CLSE PPT CONTRACTS, LAWS, SPECIFICATIOMS & ETHICS

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1. TECHNOLOGICAL UNIVERSITY OF THE PHILIPPINES VISAYAS Capt. Sabi St., City of Talisay, Negros Occidental LEARNING MODULE ( Wk 10) CLSE: Contracts, Laws, Specifications & Ethics Instructor: Samuel C. Feliciano (Bing)

2. Essential Requisites of Contract—consent, object and cause LEARNING OUTCOMES By the end of today’s lesson, students should have understood and discussed the following: Consent of contracting parties Object certain Cause of obligation

3. D. Consent ( 1 st requisite of contract ) Consent – conformity of wills; with reference to contracts, it is the agreement of the will of one contracting party with that of another or others, upon the object and terms of the contract . Manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract . The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counteroffer . Ex: “A” offers to sell his car to “B” at P300,000. “B” agrees to pay such amount. Thus the offer of “A” to sell his car is certain and the acceptance of “B” to buy the car is absolute. However, if “B” proposes to pay only P180,000 (counteroffer), then there is no valid acceptance. If “A” accepts the counteroffer, then the contract is perfected.

4. Persons Who Cannot Give Consent ( Can give consent ) One with capacity to act and not disqualified may give consent to a contract. Who are incapacitated to give consent ( art.1327, new civil code): 1) Unemancipated minors – below 18 years; have not been released from parental authority by marriage. Observe that concession of a father or of the mother who exercises parental authority may emancipate a minor . NB: RA 6809 [Dec 13, 1989] - AN ACT LOWERING THE AGE OF MAJORITY FROM TWENTY-ONE TO 18 YRS YEARS, AMENDING EXECUTIVE ORDER 209)  

5. Who are incapacitated to give consent . 2) In sane or demented persons . Insanity – degree of mental illness which negates the legal responsibility or capacity. Law requires that insanity must exist at the time of perfection of the contrac t . Otherwise, one is presumed sane. Note: contract entered by an insane person during lucid interva l (temporary period of sanity) is valid . 3) Deaf mute – deaf & dumb and do not know how to write cannot give consent . But a deaf-mute who knows how to write could intelligently give consent.  

6. Essential Characteristics of Consent (legal) Intelligent – a capacity to act Free and voluntary – no impairment of consent by reason of violence or intimidation Conscious and spontaneous – no impairment of consent by reason of mistake , undue influence or fraud

7. Vices of Consent - circumstances affecting the nature of consciousness and the free will to conclude a legal act The following may invalidate consent : 1) Error or mistake . For mistake to invalidate consent, it should refer to the substance of the thing , i.e. , object of the contract , or to conditions which have principally moved one or both parties to enter into the contract. Ex: when the parties believe that the other is selling , but in truth and in fact, both are buying .

8. Vices of Consent 2) Violence or force – unjust or unwarranted exercise of force , usually accompanied by vehemence (strong emotions), outrage or fury . Ex: A party to the contract signed the agreement for he was hit by the butt of the gun . Here, there is impairment of consent.

9. Vices of Consent 3) Intimidation , threat or duress (unlawful threat or coercive behavior) . Intimidation – when 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/property of his spouse, descendants or ascendants, to give his consent . Ex: A person signed a contract because a gun is pointed at him. Hence there is a well-grounded fear of an imminent & grave evil upon his person, i.e., that of being killed.

10. Vices of Consent 4) Undue influence – when a person takes i mproper advantage of his power over the will of another , depriving the latter of a reasonable freedom of choice . Also, when a person’s mental weakness, ignorance, or financial distress is unduly taken advantage of by another. There is no undue influence when consent is obtained by solicitation, affection, or argument and persuasion . Ex: “A”, who is in financial distress , approached “B” to lend him a sum of money. But, “B” did not agree until and unless “A” sells his only car to him (‘B”). Whatever agreement signed between them could be voided on the ground of undue influence . (should be clearly established in court)

11. Vices of Consent 5) Fra ud and deceit . C asual fraud – committed through insidious words or machinations or by concealment ; used by a party to induce the other to enter into a contract without which the latter would have agreed to. Ex: “A” offers to sell his ring to “B”. The latter agrees to buy on the representation of “A” that the ring is embedded with a diamond, when in truth and in fact, it is fake. The contract signed by them may be annulled on the ground of fraud.

12. Object of Contract ( 2 nd essential requisite of contract ) Object – subject matter of contract ; may be things, rights, or services . All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of contracts . A contract may not be entered into upon future inheritance except in cases expressly authorized by law .

13. Objects of Contract 1) Not outside the commerce of men ( existing, legal, subject of commercial transaction) 2) Not contrary to law, morals, good customs, public order or public policy (not illegal) 3) Not impossible either physically or legally 4) Determinate as to its kind. The following are not object of contrac t : plazas, streets, and rivers are outside the commerce of men (gov’t owned) prohibited drugs—opium, marijuana, shabu , etc ( illegal/ contrary to law)

14. Cause of Contract ( 3 rd essential requisite of contract ) Cause –essential or more proximate purpose which the contracting parties have in view at the time of entering into the contract. Contracts without cause, or with unlawful cause produce no effect. Ex: “A” binds himself to pay “B” the sum of P 10 0,000.00 provided the latter agrees to become the common-law wife of the former. This is void for it is founded on an unlawful cause.  

15. Forms of Contract Form – procedure or manner to be adhered to in the execution of a contract. Contracts shall be obligatory in whatever form … provided all requisites for validity are present. This is consistent with the “spiritual system” concept (Spanish Civil Code)—look at spirit of contract rather than its form. Exceptions to this rule include: contracts for which the law prescribes a certain form to be valid b) contract for which the law requires a certain form to be enforceable

16. Formalities Necessary for Validity 1) Contracts must appear on writing a) Donations of personal property whose value exceeds P5,000 . b) Sale of a piece of land or any interest therein by an agent. The authority of the agent must be in writing . c) On a contract of antichresis , the principa l and the interest must be in writing . Note: Antichresis , under civil law and Roman law, is a contract whereby a debtor pledges real property to a creditor , allowing the use and occupation of the pledged property , in lieu of interest on the loan.

17. Formalities Necessary for Validity 2) Contracts which must appear in a private document a) Donation of immovable property . b) In partnership where real property or real rights are contributed to the common fund. 3) Contracts which must be registered . a) Chattel mortgage b) Sale and transfer of large cattle. Chattel Mortgage – a contract by virtue, which involves recording the personal property in the Chattel Mortgage Register as security for the performance of an obligation; formal or accessory contract; required if debtor has to retain the property.

18. Reformation of Instruments Reformation – remedy in equity by means of which a written instrument is made/construed as to conform to real intention of the parties by reason of mistake/fraud , has been commuted. Ex: “A” sells his car to “B” for P150,000. “B” accepts and pays P150,000. The Deed of Absolute Sale , however, reflects the sum of P175,00,i.e., not in conformity with real intention of the parties . Remedy in this example is reformation of the instrument.

19. Reformation of Instruments Note: there shall be no reformation in the following cases : simple donations inter vivos (while alive ) wherein no condition is imposed; Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it . wills ; and when the real agreement is void

20. Interpretation of Contracts Interpretation – the art or process of discovering and ascertaining the meaning of statute , will , contract or other written document. I ntention of contracting parties should preva il because their will has the force of law between them. Where the terms of the contract are clear and positive and leaves no room for doubt , no interpretation should be given which would alter or change its strict and literal signification .

21. Governing Rules on Interpretation 1) Literal meaning controls . When sum of the contract is clear and leave no doubt as to the intention of the parties, the literal sense of its stipulation shall be observed. Ex: “A” commits to deliver a car to “B” for P150,000 by virtue of a “sale of a motor vehicle.” “A” is the vendor (seller) , and “B” is the vendee (buyer). All details are provided, e.g., model, type, etc. of car; with no provision that runs contrary to law, public moral, etc. Thus the will of the parties should be literally applied.

22. Governing Rules on Interpretation 2) Evident intention of parties prevails . Where words and clauses of a written contract are in-conflict with the manifest intention of the parties , the latter (intention) shall prevail over such clauses or words. Ex: Parties agreed that the purchase price is P10,000. However, in the contract itself, the sum of P100,000.00 appears. Thus, the latter is evidently in conflict with the intention of the parties which is P10,000. Therefore, the intention of the parties shall prevail. (Remedy: Reformation)

23. Governing Rules on Interpretation 3) Contemporaneous subsequent acts to be principally considered . To determine the intention of the parties, acts contemporaneous and subsequent to the execution of a contract, antecedent circumstances under which it was made may also be considered. Ex: “A” had a contract entitled “ Pacto de Recto Sale .” “A” requested his lawyer to prepare the document. Wittingly or unwittingly, the lawyer prepared an “ A bsolute D eed of S ale.” Knowing that their contract was “ Pacto de Recto Sale”, “B” wrote a letter to “A” informing him that he (“A”) could exercise the right to repurchase the property . The contract should be interpreted as “sale with right to repurchase ” (or Pacto de Recto Sale).

24. Governing Rules on Interpretation 4) Special intent prevails over a general intent . However general the terms of agreement, the contract cannot be understood to include things and cases different from those upon which the parties intended to agree . Ex: “A” binds himself to convey all his properties to “B”. The conveyance should not of course include properties which do not belong to him.

25. Governing Rules on Interpretation 5) Interpretation of a contract with several meanings - should be understood as bearing that import which is most adequate to render it effectual. I nterpret in the sense most suitable to give its effect . Thus, it’s understood most in keeping with the nature and object of the contract. Ex: A contract susceptible of double interpretations; one for its validity, and one, for its nullity, the interpretation that would give effect to its validity should prevail . (what’s the intent of the parties)

26. Governing Rules on Interpretation 6) Interpretation of various stipulations . Whole document must be considered. Words, phrases or clauses cannot be segregated and given a meaning which is contrary to the terms of the entire document . Interpret whole contract or read together to arrive at its true meaning. Ex: “A” enters into a lease contract with “B” where “B” must refrain from doing something, i.e., to sublease without the knowledge of “A”. Also, it is agreed that if “B” violates the “obligation not to do,” he would be penalized for a certain sum. Suppose “B” violates the “obligation not to do,” could “A” file an ejectment case against “B”? In light of the stipulation providing for a penalty, the ejectment case will not prosper.

27. Governing Rules on Interpretation 7) Custom or usage as aid in interpretation . The custom or usage of the place shall be borne in mind in the interpretation of the ambiguities of a contract and shall fill the omission of stipulations which are ordinarily established. Ex: “A” renders services to “B” and the compensation to be paid has not been fixed. Hence the court is empowered to fix the reasonable value of such services, taking into consideration the rate that is customarily paid for such kind of service.

28. Governing Rules on Interpretation 8) Obscure terms construed against one who drafted the contract . In case of doubt, a contract should be interpreted against the party who has drawn the contract . Ex: “A” (consignor) shipped his goods to “B” (carrier) upon which he was issued a bill of lading. Suppose there were ambiguous provisions or terms, the contract will be construed strongly against the carrier and favorably to the consignor. A bill of lading, being a contract of adhesion (ready-made contract), is drafted and prepared by the carrier. Thus, ambiguity or uncertainty should be construed against the carrier who has drawn the bill of lading.

29. Governing Rules on Interpretation 9) If doubts are impossible to settle, the least transmission of rights and interest shall prevail . If doubts cannot be resolved and doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interest shall prevail. Ex: “A” executed a deed of donation in favor of “B” whereby “A” is disposing his land to “B”. Suppose “A” has two parcels of land with an area of 1,000 square meters each—one parcel in Manila and the other in Calamba, Laguna. It’s not clear which parcel “A” is disposing.

30. Governing Rules on Interpretation By law, “ A” wanted to convey the parcel located in Calamba because it has smaller value than the parcel in Manila . Thus there will be lesser transmission of rights and interests . Likewise, when doubt exists whether transaction is “ sale with pacto de recto” or a mortgage , doubt should be resolved in favor of mortgage for it is lesser transmission of rights and interests.

31. Governing Rules on Interpretation 10) Principles of interpretation in the Rules of Court are applicable . Sec. 8, 17, Rule 130 (Rules of Court) on interpretation of documents principle are applicable. Examples: a) Language of writing shall have legal meaning it bears in the place of execution , unless the parties intended otherwise;

32. Governing Rules on Interpretation 10) Principles of interpretation in the Rules of Court are applicable . b) An instrument with several provisions or particulars shall be construed so as to give effect to all ; c) In case of conflict, written words will prevail o ver the printed form ; d) Usage may be the basis to determine the true character of an instrument  

33. Assignment (small group) = 20 pts (deadline: on/before next meeting) Krisha , a Visayan resident, is the owner of a 200 square meter (sqm) lot in Tagaytay City. Due to false information from Karen, Krisha entered into a contract with Karen selling the land at P10,000.00 per sq.m . when the market value of the same is P30,000.00 per sqm. Is the contract valid? Why or why not? (10 Points) Jorge mortgaged a piece of land to Jan which was written in a private instrument (a piece of paper). When Jan sought registration of the instrument, the Registry of Deeds refused to register the same because it is not in the proper form. What is the remedy of Jan? Give reasons. (10 Points)