Final Exam Key - Accounting (Obligations & Contracts)

A contract is void when its object is outside the commerce of man. This means the subject matter of the contract is something that cannot be legally bought or sold, such as human beings or illegal substances.

A contract becomes voidable when fraud is involved, specifically when it's serious and not committed by both parties. This means one party tricked the other into signing the contract.

A contract between unemancipated minors (those under legal age) is generally voidable. This means either party can choose to cancel the contract.

Contracts entered into during lucid intervals (periods of temporary mental clarity for individuals with mental illness) are considered perfectly valid. This means these contracts are legally binding.

Objects of a contract must be within the commerce of man, legal services, and transmissible rights. This means they must be things that can be bought, sold, legally performed, and passed on to others.

Impossible things or services are not valid objects of a contract. This means the contract cannot be legally fulfilled because the subject matter is not possible or is forbidden.

A void contract is completely null and unenforceable from the beginning. A voidable contract is valid until one party chooses to cancel it.

A valid contract requires capacity, consent, object, and cause. Capacity means the parties understand the agreement. Consent refers to the freely given agreement. Object is the subject matter. Cause is the reason for the agreement.

A contract that is considered legally invalid from the start. It has no legal effect and cannot be enforced in court.

A contract that can be declared invalid by one or both parties. It is initially valid but can be set aside if certain conditions are met, such as fraud or duress.

The act of accepting and confirming a contract that was originally invalid or defective, making it legally binding.

The key components that must be present in a contract for it to be valid. Without them, the contract cannot exist.

A legally binding agreement between two or more parties, where each party agrees to do something in exchange for something else.

A contract that stands on its own, independent of any other contracts. It doesn't require another contract for its validity.

A contract that depends on another contract for its validity. It exists only because of the main contract.

Legal action taken to make a contract legally void, as if it never existed. This can be done due to fraud, duress, or other issues.

The termination of a contract by mutual agreement of both parties or by a court order due to a breach of the agreement.

In this scenario, where B failed to pay for the sugar on the agreed date, A has the right to rescind the contract because B's non-payment is a breach of the contract.

The principle that allows contracting parties to freely negotiate and agree on the terms and conditions of their agreement within legal bounds.

The principle that a contract is binding only if both parties have freely given their consent to it.

In the scenario described, A cannot recover the P5,000 paid to B for the kidnapping. This is because the contract was illegal from the beginning.

The legal duties and responsibilities that arise from a valid contract, binding the parties to fulfill their agreed-upon terms.

A law requiring certain contracts to be in writing to be enforceable. Failure to comply renders the contract unenforceable, but not void.

A contract where both parties have yet to perform their obligations. For example, a contract to buy a house where the buyer has not yet paid and the seller has not yet delivered the house.

Occurs when one party takes improper advantage of their power over another, robbing the latter of free will.

A contract that can be set aside or canceled due to certain legal circumstances, such as when one party suffers a significant loss.

A significant loss or disadvantage suffered by one party in a contract.

A contract made by a legal guardian on behalf of their ward (minor). Such contracts can be rescinded if the ward suffers a loss of more than 25% of the object's value.

A contract made on behalf of a person who is not present. It is rescissible if the absentee suffers a loss greater than 25% of the object's value.

A contract of sale is an agreement where one party (the seller) agrees to transfer ownership of a thing to another party (the buyer) in exchange for a price.

This refers to a situation where someone enters into a contract to hide assets or deceive creditors who are trying to collect money owed to them.

A contract is rescissible when a guardian enters into a contract on behalf of a minor, and the minor suffers a significant loss (more than 1/4 of the value of the object).

The object of a contract is the subject matter of the agreement - the specific item, service, or right being exchanged.

This means the object is not something that can be legally bought or sold, making the contract void. It's impossible or illegal.

A valid contract has all the essential elements: capacity, consent, object, and cause. This means the parties are able to agree, the agreement is freely given, the object is legal, and there's a valid reason for the agreement.

A voidable contract can be cancelled by one or both parties because of factors like fraud or mistake. A rescissible contract can be cancelled by the harmed party because of legal reasons like undue influence.

A relative simulated contract is a contract that appears to be different from what it actually is, but it is not completely void. This means it is partially valid and can be enforced in court if it aligns with the true intentions of the parties involved.

A contract is not automatically void just because the motive of one party is illegal. The contract remains valid unless the motive is directly related to the object of the contract. This means if the illegality doesn't directly affect the core subject of the contract, it won't invalidate the whole agreement.

A consensual contract is a contract that is formed through the mutual agreement of the parties involved. This means both parties freely agree to the terms and conditions outlined in the contract.

The principle of relativity of contract states that the contract is binding only on the parties who signed it. This means outsiders cannot be compelled to follow or fulfill the terms of that contract.

The essential elements of a contract are consent, object, cause, and capacity. Consent means the parties freely agree. Object is the subject matter. Cause is the reason for the agreement, and capacity indicates that the parties are able to understand the agreement.

A real contract is a contract that is perfected when the object of the contract is delivered. This means the contract isn't complete until you physically receive the goods or services.

An innominate contract is a contract that doesn't have a special name under the law. This means it's not categorized as a specific type of contract and can involve various elements.

A contract that depends on chance is one where the fulfillment of the contract relies on an uncertain event. This means the outcome of the contract hinges on something unpredictable.