Contracts

• Meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or render some service: Contract
• Real Contracts (perfected by delivery): Deposit, Commudatum, Pledge, Loan/Mutuum
• "To give that you may do" = Do ut facias
• Contract dependent upon chance (ex. insurance): Aleatory
• Only one party drafted contract: Contract of adhesion
• Creditor automatically becomes owner of property pledged/mortgaged if the debtor defaults in his payment: Pactum Commisorium = Void
• Mortgage contract, specified price below w/c mortgaged property is not to be sold at the foreclosure sale = Void
• Unconscionable interest = Void
• Debtor to work without pay until he finds money to pay debt = Void
• Hide a crime, suppress evidence, stifle the prosecution of the offender = Void
• Contract stipulated in favor of third person: Pour autrui
• Cannot give consent: minors, insane or demented (lucid intervals = valid contracts), deaf-mutes who do not know how to read or write *valid if necessities
• Consent under drunkenness and hypnotic spell = Contract voidable
• Vices of Consent (MIFUV):

  • Mistake
  • Intimidation
  • Fraud
  • Undue Influence
  • Violence
• When mistake invalidates consent:

  • mistake is with object of the contract (can have the contract canceled)
  • if mistake was known, one party would not have entered the contract (“)
  • mistake refers to legal effect of an agreement & when the real purpose of the parties is frustrated & the same is mutual
• When mistake does not vitiate consent:

  • simple mistake of account = shall only be corrected
  • if party alleging it knew the doubt, contingency or risk affecting the object
  • one party is unable to read/understand the language of the contract ( person enforcing must show that the contract has been explained to) 
• Serious, irresistible force is employed (even if by third person): Violence or Physical Coercion
• Reasonable well-grounded fear of an imminent and grave evil upon his person or property or of his spouse, descendants, ascendants (even if by third person): Intimidation
• When a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice: Undue influence
• Absolutely Simulated Contract = Void Contract; may recover what they have given
• Relatively Simulated Contract: parties conceal true agreement: bound by real agreement; only consent and term are simulated
• Contract is generally void when object is future inheritance
• Inadequacy of cause: Lesion
• Lesion invalidates contract when:

  • there is fraud, mistake, undue influence
  • by law
• Has all essential requisites but which may be set aside by reason of equity on account of damage to one of the parties or upon a third person: Rescissible Contract
• Rescissible Contracts:

  • Guardian and ward ¼ lesion
  • Representative and absentee ¼ lesion *absentee: not in his domicile; whereabouts unknown and w/o agent
  • Undertaken to defraud creditors *third person must know
  • Things under litigation
• Rescission is a last option remedy
• Party demanding rescission must be able to return whatever he is obliged to restore (w/ fruits; and price w/ interest)
• Action for rescission: 4 years from contract

  Except:

  • guardianship: from capacity
  • absentees: from when domicile is known
• Defective because of incapacity or vitiated consent; binding unless annulled by proper action in court; susceptible of ratification: Voidable Contract
• Prescriptive period for Annulment = 4 yrs from:

  • intimidation, violence, undue influence (when defect ceases)
  • mistake, fraud (when discovered)
  • minors, etc. (when guardianship ceases)
• Annulment is only available to contracting parties
• Cannot be enforced unless ratified: Unenforceable Contract
• Unenforceable Contracts:

  • Unauthorized (may be ratified expressed/impliedly by person whose name was used)
  • Statute of frauds (wholly executory contracts only)
  • Both parties incapacitated to give consent
•  Statute of Frauds:  *must be in writing

  • Not to be performed within one year
  • Special promise to answer for debt, default, or miscarriage of another; guaranty
  • Agreement in consideration of marriage, other than mutual promise to marry
  • Sale of goods, chattels, or things in action (credits, shares of stock, incorporeal rights) at a price not less than 500
  • Leasing of real property or of an interest therein for more than a year
  • Sale of real property and interest
  • Representation as to credit of third person
• No force and effect from the beginning, as if it had never been entered into; cannot be ratified, defense of illegality cannot be waived; no prescription for declaration of inexistence: Void Contract
• Void by law:

  • Donation between spouses (except moderate gifts)
  • Sale between spouses (except separation of property)
  • Household service without compensation
  • Future inheritance
• No action or relief to both parties (equal guilt): Pari delicto
• Forms of contracts to be valid:

  • donation of immovable and acceptance = public instrument
  • donation of movable with value above 500 and acceptance = writing
  • authority of agent to sell land = writing
  • contract of partnership where immovable is contributed = public instrument attached with signed inventory
• Correct error/mistake; to reveal real intention: Reformation