Chapter 85

COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 1PART 2 CONTRACTS Chapter 85. Nature of a Contract. Chapter 86. Manner of Creating Contracts. Chapter 87. Interpretation of Contracts. Chapter 88. Unlawful Contracts. Chapter 89. Extinction of Contracts. CHAPTER 85 NATURE OF A CONTRACT Article 1. D efinition. Article 2. Parties. Article 3. Consent. Article 4. Object of a Contract. Article 5. Consideration. ARTICLE 1 DEFINI TION § 85101. What is a Contract. § 85102. Essential Elements of a Contract. § 85101. What is a Contract. A contract is an agreement to do or not to do a certain thing. SOURCE: CC § 1549. § 85102. Essential Elements of a Contract. It is essential to the existence of a contract that there should be: 1. Parties capable of contracting; 2. Their consent; 3. Alawful object ; and 4. Asufficient cause or consideration. SOURCE: CC § 1550. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 2NOTE: No 1970 Civil Code §§ 1551 -1555 existed. ---------- ARTICLE 2 PARTIES § 85201. Who may Contract. § 85202. Minors, etc. § 85203. Identification of Parties. § 85204. When Contr act for Benefit of Third Parties En forced. § 85201.

555 existed. ---------- ARTICLE 2 PARTIES § 85201. Who may Contract. § 85202. Minors, etc. § 85203. Identification of Parties. § 85204. When Contr act for Benefit of Third Parties En forced. § 85201. Who may Contract . All persons are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil rights. SOURCE: CC § 1556. CROSS -REFERENCES: For the law respecting mi nors and their contracts, see 19 GCA Chapter 1. For a more recent and specific law regard ing disabilities suffered by persons convicted of crimes, see 9 GCA Chapter 82. § 85202. Minors, etc. Minors and persons of un sound mind have only such capacity a s is defined by Title 19 of the Guam Code Annotated. SOURCE: CC § 1557. NOTE: Original reference was to Division 1, Part 1 'of this Code' --the Civil Code. Such part is now found in 19 GCA, Personal Relations, primarily in Chapter 1. § 85203. Identific ation of Parties. It is essen tial to the validity of a contract, not only that the parties should exist, but that it should be possible to identify them. SOURCE: CC § 1558. § 85204. When Contract for Benefit of Third Parties Enforced.

o the validity of a contract, not only that the parties should exist, but that it should be possible to identify them. SOURCE: CC § 1558. § 85204. When Contract for Benefit of Third Parties Enforced. A contract, made expressly for the benefit of a third person, may been- forced by him at any time before the parties thereto rescind it. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 3SOURCE: CC § 1559. COURT CASES : See T.S.S. Sportswear Ltd. v . Swank Shop , 380 F .2d 512 (1967). NOTE: No 1970 Civil Code §§ 1560-1564 existed. ---------- ARTICLE 3 CONSENT § 85301. Essentials of Consent. § 85302. When Consent V oidable. § 85303. When Consent not Free. § 85304. Application of Previous Section. § 85305. Duress. § 85306. Menace. § 85307. Fraud; Actual & Constructi ve. § 85308. Actual Fraud. '80309. Constructive Fraud. § 85310. Actual Fraud: Question of Fact. § 85311. Undue Influence. § 85312. Mistake. § 85313. Mistake of Fact. § 85314. Mistake of Law . § 85315. Mistake of Foreign Law . § 85316. Mutuality of Consent. § 85317. Communication of Consent. § 85318. Mode of Communicating Acceptance. § 85319. When Communication Complete. § 85320.

of Law . § 85315. Mistake of Foreign Law . § 85316. Mutuality of Consent. § 85317. Communication of Consent. § 85318. Mode of Communicating Acceptance. § 85319. When Communication Complete. § 85320. Acceptance, Performed Conditions. § 85321. Acceptance must be Absolute. § 85322. Revocation of Proposal. § 85323. How Revocation Made. § 85324. Ratification of V oid Contract. § 85325. Assumption of Obligation by Accep tance of Bene fits. § 85301. Essentials of Consent.COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 4The consent of the parties to a contract must be: 1. Free; 2. Mutual; and 3. Communicated by e ach to the other. SOURCE: CC § 1565. § 85302. When Consent V oidable. A co nsent which is not free is nevertheless not absolutely void, but may be rescinded by the parties, in the manner prescribed in Chapter 89, Article 2 of this Title, Rescission of Con tracts. SOURCE: CC § 1566. § 85303. When Consent not Free. An apparent consent is not real or free when obtained through: 1. Duress; 2. Menace; 3. Fraud; 4. Undue influence; or 5. Mistake. SOURCE: CC § 1567. § 85304. Application of Previous Section.

ot Free. An apparent consent is not real or free when obtained through: 1. Duress; 2. Menace; 3. Fraud; 4. Undue influence; or 5. Mistake. SOURCE: CC § 1567. § 85304. Application of Previous Section. Consent is deemed to have been obtained through one of the causes mentioned in the last section only when it would not have been given had such cause not existed. SOURCE: CC § 1568. § 85305. Duress. Duress consists in: 1. Unlawful confinement of the p erson of the party , or of the husband or wife of such party , or of an ancestor , descendant, or adopted child of such party , husband or wife; 2. Unlawful detention of the property of any such person; or COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 53. Confinement of such person, lawful in form, but fr audulently obtained or fraudu lently made, unjustly harassing or oppressive. SOURCE: CC § 1569. § 85306. Menace. Menace consists in a threat: 1. Of such duress as is specified in subdi visions 1 and 3 of the last section; 2. Of unlawful and violent inju ry to the person or property of any such person as is specified in the last section; or 3. Of injury to the character of any such per son. SOURCE: CC § 1570.

section; 2. Of unlawful and violent inju ry to the person or property of any such person as is specified in the last section; or 3. Of injury to the character of any such per son. SOURCE: CC § 1570. § 85307. Fraud; Actual & Constructive. Fraud is either actual or constructive. SOURCE: CC § 1 571. § 85308. Actual Fraud. Actual fraud, within the meaning of this Article, consists of any of the following acts commit ted by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true. 2. A positive assertion in a manner not warrant ed by the information of the person making it, of that which is not true, though he believes it to be true; 3. The suppression of that which is true, by one having knowledge or belief of the fact; 4. Apromise made without any intention of per form ing it; or, 5. Any other act fitted to deceive. SOURCE: CC § 1572. § 85309. Constructive Fraud. Constructive fraud con sists:COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 61.

it; or, 5. Any other act fitted to deceive. SOURCE: CC § 1572. § 85309. Constructive Fraud. Constructive fraud con sists:COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 61. In any breach of duty which, without an actual ly fraudulent intent, gains an advan tage to the person in fault, or anyone claim ing under him, by mislead ing another to his prejudice, or to the preju dice of anyone claim ing under him. SOURCE: CC § 1573. § 85310. Actual Fraud: Question of Fact. Actual fraud is always a question of fact. SOURCE: CC § 1574. CROSS -REFERENCES: See the Guam Rules of Civil Procedure for the pleadings required in order to establish fraud in a case. § 85311. Undue Influence. Undue influence consists: 1. In the use, by one in whom a confi dence is re posed by another , or who holds a real or apparent authority over him, of such confi dence or authori ty for the purpose of obtain ing an unfair advan tage over him; 2. In taking an unfair advantage of anoth er's weak ness of mind; or, 3. In taking a grossly oppressive and unfair advan tageof another's necessities or distress. CROSS -REFERENCES: CC § 1575. § 85312. Mistake. Mistake may be either of fact or law .

k ness of mind; or, 3. In taking a grossly oppressive and unfair advan tageof another's necessities or distress. CROSS -REFERENCES: CC § 1575. § 85312. Mistake. Mistake may be either of fact or law . SOURCE: CC § 1576. § 85313. Mistake of Fact. Mistake of fact is a mis take, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in --- 1. An unconscious ignorance or forgetful ness of a fact past or present, material to the contract; or, 2. Belief in the present existence of a thing materi al to the contract, which does not exist, or in the past existence of such a thing, which has not existed. SOURCE: CC § 1577. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 7§ 85314. Mistake of La w. A mistake of law consti tutes a mistake within the meaning of this Article only when it arises from --- 1. Amisapprehension of the law by all parties, all supposing that they knew and understood it, and all making substantially the same mistake as to the law; or 2. Amisapprehension of the law by one party , of which the others are aware at the time of the con tracting, but which they do not rectify . SOURCE: CC § 1578.

ally the same mistake as to the law; or 2. Amisapprehension of the law by one party , of which the others are aware at the time of the con tracting, but which they do not rectify . SOURCE: CC § 1578. § 85315. Mistake of Foreign Law. Mistake of foreign laws is a mistake of fact. SOURCE: CC § 1579. § 85316. Mutuality of Consent. Consent is not mutual, unless the parties all agree upon the same thing in the same sense. But in certain cases defined by Chapter 87 of this Part, Inter pretation of Contracts, they are to be deemed so to agree without regard to the fact. SOURCE: CC § 1580. § 85317. Communication of Consent. Consent can be communicated with effect, only by some act or omis - sion of the party contracting, by which he intends to communicate it, or which necessarily tends to such communication. SOURCE: CC § 1581. § 85318. Mode of Communicating Acceptance. If a proposal prescribes any conditions concerning the commu nication of its acceptance, the propos er is not bound unless they are conformed to; but in other cases any r easonable and usual mode may be adopted. SOURCE: CC § 1582. § 85319. When Communication Complete.

of its acceptance, the propos er is not bound unless they are conformed to; but in other cases any r easonable and usual mode may be adopted. SOURCE: CC § 1582. § 85319. When Communication Complete. Consent is deemed to be fully communicated between the parties as soon as the party accepting a proposal has put his accep tance in the course of transmis sion to the proposer , in conformity to the last section. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 8SOURCE: CC § 1583. § 85320. Acceptance, Performed Conditions. Perfor mance of the conditions of a proposal, or the acceptance of the consideration offered with a proposal, is an acceptance of the proposal. SOURCE: CC § 1584. § 85321. Acceptance must be Absolute. An accep tance must be absolute and unqualified, or must include in itself an acceptance of that character which the proposer can separate from the rest, and which will include the perso n accepting. A qualified acceptance is a new proposal. SOURCE: CC § 1585. § 85322. Revocation of Proposal. A proposal can be revoked at any time before its acceptance is communicat ed to the proposer, but not afterwards. SOURCE: CC § 1586. § 85323.

osal. SOURCE: CC § 1585. § 85322. Revocation of Proposal. A proposal can be revoked at any time before its acceptance is communicat ed to the proposer, but not afterwards. SOURCE: CC § 1586. § 85323. Ho w Revocation Made. A proposal is revoked: 1. By the communication of notice of revocation by the proposer to the other party , in the manner pre scribed by '§ 85317 and 85319 of this Chap ter, before his accep tance has been communicat ed to the former; 2. By the lapse of the time prescribed in such propos al for its acceptance, or if no time is so pre scribed, the lapse of a reason able time with out commu nication of the acceptance; 3. By the failure of the acceptor to fulfill a condi tion precedent to acceptance; or 4. By the death or insanity of the proposer . SOURCE: CC § 1587. § 85324. Ratification of V oid Contract. A co ntract which is voidable solely for want of due consent, may be ratified by a subsequent consent. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 9SOURCE: CC § 1588. § 85325. Assumption of Obligation by Accep tance of Benefits. A voluntary acceptance of the benefit of a transac tion is equivalent to a consent to all the obliga tions

CONT RACT 9SOURCE: CC § 1588. § 85325. Assumption of Obligation by Accep tance of Benefits. A voluntary acceptance of the benefit of a transac tion is equivalent to a consent to all the obliga tions arising from it, so far as the facts are known, or ought to be known, to the person accepting. SOURCE: CC § 1587. NOTE: No 1970 Civil Code '§ 1588 -1594 existed. ---------- ARTICLE 4 OBJECT OF A CONTRACT § 85401. Object, What is. § 85402. Requisites. § 85403. Impossibility . § 85404. When Contract Wholly V oid. § 85405. When Partially V oid. § 85401. Object, What is. The object of a contract is the thing which is agreed, on the part of the party receiving the consideration, to do or not to do. SOURCE: CC § 1595. § 85402. Requisites. The object of a contract must be lawful when the contra ct is made, and possible and ascertainable by the time the con tract is to be performed. SOURCE: CC § 1596. § 85403. Impossibility. Every thing is deemed possible except that which is impossible in the nature of things. SOURCE: CC § 1597. § 85404. When Contract Wholly V oid. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.

bility. Every thing is deemed possible except that which is impossible in the nature of things. SOURCE: CC § 1597. § 85404. When Contract Wholly V oid. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 10Where a contract has but a single object, and such object is unlawful, wheth er in whole or in part, or wholly impossi ble of performance, or so vaguely expressed as to be wholly unascertainable, the entire contract is void. SOURCE : CC § 1598. § 85405. When Partially V oid. Where a con tract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest. SOURCE: CC § 1 599. NOTE: No 1970 Civil Code '§ 1600 -1604 existed. ---------- ARTICLE 5 CONSIDERA TION § 85501. What is Good Consideration. § 85502. Extent Legal or Moral Obligation Good Consid eration. § 85503. Consideration Lawful. '85504. Effect of Illegality . § 85505. Consideration Executed or Executory . § 85506. Executory Consideration. § 85507. How Ascertained. § 85508. Effect: Impossibility of Ascertaining. § 85509. Effect: When in Fact Impossible. § 85510. Written Instrument; Effect.

Executory . § 85506. Executory Consideration. § 85507. How Ascertained. § 85508. Effect: Impossibility of Ascertaining. § 85509. Effect: When in Fact Impossible. § 85510. Written Instrument; Effect. § 85511. Burden of Proof to Invalidate Con sider ation. § 85501. What is Good Consideration. Any benefit conferred, or agreed to be conferred, upon the promisor, byany other person, to which the promisor is not lawful ly entitled, or any prejudice suffered, or agreed to be suf fered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an induce ment to the promisor, is good con sideration for a promise.COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 11SOURCE: CC § 1605. § 85502. Extent Legal or Moral Obligation Good Consid eration. An existing legal obligation resting upon the promisor , or a moral obligation originating in some benefit conferred upon the promisor or prejudice suffered by the promisee, is also a good consideration for a promise, to an extent corresponding wit h the extent of the obligation, but no further or otherwise. SOURCE: CC § 1606. § 85503. Consideration Lawful.

the promisee, is also a good consideration for a promise, to an extent corresponding wit h the extent of the obligation, but no further or otherwise. SOURCE: CC § 1606. § 85503. Consideration Lawful. The considera tion of a contract must be lawful within the meaning of '87101 of this Title. NOTE: Inthe 1970 Civil Code, the section referred to by this section was '1667. SOURCE: CC § 1607. § 85504. Effect of Illegality. If any part of a single consideration for one or more objects, or of several consid erations for a single object, is unlawful, the entire contract is void. SOURCE: CC § 16 08. § 85505. Consideration Executed or Executory. A consideration may be executed or executory , in whole or in part. Insofar as it is executory it is subject to the provisions of Article 4 of this Chapter . SOURCE: CC § 1609. § 85506. Executory Considera tion. When a consid eration is executory , it is not indispens able that the contract should specify its amount or the means of ascertaining it. It may be left to the decision of a third person, or regulated by any specified standard. SOURCE: CC § 1610.

ndispens able that the contract should specify its amount or the means of ascertaining it. It may be left to the decision of a third person, or regulated by any specified standard. SOURCE: CC § 1610. COURT CASES: In suit by seller to recover price of stock contract ed to be sold to buyer who agreed actual value under a complex formula, action could not be dis missed as premature on the ground that unfilled conditions precedent existed when the parties followed the procedures set up in the con tract. Hines v . Perez, 242 F .2d 459 (CA9, 1857). COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT 12§ 85507. How Ascertained. When a contract does not determine the amount of the considera tion, not the method by which it is to be ascer tained, or when it leaves the amount thereof to the discretion of an interested party , the con sider ation must be so much money as the object of the contract is reasonably worth. SOURCE: CC § 1611. § 85508. Effect: Impossibility of Ascertaining. Where a contract provides an exc lusive method by which its consid - eration is to be ascertained, which method is on its face impossible of execution, the entire contract is void.

y of Ascertaining. Where a contract provides an exc lusive method by which its consid - eration is to be ascertained, which method is on its face impossible of execution, the entire contract is void. SOURCE: CC § 1612. § 85509. Effect: When in Fact Impossible. Where a contract provides an exclusive method bywhich its consid er- ation is to be ascertained, which method appears possible on its face, but in fact is, or becomes, impossible of execu tion, such provision only is void. SOURCE: CC § 1613. § 85510. Written Instrument; Effect. A wr itten instru ment is presumptive evidence of a consideration. SOURCE: CC § 1614. § 85511. Burden of Proof to Invalidate Consid eration. The burden of showing a want of consideration sufficient to support an instrument lies with the party seeking to invalidate or avoid it. SOURCE: CC § 1615. CROSS -REFERENCES: For the rules of evi dence, see Title 6, Guam Code Annotated. NOTE: No 1970 Civil Code '§ 1616-1618 existed. ----------COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH. 85 NATUR E OF A CONT RACT