MODULE 6

• Contract


  A meeting of the minds between two (2) persons whereby one binds himself to the other to give something or render some service
• Two (2) persons must be involved; otherwise, allowing one to contract with himself would only result in confusion that extinguishes an obligation
• Contract


  One of the sources of obligation
• Contract


  Adheres to technical rules and must be lawful
• Contract


  Enforceable through legal proceedings
• Requisites that must concur for a contract to exist


  • Consent of the contracting parties
  • Object certain, which is the subject of the contract
  • Cause of the obligation that is established
• Valid Contract


  Contracts that meet all the legal requirements and limitations for the type of agreement involved
• Classification of Contracts as to perfection


  • Consensual contracts
  • Real contracts
• Classification of Contracts as to form


  • Formal contracts
  • Informal contracts
• Classification of Contracts as to name


  • Nominate contracts
  • Innominate contracts
• Innominate contracts


  Contracts without any name or title under the law
• Types of Innominate contracts


  • do ut des ("I give that you may give.")
  • do ut facias ("I give what you may do.")
  • facto ut des ("I do what you may give.")
  • facto ut facias ("I do what you may do.")
• Governing rules for Innominate contracts


  • The agreement of the parties
  • The provisions of the Civil Code on obligations and contracts
  • The rules governing the most analogous contracts
  • The customs of the place
• Classification of Contracts as to cause


  • Onerous
  • Remuneratory
  • Gratuitous
• Classification of Contracts as to dependence on another contract


  • Preparatory
  • Principal
  • Accessory
• Classification of Contracts as to parties obligated


  • Unilateral
  • Bilateral
• Classification of Contracts as to risk involved


  • Commutative
  • Aleatory
• Freedom to Contract


  The contracting parties may establish stipulations, clauses, terms and conditions as they deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy
• Limitations on the Freedom to Contract


  • Contract must not be contrary to law
  • Contract must not be contrary to morals
  • Contract must not be contrary to good customs
  • Contract must not be contrary to public order
  • Contract must not be contrary to public policy
• Principle of Mutuality of Contract


  The contracts must bind both contracting parties; its validity or compliance cannot be left to the will of one of them
• Exception to the Principle of Mutuality of Contracts: Determination by Third Person


  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
• Relativity of Contracts


  Contracts take effect only between the parties, their assigns and heirs, except where the rights and obligations arising from the contract are not transmissible by their nature, by stipulation or by provision of law
• Contract Pour Autrui


  A stipulation in favor of a third person conferring a clear and deliberate favor upon him, which stipulation is merely part of a contract entered into by the parties, neither of whom acted as agent of the third person
• Requisites of Contract Pour Autrui


  • There is a stipulation in favor of a third person
  • The stipulation is a part, not the whole, of the contract
  • The contracting parties clearly and deliberately conferred a favor to the third person – the favor is not an incidental benefit
  • The favor is unconditional and uncompensated
  • The third person communicated their acceptance of the favor before its revocation
  • The contracting parties do not represent, or are not authorized by, the third person
• Obligatory Force of the Contract


  The obligations arising from contracts shall have the force of law between the contracting parties and should be complied with in good faith
• Consensuality of Contract


  A contract 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 all the consequences which, according to their nature, may be in keeping with good faith, usage and law
• Consensual contracts are perfected by mere consent, while real contracts are perfected not by mere consent but by delivery of the object of the obligation
• Contracts take effect ONLY between the parties, their assigns, and heirs, which means only these people can have the rights and obligations under the contract
• Exceptions where contracts can affect third persons


  • When a contract is effective only between the parties and the obligation arising from the contract is not transmissible by its nature, by stipulation, or by the provision of law
  • When strangers or third persons are affected by the contract (i.e., contracts containing stipulation pour autrui, contracts creating real rights, contracts entered into to defraud creditors, and contracts which have been violated at the inducement of a third person)