In every transaction, it is always important to have a meeting and understanding between the parties involved. To safeguard the conditions and rights of one another, contracts are made. As defined by the Civil Code, a contract is a meeting of minds. It is essentially a binding agreement that is enforceable which gives rise to obligations. There can be no contract if there is no obligation accepted. Articles 1305-1422 of the Civil Code predominantly rules over the topic on contracts. Article 1305 defines it as a meeting of minds where one person binds themself to the other party to either give something or render a service.
Valid Contract
It is important to take note of what constitutes a valid contract, since it is not just simply an agreement between parties. A contract, whether verbal or written, must meet all requisites (consent, object, cause) for it to be valid. All requisites must be present, otherwise it constitutes an invalid contract even if only one of it is missing. A then valid contract is legally binding and enforceable by the courts that results in having obligations. But, a contract meets all the criteria or requisites, but may not be enforceable for failure to comply with the Statute of Fraud. There are also certain transactions wherein verbal contracts are not enough, and must be stipulated in writing.
Limitations
As mentioned, not all contracts are immediately valid and binding. Contract limitations are as follows
- A contract must not be contrary to law
- Laws are rules of conduct that are integral parts of any contract. Any contract that goes against Philippine laws are ineffective and invalid. Consequently, acts that are executed through such contracts are void as well. However, some circumstances allow this when the law itself authorizes validity.
- It must not be contrary to morals
- Morals are defined as norms of good and right conduct, and are generally specified. It may be different for different times and places.
- It must not be contrary to good customs
- Customs are habits and practices followed and enforced as if they are binding rules of conduct. These are expressly mentioned as well. It also has the force of law when recognized and enforced by it.
- It must not be contrary to public order
- It must not endanger any individual and ensures public safety and public welfare.
- It must not be contrary to public policy
- Public policies are broader than public orders. This refers to policies and considerations moved by the common good (the good of all). When a contract has a tendency to be injurious or against public good is considered contrary to public policy.
Essential Requisites
There are three essential requisites of a contract, and all of these are needed to be present for a contract to be considered valid.
Consent is the concurrence of the will. Tthere is an agreement of one party upon another. The acceptance may be express or implied, and mere silence is not considered such.
Object is the subject matter of the contract which is either the thing or service. It should be within the commerce of men (be the subject of commercial transaction), must be determinate or specific, must be lawful, and must be legally and physically possible; this also applies to future things.
Lastly, the cause is the essential reason or purpose of the contract. This is why each party binds itself to one another. Unlike motives, the cause is always known to the other party and is not a personal or private reason. It should also be immediate or direct.
Stages of a Contract
In relation to the essential requisites, a contract undergoes three stages wherein these requisites are present. In the preparation or negotiation stage, it is where all steps leading to the perfection of the contract happens. This is when the parties lay out their conditions, and they have not yet arrived in definite agreement. The perfection stage succeeds the negotiation stage. This is where the “meeting of the minds” happens – meaning consent is already present and there is a definite agreement already. Therefore, the contract is already valid and binding. The last stage is the consummation or termination. In this stage, either performance, breach, and or extinction happens. Performance is when the parties adhere to their stipulated obligations. Contracts may also be fully accomplished or executed that results in extinguishment. A contract may also be terminated, but there should be a mutual agreement.
In the case of Buce vs Heirs of Galang, it involved a conditional sale contract for a 80 sqm lot. The buyer’s full payment became a suspensive condition for the transfer of ownership. The buyer failed to pay the 3% monthly interest for his intermittent payment resulting in delays. The court ruled to have a trial for the computation of unpaid balance and for the interest, evidently allowing the buyer be allowed to pay their balance with the stipulated interest. Afterwhich, the sellers are mandated to execute the contract to sell after complete payment of dues.1
Who Cannot Give Consent
As consent is an essential requisite of contracts, those who cannot expressly give their consent and enter into a contract must be taken note of. These are:
- Unemancipated minors
- These are the individuals who are below the age of majority or below 18 years of age. When giving consent, they are subject to parental authority.
- Insane or demented persons
- Insane or demented persons are those who are said to be mentally unwell and are mostly not in their lucid state. However, it must be proven that during the time they entered into a contract and gave their consent, they are not in the right state of mind or insane. Unless it is proven otherwise, the presumption is that they are sane during the transaction.
- Deaf-mutes
- These are the deaf and dumb individuals – those who do not know how to read and or write. If one knows how to write, the contract is considered valid for as long as they are capable of giving an intelligent consent.
- Buce v. Heirs of Apolonio Galang, G.R. No. 259066. (2023, December 4). Supreme Court of the Philippines. ↩︎
