CONTRACTS

definition of contracts
stages/phases of contracts
elements of contract/requisites of contracts
classification of contracts
characteristics of contracts
defective contracts

MEMBERS:
Rea Janine Estabillo Joyel
Ramon Ribas
Gerimae Agcaoili Necesito
Mabel Enriquez Galas
Micah Javier
Ma. Victoria Nicole Rodil
Carla Fatima Fernando
Angelica Almiraez

CE195/C3I. Definition of Contract

Definition
The meeting of minds between two contracting parties which takes places when
an offer by one party is accepted by the other.
In a contract, one or more person bind himself with respect to another to the
fulfilment of a prestation to give, to do or not to do.
In a contract, there must be at least two persons or parties, because it is impossible
for one to contract with himself.
Civil Code
ART. 1305.

A contract is a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service. (1254a)
Causes of Contract
The cause of contracts is also important, because it determines why the contract takes
place and how important is the contract
In tedious contracts the cause is understood to be, for each contracting party, the promise
of a thing or service by the other
Causes of Contract
Remunerators - the service or benefit which is remunerated
Contracts of pure beneficence - the mere liberality of the benefactor
Causes of Contract
Contracts without cause, or with unlawful cause, produce no effect whatever
The cause is unlawful if it is contrary to law, morals, good customs, public order or
public policy

II.STAGES OF CONTRACT
Preparation or Conception Stage
-this 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 Stage- this is when the parties have come to a definite agreement or meeting of the minds regarding
the subject matter and cause of the contract (Art 1319) upon concurrence of the essential elements
thereof.
Consummation or Termination Stage
- 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 the extinguishment or termination
thereof.
Examples:
(1) S offers to sell the car to B for Php 200,000.00. B asks S to show him the car. Later, S brings the
car and shows it to B. B offers to pay Php 160,000.00.
(2) Now, if S agrees to sell the car for php 160,000.00 , the contract is perfected because there is the
meeting of the minds upon the subject matter and the cause of the contract.
(3) The contract will be consummated after S delivers the car to B and B pays Php 160,000.00 .
How contracts are perfected
Consensual Contracts
-as a general rule, contracts are perfected by mere consent of the parties regarding the subject
matter and the cause of the contract (Arts. 1315,1319).They are obligatory in whatever form they may
have been entered into, provided all the essential requisites for their validity are present (Art.1356).
Almost all contracts are consensual as to its perfection by mutual consent, even if the subject matter or the
consideration has not been delivered.
- in the absence of delivery, perfection does not transfer title or create real right, yet, it gives rise
to obligations binding upon both parties (Arts. 1305,1308).
Example:
Today S and B enter into a contract whereby S bind himself to sell his car to B for Php.
200,000.00

The contract is deemed perfected although there is as yet no delivery of the car and payment of
the price. Both parties acquire the right to demand from the other the fulfilment of his obligations to
deliver the car on the part of S, and to pay the amount of Php 200,000.00 on the part of B.
Real Contracts
the exceptions are the so-called real contracts which are perfect not merely by consent but by the
delivery, actual or constructive, of the object of the obligation (Art.1316). These contracts have for their
purpose restitution because they contemplate the return by a party of what has been received from
another.
Example:
D borrowed from C Php. 5,000.00. As security for the debt, D promised to pledge his diamond
ring to C.
Before the delivery of the ring to C, the contract of pledge is not yet perfected.
If D later on refuses to pledge the ring, C can demand the payment of the obligation although it is
with a period (Art. 1198[2]). But C cannot require D to deliver the ring as the security because there is no
real contract of pledge yet. There is merely a consensual contract to constitute a pledge. What exists is a
personal right, the right of action on the part of C to demand the constitution of the pledge (see Art. 2092)
Solemn Contracts
When the law requires that a contract be in some form to be valid (Art.1356). This special form is
necessary for its perfection. Thus, a donation of real property cannot be perfected until it is embodied in a
public instrument (Art. 749).
Effect of the perfection of contract
(1) Fullfillment of what has been expressly stipulated but also,
(2) To all the consequences which according to their nature, may be in keeping with good faith, usage and
law ( Art. 1315)
Example:
1. S sold a horse to B for Php.15,000.00. The details of this contract as regards the place of delivery
of the horse, the payment of the price, the time of delivery and payment etc. are not included.
These details are furnished by law and have been taken up in the various provisions of the Code.
2. S agreed to sell his horse to B. It was stipulated that S should deliver the horse to B the next day.
Article 1317
No one may contract in the name of another without being authorized by the latter or unless he
has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed, before it is revoked by the other
contracting party. (1259a)

III. ELEMENTS OF CONTRACT

Essential Elements
Natural Elements
Accidental Elements
ESSENTIAL ELEMENTS - those elements without which there can be no valid contract.
This element are consent, object or subject matter and cause or consideration.
NATURAL ELEMENTS - those elements which are found in a contract by its nature
and presumed by law to exist, such as Warranty of hidden defects or eviction in
contract of sale.

ACCIDENTAL ELEMENTS - those which exist by virtue of an agreement for the

purpose of expanding, limiting, or modifying a contract. Such accidental elements
are condition, clause, terms, modes of payment, or penalties.

IV.CLASSIFICATION

According to Perfection
According to Dependence to other contract
According to Name or designation
According to Nature of obligation
According to Risk involved
According to Cause
According to Form
ACCORDING TO PERFECTION
Consensual
perfected by mere consent of the parties without need of other formalities
Contracts of sale & partnership
Article 1315. 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 the consequences
which, according to their nature, may be keeping with good faith, usage and law.
For example in a contract of sale, it is perfected from the moment the seller and the buyer agree that the
buyer will take a particular item in exchange for a certain price.
ACCORDING TO PERFECTION
Real
require not only the consent of the parties, but also the delivery of the object of
the contract
Deposit, pledge
Article 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the
delivery of the object of the obligation.
ACCORDING TO DEPENDENCE TO OTHER CONTRACT
Principal
exist independently from other contracts
Contracts of lease & sale
Accessory
those which cannot exist without another prior contract
Contracts of Mortgage, pledge of guaranty
Preparatory
Those which is created in order a future transaction or contract may be
entered into by the parties
Contracts of Partnership
ACCORDING TO NAME OR DESIGNATION
Nominate
one with a particular name or designation
purchase and sale, hiring, partnership, loan for use,
deposit
Innominate
not classifiable under any particular name
ACCORDING TO THE NATURE OF OBLIGATION
Unilateral
where only one has an obligation to perform

Contract of donation

Bilateral

where both parties have reciprocal obligation to perform

sale
ACCORDING TO RISK INVOLVED
Commutative
where there is an exchange of values such as lease
Aleatory
A mutual agreement between two parties in which the performance of th
e contractual obligations of one or both parties depends upon a
fortuitous event.
Contract of insurance
ACCORDING TO CAUSE
Onerous
one which imposes valuable consideration
Sale, mortgage
Gratuitous
one which one of the parties does not receive any valuable consideration.
Commodatum
ACCORDING TO FORM
Imformal or Common
one which may be entered into in whatever form provided all the
essential requisites for their validity are present. May be oral or written.
Formal or Solemn
one which is required by law for its efficacy to be in a certain specified
form.

V.Characteristics of Contract
CHARACTERISTICS OF CONTRACT :
Freedom to act
Relativity
Obligatory force
Mutuality
FREEDOM TO ACT :
Contracts may establish terms and conditions in a convenient way for the contracting
parties
However the stipulations in the said contract must not be contrary to law, public order or
public.policy.
RELATIVITY
Contracts are relative and binding only upon the parties and their successors
This is supported by Art 1178. According to this, a party's rights and obligations derived
from a contract are transmissible to their successors
In Article 1311, it is said that contracts take effect knly between the parties, their heirs
and assigns and only they have the rights and obligations under the contracf.
OBLIGATORY FORCE The terms and conditions stated in the con9tract constitute to the law as between the
parties

 According to the Constitution, one of the rughts of a citizen is thr non-impairment of

contracts. In this, the law guarantees that the stipulations in the contracts will prosper
abive what is required by anything else (but still subject to limitations: police power)
MUTUALITY According to Art. 1308, the contract must bind both contracting parties, its validity or
compliance cannot be left to the willl of one of them.
EXAMPLE OF MUTUALITY

X agreed to sell his car to Y for Php 100 000.

In this, Y's obligation is to pay 100,000.

For X, his obligation is to give the car to Y upon payment.
Kinds of Contract
Express
Implied In Fact
Implied In Law (Quasi-Contract)
Unilateral-Bilateral Distinction
EXPRESS- An express contract is formed by written or oral language
IMPLIED IN FACT- An implied-in-fact contract is manifested by the actions of the
parties, although it is not explicitly written or stated.

Example: plunking down 50 cents at a newsstand and taking a paper.

IMPLIED IN LAW (QUASI-CONTRACT)
A quasi-contract is a recovery or obligation that is not created by an actual agreement, but by
the law for reasons of justice. It is not an actual contract negotiated by the parties.
Example: The obligation to return money paid by mistake or which is not due as it is an
unjust enrichment on the part of the receiver.
UNILATERAL-BILATERAL DISTINCTION
Unilateral Contract
A unilateral contract is one in which a promise is made in exchange for actual performance,
as opposed to a promise to perform.
Example: A promises to pay B $100 if B paints As home. A has not asked B for a promise to
paint, but rather to actually paint

VI. DEFECTIVE CONTRACTS

Contracts that lack the certain elements or requisites.
4 KINDS OF DEFECTIVE CONTRACTS:
- Rescissible (Chapter 6)
- Voidable (Chapter 7)

- Unenforceable (Chapter 8)
- Void or Inexistent (Chapter 9)
RESCISSIBLE CONTRACTS
(1)Declaration or clearly communicated intention by a party where its right to terminate (rescind) is
exercised
(2)It is an irrevocable step that frees the other party as well from its contractual obligations, as if the
contract never existed.
(2)Rescission may be on mutual consent, by an act of law, or by either party for reasonable cause such as
a material misrepresentation.
The following contracts are rescissible:
(1) Entered into by guardian whenever ward suffers damage more than of value of property.
(2) Agreed upon in representation of absentees, if absentee suffers lesion by more than of value of
property.
* lesion refers to loss from another's failure to perform contract
(3)Contracts where rescission is based on fraud committed on creditor.
* Fraud is a deception deliberately practiced in order to secure unfair or unlawful gain
(4)Objects of litigation; contract entered into by defendant without knowledge or approval of litigants or
judicial authority.
* Litigation is an action brought in court to enforce a particular right.
VOIDABLE CONTRACTS
The following contracts are voidable or annullable, even though there may have been no damage
to the contracting parties:
1. Those where one of the parties is incapable of giving consent to a contract.
* Consent is to voluntary agree to an act or proposal of another in the contract
2. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
* Vitiate is to destroy or annul
UNENFORCEABLE CONTRACTS
A contract is said to be unenforceable when it cannot be sued upon or enforced in court unless it
is ratified.
* Ratification is the confirmation or adoption of an act that has already been performed.
The following contracts are unenforceable, unless they are ratified:
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.
Those that do not comply with the Statute of Frauds.
* The statute of frauds refers to the requirement that certain kinds of contracts be memorialized
in a writing, signed by the party to be charged, with sufficient content to evidence the contract
Those where both parties are incapable of giving consent to a contract
VOID OR INEXISTENT CONTRACTS
The following contracts are inexistence and void from the beginning:
Those whose cause, object or purpose is contrary to law, morals, good customs, public order or
policy.
Those expressly prohibited or declared void by law
Those whose cause or object did not exist at time of the transaction.
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 which are absolutely simulated or fictitious.
Those whose object is outside the commerce of men