CONTRACTS

Chapter 2 Essential Requisites of Contracts

GENERAL PROVISIONS
(Art. 1318)
Section 2 Object of Contracts
(Arts. 1347 1349)

I. Definitions
1. Future inheritance is any property or right, not in existence or capable of
determination at the time of the contract, that a person may inherit in the
future, such person having only an expectancy of a purely hereditary right.

2. Physical impossibility when the thing or service in the very nature of things
cannot exist or be performed. With particular reference to services (see Arts.
1206, 1207.), the impossibility may be:
a. Absolute when the act cannot be done in any case so that nobody
can perform it; or
b. Relative when it arises from the special circumstances of the case or
the special conditions or qualifications of the obligor.

II. Discussions
1. Give the requisites of things as object of a contract.
In order that things may be the object of a contract, the following
requisites must be present:
(1) The thing must be within the commerce of men, that is, it can legally
be the subject of commercial transaction (Art. 1347.);
(2) It must not be impossible, legally or physically (Art. 1348.);
(3) It must be in existence or capable of coming into existence (see Arts.
1461, 1493, 1495.); and
(4) It must be determinate or determinable without the need of a new
contract between the parties. (Arts. 1349, 1460, par. 2.)

2. Give the requisites of service as object of a contract.
In order that service may be the object of a contract, the following
requisites must concur:
(1) The thing must be within the commerce of men;
(5) It must not be impossible, legally or physically (Art. 1348.); and
(6) It must be determinate or capable of being made determinate. (Arts.
1318[2], 1349.)

3. May a contract be entered upon future inheritance?
ART. 1347[2]. No contract may be entered into upon future inheritance
except in cases expressly authorized by law.
III. Problems
Explain or state briefly the rule or reason for your answer.
1. S sold to B for 100,000 a parcel of land belonging to S located in his
hometown without specifying its exact location and area. Is the sale valid?
The sale of the land is valid because the object is determinate as to its
kind although it has not been particularized. The fact that the area is not
determinate shall not be an obstacle to the existence of the contract because
such area can be determined by the parties without the need of entering into
another contract.

1. S has several pigs. Under a contract of sale, S binds himself to deliver a pig to
B for 3,000 if the pig has a weight of at least 30 kilos. State the binding
effect of the sale.
Since the obligation consists in the delivery of a generic thing which is
determinable, and whose quality and circumstances have been stated which is B
will pay for a price of 3,000 if the pig has a weight of at least 30 kilos, so S
cannot compel B to accept a pig that weighs 30 kilos below. The moment the pig
is delivered, it becomes determinate.


Chapter 3 Form of Contracts
(Art. 1356 1358)

I. Definitions
1. Form of contract refers to the manner in which a contract is executed or
manifested.

2. Informal contract (or common contract) or that which may be entered into
in whatever form provided all the essential requisites for their validity are
present. (Art. 1356.) This refers only to consensual contracts (Art. 1356.),
such as the contract of sale. It may be oral or written.

II. Discussions
1. What may be the form of a contract?
The contract may be oral, or in writing, or partly oral and partly in writing.
If in writing, it may be in a public or a private instrument.

2. If the law requires a contract to be in writing, will the contract be invalid if it
is not in writing?
ART. 1356. Contracts shall be obligatory, in whatever form they have
been entered into, provided all the essential requisites for their validity are
present. However, when the law requires that a contract be in some form in
order that it may be valid or enforceable, or that a contract be proved in a
certain way, that requirement is absolute and indispensable. In such cases, the
right of the parties stated in the following article cannot be exercised.

1. For validity
If the contract is not in the form provided by law for its validity, the
contract is void.
2. For enforceability
If the contract is not in the form provided by law for its enforceability, the
contract, though it has all the essential requisites for validity, cannot be enforced
against the party sought to be charged.
3. For convenience
If the contract is valid and enforceable but the same is not in the form
required by law, the contracting parties may compel each other to observe that
form. This right may be exercised simultaneously with the action upon the
contract. (Art. 1357.)

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S (seller) and B (buyer) entered into a contract of sale of a parcel of land. The
sale is embodied only in a private document and not in a public instrument
because it was not acknowledged before a notary public as required by law.
Is the sale valid?
The sale is valid because it was in writing even though it was not made to
appear in a public instrument.

2. In the same example, what rights if any, are acquired by the contracting
parties?
The contract is valid and binding, although it is still executory, but only as
between the parties and not as against third persons without notice until the
sale is registered in the Registry of Property.
B has a right to compel S to put the contract in a public instrument so
that it can be registered to affect third persons, even in the absence of express
agreement between them to the effect.


Chapter 4 Reformation of Instruments
(Art. 1359 1369)

I. Definitions
1. Reformation is that remedy allowed by law by means of which a written
instrument is amended or rectified so as to express or conform to the real
agreement or intention of the parties when by reason of mistake, fraud,
inequitable conduct, or accident, the instrument fails to express such
agreement or intention.

2. Mutual mistake is mistake of fact that is common to both parties of the
instrument which causes the failure of the instrument to express their true
intention.

II. Discussions
1. What is the reason why the law in certain cases permits a written instrument
to be reformed or corrected?
Equity orders the reformation of an instrument in order that the
intention of the contracting parties may be expressed.
The courts do not attempt to make another contract for the parties. The
rationale of the doctrine is that it would be unjust and inequitable to allow the
enforcement of a written instrument which does not reflect or disclose the real
meeting of the minds of the parties. The rigor of the legalistic rule that the
written instrument should be the final and inflexible criterion and measure of
the rights and obligations of the contracting parties is thus tempered, to forestall
the effects of mistake, fraud, inequitable conduct or accident. (Report of the
Code Commission, pp. 55-56.)


2. In what way is reformation of written instrument distinguished from the
annulment of a contract?
In reformation, there has been a meeting of the minds of the parties (Art.
1359, par. 1.); hence, a contract exists but the written instrument purporting to
embody the contract does not express the true intention of the parties by reason
of mistake, fraud, inequitable conduct, or accident.
In annulment, there has been no meeting of the minds, the consent of
one of the parties being vitiated by mistake, etc. (Ibid., par.2.)


III. Problems
Explain or state briefly the rule or reason for your answer.
1. S sold his horse X to B under a written contract of sale. What B thought S
was selling him is horse Y. Can S ask for the reformation of the contract
against the objection of B who is agreeable to the sale of horse X?
Since both parties commit mutual mistake, Art. 1361 applies.

ART. 1361. When a mutual mistake of the parties causes the failure of the
instrument to disclose their real agreement, said instrument may be reformed.

2. Suppose in the same example, S was intending to sell his horse Y. Give the
three (3) cases when he can ask for the reformation of the contract.
ART. 1362. If one party was mistaken and the other acted fraudulently or
inequitably in such a way that the instrument does not show their true intention,
the former may ask for the reformation of the instrument.

ART. 1363. When one party was mistaken and the other knew or believed
that the instrument did not state their real agreement, but concealed that fact
from the former, the instrument may be reformed.

ART. 1364. When through the ignorance, lack of skill, negligence or bad
faith on the part of the person drafting the instrument or of the clerk or typist,
the instrument does not express the true intention of the parties, the courts may
order that the instrument be reformed.