Business Law Contract Principles

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Questions and Answers

What is the definition of a contract?

A meeting of minds by two persons, binding one to another (correct)

A legal document filed in court

A policy enforced by government regulations

An informal agreement between friends

What does 'Stipulation pour autrui' refer to in contract law?

A contract between two parties without any third-party rights

A stipulation granting a favor to a third party who can demand fulfillment (correct)

A requirement for written contracts only

A type of verbal agreement that is not enforceable

What characterizes a solemn contract?

Requires no formalities

Is automatically valid without any conditions

Requires compliance with certain formalities prescribed by law (correct)

Is only executed verbally

Which of these statements best describes ratification?

It is the approval of an unauthorized act by another person Signup and view all the answers

What distinguishes a valid contract from an invalid one?

Valid contracts meet all legal requisites and limitations Signup and view all the answers

What is a nominate contract?

A contract that has a specific name or designation in law Signup and view all the answers

How is the perfection or birth of a contract defined?

The point at which there is a definite agreement on the subject matter Signup and view all the answers

What do the terms 'morals' and 'good customs' primarily deal with?

Norms of conduct within a community Signup and view all the answers

What is a mutual mistake in a contract?

A mistake of fact common to both parties that affects the contract Signup and view all the answers

Which of the following accurately defines a donation mortis causa?

A donation that takes effect after the donor's death Signup and view all the answers

What characterizes a voidable contract?

It is valid until annulled due to a defect in consent Signup and view all the answers

Which type of contract is known to be absolutely null and void?

Void or inexistent contract Signup and view all the answers

What is the primary purpose of rescission in contract law?

To restore the parties to their pre-contractual positions Signup and view all the answers

Which of the following best describes contracts of adhesion?

Contracts where one party prescribes terms without negotiation Signup and view all the answers

What term refers to the act of disposing of a thing or right gratuitously in favor of another?

Donation Signup and view all the answers

Which of the following best describes unenforceable contracts?

They can be enforced only if ratified Signup and view all the answers

Can a third person who is a stranger to a contract enforce or question its validity?

No, they have no rights or obligations under the contract. Signup and view all the answers

What must occur for a contract to be considered perfected?

There must be a definite agreement and compliance with legal formalities. Signup and view all the answers

Under what circumstance can one be bound by a contract made by another party?

If authorized by the contracting party or legally represented. Signup and view all the answers

What is the effect of the perfection of a contract?

Parties are bound to fulfill stipulated terms and all lawful consequences. Signup and view all the answers

Are contracts that do not have a specific name or designation still valid?

Yes, as long as they meet legal requisites. Signup and view all the answers

If S and B agree that T will determine the price in a contract of sale, can either refuse T's determination?

No, they must accept T's determination unless proven inequitable. Signup and view all the answers

What recourse do S and B have if T acts in bad faith while determining the contract price?

They can seek the intervention of the court. Signup and view all the answers

Which of the following statements correctly describes the obligations of parties in a perfected contract?

They have additional obligations based on good faith and customary law. Signup and view all the answers

When can an offerer withdraw their offer even after acceptance by the offeree?

If the offeree fails to fulfill a condition Signup and view all the answers

Is the sale of a parcel of land valid if the exact location and area are not specified?

Yes, if the buyer is aware of the location Signup and view all the answers

What condition allows a party to ask for the reformation of a contract?

If there was a mutual mistake regarding the subject matter Signup and view all the answers

What is generally the binding effect of a sale contract regarding the delivery of goods?

Delivery must match the quantity specified in the contract Signup and view all the answers

What determines the interpretation of a contract?

The intention of the parties involved Signup and view all the answers

What happens if a stipulation in a contract has multiple interpretations?

The court decides based on legal standards Signup and view all the answers

Can B annul the contract if S deliberately misrepresents the delivery of rice?

Yes, because B was not informed truthfully Signup and view all the answers

Is the antique chair included in the sale of the condominium unit?

No, unless specifically stated in the contract Signup and view all the answers

When both parties are not equally guilty under a contract deemed unlawful, which is a possible outcome?

Only the innocent party may seek restitution. Signup and view all the answers

What happens to a payment made under a voidable contract if the incapacitated party is unable to recover the payment?

The incapacitated party cannot recover due to the nature of the contract. Signup and view all the answers

In a situation where a minor enters into a contract, what legal standing does that contract typically have?

It is voidable at the minor's discretion. Signup and view all the answers

If X paid Y to burn Z's house and later attempted to retract the agreement, what is Y's legal standing?

Y can keep the money without legal ramifications. Signup and view all the answers

What is the effect of voluntarily performing a natural obligation?

The performer cannot demand the return of benefits. Signup and view all the answers

Does C have the right to ask for the rescission of the sale when D, in bad faith, sold the car to X?

Yes, C can demand the return of the car from X. Signup and view all the answers

What defense can B present to avoid rescission if F sold M's property for less than market value?

B was unaware of M's minority. Signup and view all the answers

Which of the following is NOT a requisite for the ratification of a voidable contract?

The ratification must be made in writing. Signup and view all the answers

What is the rule regarding strangers to a contract seeking annulment?

Strangers may only bring action for annulment if they are directly affected. Signup and view all the answers

What defines a voidable contract under the law?

A contract that is valid until annulled. Signup and view all the answers

When S, a minor, sells property to B and the sale is annulled, is S bound to return the price?

No, S is not bound due to being a minor. Signup and view all the answers

If the court annulled the sale between S and B, and the property was lost without B's fault, what is B's right?

B has the right to receive compensation for the loss. Signup and view all the answers

What is the primary purpose of the statute of frauds?

To ensure that certain contracts are in writing to be enforceable. Signup and view all the answers

Study Notes

Business Law Reviewer

Contract: A meeting of minds between two parties, where one party binds himself to the other.
Stipulation pour autrui: A contract provision clearly benefiting a third party, who can demand fulfillment if they communicate acceptance to the obligor before revocation.
Real contract: Requires delivery of the subject matter for perfection.
Consensual contract: Perfected by mere consent.
Solemn contract: Requires specific formalities as prescribed by law.
Perfection of Contract: Occurs when parties agree on the essential elements (subject matter, cause) of the contract.
Ratification: Approving an act performed without prior authorization by a person claiming agency.
Law: Rules of conduct established by legitimate authority, obligatory to ensure common benefit and justice.
Valid contracts: Meet all legal requirements specific to the agreement, and stipulations are enforceable.
Nominate contract: Has a specific name or designation in law.
Innominate contract: Has no specific legal designation.
Morals: Norms of good conduct accepted within a community.
Good customs: Habits and practices, enforced over time, as binding rules of conduct within a community.
Public Order: Primarily focuses on public safety, but may also include public well-being.
Public Policy: Broad concept encompassing public safety and considerations for common good.
Preparation/Negotiation: Steps leading to contractual agreement.
Perfection/Birth: When parties have a definite agreement on the essential elements of a contract.
Consummation/Termination: When parties have fully fulfilled their obligations, terminating the contract.
Essential elements: The necessary components without which a contract is invalid (e.g., consent, object, cause).

Essential Elements (continued)

Natural Elements: Presumed to exist (e.g. warranty against hidden defects in sales); unless expressly excluded.
Accidental Elements: Stipulations, clauses, or conditions specifically agreed upon by parties.
Consent: Mutual agreement or meeting of minds between parties regarding the contract's terms and objects.
Offer: A proposal to enter a contract.
Acceptance: Manifestation of consent to the offer’s terms by the offeree.
Option Contract: Offeree pays consideration for the right to accept the offer within a specified timeframe.
Option Period: Specified time allowed for acceptance of the offer.
Option Money: Payment for the option contract.
Earnest Money: Partial payment serving as proof of contract's perfection.
Unemancipated Minors: Persons under parental authority, not yet reached the age of majority.

Defective Contracts

Rescissible Contracts: Valid, but can be cancelled due to economic harm to one party or a third party.
Voidable Contracts: Valid until annulled due to defects like mistake, violence, intimidation, undue influence, or fraud, affecting the consent.
Unenforceable Contracts: Cannot be enforced unless ratified, occupying a middle ground between voidable and void contracts.
Void or Inexistent Contracts: Absolutely null and have no legal effect.

Other Important Concepts

Insane or Demented Persons: Insanity at the time of contracting renders contracts voidable.
Deaf-Mutes: Contracts can be voidable if the deaf-mute doesn't understand the contract or if there are issues with communication.
Lucid Interval: Temporary period of sanity, allowing contracts during those periods to be valid.
Mistake/Error: Incorrect understanding or lack of knowledge of a material fact.
Mistake of Law: Inappropriate interpretation or ignorance of a legal provision.
Substantial Mistake of Fact: Mistake on a material fact contemplated by law.
Violation of Law: Legally wrong actions or behaviours.
Ignorance of the Law: Ignorance of the law does not excuse violating the law.
Violence: Use of physical force.
Undue Influence: Overpowering someone's mind.
Causal Fraud: Fraud committed prior to or during agreement.
Insidious Words or Machination: Deliberately deceitful actions.
Dolo Causante (Causal Fraud): Fraud induces the other party to enter the contract, voidable.
Dolo Incidente (Incidental Fraud): Fraud doesn't directly induce consent, contract voidable for damages, not automatically voidable.
Concealment: Equivalence to misrepresentation.
Dealer's Talk/Trader's Talk: Promotional talk, not legally binding.
Simulation of Contract: Deceptive display of a contract.
Object of a Contract: Subject matter of the agreement.
Future Inheritance: Property rights expected to be inherited.
Physical impossibility: Thing or service is nonexistent. (Absolute or Relative)
Legal Impossibility: Contract is against the law, morals, etc.
Causa: Essential reason or purpose for entering the contract, consideration.
Onerous: Each party gives something of value.
Remuneratory: One side provides a service.
Gratuitous: One party gives something without receiving anything of value.
Motive: Reason behind making the contract, distinct from the cause.
Illegality of cause, Falsity of cause, Lesion- details of defects in contracts.
Formal/Solemn contracts: specific form required by law, Public document/instrument: Acknowledged forms of documents, Reformation: corrections to errors in written agreements.

Other Contractual Defects

Mutual Mistake: Both parties make an error in the agreement.
Donation: Act of generosity. (Inter Vivos or Mortis Causa).
Interpretations of Contracts: Determining parties' meaning and intent.
Contracts of Adhesion: Terms pre-determined and presented to the other party.
Ceiling Law: Statute limiting maximum prices.
Indivisible Contract: Entire payment for a single consideration.
Natural Obligations: Ethical obligations not enforceable by law.
Civil Obligations: Obligations enforceable by law.
- Legacies: dispositions of property in a will.
Vices of Consent: Factors affecting validity due to defects in consent (Error, Violence, Intimidation, Undue Influence, Fraud)
Voidable: Contract can be voided due to a defect.

(Further topics on pages missing details): Further discussion of Specific Contracts (Buying, Selling, Leases, etc.). Specific contract elements (clauses).

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Description

Test your knowledge of essential business law principles, focusing on various types of contracts and their elements. This reviewer covers key concepts such as stipulation pour autrui, perfection of contract, and different forms of agreement. Hone your understanding of lawful conduct and contract validity.