LEGAL OPINION

CONTRACTS

NATURE OF CONTRACTS

What is a contract?
- an agreement having a lawful object entered into voluntarily by two or
more parties, each of whom intends to create one or more legal obligations between
them.
According to Article 1305, contract is defined as a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or
to render some service.

From the definition of a contract above, we can assume the following

:

(a) There are at least two parties involved in a

(creditor) and a passive subject (debtor).

contract an active subject

(b) An obligation is created because the passive subject promises to the active
subject the performance of a prestation, either to give something (to give), or to
render some service (to do or not to do ).
(c) By agreement between the parties, a civil obligation is created. At this point, we
make a distinction between an agreement and a contract . If two parties agree on
the performance of a moral or social obligation, there is an agreement but there is
no contract. However, if the parties agree on the performance of civil obligation, the
result is a contract which is legally enforceable in court.
(d) A contract gives rise to an obligation between the parties to the contract. Hence,
there can be no contract if there is no obligation.

PURPOSE/FUNCTION

to define both parties responsibilities with respect to a desired scenario

outcome to the level of detail necessary to make both parties comfortable
with respect to the relationship.

to establish the agreement that the parties have made

to fix their rights and duties in accordance with that agreement.

to document what each party to a contract is obligated to do for the other.

to assign consequences in the event either party is unable to perform the

duties taken up under the terms laid out in the original contract.

ELEMENTS OF A CONTRACT

Essential Elements

Consent
Subject Matter
Consideration

Natural Elements

otherwise

stipulated

these

elements

are

Accidental Elements

unless
presumed to exist.

Those agreed upon by the parties like agreement to pay in five equal
instatement.

When is a contract perfected?

Consensual Contract like sale is perfected by mere consent.

Real Contract like pledge, is perfected by the delivery of the thing.
Formal Contract like donation of parcel of land where a subdivision chapel share
built requires public instrument.

STAGES OF CONTRACT FORMATION

1. Preparation, conception, or generation, which is the period of negotiation and

bargaining, ending at the moment of agreement of parties.
2.

Perfection or birth of the contract, which is the moment when the parties
come to agree on the terms of the contract.

3. Consummation or death, which is the fulfillment or the performance of

terms agreed upon the contract.

DIFFERENCE BETWEEN CONTRACT OF SALE AND CONTRACT TO SELL

I. CONTRACT TO SELL
a formal agreement in which a person, company, etc.
agrees to sell something to a buyer at a time in the future, and the buyer agrees to
buy it.

II. CONTRACT OF SALE

Formal contract by which a seller agrees to sell and a
buyer agrees to buy, under certain terms and conditions spelled out in writing in the
document signed by both parties. An invoice, for example, is a contract of sale. Also
called agreement of sale, contract for sale, sale agreement, or sale contract.

PARTS OF A CONTRACT

1. TITLE
The title is normally in all capital letters, centered and
underlined. The title should identify the type of contract using a generic term.

Ex.
DEED OF ABSOLUTE SALE
2. Introductory paragraph
This paragraph is not numbered. This first paragraph identifies the parties and the
type of transaction they are documenting, establishes defined terms for the parties,
and provides a reference date for the document.
Ex.
KNOW ALL MEN BY THESE PRESENTS:
This DEED OF ABSOLUTE SALE is made, executed and entered into by:

(NAME OF SELLER), of legal age, single/married to (Name of spouse if

any), Filipino, and with residence and postal address at (Address of Seller),
hereinafter referred to as the SELLER

-AND-

(NAME OF BUYER), Filipino and with residence and postal address at (Address of
Buyer), hereinafter referred to as the BUYER.
3. PREAMBLE/RECITALS
These set the context for the agreement and are useful for later interpretation of
the agreement. They also provide a place to list related transactional documents.
Preambles are traditionally preceded by the word WHEREAS, though this is
unnecessary. It is not necessary to title the section Recitals.
Recitals should include facts that will help a later reader grasp the nature, purpose
and basis for the agreement. Examples of appropriate facts include:

the relationship and goals of the parties;

the nature of the transaction; and

other transactional documents and things associated with the transaction.

EX.

4. SIGNATURE BLOCK

5. ACKNOWLEDGEMENT

To acknowledge is to admit, declare, testify, avow,

confess, or own as genuine.
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES)
_____________________________ ) SS.
BEFORE ME, a Notary Public for and in the City of ___________________, personally
appeared:

Name

CTC Number

Date/Place Issued

(Name of Seller)

10000000

(Name of Buyer)

10000000

Jan 15, 20__ / Angeles City

Jan 9, 20__ / Manila

Known to me and to me known to be the same persons who executed the foregoing
instrument and acknowledged to me that the same are their free act and voluntary
deed.

This instrument, consisting of (__) pages, including the page on which this
acknowledgment is written, has been signed on the left margin of each and every
page thereof by the concerned parties and their witnesses, and sealed with my
notarial seal.

WITNESS MY HAND
at_______________.

AND

SEAL

on

this

___day

of

__________________20__

Notary
Public

Doc. No. ........;

Page No. .......;
Book No. .......;
Series of 20__.