You are on page 1of 11

Palmones, Jayhan Grace M.

1. A contract is usually an agreement between two or more parties; the condition is that it
should contain the elements of a valid legal agreement given by the law or by the
binding arbitration. That is why it commonly says that a contract is an exchange of

Agreement is said to be done when an offer which is capable of immediate acceptance

has been accepted. The parties which are involved in the contract must have the valid
capacity to contract.

Essential Elements of Contracts

 Consent is manifested by the meeting of the offer and acceptance upon the thing and
the cause which are to constitute the contract. The offer must be certain and absolute. A
qualified acceptance constitutes a counter offer.
Who can give consent? –Anyone
Who cannot give consent? -Minors, Deaf-mutes who cannot read or write, insane or
demented, persons suffering from penalty of Civil Interdiction, those adjudged by court
as incompetent, spouses with regard to the property owned by the other spouse(unless
there is a marriage settlement), those exercising fiduciary relationships to a person and
his property [lawyers to their clients, judges as to objects being litigated in front of them,
government officials as to property whom they exercise authority], any transaction
between a married person and his/her paramour.

 Cause. Understood to be, for each contracting party, the prestation or promise of a thing
or service or benefit which remunerated.

 Object. What cannot be objects of a contract?

a.) those outside the commerce of persons
b.) Rights which are in transmissible
c.) Future inheritance
d.) Objects or services which are contrary to law, morals, good customs, public ordered.
e.) Impossible things or services
f.) Those incapable of existing in the future


3. Nominate contracts are those given a special designation such as purchase and
sale, lease, loan, or insurance.

An innominate contract is those with no special designation and has no special name
by which it is known.

Consensual contract is a contract that arises from the mere consensus of the parties. It
does not require the performance of any formal or symbolic acts to fix the obligation. Although
the consensual contract was known to the common law, it originated in Roman law. In Roman
law, this embraced four kinds of contracts in which informal consent alone was sufficient: (1) an
agency agreement (2) a partnership agreement, (3) a sale, or (4) a letting or hiring. Consensual
contracts require no formalities to create them out of the Pact. Consent of the parties is more
emphatically given in a consensual contract. When the assent of parties is given, at once there
forms a contract.

4. Mutuality of contract refers to the reciprocal understanding or agreement between

parties. This is an essential ingredient in the creation of a legally enforceable
contract. An important part of a contract is mutuality, which states that both parties
should be bound or neither should be. However, this principle does not apply to
unilateral contracts where there is only one party who is bound. It shall also be
inapplicable where both parties make promises but only one is bound, as in a fraud.
A lack of mutuality means a lack of common understanding or meeting of the minds.

 perfected by mere consent without any further act

The Mutuality Principle: Exceptions

1) Unilateral Contracts
2) Contracts where there is a notice requirement before termination
3) A contract that is voidable by one party because of a legal disability
4) A conditional obligation that is beyond the party’s control
5) When a party has a choice on how to perform; but both choices constitute a legal detriment
6) Where the parties leave a term open to be decided by one party later the court will infer a
“reasonable” term
7) Where a contract calls for one party to get a percentage of profits or sales only; courts will
infer a duty to use best efforts
8) Output and Requirements contracts

5. Relativity of contracts refers to the principle of the civil law that a contract can only
bind the parties who had entered into it or their successors who have assumed their
personality or their judicial position, and that, as a consequence, such contract can
neither favor or prejudice a third person, in conformity with the axiom res inter alios
acta aliis nocet prodest (the act, declaration, or omission of another, cannot affect
another, except as otherwise provided by law or agreement) [Vide Section 25, Rule
130, Rules of Evidence]. Thus Article 1311 declares that “contracts take effect only
between the parties, their assigns and heirs.”



a) Where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the
property he received from the decedent (Article 1311).

b) Stipulation Pour Autrui –where a contract contains a beneficial stipulation in favor of a third
person provided he communicated his acceptance to the obligor before its revocation. (Article
1311, Par. 2).

c) In contracts creating real rights where third persons come into possession of the object of the
contract, subject to the provisions of the Mortgage Law and the Land Registration Laws (Article

d) Where the contract is entered into in order to defraud a third person, in which case, creditors
are protected in cases of contracts intended to defraud them (Article 1313).
e) Where the third person induces a contracting party to violate his contract. The third person
who induces another to violate his contract shall be liable for damages to the other contracting
party (Article 1314). This is called TORTINTERFERENCE.

f) Where, in some cases, third persons may be adversely affected by a contract where they did
not participate (Articles 2150, 2151).

g) Where the law authorizes the creditor to sue on a contract entered into by his debtor (Accion

6. Art 1315. Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law.

7. Cognition theory – Contract is perfected from the moment the acceptance comes to
the knowledge of the offeror.

Expedition theory – Contract is perfected from the moment the acceptance is declared
or made even if not made known to the offeror.

8. Stipulation Pour Autrui

It is a stipulation in a contract clearly and deliberately conferring a benefit upon a third person
who has the right to demand its fulfillment, provided he communicated his acceptance of the
benefit to the obligor before its revocation by the oblige or the original parties.
It is also an exception to the general rule of relativity, one of the characteristics of a contract,
stating that contracts take effect only between parties, their assigns and heirs. (Civil Code, Art.
Requisites of a Stipulation pour autrui
 There must be a stipulation in favour of a third person; 2 classes of
stipulations in favour of a third person:
a. Those where the stipulation is intended for the sole benefit of such person;
b. Those where an obligation is due from the promise to the third person
which the former seeks to discharge by means of such stipulation, such as
where a transfer of property is coupled with the purchaser’s promise to pay a debt
owing from the seller to a third person
 The stipulation is a part, not the whole of the contract;
 The contracting parties clearly and deliberately conferred a favour to the third
person the favour is not anincidental benefit;
 The favor is unconditional and uncompensated; That the favorable stipulation
should not be conditioned or compensated by any kind of obligation
 The third person communicated his or her acceptance of the favor before
its revocation by the original parties;
 The contracting parties do not represent, or are not authorized by, the third
party. Example: Benito leased his house to Procopia for 2 years at an agreed
rental of P10, 000.00 a month. They stipulated that the P10000 monthly
rental should be given to Celso, a godson of Benito, as his monthly
allowance. Celso communicated his acceptance of the benefit to Abel, the
debtor, before Benito could revoke the same. The stipulation in the contract
between Benito and Procopia expressly granting a benefit to Celso who
accepts the same is known as stipulation pour autrui.

9. An OFFER is a proposal made by one party to another to enter into a contract.

 To be valid, the offer must be certain or definite with respect to the object and
cause of the contract, and other circumstances that the offeror deems convenient
under the contract.

A counter offer is an offer made in response to a previous offer by the other party
during negotiations for a final contract. It is a new offer made in response to an offer
received. It has the effect of rejecting the original offer, which cannot be accepted
thereafter unless revived by the offeror. Making a counter offer automatically rejects
the prior offer, and requires an acceptance under the terms of the counter offer or
there is no contract.

10. The following cannot give consent to a contract:

(1) Un-emancipated minors;

(2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
Persons who cannot give consent to a contract.

1. Un-emancipated Minors. – Minors below 18 years of age. There are no more un-emancipated
minors above 18 since the legal age was reduced from 21 to 18. Emancipation by marriage and
parental concession had already been eliminated. Children below 18 by themselves being
minors cannot enter into valid contracts. However, if misrepresented his age on the contract by
stating of his age, and other party was misled, the contract shall be binding upon him on the
basis of estoppel.
2. Insane or Demented Persons. – When a person is insane or demented, his is detached from
reality. He does not know what he is doing. He cannot act with legal effects. Consequently, he
cannot enter into valid contracts. During lucid intervals, as may happen in rare cases, they
may enter into valid contracts because at this moment, they are sane and capable of knowing
what they are doing.
3. Deaf-Mutes. – Not all deaf-mutes are disqualified to give consent to contracts. Only those who
do not know how to write are disqualified.

12. There are several situations where a contract becomes invalid or
unenforceable. Invalid Contracts those that do not contain any one of the three
elements, do not satisfy the terms or are illegal.

Contracts may become invalid under the following circumstances:

 If the contract is against public policy

 If the contract is illegal
 If the offer/acceptance/consideration calls for action that violates the law – such as
gambling, robbery, etc.
 If the purpose of the contract is illegal

Contracts may be deemed unenforceable due to a variety of reasons. Sometimes, the contract
is not legal but against public policy. For example, a clause in an employment contract to not
compete in the organization is against public policy. Employers may do this to ensure that
employees due not leave the organization. However, this restricts the right of free employment
for an individual.
Breach of contract cannot be charged if the contract, itself, is invalid. In such cases, the suing
party is not awarded any damages as the contract is considered unenforceable.

-If an individual is hired by an employer and the terms of the employment agreement list illegal
job responsibilities, this contract is void because it is against the law and does not adhere to
valid contract elements.

13. 1595. The object of a contract is the thing which it is agreed, on the part of the
party receiving the consideration, to do or not to do.

1596. The object of a contract must be lawful when the contract is made, and possible and
ascertainable by the time the contract is to be performed.
1597. Everything is deemed possible except that which is impossible in the nature of things.
1598. Where a contract has but a single object and such object is unlawful, whether in whole or
in part, or wholly impossible of performance, or so vaguely expressed as to be wholly
unascertainable, the entire contract is void.
1599. Where a contract has several distinct objects, of which one at least is lawful, and one at
least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest.

14. Yes.

15. What is a contract of sale?

According to Art. 1458 of the New Civil Code, it is defined as:

Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer
the ownership and to deliver a determinate thing, and the other to pay therefore a price certain
in money or its equivalent.

A contract of sale may be absolute or conditional.

*It is an agreement between two parties whereby one, who is the seller or vendor, obligates him
to deliver something to the other party who is the buyer or vendee who is bound to pay a sum of
money or its equivalent.
16. Absolute Sale- one wherein there is no condition whatever and imposes upon the
vendor the obligation to deliver the real estate, subject matter of the agreement to
the vendee who upon the receipt of the property hands over and pays the purchase
price that has been previously agreed upon with the vendor.

 The Deed of Absolute Sale where both parties agree on and accept the real estate to be or
being conveyed and price therefore that the vendee should pay for it. This transaction is the
most common where the title of the real estate, subject sale, is free from and clears of any alien
or encumbrance whatever. No other condition is necessary except the actual delivery and
transfer of the property to the vendee without delay. The deed will then be registered to the
proper Registry of Deeds as required by the Torrens Registration Law.

 Sale in Exchange or Barter where the real properties is subject to the transaction is deeded in
exchange of and for another real property that is acceptable to the vendor without any additional
monetary consideration. It is essential in the transaction that the title of both properties in the
exchange is valid and unencumbered or free from any liens or encumbrances of any nature.

2. Conditional Sale-This is an agreement to sell or buy real estate with certain conditions that
must be accomplished by either or both the parties so as to extinguish and or create ownership
over the subject property. This is merely an executory contract in contemplation of the law and
the right of ownership is withheld for the meantime. In other words, the certificate of title of the
real property is not turned over to the vendee until and after certain conditions have been
accomplished by either or both the parties. Then it becomes an executed contract.

It may be:

 Sale on installments- commonly adopted for the sale of lots in a land subdivision or units in a
condominium or townhouse project. Its principal feature is that the purchase price is fixed at a
certain amount that shall be paid in equal monthly or yearly installments for a period of five or
ten years.

 Contract to Sell- This is similar to sale on installments except that the period allowed for the final
payment of the purchase price is much shorter in duration.
 Pacto de Retro- The sale in which the vendor is granted the right to repurchase the property
sold on a certain date fixed in the Contract. This is done by returning to the vendee the entire
purchase price including the expenses for the preparation of the contract and the necessary and
useful expenses on the property sold. This is termed as conventional redemption under Article
1691 of the New Civil Code.

There are other forms of Conditional Sale where ownership and possession of subject property
are transferred to the vendee upon execution of the contract such as:

1. Sale with mortgage- A portion of the purchase price is initially paid by the vendee and the
vendor delivers possession and ownership of subject property tot eh vendor who, thereafter,
execute a Deed of Mortgage on the same property in favor of the vendor to guarantee payment
in full of the balance of the purchase price.

2. Sale with assumption of mortgage- The Vendor pays in cash a portion of subject property to the
vendee who assumes the payment of the existing mortgage on the property that represents the
balance of the purchase price.

3. Dacion en Pago- This is an agreement where the encumbered property of the vendor is sold by
the latter to his creditor or mortgagee as vendee to satisfy or in payment of his existing loan and
other charges

ABSOLUTE- where the sale is not subject to any condition and where the title of the
ownership passes to the buyer upon the delivery of the thing sold.

CONDITIONAL- where the contract is subject to certain conditions, usually the full
payment of the price. The ownership of the thing does no pass unless condition is

17. Article 1459. The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered.

Requisites for the object of the Contract of Sale

The thing or the object of the contract of sale must be determinate or capable of
being determinate. It also needs to be licit or lawful, that is, it should not be contrary
to law, morals, good customs, public order, and public policy. Third, it should not be
impossible. The object of the contract must be within the commerce of men, which
means that it is legal and its ownership is transferable.

Rights that are transmissible or personal may also be the object of the contract of
It should be noted that services (or obligations to do) cannot be the object of a
contract of sale, even if they can be the object of a contract. (Contract for a piece of
A CONTRACT FOR A PIECE OF WORK-is a contract whereby the contractor binds
himself to execute a piece of work in behalf of or for the employer, in consideration
of a certain price or compensation
-general market
-thing transferred is one which would have existed
-Risk of loss borne by seller (warranty) -risk of loss borne by the buyer (damages)
-upon special order
-not of existence until the order of the party desiring to acquire it
-risk of loss borne by the buyer (damages)

19. Barter is a contract whereby one of the parties binds himself to give one thing in
consideration of another’s promise to give another thing.
It is Barter if intention cannot be ascertained, then it shall be considered barter if the
value of the thing given as part of consideration exceeds the amount of money or its
equivalent. And it is Sale if thing consists partly in money and party in another thing,
the manifest intention of the parties paramount in determining whether it is sale or
20. Price - the amount of money expected, required, or given in payment for something.
21. Contract of sale is perfected by mere consent; ownership of the thing sold is
acquired only its delivery to the buyer. Upon the perfection of the sale, the seller
assumes the obligation to transfer ownership and to deliver the thing sold, but the
real right of ownership is transferred only “by tradition” or delivery thereof to the