Understanding Contract Law: Essential Elements and Validity

What Is a Contract?

A contract is an agreement of wills between two or more persons, by which one or more of them consent to be bound to another or others to give something or provide a service. The essence of the contract is the agreement of wills; without it, there is neither a contract nor the obligations derived from it. This agreement requires two key elements: offer and acceptance.

Essential Elements of a Contract

A contract is only valid when the following requirements concur:

• Consent of the contracting parties.
• A certain object which is the subject matter of the agreement.
• The cause of the obligation established.

A. Consent

Consent is the meeting of offer and acceptance, which entails the birth of the contract. However, consent may be defective due to three causes, rendering the contract annullable:

• Error: Must be excusable. If the error resulted from open negligence, it is not considered a valid error.
• Malice: May be carried out by action or omission.
• Duress or Intimidation: Occurs if an irresistible force is applied to extract consent.

B. Object

The object of the contract is to give something or provide a service. This refers to the object of obligations—giving, doing, or refraining from doing something—as a contract is a bundle of reciprocal obligations. The object must be possible, lawful, and determined.

C. Cause

The "cause" of a contract is the true intention of the parties when entering into the agreement:

• Onerous Contracts: The cause is the thing or service to be received by the other party.
• Gratuitous Contracts: The cause is the generosity or liberality of the other party.

Unless proven otherwise, the law presumes that the cause exists, is true, and is lawful.

D. Interpretation of Contracts

If the terms of a contract are clear and leave no doubt regarding the intention of the contracting parties, they shall abide by the literal meaning of the clauses.