Contracts and Their Legal Principles

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Questions and Answers

What is the primary obligation of contracting parties once a contract is perfected?

To seek judicial approval for any changes

To fulfill the contract in good faith (correct)

To renegotiate the terms at any time

To ignore the contract if conditions change

What does the binding effect of a contract imply regarding the contracting parties?

The contract's compliance can be unilaterally determined

The contract is only valid if notarized

One party can bind the other without consent

Both parties must adhere to the contract terms (correct)

Which limitation is imposed on the freedom to stipulate in contracts?

One party can cancel the contract at any time

Terms must comply with good faith and public policy (correct)

Parties can include any terms they desire

Contracts cannot include penalties of any kind

What is the status of a contract if one of the parties is incapable of giving consent?

It is voidable Signup and view all the answers

What does an employment contract that prohibits work with another company for five years exemplify?

An unreasonable restraint to livelihood Signup and view all the answers

What principle is essential in determining the validity of contractual agreements?

The consent must be evident and mutual Signup and view all the answers

Which of the following is NOT considered a vice of consent that can make a contract voidable?

Miscommunication Signup and view all the answers

What defines the cause or consideration in a contract?

The immediate reason explaining the obligation Signup and view all the answers

Which scenario might lead a court to intervene in the terms of a contract?

The contract is evidently inequitable Signup and view all the answers

What does 'freedom to stipulate' in contracts refer to?

The ability to choose to enter into a contract Signup and view all the answers

Which of the following is a requisite for a valid object in a contract?

It should be within the commerce of man Signup and view all the answers

What happens to a contract if both parties are incapable of giving consent?

It is unenforceable unless ratified Signup and view all the answers

How are contracts defined in terms of their enforceability by the courts?

They cannot be created or enforced without at least one stipulation Signup and view all the answers

Which of the following objections would NOT fall under the definition of 'objects' in a contract?

A valid rental agreement Signup and view all the answers

Which principle emphasizes that obligations arising from contracts have the force of law between parties?

Obligatory force of a contract Signup and view all the answers

What is the legal implication if consent to a contract is obtained through violence?

The contract is voidable Signup and view all the answers

What defines the principle of mutuality of contracts?

It ensures that both parties have equal obligations under the contract. Signup and view all the answers

Which of the following scenarios would violate the principle of autonomy of contracts?

A contract for the sale of land covered by a homestead. Signup and view all the answers

What is a defining characteristic of a contract of adhesion?

It typically provides one party with greater negotiating power. Signup and view all the answers

In what context can a contract of adhesion be deemed void?

When imposed during unequal bargaining circumstances. Signup and view all the answers

What guarantees the binding effect of a contract?

It should not conflict with public order or morals. Signup and view all the answers

How does the principle of privity of contract function?

It restricts contract effects solely to the parties involved. Signup and view all the answers

Which of the following is NOT true regarding the binding nature of contracts?

All contracts must be written to be enforceable. Signup and view all the answers

Which of the following would invalidate a contract based on consideration?

A promise of marriage without any exchange of value. Signup and view all the answers

Study Notes

Binding Effect of a Contract

Contracts bind both parties and neither can decide unilaterally whether or not to fulfill the agreement.
Obligations arising from contracts are legally binding and parties must comply in good faith.
Courts must enforce contracts between contracting parties.

Principle of Mutuality of Contracts

The principle of mutuality emphasizes that a contract's validity or fulfillment should not rely solely on the will of one party. It outlines that both parties are equally bound by the terms of the agreement.

Freedom to Stipulate and its Limitations

Parties have the freedom to decide whether or not to enter a contract and to agree upon terms.
Parties cannot stipulate terms that violate the law, morals, good customs, public order, or public policy.
Freedom to stipulate is known as the Autonomy of Contracts.

Contracts Contrary to the Principle of Autonomy of Contracts

A contract to sell land covered by a homestead patent within the five-year prohibition period is contrary to law.
A promise of marriage where carnal knowledge is the consideration is contrary to morals.
A quitclaim by a hospital to stop paying a victim is contrary to morals and public policy.
An employment contract preventing an employee from working with another company for five years after termination, without employer consent, is an unreasonable restraint on livelihood.
A waiver of rights to transfer to another school in a scholarship grant can be contrary to public order and public policy.

Contract of Adhesion

One party imposes a pre-written standard agreement on another, with minimal room for negotiation.
A contract of adhesion is not necessarily invalid, however, it can be struck down if the party was unfairly pressured to agree to terms.
The party who signed the agreement must have been deprived of the opportunity to bargain on equal footing.

Privity of Contract

Contracts take effect only between the parties involved, their assigns, and heirs.
The principle of Privity of Contract emphasizes that a deal's obligations are generally restricted to the parties who explicitly created it.

Requisites of a Valid Object

A contract must be within the commerce of Man.
The object of the contract must be real or possible.
The object of the contract must be licit (legal).

Cause or Consideration Defined

The immediate reason behind creating an obligation via the parties' will.

Basic Principles of Contracts

Obligatory Force of a Contract: Contracts have the force of law between parties and should be complied with in good faith.
Freedom to stipulate and its limitations: Parties can decide to enter into a contract or not, and agree on terms, but they cannot violate the law, morals, good customs, public order, or public policy.
Binding effect of a contract: The contract must bind both parties and neither can decide unilaterally whether or not to fulfill the agreement.
Privity of a Contract: Contracts take effect only between the parties involved, their assigns, and heirs.
Consensuality of Contracts: Contracts are perfected by mere consent.

If consent is obtained through violence, intimidation, mistake, fraud, or undue influence, the contract is voidable.

Object Defined

A thing, right, or service that serves as the subject matter of the obligation stemming from the contract.

Rule When Incapable Parties Enter Into a Contract

A contract is voidable if one party is incapable of giving consent.
A contract is unenforceable if both parties are incapable of giving consent unless ratified.

Things Outside the Commerce of Men

These are not valid objects of a contract.

Intransmissible Rights

These are rights that cannot be transferred to another.

Future Inheritance

A contract pertaining to a future inheritance is not valid unless specifically authorized by law.

Services Contrary to the Law, Morals, Good Customs, Public Order or Public Policy

Contracts for such services are not valid.

Impossible Things or Services.

Contracts pertaining to impossible things or services are not valid.

Objects Not Possible of Determination as to Their Kind

Contract involving objects that are not clearly defined are not valid.

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Description

This quiz explores the binding effects of contracts, the principle of mutuality, and the limitations on the freedom to stipulate contract terms. Participants will test their understanding of legal obligations and the enforceability of contracts under different circumstances.