CONTRACT

Article 1305. Contract is a meeting of the minds between two persons, whereby one
binds himself, with respect to the other, to give something or render some service.

Contract is one of the sources of obligation, hence, if the obligation in the contract
was not performed, one of the parties may have the right to sue the other.

The definition clearly states that contract is the meeting of the minds. From the
moment the parties concur or agree to the object, price or the terms and
conditions, the contract is perfected.

Contrary to some beliefs, the contract is not the paper. The contract as stated is
the meeting of the minds, while the paper where the contract was written is called
instrument. The instrument is as general rule the evidence of the contract.

Essential Requisites of Contract

Art. 1318 There is no contract unless the following requisites concur.

1. Consent of the contracting parties,

2. Object certain which is the subject matter of the contract,
3. Cause of the obligation which is established.

Consent is manifested by the meeting of the offer and the acceptance of the thing
and the cause, which are to constitute the contract.

To create a valid contract, the meeting of the minds must be free, voluntary, willful,
and with a reasonable understanding of the various obligations the parties assumed
for themselves.

Where consent, however, is given through mistake, violence, intimidation, undue

influence, or fraud, the contract is deemed voidable meaning it is valid until annulled.

Object. The object of the contract may be.

1. Things, or
2. Rights, or
3. Service (Example: Catering of foods, Accounting, Event organizing)

Rules Regarding the Object

1. The Object of the Contract must be within the commerce of man.

2. The object must be lawful.
3. Services as an object should not be contrary to law, morals, good customs,
public order, or public policy.
4. Intransmissible rights cannot be the object of the contract.

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Cause or Consideration is an essential requisite of a contract. It is the reason why
the parties entered into a contract.

Formalities of Contract

As to the formalities, generally contracts shall be obligatory in whatever form.

Contract may be made orally or in writing as long the three essential requisites are
present.

However, the above rule admits of certain exceptions, namely,

a. When the law itself requires that they be in some form (writing) in order to
make them valid and enforceable (the so-called solemn contracts)

b. When the law requires to be proved by some writing (memorandum) of its

terms, as in those covered by the Statue of Frauds, in Article 1403 (2) of the
Civil Code.

Stages of Contract

The stages of contract will help the student and industry practitioner to prepare or
draft a contract. In drafting a contract, just remember the essential requisites.

If the contract is in writing, the parties may use their vernacular language. Any
dialect can be use as long as both parties understand the same.

In general, contracts undergo three distinct stages, to wit, negotiation, perfection

or birth, and consummation.

1. Negotiation Stage or the Generation Stage. This is the first step. Here the
parties will bargain or negotiate as to the terms and conditions, In this stage,
the parties do not yet agree. Hence, there is still no meeting of the minds.

2. Perfection or Birth of the Contract. Takes place when the parties agree upon
the essential elements of the contract.

3. Consummation/ Termination. This is the stage where the contract is ended

because the parties have fulfilled with their obligations.

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Characteristics of Contract

1. Mutuality of Contract. The validity or performance of which cannot be left to

the will of only one of the parties.

The ultimate purpose of the mutuality principle is to nullify a contract

containing a condition which makes its fulfillment or pre-termination
dependent exclusively upon the uncontrolled will of one of the contracting
parties.

2. Autonomy of Contract. The contracting parties may establish such stipulations,

clauses, terms, and conditions as they may deem convenient, provided they are
not contrary to law, morals, good customers, public order, or public policy.

3. Obligatory Force. Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law. Once the contract is
perfected, the parties must faithfully observe the terms and conditions
established. Otherwise, a cause of action for breach of contract will arise.

4. Relativity of Contract. This means that the contract entered into by the parties
are binding only between them, their heirs and assigns, except in case where the
rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not liable beyond the
value of the property he received form the decedent.

Defective Contracts and their Effects

1. Rescissible Contracts. Contracts which are rescissible are valid contracts

havill all the essential requisites of a contract, but by a reason of injury or
damage caused to either of the parties therein or to third persons are
considered defective and thus, may be rescinded.

Once the contract is rescinded, it is terminated and the parties will return to
their original position as if there was no contract entered into. Or if the
property or the object of the contract has been deposed, the value thereof
shall be returned.

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 2. Voidable Contracts. Voidable means those contracts which are valid until
annulled.

Art. 1390. The following contracts are voidable or annullable, even though
there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.

These contracts are binding, unless they are annulled by a proper action in
court. They are susceptible of ratification.

3. Unenforceable Contract. A contract which cannot be enforced unless ratified,

due to any of the following reasons:
a. The contract was entered into in the name of another person by one who
has given no authority or legal representation, or who has acted beyond
his powers.
b. The Contract did not comply with the Statues of Frauds. In the Statue of
Frauds, some transactions must be in writing to effect its enforceability
such as sale of real property, sale of goods, chattels or things if the price
is not less than Php. 500.00, an agreement to lease(rent) for more than
one year. If these contracts were not in writing, the other party may not
sue the one who violated it before the court.
c. Both parties are incapable of giving consent.

4. Void and Inexistent Contract. It is equivalent to nothing and is absolutely

wanting in civil effects. It cannot be validated either by ratification or
prescription.
The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object, or purpose is contrary to law, morals, good
customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of
the contract cannot be ascertained; and
(7) Those expressly prohibited or declared void by law

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 TYPES OF CONTRACTS FOR TOURISM AND HOSPITALITY

Agency Agreement

A contract between a travel agent and a tour or activity operator setting out the terms
and conditions for the transaction of business by the travel agent with and on behalf
of the tour operator.

The agency agreement can either be:

Net rate agreement: This type of agreement involves the tour operator selling their
tours or activities to the agent at a discounted net rate (or wholesale rate) based on
the rack rate or retail rate.

Commission agreement: This type of agreement involves the agent selling the tours
or activities offered by the tour operator at the rack rate or retail rate directly to
customers. The operator calculates a commission for sales made by the agent during
a specific period and pays them an agreed upon commission.

In the case of flights, the contract for the flight is always between the traveller and
the airline. The contract is the air ticket itself. The agent generally only charges a
service fee or booking fee to do the booking on your behalf.

Waiver

For many tourism operators, waivers are considered a key part of their risk
management process. Waivers are particularly important in the adventure, outdoor,
and sport tourism sectors where there is a greater risk of personal injury, and they
are an effective risk management tool.

A waiver is a form of contract that transfers acceptance of the risk to the participants
by requiring them to acknowledge the risks present in the activity. It also requires
participants to waive their right to take legal action if an accident occurs. Despite their
effectiveness, there have been cases where waivers have failed to protect an
organization, often because the waiver was poorly written or delivered incorrectly

To be effective, a waiver should include four components. First, it should clearly

outline the risks in the activity — voluntary acceptance of risk. Second, it should
waive the participant’s right to pursue legal action against the tourism operation in
case of negligence — waiver of rights. Third, it should be relatively short and easy to
read, be easily recognized as a legal document, and include a place for signature that
can be witnessed by a company employee. Fourth, it should be signed by participants
only when they have been given ample time to read and understand it well in advance
of the event or activity.

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Tour Participant Agreement

This is the contract that you should have with each individual age 18 and over. It is
also called your "disclaimer," "terms and conditions" or "terms of use." It requires the
participants to agree that your company is not responsible for the acts or omissions of
travel suppliers or events beyond your control. It also contains your payment and
cancellation terms and many other important disclosures, releases and the like.

Hotel Management Contracts

Most hotels are managed by brands or independent operators - not their owners; the
owner is generally responsible for providing funding for the operation of the hotel
when necessary while the operator manages the hotel’s day-to-day operation.

The agreement between the two parties is often structured with the operator as a
contractor using a contract that specifies duties, obligations, and liabilities.

Hotel Management contracts allow investors with relatively little knowledge and
experience in the hotel industry, or who cannot directly manage hotels for a variety of
reasons, to invest in hotels. Because competitive supply is increasing, hotel investors
have attempted to realize efficiency gains by assembling specialists to be responsible
for the various components of their hotel investments. Specifically, owners frequently
contract specialists " hotel brands and hotel operators " to help them maximize the
returns on their investments.

Hotel Guest Agreement

The hotel guest agreement contains terms and conditions of the accommodation that
is signed among the hotel and the guest. The agreement form is filled out by the
guest before using a room

Types of Contracts for Restaurants

If you are a restaurant owner, you are bound to encounter many different types of
contracts that will affect your relationships with suppliers, contractors and employees.
Before signing or drafting any contract you should make sure that the terms are as
clear as possible and all essential aspects of the agreement you are making are
reflected in the contract.

Leases

The first contract a restaurant owner may encounter is the lease for restaurant space.
The lease will dictate the essential terms between the relationship with the landlord
including the amount of rent, lease renewal procedures, the length of the lease and
the amount of time necessary to terminate your lease. Be sure to discuss alterations
to the property with the space owner as some alterations could be considered lease
violations. Also, take note of any provisions regarding late rent payments and how
security deposits will be handled.

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Employment Agreements

Employment contracts state the terms of employment such as pay, benefits, sick
leave, disciplinary procedures, promotion procedures and termination procedures.
Although employment contracts are not required to hire an employee, they are
desirable as they clearly define workplace duties and expectations.

Supplier Agreements

Contracts with food suppliers or paper product suppliers will dictate the terms of when
and how goods will be delivered to the restaurant. A well-thought-out supplier
agreement is essential because if your supplier fails to provide the goods you require,
you may be forced to temporarily close your restaurant or seek an alternate supplier.
Common things to consider in a supplier agreement include: how will the supplier
compensate you if delivery is late, how will prices change throughout the year as the
availability of certain foods changes and when will routine deliveries occur.

Contractor Agreements

Restaurant owners are required to hire contractors from time to time in order to
obtain certain services such as refrigeration and kitchen maintenance, cleaning of
uniforms, rugs and linens and repairs to your dining space. When reviewing a
contractor agreement, be sure to pay attention to the contractor's insurance coverage
and necessary indemnification clauses. An indemnification clause will protect your
restaurant if the contractor accidentally hurts someone or causes damage while
working on your property.

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