CONTRACTS
CHAPTER 1 - GENERAL PROVISIONS
METALANGUAGE
Accessory contract - when it is dependent upon another contract it secures or
guarantees for its existence and validity (e.g., mortgage, guaranty).
Agreement – is wider in scope than a contract because the former may not have all the
components of a contract.
Aleatory contract - when it depends upon an uncertain event or contingency both as to
benefit or loss (e.g., insurance, sale of a hope).
Bilateral contract – when it gives rise to reciprocal obligations for both parties (e.g.,
sale, lease).
Breach of contract – occurs when a party was not able, for no legally justifiable
reason, to comply with the term/s of an agreement.
Consensual contract – a contract which is perfected by mere consent (e.g., sale,
lease,agency).
Consent – is the conformity of the intention or desire of one party with that of the other
party regarding the object and terms of the agreement.
Customs – consist 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. It has
the force of law when recognized and enforced by law. A custom must be proved as a
fact, according to the rules of evidence.
Gratuitous or lucrative contract – one party gives a prestation for free or without
receiving anything in return.
Good custom – consists of long-practiced ways and traditions accepted and followed
by society as enforceable proper ways of conduct. It must be proven as a fact for it to be
recognized and treated as a force of law.
Innominate contract – a contract which has no specific name or designation in law.
Law – (in its specific sense) is defined as “a rule of conduct, just, obligatory,
promulgated by legitimate authority, and of common observance and benefit.”
Morals - refers to the commonly accepted good and right conduct developed in a
community. They change as time goes by and are unique in each different time and
place and with each set of individuals.
Mutuality of contract – both parties are bound as they are deemed equal to each other
and their contract has the force of law between them nominate contract – a contract
which has a specific name or designation in law (e.g.,commodatum, lease, agency,
sale, etc.
onerous contract – where the parties exchange considerations of equivalent value.
Preparatory contract- when it is entered into as a means to an end (e.g., agency,
partnership).
Principal contract – when it does not depend for its existence and validity upon
another contract but is an indispensable condition for the existence of an accessory
contract (e.g., sale, lease).
Public policy – is broader than public order; it refers not only to public safety but to
matters concerning the common good of the people.
Public order – public safety; public weal.
Real contract – a contract which is perfected, in addition to the above, by the delivery
of the thing subject matter of the contract (e.g., depositum, pledge, commodatum).
Real right – is binding against the whole world and attaches to the property over which
it is exercised wherever it goes.
Remunerative contract – one party gives the other party a prestation in exchange for a
benefit or service already previously rendered.
Rescission of a contract – is to consider a contract as though it never existed –
meaning void from its inception - and put the parties back to their supposed positions
before the contract was made.
Solemn contract – a contract which, according to law, must be in a certain form to be
considered valid. (e.g., donation of real property).
Stipulation pour atrui – it is a term in a contract which obviously and deliberately
confers a favor upon a third person, with neither of the conferring partners acting as
agent of the third person.
Termination of a contract – acknowledges the existence of the contract before its
cancellation as it requires compliance of its terms prior to its termination.
Unilateral contract – when it creates an obligation on the part of only one of
parties(e.g., commodatum, gratuitous deposit).
CHAPTER 2 - ESSENTIAL REQUISITES OF CONTRACTS
absolute impossibility – when the deed cannot be performed at all by anybody
Absolute simulation – when there is really no contract and the parties have no
intention to be bound at all. Absolutely simulated or fictitious contracts are inexistent
and void and are not susceptible of ratification.
Acceptance – is the indication by the offeree of his agreement to the terms of the offer.
Accidental elements – those specific stipulations, clauses, terms, or conditions which
exist only when established by the parties in their contract,
cause (causa) – is the essential reason or purpose which the contracting parties have
in view at the time of entering into the contract.
Causal fraud or dolo causante – is the fraud employed by one party, through
dishonest statements or schemes or by failure to declare (concealment), to convince the
other party to take part in a contract, without which the latter would not have assented
to, considering the unique facts of each case.
Common elements - elements present in all valid contracts – consent, object, and
cause.
Concealment – is when a party to a contract knows a relevant fact which he should
communicate to the other party but he fails or neglects to do so. This is synonymous to
misrepresentation.
Consent – is the agreement of the offer and the acceptance of the thing and the cause
between the parties which comprise the contract, despite nondelivery of both.
Special elements- elements which exist or is required only in certain specified
contracts (e.g., form and delivery).
Counter-offer – is when the offeree accepts the offer but changes any, some or all of its
terms; is in reality a new offer which terminates the old one; may be accepted or
rejected by the original offerer.
Dealer’s talk or trader’s talk – are declarations or statements made which are not on
the face of the contract and are not binding on either party.
Deceit – is a kind of fraud. It is the untruthful statement of a matter of fact, by incorrect
or misguiding declarations or by hiding or omissions which defrauds or is meant to
cheat another.
Earnest money – is really a down payment of the purchase price and is deemed as
proof that the contract is already perfected.
Essential elements – requisites of a contract; they must be present for a contract to
exist.
Express acceptance – may be oral or written.
Falsity of cause – is when a contract declares a valid consideration but such statement
is false.
Fraud – is described, generally, as any of the diverse ways a person can concoct and
perform for one party to have an unjust edge over the other party resulting to the latter
being cheated.
Future inheritance – is any property or right, not in existence or capable of
determination at the time of the contract, that a person may inherit in the future.
Gratuitous contract – a contract in which the cause is the mere liberality of the
benefactor or giver.
Hypnotic spell – may be induced by drugs, or by deliberate or unintentional hypnotism
or while a person walks during his sleep, somnambulism.
Ignorance – the absence of knowledge with respect to a thing.
Incidental fraud – fraud used to secure the consent of the other party but it only makes
the party who utilized it to be responsible only for damages.
Implied acceptance – may be inferred.
Insidious words or machinations - “include false promises, exaggerated expectations
or benefits, abuse of confidence, fictitious names, qualities, or power; in fine, the
thousand forms of fraud, which can deceive a contracting party, producing a vitiated
consent”.
Intimidation or threat – is internal and need not resort to physical force; moral
coercion.
Legal capacity – also found in juridical persons; legal incapacity is due to positive
provisions of law which contradicts or limits the natural capacity (e.g persons under civil
interdiction).
Legal impossibility – when the thing or service is contrary to law, morals, good
customs, public order, or public policy.
Lesion – inadequate cause resulting to damage, such as insufficient price
lucid interval – is an interim period of sanity.
Mistake or error – is the false notion of a thing or a fact material to the contract.
Mistake of law – is that which arises from an ignorance of some provisions of law, or
from an erroneous interpretation of its meaning, or from an erroneous conclusion as to
the legal effect of an agreement, on the part of one of the parties.
Motive – is the reason which a party has in entering into a contract. It is different from
the cause of the contract.
Natural capacity – found only in natural persons; should be partnered with legal
capacity to be full capacitated to contract. Natural incapacity is due to nature or actual
lack of ability to give consent (e.g., insane persons).
Natural elements – elements presumed to exist in certain contracts except if otherwise
stipulated by the parties.
Offer – is a proposal to take up a contract; it must be certain or clear.
Onerous contract – a contract the cause of which, for each contracting party, is the
prestation or promise of a thing or service by the other.
Option – is the opportunity provided to the offeree to take up an offer within a particular
length of time.
Option contract – is an agreement which allows a person, in exchange for a
consideration, a certain duration and under specified conditions, during which to take up
the offer of the offeror.
Option money – is the amount given or promised to be given as a separate payment
for an option contract.
Option period – is the term allowed during which the offeree must make up his mind
whether or not to take part in the primary contract.
Physical impossibility- when due to the nature of things, the thing or service cannot
really exist or be performed.
Qualified acceptance – is considered just a counter-offer or a new proposal.
Relative impossibility – when the impossibility exists due to the particular situation of
the case.
Relative simulation – the parties hide their real agreement. The parties are bound to
the real or true agreement except if the contract should prejudice a third person or if the
purpose is contrary to law, morals, good customs, public order, or public policy.
remuneratory contract – a contract in which the cause is the service or benefit which
is remunerated.
Simulation of a contract – is the deed of intentionally deceiving others, by pretending
the appearance of a contract which actually do not really exists or is hidden or that
which is different from the one agreed upon.
Substantial mistake of fact – meaning the party would not have given his consent had
he known of the mistake.
Undue influence – is influence acquired through superiority of will, mind, or character
under circumstances which give dominion over the will of another to such a degree that
he loses his free will or he is forced to do something which he cannot refuse.
Unemancipated minors – persons below 18 years old and still under parental
authority.
Vices of consent – defects of the will; results to contracts which are valid and binding
unless annulled by a proper action in court, though it may be ratified before its
annulment.
Violence – is external; physical coercion
CHAPTER 3 - FORM OF CONTRACTS
clear and convincing evidence – is evidence greater than mere preponderance of
evidence.
contracts of adhesion - These contracts are called such for the reason that almost all
their terms are stipulated by one party and the other party can only sign it with his
signature without the right to modify it.
donation – is an act of liberality whereby a person disposes gratuitously of a thing or
right in favor of another, who accepts it.
donation inter vivos - when the donor intends that the donation shall take effect during
his lifetime.
donation mortis causa – a donation that takes effect after the donor’s death.
form of a contract - refers to the way a contract is made or presented.
formal or solemn contract - that which is required by law for its efficacy to be in a
certain specified form.
informal or common contract - that which may be entered into in whatever form,
provided, all the essential requisites for their validity are present.
interpretation of a contract– is ascertaining the meaning of the terms or words stated
in the written contract to determine the intention of the parties.
public document/instrument - is one which is acknowledged before a notary public or
any official authorized to administer oath, by the person who executed the same. The
party making the acknowledgment formally declares that the instrument is his free act
and deed while the officer taking the same attests and certifies that such party is known
to him and that he is the same person who executed the instrument and acknowledged
that the instrument is his free act and deed.
reformation - is the remedy of amending or rectifying a written instrument for it to
declare or reconcile to the real deal or will of the parties when because of mistake,
fraud, inequitable conduct, or accident, the instrument was unable to state such
agreement or intention.
will – is an act whereby a person is permitted with the formalities prescribed by law to
control to a certain degree the disposition of his estate, to take effect after his death.