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This document discusses key concepts regarding contracts under Philippine law. It defines a contract as a meeting of minds between two parties where one binds themselves to give or render something to the other. It notes that contracts can be presumed from obligations arising from agreements. It outlines the different stages of a contract from conceptualization to execution. It also discusses characteristics of a valid contract such as autonomy, mutuality, and object. Agents are allowed to both borrow and lend money for principals under certain conditions.
This document discusses key concepts regarding contracts under Philippine law. It defines a contract as a meeting of minds between two parties where one binds themselves to give or render something to the other. It notes that contracts can be presumed from obligations arising from agreements. It outlines the different stages of a contract from conceptualization to execution. It also discusses characteristics of a valid contract such as autonomy, mutuality, and object. Agents are allowed to both borrow and lend money for principals under certain conditions.
This document discusses key concepts regarding contracts under Philippine law. It defines a contract as a meeting of minds between two parties where one binds themselves to give or render something to the other. It notes that contracts can be presumed from obligations arising from agreements. It outlines the different stages of a contract from conceptualization to execution. It also discusses characteristics of a valid contract such as autonomy, mutuality, and object. Agents are allowed to both borrow and lend money for principals under certain conditions.
IV, TITLE II:CONTRACTS o Contract entered into by one
CHAPTER 1: GENERAL PROVISIONS person representing two parties o Recognized by the NCC Article 1890. If the agent has been empowered to INTRODUCTION borrow money, he may himself be the lender at the • Obligations are always expressed; cannot be current rate of interest. If he has been authorized to implied or presumed. lend money at interest, he cannot borrow it without the consent of the principal. (n) • However,obligations arising from contracts, o Agent may be authorized to get a MAY BE PRESUMED loan for a principal; same agent *1997 Bar Question: comment on the definition of may provide that loan; the agent contracts in Art. 1305 Article 1305. A contract is a meeting of minds between two persons will sign as a borrow for the whereby one binds himself, with respect to the other, to give agent and as a lender something or to render some service. (1254a) COMMENT: STAGES/LIFE OF A CONTRACT: 1. IT IS INCOMPLETE It is very important because you have to determine Ø the concept in Art. 1305 is limited to: when the juridical tie is established; only from that 1. Consensual contracts (those with C- moment when parties be bound by the agreement; O-C) complied with in good faith - not include formal and real contracts 1. CONCEPTUALIZATION STAGE - some contracts do not comply with • Offer is made and acceptance not yet C-O-C expressed a. Formal Contracts : need a • Negotiation stage specific form • Juridical tie does not exist yet b. Real contracts – to be • NO CAUSE OF ACTION executor, need a delivery 2. EXECUTORY STAGE (Art. 1316) – Eg: contract of • Juridical Ties IS MADE deposit [commodatum] – ask • Binding upon the parties a depositor to keep the • THERE IS A CAUSE OF ACTION property that belongs to you, • There is a concurrence of offer and even if he agrees to deposit, unless the thing is delivered, acceptance the contract of deposit is not • Contract is executor executor. 3. EXECUTED STAGE 2. Unilateral Contracts • Extinguished juridical tie - those contracts that are reciprocal; • No cause of action anymore the definition does not cover it • They do their obligation and they use 3. Contracts that create obligations their rights - because contracts entered into • no more contract maybe for an extinguishment of an • no longer actionable obligation – mutual dissent CASE: 2. IT IS DEFECTIVE Sps. Llenado v. Llenado [GR NO. 145736, March 4, Ø makes it appear that it needs TWO 2009] PERSON – when in fact it should be two - the lessees were given an option to parties. renew the contract for another term Ø one person can enter into a VALID upon the expiration CONTRACT – - SC: must be exercised when the Ø AUTO CONTRACT contract is in its executory stage o One person but two parties - It was done in the executed stage.
- Lessee did not inform the lessor the - PAL case: female flight attendant got willingness to execute option when married and got fired by PAL because the term was still valid it was stipulated in their contract - Lessor: existing option prior to that they are not allowed to get expiration is deemed executed married; SC: stipulation is void - Sc: lessee has no valid cause of because contrary to constitutional action because the contract had provision on supporting and been deemed executed already promoting family - Minimum wage Law : labor Contracts are agreements; but not all agreements standards are contracts because if an agreement is not a - Adhesion contracts “ take it or leave contract, there will be no cause of action. it” – only one of the contracting *Review BF/GF example parties gives a proposal and the other will accept or reject it But how does one determine if it is a contract or an - If protests, there is a counter-offer agreement? Know the characteristics of a contract. - Construed always in favor of those at a disadvantage. CHARACTERISTICS OF A CONTRACT 1. AUTONOMY 2. MUTUALITY Article 1308. The contract must bind both contracting Article 1306. The contracting parties may establish such parties; its validity or compliance cannot be left to the will stipulations, clauses, terms and conditions as they may of one of them. (1256a) deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a) • Agreed to by parties and decision cannot be left to just one or few; • This is in relation to the non-impairment • Must be agreed to by all parties clause in Art. III, Sec. 10 of the • Mutual consent Constitution A. VALIDITY OF CONTRACT • Emphasizes a person’s right to contract - power to determine whether or not • The state cannot interfere or change the content is valid and cannot be left tenor of the obligation with one party • There is a certain independence B. COMPLIANCE OF THE CONTRACT • May enter stipulations, clauses, -power to determine whether or not the covenants – binding with you and the contract will be fulfilled other party - power to terminate, however, is not • Independent of third forces included EXCEPTIONS / LIMITATIONS : Case: Encarnacion v. Baldomar [ GR No. L- a. Stipulations should not be contrary to 264, Oct. 4, 1946 ] law, morals, good customs, public order and - lease where a provision giving the public policy lessee the right to decide whether or - if it contrary to such, the Courts not to continue with lease by may interfere. They may be ceased in requiring to continuously pay rent lieu of polic power and allowing the lessee the right to b. PARENS PATRIAE determine when to end by simply - contracts where one of the parties is discontinuining at an undue advantage insofar as the - sc: VOID AGREEMENT: against other is concerned mutuality. This is different in the - gave rise to social legislation option to extend.
LLENADO CASE ENCARNACION & the property he received from the decedent. If a contract should contain some stipulation in favor of a CABANCALAN CASE third person, he may demand its fulfillment provided he Not violative of Violative of mutuality communicated his acceptance to the obligor before its mutuality revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have Option to renew is in No period fixed;; lease clearly and deliberately conferred a favor upon a third fact an option to did not cary nay fixed person. (1257a) Article 1312. In contracts creating real rights, third persons terminate ; allowed; not term for the validity of who come into possession of the object of the contract are to decide on his; there is the contract – deemed bound thereby, subject to the provisions of the Mortgage a term fixed; executed; It was open- Law and the Land Registration Laws. (n) Article 1313. Creditors are protected in cases of contracts ended intended to defraud them. (n) Article 1314. Any third person who induces another to violate his contract shall be CASE: Phil. Savings Bank v. Sps. Castillo [ GR No. liable for damages to the other contracting party. (n) 193178, May 30, 2011] Article 1315. Contracts are perfected by mere consent, and - unilateral determination and from that moment the parties are bound not only to the imposition of increased sales of fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may interest of loan is violative of be in keeping with good faith, usage and law. (1258) mutuality; because when the Article 1316. Real contracts, such as deposit, pledge and currency increases, the interest also commodatum, are not perfected until the delivery of the object of the obligation. (n) increases but if not, no decrease. Article 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by TEST FOR VIOLATION: Whether or not one of the law a right to represent him. A contract entered into in the name of another by one who parties may be prejudiced or damaged by the sole has no authority or legal representation, or who has acted decision of the other beyond his powers, shall be unenforceable, unless it is Reason: purely potestative obligations – art. ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the 1182 – if condition is solely dependent of the will of other contracting party. (1259a) debtor- it is void • Relation; relatives; binding efficacy EXCEPTION: If the determination of the validity is • Obligatory effect delegated to a 3rd party. Article 1309. The determination of the performance may be left to a RULE: binding only between the parties, heirs, and third person, whose decision shall not be binding until it has been assignees. made known to both contracting parties. (n) Article 1310. The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is LIMITATIONS ON RULE OF RELATIVITY: equitable under the circumstances. (n) Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112) 3. OBLIGATORY 1. Rights of the obligation arising from Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be contracts ARE NOT TRANSMISSIBLE complied with in good faith. (1091a) a. Agreement of parties • Binding between parties b. Law does not allow transmission • Stipulation and conditions have the force of c. Nature of the obligation of the rights law between the parties and must be are not transmissible complied with in good faith. 2. Heirs and extent of the liability for the obligation arising from contracts by 4. RELATIVITY inheritance—limited only to the amount of Article 1311. Contracts take effect only between the successional rights parties, their assigns and heirs, except in case where the ART. 1311(2): The heir is not liable beyond the value of the rights and obligations arising from the contract are not property he received from the decedent. transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of EXCEPTIONS TO THE RULE OF RELATIVITY: JTVS | Obligations & Contracts | 1M | Dean Ulan Sarmiento 3 1. When the party transfers to a 3rd person the o The 3rd person should respect that rights they acquire in a contract real right; he does not have a better o 3rd person happens to be an assignee right to the object of the obligation also 5. In suspension of payments and o In general, the assignee are those third compositions under Insolvency Law parties who by LAW accepts the rights of 6. Labor Contracts of CBA – with union a creditor thru legal subrogation or o Non-union members are NOT parties reimbursement; by the operation of law to a contract in the CBA; in the Labor o In this type of assignment, assignee is Code, non-union members will also effected by the agreement of the parties enjoy the rights of the CBA if they o Legal subrogation – when a 3rd party pay the union dues. consents to it 7. Negotiorum Gestio (For finals) 2. Contracts with a stipulation in favor of a 3rd Article 2150. Although the officious management may not have been expressly ratified, the owner of the property or person – POUR AURTRUI – BENEFICIAL business who enjoys the advantages of the same shall be STIPULATION liable for obligations incurred in his interest, and shall o Accessory contract; also an reimburse the officious manager for the necessary and useful expenses and for the damages which the latter may exception in cases of novation have suffered in the performance of his duties. o Definition: parties clearly and The same obligation shall be incumbent upon him when deliberately stipulated a third person the management had for its purpose the prevention of an imminent and manifest loss, although no benefit may have to benefit from the contract and been derived. (1893) such beneficiary accepts it before it Article 2151. Even though the owner did not derive any was revoked benefit and there has been no imminent and manifest danger to the property or business, the owner is liable as o The debtor extended the benefit to under the first paragraph of the preceding article, the third person provided: o Promimssor, promissee, beneficiary (1) The officious manager has acted in good faith, and (2) The property or business is intact, ready to be returned – should give his consent to the owner. (n) 3. Art. 1313 Creditors are protected in cases of 8. TORTIOUS INTERFERENCE contracts intended to defraud them.(n) Article 1314. Any third person who induces another to violate his o This is one of the remedies; related contract shall be liable for damages to the other contracting party. to Art. 177 o When a party interferes, and induces Remedies: (in this order) another to not push thru with the 1. Specific Performance contract. 2. Payment by Cession Requisites: 3. If still not enough, accion pauliana, 1. EXISTENCE of a valid contract – must be in rescissible action executory stage 4. Subrogatory action – accion subrogatoria 2. KNOWLEDGE of a 3rd party of a contract 3. INTERFERENCE without any justification 4. Article 1312. In contracts creating real rights, CASE: Jose Lagon v. CA [GR NO.119107, March 18, third persons who come into possession of the 2005] object of the contract are bound thereby, subject to - justification for interfering with the provisions of the Mortgage Law and the Land business of another exists when Registration Laws. (n) motive is to benefit himself; not o This is also an exception because guilty of tortious interference such 3rd person is not an heir, - if for the business, it is valid. assignee, or the party However, there may be claim for o Such 3rd person is bound because of damages – only as to the contracting the real right created that is party, not the 3rd party. enforceable against the whole world Issue: you will have a cause of action, two JTVS | Obligations & Contracts | 1M | Dean Ulan Sarmiento 4 debtors—seller & 3rd party ; is it joint or solidary? Two views: • Caguiao – joint; source of obligation for seller and 3rd party is different—quasi-delict and contract – not solidary • CODE OF COMMERCE – joint Ergo, need to determine if the contract involved is COMMERCIAL or CIVIL COMMERCIAL CIVIL CONTRACT CONTRACT One or both parties are Only one instance and in the activity for profit not regularly; once in a regularly lifetime SOLIDARY liability JOINT liability
9. Article 1336. Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract. (1268) 10. Article 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extra-judicial demand by the lessor. Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor's claim is concerned, unless said payments were effected in virtue of the custom of the place. (1552a) 11. Article 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials: (1) Payments made by the owner to the contractor before they are due; (2) Renunciation by the contractor of any amount due him from the owner. This article is subject to the provisions of special laws. (1597a) 12. Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. (1722a)
13. Article 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. (1510)
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