The meeting of the minds between two

persons whereby one binds himself,

with respect to the other, to give
something or to render some service
§Agreement of the parties
§Civil Code provisions on Oblicon
§Rules governing analogous
contracts
§Customs of the place
§Autonomy
§Mutuality
§Relativity
§Obligatoriness
§ Freedom to contract
§ Parties may contract (establish stipulations, clauses,
terms and conditions) as they may deem convenient
§ Limitation: As long as it is not contrary to:
§ law
§ Morals
§ good customs
§ public order or
§ public policy
§ Because of this autonomy, there are some contracts
that has no specific designation à INNOMINATE
CONTRACTS
§ The law cannot anticipate all forms of agreement

§ But other contracts are NOMINATE CONTRACTS

which has specific designation or name in law
§Contracts must bind both parties
§Compliance cannot be left to the will of
one party
§There must be mutual consent
§Contracts take effect only between the
parties, their assigns, and heirs
§Third parties could only be affected
where:
§ It contains stipulations against third persons
§ It contains real rights
§ It defrauds creditors
§ It has been violated due to the inducement of
the third person
§Once a contract is perfected, the parties
are bound to fulfill what has been
expressly stipulated and all the
consequences thereof
§Contracts cannot bind a third person who
has not given consent thereto
(UNAUTHORIZED CONTRACT)
§Exceptions: guardianship, administration,
agency
§Contracts are perfected from the
moment of perfection.
§ when the parties have come to a definite
ie.
agreement or meeting of the minds
regarding the subject matter and cause of
the contract.
§Contracts are valid and binding in
whatever form in which the contract has
been entered into as long as all the three
essential requisites for their validity are
present
§ Oral
§ Public
§ Private
§ In writing
§ Partly oral and partly in writing
§Except where the law provides otherwise
• Consent
• Object Certain
• Cause
§ Meeting of the minds
§ Steps:
1. Offer (offeror makes a proposal)
2. Acceptance (offeree communicates to the offeror
agreement to all the terms of the offer)
§ After acceptance is communicated by the offeree to
the offeror, the contract is already perfected
üIntelligent ❌ Mistake
• Capacity to act • Must be substantial or
gross
• No impairment
• substance of the thing
• Condition of the contract
• Identity or qualifications
of one of the parties
 ❌ Undue influence
üConscious/spontaneo • Influence that is excessive,
us disproportionate, unwarranted,
inappropriate
• Aware • Considering a person’s mental
weakness, ignorance, financial
• Voluntary or unforced distress
❌ Fraud
• Must be committed before or at
the time of the celebration of the
contract
• Serious
• Made in bad faith or with intent
to defraud
• Committed by one of the parties
üFree and ❌ Violence and
intimidation
voluntary § Must be imminent and
grave
§ Against the party, party’s
property, spouse,
descendants, ascendants
§ The reason the contract is
entered into
§ Committed by one of the
parties or by a third person
§In the absence of consent, the contract is
simulated (fictitious/fake)
§ ABSOLUTE SIMULATION
§ no contract at all, contract is void
§ RELATIVE SIMULATION
§ contract is different from true agreement
§ Parties are bound by their true agreement
§When the contract is in writing but
does not reflect the true intent of
the parties due to mistake, fraud,
inequitable conduct or accident
§The contract may be reformed
REFORMATION OF INSTRUMENT
§The obligation (thing, right, service); the
subject matter
§ Must be within the commerce of man
§ Must not be legally or physically impossible
§ Must be capable of being determinate
§aka CONSIDERATION
§The essential reason or purpose which the
contractive parties have in view at the
time of entering the agreement
§Must exist at the time the contract is
entered into
§Must be lawful
§Must be true or real
ü Cause is inadequate (aka LESION)
ü Failure of cause
❌Absence of cause
• Contract is simulated and thus, contract
is void
• The determination of the meaning of the terms or
words used by the parties in their written contract.
• The process of ascertaining the intention of the parties
from the written works contained in the contract.
1. When the contract is clear, do not interpret.
2. The evident intention of the parties prevail.
3. Special intent prevails over a general intent.
4. The interpretation which validates a contract
shall prevail over the illegal interpretation.
5. The contract shall be interpreted as a whole,
interpret in such a way that the stipulations
are harmonized l interpretation.
6. A word with several meanings must be
understood in the sense that is most in
keeping with the nature and object of the
contract
7. Resort to usage or custom as aid in
interpretation.
8. Interpret obscure words against the person
who caused the obscurity
• Rescissible contract • Unenforceable contracts
• Voidable contracts • Void contracts
üContract is valid (all elements are present) and
legal; there is no defect at all
But:
❌ Ward or absentee suffers lesion of more than ¼ of the value of the
object
❌ Object is under litigation
❌ Payment was made in a state of insolvency
❌ Contract was undertaken in fraud of creditors
üContract may be ratified or rescinded
üThe law allows the contract to be rescinded/cancelled
in the interest of equity/fairness
üParties must be restored to their original situation
üContracts posses all the essential requisites
❌There are vices of consent
üContract may be RATIFIED or ANNULLED
üContract is VALID until ANNULLED/cancelled
üAnnulment must be filed four years:
• From the time the vices of consent ceases
• From the time the mistake or fraud was discovered
• From the time the guardianship ceases
üAfter annulment, the parties must restore to each
other the subject matter + fruits and the price
üContract produces no effect at all
❌Cannot be ratified
❌Cannot be enforced
❌Cannot be valid
VOID CONTRACTS ARE CONTRACTS THAT
• are contrary to law, morals, good customs, public order or public
policy
• simulated or fictitious
• lack any of the essential elements
• which contemplate an impossible service
• cannot ascertain the intent of the parties
• are expressly prohibited or declared void by law