MODULE 7

• Stages in the Life of a Contract


  1. Preparation or negotiation

  2. Perfection or birth of the contract

  3. Consummation or termination
• Consensual contract


  The contract exists upon the perfection of mutual consent even if the subject matter or the consideration has not been delivered
• Real contract


  The contract is perfected not merely by mutual consent but by the actual or constructive delivery of the object of the obligation
• Solemn contract


  The contract is perfected upon the execution of the form required by law
• A person is not bound by the contract of another to which they have no knowledge or to which they have not given any consent
• A contract entered into in the name of another by one with no authority is unenforceable against the former unless ratified by them before the other contracting party revokes it
• A lapse of time cannot remedy such unauthorized contract except insofar as it has been subsequently ratified by the person in whose name the contract was entered into or by their duly authorized representative
• Essential Requisites of Contracts


  • Consent of the contracting parties
  • Object certain, which is the subject of the contract
  • Cause of the obligation that is established
• Consent


  Manifested by meeting the offer and accepting the thing and the cause, which constitute the contract
• The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counteroffer
• Cognition Theory


  Acceptance takes effect from the time the offeror knows of the offeree's acceptance
• Manifestation Theory


  Acceptance will take effect once the offeree manifests it
• Acceptance must be made before the offer becomes ineffective, that is, before the withdrawal of the offer by the offeror or before the death, civil interdiction, insanity, or insolvency of either party
• An acceptance may be expressed or implied
• The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with
• An offer made through an agent is accepted from the time acceptance is communicated to him
• An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed
• Option contract


  Where the offeror gives the offeree for consideration a certain period within which to accept the offer
• Option period


  The period within which the offeree must accept the offer
• Option money


  The money paid or promised to be paid in consideration for the option
• Earnest Money


  Given only where there is already a sale. When earnest money is given, the buyer is bound to pay the balance. It is part of the purchase price
• Business advertisements of things for sale are not definite offers but mere invitations to make an offer
• 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
• Persons who cannot give consent (Incapacitated Persons)


  • Unemancipated minors
  • Insane or demented persons
  • Deaf-mutes who do not know how to write
• Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable
• If both parties in the contract are incapacitated persons, then the contract is enforceable, which means it cannot be enforced unless it is ratified
• If only one of the parties is incapable of giving consent, then the contract is voidable, which means that the contract is valid until annulled
• Vices of Consent (Vitiated Consent)


  • Mistake
  • Violence
  • Intimidation
  • Undue Influence
  • Fraud
• Mistake


  Refers to the substance of the thing which is the object of the contract, the conditions that have principally moved both parties to enter into the contract, the identity or qualifications that have been the principal cause of the contract, or the legal effect of an agreement when the real purpose of the parties is frustrated
• Violence


  Serious or irresistible force is employed to compel a person to enter into a contract
• Vices of consent


  • Mistake
  • Violence
  • Intimidation
  • Undue Influence
  • Fraud
• Void contract


  Contract is void if consent is given through any of the vices mentioned above
• Voidable contract


  Binding unless annulled by a proper action in court
• Conditions for mistake to invalidate consent


  • Substance of the thing which is the object of the contract
  • Conditions that have principally moved both parties to enter into the contract
  • Identity or qualifications that have been the principal cause of the contract
  • Legal effect of an agreement, when the real purpose of the parties is frustrated
• Violence


  Serious or irresistible force employed to wrest consent
• Intimidation


  One of the contracting parties is compelled 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, to give his consent
• Undue Influence


  A person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice
• Factors in determining undue influence


  • Confidential, family, spiritual and other relations between the parties
  • Mental weakness of the person alleged to have been unduly influenced
  • Ignorance
  • Financial distress of the person alleged to have been unduly influenced
• Fraud


  Through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract he would not have agreed to without them
• Kinds of fraud


  • Dolo incidente or incidental fraud (not serious and without which the other party would still have entered into the contract)
  • Dolo causante or causal fraud (deceptions or misrepresentations of a serious character employed by one party without which the other party would not have entered into the contract)