Contract Law Basics

Sources of Law

• The Philippine Constitution is the fundamental law of the land, establishing, limiting, and defining the government's powers and distributing them among several departments.
• Statutes or legislation enactments are written wills of the legislative department, prescribing rules of action or civil conduct.
• Treaties are compacts made between two or more independent nations for public welfare.

Administrative or Executive Orders, Regulations, and Rulings

• Issued by administrative officials under legislative authority
• Examples: Rules and Regulations promulgated by the Secretary of Tourism, BIR Circulars and Rulings, and Administrative issuances by the Department of Foreign Affairs

Juridical Decisions or Jurisprudence

• Refers to the decisions of the Supreme Court in interpreting the laws of the constitution

The Legislative Branch

• The legislative power is vested in the Congress of the Philippines, consisting of a Senate and a House of Representatives
• Authorized to make laws, alter, and repeal them through the power vested in the Philippine Congress
• This institution is divided into the Senate and House of Representatives

The Executive Branch

• The executive power is vested in the President of the Philippines
• Composed of the President and the Vice President, who are elected by direct popular vote and serve a term of six years
• The President has authority to appoint his cabinet, which forms a large portion of the country's bureaucracy

The Judicial Branch

• The judicial power is vested in one Supreme Court and in such lower courts as may be established by law
• Holds the power to settle controversies involving rights that are legally demandable and enforceable
• Determines whether there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the government

Contracts

• A contract is a meeting of minds between two persons, whereby one binds himself to give something or render some service
• Essential elements of a contract: consent, object certain, and cause of the obligation

Types of Contracts

• Principal contracts: can subsist independently from other contracts and whose purpose can be fulfilled by themselves (e.g. sale, lease)
• Accessory contracts: can exist only as a consequence of, or in relation with, another prior contract (e.g. mortgage)
• Contract of Adhesion: one which is almost all the provisions have been drafted only by one party, usually a corporation or insurance company

Characteristics of a Contract

• Mutuality of contracts: validity and performance cannot be left to the will of only one of the parties
• Autonomy of contracts: parties are free to stipulate terms and provisions in a contract, as long as these provisions are not contrary to law, morals, good customs, public order, and public policy
• Relativity of contracts: contracts are binding only the parties and their successors-in-interest
• Consensuality of contracts: contracts are perfected by mere consent, and no form is prescribed by law for their validity
• Obligatory force of contracts: constitutes the law as between the parties who are compelled to perform under the threat of being sued in the courts of law

Classification of Contracts

• According to their relation to other contracts: preparatory, principal, and accessory contracts
• According to perfection: consensual and real contracts
• According to form: common and special or formal contracts
• According to their purpose: transfer of ownership, conveyance of use, and rendition of service
• According to their subject matter: things and services
• According to the nature of the vinculum which they produce: unilateral and bilateral contracts
• According to their cause: onerous and gratuitous contracts
• According to the risk involved: commutative and aleatory contracts