1. Explain the principle of relativity of contracts.

Are there any exceptions to the relativity

principle? What are these, if any?

The principle of relativity of contracts is embodied in Article 1311 of the New

Civil Code of the Philippines (NCC); it states that contracts take effect only between the
parties, their assigns, and heirs, except in cases where the rights and obligations arising
from the contract are not transmissible by their nature, or by stipulation or by the
provision of law xxx. This means that contracts can only bind the parties who entered
into them and cannot favor or prejudice a third person. The first exception to the said
principle is the principle of Stipulation pour autrui or Stipulation in favor of third
persons. The same Article provides that if a contract 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 deliberately conferred
a favor upon a third person. The second exception is the principle of Tortious
interference as discussed in Article 1314 of the NCC, which states that any third person
who induces another to violate his contract shall be liable for damages to the other
contracting party.

2. Mr. A and Mr. B entered into a contract whereby Mr. B, a dealer of alcoholic beverages,
promises to deliver for a certain consideration, 100 cases of beer to Mr. A’s sari-sari store
in time for Town Fiesta. Mr. C, another sari-sari store owner, upon knowing the contract
thereafter convinces Mr. B to instead affect delivery to him rather than to Mr. A and paid
twice the amount. Is Mr. C liable for contractual interference?

Yes, Mr. C is liable for contractual interference. Under Article 1314 of the
NCC, any third person who induces another to violate his contract shall be liable for
damages to the other contracting party. This is known as tortious interference as
discussed in So Ping Bun v. CA et,al,1 The elements of tort interference are the following:
(1) the existence of a valid contract; (2) knowledge on the part of the third person of the
existence of the contract; and;(3) interference of the third person is without legal
justification or excuse. Here, there is a valid contract for the sale of alcoholic beverages
between Mr. A and Mr. B. Mr. C got to know the said contract and knowingly convinced
Mr. B to deliver the same to him rather than to Mr. A for twice the amount; therefore, Mr.
C is liable for contractual interference.

3. A contract says “First contracting party hereby bounds himself to sell his house and lot to
the second contracting party.” The second contracting party now claims the contract is
void because of the absence of cause. Is the second contracting party correct?

Yes, the second party is correct. Article 1318 of the NCC provides that there is
no contract unless the following requisites concur: (1) Consent of the contracting
parties; (2) Object certain which is the subject matter of the contract;(3) Cause of the
obligation which is established. Here, the cause or price of the said house and lot should
1
G.R. No. 120554, September 21, 1999
 have been indicated in the contract; therefore, in the absence of one of the essential
requisites of a contract, the contract is deemed void.

4. An offer was made by Mr. X to Mr. Y through registered mail for the purchase of Y’s
car. Contained in the mail were the contract details of Mr. X. Mr. Y, residing in Baguio
City emailed his reply accepting the offer of Mr. X in all respects. Mr. X however
thereafter decided to withdraw the offer. Mr. X claims that no contract has yet been
perfected. He claims that he hadn’t read yet the acceptance as he forgot his email
password and that the acceptance is not in proper form. Is Mr. X. correct?

Yes, Mr. X is correct. Art. 1319 of the NCC provides that acceptance made by
letter or telegram does not bind the offeror except at the time it came to his knowledge.
Here, the acceptance of Mr. Y never came to the knowledge of Mr. X. Also, the
acceptance was not made through a letter or telegram; therefore, there is no perfected
contract between Mr. X and Mr. Y.

5. Mr. D is a dealer of pieces of jewelry. Mr. E is looking for a diamond ring to be used as
an engagement ring as he is planning to propose to his girlfriend he is dating for 10 years.
Mr. D and Mr. E thereafter entered into a contract of sale involving a diamond ring. At
the time of delivery, Mr. D purposely and with intent swapped the diamond ring with a
shiny stone with no value. Upon discovery, Mr. E asked for your help with legal
remedies. What course of action/s would you advise him?

I will tell Mr. E to file for the case of annulment of the contract with damages
against Mr. D. Article 1344 of the NCC provides that in order that fraud may make a
contract voidable, it should be serious and should not have been employed by both
contracting parties. This is also known as dolo causante or when deception is used by one
party prior to or simultaneous with the contract, in order to secure the consent of the
other.2 Here, when Mr, D employed fraud when deceived Mr. E that the object of the
contract is a diamond ring but in truth a shiny stone with no value; therefore, the contract
of sale shall be annulled.
As regards damages, Article 1170 of the NCC provides that those who in the
performance of their obligations are guilty of fraud are liable for damages. Here, since
Mr. D employed fraud in the performance of his obligation, he shall then be liable for
damages in favor of Mr. E.

6. Will a case of mistaken identity result in vitiated consent?

Yes, mistaken identity could result in vitiated consent. Article 1331 of the NCC
provides that mistake as to the identity or qualifications of one of the parties will vitiate
consent only when such identity or qualifications have been the principal cause of the
contract; therefore, if identity or qualifications have been the principal cause of the
contract, and the other party had mistaken the same, it results in the vitiation of the
consent.

2
Solidbank Corporation v. Mindanao Ferroalloy Corporation, et al, G.R. No. 153535, July 28, 2005.
7. On November 21, 2014, Mr. G, the guardian of Mr. M who is 16 years old, entered into a
contract of sale with Mr. F involving a house and lot owned by Mr. M. The lot was sold
for an inadequate value. In 2019, Mr. M is now seeking your advice. What legal
remedy/ies shall he avail?

Mr. M may file for the recission of the said contract. Art. 1381 of the NCC
provides that the contract is rescissible if the same is entered into by guardians whenever
the wards whom they represent suffer lesion by more than one-fourth of the value of the
things which are the object thereof. Here, Mr. M was only 16 years old when his guardian
Mr. G entered into a contract of sale with Mr. F for an inadequate value; therefore, Mr.
M. may rescind the said contract for the lesion suffered by the ward.

8. On November 21, 2014, Mr. M, who is 16 yrs. old, entered into a contract of sale with
Mr. involving a house and lot owned by him and to be paid in installments payable at the
end of each year for 5 years. The lot was sold for an inadequate value. At the start of
2019 and before receiving the last installment, Mr. M is now seeking your advice. Can
Mr. M recover the house and lot?

No, Mr. M could no longer recover the house and lot. Article 1390 of the NCC
provides that a contract is voidable or annullable when one party is incapable of giving
consent to a contract and is given 4 years to annul the same upon reaching the age of
majority (Article 1391). However, a closer look at Articles 1392 and 1393 of the NCC
provides that ratification extinguishes the action to annul a voidable contract and the
same may be effected expressly or tacitly. It is understood that there is a tacit ratification
if, with knowledge of the reason which renders the contract voidable and such reason
having ceased, the person who has a right to invoke it should execute an act that
necessarily implies an intention to waive his right. Article 1396 further added that
ratification cleanses the contract from all its defects from the moment it was constituted.
Here, Mr. M was a minor when he entered the contract of sale, he should have had four
years from reaching the age of majority or from 2016 to 2020 to annul the contract, but it
is important to recognize that upon reaching the age of majority in 2016, he continued
receiving the installments of the said sale. Such an act is an implied ratification of the
voidable sale and cleanses the contract from all its defects the moment it was instituted;
therefore, Mr. M could no longer recover the house and lot for the voidable contract was
deemed ratified.

9. Mr. Right, on bended knees, asked for the hand of Ms. Beauty for marriage. Ms. Beauty
says yes. Four hours later Mr. Right has a change of heart. He no longer wished to
continue with the marriage. Ms. Beauty, with a broken heart and eyes sore from crying,
sued for specific performance claiming a contract has been perfected between her and
Mr. Right. Mr. Right, however, claims that the contract is unenforceable as it falls under
the Statute of Fraud. Rule on both parties’ contentions. Which of them is correct? Can
Ms. Beauty demand the performance of the contract?

Both of them are incorrect and Ms. Beauty cannot demand the performance of the
contract. In the case of Mr. Right, Article 1403 (2) (c) of the NCC provides that the
 enumerated circumstances must be in writing otherwise those are unenforceable unless
ratified. One of the circumstances is the agreement made in consideration of marriage,
other than a mutual promise to marry; Here, Mr. Right’s promise to marry Ms. Beauty is
not an unenforceable contract under the statute of fraud; therefore, his contention is
incorrect.

In the case of Ms. Beauty, she cannot enforce the contract for being void. Article
1409 of the NCC provides that a contract is void if the cause, object, or purpose is
contrary to law, morals, good customs, public order or public policy. Here, the object of
the contract is the promise of Mr. Right to marry Ms. Beauty and the same is contrary to
morals, good customs, public order or public policy because basic decency dictates that
you cannot force a person to marry and cohabitate with another person; therefore, Ms.
Beauty cannot enforce the said contract for being void..

10. Mr. A is an agent of Mr. P. The contract of agency says “The agent is given full authority
to sell the house and lot owned by the principal for an amount not lower than P1 million.”
Mr. A sold the property to Mr. B for P950,000.00. Mr. B is now asking Mr. P to transfer
the title of the house and lot. Mr. P is now asking for your advice. Can he refuse the
demand of Mr. B?

Yes, Mr. P may refuse the demand of Mr. B. Article 1403 (1) of the NCC
provides that a contract that is entered into by one who has acted beyond his powers is
unenforceable unless ratified. Here, Mr. A, the agent of Mr. P acted beyond his authority
when he sold the house and lot for P950,000.00 although he was only authorized to sell
the same for an amount not lower than P1 million; therefore, Mr. P may refuse the
demand of Mr. B since the contract is unenforceable.