CONTRACTS Flashcards
is meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service
Contract
contract or that which has a specific name or designation in law
Nominate Contract
In a contract there must be at least _ persons or parties
2
that which has no specific name or designation in law
Innominate Contract
are those that meet all the legal requisites for the type of agreement involved and the limitations on contractual stipulation and are, therefore, legally binding
Valid Contracts
is a fundamental requirement that the contract entered into must be in accordance with, and not repugnant to, an applicable statue
Law
when there is no law in existence, the will of the parties prevail.
Police power
deal with norms of good and right conduct evolved in a community
Morals
consists of habits and practices which through long usage have been followed and enforced by society or some part of it as binding rules of conduct.
Customs
refers to the principally to public safety although it has been considered to mean also the public weal
Public Order
is broader that the public order, as the former may refer not only to public safety but also to considerations which are moved by the common good
Public Policy
Hypothetical case: A entered into a contract whereby A binds himself to slap his mother in consideration of P10,000 to be given by Z, What is the status of the contract?
This contract is VOID because it is against the good custom of showing respect to our parents.
Kinds of innominate contract
a. Do ut des (I give that you may give)
b. Do ut facio (I give that you may do)
c. Facio ut des (I do that you may give)
d. Facio ut facias (I do that you may do)
is no longer an innominate contract. It is now called BARTER or EXCHANGE
Do ut des
I give that you may do
Do ut facio
I do that you may give
Facio ut des
I do that you may do
Facio ut facias
Article 1309. The determination of the performance may be left to a ________________, whose decision shall not be binding until it has been made known to both contracting parties.
Third Person
Hypothetical case: S agrees to sell her antique coin collection to B. they both agree that the price will be determined by a coin appraiser, C, who is a third person not directly involved in the contract.
C’s determination of the price shall not be binding until it has been made known to both S and B
is one who has not taken part in a contract and is therefore, a stranger to the contract.
Third person
is a stipulation in a contract clearly and deliberately conferring a favor upon a third person who has a right to demand it’s fulfillment provided he communicated his acceptance to the obligor before it’s revocation by the obligee or original parties
Stipulation pour autrui
Requisites of stipulation pour autrui
- The contracting parties by their stipulation must have clearly or deliberately conferred a favor upon a thirdperson;
- The third person must have communicated his acceptance to the obligor before its revocation by the obligee or the original parties
- The stipulation in favor of the third person should be a part not the whole, of the contract;
- The favorable stipulation should not be conditioned or compensated by any kind of obligation whatever; and
- Neither of the contracting parties bears the legal representation or authorization of the third party for otherwise, the rules on agency will apply
Hypothetical Case: D is indebted to C in the amount of P10,000. What would happen if one of them died?
A. If C Dies, D must pay the heirs of C.
B. If C assigns his credit to X, then D is liable to pay X.
C. If D Dies and H is the heir, Then H assumes the obligation of D to C. H is bound by the contract entered into by D. However H is not liable beyond the value of the property he inherits from D, the decedent
Classification of contracts according to perfection
a. Consensual Contract
b. Real Contract
c. Solemn Contract
A contract that which is perfected by mere consent
Consensual Contract
A contract which is perfected by the delivery of the thing subject matter of the contract.
Real Contract
A contract which requires compliance with certain formalities prescribed by law, such prescribed from being thereby an essential element thereof
Solemn Contract
Stages of life in a contract
- Preparation or negotiation
- Perfection or birth
- Consummation or termination
the parties have not yet arrived at any definite agreement
Preparation or negotiation
the parties have come to a definite agreement or meeting of minds
Perfection or Birth
parties have performed their respective obligations and the contract may be said to have been fully accomplished or executed.
Consummation or Termination
Article 1317. Requisites in order a person be bound by the contract of another
a. He must be duly authorized (Expressly or Impliedly)
b. He must have by law, a right to represent him
c The contract must be subsequently rattified
d. He must act within his power
Hypothetical Case: A has a car and that car was sold by B in the name of A but he does not have the authority from A. B then sold it to C.
According to Article 1317, the contract is uneforceable since B is not authorized by A to sell the car to C.
What are the Essential Requisites of a contract?
- Consent
- Object
- Cause
is the conformity or concurrence of wills (offer and acceptance and with respect to contracts), it is the agreement of the will of one (1) contracting party with that of another of others, upon the object and terms of the contract
Consent
Requisites of CONSENT
- There must be 2 Parties;
- The parties must be CAPABLE and CAPACIATATED
- There must be NO VITATION of consent;
- There must be NO CONFLICT between what was expressly declared and what was really intended;
- Intent must be declared PROPERLY.
is the manifestation by the offeree of his assent to all terms of he offer. Without this, there can be no meeting of minds between the parties
Acceptance
Requisites of Acceptance
- It must be absolute
- It must be unconditional
- It must be unqualified
Hypothetical Case: 1. Sonny offer to buy the watch of Patricia for P5,000, Patricia accept Sonny’s offer. What is the status of Patricia’s acceptance?
- If Patricia proposes to sell the watch to sonny for P6,000. What is the status of the offer and acceptance?
- The acceptance of Patricia here is absolute and Unconditional
- her acceptance is qualified and it becomes a counter offer
Article 1322. An offer made through an ______ is accepted from the time acceptance is communicated to him
Agent
is considered an extension of the personality of his principal, If duly authorized, the act of the agent is, in law, the act of the principal
Agent
Hypothetical Case: Daniela is a sales agent of Luna Homes Subdivision, She offered to sell a 15 bedroom mansion to Theo at the price of 15 million, Theo agrees and accepts the offer to buy the property for the stipulated price. What is status of the contract?
The contract of sale is valid even though the acceptance was made with the agent
Article 1324.
General Rule: the offer may be withdrawn as a matter of right anytime before acceptance.
Exception: ???
when the option is founded upon a consideration, as something paid or promised
Is one giving a person for a consideration a certain period within which to accept the offer of the offerer.
Option Contract
is the period given within which the offeree must accept the offer
Option Period
is the money paid or promised to be paid in consideration for the option
Option Money
They refer to those persons who have not yet reached the age of the majority (18) years.
Unemancipated minors
According to Art. 1327, Who cannot give consent to a contract?
- Unemancipated minors
- Insane or demented persons, and deaf-mutes who do not know how to write
These are person who are deaf and dumb
Deafmutes
When offer and/or Acceptance is made during lucid interval
VALID
When offer and/or Acceptance is made during drunkenness
VOIDABLE
When offer and/or Acceptance is made during drunkenness
VOIDABLE
True or False
A contract is VALID if entered into through a guardian or legal representative
True
True or False
A contract is not valid where the minor misrepresented his age and convincingly led the other party to believe in his legal capacity
False
Characteristics of CONSENT
- It is intelligent
- It is free and voluntary
- It is conscious and spontaneous
What are the VICES of consent?
- Mistake
- Violence
- Intimidation
- Undue Influence
- Fraud
A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is ????
VOIDABLE
a wrong or false notion about such matter, a belief in the existence of some circumstances, fact or event which in reality does not exist
MISTAKE
According to Art.1331
A simple mistake of account shall give rise to its _____
CORRECTION
Kinds of Mistake
- Mistake of Fact
- Mistake of Law
Article 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may __________
VITIATE CONSENT
Requisites of Mutual Error according to Art.1334
- The error must be mutual
- It must be as to the legal effect of an agreement and
- It must frustrate the real purpose of the parties
Hypothetical case: D borrows P10,000 from C. As security debt, it was agreed that D should mortgage his parcel of land in favor of C. However, the document as written is one of antichresis, the parties erroneously believing that it has the same effect as a mortgage. What is status of the contract?
In this case the contract is VOIDABLE because there is no meeting of minds
There is ________ when in order to wrest consent, serious or irresistible force is employed.
VIOLENCE
There is _______ when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property.
Intimidation
True or False
A threat to enforce one’s claim through competent authority, if the claim is just legal, does vitiate consent
False; It does not Vitiate consent
What is the effect of violence and intimidation
Article 1336. Violence or Intimidation shall annul the obligation, although it may have been employed by a third person who did not take a part in the contract. (VOIDABLE)
is influence of a kind that so overpowers the mind of a party as to prevent him from acting understandingly and voluntarily to do what he would have done if he had been left to exercise freely his own judgement and discretion
UNDUE INFLUENCE
There is _____ when through insidious words or machinations of one of the contracting parties, the offer induces to enter intro a contract which, without them, he would not have agreed to
Fraud
What kind of fraud is the ground for the annulment of the contract?
Causal Fraud
This fraud only obliges the person employing it to the damages
Incidental Fraud
is the fraud committed by one party before or at the time of the celebration of the contract to secure the consent of the other. It is the fraud used by a party to induce the other to enter into a contract without which the latter would not have agreed to.
Causal Fraud
S offered to sell to B a ring, claiming that the stone on the ring is diamond. S knows that it is not diamond but ordinary glass.
If B buys the ring relying on the truth of the representation of S, what is the status of contract?
VOIDABLE. The sale may be annulled on the ground of fraud
Article 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are ________
not in themselves fraudulent
are representations which do not appear on the face of the contract and these do not bind either party.
Dealer’s Talk or Trader’s Talk
General Rule: A mere expression of an opinion does not signify fraud
Exception: ???
Exception: Unless made by an expert and the other party has relied on the former special knowledge
Hypothetical Case: B bought the land of S for P2,000 per square meter. The reasonable price of lands in the same vicinity is P2,500 per square meter because C had deceived him regarding its market it’s value.
Is the contract annullable?
In this case, the contract cannot be annulled unless it can be shown that B was a party to the fraud
Article 1343. Misrepresentation made in good faith is not fraudulent but may constitute _______
Error
S sold a ring to B. S honestly believed that what he sold to B was a diamond ring. It turned out that it was not a diamond ring.
The misrepresentation of B is a mere mistake and the contract is voidable on that ground and not on the ground of fraud
When fraud is employed by both parties, neither may ask for annulment as the fraud of one neutralizes that of the other. The contract is, therefore, considered valid. The rule is in accordance with the principle that _______________
he who comes to court, must come with clean hands
is the act of deliberately deceiving others, by feigning or pretending by agreement the appearance of a contract which is either non-existent or concealed
Simulation of a contract
Kinds of Simulation of contract
- Absolute Simulation
- Relative Simulation
When the contract does not really exist and the parties do not intend to be bound at all
Absolute simulation
When the contract entered into by the parties is different from their true agreement.
Relative Simulation
Absolutely simulated or fictitious contracts are _________
inexistent and void
In relative simulation contract. the parties are bound by their real agreement provided it does not prejudice a ____________ and is not intended for a purpose contrary to ___________
- Third Person
- law, morals, good customs, public order, public policy
Requisites of things an object of contract
- The thing must be within the commerce of men, it can legally be the
- subject of commercial transaction.
- It must not be impossible, legally or physically.
- It must be in existence or capable of coming into existence
- It must be determinate or determinable without the need of a new contract between the parties
Requisites of services as object of contract.
- The service must be within the commerce of men;
- It must not be impossible, physically or legally
- It must be determinate or capable of being determinate
True or False
Intransmissible rights can be the object of the contract
FALSE
is any property or right, not in existence or capable determination at the time of the contract that a person may inherit the future, such person having only an expectancy of a purely hereditary right
Future Inheritance
Inheritance ceases to be future upon the _____________
death of the decedent or deceased
Except in cases expressly authorized by law, a contact concerning future inheritance is ________
void
The law permits contract on future inheritance when ___________
- in the case of donations by reason of marriage between future spouses with respect to their future property to take effect, only in the event of death, to the extent laid down by law in testamentary succession
- in the case of partition of property by act inter vivos by a person (owner of the property) to take effect upon his death
is the essential reason or purpose which the contracting parties have in view at the time of entering into the contract. It is something bargained for or given by a party in exchange for a legally enforceable promise of another
Cause (causa)
one the cause of which, for each contracting party is the prestation or promise of a thing or service by the other. In other words, in this contract, the parties are reciprocally obligated to each other.
Onerous Contract
one the cause of which is the service or benefit which is remunerated. The purpose of the contract is to reward the service that had been previously rendered by the party remunerated.
Remunerative contract
one the cause of which is the liberality of the benefactor or giver
Gratuitous contract
is the purely personal or private reason which a party has entering into a contract. It is different from the cause of the contract
Motive
True or False
The illegality of the cause affects the validity of a contract, while the illegality of one’s motive does not render the contract void
True
Requisites of cause
- It must exist at the time the contract is entered into
- It must be lawful
- It must be true or real
is any damage caused by the fact that the price in unjust or inadequate
Lesion
General rule: Lesion or inadequacy of cause does not itself invalidate a contract
Exception : Lesion will invalidate a contract if there is _______
When there has been fraud, mistake, or undue influence
What are the Defective Contracts?
- Rescissible Contracts
- Voidable Contracts
- Unenforceable contracts
- Void or Inexistent Contracts
are those validly agreed upon because all essential elements exist and, therefore, legally effective, but in the cases established by law, the remedy of rescission is granted in the interest of equity
Rescissible Contracts
Binding force of rescissible contracts
They are valid and enforceable although subject to rescission by the court when there is economic damage or prejudice to one of the parties or to a third person. In a rescissible contract, there is no defect at all but by reason of some external facts, its enforcement would cause injustice
is a remedy granted by law to the contracting parties and sometimes even to a third person in order to secure reparation of damages caused them by a valid contract.
Rescission
is a person under guardianship by reason of some incapacity
Ward
Hypothetical case.
G is the guardian of M (a minor). G sells the property of M worth P20,000 for only P15,000. Can M ask for rescission?
The contract of sale cannot be rescinded because the lesion is not more the one-fourth. However if the property is sold for less then P15,000, M can rescind the sale by proper action in court upon reaching the age of majority.
is a person who disappears from his domicile his whereabouts being unknown, and without leaving an agent to administer his property.
Absentee
are those which possess all the essential requisites of valid contract but one of the parties is incapable of giving consent, or consent is vitiated by mistake, violence, intimidation, undue influence, or fraud
Voidable or Annullable contracts
Binding force of voidable contracts
They are valid and binding between the parties unless annulled by a proper action in court by the injured party.
Kinds of voidable Contracts
- Legal incapacity to give consent
- Violation of consent
Art. 1391. The action for annulment shall be brought within _______
Four (4) years
means that one voluntarily adopts or approves some defective or unauthorized act or contract which, without his subsequent approval or consent, would not be binding on him.
Ratification
True or False.
Ratification cleanses the contract from all its defects from the moment it was constituted
True
Kinds of Ratification
- Express Ratification
- Implied or tacit Ratification
When the ratification is manifested in words or in writing
Express Ratification
it may take diverse forms, such as by silence or acquiescence; by acts of showing adoption or approval of the contract; or by acceptance or retention of benefits flowing therefrom
Implied or tacit Ratification
A contract entered into by an incapacitated person may ratified by:
a. the guardian
b. the injured party himself provided he is already capacitated
In case the contract is voidable on the ground of mistake, etc ratification can be made _____
by the party whose consent is vitiated
What is the retroactive effect of ratification?
It validates the contract from the date of its execution
In a state of drunkenness, S sold a parcel of land to E. Later, S sold the same land to Y. Does the subsequent ratification by S of the sale to E can prejudice Y?
No it cannot prejudice Y. Under Article 1396. the retroactive effect of the ratification which cleanses the voidable contract of its defect from its inception will not affect or prejudice the rights of Y who is an innocent third person
are those that cannot be reinforced or given effect in a court of law or sued upon by reason of certain defects provided by law until and unless they are ratified according to law
Unenforceable Contracts
Binding force of unenforceable contracts
While rescissible and voidable contracts are valid and enforceable unless they are rescinded or annulled, Unenforceable contracts although valid, are unenforceable in court unless they are cured and ratified. Once ratified, these contracts may then be enforceable
are 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 power
Unauthorized contracts
Under Article 1403, the following contracts are unenforceable, unless they are ratified
- those entered into in the name of another by one without, or acting in excess of, authority.
- those that do not comply with the Statute of Frauds; and
- those where both parties are incapable giving consent to a contract
are those which, because of certain defects, generally produce no effect at all
Void contracts
refer to the agreement which lack one or some or all of the elements (consent, object, cause) or do not comply with formalities which are essential for the existence of the contract.
Inexistent contract
True or False.
An illegal contract may produce effects under certain circumstances where the parties are not equal of guilt
True
refers to the manner in which a contract is executed or manifested
form of a contract
Contracts that must comply with specific
formalities prescribed by law to be valid, e.g.,
donation of real property, antichresis.
Formal Contracts
Donation of real property
it must be in public instrument
Donation of personal property the value of which exceeds P5,000
The donation and acceptance must be in writing
Sale of land through an agent
The authority of the agent must be in writing; otherwise, the sale is void
Stipulation to pay interest
It must be in writing; otherwise, no interest is due
Contract of partnership
if immovables are contributed, it must be in public instrument to which shall be attached a signed inventory of the immovable property contributed
is that remedy allowed by law by means of which a written instrument is amended or rectified so as to express or conform the real agreement or intention of the parties when by reason of mistake, fraud, inequitable conduct, or accident, the instrument fails to express such agreement or intention
Reformation
Requisites of reformation
- There is meeting of the minds of the parties to the contract;
- The written instrument does not express the true agreement or intention of the parties
- The failure to express the true intention is due to mistake, fraud, inequitable conduct, or accident
- The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings and
- There is clear and convincing evidence of the mistake, fraud, inequitable conduct, or accident
Reformation distinguished from annulment
In reformation, there has been a meeting of the minds of the parties; hence, a contract exists but the written instrument purporting to embody the contract does not express the true intention of the parties by reason of mistake, fraud, inequitable conduct, or accident
In annulment, there has been no meeting of the minds, the consent of one of the parties being vitiated by mistake
is a mistake of fact that is common to both parties of the instrument which causes the failure of the instrument to disclose their true intention
Mutual mistake
Art. 1366. There shall be no reformation in the following cases;
- Simple donations inter vivos wherein no condition in imposed
- Wills;
- When the real agreement is void
When the donor intends that the donation shall take effect during his lifetime,
Donation intervivos
this kind of donation takes effect after the donor’s death
Mortis causa
is the determination of the meaning of the terms or words used by the parties in their written contract. It is the process of ascertaining the intention of the parties from the written words contained in the contract.
Interpretation of contracts
