Title: Contracts

Study Guide
I. DEFINITIONS
1. Contracts
-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
2. Stipulation of pour autrui
Stipulation in a contract clearly and deliberately conferring a favor upon a third person
who has a right to demand its fulfillment provided he communicates his acceptance to the
obligor before its revocation by the oblige or the original parties
3. Real Contract
Which perfected by the delivery of the thing subject matter of the contract  Ex.
Depositum, pledge, commodatum
4. Perfection of Contract
Stages in the life of a contract
1. Preparation/ Negotiation – includes all the steps taken by the parties leading to the
perfection of the contract. The parties have not yet arrived at any definite agreement
2. Perfection/ Birth – this is when the parties have come to a definite agreement or
meeting of the minds regarding to the subject matter and cause of the contract
3. Consummation/ Termination – this is when the parties have performed their
respective obligations and the contract may be said to have been fully accomplished or
executed, resulting in the extinguishment or termination thereof. A contract may also be
terminated after its perfection, not by performance but by mutual agreement of the parties
II. DISCUSSION
1. May a third person acquire rights under a contract to which he is a stranger or be bound
thereby?
-based on article 1311, Contracts take effect only in between the parties, their assigns
and heirs, except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The heirs is not liable
beyond the value of the property he received from the decedent. If a contract should contain
some stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation. A mere incidental benefit or
interest of a person is not sufficient. The contracting parties must have clearly deliberately
conferred a favor upon a third person. In addition, under article 1312, In contracts creating real
rights, third persons who come into possession of the object of the contract are bound thereby,
subject to the provisions of the Mortgage Law and the Land Registration law, Article 1313,
Creditors are protected in cases of contracts intended to defraud them and lastly is article 1314,
Any third person who induces another to violate his contract shall be liable for damages to the
other contracting party
2. How are contracts perfected?
-According to 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.
3. When will the a person be bound by a contract entered into by another?
-According to 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. A contract entered
into in the name of another by one who has no authority or legal representation, or who has
acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by
the person on whose behalf it has been executed, before it is revoked by the other contracting
party.
4. Give the effect of the perfection of a contract
-1) To the fulfillment of what has been expressly stipulated. 2) To all the consequences
which according to the their nature may be in keeping with good faith, usage, and law.

III. Problems
1. A and B entered in to a contract not specifically provided in the Civil Code. Is the contract
valid and binding?
-under 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.
2. S(seller) and B(buyer) entered into a contract of sale. It was agreed that the price of
the sale shall be determined by T, not a party to the contract.
-According to Equality of Contracts, agreement cannot be left to the will of one
of the contracting parties. However, under Article 1309, the determination of its
performance may be left to a third person since the decision has been made known to
the contracting parties.
3. D owes C P 20,000.00 both are painters. It was agreed that instead of paying C, D will
paint the house of E to which E expressed his conformity to C, whose services was
previously contracted by E. Has E the right to enforce the stipulation between C and D, even
if he is not a party to the contract? Why?
-E has the right to enforce the stipulation between C and D, even if he is not a party to
the contract, because under Article 1311, Contracts take effect only in between the parties,
their assigns and heirs, except in case where the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation or by provision of law. The heirs is not
liable beyond the value of the property he received from the decedent. If a contract should
contain some stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation. A mere incidental benefit or
interest of a person is not sufficient. The contracting parties must have clearly deliberately
conferred a favor upon a third person.
4. X made an office desk for Y. X told Y that the latter may pay whatever amount he would
like to pay for it. When the desk was finished Y offered to pay P 2,000.but instead X
demanded P 3,000.00. Is X entitled to paid P 3,000.00?

-X is not entitled to pay P3,000.00, because under 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.