CONTRACTS

• Contract - A contract is a meeting of the minds between two persons

whereby one binds himself, with respect to the other, to give something
or to render some service [Art, 1305, CC]

How many parties should be in a contract?

- At least 2 persons or parties, because it is impossible for one to contract
with himself.

How can a contract be terminated? (pano matatapos ang contract?)

- there must be some consideration, either in the delivery of money or
something else, or in rendering some act or forbearance
- Check Art. 1305 – there is termination if something is already given, or a
service has already been rendered
- It can also be terminated by the stipulation of the parties (it can be
terminated at the option of one of the parties if that was stipulated in the
contract)

What is the difference between a contract and an agreement?

Contract Agreement

- It is an agreement that is - Agreements are those that

enforceable through legal CANNOT be enforced by action
proceedings (can be brought to in the courts
court if there is breach or - may not have all the necessary
failure to comply the contract) elements of a contract

NOTE: All contracts are agreements but not all agreements are contracts.

Characteristics of a Contract:

(1) Freedom or autonomy of contracts. — The 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, and public policy (Art. 1306.);

(2) Obligatoriness of contracts. — Obligations arising from contracts have

the force of law between the contracting parties and should be complied
with in good faith (Arts. 1159, 1315.);

(3) Mutuality of contracts. — Contracts must bind both and not one of the
contracting parties; their validity or compliance cannot be left to the will
of one of them (Art. 1308.);

(4) Consensuality of contracts. — Contracts are perfected, as a general

rule, by mere consent, and from that moment the parties are bound not
only by 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 (Art. 1315.); and

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 (5) Relativity of contracts. — Contracts take effect only between the
parties, their assigns and heirs, except in cases where the rights and
obligations arising from the contract are not transmissible by their
nature, or by stipulation, or by provision of law. (Art. 1311.)

a. Freedom or autonomy of contracts. — The 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, and public policy (Art. 1306.);

Can the parties stipulate in their contract that they are to sell
marijuana?
- No. although they have freedom to stipulate, this should not be contrary
to law.

Note:
- A contract cannot be given effect if it is contrary to law because law is
superior to a contract.

Is this a valid contract?

Anna promised to pay Berna P50,000 if Berna will abort her child.

- No, abortion is contrary to law and morals. (contrary to law and morals
mean saliwa o hindi sang ayon sa batas at moralidad)

What is custom?
- consist of habits and practices which through long usage have been
followed and enforced by society or some part of it as binding rules of
conduct. Ex:

During the Lenten season, Catholics give up on eating meat on Fridays.

Celebrating Christmas.
Getting married before cohabiting.

Is this a valid contract?

Ana and Ben are legally married. However, they want to annul their
marriage but doesn’t want to go to the court to file annulment. Instead,
they decided to go to a notary public to make an agreement stating that
they agreed to be legally separated from each other and they can already
remarry other people.

- NOT a valid contract. The annulment of marriage must be made only

through the annulment process in court. Since the law and society
considers marriage as a vital foundation of society, it cannot be easily
dispensed with by mere agreement.
- Annulment cannot be made through the agreement of the parties before
the notary public. Such act is contrary to law, morals, and good
customs.

b. Obligatoriness of contracts. — Obligations arising from contracts

have the force of law between the contracting parties and should be
complied with in good faith (Arts. 1159, 1315.);
- Pag pumasok ang parties sa contract, ang usapan nila sa kontrata ang
magiging batas sa kanila

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 b. Mutuality of contracts. — Contracts must bind both and not one of
the contracting parties; their validity or compliance cannot be left to
the will of one of them (Art. 1308.);
- Kapag pumasok ang parties sa contract, ang terms ng contract ay maga-
apply sa lahat ng partido sa contract

b. Consensuality of contracts. — Contracts are perfected, as a general

rule, by mere consent, and from that moment the parties are bound
not only by 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 (Art. 1315.); and
- Ang contract ay naging perfect o nagiging valid kapag nagbigay ng
consent ang mga parties na papasok dito

b. Relativity of contracts. — Contracts take effect only between the

parties, their assigns and heirs, except in cases where the rights and
obligations arising from the contract are not transmissible by their
nature, or by stipulation, or by provision of law. (Art. 1311.)
- Ang contract ay may epekto lamang sa mga parties na bumubuo dito, pati
na din sa kanilang mga assigns at tagapagmana

Who are the persons affected by a contract? -

Parties involved, their assigns and heirs.

May a third person be affected by the contract?

- Yes, Some of the examples are the following:
(1) In contracts containing a stipulation in favor of a third person
(stipulation pour autrui) (Art. 1311, par. 2.);
(2) In contracts creating real rights (Art. 1312.);
(3) In contracts entered into to defraud creditors (Art. 1313.);
(4) In contracts which have been violated at the inducement of the
third person (Art. 1314.);
(5) In contracts creating “status” (e.g., the resulting status of marriage
must be respected, even by strangers, while the contract is in force);
(6) In the quasi-contract of negotiorum gestio, the owner is bound in a
proper case, by contracts entered into by the “gestor’’ (unauthorized
manager) (Art. 2150.).

Stipulations pour atrui

- a 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 original parties.
Expressly na binibigyan yung third party ng right na magdemand sa
fulfillment ng contract
Pero dapat ni-communicate niya yung acceptance na siya yung papalit

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Stages of a Contract:

a. Preparation (conception or “generation”) – when negotiations are in

progress
b. Perfection (or birth) – when the parties come to an agreement
c. Consummation (or death) - when the contract is fully executed

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Classifications of Contracts:

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ELEMENTS OF A CONTRACT:

ESSENTIAL REQUISITES OF A CONTRACT:

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There is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established. [Art. 1318, CC]

1. Consent
- The meeting of the minds of the parties on the subject matter and cause of
the contract. The facts that the signatures of the witnesses and the
notary public were forged does not negate the existence of the contract
for as long as the parties consented to it. The signatures of the witnesses
and the notary public are necessary simply to make the contract binding
on the third person.

• Requisites
a. It must be manifested by the concurrence of the offer and acceptance
[Arts. 1319-1326, CC].
b. The contracting parties must possess the necessary legal capacity [Arts.
1327-1329, CC].
c. It must be intelligent, free, spontaneous, and real (not vitiated) [Arts.
1330-1346, CC]

Note: A contract is perfected by mere consent. From the moment of a meeting

of the offer and the acceptance upon the object and the cause that would
constitute the contract, consent arises.
- However, “the offer must be certain” and “the acceptance seasonable and
absolute; if qualified, the acceptance would merely constitute a
counteroffer.

Example of perfected contract:

Alice is selling her laptop to Jane for P15,000. Jane accepted the offer of
Alice and agreed to pay P15,000.

Example of non-perfected contract due to counteroffer:

Alice is selling her laptop to Jane for P15,000. Jane asked Alice if she
can buy the same for P12,000.

- The offer of Jane to buy the laptop on a lower price (P12,000 instead of
the selling price of P15,000) is called counteroffer.
- Here, there is NO meeting of the minds because the selling price of Alice
and the amount offered by Jane are not the same (no concurrence of
offer and acceptance).

To be considered as a perfected contract, the minds of the parties must meet

as to all the terms, and nothing is left open for further arrangement.

What is an offer?
- a proposal made by one party (offeror) to another to enter into a contract.
It is more than an expression of desire or hope. It is really a promise to
act or to refrain from acting on condition that the terms thereof are
accepted by the person (offeree) to whom it is made.

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Note: The offer must be certain or definite and clear, and not vague or
speculative so that the liability (or the rights) of the parties may be exactly fixed
because it is necessary that the acceptance be identical with the offer to create
a contract without any further act on the part of the offeror.

• Note: Business advertisements are not definite offers, unless they are
complete in all particulars necessary in a contract.

• The first one is NOT a definite offer because it is not complete

in important particulars. It does not have the exact place of
the property, it does not state if the P5,000,000 is to be paid in
cash, check, or by installment.

What is an acceptance?
- the manifestation by the offeree of his assent to the terms of the offer.
Without acceptance, there can be no meeting of the minds between the
parties. (Art. 1305.)

• An offer must be accepted to be considered as having meeting of the

minds.
• The acceptance of an offer must be absolute, unconditional or
unqualified, that is, it must be identical in all respects with that of the
offer so as to produce the consent or meeting of the minds necessary to
perfect a contract.

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How will you know if the acceptance is unqualified?
- If the acceptance has no condition or the acceptance does not modify the
terms of the offer

How should the acceptance be relayed? (Paano ipapalam yung

acceptance of offer?)
- Can be expressed or implied (implied means the acceptance can be
inferred from act or conduct)
- Can be verbal or written
- If electronic (email, text message, etc), the time of receipt would be at the
time the electronic data message or electronic document enters the
designated information system of the addressee

Note: If through letter – however, offer will only be treated as accepted on the time
that the offeror’s knowledge of the acceptance (can be from the time of receipt or
from the time he had knowledge of the offer but has not yet received the letter
physically)
• Once acceptance is given, may it still be revoked? (Pwede pa ba na i-cancel
ang acceptance?
o YES, the offeree may revoke provided that the revocation reaches
the offeror before the latter learns of the acceptance.
o This means that the revocation of acceptance must first reach the
offeror before he receives the offer of acceptance.

Offeree – a person or entity to whom an offer to enter into a contract is made

by another
- The person who can accept the offer made by the offeror

Offeror – the person who makes the offer

What is a counteroffer?
- An acceptance departing from the terms of the offer constitutes a
counteroffer.
- It has the effect of extinguishing the offer. It, in effect, constitutes a new
offer which the original offeror may accept or reject

Example of counteroffer:

Alice is selling her laptop to Jane for P15,000. Jane asked Alice if she
can buy the same for P12,000.

- The acceptance of Jane to buy the laptop, but on a lower price (P12,000
instead of the selling price of P15,000) is called counteroffer.

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 - Here, there is NO meeting of the minds because the offer price of Alice
and the amount offered by Jane are not the same (no concurrence of
offer and acceptance).

Is there acceptance by silence? If a person offered to sell his shoes to

another, and the other person is silent, will it be considered as
acceptance?
- As a rule, silence cannot be construed as acceptance. The acceptance
must be affirmatively and clearly made and evidenced by words or some
acts or conduct communicated to the offeror. The exceptions are: (a)
where the parties agree expressly or impliedly, that it shall amount to
acceptance;
(b) where specific provisions of law so declare (e.g., Arts. 1670,
18701873.); and
(c) where under the circumstances such silence constitutes estoppel.

Who is the person who makes the offer?

- Offeror

When is an offer terminated?

- When the offer is terminated by the offeree
- When the offer was not accepted

• Note that the offer can still be withdrawn before it is accepted. After
acceptance, the contract is already perfected.

• Under Article 1323, even if the offer is not withdrawn, its acceptance will
not produce a meeting of the minds in case the offer has already become
ineffective because of the death, civil interdiction, insanity, or insolvency
of either party before the conveyance of the acceptance to the offeror .

WHO ARE THE PERSONS NOT CAPACITATED TO ENTER INTO A

CONTRACT?

Unemancipated minors
- Does not reach the age of 18 years and are still subject to parental
authority

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Insane or demented person
- insanity must exist at the time of contracting

Deaf-mute
- persons who are deaf and dumb
- if the deaf-mute knows how to write, the contract is valid for then he is
capable of giving intelligent consent
- A person who does not know how to write, does not know how to read:
and one who knows how to read necessarily knows how to write. A
contract entered into by a deaf-mute who knows how to read is,
therefore, valid, although he cannot write because of some physical
reasons.

Why are these persons considered as disqualified from entering into

contracts?
- those persons mentioned can easily be the victims of fraud as they are
not capable of understanding
or knowing the nature or import of their actions. They can enter into a contract
only through a parent or guardian.

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