Reviewer In Obligations and Contracts – Contracts – Chapter 1 (General Provisions) – Jerome D.

Canlas 39

Reviewer in Obligations and Contracts d. Public Policy – contract that has a tendency to injure
the public is against the public good, or contravenes
Title II – Contracts some established interest of society or is inconsistent
with sound policy and good morals, or tends clearly to
Chapter 1 – General Provisions undermine the security of individual rights
Ex. Contracts impairing the efficient and
conscientious performance of public duties
A. Definition Ex. Cui v. Arellano – Cui’s contract with Arellano,
Contract – meeting of minds between two persons whereby one saying that he waives the right to transfer to another
binds himself, with respect to the other, to give something or to school without having refunded the equivalent of his
render some service scholarship in cash is against public policy.
B. Elements Scholarships are awarded because of merit and not to
1.) Essential Elements – if without, there can be no contract increase the business potential of the school
a. Consent 2.) Relativity – Contracts take effect only between the parties,
b. Object their assigns and heirs except where the obligation are not
c. Cause transmissible by their nature, by stipulation, or by provision
2.) Natural Elements – those which exist as part of the contract of law.
even if the parties do not provide for them, because the law Ex. DKC Holdings v. CA – DKC has a contract of lease with
creates them Bartolome that DKC had the option to buy the property after 2
Ex. warranty against eviction in the contract of sale years. Bartolome died, leaving only a sole heir. The heir
3.) Accidental Elements – those which are agreed upon by the refused to accept the payments. However, the Court said
parties and which cannot exist without being stipulated that the heir is bound by the contract of his predecessor-in-
C. Characteristics interest. The obligation is transmissible by nature.
1.) Autonomy or Freedom of Contract – The parties may  No one may contract in the name of another without
establish such stipulations, clauses, terms and conditions as authority of the latter or unless he is allowed by law.
they may deem convenient, provided that they are not o A contract entered into the name of one who
contrary to: has no authority is unenforceable, unless it is
a. Law – refers to mandatory or prohibitory laws ratified by the person in whose name it was
Ex. (1) Pactum Leonina – excluding one or more entered into.
partners from any share in the profits or losses Ex. Gutierrez Hmnos v. Orense – Duran sold his
(2) Pactum Commissorium – appropriating things uncle’s property to Gutierrez but the uncle refused to
given by pledge or mortgage deliver the property after 4 years. The Court upheld
- Anti-Chresis – acquiring ownership over the sale, since the uncle himself admitted that he
real estate for non-payment of debt consented to the sale.
(3) Pactum de non alienado – forbidding the  Another exception, when there are stipulations in
owner from alienating the immovable mortage favor of a 3rd person and when the law authorizes
b. Morals & Good Customs – refers to standards of the creditor to sue on his debtor’s contract
justice and decency acknowledged by society (Accion Directa).
Ex. Carnal relation as consideration of a promise to
3.) Consensuality – Contracts are perfected by mere consent
marry
from the moment the parties are bound except in cases of
c. Public Order – considers the public weal, safety, and
health of the community
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solemn contracts and real contracts such as mutuum, b. Real (by delivery of the object) – ex. deposit, pledge,
deposit, pledge, and commodatum commodatum, and mutuum (simple loan)
c. Solemn – requires certain formalities prescribed by law to
4.) Obligatory Force of Contracts – Obligations arising from be perfected
contracts have the force of law between the contracting 4.) According to its Relation to Other Contracts
parties and should be complied with in good faith. a. Preparatory – when it is entered into as means to an end
5.) Mutuality – Contracts must bind both contracting parties; its (ex. agency, partnership)
validity cannot be left to the will of one of them. b. Principal – when it does not depend upon another
Ex. GSIS v. CA – GSIS inserted a notation unknown to contract for its existence and validity (ex. sale, lease)
Leuterio which stated that the purchase price would be c. Accessory – it is dependent on another contract for its
subject to adjustment pending the approval of the board. existence and validity (ex. mortgage, guaranty)
There is no mutuality in the contract as it is contrary to law for 5.) According to Form
GSIS to raise the price unilaterally. GSIS cannot be excused a. Common or Informal
from performing its obligation of executing the final deed of b. Special or Formal (Solemn)
sale. 6.) According to Purpose
a. Transfer of Ownership – ex. sale
D. Parties b. Conveyance of Use – ex. commodatum
 At least 2 parties. c. Rendition of Services – ex. agency
 Auto-Contracts – Same person, acting in a different 7.) According to Nature of the Vinculum Produced
capacity, entering into a contract with himself. = Valid! a. Unilateral
o Contract is not determined by the no. of persons but b. Bilateral
by the no. of parties; not by the no. of individual wills c. Reciprocal
but the no. of declarations of will. 8.) According to Cause
Special Disqualifications a. Onerous
(1) Donations between spouses are void b. Gratuitous or Lucrative
(2) Spouses cannot sell property to each other 9.) According to Risk
(3) Persons prohibited from giving each other donation or a. Commutative – when the undertaking of one party is
advantage cannot enter into universal partnership considered the equivalent of that of the other (ex. sale,
lease)
E. Classification b. Aleatory – when it depends upon an uncertain event or
1.) According to Subject-Matter contingency both as to benefit or loss (ex. insurance)
a. Things
b. Services F. Stages
2.) According to Name 1.) Preparation – period of negotiation and bargaining, ending
a. Nominate at the moment of agreement of the parties
b. Innominate 2.) Perfection – which is the moment when the parties come to
(1) Do ut des – I give and you give agree on the terms of the contract
(2) Do ut facias – I give and you do 3.) Consummation or Death – fulfillment or performance of the
(3) Facio ut des – I do and you give terms agreed upon in a contract
(4) Facio ut facias - I do and you do
3.) According to Perfection G. As distinguished from a Perfected Promise and an Imperfect
a. Consensual (by mere consent) Promise (Policitacion)
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 Contract – establishes and determines the obligations fulfilling his obligation of going to a journey to
arising therefrom an unhealthful climate.
 Perfect Promise – tends only to assure and pave the way for Ex. Daywalt v. Corporacion – Endencia was
the celebration of a contract in the future persuaded by La Corporacion’s agent, Father
 Imperfect Promise (Policitacion) – unaccepted offer Sanz, to deliver the title of her land to the
Corporacion instead. Daywalt seeks to recover
H. With Respect to 3rd Persons damages from La Corporacion for intervening but
1.) Stipulations in favor of 3rd Persons (Stipulations Pour Atrui) the Court held that they shouldn’t be liable as the
o The contracting parties must have clearly and reason for their interference was that they
deliberately conferred a favor upon 3rd person. believed in good faith that Endencia would be
o NOTE! wronged if she carried out with the obligation.
 The stipulation in favor of the 3rd person o The 3rd Person who intervened shall be solidarily
should only be a part and not the whole of the liable. To hold the stranger liable for damages in
contract. excess of those that could be recovered against the
 The 3rd person must accept it before it is immediate party to the contract would be unjust.
revoked.
 Neither of the contracting parties should have
an agency relationship with the 3rd party.
Ex. Coquia v. Fieldmen’s Insurance Co. – Fieldmen’s
Insurance issued in favor of Manila Yellow Taxicab a
common carrier accident policy that Manila Yellow will be
liable for. It is a stipulation pour atrui since its
enforcement may be demanded by a 3rd person for whose
benefit it was made.
2.) Possession of the Object of Contract by 3rd Persons
o 3rd Persons who come into a possession of the object
of the contract over which there is a real right, are
bound even if they were not parties to the contract.
3.) Creditors of the Contracting Parties
o When a debtor enters into a contract in fraud of his
creditors, the creditors may ask for its rescission
(accion pauliana).
o The law may also authorize a creditor to sue on his
debtor’s contract, such as the lessor against a sub-
lessee and a principal against a sub-agent (accion
directa)
4.) Interference by 3rd Persons
o 3rd Persons who unjustly induces another to violate
his contract shall be liable for damages to the other
contracting party.
 3rd Persons may have legal justification in
intervening, such as dissuading a person from