Civil Law > V. Obligations and Contracts > B. Contracts > 3. Real vs. Consensual Contracts

In the Philippine legal system, contracts are generally governed by the Civil Code, specifically under Book IV, Title II, which covers Obligations and Contracts. One significant aspect of contract law within this jurisdiction is the distinction between real contracts and consensual contracts. This distinction hinges on the mode of perfection and the necessity of the delivery of an object for the contract to produce its legal effects. Below is a meticulous examination of both types of contracts, their characteristics, and how they differ within Philippine law.

I. Consensual Contracts

Definition and Nature

Consensual contracts are agreements that are perfected solely by the meeting of the minds between the parties on the subject matter and cause. In consensual contracts, the agreement becomes enforceable and binding at the moment of consent. The delivery of an object, although it may be a future obligation, is not required for the contract to be perfected.

Legal Basis

Under Article 1315 of the Civil Code, “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.” This provision reflects the principle that in consensual contracts, the mere agreement of the parties is sufficient to give rise to a binding contract.

Common Types of Consensual Contracts

Contract of Sale (except for certain types of sale, e.g., chattel mortgage or contract to sell real property, which may involve specific delivery requirements for effectivity).
Lease – Agreement on the terms and rental fee is sufficient for perfection.
Agency – The agent’s consent and the principal’s authorization, even without delivery of property, can establish an agency relationship.

Important Characteristics of Consensual Contracts

Perfected by Consent Alone: No delivery of an object is needed for the contract’s perfection.
Binding Effect: From the moment of consent, the contract obliges parties to its terms.
Enforceability: Enforceable once the meeting of minds is established, provided it adheres to statutory requirements on form if specific formalities are necessary (e.g., sales of real property require written form for enforceability but not perfection).

Examples in Philippine Law

In sales contracts, consent between buyer and seller on the object and price is sufficient to perfect the contract, even if delivery and payment are still to occur later. However, this differs if the transaction involves movable properties with installment payments or mortgages, which may require formalities beyond consent.

II. Real Contracts

Definition and Nature

Real contracts, unlike consensual contracts, require not only consent but also the actual delivery of the object for their perfection. This means that the mere agreement between the parties is insufficient to make the contract binding; the physical handing over of the thing (or object) is necessary for the contract to take effect.

Legal Basis

Article 1316 of the Civil Code provides: “Real contracts, such as deposit, pledge, and commodatum, are not perfected until the delivery of the object of the obligation.” This provision highlights the need for delivery as an essential element of real contracts, as delivery transforms an agreement into an enforceable contract.

Common Types of Real Contracts

Deposit – The depositor must deliver the item to the depositary for the deposit contract to be perfected.
Pledge – The debtor or a third party must deliver the movable item to the creditor as security for the debt.
Commodatum – The lender must physically transfer the object (usually non-consumable goods) to the borrower.
Mutuum (Loan for Consumption) – The lender must transfer ownership of the consumable object (e.g., money, grain) to the borrower for the contract to be perfected.

Important Characteristics of Real Contracts

Delivery is Essential: The contract remains incomplete until delivery is made, even if the terms are agreed upon.
Binding Effect on Delivery: Obligations arise only when the object is transferred from one party to the other.
Enforceability upon Perfection: Once the contract is perfected by delivery, it becomes binding according to its terms.

Examples in Philippine Law

In a pledge, for example, if a debtor intends to secure a loan by pledging a valuable item, the contract of pledge is not perfected merely by agreement. The item must be physically handed over to the creditor. Similarly, in commodatum, a type of gratuitous loan, the lender must deliver the item to the borrower before the agreement becomes enforceable.

III. Key Distinctions Between Real and Consensual Contracts

Perfection:
- Consensual Contracts: Perfected by mere consent (agreement).
- Real Contracts: Perfected only by the delivery of the object.
Nature of Obligation:
- Consensual Contracts: Create obligations upon mutual consent.
- Real Contracts: Obligations arise only after the actual transfer of possession of the object.
Common Examples:
- Consensual: Sale, lease, agency, partnership.
- Real: Deposit, pledge, commodatum, mutuum.
Application in the Philippine Legal System:
- For consensual contracts, courts will recognize obligations based solely on the agreement of the parties. For real contracts, courts require proof of delivery before enforcing obligations under the contract.

IV. Legal Implications of the Distinction

The distinction between real and consensual contracts has significant legal implications in terms of obligations and remedies available to the parties:

Proof of Contract Existence: In consensual contracts, proving the existence of the agreement suffices. In real contracts, delivery must be shown to establish enforceability.
Breach of Contract: In consensual contracts, breach occurs when a party fails to perform as agreed upon. In real contracts, breach occurs only after delivery and subsequent failure to fulfill the agreed obligations.
Remedies: For consensual contracts, remedies are available immediately upon a party's failure to perform, while for real contracts, remedies are available only after the object has been delivered and one party fails to comply with subsequent obligations.
Risk of Loss: In real contracts, risk of loss often follows the delivery of the object, which places certain risks on the recipient. In consensual contracts, the allocation of risk depends on specific agreements or statutory provisions.

V. Conclusion

Understanding the distinction between real and consensual contracts is fundamental in Philippine contract law. This distinction determines when and how obligations are enforceable and shapes the available legal remedies in case of disputes. Consensual contracts are perfected by mutual consent, making them effective immediately, while real contracts require actual delivery to attain legal effect. This conceptual framework is essential for interpreting the enforceability of agreements and rights under Philippine law.