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Chapter 2
ESSENTAL REQUISITES OF
CONTRACTS

Essential Requisites of Contracts

General Provisions
 There are three (3) essential
requisites which must concur in
order to give rise to consensual
Art. 1318. There is no contract unless contracts, or to those that are
the following requisites concur: perfected by mere consent:
1. Consent of the contracting 1. Consent of the contracting
parties; parties;
2. Object certain which is the 2. Object certain which is the
subject matter of the contract; subject matter of the
and contract; and
3. Cause of the obligation which is 3. Cause of the obligation which
established. is established.
 In real contracts, the essential
requisites are the following:
1. Consent of the contracting
Kinds of Elements
parties;
1. Essential Elements 2. Object certain which is the
 are those necessary for the subject matter of the
very existence of the contract contract;
itself. The absence of any 3. Cause of the obligation which
one of these essential is established; and
elements will prevent the 4. Delivery of the object of the
creation or existence of a contract.
contract.
2. Natural Elements
Purpose of Essential Requisites
 are not essential to the
existence of a contract but  The requisites enumerated in Article
they are presumed to exist in 1318 are necessary only for the
certain contracts unless there perfection of the contract and not for
is an express stipulation to its validity. This is clear from the
the contrary. language of the provision itself which
 Example: warranty in case of says that “there is no contract
eviction in a contract of sale. unless the following requisites
Warranty against eviction is concur xxx.”
a natural element of contract
of sale, although the
contracting parties may Section 1. – Consent
increase, diminish or even
suppress it. Art. 1319. Consent is manifested by the
3. Accidental Elements meeting of the offer and the acceptance
 in turn, can only exist when upon the thing and the cause which are
the parties expressly provide to constitute the contract. The offer must
for them. be certain and the acceptance absolute.
 These are the clauses, terms A qualified acceptance constitutes a
and conditions that the counter-offer.
parties may deem
convenient, provided they Acceptance made by letter or
are not contrary to law, telegram does not bind the offeror
morals, good customms, except from the time it came to his
public order or public policy. knowledge. The contract, in such a case,
is presumed to have been entered into in
the place where the offer is made.

Element of Consent

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 is the essence of the contract. There express or implied, but must not
can be no contract in the true sense qualify the terms of the offer.
in the absence of the element of the
agreement, or of mutual assent of
the parties. Acceptance Must Be Absolute
 The acceptance of an offer must be
Manifestation of Consent unqualified and absolute to perfect
the contract.
 The first paragraph of Article 1319  An acceptance is considered
provides that “consent is manifested absolute and unqualified when it is
by the meeting of the offer and the identical in all respects with that of
acceptance upon the thing and the the offer so as to produce consent or
cause which are to constitute the meeting of the minds.
contract.”
 The essence of contract, therefore,
is the conformity of the parties to the Effect of Qualified Acceptance
terms of the contract, the
acceptance by one of the offer made  A qualified acceptance or one that
by the other; it is the concurrence of involves a new proposal constitutes
the minds of the parties on the a counter-offer and a rejection of the
object and he cause which shall original offer.
constitute the contract.
 Under the objective theory of
contracts, the intention of the parties Mirror-Image Rule
to enter into a contract is to be
judged by their outward or objective  This rule requires the offeree’s
manifestations of intent. acceptance to exactly match the
 In determining whether a contract is offeror’s offer – to mirror the offer.
already formed between the parties,  In effect, the acceptance must be
the objective manifestations of the the mirror image of the offer
intent of the parties are to be
considered, that is, what a
reasonably prudent person would be Manner of Acceptance
lead to believe from the actions and
words of the parties.  The offeror has a right to prescribe
in his offer “the time, place and
manner of acceptance” or other
matters which it may please him to
Art. 1320. An acceptance may be insert in and make a part thereof,
express or implied. and the acceptance, to conclude the
agreement, must in every respect
meet and correspond with the offer,
Form of Acceptance neither falling short of, nor going
beyond, the terms purpose, but
 An acceptance may be express or
exactly meeting them at all points
implied, unless the law specifically
and closing with them as just as they
requires a particular format or
stand, and, in the absence of such
manner of expressing such consent.
acceptance, subsequent words or
acts of the parties cannot create a
contract.
Acceptance of Offer
 is defined as the offeree’s
expression of assent to the exact When Acceptance Binds Offeror: Theory
terms of the contract. of Cognition
 With regard to contracts between
absent persons or when the parties
Requirement of Acceptance involved are not dealing face to face,
 To produce a contract, there must there are two (2) principal theories
be acceptance, which may be as to when the contract is perfected:
1. Theory of Cognition – holds
than an acceptance by letter

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of an offer has no effect until Seriousness of the Offer

it comes to the knowledge of
the offeror.  For an effective offer to exist, it is the
2. Mailbox Rule – maintains requirement that there must be
that acceptance by letter of serous intent on the part of the
an offer is effective from the offeror in making the offer.
time the letter is sent.  Following, however, the objective
theory of contracts, the seriousness
of such intention is to be determined
by what a reasonable person in the
Art. 1321. The person making the offer offeree’s position would conclude
may fix he time, place, and manner of the offeror’s words and actions
acceptance, all of which must be meant and not by the subjective
complied with. intentions or beliefs of the offeror.

Meeting of Offer And Acceptance Certainty of Offer

 The existence of mutual consent,  An offer to be effective must be
being a state of mind, may only be certain and definite with respect to
inferred from the confluence of two the cause or consideration and
acts of the parties: object of the proposed contract.
1. An offer certain as to the  There is an offer only if the contract
object of the contract and its can come into existence by the mere
consideration; and acceptance of the offer without any
2. An acceptance of the offer further act on the part of the offeror.
which is absolute in that it  In the event that the terms of the
refers to the exact object and offer is not sufficiently detailed or if
consideration embodied in the expression of intent is too vague
said offer. in such a way that the terms thereof
 The meeting of the minds is actually cannot be ascertained with
the meeting of the offer and the reasonable certainty, a contract is
acceptance. not formed notwithstanding the
acceptance of the offer and the court
is powerless to supply the missing
Concept of Offer terms, except when the missing
terms are minor or insignificant and
 is defined as “an expression of
the parties have clearly manifested
willingness to contract on certain
an intent to form a contract.
terms, made with the intention that it
shall become binding as soon as it
is accepted by the person to whom it
is address.” Communication of Offer
 The party who makes the offer is call  The terms of an offer must be
the offeror while the party to whom communicated by the offeror to the
an offer is made is called the offeree. The latter cannot accept an
offeree. offer which has not been
communicate to him; and, therefore,
as a general rule, an
Requisites of Offer uncommunicated offer, whether by
words or acts, cannot result in a
1. The offeror must have a serious
contact.
intention to become bound by his
offer;
2. The terms of the offer must be
reasonably certain, definite and Termination of Offer
complete, so that the parties and the  An offer can be terminated either
court can ascertain the terms of the through the action of the parties or
offer; and by the operation of law.
3. The offer must be communicated by  The parties can terminate the offer in
the offeror to the offeree, resulting in three (3) ways:
the offeree’s knowledge of the offer. 1. By revocation – The offer
may be withdrawn at any

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time prior to the perfection of  According to Article 1321, “the

the contract. However, where offeror may fix the time of
a period is given to the acceptance which, according to the
offeree within which to same law, must be complied with”.
accept the offer and the  Thus, where a time is stated in an
same has separate offer for its acceptance, the offer is
consideration, a contract of terminated at the expiration of the
option is deemed perfected, time given for its acceptance.
it would be a breach of that  If the offer does not state a specific
contract to withdraw the offer time period for acceptance, the
during the agreed period. passage of a reasonable length of
2. By rejection – the offeree time after the offer has been made
thereby terminates the offer will likewise result in the termination
and his subsequent attempt of the offer.
to accept the previous offer  However, an offer made inter
will not result to its praesentes or made to a person
reinstatement. present must be accepted
3. By counter-offer – is immediately, otherwise the offer is
considered a rejection of the immediately terminated.
original offer and an attempt
to end the negotiation
between the parties on a Art. 1322. An offer made through an
different basis. A counter agent is accepted from the time
offer has a dual function: it acceptance is communicated to him.
rejects the original offer and
simultaneously makes a new
offer.
Acceptance Through Agent
 Termination of the offer by operation
of law may occur through the:  If an offer has been made through
1. Supervening illegality of an agent, it is deemed accepted
the proposed contract – from the time acceptance is
The termination of the offer communicated to said agent, since
likewise occurs when a by legal fiction, the agent is the
legislative enactment or a extension of the personality of the
court decision makes the principal.
offer illegal after it has been  One who makes an offer through a
made. particular channel or agency
2. Lapse of time – the offeror impliedly authorizes an acceptance
may fix the time of through the same channel or
acceptance which, according agency.
to the same law, must be
complied with.
3. Destruction of the subject Art. 1323 An offer becomes ineffective
matter of the offer – the upon the death, civil interdiction, sanity,
offer is likewise terminated if or insolvency of either party before
the specific subject matter acceptance is conveyed.
thereof is destroyed before
the offer is accepted.
4. Death, civil interdiction,
insanity or insolvency of Effect of Death, Insanity Insolvency or
either the offeror or offeree Civil Interdiction
– the power of the offeree to  The contract is perfected only from
accept the offer is terminated the time an acceptance of an offer is
when the offeror or offeree made known to the offeror. If prior
dies or is deprived of legal thereto, either party dies, suffers
capacity to enter into the from civil interdiction, becomes
proposed contract. insane or insolvent, the offer is
rendered ineffective.

Lapse of Time
Art. 1324. When the offeror has the
allowed the offeree a certain period to

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accept, the offer may be withdrawn at is to be distinguished from the

any time before acceptance by projected main agreement (subject
communicating such withdrawal, except matter of the option) which is
when the option is founded upon a obviously yet to be concluded.
consideration, as something paid or  The distinction between an “option”
promised. and a contract of sale is that an
option is an unaccepted offer. The
optionee has the right, but not the
obligation, to buy.
 The option states that the terms and
conditions on which the owner is
willing to sell the property, if the
optionee elects to accept them
Revocation within the time period. If the optionee
does so elect, he must give notice to
 The offer may be withdrawn at any the other party, and the accepted
time prior to the perfection of the offer thereupon become a valid and
contract. However, where a period is binding contract of sale. If an
given to the offeree within which to acceptance is not made within the
accept the offer and the same has time fixed, the owner is no longer
separate consideration, a contract of bound by his offer, and the option is
option is deemed perfected, it would at an end.
be a breach of that contract to  A contract of sale fixes definitely the
withdraw the offer during the agreed relative rights and obligations of both
period. parties at the time of its execution.
The offer and the acceptance are
concurrent, since the minds of the
Option contracting parties meet in the terms
of the agreement.
 is a preparatory contract in which
one party grants the other, for a
fixed period and under specified
conditions, the power to decide, When Supported By Separate
whether or not to enter into a Consideration
principal contracts.  Where a period is given to the
 It binds the party who has given the offeree within which to accept the
option, not to enter into the principal offer and the same is founded upon
contract with any other person or supported by a separated
during the period designated, and, consideration, a contract of option is
within that period, to enter into such deemed perfected.
contract with the one to whom the  For a contract to be valid and
option was granted, if the latter enforceable against the promisor,
should decide to use the option. there must be a separate and
 It is a continuing offer or contract by distinct consideration that supports
which the owner stipulates with its.
another that the latter shall have the
right to buy the property at a fixed
price within a certain time, or under,
When Not Supported By Separate
or in compliance with, certain terms
Consideration
and conditions, or which gives to the
owner of the property the right to sell  If the period is not itself founded
or demand a sale. upon or supported by a
 Its distinguishing characteristics is consideration, the option does not
that, it imposes no binding obligation become a contract.
on the person holding the option,  Thus, the offeror is still free and has
aside from the consideration for the the right to withdraw the offer before
offer. its acceptance, or, if an acceptance
has been made, before the offeror’s
coming to know of such fact, by
Distinguished from Contract of Sale communicating that withdrawal to
the offeree.
 The option, however, is an
independent contract by itself, and it

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 The right to withdraw, however, must  For an offer to be effective it must be

not be exercised whimsically or one which is intended of itself to
arbitrarily; otherwise, it could give create legal relations on acceptance,
rise to a damage claim. and must be capable of creating a
definite obligation.
 It must be more than a mere
Consideration in Option Contract expression of opinion, desire, or
hope.
 By the very nature of an option  A mere statement of willingness to
contract, the same is an onerous enter into negotiations or a mere
contract for which the consideration inquiry as to whether a person could
must be something of value, make specified rules is not an offer.
although its kind may vary.  Preliminary negotiations are not
 The consideration need not be viewed as on offer but rather are
monetary but could consist of other invitations to negotiate or to make an
things or undertakings of value. offer. It only expresses a willingness
Furthermore, when a consideration to discuss the possibility of entering
for an option contract is not into a contract.
monetary, said consideration must  Invitation to treat or invitation to
be clearly specifies as such in the bargain is an action by one party
option contract or clause. which may appear to be a
contractual offer but which is actually
inviting other to make an offer of
Option Money Distinguished From their own. It may seen as a request
Earnest Money for expressions of interest.

 Earnest money is something of

value to show that the buyer was
Advertisement of Things for Sale
really earnest, and given to the seller
to bind the bargain, and whenever  In general, advertisements of things
earnest money is given in a contract for sale are treated as not as offers
of sale, it is considered as part of the to contract but as invitations to
purchase price and proof of the negotiate.
perfection of the contract.  The clause “unless it appears
 There are clear distinctions between otherwise” takes into consideration,
earnest money and option money, however, the fact that advertisement
as follows: may, under certain situation, be in
1. Earnest money is part of the the nature of an offer.
purchase price, while option
money is the money given as
a distinct consideration for an Display of Goods
option contract;
2. Earnest money is given only  The display of good with a price
where there is already a sale, ticket attached in a shop window or
while option money applies on a supermarket shelf is not an
to a sale not yet perfected; offer to sell but an invitation for
and customer to make an offer to buy.
3. When earnest money is
given, the buyer is bound to
pay the balance, while when Art. 1326. Advertisements for bidders
the would-be buyer gives the are simply invitations to make
option money, he is not proposals, and the advertiser is not
required to buy. bound to accept the highest or lowest
bidder unless the contrary appears.

Art. 1325. Unless it appears otherwise,

business advertisements of things for Invitations to Bid
sale are not definite offers, but mere
invitations to make an offer.  Where a person or a corporation
advertises for or requests bidders for
property to be sold or for the
Mere Invitations to Make An Offer erection or construction of particular

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work, it is well-settled that this is

simply an invitation to make offer, to
make tenders, as it is often called, Person Not Legally Capacitated to
and is not an offer obliging the one Contract
extending the invitation to accept the  Under Article 1327, the following are
highest or lowest of any of the bids. the persons who cannot give valid
 This rule applies although the call for consent to a contract:
bids reserves no right to reject any 1. Unemancipated minors;
and all bids, unless it contains 2. Insane or demented persons;
language subject to the and
interpretation that the intention is to 3. Deaf-mute who do not know
let the contract to the highest or how to write.
lower bidder.  The persons who are under
guardianship are also deemed
incapable of giving consent to a
contract.

Auctions Minors
 In an auction, the auctioneer’s call  Minority is defined as the state of a
for bids is not considered as an offer person who is under the age of legal
but simply an invitation to make majority and a minor is a person who
proposals. is below 18 years of age since
 An auction may either be an: majority commences upon attaining
1. Auction with reserve – the age of 18 years.
there is no obligation to sell,  A contract entered into by a minor is
and the seller may refuse the not void, but merely voidable.
highest bid. In this kind of  The law gives the minor the right to
auction, the seller may annual the contract entered into by
reserve the right to confirm or him upon his attainment of the age
reject the sale even after the of majority, but he must bring the
hammer as fallen. In this action for annulment within four (4)
situation, the seller has the years from his attainment of the age
obligation of notifying those of minority, otherwise, the action will
attending the auction that be barred by the statute of
sale of goods made during limitations or prescription.
the auction are not final until  He may, however, be represented in
confirmed by the seller. a contract by his guardian. The
2. Auction without reserve – father and the mother jointly
the goods may not be exercise legal guardianship over the
withdrawn by the seller and property of the minor child without
they must be sold to the need of a court appointment, except
highest bidder. that they are required to furnish a
bond when the market value of the
property or the annual income of the
Art. 1327. The following cannot give child exceed Php 50,000.00.
consent to a contract:
1. Unemancipated minors; Insane
2. Insane or demented persons, and
deaf-mutes who do not know how  As to the defense of insanity, the law
to write. presumes that every person is of
sound mind, in the absence of proof
to the contrary.
Importance to Give Capacity  If a contracting party is under
guardianship by reason of insanity,
 The legal capacity of the parties is there is naturally a presumption of
the essential element for the insanity.
existence of the contract because it  However, the presumption of
is an indispensable condition for the insanity and mental incapacity is
existence of consent. only prima facie and may be

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rebutted by evidence; and that a 3. Management of his property;

person under guardianship for and
insanity ay still enter into a valid 4. Disposition of his property by
contact and even convey property, any act or any conveyance
provided it is proven that at the time inter vivos.
of entering into said contract, he was
not insane or that his mental defect if
mentally deranged did not interfere Art. 1328. Contracts entered into during
with or affect his capacity to a lucid interval are valid.
appreciate the meaning and
significance of the transaction
entered into by him.
Lucid Interval
 Under Article 1328, contracts
entered into during a lucid interval
are valid.
 Lucid interval is defined as the
Illiteracy intervals occurring in the mental life
of an insane person during which he
 Illiteracy, in itself, is not an is completely restored to the use of
incapacity to give consent, except his reason, or so far restored that he
when he is also a dead-mute. has sufficient intelligence, judgment,
 Under Article 1327 (2), a deaf-mute and will to enter into contractual
who does not know how to write is relations, or perform other legal acts,
deemed incapable of giving consent without disqualification by reason of
to a contract. disease.
 “Contracts agreed to in a state of
drunkenness or during a hypnotic
Old Age or Other Physical Infirmities sell are voidable.”

 A person is not, as a general rule,

incapacitated to enter into a contract Art. 1329. The incapacity declared in
merely because of advanced years Article 1327 is subject to the
or by reason of physical infirmities. modifications determined by law, and is
 However, when such age or understood to be without prejudice to
infirmities impair his mental faculties special disqualifications established in
to the extent that he is unable to the laws.
properly, intelligently, and fairly
understand the provisions of said
contract, or to such extent as to
prevent him form properly, Incapacity Declared in Article 1327
intelligently, and fairly protecting his  According to Article 1329, the
rights, is considered incapacitated. incapacity declared un Article 1327
“is understood to be without
prejudice to special disqualifications
Civil Interdiction established in the laws.”
 Incapacities must be distinguished
 Civil interdiction is an accessory from disqualification. Incapacities
penalty imposed upon an accused are limitations on capacity to act and
who is sentenced to a principal are, therefore, restrictions on the
penalty not lower than reclusion exercise of the right, and are
temporal, which is a penalty ranging founded on subjective
from twelve years and one day to circumstances within the person
twenty years. afflicted thereof; whereas,
 It deprives the offender during the disqualifications or prohibitions
time of his sentence of the following are not imitations on capacity to act
rights: but merely restrictions on the
1. Parental authority, or enjoyment of the right and are based
guardianship, either as to the on reasons of morality.
person or property of any  Examples of prohibitions or special
ward; disqualifications:
2. Marital authority;

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1. The spouses and persons Vices of Consent

living together as husband
and wife without valid  Consent in contracts presupposes
marriage are prohibited from the following requisites:
making donations to each 1. It should be intelligent or with
other. an exact notion of the matter
2. The spouses cannot sell to to which it refers;
each other, except when the 2. It should be free; and
property regime is complete 3. It should be spontaneous.
separation.  Intelligence in consent is vitiated by
3. The guardian cannot acquire error; freedom by violence,
by purchase, even at a intimidation or undue influence; and
public or judicial action, the spontaneity by fraud.
property of the ward.  Thus, a contract where consent is
4. The agent cannot acquire, given through mistake, violence,
even at a public or judicial intimidation, undue influence, or
action, the property whose fraud is voidable. These
administration or sale has circumstances are defects of the will,
been trusted to him, unless the existence of which impairs the
the consent of the principal freedom, intelligence, spontaneity,
has been given. and voluntariness of the party in
5. The executor or giving consent to the agreement.
administrator cannot acquire Art. 1331. In order that mistake may
by purchase, even at a invalidate consent, it should refer to the
public or judicial action, the substance of the thing which is the
property of the state under object of the contract, or to those
his administration. conditions which have principally moved
6. Public officer and employees one or both parties to enter into the
cannot acquire by purchase, contract.
even at a public or judicial
action, the property of the Mistake as to the identity or
State or of any subdivision qualifications of one of the parties will
thereof or of any vitiate consent only when such identity
government-owned or or qualifications have principally moved
controlled corporation or one or both parties to enter into the
institution, the administration contract.
of which has been entrusted
A simple mistake of account shall
to them.
give rise to its correction.
7. Justices, judges, prosecuting
attorneys, clerks of superior
and inferior courts, and other
officers and employees Covers Both Mistake and Ignorance
connected with the  Ignorance is the absence of
administration of justice, knowledge with respect to a thing;
including attorneys or while mistake properly speaking is a
lawyers, cannot acquire by wrong conception about said thing,
purchase, even at a public or or a belief in the existence of some
judicial action, the property circumstance, fact, or event, which
and right in litigation or levied in reality does not exist.
upon an execution before the  The concept of mistake in Article
court within whose 1331 which may validate consent
jurisdiction or territory they covers both notions since in both
exercise their respective cases, there is lack of full and
jurisdiction. correct knowledge about the thing,
hence, the identity as to their
juridical effects.
Art. 1330. A contract where consent is
given through mistake, violence,
intimidation, undue influence, or fraud is Character of Mistake Which Annuls
voidable. Consent

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 According to the Civil Code, in order extension of dimension of the

that mistake may invalidate consent, object and differs from the
it is necessary that: mistake of account which is
1. It should refer to the simply a mistake in the
substance of the thing which computation or in a
is the object of the contract, mathematical operation.
or to those conditions which
have principally moved one
or both parties to enter into Mistake as to Conditions
the contract, or to the identity
or qualifications of one of the  According to Article 1331, mistake
parties when the same been as to conditions will invalidate
the principal cause of the consent only when they are
contract; essential, or have principally moved
2. It must be excusable and not one or both parties to enter into the
one that could have been contract.
avoided by the party alleging;  But when the conditions are not
and essential but merely incidental, they
3. It must generally be a will not invalidate consent.
mistake of fact and not
mistake of law.
Mistake as to Identify or Qualifications of
Parties
 For mistake as to the qualification of
one of the parties, two requisites
must concur:
1. The mistake must be either
Mistake as to Object of Contract with regard to the identity or
with regard to the
 Mistake as to the object of the qualification of one of the
contract (error in re) may either be: contracting parties; and
1. Mistake over the identity of 2. The identity or qualification
the thing (error in coropre) – must have been the principal
which happens when one consideration for the
thing is mistaken for another. celebration of the contract.
Example: substitution of a
specific thing by the parties
with another. Mistake as to Non-Essential Elements
2. Mistake over the essence
or the substantial qualities  The following kinds of mistake do
of a thing (error in sustantia) not vitiate consent because they
– which affects not the refer merely to non-essential
identity of the thing but the elements of the contract:
materials which compose it. 1. Mistake as to the identity or
Example: the purchase of an qualification of one of the
object which is gold plated in contracting parties, unless
the belief that it is really gold. such identity or qualification
3. Mistake over determinate have been the principal
attributes or consideration for the
characteristics of a thing celebration of the contract.
foreign to its matter, but 2. A simple mistake of account,
which has been or mistake in mathematical
understood as essential by operation. Hence, the
the contracting parties remedy is simply correction.
(error in sustantia) – 3. Mistake as to motive
Example: a painting by Goya because the latter is not an
is bought and the painting is essential element of contract,
not of Goya. unless the motive
4. Mistake as to amount (error predetermines the purpose of
in quantitate) – which refers the contract, in which case, it
to mistake as to the

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also becomes the cause of

the contract.
Mistake Must Be Excusable
 To invalidate consent, the error must
Art. 1332. When one of the parties is be excusable. It must be real error,
unable to read, or if the contract is in a and not one that could have bee
language not understood by him, and avoided by the party alleging it.
mistake or fraud is alleged, the person  The error must arise from facts
enforcing the contract must show that unknown to him. He cannot allege
the terms thereof have been fully an error which refers to a fact known
explained to the former. to him, or which he should have
known by ordinary diligent
examination of the facts.
Effect If A Party Is Illiterate  Thus, Article 1333 provides that
“there is no mistake if the party
 The general rule is that whosoever alleging it knew the doubt,
alleges fraud or mistake in any contingency or risk affecting the
transaction must substantiate his object of the contract.”
allegation, since it is presumed that  Consequently, an error so patent
a person takes ordinary care for his and obvious that nobody could have
concerns and that private made it, or one which could have
transactions have been fair and been avoided by ordinary prudence,
regular. cannot be invoked by the one who
 The exception to this rule is provided made it in order to annul his
for under Article 1332 which contract. Likewise, a mistake that is
provides “When one of the parties is caused by manifest negligence
unable to read, or if the contract is in cannot invalidate a juridical act.
a language not understood by him,
and mistake or fraud is alleged, the
person enforcing the contract must Art. 1334. Mutual error as to the legal
show that the terms thereof have effect of an agreement when the real
been fully explained to the former.” purpose of the parties is frustrated, may
 Under said article, where party is vitiate consent.
unable to read or when the contract
is in a language not understood by
the party and mistake or fraud is
alleged, the obligation to show that Mistake Must Be of Fact
the terms of contract had been fully  As a general rule, in order that
explained to said party who is mistake may invalidate consent, the
unable to read or understand the same should refer to a mistake of
language of the contract devolves on fact and not of law.
the party seeking to enforce the  Ordinarily, a mistake of law does not
contract to show that the other party vitiate consent because of the rule
fully understood the contents of the that “ignorance of the law excuses
document. If her fails to discharge no one from compliance therewith.”
this burden, the presumption of  Article 1334 is an exception,
mistake, if not fraud, stands however, to the foregoing rule.
unrebutted, and controlling. Under this article, “mutual error as to
 It must be stressed, however, that the legal effect of an agreement
Article 1332 contemplates a situation when the real purpose of the parties
wherein a contract has been entered is frustrated, may vitiate consent.”
into, but the consent of one of the  In order, however, for a mistake of
parties is vitiated by mistake or fraud law to invalidate consent, the
committed by the other contracting following requisites must be present:
party. 1. The mistake must be with
respect to the legal effect of
an agreement;
Art. 1333. There is no mistake if the party 2. It must be mutual; and
alleging it knew the doubt, contingency 3. The real purpose of the
or risk affecting the object of the parties must have been
contract. frustrated.

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 Such violence will annul the

obligation, although it may have
Art. 1335. There is violence when in been employed by a third person
order to wrest consent, serious or who did not take part in the contract.
irresistible force is employed.
There is intimidation when one of
the contracting parties is compelled by a Requisites of Intimidation
reasonable and well-grounded fear of an
imminent and grave evil upon his person  According to the Article 1335 (2),
or property, or upon the person or “there is intimidation when one of
property of his spouse, descendants or the contracting parties is compelled
ascendants, to give his consent. by a reasonable and well-grounded
fear of an imminent and grave evil
To determine the degree of the upon his person or property, or upon
intimidation, the age, sex, and condition the person or property of his
of the person shall be born in mind. spouse, descendants or
ascendants, to give his consent.”
A threat to enforce one’s claim  In order that intimidation may vitiate
through competent authority, if the claim consent and render the contract
is just or legal, does not vitiate consent. invalid, the following requisites must
Art. 1336. Violence or intimidation shall concur:
annul the obligation, although it may 1. That the intimidation must be
have been employed by a third person the determining cause of the
who did not take part in the contract. contract, or must have
caused the consent to be
given;
2. That the threatened act be
Violence and Intimidation Distinguished
unjust or unlawful;
 Violence and intimidation are both 3. That the threat be real and
forms of duress but in varying serious, there being an
degrees. In both, the party is evident disproportion
deprived of free will and choice. between the evil and the
 Violence refers to physical force or resistance which all men can
compulsion while intimidation refers offer, leading to the choice of
to moral force or compulsion. In the the contract as the lesser
former, there is actual infliction of evil; and
harm; while in the latter, there is 4. That it produces a
merely a threat to inflict harm. reasonable and well-
 Violence, therefore, is external and grounded fear from the fact
generally prevents the will from that the person from whom it
acting at all, whereas intimidation is comes has the necessary
internal and does not prevent the will means or ability to inflict the
from operating but merely directs it threatened injury.
to operate in only one particular  In determining the degree of
manner. intimidation, the age, sex, and
condition of the person shall be
borne in mind.
Requisites of Violence  The intimidation will annul the
obligation, although it may have
 According to the Article 1335 (1), been employed by a third person
“there is violence when in order to who did not take part in the contract.
wrest consent, serious or irresistible  However, a threat to enforce one’s
force is employed.” claim through competent authority, if
 Therefore, in order that violence may the claim is just or legal, does not
vitiate consent and be a ground for vitiate consent.
annulment of a contract, the
following requisites must be present:
1. The force employed is either Art. 1337. There is undue influence when
serious or irresistible; and a person takes improper advantage of
2. It must have been the his power over the will of another,
determining cause of depriving the latter of a reasonable
consent. freedom of choice. The following

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circumstances shall be considered: the person into error after taking the
confidential, family, spiritual and other circumstances into account.
relations between the parties, or the fact  Insidious machination refers to a
that the person alleged to have been deceitful scheme or plot with an evil
unduly influenced was suffering from or devious purpose.
mental weakness, or was ignorant or in  Deceit exists where the party, with
financial distress. intent to deceive, conceals or omits
to state material facts and, by
reason of such omission or
Undue Influence concealment, the other party was
induced to give consent that would
 There is undue influence when a not otherwise have been given.
person takes improper advantage of  The deceit employed must be
his power over the will of another, serious.
depriving the latter of a reasonable
freedom of choice.
 Undue influence is any means Kinds of Fraud
employed upon by a party which,
under the circumstances, he could  Fraud may be present or employed
not well resist and which controlled during the performance of the
his volition and induced him to give obligation. Here, fraud is defined as
consent to the contract, which the deliberate and intentional
otherwise he would not have entered evasion of the normal fulfillment of
into. obligation, and properly corresponds
 It must in some measure destroy the to malice or bad faith. This is the
free agency of party and interfere kind of fraud referred to in Articles
with the exercise of that independent 1170 and 1171.
discretion which is necessary for  Fraud may also be present or
determining the advantages or employed or employed at the time of
disadvantages of a proposed birth or perfection of a contract. This
contract. is the kind of fraud referred to in
 In determining the existence of Article 1338, “There is fraud when,
undue influence, the following through insidious words and
circumstances shall be considered: machinations of one of the
the confidential, family, spiritual and contracting parties, the other is
other relations between the parties, induced to enter into a contract
or the fact that the person alleged to which, without them, he would not
have been unduly influenced was have agreed to.
suffering from mental weakness, or  The latter kind of fraud, may either
was ignorant or in financial distress. be dolo causante or dolo incidente.
 In the absence of a confidential or
fiduciary relationship between the
parties, the law does not presume Dolo Causante or Casual Fraud
that one person exercised undue
influence upon the other.  are those deceptions or
misrepresentations of a serious
character employed by one party
Art. 1338. There is fraud when, through and without which the other party
insidious words and machinations of would not have entered into the
one of the contracting parties, the other contract.
is induced to enter into a contract which,  determines or is the essential cause
without them, he would not have agreed of the consent.
to.  The effects are the nullity of contract
and the indemnification of damages.

Concept of Fraud
Dolo incidente or Incidental Fraud
 Fraud refers to all kinds of
deception, whether through insidious  are those which are not serious in
machination, manipulation, character and without which the
concealment or misrepresentation, other party would still have entered
that would lead an ordinarily prudent into the contract.

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 refers only to some particular or is true that mere silence is not in

accident of the obligation. itself concealment. Concealment
 The effect only obliges the person which the law denounces as
employing it to pay damages. fraudulent implies a purpose or
design to hide facts which the other
party ought to know.
Requisites of Fraud That Vitiates  Fraudulent concealment
Consent presupposes a duty to disclose the
truth and that disclosure was not
1. It must have been employed by one made when opportunity to speak
contracting party upon other; and inform was presented, and that
2. It must have induced the other party the party to whom the duty of
to enter into the contract; disclosure, as to a material fact was
3. It must have been serious; and due, was induced thereby to act to
4. It must have resulted in damage and his injury.
injury to the party seeking  Pursuant to Article 1339, silence or
annulment. concealment, by itself, does not
constitute fraud, unless there is a
special duty to disclose certain facts,
Employed By One Against Another or unless according to good faith
and the usages of commerce the
 The fraud which vitiates consent communication should be made.
must have been employed by one of
the contracting parties only and
should not have been employed by
Art. 1340. The usual exaggerations in
both of them; otherwise, the contract
trade, when the other party had an
is not voidable.
opportunity to know the facts, are not in
 Fraud must have been employed by
themselves fraudulent.
a contracting party upon another and
not by a third person.
Usual Exaggerations In Trade
Quantum of Evidence To Prove Fraud  The usual exaggerations in trade,
when the other party had an
 The Civil Code, however, does not
opportunity to know the facts, are not
mandate the quantum of evidence
in themselves fraudulent.
required to prove actionable fraud,
 The law allows considerable latitude
either for purposes of annulling a
to seller’s statements, or dealer’s
contract (dolo causante) or
talk; and experience teaches that it
rendering a party liable for damages
is exceedingly risky to accept it at its
(dolo incidente).
face value.
 For the purpose of annulling a
contract on the basis of dolo
causante, the standard of proof
required is clear and convincing Art. 1341. A mere expression of an
evidence. It is less than proof opinion does not signify fraud, unless
beyond reasonable (for criminal made by an expert and the other party
cases) but greater than has relied on the former’s special
preponderance of evidence (for civil knowledge.
cases).

Expression of Opinion
Art. 1339. Failure to disclose facts, when  As a general rule, a mere expression
there is a duty to reveal them, as when of opinion does not signify fraud.
the parties are bound by confidential  A misinterpretation upon a mere
relations, constitute fraud. matter of opinion is not an actionable
deceit, nor is it a sufficient ground for
avoiding a contract as fraudulent,
Rule on Silence And Concealment because there is a difference
between giving an honest opinion
 Fraud includes all kinds of
and making a false representation.
deception, including concealment. It

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 The exception to the foregoing rule Incidental fraud only obliges the
is when the opinion is made by an person employing it to pay damages.
expert and the other party relied on
the former’s special knowledge.
 Hence, where one party to a Fraud Must Be Serious
contract, having special or expert
knowledge, takes advantage of the  Under Article 1344, the fraud must
ignorance of another to impose upon be serious to annul or avoid a
him, the false interpretation may contract and render it voidable.
afford ground for relief, though  The fraud is serious when it is
otherwise the injured party would be sufficient to impress, or to lead an
bound. ordinarily prudent person into error;
that which cannot deceive a prudent
person cannot be ground for nullity.
Art. 1342. Misrepresentation by a third
person does not vitiate consent, unless
such misinterpretation has created a Fraud Must Be Dolo Causante
substantial mistake and the same is
 In order that fraud may vitiate
mutual.
consent, it must be the casual (dolo
Art. 1343. Misrepresentation made in causante), not merely the incidental
good faith is not fraudulent but may (dolo incidente), inducement to the
constitute error. making of the contract.

Misrepresentation By A Third Peson Art. 1345. Simulation of contract may be

absolute or relative. The former takes
 Misrepresentation by a third person place when the parties do not intent to
does not vitiate consent, unless such be bound at all; the latter when the
misinterpretation has created a parties conceal their true agreement.
substantial mistake and the same is
mutual. Art. 1346. An absolutely simulated or
 The rationale for the rule is “there is fictitious contract is void. A relative
no reason for making one of the simulation, when it does not prejudice a
parties suffer for the consequences third person and is not intended for any
of the act of a third person in whom purpose contrary to law, morals, good
the other contracting party may have customs, public order or public policy
reposed an imprudent confidence.” binds the parties to their real agreement.
 The fraud caused by a third person
may produce effects and, in some
cases, bring about the nullification of Simulation of Contracts
the contract. This will happen when
the third person causes in  Simulation is the declaration of
connivance with, or at least with the fictitious will, deliberately made by
knowledge, without protest, of the agreement of the parties, in order to
favored contracting party, in which produce, for the purposes of
case the latter cannot be considered deception, the appearances of a
exempt from the responsibility. juridical act which does not exist or
 By way of exception, however, to the is different with that which was really
foregoing rule, a contract may be executed.
invalidated by substantial mistake  Its requisites are:
mutually committed by the 1. An outward declaration of will
contracting parties as a different from the will of the
consequence of the fraud and parties
misrepresentation committed by a 2. The false appearance must
third party. have been intended by
mutual agreement; and
3. The purpose is to deceive
third persons.
Art. 1344. In order that fraud may make a
 Simulation or vices of declaration
contract voidable, it should be serious
may either be absolute or relative.
and should not have been employed by
both contracting parties.

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Absolute Simulation future things, may be the object of the

contract. All rights which are not
 there is a colorable contract but it intransmissible may also be the object
has no substance as the parties of contracts.
have no intention to be bound by it.
 The main characteristic is that the No contract may be entered into
apparent contract is not really upon future inheritance except in cases
desired or intended to produce legal expressly authorized by law.
effect or in any way alter the juridical
situation of the parties. All services which are not
 As a result, the contract is void, and contrary to law, morals, good customs,
the parties may recover from each public order, or public policy may
other what they may have given likewise be the object of a contract.
under the contract.
 There appears to be a valid contract
but there is actually none because Concept of Object of Contracts
the element of consent is lacking
 The object of the contract is the
because the parties do not actually
subject matter.
intend to be bound by the terms of
 In Article 1347, a contract can have
the contract.
as its object or subject matter either
a thing, right or service.
 In obligations arising from contracts,
Relative Simulation a distinction must be made between
 The parties conceal their true the object of the obligation and the
agreement. object of the contract.
 The essential requisites of a contract 1. Object of the obligation – is
are present and the stimulation the prestation or the conduct
refers only to the content or terms of required to be observed by
the contract. the debtor (to give, to do or
 There are two (2) juridical acts not to do).
involved: 2. Object of the contract – is
1. Ostensible act – is the the subject matter of the
contract that the parties prestation, which can either
pretend to have executed. be a thing, right or service.
2. Hidden act – is the true
agreement between the
parties. Requisites of Object of Contract
 To determine the enforceability of
 In order for a thing, right or service
the actual agreement between the
to be the object of a contract, the
parties, we must discern whether the
following requisites must concur:
concealed or hidden act is lawful
1. It must be within the
and the essential requisites of a
commerce of men;
valid contract are present.
2. It must be licit;
 Thus, Article 1346 provides that a
3. It must be real or possible;
relative simulation binds the parties
and
to their real agreement “when it
4. It must be determinate or
does not prejudice a third person
susceptible to determination.
and is not intended for any purpose
 The following cannot, therefore, be
contrary to law, morals, good
the object of contracts:
customs, public order or public
1. Things which are outside the
policy binds the parties to their real
commerce of men;
agreement.”
2. Right which are
 The primary consideration in
intransmissible;
determining the true nature of a
3. Future inheritance, except in
contract is the intention of the
cases expressly authorized
parties.
by law;
4. Services which are contrary
Section 2. – Object of Contracts to law, morals, good
customs, public order or
Art. 1347. All things which are not public policy;
outside the commerce of men, including

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5. Impossible things or
services;
6. Things which are not Must Have Possibility or Potentiality of
susceptible to determination Existence
as to its kind; and  In order for the contract to be valid, it
7. Things which do not have the is necessary that the object thereof
possibility or potentiality of must either be:
coming into existence. 1. Existing at the time of the
perfection of the contract; or
2. Even if not existing at that
Must Be Within Commerce of Men time, at least, it has the
possibility or potentiality of
 All things which are not outside the coming into existence.
commerce of men, including future  Hence, Article 1347 (1) states that
things, may be the object of a “future things” can be the object of
contract. the contract.
 Things which are not outside the  Future thing is understood as
commerce of men cannot become anything which is not yet owned or
objects of contracts. possessed by the obligor at the time
 Any contract whose object is outside of the celebration of contract, but it
the commerce of men is void. may be manufactured, raised or
 To be considered within the acquired after the perfection of the
commerce of men, a thing must be: contract.
1. Susceptible of appropriation  When the object of the contract is a
or of private ownership; and future thing, there are two
2. Transmissible. possibilities:
 The following things may not be the 1. The contract is conditional –
object of a contract because they the efficacy of the contract is
are not susceptible of appropriation, dependent upon the future
therefore, outside the commerce of existence of the thing; or
men; 2. It is aleatory – one of the
1. Properties of public parties bears the risk of the
dominion; thing never coming into
2. Sacred things and common existence.
things.  The foregoing rule which allows
 Rights which are intransmissible “future things” to be the object of the
may not also be the object of a contract admits of two exceptions:
contract because they are also 1. Future inheritance may not
considered outside the commerce of be the object of a contract
men, such as: unless it is in the nature of a
1. Purely personal rights – such partition inter vivos made by
as patria potestas or marital the decedent; and
authority, the status and 2. Future property may not be
capacity of persons, and the object of donation, unless
honorary titles and the donation is between the
distinctions. future spouses, in
2. Public offices, inherent consideration of their
attributes of the public marriage, and to take effect
authority, and political rights after death.
of individuals – such as the
right of suffrage.

Must Be Licit Future Inheritance

 To be an object of a contract, the  Article 1347 (2) provides that “no
thing or service must not be contrary contract may be entered into upon
to law, morals, good customs, public future inheritance except in cases
order or public policy. expressly authorized by law.” The
 Ant contract whose object is contrary same law authorizes a contract
to law, morals, good customs, public entered into upon future inheritance
order or public policy is void. as void.

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 For the inheritance to be considered  According to Article 1348,

future, the succession must not have “impossible things or services
been opened at the time of the cannot be the object of contracts.
contract.  An impossible thing is one which is
 A contract must be classified as a not susceptible of coming into
contract upon future inheritance, existence or outside the commerce
prohibited under Article 1347 (2), of men.
where the following requisite concur:  An impossible service is that which
1. That the succession has not is beyond the ordinary power of man
yet been opened; or that which is against the law,
2. That the object of the morals, good customs, public order,
contract forms part of the or public policy.
inheritance; and  As to impossible services, the
3. That the promisor has, with impossibility may either be:
respect to the object, an 1. Absolute – when nobody
expectancy of a right which is can perform it. This nullifies
purely hereditary in nature. the contract.
 The prohibition on contracts 2. Relative – when it cannot be
respecting future inheritance admits performed because of the
of an exception, which is the special conditions or
partition inter vivos referred to in qualifications of the obligor.
Article 1080 of the Civil Code.  In relative impossibility, the effects
thereof shall depend on whether the
same is temporary or permanent.
Donation of Future Property 1. Temporary – it does not
nullify the contract, such as
 Donations cannot comprehend when a partner agrees to
future property. As being itself a contribute to the partnership
mode of acquiring ownership, a sum more than what his
donation results in an effective means allow.
transfer of title over the property 2. Permanent – it nullifies the
from the donor to the done once the contract, such as blindness
donation is perfected. in a contract which requires
 For this reason, the law requires that the use of eyesight.
the donor must be the owner of the  The impossibility contemplated by
thing donated at the time of the Article 1348, as to services, is that of
donation. This, in essence, is the absolute impossibility. In case of
meaning of rule in Article 751 that relative impossibility, the debtor
“donations cannot comprehend becomes liable for damages if he
future property.” If the rule were cannot perform the undertaking.
otherwise, it will be an inefficacious
process since the donor will have
nothing to convey at the time that Art. 1349. The object of every contract
donation is made following the rule must be determinate as to its kind. The
that “no one can give what he does fact that the quantity is not determinate
not have.” shall be an obstacle to the existence of
 By future property is understood the contract, provided it is possible to
anything which the donor cannot determine the same, without the need of
dispose of at the time of the anew contract between the parties.
donation.
 By wat of exception to the foregoing
rule, the Family Code allows a
donation of future property between
the future spouses in donation
propter nuptias.
Art. 1348. Impossible things or services
cannot be the object of contracts. It Must Be Determinate or Susceptible to
Determination
 The object of a contract, in order to
Impossible Things or Services be considered as certain, need not
specify such object with absolute

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certainty. It is enough that the object 3. Contracts of pure

is determinable in order for it to be beneficence
considered as certain.
 In order for the object of the contract
to be considered “determinate”, it is Onerous Contracts
not necessary that the same be
particularly designated or physically  The cause is understood to be, for
segregated from all others of the each contracting party, the
same class. It is sufficient that the prestation or promise of a thing or
object be determinate as to its kind service by the other.
or species.  The cause of the obligation of one
 Where the intention of the parties party is the expectation of
relative to the principal object of the performance of the obligation of the
contract cannot be ascertained, other.
Article 1409 (6) declares that the  It is not necessary , however, that
contract is void or inexistent. both be civil obligations.
 This principle is echoed in Article
1378 (2) which states that “if the
doubts are cast upon the principal Remuneratory Contracts
object of the contract in such a way
that it cannot be known what may  The cause is the service or benefit
have been the intention or will of the which is remunerated.
parties, the contract shall be null  The consideration is the service or
and void. benefit for which the remuneration is
given; causa is not liberality in these
cases because the contract or
conveyance is not made out of pure
Section 3. – Cause of Contracts
beneficence, but solvendi animo.
Art. 1350. In onerous contracts the  It is essential, however, that the
cause is understood to be, for each service or benefit for which the
contracting party, the prestation or remuneration is given must not be in
promise of a thing or service by the the nature of demandable debt (or
other; remuneratory ones, the service or legal obligation), otherwise, it will be
benefit which is remunerated, and in an onerous not a remuneratory
contracts of pure beneficence, the mere contract.
liberality of the benefactor.

Contracts of Pure Benficence

Concept of Cause of Contracts
 The cause is the mere liberality of
 Cause or consideration is the “why the benefactor.
of the contracts, the essential  The liberality of the donor is deemed
reason which moves the contracting the causa.
parties to enter into the contract.”  Here, the contract is designed solely
 Cause the immediate, direct, and and exclusively to procure the
proximate reason which justifies the welfare of the beneficiary, without
creation of an obligation through the any intent of producing any
will of the contracting parties. satisfaction for the donor.
 In reality therefore, what is referred  The idea of self-interest is totally
to as the cause of the contract is absent on the part of the transferor.
actually the cause of the obligation.

Art. 1351. The particular motives of the

parties in entering into a contract are
different from the cause thereof.

Kinds of Cause
Distinguished from Motive
 The various causes are as follows:
1. Onerous contracts;  Ordinarily, cause is different from
2. Remuneratory contracts; and motive. This principle is stated in
Article 1351, “The particular motives

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of the parties in entering into a contract. When they blend to that

contract are different from the cause degree, and the motive is unlawful,
thereof.” then the contract entered into is null
 Cause is distinguished from motive and void. If the motive (which is also
as follows: the causa) is negated, the contract
1. Cause or consideration is becomes inexistent.
defined as some right,
interest, benefit, or
advantage, conferred upon Art. 1352. Contracts without cause, or
the promissor, to which he is with unlawful cause, produce no effect
otherwise not lawfully whatever. The cause is unlawful if it is
entitled, or any detriment, contrary to law, morals, good customs,
prejudice, loss, or public order, or public policy.
disadvantages suffered or
undertaken by the promise
other than to such as he is at
Requisites of Cause
the time of consent bound to
suffer; whereas motive is the 1. It must exist;
condition of mind which 2. It must be true;
incites to action, but includes 3. It must be lawful.
also the inference as to the
existence of such condition,
from an external fact of a Existing and Lawful Cause
nature to produce such a
condition;  Cause is one of the essential
2. Cause is the essential elements of a contract. Article 1352
reason for the contract, while declares that “contracts without
motive is the particular cause, or with unlawful cause,
reason of a contracting party produce no effect whatever.”
which does not affect the  If the contract is without a cause, it is
other party; actually inexistent because the same
3. Cause is the immediate, is absolutely simulated or fictitious.
direct and proximate reason  Where the cause is unlawful, or
which justifies the creation of contrary to law, morals, good
an obligation through the will customs, public order, or public
of the contracting parties, policy, the contract is void ab inittio.
while motive is the remote  A contract with an unlawful cause
reason for entering into a should be distinguished from a
contract. contract without cause.
4. Cause refers to the objective 1. Contract with an unlawful
aspect which justifies the cause – the cause exists but
creation of the contract and it is unlawful. Here, the
is known to the other party, contract should properly be
while motive is the subjective classified as void and not
aspect and may not be merely inexistent.
known to the other party. 2. Contract without a cause –
 As a general rule, the motive or there is an absence of an
particular purpose of a party entering essential element which
into a contract does not affect the prevents the existence of a
validity nor existence of the contract. valid contract.
However, the motive may be
regarded as causa when it
predetermines the purpose of the Art. 1353. The statement of a false cause
contract. in contracts shall render them void, if it
 The motive predetermines the should not be proved that they were
purpose of the contract when the founded upon another cause which is
realization of such motive or true and lawful.
particular purpose has been made a
condition upon which the contract is
made to depend. If the motive True Cause
becomes the case, it may now affect
the validity or existence of the  Article 1353 provides that “the
statement of a false cause in

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contracts shall render them void, if it who has that burden is relieved from
should not be proved that they were the time being from introducing
founded upon another cause which evidence in support of the averment,
is true and lawful.” because the presumption stands in
 The provision should not refer to a the place of evidence unless
situation where the contract has in rebutted.
fact a real consideration but the
same is not stated in the document
because here there is only a case of Art. 1355. Except in cases specified by
relative simulation. law, lesion or inadequacy of cause shall
 The statement of false cause must not invalidate a contract, unless there
be interpreted in conjunction with has been fraud, mistake, or undue
Article 1471 which states that “if the influence.
price is simulated, the sale is void,
but the act may be shown to have
been in reality a donation, or some
Effect of Lesion or Inadequacy of Cause
other act or contract.”
 What is contemplated in this article  Inadequacy of the consideration
is a case of absolute simulation, does not render a contract void,
such as when the deed of sale even if it is a case of gross
states that the purchase price has inadequacy of the price. The reason
been paid but in fact has never been for the rule is that a bad transaction
paid, in which case the sale is null cannot serve as a basis for voiding a
and void ab initio produces no effect contract.
whatsoever.  Under Article 1355, inadequacy of
cause shall not invalidate a contract,
unless there has been fraud,
Art. 1354. Although the cause is not mistake, or undue influence.
stated in the contract, it is presumed
that it exists and is lawful, unless the
debtor proves the contrary.

Presumption of Existence and

Lawfulness of Cause
 Under Article 1354, it is presumed
that consideration exists and is
lawful unless the debtor proves the
contrary.
 Under Section 3, Rule 131 of the
Rules of Court, the following are
disputable presumptions:
1. Private transactions have
been fair and regular;
2. The ordinary course od
business has been followed;
and
3. There was sufficient
consideration for a contract.
 A presumption may operate against
an adversary who has not
introduced proof to rebut it. The
effect of legal presumption upon a
burden of proof is to create the
necessity of presenting evidence to
meet the legal presumption or the
prima facie case created thereby,
and which, if no proof to contrary is
presented or offered, will prevail.
 The burden of proof remains where
it is, but by the presumption, the one

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YRSC – Obligations and Contracts Reviewer, 2019-2020