Contracts

The meeting of minds between two

persons whereby one binds
himself, with respect to the other,
to give something or to render
some service
General rule:

Parties may put whatever condition,

term, clause or stipulation that they
like provided such condition, term or
stipulation is not contrary to law,
morals, good customs, public order
and public policy.
 While a contract is one of
the sources of obligations,
an obligation is the legal
Obligation vs. tie or relations itself that
exists after a contract has
Contract been entered into. Hence,
there can be no contract if
there is no obligation. But
an obligation may exist
without a contract
Essential elements a. Consent
of a Contract b. Object
Without which there can be no
c. Cause
contract
 1. Relativity (Art. 1311,
NCC)

Characteristics of 2. Obligatoriness and

consensuality(Art. 1315,
Contracts NCC)

3. Mutuality (Art. 1308,

NCC)

4. Autonomy (Art. 1306)

 General rule:

Contracts take effect only

between the parties or their
Principle of relativity or assigns and heirs, except
Principle of limited where the rights and
effectivity of contracts obligations arising from the
contract are not
General Rule
transmissible by their
nature, by stipulation, or by
provision of law (Art. 1311,
NCC).
Res inter alios acta aliis neque nocet prodest (a
thing done between others does not harm or
benefit others) – a contract can only obligate
the parties who entered into it, or their
successors who assumed their personalities,
and that, concomitantly, acontract can neither
favor nor prejudice third persons.
Exceptions:
1. Rights and obligations that are not transmissible by their
nature, or by the stipulation or by provisions of law(Art. 1311,
NCC).
2. Stipulation pour autrui (stipulation in favor of a third person);
3. Third persons coming into possession of the object of the
contract creating real rights subject to the provisions of Mortgage
Law and the Land Registration Law (Art. 1312, NCC).
4. Contracts entered into in fraud of creditors (Art. 1313, NCC).
5. When a third person induces a party to violate the contract (Art.
 Benefits clearly and deliberately
conferred by parties to a contract

Stipulation pour
upon third persons (Art. 1311, NCC)
and which stipulation is merely

autrui
part of a contract entered into by
the parties, neither of whom acted
as agents of the third person and
which favor can be demanded by
the third person if duly accepted by
him before it could be revoked.
 a. Stipulation in favor of a third
person;
b. Stipulation is just part and not the
Stipulation pour whole obligations of the contract;

autrui
c. Contracting parties must have
clearly and deliberately conferred a
favor upon third person;
Requisites
d. Third person must have
communicated his acceptance; and
e. Neither of the contracting parties
bears the legal representation of the
third person
 Contracts shall be obligatory, in
whatever form they may have been
entered into, provided all the
essential requisites for validity are

Obligatory Force of present (Art. 1356, NCC). The

parties are bound from the

Contracts moment the contracts are

perfected by mere consent not
only from the fulfillment of what
has been expressly stipulated but
also to all the consequences which,
according to their nature, may be
in keeping with good faith, usage
and law (Art. 1315, NCC).
 The contract must bind both
contracting parties and its
validity or compliance
cannot be left to the will of
Mutuality of one of them (Art. 1308, NCC).

Contracts NOTE: A contract

containing a condition
whose efficacy or fulfillment
is dependent solely on the
uncontrolled will of one of
the parties is void
 It is the freedom of the

Mutuality of
parties to contract and to
stipulate provided the
Contracts stipulations are not
contrary to law, morals,
good customs, public
order or public policy.
Kinds of Contracts
According to
Perfection or
Formation
Consensual Perfected by the mere
meeting of the minds of
contracts the parties. (Art. 1305)
(e.g. Sale, Lease)
 Those which require for their
perfection both the consent of the
parties and the delivery of the
Real Contracts object by one party to the other.
(e.g. creation of real rights over
immovable property must be
written, deposit and pledge)
Solemn Contracts
Contracts which must appear in
writing, such as:
a. Donations of real estate or of
movables if the value exceeds
P5,000;
b. Partnership to which
immovables are contributed;
c. Contract of antichresis –
requires the amount of principal
and interest be specified;
d. Sale of piece of land or interest
therein is through an agent;
e. Stipulation to charge interest;
f. Stipulation limiting common
carrier's duty of extraordinary
diligence to ordinary diligence;
g. Chattel mortgage; or
h. Transfer of large cattle (Sec.
22, Act No. 1147; Art. 1581, NCC);
According to
their Relation to
Other Contracts
 are those which have for
their object the

Preparatory
establishment of a
condition in law which is
Contracts necessary as a preliminary
step towards the
celebration of another
subsequent contract. (e.g.
Partnership, Agency)
 are those which can
subsist independently
Principal Contracts from other contracts (e.g.
Sale, Lease).
Accessory
those which can exist only
as a consequence of, or in
Contracts relation with, another
prior contract. (e.g.
Pledge, Mortgage)
 1. Onerous (e.g. Sale)

Kinds of Contracts 2. Gratuitous (e.g.

Commodatum)
According to their Cause

Kinds of Contracts
According to their names or
norms regulating them
1. Nominate Contracts – are those
which have their own name and
individuality, and are regulated by
provisions of law. (e.g. Sale)
2. Innominate Contracts – are those
which lack name or individuality, and
are not regulated by special
provisions of law.
A contract which is not classifiable
under any particular name. In an
innominate contract, the law
supplies nothing in addition to the
express agreement of the parties.
Classes of Innominate Contracts
1.Do ut des(I give and you give)– is an agreement in which A will
give one thing to B, so that B will give another thing to A.
2.Do ut facias(I give and you do)-is a contract under which A will
give something to B, in order that B may do something for A.
3.Facio ut des(I do and you give)– is an agreement in which A
binds himself to do something for B, so that B will give something
to A.
4.Facio ut facias(I do and you do)– is a convention whereby A is to
do something for B, so that B will render some other service to A.
Essential Requisites of
Contracts
1. Consent of the contracting
parties
2. Object certain which is the
subject matter of
the contract
3. Cause of the obligation which is
established