1. Jardine Davies Inc. Vs CA settled the differences between the parties. The MOU was signed by Ruling: Yes.

n the parties. The MOU was signed by Ruling: Yes. Perfection of the contract took place when Aromin and
Francisco Viray, for UCC, and Ramon Ang, for ECC. The MOU essentially Albano, acting for BPI, agreed to sell and Alfonso Lim & Albino Limketkai,
FACTS; At the height of the power crisis which the country was then provided for reciprocal cession of claims and ownership of lands in the agreed to buy the lot at Php1000/sqm. A consensual contract is perfected
experiencing, petitioner PURE FOODS CORPORATION decided to install mining dispute before the MAB by swapping of mining claims and rights. upon mere meeting of the minds and although the deed of sale had yet to
2- 1500 KW generators in its food processing plant. a bidding for the Teng prayed for the resolution of the MAB appeal on the ground that both be notarized, it does not mean that no contract was perfected.
supply and installation of the generators was held. Thereafter, in a letter parties had already resolved the issue by virtue of the executed MOU.
dated 12 December 1992 addressed to FEMSCO President Alfonso Po, ISSUE: Whether the Memorandum of agreement was a valid compromise A sale of land is valid regardless of the form it may have been entered
PUREFOODS confirmed the award of the contract to FEMSCO. Later, in a agreement into. The requisite form under Article 1458 of the Civil Code is merely for
letter PUREFOODS unilaterally canceled the award as "significant factors RULING: Yes, As a contract, a compromise agreement must comply with greater efficacy or convenience and the failure to comply therewith does
were uncovered and brought to (their) attention. Consequently, FEMSCO the following basic elements: (1) consent of the contracting parties; (2) not affect the validity and binding effect of the act between the parties. If
protested the cancellation of the award and sought a meeting with object certain which is the subject matter of the contract; and (3) cause of the law requires a document or other special form, as in the sale of real
PUREFOODS. However, PUREFOODS already awarded the project and the obligation which is established. property, the contracting parties may compel each other to observe that
entered into a contract with JARDINE NELL, a division of Jardine Davies, First, petitioner and private respondent freely and voluntarily form, once the contract has been perfected. Their right may be exercised
Inc. FEMSCO sued both PUREFOODS and JARDINE: PUREFOODS for entered into the MOU. Petitioner admits that it authorized Francisco Viray simultaneously with action upon the contract (Article 1359, Civil Code).
reneging on its contract, and JARDINE for its unwarranted interference to sign the MOU,46 while private respondent was duly represented by
and inducement. Trial ensued. PUREFOODS maintains that its 12 Ramon Ang.47 The authority of the agents is evidenced by duly executed 4. ABS CBN v. CA
December 1992 letter to FEMSCO was not an acceptance of the latter's board resolutions of the respective companies.
bid proposal and award of the project but more of a qualified acceptance Second, there is identity of the parties and subject matter. FACTS:
constituting a counter-offer which required FEMSCO's express conforme. Petitioner admits that it has merged with CCC, which entered into the Viva, through Del Rosario, offered ABS-CBN through its vice-president
Since PUREFOODS never received FEMSCO's conforme, Hence, no MOU. Charo Santos-Concio, a list of 3 film packages or 36 titles from which
contract was perfected between PUREFOODS and FEMSCO. Hence, this Third, the parties intended the MOU as a compromise ABS-CBN may exercise its right of first refusal. Ms. Concio informed Vic
recourse agreement to amicably settle the mining dispute with the MAB. through a letter that they can only purchase 10 titles to be schedules on
Fourth, both parties are bound by the terms of the MOU. non-primetime slots because they were very adult themes which the ruling
ISSUE; Whether there was a contract perfected MAIN POINT: Article 1315 of the Civil Code provides that a contract is of the MTRCB advises to be aired at 9:00 p.m. February 27, 1992 Del
perfected by mere consent, which is manifested by the meeting of the offer Rosario approached ABS-CBN's Ms. Concio with a list consisting of 52
RULING; Yes, As can be inferred from the actual phrase used in and the acceptance upon the thing and the cause which are to constitute original movie titles as well as 104 re-runs proposing to sell to ABS-CBN
the first portion of the letter, the decision to award the contract has already the contract. Here, there is no dispute that the MOU was already airing rights for P60M (P30M cash and P30M worth of television spots).Del
been made. The letter only serves as a confirmation of such decision. "perfected" as manifested by the parties' assent to it. They freely and Rosario and ABS-CBN general manager, Eugenio Lopez III met wherein
Hence, to the Court's mind, there is already an acceptance made of the voluntarily signed the MOU. Del Rosario allegedly agreed to grant rights for 14 films for  P30M. Del
offer received by Purefoods. the 12 December 1992 letter of petitioner. Rosario and Mr. Graciano Gozon of RBS Senior vice-president for
PUREFOODS to FEMSCO constituted acceptance of respondent 3-Cruz Finance discussed the terms and conditions of Viva's offer to sell the 104
FEMSCO's offer as contemplated by law. The tenor of the letter, i.e., "This films, after the rejection of the same package by ABS-CBN. Ms. Concio
will confirm that Pure Foods has awarded to your firm (FEMSCO) the Limketkai Sons Milling v CA sent the proposal draft of 53 films for P35M which Viva's Board rejected
project," could not be more categorical. since they will not accept anything less than P60M. On April 29, 1992 Viva
G.R. No. 118509 December 1, 1995 granted RBS exclusive grants for P60M.
Thus, even the tenor of the subsequent letter of petitioner
PUREFOODS, i.e., "Pure Foods Corporation is hereby canceling the RTC Issued TRO against RBS in showing 14 films as filed by ABS-CBN.
award to your company of the project," presupposes that the contract has RBS also set up a cross-claim against VIVA. RTC ordered ABS-CBN to
been perfected. For, there can be no cancellation if the contract was not Facts: Philippine Remnants was the owner of a piece of land which it then payRBS P107,727 premium paid by RBS to the surety which issued their
perfected in the first place. entrusted to BPI. Pedro Revilla was authorized by BPI to sell the lot for bond to lift the injunction, P191,843.00 for the amount of print
PHP1000/sqm. Revilla contacted Alfonso Lim who agreed to buy the land. advertisement for "Maging Sino Ka Man" in various newspapers, P1M
Contracts - Chua Alfonso Lim and Albino Limketkai went to BPI and were entertained by VP attorney's fees, P5M moral damages, P5M exemplary damages and costs.
2. CENTRAL CEMENT CORPORATION vs.MINES Albano and Asst. VP Aromin. BPI set the price at 1,100 while Limketkai Cross-claim to VIVA was dismissed. ABS-CBN appealed. VIVA and Del
ADJUDICATION BOARD, ROCK AND ORE INDUSTRIES haggled to 900. They subsequently agreed on Php1,000 on cash basis. Rosario also appealed seeking moral and exemplary damages and
3. Alfonso Lim asked if it was possible to pay on terms and BPI officials said additional attorney's fees.CA reduced the awards of moral damages to
FACTS: petitioner CCC and Respondent ROI filed Mineral Production there was no harm in trying to ask for payment in terms but if disapproved, P2M, exemplary damages to P2M and attorney's fees to P500,000.
Sharing Agreement (MPSA) with the DENR. Petitioner opposed and filed the price would have to be paid in cash. Limketkai paid the initial 10% with Denied VIVA and Del Rosario's appeal because it was RBS and not VIVA
an adverse claim to the application of private respondent with the Panel of the remaining 90% to follow. Two or three days later, Alfonso Lim found which was actually prejudiced when the complaint was filed by ABS-CBN
Arbitrators of the DENR claiming that private respondent's MPSA was in out that their offer had been frozen and then went to BPI to tender full
conflict with its MPSA in terms of area covered. payment of 33M to Albano but was refused by both Albano & Bona. ISSUE:
During the pendency of the case, the President of private Whether there was a perfected contract between VIVA and ABS-CBN
respondent Teng brought to the attention of MAB that two companies, Issue: Whether there was a perfected contract of sale
Union Cement Corporation (UCC) and Eagle Cement Corporation (ECC), RULING:
had executed a Memorandum of Understanding (MOU) which amicably
No. In the case at bar, ABSCBN made no unqualified acceptance of
VIVA's offer. Hence, they underwent a period of bargaining. ABSCBN then
formalized its counterproposals or counteroffer in a draft contract, VIVA
through its Board of Directors, rejected suchcounter offer,Even if it be
conceded arguendo that Del Rosario had accepted the counteroffer, the
acceptance did not bind VIVA, as there was no proof whatsoever that Del
Rosario had the specific authority to do so.
A contract is a meeting of minds between two persons whereby one binds
himself to give something or to render some service to another for a
consideration. There is no contract unless the following requisites concur:
(1) consent of the contracting parties; (2) object certain which is the
subject of the contract; and (3) cause of the obligation, which is
established.
Once there is concurrence between the offer and the acceptance upon the
subject matter, consideration, and terms of payment a contract is
produced. The offer must be certain. To convert the offer into a contract,
the acceptance must be absolute and must not qualify the terms of the
offer; it must be plain, unequivocal, unconditional, and without variance of
any sort from the proposal. A qualified acceptance, or one that involves a
new proposal, constitutes a counteroffer and is a rejection of the original
offer.
CASE NO. 5- GENON
ANG YU ASUNCION VS. CA
FACTS: Second amended complaint for specific performance was filed by
Petitioners Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu
Unjieng and Jose Tan before the RTC of Manila. The plaintiffs were
tenants or lessees of residential and commercial spaces owned by
defendants in Binondo, Manila. On several conditions defendants informed
the plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same. During negotiations, Bobby Cu Unjieng
offered a price of P6- million while plaintiffs made a counter of offer of P5-
million. Plaintiff thereafter asked the defendants to put their offer in writing
to which the defendants acceded. In reply to defendants’ letter, plaintiffs
wrote, asking that they specify the terms and conditions of the offer to sell.
When the plaintiffs did not receive any reply, they sent another letter with
the same request. Since defendants failed to specify the terms and
conditions of the offer to sell and because of information received that the
defendants were about to sell the property, plaintiffs were compelled to file
the complaint to compel defendants to sell the property to them. The court
dismissed the complaint on the ground that the parties did not agree upon
the terms and conditions of the proposed sale, hence, there was no
contact of sale at all.  Then, the Cu Unjieng spouses executed a Deed of
Sale transferring the property in question to Buen Realty and Development
Corporation. Buen Realty, as the new owner of the subject property, wrote
to the lessees demanding the latter to vacate the premises. In its reply, it
stated that Buen Realty brought the property subject to the notice of lis
pendens (pending suit).
ISSUE: Whether there was contract of sale executed.
RULING: No. Among the sources of an obligation is a contract (Art. 1157, There was indeed no acceptance of the offer by Asset Builders. Such
Civil Code), which is a meeting of minds between two persons whereby failure to comply with the condition imposed for the perfection of the
one binds himself, with respect to the other, to give something or to render contract resulted in the failure of the contract. It is elementary that, being
some service (Art. 1305, Civil Code). A contract undergoes various stages consensual, a contract is perfected by mere consent. From the moment of
that include its negotiation or preparation, its perfection and, finally, its a meeting of the offer and the acceptance upon the object and the cause
consummation. Negotiation covers the period from the time the that would constitute the contract, consent arises. However, "the offer
prospective contracting parties indicate interest in the contract to the time must be certain" and "the acceptance seasonable and absolute; if
the contract is concluded (perfected). The perfection of the contract takes qualified, the acceptance would merely constitute a counter-offer."
place upon the concurrence of the essential elements thereof. A contract
which is consensual as to perfection is so established upon a mere There are three distinct stages of a contract- preparation or negotiation,
meeting of minds, i.e., the concurrence of offer and acceptance, on the perfection or consummation. Negotiation begins when the prospective
object and on the cause thereof. A contract which requires, in addition to contracting parties manifest their interest in the contract and ends at the
the above, the delivery of the object of the agreement, as in a pledge or moment of their agreement. Perfection occurs when they agree upon the
commodatum, is commonly referred to as a real contract. In a solemn essential elements thereof. The last stage is the consummation where
contract, compliance with certain formalities prescribed by law, such as in they fulfill the terms agreed upon culminating in the extinguishment of the
a donation of real property, is essential in order to make the act valid, the contract.
prescribed form being thereby an essential element thereof. The stage of
consummation begins when the parties perform their respective In the case at bar, the parties did not get past the negotiation stage.
undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of In fact, there was only an offer and a counteroffer that did not sum up to
obligation, serve as a binding juridical relation. In sales, particularly, any final arrangement containing the elements of a contract. Clearly, no
to which the topic for discussion about the case at bench belongs, meeting of minds was established.
the contract is perfected when a person, called the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a Moreno Jr. VS Private Management Office (formerly, Asset
thing or right to another, called the buyer, over which the latter Privatization Trust)
agrees. (Such is not present in the case at bar)
Facts:
The defendant, a juridical entity, called for a conference for the purpose of
INSURANCE LIFE ASSURANCE COMPANY, LTD. VS. ASSET discussing plaintiff’s right of first refusal over the floors of the building
BUILDERS CORPORATION owned by defendant. At said meeting, defendant informed plaintiff that the
proposed purchase price for said floors was ₱21M.  Plaintiff is the owner
FACTS: of the Ground Floor, the 7th Floor and the Penthouse of the J. Moreno
Building and the lot on which it stands. Defendant is the owner of the 2nd,
Insular Life Insurance Company, Limited invited companies to participate 3rd, 4th, 5th and 6th floors of the building, the subject-matter of this suit. In
in the bidding of the proposed Insular Life building. The Instruction to a letter signed by its Trustee, Juan W. Moran, informed plaintiff that the
Bidders prepared by Insular Life expressly required a formal acceptance Board of Trustees (BOT) of APT "is in agreement that Mr. Jose Moreno,
and a period within which such acceptance was to be made known to the Jr. has the right of first refusal" and requested plaintiff to deposit 10% of
winner. Asset Builders Corporation submitted a bid proposal secured by the "suggested indicative price" of ₱21 million on or before February 26,
bid bonds valid for 60 days. Under its proposal form, Asset Builders bound 1993 Plaintiff paid the ₱2.1 million on February 26, 1993. Defendant wrote
and obliged itself to enter into a contract with Insular Life within 10 days plaintiff that the APT BOT has "tentatively agreed on a settlement price of
from the notice of the award, with good and sufficient securities. The ₱42,274,702.17" for the said floors.
project was awarded to the Asset Builders and a notice to proceed with
the construction was sent by Insular Life to the former. However, Asset Issue:
Builders project neither did it execute any construction agreement. It WON there was a perfected contract of sale over the said floors for the
informed Insular Life that it will not proceed with the project. amount of ₱21M, which will give rise to a right on the part of the plaintiff to
demand that the said floors be sold to him for said amount.
ISSUE:
Ruling:
Whether or not there is a perfected contract between Insular Life and No. A contract of sale is perfected at the moment there is a meeting of
Asset Builders. minds upon the thing which is the object of the contract and upon the
price. Consent is manifested by the meeting of the offer and the
HELD: acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. To reach
that moment of perfection, the parties must agree on the same thing in the
same sense, so that their minds meet as to all the terms. They must have
a distinct intention common to both and without doubt or difference; until
all understand alike, there can be no assent, and therefore no
contract. The minds of parties must meet at every point; nothing can be
left open for further arrangement. So long as there is any uncertainty or
indefiniteness, or future negotiations or considerations to be had between
the parties, there is not a completed contract, and in fact, there is no
contract at all.
Contract formation undergoes three distinct stages – preparation or
negotiation, perfection or birth, and consummation. Negotiation  begins
from the time the prospective contracting parties manifest their interest in
the contract and ends at the moment of agreement of the parties. The
perfection or birth of the contract takes place when the parties agree upon
all the essential elements thereof. The last stage is the consummation of
the contract wherein the parties fulfill or perform the terms agreed upon,
culminating in its extinguishment. Once there is concurrence of the offer
and acceptance of the object and cause, the stage of negotiation is
finished. This situation does not obtain in the case at bar. The letter signed
defendant’s trustee clearly states that ₱21M is merely a "suggested
indicative price" of the subject floors as it was yet to be approved by the
Board of Trustees. Before the Board could confirm the suggested
indicative price, the Committee on Privatization must first approve the
terms of the sale or disposition, and the surrounding circumstances clearly
show that the parties are not past the stage of negotiation, hence there
could not have been a perfected contract of sale.
Serra vs. Court of Appeals, and RCBC
229 SCRA 60
January 1994
FACTS:
Disputed in the present case is the efficacy of a "Contract of Lease with
Option to Buy", entered into between petitioner Federico Serra and private
respondent Rizal Commercial Banking Corporation. (RCBC).
Petitioner Federico Serra, who is the owner of a 374 square meter parcel
of land located at Masbate, Masbate, and private respondent Rizal
Commercial Banking Corporation (RCBC) entered into a "Contract of
Lease with Option to Buy" in May 25, 1975 which provided that Serra will
lease the subject land to RCBC for a period of 25 years from June 1, 1975
to June 1, 2000, that the RCBC has the option to purchase the same at
P210.00 per square meter within a period of 10 years from May 25, 1975,
the date of the signing of the Contract, and that Serra will have to register
said land under the Torrens System to the Register of Deeds of Province
of Masbate within the same 10-year option period. Pursuant to said
contract, RCBC constructed improvements on the subject land to house its
branch office, while the petitioner had the property, within 3 years from
1975, duly registered with OCT No. 0-232 under the Torrens System.
Later, petitioner alleged that as soon as he had the property registered, he
kept on pursuing the branch manager for the sale of the lot as per their
agreement, but it was not until September 4, 1984, that RCBC decided to
exercise the option.
RCBC informed petitioner, through a letter, of its intention to buy the
property at the agreed price of not greater than P210.00 per square meter
or a total of P78,430.00, but petitioner replied that he is no longer selling
the property. RCBC then filed an action for specific performance and
damages against Serra in March 1985 alleging that during the negotiations
it made clear to petitioner that it intends to stay permanently on property
once its branch office is opened unless the exigencies of the business
requires otherwise.
Although finding that the contract was valid, the lower court ruled that the
option to buy is unenforceable because it lacked a consideration distinct
from the price and RCBC did not exercise its option within the reasonable
time. Upon motion for reconsideration, however, the lower court reversed
itself on the 2nd issue, declared the contract as valid, and ordered Serra to
deliver the proper deed of sale to RCBC. The Court of Appeals likewise
affirmed said decision.
ISSUE:
Whether there was a valid contract of lease with option to buy between the
parties? Was there a consideration distinct from the price to support the
option given to RCBC?
RULING:
The Supreme Court affirmed the appellate court’s decision. A contract of
adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his
signature or his "adhesion" thereto. These types of contracts are as
binding as ordinary contracts because in reality, the party who adheres to
the contract is free to reject it entirely. In the case at bar, the Supreme
Court did not find the situation to be inequitable because petitioner is a
highly educated man, who, at the time of the trial was already a CPA-
Lawyer, and when he entered into the contract, was already a CPA,
holding a respectable position with the Metropolitan Manila Commission. It
is evident that a man of his stature should have been more cautious in
transactions he enters into, particularly where it concerns valuable
properties. Also, in the present case, the consideration is even more
onerous on the part of the lessee since it entails transferring of the building
and/or improvements on the property to petitioner, should respondent
bank fail to exercise its option within the period stipulated.
A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. An accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price. (Article
1479, New Civil Code) The first is the mutual promise and each has the
right to demand from the other the fulfillment of the obligation. While the
second is merely an offer of one to another, which if accepted, would
create an obligation to the offeror to make good his promise, provided the
acceptance is supported by a consideration distinct from the price.
9.Lim
Laudico vs. Arias
Contracts
Main Point: Under article 1262, paragraph 2, of the Civil Code, an
acceptance by letter does not have any effect until it comes to the
knowledge of the offerer. Therefore, before he learns of the acceptance,
the latter is not yet bound by it and can still withdraw the offer. --- before
notice of acceptance, the offer may be revoked, and the revocation will
have the effect of preventing the perfection of the contract, although it may
not be known by the acceptant.
Facts: On February 5, 1919, the defendant, Vicente Arias, who, with his
codefendants, owned the building Nos. 205 to 221 on Carriedo Street, on
his behalf and that of his coowners, wrote a letter to the plaintiff, Mamerto
Laudico, giving him an option to lease the building to a third person, and
transmitting to him for that purpose a tentative contract in writing
containing the conditions upon which the proposed lease should be made.
On one hand, other conditions were added to those originally contained in
the tentative contract, and, on the other, counter-propositions were made
and explanations requested on certain points in order to make them clear.
These negotiations were carried on by correspondence and verbally at
interviews held with Mr. Vicente Arias, no definite agreement having been
arrived at until the plaintiff, Mr. Laudico, finally wrote a letter to Mr. Arias
on March 6, 1919, advising him that all his propositions, as amended and
supplemented, were accepted. It is admitted that this letter was received
by Mr. Arias by special delivery at 2.53 p.m. of that day. On that same day,
at 11.25 in the morning, Mr. Arias had, in turn, written a letter to the
plaintiff, Mr. Laudico, withdrawing the offer to lease the building.
Issue: Whether the contract was perfected? Whether there was
acceptance?
Ruling: No, Consequently, when Mr. Arias wrote Mr. Laudico, withdrawing
the offer, he had the right to do so, inasmuch as he had not yet receive
notice of the acceptance. And when the notice of the acceptance was
received by Mr. Arias, it no longer had any effect, as the offer was not then
in existence, the same having already been withdrawn. There was no
meeting of the minds, through offer and acceptance, which is the essence
of the contract. While there was an offer, there was no acceptance, and
when the latter was made and could have a binding effect, the offer was
then lacking. Though both the offer and the acceptance existed, they did
not meet to give birth to a contract.
10. Atkins Kroll & Co. vs. Cu Hian Tek
102 Phil 984 January 1958
FACTS:
On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter
to respondent B. Cu Hian Tek (Hian Tek) offering cartons of Luneta brand
Sardines in Tomato Sauce in different volumes and prices, with all of the
offers subject to reply by September 23, 1951. Hian Tek unconditionally
accepted the said offer through a letter delivered on September 21, 1951,
but Atkins failed to deliver the commodities due to the shortage of catch of
sardines by the packers in California.
 Plaintiff Sanchez, alleged in his compliant that, by virtue of the option other donated lots at public auction in order to raise money for
Hian Tek, therefore, filed an action for damages in the CFI of Manila which under consideration, "defendant agreed and committed to sell" and "the infrastructure projects. The highest bidder for subject lot was Hever
granted the same in his favor. Upon Atkins’ appeal, the Court of Appeals plaintiff agreed and committed to buy" the land described in the option. Bascon but Morales was allowed to match the highest bid since she had a
affirmed said decision but reduced the damages representing unrealized The lower court rendered judgment in favor of Sanchez and ordered Rigos preferential right to the lot as actual occupant thereof. Morales thus paid
profits. Atkins herein contends that there was no such contract of sale but to accept the sum Sanchez judicially consigned, and to execute in his the required deposit and partial payment for the lot. Respondents filed an
only an option to buy, which was not enforceable for lack of consideration favor the requisite deed of conveyance. The CA certified the case at bar to action for specific performance and reconveyance of property against
because it is provided under the 2nd paragraph of Article 1479 of the New the Supreme Court for it involves a question purely of law. petitioner. Respondents averred that the award at public auction of the lot
Civil Code that "an accepted unilateral promise to buy or to sell a to Morales was a valid and binding contract entered into by the City of
determinate thing for a price certain is binding upon the promisor if the ISSUE: Whether there was a contract to buy and sell between the parties Cebu and that the lot was inadvertently returned to petitioner under the
promise is supported by a consideration distinct from the price.” Atkins or only a unilateral promise to sell? compromise judgment. They alleged that they could not pay the balance of
also insisted that the offer was a mere offer of option, because the "firm the purchase price during the pendency of said case due to confusion as
offer" was a continuing offer to sell until September 23. RULING: The Supreme Court affirmed the lower court’s decision. The to whom and where payment should be made. They thus prayed that
instrument executed in April 1961 is not a "contract to buy and sell," but judgment be rendered ordering petitioner to execute a final deed of
ISSUE: merely granted plaintiff an "option" to buy, as indicated by its own title absolute sale in their favor, and that Transfer Certificate of Title in the
Whether there is a contract of sale between the parties or only a unilateral "Option to Purchase." The option did not impose upon plaintiff Sanchez name of petitioner be cancelled.
promise to buy. the obligation to purchase defendant Rigos' property. Rigos "agreed,
promised and committed" herself to sell the land to Sanchez for ISSUE: Whether or not the award at public auction of the lot to Morales
RULING: P1,510.00, but there is nothing in the contract to indicate that her was a valid and binding contract.
The Supreme Court held that there was a contract of sale between the aforementioned agreement, promise and undertaking is supported by a
parties. Petitioner’s argument assumed that only a unilateral promise consideration "distinct from the price" stipulated for the sale of the land. RULING: Yes. The award is tantamount to a perfected contract of sale
arose when the respondent accepted the offer, which is incorrect because The lower court relied upon Article 1354 of the Civil Code when it between Morales and the City of Cebu, while partial... payment of the
a bilateral contract to sell and to buy was created upon respondent’s presumed the existence of said consideration, but the said Article only purchase price and actual occupation of the property by Morales and
acceptance. Had B. Cua Hian Tek backed out after accepting, by refusing applies to contracts in general. respondents effectively transferred ownership of the lot to the latter. A sale
to get the sardines and / or to pay for their price, he could also be sued. by public auction is perfected "when the auctioneer announces its
But his letter-reply to Atkins indicated that he accepted "the firm offer for However, it is not Article 1354 but the Article 1479 of the same Code perfection by the fall of the hammer or in other customary manner". It does
the sale" and that "the undersigned buyer has immediately filed an which is controlling in the case at bar because the latter’s 2nd paragraph not matter that Morales merely matched the bid of the highest bidder at
application for import license.” After accepting the promise and before he refers to "sales" in particular, and, more specifically, to "an accepted the said auction sale. The contract of sale was nevertheless perfected as
exercises his option, the holder of the option is not bound to buy. In this unilateral promise to buy or to sell." Since there may be no valid contract to Morales, since she merely stepped into the shoes of the highest bidder.
case at bar, however, upon respondent’s acceptance of herein petitioner's without a cause or consideration, the promisor is not bound by his promise Consequently, there was a meeting of minds between the City of Cebu
offer, a bilateral promise to sell and to buy ensued, and the respondent and may, accordingly, withdraw it. Pending notice of its withdrawal, his and Morales as to the lot sold and its price, such that each party could
had immediately assumed the obligations of a purchaser. accepted promise partakes, however, of the nature of an offer to sell reciprocally demand performance of the contract from the other. A contract
which, if accepted, results in a perfected contract of sale. of sale is a consensual contract and is perfected at the moment there is a
MAIN POINT: meeting of minds upon the thing which is the object of the contract and
If the option is given without consideration, it is a mere offer of a contract
MAIN POINT: The Supreme Court ruled that in unilateral offers to buy or upon the price. From that moment, the parties may reciprocally demand
of sale, which is not binging until accepted. If, however, acceptance is to sell, since there may be no valid contract without a cause or performance subject to the provisions of the law governing the form of
made before withdrawal, it constitutes a binding contract of sale, even consideration, the promisor is not bound by his promise and may, contracts.
though the option was not supported by a sufficient consideration. accordingly withdraw it. Pending notice of his withdrawal, his promise
partakes of the nature of an offer to sell which, if accepted, results in a 13 REYES
perfected contract of sale. Stated in another way, if the option is without a Article 1306: Freedom to Contract
11. Sanchez v. Rigos (45 SCRA 368) consideration, it is a mere offer to sell which is not binding until accepted. Gabriel vs. Monte de Piedad
If, however, acceptance is made before a withdrawal, it constitutes a
FACTS: In an instrument entitled "Option to Purchase," executed on April binding contract of sale. There is already a concurrence of both offer and FACTS: Petitioner Gabriel was an appraiser of jewels in the pawnshop of
3, 1961, defendant Severina Rigos "agreed, promised and committed to acceptance. Under Article 1319 of the Civil Code, the contract is Monte de Piedad. He executed a chattel mortgage to secure the payment
sell" to plaintiff Nicolas Sanchez for the sum of P1,510.00 within two (2) perfected. of the deficiencies which resulted from his erroneous appraisal of the
years from said date, a parcel of land situated in San Jose, Nueva Ecija. It jewels pawned amounting to around P14,000.00 with 6% interest. Gabriel
was agreed that said option shall be deemed "terminated and elapsed," if 12 PELAEZ promised to pay Monte de Piedad the sum of P300 a month until the
Sanchez shall fail to exercise his right to buy the property within the PROVINCE OF CEBU v. HEIRS OF RUFINA MORALES GR NO 177-115 aforementioned sum was fully paid and the document of the chattel
stipulated period. On March 12, 1963, Sanchez deposited the sum of FEBRUARY 19, 2008 mortgage was registered.
Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific Perfection of Contract
performance and damages against Rigos for the latter’s refusal to accept To recover the remaining balance, an action was instituted against Gabriel
several tenders of payment that Sanchez made to purchase the subject FACTS: In 1961, Province of Cebu leased in favor of Rufina Morales a by Monte de Pieded. Gabriel denied under oath the genuineness of the
land. Defendant Rigos contended that the contract between them was only 210- square meter lot which formed part of Lot No. 646-A of the Banilad execution of the alleged chattel mortgage and contended that the chattel
“a unilateral promise to sell, and the same being unsupported by any Estate. Subsequently or sometime in 1964, petitioner donated several mortgage was actually a scheme on the part of the management to cover
valuable consideration, by force of the New Civil Code, is null and void." parcels of land to the City of Cebu. The city sold the lot as well as the up supposed losses incurred; that he was induced, through false
representation, to sign said chattel mortgage against his will; and that the discharge and without the consent, either written or verbal, of the Lastly, the SC said that he legislature is not permitted to prescribe terms of
contract was based upon a non-existing subject matter and consideration. defendant. This work was entirely different and disassociated from that legal contract and thereby deprive the citizens of the state from entering
He further contended that the contract was void ab initio on the ground engaged in by the defendant Gsell, the question now arises whether these freely into such contracts according to their own convenience and
that the provisions of the chattel mortgage contract were contrary to law, provisions of the contract are valid and binding upon the plaintiff. advantage, so long as the contracts entered into are not prohibited by
morals and public policy. public policy or morals. To enter into legal contracts freely and without
ISSUE: Whether or not the provision in the contract which prohibits restraint, is one of the liberties guaranteed to the people of the state.
ISSUE: Whether the chattel mortgage contract was valid. Ferrazini to enter into an employment within five years after the
termination of his contract with Gsell is valid.  16. SALVADOR
RULING: YES. The chattel mortgage contract is not contrary to public Contracts; Freedom of parties to stipulate
policy as contended by Gabriel. A contract is to be judged by its character, RULING: RP vs. PLDT 26 SCRA 629
and courts will look to the substance and not to the mere form of the
transaction. The freedom of contract is both a constitutional and statutory No. The contract under consideration, tested by the law, rules and Facts: Appeal from a decision of the CFI of Manila. PLDT (is a public
right and to uphold this right, courts should move with all the necessary principles above set forth, is clearly one in undue or unreasonable restraint service corporation holding a legislative franchise within the Philippines),
caution and prudence in holding contracts void. Article 1306 of the New of trade and therefore against public policy. It is limited as to time and and the RCA Communications, Inc. ( American corporation authorized to
Civil Code enunciates the right of the contract parties to establish any space but not as to trade. It is not necessary for the protection of the transact business in the Philippines and is the grantee, by assignment, of
stipulation, clause, term or condition as they may deem convenient, defendant, as this is provided for in another part of the clause. It would a legis lative franchise to operate a domestic station for the reception and
provided they are not contrary to law, morals, good customs, public order, force the plaintiff to leave the Philippine Islands in order to obtain a transmission of long distance wireless messages ), entered into an
or public policy. The expression “public policy” is a principle of law which livelihood in case the defendant declined to give him the written agreement whereby telephone messages, coming from the United States
holds that no person can lawfully do that which has a tendency to be permission to work elsewhere in this country. The doctrine that a contract and received by RCA's domestic station, could automatically be
injurious to the public or against the public good. It is the principle under in restraint of trade is void as against public policy is based on two transferred to the lines of PLDT; and vice-versa, for calls collected by the
which freedom of contract is restricted by law for the public good. principal grounds: 1.) the injury to the public by being deprived of the PLDT for transmission from the Philippines to the United States.
restricted party’s industry; and 2.) the injury to the party himself by being
In order to declare a contract void as against public policy, must find that precluded from pursuing his occupation, preventing him from supporting The plaintiff Bureau of Telecommunications, after having set up its own
the contract as to the consideration or thing to be done, has a tendency to his family and/or himself. Moreover, stressing a rule in Gibbs v. CGCB, the Government Telephone System, by utilizing its own appropriation and
injure the public, is against the public good, or contravenes some court held that public welfare is first considered. Therefore, the contract equipment and by renting trunk lines of the PLDT, entered into an
established interests of society, or is inconsistent with sound policy and between the plaintiff and defendant is clearly one that is against public agreement with RCA for a joint overseas telephone service.
good morals, or tends clearly to undermine the security of individual rights, policy because it deprives the former in obtaining a livelihood.
whether of personal liability or of private property. In the case at bar, the Alleging that plaintiff is in competition with them, PLDT notified the former
chattel mortgage contract does not in any way militate against the public Salinas- 15. People v. Pamor and receiving no reply, disconnected the trunk lines being rented by the
good. Neither does it contravene the policy of the law nor the established same; thus, prompting the plaintiff to file a case before the CFI praying for
interests of society. Facts: Julio Pomar is alleged to be in violation of section 13 in connection judgment commanding PLDT to execute a contract with the Bureau for the
with section 15 of Act No. 3071 of the Philippine Legislature. Being the use of the facilities of PLDT’s telephone system, and for a writ of
manager and person in charge of La Flor de la Isabela, he was alleged to preliminary injunction against the defendant to restrain the severance of
CASE NO. 14 – SABTALUH not pay Macaria Fajardo the sum of eighty pesos (P80) to which she was the existing trunk lines and restore those severed. Bureau in its appeal
CONTRACTS CONTRARY TO PUBLIC POLICY entitled as her regular wages corresponding to thirty days before and thirty seeking to compel the defendant (PLDT) to enter in an interconnecting
FERRAZINI V. GSELL days after her delivery in effect of a pregnancy leave as the contract with it.
  aforementioned law provides. Being found guilty in the CFI, he then
appealed to the SC arguing that section 13 of Act No. 3071 Issue: Whether PLDT can be compelled to enter into a contract with
FACTS: unconstitutional for that reason that the same encroaches upon the Bureau.
liberality given to an individual to enter into a contract about one’s affair.
Plaintiff Anselmo Ferrazini had been employed by defendant for an Ruling: NO. The parties can not be coerced to enter into a contract where
indefinite time to work in the latter’s industrial enterprise in Manila. The Issue: Whether the Sec. 13 of Act No. 3071 violates the freedom of no agreement is had between them as to the principal terms and
issue started when defendant was alleged to wrongfully discharge the individual to enter into a contract conditions of the contract. Freedom to stipulate such terms and conditions
plaintiff without giving him the "written advice of six months in advance” is of the essence of our contractual system, and by express provision of
admitting that he discharged the plaintiff without written advice, however, Ruling: Yes. The SC ruled that the right to enter into lawful contracts the statute, a contract may be annulled if tainted by violence, intimidation
he asserts that such discharge is lawful on account of absence and constitutes one of the liberties of the people of the state. If that right be or undue influence. Parties can not be coerced to enter into a contract
disobedience of the plaintiff. The previous judgment was in favor of the struck down or arbitrarily interfered" with, there is a substantial impairment where no agreement is had between them as to the principal terms and
plaintiff, hence, the defendant now seeks an appeal. The defendant of the liberty of the people under the constitution. conditions of the contract. Freedom to stipulate such terms and conditions
asserts that in their contract, the petitioner cannot enter into an is of the essence of our contractual system, and by express provision of
employment within five years after the termination of their agreement. Liberty includes not only the right to labor, but to refuse to labor, and, the statute, a contract may be annulled if tainted by violence, intimidation
However, the plaintiff has contracted another employment, hence, consequently, the right to contract to labor or for labor, and to terminate or undue influence (Art 1306). However, the Republic may, in the exercise
violating their agreement. The plaintiff admits that he entered the such contracts and to refuse to make such contracts. of the sovereign power of eminent domain, require the telephone company
employment of Mr. Whalen in the Philippine Islands as a foreman on some to permit interconnection of the government telephone system and that of
construction work for a cement factory within a few days after his
the PLDT, as the needs of the government service may require, subject to In the provincial convention Saura was elected and proclaimed the Party's RULING; Yes, A limitation of liability based upon an agreed value to
the payment of just compensation to be determined by the court. official congressional candidate for the aforesaid district of Pangasinan. obtain a lower rate does not conflict with any sound principle of public
Nonetheless, Sindico, in disregard of the covenant, filed her certificate of policy; and it is not conformable to plain principles of justice that a shipper
Case 17 – Tan candidacy for the same office with the Commission on Elections, and she may understate value in order to reduce the rate and then recover a larger
Ollendorff vs. Abrahamson, 38 Phil 585 (1918) openly and actively campaigned for her election. Wherefore plaintiff Saura value in case of loss.
commenced this suit for the recovery of damages. Upon motion of the
Facts: William Ollendorff was in the business of manufacturing defendant, the lower court dismissed the complaint on the basis that the A stipulation in a bill of lading which limits the liability of the
embroidered female underwear and he acquired the services of Ira agreement sued upon is null and void, in that (1) the subject matter of the carrier to a specified amount unless the shipper declares a higher
Abrahamson for 2 years. It was further agreed upon that failure to comply contract, being a public office, is not within the commerce of man; and (2) value and pays a higher freight is valid and enforceable.
with conditions, as may be additionally given by the employer, would give the "pledge" was in curtailment of the free exercise of elective franchise
him the right to terminate her without notice and that upon termination, she and therefore against public policy. Hence, this appeal. Contrary to public policy- chua
could not enter into any similar or competitive business to that of the said 20. Arroyo v. Berwin
party. 7 months thereafter, she would fly to the US leaving her work citing FACTS: Respondent was prosecuted by the plaintiff for the crime of theft.
health reasons. However, she returned a few months later to the ISSUE: Whether or not there was a valid object or cause for the Contract The defendant requested the plaintiff to agree to dismiss the said criminal
Philippines and was working as the manager for the Philippine Embroidery to prosper? proceeding, and, stipulated with the plaintiff in the presence of Roque
Company. She assails the contract for lack of mutuality wherein the Samson, among other things, that his client Marcela Juaneza would
employer could prematurely terminate her and that that it is void for RULING: NO. The object for a contract to be valid must not be prohibit by recognize the plaintiff's ownership in the land situated on Calle San Juan,
unreasonable restriction of trade. law and contrary to public policy and morals. The object must also be suburb of Molo, municipality of Iloilo, Province of Iloilo, where his said
within commerce to be transmitted and be conferred from and to another client ordered the cane cut, which land and which cut cane are referred to
Issues: (1) Whether there was a lack of mutuality? individual. Rights may be transferred but not the rights which are in the cause for theft above-mentioned; and the defendant furthermore
(2) Whether there was an unreasonable restriction of trade? inherently protected by the constitution to not be transmissible. agreed that the plaintiff should obtain a Torrens title to the said land during
the next term of the court for the trial of cadastral cases, and that the
Ruling: (1) Yes. However, it is largely academic. It is admitted that defendant's client, Marcela Juaneza, would not oppose the application for
MAIN POINT: Among those that may not be the subject matter (object) of
defendant left plaintiffs employ at his own request before the expiration of registration to be filed by the said applicant; provided that the plaintiff
contracts are certain rights of individuals, which the law and public policy
the stipulated term of the contract. Had plaintiff sought to discharge would ask the prosecuting attorney to dismiss the said proceedings filed
have deemed wise to exclude from the commerce of man. Among these
defendant without just cause, before the expiration of the term of the against Marcela Juaneza and Alejandro Castro for the crime of theft.
are the political rights conferred upon citizens, including, but not limited to
employment, it might have been a serious question whether he could ISSUE: Whether the agreement is valid
one's right to vote, the right to present one's candidacy to the people and
lawfully do so, notwithstanding the terms in which the contract was drawn. RULING: No, An agreement by the owner of stolen goods to stifle the
to be voted to public office, provided, however, that all the qualifications
But even assuming this clause of the contract to be invalid, this would not prosecution of the person charged with the theft, for a pecuniary or other
prescribed by law obtain. Such rights may not, therefore, be bargained
necessarily affect the rest of the agreement. The inclusion in an valuable consideration, is manifestly contrary to public policy and the due
away or surrendered for consideration by the citizen or unduly curtailed
agreement of one or more pacts which are invalid does not of necessity administration of justice. In the interest of the public it is of the utmost
with impunity, for they are conferred not for individual or private benefit or
invalidate the whole contract. importance that criminals should be prosecuted, and that all criminal
advantage but for the public good and interest.
proceedings should be instituted and maintained in the form and manner
(2) No. A contract by which an employee agrees to refrain for a prescribed by law; and to permit an offender to escape the penalties
19. Heacook Vs. Macondray
given length of time after the expiration of the term of his employment, prescribed by law by the purchase of immunity from private individuals
from engaging in a business competitive with that of his employer is not would result in a manifest perversion of justice.
FACTS: The plaintiff shipped Edmonton clocks from New York to Manila
void as being in restraint of trade, if the restraint imposed is no greater MAIN POINT: The contracting parties may make the agreement and
on board of steamship Bolton Castle, a vessel of the defendant. It was
than that which is necessary to afford a reasonable protection to the establish the clauses and conditions which they may dream advisable,
agreed in the bill of lading that the value of the goods receipted do not
employer. provided they are not in contravention of law, morals, or public order.
exceedUS$500 per freight on or in proportion for any part of a ton, unless
the value be expressly stated in the bill and freight paid. It was also agreed Contracts without consideration or with an illicit one have no
18 TORIBIO effect whatsoever. A consideration is illicit when it is contrary to law and
that in the event of claims for shortage or damage the carrier shall not be
SAURA v SINDICO (1960) good morals.
liable for more than the net invoice price plus freight and insurance less
Requisites of a Valid Contract : Object or Subject Matter 21-Cruz
charges, and any loss or damage for which the carrier may be liable shall
G.R. No. L-13403 March 23, 1960
be adjusted pro rata on said basis. The clocks were not delivered despite
demands. Plaintiff claimedP420.00, the market value of the clocks, while Filipinas Compania de Seguros v Mandanas
defendant tendered only P76.36, the proportionate freight ton value. Trial
FACTS: It appears that Ramon E. Saura and Estela P. Sindico were court decided for the plaintiff for P226.02, the invoice value plus freight G.R. No. L-19638, June 20, 1966
contesting for nomination as the official candidate of the Nacionalista Party and insurance. Hence this recourse.
in the fourth district of Pangasinan in the congressional elections. The Facts: Respondent-appellant (Mandanas) assails the legality of Article 22
parties entered into a written agreement, containing among other matters ISSUE; Whether a common carrier, by stipulations inserted in the bill of of the Constitution of the Philippine Rating Bureau. He maintains that,
stated therein, a pledge that : Each aspirant shall respect the result of the lading may limit its liability for the loss of or damage to the cargo to an since, in the aforementioned Article 22, members of the Bureau "agree not
aforesaid convention, i.e., no one of us shall either run as a rebel or agreed valuation to represent nor to effect reinsurance with, nor to accept reinsurance from
independent candidate after losing in said convention. any company, body, or underwriter, licensed to do business in the
Philippines not a member in good standing of the Bureau", said provision ISSUE: Whether the provisions and conditions contained in the 3rd a position paper claiming that Farrales and Mamasig were habitual
is illegal as a combination in restraint of trade. paragraph of said contract constitute an illegal and unreasonable absentees; that both were in the habit of bringing in from abroad sizeable
restriction upon plaintiffs’ liberty to contract? quantities of "personal effects"; and that PIA personnel at the Manila
Issue: Whether said article is against public policy International Airport had been discreetly warned by customs officials to
RULING: advise private respondents to discontinue that practice. Regional Director
Ruling: No. There is nothing unlawful, immoral, unreasonable or contrary NO. The contract the annulment of which is sought by the plaintiff is ordered reinstatement and payment of full back wages or in the alternative
to public policy either in the objectives sought to be attained by the Bureau neither oppressive to him, nor unreasonably necessary to protect the payment of their salaries for the remainder of the 3-year period.
of Philippine Rating in adopting Article 22 of its constitution, or in the defendant's business, nor prejudicial to the public interest. 1. They have attained status of regular employees
means availed of to achieve said objectives, or in the consequences of the The law concerning contracts which tend to restrain business or trade has 2. The provision stipulating a three-year period of employment
accomplishment thereof. Said Article 22 provides that the members of the gone through a long series of changes from time to time with the changing is null and void for violating Labor Code provisions on
Bureau “agree not to represent nor to effect reinsurance with, nor to conditions of trade and commerce. With trifling exceptions, said changes regular employment
accept reinsurance from, any company, body, or underwriter licensed to have been a continuous development of a general rule. Later, the rule 3. Dismissal without clearance from MOLE entitles employees to
do business in the Philippines not a member in good standing of this became well established that if the restraint was limited to "a certain time" reinstatement
Bureau”. Its purpose is not to eliminate competition, but to promote ethical and within "a certain place," such contracts were valid and not "against the PIA’s contention was their relationship with Farrles and Mamasig was
practices among non-life insurance companies, although incidentally, it benefit of the state." Later cases, and we think the rule is now well governed by the provisions of its contract rather than by the general
may discharge, and hence, eliminate, unfair competition, through established, have held that a contract in restraint of trade is valid providing provisions of the Labor Code.
underrating, which, in itself, is eventually injurious to the public. The there is a limitation upon either time or place. A contract, however, which
limitation upon reinsurance contained in Article 22 does not affect the restrains a man from entering into a business or trade without either a ISSUE: Whether Philippine law governs the relationship of the parties to
public at all, for whether there is reinsurance or not, the liability of the limitation as to time or place, will be held invalid. the contract.
insurer in favor of the insured is the same. What is more, whatever the If the contract is reasonably necessary to protect the interest of the
Bureau may do in the matter of rate-fixing is not decisive insofar as the parties, it will be upheld. (Ollendorff  vs. Abrahamson, 38 Phil., 585.)In that RULING: Yes. Petitioner PIA cannot take refuge in paragraph 10 of its
public is concerned, for no insurance company in the Philippines may case we held that a contract by which an employee agrees to refrain for a employment agreement which specifies, firstly, the law of Pakistan as the
charge a rate of premium that has not been approved by the Insurance given length of time, after the expiration of the term of his employment, applicable law of the agreement and, secondly, lays the venue for
Commissioner. The said Article 22 does not, therefore, constitute an illegal from engaging in a business, competitive with that of his employer, is not settlement of any dispute arising out of or in connection with the
or undue restraint of trade. void as being in restraint of trade if the restraint imposed is not greater agreement "only [in] courts of Karachi, Pakistan". The first clause of
than that which is necessary to afford a reasonable protection. In all cases paragraph 10 cannot be invoked to prevent the application of Philippine
22. DEL CASTILLO v. RICHMOND like the present, the question is whether, under the particular labor laws and regulations to the subject matter of this case, i.e., the
circumstances of the case and the nature of the particular contract employer-employee relationship between petitioner PIA and private
FACTS: involved in it, the contract is, or is not, unreasonable respondents. We have already pointed out that that relationship is much
Shannon Richmond and Alfonso del Castillo entered into a “Contract of affected with public interest and that the otherwise applicable Philippine
Rendering Services”, whereby del Castillo agrees to enter the employ of CASE NO. 21-GENON laws and regulations cannot be rendered illusory by the parties agreeing
Richmond as a pharmacist with a monthly remuneration of P125 each Pakistan International Airlines vs. Ople upon some other law to govern their relationship. Neither may petitioner
month. invoke the second clause of paragraph 10, specifying the Karachi courts
Paragraph 3 of the said contract read as follows: FACTS: as the sole venue for the settlement of disputes between the contracting
1. That in consideration of the fact that the said Alfonso del Castillo has Pakistan International Airline (PIA) is a foreign corporation licensed to do parties. Even a cursory scrutiny of the relevant circumstances of this case
just graduated as a pharmacist and up to the present time has not business in the Philippines. 2 separate contracts of employment with will show the multiple and substantive contacts between Philippine law
been employed in the capacity of a pharmacist and in consideration of Farrales and Mamasig were entered into by PIA in Manila. The contracts and Philippine courts, on the one hand, and the relationship between the
this employment and the monthly salary mentioned in this contract, contained provisions: parties, upon the other: the contract was not only executed in the
the said Alfonso del Castillo also agrees not to open, nor own nor a. Providing for the term of 3 years extendible upon mutual consent of Philippines, it was also performed here, at least partially; private
have any interest directly or indirectly in any other drugstore either in the parties respondents are Philippine citizens and residents, while petitioner,
his own name or in the name of another; nor have any connection b. That PIA reserves the right to terminate the employee either by although a foreign corporation, is licensed to do business (and actually
with or be employed by any other drugstore situated within a radius of giving notice 1 month before the date of termination or one month’s doing business) and hence resident in the Philippines; lastly, private
our miles from the district of Legaspi, municipality and Province of salary respondents were based in the Philippines in between their assigned
Albay, while the said Shannon Richmond or his heirs may own or c. “This agreement shall be construed and governed under and flights to the Middle East and Europe. All the above contacts point to the
have open a drugstore, or have an interest in any other one within the by the laws of Pakistan, and only the Courts of Karachi, Philippine courts and administrative agencies as a proper forum for the
limits of the districts of Legaspi, Albay, and Daraga of the municipality Pakistan shall have the jurisdiction to consider any matter resolution of contractual disputes between the parties. Under these
of Albay, Province of Albay. arising out of or under this agreement.” circumstances, paragraph 10 of the employment agreement cannot be
The plaintiff alleges that the provisions and conditions contained in the After their training period, Farrales and Mamasig commenced their given effect so as to oust Philippine agencies and courts of the jurisdiction
third paragraph of said contract constitute an illegal and unreasonable services as flight attendants with base station in Manila. 1 year and 4 vested upon them by Philippine law. Finally, and in any event, the
restriction upon his liberty to contract, are contrary to public policy, and are months before the lapse of the 3-year period, counsel for the local branch petitioner PIA did not undertake to plead and prove the contents of
unnecessary in order to constitute a just and reasonable protection to the of PIA sent Farrales and Mamasig notices expressing that their services Pakistan law on the matter; it must therefore be presumed that the
defendant; and asked that the same be declared null and void and of no will be terminated a month thereafter. Farrales and Mamasig filed a joint applicable provisions of the law of Pakistan are the same as the applicable
effect. complaint for illegal termination and non-payment of company benefits provisions of Philippine law. While parties to a contract may establish
before the then Ministry of Labor and Employment (MOLE). PIA submitted stipulations, terms and conditions as they may deem convenient,
they may not contract away applicable provisions of law especially Spouses Almeda VS CA
peremptory provisions dealing with matters heavily impressed with H.C. Liebenow vs. The Phil. Vegetable Oil Company
public interest. Facts:
On various dates in 1981, PNB granted to herein petitioners, the spouses FACTS
Case 24 Almeda several loan/credit accommodations totaling P18.0 Million pesos
payable in a period of six years at an interest rate of 21% per annum. To March 17, 1914, The contract under which plaintiff rendered the service to
ONG YIU V. CA secure the loan, the spouses Almeda executed a Real Estate Mortgage which reference has been made is expressed in a letter written by the Phil.
Contract covering a 3,500 square meter parcel of land, together with the Vegetable Oil Company to Liebenow. The plaintiff entered upon the
FACTS: building erected thereon (the Marvin Plaza). Between 1981 and 1984, discharged of his duties as superintendent of the factory on April 1, 1914
petitioners made several partial payments on the loan totaling. until August 1, 1916 and with salary from P500 to P750. After the
Ong Yiu was a fare paying passenger of respondent PAL from Mactan, P7,735,004.66, a substantial portion of which was applied to accrued employment ceased, the defendant continued to deliver to plaintiff each
Cebu to Butuan City. He checked in one piece of luggae, blue maleta for interest. On March 31, 1984, respondent bank, over petitioners’ month until the total sum of P4,500. The plaintiff alleges by his skill and
which he was issued a claim ticket. Upon arrival at Butuan City, his protestations, raised the interest rate to 28%, allegedly pursuant to Section ability the defendants plant was made much more productive and its profit
luggage could not be found but has been over carried to Manila then III-c (1) of its credit agreement. Said interest rate thereupon increased increased. The plaintiff, contents that he is entitled to a bonus to be fixed
advised PAL Butuan that the luggage will be forwarded the following day, from an initial 21% to a high of 68% between March of 1984 to September by the court as a reasonable participation in the increased profits of the
on scheduled morning flight. Meanwhile, Ong Yiu was worried about the of 1986. factory under his care, taking into consideration his technical skill and the
missing luggage because it contained vital documents needed for the trial greater output therefrom. He suggest, as the lowest proper minimum that
the next day so he wired PAL Cebu demanding delivery of his luggage Petitioner protested the increase in interest rates, to no avail. Before the he should be awarded an amount sufficiently to raise his salary for the
before noon that next day or he would hold PAL liable for damages based loan was to mature in March, 1988, the spouses filed on, February 6, 1988 whole period to the sum of P12,000 per anum, the amount supposedly
on gross negligence. The luggage arrived at 10:00am. Dagorro, a driver of a petition for declaratory relief with prayer for a writ of preliminary paid to his predecessor. Subpoena has been issued duces tecum which
a colorum car, who also used to drive the petitioner volunteered to take injunction and temporary restraining order. Invoking the Law on Mandatory the plaintiff caused to be issued a few days prior to the hearing in CFI.
the luggage to the petitioner. He revealed that the documents were lost. Foreclosure (Act 3135, as amended and P.D. 385), the PNB countered by
Ong Yiu demanded from PAL Cebu actual and compensatory damages as ordering the extrajudicial foreclosure of petitioner’s mortgaged properties After the defendant move the court to vacate this subpoena in the ground
an incident of breach of contract of carriage. and scheduled an auction sale for March 14, 1989. Upon motion by that the plaintiff was not entitled to require the production of the
petitioners, however, the lower court, on April 5, 1989, granted a documents called for. The court reserved the matter for later determination
RULING: supplemental writ of preliminary injunction, staying the public auction of and ruled that the evidence which the plantiff sought to elicit was
the mortgaged property. irrelevant. the witness was excused from producing the papers mentioned
WON PAL is guilty only of simple negligence and not bad faith in the in the subpoena duces tecum and the plaintiff duly excepted. The solution
breach of its contract of transportation Issue: of the case makes it necessary to consider the legal effect of the
Whether or not respondent bank was authorized to raise its interest rates stipulation inserted in the contract in question to the effect that the plaintiff
ISSUE: from 21% to as high as 68% under the credit agreement should be entitled to such further amount in the way of bonus as the board
of directors might see fit to grant.
NO.PAL had not acted in bad faith. Bad faith means a breach of a known Ruling:
duty through some motive of interest or ill will. It was the duty of PAL to No. The binding effect of any agreement between parties to a contract is Issue: Whether that the subpoena duces tecum is needed to determine to
look for petitioner's luggage which had been miscarried. PAL exerted due premised on two settled principles: (1) that any obligation arising from justify the awarding of the questioned amount of claim as bonus of the
diligence in complying with such duty. contract has the force of law between the parties; and (2) that there must plaintiff from the defendant.
be mutuality between the parties based on their essential equality. Any
While it may be true that petitioner had not signed the plane ticket, he is contract which appears to be heavily weighed in favor of one of the parties Ruling : No. When the case was called for hearing the attorney for the
nevertheless bound by the provisions thereof. "Such provisions have been so as to lead to an unconscionable result is void. Any stipulation regarding defendant moved the court to vacate this subpoena on the ground that the
held to be a part of the contract of carriage, and valid and binding upon the the validity or compliance of the contract which is left solely to the will of plaintiff was not entitled to require the production of the documents called
passenger regardless of the latter's lack of knowledge or assent to the one of the parties, is likewise, invalid. for. The court reserved the matter for later determination and in the end
regulation". It is what is known as a contract of "adhesion", in regards ruled that the evidence which the plaintiff sought to elicit was irrelevant.
which it has been said that contracts of adhesion wherein one party The witness was therefore excused from producing the papers mentioned
imposes a ready-made form of contract on the other, as the plane ticket inIt is plainly obvious from the undisputed facts of the case that respondent
in the subpoena duces tecum and the plaintiff duly excepted.The
bank unilaterally altered the terms of its contract with petitioners by
the case at bar, are contracts not entirely prohibited. The one who adheres subpoena duces tecum is, in all respects, like the ordinary subpoena ad
increasing the interest rates on the loan without the prior assent of the
to the contract is in reality free to reject it entirely; if he adheres, he gives testificandum, with the exception that it concludes with an injunction that
his consent. latter. In fact, the manner of agreement is itself explicitly stipulated by the
the witness shall bring with him and produce at the examination the books,
Civil Code when it provides, in Article 1956 that "No interest shall be due
documents, or things described in the subpoena. It is issued in the same
"A contract limiting liability upon an agreed valuation does not offend unless it has been expressly stipulated in writing." What has been manner as the ordinary subpoena, and is procurable from the clerk as of
against the policy of the law forbidding one from contracting against his "stipulated in writing" from a perusal of interest rate provision of the credit course without application to the court. We see no reason to doubt that a
own negligence. agreement signed between the parties is that petitioners were bound
promise of this character creates a legal obligation binding upon the
merely to pay 21% interest, subject to a possible escalation or de-
promisor, although in its actual results it may not infrequently prove to be
escalation, when 1) the circumstances warrant such escalation or de-
illusory. Such a promise is not, in our opinion, nugatory, under article 1115
escalation; 2) within the limits allowed by law; and 3) upon agreement.
of the Civil Code, as embodying a condition dependent exclusively upon
the will of the obligor. Nor can it be held invalid under article 1256 of the always and since the beginning been upon a month-to-month basis. The “It was understood and agreed that should the machinery to be installed
same Code, which declares that the validity and performance of a contract court added in its decision that this defense which was put up by fail, for any reason, to arrive in Manila within the period of 6 months, the
cannot be left to the will of one of the contracting parties. The uncertainty defendant's answer, for which reason the Court considered it as indicative contract may be cancelled by the party of the second part at its option,
of the amount to be paid by way of bonus is also no obstacle to the validity of an eleventh-hour theory. We think that the Court of First Instance was such cancellation not to occur before the expiration of such 6 months.”
of the contract (article 1273, Civil Code); since the contract itself specifies right in so declaring. Furthermore, carried to its logical conclusion, the The machinery did not arrive in Manila within the 6 months, the reason
the manner in which the amount payable is to be determined, namely, by defense thus set up by defendant Lefrado Fernando would leave to the does not appear, but a preponderance of evidence show that the
the exercise of the judgment and discretion of the employer. sole and exclusive will of one of the contracting parties (defendants in this defendants seeing that oil business no longer promised large returns,
case) the validity and fulfillment of the contract of lease, within the either cancelled the order for machinery from choice or were unable to
27. Lim meaning of article 1256 of the Civil Code, since the continuance and supply the capital necessary to finance the project. Defendants
Encarnacion vs. Baldomar 1946 fulfillment of the contract would then depend solely and exclusively upon communicated in writing to Taylor saying that they had decided to rescind
Contracts their free and uncontrolled choice between continuing paying the rentals or the contract. Taylor instituted this action to recover damages in the
not, completely depriving the owner of all say in the matter. amount of 13k, covering salary and perquisites due and to become due
Main Point: The continuance and fulfillment of the contract of lease cannot under the contract.
be made to depend solely and exclusively upon the free and uncontrolled 28. Musa
choice of the lessees between continuing paying the rentals or not, Lao Lim v. Court of Appeals ISSUE: Whether in a contract for the prestation of service, it is lawful for
completely depriving the owner of all say in the matter. For if this were the parties to insert a provision giving the employer the power to cancel
allowed, so long as he defendants elected to continue the lease by FACTS: the contract in contingency which may be denominated by him.
continuing the payment of the rentals. The owner would never be able to Francisco Lim entered into a contract of lease with Benito Dy for a period
discontinue it; conversely, although the owner should desire the lease to of 3 years, from 1976 to 1979. After the stipulated term expired the RULING: Yes. Undoubtedly one of the consequences of this stipulation
continue, the lessees could effectively thwart his purpose if they should respondent refused to leave the premises, so Francisco Lim filed an was that the employers were left in a position where they could dominate
prefer to terminate the contract by simple expedient of stopping payment ejectment suit against Benito Dy. This case was then taken over by a the contingency, and the result was about the same as if they had been
of the rentals. This is prohibited by Art. 1256 of the Civil Code. judicially approved compromise agreement which provides an automatic given an unqualified option to dispense with the services of the plaintiff at
increase in rent of 20% every 3 years. On 1985, Dy, informed Lim of his the end of six months. But this circumstance does not make the stipulation
Facts: Vicente Singson Encarnacion, owner of the house numbered 589 intention to renew the lease up to 1988, Lim did not agree to the renewal. illegal. A condition at once facultative and resolutory may be valid even
Legarda Street, Manila, some six years ago leased said house to Jacinto In 1987 another ejectment suit was filed by Lim after the failure of Dy to though the condition is made to depend upon the will of the obligor. If it
Baldomar and her son, Lefrado Fernando, upon a month-to-month basis vacate the premises. It was dismissed by the RTC and later affirmed by were apparent, or could be demonstrated, that the defendants were under
for the monthly rental of P35. After Manila was liberated in the last war, the CA for the following reasons: (1) the stipulation in the compromise a positive obligation to cause the machinery to arrive in Manila, they would
specifically on March 16, 1945, and on April 7, of the same year, plaintiff agreement which allows the lessee (Benito Dy) to stay on the premises as of course be liable, in the absence of affirmative proof showing that the
Singson Encarnacion notified defendants, the said mother and son, to long as he needs it and can pay rents is valid, being a resolutory condition, nonarrival of the machinery was due to some cause not having its origin in
vacate the house above-mentioned on or before April 15, 1945, because and therefore beyond the ambit of Art 1308 of the NCC; and (2) the their own act or will. The contract, however, expresses no such positive
plaintiff needed it for his offices as a result of the destruction of the compromise agreement has the effect of res judicata. obligation, and its existence cannot be implied in the fact of stipulation,
building where said plaintiff had said offices before. Despite this demand, defining the conditions under which the defendants can cancel the
defendants insisted on continuing their occupancy. When the original ISSUE: contract.
action was lodged with the Municipal Court of Manila on April 20, 1945, Whether the stipulation in the compromise agreement which allows the
defendants were in arrears in the payment of the rental corresponding to lessee to stay on the premises as long as he needs it and can pay rents MAIN POINT: When the fulfilment of the condition depends upon the sole
said month, the agrees rental being payable within the first five days of violates mutuality character of the contract. will of the debtor, the conditional obligation is void (Art. 1182, Civil Code) if
each month. the condition is SUSPENSIVE. If it is RESOLUTORY, the obligation is
RULING: valid. Hence, it is all right for the contract to expressly give to one party the
In the Court of First Instance the graveman of the defense interposed by YES. The continuance, effectivity, and fulfillment of a contract of lease right to CANCEL the same. This is because, when the contract is thus
defendants, as it was expressed defendant Lefrado Fernando during the cannot be made to depend exclusively upon the free and uncontrolled cancelled, the agreement is really being FULFILLED.
trial, was that the contract which they had celebrated with plaintiff since choice of the lessee between continuing payment of the rentals or not,
the beginning authorized them to continue occupying the house indefinetly completely depriving the owner of any say in the matter. Mutuality does 30 PELAEZ
and while they should faithfully fulfill their obligations as respects the not obtain in such a contract of lease and no equality exists between the VALES V. VILLA GR NO. 10028, DEC. 16, 1916
payment of the rentals, and that this agreement had been ratified when lessor and the lessee. CONSENT
another ejectment case between the parties filed during the Japanese
regime concerning the same house was allegedly compounded in the 29. Taylor v. Uy Tieng Piao and Tan Liuan (43 Phil. 873) FACTS: Vales, the owner of several properties, was indebted to Silvestre,
municipal court a widow, 70, and is the aunt of the defendant Garcia, wife of Villa. He
FACTS: Taylor contracted his services to Tan Liuan & Co as conveyed some of the properties to Silvestre to pay his debt, with a clause
Issue: Whether the contention of Baldomar, to let the lease continue superintendent of an oil factory which the latter contemplated establishing. giving to Vales the right to repurchase within one year from the date of the
despite the demand of Encarnacion to vacate the premises with intent to The contract extended over 2 years and the salary was 600/month during conveyance. Vales did not repurchase and having been indebted to
use the house, will prosper the first year and 700/month during the second with electric, light and Silvestre in an additional sum, he conveyed the premises to Garcia at the
water for domestic consumption or in lieu thereof, 60/month. At the time request of Silvestre. The consideration for the transfer was the debt of
Ruling: No. The Court of First Instance gave more credit to plaintiff's this agreement was made the machinery for the contemplated factory had P25,000. The deed was absolute on its face and, conveyed the property in
witness, Vicente Singson Encarnacion, jr., who testified that the lease had not been acquired, through ten expellers had been ordered from the US. fee simple; but Vales contended that there was a parol agreement
between him and the defendants entered into at the time the conveyance failure or delay of Fil-Anchor to deliver printing paper, IPC could have sold ISSUE: Whether or not the Contract of Lease with Option to Buy entered
was executed and delivered, giving him the right to repurchase the books to Philacor and realized profit. On appeal, the CA deleted the award into by the late Encarnacion Bartolome with petitioner was terminated
premises so conveyed at any time on paying to the vendee the of moral damages for lack of basis. Hence, this petition. upon her death or whether it binds her sole heir, Victor.
consideration. The defendants deny the existence of such an agreement.
Vales claimed that he made the conveyances because he was threatened ISSUES:
RULING: Yes. The general rule is that heirs are bound by contracts
that his properties would not be returned. Vales alleged that the consent (1) Whether Fil-Anchor violated the order agreement; and
entered into by their predecessors-in-interest except when the rights and
he gave was vitiated by the duress to which he was subjected by the (2) Whether Fil-Anchor is liable for IPC’s breach of contract with Philacor.
obligations arising therefrom are not transmissible by (1) their nature, (2)
defendants, and that they are bound to make restitution to him of every
stipulation or (3) provision of law.
dollar which they have extorted from him by their threats and intimidation, RULINGS:
In the case at bar, there is neither contractual stipulation nor legal
thus, constituting fraud and vitiating his consent. (1) NO. Fil-Anchor did not violate the order agreement. Reciprocal
provision making the rights and obligations under the contract
obligations, like the contract of sale in this case, are to be performed
intransmissible. More importantly, the nature of the rights and obligations
ISSUE: Whether or not there was fraud in the acts of the defendants, simultaneously, so that the performance of one is conditioned upon
therein are, by their nature, transmissible.
vitiating Vales’ consent. the simultaneous fulfillment of the other. Thus, Fil-Anchor undertakes
It has also been held that a good measure for determining whether a
to deliver printing paper of various quantities subject to IPC’s
contract terminates upon the death of one of the parties is whether it is of
RULING: NO. There can be no actionable misrepresentation where the corresponding obligation to pay, on a maximum 90-day credit, for
such a character that it may be performed by the promissor’s personal
person to whom the misrepresentations are made knows the facts these materials. Clearly, IPC did not fulfill its side of the contract for
representative. Contracts to perform personal acts which cannot be as
concerning which the misrepresentations are made. Misrepresentations non-payment of the printing paper. Fil-Anchor’s suspension of its
well performed by others are discharged by the death of the promissor.
will not be actionable unless the person to whom the misrepresentations deliveries to IPC whenever the latter failed to pay on time is legally
Conversely, where the service or act is of such a character that it may as
were made relied upon them and is deceived by them to his injury. justified since it was actually IPC which breached the agreement as it
well be performed by another, or where the contract, by its terms, shows
Petitioner’s consent was not obtained by deceit in any of the transactions. failed to pay on time the materials delivered by Fil-Anchor.
that performance by others was contemplated, death does not terminate
There did not exist in any one of the transactions complained of a
the contract or excuse nonperformance. In the case at bar, there is no
condition where "by words and insidious machinations on the part of one (2) NO. Fil-Anchor cannot be made responsible under the contracts
personal act required from the late Encarnacion Bartolome. Rather, the
of the contracting parties the other is (was) induced to execute a contract entered into by IPC with Philacor. Fil-Anchor is not a party to said
obligation of Encarnacion in the contract to deliver possession of the
which, without them, he would not have made." agreements and it is also not a contract pour autrui. The said
subject property to petitioner upon the exercise by the latter of its option to
contracts could not affect third persons like Fil-Anchor because of the
lease the same may very well be performed by her heir Victor.
31 REYES basic civil law principle of relativity of contracts which provides that
The subject matter of the contract is a lease, which is a property right and
Article 1311: Principle of Relativity of Contracts contracts can only bind the parties who entered into it, and it cannot
is a transmissible.
Integrated Packaging Corp. vs. CA favor or prejudice a third person, even if he is aware of such contract
and has acted with knowledge thereof. Moreover, the paper specified
FACTS: The Integrated Packaging Corp. (IPC) and Fil-Anchor Paper Co., in the order agreement between IPC and Fil-Anchor are markedly Salinas- 33. Geraldez v. CA and Kenstar Travel Corp.
Inc. (Fil-Anchor) executed an order agreement whereby Fil-Anchor bound different from the paper involved in the contracts of IPC with Philacor.
itself to deliver reams of printing paper under an agreed schedule for its Facts: October, 1989, petitioner hired the respondent for the service of
simultaneous delivery and payment. In accordance with the standard CASE NO. 32 – SABTALUH giving them European tour, in this case, the tour classified as the
operating practice of the parties, the materials were to be paid within a ART. 1311 “VOLARE 3”. She paid the total equivalent amount of P190,000.00
minimum of 30 days and maximum of 90 days from delivery. Later on, IPC DKC HOLDINGS VS CA charged by private respondent for her and her sister. Petitioner claimed
entered into a contract with Philippine Appliance Corporation (Philacor) to that, during the tour, she was very uneasy and disappointed when it turned
print volumes of Philacor Cultural Books for delivery. FACTS: DKC Holdings Corporation entered into a Contract of Lease with out that, contrary to what was stated in the brochure, there was no
Option to Buy with Encarnacion Bartolome, which option must be European tour manager for their group of tourists, the hotels in which she
Upon the agreed schedule, Fil-Anchor delivered various quantities of exercised within a period of two years counted from the signing of the and the group were billeted were not first-class, the UGC Leather Factory
printing paper but IPC encountered difficulties in paying the former. It Contract. In turn, DKC undertook to pay P3,000.00 a month as which was specifically added as a highlight of the tour was not visited, and
made a formal demand upon IPC to settle the outstanding account. It also consideration for the reservation of its option. Within the two-year period, the Filipino lady tour guide provided by private respondent was a first
ceased making deliveries until further payment. Meanwhile, IPC entered DKC shall serve formal written notice upon the lessor of its desire to timer, that is, she was performing her duties and responsibilities as such
into an additional printing contract with Philacor. Unfortunately, it also exercise its option. When Encarnacion died, petitioner coursed its for the first time. Respondents as a defense sought sanctuary in the
failed to fully comply with its contract. Thus, Philacor demanded payment to private respondent Victor Bartolome, being the sole heir of delimitation of its responsibility as printed on the face of its brochure on
compensation for the delay and damage it suffered on account of their Encarnacion. Victor, however, refused to accept the payments. the Volare 3 program which states that “Kenstar Travel Corporation, your
failure. Subsequently, petitioner served upon Victor notice that it was exercising Travel Agent, their employees or sub-agents is not responsible for any act,
its option to lease the property, tendering the amount of P15,000.00 as error or omission, or of any damages, injury, loss, accident, delay or
Fil-Anchor filed a collection suit against IPC for the unpaid purchase price rent. Again, Victor refused to accept the tendered rental fee and to irregularity which may be occasioned by reason (of) or any defect in
of printing paper. IPC denied the allegations and contended that Fil- surrender possession of the property to petitioner. On April 23, 1990, lodging place or any facilities.”
Anchor violated their order agreement for failure to deliver the balance of petitioner filed a complaint for specific performance and damages against
the printing paper despite demand therefor, hence, it suffered actual Victor and the Register of Deeds. Issue: Whether the defense provided by the respondents will prosper.
damages and failed to realize expected profits. The trial court rendered
judgment declaring IPC to pay Fil-Anchor. However, the trial court Ruling: No. the SC stated that while, generally, the terms of a contract
awarded moral damages to IPC on the ground that were it not for the result from the mutual formulation thereof by the parties thereto, it is of
common knowledge that there are certain contracts almost all the Ruling: Yes. Art 1311 states an exception to the general rule to the effect 36 TORIBIO
provisions of which have been drafted by only one party, usually a that contracts are productive of effects only between the parties who VELASCO v COURT OF APPEALS (1960)
corporation. Such contracts are called contracts of adhesion, because execute them; to wit "Should the contract contain any stipulation in favor of Requisites of a Valid Contract : Contracting Parties and Vinculum
the only participation of the party is the affixing of his signature or his a third person, he may demand its fulfillment, provided he has given notice Contractual Relation Art 1311 and Art 729 correlation
“adhesion” thereto. While it is true that an adhesion contract is not of his acceptance to the person bound before the stipulation has been G.R. No. L-13403 March 23, 1960
necessarily void, it must nevertheless be construed strictly against revoked" (Art 1311 Par 2). In the light of the conclusions thus stated, the
the one who drafted the same. This is especially true where the right of the plaintiff to maintain the present action is clear enough; for it is
stipulations are printed in fine letters and are hardly legible, as is the undeniable that the bank's promise to cause a definite sum of money to be FACTS: The case at bar is an appeal wherein GSIS who foreclosed the
case of the tour contract involved in the present controversy. paid to the plaintiff in New York City is a stipulation in his favor within the property from Alta Farm who conveyed a Deed of Sale with Assumption of
meaning of the paragraph above quoted; and the circumstances under Mortgage with Asian Engineering Corporation who subsequently executed
34. SALVADOR which that promise was given disclose an evident intention on the part of an Exclusive Sales Agency, Management and Administration Contract
Contracts the contracting parties that the plaintiff should have that money upon with Laigo Realty Corporation to convert the piggery of Alta Farm into a
Kaufman vs. PNB 42 Phil 182 demand in New York City. The recognition of this unqualified right in the Subdivision (Palos Verde Estate). Laigo in the process of building the
plaintiff to receive the money implies in our opinion the right in him to houses subcontracted these to the petitioners who are contractors of the
Facts: Plaintiff George Kauffman was the president and owner of almost maintain an action to recover it. subdivision entered with Laigo Corporation.
all shares of stocks of the Philippine Fiber and Produce Company in the
Philippine Islands. On February 5, 1918, the board of directors of said It will be noted that under the paragraph cited a third person seeking to Laigo failed to pay the contractors and amortizations to GSIS defaulted
company, declared a dividend of P100,000 from its surplus earnings for enforce compliance with a stipulation in his favor must signify his therefore foreclosure was done as a remedy in favor of GSIS. Then the
the year 1917, of which the plaintiff was entitled to the sum of P98,000. acceptance before it has been revoked. In this case the plaintiff clearly contractors which are not fully settled with Laigo asked GSIS to intercede
This amount was accordingly placed to his credit on the books of the signified his acceptance to the bank by demanding payment; and although payment but the latter refused alleging that the petitioners are not privy to
company, and so remained until in October of the same year when an the Philippine National Bank had already directed its New York agency to the contract and that there is no contractual relation that is enforceable
unsuccessful effort was made to transmit the whole, or a greater part withhold payment when this demand was made, the rights of the plaintiff towards them. This was the source of the appeal of the petitioners alleging
thereof, to the plaintiff in New York City. cannot be considered to have been prejudiced by that fact. The word that they are parties to the contract corollary to the main contract of GSIS
"revoked," as there used, must be understood to imply revocation by the and Alta Farm.
On October 9, 1918, George B. Wicks, treasurer of the Philippine Fiber mutual consent of the contracting parties, or at least by direction of the
and Produce Company, presented himself in the exchange department of party purchasing the exchange. ISSUE: Whether or not there was a contractual relation between the
the Philippine National Bank in Manila and requested that a telegraphic petitioners and GSIS for enforceability of collection?
transfer of $45,000 should be made to the plaintiff in New York City, upon Case 35 – Tan
account of the Philippine Fiber and Produce Company. On the same day Uy Tam vs. Leonard, 30 Phil 471 (1915) RULING: YES. The contemplation of Art 1311 of the Civil Code which
the Philippine National Bank dispatched to its New York agency a enumerates the limitation and exception of the enforceability of the
cablegram to the following effect: "Pay George A. Kauffman, New York, Facts: Hosty and Brown was obligated to furnish crushed rocks to the city stipulation of the contract among the contracting party and third person of
account Philip- pine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE of Manila for 1 year. Thomas Leonard was one of the 5 sureties in the interest and succession. This case if cleared out as one of those
NATIONAL BANK, Manila." However the Philippine National Bank in agreement for ₱28,500. It was also stipulated that Hosty and Brown exceptions of third party which stipulations would be in favor and read with
Manila, upon advise by the bank’s representative in New York of the should promptly pay any laborer or materialman who aids in the Art 1729 of the Civil Code which creates a CONSTRUCTIVE VINCULUM
plaintiff’s reluctance to accept bills from his company and that payment be disposition of their obligation to the Manila. Uy Tam and Uy Yet provided or CONTRACTUAL PRIVITY in favor of third party.
withheld, sent another telegram message on October 11 to its materials for them and they also notified Hosty and Brown of their
representative to withhold the payment to plaintiff as suggested. acceptance to the conditions in the bond. MAIN POINT: The general rule is that the stipulations are only applicable
to the contracting parties however when a third party is interpleaded and
Meanwhile, Wicks cabled the plaintiff in New York advising him that the Issue: Whether petitioners, as 3rd parties, can benefit from the there is a material connection that is indispensable subsequent to the
$45,000 had been placed to his credit in the New York agency of PNB. agreement? principal contract, without fraud involved, CONSTRUCTIVE VINCULUM
Thereafter, plaintiff presented himself at the office of PNB in New York may be established.
City demanding payment. By this time, the message from PNB Manila of Ruling: No. A condition pour atrui requires that the benefit claimed by a 3rd
October 11 directing the withholding of payment and that payment was person must be one intended to be conferred upon him by the parties. It
therefore refused. In view of these facts, the plaintiff Kauffman instituted does not lend its aid to an incidental benefit which a 3 rd person may have 37. DAYWALT v LA CORPORACION DE LOS PADRES AGUSTINOS
the present action in the Court of First Instance of the city of Manila to in the performance of the contract. The absence of apt words describing RECOLETOS
recover said sum, with interest and costs; and judgment having been there the materialmen as creditors on the bond negatives a clear intent of the
entered favorably to the plaintiff, the defendant appealed. PNB contends parties to stipulate in their favor. Facts: in 1902, Teodorica Endencia executed a contract whereby she
that Kauffman has no right because he lack of knowledge to the contract obligated herself to conveyto Geo W. Daywalt a 452-hectare parcel of land
between PNB and George Wicks. Note: Also mentions 3 rules, Roman Law which did not recognize for P 4000. They agreed that a deed should beexecuted as soon as
stipulations in favor of 3rd persons at all. English Rule which states that Endencia’s title to the land was perfected in the Court of Land Registration
Issue: Whether Kauffman can maintain the action considering his lack of such stipulation is valid but unenforceable. American Rule which and a Torrens title issued in her name. When the Torrens title was issued,
privity to the contract between PNB and George Wicks. recognized the validity of the stipulation with varying limitations of Endencia found outthat the property measured 1248 hectares instead of
strictness. 452 hectares, as she initially believed. Because of this, she became
reluctant to transfer the whole tract to Daywalt, claiming that she never
intended to sell so large an amount and that she had been misinformed as Mr. Yang replied that he would let Mr. Pascal know of his decision. Mayfair Rosenstock is the administrator of the estate) began negotiations with
to its area.Daywalt filed an action for specific performance. The SC sent another letter to Carmelo purporting to express interest in acquiring Burke and wrote a letter: “In connection with the yacht Bronzewing, I am in
ordered Endencia to convey the entire tract to Daywalt. Meanwhile, La not only the leased premises but "the entire building and other position and am willing to entertain the purchase of it under the following
Corporacion de los Padres Agustinos Recoletos (Recoletos), was a improvements if the price is reasonable. However, both Carmelo and terms.” Plaintiff accepted all the terms.
religious corp., w/c owned an estate immediately adjacent to the property Equatorial questioned the authenticity of the second letter.
sold by Endencia to Daywalt. Italso happened that Fr. Sanz, the Four years later Carmelo sold its entire C.M. Recto Avenue land and Issue: Whether there was an offer here that was certain, an offer which, if
representative of the Recoletos, exerted some influence and ascendancy building, which included the leased premises, to Equatorial by virtue of a accepted, could compel the writer to really buy the yacht
over Endencia, who was a woman of little force and easily subject to the Deed of Absolute Sale.
influence of other people. Fr. Sanz knew of the existence of the contracts Mayfair instituted the action a quo for specific performance and annulment Ruling: No because here the offer was neither definite nor certain. Said
with Daywalt and discouraged her from conveying the entire tract. Daywalt of the sale of the leased premises to Equatorial. In its Answer, Carmelo the Supreme Court: “The word ‘entertain’ applied to an act does not mean
filed an action for damages against the Recoletos on the ground that it alleged as special and affirmative defense (a) that it had informed Mayfair the resolution to perform said act, but simply a position to deliberate for
unlawfully induced Endencia to refrain from the performance of her of its desire to sell the entire C.M. Recto Avenue property and offered the deciding to perform said act. It was not a definite or certain offer, but a
contract for the sale of the land in question and to withhold delivery of the
same to Mayfair, but the latter answered that it was interested only in mere invitation to a proposal being made to him, which might be accepted
Torrens title. Daywalt’s claim for damages against the Recoletos was for buying the areas under lease, which was impossible since the property by him or not.”
the huge sum of P 500000 [in the year 1919], since he claims that was not a condominium; and (b) that the option to purchase invoked by
because of the interference of the Recoletos, he failed to consummate a Mayfair is null and void for lack of consideration. Equatorial, in its Answer, The question whether or not an expression is a definite offer to purchase
contract with another person for thesale of the property and its conversion pleaded as special and affirmative defense that the option is void for lack or merely an invitation to a proposition being made to him, is one of
into a sugar mill. of consideration (sic) and is unenforceable by reason of its impossibility of intention of the person using said expression, which is to be determined by
performance because the leased premises could not be sold separately the circumstances surrounding the case: Petitioner never thought of
Issue: whether Recoletos is liable to Daywalt? from the other portions of the land and building. It counterclaimed for acquiring the yacht for personal use, but for gain (resell) which is why he
cancellation of the contracts of lease, and for increase of rentals in view of did not say in his letter that he was in position to purchase the yacht, but
Held: No, it is not liable. The stranger who interferes in a contract alleged supervening extraordinary devaluation of the currency. only to entertain this purchase. Stenographer of the letter corroborated
between other parties cannot become more extensively liable in damages that the suggested the elimination of the word entertain and the
for the non-performance of the contract than the party in whose behalf he ISSUE: Whether the sale is void substitution therefor of a definite offer, but after a discussion between
intermediates. Hence, in order to determine the liability of the Recoletos, them, during which the plaintiff clearly said that he was not in position to
there is first a need to consider the liability of Endencia to Daywalt. The RULING: Yes, Contracts without consideration produce no effect make a definite offer, the word entertain now appearing in the letter was
damages claimed by Daywalt from Endencia cannot be recovered from whatsoever. Article 1324 provides: When the offeror has allowed the preserved.
her, first, because these are special damages w/c were not w/in offeree a certain period to accept, the offer may be withdrawn at any time
thecontemplation of the parties when the contract was made, and before acceptance by communicating such withdrawal, except when the Additional Facts: Yacht was mortgaged for a loan (100k) from BPI.
secondly, these damages are tooremote to be the subject of recovery. option is founded upon consideration, as something paid or promised. Plaintiff wanted to organize a yacht club and sell the yacht for 120k – 100
Since Endencia is not liable for damages to Daywalt,neither can the for Defendant (owner) and 20 for Plaintiff. A pleasure cruise was to be
Recoletos be held liable. As already suggested, by advising Endencia not MAINPOINT: What Carmelo and Mayfair agreed to, by executing the two conducted to advertise the yacht and to fix the vessel, plaintiff incurred
to perform the contract, the Recoletos could in no event render itself more lease contracts, was that Mayfair will have the right of first refusal in the expenses of 6k because defendant had no money. Plaintiff attempted to
extensively liable than the principal in the contract. event Carmelo sells the leased premises. It is undisputed that Carmelo did loan from BPI but this was rejected in view of the subsisting debt. It was
recognize this right of Mayfair, for it informed the latter of its intention to after a series of communications from defendant, plaintiff, and BPI, that
38. Equitorial Realty Development V. Mayfair Theater sell the said property in 1974. There was an exchange of letters the letter in the main facts above was executed in the plaintiff’s office by
evidencing the offer and counter-offers made by both parties. Carmelo, his stenographer. Current action is for plaintiff’s recovery of 6k used to fix
FACTS: Carmelo entered into a contract of lease with Mayfair for the however, did not pursue the exercise to its logical end. While it initially the yacht. Defendant raised the defense that their agreement was that
latter's lease of a portion of Carmelo's property for use by Mayfair as a recognized Mayfair's right of first refusal, Carmelo violated such right when plaintiff was to shoulder repair costs in exchange for the gratuitous
motion picture theater and for a term of twenty (20) years. Two years later without affording its negotiations with Mayfair the full process to ripen to at voyage. Furthermore, alleging that the plaintiff purchased the vessel in
Mayfair entered into a second contract of lease with Carmelo for the lease least an interface of a definite offer and a possible corresponding accordance with the letter above which leads to the issue of the case.
of another portion of Carmelo's property for similar use. Both contracts of acceptance within the "30-day exclusive option" time granted Mayfair,
lease provides (sic) identically worded paragraph 8, which reads: Carmelo abandoned negotiations, kept a low profile for some time, and 40. LEOQUINCO v. POSTAL SAVINGS
That if the LESSOR should desire to sell the leased premises, the then sold, without prior notice to Mayfair, the entire Claro M Recto property FACTS:
LESSEE shall be given 30-days exclusive option to purchase the same. to Equatorial. Plaintiff Leoquinco alleged that he was the highest bidder at a
In the event, however, that the leased premises is sold to someone other public auction held by the defendants on for the sale of a piece or parcel of
than the LESSEE, the LESSOR is bound and obligated, as it hereby binds 39-Cruz land belonging to the Bank. In Resolution No. 31 of the board of directors
and obligates itself, to stipulate in the Deed of Sale hereof that the of the Bank, the sale of said property at public auction was authorized, as
purchaser shall recognize this lease and be bound by all the terms and Rosentock v Burke well as in the public notice announcing said sale. The board of directors
conditions thereof. have expressly reserved to themselves the right to reject any and all bids.
46 Phil. 217 A letter to the defendants was sent advising that the plaintiff was ready to
Carmelo informed Mr. Yang, President of Mayfair, through a telephone tender payment for the land as soon as the deed of sale of the same in his
conversation that Carmelo was desirous of selling the entire property to Facts: Burke (defendant) acquired a yacht from Australia for the purpose favor is executed and delivered by the defendants. The defendants
another person and an offer of 120k us dollar was made. of reselling it here in the Philippines. H.W. Elser (real plaintiff – refused to execute the deed in spite of requests made therefor by him.
Plaintiff prayed that said defendants be ordered to execute and deliver the to Mr. Arias on March 6,1919, advising him that all his propositions, as Under article 1115 of the old Civil Code which provides as follows: "If the
deed of sale of said land in his favor, and to pay him damages and the amended and supplemented, were accepted, It is admitted that this letter fulfilment of the condition should depend upon the exclusive will of the
costs. was received by Mr. Arias by special delivery at 2.53 p. m. of that day. debtor, the conditional obligation shall be void.”
On that same day, at 11.25 in the morning, Mr. Arias had, in turn, written
The defendants admitted the allegations of the complaint, except a letter to the plaintiff, Mr. Laudico, withdrawing the offer to lease the
the conclusions of law set forth and the damages alleged to have been building. The chief prayer of the plaintiff in this action is that the
suffered by plaintiff. As a special defense, the defendants alleged that in defendants be compelled to execute the contract of lease of the building in Perez VS Pomar
Resolution No. 31 of the board of directors of the Postal Savings Bank, the question.
defendants expressly reserved to themselves "the right to reject any and Facts:
all bids," and that they never accepted the bid or offer of the plaintiff. The ISSUE: Whether a contract of lease was perfected. Plaintiff, Perez, render services to defendant, Pomar, as interpreter
defendants prayed for relief from the complaint, with costs against the between latter and the military authorities; as well to the colonel
plaintiff. RULINFG: No. Under article 1262, paragraph 2, of the Civil Code, an commanding the local garrison and with various officer residing in the
acceptance by letter does not have any effect until it comes to the area, to the end that such services might be punctually rendered, Pomar,
knowledge of the offerer. Therefore, before he learns of the acceptance, assured him that the Tabacalera Company always generously repaid
ISSUE: the latter is not yet bound by it and can still withdraw the offer. services rendered it, and that he therefore did not trouble himself about his
Whether or not defendants may refuse to execute the deed as it Consequently, when Mr. Arias wrote Mr. Laudico, withdrawing the offer, he inability to devote the necessary amount of time to his business, the
is expressed in Resolution No. 31 of the board of directors of the Postal had the right to do so, inasmuch as he had not yet received notice of the defendant going so far as to make him flattering promises of employment
Savings Bank, that the defendants has reserved to themselves "the right acceptance. And when the notice of the acceptance was received by Mr. with the company, which he did not accept; that these statements were
to reject any and all bids," Arias, it no longer had any effect, as the offer was not then in existence, made in the absence of witnesses and that therefore his only proof as to
the same having already been withdrawn. There was no meeting of the the same was Mr. Pomar’s word as a gentleman.
HELD: minds, through offer and acceptance, which is the essence of the contract.
Yes. The plaintiff has no ground of action to compel defendants While there was an offer, there was no acceptance, and when the latter According to the defendant plaintiff acted as interpreter of his own free will,
to execute a deed of sale of the land in his favor, nor to compel them to was made and could have a binding effect, the offer was then lacking. without being requested to do so by the defendant and without any offer of
accept his bid or offer. "The owner of property offered for sale at auction Though both the offer and the acceptance existed, they did not meet to payment or compensation; that therefore there existed no legal relation
has the right to prescribe the manner, conditions and terms of sale, and give birth to a contract. whatever between the company and the plaintiff, and the defendant.
where these are reasonable and are made known to the buyer, they are
binding upon him, and he cannot acquire a title in opposition to them, and Before notice of acceptance, the offer may be revoked, and the Issue: WON there is a contract between Pomar and Perez
against the consent of the owner. The owner of property offered for sale revocation will have the effect of preventing the perfection of the
either at public or private auction has the right to prescribe the manner, contract, although it may not be known by the acceptant. Ruling:
conditions and terms of such sale. He may provide that all of the purchase Yes. Whether the service was solicited or offered, the fact remains that
price shall be paid at the time of the sale or any portion thereof, or that TRILLANA VS QUEZON COLLEGE Perez rendered to Pomar services as interpreter. As it does not appear
time will be given for the payment. The conditions of a public sale that he did this gratuitously, the duty is imposed upon the defendant,
announced by an auctioneer or the owner of the property at the time and FACTS: having accepted the benefit of the service, to pay a just compensation
place of the sale, are binding upon a purchaser, whether he knew them or therefore, by virtue of the innominate contract of facio ut des implicitly
not. (wala po talagang contracts sa full text, yan na po ang pinakamalapit Damasa Crisostomo subscribed 200 shares of capital stock with a par established.
na topic) value of P100 each through a letter sent to the Board of Trustees of the
Quezon College, enclosed with the letter are a sum of money as her initial
The obligations arising from this contract are reciprocal, and, apart from
payment and her assurance of full payment after she harvested fish.
the general provisions with respect to contracts and obligations, the
CASE NO. 41-GENON Damasa Crisostomo passed away. As no payment appears to have been
special provisions concerning contracts for lease of services are
LAUDICO VS. ARIAS RODRIGUEZ made on the subscription mentioned in the foregoing letter, the Quezon
applicable by analogy.
College, Inc. presented a claim before the CFI of Bulacan in her testate
FACTS: Defendant, Vicente Arias, who, with his codefendants, owned the proceeding, for the collection of the sum of P20, 000, representing the
building Nos. 205 to 221 on Carriedo Street, on his behalf and that of his value of the subscription to the capital stock of the Quezon College, Inc. In this special contract, as determined by article 1544 of the Civil Code,
co-owners, wrote a letter to the plaintiff, Mamerto Laudico, giving him an which was then opposed by the administrator of the estate. one of the parties undertakes to render the other a service for a price
option to lease the building to a third person, and transmitting to him for certain. The tacit agreement and consent of both parties with respect to
that purpose a tentative contract in writing containing the conditions upon ISSUE: the service rendered by the plaintiff, and the reciprocal benefits accruing to
which the proposed lease should be made. Later Mr. Laudico presented each, are the best evidence of the fact that there was an implied contract
his coplaintiff, Mr. Fred. M. Harden, as the party desiring to lease the Whether or not the condition entered into by both parties are valid. sufficient to create a legal bond, from which arose enforceable rights and
building. On one hand, other conditions were added to those originally obligations of a bilateral character.
contained in the tentative contract, and, on the other, counter-propositions RULING:
were made and explanations requested on certain points in order to make In contracts the will of the contracting parties is law. If it is a fact sufficiently
them clear. These negotiations were carried on by correspondence and No. In view of proposal of Damasa to pay value of subscription after he proven that the defendant, Pomar, on various occasions consented to
verbally at interviews held with Mr. Vicente Arias, no definite agreement has harvested fish is a condition obviously dependent upon her sole will accept an interpreter's services, rendered in his behalf and not
having been arrived at until the plaintiff, Mr. Laudico, finally wrote a letter and therefore void. gratuitously, it is but just that he should pay a reasonable remuneration
therefor, because it is a well-known principle of law that no one should be actual guardians, granted the prayers of the complaints of the two Supreme Court, the judgment of the lower court was affirmed by a
permitted to enrich himself to the damage of another. mortgagees, Perfecto Gabriel and the Santa Clara Monastery. decision promulgated November 16, 1925.

Garchitorena v Sotelo It is insisted by petitioner Gabriel that Gatchalian had no defense anyway In the meantime cadastral case No. 30 of the Province of Tarlac, was
against the complaints of foreclosure of mortgage and that his confession instituted, and on August 21, 1923, Eleuteria Macaraeg, as administratix of
Facts: The property involved in this litigation is the house and lot situate at of judgment was not only proper but commendable in the interest of a the estate of Vicente Macaraeg, filed claims for the parcels in question.
97 Sta. Potenciana Street, corner of Cabildo Street, Manila. Originally it prompt administration of justice. But Gatchalian was not sued in his Buenaventura Lavitoria, administrator of the estate of Juan Soriano, did
belonged to Asuncion Jarata, who mortgaged it to Perfecto Gabriel. The personal capacity; he was sued as guardian of the property of his wards. likewise and so did Sisenado Palarca. In a decision dated June 21, 1927,
latter foreclosed the mortgage and after buying the property at public And Gabriel, who sued him was his predecessor as guardian and was the the Court of First Instance, Judge Carballo presiding, rendered
auction transferred it to Carmen Garchitorena, who in turn transferred it to one who executed the Santa Clara mortgage on behalf of the minors. It judgment in favor of Palarca and ordered the registration of the land
Jesus Pellon in whose name the Torrens certificate of title now stands. had been his duty to preserve the estate of his wards. Moreover, he was in his name. Upon appeal to this court by the administrators of the estates
formerly the employer and legal counselor of Gatchalian. As the Court of of Juan Soriano and Vicenta Macaraeg, the judgment of the court below
This action was commenced on June 3, 1932, by Vicente Sotelo, as Appeals said, "that relation has exerted a predominating influence in was reversed and the land adjudicated to the two estates as conjugal;
judicial guardian of the eight minor children of Asuncion Jarata, against Gatchalian's mind." In no relation, except perhaps that of parent and child property of the deceased spouses
Perfecto Gabriel and Carmen Garchitorena to annul the judgment or husband and wife, are the elements of the confidence on one side and
obtained by Gabriel in the foreclosure of his mortgage and the subsequent active good faith on the other more essential than in the relation of Upon the return of the record to the Court of First Instance, the
transfers of the mortgaged property on the ground that said judgment had guardian and ward. The Government itself is in a sense the supreme administrators filed a motion asking that a writ of possession for the land
been obtained through fraud. Jesus Pellon was joined as party defendant guardian whom the individual guardian represents in its solicitude for the be issued in their favor and against Sisenado Palarca. Palarca opposed
after the property was transferred to him by Carmen Garchitorena welfare of the wards. (25 Am. Jur., Guardian and Ward, sec. 205, p. 128.) the motion on the ground that he could not legally be ejected until he had
subsequent to the commencement of the action. On January 31, 1936, the If Gabriel wanted to collect his mortgage and the minors had no defense been reimbursed for the consideration stated in the deed hereinbefore, the
trial court rendered judgment in favor of the plaintiff, ordering that the new against its foreclosure, so that a court action and a sheriff's sale would total amount of the reimbursement being P16,250.
title in the name of Jesus Pellon be canceled and replaced with a new one only entail unnecessary expense, honesty and fidelity to his trust required
in the name of the minors. From that decision Gabriel and Garchitorena of the guardian that he inform the court of the situation so that it could Issue: Whether the contention of Palarca is valid
appealed, but Pellon did not. On August 22, 1940, the Court of Appeals in authorize the sale of the property to best advantage and save something
banc, by a majority of nine justices (two justices dissenting), affirmed the for the minors. Ruling: No. The opposition of Palarca was overruled by the court, and the
judgment of the trial court with modification. motion of the administrators granted. We can find no error in the appealed
Under these circumstances, the agreement and the conduct of Gabriel orders. The appellant Palarca is a lawyer and is presumed to know the
The Court of Appeals found as a fact that Gabriel and Gatchalian agreed and Gatchalian in connection with the foreclosure proceeding cannot but law. He must, therefore, from the beginning, have been well aware of the
to take the property of the minors from the custody of the court by be considered a collusion between them to induce the court into entering defect in his title and is, consequently, a possessor in bad faith. In cases
foreclosing the mortgage on it so that Gabriel could buy the property at the judgment in favor of Gabriel without any trial and without giving the minors of judgment only the possessor in good faith may retain the land until the
sheriff's sale and later resell it to Gatchalian. Pursuant to that agreement affected an opportunity to protect their interests necessary expenses have been refunded (art. 453, Civil Code). The
Gatchalian entered a confession of judgment to the complaints files by appellant has been a possessor in bad faith for many years and is bound
Gabriel in his own behalf and in that of his principal, the Santa Clara 45. Lim to account for the fruits received and for those which the lawful possessor
Monastery; and it was in virtue of that confession of judgment that the Director of Lands vs Abagat and Palarca 1929 might have received (art. 455, Civil Code.) We may say further that, under
court, unaware of the agreement behind it between the former and the Contracts the circumstances of the case, we find if difficult to believe that the
actual guardians, granted the prayers of the complaints of the two appellant Palarca ever paid any part of the consideration stated in the
mortgagees, Perfecto Gabriel and the Santa Clara Monastery. Under Main Point: article 1308 of the Civil Code has no application to this case. deed executed in his favor by Juan Soriano, and there is room for more
these circumstances, the agreement and the conduct of Gabriel and (principle of mutuality) than a suspicion that the deed was purely fictitious.
Gatchalian in connection with the foreclosure proceeding cannot but be
considered a collusion between them to induce the court into entering Facts: The spouses, Juan Soriano and Vicenta Macaraeg, were the 46. Musa
judgment in favor of Gabriel without any trial and without giving the minors owners of twelve parcels of land. Vicenta Macaraeg died in November, A. MAGSAYSAY, INC. vs. CEBU PORTLAND CEMENT CO.
affected an opportunity to protect their interests. 1909, leaving a large number of collateral heirs but no descents. Litigation
between the surviving husband, Juan Soriano, and the heirs of Vicenta Facts:
Issue : Whether there was collusion between Gabriel and Gatchalian in Macaraeg immediately arose, and the herein appellant Sisenado Palarca The Cebu Portland Cement Co., is a government controlled corporation
the foreclosure suit instituted by the former against the latter? acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed for that desired to contract for the hauling of coal from its mines at Malangas,
the aforesaid twelve parcels of land in favor of Sisenado Palarca, and on Zamboanga to Bacnotan, and circularized to shipping companies an
Ruling : The Court of Appeals found as a fact that Gabriel and Gatchalian the following day, May 3, 1918, Palarca filed an application for the invitation to submit quotations until December 18, 1953. Mr. Roberto Ho,
agreed to take the property of the minors from the custody of the court by registration of the land described in the deed. After hearing, the Court of traffic manager of A. Magsaysay, Inc., a Philippine corporation, submitted
foreclosing the mortgage on it so that Gabriel could buy the property at the First Instance declared that the deed was invalid by virtue of the provisions a written proposal on behalf of said corporation containing prices, terms
sheriff's sale and later resell it to Gatchalian. Pursuant to that agreement of article 1459 of the Civil Code, which prohibits lawyers and solicitors and conditions. Three other companies also submitted quotations. Upon
Gatchalian entered a confession of judgment to the complaints files by from purchasing property or rights involved in any litigation in which representations by A. Magsaysay, Inc. that it had submitted the lowest
Gabriel in his own behalf and in that of his principal, the Santa Clara they may take part by virtue of their profession. The application for quotation, as confirmed by Mine Superintendent Norberto Gapud, the
Monastery; and it was in virtue of that confession of judgment that the registration was consequently denied, and upon appeal by Palarca to the Board cancelled the call for bids, and instead, adopted a resolution to the
court, unaware of the agreement behind it between the former and the effect that the management as it is hereby directed, to enter into a contract
with A. Magsayasy, Inc., for the transportation of coal from Malangas,
Zamboanga, to San Fernando, La Union by water, at the rate of P7.84 per
ton, for a total of 30,000 tons. The parties drafted a Charty Party
agreement.
However, the Board, instead of acting on the revised draft, approved a
new resolution revoking the previous resolution No. 417 (ante) and
directing the management to submit the matter anew “to public bidding
with such specifications as may be necessary, in order to place all bids on
equal footing.” Magsaysay, Inc. filed suit in the CFI Manila (alleging that a
contract had been perfected between it and the Cebu Portland Cement
Co. and that the latter ref used to comply with the same.
Issue:
Whether or not a contract was perfected between the parties.
Ruling:
No. While Article 1319 of the new Civil Code prescribes that “consent is
manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract” this rule does not apply
to a situation where one or both parties consider that the matters or
details, in addition to the subject matter and the consideration, should be
stipulated and agreed upon. The area of agreement must extend to all
points that the parties deem material or there is no contract.
That no final understanding was arrived at by the parties in the present
case is apparent from the fact that the final draft of the Charter Party
agreement was neither signed
nor even initialled by the parties before they separated. It is of course true
that if a definite agreement had been reached the contract would be
binding regardless of the lack of a written memorial; but the failure to sign
or initial the alleged draft of agreement, admittedly drawn up after
laborious discussion and bargaining, is circumstantial evidence that
neither party considered that a binding agreement had been attained.
47. Pan American World Airways, Inc. v. Rapadas (GR No. 60673, May
19 1992, 209 SCRA 67)
FACTS: While standing in line to board the flight at Guam airport,
Rapadas was ordered by petitioner's handcarry control agent to check-in
his attache case. Rapadas protested saying that other co-passengers
were permitted to handcarry bulkier baggages. Rapadas tried to fall in line
again but with the same agent, mandated him to check in such baggage.
He then gave his attache case to his brother who checked it in for him, but
without declaring its contents or the value of its contents, he was given a
Baggage Claim Tag. Upon arriving in Manila, Rapadas was given all his
checked-in baggages except the attache case. Since he felt ill, he sent his
son, Jorge Rapadas to request for the search of the missing luggage. The
petitioner exerted efforts to locate the luggage through the Pan American
World Airways-Manila International Airport (PAN AM-MIA) Baggage
Service. Thereafter, Rapadas personally followed up his claim. For several
times, he called up Mr. Panuelos, the head of the Baggage Section of
PAN AM. He also sent letters demanding and reminding the petitioner of
his claim. Rapadas received a letter from the petitioner's counsel offering
to settle the claim for the sum of $160.00 representing the petitioner's
alleged limit of liability for loss or damage to a passenger's personal
property under the contract of carriage between Rapadas and PAN AM. 48 PELAEZ
Rapadas refused to accept the settlement, hence, filed the instant action Philippine Commercial International Bank v. CA G.R. No. 97785
for damages. He alleged that PAN AM neglected its duty in the handling
and safekeeping of his attache case. He placed the value of the lost FACTS: Private respondent Lim delivered to his cousin Lim Ong Tian
attache case and its contents at US$42,403.90. PAN AM acknowledged PCIB Check in the amount of P200,000.00 for the purpose of obtaining a
responsibility for the loss of the attache case but asserted that the claim telegraphic transfer from petitioner PCIB in the same amount. The money
was subject to the "Notice of Baggage Liability Limitations" allegedly was to be transferred to Equitable Banking Corporation, Cagayan de Oro
attached to the passenger ticket. The lower court ruled in favor of Branch, and credited to private respondent’s account at the said bank.
Rapadas after finding no stipulation giving notice to the baggage liability When the checks were presented for payment, five of them bounced for
limitation. The CA affirmed the trial court decision. Hence, this petition. insufficiency of funds, while the remaining three were held overnight for
lack of funds upon presentment. Consequent to the dishonor of these
ISSUE: Whether a passenger is bound by the terms of a passenger ticket checks, Equitable Bank charged and collected the total amount of P1,
declaring the limitations of carrier’s liability 100.00 from private respondent.  The dishonor of the checks came to
private respondent’s attention only on April 2, 1986, when Equitable Bank
RULING: Yes. The Warsaw Convention provides that it is applicable to notified him of the penalty charges and after receiving letters from his
international carriage which it defines as follows: suppliers that his credit was being cut-off due to the dishonor of the
checks he issued.
For the purposes of this Convention, the expression "international
carriage" means any carriage in which, according to the agreement Aggrieved, private respondent demanded from petitioner PCIB that he be
between the parties, the place of departure and the place of destination, compensated for the resulting damage that he suffered due to petitioner’s
whether or not there be a breach in the carriage or a transhipment, are failure to make the timely transfer of funds which led to the dishonor of his
situated either within the territories of two High Contracting Parties or checks. PBIC mainly argues that even assuming that the disputed
within the territory of a single High Contracting Party if there is an agreed provision is a contract of adhesion, such fact alone does not make it
stopping place within the territory of another State, even if that State is not invalid because this type of contract is not absolutely prohibited. Petitioner
a High Contracting Party. Carriage between two points within the territory invoked the validity of the assailed provision found in the application
of a single High Contracting Party without an agreed stopping place within form/receipt exempting it from any liability in case of loss resulting from
the territory of another State is not international carriage for the purposes errors or delays in the transfer of funds. Petitioner mainly argues that even
of this Convention. assuming that the disputed provision is a contract of adhesion, such fact
alone does not make it invalid because this type of contract is not
Nowhere in the Warsaw Convention is such a detailed notice of baggage absolutely prohibited. Moreover, the terms thereof are expressed clearly,
liability limitations required. Nevertheless, it should become a common, leaving no room for doubt, and both contracting parties understood and
safe and practical custom among air carriers to indicate beforehand the had full knowledge of the same. Private respondent however contends
precise sums equivalent to those fixed by the Convention. The Convention that the agreement providing non-liability on petitioner’s part in case of
governs the availment of the liability limitations where the baggage check loss caused by errors or delays despite its recklessness and negligence is
is combined with or incorporated in the passenger ticket. In the case at void for being contrary to public policy and interest.
bar, the baggage check is combined with the passenger ticket in one
document of carriage. The passenger ticket provides a notice to the effect ISSUE: Whether or not PCIB is exempted from any liability
that, if the passenger's journey involves an ultimate destination or stop in notwithstanding its failure to discharge its obligation to transmit Lim’s
a country other than the country of departure, the Warsaw Convention telegraphic transfer on time in accordance with their agreement
may be applicable and that the Convention governs and in most cases
limits the liability of carriers for death or personal injury and in respect of RULING: NO. Any attempt to completely exempt one of the contracting
loss of or damage to baggage. parties from any liability in case of loss notwithstanding its bad faith, fault
or negligence, as in the instant case, cannot be sanctioned for being
What the petitioner is concerned about is whether or not the notice, which inimical to public interest and therefore contrary to public policy.
it did not fail to state in the plane ticket and which it deemed to have been Resultingly, there being no dispute that petitioner acted fraudulently and in
read and accepted by the private respondent will be considered by this bad faith. Freedom of contract is subject to the limitation that the
Court as adequate under the circumstances of this case. The Court finds agreement must not be against public policy and any agreement or
the provisions in the plane ticket sufficient to govern the limitations of contract made in violation of this rule is not binding and will not be
liabilities of the airline for loss of luggage. The passenger, upon enforced. The use of telegraphic transfers have now become
contracting with the airline and receiving the plane ticket, was expected to commonplace among businessmen because it facilitates commercial
be vigilant insofar as his luggage is concerned. If the passenger fails to transactions and any attempt to completely exempt one of the contracting
adduce evidence to overcome the stipulations, he cannot avoid the parties from any liability in case of loss notwithstanding its bad faith, fault
application of the liability limitations. or negligence cannot be sanctioned for being inimical to public interest
and therefore contrary to public policy.
 2. Whether the the defense of minority cannot anymore prosper due as it
49 REYES is barred by prescription
Aznar vs. Citibank CASE NO. 50 – SABTALUH 3. Whether the minors are entirely absolved from monetary
MERCADO AND MERCADO V. ESPIRITU responsibility.
FACTS: Petitioner Aznar was a holder of a Preferred Master Credit Card
(Mastercard) issued by Citibank with a credit limit of P150,000.00. Since Ruling:
he and his wife planned to take their two grandchildren on an Asian tour, FACTS: The case was about the contract made by Luis Espiritu (father of
he made a total advance deposit of P485,000.00 with Citibank with the Jose Espiritu, the defendant) and the heirs of his sister Margarita 1. No. The court ruled that in order to hold the infant liable the fraud
intention of increasing his credit limit to P635,000.00. However, he claims Mercado; The plaintiffs Domingo and Josefa Mercado assailed the validity must be actual and not constructive. It has been held that his mere
that when he presented his Mastercard in some establishments in of the deed of sale executed by them to their uncle on the ground that silence when making a contract as to his age does not constitute a
Malaysia, Singapore and Indonesia, the same was not honored. He tried they were minors when they executed it, that as a minor and after the fraud which can be made the basis of an action of deceit.
to use the same in Ingtan Agency to purchase plane tickets to Bali, but it execution of the deed and within legal period, can ask for the annulment of
was again dishonored for the reason that his card was blacklisted by the instrument executed by him, because of some defect that invalidates 2. No. The provisions of Article 1301 of the Civil Code are quoted to the
Citibank. Such dishonor forced him to buy the tickets in cash. He further the contract, in accordance with the law (Civ. Code, arts. 1263 and 1300), effect that "an action to annul a contract by reason of minority must be
claims that his humiliation caused by the denial of his card was so that he may obtain the restitution of the land sold. filed within 4 years" after the minor has reached majority age. The
aggravated when Ingtan Agency spoke of swindlers trying to use parties do not specify the exact date of Rodolfo's birth. It is undenied,
blacklisted cards. ISSUE: Whether or not the deed of sale is valid, when the minors however, that in October 1944, he was 18 years old. Based on such
presented themselves of legal age, at the time of the perfection of the datum, it should be held that in October 1947, he was 21 years old,
Aznar filed a complaint for damages against Citibank and presented a contract. and in October 1951, he was 25 years old. So that when this defense
computer print-out, denominated as Online Authorizations Foreign was interposed in June 1951, four years had not yet completely
Account Activity Report by Ingtan Agency which shows that his card in RULING: elapsed from October 1947.
question was “DECL OVERLIMIT” or declared over the limit. On the other
hand, Citibank denied the allegations and contended that under its Terms Yes. The courts, in their interpretation of the law, have laid down the rule Sidenote by SC: As a defense lang naman nila ginamit to excuse
and Conditions, Citibank is exempt from any liability for the dishonor of its that the sale of real estate, made by minors who pretend to be of legal them from liability and not basis for action so baka di pertinent.
cards by any merchant affiliate, and that its liability for any action or age, when in fact they are not, is valid, and they will not be permitted to
incident which may be brought against it in relation to the issuance and excuse themselves from the fulfillment of the obligations contracted by 3. No. The SC ruled that these minors may not be entirely absolved from
use of its credit cards is limited to ₱1,000.00 or the actual damage proven them, or to have them annulled in pursuance of the provisions of Law 6, monetary responsibility. In accordance with the provisions of the Civil
whichever is lesser. As a defense, it presented a Warning Cancellation title 19, of the 6th Partida; and the judgment that holds such a sale to be Code, even if their written contract is unenforceable because of non-
Bulletins which contained the list of its cancelled cards covering the period valid and absolves the purchaser from the complaint filed against him age, they shall make restitution to the extent that they may have
of Aznar’s trip. does not violate the laws relative to the sale of minors' property, nor the profited by the money they received. There is testimony that the funds
juridical rules established in consonance therewith. (Decisions of the delivered to them by Villa Abrille were used for their support during
The trial court dismissed the complaint. The motion for reconsideration supreme court of Spain, of April 27, 1860, July 11, 1868, and March 1, the Japanese occupation. Such being the case, it is but fair to hold
was granted and it was ruled that the fine prints in the flyer of the credit 1875.). that they had profited to the extent of the value of such money, which
card limiting the liability of the bank to P1,000.00 or the actual damage value has been authoritatively established in the so-called Ballantine
proven, whichever is lower, is a contract of adhesion which must be Salinas- 51. Braganza v. De Villa Abrille Schedule
interpreted against Citibank. However, upon appeal, the CA reversed the
trial court’s decision. Hence, this petition. Facts: Rosario L. de Braganza and her sons Rodolfo and Guillermo 52. SALVADOR
received from Villa Abrille, as a loan, on October 30, 1944 P70,000 in Contacts; Reuisites
ISSUE: Whether the agreement between the parties was a contract of Japanese war notes and in consideration thereof, promised in writing to Mendezona vs. Ozamiz, G.R. No. 143370, February 6. 2002, 426 Phil.
adhesion. pay him P10,000 "in legal currency of the P. I. two years after the 888, 905
cessation of the present hostilities or as soon as International Exchange
RULING: YES. The terms and conditions of Citibank’s Mastercard has been established in the Philippines", plus 2% per annum. Because Facts: Mendezona allege that they are the owners of three parcels of land
constitute a contract of adhesion. It is settled that contracts between payment had not been made, Villa Abrille sued them in March 1949. in Cebu City, the Deed of Sale thereto dated April 28, 1989 was executed
cardholders and the credit card companies are contracts of adhesion, so- Defendants claimed to have received P40,000 only—instead of P70,000 in their favor by Carmen Ozamiz for and in consideration of the sum of
called, because their terms are prepared by only one party while the other as plaintiff asserted. They also averred that Guillermo and Rodolfo were P1,040,000.00. However, Carmen Ozamiz was, starting on July 1987,
merely affixes his signature signifying his adhesion thereto. minors (Guillermo-16 and Rodolfo-18) when they signed the promissory allegedly became an invalid and “could no longer take care of herself or
note. Trial Court rendered a decision whereby petitioners were required manage her properties by reason of her failing health, weak ,mind and
While it is true that Citibank may have no control of all the actions of its solidarily to pay de Villa Abrille the sum of P10,000 plus 2% interest from absent-mindedness” as alleged in the special proceeding for guardianship
merchant affiliates, and should not be held liable therefor, it is incorrect to October 30, 1944 and Court of First Instance affirmed such decision. filed by her nephews 0n January 15, 1991.
give it blanket freedom from liability if its card is dishonored by any Comes now the instant petition.
merchant affiliate for any reason. Such phrase renders the statement The guardianship was granted and in the course of the inventory of
vague and as the said terms and conditions constitute a contract of Issues: Ozamiz's properties, the properties covered by the Deed of Sale were
adhesion, any ambiguity in its provisions must be construed against the 1. Whether there are false representation and fraud done by the Minors included as properties of Carmen. Hence, the petitioners filed a suit for
party who prepared the contract, in this case Citibank. by not disclosing their minority in the said promissory note quieting of titles. The lower court rendered judgment in favor of the
Mendezona. On appeal, however, the decision was reversed and the sells her land. Undue influence is not to be inferred from age, sickness, or MAIN POINT: A     contract of sale is born from the moment there is a
Deed of Sale considered to be simulated since the petitioners failed to debility of body, if sufficient intelligence remains. Petitioners never meeting of minds upon the thing which is the object of the contract and
establish payment and at the time of the execution of the contract, the rebutted the testimony of the notary public that he observed Gaudencia upon the price. This meeting of the minds speaks of the intent of the
mental faculties of Carmen were already seriously impaired. Hence, the still alert and sharp. parties in entering into the contract respecting the subject matter and the
petition for review on certiorari. consideration thereof. Thus, the elements of a contract of sale are
Issue: Whether the Court of Appeals erred in ruling that the Deed of Sale The requirements for undue influence to be established to justify consent, object, and price in money or its equivalent. Under Article 1330 of
was a simulated contract. the cancellation of an instrument, (1) a person who can be influenced; (2) the Civil Code, consent may be vitiated by any of the following: (a)
the fact that improper influence was exerted; and (3) submission to the mistake, (2) violence, (3) intimidation, (4) undue influence, and (5) fraud.
Ruling: No. Simulation is defined as the declaration of a fictitious will, overwhelming effect of such unlawful conduct. The presence of any of these vices renders the contract voidable.
deliberately made by agreement of the parties, in order to produce, for the
purposes of deception, the appearances of a juridical act which does not 54 TORIBIO
exist or is different from what that which was really executed.The KATIPUNAN v KATIPUNAN, JR. (2002)
requisites of simulation are: (a) an outward declaration of will different from Requisites of a Valid Contract : Valid Consent
the will of the parties; (b) the false appearance must have been intended Vitiation of consent through fraud Art 1332
by mutual agreement; and (c) the purpose is to deceive third persons. G.R. No. L-13403 March 23, 1960
None of these were clearly shown to exist in the case at bar. A simulated
contract cannot be inferred from the non-production of the checks. The
Deed of Sale, being a notarized document, has in its favor the FACTS: The case is a review to the validity of the Contract of Sale which
presumption of regularity and the burden of proof of irregularity is on the is entered by the respondent with the petitioners. The property involves a
persons alleging it. Whosoever alleges the fraud or invalidity of a notarized lot with 5-door apartment in Manila. The respondent was asked to sign
document has the burden of proving the same by evidence that is clear, documents which was explained to him as employment contracts which he
convincing and more than merely preponderant. The respondents failed to was assisted and facilitated by the petitioners but was apparently Deed of
do so. Absolute Sale and subsequently the title was transferred to the petitioners
Balguma as the supposed buyers.
In the case of Carmen’s mental capacity, it has been held that a person is
not incapacitated to contract merely because of advanced years or by The Balguma assumed and collected the rentals from the tenants since
reason of physical infirmities. Only when such age or infirmities impair her 1988 and was allegedly estopped since he did not protest. Also the
mental faculties to such extent as to prevent her from properly, petitioner in this case alleges there is a valid consent as there was
intelligently, and fairly protecting her property rights, is she considered signature and consideration was received. The respondent alleged that he
incapacitated.The respondents utterly failed to show adequate proof that was intimidated to sign the document and he was not aware of the nature
at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lost of the document to be a conveyance and sale. The intent was to sign an
control of her mental faculties. Hence, absent the showing that the Employment Contract as also explained by the petitioners to him which is
contract was simulated, the petition is deemed meritorious and the a clear manifestation of deceitful machinations.
decision of the trial court is deemed reinstated.
Case 53 – Tan The contention of this case is whether the parties contracting are all
Loyola vs. CA, 326 SCRA 285 (2000) capacitated and that the consent given was with the same intent to
dispose as written for a contract to be binding. It is also for the petitioners
Facts: A lot was originally owned by siblings Zarraga. Gaudencia was the to prove that the incompetence of the contracting party was answered in
only surviving sibling out of the 4. The respondents are all grandchildren of accordance with the requisites of the Law.
Gaudencia’s sister who took care of her before she passed because she
was single with no children of her own. 3 years prior to her death, ISSUE: Whether or not there was a valid consent secured from the
Gaudencia executed a deed of sale transferring the lot to them. However, contracting parties?
siblings Loyola, 1st cousins of respondents, assail the deed of sale as
simulated and that undue influence was present because they took RULING: NO. The respondent herein was evidently that which that law
advantage of Gaudencia’s reliance upon them. Gaudencia was 97 at the contemplates as INCOMPETENT being his mental state is that of a six
time of her death. years old child as attested by an expert witness. Therefore, according to
Art 1332 of the Civil Code, when the party cannot read or write or the
Issue: Whether undue influence was present? contract is not in the language he understands, the person enforcing it
must show that same terms are fully explained to the incompetent party. In
Ruling: No. To prove a confidential relationship from which undue the case at bar there was clear fraudulent acts with intimidation that is
influence may arise, the relationship must reflect a dominant, inflicted to secure the signature of the defendant and that his consent was
overmastering influence which controls over the dependent person. In the not an informed consent and no intent to enter in the contract of sale.
present case, petitioners failed to show that respondent used their aunt’s
reliance upon her to take advantage or dominate her and dictate that she