LAW ON OBLIGATIONS AND

CONTRACTS

LEARNING MODULE

LAW ON OBLIGATIONS AND

CONTRACTS
LAW 101

LAW 101
 NATURE AND EFFECTS OF
Module 3
OBLIGATIONS

 Overview

Parties involved in an obligation must be knowledgeable as to the rights

(of the creditor/obligee) available and duties (of the debtor/obligor) that
must be fulfilled depending on the nature of the obligation they are in. As ignorance of
the law excuses no one, knowledge on the effects of the different natures of obligations
will guide both parties on how to execute it successfully and avoid any breach to an
obligation.
This module will make you understand the nature of different kinds of
obligations; the duties of the obligor and rights of the creditor; the different kinds of
breach of obligation as well as the remedies available in case of breach; rules of
fortuitous events and the transmissibility of rights.
Illustrative examples as well as legal opinions in each kind of obligations were
also included in this module so that you will be guided on how to make decisions on
cases involving the nature and effects of obligations. Let's start, learn and grow in
knowledge together!

🎯 Learning Objectives

At the end of this lesson, the students are expected to:

 Understand the nature of obligation
 Scrutinize the effects of fulfillment and non-fulfillment of obligation
 Identify remedies available in case of breach
 Decide on cases involving the nature and effects of obligation

Learning Objectives
🗐
This module will discuss the following topics:
 What are the different types of obligation according to prestation?;
 What are the the causes of breach of obligations?;
 What re the possible demedies in case of breach?
 What is fortuitous event?;
 What are damages; and
 Are rights transmissible?

🗪
Discussion

What are the different types of obligation according to prestation?

1. Real obligation
a. to give specific/determinate thing
b. to give generic/indeterminate thing
2. Personal obligation
a. Positive (to do)
b. negative (not to do)

1.a. Obligation to give (specific/determinate thing)

 Specific/generic thing is particularly designated or physically segregated

Illustrative Examples
o Paul bound himself to deliver to James his only guitar tomorrow
o Mark obliged himself to give Timothy as a birthday gift his car with plate number
DEF 456

Duties of obligor/debtor
a. To deliver thing itself (Art. 1244)
b. To preserve thing with due care (Art. 1163)
c. To deliver the accessions and accessories (Art 1166)
d. To deliver the fruits (Art 1164)
e. To pay damages if guilty of fraud, negligence, delay or contravention of the
terms of the obligation (Art. 1170).

Rights of obligee/creditor
a. Right to compel
b. Right to rescission or resolution
c. Right to damages (caused by failure to deliver, fraud, negligence, delay,
contravention of tenor)

Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to
deliver it arises. However, he shall acquire no real right over it until the same has been
delivered to him.

1.b. Obligation to give (generic/indeterminate thing)

 Specific/generic thing is not particularly designated or not physically segregated
from any of the same kind or class.

Art 1246. When the obligation consists in the delivery of an indeterminate or generic
thing, whose quality and circumstance have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of the obligation and other circumstances shall be taken into
consideration.
Art 1165. Creditor may ask for compliance by third person at debtor’s expense, action is
considered in itself a determinate object

Duties of obligor/debtor
a. To deliver the thing
b. To bear expenses of having someone else comply with the obligation (Art.
1165 par. 2)
c. To pay damages if guilty of fraud, negligence, delay or contravention of the
terms of the obligation (Art. 1170).

Illustrative Examples
o Joel bound himself to give Ezekiel P10,000 on December 5, 2020.
o Micah obliged herself to deliver a cellphone to Jonah on her birthday.

Rights of Creditors over a thing

Type of Rights Enforceable Against When Acquired?

Whom?
Personal A specific passive subject From the time obligation to
deliver arises
Real Anyone Delivery

Right to damages
a. Failure to deliver
 Legal excuse of breach if due to fortuitous event unless there is law,
stipulation to the contrary, nature requires assumptions of risks
 Fortuitous event applicable to: non-performance, delay, loss/deterioration of
specific thing (Art 1189 before happening of suspensive condition, Art 1190
before happening of resolutory condition)
 Debtor still liable despite FE: 1. expressly specified by law (Art 1942.
commodatum, Art 2001. act of thief, Art 2147 negotiorium gestio, Art 1993.
loss of deposit); 2. stipulation (insurer); 3. assumption of risk; 4. fraud or
malice, bad faith (Art 1165 par 3); 5. guilty of delay; 6. liability arises out of
criminal act except debtor tender's thing and creditor unjustly refuses to
receive (Art 1268).

2.a. Obligation to do (Art 1244 par 2, 1167)

Art 1244 par 2. In obligation to do or not to do, an act of forbearance cannot be
substituted by another act or forbearance against the obligee’s will. (except in facultative
obligation)
Art 1167. If a person is obliged to do something fails to do it, the same shall be
executed at his cost. The same rule shall be observed if he does it in contravention of
the tenor of the obligation. Furthermore, it may be decreed that what has been poorly
done be undone.

*no action for compliance because that would be involuntary servitude which is
prohibited by the constitution.

Duties of Obligor/Debtor
a.To do the obligation (Art 1167)
b.To shoulder the expenses if someone else does it (Art 1167, par. 1)
c. To undo what has been poorly done (Art 1167 par. 2)
d.To bear the expenses of having someone else undo what has been poorly
done (Art. 1167 par. 2)
e.To pay damages (art 1170-1172, 2201-2202)

Illustrative Examples
o Abraham bound himself to paint Noe's house on weekend.
o John obliged himself to harvest Joseph's rice field tomorrow.

2.b. Obligation not to do (Art 1244 par 2, 1168)

Art 1244 par 2. In obligation to do or not to do, an act of forbearance cannot be

substituted by another act or forbearance against the obligee’s will (except in facultative
obligation).

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.

Duties of Obligor
a.Not to do what should not be done
b.To undo what has been done that is forbidden (Art. 1168)
c. To shoulder the cost to undo what should not have been done (Art 1168)
d.To pay damages (Art 1170, 2201-2202)

Illustrative Examples
o John and Mark agreed not to build any structure on the boundaries of their
properties.
o Matthew agreed not to drunk drive as one of the conditions for his insurance
policy.

Rights of the obligee/creditor

a.Right to ask performance
b.Right to ask substituted performance
 c. Right to ask damages (failure to deliver, fraud, negligence, delay,
contravention of tenor)
d.Recission

What are the causes of breach of obligations?

Art. 1170. Those who in the performance of their obligation are guilty of fraud,
negligence or delay and those who in any manner contravene the tenor of thereof, are
liable for damages.

Kinds of Breach
1. Fraud / dolo (Art 1171)
2. Negligence/ culpa contractual (Art 1172)
3. Delay / mora (Art 1169)
4. Contravention of the tenor (Art 1170)

Classification of Commission of Breach

 Voluntary- arises from the modes provided in art 1170
 Involuntary- arises because of fortuitous event
 Substantial breach/ total amount to non-performance- basis for rescission and
payment for damages
 Casual/partial-liability for damages

1. Fraud / dolo (Art 1171)

 Voluntary execution of a wrongful act or willful omission, knowing and intending
the effects which are naturally and necessarily arise from such act or omission
 Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any
waiver of an action for future fraud is void
 Effects of Fraud- liability for damages, a crime or a quasi-delict

Kinds of Fraud
a. According to meaning
 Causal fraud/Dolo causante- fraud in obtaining consent / (Art 1344)

Illustrative Example:
o Miriam was able to close the deal to deliver a pair of Nike rubber shoes to Ruth
for P5,000 with the condition that the stocks to be delivered is an authentic one.

 Incidental fraud/Dolo incidente- fraud in performing a contract (Art 1388)

Illustrative Example:
o Miriam was ready to deliver a pair of authentic Nike rubber shoes but before the
actual delivery, Miriam decided to replace the authentic pair with a class A pair
since the latter looks almost the same thinking that Ruth will not be able to
distinguish the two.
 b. According to time of commission
 Past fraud- fraud already committed
 Future fraud- fraud not yet committed

2. Negligence/Culpa (Art 1172, 1173 par 1)

 Negligence is absence of due diligence
 Art. 1172. Responsibility arising from negligence in every kind of obligation is
also demandable, but such liability may be regulated by 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 obligation and corresponds with
the circumstances of the persons, of the time and the place. When negligence
shows bad faith, the provisions of Art 1171 and Art 2201 par 2, shall apply

Kinds of Negligence
a. Culpa Aquiliana/culpa extra-contractual/quasi-delict (Art 2176 to 2194)-
negligence as a source of obligation. There is no pre-existing contractual relation
between the two parties. Mere preponderance of evidence is enough to ask for
damages. Master servant rule is applicable defense.

Illustrative Example:
o Caleb was driving his motorcycle along Maharlika Highway. while he accidentally
hit a pedestrian crossing the road causing minor injuries to the latter.

b. Culpa Contractual (art 1179)- negligence in the performance of a contract.

There is pre-existing contractual relation between the two parties. Mere
preponderance of evidence is enough to ask for damages. Master servant rule as
defense is not applicable.

Illustrative Example:
o Samson bumped into truck while he was driving ABC Transit bound to
Cabanatuan resulting to both major and minor injuries to his passengers.

c. Culpa Criminal (delict)- negligence which resulted to death of a party.

Presentation of proof beyond reasonable doubt is required. No defense available
as the owner/operator is automatically subsidiary liable.

Illustrative Example:
o Caleb was driving his motorcycle along Maharlika Highway. while he accidentally
hit a pedestrian crossing the road which resulted to the death of the latter.

Comparison Between Fraud (dolo) and Negligence (culpa)

Fraud (dolo) Negligence (culpa)

 Deliberate intent to cause damage or Lack or insufficiency of diligence
injury to another required in a given situation
Liability cannot be mitigated by the Liability can be mitigated by the court
court
Waiver of action for future fraud is Waiver of action for future negligence
VOID may be valid

 When there is gross negligence, it may be equivalent to fraud as it is just shy of

being intentionally evil.

3. Delay/ mora (Art 1169)

 Delay is non-fulfillment of obligation with respect to time

Art 1169. 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 obligations.
 *creditor should make demands before debtor incurs delay

Kinds of Delay
a. Mora solvendi- delay of debtor

Illustrative Example:
o Matthew promised to deliver 100 sacks of rice to Zacheo on August 30, 2020. If
Zacheo made a demand from Matthew but the latter failed to deliver the items on
the said date, Matthew incurs delay.

b. Mora accipiendi- delay of creditor

Illustrative Example:
o Matthew promised to deliver 100 sacks of rice to Zacharias on August 30, 2020.
If on the said date Matthew delivers the products to Zacharias but Zacharias is
not yet ready to accept the rice because he is still preparing the warehouse
where these sacks of rice will be stored, Zacharias incurs delay.

c. Compensatio marae- delay of both creditor and debtor (no delay)

Unilateral Obligations Reciprocal Obligations

General Rule: General Rule:
No demand, no delay Delay occurs from the moment one
party fulfills his undertaking, while
the other does not comply or is not
ready to comply in a proper manner
with what is incumbent upon him
Exceptions: Exceptions:
 The law or obligation so declare Different dates for the performance
 Time is the essence or of respective obligations are fixed by
controlling motive for the the parties
 establishment of obligation
 Demand would be useless

4. Contravention of the tenor

 Any illicit act which impairs the strict and faithful fulfillment of the obligation or
every kind of defective performance
 Malicious or violation of the terms and conditions stipulated
 Must not be due to fortuitous event

What re the possible remedies in case of breach?

1. Primary Remedies
a. Action for performance (Art 1165, 1167, 1168)
b. Action for Damages (Art 1170)
c. Action for Rescission (Art 1190, 1192)

2. Subsidiary Remedies
a. Accion subrogatoria- Art 1177. The creditors after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all the rights and
bring all the actions of the latter for the same purpose, save those which are
inherent in his person; they may also impugn the acts which the debtor may have
done to defraud them.
b. Accion Pauliana. Art 1177… they may also impugn the acts which the debtor
may have done to defraud them.

Art 1381 par 3, those undertaken in fraud of creditors when the latter cannot in any
other manner collect the claims due them.

Other specific Remedies

 Art 1652. lessor vs. sub-lessee
 Art 1729. laborers vs. owner
 Art 1608. vendee a retro vs vendee a retro’s transferee
 Art 1893. principal vs substitution appropriated by principal
 What are damages, and
 Are rights transmissible?
What is fortuitous event? (Caso Fortuito)
Requisites:
1. the cause of the breach is independent of the debtor's will
2. The event is unforeseeable or unavoidable
3. the event is such as to render it impossible for the debtor to fulfill his
obligation in a normal manner.
4. The debtor did not take part in causing the injury to the creditor

Illustrative Example:
o Cain obliged himself to deliver to Nahum a specific dog on September 1, 2020.
While on his way to deliver the item, a lightning struck the dog resulting to the
 death of the dog. The obligation of Cain will be extinguished due to fortuitous
event.

Exceptions:
1. Law or stipulation expressly so declares
 A possessor in bad faith shall be liable for deterioration or loss in every
case, even if caused by a fortuitous event (Art 552)
 The bailee in commodatum is liable for the loss of the thing, even if it
should be through a fortuitous event for certain instances. (Art. 1942).
 The officious manager in negotiorium gestio shall be liable for any
fortuitous event in certain instances (Art. 2147)
2. Nature of the obligation requires the assumption of risk (e.g. Insurance
contract)
3. Obligation is to deliver a generic thing
4. Debtor is already in delay

What are damages?

o Only actual or compensatory damages needs proof of pecuniary loss

Kinds of Damages
1. Actual or Compensatory- (e.g. Copyright infringement (Art 2199)
2. Moral- (e.g. physical suffering, fright, serious anxiety, etc. (Art. 2217)
3. Nominate- (e.g. to vindicate or recognize a right (Art. 2221)
4. Temperate or Moderate- pecuniary loss cannot be proved with certainty (Art.
2224)
5. Exemplary or Corrective- imposed to set an example for the public good (Art.
2229)
6. Liquidated- damages agreed upon by parties to a contract (Art 2226)

Presumption
 Initial beliefs on a certain case which can be valid or invalidated depneding upon
the available evidence

Kinds of Presumptions
1. Conclusive presumptions- cannot be rebutted by additional evidence or argument
2. Disputable Presumptions- can be rebutted by additional evidence or argument

Illustrative Example:
o The receipt of electric bill payment for the month of September will give rise to
the presumptions that August bill was already paid. (Art. 1176)

Are rights transmissible?

General Rule:
 All rights acquired by virtue of an obligation are transmissible.

Exceptions: (Art. 1178)

1. Exempted by law (right to vote during election)
2. Exempted by stipulations (scholarships that are not transferrable)
3. Not transmissible by nature (right to attend your own wedding ceremony)

 Summary

 The two main types of obligation according to prestation are real and personal.
Real obligation could either be to give specific/determinate thing or to give
generic/indeterminate thing while personal obligation could be positive (to do) or
negative (not to do).
 Fraud, negligence, delay and contravention of the tenor of the obligation are the
kinds of breach of obligations.
 The primary remedies in case of breach are action for performance, action for
damages and action for rescission while the secondary remedies are accion
subrogatoria and accion pauliana.
 Fortuitous event are events which could not be foreseen or though foreseen is
inevitable or uncontrollable.
 Damages are injuries cause to the other party which could be actual, moral,
nominate, temperate or liquidated.
 Presumptions can be conclusive of disputable depending on the additional
evidence presented.
 All rights acquired by virtue of an obligation are transmissible.

 References

A. Textbooks
De Leon, H. S. (2003). The Law on Obligations and Contracts. Rex Printing
Company, Inc. Quezon City.

Luna, M. Ancheta (1995). The Law on Obligations and Contracts (Revised

Edition). New Galaxie Lithographic Arts and Printing Press. Quezon City

B. Main Reference
Suarez, C. B. & Suarez, A. Q. (2011). The Law on Obligations and Contracts.
GIC Enterprises & Co., Inc. C.M. Recto, Manila

C. Other References
Chan Robles Virtual Law Library
chanrobles.com/civilcodeofthephilippinesbook4.htm

Youtube Channels:
Lecture Videos on Law on Obligations and Contracts
AKAWNTING.COM
Atty. Javier Law Vlog