COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION
LAW ON CONTRACTS
I. GENERAL PROVISIONS
A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give
something or to render some service (NCC, Art. 1305).
Meeting of minds - Speaks of the intention of the parties in
entering into the contract respecting the subject matter and
the consideration thereof. As a rule therefore, a contract is
perfected by mere consent. It does not require any special
form, as a rule, and is binding from the moment that the
essential requisites are present. Thus, the meeting of the
minds between the parties rise to the binding contract
althought they have not affixed their signature to its written
form (Rabuya, 2017).
Obligation v. Contract - While a contract is one of the
sources of obligations, an obligation is the legal tie or
relations itself that exists after a contract has been entered
into. Hence, there can be no contract if there is no
obligation. But an obligation may exist without a contract
(De Leon, 2010).
Duty of courts in interpreting contracts - It is not the province
of the court to alter a contract by construction or to make a
new contract for the parties. Its duty is confined to the
interpretation of the one which they have made for
themselves without regard to its wisdom or folly as the court
cannot supply material stipulations or red into the contract
words which it does not contain (Cuizon v. CA, G.R. No.
102096, August 22, 1996).
Stages in the making of a contract
Three stages in the making of a contract (CPC) :
1. Conception or Generation – the first stage where the
parties begin their initial negotiation and bargaining for the
formation of the contract ending at the moment of
agreement of the parties.
2. Perfection or Birth – Here, the parties had a meeting of
minds as to the object, cause or consideration and other
terms and conditions of the contract.
3. Consumation or fulfillment – This the last stage which
consists in their performance or fulfillment by the parties
of their obligations under the term of the perfected
contract.
Characteristics of a contract (MARCO)
The following are the characteristics of a contract
(MARCO):
1. Mutuality (NCC, Art. 1308);
2. Autonomy (NCC, Art. 1306);
3. Relativity (NCC, Art. 1311);
4. Consensuality (NCC, Art. 1315); and
5. Obligatoriness (NCC, Art. 1315).
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1. Mutuality of Contracts
The contract must bind both contracting parties and its
validity or compliance cannot be left to the will of one of
them (NCC, Art. 1308).
If a party alleges defects in the contract so that it could be
set aside, he must prove conclusively the existence of the
defects because the validity and fulfillment of the contract
cannot be left to the will of one of the contracting parties.
(Pineda, 2009)
The binding effect of any agreement between parties to a
contract is premised on two settled principles: (1) that any
obligation arising from contract has the force of law between
the parties; and (2) that there must be mutuality between
the parties based on their essential equality. Any contract
which appears to be heavily weighed in favor of one of the
parties so as to lead to an unconscionable result is void. Any
stipulation regarding the validity or compliance of the
contract which is left solely to the will of one of the parties,
is likewise, invalid. (Sps. Juico vs. China Banking Corp.,
G.R. 187678, April 10, 2013)
NOTE: A contract containing a condition whose efficacy or
fulfillment is dependent solely on the uncontrolled will of one
of the parties is void (Garcia v. Rita, G.R. No. L-20175,
October 30, 1967; PNB v. CA, G.R. No. 88880, April 30,
1991). However, the termination of the contract does not
necessarily require mutuality, and it can even be validly left
to one party by agreement or under a resolutory facultative
condition (Vitug, 2006; see also PNB v. CA, 1994).
Contract of Adhesion - It is a contract in which one of the
parties prepares the stipulations in the form of a ready-
made contract, which the other party must accept or reject,
but not modify, by affixing his signature or his “adhesion”
thereto; leaving no room for negotiation and depriving the
latter of the opportunity to bargain on equal footing (Norton
Resources and Development Corporation v. All Asia Bank
Corporation, G.R. No. 162523, November 25, 2009).
Validity of contract of adhesion It is not entirely prohibited
since the one who adheres to the contract is, in reality, free
to reject it entirely, and if he adheres, he gives his consent
(Premiere Development Bank v. Central Surety & Insurance
Company, Inc., G.R. No. 176246, February 13, 2009).
However, it is void when the weaker party is imposed upon
in dealing with the dominant bargaining party, and its option
is reduced to the alternative of “taking or leaving it,”
completely depriving such party of the opportunity to
bargain on equal footing (Keppel Cebu Shipyard, Inc. v.
Pioneer Insurance and Surety Corporation, G.R. Nos.
180880-81, September 25, 2009).
Note: Such contracts are not void in themselves. They are
as binding as ordinary contracts. Parties who enter into
such contracts are free to reject the stipulations entirely.
(Ermitao vs. CA, G.R. No. 127246, April 21, 1999)
Third person may determine the performance of a contract
- The determination of the performance may be left to a third
person. However, his decision shall not be binding until it
has been known to both the contracting parties (NCC, Art.
1309). Moreover, the determination made shall not be
obligatory if it is evidently inequitable. In such case, the
courts shall decide what is equitable under the
circumstances (NCC, Art. 1310).
Unilateral increase of interest rate - Even assuming that the
loan agreement between the creditor and the debtor gave
the former a license to increase the interest rate at will
during the term of the loan, that license would have been
null and void for being violative of the principle of mutuality
essential in contracts (Rabuya, 2017).
2. Autonomy of Contracts/Liberty of contracts
It is the freedom of the parties to contract and to stipulate
provided the stipulations are not contrary to law, morals,
good customs, public order or public policy (NCC, Art.
1306).
NOTE: Courts cannot make for the parties better or more
equitable agreements than they themselves have been
satisfied to make, or rewrite contracts because they operate
harshly or inequitably as to one of the parties, or alter them
for the benefit of one party and to the detriment of the other,
or by construction, relieve one of the parties from terms
which he voluntarily consented to, or impose on him those
which he did not (Angel Bautista v. Court of Appeals, G.R.
No. 123655, January 19, 2000).
An agreement to pay unconscionable interests on a loan is
against morals. (Medel, et al. vs. Ca, 299 SCRA 481)
3. Relativity of Contracts/ Principle of limited effectivity
contracts
GR: Contracts take effect only between the parties or their
assigns and heirs.
Res inter alios acta aliis neque nocit prodest (a thing done
between others does not harm or benefit others) – a
contract can only obligate the parties who entered into it, or
their successors who assumed their personalities, and that,
concomitantly, a contract can neither favor nor prejudice
third persons (Vitug, 2006).
NOTE: With respect to the heir, he shall not be liable beyond
the value of the property he received from the decedent
(NCC, Art. 1311).
XPNs:
1. Rights and obligations that are not transmissible by
their nature, or by the stipulation or by provisions of law
(NCC, Art. 1311). NOTE : Determine whether a contract
terminates upon the death of one of the parties;
2. Stipulation pour autrui (stipulation in favor of a third
person) – benefits clearly and deliberately conferred by
parties to a contract upon third persons (NCC, Art. 1311)
and which stipulation is merely part of a contract entered
into by the parties, neither of whom acted as agents of the
third person and which favor can be demanded by the
third person if duly accepted by him before it could be
revoked
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Requisites of stipulation pour atrui:
a. Stipulation in favor of a third person;
b. Stipulation is just part and not the whole obligations
of the contract;
c. Contracting parties must have clearly and
deliberately conferred a favor upon third person;
d. Favor or benefit conferred is not just an incidental
benefit or interest;
e. Third person must have communicated his
acceptance; and
f. Neither of the contracting parties bears the legal
representation of the third person (Young v. Court of
Appeals, G.R. No. 79518, January 13, 1989).
NOTE: The fairest test to determine whether the interest
of third person in a contract is a stipulation pour autrui or
merely an incidental interest, is to rely upon the intention
of the parties as disclosed by their contract. In applying
this test, it matters not whether the stipulation is in the
nature of a gift or whether there is an obligation owing
from the promise to the third person (Rabuya, 2017);
3. Third persons coming into possession of the object of
the contract creating real rights subject to the provisions
of Mortgage Law and the Land Registration Law (NCC,
Art. 1312);
4. Contracts entered into in fraud of creditors; (NCC, Art.
1313);
5. When a third person induces a party to violate the
contract (NCC, Art. 1314).
NOTE: This tort or wrongful conduct is known as
“interference with contractual relations.”
Requisites: a. Existence of a valid contract; b. Third
person has knowledge of such contract; c. Third person
interferes without legal justification or excuse (De Leon,
2010). Thus, third person and the breaching party is liable
for damages. It is based on quasi-delict and their liability
is solidary.
Liability of heirs for the obligation contracted by the
decedent The heirs are liable for the obligation contracted
by the decedent when the rights and obligations arising from
the contract are transmissible: 2. By their nature; 3. By
stipulation; or 4. By provision of law (NCC, Art. 1311).
Q: Fieldmen's Insurance issued, in favor of MYT, a common
carrier, accident insurance policy. 50% of the premium was
paid by the driver. The policy indicated that the Company
will indemnify the driver of the vehicle or his representatives
upon his death. While the policy was in force, the taxicab
driven by Carlito, met with an accident. Carlito died. MYT
and Carlito's parents filed a complaint against the company
to collect the proceeds of the policy. Fieldmen’s admitted
the existence thereof, but pleaded lack of cause of action
on the part of the parents. Decide.
A: Carlito’s parents who, admittedly, are his sole heirs have
a direct cause of action against the Company. This is so
because pursuant to the stipulations, the Company will also
indemnify third parties. The policy under consideration is
typical of contracts pour autrui, this character being made
more manifest by the fact that the deceased driver paid 50%
of the premiums (Coquia v. Fieldmen’s Insurance Co.,
Inc.,G.R. No. L23276, November 29, 1968).
4. 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. (NCC, Art. 1315).
Note: This refers to consensual contracts. However, real
contracts are perfected by delivery and formal contracts are
perfected upon compliance.
5. Obligatory Force of Contracts
Contracts shall be obligatory, in whatever form they may
have been entered into, provided all the essential requisites
for validity are present (NCC, Art. 1356).
Obligations arising from contracts have the force of law
between the contracting parties and should be complied
with in good faith. (NCC, Art. 1159)
This provision must fall within the other characteristic of a
contract.
NOTE: Obligations arising from contracts have the force of
law between the contracting parties and should be complied
with in good faith (NCC, Art. 1159).
Requisites for the application of the principle
Before a contract may be considered obligatory, it is
necessary that: 1. It is perfected; 2. It is valid; and 3. It is
enforceable (Rabuya, 2017).
Q: FBDC entered into a Trade Contract with MS Maxco
Company, Inc. (MS Maxco) for the execution of the
structural and partial architectural works of one of its
condominium projects. The Trade Contract likewise
provided that MS Maxco is prohibited from assigning or
transferring any of its rights, obligations, or liabilities under
the said Contract without the written consent of FBDC.
FBDC received a letter from the counsel of Fong informing
it that MS Maxco had already assigned its receivables from
FBDC to him. Despite Fong’s repeated requests, FBDC
refused to deliver to Fong the amount assigned by MS
Maxco. Is FBDC bound by the assignment between MS
Maxco and Fong?
A: No. Obligations arising from contracts have the force of
law between the contracting parties and should be complied
with in good faith. The Court finds that MS Maxco, as the
Trade Contractor, cannot assign or transfer any of its rights,
obligations, or liabilities under the Trade Contract without
the written consent of FBDC. ( Dort Bonifacio Dev’t Corp.,
vs. Valentin L. Fong, G.R. No. 209370, March 25, 2015).
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II. ESSENTIAL REQUISITES OF A CONTRACT
The following are the essential requisites of contracts
(COC):
1. Consent;
2. Object or subject matter; and
3. Cause or consideration (NCC, Art 1318). (See Cathay
Pacific v. Vasquez, 2003)
NOTE: These three requisites are, therefore, the essential
elements of a consensual contract. In real contracts,
however, in addition to the above, the delivery of the object
of the contract is required as a further requisite.
1. CONSENT
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 constiturtes a
counter-offer. (NCC, Art. 1319)
It is the concurrence of the wills of the contracting parties
with respect to the object and cause, which shall constitute
the contract (De Leon, 2010).
NOTE: Consent is essential to the existence of a contract;
and where it is wanting, the contract is non-existent.
Requisites of consent (LM-CR)
1. Legal capacity of the contracting parties;
NOTE: The parties must have full civil capacity. Hence, if
any one party to a supposed contract was already dead
at the time of its execution, such contract is undoubtedly
simulated and false and, therefore, null and void by
reason of its having been made after the death of the party
who appears as one of the contracting parties therein.
The death of a person terminates contractual capacity
(Milagros De Belen Vda. De Cabalu, et. al. v. Sps. Renato
Dolores Tabu and Laxamana, G.R. No. 188417,
September 24, 2012).
2. Manifestation of the conformity of the contracting
parties;
Note: Manifestation may be in writing bearing the
signature or marks of the parties, or it may be implied from
the conduct of the parties like the acceptance of payment.
3. Parties’ Conformity to the object, cause, terms and
condition of the contract must be intelligent, spontaneous
and free from all vices of consent; and
NOTE: Intelligence in consent is vitiated by error; freedom
by violence, intimidation or undue influence; and
spontaneity by fraud.
4. The conformity must be Real.
Offer - An offer is defined as an expression of willingness to
contract on certain terms, made with the intention that it
shall become binding as soon as it is accepted by the
person to whom it is addressed (Rabuya, 2017 citing G. H.
Treitel, The Law of Contract, 10th Ed., p.8).
Requisites of an effective offer 1. The one offering must
have a serious intention to become bound by his offer; 2.
The terms of the offer must be reasonably certain, definite
and complete, so that the parties and the court can
ascertain the terms of the offer; and 3. The offer must be
communicated by the offeror to the offeree, resulting in the
offeree’s knowledge of the offer (Rabuya, 2017).
Requisites of a valid acceptance
1. Must be absolute; a qualified acceptance constitutes a
counter-offer (NCC, Art. 1319).
2. No specified form but when the offeror specifies a
particular form, such must be complied with.
Option contract - It is a contract between the offeror and the
offeree whereby the former grants the latter, for a valuable
consideration, the privilege to buy or not to buy certain
objects at anytime within a specified period and for a fixed
price. Note: The privilege granted to the offeree must be
supported by a considereation, the option is just considered
an “offer to sell” to the offeree which is not binding until
accepted. (Pineda,2009 citing Sanchez vs. Rigos, 45 scra
368)
Persons incapacitated to give consent (DIM)
1. Deaf-mutes who do not know how to read and write
(illiterates);
2. Insane or demented persons, unless the contract was
entered into during a lucid interval;
3. Minors (NCC, Art. 1327) except: a. Contracts for
necessaries (NCC, Art. 1489); b. Contracts by guardians
or legal representatives and the court having jurisdiction
had approved the same; c. When there is active
misrepresentation on the part of the minor (minor is
estopped); d. Contracts of deposit with the Postal Savings
Bank provided that the minor is over 7 years of age; e.
Contract of an insurance for life, health and the accident
on the minor’s life. f. Upon reaching age of majority – they
ratify the same.
NOTE: Because the law incapacitates them to give their
consent to a contract, the only way by which any one of
those enumerated above can enter into a contract is to act
through a parent or guardian. If this requirement is not
complied with, the result is a defective contract. If only one
of the contracting parties is incapacitated to give his
consent, the contract is voidable. If both of them are
incapacitated to give their consent, the contract is
unenforceable [NCC, Art. 1390(1), NCC, Art. 1403(3)]
Vices of consent (MI-VUF)
1. Mistake
2. Intimidation
3. Violence
4. Undue influence
5. Fraud
NOTE: A threat to enforce a just or legal claim through a
competent authority does not amount to intimidation nor
vitiate consent (NCC, Art. 1335).
1. Mistake
GR: Mistake as a vice of consent refers to mistake of facts
and not of law, thus rendering the contract voidable (Jurado,
2010).
XPN: When mistake of law involves mutual error as to the
legal effect of an agreement when the real purpose of the
parties is frustrate (NCC, Art. 1334).
Mistake Distinguished from Ignorance - Mistake is a false
impression on something, while Ignorance is absence of
any notion or impression about a particular thing
Requisites:
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1. Mistake must be with respect to the legal effect of the
agreement;
2. It must be mutual; and
3. Real purpose of the parties must have been frustrated.
Kinds of mistakes of fact which vitiate consent
1. Mistake as to the nature of the contract;
2. Mistake as to object of the contract;
3. Mistake as to the quality or principal conditions of the
thing; 4. Mistake or error in quantity;
5. Mistake as to identity of the person; Mistake as to the
identity or qualifications of one of the parties will vitiate
consent only when such identity or qualifications have
been the principal cause of the contract.
For mistake (as to the qualification of one of the parties) to
vitiate consent, two requisites must concur:
a. The mistake must be either with regard to the identity
or with regard to the qualification of one of the contracting
parties; and
b. The identity or qualification must have been the
principal consideration for the celebration of the contract
(The Roman Catholic Church v. Regino Pante, G.R. No.
174118, April 11, 2012).
Mutual Error - Mutual Error as to the legal effect of an
agreement when the real purpose of the parties is
frustrated, may vititate consent. (NCC, Art. 1334) Legal
effect refers to the rights of the parties as stated in legal
provisions.
2. Intimidation
There is intimidation when one of the contracting parties is
compelled by a reasonable and well-grounded fear of an
imminent and grave evil upon his person or property, or
upon the person or property of his spouse, descendants or
ascendants, to give his consent [NCC, Art. 1335(2)].
Requisites of intimidation (CICU)
1. One of the parties is compelled to give his Consent by
a reasonable and well-grounded fear of an evil;
2. The evil must be Imminent and grave;
3. It must be Unjust; and
4. The evil must be the determining Cause for the party
upon whom it is employed in entering into the contract
(NCC, Art. 1335).
NOTE: To determine the degree of the intimidation, the age,
sex and condition of the person shall be borne in mind
(NCC, Art. 1335).
Validity of a contract if consent is reluctant - A contract is
valid even though one of the parties entered into it against
his wishes and desires or even against his better judgment.
Contracts are also valid even though they are entered into
by one of the parties without hope of advantage or profit
(Martinez v. Hongkong and Shanghai Banking Corp., G.R.
No. L-5496, February 19, 1910).
3. Violence
There is violence when in order to wrest consent, serious or
irresistible force is employed. (Art. 1335)
Requisites of violence
1. Physical force employed must be serious or irresistible;
and
2. The determining cause for the party upon whom it is
employed in entering into the contract.
A threat to enforce one’s claim through competent authority, deception or
if the claim is just or legal, does not vititate consent. [NCC, misrepresentation
Art. 1335(4)] Effect It is not a ground It is a ground for
for annulment of annulment of the
NOTE: Violence or intimidation shall annul the obligation, the contract. contract.
although it may have been employed by a third person who Remedy Action for Action for
did not take part in the contract (NCC, Art. 1336). damages only annulment with
damages.
4. Undue Influence

There is undue influence when a person takes improper 2. OBJECT

advantage of his power over the will of another, depriving
the latter of a reasonable freedom of choice (NCC, Art. It is the subject matter of the contract. It can be a thing, right
1337). or service arising from a contract.

Circumstances to be considered for the existence of undue Note: rights which are transmissible can only be the object
influence 1. Confidential, family, spiritual and other relations of the contract. (NCC, Art. 1347)
between the parties; 2. Mental weakness; 3. Ignorance; 4.
Financial distress (NCC, Art. 1337). Requisites of an object (DELiCT)
1. Determinate as to kind (even if not determinate,
Determination of undue influence - The test to determine provided it is possible to determine the same without the
whether or not there is undue influence which will invalidate need of a new contract);
a contract is to determine whether or not the influence 2. Existing or the potentiality to exist subsequent to the
exerted has so overpowered and subjugated the mind of the contract;
contracting party as to destroy his free agency, making him
express the will of another rather than his own (Jurado,
3. Must be LIcit; legal/lawful
4. Within the Commerce of man; and
2011). 5. Transmissible.

5. Fraud NOTE: The most evident and fundamental requisite in order

There is fraud when through the insidious words or
machinations of one of the contracting parties the other is
induce to enter into a contract which, without them, he would
not have agreed to (NCC, Art. 1338).
NOTE: Insidious words refers to a deceitful scheme or plot
with an evil design, or a fraudulent purpose (Pineda, 2000).
that a thing, right or service may be the object of a contract,
is that it should be in existence at the moment of the
celebration of the contract, or at least, it can exist
subsequently or in the future (De Leon, 2010).
Object of contracts
GR: All things or services may be the object of contracts.

Failure to disclose facts, when there is a duty to reveal them, XPNs:

as when the parties are bound by confidential relations, 1. Things outside the commerce of men (NCC, Art. 1347);
constitutes fraud (NCC, Art. 1339). 2. Intransmissible rights;
3. Future inheritance, except in cases expressly
Requisites of Fraud to vitiate consent (Dolo) authorized by law;
4. Services which are contrary to law, morals, good
1. it was applied or utilized by one contracting party upon customs, public order or public policy;
the other 5. Impossible things or services; and
2. it must be serious deception 6. Objects which are not possible of determination as to
3. it must have induced the victim to enter the contract their kind.
without which he would not have agreed to.
4. It must have resulted in damage or injury.
3. CAUSE OR CONSIDERATION
Kinds of Fraud
1. Fraud in the perfection of the contract - Causal fraud Cause is the essential reason which moves the parties to
(dolo causante) enter into the contract It is the immediate, direct and
proximate reason which justifies the creation of an
2. Fraud in the performance of an obligation - Incidental obligation through the will of the contracting parties.
fraud (dolo incidente) (NCC, Art. 1170).
Requisites of a cause:
Basis Fraud in the Fraud in the
performance perfection (Dolo It must: 1. Exist; 2. Be true; and 3. Be licit.
(Dolo incidente) causante)
Time of It occurs after It occurs before or NOTE: Although the cause is not stated in the contract, it is
occurrence the valid simultaneous with presumed that it exists and is lawful unless the debtor
execution of the the creation or proves the contrary. (NCC, art. 1354)
contract. It is perfection of the
employed in the obligation. Rules relating to cause on contracts
performance of a
pre-existing 1. Absence of cause – confers no right and produces no
obligation. legal effect.
Consent Consent is free Consent is
and not vitiated. vitiated by serious 2. Failure of cause – does not render the contract void.
not paid
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3. Illegality of cause – contract is null and void.
4. Falsity of cause – contract is void; unless the parties show
that there is another cause which is true and lawful.
5. Lesion or inadequacy of cause – does not invalidate the
contract, unless: a. there is fraud, mistake, or undue
influence; b. when the parties intended a donation or some
other contract; or c. in cases specified by law e.g. contracts
entered by guardian when ward suffers lesion of more than
25% and with court approval, otherwise, if there is no
approval, the contract is void regardless of the amount of
lesion.
III. FORMALITY OF CONTRACTS
Rules on the form of contracts
GR: Form is not required in consensual contracts.
(Provided, all the essential requisites for their validity are
present.)
XPNs: When the law requires a contract be in writing for
its:
1. Validity (formal contracts);
2. Enforceability (under Statute of Frauds); or
3. For the convenience of the parties
ELECTRONIC COMMERCE ACT of 2000 (RA No. 8792)
Legal Recognition of Electronic Documents
Under Section 7 of the Act, electronic documents shall have
the legal effect, validity or enforceability as any other
document or legal writing, and —
(a) Where the law requires a document to be in writing, that
requirement is met by an electronic document if the said
electronic document maintains its integrity and reliability
and can be authenticated so as to be usable for subsequent
reference, in that; (i) The electronic document has remained
complete and unaltered, apart from the addition of any
endorsement and any authorized change, or any change
which arises in the normal course of communication,
storage and display; and (ii) The electronic document is
reliable in the light of the purpose for which it was generated
and in the light of all relevant circumstances.
(b) Paragraph (a) applies whether the requirement therein
is in the form of an obligation or whether the law simply
provides consequences for the document not being
presented or retained in its original form.
(c) Where the law requires that a document be presented or
retained in its original form, that requirement is met by an
electronic document if — (i) There exists a reliable
assurance as to the integrity of the document from the time
when it was fi rst generated in its final form; and
That document is capable of being displayed to the person
to whom it is to be presented. It is expressly provided, that
no provision of the Act shall apply to vary any and all
requirements of existing laws on formalities required in the
execution of documents for their validity.
6 insurance
IV. KINDS OF CONTRACTS
According to perfection or formation:
1. Consensual contracts which are perfected by the mere
meeting of the minds of the parties (NCC, Art. 1305).
(2005 BAR) e.g. Sale, Lease.
2. Real contracts are those which require for their
perfection both the consent of the parties and the delivery
of the object by one party to the other. e.g. creation of real
rights over immovable property must be written, deposit
and pledge.
3. Solemn contracts – contracts which must appear in
writing, such as:
a. Donations of real estate or of movables if the value
exceeds P5,000;
b. Partnership to which immovables are contributed;
c. Contract of antichresis – requires the amount of
principal and interest be specified;
d. Sale of piece of land or interest therein is through an
agent;
e. Stipulation to charge interest;
f. Stipulation limiting common carrier's duty of
extraordinary diligence to ordinary diligence;
g. Chattel mortgage; or
h. Transfer of large cattle (Sec. 22, Act No. 1147; NCC,
Art. 1581).
According to the degree of dependence:
1. Principal – that which can exist independently of their
contracts; e. g. contract of loan.
2. Accessory – that which cannot exist without a valid
principal contract; e. g. guaranty, surety, pledge,
mortgage.
3. Preparatory – that which is not an end by itself but only
a means for the execution of another contract. e. g.
contract of agency as agency does not stop with the
agency because the purpose is to enter into other
contract of partnership
contracts (Rabuya, 2017).
According to their relation to other contracts:
1. Preparatory Contracts – are those which have for their
object the establishment of a condition in law which is
necessary as a preliminary step towards the celebration
of another subsequent contract. e.g. Partnership, Agency.
2. Principal Contracts – are those which can subsist
independently from other contracts. e.g. Sale, Lease.
3. Accessory Contracts – those which can exist only as a
consequence of, or in relation with, another prior contract.
e.g. Pledge, Mortgage.
According to the nature of the vinculum which they produce:
1. Unilateral Contracts – are those which give rise to an
obligation only to one of the parties. e.g. Commodatum.
2. Bilateral Contracts – are those which give rise to
reciprocal obligations for both parties. e.g. Sale.
According to their cause:
with consideration
1. Onerous e. g. Sale.
2. Gratuitous e. g. commodatum
3. Remuneratory w/o consideration
According to the risks involved:
1. Commutative Contracts – are those where each of the
parties acquire an equivalent of his prestation and such
equivalent is pecuniarily appreciable and already
determined from the moment of the perfection of the
contract. e.g. Lease.
2. Aleatory Contracts – are those which are dependent
upon the happening of an uncertain event, thus, charging
the parties with the risk of loss or gain. e.g. Insurance.