Contracts- Chapter-1 PDF

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TITLE 2: CONTRACTS. CHAPTER 1: GENERAL PROVISIONSArt 1305 - Definition A contract is a meeting of minds between 2 persons whereby one binds himself, with respect to the other, to give something or to render some service  Contract vs obligation o contract is the source, obligation is the legal tie ...

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TITLE 2: CONTRACTS. CHAPTER 1: GENERAL PROVISIONS Art 1305 - Definition  

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A contract is a meeting of minds between 2 persons whereby one binds himself, with respect to the other, to give something or to render some service Contract vs obligation o contract is the source, obligation is the legal tie that exists in a contract o there is no contract if there is no obligation but an obligation may exist without a contract Contract vs Agreement o contracts are binding agreements enforceable through legal proceedings o agreements (moral or social) cannot be enforced by action in the courts of justice because it lacks legality o all contracts are agreements but not all agreements

Classifications of Contract: 1. According to name or designation: 1. Nominate 2. Inominate 2. According to perfection 1. Consensual 2. Real 3. According to cause 1. Onerous 2. Remuneratory 3. Gratuitous 4. According to form 1. Informal 2. Formal or solemn 5. According to obligatory force 1. Valid 2. Rescissible 3. Voidable 4. Unenforceable 5. Void 6. According to person obliged 1. Unilateral 2. Bilateral 7. According to risks 1. Commutative 2. Aleatory 8. According to liability 1. Unilateral 2. Bilateral 9. According to status 1. Executory 2. Executed 10. According to dependence to another contract 1. Preparatory 2. Accessory 3. Principal 11. According to dependence of part of contract to other parts 1. Indivisible

2. Divisible Art 1306. Freedom to Stipulations of Choice as long as Contract is Valid 

Valid Contracts - those that meet all (1) legal requirements and (2) limitations o not contrary to (1) law, (2) morals, (3) good customs, (4) public order, or public policy o Morals - deals with norms of goods and right conduct evolved in a community o Good Customs - consists of habits and practices which through long usage have been followed o Public Order - public safety o Public Policy - (broader than public order), refers not only to public safety but also to considerations which are moved by the common good

Art 1307. Inominate and Nominate Contracts 1. Nominate contract - contract that has a specific name (commodatum, lease, agency, sale) 2. Inominate contract - contract that has no specific name 1. do ut des (I give that you may give) - (no longer inominate) now known as barter or exchange 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)  

Reason why we have inominate contracts - there is an impossibility of anticipating all forms of agreement Rules governing inominate contracts: 1. agreement of parties 2. provisions of Civil Code 3. rules governing the most analogous contracts 4. customs the place

Art 1308. Contract Binds 2 Party, Cannot Be Left To the Will of One of the Party  

a contract binds both parties in order that it can be enforced against either reason why it cannot be left to the will of one party: it is a fundamental rule that no party can renounce or violate the law of the contract without consent of the other

Art 1309. When (Determination) Performance is Left To a 3rd Person  

the decision shall only be binding when it has been MADE KNOWN to both parties this is similar to a suspensive condition in obligations

Art 1310. Effect Where Determination is Inequitable (unfair)  

the determination shall not be obligatory if it is evidently inequitable(unfair) remedy: the courts shall decide what is equitable under the circumstances

Art 1311. Persons Affected By Contract 

General rule: Contracts take effect only between (1) parties, (2)assigns, and (3) heirs o exception: rights arising from contract are not transmissible by  (1) nature - like a contract involving personal qualifications as painting, singing, etc  (2) stipulation - in accordance with the principle of freedom to contract  (3) provision of law - (as in agency, partnership, and commodatum) when death extinguishes the legal relationship o the heir is not liable beyond the value of the property he received from the decedent

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When 3rd Persons are Affected by a Contract o 3rd person is one who has not taken part in a contract o general rule: a third person has no rights and obligations under a contract to which he is a stranger o exceptions: 1. Stipulation pour autrui (contracts with stipulation in favor of a 3rd person) 2. Contracts creating real rights 3. Contracts which have been violated at the inducement of a third person

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Stipulation pour autrui o a stipulation in a contract clearly in favor upon a 3rd person o this 3rd person has a right to demand fulfillment if he communicates his acceptance to the obligor (debtor) before the revocation (cancellation) of the creditor o types/classes: 1. 3rd party as done beneficiary - stipulation intended for the sole benefit of such person (gift) (rules of donation applies) 2. 3rd party as creditor beneficiary - an obligation is due from the promise to the third person which the former seeks to discharge by means of stipulation Requisites 1. 2. 3. 4. 5.

1. stipulation is clear in favor of 3rd person 2. 3rd person has commicated his acceptance to debtor/obligor 3. the 3rd person is only a part, not the whole, contract 4. the favorable stipulation is not conditioned or compensated by any kind of obligation 5. neither of the parties bears the legal representation of the 3rd party (ie. not the guardian or administrator of the 3rd party

Art 1312. 2nd Case When 3rd Person May be Affected by Contract    

in contracts creating real rights, 3rd persons who come into possession of the object of the contract are subject to the provisions of (1) Mortgage Law, (2) Land Registration these 3rd persons can be bound even if they were not parties to the contract Why? - a real right is binding against the whole world and attaches to the property over which it is exercised wherever it goes an exception to the general rule that a contract binds only the parties

Art 1313. Right of Creditor To Impugn Contracts Intended to Defraud Them  

Impugn means to contest/challenge/protest creditors are protected in case of contracts intended to defraud them, thus they have the right to impugn

Art 1314. 3rd Person is Liable for Damages Through INDUCING a Violation of a Contract  

an instance when a stranger to a contract can be sued for damages for his unwarranted interference (pangingialam) with the contract this is a rule of American law

Art 1315 and Art 1316. Contracts According to Perfection  

general rule: contracts are perfected by mere consent, the exception are real contracts, where perfection is achieved upon delivery of the object Stages in the Life of a Contract

1. Preparation or Negotiation - all steps leading to the perfection of contract, there is still no definite agreement (i.e. bidding) 2. Perfection or Birth - MOM or meeting of minds, there is a definite agreement 

How are Contracts Perfected?  For consensual contracts - perfected by mere consent, provided all the essential requisites are present  For real contracts - (exception to consent) as perfection is achieved upon delivery  For solemn contracts -

3.Consummation or Termination - when the parties have performed their respective obligations and results to extinguishment; note: a contract may be extinguished by mutual disagreement

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Effect of Perfection of the Contract o parties are bound not only to: 1. fulfillment of the contract; but also 2. all the consequences that are possible in case of breach

Art 1317. Unauthorized contracts are unenforceable 

No one may contract in the name of another without being authorized (ratified) o If the opposite is done, the contract is unforceable unless ratified o the only cure/remedy is ratification o Exceptions (requisities): 1. the 3rd person entering must be duly authorized by the person whose name appears in the contract (i.e. guardian or administrator) 2. the 3rd person must act within his power

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General rule: a person is not bound by the contract of another that he has no knowledge/consent about it. A contract involves the free will of parties thus, the voluntary entering of the parties shall render the contract binding An authorized contract is not to be confused with a contract for the benefit of a 3rd person...