Key Concepts in Contract Law: Formation, Third Parties, and Remedies

Essential Elements of a Contract

Vices of Consent:

• Error
• Violence
• Intimidation
• Fraud

Purpose Requirements:

• Legality
• Opportunity
• Determination

Types of Cause:

• Free (Gratuitous)
• Expensive (Onerous)
• Illicit

Contract Formation Stages

• Generation
• Perfection
• Consummation

Generation Stage Details

• Pre-contractual period
• Offer and acceptance

Contract Between Absent Parties (Theories)

• Broadcast (Declaration)
• Expedition (Sending)
• Cognition (Knowledge)
• Reception

Contract in Favor of a Third Party

A contract where the contractors, acting on their own behalf, stipulate that one party (the Promisor or Promitente) will provide a benefit in favor of a third party (the Beneficiary), who is a stranger to the contract stipulation imposed by the other contracting party (the Promisee or Estipulante).

Prerequisite for Effectiveness:

Acceptance by the third party (Beneficiary).

The Hedging Relationship (Promisee and Promisor)

This is the normal contractual relationship. Before the third party's acceptance, the provision can be resolved by mutual agreement, provided the power to revoke the stipulation was reserved. Revocation is possible if the third party has not yet accepted.

Relationship Between Promisee and Third Party (Valuation Relationship)

This relationship arises from the liberality of the Promisee and determines the underlying cause:

• Donandi Causa: Based on liberality (donation).
• Solvendi Causa: Based on the Promisee's debt or compensation due (payment).
• Crescendi Causa: Based on creating a credit.

Contractual Ineffectiveness and Nullity

Ineffectiveness Definition

Cases where the contract fails to produce the intended effects or stops producing them.

Examples of Ineffective Contracts:

• Contracts subject to suspensive conditions.
• Contracts involving the concealment of assets.

Causes of Extrinsic Ineffectiveness (Termination)

Ineffectiveness resulting from certain defects or shortcomings extrinsic to the contract, such as:

• Mutual consent (Rescission)
• Cancellation
• Unilateral withdrawal
• Revocation
• Termination for default
• Occurrence of a resolutory condition

Absolute Nullity (The Most Severe Form of Ineffectiveness)

Causes of absolute nullity include:

• Lack or absence of any essential element of the contract.
• Breach of any legal requirement for the contract.
• Illegality of the cause.
• Breach of mandatory rules, morality, or public order.
• Acts of gratuitous title concerning common marital property made by one spouse without the consent of the other.

Characteristics of Absolute Nullity

• It is non-confirmable (indefeasible).
• The objective is restitution (undoing the contract).
• Any interested party may invoke it.

Voidability (Annulability)

A contract that may be annulled, but continues to have effect if the annulment is not sought.

Causes of Voidability:

• All vices of consent (error, violence, intimidation, fraud).
• Lack of full capacity to act by any of the contractors.
• Lack of spousal consent for onerous contracts made by the other spouse.

Statute of Limitations:

The limitation period for seeking annulment is 4 years.