reviewer

This text discusses the essential elements of a valid contract, along with various factors that may
affect its validity or enforceability. The key points covered include:

1. Requisites of a Contract: A contract must have three essential elements:

o Consent: The agreement of the parties must be mutual, clear, and absolute.
o Object: The subject matter of the contract must be clear and specific.
o Cause: The reason or purpose of the contract must be legally valid.
2. Consent:
o Consent must be freely given, meaning it should not be influenced by factors like
mistake, violence, intimidation, undue influence, or fraud.
o If an offer is made and the acceptance is not absolute (e.g., with changes), it
becomes a counteroffer and consent is not established.
3. Mistake:
o A mistake of fact (e.g., misunderstanding the subject matter) can invalidate
consent.
o Mistakes involving identity or qualifications can also lead to annulment if they are
central to the contract.
o A mistake of account can be corrected, but it does not annul the contract.
4. Vices of Consent:
o Violence and Intimidation: If a party is forced to consent through serious
physical force or threats, the contract is voidable.
o Undue Influence: If one party takes advantage of a relationship of trust or power
to influence another, the consent is invalidated.
o Fraud: Fraud, such as false representations made to deceive another party, can
make a contract voidable.
o Duty to Disclose: Failure to disclose material facts, particularly in relationships of
trust, can lead to fraud.
5. Simulated Contracts:
o An absolutely simulated contract is one where the parties do not intend to be
bound at all (e.g., a fraudulent transaction to deceive creditors).
o A relatively simulated contract is one where the true intent is hidden, but the
apparent contract may still be considered valid under certain circumstances.

Reviewer: Contract Law – Object and Cause of Contracts

Object of Contracts

1. What may be the object of contracts?

o The object of a contract must be certain and legal. It can include things or services
that are within the commerce of man, such as tangible and intangible goods, and
services that are not contrary to law, morals, public order, or public policy.
2. When is an inheritance considered a future inheritance?
 o An inheritance is considered a future inheritance until the death of the benefactor.
A contract involving a future inheritance is void unless expressly authorized by
law.
3. When may the object of a contract be considered determinate?
o The object is determinate if it is clear enough that there is no doubt as to what is
being agreed upon. For example, if the object is a specific item, such as "the first
batch of lanzones from a five-hectare land," even if the quantity isn’t exactly
specified, the object is still determinate.
4. When may a thing have potential existence? Explain.
o A thing has potential existence if it is certain to come into being barring
unforeseen events, even if it does not yet exist. For example, mangoes from a
mango tree in the upcoming season, or milk from a cow in the next year, are
things with potential existence.
5. May things within the commerce of man cease to be so? Why?
o Yes, things that are within the commerce of man can cease to be so if they
become prohibited by law. For instance, slaughtering carabaos may be allowed in
the past but later prohibited by a local ordinance, making it outside the commerce
of man.
6. May an impossible service be the object of a contract? Why?
o No, an impossible service cannot be the object of a contract because if a service is
physically or legally impossible to perform, the contract would be void.
7. X owns a hectare lot planted with 300 lanzones trees, yielding about 900 baskets a
season. Two months before the next season, X enters into a contract of sale with Y
regarding the fruits of the next season. Is the object of the contract determinate?
Why?
o Yes, the object is determinate, as it specifies the fruits that will be harvested from
a definite piece of land, even though the quantity is not exactly determined at the
time of the contract.
8. X and Y are father and son. On January 15, 1984, Y enters into a contract with Z
whereby he sells a white racehorse which he alone will inherit in addition to other
properties of X. On January 20 of the same year, X dies. Discuss the effects of the
sale.
o The sale is void because the subject matter involves a future inheritance, which is
prohibited by law as an object of a contract.

Cause of Contracts

1. Cause of Contracts – Meaning and Importance

o The cause is the reason or consideration for which a party enters into a contract. It
must be in existence at the time of the contract. Without a valid cause, the
contract is null and void.
2. Types of Causes
o Onerous Contracts: Each party gives something in exchange, e.g., X sells land
for a certain price.
 o Remuneratory Contracts: The cause is a service or benefit that is paid or
remunerated.
o Gratuitous Contracts: The cause is based on liberality, with no expectation of
return, e.g., donating land to a poor community.
3. Motive vs. Cause
o Motive refers to the personal or subjective reason for entering a contract (e.g., the
buyer’s desire to gift the car to someone), while cause refers to the objective legal
reason for the contract (e.g., the sale price and the item being sold).
o Motive does not affect the validity of the contract unless it is illegal. An illegal
cause, however, renders the contract void.
4. Contracts without Cause or with Illegal Cause
o Contracts without a cause or with an illegal cause are void. Examples include
contracts to distribute contraband or engage in illegal activities like drug dealing.
5. Statement of a False Cause
o If the stated cause of the contract is false, the contract is void unless the party
enforcing the contract can prove a lawful and true cause exists.
6. Presumption of Consideration
o Contracts are presumed to have lawful consideration unless proven otherwise by
the debtor. For example, if a negotiable instrument is signed, it is presumed to
have been issued with lawful consideration unless the debtor can prove that it
wasn’t.
7. Lesion or Inadequacy of Cause
o The contract remains valid even if one party suffers a lesion (loss due to an unfair
price), unless fraud or undue influence is involved. For example, if a party sells a
property at a price much lower than market value without any deceit, the contract
is still valid, but if deceit is proven, the contract can be invalidated.
Reviewer on Form of Contracts:

1. Binding Nature of Contracts

Contracts are binding regardless of the form in which they are entered, as long as the essential
requisites for validity are present. These essential requisites are:

 Consent of the contracting parties

 Object certain, which is the subject of the contract
 Cause/consideration, which refers to the reason for the contract

2. When Form is Required for Validity

In certain cases, form is required by law for a contract to be valid or enforceable. Examples of
such requirements include:

 Written contracts or public instruments:

o Some contracts must be in writing to be valid, e.g., a guarantee of another's
debt must be in writing to be enforceable.
o Donations of real property must be executed in a public instrument to be valid.
 Form for Enforceability:
o Certain contracts must be written or recorded in a specific manner for them to be
enforceable, especially in cases covered by Statute of Frauds (Articles 1356–
1358 of the Civil Code).
 Form for Convenience:
o Even if a contract is valid, it may need to be rewritten or amended to meet legal
form requirements, such as being recorded in a public instrument for registration
purposes.

3. Remedy for Invalid Contract Due to Missing Form

If a contract is not in the required form (e.g., not in a public instrument), the interested party
can compel the other party to rewrite it in the proper form once the contract is perfected. This
remedy can be pursued simultaneously with an action on the contract.

Example:

 If a sale of land was made in an ordinary document but should have been in a public
instrument (according to the law), the buyer can compel the seller to execute a public
instrument to make the contract enforceable and registerable.

4. Public Instrument

A public instrument is a document that is acknowledged and sworn to by the parties before a
government official or notary public. These contracts are binding on the public and often
include acts related to real property, creation, modification, or termination of real rights over
immovable property.

5. Acts that Must Appear in a Public Instrument:

 Creation, transmission, modification, or extinction of real rights over immovable

property, such as land or buildings.
 Cessation, repudiation, or renunciation of hereditary rights (inheritance rights) or
conjugal partnership rights.
 Powers of administration or any act affecting third-party interests.
 Cessation of actions or rights, such as releasing a mortgage or canceling an
encumbrance.

6. Contracts Partly Written and Partly Oral

If a contract is partly written and partly oral, the oral parts are usually excluded from the
written document. Disputes regarding the oral agreement are typically not enforceable unless
the oral terms can be proven by other legal evidence.

Q AND A

1. How is consent manifested in contracts?

Consent in contracts is manifested through the offer made by one party and the acceptance of
that offer by the other party. It may be expressed either verbally or in writing and must be free,
clear, and informed, without any vitiating factors such as coercion or fraud.

2. What are the requisites of a contract?

The requisites of a contract are:

 Consent of the parties

 Object certain (the subject matter of the contract)
 Cause or consideration (the reason or value exchanged for the contract to be binding)

These elements are necessary for the contract to be valid and enforceable.

3. Generally, an offer may be revoked at any time before acceptance by the offeree. When
is the offeror precluded from revoking an offer?
An offeror may be precluded from revoking an offer when:

 The offer is irrevocable due to a binding option contract (where the offeror promises
not to revoke the offer for a specified period in exchange for a consideration).
 The offeree has started performance of the offer (in the case of unilateral contracts).
 The offer is made under a special condition or contract which prevents revocation.
4. When may an advertisement constitute a definite offer? Why?
An advertisement may constitute a definite offer when it:

 Specifies clear terms that can be accepted without further negotiation, such as offering a
reward for a certain action (e.g., "I will pay $100 to anyone who finds and returns my lost
dog").
 Indicates a promise that is binding on the advertiser, which creates a clear expectation
of performance.

In general, advertisements are usually considered invitations to treat rather than offers, but
when they contain definite terms, they can be viewed as offers.

5. What is a simulated contract?

A simulated contract is one where the parties create a contract that appears valid but is actually
intended to conceal the true nature of the agreement. The parties involved do not intend to be
bound by the terms stated in the contract.

6. Differentiate an absolutely simulated from a relatively simulated contract.

 Absolutely simulated contract: The contract is a complete sham. There is no actual

agreement or intention to create legal obligations. The contract is void because it lacks
the requisite intent to form a valid contract.
 Relatively simulated contract: The contract appears to be real but is intended to affect
only specific parties or serve a hidden purpose, such as evading taxes or debts. It is not
entirely void but may be voidable if its true purpose is revealed.

7. State three cases or circumstances that may induce a party to enter into a contract but
which the law does not consider as fraud?
The following circumstances may induce a party to enter into a contract, but they are not
considered fraud under the law:

 Misrepresentation made without intent to deceive or with no knowledge of its

falsehood.
 Concealment of facts that do not pertain to material issues.
 Puffing or exaggeration (e.g., advertising a product as the best in the market), which is
understood as an opinion rather than a factual claim.

8. What are the different kinds of frauds and explain each?

The two main types of fraud are:

 Fraud in the inducement: When one party is misled into entering a contract by
fraudulent representations about the subject matter, which directly impacts the consent of
the party entering the contract.
 Fraud in the execution: When a party is deceived about the nature of the document they
are signing, and they are unaware that it is a contract or that it contains certain terms.
9. ABC Manufacturing Corporation advertised its detergent soap as "washes clothes
doubly clean." X, relying on the representation of the Corporation, bought several bars of
soap and discovers that the advertisement is not true. Can he ask for annulment of the
contract by reason of fraudulent representation? Why?
Yes, X may ask for annulment of the contract because the advertisement constitutes
fraudulent misrepresentation. Since X relied on the false advertisement (which is a material
misrepresentation), it vitiates consent, and X can seek to annul the contract based on fraud.

10. X is indebted to Y in the amount of ₱25,000.00. In order to escape payment of his debt
to Y, he sold his only passenger jeepney to his brother-in-law Z. State whether the contract
is absolute or relative simulation. Why?
The contract between X and Z is a relative simulation because it appears to be a genuine sale
but is made to evade X's debt to Y. The real intent is to conceal the property transfer to prevent Y
from claiming the debt. This contract may be voidable under the law if it is proven that it was
made with the intent to defraud creditors.

What may be the object of contracts?

The object of contracts may be either a thing, a service, or a right that is capable of being the
subject of a contract, provided it is possible, lawful, and determined or determinable.

2. The law prohibits future inheritance to be an object of a contract. When is an

inheritance considered as future inheritance?
An inheritance is considered as future inheritance when it pertains to property that a person
has not yet inherited or does not yet have a vested right in, such as an estate that may be
inherited after the death of the current owner.

3. When may the object of a contract be considered as determinate?

The object of a contract is considered determinate when it is specific and identifiable, meaning
that the subject matter is clearly defined, and the parties can identify it without ambiguity.

4. When may a thing have potential existence? Explain.

A thing may have potential existence if it is something that does not yet exist but is capable of
coming into existence in the future, such as crops that have not yet been harvested or goods
that have not yet been produced but are likely to be in the future.

5. May things which are within the commerce of man cease to be so? Why?
Yes, things within the commerce of man may cease to be so if they become legally or physically
impossible to transfer or if they are prohibited by law from being owned or transferred (e.g.,
illegal substances, public property).

6. May an impossible service be the object of a contract? Why?

No, an impossible service cannot be the object of a contract because the law requires that the
object or service must be possible to perform. If the service is impossible, the contract is
considered void.
7. X owns a hectare lot planted with 300 lanzones trees which yield about 900 baskets a
season. Two months before the next season, he enters into a contract of sale with Y
regarding the fruits it may yield in the next season. Is the object of the contract
determinate? Why?
The object is determinate because it refers to the fruits of the lanzones trees, which are
identifiable once the season arrives. Even though it is a future event, the object is still
determinable by the specific trees and expected yield.

8. X and Y are father and son. On January 15, 1984, Y enters into a contract with Z
whereby he sells a white race horse which he alone will inherit in addition to the other
properties of X. On January 20 the same year, X dies. Discuss the effects of the sale.
The contract is void because Y could not sell an inheritance that he did not yet possess, as the
sale concerned future inheritance. Since X died after the contract was made, Y cannot transfer
ownership of the horse until he legally inherits it.

Cause of Contract (summarized)

The cause of a contract is the reason or consideration that motivates the parties to enter into the
agreement. It must be lawful, possible, and determined. If the cause is illegal or impossible, the
contract is void.

 What is meant by cause or consideration?

 Cause or consideration is the reason or value exchanged in a contract, making the

agreement binding.

 Differentiate motives in contract from causes in contracts?

 Motives: Personal reasons for entering into a contract, not legally significant.
 Causes: Legal and actual reasons for entering a contract, making the contract
enforceable.

 What is the presumption on the existence of a cause?

 It is presumed that every contract has a valid cause, unless proven otherwise.

 How is a gratuitous cause distinguished from an onerous cause?

 Gratuitous cause: No exchange or compensation (e.g., a gift).

 Onerous cause: Involves exchange of value (e.g., sale).

 May lesion or inadequacy cause invalidate a contract? Why?

  Lesion (undervaluation) does not automatically invalidate a contract, unless it involves
fraud or is unconscionable.

 When is the cause of the contract considered unlawful?

 When it involves illegal activities, such as contracts for illegal acts or immoral purposes.

 X, a Visayan resident, is the owner of a 200-square-meter lot in Tagaytay City. Due to

false information from Y, he (X) entered into a contract with Y selling the land at ₱200 per
square meter when the market value of the same is ₱500 per square meter. Is the contract
valid? Why?

 The contract is voidable due to fraud (false information about the price).

 X signs a contract that he sold and delivered a Betamax to Y for ₱10,000.00, which the
latter paid in cash. X did this actually to place the Betamax beyond the reach of his creditor
Z, and as a matter of fact, he did not receive the amount of ₱10,000.00. Can the contract be
enforced? Reason.

 The contract is voidable due to fraudulent intent to evade creditors, making it

unenforceable.

CHAPT 4 Q AND A

 Does the law require a form in order that a contract may be valid or enforceable?
Explain.

 Yes, the law requires certain contracts to be in a specific form (written or public
instrument) for validity or enforceability, such as real property transactions or surety
agreements.

 What are the acts and contracts which must appear in a public instrument?

 Contracts involving real rights over immovable property, donations of real property,
contracts of surety, and powers of attorney related to property administration must appear
in a public instrument.

 What are some of the real rights that affect an immovable property?

 Examples include ownership, possession, mortgage, easements, and usufruct.

 When may a party to the contract which is not in the required form demand for the
observance of the required form from the other party?
  The party can demand the proper form once the contract has been perfected but is not in
the required form, as the law allows the contract to be formalized through a public
instrument or correction.

 X mortgaged a piece of land to Y, which was written in a private instrument. When Y

sought registration of the instrument, the Registry of Deeds refused to register the same
because it is not in the proper form. What is the remedy of Y? Reason.

 Y can compel X to execute the mortgage in the proper form (public instrument) to be
valid for registration, as the law requires certain contracts to be in public form to be
enforceable against third parties.

 X and Y are husband and wife whose conjugal partnership of gains stands to a net
worth of ₱500,000.00. In order to show his affection to his wife, Y executed a private
writing clearly repudiating and renouncing his share to the partnership. Is the repudiation
in the form required by law? Why?

 No, the repudiation is not in the required form. A renunciation of conjugal partnership
must be in a public instrument to be valid.