CONTRACTS

GOOD MORNING STUDENTS! HOW ARE YOU TODAY?

• Today, we will discuss CONTRACTs.

• Objectives:
• You will be able to understand:
• A. the difference between contract and obligation;
• B. Nature of Contracts;
• C. Characteristics;
• D. Stages;
• E. Defective contracts;
• F. Requirement of writing;
• G. Quasi-contracts;
• H. Special Transactions
• THE TRAVEL TRADE HAS BEEN GROWING IN
COMPLEXITY WITH REGARD TO THE VARIETY
OF TRANSACTIONS THAT GOVERN THE
CONDUCT OF ITS EXISTENCE.
• IN THE WAKE OF SUCH A DEVELOPMENT, THE
PROLIFERATION OF CONTRACTS IN VARIOUS
FORMS IS A FAST-EMERGING REALITY TO
WHICH ANY PERSON WHO WOSHES TO DELVE
IN ITS WATERS MUST BE PROPERLY ORIENTED.
• KNOWLEDGE OF CONTRACTS, THOUGH
CURSORY, MAY PREVENT UNWANTED
DIFFICULTIES IN THE FUTURE IN RELATION
WITH CLIENTS AND GUESTS.
• Origin of Contract
• The noun "contract" is believed to come from 
Latin roots, a combination of 'con-' meaning
"with, together" and 'trahere' meaning "to
draw." Makes sense, right? Before the legal
connotation, it meant to bring people or
things together. 
• Article 1305 of the Civil Code defines a
contract as “ a meeting of the mind between
two persons whereby one binds himself, with
respect to the other, to give something or to
render some service.”
• HOWEVER, SOME LAW COMMENTARIES BELIEVES
THAT THE TERM “PERSONS” AS USED IN THE
DEFINITION SHOULD BE CONSTRUED AS TO MEAN
PARTIES SINCE A CONTRACT MAY EXIST BETWEEN
AND AMONG TWO OR MORE PERSONS.
• Meeting of the minds ESSENTIALLY PERTAINS TO
AGREEEMENT BETWEEN THE PARTIES; THAT EACH
PARTY HAS CONSENTED TO THE CONTRACT AND
ITS PROVISION.
• CONTRACTS OF ALL KINDS AND FORMS ARE
ABUNDANT IN THE HOSPITALITY SECTOR.
REGARDLESS TO WHICH SECTOR HAS MORE LIKELY
ENCOUNTERED A CONTRACT.
• A CONTRACT IS COMMONLY MISTAKEN BY MOST
PEOPLE AS THAT PIECE OF PAPER OR DOCUMENT
EXECUTED BETWEEN TWO PEOPLE. HOWEVER
WHAT IS REALLY THE CONTRACT IN SUCH
INSTRUMENT IS THE VERY AGREEMENT OF THE
PARTIES CONTAINED THEREIN.
• A CONTRACT MAYBE ORAL OR WRITTEN. WITH
RESPECT TO THE LATTER, THE LAW REQUIRES
THAT CERTAIN AGREEMENT BE CONTAINED IN
MORE CONCRETE FORM FOR EFFECTIVITY OR
ENFORCEABILITY.
• A CONTRACT MAY LIKEWISE BE REAL OR
PERSONAL. THE FORMER REQUIRES AN ACT OF
DELIVERY WHILE THE LATTER IS PERFECTED BY
MERE CONSENT OF AGREMENT OF THE PARTIES.
 THE ATTRIBUTES OF CHARACTERISTICS
OF A VALID CONTRACTS ARE THE
FOLLOWING:
• A. AUTONOMY- WHICH ALLOWS PARTIES TO STIPULATE
ANYTHING IN THE CONTRACT PROVIDED IT IS NOT
IMMORAL OR ILLEGAL.
• B. MUTUALITY- WHICH MEANS THAT THE PROVISIONS
APPLIES TO ALL PARTIES.
• C. OBLIGATORY FORCE- WHICH BINDS ALL PARTIES
FROM THE PERFECTION OF A CONTRACT.
• D. RELATIVITY- WHICH LIMITS THE BINDING EFFECTS OF
THE CONTRACTS BETWEEN THE PARTIES.
 STAGES
• PREPARATION/NEGOTIATION
• PERFECTION/BIRTH
• CONSUMMATION OR DEATH OR
TERMINATION
• In the first stage, there is bargaining between
the parties, there is no meeting of the minds
yet.
• The second stage involves a definite
agreement and there is a mutual acceptance
as between the subject matter and cause of
the contract. This is the stage where there is
already a meeting of the minds.
• The last stage entails the performance or
execution of the contract according to its
terms such as payment or delivery.
 DEFECTIVE CONTRACTS
• Rescissible Contracts- EXTRINSIC DEFECT*FRAUD OF
CREDITORS
For INSTANCE, ACME HOTEL ENTERED INTO A BOOKING
CONTRACT WITH FLY AWAY TRAVEL REGARDING THE
RESERVATION OF ALL ITS ROOMS DURING THE CHRISTMAS
SEASON WITH THE LATTER MAKING FULL PAYMENT FOR THE
SAID RESERVATION. HOWEVER, THE CONCERNED HOTEL
ROOMS WERE ALREADY LEASED OUT FOR THAT PERIOD TO
ANOTHER TRAVEL AGENCY. IN SUCH A CASE, THE CONTRACT
ENTERED INTO BY THE HOTEL WITH FLY AWAY TRAVEL CAN
BE CONSIDERED AS A RESCISSIBLE CONTRACT SINCE IT WAS
ENTERED INTO IN FRAUD OF CREDITORS.
 VOIDABLE CONTRACTS
• INTRINSIC DEFECTS ATTRIBUTABLE TO VICES OF CONSENT
OR LEGAL INCAPACITY OF THE PARTIES.
• VICES OF CONSENT INCLUDE MISTAKE, VIOLENCE,
INTIMIDATION, UNDUE INFLUENCE, OR FRAUD.
• SO IF A PERSON IS INDUCED TO PURCHASE A EUROPEAN
TOUR PACKAGE FROM A TRAVEL AGENCY SOLELY ON THE
PROMISE OF ITS BROCHURE THAT THEY SHALL BE GIVEN
FIRST-CLASS ACCOMMODATION WHEN IN FACT THEY WERE
NOT, THEN THE CONTRACT BETWEEN THE PERSON AND
THE TRAVEL AGENCY PARTAKES OF THE NATURE OF A
VOIDABLE CONTRACT.
 UNENFORCEABLE CONTRACTS
• ARISE WHEN ANY OF THE PARTIES ARE UNAUTHORIZED OR LACK
SUFFICIENT AUTHORITY TO CONTRACT OR THERE IS A FAILURE TO
COMPLY WITH THE STATUTE OF FRAUDS.
• IT MAY BE VALIDATED BY RATIFICATION BUT PRODUCES NO LEGAL
EFFECT UNTIL SUCH VALIDATION.
• EXAMPLES OF A VOIDABLE CONTRACT ARE THOSE ENTERED INTO
BY ALLEGED AGENTS WHO FAILED TO SECURE AN AUTHORITY TO
SELL FROM THEIR PRINCIPALS. AS BETWEEN THE BUYER AND THE
AGENT, THE CONTRACT IS VALID BUT THE EFFECT OF THAT
AGREEMENT CANNOT BIND THE PRINCIPAL OR OWNER OF THE
PROPERTY SINCE HE NEVER CONSENTED TO SUCH SALE, HAVING
WITHHELD AN AUTHORITY TO SELL FROM AGENT.
 VOID CONTRACTS
• LACK OF ANY OF THE ESSENTIAL ELEMENTS OF
A CONTRACT OR SUCH AGREEMENT IS
PROHIBITED BY LAW.
• IT CANNOT BE SUBJECT TO RATIFICATION OR
REFORMATION. IT IS DEEMED AS IF NO SUCH
CONTRACT EVER EXISTED.
 QUASI-CONTRACTS
• Quasi-contracts are obligations which law
creates in absence of an agreement.
• ARE CREATED BY LAW TO PREVENT UNJUST
ENRICHMENT OF A PERSON. THEY ARE NOT
REALLY CONTRACTS BUT RATHER LEGAL
FICTION TO PERMIT RECOVERY BY
CONTRACTUAL REMEDY IN ABSENCE OF
CONTRACTS. IT FOUNDED ON
CONSIDERATION OF JUSTICE AND EQUITY.
• Negotiorum gestio or unauthorized management and solutio
indebiti
• In the first form, there is a voluntary take-over of a business by
a person which was abandoned by another. As a rule,
reimbursement for necessary and useful expenses must be
made to the gestor.
• To illustrate, Pedro owns a Hotel which he surprisingly left to
take a vacation in Erope without living a person in charge. Jose,
a nephew of Pedro, took over management of establishment
to prevent losses to the business.
• On the other hand, solutio indebiti takes place when
something is received by a person when there is no right for its
demand or there was a mistake in the delivery.
• A good example of this is when a person receives change from
payment in excess of what he is supposed to receive. The
person receiving such excess is obliged to return such amount.
 Special Transactions

• We go further on the various forms of special

contracts and transaction that one may
encounter in the regular management of
property in the hospitality business. Though
there has been no specific law or code that
provides a holistic view of tourism, parts and
parcels of these laws can be found in the Civil
code as well as other subsequent legislation.
 SALES
• SALES ARE CCOMMON TRANSACTIONS IN THE
HOSPITALITY INDUSTRRY. WHETHER IT INVOLVES A SALE
OF AN AIRPLANE TICKET, A SOUVENIR SHOP, A TOUR
PACKAGE OR EVEN A LUXURIOUS MEAL IN A DELUXE
HOTEL, THEY ARE STILL GOVERNED BY THE LAW.
• THE LAW DEFINES A SALE AS A CONTRACT WHEREBY ONE
OF THE CONTRACTING PARTIES OBLIGATES HIMSELF TO
TRANSFER OWNERSHIP OF AND TO DELIVER A
DETERMINATE THING AND THE OTHER PARTY TO PAY
THEREFORE A PRICE CERTAIN IN MONEY OR ITS
EQUIVALENT.
 REQUISITES:
• 01. THE CONSENT OR MEETING OF THE MINDS OF THE PARTIES
• 02. DETERMINE SUBJECT MATTER
• 03. PRICE CERTAIN IN MONEY OR ITS EQUIVALENT.
• THE REQUISITES MUST PRESENT TO CONSTITUTE A SALE.
• IT IS A MISCONCEPTION THAT A CONTRACT OF SALE NEED BE IN
WRITTEN FORM OR REQUIRE PAYMENT FOR PERFECTION. HOWEVER, IN
THE FAST-CHANGING FACE OF COMMERCE, SALE FORMS AN IMPORTANT
ASPECT AND IS ENCOUNTERED IN OUR DAILY LIVES. BEING A
CONSENSUAL CONTRACT, A SALE IS NORMALLY PERFECTED FROM THE
MERE AGREEMENT OF THE BUYER AND THE SELLER. Payment f the price
is not a prerequisite but merely constitutes a breach of contract which
allows for rescission or specific performance. However, certain sales
require delivery of the object for its perfection.