From the legal perspective, a contract is deemed perfected or given force when the components of

consent, object and consideration are present. When a seller offers to sell goods at an offer price plus a
buyer agrees to the cost, there’s a perfected contract of sale. But, the consummation of a contract is
already considered absolute in the sense of consensual contracts – those that no longer requisite the
procurement of special forms to be valid and enforceable. Enforceability means the party can bring the
case to any competent court of justice to make certain the other party’s performance of the duty.

Some contracts don’t achieve enforceability unless they’re in writing, along with the three components
mentioned previously. All these are covered by the Statute of Frauds.

The intention behind the Statute is to prevent fraud and perjury in the enforcement of obligations that
rely on evidence of the vague memory of witnesses. These special agreements require specific
enumerated transactions to be evidenced by a writing signed by the party to be charged. A note,
memorandum and other private in addition to public instruments may suffice. These contracts are
enumerated under Chapter 8, Articles 1403 paragraph (2) of the Civil Code of the Philippines. They
comprise:

1. An agreement that by its provisions isn’t to be performed within a year from the making thereof;

2. A unique promise to answer for the debt, default, or miscarriage of another;

3. An arrangement made in consideration of union, other than a mutual promise to marry;

4. An arrangement for the selling of products, chattels or things in action, at a cost not less than five
hundred pesos;

5. An arrangement for the leasing for a longer period than one year, or for the selling of real property or
of an interest therein;

6. A representation regarding the credit of a third person.

Contracts not covered above are considered perfected and absolute upon the meeting of the minds.
Again, in order that contracts entered into via the 6 ways aforementioned may be enforceable, they
need to be in written form and subscribed by the party charged. Subscription by the latter’s
representative is satisfactory. It should be noted however, that the unenforceability employs only to
executory contracts. By executory, this means that either of the party is yet to perform his duties to the
contract. If by any means one party has already rendered or carried through his portion of the duty,
then the other party has to officially perform his portion of the duty, the deficiency in the understanding
(i.e. only in oral form) however.

Although a contract is just a piece of paper that you sign to seal the deal, you can still end up in court
due to misinterpretation. A poorly written contract is not necessarily the reason a person can face a
lawsuit. Even if your contract has been prepared by one of the biggest law firms in the country, it is still
not immune to criminal charges if the obligations that are stated have not been fulfilled. There are basic
elements in a contract, which need to be present before any deals can be made.

A contract refers to an agreement of two or more contracting parties on a particular venture whereby
one person binds himself, with respect to the other, to render services or give something.

The contract must not be obtained through undue influence, coercion, misrepresentation and fraud. As
a general rule, the party who has suffered due to breach of contract can claim money damages from the
other. The breaching party will also be ordered by the court to perform obligations that are stipulated in
the contract.

Contracts cannot completed without the following requisites:

(1) Contracting parties' consent;

(2) subject matter of the contract; and

(3) the cause of the obligation.

The Basic Elements of Contracts

Consent

In general, when a consent is given, the contract is considered perfected. It can be deemed an oral
contract that binds both contracting parties. One person must have a definite offer and the other must
have an absolute acceptance of the offer.

Object of the Agreement

The subject matter refers to the object of the contract. If a thing is deemed outside the commerce of
man, it will not be accepted as the object of the contract. Contracts are made to transfer the rights of
property, render services and others. However, the object of the contract must not be contrary to law,
good customs, morals and public order.

Consideration

The cause of the contract will be based on the type of contracts. For instance, onerous contract's cause
is the promise of service or thing by the other person. Remunatory contract's cause is the benefit or
service, which is being remunerated. For contracts of pure beneficence, the cause is the benefactor's
liberality. The cause can only be defined based on the nature of the contract.

An oral contract may not suffice even if both parties have made an agreement. A written contract is a
strong proof that a deal or agreement has been made. It includes the necessary details that can be used
in court when the obligations have not been met.

A contract is an agreement through meeting of the minds between two persons

whereby one binds himself, with respect to the other, to give something or to render
some service.[1] It have the force of law between the parties and have been complied
with in good faith.[2]
The term force of law in the definition refers to the legal aspect of an agreement as a
contract. This means that you can go to court and ask for a civil action in case of non-
compliance of the contract. Any agreement without the 'force of law' are not contracts
but merely personal or social agreements.
The term in good faith denotes fairness and honesty of intention in the performance of
the contract, so as to not destroy or injure the right of one of the parties. It would not
be in good faith, for instance, when one party has exempted himself from the contract
while the other is still bound to it.
A contract is one of the sources of obligation. An obligation is the juridical necessity that
results when a contract is completed or perfected. There can be no contract if there is
no obligation, though not all obligations arise from contracts. The obligation that arises
from contracts is called conventional obligation.
 Contents
[show]

Characteristics of Contract
The common characteristics of contracts are:
 Obligatory - the force of law between the contracting parties compel them to
perform under the threat of civil action or lawsuit.
 Autonomy - such stipulations, clauses, terms and conditions are established by
the contracting parties as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy. [3]
 Mutuality - the bind must involve both of the parties,so that the validity or
compliance of a contract cannot be left to the will of only one of them. [4]
 Relativity - the effectivity is only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. [5]
 Consensuality - the mere consent that perfected the contract should bound the
parties to the fulfillment of what has been expressly stipulated, and all the
consequences which, according to their nature, may be in keeping with good
faith, usage and law.[6] However, real contracts, such as deposit, pledge and
commodatum, are not perfected until the delivery of the object of the obligation. [7]
Elements of Contract
A contract has the following essential elements:
 Consent - a meeting of the minds between parties with respect to the object and
cause; there is a certain offer by one party and there is an absolute acceptance by
another party.[8]
 Object - the thing, right, or service to be provided or performed under the contract.
 Cause (causa) - the essential purpose or reason for the contract:
 for onerous contracts, the promise of a thing or service by the other.[9]
 for remuneratory contracts, the service or benefit which is being
remunerated.[9]
 for contracts of pure beneficence, the mere liberality of the benefactor. [9]
The contract will not be perfected unless the aforementioned elements or requisites
concur.[10]

In addition, a contract also has:

 Natural elements - those which are part of the contract even if the parties do not
provide (stipulate) them, and is presumed by law to exists; such as a warranty of
hidden defects or eviction in contract of sale.
 Accidental elements - those which are established or stipulated in the contract
by the contracting parties as they may deem convenient; such as stipulations,
clauses, terms and conditions.[3]
Stages of Contract
A contract undergoes three stages:
 Preparatory or conception - process of formation through bargaining or
negotiation, which begins from the time the prospective contracting parties
manifest their interest in the contract that leads to the perfection of the contract.
Either party may stop the process or withdraw an offer made.
 Pefection or birth - process of arriving at a definite agreement or meeting of the
minds as to the elements of the contract, particularly the essential ones (object
and cause).
 Consumption or death - the fulfillment of the respective obligations of the parties
under the contract, resulting to its accomplishment and extinguishment.
Form of Contract
main article: Form of Contract

The form of a contract is manifested by:

 intent or will - its psychological existence; only conceptual and cannot have legal
value.
 expression of such intent or will - its physical or logical existence; substantial and
can have legal value.
A contract may be in the form of:
 an oral agreement, or those that are partly oral and partly written, which are oral
contract in legal effect.[11]
 a single written agreement signed by both parties, wherein all its terms are in
writing[11], regardless if it is hand-written or electronically encoded/printed.[12]
 a written agreement with two copies; one signed by one party, the other signed by
the other party.
 a set of signed written agreements which are related and not contradictory.
 a set of unsigned written agreements identified as part of the signed written
agreements.
 any formal written agreement/s:
 private instrument - has no acknowledgement from a notary public or any
authorized official.
 public instrument - has acknowledgement from a notary public or any
authorized official.
A contract should also be in:
 a form required by the law for its validity.[13]
 a form required by the law to be enforceable or be proved in a certain way. [13]
 a form required by the law for for the convenience of the parties or for the purpose
of affecting third persons.

Reformation of Contract
main article: Reformation of Instruments
A contract is reformed to order to amend or correct its form as a written instrument so
that it would conform to the real intention of the parties.[14]

It is important to note that reformation does not change the contract, rather it aims to
establish its real purpose as manifested by the real intention of the parties.

The reformation of instrument requires:[14]

 a meeting of the minds of the parties.
 a written instrument that does not express the real intention of the parties due to
mistake, fraud, inequitable conduct, or accident; such real intention must always
prevail.
 a petition/request for the reformation of the instrument; this is in order for the facts
to be put into legal proceeding.
 a clear and convincing proof to support such petition.

Interpretation of Contract
main article: Interpretation of Contract

A contract is interpreted in order to determine the meaning of the terms or words used
in its contents and provisions (stipulations) that are ambiguous, not understood, and not
obvious.

The interpretation of contract has the following rules:

 there is no need for interpretation if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties.[15]
 the evident intention of the parties shall prevail if there is a conflict between such
intention and the words.[16]
 the specific terms shall prevail if there is inconsistency or confusion over the uses
of general terms covering the same subject matter.[17]
 the most adequate meaning shall prevail if some provisions have several
meanings.[18]
 the interpretation of a contract as a whole shall prevail if there are various
doughtful provisions in the entirety.[19]
 the most sensible meaning shall prevail if a word has multiple meanings; this is in
keeping with the nature and object of the contract.[20]
 the usage or custom of the place shall prevail if the parties entered into their
contract with reference to such usage or custom.[21]
 the interpretation of obscure terms or stipulations shall be against the party who
caused the obscurity.[22]
 in case the above rules are unable to settle doubts, the supplementary rule shall
resolved such doubts:
 in incidental circumstances of a gratuitous contract, the interpretation should
be made which would result in the least transmission of rights and
interests.[23]
  in onerous contract, the interpretation should be in favor of the greatest
reciprocity of interests.[23]
 in object, the contract shall be null and void since the intention of the parties
cannot be known.[23]
Classifications of Contract
according to form:
 Informal contract - in any form as long as all the requisites or essential elements
for its validity are present.[13]
 Formal contract - in a form required by the law.[13]
according to the involvement of the parties:
 Unilateral contract - one party is bound to fulfill an obligation for an act by
another party.
 Bilateral contract - both parties are bound to fulfill their mutual promises or
respective obligation to each other reciprocally.[24]
according to name or designation:
 Nominate contract - has specific name or designation in law; such as
commodatum, lease, agency, and sale.
 Innominate contract - has no specific name or designation in law; shall be
regulated by the stipulations of the parties, by the Civil Code, by the rules
governing the most analogous nominate contracts, and by the customs of the
place.[25]
 do ut facias (I give that you may do)
 facia ut des (I do that you may give)
 facio ut facias (I do that you may do)
according to perfection:
 Consensual contract - perfected by mere consent;[26] such as the contract of
sale, lease and agency.
 Real contract - perfected by mere consent and the delivery of the object; such as
deposit, pledge and commodatum.[7]
 Solemn contract - perfected through compliance with the form required by
law;[13] identical with formal contract.
according to cause or purpose:
 Onerous contract - the purpose is the performance of an obligation by one party
as the other party performs or has performed its own obligation.[9]
 Remuneratory contract - the purpose is the remuneration or payment by one
party for a service or benefit previously rendered by the other party. [9]
 Gratuitous contract - the purpose is the mere liberality or the feeling by one party
that the other party (which is the benefactor/giver) has been generous; such as in
free, pure donation.[9]
according to the obligatory force:
  Valid contract - with such stipulations, clauses, terms and conditions that are not
contrary to law, morals, good customs, public order, or public policy.[3]
 Rescissible contract - with legal validity, but may be rescinded or revoked in the
cases established by law.[27]
 Voidable/Annullable contract - with legal validity but may be invalidated by a
court action on the grounds of mistake, violence, intimidation, undue influence,
fraud, or incapacity of one of the parties to give consent.[28]
 Unenforceable contract - with legal validity but cannot be enforce through court
action by reason of defects, unless it is ratified according to law.[29]
 Void contract - with no validity at all because of certain defects, such as illegality;
considered inexistent from the very beginning and cannot be ratified according to
law.[30]
Resources
General References:
Websites:
Citations:
1. ↑ Civil Code, Article 1305
2. ↑ Civil Code, Article 1159
3. ↑ 3.0 3.1 3.2 Civil Code, Article 1306
4. ↑ Civil Code, Article 1308
5. ↑ Civil Code, Article 1311
6. ↑ Civil Code, Article 1315
7. ↑ 7.0 7.1 Civil Code, Article 1316
8. ↑ Civil Code, Article 1319
9. ↑ 9.0 9.1 9.2 9.3 9.4 9.5 Civil Code, Article 1350
10. ↑ Civil Code, Article 1318
11. ↑ 11.0 11.1 Manuel v. Rodriguez; G.R. No. L-13435 (1960)
12. ↑ Sec. 17, Republic Act No. 8792 (Electronic Commerce Act of 2000)
13. ↑ 13.0 13.1 13.2 13.3 13.4 Civil Code, Article 1356
14. ↑ 14.0 14.1 Civil Code, Article 1359
15. ↑ Civil Code, Article 1370 par. 1
16. ↑ Civil Code, Article 1370 par. 2
17. ↑ Civil Code, Article 1372
18. ↑ Civil Code, Article 1373
19. ↑ Civil Code, Article 1374
20. ↑ Civil Code, Article 1375
21. ↑ Civil Code, Article 1376
22. ↑ Civil Code, Article 1377
23. ↑ 23.0 23.1 23.2 Civil Code, Article 1378
24. ↑ Civil Code, Article 1191
25. ↑ Civil Code, Article 1307
26. ↑ Civil Code, Article 1315
27. ↑ Civil Code, Article 1380
28. ↑ Civil Code, Article 1390
29. ↑ Civil Code, Article 1403
30. ↑ Civil Code, Article 1409
A contract is an agreement through meeting of the minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.[1] It have the force of
law between the parties and have been complied with in good faith.[2]

The term force of law in the definition refers to the legal aspect of an agreement as a contract. This
means that you can go to court and ask for a civil action in case of non-compliance of the contract. Any
agreement without the 'force of law' are not contracts but merely personal or social agreements.

The term in good faith denotes fairness and honesty of intention in the performance of the contract, so
as to not destroy or injure the right of one of the parties. It would not be in good faith, for instance,
when one party has exempted himself from the contract while the other is still bound to it.

A contract is one of the sources of obligation. An obligation is the juridical necessity that results when a
contract is completed or perfected. There can be no contract if there is no obligation, though not all
obligations arise from contracts. The obligation that arises from contracts is called conventional
obligation.

Contents[show]

Characteristics of Contract

The common characteristics of contracts are:

Obligatory - the force of law between the contracting parties compel them to perform under the threat
of civil action or lawsuit.

Autonomy - such stipulations, clauses, terms and conditions are established by the contracting parties as
they may deem convenient, provided they are not contrary to law, morals, good customs, public order,
or public policy.[3]

Mutuality - the bind must involve both of the parties,so that the validity or compliance of a contract
cannot be left to the will of only one of them.[4]

Relativity - the effectivity is only between the parties, their assigns and heirs, except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or
by provision of law.[5]

Consensuality - the mere consent that perfected the contract should bound the parties to the fulfillment
of what has been expressly stipulated, and all the consequences which, according to their nature, may
be in keeping with good faith, usage and law.[6] However, real contracts, such as deposit, pledge and
commodatum, are not perfected until the delivery of the object of the obligation.[7]
Elements of Contract

A contract has the following essential elements:

Consent - a meeting of the minds between parties with respect to the object and cause; there is a
certain offer by one party and there is an absolute acceptance by another party.[8]

Object - the thing, right, or service to be provided or performed under the contract.

Cause (causa) - the essential purpose or reason for the contract:

for onerous contracts, the promise of a thing or service by the other.[9]

for remuneratory contracts, the service or benefit which is being remunerated.[9]

for contracts of pure beneficence, the mere liberality of the benefactor.[9]

The contract will not be perfected unless the aforementioned elements or requisites concur.[10]

In addition, a contract also has:

Natural elements - those which are part of the contract even if the parties do not provide (stipulate)
them, and is presumed by law to exists; such as a warranty of hidden defects or eviction in contract of
sale.

Accidental elements - those which are established or stipulated in the contract by the contracting
parties as they may deem convenient; such as stipulations, clauses, terms and conditions.[3]

Stages of Contract

A contract undergoes three stages:

Preparatory or conception - process of formation through bargaining or negotiation, which begins from
the time the prospective contracting parties manifest their interest in the contract that leads to the
perfection of the contract. Either party may stop the process or withdraw an offer made.

Pefection or birth - process of arriving at a definite agreement or meeting of the minds as to the
elements of the contract, particularly the essential ones (object and cause).

Consumption or death - the fulfillment of the respective obligations of the parties under the contract,
resulting to its accomplishment and extinguishment.

Form of Contract

main article: Form of Contract

The form of a contract is manifested by:

intent or will - its psychological existence; only conceptual and cannot have legal value.

expression of such intent or will - its physical or logical existence; substantial and can have legal value.

A contract may be in the form of:

an oral agreement, or those that are partly oral and partly written, which are oral contract in legal
effect.[11]

a single written agreement signed by both parties, wherein all its terms are in writing[11], regardless if it
is hand-written or electronically encoded/printed.[12]

a written agreement with two copies; one signed by one party, the other signed by the other party.

a set of signed written agreements which are related and not contradictory.

a set of unsigned written agreements identified as part of the signed written agreements.

any formal written agreement/s:

private instrument - has no acknowledgement from a notary public or any authorized official.

public instrument - has acknowledgement from a notary public or any authorized official.

A contract should also be in:

a form required by the law for its validity.[13]

a form required by the law to be enforceable or be proved in a certain way.[13]

a form required by the law for for the convenience of the parties or for the purpose of affecting third
persons.

Reformation of Contract

main article: Reformation of Instruments

A contract is reformed to order to amend or correct its form as a written instrument so that it would
conform to the real intention of the parties.[14]

It is important to note that reformation does not change the contract, rather it aims to establish its real
purpose as manifested by the real intention of the parties.
The reformation of instrument requires:[14]

a meeting of the minds of the parties.

a written instrument that does not express the real intention of the parties due to mistake, fraud,
inequitable conduct, or accident; such real intention must always prevail.

a petition/request for the reformation of the instrument; this is in order for the facts to be put into legal
proceeding.

a clear and convincing proof to support such petition.

Interpretation of Contract

main article: Interpretation of Contract

A contract is interpreted in order to determine the meaning of the terms or words used in its contents
and provisions (stipulations) that are ambiguous, not understood, and not obvious.

The interpretation of contract has the following rules:

there is no need for interpretation if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties.[15]

the evident intention of the parties shall prevail if there is a conflict between such intention and the
words.[16]

the specific terms shall prevail if there is inconsistency or confusion over the uses of general terms
covering the same subject matter.[17]

the most adequate meaning shall prevail if some provisions have several meanings.[18]

the interpretation of a contract as a whole shall prevail if there are various doughtful provisions in the
entirety.[19]

the most sensible meaning shall prevail if a word has multiple meanings; this is in keeping with the
nature and object of the contract.[20]

the usage or custom of the place shall prevail if the parties entered into their contract with reference to
such usage or custom.[21]

the interpretation of obscure terms or stipulations shall be against the party who caused the
obscurity.[22]
in case the above rules are unable to settle doubts, the supplementary rule shall resolved such doubts:

in incidental circumstances of a gratuitous contract, the interpretation should be made which would
result in the least transmission of rights and interests.[23]

in onerous contract, the interpretation should be in favor of the greatest reciprocity of interests.[23]

in object, the contract shall be null and void since the intention of the parties cannot be known.[23]

Classifications of Contract

according to form:

Informal contract - in any form as long as all the requisites or essential elements for its validity are
present.[13]

Formal contract - in a form required by the law.[13]

according to the involvement of the parties:

Unilateral contract - one party is bound to fulfill an obligation for an act by another party.

Bilateral contract - both parties are bound to fulfill their mutual promises or respective obligation to
each other reciprocally.[24]

according to name or designation:

Nominate contract - has specific name or designation in law; such as commodatum, lease, agency, and
sale.

Innominate contract - has no specific name or designation in law; shall be regulated by the stipulations
of the parties, by the Civil Code, by the rules governing the most analogous nominate contracts, and by
the customs of the place.[25]

do ut facias (I give that you may do)

facia ut des (I do that you may give)

facio ut facias (I do that you may do)

according to perfection:

Consensual contract - perfected by mere consent;[26] such as the contract of sale, lease and agency.

Real contract - perfected by mere consent and the delivery of the object; such as deposit, pledge and
commodatum.[7]
Solemn contract - perfected through compliance with the form required by law;[13] identical with
formal contract.

according to cause or purpose:

Onerous contract - the purpose is the performance of an obligation by one party as the other party
performs or has performed its own obligation.[9]

Remuneratory contract - the purpose is the remuneration or payment by one party for a service or
benefit previously rendered by the other party.[9]

Gratuitous contract - the purpose is the mere liberality or the feeling by one party that the other party
(which is the benefactor/giver) has been generous; such as in free, pure donation.[9]

according to the obligatory force:

Valid contract - with such stipulations, clauses, terms and conditions that are not contrary to law,
morals, good customs, public order, or public policy.[3]

Rescissible contract - with legal validity, but may be rescinded or revoked in the cases established by
law.[27]

Voidable/Annullable contract - with legal validity but may be invalidated by a court action on the
grounds of mistake, violence, intimidation, undue influence, fraud, or incapacity of one of the parties to
give consent.[28]

Unenforceable contract - with legal validity but cannot be enforce through court action by reason of
defects, unless it is ratified according to law.[29]

Void contract - with no validity at all because of certain defects, such as illegality; considered inexistent
from the very beginning and cannot be ratified according to law.[30]

Resources

General References:

Websites:

Citations:

↑ Civil Code, Article 1305

↑ Civil Code, Article 1159

↑ 3.0 3.1 3.2 Civil Code, Article 1306

↑ Civil Code, Article 1308

↑ Civil Code, Article 1311

↑ Civil Code, Article 1315

↑ 7.0 7.1 Civil Code, Article 1316

↑ Civil Code, Article 1319

↑ 9.0 9.1 9.2 9.3 9.4 9.5 Civil Code, Article 1350

↑ Civil Code, Article 1318

↑ 11.0 11.1 Manuel v. Rodriguez; G.R. No. L-13435 (1960)

↑ Sec. 17, Republic Act No. 8792 (Electronic Commerce Act of 2000)

↑ 13.0 13.1 13.2 13.3 13.4 Civil Code, Article 1356

↑ 14.0 14.1 Civil Code, Article 1359

↑ Civil Code, Article 1370 par. 1

↑ Civil Code, Article 1370 par. 2

↑ Civil Code, Article 1372

↑ Civil Code, Article 1373

↑ Civil Code, Article 1374

↑ Civil Code, Article 1375

↑ Civil Code, Article 1376

↑ Civil Code, Article 1377

↑ 23.0 23.1 23.2 Civil Code, Article 1378

↑ Civil Code, Article 1191

↑ Civil Code, Article 1307

↑ Civil Code, Article 1315

↑ Civil Code, Article 1380

↑ Civil Code, Article 1390

↑ Civil Code, Article 1403

↑ Civil Code, Article 1409

4
4

Art 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.* embodies the Principle of
Consensuality:4.Perfection of a contract, in general: the moment from which it exists; the juridical tie
between the parties arises from that time.5.Perfection of Consensual Contracts: the mere consent which
is the meeting of the minds of the parties upon the terms of the contract1.consent may not be expressly
given.* Binding Effect of Consensual Contracts:2.The binding force of such contracts are not limited to
what is expressly stipulated, but extends to all consequences which are the natural effect of the
contract, considering its true purpose, the stipulations it contains, and the object involved.