Contracts.pptx a guide for students who are studying law
- 2. § A meeting of minds between persons whereby one binds himself, with respect to the other, to give something or to render some service. § Contract vs. Obligation Contract is one of the sources of obligation Obligation is the legal tie or relation itself that exists after a contract has been entered into
- 3. § Art. 1306.The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. § Law: a rule of conduct, just, obligatory, promulgated by legitimate authority, and of common observance and benefit; § Morals: deal with norms of good and right conduct evolved in a community § 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 § Public Policy: May refer not only to public safety but also to considerations which are moved by common good
- 4. Nominate contracts § those which have their own distinctive individuality and are regulated by special provisions of law. Innominate contracts § those which lack individuality and are not regulated by special provisions of law. § regulated by the stipulations of the parties by the general provisions of the Civil Code on obligations and contracts, by rule governing the most analogous nominate contracts and by the customs of the place 4 Kinds of Innominate Contract: § Do ut des – I give that you give § Do ut facias – I give that you do § Facio ut des – I do that you give § Facio ut facias – I do that you do
- 5. Characteristics of Contracts: § Relativity (Art. 1311) § Obligatoriness and Consensuality (Art. 1315) § Mutuality (Art. 1308) § Autonomy (Art. 1306)
- 6. Relativity GENERAL RULE: Contract is only valid between parties, assigns and heirs. EXCEPTIONS: § Stipulation pour autrui (Art 1311, par 2) § In contracts creating real rights (Art 1312) § In contracts entered into to defraud creditors (Art. 1313) § In contracts which have been violated at the inducement of third persons (Art 1314)
- 7. § Mutuality § The contract must bind both parties; its validity or compliance must not be left to the will of one of them. (Art.1308) § Autonomy § The parties are free to stipulate anything they deem convenient provided that they are not contrary to law, morals, good customs, public order and public policy. (1306) § Consensuality § Contracts are perfected by mere consent and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature may be in keeping with good faith, usage and law. (1315)
- 8. Classification of Contracts according to perfection § Consensual:That which is perfected by mere consent Example: Sale, Lease, Agency § Real:That which is perfected by delivery of the thing subject matter of the contract Example: Deposit, Pledge, Commodatum § Solemn:That which requires compliance with certain formalities prescribed by law, such prescribed form being thereby an essential element thereof Example: Donation of real property which must be in a public instrument
- 9. STAGES IN THE LIFE OF A CONTRACT: § Preparation or 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 or Birth: Parties have come to a definite agreement or meeting of the minds regarding the subject matter or cause of the contract § Consummation or Termination: This is when the parties have performed their respective obligations and the contract may be said to have been fully accomplished or executed.
- 10. §Elements: §1. Consent §2. Object or Subject Matter §3. Cause or Consideration
- 11. CONSENT § manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. Requisites: § Legal capacity of the contracting parties § Manifestation of the conformity of the contracting parties § The parties’ conformity to the object, cause, the terms and conditions of the contract must be intelligent, spontaneous and free from all vices of consent (free and voluntary). § The said conformity must be real and not simulated or fictitious
- 12. §Requisites of a Valid Consent: §It is intelligent – There is capacity to act (Arts. 1327-1329) §It is free and voluntary - There is no vitiation of consent by reason of violence or intimidation (Art. 1330) §It is Conscious or spontaneous - There is no vitiation of consent by reason of mistake, undue influence or fraud
- 13. § Offer – a proposal made by one party to another to enter into a contract § Acceptance – manifestation by the offeree of his assent to the terms of the offer § Note: § The offer must be certain and the acceptance absolute § The acceptance of the offer must be absolute or unqualified (identical in all respects with that of the offer) § Consensual contracts are perfected from the moment there is a manifestation of concurrence between the offer and the acceptance regarding the object and the cause. § Real contracts like deposit, pledge and commodatum requires delivery of object for perfection.
- 14. VICES OF CONSENT § Mistake § Intimidation – when 1 of the contracting parties is compelled by a reasonable & well-grounded fear of an imminent & grave evil upon his person or property of his spouse, descendants or ascendants, to give his consent § Violence – when in order to wrest consent, serious or irresistible force is employed § Undue influence – when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice § Fraud – when, through insidious words or machinations of 1 of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.
- 15. Mistake § Meaning: It is the false notion of a thing or fact material to the contract § Nature: should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contact (Mistake of fact) § Mistake of law:That which arises from an ignorance of some provisions of law, or from an erroneous interpretation of its meaning, 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. § As a rule, mistake of law does not invalidate consent because “ignorance of law excuses no one from compliance therewith” (ignorantia legis neminem excusat § Exception: Mistake on a doubtful question of law or on the construction or application of law (analogous to a mistake of fact)
- 16. § OBJECT: suject matter of the contract § Kinds: may be things, rights, or services (ex. Assignment of credit, Agency) § Requisites: § It must be w/in the commerce of man (subject to commercial transactions) (1347) § It must be licit or not contrary law, morals, good customs, public order or public policy § It must be possible (1348) § It must be determinate as to its kind (Art. 1349) § It must be in existence or capable of coming into existence (Arts. 1461, 1493, 1495) Rights as object of contract: General Rule: All Rights may be the object of a contract Exceptions: Rights that may be intransmissible by their nature, by stipulation, or by provision of law (Art 1311, par 1)
- 17. CAUSE § the immediate, direct and most proximate reason which explains and justifies the creation of obligation. § Requisites § Cause should be in existence at the time of the celebration of the contract (Art 1352, 1409(3)) § Cause should be licit or lawful § Cause should be true (Art 1353)
- 18. § CLASSIFICATION OF CONTRACT ACCORDING TO CAUSE § ONEROUS: One the cause of which, for each contracting party is the prestation or promise of a thing or service by the other. Parties are reciprocally obligated § REMUNERATORY: One the cause of which is the service or benefit which is remunerated § GRATUITOUS: One the cause of which is the liberality of the benefactor or giver
- 19. Cause § Requisites § Cause should be in existence at the time of the celebration of the contract § Cause should be licit or lawful § Cause should be true § Rules: § In onerous contracts, the cause is understood to be, for each contracting party, the prestation of promise of a thing or service by the other § In remuneratory contracts, the service or benefit w/c is remunerated § In contracts of pure beneficience, the mere liberality of the benefactor
- 20. ESSENTIAL REQUISITES OF CONTRACTS CAUSE EFFECT 1. Absence of cause (there is total lack of any valid consideration) the contract confers no right and produces no legal effect 2. Failure of cause ( there is sufficient cause at the beginning but ceased to be so. ex.1169 par 3 ) does not render the contract void 3. Illegality of cause (there is cause but the same is unlawful) the contract is null and void 4. Falsity of cause (contract states a valid consideration but the same is not true) the contract is void, unless the parties show that there is another cause which is true and lawful 5. Lesion (any damage caused by the fact that the price is unjust or inadequate) does not invalidate the contract, unless (1) there is fraud, mistake or undue influence; or (2) when the parties intended a donation or some other contract
- 21. § FORM OF CONTRACT: Refers to the manner in which a contract is executed or manifested. § GENERAL RULE: Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present.
- 22. § EXCEPTIONS: § When the law requires that a contract be in some form in order that it may be valid § When the law requires that a contract be in some form in order that it may be enforceable § For the convenience of the parties (Art 1356) Note: § Parties may compel each other to comply with the form required once the contract has been perfected. (Art 1357)