Syllabus

Question 1

CONTRACT

What is a Contract

Answer 1

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)

Question 2

Contract vs. Obligation

Answer 2

Contract is one of the sources of obligations.3 (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. But an obligation may exist without a contract

Question 3

Contract vs. Agreement

Answer 3

There can be no contract in the true sense in the absence of the
element of agreement, or of mutual assent of the parties. (Phil. National
Bank vs. Court of Appeals, 238 SCRA 20 [1994].)

Contracts are agreements enforceable through legal proceedings. 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 contract because the former may not have all the elements of a contract. (see Art. 1318.)

So, all contracts are agreements but not all agreements are contracts.

Question 4

Characteristics of contracts

Answer 4

(1) Freedom or autonomy of contracts.

(2) Obligatoriness of contracts.

(3) Mutuality of contracts

(4) Consensuality of contracts.

Question 5

Principle of Ignorantia legis neminem excusat

Answer 5

“Mistake of law does not generally vitiate consent. But when there
is a mistake on a doubtful question of law, or on the construction or
application of law, this is analogous to a mistake a fact, and the maxim
of ignorantia legis neminem excusat (ignorance of law excuses no one)

Question 6

Police power

Answer 6

Public welfare is superior to private rights. 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

Question 7

Morals or Good Customs

Answer 7

Morals or good customs are often embodied in the law (see Arts.
873, 1183.), but the morals or good customs referred to in Article 1306
must refer to those not expressed in legal provisions. (G. Florendo, op.
cit., p. 493.)

Question 8

Public Policy

Answer 8

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.10 (Report of Code Commission, p. 134.) By public
policy is intended that principle of law which holds that no subject or
citizen can lawfully do that which has a tendency to be injurious to the
public or against the public good which may be termed the “policy of
the law,’’ or “public policy in relation to the administration of the law.’

Question 9

Classifications of Contracts

Answer 9

(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 or common; and
(b) Formal or solemn. (see Art. 1356.)

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

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

(7) 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.

(8) According to risks:
(a) Commutative (e.g., sale, lease), when the undertaking of one party is considered the equivalent of that of the other; and
(b) Aleatory (e.g., insurance, sale of a hope6), when it depends upon an uncertain event or contingency both as to benefit or
loss.

(9) 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.

Question 10

Innominate Contracts

Answer 10

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

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

Question 11

Kinds of Innominate Contracts

Answer 11

(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).

Question 12

Third persons affected by contracts

Answer 12

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. (Art. 1311, par. 1.) He has no legal standing or capacity to demand the enforcement of a contract or assail its validity even if it is admitted that it is defective.

Question 13

Stipulation Pour Autrui

Answer 13

Stipulation pour autrui is a stipulation in a contract clearly and
deliberately conferring a favor upon a third person who has a right to
demand its fulfi llment, provided, he communicates his acceptance to
the obligor before its revocation by the obligee or the original parties.

Question 14

Requisites of Stipulation Pour Autrui

Answer 14

(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;

(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.

Question 15

Rights of Creditors in fraudulent contracts

Question 16

Liability of third person responsible for breach of contract

Answer 16

(1) Preparation or negotiation.

Question 17

Perfection of contracts

Answer 17

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)

Question 18

Stages in the life of a Contract

Answer 18

(1) Preparation or negotiation.

(2) Perfection or birth.

(3) Consummation or termination.

Question 19

ESSENTIAL REQUISITES OF CONTRACTS

What are the requisites of contracts

Answer 19

ART. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)

Question 20

Classes of elements of contracts

Answer 20

(1) Essential elements or those without which no contract can validly exist

(a) common or those present in all contracts, namely, consent,
object, and cause (Art. 1318.); and

(b) special or those not common to all contracts or those which
must be present only in or peculiar to certain specifi ed contracts,
and such peculiarity

(2) Natural elements or those that are presumed to exist in certain
contracts unless the contrary is expressly stipulated by the parties,
like warranty against eviction (Art. 1548.) or warranty against hidden
defects in sale (Art. 1561.);

(3) Accidental elements or the particular stipulations, clauses,
terms, or conditions established by the parties in their contract (Art.
1306.), for the purpose of clarifying, restricting, or modifying its legal
effects, like conditions, period, interest, penalty, etc., and, therefore, they exist only when they are expressly provided by the parties.

Question 21

CONSENT

Definition of Consent

Answer 21

Consent is the conformity of wills and with respect to contracts, it is
the agreement of the will of one contracting party with that of another or others, upon the object and terms of the contract. (4 Sanchez Roman 191; 8 Manresa 648.)

Question 22

Offer

Answer 22

Offer is a proposal made by one party (offerer) to another to enter
into a contract. It is more than an expression of desire or hope. It is
really a promise to act or to refrain from acting on condition that the
terms thereof are accepted by the person (offeree) to whom it is made

Question 23

Acceptance

Answer 23

Acceptance is the manifestation by the offeree of his assent to the
terms of the offer. Without acceptance, there can be no meeting of
the minds between the parties. (Art. 1305.) A mere offer produces no
obligation.

Question 24

Forms of acceptance

Answer 24

(1) Acceptance by promise

(2) Acceptance by act.

(3) Acceptance by silence or inaction.

Question 25

Option contract

Answer 25

Option contract is a preparatory contract giving a person for a
consideration a certain period and under specified conditions within
which to accept the offer of the offerer

Question 26

Option money vs. earnest money

Answer 26

earnest money is part of the purchase price, while option
money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while
option money applies to a sale not yet perfected

Question 27

Option contract vs. right of first refusal

Answer 27

An option is a preparatory contract in which one party grants to another, for a fi xed period and at a determined price, the privilege
to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into
the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the
option.

Question 28

Advertisements not definite offers

Answer 28

Business advertisements of things for sale are not definite offers,
acceptance of which will perfect a contract but are merely invitations
to the reader to make an offer or only as proposals. However, if the advertisement is complete in all the particulars necessary in a contract,
it may amount to a defi nite offer which, if accepted, will produce a
perfected contract.

Question 29

General offer

Answer 29

The principle
is that a general offer made to the public, or to a particular class of
persons, may be accepted by any one or by any one coming within
the description of the class, as for example, an offer of a prize for a
design for a public building or a bonus to any one who will make a
certain improvement, or of a reward, and other like cases

Question 30

Incapacity to give consent

Answer 30

minors, individuals with psychological disabilities, and intoxicated persons

Question 31

Characteristics of consent

Answer 31

(1) It is intelligent.

(2) It is free and voluntary.

(3) It is conscious or spontaneous.

Question 32

Voidable contracts

Answer 32

Voidable or annullable contracts are those which possess all the essential requisites of a valid contract but one of the parties is legally incapable of giving consent, or consent is vitiated by mistake, violence, intimidation, undue infl uence, or fraud.

Question 33

OBJECT

Definition of object

Answer 33

The object of a contract is its subject matter. (Art. 1318[2].)

In reality, the object of every contract is the obligation created. But
since a contract cannot exist without an obligation, it may be said that
the thing, service, or right which is the object of the obligation is also
the object of the contract

Question 34

Requisites of service as object

Answer 34

(1) The service must be within the commerce of men;

(2) It must not be impossible, physically or legally (Art. 1348)
and

(3) It must be determinate or capable of being made determinate. (Arts. 1318[2], 1349.).

Question 35

Future things or rights as object

Answer 35

Things to be manufactured, raised, or acquired after the perfection of the contract such as wine that a vineyard is expected to produce; wool that shall thereafter grow upon a sheep; rice to be harvested next harvesting season; milk that a cow may yield; eggs that hens may lay; young animals not yet in existence, etc.

Question 36

CAUSE

Definition of Cause

Answer 36

Cause (causa) is the essential or more proximate purpose or reason
which the contracting parties have in view at the time of entering into
the contract or, as expressed in another case, it is the “why of the contract, the essential reason which moves the contracting parties to enter into the contract.

Question 37

Classification of contracts according to cause

Answer 37

(1) Onerous or one the cause of which, for each contracting party,
is the prestation or promise of a thing or service by the other. In other words, in this contract, the parties are reciprocally obligated to each
other.

(2) Remuneratory or remunerative or one the cause of which is the
service or benefit which is remunerated. The purpose of the contract is to reward the service that had been previously rendered by the party
renumerated

(3) Gratuitous or one the cause of which is the mere liberality of
the benefactor or giver, such as commodatum; pure donation; guaranty or suretyship unless there is a stipulation to the contrary

Question 38

Cause vs. Motive

Answer 38

The cause of the contract is the proximate reason of the parties to enter into a contract while motive is the remote reason of the parties in entering into a contract

Question 39

Absence of cause vs inadequacy of cause

Question 40

Falsity of cause

Answer 40

falsity of cause is meant that the contract states a valid
consideration but such statement is not true.
A false cause may be erroneous or simulated. The first always
produces the inexistence of a contract. If the cause is false, the contract
is rendered void because the same actually does not exist.

Question 41

Partly valid and partly void

Question 42

Lesion

Answer 42

Lesion is any damage caused by the fact that the price is unjust or
inadequate.

It is the injury suffered in consequence of inequality of situation, by one party who does not receive the full equivalent for what he gives
in a commutative contract, like a sale.

Question 43

FORM OF CONTRACTS

Informal vs Solemn contract

Answer 43

Informal or common or simple contract – which may be entered into in whatever form provided all the essential requisites are present. While solemn contract – required by law for its efficacy to be in a certain specified form.

Question 44

Classification of contracts according to cause

Question 45

Cause vs. Motive

Question 46

Absence of cause vs inadequacy of cause

Question 47

Falsity of cause

Question 48

Lesion

Question 49

Contracts which must appear in a public instrument

Question 50

REFORMATION OF INSTRUMENTS

Mistake of law vs. Mistake of fact

Question 51

H. INTERPRETATION OF CONTRACTS

DEFECTIVE CONTRACTS

Question 52

Rescissible contracts

Question 53

Badges of fraud

Question 54

Voidable contracts

Question 55

Unenforceable contracts

Question 56

Unauthorized contracts

Question 57

Void or inexistent contracts

Question 58

NATURAL OBLIGATIONS

Question 59

ESTOPPEL

Definition

Question 60

Kinds of estoppel

Question 61

Laches