OBLIGATIONS AND CONTRACTS

PART 1
Obligations
1. Q – What is the law on “Obligations and otherwise known as juridical tie or
Contracts”? vinculum juris.
A – the law on obligations and contracts Example:
is the body of rules which deals with the D promises to buy C’s car as a
nature and sources of obligations and result of an agreement. (Here D is
rights and duties arising from the obligor, C is the Obligee; the car
agreements and contracts. is the object or prestation; the
agreement or contract is the
2. Q – Source of the “Law on Obligation efficient cause.)
and Contracts”. 5. Kinds of obligation:
A – The source of the Law on Obligation A. Viewpoint of sanction
and Contracts is the Civil Code of the a. Civil Obligations – give a right of
Philippines (Republic Act No. 386), which action to compel their
was approved on June 18,1949 and took performance.
effect on August 30,1950. The Civil Code b. Natural Obligations – not based
of the Philippines is based on the Civil on positive law but on equity
Code of the Spain which took effect in and natural law; do not grant a
the Philippines on December 7, 1889. right of actin to enforce their
performance, but after
3. Q – What is an Obligation? voluntary fulfillment by the
A – 1. Civil Code Definition – obligor, they authorize the
An obligation is a juridical retention of what has been
necessity to give, to do or not to delivered or rendered by reason
do. thereof.
2. Manresa’s Definition – c. Moral Obligations – those that
An obligation is the legal relation cannot be enforced by action
between one party and another, but which is binding on the
the latter is bound to the party who makes it in
fulfillment of the prestation conscience and natural law.
which the former may demand of Under our law, moral
him. obligations are now merged
4. Requisites or elements of an obligation. with natural obligations.
1. Active subject – known as the
creditor or obligee; the person who Civil Obligations
is entitled to demand and the Example – D promise to pay C
fulfillment of an obligation. his (D’s) debt of P50,000.
2. Passive subject – known as the Natural Obligations
debtor or obligor; the person who is
bound to the fulfillment of an Example – D is indebted to C in
obligation. the amount of P50,000. But the debt
3. Prestation – the promise or the has already prescribed. Still, D paid
particular contract to be observed in C. D cannot later on get back what
the performance of an obligation, he voluntarily paid.
and may consist of giving, doing, or
not doing a thing. Moral Obligations
4. Efficient cause – the legal tie which Example - The duty of a
binds the parties to the obligation; husband and wife to observe
fidelity. The duty of Catholics to hear
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
mass on Sundays and Holy days of 1. Negotiorum Gestio – the voluntary
obligations. management of the property or
B. Viewpoint of performance affairs of another without the
a. Positive – to give or to do knowledge or consent oof the latter.
b. Negative – not to do (Art. 2144, CC)
C. Viewpoint of subject matter 2. Solutio Indebiti – the juridical
a. Real obligation – to give relation which is created when
b. Personal Obligation – to do or something is received when there is
not to do no right to demand it and it was
D. Viewpoint of persons obliged unduly delivered through mistake.
a. Unilateral – where only one of
the parties is bound 10. Delict as a source of obligation
b. Bilateral – where both parties Every person criminally liable for a felony
are bound is also civilly liable. (Article 100, Revised
6. Q – Sources of obligations: (act. 1157, Penal Code)
CC)
A – 1. Law 11. Quasi-delict or culpa aquiliana or tort as
2. Contracts a source of obligation
3. Quasi-contracts One which causes damages to another,
4. Act or omission punishable by law there being fault or negligence, but there
5. Quasi-delicts is n pre-existing contractual relation
between the parties (Art. 2176, Civil
7. Law as a source of obligation Code)
Obligation derived from law are not
presumed. Only those expressly 12. Obligations ex lege not presumed.
determined in this code or by special Obligations arising from law are not
laws are demandable, and shall be presumed. To be demandable and
regulated by the precepts of the law enforceable, the obligation must be
which established them; and as to what stated by the law which created the
has not been foreseen, by the provisions obligation. Such being the case, the
of this book. (Art. 1158, CC) agreement of the parties under this
obligation is no longer necessary
8. Contract as a source of obligation because it is the law which governs their
Obligations arising from contracts obligation.
have the full force of law between the
contracting parties and should be 13. Law governing obligations derived from
complied with in good faith. (Art. 1159, law.
CC) Obligations derived from law shall be
governed by the law which established
9. Quasi-contract as a source of obligation them. In case of insufficiency, the same
It is the juridical relation resulting shall be supplemented by the provisions
from lawful, voluntary and unilateral acts of the Civil Code.
by virtue of which the parties become
bound to each other to the end that no Examples:
one will be unjustly enriched or a. The obligation of husband and wife
benefited at the expense of another. to support each other. (Art. 68,
Family Code)
Kinds of quasi-contract
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
b. The obligation of a taxpayer to file In contracts, as to their general
his income tax return. (Title VI, formation, it is what we call freedom to
Section 44, NIRC) contract or autonomy of will. The
c. The obligation of the legitimate “contract” entered into between the
ascendants and descendants to parties shall have the force of law
support each other. (Art. 70, Family between them. Any violation by either
Code) party shall produce a cause of action
14. Meaning of the article “Obligations against the violator. However, in order
derived from law are not presumed.” for a contract to be valid and
The law says “obligations derived from enforceable, it must not be contrary to
law are not presumed”. This merely law, morals, good customs, public order
means that the obligation must be or public policy, otherwise, the contract
clearly set forth in the Civil Code or is void. (Arts. 1306, 1409, CC)
special laws.
16. Effect if part of the contract is void.
ILLUSTRATIVE CASE. SG, while employed If part of the contract is void but the
as a guard of a moviehouse by O, shot contract is susceptible of division, that
and killed a gatecrasher, X, who attacked part which is not affected may be
SG with a knife after having been refused enforced disregarding that part which is
entrance without first providing himself void. Such that if the contract is falsified
with a ticket. SG was criminally charged by the unauthorized insertion of
with homicide but the case was additional stipulation, this falsified
dismissed by the trial court. For the insertion shall be considered inexistent
expenses incurred in his defense, SG and the part unaffected shall be
demanded reimbursement from the enforced.
owner. When the owner refused, he filed
his action for the recovery of the amount 17. Concept of Quasi – Contract
paid to his lawyer plus moral damages. It is a juridical relation which arises
from certain lawful voluntary, and
HELD: The owner, “O”, is not liable unilateral acts, to the end that no one
because the giving of legal assistance to may be unjustly enriched or benefited at
an employee is not a legal obligation. the expense of another.
A quasi-contract is not an implied
While it may be true that it may be contract because in a quasi-contract
considered as a moral obligation, it does (unlike in an implied contract) there is no
not, at present, count with the legal meeting of the minds.
sanction of any man-made law. If the
owner is not legally obliged to give legal Two principal kinds of Quasi-Contracts.
assistance to the employee, then the 1. Negotiorum Gestio – voluntary
latter cannot recover the amount paid by administration of the property,
him to his lawyer.in short, obligations business or affairs of a third person
arising from law cannot be presumed, it withot the consent or authority of
must be stated before it becomes its owner.
obligatory. (Dela Cruz vs. Northern 2. Solutio Indebiti – payment by
Theatrical Ent. 50 Q.G. 422, Sept. 1954) mistake of an obligation which was
not due when paid.
15. Validity of Contract
OBLIGATIONS AND CONTRACTS
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Obligations
The distinctive mark of a quasi- this case, C’s obligation is to return
contract from contract is that in the amount paid because the
contract, there is consent of the parties, obligation is not yet due and the
while in quasi-contract, the obligation oblige © has no right to demand it.
arises without a contract.
3) Art. 2164. When, without the
18. Some examples of Quasi-Contract knowledge of the person obliged to
1) Art. 2144. Whoever voluntarily takes give support, it is given by a
charge of the agency or stranger, the latter shall have a right
management of the business or to claim the same from the former,
property of another, without any unless it appears that he gave it out
power from the latter, is oblige to of piety and without intention of
continue the same until the being repaid.
termination of the affair and its 4) Art. 2167. When, through an
incidents, or to require the person accident or other cause, a person is
concerned to substitute him, if the injured or becomes seriously ill, and
owner is in a position to do so. he is treated or helped while he is
not in a condition to give consent to
Example: a contract, he shall be liable to pay
D, a merchant-farmer, and for the services of the physician or
owner of a ten-hectare agricultural ither person aiding him, unless the
land left for USA on a pleasure trip. service has been rendered out of
While enroute to USA, typhoon pure generosity.
“Dading” devastated the entire 5) Art. 2168. When, during a fire, flood,
Philippines, including the land storm, or other calamity, property is
owned by D. before the typhoon saved from destruction by another
reached our area of responsibility, C, person without the knowledge of
a neighbor of D, employed six (6) the owner, the latter is bound to pay
farmers to harvest the palay planted the former just compensation.
on the land of D. the expenses 6) Art. 2174. When, in a small
incurred is P600. In here, the community, a majority of the
obligation of D upon arrival is to inhabitants of age decides upon a
reimburse C P600 because he must measure for protection against
not be enriched at the expense of lawlessness, fire, flood, storm or
another. other calamity, anyone who objects
to the plan and refuses to contribute
2) Art. 2154. If something is received to the expenses but is benefited by
when there is no right to demand it, the project as a executed shall be
and it was unduly delivered through liable to pay his share of said
mistake, the obligation to return it expenses.
arises.
19. Rule governing obligation ex delicto or
Example: ex maleficio.
D owes C P10,000 payable on 1) Philippine Revised Penal Code and
December 25, 2010. On December other penal laws subject to the
25, 2009, D, thinking that the provisions of Article 2177 of the Civil
obligation was already due paid C Code.
the full amount of the obligation. In
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
2) Chapter II, preliminary Title, on the proper person who may be
Human Relations of the Civil code. liable to him.
3) Civil Code on damages, Title 18 of This provision is not applicable
Book IV. in cases in which the thing has been
20. Commission of a crime as a source of an acquired by the third person in the
obligation manner and under the requirements
Every person who is criminally liable which, by law, bar an action for its
is also civilly liable under Art. 100 of the recovery.
Revised Penal Code. If a person 2) Reparation of the damaged caused –
therefore is guilty of the crime charged, Art. 106, Revised Penal Code – The
he must not only be imprisoned but he court shall determine the amount of
shall also answer for damages as a civil damage, taking into consideration
obligation. Such civil obligation is a the price of the thing, whenever
necessary consequence of criminal possible, and its special sentimental
responsibility, and is to be declared and value to the injured party, and
enforced in the same criminal reparation shall be made
proceeding except when the injured accordingly.
party reserved his right to file the civil 3) Indemnification for consequential
action independents from the criminal damages – Art. 107, RPC –
action. (Sec. I, Rule 111, Revised Rules of Indemnification for consequential
Court). damages shall include not only those
caused by the injured party, but also
21. Commission of a crime or felony will not those suffered by his family or by a
always make a person civilly liable. third person by reason of the crime.
As a rule, when a person commits a
crime, he can be held criminally liable Example:
and in addition, he can also be held D stole the car of C. While driving
civilly liable because most often the the stolen car looking for a buyer, a
commission of a crime causes not only 6 x 6 truck sideswiped the car
moral evil but also material damage. causing a damage of P50,000. In this
However, not all crimes cause material case, the obligation of D is to restore
injury. Therefore, if there is no material or return the car to the owner c and
damage to be compensated or to be to pay the damage cause amounting
indemnified, there is no civil liability to to P50,000. D must also pay the
be indemnified. consequential damage suffered by C,
and those suffered by his family or
22. What is include in civil liability? by third persons by reason of the
1) Restitution – Art. 105, Revised Penal crime.
Code – the restitution of the thing 23. Proof or evidence required.
itself must be made whenever 1. Proof or evidence beyond
possible, with allowance for any reasonable doubt – when civil
deterioration or diminution of value liability for damage is included in the
as determined by the court. criminal case.
The thing itself shall be 2. Mere preponderance of evidence –
restored, even though it be found in when claim for damage is filed
the possession of a third person who separately with the criminal action.
has acquired it by lawful means,
saving to the latter his action against
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
24. Effect if the guilty party died pending 4. Accident
trial. 5. Persons acting under the
The civil obligation is not compulsion of an irresistible
extinguished. The injured party may file force.
his claim against the estate of the 6. Persons acting under the impulse
offender, but the heirs are not liable of an uncontrollable fear of an
beyond the value of the property they equal or greater injury.
received from the decedent. (Arts. 1178 7. Persons who fail to perform an
and 1311, CC) act require by law when
prevented by some lawful or
25. Effect if the guilty is acquitted of the insuperable cause.
criminal action filed. Note: These persons are exempted from
The extinction of the penal action criminal liability but not from civil
does not carry with it extinction of the liability, except paragraphs 4 and 7. This
civil action. However, the civil action civil liability shall devolve upon their
based on delict shall be deemed guardians or persons whom they are
extinguished if there is a finding in final under control or authority.
judgement in the criminal action that the
act or omission from which the civil 28. Concept of quasi-delict or culpa
liability may arise did not exist. aquiliana
(Section 2, Rule 111, Revised Rules of Quasi-delict, or tort, or Culpa
Court). Aquiliana, is the wrong committed
against a person independent of contract
26. Minimum amount recoverable in case and without criminal intent.
of death.
The minimum amount of damages Example:
recoverable in case of death caused by a D, while driving his car negligently hit
crime or quasi-delict is P50,000 without a pedestrian X, inflicting upon the latter
the need of presenting evidence or proof bodily injury. In here, D is liable because
of damages. However, other damaged of his negligent act and this is called
may be recovered by the injured party. quasi-delict.
(People vs. De Guzman, 194 SCRA 618)
29. Basis of liability.
27. May a person who committed an act Manresa, a Spanish Commentator in
constituting a crime be exempted from Civil law states that the liability for quasi-
criminal liability. delict is founded upon an indisputable
Yes, this is provided for Article 12 of principle of equity; namely, the fault or
the Revised Penal Code. The following negligence cannot prejudice anyone else
persons are exempted from criminal besides its author, and in no case should
liability even if the act committed its consequences be born by him who,
constitutes a crime: without will or fault on his part, becomes
1. An imbicile or insane person, the victim of the result or suffers the
unless he acted during a lucid harm produced by such fault or
interval. negligence.
2. A person under 9 years old He goes further and opined that a
3. A person over 9 years old but man is responsible not only for his
below 15, unless he acted with voluntary willful act executed
discernment. consciously and intentionally, but also
OBLIGATIONS AND CONTRACTS
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Obligations
for those acts performed with lack of 1) In culpa or quasi-delict, whenever in
foresight, care and diligence, which the execution of the act or its
caused material harm to society or to omission, fault or negligence
other individuals. supervenes, the actor is liable; while
crimes, there is no crime unless
30. Requisites or elements to concur before there is a law penalizing it. The
the person is liable. notion is “Nullum Crimen, Nulla
1. The act or omission complained of is Poena sine lege”.
due to the fault or negligence of the 2) In culpa or quasi-delict, criminal
offending party. intent is not necessary, while in
2. The act or omission causes damage crimes, criminal intent is necessary,
or injury. except in criminal negligence.
3. There is a direct relation of cause 3) In culpa or quasi-delict, damages is
and effect between the fault or awarded to the injured party; while
negligence and the damage or in crimes, some violations will not
injury. make the person liable for damages
4. There is no pre-existing relation because there is no one injured.
between the offender and the 4) In culpa or quasi-delict, the right
offended parties. violated is a private right; while in
crimes, the right violated is a public
31. Definition of negligence right.
Negligence is the omission of that 5) In culpa or quasi-delict, the proof of
diligence which is required by the fault or negligence will only be by
circumstances of person, place, and preponderance of evidence; while in
time. crimes, it is beyond reasonable
Kinds of negligence doubt.
1. Culpa acquiliana or quasi-delicts –
The negligence as a source of an Illustrative Case: X ordered a 10-year-old
obligation. boy, C. to climb a high and slippery
2. Culpa contractual – the negligence santol tree, with a promise to give him
in the performance of an obligation parts of the fruits. C slipped, fell on the
arising from contract. ground and died instantaneously. Is X
3. Culpa criminal – That negligence liable?
that results to a crime. Yes, in view of his negligent act in
making the order. His act was clearly a
32. Culpa or negligence distinguished from departure from the standard conduct
Dolo or Fraud. required of a prudent man. He should
In Culpa, it is not the act or omission not have ordered the boy to climb the
which gives rise to the responsibility, but tree because it is treacherous, a veritable
the want of care required from the trap. In this case, there is no criminal
circumstances. In dolo, the act done or liability because there no intention to kill
executed by the actor s willful or the boy, but only damages based on
deliberate with an intention to cause the culpa aquiliana or torts.
resulting loss.
34. The presentation in an obligation.
33. Culpa or negligence as distinguished 1) To give
from crimes. 2) To do
3) Not to do
OBLIGATIONS AND CONTRACTS
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Obligations
35. Obligations of a person obliged to give will answer for damages because he is
something guilty under this article.
A. Obligation is determinate.
1. To deliver the thing. 38. Creditor’s right to the fruits of the thing.
2. To take care of the thing with The creditor has a right to the fruits
the proper diligence of a good of the thing from the time the obligation
father of a family (Art. 1163, CC) to delivery it arises. (Art. 1164, CC)
3. To deliver all accessions and Example: June I, 2010, D obliged
accessories (Art. 1166, CC) himself to give C a specific parcel of land
4. To pay damages in case of on December 31, 2010. However, this
breach of the obligation (Art. land is leased to X for P12,000 per
1170, CC) month. In here, the only right of C on
B. Obligation is indeterminate or December 31 is to demand delivery, but
generic. he cannot require D to give the rentals X
1. To deliver a thing which must paid D from June up to December,
be neither of superior nor because he is entitled to the fruits only
inferior quality. (Art. 1246, CC) from the moment the obligation to
2. To pay damages in case of deliver it arises. However, if D could not
breach of the obligation. (Art. deliver the land after demand on
1170, CC) December 31, 2010, and delivers it only
on December 31, 2011. C now can
36. Diligence required in the preservation demand payment of the rentals for
and delivery of a determinate thing. P12,000 because is entitled to the fruits
1. By provision of law. Example, the from December 31, 2010 to December
extraordinary diligence required of a 31, 2011.
common carrier with respect to its
passengers. (Art. 1755, CC) 39. Creditor’s right to the fruits, personal
2. By stipulation of the parties. and real rights explained.
3. In the absence of both, the diligence 1) Before delivery of the fruits – the
of a good father of a family. creditor’s right is personal or jus in
personam, a right which is
37. Meaning of the phrase “good father of enforceable only against a definite
a family or bonum pater familia”. passive subject, the debtor.
if a person is obliged to give 2) After delivery of the fruits – the
something, he must take good care of it creditor has now a real right over
as if he is the real owner. Short of that the fruits from the time of delivery
expectation, he will answer for damages. and becomes enforceable against
Examples: January 1, 2010, D the whole world. In short, it gives a
obliged himself to give C a specific racing person a direct and immediate
horse on December 25, 2010. The juridical power over a thing which
obligation of D in this case is to deliver can be exercised not only against a
the horse on December 25, 2020. But definite passive subject but against
from January 1 up to December 25, he the whole world. The rights of
must take good care of the horse as if he ownership and possession are real
is the owner. Since this is a racing horse, rights.
D must feed the horse three times a day
until the date of delivery. Failure to do, 40. Delivery or tradition is a requisite for
and the horse, as consequence, dies, D the purpose of acquiring ownership.
OBLIGATIONS AND CONTRACTS
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Obligations
It is a fundamental principle in 2) Industrial fruits – products of the soil
contact of sales that what transfers through cultivation or human labor,
ownership of a thing is not the such as palay and vegetables,
agreement but the delivery of the object. planted by farmers.
So, before delivery, the creditor’s right is 3) Civil fruits – fruits as a result of
only personal, that is, to demand of the civilization of fruit arising out of a
object and its fruits. juridical relation, such as rent of
Example: lands, apartments and buildings.
1) Personal right or jus in personam.
On June 1, 2010, D obliged 42. Definition of terms and examples
himself to deliver to C a specific 1) Determinate – particularly
horse on June 30, 2010. D fails to designated or physical segregated
deliver on the date promised and from all others of the same class.
in the meantime the horse gave Examples:
birth to a colt on July 15, in here, a) A 1968 Toyota Crown, with
C can demand from D the delivery engine No. 007 and plate No.
of the horse and the colt which PAW-008.
was born after the due date of the b) Apartment No. 9, situated at
obligation. This right is personal to the corner of Reten Street and
be delivered only against the San Anton Street, Sampaloc,
passive subject which is D. Manila.
However, if D sold and 2) Indeterminate or generic – not
delivered the horse and the colt to particularly designated or separated
x, a buyer in good faith, C has no from the other of the same class.
right against C because what Examples:
transfers ownership is he delivery a) A 1968 Toyota crown
of the object. X now is the owner b) A horse
of D’s failure to delivery. c) P10,000
2) Real right or jus in rem. 43. Illustrative Case: S bound himself to
In the above example, if D deliver to B the following:
delivered the horse and the colt to a) 21-inch 2006 model TV set
C on July 16, C becomes the b) 14 cubic feet, white Westinghouse
owner of the horse and the colt refrigerator, with Motor No. 007.
on July 16, the date of delivery. S did none of these things. May the
Take note that C’s right is court compel S to deliver the TV set
converted into a real right and the refrigerator? Why?
enforceable against the whole a) TV set. No, because the object is
world. generic. The right of B is to
demand a TV set which is
41. Kinds of fruits: N I C neither superior nor inferior in
1) Natural fruits – spontaneous quality as provided for in Article
products of the soil without the 1246, which states that “when
intervention of human labor, and the obligation consists in the
the young and other product of delivery of an indeterminate or
animals with or without the generc thing, whose quality and
intervention of human labor, such as circumstances have bot been
forest products. stated, the creditor cannot
demand a thing of superior
OBLIGATIONS AND CONTRACTS
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Obligations
quality. Neither can the debtor have been temporarily separated, the
deliver a thing of inferior obligor is still bound to make the
quality”. Therefore, specific necessary delivery. However, the parties
performance is physically or may stipulate that the accession and
legally impossible. accessories may be excluded from the
b) Refrigerator – yes, because the obligation to deliver.
object is determinate.
C. B. Suppose that the object of the 46. Creditor’s right in an obligation to do
obligation to give is lost or something.
destroyed through a fortuitous 1. If the debtor fails to perform the
event, can the debtor or obligor still obligation.
be held liable for damages? a) The creditor may demand that
Answer: it depends. If the obligation the obligation be performed by
is determinate, as a general rule, the the debtor himself or by a third
obligor or debtor cannot be held person at the expense of the
liable for damages (Art. 1174, CC) debtor. However, the debtor
If the obligation, however, is cannot be compelled to comply
indeterminate or generic, the debtor with his obligation for this will
or obligor can still be held liable for amount to involuntary servitude
damages (Art. 1263, CC). an in violation of his constitutional
indeterminate or generic thing can right. Even when the obligation
never perish (genus nunquan is too personal that only the
peruit). debtor can do it, the only
remedy is to recover damages
44. Accessions and accessories defined and in case of non-performance.
exemplified b) To demand damages against the
1) Accessories are those things which debtor for breach of contract
are used for the embellishment, use, under Article 1170.
or preservation of another thing of 2. If the debtor performed the
more importance. obligation but in contravention of
Example: Tools and spare parts, with the agreement.
respect to a machine, the keys with a) The creditor may ask that
respect to a house; the jack with another person perform the
respect to a specific car. obligation at the expense of the
2) Accessions include everything which debtor.
is produce by a thing, incorporated b) The creditor may demand
or attached thereto, either naturally damages against the debtor for
or scientifically. It includes natural breach of contract under Article
accession, such as alluvion, and 1170.
industrial accession, such as 3. If the obligation is poorly done.
building, planting and sowing. a) The creditor may ask that it be
undone at his (debtor’s)
45. Creditor’s right to the accession or expense.
accessories of a determinate thing. b) The creditor may demand
The creditor is entitled to everything damages against the debtor
that is attached, naturally or artificially, under Article 1170.
to the principal thing. Accordingly, even
when the accessions and accessories
OBLIGATIONS AND CONTRACTS
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Obligations
47. Illustrative Case: D obliges himself to stipulation, the rate of interest shall
construct a one-kilometer Sabo dam in be 12% per annum to be computed
Bacolor, Pampanga, to protect the from default, i.e., from judicial or
property of C against the lahar fury of extra-judicial demand under and
the Mount Pinatubo eruption. It was suspect to the provisions of Art. 1169
stipulated that the height of the dam of the Civil Code.
from the basement shall be four meters, 2. When an obligation, not constituting
and crushed stone measuring two inches a loan or forbearance of damages
in diameter shall be used. awarded may be imposed at the
1. If D does not construct the dam on discretion of the court at the rate of
time, C may ask another contractor 6% per annum. No interest, however,
to do the job at the expense of D shall be adjudged on unliquidated
plus damages. claims or damages except when or
2. If D constructed the dame but used until the demand can be established
1/2 -inch diameter of crushed stone, with reasonable certainty.
C may ask that D comply with his Accordingly, where the demand s
obligation or may ask another established with reasonable
contractor to do the job at the certainty, the interest shall begin to
expense of D plus damages. run from the time the claim is made
3. If D constructed the dam according judicially or extra-judicially (Art. 1169,
to specification combination but the Civil Code), but when such certainty
height is only 3 meters, C may ask cannot so reasonable established at
another contractor to do the job for the time demand is made, the
C at D’s expense plus damages. interest shall begin to run only from
the date the judgement of the court
48. When obligation is breached. is made, the interest shall begin to
When an obligation, regardless of its run only from the date the judgement
source, i.e., law, contracts, quasi- of the court is made (at which time
contracts, delicts or quasi-delicts, is the qualification of damages may be
breached, the contravenor can be held deemed to have been reasonable
liable for damages =. The provisions ascertained). The actual base for the
under Title XVII on “damages” of the Civil computation of legal interest shall, in
Code govern in determining the measure any case, be on the amount finally
of recoverable damages. adjudged. (Eastern Shipping Lines,
With regard particularly to an award Inc. vs. Court of Appeals, 234 SCRA
of interest in the concept of actual and 78)
compensatory damages, the rate of
interest, as well as the accrual thereof, is 49. Creditor’s right against the debtor if the
imposed as follows: debtor does what has been forbidden.
1. When the obligation is breached, and 1. To ask that it be undone at the
it consists in the payment of a sum of expense of the debtor.
money, i.e., a loan or forbearance of 2. Demand damages for breach of
money, the interest dues should be contract.
that which may have been stipulated Illustrative Case: X and Y are owners of
in writing. Furthermore, the interest two adjoining pieces of land situated in
due shall itself earn legal interest Bocaue, Bulacan. The parties agreed that
form the time it is judicially X will give P10,000 to Y on the condition
demanded. In the absence of that Y will not construct any tenement,
OBLIGATIONS AND CONTRACTS
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Obligations
temporary or permanent on his land for 2. The debtor is liable even if the loss is
five years because X will use it as his due to fortuitous event.
garage for five years. After one year, Y 3. The debtor shall bear the risk of loss.
constructed a semi-structure garage to
house his three (3) for hire tricycles. In 54. Instances when there is no default or
here, X may ask that Y demolish the mora solvendi.
structure, or t ask a third person to do 1. In negative obligation, because one
the job at the expense of Y plus can never be late in not doing or not
damages. giving something.
2. In natural obligation, because the
50. Q – When does the obligation to deliver performance is optional or voluntary
arises? on the part of the debtor.
A – 1. If there is no term or condition,
then from the perfection of the 55. Rules on Mora, delay or default.
contract. 1. Unilateral obligations; As a rule, “No
2. If there is a term or a condition, demand – no delay”. Therefore, the
then from the moment the term mere expiration of the period fixed
arrives or the condition happens. by the parties is not enough in order
that the debtor may incur delay.
51. Concept of delay, default r mora. There must be judicial or
It is the delay or nonfulfillment of an extrajudicial demand to be made
obligation with respect to time. before or simultaneous to the
maturity of the obligation. Failure to
Kinds of Mora or Delay. demand performance will not make
1. Mora solvendi – debtor’s part. the debtor in default under the
2. Mora accipiendi – creditor’s part. principle of “No demand – No
3. Compensatio morae – both parties delay”.
defaulted.
52. Q – In obligations to gibe or to do, when Exceptions to this rule are:
does the obligor or debtor incur in a. When stipulated by the parties
delay? Example: D obliges himself to
A – The debtor incurs in delay from the give C a specific car on June
time the creditor judicially or 30,2010 without the need of a
extrajudicially demands from him the demand. If on June 30 D does
fulfillment of his obligation an in spite of not deliver, the nest day he is
such demand, he is unable to comply considered in default without
with the obligation. (Art. 1169 par. 1) the need of a demand.
Let it be noted that it is not
Requisites of Mora Solvendi enough that there is a specific
1. The obligation must be liquidated, date for its performance. The
due and demandable. obligation must expressly state
2. The debtor is guilty of non- that “there is no need for
performance. demand”, otherwise he will not
3. There was demand made judicially be considered in default.
or extra-judicially. b. By provision of law.
Example: Article 1788 of the Civil
53. Effects of Mora Solvendi Code – a partner who has
1. The creditor may ask for damages. undertaken to contribute a sum
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
of money and fails to do so 2009. Upon the arrival of the
becomes a debtor for the designated date for payment, is
interest and damages from the demand necessary in order that “D”
time he should have complied shall incur in delay?
with his obligation without the ANSWER:
need of a demand. It is submitted that the answer is
c. When time is of the essence of Yes, and the first exception will not
the contract. apply. According to the decision of
Example: D obliges himself to the Supreme Court as well as
construct in favor of C a one- authorities of Civil Law, in order that
kilometer Sabo dam in Bacolor, the first exception as provided for
Pampanga, to protect the Article 1169 can be applied, it is
property of C against the lahar indispensable that the law or the
coming from Mount Pinatubo. If stipulation should expressly add that
by June of this year, D has not the obligor shall incur in delay if he
yet started the construction, he fails to fulfill the obligation upon the
can already be declared in arrival of a designated date
default without demand “without the need of a demand”,
because time of is the essence otherwise demand is necessary to
of the contract. declare the debtor in default.
d. Demand will be useless. 2. “A” and “B” entered into a contract
e. Example: S and B executed a of partnership for the purpose of
contract on June 15, 2009 by buying and selling textbooks, with
the terms of which S undertook the former as capitalist partner and
to sell and B promised to buy the latter as industrial partner. It
A’s white horse. Elivery of the was agreed that “A” shall contribute
horse as to be made on P50,000 to the common fund on
December 25,2009 at which January 10,2010. Upon the arrival of
time, B would pay the agreed the designated date for payment, is
price of P10,000. On June demand necessary in order that “A”
30,2009, S sold and delivered shall incur in delay?
the same white horse ANSWER:
irrevocable to X. in here, S is Demand is not necessary in order
considered in default after he that “A” shall incur in delay.
sold and delivered the horse to According to the Civil Code, where
X without demand because the one of the partners who has
demand to be made by B will be undertaken to contribute a sum of
useless, S should no longer money to the common fund at a
perform his obligation since X specific date but fails to do so, he
after delivery is already the becomes a debtor of the partnership
owner. not only for the amount which he
has promised to contribute but also
Illustrative Case of exception Nos. 1 and or interest and damages from the
2: time he should have complied with
1. “D” borrowed P10,000 from “C” on his obligation without the need of a
December 1, 2009. He executed a demand. (Arts. 1786, 1788, Civil
promissory note promising to pay Code).
the indebtedness on December 25,
OBLIGATIONS AND CONTRACTS
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Obligations
2. Reciprocal obligations: There are 3. Delay or mora
obligations arising out of the same cause and 4. Contravention of the term of the
are to be fulfilled at the same time. agreement.
Example: In contract of Sales, when the
obligation of the seller and the buyer will 60. Non-performance by fraud.
take place at the same time. Fraud may be defined as the
voluntary execution of a wrongful act, as
56. Delay in reciprocal obligation. willful omission, knowing and intending
From the time one of the parties fulfills the effect which will arise from such act
his ibligation, the other incurs delay. If or omission. This is distinguished from
neither party performs his undertaking, negligence, in the sense, that in fraud,
neither incurs delay. there is intentional evasion of the
Example: S sold to B a specific car for normal fulfillment of the obligations. This
P10,000. Bothe parties agreed that the fraud called incidental fraud or dolo
delivery and payment shall take place on indidente, committed in the performance
June 30. If on June 30, B is paying S of the obligation or after the contract is
P10,000 and the latter cannot deliver, S already perfected.
is considered in default. Likewise, if on The other fraud referred to in Civil
June 30 S tenders delivery and B cannot law is provided in Article 1338, and this is
pay the price, the latter is considered in committed before or at the moment of
default. creating the obligation.
Fraud, as a ground for damages,
57. Effects of Mora. implies some kind of malice or
When there is delay, the injured party dishonesty and it does not cover cases of
may ask for damages. But this benefit mistake and error of judgement made in
arising from Mora, default or delay may good faith. The test is the element of
cease upon: mistake, and not the actual harm done.
1. Renunciation by the creditor
2. Prescription of action 61. Fault or Negligence or Culpa
3. Extension of time for the fulfillment This fault or negligence is called culpa
of the obligation. contractual and not culpa aquiliana or
culpa extra-contractual. Culpa
58. A. Requisites of Mora Acciciendi contractual is the fault or negligence of
1. Offer of performance by the debtor, the debtor as an incident in the
and fulfillment of an obligation, while culpa
2. Refusal of the creditor to accept aquiliana is the fault or negligence which
without just cause. constitutes an independent source of an
obligation between parties not
B. effect of Mora Accipiendi previously bound.
1. Creditor shall bear the risk of loss.
2. All expenses for the preservation of 62. In contravention of the terms of the
the thing after the delay shall be borne agreement.
by the creditor. In general, every debtor who fails in the
3. Creditor is liable for damages. performance of his obligation is bound to
indemnify the aggrieved party for the
59. Grounds for liability to pay damages. losses and damages caused thereby. By
1. Fraud or dolo the phrase “in any manner contravenes
2. Negligence or culpa the tenor” means any illicit act which
OBLIGATIONS AND CONTRACTS
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Obligations
impairs the strict and faithful fulfillment Example of Fraud in performing a
of the obligation, or every kind of contract
defective performance. It is therefore Today, D promised to deliver to C 100
immaterial whether or not the actor is in canvas of C-4 variety rice, delivery to
bad faith or negligent, what is required is take place after 10 days. Upon delivery,
that it is his fault or the act done D delivered the C-4 variety but mixed
contravenes their agreement. them with C-6, an inferior variety. In
here, the right of C is to ask for damages.
63. Kinds of damages: C cannot ask for annulment or
M – Moral and physical aguish cancellation of the contract because the
E – Exemplary – corrective or to set an fraud is committed at the time of
example performance. This fraud called dolo
N – Nominal – to vindicate a right incidneti.
T – Temperate – exact amount cannot be
determined 66. Renunciation of Fraud
A – Actual – actual losses and unrealized 1. Future fraud cannot be renounced
profit because the advance renunciation of
L – Liquidated – predeterminated the creditor would practically leave
beforehand by agreement the obligation without effect. (Art.
1171, CC)
DAMAGE: Refers to the harm done and 2. Past fraud can be renounced. The
what may be recovered. fraud referred to is fraud in Article
INJURY: Refers to the wrongful or 1170, which is the malice or bad
unlawful act. faith in the performance of the
obligation.
64. A. definition of Fraud
Fraud or dolo consists in the conscious 67. Test of Negligence.
and intentional proposition to evade the the test of negligence is:
normal fulfillment of an obligation (8 did the actor in doing the alleged
Manresa Bk. 1. P. 168). negligent act use the reasonable care
and caution which an ordinary prudent
B. Kinds of Fraud person would have used in the same
1. Fraud in obtaining consent. situation? If not, then he is guilty of
2. Fraud in performing a contact negligence.

65. Example of Fraud in obtaining consent 68. Kinds of Culpa or Negligence.

S sold to B for P10,000 a specific ring 1. Culpa aquiliana – the wrong or
misrepresenting it as a diamond ring negligence committed independent
when in fact it is a fake. B bought the of contract and without criminal
ring because of the misrepresentation of intent.
S. Later, it turns out that the ring is only 2. Culpa contractual – the wrong or
made of glittering glass. In here, the right negligence in the performance of a
of B is to annul the contract because the contract.
fraud is committed at the same time the 3. Culpa criminal – the wrog or
contract is perfected. This is called dolo negligence in the commission of
causanti. The fraud employed is the very crime.
reason why B entered into the contract.
OBLIGATIONS AND CONTRACTS
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Obligations
69. Distinguish Culpa Aquiliana from Culpa P, and this is known as Culpa
Contractual Contractual.
1. In culpa contractual, there is a pre- Article 1755 of the Civil Code
existing contractual relation provides that a common carrier is
between the parties; while in culpa bound to carry the passengers safely
aquilliana, there is no contractual as far as human care and foresight
relation. can provide using the utmost
2. In culpa contractual, the negligence diligence of very cautious persons,
of the actor is merely an incident in with a due regard for all the
the performance of the obligation; circumstances.
while in culpa aquiliana, it is Be it noted that the heirs of P
substantive and independent. must bring the action against the
3. In culpa contractual, the source of owner-operator of the taxi, and not
liability of the actor is the breach of against the driver, because the
contract; while in culpa aquiliana, it contract is between the passenger
is the negligence act or the omission and the owner, and not between the
itself. passenger and the driver, who
4. In culpa contractual, the proof of merely represents the owner. Of
contract and the breach is sufficient course, the owner can later on ask
proof to warrant recovery of reimbursement from the driver.
damages; while in culpa aquiliana, Likewise, the operator cannot
the negligence of the actor must be escape from his liability by providing
proved. hat he exercised due diligence in the
selection and supervision of the
70. Illustrative Case: driver, but it might mitigate his
Taxi driver D, driving recklessly, killed culpability. This is based on the legal
pedestrian X and his passenger P. What maxim “respondeat superior” or the
are the sources of the obligation of D master-servant rule, that the
and that of his employer to P and X? negligence of the servant is the
negligence of the master.
1. The right of the heirs of X, the
pedestrian, is to proceed against D 71. Degree of diligence required.
or his employer and this is based on 1. Diligence required by law, if any.
quasi-delict or culpa aquiliana 2. Diligence required by the parties.
because there is no existing contract 3. In the absence of both, diligence of a
between D and X. the liability of good father of a family.
both is direct and primary.
However, the employer or 72. Distinguish fraud from negligence.
operator can relieve himself of his 1. In fraud, there is a deliberate
liability by proving that due diligence intention to cause damage while in
of a good father of a family is made negligence, there is no intent to
in the selection and supervision of cause damage.
his driver and this is based on Article 2. In fraud, the liability of the actor
2180, Civil Code. cannot be reduced by the court
2. The heirs of P may proceed against while in negligence, the liability may
D’s operator only. The source of the be reduced by the court.
liability of D’s employer is the
breach of contract of carriage with
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
73. A. Concept of fortuitous events. responsible for any fortuitous
Fortuitous events or caso fortuito are event until he has effected the
events which cannot be foreseen or delivery.
which, though foreseeable are b. Article 1268 – when the debt of
inevitable. These are acts of God which a thing certain and determinate
could neither be foreseen nor resisted, proceeds from a criminal
such as floods, storm, lighting, typhoon offense, the debtor shall not be
and perils of the sea and eruptions of exempted from the payment of
volcano. the price, whatever may be the
cause for the loss, unless there
B. Requisites of Fortuitous Events or is refusal without justification
Caso Fortuito. on the part of the creditor to
1. That the event must be independent accept the thing.
of the will f the debtor. c. Article 1942, Paragraph 1 – The
2. That it must be either unforeseeable bailee is liable for the loss of the
or unavoidable. thing even if it should be
3. That the occurrence must render it through a fortuitous event, if he
impossible for the debtor to fulfill the devotes the thing to any
obligation in normal manner. purpose different from that for
4. That the debtor must be free of which it has been loaned.
participation in, or aggravation of, the 3. Where the nature of the agreement
injury to the creditor (Austria vs. Court of requires the assumption of risk.
Appeals, 39 SCRA 527) This known as the doctrine of
“assumption of risk”. It refers to a
74. Fortuitous event distinguished from situation in which th obligor or
force majeure. debtor with full knowledge of the
Force majeure is a superior or irresistible risk, voluntarily assumes such risk.
force which is essentially an ac act of This is based on the principle “no
man, such as wars, strikes, riots, acts of wrong is done to one who
robbers, pirates and brigands. consents”. This is illustrated in
insurance contracts, whereby the
75. Effect of fortuitous events in the obligor as insurer is liable to pa even
performance of an obligation. if the property is lost by fire and this
When a debtor is unable to fulfill his is fortuitous in nature.
obligation because of fortuitous event,
his obligation to comply is extinguished 76. Illustrative case:
subject to the following exceptions: P was injured while he was a
passenger of a Love Bus operated by O
1. When stipulated by the parties that and company. The proximate cause of
the happening of an event fortuitous the accident was failure of the steering
in nature shall not exempt the knuckle to work causing the driver to
debtor from his liability. lose control of the wheel as a result if
2. When the law expressly so provides. which the bus fell into a ditch.
a. Article 1165 – if the debtor 1. Can the operator exempt himself
delays, or has promised to due to fortuitous event?
deliver the same thing to two or ANSWER: The weight of authority
more persons who do not have sustains the view that a passenger is
the same interest, he shall be entitled to recover damages from
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
the carrier for an injury resulting 78. Receipt of a later installment without
from defect in an equipment reservation as to prior installments:
purchased from a manufacture, A receipt acknowledging the payment of
unless extraordinary diligence has a later installment without reservation as
been exercised with regard to to the earlier installment due, will raise
inspection and application of the the presumption that the prior
necessary tests. installment is also paid. But this
presumption is not conclusive. It can be
2. Suppose the proximate cause of the controverted by proof to the contrary.
accident was a tire blowout, is that (Art. 1176, CC)
fortuitous in nature? Example: S sold to B a specific car for
ANSWER: Our Supreme Court P20,000 payable in four equal
repeatedly stated in its decisions installments:
that defective brakes, the blowout January 1 – P5,000
of tires and others of similar nature February 1 – 5,000
cannot be classified as fortuitous March 1 – 5,000
event per se within the meaning of April 1 – 5,000
the law. B paid S the first and second
installments, but failed to pay third. If he
77. Receipt of the Principal without tenders payment on April 1, the payment
reservation as to the interest. must be applied on the third installment,
This article must be gleaned with Article otherwise it will raise a presumption that
1253 which provides that if a debt the later installment was already paid.
produces interest, payment of the However, he may accept the fourth
principal shall not be deemed to have installment but he must make a
been made until the interest has been reservation in the receipt that the third
covered. This article therefore raises a installment is not yet paid.
rebuttable presumption that the receipt
of the principal without reservation as to 79. The right of the creditor as against the
the payment of interest shall raise the debtor.
presumption that the said interest has In order to satisfy his claim against the
been paid. debtor, the creditor has the following
Example: D borrowed from C P10,000 at successive rights.
12% interest per annum. On the date of 1. To demand fulfillment of the
maturity D paid C, and the latter issued a obligation or specific performance.
receipt under the following tenor: 2. To attach the properties of the debtor,
Received from D P10,000 in payment of except those exempts by law from
his obligation. (Sgd. C) In here, the law execution.
presumed that the interest of 12% was 3. to exercise all rights of the debtor
already paid because in the payment of except those inherent and personal to
an obligation in money, the payment is him. This is Accion Subrogatoria.
applied first to cover the interest, then 4. to ask for the recission of contracts
the principal obligation. intended to defraud him. This is Accion
If the interest has not yet been paid, Paulina.
C should have reserved the payment of
interest in the receipt, to read as follows:
Receiver from D P10,000 in payment of
his obligation. Interest unpaid. (Sgd. C)
OBLIGATIONS AND CONTRACTS
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Obligations
80. Accion subrogatoria or the right to be 3. to compel D to assign to C whatever
subrogated. rights D may have against third person
The action which the creditor may and this is called Accion Subrogatoria.
exercise in the place of his debtor in 4. to rescind or impugn acts executed by
order to preserve or recover the D in order to defraud C. this is called
property lost or transferred so that he Accion Pauliana. Such that in the
can satisfy his own credit is called accion illustration given, if D sold the land to X
subrogatoria or subrogatory action. on December 20 without reserving
properties to answer for his obligation to
81. Accion Paulina or the right to rescind or C, the right of C is to rescing or cancel
impugn fraudulent act. the sale between D and X because this is
The creditor as a last resort has the right considered a fraudulent act. This right of
to set aside or revoke or cancel the acts rescission is applicable only if X is in bad
which the debtor may have done to faith.
defraud him and this is called Accion
pauliana or the right to rescing. NOTE: There are, however, some
personal rights of the debtor which the
82. Remedies which are available to the creditor cannot exercise.
creditor in order to protect his rights
against the debtor. Examples:
1. Exhaust the property in possession of a. The right of existence or support
the debtor. b. The right of an honorary character
2. to be subrogated to all of the rights c. The power to carry out the contract
and actions of the debtor save those of agency
which are inherent in his person (accion d. The right or relation as public
subrogatoria). character
3. to impugn all of the acts which the e. The right to a government gratuity
debtor may have done to defraud him or pension
(accion pauliana).
Note: The second and third are 83. Transmissibility of rights.
subsidiary to the first. As a rule, all rights acquired in virtue of
an obligation are transmissible, if there
Illustrative case exemplifying the rights has been no stipulation to the contrary.
of the creditor. Be it noted that it is the right of a person
D owns a specific parcel of land and that is transmissible, the obligation is not
at the same time owes C P100,000 transmissible. (Art. 1178, CC)
payable on December 25. On the due
date, D failed to pay. What are the Example: D owes C P10,000 payable on
successive rights of C? December 25. His would-be-heirs are X,
Y, Z. If D dies on December 20, D’s
1. To demand payment. obligation to C to pay P10,000 is
2. To bring an action against D if D fails extinguished. Hence, C’s right is to file an
to pay after demand. If judgement is action or claim against the estate of the
favorable, to attach the properties of D deceased debtor. However, the heirs are
in satisfaction of the obligation, except not liable beyond the value of the
those exempts from attachment. property received from their decedent.
If, however, it was C who dies and he is
survived by his only heirs S, O, N, the
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
heirs can demand payment from D obligation is subordinated or made to
because rights are transmissible. depend. (Esriche, Law Dictionary)

84. Exception to transmissibility of rights. 2. Q – what are the requisites of

1. When the parties agreed against condition?
transmission. A – a. Futurity
2. When the law prohibits the b. Uncertainty
transmission of rights. 3. Kinds of conditions
3. When the nature of the obligation 1. Suspensive – one which suspects
does not permit transmission of rights, the effectivity of the obligation until
such as when the right is personal. the condition is fulfilled. It is the
fulfillment of the condition that
85. Classification of Obligations produces the efficacy of the obligation.
1. PRIMARY classification according to No fulfillment, no obligation.
the Civil Code. Example: I will give you P10,000 if you
a. pure and conditional will pass next CPA examination. This is
b. with a period or with a term suspensive because it suspends the
c. alternative and facultative demandability of the obligation.
d. joint and solidary
e. divisible and indivisible 3. Resolutory – one which extinguishes
f. with a penal clause the obligation takes effect at once,
but will terminate upon the
2. SECCONDARY classification according happening of the event.
to the Civil Code. Example: I will let you use my car
a. unilateral and bilateral until you pass the next CPA
b. real and personal examinations. The promise is made
c. determinate and indeterminate today. Tomorrow you can demand
d. positive and negative delivery from me. But if you pass the
e. legal and conventional examination, let us say on May 30,
f. civil and natural my obligation is already
extinguished because the event
86. Concept of pure and conditional already happened and from that
obligation. time there is a revertion of the
1. Pure obligation – one without a personality, the “debtor becomes
condition or a term, therefore the creditor, and the creditor
demandable at once. becomes the debtor”. So, your
Example: obligation is to return the car to me
a. I promise to give you a specific car. because you are in possession and
b. I obliged to give you P10,000 on my obligation is already
demand. extinguished since the event already
2. Conditional obligation – when there happened.
is a condition imposed in its
performance. 88. When an obligation is demandable at
once.
87. 1. Q – What is a condition? 1. When it is pure.
A – a condition is a future and 2. When the obligation is subject to a
uncertain event upon which an resolutory condition or period.
OBLIGATIONS AND CONTRACTS
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Obligations
89. Debtor to pay the creditor “when his condition are valid. Example: I
means permit” will give you P10,000 if you like.
If debtor will pay when his means permit 2. Casual – one which depends
him to do so, or words of similar import, exclusively upon chance. This is a
such as, valid obligation. Example: I’ll give
1. “when I can afford” you P10,000 if I win the Lotto draw
2. “when I am able to” next Wednesday.
3. “when I have money” 3. Mixed – one which demands upon the
The obligation is not conditional but with will of one of the contracting parties
a period. The payment here does not and partly upon chance or the will of
depend upon the will of the debtor – it is a third person. This is also a valid
only the time when payment is to be obligation. Example: I will give you
made. Since we are referring to the time P10,000 if you’ll marry X this year.
of effectively, we consider it a term or a
period. Illustrative Case: I will give you P10,000 if
I can sell land this year. If I succeed in
90. When is the obligation demandable? selling my land this year, am I under
Since the time for payment (not the obligation to give you P10,000.
payment) depends upon the will of the
debtor, immediate performance cannot It is submitted that the answer is yes,
be enforced, the right of the creditor is because the condition attached in the
to go to court and let the court fic the obligation is not entirely dependent
date for payment. The creditor in this upon the will of the debtor, but instead
case is not demanding payment, he is it is considered mixed, dependent upon
only asking the court to fix the date for the will of the debtor and a third person,
payment. Once fixed by the court, the that is, the buyer, his availability and
obligation becomes demandable on the willingness to buy.
date fixed.
Effects of protestative, Casual, and
91. Kinds of condition under Article 1182. Mixed Conditions.
1. Potestative – one which depends upon
the will of one of the parties. This is A. Potestative
called facultative condition. If the condition is potestative
a. Potestative on the part of the and the fulfillment depends
debtor if suspensive: both the exclusively upon the will of the
condition and the obligation are debtor, the conditional obligation
void. shall be void. If the condition is
Example: I’ll give you P10,000 if potestative and the fulfillment
I like. depends exclusively upon the will of
b. Potestative on the part of the the creditor, the conditional
debtor if resolutory: the obligation shall be valid.
obligation and the condition are
valid. Example: I’ll give you B.Casual
P10,000 until I return from If the condition is casual and its
Tarlac. fulfillment depends upon chance
c. Potestative on the part of the and/or upon the will of a third
creditor, the obligation and the person, the obligation shall be valid.
OBLIGATIONS AND CONTRACTS
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Obligations
C. Mixed
If the condition is mixed and its 93. Effects of impossible and illegal;
fulfillment depend partly upon the condition:
will of a party to the obligation and 1. Impossible physically: to make a dead
partly upon chance and/or the will man alive
of a third person, the obligation shall 2. Impossible logically: to make a circle
be valid. that is at the same time a square.
3. Illegal condition: to kill X
Exceptions to the rule that when the
fulfillment of the condition depends upon the Effects
sole will of the debtor, the conditional 1. If the condition is to do an
obligation shall be void. impossible or illegal thing, both the
1. If the condition is resolutory and condition and the obligation are
potestative, the obligation is valid even if void. Example: I’ll give you P10,000
the fulfillment of the condition is made if you will make a dead man alive.
to depend upon the sole will of the 2. If the condition is negative, that is,
debtor. (Taylor vs. Uy Tieng piao, 43 Phil. not to do an illegal thing, both the
873) condition and the obligation are
2. The rule that even the obligation itself valid. Example: I will give you
shall be void is applicable only to an P10,000 if you will not kill X.
obligation which depends for its 3. If the condition is negative, that is,
perfection upon the fulfillment of the not to do the impossible, just
potestative condition and not to a pre- disregard the condition, but the
existing obligation. (Trillana vs. Quezon obligation remains. Example: I will
Colleges, 93 Phil. 383) give you P10,000 if you cannot
make a circle that is at the same
92. When does an obligation to deliver time a quare.
arise?
1. When there is no term, period, or 94. Effects of positive condition.
condition, the obligation to deliver Example: I will give you a specific car if
arises from the perfection of the you will marry X this year.
contract or its constitution or creation, 1. If you marry X on December 25, my
the obligation being pure. obligation is to give you the car.
2. If subject to a suspensive condition, 2. If on December 25, X died, without
the obligation to deliver arises from marriage, my obligation is
the moment the condition happens. extinguished because one party is
3. If subject to a suspensive term or dead. Marriage is impossible to take
period, the obligation to deliver arises place.
upon the expiration of the term or 3. If the year has ended, no marriage
period. taking place, both parties are alive,
4. In obligations arising from law, quasi- just the same my obligation is
delicts, quasi-contract and crimes, the extinguished because the time
specific provision of the laws indicated has already elapsed.
applicable shall control. 95. Effects of negative condition.
Example: I will give you a specific car if
Example: In a contract of sale, Art. 1573, you will not marry X this year.
all the fruits shall pertain to the vendee
from the day the contract was perfected.
OBLIGATIONS AND CONTRACTS
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Obligations
1. If on December 25 you marry X, my Example: On June 25, 2010, S will sell his
obligation is extinguished because parcel of land to B for P10,000, if B will
you violated the condition. pass the CPA examination on May
2. If on December 25, X died and no 25,2012.
marriage took place, my obligation 1. On June 25, 2010 after the promise
becomes effective (not was made up to may 25,2012, S
extinguished), because the expected remains to be the owner because
event cannot occur anymore. the condition is not yet fulfilled.
3. If the year has ended, and no marriage 2. If on may 25, 2012, B passed the
took place, both parties are still examination, after payment and
alive, my obligation becomes delivery, B becomes the owner and
effective (not extinguished) because the effect is retroactive dating back
the time indicated has already from the time the obligation was
elapsed. constituted, that is June 25, 2010.
3. One year after the promise was made
96. Effect when the debtor voluntarily or on may 25, 2011, S sold the land
prevents fulfillment of the condition. to X. is the sale valid?
When the debtor voluntarily prevents Yes, because S is still the owner on
the fulfillment of the condition, the the date stated.
condition is deemed fulfilled. The 4. Supposing on May 25, 2012, B passed
obligation therefore, is effective. This is the examination, how will the
called constructive or presumed dispute between B and X be
fulfillment. resolved?
If after the promise made by S to B
Illustrative Case: O was a hacienda (2010), B preserved his right by
owner, who contracted the service of C, having the conditional sale noted at
a sugar central, to grind O’s sugar cane. the Register of Deeds, the passing
It was agreed further as a condition that will vest in him an absolute right
C may construct railroad to pass on O’s OVER the property. X cannot
hacienda to facilitate the easy question B’s right because of his (X)
movement of sugar wagon from one knowledge of the conditional sale
point to another. When C is asking the inscribed in the Torrens Title. If no
written permission of O, the latter inscription is made, the right of B
refused. Yet, he sued C for failure to will be defeated because a buyer in
gring the sugar can on time. Will the good faith is protected by the law.
action of O prosper?
98. Retroactive effects as to the fruits and
No, because O voluntarily prevented the interest.
fulfillment of the condition, the obligor 99. Rules to be observed in case of the loss,
must be released in whole or in part. deterioration or improvement of the
thing during the pendency of the
97. Effects of fulfillment of suspensive condition.
condition. 1. If the thing is lost without the fault of
The obligation becomes effective on the the debtor, the obligation shall be
day the obligation is constituted. In other extinguished.
words, the effect is retroactive. 2. If the thing is lost through the fault of
the debtor, he shall be obliged to
pay damages.
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
3. When the thing deteriorates without right is to demand delivery of
the fault of the debtor, the the table in its faded condition
impairment is to be borne by the because it deteriorated without
creditor. my fault. However, if after the
4. If it deteriorates through the fault of promise was made, I exposed
the debtor, the creditor may choose the table to the heat of the sun
between the recission of the and the tempest of the rain,
obligation and its fulfillment, with deterioration is due to my fault,
indemnity for damages in either your right after passing is to
case. demand delivery or to rescind
5. If the thing is improved by its nature, the contract, in either case, plus
or by time, the improvement shall damages.
inure to the benefit of the creditor.
6. If it is improved at the expenses of the 102. Rule in improvement of the thing:
debtor, he shall have no other right 1. By nature or by time – it shall inure to
that that granted to be usufructuary. the benefit of the creditor.
(Art. 1189) 2. At the expense of the debtor - debtor’s
Q – What is the meaning of the term right is that granted to a
“lost”? usufructuary.
A – it is understood that the thing is lost Example:
when it perishes, or goes out of a. I will give you a specific horse if you
commerce, or disappears in such a way will pass the May 30, 2010 CPA
that its existence is unknown or it cannot examination.
be recovered. (Art. 1189) If on may 20, 2010 the horse
gave birth to a colt, your right after
100.Rule on loss: passing is to demand the delivery of
1. Loss without debtor’s fault – obligation the horse and colt because the
is extinguished. improvement is by nature.
2. Loss due to debtor’s fault – obligations b. I will give to a specific car if you will
to pay damages. pass the may 30, 2010 CPA
examination. However, on May 12,
101.Rule on deterioration: 2010, I installed an air conditioning
1. Without debtor’s fault – impairment unit inside the car because of the
shall be borne by the creditor; dry season spell. If you pass the CPA
debtor is not liable. exams, my right is to remove the air
2. Due to debtor’s fault – creditor may conditioning unit if it will not cause
choose between: destruction on the car, and if it will
a. Recission plus damages cause destruction or injury to the
b. Fulfillment plus damages car, my obligation is to deliver the
Example: I will give you a car with its improvement because
specific table, painted chocolate my right is that of a usufructuary.
brown if you will pass the CPA
examination. Article 579 – the usufructuary may
make on the property held in
Sad to say, the passing took usufruct such useful improvement
place after 2 years. In two or expenses for mere pleasure as he
years’, time the painting will may deem proper, provided he does
fade. After passing, your only not alter its form or substances, he
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
shall have no right to be indemnified Characteristics of the right to rescind
therefor. He may, however, remove under Article 1191.
such improvements, should it be a. It exists only in reciprocal obligations.
possible to do so without damage to b. It can be demanded only if the plaintiff
the property. is ready, willing, and able to comply
with his own obligation and the
103. Improvement if partly by nature and other is not. (Seva vs. Berwia, 48
partly at the expense of the debtor. Phil. 581)
Example: I will give you a specific horse if
you will pass the May 2010 CPA 106. Essential features of rescission in
examinations. However, on May 1, the reciprocal obligation.
horse gave birth by artificial 1. The right to rescind is implied, so there
insemination at the expense of the is no need to stipulate it in the
debtor. In here, the right of C after contract.
passing the examination is to demand 2. The right is not automatic or absolute.
the delivery of the horse and the colt, The injured party should apply to the
but he must reimburse D on the expense court for a decree of rescission.
incurred due to the insemination. 3. The court is given discretionary [power
to fix a period, instead of rescinding
104. Effects when resolutory condition is the obligation especially if the breach
fulfilled. is sight or casual. Neither will
1. The obligation is extinguished. rescission take place if the object is in
2. The parties should return or restore to the possession of a third person who
each other what they have received acted in good faith.
including the fruits and interest.
3. The rules in Article 1189 will apply to 107. Exception to the rule when judicial
whoever has got a duty to return in approval is necessary for recission.
case of loss, deterioration or 1. When the object is not yet delivered.
improvement of the thing. 2. When even if there has been delivery,
4. If the obligation is to do or not to do, the contract states that either party
the courts are given the power to can rescind the same or take
determinate the retroactivity of the possession of the property upon non-
fulfillment of the condition as stated fulfillment of the obligation by other
in Article 1187. party.

105. Concept of Recission as used in Article 108. Concepts:

1191. 1. Period - a period is a certain length of
The power to rescind means the right time which determinate the
to cancel or to resolve the contract in effectively or the extinguishment of
case of non-fulfillment of the obligation an obligation. According to Manresa,
on the part of one of them. a Spanish commentator in Civil Law,
This is not the recission referred to in a period or term consists in a space
Article 1380, which involves damage or of time which has an influence on
lesion, or injury to the economic interest obligations as a result of a juridical
of a person. The rescission contemplated act and either suspends their
by this Article (1191), is to breach of faith demand ableness, or produces their
committed by the person who is extinguishment.
supposed to comply with the obligation.
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
2. Day certain – the day which will Note:
necessarily come whether we like it a. When we know that something will
or not. happen but we are uncertain as to
the time it happen, this is a period
109.Kinds of period. or a term.
1. According to source b. When we are not even sure if
a. Legal – fixed by law something will happen, as a fact or
b. Voluntary – fixed by the parties not, this is a condition.
c. Judicial – fixed by the court
2. According to effect 112. Illustrative Case: “A” Corporation,
a. Ex-die (suspensive period) a engaged in the sale of subdivision
period which must lapse before residential lots, sold to “B” a lot of 1,000
the obligations can be square meters. The contract provides
demanded. that the corporation should put up an
b. In-diem (resolutory period) a artesian well with tank, within a
period after which the reasonable time from the date thereof
obligation is extinguished. and sufficient for the need of the buyers.
3. According to definiteness Five years thereafter, no well and tank
a. Definite – refers to a fixed have been put up by the corporation, “B”
known date or time. Example: I sued the corporation for specific
will give you specific car on performance. Will the action prosper?
December 25, 2010. Why?
b. Indefinite – refers to an event
which necessarily happen but No, the action will not prosper. The
the date of its happening is not obligation is to be performed “within a
known. Example: I will give you reasonable time”, the performance of
a specific a car when X dies. which is in the future, that is, after the
obligation was contracted. It is therefore
110. Requisites of Period. subject to a period. The right of B is to go
1. It must refer to the future. to court so that the court will fix the date
2. It must be certain. of performance. After the date is fixed
3. It must be possible. and still. The debtor cannot comply with
his obligation, specific performance is
111. Distinction between a condition and a the right of the creditor.
term or period.
Condition 113.Effect of payment before the arrival of
1. Refers to an event the period.
2. Has for its requisite’s futurity and The debtor may recover what he has
uncertainty. paid including the fruits and interest if he
3. May or may not happen is unaware of the period. If he paid
Term or Period voluntarily knowing that the obligation is
1. Refers to an interval of time not yet due, he cannot recover what he
2. Has for its requisite’s futurity and had paid.
certainty.
3. Will surely come to pass, although it 114.Illustrative Case: on January 1. 2008, D
may not be known when. borrowed from C P10,000 payable on
January 1, 2010, that is 2 years, with 6%
interest annually. On January 1, 2009, D
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
thinking that the obligation is already 118. For whose benefit is the period in the
due, paid C P10,000 plus P1,200 interest. following obligations?
In this case, D can recover from C the 1. D binds himself to pay C P10,000 on
principal sum of P10,000 plus P600 December 25, 2010. This is for the
interest, that is, the interest to be due benefit of both D and C.
from 2009 to 2010. This is a case of 2. D binds himself to pay C “within 2
solution indebiti or undue payment. years”. This is for the benefit of D
only. D can pay before the end of 2
115. The benefit of the period in an years, but he cannot be compelled
obligation. to pay before the two-year period.
Whenever in an obligation a period is 3. D binds himself to pay C “within 2
designated, it is presumed to have been years on demand”. This is for the
established for the benefit of both the benefit of C because of the words
creditor and the debtor, unless from the “on demand”.
tenor of the same or other
circumstances, it should appear that the 119. When the court may fix a period.
period has been established in favor of 1. When the duration depends upon
the other. the will of the debtor.
Examples:
Example: On December 25, 2008, D a. Obligation stating that
bonds himself to pay C P16,000 with 14% payments is “When my means
interest annually on December 25, 2010. permit me to do so”. (Art. 1180,
Before December 25, 2010 C cannot Civil Code).
demand payment. Likewise, on b. “I will pay you little by little”.
December 25, 2009 if D is paying C, the c. “As soon as possible”.
latter can refuse the tendered payment, d. “As soon as I have money”.
because the period is for the benefit of e. “In partial payment”.
both the debtor and the creditor. The Examples: D obliges himself to
benefit of the creditor in this case is the pay C P10,000 “as soon as
interest to be paid by D from 2009 to possible”. Three months adter,
2010. C demanded payment from D
but the latter refuses to pay.
116. Example of an obligation for the benefit Can C file an action in court
of the debtor. compeling D to pay the
D obliges himself to pay C P10,000 on or obligation?
before December 25, 2010. Before No. the obligation is subject to a
December 25, 2010, D can pay the period. C’s right is to go to court
obligation because the period is for the so that the court will fix the
benefit of D. date of payment.

117. Example of an obligation for the benefit 2. When, though the obligation does
of the creditor. not fix a period, it can be inferred
D obliges himself to give C P10,000 on that a period was intended.
demand. In here, C can demand payment a. In sale on credit when the
from D after a reasonable time from the period of payment was not
date the promise was made because the stated.
period is for his own benefit. b. Construction of sabo Dam in
Bacolor, Pampanga where the
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
date of construction and the 5. When the debtor attempts to
date of completion is not stated abscond. (Art. 1198, CC)
the contract.
c. The period is not stated in the NOTE: In a CPA examination, this
construction of a house. question was paraphrased: When
can the creditor demand payment of
120. Instances when the court may not fix the obligation even if such
the term or period. obligation is not yet due?
1. When no term was specified by the
parties because no term was ever 123. Definition of Alternative Obligation:
intended, in which case it is Alternative obligation is one of two or
considered a pure obligation. more prestation which may be given,
2. When the obligation is payable on only one is due. In short, there are
demand. several things due but the delivery of
3. When specified period is provided one is sufficient to extinguish the
by law. obligation.
Example: Contract of employment Examples: D obliged himself to give C
object No. 1 or object No. 2, or object
121. How the court fixes the period. No. 3 on June 30. D does not have to give
The court determines the period by C all the three objects stated. The giving
considering the time probably of one of the three is enough to comply
contemplated by the parties. Once the with his obligation. Be it noted that the
period is fixed by the court, the period obligation of the obligor is to deliver
becomes part of the contract, and the completely any of the objects he
court cannot change it. However, the promised because the creditor cannot be
parties may change the period by mutual compelled to receive part of one and
agreement or even disregard the period part of the other undertaking.
making it demandable at once.
124. Right to Choose
122. Instances when the debtor losses the General rule : The right belongs to
benefit of the period. the debtor
1. When, after the obligation has been Exception : Unless given to the
contracted, the debtor becomes creditor.
insolvent, unless he gives a guaranty
or security for the debt. Example: D obliged himself to give C,
2. When he does not furnish to the object No. 1, or object No. 2. The
creditor the guaranties or securities contract giving rise to the obligation did
which he has promised. not mention the right to choose. On the
3. When by his own he has impaired date of maturity, can C demand from D
said guaranties or securities after the delivery of object No. 1?
their establishment, and when Answer: No, because the obligation is
through a fortuitous event they silent, the right of choice belongs to D.
disappear, unless he immediately
gives new ones equally satisfactory. Example: when the right to choose
4. When the debtor violates any belongs to C.
undertaking in consideration of D obliged himself to give C, object No. 1,
which creditor agreed to the period. or object No. 2, or object no. 3 at C’s
option. In here, the creditor is given the
OBLIGATIONS AND CONTRACTS
PART 1
Obligations
right to choose what the debtor will
delivery.

125. Illustrative Case: X insured his specific

house to Y insurer. The contract stated
that if the house is damaged or
destroyed by the peril insured against, Y
will pay the policy or rebuild it in a
sufficient manner. Is this an alternative
obligation of the insurer?
Answer: Yes, because after the
occurrence of loss, he may pay the
proceeds of the policy or rebuild it.

126. Limitations on the right of the debtor to

choose.
The debtor shall have no right to choose
those prestation which are:
1. Impossible.
2. Unlawful.
3. Those which could not have been
the object of the obligation.

Examples: D obliges himself to deliver to

c, a can of opium; or can of carabao milk
taken from a cow; or s specific car. The
right of D is to deliver the last object
because object 1 is unlawful, while
object 2 is impossible.