CONTRACTS (Articles 1305 -1349, Civil Code) Page

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CHAPTER 1 GENERAL PROVISIONS

Article 1305 A contract is a meeting of minds between two person whereby one binds
himself, with respect to the other, to give something or to render some service.

1. There should be two contracting parties

2. A party is bound to the fulfillment to give, to do, or not to do,

Contract and Obligation distinguished

 Contract is one source of obligation

 Obligation is the object of the contract
 There can be no contract if there is no obligation
 Obligation may exist without contract such as the obligation imposed by law

Contract and Agreement distinguished

 Contracts are binding agreements enforceable through legal proceedings in case the other
party does not comply with his obligation under the agreement.
 Agreements which cannot be enforced by action in the courts of justice are not contracts
but merely moral or social agreements (eg. Agreement to go to a dance party)
 Agreement is broader than a contract because the former may not have all the elements
of a contract
 All contracts are agreement but not all agreements are contract

Article 1306

The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient provided they are not contrary to the law, morals, good
customs, public order, or public policy.

Valid Contracts

- Those that meet all the legal requirements and limitations for the type of agreement
involved and are, therefore, legally binding and enforceable.

Limitations on contractual stipulations

1. Law – contract must be in accordance to law

2. Police power – all contractual obligations are subject to the possible exercise of the police
power as mere enforcement of one of the conditions deemed imposed in all contract

A. Contracts must not be contrary to the law

B. Contracts must not be contrary to the morals
C. Contracts must not be contrary to good customs
D. Contracts must not be contrary to public orders
E. Contracts must not be contrary to public policy

CE 516 CELAWS CONTRACTS AND ETHICS | CONTRACTS

CONTRACTS (Articles 1305 -1349, Civil Code) Page
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Article 1307 – Innominate contract shall be regulated by the stipulations of the

parties, by the provisions of the Titles I and II of this Book, by the rules governing the
most analogous nominate contracts, and by the customs of the place.

Classification of Contract according to its name or designation

1. Nominate Contract – contracts that has designation or name in law

Example: lease, agency, sale

2. Innominate Contract – contracts which has no specific name or designation in law

Example: “I give that you may do.”
“I do that you may give.”
“I do that you may do.”

Article 1315 Contracts are perfected by mere consent, and from that moment the
parties are bound not only to 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.

Article 1316 Real contracts, such as deposit, pledge and Commodatum, are not
perfected until the delivery of the object of the obligation.

Classification of Contracts according to perfection:

a. Consensual Contract – that which is perfected by mere consent

b. Real Contract – that which is perfected by delivery of the thing subject matter of the
contract

Stages in the life of contract:

1. Preparation or Negotiation – this includes all the steps taken by parties leading to the
perfection of the contract. At this stage, the parties have not yet arrived at any definite
agreement

2. Perfection or Birth – this is when the parties have come to a definite agreement or meeting
of minds

3. Consummation or Termination – this is when the parties have performed their respective
obligations and the contract may have been said to have been fully accomplished or
executed resulting in the termination thereof.

Article 1317 No one may contract in the name of another without being authorized by
the latter, or unless he has by law a right to represent him.

CE 516 CELAWS CONTRACTS AND ETHICS | CONTRACTS