SUMMARIZE OF TITLE 2 OF OBLICON (CONTRACTS) | Study notes Contract Law

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TITLE II – C O N T R A C T S

CHAPTER 1. GENERAL PROVISIONS

Article 1305-1317

PRINCIPAL CHARACTERISTICS:

1. Autonomy of wills – parties may stipulate anything as long

as not illegal, immoral, etc.

2. Mutuality – performance or validity binds both parties; not

left to will of one of parties

3. Obligatory Force – parties are bound from perfection of

contract:

4. Fulfill what has been expressly stipulated

5. All consequences w/c may be in keeping with good faith,

usage and law

6. Relativity – binding only between the parties, their assigns,

heirs; strangers cannot demand enforcement

EXCEPTION TO RELATIVITY:

1. Accion pauliana

2. Accion directa

3. Stipulation pour autrui

REQUISITES OF STIPULATION POUR AUTRUI

1. Parties must have clearly and deliberately conferred a favor

upon a 3rd person

2. The stipulation in favor of a 3rd person should be a part of,

not the whole contract

3. That the favorable stipulation should not be conditioned or

compensated by any kind of obligation whatsoever

4. Neither of the contracting parties bears the legal

representation or authorization of 3rd party

5. The third person communicates his acceptance before

revocation by the original parties

6. Art 1312; Art 1314

REQUISITES OF ART 1312:

1. Existence of a valid contract

2. Knowledge of the contract by a 3rd person

3. Interference by the 3rd person

KINDS OF CONTRACTS

1. As to perfection or formation (CRF)

• Consensual – perfected by agreement of parties

• Real – perfected by delivery (commodatum, pledge,

deposit)

• Formal/solemn – perfected by conformity to essential

formalities (donation)

2. As to cause (OGR)

• Onerous – with valuable consideration

• Gratuitous – founded on liberality

• Remunerative – prestation is given for service previously

rendered not as obligation

•

3. As to importance or dependence of one upon another (PAP)

• Principal – contract may stand alone

• Accessory – depends on another contract for its existence;

may not exist on its own

• Preparatory – not an end by itself; a means through which

future contracts may be made

4. As to parties obliged (UB)

• Unilateral – only one of the parties has an obligations

• Bilateral – both parties are required to render reciprocal

prestations

5. As to name or designation (NI)

a. Nominate

b. Innominate

➢ Do ut des – I give that you may give

➢ Do ut facias – I give that you may do

➢ Facio ut des – I do that you may give

➢ Facio ut facias – I do that you may do

STAGES IN A CONTRACT:

1. Preparation - negotiation

2. Perfection/birth

3. Consummation – performance

CHAPTER 2. – ESSENTIAL REQUISITES OF A CONTRACT

Article 1318-1355

ESSENTIAL ELEMENTS:

1. Consent

2. Subject Matter

3. Consideration

CONSENT

CONSENT – meeting of minds between parties on subject matter and

cause of contract; concurrence of offer and acceptance

REQUIREMENTS:

1. Plurality of subject

2. Capacity

3. Intelligence and free will

4. Manifestation of intent of parties

5. Cognition by the other party

6. Conformity of manifestation and cognition

AUTO CONTRACTS

• made by a person acting in another’s name in one capacity

COLLECTIVE CONTRACTS

• will of majority binds a minority to an agreement notwithstanding

the opposition of the latter

CONTRACTS OF ADHESION

• one party has already prepared form a contract a containing the

stipulations he desires, and he simply asks the other party to

agree to them if he wants to enter into the contract

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TITLE II – C O N T R A C T S

CHAPTER 1. GENERAL PROVISIONS

Article 1305- 1317 PRINCIPAL CHARACTERISTICS:

Autonomy of wills – parties may stipulate anything as long as not illegal, immoral, etc.
Mutuality – performance or validity binds both parties; not left to will of one of parties
Obligatory Force – parties are bound from perfection of contract:
Fulfill what has been expressly stipulated
All consequences w/c may be in keeping with good faith, usage and law
Relativity – binding only between the parties, their assigns, heirs; strangers cannot demand enforcement EXCEPTION TO RELATIVITY: 1. Accion pauliana 2. Accion directa 3. Stipulation pour autrui REQUISITES OF STIPULATION POUR AUTRUI
Parties must have clearly and deliberately conferred a favor upon a 3rd person
The stipulation in favor of a 3rd person should be a part of, not the whole contract
That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever
Neither of the contracting parties bears the legal representation or authorization of 3rd party
The third person communicates his acceptance before revocation by the original parties
Art 1312; Art 1314 REQUISITES OF ART 1312:
Existence of a valid contract
Knowledge of the contract by a 3rd person
Interference by the 3rd person KINDS OF CONTRACTS 1. As to perfection or formation (CRF)

Consensual – perfected by agreement of parties
Real – perfected by delivery (commodatum, pledge, deposit)
Formal/solemn – perfected by conformity to essential formalities (donation) 2. As to cause (OGR)
Onerous – with valuable consideration
Gratuitous – founded on liberality
Remunerative – prestation is given for service previously rendered not as obligation

3. As to importance or dependence of one upon another (PAP)

Principal – contract may stand alone
Accessory – depends on another contract for its existence; may not exist on its own
Preparatory – not an end by itself; a means through which future contracts may be made 4. As to parties obliged (UB)
Unilateral – only one of the parties has an obligations
Bilateral – both parties are required to render reciprocal prestations 5. As to name or designation (NI) a. Nominate b. Innominate ➢ Do ut des – I give that you may give ➢ Do ut facias – I give that you may do ➢ Facio ut des – I do that you may give ➢ Facio ut facias – I do that you may do STAGES IN A CONTRACT:

Preparation - negotiation 2. Perfection/birth
Consummation – performance CHAPTER 2. – ESSENTIAL REQUISITES OF A CONTRACT Article 1318- 1355 ESSENTIAL ELEMENTS:
Consent
Subject Matter
Consideration CONSENT CONSENT – meeting of minds between parties on subject matter and cause of contract; concurrence of offer and acceptance REQUIREMENTS:
Plurality of subject
Capacity
Intelligence and free will
Manifestation of intent of parties
Cognition by the other party
Conformity of manifestation and cognition AUTO CONTRACTS

made by a person acting in another’s name in one capacity COLLECTIVE CONTRACTS
will of majority binds a minority to an agreement notwithstanding the opposition of the latter CONTRACTS OF ADHESION
one party has already prepared form a contract a containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract

NOTE: We follow the theory of cognition and not the theory of manifestation. Under our Civil Law, the offer and acceptance concur only when the offeror comes to know, and not when the offeree merely manifests his acceptance ELEMENTS OF VALID OFFER / ELEMENTS OF VALID ACCEPTANCE

Definite --unequivocal
Complete --unconditional 3. Intentional WHEN OFFER BECOMES INEFFECTIVE:
Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed
Express or implied revocation of the offer by the offeree
Qualified or conditional acceptance of the offer, which becomes a counter-offer
Subject matter becomes illegal or impossible before acceptance is communicated PERIOD FOR ACCEPTANCE
Stated fixed period in the offer
No stated fixed period a. Offer is made to a person present – acceptance must be made immediately b. Offer is made to a person absent – acceptance may be made within such time that, under normal circumstances, an answer can be received from him NOTE: Acceptance may be revoked before it comes to the knowledge of the offerror. AMPLIFIED ACCEPTANCE

under certain circumstances, a mere amplification on the offer must be understood as an acceptance of the original offer, plus a new offer which is contained in the amplification. RULE ON COMPLEX OFFERS a. Offers are interrelated – contract is perfected if all the offers are accepted b. Offers are not interrelated – single acceptance of each offer results in a perfected contract unless the offeror has made it clear that one is dependent upon the other and acceptance of both is necessary. Malbarosa vs. CA 2003 G.R.12576 - Offer inter praesentes must be accepted IMMEDIATELY. If the parties intended that there should be an express acceptance, the contract will be perfected only upon knowledge by the offeror of the express acceptance by the offeree of the offer. An acceptance which is not made in the manner prescribe by the offeror is NOT EFFECTIVE, BUT A COUNTER- OFFER which the offeror may accept or reject RULE ON ADVERTISEMENTS AS OFFERS
Business advertisements – Not a definite offer, but mere invitation to make an offer, unless it appears otherwise
Advertisement for Bidders – only invitation to make proposals and advertiser is not bound to accept the highest or lowest bidder, unless appears otherwise OPTION OPTION - option may be withdrawn anytime before acceptance is communicated but not when supported by a consideration other than purchase price: option money _Ang Yu v. CA (1994)_* states that a unilateral promise to buy or sell, if not supported by a distinct consideration, may be withdrawn but may not be done whimsically or arbitrarily; the right of the grantee here is damages and not specific performance; Equatorial v. Mayfair(264 SCRA 483) held that an option clause in order to be valid and enforceable must indicate the definite price at which the person granting the option is willing to sell, contract can be enforced and not only damages; Paranaque Kings V CA (1997) states that right of PERSONS WHO CANNOT GIVE CONSENT TO A CONTRACT:

Minors
Insane or demented persons
Illiterates/ deaf-mutes who do not know how to write
Intoxicated and under hypnotic spell
Art 1331 - person under mistake; mistake may deprive intelligence
Art 1338 - person induced by fraud (dolo causante)

NOTE : Dolus bonus (usual exaggerations in trade) are not in themselves fraudulent RULE ON CONTRACTS ENTERED INTO BY MINORS: GENERAL RULE: VOIDABLE EXCEPTIONS: a. Upon reaching age of majority – they ratify the same b. They were entered unto by a guardian and the court having jurisdiction had approved the same c. They were contracts for necessities such as food, but here the persons who are bound to give them support should pay therefor d. Minor is estopped for having misrepresented his age and misled the other party (when age is close to age of majority as in the Mercado v Espiritu and Sia Suan v Alcantara cases. __* In the Sia Suan v Alcantara case, there is a strong dissent by J.Padilla to the effect that the minor cannot be estopped if he is too young to give consent; one that is too young to give consent is too young to be estopped. Subsequently, in Braganza v Villa- Abrille , the dissent became the ruling. Minors could not be estopped. DISQUALIFIED TO ENTER INTO CONTRACTS: (contracts entered into are void)

Those under civil interdiction
Hospitalized lepers
Prodigals
Deaf and dumb who are unable to read and write
Those who by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of themselves and manage their property, becoming an easy prey for deceit and exploitation

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TITLE II – C O N T R A C T S

CHAPTER 1. GENERAL PROVISIONS

CHAPTER 3. – FORM OF CONTRACTS

Article 1356 - 1358

FORM – in some kind of contracts only as contracts are

generally consensual; form is a manner in which a contract

is executed or manifested

1. Informal – may be entered into whatever form as long

as there is consent, object and cause

2. Formal – required by law to be in certain specified form

such as: donation of real property, stipulation to pay

interest, transfer of large cattle, sale of land thru agent,

contract of antichresis, contract of partnership,

registration of chattel mortgage, donation of personal

prop in excess of 5,

3. Real – creation of real rights over immovable prop

must be written

WHEN FORM IS IMPORTANT:

1. For validity (formal/solemn contracts)

2. For enforceability (statute of frauds)

3. For convenience

• GENERAL RULE : contract is valid and binding in whatever

form provided that 3 essential requisites concur

• EXCEPTIONS

a. Law requires contract to be in some form for

validity - donation and acceptance of real property

b. Law requires contract to be in some form to be

enforceable - Statute of Frauds; contract is valid but

right to enforce cannot be exercised; need

ratification to be enforceable

c. Law requires contract to be in some form for

convenience - contract is valid and enforceable,

needed only to bind 3rd parties

Ex: public documents needed for the ff:

i. Contracts w/c object is creation, transmission

or reformation of real rights over immovables

ii. Cession, repudiation, renunciation of hereditary

rights/CPG

iii. Power to administer property for another

iv. Cession of action of rights proceeding from an

act appearing in a public inst.

v. All other docs where amount involved is in

excess of 500 (must be written even private

docs)

NOTE: RA 8792 (E-COMMERCE ACT)

Formal requirements to make contracts effective as

against third persons and to establish the existence of a

contract are deemed complied with provided that the

electronic document is unaltered and can be

authenticated as to be useable for future reference

CHAPTER 4. – REFORMATION OF INSTRUMENTS

Article 1359 – 1369

REFORMATION OF CONTRACTS – remedy to

conform to real intention of parties due to mistake, fraud,

inequitable conduct, accident

CAUSES/GROUNDS:

1. Mutual: instrument includes something w/c should not be

there or omit what should be there

a. Mutual

b. Mistake of fact

c. clear and convincing proof

d. causes failure of instrument to express true

intention

2. Unilateral

a. one party was mistaken

b. other either acted fraudulently or inequitably or knew

but concealed

c. party in good faith may ask for reformation

3. Mistake by 3rd persons – due to ignorance, lack of skill,

negligence, bad faith of drafter, clerk, typist

4. Others specified by law – to avoid frustration of true intent

Requisites:

a. There is a written instrument

b. There is meeting of minds

c. True intention not expressed in instrument

d. Clear and convincing proof