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 service.
Number of parties to a contract.
In a contract, there must be at least two persons or parties, because it is impossible for one
to contract with himself.
Termination or cancellation of pre-existing contract.
Article 1305 fully covers the case where two persons agree to terminate or cancel a pre-
existing contract.
To terminate a contract, there must be some consideration, either in the delivery of
money or something else, or in rendering some act or forbearance.
Termination by stipulation of the parties - As a rule, the method of terminating a contract
is primarily determined by the stipulation of the parties.
A contract may be superseded by a compromise agreement. provided it is not contrary to
law, morals, good customs. To be valid, a compromise agreement is merely required by law
to be based on real claims and to be agreed upon in good faith.
Termination, by stipulation, at option of one party - A contract may provide, however, that
it shall come to an end at the option of one, or either of the parties and such stipulation,
when fairly entered, will be enforced if not contrary to equity and good conscience.
Termination by one party with conformity of the other - Whereon party opts to cancel an
existing agreement and the other party expresses its conformity thereto, in legal effect, the
parties enter another contract for the dissolution of the previous one, and they are bound by
their contract.
The dissolution or cancellation of the original agreement necessarily involves restoration of
the parties to the Status quo ante prevailing immediately prior to the execution of the
agreement.
Distinctions between termination and rescission of a contract.
To rescind is to declare a contract void in its inception and to put an end to it as though it
never were.
Termination of a contract is congruent with an action for unlawful detainer.
Contract and agreement distinguished.
There can be no contract in the true sense in the absence of the element of agreement, or
of mutual assent of the parties.
Contracts are agreements enforceable through legal proceedings. Those agreements which
cannot be enforced by action in the courts of justice (like an agreement to go to a dance
party) are not contracts but merely Moral or social agreements.
An agreement is broader than contract because the former may not have all the elements of
a contract.
all contracts are agreements but not all agreements are contracts.
Characteristics of contracts.
They are:
Freedom or autonomy of contracts. — The 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, and public policy (Art. 1306.); (2)
Obligatoriness of contracts. —Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith (Arts. 1159,
1315.); (3)
Mutuality of contracts. —Contracts must bind both and not one of the contracting parties;
their validity or compliance cannot be left to the will of one of them (Art. 1308.); (4)
Consensually of contracts. —Contracts are perfected, as a general rule, by mere consent,
and from that moment the parties are bound not only by 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.
Relativity of contracts. — Contracts take effect only between the parties, their assigns and
heirs, except in cases where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation, or by provision of law
ART. 1306. 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.
Freedom to contract guaranteed. The freedom to contract is both a constitutional and
statutory right.
Limitations on contractual stipulations
Law. — It is a fundamental requirement that the contract entered must be in accordance
with, and not repugnant to, an applicable statute. Its terms are embodied in every contract.
Police power. —Public welfare is superior to private rights. When there is no law in
existence or when the law is silent, the will of the parties prevails unless their contract
contravenes the limitation of morals, good customs, public order, or public policy.
Contract must not be contrary to morals.
Morals deal with norms of good and right conduct evolved in a community. These norms
may differ at different times and places and with each group of people.
Contract must not be contrary to good customs.
Customs consist of habits and practices which through long usage have been followed and
enforced by society or some part of it as binding rules of conduct. It has the force of law
when recognized and enforced by law. A custom must be proved as a fact, according to the
rules of evidence.
Contract must not be contrary to public order.
Public order refers principally to public safety although it has been considered to mean also
the public weal.
Contract must not be contrary to public policy.
Public policy is broader than public order, as the former may refer not only to public safety
but also to considerations which are moved by the common good.
ART. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the
provisions of Titles I and II of this Book, by the rules governing the most analogous nominate
contracts, and by the customs of the place.
Classification of contracts according to its name or designation.
They are:
(1) Nominate contract
or that which has a specific name or designation in law (e.g., commodatum, lease, agency,
sale, etc.); and
(2) Innominate contract or that which has no specific name or designation in law
Kinds of innominate contract.
They are:
(1) do ut des (I give that you may give);
(2) do ut facias (I give that you may do);
(3) facio ut des (I do that you may give); and
(4) facio ut facias (I do that you may do).
Do ut des is, however, no longer an innominate contract. It has already been given a name
of its own,i.e., barter or exchange.
Rules governing innominate contracts.
Innominate contracts shall be governed by:
(1) the agreement of the parties
(2) the provisions of the Civil Code on obligations and contracts
(3) the rules governing the most analogous contracts; and
(4) the customs of the place.