CONTRACTS

Chapter 1
GENERAL PROVISIONS

Old way of entering into contracts (Brief background of how contracts are before)
In the old times, there’s no really a written contract. Kapag may napag-agreehan before hahatiin nila yun exactly in
half (if 2 parties are involved). If you violate, you will be criticized by the whole community and you will be killed by the
other party.

3 Problem areas in contract:

1. The parties will try to circumvent what the contract is.

Circumvent - Meaning pinapaikot nila yung batas. They are trying to go around what was agreed upon to get away
from their commitments in the contract.

2. Sometimes the contract is so open ended that you do not know the commencement and the date of completion.
Walang nakaindicate kung kalian mags-start at dapat matapos yung contract.
2. There is no legal and material consequence for breach.
Sumira ka, so what?

NOW YOU KNOW: If all people will not violate their contracts and people will respect the rights of other people, no
lawyers are needed. Kaya lang naman may abogado kasi may gulo. Kapag Christmas walang income mga lawyers kasi
nagkakapatawaran na. Isa pang time is during enrolment, kasi paprioritize nila yung tuition ng mga anak nila.

Contracts
 Meeting of the minds between two persons whereby BOTH PARTIES BIND THEMSELVES, with respect to
another, to give something or to render some service.
 Why is that? Kasi parang lumalabas na isa lang yung may obligation to give something or to render service.

How to prepare a contract and components of each contract:

1. Preface
a. It contains the title of the contract.
 Important ang title because you will be able to know the contract outright is. But under the law, what’s more
controlling is the body not the title of the contract.
Example:
Nakalagay sa title is contract of mortgage pero ang body/content is contract of marriage talaga, mas controlling
yung body/content kesa sa title.

Question: Pano yung mga contract na wala naman talagang title?

Answer: Ang term for that is Memorandum of Agreement or MOA.

b. Names of the parties.

Why important? Hindi ba pwedeng ilagay na lang is JOHN DOE (Nilalagay if hindi maidentify sino nagcommit ng criminal
act ang tawag sakanya is JOHN DOE) But in contracts hindi pwede ni JOHN DOE yung ilagay.
 Names are there because it provides the identity and the person to whom the liability attaches.
 Age because baka minor yung nageenter into contracts which is not legal unless represented by the guardian.
 Citizenship foreigners are PROHIBITED from owning lands and properties in the Philippines.
 o Bakit bawal? Well bawal din tayo sa ibang bansa except sa United States (di sinabi reason bakit haha)
Because it will lead to indirect domination because they are able and capable of purchasing all the lands in
the Philippines except for condominium units (because in condos you don’t own the land, may share lang
sa building but not in the land).
o Pero yung mga foreigners na may asawang Filipina, swerte sila. Because the property will be in the name
of the Filipina.
o If dual citizen sya pwede magown.
o 60/40 is applicable to corporations. 60% Filipino owned, 40% foreigner owned. Kaya kaunti lang ang
investments sa Pilipinas because of this 60/40 rule.
o Kahit kasal yung foreigner sa Filipina and may prenup hindi pa rin allowed yung foreigner to own lands
and properties in the PH. If namatay yung Filipina unless there’s stipulation mapupunta yung properties
nya sa heirs of the Filipina who died. If wala ng heirs, ibabalik siya sa state thru escheat proceedings.
o RETAIL TRADES AND MEDIA REQUIRES 100% FILIPINO OWNERSHIP.

● Civil Status, because you are married then the property is absolute community conjugal. Meaning hindi mo siya
mabibili unless the other spouse mag sign.
➢ Pwede mo ibenta ang isang property napag aari niyong dalawa pero half lang.
➢ May bibili ba ng kalahati lang? Normally, you have to file Petition for Separation of Properties na
matagal na proseso.
➢ Kaya ang sinusuggest ko you make a Deed of Sale na pumirma ang lahat ng kung ano ang sa
husband and wife. There will be no problem and you don’t have to go to court to file for petition.
 Residences are there because it’s going to determine the venue if you will file a case.

II. BODY OF THE AGREEMENT

(1) Manner of Payment

- There are contracts that are prepared but not really so complete with respect to all the provision that there
is. By cash? Installment? Check? – those are the things that you need to stipulate.
(2) Date of Commencement
- Kapag wala nito kaya nagkakaroon ng Open Ended Contract
- The other party will always say: “Teka gagawin ko nga yan pero wala ako sinasabi kung kailan.”
❖ Ex: Paghuhugas ng plato pero wala naman sinabi kung kailan
(3) Date of Completion
- Napagusapan kung kailan magsisimula pero hindi kung kailan matatapos
❖ Ex: Kapag maraming projects they jungle the funds by moving one project to another kaya sa
kaduluhan nagkakaproblema.
❖ Ex: CPA former student ko, they form a partnership nagtatayo sila ng bahay. Sa unang bahay dahil
Malaki ang contract kumuha sila ng kotse and they wait for another project. Kaya natapalan yung
first project, ang nagging problema ay sa huling project wala na silang pangtapal. They were sued
for estafa, hindi niyo malulusutan ang kaso dahil may kontrata kayo dito.
❖ Ex: Marketing Student ko, 5 sila na Bibili ng van in cash tapos yung boundary (income) ng 1st van
ipambibili ng 2nd van at yung income ng dalawa ipambibili for 3rd Van and yung income ng tatlo
for 4th Van. Ang problema yung panglima sorry ka na lang kaya dapat may date of completion na
stipulated or yung iba may penal clause, hindi mo natapos? P5000 per day of delay.
(4) Clauses
➔ Warranty against Eviction – the person who sells or leases the property is the owner of the property. And that he is
willing to defend his ownership of the property against anybody else.
➔ Warranty against Hidden Defects- is a defect in the product that is hidden. If the defect is apparent at binili mo pa
din.
 ❏ Under the Consumer Act of the Philippines you have 1 year to complain for the hidden effect of a
brand new item.
❏ 2nd Hand hindi pwede
❏ CD-R KING- 1year pa din dahil nasa batas. Sabi ng DTI pwede papalitan dahil wala pang 1 year
yung date of purchase.
❏ You cannot stipulate against the law because it is a violation of the freedom to contract.

❖ Ex: Cellphone gadgets na binili mo pero di mo ginagamit then inireklamo, pwede sabihin ng seller na defect
sya because of nonuse kaya nagkaroon ng problema. Kaya dapat pin pointed na hidden defect.

Hidden Defects- Upon testing gumagana lahat, pero nung inuwi mo nagkaroon na ng problema.

SECTION II
Consent - Is the conformity or concurrence of wills (offer and acceptance) and with respect to contracts.

Two basic components of a valid consent:

1. Offer
2. Acceptance

Offer - Proposal made by one party to another to enter into a contract. It must be an outright or straight forward
of a thing. Must be complete.

Example:
If youre going to offer a cellphone, youre not just going to offer a cellphone but also the specifications of
the cellphone (must be specified).

It is hard to accept something which you are not certain of, it must be specified otherwise the author will not
consider this as valid.

Acceptance must also be absolute and qualified. When you accept something, you must accept the thing as
offered.

Example:
I’m going to accept the car but you will have to change the car’s color from blue to red - Case where
acceptance is not valid, but more like a qualified offer.

Qualified offer - Counter offer; therefore no valid consent is acquired.

Example: 100 ang price, “pwede bang 50 nalang?”

Form of acceptance:
1. Express - outright
2. Implied

Example:
Yan ay sampung piso per tali (gulay), wala ka namang sinabi, kinuha mo lang ung gulay - example of
implied acceptance.

The person making an offer must define the terms and condition of the offer (if otherwise, will result to
counter-offer).
 Caveat emptor - Buyer beware; you will have to investigate yourself whether or not that thing is
acceptable under your terms.

Agent - Is the extension of the principal’s person; one that represents the principal; extension of principal.
If the principal will not do it, the agent can do it.
Principal is bound by the acceptance made by the agent.

Example:
Selling a property through agent, pag nag “yes” ung agent through the principal, it is considered to be a
valid acceptance.

An offer remains to be an offer until accepted. But there are instances where the offer will no longer come to
acceptance because the offer will be considered invalid: When offer becomes ineffective.
1. Death
2. Civil interdiction
3. Insanity
4. Insolvency

Option contracts - This kind of contracts are actually the ones that were used by developers of subdivisions
and villages, they do option contact; Not part of the principal contract but only an ancillary to the principal
contract.

Example:
Bibili ka ng cellphone, 5k, wala kang 5k. Pasok ka sa option contract, where u get the consideration for
u to be given a certain period of time within which to accept an offer “bibilhin ko yan on monday”, “please give
me time on monday, while ure waiting, imma pay u 300. 300 is for the offer to stay on u until monday.” Hindi
ibabawas ung 300 sa 5k on monday.

If the person sold the cellphone before monday, u can sue him for breach of contract.

Option Period - Period given within which the offeree must accept the offer.

Follow up example: “From today to monday”

Option money - Is the money paid or promised to be paid in consideration for the option. It is not to be confused
with earnest money which is actually a partial payment or reservation fee of the purchase price and is
considered as proof of the perfection of the contract. Di pwedeng i refund ang option money.

Residential Land - Di pwedeng bungkalin.

Business advertisements generally are not definite offers but are merely invitations to the reader to make an
offer.

➔ Business advertisements no matter how complete it may be, will only be mere invitations to make. (ibig
sabihin, tumawag ka, nag-usap kayo, that does not mean that there is already a perfected contract.)
➔ Advertisement for bidders are generally not definite offers. (only again a mere invitation of offer)

➢ When does a contract of sale for bidders become an absolute deed of sale?
 ● Answer: The last offer is made and there is already a fall of the hammer. Once you
hammer it, it means there is already a perfected contract of sale.
Ex. sabi niya, 5000, 6000, 7000, pag pinukpok niya, ay sir sir 9000 po! Wala na. When
there is already a contract of sale upon the fall of the hammer, then the contract of sale is already
perfected.

➔ Capacity to give or to give consent is already presumed unless you fall under any of the disqualifications
provided for by law.
➔ Drunkenness and hypnotic spell are causes to make contract voidable. Something that can make a
contract null and void. But as it is, it is not considered to ba a cause to have the contract null and void.
➢ Hypnotic spell - It’s like drunkenness.It impairs the capacity of the person to give an intelligent
consent. (Pag lasing ka daw, di mo na natatandaan ginawa mo kahapon, pero di ako naniniwala.
Oh mr. Nolasco tama ba?)
➢ Even under criminal law, drunkenness is considered to be a mitigating circumstance if it impairs
the capacity to understand what you are doing at the time that you are drunk.
➢ Anti drunk driving law - carries a punishment of 6 years to 12 years imprisonment. Pero for
there to be a valid determination of whether you are drunk or not. Di na pwede yung mga literal
na example nila like, walking on a straight line.
➢ They cannot charge you with anti drunk driving law unless they have a breath analyser. Pag
sinabing punta sa ospital kumuha tayo ng blood mo, wag ka pumayag “self incrimination” yun.
Pag may .06 na alcohol sa blood mo then you are considered drunk.
➢ Drunk driving is the same as texting while you are driving.
➢ Pag kinasal ka daw ng lasing, voidable yun.

❖ Exceptions to the rule that minor cannot enter into a contract:

1. Basic necessities
2. Contract of life insurance for the minor
3. Contract entered into through guardian or legal representative
4. (estoppel) when a minor misrepresented his age. He/she is considered of age even if you are a
minor. (if u happened to come up with a violation of the law, you cannot interposed minority kasi
nga, you misled others to believe that you are already a person of age)
5. Yung pang 5 wala ng importansya kasi yung age naman is actually 18.

❖ Other disqualification provided for by law:

1. incompetence/ wards
2. Person suffering from civil interdiction
3. Hospitalized lepers (means you are in a terminal stage)
4. Prodigals
5. Person of unsound minds (person who cannot think logically, different from insanity, pero meron
din sila lucid intervals)
6. (all catch provision) Those by reason of age, weak mind another similar causes, cannot enter into
a contract because they easily become prey.

❖ 3 characteristics of consent:
1. Intelligent - must be intelligently given
2. Free and voluntary - walang violence/ intimidation
3. conscious/ spontaneous - free from mistake, undue influence/ fraud

❖ 5 vices of consent:
 1. Error/ mistake
2. violence/force
3. Intimidation
4. Undue influence
5. fraud/deceit

Causes of consent and causes of incapacity distinguished:

Error or mistake - false notion of a thing or a fact material to a contract. Even if there’s mistake but it has nothing
to do with a contract entered into then it will not vitiate contract.
Lying - stating something that you yourself does not believe.

Example: Dropping of calls in a Call Center is a major offense. When a Call center agent wants to file a counter
affidavit and wants to deny that he drop the call that accidentally naputol yung line.
Sir: Kapag dineny mo yan you will be dismissed for dishonesty, kapag inadmit mo at huminga ka ng pasensya
you will just be suspended.

Generally, Mistake of fact does not vitiate consent. For there to be a vitiate consent, there must be substantial
mistake of fact. Dapat may kinalaman sa kontrata that there is something that could have change your mind had
you knew about the mistake.

For there to be a vitiate consent in the account of mistake

(1) It must refer to substance of the thing.
Ex: If you bought something that you knew to be genuine and it turns out to be a fake. Then it would refer to very
substance of the thing. The meaning of to vitiate consent is to go to court and have the contract that declared by
you that it refers to the very substance. Kase kailangan yun ang nagbago.

❏ For example
➢ you will buy the cellphone whether fake or real then it will not vitiate consent.
➢ You will buy that cellphone whether fake or real. But if you don’t know that it’s fake and you
thought that it’s really genuine then it would refer to the very substance

(2) The conditions which principally move the parties in entering the contract. It must be vital condition. A
condition that is related to the contract
❏ For Example:
➢ You bought the house because your principal condition is near in the church. You bought the
house because you thought that it’s near to school of your children at malayo pala.
(3) Identity or qualification which is actually substantial and material to the contract . It must be the principal
cause.
 ❏ For Example:
➢ You entered into a contract of sale of a land with a doctor. Then it turns out that he is not a doctor.
Will that vitiate consent? NO, because walang kinalaman yung pagiging doctor niya sa sale of
land.
➢ But if you entered into a contract because of treatment of your disease and it turns out that he is
not a doctor then it will definitely vitiate your consent, it would change your mind.
❏ For Example:
➢ You entered into a contract of lease with someone who pretend to be a lawyer. It
Will not vitiate consent because his being a lawyer has nothing to do in the contract of lease.
➢ You pretend to be a lawyer when you are not and he use the identity of a deceased lawyer.
Nalaman lang na hindi siya lawyer kase meron kaming mandatory continuing legal education
every 3 years and hindi siya makapag update tapos nakalagay sa record na this person is already
dead.
❏ For Example:
➢ There is this person who taught in DLSU-D here in CBAA for 8 years teaching something
subject(nalimutan na ni sir). This person is a Phd as he said he is, but it turns out that he is not a
doctor, not a masteral degree holder and not even a college graduate. Kaya nalaman dahil kapag
you are a doctor here, you are commissioned to do a research work. And this person just copy
the things in the internet then nadiskubre ng estudyante. Upon investigation nalaman na hindi
talaga siya doctor at kasalanan ng HR.
(4) Identity or qualifications
❏ For Example:
➢ In a contract of marriage, wherein consent is very material.
➢ Religion? FOr some important siya.
➢ Financial Status?(Di ko narinig medyo maingay)
➢ Educational Attainment
➢ MIstake as to quantity - kung kulang dagdagan, kung sobra, bawasan
➢ As to motives- Bibili ako ng kotse kase gusto ko may pang porma. Bibili ako ng cellphone para
ipakita sa nililigawan ko na mayaman ako.

THINGS THAT ARE NOT IMPORTANT IN THE CONTRACT

> Deed of Sale
> Doctor
> Lawyer

Question:
Ed: Sir paano kapag lawyer talaga pero retired na?
Sir: Walang nag re retire na lawyer. YOu remained to be a lawyer until you died, bit if you dont want to practice
your profession you have to report it so that you will not be required to take the mandatory legal education. You
will only become an attorney when you take your oath and not when you pass the BAR.

● Mistake of Fraud is incumbent upon to the person who alleged the fraud. Sinabi mo yung pandaraya and
you have to prove that.

There are instances where it is not an error of mistake because sometimes there is venture which actually
amounts to taking risk and contingency.

❏ For Example:
 ➢ Educational Fund na nawala. For 15 years nasa Supreme Court. Yung pera bang nasa trust fund or an
investment di pa din mapagdesisyunan ng Supreme Court. If it is an investment and when it is subject to
contingency and risk, pwedeng malugi. At kapag nalugi walang kinalaman ang company, it is something
of contingency and risk. But if its a trust fund it doesn’t really matter, mananagot ka.
➢ Whenever you enter into a venture or whatever it is that is something about business. Having such
contingency and risk even if it amounts to payor will not vitiate consent and walang kinalaman ang
mistake.
➢
MISTAKE OF LAW- generally does not vitiate consent because ignorance of the law excuses no one. But there
is only one exception. Mistake of law will vitiate consent if it refers to fraud and erroneous conclusions as to legal
effect of an agreement. In other words, the difficult interpretation of law and contracts that will vitiate consent.

❏ For Example:
➢ You enter into a contract thinking it is a Deed of Sale when the truth it is only a Deed of Purchase of
*toot*. Sa palengke sa Imus, several years ago the municipality of Imus asking for fees from the owners
of store. Because akala nila they bought is the actual store itself. But it turns out that what they bought is
only the right to use the store for 10 years. That is why in those cases when the consent is considered to
be vitiated because it refers to difficult interpretation.

MUTUAL MISTAKE THAT WILL VITIATE CONSENT

(1) It must be mutual
(2) It must be with respect to the agreement
(3) It must frustrate the real purpose of the agreement

❏ For Example:
➢ Contract of Lease with option to purchase. There are cases when the person would opt to buy the
property he is leasing. Bibilhin ko to but not today. Maglagay tayo ng provision with respect to the sale.
If you have different interpretation as to what the contract is and it frustrate the legal effect of the contract
and the party, then it will vitiate consent

VIOLENCE- requires the employment of physical force to make the consent defective. May pinagkaiba siya SA
*TOOT*
> Violence refers to physical while intimidation is mental. Force requires external force and Intimidation requires
internal force.

Which is more vitiating, force or violence?

“Pumirma ka kundi babarilin kita”
“Pumirma ka kasi hawak namin ang nanay at tatay mo, hawak lang naman”
“Umuuwi ang misis mo ng gantong oras sa gantong kalsada”
“Mag ingat ka”

Requisites for intimidation or threat to vitiate consent of a party to a contract.

1. It must produce a reasonable and well-grounded fear of an evil
2. The evil must be imminent and grave.
3. The evil must be upon his person or property, or that of his spouse, descendants, or ascendants
(paano ung mga kapatid?).
4. It (pananakot or pangthreaten) is the reason why he enters into the contract

Factors affecting whether or not the kind of intimidation is really grave

 1. Age
2. Gender
3. Condition of the person

Men can physically assault you.

Women can destroy your reputation.

Reverential fear - Refers to the fear of displeasing a person to whom respect and obedience are due. Does
not annul consent in the absence of actual threat, UNLESS the fear so deprives one of reasonable inference
that undue influence has been exercised.

Threat of a legal claim - does not vitiate consent

● Pinadalhan ng demand letter - “pag di ka nagbayad sa gantong panahon, kakasuhan kita sa hukuman”
● Does it vitiate consent on account of threat or intimidation? Answer: NO.
● Legal claim is justified.
● Even if the suit turns out to be false, it will not be a cause to vitiate consent, but it may be a cause for
you to be charged with perjury or false testimony.

Threat or intimidation or violence may be employed by a third person.

Undue influence - the kind of influence which overpowers the mind and eventually destroys one’s free will as
to make him express the will of another rather than his own.
● Affects a person even if he doesn’t know how
● Circumstances to be considered for undue influence:
a. Confidential, family, spiritual, and other relations between the parties
■ The persons you look up to
■ Includes one’s significant other
■ Persons whose opinions matter most
■ Spiritual: You can be wise about a lot of things, but when you talk about spiritual things,
these are really factors that can greatly influence you.
● Example: Jim Jones, a leader of a cult which had 1200 members, who was able
to convince his followers to commit suicide. The suicide was done by
administering communion laced with cyanide.
■ If you are well-versed with the word of God, you will not be lured away from believing in
something that is not true.
b. Mental weakness - low IQ
■ You cannot do much in a contract because you cannot really understand it.
■ Doesn’t necessarily mean that you are not educated
■ If your IQ si 40 and below, you are considered to be mentally weak.
■ If you are mentally weak, you will not be able to understand the contract and you will not
know the repercussions.

c. Ignorance - lack of knowledge in certain fields of discipline

■ Example: You will enter into a construction contract. Since you do not understand all of
the terms in it, you will have to consult an engineer to ensure that the contract is within
the specifications.
■ You may be good in accounting, but not so much in engineering or science.
 ■ When you enter into a contract wherein the provisions of which you are ignorant of, then
you are considered to be unduly influenced.

● You cannot really do much in a contract because they cannot really understand it.
● Pagsinabing mental weakness d naman ibig sabihin that you are not educated but somehow you have
a very low IQ. Technically if your IQ is 40% and below you are considered to be mentally weak.
● If your mentally weak you will not be able to understand the contract, you will not know the
repercussions, and probably you do not understand the contract at all.
● Ignorance is different from mental weakness because ignorance refers to lack of knowledge and certain
fields of discipline.
Ex. you maybe good at accounting but you are not so good at engineering, science, volcanology
etc. So, when you enter in a contract where the provisions of which you are ignorant on, then you are
considered to be a unduly concerned.
● construction contract that are joint ventures medyo maraming terms that is not really understandable.
● “Financial Distress”- wala pang case na nagfile tungkol dito.
-if your financially distress you will enter in to any kind of agreement, even if its disadvantages to
you.
Ex. 5/6 -Masyadong malaking interest.
Kasi wala talaga silang pera, wala silang capital, that’s the reason why they will enter
into any kind of agreement even if it is grossly disadvantageous to them, simply because they
don’t have money.
● ang taong naiipit kahit sa bumbay kumakapit.
● Ang taong naiipit kahit sa patalim kumakapit.

● There are cases when financial distress can actually be a mitigating circumstance if it is really the
reason why you committed the crime
ex. Theft- pag walang wala ka, makukulong ka padin pero it will mitigate the parusa.

Causal fraud (di ko marinig napakaingay ni aldrin puta)

● Causal fraud vs incidental fraud
-Causal fraud vitiates consent while incidental fraud doesn’t.
● causal fraud is the fraud committed at the celebration of the contract.
○ nung pumirma ka andun na yung fraud.
Ex. NFA rice is repacked to commercial rice if the contents of that commercial rice is
really NFA Rice it is causal fraud.
WHY? because its commited at the celebration in other words you will not have bought
that kind of commercial rice at that price had you knew that it is really NFA rice.
Ex. Cellphone , Kung alam mong original tapos china phone pala, causal fraud yun.
Bcos you would have not bought if you knew that it is really china phone.

WHAT IS CAUSAL FRAUD THAT WILL VITIATE CONSENT?

It is that where there is concealment through the use of insidious word and machinations that include
any misrepresentation in words or actions done with a fraudulent cause.
 Ex. ESTAPADOR/ MANLOLOKO- they have a way with words. They will be saying something that will
convince you into buying something that in the first place you do not want to buy. Parang meron silang
charisma, they have a way of a convincing you even if you don’t like the

CAUSAL FRAUD REQUISITES:

1) There must be misrepresentation or concealment.
- when we talk about this representation, they are trying to sell something that it is not really
what we see or what they say it is.

Ex. shop tv/ O-shopping ( SOBRANG INGAY NANAMAN NI ALDRIN) yun pala yung
mga nagdedemonstrate nun mga professional kaya pala para sa kanila ang dali

● CONCEALMENT are things which you ought to tell the other party because it is material to the contract
and pag hindi mo sinabi it will amount to fraud.
ex. kotse you have to show the actual odometer, how long the car really run
*kasi merong iba sinasabi 76 thousand km tinakbo nito mula nung pagkakabili yun pala
naka dalawang ikot kasi kapag naka 500 thousand km kana.

*In the family code there are 4 concealments which is considered to be a ground annulity of marriage.
1) Concealment of the fact that you are a drug addict or alcoholic.
2) Concealment of the fact that you are infected with a sexually transmissible disease which appears to
be incurable.
3) Concealment of the fact that you are a homosexual.
4) Concealment of the fact that you are impregnated by a man other than your spouse or your boyfriend

There are also concealment which is not considered to be a ground for annulment.
Ex. Sterility- inability to produce children

● concealment of impotency is a ground for annulment

-Impotency is inability have an erection.

● Ex. The owner of the car that was sold did not disclose the fact that his entire family was murdered in
that very car. together with his entire family.
QUESTION: will that be concealment? According to the supreme court, no. because that is not
something material to a contract of sale of a motor vehicle. Ang may kinalaman lang diyan yung specification
of the vehicle but not the former owners .

● Ex. Car was used as a get-away car robbery, This probably you will change your mind but it will still not
be considered as concealment kasi wala naman syang kinalaman sa specifications.

● Ex. The house of Visconde in Paranaque is still for sale because it was involved in a massacre and no
one wants to buy it.

“Paano po pag pinatay ko tapos sinemento ko sa pader?”

Pag sinemento siya sa pader
“It will something change your mind. Had I know na may sinemento sa wall, di ako bibili”
“Yung sa globe po, may termination fee pero di sinabi.”
● “May solution dyan. Wag na magbayad kasi puputulan din naman kayo eh. Talagang may termination
fee yan. Wag nyo na bayaran pero black listed lang kayo sa globe.”
 ● If the obligation is just 20k, then will not file a case against you kasi lugi pa sila sa filling fee.

Number 2, it must be serious

How do you consider a fraud to be serious?
1. The amount involved
2. The manner of commission
Ex: pyramiding (networking tawag ngayon)
Number 3, it must be employed by one by the parties
Number 4, it must be in bad faith with intent to deceive

Misrepresentation in good faith is not considered to be fraudulent.

❖ Ex. You are selling a drug, sabi ng principal it can may you younger. If you are the agent, and you
believed what they say, you are just echoing what they have said, it is not in bad faith.

Number 5, it must have been caused the other party

Number 6, it must be proved by convincing evidence

Fraud by concealment
● This failure by one party to communicate that which a party has to know and ought to know, it
constitutes concealment. If you conceal that, it may amount to fraud. There also part of the contract that
must be communicated to the other party otherwise, it will amount to fraud

Usual exaggerations in trade

★ When the person dealing with them had an opportunity to know the facts, the usual exaggerations in
trade are not in themselves fraudulent. The law allows considerable latitude to seller’s statements or
dealer’s talk and experience teaches that is exceedingly risky to accept it at its face value.
★ Sometimes what they do is really just to say something which is a little bit of exaggeration but it is not
considered to be fraudulent
★ Usual exaggerations in trade are expected and tolerated because commercial takes weeks and months
to …. But only takes seconds to show.
★ When they said something, it must be something within your reach whether it is true. There are
exaggeration we know that will not happen in real life. “Yung biglang naghilamos naging kamukha nya
si james reid. May ginamit sya na facial cleanser tapos lahat tayo bumili na.”
★ We have an agency called PANA (Philippine Agency of National Advertisers) which they actually
prohibit the showing of commercial that are fraudulent.
★ Customers are expected to know how to take care of their concerns and to rely on their own
independent judgment.
Opinions as matter of rule, is not fraudulent.
➔ Ex. This shampoo that will take care to all of my problems
➔ It is not something that will turn out to be fraudulent even it turns out to be false
➔ Ex. Bumili ka ng isang box ng inendorse na soap ni Liza dahil sa advertisement niya, this will not
amount to fraud.

For it to be considered to nullify the contract on account to fraud,

1. It must be made by an expert
● Kaya kadalasan endorser ang kinukuha. Pero meron naming experts like PAMET (Philippine
association of Medical Technologists)
2. The other contracting party has relied on the experts opinion; and
3. The opinion turned out to be false or erroneous

Ang ground for the vitiation of consent is no longer fraud but mistake.
❏ Ex. Nagbenta ka ng (legal) drugs tapos you just believed in the manufacturer’s statement, then that is
misrepresentation in good faith and will only amount in mistake or error.
There 2 kinds of fraud
Causal fraud – fraud committed in the celebration. Nung nagpipirmahan palang kayo may pandaraya na
➢ Causal fraud will give rise to the payment of damages and also can file a case to have the contract
voided

Incidental fraud – meron na pinirmahan na contract. While in the performance of the contract that is the time
incidental fraud happen.
➢ Example: there are cases there a perfected contract of continuing sale of cement to a hardware.
Sometimes they repackt it and dilute the substance. Then there is incidental fraud. Binawasan nila
yung sako ng isang kilo. That is incidental fraud
➢ Incidental fraud will only make you liable for payment of damages.

A simulation of contract has to do something with fraud

Simulation of a contract is that act of deliberately deceiving others, by feigning or pretending by agreement,
the appearance of a contract which is either non-existent or concealed.
Pag sinabing simulation, kunwari lang pero wala naming contract.
Absolute simulation
❏ Ex. Marriage for convenience. Kung gusto mo magka visa/green card. You enter into fictitious
contracts of marriage. Ang mangayayari niyan pagdating mo sa lugar na yon, at nakuha mo na yung
visa, magdidivorce na kayo ng foreigner. Contracted na ito bago ka pa pumunta sa ibang bansa. The
parties are never intented to be bound by the contract.
Relatively simulated contract
● when the true intention of the parties are not expressed in the contract
● Contract of lease with option to purchase is really a deed of sale.