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Part 2: CONTRACT DEFINITION, CLASSIFICATION and DISTINCTIONS

[71] Contract, In General: [71.1] Definition: Art. 1305, NCC; Jardine Davies, Inc. v. Court of Appeals, 333 SCRA 684, 692-694. [71.2] Distinguished from conventions: IV Tolentino, Civil Code of the Phil., 1991 ed., p. 406. [71.3] Implied Contract: [71.3.1] Implied contract, defined: Swedish East Asia Co. v. Manila Port Service, 25 SCRA 639 [1968]; see also Pacmac, Inc. v. Vulcan Manufacturing Co., CV-57311, August 12, 1985 [71.3.2] Distinguished from quasi-contract: Suggested Answer to Q No. 8, 1989 Bar, UP Law Center. [71.4] Distinguished from obligation: [71.5] Meeting of the minds: Lustan v. Court of Appeals, 266 SCRA 663,670. [72] Classification of Contracts: [72.1] According to degree of dependence: It is either --[72.1.1] Principal: [72.1.2] Accessory: [72.1.3] Preparatory: Nielsen & Co., Inc. v. Lepanto Consoldiated Mining Co., G.R. No. L-21601, Dec. 28, 1968. [72.2] According to manner of perfection: It is either --[72.2.1] Consensual: example: sale (Dalion v. Court of Appeals, 182 SCRA 872) [72.2.2] Real: Arts. 1316, 1934, 1963, 2093, NCC,

[72.3] According to nature of obligation produced: It is either --[72.3.1] Bilateral: [72.3.2] Unilateral: [72.4] According to their name: It is either --[72.4.1] Nominate (nominado [72.4.2] Innominate (innominado): [72.5] According to cause: It is either ---

[72.5.1] Onerous: see Art. 1350, NCC [72.5.2] Remuneratory: see Art. 1350, NCC [72.5.3] Gratuitous: see Art. 1350, NCC [72.6] According to risk involved: It is either --[72.6.1] Commutative: [72.6.2] Aleatory: see Art. 2010, NCC [72.7] According to requirement of form or solemnity: [72.7.1] Common: [72.7.2] Special or solemn: [72.8] According to purpose: It is either --[72.8.1] [72.8.2] [72.8.3] [72.8.4] To To To To transfer ownership: Such as sale or barter convey the use: Such as commodatum or lease. give security: Such as pledge or mortgage render some service: Such as agency.

[72.9] According to their subject-matter: [72.9.1] Things: Examples are sale, pledge or mortgage. [72.9.2] Services: Such as lease of services or agency. [72.9.3] Rights: Provided they are not personal or intransmissible. [72.10] According to their defects: [72.10.1] [72.10.2] [72.10.3] [72.10.4] [72.10.5] Perfectly valid -- That which is not suffering from any defect. Rescissible (Art. 1380, NCC) Voidable (Art. 1390, NCC) Unenforceable (Art. 1403, NCC) Void or inexistent (Art. 1409, NCC)

CHARACTERISTICS OF CONTRACTS
[73] Characteristics characteristics --1) 2) 3) 4) The The The The of Contracts: Every contract has four (4) fundamental

obligatory force or character of contracts; autonomy of contracts; mutuality of contracts; and relativity of contracts.

[74] Principle of Obligatory Force of Contracts:

[74.1] Statement of the principle: see Art. 1159, NCC [74.2] Consequence: Art. 1315, NCC; Pangilinan v. Court of Appeals, 279 SCRA 590; Esguerra v. Court of Appeals, 267 SCRA 380, 393-394. [74.3] Requisites for application of principle [75] Principle of Autonomy of Contracts: [75.1] Statement of the principle: see Art. 1306, NCC; Gomez v. CA, 340 SCRA 720 (2000). [75.2] Freedom of contract protected: Secs. 1 and 10, Art. III, 1987 Constititution [75.2.1] Due process clause: National Labor Union, Inc. v. The Court of Industrial Relations, G.R. No. L-46598, Oct. 14, 1939; Alalayan v. National Power Corp., G.R. No. L-24396, July 29, 1968; Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary [190 SCRA 673, 684 (1990). [75.2.2] Non-impairment clause: Ortigas & Co. Limited Partnership v. Feati Bank and Trust Co., 94 SCRA 533; Juarez vs. Court of Appeals, 214 SCRA 475, 480; Presley v. Bel-Air Village Association, Inc., 201 SCRA 13, 18-19. [75.3] Limitations on freedom of contract: see Art. 1306, NCC [75.3.1] Law, as limitation: Lakas ng Manggagawang Makabayan (LMM) v. Abierra, 36 SCRA 437, 444, Communication Materials and Design, Inc. v. CA, 260 SCRA 673, 693 [1996]), Chavez v. Presidential Commission on Good Government, 307 SCRA 394, 399. [75.3.2] Public order and public policy: Ollendorff vs. Abrahamson, 38 Phil. 585; IV Tolentino, Civil Code of the Phil., 1991 ed., 415; Philippine Commercial and International Bank v. Court of Appeals, 255 SCRA 299, 307. [76] Principle of Mutuality of Contracts: [76.1] Principle, explained: Allied Banking Corporation vs. Court of Appeals, 284 SCRA 357, 363-364 (1998); Art. 1308, NCC [76.2] Determination of performance by third person: Arts. 1308-1310, NCC [76.3] Contract of adhesion: [76.3.1] Definition: PCIB v. CA, 255 SCRA 299, 306 ; Geraldez v. Court of Appeals, 230 SCRA 320, 330-331 (1994). [76.3.2] Generally valid: see PCIB v. CA, supra. [76.3.3] When invalid: see PCIB v. CA, supra., at 306-307 ; Ermitano v. CA, 306 SCRA 218 (1999) [76.3.4] Unilateral increase of interest rate: PNB v. CA, 196 SCRA 536 (1991); PNB v. CA, 238 SCRA 20 (1994). [76.3.5] Strictly construed: Geraldez v. CA, supra.

[77] Principle of Relativity of Contracts: [77.1] Principle, explained: Art. 1311, NCC; Integrated Packaging Corp. v. Court of Appeals, 333 SCRA 170 (2000); Separate Opinion, J. Vitug in Lagandoan vs. CA, 290 SCRA 330 (1998) [77.2] Contracts generally binding upon heirs: Art. 1311, NCC; DKC Holdings Corporation v. Court of Appeals, 329 SCRA 666, 672 (2000); Eleizegui v. Lawn Tennis Club, 2 Phil. 309, 313 (1903); Carillo v. Salak de Paz, 91 Phil. 265 [1952] [77.2.1] Rule in monetary debts: III Tolentino, Civil Code of the Phil., 1979, p. 776; (Pavia vs. Dela Rosa, 8 Phil. 70; Suiliong & Co. vs. Chio-Taysan, 12 Phil. 13; Centenera vs. Sotto, 78 Phil. 432. [77.3] Exceptions to principle of relativity: The following are the wellrecognized exceptions to the principle of relativity -1) Exceptionally, contract may confer benefits to a third person or what are otherwise known as stipulation pour autrui. (Art. 1311. 2nd par., NCC) 2) In contracts creating real right, third persons who come into possession of the object of the contract may be bound thereby under the provisions of mortgage laws and land registration laws. (Art. 1312, NCC) 3) Creditors are protected in cases of contracts intended to defraud them. (Art. 1313, NCC) 4) Accion directa is allowed by law in certain cases (see Art. 1729, NCC). 5) Any third person who induces another to violate his contract can be made liable for damages to the other contracting party. (Art.1 314, NCC) [77.3.1] Stipulation pour autrui: [77.3.1.1] Concept, explained: Florentino v. Encarnacion, Sr., 79 SCRA 193, 201 (1977); Associated Bank v. CA, 291 SCRA 511 (1998). [77.3.1.2] Requisites: Young v. CA, 169 SCRA 213, 219 (1989). [77.3.1.3] Example: Application of principle ( Mandarin Villa, Inc. vs. Court of Appeals, 257 SCRA 538) [77.3.2] Tort interference: [77.3.4.1] Rule: Art. 1314, NCC [77.3.4.2] Elements of tort interference: So Ping Bun v. CA, 314 SCRA 751 (1999)

[77.3.4.3] Identity of injured party not required: Gilrichst v. Cluddy, 29 Phil. 542

PERFFECTION OF CONTRACTS
[78] Stages of Contracts: Bugatti v. CA, 343 SCRA 335, 346 (2000), citing Ang Yu Asuncion v. CA, 238 SCRA 602 (1994). [79] Perfection of Contracts: [79.1] Concept: Ang Yu Case, at p. 611. [79.2] Manner of perfecting contracts: [79.2.1] Consensual contract: Art. 1315, NCC 79.2.2] Real contract: Art. 1316, NCC

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