Contract

 is a meeting of the mind between two persons whereby one binds

himself, with respect to the other, to give something or to render
some service.

 It is an agreement between two or more competent parties, based

on mutual promises, to do or to refrain form doing a particular
thing which is neither illegal nor impossible.
 Contract is an agreement but not all agreements are contracts.
 Elements of Contracts
1. Essential Elements
Consent
Subject Matter
Cause or consideration
2. Natural Elements – presumed to exists
3. Accidental Elements – stipulated by the parties
 Stages in the Life of the Contract
1. Preparation or Conception – bargaining point of the
contract.
2. Perfection or Birth – there is meeting of the mind
already. The parties have come to an agreement.
3. Consummation or Death or Termination – parties
have performed their obligations under the contract.
Basic Principles/Characteristics of a Contract
1. Freedom (or liberty) to stipulate provided not contrary to law,
morals, good customs, public order, or public policy (Article
1306)
2. Obligatory force and compliance in good faith (Article 1159)
3. Perfection by mere consent (Article 1315)
4. Both parties are mutually bound (Article 1308)
5. Relatively binding only between the parties, their assigns, and
heirs (Article 1311)
 KINDS OF CONTRACTS
1. According to Perfection
a. Consensual – perfected by mere consent.
example: sale
b. Real – perfected by delivery. Examples: depositum, pledge,
commodatum
2. According to Degree of Importance
a. Principal – the contract stand by itself. Examples: sale,
lease
b. Accessory – Depends upon another contract for contract
for existence. Example: mortgage
c. Preparatory – beginning of future transactions.
3. According to subject matter

a. Contracts involving things. (Examples: sale, barter)

b. Contracts involving rights/credit. (Examples: usufruct/assignment of credit)
c. Contracts involving services. (Examples: agency, lease of service

4. According to name
d. Nominate – with name (Examples: sale, lease, pledge, barter)
e. Innominate – without any name
i. Do ut des – I give that you may give
ii. Do ut facias – I give that you mad do
iii. Facio ut des – I do that you may give
iv. Facio ut facias – I do that you may do
5. According to Cause

a. Onerous- there is an exchange of valuable consideration.

Examples: sale, barter, and lease
b. Gratuitous – there is no consideration received in exchange
for what has been given. Examples: donation, remission and
commodatum
c. Remuneratory – something is given for a benefit of service
previously rendered.

6. According to number of parties

d. Unilateral
e. Bilateral
7. According to Risk

a. Commutative – The parties contemplate a real fulfillment,

hence, equivalent values are given. Example: Sale, Lease
b. Aleatory – the fullfillment depends upon a chance.
Example: Insurance

8. According to Fulfillment –

a) Executed – The obligations are complied with.

b) Executory – The obligations are to be complied with at
some future time.
Exceptions to the Rule on Relativity

a. Obligations arising form contract that are not transmissible by

nature, by stipulation or by provision of law (Article 1311)
b. Stipulation pour autri – a stipulation in favor of a their person
conferring a clear and deliberate favor upon him, and which stipulation is
merely part of a contract entered into by the parties, neither of whom acted
as an agent of the third person.
c. When a third person induces another to violate a contract
(Article 1314)
d. When the law authorizes the creditor to sue on a contract
entered into be his debtor (Article 1313)
Requisites of Stipulation Pour Autri

a. Stipulation in favor of a third person

b. The contracting parties must have clearly and deliberately
conferred the favor upon the third person
c. The stipulation must be part of the contract
d. The third person communicated his acceptance to the obligor
its revocation
e. Neither of the contracting parties represents the third party.