Chapter

I

General

Provisions

1

TITLE II CHAPTER I - GENERAL PROVISIONS (Articles 1305-1317)
1. What is a contract?  As defined under Article 1305, a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.  To better understand the definition, let us recall the definition of an obligation under Article 1156 that, “(A)n obligation is a juridical necessity to give, to do, or not to do. We said that the definition of an obligation under Article 1156 refers specifically to civil obligations, and not to moral, divine or natural obligations which cannot be legally enforced in court by the creditor or active subject.  From the definition of a contract above, we can assume the following :
(a) There are at least two parties involved in a contract – an

active subject (creditor) and a passive subject (debtor).
(b) An obligation is created because the passive subject promises

to the active subject the performance of a prestation, either to give something (“to give”), or to render some service (“to do” or “not to do”).
(c) By agreement between the parties, a civil obligation is

created. At this point, we make a distinction between an agreement and a contract. If two parties agree on the performance of a moral or social obligation, there is an agreement but there is no contract. However, if the parties

Chapter

I

General

Provisions

2 agree on the performance of a civil obligation (Art. 1156), the result is a contract which is legally enforceable in court.
AGREEMENT: D and C agreed that they will go to mass every Sunday at the St. Therese Chapel in Villamor, Pasay for 10 consecutive Sundays. CONTRACT : D and C agreed that if D will hear mass for 10 consecutive Sundays at the St. Therese Chapel, C will give D P100,000. Here, we have a contract which gives rise to a suspensive conditional obligation. If D performs his obligation, C will be obliged to give D P100,000. If C does not comply with his obligation as agreed upon, D’s obligation will then be extinguished.

(d) A contract gives rise to an obligation between the parties to

the contract. Hence, there can be no contract if there is no obligation. However, can a party have an obligation even without a contract? YES. As we have previously studied in Article 1157, contract is only one of the sources of an obligation. Thus, we are reminded that even without the debtor’s knowledge or consent (i.e., even without a previous contract entered into with the active subject), he will be liable for reimbursement arising from quasi-contract [Art. 1160] if he has been benefited at the expense of another. 2. What are the basic principles governing contracts?
(a) (b) (c) (d) (e)

Autonomy or Liberty of Contracts (Art. 1306) Mutuality of Contracts (Art. 1308) Consensuality of Contracts (Art. 1315) Relativity of Contracts (Art. 1311) Obligatory Force of Contracts (Art. 1159)

As agreed upon.e. or public policy. B was apprehended by the police authorities before he could deliver the lion to A. Example of a contract which is contrary to law. Autonomy or Liberty of Contracts . clauses.Chapter I – General Provisions 3 3. A and B entered into a contract. the contract is illegal and cannot be given effect. both of them will be put on trial for the crime of robbery or theft. D could not pay his obligation to C. public order. Hence. “The contracting parties may establish such stipulations. morals.000 if B will steal the pet lion of C. After 3 months of working without pay.000.The principle of autonomy of contracts is stated in Article 1306.000 from B on the basis of their contract. It was agreed that A will give B P500. can A file an action in court against B for the recovery of the P250. contrary to LaMoG-PuPu). Question: Since B failed to deliver the lion to A as agreed upon.. and the balance will be given to B when B delivers the lion to A. D will work as the secretary of C without pay. If A files an action for recovery of the P250. B stole the lion from the residence of C. However.”  By this principle. The only limitation is that the agreement should not be illegal (i. Example of a contract which is contrary to law. provided they are not contrary to law.000 advanced to B? Answer: NO. Stealing is unlawful. It was also agreed that A will give an advance payment of P250.000 from C. D borrowed P100. good customs. The prestation of B in the parties’ contract is to steal the lion of C. The contracting parties must respect the law which is considered as an essential part of every contract. D and C then agreed that for the meantime that D is not able to pay his debt. On maturity date. the parties to a contract are given the freedom to agree on any terms or stipulations in their contract. terms and conditions as they may deem convenient. D suddenly .

the court has to deny C’s prayer to compel D to comply with his obligation to work without pay because the agreement is illegal. Joe is a 40-year old bachelor. 1 of your application or problems in the study guide. C cannot compel D to work without pay. Example of a contract which is contrary to morals. Jane is a 17-year old student who has been compelled to obtain a leave of absence from school this semester because her parents could no longer afford to pay her tuition. D should continue working without pay in the office of C because it was what they agreed upon. and subtract it from D’s P100. Therefore. The parties can then agree that D will not receive salary for 10 months to compensate for the P100.Chapter I – General Provisions 4 left the office of C.000 loan to C. A lawful arrangement would be to require D to work as the secretary in the office of C with a salary of. On January 6. hence. 2012. In this case. On January 2. Question: Is the contract valid? Can Jane be compelled to comply with her promise under the agreement? . Jane informed Joe that she was backing out from their agreement because she had already found an employer who was willing to help her with her studies. Joe was upset.000. the court can determine how much D should receive from C by way of compensation for work rendered for 3 months. Joe promised to give Jane P1M if Jane will live with him as his wife for 6 months without the benefit of marriage.000 debt that he owes C. Jane agreed. D has the right to be paid for his services rendered to C. however. let us say. However. C filed an action in court against D stating that D had not yet paid his debt.  Study No. He filed an action against Jane for specific performance (to compel her to comply with her obligation) and for damages. Question: Is D bound by the agreement? Can D demand payment equivalent to 3 months salary for his services from C? Answer: The parties’ agreement for D to render service without pay is contrary to law and cannot be given effect. Hence. P10.

O is the owner of an apartment. . T is interested in leasing or renting the apartment of O. Example of a contract which is contrary to public order. In this case. void for being immoral and cannot be enforced. The proper recourse of O is not to use physical force on T to leave the apartment. T must leave the apartment. 2. to compel a woman to cohabit with a man (even if not married) without the benefit of marriage is contrary to morals. Example of a contract which is contrary to public policy. The parties enter into a contract with the following stipulations. T promised to pay a monthly rental of P10. Kulit promised to give Galang P100. O will ask his 2 wrestler brothers (each weighing 500 pounds) to drag T out of the apartment never to be seen again. This contract is void because it is against the good custom of showing respect to our parents. the parties are free to establish any stipulation in their contract as they may consider convenient to them. What O should do is to file an action for ejectment in court against T.000. Example of a contract which is contrary to good customs. Both O and T agreed to these provisions in their lease contract.Chapter I – General Provisions 5 Answer: It is stated that by the autonomy of contracts. While the other terms in the parties’ contract is lawful and valid. The contract of Joe and Jane is.000 if Galang will slap his father once on both cheeks. O must first secure a final judgment from the court ordering T to vacate the premises. Question: Assuming that T later on fails to pay his monthly rentals. 4 in their agreement considering that T had agreed to the stipulation? Answer: NO. among others: 1. term No. Then the sheriff of the court will carry out the final order of ejectment (an order to compel the tenant to leave the property being leased). 3. therefore. can O enforce term No. Should T fail to pay his monthly rentals. O obliged to rent his apartment to T for 2 years. however. 4. If after failure to pay rentals T refuses to leave the apartment. 4 cannot be enforced by O for being against public order.

Determination of performance by a third person. It was agreed that A. There is here no valid contract. 4. however. A . 2 of your application or problems in the study guide.The principle of mutuality of contracts is stated in Article 1308. if B decides to accept delivery and agrees to the purchase price of P3.5M which is what S had decided.5M upon delivery. “The contract must bind both contracting parties. S sold his parcel of land to B.”  By this principle. S promised to sell his car to B. under Article 1309. Of course. The determination.5M? Answer: NO. therefore. Mutuality of Contracts . an interested buyer. will bind the contracting parties only after it has been made known to both of them. the determination of its performance may be left to a third person. It was agreed that S will determine the price of the car and inform B about it on the same day that S will deliver the car. would be the one to determine the reasonable price of the land. A contract is a meeting of the minds and. the contract of sale is perfected. S was also collecting from B the purchase price of P3.Chapter I – General Provisions 6  Study No. its validity or compliance cannot be left to the will of one of them. The following day. Question: Can S compel B to accept delivery of the car and to pay the purchase price of P3. S went to the house of B and delivered the car. there must be mutual consent. The contract does not bind both contracting parties because the determination of the purchase price of the car was left to the sole determination of S. Example of the principle of mutuality.  While the compliance with a contract cannot be left to the will of only one of the contracting parties. no party to a contract can renounce or violate the law of the contract without the consent of the other. a real estate appraiser.

(2) Object certain which is the subject matter of the contract. let us take a quick look at the essential requisites of a contract discussed in the next chapter. Question: Can S compel B to pay the P5M purchase price? Answer: NO.Chapter I – General Provisions 7 then appraises the land. and informs S about it. Since it was only S who was informed. (3) Cause of the obligation which is established. let us assume that A conspired with S for the fixing of the price at P5M even if the appraised value of the land was only P3M.  In the above example. The determination by A of the price of the land. There is no contract unless the following requisites concur: (1) Consent of the contracting parties. 5. Article 1310 states that a contracting party is not bound by the determination of a third person if it is evidently inequitable or unjust as when the third person acted in bad faith or by mistake. and B had no idea of the price fixed by A. Consensuality of Contracts –  Under the principle of consensuality of contracts.  Before we start discussing this principle. even if agreed to by S and B will bind both contracting parties only after A informs both S and B of his determination. B cannot be bound by the determination. fixes the price at P5M. 1318. . ART. Question: Will B be bound by the determination of A? Answer: Still NO. Example: S agreed to sell his BMW car to B for P6M. it is stated that contracts are perfected by mere consent (Article 1315). Then A informs both S and B of the price.

 We also need to take a look into the three stages in the life of a contract.B goes to S and offers to buy the BMW car for P5M.This includes all the negotiations or steps taken by the parties leading to the perfection of the contract. (1) Stage of Conception . (3) Consummation or termination – This is when the parties have performed their respective obligations.5M. 1319). Example: S advertised his BMW car for sale at P6M. At this stage. Here.Chapter I – General Provisions 8 (1) The object is the delivery of the car. (3) There is consent because both parties agree as to the object and the cause of the sale. Here. there is already a concurrence of all the essential elements or requisites of a contract. the contract is perfected. (2) Stage of Perfection – S agrees to B’s offer of P5.5M. (2) The cause or consideration is the payment of the purchase price of P6M. Effect of lack of any one of the requisites: The contract will be void and cannot be enforced. resulting in the extinguishment or termination thereof. There is already a mutual agreement as to the object and the cause of the sale. (1) Conception (Preparation or negotiation) . (2) Perfection or birth – This is when the parties have come to a definite agreement or meeting of the minds regarding the subject matter and cause of the contract (Art.8M. B again makes another offer to buy at P5. Stages in the life of a contract. the parties are still negotiating. the parties have not yet arrived at any definite agreement. At this stage. . S is willing to sell at P5. and the contract may be said to have been fully accomplished or executed.

Question: Was there here a perfected contract of sale between S and B? . object and cause. In other words.Chapter I – General Provisions 9 (3) Stage of Consummation – S delivers the BMW car to B. or C-O-C . Contracts are perfected by mere consent. the contract is perfected. Example : A contract of sale is an example of a consensual contract. On January 25.5M purchase price. Classification of contracts according to perfection : (1) Consensual contract – This kind of contract is perfected by mere consent. On January 31. S refused to deliver the car stating that he had changed his mind about selling his car. It is in this stage that the obligations of the parties are completely extinguished. 2012. a contract is already perfected. This is. Effect of perfection of a contract: It is only after perfection of a contract that the following will arise: (a) the obligation of the debtor to perform the prestation and/or to pay for damages. Here. We can understand this better by examining the three (3) kinds of contracts according to perfection outlined below. if all the requisites of C-O-C are present. S promised to sell his car to B for P3M. however.  Now we go back to the principle of consensuality. the parties comply with their respective prestations under the contract. 2012.  A contract is thus only perfected after compliance with all the three essential requisites of consent. only the GENERAL RULE because some contracts need more than mere consent for their perfection. As long as there is C-O-C. 2012. B then pays S the P5. (b) the right of the creditor to compel performance of the obligation and/or claim for damages. It was agreed by the parties that delivery of the car and payment of the purchase price was to be made on January 31.

000 from C due for payment on July 4. D borrowed P200.000 loan of D. Therefore. since pledge is a real contract. D. and use the proceeds from the sale to cover the P200. the creditor is given the right to sell the thing pledged at public auction. D promised C that he will deliver his rolex watch valued at P250. In other words. 2012.000 to C the following day. Under the contract of pledge. and there was a cause (the payment of the P3M purchase price). there was already a perfected contract of sale because as of that date there was already consent on the part of both contracting parties. both S and B are bound to the fulfilment of their respective obligations under the contract. however. (2) Real contract – This kind of contract is perfected by the delivery of the thing subject matter of the contract. There is an additional requisite for the perfection of the contract – that is. mere consent is not enough. a contract of pledge is one example of a real contract. D never delivered the rolex watch to C until the debt already matured. failed to deliver the watch. To secure the loan. 2012. In this case. 2012. there was an object (the delivery of the car). S can no longer back out from his obligation of delivering the car to B unless he is willing to be liable for damages to B for breach of contract. On January 5. Question: Was there here a perfected contract of pledge between D and C? Can C compel D to deliver the rolex watch so that it may be sold at public auction to pay for the indebtedness? Answer : NO. it will be perfected (the contract will be born) only if the thing object of the contract is delivered to the creditor. C-O-C-D Example : As stated in Article 1319. On maturity date. there was no perfected .Chapter I – General Provisions 10 Answer : YES. D could not pay his P200. In other words. Since there was already a perfected contract.000 debt to C. The purpose of a contract of pledge (which is merely an accessory contract to the principal contract of loan) is to secure the payment of the loan by the debtor. Since there was no delivery of the rolex watch. As of January 25. C then demanded that D deliver the watch so that C may sell the watch at public auction. delivery of the object of the contract. and C eventually forgot about it. if the debtor fails to pay the principal obligation on maturity date.

On January 5. (3) Solemn contract – This kind of contract is perfected after compliance with certain formalities prescribed by law. on maturity date. the contract will be lacking one essential requisite which is form. there was no contract of . Just like in real contracts. Don died leaving as sole heir his only son. it must be in a public instrument. In other words. Question: Was there a perfected contract of donation between Don and Des? Can Andy recover the property from Des? Answer : The contract of donation is an example of a solemn contract which requires a specific form for the validity of the contract. without the specific form required by law for its perfection. in addition to the three essential requisites of consent. It is as if C agreed to the contract of loan without security. Don donated to Des a 1000 square-meter house and lot located in Manila. the parties must have the document notarized by a lawyer. (Remember that for the perfection of a real contract. 2012. if D fails to pay his obligation. mere consent is not enough. Don and Des then drafted and signed a “Deed of Donation”.) Therefore. C-O-C-F Example : A contract of donation of real property is an example of a solemn contract. (This is a private document only. The proper recourse of C is to file an action in court for the collection of the P200. After two years.000 unpaid obligation of D. object and cause. the contract of donation between Don and Des was made only in a private document.) After signing the written contract of donation. C will have no right to demand the delivery of the rolex watch for purposes of selling it at public auction. There is an additional requisite for the perfection of this kind of contract – that is. (The private document of donation is now converted into a public document. there must be delivery of the object or subject matter of the contract.) In this case. compliance by the parties with the formalities required by law for its validity or effectiveness. Article 749 requires that for a contract of donation of real property to be valid. it must be executed by the parties in a public instrument.Chapter I – General Provisions 11 contract of pledge between D and C. it is not enough that the parties draft and sign the document. Article 749 of the Civil Code requires that for the contract of donation to be valid. Therefore. Andy. In other words. Andy now wants to recover the house and lot from Des.

Question: Will the action for collection filed by M against B prosper? Answer : NO. The property may still be recovered from Des by Andy who is the rightful heir of the property left by his father Don. the mother of S.Chapter I – General Provisions 12 donation perfected between Don and Des. however. Neither can strangers claim benefits under the contract. B promised to deliver the balance of the purchase price to S the following day. S delivered the car but B paid only P1. 1: Contracts take effect only between the parties. (Article 1310). 2012. Strangers to a contract cannot be made liable for damages under the contract. 2012. 2012. When M. 6. failed to pay despite repeated demands from S. Hence. their assigns and heirs. Under the principle of relativity of contracts. B. S promised to sell his BMW car to B for P2M. On January 5. In the example above. it is stated that contracts take effect only between the parties.000. Only S is the proper party to file the collection case against B. Relativity of Contracts –  Under the principle of relativity of contracts. M filed a case against B in court for collection of the balance of P500. Even if M is the mother of S. . their assigns and heirs can have rights and obligations under the contract. and to file an action for collection in case of non-payment. the contract takes effect only between the parties. The delivery of the car and payment of the purchase price was set on January 15. let us assume that S specifically authorized his mother M to collect the purchase price of the car. M has no legal standing to file the action for collection against B. 2: Contracts can also bind the assigns of the parties. Example No. M cannot claim any rights under the contract by collecting the balance of the purchase price which B failed to pay. On January 15. heard about what happened. Example No. This means that only the parties. M is a stranger to the contract of sale between S and B.5M of the purchase price.

also instances when the contract takes effect ONLY between the parties. Under the last sentence of the first paragraph of Article 1311. and cannot bind even assigns and/or heirs. 2011. but only to the extent of whatever S inherited from D – that is. since M has been specifically authorized and allowed by her son to collect the purchase price and file an appropriate action against B. how much? Answer : YES. 3: Contracts have also binding effect on the heirs of the parties. Question: Can C collect the obligation from S? If so. .e. if he considers it his moral obligation to pay the entire debt of his father. however. that the contract will bind even the heirs.  There are. “(T)he heir is not liable beyond the value of the property he received from the decedent. since D is already dead. will an action for collection filed by M against B prosper? Answer : YES. but the estate of the deceased (the contracting party who died).5M. Example No. By the principle of relativity. he is not legally prohibited from doing so. cannot be transferred or passed on to another person). since S is a multimillionaire.5M. On November 30. P1. Hence. C may recover from S. When we say. D borrowed P2M from C due on December 30.” Of course. S is a multimillionaire with a total asset valued at P890M. (a) The rights and obligations arising from the contract may not be transmissible by their very nature. 2011. This is because M is now an assignee or authorized representative of S who can legally act in behalf of S. D died of a heart attack leaving his only son S an inheritance amounting to P1. This happens when the rights and obligations arising from the contract are not transmissible (i. the action for collection will prosper.Chapter I – General Provisions 13 Question: This time. S cannot be personally liable for the obligation of D even if D was his father. however. In this case. if D died without leaving any inheritance to S. This is only possible if one of the parties to a contract dies before the maturity date of the obligation. what the law actually means is not the heir personally. the contract can be made to bind the son S. This time..

however. 2012. Question: Can S. Example : Look at Example No. the rights and obligations of the parties under the contract will be extinguished. D. died on February 10.Chapter I – General Provisions 14 Example : D agreed to sing in the nightclub of C for 3 consecutive nights on February 12. there are cases when even third persons (not parties to the contract) may assume benefits. (c)The rights and obligations arising from the contract may not be transmissible by provision of law. Therefore. if one of the partners die. the only son of D. the dead partner ceases to be a partner and cannot transmit or pass on to his heirs the rights and obligations of a partner. under the contract. however. 3 above. . In other words. exceptions to this rule. or may be held liable for damages. The customers specially requested for D because D is the only singer in the country who can sing while walking on a rope in the air. 13 and 14. the personal qualification of D was the reason why C hired his services. 2012 in a car accident. The law (Article 1830[5]) specifically provides that the death of one of the partners in a partnership will extinguish the legal relationship.5M from his father D. The obligation of D will simply be extinguished. even if S inherited P1. Example : In a contract of partnership. (b) The rights and obligations arising from the contract may not be transmissible by stipulation of the parties. S cannot do what his father does – walk on a rope in the air while singing. S will no longer be bound under the contract. In this case. There are. because of the death of D. Assume that D and C specifically agreed in their contract that should one of them die before the maturity date of the obligation.  The general rule is that: strangers cannot be bound by a contract to which they are not parties. If this is the parties’ agreement in their contract. the partner who died cannot be replaced by his heirs in the partnership. In other words. C can no longer collect from S after the death of D. perform for his father? Answer : NO.

it is clear that there was a stipulation pour autrui granted by the parties D and C in favour of a third person T. of course. This presupposes. acceptance to the obligor is a stipulation in a contract a third person who has a right to provided he communicates his before its revocation. On June 30. that the . C changed his mind and asked D to deliver the entire amount of P110. for T’s assumption of benefits under the contract is that T communicate his acceptance of the benefits to D (the obligor) before the revocation (withdrawal or cancellation) of the benefit. third persons who come into possession of the object of the contract are bound thereby. however.000 from C payable after one year. and he can no longer collect the benefit on maturity date of the obligation. 2012. T went to C demanding for the payment of P10. on May 30. or on June 30. An important requirement. However. In this case. This is because C also owes T the amount of P10. Question: Can T collect from D? Answer : NO. T loses his right to claim under the contract. It was also agreed by the parties that on maturity date D will pay to C the principal. 2012. T was informed of the stipulation in his favour after the contract of loan between D and C was perfected. plus 10% interest. – A stipulation pour autrui conferring a favour upon demand its fulfilment. (b)In contracts creating real rights. T was informed by the parties of the agreement. but the interest of P10. 2012. C had already revoked the benefit as of May 30.000. Example : D borrowed P100. before T could signify his acceptance of such benefit to D. However. In this case.Chapter I – General Provisions 15 (a) In contracts containing a “stipulation pour autrui”.000 will be given to T. Therefore.000 to him as earlier agreed upon.000 to C on maturity date of the obligation. (Article 1312) Example : A contract of mortgage on land (“pagkasanlaan ng lupa”) is a real right which is binding not only between the mortgagor (“ang taong me pagkakautang na nagsasanla ng lupa”) and the mortgagee (“ang taong pinagkakautangan at pinagsasanlaan ng lupa”) but is also binding against the whole world.

that D did not make good his promise to B. D borrowed P2M from C payable on June 30. D failed to pay his P2M obligation to C. 2012. (c) In contracts entered into by the debtor to defraud his creditor(s). The contract of mortgage was duly registered in the Registry of Property of Quezon City. even if it was subject to a mortgage. Question: Can C still foreclose on the mortgage considering that the owner of the land now is already B? Answer : YES. 2012. was because D promised B that he will pay the obligation to C on maturity date. and is therefore annotated (recorded) in the title to the land now in the name of B. and B started occupying the land. B bought the land from D while the mortgage on the land in favour of C was still subsisting. D sold the same parcel of land to B for P3M. On maturity date. It turned out. even if B is not a party to the contract of mortgage between D and C. On June 30. As security for the loan. even if D is no longer the owner of the property mortgaged. B will be bound by the stipulations in the mortgage. D (mortgagor) mortgaged his parcel of land in Quezon City in favour of C (mortgagee). however. C can foreclose on the mortgage and sell the land at public auction to pay for D’s indebtedness. 2012. the contract of mortgage will simply be extinguished. Upon payment of the principal obligation of loan. Hence. Hence. if D is not able to pay on maturity date. In this case. This is because the only probable reason of B in buying the land from D. C will have the right to foreclose on the mortgage. The title of the land was transferred to the name of B. B now can go after D for the loss that he has suffered by reason of the foreclosure. The proper recourse of B will be to file an action against D for damages. (Article 1313) .Chapter I – General Provisions 16 contract of mortgage is registered in the Registry of Property of the place where the property is located. and sell the land at public auction to pay for the obligation. and for consequential damages arising from the foreclosure. On May 1. Under the contract. C will still have the right to sell the land at public auction. B cannot say that he was not aware of the mortgage because the mortgage was registered in the Registry of Property.

Chapter I – General Provisions 17 Example : D borrowed P6M from C payable on February 15. (Article 1314) In this case. a third person convinces in bad faith a contracting party to violate his contract with another. D squandered the entire P10M after gambling everyday at the Casino Filipino for two entire weeks.. In case of breach because of the inducement. when C demanded for payment of the P6M debt on February 15. NOTE: Under Article 1381(3). If the sale is cancelled. Question: Can C file an action to rescind or cancel the contract of sale between D and B considering that he is a stranger to the said contract of sale? Answer : YES. D has a house and lot in Manila valued at P8M. Hence. C then filed an action for the rescission or cancellation of the contract of sale between D and B. Thereafter. C. Under Article 1313. D sold his Manila house and lot for P10M to his friend B. who was aware of D’s intention to evade his obligation to C. 2011. D sold his property to B for purposes of defrauding C – that is.” When we discuss the chapter on rescissible contracts.. 2011. In this case. is given the right to attack the validity of the contract of sale (to which he is a stranger) by filing an action for its cancellation so that he may be paid his claims against the defrauding debtor. Why don’t you go and have a peep at the author’s commentaries under Article 1381(3).  (d)In contracts which have been violated by reason of the inducement of a third person. . you will have a more detailed study of the requirements for rescission. D was already insolvent without any other property.. C can then ask the court to attach the property and sell it at public action for the payment of D’s obligation. One of the rescissible contracts are “(T)hose undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. the defrauded creditor. and the ownership of the house and lot is reverted back to B. On January 28.. to evade the payment of his obligation to C on maturity date. the third person may be sued for damages by the other contracting party who suffered the damage. 2011.I know you feel tempted.just give in.

S then sold the land to M. It was stipulated that S should deliver the horse after two days. In this case. While waiting. It was also agreed by the parties that should S fail to deliver the lot. (Art. 1315) Example : S agreed to sell his horse to B. usage and law. B suffered business loses amounting to P1. visited S and convinced him to sell the land instead to M who is willing to pay P12M for the lot. Hence. which is the penalty that has been agreed upon for breach in the contract between S and B. Since S did not deliver the land to B. Also. The source of F’s obligation here is based on the theory of quasi-delict (Art. S has the obligation to deliver the horse after two days as agreed upon in the contract. Later. S did not feed the horse anymore. 1159) From the moment a contract is perfected. it is stated that “Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. since it was not part of the . B can sue F for damages even if F is a stranger to the contract of sale between S and B. S will be liable to pay B damages amounting to P500.000 as damages.Chapter I – General Provisions 18 Example : S agreed to sell his land to B for P5M. may be in keeping with good faith. a close friend. However. 7. B then filed an action for damages against F who was the one who convinced S to violate his contract.” (Art. 1162). F. Obligatory Force of Contracts –  Under the principle of the obligatory force of contracts. Question: Can F be made liable for damages under a contract to which he is a stranger? If so. how much will F be liable in damages to B? Answer : YES. B can recover from F only the amount of P500. according to their nature.000 as penalty.5M. “the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all the consequences which. since it was not part of the agreement. the liability of F for damages cannot be more than what S should have been liable for violation of his contract.

Chapter I – General Provisions 19 agreement.This article discusses the effect of an unauthorized contract. S had the obligation to feed the horse. 1163). After two days. before C gave the money to A. Question: Was S obliged to feed the horse and provide adequate shelter for it considering that it was never stipulated in the parties’ contract? Answer : YES. and law. the debtor is obliged to take care of the thing to be delivered with the proper diligence of a good father of a family (Art.000 from C. the horse fell ill and died. P never sent A to C to borrow the money. . The veterinarian said that the horse catched a deadly virus while soaked in heavy rains two nights before the delivery date. A tells C that P sent him to borrow the P50. . it is the agent who will be personally liable to the creditor under the contract. in the name of another person (the principal). S did not let the horse stay in the stable anymore.000. In any event. unless he ratifies or confirms it before the contract is revoked or cancelled by the other contracting party (the creditor in the unauthorized contract). Example: A went to C to borrow P50. Article 1317. Since the agent entered into the contract without the consent of the principal. however. Pending delivery of the object of a contract. Hence. usage. in truth and in fact. 8. he made A sign a promissory note with the following tenor: I promise to pay the sum of P50. An unauthorized contract is unenforceable against the principal (the debtor in the unauthorized contract). without the consent of that other person (the principal). 2012.000 to C on March 15. An unauthorized contract is one which is entered into by a person (the supposed agent). and provide it adequate shelter before the appointed delivery date even if nothing is said about the obligation in his contract with B as this is in keeping with good faith.

000 loan? Answer: NO. the proper remedy of C will be to proceed against A who himself signed the promissory note.000 if he indeed authorized A to borrow the money from C. This case is an example of an unauthorized contract. making P primarily liable on the note with the obligation to pay the P50. Of course. 2012 Reyes . and benefited from the P50.000 he received from C. Under Article 1403.000 to C on maturity date. Question: Can C compel P to pay the P50. C went to P to collect on the promissory note. even if P did not authorize A.) by A for P On March 15. In the instant case. an unenforceable contract (even if valid) cannot be enforced by the creditor against the debtor.Chapter I – General Provisions 20 P (Sgd. The debtor in this contract of loan appears to be P. this contract of loan will be unenforceable against P (the supposed debtor in the contract of loan) because P did not authorize A to contract it for him (P). P can always ratify or confirm the contract by paying C the P50. Harriet Linsangan August 19. But the contract of loan. 2012. instead of being contracted by P himself. We will study this provision again when we study Article 1403 (1) of the chapter on “Unenforceable Contracts”. You can take an advance look at the commentaries under Article 1403 (1) for a more detailed understanding of this provision. Atty. Under Article 1317. is contracted by A (the supposed authorized agent of A) in favour of P.

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