CHAPTER I

Article 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.
Meaning of a contract-I t l a y s e m p h a s i s o n t h e m e e t i n g
o f m i n d s between 2 contracting parties that take place
when the other accepts an offer by one party. In contract, one or
more persons binds himself or themselves with respect to
another or the others, or reciprocally, to the fulfillment to give,
or to do, or render service or to refrain from doing some
particular thing. In a contract, there must be at least 2 people or
partie s, because it i s i mpossible for one to contract
himself.
EG. A sell his car to B for P500,000.For A, seller, the object is
the car and the cause is the price; for B, buyer, the object is the
price and the cause is the car.

Article 1306

The contracting parties may establish such stipulations, clauses

terms and conditions as may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or public
policy. (1255a)
Eg. Cui vs Arellano University 2 SCRA 205, May 30, 1961
Ponente: J. Concepcion
FACTS
Emeritio Cui was granted scholarship by the defendant
university on scholarship merit as a student of the College of
Law. Stipulated in the contract for the scholarship grant is the
following:
“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 (defendant) the
equivalent of my scholarship cash.”
On his last semester on the University, Cui transferred to Abad
Santos University where his uncle, the previous dean and legal
adviser of Arellano University, was now the dean of the College
of Law of Abad Santos University.
Before taking the bar, Cui petitioned the defendant university for
the release of his TOR. The university refused until Cui
refunded the scholarship granted to him totaling the amount of
Php 1,033.87, which he did under protest.
Thereafter, he filed for recovery plus damages. The Court of
First Instance of Manila ruled in favor or Arellano University.
Hence, this petition for review.
ISSUE
Whether or not the stipulation on waiver of right to transfer
without having refunded the scholarship is void.
HELD
Yes. The stipulation contravenes both moral and public policy.
Scholarship grants are not for propaganda purposes but are
awards for merits.

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.
Eg. Vicente Perez vs. Eugenio Pomar
Case Digest:
G.R. No. L-1299 November 16, 1903
VICENTE PEREZ, plaintiff-appellee,
vs.
EUGENIO POMAR, Agent of the Compañia General de
Tabacos, defendant-appellant.
Francisco Dominguez for appellant.
Ledesma, Sumulong and Quintos for appellee.
TORRES, J.:
Facts: On December 8, 1901 Vicente Perez came to an
agreement with Eugenio Pomar as an English interpreter which
is not a free service. Perez ask for the payment for the service
that he made to Pomar but the later did not do his part to pay
Perez for the service that made to him.
Issues: Should Pomar need to pay the interpretation made by
Perez?
Ruling: Yes, he should pay the service of Pomar because it is
not a gratuitous one and it is under the innominate contract of
facio ut des which is I do that you give.
Article 1308
The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them. (1256a)
Case: UCPB vs SPS Samuel & Odette Beluso (Art 1308 JN
Robillon)
PETITIONER: UCPB, plaintiffs-appellants,
RESPONDENT: SPS SAMUEL & ODETTE
BELUSO, defendant-appellee
In April 1996 UCPB granted spouses Beluso a Promissory Note
and credit line up to 1.2 million available until the end of April
1997. Beluso couple constituted other than promissory notes a
real estate mortgage over a parcel of land in Roxas City. The 3
promissory notes were debited from Beliuso account with
UCPB. A consolidated loan for 1.3 million was released to
Beluso under single promissory note with due date of Feb 1998
to make credit 2.35 million they executed 2 more promissory
notes for 350.000. Beloso, claimed that the amount was not
given to them and their total debts was 2 million only. But the
UCPB applied interest rates ranging from 18% to 34 % from
1996 to Feb 1988 and Beluso failed to pay the total sum of
763,692.03. The UCPB continued to imposed charging these
interest rates and penalty.
The UCPB in Sept 1998 demanded from Beluso to pay
2,932,543 plus 25% atty fees again Belsulo failed to comply,
December 0f 1988 UCPB foreclosed property mortgaged and
Beluso debts rouse to 3,874,603. Feb 1999 Beluso petition with
RTC Makati to annul foreclosure and demanded accounting of
their accounts, March 2000 RTC ruled in favor to Beluso and
declared the sheriff sale certificate of the sale as void and for
UCPB to return the property to Beluso, it likewise ordered
Beluso to pay to UCPB sum of 1,560,308, motion was made by
UCPB but was denied hence went to CA, the appellate court
affirmed RTC ruling and therefor appealed via certiorari.
Article 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.
CASE DIGEST BY ALLAN PAILAN
G.R. No. L-23390 April 24,1967
Mindanao Portland Cement Corporation-
Petitioner/Appelle
vs.
Mc Donough Construction Company of Florida-
Respondent/Appellant
FACTS:
a.) February 13, 1962, Mindanao Portland Cement
Corporation & respondent Mc Donough Construction
Company of Florida USA executed a contract for the
construction by the respondent for the petitioner of a dry
portland cement plan at Iligan city.
b.) Turbull incorporated was engaged to design and
manage the construction of the plant, supervise the
construction, schedule deliveries amd the construction
work as well as check and certify ill contractors progress
and fiscal request for payments.
c.) Extensions of time for the termination of the project,
initially agreed to be furnished on December 17, 1961were
granted.
d.) October 22, 1962, respondent finally completed the
project and November 14, 1962, the delivery flood lamps
were complied.
e.) Petitioner claimed from respondent in damages in the
amount of more thanP2,000,000 allegedly occasioned by
the delay in the projects completion and respondent in turn
asked for more than P450,000 from petitioner for alleged
losses due top cost of extra work and overhead as of April
1962.
f.) August 8, 1962, petitioner sent respondent and on
September 24, 1962 written invitation to arbitrate, invoking
a provision in their contract regarding arbitration of
disputes.
g.) November 14, 1962, respondent with Turnbull Inc.’s
approval , asking for P403,700 as unpaid balance of the
consideration of contract.
h.) January 29, 1963, petitioner filed the present action in
the Court of First Instance of Manila to compel respondent
to arbitrate with it concerning alleged disputes arising from
their contract.
i.) February 23, 1963, respondent filed an answer denied
the alleged existence of disagreement between parties,
that claims and and damages should be resolved by
Turnbull Inc..
J.) May 13, 1964, court rendered decision with respect to
their rights and obligations under their contract and the
same should be submitted for arbitration pursuant to
paragraph 39 of contract and the arbitration clause – to
R.A. 876- The Arbitration Law.
ISSUE:
Whether or not disputes arises between parties should be
subjected to arbitration.
HELD:
Yes, since there obtain a written provision for arbitration
as well as failure on respondent’s part to comply therewith,
the court quo rightly ordered the parties to proceed to
arbitration in accordance with the terms of the agreement
(sec. 6, R.A. 876). respondent’s arguments touching upon
the merits of the dispute are improperly raised herein.
They should be addressed to the arbitrators. This
proceeding is merely a summary remedy to enforce the
agreement to arbitrate. The duty of the court in this case is
not to resolve the merits of parties claims but only to
determine if they should proceed to arbitration or not.
Frivolous/patently baseless claim should not be ordered to
arbitration, defense exist against a claim, does not make it
frivolous or baseless.
Judgment rendered is affirmed with cost against appellant.
 Article 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.
Discussion:
Juan a tenant of a rice farm of Mrs soledad was not able to give
the lease due to Mrs Soledad for two consecutive rice
season. Who will decide on the case? How do you think it will
be decided? Justice or Equity?
Base on Article 1310, the Court will only be the one to decide
on the based on justice and equity. Justice means giving each
what is due but equity is a process by which court relax the
sanctions of the law for humanitarian consideration.

Article 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.
Example:
James is indebted to Jake in the amount of P10,000.00. James
and Jake are the parties to the contract.
If Jake dies, James must pay the heirs of Jake. If Jake assigns his
credit to Paulo, then James is liable to pay Paulo.
If James dies and Sherwin is the heir, the Sherwin assumes the
obligation of James and Jake. Sherwin is bound by the contract
entered into by James, his predecessor in interest, in view of the
privity of interest between him and James. However, Sherwin is
not liable beyond the value of the property he inherits from
James, the decedent.
Article 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.
A mortgage his parcel of land in favor of C as a security for
his debt. The mortgage is duly registered to the registry of
property. Later on, A sold the land to B. In this case, C
bought the land subject to the mortgage constituted
thereon. In other words, B is bound by the contract between
A and C although he is stranger to said contract because
the right of C to the mortgage , being real right, follows the
property whenever it goes.
Article 1313
Creditors are protected in cases of contracts intended to defraud
them.
Discussion:
This action is article is an exception to the principle of relativity
which covers contracts that are binding only between parties,
their assigns and heirs.
When a debtor intends to defraud his creditor and alienates his
property without leaving enough for them, his creditor may file
for rescission of the said contracts. This action of rescission of
contract is also known as accion pauliana.
 Article 1314
Any third person who induces another to violate his contract
shall be liable for damages to the other contracting party.
So Ping Bun vs Court of Appeals 314 SCRA 752, September
21, 1999
Tek Hua Trading Co. entered into lease agreement with the
lessor Dee C. Chuan and Sons Inc. (DCCSI). When Tek Hua
Trading Co. was later dissolved and the original members built
Tek Hua Trading Corp. The grandson of the partners named So
Ping Bun, after the death of his grandfather, continued
occupying the warehouse for his own textile business.
In a letter to petitioner, the owner of Tek Hua Trading Corp.
informed the petitioner to vacate the warehouse. Petitioner
refused and requested formal contracts of lease with DCCSI to
which it acceded and a new lease of contract in favor of
Trendsetter was executed.
Tek Hua Enterprises Corp. then petitioned the court for
injuction, nullification of the lease contract between DCCSI and
So Ping Bun and damages, to which the Regional Trial Court of
Manila Branch 35 granted and was affirmed by the Court of
Appeals.
Hence, this petition for certiorari.
ISSUE
Whether or not So Ping Bun acted as intermeddler in violation
of Article 1314 of the New Civil Code.
HELD
Yes.
Damage is the loss, hurt or harm which results from injury and
damages are the recompense or compensation for the damage
suffered.
A duty which the law of torts is concerned with is respect for the
property of others, and a cause of action ex delicto may be
predicated upon unlawful interference by one person of the
enjoyment by the other of his private property. This may pertain
to a situation where a third person induces a party to renege on
or violate his undertaking under a contract. Such is a violation of
Article 1314 which states:
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 the consequences which,
according to their nature, may be in keeping with good faith,
usage and law.
Pilar Gil Vda. De Murciano vs. The Auditor General, Et. Al.,
Facts: This is a case where the property in question was
occupied and utilized from May 1, 1949 to October 8, 1949, by
the Artillery Firing Group of the Philippine Ground Force,
Armed Forces of the Philippines. On July 27, 1950 forwarded to
petitioner for her signature a quitclaim agreement whereby she
was to be paid the amount of P15,067.31 representing “complete
payment of rentals for the entire period of occupancy from 1
May 1948 to 8 October 1949 at the rate of P6.00 per hectare per
month”, with the understanding that upon payment of said
amount, “the Armed Forces of the Philippines is released from
all claims which you may have against it for the occupancy of
the land upon payment of the above-mentioned rentals”. A new
quitclaim agreement of exactly the same tenor as the first was on
April 4, 1951, prepared and signed by petitioner, through her
attorney-in-fact, and again returned to the Office of the Chief of
Engineers of the Armed Forces of the Philippines at Camp
Murphy, but before it could be signed by Lt. Col. Littaua of the
Philippine Service Command in representation of the Republic
of the Philippines, the Armed Forces of the Philippines was
reorganized and the Philippine Service Command abolished.
Issues: Whether or not the Auditor General is right in making a
decision on denying the payment for the balance of the back
rental of the land they used which belongs to Pilar.
Article 1316
Real contracts, such as deposit, pledge and commodatum, are not
perfected until the delivery of the object of the obligation.
Example:
Deposit. A and B agreed that before A leaves for abroad A
would deliver to B his Toyota car for safekeeping for
consideration. The contract between A and B is not perfected
until A delivers his Toyota car to B. This is so because a deposit
is a real contract and for its perfection the delivery of the thing is
required.
Pledge. A barrowed P1, 000.00 from B. A promised to give his
Rolex watch to B as security with the agreement that should
debt be unpaid at maturity the Rolex watch would be sold and
the proceeds applied to the payment of the debt. The contract of
pledge is not perfected until a delivers his Rolex watch to B.
Commodatum. Ernesto and Fausto agree that Ernesto will use
the car of Fausto for one week free of charge. The mere
agreement of the parties in this case is not sufficient to constitute
a contract of commodatum. Fausto should deliver the car to
Ernesto because commodatum is a real contract and like in
deposit and pledge, the object thereof must be delivered.
Case digest 1316 Perez vs Pomar 2 Phil. 682 (1903) By: Evelyn
Balaoro
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.
He has been authorized or
Pedro did not authorized Gina to sell the hacienda, but upon
being informed that she had done so, instead of demanding the
annulment of the sale, Pedro proceeded to collect the installment
the amount of the promissory note given for the purchase of the
sale, and necessarily implies his waiver of the right to avoid the
contract.