Contract Law under the Contract

In Scots law, a contract is formed when an offer meets an unequivocal acceptance. This is then considered as a legally binding obligation. A promise can also be considered as a legally binding obligation, as no consideration is required before the same can be said to be legally binding. Further, a contract is deemed to embody all the terms and conditions agreed to in the negotiation of the contract, but extrinsic evidence may be presented to prove terms and conditions that are merely implied under the contract.

Under the Contract (Scotland) Act, if there is a declaration in the same contract that the terms and conditions do represent the intentions of the parties, then there can be no extrinsic proof to prove deviation from the terms and conditions as written in the contract. Applying Scots law on contracts therefore to sales of land, a contract for the purchase of land is complete upon the receipt of the buyer’s written offer with the subsequent written acceptance of the solicitor or agent of the seller.

In case the contract is breached, the offended party may choose to use self-help (such as suspending future obligations under the contract) or seek redress from courts of law by having a judge order that the obligation be fulfilled, with damages to the offended party. In any case, actions arising from breach must be instituted within five years. There are then two classes of defective contracts in Scotland: void and voidable contracts. Void contracts are said to not exist, as there is a factor that prevents its formation.

On the other hand, when the contract is voidable, the contract is said to have been procured through questionable means, which may be challenged in court. In general, for the contract to be invalid there must be either force and fear, fraud, facility and circumvention (that is, taking advantage of the weakened mental state of another), undue influence, and error, which refers to that degree of mistake that affected the ability of one or both parties to contract. Philippines law follows a restricted view of contracts found in the Spanish Civil Code which we have preserved.

In its derivative sense, the word “contract” (cum traho) simply means an agreement or convention. It must be noted, however, that a contract is not exactly synonymous with a convention. Contracts are limited exclusively to those agreements which produce patrimonial obligations. It is clear that “convention” is the genus; “contract” is the specie. A contract may be 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.

From the very definition of a contract, it is evident that two parties must exist for a contract to exist. This must be added to the requirements of consent, object certain, and cause. Consequently, a person cannot enter into a contract with himself. As such, Philippine law mandates that no contract is present unless these three requisites concur: consent of the contracting parties; object certain which is the subject matter of the contract; and cause of the obligation which is established.

Vices of consent in a contract may be divided into two kinds: vices of the will, which comprehends mistake, violence, intimidation, undue influence, and fraud; and vices of declaration, which comprehends all of the forms of simulation of contracts. The presence of any of these vices makes a contract voidable in Philippines law. As to objects of the contract, as a general rule, all things or services may be the object of contracts. However, it is essential that the following requisites must concur: The object should be within the commerce of men.

In other words, it should be susceptible of appropriation and transmissible from one person to another. The object should be real or possible; in other words, it should exist at the moment of the celebration of the contract, or at least, it can exist in the future. The object should be licit; it should not be contrary to law, morals, good customs, public order or public policy. The object should be determinate, or at least determinable as to its kind. Any object not falling under the enumeration that is subject of a contract renders that contract void in Philippines law.