CONTRACTS Flashcards
What is a contract?
- 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.
Requisites of a contract
Cause, Object and Consent
OTHER ELEMENTS OR PROVISIONS OF A VALID CONTRACT:
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
What is the general rule for default rules in a contract with regard to the parties?
Parties may opt out of the default rules/laws by stipulation.
What is the xpn?
They cannot stipulate to opt out of mandatory laws.
STAGES OF A CONTRACT:
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
KINDS OF CONTRACTS BASED ON MODE OF PERFECTION;
CONSENSUAL CONTRACT and REAL CONTRACT
What is a consensual contract?
Perfected as soon as the parties agree at least on the object and the cause thereof
What is a real contract?
Perfected only upon delivery of the object thereof
What are examples?
Loan, contract of pledge (collaterals), and contract of deposit
What stage of the contract will interest accrue in a loan contract?
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
What is the obligatory force of a contract?
Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (Consent)
MUTUALITY OF CONTRACTS
The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.
AUTONOMY OF CONTRACTS
“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.”
RELATIVITY OF CONTRACTS
“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.”
What is an escalation clause?
Stipulation allowing the periodic adjustment of the interest rate agreed upon by the contracting parties
What are the requirements?
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
Is a non compete clause valid?
Valid as long as reasonably limited in application as to time, trade and place.
What are the limitations?
Not unduly deprive the employee of work and it cannot be perpetual.
What are INNOMINATE CONTRACTS?
Contracts that do not fall under the specific categories of contracts under the Civil Code
What is the limitation?
parties are free to stipulate anything as long as they do not violate the law.
What are the exceptions to the relativity of contracts?
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
What is the purpose of the exceptions?
Third party may have a right or liability under the contract even if they weren’t privy to the contract.
Requisites of STIPULATION POUR AUTRUI
- 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.
How must a stipulation pour autrui be accepted?
No requirement, may be done impliedly.
Requisites of Accion Paulianna
- 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
TORTIOUS INTERFERENCE
- 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.
Who has the burden of proof in TORTIOUS INTERFERENCE
Whoever claims the tortious interference.
How does a third party dispute a claim of her knowledge of the contact supposedly interfered with?
- 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
WHO SHOULD CONSENT
Parties who assume obligations
How
Either personally or through an agent with proper authority
What should they consent to?
At least an object and cause
HOW MAY A PARTY CONSENT TO A CONTRACT?
Express (signing) or implied (performing the obligation or signing as a witness)
PERSONS WHO CANNOT GIVE A COMPLETELY VALID CONSENT:
- 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
When is agency revoked?
The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons (Art 1294)
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?
It’s ratified
WHAT IS AN OFFER:
Unilateral proposition made by one party to another for the celebration of a contract
WHEN IS AN OFFER COMPLETE:
If it includes the object and the cause
By accepting the offer, all the essential requisites of a contract will concur.
