2 - CONTRACTS Flashcards
What are the two primary parties involved in a contract?
The Buyer and Seller in a sale, or the Pledgor and Pledgee in a pledge.
What are examples of scenarios involving three parties in a contract?
Scenarios involving a guarantor or a third-party beneficiary.
What are the five characteristics of a contract represented by the acronym AMRCO?
- Autonomy (Freedom)
- Mutuality
- Relativity
- Consensuality
- Obligatory Force
Describe the characteristic of “Autonomy” in contracts.
Parties are free to stipulate the contract’s terms, as long as they do not violate the law, morals, good customs, or public policy.
What is the significance of “Mutuality” in a contract?
Contracts require a mutual agreement or “meeting of the minds,” meaning that both parties are bound by the terms agreed upon.
Explain the concept of “Relativity” in contracts.
Contracts are binding only on the parties involved and their legal successors, with exceptions for third-party rights under certain conditions.
What are some exceptions to the rule of relativity in contracts?
- Stipulation Pour Autrui: Benefits a third party.
- Rights Following Property: Rights like mortgages attach to property.
- Fraud Against Creditors: Contracts that defraud creditors can be rescinded.
- Third Party Interference: Liability for a third party who induces breach of contract.
What does “Consensuality” imply in contract law?
Contracts are generally perfected by mere consent, except for real contracts, which require delivery to be perfected.
Define “Obligatory Force” in the context of contracts.
Once a contract is perfected, it binds the parties to fulfill their promises and any legal consequences arising from those promises.
What are nominate contracts?
Contracts with specific names governed by specific legal provisions, such as lease, sale, donation, and barter.
What are innominate contracts?
Unnamed contracts governed by general principles of obligations and contracts, such as “do ut facias” and “facio ut des.”
Why is “do ut des” considered a nominate contract?
It falls under barter or exchange, which is specifically recognized in contract law.
What are the three essential elements of a valid contract?
- Consent
- Object Certain
- Cause
What is required for “Consent” in a contract?
Both parties must agree to the same terms, and the offer and acceptance must be certain and absolute.
Describe “Object Certain” in a contract.
The subject matter of the contract must be specific, identifiable, and lawful; for example, selling a house is valid, while selling illegal drugs is void.
What does “Cause” refer to in a contract?
The reason or purpose for the obligation established in the contract, such as payment for goods delivered.
Are contracts generally valid regardless of their form?
Yes, unless a specific form is required by law for validity, enforceability, or to bind third parties.
What is an example of a contract that requires a specific form for validity?
A donation of real property must be in writing and notarized.
What is necessary for a sale of real property to be enforceable in court?
It must be in writing; however, oral agreements are not inherently invalid.
Why might a pledge need to be in a public instrument?
To affect third parties and provide public notice of the pledge.
What happens if a donation is made orally?
Parties can compel compliance with the required form unless the donation is inherently invalid.
What is the definition of reformation in contract law?
Reformation allows for the correction of written terms in a contract to reflect the true agreement of the parties when the documentation does not express their real intent.
What are the requisites for reformation of a contract?
- There was a meeting of the minds.
- The true intention is not reflected due to mistakes, fraud, inequity, or accidents.
What types of contracts cannot be reformed?
- Void contracts (no valid agreement exists).
- Gratuitous contracts like wills (cannot clarify intentions post-death).
Give an example of a situation where reformation cannot be applied.
If Seller (S) sells to Buyer (B) for ₱1M, but Buyer mistakenly believes the price is ₱100K, there is no meeting of the minds, and therefore, reformation cannot be applied—annulment is the remedy.
What are rescissible contracts?
Valid contracts that can be annulled if they cause material damage to one party or a third party.
What are the key examples of rescissible contracts?
- Guardian-Ward Contracts (lesion of more than 1/4).
- Contracts Representing Insane Persons (damages demonstrated).
- Contracts Representing Absentees (lesion of more than 1/4).
- Fraud Against Creditors (alienation of property).
- Contracts Involving Litigated Property (made without court approval).
What is the prescriptive period for rescissible contracts?
Generally, within 4 years from the termination of incapacity or knowledge of the lesion.
Define voidable contracts.
Valid contracts that remain effective until annulled due to vitiated consent (e.g., fraud, mistake, undue influence).
What are unenforceable contracts?
Contracts that cannot be enforced due to lack of necessary form or authority.
What defines void contracts?
These contracts are invalid from the beginning and cannot be ratified.
How should multiple types of defects in a contract be treated?
The more defective status should be chosen; for instance, if a contract is both voidable and void, it is treated as void.
What remedies are typically available for rescissible contracts?
Rescission is a subsidiary remedy; if the principal remedy (such as damages) fails, rescission can be sought.
