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CONTRACTSContract ฀ It is a meeting of the minds between two or more persons whereby one binds himself, with respect to the other, or where both parties bind themselves reciprocally in favor of one another, to fulfill a prestation to give, to do, or not to do. (Pineda, Obligations and Contracts, 200...

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It is a meeting of the minds between two or more persons whereby one binds himself, with respect to the other, or where both parties bind themselves reciprocally in favor of one another, to fulfill a prestation to give, to do, or not to do. (Pineda, Obligations and Contracts, 2000 ed, p. 328)

฀ It 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.

฀ 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, Obligations and Contracts, 2003 ed, p. 283‐284) 1. 2. 3.

onsent; bject or subject matter; and ause or consideration.

1. 2.

elativity (Art. 1311, NCC) bligatoriness and consensuality(Art. 1315, NCC) utuality (Art. 1308, NCC) utonomy (Art. 1306, NCC)

3. 4.

1.

egal capacity of the contracting parties; 2. anifestation of the conformity of

the contracting parties; 3. Parties’ onformity to the object, cause, terms and condition of the contract must be intelligent, spontaneous and free from all vices of consent; and 4. The conformity must be eal.

We follow the theory of cognition and not the theory of manifestation. Under our Civil Law, the offer & acceptance concur only when the offeror comes to know, and not when the offeree merely manifests his acceptance.

It should be: 1. Intelligent, or with an exact notion of the matter to which it refers; Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; and spontaneity by fraud. 2. Free; and 3. Spontaneous

฀ 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., GR No. L‐5496, Feb. 19, 1910).

1. Absolute – the contracting parties do not intend to be bound by the contract at all, thus the contract is void. 2. Relative – the real transaction is hidden; the contracting parties conceal their true agreement; binds the parties to their real agreement when it does not prejudice third persons or is not intended for any purpose contrary to law, morals, etc. If the concealed contract is lawful, it is absolutely enforceable, provided it has all the essential requisites: consent, object, and cause. As to third persons without notice, the apparent contract is valid for purposes beneficial to them. As to third persons with notice of the simulation, they acquire no better right to the simulated contract than the original parties to the same.

cause stated in the first deed of assignment is false. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indicia of their true intention. Where the parties to a contract have given it a practical construction by their conduct as by acts in partial performance, such construction may be considered by the court in construing the contract, determining its meaning and ascertaining the mutual intention of the parties at the time of contracting. The first deed of assignment is a relatively simulated contract which states a false cause or consideration, or one where the parties conceal their true agreement. A contract with a false consideration is not null and void per se . Under Article 1346 of the Civil Code, a relatively simulated contract, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. (Javier v. CA, G.R. No. L‐48194, Mar. 15, 1990) ฀ One party has already a prepared form of a contract, containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract.

1. Definite – unequivocal 2. Intentional 3. Complete – unconditional

1. Must be certain 2. May be made orally or in writing, unless the law prescribes a particular form The contemporaneous and subsequent acts of Tiro and the Javiers reveal that the

1. Death, civil interdiction, insanity

or insolvency of either party before acceptance is conveyed 2. Express or implied revocation of the offer by the offeree 3. Qualified or conditional acceptance of the offer, which becomes counter‐offer 4. Subject matter becomes illegal or impossible before acceptance is communicated 1. Offers are interrelated – contract is perfected if all the offers are accepted 2. Offers are not interrelated – single acceptance of each offer results in a perfected contract unless the offeror has made it clear that one is dependent upon the other and acceptance of both is necessary.

1. Business advertisements –not a definite offer, but mere invitation to make an offer, unless it appears otherwise 2. Advertisement for bidders – only invitation to make proposals and advertiser is not bound to accept the highest or lowest bidder, unless it appears otherwise.

1. Must be absolute; a qualified acceptance constitutes a counter‐offer 2. No specified form but when the offeror specifies a particular form, such must be complied with Offer or acceptance, or both, expressed in electronic form, is valid, unless otherwise agreed by the parties (electronic contracts).

1. Stated fixed period in the offer a. Must be made within the period given by the offeror i. As to withdrawal of the offer: It can be made at any time before acceptance is made, by communicating such withdrawal When the option is founded upon a consideration, as something paid or promised since partial payment of the purchase price is considered as proof of the perfection of the contract

2. No stated fixed period a. Offer is made to a person present – acceptance must be made immediately b. Offer is made to a person absent – acceptance may be made within such time that, under normal circumstances, an answer can be received from him Acceptance may be revoked before it comes to the knowledge of the offeror (withdrawal of offer)

1. Determinate as to kind (even if not determinate, provided it is possible to determine the same without the need of a new contract); 2. Existing or the potentiality to exist subsequent to the contract; 3. Must be licit; 4. Within the commerce of man; and 5. Transmissible The most evident and fundamental requisite in order that a thing, right or service may be the object of a contract, 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.

condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. (Heirs of San Andresv.Rodriguez, G.R. No. 135634, May 31, 2000)

It must: 1. exist 2. be true 3. be licit

1. Every contract is presumed to have a cause; and 2. The cause is valid.

All things or services may be the object of contracts.

1. Things outside the commerce of men; 2. Intransmissible rights; 3. Future inheritance, except in cases expressly authorized by law; 4. Services which are contrary to law, morals, good customs, public order or public policy; 5. Impossible things or services; and 6. Objects which are not possible of determination as to their kind.

1. Cause of onerous contracts – the prestation or promise of a thing or service by the other 2. Cause of remuneratory contracts– the service or benefit remunerated 3. Cause of gratuitous contracts – the mere liberality of the donor or benefactor 4. Accessory – identical with cause of principal contract, the loan which it derived its life and existence (e.g. : mortgage or pledge)

Direct and most proximate reason of a contract

No, it is not. The stipulation is not a

Objective and juridic

Indirect or remote reason s Psycholog ical or purely

al reason of contra ct Legality or illegality of cause affects the existence or validity of the contract Cause is always the same for each contracting party

person al reason

Legality or illegality of motive does not affect the existence or validity of contract Motive differs for each contra cting party

1. Absence of cause (want of cause; there is total lack or absence of cause) – Confers no right and produces no legal effect 2. Failure of cause ‐ Does not render the contract void 3. Illegality of cause (the cause is contrary to law, morals, good customs, public order and public policy)–Contract is null and void 4. Falsity of cause (the cause is stated but the cause is not true)–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: there is fraud, mistake, or undue influence; when the parties intended a donation or some other contract;or in cases specified by law (e.g.contracts entered when ward suffers lesion of more than 25%)

KINDS OF CONTRACTS

1. Consensual contracts which are perfected by the mere meeting of the minds of the parties 2. Real contracts that require delivery for perfection –creation of real rights over immovable property must be written 3. Solemn contracts– contracts which must appear in writing, such as: a. Donations of real estate or of movables if the value exceeding P5,000; b. Transfer of large cattle; c. Stipulation to pay interest in loans; d. Sale of land through an agent; e. Partnership to which immovables are contributed; f. Stipulation limiting carrier’s liability to less than extra‐ordinary diligence; or g. Contracts of antichresis and sale of vessels.

A contract is binding not only between parties but extends to the heirs, successors in interest, and assignees of the parties, provided that the contract involves transmissible rights by their nature, or by stipulation or by provision of law.

1. Stipulation pour autrui (stipulation in favor of a third person) – benefits deliberately conferred by parties to a contract upon third persons. Requisites: a. The stipulation must be part, not whole of the contract; b. Contracting parties must have clearly and deliberately conferred a favor upon third person c. Third person must have communicated his acceptance; and d. Neither of the contracting parties bears the legal representation of the third person. 2.

When a third person induces a party to violate the contract

the part of the parents. Decide.

Yes. 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. L‐23276, Nov. 29, 1968)

฀ The parties are bound not only by what has been expressly provided for in the contract but also to the natural consequences that flow out of such agreement. (Art. 1315, NCC)

Requisites: a. Existence of a valid contract b. Third person has knowledge of such contract c. Third person interferes without justification 3. Third persons coming into possession of the object of the contract creating real rights 4. Contracts entered into in fraud of creditors

None. The rule is that a lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the same time and for the same consideration. This rule applies although the invalidity is due to violation of a statutory provision, unless the statute expressly or by necessary implication declares the entire contract void. Thus, even with such waiver of prescription, considering that it was the intent of the parties to effectuate the terms of the promissory note, there is no legal obstacle

to the action for collection filed by Borromeo. (Borromeo v. CA,G.R. No. L‐22962, Sept. 28, 1972)

Contracts which require a special form for perfection

Where an agreement founded on a legal consideration contains several promises, or a promise to do several things, and a part only of the things to be done are illegal, the promises which can be separated, or the promise, so far as it can be separated, from the illegality, may be valid.(Borromeo v. CA,G.R. No. L‐22962, Sept. 28, 1972)

฀ It is the freedom of the parties to contract and includes the freedom to stipulate provided the stipulations are not contrary to law, morals, good customs, public order or public policy. (Art. 1306, NCC

a. personal property‐ if value exceeds 5000, the donation and acceptance must both be written. b. real property: i. donation must be in a public instrument, specifying therein the property donated and value of charges which donee must satisfy. ii. acceptance must be written, either in the same deed of donation or in a separate instrument. iii. If acceptance is in a separate instrument, the donor shall be notified therof in authentic form, and this step must be noted in both instruments. The acceptance in a separate document must be a public instrument.

฀ They are contracts perfected by mere consent.

i. there must be a public instrument regarding the partnership. ii. the inventory of the realty must be made, signed by the parties and attached to the public instrument.

฀ Contract must be binding to both parties and its validity and effectivity can never be left to the will of one of the parties. (Art. 1308, NCC)

This is only the general rule.

3.

the amount of the principal and interest must be in writing.

4. They are delivery

contracts

perfected

‐ authority of the agent must be in writing.

by 5.

interest must be stipulated in writing.

i. must be in writing, signed by shipper or owner ii. supported by valuable consideration other than the service rendered by the common carrier iii. reasonable, just and not contrary to public policy.

1. 2.

3.

4. 1. Contracts shall be obligatory, in whatever form they may have been entered into, provided all essential requisites for their validity are present. 2. Contracts must be in a certain form – when the law requires that a contract be in some form to be: a. valid; b. enforceable; or c. for the convenience of the parties. 3. The parties may compel each other to reduce the verbal agreement into writing.

5.

6.

Donation of real properties (Art. 719); Partnership where immoveable property or real rights are contributed to the common fund (Arts. 1171 & 1773); Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein is governed by Arts. 1403, No. 2, and 1405 [Art. 1358 (1)]; The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains [Art. 1358 (2)] The power to administer property or any other power which has for its object an act appearing or which should appear in a public document or should prejudice a third person [Art. 1358 (3)]; The cession of actions or rights proceeding from an act appearing in a public document [Art. 1358 (4)].

: 1. Chattel mortgages (Art. 2140) Sale or transfer of large cattle (Cattle 2. Registration Act)

Form is not required in consensual contracts. When the law requires a contract be in certain for its: 1. validity (formal contracts); or 2. enforceability (under Statute of Frauds).

฀ It is a remedy to conform to the real intention of the parties due to mistake, fraud, inequitable conduct, accident. (Art. 1359) Reformation is based on justice and equity.

1. Meeting of the minds to the contract 2. True intention is not expressed in the instrument 3. By reason of : ( a. istake, b. ccident, c. elative simulation, d. raud, or e. nequitable conduct 4. Clear and convincing proof of MARFI When there is no meeting of the minds, the proper remedy is annulment and not reformation.

1. Simple, unconditional donations inter vivos 2. Wills 3. When the agreement is void 4. When an action to enforce the instrument is filed (estoppel)

฀ 10 years from the date of the execution of the instrument.

฀ It may be ordered at the instance of: 1. if the mistake is mutual – either party or his successors in interest; otherwise; 2. upon petition of the injured party; or 3. his heirs and assigns. When one of the parties has brought an action to enforce the instrument, no subsequent reformation can be asked (estoppel).

In reformation of contracts, what is reformed is not the contract itself, but the instrument embodying the contract. It follows that whether the contract is disadvantageous or not is irrelevant to reformation and therefore, cannot be an element in the determination of the period for prescription of the action to reform.

1. 2. 3. 4.

Valid Void Voidable Rescissible 5. Unenforceable 6. Inexistent

฀ Those which have caused a particular economic damage either to one of the parties or to a third person and which may be set aside even if valid. It may be set aside in whole or in part, to the extent of the damage caused. (Art. 1381, NCC)

1. Entered into by persons exercising fiduciary capacity: a. Entered into by guardian whenever ward suffers damage more than ¼ of value of property. b. Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ of value of property...