CONTRACTS

What is a contract?

A contract is a meeting of minds between two parties

whereby one binds himself, with respect to the other, to give
something or to render some service.

Contract vs Obligation

CONTRACTS OBLIGATION
One of the sources of Juridical necessity to give to
obligation. do or not to do.

Contract vs Other Sources Obligations

CONTRACT OTHER SOURCES OF

OBLIGATIONS (law, quasi-
contracts, delict, quasi-delict)

Will of the parties Laws


• Contract of sale – Goods, Payment
• Donation – liberality of the donor
Characteristics of a Contract
1. Obligatory
2. Mutuality
3. Autonomy
4. Relativity
Obligatory - A contract has the force of law between the
contracting parties and should be complied with in good faith.
Mutuality - The validity and compliance of a contract cannot
be left to the will of one of them.
Autonomy - Parties may establish such agreements as they
may deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy.
Example of a lawful provision
A and B entered into a contract of lease of a 2-story building
for a period of 5 years. During the duration of the contract, A
will pay B 100,000 per month.
Par. 9 of the contract provides for a penalty clause which
states that in case of breach, the breaching party will pay
Php50,000 pesos as liquidated damages.
After 3 years, A no longer wanted to continue the lease
agreement. A may does so, provided that she pays B the
amount of Php50,000 as liquidated damages.
Relativity - A contract binds ONLY the contracting parties,
their assigns and heirs.
Essential Elements of a Contract
1. Object
2. Cause or consideration
3. Consent
Object - GENERAL RULE: All things and services may be
the object of contract.
EXCEPTIONS:
 Things outside the commerce of man (inalienable lands)
 In transmissible rights (right to vote)
 Future inheritance
 Services which are contrary to law, morals, good customs,
public order or public policy (dangerous drugs,
endangered species)
 Impossible things or services (ability to fly)
Cause or Consideration - is the essential or more proximate
purpose which moves the contracting parties to enter into the
contract.
What would I get in return?
Consent - is manifested by the meeting of the offer and the
acceptance upon the object and the consideration.
• Consent is essential in a contract. No consent = no
contract.
First Requisite of Consent
The OFFER must be:
a) It must be definite (e.g., not negotiable)
b) It must be intentional (not a joke)
c) It must be complete (all conditions)
d) It must be directed to a person or persons with whom the
offeror intends to enter into a contract except definite
offers which are not directed to a particular person but to
the public in general
Counter-Offer - Acceptance of the offer must be definite and
absolute in character. A qualified acceptance constitutes a
counter-offer.
Implied Acceptance - may arise from acts or facts which
reveal the intent to accept, such as the consumption of things
sent to the offeree, or the fact of immediately carrying out the
contract offered.
Withdrawal of offer - Offer may be withdrawn so long as the
offeror has no knowledge of the acceptance by the offeree.
 General Rule: Contracts shall be obligatory, in whatever form
they may have been entered into, provided that all the essential
requisites for their validity are present.
Exceptions:
Offer made to 2 or more persons
1) When law requires that the contract be in a certain
General Rule: Pending acceptance of the offer, the offeror form to be valid;
may perfect a contract over the same thing with another 2) When law requires that the contract be in a certain
form to be enforceable;
person
3) When required to make the contract effective as
Exception: against third parties

Option Contract – one-person (the offeror/promisors) grants Contracts which must appear in WRITING to be VALID.
to another person (the offeree/promisee) the right or privilege
to buy (or to sell) a determinate thing at a fixed price, if he or 1. Donation of real property.
she chooses to do so within an agreed period. 2. Donation of personal property with value exceeding
Php 5,000
Business Advertisements - They are mere invitations to make 3. Sale of piece of land or any interest therein through
an offer, and not definite offers, unless it appears otherwise. an agent
4. Agreements regarding payment of interest in
Advertisements for bidders - are simply invitations to make contracts of loan
proposals, and the advertiser is not bound to accept the highest
and lowest bidder, unless the contrary appears. Contracts which must appear in a PUBLIC
INSTRUMENT (notarized) to be VALID.
Second Requisite of Consent
1. Donation of real property.
2. Parties must possess the necessary legal capacity
2. Partnership where real rights are contributed to the
I. Who are persons incapacitated to give consent?
common fund.
No legal capacity to give consent
a) Minors
Defective Contracts
Exceptions:
1. When the contract is entered into by a minor who VOID OR VOIDABLE RESCISSIBLE UNENFORCEABLE
actively misrepresents his age, not merely INEXISTENT
constructive misrepresentation
2. When it involves sale and delivery of necessities to Do not Valid and Valid and Cannot be enforced
minors produce any enforceable enforceable by a proper action
3. Contracts entered into in behalf of the minor by legal effect until until in court
annulled by rescinded by a
guardians or legal representatives a competent
4. When upon reaching the age of majority, the minor competent court
ratifies the contract. court
b) Insane or demented persons, unless the contract was
entered into during lucid interval. Defect is Defect is Defect is Defect is caused by
It is not necessary that there be a previous declaration of caused by cause by caused by lack of form,
mental incapacity in order that a contract entered into may be lack of vice of injury/damage authority, or
annulled. essential consent; or to either one capacity of both
• Contracts entered into in state of drunkenness or requisites or one of the of the parties parties
illegality or parties to a or to a third
hypnotic spell may be voidable provided that it must impossibility contract is person
be of a degree that obscures completely the faculties a minor
and almost extinguishes the conscious of acts.
Cannot be Can be Need not be Can be ratified
c) Deaf-mute who do not know how to read and write. ratified ratified ratified

Third Requisite of Consent

3. Consent must be intelligent, free, spontaneous and real. Examples:

Vices of consent (Third requisite is not present if consent is
Minor entered into a contract with a person of legal age
vitiated)
- voidable; one of the parties is incapable of giving consent
1. violence
Minor entered into a contract with a person of legal age
2. intimidation
but the object of the contract is food
3. mistake of fact – must be substantial
- valid; the contract involves sale and delivery of necessities to
4. fraud
minors
5. undue influence
Minors entered into a contract.
- unenforceable; both parties are incapable of giving a consent
Forms of a contract
The parent of the minors ratified the contract.
- valid; the defect is cured by ratification