Essential Elements | Elements of a Contract | General Provisions | Contracts | OBLIGATIONS AND CONTRACTS

The essential elements of a contract, as governed by Philippine Civil Law, are fundamental requirements that must be present for a contract to be valid and legally enforceable. The Civil Code of the Philippines enumerates these elements and provides specific definitions and parameters for each. These elements fall into three primary categories: consent, object, and cause of obligation, which must coexist for a contract to be perfected.

1. Consent

Consent is a critical element of any contract, as it represents the agreement of the parties involved. For consent to be valid, the following requirements must be met:

• Mutuality: Both parties must agree to the same terms without ambiguity. A “meeting of the minds” is necessary.
• Free Will: Consent must be freely given without any form of coercion, undue influence, mistake, fraud, or intimidation. Any presence of these vices vitiates consent.
• Capacity to Give Consent: Parties must have the legal capacity to enter into a contract. Under Philippine law, those lacking capacity include:
  • Minors (except in specific cases, such as those involving necessities or where emancipated)
  • Insane or demented persons
  • Those under civil interdiction or other legal restrictions.
• Requisites for Offers and Acceptance: An offer must be clear, definite, and communicated, while the acceptance must be absolute and made in a manner prescribed by law or the offer itself. Acceptance must mirror the terms of the offer; otherwise, it constitutes a counter-offer.

A defect in consent, such as an error on an essential term, fraud, undue influence, or intimidation, renders the contract voidable, meaning it is valid until annulled by the aggrieved party.

2. Object

The object of a contract refers to the subject matter over which the contract is created. For an object to meet the requirements under Philippine law, it must adhere to the following characteristics:

• Determinate or Determinable: The object must be identifiable and specified in the contract. It must either be present (already existing) or capable of future existence and must be within commerce. A determinate object is one that is specifically identified, while a determinable object can be specified upon performance.
• Legality: The object of the contract must be lawful. Objects that are illegal, impossible, or contrary to public policy render the contract void ab initio. Examples include contracts for illegal acts or purposes, such as contracts for illegal drugs, fraud, or activities against public morals.
• Possibility: The object must be possible at the time the contract is created. Contracts over objects that are physically or legally impossible are considered void.

An object that fails to meet these requirements results in the contract being null and void.

3. Cause (Causa)

The cause of a contract, as provided in Article 1350 of the Civil Code, is the essential reason why each party enters into the contract. The cause is closely related to the purpose of the contract and varies according to the type of contract involved:

• Onerous Contracts: The cause is the prestation or obligation promised by the other party. For example, in a sales contract, the cause is the payment of the purchase price for the item being sold.
• Gratuitous Contracts: The cause is the liberality or generosity of the donor or giver. In donations, for example, the cause is the intention of the donor to give something without expecting anything in return.
• Remuneratory Contracts: The cause is the service or benefit rendered by one party, with the other party agreeing to compensate. This is applicable in cases where services have already been performed and compensation is promised afterward.
• Legality and Validity: The cause must be lawful and moral. An illicit cause, one contrary to law, morals, good customs, or public order, makes the contract void.

The cause must exist, and the Civil Code provides that if the cause is not stated in the contract, it is presumed to exist unless proven otherwise.

Void Contracts Due to Absence of Essential Elements

The absence of any essential element results in a void contract, which is legally considered non-existent and cannot be ratified or enforced in any court of law. Void contracts differ from voidable contracts, as voidable contracts possess all essential elements but may be annulled due to defects in one of those elements, often related to consent.

• Void Contracts: Lack an essential element and are treated as if they never existed.
• Voidable Contracts: Have all essential elements but are defective, often due to vitiated consent. These can be ratified unless the aggrieved party petitions for annulment within a prescribed period.

Effects and Legal Implications of Each Element

• On Consent: Defective consent allows for the annulment of the contract at the instance of the party whose consent was vitiated. Should the consent be declared valid, the contract becomes enforceable.
• On Object: The object must be legal and possible, or the contract is void. An indeterminate object renders a contract void if the indeterminacy cannot be remedied.
• On Cause: A lawful and stated cause is presumed by the Civil Code; if proven otherwise, the contract is void. Courts may inquire into the cause if it is illicit, rendering the contract void and without binding effect.

The Principle of Autonomy of Contracts and Limitation of Contractual Freedom

The Civil Code upholds the autonomy of contracts (Article 1306), allowing parties the freedom to stipulate terms and conditions. However, this freedom is limited by the law, particularly concerning the essential elements, public order, and moral considerations. Courts may declare a contract void if it is shown to contradict law, morals, or public policy, regardless of the parties' intentions.

Conclusion

For a contract to be legally binding in the Philippines, it must contain the three essential elements of consent, object, and cause. Without these elements, or with defects in any of them, the contract may either be voidable or entirely void. Understanding these requirements ensures that agreements are enforceable and protects parties from potential legal disputes that arise from void or voidable contracts.

Essential Elements | General Provisions | Obligations | OBLIGATIONS AND CONTRACTS

CIVIL LAW > V. OBLIGATIONS AND CONTRACTS > A. Obligations > 2. General Provisions > b. Essential Elements

Under Philippine law, the concept of obligations is foundational, and understanding its essential elements is crucial for properly interpreting and applying legal provisions. Obligations, as defined in the Civil Code of the Philippines (specifically, Article 1156), are juridical relations by which one party is bound to render a performance to another party. The essential elements of an obligation are critical to ensure its enforceability, and these elements are classified into active subject, passive subject, prestation, and juridical tie or vinculum juris.

1. Active Subject (Creditor or Obligee)

The active subject is the individual or entity entitled to demand the performance of the obligation. They possess the right to enforce the obligation and can seek judicial relief should the passive subject fail to fulfill the prestation. The active subject holds the legal power to compel the passive subject to act or refrain from an action in accordance with the terms of the obligation.

• Relevance: The active subject’s role underscores the personal nature of an obligation, where specific parties hold rights and responsibilities.
• Requirement: The active subject must be clearly identifiable; if there is any ambiguity about who the active subject is, the enforceability of the obligation may be compromised.

2. Passive Subject (Debtor or Obligor)

The passive subject is the individual or entity bound to fulfill the obligation. This party has the responsibility to render the prestation, which may involve giving, doing, or refraining from doing something.

• Liability: The passive subject bears the burden of compliance and is susceptible to legal action if they fail to meet the obligation’s terms.
• Identifiability: Similar to the active subject, the passive subject must be ascertainable to establish a clear duty.

3. Prestation (Object or Subject Matter of the Obligation)

The prestation is the conduct or object of the obligation, representing the act or forbearance that the passive subject is required to deliver. Prestation has several characteristics:

• Specificity: It must be determinable, legal, and possible. The prestation cannot be something that is contrary to law, morals, good customs, public order, or public policy, as specified in Article 1306.
• Types of Prestation:
  • To give – The obligation to deliver something specific or determinate. This can include movable or immovable property and may entail rights or entitlements.
  • To do – The obligation to perform a particular act, such as rendering services.
  • Not to do – The obligation to abstain from performing a particular act. Breach occurs if the debtor does what he is obliged not to do.
• Possibility and Lawfulness: The prestation must be possible both physically and legally. If the prestation is impossible or illegal, the obligation is void from the outset.

4. Juridical Tie (Vinculum Juris)

The juridical tie or vinculum juris represents the legal bond that unites the active and passive subjects in the obligation. It is the reason or basis for the obligation’s existence, which may arise from the following sources as outlined in Article 1157:

• Law: Certain obligations are imposed by law, without the need for a contractual agreement (e.g., the obligation of parents to support their children).
• Contracts: Voluntary agreements or contracts are the primary source of obligations and must adhere to the principles of consent, object, and cause for validity.
• Quasi-contracts: Obligations that arise from lawful, voluntary, and unilateral acts that create a binding responsibility without an express contract (e.g., solutio indebiti – the return of undue payments).
• Delicts: Civil obligations that arise from criminal actions, where the offender is liable to provide restitution or indemnify damages resulting from the criminal act.
• Quasi-delicts or torts: Obligations arising from fault or negligence that result in damages to another, independent of a contractual relationship.

Additional Legal Considerations in Obligations

1. Compliance and Breach: Obligations must be fulfilled in good faith, and non-performance, delayed performance, or defective performance can constitute a breach. Remedies for breach include specific performance, damages, rescission, and, in some cases, payment of a penalty as stipulated in a contract.

2. Consent: Although more relevant in contracts, consent impacts obligations as well. Parties must willingly undertake the obligations, and consent must not be vitiated by error, fraud, undue influence, or intimidation.

3. Capacity: The parties to an obligation must possess the capacity to contract or enter into legal relations. In cases of incapacity, such as minority or mental incompetency, the obligation might be unenforceable or voidable depending on the circumstances.

4. Cause or Consideration: Cause is essential for an obligation, particularly when arising from contracts. The cause must be lawful, true, and not contrary to morals or public policy; otherwise, the obligation could be nullified.

Legal Effects of Obligations

• Binding Nature: Obligations are binding and enforceable by law, and both parties are expected to perform as agreed.
• Liability for Non-Performance: Failure to perform an obligation, whether partially or fully, entitles the aggrieved party to seek legal recourse. Remedies may include:
  • Demanding fulfillment or specific performance
  • Seeking compensation for damages incurred
  • Invoking penalties stipulated in a contract where applicable.

Key Civil Code Provisions Relevant to the Essential Elements of Obligations

• Article 1156: Defines an obligation as a juridical necessity to give, to do, or not to do.
• Article 1157: Enumerates the sources of obligations – law, contracts, quasi-contracts, delicts, and quasi-delicts.
• Article 1159: Provides that obligations arising from contracts have the force of law between contracting parties.
• Article 1306: Establishes the principle of autonomy of contracts, allowing parties to stipulate terms as long as they are not contrary to law, morals, good customs, public order, or public policy.

Summary

In sum, the essential elements of obligations under Philippine law (active subject, passive subject, prestation, and juridical tie) form the backbone of enforceable obligations. These elements ensure that the obligations are clearly defined, legally permissible, and actionable. The enforcement and interpretation of these obligations are governed by established principles that protect the rights and duties of each party involved. The binding nature of obligations, adherence to contractual freedom, and respect for the rule of law underpin the legal structure for obligations in the Philippines.