Contract- meeting of the minds between two
Preparation or negotiation- includes all
persons whereby one binds himself, with respect
to the other, to give something or to render
service
Characteristics of Contract
1. Autonomy of wills- parties may stipulate
anything as long as not illegal, immoral,
etc.
2. Mutuality- performance or validity binds
both parties; not left to will of one
parties
3. Obligatory force- parties are bound from
perfection of contract
4. Fulfill what has been expressly
stipulated
5. All consequences which may be in
keeping with good faith, usage and law
6. Relativity- binding only between the
parties, their assigns, heirs, strangers
cannot demand enforcement
7. Contract must not be contrary to law
8. Contract must not be contrary to morals
9. Contract must not be contrary to good
customs
10. Contract must not be contrary to public
order
11. Contract must not be contrary to public
policy
Determination of performance by a third
person
Article 1309: The determination of the
performance may be left to a third person,
whose decision shall not be binding until it has
been made known to both contracting parties.
Article 1310: The determination shall not be
obligatory if it is evidently inequitable. In such
case, the courts shall decide what is equitable
under the circumstances
Stages that will give rise to a contract
1.
the steps taken by the parties leading to
the perfection of the contract; parties
have not yet arrived at any definite
agreement
2. Perfection or birth- it is when the parties
have come to a definite agreement or
meeting of the minds regarding the
subject matter and cause of the contract
3. Consummation or termination- when
the parties have performed their
respective obligations and the contract
may be said to have been fully
accomplished or executed, resulting in
the extinguishment or termination
How are contracts perfected
1. Consensual contracts- contracts are
perfected by mere consent of the parties
regarding the subject matter and the
cause of the contract
2. Real contracts- real contracts are
perfected not merely by consent but by
the delivery, actual or constructive, of
the object of the obligation
3. Solemn contracts- when the law
requires that a contract be in some form
to be valid, this special form is necessary
for its perfection
Effects of perfection of the contract
1. Parties are bound to the fulfillment of
what has been expressly stipulated but
also;
2. To all the consequences which according
to their nature, may be in keeping with
good faith, usage, and law.
Element of a contract
1. Essential elements- those without
which no contract can validly exist;
requisites of a contract
 a. Common- those present in
all contracts (consent,
object, cause)
b. Special- not common to all
contracts or those which
must be present only in, or
peculiar to, certain specified
contracts
2. Natural elements- those that are
presumed to exist in certain contracts
unless the contrary is expressly
stipulated by the parties, like warranty
against eviction, or warranty against
hidden defects in sale
3. Accidental elements- or the particular
stipulations, clauses, terms, or
conditions established by the parties in
their contract, like, conditions, period,
interest, penalty, therefore, they exist
only when they are expressly provided
by the parties
Unilateral contract- when it creates an
obligation on the part of only one parties
(Example: commodatum, gratuitous deposit)
Contracts entered into during lucid interval
Article 1328: Contracts entered into during a
lucid interval are valid. Contracts agreed to in a
state of drunkenness or during a hypnotic spell
are voidable.
- Lucid interval-temporary period of
sanity
- Contracts entered are valid, however, it
must be shown that there is a full return
of the mind to sanity as to enable him to
understand the contract that he is
entering into
Characteristics of consent
1. It is intelligent- there is a capacity to act
2. It is free and voluntary- there is no
vitiation of consent by reason of
violence or intimidation
3. It is conscious or spontaneous- there is
no vitiation of consent by reason of
mistake, undue influence, or fraud
Vices of consent
1. Error or mistake
2. Violence or force
3. Intimidation or threat or duress
4. Undue influence
5. Fraud or deceit
Effects of vices
Mistake
1. A simple mistake of account or
calculation does not avoid a contract
because it does not affect its essential
requisites; defect is merely in the
computation of the account or amount
which can be corrected.
2. If a party knew beforehand the doubt,
contingency, or risk affecting the object
of the contract, it is to be assumed that
he was willing to take chances and
cannot, therefore, claim mistake.
3. Mistake of law does not invalidate
consent because ignorance of the law
excuses no one from compliance
therewith.
Violence
1. Violence requires the employment of
physical force. To make a consent
defective, the force employed must
either be serious or irresistible
Intimidation
For intimidation to vitiate the consent of a party
to a contract, the following must be present:
1. It must produce a reasonable and well-
grounded fear of an evil;
2. The evil must be imminent and grave;
 3. The evil must be upon his person or a. Absolute simulation- when the contract
property, or that of his spouse, does not really exist and the parties do
descendants, or ascendants; not intend to be bound at all; inexistent
4. It is the reason why he enters into the and void
contract b. Relative simulation- when the contract
entered into by the parties is different
*if a contract is signed merely out of reverential
from their true agreement
fear or the dear of displeasing a person to whom
respect and obedience are due, contract is valid Voidable contract
because reverential fear by itself does not annul
Article 1390: The following contracts are
consent in the absence of actual threat
voidable or annullable, even though there may
Undue influence- influence of a kind that have been no damage to the contracting parties:
overpowers the mind of a party as to destroy his
1. Those where one of the parties is
free will and make him express the will of
incapable of giving consent to a
another, rather than his own
contract;
The influence must be undue or improper to 2. Those where the consent is vitiated by
avoid a contract. mistake, violence, intimidation, undue
influence, or fraud.
Fraud
These contracts are binding, unless they are
1. If the fraud did not have the effect of
annulled by proper action in court. They are
causal fraud, that is, it did not by itself
susceptible of ratification
alone cause the other contracting party
to give his consent, it gives rise only to Kind of Unenforceable Contracts
an action for damages; ground for the
1. Those entered into in the name of
annulment of contract
another by one without, or acting in
2. Incidental fraud, which only renders the
excess, of authority;
party who employs it liable for damages
2. Those that do not comply with the
because the fraud was not the principal
statute of frauds;
inducement that led the other to give his
3. Those where both parties are incapable
consent; do not vitiate consent
of giving
Concealment- a neglect or failure to
When unenforceable contract becomes a
communicate that which a party to contract
voidable contract
knows and ought to communicate
Where both parties to a contract are incapable
*To constitute a fraud, the
of giving consent, the contract is unenforceable.
misrepresentation must refer to facts not
However, if the parent or guardian, as the case
opinions
may be, of either party, or if one of the parties
Simulation of a contract- the act of deliberately after attaining or regaining capacity, ratifies the
deceiving others, by feigning or pretending by contract, it becomes voidable.
agreement, the appearance of a contract which
When unenforceable contract becomes a valid
is either non-existent or concealed
contract
If the ratification is made by the parents or
guardians, as the case may be, of both
contracting parties, or by both contracting
parties after attaining or regaining capacity, the
contract is validated and its validity retroacts to
the time it was entered into.