 665.
46
Paras, 666.
47
See Gonzales, et al. v Trinidad et al., 67 Phil 682
23
STATEMENT OF FALSE CAUSE
Art. 1353. The statement of a false cause in contracts shall render them void, if it should not be
proved that they were founded upon another cause which is true and lawful.

Statement of a False Cause48

(a) Just because the cause stated is false does not necessarily mean that the contract is void.
Reason: The parties are given a chance to show that a cause really exists, and that said cause is
true and lawful.
(b) Thus under this Article, it would seem that the contract with a statement of a false cause is
not void, but merely revocable or voidable. (Concepcion v. Sta. Ana, 87 Phil. 787).

Effect of false cause. According to Art. 1353, the statement of a false cause in contracts shall
render them void, if it should not be proved that they were founded upon another cause which is
true and lawful.
Thus, where the deed of sale expressly states that the purchase price has been paid when in fact it
has never been paid, it is evident that the contract of sale is invalid in accordance with the
general rule announced in Art. 1353 and confirmed by Art. 1409, No. 2, which declares as
inexistent those contracts which are absolutely simulated or fictitious.49

By falsity of cause is meant that the contract states a valid consideration but such statement is not
true.50
-A false cause may be erroneous or simulated.

ERRONEOUS
- produces the inexistence of a contract.
If the cause is false, the contract is rendered void because the same actually does not exist. (Arts.
1353, 1409[3].)

Ex:
(1) X promised to give to Y P1,000.00 as payment for past services allegedly rendered by Y
which in truth and in fact have not been rendered; or for a carabao which unknown to X is
already dead.
Here, the cause for X, the service remunerated or the promise of Y to sell the carabao, is
erroneous as it is based upon facts believed to be existing, but really inexistent.

SIMULATED
-does not always produce this effect, because it may happen that the hidden but true cause is
sufficient to support the contract. If the parties can show that there is another cause and that said
48
Paras, 671
49
Jurado, 478
50
De Leon, 625
24
cause is true and lawful, then the parties shall be bound by their true agreement. (Art. 1346.)

Ex.
(1) S sells to B a parcel of land. In the deed of sale, P100,000.00 is stated as the price of the land.
If this statement is false, then there is no contract of sale. However, if B can prove that the
contract is founded upon another consideration, as when B has exchanged his car for the land,
then the contract of barter or exchange (not sale) shall be valid. In this case, the statement of the
price is simulated because it is wilfully made. (see Arts.1345, 1346.) Otherwise stated, there is,
in fact, a real consideration but the same is not the one stated in the contract.

PRESUMTION OF CAUSE
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.

A made a promissory note in Bs favor. A, however, alleged that the cause was his gambling
losses in a prohibited game. Who has the burden of proving that the game was indeed a
prohibited one?

ANS.: A because under the law, the presumption is that the cause is lawful. (See Rodriguez v.
Martinez, 6 Phil.594).

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
- It is inadequacy of cause, like an insufficient price for a thing sold.51
____________________
51 Paras, 672
Lesion
- is any damage caused by the fact that the price is unjust or inadequate. (8 Manresa 740.)
- It is the injury suffered in consequence of inequality of situation, by one party who does not
receive the full equivalent for what he gives in a commutative contract, like a sale. (Bouviers
Law Dictionary, p.1929.)52

A) RULES ON LESION53
General Rule Lesion or inadequacy of price does not invalidate a contract.
Exceptions:
(a) When, together with lesion, there has been:
1) fraud
2) mistake
3) or undue influence
(b) In cases expressly provided by law (in the following, the contracts may be rescinded):
1) Those which are entered into by guardians whenever the wards they represent suffer lesion
by more than one-fourth of the value of the things which are the objects thereof. (Art. 1381, par.
1, Civil Code).
2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the

25
preceding number. (Art. 1381, par. 2, Civil Code).
3) Partition among co-heirs, when anyone of them received things with a value less by at least
one-fourth than the share to which he is entitled. (Art. 1098, Civil Code).

Ex:
(a) A guardian of A sold As mansion worth P120 million for P60 million. May the contract be
rescinded on the ground of lesion?

ANS.: Yes, such a case is expressly provided for by the law as one of the contracts that may be
rescinded on the ground of lesion.

(b) A sold his mansion worth P120 million to B for only P60 million because A did not know the
true value of the house. May the contract of sale be rescinded?

ANS.: No. As a rule lesion or inadequacy of price, by itself, does not invalidate a contract. But if
A had sold it only for this amount because of fraud or mistake or undue influence, the contract
may be annulled.

NOTE : Lesion may be EVIDENCE of the presence of fraud, mistake, or undue influence.
(Rosales de Echaus v. Gan, 55 Phil.527).54

_____________________
52 De Leon, 629
53 Paras, 672-673
54 Paras, 674

WHAT IS THE EFFECT OF ERROR OF CAUSE ON CONTRACTS?

A:
1. Absence of cause (want of cause; there is total lack or absence of cause) Confers no right
and produces no legal effect
2. Failure of cause Does not render the contract void
3. Illegality of cause (the cause is contrary to law, morals, good customs, public order and public
policy)Contract is null and void
4. Falsity of cause (the cause is stated but the cause is not true)Contract is void, unless the
parties show that there is another cause which is true and lawful
5. Lesion or inadequacy of cause Does not invalidate the contract, unless:
a. there is fraud, mistake, or undue influence;
b. when the parties intended a donation or some other contract;or
c. in cases specified by law (e.g.contracts entered when ward suffers lesion of more than 25%)

26
FORMS OF CONTRACTS

GENERAL RULE:
Contracts shall be obligatory, in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. (Art 1356).

A) EXCEPTION:
However, when the law requires that a contract be in some form in order that it may be
valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute
and indispensable. In such cases, the right of the parties stated cannot be exercised (Art. 1356).
Simple Example:
a.)A made a oral contract of loan to B for 1,000,000. Valid?

It is valid because contracts is obligatory in whatever form, and there is no form stated in law
about simple contracts of loan.

b.)A made a oral contract of loan to B for 1,000,000 with 10% interest. Valid?

Valid, but the interest is prohibited by law. No interest shall be due unless it has been expressly
stipulated in writing. (Art. 1956).

IMPORTANCE OF FORM
Form may be important for:
1. Validity (748, 749, 1874, 2134, 1771, 1773)

Article 748
Donations of personal property require a written contract or document if the
donation exceeds P500.

Article 749
Donations of real property require a public instrument.

Article 1874
Authority of agent to sell a piece of land must be in writing, otherwise, the sale is void.

Article 2134
The amount of the principal and of the interest shall be specified in writing; otherwise,
the contract of antichresis shall be void.

Article 1771
A partnership may be constituted in any form, except where immovable property
or real rights are contributed thereto, in which case a public instrument shall be necessary.

Article 1773
Contracts of antichresis The principal loan, and the interest if any, must be
27
 specified in writing otherwise it is void.
2. To make it effective as to third parties (1357 and 1358)

If the contract is valid and enforceable but was not in the form required by law, the contracting
parties may compel each other to observe that form (Art. 1357).

The following contracts are required to appear in a public document (Art. 1358) for the
convenience of the parties and so that they may be registered in the proper recording office to
adversely affect third persons. (Zamora v. Miranda [2012]).
(1) Acts and contracts which have for their object the creation, transmission, modification
or extinguishment of real rights over immovable property.
(2) The cession, repudiation or renunciation of hereditary rights or of those of the
conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third
person;
(4) The cession of actions or rights proceeding from an act appearing in a public
document.

3. Purposes of proving the existence of a contract. (1403 on Statute of Frauds)

The Statute of Frauds

Purpose is to prevent fraud, and not to encourage the same. Thus, certain
agreements are required to be in writing so that they may be enforced. (See Shoemaker v.
La Tondea, 68 Phil. 24).
Some Basic and Fundamental Principles Concerning the Statute of Frauds (General
Rules of Application)

The Statute of Frauds applies only to executory contracts (contracts where no

performance has yet been made) and not partially or completely executed (consummated
contracts). (Almirol & Carino v. Monserrat, 48 Phil. 67; Asturias Sugar Central, Inc. v.
Montinola, 69 Phil. 725 and Facturan v. Sabanal, 81 Phil. 512).
The Statute of Frauds cannot apply if the action is neither for damages because of
the violation of an agreement nor for the specic performance of said agreement. (Lim v.
Lim, 10 Phil. 635 and Facturan v. Sabanal, 81 Phil. 512).
The Statute of Frauds is exclusive.
The defense of the Statute of Frauds may be waived.
The Statute of Frauds is a personal defense, that is, a contract infringing it cannot
be assailed by third persons. (Art. 1408, Civil Code; see Moore v. Crawford, 130 U.S.
122).
Contracts infringing the Statute of Frauds are not void; they are merely
unenforceable. (Art. 1403, Civil Code).
The Statute of Frauds is a Rule of Exclusion, i.e., oral evidence might be relevant
to the agreements enu- merated therein and might therefore be admissible were it not for
the fact that the law or the statute excludes said oral evidence. (See Jones on Evidence,
Sec. 1425).
The Statute of Frauds does not determine the credibility or weight of evidence. It
merely concerns itself with the admissibility thereof.
The Statute of Frauds does not apply if it is claimed that the contract does not
28
 express the true agreement of the parties. As long as the true or real agreement is not
covered by the Statute of Frauds, it is provable by oral evidence. (Cayugan v. Santos, 34
Phil. 100)

A donated real property to B in a private instrument. B accepted the donation. Is the

donation valid?

ANS.: No, because the donation was not made in a public instrument. (Camagay v.
Lagera, 7 Phil. 397).

Real property was donated in a public instrument but acceptance was made in a private
instrument. Is the donation valid?

ANS.: No, because both the giving and the accepting must be in a public instrument. (See
Abellara v. Balanag, 37 Phil. 865).

Is an oral sale of land valid as between the parties?

ANS.:

1) If the land had been delivered or the money has been paid, the sale is completely valid.
( NOTE: Although the Statute of Frauds requires this contract to be in writing, still said
statute does not apply to executed or partially executed contracts.)

2) If the land has not yet been delivered and the price has not yet been paid, the sale is
unenforceable, that is, neither party may be compelled by court action to perform unless
the defense of the Statute of Frauds is waived.
REFERENCES
New Civil Code

De Leon, H. S., & De Leon, H. M., Jr. (2014). The Law on Obligations and Contracts. Manila,
Philippines: Rex Book store.

Paras, E. L. (2012). Civil Code of the Philippines Annotated.Volume Four.Seventh Ed. Manila,
Philippines: Rex Book store.

Reyes, J. B., & Puno, R. C. (1964). An outline of Philippine civil law. Manila, Philippines:
Manila, Central Book Supply, Inc.

Tolentino
Jurado

29