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DISCUSSION 1 Precedent – decisions or principles enunciated by a court of competent jurisdiction on a question of law Law by Sanchez Roman do not only serve as...

DISCUSSION 1 Precedent – decisions or principles enunciated by a court of competent jurisdiction on a question of law Law by Sanchez Roman do not only serve as guides but also as authority to be followed by all other courts of equal or inferior - It is a rule of conduct, just and obligatory, jurisdiction in all cases involving the same question laid down by a legitimate authority for until the same is overruled or reversed by superior common observance and benefit. court Elements Customs – have the force of law only when they are acknowledged and approved by society through long and uninterrupted usage A rule of conduct Must be just Court Decision – Judicial decisions which apply or Must be obligatory interpret the Constitution and the laws are part of Must be prescribed by legitimate authority the legal system in the Philippines but they are not Must be ordained for common benefit laws. However, although judicial decisions are not laws, they are evidence of the meaning and Rule of conduct - Serves as guides of an individual in interpretation of laws. relation to his fellowmen and to his community Business Law Just - Laws as guides for human conduct "should run as golden threads through society, to the end that - This pertains to the rules, regulations, and law may approach its supreme ideal which is the legal principles governing businesses and sway and dominance of justice” commercial transactions. Obligatory - If laws are not enforced, the purpose for Marketing Management which they are intended will not be served. - It refers to the process of planning, Prescribed by legitimate authority - If laws are not executing, and controlling and prescribed by legitimate authority, the people could organization’s marketing activities to not be expected to observe them. achieve the company’s/business’ objectives. Common benefit - “Salus Populi Est Suprema Lex” – - It involves the strategic planning and the welfare of the people shall be the supreme law. implementation of marketing strategies, Laws should be applied not only to a particular group tactics, and campaigns to promote products of citizens. They are supposed to be applied equally or services of the company/business to all citizens regardless of their religion, political effectively in the marketplace. persuasion, and status in life Key Aspect Sources of Law 1. Strategic Planning Legislation 2. Market Research Precedent 3. Advertising and Promotion Customs 4. Product and Service Development Court Decision 5. Customer Relation Management Legislation – Congress BUSINESS LAW vis-à-vis MM Business Organizations - Understanding business law is essential for Types: business owners, managers, and professionals to operate within legal 1. Sole Proprietorship boundaries and protect their interest. 2. Partnership 3. Joint Account Obligations (Art. 1156) 4. Business Trust 5. Joint Venture - An obligation is a juridical necessity to give, 6. Cooperative to do or not to do. 7. Corporation Contract (Art. 1305) Sole Proprietorship - “A contract is a meeting of minds between - A person personally conducts business two persons whereby one binds himself, under his name or a business name. The with respect to the other, to give something business is an organization composed of the or to render some service.” proprietor himself and employees but it has no personality separate and distinct from Quasi-Delict (Art. 2176) the proprietor. - Do not possess a juridical personality. - “Whoever by act or omission causes damage to another, there being fault or Juridical Person (Art. 44) negligence is obliged to pay for the damage done, but no contractual relation exists 1. The States and its political divisions between the parties. “ 2. Constituted Corporations, institutions, and - used to designate those obligations which entities for public interest. do not arise from law, contracts, quasi- 3. Corporations, partnerships, and associations contracts or criminal offences for private interest or purpose. Negligence (Art. 1173) Juridical Personality (Art. 46) - “The fault or negligence of the obligor - Juridical persons may acquire and possess consists in the omission of that diligence property of all kinds, as well as incur which is required by the nature of the obligations and bring civil or criminal obligation and corresponds with the actions, in conformity with the laws and circumstances of the persons, of the time regulations of their organization. and of the place.” Juridical Capacity Agency (Art. 1868) - which is the fitness to be the subject of legal - “By the contract of agency, a person binds relations, is inherent in every natural person himself to render some service or to do and is lost only through death. Capacity to something in representation or on behalf of act, which is the power to do acts with legal another, with the consent of the latter.” effect, is acquired and may be lost. Partnership (Art. 1767) Joint Venture - “By the contract of partnership, two or - An association of persons or companies more person binds themselves to contribute jointly undertaking some commercial money, properties, or industry to a common enterprise; generally all contribute assets fund, with the interest of dividing the profit and share risks among themselves.” Art. 1767 - A. A joint venture is actually a form of - Two or more persons may also form a partnership and should be governed by the partnership for the exercise of a profession. laws of partnership - B. Corporations can enter into joint venture Joint Accounts agreement - C. Joint venture may result in a formation of - An arrangement whereby merchants may joint venture corporation interest themselves in the transaction of other merchants, contributing thereto the Cooperatives amount of capital they may agree upon, and participating in the favorable and - is an autonomous and duly registered unfavorable results thereof in the association of persons with a common bond proportion they may determine. of interest, who have voluntarily joined - This is commonly called an accidental together to achieve their social, economic, partnership. and cultural needs and aspirations by making equitable contributions to the Joint Account vs. Partnership capital required, patronizing their products and services and accepting a fair share of As to juridical personality. A joint account the risks and benefits of the undertaking in has no juridical personality while a accordance with universally accepted partnership has a personality separate and cooperative principles. distinct from the partners. As to business name. No commercial name Corporation (RA. 11232 RCC) common to all participants can be adopted in joint accounts. A partnership can adopt a - “an artificial being created by operation of partnership name law, having the right of succession and the As to management. The general partners powers, attributes and properties expressly are all managers in the partnership while authorized by law or incident to its only the ostensible partner manages and existence.” transacts business in his own name and under his individual liability. DISCUSSION 2 Business Trust OBLIGATION - It is a legal relation whereby one person, Article 1156, NCC – An obligation is a called the trustor, conveys a property to juridical necessity to give, to do or not to another for the benefit of a person called do. the beneficiary. The person in whom “An obligation is a juridical relation whereby confidence is reposed as regards the a person (called the creditor) may demand property is called the trustee. from another (called the debtor), the observance of a determinate conduct (the giving, doing, or not doing), and in case of  breach, may demand the satisfaction from Duty to pay taxes the assets of the latter” (Arias Ramos). CONTRACTS JURIDICAL NECESSITY Obligations arising from contracts have the It is a juridical necessity because in case of force of law between the contracting parties noncompliance, the courts of justice may be and should be complied with in good faith. called upon to force its fulfillment or in (Art. 1159, NCC) default thereof, the economic value that it Once a contract is entered into, the parties represents. are bound by its terms and cannot, without valid reason withdraw therefrom ESSENTIAL ELEMENTS OF OBLIGATION QUASI-CONTRACTS Active subject (creditor or obligee)- The person in whose favor the obligation is constituted or the one Obligations arising from quasi-contracts who can demand the performance of the obligation shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code Passive subject (debtor/obligor)- The person who is required to perform the obligation. Nominate quasi-contracts Passive subject (debtor/obligor)- The person who is Negotiorum gestio required to perform the obligation. Whoever voluntary takes charge of the Vinculum juris/Efficient Cause/Juridical Tie- The agency or management of the business and reason why the obligation exists which can be any of property of another, without any power the five (5) sources of obligation from the latter, is obliged to continue the same until the termination of the affair and EXAMPLE: its incidents, or to require the person Through an agreement, Camilla promised to give an concerned to substitute him, if the owner is iPhone 15 to Michelle. in a position to do so. This juridical relation does NOT arise in either of these instances. Debtor/obligor Camilla This juridical relation does NOT arise in Creditor/obligee Michelle either of these instances: Prestation giving the iPhone 15 Efficient cause agreement or contract 1. When the property or business is not neglected or abandoned; SOURCES OF OBLIGATION: Article 1157, NCC 2. If in fact the manager has been tacitly LAW authorized by the owner (Article 2144, NCC) Obligations arising from law are those Solutio indebiti expressly provided in the New Civil Code or in special laws. These are demandable. the juridical relation which is created when (Art.1158, NCC) something is received when there is no right to demand it and it was unduly Examples: delivered through mistake. Duty of support Requisites: Article 104. What is included in civil liability – The civil liability established in Articles There is no right to receive the thing 100, 101, 102, and 103 of this Code delivered includes: The thing is delivered through mistake A. Restitution; B. Reparation of the damage caused; Innominate quasi-contracts C. Indemnification for consequential damages When funeral expenses are borne by a third Proof necessary: person, without the knowledge of those relatives who were obliged to give support Criminal liability – proof beyond reasonable to the deceased, said relatives shall doubt reimburse the third person, should the Civil liability – preponderance of evidence latter claim reimbursement. (Article 2165, NCC) Acquittal of accused: ACTS OR OMISSIONS PUNISHED BY LAW A. Acquittal because accused did not do the act complained of – no civil liability Obligations arising from criminal offenses B. Acquittal due to reasonable doubt – there are governed by penal laws subject to the can still be civil liability provisions of Article 2177 and of the pertinent provisions of Chapter 2, QUASI-DELICTS Preliminary Title on Human Relations, Title XVII of the New Civil Code. Whoever by act or omission causes damage Article 2177, NCC. Responsibility for fault to another, there being fault or negligence, and negligence under the preceding article is obliged to pay for the damage done. Such is entirely separate and distinct from the fault or negligence, if there is no pre- civil liability arising from negligence under existing contractual relation between the the Revised Penal Code. But the plaintiff parties, is called a quasi-delict and is cannot recover damages twice for the same governed by the provisions of this chapter. – act or omission of the defendant. Article 2176, New Civil Code of the Philippines Delict is used to designate those obligations which do not arise from law, contracts, quasi- is an act or omission punishable by law contracts or criminal offences. The concept which may be governed by the Revised of liability in quasi-delictual cases is Penal Code, other penal laws, or the Title on embodied in Chapter 2, Title XVII of the Civil Human Relations under the New Civil Code. Code. Article 100. Civil liability of a person guilty of felony – Every person criminally liable for Requisites: a felony is also civilly liable. Under the Revised Rules of Court, A. There must be an act or omission; whenever a criminal action is instituted, the B. There must be fault or negligence; civil action is impliedly instituted therewith. C. There must be damage caused; D. There must be a direct relation of cause and Revised Penal Code: effect between the act or omission and the damage EXAMPLE: The obligation to give a determinate thing includes the obligation to deliver all its While driving recklessly, Jonathan hit Dixie accessions and accessories, even though Jan and the latter was injured. they may not have been mentioned. (Article 1166, NCC) Requisites: Q: When is a thing specific or determinate and when A. There must be an act or omission – driving is it generic or indeterminate? recklessly; B. There must be fault or negligence – there A: A thing is specific or determinate when it is was negligence since the required degree capable of particular designation. A thing is generic of care was not met; or indeterminate when it refers to a class, and C. There must be damage caused – there was cannot be pointed out with the particularity. damage to the Dixie Jan who was injured; D. There must be a direct relation of cause A thing is specific or determinate when it is capable and effect between the act or omission of particular designation. and the damage – the cause of the damage was the recklessly driving of the Jonathan Example: This Toyota Avanza Veloz Car with Plate No. NCV 7290. Vicarious Liability: A thing is generic or indeterminate when it refers to Article 2180. The obligation imposed by a class, and cannot be pointed out with the article 2176 is demandable not only for particularity. one’s own acts or omissions, but also for those of persons for whom — one is Example: A house responsible. EFFECT OF OBLIGATION TO DELIVER A SPECIFIC NATURE AND EFFECTS OF OBLIGATIONS: THING AND A GENERIC THING From the viewpoint of the subject matter of the There is a great difference. obligation, it may either be: General Rule: Real Obligation to give a specific thing or to give a generic thing; or The obligation to deliver a specific thing is Personal Obligation to do or not to do. extinguished by a fortuitous event. OBLIGATION OF A PERSON OBLIGED TO GIVE Fortuitous Event SOMETHING is an event which cannot be foreseen, or A person obliged to give something has the which, although foreseeable, are inevitable. following obligation: He is obliged to take care of it with the To constitute a fortuitous event, the following proper diligence of a good father of a family, elements must concur: EXCEPT if the law or stipulation of the parties requires another standard of care. A. the cause of the unforeseen and (Article 1163, NCC) unexpected occurrence or of the failure of the debtor to comply with obligations must OBLIGATION TO GIVE A DETERMINATE THING be independent of human will;  B. it must be impossible to foresee the event If a person obliged to do something fails to do it, or if that constitutes the caso fortuito or, if it can he does it in contravention of the tenor of the be foreseen, it must be impossible to avoid; obligation, the effects are as follows: C. the occurrence must be such as to render it impossible for the debtor to fulfill A. The obligation shall be executed at his cost obligations in a normal manner; and, (debtor's cost); D. the obligor must be free from any B. It may be decreed that what has been participation in the aggravation of the injury poorly done be undone. (Article 1167, NCC) or loss. EFFECTS OF OBLIGATION NOT TO DO: Note: If the obligation consist in not doing, and Caso fortuito is a fortuitous event the obligor does what has been forbidden independent of the will of the obligor but him, it shall be undone at his expense. not of other human wills. Example of this (Article 1168, NCC) are war, fire, robbery, and murder while force majeure are events which are totally DEBTOR IS IN DEFAULT FROM THE TIME OF independent of the will of every human DEMAND being. The term generally applies to a natural accident. Example of this are Those obliged to deliver or to do something earthquake, lightning, and volcanic are in default from the time of demand, eruption. judicial or extrajudicial. Without this demand, the debtor is not in default. EFFECT OF OBLIGATION TO DELIVER A SPECIFIC THING AND A GENERIC THING Exceptions: In the following instances, however, demand is not needed: A. When expressly provided by law; B. When expressly agreed upon by the parties; When the obligation expressly so provides; C. When the nature of the obligation requires When the law expressly so provides; the assumption of risk. (Art. 1174, NCC) When the time of essence of the contract; D. The debtor is guilty of dolo, malice or bad When demand would be useless, as when faith, has promised the same thing to two the obligor has rendered it beyond his or more persons who does not have the power to perform (Article 1169, NCC) same interest E. The debtor contributed to the loss (Tan v. EFFECT IS THERE IS FRAUD, NEGLIGENCE OR DELAY Inchausti & Co., G.R. No. L-6472, Mar. 7, 1912) Those who in the performance of their F. The possessor is in bad faith G. The obligor is guilty of fraud, negligence or obligations are guilty of fraud, negligence or delay or if he contravened the tenor of the delay, and those who in any matter obligation (Juan Nakpil v. United contravene the tenor thereof, ARE LIABLE Construction Co., Inc. v. CA, G.R. No. L- FOR DAMAGES 47851, Apr. 15, 1988) REMEDIES FOR BREACH OF DELAY: The obligation to deliver a generic thing is NOT extinguished by fortuitous events. OBLIGATIONS TO GIVE EFFECTS OF OBLIGATIONS:  Determinate thing-specific performance KINDS OF DAMAGES: only if it is legally and physically possible. Substitute performance is not possible. A. Moral Damages – for moral anguish, Generic thing-specific or substitute besmirched reputation, sleepless nights, performance. The creditor can have another serious anxiety, etc. person to have such kind of thing be B. Exemplary Damages – to deter others from delivered at the cost of the debtor plus committing the same act. damages. C. Nominal Damages – to vindicate a right. The assessment of nominal damages is left OBLIGATIONS TO DO to the discretion of the court. D. Temperate Damages – when the exact Substitute performance only, since forcing amount of the damages cannot be the obligor to comply would violate the determined. constitutional prohibition against E. Actual Damages – to compensate the involuntary servitude. aggrieved party for actual losses suffered. F. Liquidated Damages – damages agreed OBLIGATIONS NOT TO DO upon by the parties. and the obligor does it, the creditor may RESPONSIBILITY ARISING FROM FRAUD (DOLO) have it undone at the expense of the debtor. A. It is demandable in all obligations. Any waiver of an action for future fraud is void. REMEDIES FOR BREACH OF DELAY: (Article 1171, NCC) B. Liability due to fraud cannot be reduced by the courts. SPECIFIC PERFORMANCE C. There is deliberate intention to cause damage. is an equitable remedy where the court orders the breaching party to fulfil its RESPONSIBILITY ARISING FROM NEGLIGENCE obligations under the terms of the contract. (CULPA) This could include requiring the defendant to deliver the goods or services promised in the agreement; A. It is also demandable but such liability may be regulated by the courts according to the circumstances. SUBSTITUTE PERFORMANCE B. It can be reduced in certain cases. C. There is no deliberate intention to the case means the obligation will be performed by a damage. third party at the expense of the defaulting party; also known as “right to cover”, it KINDS OF OBLIGATION: ensures that the aggrieved party can obtain performance of a contract from a third Pure obligation vs. conditional obligation party in case of non-performance (inability or breach) by the counterparty who fails to perform and the right to recover the Pure obligation consequent loss suffered by the performing party. it is an obligation without a condition or a term and therefore, it is demandable at once. I promise to pay you PhP100,000.00 upon demand. Conditional obligation – it is one with condition in a joint obligation, an obligor answers only for a part of the entire liability. I will give a car to you if you pass the CPA X and Y borrowed PhP1,000.00 from A and board examinations this year. In this it is agreed that they are joint debtors of A. example, the condition is a suspensive one X will only be liable to pay PhP500.00. This because the giving of the car depends on is because they are joint debtors. the results of the examination to be given this 2023. Solidary obligation I will give you my car today but if you fail in CPA board examinations to be given this where both or all of the debtors can be held year, I will be the owner of the car again. In liable for the whole liability they have this example, the condition is a resolutory incurred. one because the happening of the condition X and Y borrowed PhP1,000.00 from A and extinguishes the obligation. it is agreed that they are solidary debtors. X can be held liable for the whole Alternative vs. facultative obligation PhP1,000.00 and so is Y. The creditor can run against both or against any one of them Alternative obligation because they are solidary debtors. it is one where out of the two or more Divisible obligation vs. indivisible obligation prestations which will be given, only one is due. Divisible obligation EXAMPLE: a divisible obligation is an obligation which is capable of partial performance. I will give you any of the following: My 24 A agreed to deliver 500 kilos of rice to B. karat gold right worth 1M or my Avanza Here, the subject matter is capable of 2020 model, worth 1M, or my residential lot partial performance in the sense that the in the province worth 1M. In this example, I parties may agree that A will deliver 250 can give any of the three properties I have kilos of rice today and another 250 kilos of mentioned and if give one of them, I have rice tomorrow. complied with the obligation. Indivisible obligation Facultative obligation an obligation which is not capable of partial it is one where only one prestation has been performance. agreed upon but the obligor may render A agreed to deliver Toyota Fortuner. Here, another in substitution the subject matter is not capable of partial I promise to give my niece my 14 karat gold performance because the car cannot be ring worth P60,000.00 but it is agreed that I divided into two. could give her a secondhand car with the same value as substitute Obligation with penal cause Joint obligation vs. solidary obligation in obligations with a penal clause, the penalty shall substitute the indemnity for Joint obligation the damages and payment of interest in case of non-compliance. EXAMPLE: Essential Elements 1. Consent X agreed to finish the painting job of 2. Subject Matter/Object the CBM Building within 60 days. It was 3. Consideration/Cause stipulated that in case of delay, X will be liable to pay a penalty of PhP1,000.00 Natural Elements per day of delay, if it turns out therefore that X fails to finish the Unless otherwise stipulated, these elements painting job within the 60 days and it are presumed to exist. In a contract of sale, was only on the 65th day that he warranty against eviction and warranty finished the job, X will be liable to pay a against hidden defects are presumed to penalty of P5,000.00. exist. EXTINGUISHMENT OF OBLIGATIONS: Accidental Elements Obligations are extinguished by any of Those agreed upon by the parties like the following reasons: agreement to pay in five equal installments; stipulation for interest. Article 1231, NCC. Obligations are extinguished: Stages of a Contract A. By payment or performance; 1. Negotiation (Preparation or Conception) - B. By the loss of the thing due; Here is where the parties provide for their C. By the condonation or remission of the offers and bargain with each other debt; 2. Perfection - When the parties have already D. By the confusion or merger of the rights of came to a definite agreement and all the creditor and debtor; essential elements are present; this includes E. By compensation; form and delivery in some. F. By novation. 3. Consummation (Termination) - the terms of the contract have already been performed. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory WHEN IS A CONTRACT PERFECTED? condition, and prescription, are governed elsewhere in the Code. Consensual contract like sale is perfected by mere consent. (Art. 1315, NCC) DISCUSSION 3 Real contract like pledge is perfected by delivery of the thing pledged. (Art. 1316, Contract (Art. 1305) NCC) A formal contract like donation of a parcel A contract is a meeting of minds between of land where a subdivision chapel shall be two persons whereby one binds himself, built requires a public instrument. (Art. 749, with respect to the other, to give something NCC) or to render some service. CAN THE CONTRACTING PARTIES AGREE ON ANY Elements of a Contract TERM OR CONDITION? 1. Essential Elements 2. Natural Elements Answer: Yes, provided they are not contrary to law, 3. Accidental Elements morals, good customs, public order or public policy. The contracting parties may establish such If incapacity pertains to capacity to act stipulations, clauses, terms and conditions as they (legal capacity), it can be: may deem convenient, provided they are not contrary to law, morals, good customs, public order, 1. Absolute incapacity – the party cannot or public policy. (Art. 1306, NCC) give consent in any contract, with anyone, in whatever capacity, over Law - Agreement to pay a rate of interest higher than anything that imposed by law is void. Unemancipated minors Morals - Promise to marry based on a carnal Insane or demented persons consideration is immoral. (except if consent is given during lucid interval) Good customs - Agreement between a man and a Deaf-mutes who do not know how woman, both between 18 and 21 years old, not to to write; and seek parental consent is unlawful and contrary to Drunks or hypnotized good customs. 2. Relative incapacity – a person may be Public order - Agreement to have a live performance prohibited from entering specific of nude dancers in Plaza Miranda is contrary to contracts or that in a contract, he may morals, public order and public policy. be prohibited in a certain capacity, ex., prohibited to be the buyer, or to Public policy - Agreement exempting a public utility specific things, or to specific persons. bus operator and the driver from liability in case of accident arising from gross negligence is contrary to An alien (foreigner) is prohibited law and public policy. under the Constitution from acquiring private lands EXCEPT Essential Elements when acquired through (1) succession; or 1. Consent of the Contracting Parties (2) sale of residential land to a former natural born Filipino Consent - the meeting of the offer and the citizen. acceptance upon the thing and the cause which Husbands and wives cannot enter are to constitute the contract. into a contract of sale, unless they agreed to a Separation of Property Situations Concerning Consent of The Parties: marital property regime or they a. Both parties gave their consent as to the have been legally separated. essential elements of the contract – the contract is valid Valid, Void & Defective Contracts b. Incapacity of one of the parties Kinds of CAPACITY: Valid – all the essential elements of a contract are 1. Juridical capacity – is the fitness to be present (Consent, Subject/Object Matter, subject of legal relations which is Consideration/Cause) inherent in every natural person and is lost only through death Void/Inexistent – are those which are either 2. Capacity to act (legal capacity) – is the inexistent (as when the required formalities are not power to do acts with legal effect which complied with for its perfection, which produces no is acquired and may be lost. legal effect), or illegal or illicit; cannot be enforced by Note: If incapacity pertains to juridical law capacity, the contract is void. Voidable – are those which are valid until they have been annulled by proper action in court. However, they are likewise subject to ratification to cure the defect. Unenforceable – are those which have no effect until they are ratified. Essential Elements Situations Concerning Consent of The Parties: 2. Subject Matter/Object c. Both are incapacitated – the contract is unenforceable Object certain which is the subject matter – is really to create or to end obligations, d. Both parties gave their consent, but such which, in turn, may involve things, rights or consent was vitiated services. Requisites: 1. The thing, right or service must be within the commerce of man; 2. It must be transmissible; 3. It must not be contrary to law, morals, good customs, public order or public policy; 4. It must not be impossible; VICES OF CONSENT would render the contract 5. It must be determinate as to its kind or voidable determinable without the need of a new contract or agreement. a. Mistake - blunder; error; a wrong action from proceeding from faulty judgment, inadequate knowledge, or inattention Essential Elements b. Violence – when in order to wrest consent, 3. Consideration/Cause serious or irresistible force is employed c. Intimidation – when one of the contracting Cause/consideration – is the essential or parties is compelled by a reasonable and impelling reason why a party assumes an well-grounded fear of an imminent and obligation. grave evil upon his person or property, or upon the person or property of his spouse, a. Onerous – for each contracting party, descendants or ascendants, to give his the prestation or promise of a thing or consent service by the other d. Undue influence – when a person takes b. Gratuitous – mere liberality of the improper advantage of his power over the benefactor will of another, depriving the latter of a c. Remuneratory – service or benefit reasonable freedom of choice already rendered e. Fraud – when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a Other Essential Elements contract which, without them, he would not In some cases, delivery is required for the perfection have agreed to of contract; in others, there are formal requirements. Real contracts are those perfected by delivery, thus, 2. The cession/transfer of actions or rights delivery is an essential element to its perfection. proceeding from an act appearing in a public document Real contracts include: Deposit Principles of Contracts (C-A-M-O-R) Pledge 1. Consensuality Commodatum - the lender delivers to the 2. Autonomy borrower a non-consumable thing so that 3. Mutuality the borrower may use it for a certain time 4. Obligatory force and return the identical thing 5. Relativity/privity Loan or Mutuum 1. Consensuality - As a rule, contracts are perfected by mere Forms of Contract consent; save for some cases where delivery or form is required for its perfection General rule: No form is required for the validity or perfection of a contract. 2. Autonomy (freedom or liberty to contract) - The parties to a contract may stipulate on Exceptions: anything provided that the terms and Formalities required for VALIDITY conditions they have agreed is not contrary 1. Donations of real property which requires a to the law, morals, good customs, public public instrument order, and public policy. (Art. 1306, NCC) 2. Donations of personal property which exceeds PhP5,000.00 which requires that 3. Mutuality the donation be written - The contract must bind both contracting 3. Stipulation to pay interests on loans or for parties; its validity or compliance cannot be the use of money, which must be in writing left to the will of one of them. This principle 4. Sale or transfer of large cattle which stresses that both parties are bound. The requires that it be in a public instrument, principle is based on the essential equality registered and that there should be a of the parties as it would be unfair if it is certificate of transfer binding on one party and yet leave the 5. Contribution of real property in a other free. partnership, which requires that there be an inventory attached to a public instrument 4. Obligatory force - Obligations arising from contract have the Formalities required for ENFORCEABILITY force of law between the contracting parties (Statute of Frauds) and should be complied with in good faith. - Contracts are obligatory in whatever form Formalities required for CONVENIENCE they may have been entered into, provided that all the requisites for their validity are To bind third persons, the following are required present. If a certain form is required by the to appear in a public instrument: law, that requirement is absolute and indispensable. (Art. 1356, NCC) 1. Sales of real property or interest therein governed by the Statute of Frauds 5. Relativity/privity - As a rule, a contract takes effect only as between the parties, their assigns and heirs subject to the following exceptions:  Except in the case where the rights and perfection, which produces no legal effect), obligations arising from the contracts are or illegal or illicit; cannot be enforced by law not transmissible by their nature or by 3. RESCISSIBLE – (Article 1381, NCC) stipulation and by provision of law (Art. 4. VOIDABLE – are those which are valid until 1311, NCC); and they have been annulled by proper action in Except where there is a stipulation in favor court. However, they are likewise subject to to a third person ratification to cure the defect. 5. UNENFORCEABLE – are those which have CLASSIFICATION OF CONTRACTS no effect until they are ratified According To Degree of Dependence Void/Inexistent - are those which are either inexistent (as when the required formalities are not a. PRINCIPAL – a contract which can stand on complied with for its perfection, which produces no its own, such as a contract of sale, barter, legal effect), or illegal or illicit; cannot be enforced by lease, loan law b. ACCESSORY – those which cannot stand on its own and are dependent upon other ILLUSTRATION: X, believing A (government contracts for its validity, e.g., guaranty, employee) had authority to sell a particular land, suretyship, mortgage bought the same for PhP1,000,000.00 c. PREPARATORY – a contract is a means to achieving an end, such as an option Voidable – are those which are valid until they have contract, contract of partnership and been annulled by proper action in court. However, contract of agency they are likewise subject to ratification to cure the defect. According To Perfection a. CONSENSUAL – are those perfected by ILLUSTRATION: X, a minor, leased his land to L. In this mere consent case, the contract is voidable. However, if after b. REAL – those which are perfected only upon reaching the age of majority, X continued to receive delivery of the thing subject of the contract rental payments, he is deemed to have ratified the voidable contract. (deposit, pledge, commodatum and mutuum) c. FORMAL – those which require a certain Unenforceable – are those which have no effect until form for its validity they are ratified According To Parties Obliged ILLUSTRATION: A, without the authority of his father, sold the latter’s car to X. In this case, the contract is a. BILATERAL – where both parties are unenforceable as to the father of A, who gave no reciprocally obligated (lease and sale) authority to A to sell the car on his behalf b. UNILATERAL – only one party is obliged (guaranty and pledge) Valid, Void & Defective Contracts 1. VALID – all the essential elements of a contract are present 2. VOID/INEXISTENT – are those which are either inexistent (as when the required formalities are not complied with for its