OBLIGATIONS AND CONTRACTS

BSBA MM 2-1

RESEARCH 2

MEL BRYAN R. MAPA

BSBA MKT 2-1

Question 1.)

First, remember that contracts are, more or less, enforceable promises. Promises

are an essential part of living in any society. They allow us to exchange resources with
each other, to form alliances, and to realize important individual or cultural goals—to
survive and thrive. Most of the time, however, our promises do not involve the State.
We simply promise to each other, with no expectation that the State will back us up if
someone reneges or a dispute arises. So, why does the State think that it is important to
step in when it comes to certain promises? Why does it give them a special status
as contracts?

The first reason is efficiency. Efficiency is a core principle of public policy. The
more efficiently a society runs itself, the more time and energy it has to put toward the
common goals of its members. Efficiency is not a be-all, end-all, but if it does not get in
the way of other important principles, a society benefits by maximizing efficiency. It
is efficient to have a system for enforcing certain, important promises. A consistent
system for contract law allows people to predict how others will behave (‘signaling’)
and organize their behavior accordingly. It prevents misunderstandings that create
inefficiency in important transactions. Likewise, it prevents many disputes that would
be huge wastes of time and energy. With a consistent system for contracts, we can
organize ourselves better as a society and maximize efficiency.

Reason number two is the value placed by western liberalism on autonomy and
self-determination. Although we (esp. Americans) often think of the State as a barrier to
liberal autonomy and self-determination, state enforcement of contracts is essential to
self-determination in modern societies. Even the most rugged individualists need to
interact and exchange with other people—to engage in promises—if they want to
achieve even their most basic goals in life. If those promises are to mean anything, we
need to be able to count on them, at least in important transactions. We are better able
to do that with the power of the State on our side. With the security of an enforceable
contract, we can plan ahead. We are free to make more elaborate plans, and therefore
achieve loftier goals—as a society and as individuals. If we could not count on the State
to enforce the most important promises, we simply would not risk making them. (Who
in their right mind would buy a house with nothing more than a handshake and some
spit to count on?) Our ability to determine our own lives would be severely limited.
Question 2.)

We apply laws on obligations and contracts unconsciously to our daily

activities. One will not notice that in performing a simple common task you have
applied several principles on obligations and contracts. Like, for example, buying
a piece of “pandesal”, the buyer will offer to buy and the seller will accept. At this
point, once the seller and buyer agrees to the object and price, and their minds have
met; each of them will not just rescind or refuse to comply. Even without knowledge of
law, one will not just back out from the perfected sale. Then, after the perfection of the
contract of sell; unknowingly, they will go on to consummate the same. The buyer will
hand the money and the seller, in return, will hand over the “pandesal”. A clear
example of reciprocal obligations, isn’t? If the money given is more than the price of
the “pandesal”, the seller will give the change. That is because he knows no one should
be enriched at the expense of another; hence, he has the obligation to return what is not
due him. Likewise, if what was delivered to the buyer is more than what he paid for, he
will return the same under the same principle, creating an implied obligation to return.
In a simple, but very common, transaction, the parties are not aware that they are
applying the basic principles of law on obligations and contracts. They might not be
well versed, or even, have not had any formal education, yet they apply these simple
principles of law unconsciously. Thus, If you ask: how we apply laws on
obligations and contracts on our daily activities, we apply it unknowingly, but
instinctively, depending on one's value.

LEOVIGILDO M. DAYOJA
Course Instructor