Contracts
(Article 1305-Art. 1422)
• 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.
• You will recall that contract is one of the sources of obligation.
• I assume that you can define/differentiate the two concepts now.
• Try to recall Sps. Reyes case:
The contracts involved in said case were contract of loan and real estate mortgage. In the said case, both contracts are contracts of
adhesion (boilerplate/standard form), not an ordinary contract. Also both are nominate, not innominate contracts
We can differ the two (adhesion vs. ordinary) by the number of persons who participated in the drafting of the contract.
A contract is nominate if the law/statue designates a particular name for it, otherwise it will be called innominate contract (Art. 1307)
Contract of Loan (simple loan or mutuum) Real Estate Mortgage (REM)
• It can stand alone • It cannot stand alone
• When a contract can stand alone • When a contract cannot stand alone, it
is an accessory contract
it is a principal contract
• Other examples of accessory contract
are chattel mortgage, pledge, antichresis
Before we proceed with the other classification of contracts, let
us discuss in passing innominate Contracts (contratos
innominados)
• There are four (4) kinds of innominate contracts
• Do ut des ( I give that you may give)
• Do ut facias (I give that you may do)
• Facio ut des ( I do that you may give)
• Facio ut facias (I do that you may do)
*It is founded on the principle that “no one shall unjustly enriched at the
expense of another”.
Perez vs. Pomar
• In the above case, the plaintiff instituted an action to determine the
amount of services due him as interpreter, alleging that, he rendered
services as interpreter for the defendant. The defendant denied that
the plaintiff is entitled, alleging that the services was rendered in an
spontaneous, voluntary and officious manner.
• Issue: WON the plaintiff is entitled to the fee for services rendered?
• Held: The plaintiff is entitled. Whether the services was rendered
solicited or offered, the fact remains that the services was rendered
and it does not appear that he did it gratuitously. Facio ut des.
Going back to classification of contracts:
• A contract of sale is a consensual contract; while pledge is real; and
donation is formal/solemn. The classification is based on
perfection/formation.
consensual-perfected by mere consent (A1315)
real- perfected by delivery of the object of the contract (see A. 1316)
formal-requires certain formalities for its perfection.
• Take note, that in donation the cause or equivalence of the value of
the prestation is the liberality of the donor, as such it is a gratuitous
contract, not onerous nor remunerative.
• Onerous- when there is exchange of equivalent valuable consideration
• Remunerative-contemplates a situation where a benefit or services was
previously given, and you will remunerate that previous benefit/service
• A contract could also be unilateral or bilateral; commutative or aleatory;
ordinary or auto-contract
• An example of aleatory contract is Insurance contract wherein the
fulfilment of the obligation is dependent upon chance
• An auto-contract, unlike ordinary contract, there is only one (1) person,
but this person represents two (2) opposite parties ( an agent
representing his princiapal in a contract of sale where he is the buyer).
Let us now proceed with the Elements of Contract:
• Essential: COC (Consent, Object Certain, Cause)
• If real: COC plus delivery
• If solemn: COC plus the required formality/ies
• Situation: A offered to sell B a particular car for P250,000.00. B
agreed to buy A’s particular car for P200,000.00.
Q: Was there meeting of minds?
A: None, we had qualified acceptance, and this constituted a counter-
offer.
Requisites of Consent:
• There must be two (2) parties. (reconcile it with auto-contract)
• Parties must be capable or capacitated . (take note of the persons who
cannot give consent)
• No vitiation of consent. (see A1330) (if there is vitiation, we have
voidable contract) (Reverential fear or the fear of displeasing persons to
whom obedience and respect are due is not wrong, contract is still valid)
• No conflict between what was expressly declared and what was
intended, otherwise the remedy is Reformation or if there is absolute
simulation, a void contract.
• Intent must be declared properly, it means legal formalities must be
complied with.
Requisites of meeting of minds:
• An offer that is certain
• An acceptance that must be unqualified and absolute.
• Acceptance can be expressed or implied. A1320
• Acceptance can also be presumed.
Situation: If the parties are both present, the offeror can immediately determine if
his offer is accepted or not, unless a period is given to decide. But, if the parties are
not present, for example; an offer was made thru correspondence, as well as the
acceptance, in this situation actual or constructive knowledge of the acceptance is
important for the perfection.
• Take note, an offer can be withdrawn prior to acceptance; an acceptance can also
be withdrawn prior to knowledge of the acceptance.
This brings us to the concept of option contract; option money.
•Take note that option is a contract by itself, a preparatory contract in particular.
•Option money is different from earnest money.
•Earnest money/arras—something of value to show that the buyer was really in earnest and given to the
seller to bind the bargain.
A part of the purchase price advanced by the vendee to the vendor as a token of the perfection of the
contract.
Part of the purchase price and proof of the perfection of the contract.
•
•Option money—distinct from the purchase price. (related articles A 1324, A 1479)
• Effect:
•Option- if with consideration
•Option-if without consideration
Situation:
• Problem:
•
• “A” agreed to sell to “B” a parcel of land for P1M. B was given up to December 31, 2009 within which to
raise the necessary funds. It was further agreed that if “B” could not produce the money on or before
said date, no liability would attach to him. Before December 31, 2009, A backed out of the agreement.
• Q: Is “A” obliged to sell the property to “B”?
• A: the offer of A to B is a unilateral offer (not accepted) see A 1479, par. 1
• What if there is an acceptance of the offer/option? Bilateral
--still, A is not obliged to sell for there is no consideration distinct from the price (option money)—no
preparatory contract of option
• If “A” pays an option money, there is now a perfected preparatory contract of option, A is then
obliged to wait for December 31, 2009. “B” has the right to buy the realty or not to buy it.
