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PicturesqueIrony

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West Visayas State University

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business law contract law legal studies business administration

Summary

This document is a business law reviewer, covering contract elements, types, and defects, such as stipulations, consent, objects, forms, and mistakes. It's designed as a study guide for legal concepts in business administration.

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**BUSINESS LAW REVIEWER** **Based on study guide** **Contract**- is a meeting of minds by two persons, whereby one binds himself to the other **Stipulation pour autrui-** a stipulation in a contract clearly and deliberately granting a favor to a third person who has a right to demand its fulfillm...

**BUSINESS LAW REVIEWER** **Based on study guide** **Contract**- is a meeting of minds by two persons, whereby one binds himself to the other **Stipulation pour autrui-** a stipulation in a contract clearly and deliberately granting a favor to a third person who has a right to demand its fulfillment provided that he communicates his acceptance to the obligor before its revocation by the obligee/ original parties. **Real contract-** perfected of the delivery of the thing, subject matter of the contract. **Consensual contract-** perfected by mere consent **Solemn contract-** which requires compliance with certain formalities prescribed by law, such prescribed form being thereby an essential element thereof **Perfection of contract-** when the parties have come to a definite agreement, or meeting of the minds regarding the subject matter and cause of the contract, upon concurrence of the essential elements thereof. **Ratification-** is a process by which a person adopts or approves an act performed by another person who, without authority, acted as his agent.  **Law-** rule of conduct, just, obligatory, promulgated by legitimate authority, and of common observance and benefit. **Valid contracts-** those that meet all of the legal requisites for the type of agreement involved, and the limitations on contractual stipulation and are, therefore, legally binding and enforceable. **Nominate contract-** has specific name or designation in law. **Innominate contract-** has no specific name or designation in law. **Morals-** deal with norms of good and right conduct evolved in a community. **Good customs-** Customs consist of habits and practices which through long usage have been followed and enforced by society or some part of it as binding rules of conduct. **Public order-** refers principally to public safety although it has been considered to mean also the public weal. **Public policy-** broader than pubic order, refer not only to public safety but also to considerations which are moved by the common good. **Preparation/ negotiation-** includes all the steps taken by the parties leading to the perfection of the contract. At this stage, the parties have not yet arrived at any definite agreement. **Perfection/ birth-** this is when the parties have come to a definite agreement or meeting of minds regarding the subject matter of the contract, upon concurrence of the essential elements thereof. **Consummation/ termination-** this is when the parties have performed their respective obligations and the contract may be said to have been fully accomplished or executed, resulting in extinguishment or termination thereof. A contract may also be terminated after its perfection, not by performance, but by mutual agreement of the parties. **Essential elements-** without which no contract can validly exist regardless of the intentions of the parties. Also known as the requisites. **Natural elements-** presumed to exist in certain contracts unless the contrary is expressly stipulated by the parties, like warranty against eviction, or warranty against hidden defects in sale. **Accidental elements-** particular stipulations, clauses, terms, or conditions established by the parties in their contract, like conditions, period, interest, penalty, and therefore, they exist only when they are expressly provided by the parties. **Consent-** conformity or concurrence of wills (offer & acceptance) and with respect to contracts, it is the agreement of the will of one contracting party with that of another, upon the object and terms of the contract. / Meeting of minds or mutual assent between the parties. **Offer-** proposal made by one party to another, indicating a willingness to enter into a contract. **Acceptance-** manifestation by the offeree of his assent to all the terms of the offer. **Option contract-** one giving a person for a consideration a certain period within which to accept the offer of the offerer. / privilege given to the offeree to accept an offer within a certain period. **Option period-** period given within which the offeree must accept the offer. **Option money-** money paid or promised to be paid in consideration for the option. **Earnest money-** partial payment of the purchase price and is considered as proof of the perfection of the contract. **Unemancipated minors-** persons who have not yet reached the age of majority(18) and are still subject to parental authority. **Insane or demented persons-** the insanity must exist at the time of contracting. Unless proved otherwise, a person is presumed sane. **Deaf- mutes-** deaf and dumb. **Lucid interval-** temporary period of sanity. **Mistake or error-** the false notion of a thing or a fact material to the contract. **Mistake of fact-** arises from ignorance or lak of knowledge **Substantial mistake of fact-** mistake contemplated by law. **Mistake of law-** arises from an ignorance of some provision of law, or from an erroneous interpretation of its meaning, or from an erroneous conclusion as to the legal effect of an agreement, on the part of one of the parties. **Mistake** can be **unilateral,** if one party is mistaken about a material fact**, Bilateral** when both. **Ignorantia legis neminem excusat-** ignorance of the law excuses no one **Violence-** employment of physical force **Undue influence-** is influence of a kind that so overpowers the mind of a party as to prevent him from acting understandingly and voluntarily to do what he would have done if he had been left to exercise freely his own judgement and discretion. **Causal fraud-** fraud committed by one party before or at the time of the celebration of the contract to secure the consent of the other. **Insidious words or machination-** include any misrepresentation in words or actions done with a fraudulent purpose. **Dolo Causante (Causal Fraud):** This type of fraud directly induces the other party to enter into the contract. It renders the contract voidable. **Dolo Incidente (Incidental Fraud):** This type of fraud does not directly induce consent but merely influences the terms of the contract. It does not render the contract voidable but gives rise to damages. **Concealment-** equivalent to misrepresentation or false representation. **Dealer's talk/ trader's talk-** representations which do not appear on the face of the contract and these do not bind either party. **Simulation of a contract-** the act of deliberately deceiving others, by feigning or pretending by agreement, the appearance of a contract which is either non- existent or concealed. **Absolute simulation-** when the contract does not really exist and the parties do not intend to be bound at all. **Relative simulation-** when the contract entered into by the parties is different from their true agreement. **Object of a contract-** subject matter of a contract **Future inheritance-** any property or right, not in existence or capable of determination at the time of the contract, that a person may inherit in the future, such person having only an expectancy of a purely hereditary right. **Physical impossibility-** when the thing or service in the very nature of things cannot exist. **Absolute physical-** when the act cannot be done in any case so that nobody can perform it. **Relative physical-** when it arises from the special circumstances of the case (e.g. to make payment to a dead person, to drive a car on a flooded highway.) or the special conditions or qualifications of the obligor. **Legal impossibility-** when the thing or service is contrary to law, morals, good customs, public order, or public policy. **Causa-** essential reason or purpose which the contracting parties have in view at the time of entering into the contract. It is something bargained for or given by a party in exchange for a legally enforceable promise of another. Civil code term for consideration in anglo- American or common law. **Onerous-** one the cause of which, for each contracting party is the prestation or promise of a thing or service by the other. / the parties are reciprocally obligated to each other. **Remuneratory/ remunerative-** one the cause of which is the service or benefit which is remunerated. The purpose of the contract is to reward the service that had been previously rendered by the party remunerated. **Gratuitous-** one the cause of which is the liberality of the benefactor or giver. **Motive-** purely personal or private reason which a party has in entering into a contract. It is different from the cause of the contract. **Absence or want of cause-** there is a total lack of any valid consideration for the contract. **Illegality of cause-** implies that there is a cause, but the same is unlawful or illegal. **Falsity of cause-** meant that the contract states a valid consideration but such statement is not true. **Lesion-** any damage caused by the fact that the price is unjust or inadequate. **Form of a contract-** the manner in which a contract is executed or manifested. **Informal/common/simple contract-** which may be entered into in whatever form provided all the essential requisites for their validity are present. **Formal/ solemn contract-** which is required by law for its efficacy to be in a certain specified form. **Public document/ instrument-** one which is acknowledged before a notary public or any official authorized to administer oath, by the person who executed the same. **Reformation-** is that remedy allowed by law by means of which a written instrument is amended or rectified so as to express or conform to the real agreement or intention of the parties when by reason of mistake, fraud, inequitable conduct, or accident, the instrument fails to express suh agreement or intention. **Mutual mistake-** mistake of fact that is common to both parties of the instrument which causes the failure of the instrument to express their true intention. **Donation-** is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. **Donation inter vivos-** donation shall take effect during his lifetime. **Donation mortis causa-** takes effect after the donor's death. **Wills-** an act whereby a person is permitted with the formalities prescribed by law to control to a certain degree the disposition of his estate, to take effect after his death. **Interpretation of a contract-** the determination of the meaning of terms or words used by the parties in their written contracts. Process of ascertaining the intention of the parties from the written words contained in their contract. **Contracts of adhesion-** contracts most of the terms of which do not result from mutual negotiation between the parties as they are usually prescribed in printed forms prepared by one party to which the other may adhere if he chooses but which he cannot change. **4 kinds of Defective contracts:** 1. **Rescissible contracts-** valid because all the essential requisites of a contract exist but by reason of economic injury, or damage to one of the parties or to third persons, such as creditor, the contract may be rescinded/ cancelled. 2. **Voidable contracts-** valid until annulled unless there has been a ratification. The defect is caused by vice of consent. Possessed all the essential requisites of a valid contract but one of the parties is incapable of giving consent, or consent is vitiated by mistake, violence, intimidation, undue influence, or fraud. 3. **Unenforceable contracts-** cannot be sued upon or enforced unless they are ratified. Occupies an intermediate ground between a voidable and a void contract. 4. **Void or Inexistent contracts-** absolutely null and void. Have no effect at all and cannot be ratified. **Rescission-** a remedy granted by law to the contracting parties and sometimes even to third persons in order to secure reparation of damages caused by them by a valid contract, by means of restoration of things to their condition in which they were prior to the celebration of said contract. **Ward-** person under guardianship by reason of incapacity. **Absentee-** person who disappears from his domicile his whereabouts being unknown, and without leaving an agent to administer his property. **Annulment-** remedy provided by law, for reason of public interest, for the declaration of the inefficacy of a contract based on a defect or vice in the consent of one of the contracting parties in order to restore them to their original position in which they were before the contract was executed. **Ratification-** one voluntarily adopts or approves some defective or unauthorized act or contract which, without his subsequent approval or consent, would not be binding on him. **Express ratification-** manifested in words or in writing. **Implied or tacit ratification-** takes diverse forms, such a by silence or acquiescence; by acts showing adoption or approval of the contract; or by acceptance and retention of benefits flowing therefrom. **Unauthorized contracts-** those entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers. **Statute of frauds-** enacted not only to prevent fraud but also to guard against the mistakes of honest men by requiring that certain agreements specified that are susceptible to fraud must be in writing. **Ceiling law-** a statute fixing the maximum price of any article or commodity. Its purpose is to curb evils of profiteering or black marketing. **Indivisible contract-** when the consideration is entire and single, the contract is indivisible so that if part of such consideration is illegal, the whole contract is void and unenforceable. **Natural obligations-** could not be enforced by a civil action but it had certain juridical consequences. Based not on positive law but on equity and natural law. **Civil obligations-** arise from law, contracts, quasi- contracts, delicts, and quasi- delicts. Gives a right of action in courts of justice to compel their performance or fulfillment. **Legacy-** acts of disposition by the testator in separating from the inheritance for for definite purposes, things, rights, or a definite portion of his property. **Vices of CONSENT** **a. error or mistake** **b. violence or force** **c. intimidation or threat or duress** **d. undue influence** **e. fraud or deceit** 1. **May a 3^rd^ person acquire rights under a contract to which he is a stranger or be bound thereby?** No, because according to the civil code, a third person has no rights or obligations under a contract to which he is a stranger. He has no standing in law to demand the enforcement of a contractor question its validity. 2. **How are contracts perfected?** According to the civil code, contracts are perfected if the parties have come to a definite agreement or meeting of minds regarding the subject matter of the contract, and have complied with specific formalities required by law. 3. **When will a person be bound by a contract entered into by another?** According to the civil code, a person may be bound by a contract entered into by another if he is authorized by the person whose name he contracts, or he must have legally represent him, like a guardian or an administrator. 4. **Give the effect of the perfection of a contract.** According to the civil code, if the contract have been perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated, but also to all the consequences which according to their nature, may be in keeping with good faith, usage and law. 5. **A and B entered into a contract not specifically provided in the civil code.** **Is the contract valid or binding?** Yes, the contract is valid and binding, according to the civil code, there are contracts that has no specific name or designation in law, but still valid or binding if it meets all the legal requisites prescribed by law, this contract is known as Innominate contracts. 6. **S and B entered into a contract of sale. It was agreed that the price shall be determined by T, a third person. Can S or B refuse to be bound by T's determination of the price if he does not agree with the amount thereof?** No, S and B cannot refuse T's determination of the price as it is agreed that the price shall be determined by T, but if T's decision is inequitable, S and B can refuse. According to the civil code, the parties can leave the decision to the third person, but the latter should act in good faith, if not, the parties can seek the court's intervention. 7. **D owes C P20,000. Both are house painters. It was agreed that D instead of paying C, will paint the house of E to which E expressed his conformity to C whose service as painter was previously contracted by E. Has B the right to enforce the stipulation between C and D?** No, according to the civil code, if the obligation is personal in nature like painting, as personal qualifications may be considered, the contract only involves the parties to the contracts, and not a third person. 8. **X made an office desk for Y. X told Y that the latter may pay whatever amount he would like to pay for it. When the desk was finished Y offered to pay P2,000 but X instead demanded P3,000 its fair value. Is X entitled to P3,000?** No, as X did not specifically mentioned the price, and said that Y could pay for whatever amount. The contract is perfected by Y's acceptance, so X is only entitled to P2,000 offered by Y. According to the civil code, a contract can be manifested by the consent of both of the parties. The offer must be certain or sure, and the acceptance absolute, or without any doubt. 9. **When is a contract voidable or annullable?** The contract is voidable or annullable if it does not meet all the legal requisites. According to the civil code, the contract should meet all the legal requisites, the parties should be in the right state of mind, and mistake, fraud, violence, or intimidation, or undue influence should not be present. 10. **Is it always required that he who alleges fraud or mistake in entering into a contract, must prove his allegation?** Yes, he who alleges fraud or mistake must prove his allegations, according to the civil code, the party alleging fraud or mistake bears the burden of proof. He must present clear and convincing evidence to support his claims. 11. **Give the requisites in order that intimidation may vitiate or annul consent of a party to a contract.** It must produce a reasonable and well- grounded fear of an evil, the evil must be imminent and grave, it must be upon his person or property, or that of his spouse, descendants, or ascendants. 12. **May fraud be commuted by a party to a contract though there is no misinterpretation on his part?** 13. **Will the acceptance of a business advertisement of a thing for sale produce the perfection of a contract?** 14. **In a contract containing an option period, when is the offerer not allowed to withdraw his offer even before acceptance by the offeree? When is the offerer allowed to withdraw his offer even after acceptance?** 15. **S sold his house to B believing that B was C. Can S legally withdraw from the contract on the ground of mistake?** 16. **S agreed to deliver to B 500 cavans of rice at 600 per cavan. S delivered only 490 cavans deliberately misrepresenting that the delivery consisted of 500 cavans. Can B ask the court to annul the contract on the ground of fraud?** 17. **S sold to B for P100,000 a parcel of land belonging to S located in his hometown without specifying its exact location and area. Is the sale valid?** 18. **S has several pigs. Under a contract of sale, S binds himself to deliver a pig to B for P3,000 if the pig has a weight of at least 30 kilos. State the binding effect of the sale.** 19. **What is the reason why the law in certain cases permits a written instrument o be reformed or corrected?** 20. **In what way is reformation of written instrument distinguished from the annulment of a contract?** 21. **S sold his horse ''X'' to B under a written contract of sale. What B thought S was selling him is horse ''Y''. can s ask for the reformation of the contract against the objection of B who is agreeable to the sale of horse ''X''?** 22. **Suppose in the same example, S was intending to sell horse ''Y''. give 3 cases when he can ask for the reformation of the contract.** 23. **What should be followed in the interpretation of a contract, its terms or the intention of the parties?** 24. **Suppose a stipulation or word in a written contract is susceptible of various interpretations** 25. **S sold to B his condominium unit 'including all its contents'. In the unit theres an antique chair belonging to X which X agreed to sell to S. is the chair to be included in the sale of the unit?** 26. **X, architect, designed and supervised the construction of the house of Y. the prties failed to agree beforehand the professional fee of X. how much is Y bound to pay X?** 27. **State the rule on the liability of the acquires in bad faith of property alienated in fraud of creditors.** 28. **In what cases is rescission not allowed although the contract is found to be rescissible under the law?** 29. **D owes C P100,000. Since D fails to pay, C expressed its willingness to accept the car of D, with the same value, more or less, in payment of his debt. D, in bad faith, sold the car to X. Has C the right to ask for the rescission of the sale?** 30. **F, guardian of M (minor), sold to B a property of M with a market value of P50,000 for only P37,000, or a difference of more than ¼ (12,500) of the value. If the rescission of the sale is demanded, what possible defense under the law can B present to avoid rescission?** 31. **Give the requisites for the ratification of a voidable contract.** 32. **State the rule on the right of strangers to a contract to bring an action for its annulment.** 33. **Under the law, what contracts are voidable or annullable?** 34. **S, a minor, sold a property to B. Later, the sale is annulled on the ground of the minority of S. is S bound to return the price received by him?** 35. **In the same problem, suppose S, upon reaching the age of majority, decided to ratify or respect the contract. Has B the right to refuse the ratification and demand mutual restitution of the property and the price?** 36. **In the same problem, suppose the sale was annulled by the court, what are the rights of the parties if the property was lost or destroyed?** a. **Without the fault of B?** b. **Through the fault of B?** 37. **What are kinds of unenforceable contract?** 38. **How many contracts violating the statute of frauds?** 39. **State the purpose of the statute of frauds.** 40. **I, an insane person, entered into a contract with M, a minor. What is the effect of ratification?** a. **By either** b. **By both, after becoming incapacitated?** 41. **D owes C P10,000. T orally promised to assume the obligation of D. Can the promise of T be proved by the testimony of a witness who was present when T made the same?** 42. **S orally agreed to sell his piano for P7,000 to B who made a partial payment of P1,000. Later S denied there was such a sale. Can B enforce the sale considering that the contract was oral and the price was more than P500?** 43. **What are the characteristics of a void or inexistent contract?** 44. **Give the rules where the contract is unlawful and the act constitutes a crime, and both parties are equally guilty.** 45. **Give the rules where the contract is unlawful but the act does not constitute a criminal offense, and only one party is guilty or both parties are not equally guilty.** 46. **S and B entered an absolutely simulated contract of sale of a parcel of land. S brought action in court to recover the land only after 20 years. Is it correct for the court to dismiss the action because of the long lapse of time?** 47. **In consideration of P10,000 given by X to Y, the latter agreed to burn the house of Z. Later, X told Y to forget the agreement and to return the money. Y refused. Is X entitled to recover from Y?** 48. **W agreed to stay in the house of M as the latter's live- in partner for one year in consideration of the latter's promise to pay her P100,000 after said period. W complied with her part of the agreement but M reneged on his promise. Is W entitled to recover from M?** 49. **What is the effect of the voluntary performance of a natural obligation?** 50. **Give 2 examples of natural obligations under the law.** 51. **C sued D for nonpayment of the latter's obligation. D won the case on a technicality. Nevertheless, when C asked D for payment again, D paid him. Now, D demands the return of what he has paid, claiming, he should not have paid C since he had no more obligation to C under the law. Decide.** 52. **M, a minor, bought a bicycle for P2,000 from N, who is not a minor. Under the law, the contract is voidable because M is incapacitated to give consent because of his minority. Give the situation by reason of which M cannot recover the P2,000 from N.**

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