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A contract is a voluntary arrangement between two or more parties that is enforceable

by law as a binding legal agreement. Contract is a branch of the law of obligations in


jurisdictions of the civil law tradition. Contract law concerns the rights and duties that
arise from agreements.

A contract arises when the parties agree that there is an agreement. Formation of a
contract generally requires an offer, acceptance, consideration, and a mutual intent to
be bound. Each party to a contract must have capacity to enter the agreement. Minors,
intoxicated persons, and those under a mental affliction may have insufficient capacity
to enter a contract. Some types of contracts may require formalities, such as a
memorialization in writing.

A contract is a legally binding or valid agreement between two parties. The law will
consider a contract to be valid if the agreement contains all of the following elements:

1. offer and acceptance;

2. an intention between the parties to create binding relations;

3. consideration to be paid for the promise made;

4. legal capacity of the parties to act;

5. genuine consent of the parties; and

6. legality of the agreement.

An agreement that lacks one or more of the elements listed above is not a valid
contract.

Contracts
See also: Contract

A contract can be broadly defined as an agreement that is enforceable at


law. Gaius classified contracts into four categories which are: contracts consensu,
verbal contracts, contracts re, and contracts litteris. But this classification cannot cover
all the contracts, such as pacts and innominate contracts; thus, it is no longer used.

Quasi-contracts

Quasi-contract is one of the four categories of obligation in Justinian's classification. The


main cases are negotiorum gestio (conducting of another person's affairs without their
authorisation), unjust enrichment, and solutio indebiti.
Quasi-delicts

The designation comprised a group of actions of no obvious similarity, classified7 by


Justinian as analogous to delictual obligations. It includes res suspensae, things poured
or thrown, shippers/innkeepers/stablekeepers, and erring judges.

Subject matter

Obligations are classified according to the nature of the performance (prestation):

real obligations - undertakings to give or deliver property, possession, or


enjoyment

specific real obligation - delivery of a determinate thing when it is


particularly designated or physically separated from all others of the same class

generic real obligation - delivery of a generic thing

personal obligations - undertakings either to do or not do all kinds of work or


service

positive personal obligation - performance

negative personal obligation - forbearance

Essential Requisites of Contracts

1. Chapter 2ESSENTIAL REQUISITES OF CONTRACTSGENERAL PROVISIONS

2. Article 1318.There is no contract unless thefollowing requisites concur:(1) Consent of


the contracting parties;(2) Object certain which is the subjectmatter of the contract;(3)
Cause of the obligation which isestablished. (1261)

3. Article 1319.Consent is manifested by the meeting of theoffer and the acceptance


upon the thing andthe cause which are to constitute the contract.The offer must be
certain and the acceptanceabsolute. A qualified acceptance constitutes acounter-
offer.Acceptance made by letter or telegram doesnot bind the offerer except from the
time itcame to his knowledge. The contract, in such acase, is presumed to have been
entered into inthe place where the offer was made. (1262a)

4. Article 1320.An acceptance may be express orimplied. (n)


5. Article 1321.The person making the offer may fixthe time, place, and manner
ofacceptance, all of which must becomplied with. (n)

6. Article 1322.An offer made through an agent isaccepted from the time acceptanceis
communicated to him. (n)

7. Article 1323.An offer becomes ineffective upon thedeath, civil interdiction, insanity,
orinsolvency of either party beforeacceptance is conveyed. (n)

8. Article 1324.When the offerer has allowed the offereea certain period to accept, the
offer maybe withdrawn at any time beforeacceptance by communicating
suchwithdrawal, except when the option isfounded upon a consideration, assomething
paid or promised. (n)

9. Article 1325.Unless it appears otherwise, businessadvertisements of things for sale


are notdefinite offers, but mere invitations tomake an offer. (n)

10. Article 1326.Advertisements for bidders are simplyinvitations to make proposals,


and theadvertiser is not bound to accept thehighest or lowest bidder, unless thecontrary
appears. (n)

11. Article 1327.The following cannot give consent to acontract:(1) Unemancipated


minors;(2) Insane or demented persons, anddeaf-mutes who do not know how towrite.
(1263a)

12. Article 1328.Contracts entered into during alucid interval are valid. Contractsagreed
to in a state ofdrunkenness or during a hypnoticspell are voidable. (n)

13. Article 1329.The incapacity declared in Article 1327is subject to the


modificationsdetermined by law, and is understoodto be without prejudice to
specialdisqualifications established in thelaws. (1264)

14. Article 1330.A contract where consent is giventhrough mistake,


violence,intimidation, undue influence, orfraud is voidable. (1265a)

15. Article 1331.In order that mistake may invalidateconsent, it should refer to the
substance ofthe thing which is the object of the contract,or to those conditions which
have principallymoved one or both parties to enter into thecontract.Mistake as to the
identity or qualifications ofone of the parties will vitiate consent onlywhen such identity
or qualifications havebeen the principal cause of the contract.A simple mistake of
account shall give rise toits correction. (1266a)

16. Article 1332.When one of the parties is unable toread, or if the contract is in
alanguage not understood by him, andmistake or fraud is alleged, the personenforcing
the contract must show thatthe terms thereof have been fullyexplained to the former. (n)
17. Article 1333.There is no mistake if the partyalleging it knew the doubt,contingency or
risk affecting the objectof the contract. (n)

18. Article 1334.Mutual error as to the legal effect ofan agreement when the real
purposeof the parties is frustrated, may vitiateconsent. (n)

19. Article 1335.There is violence when in order to wrest consent,serious or irresistible


force is employed.There is intimidation when one of the contractingparties is compelled
by a reasonable and well-grounded fear of an imminent and grave evil uponhis person
or property, or upon the person orproperty of his spouse, descendants or ascendants,to
give his consent.To determine the degree of intimidation, the age, sexand condition of
the person shall be borne in mind.A threat to enforce ones claim through
competentauthority, if the claim is just or legal, does notvitiate consent. (1267a)

20. Article 1336.Violence or intimidation shall annulthe obligation, although it mayhave


been employed by a thirdperson who did not take part in thecontract. (1268)

21. Article 1337.There is undue influence when a persontakes improper advantage of


his power overthe will of another, depriving the latter of areasonable freedom of choice.
The followingcircumstances shall be considered: theconfidential, family, spiritual and
otherrelations between the parties, or the fact thatthe person alleged to have been
undulyinfluenced was suffering from mentalweakness, or was ignorant or in
financialdistress. (n)

22. Article 1338.There is fraud when, throughinsidious words or machinations ofone of


the contracting parties, theother is induced to enter into acontract which, without them,
hewould not have agreed to. (1269)

23. Article 1339.Failure to disclose facts, whenthere is a duty to reveal them, aswhen
the parties are bound byconfidential relations, constitutesfraud. (n)

24. Article 1340.The usual exaggerations in trade,when the other party had
anopportunity to know the facts, arenot in themselves fraudulent. (n)

25. Article 1341.A mere expression of an opinion doesnot signify fraud, unless made by
anexpert and the other party has relied onthe formers special knowledge. (n)

26. Art. 1342.Misrepresentation by a third persondoes not vitiate consent, unless


suchmisrepresentation has createdsubstantial mistake and the same ismutual. (n)

27. Article 1343.Misrepresentation made in good faith isnot fraudulent but may
constituteerror. (n)

28. Article 1344.In order that fraud may make acontract voidable, it should be
seriousand should not have been employed byboth contracting parties.Incidental fraud
only obliges theperson employing it to pay damages.(1270)
29. Article 1345.Simulation of a contract may beabsolute or relative. The former
takesplace when the parties do not intend tobe bound at all; the latter, when theparties
conceal their true agreement. (n)

30. Article. 1346.An absolutely simulated or fictitiouscontract is void. A


relativesimulation, when it does notprejudice a third person and is notintended for any
purpose contrary tolaw, morals, good customs, publicorder or public policy binds
theparties to their real agreement.

The law of obligations is one branch of private law under the civil law legal system and
so-called "mixed" legal systems. It is the body of rules that organizes and regulates the
rights and duties arising between individuals. The specific rights and duties are referred
to as obligations, and this area of law deals with their creation, effects, and extinction.

An obligation is a legal bond (vinculum iuris) by which one or more parties (obligants)
are bound to act or refrain from acting. An obligation thus imposes on the obligor a duty
to perform, and simultaneously creates a corresponding right to demand performance
by the obligee to whom performance is to be tendered. Obligations may be civil, which
are enforceable by action in a court of law, or natural, which imply moral duties but are
unenforceable unless the obligor consents.

Sources of obligation

Obligations arising out of the will of the parties are called voluntary, and those imposed
by operation of law are called involuntary. Sometimes these are called conventional and
obediential. The events giving rise to obligations may be further distinguished into
specified categories.

voluntary:

unilateral promise (pollicitatio) - undertaking by promisor only to perform,


not requiring the agreement of the beneficiary

contract

quasi-contract
negotiorum gestio - duty to repay someone (gestor) who has
managed the affairs or property of another who was unable

solutio indebiti - undue payment or delivery of a thing to another,


who is then obligated to return the thing

involuntary:

delicts and quasi-delicts (equivalent to the common-law tort).

unjust enrichment (condictio indebiti)

Requisites for Action for Reformation

1. There must be meeting of the minds

2. True intention is not expressed in the instrument

3. There must be clear and convincing proof there of

4. It must be brought w/in the proper prescriptive period

.5. Document must not refer to a simple unconditional donation inter vivos or to wills
or to a contract where real agreement is void.

The defective contracts

These defective contracts are arranged, presented, and regulated (Articles 1380
to 1422) in ascending order of defectiveness.

The classification has been done with a not inconsiderable amount of effort and an
attempt at thoroughness. Thus, each of these defective contracts has its own requisites
and consequences. Ideally, one would suppose, the distinctions should serve as water-
tight compartments. For the most part but not always they have functioned well in
the jurisprudence that has been laid down in the six-and-a-half decades since the
effectivity of the Code.
A rescissible contract is one, which, though possessing all the essential
requisites of contracts, has caused a particular economic damage either to one of the
contracting parties or to a third person.

A voidable contract is one in which the consent of one party is defective, either
because of want of capacity, or because consent is vitiated.

An unenforceable contract is one that, for lack of authority or of the required


writing, or for incompetence of both parties, cannot be given effect unless properly
ratified.

A void contract is one which suffers from absence of object or cause and is
therefore an absolute nullity and produces no effect.

Rescission refers to the cancellation of an agreement or contract either through mutual


agreement of the parties or for cause.

A party can rescind a contract when the other party fails to comply with his legal
obligation. This is done through judicial rescission (in court).

Applicable provision:

Art. 1191 of the Civil Code. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

The Supreme Court had the occasion to decide that judicial rescission was proper in a
case where the owner of a construction project sought to rescind its construction
contract plus damages.
The Supreme Court explained: Article 1191, is not predicated on economic prejudice to
one of the, parties but on breach of faith by one of them that violates the reciprocity
between them. and affirmed the lower courts decision in favor of the respondents.

Florido & Associates was counsel for the respondents.

(ERNESTO DEIPARINE, JR, Petitioner vs. THE HON. COURT OF APPEALS,


CESARIO CARUNGAY and ENGR. NICANOR TRINIDAD, Respondents ; G.R. No.
96643. April 23, 1993) Read the full text and syllabus of the Courts decision here.

Fraud and Negligent Misrepresentation

between negligent misrepresentation and fraudulent misrepresentation. Any form of


fraud is much more serious than dealings involving negligence. Fraudulent falsification
occurs when the instigator shows a reckless disregard for the truth of the matter. They
purposefully provide information that is false with intent to deceive and harm either their
business or another company. Negligent misrepresentation involves businesses and
individuals that claim to provide certain skills, but cannot fully follow through on their
end. The company at fault often is careless in how he or she represents the business
and it is not as intentional as fraud.
WHAT CONSTITUTES THIS TYPE OF CASE?
Under any form of contract, there are certain promises that are made and when they are
not followed through with, it can create significant turmoil. Many different situations and
issues can result in falsely representing the truth, but there are five factors that can be
involved with each, including:

1. Someone falsely represented a current or past fact

2. The person who falsely represented has no basis in fact for believing in its truth

3. The false representation was intentionally made to convince another of its "truth"

4. The other party believed the misrepresentation

5. The other party who relied on the misrepresentation suffered harm as a result

Many cases of misrepresentation can be found as "innocent" in that they had


reasonable grounds to believe what they had presented before the public. These
situations are fairly simple matters to resolve in many cases. When fraud is involved,
however, the matter becomes much more serious and the legal actions taken must be
more severe. The business lawyer you want representing your interests in this type of
case, should be skilled, knowledgeable and a proven litigator.

CASES OF FRAUD
When it comes to fraudulent activity, it can happen through a variety of mediums and
affect a wide range of individuals and corporations. It may come through mail, phone or
wire, but perhaps the most common is internet fraud. Due to the accessibility of the
internet and all of its facets, deceptive users can much more easily discover ways to
steal people's credit card information, take over identities or divert innocent people to
misleading websites. They can do all of this with clicks of a button, all while keeping
their own identity a secret.

Other instances may occur where fraud is much more blatant, especially in relation to
business contracts. When a business partner performs a breach of contract, they are
breaking a binding agreement that was set forth by both partners before entering into
business with one another. If certain actions were promised that resulted in causing
another business or individual to join into contract and then they never followed through,
it could be a matter of fraudulent inducement. In such cases, it may be difficult to prove
that the other had set forth certain promises unless they were in formal writing. A
qualified business law attorney may be able to help create a solid case to defend
businesses that has been wronged by dishonest businesses breaching their formal
contracts.
M.E LAWS
(RESEARCH)
LAW ON OBLIGATION AND
CONTRACTS

Submitted to:
Submitted by: Tesara,Thadeo D.

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