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CHAPTER I General Provisions (Articles 1305-1317)

(Articles 1305-1422, New Civil Code)


(Arts. 1305-1317)


1. What is a contract? (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

2. Contracts distinguished from obligations and agreements.

There can be no contract if there is no obligation. But an obligation
may exist without a contract.
All contracts are agreements but not all agreements are contracts.

3. What are the basic principles governing contracts?

(a) Autonomy or Liberty of Contracts The contracting

parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient provided they are not contrary to law, morals, good customs,
public order, or public policy. (Art. 1306)

(b) Mutuality of Contracts The contract must bind both

contracting parties, its validity or compliance cannot be left to the will of one of
them. (Art. 1308)

(b.1) The determination of the performance of a contract may be left to a

third person whose decision, however, must be equitable or fair, and made
known to both parties. (Arts. 1309-1310)

CHAPTER I General Provisions (Articles 1305-1317)

(c) Consensuality of Contracts As a general rule, contracts are

perfected by mere consent. (Art. 1315)

(d) Relativity of Contracts As a general rule, contracts take effect

only between the parties, their assigns and heirs. (Art. 1311) The following are

(d.1) Where the obligations arising from the contract are not
transmissible by their very nature, by stipulation or by provision of law. (Art.
1311, par. 1)

(d.2) In contracts containing a stipulation pour autrui (Art. 1311, par.

2) .
It is very important that the third person communicate his
acceptance of the favour to the obligor before its revocation.

(d.3) In contracts creating real rights, third persons who come into
possession of the object of the contract are bound thereby. (Art. 1312)

(d.4) In contracts entered into to defraud creditors. (Art. 1313)

(d.5) In contracts which have been violated at the inducement of a third

person. (Art. 1313)

(e) Obligatory Force of Contracts Obligations arising from

contracts have the force of law between the contracting parties and should be
complied with in good faith. (Art. 1159) From the moment a contract is
perfected, the parties are bound not only to the fulfilment 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. (Art. 1315)

4. What are the different stages in the life of a contract?

CHAPTER I General Provisions (Articles 1305-1317)

(a) Conception (preparation or negotation) It includes all

the negotiations or 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.
(b) Perfection or birth This is when the parties have come to
a definite agreement or meeting of the minds regarding the subject matter
and cause of the contract (Art. 1319). At this stage, there is already a
concurrence of all the essential elements or requisites of a contract.

(c) Consummation or termination This is when the parties

have performed their respective obligations and the contract may be said to have
been fully accomplished or executed, resulting in the extinguishment or
termination thereof.

5. What are the kinds of contracts according to perfection or formation?

(a) Consensual perfected by mere consent. (Art. 1315)

(b) Real perfected by the delivery of the thing object of the contract.
(Art. 1316)

(c) Solemn perfected after compliance with certain legal

formalities. (Art. 1356)

6. The general rule is that a person cannot be bound by the contract of another.
A person (principal), however, may be bound by the contract entered into in his
name by another (agent) when the following requisites concur :

(a) When the person entering into the contract (agent) is duly authorized
by, or has the legal right to represent, the person in whose behalf he
is acting (principal); and

(b) He acts within the authority given. (Art. 1317)


CHAPTER I General Provisions (Articles 1305-1317)

Articles 1305, 1306, 1308 and 1315.


1. D owes C 100,000. On maturity date, since D did not have the money to pay C,
D obliged himself to work as Cs servant, without pay, until such time that D could find the
money with which to pay her debt. Later, D left the house of C without paying her debt, so
C filed an action against D to compel her to pay and/or work as a servant without pay until
D had the means to pay his debt. D, however, refused to fulfil his obligation, and instead
asked payment for services already rendered to C. Decide on the parties claims.

2. On new years eve, George witnessed Allan indiscriminately fire his gun. In the
course thereof, a four-year old boy who was in the surrounding area was hit by a stray
bullet and died instantaneously. As a result of the incident, a case for homicide was filed
by the parents of the boy against Allan. George was summoned as a witness in the case.
Shortly before the scheduled hearing, Allan went to the house of George, and offered
George the amount of P300,000 as long as George would not testify in the case against
Allan. George agreed not to testify, and accepted the P300,000 offered by Allan. On the
hearing date, however, George testified. Allan was subsequently convicted on the basis
of the testimony of George. Allan, now, seeks to recover from George the P300,000 on
the ground that George did not comply in good faith with his obligations under their
contract. Can Allan recover the P300,000 from George?

3. On January 15, 2013, Edna sold her car to Elvie for P1.5M. Payment for and
delivery of the car was set on February 15, 2013. On January 30, 2013, Edna called Elvie
and pleaded if it was alright to cancel the sale considering that Ednas son passed the
entrance test to the Ateneo Law School, and would be needing the car. Elvie, however,
refused, and demanded for the delivery of the car on the agreed date. May Edna be
compelled to deliver despite her sons urgent transport needs?

4. On August 15, 2012, Jowell sold his land to Carlito for P4M. Later on, the title to
the land was transferred to Carlito. It appears, however, that Carlito still owed Jowell a
portion of the purchase price in the amount of P500,000. As of December 15, 2012,
Carlito, despite repeated demands from Jowell, failed to pay the remaining P500,000
balance. As it now stands, Jowell gave up all hope on his claim. When his best friend
Ricky learned about the non-payment, and Jowells inability to collect the P500,000, Ricky
was annoyed. To vindicate his friend, Ricky filed an action against Carlito demanding that

CHAPTER I General Provisions (Articles 1305-1317)

Carlito pay Jowell the remaining balance on the land purchased. Does Rickys action
have legal basis?