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Title II Contracts Chapter 1 General Provisions Article 1305 Meaning of Contract A contract is a meeting of minds between two persons

s whereby one binds himself, with respect to the other, to give something or to render some service

Contract and obligation distinguished Contract is one of the sources of obligation Obligation is a legal tie or relation itself that exists after a contract has be en entered into Contract and agreement distinguished Contracts are agreements enforceable through legal proceedings. Agreements are broader than contracts because the former may not have all the el ements of a contract. Article 1306 Freedom to contract guaranteed l Right to enter into contract is one of the liberties guaranteed to the individua Freedom of contract is both a constitutional and statutory right.

Limitations on contractual stipulations 1. Law contract entered into must be in accordance with, and not repugnant to, an applicable statute. 2. Police Power- all contractual obligations are subject to the possible ex ercise of the police power of the state. Contract must not be contrary to law. Contract must not be contrary to morals. Contract must not be contrary to good customs. Contract must not be contrary to public order. Contract must not be contrary to public policy. Article 1307 Classification of contracts according to its name or designation 1. 2. Nominate contract has specific name or designation in law. Innominate contract has no specific name or designation in law.

Kinds of innominate contract

1. 2. 3. 4.

do ut do ut facto facto

des ( I give that you facias ( I give that ut des (I do that you ut facias ( I do that

may you may you

give) may do) give) may do)

Reasons for innominate contracts impossibility of anticipating all forms of agreement on one hand, and the progre ss of mans sociological and economic relationships on the other, justify this pro vision. Rules governing innominate contracts 1. 2. 3. 4. the agreement of the parties provisions of the civil code on obligations and contracts the rules governing the most analogous contracts customs of the place

Article 1308 Contract binds both contracting parties a contract is an agreement which gives rise to obligations must bind both parties in order that it can be enforced against either.

Article 1309 Determination of performance by a third person determination of the contracts performance may be left to a third person.

Article 1310 Effect where determination inequitable A contracting party is not bound by the determination if it is evidently inequitable or unjust as when the third person acted in bad faith or by mistake . Article 1311 Persons affected by a contract 1. General rule contract takes effect only between the parties, their assig ns, and heirs. 2. Exceptions- when a contract is effective only between the parties is wh en the rights and obligations arising from the contract are not transmissible: by their nature; by stipulation; by provision of law. Cases when strangers or third persons affected by a contract 1. lation 2. 3. 4. n. In contracts pour autrui) In contracts In contracts In contracts containing a stipulation in favour of a third person (stipu creating real rights entered into defraud creditors which have been violated at the inducement of a third perso

Meaning of stipulation pour autrui

A stipulation in a contract clearly and deliberately conferring a favour upon a third person who has a right to demand its fulfilment provided he commun icates his acceptance to the obligor before its revocation. Classes of stipulations pour autrui 1. Where stipulation is intended for the sole benefit of such person.

2. Where an obligation is due from the promisee to the third person which t he former seeks to discharge by means of such stipulation. Requisites of stipulation pour autrui 1. Contracting parties must have clearly and deliberately conferred a favou r upon a third person; 2. Third person must have communicated his acceptance to the obligor before its revocation by the oblige or the original parties; 3. Stipulation in favour of the third person should be a part of the contra ct; 4. Favourable stipulation should not be conditioned or compensated by any k ind of obligation whatever; 5. Neither of the contracting parties bears the legal representation or aut horization of the third party for otherwise. Article 1312 Third persons are bound by contracts; creating real rights Third persons who come into possession of the object of a contract over which th ere is a real right, are bound thereby even if they were not parties to the cont ract. However, if the real right is not registered, third persons who acted in good fa ith are protected under the provisions of the Protected Registration Decree. Article 1313 Right of creditor to impugn contracts intended to defraud them The creditor is given the right to impugn the contracts of his debtor to defraud him. Article 1314 Liability of third person responsible for breach of contract Recognizes when a stranger to a contract can be sued for damages for his unwarra nted interference with the contract. Article 1315 Article 1316 Classification of contracts according to perfection 1. 2. 3. Consensual contract Real Contract Solemn Contract

Stages in the life of a contract

1. Preparation or negotiation parties have not yet arrived at any definite a greement; 2. Preparation or birth parties have come to a definite agreement or meetin g of the minds regarding the subject matter and cause of contract 3. Consummation or termination contract may be said to have been fully acco mplished or executed. How contracts are perfected 1. Consensual contracts by mere consent of the parties

2. Real contracts by the delivery, actual or constructive, of the object of the obligation. Effect of perfection of the contract 1. To the fulfilment of what has been expressly stipulated 2. To all the consequences which according to their nature, may be in keepi ng with good faith, usage, and law. Article 1317 Unauthorized contracts are unenforceable Unauthorized contracts can be cured only by ratification. When a person is bound by the contract of another 1. The person entering into the contract must be duly authorized, expressly or impliedly, by the person in whose name he contracts or he must have, by law, a right to represent him. 2. He must act within his power. Chapter 2 Essential Requisites of Contracts Article 1318 Classes of elements of a contract 1. Essential elements those without which no contract can validly exist. Th ey are also known as requisites of a contract. a. Common those present in all contracts namely, consent, object and cause; and b. Special those not common to all contracts or those which must be present only in, or peculiar to, certain specified contracts and such peculiarity may be: i. As regards to form ii. As regards to subject matter iii. As regards the consideration or cause 2. Natural elements those that are presumed to exist in certain contracts u nless the contrary is expressly stipulated by the parties. 3. Accidental elements the particular stipulations clauses, terms, or cond itions established by the parties in the contract. Section 1 Consent

Art. 1319 Meaning of consent Consent is the conformity or concurrence of wills and with respect to th e contracts, it is the agreement of the will of one contracting party with that of the another of others, upon the object and terms of the contract. Meaning of offer Offer is a proposal made by one party to another to enter into a contrac t. Offer must be certain The offer must be certain or definite so that the liability of the parties may b e exactly fixed because it is necessary that the acceptance be identical with t he offer to create a contract without any further act on the part of the offeror . Meaning of acceptance Acceptance is manifestation by the offeree of his assent to the terms of the offer. Acceptance of offer must be absolute The acceptance of an offer must be absolute or unqualified that is it mu st be identical in all respects with that of the offer so as to produce consent or the meeting of the minds. Article 1320 Form of acceptance of offer An express acceptance may be oral or written. An implied acceptance is o ne that is inferred from act or conduct. Article 1321 Matters that may be fixed by the offerer The person making the offer may prescribe the time, the place, and the m anner of acceptance, all of which must be complied with. Article 1322 Communication of acceptance to agent An agent is considered an extension of the personality of his principal. If duly authorized, the act of the agent is , in law, the act of the principal. Article 1323 When offer becomes ineffective Offer becomes ineffective because of the death, civil interdiction, insa nity, or insolvency of either party before the conveyance of the acceptance of t he offer. Other grounds which render offer ineffective

The above grounds are not exclusive. Thus failure to comply with the con dition of the offer as to the time, place, and manner of payment, the expiration of the period fixed in the offer for acceptance, the destruction of the thing d ue before acceptance, rejection of the offer, tec., will also render the offer i neffective and prevent the creation of a contract. Article 1324 Meaning of contract of option; option period option money 1. Option contract is one giving a person for a consideration a certain per iod within which to accept the offer of the offeror. 2. Option period is the period given within which the offeree must accept t he offer. 3. Option money is the money paid or promised to be paid in consideration f or the option. Withdrawal of offer where period stipulated for acceptance When the offerer gives to the offeree a certain period within which to accept th e offer, the general rule is that the offer may be withdrawn as a matter of righ t at any time before acceptance. The exception is when the option is founded upo n a consideration, as something paid or promised. Article 1324 and 1479 compared Article lays down the general rule regarding offer and acceptance. It ha s been interpreted as modified by provision of article 1479 of the Civil Code wh ich applies specifically to a promise to buy a sell. Article 1325 Business advertisements generally not definite offers Business advertisements of the things for sale are not definite offers a cceptance of which will perfect a contract but are merely invitations to the rea der to make an offer. Art. 1326 Advertisements for bidders generally not definite offers In an advertisement for bidders, the advertiser is not the one making th e offer. In reality, the bidder is the one making the offer which the advertiser is free to accept or reject. Article 1327 Capacity to give consent presumed The civil code does not define who have capacity. It defines on the cont rary who have no capacity, by which it can be inferred that capacity is the gene ral rule, which exists in those, of whom the law has not denied it. Persons who cannot give consent 1. Unemancipated minors They refer to those persons who have not yet reache d the age of majority and are still subject to parental authority. 2. Insane or demented persons The insanity must exist at the time of contra

cting. 3. Deaf-mutes They are persons who are deaf and dumb. However, if the deaf mute knows how to write, the contract is valid for then he is capable of giving intelligent consent. Reason for disqualification The reason behind article 1327 is that those persons mentioned can easil y be victims of fraud as they are not capable of understanding or knowing the na ture or importance of their actions Article 1328 Contracts entered into during a lucid interval Lucid interval is a temporary period of sanity. A contract entered into by an in sane or demented person during a lucid interval is valid. Effect of drunkenness and hypnotic spell Drunkenness and hypnotic spell impair the capacity of a person to give a n intelligent consent. These conditions are equivalent to temporary insanity. Hence, the law considers a contract entered into in a state of drunkenness, or during hypnotic spell void able and it is not required that such state was procured by the circumvention of the other party. Article 1329 Incapacity declared in 1327 subject to modifications In general, the contracts entered into by persons enumerated in Article 1327 are voidable. However in certain cases, their incapacity may be modified by law, that is, they can also give valid consent. Other special disqualifications may be proved by law 1. Under the Rules of Court, the following are considered incompetents and may be placed under guardianship: a. Persons suffering the accessory penalty civil interdiction; b. Hospitalized lepers; c. Prodigals (spendthrifts); d. Deaf and dumb who are unable to read and write; e. Those who are of unsound mind even though they have lucid intervals; an d f. 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 thereby an easy prey for deceit and exploitation. A contract entered into by any of the above mentioned is valid except where it i s voidable by reason of incapacity under Articles 1327 and 1328 or of causes whi ch in vitiate consent, or when the incompetent has been placed under guardianshi p. Thus a prodigal is presumed to have capacity to enter into a contract. a. Insolvent until discharged; b. Married women in cases specified by law; c. Husband and wife with respect to sale of property to each other; and d. Other persons especially disqualified by law.