Impossibility of Performance

It is a fundamental rule that contracts, once perfected, bind both contracting parties,
and obligations arising therefrom have the force of law between the parties and should
be complied with in good faith.  But the law recognizes exceptions to the principle of
the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil
Code, which reads: "The debtor in obligations to do shall also be released when the
prestation becomes legally or physically impossible without the fault of the obligor."

The obligation to pay rentals or deliver the thing in a contract of

lease  falls within the prestation "to give"; hence, it is not covered within the scope of
Article 1266. At any rate, the unforeseen event and causes mentioned by petitioner are
not the legal or physical impossibilities contemplated in the said article. Besides,
petitioner failed to state specifically the circumstances brought about by "the abrupt
change in the political climate in the country" except the alleged prevailing uncertainties
in government policies on infrastructure projects.

(PNCC vs. CA, GR 116896, May 5, 1997)

Autonomy

A contract of waiver, between a student enjoying scholarship grant and the school,
where the student waives his/her right to transfer to another school unless he refunds
the costs, is contrary to public policy and, hence, null and void. The Director of Private
Schools pointed that such waiver was a direct violation of their Memorandum No. 38
and an open challenge to the authority of the Director of Private Schools because the
contract was repugnant to sound morality and civic honesty. (Cui v. Arellano, G.R. No.
L-15127, May 30, 1961, 2 SCRA 205)

An agreement by the owner of stolen goods to stifle the prosecution of the person
charged with the theft, for a pecuniary or other valuable consideration, is manifestly
contrary to public policy and the due administration of justice. In the interest of the
public it is of the utmost importance that criminals should be prosecuted, and that all
criminal proceedings should be instituted and maintained in the form and manner
prescribed by law; and to permit an offender to escape the penalties prescribed by law
by the purchase of immunity from private individuals would result in a manifest
perversion of justice. (Arroyo v. Berwin, G.R. No. L-10551, 3 March 1917)

A significant task in contract interpretation is the ascertainment of the intention of the

parties and looking into the words used by the parties to project that intention. In this
case, the intent to appropriate the property given as collateral in favor of the creditor
appears to be evident, for the debtor is obliged to dispose of the collateral at the pre-
agreed consideration amounting to practically the same amount as the loan. In effect,
the creditor acquires the collateral in the event of non payment of the loan. This is
within the concept of  pactum commissorium. Such stipulation is void. ( Bustamante v.
Rosel, G.R. No. 126800, 29 November 1999)

Nominate / Innominate Contracts

The payment of attorney's fees to respondent David may be justified by virtue of the
innominate contract of facio ut des  (I do and you give which is based on the principle
that "no one shall unjustly enrich himself at the expense of another." innominate
contracts have been elevated to a codal provision in the New Civil Code by providing
under Article 1307 that such contracts shall be regulated by the stipulations of the
parties, by the general provisions or principles of obligations and contracts, by the rules
governing the most analogous nominate contracts, and by the customs of the people.
(Corpuz v. CA and David, G.R. No. L-40424, 30 June 1980)

Mutuality

The spouses Leuterio did not give their consent for petitioner to make a unilateral
upward adjustment of the purchase price depending on the final cost of construction of
the subject house and lot. It is illegal for petitioner to claim this prerogative, for Article
1473 of the Civil Code provides that "the fixing of the price can never be left to the
discretion of one of the contracting parties . . . ."
(GSIS v. CA, G.R. No. 105567, 25 November 1993)

Once a contract is entered into, no party can renounce it unilaterally or without the
consent of the other. This is the essence of the principle of mutuality of contracts
entombed in Article 1308 of the Civil Code. To effectuate abandonment of a contract,
mutual assent is always required. The mere fact that one has made a poor bargain may
not be a ground for setting aside the agreement.
(Professional Academic Plans, Inc. Francisco Colayco and Benjamin Dino v. Crisostomo, G.R.
No. 148599, 14 March 2005)

Relativity
The general rule, therefore, is that heirs are bound by contracts entered into by their
predecessors-in-interest except when the rights and obligations arising therefrom are
not transmissible by (1) their nature, (2) stipulation or (3) provision of law.

As early as 1903, it was held that "(H)e who contracts does so for himself and his heirs."
In 1952, it was ruled that if the predecessor was duty-bound to reconvey land to
another, and at his death the reconveyance had not been made, the heirs can be
compelled to execute the proper deed for reconveyance. This was grounded upon the
principle that heirs cannot escape the legal consequence of a transaction entered into by
their predecessor-in-interest because they have inherited the property subject to the
liability affecting their common ancestor.  (DKC Holdings Corp. v. CA, G.R. No. 118248, 5
April 2000)

Stipulation pour autrui

A stipulation pour autrui  is a stipulation in favor of a third person conferring a clear

and deliberate favor upon him, and which stipulation is merely a part of a contract
entered into by the parties, neither of whom acted as agent of the third person, and such
third person and demand its fulfillment provoked that he communicates his to the
obligor before it is revoked. The requisites are: (1) that the stipulation in favor of a third
person should be a part, not the whole, of the contract; (2) that the favorable stipulation
should not be conditioned or compensated by any kind of obligation whatever; and (3)
neither of the contracting bears the legal represented or authorization of third person.

To constitute a valid stipulation pour autrui it must be the purpose and intent of the
stipulating parties to benefit the third and it is not sufficient that the third person may
be incidentally benefited by the stipulation. The fairest test to determine whether the
interest of third person in a contract is a stipulation pour autrui or merely an incidental
interest, is to rely upon the intention of the parties as disclosed by their contract. In
applying this test, it meters not whether the stipulation is in the nature of a gift or
whether there is an obligation owing from the promisee to the third person. That no
such obsorption exists may in some degree assist in determining whether the parties
intended to benefit a third person.

(Florentino v. Encarnacion, G.R. No. L-27696, 30 September 1977)

Although, in general, only parties to a contract may bring an action based thereon, this
rule is subject to exceptions, one of which is found in the second paragraph of Article
1311 of the Civil Code. This is but the restatement of a well-known principle concerning
contracts  pour autrui, the enforcement of which may be demanded by a third party for
whose benefit it was made, although not a party to the contract, before the stipulation in
his favor has been revoked by the contracting parties. (Coquia v. Fieldmen’s Insurance Co.,
G.R. No. L-23276, 29 November 1968)

It appears then that, upon the facts alleged by appellant, the contract between him and
appellee was a contract pour autrui, although couched in the form of a deed of absolute
sale, and that appellant's action was, in effect, one for specific performance. That one of
the parties to a contract is entitled to bring an action for its enforcement or to prevent its
breach is too clear to need any extensive discussion. Upon the other hand, that the
contract involved contained a stipulation pour autrui amplifies this settled rule only in
the sense that the third person for whose benefit the contract was entered into may also
demand its fulfillment provided he had communicated his acceptance thereof to the
obligor before the stipulation in his favor is revoked.

It appearing that the amended complaint submitted by appellant to the lower court
impleaded the beneficiary under the contract as a party co-plaintiff, it seems clear that
the three parties concerned therewith would, as a result, be before the court and the
latter's adjudication would be complete and binding upon them.

(Constantino v. Espiritu, G.R. No. L-22404, 31 May 1971)

Interference by third persons

Article 1902 of the Civil Code declares that any person who by an act or omission,
characterized by fault or negligence, causes damage to another shall be liable for the
damage so done. Ignoring so much of this article as relates to liability for negligence, we
take the rule to be that a person is liable for damage done to another by any culpable
act; and by "culpable act" we mean any act which is blameworthy when judged by
accepted legal standards. The idea thus expressed is undoubtedly broad enough to
include any rational conception of liability for the tortious acts likely to be developed in
any society.
Whatever may be the character of the liability which a stranger to a contract may incur
by advising or assisting one of the parties to evade performance, there is one
proposition upon which all must agree. This is, that the stranger cannot become more
extensively liable in damages for the nonperformance of the contract than the party in
whose behalf he intermeddles. To hold the stranger liable for damages in excess of
those that could be recovered against the immediate party to the contract would lead to
results at once grotesque and unjust. (Daywalt v. Corp., G.R. No. L-13505, 4 February
1919)
Damage is the loss, hurt, or harm which results from injury, and damages are the
recompense or compensation awarded for the damage suffered. 6 One becomes liable in
an action for damages for a nontrespassory invasion of another's interest in the private
use and enjoyment of asset if (a) the other has property rights and privileges with
respect to the use or enjoyment interfered with, (b) the invasion is substantial, (c) the
defendant's conduct is a legal cause of the invasion, and (d) the invasion is either
intentional and unreasonable or unintentional and actionable under general negligence
rules. 

The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on
the part of the third person of the existence of contract; and (3) interference of the third
person is without legal justification or excuse.
(So Ping Bun v. CA, G.R. No. 120554, 21 September 1999)

The purchase of the subject property was merely an advancement of financial or

economic interests, absent any proof that he was enthused by improper motives. In the
very early case of Gilchrist v. Cuddy, the Court declared that a person is not a malicious
interferer if his conduct is impelled by a proper business interest. In other words, a
financial or profit motivation will not necessarily make a person an officious interferer
liable for damages as long as there is no malice or bad faith involved. (Jose Lagon v. CA
and Lapuz, G.R. No. 119107, 18 March 2005)

Period for Acceptance

Since there may be no valid contract without a cause or consideration, the promisor is
not bound by his promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell
which, if accepted, results in a perfected contract of sale. (Sanchez v. Rigos, G.R. No. L-
25494, 14 June 1972)

An option contract is entirely different and distinct from a right of first refusal in that in the
former, the option granted to the offeree is for a fixed period and at a determined
price. Lacking these two essential requisites, what is involved is only a right of first refusal.
 
It is clear from the provision of Article 1324 that there is a great difference between the
effect of an option which is without a consideration from one which is founded upon a
consideration. If the option is without any consideration, the offeror may withdraw his offer by
communicating such withdrawal to the offeree at anytime before acceptance; if it is founded
upon a consideration, the offeror cannot withdraw his offer before the lapse of the period
agreed upon.
 
The second paragraph of Article 1479 declares that an accepted unilateral promise to buy or to
sell a determinate thing for a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price. 

(Tuazon v. Del Rosario-Suarez,  G.R. No. 168325, 13 December 2010)