Contract & Tad

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II. CONTRACTS

GENERAL PROVISIONS
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Art. 1305. A contract is a meeting of

the minds between two persons

whereby one binds himself, with

respect to the other to givesomething or to render some

service.

Definition:

Sanchez Roman a juridical convention manifestedin legal form, by virtue of which one or more persons

bind themselves in favor of another or others, or

reciprocally, to the fulfillment of a prestation to give, to

do or not to do.

* Number of Parties:The Code states two persons; what is meant

actually is twoparties. For a contract to exist, there

must be two parties.

A party can be one or more persons.
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Art. 1306. The contracting parties

may establish such stipulations,

clauses, terms & conditions as they

may deem convenient, provided

they are not contrary to law, morals,

good customs, public order, or

public policy.

Freedom to contract:

Any person has the liberty to enter into a contract

so long as they are not contrary to law, morals, good

customs, public order or public policy.

-The legislature, under the constitution, is

prohibited from enacting laws to prescribe the termsof a legal contract.

* Validity of Stipulations:

Any and all stipulations not contrary to law, morals,

good customs, public order or public policy is valid


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Art. 1307. Innominate contracts shall be regulated

by the stipulations of the parties, by the provisions of

Titles I & II of this Book, by the rules governing the

most analogous nominate contracts, and by thecustoms of the place.

* Innominate Contracts:

do ut des (I give that you may give) An agreement in

which A will give one thing to B, so that B will give another

thing to A.do ut facias (I give that you may do) An agreement under

which A will give something to B, so that B may do

something for A.

facio ut facias (I do that you may do) An agreement under

which A does something for B, so that B may render some

other service for A.facio ut des (I do that you may give) An agreement under

which A does something for B, so that B may give something

to A.


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Art. 1308. The contract must bind both

contracting parties; its validity or

compliance cannot be left to the will of

one of them* Mutuality of Contract:

The binding effect of contract on both parties is

based on the principles:

that obligations arising from contracts have the

force of law between the contracting partiesthat there must be mutuality between the parties

based on their essential equality, to which is

repugnant to have one party bound by the

contract leaving the other free therefrom.

A contract containing a condition which makes its

fulfillment dependent exclusively upon the

uncontrolled will of one of the contracting parties

is void.


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Art. 1309. The determination of the performance may

be left to a third person, whose decision shall not be

binding until it has been made known to both

contracting parties.

*A third person may be called upon to

decide whether or not performance has

been done for the fulfillment of the contract.Such decision becomes binding when the

contracting parties have been informed of

it.


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Art. 1310. The determination shall be

obligatory if it is evidently inequitable. In

such case, the courts shall decide what is

equitable under the circumstances.

*However, when the decision cannot

be arrived due to inequity, the courtsshall decide what is equitable for the

parties involved


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Art 1311. Contracts take effect only between the parties, their

assigns and heirs, except in case where the rights and

obligations arising from the contracts are not transmissible by

their nature, or by stipulation or by provision of law. The heir is

not liable beyond the value of the property he received fromthe decedent.

If a contract should contain some stipulation in favor of a

third person, he may demand its fulfillment provided he

communicated his acceptance to the obligor before its

revocation. A mere incidental benefit or interest of a person isnot sufficient. The contracting parties must have clearly and

deliberately conferred a favor upon a third person.


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* Parties bound by contract:

Generally, only the parties that agreed on the contracts are bound

by the contract.

Transmission is possible to the heirs or assignees if so stipulated

and in certain contracts.

* Third persons not bound:It is s general rule that third parties are not bound by the acts of

another.

A contract cannot be binding upon and cannot be enforced against

one who is not a party to it, even if he has knowledge of such

contract and has acted with knowledge thereof.

* Enforcement of contract:

Only a party to the contract can maintain an action to

enforce the obligations arising under said contract.

* Annulment of contracts:

A third person cannot ask for a contracts annulment

because he is not party to it.Exception: when it is prejudicial to his rights, the third

person may ask for its rescission.

* Contracts bind heirs:

General rule: rights and obligations under a contract are

transmissible to heirs.

Heirs are not third persons because there is privity ofinterest between them and their predecessor.
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* Intransmissible Contracts:

Exceptions:

contracts of purely personal in nature partnership and

agency

contracts for payment of money debts are charged not to

the heirs but to the estate of the decedent

Stipulations for Third Parties:Second paragraph creates an exception to the first.

When there is such stipulation pour autrui, it can be enforced.

2 Divisions:

those where the stipulation is intended for the sole benefit of such third person

those where an obligation is due from the promisee to the third person and the formerseeks to discharge it by means of such stipulation

* Requisites of Article:

To apply the second paragraph, the following are necessary:

stipulation in favor of a third persons

stipulation in favor of a third persons should be a part, not the whole, of the contract

clear and deliberate conferment of favor upon a third person by the contracting parties

and not a mere incidental benefit or interest

stipulation should not be conditioned or compensated by any kind of obligation

whatever

that the third person must have communicated his acceptance to the obligor before its

revocation

neither of the contracting parties bears the legal representation or authorization of the

third party


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* Beneficiaries:

A stipulation may validly be made in favor of indeterminate persons,

provided that they can be determined in some manner at the time when the

prestation from the stipulation has to be performed.

* Acceptance of Third Party:

Stipulation pour autrui has no binding effect unless it is accepted by the

third party.

Acceptance is optional to the third person: he is not obliged to accept it.

It may be in any form, express or implied, written or oral

There is no time limit to acceptance until the stipulation is revoked beforethe third persons acceptance.


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Art 1312. In contracts creating real rights, third persons who come intopossession of the object of the contract are bound thereby, subject tothe provisions of the Mortgage Law and the Land Registration laws.

* Real Rights in Property

A real right directly affects property subject to it; hence,

whoever is in possession of such property must respect that

real right.


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Art 1313. Creditors are protected in cases of contracts

intended to defraud them.

Contracts in Fraud of Creditors

When a debtor enters into a contract in fraud of his creditors, such

as when he alienated property gratuitously without leaving enough

for his creditors (article 1387), the creditor may ask for its

rescission.


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Art 1314. Any third person who induces another to violate his

contract shall be liable for damages to the other contracting

party.

* Interference of Third Persons:If a third person induced a party to violate his side of the contract, the

other party may sue the third person for damages.

Requisites:the existence of a valid contract

knowledge by the third person of the existence of a contractinterference by the third person in the contractual relation

without legal justification


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Extent of Liability:

The extent of liability of a third person interfering is limited to

the damage that the other party incurred.

Liability is solidary, the offending party and the third person,

because in so far as the third person is concerned, he

commits a tortious act or a quasi-delict, for which solidary

responsibility arises.

A t 1315 C t t f t d b t d f


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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 in

keeping with good faith, usage and law.

* Perfection of Consensual Contracts:-Perfection of a contract, in general: the moment from which it

exists; the juridical tie between the parties arises from that time.-Perfection of Consensual Contracts: the mere consent which is

the meeting of the minds of the parties upon the terms of the

contract

-consent may not be expressly given.

* Binding Effect of Consensual Contracts:The binding force of such contracts are not limited to what isexpressly stipulated, but extends to all consequences which are

the natural effect of the contract, considering its true purpose, the

stipulations it contains, and the object involved.


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Stages of a Contract:

3 stages:

1. Preparation, conception, or generation period of

negotiation and bargaining, ending at the moment of agreement

of the parties. t this stage, the parties have not yet arrived at

any definite agreement,

2. Perfection or birth of the contract the moment when the

parties come to agree on the terms of the contract

3. Consummation or death the fulfillment or performance of

the terms agreed upon in any contract


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Art 1316.

Real contracts, such as deposit, pledge or commodatum, are

not perfected until the delivery of the object of the obligation.

Perfection of real contracts:

Real contract is not perfect by mere consent. Thedelivery of the thing is required.

Delivery is demanded, neither arbitrary nor formalistic.


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Art 1317.

No one may contract in the name of another without being

authorized by the latter, or unless he has by law a right to

represent him.

A contract entered into in the name of another by one who

has no authority or legal representation, or who has acted

beyond his powers, shall be unenforceable, unless it is

ratified, expressly or impliedly, by the person on whose behalf

it has been executed, before it is revoked by the other

contracting party.

* R tifi ti


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* Ratification necessary:

A contract entered into in behalf of another who has notauthorized it is not valid or binding on him unless he ratifiesthe transaction.

When ratified, he is estopped to question the legality of the

transaction.Kinds of ratification:1. express2. implied

The ratification has a retroactive effect from the moment ofits celebration, not from its ratification.

Before ratification, the contract is in a state of suspense; itseffectivity depends on its ratification. The other party must notdo anything prior to ratification that shall prejudice the rightsof the other party.

When not ratified, the person who entered into a contract inbehalf of another without authority becomes liable to the other

party, if he did not inform the latter that he does not have anyrepresentation or authority.

When such deficiency or lack of authority has been relayed tothe other, he cannot claim for damages against he personwithout authority


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ESSENTIAL REQUISITES OF CONTRACTS

Art. 1318. There is no contract unless the following requisites

concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established. (1261)

There must be at least 2 parties to every contract. The number of

parties, however, should not be confused with the number of

persons.

A single person can represent 2 parties, and one party can be

composed of 2 or more persons.

Consent presupposes capacity. There is no effective consent in law

without the capacity to give such consent.


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NEGLIGENCE

Is defined as the failure to observe for the protection

of the interests of another person the degree of care,

precaution and vigilance which the circumstances

justly demand, whereby such other person suffers

injury ( Pnr et. Al. v CA, G.R. # 157658, Oct.

15,2007)

Is a relative or comparative concept. Its application

depends upon the situation that the parties are in and

the degree of care and vigilance which the prevailingcircumstances reasonably requires ( Bulilan vs Coa,

GR # 130057, Dec. 22, 1998)


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QUASI- DELICT (Culpa Aquiliana) : (Art. 2176, NCC)

Requisites:1. Act or omission constituting fault or negligence

2. Damage or injury caused by the said act or omission

3. Causal relation between the damage and the act or

omission

4. There is no pre- existing contractual relation

between the parties.

Concept of quasi- delict in Art. 2176 is broad, itincludes injuries to persons and damage to

property (Cinco v. Canonoy, GR # L33171, May

31, 1979)


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PROOF OF NEGLIGENCE

Burden of Proof: The quantum of proof required is

preponderance ofEvidence ( Sec 1, Rule 133, Rules of Court).

Gen, Rule: If plaintiff alleged in his complaint that he was damaged

because of the negligent acts of the defendant, plaintiff has the

burden

of proving such negligence (Taylor v Meralco)

EXCEPTIONS: When the rules or the law provide for

cases when

negligence is presumed:

PRESUMPTIONS OF NEGLIGENCE

Fault or negligence is presumed under the ff:

-Art. 2184

--Art 2185

-- Art, 2188

--Art 1733, 1756 NCC


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Res Ipsa Loquitur Doctrine

The thing or transaction speaks for itself

The doctrine can be invoked when and only when, under the

circumstancesinvolved, direct evidence is absent and not readily available.

Requisites:

1. The occurrence of an injury,

2. The thing which caused the injury was under the control and

management of the defendant;3. The occurrence was such that in the ordinary course of

things, would not have happened if those who had control or

management used proper care; and

4. The absence or explanation by the defendant ( Professional

Services, Inc v. Agana GR # 126297, Jan. 31, 2007)

It is a rebuttable presumption that defendant was negli-

gent , which arises upon proof that the instrumentality

causing injury was in defendants exclusive control, and

that the accident was one which ordinarily does not

happen in the absence of negligence (CAP et al. v.

Belfranet Dev. Inc. GR # 155604, Nov. 27, 2007)


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ELEMENTS:

a. The apparatus must be such that in ordinary state of

affairs no injury would result unless from a careless

construction, inspection or user;b. Both inspection and user must have been, at the time of the

injury, under the exclusive control of the person charged

with negligence;

c. The injurious condition or occurrence must not have been

due to any voluntary action on the part of the injuredperson.

Inapplicability of doctrine

If there is direct proof of absence orpresence of negligence (Martinez v. Buskirk GR

# L5691, Dec. 27, 1910)


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Criminal Negligence or Culpa Criminal ( Art . 365 Revised Penal Code)

Elements:1. That the offender does or fails to do an act;

2. That the doing or the failure to do an act is voluntary;

3. That it be without malice;

4. That material damage results from the reckless

imprudence;5. That there is inexcusable lack of precaution on the part of

the offender, considering his employment or occupation,

degree of intelligence, physical condition and other

circumstances regarding persons, time , and place. (Cruz

v CA GR # 122445 Nov. 18, 1997)


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CONTRACTUAL NEGLIGENCE or Culpa Contractual (Art. 1170- 1174

NCC)

Those who in the performance of their obligations are

guilty of fraud, negligence or delay are liable for damages

(Art. 1170 NCC)

It is settled that in culpa contractual, the mere proof of theexistence

of the contract and the failure of its compliance justify, prima

facie, a corresponding right of relief (Saludaga v FEU GR #

179337, Apr. 30, 2008)


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