CONTRACTS

Elements:
1. Essential consent, object, cause
2. Natural found in certain contracts unless set aside or suppressed by the parties
3. accidental stipulation of the parties
Classification according to:
1. perfection/formation consensual, real, and formal/solemn
2. cause onerous(promise of a thing or service), gratuitous(liberality of the benefactor),
remuneratory (service or benefit remunerated)
3. importance/dependence upon one another principal, accessory, preparatory
4. name/designation nominate, innominate (sample: do ut des, do ut facias, facio ut des, faciou
ut facias) *do ut des may actually be barter, hence a nominate contract
5. risk/fulfillment commutative (parties give equivalent values), aleatory (depends on chance)
ex.insurance
6. parties obligated unilateral (ex. Commodatum, gratuitous deposit), bilateral (sale, barter)
7. subject matter contracts involving: things, rights or credits, services
8. time of fulfillment executed (has been performed), executory (yet to be performed)
9. number of persons physically entering a contract ordinary(2 parties), autocontract (1 person
represents 2 opposite parties)
10. number of persons who participated in the drafting and preparation of the contract ordinary
(both parties), adhesion (1 party only)
Stages:
1. preparation/conception negotiations
2. perfection/birth meeting of the minds
3. consummation/death/termination fulfillment or performance of the terms agreed upon thus
there's extinguishment thereof.
Basic principles of contract
1. Liberality of contract or freedom to stipulate the parties are free to stipulate as long as it is not
contrary to law, morals, good customs, public order or public policy.
2. Mutuality of contracts must bind BOTH contracting parties, its validity or compliance cannot
be left to the will of one of them.
*if the fulfillment of the suspensive condition of an obligations depends upon the sole will of the
DEBTOR, the obligation and condition is VOID.
*contract which is heavily weighed in favor of ONE of the parties as to lead to an
UNCONSCIONABLE result is VOID. Example: promissory note authorizing the creditor to
increase/decrease, or otherwise change from time to time the rate of interest and/or bank charges
without advance notice to the borrower.
3. Relativity of contracts contracts take effect only between the parties, their assigns and heirs,
EXCEPT, where the rights and obligations are NOT TRANSMISSIBLE by LAW,
STIPULATION AND NATURE.
*with respect to the heir, he shall not be liable beyond the value of the property he received
from the decedent.
a. Stipulation pour autri stipulation in favor of third person; he can demand fulfillment and sue if no
fulfillment provided he has communicated his acceptance to the obligor BEFORE REVOCATION. A
mere incidental benefit or interest of a person is NOT SUFFICIENT.

b. 3rd person induces another to violate his contract - 3rd person liable for damages to the other
contracting party
c.contracts creating real rights: 3rd persons who come into possession of the object of the contract are
bound, thereby subject to the provisions of the mortgage law and the land registration law. (even if
there is NO KNOWLEDGE since registration of the mortgage operates as notice to the whole world of
the existence thereof.
d. in contracts intended to defraud creditors. This is true if the 3rd person acted in BAD FAITH.
4. Consensuality of Contract
Gen. Rule: contracts are perfected by mere consent (Art. 1315)
exceptions: real contracts (delivery is needed), formal/solemn contracts (must be in the required form)
5. Obligatory force of contract and compliance in good faith