Understanding Obligations and Contracts

Obligation under Article 1156

Juridical necessity to give, do, or not do

Origin of the term 'obligation'

Latin term meaning tying or binding

Types of obligations

Real obligation and personal obligation

Definition of a contract

Meeting of minds between two persons

Requirement for a contract to exist

At least two persons

Essential elements of a contract

Consent, object, and cause

Effect of missing an essential element of a contract

The contract is void

Elements of obligation

Passive subject (obligor), Active subject (creditor), Object (subject matter), Juridical tie (legal reason)

Definition of 'cause' in a contract

Direct reason for the contract

Difference between contract and law

Contract arises from agreement, law is imposed

Relationship between contracts and obligations

All contracts create obligations, not vice versa

Broader term: contract or obligation

Obligation

Sources of obligations under Article 1157

Law, Contracts, Delicts, Quasi-delicts, Quasi-contracts

Basic principles of contracts (MARCO)

Mutuality, Autonomy, Relativity, Consensuality, Obligatory force

Mutuality under Article 1308

Both parties must be bound by the contract

Third person deciding on a contract

Generally no, unless authorized by parties

Decision of a third person if inequitable

The decision is not valid

Autonomy in contracts under Article 1306

Parties can establish their own terms

What makes a contract void

If it is contrary to law, morals, or public policy

Relativity of contract under Article 1311

Contracts only affect parties and their heirs

Requirement for a stipulation in favor of a third person

Communication of acceptance before revocation

Effect of registration under Article 1312

Makes the contract binding to third persons

Principle of obligatory force of contract under Article 1159

Contracts must be complied with in good faith

Important terms related to contracts

Nominate: has a name (e.g., contract of sale), Innominate: has no name (e.g., service contract), Communicative: equivalent consideration must be given, Allioric: unequal consideration (e.g., insurance), Executory: performance is pending

Difference between executory and executed contracts

Executory contracts are pending performance

Definition of an innominate contract

It has no specific name

Classical example of equivalent consideration

A contractile agreement

Example of an aliatoric contract

Insurance contract

Equivalent consideration for a lotto ticket

20 pesos for a chance to win 6 million

Definition of an executory contract

Neither party has performed yet

Difference between executed and executory contract

Executed means fully performed; executory means not

Significance of the statute of frauds

It governs certain types of contracts

Definition of a principal in a contract

The main party involved in the agreement

Effect of an agent acting outside their authority

The contract may be unenforceable