A.

Classification

1. According to subject-matter
a. Contracts involving THINGS (like sale)
b. Contracts involving RIGHTS or CREDITS (provided these are transmissible, like
contract of usufruct, or assignment of credits)
c. Contracts involving SERVICES (like agency, lease of services, a contract of
common carriage, a contract of carriage like simple carriage)

2. According to name
a. NOMINATE – contract is given a particular/special name (e.g. commodatum,
partnership, sale, agency, deposit)
i. Art. 1307
 INNOMINATE – implied contracts:
i. Do ut des (I give that you may give)
ii. Do ut facias (I give that you may do)
iii. Facio ut des (I do that you may give)
iv. Facio ut facias (I do that you may do)
 Governing rules of Innominate Contracts:
i. Stipulations
ii. Title I and II of Book IV – Obligations and Contracts
iii. Rules on the most ANALOGOUS nominate contracts
iv. Customs of the place

Case

Dizon vs. Gaborro, 83 SCRA 688 (1978)

FACTS:

1. Petitioner Dizon executed an a "Deed of Sale with Assumption of

Mortgage", in which attached are 3 parcels of land, in favor of
respondent Gaborro in which the latter shall assume the debt incurred by
Dizon to the DBP in exchange for its possession.
2. Subsequently, Gaborro also executed an “Option to Purchase Real
Estate” as he was interested in owning the subject lands in the future.
Thereafter, Gaborro made several payments to the mortgagee, took
possession of, cultivated, and paid taxes, on the land.
3. When the mortgage foreclosed, DBP executed a “Conditional Deed of
Sale” over the same parcels of land.
4. Two years later, petitioner offered to reimburse what private respondent
had paid to the mortgagee, and demanded an accounting. When private
respondent dishonored the request, petitioner sued the former for
accounting, alleging that the two deeds did not express their true intent,
the transaction being one of an equitable mortgage and not an absolute
sale.
5. The trial court ordered the instruments reformed in the sense that the
true agreement is one whereby private respondent, in consideration of
the use of petitioner's properties, would assume the latter's debts. The
Court of Appeals affirmed the decision, with the some modifications.

ISSUES:

1. WON, the "Deed of Sale with Assumption of Mortgage" and the "Option
to Purchase Real Estate” constitute an absolute sale over the parcels of
land.
 HELD:

1. NO
 Because there was absolutely no money consideration.
 The properties had already been previously sold by the sheriff at
the foreclosure sale, thereby divesting the petitioner of his full
right as owner thereof to dispose and sell the lands.
2. It is merely an INNOMINATE CONTRACT
 The Supreme Court held that the agreement between the
mortgagor and transferee is one of those innominate contracts
under Article 1307 of the new Civil Code whereby the mortgagor
and transferee agreed "to give and to do" certain rights and
obligations respecting the lands and the mortgage debts of
mortgagor which would be acceptable to the mortgagee, but
partaking of the nature of ANTICHRESIS insofar as the principal
parties, mortgagor and transferee are concerned.
 Antichresis, under civil law and Roman law, is a contract whereby
a debtor pledges (i.e., conveys possession of but not title to) real
property to a creditor, allowing the use and occupation of the
pledged property, in lieu of interest on the loan.

3. According to perfection
a. Art. 1315
 Perfection of contracts by mere consent.
o Consensual contracts are perfected from the moment there is
agreement (consent) on the subject matter, and the cause or
consideration.
 Consequences of perfection:
o Parties are bound to fulfill what is EXPRESSLY STIPULATED and it
must be in GOOD FAITH.
o Also bound to ALL CONSEQUENCES which must be in GOOD
FAITH, USAGE and LAW.

b. Art. 1316
 Perfection by delivery.
o Real contracts require consent, subject matter, cause or
consideration, and DELIVERY.
 Real Contracts:
o DEPOSIT
o PLEDGE
o COMMODATUM – a loan where the identical object must be
returned (e.g. Loan of a car).

4. According to its relation to other contracts

a. Principal – the contract may STAND ALONE by itself (e.g. sales, lease).
b. Accessory – its existence depends upon another contract (e.g. mortgage; in
which the principal contract is the LOAN).
c. Preparatory – the parties do not consider the contract as end by itself, but as
means through which future transaction or contracts may be made (e.g.
agency, partnership).

5. According to form
a. Common or informal – or those which require no particular form (e.g. Loan).
b. Special or formal – or those which require some particular form. (e.g.
donations, chattel mortgage).

6. According to purpose
 a. Transfer of ownership – e.g. Sale.
b. Conveyance of use – e.g. Commodatum.
c. Rendition of services – e.g. Agency.

7. According to the nature of the vinculum produced

a. Unilateral – Those which give rise to an obligation for only one of the parties
(e.g. commodatum, gratuitous deposit).
b. Bilateral – Those which give rise to reciprocal obligations for both parties.
(e.g. sale, lease).

8. According to cause
a. Onerous – Those in which each of the parties aspires to procure for himself a
benefit through the giving of an equivalent or compensation (e.g. sale).
b. Gratuitous – Those in which one of the parties proposes to give to the other
a benefit without any equivalent or compensation (e.g. commodatum).

9. According to risk
a. Commutative – Those where each of the parties acquires an equivalent of his
prestation and such equivalent is pecuniarily appreciable and already
determined from the moment of the celebration of the contract (e.g. lease).
b. Aleatory – Those where each of the parties has to his account the acquisition
of an equivalent of his prestation, but such equivalent, although pecuniarily
appreciable, is not yet determined at the moment of the celebration of the
contract, since it depends upon the happening of an uncertain event, thus
charging the parties with the risk of loss or gain (e.g. insurance).

B. Stages
1. Generation – the period of negotiation and bargaining, ending at the moment of
agreement of the parties.
2. Perfection – the moment when the parties come to agree on the terms of the
contract.
3. Consummation – the fulfillment or performance of the terms agreed upon in the
contract.

C. As distinguished from a perfected promise and an imperfect promise (policitacion)

1. Perfected promise – merely tends to insure and pave the way for the celebration of
a future contract.
2. Imperfect promise or policitacion - a mere unaccepted offer.

D. With respect to third persons

1. Stipulations in favour of third persons (stipulations pour autrui) – Art. 1311, 2nd par.

General Rule – contract affects only the parties and the privies thereto.
EXCEPTION – second paragraph of 1311.
 if a contract should contain some stipulation in favor of a third person, he
may demand its fulfillment provided he communicated his acceptance to the
obligor before its revocation.

Pour autrui – stipulation in a contract, clearly and deliberately conferred by the

contracting parties as a favor upon a third person, who must have accepted it before
it could be revoked.

Cases

Florentino v. Encarnacion, 79 SCRA 192 (1977)

FACTS:
 1. Parties involved: petitioners-appellants (Miguel Florentino, Rosario
Encarnacion de Florentino, Manuel Arce, Jose Florentino, Victorino
Florentino, Antonio Florentino, Remedios Encarnacion, and Severina
Encarnacion) and petitioners-appellees (Salvador Encarnacion, Sr., Salvador
Encarnacion, Jr., and Angel Encarnacion).
2. Application for registration of a parcel of agricultural land in Ilocos Sur filed
by the parties.
3. Application states that the applicants are the common owners of the land
and there are no encumbrances affecting the land.
4. Contention arises from a stipulation in an extrajudicial partition agreement
that requires the fruits of the land to be used for religious expenses.
5. The trial court held, that the assailed arrangement, grant or stipulation as
embodied in the deed of extrajudicial partition, whether donation, usufruct
or eleemosynary gift, can be revoked.

ISSUES:

1. Whether the lower court erred in concluding that the stipulation is just an
arrangement or grant revocable at the unilateral option of the co-owners.

HELD:
1. YES, the stipulation is POUR AURTRUI.
 Paragraph 2 of Art. 1311 states the law on stipulations POUR AURTRUI –
stipulation in a contract, clearly and deliberately conferred by the
contracting parties as a favor upon a third person, who must have
accepted it before it could be revoked.
 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 the case at bar, the determining point is whether the co-owners
intended to benefit the Church.
 The evidence on record shows that THE TRUE INTENT OF THE PARTIES IS
TO CONFER A DIRECT AND MATERIAL BENEFIT UPON THE CHURCH. The
fruits of the aforesaid land were used thenceforth to defray the expenses
of the Church in the preparation and celebration of the Holy Week, an
annual Church function.
 While a stipulation in favor of a third person has no binding effect in itself
before its acceptance by the party favored, the law does not provide
when the third person must make his acceptance. As a rule, there is no
time limit; such third Person has all the time until the stipulation is
revoked. Here, the Church accepted the stipulation in its favor before it
is sought to be revoked by some of the co-owners.

Coquia v. Fieldmen’s Insurance Co., 26 SCRA 178 (1968)

FACTS:

1. The case involves an insurance policy issued by Fieldmen's Insurance

Company to Manila Yellow Taxicab Co., Inc.
2. The policy states that the company would indemnify the insured in the event
of an accident caused by or arising out of the use of a motor vehicle,
including death or bodily injury to any fare-paying passenger, including the
driver.
3. The policy also states that the company may make indemnity payable
directly to the claimants or heirs of claimants.
4. The Coquias, who are the sole heirs of the deceased driver, filed a complaint
against the insurance company to collect the proceeds of the policy after the
company offered a lower amount as a compromise.
 5. The insurance company argues that the Coquias have no cause of action
because they have no contractual relation with the company.

ISSUES:

1. Wheter the Coquias (heirs) have a contractual relation (a stipulation pour

autrui) with Fieldmen’s Insurance Company

HELD:

1. YES.
 Par. 2 of Art. 1311 states that if a contract should contain some
stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance of the obligor before its
revocation.
 The enforcement of this provision of which may be demanded by a
third party for whose benefit it was made, although not a party to the
contract, before the stipulation in his favor has been revoked by the
contracting parties.
 Therefore, in the event of death of any person entitled to indemnify
under this Policy, the Company will, in respect of the liability incurred
by such person, indemnify his personal representatives in terms of
and subject to the limitations of the Policy.

Constantino v. Espiritu, 39 SCRA 206 (1971)

FACTS:

1. Pastor B. Constantino conveyed a two-storey house and four subdivision lots

to Herminia Espiritu through a fictitious deed of absolute sale on October 30,
1953.
2. The property was covered by Transfer Certificate of Title No. 20174 issued in
Constantino's name.
3. The conveyance was made with the understanding that Espiritu would hold
the properties in trust for their illegitimate son, Pastor Constantino Jr., who
was still unborn at the time.
4. Espiritu violated the agreement by mortgaging the properties twice to secure
loans and attempting to sell them.
5. Constantino filed a complaint.
6. Espiritu moved to dismiss the complaint of Constantino on the ground that it
stated no cause of action because Pastor Constantino, Jr., the beneficiary of
the alleged trust, was not included as party-plaintiff.
7. RTC ruled in favor of Espiritu and dismissed the complaint.

ISSUES:

1. Whether the trust agreement between Constantino and Espiritu is

enforceable.

HELD:

1. YES. The contract between Constantino and Espiritu was a contract pour
autrui, although couched in the form of a deed of absolute sale, and that
appellant's action was, in effect, one for specific performance.
 Par. 2 of Art. 1311, the third person for whose benefit the contract
was entered into may also demand its fulfillment provided he had
communicated his acceptance thereof to the obligor before the
stipulation in his favor is revoked.
  It appearing that the amended complaint submitted by appellant to
the lower court impleaded the beneficiary under the contract as a
party co-plaintiff, it seems clear that the three parties concerned
therewith would, as a result, be before the court and the latter's
adjudication would be complete and binding upon them.

2. Possession of the object of contract by third persons—Art. 1312

 Contracts Creating Real Rights
o This article constitutes one of the exceptions to the general rule that
a contract binds only the parties.
o A third person who might come into the possession of the object of a
contract creating a real right will have to be bound by such right,
subject, of course, to the provisions of the Mortgage Law and the
Land Registration laws.

3. Creditors of the contracting parties—Art. 1313

 Art. 1313. Creditors are protected in cases of contracts intended to defraud
them.
 This article represents another instance when an outsider can in a sense
interfere with another’s contract.
 Ex: If A gratuitously gives B a parcel of land, and A has no other property or
cash left to satisfy his creditors, said creditors may ask for the rescission of
the contract, to the extent that they have been prejudiced.

4. Interference by third persons—Art. 1314

 Art. 1314. Any third person who induces another to violate his contract shall
be liable for damages to the other contracting party.
 This article gives an instance when a stranger to a contract can be sued in
view of his unwarranted interference. Whoever is injured may properly sue
for damages.
 Ex: S, a movie actress, has a one-year contract with XYZ Studio. If F, a friend
of S induces her, without any justifiable cause, to break the contract, then
XYZ Studio can sue F for damages.

Cases

Daywalt v. Corp., 39 Phil 587 (1919)

FACTS:

1.
ISSUES:
HELD:

So Ping Bun v. CA, 314 SCRA 751 (1999)

FACTS:

1. Tek Hua Enterprising Corp. (respondent) leased premises in Binondo from

Dee C. Chuan & Sons, Inc. (DCCSI).
2. So Ping Bun (petitioner) occupied the same premises for his Trendsetter
Marketing.
3. Manuel C. Tiong, a member of Tek Hua Enterprises, asked So Ping Bun to
vacate the premises, but he refused and entered into formal lease contracts
with DCCSI.
4. Private respondents filed a suit for injunction, seeking the nullification of the
lease contracts and damages.
 5. The trial court ruled in favor of the private respondents, and the Court of
Appeals affirmed the decision.

ISSUES:
1. Whether So Ping Bun guilty of tortuous interference with the contract?

HELD:

1. YES.
 The elements of tort interference are: (1) existence of valid contract;
(2) knowledge on the part of the third person of the existence of
contract; and (3) interference of the third person is without legal
justification or excuse.
 In the case before us, petitioner's Trendsetter Marketing asked DCCSI
to execute lease contracts in its favor, and as a result petitioner
deprived respondent corporation of the latter's property right. Clearly
and as correctly viewed by the appellate court, the three elements of
tort interference above-mentioned are present in the instant case.
 Authorities debate on whether interference may be justified where
the defendant acts for the sole purpose of furthering his own financial
or economic interest. As a general rule, justification for interfering
with the business relations of another exists where the actor's motive
is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other.
 Gilchrist vs. Cuddy held that where there was no malice in the
interference of a contract, and the impulse behind ones conduct lies
in a proper business interest rather than in wrongful motives, a party
cannot be a malicious interferer. Where the alleged interferer is
financially interested, and such interest motivates his conduct, it
cannot be said that he is an officious or malicious intermeddler.
 In the instant case, it is clear that petitioner So Ping Bun prevailed
upon DCCSI to lease the warehouse to his enterprise at the expense
of respondent corporation. Though petitioner took interest in the
property of Respondent Corporation and benefited from it, nothing
on record imputes deliberate wrongful motives or malice on him.
 Section 1314 of the Civil Code categorically provides also that, "Any
third person who induces another to violate his contract shall be
liable for damages to the other contracting party." Petitioner argues
that damage is an essential element of tort interference, and since
the trial court and the appellate court ruled that private respondents
were not entitled to actual, moral or exemplary damages, it follows
that he ought to be absolved of any liability, including attorney's fees.

Chapter II. Essential Requisites of Contracts

A. Consent
1. Requisites—Art. 1319
a. Must be manifested by the concurrence of the offer and acceptance.

Case

Resenstock v. Burke, 46 Phil. 217 (1924)

FACTS:

1. Edwin Burke (Burke) owned a motor yacht (Bronzewing) which was

mortgaged to the Asia Banking Corp (Bank). H.W. Elser (Elser) began
negotiations with Burke for the purchase of the yacht. Elser planned to
 organize a yacht club where he could sell Burke's yacht afterwards. He
proposed to
2. Burke that he would sail on the yacht to entice potential buyers. To do so,
Elser undertook the
3. necessary repairs to make the yacht seaworthy. All the while, Burke and
Elser had not yet agreed
4. on the purchase price of the yacht.
5. Elser wrote a letter to Burke stating:
6. “I am in position and am willing to entertain the purchase of [the yacht]
under the following terms …”
7. and enumerated his terms and conditions for the purchase price and
manner of payment.
8. Burke took Elser's letter to the Bank and there, both Burke and the Bank
(represented by the
9. manager) added their signatures on the space at the bottom of the letter
after Elser's signature.
10. Burke replied to Elser that since he had accepted Elser's offer to purchase
the yacht, with the
11. consent of the Bank, Burke now demands for the performance thereof.
ISSUES:
HELD:

Malbarosa v. CA, 402 SCRA 168 (2003)

1. Offer
a. Art. 1319
b. Art. 1321
c. Art. 1322
d. Art. 1323
e. Art. 1325
f. Art. 1326

2. Acceptance
a. Art. 1319
b. Kinds (1319-1320)
c. If made by letter or telegram –Art. 1319, 2nd par.
d. Period of acceptance—Art. 1324
Case
Sanchez v. Rigos, 45 SCRA 368 (1972)
e. Contract of option

b. Necessary legal capacity of the parties

1. Who cannot give consent—Art. 1327
2. When offer and/or acceptance is made
c. The consent must be intelligent, free, spontaneous, and real –Arts. 1330-1346
1. Effect –Art. 1330
2. Vices of consent
a. Mistake or error (1330-1334)
Case

Asiain v. Jalandoni, 45 Phil. 296 (1923)

Heirs of William Sevilla, et Al. v. Leopold Sevilla, 402 SCRA 501

(2003)

Dumasug v. Modelo, 34 Phil. 252 (1916)

Maxima Hemedes v. CA, 316 SCRA 347 (1990)