LAW: CONTRACTS GENERAL PROVISIONS

CONTENT:

1. Meaning
2. Elements
3. Classifications
4. Stages
5. Characteristics

Meaning of Contracts

A contract is a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something with respect to the other, to give something or to render some service. (Art.
1305)

Note:

With regards to obligation, there can be no contract established. If there is

contract automatically there is an obligation. Because one of the different
sources of obligations is contracts.

Elements of a Contract

3 types of elements in a contract: Note:

1. Essential Elements [Art. 1318-1355] Elements of a Contract is the building

a. Consent blocks or what comprises a contract.
b. Object
c. Cause
2. Natural Elements [e.g. warranty against eviction and hidden defects in case of sales].
3. Accidental Elements [e.g. stipulation such as interest in loan].

*Not all the time, all of the elements exist. But, Essential Elements it is required to have all 3
(Consent, Object, Cause). In any type of contract, Essential Elements are needed because if it is not
present you cannot call it a contract.

Natural Elements

-are initially existing in some certain contracts. In other words, at the birth of a contract it already
exists but, it can be removed.
 Example: (Natural Elements)

In a contract of sale, there is a natural element such as, warranty against eviction and warranty
against hidden defects.

Accidental Elements

-initially it does not exist in a contract but, it can be put inside of a contract, it must be stipulated by
the parties.

Classification of Contracts Essential Elements

1. According to perfection:
a. Consensual- perfected by consent, object, cause [COC]
[e.g. sales, partnership, real mortgage]
b. Real- perfected by COC + delivery
[e.g. pledge, loan, deposit]

Note:
There are certain contracts na hinde lang yun ang essential elements
required para maform ang contract. Ibig sabihin hinde lang COC ang
kanilang essential elements.

2. According to relation to other contract:

a. Principal- can exist on its own.
[e.g. sales, loan] – pure obligation no condition
b. Accessory- existence depends upon a principal contract.
[e.g. pledge, mortgage, guaranty] – there’s condition
c. Preparatory- needed for the formation of subsequent contracts.
[e.g. partnership, agency] can considered be as principal (may support)
3. According to parties obliged:
a. Unilateral- only one party is obliged.
[e.g. commodatum, donation] ikaw nagpahiram so ikaw lang pwede mag decide
b. Bilateral- both parties are obliged. Both have decisions
[e.g. sales, barter]
4. According to their form:
a. Common or informal- or those which require no particular form.
[e.g. loan] because its verbal
b. Special or formal- or those which require some particular form.
[e.g. donations, chattel mortgage]
 5. According to their purpose:
a. Transfer of ownership.
[e.g.sale]
b. Conveyance of use
[e.g. commodatum]
c. Rendition of services
[e.g. agency]
6. According to their subject matter:
a. Things
[e.g. sale, deposit, pledge]
b. Services
[e.g. agency, lease of services]
7. According to name:
a. Nominate- the law gives it a special name or designation
[e.g. sales, loan, partnership, donation]

Note:
As long as the contract has specific guidelines
that we can base it on, it is nominate.

b. Innominate- 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
[Art.1307]
When Dealing with Innominate Contracts

Follow in order of priority:

1. Stipulations of the parties

-Kung gusto ng parties ng ganito ganyan masusunod yon as long as, hinde siya bawal or hinde
siya ipinagbabawal ng batas, hinde siya against morals, hinde siya against public order,public
policy and good customs. If the stipulation is unclear we will go to the next which is no.2.
2. Rules governing law on obligations and contracts
-kung minsan kasi yung mismong obligations and contracts ay naka generalize, it refers to all
kinds of contracts. If still unclear go to no.3
3. Rules governing the most analogous contract
- kung yung innominate contract natin ay mukhang sales we bring rules governing the law on
sales kasi yun ang most analogous. Kapag sinabing most analogous pinakakahawig niyang
contract. If there is no analogous contract that can deal with the innominate contract then
proceed to the next no.
 4. Customs of the place
-kung ano ang nakagawian sa loob ng lugar na iyon [Art.1307]

8. According to risks:
a. Commutative- When the undertaking of one party is considered the equivalent of that
of the other
[e.g. sales, lease]
b. Aleatory- when it depends upon an uncertain event or contingency both as to benefit or
loss
[e.g. contract of insurance, sale of hope]

9. According to cause:
a. Onerous- cause has valuable obligation
[e.g. sales, lease]
b. Gratuitous- cause is purely generosity
[e.g. commodatum, donation]

Stages of Contract

1. Preparation/Conception/Generation/Negotiation
-certain terms used in the 1st stage.
-At the 1st stage there is still no contract
-At the 1st stage naguusap-usap pa lang ang dalawang parties kung ano magiging stipulation dun
sa contract. Dinadraft palang yung contract.
2. Perfection/Birth/Formation
-Creation of a contract
-Ang contract pwede siya hindi in paper
3. Consummation/Death/Extinguishment
-Lahat ng obligations within the contract ay fulfilled na or nagawa na.

Different Characteristics of a Contract (MARCO)

1. Mutuality of Contracts
2. Autonomy/Liberty of Contracts
3. Relativity of Contracts
4. Consensuality of Contracts
5. Obligatory force of Contracts
Mutuality of Contracts

The contract must bind both contracting parties; its validity or compliance cannot be left to the will of
one of them. [Art. 1308]

Art. 1308- kapag may dalawang parties na pumapasok sa isang kontrata hinde pwede na yung validity or
yung compliance ng contract ay naka rest lng sa isang tao.

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]

Art. 1309- if hinde nagkasundo yung dalawang parties pwedeng ibigay yung determination ng validity or
compliance ng kontrata sa 3 rd person. Pero kahit ibinigay na iyon sa 3 rd person para magdecide kung ano
ang stipulation, kailangan parin magcommunicate si 3 rd person sa dalawang parties.

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]

Art. 1310- sakaling hinde paren magakasundo, pwede silang pumunta sa court para madetermine kung
ano ang maigiging equitable.

Example: Mutuality of Contracts

1. S sold his parcel of land to B. It was agreed that X, a real estate appraiser, would be the one to
determine the reasonable price of the land. X, then, fixed the price after considering all the
circumstances and factors affecting the value of the land.

Ang issue ay si S and B hindi magkasundo sa magiging price ng lupa kasi si S although, siya yung
nagbebenta ng lupa hinde niya rin kasi alam yung price, hinde niya alam kung masyadong mataas ba
yung bigay niya or hinde niya rin alam baka malugi siya.(Art.1308)

Ang ginawa ni S and B naghire sila ng 3rd person si X, which is, isang expert sa pag-aapraise ng mga
properties, pero once na na-appraise ni X yung land na yon at kunwari nagbigay na ng amount si X let’s
say P5,000,000 hinde ibig sabihin na binding agad yung 5M, kailangan icommunicate niya muna iyon kay
S at B ultimately, magdedecide parin si S at B kung magkakasundo sila dun sa P5,000,000.(Art.1309)

What if si X kilala niya si B? so sabi ni B “babaan mo gawin mong P1,000,000 lng”. Kapag masyadong
mababa dahil sa feeling ni S pwede siya pumunta sa court para malaman kung ano ang equitabl.
(Art.1310)
Autonomy of Contracts

-Also called liberty of contracts or freedom to stipulate in 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]

In short, in autonomy of contract pwede tayo gumawa ng kahit anong klaseng kasunduan basta hinde
ito labag sa batas, morals, good customs, public order, and public policy.

Relativity of Contracts

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. 1311 p.1]

Ang kontrata ay nageexist lng between the parties ibig sabihin, ano man ang meron o ano man ang
benefit ano man ang consequence ng kontrata na iyon ang involved lang ang dalawang parties na iyon
or yung mga assigns nila or heirs(in case may mamatay sa parties).

Key Points:

 Contracts take effect between the parties in the contract [with exceptions]
 Contracts are generally transmissible except:
 Law
 Stipulation
Ex: Scholarship Contract Transferrable
 Nature
Ex: Contract of Marriage
 The heir is not liable beyond the value of the property he received from the decedent
(deceased).

Example: Meron utang tatay mo tapos unfortunately, pumanaw so, nagiwan siya ng pamana sayo
which is, P400,000 so yung utang niya pumasa sayo minana mo dun ang utang na 500,000. So kapag
sisingilin ka, up to the extent of the property from the decedent lang ang ibabayad.

Exceptions:

1. Stipulation Pour Autrui[Art. 1311 p.2]

2. Third persons in possession creating real rights[Art. 1312]
3. Contract is entered to defraud creditor. [Art. 1313]
4. Third person induced a party to a contract to violate the contract. [Art. 1314]
Stipulation Pour Autrui

- is the direct conferment of the benefit towards a 3 rd person.

Requisites:

- Kailangan mag exist lahat ito:

a. There must be a stipulation in favor of a 3rd person
b. The stipulation must be part, not the whole of the contract
c. The contracting parties must have clearly and deliberately conferred a favor upon a 3 rd
person, NOT a mere incidental benefit or interest
d. The 3rd person must have communicated his acceptance to the obligor before its revocation
e. No relation of agency exists between any of the parties and the person favored

Example:

D is indebted to C for P100,000 with 12% interest. It was stipulated that X will receive the 12% interest.
The stipulation is accepted by X and duly communicated the acceptance to D and C.

After a year, D and C decided to change the contract into giving a specific house and lot. Under relativity
of contracts, 3rd person cannot act upon the decisions of the parties in a contract. However, X in this
case is an exemption.

Third persons in possession of a property creating real rights

Example:

S sold to B a specific land for P1M. B occupied the said land but did not register it. One day, S sold the
land to X. X registered the said property at the Registry of Deeds.

B occupied the land pero, X registered the land. Although B initially had a contract with S pwede mag
intervene si X with regards to the contract, because he is the rightful owner. Pwede niyang i-evict si X.

Contract is entered to defraud creditors

Example:

D id indebted to C for P1,000,000. D fearing that he won’t be able to pay the debt and ultimately his land
being levied, sold the said land at a very low price to X with the condition that he can purchase it back.

Under relativity of contracts, kapag may contract between D and X hinde pwedeng makialam ang 3 rd
person pero in this case, pwedeng makialam si C. Bakit siya pwedeng makialam? Kasi isa siyang creditor
na nadefraud by the acts of D.

Third person induced a party to a contract to violate the contract

Example:

After agreeing to sell his parcel of land to B, S sells the land to C instead because of the inducement of D.
In this case, B can sue D for damages.

Ang main contract na tinutukoy ditto is yung kay B and S with regards to the sell of land. Ang nangyari
hinde nagcomply yung isa instead, kay C niya binenta in this case, pwede tayo magdamay ng 3 rd party
usually kakasuhan natin si B pero under the exemption relativity of contract pwede na natin kasuhin
yung 3rd person which is, D.

Consensuality of Contracts

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: Real [Art.1316] and Formal Contracts

-Contracts are perfected by mere consent with regards to the object and the cause. Usually, yong COC or
essential elements yun ang consensuality.

Obligatory Force of a Contract

Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.[Art. 1159]

-when we say, obligatory force ikaw pumasok sa isang contract mabibind ka na doon. Kailangan mo
magcomply sa obligation mo. As well as, get the benefit kung meron benefit.