GENERAL PROVISIONS

OF
CONTRACTS
ART 1305 - 1317
 GENERAL PROVISIONS
ART. 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. (1254a)

 In a contract, there must be at least two persons or parties.

 However, a single person may create a contract by himself where he
represents distinct interests (subject to specific prohibitions of law against the
presence of adverse or conflicting interests.)
 GENERAL PROVISIONS

CONTRACT OBLIGATION
 One of the sources of obligations  the legal tie or relation itself that
exists after a contract has been
entered into

 There can be no contract if there is no obligation but an obligation may

exist without a contract.
 GENERAL PROVISIONS

CONTRACT AGREEMENT
 agreements enforceable through  broader than contract because the
legal proceedings former may not have all the elements
of a contract

 All contracts are agreements but not all agreements are contracts.
 GENERAL PROVISIONS
Case #117. Batchelder vs Central Bank, GR L-25071 (March 29, 1972)

FACTS
Monetary Board of Central Bank issued a monetary policy authorizing Filipino
and foreign enterprises to utilize 90% of their total earnings surrendered to banks.
Batchelder applied for a license to utilize his dollar earnings arguing that the
monetary policy creates contractual obligation but the Central Bank denied his
application.

ISSUE
Whether or not monetary policy creates a contract.
 GENERAL PROVISIONS

Case #117. Batchelder vs Central Bank, GR L-25071 (March 29, 1972)

RULING
No, Art. 1305, CC defines a contract as the meeting of the minds between two or
more persons whereby one binds himself to the other to give something or render
service. A monetary policy does not create a contract absent the element of
‘accord of wills’.
 GENERAL PROVISIONS
CHARACTERISTICS OF CONTRACTS
(1) Freedom or Autonomy of Contracts
ART. 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. (1255a)
 GENERAL PROVISIONS
Case #118. Republic vs PLDT, GR 18841 (January 27, 1969)

FACTS
The Government, thru the Bureau of Telecommunications and RCA, set-up its
own system by utilizing the equipment and trunk lines of PLDT by an agreement
with RCA. PLDT, believing that the plaintiff is in competition to it, disconnected
the trunk lines being rented by the same. The plaintiff then prays for a judgment
compelling PLDT to execute a contract with RCA.

ISSUE
Whether or not PLDT may be force to enter into a contract
 GENERAL PROVISIONS

Case #118. Republic vs PLDT, GR 18841 (January 27, 1969)

RULING
No, parties may not be forced where no agreement has been made. Art. 1306, CC
provides contracting parties to have freedom to stipulate the terms, conditions,
etc., of a contract—because these are the very essence of our contractual system.
 GENERAL PROVISIONS
Case #121. Tiu vs Platinum Plans, GR 163512 (February 28, 2007)

FACTS
Platinum Plans, a pre-need industry, hired Tiu as the VP senior assistant of its
Hong Kong and Asian operation for a contract of 5 years with non-involvement
clause on 1993. However, petitioner stopped reporting for work after 3 years.
Later on she was found out working for Professional Plans Inc. Platinum sued her
but she argued that the non-involvement clause is a restraint of trade.

ISSUE
Whether or not a non-involvement clause is a restraint of trade
 GENERAL PROVISIONS

Case #121. Tiu vs Platinum Plans, GR 163512 (February 28, 2007)

RULING
Generally, it is not if there is a reasonable limitation as to its place and time—this
is supported by the records of this case. Parties may freely stipulate the terms and
conditions of their contract as long as the same is not contrary to law, morals and
good customs as per Art. 1306, CC.
 GENERAL PROVISIONS
Case #122. Cui vs Arellano University, GR L-15127 (May 30, 1961)

FACTS
Cui was a law student of Arellano University and was receiving scholarship
grants. But the stipulations of awarding of scholarship grants states that “a grantee
must waive his right to transfer to other schools”. Cui transferred, and finished
law studies in Abad Santos University. However, his TORs in Arellano University
were not released unless he refunds his scholarship grants to AU.

ISSUE
Whether or not the stipulation in scholarship grant is valid
 GENERAL PROVISIONS

Case #122. Cui vs Arellano University, GR L-15127 (May 30, 1961)

RULING
No, it is contrary to Art. 1306, CC. Contracts which are against public policy,
morals, law, or good custom are null and void. A scholarship grant is awarded in
recognition of merit and not to keep students outstanding students to bolster the
prestige of the school.
 GENERAL PROVISIONS
Case #123. Saura vs Sindico, GR L-13403 (May 23, 1960)

FACTS
Saura and Sindico are contesting as to who of them shall be the Nacionalista
Party’s congressional representative in the IV-District of Pangasinan. They
executed a ‘pledge’ that, whoever wins the nomination of Nacionalista Party, the
losing shall yield. Saura won but Sindico still run for congressional candidacy.
Saura sued Sindico for breaching the ‘pledge’.

ISSUE
Whether or not the ‘pledge’ is valid.
 GENERAL PROVISIONS

Case #123. Saura vs Sindico, GR L-13403 (May 23, 1960)

RULING
No, among those that may not be subject of contracts are certain rights of
individual, which the law and public policy have deemed wise to exclude from the
commerce of man. The right of Sindico to run for public office cannot be curtailed
by a contract or a ‘pledge’ in this case.
 GENERAL PROVISIONS
Case #124. Leal vs IAC, GR L-65425 (November 5, 1987)

FACTS
Three parcels of land were sold by respondent Santiago to petitioners. A document
entitled, “Compraventa” was executed by the parties. It was stated in the
document that the three parcels of land must not be sold to any other except the
respondent, his heirs or successors. Plaintiffs raised the petition that such
document is a restriction of trade.

ISSUE
Whether or not the “Compraventa” is binding and valid
 GENERAL PROVISIONS

Case #124. Leal vs IAC, GR L-65425 (November 5, 1987)

RULING
No, Art. 1306 of the Civil Code gives the contracting parties to stipulate freely the
terms and conditions of their contracts but if it goes against law, morals, public
policy and good custom then the same is deemed null and void. The
“Compraventa” clearly is a restriction of trade—violates public policy, which is
against Art. 1306, CC.
 GENERAL PROVISIONS
Case #125. Banco Filipino Savings vs Navarro, GR 46591 (July 28, 1967)

FACTS
Florante del Valle (respondent borrower) obtained a loan contract from plaintiff
bank secured by mortgage. It was agreed in their contract that the borrowers
“authorize Banco Filipino Savings Bank to increase the interest rate without notice
to them in the event that a law should be enacted increasing such” (escalation
clause). Central Bank issued a monetary policy increasing interest rate payments.
BFSB increased its rate but the respondents protested.

ISSUE
Whether or not the ‘escalation clause’ is valid
 GENERAL PROVISIONS

Case #125. Banco Filipino Savings vs Navarro, GR 46591 (July 28, 1967)

RULING
Yes, escalation clause in contracts are valid since the contracting parties may
stipulate freely the conditions and terms of their contracts as per Art. 1306, CC
given they are not contrary to laws, morals, public policy and good customs.
However, monetary policy issued by the Central Bank in this case is not a law so
BFSB erred in increasing its interest rate for the respondent borrowers.
 GENERAL PROVISIONS
Case #131. ACLFC vs Spouses Gravador, GR 186550
FACTS
Plaintiff extended a loan to the respondent in the amount of Php800,000.00
payable in sixty monthly installments and was secured by mortgage of Gravador’s
properties situated in Bulacan on October 1999. On February 2000, they received
a letter from ACLFC demanding the payment of Php 1.8M because the spouses
defaulted in their payments. ACLFC request the foreclosure of the mortgaged
property. Respondent objected because their principal loan boomed
unconscionably.

ISSUE
Whether or not the Court can reduce or invalidate the interest rate stipulated in the
loan contract
 GENERAL PROVISIONS

Case #131. ACLFC vs Spouses Gravador, GR 186550

RULING
Yes, although it is a recognized rule that parties are free to stipulate terms in their
contracts such will not apply if the terms for interest rate become unconscionable
or iniquitous—as this is void by virtue of public policy, morals and law. The
courts may be called upon to either reduce or invalidate such terms.
 GENERAL PROVISIONS
CHARACTERISTICS OF CONTRACTS
(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
ART. 1310. The determination shall not be obligatory if it is evidently
inequitable. In such case, the courts shall decide what is
equitable under the circumstances. (n)
 GENERAL PROVISIONS
Case #127. New World vs AMA, GR 187930 (February 23, 2015)

FACTS
New World and AMA entered into a lease contract from 1998 to 200. AMA agreed to
pay New World a monthly rental fee of Php181,500 and is allowed to preterminate
the contract at least 6 months before the intended termination. Moreover, AMA shall
be liable to liquidated damages equivalent to six months of rent. AMA, on the
evening of July 6, 2004, vacated the premises without notice to New World. Plaintiff
sued the respondent for its breach of contract of pretermination. AMA invoke revenue
losses as excuse for non-compliance with the lease contract.

ISSUE
Whether or not AMA’s excuse is valid
 GENERAL PROVISIONS

Case #127. New World vs AMA, GR 187930 (February 23, 2015)

RULING
No, Art. 1159 of Civil Code mandates the obligations arising from contracts have
the force of law and should be complied with in good faith. The law does not
relieve the party from the consequences of a contract he entered into nor do our
courts have power to ease the burden of obligations arising from contracts such as
this case.
 GENERAL PROVISIONS
Case #129. Metrobank vs Reynado, GR 164538 (August 9, 2010)

FACTS
Plaintiffs complained respondent of the crime of estafa. They alleged that the
respondent conducted anomalous and illegal lending operations of its Port Area
branch. To settle his criminal liability, Reynado executed a “Debt Settle
Agreement”. Prosecutors were quick to dismiss the complaint since his liability
was already novated by the said agreement.

ISSUE
Whether or not a criminal liability is extinguish by a contract of novation
 GENERAL PROVISIONS

Case #129. Metrobank vs Reynado, GR 164538 (August 9, 2010)

RULING
No, the settlement agreement which purports to novate his liability did not operate
to extinguish his liability. The SC ruled that criminal liability for estafa is not
affected by a compromise or novation of contract such as in this case since civil
liabilities may be recovered thereafter.
 GENERAL PROVISIONS
CHARACTERISTICS OF CONTRACTS
(3) Mutuality of Contracts
ART. 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them. (1256a)

ART. 1309. The determination of the performance may be left to a third

person, whose decision shall not be binding until it has been made
known to both contracting parties. (n)

 The decision, however, of the third person shall bind the parties only
after it has been made known to both of them.
 GENERAL PROVISIONS
Case #148. Weldon Construction vs CA, GR L-35721 (October 12, 1987)

FACTS
Weldon Construction did construction works to the gay theater owned and
operated by Mancio (respondent) situated in Manila. The entire construction
works amounted to Php 600k which is the stipulated price disputed by respondent
and which is demanded by plaintiff. Weldon Construction filed this suit to collect
however, respondent opposed. The latter’s opposition was denied by SC.

ISSUE
Whether or not the Court can intervene between the parties
 GENERAL PROVISIONS

Case #148. Weldon Construction vs CA, GR L-35721 (October 12, 1987)

RULING
No, once a contract has been perfected and thereafter consummated by the parties
thereto, its existence and binding effect cannot be disputed anymore. Art. 1308,
CC, provides that contracts binds both parties; and its validity or compliance
cannot be left to the will of one of them. Respondent must pay because plaintiff
had done already its part in the contract.
 GENERAL PROVISIONS
Case #133. Kauffman vs PNB, GR 16454 (September 29, 1921)

FACTS
Kauffman’s share to the dividend of Philippine Fiber and Produce Company is
kept in the credit book of the company. George Wicks, the treasurer of the
company requested the PNB Manila to telegraphic transfer USD 45,000 to
plaintiff in its PNB branch in New York. Kauffman went to present himself to
PNB New York and demand the release of the money but their representative
refused. Plaintiff commenced a collection suit to collect the money.

ISSUE
Whether or not the money is payable to him
 GENERAL PROVISIONS

Case #133. Kauffman vs PNB, GR 16454 (September 29, 1921)

RULING
Yes, the determination of the performance of the contract may be left to the will of
third person whose decision shall not be binding until it has communicated to both
contracting parties under Art. 1309 of the Civil Code.
 GENERAL PROVISIONS
Case #134. Bonifacio Bros vs Mora, GR 20853 (May 29, 1967)

FACTS
Mora, the owner of an automobile mortgaged the same to Reyes and promised to
get it an insurance with the latter as beneficiary. The automobile was insured with
the State Bonding & Insurance Co. During the effectivity of the insurance
contract, the car met an accident. Mora authorized the Bonifacio Bro. to repair the
car without Reyes’ consent. Plaintiff filed a collection suit to demand respondents
(Mora and SBIC) to pay to them the repair costs.

ISSUE
Whether or not Bonificio Bros is privy to the insurance contract
 GENERAL PROVISIONS

Case #134. Bonifacio Bros vs Mora, GR 20853 (May 29, 1967)

RULING
No, a policy insurance is a distinct contract between the insured and insurer. A
third person has no right in law or equity to demand the proceeds of the insurance
unless there is a contract or trust, express or implied between the parties and a
third person. See pour autrui.
 GENERAL PROVISIONS
CHARACTERISTICS OF CONTRACTS
(4) Consensuality of Contracts
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. (1258)

ART. 1316. Real contracts, such as deposit, pledge and commodatum, are
not perfected until the delivery of the object of the obligation.
 GENERAL PROVISIONS
CLASSIFICATION OF CONTRACTS ACCORDING TO
PERFECTION
(1) Consensual - perfected by mere consent
(2) Real – perfected by consent and by the delivery of the thing
subject matter of the contract
(3) Solemn - requires compliance with certain formalities
prescribed by law (essential element)
 GENERAL PROVISIONS
STAGES IN THE LIFE OF A CONTRACT
(1) PREPARATION OR NEGOTIATION
 This includes all the steps taken by the prospective parties from the time they
manifest interest in entering into a contract, leading to the perfection of the contract.
 No agreement yet, no binding juridical relation, thus, either party may stop the
negotiation or withdraw an offer made
(2) PERFECTION OR BIRTH
 This takes place when the parties have come to a definite agreement or meeting of the
minds regarding the terms
 Concurrence of the essential elements of a contract (C-O-C)
(3) CONSUMMATION OR TERMINATION
 This takes place when the parties have fulfilled or performed their respective
obligations or undertakings under the contract and the contract may be said to have
been fully accomplished or executed
 This results to the extinguishment of a contract
 GENERAL PROVISIONS
Case #143. Tong Brothers Co. vs IAC, GR 73918 (December 21, 1987)

FACTS
Plaintiff is engaged in the construction and repairs of vessels drydocked in
Zamboanga. Respondent owned the vessel Zamboanga-J. Respondent sued
plaintiff because they did not complete the task of repairing the vessel. Plaintiff,
on the other hand, argued there was no perfected contract because the
communication between them does not determine the extent of the work the
plaintiff is required to complete as evidence by the Exhibits J-1 – J-7.

ISSUE
Whether or not there is a contract or such contract has been perfected
 GENERAL PROVISIONS

Case #143. Tong Brothers Co. vs IAC, GR 73918 (December 21, 1987)

RULING
No, a contracted is 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 the consequences… (Art. 1315, CC), and consent is manifest by meeting of the
offer and the acceptance upon the thing and the cause which to constitute the
contract… (Art. 1319, CC).
 GENERAL PROVISIONS
CHARACTERISTICS OF CONTRACTS
(5) Relativity of Contracts
Article 1311. Contracts take effect only 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 heir 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 and deliberately conferred a
favor upon a third person. (1257a)
 GENERAL PROVISIONS
PERSONS AFFECTED BY A CONTRACT
GENERAL RULE
 Contracts take effect only between the parties, their assigns and heirs
Exception to G.R.
 The cases when a contract are effective only between the parties are
when the rights and obligations arising from the contract are not
transmissible:
(a) by their nature (like a contract requiring or involving personal
qualifications, as painting, singing, etc.); or
(b) by stipulation (in accordance with the principle of freedom to
contract); or
(c) by provision of law (as in agency, partnership, and commodatum,
when death extinguishes the legal relationships).
 GENERAL PROVISIONS
AS TO THIRD PERSONS
GENERAL RULE
 A third person is one who has not taken part in a contract and is,
therefore, a stranger to the contract.
Exception to G.R.
 There are cases when third persons may be affected by a contract:
1) In contracts creating real rights
ART. 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 Laws.

 Rationale: A real right is binding against the whole world and attaches
to the property over which it is exercised wherever it goes.
 GENERAL PROVISIONS
2) In contracts entered into to defraud creditors
ART. 1313. Creditors are protected in cases of contracts intended to
defraud them. (n)
 The creditor, although he is not a party to the contract, is given the
right to impugn the contracts of his debtor intended to defraud him
(Art. 1177.)

3) In contracts which have been violated at the inducement of the third person
4) In contracts creating “status” (e.g., the resulting status of marriage must
be respected, even by strangers, while the contract is in force);
5) In “collective contracts” where the majority rules over the minority
 GENERAL PROVISIONS
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)
7) Where the situation contemplated in Article 172918 obtains.
 The intention of this article is to protect the laborers and the
materialmen from being taken advantage of by unscrupulous
contractors and from possible connivance between owners and
contractors.
8) In contracts containing a stipulation pour autrui
 Stipulation pour autrui - 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
 GENERAL PROVISIONS
REQUISITES OF STIPULATION POUR AUTRUI
(1) The contracting parties by their stipulation must have clearly and deliberately
conferred a favor upon a third person;
(2) The third person must have communicated his acceptance to the obligor before its
revocation by the obligee or the original parties;
 Acceptance can be in any form, but, must be unconditional
 When a third person accepts the benefits of a contract to which he is not a party, he is
also bound to accept the concomitant obligations corresponding thereto.
(3) The stipulation in favor of the third person should be a part and not the whole of the
contract or the contract itself;
(4) The favorable stipulation should not be conditioned or compensated by any kind of
obligation whatever; and
(5) Neither of the contracting parties bears the legal representation or authorization of the
third party for otherwise the rules on agency will apply.
 GENERAL PROVISIONS

TEST TO CONSTITUTE A VALID STIPULATION POUR

AUTRUI
 The contracting parties by their stipulation must have clearly and
deliberately conferred a favor upon a third person (Requisite #1), and it is
not sufficient that the third person may be incidentally benefited by the
stipulation.
 GENERAL PROVISIONS
CLASSES OF STIPULATION POUR AUTRUI
(1) Those where the stipulation is intended for the sole benefit of such person.
 This corresponds almost always to the juridical conception of a gift
 the third party is said to be a donee-beneficiary

(2) Those where an obligation is due from the promisee to the third person
which the former seeks to discharge by means of such stipulation
 The third party is called creditor-beneficiary
 GENERAL PROVISIONS
Case #130. Prudential Bank vs Abasolo, GR 186738 (September 27, 2010)

FACTS
Abasolo inherited two parcels of land and was given a special power of attorney to
empower her to sell the lands. Corazon got interested to purchase them, and
approached Prudential Bank to obtain loan executed by a loan contract between them.
Corazon paid the purchase price in installment basis to which Abasolo got tired up.
Respondent filed a collection suit against respondent bank to fast track the release of
money to her. Plaintiff argued that Abasolo is not privy to the loan contract.

ISSUE
Whether or not Prudential Bank is liable
 GENERAL PROVISIONS

Case #130. Prudential Bank vs Abasolo, GR 186738 (September 27, 2010)

RULING
No, petitioner is correct when it raised Art. 1311, CC, that contracts take effect
between parties, their assigns and heirs except otherwise provided by their nature,
stipulations or law. It appears on the records that the loan proceeds will paid
directly to Abasolo but only to Corazon since only Corazon and Prudential Bank
are privy to the contract.
 GENERAL PROVISIONS
Case #135. Florentino vs Encarnacion, GR L-27696 (September 30, 1977)

FACTS
Plaintiffs wanted to register a parcel of land in their names alleging that the land in
question is inherited to them. Respondents likewise wanted to register it in their
names alleging they purchased them. But, an encumbrance on the back of the title
of the parcels of land was made to the Church of Cabugao, Ilocos Sur. Hence, the
plaintiffs filed to revoke the encumbrance made to the church.

ISSUE
Whether or not a pour autrui stipulation is revocable unilaterally
 GENERAL PROVISIONS

Case #135. Florentino vs Encarnacion, GR L-27696 (September 30, 1977)

RULING
No, a stipulation in favor of a third person is not revocable by the contracting
parties especially when the third person already communicated his acceptance
before its revocation. As a rule, there is no time at such a third person has after the
time until the stipulation is revoked.
 GENERAL PROVISIONS
CLASSIFICATION OF CONTRACTS
A. According to name or designation
(a) Nominate
(b) Innominate
B. According to perfection
(a) Consensual
(b) Real
(c) Solemn
C. As to cause
(a) Onerous
(b) Remuneratory
(c) Gratuitous
 GENERAL PROVISIONS
CLASSIFICATION OF CONTRACTS
D. According to form
(a) Informal
(b) Formal
E. According to obligatory force
(a) Valid
(b) Rescissible
(c) Voidable
(d) Unenforceable
(e) Void
 GENERAL PROVISIONS
CLASSIFICATION OF CONTRACTS
E. According to person obliged
(a) Unilateral
(b) Bilateral
F. According to dependence to another contract
(a) Preparatory
(b) Accessory
(c) Principal
 GENERAL PROVISIONS
CLASSIFICATION OF CONTRACTS
G. According to risks
(a) Commutative
(b) Aleatory
H. According to liability
(a) Unilateral
(b) Bilateral
 GENERAL PROVISIONS
ART. 1307. Innominate contracts shall be regulated by the stipulations of the
parties, by the provisions of Titles I and II of this Book, by the rules governing
the most analogous nominate contracts, and by the customs of the place. (n)

CONTRACTS ACCORDING TO NAME OR DESIGNATION

A. NOMINATE CONTRACTS - has a specific name or designation in law
(e.g., commadatum, lease, sale, etc.)
B. INNOMINATE CONTRACTS - has no specific name or designation in law
 GENERAL PROVISIONS
 Rationale of Innominate Contracts: The impossibility of
anticipating all forms of agreement and the progress of man’s
sociological and economic relationships.
 A contract will not, therefore, be considered invalid for failure to
conform strictly to the standard contracts outlined in the Civil Code
provided it has all the elements of a valid contract.
 Innominate contracts are based on the well-known principle that “no
one shall unjustly enrich himself at the expense of another.”
 GENERAL PROVISIONS
KINDS OF INNOMINATE CONTRACTS
A. Do ut des - I give that you may give
*no longer an innominate contract, now barter or exchange
B. Do ut facias - I give that you may do
C. Facio ut des - I do that you may give
D. Facio ut facias - I do that you may do
 GENERAL PROVISIONS
RULES GOVERNING INNOMINATE CONTRACTS
(1) Agreement of the parties;
(2) Provisions of the Civil Code on obligations and contracts;
(3) Rules governing the most analogous contracts; and
(4) Customs of the place
 GENERAL PROVISIONS
Case #119. Corpus vs CA, GR L-40424 (June 30, 1980)

FACTS
Corpus was a defendant in an administrative case but he won it with the legal
assistance of his friend. Atty. David. Atty. David’s law office requested Corpus to
pay his professional fees but refused arguing there was no contract reduced in
writing.

ISSUE
Whether or not a contract exists although not reduced in writing
 GENERAL PROVISIONS

Case #119. Corpus vs CA, GR L-40424 (June 30, 1980)

RULING
Yes, a contract can exist by virtue of facio ut des (I do and you give). Innomate
contracts have been written in the Civil Code (Art. 1307, CC) that such contracts
shall be regulated by the stipulations of the parties, general principles of
obligations and contracts, most analogous to nominate contracts, and by customs
of the people.
 GENERAL PROVISIONS
ART. 1314. Any third person who induces another to violate his contract
shall be liable for damages to the other contracting party.

 “induce’’ - where a person causes another to choose one course of conduct by

persuasion or intimidation, malice is not essential
 It presupposes that the contract interfered with is valid and the third person
has knowledge of the existence of the contract or must have known of it after
a reasonable inquiry.
 The tort or wrongful conduct is known as “interference with contractual
relations.’’
 A third person is not liable where sufficient justification for interference or
inducement can be shown.
 GENERAL PROVISIONS
Case #138. Daywalt vs La Corporacion, GR L-13505 (February 4,
1919)

FACTS
Endencia obligated herself to sell a parcel of land to Daywalt. The former
discovered that the land involved in the sale was larger than she thought so she
become reluctant to sell the land. Her reluctance was furthered when the defendant
induced her that she has no obligation with the plaintiff. Endencia refused to
consummate the sale to Daywalt.

ISSUE
Whether or not the respondent can be held liable to Daywalt
 GENERAL PROVISIONS

Case #138. Daywalt vs La Corporacion, GR L-13505 (February 4,

1919)

RULING
Yes, a third person who induces another to violate his contract shall be held liable
to the other contracting party as per Art. 1314, CC.
 GENERAL PROVISIONS
Case #139. Gilchrist vs Cuddy, GR L-9356 (February 17, 1915)

FACTS
Cuddy was the owner of the film Zigomar rented the same to Gilchrist for a week
for Php125.00. Cuddy sent back the money to Gilchrist because he had arranged a
rental contract with the defendants for Php305.00 for the film. Gilchrist raised this
action against the defending for inducing Cuddy to violate the contract with him.

ISSUE
Whether or not the defendants can be held liable
 GENERAL PROVISIONS

Case #139. Gilchrist vs Cuddy, GR L-9356 (February 17, 1915)

RULING
Yes, a third person who induces another to violate his contract shall be held liable
to the other contracting party as per Art. 1314, CC.
 GENERAL PROVISIONS
ART. 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. (1259a)

 Unauthorized contracts can be cured only by ratification.

 The ratification must be clear and express so as not to admit of any doubt or
vagueness
 Its effects retroact to the moment of the celebration of the contract.
 GENERAL PROVISIONS
UNAUTHORIZED CONTRACT
GENERAL RULE
 A person is not bound by the contract of another of which he has no
knowledge or to which he has not given his consent.
 Rationale: A contract involves the free will of the parties and only he who
enters into the contract can be bound thereby
Exception to G.R.
 In order that a person may be bound by the contract of another, there are
two requisites:
1. The person entering into the contract must be duly authorized, expressly or
impliedly, by the person in whose name he contracts or he must have, by
law, a right to represent him (like a guardian or an administrator); and
2. He must act within his power
 If in excess of authority, the in excess part is unenforceable