CONTRACT- is a meeting of the
minds of two persons whereby one
binds himself with respect to other, to
giver something or to render some
service.
- Agreement of 2 or more
persons for the purpose of
creating, modifying, or
extinguishing a juridical
relation between them.
- juridical convention manifested
in legal form, by virtue of
which, one or more persons (or
parties) bind themselves in
favor of another or others, or
reciprocally, to the fulfillment
of a prestation to give, to do or
not to do.
social agreemet- not a contract
because it cannot be enforced by
action in the court of justice.
ELEMENTS OF A CONTRACT
1. essential elements- a contract
cannot exist without them
2. natural eloements-
3. accidental
classification sof contract
as to perfection or formation:
1. consensual- mere consent
2. real- by delivery
3. formal or solemn- Those where
special formalities are essential
before the contract may be
perfected
According to cause
1. onerous- there is an interchange
of equivalent valuable
consideration
2. gratuitous/ lucrative- this is
FREE, thus one party receives
no equivalent prestation except
a feeling that one has been
generous or liberal
3. remunerative — (one where
one prestation is given for a
benefit or service that had been
rendered PREVI¬ OUSLY)
According to importance or
dependence of one upon another:
1. principal- the contract can stand
alone by itself and does not
depend its validity u[pon
another ocntractt
2. accessory- depends upon
another contract
3. preparatory- as means to an end
According to parties onligated:
1. unilateral- creates an obligation
on the part of only one of the
parties
2. bilateral/ synalagmatic- both
parties are required to render
reciprocal prestations
according to name or designation:
1. nominate - contract is given a
special or particular name
 2. innominate) contratos 3. Consummation- terms are
innominados)- no special performed and contract is
bname fully executed
according to the risk of fulfillment:
1. commutative- when the CHARACTERISTICS/ PRINCIPLE
undertaking of one party is OF CONTRACTS
considered equivalent of that of
1. AUTONOMY OF
the other
CONTRACTS
2. aleatory- fulfillment is
dependent upon chance, thus ARTICLE 1306: THE
the values vary because of the CONTRACTING PARTIES MAY
risk of chance ESTABLISH SUCH
STIPULATIONS, CLAUSES,
according to time:
TERMS AND CONDITIONS AS
1. executed — (one completed at THEY MAY DEEM CONVENIENT
the time the contract is entered PROVIDED, THEY ARE NOT
into, that is, the obligations are CONTRATRY TO LAW, MORALS,
complied with at this time GOOD CUSTOMS, PUBLIC
2. executory — (one where the ORDER OR PUBLIC POLICY.
prestations are to be com¬ plied
VALID CONTRACTS- THOSE
with at some future time
THAT MEET ALL THE LEGAL
according to subject matter: REQUIREMENTS AND
LIMITATIONS FOR THE TYPE OF
1. things
AGREEMENT INVOLVED AND
2. rights/credits
ARE LEGALLY BINDING AND
3. services
ENFORCEABLE.
According to
FREEDOM TO CONTRACT-
ARTICLE III, SECT. 10 OF
STATGES OF CONTRACT CONSTITUTION- right to enter into
contract that is legally valid. – NOT
1. PREPARATION- ABSOLUTE
negotiations
2. Perfection- parties came to LIMITATIONS ON
an agreement CONTRACTUAL STIPULATIOPNS
 1. LAW- contract must be in
accordance with
MANDATORY AND
prohibitive law.
- Law is superior to a contract
pactum commissorium- mortrage
contract- a clause prviding that
motrtrage will automatically own the
property mortraged if debt is not paid
at maturity
2. By morals- deals with right and
wrong and with human
conscience-
3. By good customs- habits and
practices followed and enforced
by the society .
4. By public order - public safety.
5. By public policy- contract is
contrary to public policy if it
has atendency to injure the
public.\
ARTICLE 1307. INNOMINATE
CONTRACTS SHALL B
REGULATED BY THE
STIPULATIOMS PF THE PARTIES,
BY THE PROVISIONS OF TITLES I
AND II OF THIS BOOK, BY THE
RULES GOVERNING THE MOST
ANALOGOUS NOMINATE
CONTRACTS AND BY THE
CUSTOMS OF THE PLACE.
GOVERNING RULES FOR
INNOMINATE CONTRACTS
a. Stipulations
b. Titles I and ii of oblicon
c. Rules on the most analogous
(comparable)
d. Customs of the place
4 KINDS OF INNOMINATE
CONTRACTS
1. Do ut des- I give that you may
give
2. Do ut facias- I give that you
may do
3. Facto ut des- I do that you may
give
4. Facto ut facias- I do that you
may do
Pactum de non alienando
 Pactum commissorium:
Pactum commissorium is "a stipulation
empowering the creditor to
appropriate the thing given as
guaranty for the fulfillment of the
obligation in the event the obligor fails
to live up to his undertakings, without
further formality, such as foreclosure
proceedings, and a public sale."
elements of pactum commissorium:
(1) There should be a property
mortgaged by way of security for the
payment of the principal obligation;
and
(2) There should be a stipulation for
automatic appropriation by the creditor
of the thing mortgaged in case of non-
payment of the principal obligation
within the stipulated period
 Dragnet Clause: A blanket
mortgage clause, which makes
available future loans without need of
executing another set of security
documents, has long been recognized
in our jurisprudence. It is meant to
save time, loan closing charges,
additional legal services, recording
fees, and other costs. A blanket
mortgage clause is designed to lower
the cost of loans to borrowers, at the
same time making the business of
lending more profitable to banks.
Settled is the rule that mortgages
securing future loans are valid and
legal contracts.
In Lease
In Employment Contracts
 Prohibition to Marry Clause:
 Non-involvement clause:
In Dealership/Distributorship
Contracts
 Exclusivity Clause: Avon
Cosmetics v. Luna, 511 S 376 as
compared with
In Partnership Agreements
 Pactum leonine
But what
is a contract? Is it the same as an
agreement? What are synonymous
legal terms?
What are the basic principles of
contracts? Understand and analyze the
contract
attributes of autonomy, obligatoriness,
mutuality, relativity or privity?
What makes the obligatory force of
contracts
What is Mutuality of Contracts? Is
it the same as Reciprocity?
RECIPROCITY- the quality or state of
being reciprocal : mutual dependence,
action, or influence.
What is Relativity/Privity of
Contractual Relations?
What is a Stipulations Pour Autrui
(A. 1311, par. 2)
M4- CONTRACTS AND
NATURAL OBLIGATIONS
(MLGREYES)
Page 6 of 10
What are contracts Creating Real
Rights (A. 1312)
What are contracts in Fraud of
Creditors (A. 1313 in rel. to A. 1381
[3])
What is Tortious or Intentional
Interference in contractual
relations? What are the
remedies of the aggrieved party?
(A. 1314)
What are the steps in contract
formation? How do we differentiate
between Essential,
Accidental and Natural Elements of
a their defectiveness? Study the
Contract?
What are the elements of and
factors affecting consent?
Every contract must have object (s).
Is the object of a contract the same
as the
object of an obligation? Is a
contract object always a thing?
What is cause? Is it the same as
consideration? Motive?
When is a contract simulated?
What are the forms of simulation of
contracts?
What are the kinds of contract
cause?
Are all contracts required by law to
be formal or solemn? Is form or
solemnity always
in writing?
When a contract is in writing, what
are the grounds for its reformation?
What are the basic rules in
interpretation of contracts? What
should prevail in case
of conflict between letter and
intent?
What are defective contracts? In
terms of defectiveness, which one is
least and
most defective? What accounts for
remedies
available for defective contracts.
What are the rescissible contracts?
Is the enumeration in the law
exclusive?
What are the voidable/annullable
contracts? Remedies?
What makes a contract
unenforceable? What is the
importance of the E-Commerce law
for enforceability of contracts?
Is a void contract identical to an
inexistent contract? What is the
source of their nullity? Is the
operative fact doctrine applicable to
void/inexistent contracts?
What are natural obligations?
Enumerate the specific natural
obligations set forth in the Civil
Code. Do natural obligations have
the same essential elements as civil
obligations?
FIRST DISCUSSION FOR FINALS:
ART. 1305 CONTRACTS-
connection, juridical tie between
debtor and creditor.
- Meeting of minds: euphemism.
Refers to consent: one cannot
create a contract by himself.
- There must be at least 2 parties
to perfect a contract
AUTOCONTRACT- there are 2
parties involving only 1 person: that
person is exercising 2 capacities.
Example: sale and purchase of
property belonging to the principal
when the buyer is the agent.
I own property and want to sell it, but
no time to look for buyer, I will
appoint agent to sell a property.
What if the agent want to buy the
property/- if the prinicipal expresses
consent for the agent to buy the
property, the autocontract will apply.
Cause and consideration- to give or
to render service.
Once contract is perfected it give rise
to civil obli.
PERFECTED CONTRACT
CHARATERISTICS
1. Autonomy- independence of
contract. Freedom of contracts.
Sabinian Doctrine- the contract
should not be contrary to law,
public policy etc.
SCTC-
IN EMPLOYMENT
PROHIBITION TO MARRIAGE
Can a contract ban you from getting
married?
- If the contractual ban of
marriage is absolute (means
that employee is banned to
marry anyone anytime
anywhere), null and void.
- Valid ban- there must be
legitimate business interest.
- Why ban? To avoid conflict of
interest. To avoid leaking the
confidential information.
IN LOAN CONTRACT
- AUTOMATIC ESCALATION
CLAUSE: stipulation in loan
contract or prom note
authorizing the creditor to
unilaterally increase the interest
rate of the loan. VOID. It
destroys mutuality of contracts
because any modification of the
original terms during must be
mutually agreed.
- VOID. It permits only increase
but there is no opportunity in
decrease of interest rate.
 AUTOMATIC ADJUSTMENT
CLAUSE:
- Interest rate is adjusted.
- Floating rate of interest.
- VALID: it is not purely
potestative on the part of the
lender, interest rate increases or
decreases based on the
government or agency sets.
Index interest=- fixed rate of interest.
IN LOAN WITH MORTGAGES
PACTUM COMMISURIUM:
- a stipulation empowering the
creditor to appropriate the thing
given as guaranty for the
fulfillment of the obligation in
the event the obligor fails to live
up to his undertakings, without
further formality, such
foreclosure proceedings, and a
public sale."
- Kukunin gamit ni debtor para
pag di nakabayad, kanya na
gamit.
- ILLEGAL. NULL AND VOID:
- DRAGNET CLASE: NOT
PROHIBITED.- multiple loans
are obtain by same debtor from
same creditor. Pag di
nakabayad si debtor, iclose ang
mortgage. – nabayaran loan 1
and nagloan loan 2, those
succeeding now will now be
cpvered by the original mortage
instruments.
- Valid because it affords the
parties convenience for they do
not need to execute new
mortgage.
IN MORTGAGE CONTRACT
PACTUM NON ALIENA
- Prohibiting the lessor from
selling the property: VOID.
- VALID: IF THERE IS A
CONSENT.
EXCLUSIVENESS CLAUSE- for
protection of business… example:
NON-INVOLVEMENT CLAUSE-
when an employer forbids the
employee from accepting employment
for A LIMITIED PERIOD of 2 uears
WITH ANOTHER COMPANY-
VALID.
2. OBLIGATORY-
as 3. MUTUALITY- the law
presumes that the parties
occupy equal position with one
another from the moment of
negotiation. Must be
maintained until contract is
fulfilled. EQUAL
BARGAINING POWER.
- The enforcement of contract
muist be by the parties and
subject to what the contract
provides. The validity of the
performance of the contract
cannot be left to a 3rd
person.exxept when the
contract contains ARBITRAL
OR ADR CLAUSE: provisions
 in case of dispute they agree to - Stipulation in favor of 3rd
submit their dispute to person
arbitrator. Neither party can file
REQUISITES
an action incpurt before
submitting controversy in - The the contract must grant
ADR. favor to a 3rd person
- (beneficiary)
- That the 3rd person has accepted
IN CONTRACT OF ADHESION
that economic favor or benefit
- Contract where all the - That the sti[pulation must be
stipulations are provided for by merely a part of main contract
only one party. - That the stipulation pour autrui
- NOT VOID because one party is not subject to conditions and
has choice to accept or nopt all legal compensation, must be an
the provisions ion the absolute grant
stipulaytion. - That neither parties of the main
- Not valid if: - it contains contract is an agent of 3rd
contrary to law etc. person
ABSOLUTE EXEMPTION
Case: baluyot.
FROM LIABILITY: VOID. –
if one oproviiosn or some are 2. Art. 1314. Contracts which
grossly disadvatagous to the have been violated at the
rights of then other party. inducement of a 3rd person
4. RELATIVITY(PRIVATY OF - 3rd person without consent in
CONTRACT)- contract takes the contract may be held liable.
effect only by the parties
Paepal si 3rd person. REQUISITES
however it can be transmissible
by heirs or successors. - The the contract must grant
- Contracts cannot create a right favor to a 3rd person
to a 3rd persons. (beneficiary)
- Strangers to contract cannot - That the 3rd person has accepted
benefit and has no rights and that economic favor or benefit
obligations. - That the sti[pulation must be
EXCEPTION: merely a part of main contract
- That the stipulation pour autrui
1. If the contract contains is not subject to conditions and
stipulation pour autrui
 legal compensation, must be an
absolute grant
- That neither parties of the main
contract is an agent of 3rd
person
- IOUS INTERFERENCE article
26 (alienation of .: breach of
contract results.
REMEDIES FOR AGGRIVED
PARTY
- Can file a suit. Action for
injunction to stop the
termination of the contract
- 3rd is liable because of
fraudelkent inducement\
3. CONTRACTS CREATING
REAL RIGHTS- art 1312
- Realn right: right or interest
over a specifc thing.
4. In contracs entered into to
defraud creditors art 1313.
- Parties to the fraud can be held
liable under an action pauliana.
DISCUSSION
OFFER- proposal indicating
willingness o enter into a contract.
It must have:
- Terms and conditions
- Price/consideration
- Object
BUSINESS ADSS FOR SALE is not
an offer. – mere intention to make an
offer.
OFFER requires parties offerer and
offeree.
Offer- first step in negotiation of a
contract.
OFFER VS COUNTER OFFER
COUNTER OFFER= new offer to
meet the needs being asked by the
person being offered to.
MIRROR IMAGE- accepting the
counter offer. – acceptance is absolute
2 STEPS IN CONSENT-
ACCEPTANCE AND OFFER.
COGNITION THEORY- knowledge
came to the offerer when letter of
acceptance is delivered to the offerer.
ARTICKE 1323:
When an offer has been accepted and
the oferee dies,
CONVEYED- offerer received the
letter of acceptance.
Both parties must be alive and
capacitated.
ARTICLE 1347
CONTRACT IN RAFFLE LOTTO,
ETC= contract of sale.
ARTICLE 1348.
NEXT TOPIC UNTIL DEFECTIVE
CONTRACTS
IF CONTRACT IS VOID- IT HAS
NO EFFECT
VICES OF CONSENT
1. VICES OF CAPACITY
- Minority: below 18 do not have
consenting capacity to enter to
a contract.
- . Consent is Vested upon the
parents or guradians
- Incase of misrepresentation, the
minor would be bound by the
contract. – fraud.
- - if sale of necessity, minor can
enter.
- INSANITY: legally
incapacitated and cannot enter
into contract. Consent is Vested
upon the guradians
( guardianchip: person
appointed by the court)
- MUTE: no facility of
expression- cannot enter to
contract unless able to read and
write.
2. VICES OF WILL- the parties
were legally incapacitated when
consent is exhanges but one of
them was a victim of subgotion/
– destruction in the agency of a
person
- Interferenece in the
- Violnce or force, intimidation
or duress, undue influence,
mistake, fraud.
- VIOLENCE MUST BE
IRRESISTABLE- physical
- INTIMIDATION- creates fear
in mind of the party
- UNDUE INFLUENCE: family
relations between the parties,
relationship causes
disadvanatges. Implicit
pressure. Improper pressure.
- MISTAKE and fraud must be
suffered from one party and
related to the object of the
contract.
- FRAUD- dolo causante: fraud
committed in order to obtain
consent ro a contract
1. Active fraud- using
machinations
2. Passive fraud- concealment
of a material fact regarding
the terms, object and cause.
Opinion intended to deceive and lead
the party into error.
MUTUAL MISTAKE between the
parties, as a rule, the contract will be
rendered void.
MUTUAL FRAUD- both parties
committed fraud but not to each other
but to third person. If mutual fraud
amounts to absolute simulation,
VOID it completely fictitious.
Relative simukation= Both partied
enter into true contravt with an
apparent contract. Intent to deceive.
Happens to tax evasion.
OBJECT OF CONTRACT- subject CONTRACTS COVERED BY
matter; thing or service. Tangible or STATUTE OF FRAUDS WRITNG
intangible things. REQUIRED
The ff cannot be a valid object of 1. ANY AGREEMENT THAT
contract: SHALL NOT BE
PERFORMWED WITHIN
1. Inalienable property- CASE OF
ONE YEAR
PENTACAPITAL or LIM
2. SPECIAL PROMISE TO
- Property belongs to the state
ANSWER FOR THE
2. POLITICAL RIGHTS
DEBTM], DEFUALT OR
3. FUTURE INHERITANCE
MISCARRIAGE OF
CUASE/CONSIDERATION ANOTHER
3. In consideration of marriage
- Purpose that each party had in
4. –
mind when consent is given
- All contracts have valid cause
- Cause exist when contract is NOVEMBER 16 DISCUSSION
perfercted
TIU VS PLATINUM
KINDS OF CAUSES DEL CASTILLO
1. Onerous- expectation of
delivery of a thing with NON-INVOLVEMENT CLAUSE-
value. Exchange of value prohibits employee to accept any
employment in competing company.
TEST TO VALIDITY OF NON-
Falsity of cause- void contract. INVOLVEMENT CLAUSE
DONATION OF IMMOVABLE- 1. AS TO TIME
IT MUST BE IN WRITING- IN 2. PLACE
ORDER TO HAVE A VALID 3. Business
DONATION FOR 5K HIGHER
ANOUT
Last case: LIMSON VS CA
FORM FOR ENFORCEABLITY
Earnest money and option money
1403.
Option contract