I.

Definition

a) Contract
- Is the meeting of minds between two persons whereby one binds himself with respect
to the other, to give something or render a service.

b) Stipulation 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 obligee or the orginal parties.

c) Real contract
- Perfected not merely by consent but it is perfected by he delivery of the thing
subject matter of the contract.
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d) Perfection of a contract
- First is the preparation or negotitation – where all steps are taken by the parties
leading to the execution of the contract. Second is Perfection or birth – this is when
have come to the decision or agreement on the subject matter and the cause of the
contract. Third is, Consumnation or termination – when the parties have performed
their respective parts of the obligation and the contract may be said to have been
fully accomploished in which it will be extinguished .

II. Discussions

1. May a third person acquire rights under a contract to which he is a stranger or be bound
thereby? Explain.
- According to Article 1311, A party’s right and obligations dervied from a contract are
transmissible to the successors. But due to article 1312 there is an exception it
states that a third person who come into the possession of the object of a contract
over which there is a real right, are bound thereby even if they are not in the same
parties.

But if the contract clearlt stipulates a favor of a third person then we may be able to
demand its fulfillment provided that he expressly communicated to the obligor his
acceptance before the contract is revoked. So contracting parties should confer a
benefito on a third party because incidental advantage or interest is not enough.

2. How are contracts perfected?

 - Contracts are perfected by mutual consent by the parties regarding the subject
matter and cause of the contract. But thare excenption, inlcuding real contracts and
solem contracts where it is requiried by the law.

3. When will a person be bound by a contract entered into by another?

- A person will be bound by a countract entered into by another is when the other
person is duly authorized ,expressly or impliedly by the person in whose name he
contracts or he must have, by law.

4. Give the effect of the perfection of a contract.

- The effect of the perfection of a contract is the extingushment of obligation or
contract.

III. Problems

Explain or state briefly the rule or reason for your answer.

1. A and B entered into a contract not specifically provided in the civil code. Is the contract valid and
binding?

- Yes, the contact of A and B is vlaid because it is an innominate contract which means
that it has no specific name or designation in law. As a result, a contract will not be deemed void
if it does not stritly follow the Civil Codes Standard Contracts.

2. S (seller) and B (Buyer) entered into a contract of sale. It was agreed that the price shall be
determined by T, a third person. Can S or B refuse to be bound by T’s determination of the price if he
does not agree with the amount thereof?

- Yes, because the amount depends on their agreement, S and B can refuse to be bound
with the determined amount since the determination shall not be obliatory if it is
inequitable. Also If the seller and buyer mutually agree to void or not follow that
provision of their contract and to proceed at a different price, or even to walk away,
then there is no obligation on both parties to proceed.