Forms of Contracts under Philippine Laws

By: grem1


As a general rule, contracts are valid and enforceable in whatever form they may appear provided that consent, object and cause are present. Thus, contracts may be made orally or in writing. However, the law may require certain contracts to appear in some form, which form may be:

a) For validity:
If the form is required for validity, that form is indispensable and if it is not followed it is void. For example donations of real property should be made and accepted in a public document (Art. 748) and those of personal property in excess of P5,000 should be made and accepted in writing (Art 748) to be enforceable (Art 1403)

b) For enforceability:
Observance of this form is required only in order to be able to enforce the contract. Thus, contracts covered by the Statute of Frauds are required to be in writing to be enforceable.

c) For convenience.
Observance of this form is for the mere convenience of the parties. Hence, even if that form is not observed, the contract is nevertheless valid and enforceable between the parties.
Examples:
a) Mr. Castro donated a parcel of land to Mrs. Ignacio in a private document. The latter accepted the donation in a private document. The donation is void. To be valid, a donation of real property should be made and accepted in a public document.
b) Mrs. Faelnar orally sold to Mrs. Sanchez a parcel of land worth P1million pesos. The parties agreed that the delivery of the land and payment of the price shall be made on January 21, 2008. The sale is valid but cannot be enforced.
c) Mr. Tan is indebted to Mr. Lim in the amount of P500,000.00 As a security of his debt, Mr. Tan orally mortgaged his land to Mr. Lim. Although the mortgage is not in a public document, the same is valid and enforceable between the parties. Hence if the debt is not paid on maturity, Mr. Lim is given the right of foreclosing the mortgage on the land.

RIGHT OF COMPELLING OBSERVANCE OF FORM REQUIRED BY LAW

When all requirements for validity and enforceability of a contract are present, but the contract is not executed in a form (convenience) required by law, the contracting parties may compel each other to observe the form. This right cannot however be exercised if the form is one for validity and enforceability.

Example:
Mr. Rollie Luna sold a parcel of land to Spouses Mr. & Mrs. Martinez. After the documents were signed, the spouses are interested in registering the the sale with the Register of Deeds but registration requires a public document. The spouses may compel Mr. Luna to execute the contract of sale in a public document because the sale is both valid and enforceable under the Statute of Frauds Art. 1358. 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

(2) The cession, repudiation, or renunciation of hereditary rights or those of conjugal partnership of gains.
(3) The power to administer property.
(4) The cession of actions or rights proceeding from an act appearing in a public document Form for Convenience

The public document is for mere convenience of the parties and therefore the contract is still valid and enforceable between the parties even if such form is not observed.
For example:

(1) Spouses Gina and Manny are owners of a coconut plantation situated in Alcoy Cebu. The spouses are now staying in Cebu City. The spouses appoints Mr Cesar Maderazo to manage the said coconut plantation. The appointment of Mr. Maderazo should be done in a public document for the convenience of the parties.

(2) Mr. Rudy Pino mortgaged a parcel of land to Joanna Corporation for the payment of a loan. They executed the mortgage in a public document. The said corporation assigns credit to Mr. Razon. The assignment of that credit is required to appear in a public document for the convenience of the parties.

(3) Josephine borrowed from William P200,000.00 To secure its payment, Josephine mortgaged a parcel of land to William. The mortgage is required to appear in a public document and if the mortgage debt is paid, the extinguishment of the mortgage should likewise appear in a public document for the convenience of the parties.

(4) Nelson and Mario are the only heirs of their parents. Nelson is interested in renouncing his hereditary rights in favor of Mario. The renunciation is required to be done in a public document for the convenience of the parties

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