Obligation

​ A juridical necessity to give, to do or not to do

In case of non-compliance, the obligee can seek redress in the court of law to enforce its
fulfilment or in default of it, the economic value that it represents. (Civil Obligation)

Essential Requisites:
A.​ Passive Subject - called debtor or obligor, a person who is bound to the fulfillment of
the obligation; he who has a duty.

B.​ Active Subject - called creditor or obligee,the person who is entitled to demand the
fulfillment of the obligation; he who has a right

C.​ Object/Prestation - subject matter of the obligation

D.​ Vinculum - the juridical tie between the parties

Essential Elements of Cause of Action - absence of any of these elements, complaint will be
vulnerable for dismissal due to insufficient cause of action.

1.​ A legal right in favor of a person- It pertains to the rights of the obligee/creditor
2.​ Correlative legal obligation of the obligor/debtor to respect the legal rights of the
others.
3.​ Act/ omission in breach/violation of said right by the defendant that results to the
injury of the other
4.​

Cause of Action Based on Written Contracts

​ -Action based upon a written contract should be brought within 10 years from the
time the right of action accrues. It accrues from the time the breach occurs.

1.​ Contract of Sale in an installment basis - cause of action arises at the time the last
installment is not paid.
2.​ Agreement that obligation is payable on demand, breach starts when demand is
made
3.​ Contract of Loan with Real Estate Mortgage

Kinds of Obligations According to Subject matter

a.​ Real Obligation (Obligation to give) - a relation where the object of the obligation has
to be delivered by the obligor to the obligee.
b.​ Personal Obligation (Obligation to do) - the object of the obligation is an act to be
done or not to be done
●​ Positive Personal Obligation
●​ Negative Personal Obligation
Sources of Obligation

●​ Law. — when they are imposed by the law itself, e.g., obligation to pay taxes;
obligation to support one’s family (Obligations arising from law are not presumed
Article 1158) To be demandable, obligations must be clearly set forth in the law. This
type of obligation is considered as a burden upon the obligor.

●​ Contracts. — when they arise from the stipulation of the parties (Art. 1306.), e.g., the
obligation to repay a loan by virtue of an agreement. (Article 1159 - Obligations
arising from contracts have force and effect of a law between the contracting parties
and should be complied in good faith)
-​ Meeting of the minds between two persons whereby one binds himself, with
respect to the other for the fulfillment of the prestation.

​ Contracts that require approval from the government (Contract for Overseas
Employment must be approved by POEA before it can take effect. Such contract become
the law between the contracting parties only when approved, provided that nothing in it is
repugnant to the law

●​ Quasi-contracts. — when they arise from lawful, voluntary and unilateral acts which
are enforceable to the end that no one shall be unjustly enriched or benefited at
the expense of another (Art. 2142.), e.g., the obligation to return money paid by
mistake or which is not due

-​ Juridical relation resulting from certain lawful, voluntary, unilateral acts by

virtue of which the parties become bound to each other to the end that no one
shall be unjustly enriched at the expense of the other.
-​ There is no consent but protected by the fiction of law. The law considers the
parties as having entered into a contract, irrespective of their intention, to
prevent injustice

●​ Delicts - Crimes or acts or omissions punished by law. — when they arise from civil
liability which is the consequence of a criminal offense (Art. 1161.), e.g., the
obligation of a thief to return the car stolen by him; the duty of a killer to indemnify the
heirs of his victim.
-​ Only the civil liability arising from the offense charged is deemed instituted
with the criminal action unless the offended party waives the civil action,
reserves his right to institute it separately, or institute the civil action prior to
the criminal action.

●​ Quasi-delicts - arise from damage caused to another through an act or omission,

there being fault or negligence, but no contractual relation exists between the parties

Elements:
a.​ There must be an act or omission by the defendant
b.​ There must be fault or negligence of the defendant
c.​ There must be damaged caused to the plaintiff
 d.​ There must be a direct relation or connection of cause and effect
between the act or omission and the damage.
e.​ There is no pre-existing contractual relation between the parties

Nature and Effect of Obligations

Article 1163: Every person obliged to give something is also obliged to take care of it with
proper diligence of a good father of a family unless there are stipulations and law requires
another standard of care.

Article 1164 - The creditor has a right to the fruits of the thing from the time the obligation to
deliver it arises. However, he shall acquire no real right over it until the same has been
delivered to him.

Different Kinds of Fruits

1.​ Natural Fruits - spontaneous products of the soil, and the young and other products
of animals
2.​ Industrial Fruits - produced by lands of any kind of cultivation or labor
3.​ Civil Fruits - Derived by a virtue of a juridical relation (rent of buildings, proceed of
leases of lands)

Rights of Creditor to the fruits

​ The creditor is entitled to the fruits of the thing to be delivered from the time the
obligation to make delivery of the things arises.

Obligation to deliver arises:

a.​ The obligation to deliver the thing due and consequently, the fruits thereof, if any,
arises from the time of the perfection of the contract
b.​ If obligation is subject to a suspensive condition or period, it arises upon fulfillment of
the condition or arrival of the period.
c.​ In a contract of sale, obligation arises from the perfection of the contract even if the
obligation is subject to a suspensive condition or a suspensive period where the price
has been paid.
d.​ Obligations derived from law, quasi-contracts, delicts and quasi-delicts, the time of
the performance is determined by specific provisions of law applicable.

Remedies of Creditor in Real Obligation

A.​ Specific Obligation

​ i. Demand specific performance or fulfilment of the obligation with a right to
indemnify for damages;
​ ii. Demands rescission or cancellation of the obligation also with a right to
recover damages
​ iii. Demand payment of damages only where it is the only feasible remedy.
Obligation to deliver a specific thing, the very thing itself must be delivered. Only the debtor
can comply with the obligation. Thus, the creditor is granted with the right to compel the
debtor to make delivery. Nevertheless, the creditor cannot compel the debtor with force and
violence. It has to be brought to the court.

B.​ Generic Real Obligation - This type of obligation can be performed by a third person
since the object is expressed only according to its family or genus. Thus, it is not
necessary for the creditor to compel the debtor to make the delivery although he may
ask for the performance of the obligation.

Delivery of Accession and accessories of a generic/determinate thing

1.​ Accession are fruits of, or additions to, or improvements upon, a thing (principal)
examples: profits or dividends accruing from shares of stock.

-​ Natural accession (alluvion, avulsion, change of course of rivers)

2.​ Accessories are things joined to, or included with, the principal thing for the latter’s
embellishment, better use, or completion. The accessory and the principal things
must go together.

Right of creditor to accessions and accessories

​ As a general rule, all accessions and accessories are considered included in the
obligation to deliver a determinate thing although they may not have been mentioned. Based
on the principle that accessory follows the principal unless there is a stipulation to that effect.

Remedies of creditor in positive personal obligation

1.​ Failure of the creditor to comply the obligations, creditor has the right:

a.​ To have the obligation performed by himself, or by another unless personal

considerations are involved, at the debtor’s expense.
b.​ To recover the damages

2. Obligation done in contravention to the tenor of the obligation

Delays incurred by the obligor when the obligee judicially or extrajudicially demands

fulfilment of the obligation. Delays can nevertheless be incurred without demands:

a.​ Obligation or the law expressly declares
b.​ Nature and circumstances of the obligation it appears that the designation of the time
when the thing to be delivered or the service is to be rendered was controlling motive
for the establishment of the contract or
c.​ When demand would be useless, as when the obligor has rendered it beyond his
power to perform
Mora solvendi
a.​ Failure of the debtor to perform his positive obligation on the date agreed upon
b.​ Demand made by the creditor upon the debtor to fulfil, perform or comply the
obligations, there must be a demand; judicially or extrajudicially.
c.​ Debtor failed to comply the demand.

Effects of Delay
1.​ Mora Solvendi
​ -Debtor is guilty of breach of obligation
​ - Liable for the interest in case of obligations to pay money or damages in
other obligation.
​ - Liable even in the fortuitous events when the obligation is to deliver
determinate thing

Elemets:
a.​ Failure of the debtor to perform positive obligation on the date agreed upon.
b.​ Demand, not mere reminder or notice is made by the creditor upon the debtor:
judicially(complaint is filed in court) or extra-judicially (made outside of court, orally or
in writing)
c.​ Failure of the debtor to comply the demand

2.​ Mora accipiendi

-​ Creditor is guilty of breach of obligation
-​ Liable for the damages suffer if any by the debtor
-​ Bears the risk of loss of the thing due
-​ If the obligation is to pay money, debtor is relieved from interest from the time
the debtor incurs delay
-​ Debtor may release himself from the obligation by the consignation of the
thing or sum due (Consignation : Deposit of the object or the amount
due with the proper court after refusal or inability of the creditor to accept the tender of
payment)

Delays incur without demands:

a.​ When the stipulations of the obligation provide
b.​ When the law provides
c.​ When time is of the essence - The debtor is aware that the performance of the
obligation after the designated time would no longer benefit the creditor.

-​ It is sufficient that the intention to this effect should appear, and there are
certain situations wherein it is held, from the nature of the agreement itself,
the time is the essence of the contract.

-​ Agreements in the form of Option, time is always held to be the essence of

the contract, therefore, acceptance of the option and payment of the purchase
price constitute conditions precedent to specific performance.

d.​ When demand would be useless

 e.​ When there is reciprocal

●​ Payment of purchase price is conditioned upon conveyance by all the co-owners of

their entire interest in the property sold

-​ There is no right to rescind the contract on the ground that the other party
failed to pay the entire purchased price.Contract entails a mutual obligation,
one party cannot rescind it based on the failure of the other party to pay by
reason of the non-compliance of the other party.

●​ Payment of the purchased price is conditioned upon grant by seller to buyer of

authority to sell or mortgage the property seller agreed to convey

Article 1170 Incidental Fraud - committed in the performance of an obligation already

existing because of contract.

-​ If the fraud employed to get the consent of the other party was not the principal
inducement that led the other party enter into the contract, the fraud is incidental and
will likewise give rise only to an action for damages

It must be deliberate or intentional evasion of the normal fulfilment of an obligation. It

cannot cover cases of mistakes or error of judgment made in good faith.
Evading of the normal fulfilment of an obligation and its existence merely results in
breach of it that will give rise to a right by the innocent party to recover damages.

-​ Party who was authorized to exercise discretion, for honest mistakes or erros of
judgment doe snot incur any liabilities.

Breach of Contract - is the failure without justifiable excuse to comply with the terms of a
contract.

Damages recoverable where obligation is to pay money

​ Talisay Silay Milling Co., Inc. vs Court of Industrial Relations
If the “If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary shall be the
payment of the interest agreed upon, and in the absence of stipulation, the legal interest,
which is six per cent per annum

Damage Dues is payable after default

Effect of negligence on the part of the injured party.

The law does not require that the negligence of the defendant should be the sole
cause of the damage. (Astudillo vs Manila Electric Co) When the plaintiff’s own negligence
was the immediate and proximate cause of his injury, he cannot recover damages. But if his
negligence was only contributory, the immediate and proximate cause of the injury being the
defendant’s lack of due care, the plaintiff may recover damages, but the courts shall mitigate
the damages to be awarded.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence shows bad faith, the provisions
of Articles 1171 and 2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required. (1104a)
(minimum care is expected)

Test of Negligence
​ It cannot be determined by the personal judgment of the actor in the situation before
him. It is the law that considers what would be reckless or negligent in the mann of ordinary
intelligence and determines liability by that.

Article 1174. As a general rule, no person shall be responsible for fortuitous events except
in cases expressly specified by law, by stipulations, nature of obligation requires
presumption of risk (independent of the will of the obligor but not of other human wills like
robbery, murder etc.)

Exemption: When the result is found to be part of the participation of man, whether due to
his active intervention or neglect or failure to act, the occurrence is humanized and removed
from the rules applicable to the acts of God.

Obligor will nevertheless be liable although there is a fortuitous event on the following
circumstances:
1.​ Expressly provided by law

2.​ Declared by stipulations

3.​ Nature of obligation requires presumption of risk

4.​ There is a participation of the obligor ( In order that fortuitous event may release a
debtor from his obligation, it is necessary that he be free from previous negligence or
misconduct by which the loss or damage may have been occasioned.)

5.​ Prestation is generic

For the obligor to be released from the chain of obligation, it is not sufficient that fortuitous
event took place. It is important that there is an impossibility of the ob;igor to perform the
obligation because of fortuitous event.

Article 1175 Usurious Transaction

1.​ Legal Rate is 12% per year - The legal rate is 12% (from default until fully paid) if the
transaction is a loan or forbearance of money, goods, or credits or the judgment
involves a loan or forbearance of money, goods or credits, as prescribed in Central
Bank Circular No. 416
 2.​ Maximum Rate - 12% per annum — if the loan is secured in whole or in part by a
mortgage upon real estate with a Torrens Title or by any agreement conveying such
real estate

Forms of usurious transaction: sale with right of repurchase

Instances where a contract shall be presumed to be an equitable mortgage when:

(a) the price of a sale with right to repurchase is unusually inadequate;

(b) the vendor remains in possession as lessee or otherwise;

(c) upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;

(d) the purchaser retains for himself a part of the purchase price; (e) the vendor binds
himself to pay taxes on the thing sold; and,

(f) in any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation

Taking or receiving not mere agreeing of usurious interest is punishable. Mere demanding or
agreeing to charge excessive interest is likewise punishable.

Requisites for Monetary Interest

1.​ The payment of interest must be expressly stipulated

2.​ The agreement must be in writing
3.​ The interest must be lawful

Presumption of Payment of interest

Article 1176 The receipt of the principal by the creditor, without reservation with respect to
the interest, shall give rise to the presumption that said interest has been paid.

The receipt of a later installment of a debt without reservation as to prior installments, shall
likewise raise the presumption that such installments have been paid. (1110a

This presumption is not applicable for the instances:

a.​ With reservation as to interest
b.​ Receipt for a part of principal
c.​ Receipt without indication of particular installment paid
d.​ Payment of taxes
e.​ Non-payment proven.

As a general rule, all rights acquired through obligations are transmissible except those
which are prohibited by law as provided in
Article 1178 Subject to the laws, all rights acquired in virtue of an obligation are
transmissible, if there has been no stipulation to the contrary

Contracts

A Definition

Article 1305 Civil Code

​ 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.

I Essential Elements of Contract

a.​ Consent
b.​ Subject Matter
c.​ Cause

II Natural Element
​ Exist as part of the contract even if the parties do not provide them, because the law,
as the suppletory to the contract, creates them

III Accidental Elements

​ Those which are agreed by the parties and which cannot exist without stipulated

Termination or cancellation of Pre-existing Contracts

Contracts can be terminated upon fulfilment of obligations or prestation. To terminate

a contract, there must be a consideration either delivery of money or something else or in
rendering some act or forbearance

●​ Termination by stipulation of the parties.

It must be terminated upon agreement of both parties otherwise it will
be violative to the Mutuality Principle of a Contract. It might be superseded by
a compromise agreement provided that such agreement is not violative to
public morals, law, good customs.

●​ Termination, by stipulation, at the option of one party.

​ A contract may provide a stipulation that it can be terminated at the
option of one party or either of the parties provided that such stipulation is not
contrary to equity and good conscience.
​ Where the contract is for an indefinite term and either parties have the
right to terminate it any time after a written notice of 30 days. It is not
necessary that the termination has cause or not for a s long as 30-day notice
is given except where one of the parties terminated the contract in bad faith to
 injure the other party, then the party terminating it shall be held liable for the
damages.

●​ Termination by one party with conformity of the other.

​ One of the parties opts to cancel an existing agreement and the other
party provides an expressed conformity to the termination made by the other
party
​

B. Characteristics of Contract

​ i. Autonomous
​ ​ Parties have the liberty to establish stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, and public policy (Art. 1306.)

​ ii. Obligatory
​ ​ Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith (Arts. 1159, 1315.)

​ iii. Mutual
​ ​ Contracts must bind both and not one of the contracting parties; their validity
or compliance cannot be left to the will of one of them (Art. 1308.)

​ iv. Consensual
​ ​ Contracts are perfected, as a general rule, by mere consent,4 and from that
moment the parties are bound not only by the fulfilment 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 (Art. 1315.)

​ v. Relative
​ ​ Contracts take effect only between the parties, their assigns and heirs, except
in cases where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation, or by provision of law. (Art. 1311.)

C. Classification of Contracts

​ i. According to name or designation:

​ ​ a. Nominate - Contracts which have designation by the laws

​ ​ b. Innominate – those which lack individuality and are not regulated by

special provisions of law. (This type of contract shall be regulated by the stipulations of the
parties, by the provisions of this book, by the rules governing the most similar contracts and
by the custom of the place where the contract takes place).
Innominate Contract– these are contracts which do not have specific name.

Note: Innominate contracts are, in the absence of stipulations and specific provisions of law
on the matter, to be governed by rules applicable to the most analogous contracts.

Note:

When service is rendered without an express agreement, price or compensation can be

determined by:

In relation to definite thing;

Under usage or customs of the place; or

CLASSES OF INNOMINATE CONTRACTS

1.Do ut des(I give and you give)– is an agreement in which A will give one thing to B, so
that B will give another thing to A.

2.Do ut facias(I give and you do)-is a contract under which A will give something to B, in
order that B may do something for A.

3.Facio ut des(I do and you give)– is an agreement in which A binds himself to do something
for B, so that B will give something to A.

4.Facio ut facias(I do and you do)– is a convention whereby A is to do something for B, so

that B will render some other service to A .

“NO ONE CAN ENRICH HIMSELF AT THE EXPENSE OF THE SWEAT OF HIS
NEIGHBOUR, UNLESS THE LATTER VOLUNTARILY AND SPONTANEOUSLY CONSENT
TO SERVE GRATUITOUSLY.”

When a person does not expect to be paid for his services there cannot be a contract
implied in fact to make compensation for said services. when the person rendering services
has renounced his fees, the services are not demandable obligations.

Agreement whereby a person would pay the indebtedness of the mortgagor in consideration
of the use of the mortgaged property until reimbursement of the amounts paid. (I give and
you do)

​ ii. According to perfection:

​ ​ a. Consensual - Contracts are perfected by mere consent,once consent is
given, parties are bound not only on the obligations stipulated in the contract but as well as
to all the consequences which according to their nature, must be kept in good faith, usage
and law.
​ Mere consent, which is the meeting of the minds of the parties

refer to contracts that are perfected by mere consent.

The essential requisites of a consensual contract are as follows:

1) Consent;

2) Object; and

3) Consideration.

Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfilment 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. (Article
1315, Civil Code)

Contracts shall be obligatory, in whatever form they may have been entered into, provided all
the essential requisites for their validity are present. (Article 1356, Civil Code)

These essential requisites last mentioned are normally (1) consent (2) proper subject matter,
and (3) consideration or causa for the obligation assumed (Article 1318). 3 So that once the
three elements exist, the contract is generally valid and obligatory, regardless of the form,
oral or written, in which they are couched. (Dauden-Hernandez v. De Los Angeles, En Banc,
G.R. No. L-27010, 30 April 1969)

Requirements
The following are the essential requirements of a consensual contract:

1) Consent;

2) Object; and

3) Causa (i.e. consideration).

It is thus seen that to the general rule that the form (oral or written) is irrelevant to the binding
effect inter parties of a contract that possesses the three validating elements of consent,
subject matter, and causa, Article 1356 of the Code establishes only two exceptions, to wit:

(a) Contracts for which the law itself requires that they be in some particular form (writing) in
order to make them valid and enforceable (the so-called solemn contracts)…

(b) Contracts that the law requires to be proved by some writing (memorandum) of its terms,
as in those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. Their
existence not being provable by mere oral testimony (unless wholly or partly executed),
these contracts are exceptional in requiring a writing embodying the terms thereof for their
enforceability by action in court. (Dauden-Hernandez v. De Los Angeles, En Banc, G.R. No.
L-27010, 30 April 1969)
​ ​ b. Real - are not perfected unless the prestation is delivered like contracts of
deposit, pledge or commodatum. This type of contracts are not perfected by mere consent

Examples of real contracts requiring delivery to be perfected:

1) Deposit (Ibid.);

2) Pledge (Ibid.);

3) Commodatum (Ibid.);

4) Movable with value less than Php500.00 (Paragraph 2, Article 748, Ibid.).

If the value of the personal property donated exceeds 5000php, the donation and
acceptance shall be made in writing, otherwise the donation is void.

An oral donation requires the simultaneous delivery of the [movable] thing or of the
document representing the right donated. (Ibid.)

​ iii. According to cause

​ ​ a. Onerous - the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other. The cause need not be adequate or
an exact equivalent in point of actual value, especially in dealing with objects which have a
rapidly fluctuating price. There are equal considerations.

​ ​ b. Remuneratory or remunerative - is one where a party gives something

to another because of some service or benefit given or rendered by the latter to the former,
where such service or benefit was not due as a legal obligation. The consideration of one is
greater than the other’s

​ ​ c. Gratuitous - an agreement to give donations. The generosity or liberality of

the benefactor is the cause of the contract. There is nothing to equate.

​ iv. According to form

​ ​ a. Informal or common - An informal contract is any sort of contract that you

enter into without any formal legal influence. A verbal agreement or a sales contract are two
examples of informal contracts.

​ ​ b. Formal or solemn - Contracts for which the law itself requires that they be
in some particular form (e.g. in writing) in order to make them valid and enforceable (the
so-called solemn contracts).

The essential requisites of a solemn/formal contract are as follows:

1) Consent;
2) Object; and

3) Consideration; and

4) Solemnity or formality.

The solemnity or formality depends on the law applicable to a contract.

… 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. In such cases, the right of the parties stated in the following article cannot be
exercised. (Article 1356, Civil Code)

If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article, the contracting parties may compel each other to
observe that form, once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.(Article 1357, Civil Code)

c. Solemnity or formality

1) In a public document

The following must appear in a public document:

1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest
therein a governed by Articles 1403, No. 2, and 1405;

2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal

partnership of gains;

3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;

4) The cession of actions or rights proceeding from an act appearing in a public document.
(Article 1358, Civil Code)

In order that the donation of an immovable may be valid, it must be made in a public
document, specifying therein the property donated and the value of the charges which the
donee must satisfy.(Article 749, Civil Code) - Documents that are notarized enjoy the
benefits of presumption of proper execution..

2) In a private document (i.e. in writing)

The following must be in writing:

a) Contracts exceeding Php500.00

 All other contracts [excluding those required to be in a public document under Article
1358] where the amount involved exceeds five hundred pesos must appear in writing, even
a private one. But sales of goods, chattels or things in action are governed by Articles, 1403,
No. 2 and 1405. (Paragraph 2, Article 1358, Ibid.)
Sales of Goods, chattels or things -

b) Donation of movables in excess of Php5000.00

If the value of the personal property donated exceeds five thousand pesos, the
donation and the acceptance shall be made in writing, otherwise, the donation shall be void.
(Paragraph 3, Article 748, Ibid.)

c) Interest payments
No interest shall be due unless it has been expressly stipulated in writing. (Article
1956, Civil Code)

d) Limitation of liability between common carrier and shipper or owner

A stipulation between the common carrier and the shipper or owner limiting the
liability of the former for the loss, destruction, or deterioration of the goods to a
degree less than extraordinary diligence shall be valid, provided it be:

1) In writing, signed by the shipper or owner;

2) Supported by a valuable consideration other than the service rendered by

the common carrier; and

3) Reasonable, just and not contrary to public policy. (Article 1744, Civil Code)

e) Contract of partnership with immovable property contributed

A contract of partnership is void, whenever immovable property is contributed

thereto, if an inventory of said property is not made, signed by the parties, and attached to
the public instrument. (Article 1773, Civil Code)

f) Real estate agent’s authority

When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. (Article 1874, Civil
Code)

g) Contract of antichresis

The amount of the principal and of the interest shall be specified in writing; otherwise,
the contract of antichresis shall be void. (Article 2134, Civil Code)

h) Express warranty under Consumer Act (see Article 68, R.A. 7394)
i) Policy of insurance (see Section 49, P.D. 612 or the Insurance Code, as amended)

​ v. According to obligatory force

​ ​ a. Valid
​ ​ b. Rescissible
​ ​ c. Voidable
​ ​ d. Unenforceable
​ ​ e. Void or inexistent

1.​ Contract Must not be contrary to Law

​ Law is an integral part of a contract.The provisions of positive law which regulate
contracts are deemed incorporated or written therein and shall limit and govern the relations
between the parties. Act executed against the provisions of the law is void.
●​ A contract that will try to circumvent the law is void ab initio
●​ A contract that stipulates automatic assignment of the policy to the lessor obtained
without prior consent of the lessee is void. The insurer cannot be compelled to pay
the proceeds of a fire insurance to a person who has no insurable interest in the
property insured.
●​ A waiver that is contrary to law is void

2.​ Contract must not be contrary to Morals

3.​ Contract must not be contrary to good customs.
4.​ Contract must not be contrary to public order.
5.​ Contract must not be contrary to public policy.0

As a general rule, third person has no legal standing to demand obligation, assail the
validity of a contract except:

1.​ If a contract has a stipulation in favor of a third person ( 1311 par 2) - pour autrui. a
stipulation in a contract clearly 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 obligee or the original parties.

Requisites:
●​ The contracting parties by their stipulation must have clearly and deliberately
conferred a favor upon a third person

●​ The third person must have communicated his acceptance to the obligor
before its revocation by the obligee or the original parties
 ●​ The stipulation in favor of the third person should be a part and not the whole
of the contract or the contract itself

●​ The favorable stipulation should not be conditioned or compensated by any

kind of obligation

●​ Neither of the contracting parties bears the legal representation or

authorization of the third party for otherwise the rules on agency will apply

2.​ If a contract creates a real rights ( In contracts creating real rights, third persons who
come into possession of the object of the contract are bound thereby, Art 1312)

Third persons who come into possession of the object of a contract over which there
is a real right, such as a real estate mortgage, are bound thereby even if they were
not parties to the contract. A real right is binding against the whole world and
attaches to the property over which it is exercised wherever it goes.

3.​ If a contract entered to defraud the creditor (Example: A has a debt to B, to avoid his
obligation, B sold his property to D. A as a creditor has the right to nullify the contract
of sale between A and D pursuant to Article 1313 of the Civil Code)

4.​ If the contract violated the inducement of the third person (Art 1314. Any third
person who induces another to violate his contract shall be liable for damages
to the other contracting party.) A stranger or the third party to a contract can be
sued for damages for his unwarranted interference with the contract. “Interference
with contractual obligation” There is a valid contract existing, the third person is
aware about its existence and induce one of the parties to breach it.

5.​ In contracts creating “status”

6.​ In the quasi-contract of negotiorum gestio

7.​ In “collective contracts” where the majority rules over the minority

8.​ Where the situation contemplated in Article 172918 obtains (To protect the laborers
from possible breach between the owner and the contractor)

Stages in the life of a contract.

1.​ Preparation or negotiation.

-​ undergoing the preliminary steps towards the formation of a valid contract.
Either party may stop the negotiation or withdraw an offer made

2.​ Perfection or birth

 -​ parties have come to a definitive agreement or meeting of the minds
regarding the terms, that is, the subject matter and cause of the (consensual)
contract upon concurrence of the essential elements of the contract

3.​ Consummation or termination

-​ parties have fulfilled or performed their respective obligations or undertakings
under the contract
-​

How are contracts perfected?

1.​ Consensual contracts

-​ perfected by mere consent of the parties regarding the subject matter and the
cause of the contract.

2.​ Real contracts

-​ not merely by consent but by the delivery, actual or constructive, of the object
of the obligation (deposit, pledge and commodatum)

3.​ Solemn Contracts

-​ When the law requires that a contract be in some form to be valid, , this
special form is necessary for its perfection, the prescribed form being thereby
an essential requisite of the contract.Thus, a donation of real property cannot
be perfected until it is embodied in a public instrument.

As soon as the contract is perfected, parties are bound not only to what has been stipulated
but as well as to all the consequences which, according to their nature, may be kept in good
faith, usage and law.

Signature is not a legal requirement in entering into a contract where there is meeting of the
minds. Art. 1319. Consent is manifested by the meeting of the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. The offer must
be certain and acceptance must be absolute.

Unauthorized Contracts are Unenforceable

​ As a general rule, a person is not bound by a contract in which he has no knowledge
or which he has not given his consent. This type of contract, although a valid one, is
unenforceable unless it is ratified by the person whose name was entered into.
Except:
●​ the third person entering the contract has been duly authorized impliedly or expressly
●​ He has acted within his power

A.​ Essential Elements of Contracts:

1.​ Common requisites: consent, object(subject matter of the contract) and cause
 2.​ Special requisites:
a.​ Formalities:

B.

Consent
​ the conformity of wills and with respect to contracts, it is the agreement of the will of
one contracting party with that of another

Offer must be certain and acceptance must be absolute, unconditional or unqualified in order
to produce the consent or meeting of the minds necessary to perfect a contract

Counter offer - acceptance of an offer requesting for a change in terms of the offer may be a
binding acceptance as long as the meaning of it is positively and equivocally mean
acceptance of the offer, whether granted or not, contract is formed.

Acceptance made in an absence of a person

​ The acceptance may be transmitted in any other means provided that the offeror
authorize the means used.

●​ Theory of Cognition or information - If acceptance is made through telegram or letter,

the contract is not perfected from the time the acceptance made by letter is sent but
from the time that the offeror has the actual and constructive knowledge about the
acceptance.
●​ Revocation of the offer - The offeror has the right to revoke the offer before he knows
the acceptance of the offer. It is not necessary that the acceptant know the
revocation. In the same vein, the offeree can revoke the acceptance provided that
the offeror has no knowledge yet about the acceptance.

Acceptance by silence or inaction- As a general rule, silence cannot be construed as

acceptance. There must be an affirmative and a clear evidence made by word, acts, conduct
communicated to the offeror except:
a.​ Where the parties agree expressly or impliedly that it shall amount to acceptance
b.​ Where specific provisions of law declared
c.​ In a circumstances where silence constitute estoppel

Acceptance made to an agent has no effect unless the acceptance is made known to the
offeror except if the agent is authorized to receive acceptance. Agent is an extension of the
personality of the principal.

Acceptance will not produce meeting of the minds if the acceptance became ineffective due
to offeree’s death, insanity, civil interdiction
Option as a preparatory contract, grants the offeree a fixed period with a determinate price, a
privilege to buy or to decide whether to enter the principal contract but it prevents the offeror
to enter a principal contract with another person.

Simulation of Contract may be absolute or relative

1.​ Relative Simulation - parties conceal their true agreement (valid as long as not
contrary to law, public policy or morals)
2.​ Absolute Simulation - Parties do not intend to be bound at all. (Void Contract)

Objects of Contract
●​ All things which are not beyond the commerce of men, including future things
●​ All rights which are not transmissible can also be an object of a contract
●​ All services which are not contrary to law

Valid Object of a contract

●​ Must be within the commerce of men
●​ Must not be impossible, legally or physically
●​ Existing or capable of coming into existence
●​ Determinate or determinable without the need of a new contract

Cause of Contract
​ Reason or purpose for the existence of a contract