Title II Contracts
Chapter 1 General Provisions
Contracts are agreements binding parties to perform obligations or provide
services, defined by mutual consent and governed by the law, good morals, and
public policy (Art. 1305-1306). Innominate contracts follow the parties' stipulations,
general rules, analogous contracts, and customs (Art. 1307). Contracts obligate
both parties equally, and decisions on performance may involve third parties if
equitable (Art. 1308-1310). They bind the parties, their heirs, and assigns, except
when non-transferable, and may include enforceable benefits for third parties if
accepted before revocation (Art. 1311-1312). Fraudulent contracts affecting
creditors are prohibited, and third parties inducing breaches are liable for damages
(Art. 1313-1314). Consent perfects contracts, making them binding to their terms
and lawful consequences, while real contracts require delivery of the object to take
effect (Art. 1315-1316). Contracts made without authority are unenforceable unless
ratified by the represented party (Art. 1317).
Chapter 2 Essential Requisites of Contracts
Contracts require consent, a certain object, and a lawful cause (Art.
1318). Consent arises from a clear offer and acceptance, but it must be free from
mistake, violence, intimidation, undue influence, or fraud, or the contract is voidable
(Art. 1319-1330). Offers become ineffective upon the death or incapacity of either
party before acceptance and can be withdrawn unless supported by consideration
(Art. 1323-1324). Minors, insane persons, and others with legal incapacities cannot
give valid consent, except during lucid intervals (Art. 1327-1328). Fraud,
misrepresentation, and undue influence vitiate consent, while simulated contracts
may be void or enforceable depending on the parties' true intentions (Art. 1338-
1346).
The object of a contract must be lawful, within commerce, and
determinable in kind and quantity (Art. 1347-1349). Impossible objects or services
invalidate contracts.
The cause of a contract is its underlying reason, such as reciprocal
promises, remuneration, or liberality (Art. 1350). Contracts with unlawful or non-
existent causes are void, and false causes render them invalid unless a lawful cause
is proven (Art. 1352-1353). Inadequate cause does not void a contract unless fraud,
mistake, or undue influence exists (Art. 1355).
Chapter 3 Form of Contracts
Contracts are valid and binding regardless of their form, provided all essential
requisites are met. However, if the law mandates a specific form for validity,
enforceability, or proof, compliance with such requirements is indispensable (Art.
1356). Once a contract is perfected, parties may compel each other to observe the
prescribed form (Art. 1357).
Certain acts and contracts must be in a public document, including those
involving real rights over immovable property, the renunciation of hereditary or
conjugal partnership rights, powers of administration over property, and the cession
of rights from acts in public documents. Other contracts involving amounts over five
hundred pesos must be in writing, except as otherwise provided by law for specific
cases like sales of goods (Art. 1358).
Chapter 4 Reformation of Instruments
Reformation of instruments occurs when a contract accurately reflects the
meeting of the parties' minds, but the written instrument fails to express their true
intentions due to mistake, fraud, inequitable conduct, or accident (Art. 1359). If no
meeting of minds occurred, annulment—not reformation—is the appropriate
remedy. General principles on reformation apply unless inconsistent with this Code
(Art. 1360).
Reformation is allowed in cases of mutual mistake (Art. 1361), fraudulent or
inequitable actions (Art. 1362), and deliberate concealment of errors (Art. 1363).
Courts may order reformation when the instrument’s errors arise from negligence or
bad faith during its drafting (Art. 1364) or when an agreement like a mortgage is
misrepresented as a sale (Art. 1365).
Reformation is not permitted for simple unconditional donations, wills, or
when the real agreement is void (Art. 1366). A party cannot seek reformation after
attempting to enforce the original instrument (Art. 1367). Either party or their
successors can petition for reformation in mutual mistakes; otherwise, only the
injured party or their heirs may do so (Art. 1368). Procedures for reformation are
governed by Supreme Court rules (Art. 1369).
Chapter 5 Interpretation of Contracts
Contracts are to be interpreted according to the clear and literal meaning of
their terms unless such interpretation contradicts the evident intention of the
parties, in which case the latter prevails (Art. 1370). The intention of the contracting
parties can be discerned by considering their contemporaneous and subsequent
acts (Art. 1371).
General terms are limited to what the parties intended and do not cover
unrelated matters (Art. 1372). Ambiguous stipulations are interpreted to make the
contract effective (Art. 1373), and all provisions are analyzed together for
consistency (Art. 1374). Words with multiple meanings are interpreted based on the
contract’s nature and purpose (Art. 1375), and local customs help clarify
ambiguities or fill omissions (Art. 1376).
Ambiguities are resolved against the party responsible for them (Art. 1377). If
uncertainty persists, doubts in gratuitous contracts are resolved in favor of minimal
obligations, while onerous contracts favor mutual benefits. However, if the primary
object of the contract remains unclear, the contract is void (Art. 1378). The
principles of interpretation in Rule 123 of the Rules of Court also apply (Art. 1379).
