Chapter 2 Section 1: Consent Flashcards

Question

Capacity to give consent presumed.

Answer 1

The Civil Code does not define who have capacity or legal ability to give consent to a contract. It defines on the contrary who have no capacity, by which it can be inferred that capacity is the general rule, which exists in those, of whom the law has not denied it. (8 Manresa 658; see the Standard Oil Co. vs. Arenas, 19 Phil. 363.) The burden of proof is on the party who asserts incapacity.

Answer 2

A contract entered into where one of the parties is incapable of giving consent to a contract is voidable. A voidable contract is valid and binding until it is annulled by a proper action in court. It is susceptible of ratification. (Art. 1390.) Those who are incapacitated to give consent under Article 1327 are the following: (1) Unemancipated minors. - They refer to those persons who have not yet reached the age of majority (18 years) and are still subject to parental authority. A minor can be emancipated by attainment of the age of majority, by marriage, or by the concession recorded in the Civil Register, of the father or of the mother who exercises parental authority (see Art. 254, Family Code.); (2) Insane or demented persons. - The insanity must exist at the time of contracting. Unless proved otherwise, a person is presumed sane; and (3) Deaf-mutes. - They are persons who are deaf and dumb. However, if the deaf-mute knows how to write, the contract is valid for then he is capable of giving intelligent consent. A person who does not know how to write, does not know how to read; and one who knows how to read necessarily knows how to write. A contract entered into by a deaf-mute who knows how to read is, therefore, valid, although he cannot write because of some physical reasons.

Answer 3

The reason behind Article 1327 is that those persons mentioned can easily be the victims of fraud as they are not capable of understanding or knowing the nature or import of their actions. They can enter into a contract only through a parent or guardian.

Answer 4

1328. Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.

Answer 5

Lucid interval is a temporary period of sanity. A contract-entered into by an insane or demented person during a luid interval is valid. It must be shown, however, that there is a faul return of the mind to sanity as to enable him to understand the contract he is entering into.

Answer 6

Drunkenness and hypnotic spell impair the capacity of a person to give intelligent consent. (8 Manresa 660-661.) These conditions are equivalent to temporary insanity. Hence, the law considers a contract entered into in a state of drunkenness, or during a hypnotic spell voidable and it is not required that such state was procured by the circumvention of the other party.

Answer 7

The incapacity declared in Article 1327 is subject to the modifications determined by law, and is understood to be without prejudice to special disqualifications established in the laws. (1264)

Answer 8

In general, the contracts entered into by the persons enumerated in Article 1327 are voidable. (Art. 1390.) However, in certain cases, their incapacity may be modified by law, thatis, they can also give valid consent. Thus: (1) When necessaries such as food, are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. (Arts. 1489, 290.) (2) A minor 18 years old or above may contract for life, health and accident insurance, provided the insurance is taken on his life and the beneficiary appointed is the minor's estate or the minor's father, mother, husband, wife, child, brother, of sister. (Insurance Code of 1978 Pres. Decree No. 1460), Sec. 3, раг. 3.) (3) A contract is valid if entered into through a guardian or legal representative. (see Art. 1381(1, 2).) (4) A contract is valid where the minor misrepresented his age and convincingly led the other party to believe in his legal capacity. (Mercado vs. Espiritu, 37 Phil. 215.) (5) A contract is valid where a minor between 18' and 21 years of age voluntarily pays a sum of money or delivers a fungible thing in fulfillment of his obligation thereunder and the oblige has spent or consumed it in good faith. (Art. 1427.)

Answer 9

In addition to the incapacity declared in Article 1327, other special disqualifications may be provided by law. (1) Under the Rules of Court, the following are considered incompetents and may be placed under guardianship: (a) persons suffering the accessory penalty civil interdiction (see Art. 34, Revised Penal Code.); (b) hospitalized lepers; (c) prodigals (spendthrifts); (d) deaf and dumb who are unable to read and write; (e) those who are of unsound mind even though they have lucid intervals; and (f) those who, by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of themselves and manage their property, becoming thereby an easy prey for deceit and exploitation. (Sec. 2, Rule 92, Rules of Court.) A contract entered into by any of the above is valid except where it is voidable by reason of incapacity under Articles 1327 and 1328 or of causes which vitiate consent (Art. 1330.), or where the incompetent has been placed under guardianship. Thus, a prodigal is presumed to have capacity to enter into a contract. (a) insolvents until discharged (Insolvency Law [Act No. 1956, as amended.], Sec. 1.); (6) married women in cases specified by law (Art, 39.); (c) husband and wife with respect to sale of property to each other (Art. 1490.); and (d) other persons especially disqualified by law. (see Arts. 1491, 1789.)

Answer 10

ART. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.

Answer 11

In order that consent may be valid for purposes of contract, it is required, not only that it exists, but that it must be given with exact understanding over the thing consented to. In other words, the contract must be based on the genuine assent of both parties to the contract and the terms thereof. There is no valid consent unless: (1) It is intelligent. - there is capacity to act (see Arts. 1327- 1329.); (2) It is free and voluntary. - there is no vitiation of consent by reason of violence or intimidation (see Art. 1330.); and * (3) It is conscious or spontaneous. — there is no vitiation of consent by reason of mistake, undue influence, or fraud. Thus, Article 1330 enumerates in a negative manner the different requisites of consent. The contracting parties must possess the necessary legal capacity to give consent to a contract. (Arts. 1327-1329.)

Answer 12

Aside from incapacity and simulation of contract, the following are the causes that vitiate consent or render it defective so as to make the contract voidable: (1) error or mistake (Art. 1331.); (2) violence or force (Art. 1335.); (3) intimidation or threat or duress (Ibid.); (4) undue influence (Art. 1337.); and (5) fraud or deceit. (Art. 1338.)

Answer 13

(1) The former are temporary, while the latter are more or less permanent; and (2) The first refers to the contract itself, while the second, to the person entering into the contract. Both make a contract "voidable" only (see Art. 1390.), not void.

Answer 14

ART. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. A simple mistake of account shall give rise to its correction. (1266a)

Answer 15

Mistake or error is the false notion of a thing or a fact material to the contract.

Answer 16

(1) Mistake may be of fact or of law. In general (see Art. 1334.), the mistake to which Article 1331 refers to is mistake of fact. It may arise from ignorance or lack of knowledge. (2) The mistake contemplated by law is substantial mistake of fact, that is, the party would not have given his consent had he known of the mistake. Hence, not every mistake will vitiate consent and make a contract voidable. (3) The mistake may be unilateral (e.g., 2nd par.), when only one party is mistaken about a material fact, or bilateral (or mutual) when both parties are in error. Generally, a person who makes mistake cannot avoid liability to the innocent party unless , he shows that he was free of fault ur negligence.

Answer 17

In order that mistake may vitiate consent, it must refer to: (1) the substance of the thing which is the object of the contract; or (2) those conditions which have principally moved one or both parties to enter into the contract; or (3) the identity or qualifications of one of the parties provided the same was the principal cause of the contract. No. 1 above includes mistake regarding the nature of the contract, as when the contracting parties believe that the other is selling, when in truth and in fact, both are buying.

Answer 18

(1) Error as regards the incidents of a thing or accidental qualities thereof (e.g., accessibility of a residential house to means of transportation; maximum speed of a car) not taken as the principal consideration of the contract, does not vitiate consent (par. 1, Art. 1331.) unless the error is caused by fraud of the other party. (see Art. 1338.) (2) Mistake as to quantity or amount does not also vitiate consent but only gives rise to its correction (Ibid., par. 3.) unless it goes to the essence of the contract. (3) Error as regards the motives of the contract (see Art. 1351.) does not also vitiate consent unless the motives constitute a condition or cause of the contract. (4) Mistake as regards the identity or qualifications of a party does not vitiate consent for the reason that contracts are entered into more in consideration of the things or services which form their subject matter rather than of persons. The exception is when such identity or qualifications have been the principal cause uf the contract (par. 2, Art. 1331.), as in contracts, which have for their object obligations to do, requiring personal quanbications, of the debtor, or involving trust and confidence, such as contracts of partnership, agency, commodatum, guaranty, deposit, etc. (5) Error which could have been avoided by the party alleging it, or which refers to a fact known to him, or which he should have known by the exercise of ordinary diligence, or which is so patent and obvious that nobody could have made it, will not invalidate consent. EXAMPLES: (1) Mistake regarding object. - A is buying from B a breeding cow but B is selling a barren cow. (2) Mistake regarding condition of the contract. - A is selling his parcel of land for P500,000 cash but B is buying the land thinking that the price is payable in installments. (3) Mistake regarding identity or qualifications. - (a) A sold his car to B. A thought that B, who is a lawyer, was a doctor. The mistake here is not material as to avoid the contract. * (b) A donated his car to B. A thought that B was his half-brother. It turned out that B is not related to A. The mistake as to the identity of B in this case is material because his identity was the principal reason or consideration for the donation. (4) Mistake which could have been avoided. - S was willing to sell his share of two (2) parcels of land, provided, that his co-owners would also sell their respective shares of the said land. s engaged the services of lawyer L without knowing that L was also representing B, the prospective buyer. L confirmed to S that all his co-owners were amenable to sell their shares. After S signed the deed of sale, drafted by L, he learned that the other co-owners did not agree to sell their shares over the subject property. S cannot invoke mistake in order to annul the sale because he could have avoided the alleged mistake had she exerted efforts to verify from his co-owners if they really consented to sell their respective shares.

Answer 19

(1) Where mistake simple. - A simple mistake of account or calculation does not avoid a contract because it does not affect its essential requisites. The defect is merely in the computation of the account or amount which can be corrected. (2) Where mistake gross. - Where the mistake was so gross that it was clearly apparent to one party and, therefore, would be impossible to escape his notice, said party cannot avoid liability on the ground of mistake in computation. * EXAMPLES: (1) S sold to B a parcel of land with an area of 567 square meters at P415 per square meter. In the document of sale, the purchase price stated is P285,305 when it should be P235,305. The mistake will not make the contract voidable. It will only give rise to its correction by putting the true amount. (2) In the same example, if the purchase price agreed upon is for a lump sum of P235,305 for the parcel of land stated as having an area of 567 square meters but with an actual area of only 467 square meters, B has the right to ask for the rescission or cancellation of the contract.

Answer 20

When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. (n)

Answer 21

(1) General rule. - When a person signs a document, the presumption is that he does so with full knowledge and understanding of the contents of the same. He is, therefore, bound by all its terms. Should he later on allege fraud or mistake, it is incumbent upon him to prove his allegation. A presumption is a fact that is accepted as true until proved otherwise. (2) Exception. - Article 1332 is an exception to the above rule. When one of the parties is unable to read or if the contract is in a language not understood by him, it is the party enforcing the contract who is duty-bound to show that there has been no fraud or mistake and that the terms of the contract have been fully explained to the former in a language understood by him. (3) Reason for the exception. — "This rule is especially necessary in the Philippines where unfortunately there is still a fairly large number of illiterates, and where documents are usually drawn up in English or Spanish." (Report of the Code Commission, p. 136.) It is also in accord with the policy in our constitution of promoting social justice and protecting the rights of those who are disadvantaged in life.

Answer 22

ART. 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.

Answer 23

If a party knew beforehand the doubt, contingency, or risk affecting the object of the contract, it is to be assumed that he was willing to take chances and cannot, therefore, claim mistake. (see Martinez vs. Court of Appeals, 56 SCRA 647.) This is especially true where the contract is aleatory in nature. B bought a parcel of land from S who informed him before the contract was perfected that the land was involved in a litigation in which C is the claimant.

Answer 24

1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent. (n)

Answer 25

Mistake of law is that which arises from an ignorance of some provision of law, or from an erroneous interpretation of its meaning, or from an erroneous conclusion as to the legal effect of an agreement, on the part of one of the parties.

Answer 26

As a rule, mistake of law does not invalidate consent because "ignorance of the law excuses no one from compliance therewith." (Art. 3.) This doctrine is based on public policy, dictated by expediency and necessity. (see Luna vs. Linatoc, 74 Phil. 15.)

Answer 27

"Mistake of law does not generally vitiate consent. But when there is a mistake on a doubtful question of law, or on the construction or application of law, this is analogous to a mistake of fact, and the maxim of ignorantia legis neminem excusat (ignorance of the law excuses no one) should have no proper application. When even the highest courts are sometimes divided upon difficult legal questions and when one-half (1/2) of the lawyers in all controversies on a legal question are wrong, why should a layman be held accountable for his honest mistake on a doubtful legal issue?" (Report of the Code Commission, p. 130; see Art. 1331.)

Answer 28

For the article to apply, the following requisites must be present: (1) The error must be mutual; (2) It must be as to the legal effect of an agreement; and (3) It must frustrate the real purpose of the parties. EXAMPLES: (1) D borrows P10,000 from C. As security for the debt, it was agreed that D should mortgage his parcel of land in favor of C. However, the document as written is one of antichresis,s the parties erroneously believing that it has the same effect as a mortgage. In this case, the contract is voidable because there is no meeting of the minds. (par. 2, Art. 1359.) (2) In the same example, if the parties really agreed on a sale, but the document as written discloses a mortgage, there is a meeting of the minds but the document does not show their true intention. In this case, the remedy is reformation. (see Art. 1359.) (3) C delivers as a deposit a movable property to D who receives it as loan (commodatum). (see Art. 1316.) Here, the mutual error is not on the legal effect but on the nature of the contract entered into. D must return the property as there is neither a deposit nor a loan.

Answer 29

There is violence when in order to wrest consent, serious or irresistible force is employed. There is 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 or property of his spouse, descendants or ascendants, to give his consent. To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind. A threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent.

Answer 30

Violence requires the employment of physical force. Under Article 1335, to make consent defective, the force employed must be either serious or irresistible. In either case, consent is not free. (Report of the Code Commission, p. 136.) It is essential that the force employed must be the determining cause or reason in giving consent. EXAMPLE: If X signs a document because every time he refuses he is hit by the butt of a gun which causes blood to flow from his head, there is violence because serious or irresistible force is employed to wrest consent. In this case, X is "mere automation and acts mechanically only. While his hand signs, the will which moves it is another's. While a contract is made, it has in reality and in law, only one party to it; and, there being only one party, the one using the force or intimidation, it is unenforceable for lack of a second party." (Vales vs. Villa, 35 Phil. 769.)

Answer 31

Under the above article, for intimidation to vitiate the consent of a party to a contract, the following requisites must be present: (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; and (4) It is the reason why he enters into the contract. Intimidation need not resort to physical force. Intimidation is internal while violence is external. EXAMPLE: In the preceding example, if X signs the document because a gun is pointed at him by Y who threatens to kill him and he has no reason to believe that Y will not carry out his threat, the intimidation would vitiate consent. But if X was merely intimidated that he would be shot by Y and the latter had no gun at the time of the threat, there is no intimidation as contemplated in Article 1335 because the fear is not reasonable and well-grounded since. Y is in no position to carry out his threat. Suppose X signs the contract because of a threat to his (her) honor or to the life of his (her) brother or sister, would there be intimidation just the same considering the enumeration in the law? (par. 2.) If the consent of X is vitiated just the same, it is believed that the threat amounts to intimidation.

Answer 32

Whether or not the fear is reasonable and well-grounded or the evil imminent and grave depends upon the circumstances, including the age, sex, and condition of the person. If a contract is signed merely out of reverential fear or the fear of displeasing a person to whom respect and obedience are due, the contract is valid because reverential fear by itself does not annul consent in the absence of actual threat (Sabalvaro vs. Erlanger and Galinger, 64 Phil. 588.), unless the fear so deprives one of reasonable inference that undue influence has been exercised. (see Art. 1337.)

Answer 33

The threat of a court action as a means to enforce a just or legal claim is justified and does not vitiate consent. It is a practice followed by creditors to demand payment of their accounts with the threat that upon failure to do so, an action would be instituted in court. Such a threat is proper within the realm of the law as a means to enforce collection. Such threat cannot constitute duress even if the claim proves unfounded so long as the creditor believes that it was his right to do so. (E. Berg vs. NCBNY, 102 Phil. 309.) EXAMPLES: (1) Dowes C P5,000. If D fails to pay his obligation, a threat by C that he would enforce collection through a court action does not vitiate consent. But if C knows that D is not obligated to him and D pays C P5,000 or a larger amount because of the threat, there is intimidation sufficient to vitiate consent. (2) X committed a violation of law. Y threatens to report X to the police unless the latter gives him P5,000. The threat of Y amounts to intimidation because his claim is not "just or legal."

Answer 34

Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract.

Answer 35

Violence or intimidation may be employed by a third person who did not take part in the contract. However, to make the contract voidable or annullable, it is necessary that the violence or intimidation must be of the character required in Article 1335.

Answer 36

ART. 1337. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly Influenced was suffering from mental weakness, or was ignorant or in financial distress. (n)

Answer 37

Undue influence is influence of a kind that so overpowers the mind of a party as to prevent him from acting unders'andingly and voluntarily to do what he would have done if he had been left to exercise freely his own judgment and discretion.

Answer 38

The influence must be undue or improper (Art. 1337.) to avoid a contract. Its effect on the person influenced must be such as to make him express the will of another, rather than his own. Mere general or reasonable influence is not sufficient. If gained by kindness and affection or argument and persuasion, the influence will not vitiate consent. (Martinez vs. Hongkong and Shanghai Bank, 15 Phil. 252.)

Answer 39

The following are examples of circumstances which shall be considered to determine whether undue influence has been exercised: (1) confidential, family, spiritual and other relations between the parties, (2) mental weakness, (3) ignorance, or (4) financial distress of the person alleged to have been unduly influenced. (Art. 1337; see Ärt. 1332.) EXAMPLE: X, a tenant, is in need of P10,000 to pay his landlord who is seeking to eject him for failure to pay the rents. X tries to borrow from Y but the latter instead tells him to sell his piano for P10,000. X has nobody to turn to for assistance. If X does not want to sell the piano but he is compelled to sell it because of his financial condition, the sale may be avoided on the ground of undue influence. "Agreements between lender and borrower are closely scrutinized because they are not always at arm's length." (13 C). 410.)

Answer 40

There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.

Answer 41

Causal fraud is the fraud committed by one (1) party before or at the time of the celebration of the contract to secure the . consent of the other. It is the fraud used by a party to induce the other to enter into a contract without which the latter would not have agreed to. The fraud contemplated in this article is causal fraud and must be distinguished from the fraud dealt with in Article 1170.

Answer 42

Causal fraud may be committed through insidious words or machinations (Art. 1338.) or by concealment. (Art. 1339.) "In-sidious words or machinations" include any misrepresentation in words or actions done with a fraudulent purpose. If the fraud did not have the effect of causal fraud, that is, it did not by itself alone cause the other contracting party to give his consent, it gives rise only to an action for damages. (see par. 2, Art. 1344.)

Answer 43

Not all forms of fraud can vitiate consent. In order that fraud may annul consent, the following requisites must be present: (1) There must be misrepresentation or concealment of a material fact with knowledge of its falsity (2) It must be serious (Art. 1344); (3) It must have been employed by only one of the contracting parties. (Ibid.) Fraud committed by a third person does not vitiate consent unless it was practiced in connivance with, or at least with the knowledge of, the favored contracting party (see Art. 1342.); (4) It must be made in bad faith or with intent to deceive (see Art. 1343.) the other contracting party who had no knowledge of the fraud; (5) It must have induced the consent of the other contracting party (Art. 1338.); and (6) It must be alleged and proved by clear and convincing evidence. The falsity of the representation is ordinarily proved from the representation itself and the circumstances under which it was made. EXAMPLES: (1) S offered to sell to B a ring, claiming that the stone on the ring is diamond. S knows that it is not diamond but ordinary glass. If B buys the ring, relying on the truth of the representation ofS, the sale may be annulled on the ground of fraud. (2) S sold to B a parcel of land representing that the same was "absolutely free of all liens and encumbrances." § gave his consent on the faith of B's representation. When the sale was registered, it was found that lis pendens notice was annotated on the title of the land. The concealment constitutes fraud such as justifies the avoidance of the sale, and entitles B to damages. (3) S sold to B a house and lot, misrepresenting that the place was easily accessible to means of public transportation. The sale is voidable on the ground of fraud if B was induced to give his consent because of the representation. If B purchased the property without any inducement from S, his mistaken belief that it was accessible does not vitiate consent because the error refers merely to an incidental quality or condition of the thing. (see Art. 1331.)

Answer 44

Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. (n)

Answer 45

A neglect or failure to communicate or disclose that which a party to a contract knows and ought to communicate constitutes concealment. In this case, concealment is equivalent to misrepresentation or false representation. The injured party is entitled to rescind or annul the contract whether the failure to disclose the material facts is intentional or unintentional as long as there is a duty to reveal them and the party is misled or deceived in entering into the contract. If the failure is unintentional, the basis of the action for annulment is not fraud but mistake or error (Art. 1343.); even if intentional but there is no duty to make the disclosure, the parties are bound by their contract. examples (1) X and Y are partners engaged in the real estate business. Here, the parties are bound by confidential relations. X learned that C was interested in buying a certain parcel of land owned by the partnership even for a high price. Without informing X, X was able to make Y sell to him (X) his (Y's) share in the partnership. Then, X sold the land at a big profit. In this case, X is guilty of fraudulent concealment because he was under the duty to make disclosure of facts having a bearing on the value of the interests of Y in the partnership which were not known to Y. (see Art. 1806.) If the sale was at the initiative of Y, and X unintentionally failed to inform Y of C's offer, the cause for annulment is mistake or error on the part of Y. (2) § sold to B stocks traded in the stock exchange at a certain price. S believed that the price of the stocks would go down and it did. The sale is valid because S was not bound to make disclosure of his reasons for his belief.

Answer 46

1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. (n)

Answer 47

It is the natural tendency for merchants and traders to resort to exaggerations in their attempt to make a sale at the highest price possible. 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 it is exceedingly risky to accept it at its face value. Customers are expected to know how to take care of their concerns and to rely on their own independent judgment. Any person who relies on said exaggerations does so at his own peril. (see Songco vs. Sellner, 37 Phil. 254.) In effect, the law does not consider such exaggerations, even if known as false by the party making them, as amounting to fraud that will affect the validity of the contract. To constitute fraud, the misrepresentation must be of a fact, past or present, and not a mere expression of an opinion. (infra.). Dealer's' talk or trader's talk are representations which do not appear on the face of the contract and these do not bind either party. (Puyat vs. Arce Amusement Co., 72 Phil. 402.) EXAMPLES: Expressions or advertisements like: "The cigarette that will give you utmost smoking pleasure" "You like it, it likes you" "The refreshment of friendship"

Answer 48

1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former's special knowledge. (n)

Answer 49

To constitute fraud, the misrepresentation must refer to facts, not opinions. Ordinarily, a mere expression of an opinion does not signify fraud. In order that it may amount to fraud, the following requisites must be present: (1) It must be made by an expert; (2) The other contracting party has relied on the expert's. opinion; and (3) The opinion turned out to be false or erroneous. EXAMPLE: X, a farmer, found a ring. He does not know anything about precious stones. He sells the ring to Y honestly believing, and telling Y, that it is a diamond ring. In this case, there is no fraud even if it turned out that the ring is not diamond because his statement is merely an expression of an opinion. (see Art. 1343.) However, if X is an expert on precious stones and he sells thowing that X san cpert retes of fis speta rowle dae the contract is voidable on the ground of fraud. Actually, X, being an expert, is making a misrepresentation of fact and he cannot escape liability by expressing it in the form of an opinion.

Answer 50

Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual.

Answer 51

(1) General rule. — A third person has no connection with a contract. Consequently, a misrepresentation by him does not vitiate consent. A party should not be made to suffer for the imprudence of another in believing the fraud of a third person. The presumption is that both contracting parties are acting in good faith. (2) Exception. - If the misrepresentation has created substantial mistake and the same is mutual, that is, it affects both parties, the contract may be annulled but principally on the ground of mistake. If the misrepresentation has been employed by a third person in connivance with, or at least with knowledge of, the party benefited by the fraud, it is deemed to have been exercised by such party upon the other contracting party. (see Hill vs. Veloso, 31 Phil. 60.) It should be remembered that force or intimidation employed by a third person on one of the parties makes a contract voidable. (Art. 1336.) The reason is because the consent is vitiated just the same. sample (1) B bought the land of S for P2,000 per square meter. The reasonable price of lands in the same vicinity is P2,500 per square meter but S sold it only for P2,000 per square meter because Chad deceived him regarding its market value. In this case, the contract cannot be annulled unless it can be shown that B was a party to the fraud. (2) B wants to buy a parcel of land on which to build a house. Sowns a land on which he wants to construct a commercial building. C tells B and S that the area where the land is located is a residential zone. B and S then enter into a contract of sale. It turns out that the area is a commercial zone. Under the facts, the sale may be annulled because of substantial mistake which is mutual.

Answer 52

Misrepresentation made in good faith is not fraudulent but may constitute error.

Answer 53

If the misrepresentation is not intentional but made in good faith (the person making the false statement believed it to be true), it is considered a mere mistake or error. Fraud is definitely more serious than mistake; hence, the party guilty of fraud is subject to greater liability. S sold a ring to B. S honestly believed that what he sold to B was a diamond ring. It turned out that it was not a diamond ring. The misrepresentation of B is a mere mistake and the contract is voidable on that ground and not on the ground of fraud.

Answer 54

In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. Incidental fraud only obliges the person employing it to pay damages.

Answer 55

Article 1344 distinguishes two (2) kinds of (civil) fraud in the making of a contract: (1) the causal fraud, which is a ground for the annulment of a contract (par. 1.), although it may also give rise to an action for damages; and (2) the incidental fraud, which only renders the party who employs it liable for damages because the fraud was not the principal inducement that led the other to give his consent. (par. Incidental fraud must not be confused with the fraud in Articles 1170 and 1171 which refers to that occurring in the performance of a contract, without affecting its validity. Both kinds of incidental fraud do not vitiate consent.

Answer 56

In order that causal fraud may vitiate consent under the above article, the following are the requisites: (1) It should be serious; (2) It should not have been employed by both contracting parties, i.e., they should not be in pari delicto (see Arts. 1411, 1414.; and (3) It should not have been known by the other contracting party. The seriousness of the fraud is a question of fact depending on the circumstances. It does not mean its influence on the other contracting party, but its importance. The requirement that fraud should be serious excludes slight and usual deviations from the truth. Such deviations are frequently present, unfortunately, in transactions, especially those taking place in fairs and markets. (see 8 Manresa 679; see Art. 1341.) When fraud is employed by both parties, neither may ask for annulment as the fraud of one neutralizes that of the other. The contract is, therefore, considered valid. The rule is in accordance with the principle that "he who comes to court, must come with clean hands." (see Valdez vs: Sibal, 46 Phil. 930.) EXAMPLE: S sold to B a parcel of land. S told B that there were 3,000 coconut trees on the land although he knew that there were only 1,000. B bought the land relying on the statement of S. The fraud here is serious and B can ask for the annulment of the contract. If there were only a difference of say, 50 coconut trees, the fraud may not be serious or important enough to make the contract voidable. But B has a right to deduct from the contract price the amount representing the value of the 50 coconut trees:

Answer 57

Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement.

Answer 58

1346. An absolutely simulated or fictitious contract is vold. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.

Answer 59

Simulation of a contract is the act of deliberately deceiving others, by feigning or pretending by agreement, the appearance of a contract which is either non-existent or concealed. (1 Castan 504.)

Answer 60

They are: (1) Absolute simulation. - when the contract does not really exist and the parties do not intend to be bound at all. (Art. 1345.) Absolutely simulated or fictitious contracts are inexistent and void. (Arts. 1346, 1409(2]; 1471.) EXAMPLE: D is indebted to C. Upon learning that C is going to enforce his credit, D pretended to sell his land to B, his father-in-law. D did not receive a single centavo for the transaction and he continued in possession of the land as the contract was merely simulated or fictitious. There is no contract of sale in this case as the parties do not intend to be bound at all. (2) Relative simulation. - when the contract entered into by the parties is different from their true agreement. (Art. 1345) The parties are bound by their real agreement provided it does not prejudice a third person and is not intended for a purpose contrary to law, morals, good customs, public order, or public policy. (Art. 1346.) EXAMPLE: sale. D and C entered into a contract of mortgage. But wanting to hide the mortgage, it was made to appear in the form of a deed of Here, there are two (2) acts involved; the ostensible or apparent act (contract of sale) and the concealed or hidden act (contract of mortgage.) As far as D and C are concerned, the contract entered into between them is a contract of mortgage. As to third persons, the apparent contract, the contract of sale, is the one entered into. Consequently, if C is the mortgagee but is made to appear as the buyer and C sells the land to B, the latter will acquire ownership. D and Care estopped or barred from claiming that the real agreement entered into by them is a contract of mortgage.

Chapter 2 Section 1: Consent Flashcards

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