1. The essential elements of a contract are briefly as follows: 1)There must be two or more competent contracting parties. 2)There must be a mutual agreement on the part of all parties to the contract to assume new obligations which each party understands and which are possible for the parties to perform. ESSENTIALS OF A CONTRACT

2. 3)There must be a valuable consideration for each of the parties to the contract, and the consideration must be reasonably equal in value. 4)The obligations which the parties to the contract undertake must be for legal acts which are not contrary to sound public policy. 5)The contract must be set forth according to the form and executed in the manner prescribed by law.

3. COMPETENCY OF CONTRACTING PARTIES Classifications: 1)Infants (minors) 2)Persons of unsound mind 3)Drunken persons 4)Persons under legal guardianship 5)Corporations 6)Convicts 7)Enemy aliens 8)Federal and state government 9)Foreign countries and their sovereigns 10)Professional persons who are required by law to register and to be licensed.

4. 1.) INFANT any person who is below the age at which one assumes certain legal obligations and privileges such as voting and competency to contract are competent to sign contracts for necessities, although exactly what constitutes a necessity may be subject to question.

5. an infant is liable for necessities furnished his wife and, in some jurisdictions, for necessities for the children if an infant avoids a contract on which he has received money or property, he must restore it if it is in his power to do so

6. 2.) Persons of Unsound Mind not a void contract but is voidable, at the option the insane person, or the person of unsound mind, or at the option of his legally appointed guardian, with the following exceptions: a)Contracts created by law are valid and binding, and b)Contracts are valid and binding where the sane person acted fairly and in good faith and without any knowledge

7. contracts made by an insane person are simply voidable and may be ratified by such insane person when he becomes sane or may be ratified by his guardian during his insanity or by his heirs after death

8. 3.) Drunken Persons contracts made by a drunken person when in such state of intoxication as to be entirely unable to understand its nature and effect are voidable in his favor except that he liable on contracts created or implied by law

9. 4.) Persons under Legal Guardianship are limited in their ability to enter into contracts in a manner similar to minors, persons of unsound mind, and drunken persons

10. 5.) Corporations an artificial person created by law and is limited in its ability to enter into contracts by its articles of incorporation and by-laws and by general statutes limiting the powers of corporations a contract with a corporation must be a contract which it is authorized to make and which is within the scope of its corporate powers as set forth in its articles of incorporation

11. 6.) Convicts in some jurisdictions those serving a penitentiary sentence have their competency to contract suspended and have a trustee appointed to supervise their property

12. 7.) Enemy Aliens In general, enemy aliens cannot contract or sue under existing contracts without the permission of the government; but they may be sued on existing contracts, and in this case have a right to answer the suit.

13. 8.) Federal and State Governments with certain restrictions procedures to be used and frequently even the form of contract are rigidly specified by law a contract with the government is signed by an official who is specifically authorized to perform the function, and contracts outside the scope of specific authorization are void even he signs them

14. 9.) Foreign Countries and Their Sovereigns may make contracts and may enter suit under these contracts in our domestic courts, but they may not sued in such courts without their consent

15. 10.) Professional Persons In most states persons practicing the skilled professions where the health, safety, or welfare of the public is involved are required by law to register and obtain a license as a prerequisite to the practice of their profession.

16. Agency the validity of such contracts depends upon the authority granted to the agent, which may be expressed and in writing For example, a clerk in a store has ostensible authority to sell goods carried in stock, but would have none to sell the owner’s pleasure boat at a different location

17. Mutual Agreement it is important to the validity of a contract that the parties to the contract agree, and they must agree to the same thing. Contractual Relations: a) Offer and acceptance b) Times of acceptance c) Method of Acceptance d) Revocation e) Misinterpretation f) Fraud

18. 1) Offer and Acceptance this offer must be accepted without qualification and without change, or there is no contract

19. Example: If Mr. Tan offered to enter into a contract with Mr. Maningo, whereby Mr. Tan was to pay Mr. Maningo $500 to design a drainage system for Mr. Tan’s farm, the said designs to be completed by March 1, and Mr. Maningo accepted this offer with the provision that he would design such drainage system for $600, the same to be completed by April 1, there would be no contract, as the terms of Mr. Tans’s offer were not accepted as they were given but were modified by Mr. Maningo.

20. 2.) Time of Acceptance The offer must be accepted with in a reasonable time, and where a time limit is fixed in such offer, it must be accepted before such time limit expires.

21. Example: Mr. Ugsimar wires offering Mr. Lobingco 1,000 bushels of winter wheat at $2.75 a bushel f.o.b. Minneapolis. Mr. Lobingco waits a week until the price of winter wheat has gone to $3.00 a bushel and wires an acceptance of the offer. The courts would hold that with a commodity such as wheat which was subject to sudden changes in market place, a week would be an unreasonable time and an acceptance at the end of that time would not constitute the contract

22. 3.) Method of Acceptance If an offer of a contract is made and specifies that the acceptance must be by wire, an acceptance in person or by letter does not constitute a contract ; and if the offer specifies a place of acceptance, acceptance at any other place is not sufficient.

23. Example: Mr. Cañete writes a letter to Ms. Blaco on January 18, offering him 10,000 bushels of wheat at $2.75 per bushel f.o.b. Minneapolis. Ms. Blanco wires back to Mr. Cañete on January 19, stating: “Your offer in letter of January 18 accepted. Letter follows.” He then writes Mr. Cañete the same day accepting his offer of 10,000 bushels of wheat at the specified price. These letters and telegrams constitute a valid and binding contract enforceable at law.

24. 4.) Revocation An offer is revoked by the death or insanity of the person making the offer; but if the offer is accepted prior to the death or insanity of the person making the same, this constitutes the contract which is binding on the executors, provided for the contract was not for personal services.

25. 5.) Misinterpretation If one party to a contract makes a statement which is in fact untrue but he believes to be true, and this fact is a material fact or element in the contract, and other party.

26. 6.) Fraud a false representation of a material fact or nondisclosure of a material fact under such circumstances that it amounts to a false representation Essential elements of fraud: a)A false representation of a material fact. b)The representation must be as to a past or present act. c)It must be of a material act, and a misinterpretation of an immaterial fact, even if made with fraudulent intent, does not constitute fraud.

27. d)The party making the statement must know it to be false. e)It must be made with intention that will be acted on by the party. f)It must be relied upon by the other party and induce him to act. g)The other must have suffered damage thereby.

28. 7.) Duress If a person is compelled to sign a contract at the point of a gun or through threats of violence to him or someone whom he holds dear, he cannot be said to have consented to the contract, but has been caused to enter into it by duress.

29. 8.) Undue Influence consists in taking advantage of a special trust or confidence which is reposed in one to caused or induce the person so trusting or having confidence in him to enter into a contract which is unfair to such person