Chapter 1

I.

1. Contract - 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

2. Stipulation pour autrui - is a stipulation in a contract clearly and deliberately conferring a favor
upon a third person who has a right to demand its fulfillment, provided, he communicates his
acceptance to the obligor before its revocation by the obligee or the original parties.

3. Real contract – is perfected by the delivery of the thing subject matter of the contract (e.g.,
depositum, pledge, commodatum)

4. Perfection of contract - This takes place when the parties have come to a definite agreement or
meeting of the minds regarding the terms, that is, the subject matter and cause of the contract.

II.

1. Yes, on stipulation pour autrui is a stipulation in a contract clearly and deliberately conferring a
favor upon a third person who has a right to demand its fulfillment provided he communicates
his acceptance to the obligor before its revocation by. the oblige or the original parties. The
stipulation in favor to the third person shall only be a part and not the main cause of the birth of
contract.

2. Contracts are perfected by mere consent, and from that moment the parties are bound not only
to 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.

3. The person entering into the contract must be duly authorized, expressly or impliedly, by the
person in whose name he contracts or he must have, by law, a right to represent him (like a
guardian or an administrator). And he must act within his power.

III.

1. It is valid and binding. Innominate contracts shall be regulated by the stipulations of the parties,
by the provisions of Titles I and II of the Civil Code of the Philippines, by the rules governing the
most analogous nominate contracts, and by the customs of the place.
 2. Article 1310, The determination shall not be obligatory if it is evidently inequitable. In such case,
the courts shall decide what is equitable under the circumstances.

3. No, it is provided in Article 1311 that contracts take effect only between the parties, their
assigns and heirs. 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. B is not part or neither a beneficiary of the contract therefore he has no right to
enforce the stipulation between the contracting parties.

4. No, the agreement was Y can pay whatever amount he would like to pay for it. X is not entitled
for his demand.

Chapter 2 – Section 1

I.

1. Consent - is the conformity of wills and with respect to contracts, it is the agreement of the will
of one contracting party with that of another or others, upon the object and terms of the
contract. (4 Sanchez Roman 191; 8 Manresa 648.)

2. Acceptance - is the manifestation by the offeree of his assent to the terms of the offer. Without
acceptance, there can be no meeting of the minds between the parties.

3. Natural elements - those that are presumed to exist in certain contracts unless the contrary is
expressly stipulated by the parties.

4. Option contract - is a preparatory contract giving a person for a consideration a certain period
and under specified conditions within which to accept the offer of the offerer. It is separate and
distinct from the projected main agreement or principal contract itself (subject matter of the
option) which the parties may enter into upon the consummation of the option or which will be
perfected upon the acceptance of the offer.
 5. Mistake of law - is that which arises from an ignorance of some provisions of law, or from an
erroneous interpretation of its meaning, or from an erroneous conclusion as to the legal effect
of an agreement, on the part of one of the parties.

II.

1. A contract where consent is given through mistake, violence, intimidation, undue influence, or
fraud is voidable.

2. No, Article 1332 is an exemption to the rule when one of the parties is unable to read or if the
contract is in a language not understood by him, it is the party enforcing the contract who is
duty-bound to show that there has been no fraud or mistake and that the terms of the contract
have ben fully explained to the former.

3. It must produce a reasonable and well-grounded fear of an evil; the evil must be upon his
person or property, or that of his spouse, descendants, or ascendants; and it is the reason why
he enters into the contract

4. Article 1339, failure to disclose facts, when there is a duty to reveal them, as when the parties
are bound by confidential relations, constitutes fraud.

5. Article 1325, unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer. Unless the advertisement is complete in
all the particularly necessary in a contract, it may amount to a definite offer which, if accepted,
will produce a perfected contract.

III.

1. When the option is founded upon a separate consideration whereby the other party paid for it.
The offerer is not allowed to withdraw his offer even before the acceptance of the offeree.
 When the offerer gives to the offeree a certain period within which to accept the offer, the
general rule is that the offer may be withdrawn as a matter of right at any time before
acceptance

2. The mistake as to the identity of B in this case is material because his identity was the principal
reason or consideration for the sale.

3. The fraud committed by S was incidental fraud which only gives rise to an indemnification.

4. No, Article 1340 provides that usual exaggerations in trade, when the other party had an
opportunity to know the facts, are not in themselves fraudulent.
5. Yes, S failed to disclose to B that the price of cement would go down before the sale happened.
Therefore, it constitutes fraud. B has the right to have the sale annulled on the ground of causal
fraud. If only B knew that the price of cement would go down he wouldn’t have given his
consent.

Section 2 – Object of Contracts

I. Definitions
1. Future inheritance - is any property or right, not in existence or capable of determination at
the time of the contract, that a person may inherit in the future. (Blas vs. Santos, 1 SCRA 899
[1961].)
2. Physical impossibility - takes place when, for example, the obligor dies or becomes physically
incapacitated to perform the obligation.

II. Discussions
1. (1) The thing must be within the commerce of men, that is, it can legally be the subject of
commercial transaction (Art. 1347.); (2) It must not be impossible, legally or physically (Art.
1348.); (3) It must be in existence or capable of coming into existence (see Arts. 1461, 1493,
1494.); and (4) It must be determinate or determinable without the need of a new contract
between the parties. (Arts. 1349, 1460, par. 2.)

2. In order that service may be the object of a contract, the following requisites must concur:
(1) The service must be within the commerce of men; (2) It must not be impossible,
 physically or legally (Art. 1348.); and (3) It must be determinate or capable of being made
determinate. (Arts. 1318[2], 1349.)

3. No contract may be entered into upon future inheritance except in cases expressly
authorized by law. Art. 1347, par. 2

4. If the land sold by S can be determined without a new or further agreement between the
parties then the sale is valid. By assuming that S only owns the sold parcel of land and even
without specifying its exact location of the object of the contract is determinable without
the need of a new contract between the parties in accordance to Art.1349

5. The promise of B is to deliver a generic thing which is determinable. The moment it is

delivered, it becomes determinable. Therefore, it is merely an executory contract that will
only be perfected once parties performed the required obligation thereof. Art. 1349

Section 3 – Cause of Contracts

I. Definitions

1. Cause - (causa) is the essential or more proximate purpose or reason which the contracting
parties have in view at the time of entering into the contract (see 8 Manresa 697; Republic
vs. Cloribel, 36 SCRA 534 [1970].) or, as expressed in another case, it is the “why of the
contract, the essential reason which moves the contracting parties to enter into the
contract.’’ (Gonzales vs. Trinidad, 67 Phil. 682 [1939]; Villamor vs. Court of Appeals, 202
SCRA 607 [1991]; Domingo vs. Court of Appeals, 367 SCRA 368 [2001].)

2. Motive - is the purely personal or private reason which a party has in entering into a
contract. It is different from the cause of the contract.

3. Inadequacy of cause - is any damage caused by the fact that the price is unjust or
inadequate.

It is the injury suffered in consequence of inequality of situation, by one party who does not
receive the full equivalent for what he gives in a commutative contract, like a sale.
(Bouvier’s Law Dictionary, p. 1929.)
II. Discussions
1. The following are the requisites of cause: (1) It must exist at the time the contract is entered
into (Arts. 1352, 1409[3].); (2) It must be lawful (Ibid.); and (3) It must be true or real. (Art.
1353.)

2. If the cause is false, the contract is rendered void because the same actually does not exist.
(Arts. 1353, 1409[3]). If the contract is relative simulated the parties are bound by their real
agreement provided I t does not prejudice a third person and is not intended for a purpose
contrary to law, morals, good customs, public order, or public policy. (Art. 1346).

3.  The thing or the object of the contract of sale is a bilateral or reciprocal contract which is
the cause for one is the subject matter or object for the other, and vice versa. In onerous
contracts the cause is understood to be, for each contracting party, the prestation or
promise of thing or service by the other.

III. Problems
1. The cause of B is contrary to law therefore the contract shall be null and void. Contracts
without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if
it is contrary to law, morals, good customs, public order or public policy. (Art. 1352)

2. No, C is a stranger to the contract and has no right to enforce any legal claims to any
contracting parties. Contracts take effect only between the parties, their assigns and heirs.
This means that only the parties, their assigns and heirs can have rights and obligations
under a contract. (Art. 1311)

3. No, Art. 1355 provides that inadequacy of cause shall not invalidate the contract, unless
there has been fraud, mistake or undue influence. If only S exercised all the precautions in
order for the contract not to be disadvantageous for him then the effect would not be
grossly inadequate.

Chapter 3 – Form of Contracts

I. Definitions
1. Form of Contract - refers to the manner in which a contract is executed or
manifested.
2. Informal Contract - or that which may be entered into in whatever form, provided,
all the essential requisites for their validity are present. (Art. 1356.) This refers only
to consensual contracts (Art. 1356.), such as the contract of sale. An informal
contract may be oral or written

II. Discussions
1. There are two classifications when classifying the form of a contract. Informal or
common or simple contract or that which may be entered into in whatever form
 provided all the essential requisites for their validity are present. And the other one
is formal or solemn contract or that which is required by law for its efficacy to be en
a certain specified form.
2. Yes, in order for the validity and enforceability of a contract to be applied a
requirement for a specified contract should be observed. (Art. 1356)

III. Problems
1. Yes, the contract is valid. Under Art. 1403 a contract of sale should be in writing in
order for it to be enforceable. Contrary to Art. 1403, when there is a partial
performance or simply consummation thereof the Statute of Frauds is ratified. The
sale is valid and binding to both parties.

2. Both parties may compel each other to observe the required form by law it is only
permitted once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.

Chapter 4 - Reformation of Instruments

I. Definitions
1. Reformation - is that remedy by means of which a written instrument is amended or
rectified so as to express or conform to the real agreement or intention of the parties
when by reason of mistake, fraud, inequitable conduct, or accident, the instrument fails
to express such agreement or intention.
2. Mutual mistake – is mistake of fact that is common to both parties of the instrument
which causes the failure of the instrument to express their true intention.

II. Discussions
1. Equity orders the reformation of an instrument in order that the intention of the
contracting parties may be expresses. It is done to reflect the true intentions of the
contracting parties. It would be unjust and inequitable to allow the enforcement of a
written instrument which does not reflect or disclose he real meeting of the minds of
the parties.
2. In reformation, there has been a meeting of minds there is a contract existing but the
written instrument purporting to embody the contract does not express the true
intention of the parties by reason of mistake, fraud, inequitable conduct, or accident.

III. Problems
1. According to Article 1361 the contract may be reformed. As soon long as the mistake is
of fact and not by law.
2. Art. 1362 when one of the contracting parties was mistaken in good faith and the other
acted fraudulently or inequitably that causes the instrument not to show the true
intention of their agreement. The former may ask the reformation of the instrument.
When through the fault, negligence or bad faith is on the part of a third person for
example the one who is drafting the contract was didn’t express the true intention of
 the parties, then the court may order that the instrument be reformed (Art. 1364). As
stated expressly in Article 1363 that when one of the contracting parties knew or
believed that the written instrument does not state their real agreement, but concealed
the fact from the party who has mistaken in good faith then the instrument may be
reformed. It may only be availed by the party who acted in good faith.

Chapter 5 – Interpretations of Contracts

I. Definitions
1. Interpretation of contract - is the determination of the meaning of the terms or words
used by the parties in their contract.
2. Contract of adhesion - Generally, the terms of a contract result from the material
formulation thereof by the parties thereto. It is, however, of common knowledge that
there are certain contracts almost all the provisions of which have been drafted by only
one party, usually a corporation (e.g., insurance company). Such contracts are called
contracts of adhesion because the only participation of the party is the affi xing of his
signature or his “adhesion’’ thereto. (see Art. 1377.)

II. Discussions
1. If the terms agreed by the contracting parties are clear and leaves no doubt to their
intentions then the agreement shall prevail. If the agreement of the parties are contrary
to the evident intentions of the parties then the latter shall prevail as stated in Art. 1370
2. The one that renders the stipulation valid in order for it to be effectual (Art. 1373). And
words which may have different significations shall be understood in that which is most
in keeping with the nature and object of the contract. (Art. 1375)
3. Various stipulations shall be interpreted together as it will not only cause confusion. In
order to understand the intention all of the stipulations shall be interpreted as a
together. (Art. 1374)

III. Problems
1. No, the problem is if the chair was not yet paid by S then it should not be included in the
sale of the unit. Unless, S already settled it with X then it shall be included. (Art. 1372)
2. The payment to X shall be determined by the rate customarily paid in the place where
the construction happened. (Art. 1376)
3. X was the one who prepared the written contract who could have prevented the
ambiguity shall not in favor him of the interpretation whether it should be P200,000.00
or 6% of the cost of contract. The liability of the other depends upon the choice he will
make. As stated in Art. 1377 that the interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.