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Atty Tizon
Lecture 5: 14 February 2015
CONTRACTS A. Definition
1. There are different sources of obligations. One of those is contracts. a. The court ruled that the deed of sale executed by Irineo and
Salvancion in favor of Sps Intac is void. It was an absolute
2. Obligations are broader of contracts. Contracts is just one source of simulation. The court made a distinction between absolute
obligaitons. There can be obligation but not necessarily a contract. simulation and relative simulation
But a contract necessarily gives birth to obligation.
i. Absolute: total lack of consideration. the parties
Article 1305. A contract is a meeting of minds between two persons did not really intend to bind themselves of change
whereby one binds himself, with respect to the other, to give something or their juridical relationship.
to render some service. (1254a)
ii. Relative: there is a false consideration and
3. The essential elements of a contact: something else was actually intended.
c. Cause or consideration ii. Even the contemporaneous acts of the parties show
that they had no intneiton to sell the property to
i. Reason for the constitution of the contract. it Sps Intac. Sps Intac only paid the real estate tax
determines the type of contract: can be onerous, belatedly in 1999.
remuneratory, gratuitous (like donation).
c. In this case there is a missing element of a contract, thus
4. General rule: contracts are perfected by mere meeting of the minds void. Parties have no intention to be bound. Furthermore,
of the parties. there was total lack of consideration.
a. Exception: where law requires specific form for its validity 6. MIAA v Avaia (2012)
or certain manner of proving it in court.
a. Parties entered into a one year lease agreement. MIAA
b. In some cases, perfection happens not upon meeting of the leased to Avaia portion of NAIA airport for purposes of its
minds of the parties but upon delivery. This is in cases of chartering operations and aircraft repair.
pledge, commodatum, deposit and mutuum.
i. During the effectivity of the lease, MIAA adopted
an admin order increasing the rental rates. Despite
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CIVIL LAW REVIEW 2: Obligations
Atty Tizon
Lecture 5: 14 February 2015
such, Avaia continued paying the lease based on c. With respect to the 2nd contract. The problem of the heirs
the old rates. was the gross inadequacy of the price. The contract only
stipulates the P180K. Respondents were claiming that it
ii. MIAA sent a billing statement to Avaia assessing should be around P9 to 15 million. Nonetheless, the court
the balance of Avaia based on the new rental rates ruled that gross inadequacy of the price does not
and a lump sum based on the different between the affect the validity of the contract, unless there was a
old and the new rates pertaining to previous years. showing that there was vitiated consent.
Avaia paid the new rental rate but refused to pay
the lump sum. Avaia was denied entry to the d. Testimony of one of Respondents was they were forced to
property. sign the agreement. What they actually meant was that they
were felt compelled to do so, although it is not sufficient to
iii. MIAA filed a collection case against Avaia. find vitiation of consent. They could have opted not to sign.
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CIVIL LAW REVIEW 2: Obligations
Atty Tizon
Lecture 5: 14 February 2015
9. RS Tomas v Rizal (2012) Article 1310. The determination shall not be obligatory if it is evidently
inequitable. In such case, the courts shall decide what is equitable under
a. FACTS: RS Tomas bid to perform certain job orders in the circumstances. (n)
favor of Rizal Cement. They agreed on a total contract
price. RS Tomas won the bid but was not able to finish all a. In relation to 1182, suspensive potestative condition,
the job orders. RS asked to extension and at the same time if it is left to the will of the debtor, it is void. If it is left to
price adjustments. Thus, Rizal cement was compelled to the will of the creditor, it is valid. however, you have to look
have the work done by another contractor and terminate at it if it would violate this provision of mutuality of
the contract with RS Tomas. contracts.
i. Rizal Cement filed a collection case against RS b. Based on 1309, the determination of performance may be
Tomas for the reimbursement of the advances it left to the will of a third person. The decision will not be
made and for the additional expenses it had binding unless known to both contracting parties. If the
incurred for having another contractor to finish the decision is unjust, it will be the court that shall be the one
obligations of RS Tomas. to determine which is equitable under the circumstances
(1310).
i. Stipulations of banks with respect to interest. PNB bound to respect the transactions between
v Manalo and PNB v Silos. Interest in a loan is respondents PEPI and Dee. The petitioner was well
a very important condition in a contract. It cannot aware that the properties mortgaged by PEPI were
be left to the sole will of one of the parties. also the subject of existing contracts to sell with
Although the ceiling under the usury law has been other buyers.
lifted, it does not give the parties unbridled
discretion to make unilateral imposition of interest. 13. Exception to the principle of relativity
11. Relativity – The contract only binds and affects only the parties a. Accion Pauliana – the creditor may ask for the
to the contracts, their assigns and heirs, except in cases of personal rescission of the agreement entered into in fraud of
obligations and intransmissible. creditors
Article 1311. Contracts take effect only between the parties, their assigns b. Accion Directa – rights granted to a person to directly
and heirs, except in case where the rights and obligations arising from the file or collect against a person. Example, a provider of
contract are not transmissible by their nature, or by stipulation or by materials can go straight to the owner of the building.
provision of law. The heir is not liable beyond the value of the property he
received from the decedent. c. Art 1312 – deals with real right over objects. The real right
is entwined with the object. Who ever gets possession of the
If a contract should contain some stipulation in favor of a third person, he object, subject to the requirements under land registration
may demand its fulfillment provided he communicated his acceptance to laws and mortgage law.
the obligor before its revocation. A mere incidental benefit or interest of a
person is not sufficient. The contracting parties must have clearly and Article 1312. In contracts creating real rights, third persons who
deliberately conferred a favor upon a third person. (1257a) come into possession of the object of the contract are bound
thereby, subject to the provisions of the Mortgage Law and the
Land Registration Laws. (n)
12. We saw the principle of mutuality applied in the case of PNB v d. Stipulation pour Autrui
Dee (2014)
Article 1311 (2) If a contract should contain some stipulation in
a. Dee previously purchased a house and lot from PEPI on favor of a third person, he may demand its fulfillment provided he
installment. PEPI was later on rehabilitated. It made a communicated his acceptance to the obligor before its revocation.
dacion en pago with PNB certain real properties, including A mere incidental benefit or interest of a person is not sufficient.
one purchased by Dee. After full payment, Dee sought from The contracting parties must have clearly and deliberately
PNB the delivery of the title, to no avail. On the other hand, conferred a favor upon a third person. (1257a)
in their MOA, Dee promised to deliver the title of the
property upon proof of full payment by the purchaser. i. If the parties to a contract stipulates in favor of
third person, that third person may enforce the
b. SC: PNB was not privy to the agreement between Dee and stipulation provided that he communicated his
PEPI. However, whatever claim PNB may have against acceptance before revocation of the stipulation in
PEPI because of their dacion agreement it should not his favor.
prejudice the rights of Dee.
ii. Stipulation has to be clearly provided and
i. Despite the apparent validity of the mortgage deliberately conferred upon that person.
between the petitioner and PEPI, the former is still
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CIVIL LAW REVIEW 2: Obligations
Atty Tizon
Lecture 5: 14 February 2015
C. Elements of a contract
17. Essential 20. Acceptance must be absolute. If you make a qualification, it a
counter-offer, which has to be accepted by the other party. Until
a. consent you meet, there is only negotiation and no perfected contract.
b. object 21. Acceptance made by letter or telegram does not bind the offerer
except from the time it came to his knowledge. The contract, in
c. cause such a case, is presumed to have been entered into in the place
where the offer was made (1319(2)).
18. Consent is manifested by:
Article 1319 (1). 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.
19. The person making the offer can fix the time, manner and place of
acceptance. All of which must be complied with. In Malbarosa
case, since there was a manner of acceptance required, acceptance
not in accordance to such is not a valid acceptance. Even if he
complied in accordance with the manner prescribed but the offer
has already been withdrawn by the offeror, it is no longer an
acceptance. Acceptance is ineffective.
Article 1321. The person making the offer may fix the time, place, and
manner of acceptance, all of which must be complied with. (n)
Article 1324. When the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon a
consideration, as something paid or promised. (n) (option contract)