1305 Meeting of minds between two

persons whereby one binds himself,

with respect to the other, to give
something or to render some service.
Contact - One of the sources of obligations.
Obligation - The legal tie or relation itself
exists after a contract has been entered into.
No contract when there is no obligation. An
obligation may exist without a contract.
Classification of Contracts
As to name
1. Nominate which has specific name
2. Innominate no specific name or
designation by law
As to perfection
1. Consensual perfected by mere
consent
2. Real perfected by the delivery of the
thing subject matter of the contract
3. Solemn requires compliance with
certain formalities prescribed by law,
such prescribed form being thereby an
essential element thereof
According to cause
1. Onerous - A type of contract where
the costs involved with fulfilling the
terms and conditions of
the contract are higher than the
amount of economic benefit received.
2. Remuneratory - it is the service or benefit
for which the remuneration is given.

3. Gratuitous - A type of contract where

the costs involved with fulfilling the
terms and conditions of
the contract are higher than the
amount of economic benefit received.
4.
According to Form
1. Formal
2. Informal
According to obligatory force
1. Valid meet all the legal
requirements and limitations for the
type of agreement involved and are,
therefore, legally binding and
enforceable.
2. Rescissible - Those which have
caused a particular economic damage
either to one of the parties or to a 3rd
person and which may be set aside
even if valid. It may be set aside in
whole or in part, to the extent of the
damage caused.
3. Voidable - contract, unlike a void
contract, is a valid contract. At most,

one party to the contract is bound.

The unbound party may repudiate the
contract, at which time the contract is
void.
4. Unenforceable
5. Void or inexistent
According to person obliged
1. Unilateral
2. Bilateral
According to risk
1. Commutative undertaking of one
party is considered as equivalent of
that of the other
2. Aleatory depends upon an
uncertain event or contingency both
as to benefit or loss
According to liability
1. Unilateral creates an obligation to
only one of the parties
2. Bilateral gives rise to reciprocal
obligation to both parties
According to status
1. Executory has not yet been
completely performed by both parties
2. Executed fully and satisfactorily
carried out by both parties
According to dependence to another
contract
1. Preparatory entered into as a
means to an end
Means to an end - a thing that is not
valued or important in itself but is
useful in achieving an aim
2. Accessory dependent upon another
contract it secures or guarantees for
its existence and validity
3. Principal does not depend for its
existence and validity upon another
contract but is an indispensable
condition for the existence of an
accessory contract
According to dependence of part of
contract to other parts
1. Indivisible each part of the contract
is dependent upon the other parts for
satisfactory performance
2. Divisible when one part of the
contract may satisfactorily performed
independently of the other parts

1306 The contracting parties establish

such stipulations, clauses, terms and
conditions as they may deem
convenient, provided they are not

contrary to law, morals, good customs,

public order and public policy.
Freedom to contract guaranteed right
to enter into contract is one of the liberties
guaranteed to the individual by the
Constitution. However, the constitutional
prohibitions against impairment of
contractual obligations refers only to legally
valid contracts.
Limitations on Contractual Stipulations
1. Law in accordance with, and not
repugnant to, an applicable statute.
Law a rule of conduct, just,
obligatory, promulgated by legitimate
authority, and of common observance
and benefit.
Law is superior to contract.

2.
3.

4.
5.

Police Power When the law is

silent, all contractual obligations are
subject to possible exercise of the
police power of the state.
Morals deal with norms of good and
right conduct evolved in a community
Good customs habits and practices
which through long usage have been
followed and enforced by society or
some part of it as binding rules of
conduct.
Public Order refers to public safety
although it has been considered to
mean also the public weal.
Public Policy refer to
considerations which are moved by
the common good.

1307 Innominate contracts shall be

regulated by the stipulations of the
parties, by the provisions of Tiles I and
II of this Book, by the rules governing
the most analogous nominate contracts
and by customs of the place.
Kinds of Innominate contract
1. Do ut des (no longer and innominate
contract. Barter or exchange)
2. Do ut facias
3. Facto ut des
4. Facto ut facias
Reason for innominate contract
-

Impossibility of anticipating all

forms of agreement
Progress of mans sociological and
economic relationships

Rules governing innominate contracts

1. The agreement of the parties
2. Provisions of the Civil Code on
obligation and contracts

3. Rules governing the most analogous

contracts
4. Customs of the place
1308 The contract must bind both
parties, its validity or compliance
cannot be left to the will of one of
them.
1309 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.
1310 The determination shall not be
obligatory if it is evidently inequitable.
In such case, the courts shall decide
what is equitable under the
circumstances.
1311 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.
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 of a thirds person is
not sufficient. The contracting parties
must have clearly and deliberately
conferred a favor upon a third person.
Not transmissible contracts:
1. By their nature
2. By stipulation
3. By provision of law
Third person - one who has not taken part
in a contract and is, therefore, a stranger to
the contract. He has no standing in law to
demand the enforcement of a contract or
question its validity.
Cases when third persons affected by a
contract:
1. Stipulation pour autrui stipulation in
favor of a third person
Class of stipulation pour autrui:
a) Third party is said to be a done
beneficiary (donation)
b) Third party is called creditor
beneficiary
Requisites:

a) Clearly and deliberately

conferred a favor upon third
person
b) Communicated his acceptance
to the obligor before revocation
c) Stipulation in favor of the third
person must be a part of the
contract
d) Favorable stipulation must not
be conditioned or compensated
by any kind of obligation
e) No contracting parties bears
representation or authorization
of the third party
2. Contracts creating real rights
3. Contracts entered into to defraud
creditors
4. Contracts which have been violated at
the inducement of a third person
1312 In contracts creating real rights,
third persons who come into possession
of the object of the contract are bound
thereby, subject to the provisions of the
Mortgage Law and the Land
Registration Laws.
However, if the real right is not
registered, third persons who acted in good
faith are protected under the provisions of
the Property Registration Decree.
1313 Creditors are protected n cases
of contracts intended to defraud them.
1314 Any person who induces another
to violate his contract shall be liable for
damages to the other contracting party.

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.
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
includes all the steps taken by the
parties leading to the perfection of the
contract.
2. Perfection or birth when the
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 or termination
when the parties have performed their
respective obligations and the
contract may be said to have been
fully accomplished
Effect of the perfection of the contract:
1. Fulfillment of what has been expressly
stipulated
2. All consequences which according to
their nature, may be in keeping with
good faith, usage, and law.
1317 No one may contract in the name
of another without being authorized by
the latter, or unless he has by law a
right to represent him.
A contract entered into the name
of another by one who has no authority
or legal representation, or who has
acted beyond his powers, shall be
unenforceable, unless it is ratified,
expressly or impliedly, by the person
whose behalf it has been executed,
before it is revoked by the other
contracting party.
Unauthorized contracts can be cured
only by ratification ratification must be
clear and express so as not to admit of any
doubt or vagueness.
When a person is bound by the contract
of another
1. The person entering into the contract
must be duly authorize, expressly or
implied, by the person whose name he
contracts or he must have, by law, or
a right to represent him.
2. He must act within his power
1318 There are no contracts unless
the following requisites concur:
1. Consent of the contracting
parties;
2. Object certain which is the subject
of the contract;
3. Cause of the obligation which is
established
Classes of the elements of a contract:
1. Essential elements those without
no contract can validly exist
regardless of the intentions of the
parties.
a) Common those present in all
contracts
i.
Consent
ii.
Object
iii.
Cause

b) Special those not common to

all contracts
i.
Regards to form
ii.
Regards to subject matter
iii.
Regards the
consideration or cause
1. Natural elements presumed to
exist in certain contracts unless the
contrary is expressly stipulated by the
parties, like warranty against eviction,
or warranty against hidden defects in
sale.
2. Accidental elements particular
stipulations, clauses, terms, or
conditions established by the parties
in their contract which exist only when
they are expressly provided by the
parties.
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.
Consent the conformity or concurrence of
wills and with respect to contracts, it is the
agreement of the will of one contracting
party with that of another or others, upon
object and terms of the contract.
Offer proposal made by one party
(offerer) to another (offeree) indicating a
willingness to enter into a contract.
Offer must be certain and seriously
intended
1. Offer must be certain or definite
2. An offer made in jest or anger or in
other ways indicating that the same
was not seriously intended is not a
valid offer.
Acceptance the manifestation by the
offerree of his assent to all the terms of the
offer.
Acceptance of offer must be clear and
absolute.
1320 An acceptance may be express or
implied.

Express in the form of a promise to pay a

certain amount or to do something, may be
oral or written.
Implied one that is inferred from act or
conduct.
1321 The person making the offer may
fix the time, place, and the manner of
acceptance, all of which must be
complied with.
Communication of an offer it must be
communicated and received by the offeree
1322 An offer made through an agent
is accepted from the time acceptance is
communicated to him
Communication of acceptance:
1. To offerer offer must be absolute
and the acceptance must be
communicated to the offerer, it can be
expressed or implied.
2. To agent by legal fiction, an agent is
considered an extension of the
personality of his principal. If duly
authorized, the act of the agent is in
law, the act of the principal.
1323 An offer becomes ineffective
upon death, civil interdiction, insanity,
or insolvency of either party before
acceptance.
1.
2.
3.
4.

Death
Civil interdiction
Insanity
Insolvency

1324 When the offerer has allowed the

offeree a certain period to accept, the
offer may be withdrawn at any time
before acceptance by communicating
such withdrawal, except when the
option is founded upon a consideration,
as something paid or promised.
1. Option Contract giving a person for
a consideration a certain period within
which to accept the offer of the offerer.
2. Option Period the period given
within which the offeree must accept
the offer.
3. Option Money money paid or
promised to be paid in consideration
for the option.
1325 Unless it appears otherwise,
business advertisements of things for
sale are not definite offers, but mere
invitations to make an offer.
However, if the advertisement is
complete in all the particulars necessary in a
contract, it may amount to a definite offer,

which, ifaccepted, will produce a perfected

contract.
1326 Advertisements for bidders are
simply invitations to make proposals,
and the advertiser is not bound to
accept the highest or lowest bidder,
unless the contrary appears.

1327 The following cannot give

consent to a contract:
1. Unemancipated minors refer to
those persons who have not yet
reached the age of majority and are
still subject to parental authority.
Emancipation:
a) Attainment of the age of
majority
b) Marriage
c) Concession recorded in the
Civil Register of either the
parents who exercises
parental authority.
2. Insane or demented persons
Insanity must exist at the time of
contracting. Unless proved otherwise,
a person is presumed sane.
3. Deaf-mutes who do not know how
to write - If they know how to write,
the contract is valid for then he is
capable of giving intelligent consent.
The civil code does not define
who have capacity or legal ability to
give consent to a contract. The burden
of proof is on the party who asserts
incapacity.
Reason for disqualification
-

Those persons mentioned can

easily be victims of fraud as they
are not capable of understanding
or knowing the nature or import of
their actions.

1328 Contracts entered into during

lucid interval are valid. Contracts
agreed to in a state of drunkenness or
during a hypnotic spell are voidable.
Lucid Interval temporary period of sanity.
It must be shown that there is a full return of
the mind to sanity as to enable him to
understand the contract he is entering into.
1329 The incapacity declared in article
1327 is subject to the modifications
determined by law, and is understood
to be without prejudice to special
disqualifications established by law.

Other Special Disqualification made by

law
Incompetents, may be placed under
guardianship:
1. Suffering the accessory penalty civil
interdiction.
2. Hospitalized lepers
3. Prodigals (spendthrifts)
4. Deaf and dumb who are unable to
read and write
5. Unsound mind even though they have
lucid intervals
6. Disease, weak mind and other similar
causes, cannot without outside aid,
take care of themselves and manage
their property, becoming thereby an
easy prey for deceit and exploitation.
Contracts entered into by any of the
above is valid except where it is voidable
by reason of incapacity under Articles
1327 and 1328 or of causes which vitiate
consent, or where the incompetent has
been placed under guardianship.
1330 A contract where consent is
given through mistake, violence,
intimidation, undue influence, or fraud
is voidable.
There is no valid consent unless:
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 no
vitiation of consent by reason of
mistake, undue influence, or fraud.
Vices of consent:
1.
2.
3.
4.
5.

Error or mistake
Violence or force
Intimidation or threat or duress
Undue influence
Fraud or deceit

Causes vitiating consent

-

Temporary;
Refers to contract itself

Cause of incapacity
-

More or less permanent

Refers to the person entering into
the contract