RFBT: CONTRACTS
CHAPTER 1. GENERAL PROVISIONS
See Arts. 1305 – 1317
ART. 1305. A contract is a meeting of
the minds between 2 persons whereby
one binds himself, with respect to the
other, to give something or to render
some service.
- Emphasis on the meeting of minds between 2
contracting parties which takes place when an offer
by 1 party is accepted by the other.
- In a contract, there must be at least 2 persons or
parties, because it is impossible for one to contract
with himself.
GENERAL RULE: Contract binds only the
parties.
- There can be no contract if there is no obligation
accepted in return for some benefit to be enjoyed.
But an obligation may exist without a contract such
as the obligation imposed by law to pay taxes.
CONTRACT vs. AGREEMENT
“All contracts are agreements but not all
agreements are contracts.”
(i). CONTRACTS are binding agreements
enforceable through legal proceedings in case
the other party does not comply with his obligation.
To be valid and enforceable, a contract
MUST be LAWFUL and ALL REQUISITES for its
validity must be present (COC – Consent; Object;
Consideration).
(ii). AGREEMENTS which cannot be enforced by
action in the courts of justice (agreement to dance
in the party) are not contracts but merely
moral/social agreements.
Agreements are broader than contracts
and MAY NOT HAVE ALL the ELEMENTS of a
contract that create legally enforceable obligations.
KINDS/CLASSIFICATIONS OF CONTRACTS
1. As to perfection or formation
a. Consensual – perfected by agreement
of parties (sales, lease, agency)
In the absence of delivery, perfection does
not transfer title or create real right, yet, it
gives rise to obligations binding upon both
parties.
b. Real – perfected by delivery, actual or
constructive, of the object (commodatum,
pledge, deposit).
c. Formal/solemn – perfected by
conformity to essential formalities –
solemn act (donation, marriage)
Law requires that a contract be in some
form to be valid (e.g. public instrument).
2. As to cause
a. Onerous – with valuable consideration
b. Gratuitous – founded on liberality
c. Remunerative – prestation is given for
service previously rendered not as
obligation
3. As to importance or dependence of one upon
another
a. Principal – contract may stand alone
b. Accessory – depends on another
contract for its existence; may not exist on
its own
c. Preparatory – not an end by itself; a
means through which future contracts may
be made
4. As to parties obliged
a. Unilateral – only one of the parties has
an obligation
b. Bilateral – both parties are required to
render reciprocal prestations
5. As to name or designation
a. Nominate
b. Innominate
I. Do ut des – I give that you may give
(BARTER)
II. Do ut facias – I give that you may do
III. Facio ut des – I do that you may give
IV. Facio ut facias – I do that you may do
PRINCIPAL CHARACTERISTICS:
1. ART. 1306. Principle of Autonomy – 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, or public policy.
Autonomy of wills – parties may
stipulate anything as long as not illegal,
immoral, etc.
Contracts should yield to the inherent
powers of the state (valid police power).
VALID CONTRACTS
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- Those that meet all the legal requirements (COC)
and limitations (not against law, etc.)
- An agreement may meet all the criteria of a valid
contract but unenforceable in the court of law for
failure to comply with the Statute of Frauds.
2. ART. 1308. Principle of Mutuality of Contracts
– the contract must bind both contracting
parties; its validity or compliance cannot be left
to the will of one of them.
Mutuality – performance or validity
binds both parties; not left to will of one
of parties
- Fundamental rule: no party can renounce or
violate the law of the contract without the consent of
the other.
- Compliance cannot be left with one party; but
determination of the performance may be left to
a 3rd person, whose decision shall be binding after
it has been made known to both contracting parties.
(ART. 1309)
3. ART. 1315. Principle of Obligatory Force of
Contract - 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 keeping with good faith, usage and law.
Obligatory Force – parties are bound
from perfection of contract.
EXCEPTION: ART. 1316. Real contracts, such as
deposit, pledge, and commodatum, are NOT
PERFECTED until DELIVERY of the object of the
obligation.
4. Fulfill what has been expressly stipulated
5. All consequences w/c may be in keeping with
good faith, usage and law
6. ART. 1311. Principle of Relativity (RES INTER
AIOS ACTA RULE) – contracts take effect only
between parties, their assigns, and heirs; except in
case where the rights and obligations arising from
the contract are not transmissible by nature, or by
stipulation or by provision of law. The heir is not
liable beyond the value of the property he
received from the decedent.
Example of transmissible rights: a. Contract of sale b. Right to
contract of loans
Relativity – binding only between the
parties, their assigns, heirs; strangers
cannot demand enforcement.
- “Contracts take effect only between parties, their
assigns, and heirs” because GENERAL RULE: A
party’s rights and obligations derived from a
contract are transmissible to the successors.
- EXCEPTIONS: not transmissible; nature of
contract; stipulation; provision of law
EXCEPTION TO RELATIVITY:
1. Accion pauliana
2. Accion directa
3. Stipulation pour autrui
4. ART. 1312; ART. 1313
Stipulation Pour Autrui – a stipulation in a contract
clearly and deliberately conferring a favor upon
a third person who has a right to demand its
fulfillment provided he communicates acceptance
to the obligor before its revocation by the oblige or
the original parties.
2 CLASSES OF STIPULATIONS POUR AUTRUI
1. Stipulation intended for SOLE BENEFIT of such
person. [This stipulation confers a gift, it being necessary
such case to apply the rules relating to donations insofar as the
form of acceptance is concerned.] – DONEE
BENEFICIARY
2. Those where an OBLIGATION IS DUE from the
PROMISE TO THE THIRD PERSON which the
former seeks to discharge by means of such
stipulation, for instance, where a transfer of property
is coupled with the purchaser’s promise to pay a
debt owing from the seller to a third person. –
CREDITOR BENEFICIARY
REQUISITES OF STIPULATION POUR AUTRUI
1. Contracting parties must have clearly and
deliberately conferred a favor upon a 3rd person
2. The stipulation in favor of a 3rd person should
be a part of, not the whole contract
3. That the favorable stipulation should not be
conditioned or compensated by any kind of
obligation whatsoever
RFBT: CONTRACTS
4. Neither of the contracting parties bears the legal
representation or authorization of 3rd party
5. The third person communicates his
acceptance before revocation by the original
parties
6. Art 1312; Art 1314
ART. 1312. [Third persons are bound by contracts;
creating real rights.] In contracts creating real
rights, third persons who came into possession
of the object of the contract are bound by
thereby, subject to the provisions of the
Mortgage Law and Land Registration Laws.
REQUISITES OF ART 1312:
1. Existence of a valid contract
2. Knowledge of the contract by a 3rd person
CHAPTER 2. – ESSENTIAL REQUISITES OF A
CONTRACT [Arts. 1318 – 1355]
ESSENTIAL ELEMENTS: [No contract can validly exist
without these, regardless of the intentions of the parties]
1. Consent
2. Object/Subject Matter
3. Consideration
CONSENT
– meeting of minds between parties on subject
matter and cause of contract; concurrence of
[wills] offer and acceptance.
ART. 1319. Consent is manifested by the meeting
of the OFFER and the ACCEPTANCE upon the
thing and the cause which are to constitute the
contract.
REQUIREMENTS OF CONSENT
3. Interference by the 3rd person
1. Plurality of subject
ART. 1313. Creditors are protected in cases of
contracts intended to defraud them.
Creditor is given the right to impugn the
contracts of his debtor to defraud him.
2. Capacity
ART. 1314 Any third person who induces
another to violate his contract shall be liable for
damages to the other contracting party.
5. Cognition by the other party
3. Intelligence and free will
4. Manifestation of intent of parties
6. Conformity of manifestation and cognition
STAGES IN THE LIFE OF A CONTRACT
AUTO CONTRACTS - made by a person acting in
another’s name in one capacity
1. Preparation/Negotiation – all steps taken
leading to the perfection of the contract. Negotiate
stipulations of what to do, not to do, etc.
- NOT YET ARRIVED AT ANY DEFINITE
AGREEMENT
COLLECTIVE CONTRACTS - will of majority binds
a minority to an agreement notwithstanding the
opposition of the latter
2. Perfection/Birth – parties have come to a
definite agreement or meeting of minds regarding
the subject matter and cause of the contract. [Upon
concurrence of the essential elements thereof.]
3. Consummation/Termination – parties have
performed their respective obligations and the
contract may be said to have been fully
accomplished/executed,
resulting
in
the
extinguishment/termination thereof.
- A contract may also be terminated after its
perfection, not by performance, but by mutual
agreement of the parties.
CONTRACTS OF ADHESION - one party has
already a prepared form of a contract, containing
the stipulations he desires, and he simply asks the
other party to agree to them if he wants to enter into
the contract
NOTE: We follow the theory of cognition and not the
theory of manifestation. Under our Civil Law, the
offer and acceptance concur only when the offerer
comes to know, and not when the offeree merely
manifests his acceptance.
- OFFER: must be CERTAIN or DEFINITE
Offer – a proposal made by 1 party
(offerer) to another (offeree), indicating
RFBT: CONTRACTS
willingness to enter into a contract. It is a
promise to act or to refrain from acting
on condition that the terms thereof are
accepted by the person to whom it is
made.
- ACCEPTANCE: CLEAR & ABSOLUTE
- it must be unconditional & unqualified; identical in
all respects with that of the offer.
ART. 1321. The person making the offer (offerer)
may fix the time, place, and the manner of
acceptance, all of which must be complied with.
Acceptance – manifestation [of agreement] by
the offeree of his assent to all the terms of the
offer.
2. No stated fixed period
NO ACCEPTANCE = NO MEETING OF MINDS
- If acceptance is qualified, as when it is subject to
a condition, it merely constitutes a counter-offer
[effect: extinguish a previous offer] which, in law, is
considered a rejection to the original offer and an
attempt by the parties to enter into a contract in
a different basis.
ART. 1320. An acceptance may be express or
implied.
NOTE: If acceptance is made by letter or telegram, it
does not bind the offerer expect from the time it came to
his knowledge. Presumed the contract have been
entered into in the place where the offer was made.
ELEMENTS OF VALID OFFER / ELEMENTS OF
VALID ACCEPTANCE
1. Definite--unequivocal
2. Complete--unconditional
3. Intentional
ART. 1323. WHEN OFFER BECOMES
INEFFECTIVE:
1. Death, civil interdiction, insanity or
insolvency of either party before acceptance is
conveyed
2. Express or implied revocation of the offer by
the offeree
3. Qualified or conditional acceptance of the
offer, which becomes a counter-offer
4. Subject matter becomes illegal or impossible
before acceptance is communicated
PERIOD FOR ACCEPTANCE
- Acceptance departing from the terms of the offer
constitutes a counter-offer, which extinguishes the offer,
and constitutes a new offer.
1. Stated fixed period in the offer
a. Offer is made to a person present – acceptance
must be made immediately
b. Offer is made to a person absent – acceptance
may be made within such time that, under normal
circumstances, an answer can be received from him
NOTE: Acceptance may be revoked/withdrawn
before it comes to the knowledge of the offerer and
before it is accepted. EXCEPTION: ART. 1324.
When the option is founded upon a
consideration, as something paid or promised.
Option contract – one giving a person for a
consideration a certain period within which to accept
the offer of the offerer. Option is the privilege itself
given to the offeree to accept an offer within a certain
period.
Option period – period given within which the
offeree must accept the offer.
Option money – money paid or promised to be paid
in consideration for the option. –earnest money is
different as it is a partial payment of the purchase price
and is considered a proof of the perfection of the contract.
Amplified Acceptance – under certain
circumstances, a mere amplification on the offer
must be understood as an acceptance of the
original offer, plus a new offer which is contained in
the amplification.
RULE ON COMPLEX OFFERS
1. Offers are interrelated – contract is perfected if all
the offers are accepted