Obligation and Contract

• Contracts between individuals that are justified by coercion or threats rather than mutual consent are considered legally voidable.
• Obligation

  A juridical necessity to give, to do, or not to do
• Juridical Necessity


  Juridical tie; connotes that in case of noncompliance, there will be legal sanctions
• Damages


  Sum of money given as compensation for the injury or harm suffered by the obligee for the violation of his right
• Kinds of Obligation

  • Civil Obligation
  • Natural Obligation
  • Moral Obligation
• From the viewpoint of "sanction"

  • Civil Obligation
  • Natural Obligation
  • Moral Obligation
• From the viewpoint of subject matter

  • Real Obligation
  • Personal Obligation
• From the affirmativeness and negativeness of the obligation

  • Positive or Affirmative Obligation
  • Negative Obligation
• From the viewpoint of persons obliged

  • Unilateral
  • Bilateral
• Elements of Obligation

  • Active Subject (Creditor / Obligee)
  • Passive Subject (Debtor / Obligor)
  • Prestation
  • Efficient Cause
  • Causa
• Prestation


  Object; subject matter of the obligation; conduct required to be observed by the debtor
• Prestation (Object)

  • To Give
  • To Do
  • Not to Do
• Injury


  Wrongful act or omission which causes loss or harm to another
• Damage


  Result of injury (loss, hurt, harm)
• Ways Obligations Arise From

  • Law
  • Contracts
  • Quasi-contracts
  • Acts or omissions punished by law
  • Quasi-delicts
• Obligations must be complied with in good faith because it is the "law" between parties; neither party may unilaterally evade his obligation in the contract
• When analysing markets, a range of assumptions are made about the rationality of economic agents involved in the transactions
• The Wealth of Nations was written


  1776
• Rational


  (in classical economic theory) economic agents are able to consider the outcome of their choices and recognise the net benefits of each one
• Producers act rationally by


  Selling goods/services in a way that maximises their profits
• Workers act rationally by


  Balancing welfare at work with consideration of both pay and benefits
• Governments act rationally by

  Placing the interests of the people they serve first in order to maximise their welfare
• Rationality in classical economic theory is a flawed assumption as people usually don't act rationally
• Demand curve shifting right

  Increases the equilibrium price and quantity
• If you add up marginal utility for each unit you get total utility
• Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith
• Contract

  Meeting of minds between two persons whereby one binds himself, with respect to the other, to give, to do something or to render some service; governed primarily by the agreement of the contracting parties
• Valid Contract

  It should not be against the law, contrary to morals, good customs, public order, and public policy
• In the eyes of law, a void contract does not exist and no obligation will arise from it
• Obligations arising from contracts


  Primarily governed by the stipulations, clauses, terms and conditions of their agreements
• If a contract’s prestation is unconscionable (unfair) or unreasonable, even if it does not violate morals, law, etc., it may not be enforced totally
• Interpretation of contract involves a question of law
• Compliance in good faith


  Compliance or performance in accordance with the stipulations or terms of the contract or agreement
• Falsification of a valid contract – only the unauthorized insertions will be disregarded; the original terms and stipulations should be considered valid and subsisting for the parties to fulfill
• Quasi-Contract

  Juridical relation resulting from lawful, voluntary and unilateral acts by virtue of which, both parties become bound to each other, to the end that no one will be unjustly enriched or benefited at the expense of the other
• There is no consent - consent is PRESUMED
• Negotiorum gestio

  Unauthorized management; Takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority
• Solutio indebiti

  Undue payment; Takes place when something is received when there is no right to demand it, and it was unduly delivered thru mistake
• Obligations derived from quasi-contracts shall be subject to the provisions of chapter 1, title 17 of this book
• Owner shall reimburse the gestor for necessary and useful expenses incurred by the latter for the performance of his function as gestor