Right – is anything which is owed or due.
Moral power, bound to be o Prayer – communication with God
respected by others.
Characteristics of Rights
1. Co-action – power to inherent in rights to prevent being
violated and to exact redress for their unjust violation.
2. Collision – conflict of two rights so related that it is not
possible to exercise one without violating the other.
3. Limitation – natural limits or boundary beyond which a
right may not be insisted without violating the right of
another.
Kinds of Rights
1. Natural Rights – based on natural law. Right to live, right
to education, and right to work.
2. Human Rights – based on human laws.
3. Alienable Rights – rights which can be surrendered,
renounced, or removed. (Religion, properties, citizenship)
Right to travel and right to operate a business.
Inalienable Rights – cannot be surrendered, renounced,
or removed. (Forest, Historical Landmarks). Right to life,
right to marry, and right to education.
4. Right of Jurisdiction – is the power to own, to sell, to
barter, to lend, to change, or give away one’s personal
possessions. (Based on Human Law w/ court jurisdiction
limitation). Power of a lawful authority to govern and make
laws for his constituent or dependents.
5. Right of Property – power to own, to sell, to barter, to
lend, to change, or give away.
6. Juridical Rights – refers to all rights insofar as they are
based on law. These rights must be respected, allowed,
fulfilled, as a manner of strict justice.
Non-Juridical – based on virtue rather than strict justice.
Duty – anything we are bound to do or omit. Moral obligation
incumbent upon a person to do, omit or avoid something.
Types of Duties
1. Positive – imposed by a human positive law (pay taxes)
2. Affirmative – requires some effort. Positive duties.
3. Conflict of Duties – two duties at the same time. Prioritize
duties.
1. God
2. Yourself
3. Others
a. Relatives
b. Good of many
c. Family
d. More important
e. Higher Position
Religion - personal set or institutionalized system of religious
attitudes, beliefs, and practices. Practice beliefs based on divine law.
1. God
• Have a religion – practice beliefs based on divine law.
• Acts of Religion
o Devotion
o Adoration
o Sacrifice
2. Behavior of Person –
Virtues – Good Action, High moral action
Wisdom, artistic, prudence, justice, fortitude,
temperance, denacity, fair mindedness, perseverance,
curiosity, humility, attentiveness, honesty, thoroughness,
courage, craftmanship, carefulness, respect.
Vices – Bad habit.
Greed, anger, lust, envy, gluttony, pride,
laziness, indifference, melancholy, fraud, hooliganism,
cultism, theft.
The 1987 Constitution of the Republic of the Philippines
Bill of Rights
Section 1 – no person be deprived of life, liberty, or property without
due process of law.
Section 2 – right to be secure against unreasonable searches and
seizures. Warrant if it is a probable cause.
Section 3 – privacy of communications
Section 4 – no law abridging the freedom of speech
Section 5 – right for religion
Section 6 – Liberty of abode and right to travel
Section 7 – Right to information
Section 8 – right to form unions, associations or societies
Section 9 – private property shall not be taken for public use
Section 10 – contracts
Section 11 – free access to legal assistance
Section 12 – to be informed about the right to remain silence
Section 13 – right to bail, except for reclusion perpetua
Section 14 – not answer criminal offense without due process
Section 15 – writ of habeas corpus
Section 16 – right for speedy disposition of their cases.
Section 17 – no person shall be forced to be witness against himself.
Section 18 – no person shall be detained because of political beliefs
Section 19 – Excessive fines shall not be exposed
Section 20 – No person shall be imprisoned for debt and non-
payment of poll tax
Section 21 – no person put twice in jeopardy for same offense
Section 22 – no ex post facto law
CONTRACT
A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something
or to render some service.
Form of Contract
• An oral contract is a type of business contract that is
outlined and agreed to via spoken communication, but not
written down.
• A written contract is a printed agreement between two
parties, one a lender and one a borrower. Written contracts
are not only legally binding documents, but also more
enforceable than an oral agreement.
Two (2) Persons that can enter into contract
1. Natural Person - individual person
2. Juridical Person - bodies of person (business, partnership,
company, corporation, cooperative)
Elements of a Contract (O-A-C-L-C-M)
1) Offer – a party must make an offer
2) Acceptance – another party must accept the offer
3) Consideration – can be money, goods, services, or any
other form of legal tender that both parties agree upon.
4) Legality – establishes the set of laws and regulations that
apply to a contract, which varies by state and country.
5) Capacity – is a person's ability to satisfy the elements
required to enter into a binding contract.
6) Mutuality – the parties understood and agreed to the basic
substance and terms of the contract
Essential Elements Of Contract
1. There must be two or more competent contracting parties,
2. There must be a mutual agreement on the part of all parties
to the contract,
3. There must be a valuable consideration for each of the
parties to the contract,
4. The obligations which the parties to the contract undertake
must be created by law for legal acts,
5. The contract must be set forth according to the form and
executed in the manner prescribed by law.
What Makes a Contract Invalid?
The terms of a contract specify the illegal activity. One of the
parties to which the agreement relates doesn't have legal capacity (is
mentally incapable of entering into a legally binding agreement).
Invalid Contract – no valid contract
Illegal Contract – illegal activity; crime
Contracts with Restrictions as to the classification of competency of
parties to contract
1. Infants(minors)
2. Persons of unsound mind
3. Drunken person
4. Persons under legal guardianship
5. Corporations
6. Convicts
7. Enemy aliens
8. State governments
9. Foreign countries and their sovereigns
10. Professional persons who are required by law to register and
to be licensed.
Types of Contract
A.) Bilateral Contract - A bilateral contract is a binding
agreement between two parties where both exchange
promises to perform and fulfill one side of a bargain.
B.) Unilateral Contract - A unilateral contract, unlike the more
common bilateral contract, is a type of agreement where one
party (sometimes called the offeror) makes an offer to a
person, organization, or the general public.
C.) Multilateral Contract - Multilateral Contract is an
agreement between multiple parties.
Classification of Contracts
1. As to Origin
a. Express Contract – An express contract is an exchange
of promises in which the terms by which the parties
agree to be bound are declared either orally or in writing,
or a combination of both, at the time it is made.
Ex. If you offer to sell your bike to Jose for Php5000 and
Jose states that he agrees to buy the bike for that price, you
have an express contract. Jose's words have clearly
communicated his intention to be bound by the terms of your
offer.
b. Implied contract – An implied contract is a legally-binding
obligation that derives from actions, conduct,
or circumstances of one or more parties in an agreement. It
has the same legal force as an express contract, which is a
contract that is voluntarily entered into and agreed on
verbally or in writing by two or more parties. The implied
contract, on the other hand, is assumed to exist, but no
written or verbal confirmation is necessary.
There are two forms of implied contract:
i. Implied-in-fact contract – is created by the
circumstances and behavior of the parties
involved.
Ex. If a customer enters a restaurant and orders
food, for example, an implied contract is created.
The restaurant owner is obligated to serve the
food, and the customer is obligated to pay the
prices listed on the menu for it.
ii. Implied-in-law contract – is a legally binding
contract that neither party had the intention of
creating.
 Ex. Say the same restaurant patron mentioned
above chokes on a chicken bone, and a doctor
dining at the next booth leaps to the rescue. The
doctor is entitled to send a bill to the diner, and the
diner is obligated to pay it.
4.
c. Quasi contract – A quasi contract is a retroactive
arrangement between two parties who have no previous
obligations to one another. It is created by a judge to correct
a circumstance in which one party acquires something at the
expense of the other. The contract aims to prevent one party
from unfairly benefiting from the situation at the other party's
expense. These arrangements may be imposed when
goods or services are accepted, though not requested, by a
party. The acceptance then creates an expectation of
payment.
Ex. A person orders some perishable items online by
providing his address and paid for the same. At the time of
5.
the delivery of the goods, the delivery man delivers it to the
wrong address. The receiving party then, instead of denying
the delivery, accepts the order and consumes the same. The
case went to the court and the court then ordered to issue a
quasi-contract according to which the recipient has to pay
back the cost of the item to the party who the person who
paid for the item initially. So, in this case, the benefits of the
goods have been enjoyed by the receiving party, so such a
receiving party is bound to give compensation to the former
party.
2. As to participants
a. Two-party Contract- is a common type of contract in which
only two parties are involved
b. Joint Contract - is one in which two or more parties merge,
to a greater or less extent, their interest to enter into a
contract with another party or parties
c. Several Contract - is one in which two or more persons
enter into a contract as promisors or promisees but keep
their liability more or less separate.
6.
d. Joint and Several Contract - has some of the nature of
each of the preceding types.
e. Third-party Beneficiary Contract - is one in which two
parties enter into a contract for the protection of a third
person who is not a party to the contract.
3. As to obligation status
a. Bilateral Contract - is one in which one party agrees to
perform or refrain from performing some certain acts in
return for which the other party agrees to perform or refrain
from performing certain acts.
b. Unilateral Contract - is one in which there is a promise by
one party to perform certain acts provided the other party
does certain things, the acceptance to be accomplished by
the act.
As to contemplation status
a. Executory Contract - is one in which an obligation is
assumed by one or both parties to do or refrain from doing
certain acts at some time in the future.
b. Executed Contract - is one in which everything is done at
the time of making the contract and no obligations for future
acts is assumed by either party.
As to form
a. Contract under Seal - is one with a seal attached
b. Contract of Record - are those which exist as a
consequence of court judgements. The court judgement is a
quasi contract of record.
c. Simple or Parol Contract - is one which is less formal than
a sealed contract. It may or may not be in some special form
and may in some cases be written and in others may be oral.
Contracts in some specified form - are required in
some jurisdictions for certain contracts, such as negotiable
instruments(bill of exchange , promissory notes, etc.) These
are always in writing as well as of the specified form.
Contracts in writing but not in any special form are
required by statute in many jurisdictions for contracts such
as insurance policies.
Contract without requirement as to form or writing,
an oral contract is just as binding as a written contract.
As to legal status
a. Valid Contract - is one which is in full force and enforceable
by court action.
b. Void Contract - is one which has no status at law and is
therefore not enforceable by court action.
c. Voidable Contract - is one which is binding on one party
but may be either binding or nonbinding on the other party
at his option.
d. Unenforceable Contract - is one which is valid in all
respects except that it is unenforceable through court action.
Essential Requisites Of Contracts
There is no contract unless the following requisites concur:
English:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Tagalog:
Sa pagkakaroon ng isang kasunduan kinakailangan na ito ay
naglalaman ng mga sumusunod:
1) ang dalawang partido ay lubos na nagkakaintindihan;
2) na ang pinagkakasunduan ay tiyak at tukoy;
3) kinakailangan na ang sanhi ng obligasyon ay malinaw na nabuo
para sa kinakailangang pagtalima sa kasunduan ng dalawang partido.
Form Of Contract
Form of Contract means the document comprising Section
1 of the Contract signed by or on behalf of the Parties confirming their
willingness to enter into and be bound by the terms of the Contract.
Contracts shall be obligatory, in whatever form they may
have been entered into, provided all the essential requisites for their
validity are present. However, when the law requires that a contract be
in some form in order that it may be valid or enforceable, or that a
contract be proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties stated in the
following article cannot be exercised.
Mutual Agreement
It is essential to the validity of a contract that the parties to the contract
agree, and they must agree to the same the Factors for Mutual
Agreement of Contract;
1. Offer and Acceptance - in order to create contractual
relations, there must be an offer on the part of one of the
parties to the contract and an acceptance by the other party.
2. Time of Acceptance- the offer must be accepted within a
reasonable time, and where a time limit is fixed in such offer,
it must be accepted before such time limit expires.
3. Method of Acceptance - if a method of acceptance is
specified in the offer, the acceptance must be by the
specified method.
4. Revocation - an offer is revoked by the death or insanity of
the person making the offer, but if the offer is accepted prior
to the death or insanity of the person making the same, this
constitutes a contract which is binding on the executors,
administrators, guardian, or heirs of such person, provided
the contract was not for personal services.
5. Misrepresentation - if one party to a contract makes a
statement which in fact untrue but which he believes to be
true, and this fact is a material fact or element in the contract,
and the other party, believing the statement to be true and
relying on the truth of it, enters into the contract, it may be
avoided on the ground of misrepresentation.
6. Fraud - is a false representation of a material fact or non
disclosure of a material fact under such circumstances that
it amounts to a false representation.
7. Duress - If a person is compelled to sign a contract at the
point of a gun or through threats of violence to him or
someone whom he holds dear, he cannot be said to have
consented to the contract.
8. Undue influence - consists in taking advantage of a special
trust or confidence, which is reposed in one to cause or
induce the person so trusting or having confidence in him to
enter into a contract which is unfair to such person, in taking
advantage of the weaknesses, superstition, or necessities,
and distress of another.
Breach of Contract
A breach of contract occurs when one party in a binding
agreement fails to deliver according to the terms of the
agreement. A breach of contract can happen in both a written and an
oral contract. The parties involved in a breach of contract may resolve
the issue among themselves, or in a court of law.
Liquidated Damages
Liquidated damages is the amount, in case of breach of
contract, the parties to a contract quantify and designate during the
negotiation of a contract for the non-breaching party to receive as
compensation upon a specific breach
Contracts often provide that in case of breach of the
contract, the party aggrieved may collect from the other party a certain
specified amount as liquidated damages, or simply damages. The
court will give effect to the intention of the parties provided the amount
stated is, as a matter of fact, liquidated damages and not a penalty.
Liquidated damages are a fixed amount set forth in a
contract by an agency to compensate the agency for unexcused delay
in the performance of the contract. The purpose of the liquidated
damages clause is to establish, in advance, a reasonable estimate of
the damages that would be incurred by the agency if there is an
unexcused delay, or a breach of contract, which causes the work to be
extended beyond the contractual completion date. This establishment
of damages is designed to avoid arguments about the reasonableness
of the actual damages an owner may have due to unexcused delays
by the contractor.
If the amount of liquidated damages is later found to be
greater than the number of actual damages that should have been
anticipated, the liquidated damages may be deemed a penalty, and,
hence, unenforceable. The liquidated damages set forth in the contract
provision must be a reasonable forecast of the actual anticipated
damages. If the liquidated damages do not meet this test, then they
could be deemed an unenforceable penalty by a court or
administrative contract appeals board.
Discharge of Contracts
1. Discharge by Performance
2. Discharged by Impossibility of Performance
3. Discharged by Substantial Performance
4. Discharged by Agreement
5. Discharged by Operation of Law
6. Discharged by Breach of Contract
7. Discharged by Statute of Limitations
Contract Crime
Contract crime means a violation of antitrust law, fraud,
theft, embezzlement, bribery, forgery, misrepresentation, making false
statements, falsification or destruction of records, or other criminal
offense in connection with obtaining, attempting to obtain, or
performing a public or private contract.
Breach of contract is not a contract crime.
Contract killing is a form of murder or assassination in which one
party hires another party to kill a targeted person or persons. It
involves an illegal agreement which includes some form of payment,
monetary or otherwise.
Illegal Contracts
A contract is illegal if it involves doing something that is a
criminal act or a civil wrong, or against the public good. For example,
it is an offence to sell a firearm to a person not licensed to hold one,
so a contract to sell a firearm in these circumstances is illegal. A
contract whose purpose is to get the party to it to break another legally
binding contract that the party has made already is also illegal.
Civil Courts will not enforce an illegal contract. Money paid
or property transferred under an illegal contract cannot normally be
recovered because the contract is illegal and unenforceable by Civil
Court.
Construction Bond
A construction bond is a type of surety bond used
by investors in construction projects. Construction bonds are a type of
surety bond that protects against disruptions or financial loss due to a
contractor's failure to complete a project or failure to meet contract
specifications. These bonds ensure a construction project’s bills will
get paid.
Surety Bond
A surety bond is a promise to be liable for the debt,
default, or failure of another. It is a three-party contract by which one
party (the surety) guarantees the performance or obligations of a
second party (the principal) to a third party (the obligee).
A surety bond is defined as a three-party agreement that
legally binds together a principal who needs the bond, an obligee who
requires the bond and a surety company that sells the bond. The bond
guarantees the principal will act in accordance with certain laws. If the
principal fails to perform in this manner, the bond will cover resulting
damages or losses.
Will
A will is a legal declaration of a person's wishes regarding
the disposal of his or her property or estate after death especially : a
written instrument legally executed by which a person makes
disposition of his or her estate to take effect after death.
Extrajudicial Settlement
Common Examples
1. Extrajudicial Settlement of Estate - is a private agreement
between the heirs of the deceased person which sets
out how the estate of the deceased will be divided or
distributed among themselves. ... It is “extrajudicial”, as
opposed to judicial, in the sense that the heirs do not go to
court to settle the estate.
2. Extrajudicial Settlement of Estate with Absolute Sale
3. This involves selling of party by the heirs to other person.
4. Extrajudicial Settlement of Estate with Partition
5. Extrajudicial Settlement with Waiver of Rights
Types of Considerations
1. Good Considerations – A reason for doing something
based on natural affection, generosity, love, or moral duty.
This reason is insufficient to judge a commercial contract or
promise enforceable as it lacks valid, valuable, and legal
basis for the reason.
2. Valuable Considerations – means any consideration that
sufficiently compensates for the exchanged products or
services to be considered a binding contract. Valuable
consideration as a terminology can also arise in situations
of fraud.
Unlawful Contracts
1. Public Property
2. Contract of Bribing Public Officials
3. Contract encourage liquidations.
 4. Contract for Preach Committing Crime
5. Agreement to promote fraud and breach of contract.
6. Contracts which duty affected the security of marriage.
7. Contracts in unreasonable restrain of trades.
8. To pay usurious(charging illegal or exorbitant rates of
interest for the use of money) rate of interest
9. Any agreement that endangered the Public Health or Safety
10. Establishing of unlawful monopoly
Terms Related to Contract
Addendum – is an additional document that is used to add to or edit
terms within an executed contract without invalidating the existing
agreement.
Adjusted Contract Price – means the Contract Price as set forth in
the Contract, as previously adjusted by valid Change Order or written
amendment to the Contract.
Advertisements – are typically viewed as preliminary negotiations
that invite other parties to make an offer.
Alternative Dispute Resolution (ADR) – methods of attempting to
resolve a dispute without going to court. Arbitration, Mediation and
negotiation are types of ADR. Contracts may contain a clause
requiring the Parties to that contract to follow specific processes if a
contract-related disagreement occurs. Such a clause may prevent a
Party from starting court proceedings at all or without first following the
prescribed process.
Amendments – If all involved agree, amendments can be made to
contracts after they are signed. But they must be signed by all parties.
Also called a variation.
Arbitration – a method of dispute resolution where a private tribunal
determines the resolution of a dispute between the Parties to a
contract.
Assignment / Novation – the Parties to a contract may, under agreed
conditions, transfer or assign (novate) any of their liabilities, rights or
obligations under the contract to a third party.
Bankruptcy – the official legal status of a person or organization that
cannot repay the debts owed to creditors.
Bid Amount – An offer by an intending purchaser to pay a designated
price for property which is about to be sold at an auction. A bid may
also refer to an offer to perform a contract for work and labor or
providing materials at a stated price.
Bid/Tender – means the Techno Commercial and the Price Bid
submitted by the Bidder along with all
documents/credentials/attachments, formats, etc., in response to this
Bid Document, in accordance with the terms and conditions hereof.
Bill of Sale – A written statement attesting to the transfer (sale) of title
to goods, equipment, possessions, or a business to a buyer. It is useful
to show that the buyer now has ownership and to detail what was
actually purchased.
Bona Fide – Latin, meaning in good faith. Usually implies a level of
trust that the Parties to a contract are acting honestly without any
hidden motives.
Breach of Contract – failure by a Party to a contract to comply with
one or more Conditions of the contract. A breach of contract will make
the whole thing Void and can lead to Damages being awarded against
the breaching Party.
Calendar Days – the period of time of 24 hours' duration reckoned
from one midnight to the next.
Certificate of Cash Deposit – is a savings product that earns interest
on a lump-sum deposit that's untouched for a predetermined period of
time.
Condition of the Contract – is a requirement and one or both parties
must comply. Benefits given to the other party.
Confidential – a secret or something that should not be disclosed
except under specified circumstances.
Confirmation of Contract – means the written confirmation of
Products and/or Services covered under the Contract. This written
confirmation may include additional Special Terms provided by Seller,
and such terms shall be part of the Contract.
Confirmed Contract – by signing and dating the contract, and
exchanging copies with the other party.
Consideration – the benefit given by each Party to a contract to the
other Party in exchange for the contractual promise of another Party
to the contract. The benefit exchanged can be something physical like
equipment, monetary, behavioural like an action or inaction, anything
that has some value to the provider of the benefit.
Construction Plan –is a set of documents that defines the
requirements for a construction project, such as the activities,
resources, schedule and budget.
Contract Provision – is a stipulation within a contract, legal
document, or a law. A contract provision often requires action by a
specific date or within a specified period of time. Contract provisions
are intended to protect the interests of one or both parties in a contract.
Contract Time – means the period of time allotted in the Contract
Documents for Substantial Completion of the Work, including
authorized adjustments thereto.
Counterpart – a copy of a contract, often created so that each Party
to the contract may have its own copy. A contract may contain a
Counterparts clause allowing the Parties to each sign their own copy
of the contract rather than require all Parties to sign the one copy.
Damages – an amount of money sought or awarded to a Party to a
contract to compensate for the loss that Party has suffered due to a
Breach of Contract.
Deed – a special type of legally binding and enforceable contract that
does not require Consideration to pass from one Party to another.
Default – the circumstances where a Party to a contract is considered
to be in Breach of Contract.
Deliverables – a collective name for all those tangible things that a
Party to a contract is required to supply, often by an agreed date.
Discharge – occurs either when the parties have completed their
obligations under the contract, or when events, the conduct of the
parties, or the operation of law releases the parties from performing.
Entire Agreement – a clause in a contract stating that the written
document is the complete understanding between the Parties. Any
statement or promise made by a Party to the contract that is not in that
written document will not be considered part of the legally binding
contract, and cannot be relied upon in relation to the contract.
Excuse – something that forgives performance and bars enforcement
of a contract. If performance of a contractual obligation of a Party to
the contract is excused, this relieves the non-performing Party of
liability with respect to that obligation.
Force Majeure – the circumstances or situations described in a
contract that may prevent one or more of the Parties to the contract
from performing their contractual obligations. The occurrence of such
circumstances or situations may excuse the affected Party.
Forfeiture – Loss of property due to a violation of law pursuant to
circumstances set forth in federal and state forfeiture laws. Critics
complain of a lack of due process given to the owner of the property
prior to the state seizing it.
Imposed – should be follow/obey according to the law.
Indemnity – a contractual obligation on a Party to a contract to
compensate for any loss another Party to the contract may suffer in
the circumstances that are the subject of the Indemnity, such as
payment of reasonable court costs in the settlement of a contractual
dispute.
Injunction – a court order sought by a Party to a contract to make
another Party to the contract do or stop doing something. It is sought
urgently where the whole purpose of the contract would be defeated
and Damages would not adequately compensate the Party seeking
the Injunction for the loss it is likely to suffer from the other Party’s
actions or omissions.
Insolvency – the situation where a person or business is unable to
meet their financial obligations. See Bankruptcy, Liquidation and
Receivership.
Liability – a Party to a contract's legal obligation, on its Breach of
Contract, to compensate another Party to the contract for any harm so
caused.
License – a method by which the owner of physical or Intellectual
Property (the licensor) allows someone else (the licensee) to use it in
some prescribed manner, typically but not always for a royalty or a fee.
Limited liability – a Party to a contract's financial liability may be
limited to a fixed sum, commonly some fraction or multiple of the value
of the fees paid by another Party to the contract over the preceding 12
months.
Liquidated Damages – a contract provision that estimates and fixes
in advance the sum payable as Damages for a Party to the contract's
Breach of Contract.
Liquidation – the formal dissolution of a business by the sale or
transfer of its assets to pay a debt. This often occurs as a result of
Insolvency, but a solvent business can be liquidated if it no longer
wishes to continue trading.
Litigation – the conduct of court proceedings to resolve a dispute.
Mala Fide – Latin, meaning in bad faith, opposite of Bona Fide.
Mediation – a form of Alternative Dispute Resolution where an
independent person meets with the Parties to a contract to help them
formulate their own resolution to a conflict.
Misrepresentation – When facts presented during contract
negotiations are found to be false. If this was done intentionally, it is
seen as fraud or negligent representation.
Modify – To make partial or minor changes to (something), typically
so as to improve it or to make it less extreme.
Notice – A communication in agreed forms by one Party to a Contract
to the other Parties, advising or warning about something the other
Parties need to be aware of; or may be the notice required to do a
certain thing under the contract.
Novation – When the party transfers their rights to someone who was
not originally involved in the contract.
Obligation – something which must or must not be done by one or
more Parties to a contract.
Offer – is a show of willingness to enter into a contract, in exchange
for consideration, made so that the person to whom it is made
understands that their acceptance is requested and will close the deal.
There is no time limit for acceptance unless the offer has a deadline or
is withdrawn.
Party – Any individual, group or organization participating in a
contract. 'Parties' has a corresponding meaning.
Penalty – a clause within a contract that seeks to make the
counterparty responsible for paying a large sum of money if they
breach the contract.
Performance Bond – is a financial guarantee that the terms of a
contract will be honored. If one party to a contract cannot complete
their obligations, the bond is paid out to the other party to compensate
for their damages or costs.
Period – The length of time a contract is expected to be in force (see
also 'Term').
Pro Tempore (Pro Tem) – Latin, meaning for the time being.
Quotation – is a document that a seller provides to a buyer to offer
goods or services at a stated price, under specified conditions.
Receivership – the appointment of a licensed insolvency practitioner
to take over the running of a business that cannot meet its financial
commitments.
Representations – statements or promises made as a fact by one
Party to a contract to another Party to the contract.
Rights – the things a Party to a contract is entitled to do or not do as
the case may be.
Security Interest – Refers to a lender's interest in property that the
borrower has put up as collateral to secure the loan. The lender holds
a security interest in the collateral.
Severability – the allowance a contract for removal or correction of
portions of the contract that are incorrectly or illegally drawn up,
allowing the remainder of the contract to be valid and enforceable.
Surety – is the company that provides a line of credit to guarantee
payment of any claim. They provide a financial guarantee to the
obligee that the principal will fulfill their obligations.
Term – either (a) the length of time for which a contract operates (see
Period) or (b) any contract clause (see Condition).
Third Party – an individual, group, organization or other legal entity
(eg. a company) that is not a Party.
Variation – the method agreed by the Parties to a contract for making
changes to the contract after it has been signed. It usually requires that
any change to the contract be in writing signed by all Parties.
Void – making a contract unenforceable in law.
Waiver – an intentional surrendering of rights by a Party to a contract.
A 'no waiver' clause can be agreed stating that no provision in the
contract may be waived, except by means of a writing signed by the
Party to the contract against whom a waiver is sought.
Warranties – promises made in a contract. Failure of a warranty
results in liability to pay Damages.
DISCUSSION NO.13
CONTRACT – meeting of minds between two persons. Agreement.
TWO PERSONS THAT CAN ENTER INTO A CONTRACT
1. Natural Person – individual person
2. Juridical Person – bodies of person (business,
partnership, company, corporation, cooperative.
• Bilateral Contract - A bilateral contract is a binding agreement
between two parties where both exchange promises to perform
and fulfill one side of a bargain.
• Unilateral Contract - A unilateral contract, unlike the more
common bilateral contract, is a type of agreement where one
party (sometimes called the offeror) makes an offer to a person,
organization, or the general public.
• Multilateral Contract - Multilateral Contract is an agreement
between multiple parties.
ELEMENTS OF CONTRACT
1. Offer
2. Acceptance – one party must make an offer and another
party must accept the offer.
3. Mutuality of Obligation – both parties must intend to be
legally bound.
4. Consideration – something of value is exchanged for
something of value, or for action or inaction.
5. Capacity – each party must be legally able to enter into a
contract.
6. Legality – the contract must be for a legal purpose.
ESSENTIAL ELEMENTS OF CONTRACT
1. There must be two or more competent contracting parties,
2. There must be a mutual agreement on the part of all parties to
the contract,
3. There must be a valuable consideration for each of the parties
to the contract,
4. The obligations which the parties to the contract undertake
must be created by law for legal acts,
5. The contract must be set forth according to the form and
executed in the manner prescribed by law.
COMPETENCY OF CONTRACTING PARTIES
Every contract must have two or more parties, all of whom are legally
competent to enter into contractual relations. These parties may be
either natural persons or bodies created by law and authorized to
enter into contractual relations.
Contracts with Restrictions as to the classification of competency of
parties to contract-
1. Infants(minors)
2. Persons of unsound mind
3. Drunken person
4. Persons under legal guardianship
5. Corporations
6. Convicts
7. Enemy aliens
8. State governments
 9. Foreign countries and their sovereigns
10. Professional persons who are required by law to register and
to be licensed
CLASSIFICATION OF CONTRACTS
1. As to Origin
a. Express Contract - An express contract is an exchange of
promises in which the terms by which the parties agree to
be bound are declared either orally or in writing, or a
combination of both, at the time it is made.
Ex: If you offer to sell your bike to Jose for Php5000 and
Jose states that he agrees to buy the bike for that price, you
have an express contract. Jose's words have clearly
communicated his intention to be bound by the terms of
your offer.
b. Implied Contract - An implied contract is a legally-binding
obligation that derives from actions, conduct, or
circumstances of one or more parties in an agreement. It
has the same legal force as an express contract, which is a
contract that is voluntarily entered into and agreed on
verbally or in writing by two or more parties. The implied
contract, on the other hand, is assumed to exist, but no
written or verbal confirmation is necessary.
Two Forms of Implied Contract
A. Implied-in-fact contract is created by the circumstances
and behavior of the parties involved.
Ex: If a customer enters a restaurant and orders food, for
example, an implied contract is created. The restaurant
owner is obligated to serve the food, and the customer is
obligated to pay the prices listed on the menu for it.
B. Implied-in-law contract is a legally binding contract that
neither party had the intention of creating.
Ex: In this scenario, if a restaurant patron chokes on a
chicken bone and a doctor from the neighboring booth
saves them, the doctor can lawfully send a bill to the
patron, who is then obligated to settle the payment.
C. Quasi contract is a retroactive arrangement between
two parties who have no previous obligations to one
another. It is created by a judge to correct a circumstance
in which one party acquires something at the expense of
the other.
Ex: In this scenario, an individual orders perishable items
online, but the delivery is made to the wrong address and
accepted by the unintended recipient. The court orders
the creation of a quasi-contract, requiring the recipient to
reimburse the original purchaser. This quasi-contract
serves to prevent unfair benefits from being derived at the
expense of the other party, establishing an obligation for
compensation when goods or services are accepted, even
if not requested, by a party.
2. As to Participants
a. Two-party Contract- is a common type of contract in which
only two parties are involved
b. Joint Contract - is one in which two or more parties merge,
to a greater or less extent, their interest to enter into a
contract with another party or parties
c. Several Contract - is one in which two or more people
enter into a contract as promisors or promises but keep their
liability more or less separate.
d. Joint and Several Contract - has some of the nature of
each of the preceding types.
e. Third-party Beneficiary Contract - is one in which two
parties enter into a contract for the protection of a third
person who is not a party to the contract.
3. As to Obligation Status
a. Bilateral Contract - is one in which one party agrees to
perform or refrain from performing certain acts in return for
which the other party agrees to perform or refrain from
performing certain acts.
b. Unilateral Contract - is one in which there is a promise by
one party to perform certain acts provided the other party
does certain things, the acceptance to be accomplished by
the act.
4. As to Completion Status
a. Executory Contract - is one in which an obligation is
assumed by one or both parties to do or refrain from doing
certain acts at some time in the future.
b. Executed Contract - is one in which everything is done at
the time of making the contract and no obligations for future
acts is assumed by either party.
5. As to form
a. Contract under Seal - is one with a seal attached
b. Contract of Record - are those which exist as a
consequence of court judgements. The court judgement is a
quasi contract of record.
c. Simple or Parol Contract - is one which is less formal than
a sealed contract. It may or may not be in some special
form and may in some cases be written and in others may
be oral.
• Contracts in some specified form - are required in some
jurisdictions for certain contracts, such as negotiable
instruments(bill of exchange , promissory notes, etc.) These
are always in writing as well as of the specified form.
• Contracts in writing but not in any special form are required
by statute in many jurisdictions for contracts such as
insurance policies.
• Contract without requirement as to form or writing, an oral
contract is just as binding as a written contract.
6. As to Legal Status
a. Valid Contract - is one which is in full force and enforceable
by court action.
b. Void Contract - is one which has no status at law and is
therefore not enforceable by court action.
c. Voidable Contract - is one which is binding on one party
but may be either binding or nonbinding on the other party
at his option.
d. Unenforceable Contract - is one which is valid in all
respects except that it is unenforceable through court action.
ESSENTIAL REQUISITES OF CONTRACTS
There is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Sa pagkakaroon ng isang kasunduan kinakailangan na ito ay
naglalaman ng mga sumusunod:
1. Ang dalawang partido ay lubos na nagkakaintindihan;
2. Na ang pinagkakasunduan ay tiyak at tukoy;
3. Kinakailangan na ang sanhi ng obligasyon ay malinaw na
nabuo para sa kinakailangang pagtalima sa kasunduan ng
dalawang partido.
FORM OF CONTRACT
DISCUSSION NO.14
MUTUAL AGREEMENT
It is essential to the validity of a contract that the parties to the
contract agree, and they must agree to the same-
Factors for Mutual Agreement of Contract;
1. Offer and Acceptance - in order to create contractual
relations, there must be an offer on the part of one of the
parties to the contract and an acceptance by the other party.
2. Time of Acceptance- the offer must be accepted within a
reasonable time, and where a time limit is fixed in such offer, it
must be accepted before such time limit expires.
3. Method of Acceptance - if a method of acceptance is
specified in the offer, the acceptance must be by the specified
method.
4. Revocation - an offer is revoked by the death or insanity of
the person making the offer, but if the offer is accepted prior to
the death or insanity of the person making the same, this
constitutes a contract which is binding on the executors,
administrators, guardian, or heirs of such person, provided the
contract was not for personal services.
5. Misrepresentation - if one party to a contract makes a
statement which in fact untrue but which he believes to be
true, and this fact is a material fact or element in the contract,
and the other party, believing the statement to be true and
relying on the truth of it, enters into the contract, it may be
avoided on the ground of misrepresentation.
6. Fraud - is a false representation of a material fact or non-
disclosure of a material fact under such circumstances that it
amounts to a false representation.
7. Duress - If a person is compelled to sign a contract at the
point of a gun or through threats of violence to him or
someone whom he holds dear, he cannot be said to have
consented to the contract.
8. Undue influence - consists in taking advantage of a special
trust or confidence, which is reposed in one to cause or
induce the person so trusting or having confidence in him to
enter into a contract which is unfair to such person, in taking
advantage of the weaknesses, superstition, or necessities,
and distress of another.
DISCUSSION NO.15
Breach of Contract
A breach of contract occurs when one party in a binding agreement
fails to deliver according to the terms of the agreement. A breach
of contract can happen in both a written and an oral contract. The
parties involved in a breach of contract may resolve the issue among
themselves, or in a court of law.
Liquidated Damages
• Liquidated damages are predetermined amounts set during
contract negotiations for the non-breaching party to receive as
compensation in the case of a breach.
• Contracts often allow the aggrieved party to collect a specific sum
as liquidated damages in the event of a breach.
• Court enforcement of the designated amount depends on its
classification as liquidated damages rather than a penalty,
respecting the parties' intentions.
• They serve as fixed compensation for an agency in the case of
unjustified delays in contract performance.
• The clause aims to pre-estimate damages to prevent disputes
over actual damages arising from delays or breaches.
• Excessive liquidated damages compared to actual damages may
render them unenforceable as a penalty.
• To be enforceable, the liquidated damages must reasonably
forecast the anticipated damages, failing which they may be
considered unenforceable by a court or administrative contract
appeals board.
Discharge of Contracts
1. Discharge by Performance
2. Discharged by Impossibility of Performance
3. Discharged by Substantial Performance
4. Discharged by Agreement
5. Discharged by Operation of Law
6. Discharged by Breach of Contract
7. Discharged by Statute of Limitations
Contract Crime
Contract crime means a violation of antitrust law, fraud, theft,
embezzlement, bribery, forgery, misrepresentation, making false
statements, falsification or destruction of records, or other criminal
offense in connection with obtaining, attempting to obtain, or
performing a public or private contract. Breach of contract is not a
contract crime.
Contract killing is a form of murder or assassination in which one
party hires another party to kill a targeted person or persons. It involves
an illegal agreement which includes some form of payment, monetary
or otherwise.
Illegal Contracts
A contract is illegal if it involves doing something that is a criminal act
or a civil wrong, or against the public good. For example, it is an
offence to sell a firearm to a person not licensed to hold one, so a
contract to sell a firearm in these circumstances is illegal. A contract
whose purpose is to get the party to it to break another legally binding
contract that the party has made already is also illegal.
Civil Courts will not enforce an illegal contract. Money paid or property
transferred under an illegal contract cannot normally be recovered
because the contract is illegal and unenforceable by Civil Court.
Construction Bond
A construction bond is a type of surety bond used by investors in
construction projects. Construction bonds are a type of surety bond
that protects against disruptions or financial loss due to a contractor's
failure to complete a project or failure to meet contract specifications.
These bonds ensure a
Surety Bond
A surety bond is a promise to be liable for the debt, default, or
failure of another. It is a three-party contract by which one party (the
surety) guarantees the performance or obligations of a second party
(the principal) to a third party (the obligee).
A surety bond is defined as a three-party agreement that legally binds
together a principal who needs the bond, an obligee who requires the
bond and a surety company that sells the bond. The bond guarantees
the principal will act in accordance with certain laws. If the principal
fails to perform in this manner, the bond will cover resulting damages
or losses.
Will
A will is a legal declaration of a person's wishes regarding the disposal
of his or her property or estate after death especially: a written
instrument legally executed by which a person makes disposition of
his or her estate to take effect after death.
Extrajudicial Settlement
a. Extrajudicial Settlement of Estate - Extrajudicial Settlement of
Estate is a private agreement between the heirs of the deceased
person which sets out how the estate of the deceased will be
divided or distributed among themselves. ... It is “extrajudicial”, as
opposed to judicial, in the sense that the heirs do not go to court
to settle the estate.
b. Extrajudicial Settlement of Estate with Absolute Sale- This
involves selling of party by the heirs to other person.
c. Extrajudicial Settlement of Estate with Partition
d. Extrajudicial Settlement with Waiver of Rights
DISCUSSION NO.16
CONSTRUCTION CONTRACT DOCUMENT FORM
1. Identification of Contracting Parties
2. Scope of Work
3. Contract Price
4. Component Parts of Contract
- General Conditions
- Specifications
- Plans
- Addendum
STEPS IN CONTRACTING
1. Invitation to Bidders
2. Instructions to Bidders
3. Proposals
4. Awarding of Construction Contract
DISCUSSION NO.17
Standard contracts are not mandatory for private construction
projects in the Philippines, but templates are available. For
government construction projects, standard forms are typically used,
as required by relevant laws and regulations.
2. PARTIES
2.1 The Employer
Companies that Act as Employers – private individuals, privately
owned entities, and government agencies.
Rights and Obligations of the Employer
1. Rights
o To inspect the work and require the correction of
defects.
o To stop the work if the contractor fails to complete or
correct it.
o To obtain ownership of the completed work, materials,
equipment, and supplies.
o To request variations or changes to the work.
2. Obligations
o To pay the contractor the contract price.
o To provide the contractor with access to the work site.
o To provide the contractor with necessary information
about the work site.
o To obtain the necessary government permits and
licenses.
o To obtain and maintain the necessary insurance
coverage.
2.2 The Contractor
Companies that Act as Contractors
• Contractors in construction projects in the Philippines must be
licensed by the PCAB.
• Multiple contractors can form an unincorporated joint venture
(UJV) to undertake a single project, and the UJV itself must
obtain a PCAB license.
• A consortium between a PCAB-licensed contractor and a non-
contractor can be formed to undertake a single project, and
the consortium itself must obtain a PCAB license.
• Contractors must satisfy certain legal, financial, and technical
eligibility requirements.
PCAB: Philippine Contractors Accreditation Board
Unincorporated joint venture (UJV): A business agreement between
two or more parties to undertake a single project.
 Types of PCAB Licences
There are two main types of PCAB licenses:
1. Regular License: This license can only be issued to Filipino sole
proprietorships, partnerships, and corporations that have at least
60% Filipino equity participation. It allows the licensee to engage
in construction contracting within the field and scope of the
license classification during the license's validity.
2. Special License: This license can be issued to a joint venture, a
consortium, a foreign constructor, or a project owner. It only
allows the licensee to engage in the construction of a single,
specific project.
Regular License with Annotation - Quadruple-A License
The Quadruple-A License is a sub-type of Regular License. It can
be issued to a corporation organized under Philippine law,
including ones that are up to 100% foreign-owned. The applicant
must have a minimum paid-up capitalization of at least PHP1
billion at the time it applies for the license. The holder of a
Quadruple-A License may undertake only specific types of
vertical and horizontal projects, each with a prescribed minimum
contract value.
Rights and Obligations of a Contractor
1. Rights
o Receive the contract price
o Access to the construction site
o Pertinent information about the site
o Extension of time, if applicable
2. Obligations
o Complete the work within the specified timeline
o Use quality materials and methods
o Provide and pay for labor, materials, equipment, and
services
o Obtain necessary permits
o Warrant that the work meets all requirements
o Rectify any defects
o Comply with labor laws
o Ensure security and safety at the site
o Procure and maintain appropriate bonds and
insurance
3. WORK
3.1 Scope
The scope of work is typically determined by the employer or its
consultants and included in the tender documents. However, it can
also be prepared jointly by the employer and the contractor and
incorporated into the construction contract.
Methods of description for the scope of work include:
• Program of works
• Terms of reference
• Drawings and specifications
• Project schedules and milestones
3.2 Variations
Scope and Price of Variations Requested by the Employer
• Variations are typically changes in quantities, extra work, or
additional work resulting from different sub-surface conditions.
• The price of the variation is usually determined by a lump
sum, unit prices, or actual direct cost plus a fixed percentage
for profit and overheads.
Scope and Price of Variations Requested by the Contractor
• The contractor can propose variations to the employer, and if
approved, the parties will agree on the value of the variation.
• Under Philippine law, the contractor can only demand an
increase in the price if there is a change in the plans and
specifications, and the change is authorized by the employer
in writing.
3.3 Design
• The employer is typically responsible for the adequacy of the
design, unless the contract states otherwise.
• The contractor must adhere to the drawings and specifications
prepared by the architect or design consultant, unless the
contract states otherwise.
• The employer may require the rectification of any work that the
architect or design consultant determines to be non-compliant.
• If the contractor is responsible for the design, they are
responsible for the adequacy of the design.
3.4 Construction
Responsibilities of the Contractor
• Perform all the works and complete them within the timelines
provided in the construction contract.
• Supply all the materials, goods, and equipment needed for the
works.
• Rectify or remedy any defect or deficiency that may arise during
the construction period and/or within a certain period thereafter.
• Remain responsible for all acts of its subcontractors, as if they
were the acts, negligence, and omissions of the contractor itself.
Responsibilities of the Employer
• Pay the contract price to the contractor.
• Allow the contractor and subcontractor access to the site to
perform the works.
Important Points
• The contractor is generally responsible for the performance of
all the works.
• The employer is generally not involved in the performance of the
works.
• The employer is generally liable only to pay the contract price to
the contractor.
3.5 Site Access
Prior to Construction
• The responsibility for matters relating to the status of the site is
stipulated in the contract.
• Remedial works to prepare the site may be included in the
contractor's scope of work or be the employer's responsibility.
• Contractors typically visit the site to assess facilities and
potential difficulties before bidding.
• The employer must provide the contractor with a geodetic
survey and subsurface exploration.
• The employer is responsible for any violations of environmental
laws and regulations prior to construction.
• Archaeological finds found on the site are considered the
employer's property.
During Construction
• The contractor is responsible for the site and must comply with
environmental laws and regulations.
• The contractor may be held responsible for environmental
violations arising from its own acts or omissions.
Important Points
• The responsibility for site preparation varies depending on the
contract.
• Contractors should assess the site before bidding to identify
potential challenges.
• The employer is responsible for providing necessary site
information to the contractor.
• The employer is initially responsible for environmental
compliance, but the contractor may also be liable.
• Archaeological finds belong to the employer.
3.6 Permits
Required Permits for Construction Projects
• Contractor's License from the Philippine Contractor's
Accreditation Board (PCAB)
• Environmental Compliance Certificate (ECC) or Certificate of
Non-Coverage (CNC) from the Department of Environment and
Natural Resources (DENR)
• Zoning/locational clearance, building permit, occupancy permit,
and other related permits from the local government unit (LGU)
• Fire safety evaluation clearance from the Bureau of Fire
Protection (BFP)
• Height clearance permit from the Civil Aviation Authority of the
Philippines (CAAP) for projects near airports
Permits Issuance and Responsibilities
• All permits, except for the Contractor's License, are typically
issued in the employer's name.
• The contractor is responsible for obtaining all required permits
on behalf of the employer.
3.7 Maintenance
• The maintenance contract is typically separate from the
construction contract.
• The scope of maintenance works varies depending on the
project type.
• The maintenance manual is prepared by the contractor and
turned over to the employer upon completion of construction.
3.8 Other Functions
• Operational services, financing arrangements, and project
transfer are typically handled by separate contracts or
agreements.
• The construction contract may include provisions related to these
functions, but the employer has primary responsibility for
managing them.
• Operational services are typically managed by an operation and
maintenance service provider, which may or may not be the
construction contractor.
• Financing arrangements are independent of the construction
contract but may involve specific rights granted to the financier.
• The transfer of the project from the contractor to the employer is
governed by the terms of the construction contract.
3.9 Test
• The employer has the right to inspect and test the completed
works.
• The contractor is responsible for remedying any deficiencies
identified during the inspection or testing.
• The contractor bears the costs associated with rectifying
deficiencies and further testing.
• The employer's completion certificate signifies satisfactory
completion of the works.
3.10 Completion, Takeover, Delivery
Substantial Completion and Final Completion
Construction contracts typically distinguish between Substantial
Completion and Final Completion.
Substantial Completion
• Marks the completion of at least 95% of the works.
• Allows the employer to occupy and use the site.
• Triggered by the contractor's request for inspection.
• Upon verification, the employer issues a Certificate of
Substantial Completion.
• If the employer finds deficiencies, the contractor must rectify
them to achieve Substantial Completion.
Final Completion
• Represents the completion of all contractual obligations.
• Occurs after Substantial Completion and rectification of any
deficiencies.
• Triggers the issuance of a Certificate of Final Completion by the
employer.
Site Turnover
• Following Substantial Completion, the works and the site are
handed over to the employer.
"Punch List"
• If the employer identifies any defects or non-compliant works
during Final Completion inspection, they issue a "punch list"
outlining the required rectifications.
• Upon satisfactory completion of the punch list items, the
employer issues the Certificate of Final Completion.
Important Points
• Substantial Completion allows for site usage, but Final
Completion signifies complete fulfillment of the contract.
• The employer has the right to verify Substantial Completion and
Final Completion before issuing certificates.
• The contractor is responsible for rectifying any deficiencies
identified before Substantial Completion and any defects or non-
compliant works included in the punch list.
• Final Completion marks the formal conclusion of the
construction project.
3.11 Defects and Defects Liability
• Defects Liability Period: A period during which the contractor
is liable for remedying defects in the works.
• Substantial Completion: Completion of at least 95% of the
works, allowing the employer to occupy and use the site.
• Final Completion: Completion of all contractual obligations,
triggering the issuance of a Certificate of Final Completion.
• Warranty Security or Retention: A portion of the contract price
withheld by the employer as security for the contractor's
performance.
• Civil Code (Article 1723): A provision in the Philippine Civil
Code that establishes liability for defects in construction
projects.
• The defects liability period typically lasts for one year from
Substantial or Final Completion.
• During the defects liability period, the employer can require the
contractor to remedy any discovered defects at no cost.
• If the contractor fails to rectify the defects, the employer can
either fix them themselves or engage a third party, seeking
compensation from the warranty security or retention.
• In the absence of a contractual defects liability period, the Civil
Code (Article 1723) applies.
• Under the Civil Code, the engineer or architect responsible for
the plans and specifications may be liable for damages if the
building collapses within 15 years due to defects in the plans,
specifications, or the ground conditions.
• The contractor is liable for damages if the building collapses
within 15 years due to construction flaws, the use of
substandard materials, or breach of contract terms.
• Claims under the Civil Code must be filed within ten years of the
building's collapse.
• The Civil Code does not specify a deadline for reporting defects
discovered after the initial defects liability period.
4. PRICE
4.1 Price
Payment Methods in Construction Contracts
Construction contracts typically employ one of two payment methods:
1. Lump Sum Contracts: The contract price is fixed and
predetermined, covering all costs and expenses associated with
the project's execution, completion, and performance. Variations
may necessitate adjustments to the contract price, but these are
subject to mutual agreement between the parties.
2. Cost-Plus Contracts: These contracts are commonly used
when the project's scope is not fully defined. They reimburse the
contractor for all incurred costs, plus an additional percentage
(cost-plus fixed percentage) or a fixed fee (cost-plus fixed fee).
Milestone Payments
Construction contracts often incorporate milestone payments, where
each payment is contingent upon verification or testing by the
employer. Down payments are also common, typically issued upon
delivery of the required performance bond and obtaining necessary
permits and licenses. Full payment of the contract price occurs upon
Final Completion, subject to any agreed-upon retention amount.
4.2 Payment
Late or Non-Payment in Construction Contracts
Parties involved in construction contracts have the freedom to
establish the conditions that govern late or non-payment. These
conditions may include the payment of interest, penalties, and the
potential for work suspension or contract termination.
Typical Measures for Late or Non-Payment
1. Payment within an Agreed Period: Upon receipt of a payment
request from the contractor, the employer is obligated to pay the
certified amount within a stipulated timeframe.
2. Interest on Late Payments: If the employer fails to make timely
payments, they are liable for interest on the outstanding amount.
3. Extended Completion Time: Delays in progress payment
settlements automatically extend the project completion date by
an equivalent period.
4. Suspension or Termination: The contractor has the right to
suspend work or terminate the contract if the employer fails to
make the approved progress payments.
5. Extra Cost Claims: If the contractor incurs delays due to the
employer's actions, they may be entitled to claim additional
costs and an extension of time.
6. Advance Payments: Advance payments are commonly used to
provide the contractor with upfront funding for mobilization and
material procurement.
4.3 Invoicing
The particular means and form of invoicing are not normally provided
in the contract. However, in milestone payments, approval by the
employer is generally required before the contractor may issue
invoices to the employer for the particular payment.
5. TIME
5.1 Planning
• The employer is generally responsible for developing and
finalizing the plans, schedules, and milestones for the
construction project.
• In some cases, the contractor may be tasked with preparing a
contractor's plan, which must be approved by the employer
before becoming binding.
• Any modifications to the plans, schedules, or milestones require
approval from both the employer and the contractor.
• The completion of each milestone is subject to verification and
testing procedures outlined in the contract.
• Upon completion of a milestone, the employer typically issues a
milestone certificate to formally acknowledge its achievement.
5.2 Delays
• The parties to a construction contract can define what
constitutes a delay in performance and the consequences of
such a delay for their respective obligations.
• A party is typically required to notify the other party if it believes
the other party is causing a delay. This aligns with Article 1169
of the Civil Code, which states that those responsible for
delivering or performing an action are considered in delay from
the moment a demand is made. However, a demand is not
always necessary for a delay to exist if the law or the obligation
itself expressly declares it so, such as when the contract
explicitly specifies key dates or a timeline. Nevertheless, it is
common practice to have a notification requirement to determine
the starting point from which an extension of time or an
additional cost claim can be based, if applicable.
• After providing notice, the party claiming the delay is generally
responsible for substantiating the impact of the delay and
justifying their entitlement to an extension of time and/or an
additional cost claim.
5.3 Remedies in the Event of Delays
• The contractor faces financial penalties for delays in completing
the project.
• The employer may terminate the contract if the delay is
substantial.
• Liquidated damages are a predetermined amount agreed upon
in the contract as compensation for delays.
• Consequential costs are additional expenses incurred by the
employer due to the contractor's delay.
• The performance bond provides financial security for the
employer in case of contractor defaults.
5.4 Extension of Time
• If the contractor experiences delays due to factors beyond their
control (such as employer actions, third-party strikes, natural
disasters, or force majeure events), they are entitled to a fair
adjustment to the project completion time.
• The contractor must notify the employer of the delay within a
specified timeframe under the contract.
• The employer must, within a similar timeframe, grant the
contractor an equitable adjustment of the completion time,
based on their assessment of the delay's duration.
• If the contractor and employer cannot agree on the proposed
adjustment period, the contract may outline dispute resolution
mechanisms.
• The parties may also specify that the employer's failure to
respond to the contractor's notification constitutes approval of
the requested adjustment.
5.5 Force Majeure
Force majeure, also known as fortuitous events, are circumstances
beyond the control of any party that prevent them from fulfilling their
contractual obligations. In the Philippines, no one can be held liable
for events that were unforeseeable or inevitable.
The most common force majeure events in Philippine
construction contracts include:
• War, riot, sabotage, acts of terrorism, insurrections, acts of
public enemies
• Strike, industrial dispute, blockade, labor dispute, lockout
• Fire, explosion, flood, typhoon, tornado, epidemic or pandemic,
earthquakes, or other natural disasters
• Export or import restrictions
• Closing of harbors, docks, canals, or other assistance to or
adjuncts of shipping or navigation
• Rationing or allocation imposed by law, decree, or regulation
Contractual Limitations
Parties to a construction contract can mutually agree to limit or
exclude certain events from being considered force majeure. This
allows them to tailor the force majeure clause to the specific risks
associated with the project.
5.6 Unforeseen Circumstances
Unforeseen Circumstances in Construction Contracts
Unforeseen circumstances, such as fortuitous events (discussed
under Force Majeure), legal or physical impossibility, or unforeseen
difficulty, can arise in construction projects. These circumstances
may impact the contractor's ability to fulfill their contractual
obligations.
Civil Code Provisions
The Civil Code's provisions are considered incorporated into
construction contracts unless the parties explicitly agree otherwise.
These provisions govern how unforeseen circumstances are
addressed.
Legal Impossibility
Under the Civil Code, a debtor is released from their obligation to
perform a service if the obligation becomes legally or physically
impossible without their fault. Legal impossibility occurs when an act
is prohibited or prevented by law, while physical impossibility arises
when an act can no longer be accomplished due to its nature.
Difficulty Beyond Contemplation
The Civil Code also provides that if the service becomes so difficult
as to be manifestly beyond the contemplation of the parties, the
obligor may be released from the obligation in whole or in part. This
applies when exceptional changes in circumstances occur,
considering the risks assumed by the parties at the contract's
inception.
Classification and Claims
Unforeseen circumstances may be classified as force majeure or a
change in legislation. Depending on the circumstances and the
contractor's ability to substantiate their claims, they may be entitled to
an extension of time and/or additional costs.
Key Points
• Unforeseen circumstances can significantly impact construction
projects.
• The Civil Code's provisions govern unforeseen circumstances
unless otherwise specified in the contract.
• Legal or physical impossibility and difficulty beyond
contemplation are grounds for release from obligations.
• Contractors may be entitled to an extension of time and/or
additional costs for unforeseen circumstances.
6. LIABILITY
6.1 Exclusion of Liability
Liability for future fraud cannot be contractually excluded under
mandatory law (Civil Code, Article 1171). In addition, limitation of
liability for gross negligence and willful misconduct may be
considered void, as it is contrary to public policy.
6.2 Willful Misconduct and Gross Negligence
Wilful Misconduct
Wilful misconduct involves intentional or deliberate wrongdoing, often
with the knowledge that it will cause harm to others. In construction
projects, wilful misconduct may include intentionally using
substandard materials, failing to follow safety protocols, or knowingly
providing false information.
Gross Negligence
Gross negligence is a higher standard of care than ordinary
negligence. It involves a "want of even slight care and diligence" and
a "such entire want of care as to raise a presumption that the person
in fault is conscious of the probable consequences of carelessness,
and is indifferent, or worse, to the danger of injury to person or
property of others." In construction, gross negligence could include
failing to take obvious safety precautions or disregarding known
risks.
Liability for Wilful Misconduct and Gross Negligence
Under Article 2176 of the Civil Code, anyone who causes damage to
another due to fault or negligence is liable for the resulting damages.
This includes both actual damages, which represent the actual loss
suffered, and exemplary damages, which are intended to punish the
wrongdoer and deter future misconduct.
Limitations on Liability
While parties are free to exclude or limit their liability for ordinary
negligence, limitations on liability for gross negligence and wilful
misconduct are generally considered void. This means that parties
cannot contractually evade responsibility for their intentional or
reckless actions that cause harm to others.
Key Points
• Wilful misconduct and gross negligence are serious breaches of
duty that can result in significant liability in construction
contracts.
• The Civil Code holds parties liable for damages caused by their
fault or negligence, including exemplary damages in cases of
gross negligence.
• Limitations on liability for gross negligence and wilful misconduct
are generally unenforceable.
6.3 Limitation of Liability
Limitations of Liability in Construction Contracts
Parties involved in construction contracts have the freedom to
contractually limit their liabilities. This typically involves limiting the
contractor's overall liability under the contract and restricting claims
for certain types of consequential damages, such as lost profits.
When parties agree to limit liability, the cap is usually set at an
amount equivalent to the contract price or a predetermined
percentage of it.
Exceptions to Limitations of Liability
Despite contractual limitations, parties cannot limit their liability for
damages arising from fraudulent acts, gross negligence, or willful
misconduct. Such stipulations are considered void and
unenforceable. Additionally, parties are generally not liable for events
of force majeure.
Key Points
• Parties can contractually limit their liabilities in construction
contracts.
• Limitations typically apply to the contractor's overall liability and
restrict claims for consequential damages.
• Liability cannot be limited for fraudulent acts, gross negligence,
or willful misconduct.
• Force majeure events generally exempt parties from liability.
7. RISK, INSURANCE AND SECURITIES
7.1 Indemnities
Indemnities are commonly used in construction contracts to shift the
financial burden of potential risks from one party to another.
Typically, the contractor agrees to indemnify the employer for the
following:
• Breaches of Contractual Obligations: The contractor's failure to
fulfill their contractual obligations or adhere to applicable laws
and regulations.
• Delayed Completion: Failure to complete the construction work
within the agreed-upon timeframe.
• Negligence and Errors: Negligent acts, errors, omissions, or
inadequate supervision by the contractor or subcontractors
during the construction process.
• Breaches of Warranties and Confidentiality: Breach of any
warranties provided in the contract or violation of confidentiality
obligations.
• Intellectual Property Infringement: Infringement or violation of
third-party intellectual property rights.
• Contractor-Caused Injuries and Property Damage: Death, illness,
or injury to the contractor's or subcontractor's employees, or
damage to any property arising from the construction work, if
attributable to the contractor.
• Employment-Related Claims: Employment-related claims brought
by the contractor's employees.
• Unpaid Bills for Labor and Materials: Failure to pay for labor and
materials used in the construction project.
• Damage to Employer's Property: Damage caused by the
contractor or its employees to any property belonging to the
employer or adjacent properties.
7.2 Guarantees
Guarantees are crucial provisions in construction contracts, as they
safeguard the employer's interests against defects in workmanship
and materials. These warranties typically cover the following aspects:
1. Conformity to Requirements: The contractor assures that the
completed project meets all applicable laws, contract
specifications, and the employer's specific expectations.
2. Quality of Materials: The contractor guarantees that all
materials used in the project are standard industry products,
adhere to contract specifications, and are free from defects.
3. Workmanship Standards: The contractor pledges to execute
all civil works and installations in a professional and skillful
manner, adhering to contract standards or recognized industry
practices.
4. Retention or Warranty Security: To ensure warranty
compliance, a portion of the contract price may be held by the
employer until the warranty period expires, or the contractor
may provide warranty security, such as a bond or letter of credit.
Key Points
• Warranties protect the employer's interests against defects in
workmanship and materials.
• Warranties cover conformity to requirements, material quality,
workmanship standards, and remedies for defects.
• Retention or warranty security mechanisms ensure contractor
compliance with warranties.
7.3 Insurance
Construction contracts typically mandate that contractors procure
and maintain insurance coverage from reputable and financially
sound insurance companies approved by the employer. The required
policies typically include:
1. Contractor's All-Risk Insurance: This policy covers against a
wide range of risks, including fire, earthquake, typhoon,
hurricane, windstorm, and any other similar perils or causes.
2. Third-Party Liability Insurance: This policy protects against
claims for bodily or personal injury, death, and/or property
damage caused to third parties during the construction project.
3. Professional Liability Insurance: This policy safeguards
against losses incurred due to negligence, wrong advice, or
similar acts of advisers involved in the project.
4. Automobile Liability Insurance: This policy provides coverage
for bodily injury, death, and property damage arising from
owned, non-owned, and hired vehicles used in connection with
the construction project.
7.4 Insolvency
• Insolvency of a party is typically considered an event of default,
allowing the other party to terminate the contract according to its
terms.
• This termination right applies to both the employer and the
contractor.
• In case of the employer's insolvency, the contractor usually has
the right to immediately cease all work.
7.5 Risk Sharing
• Risks arising from construction work generally fall under the
contractor's responsibility.
• Contracts typically state that the contractor is fully responsible
for the care of the works from commencement until handover to
the employer, at which point the responsibility shifts to the
employer.
• However, even after handover, the contractor may still be liable
for losses or damages caused by their actions or due to
previous events for which they were responsible.
• Risks that may be shared include force majeure and unforeseen
circumstances (see sections 5.5 Force Majeure and 5.6
Unforeseen Circumstances).
• Losses or damages arising from force majeure or unforeseen
circumstances are typically not the contractor's responsibility.
8. Contract Administration and Claims
8.1 Personnel
Party Responsible for Personnel: The contractor is responsible for
providing and paying for all labor and manpower needed for the
project, ensuring compliance with all applicable labor laws.
Employment Arrangements: Workers in the construction industry
are usually engaged on project employment but may also be
engaged under regular, casual, fixed-term, or piece-work basis.
Employment contracts typically specify the effective date/duration,
compensation, benefits, reporting structure, work schedule, job
description, termination rules, and company policies.
8.2 Subcontracting
Contracting and subcontracting are legally permitted and common
practices in the construction industry. Projects may be subcontracted
to other entities.
Valid Contracting Arrangement: For a valid contracting arrangement,
the contractor must:
• Engage in a distinct and independent business, performing the
work on its own responsibility and method.
• Have substantial capital to carry out the job, including tools,
equipment, machinery, and supervision.
• Be free from control of the employer in all matters except the
result of the work.
• Ensure compliance with labor laws for its employees.
Employer-Employee Relationship: The elements of an
employment relationship should not exist between the employer and
the contractor's employees, particularly:
• Selection and engagement of the individual
• Payment of wages to the individual
• Power to dismiss or impose disciplinary action on the individual
• Power to control the individual with respect to the means and
method of work performance ("control test")
Control Test: The most important element to determine an
employer-employee relationship is the "control test." The presence of
control indicates an employment relationship, while its absence
indicates an independent contracting relationship. The principal
should only be interested in the results of the work.
8.3 Intellectual Property
Intellectual Property (IP) Clauses: IP clauses typically found in
construction contracts in the Philippines include:
• Comprehensive definition of "intellectual property" including
trademarks, copyrights, designs, patents, or other IP recognized
anywhere in the world.
• Delineation of IP to be retained by the contractor and employer,
usually for IP developed before and after the construction
engagement.
• Granting of permission to use pre-existing IP or IP retained by
parties, without payment (due to strict "technology transfer
agreement" regulations, "licensing" of IP is usually avoided).
• Agreement concerning ownership of jointly developed IP.
• Agreement concerning ownership of modifications of IP.
• Confidential treatment of all IP disclosed and shared between
the contractor and employer.
• Automatic assignment of IP created during engagement.
• Provision requiring execution of necessary documents to
effect/complete/formalize record assignments of IP.
• Provision to co-operate in enforcement of assigned IP.
• Agreement to subsequently assign IP that may not be covered
by provisions on automatic assignment.
• Waiver of moral rights, except where such waiver shall permit
another:
o To use the name of the author, or the title of their work, or
otherwise make use of their reputation with respect to any
version or adaptation of their work which, because of
alterations therein, would substantially injure the literary or
artistic reputation of another author; or
o To use the name of the author with respect to a work they
did not create; and
• Provisions as to the ownership of IP rights in feedback.
9. REMEDIES AND DAMAGES
9.1 Remedies
Philippine General Contract Law: In the event of a breach of
contract, the injured party can choose between specific performance
(fulfilling the obligation) or rescission (canceling the obligation) with
damages in either case. Damages are also available for breach due
to fraud, negligence, delay, or violation of the contract's intent.
Contractual Remedies: Specific performance, rescission, and
damages are generally available in construction contracts. Parties
can modify these remedies through contract. Common contractual
remedies include:
• Liquidated damages for contractor delays
• Suspension of work due to the employer's breach
• Employer-ordered work suspension due to contractor breach
• Termination for specific causes, such as bankruptcy or
insolvency
9.2 Restricting Remedies
Limitations: Parties can agree on the available remedies for breach
in a construction contract, subject to mandatory limitations of liability
laws and public policy restrictions.
Public Policy Restrictions: Public policy restrictions include
prohibiting waivers for future fraud or gross negligence/wilful
misconduct claims.
9.3 Sole Remedy Clauses
Sole Remedy Clauses: Sole remedy clauses, which limit remedies
to a specific option, are uncommon in Philippine construction
contracts.
Waiver Enforceability: Waivers of rights and remedies are generally
allowed under Philippine law and may be enforceable.
Unenforceable Sole Remedy Clauses: Sole remedy clauses may
be unenforceable if they limit claims in situations where limitations of
liability are disallowed, such as fraud.
9.4 Excluded Damages
Limitation of Consequential Damages: Parties can agree to limit
liabilities for certain types of consequential damages, such as lost
profits.
Claims Exclusion: These agreements typically specify that such
damages cannot be claimed by one party against another, subject to
statutory limitations on liability exclusions.
9.5 Retention and Suspension Rights
Retention Rights: Contracts typically allow employers to retain a
portion of the contract sum until the defects liability period expires.
Suspension Rights: Suspension rights are generally allowed and
not typically excluded.
Contractor's Suspension Rights: Contractors can suspend work or
terminate the contract if the employer fails to pay an approved
request for payment.
Employer's Suspension Rights: Employers can order suspension
of work due to contractor breach.
10. DISPUTE RESOLUTION
10.1 Regular Dispute Resolution
Disputes arising from construction contracts without arbitration
clauses are resolved through ordinary court litigation in Philippine
courts.
If an arbitration clause is included, the dispute will be resolved
through arbitration before the CIAC, regardless of any other chosen
forum.
The Philippine Supreme Court has ruled that parties can choose to
submit their dispute to the CIAC, even if they initially chose another
forum. Construction Industry Arbitration Commission
10.2 Alternative Dispute Resolution
Republic Act No 9285 (Alternative Dispute Resolution Act of
2004) recognizes mediation, arbitration, and other alternative dispute
resolution mechanisms.
Arbitration, mediation, and Dispute Boards are alternative means of
dispute resolution available to parties in construction contracts.
 Construction contracts with arbitration clauses are subject to CIAC
jurisdiction for dispute resolution.
Dispute Boards are becoming increasingly popular in Philippine
construction contracts, particularly those based on FIDIC contracts.
• PENALTY – amount of money stated in contract if there is stated in
the contract. Includes the date of completion and price.
• INSOLVENCY – the state of company where it is unable to comply or
handle financial obligations
• BANKCRUPTCY – unable to repay outstanding debts or obligations.
• ASSIGNMENT – contracts liability that can be transferred by the third
party.
• RECEIVERSHIP – the appt. of involving the practitioner to take over
the financial commitment
• CONDITION – it is essential in contract; if not meet might result in
breach of contract. It is a requirement and one or both parties must
comply.
• CONSIDERATION – benefits that is given to each party in exchange
to another party with other party.
• CONFIDENTIAL – a secret that cannot be disclosed outside.
• BONA FIDE – “in good faith”; signify an honest and legitimate
transaction
• MALA FIDE – “bad faith”; without honest intentions.
• COUNTER PART – a copy of contract, each party must have their own
original copy.
• DAMAGES – Amount of money sough or awarded in contract to
compensate the party die to breach of contract.
• LIQUID DAMAGES – computation of damages through numbers;
happens through negotiation or with the mediator.
• DEED – used for rights; special type of contract legally binding
obligations that does not required to pass to other party to another.
• DEFAULT – considered to be in breach of contract; non – compliance
with a legal obligation.
• DELIVERABLE – the collective naman for all tangible things that a
party of a contract is required to supply at specified date.
• EXCUSE – something forgives the performance; both parties must
agree.
• FORCE MAJEURE / FORTUITOUS EVENT – events that cannot do
obligations due to unforeseeable and unavoidable catastrophes.
“excused” in the performance of the partition. (earthquake, flood..)
• INDEMNITY – obligation on a party to compensate for any loss in other
party. Indemnity is a type of insurance compensation paid for damage
or loss.
• INJUNCTION – Court order sought to another party. Duties to
obligation. TO DO OR NOT TO DO.
(GOOGLE) injunction is a court order prohibiting a person from taking
a particular action (a prohibitory injunction) or requiring them to take a
particular action (a mandatory injunction).
• LIABILITY – legal obligation on the breach of contract by one party.
(google) contract liability is when one party to a contract agrees to
reimburse any damages or losses suffered by another party.
• ALTERNATIVE DISPUTE RESOLUTION ("ADR") – method of
attempting to resolve a dispute without going to court.
• ARBITRATION – involves a third party who is neutral (arbitrator) to
resolve the dispute.
• MEDIATION – the mediator, the one who solves the conflict.
• BID – written offer from a bidder.
• QUOTATION – a formal statement for estimating cost for a particular
job or services.
• CONFORME – agreed with the terms and condition, and already a
contract.
• IMPOSE – It should be obeyed or followed according to the law.
• CONSTRUCTION PLAN – All equipments, facilities, are required to a
requisition of the execution of the project.
• CALENDAR DAYS – period of 24 hours.
• PERFORMANCE BOND – a financial guarantee to the party to
another of a contract.
• SURETY COMPANY – third party beneficiary
• CERTIFICATE OF THE CASH DEPOSIT – issued by the bank or a
proof of evidence of financial statement.
• CONFORM CONTRACT – both parties and signs the contract made
by the owner.
• PREQUALIFICATION – the contractor should be Technically qualified
to complete the project, and financially qualified.
• ADDENDUM – addition or revision in a contract.
• Completion
• Takeover
• Delivery
• Defects
• Liability Period
• Fixed Cost
• Lump Sum
• Consequential Cost
• Defects Liability Period: A period during which the contractor is
liable for remedying defects in the works.
• Substantial Completion: Completion of at least 95% of the works,
allowing the employer to occupy and use the site.
• Final Completion: Completion of all contractual obligations,
triggering the issuance of a Certificate of Final Completion.
• Warranty Security or Retention: A portion of the contract price
withheld by the employer as security for the contractor's
performance.
• Civil Code (Article 1723): A provision in the Philippine Civil Code
that establishes liability for defects in construction projects.
1. Force majeure: An event that could not be foreseen, or though
foreseen, was inevitable.
2. Essential construction projects: Projects relating to COVID-19
facilities, emergency works, priority public and private
infrastructure projects.
3. Skeletal workforce: A minimum number of employees required to
maintain essential operations.
4. Health and safety protocols: Measures taken to protect workers
from COVID-19.
5. Construction arbitration proceedings: A process for resolving
disputes between construction parties.
Professional Organization of Civil Engineers (PICE)
Brief History of PICE
In the late 1920s, group of civil engineers from the government sector formed the Philippine Society of Civil Engineers (PSCE) which was the first civil engineerin
In 1937, the Philippine Association of Civil Engineers (PACE) was formed. This time, it was a group of civil engineers in the private sector with Engr. Enrique Sto
The objectives of both organizations were similar with each other in which both of them wants to: "elevate the standards of the profession, encourage research and en
The PACE being the most active than the PSCE led to the transfer of many PSCE members to PACE. In 1950, Republic Act No. 544 (also known as the "Civil Eng
In 1972, PACE President Engr. Cesar A. Caliwara, exerted a serious effort in merging the two organization. Leaders of PACE and PSCE negotiated, and talked abou
In February 1974, the first election of officers was held and Engr. Cesar Caliwara became its first president. In order to truly unite the civil engineers of the Philippin
Affiliate societies-
• Association of Structural Engineers of the Philippines (ASEP)
• Association of Accredited Consultant CE of the Philippines (AACCEP)
• Association of Civil Engineering Educators of the Philippines (ACEEP)
• City and Municipal Engineers Association of the Philippines (CMEAP)
• District Engineers League of the Philippines (DELP)
• Philippine Association of Building Officials (PABO)
• Provincial Engineers Association of the Philippines (PEAP)
• Road Engineering Association of the Philippines (REAP)
• Philippine Accredited Materials Engineers Association (PAMEA)
• Filipino Planning Engineers Association (FPEA)
• Structural Engineers Association of Davao (SEAD)
References- various textbooks and internet source(google and you tube)
Properties of Human Law:
1. Human laws must concern with divine laws.
2. Human laws must promote the common good.
3. Human laws must be just and not discriminatory of certain individuals or groups.
4. Human laws must be practicable (easy compliance and not impossible).
5. Human laws regulate external actions only
6. Human laws are fallible (laws must be dynamic, allowing for adjustments in accordance with emergent ideas for development.
Characteristics of Human Acts-
1. It must be performed by a conscious agent who is aware of what he is doing and of its consequences,
2. It must be performed by an agent who is acting freely.
3. It must b performed by an agent who decides wilfully to perform the act.
Steps of Action by a Moral person-
1. Wish
2. Intention
3. Consent
4. Election
5. Use
6. Fruition
 CE 593 - CE LAWS AND ETHICS

FROM THE CIVIL CODE OF THE PHILIPPINES (TITLE I)

Chapter 1 General Provisions Article 1156-1162
Chapter 2 Nature and Effect of Obligations Article 1163-1178
Chapter 3 Different Kinds of Obligation
o Section 1 - Pure and Conditional Obligation Article 1179-1192
o Section 2 - Obligations with a Period Article 1193-1198
o Section 3 - Alternative Obligation Article 1199-1206
o Section 4 - Joint and Solidary Obligation Article 1207-1222
o Section 5 - Divisible and Indivisible Obligation Article 1223-1225
o Section 6 - Obligations with a Penal Clause Article 1226-1230
Chapter 4 Extinguishment of Obligation
o General Provisions Article 1231
o Section 1 - Payment or Performance Article 1232-1261
o Section 2 - Loff of the Thing Due Article 1262-1269
o Section 3 - Condonation or Permission of the Debt Article 1270-1274
o Section 4 - Confusion or Merger of Rights Article 1275-1277
o Section 5 - Compensation Article 1278-1290
o Section 6 - Novation Article 1291-1304

FROM THE CIVIL CODE OF THE PHILIPPINES (TITLE II)

Chapter 1 General Provisions Article 1305-1317
Chapter 2 Essential Requisites of Contracts
o General Provisions Article 1318
o Section 1 - Consent Article 1319-1346
o Section 2 - Object of Contracts Article 1347-1349
o Section 3 - Cause of Contracts Article 1350-1355
Chapter 3 Form of Contracts Article 1356-1358
Chapter 4 Reformation of Instruments Article 1359-1369
Chapter 5 Interpretation of Contracts Article 1370-1379
Chapter 6 Rescissible Contracts Article 1380-1389
Chapter 7 Voidable Contracts Article 1390-1402
Chapter 8 Unenforceable Contracts Article 1403-1408
Chapter 9 Void or Inexistent Contracts Article 1409-1422
ESSENTIAL REQUISITES OF CONTRACTS
Article 1318. There is no contract unless the
following requisites concur.
• Consent of the contracting parties.
• Object certain which is the subject matter
of the contract.
• Cause of the obligation which is
established.
Article 1319. Consent is manifested by the
meeting of the offer and the acceptance.
• Upon the thing and the cause which are
to constitute the contract.
• Acceptance made by letter or telegram
does not bind the offerer except from the
time it came to his knowledge.
DEFINITION OF TERMS
• Object of Contracts - The object of a
contract is the thing which is agreed on
the part of the party receiving the
consideration to do or not to do.
• Form of Contract - an agreement where
one party has prepared the agreement,
and the other party has had little to zero
input regarding the terms of the contract.
• Reformation of Instrument - if one party
was mistaken and the other acted
fraudulently or inequitably in such a way
that the instrument does not show their
true intention. A remedy in equity by
means or which a written instrument is
made or consigned so as to express or
confirm the real intention of the parties
when some errors or mistake is
committed.
• Interpretation of Contract - involves an
ascertainment of the meaning of the
words and provisions of a contract.
• Rescissible Contract - one that was
entered into legally by the contracting
parties but has resulted in economic
damage to one of the parties or an outside
party.
• Voidable Contract - a formal agreement
between two parties that may be rendered
unenforceable for any number of legal
reasons.
• Unenforceable Contract - a contract that
is valid but one that a court chooses not
to enforce.
• Void or Inexistent Contract - void
contracts are any obligation and cannot
be validated, inexistent contracts are
considered as nor having been entered
into.
• Divisible Obligation - one the object of
which its delivery or performance is
capable of partial fulfillment.
• Indivisible Obligation - one object of which
its delivery or performance is not capable
of partial fulfillment.
KINDS OF DIVISION (Section 5. Article 1223)
• Qualitative Division - are based on quality
not on number or quantity of the things
that are the object of obligation.
• Quantitative Division - one based on
quantity rather than on quality.
• Ideal or Intellectual Division - one which
exists only in the minds of the parties.
JOINT INDIVISIBLE OBLIGATION (Section 5.
Article 1224)
• Gives rise to indemnity for damages from
the time of anyone of the debtors does not
comply with his undertaking.
OBLIGATION WITH A PENAL CODE (Section 6.
Article 1226-1230)
• One which contains an accessory
undertaking to pay a previously stipulated
indemnity in case of breach of the
principal presentation intended primarily
to induce its fulfillment.
• Reason:
• To substitute indemnity of damages and
noncompliance.
• To ensure performance.
• To punish the person for not compliance
with the obligation.
SOLIDARY OBLIGATION
• A situation where several debtors are
bound to render one and the same
performance to a creditor with the effect
that the creditor can claim it from anyone.
All for one, one for all.
FACULTATIVE OBLIGATION
• One where only one prestation has been
agreed upon but the obligor may render
another in substitution.
EXTINGUISHMENT OF OBLIGATION
• By Payment or Performance - Payment
means not only the delivery of money but
also the performance, in any other
manner, of an obligation.
• By loss of the thing due - an obligation
which consists in the delivery of a
determinate thing shall be extinguished if
it should be lost or destroyed without the
fault of the debtor, and before he has
incurred in delay. (Article 1262, Ibid)
o Exceptions
o By law
o By stipulation
o Assumption of Risk
• By the Condonation or Remission of the
debt - an act of liberality where the
creditor gives up his right against the
debtor, either in whole or in part.
• By the Confusion or Merger of Rights of
creditor and debtor - the obligation is
extinguished from the time the characters
of creditor and debtor are merged in the
same person. (Article 1275, Ibid).
• By Compensation - takes place when two
persons, in their own right, are creditors
and debtors of each other.
• By Novation (Article 1231, Civil Code) -
the substitution or charge of the obligation
by a subsequent one which terminates
the first, either by changing the object or
principal conditions, or by substituting the
person of the debtor, or subrogating a
third person in the rights of the creditor.