Law on obligations and contracts PowerPoint presentation

Contracts

1. Contract Atty. Kara Jo Aiza R. Modina

2. What is CONTRACT? 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.

3. BASIC PRINCIPLES OF A CONTRACT

4. Basic Principles of a Contract Freedom (or liberty) to Stipulate Mutuality of Contract Relativity of Contract Consensuality of Contract Obligatory Force and Compliance in Good Faith

5. I. Freedom to STIPULATE 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.

6. I. Freedom to STIPULATE LIMITATIONS ON THE NATURE OF THE STIPULATION: Law Morals Good customs Public order Public policy

7. II. MUTUALITY of Contract Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

8. II. MUTUALITY of Contract Reciprocity Binding to both parties A party cannot revoke or renounce a contract without the consent of the other, nor can it have it set aside on the ground that he had made a bad bargain.

9. III. RELATIVITY of Contract 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 fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

10. III. RELATIVITY of Contract GENERAL RULE: Contracts take effect only between the parties, their assigns and their heirs. A contract can only bind the parties who had entered into it or their successors who assumed their personalities or their juridical positions, and that, as a consequence, such contract can neither favor nor prejudice a third person.

11. III. RELATIVITY of Contract Exception: (when strangers can be bound to the contract): STIPULATION POUR AUTRUI CONTRACTS INTENDED TO DEFRAUD CREDITORS INSTIGATION BY A 3RD PERSON

12. III. RELATIVITY of Contract Exception: (when strangers can be bound to the contract): STIPULATION POUR AUTRUI CONTRACTS INTENDED TO DEFRAUD CREDITORS INSTIGATION BY A 3RD PERSON

13. III. RELATIVITY of Contract STIPULATION POUR AUTRUI “ 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 .” (Par.2 Art. 1311) Stipulation in favor of a third person

14. III . RELATIVITY of Contract STIPULATION POUR AUTRUI Example: D purchased C’s land for Php10,000,000.00. It was also agreed that only Php8,000,000.00 would be given to C, because the remaining Php2,000,000 would be given by D to X, a creditor of C. If X communicates his acceptance of the stipulation to D, X can demand its fulfillment. Insurance taken by a PUV company in favor of its passengers.

15. III . RELATIVITY of Contract STIPULATION POUR AUTRUI Requisites: There must be a stipulation in favor of a third person. The stipulation must be a part, not the whole of the contract. The contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest. The third person must have communicated his acceptance to the obligor before its revocation. Neither of the contracting parties bears the legal representation or authorization of the third party.

16. III . RELATIVITY of Contract CONTRACTS INTENDED TO DEFRAUD CREDITORS “Art . 1313. Creditors are protected in cases of contracts intended to defraud them .”

17. III . RELATIVITY of Contract CONTRACTS INTENDED TO DEFRAUD CREDITORS Example: If A gratuitously gives B a parcel of land, and A has no other property or cash left to satisfy his creditors, said creditors may ask for the rescission of the contract, to the extent that they have been prejudiced.

18. III . RELATIVITY of Contract INSTIGATION BY A THIRD PERSON “Art . 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party .”

19. III. RELATIVITY of Contract INSTIGATION BY A THIRD PERSON This is an instance when a stranger to a contract can be sued in view of unwarranted interference. Whoever is injured may properly sue for damages.

20. III. RELATIVITY of Contract INSTIGATION BY A THIRD PERSON Example: S, a movie actress, has a one-year contract with XYZ Studio. If F, a friend of S induces her, without justifiable cause, to break the contract, then XYZ Studio can sue F for damages.

21. IV.CONSENSUALITY of Contract Art. 1315. 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.

22. IV.CONSENSUALITY of Contract How contracts are PERFECTED? CONSENSUAL CONTRACTS By mere consent Ex. Contract of Sale REAL CONTRACTS Perfected by delivery Ex. Contract of pledge FORMAL/SOLEMN CONTRACTS Perfected only upon compliance of the special form required Ex. Donation of a real property.

23. IV.CONSENSUALITY of Contract How contracts are PERFECTED? CONSENSUAL CONTRACTS By mere consent Ex. Contract of Sale REAL CONTRACTS ( Art . 1316 .) Perfected by delivery Ex. Contract of pledge FORMAL/SOLEMN CONTRACTS Perfected only upon compliance of the special form required Ex. Donation of a real property.

24. V. Obligatory Force and Compliance in Good Faith Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.