PAYMENT

SPECIAL FORMS OF PAYMENT:

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DATION IN PAYMENT (ART. 1245)
Article 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on sales.

- Is a special form of payment where the ownership of property is transferred to his creditor to pay a debt in money.

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APPLICATION OF PAYMENT (ARTICLE 1252)

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APPLICATION OF PAYMENT (ARTICLE 1252)

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APPLICATION OF PAYMENT (ARTICLE 1252)

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APPLICATION OF PAYMENT (ARTICLE 1252)

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APPLICATION OF PAYMENT (ARTICLE 1252)

Example 2: D owes C P7,000 due on July 1, 5 sacks of rice worth 5,000 due on July 8, and P5,000 due on July 8.

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PAYMENT BY CESSION (ARTICLE 1255)

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PAYMENT BY CESSION (ARTICLE 1255)
- The cession or assignment operates only to authorize the creditors to sell the debtors property, hence, ownership is not transferred to them. Unless agreed upon, the cession releases the debtor from responsibility only to the extent of the net proceeds of the things assigned.

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PAYMENT BY CESSION (ARTICLE 1255)

REQUISITES OF PAYMENT BY CESSION 1. There must be two or more creditors 2. The debtor is insolvent 3. The debtor abandons all his properties except those which are exempt from execution 4. The creditors accept the abandonment.

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PAYMENT BY CESSION (ARTICLE 1255)
Example: D owes X, P50,000; Y, P20,000; and Z, P30,000. All the obligations are due but D has assets worth P80,000 only. D offers to assign his assets to X, Y, and Z so that they may sell them and apply the proceeds of their respective claims. X, Y and Z accepted the offer. If the assets are sold for P70,000, then D will be released from his obligations only up to that amount, unless the creditors agreed to release him completely from his debts.

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PAYMENT BY CESSION AND DATION IN PAYMENT DISTINGUISHED
PAYMENT BY CESSION DATION IN PAYMENT 1. There must be two or more Plurality of creditors is not creditors required 1. The debtor is insolvent The debtor may not be insolvent 1. Affect all the debtors Does not affect all the debtors properties, except those properties exempt from execution 1. The creditors are authorized The creditor becomes the owner to sell only the debtors of the properties given as properties payments 1. The debtor is not released as The debtor is released as a rule a rule

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TENDER OF PAYMENT AND CONSIGNATION (ARTICLE 1256)

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TENDER OF PAYMENT AND CONSIGNATION (ARTICLE 1256)

EXAMPLE: D borrowed P50,000 from C. On due date, D tendered payment in P20.00 bills totalling P50,000 to C. C refused to accept the payment demanding that he be paid in higher denominations. Since the payment tendered by D was legal tender, C was not justified in refusing to accept it. D may thus consign the payment in court.

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TENDER OF PAYMENT AND CONSIGNATION (ARTICLE 1256) REQUISITES (STEPS) FOR TENDER OF PAYMENT AND CONSIGNATION TO EXTINGUISH THE OBLIGATION. 1. There must be a valid tender of payment. (1256) 2. The creditor refuses without just cause to the receive the payment 3. The persons interested in the fulfillment of the obligation must be notified of the debtors intention to deposit the sum payable to judicial authorities. 4. The sum or thing must be deposited with judicial autorities. 5. The persons interested must be notified of such deposit

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CONDONATION OR REMISSION (1270)

CONDONATION OR REMISSION, CONCEPT: Condonation or remission is a gratuitous abandonment by the creditor of his right. In plain language, this refers to the forgiveness of an indebtedness. To extinguish the obligation, it requires the debtors consent. (1270)

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CONFUSION OR MERGER OF RIGHTS

Article 1275. The obligation is extinguished from the time the characters of the creditor and debtors are merged in the same person.
Confusion or merger is the meeting in one person of the qualities of the character of creditor and debtor.

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CONFUSION OR MERGER OF RIGHTS Example: M makes a promissory note payable to P or order. P indorses the note to A, A then indorses to B, and B to C, and then C indorses it back to M. The obligation here is extinguished because M is now the creditor of himself.

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CONFUSION OR MERGER OF RIGHTS

....Reason or basis of confusion.... The law treats confusion or merger as a mode of extinguishing obligations because if the debtor is his own creditor, enforcement of the obligation becomes absurd since a person cannot claim payment from himself.

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CONFUSION OR MERGER OF RIGHTS ....Effect of merger when there is a guarantor... Article 1276. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Confusion which takes place in the person of any of the latter does not extinguish the obligation.

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CONFUSION OR MERGER OF RIGHTS ....Effect of merger when there is a guarantor...

1. Merger which takes place in the principal debtor or creditor benefits the guarantors. In this case, both the principal obligation and the guaranty are extinguished.

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CONFUSION OR MERGER OF RIGHTS ....Effect of merger when there is a guarantor... Example: M owes P 50,000. The debt which is evidenced by a negotiable promissory note is guaranteed by G. P indorses it to A, A to B, B to C, and C back to M. Ms debt is extinguished. Gs guaranty is likewise extinguished since the principal obligation is secures has been extinguished.

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CONFUSION OR MERGER OF RIGHTS ....Effect of merger when there is a guarantor...

2. Merger takes place in the person of the guarantor does not extinguish the obligation. Here, only the guaranty is extinguished

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CONFUSION OR MERGER OF RIGHTS ....Effect of merger when there is a guarantor... Example: What if in the preceding example, C indorses the note to G instead of M. Gs guaranty is extinguished because the qualities of debtor and creditor are merged in his person. However, Ms obligation is not extinguished. G as the new creditor may go after M.

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COMPENSATION
Article 1278. Compensation shall take place when two persons, in their own rights, are creditors and debtors of each other.

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COMPENSATION

Compensation, concept: Compensation is the extinguishment of the concurrent amount of debts of two persons who, in their own right, are reciprocally principal debtors and creditors of each other.

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COMPENSATION Example:
D owes C 100,000. C owes D 100,000. In this case, the parties do not need to pay each other as their obligations are extinguished by compensation.

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COMPENSATION

KINDS OF COMPENSATION

Artcle1281. Compensation may be total or partial. When the two debts are of the same amount, there is total compensation.

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COMPENSATION
KINDS OF COMPENSATION 1. As to the amount or extent a. Total When the debts are of the same amount b. Partial When the debts are of different amount

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COMPENSATION
KINDS OF COMPENSATION

2. As to cause or origin a. Legal This takes place by operation of law and extinguishes both the debts and the concurrent amount (Art. 1279), even though the debts are payable at different places (Art. 1286) and the creditors and debtors are not aware of the compensation. (Art. 1290)

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COMPENSATION
Requisites: (Art. 1279) 1. That each one of the obligors be bound principally, and he be at the same time a principal creditor of the other. 2. That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind, and also the same quality if the latter has been stated. 3. That the two debts are due 4. That they be liquidated and demandable. 5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

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COMPENSATION
KINDS OF COMPENSATION

b. Voluntary or conventional. This takes place by the agreement of the parties, such as when they agree to the compensation of debts which are not yet due. (Art. 1282)

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COMPENSATION
KINDS OF COMPENSATION

c. Judicial (Set-off) This compensation ordered by the court.

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COMPENSATION .... Compensation when one or both debts are rescissible or voidable... When one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided. (Art. 1284)

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COMPENSATION

..... Compensation when debt are payable at different places...

Compensation takes place by operation of law, even though the debts may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment. (Art. 1286)

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NOVATION

Article 1291. Obligations may be modified by: 1. Changing the object or principal obligations 2. Substituting the person of the debtor 3. Subrogating a third person in the rights of the creditor.

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NOVATION

NOVATION, CONCEPT: It is the modification or extinguishment of an obligation by another, either by changing the object or principal condition, substituting the person of the debtor, or subrogating a third person in the rights of the creditor.

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NOVATION

Novation is the total or partial extinction of an obligation through the creation of a new one which substitute it.

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NOVATION
Example: D owes C 20,000: 1. If the parties later agree that D should give instead a ring to C, there is novation by changing the object or prestation; 2. If the parties agreed that T shall take place of D as the new debtor, there is novation by substituting the person of the debtor; 3. If the parties later agree that X shall take place of C as the new creditor, there is novation by subrogating a third person in the rights of the creditor.

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NOVATION ....Requisites of novation.... Article 1292. In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligation be on every point incompatible with each other.

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NOVATION ....Requisites of novation....
1. The existence of a previous valid obligation. 2. The intention or agreement and capacity of the parties to extinguish or modify the obligation. 3. The extinguishment or modification of the obligation. 4. The creation or birth of a valid new obligation.

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NOVATION .....Effect if new obligation is void....

If the new obligation is void, the novation is void. In such case, the original one shall subsist, unless the parties intended that the former relation will be extinguished in any event. (Art. 1297)

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NOVATION ....Effect if the original obligation is voidable.... The novation is valid provided that annulment may be claimed only by the debtor or when ratification extinguishes acts which are voidable. (Art. 1298)

The novation here cures whatever defects present in the original obligation.

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NOVATION Example: D executed a promissory note for P100,000 representing the price of a car that C, by means of violence, sold to D. Later, when the violence has ceased, D proposes to C that he would give his ring instead of P100,000, C accepted that proposal.

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NOVATION ....Effect if the original obligation is subject to a suspensive or resolutory condition... The new obligation shall be subject to the same condition unless otherwise stipulated by the parties. (Art. 1299)

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NOVATION Example: D promised to give C a specific car if C finishes his degree in Accountancy with honors. Later, the parties agreed that D would give C a specific automatic watch instead of the car. Here, the obligation to give a specific watch is subject to the same condition that C must finish his Accountancy with honors, unless stipulated otherwise.

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OTHER CAUSES OF EXTINGUISHING AN OBLIGATION. Insolvency and bankruptcy of debtor. A debtor who is adjudged an insolvent and subsequently discharged by the court shall be released from the obligation of all debts. He may thereafter engage in business and acquire property without being liable for the satisifaction of his former debts. (See Sec. 17, Insolvency Law)

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Contract, Defined. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (Article 1305)

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ELEMENTS OF A CONTRACT: 1. ESSENTIAL ELEMENTS Those without which there will be no contract 1. Consent of the contracting parties 2. Object certain which is the subject matter of the contract 3. Cause of the obligation which must be established. (Art. 1318)

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ELEMENTS OF A CONTRACT:

2. NATURAL ELEMENTS Those found in certain contracts unless set aside or suppressed by the parties Example: warranty against eviction or warranty against hidden defects in a contract of sale). Art. 1547

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ELEMENTS OF A CONTRACT: 3. ACCIDENTAL ELEMENTS Those that refer to particular stipulations of the parties

Example: such as terms of payment, interest rate, place of payment.

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CLASSIFICATION OF CONTRACTS:
1. ACCORDING TO PERFECTION OR FORMATION
a. Consensual Those that are perfected by mere consent, e.g. sale and lease b. Real Those that are perfected by the delivery of the object of the contract, e.g. depositum, pledge, and commodatum) c. Formal or solemn Those which must be in the form provided by law for their perfection, e.g. donation of an immovable which, together with the acceptance by the done, must be in public instrument to be valid.

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CLASSIFICATION OF CONTRACTS:
2. ACCORDING TO CAUSE a. Onerous Those where there is an exchange of valuable consideration such as sale and barter. b. Gratuitous Those where one party receives no equivalent consideration such as donation. c. Remuneratory Those where the cause is the service or benefit remunerated. (Art. 1350)

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CLASSIFICATION OF CONTRACTS:
3. ACCORDING TO IMPORTANCE DEPENDENCE OF ONE UPON ANOTHER OR

a. Principal One that can stand by itself. b. Accessory One whose existence depends upon another contract such as pledge or mortgage which is dependent upon a principal contract such as loan) c. Preparatory One which serves as a means by which other contracts may be entered into such as agency and partnership.

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CLASSIFICATION OF CONTRACTS: 4. ACCORDING TO NAME OR DESIGNATION a. Nominate Those which have a name under the law. b. Innominate Those without a name under the law. 1.Do ut des (I give that you may give) 2. Do ut facias (I give that you may do) 3. Facio ut des (I do that you may give) 4. Facio ut facias (I do that you may do)

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CLASSIFICATION OF CONTRACTS: Rules that govern innominate contracts: 1. The stipulation of the parties; 2. The provisions of obligations and contracts; 3. The rules governing the most analogous nominate contract; and 4. The customs of the place. (Art. 1307)

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STAGES OF A CONTRACT:

1. Preparation or conception 2. Perfection or birth 3. Consummation or death or termination

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CHARACTERISTICS OF A CONTRACT:

1. Freedom or autonomy of contracts

The parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. (Art. 1306)

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CHARACTERISTICS OF A CONTRACT:
Law has been defined as a rule of conduct, just, obligatory, promulgated by legitimate authority, and of common observation and benefit. (1 Sanchez Roman 3) Morals deals with norms of good and right conduct evolved in a community. These norms may differ at different times and places and with each group of people.

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CHARACTERISTICS OF A CONTRACT: Customs consists of habits and practices which through long usage have been followed and enforced by society or some part of it as binding rules of conduct. Public policy is broader than public order, as the former may refer not only to public safety but also to considerations which are moved by the common good.

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CHARACTERISTICS OF A CONTRACT:

2. Obligatoriness of contracts
Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (Art. 1159, 1315)

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CHARACTERISTICS OF A CONTRACT: 3. Mutuality of contracts Art. 1308. The contracts must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. After a party has entered into a contract, he will not be permitted to renounce it unilaterally. If the fulfillment of the suspensive condition of an obligation depends upon the sole will of the debtor, the obligation and condition is void. (Art. 1182)

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CHARACTERISTICS OF A CONTRACT: 4. Relativity of contracts Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. (Art. 1311)

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CHARACTERISTICS OF A CONTRACT: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favour upon a third person. (Stipulation Pour Autrui);(Art. 1311)

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CHARACTERISTICS OF A CONTRACT: ....As a general rule.... Contracts take effect only between the contracting parties, their assigns and heirs. In other words, only the parties, their assigns and heirs can have rights and obligations under a contract.

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CHARACTERISTICS OF A CONTRACT:
Example:
D is indebted to C in the amount of P100,000. D and C are the parties to the contract.

If C dies, D must pay the heirs of C.

If C assigns his credit to X, then D liable to pay X. If D dies and Y is an heir, the Y assumes the obligation of D to C. Y is bound by the contract entered into by D, his predecessor in interest, in view of the privity of interest between him and D.

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REVIEW QUESTIONS:
1. What is the definition of a contract?

2. What are the elements of a contract?

3. What are characteristics of contract? the a

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CHARACTERISTICS OF A CONTRACT:
....WHEN A CONTRACT MAY BE ENFORCED BY OR AGAINST A THIRD PERSON....

A. Stipulation pour autrui.

Stipulation pour autrui is a stipulation in a contract clearly and deliberately conferring a favor upon a third person who has a right to demands its fulfillment, provided, he communicates his acceptance to the obligor before its revocation by the oblige or the original parties.

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CHARACTERISTICS OF A CONTRACT:
....WHEN A CONTRACT MAY BE ENFORCED BY OR AGAINST A THIRD PERSON....

Example:
D obtained a loan from C amounting to P100,000. The parties agreed that the loan shall bear an interest of 1% per month to be paid by D to X until the principal is paid in full. The stipulation for the payment of interest to X who is not a party to the contract is a stipulation pour autrui. X can sue on the contract although he is not a party if he does not receive the interest.

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CHARACTERISTICS OF A CONTRACT:
....WHEN A CONTRACT MAY BE ENFORCED BY OR AGAINST A THIRD PERSON....

B. When a third person induces another to violate his contract, in which case, such third person may be held liable for damages by the other contracting parties. (Art. 1314)

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CHARACTERISTICS OF A CONTRACT:
....WHEN A CONTRACT MAY BE ENFORCED BY OR AGAINST A THIRD PERSON....

Example:
D has a contract for 5 years with XYZ Broadcasting Company. During the second year of the contract, RST Radio Company, with knowledge of the existing contract between D and XYZ, induced D to sign a contract as radio talent of RST. XYZ may sue RST (and also D) for damages under the contract between D and XYZ although RST is not a party thereto.

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CHARACTERISTICS OF A CONTRACT:
....WHEN A CONTRACT MAY BE ENFORCED BY OR AGAINST A THIRD PERSON....

C. In contracts intended to defraud creditors, the law gives them protection. (Art. 1313) Example:

D owed C P100,000.00. To defraud C, D sold his only lot to X who knew of Ds fraudulent intent, i.e. in bad faith. Here, C may sue for the rescission of the sale between D and X although he was not a party to it.

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CHARACTERISTICS OF A CONTRACT: 5. Consensuality of contracts Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

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CHARACTERISTICS OF A CONTRACT:
Contracts are perfected by mere consent (Art. 1315) except in the following contracts which need to comply with additional requirements:
1. In real contracts such as deposit, pledge and commodatum, which are perfected upon the delivery of the object of the obligation. (1316) 2. In formal or solemn contracts, which are required to be in the form provided by law, to be perfected, such as the donation of an immovable which must be in public instrument together with the acceptance thereof, otherwise the contract is void.

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ESSENTIAL ELEMENTS OF A CONTRACT: CONSENT OF THE CONTRACTING PARTIES
Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitute a counter offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into the place where the offer was made.

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ESSENTIAL ELEMENTS OF A CONTRACT: CONSENT OF THE CONTRACTING PARTIES Consent is the conformity of wills and with respect to contracts; it is the agreement of the will of one contracting party with that of another or others, upon the object and terms of the contract. Offer is the proposal made by one party (offerer) to another to enter into a contract. It is more than an expression of desire or hope. It is really a promise to act or refrain on condition that the terms thereof are accepted by the person (offeree) to whom it is made.

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ESSENTIAL ELEMENTS OF A CONTRACT: CONSENT OF THE CONTRACTING PARTIES Acceptance is the manifestation by the offeree of this assent to the terms of the offer. Without acceptance, there can be no meeting of the minds between the parties (1305). A mere offer produces no obligation.

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ESSENTIAL ELEMENTS OF A CONTRACT:

RULES ON OFFER.
1. The offer must be certain. (Art. 1319) because there could be no meeting of minds if it is vague or not definite. Example:

If S who has several lots, offers his lot to B without designating which of the lots he is selling, the offer is not definite.

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ESSENTIAL ELEMENTS OF A CONTRACT: ....Nature of advertisements.... a. Business advertisements of things for sale are not definite offers, but mere invitations to make an offer unless it appears otherwise. (Art. 1325) Example:

An advertisement reads: For sale; residential house on a 250 square meter lot located at Green Valley for P2.5 M. Please call 928-3111.

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ESSENTIAL ELEMENTS OF A CONTRACT: Another example: An advertisement reads: For sale, 3 bedroom bungalow, on a 200 square meter lot located at No. 456 General Luna Road, Baguio City, for 4 M cash.

This is a definite offer because it contains all the matters required of a contract.

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ESSENTIAL ELEMENTS OF A CONTRACT: ....Nature of advertisements.... b. Advertisements for bidders are merely invitations to make proposals and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.

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ESSENTIAL ELEMENTS OF A CONTRACT: ....Nature of advertisements....
Example: Barrel Porks Company published an advertisement in the local newspapers which reads as follows INVITATION TO BID: Construction of two storey office located at 123 Batasan Center, Metro Manila. The advertisement also included the specifications of the proposed office to be constructed. Three companies submitted their bids: ABC Construction with a bid price of P4,000,000.00; DEF Company at P4,650,000.00; and XYZ Company for P5,000,000.00. After consideration of the financial capability and reputation of the three bidders, Barrel Porks chose DEF Company.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON OFFER:

2. An offer becomes ineffective upon the death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed. (Art. 1323)

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON OFFER: 3. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded on a consideration as something paid or promised. (Art. 1324)

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON OFFER: OPTION

Option is a contract whereby the offerer give the offeree a certain period to accept within which to buy or not to buy a certain object for a fixed price. It may or may not be for a valuable consideration.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON OFFER: ... Right of the offeror to withdraw the offer... a. If there is no consideration for the option, the offeror may withdraw the offer at anytime within the option period provided there has not yet been any acceptance.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON OFFER: ... Right of the offeror to withdraw the offer...

b. If there is a consideration, the offerer may not withdraw the offer within the option period. Otherwise, he will be liable for damages to the offeree for breach of contract.
Take note: In both cases, the option is extinguished upon the lapse of the period, unless in the meantime, the offeree has accepted the offer.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON OFFER: ... Right of the offeror to withdraw the offer...
Example: S promised to sell his car to B for P500,000.00 giving B thirty days to decide. B accepts the promise. S may withdraw his promise even before the lapse of the 30-day period by informing B of his withdrawal. However, if B had given to S option money of say P5,000. S cannot withdraw the offer before the lapse of the period because the option given to B was founded on a consideration.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON ACCEPTANCE:

1. Acceptance must be absolute. (Art. 1319) If the acceptance varies the offer, there is no contract since there is no meeting of minds.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON ACCEPTANCE:
a. If acceptance is qualified, it constitutes a counter offer; (Art. 1319) Example: S offers to sell his car for P200,000 to B. B accepts the offer but is willing to pay only P180,000. The acceptance by B is a qualified acceptance which constitutes a counter-offer. Accordingly, no contract is perfected. However, of S accepts the counter-offer, then there will be a perfected contract at the price of P180,000.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON ACCEPTANCE: b. If the offer fixes the time, place, and manner of acceptance, all must be complied with (Art. 1321) Otherwise, there will no meeting of minds.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON ACCEPTANCE: 2. Acceptance by a letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract in such a case is presumed to have been entered into the place where the offer was made. (Art. 1319)

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON ACCEPTANCE: 3. Acceptance may be express or implied (Art. 1320)

The acceptance is express if made orally or in writing. It is implied if it can be inferred from the conduct of the parties.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON ACCEPTANCE: Example: S offers to sell a kilo of his avocados to B for P50.00, and B, without saying anything to S, takes the avocados and begins to eat one and offers the rest to others, the B deemed to have impliedly accepted the offer of S.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

1. The parties must have the capacity to enter into a contract.

The following cannot give consent to a contract: a. Unemancipated minors Emancipation takes place by the attainment of the age of majority which is eighteen years. (Art 234, Family Code, as amended)

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

The following cannot give consent to a contract:

b. Insane or demented persons However, contracts entered into during lucid intervals are valid (Art. 1328)

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

Lucid interval refers to the period of temporary sanity of an insane person.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

The following cannot give consent to a contract:

c. Deaf mutes who do not know how to write A contract entered into by the above named persons is voidable (Art. 1390). However, when both parties are incapable of giving consent to a contract, the contract is unenforceable. (Art. 1403)

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

A voidable contract is one that is defective by reason of the incapacity or vitiated consent of one of the parties. It is binding unless unnulled by a proper action in court. It is susceptible to ratification. (Art. 1390)
Annulment is the action brought to set aside a voidable contract.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

2. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. (Art. 1328) This is so because consent given is such states is not freely and intelligently given.

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ESSENTIAL ELEMENTS OF A CONTRACT: RULES ON CONSENT:

3. A contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable. (Art. 1330). These five are referred to as the causes that vitiate consent or the VICES of consent.

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ESSENTIAL ELEMENTS OF A CONTRACT: ...When mistake will invalidate consent... a. If the mistake refers to the substance of the thing which is the object of the contract. (Art. 1331)
Example: If B(uyer) bought a lot on which he wanted to construct a factory believing that it was situated in an industrial area, he can have the contract annulled if the lot was actually situated in a residential area.

CONTRACTS
ESSENTIAL ELEMENTS OF A CONTRACT: ...When mistake will invalidate consent...
b. If the mistake refers to those conditions which have principally moved one or both parties to enter into a contract. (Art. 1331) Example: S sold his second hand car to B for P100,000.00 cash because he needed the money to settle his debt. The deed of sale signed by him showed, however, that the price would be paid in four equal instalments. S can have the sale annulled because of mistake as to the condition of the contract

CONTRACTS
ESSENTIAL ELEMENTS OF A CONTRACT: ...When mistake will invalidate consent...
c. If the mistake refers to the identity or qualifications of one of the parties if such identity or qualifications have been the principal cause of the contract. (Art. 1331) Example:

D donated a lot to Z believing that Z was his illegitimate son. D found out later that Z was not his son. The identity of Z was material to the contract, hence, D can have the contract annulled on the ground of mistake as to the identity of the donee (Z).

CONTRACTS
ESSENTIAL ELEMENTS OF A CONTRACT: ...When mistake will invalidate consent...
d. If the mistake refers to the legal effect of an agreement when the real purpose of the parties is frustrated and the same is mutual. Example:

S entered into a contract of sale with a right to repurchase believing that the contract had the same effect as a contract of loan or mortgage. The mistake here refers to the legal effect of their agreement. Each party may annul the contract on such ground.

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ESSENTIAL ELEMENTS OF A CONTRACT: ...When mistake will NOT invalidate consent...
a. If the mistake refers to a simple mistake of account which shall only be corrected. Example: If 10 books were sold at P678.50 each but the total price was shown at P6,875.00 instead of P6,785.00, the mistake in computation will not render the contract voidable but will only be corrected.

CONTRACTS
ESSENTIAL ELEMENTS OF A CONTRACT: ...When mistake will NOT invalidate consent...
b. If the party alleging it knew the doubt, contingency or risk affecting the object of the contract. (Art. 1333) Example: If B buys a brand new car stereo for P500.00 when he knows that the price of one is P5,000.00, he cannot allege mistake if the car stereo later turns out to be stolen. The fact that the car stereo was offered to him at a very low price should have put him on guard that it might have come from an illegal source.

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ESSENTIAL ELEMENTS OF A CONTRACT: ...When VIOLENCE will invalidate consent... There is violence when in order to wrest consent, serious or irresistible force is employed. (Art. 1335) Example: S signed a deed of sale his land to B because B twisted and threatened to break his arm if he refused to sign. Consent here is given because of violence.

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ESSENTIAL ELEMENTS OF A CONTRACT: ...When INTIMIDATION (Moral coercion) will invalidate consent... There is intimidation when one of the contracting parties is compelled by a reasonable and well grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descended or ascendants to give his consent. (Art. 1335)

CONTRACTS
ESSENTIAL ELEMENTS OF A CONTRACT: ...When INTIMIDATION (Moral coercion) will invalidate consent... Example:

If S signed the deed of sale because B pointed a gun on his head and threatened to shoot him if he did not sign the deed of sale, consent here is by reason of intimidation.

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ESSENTIAL ELEMENTS OF A CONTRACT: ...When UNDUE consent... INFLUENCE will invalidate

There is undue influence when person takes improper advantage of his power over the will of another, depriving the latter of reasonable freedom of choice (Art. 1337)

For it to be present, the influence exerted must have so overpowered or subjugated the mind of a contracting party as to destroy his free agency, making him express the will of another rather than his own.

CONTRACTS
ESSENTIAL ELEMENTS OF A CONTRACT: ...When UNDUE consent... INFLUENCE will invalidate

Example:
If a church minister improperly takes advantage of his power over a member of his congregation who regularly confides in him by persistently telling the member to sell his property to him, the contract if entered into will be voidable at the instance of the member on the ground of undue influence.

THAT IS FOR NOW MY DEAR STUDENTS...

With prayers, Apl