C O N TRACTS
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.
Contract a n d obligation
distinguished.
C ontract is one of the sourc e s of
obligations. O n the other hand,
o bliga tion is the leg a l tie o r re lation itse lf
that exists after a contract has been
entered into.
Hence, there c a n b e no contract if
there is no o b lig ation. But a n o b ligation
m ay exists without a contract.
ART. 1306. The contracting
parties may established 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. 1308. The contract
must bind both contracting
parties, its validity or
compliance cannot be left to
the will of one of them.
ART. 1310. The determination
shall not be obligatory if it is
evidently inequitable. Insuch
case, the courts shall decide
what is equitable under the
circumstances.
Persons affected by a
contract
1. General rule.- Contract takes effect only
between the parties, their assigns (i.e.,
transferees), a n d heirs. This means that only
the parties, their assigns a n d heirs c a n have
rights a n d obligations under the contract. As
a rule, the act, declaration, or omission of a
person cannot affect or prejudice another
without the latter’s authorization or
ratification.
Example:
D is indebte d to C in the a m ount of
P10,000. D a n d C are the parties to the
contract.
If C dies, D m ust p a y the heirs of C . If C
assigns his credit to X, then D is liable to p a y
X.
If D dies a n d H is the heir, then H assumes
the obliga tion of D to C . H is bound by the
contract entered into by D, his predecessor
in interest, in view of the privity of interest
between him a nd D . How ever, H is not
liable beyond the value of the property he
Persons affected by a
contract
[Link].- The cases when a c o ntract are
effective only between the parties are when the
rights a n d obligations arising from the contract are
not transmissible:
[Link] their nature (like a contract involving
personal qualifications, as painting, singing,
etc.);
[Link] stipulation (in a c c o r d a n c e with the
principle of freedom to contract);
c. by provision of law (as in agency, partnership,
a n d commodatum, when death extinguishes the
legal relationships.)
ART. 1314. Any third person
who induces another to
violate his contract shall be
liable for damages to the
other contracting party.
Example:
S agreed to sell his parcel of land to B fro P9,000.
S sells the land to C instead because of the
inducement of D.
In this case, B c a n sue D for damages. However,
the liability of D for d a m a g e s cannot b e more than
that of S for the latter’s violation of his contract. To
hold D liable for d a m a g e s in excess of those that
c a n b e recovered against S “would lead to a result
at o n c e grotesque a n d unjust.” At most, D would b e
solidarily liable with S.
ART. 1315. 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.
ART. 1316. Real contracts, such
as deposit, pledge and
commodatum, are not
perfected until the delivery of
the object of the obligation.
Stages in the life of a contract
1. Preparation or negotiation.-
This includes all the steps taken
by the parties leading to the
perfection of the contract. At
this stage, the parties have not
yet arrived at any definite
agreement;
Stages in the life of a
contract
2. Perfection or birth.- This is
when the parties have c o m e to
a definite agreement or
meeting of the minds
regarding the subject matter
a n d cause of the contract, i.e.,
upon the occurrence of the
essential elements thereof;
Stages in the life of a
contract
3. Consuming or termination.-
This is when the p a rties h a ve
performed their respective
obligations a n d the contract
m a y b e said to have been fully
accomplished or executed,
resulting in the extinguishment
or termination thereof.
Examples:
1. S offers to sell his car to B for P100,000. B asks S
to show him the car. Later, S brings the car a n d
sho ws it to B. B o ffers to p a y P80,000 for the c a r.
Here, the parties are taking all the steps that may
lead to the perfection of the contract.
Examples:
[Link], if S agrees to sell the car for P80,000, the
c o ntract is p erfecte d b ecause there is a meeting o f
the minds upon the subject matter a n d the cause
of the contract.
[Link] c o ntract will b e c o nsummate d after S d elivers
the car to B a n d B pays P80,000. B becomes the
owner of the car a n d S, the owner of the money
paid by B.
ESSENTIAL
REQUISITES OF
CONTRACTS
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. The offer must be certain and the
acceptance absolute. A qualified acceptance
constitutes a counter-offer.
Acceptance made by letter or telegram
does not bind the offerer except from the time
it came to his knowledge. The contract, in such
a case, is presumed to have been entered into
in the place where the offer was made.
ART. 1327. The following
cannot give consent to a
contract:
1. Unemancipated minors;
2. Insane or demented
persons, and deaf-mutes who do
not know how to write.
Capacity to give consent presumed
The Civil Code does not define
who have capacity. It defines on the
contrary who have no capacity, by
which it can be inferred that the
capacity is the general rule, which
exists in those, of whom the law has
not denied it.
Persons who cannot give consent
A contract entered into where one of
the parties is incapable of giving consent to
a contract is voidable. A voidable contract is
valid and binding until it is annulled by a
proper action in the court. It is susceptible of
ratification. Those who are incapacitated to
give consent under Article 1327 are the
following:
Persons who cannot give consent
1. Unemancipated minors.- They refer to
those persons who have not yet reached the
age of majority (18years) and are still
subject to parental authority. A minor can be
emancipated by attainment of the age of
majority, by marriage, or by the concession
recorded in the Civil Register, of the father
or the mother who exercise parental
authority;
Persons who cannot give consent
2. Insane or demented persons.- The
insanity must exist at the time of
contracting. Unless proved otherwise, a
person is presumed sane.
Persons who cannot give consent
3. Deaf-mutes.- They are persons who are deaf
and dumb. However, if deaf-mute knows how to
write, the contract is valid for then he is capable of
giving intelligent consent. A person who does not
know how to write, does not know how to read,
and one who knows how to read necessarily
knows how to write. A contract entered into by a
deaf-mute who knows how to read is, therefore,
valid, although he cannot write because of some
physical reasons.
ART. 1328. Contracts
entered into during a lucid
interval are valid. Contracts
agreed to in a state of
drunkenness or during a
hypnotic spell are voidable.
Contracts entered into during a lucid
interval.
Lucid interval is a temporary period
of sanity. A contract entered into by an
insane or demented person during a
lucid interval is valid. It must be shown,
however, that there is a full return of the
mind to sanity as to enable him to
understand the contract he is entering
into.
Effect of drunkenness and hypnotic spell.
Drunkenness and hypnotic spell impair
the capacity of a person to give intelligent
consent.
These conditions are equivalent to
temporary insanity. Hence, the law considers
a contract entered into a state of
drunkenness, or during a hypnotic spell
voidable and it is not required that such
state was procured by the circumvention of
the other party.
ART. 1330. A contract
where consent is given
through mistake, violence,
intimidation, undue
influence, or fraud is
voidable.
Characteristics of consent
In order that consent may be
sufficient for purposes of contract, it
is required, not only that it exists,
but that it must be given with exact
notion over the thing consented to.
There is no valid consent unless:
Characteristics of consent
1. It is intelligent.- there is capacity to act.
2. It is free and voluntary.- there is no vitiation of
consent by reason of violence or intimidation.
3. It is conscious or spontaneous.- there is no
vitiation of consent by reason of mistake, undue
influence, or fraud.
Thus, Article 1330 enumerates in a negative
manner the different requisites of consent. The
contracting parties must possess the necessary
legal capacity.
Vices of consent
Aside from incapacity and simulation of
contract, the following are the causes that vitiate
consent or render it defective so as to make the
contract voidable:
1. Error or mistake
2. Violence or force
3. Intimidation or threat or duress
4. Undue influence
5. Fraud or deceit
Section 2. –
Object of
Contracts
Object of Contracts
u Article 1347. All things which are not outside the
commerce of men, including future things, may
b e the object of a contract. All rights which are
not intransmissible m a y also b e the object of
contracts. N o contract ma y b e entered into upon
future inheritance except in cases expressly
authorized by law. All services which are not
contrary to law, morals, g o o d customs, public
order or public policy ma y likewise b e the object
of a contract. (1271a)
u Article 1348. Impossible things or services cannot
b e the object of contracts. (1272)
Requisites of things as
object of contract
1. The thing must b e within the commerce of men
that is, it c a n b e legally the subject of
commercial transaction;
2. It must no t b e im p o ssib le, le g ally o r p hysically;
3. It must b e in existenc e o r c a p a b le o f c o ming
into existence; a n d
4. It must b e d eterminate o r d etermina b le witho ut
the need of a new contract between the
parties
Requisites of services as
object of contract
1. The service must b e within the commerce of
men;
2. It must no t b e im p o ssib le, p hysically o r le g ally;
3. It must b e d eterminate o r c a p a b le o f b eing
m a d e determinate
Section 3. – C a u s e of
Contracts
u Article 1350. In onerous contracts the cause is
understood to be, for e a c h contracting party, the
prestation or promise of a thing or service by the
other; in remuneratory ones, the service or benefit
which is remunerated; a n d in contracts of pure
beneficence, the mere liberality of the
benefactor. (1274)
u Article 1351. The particular motives of the parties
in entering into a contract are different from the
cause thereof. (n)
Section 3. – C a u s e of
Contracts
u C ause is the essential o r p roximate p urpo se which
the contracting parties have in view at the time of
entering into the contract.
u It is also calle d “consid eratio n”.
Kinds of Defective
Contracts
u Rescissible contracts
u Voidable contracts
u Unenforceable contracts
u Void or inexistent contracts
Rescissible contracts
u are valid because all the essential requisites of a
contract exist but by reason of injury or d a m a g e
to one of the parties or to third persons, such as
creditors, the contract m ay rescinded.
Voidable Contracts
u Are also valid until annulled unless there ahs been
ratification. In a voidable contract, the defect is
caused by vice of consent.
Unenforceable Contracts
u Are valid contracts but cannot b e sued upon or
enforced unless they are ratified.
Void or Inexistent
Contracts
u They are absolutely null a n d void. They have no
effect at all a n d cannot b e ratified.
