The Basic Elements of Contracts

If a contract brings you to court, it’s a poorly-prepared contract. The rationale for this statement is this – if the rights and obligations of the parties are clearly provided and defined, there’s a lesser chance of misinterpretation. This, of course, is not necessarily true. Even a carefully drafted contract, prepared by the big law firms, may still end up in court if the parties do not comply in good faith with their respective obligations. Still, it would be better to know the basic elements of a contract.

A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some services. A contract is also 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.” A contract binds both contracting parties and has the force of law between them.

There are different kinds of contracts and there may be a host of additional provisions to a basic contract. These flavors and add-ons will be further discussed in this series on contracts. Right now, let’s start with the basics – the 3 elements or requisites of a contract. There can be no contract unless the following requisites are present:

(1) consent of the contracting parties;
(2) object certain which is the subject matter of the contract; and
(3) cause of the obligation which is established.

Consent. Contracts are generally perfected by mere consent, which is the reason why there’s such a thing as oral contracts. It’s a meeting of the minds between the parties: there’s a definite offer by one person and there’s an absolute acceptance by another.

Subject Matter. A thing, right or service may be the object or subject matter of a contract. All things that are outside the commerce of man (e.g., the moon) may not be the object of a contract. Rights that are transmissible (e.g., the right to possess a real property) may be the subject of a contract. Services, on the other hand, must not be contrary to law, morals, good customs, public order of public policy (e.g., services of an assassin or a prostitute).

Cause. The cause varies according to the type of contracts: (a) for onerous contracts, the cause is the promise of a thing or service by the other; (b) for remunatory contracts, the cause is the service or benefit which is being remunerated; and (c) for contracts of pure beneficence, the cause is the mere liberality of the benefactor. These concepts may appear alien, but since this is merely a brief discussion, suffice it to state that a “cause” is technically different from a contract’s object (or subject matter, as discussed above) or motive.

These three requisites are important because there’s no perfected contract without them. This discussion is just the tip of the iceberg, so to speak, and future discussions will hopefully clarify certain matters that may be of interest to Pinoy Entrepreneurs, considering that contracts are inseparable from business transactions.

* I originally posted this article at the Pinoy Entrepreneurs blog. There are other discussions on contracts, such as the title, preamble or whereas clause, parties, the term or period, venue, fortuitous events or force majeure, earnest money, option money and downpayment, and equitable mortgage and sales.

18 thoughts on “The Basic Elements of Contracts

  1. Jantzen

    I would like to ask if there is any possible solution on my problem. A used car was offered to me by a friend of mine. The car was technically not in good running condition for it was parked in his garage for quite sometime. Although it was running but its engine was stuck on third gear ( automatic trans). Since that person owed me P20,000 and car selling price was for 50 with an option to pay it on installment basis. I spent more than P10,000 to have the car fixed as i was permitted by the seller to get it fix first before paying the remaining balance. Or/cr and deed of sale will be given to me when i am fully paid. The car was in my posession for more than a month then it was borrowed by the owner with the promise of returning it after 2 weeks. It has been 2 months now and it was never returned. I am humbly seeking for your legal advise, please help me for i dont know what to do, i am very much thankful if this letter will be gven a favorable response. Thank you.

    1. Enzo

      I would like to know the best way to execute a good contract online since my partner is based overseas and service will be done locally. Are e-documents with digital signature just as good as paper documents? What is my best option on this situation? Thanks.

  2. Rem

    Hi, my friend offered me, in the Facebook messenger conversation, that he will give me a 10% comission of the total amount of the product that my friends will purchase from him in every shipment for me to encourage my friends to buy his product in huge quantity he said as minimum order for 1 shipment and become distributors im their respective area. It was good at first he’s paying the right amount until the 6th shipments but after that his wife changed the computation it became so far low that what’s agreed and threatens me that I should also order from them a wholesale of huge quantity every month so that they will give me my commisions of the shipments bought by my friends. My friends already had 12 shipment total and his wife don’t want to give me what is supposed to be my commision. I have made a screenshot of all our conversations about the agreement.and also the messages feom his wife about the changes in the computation and the threat. Do I have a chance to win this case in case I will sue them? Does the oral agrewment really exists? In my case I have save all the screenshots of the promises he made and the threats from his wife with their fb profiles in it, will this still be called an oral or verbal agreement?


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