A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (125a)
Ang kontrata ay pagpupulong ng kaisipan sa pagitan ng dalawang tao na kung saan ang isa ay binibigkis ang kanyang sarili sa isa na magbigay o maggawad ng serbisyo.
Discussion:
Dean Ernesto Pineda, in his book, suggested a definition of a contract:
It is a meeting of the minds between two or more parties, whereby one party 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.
Three stages in making a contract:
- Conception or Generation – This is the stage where the parties begin their intial negotiation, bargaining for the formation of the contract and ending at the moment of agreement. It is also called the preparatory stage.
- Perfection or Birth – This is the stage where the contract is said to have been born, where the parties had a meeting of minds as to the object, cause or consideration and other terms and conditions of the contract. It has passed the preparatory state, thus giving birth to the contract.
- Consummation or Fulfillment – This is the last stage which consists the performance or fulfillment by the parties of their obligations under the terms of the perfected contract. Consummation means the accomplishment, death or termination of the contract where the parties cease to be contractually related to one another.
Classifications of contracts
- By name
a. Nominate – those which have been given particular names (i.e. sale, barter, mortgage, lease, carriage, agency, etc.)
b. Innominate – those which have not been given a particular name and not regulated by special provision of law. Roman law has classified them as follows: Do ut des (I give that you may give); Do ut facias (I give that you may do); Facio ut facias (I do that you may do); Facio ut des (I do that you may give).
2. By subject matter
a. Contracts covering things (i.e. contract of sale, deposit, pledge)
b. Contracts covering services (i.e. contract of carriage)
c. Contracts covering tranmissible rights or credits (i.e. contract of usufruct, assignment of credits.)
3. By formation or perfection
a. Consensual – perfected by mere consent (i.e. sale)
b. Real – cannot be perfected without delivery (i.e. commodatum, depositum, pledge, loan)
c. Formal or Solemn- cannot be perfected without compliance with the special formalities or solemnities required by law, otherwise they are void (i.e. donations, mortgages of real property)
4. By Cause
a. Onerous – contracts that provide for exchange of valuable considerations (i.e. sale where the seller delivers the object of the contract and the buyer pays the purchase price)
b. Gratuitous – contracts where one of the parties gives something or renders service to the other without receiving any equivalent or compensation (i.e. pure donation, commodatum). It is also called the lucrative contract because it provides gain to the other party for free.
c. Remunerative – contracts where one party gives something or renders service to another in consideration of a previous or past deeds of the other.
5. By vinculum produced or according to the party or parties obligated
a. Unilateral – contracts where only one of the parties is bound to fulfill and obligation (i.e. commodatum, promissory note)
b. Bilateral – contracts where both parties have reciprocally bound themselves to fulfill their obligations in favor of the other (i.e. sale) Also known as synalagmatic contracts.
6. By certainty or fulfillment
a. Commutative – contracts where the contracting parties contemplate the assured fulfillment of the terms and conditions of their agreement, and there is no risk to anticipate (i.e. contracts of mortgage and pledge)
b. Aleatory – contracts where the fulfillment is dependent on chance or event which may not happen within the period stipulated, and the loss contempated may not happen. (i.e. insurance contract)
7. By completion or performance
a. Exceuted – contracts which are already completed when formally entered into (i.e. sale of a thing)
b. Executory – contracts where the prestation promised by the parties have yet to be fulfilled at some future date (i.e. a unilateral promise to sell which has been accepted, but the sale is not yet executed)
8. By dependence of one contract on the other
a. Principal – contracts which can exist by themselves alone without depending on another (i.e. sale, lease, deposit, commodatum)
b. Accessory – contracts which cannot exist alone but mut depend on another contract (i.e. mortgage – depends on the contract of loan)
c. Preparatory – contracts entered into for the creation of another contract (i.e. agency, the principal gives authority to the agent through a Special Power of Attorney)
9. By the actual number of person/s participating in the contract
a. Ordinary – contracts where two (or more) parties are represented by different persons (i.e. sale – there is a seller and a buyer)
b. Auto-contracts – contracts where the two parties are represented by the one and the same person, who represents and acts in different capacities (i.e. agent representing his principal who authorized him to borrow money)
10. By the dignity accorded by law
a. Institutional – contracts which are given special digniy by law (i.e. contract of marriage which is considered a “social inviolable institution)
b. Ordinary – contracts which are not institutional (i.e. sale, lease, deposit, etc)
11. By freedom of bargain
a. Ordinary – contracts where both parties are palce on equal footing in the negotiation and perfection stages.
b. Contracts of adhesion – contracts where one of the parties had drafted the contract for the other party to accept or not to accept (i.e. insurance contract which is already printed)
12. By the evidence needed to prove their existence
a. Contracts covered by the Statute of Frauds – requires written evidence, note or memorandum to prove their existence
b. Contracts which be be proven by oral or parol evidence (i.e. lease contract for one year)
13. By the personality of the parties
a. Personal – contracts where the person of the party is essential to the existence of teh contract (i.e. contract for life insurance where the contract shall cease to exist upon the death of the insured)
b. Impersonal – contracts where the person/s of a part or parties are not essential to the continuity of the contract (i.e. contract of lease – the heirs may continue the contract)
14. By manner the consent is given
a. Express – contracts where the consent of the parties is given expressly in writing or verbally
b. Implied – contracts where the consent of the parties is not given expressly but is deducible from the conduct or acts of the parties (i.e. implied agency when the principal fails to repudiate the acts of the person on his behalf)
c. Presumed – contracts where the consent was not given by the parties but is presumed or provided by the law itself, to prevent unjust enrichment on the part of one party to the prejudice of the other, such as quasi-contracts
Case Illustration: Ong Yiu vs. CA (91 SCRA 223)
Obligations and Contracts 