CONTRACTS (Articles 1305 -1349, Civil Code) Page |1

CHAPTER 1 GENERAL PROVISIONS

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

1. There should be two contracting parties

2. A party is bound to the fulfillment to give, to do, or not to do,

Contract and Obligation distinguished

 Contract is one source of obligation

 Obligation is the object of the contract
 There can be no contract if there is no obligation
 Obligation may exist without contract such as the obligation imposed by law

Contract and Agreement distinguished

 Contracts are binding agreements enforceable through legal proceedings in case the other party does not comply
with his obligation under the agreement.
 Agreements which cannot be enforced by action in the courts of justice are not contracts but merely moral or
social agreements (eg. Agreement to go to a dance party)
 Agreement is broader than a contract because the former may not have all the elements of a contract
 All contracts are agreement but not all agreements are contract

Article 1306

The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient provided they are not contrary to the law, morals, good customs, public order, or public policy.

Valid Contracts

- Those that meet all the legal requirements and limitations for the type of agreement involved and are, therefore,
legally binding and enforceable.

Limitations on contractual stipulations

1. Law – contract must be in accordance to law

2. Police power – all contractual obligations are subject to the possible exercise of the police power as mere
enforcement of one of the conditions deemed imposed in all contract

A. Contracts must not be contrary to the law

B. Contracts must not be contrary to the morals
C. Contracts must not be contrary to good customs
D. Contracts must not be contrary to public orders
E. Contracts must not be contrary to public policy

Article 1307 – Innominate contract shall be regulated by the stipulations of the parties, by the provisions of the
Titles I and II of this Book, by the rules governing the most analogous nominate contracts, and by the customs of
the place.
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CONTRACTS (Articles 1305 -1349, Civil Code) Page |2

Classification of Contract according to its name or designation

1. Nominate Contract – contracts that has designation or name in law

Example: lease, agency, sale

2. Innominate Contract – contracts which has no specific name or designation in law

Example: “I give that you may do.”
“I do that you may give.”
“I do that you may do.”

Article 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 in keeping with good faith, usage and law.

Article 1316 Real contracts, such as deposit, pledge and Commodatum, are not perfected until the delivery of the
object of the obligation.

Classification of Contracts according to perfection:

a. Consensual Contract – that which is perfected by mere consent

b. Real Contract – that which is perfected by delivery of the thing subject matter of the contract

Stages in the life of contract:

1. Preparation or Negotiation – this includes all the steps taken by parties leading to the perfection of the contract. At
this stage, the parties have not yet arrived at any definite agreement

2. Perfection or Birth – this is when the parties have come to a definite agreement or meeting of minds

3. Consummation or Termination – this is when the parties have performed their respective obligations and the
contract may have been said to have been fully accomplished or executed resulting in the termination thereof.

Article 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.

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