OBLIGATION

 Effect
 Broader/General
 Juridical necessity to give, to do or not to do

CONTRACT
 Cause
 Narrower/Specific
 meeting of the minds between 2/more persons whereby
one binds himself, with respect to the other, or where
both parties bind themselves reciprocally in favor of one
another, to fulfill a prestation to give, to do, or not to do.

STAGES/ PHASES OF LIFE OF A CONTRACT

1.) PREPARATION/GENERATION
 Exchanges of offers and Counter-offers
 No contract yet, thus no binding effect

2) PERFECTION
 Parties come to an agreement
 All essential elements of contract exist
 The stage to look at to determine status of the contract (i.e., valid, voidable, void, unenforceable,
rescissible)
3) CONSUMMATION
 Parties perform their obligations under the contract
 The stage to look at to determine whether there has been a breach of the contract

FUNDAMENTAL PRINCIPLES IN CONTRACT

Obligatory Force
Once contract is perfected, it shall have obligatory force upon both parties.

Autonomy
GR: Parties are free to enter into contract and establish stipulations, terms and conditions as they
may deem convenient.

EXC: They cannot enter to contracts contrary to law, morals, good customs, public order or public
policy.

Mutuality
Validity or compliance of contract cannot be left to the will of one of them

Relativity
GR: Contract can bind only the parties, their assigns or successors

Pertinent EXC:
See next slide
 Pertinent Exceptions to the Principle of Relativity

Stipulation Pour Autrui

Elements:
1. stipulation must be part, not whole of contract;
2. contracting parties must clearly and deliberately conferred
favor upon 3rd person;
3. 3rd person must communicate his acceptance; and
4. 4. neither of contracting parties bears legal representation of
3rd person.

3rd Person Induces Contracting Party to Violate Contract

Contracts entered into fraud of Creditors

COMMON CLASSIFICATIONS

As to Perfection
1. Consensual – consent is sufficient to perfect contract
2. Real – delivery, actual or constructive, is required in addition to consent
3. Solemn or formal – where special formalities are required for perfection

As to relation to other contracts

1. Preparatory- acts as a preliminary step towards the celebration of another subsequent contract
2. Principal – may exist alone
3. Accessory – depends on another contract for its existence

As to Cause
1. Onerous – with exchange of correlative values
2. Gratuitous- liberality like kindness, love without any exchange

ESSENTIAL ELEMENTS/REQUISITES (COC)

Consent
 meeting of the minds of the
parties on the object and cause

a. With concurrence of offer and acceptance

b. Legal capacity of
contracting parties
c. must be intelligent, free,
spontaneous, and real

Object
 the thing, right or service which is the subject matter of obligation

1. Within commerce of men

2. Not legally or physically impossible
3. Determinate or determinable

Cause
 essential and impelling reason why a party assumes an obligation

`1. Exists at the time the

contract is entered into
2. Lawful
3.True or real

PERTINENT POINTS ABOUT CONSENT

 Elements of Valid Offer and Acceptance:
1. Definite/unequivocal;
2. Intentional;
3. Complete/unconditional

 Business advertisements are not a definite offer, but mere invitation to make an offer,
unless it appears otherwise.

Contract of Adhesion
 one party has already a prepared form of a contract, containing the stipulations he desires,
and he simply asks the other party to agree to them if he wants to enter into the contract.
 not invalid per se; not entirely prohibited. The one who adheres to such contract is in reality
free to reject it entirely; if he adheres, he gives his consent.
 Its validity or enforceability will have to be determined by peculiar circumstances obtaining
in each case and the situation of the parties concerned.
 It may be declared invalid if one party is either disadvantaged, with mental weakness,
handicap, or other analogous circumstances.