1. General Provisions

Principle of Relativity or Principle of Limited Effectivity of Contracts (2011 BAR)

GR: Contracts take effect only between the parties or their assigns and heirs.

Res inter alios acta aliis neque nocet neque prodest (a thing done between others does not harm or benefit others) – a contract can only obligate the parties who entered into it, or their successors who assumed their personalities, and that, concomitantly, as a general rule, a contract can neither favor nor prejudice third persons. (Vitug, 2006) A third person may, however, demand fulfillment of a stipulation clearly and deliberately made in his favor if he communicated his acceptance to the obligor before its revocation; a mere incidental benefit or interest is insufficient. (Art. 1311, Par. 2, NCC)

NOTE: With respect to the heir, he shall not be liable beyond the value of the property he received from the decedent. (Art. 1311, NCC)

Contracts take effect only between parties, their assigns and heirs, EXCEPT in case where the rights and obligations arising from the contract are not transmissible by their:

• nature;
• by stipulation; or
• by provision of law. The heir is not liable beyond the value of the property he received from the decedent. (Art. 1311, Par. 1, NCC)

No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. (Art. 1317, NCC)

A contract entered in the name of another by one who has no authority or legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified expressly or impliedly by the person on whose behalf it has been executed, before it is revoked by the other contracting party. (Art. 1317, NCC)