THE LAW ON OBLIGATIONS AND CONTRACTS
Consent
CHAPTER 2: ESSENTIAL REQUISITES OF
CONTRACTS
GENERAL PROVISIONS
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.
(1261)
SECTION 1. CONSENT
ARTICLE 1319. 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 the
acceptance absolute. A qualified acceptance
constitutes a counter-offer.
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. (1262a)
Consent – meeting of the minds between the
parties on the subject matter and cause of the
contract
It is the manifestation of the meeting of the offer
and the acceptance upon the thing and the cause
which are to constitute the contract.
Requisites of Consent:
1. There must be two or more parties.
2. The parties must be capable or
capacitated.
3. There must be no vitiation of consent.
4. There must be no conflict between
what was expressly declared and what
was really intended.
5. The intent must be declared properly.
CONSENT
1
NOTE:
One person may represent two or more
parties, unless there are contradictory or
prejudicial interests involved.
There must be no fraud or intimidation,
otherwise the contract is voidable.
Remedy should there be conflict may be
reformation, as when the parties really
intended to be bound, or else the contract is
VOID, as when the contract is fictitious or
absolutely simulated.
Requisites for Meeting of the Minds:
a) an offer must be CERTAIN;
b) and an acceptance that must be
UNQUALIFIED and ABSOLUTE.
NOTE:
If the acceptance is qualified, let us say
by a condition, this merely constitutes a
COUNTER-OFFER. A counter-offer as a matter of
fact extinguishes the offer. Moreover, it may or
may not be accepted by the original offeror.
a) In order that an offer can be considered
CERTAIN, it must not be vague, misleading, or
made as a joke.
Therefore, a declaration of a person of “his
intention to enter into a contract” is not an offer
that is CERTAIN. If the offer is withdrawn before
it is accepted, there is no meeting of the minds.
b) If there is completely no acceptance or if the
offer is expressly rejected, there is no meeting of
the minds. If the acceptance be qualified
or not absolute, there is no concurrence of
minds. There merely is a counter-offer. If one
promises to act as surety for another’s obligation
as an agent, he does not answer for the latter’s
obligation as a purchaser.
NOTE:
If the acceptance is qualified, let us say
by a condition, this merely constitutes a
COUNTER-OFFER. A counter-offer as a matter of
fact extinguishes the offer. Moreover, it may or
may not be accepted by the original offeror.
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 THE LAW ON OBLIGATIONS AND CONTRACTS
Roberto D. Tuazon
vs.
Lourdes Q. Del Rosario-Suarez, et al.
G.R. No. 168325. December, ,2010
The counter-offer of Roberto for a much
lower price was not accepted by Lourdes. There
is therefore no contract that was perfected
between them with regard to the sale of subject
property. Roberto, thus, does not have any right
to demand that the property be sold to him at
the price for which it was sold to the De Leons
neither does he have the right to demand that
said sale to the De Leons be annulled.
A offered 20 fountain pens to B for
P1,000 each. B answered by letter that he was
willing to purchase 30 fountain pens at said
price at P1,000 each. Is the contract perfected?
ANSWER: It depends:
(a) If B wanted 30 pens and would not be
satisfied with less, the acceptance can
be considered as qualified, so there has
been no perfection yet.
(b) If B was contented with 20 pens, but
desired, if possible to get 10 more,
there is a perfected sale regarding the
original 20, and an offer with respect to
the extra ten. Unless accepted in turn,
there would be NO contract yet with
respect to the additional 10 fountain
pens.
See Tolentino, Civil Code of the
Phil., Vol. V, p. 413
Article 1319, Paragraph 2 provides that
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.
The knowledge may be actual or constructive (as
when the letter of acceptance has been received
in the house of the offerer by a person possessed
of reasonable discernment).
If actual knowledge be required, proof of this
would be almost impossible, for even when the
CONSENT
2
Consent
letter containing the answer has been opened
and read, the offerer can always
claim, in some cases truthfully, that while he was
reading the same, his mind was elsewhere, and
he did not actually know the contents of said
answer.
• A letter of acceptance may in turn be
withdrawn or revoked.
However, the revocation of the
acceptance “must reach and be learned by the
offerer ahead of the acceptance.” (Reyes and
Puno, op. cit., p. 186).
• “Where the offeree has sent his
acceptance, but then sends a rejection
or a revocation of the acceptance, which
reaches the offerer BEFORE the
acceptance, there is NO meeting of the
minds, because the revocation has
cancelled or nullifi ed the acceptance
which thereby ceased to have any legal
effect.” (Tolentino, op. cit., p. 418).
An offer by telegram is governed NOW by the
same rules for letters, but there was a time when
to be valid it had to be followed by a letter of
confirmation, unless the mode of
communicating by telegram had previously been
agreed upon in a written contract. (See Engel v.
Mariano Velasco and Co., 47 Phil. 115).
ARTICLE 1320. An acceptance may be express
or implied. (n)
Forms of Acceptance
Acceptance may be:
(a) express (Art. 1320);
(b) implied (Art. 1320) from conduct, or
acceptance of unsolicited services
(Perez v. Pomar, 2 Phil. 682);
(c) presumed (by law) as when there is
failure to repudiate hereditary rights
within the period fixed by law (Art. 1057,
Civil Code); or when there is SILENCE in
certain specific cases as would tend to
mislead the other party, and thus place
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 THE LAW ON OBLIGATIONS AND CONTRACTS
the silent person in estoppel. (See Arts.
1670, 1870, 1871, 1872 and 1873, Civil
Code).
ARTICLE 1321. The person making the offer may
fix the time, place, and manner of acceptance,
all of which must be complied with. (n)
Things that May Be Fixed by the Offerer
(a) the time
(b) the place
(c) the manner of acceptance
Any act contrary to the prescribed terms
really constitutes a counter-offer or counter-
proposal.
The rule stated in this Article applies also to an
auction sale, whether it be a public or a private
one. (Leoquinco v. Postal Savings Bank, 47 Phil.
772)
A “contract to purchase” which does not give
specific description of the objects to be
purchased nor the price nor the rate of exchange
to be used is a mere preliminary agreement.
ARTICLE 1322. An offer made through an agent
is accepted from the time acceptance is
communicated to him. (n)
• BOTH the offer and the acceptance are
made thru an AGENT (who is an
extension of the personality of the
principal. (Art. 1910, par. 4, Civil Code).
• Any other intermediary (who is not an
agent, with power to bind) is merely a
sort of messenger, who must
communicate to the person who sends
him; otherwise, there is as yet no
meeting of the minds.
General Rule:
There would as yet be no meeting of the
minds, for the agent may be an ordinary one, not
authorized to receive the acceptance for the
PARTICULAR transaction.
CONSENT
3
Consent
Exceptions:
- if the agent was expressly authorized to
receive the acceptance, or
- if the offeree had been told that
acceptance could be made direct with the
agent, who would then be given freedom to
act or to proceed,
there can be a meeting of the minds and a
perfection of the contract.
ARTICLE 1323. An offer becomes ineffective
upon the death, civil interdiction, insanity, or
insolvency of either party before acceptance is
conveyed. (n)
Four (4) instances when the offer becomes
ineffective:
• Death
• Civil Interdiction
• Insanity
• Insolvency
•
EXAMPLE:
A makes an offer to B on Jan. 1. B writes
a letter on Jan. 3, accepting the offer. This letter
is received by A on Jan. 5. But on Jan. 4, B had
died. Here the offer is also ineffective, because
there was no meeting of the minds.
• There are other instances when the
offer becomes ineffective, namely:
(a) When the offeree expressly or impliedly
rejects the offer.
(b) When the offer is accepted with a
qualification or condition, which would
merely arise a counter-offer
(c) When before acceptance is
communicated, the subject matter has
become illegal or impossible.
(d) When the period of time given to the
offeree within which he must signify his
acceptance has already lapsed.
(e) When the offer is revoked in due time
(that is, before the offeror has learned of
its acceptance by the offeree).
Laudico v. Arias, 43 Phil. 270
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ARTICLE 1324. When the offerer has allowed
the offeree a certain period to accept, the offer
may be withdrawn at any time before
acceptance by communicating such
withdrawal, except when the option is founded
upon a consideration, as something paid or
promised. (n)
Option – a contract granting a person
the privilege to buy or not to buy certain objects
at any time within the agreed period at a fixed
price.
The contract of option is a separate and
distinct contract from the contract which the
parties may enter into upon the consummation
of the contract. It can only be perfected if there
is a meeting of the minds on the option. Thus,
the offer to grant an option, even if founded on
a distinct cause or consideration, may itself be
withdrawn before the acceptance of the offer of
an option.
Therefore, an option must have its own
cause or consideration (Enriquez de la Cavada v.
Diaz, 37 Phil. 982), a cause distinct from the
selling price itself (Millar v. Nadres, 74 Phil.)
EXAMPLE:
If Sam had offered to grant Ben a week’s time if
Ben would give P20,000 may Sam still withdraw
the offer of option before Ben signifies his
acceptance thereof?
ANSWER:
Yes, because here the option does not yet exist.
NOTE:
When the law therefore says “except
when the option is
founded upon a consideration, as something
paid or promised,”
the word “option” here refers to a “perfected
contract of option,”
that is, the option already exists.
There is therefore a difference between
acceptance
CONSENT
4
Consent
of the offer of option (which results in the
contract of option), and
acceptance of the object being offered for sale or
acceptance of the
offer of sale (which results in the contract of
sale).
General Rule:
If the offerer has allowed the offeree a
certain period to accept, the offer may be
withdrawn at any time before acceptance (or the
thing being offered) by communicating such
withdrawal.
Exception:
When the option is founded upon a
consideration as something paid or promised.
EXAMPLE:
B, interested in a particular car at a car exchange
company, asked S for the price, which was
“P3,500,000.” B however could not make up his
mind whether to buy or not. So S told B to give
him a week to make up his mind and wanted to
have the car reserved for the meantime. Before
the week is over, can S withdraw the offer to sell
the car for P3,500,000?
ANS.: Yes, provided B has not yet signified his
acceptance of the offer to sell, that is, B has not
yet bought the car, and provided that S
communicates such withdrawal to B. Thus, S
may, without liability to B, sell to another.
Cronico
v.
J.M. Tuason & Co., Inc.
78 SCRA 331
To be binding on the person who made
a unilateral promise, the promise must be
supported by a cause or consideration distinct
from the price.
ARTICLE 1325. Unless it appears otherwise,
business advertisements of things for sale are
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not definite offers, but mere invitations to
make an offer. (n)
Business advertisements can be definite or not
define offers
a) If appears to be a definite offer
containing all the specific particulars
needed in a contract, it really is a definite
offer.
b) If important details are left out, the
advertisement is not a definite offer, but
a mere invitation to make an offer.
“For Sale: 900 sq. meter lot with a brand new
1-1/2 storey house at 1445 Perdigon, Paco,
Manila for P10 million cash.” This is a
definite offer, from which the advertiser
cannot back out, once it is accepted by
another.
“For Sale: 1000 sq. meter lots at P100 million
to P150 million a lot at South Forbes Park Tel.
88-00-00.” This is clearly merely an
invitation to make an offer, which the
advertiser is free to accept or to reject.
ARTICLE 1326. 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.
(n)
General Rule:
The advertiser is NOT bound to accept
the highest or lowest bidder.
The mere determination of a public
official or board to accept the proposal of a
bidder does NOT constitute a contract; the
decision must be communicated to the bidder.
(Jalandoni v. National Resettlement &
Rehabilitation Adm., et al., L-15198, May 30,
1960).
Anybody participating in the bidding at a
public auction is understood to have submitted
himself to all the conditions set forth at such
sale. (Leoquinco v. Postal Savings Bank, 47 Phil.
772).
CONSENT
5
Consent
ARTICLE 1327. The following cannot give
consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and
deaf-mutes who do not know how to
write. (1263a)
Persons Incapacitated to Consent
a) Unemancipated minors.
b) Insane or demented persons (unless
they acted during a lucid interval),
drunks and those hypnotized. (Art. 1328,
Civil Code).
c) Deaf-mutes who do not know how to
write (and read).
NOTE:
If they know how to read, but do not
know how to write, it is submitted that the
contract is valid, for then they are capable of
understanding, and therefore capacitated to
give consent.
Unemancipated Minors - minors who have not
been emancipated by marriage, attainment of
the age of majority, or by parental or judicial
authority. (Art. 1397, Civil Code)
Insane or Demented Persons (Unless They Acted
During a Lucid Interval)
(a) Reason: People who contract must know
what they are entering into.
(b) No proper declaration of insanity by the court
is required, as long as it is shown that at the time
of contracting, the person was really insane. (18
Manresa 660).
(c) Even if a person had already been declared
insane, this does not necessarily mean that at
the time of contracting, said person was still
insane. (Dumaguin v. Reynolds, 48 O.G. 3887).
(d) Contract made before the declaration of
insanity, the presumption is that he was still
SANE at the time of contracting and he who
alleged must prove the same (Carillo v. Jaoco, 45
Phil. 597).
Deaf-Mutes Who Do Not Know How to Write
(and Read)
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(a) Formerly, a deaf-mute was presumed to be an
idiot. (See
Director of Lands v. Abelardo, 54 Phil. 387).
(b) If a deaf-mute does not know how to write
but he knows how to read, he should be
considered capacitated.
Voidable Contracts
a) Those where one party is incapacitated
to give consent. (Art. 1327, Civil Code).
b) Those where the consent of one party
has been vitiated (such as by error,
fraud, violence, intimidation, and undue
influence). (Arts. 1330-1334, Civil Code).
In general, the contracts which they enter into
are VOIDABLE, unless:
1) Upon reaching the age of majority, they
ratify the same. (Ibanez v. Rodriguez, 47
Phil. 554).
2) They were entered into thru a guardian,
and the court having jurisdiction had
approved the same. They were contracts
of life insurance (Roa v. Roa, 52 Phil.
879).
3) in favor of their parents, spouse,
children, brothers, sisters, and provided,
furthermore, that the minor is 18 years
old or above. (See Act No. 3870).
4) They were in the form of savings account
in the Postal Savings Bank, provided
furthermore that the minor was at least
seven years old. (Sec. 2007, Rev. Adm.
Code).
5) They were contracts for necessities such
as food, but here the people who are
legally bound to give them support
should pay therefor.
6) They were contracts where the minor
misrepresented his age, and pretended
to be one of major age and is, thus, in
ESTOPPEL. It is, however, essential here
that the other party must have been
MISLED.
Married minors can validly alienate or
encumber personal property without parental
CONSENT
6
Consent
consent, but in the case of real property or if they
want to borrow money, they need such
parental consent, without which the transaction
is voidable. (See Art. 399, Civil Code).
If both parties to a contract are minors, the
contract is unenforceable. (Art. 1403, No. [3]
states that contracts “where both parties are
incapable of giving consent to a contract” are
UNENFORCEABLE.)
Persons Specially Disqualified
There are people who are SPECIALLY
DISQUALIFIED in certain things. Here, the
transaction is VOID because the right itself is
restricted, that is, the right is WITHHELD.
Examples:
• Husband and wife who cannot sell or
donate to each other
• Insolvents before they are charged
cannot make payments
• Persons disqualified because of fiduciary
relationship, such as the guardian, who
is not allowed to purchase the property
of his ward; or judges, with reference to
the property under litigation.
In the case of mere legal incapacity, the
transaction is VOIDABLE because the right itself
is not restricted, but merely its EXERCISE, that is,
it can still be exercised but under certain
conditions, such as when the parents of an
unemancipated minor consent.
ARTICLE 1328. Contracts entered into during a
lucid interval are valid. Contracts agreed to in a
state of drunkenness or during a hypnotic spell
are voidable.
THE VOIDABLE CONTRACTS REFERRED TO IN
THIS ARTICLE ARE THOSE ENTERED INTO BY:
1.) Insane or demented persons (unless they
acted during a lucid interval);
2.) Those in the state of drunkenness or
intoxication;
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3. ) Those entered into during a hypnotic spell
or when a person walks during his sleep,
somnambulism.
Drunkeness which temporarily results in
complete loss if understanding, and may
therefore be equivalent to temporary insanity.
Hypnotic spell may be induced by drugs, or
deliberate or unintentional hypnotism.
Somnambulism or sleep walking- in this case, a
person is incapable of intelligent consent.
CONTRACTS ENTERED INTO DURING A LUCID
INTERVAL ARE VALID.
-Even if a person has already been
judicially declared insane and is under
guardianship, he may still enter into a valid
contract, provided that it can be shown that at
the time of contracting, he was in a lucid
interval.
ARTICLE 1329. 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.
Persons Specially Disqualified (MODIFICATIONS
AS DISCUSSED IN ARTICLE 1327)
There are people who are SPECIALLY
DISQUALIFIED in certain things. Here, the
transaction is VOID because the right itself is
restricted, that is, the right is WITHHELD.
Examples:
 Husband and wife who cannot sell or
donate to each other
 Insolvents before they are charged cannot
make payments
 Persons disqualified because of fiduciary
relationship, such as the guardian, who is
not allowed to purchase the property of his
CONSENT
7
Consent
ward; or judges, with reference to the
property under litigation.
The Rules of Court provide a list of
incompetents who need guardianship:
 those under civil interdiction;
 hospitalized lepers;
 prodigals;
 deaf and dumb who are unable to write;
those of unsound mind even though they have
lucid intervals;
 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
thereby an easy prey for deceit and
exploitation.
Example:
If a hospitalized leper or a very old man
has not been placed under guardianship, may he
still enter into a binding contract?
ANS: Yes, because he would still be presumed
capacitated to enter into a contract (although
classified as an incompetent). Of course it can be
shown that intelligent consent was absent, the
contract can be considered VOIDABLE. (See Cui,
et al v. Cui, et al., 100 Phil. 913)
ARTICLE 1330. A contract where consent is
given through mistake, violence, intimidation,
undue influence, or fraud is voidable.
Causes of Vitiated consent (vices of consent)
1.) Mistake (or error)
false belief into something
REQUISITES
a. Refers to the subject of the thing which is
the object of the contract.
b. Refers to the nature of the contract.
c. Refers to the principal conditions in an
agreement
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d. Error as to person - when it is the principal
consideration of the contract.
e. Error as to legal effect - when mistake is
mutual and frustrates the real purpose o
2.) Fraud (or deceit)
when, through insidious words or
machinations of 1 of the contracting parties, the
other is induced to enter into a contract which,
without them, he would not have agreed to.
3.) Violence
- when in order to wrest consent,
serious or irresistible force is employed.
4.) Intimidation
when 1 of the contracting parties is
compelled by a reasonable & well-grounded fear
of an imminent & grave evil upon his person or
property, or upon the person or property of his
spouse, descendants or ascendants, to give his
consent.
5.) Undue influence
- when a person takes improper
advantage of his power over the will of another,
depriving the latter of a reasonable freedom of
choice.
ARTICLE 1331. In order that mistake may
invalidate consent, it should refer to the
substance of the thing which is the object of the
contract, or to those conditions which have
principally moved one or both parties to enter
into a contract.
Mistake as to the identity or
qualifications of one of the parties will vitiate
consent only when such identity or
qualifications have been the principal cause of
the contract.
A simple mistake of account shall give
rise to its correction.
REQUISITES FOR MISTAKE TO VITIATE CONSENT
a.) The error must be substantial regarding:
1.) The object of the contract;
CONSENT
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Consent
2.) The conditions which principally
moved or induced one of the parties (error in
quality or quantity--error in qualitate or
quantitate);
3.) identity or qualifications (error in
personae), but only if such was the principal
cause of the contract.
b.) The error must be excusable (not caused by
negligence).
c.) The error must be a mistake of fact, and not
of law.
The object of a contract pertains to the thing,
right or service which is the subject matter of the
obligation arising from the contract.
Things which cannot be the OBJECT of Contract:
1.) Things which are outside the commerce of
men
2.) Intransmissible rights
3.) Future inheritance, except in cases expressly
authorized by law
4.) Services which are contrary to law, morals,
good customs, public order, public policy
Impossible things or service
5.) Objects which are not possible of
determination as to their kind
SUBSTANTIAL ERROR
The error is substantial if because of it,
the party gave his consent. Therefore, if a party
would still have entered into a contract even if
he had known of the error, the error is NOT
substantial. (8 Manresa 666).
ERROR IN IDENTITY OR QUALIFICATIONS
This vitiates consent only when such
identity or qualifications have been the principal
cause of the contract,
Example:
Hiring a pre-bar reviewer, a particular singer for
a concert. Contracts involving partnership,
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agaency, deposit-- since these require trust and
confidence. (See 8 Manresa 667-669)
EXCUSABLE ERROR
The error does not vitiate consent if the
party in error was negligent, or having the
opportunity to ascertain the truth, he did not do
so. (See, however, Article 1332. Civil Code).
There is no mistake if the party alleging
it knew the doubt, contingency or risk affecting
the object of the contract. (Article 1333, Civil
Code)
ERROR OF FACT, NOT OF LAW
The error must be one of fact, not of law. This is
because ignorance of the law excuses no one
from compliance therewith. (Art.3, Civil Code
and 8 Manresa 646)
Thus, if one sells property in the false belief that
conjugal property could be partitioned during
marriage, the sale cannot be annuled. (Luna, et
al. v. Linatoc, 74 Phil. 15)
Error of law, however, on a doubtful or difficult
question can exist together with good faith. (Art.
526, Civil Code; and Kasilag v. Rodriguez, 69 Phil.
217)
ARTICLE 1332. When one of the parties is
unable to read, or if the contract is in a language
not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must
show that the terms thereof have been fully
explained to the former.
PRESUMPTION
The natural presumption is that one
always acts with due care and signs with full
knowledge of all the contents of a document.
It is true even if the mind of the party
signing was confused at the time of the signing,
as long as he still knew what he was doing.He this
cannot repudiate the transaction.
CONSENT
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Consent
WHEN PRESMPTION DOES NOT APPLY
1.) when one of the parties is unable to read
(including a blind person); or
2.) if the contract is in a language not
understood by one of the parties.
Thus, a blind person who affixes her thumb mark
in the belief that the contract was a deed of
mortgage when in fact it was a deed of sale, the
court held that the contract can be annulled due
to the failure of the one who executed the
contract to prove that he did not take advantage
of his favored situation.
- TRANSPORTE vs. BELTRAN, (C.A.) 51
O.G. 1434
ARTICLE 1333. There is no mistake if the party
alleging it knew the doubt, contingency or risk
affecting the object of the contract.
KNOWLEDGE OF DOUBT OR RISK DOES NOT
VITIATE CONSENT.
It is to be assumed that the party was willing to
take the risk. This is particularly true in contracts
which are evidently aleatory in nature.
EXAMPLE:
A bought a fountain pen which was
presented as possibly being able to write even
underwater. A also know that the pen's ability
was questionable, and yet A bought the said pen.
Here, A cannot allege mistake since he knew
beforehand of the doubt, risk, or contingency
affecting the object of the contract.
MISTAKE CAUSED BY INEXCUSABLE
NEGLIGENCE
If mistake is caused by inexcusable negligence,
the contract cannot be annulled.
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ARTICLE 1340. The usual exaggerations in trade,
when the other party had an opportunity to
know the facts, are not in themselves
fraudulent.
Usual exaggerations in trade.
This Article stresses the rule of “caveat
emptor” (let the buyer beware)
Dacusin v. Court of Appeals
80 SCRA 89
The maxim “caveat emptor” simply
means that a buyer must be on his guard. It his
duty to check the title of the seller, otherwise the
buyer gets the object at his own risk.
Dealer’s talk or trader’s talk are
representation which do not appear on the face
of the contract and these do not bind either
party.
EXAMPLES:
Expressions or advertisements like:
“The cigarette that will give you utmost
smoking pleasure”
“You like it, it likes you”
“The best in its class”
ARTICLE 1341. A mere expression of an opinion
does not signify fraud, unless made by an
expert and the other party has relied on the
former’s special knowledge.
Mere Expression of an Opinion.
To constitute fraud, the
misrepresentation must refer to facts, not
opinions. Ordinarily, a mere expression of an
opinion does not signify fraud. In order that it
may amount to fraud, the following requisites
must be present:
(1) It must be made by an expert;
(2) The other contracting party has
relied on the expert’s opinion; and
(3) The opinion turned out to be false or
erroneous.
CONSENT
10
Consent
ARTICLE 1342. Misrepresentation by a third
person does not vitiate consent, unless such
misrepresentation has created substantial
mistake and the same is mutual.
Misrepresentation by a Third Person
How does the participation of a third
person in force and in fraud or misrepresentation
differ?
ANSWER:
(a) Force or intimidation by a third
person makes the contract
voidable
(b) Fraud by a third person does not
make the contract voidable
unless –
1) The representation has
created substantial
mistake, and
2) The mistake is mutual
(Article 1342)
In this case, the contract may be
annulled, not principally on the ground
of fraud, but on the ground of error or
mistake.
ARTICLE 1343. Misrepresentation made in good
faith is not fraudulent but may constitute error.
Misrepresentation Made in Good Faith
EXAMPLE:
A bought a certain article from B. The
article was needed for A’s radio. B honestly but
mistakenly assured A that the article was the
proper objet. May the contract be annulled?
ANSWER: Yes, not on the ground of
fraud, for the misrepresentation was honest, but
on the ground of substantial error.
ARTICLE 1344. In order that fraud may make a
contract voidable, it should be serious and
should not have been employed by both
contracting parties.
Article 1344 distinguishes two kinds of (civil)
fraud in the making of a contract:
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 THE LAW ON OBLIGATIONS AND CONTRACTS
(1) causal fraud – which is a ground for
the annulment of a contract (par.1), although it
may also give rise to an action for damages
(2) incidental fraud – which only renders
the party who employs it liable for damages
because the fraud was not the principal
inducement that led the other to give his
consent.
REQUISITES of CAUSAL FRAUD:
(1) it should be serious
(2) it should not have been employed by
both contracting parties, i.e., they should not be
in pari delicto (mutual guilt)
(3) it should not have been known by the
other contracting party
The seriousness of the fraud is a
question of fact depending on the
circumstances. It does not mean its influence on
the other contracting party, but its importance.
The requirement that fraud should be serious
excludes slight and usual deviations from the
truth. Such deviations are frequently present,
unfortunately, in transactions, especially those
taking place in fairs and markets.
Effect of Fraud in the Performance of a Contract
If there is fraud in the performance of
the contract, then this fraud will give rise to
damages (Tanken v. DBP)
‘Incidental Fraud’ defined
In Tankeh v. Development Bank of the
Philippines, 709 SCRA 19, the Supreme Court
defined incidental fraud as – “those which are
not serious in character and without which the
other party would still have entered into the
contract.”
ARTICLE 1345. Simulation of a contract may be
absolute or relative. The former takes place
when the parties do not intend to be bound at
all; the latter, when the parties conceal their
true agreement.
‘Simulation of a Contract’
CONSENT
11
Consent
It is the process of intentionally
deceiving others by producing the appearance of
a contract that really does not exist (absolute
simulation) or which is different from the true
agreement (relative simulation)
Requisites for Simulation
 An outward declaration of will different
from the will of the parties
 The false appearance must have been
intended by mutual agreement
 The purpose is to deceive third persons
ARTICLE 1346. An absolutely simulated or
fictitious contract is void. A relative simulation,
when it does not prejudice a third person and is
not intended for any purpose contrary to law,
morals, good customs, public order, or public
policy binds the parties to their real agreement.
Absolute simulation – when the contract does
not really exist and the parties do not intend to
be bound at all.
Relative simulation – when the contract entered
into by the parties is different from their true
agreement (art 1345). The parties are bound by
their real agreement provided it does not
prejudice a third person and is not intended for
a purpose contrary to law, morals, good
customs, public order, or public policy.
Kinds of Simulated Contracts
(a) Absolutely simulated fictitious
contracts:
(1) parties do not intend to be
bound
(b) Relatively simulated disguised
contracts:
(1) Parties conceal their
true agreement except
–
i. If the contract
should
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 THE LAW ON OBLIGATIONS AND CONTRACTS 12
Consent

prejudice a
third person;

ii. Or if the
purpose is
contrary to law,
morals, good
customs, public
order, or public
policy

‘Absolute Simulated Contract’ distinguished

from an Illegal Contract

In Rodriguez v. Rodriguez, the Supreme

Court held that in simulation, the contract is not
really desired to produce an illegal effect or in
any way alter the juridical situation of the
parties; whereas an illegal contract is intended to
be real and effective, and entered in such form
as to circumvent a prohibited act.

CONSENT DELLOMOS / DIANA / JAGOLINO / OPU-AN