Contracts

Question 1

Meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

Answer 1

Contracts

Question 2

Is the legal tie or relation itself that exists after a contract has been entered into.

Answer 2

Obligation

Question 3

Agreements which cannot be enforced by action in the courts of justice (like an agreement to go to a dance party) are not contracts but merely moral obligations.

Answer 3

Moral or Social Agreement

Question 4

Deal with norms of good and right conduct evolved in a community. These norms may differ at different times and places and with each group of people.

Answer 4

Morals

Question 5

Refers principally to public safety although it has been considered to mean also the public weal.

Answer 5

Public Order

Question 6

Is broader than public order, as the former may refer not only to public safety but also to considerations which are moved by the common good.

Answer 6

Public Policy

Question 7

Is an agreement which gives rise to obligations. It must bind both parties in order that it can be enforced against either. Without this equality between the parties, it cannot be said that the contract has the force of law between them.

Answer 7

Contract

Question 8

That which requires compliance with certain formalities prescribed by law (e.g. donation of real property which must be in a public instrument).

Answer 8

Solemn Contract

Question 9

that which is perfected by mere consent. (e.g. sale, lease, agency)

Answer 9

Consensual contract

Question 10

This includes all the steps taken by the parties leading to the perfection of the contract. At this stage, the parties have not yet arrived at any definite agreement.

Answer 10

Preparation or negotiation

Question 11

that which is perfected by the delivery of the thing subject matter of the contract. (e.g. pledge)

Answer 11

Real contract

Question 12

This is when the parties have come to a definite agreement or meeting of the minds regarding the subject matter and cause of the contract.

Answer 12

Perfection or birth

Question 13

This is when the parties have performed their respective obligations and the contract may be said to have been fully accomplished or executed, resulting in the extinguishment or termination thereof.

Answer 13

Consummation or termination

Question 14

Essential Requisites of Contracts

Answer 14

a. Consent of the contracting parties
b. Object certain which is the subject matter of the contract
c. Cause of the obligation which is established

Question 15

Those present in all contracts, namely, consent, object, and cause.

Answer 15

Common

Question 15

Those without which no contract can validly exist. They are also known as requisites of a contract.

Answer 15

Essential elements

Question 16

Those not common to all contracts or those which must be present only in, or peculiar to, certain specified contracts.

Answer 16

Special

Question 17

Those that are presumed to exist in certain contracts unless the contrary is expressly stipulated by the parties, like warranty against eviction or warranty against hidden defects in sale.

Answer 17

Natural elements

Question 18

Or the particular stipulations, clauses, terms, or conditions established by the parties in their contract like conditions, period, interest, penalty, etc. And, therefore, they exist only when they are expressly provided by the parties.

Answer 18

Accidental errors

Question 19

The meeting of minds between the parties on the subject matter and the cause which are to constitute the contract.

Answer 19

Consent

Question 20

A proposal made by one party to another to enter into a contract. It is more than an expression of desire or hope. It is really a promise to act or to refrain from acting on condition that the terms thereof are accepted by the person (offeree) to whom it is made.

Answer 20

Offer

Question 21

The manifestation by the offeree of his assent to the terms of the offer. Without acceptance, there can be no meeting of the minds between two parties. The acceptance of an offer must be absolute or unqualified. It must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.

Answer 21

Acceptance

Question 22

A temporary period of sanity. A contract entered into by an insane or demented person during a lucid interval is valid. It must be shown, however, that there is a full return of the mind to sanity as to enable him to understand the contract he is entering into.

Answer 22

Lucid interval

Question 23

the false notion of a thing or a fact material to the contract.

Answer 23

Mistake or error

Question 24

The essential or more proximate purpose which the contracting parties have in view at the time of entering into the contract.

Answer 24

Cause

Question 25

One the cause of which, for each contracting party, is the prestation or promise of a thing or service by the other. In this contract, the parties are reciprocally obligated to each other.

Answer 25

Onerous

Question 26

One the cause of which is the service or benefit which is remunerated. The purpose of the contract is to reward the service that had been previously rendered by the party remunerated.

Answer 26

Remuneratory or remunerative

Question 27

one the cause of which is the mere liberality of the benefactor or giver.

Answer 27

Gratuitous

Question 28

It means that there is a total lack of any valid consideration for the contract. Contracts without cause confer no right and produce no legal effect whatever. Thus, a contract which is absolutely simulated or fictitious is inexistent and void.

Answer 28

Absence or want of cause

Question 29

Refers to the manner in which a contract is executed or manifested. The contract may be oral, or in writing, or partly oral and partly in writing.

Answer 29

form of contract

Question 30

that which may be entered into in whatever form provided all the essential requisites for their validity are present.

Answer 30

Informal or common contract

Question 31

that which is required by law for its efficacy to be in a certain specified form.

Answer 31

Formal or solemn contract

Question 32

is one which is acknowledged before a notary public or any official authorized to administer oath, by the person who executed the same.

Answer 32

public document or instrument

Question 33

The determination of the meaning of the terms or words used by the parties in their contract.

Answer 33

Interpretation of a contract

Question 34

Are those which possess all the essential requisites of a valid contract but one of the parties is incapable of giving consent.

Answer 34

Voidable or annullable contracts

Question 35

cleanses the contract from all its defects from the moment it was constituted.

Answer 35

Ratification

Question 36

Are those that cannot be enforced in court or sued upon by reason of defects provided by law until and unless they are ratified according to law.

Answer 36

Unenforceable contracts

Question 37

Are those entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers.

Answer 37

Unauthorized contracts

Question 38

Are valid contracts until annulled unless there has been a ratification. These are those which possess all the essential requisites of a valid contract but one of the parties is incapable of giving consent.

Answer 38

Voidable contracts

Question 39

Are valid contracts because all the essential requisites of a contract exist but by reason of injury or damage to one of the parties or to third persons, such as creditors, the contract may be rescinded.

Answer 39

Rescissible contracts

Question 40

are absolutely null and void. Void contracts have no effect at all and cannot be ratified.

Answer 40

Void or inexistent contracts

Question 41

Is a remedy granted by law to the contracting parties and sometimes even to third persons in order to secure reparation of damages caused them by a valid contract.

Answer 41

Rescission

Question 42

The oldest and most common method of letting work under contract is by receiving competitive bids with fixed prices. It is commonly referred to as “Hard Dollar contracts.”

Answer 42

The Lump-Sum contract

Question 43

The most common method used to obviate the difficulties of the fixed price contract is to pay the contractor the actual cost of the construction work with a specified percentage as compensation for his overhead expenses, personal services, and profits. It does not provide any direct incentive for the contractor to minimize construction costs. Rather, it seems to work the other way.

Answer 43

Contract for Cost-Plus-a-Percentage

Question 44

This is a substitute from a percentage to a fixed sum where the contractor cannot profit by any increase in cost. It secures the greatest returns for the contractor by keeping the least expenditures of time and money for the owner.

Answer 44

Contract for Cost-Plus-a-Fixed Sum

Question 45

This is a contract where the contractor undertakes to complete the work for a fixed sum and in a definite time. He will be paid in addition to the sum a stated premium which is reduced or increased accordingly as the actual cost and time of completion are greater or less than the stipulated costs and time of completion.

Answer 45

Contract for Cost-Plus-a-Variable Premium

Question 46

The responsibility for the cost and construction is placed on a group created by the owner or governmental body wherein results depend mainly on their efficiency.

Answer 46

Construction by the Direct Employment

Question 47

It is based on estimated quantities of defined items of work and costs per unit amount of each of these work items. The owner compiles the estimated quantities, and the unit costs are those bid by the contractor for carrying out the stipulated work in accordance with the contract documents.

Answer 47

The Unit-Price Contract

Question 48

This is an open-ended contract in the sense that the total construction cost to the owner cannot be known until completion of the project. When the drawings and specifications are not complete at the time of contract negotiation, the owner and contractor negotiate what is called a “scope contract.”

Answer 48

Cost-Plus-Fee Contract

Question 49

The lowest bidder whose offer best responds in quality, fitness, and capacity to fulfill the particular requirements of the proposed work and with the terms of the contract.

Answer 49

Lowest responsible bidder

Question 50

Document specifically designed to formalize the construction contract. It acts as a single instrument that brings together all of the contract segments by reference, and it functions for the formal execution of the contract.

Answer 50

Agreement

Question 51

It is normally neither practicable nor desirable for the contractor to finance the construction from its own resources.

Answer 51

Progress payments

Question 52

the degree of completion of each major work category is usually expressed as a percentage.

Answer 52

lump-sum contracts

Question 53

commonly require the contractor to submit applications for payment at least 10 days before the date established for each progress payment.

Answer 53

Fixed-price contracts

Question 54

Usually provide for the contractor to submit payment vouchers to the owner at specified intervals during the life of the contract.

Answer 54

Cost-plus contracts

Question 55

This part of the contract describes the materials excluded in the scope of the contractor and instead will be supplied by the owner in accordance with the construction schedule.

Answer 55

Owner supplied & excluded items

Question 56

Is the performance or service to be rendered by the contractor under such agreement until completion or delivery of the project as stipulated in the contract documents.

Answer 56

Scope of works

Question 57

The amount in money or other consideration to be paid by the owner to the contractor for the execution of the work in accordance with the contract.

Answer 57

Contract price

Question 58

Takes place under such agreement in scope when there are change orders or variation orders from the original scope of works as stipulated in the contract and contract document.

Answer 58

Adjustment of contract price

Question 59

Is a written order to the contractor issued by the owner after the execution of the contract authorizing a change or variation in the work or an adjustment in the contract price or contract time.

Answer 59

Change order

Question 60

Describes how the down payment, progress billing, retention, and release of retention are being paid by the owner. There are certain insurance and surety required to be submitted to the owner prior to the contractor’s claim of payment.

Answer 60

Terms of payment

Question 61

the period of time allowed by the Contractor for the completion of the project or any stipulated portion thereof.

Answer 61

Time of completion

Question 62

In case of delay in the completion and turnover of contract works, the contractor shall pay the owner liquidated damages under the contracted computations but not greater than the percentage of the contract price set forth.

Answer 62

Failure to complete works

Question 63

Many construction contracts provide that the owner will retain a certain percentage of the progress payments. A retainage of 10% is typical.

Answer 63

Retainage

Question 64

**One year** is a commonly specified warranty period, although periods of up to **five years** are sometimes required to make good, at its own expense, defects detected during this period.

Answer 64

The Warranty Period

Question 65

When the contract time is stated to be a given number of calendar days, the date on which the time begins is an important matter. Construction contracts usually state that the time will begin on the date the contract is signed or on the date the contractor receives a formal “notice to proceed.”

Answer 65

Contract Time

Question 66

An advantage to the use of a liquidated damage provision in a construction contract is the possible avoidance of subsequent litigation between owner and contractor.

Answer 66

Liquidated Damages

Question 67

Refers to the owner’s directing the prime contractor to accelerate its performance to complete the project at an earlier date than the current rate of work advancement will permit.

Answer 67

Acceleration

Question 68

Refers to some physical aspect of the project or its site that differs materially from that indicated by the contract documents or that is of an unusual nature and differs materially from the conditions ordinarily encountered.

Answer 68

Differing site condition, or changed condition, or concealed condition

Question 69

Examples include delays in making the site available to the contractor, failure to deliver owner-provided materials on time, unreasonable delays in the approval of shop drawings, delays caused by another contractor, delays in issuance of change orders, and suspension of the work because of financial or legal difficulties.

Answer 69

Owner-Caused Delay

Question 70

It is applied after the contract is awarded and is concerned with the elimination or modification of any contract provision that adds cost to a project but is not necessary to the structure’s required performance, safety, or maintenance.

Answer 70

Value Engineering

Question 71

an agreement between a prime contractor and a subcontractor under which the subcontractor agrees to perform a certain specialized part of the work.

Answer 71

Subcontract

Question 72

a written document that defines and prescribes the conditions pertaining to a purchase of materials, supplies, equipment, machinery, and similar goods.

Answer 72

Purchase order

Question 73

A simple document that makes no attempt to describe in detail the specific liabilities of the surety. The bond can be invoked by the owner only if the contractor is in breach of contract.

Answer 73

Contract bond form

Question 74

Acts primarily for the protection of the owner. It guarantees that the contract will be performed and that the owner will receive its structure, built in substantial accordance with the terms of the contract.

Answer 74

Performance bond