iii. Relativity

Relativity

Concept

Relativity means that a contract takes effect only between the contracting parties, their assigns, and their heirs. A person with no privity of contract generally cannot be prejudiced or favored by obligations or liabilities arising from it, subject to a stipulation pour autrui under Article 1311. The rule concerns who is bound by the contract, rather than the parties’ freedom to set its terms. (Incorporated v. Tacloban City Government, G.R. No. 214195, 23 March 2022)¹ (Art. 1306, Civil Code)² (Art. 1311, Civil Code)

Governing provisions

Article 1305 describes a contract as a meeting of minds in which one person binds himself, with respect to another, to give something or render a service. Article 1306 allows the contracting parties to set stipulations, clauses, terms, and conditions, subject to the limits stated in that provision. These articles supply context; Article 1311 governs relativity. (Art. 1305, Civil Code)³ (Art. 1306, Civil Code)² (Art. 1311, Civil Code) (Incorporated v. Tacloban City Government)¹

Requisites / Rules

• Identify the contracting parties and the obligation asserted under their agreement. The contractual undertaking described in Article 1305 is made by one person with respect to another. (Art. 1305, Civil Code)³
• Determine whether the person sought to be bound is a party, assign, or heir. The stated reach of a contract includes those persons, but generally not a third person without privity. (Incorporated v. Tacloban City Government)¹ (Art. 1311, Civil Code)
• Do not treat an heir as a stranger merely because the heir did not personally sign the predecessor’s agreement. Heirs generally cannot deny the binding effect of a valid agreement entered into by their predecessors. (Spouses Pontigon v. Heirs of Sanchez, G.R. No. 221513, 5 December 2016)⁴

Distinctions

An heir and a person without privity stand differently under relativity. The former is generally within the contract’s binding reach through the predecessor; the latter generally cannot be prejudiced or favored by a contractual obligation or liability to which that person is a stranger, subject to a stipulation pour autrui. (Spouses Pontigon v. Heirs of Sanchez)⁴ (Incorporated v. Tacloban City Government)¹ (Art. 1311, Civil Code)

Relativity should also be kept distinct from a claim that death itself ends performance. If the contracted act or service can as well be performed by another, death does not terminate the contract or excuse nonperformance. Whether an action survives death depends on its nature; an action primarily affecting property and property rights survives. (Heirs of Villeza v. Dela Cruz, G.R. No. 179965, 2 December 2020)⁵

Key doctrines

In Incorporated v. Tacloban City Government, the Court stated the privity rule while addressing liability connected with beneficial use of property. Its statement of relativity was that contracts take effect only between the parties, their assigns, and heirs, and that contractual obligations or liabilities cannot prejudice or favor persons without privity. (Incorporated v. Tacloban City Government)¹

In Spouses Pontigon v. Heirs of Sanchez, the Court treated heirs of contracting parties as generally bound by a valid agreement of their predecessors. That treatment does not depend on whether the agreement is public or private, or notarized. (Spouses Pontigon v. Heirs of Sanchez)⁴

Exceptions

Article 1311 recognizes a stipulation pour autrui: a third person may demand fulfillment of a stipulation clearly and deliberately conferred in that person’s favor if the third person communicates acceptance to the obligor before its revocation. Do not infer such a stipulation from the mere fact that a contract affects property or is notarized. (Art. 1311, Civil Code) (Incorporated v. Tacloban City Government)¹ (Spouses Pontigon v. Heirs of Sanchez)⁴

Bar tip

Ask first: Is the person a party, assign, heir, or stranger? If a stranger, check whether Article 1311’s requirements for a stipulation pour autrui are met. Then address any claim that death ended the undertaking by examining whether another can perform the act or service and whether the action primarily concerns property rights. (Incorporated v. Tacloban City Government)¹ (Spouses Pontigon v. Heirs of Sanchez)⁴ (Heirs of Villeza v. Dela Cruz)⁵ (Art. 1311, Civil Code)