Contracts and Agreements

• A contract is an agreement, between two or more people, that creates or transfers rights and obligations
• Its existence requires the consent of the parties, expressed or implied, and a defined subject matter

Contracts versus Agreements

• An agreement is between two or more people to create, transfer, modify, or extinguish obligations
• Agreements that create or transfer obligations and rights are called contracts

Types of Contracts

• Civil and mercantile contracts are the primary types

Types of Civil Contracts

• Preparatory contracts
• Contracts transferring ownership
• Contracts transferring use
• Guarantee contracts

Types of Promise Contracts

• Sales agreements

• Purchase agreements

• Purchase-sale agreements

• Preparatory contracts relate to the promise of a real estate purchase and sale

• A purchase-sale agreement is a contract where one party is obligated to transfer ownership of something to another, who in turn pays a specific price in money

• In a sale agreement documented in a Public Deed, the expenses of writing and registering the sale are usually split equally between the parties

• Donation is a contract where someone is obligated to freely transfer ownership of a portion of their present assets to another person, who accepts the transfer

• Donations cannot involve future assets

• Exchange involves a contract where one party grants ownership of something in exchange for another item; it's a swap of items

• Mutuum involves a contract where one party (the lender) is obligated to transfer ownership of money or fungible goods, freely or not, to another party (the borrower). The borrower then commits to return the same type, quality, and amount

• Mutuum is the contract that should be signed in the scenario of Juan Carlos' wings business receiving a large order at the last minute, needing 10 kilos of wings urgently, and borrowing them from a contact who also sells wings and burgers, with the agreement to return the same quantity in 1 week

• Commodatum involves a contract where one party (the lender) must freely allow the use of a non-fungible item to another party (the borrower), who must return the borrowed item

• Commodatum is the contract that Galletas Lucita, S.A. and Paco should sign for their vehicle use agreement

Other Contracts

• Leasing is where a party must transfer temporarily a thing or good for its use with a previously agreed payment.
• Guarantee is when a person, called the guarantor, commits to another, called the creditor, to pay for the debtor if they do not
• A mortgage is an ancillary contract that constitutes a real guarantee over transferable assets, which are not given to the creditor, but gives the right to be paid with the value of the assets if the main obligation is not fulfilled, with the preference established by law
• The contract for the provision of professional services is designed to fulfill an objective through the payment of fees
• A commercial partnership is when two or more partners join efforts to achieve a common goal, formalized in a legal act
• Social capital represents the total amount contributed by the partners to form the company, always in legal tender, and is an essential part of starting a company
• Reserves are restricted profits; legal reserves are mandated by law, statutory reserves by statutes, and voluntary reserves are agreed upon by the partners

Corporate Structures

• Stock is viewed as an indispensable valuable right within a corporation for a partner to enforce their rights
• A decision to immobilize 50% of the profits of 2020 is also called a reserve
• In a limited liability company (S. de R.L.), partners are only required to pay their contributions and the company cannot have more than fifty partners
• To establish a corporation (S.A.) requires a minimum of two partners, a minimum capital as determined by law, and for each partner to seek a share of the profits
• In a corporation (S.A.), partner rights are represented by a stock, considered an essential title to assert such rights
• Simplified Stock Companies (SAS) are intended to simplify the process of incorporating a company, even through electronic means without needing a public notary, ideal for micro and small businesses with annual income below 5 million MDP
• In no instance may shareholders simultaneously be shareholders with decision-making power in another type of commercial company
• A company whose partners are only limited to paying their shares is called a corporation (Sociedad Anónima)
• Secondary liability is when legal action is taken against a society's partners for a debt that the society owes
• Capital Stock is the amount of money contributed to the society by Luis and the other partners