Article 1315.

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.

*Responsibility of the parties upon perfection of consensual contract are extended to all consequences
which are natural effects of the contract taking into consideration of its real objects, purposes or aims and
other related things in keeping with the law, good faith and usage.

CLASSIFICATIONS OF CONTRACTS ACCORDING TO PERFECTION

(1) Consensual contract or that which is perfected by mere consent of the parties.

Example: marriage, partnership agreement

ILLUSTRATION

When Anne (an employer) hires Bryan (an employee), as soon as both have agreed on the terms
of employment, a contract commences.

(2) Real contract or that which is perfected, in addition to the above, by the delivery of the thing
subject matter of the contract.

ILLUSTRATION
Xian borrowed from Yanee Php5,000. As Xian’s security for the debt, Xian promised to pledge
his diamond ring to Yanee.

Before the delivery of the ring to Yanee, the contract of pledge is not yet perfected. If Xian later
on refuses to pledge the ring, Yanee can demand the payment of the obligation although it is with
a period. But Yanee cannot require Xian to deliver the ring as security because there is no real
contract of pledge yet. There is merely a consensual contract to constitute a pledge. What exists,
is a personal right, the right of action on the part of Yanee to demand the constitution of the
pledge.

EFFECT OF PERFECTION OF THE CONTRACT

From the moment the parties come to an agreement on a definite subject matter and valid
consideration they are bound not only:

(1) to the fulfillment of what has been expressly stipulated 

EXAMPLE
Anne sold a horse to Bryan for Php15, 000. The details of this contract as regards the place of
delivery of the horse and payment of the price, the time of delivery and payment, etc. are not
included. These details are furnished by law and have been taken up in the various provision of
the Code.

(2) to all the consequences which according to their nature, may be in keeping with good
faith, usage, and law. (Art. 1315.)
EXAMPLE
Anne agreed to sell his horse to Bryan. It was stipulated that Anne should deliver the horse to
Bryan the next day. 

In this case, Anne has the obligation to deliver the horse the next day as expressly stipulated in
the contract. Anne has also the obligation to take care of the horse pending delivery and to
warrant that he has the right to sell the horse although nothing is said about the obligation in the
contract as this is in keeping with good faith, usage, and law.
Article 1316. Real contracts, such as deposit, pledge and
commodatum are not perfected until the delivery of the object of
the obligation.
Discussion:

Perfection of real contracts. The article refers to real contracts which require delivery of
the object for their validity, in addition to the presence of the other essential elements of
a contract: consent subject matter and cause of consideration.

Real contract is perfected from the moment of the delivery of the object of the
obligation.

Elements of Real Contract.  The elements of a real contract are consent, object cause
and delivery.

Meaning of deposit:  A deposit is constituted from the moment a person receives a

thing belonging to another, with the obligation of safely keeping it and returning the
same.  If the safekeeping of the thing delivered is not the principal purpose of the
contract, there is no deposit but some other contract.

Meaning of Pledge:  A pledge is a contract by virtue of which one person delivers to

another a movable, or instrument evidencing incorporeal rights, for the purpose of
securing a principal obligation, with the understanding that when the obligation is
fulfilled the thing or the instrument shall be returned by the creditor to the debtor with its
fruits and accessions.

Meaning Commodatum:  Commodatum is a species of bailment, by which one of the

parties binds himself to return to the other certain personal chattels which the latter
delivers to him   to be used by him without reward.  It is actually a loan for use.

Example:

Deposit. A and B agreed that before A leaves for abroad A would deliver to B his
Toyota car for safekeeping for consideration.  The contract between A and B is not
perfected until A delivers his Toyota car to B.  This is so because a deposit is a real
contract and for its perfection the delivery of the thing is required.

Pledge. A barrowed P1,000.00 from B.  A promised to give his Rolex watch to B as
security with the agreement that should debt be unpaid at maturity the Rolex watch
would be sold and the proceeds applied to the payment of the debt.  The contract of
pledge is not perfected until A delivers his Rolex watch to B.

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Commodatum. Ernesto and Fausto agree that Ernesto will use the car of Fausto for
one week free of charge.  The mere agreement of the parties in this case is not
sufficient to constitute a contract of commodatum.  Fausto should deliver the car to
Ernesto because commodatum is a real contract and like in deposit and pledge, the
object thereof must be delivered.

Reason why delivery is required in real contracts. In real contracts, delivery of the object
is necessary because without the object, the other party cannot comply with his duties
under the contract.

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Agreement to enter into real contract distinguished from real contract itself. There can
be a contract “to make a deposit, pledge, etc.” This is consensual. It is perfected upon
the meeting of the minds of the parties. However, once the object has been delivered,
the contract is converted into a real contract.

Classification of contracts according to perfection

Consensual contract or that which is perfected by mere consent (e.g., sale, lease,
agency)

Real contract or that which is perfected by the delivery of the thing subject matter of
the contract (e.g., deposit, pledge, commodatum, etc.)

Solemn/Formal contract or that which requires compliance with certain formalities

prescribed by law, such prescribed form being thereby an essential element thereof
(e.g., donation of real property which must be in a public instrument)

Innominate Contracts or contracts which have no designated name.

Examples:

1.Today Sam and Bert enter into a contract whereby Sam binds himself to sell his car to
Bert for P300,000.00. Is the contract deemed perfected although there has yet no
delivery of the car and payment of the price made?
2.Dina borrowed from Cita P200,000.00. As security for the debt, Dina promised to
pledge his diamond ring to Cita. Before the delivery of the ring to Cita, is the contract of
pledge perfected? If Dina later on refuses to pledge the ring, can Cita demand the
payment of the obligation although it is with a period? Can Cita require Dina to deliver
the ring as security?

Effect of perfection of the contract

From the moment the parties come to an agreement on, a definite subject matter and
valid consideration, they are bound not only

(1) to the fulfillment of what has been expressly stipulated but also

(2) to all the consequences which according to their nature, may be in keeping with
good faith, usage, and law.

Example: Sam agreed to sell his horse to Bert. It was stipulated that Sam should deliver
the horse to Bert the next day. What is Sam’s obligation then?
(1) Preparation or negotiation. — This includes all the steps taken by the parties leading: to the perfection
of the contract. At this stage, the parties have not yet arrived at any definite agreement;

(2) Perfection or birth. — This is when the parties have come to a definite agreement or meeting of the
minds regarding the subject matter and cause of the contract (Art, 1319.), i. e., upon concurrence of the
essential elements thereof; and

(3) Consummation or termination. — This is when the parties have performed their respective
Obligations and the contract may be said to have been fully accomplished or executed, resulting in the
extinguishment or termination thereof. A contract may also be terminated after its perfection, not by
performance, but by mutual agreement of the parties.

EXAMPLES:

(1) S offers to sell his car to B for P500,000. B asks $ to show him the car. Later, $ brings the car and
shows it to B.B offers to pay P400,000 for the car.

Here, the parties are taking all the steps that may lead to the perfection of the contract.

(2) Now, if S agrees to sell the car for P400,000, the contract is perfected because there is a meeting of the
minds upon the subject matter and the cause of the contract.

(3) The contract will be consummated after S delivers the car to B and B pays P400,000. B becomes the
owner of the car and S, the owner of the money paid by B. The contract is completely executed. It ceases
to be an active or existing agreement and it is valuable only in case later dispute should arise between S
and B about the agreement.

S and B may terminate their contract by mutual agreement thereby releasing them from their respective
obligation as seller and buyer.

How contracts are perfected.

(1) Consensual contracts. - As a general rule, contracts are perfected mere consent of the parties regarding
the subject matter and the cause of the contract. (Arts. 1315, 1319.) They are obligatory in whatever orm
they may have been entered into, provided all the essential requisites for their validity are present. (Art.
1356.) Almost all contracts are consensual as to its perfection. They come into existence upon their
perfection by mutual consent, even if the subject matter or the consideration has not been delivered.

In the absence of delivery, perfection does not transfer title or create real right, yet, it gives rise to
obligations binding upon both parties. (Arts. 1305, 1308.)

EXAMPLE:

Today S and B enter into a contract whereby S binds himself to sell his car to B for P200,000.

The contract is deemed perfected although there is as yet no delivery of the car and payment of the price.
Both parties acquire the right to demand from the other the fulfillment of his obligation: to deliver the car
on the part of S, and to pay the amount of P200,000 on the part of B.

' (2) Real contracts. — The exceptions are the so-called real contracts which are perfected not merely by
consent but by the delivery, actual or constructive, of the obligation. (Art. 1316.) These contracts have for
their purpose restitution because they contemplate the return by a party of what has been received from
another.

EXAMPLE:

D borrowed from C P5,000. As security for the debt, D promised to pledge his diamond ring to C. :

Before the delivery of the ring to C, the contract of pledge is not yet perfected.

If D later on refuses to pledge the ring, C can demand the payment of the obligation although it is with a
period. (Art. 1198[2].) But C cannot require D to deliver the ring as security because there is no real
contract of pledge yet. There is merely a consensual contract to constitute a pledge. What exists is a
personal right, the right of action on the part of C to demand the constitution of the pledge. (see Art.
2092.)

(3) Solemn contracts.- When the law requires that a contract be in some form to be valid (Art. 1356.), this
special form is necessary or its perfection. Thus, a donation of real property cannot be perfected until it is
embodied in a public instrument.