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Chapter I – General Provisions
TI TLE I I CHAPTER I I ESSENTI ALREQU QUI SI TESOFCONTRACTS SECTI ON 1.-CONSENT ( Ar t i c l e s13181346)
1. What is consent? How is it manifested? In other words, how do we know that there has already been consent to a contract? As defined defined nder nder Article 1319, consent is manifested by the meetin! of the offer and the acceptance pon the thin! and the case which are to constitte the contract"
2.
What is an #$$%&? (Article 1319)
An #$$%& #$$%& is a propos proposal al made by one party party to another another to enter enter into into a contract"
'o be valid, the offer mst mst be certain certain or definite definite with respect to the ob(ect and and cas casee of the the cont contra ract ct,, and and othe otherr circ circmst mstan ance cess that that the the offe offero rorr deem deemss convenient nder the contract" told *en that she she was willin! willin! to sell her her +- Example of a valid offer: )elina told model 'oyota 'oyota Altis Altis Car .#*/%C'0 to him for P-"12 cash .CA3)%0" .CA3)%0" In addition, )elina told *en that he mst accept her offer personally on $ebrary 4, +-before 15 o6clock P"2" at her office at &oom +4, &C*C *ildin!, 2akati City .time, place and manner of acceptance as provided nder Art. 13210.
3.
What is an ACC%P'A7C%? (Article 1319)
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An ACC%P'A7C% ACC%P'A7C% is the e8pression by the offeree offeree of his a!reement to the terms of the offer made by the offeror" offeror" 'o prodce prodce consent or meetin! meetin! of the minds, minds, the acceptance acceptance mst be absolte or n9alified .withot any conditions0" It mst be identical in all aspects to the offer" $ebraryy 4, +-+-- at Example of a valid acceptance to the offer above: #n $ebrar :5; o6clock P"2", *en went to the office of )elina in 2akati and si!nified his willin!ness to by )elina6s )elin a6s 'oyota 'oyota Altis for P-"12 cash" Here, a contract of sale is perfected"
A contract of sale is not perfected because the acceptance is ualified: #n $ebrary 4, +-- at :5; o6clock P"2", *en went to the office of )elina in 2akati and si!nified his willin!ness to by )elina6s 'oyota Altis for P-"12 payable in : e9al monthly installmen installments" ts" Here, the acceptance acceptance is 9alified .conditiona .conditional0, l0, and no contract of sale is perfected" perfected" *y !ivin! a 9alified 9alified acceptance, acceptance, it is as if *en is makin! a conter
4.
What are the cases which render an offer ineffective?
(a) When the offeror withdraws his offer before its acceptance by the offeree, the offer becomes ineffective" (Art. 1319) (b) When the offeree makes a 9alified acceptance of the offer as discssed above" (Art. 1319) interdiction, n, insanity, insanity, or insolvency insolvency of either either party (c) 3pon the death, civil interdictio before acceptance is conveyed" (Art. 1323) Example: !f an" one of the parties parties die after an an offer is made but before the offeree could conve" his acceptance, the offer becomes ineffective and +--, )onia sent *art a letter offerin! no contract is perfected. #n /anary -1, +--,
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to sell her car to *art for P;2" #n /anary -=, +--, *art received the letter" #n /anary ->, *art mailed his letter of acceptance of the offer to )onia" #n /anary -, *art died in a bs bombin! incident in 2akati" #n /anary +, )onia received the letter of acceptance"
#uestion: Was there a perfected contract of sale? If *art left a son as sole heir, can his son demand from )onia the delivery of the car? Ans$er: %&. In this case, it cannot be denied that *art received the letter of )onia re!ardin! the offer, and was able to si!nify and mail his letter of acceptance to the offer on /anary -> before he died" However, before )onia cold receive the letter of acceptance, *art had already died in the bombin! accident" Article 1323 re9ires that both parties mst be alive at the time the offer is made as well as at the time the acceptance to the offer is conveyed .made known0 to the offeror" 'herefore, since *art was already dead at the time )onia received his letter of acceptance .i.e., before the acceptance was conveyed0, no acceptance is deemed to have been made, and no contract is perfected" *art6s son, as heir to one of the contractin! parties .nder the principle of relativity 0 cannot then compel )onia to deliver the car" 'emember aain : !f no contract is perfected, no rihts and obliations $ill arise. efore "ou determine the rihts and liabilities of the parties to a contract, "ou have to ma*e sure first that a contract $as indeed perfected. If *art had died on /anary +-, the contract wold have been perfected, and *art6s son as heir .nder the principle of relativity of contracts0 wold have had the ri!ht to enforce the contract after payment of the P;2 prchase price which was the obli!ation of *art nder the contract of sale"
(d) 3pon e8piration of the period fi8ed in the offer for acceptance" Article 132+ states that 5 A'-. 132+. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by commnicatin! sch withdrawal, except when the option is fonded pon a consideration, as somethin! paid or promised" .emphasis supplied) Example: -he eneral rule is that an offer ma" be $ithdra$n b" the offeror at an" time before acceptance is conve"ed b" the offeree. #n $ebrary -,
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+--, 2ario promised to sell his Harley @avidson bi! bike to )hiela for the contract price of P12" )ince )hiela coldn6t make p her mind, 2ario !ave her -1 days .ntil $ebrary -40 within which to decide whether she will by the bike" #n $ebrary -1, /ames went to 2ario and offered to by the bi! bike for P4"12" *ecase the price offer was hi!her, 2ario sold the bi! bike to /ames and informed )hiela abot it" )hiela, however, informed 2ario that she was abot to see him and she already had the P12 ready" )he states that 2ario cannot offer the bike to another byer becase the -1
#uestion %o. 1: Was there a perfected contract of sale between 2ario and )hiela? Can )hiela demand for the delivery of the bike? Ans$er: Article 132+ states that before acceptance is conveyed, the offeror may withdraw his offer by notifyin! the offeree even if the period to accept !iven to the offeree had not yet elapsed" We then follow the !eneral rle that the offer may be withdrawn at any time before its acceptance" Hence, )hiela cannot demand for the delivery of the bike becase 2ario withdrew the offer before she cold convey her acceptance to it" #uestion %o. 2: et s assme that in the above e8ample )hiela paid 2ario a consideration of P1, for !ivin! her the -1
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-" +"
C#7)%7' – 2ario and )hiela a!reed" #*/%C' – 'he Boption period”, or the -1
'emember: If )hiela decides to by the bike and !oes to 2ario on $ebrary -1, +--, which is before $ebrary -4, +--, it is only at this time that a contract is perfected" 'his is becase it is only on this day, $ebrary -1, that )hiela si!nified her acceptance to the offer of 2ario" 'emember also: If )hiela decides to by the bike and !oes to 2ario on $ebrary -=, +--, which is after $ebrary -4, +--, 2ario can already refse to sell the bike to her as the -1
5. Who are are the persons who are incapacitated .do not have le!al capacity0 to !ive valid consent to contracts? A.2inors /Art. 1320(1)
A minor refers to a person who has not yet reached the a!e of ma(ority .-> years old0" A minor is incapacitated to validly enter into a contract"
B.Insane or demented persons /Art. 1320(2)
Altho!h insane or demented persons cannot validly enter into a contract, the contract is valid if entered into by the insane person drin! a lcid interval" (Art. 132)
A lucid interval is a temporary period of sanity"
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'he party who intends to enforce a contract entered into by an insane or demented person drin! a lcid interval 23)' P&#D% that at the time the contract was entered into by the insane person, there was a fll retrn of the mind to sanity as to enable him to nderstand the contract he is enterin! into"
C.@eaf
A deaf
D.Persons in a state of drnkenness or nder a hypnotic spell" (Art. 132)
'hese conditions are e9ivalent to temporary sanity and ths impair the capacity of a person to !ive intelli!ent consent" Hence, persons in a state of drnkenness or nder a hypnotic spell are incapacitated to enter into a contract"
6. Contracts entered into by persons who are incapacitated are 7#' D#I@" 'hey are merely D#I@A*% (Article 1394). If a contract is merely voidable, its provisions can be le!ally enforced by the contractin! parties thereto if the incapacitated party does not choose to annl the contract" #n the other hand, if a contract is void, it can never be enforced even if the parties thereto a!ree to its enforcement"
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A void contract can never be enforced. A a!reed to work for and to be paid a salary which is less than the minimm wa!e" 'his a!reement with respect to the compensation packa!e is contrary to abor aws" Hence, even if A a!reed to the salary rate in his contract with , it is void and will not be enforced" will still be compelled to pay A the minimm wa!e prescribed by law" A voidable contract is valid and bindin until it is declared ineffective in an action for annulment filed b" the incapacitated in court. A, a minor, entered into a contract of sale with who knew the stats of A. When A reaches the a!e of ma(ority, he has the option to ratify the contract .i.e., to permit the contract to be enforced a!ainst him0 or to file an action in cort for the annlment of the contract" If A proves that he was incapacitated at the time the contract of sale was perfected, then the cort will annl the sale and declare it ineffective"
7. What is the reason for the dis9alification of the persons enmerated in Article 1320 and Article 132 to enter into a contract?
'he reason behind Article 1320 and Article 132 is that those persons mentioned can easily be the victims of frad as they are not capable of nderstandin! or knowin! the natre and conse9ences of their actions" 'hey can, however, enter into a contract if they are assisted by a parent or a le!al !ardian"
'emember: 'he incapacity of a person to enter into a contract is determined at the sta!e of perfection or birth of a contract" In other words, if one of the contractin! parties was incapacitated at the time of conception, bt attained capacity already at the sta!e of the perfection of the contract, the contract is not defective" In the same manner, if the contractin! party became incapacitated only at the sta!e of the consummation of the contract, the contract is also not defective" !f one of the contractin parties became incapacitated onl" at the stae of consummation of the contract, the contract is not defective. 5 is an insane person who leaves home only drin! re!lar check<ps with the psychiatrist" A nmber of times, however, he still e8periences lucid intervals when he is in his
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ri!ht senses" In one of his lcid intervals on $ebrary :, +--, 5 promised to sell his - s9are
#uestion: Was there a perfected contract of sale between 5 and 67 Can 6 demand for the delivery of the lot as a!reed pon? Ans$er: %)" While 5 was insane at the time of the consmmation of the contract when delivery was already bein! demanded, 5 was in a lcid interval when he a!reed to sell his lot to 6. 3nder Article 132, contracts entered into drin! a lcid interval are valid" 'herefore, 6 can demand for the delivery of the lot" If 5 cannot deliver, 6 may ask the parent or le!al !ardian of 5 to effect the delivery" 'emember: $rom the facts above, yo can assme that the parents, children or !ardian of 5 may file an action for annlment of the contract claimin! that the contract is voidable and shold be annlled becase 5 was insane at the time the contract was entered into" If 6 wants to enforce the contract of sale, 6 mst prove before the cort that 5 was in a lcid interval at the time the sale was perfected" If 6 sccessflly proves this fact, the contract will be enforced" *t if 6 fails to prove 58s capacity at the time of the sale, the contract will be annlled or set aside by the cort for bein! defective de to the incapacity of 5.
.)ee also the discssion in %o. (b) above"0
8.
What are the five .10 vices of consent?
Aside from incapacity, the followin! are the cases that vitiate consent or make the consent defective 5
A. . 6. 5. E.
%rror or mistake (Article 1331) Diolence or force (Article 133) Intimidation or threat or dress (Article 133) 3nde inflence (Article 1330) and $rad or deceit (Article 133)
Chapter I – General Provisions
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What is mistake? When does mistake vitiate consent in a contract?
2istake or error is the false belief of a thin! or a fact which is material to the contract" In other words, an erroneos belief of a thin! or fact is what convinces a party to enter into a contract" In sch a case, after the mistake is discovered, the in(red party can !o to cort and ask the cort for annlment of the contract"
'o be sfficient to vitiate consent, the mistake mst refer either to 5 (a) the sbstance of the thin! which is the ob(ect of the contractF (Article 1333, par. 1) Example A: wanted to by a female pi! for breedin! in his pi!!ery bsiness" All his female pi!s were already old and barren" ; a!reed to sell to his female pi! which was known to !ive birth to at least > pi!lets everytime" After ; delivered the pi! and paid the prchase price for it, bro!ht the pi! to the veterinarian for check<p" 'he veterinarian, however, informed that the pi! was already barren" At the time of the sale, ; did not know that the pi! was already barren as it had (st !iven birth to healthy pi!lets ; months a!o" #uestion: 2ay file an action for annlment of the contract of sale becase of mistake? Ans$er: %)" In this case, ; was of the mistaken belief that her female pi! was still fertile" #n the other hand, , who wanted a breedin! pi! bo!ht the pi! becase ; advised that the pi! was still fertile" 'here is here a mistake as to the sbstance of the thin! which is the ob(ect of the contract" Hence, can file an action for annlment of the contract of sale becase he will have no se for a barren pi! in his pi!!ery bsiness"
(b) those conditions which have principally moved one or both parties to enter into the contractF (Article 1333, par. 1) Example : - was lookin! for a place to rent which was near an olympic sie pool where his son can train everyday in preparation for the #lympics" & offered to rent ot his townhose to - for a monthly rental of P-1," &
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told - that there was an olympic sie pool (st + meters away from his townhose" *ecase of this, - a!reed to rent the townhose and !ave & two months advance rentals" However, before - and his family cold move in to the townhose, they discovered that the olympic sie pool had been sold by the previos owner and the new owner wold not allow pblic se of the pool as before" & was not aware of this fact"
#uestion: 2ay - file an action for annlment of the contract of lease becase of mistake" Ans$er: %)" In this case, & was of the mistaken belief that the olympic sie pool near her townhose was still open for swimmin! to the pblic" #n the basis of this belief, & told - that his son cold train in the pool everyday" 'his is the reason why - rented the hose of &. )ince it trns ot that the reason why - is rentin! the place is not tre, then - can have the contract of lease annlled in cort on the !rond of mistake or error.
(c) the identity or 9alifications of one of the parties provided the same was the principal case of the contractF (Article 1333, par. 2) Example 6:
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@ennis was so happy that he donated his car to aren on the very same day that they were introdced" After the @7A reslts, however, were released, it was fond that aren was the wron! woman"
#uestion: Can @ennis file an action for annlment of the contract of donation becase of mistake as to the identity of aren7 Ans$er: %)" 'his time, the mistaken belief of @ennis with respect to the identity of aren is very material to the contract" 'he real reason why @ennis donated the property to aren is becase he really tho!ht that aren was his half
(d) an e8csable mistake .i.e., a mistake not cased by the ne!li!ence of the party0" 3nder Article 1333, “there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.” Example E: 'iny lives in a hose and lot in 2akati which she inherited from her father" #n $ebrary :, +--, 'iny6s 3ncle @a!l .brother of his father0 filed an action in cort for “recovery of the ownership” of the hose and lot" @a!l states that the hose and lot was sold to him by his brother when he was still alive" 'iny did not want to believe her ncle" )he had the spport of her best friend 2edin! who even offered to by the hose and lot for P12" 'iny a!reed to sell the hose and lot and 2edin! eventally occpied the property" ater on, the cort hearin! the case rendered (d!ment declarin! @a!l the ri!htfl owner of the hose and lot" #uestion: Can 2edin! file an action for annlment of the contract of sale on the !rond of mistake? Ans$er: 2edin! here honestly believed that her best friend 'iny was the real owner of the lot havin! inherited it from her father" 2edin! also honestly believed that @a!l had no ri!ht to the property" However, 2edin! was also aware that a case for recovery of the ownership of the land was pendin! between 'iny and @a!l" )ince the cort rled in favor of @a!l, it appears that 2edin! has no ri!ht over the property becase the seller 'iny had no ri!ht to sell it" 2edin!6s remedy is not to file an action for annlment of the
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contract of sale bt to enforce the contract by filin! an action for dama!es a!ainst 'iny"
10. If mistake or frad is claimed as the reason or !rond for filin! an action for annlment, who will prove that there was mistake or frad?
'he !eneral rle is, he who alle!es frad or mistake mst prove the same"
When a person si!ns a docment, it is presmed that he si!ned the docment with fll knowled!e of its contents" 'hat is why, if he shold later on file an action for annlment of the contract claimin! that there was mistake or frad, he will have the dty to prove the facts which amont to mistake and frad, and which made his consent to the contract defective"
Article 1332, however, cites the e8ception to the !eneral rle5 A'-. 1332. When one of the parties is nable to read, or if the contract is in a lan!a!e not nderstood by him, and mistake or frad is alle!ed, the person enforcin! the contract mst show that the terms thereof have been flly e8plained to the former. Example: -he burden of proof is on the part" allein mista*e or fraud. I want yo to refer to Example A in %o. 9 above" In that case, filed an action for annlment of the contract of sale on the !rond of mistake becase the pi! that he bo!ht was already barren and not fertile as what the seller ; stated" In cort, will be the one to prove the female pi! is no lon!er fertile" It will not be the dty of ; to prove that the pi! is still fertile" If does not prove the fact of mistake, even if ; does not prove anythin!, the action for annlment will be denied and will be bond by his contract of sale with ;. Example: -he burden of proof is not on the part" allein mista*e or fraud but on the part" enforcin the contract $hen one of the parties is illiterate, or is in a lanuae not understood b" him. ; is the owner of a +< hectare farmland planted with -, lanones tress" 'he farmland makes a P+2 annal income on its harvest" ; was nschooled and did not know how to read
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or write" #n $ebrary -, ; needed money for the schoolin! of his ; children so he sold the farmland to for P;2. 'he parties si!ned a “Deed of Sale” which transferred ownership of the farmland to . careflly e8plained the contents of the deed to ; before ; si!ned the docment" 'here were two witnesses who were there when the docment was si!ned" After the children of ; learned abot the sale, they filed an action for annlment of the contract of sale on the !rond of frad" 'he children claim that the farmland of their father was worth P12 and it was sold for only P;2 becase employed frad on their father" In this action for annlment, since ; was illiterate, the brden of proof to prove frad is not pon the children" It is , who seeks to enforce the contract of sale and who does not want the contract of sale annlled, who mst prove that he did not e8ercise frad to compel ; to sell the farmland to him" It is who mst prove that he had flly e8plained to ; the stiplations, terms and conditions of the “Deed of Sale” that ; si!ned" If ; is not able to prove this, even if the children do not prove their alle!ations of frad, the contract of sale will be annlled"
11. What is violence? When does violence make the consent of a party in a contract defective as to reslt in the annlment of the contract later on?
'o prevent confsion, let s refer to two .+0 kinds of parties when we discss the different vices of consent5 'H% I7/3&%@ PA&' – 'he party pon whom violence, intimidation, nde inflence and frad is employed" 'H% G3I' PA&' – 'he party who ses violence, intimidation, nde inflence or frad to compel or convince the other party to enter into a particlar contract
Diolence makes the consent of a party defective when 5 (Article 133, par. 1)
(a) 'he consent of the in(red party is obtained by the !ilty party by the employment of serios or irresistible force"
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(b) 'he violence employed is the reason why the in(red party !ave his consent and perfected a contract with the !ilty party" Example: is interested in byin! the +
$rom the above e8ample, we can see that violence re9ires the employment of physical force"
12. What is intimidation or threat? When does intimidation make the consent of a party in a contract defective as to reslt in the annlment of the contract later on? (Article 133, par. 2)
'here is intimidation when a person is compelled to !ive his consent becase of a reasonable and well
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threat or intimidation" )till, ; can later on file an action for annlment of the contract bt this time on the !rond of intimidation"
Example: !ntimidation exerted upon the propert" of the in=ured part"8s descendant. threatened to brn down the hose of the son of ; if ; will not si!n the contract of sale transferrin! ownership of a parcel of land to . ; then si!ns the Deed of Sale a!ainst his will for fear that mi!ht brn down the hose of his son" 3nder Article 133, par. 2, even if it is not the person or property of the in(red party himself that is bein! threatened, the intimidation employed by the !ilty party will be eno!h to make the consent of the in(red party defective"
$rom comparison of the above e8amples in %os. 11 > 12, altho!h no physical force is e8erted on the in(red party in intimidation, in both violence and intimidation, the in(red party can file an action for annlment of the contract" 'he reason is becase in both vices of consent, he is not able to !ive his free and volntary consent to the contract" 'he consent is merely a prodct of complsion from the !ilty party"
'emember , however, that the intimidation or threat mst be of an unjust act , an actionable wron!" 'herefore, a threat to enforce a (st or le!al claim does not vitiate consent" (Article 133, par. +) Example: -he intimidation emplo"ed constitutes a =ust or leal claim $hich is not sufficient to invalidate a contract. was very mch interested in byin! a hose and lot owned by ; which was located in the heart of 2akati" wanted to convert the property into a restarant which had the motif of the 46s" knew very well that ; was a crooked bsinessman" Hence, threatened ; that if ; will not sell the hose and lot to him, will report him to the *I& athorities" $or fear that he will be prosected for ta8 evasion and ordered to pay millions of back ta8es, ; sold the land to . #uestion: Can ; later on file an action for annlment of the contract of sale a!ainst on the !rond that he was merely threatened and intimidated to sell his hose and lot to ?
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Ans$er: %&. 3nder Article 133, par. +, for intimidation to vitiate the consent of the in(red party and to case the conse9ent annlment of the contract where a defective consent is !iven, it is re9ired that the intimidation or threat mst consist of an n(st act or an actionable wron!" Here, the threat of to report ; to the *I& athorities is not an n(st act or an actionable wron!" It is the dty of every citien to report any ille!al activity that he is personally aware of" Hence, an action for annlment filed by ; to invalidate the contract of sale will not prosper or become sccessfl"
13. A'-. 133?. Diolence or intimidation shall annl the obli!ation, altho!h it may have been employed by a third person who did not take part in the contract. .emphasis spplied0 Example: wants to by the land of ;. thinks that after he develops the land, the present market vale of the land, which is P1, per s9are meter, will rise to P1, per s9are meter" % is the owner of a land ne8t to the land of ;. % thinks that he will also become a rich man if ; sells the land to becase the valation of his property will also increase tremendosly" Withot the knowled!e of , % went to ; and threatened ; that if he does not sell the land to , % will kill him" )ince ; knew that % had many relatives from the Ab )ayaf, ; was forced to sell the land to . was, of corse, srprised bt happy that ; had chan!ed his mind abot sellin! the property" ater on, ; filed an action for annlment of the contract of sale a!ainst on the !rond of intimidation" #uestion: Will the action for annlment filed by ; a!ainst prosper considerin! that the intimidation here was e8erted not by bt by a third person % who was not a party to the contract of sale between ; and 7 Ans$er: @E;. 'hat the intimidation in this case was employed by %, a third person .with or withot the knowled!e or consent of 0 is immaterial" What is important to consider is that at the time ; sold the land to , ; did not !ive his free and volntary consent becase he acted only becase of the threat employed by %. If the in(red party !ave his consent not of his own free will, his consent becomes defective or vitiated whether the party who employed the violence or intimidation was a contractin! party or a stran!er to the contract"
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14. When does nde inflence vitiate consent to a contract? 'here is nde inflence when a person takes improper advanta!e of his power over the will of another person, deprivin! that person of a reasonable freedom of choice" (Article 1330)
Example: 'ony has not been able to pay his rentals for two months worth P-+," His landlord has threatened to e(ect him from the apartment if he does not pay his overde rentals in three days" 'ony !oes to his friend Gene and tries to borrow money" Instead of lendin! him money, Gene convinces 'ony to sell to him the !rand piano which 'ony inherited from his !randfather for P;," 'ony sells the piano to Gene becase he has no one else to trn to for help" ater, 'ony files an action for annlment of the contract of sale of the !rand piano a!ainst Gene" #uestion: Will 'ony be able to recover his precios !rand piano from 7 Ans$er: %)" In the instant case, 'ony was compelled to sell his !rand piano by the employment of nde inflence on the part of Gene" If we look at the facts, 'ony was never threatened by Gene to sell the piano" 7either did Gene employ physical force on the person of 'ony to compel him to sell the piano" What Gene clearly did was take advanta!e of the financial distress of 'ony who was in desperate need of money for the payment of his overde rentals" 'hese facts constitte nde inflence which compelled 'ony to sell his piano" Article 1330 states 5 A'-. 1330. 'here is nde inflence when a person takes improper advanta!e of his power over the will of another, deprivin! the latter of a reasonable freedom of choice" 'he followin! circmstances shall be considered5 the confidential, family, spirital and other relations between the parties, or the fact that the person alle!ed to have been ndly inflenced was sfferin! from mental weakness, or was i!norant or in financial distress. .emphasis spplied0
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15. When is there frad as a vice of consent?
3nder Article 133, there is frad when, thro!h insidios words or machinations of one of the contractin! parties, the other is indced to enter into a contract which, withot them, he wold not have a!reed to" In simple terms, frad consists in the act of the !ilty party in sin! dishonest or tricky statements (st to inflence or convince the innocent party to enter into the desired conract"
7ot all kinds of frad, however, is sfficient to vitiate consent and case the annlment of the contract" We then distin!ish between two kinds of frad 5
A.Causal Fraud – 'his is the kind of frad referred to in Article 133 " It is committed by one party before or at the time of the celebration of the contract to secre the consent of the other party" In other words, were it not for the frad employed, the innocent party wold not have !iven his consent to the contract" 'he reslt of the se of this kind of frad is the annlment of the contract becase of a defective consent !iven by the innocent party" Example: -he emplo"ment of causal fraud $ill cause the annulment of the contract due to a defective consent. ; offered to sell to a *2W car %;+ for P42" After the sale, fond ot that what he really bo!ht was a *2W %+; worth P;"12" It appears that A (st (mbled the nmbers + and ; brass si!ns at the back of the car chan!in! the si!n from *2W %+; to %;+" *ecase of this, filed an action for annlment of the contract of sale on the !rond of frad" #uestion: Will the action for annlment prosper? Ans$er: @E;. In this case, had known that he was merely byin! a *2W car %+;, which is of inferior 9ality than the *2W %;+, wold not have bo!ht the car" However, becase ; represented that it was a *2W %;+, was fooled into byin! the car offered by ;. 'his is what we call casal frad which makes the consent of defective, and which prevents the perfection of a contract of sale between the parties" Hence, an action for annlment is proper nder the facts of this case"
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B.raud in the performance of the obliations under the contract 'his is the kind of frad referred to in Article 1104. 'he frad here is employed after the perfection of the contract" It is in the manner of performance of the obli!ation that frad is employed by the other party" 'he effect of the se of this kind of frad is liability for dama!es on the part of the party employin! the frad" Annlment of the contract is not a proper remedy becase there was no defective consent on the part of both contractin! parties" Example: #n $ebrary 1, +--, ; offered to sell his #me!a watch to for P;1," After e8amined the watch, a!reed to by it at the price offered by ;" @elivery date and payment was then set by the parties on $ebrary -1, +--" *efore delivery date, ; went to Dirra 2all, Greenhills and bo!ht an e8act imitation of the #me!a watch he offered for sale to . 'wo weeks after the #me!a watch was delivered to , he discovered that the watch delivered to him was only an imitation of the ori!inal" #uestion: What is the remedy of in this case? Ans$er: In this case, a contract of sale was perfected on $ebrary 1, +-between ; and . 'here was already consent – meetin! of minds between the parties with respect to the ob(ect .an athentic #me!a watch0 and the case .the P;1, prchase price0 of the contract" ; did not employ frad to convince to by the watch" ; is !ilty of frad in the performance of his obli!ation" He employed frad at the time the ob(ect was to be delivered to the byer by replacin! it with an imitation" 'he proper remedy of here is to file an action a!ainst ; for specific performance .to compel ; to deliver the !enine watch0 and for dama!es for frad"
16. What are the essential re9isites for frad to vitiate consent? (A) 'here mst be misrepresentation (Art. 133) or concealment (Art. 1339). $rad has two faces, i.e., there are two ways of employin! frad which can vitiate the consent of a party to the contract 5
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(1) 2isrepresentation – In frad by misrepresentation, the !ilty party ses falsehood or misleadin! statements to compel the innocent party to enter into a contract" 'his is the kind of frad defined nder Article 133 and discssed in %o. 1 above. (2) Concealment < In frad by concealment, there is an intentional failre on the part of the !ilty party to reveal to the innocent party important facts or details which the innocent party shold have known in order to be able to !ive his intelli!ent consent to the contract" Example: @es and @in! inherited a - s9are meter parcel of land from their father which had a crrent market price of P+, per s9are meter" @es offered to sell to her brother her 1 s9are meter share in the inheritance as she was in immediate need of cash" #n $ebrary :, +--, cy came to @in! and offered to by the property for the price of P+, per s9are meter" Withot informin! his sister abot cy6s proposal, @in! accepted his sister6s earlier offer to sell her share of the property and bo!ht the share of @es at P+, per s9are
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(B) It mst be serios (Art. 13++). Example of serious fraud: /ack sold to /ill a land and told her that there were ;, cocont trees on the land even if he knew that there were only 1 trees" /ill then bo!ht the land believin! the statement of /ack" 'he frad here is serios and /ill can ask for the annlment of the contract" Example of minor fraud: If /ack told /ill that there were ;, cocont trees on the land bt the trth was there were really ;,- cocont trees, the frad cannot be considered serios or important eno!h to make the contract voidable" *t /ill has a ri!ht to dedct from the contract price the amont representin! the vale of the - cocont trees"
(C) It mst have been employed by #7 #7% of the contractin! parties (Art. 13++). If frad is employed by both parties, neither may ask for annlment as the frad of one contractin! party offsets the frad of the other" 'his rle is in accordance with the principle that “he who comes to court, must come with clean hands"E ,, i.e., sli!htly sed" *ecase of the statement of arl that the car was sli!htly sed, eana immediately bo!ht the car" After two weeks, eana fond ot that arl altered the kilometer readin! becase the mechanic told her that the $ortner had already travelled >, kilometers" As a reslt, eana filed an action for the annlment of the contract of sale on the !rond of frad" #uestion: Will the action filed by eana a!ainst arl for annlment of the contract of sale between them prosper? Ans$er: %&. In this case, both arl and eana are !ilty of frad in enterin! into the contract of sale" Hence, eana cannot ask for any relief from the cort" #n the other hand, both arl and eana may be pt on trial for the crime of carnappin!"
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3nlike in the case of violence and intimidation, frad committed by a third person does not vitiate consent" (Article 13++)
H#W%D%&,
(i) %ven if employed by a third person, frad will vitiate consent and reslt in the annlment of the parties6 contract if it was sed with the knowled!e of the contractin! party who is benefited by the frad (Art. 13++).
(ii) %ven if employed by a third person, frad will vitiate consent and reslt in the annlment of the parties6 contract if the misrepresentation has created sbstantial mistake and the same is mtal .i.e., affects both parties0"
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(D) It mst be made with intent to deceive .to trick or to cheat0 the other contractin! party" In the followin! instances, there is no intent to deceive, so there is no frad"
(1) 2isrepresentation made in !ood faith is not fradlent bt may constitte error or mistake (Art. 13+3). Example: 7ina inherited a rin! from her mother" 7ina did not know anythin! abot stones or other pieces of (ewelry" )he believed that she had inherited a diamond rin!" ater, when she was in dire need of money for her sick son, she offered the rin! for sale to 7icholas and told him that it was !enine diamond" 7icholas bo!ht the rin! for P:, bt fond ot later that the stone on the rin! was only &ssian diamond worth P;,"
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5iscussion: In this case, there is no frad nder Article 133. 'here was no intent to deceive on the part of 7ina" )he honestly believed that the rin! she inherited was !enine diamond and that is what she told 7icholas" However, 7icholas can still file an action for annlment bt on the !rond of mistake or error nder Article 1331. 'his is becase 7icholas bo!ht the rin! on the mistaken belief that it was a diamond rin!" Had he known that it was only &ssian diamond, he wold not have bo!ht the rin! or paid an enormos price for it"
(2) 'he sal e8a!!erations in trade, when the other party had an opportnity to know the facts, are not in themselves fradlent (Art. 13+4). Dealers talk or traders talk are sally e8a!!erated and not e8actly tre" If a party !ives his consent to a contract on the basis of these misrepresentations made by merchants or traders, the contract cannot be invalidated on the !rond of frad" Example: I saw an advertisement in the department store which read 5 “!ossess flawless skin in " days. #our husband will never take his eyes off you.” *ecase of the ad, I bo!ht ; bottles of the prodct and immediately sed the prodct" 'wo weeks had passed and my hsband barely noticed me" 5iscussion: In this case, I cannot file an action for annlment of the contract of sale on the !rond of the misrepresentations made in the ad which is the reason why I bo!ht the prodct from the department store"
(3) 'he mere e8pression of an opinion does not si!nify frad, nless made by an e8pert and the other party has relied on the former6s special knowled!e (Art. 13+1). Example: In the e8ample in %o. 1 above, 7ina was merely e8pressin! her opinion re!ardin! the worth of the rin!" 'he misrepresentations made by 7ina to 7icholas on the basis of that opinion was made in !ood faith and, therefore, did not amont to frad" However, if 7ina is a !oldsmith or (eweller, and she represents to 7icholas that the rin! was !enine diamond, she will have been makin! a misrepresentation in bad faith becase of her e8pertise in stones and
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other pieces of (ewelry" 'his time, 7icholas can have the contract annlled on the !rond of frad"
(E) It mst have indced the consent of the other contractin! party" 'he frad employed by the !ilty party is the main reason why the in(red party !ave his consent to the contract"
17. What is meant by “simulation of a contract”. (Article 13+) Simulation of a contract is the act of intentionally deceivin! others by prodcin! the appearance of a contract that really does not e8ist .absolte simlation0 or which is different from the tre a!reement .relative simlation0" 'here are two .+0 kinds of simlation of a contract 5
(A) Absolte simlation – 'here is absolte simlation when the contract does not really e8ist and the parties do not intend to be bond at all (Article 13+). Absoltely simlated or fictitios contracts are ine8istent and void (Article 13+?). () &elative simlation < 'here is relative simlation when the contract entered into by the parties is different from their tre a!reement (Article 13+). Here, the parties conceal their tre a!reement" 'he parties are bond to the real or tre a!reement e8cept – (.1) if the contract shold pre(dice a third personF #& (.2) if the prpose is contrary to law, morals, !ood cstoms, pblic order, or pblic policy Example: Absolute ;imulation: 5 owes 6 P+2" *efore matrity date, 5 became insolvent" 'he only property that he had was a + s9are
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the lot for P;2" 5, however, did not receive a sin!le centavo from as prchase price" 7either did , as new owner, occpy the lot"
5iscussion: 5 fradlently entered into a contract of sale with only for the prpose of transferrin! title to the lot to , so that 6 will not be able to attach the lot anymore when 6 collects his claim" 5 and never intended to be bond nder the contract as shown by the fact that no prchase price was paid and 5 contined occpyin! the lot" 'he contract of sale is, therefore, void for bein! absoltely simlated" Hence, on matrity date, if 5 is insolvent to pay his debt, 6 can still attach the lot to secre the payment of the obli!ation" Example: 'elative ;imulation: 5iscussion: .'# *% C#7'I73%@0
18.
Prepared by 5 Atty" Harriet &eyes insan!an $ebrary 1, +--
