Contracts – a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give, something or to render some service.
*Can there be a contract even without a written instrument? Yes, if there is a meeting of minds, there is
a contract.
Required: Meeting of minds; Not required: written form
Mere agreement does not result to a contract. Not all agreements result to a contract, but all contracts
are agreements.
An agreement results to a contract if there is an obligation. Agreement without obligation is not a
contract
Kinds of Contracts
A. As to perfection
1. Consensual – contract is perfected by mere consent or meeting of minds as to the object and
consideration.
2. Real – perfected upon delivery of the object of the contract. (Art. 1316) E.g.: pledge, deposit
commodatum,
3. Formal – or solemn contracts; perfected upon complying with the form prescribed by law.
Certain form is executed for its validity. E.g.: Donation
B. As to cost
1. Onerous – there is an exchange of valuable considerations. E.g.: Contract of sale
2. Gratuitous – where one party receives the equivalent consideration. E.g.: Donation
3. Remuneratory – the cost is yung service or benefit remunerated. E.g.: Contract of employment
(render service to the company in exchange of salary)
C. As to importance or dependence of one or of another
1. Principal – it can stand by itself
2. Accessory – its existence depends upon another contract. E.g.: Contract of pledge (di ka muna
magsasangla kung di ka mangungutang) In contract of pledge, principal contract: utang;
accessory contract: pledge
3. Preparatory – contract in preparation of another contract. E.g. Partnership
D. As to name or designation
1. Nominate – those which have names under the law. E.g..: contract of sale, contract of pledge,
channel mortgage, realistic mortgage
2. Innominate – without any name under the law.
a. Do ut des – I give that you may give
b. Do ut facias – I give that you may do
c. Facio ut des – I do that you may give
d. Facio ut facias – I do that you may do
Innominate contracts shall be governed by:
1. Agreement of the parties
2. By the provisions of the Civil Code on obligations and contracts
3. The rules governing the most analogous contracts; E.g.: Joint venture- since madaming katulad
sa partnership, apply the rules of contract of partnership sa joint venture
4. The customs of the place
Fundamental Characteristics or basic principles of contracts
A. Autonomy of contracts (Liberty of Contract or Freedom to Stipulate
– (Art. 1306) The contracting parties may establish such stipulations, clauses, terms, and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order and public policy.
– Assumption: the law forms part of a contract. All provisions of law are understood
incorporated in a contract. Ignorance of the law excuses no one from compliance therewith.
– Examples of stipulations that are void:
a. Waiver for future fraud
b. Pactum leonina – stipulation in a contact of partnership excluding one of the partners from
sharing in the profits
c. Pactum commissorium – stipulation in contracts of pledge and mortgage, na kapag di
nakapagbayad si debtor, automatic mapupunta kay creditor ownership ng isinangla
d. Pactum non-aliendo – Stipulation na kapag nagsangla ng property, particularly in mortgage,
ay pinagbabawalan ibenta ang property without consent of creditor. It is void kasi si debtor
pa rin ang owner ng property so hindi niya kailangan ng consent from creditor kung
ibebenta.
e. Restraint of trade (non-involvement/non-complete clause) – stipulation na bawal mag-apply
sa certain company after leaving the company. IT is against public policy. NONINVOLVEMENT CLAUSE IS NOT NECESSARILY VOID AS LONG AS THERE ARE REASONABLE
LIMITATIONS AS TO TIME, TRADE AND PLACE, ALSO A REASONABLE PROTECTION ON THE
PART OF EMPLOYER. A stipulation to refund all expenses under the scholarship is void for
being contrary to morals. Scholarship should not be a propaganda matter; they are rewards
for merit.
B. 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.
– based on essentially quality of partners
– A party cannot revoke or renounce a contract without the consent of the other.
C. Obligatory Force of Contracts and compliance in Good faith
Obligations arising from contracts shall have the force of law between the contracting parties
and should be complied with in good faith. (Art. 1159)
Upon the perfection of contract, the parties are bound to the following:
1. The fulfillment of what has been expressly stipulated
2. The consequences of which, according to their nature, may be in keeping with good faith,
usage and law. (Art. 1315)
Kapag nakipagkontrata, make sure na susundin ang terms and conditions stiulated because the
contract have the force of law which makes you liable.
D. Relativity of contracts
– (Art. 1311) Contracts take effect 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 provision of law
– Privity of Contracts Principle
– General rule: Contracts is binding only between the parties, their assigns and heirs.
Except: Rights and obligations from the contract are not transmissible - by nature, stipulation, or
by law
– A 3rd person may be bound or may have a right under a contract:
1. Contracts creating real rights (Art. 1312) – e.g: Nangutang si A kay B supported ng sangla sa
lupa ni A. Kapag isinangla ang titula ng lupa, may annotation sa likod to give notice kung
may bibili. Binenta ni A ang luypa kay C. C holds the title over the land. C is not a party on
the debt but is bound sa sanglaan ng lupa kahit 3rd person kasi contracts create a real right.
2. Contracts in fraud of creditors (Art. 1313) – Accion pauliana
3. Interference by a third person in a contract (Art. 1314) – kapag iniinduce to violate a
contract
4. Stipulation pour autrui – Stipulation in favor of 3rd person conferring a clear and deliberate
favor upon him, and w/c stipulation is merely part of a contract entered into by the parties,
neither of whom acted as agent of the 3rd person.
If a contract should contain some stipulation in favor of a 3rd person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A
mere accidental benefit or interest of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred upon a 3rd person. (Art. 1311, par. 2)
A stipulation in favor of a 3rd person is a gratuitous benefit accorded to a 3rd person. There
must be a deliberate and clear grant of benefit in favor the 3rd person. Hindi lang yung two
parties ang mag-uusap, involved si 3rd person dapat.
E. Consensuality of Contracts – contracts must be voluntarily entered into by the parties. A person
cannot be compelled to enter a contract, except in contracts of adhesion.
General Rule: Contracts are perfected by mere consent
Except:
1. Real contracts – perfect upon delivery of the object of obligation. E.g.: deposit, pledge
Exception to real contracts: Future real contracts are consensual. E.g: to make a
deposit/pledge.
2. Formal/solemn contracts – perfected upon compliance with the formalities and form
required by law.
Contracts of adhesion – a valid contract where one party merely signs carefully prepare contracts. Hindi
na nabigyan ng chance ang isang party na mag-negotiate since prepared na ang terms and conditions ng
contract by the other party, he/she only needs to adhere. E.g.: Enrolment, Insurance, LBC, Grab express
If the contract of adhesion has ambiguous terms, the contract should be strictly interpreted against the
one who prepared such contract and liberally in favor of the party who is usually helpless to bargain for
better terms. Ang makikinabang dapat ay yung pipirma ng contract.
Elements of a Contract
1. Essential elements – without them, a contract cannot exist. Most important
a. Consent
b. Object
c. Cause or consideration
2. Natural elements – those that are deemed included in the contract unless set aside by the
parties. E.g.: Accessions and accessories – kahit di pinag-uusapan, included na siya
3. Accidental elements – those that are included only if stipulated by the parties. E.g.: discounts,
terms, credit terms