Definition and Characteristics of a Contract

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Questions and Answers

What is a contract?

A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

Which of the following is NOT a characteristic of a contract?

Independence (correct)

Obligatoriness

Autonomy

Mutuality

Contracts can be binding on only one party.

False

What are the essential elements of a contract?

Consent, object certain or subject matter, and cause or consideration. Signup and view all the answers

What principle indicates that contracts only bind the parties who entered into them?

Privity of Contract Signup and view all the answers

Contracts are perfected by mere _____

consent Signup and view all the answers

Heirs of the contracting parties can deny the binding effect of a contract.

False Signup and view all the answers

What must be present for a contract to be considered obligatory?

It must be perfected, valid, and enforceable. Signup and view all the answers

Which of the following is an essential element of a contract?

Consent Signup and view all the answers

The obligations arising from a contract are non-binding unless they are documented in writing.

False Signup and view all the answers

What term describes elements that are derived from the nature of the contract?

Natural Elements Signup and view all the answers

A contract is perfected by mere _____ and binds the parties involved.

consent Signup and view all the answers

Match the concepts related to contracts with their definitions:

Consent = Agreement between parties Accidental elements = Exist only when expressly provided Obligatory force = Legal binding nature of contracts Consideration = The cause or reason for a contract Signup and view all the answers

Which contract must be in writing to be valid?

Sale of a piece of land through an agent Signup and view all the answers

A donation of real property must be in writing and appear in a public instrument.

True Signup and view all the answers

What is the purpose of reformation of instruments?

To conform to the real intention of the parties due to mistakes or fraud. Signup and view all the answers

The ___________________ requires contracts like real estate mortgages to be registered.

NCC Signup and view all the answers

Match the type of contract with its requirement:

Donation of personal property = Must be in writing if over five thousand pesos Partnership with real property contribution = Must appear in a public instrument Real estate mortgage = Must be registered Sale of large cattle = Requires registration under the Cattle Registration Act Signup and view all the answers

Study Notes

Definition and Characteristics of a Contract

A contract is an agreement between two or more individuals where one party commits to perform an action or provide something for another.
Key characteristics include:
- Autonomy: Parties can create their own terms, provided they don't violate laws, morals, good customs, public order, or public policy (Article 1306).
- Mutuality: The contract binds both parties; neither can unilaterally decide its validity or fulfillment (Article 1308).
- Obligatoriness: Parties are bound to fulfill express stipulations and any consequences arising from good faith, custom, and law (Article 1315).
- Relativity: Contracts affect only the parties involved, their assigns, and heirs unless the rights and obligations are non-transferable by nature, stipulation, or law (Article 1311).
- Consensuality: Contracts are finalized by mutual consent.

Elements of a Contract

Essential Elements: These are necessary for a valid contract:
- Consent of all parties involved.
- A clearly defined object or subject matter.
- A lawful cause or consideration.
Natural Elements: Inherent in the nature of the contract and usually present.
Accidental Elements: Specified by the contracting parties; they aren't always present.

Basic Principles of Contracts

Obligatory Force: Contracts have the force of law; parties must act in good faith (Articles 1159, 1308, 1315, 1356). A valid and perfected contract is enforceable.
Freedom to Stipulate (Autonomy of Will): Parties have freedom to negotiate contract terms with limitations based on law, morals, and public policy (Article 1306).
Binding Effect/Mutuality: The contract's validity and fulfillment cannot depend solely on one party's will. (Article 1308).
Privity of Contract (Relativity): Contracts only bind the involved parties, their assigns and heirs, generally not affecting third persons. Heirs typically inherit the contract's obligations and benefits.

Contracts: Validity and Formalities

Contracts must be reasonable, just, and not contrary to public policy (Art. 1744, NCC).
Certain contracts require specific forms for validity:
- Donation of personal property exceeding ₱5,000: Requires donation and acceptance in writing (Art. 748, NCC).
- Sale of land through an agent: Agent's authority must be in writing (Art. 1874, NCC).
- Loan interest agreements: Interest must be specified in writing (Art. 1956, NCC).
- Antichresis: Principal and interest amounts must be specified in writing (Art. 2134, NCC).
Some contracts necessitate public instruments:
- Donation of real property (Arts. 719-74, NCC).
- Partnerships contributing immovable property: Requires a public instrument with an inventory of the property (Arts. 1771 & 1773, NCC).
- Acts creating, transmitting, modifying, or extinguishing real rights over immovable property: This includes sales of real property (Art. 1358, NCC, Arts. 1403 No.2 and 1405).
- Cession, repudiation, or renunciation of hereditary or conjugal partnership rights (Art. 1358, NCC).
- Powers to administer property or powers affecting third parties: These must appear in a public document (Art. 1358, NCC).
- Cession of actions or rights from acts in a public document (Art. 1358, NCC).
Contracts requiring registration:
- Real estate mortgages (Art. 2125, NCC).
- Sale or transfer of large cattle (Cattle Registration Act).

Reformation of Instruments

Reformation corrects instruments to reflect the parties' true intent due to mistake, fraud, inequitable conduct, or accident.

Contract Essentials and Principles

Essential elements: Consent, certain object/subject matter, and cause/consideration.
Natural elements: Inherent in the contract's nature.
Accidental elements: Expressly provided by the parties.
Obligatory force: Contracts are legally binding and must be performed in good faith (Art. 1159, NCC; Art. 1308, NCC; Art. 1315, NCC). Contracts are perfected by mere consent.
Exceptions to the general rule of obligatory force include cases where the law mandates a specific form for validity, enforceability (Statute of Frauds), or convenience.

Specific Contract Formalities

Donations:
- Personal property (over ₱5,000): Donation and acceptance must be written (Art. 748, NCC).
- Real property: Requires a public instrument specifying the property and charges (Art. 749, NCC). Acceptance must be in writing, either in the same deed or separate instrument. Acceptance must occur during donor's lifetime, and if in a separate instrument the donor must be notified.
Partnerships with real property contributions: Requires a public instrument with a signed inventory of the real estate (Art. 1773, NCC).
Antichresis: Principal and interest must be in writing (Art. 2134, NCC).
Agency to sell real property: Agent's authority must be in writing (Art. 1874, NCC).
Interest stipulations in loans: Interest must be stipulated in writing (Art. 1956, NCC).
Common carrier stipulations limiting diligence: Must be in writing, signed by the shipper/owner, supported by consideration beyond the carrier's service (binding unless annulled).

Voidable Contracts

Effective until annulled.
Can be ratified.
Only the party with defective consent (or heirs/assigns) can challenge.
Can be attacked directly or indirectly.
Grounds: Incapacity, mistake, violence, intimidation, undue influence, fraud.
Annulment effects: Restitution (generally mutual, except for unjust enrichment). If the thing is lost through the fault of the obligated party, they return fruits received and the thing's value at the time of loss.
Extinction of action to annul: Prescription (4 years, depending on the ground), ratification, loss of the object through the fault of the party entitled to annul.

Unenforceable Contracts

Cannot be enforced by action unless ratified.
Can be ratified.
Cannot be challenged by third persons.
Assailed only defensively.
Defect is permanent unless ratified. Time lapse does not validate.
Types: Unauthorized contracts, those violating the Statute of Frauds, those where both parties lack capacity to consent.

Void Contracts

Produce no legal effect.
Cannot be validated.
Grounds include illegality, simulation, non-existent object, impossible subject matter, uncertainty of intent, express prohibition by law.
Characteristics: produces no effects for anyone.

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Description

This quiz covers the fundamental aspects of contracts, including their definition and key characteristics. Participants will explore essential elements such as autonomy, mutuality, obligatoriness, relativity, and consensuality. It's an essential study for anyone interested in contract law.