CONTRACT MUTUALITY OF CONTRACTS (ART.

1308 to 1310)

is a meeting of minds between two persons whereby one • The contract must bind both contracting parties;
binds himself, with respect to the other, to give its validity or compliance cannot be left to the
something or to render some service. will of one of them.

Agreement not necessarily a contract: if no obligation • In order that obligations arising from contracts
would arise from the agreement, there is no contract. may have the force of law between the parties,
there must be mutuality between the parties
CONSENSUALITY OF CONTRACTS (Art. 1305 & 1307)
based on their essential equality. A contract
• There can be no contract in the true sense in the containing a condition which makes its
absence of the element of agreement, or mutual fulfillment dependent exclusively upon the
assent of the parties, for consent is the essence uncontrolled will of one of the contracting
of contract. parties, is void.

• The element of consent is what makes contract CONTRACT OF ADHESION

different from other sources of obligations.
• Is defined as one in which one of the parties
How is consent manifested? imposes a ready-made form of a contract, which
the other party may accept or reject, but which
• EXPRESSLY (Verbal or Written) the latter cannot modify. One party prepares the
• IMPLIEDLY stipulation in the contract, while the other party
merely affixes his signature or his adhesion
Example of implied consent thereto.
• Where one has rendered services to another, and • Contracts of adhesion are not void per se. The
these services are accepted by the latter, in the same is binding however, these kind of contracts
absence of proof that the service was rendered must be construed strictly against the one who
gratuitously, it is but just that he should pay a drafted the same.
reasonable remuneration therefor because 'it is
a well-known principle of law, that no one should RELATIVITY/PRIVITY OF CONTRACTS (1311 TO 1314)
be permitted to enrich himself to the damage of • Contracts take effect only between the parties,
another. (Corpus vs CA) their assigns and heirs, except in case where the
AUTONOMY OF CONTRACTS (ART.1306) rights and obligations arising from the contract
are not transmissible by their nature, or by
• The contracting parties may establish such stipulation or by provision of law.
stipulations, clauses, terms and conditions as
they may deem convenient, provided they are • The principle of relativity of contracts provides
not contrary to law, morals, good customs, public that contracts can only bind the parties who
order, or public policy. Otherwise known as, entered into it.
Liberty to Contract • According to the principle of relativity of
• Obligations arising from contracts have the force contracts in Article 1311 of the Civil Code, a
of law between the parties and should be contract takes effect only between the parties,
complied with in good faith. In characterizing the their assigns, and heirs; except when the
contract as having the force of law between the contract contains a stipulation in favor of a third
parties, the law stresses the obligatory nature person, which gives said person the right to
of a binding and valid agreement. demand fulfillment of said stipulation.

• Article 1306 provides also the limitation on • Contracts cannot favor or prejudice a third
freedom of contract. person, even if the latter is a aware of such
contract and acted with knowledge thereof.
RELATIVITY OF CONTRACTS (1311 TO 1314) OBLIGATORY FORCE OF A CONTRACT (1315 & 1316)

• When are contracts not transmissible: • Obligations arising from contracts have the force
of law between the contracting parties and
a. When the nature of the obligation is that it is not
should be complied with in good faith.
transmissible: when the rights are purely or strictly
personal in nature, i.e., the qualifications and skills of the • Contracts are perfected by mere consent, and
person have been considered in the constitution of the from that moment the parties are bound not
contract. only to the fulfillment of what has been expressly
stipulated but also to all the consequences
b. By stipulation: e.g. the right to sublease is granted by
which, according to their nature, may be in
law, but may be prohibited by stipulation.
keeping with good faith, usage and law.
c. By provision of law: e.g. heirs as to the usufruct. The
• It is a fundamental rule that contracts, once
law provides that the rights of a usufructuary shall not be
perfected, bind both contracting parties, and
transmitted to the heirs, unless the parties stipulate
obligations arising therefrom have the force of
otherwise.
law between the parties and should be complied
• Third Parties: as a general rule do not have a right with in good faith.
to enforce or annul a contract.
Classification of contracts
• Exceptions:
1. According To Degree Of Dependence
a. When he is bound by the contract (Art. 1312)
2. According To Perfection
b. A creditor may initiate an action against the
3. According To Purpose
contracting parties
4. According To Nature Of Obligation Produced
c. Third persons may be benefited by a contract –
2nd paragraph of Art. 1311, otherwise known as 5. According To Cause
a stipulation pour autrui.

“If a contract should contain some stipulation in favor of

ACCORDING TO DEGREE OF DEPENDENCE
a third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its • Preparatory Contract – a contract whose
revocation” purpose is to enter into other contracts. (i.e.
contract of agency, contract to sell, Option
Requisites of a valid stipulation POUR AUTRUI
contract)P
• There is a stipulation in favor of a third person • Principal Contracts – (i.e. Contract of Sale,
Contract of Loan, Contract of Barter etc.). These
• The stipulation is a part, not a the whole of a the
are contracts that can survive on its own.
contract;
• Accessory Contracts - those which cannot stand
• The contracting parties clearly and deliberately on its own and are dependent upon other
conferred a favor to the third person – the favor contracts for its validity. E.g., guaranty,
is not an accidental benefit; suretyship, mortgage and antichresis.

• The favor is unconditional and uncompensated

• The third person communicated his or her

acceptance of the favor before its revocation;
and

• The contracting parties do not represent, or are

not authorized by, the third party.
ACCORDING TO PERFECTION STAGES IN CONTRACTS

• CONSENSUAL - are those perfected by mere • NEGOTIATION - begins when the prospective
consent. Under Art. 1315, Contracts are contracting parties manifest their interest in the
perfected by mere consent, and from that contract and ends at the moment of their
moment the parties are bound not only to the agreement.
fulfillment of what has been expressly stipulated
• PERFECTION – or birth of the contract occurs
but also to all the consequences which,
when they agree upon the essential elements
according to their nature, may be in keeping with
thereof.
good faith, usage and law.
• CONSUMATION – the last stage, occurs when the
• REAL - those which are perfected only upon
parties fulfill or perform the terms agreed upon
delivery of the thing subject of the contract. E.g.,
in the contract, culminating in the
deposit, pledge, commodatum and mutuum.
extinguishment thereof.
Under Article 1316, Real contracts, such as deposit,
NEGTIOATION (Art. 1324)
pledge and Commodatum, are not perfected until the
delivery of the object of the obligation. • Formally initiated by an offer which should be
certain with respect to both the object and the
• FORMAL - those which require a certain form for
cause or consideration of the envisioned
its validity (Donation, Antichresis). Refer to
contract.
Article 1356.
• OPTION CONTRACT - In an option agreement, as
ACCORDING TO PURPOSE
provided under Art. 1324, the offeror may
• To transfer ownership – Donation, Sale, Barter withdraw the offer before acceptance is
communicated to him, and he would not be
• Conveyance of use – Usufruct, Lease, Loan
liable for damages. However, if there is an option
• Rendition of service – Lease and Agency contract, he may only withdraw upon the
expiration of the period related to the option
ACCORDING TO NATURE OF OBLIGATION PRODUCED contract.
• BILATERAL - where both parties are reciprocally • In option contract, there is already a perfected
obligated, e.g., lease (where the lessor is obliged contract of option. Here, there is a consideration
to allow the use of the thing and the lessee is distinct and separate from the price. As such, the
obliged to pay rent) and sale (where the buyer is offeror cannot validly withdraw before the
obliged to pay the price and the seller obliged to period agreed upon without being liable for
deliver the thing) (ARTS. 1642, 1458) damages.
• UNILATERAL – only one party is obliged. E.g., • Likewise, an option contract does not bind the
guaranty and pledge offeror to enter into a contract, he has the choice
ACCORDING TO CAUSE whether to pursue or not the contract, if he does
not pursue, he loses his right to the option
• ONEROUS- In onerous contracts, the money given.
consideration as to each of the parties is the
delivery or performance or the promise of PERFECTION OF CONTRACTS
delivery or performance of a thing or service by • Takes place upon concurrence of the essential
the other party. elements thereof. Consensual contracts is so
• GRATUITOUS - In gratuitous contracts, the cause established upon a mere meeting of minds. On
is the liberality or generosity of a party. the other hand, real contracts require meeting of
Essentially, the latter involves contracts of the minds as well as delivery of the object of the
donation. agreement.
 Essential elements of a contract MISTAKE

1. CONSENT • Should refer to the substance of the thing which

is the object of the contract, or to those
2. OBJECT CERTAIN WHICH IS THE SUBJECT MATTER
conditions which have principally moved one or
OF THE CONTRACT
both parties to enter into the contract.
3. CAUSE OF THE OBLIGATION Otherwise, such will be considered as simple
mistake and will not affect the validity of the
Purpose of Essential elements of a contract contract but will result in correction of such
The essential elements of contracts enumerated under mistake (Art. 1331)
article 1318 are necessary only for the perfection of the • Mistake is not present, if the party alleging it
contract and not for its validity. knew the doubt, contingency or risk affecting the
Perfection of the contract is different from its validity. object of the contract.

Although a valid contract presuppose its perfection, not • As a rule, mutual error will not affect the validity
all perfected contracts are valid. of the contract. However, if due to such mutual
error the real purpose of the parties is frustrated,
For example then such will affect the validity of the contract.
1. A contract that is contrary to law. VIOLENCE
2. A contract that violates the principle of mutuality • There is violence when there is an employment
CONSENT (Art. 1319 to 1346) of serious or irresistible force to secure consent.

• CONSENT - is manifested by the meeting of the • Violence, whether committed by one of the
offer and the acceptance upon the thing and the parties or a third person who did not take part in
cause which are to constitute the contract. the contract shall annul the obligation.

• Acceptance maybe express or implied INTIMIDATION

• KINDS OF ACCEPTANCE: • Occurs when one of the contracting parties is

compelled by a reasonable and well-grounded
a. Absolute – Perfects the contract. fear of an imminent and grave evil upon his
person or property, or upon the person or
b. Qualified – Constitutes a counteroffer.
property of his spouse, descendants or
PERSONS WHO CANNOT GIVE CONSENT (ART. 1327) ascendants, to give his consent.
• Unemancipated (still under parental authority) • Things to consider in assessing level of
minors intimidation:
• Insane or demented persons, and deaf-mutes a. Age
who do not know how to write.
b. Sex
*In relation to insane persons, contracts entered during
c. Condition of the person
lucid interval are VALID. However, entered during a state
of drunkenness or during a hypnotic spell are VOIDABLE. • Intimidation shall annul the contract.
ACTS WHICH VITIATES CONSENT FRAUD
• Mistake • There is fraud when, through insidious words or
• Violence machinations of one of the contracting parties,
• Intimidation the other is induced to enter into a contract
• Undue influence which, without them, he would not have agreed
• Fraud to.
 • What acts constitutes fraud? 3. Things – must not be outside of commerce of
men, it must be licit and not impossible
1. Failure to disclose facts, when there is a duty to
reveal them, as when the parties are bound by *Future Inheritance: cannot be the subject matter of a
confidential relations valid contract as provided under Art. 1347. This is
because the seller owns no inheritance while his
2. Exaggerations in trade when the other party has
predecessor lives. Public policy demands that if you’re
no opportunity to know the facts
going to sell, you have the right to do so, but not
3. Expression of an opinion made by an expert necessarily requiring that the seller is the owner.
which relied upon by the other party
• The object of a contract, in order to be
4. Misrepresentation in bad faith, and those made considered as "certain," need not specify such
by a third person which created substantial object with absolute certainty. It is enough that
mistake the object is determinable in order for it to be
considered as "certain."
• In order to affect the validity of the contract,
FRAUD must be employed by one party ONLY. CAUSE OF THE OBLIGATION (ART. 1350 TO 1355)
• Incidental Fraud does not affect the validity of a • Under Article 1350, In onerous contracts the
contract but gives rise to an action for damages. cause is understood to be, for each contracting
party, the prestation or promise of a thing or
SIMULATED AND FICTITIOUS CONTRACTS service by the other; in remuneratory ones, the
● Simulated Contracts: where the parties would service or benefit which is remunerated; and in
make it appear that they entered into a contract contracts of pure beneficence, the mere
when in fact they did not. liberality of the benefactor.

● Fictitious Contracts: where one of the parties did • Contracts without a cause or consideration
not actually gave his consent. E.g., a party’s produce no effect whatsoever
signature in a deed of sale is forged; • A contract of purchase and sale is null and void
Simulated contracts and produces no effect whatsoever where the
same is without cause or consideration in that
• Absolutely Simulated Contracts – A contract the purchase price which appears thereon as
where parties did not intend to be bound by the paid has in fact never been paid by the purchaser
contract or any contract for that matter. Usually to the vendor.
created to defraud someone. Contract is VOID
• As a rule, motive does not affect the validity of a
• Relatively Simulated Contracts – takes place contract since motive is different from cause and
when the parties conceal their true agreement. the illegality of motive does not affect the validity
Object of the contract.

• OBJECT: is the subject matter of a contract which • Although the cause is not stated in the contract,
may not necessarily be a thing, it may be rights it is presumed that it exists and is lawful
or service. • As a rule, gross inadequacy of the price does not
• Requirements in order to be an Object of a affect the validity of contracts.
contract:

1. Rights – Must not be intransmissible

2. Services – not contrary to law, morals, good

customs, public order or public policy;