CONTRACTS

Question 1

What is a contract?

Answer 1

• A meeting of the minds between two persons
• One binds himself with respect to the other, to give something or render something
• Legal agreement between two or more parties whereby one party undertakes to perform a prestation in exchange for the performance by the other party of another prestation.

Question 2

Requisites of a contract

Answer 2

Cause, Object and Consent

Question 3

OTHER ELEMENTS OR PROVISIONS OF A VALID CONTRACT:

Answer 3

Those legally read into the contract or elements and provisions implied in the contract by operation of law and those agreed upon by the parties

Question 4

What is the general rule for default rules in a contract with regard to the parties?

Answer 4

Parties may opt out of the default rules/laws by stipulation.

Question 5

What is the xpn?

Answer 5

They cannot stipulate to opt out of mandatory laws.

Question 6

STAGES OF A CONTRACT:

Answer 6

Negotiation → begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of the parties agreement

Perfection → birth of the contract takes place when the parties agree (consent) upon the essential elements of the contract (cause, object)

Consummation → occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof

Question 7

KINDS OF CONTRACTS BASED ON MODE OF PERFECTION;

Answer 7

CONSENSUAL CONTRACT and REAL CONTRACT

Question 8

What is a consensual contract?

Answer 8

Perfected as soon as the parties agree at least on the object and the cause thereof

Question 9

What is a real contract?

Answer 9

Perfected only upon delivery of the object thereof

Question 10

What are examples?

Answer 10

Loan, contract of pledge (collaterals), and contract of deposit

Question 11

What stage of the contract will interest accrue in a loan contract?

Answer 11

Interest will accrue from the time of perfection of the loan contract (date of delivery not signing) because borrower has the use of the money

Question 12

What is the obligatory force of a contract?

Answer 12

Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (Consent)

Question 13

MUTUALITY OF CONTRACTS

Answer 13

The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

Question 14

AUTONOMY OF CONTRACTS

Answer 14

“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.”

Question 15

RELATIVITY OF CONTRACTS

Answer 15

“Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contracts are not transmissible by their nature, or by stipulation or by provisioning of law.”

Question 16

What is an escalation clause?

Answer 16

Stipulation allowing the periodic adjustment of the interest rate agreed upon by the contracting parties

Question 17

What are the requirements?

Answer 17

There must be a de-escalation clause → it should provide an upward or downward adjustment of the interest rate
It should not violate the mutuality of contracts

Question 18

Is a non compete clause valid?

Answer 18

Valid as long as reasonably limited in application as to time, trade and place.

Question 19

What are the limitations?

Answer 19

Not unduly deprive the employee of work and it cannot be perpetual.

Question 20

What are INNOMINATE CONTRACTS?

Answer 20

Contracts that do not fall under the specific categories of contracts under the Civil Code

Question 21

What is the limitation?

Answer 21

parties are free to stipulate anything as long as they do not violate the law.

Question 22

What are the exceptions to the relativity of contracts?

Answer 22

Stipulation Pour Autrui, Contracts creating real rights, creditor may impugn a contract entered into by the debtor to defraud the creditor and Tortious Interference by a 3rd party with a contract

Question 23

What is the purpose of the exceptions?

Answer 23

Third party may have a right or liability under the contract even if they weren’t privy to the contract.

Question 24

Requisites of STIPULATION POUR AUTRUI

Answer 24

• There is a stipulation in favor of a third person;
• The stipulation is a part, not the whole, of the contract;
• The contracting parties clearly and deliberately conferred a favor to the third person (not incidental)
• The favor is unconditional and uncompensated;
• The third person communicated his or her acceptance of the favor before its revocation; and
• The contracting parties do not represent, or are not authorized, by the third party.

Question 25

How must a stipulation pour autrui be accepted?

Answer 25

No requirement, may be done impliedly.

Question 26

Requisites of Accion Paulianna

Answer 26

• No other recourse (exhausted all efforts), but would benefit by rescission of the conveyance to the third person;
• The debtor has made a subsequent contract conveying a patrimonial benefit to a third person;
• Creditor must be a creditor prior to the conveyance or alienation sought to be rescinded.
• Act being impugned should be fraudulent
• Third party must not be in good faith/been an accomplice in fraud

Question 27

TORTIOUS INTERFERENCE

Answer 27

• Existence of a valid contract;
• Knowledge on the part of the third person of the existence of the contract; and
• Interference on the part of the third person without legal justification or excuse.

Question 28

Who has the burden of proof in TORTIOUS INTERFERENCE

Answer 28

Whoever claims the tortious interference.

Question 29

How does a third party dispute a claim of her knowledge of the contact supposedly interfered with?

Answer 29

• The third party can show that she was unaware of the contract despite the exercise of due diligence warranted by the circumstances
• The third party can show that she only (a) seeks to enforce the law, (b) performs a legal obligation or (c) lawfully exercises a right, including the threat or actual filing of a legal action

Question 30

WHO SHOULD CONSENT

Answer 30

Parties who assume obligations

Question 31

How

Answer 31

Either personally or through an agent with proper authority

Question 32

What should they consent to?

Answer 32

At least an object and cause

Question 33

HOW MAY A PARTY CONSENT TO A CONTRACT?

Answer 33

Express (signing) or implied (performing the obligation or signing as a witness)

Question 34

PERSONS WHO CANNOT GIVE A COMPLETELY VALID CONSENT:

Answer 34

• Minors or persons below 18 years of age
• Insane or demented persons
• Deaf-mutes who do not know how to write
• Persons who consented to a contract in a state of 1) drunkenness or 2) during a hypnotic spell and

Question 35

When is agency revoked?

Answer 35

The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons (Art 1294)

Question 36

When agency is revoked and the third person deals directly with the agent the sale is not valid but if the principal collects payment, what happens?

Answer 36

It’s ratified

Question 37

WHAT IS AN OFFER:

Answer 37

Unilateral proposition made by one party to another for the celebration of a contract

Question 38

WHEN IS AN OFFER COMPLETE:

Answer 38

If it includes the object and the cause
By accepting the offer, all the essential requisites of a contract will concur.