Law on Contracts and Obligations: A rule of conduct that is just, obligatory, and established by a legitimate authority for common observance and benefit.
Requisites of Law
Rule of conduct.
Just or presumed to be just.
Laid down by a legitimate power.
Obligatory or compulsory.
Sanction for non-observance.
Ignorance of the Law
Ignorantia lege neminem excusat: Ignorance of the law excuses no one.
Divisions of Law
Non-Legal Sense:
Divine Law: Based on faith, concerned with sin.
Natural Law: Based on morality, basis of state law.
Moral Law: Norms of good conduct in a community.
Physical Law: Laws of physical science.
Strictly-Legal Sense:
Private Law: Regulates relations between individuals.
Public Law: Governs relations between an individual and the State.
Substantive Law: Establishes rights and duties.
Procedural Law: Enforces rights or claims.
Sources of Law
Constitution.
Legislation.
Administrative rules and regulations.
Judicial decisions or jurisprudence.
Custom and other supplementary sources.
Sanctions for Non-Observance
Fine.
Imprisonment.
Forfeiture of property.
Liability for damage.
Expulsion/Exile.
Obligation
Juridical necessity to give, to do, or not to do; derived from Latin obligation (tying or binding).
Elements of an Obligation
Active Subject: Can compel compliance.
Passive Subject: Compelled to perform.
Juridical Tie: Binds the parties.
Prestation: Object/undertaking of the obligation.
Kinds of Obligation
Civil Obligations: Gives right of action.
Natural Obligations: Based on equality, no right of action to enforce.
Key Articles
Article 1156: Obligation is a juridical necessity to give, to do, or not to do.
Article 1159: Obligations from contracts have the force of law.
Article 1167: If a person fails to do something, it shall be executed at his cost.
Article 1170: Sources of liability for damages include fraud, negligence, delay, and contravention of the tenor of the obligation.
Fraud – dolo, intentional non-performance of obligation; deception.
Negligence - culpa, carelessness or lack of diligence.
Delay – mora, on the part of the debtor
Contravention of the tenor of obligation –Violation of the stipulations in the obligation
Article 1174: No responsibility for unforeseen or inevitable events (fortuitous events/force majeure).
Extinguishment of Obligations (Article 1231)
Payment or Performance.
Loss of the thing due.
Remission.
Merger of rights.
Compensation.
Novation.
Other causes: annulment, rescission, compromise, impossibility, fortuitous event.
Payment
Delivery of money, rendition of service, and performance of obligation.
Article 1235: Payment produces extinguishment of obligation
Contract
An agreement effective to give rise to a civil obligation; parties can stipulate unless contrary to law, morals, etc.
Characteristics of Contracts
Consensuality: Perfected by mere consent.
Relativity: Takes effect only between parties, assigns, and heirs.
Mutuality: Binds both parties, validity/compliance cannot be left to one party’s will.
Autonomy: Parties may establish stipulations as they deem convenient.
Stages of a Contract
Generation (Negotiation).
Birth (Meeting of minds).
Termination (Performance of obligation).
Key Articles
Article 1314: Third person inducing another to violate a contract is liable for damages.
Article 1317: Requirements of a Person to Contract in the Name of Another (Agent)
Must be duly authorized.
Must have by law a right to represent him.
The contract must be subsequently ratified.
Requisites for a Valid Contract (Consent, Object, and Cause)
Types of Contract
Consensual: Perfected by mere consent.
Real: Requires consent + delivery.
Solemn: Requires consent + required formality.
Consent (Article 1319)
Conformity of wills, manifested by meeting of offer and acceptance.
Requirements: two or more parties, parties capable, no violation of consent, intent declared properly.
Offer
A proposal to enter into a contract.
Acceptance is always required, otherwise there is no meeting of minds and hence no agreement
Offer becomes ineffective prior to acceptance for several reasons, including death, insanity, insolvency, failure to comply with conditions, lapse of time, destruction of the thing due, rejection, or illegality.
Acceptance
Manifestation of agreement to the terms of the offer.
Must be absolute and constitute a counter-offer.
Persons Incapacitated to give Consent:
Unemancipated minor.
Insane or demented persons.
Deaf-mutes who do not know how to write.
Causes That Deem a Contract Voidable
MISTAKE - Unconscious ignorance of the existence or non-existence of a fact, past or present, material to the contract.
VIOLENCE - Serious or irresistible force is employed in order to wrest consent.
INTIMIDATION - One of the contracting parties is compelled by a reasonable and well- grounded fear of an imminent and grave evil upon him or his property.
UNDUE INFLUENCE - When a person takes improper advantage over the will of another, depriving the latter of a reasonable freedom of choice.
FRAUD - Through insidious words or machinations of one of the contracting parties, the other is induced to enter to a contract, which without them, he would not have agreed to - Two kinds of Fraud: * Incidental Fraud * Casual Fraud
Objects of a Contract
Future things may be the object of a contract provided they have potential existence.
Requirements: Not outside commerce, transmissible, not contrary to law, possible, determinate.
Kinds of Defective Contracts
Rescissible: Can be rescinded for reparation of damage.
Voidable: Valid unless annulled by court action.
Unenforceable: Cannot be enforced unless ratified.
Void: No effect, cannot be ratified.
Contract For A Piece of Work
CONTRACTOR SUPPLIED MATERIALS (CSM)
OWNER SUPPLIED MATERIALS (OSM)
Two Common Forms of Contract For A Piece of Work
LUMP SUM CONTRACT
COST PLUS CONTRACT
Discharge of Contract
Performance.
Substantial Performance.
Impossibility of Performance.
Agreement.
Breach of Contract.
Damages
Estimated compensation for damage sustained.
Kind of Damages
Actual Damages.
Moral Damages.
Nominal Damages.
Temperate Damages.
Liquidated Damages.
Exemplary Damages.
National Building Code of the Philippines (PD 1096)
Adopted in 1977, revising R.A. No. 6541.
Policy: To safeguard life, health, property, and public welfare.
Purpose: Framework of minimum standards for buildings and structures.