Contract

• Obligation (article 1156) -  Juridical necessity to give (real), to do or not to do(personal) 
• Obligatio – latin word – tying or binding 
• Contract (article 1305) – meeting of minds between two persons whereby one binds himslef with respect to another, to give something or render some service 
• Essential elements/ requisites obligation  

  1. Passive subject/ debtor / obligor- perform 
  2. Active subject / creditor / obligee -  demand the obligation 
  3. Object / prestation / subject matter 
  4. Juridical tie / legal tie – efficient cause, reason for the performance of the obligations
• Essential elements/ requisites of contract, if one of them is missing- VOID 

  1. Consent- meeting of the minds 
  2. Object – subject matter 
  3. Cause / causa / consirderation/ price 
• Contract v. Law 

  Contract – arises from the agreement of the parties / contractual obligation 

  Law - is basically imposed by the law itself / legal obligation 
• Contract v. Obligation  

  all contract have obligation but not all obligation arise from contract 

  Contract – is the cause  

  Obligation-  is the effect, (Article 1157: broader) 
• Contract v. agreement 

  Contract- is always legal 

  Agreement- may be legal or illegal 
• Contract v. Pact 

  Contract 

  Pact- pact is something broad which include international agreements 
• Contract v. Stipulation 

  Contract 

  Stipulation- are parts of contract 
• Sources of Obligation (1157) 

  1. Law 
  2. Contracts (Art.1305) 
  3. Quali- Contracts (Art.2142) 
  4. Delicts / Crime/Felon (Art.3 RPC) 
  5. Quali-delicts / Tort / Culpa Aquiliana 
• Basic Principles/ Characteristics of contracts 

  Mutuality (1308) 

  Autonomy / Liberty/ Freedom (1306) 

  Relativity (1311) 

  Consensual (1315) 

  Obligatory Force of Contract(1159) 
• Mutuality of Contract (1308) 

  • The contract must bind both contracting parties; uts validity or compliance cannot be left to the will of one of them 
  • General rule- Third party cannot decide 
  • Except- If authorized by the parties (1309) 
  • Effect- decision of third party is valid (Exception to the exception-1310 if the decision of the third person is evidently inequitable) 
• Autonomy of Contract (1306) 

  • General rule- the contracting parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient 
  • Exception/ limitations- if contrary to law, morals, good customs, public order, or public policy  
• Relativity of Contracts (1311) 

  • Contracts take effect only between the parties, their assigns and heirs 
  • General rule- third person are not bound by the agreement 
  • Exception- Third party are bound/ liable 
  • 1311 [2]- Stipulation Pour Autrui- stipulation in favor of third person, communication of acceptance 
• Relativity of Contracts (1311) 

  • Contracts take effect only between the parties, their assigns and heirs 
  • General rule- third person are not bound by the agreement 
  • Exception- Third party are bound/ liable 
  • 1311 [2]- Stipulation Pour Autrui- stipulation in favor of third person, communication of acceptance 
  • 1312- registration 
  • 1313- Accion Pauliana- contract to defraud creditor (rescissible) 
  • 1314- Interference in contractual relations 
• Consensual Contract (1315) 

  • General Rule- mere consent creates a contract  
  • Exceptions 
  • Real(1316) - consent plus delivery 
  • (deposir, pledge, commodatum) 
  • Formal /solemn (1356)- consent plus form 
  • A form is required 
• Obligatory force of contract (1159) 

  • Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith 
• Nominate- it has a name

  Innominate- no name

  Commutative- equivalent consideration

  Aleatory- not equivalent consideration

  Executory- not yet, gagawin palang

  Executed- has delivered, has paid, performed

  Preparatory- preparation

  Accessory- Not stand alone, dependent of principal

  Principal-  can stand alone

  Formal (solmn)- form required

  Informal (common or simple)- no form required

  Onerous- reciprocally obligated

  Gratuitous- Free, donation

  Remuneratory- Compensate the person

  Auto contract- you, you
• Innominate contract(1307) 

  Do ut des- I give that you may  give 

  Do ut facias – I give that you may do 

  Facio ut des- I do that you may give 

  Facio ut facias- I do that you may do 

   
• Rules governing innominate contracts ACAC 

  • Agreement 
  • Civil Code 
  • Analogous Cases 
  • Customs 
• Unauthorized/ unenforceable contract(1317) 

  • Requisites 

  1. Must be authorized 
  2. Must act within the scope of his authority 

  • Effect if violated- UNENFORCEABLE 
  • Remedy if violated- Ratification 
• Stages of contract 

  1. Preparation/ bargaining/ negotiation- No meeting of the minds 
  2. Perfection / Creation/ Birth- meeting of the minds 
  3. Termination/ Consummation- perform the obligation 
• 1318- Essential Elements/ requisites. Effect if one is missing- VOID 

  Consent 

  Object / subject matter 

  Cause/ causa/ consideration 
• 1319- consent (offer plus acceptance) 

  Characteristics of consent 

  1. Concurrence of offer and acceptance 
  2. Legal capacity of the contracting parties 
  3. It must be intelligent, free, spontaneous and real 
• Cognition Theory- Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into the place where the offer was made (Art. 1319, 2nd par.) 
• Policitacion- imperfect promise, unaccepted unilateral promise top buy or sell a thing 
• Characteristics of consent 

  1. Intelligent 
  2. Free and voluntary 
  3. Conscious and spontaneous 
• Not definite offers 

  1. Business advertisements 
  2. Advertisement for bidders 
• 1319- consent (offer plus acceptance) 
• 1323- ineffective offer (DICI) 

  death, insanity, civil interdiction, insolvency 

  • insanity, civil interdiction-  VOIDABLE   
• 1324- option money v. earnest money 

  Option money- option to buy or not to buy ( not deductible) 

  Earnest money- part of the purchase price ( can be deducted, but cannot be withdrawn since its already perfected contract 
• Incapacitated (1327) to enter into contract 

  1. Minors 
  2. Insane 
  3. Deaf mute who do not know how to read 
  4. These under guardianship 
  5. Those under civil interdiction 
• Person who are Prohibited 

  1. Insolvents 
  2. Husband and wife are prohibited from donating or selling to each other during the marriage or entering into a universal partnership 
  3. Persons who are prohibited from giving each other any donation or advantage 
  4. Persons holding a fiduciary relation with respect to certain property 
• If one is incapacitated- VOIDABLE 

  If both are incapacitated- UNENFORCEABLE (Exception – marriage) 

  If one or both are prohibited- VOID 

  Under lucid interval- VALID 

  Hypnotic spell- VOIDABLE 

  State of drunkenness- VOIDABLE 

  MIVUF(1330)- VOIDABLE 

  Minor, insane, deaf mute- VOIDABLE 

  REMEDY – ANNULMENT 
• Vices of consent 

  Mistake- mistake of fact 

  Intimidation- internal 

  Violence- external/physical 

  Undue influence- improper advantage 

  Fraud- causal fraud 
• If the party knew the risk- No mistake 

  Usual exaggeration in trade- Not fraudulent 

  Mere expression of an opinion- not fraud 

  Misrepresentation made in good faith- not fraud 

  Misrepresentation by a third person-not fraud, unless pre- requisites are present its mutual and it created a substantial mistake 
• Simulation of contract- pretending by agreement 

  2 kinds 

  1. Absolute simulation/fictitious- no intention to be bound 
  2. Effect- VOID 
  3. Relative simulation- parties conceal their true agreement 
  4. Effect- parties are bound by their true agreement 
• Object- subject matter of the contract 

  Requisites 

  1. Within the commerce of man 
  2. Licit or lawful 
  3. Determinate or at least possible of determination 
  4. Transmissible 

  Future things- Yes 

  Future inheritance- No 

  Right to inherit- Yes 
• Cause / causa/ consideration- why of the contract 

  Requisites of cause 

  1. Must be in existence 
  2. Must be licit 
  3. Must be true