CONTRACTS

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.
CONTRACT vs. OBLIGATION
Contract is one of the sources of obligations while Obligation is the legal tie or relation itself
that exist after a contract has been entered into.
CONTRACT vs. AGREEMENT
Contracts are agreements enforceable through legal proceedings, while an Agreement is
broader than contract because the former may not have all the elements of a contract.
CHARACTERISTICS OF A CONTRACT
(a) Freedom to contract / to stipulate
(b) Mutuality
(c) Obligatory force
(d) Relativity
CONTRACT OF ADHESION - a contract (often a signed form) so imbalanced in favor of one party
over the other that there is a strong implication it was not freely bargained.
CLASSIFICATION OF CONTRACT
(1) According to Name [Nominate, Innominate]
(2) According to Perfection [Consensual, Real]
(3) According to Cause [Onerous, Remuneratory, Gratuitous]
(4) According to Form [Informal, Formal]
(5) According to Obligatory Force [Valid, Rescissible, Voidable, Unenforceable, Void]
(6) According to Person Obliged [Unilateral, Bilateral]
(7) According to Dependence to another contract [Preparatory, Accessory, Principal]
(8) According to Risks [Commutative, Aleatory]
(9) According to Liability [Unilateral, Bilateral]
*An individual does not have an absolute right to enter into any kind of contract
LIMITATIONS ON CONTRACTUAL STIPULATION
CONTRACT MUST NOT BE CONTRARY TO:
A. Law
B. Morals
C. Good Customs
D. Public Order
E. Public Policy
ART 1307. Innominate contracts
(1) Nominate Contracts has a specific name or designation in law
(2) Innominate Contracts has no specific name or designation in law
Kinds of Innominate Contract
(1) Do ut des (I give that you may give)
(2) Do ut facias (I give that you may do)
(3) Facto ut des (I do that you may give)
(4) Facto ut facias (I do that you may do)
^ A contract will not be considered invalid for failure to conform strictly to the standard
contracts outlined in the Civil Code. It is sufficient that It has all the elements of a valid contract.
Rules governing Innominate Contracts
(a) Agreement of the parties
(b) Provisions of the Civil Code
(c) Rules governing the most analogous contracts
(d) Customs of the place
Mutuality of contracts : ART. 1308. The contract must bind both contracting parties, its validity
or compliance cannot be left to the will of one of them.
ART 1309. The determination of the performance may be left to a third person, whose decision
shall not be binding until it has been made known to both contracting parties.
Principle of Relativity: A partys rights and obligations derived from a contract are transmissible
to the successors; contracts may take effect only between the parties, their assigns, and heirs.
CASES WHEN STRANGERS OR THIRD PERSONS MAY BE AFFECTED BY A CONTRACT:
(A) Stipulation pour autrui
(B) Contracts creating real rights
(C) Contracts entered into to defraud creditors
(D) Contracts w/c have been violated at the inducement of a third person
(E) In determining the performance of both parties
Stipulation pour autrui stipulation in a contract clearly and deliberately conferring a favor
upon a third person.
Requisites for Stipulation pour autrui
(1) Parties must have clearly and deliberately conferred a favor upon a third person
(2) Third person must have communicated his acceptance to the obligor before its
revocation
(3) Should be a part, not the whole, of the contract
(4) Should not be conditioned or compensated
(5) Neither parties bears the legal representation of third party
ART.1315. CONSENSUAL CONTRACTS
ART. 1316. REAL CONTRACTS
(1) Consensual perfected by mere consent
(2) Real perfected not only by consent but by the delivery of the thing
Deposit constituted from the moment a person receives a thing belonging to another, with
the obligation of safely keeping it and of returning the same.
Pledge the delivery of a personal property by a debtor to a creditor as security for a debt
Commodatum contract whereby one of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and with an obligation to
return it.
Stages in the life of a contract
(1) Preparation or Negotiation parties have not yet arrived at any definite agreement
(2) Perfection or Birth meeting of the minds
(3) Consummation or termination contract may be said to have been fully accomplished
or executed
Two requisites in order that a person may be bound by a contract of another:
(1) Person must be duly authorized
(2) He must act within his power
ELEMENTS OF A CONTRACT
(1) Essential elements
(2) Natural elements presumed to exist in certain contracts
(3) Accidental elements exist only when they are expressly provided by the parties
CONSENT
- The conformity or concurrence of wills
- It is the meeting of minds between the parties on the subject matter and cause
REQUISITES OF CONSENT
(a) Must be given by two or more parties
(b) Parties are capacitated to contract
(c) Consent must be intelligently or freely given
(d) Express manifestation of the will of the contracting parties
OFFER proposal made by one party to another to enter into a contract
ACCEPTANCE manifestation by the offeree of his assent to the terms of the offer
ART 1321. The person making the offer may fix the time, place, and the manner of acceptance,
all of which must be complied with.
^ An offer may be withdrawn before it is accepted. After acceptance, the contract is already
perfected. At the time the acceptance is communicated, both parties, offerer and offeree, must
be living and capacitated.
(1) Option Contract certain period to accept the offer of the offerer.
(2) Option Period period given within w/c the offeree must accept the offer
(3) Option money money paid or promised to be paid
ART. 1325. Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer.
ART. 1327. The following cannot give consent to a contract:
(1) Unemancipated Minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write
REASON : those persons mentioned can easily be the victims of fraud.
EXCEPTIONS TO THE ABOVE RULE:
(1) Where the contract is entered into by a minor who mirepresents his age, applying the
doctrine of estoppels
(2) Where the contract involves the sale and delivery of necessities to a minor
ART. 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
LUCID INTERVAL a temporary period of sanity.
CHARACTERISTICS OF CONSENT
(a) Intelligent
(b) Free and voluntary
(c) Conscious or spontaneous
VICES OF CONSENT / CAUSES VITIATING CONSENT
(1) Error or mistake
(2) Violence
(3) Intimidation or threat
(4) Undue influence
(5) Fraud or deceit
MISTAKE false notion
Substantial mistake of fact mistake contemplated by law
Mistake of fact which does not vitiate consent
(1) Error as regards the incidents of a thing
(2) Mistake as to quantity or amount
(3) Error as regards the motives
(4) Mistake as regards the identity or qualifications
(5) Error which could have been avoided
MISTAKE OF LAW arises from an ignorance of some provision of law
^ As a rule, mistake of law does not invalidate consent because ignorantia legis nemines
excusat (ignorance of the law excuses no one) from compliance therewith.
VIOLENCE - requires the employment of physical force.
REQUISITES OF VIOLENCE TO VITIATE CONSENT
(a) Employment of serious or irresistible force
(b) The very reason why the contract is entered into
INTIMIDATION there is mental or moral coercion
REQUISITES FOR INTIMIDATION TO VITIATE CONSENT
(a) Reasonable and well grounded fear
(b) Of an imminent and grave evil
(c) Upon his person, property
(d) Very reason why the contract is entered into
^ Intimidation is internal, violence is external
UNDUE INFLUENCE overpowers the mind of a party to destroy his free will and make him
express the will of another, rather than his own
CAUSAL FRAUD fraud committed to secure the consent of the other.
- Fraud used by a party to induce the other to enter into a contract
REQUISITES FOR CAUSAL FRAUD
(1) Misrepresentation
(2) Must be serious
(3) Employed by only one of the contracting parties
(4) Made in bad faith
(5) Induced the consent of the other party
(6) Alleged and proved by clear and convincing evidence
Dolo causante vs. dolo incidente
Dolo causante refers to fraud which is serious in character, whereas dolo incidente is not
serious
CAVEAT EMPTOR let the buyer beware
SIMULATION OF A CONTRACT- act of deliberately deceiving others
KINDS OF SIMULATION
(1) Absolute does not really exist; parties do not intend to be bound at all
(2) Relative contract entered into is different from their true agreement
OBJECT
- Subject matter of a contract
REQUISITES OF THINGS AS OBJECT OF CONTRACT
(a) Within the commerce of men
(b) Must not be impossible
(c) In existence or capable of coming into existence
(d) Determinate
FUTURE INHERITANCE any property or right, not in existence at the time of the contract that a
person may inherit in the future.
- Future inheritance, one where the source of property is still alive cannot be the object
of a contract, except in cases provided by law.
CAUSE OF CONTRACTS
- The why of the contract
- Purpose which the contracting parties have in view at the time of entering the contract
REQUISITES OF CAUSE
(1) Must exist
(2) Real, that is, true
(3) Lawful
ONEROUS for each contracting party, is the prestation or promise of a thing or service by the
other. (e.g. Sale, Lease)
REMUNERATORY cause of which is the service or benefit which is remunerated

GRATUITOUS cause of which is the mere liberality of the giver. (e.g. pure donation,
commodatum)
MOTIVE reason a party has in entering into a contract
CAUSE vs. MOTIVE
(a) Cause is direct reason; motive is the remote or indirect reason
(b) Cause is essential element of a contract; motive is not
(c) Cause is always known to the other party; motive is not