CONTRACTS Different kinds of Contracts
11 ASPECTS IN DETERMINING
CHAPTER I- General Provisions
Based on Dean Ulan Video Lecture
Art. 1305 Contracts- Meeting of minds between
two persons whereby one binds himself with respect
to another to give something or render some service.
Contracts are not just those which are reduced in
writing (signing)
Not necessarily expressed there are implied and
presumed contracts
According to Caguioa, the definition of contract is
incomplete because:
1. Only covers the concept of unilateral doesn’t
include bilateral contract
2. Only covers the type of contract that creates
an obligation does not include those which
extinguishes an obligation
3. Only covers consensual contracts, does not
cover formal contracts
Formal Contracts- contracts that meet a form,
mere consent is not sufficient. Parties should
adapt a form prescribed by law.
According to Caguioa it is defective because:
Meeting of minds between TWO persons
1. It connotes that it only requires 2 persons, but
in reality, there are contracts where it put in
only 1 person but representing 2 or more
parties. It should be two parties.
It excluded Auto Contracts- actually entered
into by two parties but represented by 1 person.
In a principal- agent relationship.
e.g., Principal to agent: enter a loan for me, enter
in in my behalf. Agent is also the creditor. It is
allowed.
CLASSIFICATION OF CONTRACT
1. As to Degree of dependence to previous
contract.
a. Principal Contract- Exists
independently on other contracts
b. Accessory Contract- cannot exist
without a principal contract (e.g.,
agreement to pay interest in loan)
c. Preparatory Contract- most
uncommon. Contracts which is not an end
by itself, but only a means of execution
by other contracts (e.g., contract of
agency: Principal enters agreement with
agent, for the agent to enter to subsequent
contracts in behalf of the principal).
2. As to the Risk Involved
a. Commutative Contract- each party give
and receives an equivalent or there is
mutual exchange of relative values (e.g.,
sale: both buyer and seller obligated to
fulfill prestation, both are burdened)
b. Aleatory Contracts- Parties reciprocally
bind themselves to give or do something
in consideration of what other shall give
or do upon happening an event uncertain
or which to occur an indeterminate time
(e.g., contract of insurance: car, you are
actually paying the insurance company
for nothing, the exchange will happen
only if the condition is fulfilled or if the
car is damaged.)
c. Adhesion Contract- One of the parties
imposes a ready-made form of contracts
which the other party may accept but
cannot modify.
GUEVARRA, A.
3. According to Perfection
a. Consensual- (mere consent) agreement
only, no formalities required (e.g.,
contract of carriage)
b. Real- (delivery of a thing) is not at the
moment of the consent given but only
upon the delivery of a thing which is the
object of the contract (e.g., pledge: telling
someone to take care of the car? NO. It
only happens when there is the delivery
of the car
6. According to Form or solemnity
a. Common or informal- doesn’t need a
form for its validity
b. Special or Formal- Needs a form for
validity
7. According to Purpose
a. Transfer of Ownership
b. Conveyance the use- contracts of lease
c. Security- surety or guarantee
d. Render some service

4. According to Name 8. According to subject matter

a. Nominate Contracts (contrato a. Things
nominado) - Contracts which has an b. Services- Employment
individuality of its own. Named by the c. Rights- assignment of rights (creditor to
civil code, special designation (e.g., sale, another person)
lease)
9. As to defects
b. Innominate- No individuality of its own, a. Rescissible
no specific name (1307). Based on other b. Voidable
quasi contracts. (prevent unjust c. Unenforceable
enrichment) d. Void

5. According to Cause 10. According to the nature of the vinculum

a. Onerous- The prestation is a give and
take, for a price. (e.g., sale: to give)
b. Remunerative- cause is the service or
benefit by which the remuneration is
given (almost similar to onerous, quid pro
quo) e.g., remunerative donation: onerous
donation: A is a care giver of a rich old
man for many years, were not expecting
any compensation but as a gesture of the
relatives a family donates a house and lot
to you in recognition of the services
rendered. The donation of the house and
lot is a not demandable.
c. Gratuitous- cause is the mere liberality
of the benefactor, altruistic feeling, not
inconsideration of something. (e.g.,
contribution to the poor)
produced
a. Unilateral- e.g., commodatum or
gratuitous deposit
b. Bilateral or sinalagmatico- e.g.,
purchase and sale
c. Reciprocal
STAGES OF CONTRACTS
1. Preparation or conception- The negotiation
stage. No tie yet.
2. Perfection or executory stage- Meeting of
minds is achieved. The juridical tie exists
here, upon perfection. (Dean: in contract of
sales, agreement equals perfection)
3. Consummation or executed stage- rights
are enforced or fulfilled. The juridical tie no
longer exists. The agreement can no longer be
GUEVARRA, A.
 insisted since it is already executed or
consummated.
Case: Estate of Orlando Llenado, et al. vs. Llenado
(March 4, 2009)
Lease with option to Lessee to renew must be
exercised.
Lease was entered into: Lease agreement could be
renewed after expiration. After the expiration, that is
the only term when the lessee communicated that
they wanted to renew. The contract is already
executed (consummated) so she cannot insist on the
right. Should have exercised the right before
expiration.
SC – “While the option to renew is an enforceable
right, it must be first exercised to be given effect.
xxx the option of the lessee gives the latter an
enforceable right to renew xxx such time as provided
for. xxx in the absence of a stipulation in the lease
requiring notice of the exercise of an option xxx to
be given within a certain time before the expiration
of the lease, xxx general rule is that the lessee must
exercise an option xxx to renew xxx and NOTIFY
the lessor thereof BEFORE or at least at the time of
the expiration of the original term xxx (Executory).
The silence of lessee after termination of original
period CANNOT mean to be that they opted to
renew xxx (Executed).
Notes:
- If they are only in the negotiation stage, can
the parties now stull withdraw? YES. There
is no existing juridical tie.
- In a contract of sale: proposal of the seller,
buyer considers it meetings have been made,
proposals and counter proposals. One
withdraws can it be done without the consent
of the other? YES. Still no meeting
- If there is a meeting of minds? No cannot
withdraw
- If it is executed already? Yes. The juridical
tie is extinguished.
ELEMENTS OF THE CONTRACT
Necessary to conclude the validity
1. Essential- requisites in all types of contracts,
must all be present. Most important
a. Common Elements:
- Consent
- Object
- Cause
b. Special Elements- only in certain
contracts
c. Extraordinary Elements- peculiar to
specific contract
2. Natural- those which are derived from the
nature of the contract and ordinarily
accompany the same; they are presumed by
law. (e.g., warranty of defect in sales)
3. Accidental – those which exist only when the
parties expressly provide for them for the
purpose of limiting or modifying the normal
effects of the contract. (e.g., agreement
relative to how payment shall be made;
manner of payment of the price)
Notes:
- All contracts are agreement, but are all
agreement considered to be contracts? NOT
ALL AGREEMENTS would RESULT TO A
CONTRACT.
How do we know that an agreement is a contract?
E.g., You have an agreement with your friend to
meet at a place. He never came, there is a breach.
Do you have a cause of action? Can you be
compensated?
- It would depend if your agreement with your
friend resulted to a contract.
There should be the characteristics of a contract
GUEVARRA, A.
CHARACTERISTICS OF CONTRACTS
1. Obligatory force of contracts
2. Mutuality
3. Autonomy
4. Relativity
5. Some authors include “Consensuality”
1. Obligatory force of Contracts (1306)
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 principle is explicitly
recognized in Arts. 1159, 1308, 1315 and 1356)
- Relate to 1159: Obligations arising from
contracts have the force of law between the
contracting parties and should be complied
with in good faith.
- It is a rule that once the contract is perfected,
it shall be of obligatory force upon both of
the contracting parties.
- If there is a breach of agreement, there is a
cause of action. Except if the contract is
contrary to law, morals, good customs, public
order or public policy.
e.g., A and B exchanging husbands every
weekend, upon seeing the husband of A, B
decided not to continue, is there a cause of
action for A? NO.
Requisites of Obligatory Contract
a. Perfected or executory
b. Valid
c. Enforceable
A. 4 types of LAW that should not be
disregarded by the agreement of the parties
in the Contracts (Manresa)
1. Law expressly declares the obligatory
character- it must be fulfilled (must, shall)
2. Laws which are prohibitive- not allowed to
enter to a contract which is prohibited by law.
3. The express fundamental principles of
justice- cannot overlook
4. Those laws which impose essential requisites
or requirements- without these requirements
provided by law, it cannot be valid. (e.g.,
formal contract, which requires a specific
form for its validity)
B. Agreement Against Public Policy
(Manresa)
1. Injurious to the interest of public
2. Contravenes some established interest of
society
3. Violates public statutes
4. Against morals
5. Trends to interfere with public welfare and
safety
6. At war with the interest of the society
7. In conflict with the morals of that time
C. Public Order
Signifies Public WEAL, sound healthy
prosperous state or well- being.
Any agreement that runs counters to public
Weal that which is permanent and essential in
the institution or community will be contrary
to public order.
Note: You must be able to distinguish what is the
violation, because these violations are not the same.
2. Mutuality (Art 1308)
- The contract must bind both parties
- The validity or fulfilment of a contract cannot
be left to the will of one of the contracting
parties.
- Validity or fulfilment may be left to (1) the
will of a third person, whose decision shall
not be binding until made known to both
the contracting parties (Art. 1309) or (2)
chance.
GUEVARRA, A.
 - Not depends exclusively upon the
uncontrolled will of one of the contracting
parties.
- If one of the parties find it inequitable: Court
may decide what is equitable, determine the
validity and fulfillment.
Cases: PNB v. CA (196 SCRA 536); (238 SCRA 20)
Philippine Savings Bank vs. Sspouses. Castillo, et al.
(May 30, 2011)
Held: The unilateral determination and
imposition of the increased rates (of interest in
loan) is violative of the principle of mutuality of
contracts under Art. 1308 xxx. A perusal of the
Promissory Note will readily show that the increase
or decrease of interest rates hinges solely on the
discretion of petitioner. It does not require the
conformity of the maker xxx. Any contract which
appears to be heavily weighted in favor of one of the
parties so as to lead to an unconscionable result, thus
partaking of the nature of a contract of adhesion, is
void. Any stipulation regarding the validity or
compliance of the contract left solely to the will of
one of the parties is likewise invalid.
Exception: Villa Christa v. Equitable PCIB (G.R.
No. 208336)
- Escalation Clause
- De Escalation Clause
- There should be the authorized increase of
the rate either by legislation or regulatory
board
- Notice
SC- No de-escalation clause, BUT prior to that PCIB
reduced interest for a certain time and notified/
allowed the borrower the discretion to continue with
the repriced rates.
“An escalation clause without a concomitant de-
escalation clause is void and ineffectual for violating
Presidential Decree No. 1684,1 otherwise known as
Amending Further Act No. 2655, As Amended,
Otherwise Known as "The Usury Law," as well as
the principle of mutuality of contracts unless the
established facts and circumstances, as well as the
admissions of the parties, indicate that the lender at
times lowered the interest rates, or, at least, allowed
the borrower the discretion to continue with the
repriced rates.”
Case: GF Equity Inc. v. Valenzona (G.R. 156841)
Valenzona, in contract with Petitioner to coach. “If
coach, in the sole opinion of the corporation fails to
exhibit competence, the corporation may terminate
contract.”
- Will not be given a chance to explain his side,
no due process
- This disregard the principle of mutuality
- It should not allow only one of the parties in
a stipulation, unilaterally renounce the
agreement.
Notes:
- Issue in contracts of lease re: Lessee’s option
to renew his/her contract or not. (Should be
exercised when the contract is still executory)
- It appears to be an agreement that the
decision of the continuity depends upon the
lessee and is binding upon the lessor.
- This provision is also questioned, it is alleged
that it is a disregard of mutuality. BUT the SC
made clear that it is not a violation of
mutuality.
Case: MIAA vs. Ding Velayo Sports Center (May 30,
2011)
Held: An express agreement which gives the lessee
the sole option to renew the lease is frequent and
subject to statutory restrictions, valid and binding on
the parties. This option, which is provided in the
same lease agreement, is fundamentally part of the
consideration in the contract xxx. It is a purely
executory contract and at most confers a right to
GUEVARRA, A.
obtain a renewal if there is compliance with the
conditions on which the right is made to depend. The
right of renewal constitutes a part of the lessee's
interest in the land and forms a substantial and
integral part of the agreement. The fact that such
option is binding only on the lessor and can be
exercised only by the lessee does not render it void
for lack of mutuality. After all, the lessor is free to
give or not to give the option to the lessee. xxx
Mutuality obtains in such a contract and equality
exists between the lessor and the lessee since they
remain with the same faculties in respect to
fulfillment.
- Although it appears to be something which is
solely dependent to the lessee, the lessee is
actually also subject to the compliance of the
entire agreement.
Notes:
- In a case where the lessee is given an option
to renew the lease, where the period is for
an unreasonable amount of time.
- Amount of rent has become so unfair,
unjust unconsolably low because of change
in condition, without the same privilege
given to the lessor is considered violative of
the mutuality principle.
- E.g., 1990, you open the property for rent for
2,000 for 10 years. Property value increased.
(1,000/ sqm became 2,000/sqm). The lessee
cannot renew since it would be violative of
the principle of mutuality.
Case: Encarnacion v. Baldomar (G.R. L-264)
In this case, there is no specific term or period
fixed. If the lessee wanted to continue, he just
needs to pay the rentals if he wanted to end the
contract he just needs to discontinue paying.
SC- “Fulfillment of the contract would then
depend solely and exclusively upon their free and
uncontrolled choice between continuing paying
the rentals or not, completely depriving the
owner of all say in the matter. If this defense were
to be allowed, so long as defendants elected to
continue the lease by continuing the payment of
the rentals, the owner would never be able to
discontinue it.
Notes:
- Issue of the issue of the validity of the
contract of Adhesion. Isn’t it a disregard of
mutuality?
- SC Said that it is binding and Valid
Case of PCIB v. CA: Contracts of adhesion are
binding as ordinary contracts because the party
who adhere to the contract is free to reject it
entirely.
Case of Ermitano v. CA, BPI: BUT a contract
of adhesion is void if it is contrary to public
policy, if the weaker party is bound to deal with
the dominant party and is reduced to the
alternative of taking or leaving it, completely
deprived of the opportunity of equal footing the
validity must be determined in the light of the
circumstances under which the stipulation is
intended to apply. There is a clause here which
states that: in the event that the credit card was
stolen, the card holder continues to be liable for
the purchases made under the stolen card until the
BPI Express Corp, communicated such loss to
the establishment. This puts the card holder in the
mercy of the credit card company. This is clearly
unfair.
3. Autonomy (Art. 1306)
- Independence, not being subject to
authority of another or other external
interference
- The contracting parties may establish such
stipulations, clauses, terms and conditions as
they deem convenient.
- It may not be change, or the tenor altered by
a third party.
- Any change may only be possible by mutual
agreement by the parties.
GUEVARRA, A.
 - It also prevents the state from intervening. Notes:
- Based on Art III, Sec 10 of the 1987
- In effect autonomy cannot be exerted
Constitution: No law impairing the
against the state’s exercise of Police Power.
obligation of contracts shall be passed.
- Exercise of Parens Patriae (father of the
EXCEPTIONS: People).
- Parens Patriae illustrated particularly in
- If what is stipulated is contrary to law, public
Contracts of Adhesion. Weakening the
policy, public order, good customs or good
consensual nature of contracts giving undue
morals; the state may intervene through its
advantage to one of the contracting practices
police power.
the state to the government will come in as an
- Contrary to law: expressly obligatory, “shall
equalizer.
or must”; prohibitory “prohibits an act.”
- Labor Code on minimum wage, minimum
- Which disregards express fundamentals
mandatory benefits, it is no longer based on
principles of justice which cannot be
the agreement of the parties but is dictated by
overlooked by the parties.
the state.
- Those provisions which disregards the
- Labor Contract: where the employer may
necessity of the existence of a valid contract
impose to the employee a wage lower than
(3 essential requisites).
minimum may be disregarded.
Case: Sanggalang v. IAC (168 SCRA 634) 4. Relativity (Art. 1311) ‘kamag-anak’
- Contracts take effect only between parties,
- The Bel-Air subdivision in Makati their assigns and heirs.
- Developer imposed restrictions that the lot - Concept of Relativity: Res inter alios acta,
owners should observe or adapt. One of the aliis nec nocet nec prodest (Latin for "a thing
provisions is to limit the use of property. done between others does not harm or benefit
Owners cannot use the lot for commercial others")
purposes only residential. - A contract can only obligate the parties who
- Subsequently, the Metropolitan Commission had entered into it and that concomitantly can
issued an ordinance where it declares that a neither favor nor prejudice 3rd persons.
portion of the Bel-Air property may now be
utilized as commercial purposes.
- The issue is, can the MC Ordinance disregard
A. LIMITATIONS: Scope of obligatoriness is
the agreement between Bel-Air and the land
only limited to parties exclude the assignees
owners?
and heirs.
- SC- “The the Metro Manila Commission
- HOWEVER, with respect to assignees or
(MMC) that reclassified Jupiter Street into
heirs, the general rule under Art. 1311 is not
high density commercial (C-3) zone, is an
applicable if the rights and obligations
exercise of Police Power. Such ordinance
arising from the contract are not
would prevail over the deed of restrictions of
transmissible or purely personal.
the lot owners of Bel-Air, restraining the use
of the lots for residential purposes.” First Limitation: if NOT Transmissible
- This is due to increasing population.
How do you know if the contracts are not
- Government is allowed to intervene,
transmissible?
disregarding the autonomy of the contract.
GUEVARRA, A.
 a. Stipulated by parties b. When it is prohibited by law
e.g., contract of lease, lessee- lessor; the e.g., ***self-explanatory
lessor wants that the lessee does not sub-
lease the lease premises to third parties. c. Nature of the Contract would not allow
e.g., Those obligations arising from the obligation and rights to be
contracts which are extinguished due to transmissible
the death or incapacity of the debtor;
e.g., Contracts which requires the
Right of Usufruct: right of the person
personal skill or identity of the obligor.
leasing property, the property produce
The portrait example: I asked you to paint
fruits the usufructuary will allow him to
my portrait, you are the one I desire to
use/ appropriate the fruits. (property with
paint it if you failed to fulfill it during
mango trees). Usufructuary by law, is not
your lifetime, you cannot assign it to your
transmissible; if you do not expressly
heirs or other people.
prohibit your lessee to enter to a sublease,
he would have that right to do so, because Second Limitation: if Reduces the scope of the
the right of a lessee is transmissible. extent of obligatoriness of the provisions of the
contract.
Case of Estate of Llenado v Llenado (G.R. 145736):
when we mention heirs. The heirs have a limited
A contract of lease is, therefore, generally
scope of liability that they inherit from their
transmissible to the heirs of the lessor or lessee. It
ascendant.
involves a property right and, as such, the death of a
party does not excuse non-performance of the e.g., Hypo Facts: A father who has a son, incurred
contract. an obligation of 2M arising from a contract of loan,
the father sadly failed to pay the obligation during his
Notes:
lifetime. Obligation goes down to the son.
- Same principle applies to the option to renew
- Q: Will the son be liable to pay the entire
the lease.
obligation of 2M?
- Lease is transmissible.
A: It depends upon the extent of successional
Hypo Facts: If the lessor leases out to the lessee a rights the son acquired by virtue of
property for a period, before the period expire both inheritance.
the lessee and the lessor dies, leaving children of
If the father who left the unpaid obligation also left
lessor and children of lessee.
to the son assets. In order for the son to be liable for
Q: Can the children of lessee insist on the continuity
the entire 2M, the assets that the son acquired to the
of the lease agreement?
inheritance must be at least equal to or more than the
A: Yes, but not insofar as the usufructuary is obligation.
concerned.
In this case, it would no longer be the parties, heirs
and assignees BUT will only be limited to the parties.
Even insofar as provisions which gives lessees that
gives the lessee the option to renew or first refusal,
these are transmissible rights; the lessee may assign
these to a third person.
GUEVARRA, A.
 B. EXCEPTIONS: Scope of the effect of the
obligatoriness will be expanded.
IMPORTANT: How do these become exceptions to
the rule of Relativity in Contract?
1. Beneficial stipulation/stipulation pour
autrui – A stipulation in favor of a third
person
- Par 2 of Art. 1311: 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.
- It is an accessory contract and NOT a
principal contract.
- E.g., You extend to Dean a loan of 5M with
interests. But there is the stipulation re:
interest. Dean will pay the interest to the SBU
scholarship fund (3rd party benefitted).
3 Parties:
a. Promisor- Dean
b. Promisee- You
c. Beneficiary- SBU
Case: Limitless Potentials, Inc. v. Quilala (462
SCRA 586) 3 types of Beneficiaries
1. Donee-Beneficiary- Stipulation where the
nature of the gift and the sole benefit of the
3rd person. Gratuitous
2. Creditor Beneficiary- When the obligation
is due from the promisee to the 3rd person,
which the former seeks to discharge by
means of such stipulation. Payment by 3rd
person e.g., Dean agreed to pay you the
interest, the amount of interest will be paid to
your creditor (SBU).
3. Incidental beneficiary- when there is
absence of the intent to benefit a 3rd party, an
incidental beneficiary is one who benefits
from the contract of another, but whose
benefit is not the intent of the contracting
parties. Here there is no right or obligation
under the contract. This is NOT contemplated
in the concept of pour autrui in the civil code.
Notes:
Issue: for the validity of Donee Beneficiary: Does it
need to comply with the requisites of a valid
donation? (contract with forms)
A: NO. It does not require the formalities of a valid
donation to be binding. What it merely requires is
that it is expressly stated in the contract by the parties
of their intention to provide for the benefit of the 3 rd
party and the 3rd party communicates acceptance.
e.g., Credit card: once you acquire it, you are
considered to be a creditor-beneficiary. When the
company offers to buyers, it would have to enter to
an agreement to commercial establishments to honor
the credit card. The contract between the company
and the commercial establishment is a provision pour
autrui.
Case: Mandarin Villa Inc. v. CA (G.R. 119850)
Lawyer (Atty. De Jesus) acquired a bankard (PCI),
he presented the credit card to pay Mandarin but is
dishonored. The reason why Mandarin dishonored is
that they cannot be compelled to accept payment in
card because it is not in cash (legal tender to which
the corporation be compelled).
It was found that Mandarin has an agreement with
bankard to accept.
SC- Card holder had the right to compel in the basis
of pour autrui between Mandarin Villa and Credit
Card Company (PCI).
Essential Requisites:
a. Clear Deliberate intention of conferring a
favor to a 3rd person
b. There should be no compensation, 3rd party
not required to compensate for what he
received
c. Stipulation is not an entire contract, should be
an accessory
GUEVARRA, A.
 d. Parties do not have any legal representation
or authorized by the 3rd party. Separate
interest.
e. 3rd party must accept and communicate such
acceptance.
*Provision, although accessory is NOT necessarily
extinguished even though the principal is
extinguished.
IF a creditor condones a debtor of the principal
obligation, if there is a contractor autrui, the CA will
not necessarily be affected of the condonation or
remission. BUT in the Autrui provision, if there has
already been a communication of acceptance, the
condonation of the principal will not result to the
extinguishment of the accessory.
2. Art. 1312: When the third person comes
into possession of the object of a contract
creating real rights
- Real Rights: Enforceable against the whole
world.
e.g., If a seller (S) sells to a buyer (B) to a car,
before the delivery what is the right of the
buyer re: car? A: it is only a personal right
because Art. 1164: Real Right is only
acquired when there has been delivery.
- IF S delivers the car to B, B’s right to the car
is already real.
- What is the relation of this right to the
exceptions to the rule of relativity?
It seeks to tell us that: Because it is a real
right, the right of B to the car is not only
enforceable against S but to the world or
against any other person. So, the “any other
person” is now in effect, affected by the
agreement. It creates an obligation to the 3 rd
person.
- The obligation of the 3rd person: not to get the
car from B.
3. Art 1313: Where the contract is entered
into in order to defraud a creditor.
- Creditor has the right to ask for the
recission of the contract.
What are the steps that a creditor could take in
order to fully satisfy the judgement claim
against his debtor?
Answer: Enforce the judgment, (hanap ng
kwarta) ex. 10M, 2M lang money may
balance pa 8M. Creditor may seek for the
assets (personal or real) to be attached which
will be sold at an auction.
- This will be the time when the debtor may
enter into contracts that will defraud the
creditor; if these assets are to be attached and
sold at public auctions, the title or ownership
generally still belongs to the debtor.
- Hypo Scenario: So, for instance, if the
debtor sees that the creditor is seeking the
attachment of such property, before the C ask
the attachment of such condo unit, the D sells
the condo unit to (mistress, sibling etc.) so the
sheriff will be notified that the property is no
longer in the name of the D, but in the name
of another person. If this instance is done by
D to avoid the action of C, this falls under
defrauding a creditor.
In the case, the creditor may rescind it. ***to
be discussed in detail.
4. Art. 1314: Tortious Interference Where the
third person induces a contracting party to
violate his contract. Such third person can be
held liable for damages. (Tort interferer).
- Conduct is stirred by unlawful motive.
- The effect on 3rd persons is the obligation to
pay for damages.
e.g., contract between A and B, contract of
sale. A already sold the house to B, no
delivery only executory contract. C, a 3rd
party told A “wag mo nang ituloy yung
GUEVARRA, A.
 contract with B, tarantado yan”. Because of
this inducement, A does not push through
with it.
- B would have a cause of action against A and
C. He can sue for damages.
Tortious Interference- C
Requisites of Tortious Interference:
a. Existence of the valid contract
b. 3rd person has knowledge about the existing
contact
c. The interference of the 3rd person is with
malice, without justification or excuse.
- 3rd person’s goal is to injure or damage a
party, must have malice.
- Acted with malice, driven with purely
impious reasons to injure the plaintiff.
When do we know if there is malice?
Case: So Ping Bun v. CA; GilChrist v. Cuddy
- Would economic or business advantages
or economic gain be a justifiable reason in
order to avoid being a tortious interferer?
Hypo Facts: e.g., Lessor A, entered into an
agreement with Lessee B. Contract is executed,
all that is needed to be done is B to acquire the
possession of the lease premises (hardware). But
before B is able to occupy and use the hardware.
3rd part C, saw that the location and the hardware
itself would be the best place for him to put up
his new business. No other place could substitute
insofar as the advantages if C acquired it. C urged
A to discontinue the contract, and C induced A
that he will ‘triple’ the payment for the lease. A,
adhered to the condition and breached the
agreement with B.
Q: Can C be a tortious interferor? (Art. 1314)
A: SC- In GilChrist: “There was no malice
beyond this desire; but this fact does not
relieve them of the legal liability for
interfering with that contract and causing its
breach.”
- Where there was no malice in the
interference of a contract and the impose
behind one’s conduct lies on a proper
business interest rather than an unlawful
motive, a party cannot be a malicious
interferer.
- Where the alleged interferer is financially
interested or there would be economic benefit
and this motivates his conduct, it cannot be
said that he is a malicious intermeddler or
tortious interferer.
5. Accion directa- Allowed by law in certain
cases.
- Law that allows certain parties to go directly
against another for damages on the basis of a
contract to which this plaintiff may not be a
party to.
e.g., Art. 1729: “Those who put their labor
upon or furnish materials for a piece of work
undertaken by the contractor have an action
against the owner up to the amount owing
from the latter to the contractor at the time the
claim is made.”
Hypo Facts: A, a contractor entered into a contract
with B, for the construction of B’s house. A, in order
to fulfill the commitment to build B’s house, he
would enter contracts with suppliers or laborers.
With respect to A’s contracts with suppliers and
laborers, B is a 3rd party. For instance, if there is a
breach of A with a supplier (plywood unpaid). A,
already used the plywood for B’s house. In this case,
the supplier may directly sue B.
It is the same when e.g., Laborers, entered contract
with A, B is a 3rd person to this contract. If B failed
to pay the wages of the laborers, can laborers run
after B? YES.
Art. 1652: Lessor having a right of accion directa
against sublessee.
GUEVARRA, A.
Art. 1893: principal has the right of AD against
subagents
Art. 1608: where a vendor arrectro would have an
AD right against transferee of vendors.
6. Contracts creating “status”
- Marriage contract, status becomes “married”
- You are “married”, not just to your spouse
but even to 3rd parties. Your status is
married.

7. In suspension of payments and

compositions under the Insolvency Law
***To be discussed in future subjects

8. Collecting Bargaining Agreement (CBA)

***To be discussed in labor relations
- It is a contract entered between the employer
and the union, in behalf of its member unions.
- Non-labor union members may in effect be
benefited by the CBA; they just need to pay a
fee.

9. Negotiorum gestio (Art. 2150-2151)

***just read the provisions again and examine
why.
10. Art. 1336: Violence and intimidation
employed by 3rd Persons.
- Almost similar to tortious interferor, but
what is applied by the 3rd party is violence
and intimidation.
- The 3rd party, even if not a party of the
contract, may be held liable by the
contracting party who may have been forced
to enter or prevented from fulfilling the
contract.

GUEVARRA, A.