Chapter I General Provisions

TITLE II CHAPTER I - GENERAL PROVISIONS (Articles 1305-1317)

1. What is a contract? As defined under Article 1305, 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 !o better understand the definition, let us recall the definition of an obligation under Article ""#$ that (A)n obligation is a juridical necessity to give, to do, or not to do. We said that the definition of an obligation under Article ""#$ refers specifically to civil obligations and not to moral, divine or natural obligations which cannot be legally enforced in court by the creditor or active sub%ect &rom the definition of a contract above, we can assume the following ' (a) (b) !here are at least two parties involved in a contract an active sub%ect (creditor) and a passive sub%ect (debtor) An obligation is created because the passive sub%ect promises to the active sub%ect the performance of a prestation either to give something ( to give*) or to render some service (to do or not to do) +y agreement between the parties, a civil obligation is created At this point, we ma,e a distinction between an agreement and a contract If two parties agree on the performance of a moral or social obligation, there is an agreement but there is no contract -owever, if the parties agree on the performance of a civil obligation (Art ""#$), the result is a contract which is legally enforceable in court
AG.//0/1!' D and C agreed that they will go to mass every 2unday at the 2t !herese Chapel in 3illamor, Pasay for "4 consecutive 2undays C51!.AC! ' D and C agreed that if D will hear mass for "4 consecutive 2undays at the 2t !herese Chapel, C will give D P"44,444 -ere, we have a contract which gives rise to a suspensive conditional obligation If D performs his obligation, C will be obliged to give D P"44,444 If C does not comply with his obligation as agreed upon, Ds obligation will then be e6tinguished

(c)

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(d)

A contract gives rise to an obligation between the parties to the contract -ence, there can be no contract if there is no obligation -owever, can a party have an obligation even without a contract? YES. As we have previously studied in Article ""#7, contract is only one of the sources of an obligation !hus, we are reminded that even without the debtor8s ,nowledge or consent ( i.e., even without a previous contract entered into with the active sub%ect), he will be liable for reimbursement arising from 9uasi:contract ;Art ""$4< if he has been benefited at the e6pense of another

2. What are the basic principles governing contracts?

(a) (b) (c) (d) (e)

Autonomy or =iberty of Contracts (Art. 1306) 0utuality of Contracts (Art. 1308) Consensuality of Contracts (Art. 1315) .elativity of Contracts (Art. 1311) 5bligatory &orce of Contracts (Art. 1159)

3. A tono!" or #ibert" o$ Contracts % !he principle of autonomy of contracts is stated in Article 1306.
The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

+y this principle, the parties to a contract are given the freedom to agree on any terms or stipulations in their contract !he only limitation is that the agreement should not be illegal (i.e., contrary to =a0oG:PuPu) !he contracting parties must respect the law which is considered as an essential part of every contract
E&a!'le o$ a contract ()ic) is contrar" to la(. A and * entered into a contract It was agreed that A will give * P#44,444 if * will steal the pet lion of C It was also agreed that A will give an advance payment of P>#4,444 and the balance will be given to * when * delivers the lion to A. As agreed upon, * stole the lion from the residence of C. -owever, * was apprehended by the police authorities before he could deliver the lion to A.

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+ estion, 2ince * failed to deliver the lion to A as agreed upon, can A file an action in court against * for the recovery of the P>#4,444 advanced to *Ans(er, 15 !he prestation of * in the parties8 contract is to steal the lion of C. 2tealing is unlawful -ence, the contract is illegal and cannot be given effect If A files an action for recovery of the P>#4,444 from * on the basis of their contract, both of them will be put on trial for the crime of robbery or theft E&a!'le o$ a contract ()ic) is contrar" to la(. D borrowed P"44,444 from C. 5n maturity date, D could not pay his obligation to C. D and C then agreed that for the meantime that D is not able to pay his debt, D will wor, as the secretary of C without pay After ? months of wor,ing without pay, D suddenly left the office of C. C filed an action in court against D stating that D had not yet paid his debt -ence, D should continue wor,ing without pay in the office of C because it was what they agreed upon + estion, Is D bound by the agreement? Can D demand payment e9uivalent to ? months salary for his services from CAns(er, 15 An agreement to render service without pay is contrary to law and cannot be given effect C cannot compel D to wor, without pay A lawful arrangement would be to re9uire D to wor, as the secretary in the office of C with a salary of, let us say, P"4,444 !he parties can then agree that D will not receive salary for "4 months to compensate for the P"44,444 debt that he owes C. In this case, the court has to deny C8s prayer to compel D to comply with his obligation to wor, without pay because the agreement is illegal -owever, D has the right to be paid for his services rendered to C. !herefore, the court can determine how much D should receive from C by way of compensation for wor, rendered for ? months, and subtract it from Ds P"44,444 loan to C. 2tudy .o. 1 of your application or problems in the study guide E&a!'le o$ a contract ()ic) is contrar" to !orals. @oe is a A4:year old bachelor @ane is a "7:year old student who has been compelled to obtain a leave of absence from school this semester because her parents could no longer afford to pay her tuition 5n @anuary >, >4"", @oe promised to give @ane P"0 if @ane will live with him as his wife for $ months without the benefit of marriage @ane agreed 5n @anuary $, however, @ane informed @oe that she was bac,ing out from their agreement because she had already found an employer who was willing to help her with her studies @oe was upset -e filed an action against @ane for specific performance (to compel her to comply with her obligation) and for damages

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+ estion, Is the contract valid? Can @ane be compelled to comply with her promise under the agreement? Ans(er, It is stated that by the autonomy of contracts, the parties are free to establish any stipulation in their contract as they may consider convenient to them In this case, however, to compel a woman to cohabit with a man (even if not married) without the benefit of marriage is contrary to morals !he contract of @oe and @ane is, therefore, void for being immoral and cannot be enforced E&a!'le o$ a contract ()ic) is contrar" to /ood c sto!s. Bulit promised to give Galang P"44,444 if Galang will slap his father once on both chee,s !his contract is void because it is against the good custom of showing respect to our parents E&a!'le o$ a contract ()ic) is contrar" to ' blic order. 0 is the owner of an apartment 1 is interested in leasing or renting the apartment of 0. !he parties enter into a contract with the following stipulations, among others' " 0 obliged to rent his apartment to 1 for > years > 1 promised to pay a monthly rental of P"4,444 ? 2hould 1 fail to pay his monthly rentals, 1 must leave the apartment A If after failure to pay rentals 1 refuses to leave the apartment, 0 will as, his > wrestler brothers (each weighing #44 pounds) to drag 1 out of the apartment never to be seen again +oth 0 and 1 agreed to these provisions in their lease contract + estion, Assuming that 1 later on fails to pay his monthly rentals, can 0 enforce term 1o A in their agreement considering that 1 had agreed to the stipulation? Ans(er, 15 While the other terms in the parties8 contract is lawful and valid, term 1o A cannot be enforced by 0 for being against public order !he proper recourse of 0 is not to use physical force on 1 to leave the apartment What 0 should do is to file an action for e%ectment in court against 1. 0 must first secure a final %udgment from the court ordering 1 to vacate the premises !hen the sheriff of the court will carry out the final order of e%ectment (an order to compel the tenant to leave the property being leased) E&a!'le o$ a contract ()ic) is contrar" to ' blic 'olic". 2tudy .o. 2 of your application or problems in the study guide

4. 3 t alit" o$ Contracts % !he principle of mutuality of contracts is stated in Article 1308.

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The contract must bind both contracting parties, its validity or compliance cannot be left to the will of one of them.

+y this principle, no party to a contract can renounce or violate the law of the contract without the consent of the other
E&a!'le o$ t)e 'rinci'le o$ ! t alit". S promised to sell his car to *, an interested buyer It was agreed that S will determine the price of the car and inform * about it on the same day that S will deliver the car !he following day, S went to the house of * and delivered the car S also collected from * the purchase price of P? #0 which is what S had decided + estion, Can S compel * to accept delivery of the car and to pay the purchase price of P? #0? Ans(er, 15 !here is here no valid contract A contract is a meeting of the minds and, therefore, there must be mutual consent !he contract does not bind both contracting parties because the determination of the purchase price of the car was left to the sole determination of S. 5f course, if * decides to accept delivery and agrees to the purchase price of P? #0 upon delivery, the contract of sale is perfected

2tudy also .o. 2 of your application or problems in the study guide While the compliance with a contract cannot be left to the will of only one of the contracting parties, under Article 1309, the determination of its performance may be left to a third person !he determination, however, will bind the contracting parties only after it has been made ,nown to both of them
Deter!ination o$ 'er$or!ance b" a t)ird 'erson. S sold his parcel of land to *. It was agreed that A, a real estate appraiser, would be the one to determine the reasonable price of the land A then appraises the land, fi6es the price at P#0, and informs S about it + estion, Can S compel * to pay the P#0 purchase price? Ans(er, 15 !he determination by A of the price of the land, even if agreed to by S and * will bind both contracting parties only after A informs both A and * of his determination 2ince it was only A who was informed and * had no idea of the price fi6ed by A, * cannot be bound by the determination

In the above e6ample, let us assume that A conspired with S for the fi6ing of the price at P#0 even if the appraised value of the land was only P?0 !hen A informs both S and * of the price Question: Will * be bound by the determination of AAnswer: 2till not Article 1310 states that a contracting party is not bound by the

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determination of a third person if it is evidently ine9uitable or un%ust as when the third person acted in bad faith or by mista,e 5. Consens alit" o$ Contracts 4 Cnder the principle of consensuality of contracts, it is stated that contracts are perfected by mere consent (Article 1315). +efore we start discussing this principle, let us ta,e a 9uic, loo, at the essential re9uisites of a contract discussed in the ne6t chapter
A51. 1318. !here is no contract unless the following re9uisites concur' (") Consent of the contracting partiesD (>) 5b%ect certain which is the sub%ect matter of the contractD (?) Cause of the obligation which is established E&a!'le, S agreed to sell his +0W car to * for P$0 (1) !he ob%ect is the car (2) !he cause or consideration is the purchase price of P$0 (3) !here is consent because both parties agree as to the ob%ect and the cause of the sale E$$ect o$ lac6 o$ an" one o$ t)e re7 isites, !he contract will be void and cannot be enforced

We also need to ta,e a loo, into the three stages in the life of a contract
Sta/es in t)e li$e o$ a contract. (1) Conce'tion (8re'aration or ne/otiation) % !his includes all the negotiations or steps ta,en by the parties leading to the perfection of the contract At this stage, the parties have not yet arrived at any definite agreement (2) 8er$ection or birt) 4 !his is when the parties have come to a definite agreement or meeting of the minds regarding the sub%ect matter and cause of the contract (Art. 1319). At this stage, there is already a concurrence of all the essential elements or re9uisites of a contract

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(3) Cons !!ation or ter!ination 4 !his is when the parties have performed their respective obligations and the contract may be said to have been fully accomplished or e6ecuted, resulting in the e6tinguishment or termination thereof
E&a!'le, S advertised his +0W car for sale at P$0 (1) Conce'tion % * goes to S and offers to buy the +0W car for P#0 S is willing to bargain at P# E0 * again ma,es another offer to buy at P# #0 -ere, the parties are still negotiating (2) 8er$ection 4 S agrees to *s offer of P# #0 -ere, the contract is perfected !here is already mutual agreement as to the ob%ect and cause of the sale (3) Cons !!ation 4 S delivers the +0W car to *. * then pays S the P# #0 purchase price -ere, the parties comply with their respective prestations under the contract It is in this stage that the obligations of the parties are completely e6tinguished

E$$ect o$ 'er$ection o$ a contract, It is only after perfection of a contract that the following arises' (a) the obligation of the debtor to perform the prestation andFor to pay for damages (b) the right of the creditor to compel performance of the obligation andFor claim for damages

A contract is only perfected after compliance with all the three re9uisites of consent, ob%ect and cause, or C:5:C 1ow we go bac, to the principle of consensuality. Contracts are perfected by mere consent In other words, if all the re9uisites of C:5:C are present, a contract is already perfected !his is, however, only the G/1/.A= .C=/ because some contracts need more than mere consent for their perfection We can understand this better by e6amining the three (?) ,inds of contracts according to perfection outlined below
Classi$ication o$ contracts accordin/ to 'er$ection , (1) Consens al contract 4 !his ,ind of contract is perfected by mere consent As long as there is C:5:C, the contract is perfected E&a!'le , A contract o$ sale is an e&a!'le o$ a consens al contract. 5n @anuary >#, >4"", S promised to sell his car to * for P?0 It was agreed by the parties that delivery of the car and payment of the purchase price was to be made on @anuary ?", >4"" 5n @anuary ?", >4"", S refused to deliver the car stating that he had changed his mind about selling his car + estion, Was there a perfected contract of sale?

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Ans(er , G/2 As of @anuary >#, >4"", there was already a perfected contract of sale because as of that date there was already consent on the part of both contracting parties, there was an ob%ect (the car), and there was a cause (the P?0 purchase price) 2ince there was already a perfected contract, both S and * are bound to the fulfilment of their respective obligations under the contract !herefore, S can no longer bac, out from his obligation of delivering the car to * unless he is willing to be liable for damages to * for breach of contract

(2) 5eal contract 4 !his ,ind of contract is perfected by the delivery of the thing sub%ect matter of the contract In other words, mere consent is not enough !here is an additional re9uisite for the perfection of the contract that is, delivery of the ob%ect of the contract C%0%C%D E&a!'le , A contract o$ 'led/e is an e&a!'le o$ a real contract. 5n @anuary #, >4"", D borrowed P>44,444 from C due for payment on @uly A, >4"" !o secure the loan, D promised C that he will deliver his role6 watch valued at P>#4,444 to C the following day D, however, failed to deliver the watch and C eventually forgot about it 5n maturity date, D could not pay his P>44,444 debt to C. C then demanded that D deliver the watch so that C may sell the watch at public auction and use the proceeds from the sale to cover the P>44,444 loan of D. + estion, Was there a perfected contract of pledge? Can C compel D to deliver the role6 watch so that it may be sold at public auction? Ans(er , !he purpose of a contract of pledge (which is merely an accessory contract to the principal contract of loan) is to secure the payment of the loan by the debtor Cnder the contract of pledge, the creditor is given the right to sell the thing pledged at public auction if the debtor fails to pay the principal obligation on maturity date In this case, D never delivered the role6 watch to C until the debt already matured In other words, since pledge is a real contract, it will be perfected only if the thing ob%ect of the contract is delivered to the creditor 2ince there was no delivery of the role6 watch, there was no perfected contract of pledge between D and C !herefore, on maturity date, if D fails to pay his obligation, C will have no right to demand the delivery of the role6 watch for purposes of selling it at public auction It is as if C agreed to the contract of loan without security !he proper recourse of C is to file an action in court for the collection of the P>44,444 unpaid obligation of D. (3) Sole!n contract 4 !his ,ind of contract is perfected after compliance with certain formalities prescribed by law @ust li,e in real contracts, mere consent is not enough !here is an additional re9uisite for the perfection of this ,ind of contract that is, compliance by the parties of the formalities re9uired by law for its validity or effectiveness C%0%C%9 E&a!'le , A contract o$ donation o$ real 'ro'ert" is an e&a!'le o$ a sole!n contract. Article :;9 re7 ires t)at $or a contract o$ donation o$ real 'ro'ert" to be <alid, it ! st be in a ' blic instr !ent. 5n @anuary #, >4"", Hon donated to Hes a "444 s9uare:meter house and lot located in 0anila Hon and Hes then drafted and signed a eed

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of onation. After two years, Hon died leaving as sole heir his only son, Andy Andy now wants to recover the house and lot from Hes + estion, Was there a perfected contract of donation between Hon and Hes? Can Andy recover the property from Hes? Ans(er , !he contract of donation is an e6ample of a solemn contract which re9uires a specific form for the validity of the contract In other words, without the specific form, it is as if the contract will be lac,ing one essential re9uisite which is $or!. Article 7AI of the Civil Code re9uires that for the contract of donation to be valid, it must be e6ecuted by the parties in a public instrument In other words , it is not enough that the parties draft and sign the document (a private document only) After signing, the parties must have the document notariJed by a lawyer (now a public document) In this case, the contract of donation between Hon and Hes was made only in a private document !herefore, there was no contract of donation perfected between Hon and Hes !he property may still be recovered from Hes by Andy who is the rightful heir of the property left by his father Hon

6. 5elati<it" o$ Contracts 4 Cnder the principle of relativity of contracts, it is stated that contracts ta,e effect only between the parties, their assigns and heirs (Article 1310). !his means that only the parties, their assigns and heirs can have rights and obligations under the contract 2trangers to a contract cannot be made liable for damages under the contract 1either can strangers claim benefits under the contract
E&a!'le .o. 1, Contracts ta6e e$$ect onl" bet(een t)e 'arties. 5n @anuary #, >4"", S promised to sell his +0W car to * for P>0 !he delivery of the car and payment of the purchase price was set on @anuary "#, >4"" 5n @anuary "#, >4"", S delivered the car but * paid only P" #0 of the purchase price * promised to deliver the balance of the purchase price to S the following day *, however, failed to pay despite repeated demands from S. When 3, the mother of S, heard about what happened, 3 filed a case against * in court for collection of the balance of P#44,444 + estion, Will the action for collection filed by 3 against * prosper? Ans(er , .0. 3 has no legal standing to file the action for collection against *. Cnder the principle of relativity of contracts, the contract ta,es effect only between the parties /ven if 3 is the mother of S, 3 is a stranger to the contract of sale between S and *. -ence, 3 cannot claim any rights under the contract by collecting the balance of the purchase price which * failed to pay 5nly S is the proper party to file the collection case against *. E&a!'le .o. 2, Contracts can also bind t)e assi/ns o$ t)e 'arties. In the e6ample above, let us assume that S specifically authoriJed his mother 3 to collect the purchase price of the car and to file an action for collection in case of non:payment

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+ estion, !his time, will an action for collection filed by 3 against * prosper? Ans(er , YES. !his time, since 3 has been specifically authoriJed and allowed by her son to collect the purchase price and file an appropriate action against *, the action for collection will prosper !his is because 3 is now an assignee or authoriJed representative of S who can legally act in behalf of S.

E&a!'le .o. 3, Contracts )a<e also bindin/ e$$ect on t)e )eirs o$ t)e 'arties. 1)is is onl" 'ossible i$ one o$ t)e 'arties to a contract dies be$ore t)e !at rit" date o$ t)e obli/ation. D borrowed P>0 from C due on Hecember ?4, >4"4 5n 1ovember ?4, >4"4, D died of a heart attac, leaving his only son S an inheritance amounting to P" #0 S is a multimillionaire with a total asset valued at PEI40 + estion, Can C collect the obligation from S- If so, how much? Ans(er , YES. +y the principle of relativity, since D is already dead, the contract can be made to bind the son S. When we say, however, that the contract will bind even the heirs, what the law actually means is not the heir personally, but the estate of the deceased (the contracting party who died) -ence, if D died without leaving any inheritance to S, S cannot be personally liable for the obligation of D even if D was his father In this case, C may recover from S but only to the e6tent of whatever S inherited from D 4 that is, P" #0. Cnder the last sentence of the first paragraph of Article 1311, (T)he heir is not liable beyond the value of the property he received from the decedent. 5f course, since S is a multimillionaire, if he considers it his moral obligation to pay the entire debt of his father, he is not legally prohibited from doing so

!here are, however, also instances when the contract ta,es effect 51=G between the parties and cannot bind even assigns andFor heirs !his happens when the rights and obligations arising from the contract are not transmissible ( i.e., cannot be transferred or passed on another person) (a) !he rights and obligations arising from the contract may not be transmissible by their very nature
E&a!'le , D agreed to sing in the nightclub of C for ? consecutive nights on &ebruary ">, "? and "A, >4"" !he customers specially re9uested for D because D is the only singer in the country who can sing while wal,ing on a rope in the air D, however, died on &ebruary "4, >4"" in a car accident + estion, Can S, the only son of D, perform for his father? Ans(er , .0. In this case, the personal 9ualification of D was the reason why C hired his services S cannot do what his father does wal, on a rope in the air while singing !herefore, because of the death of D, S will no longer be bound under the contract !he obligation of D will simply be e6tinguished

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(b) !he rights and obligations arising from the contract may not be transmissible by stipulation of the parties
E&a!'le , =oo, at E&a!'le .o. 2 above Assume that D and C specifically agreed in their contract that should one of them die before the maturity date of the obligation, the rights and obligations of the parties under the contract will be e6tinguished If this is the parties8 agreement in their contract, even if S inherited P" #0 from his father D, C can no longer collect from S after the death of D.

(c) !he rights and obligations arising from the contract may not be transmissible by provision of law
E&a!'le , In a contract of partnership, if one of the partners die, the partner who died cannot be replaced by his heirs in the partnership !he law (Article "E?4;#<) specifically provides that the death of one of the partners in a partnership will e6tinguish the legal relationship In other words, the dead partner ceases to be a partner and cannot transmit or pass on to his heirs the rights and obligations of a partner

!he general rule is that' strangers cannot be bound by a contract to which they are not parties !here are, however, e6ceptions to this rule In other words, there are cases when even third persons (not parties to the contract) may assume benefits, or may be held liable for damages, under the contract (a) In contracts containing a stipulation pour autrui. ! A stipulation pour autrui is a stipulation in a contract conferring a favour upon a third person who has a right to demand its fulfilment provided he communicates his acceptance to the obligor before its revocation
E&a!'le , D borrowed P"44,444 from C payable after one year, or on @une ?4, >4"", plus "4K interest It was also agreed by the parties that on maturity date D will pay to C the principal, but the interest of P"4,444 will be given to 1. !his is because C also owes 1 the amount of P"4,444 1 was informed by the parties of the agreement -owever, on 0ay ?4, >4"", C changed his mind and as,ed D to deliver the entire amount of P""4,444 to C on maturity date of the obligation . 5n @une ?4, 1 went to C demanding for the payment of P"4,444 to him as earlier agreed upon + estion, Can 1 collect from DAns(er , .0. In this case, it is clear that there was a stipulation pour autrui granted by the parties D and C in favour of a third person 1. An important re9uirement, however, for 1s assumption of benefits under the contract is that 1 communicate his acceptance of the benefits to D (the obligor) before the revocation (withdrawal or cancellation) of the benefit In

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this case, 1 was informed of the stipulation in his favour after the contract of loan between D and C was perfected -owever, before 1 could signify his acceptance of such benefit to D, C had already revo,ed the benefit as of 0ay ?4, >4"" !herefore, 1 loses his right to claim under the contract and he can no longer collect the benefit on maturity date of the obligation

(b) In contracts creating real rights, third persons who come into possession of the ob%ect of the contract are bound thereby (Article 1312)
E&a!'le , A contract o$ !ort/a/e on land (pag"asanlaan ng lupa) is a real ri/)t ()ic) is bindin/ not onl" bet(een t)e !ort/a/or (Lang taong me pag,a,autang na nagsasanla ng lupa*) and t)e !ort/a/ee (ang taong pinag"a"autangan at pinagsasanlaan ng lupa) b t is also bindin/ a/ainst t)e ()ole (orld.
D borrowed P>0 from C payable on @une ?4, >4"" As security for the loan D (mortgagor) mortgaged his parcel of land in MueJon City in favour of C. !he contract of mortgage was duly registered in the .egistry of Property of MueJon City Cnder the contract, C will have the right to foreclose on the mortgage and sell the land at public auction to pay for the obligation if D is not able to pay on maturity date 5n 0ay ", >4"", D sold the same parcel of land to * for P?0 !he title of the land was transferred to the name of *, and * started occupying the land 5n @une ?4, >4"", D failed to pay his P>0 obligation to C. + estion, Can C still foreclose on the mortgage considering that the owner of the land now is already *? Ans(er , YES. In this case, * bought the land from D while the mortgage on the land in favour of C was still subsisting * cannot say that he was not aware of the mortgage because the mortgage was registered in the .egistry of Property and is therefore annotated (recorded) in the title to the land now in the name of *. -ence, even if * is not a party to the contract of mortgage between D and C, * will be bound by the stipulations in the mortgage 5n maturity date, even if D is no longer the owner of the property mortgaged, C will still have the right to sell the land at public auction !he proper recourse of * will be to file an action against D for damages !his is because the only probable reason of * in buying the land from D, even if it was sub%ect to a mortgage, was because D promised * that he will pay the obligation to C on maturity date Cpon payment of the principal obligation of loan, the contract of mortgage will simply be e6tinguished It turned out, however, that D did not ma,e good his promise to *.

(c) In contracts entered into by the debtor to defraud his creditor(s) (Article 1313)
E&a!'le , D borrowed P$0 from C payable on &ebruary "#, >4"" D has a house and lot in 0anila valued at PE0 5n @anuary >E, >4"", D sold his 0anila house and lot to * for P"40 D s9uandered the entire P"40 after gambling everyday at the Casino &ilipino for two entire wee,s -ence, when C demanded for payment of the P$0 debt on &ebruary "#, >4"", D was already insolvent without any other property C then filed an action for the rescission or cancellation of the contract of sale between D and *. If cancelled and reverted bac, to the

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ownership of *, C can then as, the court to attach the property and sell it at public action for the payment of Ds obligation + estion, Can C file an action to rescind or cancel the contract of sale between D and * considering that he is a stranger to the contract? Ans(er , YES. In this case, D sold his property to * for purposes of defrauding C 4 that is, to evade the payment of his obligation to C on maturity date Cnder Article "?"?, C, the defrauded creditor, is given the right to attac, the validity of the contract of sale (to which he is a stranger) by filing an action for its cancellation so that he may be paid his claims against the defrauding debtor

(d) In contracts which have been violated by reason of the inducement of a third person (Article 131;) In this case, a third person convinces in bad faith a contracting party to violate his contract with another In case of breach because of the inducement, the third person may be sued for damages by the other contracting party who suffered the damage
E&a!'le , S agreed to sell his land to * for P#0 It was also agreed by the parties that should S fail to deliver the lot, S will be liable to pay * damages amounting to P#44,444 as penalty =ater, 9, a close friend, visited S and convinced him to sell the land instead to 3 who is willing to pay P">0 for the lot S then sold the land to 3. 2ince S did not deliver the land to *, * suffered business loses amounting to P" #0 * then filed an action for damages against 9 who was the one who convinced S to violate his contract
+ estion, Can 9 be made liable for damages under a contract to which he is a stranger? If so, how much will 9 be liable in damages to *Ans(er , YES. * can sue 9 for damages even if 9 is a stranger to the contract of sale between S and *. !he source of 9s obligation here is based on the theory of 9uasi:delict (Art ""$>) -owever, the liability of 9 for damages cannot be more than what S should have been liable for violation of his contract -ence, * can recover from 9 only the amount of P#44,444 as damages which is what has been agreed upon in the contract

7. 0bli/ator" 9orce o$ Contracts 4 Cnder the principle of the obligatory force of contracts, it is stated that L5bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith * (Art. 1159) &rom the moment a contract is perfected, Lthe parties are bound not only to the fulfilment of what has been e6pressly stipulated but also

Chapter I General Provisions

14

to all the conse9uences which, according to their nature, may be in ,eeping with good faith, usage and law (Art. 1315)
E&a!'le , S agreed to sell his horse to * It was stipulated that S should deliver the horse after two days In this case, S has the obligation to deliver the horse after two days as agreed upon in the contract While waiting, since it was not part of the agreement, S did not feed the horse anymore Also, since it was not part of the agreement, S did not let the horse stay in the stable anymore After two day, the horse fell ill and died !he veterinarian said that the horse catched a deadly virus while soa,ed in heavy rains two nights before the delivery date + estion, Was S obliged to feed the horse and provide ade9uate shelter for it considering that it was never stipulated in the parties8 contract? Ans(er , YES. Pending delivery of the ob%ect of a contract, the debtor is obliged to ta,e care of the thing to be delivered with the proper diligence of a good father of a family (Art ""$?) -ence, S had the obligation to feed the horse and provide it ade9uate shelter before the appointed delivery date even if nothing is said about the obligation in his contract with * as this is in ,eeping with good faith, usage, and law

8. Article 131:. % We will study this provision when we study Article "A4? (") of the chapter on #nenforceable $ontracts.

Prepared by ' Atty -arriet .eyes =insangan @uly >7, >4""