Article 1356
Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)
Contracts are binding upon the contracting parties in whatever form they may have been entered into as long as all the essential requisites for their validity are present. However, when can we consider form as essential requisite of a contract?
The form of a contract is essential:
When the law requires that a contract be in certain form for its validity; (refers to solemn or formal contracts).
When the law requires that a contract be in certain form for its enforceability. (refers to the agreements covered by the Statute of Frauds. (Art. 1403, par 2.)
Case Related/Cited
Far Eastern Bank v PDIC
On July 5, 1985, the Central Bank of the Philippines placed Pacific Banking Corporation (PBC) under receivership through Monetary Board (MB) Resolution No. 699.
On October 28, 1985, the Central Bank invited banks to submit proposals for the purchase of PBC's assets and franchise.
FEBTC submitted its bid on November 14, 1985, which included the purchase of both non-fixed and fixed assets of PBC, as described in the Asian Appraisal Report of August 1984.
The Central Bank accepted FEBTC's bid through MB Resolution No. 1234 on November 22, 1985.
On April 16, 1986, a Memorandum of Agreement (MOA) was executed among FEBTC, PBC, and the Central Bank, with PBC represented by Liquidator Renan V. Santos.
The MOA specified that the parties would execute an absolute purchase agreement covering all PBC assets, including non-fixed and fixed assets.
The Purchase Agreement (PA) executed on October 24, 1986, covered only the non-fixed assets.
FEBTC took possession of the fixed assets and sought the execution of deeds of sale, which Liquidator Santos initially supported but failed to finalize.
PDIC, as the new liquidator, contended that the fixed assets should be purchased at their present appraisal value, higher than the sound value.
FEBTC filed a motion before the Regional Trial Court (RTC) to compel the execution of deeds of sale for the fixed assets.
The RTC ruled in favor of FEBTC, directing PDIC to execute the deeds of sale at the sound values stated in the Asian Appraisal Report.
PDIC appealed, and the Court of Appeals (CA) reversed the RTC's decision, leading FEBTC to seek a review from the Supreme Court.
Issue:
WON the FEBTC can validly compel the PDIC to execute the deed of sale over the fixed assets?
Ruling:
The Supreme Court ruled that there was a perfected contract of sale over the disputed fixed assets.
The Supreme Court found that the fixed assets were not submitted as collaterals to the Central Ban...(Unlock)
Ratio:
The Supreme Court emphasized that a contract of sale is perfected upon the meeting of the minds of the parties on the essential elements of the contract, i.e., consent, object, and consideration.
The Court found that these elements were present in the MOA, which incorporated FEBTC's bid to purchase PBC's fixed and non-fixed assets.
The MOA and PA confirmed the essential terms, including the valuation and manner of payment for the fixed assets.