Key Concepts in Contract Law: Stages, Effects, and Types
Fundamental Concepts in Contract Law
Debit vs. Responsibility
- Debit: The duty to carry out a performance (to give, to do, or not to do).
- Responsibility: The legal effects derived from the failure to carry out that performance; the legal consequence if you do not comply with that performance.
Stages of a Contract
- Preparatory (Conception): The process of formation, such as bargaining and negotiation, to reach a defined contract.
- Perfection (Birth): A meeting of minds to arrive at a definite agreement on the subject matter, cause or consideration, and terms and conditions of the contract.
- Consummation (Termination): The fulfillment or performance of the terms and conditions agreed upon in the contract, which have been fully accomplished or executed.
Effects of a Contract
- Principle of Enforceability: When you enter into a contract, the law enforces this obligation. This means that you have a subjective right to demand the fulfillment of the contract.
- Principle of Relativity: This means that the contract only applies to the parties involved in the contract.
- Principle of Irrevocability: Once you enter into a contract, you cannot simply get out of it. Exiting the contract would require another agreement.
Ineffectiveness of a Contract
- Absolute Nullity: The contract is completely annulled because it is contrary to the law or morality.
- Annullability (Relative Nullity): There is a defect in the consent, which may invalidate that part of the contract.
- Resolution: When one of the parties does not carry out their obligations, the other party may either demand performance of the contract or request its termination. Its effects are retroactive.
- Revocation: Occurs only in certain contracts where the law allows one of the parties to leave it without effect by their own will.
- Rescission: When a valid contract causes some damage or injury to one of the parties or to a third party, the law grants an action to terminate its effects.
- Unilateral Withdrawal: When the contract grants one of the parties the power to terminate the obligatory relationship freely or based on a just cause previously contemplated in the contract.
Common Types of Contracts
Purchase and Sale Contract
(Arts. 1445 et seq. of the Civil Code)
A contract in which there is an exchange of a thing for a price. One of the parties, the seller, undertakes to transfer an object or a right to another, the buyer, who in exchange must deliver a certain sum of money. It is a consensual, bilateral, onerous, principal, and standard contract.
Lease Contract
(Arts. 1542 et seq. of the Civil Code)
A contract in which one of the parties (lessor) undertakes to give the other (lessee) the use or enjoyment of a thing for a determined and certain period of time in exchange for rent. It is a consensual, onerous, bilateral, principal, and standard contract. The lease can be for things, work, or services.
Contract Classifications
- Consensual, Real, and Formal:
- Consensual: Perfected by mere consent.
- Real: Requires the delivery of the object (e.g., a loan agreement).
- Formal: Must be in writing.
- Standard and Non-standard:
- Standard: Have their own specific laws and regulations (e.g., lease contract).
- Non-standard: Do not have specific laws and regulations.
- Onerous and Gratuitous:
- Onerous: Both parties receive a benefit or profit.
- Gratuitous: Only one party receives a benefit.
- Unilateral and Bilateral:
- Unilateral: Only one of the parties has obligations.
- Bilateral: Both parties have regulations and obligations.
- Agreed and Adhesion:
- Agreed: The terms are negotiated.
- Adhesion: There is no negotiation; one party accepts the terms as-is.
- Principal and Accessory:
- Principal: The main contract of the subject.
- Accessory: A contract that depends on a principal contract.