OUTLINE NOTES

LAW 121/OBLICON
SECTIONS JD 1A & JD 1B
By: Atty. JEN N. ASUNCION

ESSENTIAL REQUISITES OF CONTRACT

I. GENERAL PROVISIONS:

a. ESSENTIAL ELEMENTS – those without which there can be no contract. (Art. 1318, NCC). The
essential elements may be:

i. COMMON – present in all contracts. Art. 1318 refers to the common essential elements
of contracts – CONSENT, OBJECT CERTAIN and CAUSE.
ii. SPECIAL – essential elements present in certain contracts. (e.g. donation, chattel
mortgage, antichresis, pledge, lease)
iii. EXTRAORDINARY OR PECULIAR – those which are peculiar to a specific contract. (e.g.
price (sale), rent (lease), loan (REM/Chattel Mortgage)

b. NATURAL ELEMENTS – those that are presumed to exist in certain contracts unless the contrary
is expressly stipulated by the parties. (e.g. warranty against eviction [sale of real property];
warranty against hidden defects [sale of real or personal property]).

c. ACCIDENTAL ELEMENTS – those which exist only when the parties expressly provide for them
for the purpose of limiting or modifying the normal effects of the contract. (e.g. conditions,
penalties, interest)

II. ESSENTIAL ELEMENTS OF A CONTRACT

A. CONSENT. (Art. 1319, NCC)

1. Concept. Consent is the conformity of the parties to the terms of the contract; the
acceptance by one of the offer made by the other; the concurrence of the minds of the
parties on the object and the cause which shall constitute the contract.

MUTUAL ASSENT between the parties on the subject matter and the cause which are to
constitute the contract.

NB: Mutual Assent or agreement takes place when there is an offer and acceptance of
the offer.

2. MANIFESTATION. Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.

3. REQUISITES OF CONSENT.

(a) AN OFFER THAT MUST BE CERTAIN. (Art. 1319, 1325 and 1326, NCC)

i. DEFINITION. Offer means a unilateral proposition which one party makes to the
other for the celebration of the contract.

Proposal made by one party (OFFERER) to another (OFFEREE), indicating a

willingness to enter into a contract.

CERTAINTY. Offer must not be vague, misleading. It is more than an expression

of desire or hope. It must be DEFINITE, COMPLETE and INTENTIONAL.

An invitation to negotiate, or an offer to “entertain” or deliberate on whether

to purchase a thing is NOT a definite offer.

E.g.

OFFER IS CERTAIN: “I am selling this mobile phone for P10,000.00.”

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 OFFER IS UNCERTAIN: “I am willing to entertain the purchase of my house and
lot to you for P5M”.

OFFER IS UNCERTAIN: “I am willing to buy your vehicle.” (absence of price)

ii. EFFECTIVITY. An offer is effective until either party becomes incapacitated, or

until the offer is withdrawn by the offerer.

(1) INCAPACITY. An offer becomes ineffective upon the death, civil

interdiction, insanity, or insolvency of either party before acceptance is
conveyed (Art. 1323, NCC). “Conveyed” means the time when the offerer
learns of the acceptance by the offeree.

Example: A makes an offer to B on April 2, 2020. B in a letter makes known

his acceptance on April 5, 2020. However, A died on April 4, 2020. The offer
is ineffective because there is no meeting of the minds.

(2) WITHDRAWAL. As a general rule, the offerer may withdraw the offer at
any time before he learns of the acceptance by the offeree.

The withdrawal is effective immediately after its manifestation, such as by

its mailing and not necessarily when the offeree learns of its withdrawal.

Example: If A makes an offer to B, and B mails his acceptance to A, but

before receipt thereof, A already mails withdrawal to B, there is no
contract. The offer is deemed withdrawn upon B’s mailing of withdrawal
(before the contract could be perfected by B’s receipt of the acceptance).

WHEN PERIOD IS GIVEN. When the offerer has allowed the offeree a certain
period to accept –

GENERAL RULE: If the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance.

EXCEPTION: The offer may not be withdrawn when it is founded upon a

consideration, as something paid or promised. The consideration must be
separate and distinct from the price in the principal contract. In such a
situation, a contract of option or Option Contract is created.

An OPTION CONTRACT grants a person the choice, for a distinct and separate
consideration, to purchase a determinate thing at a predetermined fixed
price.

Example: A offered to sell his house and lot for P7M to B, who was
interested to buy the same. A gave B 10 days to decide. If after 10 days there
is no acceptance, A may withdraw the offer. However, if money is paid or
promised to be paid (option money) in consideration of the option, the offer
may not be withdrawn until the end of the period agreed upon.

NB: Option Contract is separate and distinct from the contract which will
be perfected upon the acceptance of the offer. In case of breach, the
remedy of the offeree is DAMAGES for breach of the option contract, and
not damages or specific performance of the contract which is the object
of the option.

NB: If the consideration given is really intended as part of the

consideration for the main contract, the main contract could be deemed
perfected. Thus, an “EARNEST MONEY”1 in a contract of sale is evidence
of its perfection. (Art. 1482, NCC)

RIGHT OF FIRST REFUSAL (where A gives B the right to buy a property should
A decide to sell it) is NOT AN OPTION CONTRACT because it depends on

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Actually a partial payment of the purchase price and is considered proof of the perfection of the contract.
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 whether A will decide to sell the property and on terms that are not yet
determined.

- Since it is not an option contract, a right of first refusal does not need
separate consideration to be valid. The right of first refusal may be a
clause in a principal contract (e.g. lease), in which case the consideration
for the right of first refusal forms part of the consideration for the
principal contract.

- In case the right of first refusal is violated – i.e., A sells the property not
a third person without first allowing B (the right-holder) to purchase it
– the right-holder may: (a) seek the rescission of the sale as rescissible
contract; and (b) seek specific performance of the owner’s obligation
to grant him the right of first refusal (by allowing the right-holder to
buy the property at the same terms and conditions at which it was sold
to the third party.)

(3) ADVERTISEMENTS.

a. Unless it appears otherwise, business advertisements of things for sale are

not definite offers, but mere invitations to make an offer. (Art. 1325, NCC)

EXCEPTION. If the business advertisements of things for sale appears to be a

definite offer.

Example (General Rule):

For Sale: 150 square meter lot located at Aurora Hill, Baguio City for
P2M.

Example (Exception):

For Sale: 150 square meter residential lot located at Aurora Hill, Baguio
City covered by TCT No. 1234567890 for P2.7M all-in.

b. Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the
contrary appears. (Art. 1326, NCC)

c. Public advertisements offering rewards or prizes, such as in contest or

competitions, constitute unilateral promise. When a member of the public
performs an act pursuant to the offer. (e.g., participates in the contest),
such action constitutes an acceptance which converts the promise into a
contract binding on the advertiser.

(b) THE ACCEPTANCE MUST BE ABSOLUTE. (Art. 1319, 1320, 1321 and 1322, NCC)

i. DEFINITION. Acceptance is the conformity by the offeree to the proposition of

the offerer.

ii. ABSOLUTE.

a. The acceptance must be absolute (Art. 1319, NCC)

To produce a contract, the acceptance must not qualify, modify or vary the
terms of the offer.

b. A QUALIFIED ACCEPTANCE constitutes a COUNTER-OFFER. (Art. 1319, NCC)

Any modification or variation from the terms of the offer annuls the latter
and frees the offerer. The original offerer is free to accept or refuse the
counter-offer.

iii. KNOWLEDGE OF THE ACCEPTANCE. The acceptance of an offer must be MADE

KNOWN to the offerer. The contract is perfected only from the time the
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 acceptance of the offer is made known to the offerer. Unless and until the
offerer knows of the acceptance, there is no meeting of the minds of the parties,
no real concurrence of offer and acceptance.

a. The offerer may withdraw his offer before he learns of the acceptance
thereof by the offeree. The contract is not perfected if the offerer
withdraws his offer, and the withdrawal is made before he learns of the
acceptance.

b. 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 (acceptance by letter or telegram), is

presumed to have been entered into in the place where the offer is made.

Example: A sent a letter offering Contract to Sell to B on May 1, 2020.

In the afternoon of the same day, B sent a letter of acceptance to A. A
received and read the letter of acceptance on May 5, 2020. When did the
acceptance bind the parties? Answer: May 5, 2020 (from the time it came
to the knowledge of A)

c. An offer made through an agent is accepted from the time acceptance is

communicated to him. (the agent) (Art. 1322, NCC)

iv. EXPRESS or IMPLIED. An acceptance may be express or implied. (Art. 1320, NCC)

a. Acceptance may be implied from contemporaneous and subsequent acts of

the contracting parties. (E.g., participation in a sport or contest,
performance of the conditions in a conditional counter-offer)

b. In general, the offerer is not bound to answer a proposal, and his silence per
se cannot be construed as an acceptance. As an exception, however,
acceptance may be implied from silence, if clearly warranted by the
circumstances.

c. If the offeree requires express acceptance, it should be done expressly.

v. TIME, PLACE and MANNER. The person making the offer may fix the time, place,
and manner of acceptance, all of which must be complied with. (Art. 1321, NCC)

Example: A (offerer) may tell B (offeree) that the latter must accept the offer
personally on May 20, 2020 before 5:00 o’clock in the afternoon in the residence
of A. All of which must be complied with.

a. An acceptance which is not made in the manner, place or period prescribed

by the offerer is not effective but constitutes a counter-offer, which the
offeree may accept or reject.

b. In general, when the offerer has not fixed a period for the offeree to accept
the offer, and the offer is made to a person present, the acceptance must be
made immediately.

vi. REVOCATION OF ACCEPTANCE. Acceptance may be revoked, but the revocation

must be MADE KNOWN to the offerer BEFORE he learns of the acceptance. For
as soon as the offerer learns of the acceptance, the contract is deemed
perfected.

4. CAPACITY TO GIVE CONSENT

a. CAPACITY. As a general rule, any person of legal age can give consent to a contract
unless there is a ground for his incapacity provided by law.

NB: Capacity is PRESUMED, the party who alleges the incapacity of a certain person
has the burden to prove such incapacity.

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 b. INCAPACITY. The following cannot give consent to a contract: (Art. 1327, NCC)

i. UNEMANCIPATED MINORS

- The reference of unemancipated minors is meant to distinguish them

from minors who had been emancipated by marriage. With the Family
Code setting the age of consent for marriage to 18 years old, there is no
longer a possibility of an emancipated minor.

ii. INSANE OR DEMENTED PERSONS

- Contract entered into during lucid interval are valid. (Art. 1328, NCC)
- Contracts agree to in a state of drunkenness or during a hypnotic spell
are voidable. (Art. 1328, NCC)

iii. DEAF-MUTES WHO DO NOT KNOW HOW TO WRITE

iv. OTHER GROUNDS FOR INCAPACITY/DISQUALIFICATIONS. The incapacity

declared in Art. 1327, NCC is subject to the modifications determined by law,
and is understood to be without prejudice to special disqualifications established
in the laws.

- Special Disqualifications provided by Sec. 2, Rule 92 of the Rules of

Court (INCOMPETENTS) (I leave this to you, please check and read,
thank you.)

NB: REASON FOR DISQUALIFICATION: Persons mentioned in Art. 1327 and the
Rules of Court can easily be victims of fraud or taken advantage by the other
contracting party.

c. EFFECT OF INCAPACITY.

i. If one of the parties to a contract is incapacitated, the contract is voidable (not

void) Art. 1390, NCC.

ii. If both parties to a contract are incapacitated, the contract is unenforceable

(not void) Arts. 1403 (3) and 1407, NCC

- If a party is disqualified by law, the contract is void.

5. VICES OF CONSENT.

Consent is essential to the existence of a contract. If consent is absent, the contract

is non-existent.

If consent is present, but it was given through mistake, violence, intimidation, undue
influence, or fraud, the contract is voidable. (Art. 1330, NCC)

Consent has the following requisites:

(1) It should be intelligent or with an exact notion of the matter to which it refers;
(2) It should be free and voluntary; and,
(3) It should be conscious and spontaneous.

NB: These requisite characteristics are VITIATED by the aforementioned vices or defects of
consent – intelligence is vitiated by error; freedom is vitiated by violence, intimidation
or undue influence; and, spontaneity is vitiated by fraud.

a. MISTAKE. A false belief about something.

i. In order that mistake may invalidate consent, it should refer to:

- The substance of the thing which is the object of the contract; or,

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 - Those conditions which have principally moved one or both parties to
enter into the contract. (Art. 1331, NCC)

ii. REQUISITES FOR MISTAKE TO VITIATE CONSENT:

o Error or mistake must be substantial regarding the OBJECT OF THE

CONTRACT (e.g., a contract of sale instead of a mortgage); THE
CONDITION which principally moved or induced one of the parties (e.g.,
error in the boundaries or location of the land); error in QUANTITY (e.g.,
300 square meters instead of 600 square meters); error in QUALITY (e.g.,
clothes which were offered as original but really an imitation); or,
IDENTITY or QUALIFICATIONS (e.g., hiring a lecturer who must be law
professor but turns out that he is merely a graduate of law), but only if
such was the principal cause of the contract;

o Error must be excusable; and,

o Error must be a mistake of fact and not of law.

NOTES:

(1) The concept of error in Art. 1331, NCC includes both: (a) IGNORANCE, which
is the absence of knowledge with respect to a thing, and (b) MISTAKE
PROPER, which is a wrong conception about said thing, or a belief in the
existence of some circumstance, fact, or event, which in reality does not
exist. In both cases, there is lack of full and correct knowledge about the
thing.

Examples: (a) sale of a parcel of land which the seller mistakenly thought
he owned; (b) sale of a parcel of land which the seller thought and
represented to be 30 hectares, but turned out to be only 17 hectares.

(2) The error must be the causal, not merely incidental, factor that induced the
complaining party to enter into the contract. (revisit the distinction
between dolo causante v. dolo incidente)

(3) Mere error as to the designation will not vitiate consent, as long as the
intended object is clear. Thus, a sale of particular parcel of land may be
considered valid even if there is a mistake in the designation of the Lot
number or TCT number. The remedy is reformation of instrument.

(4) There is no mistake if the party alleging it knew the doubt, contingency or
risk affecting the object of the contract. (Art. 1333, NCC)

- To invalidate consent, the error must be real and not one that could have
been avoided by the party alleging it. An error so PATENT and OBVIOUS
that nobody could have made it, or one which could have been avoided
by ordinary prudence, cannot be invoked by the one who made it in order
to annul his contract.

Example: “Gayuma” bought in Quiapo – you know that the ability of

the gayuma is questionable, yet you bought it. (party was willing to
take the risk – no mistake)

(5) MUTUAL ERROR as to the LEGAL EFFECT of an agreement when the real
purpose of the parties is frustrated, may vitiate consent. (Art. 1334, NCC)

- GENERAL RULE: Mistake of law does not vitiate consent. (Ignorantia Legis
Non Excusat)

- EXCEPTION: MUTUAL ERROR. The following requisites must be present:

(i) the error must be mutual; (ii) the error must refer to the legal

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 effect of the agreement; and (iii) the real purpose of the parties is
frustrated.

Example: A promises to lend B a particular thing, and B agrees in the

belief that it is donated to him, there is no contract.

(6) When one of the parties is unable to read, or if the contract is in a language
not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to
the former. (Art. 1332, NCC)

- PRESUMPTION: One always acts with due care and signs with full
knowledge of all the contents of the documents.

- PRESUMPTION DOES NOT APPLY: (1) When one of the parties is unable
to read; or (2) the contract is in a language not understood by one of the
parties.

- The person enforcing the contract must show that the terms thereof have
been fully explained to the former.

- If the illiterate party is the one seeking to enforce the contract, he need
not prove that the contract was fully explained to him.

- RATIONALE: Art. 1332 is based on the principle that when one of the
parties is at a disadvantaged on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap,
the courts must be vigilant for his protection. (Art. 24, NCC)

b. VIOLENCE.

i. There is violence when in order to wrest consent, serious or irresistible force is

employed. (Art. 1335, NCC). Refers to physical coercion.

ii. REQUISITES OF VIOLENCE AS A VICE OF CONSENT.

(1) The force must be the determining cause of the contract, or must have
caused the consent to be given; and,

(2) The force must be serious or irresistible.

Example: One party is made to sign a contract by forcing his hand to

signify.

iii. Violence shall annul the obligation, although it may have been employed by a
third person who did not take part in the contract. (Art. 1336, NCC)

c. INTIMIDATION

i. There is intimidation when one contracting party is compelled to give his consent
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, descendants or
ascendants. (Art. 1335, NCC)

ii. REQUISITES OF INTIMIDATION AS VICE OF CONSENT

(1) The intimidation must be the determining cause of the contract, or must
have caused the consent to be given;

(2) The threatened act be unjust or unlawful;

- A threat to enforce one’s claim through competent authority, if the claim

is just or legal, does not vitiate consent.

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 Example: A threat to file a case for immorality against a bar
candidate if he does not marry a girl he had sex with, does not vitiate
consent.

(3) The threat must be real and serious, there being an evident disproportion
between the evil and the resistance which all men can offer, leading to the
choice of the contract as the lesser evil; and,

(4) The threat produces a reasonable and well-grounded fear from the fact that
the person from whom it comes has the necessary means or ability to inflict
the threatened injury.

Example: A party signs a contract because a gun is pointed to him or to

his family members.

iii. To determine the degree of intimidation, the age, sex and condition of the
person shall be borne in mind.

A high level of education usually entails that a person is less susceptible to

intimidation.

REVERENTIAL FEAR – fear of displeasing a person to whom respect and obedient

are due. Reverential fear cannot be considered intimidation.

iv. Intimidation shall annul the obligation, although it may have been employed by
a third person who did not take part in the contract. (Art. 1336, NCC)

d. UNDUE INFLUENCE.

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

- Influence that overpowers the mind of a party to prevent him from acting
understandingly and voluntarily to do what he would have done if he had
been left to exercise freely his own judgment and discretion.

ii. REQUISITES OF UNDUE INFLUENCE AS A VICE OF CONSENT:

(1) Improper advantage;

(2) Power over the will of another; and,
(3) Deprivation of the latter’s will of a reasonable freedom of choice.

iii. The following circumstances shall be considered: (Art. 1337, NCC)

(1) The confidential, family, spiritual and other relations between parties; or,
(2) The fact that the person alleged to have been unduly influenced was suffering
from mental weakness or was ignorant or in financial distress.

However, financial distress per se cannot be equated with undue

influence.

iv. CONTRACTS OF ADHESION. A contract of adhesion is one wherein almost all of

the provisions are drafted by one party. The participation of the other party is
limited to affixing his signature or his “adhesion” to the contract. (e.g.,
insurance contracts, loan or mortgage contracts of banks and other financial
institutions, transportation tickets)

RULES:

(1) Any ambiguity, obscurity or doubt in a contract of adhesion is construed or

resolved strictly against the party who prepared it. (Art. 24, NCC)

(2) Note, however, that contracts of adhesions are not invalid per se and not
strictly against the law; they are as binding as ordinary contracts. This is
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 particularly so in contracts entered into by educated persons or by seasoned
businessmen, since they are presumed to have acted with due care and to
have signed the contracts with full knowledge of its import.

v. Undue influence shall annul the obligation, although it may have been employed
by a third person who did not take part in the contract. (Art. 1336, NCC)

e. FRAUD

i. In General. There is fraud when, through insidious words or machinations of one

of the contracting parties, the other is induced to enter into a contract which,
without them, he would not have agreed to. (Art. 1338, NCC) (DOLO CAUSANTE)

ii. REQUISITES FOR FRAUD/DECEIT TO VITIATE CONSENT.

(1) The fraud must be material and serious, that is, it really induced consent;
(2) The fraud must be employed by only one of the contracting parties;
(3) There must be deliberate intent to deceive or to induce; therefore,
misrepresentation in good faith is not fraud;
(4) The other party must have relied on the untrue statement and must himself
not be guilty of negligence in ascertaining the truth; and,
(5) It must be alleged and proved by clear and convincing evidence.

iii. DETERMINATION OF FRAUD.

(1) Failure to disclose facts, when there is a duty to reveal them, as when the
parties are bound by confidential relations, constitutes fraud.

Example: Husband and wife should disclose if the property is a conjugal

property or co-ownership or partnership.

(2) The usual exaggerations in trade, when the other party had an opportunity
to know the facts, are not in themselves fraudulent. (Art. 1340, NCC)

- Caveat Emptor – the buyer beware. The buyer is expected to make the
proper inquiries and not simply rely on or accept the seller’s assertion at
face value.

(3) A mere expression of an opinion does not signify fraud. (Art. 1341, NCC)

- EXCEPTION: Opinion constitutes fraud if: (i) made by an expert; and (ii)
the other party relied on the former’s special knowledge. (e.g.,
quality of land, precious stones, etc.)

(4) Misrepresentation by a third person does not vitiate consent. (Art. 1342, NCC)

- UNLESS (i) such misrepresentation has created substantial mistake; and,

(ii) the same is mutual. (Revisit lecture notes on tortious interference)

(5) Misrepresentation made in good faith is not fraudulent but may constitute
error. (Art. 1343, NCC)

iv. EFFECTS OF FRAUD.

(1) DOLO CAUSANTE makes the contract VOIDABLE provided that it is (a)
serious, and (b) has not been employed by both contracting parties. (Art.
1344, NCC)

(2) DOLO INCIDENTE only obliges the person employing it to pay damages.

6. SIMULATED CONTRACTS

a. DEFINITION. Simulation occurs when an apparent contract is a declaration of a fictitious

will, deliberately made by agreement of the parties, in order to produce, for the purpose
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 of deception, the appearance of a juridical act which does not exist or is different from
that which was really executed.

b. REQUISITES OF SIMULATION:

i. An outward declaration of will different from the will of the parties;

ii. The false appearance must have been intended by mutual agreement; and,
iii. The purpose is to deceive third persons.

c. TYPES OF SIMULATION. Simulation of a contract may be absolute or relative. (Art. 1345,

NCC)

i. ABSOLUTE SIMULATION (SIMULADOS) – When the parties do not intend to be

bound at all.

Example: When A and B enters into a sale of land, but did not really intend
it; no consideration was given and the land was not delivered.

EFFECT: An absolutely simulated or fictitious contract is void, because consent

is totally absent.

ii. RELATIVE SIMULATION (DISIMULADOS) – When parties conceal their true

agreement.

Example: When A and B enters into a purported sale of land, but their real
intent is for it to be donation, or equitable mortgage.

EFFECT: The real or true agreement is binding on the parties, provided that: (1)
It does not prejudice a third person; and (2) It is not intended for any purpose
contrary to law, morals, good customs, public order or public policy. (Art. 1346,
NCC)

TWO (2) JURIDICAL ACTS INVOLVED IN RELATIVE SIMULATION:

(a) OSTENSIBLE ACT – contract that the parties pretend to have executed.

(b) HIDDEN ACT – the true agreement between the parties.

B. OBJECTS/SUBJECT MATTER OF CONTRACTS

Object is the thing, right or service which is the subject matter of the contract. (Arts 1318 and
1347, NCC)

THE FOLLOWING ARE THE REQUISITES FOR A THING, RIGHT OR SERVICE TO BE AN OBJECT
OF CONTRACTS:

a. WITHIN THE COMMERCE OF MAN.

i. All things which are not outside the commerce of man, including future things, may
be the object of contracts. (Art. 1347, NCC)

- Things outside the commerce of man are those which are not susceptible
of appropriation or private ownership. (Example: public office, political
rights, purely personal rights, properties of public dominion, etc.)

- Future things are those which are not yet existing, or not yet owned by
the obligor at the time of the contract. (e.g., a person may sell future
goods, those which are not yet existing at the time of perfection of sale,
but are to be manufactured or acquired thereafter) (Art. 1462, NCC)

- No contract may be entered into upon future inheritance except in cases

expressly authorized by law. (Art. 1347, NCC)

ii. All rights which are not intransmissible may also be the object of contracts.

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 iii. All services which are not contrary to law, morals, good customs, public order or
public policy may likewise be the object of a contract.

b. POSSIBLE.

Impossible things or services cannot be the object of contracts

c. CERTAIN.

i. AS TO KIND. The object of every contract must be determinate as to its kind. (Art.
1349, NCC)

ii. AS TO QUANTITY. The quantity must at least be determinable, based on

circumstances stipulated in the contract.

C. CAUSE OF CONTRACTS.

1. DEFINITION. Cause is the essential reason which moves the contracting parties to enter into
it. It is the essential and impelling reason why a party assumes an obligation.

2. KINDS: CONTRACTS ACCORDING TO CAUSE:

i. ONEROUS CONTRACTS – the cause is the prestation or promise of a thing or service

by another. (Art. 1350, NCC)

- Example: In a sale, the cause consists of the seller’s undertaking to

deliver the property and the buyer’s undertaking to pay the purchase
price. The cause should not be confused with the object, which is the
thing sold.

ii. REMUNERATORY CONTRACTS – the cause is the service or benefit which is

remunerated.

- Example: Bonuses granted to employees to excite their zeal and

efficiency.

iii. GRATUITOUS CONTRACTS – the cause is the mere liberality of the benefactor.

- Example: Commodatum, Donation

3. REQUISITES OF A CAUSE:

i. It must be present, or it must exist at the time the contract is entered into;
ii. It must be true or real; and,
iii. It must be lawful.

4. CAUSE v. MOTIVE

CAUSE MOTIVE
The essential reason for the contract The particular or purely personal or private
reason which a party has in entering into a
contract and which does not affect the
other party.

Example: In the sale of a computer, the cause for the buyer is the seller’s undertaking
to deliver a computer to him. The buyer’s motive may be different, e.g., to be able to
surf the internet, or edit his photos, or start an online business.

GENERAL RULE: A party’s motives for entering into the contract do not affect the contract.
A party’s motive does not even have to be known to the other party.

EXCEPTION: The motive may be regarded as the cause “when the motive predetermines
the cause”, i.e., when the contract is conditioned upon the attainment of the motives of
one of the contracting parties.
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 Example: Where a man donated land to a woman with the motive of getting her to
agree to have sexual relations with him, the motive was deemed the (illegal) cause.

5. EXISTENCE OF CAUSE: Contracts must have a cause, as it is an essential requisite. Contracts

WITHOUT A CAUSE produce no effect whatever (Art. 1352, NCC)

i. PRESUMPTION. Although the cause is not stated in the contract, it is presumed that
it exist (and is lawful), unless the debtor proves the contrary. (Art. 1354, NCC)

ii. DISTINGUISHED FROM FAILURE TO PAY CONSIDERATION. Lack of consideration or

cause is different from failure to pay the consideration. The former prevents the
existence of a valid contract, while the latter results in a right to demand the
fulfillment or cancellation of the obligation under an existing valid contract.

6. LEGALITY OF CAUSE. The cause must be legal. Contract with unlawful cause produce no
effect whatever (Art. 1352, NCC), i.e., VOID.

i. PRESUMPTION. The cause is presumed lawful. Although the cause is not stated in
the contract, it is presumed that it exist and is lawful, unless the debtor proves the
contrary.

ii. UNLAWFUL CAUSE. The cause is unlawful if it is contrary to law, morals, good
customs, public order or public policy

Example: Termination of marital relations is an unlawful consideration which

renders the contract void.

iii. FALSE CAUSE. The statement of a false cause in contracts shall render them void,
unless it should be proved that they were founded upon another cause which is true
and lawful.

7. ADEQUACY OF CAUSE

i. GENERAL RULE: As a general rule, lesion (injury) or inadequacy of cause shall not
invalidate a contract (Art. 1355, NCC)

- Example: A, an agent of B, sold B’s land for P50M but it is really

worth P100M. Here, the contract is valid.

ii. EXCEPTIONS –

a. In cases specified by law (Art. 1355, NCC)

b. If there has been fraud, mistake or undue influence. (Art. 1470, NCC)

- Gross inadequacy of price does not affect a contract of sale, except as

may indicate a defect in the consent, or that the parties really intended
a donation or some other act or contract.

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