GENERAL PROVISION
Contract
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.
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A contract constitute an obligation, but obligation itself does not constitute a contract.
A contract can have a single or multiple obligations.
Elements of a Contract
1. Essential Elements (art .1318-1355)
a. Consent
b. Object
c. Cause
2. Natural elements (such as warranty against eviction and hidden defects in case of sales)
3. Accidental elements (stipulation of the contract such as terms and conditions in a contract)
Classification of Contracts
1. According to perfection
a. Consensual contracts – perfected by COC
b. Real contracts – perfected COC + delivery
c. Formal or Solemn contracts – perfected by COC + formalities required by law
2. According to relation to other contracts
a. Principal – a contract that can exist on its own
b. Accessory – existence depends upon a principal contract
c. Preparatory – needed for the formation of subsequent contracts
3. According to parties obliged
a. Unilateral – only one party is obliged
b. Bilateral – both parties are obliged
4. According to name
a. Nominate contracts – the law gives it a special name or designation, such as sales,
loan, partnership, donation – these have its own law provision
b. Innominate contracts – the law does not give it a special name or designation
i. Do ut des – I give that you may give
ii. Do ut facias – I give that you may do
iii. Facio ut facias I do that you may do
iv. Facio ut des – I do that you may give
When dealing with innominate contracts (art. 1307)
Stipulations of the parties
Rules governing law on obligations and contracts
Rules governing the most analogous contract
Custom of the place
5. According to risk
a. Commutative – when the undertaking of one party is considered the equivalent of
the other
b. Aleatory – when it depends upon an uncertain event or contingency as to benefit or
loss
6. According to cause
a. Onerous – cause has valuable consideration
b. Gratuitous – cause is purely generosity
c. Remuneratory – cause is based on services or benefits already received
7. According to the binding force
a.
b.
c.
d.
e.
Valid
Rescissible
Voidable
Unenforceable
Void
Stages of a Contract
1. Preparation/conception/generation/negotiation of a contract
2. Perfection/birth/formation of the contract
3. Consummation/death/extinguishment of a contract
Characteristics of Contracts (MARCO)
1.
2.
3.
4.
5.
Mutuality of contracts
Autonomy/liberty of contracts
Relativity of contracts
Consensuality of contracts
Obligatory force of contracts
^Mutuality of Contracts
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The contract must bind both contracting parties; its validity or compliance cannot be left to
the will of one of them (art. 1308)
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 (art. 1309)
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. 1310)
^Autonomy of Contracts
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Liberty of contracts or freedom to stipulate contracts
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 (art. 1306)
^Relativity of Contracts
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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. The heir is not liable beyond the value of the property
he received from the decedent (art. 1131 par. 1)
Contracts take effect between the parties in the contract, with exceptions
Contracts are generally transmissible, except:
o When provided by the law
o When stipulated
o When it is not, due to the nature of the contract
The heir is not liable beyond the value of the property he received from the decedent
Exceptions in the relativity of contracts:
o Stipulation Pour Atrui – direct conferment of a benefit towards a third person (art.
1311 par 2)
 Requisites:
 There must be a stipulation in favor of a third person
 The stipulation must be part, not the whole part of the contract
 The contracting parties must have clearly and deliberately conferred
a favor upon a third person, not a mere incidental benefit or interest
 The third person must have communicated his acceptance to the
obligor before its revocation

o
o
o
No relation of agency exists between any of the parties and the third
person favored
 In case of novation, the third person shall still be rewarded of the original
benefits in the stipulated in the contract prior to novation
When third persons in possession of a property creating real rights
When contract is entered to defraud creditors
Third person induced a party to a contract to violate the contract
^Consensuality of Contracts
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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 in keeping with good faith, usage, and law (art
.1315)
Exceptions:
o Real Contracts and Formal Contracts
^Obligatory Force of a Contract
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Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith (art. 1159)