Compliance in good faith
Compliance in good faith means compliance or
performance in accordance with the stipulations or terms of the
contract or agreement. Sincerity and honesty must be observed to
prevent one party from taking unfair advantage over the other.
Non compliance by a party with his legitimate obligations
after receiving the benefits of a contract would constitute unjust
enrichment on his part.
Examples:
(1) If Francis agrees to sell his house to Paul and Paul agrees to
buy the house of Francis, voluntarily and willingly, then they
are bound by the terms of their contract and neither party
may upon his own will, and without any unjustifiable reason,
withdraw from the contract or escape from his obligations
there under.
That which is agreed upon in the contract is the law
between Francis and Paul and must be complied with in good
faith.
(2) A contract whereby Francis will kill Paul in consideration of
P1,000.00 to be paid by CJ, is void and non-existent because
killing a person is contrary to law. Likewise, an agreement
whereby Francis will render domestic service gratuitously until his
loan to Paul is paid, is void as being contrary to law and morals.
Differences between an Obligation and a
Contract
An obligation is the result of a contract (or some
other source). Hence, while a contract, if valid, always
results in obligations, not all obligations come from
contracts. A contract always presupposes a meeting of
the minds; this is not necessarily true for all kinds of
obligations.
Be it noted however, from another viewpoint that
a contract may itself be the result of an obligation. Thus, if
Paul engages Allen as the former’s agent, we have the
contract of agency. As an agent, Allen has the obligation,
say to look around for clients or buyers, as in the real estate
business. As a result of such obligation, Allen may enter into
a contract of sale with Carlo, a customer. The contract of
sale itself results in the obligations to pay and to deliver.
The obligation to deliver may result in a contract of
carriage, and so on, ad infinitum.
Condrado v. Judge Tan
51 O.G. 2923, Jun. 1955
FACTS: In a validity made contract, some
provisions were later on inserted by a falsifier.
Issue: Is the whole contract void?
HELD: Only the additional provision should be
disregarded, and the original terms should be
considered valid and subsisting.
ART. 1160. Obligations
derived from quasi-contracts
shall be subject to the
provisions of Chapter 1, Title
XVII of this Book. (n) (Art. 1160, NCC)
A quasi-contract is that juridical relation
resulting from lawful, voluntary, and unilateral acts by
virtue of which the parties become bound to each
other to the end that no one will be unjustly enriched
or benefited at the expense of another.
It is not properly a contract at all. In contract,
there is a meeting of the minds or consent; the parties
must have deliberately entered into a formal
agreement. In a quasi-contract, there is no consent
but the same is supplied by a fiction of law. In other
words, the law considers the parties as having
entered into a contract, although they have not
actually did do, and irrespective of their intention, to
prevent injustice.
Kinds of quasi-contracts
(1) Negotiorum gestio is the voluntary management
of the property or affairs of another without the
knowledge or consent of the latter. (Art. 2144,
NCC.)
(2) Solutio indebiti is the juridical relation which is
created when something is received when there is
no right to demand it and it was unduly delivered
through mistake. (Art. 2154, NCC) The requisites
are:
(a) There is no right to receive the thing delivered
(b) The thing was delivered through mistake
UST Cooperative Store v. City of Manila, et al.
L-17133, Dec. 31, 1965
FACTS: The UST Cooperative Store, which is tax-exempt under RA
2023 (The Philippine Non-Agricultural Cooperative Act) because its
assets are not more than P500,000 paid taxes to the City of Manila,
not knowing that it was tax exempt.
ISSUE: May it successfully ask for refund?
HELD: Yes, because the payment is not considered voluntary in
character. Clearly, the payment was made under mistake.
Query: Is a Quasi-Contract an
Implied Contract?
• No, because in a quasi-
contract (unlike in an
implied contract) there is
NO meeting of the minds.
Other Examples of Quasi-
Contracts
• When during fire, flood, or other calamity,
property is saved from destruction by
another person without the knowledge of
the owner, the latter is bound to pay the
former just compensation.
• Any person who is constrained to pay the
taxes of another shall be entitled to
reimbursement from the latter.
