Consensual Contracts, A1315 Civil Code

1. Concept

Article 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (1258)

Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Ignacio v. Home Bankers Savings and Trust Company, G.R. No. 177783, January 23, 2013, Per Villarama, JR., J.)

It is a fundamental rule that, being consensual, a contract is perfected by mere consent. From the moment of a meeting of the offer and the acceptance upon the object and the cause that would constitute the contract, consent arises. The essence of consent is the conformity of the parties on the terms of the contract, that is, the acceptance by one of the offer made by the other. However, the acceptance must be absolute; otherwise, the same constitutes a counter-offerand has the effect of rejecting the offer. (XYST Corporation v. DMC Urban Properties Development, Inc., G.R. No. 171968, July 31, 2009, Per Quisumbing, J.)

Under the law, a contract is perfected by mere consent, that is, from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. The law requires that the offer must be certain and the acceptance absolute and unqualified. An acceptance of an offer may be express and implied; a qualified offer constitutes a counter-offer. Case law holds that an offer, to be considered certain, must be definite, while an acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds. We have also previously held that the ascertainment of whether there is a meeting of minds on the offer and acceptance depends on the circumstances surrounding the case. (Traders Royal Bank v. Cuison Lumber Co., Inc., G.R. No. 174286, June 5, 2009, Per Brion, J.)

A contract of sale is consensual,as such it is perfected by mere consent.Consent is essential for the existence of a contract, and where it is wanting, the contract is non-existent.Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; and spontaneity by fraud.Thus, a contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable. (Lim v. San, G.R. No. 159723, September 9, 2004, Per Ynares-Santiago, J.)

Lim v. San, G.R. No. 159723, September 9, 2004, Per Ynares-Santiago, J.:

• Contrary to the allegations of the petitioner that the consent of his attorney-in-fact to the deed of sale was vitiated, a perusal of the records of this case showed that the petitioner failed to establish that violence, intimidation and undue influence vitiated the consent of Paz S. Lim to the deed of sale pertaining to the subject property. In determining whether consent is vitiated by the circumstances provided for in Article 1330 of the Civil Code of the Philippines, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in favor of what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship and the conduct of the parties at the time of making the contract and subsequent thereto, irrespective of whether the contract is in a public or private writing.

• While it is true that upon the death of her husband, Dr. Antonio T. Lim, Sr., on May 18, 1990,Paz S. Lim returned to the Philippines and subsequently stayed at the house of the respondent, such fact per se is not sufficient to establish that the latter employed intimidation, violence or undue influence upon the former. Defect or lack of valid consent, in order to make the contract voidable, must be established by full, clear and convincing evidence, and not merely by a preponderance thereof.Petitioner’s mere allegations that respondent threatened his mother with harm if she will not sign the contract failed to measure up to the yardstick of evidence required, not only to prove vitiation of consent, but also to overturn the presumption that private transactions have been fair and regular.

Traders Royal Bank v. Cuison Lumber Co., Inc., G.R. No. 174286, June 5, 2009, Per Brion, J.:

In Villonco Realty Co. v. Bormacheco, the Court found a perfected contract of sale between the parties after considering the parties’ written communications showing the offer (counter-offer) and acceptance by the seller who formally manifested his conformity with the offer in the buyer’s letter. We took note of the acts of the parties – the payment of the buyer of an amount representing the partial payment under the contract; the acceptance of the partial payment by the seller; the allowance of the buyer for the seller to encash the check containing the partial payment; the subsequent return of the amount representing the partial payment by the buyer with the corresponding interest stated in the buyer’s letter (offer) – and considered them evidence of the perfection of the sale. Under these circumstances, we also declared that a change in a phrase in the offer to purchase, that does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counter-offer.

• In Schuback & Sons Philippine Trading Corp. v. CA, we declared a meeting of minds between the vendor and the vendee even though the quantity of goods purchased had not been fully determined. We noted that the vendee, after expressing his intention to purchase the merchandise, simultaneously enclosed a purchase order whose receipt prompted the vendor to immediately order the merchandise. We also took into account the act of the vendee in requesting for a discount as proof of his acceptance of the quoted price.

• Yuviengco v. Dacuycuy yielded a different result, as we considered that the letter and telegrams sent by the parties to each other showed that there was no meeting of minds in the absence of an unconditional acceptance to the terms of the contract of sale; otherwise, the buyers would not have included the phrase “to negotiate details” when they agreed to the property that was subject of the proposed contract.

• Similarly, in Philippine National Bank v. CA, we ruled that there was no perfected contract of sale because the specified terms and conditions imposed under the facts of the case constituted counter-offers against each other that were not accepted by either of the parties. This case involved a first contract, involving the same property, which the parties mutually cancelled; we said that the terms of this earlier contract cannot be considered in determining the acceptance and compliance with the terms of a proposed second contract – a distinct and separate contract from the one earlier aborted.

• The incomplete details of the agreement led us to conclude in Insular Life Assurance Co. Ltd. v. Assets Builders Corp. that no perfected contract existed; there were “other matters or details – in addition to the subject matter and the consideration – [that] would be stipulated and agreed.” We likewise considered the subsequent acts between the parties and the existence of a second proposal which belied the perfection of any initial contract.

• The recent Navarra v. Planters Development Bank is another case where we saw no perfected contract, as the offer was incomplete for lack of agreed details on the manner of paying the purchase price; there was also no acceptance as the letter of Planters Development Bank indicated the need to discuss other details of the transaction.

• All these cases illustrate the rule that the concurrence of the offer and acceptance is vital to the birth and the perfection of a contract. The clear and neat principle is that the offer must be certain and definite with respect to the cause or consideration and object of the proposed contract, while the acceptance of this offer – express or implied – must be unmistakable, unqualified, and identical in all respects to the offer. The required concurrence, however, may not always be immediately clear and may have to be read from the attendant circumstances; in fact, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document.

a. Offer and acceptance

1) Offer

An offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. Match v. CA, G.R. No. 128120, October 20, 2004, Per Tinga, J.)

Match v. CA, G.R. No. 128120, October 20, 2004, Per Tinga, J.;

• Quite obviously, Litonjua’s letter dated 21 May 1990, proposing the acquisition of the Phimco shares for US$36 million was merely an offer. This offer, however, in Litonjua’s own words, “is understood to be subject to adjustment on the basis of an audit of the assets, liabilities and net worth of Phimco and its subsidiaries and on the final negotiation between ourselves.”

• Was the offer certain enough to satisfy the requirements of the Statute of Frauds? Definitely not.

• Litonjua repeatedly stressed in his letters that they would not be able to submit their final bid by 30 June 1990.With indubitable inconsistency, respondents later claimed that for all intents and purposes, the US$36 million was their final bid. If this were so, it would be inane for Litonjua to state, as he did, in his letter dated 28 June 1990 that they would be in a position to submit their final bid only on 17 July 1990. The lack of a definite offer on the part of respondents could not possibly serve as the basis of their claim that the sale of the Phimco shares in their favor was perfected, for one essential element of a contract of sale was obviously wanting—the price certain in money or its equivalent. The price must be certain, otherwise there is no true consent between the parties.There can be no sale without a price.Quite recently, this Court reiterated the long-standing doctrine that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist since the agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.

a) Time, place, manner of acceptance

The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with. (CIVIL CODE, Article 1321) 

b) When offer made through an agent

An offer made through an agent is accepted from the time acceptance is communicated to him. (CIVIL CODE, Article 1322)

c) Death, civil interdiction, insanity, insolvency

An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. (CIVIL CODE, Article 1323)

d) Waiting period to accept

GENERAL RULE:When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal. (CIVIL CODE, Article 1324)

EXCEPTION:… except when the option is founded upon a consideration, as something paid or promised. (Ibid.)

e) Business advertisements

Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer. (CIVIL CODE, Article 1325)

f) Advertisements for bidders

Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. (CIVIL CODE, Article 1326) 

2) Acceptance

[C]contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. (Rizalion v. Paraiso Development Corporation, G.R. No. 167493, February 5, 2007)

a) How expressed

[A]cceptance may be express or implied. For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. (Rizalion v. Paraiso Development Corporation, G.R. No. 167493, February 5, 2007)

1) Express acceptance

a) By letter or telegram

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (CIVIL CODE, Paragraph 2, Article 1319)

2) Implied acceptance

b) When expressed

For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. (Rizalion v. Paraiso Development Corporation, G.R. No. 167493, February 5, 2007)

c) Nature of acceptance

1) Unqualified acceptance

XYST Corporation v. DMC Urban Properties Development, Inc., G.R. No. 171968, July 31, 2009, Per Quisumbing, J.:

• XYST and DMC were still in the negotiation stage of the contract when the latter called off the deal. The facts show that DMC as agreed undertook to obtain the conformity of Citibank N.A. However, Citibank N.A.’s consent to the intended sale cannot be obtained since it does not conform to the amendments made by XYST on the pro-forma Contract to Sell. By introducing amendments to the contract, XYST presented a counter-offer to which DMC did not agree. Clearly, there was only an offer and a counter-offer that did not sum up to any final arrangement containing the elements of a contract. No meeting of the minds was established. The rule on the concurrence of the offer and its acceptance did not apply because other matters or details–in addition to the subject matter and the consideration–would still be stipulated and agreed upon by the parties.

• Therefore, since the element of consent is absent, there is no contract to speak of. Where the parties merely exchanged offers and counter-offers, no agreement or contract is perfected.

2) Qualified acceptance

A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. (Manila Metal Container Corporation v. PNB, G.R. No. 166862, December 20, 2006, Per Callejo, SR., J.)

Manila Metal Container Corporation v. PNB, G.R. No. 166862, December 20, 2006, Per Callejo, SR., J.:

• In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties. The request, which was made through a letter dated August 25, 1983, was referred to the respondent’s main branch for appropriate action. Before respondent could act on the request, petitioner again wrote respondent as follows:

1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00);

2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and

3. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for.

When the petitioner was told that respondent did not allow “partial redemption,” it sent a letter to respondent’s President reiterating its offer to purchase the property. There was no response to petitioner’s letters dated February 10 and 15, 1984.

• The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 was P1,574,560.47 cannot be considered an unqualified acceptance to petitioner’s offer to purchase the property. The statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and miscellaneous expenses.

• There is no evidence that the SAMD was authorized by respondent’s Board of Directors to accept petitioner’s offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioner’s offer would not bind respondent.

c) Communicated

The Insular Life Assurance Company, Ltd. v. Asset Builders Corporation, G.R. No. 147410, February 5, 2004, Per Panganiban, J.:

• [N]o contract shall arise unless its acceptance is communicated to the offeror. That is, the mere determination to accept the proposal of a bidder does not constitute a contract; that decision must be communicated to the bidder.Although consent may be either express or implied,the Instruction to Bidders prepared by petitioner itself expressly required (1) a formal acceptance and (2) a period within which such acceptance was to be made known to respondent. The effect of giving the Notice of Award to the latter would have been the perfection of the contract.No such acceptance was communicated to respondent; therefore, no consent was given. Without that express manifestation, as required by the terms of its proposal, there was no contract. The due execution of documents representing a contract is one thing, but its perfection is another.

• There is no issue as regards the subject of the contract or the cause of the obligation. The controversy lies in the consent — whether there was an acceptance by petitioner of the offer made by respondent; and, if so, whether that acceptance was communicated to the latter, thereby perfecting the contract. The period given to the former within which to accept the offer was not itself founded upon or supported by any consideration. Therefore, under the law, respondent still had the freedom and the right to withdraw the offer by communicating such withdrawal to petitionerbefore the latter’s acceptance of the offer;or, if the offer has been accepted,before the acceptance came to be known by respondent.