Short answer. As a rule, no. Contracts take effect only between the parties, their assigns and their heirs. A stranger cannot be bound by an agreement he never entered. The main exception runs the other way: a third person deliberately favoured by a stipulation may demand that it be performed.
What the law says
Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.
Civil Code, Article 1311 — Relativity of Contracts; Stipulation Pour Autrui. Read the full provision →
What the law says
A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.
Civil Code, Article 1311 — Relativity of Contracts; Stipulation Pour Autrui. Read the full provision →
Relativity: the contract reaches the parties and those who step into their shoes
Article 1311 of the Civil Code opens with the general rule: Contracts take effect only between the parties, their assigns and heirs. A person who did not consent cannot be made to answer for the agreement, which is why demand letters addressed to a relative, a business associate or a company officer who signed nothing usually go nowhere. Assigns and heirs are included not as exceptions but because they succeed to the party's own position. The exception within the rule covers obligations that are not transmissible — by their nature, by stipulation, or by provision of law — such as those depending on the personal qualifications of the party who undertook them.
An heir does not inherit debts out of his own pocket
The article adds a sentence that settles a great deal of family anxiety: the heir is not liable beyond the value of the property he received from the decedent. Obligations pass with the estate, and they are answered out of the estate. An heir who receives nothing answers for nothing, and an heir who receives a modest share does not become personally liable for a debt larger than what came to him. Creditors are entitled to be paid from what the deceased left behind, not from what the children earned themselves. That limit is worth knowing before agreeing to anything after a death in the family.
The exception that helps a stranger: stipulation pour autrui
The genuine exception gives a third person a right rather than a burden. Where a contract contains a stipulation in favour of someone outside it, Article 1311 lets him demand its fulfilment provided he communicated his acceptance to the obligor before the stipulation was revoked. Two conditions therefore matter, and both are commonly missed: the favour must be a real term of the contract, and the beneficiary must have accepted it, and done so before the parties withdrew it. Silence is not acceptance, and a beneficiary who only learns of the clause after the parties have changed their arrangement is generally too late.
Incidental benefit is not enough
The provision then narrows the exception sharply: A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Many people gain something from contracts they are not part of — neighbours of an improved property, suppliers of a party who wins a contract, relatives who live in a house being renovated. None of them acquires an enforceable right. The test is intention, and the evidence for it is the wording of the agreement itself. If you believe a contract was made partly for you, the first thing to look for is the clause that says so.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Limitless Potentials, Inc. vs. The Hon. Reinato G. Quilala, et al, G.R. No. 157391, July 15, 2005 — read the decision on LawPhil →
- DKC Holdings Corp. vs. Court of Appeals, et al, G.R. No. 118248, April 5, 2000 — read the decision on LawPhil →
- The Consortium of Hyundai Engineering Co., Ltd. and Hyundai Corporation vs. National Grid Corporation of the Philippines, G.R. No. 214743, December 4, 2023 — read the decision on LawPhil →
- Raquel Estipona (Lelandlord E. Sto. Domingo) and Sps. Alberto Co and Lulu Co, G.R. No. 207407, September 29, 2021 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1311 — Relativity of Contracts; Stipulation Pour Autrui
- Civil Code, Article 1318 — Essential Requisites of a Contract