The Basic Elements of Contracts

If a contract brings you to court, it is a poorly-prepared contract. The rationale for this statement is this – if the rights and obligations of the parties are clearly provided and defined, there is a lesser chance of misinterpretation. This, of course, is not necessarily true. Even a carefully drafted contract, prepared by the big law firms, may still end up in court if the parties do not comply in good faith with their respective obligations. Still, it would be better to know the basic elements of a contract.

Basic Elements of Contracts in the Philippines

WHAT IS A CONTRACT?

A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some services. A contract is also defined as “a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do.” A contract binds both contracting parties and has the force of law between them.

ELEMENTS OF A CONTRACT

There are different kinds of contracts and there may be a host of additional provisions to a basic contract. These flavors and add-ons will be further discussed in this series on contracts. Right now, let us start with the basics – the 3 elements or requisites of a contract. There can be no contract unless the following requisites are present:

  • (1) consent of the contracting parties;
  • (2) object certain which is the subject matter of the contract; and
  • (3) cause of the obligation which is established.

1. CONSENT

Contracts are generally perfected by mere consent, which is the reason why there’s such a thing as oral contracts. It’s a meeting of the minds between the parties: there’s a definite offer by one person and there’s an absolute acceptance by another.

2. SUBJECT MATTER

A thing, right or service may be the object or subject matter of a contract. All things that are outside the commerce of man (e.g., the moon, public properties) may not be the object of a contract. Rights that are transmissible (e.g., the right to possess a real property) may be the subject of a contract. Services, on the other hand, must not be contrary to law, morals, good customs, public order of public policy (e.g., services of an assassin or a prostitute).

3. CAUSE

The cause varies according to the type of contracts:

  • (a) for onerous contracts, the cause is the promise of a thing or service by the other;
  • (b) for remunatory contracts, the cause is the service or benefit which is being remunerated; and
  • (c) for contracts of pure beneficence, the cause is the mere liberality of the benefactor.

These concepts may appear alien, but since this is merely a brief discussion, suffice it to state that a “cause” is technically different from a contract’s object (or subject matter, as discussed above) or motive.

These three requisites are important because there’s no perfected contract without them. This discussion is just the tip of the iceberg, so to speak, and future discussions will hopefully clarify certain matters that may be of interest to entrepreneurs, considering that contracts are inseparable from business transactions.

Atty.Fred

27 thoughts on “The Basic Elements of Contracts

  1. Christian

    Hi, we’re about to make a black and white contract. Can someone help us what law is under the black and white contact? And what might happen to other party if they broke the b&w contract?
    Please help us have some ideas and actions we can do if the other party broke the contract. And what we can file ( demanda ) on the court incase this happen?
    Thank you so much!
    Any advice will be appreciated a lot!

    Respectfully yours:
    Christian CasiƱo.

    Reply
  2. Andrew Cezar

    Good day!

    May small business po ako. Tapos po nagpa-franchise ako sa kaibigan ko. Gumawa po ako ng contract as a legal ng franchise ko. Then after a month hindi pa din po nya napipirmahan. At ako din po hindi pa nakakapagpapirma. And bad news po hindi nya po sinusunod yung nakasulat sa contract po. Ano po ba maaari kong gawin dito? Pwede ko po bang bawiin ang mga gamit ko sa kanya at ibalik na lang po ang pera nya? Maraming salamat po.

    Reply
  3. Rachelle

    Hi,

    I just would like to ask if an online agreement with unsigned documents is legallh valid contract especially if you are not aware?

    Reply
  4. Jaime Jr

    Hello po, ask ko lang po advise nyo that we subscribe to Globe internet with lock in period of two year eh panu kung very poor performance po service nila can we cancel our subscription? Wala pong contract, with thanks.

    Reply
    1. pnl

      Hi Jaime. Contracts of adhesion (like the contract of Globe) is a bit complicated matter (accounts with lock-in period usually have documents signed). Pre-termination based on “very poor performance” of telcos is an interesting issue. Perhaps we can have a post on that sometime in the future. Good luck.

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