1E Obligations and Contracts Reviewer 1 Contracts General Provision

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. From the book of Jurado, contract was derived from the word cum traho which means an agreement or convention. However, do not be misled that contract is synonymous with convention because the latter is broad enough to include any kind of agreement which may create, extinguish or modify patrimonial and even family relations while contract is limited to only those which create patrimonial obligations. anche! "oman, on the other hand, defined contract as a #uridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another or others, reciprocally, to the fulfilment of a prestation to give, to do, or not to do. $n order to further understand the concept of contract, Jurado distinguished an ordinary contract from a marriage contract% ORD !AR" #O!$RA#$ &arties may be two or more persons of the same or different sexes. (he nature, conse)uences and incidents of the contract are primarily governed by the agreement of the parties. *nce executed, the result is a contract. $t can be terminated or dissolved by mere agreement of the parties. $n case of breach, the remedy available is to institute an action against the other party for damages. #O!$RA#$ O% &ARR A'( 'ecessary that the parties must be one man and one woman. 'ature, conse)uences and incidents are governed by law *nce executed the result is a status. $t cannot be terminated by mere agreement. (he usual remedy is a civil action for legal separation or a criminal action for adultery or concubinage

(hey also discussed the concept of an auto, contract. $t is a kind of contract in which only one person acted in behalf of the other party and himself or another person in another capacity to establish a contract. (olentino said that in order that a contract be existing, it re)uires two parties and not two persons, two declaration of wills and not two wills. (lements of contract) a. Essential are those without which there can be no contract Common the consent of the contracting parties, ob#ect or the sub#ect of the contract and cause of the obligation Special this is only present in certain contracts such as delivery in real contracts or form in solemn ones. Extraordinary peculiar to a specific contract, such as the price in a contract of sale. b. Natural those which are derived from the nature of the contract and ordinarily accompany the same. $t is presumed by law, but it also be excluded by the contracting parties if they so desire. Accidental are those which only exist when the parties expressly provide for them for the purpose of limiting or modifying the normal effects of the contract. -ex. .onditions, terms or modes/

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#*ARA#$(R +$ #+ O% A #O!$RA#$ 0. *bligatory force 1 character of contracts 2 -3rts. 0045, 0678, 0604 and 0649/ , $t refers to the rule that once the contract is perfected, it shall be of obligatory force upon both parties. (hey are bound not only to the fulfilment of obligations but also to all the conse)uences. :. , ;utuality of contracts 2 -3rt. 0678 and the nature of contract/ $t refers to the position of essential e)uality that is occupied by both contracting parties. (he contract must be binding upon both parties and its validity or compliance cannot be left to the will of only one party.

+oth Jurado and (olentino explained the difference between a contract and a perfected and an imperfect promises. &erfected promise merely tends to insure and pave the way for the celebration of a future contract while an imperfect promise is a mere unaccepted offer.

1E Obligations and Contracts Reviewer 2 Contracts General Provision

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3utonomy of contracts 2 -3rt. 0679/ (he contracting parties may establish agreements provided it is not contrary to law, public order, morals, good customs or public policy. "elativity of contracts 2 -First paragraph of 3rt. 0600/ .ontracts take effect only between parties, their assigns and heirs.

5. According to their s/b2ect matter) a. Things b. Services 3. According to the nat/re of the vinc/l/m which they prod/ce) a. Unilateral those which give rise to an obligation for only one party b. Bilateral those which give rise to reciprocal obligations for both parties

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+$A'(+ O% #O!$RA#$+ 1. 'eneration , it comprehends the preliminary or preparation or conception. $t is the period of negotiation and bargaining. -. .erfection , it is the moment when parties come to agree on the terms of the contract 3. #ons/mmation , it is the fulfilment or performance of the terms agreed upon in the contract. #0A++ % #A$ O! O% #O!$RA#$+ 1. According to their relation to other contracts) a. Preparatory 2 those which have for their ob#ect the establishment of a condition in law which is necessary as a preliminary step towards the celebration of another subse)uent contract b. Principal 2 those which can subsist independently from the other contracts and whose purpose can be fulfilled by themselves. c. Accessory 2 those which can exist only as a conse)uence of, o in relation with, another prior contract. -. According to their perfection) a. Consensual those which are perfected by the mere agreement of the parties. b. Real those which are re)uire not only the consent of the parties for their perfection, but also the delivery of the ob#ect by one party to the other. 3. According to their form) a. Common those which re)uire no particular form b. Special those which re)uire some particular form 1. According to their p/rpose) a. Transfer of ownership b. Conveyance of use c. Rendition of services

4. According to their ca/se) a. Onerous those in which each of the parties aspires to procure for himself a benefit through the giving of an e)uivalent or compensation b. ratuitous those in which one of the parties proposes to give to the other a benefit without any e)uivalent or compensation. 5. According to the ris6 involved) a. Commutative those where each of the parties ac)uires an e)uivalent of his prestation and such e)uivalent is pecuniarily appreciable and already determined from the moment of the celebration of contract. b. Aleatory those where each of the parties has to his account the ac)uisition of an e)uivalent of his prestation, but such e)uivalent is not yet determined at the moment of celebration# of contract. $t depends upon the happening of an uncertain event.

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According to their names or norms reg/lating them) a. !ominate those which have their own individuality and are regulated by special provisions of law. b. "nnominate those which lack individuality and not regulated by special provisions of law. Art. 1303. $he contracting parties may establish s/ch stip/lations, cla/ses, terms and conditions as they deem convenient, provided they are not contrary to law, morals, good c/stoms, p/blic order, or p/blic policy. 3rt. 0679 enunciates one of the most fundamental principles of the law on contracts 2 the right of the contracting parties to establish any

1E Obligations and Contracts Reviewer 3 Contracts General Provision

stipulation, clause, term or condition as they deem convenient. However, the article also provided the limitations to this right of the contracting parties. (he limitations are the following% Law those which are mandatory or prohibitive in character those which impose essential re)uisites without which the contract cannot exist. those, without being mandatory, are expressive of fundamental principles of #ustice

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something to 3/ Facio ut facias $ do and you do -3 will do something for +, so that + will do something for 3/

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Art. 1305. $he contract m/st bind both contracting parties: its validity or compliance cannot be left to the will of one of them. (he binding effect of the contract on both parties is based on the principles that obligations arising from contracts have the force of law between the contracting parties and that there must be mutuality between the parties based on their essential e)uality. ./rpose) (o render void a contract containing a condition which makes its fulfilment dependent exclusively upon the uncontrolled will of one of the contracting parties. 'eneral R/le on ;nilateral #ancellation) 'o one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the pre#udice of the other party. Art. 1307. $he determination of the performance may be left to a third person, whose decision shall not be binding /ntil it has been made 6nown to both contracting parties. Art. 1310. $he determination shall not be obligatory if it is evidently ine</itable. n s/ch case, the co/rts shall decide what is e</itable /nder the circ/mstances. Art. 1311. #ontracts ta6e effect only between the parties, their assigns and heirs, e=cept in case where the rights and obligations arising from the contracts are not transmissible by their nat/re, or by stip/lation or by provision of law. $heir heir is not liable beyond the val/e of the property he received from the decedent. f a contract sho/ld contain some stip/lation in favor of a third person, he may demand its f/lfilment provided he comm/nicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not s/fficient. $he contracting parties m/st have clearly and deliberately conferred a favor /pon a third person. 'eneral R/le) (he contract is only binding between the contracting parties, their assigns and heirs. (=ceptions >par.1? 3ccording to the first paragraph, the rule is not applicable if

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;orals 2 (olentino said that it means those generally accepted principles of morality which have received some kind of social and practical confirmation. =ood .ustoms 2 Jurado acknowledged the possible overlapping of the concept of good customs and good morals. +ut he gave a distinction, he said that if a moral precept or custom is not recogni!ed universally but is sanctioned by the practice of a certain community, then it shall be included within the scope of good customs. &ublic *rder 2 -(his one is self explanatory/ &ublic &olicy, it is defined as a principle of law which holds that no person can lawfully do that which has a tendency to be in#urious to the public or against the public good.

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Art. 1304. nnominate contracts shall be reg/lated by the stip/lations of the parties, by the provisions of $itles and of this 8oo6, by the r/les governing the most analogo/s nominate contracts, and by the c/stoms of the place. 9inds of innominate contracts) a. Do ut des $ give that you give. -$llustration 2 3 will give one thing to +, so that + will give another thing to 3/ b. Do ut facias $ give and you do -$llustration 2 3 will give something to +, in order that + may do something for 3/ c. Facio ut des $ do and you give -3 binds himself to do something for +, so that + will give

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the rights and obligations arising from the contract are not transmissible% +y their nature +y stipulation +y provision of the law >par.-? 0. :. 6. <. (he contract contains a stipulation in favor of a third person. (he third person comes into possession of the ob#ect of a contract creating a real right. (he contract is entered into in order to defraud a third person (he third person induces a contracting party to violate his contract.

Art. 131-. n contracts creating real rights, third person who come into possession of the ob2ect of the contract are bo/nd thereby, s/b2ect to the provisions of the &ortgage 0aw and the 0and Registration 0aws. Real right , a right belonging to a person over a specific thing, without a passive sub#ect individually determined, against whom such right may be personally enforced. Art. 1313. #reditors are protected in cases of contracts intended to defra/d them. Art. 1311. Any third person who ind/ces abother to violate his contract shall be liable for damages to the other contracting parties. Re</isites) 1. >xistence of a valid contract -. ?nowledge on the part of the third person of the existence of the contract 3. $nterference by the third person without legal #ustification or excuse Art. 1315. #ontracts are perfected by mere consent, and from that moment the parties are bo/nd not only to the f/lfilment of what has been e=pressly stip/lated b/t also to all the conse</ences which, according to their nat/re, may be in 6eeping with good faith, /sage and law. Art. 1313. Real contracts, s/ch as deposit, pledge and commodat/m, are not perfected /ntil the delivery of the ob2ect of the obligation. (he perfection of a contract refers to that moment in the life of a contract when there is finally a concurrence of the wills of the contracting parties with respect to the ob#ect and the cause of the contract. (he general rule is that a contract is already perfected by mere consent. +ut article 0609 provided the exception to this rule. Art. 1314. !o one may contract in the name of another witho/t being a/thori@ed by the latter, or /nless he has by law a right to represent him. A contract entered into in the name of another by one who has no a/thority or legal representation, or who has acted beyond his powers,

+tip/lation po/r a/tri/ , it is a stipulation in a contract clearly and deliberately conferring a favor upon a third person who has a right to demad its fulfilment provided he communicates his acceptance to the obligor prior to its revocation. 9inds) 1. -. (hose where the stipulation is intended for the sole benefit of a third person (hose where an obligation is due from the promisee to the third person which the former seeks to discharge by means of such stipulation.

Re</isites) (here must be a stipulation in favor of third persons (hat the stipulation in favor of a third person should be a part of the contract (hat the contracting parties must have clearly and deliberately conferred a favor upon a third person (he favourable stipulation should not be conditioned or compensated by any kind of obligation (hat the person must have communicated his acceptance to the obligor prior its revocation. 'either of the contracting parties bears a legal representation or authori!ation of the third party. $est of 8eneficial +tip/lation (o constitute a valid stipulation pour autriu, it must be the purpose and intent of the stipulating parties to benefit the third person, and it is not sufficient that the third person be incidentally benefited by the stipulation. o in order to determine whether or not such stipulation exist, one needs to rely upon the intention of the parties as disclosed by their contract.

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shall be /nenforceable, /nless it is ratified, e=pressly or impliedly, by the persons in whose behalf has been e=ec/ted, before it is revo6ed by the other contracting party. @nder this rule, no person may enter into a contract in the name of another unless he has been duly authori!ed by the latter or he has by law a right to represent him. (he unauthori!ed contract produces a state of suspenseA its effectivity depends upon its ratification. $f the contract is not ratified by the person represented, the representative becomes liable in damages to the other party, if he did not give notice of the absence or deficiency of his power. (his liability is based on the fact that having represented himself as having authority to act for another, he is responsible for the truth of such affirmation.