These notes focus on Article 1306, the liberty of contracts as well as the principle of mutuality.
Unconscionable interest rates may be declared void for being contrary to morals.
In Union Growers Inc. case: Circular No. 905 of the Bangko Sentral ng Pilipinas allows contracting parties to stipulate the rates of interest.
There is no absolute liberty. Stipulations must not be contrary to law, morals, good customs, public order, or public policy.
In relation to Article 2035, what may not be compromised:
- civil status of persons
- validity of a marriage or legal separation
- ground for legal separation
- future support
- the jurisdiction of course
- future legitime
Non-involvement clause could be declared void depending on the circumstances. If the non-involvement clause is all-encompassing as to constitute restraint of trade, it is contrary to public policy.
Mutuality of contracts (Article 1308). Parties may agree to waive certain rights as long as the waiver is not contrary to law, morals, public policy, etc.
Article 1347 in relation to Article 905 on Future Inheritance: No contract may be entered into upon future inheritance except in cases expressly authorized by law.
GSIS Case. Facts: construction of house; bad bargain; asking for additional payment because of increase in the cost of construction materials but the contract did not provide an escalation clause. SC: contractor is not entitled to additional payment.
Security Bank Case. Facts: construction of building and contract provided for an escalation clause. SC: parties are bound by the principle of mutuality of contracts. Security Bank must PAY.
Article 311 Relativity of Contracts = binding effect of contracts.
What is stipulation pour autrui? A stipulation in favor of third persons, not parties to the instrument.
How are contracts perfected? Give examples of each of them. (Article 1315 and 1316)
Contracts are perfected depending upon their nature. Consensual contracts are perfected by mere consent, such as contract of sale. Real contracts, such as commodatum, are perfected until the delivery of the object of the obligation.
Naguiat vs CA. Payment of a check is not equivalent to delivery. Contract of mutuum is not perfected until the proceeds of the check have been encashed. It only constitutes consensual agreement to lend money at a future time.
When is there consent? When there is meeting of the minds as to the object and cause or consideration.
Consent may be proven by evidence aliunde.
Object must be definite, determinate, and within the commerce of man.
Cause or consideration is presumed (Article 1354)
Article 1354 in relation to Article 1479 (Options): Is the consideration distinct from the price? Is it always in the form of money?
Answer: Read Serra vs. Court of Appeals and RCBC of Sorsogon. The stipulation whereby the building shall be transferred to the lessor int he case the lessee does not exercise the option to buy is the consideration of the option. Therefore, a consideration may be an undertaking, distinct from the price.
In Sanchez vs Rigos, no money, undertaking, or anything of value was given, the offer was simply accepted. The offer may be withdraw anytime prior to the exercise of the option because there's no consideration distinct from the price.
That's it for now. I suggest you read the full text of the jurisprudence mentioned.
