SPECIAL CONTRACTS

CIVIL LAW: VII. SPECIAL CONTRACTS

Special contracts, as part of civil law in the Philippines, are specific agreements that involve particular stipulations and relationships between contracting parties, regulated primarily under the Civil Code of the Philippines (Republic Act No. 386). These contracts possess unique characteristics that distinguish them from general contractual agreements. Below is a comprehensive breakdown:

GENERAL PRINCIPLES GOVERNING SPECIAL CONTRACTS

  1. Freedom to Contract (Art. 1306):

    • Parties may establish any terms and conditions, provided they are not contrary to law, morals, good customs, public order, or public policy.

  2. Mutuality of Contracts (Art. 1308):

    • Contracts must bind both parties, and neither party can unilaterally withdraw except under the terms agreed upon or as allowed by law.

  3. Relativity of Contracts (Art. 1311):

    • Contracts bind only the contracting parties, their assigns, and heirs unless the rights and obligations are not transmissible by nature or stipulation.

  4. Form of Contracts (Art. 1356-1358):

    • Special contracts may require specific formalities for validity or enforceability, such as being in writing or registered, depending on their nature.

TYPES OF SPECIAL CONTRACTS

1. Contracts of Sale (Arts. 1458–1637):

  • Definition: An agreement where one party (seller) obligates to deliver a determinate thing, and the other party (buyer) obligates to pay a price certain in money or its equivalent.

  • Key Provisions:

    • Object and Price (Art. 1460): The object must be determinate and lawful; the price must be certain.
    • Delivery and Ownership (Art. 1497): Ownership transfers upon delivery, unless otherwise stipulated.
    • Warranties: Includes warranty against eviction (Arts. 1548–1556) and warranty against hidden defects (Arts. 1561–1571).

  • Subtypes:

    • Sale with a right to repurchase (Pacto de retro).
    • Installment sales under the Maceda Law (RA 6552).

2. Contracts of Lease (Arts. 1642–1688):

  • Definition: A lease is an agreement where one party (lessor) grants the other (lessee) the right to use or occupy property for a specified period in exchange for rent.

  • Key Features:

    • Lease of things: Includes real property (e.g., land, buildings) and personal property.
    • Lease of services: Governed by employment laws in conjunction with the Civil Code.

  • Notable Rules:

    • Duration limits for real property (Art. 1687).
    • Lessee’s right of first refusal in some cases.

3. Agency (Arts. 1868–1932):

  • Definition: A contract where one person (agent) acts on behalf of another (principal) with authority.
  • Characteristics:
    • Gratuitous unless there is an agreement for compensation.
    • Subject to fiduciary duty and strict accountability.
  • Termination:
    • By principal’s revocation, agent’s resignation, death, or expiration of term.

4. Partnership (Arts. 1767–1867):

  • Definition: A contract where two or more persons agree to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves.
  • Essential Elements:
    • Contribution (cash, property, or skill).
    • Common business purpose.
    • Intention to divide profits.
  • Liabilities:
    • Partners are solidarily liable for obligations under the partnership.

5. Loan (Arts. 1933–1954):

  • Definition: A contract where one party (creditor) delivers money or consumable goods to another (debtor), with the obligation to repay the same amount or equivalent.
  • Types:
    • Mutuum: For consumable goods.
    • Commodatum: For non-consumable goods, gratuitous in nature.

6. Deposit (Arts. 1962–2009):

  • Definition: A contract where one party (depositor) delivers a thing to another (depositary) for safekeeping, with the obligation to return the item upon demand.
  • Subtypes:
    • Voluntary Deposit: By the depositor's will.
    • Necessary Deposit: Due to unforeseen events or urgent need.

7. Commodatum and Precarium (Arts. 1935–1954):

  • Commodatum: Gratuitous loan for the use of a thing, which must be returned after use.
  • Precarium: Where the owner can demand the return at will.

8. Guaranty and Suretyship (Arts. 2047–2084):

  • Guaranty: A contract where one guarantees the obligation of another in case of default.
  • Suretyship: The surety binds itself solidarily with the principal debtor.

9. Insurance (Arts. 2011–2027, Insurance Code):

  • A contract where one party (insurer) undertakes to indemnify another (insured) for loss or damage upon the occurrence of a specific event.

10. Pledge, Mortgage, and Antichresis (Arts. 2085–2132):

  • Pledge: Delivery of movable property to secure an obligation.
  • Mortgage: Use of immovable property as security, without delivering possession.
  • Antichresis: Creditor is given possession of real property to apply its fruits to the interest and principal of a debt.

11. Contract of Carriage (Arts. 1732–1766):

  • Governs the transportation of persons or goods.
  • Diligence Required:
    • Extraordinary diligence for common carriers.
    • Ordinary diligence for private carriers.

12. Contracts for Services (Arts. 1713–1723):

  • Construction Contracts: Builder undertakes construction for agreed compensation.
  • Service Agreements: Subject to labor laws and regulations.

13. Trusts (Arts. 1440–1457):

  • Governed by principles of equity and fiduciary relationships.
  • May be express or implied.

GENERAL REMEDIES IN SPECIAL CONTRACTS

  1. Specific Performance: Enforce exact fulfillment of contractual obligations.
  2. Rescission (Art. 1381): Cancellation of a contract due to defects or breach.
  3. Damages (Arts. 2201–2235):
    • Includes actual, moral, nominal, temperate, liquidated, or exemplary damages.
  4. Resolution (Art. 1191):
    • Cancellation due to substantial breach.

SPECIAL LAWS AFFECTING SPECIAL CONTRACTS

  1. Consumer Act of the Philippines (RA 7394):
    • Governs warranties in sale contracts, particularly consumer goods.
  2. Maceda Law (RA 6552):
    • Provides protection to buyers in installment contracts for real property.
  3. Retail Trade Liberalization Act (RA 11595):
    • Regulates contracts for foreign entities in retail businesses.

Special contracts are pivotal in Philippine legal practice. Proper adherence to statutory requirements and jurisprudence is essential to avoid invalidity and disputes. Each type of special contract has distinct nuances that require precise legal understanding and application.

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