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Questions and Answers
What are the essential elements of a contract?
In a void contract, what happens to any goods or money obtained?
What does it mean for a contract to be unenforceable?
What is the main difference between void and voidable contracts?
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What does a contract of sale entail according to Art. 1458?
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What is the consequence of entering into a contract with insufficient capacity?
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What is a unilateral contract?
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What distinguishes a deed from a simple contract?
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In a bilateral contract, what happens when one party does not fulfill their promise?
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What characterizes a simple contract?
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Which statement best describes a deed?
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In a unilateral contract, what happens if no one performs the required act?
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Study Notes
Definition and Classification of Contracts
- A contract is a legally binding agreement or a set of promises that the law will enforce.
- Contracts can be classified into two broad classes: contracts by deeds and simple contracts.
- Contracts by deeds: formal legal documents signed, witnessed, and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract.
- Simple contracts: informal contracts that can be made in any way, such as in writing, orally, or implied from conduct.
Classification of Contracts (Unilateral and Bilateral)
- Unilateral contracts: one party promises to do something in return for an act of the other party, with no obligation on the other party to perform.
- Example: offering a reward for finding a lost wallet.
- Bilateral contracts: a promise by one party is exchanged for a promise by the other, making both parties bound to perform.
- Example: a contract for the sale of goods, where the buyer promises to pay the price and the seller promises to deliver the goods.
Essential Elements of a Contract
- Agreement: formed when one party accepts the offer of another and involves a "meeting of the minds".
- Consideration: both parties must have provided consideration, i.e., each side must promise to give or do something for the other.
- Intention to create legal relations: the parties must have intended their agreement to have legal consequences.
- Form: in some cases, certain formalities (writing) must be observed.
- Capacity: the parties must be legally capable of entering into a contract.
- Consent: the agreement must have been entered into freely, without duress or undue influence.
- Legality: the purpose of the agreement must not be illegal or contrary to public policy.
Types of Contracts
- Void contracts: the whole transaction is regarded as a nullity, and goods or money obtained under the agreement must be returned.
- Voidable contracts: operates as a valid contract unless and until one of the parties takes steps to avoid it.
- Unenforceable contracts: a valid contract that cannot be enforced in the courts if one of the parties refuses to carry out its terms.
Law on Sales (Arts. 1458-1637, Civil Code)
- A contract of sale involves the transfer of ownership and delivery of a determinate thing in exchange for a price certain in money or its equivalent.
- A contract of sale can be absolute or conditional.
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Description
Test your knowledge on the definition of a contract as a legally binding agreement and its classification. Understand the concept of rights, obligations, enforcement methods, and types of contracts.
