General provisions

• Contract


  A meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service
• Elements of Contracts


  • Essential
  • Natural
  • Accidental
• Essential elements of contracts

  • Common (consent, cause, object)
  • Special (e.g. delivery, form)
  • Extraordinary (e.g. consideration/price)
• Apparently, in auto contracts, there is only one party involved, but in reality, said party merely acts in the name and for the account of two distinct contracting parties
• Exceptions to single party in auto contracts


  • When a person, in his capacity as representative of the other contracts with himself
  • When as a representative of two different persons, he brings about a contract between his principals by contracting with himself, unless there is a conflict of interests or when the law expressly prohibits it in specific cases
• Characteristics of Contracts


  • Obligatory force or character of contracts
  • Autonomy of contracts
  • Mutuality of contracts
  • Relativity of contracts
• Obligatory force of contract

  Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith
• 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
• When the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable
• Mutuality of contract


  The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them
• Autonomy of contract


  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
• Relativity of contract


  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
• Breach of contract


  The failure, without legal reason, to comply with the terms of the contract
• Stages of a contract

  • Generation (preliminary or preparation, conception or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties)
  • Perfection (the moment when the parties come to agree on the terms of the contract)
  • Consummation (fulfillment or performance of the terms agreed upon in the contract)
• Classification of contracts by relation to other contracts


  • Preparatory (those which have for their object the establishment of a condition in law which is necessary as a preliminary step towards the celebration of another subsequent contract)
  • Principal (those which can subsist independently from other contracts and whose purpose can be fulfilled by themselves)
  • Accessory (those which can exist only as a consequence of, or in relation with, another prior contract)
• Classification of contracts by perfection


  • Consensual (those which are perfected by the mere agreement of the parties)
  • Real (those which require not only the consent of the parties for their perfection, but also the delivery of the object by one party to the other)
• Classification of contracts by form


  • Common or informal (those which require no particular form)
  • Special or formal (those which require some particular form)
• Classification of contracts by purpose


  • Transfer of ownership
  • Conveyance of use
  • Rendition of services
• Classification of contracts by subject matter


  • Things
  • Services
• Classification of contracts by nature of vinculum

  • Unilateral (those which give rise to an obligation for only one of the parties)
  • Bilateral (those which give rise to reciprocal obligations for both parties)
• Classification of contracts by cause


  • Onerous (those in which each of the parties aspires to procure for himself a benefit through the giving of an equivalent or compensation)
  • Gratuitous (those in which one of the parties proposes to give to the other a benefit without any equivalent or compensation)
• Classification of contracts by risk involved


  • Commutative (those where each of the parties acquires an equivalent of his prestation and such equivalent is pecuniarily appreciable and already determined from the moment of the celebration of the contract)
  • Aleatory (those where each of the parties has to his account the acquisition of an equivalent of his prestation, but such equivalent, although pecuniarily appreciable, is not yet determined at the moment of the celebration of the contract, since it depends upon the happening of an uncertain event, thus charging the parties with the risk of loss or gain)
• Classification of contracts by name or norms regulating them


  • Nominate (those which have their own individuality and are regulated by special provisions of law)
  • Innominate (those which lack individuality and are not regulated by special provisions of law)
• Right to contract


  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
• Mutuality of contract


  The validity or fulfillment of a contract cannot be left to the will of one of the contracting parties. The validity or fulfillment may be left to the will of a third person.
• Mutuality of Contract


  The validity or fulfillment of a contract cannot be left to the will of one of the contracting parties
• Determination of performance

  May be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties
• Relativity of Contract


  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, by stipulation or by provision of law
• The heir is not liable beyond the value of the property he received from the decedent
• General rule on effect of contract on third persons

  A contract can only bind the parties who had entered into it or their successors who have assumed their personality or their juridical position
• Exceptions to the general rule on effect of contract on third persons

  • Where the contract contains a stipulation in favor of a third person
  • Where the third person comes into possession of the object of a contract creating a real right
  • Where the contract is entered into in order to defraud a third person
  • Where the third person induces a contracting party to violate his contract
• Stipulation in favor of a third person

  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
• Requisites for a stipulation in favor of a third person

  • There must be a stipulation in favor of a third person
  • The stipulation must be a part, not the whole of the contract
  • The contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest
  • The third person must have communicated his acceptance to the obligor before its revocation
  • Neither of the contracting parties bears the legal representative or authorization of the third party
• Real right


  A right belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally enforced
• Contracts in fraud of creditors

  Creditors are protected in cases of contracts intended to defraud them
• Interference with contractual relation

  Any third person who induces another to violate his contract shall be liable for damages to the other contracting party
• Requisites for interference with contractual relation

  • The existence of a valid contract
  • Knowledge on the part of the third person of the existence of the contract
  • Interference by the third person without legal justification or excuse
• Interference with contractual relation

  • O, a movie star, was under contract with P Movie Productions. X Film Co. induced O to break her contract with P by offering her a higher salary. P sued X for damages.
• The contention of P Movie Productions should be sustained as X Film Co. induced O to violate her valid contract with P, which is actionable interference with contractual relation