Law 1 Handout Part 1

Business Law 4 1st Semester A.Y.
2020-2021 Atty. Muriel Ielaine B.

Panganiban
Hand-out on Obligations and Contracts Part

1
Article 1156. An obligation is a juridical necessity to give, to do or not to

do.
➢ An obligation is a legal relation established between one party and another whereby the latter is bound to the
fulfillment of a prestation which the former may demand of
him
Juridical Necessity
➢ Legal sanctions arise from non-compliance of an obligation ➢ The courts of justice may be
called upon by the aggrieved party to avail of legal remedies
Prestation
➢ The particular conduct of the debtor/obligor which may consist in 1) giving (to give), 2) doing (to do) or 3)
not giving or not doing something (not to do).
Essential Requisites/ Elements of an Obligation 1) Passive Object – called the obligor or debtor; the
person who is bound to the fulfillment of the obligation
Passive = Obligor/Debtor = DUTY
2) Active Object – called the creditor or oblige; the person who is entitled to demand the fulfillment
of the obligation
Active = Obligee/Creditor = RIGHT
3) Object or Prestation – subject matter of the

obligation
Kinds • To give
• To do
• Not to do Requisites of
Prestation
• Physically and juridically possible
• Determinate or at least determinable, according to pre-established elements or
criteria
• Must be within the “commerce of man”
• Must be licit; and
• Possible equivalent in money
4) Juridical or legal tie –the efficient cause which creates the relation between the
obligor/debtor and oblige/creditor
Article 1157. Obligations arise from:

1) Law; 2) Contracts; 3) Quasi-
Contracts; 4) Acts or omissions
punished by law; 5) Quasi-delicts.
Sources of Obligations
A. Law
• When an obligation is imposed by law itself
• Obligations arising from law are NOT presumed
• It must be clearly set forth
B. Contracts
• Obligation arising from the stipulation of the parties
• Article 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
• Article 1306. 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
customs, public order, or public policy.
C. Quasi-contracts
• Article 2142. Certain lawful, voluntary, and unilateral acts give rise to the juridical relation of
quasi- contract to the end that no one shall be unjustly enriched or benefited at the expense of
another.
• Principles in which quasi-contracts are based
o No one must unjustly enrich himself at the expense of
another; o If one benefits, he must reimburse; and o Justice
and equity
• Kinds of Quasi-contracts
o Negotiorum gestio (Officious Management)
▪ Whoever voluntarily takes charge of the agency or management of the business of
property of another without any power from the latter, is obliged to continue the
same until the termination of the affair and its incidents, or to require the person
concerned to substitute him, if the owner is in a position to do so (Article 2144)
▪ Officious manager is entitled to reimbursement for necessary and useful expenses. o
Solutio Indebiti (Payment Not Due)
▪ If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return arises (Article 2154) o Others
(Support given by Strangers) – Articles 2164 to 2175
D. Delicts • Acts or omissions punished by laws

• Article 1161. Civil obligations arising from criminal offenses shall be governed by the penal
laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages.
• General Rule: Every person criminally liable for a l=felony is also civilly liable (Article 100 of the
Revised Penal Code)
• Civil liability may be in the form of:
o Reparation o Restitution of the damages
caused; or o Indemnification for
consequential damages
E. Quasi-delicts
• Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter.
• Requisites of Quasi-delicts
o Act or omission by the defendant; o Fault or negligence of the defendant; o Damage
or injury caused to the plaintiff; o Direct relation or connection of cause and effect
between the act/omission and the damage;
and o No pre-existing contractual relation between the parties
• Fault or negligence is the failure to observe for the protection of the interests of another person,
that decree of care, precaution and vigilance which the circumstances justly demands.

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Business Law 4 1st Semester A.Y.

2020-2021 Atty. Muriel Ielaine B.

Hand-out on Obligations and Contracts Part

Article 1156. An obligation is a juridical necessity to give, to do or not to

Passive = Obligor/Debtor = DUTY

Active = Obligee/Creditor = RIGHT

3) Object or Prestation – subject matter of the

Article 1157. Obligations arise from:

D. Delicts • Acts or omissions punished by laws

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