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Contracts take effect only in between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract 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 from the 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 is not sufficient. The
contracting parties must have clearly deliberately conferred a favor upon a third person.

Ang kontrata ay magkakabisa lamang sa pagitan ng mga partido, ang kanilang pinaglaanan at
mga tagapagmana, maliban sa mga kaso kung saan ang mga karapatan at mga obligasyon na
nagmumula sa ang kontrata ay hindi naipapasa sa pamamagitan ng kanilang natural na
katangian, o sa pamamagitan ng pagkakasundo o sa pamamagitan ng pagkakaloob ng batas.
Ang tagapagmana ay hindi mananagot ng higit pa sa halaga ng ari-arian na natanggap niya mula
sa yumao.

Kung ang isang kontrata ay dapat na maglaman ng ilang kondisyon na pabor sa ibang tao, maaari
niyang hilingin ang pagsasakatuparan kung siya ay nakipag-usap tungkol sa kanyang
pagtanggap sa may pananagutan bago iyon bawiin. Ang kaugnay na benepisyo o interes ng isang
tao ay hindi sapat. Ang mga nagkasundong partido ay dapat maglinaw na sadyang
ipinagkakaloob ang pagpabor sa ibang tao.


Straw Berry is indebted to Buko Pie in the amount of Php 5,000.00. If Buko Pie dies, Straw Berry
must pay the heir of Buko Pie, Apple Pie. If Straw Berry dies and Blue Berry is her heir, then Blue
Berry assumes the obligation of Straw Berry to Buko Pie. Blue Berry, however, is not liable beyond
the value of the property she inherited from Straw Berry.


Parties Bound by Contracts. One of the characteristics of contracts is that they are binding or
effective only between contracting parties, their assigns and heirs. The rights and obligation is
transmissible, because if they are not transmissible they are only binding between the contracting
parties. Assigns and heirs are excluded when the right or obligation is personal to the party.

Third Persons Not Bound. The act, declaration, or omission of another, cannot affect another,
except as otherwise provided by law or agreement. A contract cannot adversely affect the rights
of one who is not party to the contract even if he is aware of such contract and has acted upon
with knowledge thereof.

Third Persons Affected. As a general rule, a contract is not binding upon and cannot be
enforced against third persons, except:
1. In contracts creating real rights where third persons who come into possession of the object of
the contract are bound by that contract.


MMG borrowed P 300,000.00 to CNN secured by a mortgage on MMG’s rice field. CNN registered
the mortgage to the Registry of Deeds. After the said registration, MMG sold the rice field to SPS.
SPS is bound by the mortgage contract between MMG and CNN. CNN can still foreclose the
mortgage on the rice field even if it has been sold to SPS.

2. A third person who induces one of the parties to violate his contract is liable to pay.


ALDUB are talents of GMA with whom they have a 10-year contract. With 5 years still remaining
in the contract, ABS-CBN, the rival station, convinced ALDUB to breach off their contract with
GMA by offering them a more deal profit of contract.

Enforcement of Contract. Only the contracting parties can maintain an action and to enforce the
obligations arising under said contract. Strangers, therefore, cannot generally demand the
enforcement of a contract nor can they demand its annulment nor are they bound by the same.


Reno shipped his cargo in Ligo’s vessel. Ligo and Tuna’s company entered into a contract for
Tuna’s company to unload the cargo from the ship’s hold. In the lifting operations, Reno’s cargo
was damaged. Reno cannot sue Tuna’s company for damages for there was no contract between
Reno and Tuna’s company. Reno’s remedy is to go against Ligo.

Annulment of Contract. One who is not a party cannot ask for a contract to be annulled unless
the said contract violates his rights with respect to one of the contracting parties.

Contracts Bind Heirs. Heirs are not considered as third parties, there is a privity of interest
between them and their predecessors, giving them the rights and obligations under a contract.

Intransmissible Contracts. Rights and obligations arising from contracts are not transmitted to
the heirs when the same are intrasmissible:

1. By Law.Example: Blue designated Yellow as his agent for the purpose of buying and selling
mangoes for a period of 3 years. If after 1 year, Yellow dies, his death would mean the
extinguishment of the agency.
2. By Agreement.Example: On January 1, 2017, Morning obliged herself to deliver to Evening a
Balenciaga shoes on March 1, 2017. The obligation of delivering the shoes is not transmitted to
the heirs of Evening because the agreement between Morning and Evening is intransmissible.

3. By Nature.Example: John Lennon obliged himself to compose a song for Yoko Ono. If Lennon
dies, the obligation to compose a song for Yoko Ono is extinguished because such obligation is
by nature intransmissible.

Stipulation of Third Parties. The second paragraph of this Article is solely directed on the benefit
of the third person. The following are requisites for the application of the second paragraph:

1. There must be a stipulation in favor of a third person

2. The stipulation must be part, not the whole of the contract
3. The contracting parties must have clearly and deliberately conferred a favor upon a third person,
NOT a mere incidental benefit or interest.
4. That the favorable stipulation should not be conditioned or compensated by any kind of obligation
5. No relation of agency exists between any of the parties and the third person favored.
6. The third person must have communicated his acceptance to the obligor before its revocation.

Stipulations Pour Autrui. Stipulation Pour Autrui is a stipulation in favor of a third person
conferring a clear and deliberate favor upon him, and which stipulation is merely part of a contract
entered into by the parties, neither of whom acted as agent of the third person.


A stipulation in a contract stating that the fruits of a certain parcel of land will be used for expenses
connected with specified religious festivities.


Green is indebted to Pink the amount of P 200,000.00. Green died. His daughter Violet is his heir.
Violet received a property from her father amounting to P 100,000.00. Is she obligated to pay P
200,000. to Pink? Why or why not?


Violet is not obligated to pay Pink the full amount of her father’s debt. According to Article 1311
the heir is not liable beyond the value of the property he received from the decedent.