C O NTRAC

TS
 ART. 1305. A contract is
a meeting of minds
between two persons
whereby one binds
himself, with respect to
the other, to give
something or to render
some service.
Contract a n d
obligation
C ontract is
distinguished. one of the sourc e s of
obligations. O n the other hand,
o bliga tion is the leg a l tie o r re lation
itse lf that exists after a contract
has been entered into.
Hence, there c a n b e no
contract if there is no o b lig ation.
But a n o b ligation m a y exists
without a contract.
 ART. 1306. The
contracting parties may
established such
stipulations, clauses, terms
and conditions as they
may deem convenient,
provided they are not
contrary to law, morals,
good customs, public
 ART. 1308. The contract
must bind both
contracting parties, its
validity or compliance
cannot be left to the will
of one of them.
 ART. 1310. The
determination shall not
be obligatory if it is
evidently inequitable. In
such case, the courts
shall decide what is
equitable under the
circumstances.
Persons aff ected
by a contract
1. General rule.- Contract takes effect
only between the parties, their assigns
(i.e., transferees), a n d heirs. This means
that only the parties, their assigns a n d
heirs c a n have rights a n d obligations
under the contract. As a rule, the act,
declaration, or omission of a person
cannot affect or prejudice another
without the latter’s authorization or
ratification.
Exampl
e:
D is indebte d to C in the
a m ount of P10,000. D a n d C are
the parties to the contract.
If C dies, D m ust p a y the heirs of C .
If C assigns his credit to X, then D is
liable to p a y X.
If D dies a n d H is the heir, then H
assumes the obliga tion of D to C . H is
bou nd by the contract entered into
by D, his predecessor in interest, in
view of the privity of interest between
him a nd D . How ever, H is not liable
Persons aff ected
by a contract
[Link].- The cases when a c o ntract
are effective only between the parties are
when the rights a n d obligations arising from
the contract are not transmissible:
[Link] their nature (like a contract
involving personal qualifications, as
painting, singing, etc.);
[Link] stipulation (in a c c o rd a n c e with
the principle of freedom to
contract);
[Link] provision of law (as in agency,
partnership, a n d commodatum, when death
extinguishes the legal relationships.)
 ART. 1314. Any third
person who induces
another to violate his
contract shall be liable
for damages to the
other contracting party.
Exampl
e:
S agreed to sell his parcel of land to B fro
P9,000.
S sells the land to C instead because
of the inducement of D.
In this case, B c a n sue D for damages.
However, the liability of D for d a m a g e s
cannot b e more than that of S for the latter’s
violation of his contract. To hold D liable for
d a m a g e s in excess of those that c a n b e
recovered against S “would lead to a result at
o n c e grotesque a n d unjust.” At most, D would
b e solidarily liable with S.
 ART. 1315. Contracts are
perfected by mere consent,
and from that moment the
parties are bound not only to
the fulfillment of what has
been expressly stipulated but
also to all the consequences
which, according to their
nature, may be keeping with
good faith, usage and law.
 ART. 1316. Real contracts,
such as deposit, pledge
and commodatum, are not
perfected until the delivery
of the object of the
obligation.
Stages in the life of a
contract
1. Preparation or
negotiation.- This includes all
the steps taken by the
parties leading to the
perfection of the contract.
At this stage, the parties
have not yet arrived at any
definite agreement;
Stages in the life
of a contract
2. Perfection or birth.- This is
when the parties have
c o m e to a definite
agreement or meeting of
the minds regarding the
subject matter a n d cause
of the contract, i.e., upon
the occurrence of the
essential elements thereof;
Stages in the life
of a contract
3. Consuming or
termination.- This is when
the p a rties h a ve
performed their respective
obligations a n d the
contract m a y b e said to
have been fully
accomplished or executed,
resulting in the
Example
s:
1. S offers to sell his car to B for P100,000. B
asks S to show him the car. Later, S brings
the car a n d sho ws it to B. B o ffers to p a y
P80,000 for the c a r.

Here, the parties are taking all the steps that

m ay lead to the perfection of the contract.
Example
s:
[Link], if S agrees to sell the car for P80,000,
the c o ntract is p erfecte d b ecause there is a
meeting o f the minds upon the subject
matter a n d the cause of the contract.

[Link] c o ntract will b e c o nsummate d after S

d elivers the car to B a n d B pays P80,000. B
becomes the owner of the car a n d S, the
owner of the money paid by B.
ESSENTIAL
REQUISITES OF
CONTRACTS
 ART. 1319. Consent is manifested by 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 the
acceptance absolute. A qualified acceptance
constitutes a counter-offer.
Acceptance made by letter or telegram
does not bind the offerer except from the time
it came to his knowledge. The contract, in such
a case, is presumed to have been entered into
in the place where the offer was made.
 ART. 1327. The following
cannot give consent to a
contract:
1. Unemancipated minors;
[Link] or demented
persons, and deaf-mutes who do
not know how to write.
Capacity to give consent
presumed
The Civil Code does not
define who have capacity. It
defines on the contrary who
have no capacity, by which it
can be inferred that the
capacity is the general rule,
which exists in those, of whom
the law has not denied it.
Persons who cannot give
consent
A contract entered into where one
of the parties is incapable of
giving consent to a contract is
voidable. A voidable contract is valid
and binding until it is annulled by a
proper action in the court. It is
susceptible of ratification. Those who
are incapacitated to give consent
under Article 1327 are the following:
Persons who cannot give
consent
1. Unemancipated minors.- They refer to
those persons who have not yet
reached the age of majority (18years)
and are still subject to parental
authority. A minor can be
emancipated by attainment of the age
of majority, by marriage, or by the
concession recorded in the Civil
Register, of the father or the mother
who exercise parental authority;
Persons who cannot give
consent
2. Insane or demented persons.- The
insanity must exist at the time of
contracting. Unless proved
otherwise, a person is presumed
sane.
Persons who cannot give
consent
3. Deaf-mutes.- They are persons who are
deaf and dumb. However, if deaf-mute
knows how to write, the contract is valid
for then he is capable of giving intelligent
consent. A person who does not know how
to write, does not know how to read, and
one who knows how to read necessarily
knows how to write. A contract entered into
by a deaf-mute who knows how to read is,
therefore, valid, although he cannot write
because of some physical reasons.
 ART. 1328. Contracts
entered into during a lucid
interval are valid. Contracts
agreed to in a state of
drunkenness or during a
hypnotic spell are voidable.
Contracts entered into during
a lucid interval.
Lucid interval is a temporary
period of sanity. A contract
entered into by an insane or
demented person during a lucid
interval is valid. It must be shown,
however, that there is a full return
of the mind to sanity as to enable
him to understand the contract he
is entering into.
Effect of drunkenness and hypnotic
spell.
Drunkenness and hypnotic spell
impair the capacity of a person to
give intelligent consent.
These conditions are equivalent to
temporary insanity. Hence, the law
considers a contract entered into a
state of drunkenness, or during a
hypnotic spell voidable and it is not
required that such state was procured
by the circumvention of the other
 ART. 1330. A contract
where consent is given
through mistake, violence,
intimidation, undue
influence, or fraud is
voidable.
Characteristics of consent

In order that consent may

be sufficient for purposes of
contract, it is required, not
only that it exists, but that it
must be given with exact
notion over the thing
consented to.
There is no valid consent
Characteristics of
consent
1. It is intelligent.- there is capacity to act.
2. It is free and voluntary.- there is no
vitiation of consent by reason of violence
or intimidation.
3. It is conscious or spontaneous.- there is no
vitiation of consent by reason of mistake,
undue influence, or fraud.

Thus, Article 1330 enumerates in a

negative manner the different requisites of
consent. The contracting parties must
Vices of
consent
Aside from incapacity and simulation
of contract, the following are the causes
that vitiate consent or render it defective
so as to make the contract voidable:

1. Error or mistake
2. Violence or force
3. Intimidation or threat or duress
4. Undue influence
5. Fraud or deceit
Section 2. –
Object of
Contracts
Object of
Contracts
u Article 1347. All things which are not outside
the commerce of men, including future
things, m ay b e the object of a contract. All
rights which are not intransmissible m a y
also b e the object of contracts. N o contract
m ay b e entered into upon future
inheritance except in cases expressly
authorized by law. All services which are not
contrary to law, morals, g o o d customs,
public order or public policy m a y likewise
b e the object of a contract. (1271a)

u Article 1348. Impossible things or services

cannot b e the object of contracts. (1272)
Requisites of things
as object of
contract
The thing must b e within the commerce of
1.
men that is, it c a n b e legally the subject
of commercial transaction;
2. It must no t b e im p o ssib le, le g ally o r
p hysically;
3. It must b e in existenc e o r c a p a b le o f
c o ming into existence; a n d
4. It must b e d eterminate o r d etermina b le
witho ut the n e e d of a new contract
between the parties
Requisites of services
as object of
contract
The service must b e within the
1.
commerce of men;
2. It must no t b e im p o ssib le, p hysically o r
le g ally;
3. It must b e d eterminate o r c a p a b le o f
b eing m a d e determinate
Section 3. – C a u s e
of Contracts
u Article 1350. In onerous contracts the cause
is understood to be, for e a c h contracting
party, the prestation or promise of a thing or
service by the other; in remuneratory ones,
the service or benefit which is remunerated;
a n d in contracts of pure benefi cence, the
mere liberality of the benefactor. (1274)

u Article 1351. The particular motives of the

parties in entering into a contract are
different from the cause thereof. (n)
Section 3. – C a u s e
of Contracts
u C ause is the essential o r p roximate p urpo se
which the contracting parties have in view
at the time of entering into the contract.

u It is also calle d “consid eratio n”.

Kinds of
Defective
Contracts
u Rescissible
contracts
u Voidable contracts
u Unenforceable
contracts
u Void or inexistent
contracts
Rescissible
contracts
u are valid because all the essential requisites
of a contract exist but by reason of injury or
damage to one of the parties or to third
persons, such as creditors, the contract m a y
rescinded.
Voidable
Contracts
u Are also valid until annulled unless there ahs
been ratification. In a voidable contract, the
defect is caused by vice of consent.
Unenforceable
Contracts
u Are valid contracts but cannot b e sued
upon or enforced unless they are ratified.
Void or
Inexistent
Contracts
uThey are absolutely null a n d void. They
have no effect at all a n d cannot b e
ratified.