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CONTRACT meeting of minds between 2 persons to give

something or to render service.


3 ELEMENTS OF CONTRACT
1. ESSENTIAL w/o them, contract cannot exist
a. CONSENT of contracting parties
b. OBJECT CERTAIN subject matter
c. CAUSE/CONSIDERATION
In some contracts, ff are also essential:
d. FORM
e. DELIVERY
2. NATURAL found in certain contract, presumed to exist
unless stipulated
3. ACCIDENTAL various particular stipulations that may
be agreed upon by contracting parties
(7) CLASSIFICATION OF CONTRACTS
According to:
1. PERFECTION/FORMATION
a. CONSENSUAL perfected by mere consent
b. REAL perfected by delivery
c. FORMAL/SOLEMN special formalities are essential
before perfection of contract
2. PARTIES OBLIGATED
a. UNILATERAL only 1 has obligation
b. BILATERAL both parties require
reciprocal prestations

to

render

3. CAUSE
a. ONEROUS exchange of considerations
b. GRATUITOUS no consideration received in exchange
of what is given
c. REMUNERATORY
something
is
given
for
benefit/service that had been rendered previously
4. RISK OF FULFILLMENT
a. COMMUTATIVE equivalent values are given by both
parties
b. ALEATORY fulfillment of contract depends on
chance (eg. insurance)
5. IMPORTANCE
a. PRINCIPAL contract may stand alone (eg. sale,
partnership)
b. ACCESSORY existence depends on another contract
(pledge, guarantee)
c. PREPARATORY contract not an end by itself but a
means thru w/c other contracts may be made (eg. agency)
6. NAME
a. NOMINATE contract given a particular/special name
(eg. partnership)
b. INNOMINATE not given special name (eg. I give that
you may give)
7. SUBJECT MATTER
a. Contracts involving things
b. Contracts involving rights/credits
c. Contracts involving services

3 STAGES OF CONTRACT
1. PREPARATION/CONCEPTION preparatory steps to
perfect contract
2. PERFECTION/BIRTH meeting of minds between 2
contracting parties
3. CONSUMMATION/TERMINATION terms of contract are
performed, & contract is fully executed
5 BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT
1. PRINCIPLE OF AUTONOMY (liberty to contract)
Provided they are not contrary to:
a. Law
b. Morals
c. Good customs
d. Public order
e. Public policy
2. MUTUALITY OF CONTRACTS
- the contract must bind both parties; its
validity/compliance cannot be left to the will of one of
them
3. RELATIVITY OF CONTRACTS
- Contracts take effect only between the parties, their
assigns & heirs except when there are rights & obligations
not transmissible:
a. by their nature
b. by stipulation (stipulation por autri)
c. by provision of law
4. CONSENSUALITY OF CONTRACTS
- Contracts are perfected by mere consent
Exceptions:
a. REAL CONTRACTS perfected by delivery
b. FORMAL/SOLEMN CONTRACTS special form required
for its perfection
5. OBLIGATORINESS OF CONTRACTS
- The contract, once perfected, has the force of law
between parties which bound to comply in good faith
4 KINDS OF INNOMINATE CONTRACTS
1. I give that you may give
2. I do that you may do
3. I give that you may do
4. I do that you may give
4 RULES FOR INNOMINATE CONTRACTS
1. Agreement of parties
2. Law on Obligations & Contracts
3. Rules on most analogous nominate contract
4. Customs of place
STIPULATION POR AUTRI
- stipulation in favor of 3rd person
5 REQUISITES OF STIPULATION POR AUTRI
1. Stipulation in favor of 3rd person
2. Stipulation is only PART, not the whole of the contract.
3. Both parties must conferred upon a favor of 3rd person
4. 3rd person must accept & say it to debtor before its
revocation/cancellation

5.
Neither
of
both
parties
be
representation/autho-rization of 3rd person

the

legal

CONSENT
- meeting of offer (certain) & acceptance (absolute) upon
a thing
5 REQUISITES OF CONSENT
1. Must be given by 2 or more parties
2. Parties are capacitate to enter in contract
3. No vitiation of consent
4. No conflict between declared & intended
5. Legal formalities must be complied
7 RULES ON OFFER/ACEPTANCE
1. An offer must be certain.
2. Business advertisements for sale are NOT offers but
ONLY invitations to make an offer.
3. Advertisements for bidders are ONLY invitations.
4. An acceptance made by letter/telegram does NOT
bind offeror EXCEPT from the TIME it came to his
knowledge.
5. An offer made through an agent is accepted from the
TIME the acceptance is done through an agent.
6. An offer is ineffective upon death, insanity, insolvency,
of EITHER party BEFORE acceptance is made.
7.
When offeror allowed offeree a
certain
period
to accept, offer MAY be withdrawn AT ANYTIME unless
there is something PAID/PROMISED.
3 persons who CANNOT GIVE CONSENT to a contract (if
entered into, contract is voidable)
1. UNEMANCIPATED MINORS
2. INSANE/DEMENTED PERSONS (unless they acted DURING
LUCID INTERVAL)
3. DEAF-MUTES who DO NOT know how to write
DEMENTED PERSON NOT exactly insane; difficult to
distinguish right from wrong
LUCID INTERVAL period when an INSANE has acquired
SANITY temporarily, therefore, capacitated to enter into a
valid contract
2 RULES on persons WHO CANNOT GIVE CONSENT to a
contract
1. Age of majority is 18 yrs old
2. A contract entered into by UNEMANCIPATED MINOR w/o
parents/guardians consent is voidable, except:
a. Minor MISREPRESENTS his age (estoppel)
b. Contract involves sale & delivery of necessities to
minor
5 VICES OF CONSENT
- NOTE: When there is a DEFECTIVE CONSENT of EITHER of
parties, contract is voidable; Remedy:annulment of
contract.
1. MISTAKE/ERROR
2. FRAUD/DECEIT
3. VIOLENECE
4. INTIMIDATION
5. UNDUE INFLUENCE

1. MISTAKE/ERROR
- wrong conception & lack of knowledge upon a thing
(2) MISTAKES W/C VITIATES CONSENT
It should refer to:
1. substance of thing that is the OBJECT of contract
2. conditions w/c MOVED either/both parties to enter into
contract
4 RULES ON MISTAKE
1. Mistake to identity/qualifications of either of parties
will vitiate consent ONLY when IT is theprincipal cause of
contract.
2. Simple mistake of account must be corrected.
3. No mistake if parties knew the risk/doubt affecting
OBJECT of contract.
4. When one of parties is unable to read or the contract is
in language not understood by him, & mistake/fraud is
alleged, the person enforcing the contract must FULLY
explained the terms to him.
2. FRAUD/DOLO
- when through insidious words/machinations of one of the
parties, INDUCED the other to enter into a contract, & w/o
them, he will not agree.

DOLO CAUSANTE
DOLO INCIDENTE
Serious
Not serious
cause induces party to NOT the cause to enter
ENTER into contract
into contract
make contract voidable
contract is valid; liable
fordamages
7 RULES OF FRAUD
1. Failure to disclose facts when these needs to be
revealed, is a fraud.
2. Fraud should be SERIOUS (dolo causante) & SHOULD NOT
be done by BOTH parties to make contractvoidable.
3. Incidental fraud (dolo incidente) ONLY obliges person to
PAY DAMAGES.
4. Usual exaggerations in trade, when other party know
the real facts, is NOT FRAUD.
5. A mere expression of opinion is NOT FRAUD UNLESS
made by an expert & the other party relies onhis special
knowledge.
6. Misrepresentation made in good faith is NOT FRAUD but
may constitute an error.
7. Misrepresentation by 3rd person DOES NOT vitiate
consent UNLESS it created substantial mistake.
3. VIOLENCE
- serious/irresistible force is employed.
2 RULES ON VIOLENCE
1. Serious/irresistible force is employed w/c constitutes
the reason why one entered into a contract.
2. Violence ANNULS obligation although it is DONE by
3rd person not part of contract.
4. INTIMIDATION

- 1 of the parties is compelled by a reasonable & wellgrounded fear of an imminent & grave evil upon his
person/property to give his consent.
3 RULES ON INTIMIDATION
1. Age, sex, & condition of person must used to determine
the degree of intimidation.
2. Intimidation ANNULS obligation although it is DONE by
3rd person not part of contract.
3. A threat to enforce ones claim (claim must be just &
legal), DOES NOT vitiate consent.

VIOLENCE
External
Physical contact/coercion

INTIMIDATION
Internal
NO physical coercion;
ONLY MENTAL/MORAL
coercion

5. UNDUE INFLUENCE
- a person takes improper advantage of his power over
others will, depriving the other to hisreasonable freedom
of choice.
3 RULES ON UNDUE INFLUENCE
1. There is a person who takes improper advantage of his
power over others will, depriving the other to
his reasonable freedom of choice.
2. Undue influence ANNULS obligation although it is DONE
by 3rd person not part of contract.
3. To constitute undue influence, ff circumstances must be
considered: (1) confidential, family, spiritual, & other
relations of parties; or (2) the aggrieved party is suffering
from mental weakness; or (3) ignorant; or (4) in financial
distress.
SIMULATION OF CONTRACT
- process of INTENTIONALLY deceiving others by producing
a contract not really exist (absolute simulation), or w/c is
different from true agreement (relative simulation).
2 KINDS OF SIMULATED CONTRACT
1. ABSOLUTE SIMULATION (the parties DO NOT intend to
be bound at all)
- completely fictitious/make-believe; VOID
2. RELATIVE SIMULATION (parties conceal their true/real
agreement)
- parties are bound to real/true agreement, EXCEPT:
a. contract prejudice 3rd person
b. purpose is contrary to law, morals, good customs,
public order, public policy
7 REQUISITES OF OBJECT OF CONTRACT
1. Specific & certain
2. Services not contrary to law, morals, good customs,
public order, public policy
3. Services/things must NOT be legally/physically
impossible
4. Services/things are w/in commerce of man including
future things
5. Rights are NOT TRANSMISSIBLE.
6. Determinate (kind) or determinable ( w/o the need of
new contract/agreement)

7. NO contract be entered for future inheritance UNLESS


law states
4 REQUISITES OF CAUSE
1. It is just & equitable.
2. It exists.
3. It is lawful.
4. It is true.
LESION
- inadequacy of cause (eg. insufficient price for thing sold)
RULES ON LESION
- Lesion DOES NOT invalidate contract, except there is:
a. Fraud
b. Mistake
c. Undue influence
2 FORM OF CONTRACTS
1. Contracts in writing
2. Contracts in a public instrument
1. Contracts w/c must be IN WRITING to be valid:
a. Donation of personal property exceeds P5000.
b. Agents authority in sale of land/any interest.
c. Contract of antichresis.
d Stipulation to pay interest on loans.
e.
Stipulation
to
reduce
common
carriers
extraordinary diligence & to limit its liability.
2. Contracts w/c must be IN A PUBLIC INSTRUMENT to be
valid:
a. Donation of real property (both the donation &
accep-tance).
b. Sale of real property.
c. Partnership where real property/rights is
contributed; or when capital contribution exceeds P3000.
REFORMATION OF INSTRUMENTS
- REMEDY in equity in w/c a written instrument is
made/construed to the REAL intention of parties when
there is an error/mistake.
(5) CASES REFORMATION OF INSTRUMENT IS AVAILABLE
1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.
3. One party was mistaken & the other knew/believed that
the instrument did not state their REAL agreement.
4. Ignorance, lack of skill, negligence, or bad faith of
person drafting the instrument DOES NOT state the TRUE
INTENTION of parties
5. Two parties agree on mortgage/pledge of personal/real
property BUT the instrument states the property is sold
ABSOLUTELY, or w/ the right to repurchase.
(3) NO REFORMATION OF INSTRUMENT WHEN:
1. Simple donation inter vivos where NO CONDITION is
imposed.
2. Will.
3. Real agreement is VOID.
4 KINDS OF DEFECTIVE CONTRACTS

1. RESCISSIBLE valid until rescinded; has ALL essential


requisites but because of injury/damage to one of the
parties, the contract may be rescinded.
2. VOIDABLE valid until annulled; has ALL essential
requisites but because of defect in consent, contract may
be annulled.
3. UNENFORCEABLE cannot be sued/enforced unless
ratified; no effect NOW but may take effect upon
ratification.
4. VOID NO effect at all; cannot be ratified/validated.
5 RESCISSIBLE CONTRACTS
1. Those entered by guardians & suffered LESION by more
than of value of the value that is the OBJECT.
2. Those agreed upon in representation of absentees, if
the absentees suffered LESION.
3. Those undertaken in FRAUD of creditors when the
creditors cannot further claim.
4. If entered into contract w/o knowledge/approval of
litigants under litigation.
5. Contracts subjected to rescission declared by law.

3 VOIDABLE CONTRACTS
1. One of the parties INCAPABLE of giving consent to a
contract.

2. Those where consent vitiates by vices of consent.


(MFVIU)
3. Those agreed in the state of drunkenness/hypnotic
spell.
3 UNENFORCEABLE CONTRACTS
1. Those entered in name of other person, or who acted
BEYOND his powers.
2. Those who do not comply w/ the Statute of Frauds.
3. Both parties are incapable of giving consent to a
contract.
7 VOID/INEXISTENT CONTRACTS
1. Those w/c are ABSOLUTELY simulated/fictitious.
2. Those w/c contemplate an impossible service.
3. Those whose OBJECT is outside the commerce of man.
4. Those whose CAUSE/OBJECT did not exist at time of
tran-saction.
5. Those whose CAUSE/OBJECT/PURPOSE is contrary to
law, morals, good customs, public order, or public policy.
6. Those where INTENTION of parties to principal object
CANNOT be ascertained.
7. Those expressly prohibited/declared VOID by law.