(1) ESSENTIAL ELEMENTS OF A VALID CONTRACT
 Consent- meeting of the minds between the contracting parties on the subject matter and the
cause of the contract
o Requisites of Consent:
(a) Two or more parties
(b) Parties must be capable or capacitated
(c) No vitiation of consent
(d) No conflict between what was expressly declared and what was really intended
o Requisites for the meeting of the minds:
(a) An offer that is certain
(b) Acceptance that is unqualified and absolute
 Object certain- thing, right or service which is the subject matter of the obligation which is
created or established
o Requisites:
(a) Thing or service must be within the commerce of man
(b) Must be transmissible
(c) Must not be contrary to L, M, GC, PO or PP
(d) Must not be impossible
(e) Must be determinate as to its kind or determinable without a need for a new
contract or agreement
 Cause of the obligation- the essential and impelling reason why a party assumes an obligation
o Requisites:
(a) It must be present at the time the contract was entered into
(b) It must be true
(c) It must be lawful
(2) STAGES IN THE LIFE OF A CONTRACT
(a) Preparation- the parties are progressing with negotiations, not yet arriving at a definite
agreement, although there may have been a preliminary offer and bargaining
(b) Perfection- there is already a definite agreement; the elements of a definite subject matter and
valid cause have been accepted by mutual consent
(c) Consummation- the terms of the contract have been performed and the contract may be said to
have been fully executed
(3) ESSENTIAL CHARACTERISTICS (PRINCIPLES) OF CONTRACTS
(a) Freedom to Contract- parties are free to enter into a contract and establish such stipulations,
clauses, terms and conditions as they may deem convenient
(b) Consensuality- perfected by mere consent; consent/agreement on the subject matter and
cause/consideration
(c) Obligatory Force (and Compliance in Good Faith)- once perfected, a contract shall be obligatory
to both parties
(d) Mutuality- both parties are mutually bound; the validity and compliance of the contract cannot
be left to the will of one of the parties
(e) Relativity- contracts are generally binding only between the parties, their assigns and heirs
(4) TYPES OF CONTRACTS
(a) Valid- all essential requirements in fact and in law are present; no defect
(b) Voidable- those in which all the essential elements are present but the element of consent is
vitiated
Contracts that are Voidable:
(1) Those where one of the parties is INCAPABLE OF GIVING CONSENT TO A CONTRACT
(2) Those where the CONSENT IS VITIATED BY MISTAKE, VIOLENCE, INTIMIDATION,
UNDUE INFLUENCE OR FRAUD
Ratification of Voidable Contracts- act or means by virtue of which efficacy is given to a contract
which suffers from a vice of curable nullity
Requisites of Ratification:
(1) The contract must be a VOIDABLE ONE.
(2) The person ratifying MUST KNOW THE REASON FOR THE CONTRACT BEING
VOIDABLE (that is, the cause must be known).
(3) The CAUSE MUST NOT EXIST or continue to exist anymore at the time of
ratification.
(4) The ratification must have been made EXPRESSLY OR BY AN ACT IMPLYING A
WAIVER of the action to annul.
(5) The person ratifying must be THE INJURED PARTY.
(c) Rescissible- contract which is valid because it contains all of the essential requisites prescribed by
law, but which is defective because of injury or damage to either of the contracting parties or to
3rd person, as a consequence of which it may be rescinded
Requisites:
(1) There must be a valid or voidable contract
(2) There must be economic or financial prejudice
(3) There must be mutual restitution of the object and cause
Contracts which may be rescinded:
1.
Entered into by guardians in behalf of wards who shall suffer lesion by more than ¼
of the value of the things which are the object thereof
2. Entered into in representation of absentees if the latter suffer lesion stated in the
preceding number
3. Those undertaken in fraud of creditors when the latter cannot in any other manner
collect claims due them
4. There must be no other remedy for the prejudiced creditor.
5. Things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority
6. Other instances declared by law
 Examples
Art. 1098 – PARTITION
Art. 1189 – RESULT OF DETERIORATION
Arts. 1526 and 1534 – RIGHT GIVEN TO AN UNPAID SELLER
Art. 1539 – SALE OF REAL ESTATE
(d) Unenforceable- those which cannot be enforced by a proper action in court, unless they are
ratified, because either they are entered into without or in excess of authority or they do not
comply with the Statute of Fraud or both of the contracting parties do not possess the required
legal capacity
Kinds of Unenforceable Contracts:
(1) Unauthorized contracts- those entered into in the name of another person
a. who has been given no authority
b. or legal representation
c. or who has acted beyond his powers
(2) Those that do not comply with the Statute of Frauds. The following agreements
must be made in writing
a. An agreement that by its terms is NOT TO BE PERFORMED WITHIN A YEAR
from the making thereof.
b. A SPECIAL PROMISE TO ANSWER FOR THE DEBT, DEFAULT OR
MISCARRIAGE OF ANOTHER
c. An agreement MADE IN CONSIDERATION OF MARRIAGE, other than a
mutual promise to marry
d. An agreement for THE SALE OF GOODS, CHATTELS, OR THINGS IN ACTION
at a price NOT LESS THAN 500 pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or some of them, of such
things in action, or pay at the time some part of the purchase money; BUT
WHEN SALE IS MADE BY AUCTION and entry is made by the auctioneer in
his sales book, at the time of the sale, of the amount and kind of property
sold, terms of sale, price, names of the purchasers and person on whose
account the sale is made, it is a sufficient memorandum
o If the price is exactly P500, the contract must be in writing to be
enforceable.
e. An agreement FOR THE LEASING FOR A LONGER PERIOD THAN ONE YEAR,
or for the sale of real property or of an interest therein.
f. A representation as to the credit of a third person
(3) Those where BOTH PARTIES are incapable of giving consent. (If only one party is
incapable, contract is merely voidable).
(e) Void- where all the requisites prescribed by law for contracts are present, but the cause, object
or purpose is contrary to L, M, GC, PO or PP; are prohibited by law; or declared by the law to be
void
Inexistent Contracts- those which lack absolutely either in fact or in law one or some or all of the
essential elements of a contract
Void or Inexistent Contracts:
(1) Those whose cause, object or purpose is contrary to L, M, GC, PO or PP
(2) Those which are absolutely simulated or fictitious
(3) Those whose cause or object did not exist (or could not come into existence) at the
time of the transaction
(4) Those whose object is outside the commerce of man
(5) Those which contemplate an impossible service
(6) Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
(7) Those expressly prohibited or declared void by law
(5) TYPES OF OBLIGATIONS
(a) 1. Pure- those which are demandable at once; no conditions imposed, except if resolutory
2. Conditional- those where acquisition of right or extinguishment or loss of those already
acquired shall depend upon the happening of an event which constitutes the condition
(b) Obligations with a Period- those with a term or period may be defined as those whose
demandability or extinguishment are subject to the expiration of a term or period
(c) 1. Alternative- where out of 2 or more prestations which may be given, only one is due
2. Facultative- where only one prestation is agreed upon, but the obligor may deliver or render
another in substitution
(d) 1. Joint- 2 or more creditors and/or 2 or more debtors in one obligation, each creditor has a right
to demand, each of the debtor is bound to render, compliance with his part of the prestation.
Creditor is entitled to demand the payment of only a proportionate part of the credit, while each
of the debtors is liable for the payment or fulfillment of the proportional part of the debt or
obligation
2. Solidary- 2 or more debtors and/or 2 or more creditors in one obligation, each creditor has a
right to demand, each of the debtor is bound to render entire compliance of the obligation. A
creditor is entitled to demand compliance of the entire obligation and a debtor is obliged to
render the entire obligation
(e) 1. Divisible- prestation is susceptible of partial performance without the essence of the obligation
being changed
2. Indivisible- prestation not susceptible of partial performance, because otherwise its essence
would be changed
(f) Obligations with a Penal Clause- one with an accessory undertaking which obligor assumes a
greater liability in case of breach of obligation
Kinds:
a. Legal- constituted by law
b. Conventional- constituted by agreement of the parties
c. Compensatory- for indemnifying damages suffered by the oblige in case of breach
of the obligation
d. Punitive- punishing the obligor in case of breach of the obligation
e. Subsidiary- only the penalty may be demanded in case of breach
f. Joint- injured party may demand performance of both penalty and principal
obligation
(6) NATURE AND TYPES OF CONDITIONS AND PERIODS
A. Conditions
(a) 1. Suspensive- the happening of an event gives rise to an obligation
2. Resolutory- one which is demandable at once, but the happening of an event would extinguish
the obligation
(b) 1. Potestative- depends on the will of the debtor
2. Casual- depends on chance or hazard or will of 3rd persons
3. Mixed- depends partly upon the will of one of the parties and partly on chance or will of a 3rd
person
(c) 1. Divisible- capable of partial performance
2. Indivisible- incapable of partial performance
(d) 1. Positive- an act is to be performed
2. Negative- something will be omitted
(e) 1. Express- condition is stated
2. Implied- condition is merely inferred
(f) 1. Possible- capable of fulfillment in nature and in law
2. Impossible- incapable of fulfillment due to nature or law
(g) 1. Conjunctive- if all conditions must be performed
2. Alternative- if only a few of the conditions have to be performed
B. Periods
(a) 1. Definite- when the date or time is known beforehand
2. Indefinite- when it can only be determined by an event which must necessarily come to pass,
although it may not be known when
(b) 1. Legal- when it is granted by law
2. Conventional/Voluntary- when it is stipulated from the parties
3. Judicial- when it is fixed by the court
(c) 1. Ex Die (Suspensive)- when the obligation becomes demandable only upon the arrival of a day
certain
2. In Diem (Resolutory)- when the obligation is demandable at once, although it is terminated
upon the arrival of a day certain