CONTRACTS FINALS ACJUCO 1

PART 2: CONTRACTS public policy (e.g., services of an

assassin or a prostitute).
ART. 1305. A contract is a meeting of minds
between two persons whereby one binds ACCORDING TO NAME OR DESIGNATION:
himself, with respect to the other, to give (a) Nominate - Nominate contract or that
something or to render some service. which has a specific name or designation
In its derivative sense, the word “contract’’ (cum in law (e.g., commodatum, lease, agency,
traho) simply means an agreement or sale, etc.)
convention. Convention is the genus while (b) Innominate - that which has no specific
“contract” is the specie. name or designation in law.

CONTRACT - juridical convention manifested in ACCORDING TO PERFECTION:

legal form, by virtue of which one or more (a) Consensual- Contracts are perfected,
persons bind themselves in favor of another or as a general rule, by mere consent, and
others, or reciprocally, to the fulfillment of a from that moment the parties are bound
prestation to give, to do or not to do. not only by the fulfilment of what has
CONTRACTS OTHER been expressly stipulated but also to all
JURIDICAL the consequences which, according to
CONVENTIONS their nature, may be in keeping with good
AGREEMENT Principal LAW ITSELF faith, usage and law (Art. 1315.);
source of
(b) Real- Real contract or that which is
rights and
obligation of perfected, in addition to the above, by the
parties delivery of the thing subject matter of the
Concrete, Rights and More or less contract (e.g., depositum, pledge,
limited and obligations elastic, absolute commodatum) (Art 1316).
transitory and permanent
ACCORDING TO ITS RELATION TO OTHER
CONTRACTS:
CLASSIFICATION OF CONTRACTS
(a) Preparatory (e.g., agency, partnership),
Contract may be express/implied. A contract when it is entered into as a means to an
implied in fact is one the existence and terms of end;
which are manifested not by direct or explicit (b) Accessory (e.g., mortgage, guaranty),
words between the parties but is to be deduced when it is dependent upon another
from facts and circumstances, attending the contract it secures or guarantees for its
transactions showing a mutual intention to existence and validity; and
contract. It is a true contract (c) Principal (e.g., sale, lease), when it
ACCORDING TO SUBJECT MATTER: does not depend for its existence and
validity upon another contract but is an
(a) Things - All things that are inside the indispensable condition for the existence
commerce of man may be subject of of an accessory contract.
contract except those outside (e.g., the
moon) may not be the object of a ACCORDING TO FORM:
contract. (a) Informal or common -
(b) Services - must not be contrary to law, (b) Formal or solemn - (see Art. 1356.)
morals, good customs, public order of
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ACCORDING TO NATURE OF LEGAL TIE CHARACTERISTICS OF CONTRACTS

CREATED:
(1) Freedom or autonomy of contracts. —
(a) Unilateral - (e.g., commodatum, The parties may establish such
gratuitous deposit), when it creates an stipulations, clauses, terms, and
obligation on the part of only one of the conditions as they may deem convenient,
parties provided, they are not contrary to law,
(b) Bilateral/Reciprocal- e.g., sale, lease), morals, good customs, public order, and
when it gives rise to reciprocal public policy (Art. 1306.);
obligations for both parties. (2) Obligatory force or character of
contracts (Obligatoriedad del
ACCORDING TO CAUSE:
contrato). — Obligations arising from
(a) Onerous - or one the cause of which, for contracts have the force of law between
each contracting party, is the prestation the contracting parties and should be
or promise of a thing or service by the complied with in good faith (Arts. 1159,
other. In other Art. 1350 609 words, in 1315.);
this contract, the parties are reciprocally (3) Mutuality of contracts. — Contracts
obligated to each other. must bind both and not one of the
(b) Remuneratory or remunerative - or one contracting parties; their validity or
the cause of which is the service or compliance cannot be left to the will of
benefit which is remunerated. The one of them (Art. 1308.);
purpose of the contract is to reward the (4) Consensuality of contracts. —
service that had been previously Contracts are perfected, as a general
rendered by the party remunerated. rule, by mere consent, and from that
(c) Gratuitous - or one the cause of which is moment the parties are bound not only by
the mere liberality of the benefactor or the fulfilment of what has been expressly
giver, such as commodatum; pure stipulated but also to all the
donation; guaranty or suretyship unless consequences which, according to their
there is a stipulation to the contrary (Art. nature, may be in keeping with good
2048.), mortgage given by a third person faith, usage and law (Art. 1315.); this is
to secure an obligation of a debtor (see true in the case only of consensual
Art. 2085, last par.) unless a contracts.
consideration is paid for such mortgage. (5) Relativity of contracts (Relatividad del
contrato). — Contracts take effect only
ACCORDING TO RISKS: between the parties, their assigns and
(a) Commutative (e.g., sale, lease) - when heirs, except in cases where the rights
the undertaking of one party is and obligations arising from the contract
considered the equivalent of that of the are not transmissible by their nature, or
other; and by stipulation, or by provision of law. (Art.
(b) Aleatory (e.g., insurance, sale of a 1311.)
hope) - when it depends upon an
uncertain event or contingency both as to
benefit or loss.
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OBLIGATORY FORCE BETWEEN PARTIES (4) Proof of alleged defect in contract. — If

after a perfect and binding contract has been
ART. 1308. The contracts must bind both
executed between the parties it occurs to
contracting parties; its validity or compliance
one of them to allege defect as a reason for
cannot be left to the will of one of them. (1256a)
annulling it, the alleged defect must be
Contract binds both contracting parties. conclusively proved since the validity and
fulfillment of contracts cannot be left to the
(1) Principle of mutuality of contract. —The will of one of the contracting parties. It is the
ultimate purpose of the principle is to nullify duty of every contracting party to learn and
a contract containing a condition which know the contents of a document before he
makes its fulfilment or pre-termination signs and delivers it.
dependent exclusively upon the uncontrolled
will of one of the contracting parties. (5) Release of obligor from compliance. —
A contract is an agreement which gives rise to The mere fact that a party to a contract has
obligations. It must bind both parties in order made a bad bargain, may not be a ground
that it can be enforced against either. for setting aside the agreement. (see Art.
Needless to say, a contract can be renewed, 1355.) Where, however, the performance of
revived, extended, abandoned, renounced, or the contract has become so difficult as to be
terminated only by mutual consent of the manifestly beyond the contemplation of the
parties. Without this mutuality and equality parties, the obligor may be released
between the parties, it cannot be said that the therefrom, in whole or in part. (Art. 1267.)
contract has the force of law between them. (Art. The debtor in obligations to do shall also be
1159.) It is considered repugnant to have one released when the prestation becomes
party bound by a contract while leaving the other legally or physically impossible without the
free from complying therewith. fault of the obligor. (Art. 1266.)

(2) Fulfilment or extinguishment of contract. ART. 1306. The contracting parties may
— A contract containing a condition which establish such stipulations, clauses, terms and
makes its fulfillment or extinguishment conditions as they may deem convenient,
dependent exclusively upon the uncontrolled provided they are not contrary to law, morals,
will of one of the contracting parties is void. good customs, public order, or public policy.
GENERAL RULE: Freedom to contract
(3) Renunciation or violation of contract. — guaranteed. The freedom to contract is both a
It is an elementary rule that no party can constitutional and statutory right.
renounce or violate the law of the contract
unilaterally or without the consent of the  The right to enter into contracts is one of the
other. Hence, “its validity or compliance liberties guaranteed to the individual by the
cannot be left to the will of one of them.” (Art. Constitution.
1308; see Art. 1182.)
 It also signifies or implies the right to choose
with whom one desires to contract. The
Just as nobody can be forced to enter into a
Constitution prohibits the passage of any law
contract, no one may be permitted to change impairing the obligation contracts. (Art. III,
his mind or disavow and go back upon his Sec. 10 thereof.) However, the constitutional
own acts, or to proceed contrary thereto, to prohibition against the impairment of
the prejudice of the other party. contractual obligations refers only to legally
valid contracts.
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 Article 1490. The husband and the wife

 In appropriate cases, it cannot be invoked as cannot sell property to each other, except:
against the right of the state to exercise its
police power. In other words, an individual (1) When a separation of property was agreed
does not have an absolute right to enter into upon in the marriage settlements; or
any kind of contract. However, because the
(2) When there has been a judicial separation of
autonomy or freedom of contract is both a
property under article 191. (1458a)
constitutional and statutory right, to uphold
the right, courts are enjoined to move with  Article 1491. The following persons cannot
the necessary caution and prudence in acquire by purchase, even at a public or
holding contracts void. judicial auction, either in person or through
the mediation of another:
 The binding force of a contract must be
recognized as far as it is legally possible to (1) The guardian, the property of the person or
do so. persons who may be under his guardianship;

 The legal presumption is always on the (2) Agents, the property whose administration or
validity of contracts. sale may have been intrusted to them, unless
the consent of the principal has been given;
EXCEPTIONS:
 ART. 1310. The determination shall not be
obligatory if it is evidently inequitable. In (3) Executors and administrators, the property
such case, the courts shall decide what is of the estate under administration;
equitable under the circumstances. (4) Public officers and employees, the property
Effect where determination inequitable. of the State or of any subdivision thereof, or of
any government-owned or controlled
This article is a qualification to Article 1309. A corporation, or institution, the administration of
contracting party is not bound by the which has been intrusted to them; this provision
determination if it is evidently inequitable or shall apply to judges and government experts
unjust as when the third person acted in bad who, in any manner whatsoever, take part in the
faith or by mistake. In such case, the courts sale;
shall decide what is equitable under the
circumstances. (5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and other
 SPECIAL DISQUALIFICATIONS officers and employees connected with the
administration of justice, the property and rights
 Art 87, Family Code - Every donation or in litigation or levied upon an execution before
grant of gratuitous advantage, direct or the court within whose jurisdiction or territory
indirect, between the spouses during the they exercise their respective functions; this
marriage shall be void, except moderate gifts prohibition includes the act of acquiring by
which the spouses may give each other on assignment and shall apply to lawyers, with
the occasion of any family rejoicing. The respect to the property and rights which may be
prohibition shall also apply to persons living the object of any litigation in which they may
together as husband and wife without a valid take part by virtue of their profession;
marriage.
(6) Any others specially disqualified by law.
(1459a)
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 Article 1782. Persons who are prohibited

from giving each other any donation or
advantage cannot enter into universal
partnership.
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Kinds of innominate contract

(1) do ut des (I give that you may give);
(2) do ut facias (I give that you may do);
(3) facio ut des (I do that you may give); and
(4) facio ut facias (I do that you may do).
Do ut des is, however, no longer an innominate
contract. It has already been given a name of its
own, i.e., barter or exchange. (Art. 1638.)
Reasons and basis for innominate contracts
The impossibility of anticipating all forms of
agreement on one hand, and the progress of
man’s sociological and economic relationships
on the other, justify this provision.
A contract will not, therefore, be considered
invalid for failure to conform strictly to Art. 1307
the standard contracts outlined in the Civil Code
provided it has all the elements of a valid
contract. (Arts. 1318, 1356.)
Innominate contracts are based on the well-
known principle that “no one shall unjustly
enrich himself at the expense of another.”