CONTRACTS AND

CONTRACTS AND
OBLIGATIONS
Archt.
Maundelito
Archt.OBLIGATIONS
MaundelitoS.
S.Florendo,
Florendo,UAP
UAP
the
Brown
Bauhaus
the Brown Bauhaus

DEFINITIONS
DEFINITIONS
Contract
Contract -- is
is aa "promise"
"promise" or
or an
an "agreement"
"agreement"
made
made of
of aa set
set of
of promises.
promises. Breach
Breach of
of this
this
contract
contract is
is recognized
recognized by
by the
the law
law and
and legal
legal
remedies
remedies can
can be
be provided.
provided.
In
In civil
civil law,
law,contracts
contracts are
are considered
considered to
to be
be part
part
of
of the
the general
general law
law of
of obligations.
obligations. The
The law
law
generally
generally sees
sees performance
performance of
of aa contract
contract as
as aa
duty.
duty.

ARCHITECTURAL
ARCHITECTURAL CONTRACT
CONTRACT DOCUMENTS
DOCUMENTS

S
Specifications
pecifications
W
Working
orking Drawings
Drawings
A
Agreements
greements
G
General
eneral Conditions
Conditions
S
Special
pecial Provisions
Provisions

CONTRACT
CONTRACT vs.
vs. TORT
TORT OF
OF LAW
LAW
The
Thelaw
lawof
ofobligations
obligationshas
hastraditionally
traditionallybeen
beendivided
dividedinto
intotwo
twocategories
categories::

contractual
contractual obligations
obligations--are
arevoluntarily
voluntarilyundertaken
undertakenand
andowed
owedto
toaa
specific
specificperson
personor
orpersons.
persons.

obligations
obligations in
in tort
tort--are
arebased
basedon
onthe
thewrongful
wrongfulinfliction
inflictionof
ofharm
harmto
to

certain
certainprotected
protectedinterests,
interests,primarily
primarilyimposed
imposedby
bythe
thelaw,
law,and
andtypically
typically
owed
owedto
toaawider
widerclass
classof
ofpersons.
persons.
Recently
Recentlyitithas
hasbeen
beenaccepted
acceptedthat
thatthere
thereisisaathird
thirdcategory
category::

restitutionary
restitutionary obligations
obligationsare
arebased
basedon
onthe
theunjust
unjustenrichment
enrichmentof
of
the
thedefendant
defendantat
atthe
theplaintiffs
plaintiffsexpense.
expense.

Contractual
Contractualliability
liability,,reflecting
reflectingthe
theconstitutive
constitutivefunction
functionof
ofcontract,
contract,isisgenerally
generally
for
forfailing
failingto
tomake
makethings
thingsbetter
better(by
(bynot
notrendering
renderingthe
theexpected
expectedperformance),
performance),
liability
liabilityinintort
tortisisgenerally
generallyfor
foraction
actionmaking
makingthings
thingsworse,
worse,and
andliability
liabilityinin
restitution
restitutionisisfor
forunjustly
unjustlytaking
takingor
orretaining
retainingthe
thebenefit
benefitof
ofthe
theplaintiffs
plaintiffs money
moneyor
or
work.
work.

CONTRACT FORMATION
There must be an agreement which consists of an offer and
acceptance, consideration, and contractual intention
for a simple contract to exist.
Other ingredients that make up a contract include:

Form

- In some cases, certain formalities (that is, writing) must

be observed.
Capacity - The parties must be legally capable of entering into a
contract.
Consent - The agreement must have been entered into freely.
Consent may be vitiated by duress (undue influence).
Legality - The purpose of the agreement must not be illegal or
contrary to public policy.

Meaning and effect of contract terms: Many contract

disputes involve a disagreement between the parties about
what terms in the contract require each party to do or
refrain from doing. Hence, many rules of contract law
pertain to interpretation of terms of a contract that are
vague or ambiguous. The parol evidence rule limits what
things can be taken into account when trying to interpret a
contract.
Privity: In general, only parties to a contract may sue for the
breach of a contract, although in recent years the rule of
privity has eroded somewhat and third party beneficiaries
have been allowed to recover damages for breaches of
contracts they were not party to.

ADJUDICATION
ADJUDICATIONand
and LITIGATION
LITIGATION
Adjudication is the legal process by which an arbiter or
judge reviews evidence and argumentation including legal
reasoning set forth by opposing parties or litigants to come
to a decision which determines rights and obligations
between the parties involved.

Three types of disputes are resolved through

adjudication:
Disputes between private parties, such as individuals or
corporations
Disputes between private parties and public officials
Disputes between public officials or public bodies

VALIDITY
VALIDITYOF
OF CONTRACT
CONTRACT
Mutual
Mutual agreement
agreement -- There
There must
must be
be an
an express
express or
or implied
implied
agreement.
agreement. The
The essential
essential requirement
requirement isis that
that there
there be
be
evidence
evidence that
that the
the parties
parties had
had each
each from
from an
an objective
objective
perspective
perspective engaged
engaged in
in conduct
conduct manifesting
manifesting their
their assent,
assent,
and
and aa contract
contract will
will be
be formed
formed when
when the
the parties
parties have
have met
met
such
such aa requirement.
requirement.
Consideration
Consideration -- There
There must
must be
be consideration
consideration given
given by
by all
all
the
the parties,
parties, meaning
meaning that
that every
every party
party isis conferring
conferring aa benefit
benefit
on
on the
the other
other party
party or
or himself
himself sustaining
sustaining aa recognizable
recognizable
detriment,
detriment, such
such as
as aa reduction
reduction of
of the
the party's
party's alternative
alternative
courses
courses of
of action
action where
where the
the party
party would
would otherwise
otherwise be
be free
free to
to
act
act with
with respect
respect to
to the
the subject
subject matter
matter without
without any
any limitation.
limitation.
Consideration
Consideration need
need not
not be
be adequate,
adequate, for
for instance
instance agreeing
agreeing
to
to buy
buy aa car
car for
for 11 peso
peso may
may constitute
constitute aa binding
binding contract.
contract.

VALIDITY
VALIDITYOF
OF CONTRACT
CONTRACT
Competent,
Competent, Adult
Adult ((Sui
Sui Juris)
Juris) Parties
Parties:: Both
Both parties
parties must
must
have
have the
the capacity
capacity to
to understand
understand the
the terms
terms of
of the
the contract
contract
they
they are
are entering
entering into,
into, and
and the
the consequences
consequences of
of the
the promises
promises
they
they make.
make. CCorporations
orporations are
are considered
considered persons
persons under
under the
the
law,
law,and
and thus
thus fit
fit to
to engage
engage in
in contracts.
contracts.
Proper
Proper Subject
Subject Matter
Matter:: The
The contract
contract must
must have
have aa lawful
lawful
purpose.
purpose.
Mutual
Mutual Right
Right to
to Remedy
Remedy:: Both
Both parties
parties must
must have
have an
an equal
equal
right
right to
to remedy
remedy upon
upon breach
breach of
of the
the terms
terms by
by the
the other
other party.
party.

VALIDITY
VALIDITYOF
OF CONTRACT
CONTRACT
Mutual
Mutual Obligation
Obligation to
to Perform
Perform:: Both
Both parties
parties must
must have
have
some
some obligation
obligation to
to fulfill
fulfill to
to the
the other.
other.This
This can
can be
be distinct
distinct from
from
consideration
consideration,, which
which may
may be
be an
an initial
initial inducement
inducement into
into the
the
contract.
contract.
Intention
Intention to
to create
create legal
legal relationship
relationship:: There
There isis aa strict
strict
presumption
presumption for
for commercial
commercial agreements
agreements to
to be
be legally
legally bound.
bound.
Written
Written contracts
contracts -- Contrary
Contrary to
to common
common wisdom,
wisdom, an
an
informal
informal exchange
exchange of
of promises
promises can
can still
still be
be binding
binding and
and
legally
legally as
as valid
valid as
as aa written
written contract.
contract. AA spoken
spoken contract
contract
should
should be
be called
called an
an ""oral
oral contract"
contract",, but
but itit isis often
often erroneously
erroneously
called
called aa ""verbal
verbal contract.
contract."" Any
Any contract
contract that
that uses
uses words,
words,
spoken
spoken or
or written,
written, isis aa verbal
verbal contract.
contract.

Void, voidable and unenforceable contracts

In general, there are three classifications of contracts that are not binding:

Void: If a contract is held to be void, the contract is considered

never to have come into existence. For example, a contract is
void if it is based on an illegal purpose or contrary to public
policy.
Voidable: A contract is voidable if one of the parties has the
option to terminate the contract.
Unenforceable: If a contract is unenforceable, neither party
may enforce the other's obligations.

Uncertainty
Uncertainty and
and Incompleteness
Incompleteness
If the terms of the contract are uncertain or incomplete, the
parties cannot have reached an agreement in the eyes of the
law.
An agreement to agree does not constitute a contract, and an
inability to agree on key issues, which may include such
things as price or safety, may cause the entire contract to fail.
However, a court will attempt to give effect to commercial
contracts where possible, by construing a reasonable
construction of the contract.

Severance
Severance of
of Unenforceable
Unenforceable Clauses
Clauses
If there are uncertain or incomplete clauses in the contract,
and all options in resolving its true meaning have failed, it
may be possible to sever and void just those affected clauses
if the contract includes a severability clause.
The test of whether a clause is severable is an objective test whether a reasonable person would see the contract standing
even without the clauses.

Bilateral
Bilateral vs.
vs. Unilateral
Unilateral Contracts
Contracts
A Bilateral Contract, is an agreement in which each of the
parties to the contract makes a promise or promises to the
other party.
For example, in a contract for the sale of a home, the buyer promises to
pay the seller $200,000 in exchange for the seller's promise to deliver title
to the property.

A Unilateral Contract, only one party to the contract makes

a promise.
A typical example is the reward contract: A promises to pay a reward to B
if B finds A's dog. B is not obliged to find A's dog, but A is obliged to pay
the reward to B if B finds the dog. In this example, the finding of the dog is
a condition precedent to A's obligation to pay.

Expressed
Expressed and
and Implied
Implied Contracts
Contracts
A contract can be either an Expressed Contract or an Implied
Contract. An Expressed Contract is one in which the terms
are expressed verbally, either orally or in writing. An Implied
Contract is one in which some of the terms are not
expressed in words.

Implied
Implied in
in fact
fact or
or implied
implied in
in law
law
A contract which is Implied in Fact is one in which the
circumstances imply that parties have reached an agreement
even though they have not done so expressly.
For example, by going to a doctor for a physical examination, a patient
agrees that he will pay a fair price for the service. If he refuses to pay after
being examined, he has breached a contract implied in fact.

Quasi-Contract
Quasi-Contract
A contract which is implied in law is also called a quasicontract, because it is not in fact a contract; rather, it is a
means for the courts to remedy situations in which one party
would be unjustly enriched were he or she is not required to
compensate the other.
For example, an unconscious patient treated by a doctor at the scene of
an accident has not agreed (either expressly or by implication) to pay the
doctor for emergency services, but the patient would be unjustly enriched
by the doctor's services were the patient is not required to compensate
the doctor.

Different
Different Types
Typesof
of Statements
Statements
Puff (sales talk): If no reasonable person hearing this
statement would take it seriously, it is a puff, and no action in
contract is available if the statement proves to be wrong. It
may also be referred to as "puffery".
Representation: A representation is a statement of fact
made to induce another person to enter into a contract and
which does induce them to enter into a contract, but it is one
that the maker of the statement does not guarantee its truth.
If the statement proves to be incorrect, it cannot be enforced,
as it is not a term of the contract, but it may prove to be a
misrepresentation, whereupon other remedies are available.
Term: A term is similar to a representation, but the truth of
the statement is guaranteed by the person who made the
statement. The test is an objective test.

Factors
Factors that
that aa Court
Court may
may take
take into
into Account
Account in
in
Determining
Determining the
the Nature
Nature of
of aa Statement
Statement
Timing: If the contract was concluded soon after the statement
was made, this is a strong indication that the statement induced
the person to enter into the contract.
Content of Statement: It is necessary to consider what was
said in the given context, which has nothing to do with the
importance of a statement.
Knowledge and Expertise: A person selling a car to a secondhand car dealer stated that it was a 1948 Morris, when in fact it
was a 1939 model car. It was held that the statement did not
become a term because a reasonable person in the position of
the car dealer would not have thought that an inexperienced
person would have guaranteed the truth of the statement.

Agreements
Agreements to
to negotiate
negotiate
It is common for lengthy negotiations to be written into a heads
of agreement document that includes a clause to the effect that
the rest of the agreement is to be negotiated. Although these
cases may appear to fall into the category of agreement to
agree, courts nowadays will imply an obligation to negotiate in
good faith provided that certain conditions are satisfied:
- Negotiations were well-advanced and the large proportion of
terms have been worked out; and
- There exists some mechanism to resolve disputes if the
negotiations broke down.
The test of whether one has acted in good faith is a subjective one; the cases
suggest honesty, and possibly also reasonably!