What to do after Creating a Contract?

Last revision: Last revision:28 September 2023
Rating Rating 4.5 - 1 vote

Creating contracts is important to document what the parties have agreed upon. The rights of the parties thereto should be respected and this can be done through certain measures such as ensuring that the signatures are affixed by the parties, monitoring the copies and originals of the contract, making sure that it is kept on file and properly submitted to the government agency concerned, or being validly notarized. This ensures that the rights of the parties under the contract will be upheld and protected.

A contract is defined under the law as a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. This means that a written contract sets forth the agreement between two or more persons and the terms and conditions thereon with which the parties must comply.

A contract may also be verbally made, but it is advised that it be formalized in written form to enable the parties to remember what was agreed upon and to make sure that the covenants and promises made therein will be kept. For purposes of this guide, what should be done after creating a written contract will be explained.

1. Signatures

To make the agreement valid, the parties must affix their signatures. The parties' signatures signify that they have agreed on what has been stipulated in the contract. Affixing one's signature may be done by hand, or via electronic signature if the parties agree or allow for affixing the signatures electronically. After signing the contract and from the definition of a contract, the parties have to give something or render some service (for example when a Service Agreement is signed, the parties can expect that the service will be provided by one party and the corresponding payment will be made by the other).

In case a party is incapacitated to do certain legal acts, their representative should sign on their behalf. The following are the persons who are generally incapacitated to do legal acts or are unable to make legal decisions:

  • Minors: Individuals who are below the age of 18 are generally considered minors in the Philippines and they are deemed incapacitated to act in certain legal matters. Their parents or legal guardians are usually the ones who must act and sign on their behalf.
  • Persons with Mental Incapacity: This includes individuals who have been declared legally incompetent due to mental illness or other factors that impair their decision-making capacity. In such cases, a legal guardian or a court-appointed representative may be required to act or sign on their behalf.
  • Persons with Physical Disabilities: If a physical ability prevents a person from performing certain legal acts, they might require a legal representative or advocate to act or sign on their behalf.
  • Persons Declared Incompetent by Court Order: In some cases, a court of law may officially declare an individual as legally incompetent, such as being punished with a penalty of civil interdiction if such an individual was imprisoned. The court will typically appoint a guardian or trustee to handle their affairs including signing contracts on their behalf.
  • Individuals under Specific Legal Circumstances: Entities such as corporations and partnerships have their human element called representatives. Proof of authorization of a representative to act on behalf of a party should generally be attached to the contract itself. This may be in the form of a Secretary's Certificate if the organization is a corporation, a Partners' Certificate if the organization is a partnership, or a Special Power of Attorney if the organization is a sole proprietorship. Attachments to a contract are further discussed in section 3.

2. Originals and Copies

It is important for every party to the contract to have their own original copy, thus at the time of signing the contract. The number of original copies should correspond to the number of parties, and each party must sign the original copies by hand or electronically if allowed by the parties.

Further, if a contract is acknowledged before a notary public, another original copy should be presented to the notary public apart from the original copies for the records of each party. It must be noted that for contracts that will be acknowledged before a notary public, electronic signatures are not allowed, all copies together with the copy given to the notary public must be signed in the presence of the notary public by hand.

To learn more about the process of acknowledging a contract before a notary public, the following guide should be studied: When and how to Notarize a Document?. In said guide, the benefits and the process of notarizing a contract will be explained. The main benefit of notarizing a contract or acknowledging the same before a notary public is that the parties can easily make sure that the stipulations thereon are complied with and respected, not only by the parties themselves but also by those who are not parties thereto.

3. Attachments

There is certain information that may be too voluminous to include in the contract itself, which is why it is a sound practice to stipulate in the contract that there are other documents attached to the contract. These are generally called attachments, which may be additional contracts, photographs, or other documents that state what could not be stated in the main contract. The attachments are part of the contract.

For example, in a Motor Vehicle Lease Agreement, the details concerning the motor vehicle to be leased may be included by attaching the relevant supporting document called Certificate of Registration and Official Receipt of the motor vehicle concerned.

It must be noted that for every original copy of the contract, the necessary supporting documents should also be attached thereto.

4. Intervention of Governmental Institutions

There are certain contracts that must be registered or submitted to various government agencies to formalize their agreement, for the parties to uphold what has been stipulated thereon, and to maintain their validity.

4.1 Securities and Exchange Commission

The Securities and Exchange Commission (SEC) serves as a central repository for the registration of contracts that establish certain kinds of organizations, for purposes of overseeing the operations of such organizations. The following are the general examples of contracts that must be submitted and registered before the SEC:

  • Articles of Partnership. In case of the creation of a Partnership, an Articles of Partnership is used, which is a type of contract that formalizes the agreement of the parties to contribute money, property, or industry to a common fund for the purpose of conducting business and with the intention that the profits and losses will be divided among them.
  • Articles of Incorporation. In case of the incorporation of a Corporation, an Articles of Incorporation is used, which is a type of contract that lays down how the corporation will be formed including the circumstances of the persons who will incorporate the same.

There are several other contracts that are similar to Articles of Partnership or Articles of Incorporation with respect to the requirement that they be registered with the SEC and these may be found in the following guide: How to Register a Company?

4.2 Local Civil Registry

A Marriage Contract officiates the union of a man and a woman and is the primary document evidencing their marital bond. This contract provides for the information of the spouses such as their names, date of marriage, and other personal circumstances.

This contract is registered before the Local Civil Registry located in the place where the spouses are residences. The proper recordation of the marriage contract before the mentioned government instrumentality gives rise to a presumption that the spouses are validly married, this entails the full rights that validly married spouses can acquire after their marriage.

4.3 Register of Deeds

The functions of the Register of Deeds include receiving and processing various contracts and instruments concerning land and property ownership, ensuring their legality and authenticity. The following contracts need to be registered before the Register of Deeds situated in the place where such real property is located:

  • Deed of Absolute Sale. This is an agreement that sets forth the agreement between two parties called the buyer and the seller to transfer the ownership of the seller over a property to the buyer in exchange for a purchase price.
  • Deed of Donation. This is an agreement by 2 or more persons whether individual or organization, whereby one person (or persons) donates, gives, or bequeaths, otherwise known as the donor, in favor of another person.
  • Mortgage Contract. When a property owner uses their real property as collateral for a loan, a Mortgage Contract is created. This document is registered to establish the mortgagee's rights over the property.
  • Lease Contracts with a Term Exceeding One Year. If a lease agreement has a term of more than one year, it is required to be registered to protect the rights of both the lessor and lessee. This is regardless if the real property leased is residential or commercial.
  • Extrajudicial Settlement of Estate. When there is no will, the heirs of a deceased person may execute an Extrajudicial Settlement of Estate to distribute the property among themselves. This is registered to effectuate the transfer of titles of the real property concerned.

4.4 Land Transportation Office

There are certain contracts related to motor vehicles that need to be registered with the Land Transportation Office (LTO) in order to facilitate the registration of the transfer of ownership or some other form of transfer of rights. These contracts are the following:

5. Intervention of a Notary Public

The Civil Code provides for certain contracts to be contained in a public instrument for them to be valid. This means that these kinds of contracts should be acknowledged before a Notary Public as explained in the following guide: When and how to Notarize a Document?

To illustrate, under the Civil Code, for the donation of a real property to be valid, the act of the donor in donating to the donee, and the donee's acceptance must be formalized in a public document which is commonly done through a Deed of Donation of Real Property. If this is not followed, the act of donating becomes invalid and the donee cannot force the donor to uphold his promise to donate the property.

It must be noted that all of the contracts mentioned in section 4 and other similar contracts, must be acknowledged before a notary public before they can be submitted and registered before a public registry or the government institution concerned.

6. Conclusion

Creating a contract is just the beginning before the parties can expect each other to comply with what was agreed upon. It is vital that the parties affix their signature to the contract to signify that they have agreed to what was stipulated thereon. If a party to a contract is incapacitated to sign by reason of personal or legal circumstances, then a representative should sign on such party's behalf.

Further, the parties must ensure that each of them has their own original copies for their records together with their attachments if there are any.

Lastly, if the contract is required under the law to be notarized or contained in a public instrument, the parties must accomplish the same for its validity. Additionally, there are several contracts that should be registered or submitted before the relevant government institution for their validity.

Templates and examples to download in Word and PDF formats

Rate this guide
4.5 - very good