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CONTRACTS GENERAL PROVISIONS
Contract
- is meeting of minds between two persons
whereby one binds himself with respect to others,
to give something or to do service
- it must be mutual consent
- no party san renounce or violate the law of the
contract without the consent of the other
- “its validity or compliance cannot be left with the
will of one of the parties”
- it is one of the sources of obligation
- no contract if no obligation, but it can have
obligation even if no contract
- binding agreements enforceable through legal
proceedings
- all contracts are agreement, but not all agreement
are contracts
Number of Parties
- at least 2 parties
- a single person may create a contract by himself
where he represents distinct interest
Classifications of Contract
1. According to Name and Designation
a. Nominate – contracts that has a specific
name or designation in law
b. Innominate – contracts which has no
specific name or designation in law
2. According to Perfection
a. Consensual – contract perfected by mere
consent (sale, lease, agency)
b. Real – contract perfected by the delivery of
thing subject matter of the contract
(depositum, pledge, commodatum)
c. Solemn Contract – contract which requires
compliance with certain formalities
prescribed by law (donation of real property
which must be in public instrument)
3. According to Cause
a. Onerous – exchange for something,
bilateral, both parties are reciprocally
obligated to each other (sale; lease of thing)
b. Remuneratory or Remunerative – the
cause of which is the service or benefit
which is remunerated (render service)
c. Gratuitous – donation
4. According to Form
a. Informal, Common, or Simple – which
may be entered into in whatever form
provided all the essential requisites for their
validity are present
b. Formal or Solemn – which is required by
law for its efficacy to be in a certain
specialized form
5. According to Obligatory Force
a. Valid – are those contracts that meet all the
legal requisites
b. Rescissible
c. Voidable – A contract entered into where
one of the parties is incapable of giving
consent to a contract. It is valid and binding
until it is annulled by a proper action in
court. It is susceptible of ratification
d. Unenforceable
e. Void or Inexistent – when it is against the
law, unless law authorized the validity, or
when it is against to morals, good customs,
public order, and public policy
6. According to Person Obliged
a. Unilateral – only one
b. Bilateral – reciprocal
7. According to Risks
a. Commutative – when the undertaking of
one party is considered the equivalent of
that one of the other (sale, lease)
b. Aleatory – when it depends upon an
uncertain event or contingency both as to
benefit and loss (insurance, hope)
8. According to Liability
a. Unilateral – when it creates an obligation
on the part of only one of the parties
(commodatum, gratuitous deposit)
b. Bilateral – when it gives rise to reciprocal
obligations for both parties (sale, lease)
9. According to Status
a. Executory – when it has not yet been
completely performed by both parties
b. Executed – when it has been fully and
satisfactorily carried out by both parties
10. According to Dependence to Another
Contract
a. Preparatory – when it is entered into as a
means to an end (agency, partnership)
b. Accessory – when it is dependent upon
another contract it secures or guarantees
for its existence and validity (mortgage,
guaranty)
c. Principal – 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 (entire) – when each part of the
contract is dependent upon the other parts
for satisfactory performance (dining table
with 8 matching chairs)
b. Divisible – when one part of the contract
may be satisfactorily performed
independently of the other parts (a rocking
chair and a pair of shoes)
Valid Contracts
- are those that meet all the legal requisites for the
type of agreement involved and the limitations on
contractual stipulation are legally binding and
enforceable
- right to enter a contract is one of the liberties
guaranteed to individuals, however, contractual
obligations refer only to legally valid contracts
Limitations on Contractual Stipulation
- Law – contracts must be in accordance with an
applicable statute, because the law is superior
to a contract
- Police Power – when the law is silent, the will
of parties prevails unless contract contravenes
to:
a. Morals – deal with norms of good and right
conduct evolved in a community
b. Good Customs – habits and practices
which through long usage have been
followed and enforced by society as binding
rules of conduct
c. Public Order – refers to public safety or
public weal
d. Public Policy – refers to public safety and
to common good. A contract that tends to be
injurious to the public or against public good
is contrary to public policy. Any injury need
not be shown
Innominate Contracts
- it is not invalid
- it is sufficient that it has all the elements of a valid
contract
- it is governed by (a) agreement of the parties, (b)
provisions of the Civil Code on ObliCon, (c) rules
governing the most analogous (pinakakagaya)
contracts, and (d) customs of the place
Determination of Performance
- compliance with a contract cannot be left to the
will of one of the contracting parties
- however, the determination of its performance
may be left to a third person
- determination from third person is only binding
when it has been made known to both of the
parties
- S sold his land to B, and it was agreed that C is
the one to determine the price of land. When C
fixed the price, he must make known his decisions
to S and B for it to be binding
- when the determination of the third person is
inequitable or unjust because of bad faith or
mistake, contracting parties is not bound. For this
case, the court shall decide what is equitable
- The price C fixed, is with way higher interest, then
the court can decide to reduce it.
Persons Affected by a Contract
General Rule: party’s rights and obligations from
contract are transmissible to the successors. Only
parties, their assigns, and heirs can have rights
and obligations under contracts
- D is indebted to C in a contract. C dies, then (1)D
must pay the heirs of C, or (2) if C assign his credit
to X, then D must pay X. On the other hand, if D
dies, then his heir, H, must pay C for the debt of D.
However, H is not liable to pay beyond the value of
what inherits from D (si H na tagapagmana ang
babayaran lang ay hanggang sa kung magkano
ang naipamana sa kanya ni D. Ex. ang utang ay
10,000, and ang naipamana sa kanya ay 8,000,
then ang babayaran nya lang ay 8,000 at hindi nya
kailangang bayaran ang sobrang utang mula sa
sariling pera)
Exceptions: when contracts are effective only
between the parties then it means that the contract
is not transmissible
Cases when Strangers Affected by a Contract
General Rule: third person has no rights and
obligations under a contract and he has no
standing in law to demand the enforcement or
question the validity of a contract.
Exceptions: (a) in contracts containing a
stipulation in favor of a third person (stipulation
pour autrui), (b) in contracts creating real right, and
(c) in contracts entered into a defraud creditors.
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 fulfillment provided
he communicates his acceptance to the obligor
before its revocation (pagbawi o pagsuspinde) by
the original parties
- ito yung nakadepende sa third person ang
something sa contract, like kung magkano ang
parcel ng land and si third person ang magvavalue
kung magkano ito, magkakaroon lang ng right to
demand si third person kung successfully nyang
naicommunicate ang acceptance ng pagiging third
person sa contract bago bawiin o suspindehin ng
parties ang contract.
2 Classes of Pour Autrui
Donee-beneficiary – sole benefit of third person
Creditor-beneficiary – obligation is due from
promise to the third person to discharge from
contract (si creditor na third person muna
magbabayad ng utang ni debtor)
Requisites of Pour Autrui
- parties by their stipulation, clearly and
deliberately conferred a favor upon a third person
- third person must communicate his acceptance
before revocation of parties
- the stipulation in favor of the third person should
be a part, not the whole, contract
- the favorable stipulation should not be
conditioned or compensated
- neither of the contracting parties bears the legal
representation or authorization of the parties
Real Rights of Third Person
- third persons who come into possession of the
object of a contract over which there is a real right,
are bound even if they were not parties to the
contract
- Real Right is a right binding against the whole
world and is attached to the property over which it
is exercised whether it goes
installments at ideliver ang car kasi ang usapan ni
P at A ay incash ang bayad at hindi installments at
si A ay umakto ng beyond his powers. However, si
P pwede nyang iratify ang contract at payagan na
10 months installment na lang ang ibayad (pero di
obligated). Si A ay personally liable kay C for
damages.
ESSENTIAL REQUISITES OF CONTRACTS
- Consent of the contracting parties
- Object certain which is the subject matter of the
contract
- Cause of the obligation which is established
Classes of Elements of a Contract
1. Essential Elements – those without which no
contract can validly exist. pag nawala ay hindi
mageexist ang contract. They are also known
as requisites of a contract
a. common – those present in all contracts,
namely, consent, object, and cause
b. special – those not common to all contracts
or those which must be present only in
certain specified contracts
2. Natural Elements – those that are presumed
to exist in certain contracts unless the contrary
is expressly stipulated by the parties
3. Accidental Elements – the particular
stipulations, clauses, terms, or conditions
established by the parties in their contract, like
conditions, period, interest, penalty, and
therefore, they exist only when they are
expressly provided by the parties
Section. 1 Consent
Consent
- is the conformity or concurrence of wills (offer and
acceptance) and with respect to contracts, it is the
agreement of the will of one contracting party with
that of others, upon the object and the terms of the
contract
- it is the meeting of minds or mutual assent
between the parties on the subject matter and the
cause which are to constitute the contract even if
neither has been delivered and despite that the
parties have not affixed other signatures
- mutual assent or agreement takes place when
there is an offer and acceptance
Offer
- is a proposal made by one party (offerer) to
another (offeree), indicating a willingness to enter
into a contract
- it must be certain or definite
- an offer made in jest or in anger, or while
emotionally upset or in any ways indicating not
seriously intended is a not valid offer
- a lack of serious intent offer can enter to contract
when such condition was not apparent to the
offeree who honestly believed that the offer is
serious
- kapag emotionally upset ang nagoofer, then hindi
sya valid na offer, however pag emotionally upset
and hindi halata at naniniwala si offeree na ang
offerer ay seryoso sa pagoofer, then valid ang
offer
Acceptance
- it is the manifestation by the offeree of his assent
to all the terms of the offer.
-without acceptance, there can be no meeting of
the minds between the parties
- the acceptance of the offer must be clear,
absolute, unconditional, or unqualified. It must be
identical in all respects with that of the offer so as
to produce consent or meeting of the minds
- counter-offer happens when the acceptance is
qualified, it happens when it is subject to condition.
It is considered a rejection of the original offer and
an attempt by the parties into a contract on a
different basis
- a qualified acceptance must be accepted
absolutely in order that there will be a contract
- si S nagtanong kay B kung bibilhin ba ni B ang
specific car ni S for 200k, pag sinagot ni B na oo si
yes then it is absolute or unconditional. Pero kung
sinabi ni B na 160k na lamang ang iooffer nya or
kung ang kukunin na lang ni B ay yung lupa ni S or
another car ni S, then yung acceptance ni B ay
naging qualified and naging counter-offer sya. In
this case, si B na ang offerer at si S na ang offeree
- ang offerer ay syang nagbibigay ng value for the
object
Form of Acceptance of an Offer
1. Express – oral or written promise
2. Implied – inferred from act or conduct. Silence
cannot be mean as acceptance
Matters that may be Fixed by the Offerer
- offerer has the right to prescribe the time, place,
and the manner of acceptance, all of which must
be complied with
- an acceptance departing from the terms of the
offer constitutes a counter-offer
- a counter-offer has the effect to extinguish the
offer and create a new offer which the original
offerer may accept or reject
- the offer must be communicated and received by
the offeree
Communication of Acceptance
- to offerer – the acceptance of the offer must be
absolute and must be communicated to the offerer
2. to agent – if duly authorized, the act of the agent
is the act of the principal
- if the offer is made through the agent and the
acceptance is communicated through him it can be
accepted
- there would be no meeting of minds if the
principal made the offer and the acceptance is
communicated to the agent, unless it is authorized.
When Offer becomes Ineffective
- an offer may be revoked or withdrawn at any time
before it is accepted merely by communicating
such intentions to the other party.
- such cases when offer becomes in effective are: 1. because of death, civil interdiction, insanity,
or insolvency of either party before the
conveyance of the acceptance of the offer
2. failure to comply with the condition of the
offer as to the time, place, and the manner
of payment
3. the expiration of the period fixed in the offer
for acceptance
4. rejection of the offer
Option
- privilege given to the offeree to accept an offer
within a certain period
Option Contract
- is one giving a person for a consideration a
certain period within which to accept the offer of
the offerer
- it is separate and distinct from the contract which
will be perfected upon the acceptance of the offer
Option Period
- it is the period given within which the offeree must
accept the offer
Option Money
- is the money paid or promised to be paid in
consideration for the option
Earnest Money
- it is a partial payment of the purchase price and is
consideration as proof of the perfection of the
contract
Advertisements
Business
- it is not a definite offer but mere invitations to
make an offer
- for sale: 200sqm lot at Green Plains Village,
Quezon City for 1,000 – tel. no. 844-1284. this is
not a definite offer
- however, if the ads are complete with all the
particulars necessary in a contract, it may amount
to a definite offer which if accepted will produce a
perfect contract
- for sale: 200sqm lot at Green Plains Village,
Quezon City located at the corner of Geronimo
and Magallanes Street for 1,000 – tel. no. 844-
1284. this is a definite offer
Bidders
- the advertisements for bidders are not definite
offer
- advertisers is not the one making the offer, it is
the bidder who makes the offer which the
advertiser is free to accept or reject
- acceptance of the advertiser is necessary for a
contract to exist
- General Rule: advertiser is not bound to accept
the highest bidder or lowest bidder
- Exceptions: in juridical sales (sales ordered by
court), the auctioneer is bound to accept the
highest bid. And when the contrary to the general
rule appears.
Persons Who Cannot Give Consent
These persons cannot give consent as they can
easily be the victims of fraud as they are not
capable of understanding the nature or import of
their actions.
- General Rule: Any contracts entered by persons
enumerated are voidable.
1. Unemancipated Minors – persons whose age
is not 18 years old and therefore subject to
parental authority. A minor can be emancipated
when reach 18 years old, by marriage, or through
judicial declaration
2. Insane or Demented Persons – the insanity
must exist at the time of contracting, unless proved
otherwise, a person is presumed sane
- when an insane person is in his lucid
interval or temporary period of sanity, a contract
entered is valid
-when a sane person is drunk or under a
hypnotic spell, he then cannot give an intelligent
consent, this is considered as an equivalent to
temporary insanity and therefore it is voidable
3. Deaf-mutes – person who are deaf and dumb.
But if the deaf know how to read and write then the
contract is valid for, he is capable of giving
intelligent consent.
When an Incapacitated Person can give a Valid
Consent
- Exceptions: in certain cases, incapacity of
enumerated persons is modified by law, and
therefore they can also give a valid consent when:
- when necessaries, such as food, are sold and
delivered to an incapacitated person, he must pay
a reasonable price
- a minor may contract for insurance, provided the
insurance is taken on hos life and the beneficiary
appointed is the minor’s estate, or the family of the
minor
- if the contract is entered into through a guardian
or legal representative of the incapacitated person
- when the minor misrepresented his age and
convincingly led the other party to believe in his
legal capacity
- when a minor between 18 and 21 voluntarily
pays a sum of money or delivers a fungible thing in
- violence may vitiate consent when force
employed must be the determining cause or
reason in giving consent
- Intimidation may vitiate consent when these
requisites are present
- must produce a reasonable and well-
grounded fear of an evil
- the evil is imminent and grave
- the evil must be upon his person or property
or that his spouse, descendants, or
ascendants
- it is the reason why he enters into the
contract
Factors to Determine Degree of Intimidation
- age
- sex
- condition of the person
- any reverential fear or fear to displease a person
because of respect or obedience are valid as it is
not an actual threat
Threat to Enforce Just or Legal Claim
- the threat of a court action as a means to enforce
a just or legal claim is justified and does not vitiate
consent
- si D may utang kay C na 5,000. If D fails to pay
his obligation, and nagthreat na si C na
ipapakulong si D, then hindi navivitiate ang
consent. Pero kung wala namang utang si D kay C
pero binayaran ni D si C ng 5,000 dahil sa threat ni
C, then may intimidation na and magvivitiate na
ang consent
Undue Influence
- is an influence of a kind that so overpowers the
mind of a party as to prevent him from acting
understandingly and voluntarily to do what he
would have done if he had been left to exercise
freely his own judgment and discretion
- the influence must be undue or improper to avoid
a contract
- its effect on the person influenced must be such
as to make him express the will of another, rather
than his own
Fraud
- causal fraud is a fraud committed by one party
before or at the time of the celebration of the
contract to secure the consent of the other
- it is used by a party to induce the other to enter
into a contract without which the latter would not
have agreed to
- it may be committed through insidious words or
machinations or by concealment, any
misrepresentation in words or actions are included
- if the fraud does not have the effect of causal
fraud, then it gives rise only to action for damages
- not all fraud can vitiate consent, for a fraud to
vitiate, it has requisites
Requisites of Causal Fraud
- there must be misrepresentation or concealment
of a material fact with knowledge of its falsity
- it must be serious
- it must have been employed by only one of the
contracting parties. Fraud committed by a third
person does not vitiate consent unless it has a
knowledge of a favored party
- it must be made in bad faith or with intent to
deceive
- it must have induced the consent of the other
party
- it must be alleged and proved by clear and
convincing evidence
Fraud by Concealment
- neglect to communicate that which a party to a
contract knows and ought to communicate
- concealment is equivalent to misrepresentation
or false representation
- injured party is entitled to rescind or annul the
contract
Usual Exaggerations in Trade
- exaggeration is made by merchants and traders
in their attempt to make a sale at the highest price
possible
- exaggeration in trade is not fraudulent
- customers are expected to rely on their judgment
- exaggerations, even if false, is not fraud as it is a
mere expression of opinion
- the cigarette that will give you the utmost
smoking pleasure
Expression of Opinion
- General Rule: it does not signify fraud
- Exceptions: when opinion is made by an expert
and the party has relied on the opinion’s special
knowledge
Requisites for an Opinion to be Fraud
- must be made by an expert
- the other contracting party has relied on the
expert’s opinion
- the opinion turned out to be false or erroneous - may nakita si X, isang magsasaka, na ring and
pinaniwalaan nya itong diamond at binenta nya
kay Y at sinabi nya na diamond ring daw yun, dito
walang fraud kasi wala namang alam si X at
opinion nya lang, na kay Y na lang kung
maniniwala. Kung si X ay expert sa bato at
naniwala si Y kay X kasi nga si X ay expert, then
may fraud kasi alam naman ni X na di diamond
ang bato
Fraud by a Third Person
- General Rule: misrepresentation by him does
not vitiate consent
- Exception: if the misrepresentation has created
substantial mistake (significant error) and it affects
both parties, the contract may be annulled but
principally on the ground of mistake
Misrepresentation Made in Good Faith
- it is considered a mere mistake or error
Kinds of Fraud in the Making of Contract
- Causal Fraud – ground for the annulment of the
contract, although it may also gives to an action for
damages
- Incidental Fraud – only renders the party who
employs it liable for damages because the fraud
was not the principal inducement that led the other
to give his consent
Requisites of Causal Fraud
- causal fraud may vitiate consent, and the
following are the requisites:
- serious
- not have been employed by both contracting
parties
- not have been known by other contracting party
- mutual fraud neutralizes one another, and
therefore valid
Simulation of a Contract
- is the act of deliberately deceiving others, by
feigning or pretending by agreement, the
appearance of a contract which is either non-
existent or concealed
- Absolute Simulation is when the contract does
not really exist, and the parties do not intend to be
bound at all. It is a fictitious contract and is
inexistent and void
- Relative Simulation is when the contract
entered into by the parties is different from their
true agreement. They conceal their true
agreement. The parties are bound by their real
agreement provided it does not prejudice (harm) a
third person and is not intended for a purpose
contrary to law or police power
Section 2. Object of Contracts
- it is the subject matter
- object of the contract is the obligation
- it can be things, rights, or services
Requisites of Things as Object of Contract
- the thing must be within the commence of men, it
can be legally the subject of commercial
transaction
- it must not be impossible
- it must be in existence or capable of coming into
existence
- it must be determinate or determinable without
the need of a new contract between the parties
Requisites of Services as Object of Contract
- the service must be within the commerce of men
- it must not be impossible
- it must be determinate or capable of being made
determinate
Rights as Object of Contract
- General Rule: all rights may be the object of a
contract
- Exceptions: when rights are intransmissible by
nature, stipulation, or provision of law
Future Inheritance
- is any property or right, not in existence or
capable of determination at the time of the
contract, that a person may inherit in the future
- General Rule: a contract concerning future
inheritance is void
- Exception : the law permits contracts on future
inheritance
Kinds of Impossibility
- Physical – when in very nature cannot exists
or be performed
a. Absolute – when act cannot be done in
any case, nobody can perform it
b. Relative – when it arises from the special
circumstances of the case or the special
conditions or qualifications of the obligor
- Legal – when the thing is contrary to law and
police power
Quantity of Object of Contract Need Not be
Determinate
- the object of a contract must be determinate as to
its kind or at least determinable without the
necessity of a new agreement
- it is the same for the quantity of the object, it is
sufficient that it is possible to determine the same
without the need of a new contract
- S sold to B all the chickens in his poultry. it is valid
as the object and the quantity, though not
determined yet can still be determined without
making new contract
- S has 3 carabaos and he binds himself to deliver
one of the carabao to deliver, it is valid since the
quantity is determinable and the object becomes
determinate when it is delivered
- S binds himself to sell B a parcel of land, and he
has a lot, the contract is void if the land sold cannot
be determined without new agreement
- S obligates himself to sell B for a certain price a
specified quantity of sugar of a given quality. The
contract is not yet perfected until the quality is
agreed upon and is designated
- S obligates himself to deliver a thing or a property
to B. Here the contract is void because the object
is not determinate and cannot be determined
without a new agreement
Section 3. Cause of Contracts
- Causa (cause) is the essential reason or purpose
which the contracting parties have in view at the
- it is essential before a party may be compelled
(obliged) to execute the required form, that the
contract be both valid and enforceable
Contracts which must Appear in a Public
Document
- creation, etc., of real rights over immovable rights
(mortgage)
- cession or renunciation of hereditary rights or
those of conjugal partnership of gains (giving up of
the share in inheritance)
- power to administer property (appointing your
agent)
- cession of action rights (mortgage)
CHAPTER 4 REFORMATION OF
INSTRUMENTS
- Reformation is the remedy allowed by law by
means of which a written instrument is amended or
rectified as to express or conform to the real
agreement or intention of the parties when by
reason of mistake, fraud, inequitable conduct, or
accident, the instrument fails to express such
agreement or intention
Requisites of Reformation
- there is a meeting of minds of the parties to
the contract
- the written instrument does not express the
true agreement or intention of the parties
- the failure to express the true intention is
due to mistake, fraud, inequitable conduct,
or accident
- the facts upon which relief by way of
reformation of instrument is sought are put
in issue by the pleadings
- there is a clear and convincing evidence of
the mistake, fraud, inequitable conduct, or
accident
- reformation is not available when contract is not
written, or when written there is no showing of any
defects of consent
- what is reformed is the written instrument and not
the contract
- in case of conflict between the provisions of the
New Civil Code and the principles of the general
law on reformation, the New Civil Code prevails, as
the principles of the general law on reformation is
just a suppletory effect
Mutual Mistake
- Mistake of Fact is common to both parties of the
instrument which causes the failure of the
instrument to express their true intention.
Reformation is the remedy
S and B enters a contract where S sold his horse
name Silver to B. By mistake, both of them signed
the contract where the name of the horse is Goldie
- Mistake of Law the remedy is annulment
Mistake on One Side, and Fraud or Inequitable
Conduct to Another
- if mistake is in good faith and the other acted
fraudulently or inequitably, the right to ask the
reformation is granted to the party who is mistaken.
Concealment of Mistake by the Other Party
- when one party was mistaken and the other knew
that the instrument did not state their real
agreement and concealed the fact to the former,
then the remedy of reformation may be availed by
the party who acted in good faith, the other party
who concealed the mistake constitutes fraud
Ignorance on the Part of Third Person
- when neither party is responsible for the mistake,
either party may ask for reformation
Mortgage or Pledge stated as Sale
- when the true intention of the parties is frustrated
and is complied with good faith, then reformation of
the instrument is proper
Mortgage or pledge of real or personal property is
stated as sale
Cases when Reformation is Not Allowed
- Donation
- Will
- When the real agreement is void – because
it is unenforceable
- When one party has brought an action to
enforce the instrument – estoppel or
ratification where one party admits that the
contract is valid and expresses the true
intention of the parties
Persons Who Can Bring an Action to Reform
- either of the parties if the mistake is mutual
- in all other cases, the injured party
- the heirs or successors of the party entitled
- the burden of proof is upon the party who insists
the contract to be reformed
- the effect of the reformation is retroactive from the
time of the execution of the original contract
CHAPTER 5 – INTERPRETATION OF
CONTRACTS
- Interpretation of Contracts – is the
determination of the meaning of the terms or words
used by the parties in their written contract. It is the
process of ascertaining the intention of the parties
from written words contained in their contract
- Contracts should be fulfilled according to the
literal sense of their stipulations if the terms are
clear and unequivocal
- when the words and clauses of written contract
are in conflict with the manifest intention of the
parties, the intention will prevail
- to judge the intention, their acts shall be
principally considered
- if the interpretation of stipulation has several
meanings , the one who is understood as bearing
that import which is most adequate to render is
effectual.
S sold his land to B, S has 2 lands, one owned by
him absolutely and another who he co-owned with
C, C did not give the consent to sale, hence it is
interpreted that the land that S will going to be sold
is his own land
- a contract has a various stipulations shall be
interpreted as a whole and the intention of the
parties should be gathered from the entire
instrument
R leased his house to E. In contract, it is stipulated
that E should not sublease the house without the
written consent of R, another stipulation is that E
should pay additional 1,000 when he violate the
contract. E sublease the house without the
consent of R. R cannot eject E as what is
interpreted from their stipulation is it is a contract
with a penal clause.
- if a word is susceptible of two or more
meanings , it is to be understood in a sense which
is most in keeping with the nature and the object of
the contract in line with the intention of the parties
- in interpreting something ambiguity of a
contract, the usage or custom of the place shall be
borne in mind, and shall fill the omission of
stipulations of a contract
X rendered service to Y but their contract doesn’t
provide the amount of price, in this case, the
amount must be determined by the rate
customarily paid in the place
- interpretation of obscure words or stipulations
in a contract shall be interpreted against the party
who has drawn the contract
Rules in case Doubts absolutely Impossible to
Settle
- Gratuitous Contracts – if doubts refer to
incidental circumstances of a gratuitous
contract, such interpretation should be
made which would result in least
transmission of rights and interests. R gave
his car to E, it is not clear whether it is a
donation or commodatum (give thing to
another party for temporary use), the
contract will presumed it as mere
commodatum as it would transmit lesser
rights than donation
- Onerous Contracts – if contract is onerous
(reciprocal obligation), the doubts is settled
in favor of greatest reciprocity of interests
- Principal Object of the Contract – if the
doubt is to principal object, such doubt
cannot be resolved and the remedy is null
and void
was not benefitted, then he is not obliged to
restore what has received
When at the restitution the thing is loss
through the his own fault, then he shall
return the fruits received and the value of
the thing at the time of the loss, with the
interest
Right to annul a contract is extinguished
when the person who will institute the action
cannot restore what he will need to return
because of his fault or fraud
Unenforceable Contracts
cannot be sued upon or enforced unless
they are ratified. Between voidable and void
contract. Only when ratified it can be
enforceable
Remedy: ratification for it to be enforceable
Kinds of Unenforceable Contracts
o unauthorized contract – contract
entered into another name without
authority
o those do not comply statute of frauds
o those where both parties are
incapable of giving
Contracts not written are still enforceable
however, cases where writing is needed
for it is to be enforceable:
o agreement not to be performed
within one year
o promise to answer for the debt,
default, or miscarriage of another
o agreement in consideration of
marriage
o agreement for sale of goods at price
not less than 500
o agreement for leasing for a longer
period than one year
o agreement for the sale of real
property or of an interest
o representation as to the credit of a
third person
Ratification in Statute of Frauds
o by failure to object to the
presentation of oral evidence to
prove the contract
o by acceptance of benefit under the
contract
when both parties to a contract are
incapable of giving consent, the contract is
unenforceable, but if one of the parties
regain capacity and ratifies the contract, it
became voidable
if the ratification is made by both contracting
parties after gaining capacity, then it
became valid
Strangers to an unenforceable contract
cannot bring an action to annul it
Void or Inexistent Contracts
absolutely null and void. They have no
effect at all and cannot be ratified
- Void Contracts are those because of
defects, produce no effect at all
- they are inexistent at the very beginning
- Inexistent Contracts are agreements
which lack some or all essential requisites
Remedy: no remedy
Instances of Void or Inexistent Contract
o contracts whose cause, object, or
purpose is contrary to law or police
power
o contracts which are absolutely
simulated or fictitious
o contracts without cause or object
o contracts whose object is outside the
commerce of men
o contracts which contemplate an
impossible service
o contracts which the intention of the
parties relative to the object cannot
be ascertained
o contracts expressly prohibited or
declared by law as void
future inheritance
sale of property between
marriage
when both parties has criminal offense and
is equally guilty, the law will leave them and
the price and articles are confiscated
when one party has criminal offense, the
innocent may claim what he has given and
not bound to comply his promise
when both parties does not constitute
criminal offense, neither party may recover
what is given and neither can demand for
the performance
when one part is guilty but with no criminal
offense, the guilty party loses that he has
given and cannot ask for the fulfillment, the
innocent party may demand return for what
he has given and cannot be compelled to
comply with his part
a contract which is the direct result of a
previous illegal contract is also void and
inexistent
