Obligations and

Contracts
Session 3: General Provisions; Nature and Effect of Obligations
Attendance check!
Say “Present” or something similar when your name is called.
BEFORE WE
BEGIN…
It is hard to look for the good
in things when things don’t
look good, but we owe it to
ourselves to try.
NATURE AND EFFECT
OF OBLIGATIONS
Articles 1163-1178, New Civil Code
Art. 1168
▪When the obligation consists in not
doing, and the obligor does what has
been forbidden him, it shall also be
undone at his expense.
On Art. 1168
▪Pertains to an obligation not to do
▪Obligee’s remedies:
▪ That the thing done be undone at the obligor’s expense
▪ Damages
For example:
▪ X owned a fishpond.
▪ X leased the fishpond to Y.
▪ According to their contract, Y cannot
sublease the fishpond or assign
his rights as lessee to anyone.
▪ Y entered into a “pakiao-buwis”
agreement with Z, in which Z will
take possession of the fishpond and
pay Y a monthly fee therefor.
What is the “obligation not to do” that
was nevertheless done in the
preceding scenario?

What can X do to protect his

rights over the property?
Art. 1169, par. 1
▪Those obliged to deliver or to do
something incur in delay from the
time the obligee judicially or
extrajudicially demands from them
the fulfillment of their obligation.
Delay?
Not the common/ordinary
meaning of delay
Legal delay (default) is a
different concept
Legal delay (or default), defined
▪ Also known as mora
▪ Failure to perform an
obligation on time,
constituting a breach
of the obligation

c/o u/Kaoward @ Reddit

Requisites of delay or default (1)
▪ Obligation is already due and liquidated
▪An obligation is due when the creditor has the
right to request performance or delivery by the
debtor, particularly when the date of performance
as specified in their agreement has come
▪An obligation (particularly where the obligation is
monetary) is liquidated when the amount is
known or determinable by inspection of the terms
of the agreement between the parties
Requisites of delay or default (2)
▪ Failure to perform obligation on date agreed upon
▪ Demand made by the creditor upon the debtor
▪ May be either judicial (when a complaint is filed in court) or
extrajudicial (when made out-of-court, orally or in writing)

▪ Failure to comply with such demand

What happens after demand?

▪ Obligation becomes due and demandable

▪ If the debtor fails to comply with the demand,
he/she incurs in delay or default
Kinds of delay/default
▪ Mora solvendi: delay on the part of the
debtor to fulfill their obligation; has two kinds:
▪ Mora solvendi ex re: to give,
▪ Mora solvendi ex persona: to do
▪ Mora accipiendi: delay on the part of the
creditor to accept performance of the obligation
▪ Compensatio morae: delay of both
parties in reciprocal obligations (like in sale)
Ordinary delay v. legal delay
S obliged himself
to deliver to B a
specific washing
machine on 10
December 2021.

CCTV footage supplied to Coconuts.co

Ordinary delay v. legal delay (cont.)
▪ ORDINARY: S does not ▪ LEGAL: S does not deliver
deliver the washing machine the washing machine on 10
on 10 December. However, B December. B makes a
did not demand its delivery. demand upon S on 15
December. If S nevertheless
▪ Here, the law presumes that B fails to deliver the washing
is giving S an extension of machine despite this demand,
time within which the latter can he is deemed to be in default
deliver the washing machine. only from 15 December.
▪ There is no breach.
Art. 1169, par. 2
▪ However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
When demand is not necessary
to put debtor in delay

▪ When the obligation so provides:

▪Ex.: “D promises to pay C the sum of P20,000
on or before 30 November 2021 without the
need of any demand on the part of C.”
▪When 30 November 2021 comes and goes
without D paying C P20,000, D is
automatically in default due to their stipulation.
When demand is not necessary
to put debtor in delay (cont.)
▪ When the obligation so provides (part 2):
▪ The obligation must expressly declare that demand
is not necessary or something similar
▪ Ex.: An obligation to pay installments which states
that “The failure to pay any installment in this
Contract shall cause the entire obligation to
mature” does not state that the debtor shall
thereafter be in default, and therefore, demand is
still necessary to render the debtor in default.
When demand is not necessary
to put debtor in delay (cont.)

▪ When the law so provides:

▪Ex.: obligation to pay taxes
AHC Accounting Tax Calendar for 2021 (https://ahcaccounting.com/tax-calendar/)
When demand is not necessary
to put debtor in delay (cont.)

▪When time is of the essence:

▪Ex.:
▪Delivery of items (food, décor) for a
children’s birthday party
▪Making of needed items (wedding dress,
cake, etc.) for a wedding
▪Food delivery via GrabFood, etc.
When demand is not necessary
to put debtor in delay (cont.)

▪When demand would be useless:

▪ Ex.: A obliged himself to deliver to
B a guitar autographed by Taylor
Swift. Thanks to A’s poor handling,
the guitar fell off A’s window and
snapped at the base of the neck.
Here, any demand for the
delivery of this guitar would be
useless—A made it impossible for
the obligation to be performed.
Art. 1169, par. 3

Watch this space!

We will go back to this later.
Art. 1170
▪Those who in the performance of
their obligations are guilty of fraud,
negligence, or delay, and those who
in any manner contravene the tenor
thereof, are liable for damages.
Effects of delay or default
▪Mora solvendi:
▪ Debtor is guilty of breach/violation of the obligation
▪ Debtor is liable to pay interest or damages
▪ Debtor is liable even for a fortuitous event, where the
obligation is to deliver a determinate thing
▪ Damages may be mitigated/reduced if the debtor can
prove that the loss would have resulted just the same
even if he had not been in default
Effects of delay or default (2)
▪Mora accipiendi:
▪ Creditor is guilty of breach of obligation
▪ Creditor is liable for damages suffered by debtor (if any)
▪ Creditor bears the risk of loss of the thing due
▪ Debtor, not liable for interest from the time of creditor’s
delay (re: obligations to pay money)
▪ Debtor may release himself from the obligation by the
consignation/deposit of the thing/sum in court
Effects of delay or default (3)
▪Compensatio morae:
▪ The delay of the obligor cancels the delay of the obligee
and vice versa; legally speaking, no default
▪ If the delay of one party is followed by that of the other,
the liability of the first infractor shall be equitably
tempered or balanced by the court
▪ If it cannot be determined which of the parties is guilty of
delay, the contract is deemed extinguished, and each
shall bear his own damages (Art. 1192)
Art. 1169, par. 3
▪ In reciprocal obligations, neither party incurs
in delay if the other does not comply or is not
ready to comply in a proper manner with
what is incumbent upon him. From the
moment one of the parties fulfills his
obligation, delay by the other begins.
Reciprocal obligations
▪ Reciprocal obligations are those which arise
from the same cause, and in which each
party is a debtor and a creditor of the other,
such that the obligation of one is dependent
upon the obligation of the other.
(Consolidated Industrial Gases, Inc. v. Alabang
Medical Center, G.R. No. 181983, 13 November 2013)
On reciprocal obligations (1)
▪ A agreed to sell to B a Twice
lightstick for P3250. A’s
obligation is to deliver the
lightstick; B’s is to pay P3250.
▪ SCENARIO 1: In their
agreement, A & B specified no
date for the performance of
their obligations. Thus, the law
presumes that payment and
delivery is simultaneous—or in
Filipino, kaliwaan.
On reciprocal obligations (2)
▪SCENARIO 2: A and B agreed that
delivery and payment shall be made on
1 October 2021, the release date of
Twice’s first English single, The Feels.
▪A delivered the lightstick on 27
September 2021. Can A, right there
and then, demand payment from B?
On reciprocal obligations (3)
▪NO—at least not yet.
▪ For mora to set in, the obligation must first be due.
▪ Here, the parties agreed that their reciprocal obligations
will fall due on 1 October 2021. Thus, neither party (B in
particular) will incur in delay before 1 October 2021,
notwithstanding A’s early delivery of the lightstick.
On reciprocal obligations (4)
▪SCENARIO 3: What if A and B
agreed on the following terms:
▪ A shall deliver the lightstick to B on 1 October 2021; and
▪ In order to give B time to make sure he has money to
pay, B shall pay A P3250 on 15 October 2021, a payday.
On reciprocal obligations (5)
▪Same rules as earlier:
▪ If A fails to deliver the lightstick on 1 October 2021, B
may demand delivery on that date or after.
▪ If A was able to timely deliver the lightstick to B, he can
only demand payment from B if the latter fails to pay
P3250 on 15 October 2021 or after the said date.
▪ Remember: the obligation needs to be due first.
What did Art. 1170 identify as
circumstances accompanying the
performance or non-performance of an
obligation that justify an award of
damages?
▪ Delay (already discussed ☺)
▪ Fraud
▪ Negligence
▪ Contravention of the obligation’s tenor
Art. 1171
▪Responsibility arising from
fraud is demandable in all
obligations. Any waiver of an
action for future fraud is void.
Fraud, defined
▪ Fraud is the deliberate or intentional evasion
of the normal fulfillment of an obligation.
▪ Fraud is synonymous to bad faith and implies
some kind of malice or dishonesty; fraud
cannot cover cases of honest mistake or
errors in judgment made in good faith.
More on fraud (1)
▪The fraud referred to here is dolo
incidente (incidental fraud), an act
of fraud committed in the
performance of an obligation already
existing because of contract.
▪ As distinguished from dolo causante (causal
fraud), or fraud employed in the execution of a
contract (to be discussed when we reach Contracts)
More on fraud (2)
▪Dolo causante may serve as basis
for the contract to be annulled or set
aside (see Arts. 1390-91)
▪Meanwhile, dolo incidente only
gives the creditor the right to claim
damages, not to annul the contract
More on fraud (3)
▪ Responsibility arising from fraud can be
demanded in all kinds of obligations
▪ The court is not given the power to lessen
the damages to be awarded (Why? The law
deems fraud serious and evil, and
something that people should be
discouraged from resorting to.)
More on fraud (4)
▪ Fraud may be past
or future
▪ A waiver of an action
for future fraud is
void (for being
against the law and
public policy)
▪ A contrary rule would encourage
the perpetration of fraud
More on fraud (5)
▪ What about past fraud? Can it be waived?
▪YES. This waiver can be deemed an
act of generosity on the part of the
party who is the victim of the fraud.
Art. 1172
▪Responsibility arising from
negligence in the performance
of every kind of obligation is also
demandable, but such liability
may be regulated by the courts,
according to the circumstances.
Art. 1173, par. 1
▪ The fault or negligence of the obligor
consists in the omission of that diligence
which is required by the nature of the
obligation and corresponds with the
circumstances of the persons, of the time
and of the place. When negligence shows
bad faith, the provisions of Articles 1171
and 2201, paragraph 2, shall apply.
Art. 1173, par. 2
▪If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a
good father of a family shall be required.
Fault (culpa) or
negligence, defined
▪ Fault or negligence is any voluntary act or
omission, there being no bad faith or malice,
preventing normal fulfilment of the obligation
▪ Like the others, the presence of fault gives
the creditor the right to claim damages
More on negligence
▪ An action for future negligence may be
waived or renounced (with some exceptions,
like in contracts with a common carrier)
▪ Where negligence shows bad faith (i.e.,
deliberately committed), it is considered
equivalent to fraud; waiver of this is void
Kinds of negligence
▪Culpa contractual
▪Art. 1172 refers to this
▪Culpa aquiliana (i.e., quasi-delict)
▪Culpa criminal (criminal negligence)
More on negligence (2)
▪ Negligence is a question of fact, with its
existence dependent upon the particular
circumstances of each case, specifically with
regard to the following factors:
▪ Nature of the obligation
▪ Circumstances of the person
▪ Circumstances of time
▪ Circumstances of the place
Art. 1174
▪Except in cases expressly specified by
the law, or when it is otherwise
declared by stipulation, or when the
nature of the obligation requires the
assumption of risk, no person shall be
responsible for those events which
could not be foreseen, or which,
though foreseen, were inevitable.
Fortuitous event
▪ A fortuitous event
is any event which
cannot be foreseen,
or which, though
foreseen, is
inevitable
Requisites of a fortuitous event
▪ Must be independent of the human will, or at least
the debtor’s will
▪ Could not be foreseen, or if foreseen, is inevitable
▪ Of such character is to render it impossible for the
debtor to comply with his obligation in a normal
manner
▪ Debtor must be free from any participation in, or
aggravation of, the injury to the creditor
Kinds of fortuitous event
▪ Acts of man: events independent of the will of the
obligor but not of other human wills (e.g., war, fire,
robbery, insurrection, murder)
▪ Acts of God (force majeure): totally independent
of the will of every human being (e.g., earthquake,
flood, rain, lightning, volcanic eruption, tsunami)
Rules as to liability
in case of fortuitous event
▪ GENERALLY: A person is not responsible for loss or damage
to another resulting from the non-performance of his obligation
due to a fortuitous event
▪ EXCEPTIONS:
▪ When expressly specified by law
▪ Debtor is guilty of fraud, negligence, or delay, or contravention of the
tenor of the obligation (Arts. 1170 & 1165, par. 3)
▪ Debtor has promised to deliver the same (specific) thing to two or
more persons who do not have the same interest
▪ Obligation to deliver a specific thing arises from a crime
▪ Thing delivered is generic
Rules as to liability
in case of fortuitous event

▪MORE EXCEPTIONS:
▪When declared by stipulation
▪When the nature of the obligation
requires the assumption of risk
Art. 1175
▪Usurious transactions shall be
governed by special laws.
▪NOTE: Usury is now legally non-
existent. Parties are now free to
stipulate any amount of interest.
▪Read up on Article
1176 onwards (from
ASSIGNMENT FOR
p. 73 of the book) NEXT SATURDAY

▪We may or may

not have a quiz
That’s all for now.
See you next week!
Get some rest, class. Happy weekend!