General Provisions: (Articles 1305 to 1317) 1.

A contract is a meeting of minds: Article 13051

Jardine Davies vs. CA, 333 SCRA 684

Bidding, implied acceptance perfection of contract Pure Foods Corporation, to remedy and curtail further losses due to the series of power failures, decided to install two 1500KW generators in its food processing plant in San Roque, Marikina City In 1992, it conducted a bidding for the supply and installation of the generators and out of the eight bidders who attended the prebidding conference, only three bidders submitted their bid proposals and gave bonds equivalent to 5% of their respective bids as required. In December that same year, PUREFOODS confirmed the award of the contract to FEMSCO o This will confirm that Pure Foods Corp. has awarded to your firm the projectpayable by progress billing with 10% retentionretained amount shall be released 30 days after the acceptance of the completed project and upon posting of the guarantee bond equivalent to 20% of the contract price. o Once finalized, we shall ask you to sign the formal contract embodying the foregoing terms and conditions FEMSCO submitted the required performance bond and the contractors all-risk insurance policy which PUREFOODS, through its VP acknowledged in a letter sent to FEMSCO. FEMSCO also made arrangements with its principal and started the PUREFOODS project by purchasing the necessary materials. PUREFOODS returned to FEMSCO the bidders bond as requested Subsequently, PUREFOODS, through its Senior VP unilaterally cancelled the award as significant factors were uncovered which warranted them a total review of the project FEMSCO protested the cancellation of the award and sought a meeting with PUREFOODS, however, even before the matter is to be resolved, PUREFOODS already awarded the project and entered into a contract with JARDINE which incidentally was not one of the bidders. FEMSCO now comes to court asking PUREFOODS to honor its contract and for JARDINE to cease and desist from delivering and installing the two generators at PUREFOODS. Trial Court rendered a decision in favour of FEMSCO

CA also rendered a decision affirming the trial courts decision PUREFOODS contend that its letter to FEMSCO was not an acceptance of the proposal but a mere qualified acceptance which required FEMSCOs express conforme and since PUREFOODS never received a conforme, it is very well within reason to revoke its counter-offer. Hence no contract was perfected between PUREFOODS AND FEMSCO

DID A PERFECTED CONTRACT EXIST BETWEEN PUREFOODS AND FEMSCO? ASSUMING THERE WAS A PERFECTED CONTRACT, IS THERE ANY SHOWING THAT JARDINE INDUCED OR CONNIVED WITH PUREFOODS TO VIOLATE ITS CONTRACT WITH FEMSCO? SC RULED: On contracts o A contract is a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favour of another or others, or reciprocally, to the fulfilment of a prestation to give, to do or not to do. o Requisites of a contract: Consent of contracting parties Object certain which is the subject matter of the contract Cause of the obligation which is established o Acceptance may be expressed or implied Art 13262 of the Code applies Terms and Conditions of the Bidding advertisement Bid proposals offers Reply of PUREFOODS acceptance of offer Even assuming that the letter constituted a conditional counter-offer, the acceptance of PUREFOODS of the performance bond and the insurance constituted an implied acceptance of FEMSCO to PUREFOODS counter-proposal and accordingly, at this point the contract was PERFECTED. On third party inducement o Article 13143 allows for awarding of damages in cases where a third party induces the party to a contract to violate the same.

Article 1305 A contract is a meeting of the mind between two persons whereby one binds himself, with respect to the other, to give something or to render some service

Article 1326 Advertisements for bidders are simply invitations to make proposals
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There is no showing of specific evidence to warrant FEMSCOs claim that JARDINE induced PUREFOODS to violate the contract therefore JARDINE is not liable to pay FEMSCO damages.

The Court finds nothing immoral nor illegal with the stipulation

Manila Bay Club vs. CA, 245 S 715

Lease, breach of insurance clause, right to unilateral cancellation, not contrary to law..etc A ten-year lease contract was entered into by the Sabenianos and herein petitioner Manila Bay Club Corporation However the lease contract was short-lived due to Manila Bay Clubs failure to insure the leased building in favor of the private respondents Private respondents invoked the special clause to justify their action o if the tenant shall at any time neglect to perform or comply with any of thestipulationsthis lease contract shall be automatically terminated and cancelled WHETHER OR NOT MANILA BAY CLUB CORP. VIOLATED THE INSURANCE CLAUSE WHETHER OR NOT PRIVATE RESPONDENTS CAN VALIDLY UNILATERALLY RESCIND THE CONTRACT SINCE THE BREACH WAS MERELY SLIGHT OR CASUAL SC RULED: On the insurance clause o The building must be insured and the insurance premium must be for the account of the LESSEE o The trial courts findings that there is a failure to designate private respondents as beneficiaries in the insurance policies is affirmed. o During the testimony of Manila Bays own witness, he admitted that they in fact failed to comply with the insurance clause and that they are aware that this is a ground for rescission On the gravity of the breach o The tenor of the rescission clause of the contract intended mandatory compliance with all the provisions of the contract o Thus upon petitioners failure to comply with the mandatory requirement of the insurance clause, it is well within the right of the private respondents to rescind the contract o As long as such agreements are not contrary to law, morals, good customs, public policy or public order, they shall have the force of law between the parties

2. Freedom To Stipulate4: Article 1306

Azcuna, Jr. vs. CA, 255 S 215

1,000per day damages, lease contract, not immoral Azcuna entered into a lease contract with the Barcelonas in which he occupied three units of the building owned by the latter. Came expiration date of the lease and without an agreed renewal coupled by petitioners failure to surrender the leased units despite of private respondents demands, the latter filed an ejectment case against Azcuna The RTC as well as CA rendered a decision ordering Azcuna to pay: o Sum of 25,000Php as rental for the continued use by the three units in question o Further sum of 3,000Php per day by way of damages for his failure to turn-over peacefully the subject units o Attorneys fees and suit Azcuna now comes to court not to contest his ejectment but to take particular exception insofar as the 3,000Php per day as damages and contends that the same is a penalty shocking to the conscience and clearly contrary to public policy

WHETHER OR NOT THE 3,000PHP PENALTY IS EXCESSIVE AND IMPROPER SC RULED: That after the termination of the lease, the LESSEE shall peaceably deliver to the LESSOR the leased premisesIn case of LESSEES FAILURE LESSOR HAS THE RIGHT TO CHARGE THE LESSEE 1,000PER DAY AS DAMAGES The above-quoted portion of the lease contract is clearly an agreement for liquidated damages By virtue of Article 1306, the parties have the freedom to stipulate such that the same should not be contrary to law, good customs, morals, public order and public policy.

Article 1314 Any third person who induces another to violate his contract shall be liable for damages 4 Article 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
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De Leon vs. CA, 186 S 345

Private respondent Jose de leon and Sylvia de Leon were united in wedlock and a child named Susana was born from this union In 1972, a de facto separation between the spouses occurred due to irreconcilable marital differences with Sylvia leaving the conjugal home Sylvia, with the Superior Court of California filed a petition for dissolution of marriage against Jose Vicente and filed claims for support and distribution of properties however, this was held in abeyance for Jose Vicente did not have any properties in the US Sylvia proceed with some sort of property settlements with Jose Vicente in the Philippines Sylvia entered into a letter-agreement with her mother-in law o Letter represents a contractual undertaking among the undersigned, your son, represented by youbind yourself jointly and severally to answer for the undertakings of Jose in this contract o Deliver with clean title all liens, encumbrancesof all properties stated herein o Give monthly supportrespect custody of minor daughter as pertaining exclusively to the wife Macaria de Leon, mother of Jose de Leon in turn made cash payments to Sylvia in compliance with her obligations Sylvia and Jose de Leon thereafter moved for judicial approval of dissolution of their conjugal partnership which was hereby granted by the court The decision of the court revealed that there was a verbal reformation of Sylvias claims for support and for this reason Jose Vicente moved for the reconsideration of the order Macaria de leon intervened, claiming that she is the owner of the properties involved in the letter-agreement, and further claims that she only consented to the same because of threat and intimidation by Sylvia thus a vitiated consent

o o

o o

However, the intimidation contemplated by Macaria in the case at bar is not the intimidation contemplated by law For intimidation to vitiate consent and render the contract invalid, the ff. must concur: Intimidation must be the determining cause of the contract Threatened act must be unjust or unlawful Threat is real and serious Produces a well grounded fear from the fact that the person from whom it comes has the necessary means or ability to inflict the threatened injury Both parties being in pari delicto is left with no remedy against each other and are left to their original positions Thus the decision of the CA and trial court are affirmed, dissolving the conjugal partnership without prejudice to their agreement that each spouse shall own, dispose of and posess his/her own separate estate

Batarra vs. Marcos, 7 P 156

Breach of promise to marry upon carnal connection, married mansingle woman, in pari delicto, no awarding of damages Batarra complains of Marcos breach of promise to marry whereby Marcos induced Batarra to submit herself to sexual relations with him on account of such promise of marriage The facts appearing in the record does not constitute that of the crime of seduction because the plaintiff is not under 23 years of age therefore it cannot be the basis for the awarding of damages The defendant may have been liable for his breach of promise to marry, the carnal connection being the cause or consideration of the promise The parties committed a crime or misdemeanor and Article 1305 of the Old Civil Code or Article 14115 of the New Civil Code prevents such recovery

WHETHER OR NOT THE LETTER AGREEMENT IS VALID? SC RULED: On the ambiguous provisions of the letter-agreement o The clause regarding termination of relations although apparently ambiguous, clearly show that the parties clearly contemplated not only the termination of the property relationship but likewise the marital relationship in its entirety o Stated unequivocally too in the Obligations of the Wife is the provision in which the divorce proceedings in the US will continue o Macaria, in executing her conforme with said letter agreement had done so to terminate the marital relations of her son with Sylvia, the latter pardoning the adultery and concubinage of her son in want of peace

Article 1411 when the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties are in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or price of the contract
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This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise

Cui vs. Arellano University, 2 S 205

Scholarship, requiring refund in order to get transcript, violative of public policy Cui took up preparatory law course in Arellano University and after finishing the same, enrolled in the College of Law which, during all time in his stay was awarded scholarship grants and scholastic merits so that his semestral tuition were returned to him during the ends of each semester But during his last year in law school, he was not able to pay his tuition due to the severed connection of his uncle who was then the Dean of the College of Law who transferred to Abad Santos Law School. By reason of this, Cui transferred to Abad Santos for his last year and during the time of applying for the bar examinations he needed to secure his transcript from respondent university Respondent University required Cui to return whatever amount they have given him for his scholarship pursuant to the agreement he signed with the University: o In consideration of the scholarship granted to me by the University, I hereby waive my right to transfer to another school without having refunded to the University the equivalent of my scholarship cash WHETHER OR NOT THE ABOVE-QUOTED PROVISION IS VALID SC RULED: The stipulation in question is contrary to public policy and hence, null and void

entering into an enterprise or whatsoever in the Philippine islands without written permission from the master during the period of employment and for a term of five years from and after the termination of employment without regard to the cause of such termination

WHETHER OR NOT THE MASTER CAN VALIDLY UPHOLD THE ABOVEQUOTED PROVISION SC RULED: The stipulation was clearly one in undue and unreasonable restraint of trade and therefore void as against public policy

Omico Mining and Industrial Corp vs. Vallejos, 63 S 301

Contract of professional services between company and judge of CFI, void ab initio, judges not allowed to privately practice Alfredo Catolico, judge of the Court of First Instance entered into a contract of professional services with herein petitioner-corporation He has rendered legal services as head of the legal department of OMICO On a prior civil case instituted by Catolico against OMICO, he asks the court from OMICO to return to him the 10 certificates of stock which the corporation borrowed from him as his capacity as stockholder and for the payment of his services as legal counsel for the corporation

Ferrazzini vs. GSell, 34 P 697

Contracts in restraint of trade, void against public policy A relation of master and servant was entered into by the parties which created certain duties and obligations on the contract The master furnishing the servant with a reasonably safe place to work and not to discharge him until the expiration of six months after notice The servant serving with utmost loyalty, faithfulness and obedience to all reasonable orders not inconsistent with the contract The plaintiff was discharged for reason that he acted in contravention of the contract with his master, violating the express order of the master not to leave the factory during work hours to drink Furthermore, the defendant demands a sum of 10,000Php from the servant for violating one of the terms of their contract:

SHOULD CATOLICO BE RENDERED A JUDGMENT TO HIS FAVOR ON THE PAYMENT OF HIS SERVICES AS LEGAL COUNSEL? SC RULED: On the void ab initio contract o The contract which was entered into was patently void because it is contrary to law and public policy o The contract entered into constituted a private practice of law and in contravention of the express provision of Section 35, Rule 138 of the Revised Rules od Court o This rule is based on sound reasons of public policy o The object of this contract, being contrary to law, is void from the beginning o Therefore, Catolico cannot validly ask for the payment of his professional services since he should have known, or he is ought to know that when he was elevated as a judge of the Court of First Instance, his right to practice law as an attorney is suspended

and will continue to be suspended as long as he occupied the judicial position 3. Innominate contracts6: Article 1307

Asian Construction vs. Cathay Pacific Steel, June 29, 2010

Sales invoice, 24% interest, Contracts of Adhesion, binding as ordinary contract On several occasions in June and July of 1997, Asian Construction and Development Corporation purchased from respondent Cathay Pacific Steel Corp. various steel bars worth 2,650,916.40Php covered by a total of 12 invoices which stipulated as follows: o Interest at 24% per annum is to be charged to all accounts overdue plus 25% additional on unpaid invoice for attorneys fees aside from the court cost Petitioner made partial payments but failed to pay subsequent payments which urged herein respondent to institute an action for collection of a sum of money Petitioner, in its answer denied that it authorized the purchase orders from the respondent and it had no knowledge as to the truth of the invoices RTC and CA ruled in favor of Cathay Pacific and hereby orders Asian Construction to pay the sum plus interests stipulated in the invoice but all other fees Petitioners question the 24% interest among other questions of law and contends that it has not consented to such WHETHER THE 24% INTEREST IMPOSED IN THE JUDGEMENT RENDERED BY THE RTC AND CA IS VOID SC RULED: On contracts of adhesion The sales invoices are by their nature, contracts of adhesion, a take it or leave it contract and are binding as ordinary contracts Parties being offered of this kinds of contracts are free to reject it entirely and if they adhere, they give their consent and such will be a perfected contract and such stipulations will have the force of law between the parties Petitioner is presumed to have full knowledge and to have acted with due care, or at the very least, have been aware of the terms and conditions of the contract. Thus, the award of the 24% interest is valid and enforceable 4. Mutuality of Contracts: Article 13087

Perez vs. Pomar, 2 P 682

I do that you may give, implied consent, valid and enforceable, interpreter Don Vicente Perez, through a verbal request, acted as interpreter between Don Eugenio Pomar and the military authorities for the reason that Pomar is not capable of understanding the English language On many occasions Perez accompanied Pomar in his meetings and conferences and interpreted for the latter Large profits were achieved by the Compania General de Tobacos as result of the foregoing and Perez, by reason of this request, was obliged to abandon his own business in consideration of being paid for his services Pomar contends that no agreement has ensued and that he is did not oblige Perez to render him services as an interpreter and that Perez did this on his private capacity and not as agent of the company IS POMAR LIABLE TO PAY PEREZ FOR HIS SERVICES? SC RULED: On Innominate Contracts o Although it would not appear that ay written contract was entered into between the parties, we must consider that there was a tacit and mutual consent as to the rendition of the services which gives rise to the obligation upon the person benefited by the services to make compensation therefore since the bilateral obligation to render service as interpreter, on the one hand and on the other to pay for the services rendered is thereby incurred. o Consideration of the contract was the mutual benefit which will be derived from the service rendered o The fact that there was a concurrence of the three elements in a contract, it would be valid to consider that what they entered into was a perfected contract and such is enforceable

UCPB vs. Beluso, 530 S 567

Article 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
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Interest left at sole will of the lender-violative of mutuality of contracts

Article 1308 The contracts must bind both contracting parties; its validity or compliance cannot be left to the will of one of them
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UCPB granted the spouses Belouso a Promissory Notes Line under a Credit Agreement whereby the latter could avail from the former credit of up to a maximum amount of 1.2Million Pesos In view of the foregoing, a real estate mortgage over a parcel of land was constituted as additional security for the obligation Credit agreement was subsequently amended to allow for a higher credit limit UCPB applied for interest rates on different promissory notes ranging from 18% to 34% The spouses were able to pay some of the principal, as well as interest for some of the promissory notes, however, towards the latter have failed to make any payments UCPB foreclosed the properties to secure the spouses credit line which have already ballooned to 3,784,603Php RTC and CA ruled in favor of the spouses and rendered a judgment declaring void the interest rate used by UCPB

Defects in the contract, not proven by conclusive evidence, induced defendant to believe that he is the purchaser of the object of the contract, estoppels Attorney Leocadio Joaquin filed a complaint against Mitsumine alleging that the real purchaser in their contract for the importation in Japan of a machine for manufacture of aerated water which led him to execute a chattel mortgage instrument was not him but his client, Vito and that the same deed shall be declared null and void Facts leading to Joaquins complaint revealed that that in April of 1914, Joaquin asked defendant in his own name to import from Japan a machine for the manufacture of aerated water which Joaquin agreed to pay upon delivery of the machine 200Php of which was paid on his account and 525Php agreed to be paid on installments

WAS THE INTEREST RATE USED BY UCPB VOID? SC RULED: On the interest rate stipulations o The promissory note revealed the ff stipulations: For value receivedI/Wejointly and severally promise to pay UCPB the sum of with the interest thereon at the rate indicative of DBD retail rate or as determined by the Branch Head o Article 1308 provides that the contracts must bind both parties and its validity or compliance cannot be left to the will of one of them o As held in Garcia v. Rita Legarda, Inc, a contract containing a condition which makes its fulfillment depended exclusively upon the uncontrolled will of one of the contracting parties is void. o The provision stating that the interest shall be at the rate indicative of DBD retail rate is indeed dependent solely on the will of the bank and thus VOID for it gives the bank unfettered discretion on what the rate may be o The provision does not even specify a margin above or below the DBD retail rate and thus violative of the provision in the Truth in Lending Act which aims to protect the citizens from lack of awareness of the true cost of credit to the user by assuring full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy

WHETHER THE MORTGAGE DEED WAS NULL AND VOID SC RULED: On the validity and authenticity of the mortgage deed o Record shows that on April of 1914, Joaquin has signed and forwarded to the commercial establishment of Mitsumine, named the Nippon Bazaar an order to procure a complete machine for the manufacture of aerated waters o Validity and authenticity of the mortgage deed is unquestionable o No error has been proven nor has Joaquin proved that the real purchaser was his client Vito. o If a party alleges defects in a contract so that it could be set aside, he must prove conclusively the existence of the defects because the validity and fulfillment of the contract cannot be left to the will of one of the parties o Furthermore, the plaintiff, deliberately and intentionally, by his own acts, induced the defendant to believe that he was the real purchaser of the aerated machine, therefore he is estopped from denying or contradicting his previous acts and statements in regard to the matter

Garcia vs. Legarda, 21 S 555

Stipulation for grace period in cases of failure to pay, valid, cannot be arbitrarily exercised without breach of another party Herein petitioner Garcia and Rita Legarda Inc. entered into several contracts to sell of subdivided lots situated in Manila o In case the party of the SECOND PART fails to satisfy any monthly installmentshe is granted a month of

Joaquin vs. Mitsumine, 34 P 858

grace within which to make the retarded paymenshould a period of 90 days elapse to begin the expiration of the month of grace herein mentioned, the party of the FIRST PART has the right to declare this contract cancelled and of no effectas if the contract had never been entered into Garcia has been paying monthly installments until July 1951 As of August of 1951-May 1952, Garcia has failed to pay despite several demands to pay the installments in arrears Thus, on June of 1952, Rita Legarda Inc. cancelled the contract by virtue of the express provision in the contract DO THE SUBJECT PROVISION VIOLATE THE MUTUALITY OF CONTRACTS? SC RULED: On the stipulation o The stipulation merely gives the vendor the right to declare the contract cancelled and of no effect upon fulfillment of the conditions set forth. o The stipulation does not leave the validity or compliance of the contract entirely to the will of one of the contracting parties o The power thus granted cannot be said to be immoral, much less than unlawful for it could be exercised not arbitrarily but only upon the other contracting party committing the breach of contract of non-payment of the installments agreed upon 5. Relativity of Contracts:

Trial court rendered a decision ordering petitioner to pay private respondents the sum representing the value of printing paper delivery however it also ruled on the awarding of moral damages of private respondent to petitioner and ruled that were it not

for the delay of private respondents delivery, petitioner could have sold books to Philacor CA rendered a decision deleting the part of awarding moral damages for lack of factual basis WHETHER OR NOT PRIVATE RESPONDENT VIOLATED THE ORDER AGREEMENT WHETHER OR NOT PRIVATE RESPONDENT IS LIABLE FOR PETITIONERS BREACH TO PHILACOR SC RULED: On the alleged violation of the order agreement o The transaction between the contracting parties is a contract of sale whereby private respondent obligates itself to deliver printing paper and the petitioner obligates itself to pay a sum of money for its equivalent o The above gave rise to reciprocal obligations such that the obligation of one is dependent upon the obligation of another o Petitioner did not fulfill its side of the contract o Private respondents suspension of delivery is legally justified in Article 15838 On petitioners breach with PHILACOR o Private respondent is not a party to the agreement with Philacor o The paper specified in the agreement of petitioner to Philacor is not the same paper which private respondent undertook to deliver to petitioner. Article 1583 When there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses without just cause to take the delivery of or pay for one or more installments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of the contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable giving rise to a claim for compensation but not to a right to treat the whole contract as broken
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Integrated Packing vs. CA, 333 S 170

Failure to pay of one party cease of delivery of another, breach on part of the party who failed to pay, reciprocal obligations conditioned on the fulfillment of the other Integrating Packing Corp. and Fil-Anchor Paper Co. executed an order agreement whereby Fil-Anchor paper bound itself to deliver to petitioner reams of paper and in accordance with the SOP of the parties, the materials were to be paid within a minimum of thirty days and maximum of ninety days from delivery Later, petitioner entered into a contract with Philippine Appliance Corporation to print three volumes of cultural books for delivery on November 1978,1979 and 1980 Fil-Anchor delivered to petitioner 1,097 reams of bond paper out of the 3,450 reams as stated in the agreement and petitioner demanded delivery of the remaining reams for this will greatly prejudice him in his obligations However, petitioner failed to pay upon further delivery When petitioner entered into another contract with Philacor, it failed to fully comply with its contract.

There is thus no basis to hold petitioner liable for any damages

rights and obligations thereunder pass to the personal representatives of the deceased 6. Stipulation Pour Autrui: Article 131110

DKC Holdings vs. CA, 329 S 666

Transmissible contract, contracts involving property rights, death of a party in transmissible contracts does not excuse nonperformance DKC Holdings, in 1988, entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome o Option must be exercised within a period of two years counted from the signing of the contract Petitioner undertook to pay 3,000Php a month as consideration for the reservation of its option Petitioner has never failed to pay any installment payment until Encarnacion died and for this reason, Petitioner directed his payments to Victor, son of Encarnacion, who in turn refused acceptance of such payment TCT for the subject lot was issued in the name of Victor Petitioner offered tender of rental fee but Victor refused the same hence this complaint for specific performance WHETHER OR NOT THE CONTRACT OF LEASE WITH OPTION TO BUY ENTERED INTO BY THE LATE ENCARNACION BARTOLOME WITH PETITIONER WAS TERMINATED UPON HER DEATH SC RULED: On transmissibility of contracts o Article 13119 provides that the heirs are bound by the contracts entered into by the predecessors-in-interest except when the rights and obligations are not transmissible by their nature, by stipulations or by provision of law o A good measure for determining whether a contract terminates upon the death of one of the parties is whether it is of such character that it may be performed by the promissors personal representative o In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. The death of a party does not excuse non performance of a contract which involves a property right, and the

Marmont Hotel vs. CA, 168 S 373

Stipulation pour autrui in favor of Marmont Hotel, spouses acted in violation of the second MOA A Memorandum of Agreement was entered into between Maris Trading and petitioner Marmont Resort Hotel Enterprises o Maris Trading undertook to drill for water and to provide all equipment necessary to install and complete a water supply facility to service the hotel A second MOA was entered into between Maris Trading and spouses Guiang o That Maris has dug, drilled and tapped water source for Marmont Resorthas erected, built, and drilled for the water source of Marmont on the land owned by Guiang with the latters permission o In consideration of the sum of the spouses hereby sell, transfer and cede all possessory rights, interests and claims over the portion of the lot After some time, the water in Marmont Resort Hotel became inadequate to meet the hotels needs therefore the hotel secured the services of another contractor which, upon permission to inspect the water pump installed on the portion of the land owned by the spouses, the latter refused to give such CAN THE SPOUSES VALIDLY REFUSE TO GIVE PERMISSION NOTWITHSTANDING THE MOA ENTERED INTO? SC RULED: On the stipulation pour autrui

Article 1311 Contracts take effect only between the parties, their assigns and heirs, except it case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by law, The heir is not liable beyond the value of the property he received from the decedent
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Article 1311 Contracts take effect only between the parties, their assigns and heirs, except in cases 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
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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

Stipulations in the MOA appear to have been designed precisely to benefit petitioner and thus, partake of the nature of stipulations pour autrui A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, which stipulation is found in a contract entered into by the parties neither of whom acted as agent of the beneficiary The fact that the spouses accepted such MOA terms, respondent spouses clearly are aware of its express stipulations regarding the water facility for the resort and such refusal to give permission to survey a portion of their land is contrary to principles of honesty, good faith and fair dealing Contract pour autrui, insurance policy

Mandarin Villa vs. CA, 257 S 538

Credit card, moral damages, pour autrui stipulations Clodualdo de Jesus, a lawyer and a businessman hosted a dinner for his friends at the Mandarin Villa Seafoods Village After the dinner, the waiter handed to him 2,658Php and by this reason he handed the waiter his credit card issued by the Philippine Commercial Credit Card (BANKARD) Card was accepted by the waiter who returned a few moments later and audibly informed the private respondent that the card had expired Private respondent responded saying that the expiration date was clearly embossed on the card and the date embossed thereon was still far from said expiry date. Upon second try, the machine continued dishonoring the card, hence, private respondent, being mocked at by his peers, secured his BPI credit card from his card and used it to pay for the meal and the same was honored Private respondent now comes to court to ask that Mandarin Villa be liable to pay moral and exemplary damages

Coquia vs. Fieldmens Insurance, 26 S 178

Field Insurance Company issued in favor of Manila Yellow Taxicab Inc. a common carrier accident insurance policy o The company will indemnify the Insured in the event of accident caused by pr arising out of the use of the Motor Vehicle While the policy was in force, a taxicab of the Insured met a vehicular accident at Mangaldan Pangasinan Insured filed a claim for 5,000Php however, Insurer rejected the same and offered to pay 2,000Php but the Insured did not accept it Insured and Coquias parents (parents of the deceased driver) filed a complaint against the company and the trial court rendered a decision ordering the Insurer to pay the Insured 4,000Php Insurer questions the cause of action of Coquia and contends that Coquia has no contractual relation to the company therefore cannot be made party to the case filed. DO THE COQUIAS HAVE CAUSE OF ACTION IN THE CASE AT BAR? SC RULED: On the stipulation pour autrui o The enforcement of a stipulation pour autrui may be demanded by a third party for whose benefit it was made, although not a party to the contract before the stipulation in his favor is revoked by the contracting parties. o Pursuant to the stipulations, the Company will indemnify any authorized Driver who is driving the motor vehicle the company at its option may make indemnity payable directly to the claimants or the heirs of the claimants o Thus, it is clear from the foregoing that the Coquias have direct cause of action and had properly joined the Insured un filing the complaint therein

WHETHER OR NOT PETITIONER IS BOUND TO ACCEPT PAYMENT BY MEANS OF CREDIT CARD WHETHER OR NOT PETITIONER IS NEGLIGENT UNDER THE CIRCUMSTANCES OBTAINING IN THIS CASE SC RULED: On accepting the payment by means of credit card o Petitioner contends that it cannot be faulted for the cashiers refusal to accept the credit card for the same is not a legal tender o However, by virtue of the agreement entered into by PCCCI and Mandarin, Mandarin shall honor validly issued PCCCI credit cards provided they are not expired and the card number does not appear on the latest cancellation bulletin of lost, suspended and cancelled cards o Stipulation is a pour autrui stipulation and in this case, private respondents offer to pay constitutes not only acceptance of the said stipulation but also an explicit communication of his acceptance to the obligor. On negligence o Test for negligence: Did the defendant in doing the alleged negligent act use the reasonable care and caution which an ordinary prudent person would have used in the same situation? o The rule regarding Point of Sale reveals that whenever the words CARD EXPIRED flashes on the screen,

petitioner should check the embossed expiry date on the card itself The embossed date on the card showed that it has not expired yet and hence petitioner did not use the reasonable care and caution which an ordinary prudent person would have used in the same situation

Everett Steamship vs. CA, 297 S 496

Bill of lading stipulation-in small letters-does not affect validity of stipulation, just and reasonable, supported by legal provisions on the contract of carriage, consignee bound by stipulations Private respondent imported three crates of bus spare parts from its supplier, Maruman Trading Co. The crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, owned by herein petitioner. The crates were covered by a bill of lading which included a stipulation in cases of loss o All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice costThe carrier shall not be liable for any loss or damageto an amount exceeding One Hundred Thousand Yenunless the value of the goods higher than this amount is declared in writing by the shipper before the receipt of the goods by the carrier Upon arrival of the port of Manila, it was discovered that one of the crates of bus spare parts was missing thus Maruman Trading now asks that Everette Steamship pay for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred Yen. However, due to the stipulations indicated in the bill of lading, Everette offered to pay only One Hundred Thousand Yen, the maximum amount stipulated in said stipulation Trial Court and Court of Appeals ruled in favor of Maruman Trading and concluded that said provisions in the bill of lading are not binding for it was printed in letters so small that Maruman Trading would not be aware of such conditions Private respondent further contends that he is not bound by the stipulations thereof because he was not a signatory to the bill of lading

SC RULED: On the validity of the stipulation o A stipulation in the bill of lading limiting the common carriers liability is supported by pertinent provisions in the civil code in Articles 174911 and 1750 o The stipulations in the bill of lading are just and reasonable not to mention, clearly crafted o The contention that private respondent could not have fairly agreed on the stipulation because the same was printed in small letters is invalid o The shipper, Maruman Trading has been extensively engaged in the trading business thus it cannot be said to be ignorant to such business transactions involving the shipment of its goods to its customers On the binding character of the stipulation to the consignee o Even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract o There is no question of right of a consignee to recover from the carrier or the shipper for loss of or damage to goods although the document may have been, as in practice, drawn up only by the consignor and the carrier

Kauffman vs. PNB, 42 P 182 (Digest from Paras, doctrines from original case)
Revocation must be mutual, stipulation pour autrui in favor of Kauffman The Philippine Fiber and Produce Company for some consideration, contracted with the Philippine National Bank. One of the stipulations was for the bank to order its representative in New York to give a certain sum of money to Kaufmann, who was President of Phil. Fiber. After the order was given, the New York representative suggested that the money be withheld from Mr. Kauffman in view of the latters reluctance to pay for some company debts The Manila office then told the New York representative to withhold said money

WAS THE STIPULATION IN CASES OF LOSS OR DAMAGE IN THE BILL OF LADING BINDING? IS THE PRIVATE RESPONDENT, AS CONSIGNEE, WHO IS NOT A SIGNATORY TO THE BILL OF LADING, BOUND BY THE STIPULATIONS THEREOF?

Article 1749 A stipulation that common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value is binding
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Article 1750 - A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances and has been freely and fairly agreed upon

Later, Mr. Kauffman demanded payment and when this was refused he instituted this action for the collection of a sum of money IS KAUFFMAN ENTITLED TO THE AMOUNT? SC RULED: On the stipulation pour autrui o There is a clear case of the stipulation pour autrui o Demand for payment constituted an acceptance of the stipulation o It cannot be said that there had been a prior revocation of the stipulation, for while it is true that the Bank had ordered its New York representative to withhold payment, still the revocation referred to in the law is the revocation by both parties to the original contract o A stipulation in favor of a third person cannot be revoked by the obligated party alone, without the conformity of the other party o

Upon the effective date of the merger, all references to CBTC in any deed, documentsshall be deemed for all intents and purposes references to ABC, the Surviving Bank, as if such references were direct references to ABC Thus, the fact that the promissory note was executed after the effectivity date of the merger does not militate against the petitioner. The agreement itself clearly provides that all contracts irrespective of the date of execution entered into the name of CBTC shall be understood as pertaining to the surviving bank The clause must have been deliberately included to protect the interests of the bank

7. Contractual Interference: Article 131412

Gilchrist vs. Cuddy 29 Phil 542

ZIGOMAR movie, Interference by strangers, damage not awarded if no malice, action for injunction when proper Cuddy, a resident of Manila, was the owner of the ZIGOMAR , a film. Gilchrist on the other hand was the owner of a movie theatre in Iloilo. A contract was entered into by Gilchrist and Cuddy in which the former leased to the latter, the ZIGOMAR for exhibition in the latters theatre for a week. A third party offered to show the film for a higher price but Cuddy informed the third party that the movie will not be available until after six weeks Cuddy wilfully violated the contract in want of a higher profit in which he accepted a third party offer of a higher price as a result of the inducement of the third party Gilchrist files for injunction against the third parties and asks for awarding of damages

Associated Bank vs. CA, 291 S 513

On or about September 19, 1975, Associated Banking Corporation and Citizens Bank and Trust Company merged to form just one banking corporation known as Associated Citizens Bank On or about March 10,1981, the Associated Citizens Bank changed its corporate name to Associated Bank by virtue of the Amended Articles for Incorporation On September 7, 1977, Lorenzo Sr. executed in favor of Associated Bank a promissory note whereby the former undertook to pay the latter the sum of 2,500,000Php on or before March 6, 1978 Defendant to date, still owes the bank 2,250,000Php and despite repeated demands the defendant failed to pay the amount due WHETHER THE ASSOCIATED BANK, THE SURVIVING CORPORATION, MAY ENFORCE THE PROMISSORY NOTE MADE BY PRIVATE RESPONDENT IN FAVOR OF CBTC, THE ABSORBED COMPANY, AFTER THE MERGER AGREEMENT HAD BEEN SIGNED SC RULED: On enforcing the promissory note despite the merger o Private respondent contends that since he issued the promissory note to CBTC on September 7, 1977, two years after the merger agreement has been executed, CBTC could not have conveyed or transferred to petitioner its interest on said note, which was not yet in existence at the time of the merger therefore the surviving bank had no right to enforce the promissory note on private respondent o A closer perusal of the merger agreement reveals the ff:

WAS THERE A TORTUOUS INTERFERENCE? SC RULED: On inducing parties to a contract to violate the same o In the case at bar, the only motive for the interference with the GilChrist-Cuddy contract on the part of the third parties was a desire to make profit by exhibiting the film in their theatre.

Article 1314 Any person who induces another to violate his contract shall be liable for damages to the other contracting party
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There was no malice beyond this desire, but this does not relieve them of the legal liability for interfering with the contract and causing its breach o However, damages cannot be awarded to Gilchrist for there was no malice in the interference in the contract and the impulse behind ones conduct lies in a proper business interest rather than in wrongful motives On the complaint for injunction o As a rule, injunctions are denied to those who have an adequate remedy at law o The injunction filed in this case is validly issued restraining the third parties to exhibit the film in their theatre during the week that Gilchrist had the right to exhibit it. o

DID THE APPELLATE COURT ERR IN AFFIRMING THE TRIAL COURTS DECISION FINDING SO PING BUN GUILTY OF TORTUOUS INTERFERENCE OF THE CONDUCT? SC RULED: On tortuous interference o Damage is the loss, hurt or harm which results from injury, and damages are the recompense or compensation awarded for the damages suffered o One becomes liable in an action for damages for a nontrespassory invasion of anothers interest in the private use and enjoyment of asset if The other has property rights and privileges with respect to the use or enjoyment interfered with The invasion is substantial The defendants conduct is a legal cause of the invasion The invasion is either intentional and unreasonable or unintentional and actionable under negligence rules o Elements of tort interference are: Existence of a valid contract Knowledge on the part of the third person of the existence of the contract Interference of the third person without legal justification or excuse o In the case at bar, Trendsetter Marketing asked DCCSI to execute lease contracts in its favour and as a result petitioner deprived respondents of latters property right. o But though petitioner took interest in the property of respondent and benefitted from it, nothing on the record imputes deliberate wrongful moves or malice on him o Interference is justified if the impetus of ones conduct lies in a proper business interest rather than in wrongful motives

So Ping Bun vs. CA 314 S 751

Textile Warehouse, Elements of tort interference,proof of malice, interference justified if in furtherance of a business interest Tek Hua Trading Corporation, through its managing partner, So Pek Giok, entered into lease agreements with DCCI of the premises located in Binondo Manila to serve as warehouse for its textile business. They provided that should the lease continue to occupy the premises after the term, the lease shall be on a month-to-month basis When the contracts expired, the parties did not renew the contracts, But Tek Hua continued to occupy the premises. In 1976, Tek Hua Trading was dissolved and herein private respondents formed Tek Hua Enterprising Corp So Pek Giok, managing partner of Tek Hua Trading died in 1986. So Pek Gioks grandson So Ping Bun occupied the warehouse for his own textile business, Trendsetter Marketing DCCSI sent letters addressed to Tek Hua Enterprises informing of price increases and enclosed in the letters were new lease contracts for signing. Private respondents did not answer any of the letters but still the lease contracts were not rescinded Private respondents wrote a letter to Mr. So Ping Bun asking the latter to vacate the warehouse in view of their decision to go back to the textile business. But petitioner refused to vacate and instead requested formal contracts with DCCSI in favor of Trendsetter Marketing. So Ping Bun claimed that after his grandfather died, he has been religiously paying rent for the warehouse. Lease contracts in favour of Trendsetter were executed Trial Court as well as Court of appeals ruled for the annulment of the contracts of lease as well as the awarding of damages to private respondents

Lagon vs. CA, 453 S 616

Bai Tonina Sepi, Tortuous interference with contractual relations, elements, knowledge on part of interferor that valid contract exists, induce, financial or profit motivation not tortuous interference Jose Lagon purchased from the state of Bai Tonina Sepi through an intestate court, two parcels of land in Sultan Kudarat A few months after the sale, private respondent Menandro Lapuz filed a complaint for torts and damages against the petitioner

Private respondent claims that he entered into a contract of lease of the subject properties with Bai Tonina Sepi and has renewed the same and when Bai Tonina Sepi died, he started remitting his rental payments with the formers heirs The administrator of the estate thereafter advised him to stop collecting rental payments in view of the fact that there is a new owner to the property whom he discovered collecting rentals from the tenants Petitioner on the other hand claimed that before he bought the property he went to Atty. Benjamin Fajardo, the lawyer who allegedly notarized the lease contract between private respondent and Bai Tonina Sepi to verify if the lease contract had been renewed Petitioner averred that Atty. Fajardo showed him four copies of the contract and revealed that they were all unsigned Trial Court and Court of Appeals ruled in favor of the private respondent and declared the lease contract renewed

8. Contracts are perfected by mere consent: Article 131513

Luxuria Homes vs. CA, 302 S 315

WHETHER OR NOT THE PURCHASE BY THE PETITIONER OF THE SUBJECT PROPERTY, DURING THE SUPPOSED EXISTENCE OF PRIVATE RESPONDENTS LEASE CONTRACT WITH THE LATE BAI TONINA SEPI, CONSTITUTED TORTUOUS INTERFERENCE FOR WHICH PETITIONER SHOULD BE HELD LIABLE FOR DAMAGES SC RULED: On tortuous interference o Tortuous interference is penalized because it violates the property rights of a party in a contract to reap the benefits that should result there from On existence of a valid contract o Notarized copy of the lease contract is an incontestable proof that a valid contract exists and such remains to be prima facie evidence o On Knowledge on part of interferor Petitioner conducted his own personal inquiry into the records of the estate and found no suspicious circumstance that would have made a cautious man probe deeper and watch out for any conflicting claim over the property. Was there a wrongful motive? o Even assuming that the private respondent was able to prove the renewal of his lease contract, the fact that he was unable to prove malice or bad faith on the part of the petitioner warrants the claim that tortuous intereference was never established

Squatters, Luxuria Homes not party to any transactions, absence of mutual assent, no contract Aida Posadas, together with her two minor children co-owned a parcel of land in Sucat, Muntinlupa which was occupied by the squatters. Posadas entered into negotiations with private respondent regarding the development of the property into a residential subdivision Respondent Bravo worked on its negotiations with the squatters. Seven months later in 1989, Posadas assigned the property to Luxury Homes Inc. In 1992, the harmonious and congenial relationship of Posadas and Bravo turned sour when Posadas could not accept the management contracts of the latter. Thus Bravo demands payment for the value of work done, and Posadas refused the same Trial Court and CA rendered a decision in favor of bravo holding Posadas and Luxury Homes solidarily liable for the amount demanded by Bravo CAN LUXURIA HOMES BE HELD LIABLE TO PRIVATE RESPONDENTS FOR THE TRANSACTIONS SUPPOSEDLY ENTERED INTO BETWEEN PETITIONER POSADAS AND PRIVATE RESPONDENTS? SC RULED: On consent and on separate personality of the juridical entity o There is no dispute to the fact that Posadas and Bravo entered into a contract in which the latter is to prepare the land for development and the former to pay the services rendered o Private respondents contend that Posadas formed Luxury Homes and assigned the property to the latter to evade payment and defraud creditors. o However the contention did not find support in any of the evidences presented o It cannot be further contended that Posadas is an alter ego of Luxuria Homes since the latter is not even a major stockholder of said corporation, hence, each has its own identity/personality and cannot be held solidarily liable

Article 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 consequences which, according to their nature, may be in keeping with good faith, usage and law.
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Further, private respondents failed to show that Luxuria Homes was a party to any of the stipulations/agreements in which private respondents and Posadas entered into, therefore, whatever stipulations are present in the agreement, the same cannot be binding to Luxuria Homes.

9. Real contracts: 10. Unenforceable contracts: Article 131714

Rallos vs. Felix Go Chan, 81 S 251

General rule: Act of agent after death of principal-void ab initio subject to exceptions Attorney-in-fact, Simeon Rallos brother of the deceased, after the death of his principal, Concepcion Rallos, sold the latters undivided shares in a parcel of land to Felix Go Chan and Sons Realty Corporation pursuant to an SPA which the principal executed in his favor Administrator of Rallos estate now comes to court praying for the court to declare the sale unenforceable and to recover the disposed share Trial court rendered a judgment declaring the sale null and void WHAT IS THE LEGAL EFFECT OF AN ACT PERFORMED BY AN AGENT AFTER THE DEATH OF HIS PRINCIPAL? IS THE SALE OF THE UNDIVIDED SHARE VALID ALTHOUGH IT WAS EXECUTED AFTER THE DEATH OF THE PRINCIPAL? SC RULED: On the legal effect of the death of the principal o Basic axiom in civil law that no one may contract in the name of another and if such contract was entered into the same be declared unenforceable o In the case at bar, there sprung a relationship of agency between the brother of Concepcion Rallos and herself

Established in law that the death of the principal in an agency extinguishes the relationship between the agent and the principal On the validity of the sale of the undivided share o HOWEVER, there are exceptions to such rules provided for by Article 1931 which provides that an act done by an agent after the death of the principal is valid when: The agent acted without knowledge of the death of the principal Third person who contracted with the agent himself acted in good faith Two requisites must concur o Agent Simeon Rallos knew of the death of Concepcion at the time he sold the latters share o

United Namarco Distributors vs. NAMARCO, 114 P 802

In 1959, prices of commodities had gone up to such an extent that the President sought means to force down such prices One solution was for NAMARCO to procure, buy and distribute such commodities as were in short supply, with a special non recurring dollar allocation from the Central Bank However, said plan is being prevented by the picketing of NAMARCOs employees and this led them to execute another plan in which the importation of commodities be effected in the name of various associations so that when the goods would arrive, the labor union in NAMARCO would not prevent their movement as they would not be NAMARCO goods but of beneficiary associations Federation of United NAMARCO distributors submitted their petition for trade assistance and entered into a contract of sale with NAMARCO Parties proceeded with the terms in the contract of sale, deliveries and payments have been made although remaining commodities have been undelivered Later, a new BOD and General Manager took over the management of the NAMARCO and decided to discontinue with the contract of sale with respect to the commodities not actually delivered and it so notified the FEDERATION FEDERATION however filed a complaint to compel NAMARCO to perform the contract of sale NAMARCO on the other hand contends that the contract of sale is not binding with regard to conflicting provisions on the resolution set forth by the President and the contract itself WHETHER THE CONTRACT OF SALE IS BINDING ON APPELLANT NAMARCO SC RULED:
(Facts include only those related to the issue in the subject matter)

Article 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
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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 ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party

On conflicting provisions o Provisions on the forward sales method as well as the distribution of commodities, as contended by NAMARCO were conflicting therefore, the contract could not have been binding upon him o However, upon further perusal of the resolution and the contract, the resolutions compliment each other and thus the BOD all understood the contract of sale to be in accordance with the resolution of its governing body On the validity of the contract o At the time the new BOD refused to recognize the validity of the contract of sale, more than half of the goods had already been delivered by NAMARCO to the FEDERATION who already disposed of them and for which, NAMARCO has accepted partial payments of the purchase price of the commodities amounting to 2,452,020PHP o NAMARCOs acceptance of such partial payments constitutes an implied ratification by its BOD of the contract in question and precludes the rejection of the binding force of such contract