Summary
Highlights
A contract is defined as a meeting of the minds between two persons, where one binds himself to give something or render a service. Contracts are a source of obligations, which can also arise from law, quasi-contracts, delicts, and quasi-delicts.
Contracts go through three stages: preparatory (negotiation), perfection or birth (when parties agree or delivery occurs for real contracts), and consummation or termination (when obligations are fulfilled).
Autonomy allows parties to establish any stipulations, clauses, terms, or conditions, provided they are not contrary to law, morals, good customs, public order, or public policy. Mutuality requires that the contract binds both parties, and its validity or compliance cannot be left solely to the will of one party, though performance determination may be left to a third person.
Relativity states that contracts generally affect only the parties, their heirs, or assigns. Rights and obligations are transmissible unless personal, stipulated otherwise, or prohibited by law. Exceptions include stipulation pour autrui, contracts creating real rights, contracts to defraud creditors, and inducement of a third person.
A stipulation pour autrui is a provision that clearly confers a favor upon a third person, who then has the right to demand its fulfillment upon acceptance. There are two kinds: one for the sole benefit of the third person (donee beneficiary) and another intended to extinguish a previous obligation.
For a stipulation pour autrui to be valid, parties must clearly intend to confer a favor on a third person, the third person must accept before revocation, it must be a part of the contract and not the whole, it must not be conditioned or compensated, and no contracting party should be the third person's legal representative.
Consensual contracts are perfected by mere consent, binding parties to express stipulations and all consequences in good faith. Real contracts are perfected by the delivery of the object. No one can contract in the name of another without authorization or legal right, unless the contract is later ratified.
Breach occurs when there is a failure, without legal reason, to comply with the terms of a contract. In such cases, the aggrieved party will have remedies.
Nominate contracts are given a special name by law (e.g., sale, agency). Innominate contracts have no special name and are governed by party agreement, general provisions of the Civil Code, analogous contracts, and local customs. Examples of innominate contracts include do ut des (I give that you may give) and facio ut facias (I do that you may do).
Onerous contracts impose a burden on one or both parties. Remunerative contracts involve remuneration for service. Gratuitous contracts are driven by pure beneficence or liberality.
Formal contracts require specific legal formalities for validity, efficacy, or convenience. Informal contracts do not. Defective contracts include void, voidable, rescissible, and unenforceable contracts, which will be discussed in future videos.
Commutative contracts involve an equivalent exchange of obligations. Aleatory contracts depend on an uncertain event (e.g., insurance). Unilateral contracts impose obligations on only one party, while bilateral contracts require performance from both.
Executory contracts are yet to be performed, while executed contracts are already completed. Preparatory contracts lead to the creation of other contracts (e.g., agency). Accessory contracts exist only if there is a principal obligation.
Divisible contracts are capable of partial performance, whereas indivisible ones cannot be partially performed.