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TitleReviewer Contracts
TagsOffer And Acceptance Annulment Consideration Option (Finance) Complaint
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CONTRACTS

1. What are the four most essential characteristics of Contracts?

a. Obligatory Force of Contract (Art. 1315). Once a contract is
perfected, the parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good
faith, usage and law.

b. Autonomy of Contract (Art. 1306). The contracting parties are free
to enter into a contract and to establish such stipulations, clause,
terms and conditions as they may deem convenient, provided they
are not contrary to laws, morals, good customs, public order or
public policy.

Example: Cui vs. Arellano

The waiver signed by Cui, wherein he was to refund the
scholarship grant by Arellano University in case he transferred to
another school, is contrary to public policy. Scholarships are
awarded in recognition of merit and not to attract and keep brilliant
students in schools for their propaganda value. To look at such
grants as a business scheme to increase the business potential of
an educational institution is not only inconsistent with sound public
policy but also good morals.

c. Mutuality of Contract (Art. 1308). Essential equality of contracting
parties whereby the contract must bind both of them; its validity or
compliance cannot be left to the will of one of them.

Example: A leased a certain building to B and C. In the contract, it
was stated that B and C can continue occupying the building
indefinitely so long as they should faithfully fulfill their obligation of
paying the rentals. Here, the contract violates Art. 1308. The
continuance and fulfillment of the contract would then depend
solely and exclusively upon the uncontrolled choice of B and C
between continuing paying rentals or not, completely depriving the
owner of all say on the matter,

d. Relativity of Contract (Art. 1311). Contract takes effect only
between the parties, their assigns and heirs.

Exception:
1. Stipulation pour autrui (Art. 1311, par. 2). Where the contract

contains a beneficial stipulation in favor of a third person;
provided that such third person has communicated his
acceptance to the obligor before it is revoked.

2. Art, 1312. Where a third person comes into the possession of
the object of a contract creating a real right.

3. Art. 1313, Where the contract is entered into in order to
defraud a third person

4. Art. 1314. Where the third person induces a contracting party
to violate his contract.

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compelled to execute the contract of sale. True also, the option money of
P 1.00 is grossly inadequate. But the law is clear. Except in cases
specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. Such
circumstance is wanting in this case.

5. Simulation of Contracts (Arts. 1345)

a. Absolute simulation. When the parties do not intend to be bound
by the contract at all, as when a debtor simulates the sale of his
properties to a friend in order to prevent their possible
attachments by creditors.

b. Relative simulation. When the contracting parties conceal their
true agreement, as when a person conceals a donation by
simulating a sale of the property to eh beneficiary for a certain
consideration.

6. Requisites for a valid OBJECT of a contract. (Object, the thing, right or
service which is the subject matter of the obligations which is created or
established)

a. The object should be within the commerce of men
b. The object should be real or possible
c. The object should be licit
d. The object should be determinate, or at least possible of

determination, as to its kind.

7. CAUSE of Contract. The why of the contract, or the essential reason
which moves the contracting parties to enter into the contract.

a. In onerous contracts, the cause is the prestation or promise of a
thing or service by the other

b. In remuneratory contracts, the cause is the service or benefit
which is remunerated

c. In contract of pure beneficence, the liberality of the benefactor

8. Exception to the rule that the particular motives of the parties in entering
into a contract are different from the cause of the contract?

When the contract is conditioned upon the attainment of the motive of
either contracting party. In other words, the motive may be regarded as
causa when it predetermines the purpose of the contract. (Liguez vs.
Court of Appeals)

9. As a general rule, what is the form of a contract in order that it will be of
obligatory force?

As a general rule, the form in which a contract is executed has no effect
upon its obligatory force, provided all of the essential requisites for its
validity are present.

Exceptions:
1. When the law requires that the contract must be in a certain form in

order to be valid;
2. When the law requires that the contract must be in a certain form in

order to be enforceable;

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Sample Case: (Dauden-Hernaez vs. delos Angeles)

Marlene Dauden, a movie star, filed a complaint against X Co. to recover
P 14,700 representing the balance of her compensation as leading
actress in 2 motion pictures produced by the company. Upon motion of
defendant, the lower court dismissed the complaint because “the claim of
plaintiff was not evidenced by any written document, either public or
private” in violation of Art. 1358 of the NCC. Is the order of dismissal in
accordance with law?

Ruling: It is not in accordance with law. In the matter of formalities, in
general, contracts are valid and binding from their perfection regardless
of forms, whether they be oral or written, so long as the 3 elements exist.
To this rule, the Code admits of exceptions, and the case at bar evidently
does not fall within any of the purview of such exceptions.

10.What is the doctrine of reformation of instruments? What requisites must
concur in order that an instrument may be reformed?

When the true intention of the parties are not expressed in the
instrument purporting to embody their agreement, by reason of mistake,
fraud, inequitable conduct or accident, one of the parties may ask for the
reformation of the instrument so that such true intention may be
expressed.

The following are the requisites of reformation:

a. There must be meeting of the minds of the parties
b. Their true intention is not expressed in the instrument
c. Such failure to express their true intention is due to mistake, fraud,

inequitable conduct or accident.

11.What are the different classes of defective contracts

a. Rescissible contracts
b. Voidable contracts
c. Unenforceable contracts
d. Void contracts

12. What is a Rescissible contract? Give samples.

A Rescissible contract is a valid contract because it contains all of the
essential requisites prescribed by law, but which is defective because of
injury or damage to either of the contracting parties or to third persons.

Rescissible contracts are found in Arts. 1381 and 1382.

13.What requisites must concur before a contract may be rescinded on the
ground of lesion?

a. The contract must be entered into by the guardian in behalf of his
ward or by the legal representative in behalf of an absentee;

b. The ward or absentee suffered lesion of more than one fourth of
the value of the thing which are object thereof;

c. The contract must be entered into without judicial approval

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d. There must be no other legal means for obtaining reparation for
the lesion;

e. The person bringing the action must be able to return whatever he
may be obliged to restore

f. The object of the contract must not be legally in the possession of
a third person who did not act in bad faith

14.What requisites must concur before a contract entered into in fraud of
creditors can be rescinded?

a. There must be a credit existing BEFORE the celebration of
contract;

b. There must be a fraud, or at least the intent to commit fraud, to
the prejudice of the creditor

c. The creditor cannot in any other legal manner collect his credit;
d. The object of the contract must not be legally in the possession of

a third person who did not act in bad faith

15.What are the presumptions of fraud of creditors?

a. Alienations of property by GRATUITOUS TITLE if the debtor has
not reserved sufficient property to pay all of his debts before such
alienation;

b. Alienations of property by ONEROUS TITLE if made by a debtor
against whom some judgment has been rendered in any instance
or some writ of attachment has been issued. The decision or
attachment need NOT refer to the PROPERTY ALIENATED, and
need NOT have been obtained by the party seeking the
rescission.

16.Define voidable contracts.

Voidable contract are those in which all of the essential elements
for validity are present, but the element of consent is vitiated
either by lack of capacity of one of the contracting parties, or by
mistake, violence, intimidation, undue influence or fraud.

17.What contracts are voidable?

a. Those where one of the parties is incapable of giving the consent
to a contract;

b. Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud

18.What is the period of prescription for an action to claim rescission and
annulment of a voidable contract?

The action must be commenced within 4 years: in case of incapacitated
person, from the time guardianship ceases; if the consent is vitiated by
violence, intimidation or undue influence, from the time such violence etc
disappears; if through fraud or mistake, from the time such fraud or
mistake is discovered.

19.X, of age, entered into a contract with Y, a minor. X knew and the
contract specifically stated the age of Y. May X successfully demand
annulment of the contract. Reasons.

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