Contract

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Art. 1305.

Contracts is a meeting of the minds between two person/parties whereby one binds
himself, with respect to the other, to give something or to render some service.
It take place when an offer by one party is accepted by the other
Is it necessary that contract must be in writing? No. because it is a meeting of minds. It is not
necessary na nakasulat, except sa contracts na nirequire ng batas dapat na nakasulat. Example,
Donation, Contract of the sale of land, transfer of intellectual property rights. To avoid conflict
and to create clear binding terms. Contracts are more easily to enforceable than oral agreements,
especially of they clearly outline the parties' rights and responsibilities
Distinguish the contract from obligations:
1. Contract is one of the sources of obligation.
2. Obligation is the legal tie or relation itself that exist after a contract has been entered into
3. Hence, there can be no contract if there is no obligation, But an obligation may exist
without a contract. Obligation may arise from law, quasi contracts, quasi delicts
Distinguish contract from agreement:
1. all contracts are agreements. Contracts is enforceable through a legal proceedings.
Agreements which can not be enforce by actions in courts
2. Not all agreement are contracts
Stages in the life of a contract:
1. Preparation or conceptions
 Preparatory step
 Bargaining point
 Negotiation stage
2. Perfection
3. Consummation
Classification of Contracts
 According to perfection or formation:
1. Consensual. Perfected by mere agreement/consent of the parties(i.e. sale, lease)
2. Real Contract. Perfected by delivery of the object by 1 party to the other (i.e.
commodatum, deposit, pledge)
3. Formal or Solemn. Requires compliance with certain formalities. (i.e. donation, chattel
mortgage)
 According to Cause or equivalent vale of Prestation:
1. Onerous. Each of the parties aspires to procure for himself a benefit through the giving
of an equivalent or compensation (i.e. sale)
2. Gratuituos. One of the parties propose to give to other a benefit without any equivalent
or compensation (i.e. commodatum)
3. Remunerative. For service previously rendered
 According to Degree of dependence
1. Principal. one which can subsist independently from other contracts and whose purpose
can be fulfilled by themselves
2. Accessory. One which can exist only as a consequence of, or in relation with , another
prior contract
3. Preparatory.
 According Parties Obligated:
1. Unilateral. give rise to an obligation for only one parties (i.e. commodatum, gratuitous
deposit). does not mean no consent. giving of consent must be mutual
2. Bilateral. give rise to reciprocal obligation for both parties (i.e. sale, lease)
 According to name or designation:
1. Nominate. one which has a name and is regulated by special provision of law (i.e. sale,
deposit, agency, lease).
2. Innominate. No specific name or designation in law.
 According to Subject Matter
1. Involving Things (i.e. sale, deposit, pledge)
2. Involving Rights or Credits (i.e. usufract, assignment of credits)
3. Involving Service (i.e. agency, lease of services)

 According to the number of person who participated in the drafting of contracts:


1. Ordinary Contract
2. Contract of Adhension. Prepared only by one person. the only participation of the other
party is to sign his name or signature (i.e. insurance contract) take it or leave it contract
Art. 1306. The contracting parties may establish such stipulations, clause, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy.
Freedom to stipulate/autonomy of will/principle of freedom/principle of Autonomy of Contracts
General rule. Parties are free to stipulates into anything. However, provided the contracts are
legal
Art. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the
provision of Titles I and II of this books(the law on Obligation and Contracts), by the rules
governing the most analogous(law on most similar, identical or closest type of contract)
nominate contracts, and by the customs of the place.
Kinds of Innominate Contracts
1. Do ut des ( I give that you may give) agreement in which A will gibe one thing to B, so
that B will give another thing to A
2. Do ut facias ( i give that you may do) a contract under which A will give something to B,
in order that B may do something for A
3. Facio ut des ( i do that you may give) agreement in which A binds himself to do
something for B, so that B will give something to A
4. Facio ut facias ( i do that you may do) convention whereby A is to do something for B,
so that B will render some other service for A
Art. 1308. The contracts must bind both contracting parties; its validity or compliance cannot be
left to the will of one of them. (Principle of mutuality of contracts) Mutual consent
Example. In loan contract, pag yung isang party has a sole discretion/unilateral rights, to adjust
interest, anytime, as he wants (hindi pwede. Kailangan mag agree lahat ng parties)
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 ( exception to the
Principle of mutuality of contracts)
Art. 1310. The determination shall not be obligatory if it is evidently inequitable. In such case,
the courts shall decide what is equitable under the circumstances.
Art 1311. Contracts take effects only between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their nature, or
by stipulation or by the provision of law. The heir is not liable beyond the value of the property
he received from the decedent
If a contracts should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person. Principle of Relatively of Contract
Example: si A, may utang kay B na 1M. The contract will take effect between them. Later on
namatay si B, yung bayad ni A, ibibigay nya sa mga heirs ni B. If si A naman yung namatay,
yung heirs ni A ang magbabayad kay B. Provided na may natitirang property si A na worth 1M
na pwedeng pambayad kay B.
Stipulation Pour Autrui Requisites: ( stipulation in favor of a third person)
1. There must be stipulation in favor of a third person;
2. Contracting parties must have clearly and deliberately conferred a favor to the third person;
3. The stipulation should be part and not the whole of the contract or the contacts itself;
4. Third person must have communicated his acceptance to the obligor before its revocation by
the obligee or the original parties;
5. Neither of the contracting parties bears the legal representation or authorization of the third
party for otherwise the rules on agency will apply
Exception of the Principle of Relativity of Contracts:
 STIPULATION POUR AUTRUI (Art. 1311, 2nd part)
 Third person is bound by contacts creating real rights (Art 1312)
 Right of the defrauded creditor under ( Art 1313)
 Contract is violated through inducement by third person (Art 1314)
Art. 1312. In contracts creating real rights, third persons who come into possession of the object
of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land
Registration Laws
Example. A mortgage his land to B. so there is mortgage as to the parcel of land of A in favor of
B as a security for his death. Since owner parin si A after nyang imotgage yung land kay B, pero
gipit parin sya, kaya naman ibinenta ni A yung lupa kay C. in this case, nagkaroon ng
encumbrance. In other word, kahit pa hindi kasama sa contract of sale si B, pero dahil mayroong
pre-existing mortgage, so C will be bound between A and B
Art. 1313. Creditors are protected in cases of contracts intended to defraud them.
Refers to the rights of the creditors to impugn contracts intended to defraud them
Example If Leah gratuitously gives Piolo a parcel of land, said creditors may ask for the
rescission of the contract, to the extent that they have been prejudiced
Art. 1314. Any third person who induces another to violate his contract shall be liable for
damages to the other contracting party

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