TITLE II

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 service.
(1254a)
The above article defines the term Contract.
In a contract, one or more persons bind
themselves with respect to another or
reciprocally, to the fulfillment of a
presentation to give, to do or not to do.
1. As to perfection
a. Consensual one which is perfected by mere
consent (Art. 1315
b. Real Contract perfected by mere consent and by the
delivery of the object or subject matter. Ex. Deposit,
pledge, or commodatum.

2. As to dependence to other contract.
a. Principal one which can stand alone. Ex. A
contract of sale, lease.
b. Accessory those which are dependent upon another
contract. Ex. Contract of mortgage, pledge of
guaranty.
c. Preparatory those which is created in order that a
future transaction or contract may be entered into by te
parties. Ex. Contract of partnership or agency.

3. According to name or designation
a. Nominate one which has particular name or
designation such as sale, agency, etc.
b. Innominate those without particular name.

4. According to the nature of obligation
a. Unilateral where only one ha an obligation to perform. Ex.
Contract of donation, commodation.
b. Bilateral where both parties have reciprocal
obligation to perform. Ex. Sale.

5. According to risk involved
a. Commutative - where there is an exchange of values, such
as lease.
b. Aleatory - one which the fulfillment of the obligation
depends upon chance. Ex. Contract of insurance.

6. According to cause
a. Onerous one which imposes valuable consideration such
as sale, mortgage.
b. Gratuitous one which one of the parties does not receive
any valuable consideration, such as commodatum.


7. According to form
a. Oral by word of mouth of the parties
b. Written the agreement which is reduced in
writing which may be public or private or private
document

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. 1308. The contract must bind both
contracting parties; its validity or compliance
cannot be left to the will of one of them. (1256a)


Contracts entered by and between the parties mush
bind both parties in order that it can be enforced against
each other. This is also known as mutuality of contract.
Hence, its validity or compliance cannot be left to the will
of one of them. This principle is based on the essential
equality of the parties. It is elementary rule that no party
can renounce or violate the law of the contract without the
consent of the other. (11 Manresa 380)

Example, Tina and Laura entered into a contract to
sell whereby Tina binds herself to sell her only parcel of
land to Laura if Tina decides to leave for States. The
contract is void because the fulfillment of the condition
depends on the will of Tina.

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.

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.

As a rule, compliance with a contract cannot be left to
the will of one of the contracting parties. However, the
determination of its performance may be left to a third
person after it has been made known to both contracting
parties. Provided, further, the parties are not bound by the
determination if it is evidently inequitable or unjust when the
third person acted in bad faith or by mistake, the courts shall
decide what is equitable under the circumstances.

Example: Tina sold her parcel of land to Laura. It was
agreed that Maya, a real estate appraiser would be the one to
determine the reasonable price of the land. Maya, then, fixed
the price after considering the factors affecting the value of
the land, and informing both contracting party that the
decision is just and suitable. If the decision made by Maya is
manifestly inequitable, the court may be called upon to
decide what is equitable.
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 perceived from the decedent.

If a contact should contain some stipulation in
favor of 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. (1257a)
1. In determining the performance of both parties (Art.
1309).

2. In contracts containing a stipulation in favor of a third
person (Art. 1311).

3. In contracts creating real rights (Art. 1312).

4. In contracts entered into to defraud creditor (Art. 1313).

5. In contracts which have been violated at the inducement
of the third person (Art. 314).

Example: Tina mortgaged her parcel of land in favor of Laura
as collateral for her debt. The mortgage is duly registered. Later
on, Tina sold the same land to Tito. In this case, Tito bought the
land subject to the mortgage constituted thereon. Tito, although
a stranger in the mortgage, being a real right follows the
property on the right of Laura to the mortgage.