Contract Law PDF

14/09/2024 CONTRACTS Definitions  It is the meeting of the minds between two persons whereby one bind himself with respect to the other to give something or to render service  It comes from the Latin word “contractus” which signifies an agreement...

14/09/2024 CONTRACTS Definitions  It is the meeting of the minds between two persons whereby one bind himself with respect to the other to give something or to render service  It comes from the Latin word “contractus” which signifies an agreement 1  14/09/2024 GENERAL PROVISIONS  ELEMENTS OF CONTRACTS  Essential Elements  Consent of the parties  Object or subject matter  Cause or consideration  Natural Elements – are those the existence of which is presumed by law unless there is an agreement to the contrary  Accidental Elements – consist of the unusual stipulation of the parties such as conditions, terms, etc. GENERAL PROVISIONS  STAGES OF A CONTRACT  Preparation or Conception – includes all the initial stages up to the time the parties agree upon the terms of the contract  Perfection or Birth – the time when the minds of the parties meet in agreement upon the object or subject matter as well as to the price or consideration  Consummation or Termination 2  14/09/2024 GENERAL PROVISIONS  CLASSIFICATION OF CONTRACTS  Express and Implied Contracts – is one written in the intent of the parties is shown by words, oral or written  Executed and Executory Contracts  Executed contract – is one that has already been performed  Executory contract – is one that is not yet performed  Consensual and Real Contracts  Consensual contract – is one perfected by mere consent  Real contract – is one perfected by the delivery of the thing which is the object of the contract GENERAL PROVISIONS  Unilateral and Bilateral Contracts  Unilateral contract – only one of the parties has an obligation  Bilateral contract – both parties has an obligation 3  14/09/2024 GENERAL PROVISIONS  LIMITATIONS UPON THE RIGHT TO CONTRACTS  Contrary to law – the parties to a contract cannot agree to an object or purpose which is against the law  Against morals – no contract may be entered into which is against virtuous conduct and ethical precept  Contrary to good customs – the contracting parties are prohibited from entering into contracts which conflict with good and established practice or customs  Contrary to public order – signifies the public weal which are permanent and essential in institutions  Contrary to public policy – refers not only to “public safety” but also to considerations which are moved by the common good GENERAL PROVISIONS  ESSENTIAL REQUISITES OF CONTRACTS  Consent – manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract  Object of Contracts – it may be things, right and services  Things – must be within the commerce of men, must not be impossible, either physical or legally and must be determinate as to their kind  Rights – may be transmissible or not transmissible. Examples of these rights are the right to vote, rights flowing from a contract of marriage, parental authority, etc. 4  14/09/2024 GENERAL PROVISIONS  Cause of Contracts – the immediate, direct and proximate reason which justifies the creation of an obligation thru the will of the contracting parties GENERAL PROVISIONS  CLASSIFICATION OF CONTRACTS AS TO ITS CAUSE  Onerous Contract – the cause is mutual undertaking or promise of either of the contracting parties  Remunetory Contract – the cause is the service or benefit for which the remuneration is given  Gratuitous Contract – the cause is the pure liberality of the giver 5  14/09/2024 GENERAL PROVISIONS  REQUISITES OF A VALID CAUSE OR CONSIDERATION  The cause must be in existence  That the cause must be lawful and not contrary to law, morals, good customs, public policy, and  The cause must be true because the statement of a false cause renders the contract void REFORMATION OF INSTRUMENTS REFORMATION – is a remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed  REQUISITES OF REFORMATION  There is a valid contract  The contract is in writing  The written contract fails to express the true intention of the parties  The failure of the written contract to express the true intention is due to mutual mistake, fraud, inequitable conduct or accident 6  14/09/2024 DEFECTIVE CONTRACTS  TYPES OF DEFECTIVE CONTRACTS  Rescissible Contract  Voidable Contracts  Unenforceable Contracts  Void or Inexistent Contracts DEFECTIVE CONTRACTS  Rescissible Contract – it has all the essential requisites of a contract and the contract itself is valid, but by reason of injury or damage to third persons, such as creditors, the contract may be rescinded 7  14/09/2024 DEFECTIVE CONTRACTS Examples of rescissible contracts:  Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;  Those agreed upon in representation of absentees if the latter suffer the lesion stated in the preceding number;  Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; DEFECTIVE CONTRACTS Examples of rescissible contracts:  Those which refer to things under litigation if they have been entered into by defendant without the knowledge and approval of the litigants or of competent judicial authority;  All other contracts specially declared by law to be subject to rescission Lesion – damage or injury suffered by the party seeking rescission by reason of the fact that the price is unjust or inadequate 8  14/09/2024 DEFECTIVE CONTRACTS  Voidable Contracts – is one that possesses all the essential requisites of a valid contract, namely, consent, object and cause or consideration. It is a valid contract until it is annulled. Contracts that is voidable even though there may have been no damage to the contracting parties – Those where one of the parties is incapable of giving consent to a contract; – Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud DEFECTIVE CONTRACTS  Unenforceable Contracts – a contract is said to be unenforceable when it cannot be sued upon or enforced in court unless it is ratified 9  14/09/2024 DEFECTIVE CONTRACTS The following contracts are unenforceable unless they are ratified – Those entered into the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; – Those that do not comply with the statute of frauds as set forth in this number. In the following cases an agreement hereafter, be in writing, and subscribed by the party charged, or by his agent; evidence thereof, of the agreement cannot be received without the writing, or a secondary evidence of its content – Those were both parties are incapable of giving consent to a contract DEFECTIVE CONTRACTS  Void or Inexistent Contracts – one which is absolutely without legal force or effect. It is not susceptible of ratification Contracts that are inexistent and void from the beginning – Those whose cause, object or purpose is contrary to law, moral, good customs, public order or public policy; – Those which are absolutely simulated or fictitious; – Those whose cause or object did not exist at the time of the transaction; 10  14/09/2024 DEFECTIVE CONTRACTS Contracts that are inexistent and void from the beginning – Those whose object is outside the commerce of men; – Those which contemplate an impossible service; – Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; – Those expressively prohibited or declared void by law DEFECTIVE CONTRACTS Characteristics of void contacts – Void or inexistent contracts produce no legal effects whatsoever; – Void or inexistent contracts cannot be ratified, – The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced, – The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible – The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected 11