3. Form of Contracts

FORM OF CONTRACTS

Concept

A contract is a meeting of minds by which one person binds himself, with respect to another, to give something or render some service. Its agreement, the instrument recording it, and the registration of that instrument must be kept distinct. (Art. 1305, Civil Code)¹ (Sec. 51, Pres. Decree No. 1529)²

Governing provisions

• Parties may set the stipulations, clauses, terms, and conditions they deem convenient, subject to law, morals, good customs, public order, and public policy. Freedom to stipulate does not dispense with requirements imposed by law. (Art. 1306, Civil Code)³
• The forms and solemnities of contracts, wills, and other public instruments are governed by the law of the country where they are executed. If executed abroad before Philippine diplomatic or consular officials, Philippine solemnities apply. Foreign laws, judgments, determinations, or conventions cannot defeat the prohibitive Philippine laws described in Article 17. (Art. 17, Civil Code)⁴
• For registered land, a voluntary instrument, except a will, does not itself take effect as a conveyance or bind the land. It operates as a contract between the parties and as evidence of authority for registration; registration is the operative act affecting the land as to third persons. (Sec. 51, Pres. Decree No. 1529)²

Requisites / Rules

• For the land instruments covered by Section 112 to be registerable as public instruments, they must be executed according to law, signed by their makers in the presence of at least two witnesses who also sign, and acknowledged before a notary public or other authorized public officer as the makers’ free act and deed. The provision also prescribes page-signing, sealing, and acknowledgment details for instruments of two or more pages. (Sec. 112, Pres. Decree No. 1529)⁵
• Ask separately whether an agreement was made, whether its instrument meets the requirements for registration, and whether registration has occurred. Recording a sale does not, by itself, vest ownership. (Art. 1305, Civil Code)¹ (Sec. 112, Pres. Decree No. 1529)⁵ (Tamayao v. Lacambra, G.R. No. 244232, 9 January 2023)⁶

Distinctions

An oral agreement and a notarized instrument raise different questions. Partial execution of a verbal sale can defeat an attempt to invoke the Statute of Frauds against it. A notarized contract, meanwhile, is a public document with a prima facie presumption of authenticity and due execution; overcoming that presumption on a claim of forgery requires clear, convincing evidence. (Serna v. Cruz, G.R. No. 237291, 1 February 2021)⁷ (Spouses Anacleto v. Joselito, G.R. No. 246382, 14 July 2021)⁸

Key doctrines

• Possession, improvements, and payment of real property taxes may indicate execution of an oral sale of land. The Statute of Frauds does not apply to executed contracts. (Bueno v. Peralta, G.R. No. 205810, 9 September 2020)⁹ (Alido v. Campano, G.R. No. 226065, 29 July 2019)¹⁰
• A fictitious, inexistent, or forged deed of sale is void, as is a title issued on its basis. Notarization or registration should therefore not be mistaken for a cure for a forged conveyance. (Lopez-Julian v. Spouses Empaynado, G.R. No. 196517, 11 November 2024)¹¹ (Tamayao v. Lacambra)⁶

Exceptions

A party’s failure to object to parol evidence proving an oral contract may ratify it and remove it from the operation of the Statute of Frauds. Conversely, proof that an oral sale was executed does not save a transaction prohibited by law: a sale of free-patent land within the stated five-year prohibition is void. (Bueno v. Peralta)⁹ (Alido v. Campano)¹⁰

Bar tip

Identify the precise issue—form of execution, enforceability of an oral agreement, registerability, or effect on third persons—before applying a rule. Do not equate a deed with registration or registration with ownership. (Sec. 112, Pres. Decree No. 1529)⁵ (Sec. 51, Pres. Decree No. 1529)² (Tamayao v. Lacambra)⁶