[0:00]Hi guys, welcome to part two on the Law of Contracts. Today we'll be discussing the essential elements of contracts. So if you like my videos and you want to see more, please hit the subscribe button. Please remember that this is only for educational purposes and is not a substitute for proper legal advice or for studying and understanding the law. Okay? Now let's begin. Contracts have certain elements. We have the natural elements, which are presumed to exist even if the parties do not stipulate upon them, no? The only way that they will be avoided is if the parties expressly stipulate that we are not including these natural elements. One example is the warranty against eviction or the warranty against hidden defects in the case of a contract of sale. These warranties are impliedly written into said contract of sale, okay? Next, we have the accidental elements, no? These are the terms, stipulations, clauses which are established by the parties, okay? And finally, we have the essential elements which can be broken down into two. We have the common, which we will be talking about today, which consists of consent, object, and cause. And we have the special, which the law may require, such as, the law may require a certain form for a contract to be valid, such as a public instrument, or when the law requires that a certain object be part of the contract, such as in the case of a real estate mortgage, which must involve real or immovable properties, or when the law requires a certain cause for the contract, okay? Now let's go to the first essential element, no, consent. Consent is defined by the law as the meeting between the offer, which must be certain, and the acceptance, which must be absolute upon the thing and the cause which will constitute the contract. Okay, now let's break it down. The offer is a proposal by the offerer indicating his willingness to enter into the contract. Okay? So the requisites for a valid offer is that first, it must be definite. Okay? There should be no doubt in the mind of anyone that the offer is offering a certain thing as the subject of the obligation. For instance, when an offerer says, I am willing to think about entering into a contract with you. That is not definite, because the offerer will still be contemplating if he will enter into the contract. Okay? So that is not a valid offer. So the offer must be definite. Next, the offer must be complete. If a certain contract requires the presence of certain elements, then all those elements must be present, okay, in order for the offer to be complete. Such as in the case of a contract of sale, which must necessarily have a price stipulated in the contract. Okay? In other words, a person who offers to sell a bottle of water without indicating a price is not giving a valid offer. Okay? And finally, we have the last requisite that the offer must be intentional. The offerer must actually intend to enter into the contract with the other person. In other words, if the offer is merely given as a joke, then it will not be binding as a valid offer. Okay? Now, on the part of the offerer, he may fix the time, the place, and the manner of acceptance. Okay? However, the offer will become ineffective if the offerer dies, okay, suffers from civil interdiction, because that affects his capacity, or suffers from insanity or one of the parties becomes insolvent, okay? If any of those occur before the offer is accepted, then the offer becomes ineffective. The contract will not be perfected, okay? This is this will be important later on when we talk about perfection of the contract, huh? But for now, let's talk about uh business advertisements. You when you see business advertisements on the television or in newspapers, you may think that this is an offer. No, these are not offers, they are merely invitations to make proposals. The same way with uh invitations to bid or uh advertisements for bidders, no? Like in the cases of auctions, okay? If you are being invited to bid, there is definitely no offer yet. They are actually asking you to bid or make an offer, upon which if accepted, will only then result in a perfected contract. Okay? So uh in case of an auction, the auctioneer is not bound to accept the highest or the lowest price. Unless, of course, they have already said that they will uh accept either the highest or the lowest price. Now, finally, the offer may uh withdraw the offer as long as it is not accepted.
[6:01]Okay? At any time before acceptance, the offer may be withdrawn and the contract will not be perfected, it will not exist. Okay? So itong si offery must give his acceptance right away or within the time period given. Now, there is an exception here, okay? If the offer and the period is subject to a consideration different from the consideration of the principal obligation, then the offerer may not withdraw his offer at any time. Okay? Why? Because this is what is known as an option contract. An option contract is a preparatory contract, okay? It's a separate contract from the main contract. Under this option contract, the offery is given the right, no, to purchase if he so decides, and he has the right to uh prevent the offerer from withdrawing the offer until the period has elapsed. Why? Because it is supported by an independent consideration from the consideration of the main obligation. Okay? Let's say the main obligation involves a sale of a car worth 500,000 pesos. The consideration is 500,000 for this obligation. Now, this option contract to be valid must be supported by an independent consideration, let's say 100 pesos. Then the offerer will be bound to respect the period and cannot withdraw the offer until the period to uh choose has expired. Okay? So yeah, that is uh what an option contract is about, a separate one, a preparatory contract. Sige, let's go to acceptance. What is acceptance? Acceptance is the assent of the offery to the terms, no, all the terms of the offer by the offerer. Okay? From the definition itself, acceptance must cover all the terms, ha? This is why I mentioned earlier that acceptance must be absolute. Okay? Why? Because if the offery does not accept a certain term or certain terms, no? Then that will constitute a counter offer, which must be accepted now by the offerer who becomes an offery now. Okay? So in that case, if the offery makes a counter offer, then the offerer is within his rights to revoke or withdraw his original offer. He's not bound to respect the original offer given, okay? Why? Because there has been no acceptance. What was given by the offery was a counter offer. Okay? Now, acceptance, of course, must be clear. It must be the acceptance must be stated in unequivocal terms that you cannot interpret it in any other way. Acceptance must also be absolute. I just mentioned this earlier. Acceptance must be unconditional and unqualified. It's subject to no other condition or qualification, otherwise it will be a counter offer, no? Okay? And how do we know that a contract has been perfected? In the definition of uh consent, no, it is the meeting between the offer and acceptance, okay? So once acceptance has been given to the offer, then we can say the contract has been perfected. But take note, this is only for consensual contracts, okay? In case of real contracts, they are perfected by mere delivery. We're talking about consensual contracts here, okay? So now, how do we know the acceptance has been uh given to the offer in order to perfect the contract? Here in the Philippines, we follow the theory of cognition. In other words, a contract is perfected once the acceptance comes to the knowledge, okay, comes to the knowledge of the offerer. Okay? Here's a better example. I'll give an example rather, no? Let's say uh X, X uh writes an offer and sends it by registered mail to Y, which Y receives on the same day. Let's say it's Monday. The following day, Y writes his acceptance and sends it to X. However, since X, uh before X received the letter mailed by Y, X dies. Okay? Is the contract perfected? No. Why? Because the letter of acceptance did not come into the knowledge of uh of X. Okay? So the test here, no, there are other there are many other examples. These will be asked usually in exams, no? The easiest way is just follow the test, no? The test is the theory of cognition. Did the offerer acquire knowledge of the offer? Okay? Okay. Let's move on. Now, what are the forms of acceptance, okay? Acceptance can be express, no? And it can be implied. Can there be acceptance through silence? Yes, okay, but these are there must be strict compliance with the requisites. First, there must be a duty and an opportunity to respond, okay? There must be a duty on the part of the offery and an opportunity for the offery to respond. Then he did not give a response. Okay? Now comes the final requisite that the that the acts of the offery or the overt acts cannot be interpreted in any other way than to say that he had assented or agreed to be bound. Let's say a nod of the head is commonly accepted, no? In other words, whatever act the offery performs so as to leave a clear idea in the mind of the offerer that it has been accepted, is sufficient to constitute acceptance through silence, okay? Finally, on the part of an agent, no? We have to uh remember, no, that knowledge of the agent is attributed to the principal, of course, provided if the agent actually in the scope of the powers and authority granted to him. Okay? So uh in case an offer comes from the principal through the agent, the contract will be perfected, if the acceptance of the offery comes to the knowledge of the agent or the principal? The agent, because the agent is merely the extension of the principal, and whatever acts the agent does, and whatever knowledge the agent possesses, is automatically attributed to the principal. Okay? Now, in order for consent itself to be valid, it must be intelligently given, okay? There must be capacity. The person giving consent must know exactly what he is consenting to. Likewise, consent must be free or voluntary, okay? And finally, consent must be conscious or spontaneous. The first one I mentioned on intelligence goes into capacity, while the latter, the latter two items on uh freedom and voluntariness as well as consciousness or spontaneity goes into vices of consent, okay? Now, if the intelligence, freedom or consciousness are uh absent or defective, then what may result is a voidable contract. We'll talk about voidable contract in a different uh video, okay? So now, let's uh go into the intelligence first. Let's talk about capacity. The law says that the following individuals cannot give consent. First, minors, why? Because it's presumed that they do not have uh, well not presumed, according to the law, they do not have legal capacity to act or to act with binding effect. Okay? Also, insane or demented persons cannot give uh consent. Likewise, deaf mutes, okay, those who cannot hear and speak, who do not know how to write. Okay? They cannot give consent. Now, uh these uh these uh individuals I mentioned, are subject to modifications under the law. Such as in the case of minors when he receives uh necessaries, no? Those things necessary to subsist and live, no? He must pay a reasonable price therefore, okay? Now, in the case of insane or demented persons, if they enter into a contract during a lucid interval, during a period when they're not insane, no? then the contract is valid, okay? However, let's talk about drunk people and uh those under a hypnotic spell. In those cases, the contract may be voidable because their ability to give consent is impaired, okay? As to the other two uh requisites of consent, on freedom and uh consciousness, these go into the vices of consent, okay? And I will be talking about the vices of consent more in detail when we talk about voidable contracts. Okay? Because it's more appropriate for that discussion. But for now, the vices of consent are mistake, violence, intimidation, undue influence, and fraud, okay? Mistake, violence, intimidation, undue influence, and fraud. These are the vices of consent, which if they vitiate the consent given, render the contract voidable, and a voidable contract is a contract that is valid until it is annulled, meaning during the period it's valid, it can produce effects, but when it is annulled, then it will no longer produce any effects, okay? We'll go on now to the second essential element of contracts, which is the object, okay? The object is simply the subject matter of the contract, no? It is the thing. And how do we know if the object is a valid object of an obligation? First, of course, it must be within the commerce of men. Second, it must not be impossible, whether legally or physically, no? When we speak of legal impossibility, it's not prohibited by law, and physical impossibility, it's not physically impossible of uh being an object, okay? Next, the object must be in existence or capable of existing. So future goods may be the object of a contract, such as uh pending crops, no? That that, no? And next, the object must either be determinate or at least determinable. Now, what if we don't know the quantity of the thing? Does that mean to say that the contract is already uh void because the uh because the object is not determinate? No, if the quantity is unknown, okay, but it may be determined later on, then the contract will still be valid. What's an example? X offered to sell uh all of his uh uh dogs, no, to Y. The word "all" is uh uncertain, no? Because you don't know how many he has, but if it's determinable by uh counting the number of dogs that X actually has, then the contract will not be void for absence of an object, no? It will be void if uh let's say X offers to sell one piece of land, one parcel of land, and he has several parcels of land. There is no way for you to know which one of those several parcels of land X will actually sell to Y. So in that case, the contract is void for lack of a determinate object, okay? So this uh requisite of uh that that the object be determinate or determinable, it should in case it is only determinable, it must be determinable without the need of another contract, huh? So within the four corners of the document, you will be able to determine that the object is precisely what the parties intend to be the subject matter, okay? Now, let's just talk about one more important thing on object. A contract having as object future inheritance will be void, okay? Now, what is inheritance? I just want to clear this up, no? Because some people incorrectly use the word inheritance by saying that, oh, I have received the bracelet from my lola who passed away, that is my inheritance. No, it's the other way around. That was the inheritance of your lola, no? Why? Because the law defines inheritance as the mass of rights, properties and obligations, which a person will leave after his death and which will be transmitted by succession, but through the laws of succession to the heirs. Okay? For a more thorough discussion on inheritance, please refer to my videos on inheritance law or succession. I have a three-part series, I'll put the links in the description below, okay? Now, why is a contract for future inheritance void? Because as of the moment, the person who is going to transmit the inheritance to you has not yet died. It is as if you are contracting upon the death of a person, okay? Now, this uh prohibition on uh uh future inheritance being the object of a contract is subject to exceptions, okay? One is when uh the future spouses agree that uh their future properties shall be uh donated to each other, no? Donations by reason of marriage, which will take effect upon their death, okay? Another example is a partition inter vivos, no? During the life of the partitioner, but to take effect only upon his death, okay? Now we can move on. Let's move on to the final essential element, which is the cause of the contract, no? What is the cause? It's the essential reason or purpose why a party entered into a contract, no? Now, the cause may be different between the parties, okay? For instance, in a contract of sale over a bottle of water, the cause for the seller is to obtain the price. And the cause for the buyer is to obtain the bottle of water, okay? That that said, no, we have to say that uh the cause is different from motive, okay? And motives will not necessarily render a contract void. Now, let's differentiate cause from motive. Cause is the approximate reason why a party will enter into a contract, whereas uh motive, it's the indirect or remote reason, no? In other words, in cause, that is really why the party wants to enter into the contract. Let's say in my example, to get that bottle of water. No? In the motive, no, uh motive may be because he wants to give the bottle of water to his girlfriend, or something like that, okay? Next uh distinction, no? Here in the cause, it is the objective always, no? Objective uh it's what we look at. The objective is always the same for certain contracts, okay?
[27:26]The objective uh in a contract of sale, for the seller is to obtain the price. And the objective for the buyer is to obtain the thing being sold, okay? Whereas in motive, it may vary from contract to contract, and finally, in case of a cause, the absence or uh legality of a cause can affect the validity of the contract, huh? Which I will be coming to shortly. Whereas motive, it does not affect the validity, no? But there are exceptions, ha? Generally, motives do not, the general rule, ha, the general rule is that motives will not invalidate or will not render void a contract. However, a motive may render the contract void if it predetermines the cause of the contract. Okay? Again, just remember that the motive will render the contract void if it predetermines the purpose of the contract. Let's give you some examples, no? Let's say there's a rich old man, no? And he offers to donate a certain house and lot to a minor in exchange for the minor to have having sexual relations with him, no? There, the cause is predetermined by the motive of the old man to obtain his carnal desires, okay? Another example, in let's say there is a mother who sells a fish ponds to her daughter, no? And the daughter resells those fish ponds to her stepfather, who, of course, is married to the mother. Now, that, in that case, no, the motive also predetermines the cause, as well in that case, and the contract will be void. Why? Because it is obviously intended to circumvent the law prohibiting donations or sales between the spouses, okay? One final example, no? In case you still do not get it. Uh, let's say there is a person who owns a property and allows an alien, no, a foreigner who is not a citizen of this uh country, uh he offers for lease his property for 99 years with an option to buy the property in case the foreigner becomes a Filipino citizen. Oh, that is uh the motives predetermine the cause as well in that case, and the contract will be void. Why? Because it is obviously intended to circumvent the law prohibiting the transfer of uh Philippine lands to foreigners, okay? So uh now uh what I mentioned earlier, let's go to uh what if there is no cause, okay? The absence of cause or in case the cause is unlawful, or in case uh there is uh a false cause, no? In case there is a false cause, there are three instances, okay? There is no cause, absence of cause, or the cause is unlawful, or there is a false cause. These three instances, they will render the contract void, okay? Of course, if there is no no cause, why will you enter into a contract? There is no contract that exists. It's uh void from the beginning. The cause must likewise be lawful, okay, not contrary to law. The cause must also be true or real, okay? So uh let's uh I want to differentiate absence of cause which I discussed earlier, ha, the total absence, there is no cause from failure of cause. That's different, okay? If there is no no cause, no, the cause is absent, as I said earlier, the contract will be void, okay? But there is simply failure of cause, then there is only breach, okay? And the contract exists. Why? Because failure of uh cause goes into the performance. It simply did not materialize. What is an example? In a contract of sale where the parties agreed that a certain thing is sold for a price certain, okay, but the price was simply not paid, the contract of sale is perfected because all elements are present, ha? It is uh in the failure rather of the buyer to pay the price, is merely the failure to perform his part of the obligation, okay? And that is just a mere breach. However, if what is written in the contract is that this uh thing has been fully paid, when in truth and in fact, it has not yet been paid at all, then that may serve to render the contract void for absence of cause, okay? Now, let's talk about lesion, no? What is lesion? It is damage caused to a person or a party to the contract due to uh in in adequacy in adequacy of price. In other words, price, no? Uh it is unjustly kulang, okay? Now, the rule is, the mere fact that there is lesion in a contract, no? Uh we'll talk about this more in rescissible contracts, but the mere fact that there is lesion, no, does not serve as a ground to render the contract void, okay? That's the general rule. Why? Because uh, well, according to the Supreme Court, they're not they're not bound to check every contract of every person in the Philippines to see if there has been uh economic damage, no? Or a lesion. So uh parties are free to enter into the contract or reject it, okay? So uh lesion by itself will not serve to invalidate a contract, okay? However, lesion may invalidate a contract if it is attended by fraud, mistake, or undue influence, okay? Again, fraud, mistake or undue influence, if coupled with lesion, will render the may affect the validity of the contract. Finally, finally, let's just talk about uh moral obligations, no? If moral obligations can serve as a cause for a contract, okay? First, if a moral obligation that is sought to be used as the cause is uh simply an ethical obligation, no? With no underlying civil obligation, then it cannot serve as a cause. But a moral obligation may serve as a cause if there was a previous or prior civil obligation, which has prescribed. I explained prescription in my other video, but to review, through prescription or the passage of time, a person may uh gain or uh lose rights, okay? So let's say a civil uh obligation has prescribed, and the party wants to perform it, then it is a moral obligation only, but it can serve as a cause to support a valid contract. So that's it for uh the essential elements of contracts. Just remember, no, there are only three letters, COC. Consent, object, cause, okay? Those are the three essential elements of contracts. Okay? So stay tuned until I finish all episodes of the Law on Contracts, okay? So I hope to see you soon and I hope you've picked up a thing or two, okay? Bye guys.
