Chapter 1: General Provisions

Question 1

Article 1305

Answer 1

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

Question 2

Meaning of contract

Answer 2

The above article gives the definition of a contract. It lays emphasis o n the meeting of minds between two (2) contracting parties which takes place when an offer by one (1) party si accepted by the other. (Art. 1319.) In a contract, one (1) or more persons bind himself or themselves with respect to another or others, or reciprocally, to the fulfillment of an obligation ot give, ot do, or ot render service or ot refrain from doing some particular thing (see Art. 1156.)

Question 3

Number of parties in a contract

Answer 3

(1) In acontract, there must be at least two (2) persons or parties, because ti is impossible for one to contract with himself.

(2) A single person may create a contract by himself where he represents distinct interests, (e.g., his own and that of another for whom eh acts as agent. For example: If A(agent) has been authorized by P (principal) to borrow (not lend). A may himself be the lender at the current rate of interest.

Question 4

Contract and obligation distinguished.

Answer 4

Contract is one of the sources of obligations. (Art. 1157.) On the other hand, obligation is the legal tie or relation itself that
* exists after a contract has been entered into.
Hence, there can be no contract if there is no obligation accepted in return for some benefit to be enjoyed. But an obligation may exist without a contract such as the obligation imposed by law to pay taxes.

Question 5

Contract and agreement distinguished.

Answer 5

Contracts are binding agreements enforceable through legal proceedings in case the other party does not comply with his obligation under the agreement. To be valid and enforceable, a contract must be lawful (see Art. 1306.) and all the requisites for its validity must be present. (see Art. 1318.)
Those agreements which cannot be enforced by action in the courts of justice (like an agreement to go to a dance party) are not contracts but merely moral or social agreements. An agreement is broader than a contract because the former may not have all the elements of a contract (Art. 1318.) that create legally enforceable obligations.
So, all contracts are agreements but not all agreements are contracts.

Question 6

Classifications of contract.

Answer 6

Contracts may be categorized in various ways depending on the characteristic in them which is emphasized.

The following may be mentioned:
(1) According to name or designation:
(a) Nominate; and
(b) Innominate. (see Art. 1307.)

2) According to perfection:
(a) Consensual; and
(b) Real. (see Arts. 1315, 1316.)

(3) According to cause:
(a) Onerous;
(b) Remuneratory or remunerative; and
(c) Gratuitous. (see Art. 1350.)

(4) According to form:
(a) Informal, common or simple; and
(b) Formal or solemn. (see Art. 1356.)

(5) According to obligatory force:
(a) Valid (see Art. 1306.);
(b) Rescissible (Chap. 6.);
(c) Voidable (Chap. 7.);
(d) Unenforceable (Chap. 8.); and
(e) Void or inexistent. (Chap. 9.)

(6) According to person obliged:
(a) Unilateral; and
(b) Bilateral. (see Art. 1191.)

(7) According to risks:
(a) Commutative (e.g., sale, lease), when the undertake ing of one party is considered the equivalent of that of the other; and
(b) Aleatory (e.g., insurance, sale of hope), when it depends upon an uncertain event or contingency both as to benefit or loss.

(8) According to liability:
(a) Unilateral (e.g., commodatum, gratuitous deposit), when it creates an obligation on the part of only one of the parties; and (b) Bilateral (e.g, sale, lease), when it gives rise to reciprocal obligations for both parties.

(9) According to status:
(a) Executory, when it has not yet been completely performed by both parties; and
(b) Executed, when it has been fully and satisfactorily carried out by both parties. (see Art. 1403.)

(10) According to dependence to another contract:
(a) Preparatory (e.g, agency, partnership), when it is entered into as a means to an end;
(b) Accessory (e.g., mortgage, guaranty), when it is dependent upon another contract it secures or guarantees for its existence and validity; and
(c) Principal (e.g., sale, lease), when it does not depend for its existence and validity upon another contract but is an indispensable condition for the existence of an accessory
contract.

(11) According to dependence of part of contract to other parts.
(a) Indivisible (or entire) (e.g., sale of a dining room table and 8 matching chairs), when each part of the contract is dependent upon the other parts for satisfactory performance, and
(b) Divisible (e.g., sale of rocking chair and a pair of shoes), when one part of the contract may be satisfactorily performed independently of the other parts. (see Arts. 1223-
1225.)

The kind of contract entered into is not determined, however, by the name or title given to it by the parties but, by its nature or character as determined by principles of law, principally the intention of the contracting parties. (see Art. 1371.)

Question 7

Article 1306

Answer 7

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.

Question 8

Meaning of valid contracts

Answer 8

Valid contracts are those that meet all the legal requisites for the type of agreement involved (1318) and the limitations
on contractual stipulation (Art. 1306) and are, therefore, legally binding and enforceable.
Note: It is possible to have an agreement that meets all the criteria of a valid contract but is unenforceable in a court of law for failure to comply with the Statutes of Frauds. (see Art. 1403)

Question 9

Freedom to contract guaranteed.

Answer 9

The right to enter into contract is one of the liberties guaranteed to the individual by the Constitution. (Article I, Sec. 10 thereof.) However, the constitutional prohibition against the impairment of contractual obligations refers only to legaly valid contracts. (San Diego vs. Mun. of Naujan, 107 Phil. 118) In appropriate cases, it cannot be invoked as against the right of the state to exercise its police power. (infra.) In other words, an individual does not have an absolute right to enter into any kind of contract.
However, because the freedom of contract is both a constitutional and statutory right, to uphold the right courts are enjoined to move with the necessary caution and prudence in holding contracts void. (Gabriel vs. Mateo, 71 Phil. 497.)

Question 10

Limitations on contractual stipulations.

Answer 10

There are limitations to the freedom to contract.
(1) Law. - It is a fundamental requirement that the contract entered into must be in accordance with, and not repugnant to, an applicable statute. Its terms are embodied in every contract. The law thus sets limits.

(2) Police power. - When there is no law in existence or when the law is silent, the will of the parties prevails unless their contract contravenes the limitation of morals, good customs, public order, or public policy. In short, all contractual obligations are subject — as an implied reservation therein — to the possible exercise of the police power of the state. Far from being an impairment of contractual obligations, the exercise of such power constitutes, a mere enforcement of one of the conditions deemed imposed in all contracts.

Question 11

Contract must not be contrary to law.

Answer 11

In its specific sense, law has been defined as “a rule of conduct, just, obligatory, promulgated by legitimate authority, and of common observance and benefit.” (1 Sanchez Roman 3.)
A contract cannot be given effect if it is contrary to law because law is superior to a contract. (Art. 1409[1).) Acts executed against the provisions of mandatory or prohibitory laws are void, except when the law itself authorizes their validity. (Art. 5.) The contracting parties must respect the law which is deemed to be an integral part of every contract. (see Article 1315.)

Question 12

Contract must not be contrary to morals.

Answer 12

Morals deal with norms of good and right conduct evolved in a community. These norms may differ at different times and places and with each group of people.

Question 13

Is this void?

A contract whereby X promised to live as the common-law wife of Y without the benefit of marriage in consideration of
P100,000

An agreement whereby X is to render service as a servant to Y without compensation as long as X has not paid his debt is reprehensible and censurable.

Answer 13

Yes. It’s immoral -> void

Yes it is also contrary to law.

Question 14

Contract must not be contrary to good customs.

Answer 14

Customs consist of habits habits and practices which through long usage have been followed and enforced by society or some part of it as binding rules of conduct. It has the force of law when recognized and enforced by law.

“Good customs are expressly mentioned, although morals are already specified. The spheres of morals and good customs may frequently overlap each other but sometimes they do not” (Report of the Code Commission, p. 134.)

Question 15

Is this void?

X entered into a contract whereby X binds himself to slap his father in consideration of P5,000 to be given by Y.

Answer 15

This contract is void because it is against the good custom of showing respec to our parents.

Question 16

Contract must not be contrary to public order.

Answer 16

Public order refers principally to public safety although it has been considered to mean also the public weal.

Question 17

Is this void?

A stipulation in a contract of lease whereby the landlord can use force to eject the tenant in case of failure of the latter to pay the rent agreed upon

Answer 17

Yes because it’s against public order

Question 18

Contract must not be contrary to public policy.

Answer 18

Public policy is broader than public order, as the former may refer not only to public safety but also to considerations which are moved by the common good. (Ibid.; see Art. 1416.)

A contract which has a tendency to be injurious to the public or is against the public good is contrary to public policy. Actual injury need not be shown.

Question 19

Is this contrary to public policy?

X stole the car of Y. Later, they entered into a contract whereby Y would not prosecute X in consideration of P50,000.

Answer 19

It is to the interest of society that crimes be punished. The agreement between X and Y is, therefore, contrary to public policy because it seeks to prevent or stifle the prosecution of X for theft.
To permit X to escape the penalties prescribed by law by the purchase of immunity from Y, a private individual, would result in a manifest perversion of justice. (Arroyo vs. Berwin, 36 Phil.
386; Velez vs. Ramas, 40 Phil. 787.)

Question 20

ARTICLE 1307.

Answer 20

Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and Il of this Book, by the rules governing the most analogous nominate contracts and by the customs of the place.

Question 21

Classification of contracts according to its name or designation.

Answer 21

They are:
(1) Nominate contract or that which has a specific name or designation in law e.g., commodatum, lease, agency, sale, etc.); and

(2) Innominate contract or that which has no specific name or designation in law.

Question 22

Kinds of innominate contract.

Answer 22

They are:
(1) do ut des (I give that you may give);

(2) do ut facias (I give that you may do);

(3) facto ut des (I do that you may give);

(4) facto 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.)

Question 23

Reasons for innominate contracts.

Answer 23

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. 625.) A contract will not, therefore, be considered invalid for failure to conform strictly to the standard contracts outlined in the Civil Code. It is sufficient that it has all the elements of a valid contract.

Question 24

Rules governing innominate contracts.

Answer 24

Innominate contracts shall be governed by:-
(1) the agreement of the parties;
(2) the provisions of the Civil Code on obligations and contracts;
(3) the rules governing the most analogous contracts;
(4) the customs of the place.

Question 25

ART. 1308.

Answer 25

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

Question 26

Contract binds both contracting parties.

Answer 26

A contract is an agreement which gives rise to obligations.
It must bind both parties in order that it can be enforced against either. Without this equality between the parties, it cannot be said that the contract has the force of law between them. (Art. 1159.)
It is a fundamental rule that no party can renounce or violate the law of the contract without the consent of the other. Hence,
“its validity or compliance cannot be left to the will of one of them.”

Question 27

EXAMPLE:

Answer 27

S agreed to sell his car to B for P100,000. The contract is binding upon both contracting parties and either of them can enforce the contract against the other.
A stipulation in the contract to the effect that the contract shall be considered invalid if so declared by S or that S can comply with his obligation if he wants (Art. 1182.) without the same privilege being given to B is void because the contract does not

bind both of them. Nor can S alone determine the price of the car which price is binding upon B whether he accepts it or not.
A contract is a meeting of the minds and, therefore, there must be mutual consent. (Arts. 1305, 1319.)
But if the price fixed by S is accepted by B, the sale is perfected. (see Art. 1473.) If S or B alleges fraud, he must adduce satisfactory evidence.

Question 28

ART. 1309.

Answer 28

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.

Question 29

Determination of performance by a third person.

Answer 29

Under the preceding article, compliance with a contract cannot be left to the will of one of the contracting parties.
However, under the above provision, the determination of its performance may be left to a third person. (see Arts. 2042-2046.) In such case, the obligation does not depend upon a potestative condition. (see Art. 1182.)
The decision, however, shall bind the parties only after it has been made known to both of them.

EXAMPLE:
S sold his parcel of land to B. It was agreed that C, a real estate appraiser, would be the one to determine the reasonable price of the land. (see Art. 1469.) C, then, fixed the price after considering all the circumstances and factors affecting the value of the land.
In this case, C must make known his decision to S and B who will be bound by the same.

Question 30

ART. 1310.

Answer 30

The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances.

Question 31

Effect where determination inequitable.

Answer 31

This article is a qualification to Article 1309 A contracting party is not bound by the determination if it is evidently inequitable or unjust as when the third person acted in bad faith or by mistake. In such case, the courts shall decide what is equitable under the circumstances.

Question 32

ART. 1311.

Answer 32

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.

Question 33

Persons affected by a contract.

Answer 33

(1) General rule. - As a general rule, a party’s rights and obligations derived from a contract are transmissible to the successors. (see Art. 1178.) Under Article 1311 (par. 1.), contracts take effect only between the parties, their assigns (ie., transferees, and heirs. This means that only the parties, their assigns and heirs can have rights and obligations under the contract.
As a rule, the act, declaration, or omission of a person cannot affect or prejudice another (see Sec. 28, Rule 130, Rules of Court) without the latter’s authorization or ratification.

Question 34

Exceptions to persons affect by a contract

Answer 34

(2) Exceptions. - 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 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). (Art. 1178.)

Question 35

Meaning of stipulation pour autrui.

Answer 35

Stipulation pour autrui is a stipulation in a contract cleaty 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 oblige o the original parties.

Question 35

Cases when strangers or third persons affected by a contract.

Answer 35

A third person is one who has not taken part in a contract and is, therefore, a stranger to the contract. As a general rule, a third person has no rights and obligations under a contract to which he is a stranger. (par. 1, Art. 1311.) He has no standing in law to demand the enforcement of a contract or question its validity.
There are cases, however, when third persons may be atfected by a contract. Among such cases are the following:
(1) In contracts containing a stipulation in favor of a third person (stipulation pour autrui) (par. 2, Art. 1311.);
(2) In contracts creating real rights (Art, 1312.);
(3) In contracts entered into to defraud creditors (Art.
1313.); and (4) In contracts which have been violated at the inducement of a third person. (Art. 1314.)

Question 36

Classes of stipulations pour autrui.

Answer 36

Stipulations in favor of a third person may be divided into two (2) classes, namely:
(1) Those where the stipulation is intended for the sole benefit of such third person. This stipulation, in effect, confers a gift, it being necessary in such case to apply the rules relating to donations insofar as the form of acceptance is concerned; and
(2) Those where an obligation is due from the promise to the third person which the former seeks to discharge by means of such stipulation, as, for instance, where a sale of property is coupled with the promise of the purchaser (promisor) to paya debt owing from the seller (promisee / debtor) to a third person (creditor).
In the first case, the third party is said to be a done. beneficiary while in the second, he is called creditor-beneficiary.

Question 37

Requisites of stipulation pour autrui.

Answer 37

They are the following:
(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 oblige of the original parties;
(3) The stipulation in favor of the third person should be a part, not the whole, of the contract; (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. (see Florentino vs. Encarnacion,
79 SCRA 193.)

Question 38

example

Answer 38

(1) D owes C P10,000 payable after one year at 12% interest. It was agreed that the interest of P1,200 would be given to T to whom C is indebted for the same amount.
In this case, T must communicate his acceptance to D before the revocation of the stipulation by the parties in order that the same will be effective. From the moment communication of acceptance is duly made, T becomes a party to the contract. The promisee (C) in a contract containing a stipulation pour autrui is entitled to bring an action for its enforcement or to prevent its breach in the same manner as the beneficiary (T) thereof. (ibid.)
(2) X contracts with Y for the erection of a building which will enhance the value of Z’s adjoining property. The fact that Z may incidentally derive some benefit from the contract gives him no right to sue X for breach of his contract with Y.

Question 39

Article 1312.

Answer 39

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.

Question 40

Third persons are bound by contracts;
creating real rights.

Answer 40

This article is an exception to the general rule that a contract binds only the parties. (1312)

Third persons who come into possession of the object of a contract over which there is a real right, are bound thereby even. if they were not parties to the contract. A real right is a right binding against the whole world (everybody) and attaches to the property over which it is exercised wherever it goes. (see Art. 1164.) Thus, a contract subjecting certain real properties to the payment of certain debts, registered in accordance with the Property Registration Decree, constitutes a real right, which is produced not by the contract but by the publicity given by the Registry, such publicity prejudicing the right of third persons.
However, if the real right is not registered, third persons who acted in good faith are protected under the provisions of the Property Registration Decree.

Question 41

EXAMPLE:

Answer 41

D mortgaged his parcel of land in favor of C as a security for his debt. The mortgage is duly registered in the Registry of Property. Later on, D sold the same land to T.
In this case, T bought the land subject to the mortgage constituted thereon. In other words, T is bound by the contract between D and C although he is a stranger to said contrac because the right of C to the mortgage, being a real right, follows the property wherever it goes. (see Art. 1164.)

Question 42

ART. 1313.

Answer 42

Creditors are protected in cases of contracts intended to defraud them.

Question 43

Right of creditors to impugn contracts intended to defraud them.

Answer 43

Article 1313 is another qualification to the rule that contracts take effect only between the parties.
The creditor is given the right to impugn the contracts of debtor intended to defraud him. (Art. 1177.), Although he is not a party to the contract, he can sue to prevent the debtor from committing fraud against him.

Question 44

example

Answer 44

D is indebted to C in the amount of P100,000. D sells a parcel of land to T with the knowledge of C in order that C may not attach the land in payment of his debt and D has no other property.
C, who is a stranger to the contract between D and T, is given by law the right to ask for the rescission or cancellation of the sale in order that he may be paid his claim.

Question 45

article 1314

Answer 45

. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.

Question 46

Liability of third person responsible for breach of contract.

Answer 46

This is a rule of American law. It is also proper under the general principles of the Philippine law, because a contractual right is property. (Report of the Code Commission, p. 135.)
Article 1314 recognizes an instance when a stranger to a contract can be sued for damages for his unwarranted interference with the contract. It presupposes that the contract interfered with is valid and the third person has knowledge of the existence of the contract. It is not required in the third person to be liable that he acted with malice or in personal gain as long as there is no sufficient justification in the interference or inducement.

Question 47

EXAMPLE

Answer 47

:
S agreed to sell his parcel of land to B for P1,000,000. S sells the land to C instead because of the inducement of D.
In this case, B can sue D for damages. However, the liability of D for damages cannot be more than that of S for the latter’s violation of his contract. To hold D liable for damages in excess of those that can be recovered against S would be unjust.
At most, D would be solidarily liable with S..
The source of the obligation or liability of D will be based on the theory of quasi-delict.

Question 48

Article 1315

Answer 48

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 keeping with good faith, usage and law.
(1258)

Question 49

Article 1316

Answer 49

1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation.

Question 50

Classification of contracts according
to perfection.

Answer 50

They are:
(1) Consensual contract or that which is perfected by mere consent (e.g., sale, lease, agency) (Art. 1315.);
(2) Real contract or that which is perfected by the delivery of the thing subject matter of the contract (e.g., depositum, pledge, commodatum) (Art. 1316; see Arts. 1934, 1963, 2093.); and
(3) Solemn contract or that which requires compliance with certain formalities prescribed by law, such prescribed form being thereby an essential element thereof (e.g., donation of real property which must be in a public instrument).

Question 51

Stages in the life of a contract.

Answer 51

They are:
(1) Preparation or negotiation. - This includes all the steps taken by the parties leading to the perfection of the contract At this stage, the parties have not yet arrived at any definite agreement;
(2) Perfection or birth. — This is when the parties have come to a definite agreement or meeting of the minds regarding the subject matter and cause of the contract (Art. 1319.), i.., u concurrence of the essential elements thereof; and
(3) Consummation or termination. — This is when the parties have performed their respective obligations and the contract may be said to have been fully accomplished or executed, resulting in the extinguishment or termination thereof. A contract may also be terminated after its perfection, not by performance, but by mutual agreement of the parties.

Question 52

example

Answer 52

(1) S offers to sell his car to B for P500,000. B asks S to show him the car. Later, S brings the car and shows it to B. B offers to pay P400,000 for the car.
Here, the parties are taking all the steps that may lead to the perfection of the contract.
* (2) Now, if S agrees to sell the car for P400,000, the contract is perfected because there is a meeting of the minds upon the subject matter and the cause of the contract.
(3) The contract will be consummated after S delivers the car to B and B pays P400,000. B becomes the owner of the car and S, the owner of the money paid by B. The contract is completely executed. It ceases to be an active or existing agreement and it is valuable only in case later dispute should arise between S and B about the agreement.
S and B may terminate their contract by mutual agreement thereby releasing them from their respective obligation as seller and buyer.

Question 53

How contracts are perfected.

Answer 53

(1) Consensual contracts. - As a general rule, contracts are perfected by mere consent of the parties regarding the subject matter and the cause of the contract. (Arts. 1315, 1319.) They are obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (Art. 1356.) Almost all contracts are consensual as to its perfection. They come into existence upon their perfection by mutual consent, even if the subject matter or the consideration has not been delivered.
In the absence of delivery, perfection does not transfer title or create real right, yet, it gives rise to obligations binding upon both parties.

(2) Real contracts. - The exceptions are the so-called real contracts which are perfected not merely by consent but by the delivery, actual or constructive, of the object of the obligation.
(Art. 1316.) These contracts have for their purpose restitution because they contemplate the return by a party of what has been received from another.

(3) Solemn contracts. — When the law requires that a contract be in some form to be valid (Art. 1356.), this special form is necessary for its perfection. Thus, under the law, a donation of real property cannot be perfected until it is embodied in a public instrument. (Art.

Question 54

example

Answer 54

EXAMPLE:
Today S and B enter into a contract whereby S binds himself to sell his car to B for P500,000.
The contract is deemed perfected although there is as yet no delivery of the car and payment of the price. Both parties acquire the right to demand from the other the fulfillment of his obligation: to deliver the car on the part of S, and to pay the amount of P500,000 on the part of B.

EXAMPLE:
Under the contract signed by A and B, B agreed to loan
P100,000 to A.
No contract of loan exists before B’s delivery of P100,000 to
A. Under the Civil Code, a contract of loan is a real contract; the delivery of the loan amount by B to A perfects the contract. (Art.
1934.)
Before the delivery of the loan amount, the contract between A and B is a mere contract to loan (which is a consensua! contract). Under the Civil Code, an accepted promise to deliver something by way of simple loan is binding upon the parties.
(Art. 1934.) Hence, A can demand the delivery of the loan amount.
The contract of loan is perfected upon delivery by B of the loan amount.

Question 55

Effect of perfection of the contract.

Answer 55

From the moment the parties come to an agreement on a definite subject matter and valid consideration, they are bound not only —
(1) to the fulfillment of what has been expressly stipulated but also;
(2) to all the consequences which according to their nature, may be in keeping with good faith, usage, and law. (Art. 1315.)

Question 56

examples

Answer 56

EXAMPLES:
* (1) S sold a horse to B for P15,000. The details of this contract as regards the place of delivery of the horse and payment of the price, the time of delivery and payment, etc., are not included. These details are furnished by law and taken up in the various provisions of the Civil Code.
(2) S agreed to sell his horse to B. It was stipulated that S
should deliver the horse to B the next day.
In this case, S has the obligation to deliver the horse the next day as expressly stipulated in the contract. S has also the obligation to take care of the horse pending delivery and to warrant that he has the right to sell the horse although nothing is said about the obligation in the contract as this is in keeping with good faith, usage, and law.

Question 57

ART. 1317.

Answer 57

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.

Question 58

Unauthorized contracts are unenforceable.

Answer 58

As a 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.
(1) A contract involves the free will of the parties and only he who enters into the contract can be bound thereby. (see par. 1, Art. 1311.) Thus, under Article 1317, a contract entered into in the name of another by one who has no authority is ; unenforceable against the former unless it is ratified by him before it is revoked by the other contracting party. (see Art. 1403[1).)
(2) An unauthorized contract is not to be confused with a contract for the benefit of a third person who may demand its fulfillment provided the requisites mentioned (supra.) are present. (see par. 2, Art. 1311.)

Question 59

Unauthorized contracts can be cured
only by ratification.

Answer 59

The mere lapse of time cannot give efficacy to such a contract
(1) The defect is such that it cannot be cured exceptb; the ratification (subsequent approval or conformity) of the person in whose name the contract was entered into or by his duly authorized agent and not by any other person not so empowered. (see Att.
1405.)
(2) The ratification may be express or implied, but it must be clear so as not to admit of any doubt or vagueness.
(3) The effects of ratification retroact to the moment of the celebration of the contract.

Question 60

EXAMPLE:

Answer 60

D borrowed P10,000 from C in whose favor he executed a promissory note. In the note it is stated that D is acting as the agent of P and that the money is intended for P. P never authorized Dio borrow money from C.

In this case, the contract of D is not enforceable against P.
However, P can subsequently approve or sanction the contract unless it has already been revoked by C, the other contracting party. Ratification cleanses the contract from all its defects from the moment the contract was entered into. (Art. 1396.) If the contract has already been ratified by P, it can no longer be revoked by C.

Question 61

When a person is bound by the contract
of another.

Answer 61

In order that a person may be bound by the contract of another, there are two (2) 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.
A contract entered into by an agent in excess of his authority is unenforceable against the principal, but the agent is personally liable to the party with whom he contracted where such party was not given sufficient notice of the limits of the powers granted by the principal. (see Art. 1897.)
EXAMPLE:
P (principal) authorized A (agent) to sell his car for P200,000 cash. A sold the car to C for P200,000 payable in 10 monthly installments.
In this case, P cannot be compelled by C to accept the monthly installments and to deliver the car because A acted beyond his powers unless there has been ratification by P. A is personally liable to C for damages.

Question 62

Define or give the meaning of the following:
*1. contract;
2. stipulation pour autrui;
3. real contract;
4. perfection of contract.

Question 63

1. May a third person acquire rights under a contrat to which he is a stranger or be bound thereby? Explain.
2. How are contracts perfected?
3. When will a person be bound by a contract entered into by another?
4. Give the effect of the perfection of a contract.

Question 64

Explain or state briefly the rule or reason for your
answer.
1. A and B entered into a contract not specifically provided in the Civil Code. Is the contract valid and binding.
2. S (seller) and B (buyer) entered into a contrac of sale. It was agreed that the price shall be determined by T, a third person. Can S or B refuse to be bound by T’s determination of the price if he does not agree with the amount thereof?
3. Dowes C P20,000. Both are house painters. It was agreed that D instead of paying C, will paint the house of E to which E expressed his conformity to C whose service as painter was previously contracted by E. Has B the right 10 enforce the stipulation between C and D?
4
X made an office desk for Y. X told Y that the latter may pay whatever amount he would like to pay for it. When the desk was finished Y offered to pay P2,000 but X instead demanded P3,000, its fair value. Is X entitled to P3,000?