Contract Law

Group 3

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 What is Contract Law?
According to legaldictionary.net:
Contract law is a body of law that governs, enforces, and interprets agreements related to an
exchange of goods, services, properties, or money. According to contract law, an agreement
made between two or more people or business entities, in which there is a promise to do
something in return for a gain or advantage, is legally binding. Contract law is the center of
many business dealings, and anyone entering into a contract should that failing to abide by
the contract, even by mistake, could result in serious problems.

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 What is Contract Law?
According to Atty. Christine P. Carpio-Aldeguer
The Law on Obligations and Contracts is defined as a kind of positive law which deals with
the nature and sources of obligations as well as the rights and duties arising from agreements
in contracts.

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 What is a
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.” (1254a)

-Article 1305, Civil Code of the Philippines

 What builds Contract Law?
Contract
an agreement through
meeting of the minds
between two persons
whereby one binds himself,
with respect to the other, to
give something or to render
some service.
Force of Law
refers to the legal aspect of
an agreement as a contract.
This means that you can go
to court and ask for a civil
action in case of non-
compliance of the contract.
Good Faith
denotes fairness and honesty
of intention in the
performance of the contract,
so as to not destroy or injure
the right of one of the
parties.
 Note!
A contract is one of the sources
of obligation. An obligation is the
juridical necessity that results when a
contract is completed or perfected. There
can be no contract if there is no
obligation, though not all obligations arise
from contracts. The obligation that arises
from contracts is called conventional
obligation.
Characteristics
of a Contract
 Characteristics of a Contract
Mutuality
the bind must involve both of the parties, so that the validity or compliance of a contract
cannot be left to the will of only one of them. Its validity and performance cannot be left to
the will of only one of the parties.

-Article 1308, Civil Code of the Philippines

 Characteristics of a Contract
Autonomy
such stipulations, clauses, terms and conditions are established by the contracting parties as
they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy. Parties are free to stipulate terms and provisions in a contract,
as long as these terms and provisions are not contrary to law, morals, good customs, public
order and public policy.

-Article 1306, Civil Code of the Philippines

 Characteristics of a Contract
Relativity
the effectivity is only between the parties, their assigns and heirs, except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. Contracts are binding only upon the parties and their
successors-in-interest.

-Article 1311, Civil Code of the Philippines

 Characteristics of a Contract
Consensuality
the mere consent that perfected the contract should bound the parties to the fulfillment of
what has been expressly stipulated, and all the consequences which, according to their
nature, may be in keeping with  good faith, usage and law. However, real contracts, such as
deposit, pledge and commodatum, are not perfected until the delivery of the object of the
obligation. Contracts are perfected by mere consent. And no form is prescribed by law for
their validity. Exception: (a) real contracts (such as pledge, chattel mortgage); (b) contracts
covered under the Statute of Frauds.
-Articles 1315-1316, 1403, Civil Code of the Philippines
 Characteristics of a Contract
Obligatory
the force of law between the contracting parties compel them to perform under the threat of civil
action or lawsuit. By the obligatory force of contracts, it constitutes the law as between the parties
who are compelled to perform under the threat of being sued in the courts of law.

-Article 1159, Civil Code of the Philippines

Elements of a
Contract
 Elements of a Contract
Consent
a meeting of the minds between parties with respect to the object and cause; there is a certain offer
by one party and there is an absolute acceptance by another party. In general, when a consent is
given, the contract is considered perfected. It can be deemed an oral contract that binds both
contracting parties. One person must have a definite offer and the other must have an absolute
acceptance of the offer. 

-Article 1319, Civil Code of the Philippines

 Elements of a Contract
Object of the Agreement
The subject matter refers to the object of the contract. If a thing is deemed outside the commerce of
man, it will not be accepted as the object of the contract. Contracts are made to transfer the rights of
property, render services and others. However, the object of the contract must not be contrary to law,
good customs, morals and public order.
 Elements of a Contract
Consideration
the effectivity is only between the parties, their assigns and heirs, except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. Contracts are binding only upon the parties and their
successors-in-interest.

-Articles 1319 & 1350, Civil Code of the Philippines

Stages of a
Contract
 Stages of a Contract
Preparatory Perfection Consumption
process of formation through process of arriving at a the fulfillment of the
bargaining or negotiation, definite agreement or respective obligations of the
which begins from the time meeting of the minds as to parties under the contract,
the prospective contracting the elements of the contract, resulting to its
parties manifest their particularly the essential accomplishment and
interest in the contract that ones (object and cause).  extinguishment. 
leads to the perfection of the
contract. Either party may
stop the process or withdraw
an offer made.
Forms of
Contract
 Forms of Contract
• an oral agreement, or those that are partly oral and partly written, which are oral contract in legal
effect
• a single written agreement signed by both parties, wherein all its terms are in writing, regardless if
it is hand-written or electronically encoded/printed.
• a written agreement with two copies; one signed by one party, the other signed by the other
party.
• a set of signed written agreements which are related and not contradictory.
• a set of unsigned written agreements identified as part of the signed written agreements.
• any formal written agreement/s:
• private instrument - has no acknowledgement from a notary public or any authorized official.
• public instrument - has acknowledgement from a notary public or any authorized official.

-Manuel v. Rodriguez; G.R. No. L-13435 (1960)

-Sec. 17, Republic Act No. 8792 (Electronic Commerce Act of 2000)
Reformation
of Contract
 Reformation of Contract
• A contract is reformed to order to amend or correct its form as a written instrument so
that it would conform to the real intention of the parties.
• It is important to note that reformation does not change the contract, rather it aims to
establish its real purpose as manifested by the real intention of the parties.
• The reformation of instrument requires:
• a meeting of the minds of the parties.
• a written instrument that does not express the real intention of the parties due to
mistake, fraud, inequitable conduct, or accident; such real intention must always
prevail.
• a petition/request for the reformation of the instrument; this is in order for the facts
to be put into legal proceeding.
• a clear and convincing proof to support such petition.

-Article 1359, Civil Code of the Philippines

Interpretation
of Contract
 Interpretation of Contract
The interpretation of contract has the following rules:
• there is no need for interpretation if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties.
• the evident intention of the parties shall prevail if there is a conflict between such
intention and the words.
• the specific terms shall prevail if there is inconsistency or confusion over the uses of
general terms covering the same subject matter.
• the most adequate meaning shall prevail if some provisions have several meanings.
• the interpretation of a contract as a whole shall prevail if there are various doughtful
provisions in the entirety.
• the most sensible meaning shall prevail if a word has multiple meanings; this is in
keeping with the nature and object of the contract.
Interpretation of Contract
• the usage or custom of the place shall prevail if the parties entered into their contract
with reference to such usage or custom.
• the interpretation of obscure terms or stipulations shall be against the party who
caused the obscurity.
• in case the above rules are unable to settle doubts, the supplementary rule shall
resolved such doubts:
• in incidental circumstances of a gratuitous contract, the interpretation should be
made which would result in the least transmission of rights and interests.
• in onerous contract, the interpretation should be in favor of the greatest
reciprocity of interests.
• in object, the contract shall be null and void since the intention of the parties
cannot be known.

-Articles 1370 & 1372-1378, Civil Code of the Philippines

Classification
of a Contract
 Classification of a Contract
According to form:
• Informal contract - in any form as long as all the requisites or essential elements for its
validity are present.
• Formal contract - in a form required by the law.

-Article 1356, Civil Code of the Philippines

 Classification of a Contract
According to involvement of the Parties:
• Unilateral contract - one party is bound to fulfill an obligation for an act by another party.
• Bilateral contract - both parties are bound to fulfill their mutual promises or respective
obligation to each other reciprocally.

-Article 1191, Civil Code of the Philippines

 Classification of a Contract
According to name or designation
• Nominate contract - has specific name or designation in law; such as commodatum, lease,
agency, and sale.
• Innominate contract - has no specific name or designation in law; shall be regulated by the
stipulations of the parties, by the Civil Code, by the rules governing the most analogous
nominate contracts, and by the customs of the place

-Article 1307, Civil Code of the Philippines

 Classification of a Contract
According to perfection:
• Consensual contract - perfected by mere consent; such as the contract of sale, lease and
agency.
• Real contract - perfected by mere consent and the delivery of the object; such as deposit,
pledge and commodatum.
• Solemn contract - perfected through compliance with the form required by law; identical
with formal contract.

-Articles 1315 & 1356, Civil Code of the Philippines

 Classification of a Contract
According to purpose:
• Onerous contract - the purpose is the performance of an obligation by one party as the
other party performs or has performed its own obligation.
• Remuneratory contract - the purpose is the remuneration or payment by one party for a
service or benefit previously rendered by the other party.
• Gratuitous contract - the purpose is the mere liberality or the feeling by one party that the
other party (which is the benefactor/giver) has been generous; such as in free, pure
donation.

-Article 1350, Civil Code of the Philippines

 Classification of a Contract
According to obligatory force:
• Valid contract - with such stipulations, clauses, terms and conditions that are not contrary
to law, morals, good customs, public order, or public policy.
• Rescissible contract - with legal validity, but may be rescinded or revoked in the cases
established by law.
• Voidable/Annullable contract - with legal validity but may be invalidated by a court action
on the grounds of mistake, violence, intimidation, undue influence, fraud, or incapacity of
one of the parties to give consent.
• Unenforceable contract - with legal validity but cannot be enforce through court action by
reason of defects, unless it is ratified according to law.
• Void contract - with no validity at all because of certain defects, such as illegality;
considered inexistent from the very beginning and cannot be ratified according to law.

-Articles 1306, 1380, 1390, 1403 & 1409, Civil Code of the Philippines
 Thank you
for listening!

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 Sources:
• Legaldictionary.com
• Law on Obligations and Contracts in the Philippines: An Overview (2014) Christine
Aldeguer
• https://philawgov.wikia.org/wiki/Contract
• Civil Code of the Philippines
• Manuel v. Rodriguez; G.R. No. L-13435 (1960)
• Sec. 17, Republic Act No. 8792 (Electronic Commerce Act of 2000)