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B. Formality

1. CLASSIFICATION OF CONTRACTS

1) Consensual contracts – essential requisites

2) Formal / solemn contracts – essential requisites + formality/solemnity

3) Real contracts – essential requisites + delivery of object

2. CONSENSUAL CONTRACTS

a. Concept

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. (Article 1315, Civil Code)

Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (Article 1356, Civil Code)

These essential requisites last mentioned are normally (1) consent (2) proper subject matter, and (3) consideration or causa for the obligation assumed (Article 1318). 3 So that once the three elements exist, the contract is generally valid and obligatory, regardless of the form, oral or written, in which they are couched. (Dauden-Hernandez v. De Los Angeles, En Banc, G.R. No. L-27010, 30 April 1969)

b. REQUIREMENTS

1) Essential requisites

1) Consent

2) Object

3) Causa (i.e. consideration)

2) No form required by default – with exceptions

a) Solemn / formal contracts

b) Statute of Frauds

It is thus seen that to the general rule that the form (oral or written) is irrelevant to the binding effect inter partes of a contract that possesses the three validating elements of consent, subject matter, and causa, Article 1356 of the Code establishes only two exceptions, to wit:

(a) Contracts for which the law itself requires that they be in some particular form (writing) in order to make them valid and enforceable (the so-called solemn contracts)…

(b) Contracts that the law requires to be proved by some writing (memorandum) of its terms, as in those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. Their existence not being provable by mere oral testimony (unless wholly or partly executed), these contracts are exceptional in requiring a writing embodying the terms thereof for their enforceability by action in court. (Dauden-Hernandez v. De Los Angeles, En Banc, G.R. No. L-27010, 30 April 1969)

3. FORMAL / SOLEMN CONTRACTS

a. Concept

Contracts for which the law itself requires that they be in some particular form (e.g. in writing) in order to make them valid and enforceable (the so-called solemn contracts). (Dauden-Hernandez v. De Los Angeles, En Banc, G.R. No. L-27010, 30 April 1969)

b. Requirements

1) Essential requisites + formality/solemnity

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. (Article 1356, Civil Code)

If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.(Article 1357, Civil Code)

c. FORMALITY / SOLEMNITY

1) In a public document

The following must appear in a public document:

1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405;

2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;

3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;

4) The cession of actions or rights proceeding from an act appearing in a public document. (Article 1358, Civil Code)

In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.(Article 749, Civil Code)

2) In a private document (i.e. in writing)

a) All other contracts exceeding Php500.00

All other contracts [excluding those required to be in a public document under Article 1358] where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405. (Paragraph 2, Article 1358, Ibid.)

b) Donation of movables in excess of Php500.00

If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing, otherwise, the donation shall be void. (Paragraph 3, Article 748, Ibid.)

c) Interest payments

No interest shall be due unless it has been expressly stipulated in writing. (Article 1956, Civil Code)

d) Limitation of liability between common carrier and shipper or owner

A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:

1) In writing, signed by the shipper or owner;

2) Supported by a valuable consideration other than the service rendered by the common carrier; and

3) Reasonable, just and not contrary to public policy. (Article 1744, Civil Code)

e) Contract of partnership with immovable property contributed

A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument. (Article 1773, Civil Code)

f) Real estate agent’s authority

When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (Article 1874, Civil Code)

g) Contract of antichresis

The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void. (Article 2134, Civil Code)

h) Express warranty under Consumer Act (see Article 68, R.A. 7394)

i) Policy of insurance (see Section 49, P.D. 612 or the Insurance Code, as amended)

4. REAL CONTRACTS

a. Concept

1) Requirements

Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation. (Article 1316, Civil Code)

2) When delivery is required for perfection

a) Deposit

b) Pledge

c) Commodatum

Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation. (Ibid.)

d) Movable with value less than Php500.00

An oral donation requires the simultaneous delivery of the [movable] thing or of the document representing the right donated. (Paragraph 2, Article 748, Ibid.)

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