CONTRACTS

There was an inquiry made by a client. According to him:

cASE.

My friend and I had a verbal agreement regarding the renovation of his

house in Mandaluyong City. We stipulated that I will shoulder all the
expenses and materials of the construction, then my friend will just refund
me the cost of renovation. He seemed to be evading me after I told him
that the project was already finished and the cost amounted to
P124,000.00. Can I collect from him even if I do not have a written
agreement to support my claim?

What will be the possible advise can you give to this client:

YES. You can collect from your friend even in the absence of any written
agreement to support your claim. A contract was perfected from the
moment both of you agreed as to the renovation of his house. Under Article
1305 of the Civil Code of the Philippines, 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.

Contracts shall be obligatory, in whatever form they may have been

entered into, provided all the essential requisites for their validity are
present (Article 1356, Ibid). The following are the requisites of a
contract:

1. Consent of the contracting parties;

2. Object certain which is the subject of the contract; and
3. Cause of the obligation which is established (Article 1318, Id.).

The contract that you entered into should have been in writing to be
enforced as required under the Statute of Frauds (Article 1403 (2), Id.),
however, this will not apply if the contract is already executed like the one
in your case. This finds support from the pronouncement of the Supreme
Court.

Foremost of these is that the Statute of Frauds expressed in Article 1403,

par. (2), of the Civil Code applies only to executory contracts, i.e., those
where no performance has yet been made. Stated a bit differently, the legal
consequence of non-compliance with the Statute does not come into play
where the contract in question is completed, executed, or partially
consummated.

You need to send a demand letter to your friend for the payment of
P124,000.00. In case of non-payment, you can initiate a collection of sum
of money before the Municipal Trial Court designated as Small Claims
Court where you or your friend resides, since the amount you intend to
collect does not exceed P200,000.00 (Section 2, 2016 Revised Rules of
Procedure for Small Claims Cases (A.M. No. 08-8-7-SC).

Contract and obligation distinguished.

Contract is one of the sources of obligation (Art 1157) On the

other hand, obligation is a legal tie or relation itself that exists after a
contract has been entered into. Hence, there can be no contract if
there is no obligation accepted in return for some benefit to be
enjoyed. But an obligation may exist without the contract such as the
obligation imposed by law to pay taxes.

Article 1306
The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public
policy.
This article provides the limitations to which contracting parties may
establish in the stipulations of the contract. These limitations are:

1. Limitations by law- Stipulations in a contract must not be in violation of

mandatory and prohibitory laws, unless the law itself authorizes the
validity of such acts. As a rule, an existing law enters and into and
forms part of a valid contract without the need for the parties
expressly making reference to it.
2. Limitations by Morals- Morals refer to norms of conduct universally
accepted as rules not based on law but on principles of morality.
Morality in turn is based on man’s faculty of knowing how to
distinguish between what is right from what is wrong.
3. Limitations by Good Customs- Good customs refer to the generally
accepted principles of morality which have received some social and
practical recognition in the community for a long period of time. Thus,
contracts which have immoral aims are contrary to good customs.
4. Limitations by Public Order- Public order refers to public safety of the
people which includes the maintenance of peace and order both in
the entire country and in a particular community.
5. Limitations by Public Policy- Public policy is the express will of the
State. A contract is contrary to public policy if it has a tendency to
injure the public, is against the public good or contravene some
established interest of society, or tends clearly to undermine the
security of the individuals.

Another consultation.
Pedro came to ask because his friend Juan borrowed money from him in
the amount Php 350,000. Juan had a beautiful car and sold it to his brother
James in order for Pedro not to attach the said car in payment of his debt.
Juan had no other property.
Pedro who is stranger to the contract between James and Juan asked for
the rescission or cancellation of the sale in order that he may be paid in his
claims.
Issue: A contract only affects two persons, may it also affect a third
person who is not a party to the contract.

Ruling. Yes. In this case, a creditor is protected in cases of contracts

intended to defraud him. Art 1313. Here the creditor is given the right to
impugn the contract of his debtor that was entered in order to defraud him.

Art. 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.

Facts

Clarin, the petitioner, was one the owners of 10 hectare land in Bohol. In
1959, he executed a contract of sale to Rulona, the respondent. The
parties agreed that the price of the land would be P2, 500 with a down
payment of P1, 000 and the remaining balance would be paid monthly at
P100.00 per month. The respondent paid the down payment together with
the first installment.

The petitioner then returned the payment of Rulona because the co-owners
of the land did not agreed with the sale and the former argued that there
was no perfected sale between him and Rulona as he said that the sale
was subject to the condition that the other co-owners should give their
consent to the sale.

Issue

Whether or not there was a perfected contract of sale.

Held

Yes, there is. During trial there were 3 documents shown. Exhibit A shows
that upon payment of P800.00 by Rulona, a survey of the land was
authorized. Exhibit B shows that P200.00, part of the down payment was
paid to Clarin and that the 1stinstallment of P100.00 was also made.
Though these exhibits are not the Contract of Sale, they show that there
was a contract of sale between Rulona and Clarin.

Construing Exhibits A and B together, it can be seen that the Clarin agreed
to sell and Rulona agreed to buy a definite object, that is, 10 hectares of
land which is part and parcel of Lot 20 PLD No. 4, owned in common by the
Clarin and his sisters although the boundaries of the 10 hectares would be
delineated at a later date. The parties also agreed on a definite price which
is P2,500.00. Exhibit B further shows that Clarin has received from Rulona
as initial payment, the amount of P800.00. Hence, it cannot be denied that
there was a perfected contract of sale between the parties and that such
contract was already partially executed when the petitioner received the
initial payment of P800.00. The latter’s acceptance of the payment clearly
showed his consent to the contract thereby precluding him from rejecting its
binding effect.