CHAPTER 3 – Form of Contracts (Articles 1356-1358)

CHAPTER 3
FORM OF CONTRACTS
(Arts. 1356-1358)

STUDY GUIDE :

1. What is the meaning of “form of a contract”?

 The “form of a contract” refers to the manner in which a contract is executed or
manifested.
 The form of a contract may be oral or in writing, or partly oral and partly in
writing. If in writing, it may be in a public or a private instrument.

2. What is the form required for the validity of contracts? (Art. 1356)
(a) General Rule : Contracts shall be obligatory, in whatever from they may have
been entered into, provided all the essential requisites for their validity are present. In other
words, the contract is valid as long as there is :
consent
Consensual Contracts object
Real Contracts
subject matter
delivery

(b) Special Rule : However, when the law requires that a contract be in some
specified form, that requirement is absolute and must be complied with. Thus, the law may
require a specific form for any one of the following three (3) substantial purposes :

Status of the contract

PURPOSE that fails to comply Examples
with the required form
VALIDITY VOID
1. The donation of real property must be in a
public instrument in order to be valid, even between
the donor and the donee. (Art. 749, NCC)
2. A stipulation to pay interest must be in writing;
otherwise, no interest is due. (Art. 1956, NCC)
3. In the sale of land thru an agent, the authority
of the agent must be in writing; otherwise, the sale is

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null and void. (Art. 1874, NCC)

UNENFORCEABLE,
The contracts enumerated under Article 1403,
ENFORCEABILIT i.e., cannot be
No. 2, (a) to (f), are unenforceable by action unless
Y enforced unless
they are made in writing.
ratified

Valid and enforceable These refers to all the contracts enumerated

as between the under Article 1358 which are required to appear in a
CONVENIENCE parties, BUT not public document, NOT for their validity or
binding on third enforceability, but merely for the convenience of the
persons parties.

3. What are the contracts which are required under Article 1358 to appear in a public
instrument so that they may be enforceable even against third persons?
(a) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property.
Example: (1) The mortgagee’s real right of mortgage.
(2) The extinguishment of the mortgage by the debtor-mortgagor’s payment of the
mortgage debt.
(b) The assignment, repudiation or renunciation of hereditary rights (inheritance) or of
rights in the conjugal partnership of gains or in the community of property between husband
and wife.
(c) Powers of attorney to administer property or to perform an act requiring a public
instrument, or to perform an act which is to affect third persons; and
(d) The assignment of actions or rights arising from an act or contract contained in a
public document.
Example: The assignment by the creditor of his right under a mortgage which appears in a
public instrument.
NOTE: All other contracts where the amount involved exceeds P500.00 must
appear in writing, even a private one. But sales of goods, chattels, or things in
action are governed by Articles 1403 and 1405. (Art. 1358, par. 2)

4. Bear in mind that the enumeration under Article 1358, whereby a public instrument is
required, is only for the convenience of the parties and NOT for the validity or enforceability
of the enumerated contracts. The contract remains to be valid and enforceable BUT the

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parties are given the right to compel each other to execute the needed public document for
their convenience and to bind third persons (Art. 1357).
In other words, under Article 1357, before the contracting parties can be compelled
to execute the needed form, it is essential that the contract be previously:
(a) Valid AND (b) enforceable (Art. 1403).

PLEASE MEMORIZE :  Article 1358

APPLICATION/PROBLEMS :
1. On January 15, 2014, D and C entered into a verbal contract of loan for the amount
of P10,000.00. It was agreed by the parties that D was to pay C the amount of the loan on
March 15, 2014 plus two months interest in the amount of P1,000.00, computed at the rate of
5% per month. Is the parties’ contract valid? Can C, on due date, demand from D payment
of the loan and the interest agreed upon?

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