MARY ROSE D.

LOSIS BS
Accountancy 1

Chapter 1: GENERAL PROVISIONS

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. (1254a).
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. (1255a)
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. (n)
Classification of contracts according to its name or designation.
(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.
ART. 1308. The contracts must bind both contracting parties; its validity or compliance cannot be left
to the will of one of them. (1256a)
ART. 1309. The determination of the performance may be left to a third person, whose decision shall
not be binding until it has been made known to both contracting parties. (n
ART. 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. (n)
ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the value of the property he received
from the decedent. If a contract should contain some stipulation in favor of a third person, he may
demand its fulfi llment provided he communicated his acceptance to the obligor before its revocation.
A mere incidental benefi t or interest of a person is not suffi cient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person
ART. 1312. In contracts creating real rights, third persons who 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.19 (n
ART. 1313. Creditors are protected in cases of contracts intended to defraud them. (n)
ART. 1314. Any third person who induces another to violate his contract shall be liable for damages
to the other contracting party.
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfi llment 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. (1258)
ART. 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the
delivery of the object of the obligation. (n)
ART. 1317. No one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him. A contract entered into in the name of another by one
who has no authority or legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratifi ed, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party. (1259a)
Chapter 2: ESSENTIAL REQUISITES OF CONTRACT
ART. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)
SECTION 1: CONSENT
ART. 1319. 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 qualifi ed acceptance constitutes a counter-offer. Acceptance made by letter or telegram
does not bind the offerer except from the time it came to his knowledge. The contract, in such a case,
is presumed to have been entered into in the place where the offer was made. (1262a)
SECTION 2: OBJECT OF CONTRACTS
ART. 1347. All things which are not outside the commerce of men, including future things,
may be the object of a contract. All rights which are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized
by law.
All services which are not contrary to law, morals, good customs, public order or public policy
may likewise be the object of a contract. (1271a)
ART. 1348. Impossible things or services cannot be the object of contracts. (1272)
Concept of object of a contract. The object of a contract is its subject matter. (Art. 1318[2].)
In reality, the object of every contract is the obligation created. But since a contract cannot
exist without an obligation, it may be said that the thing, service, or right which is the object of the
obligation is also the object of the contract. (2 Castan 9.)
SECTION 3: CAUSE OF CONTRACTS
ART. 1350. In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefi t
which is remunerated; and in contracts of pure benefi cence, the mere liberality of the benefactor.
(1274)
Meaning of cause. 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.

CHAPTER 3: FORMS OF CONTRACTS

ART. 1356. Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the law requires that
a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in
a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties
stated in the following article cannot be exercised. (1278a)
The form of a contract refers to the manner in which a contract is executed or manifested.

CHAPTER 4: REFORMATION OF INSTRUMENTS

ART. 1359. When, there having been a meeting of the minds of the parties to a contract, their true
intention is not expressed in the instrument purporting to embody the agreement, by reason of
mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the
instrument to the end that such true intention may be expressed. If mistake, fraud, inequitable
conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not
reformation of the instrument but annulment of the contract.
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.

CHAPTER 5: INTERPRETATION OF CONTRACTS

Interpretation of a contract is the determination of the meaning of the terms or words used by the
parties in their contract. Determining the intent of the parties is usually what courts say it is when they
interpret a contract’s language in particular cases.
ART. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. If the words appear to be
contrary to the evident intention of the parties, the latter shall prevail over the former. (128

CHAPTER 6: RESCISSIBLE CONTRACTS

ART. 1380. Contracts validly agreed upon may be rescinded in the cases established by law. (1290)
Rescissible contracts are those validly agreed upon because all the essential elements exist and,
therefore, legally effective, but in the cases established by law, the remedy of rescission is granted in
the interest of equity.

CHAPTER 7: VIODABLE CONTRACTS

ART. 1390. The following contracts are voidable or annullable, even though there may have been no
damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or
fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are
susceptible of ratification. (n)
Voidable or annullable contracts are those which possess all the essential requisites of a valid
contract but one of the parties is legally incapable of giving consent, or consent is vitiated by mistake,
violence, intimidation, undue influence, or fraud.1