The Law on Obligations and Contracts is a kind of positive law that deals with the nature and sources

of obligations and the rights and duties arising from agreements in contracts. It is important for
everyone to know that in every obligation, there is a general principle on human relations, “Art. 19.
Every person must, in the exercise of his rights and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good faith.”

1. Definition of Obligation (Art. 1156, NCC)

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

- The term obligation is derived from the Latin word “obligatio” which means a “tying” or
“binding.”
- In simpler terms, an obligation, as defined in this article, refers to a legal or contractual
duty that requires a person to either provide something (give), perform an action (do), or
refrain from doing something (not to do). This legal necessity can arise from various
sources, such as contracts, laws, or other legal relationships. Obligations form the basis of
many legal and contractual interactions, outlining individuals' or entities' responsibilities
and duties toward each other.

3 types of Recitation

1.1 Obligation to Give

1.2 Obligation to Do
1.3 Obligation Not to Do

Example Scenario: Obligations in a Business Contract

Sarah, a clothing manufacturer, enters into a business contract with James, a textile supplier. The
contract involves the supply of raw materials for Sarah's clothing production. In this scenario,
various types of obligations are evident:

1. Obligation to Give: Sarah has an obligation to give James an initial payment of $5,000 for
the first batch of textiles to be delivered. This is an obligation to give a specific sum of
money.
2. Obligation to Do: James has an obligation to do, which is to deliver the agreed-upon
quantity of textiles to Sarah's manufacturing facility on or before the specified delivery date.
This is an obligation to perform a specific act.
3. Obligation Not to Do: The contract may contain a non-compete clause, whereby James
agrees not to supply textiles to Sarah's competitors during the duration of their contract.
This is an obligation not to do a specific act.

2. Elements of Obligation/Essential requisites of an obligation

- In the context of the Civil Code of the Philippines, obligations have certain essential
requisites that must be present for an obligation to be legally valid and enforceable.
These requisites are outlined in Articles 1318 and 1319 of the Civil Code. Here are the
essential requisites of an obligation:
 - Active subject (creditor or obligee). – the person who has the right to demand the
fulfillment of the obligation.

- Passive subject (debtor or obligor)- the one who is bound to the fulfillment of the
obligation.

- Object or prestation – It may consist of giving, doing, or not doing. Without prestation,
there is nothing to perform. Object refers to the property or the things. Prestation is
the subject matter of the obligation.

- Efficient cause (juridical or legal tie) – that which binds or connects the parties to the
obligation. The tie is an obligation that can easily be determined by knowing the source
of the obligation.

Example Scenario: Purchase of a Car

• Active Subject: John is the active subject in this scenario. He is interested in buying a car,
and he intends to enter into a contract to make the purchase.

• Passive Subject: The passive subject is the entity or individual with whom John is entering
into the contract. In this case, the passive subject is the car dealership or the private seller
who owns the car John wishes to purchase.

• Prestation or Object: The prestation or object of the contract is the car itself. It is the item
that John intends to acquire through the contract. The car's make, model, year, price, and
any additional terms or conditions related to the sale are all part of the prestation.

• Efficient Cause: The efficient cause is the reason or motive behind the contract. In this
scenario, the efficient cause is John's desire to own a vehicle for personal transportation. He
is motivated to enter into the contract to purchase the car, and this motivation drives the
contractual agreement.

Contractual Agreement: John (active subject) approaches a car dealership (passive subject)
with the intention of buying a specific car model (prestation or object). The efficient cause
behind the contract is John's need for personal transportation. They negotiate the price,
terms, and conditions of the sale, and upon agreement, they enter into a contract for the
purchase of the car.

Obligation, right, and wrong (cause of action) are distinguished.

(1) Obligation, is the act or performance, that the law will enforce.

(2) Right, on the other hand, is the power which a person has under the law, to demand from
another any prestation.

(3) A wrong (cause of action), according to its legal meaning, is an Act or Omission of a party in
violation of the legal right or rights of another, causing injury to the latter;
3 kinds of obligation according to SANCTION

1. Civil – obligation to the debtor when he/she enters into the contract (citizen of a particular
country)
2. Natural – depends on the acknowledgment of whether or not to pay by the debtor
(whether verbal or written it is still valid)
a. When someone acknowledges that she/he has an obligation, it will turn into civil
sanction again
3. Moral – it is based on religious belief (if there is an agreement it can convert into civil)

2 kinds of obligation under SUBJECT MATTER

1. Positive Obligation – the obligation to do (obligation to perform a specific act)

2. Negative Obligation – the obligation not to do (enter a contract to not perform that act)

2 kinds of obligation to the view of PERSONS LIFE

1. Unilateral – one-sided obligation (there is only one creditor and debtor)

2. Bilateral – there is a switch between passive and active subject (depends on the contract)

3. Concepts and Sources of Obligations (Arts. 1157-1162, NCC)

Sources of Obligations (Article 1157)

Obligations arise from law, contracts, quasi-contracts, acts or omissions punished by law, and
quasi-delicts. (Art. 1157)

3.1 Law (Art. 1158)

- Article 1158 of the Civil Code of the Philippines states: "Obligations derived from law
are not presumed. Only those expressly determined in this Code or in special laws are
demandable and shall be regulated by the precepts of the law that establishes them,
and as to what has not been foreseen, by the provisions of this Book."
o Some obligations are imposed by the law itself. For example, tax obligations,
obligations arising from family relationships, and obligations created by specific
legislation.

In simpler terms, obligations derived from law are not automatically assumed or presumed.
Instead, they must be expressly provided for either in the Civil Code itself or in special laws. These
obligations are demandable and are regulated by the specific legal provisions that establish them. If
a situation is not explicitly covered by the law, the provisions of the Civil Code may apply.

Examples of Obligations Derived from Law:

1. Child Support: Parents have a legal obligation to provide financial support for their children
under family and child support laws.
 2. Inheritance Laws: When a person passes away without a will, the law dictates how their
assets and estate should be distributed among their heirs.

3. Labor Laws: Employers have obligations to their employees as defined by labor laws,
including minimum wage, working conditions, and benefits.

4. Environmental Regulations: Businesses have obligations to comply with environmental laws

and regulations regarding pollution control, waste management, and conservation.

5. Criminal Laws: Criminal laws establish obligations not to engage in prohibited activities. For
example, individuals have an obligation not to steal, harm others, or engage in fraud, as
these are prohibited by law.

Example: Title to the property purchased by a person for his own benefit but paid by another.

Facts: X, of legal age, bought two vessels from B, the purchase price thereof being paid by C, X’s
father. Subsequently, differences arose between X and C. The latter brought an action to recover
the vessels, he having paid the purchase price.

Issue: Is there any obligation on the part of X to transfer the ownership of the vessel to C?

Held: None. If any such obligation was ever created on the part of X, said obligation must arise from
law. But obligations derived from law are not presumed. Only those expressly determined in the
Civil Code or in special laws are demandable. Whatever right C may have against X either for the
recovery of the money paid or for damages, it is clear that such payment gave him no title, either
legal or equitable, to these vessels.
(Martinez vs. Martinez, 1 Phil. 647 [1902].)

Note: If X was a minor, the vessels would belong to C in ownership and usufruct under Article 161
of the old Civil Code. (Now Art. 324.5) Under Article 1448,6 the payment may give rise to a gift or
an implied trust.

3.2 Contracts (Art. 1159)

- Article 1159: Obligations Arising from Contracts Have the Force of Law Between the
Parties and should be complied with in good faith
o Obligations can be created through mutual agreements between parties.
Contracts outline the rights and duties of each party, and their fulfillment
becomes legally obligatory.
o When they arise from the stipulation of the parties
o The obligation to repay a loan or indebtedness by virtue of an agreement

A contract is a meeting of minds between two persons, whereby one binds himself, with respect to
the other, to give something or to render some service. (Art. 1305.) It is the formal expression by
the parties of their rights and obligations, they have agreed upon with respect to each other.
Examples of Obligations Arising from Contracts:

1. Loan Agreement: A person borrows money from a bank and signs a loan agreement. The
borrower has an obligation to repay the loan with interest according to the terms of the
agreement.
2. Construction Contract: A construction company enters into a contract with a property
owner to build a house. The construction company has an obligation to complete the
construction within the agreed-upon timeframe, and the property owner has an obligation
to make payments as specified in the contract.
3. Service Agreement: A freelance graphic designer enters into a service agreement with a
client to create a logo. The designer is obligated to deliver the logo design by the agreed-
upon deadline, and the client is obligated to pay the designer's fees.

Elements of the CONTRACT

1. Consent – meeting minds between the parties (if both parties agree)
2. Object – (Price - wages, salary, prices) – Driving Force)
3. Consideration/Cause – (same as price)

3.3 Quasi-contracts (Art. 1160, NCC) - Definition; kinds

- Article 1160: Obligations Arising from Quasi-Contracts are Equitable

- Article 1160: Obligations derived from quasi-contract shall be subject to the provisions
of Chapter 1, Title XVII, of this book.
- This means that the law seeks to ensure fairness and justice in situations where there
isn't a formal contract but an obligation is still present. Quasi-contracts prevent unjust
enrichment.
- Quasi-contracts, as described in this article, refer to obligations that are not based on a
contractual agreement but arise due to certain actions or situations that create a legal
obligation to compensate for harm or unjust enrichment. Quasi-contracts are often used
to prevent unjust enrichment and ensure that parties are held responsible for their
actions.
- There is no consent but the same is supplied by the fiction of law

Examples of Quasi-Contracts:

1. Payment of Unjust Enrichment: Suppose you accidentally paid a bill twice because of an
error in online banking. The party receiving the double payment has been unjustly enriched,
and you can legally demand the return of the overpaid amount as it was not part of any
contractual agreement.

2. Emergency Medical Assistance: If someone provides emergency medical assistance to an

injured person without any pre-existing contract, a quasi-contractual obligation may arise.
The person who received help may be obliged to compensate the one who provided
assistance for the expenses incurred.
There are four main kinds of quasi-contracts:

1. Negotiorum Gestio (art. 2144): This refers to the voluntary management of another
person's affairs without their knowledge or consent, but with the intent to benefit them. If
the management proves beneficial, the person managing the affairs may request
reimbursement for expenses and compensation for services rendered.

o Example: X went to Baguio with his family without leaving somebody to look
after his house in Manila. While in Baguio, a big fire broke out near the house of
X. Through the effort of Y, a neighbor, the house of X was saved from being
burned. Y, however, incurred expenses. In this case, X has the obligation to
reimburse Y for said expenses, although he did not actually give his consent to
the act of Y in saving his house, on the principle of quasi-contract.

o Example Scenario: Sarah owns a vacation home in a remote area. She has not
visited the property for several years and has not made any arrangements for its
upkeep. John, Sarah's close friend, decides to take care of the property without
Sarah's knowledge. He pays property taxes, maintains the garden, and ensures
the house remains in good condition.
▪ Negotiorum Gestio Obligation: John's actions can be considered
negotiorum gestio because he voluntarily managed Sarah's property for
her benefit without her consent. While he may not have had explicit
authorization, he acted in good faith to protect and preserve the
property. As a result, he may have a quasi-contractual obligation to
recover the reasonable expenses he incurred while managing the
property when Sarah learns of his actions.

2. Solutio Indebiti: This occurs when something is delivered to a person by mistake, and that
person has no right to demand it. If the recipient becomes aware of the mistake, they are
obligated to return the item or its value.

o Example: D owes C 1,000. If D paid T believing that T was authorized to receive

payment for C, the obligation to return on the part of T arises. If D paid C 2,000
by mistake, C must return the excess of 1,000
o Example Scenario: Mary owes a monthly rent of $1,000 to her landlord. Due to a
clerical error in her online banking system, she accidentally pays $2,000 for this
month's rent.
▪ Solutio Indebiti Obligation: Mary has made an overpayment of $1,000.
According to the principle of solutio indebiti, she has the right to recover
the excess payment from her landlord. The landlord is obligated to return
the extra $1,000 to Mary because she paid more than what was due.

In summary, quasi-contracts are legal obligations that arise without a formal agreement but are
necessary to prevent unjust enrichment or unfair detriment. They are based on principles of equity
and fairness, and they ensure that individuals are not allowed to profit at the expense of others
without a legal basis.
 3.4 Crimes or delict (Art.1161, NCC) - Scope of liability

- Article 1161: Obligations Derived from Acts Punishable by Law

- Article 1161: "Civil obligations arising from criminal offenses shall be governed by the
penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of
Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book,
regulating damages."
- This article states that persons who commit acts punishable by law are liable for
damages caused. The obligation to provide compensation for the damage caused by a
punishable act is distinct from any criminal liability that might also apply.
o Obligations can arise from wrongful acts or omissions that are punishable by law.
o When they arise from civil liability which is the consequence of a criminal offense

Definition: Crimes or delicts refer to wrongful acts or offenses that are prohibited by criminal law.
These actions are typically punishable by law and can result in criminal liability, such as fines or
imprisonment.

Scope of Liability: The scope of liability for crimes or delicts extends to both criminal and civil
aspects of the offense:

1. Restitution - involves requiring a person or entity to make amends or compensate

another party for a loss or harm caused by their actions.
2. Reparation for the damage caused - also known as damages or compensation, is a
legal remedy that aims to compensate a party for losses or harm resulting from
someone else's actions.
3. Indemnification for consequential damages - typically involves one party agreeing
to compensate another party for specific losses or damages that are not directly
caused by a breach of contract or a wrongful act but are a consequence of that
breach or act.

Key points from Article 1161:

1. Governing Law: Civil obligations that arise as a result of criminal offenses are primarily
governed by the penal laws of the Philippines. In other words, the civil liability that emerges
due to a crime is rooted in the same laws that define and govern the crime itself.
2. Article 2177: Article 2177 refers to the provision that holds a person liable for damages
when they act with negligence. This applies not only to crimes but also to situations where
harm or damage is caused due to negligence.

Example: X stole the car of Y. If X is convicted, the court will order X: (1) to return the car (or to
pay its value if it was lost or destroyed); (2) to pay for any damage caused to the car; and (3) to
pay such other damages suffered by Y as a consequence of the crime.

Where the trial court convicts an accused of a crime, without, however, ordering payment of
any indemnity, it has been held that the Supreme Court, on appeal, may modify the decision by
ordering indemnification of the offended party pursuant to Articles 100, 104(3), and 107 of the
Revised Penal Code.
 3.5 Quasi-delict (Art. 1162, NCC) - Definition; Crimes vs. Quasi delict

- Article 1162: Obligations Arising from Quasi-Delicts

- Article 1162: "Obligations derived from quasi-delicts shall be governed by the
provisions of Chapter 2, Title XVII of this Book, and by special laws."
- This article notes that obligations arising from quasi-delicts are separate from criminal
liability.
o Similar to quasi-contracts, quasi-delicts involve situations where there is no pre-
existing relationship between the parties. However, in this case, the obligation
arises from causing damage to another through fault or negligence.
o A quasi-delict, also known as a culpa aquiliana, is a legal concept that pertains to
civil liability arising from negligence or fault that causes harm or damage to
another person or their property. It is a situation where one person's negligence
leads to injury or loss suffered by another, even if there is no pre-existing
contractual relationship between the parties.

Example: While playing softball with his friends, X broke the window glass of Y, his neighbor.
The accident would not have happened had they played a little farther from the house of Y.
In this case, X is under obligation to pay the damage caused o Y by that act although there is
no pre-existing contractual relation between them.

Example: Sarah is driving her car on a busy city street when she suddenly rear-ends John's
vehicle at a traffic light. The collision is a result of Sarah's negligence because she was
texting on her phone while driving. As a result of the collision, John's car sustained
significant damage, and he suffered minor injuries. In this scenario:

- Sarah's negligent act of texting while driving constitutes a wrongful act or omission.
- John, the victim, did not have a contractual relationship with Sarah regarding the
accident.
- Despite the absence of a contract, John has a legal basis to seek compensation for the
damage to his car and his injuries because Sarah's negligence caused harm to him.
- This situation falls under the realm of a quasi-delict. Sarah may be held civilly liable for
the damages caused by her negligent behavior, even though there was no contractual
agreement between the parties.

In a quasi-delict case, the injured party can file a civil lawsuit to recover damages from the negligent
party. The principle behind quasi-delicts is to ensure that individuals who cause harm to others
due to their negligence or fault are held accountable for the resulting damages, regardless of any
contractual relationship between them.

Requisites/Elements of quasi-delict.

(1) There must be an act or omission by the defendant;

(2) There must be fault or negligence of the defendant;
(3) There must be damage caused to the plaintiff;
(4) There must be a direct relation or connection of cause and effect between the act or
 omission and the damage; and
5) There is no pre-existing contractual relation between the parties.

Here's a comparison between crimes and quasi-delicts:

1. Nature:

• Crimes: Crimes are offenses against the state and society as a whole. They are violations of
criminal laws and are prosecuted by the state. The purpose of criminal law is to punish
offenders and maintain public order.
• Quasi-Delicts: Quasi-delicts are civil wrongs that lead to harm or damage. They are
violations of civil law and are primarily concerned with providing compensation to the victim
for their losses.

Example Scenario 2: Quasi-Delict (Negligent Driving) - In this scenario, Sarah, while driving her car,
negligently crashes into the back of John's vehicle at a stoplight, causing damage to both cars and
minor injuries to John.

• Nature of Quasi-Delict: This situation falls under the realm of a quasi-delict (culpa aquiliana)
or tort. Quasi-delicts involve civil liability for damages arising from wrongful acts or
omissions that result in harm, even without a contractual relationship between the parties.
• Liability: Sarah may be held civilly liable for the damages caused by her negligent driving,
including the cost of repairing the vehicles and compensating John for his injuries.
• Civil Lawsuit: John can file a civil lawsuit against Sarah to seek compensation for the harm
he suffered. The purpose of the lawsuit is to recover damages rather than to seek criminal
punishment.

In summary, crimes are violations of criminal laws that result in criminal liability and are prosecuted
by the government. Quasi-delicts, on the other hand, involve wrongful acts or omissions that cause
harm and result in civil liability. The key distinction lies in the nature of the legal action (criminal vs.
civil) and the primary purpose (punishment vs. compensation) in addressing the wrongful act.

Crime is distinguished from quasi-delict. The following are the distinctions:

(1) In crime or delict, there is criminal or malicious intent or criminal negligence, while in quasi-
delict, there is only negligence;
(2) Crime affects the public interest, while quasi-delict concerns private interest;
(3) In crime, there are generally two liabilities: criminal and civil, while in quasi-delicts, there is
only civil liability;
(4) In crime or delict, the purpose is punishment, while in quasi-delict, indemnification of the
offended party;

In summary, the primary purpose of addressing crimes is to deter, punish, and potentially
rehabilitate offenders while protecting public safety. In contrast, the primary purpose of addressing
quasi-delicts is to provide civil justice by compensating victims for their losses and restoring them to
their pre-harm condition without seeking criminal punishment for the wrongdoer.
In essence, while both crimes and quasi-delicts involve wrongful behavior, they operate within
different legal frameworks. Crimes involve violations of criminal laws and result in criminal
penalties, while quasi-delicts involve negligence or fault that leads to civil liability and the obligation
to provide compensation to the victim.

4. Concepts of obligor and oblige

In the context of obligations, "obligor" and "obligee" are important terms that refer to the parties
involved in a legal obligation or contract. They have specific roles and responsibilities in the
obligation.

1. Obligor: The obligor is the party who is bound to fulfill an obligation. This party has the duty
or responsibility to perform a specific action, provide something, or refrain from doing
something as stipulated in the obligation or contract. The obligor is also often referred to as
the "debtor." They are the one who owes a certain performance to the other party.

- For example, in a simple loan agreement, the borrower is the obligor. They are obligated
to repay the borrowed amount according to the terms agreed upon in the contract.

2. Obligee: The obligee is the party to whom an obligation is owed. This party has the right to
expect the obligor to fulfill their duty as outlined in the obligation or contract. The obligee is
the recipient of the performance required by the contract. The obligee is sometimes
referred to as the "creditor" because they are the one to whom something is owed.

- Using the same loan agreement example, the lender is the obligee. They are entitled to
receive repayment from the borrower according to the terms of the loan agreement.

Example Scenario: Loan Agreement

• Obligor (Debtor): Sarah is the obligor in this scenario. She has borrowed $10,000 from a
bank to fund her small business venture. As the debtor, Sarah is legally obligated to repay
the $10,000, along with interest, according to the terms and conditions specified in the loan
agreement.

• Obligee (Creditor): The bank, in this case, is the obligee. The bank is the party to whom
Sarah owes the debt. As the creditor or obligee, the bank has the legal right to receive
repayment of the $10,000 loan amount, along with any applicable interest and fees, as
stipulated in the loan agreement.

In summary, the obligor is the party who owes an obligation and has the duty to perform, while the
obligee is the party to whom the obligation is owed and has the right to expect fulfillment.

5. Nature and Effect of Obligations

The nature and effect of obligations are essential concepts in contract and civil law. Understanding
these aspects helps clarify the legal implications and responsibilities associated with obligations.

Injury – refers to a wrongful, unlawful, or tortious act that causes loss or harm to another
Damage – is the hurt, loss, or harm that results from the injury

Damages – are the recompense or compensation awarded for the damage suffered (sum)

Kinds of Damages under the Civil Code

1. Actual or Compensatory Damages – refers to the pecuniary (consisting of money,

measured in money, talks about monetary) loss that may be recovered. They include
the value of the loss suffered and profits not realized.
▪ Example: loss in business or profession.
▪ Hindi niya lang sakop yung value ng lost, pero pati Narin yung value ng profit
na hindi na earn dahil sa loss or harm

2. Moral Damages – they include physical suffering, mental anguish, fright, serious
anxiety, social humiliation, and similar injury.
▪ Compensation awarded for moral suffering

3. Nominal Damages – they refer to damages to vindicate a right (to defend)

▪ Binibigay to recognize or defend the right of the plaintiff

4. Temperate or Moderate Damages – they are more than nominal but less than
compensatory damages, but may be recovered if the court finds that some
pecuniary loss has been suffered but its amounts cannot, from the nature of the
case, be proved with certainty.

5. Liquidate Damages – those agreed upon by the parties to a contract to be paid in

case of breach
▪ Based on the agreement

6. Exemplary or Corrective Damages – these are imposed by way of example or

correction for the public good, in addition to the moral, temperature, liquidated or
compensatory damages.

Effect of Obligations:

1. Rights and Duties: Obligations create both rights and duties for the parties involved. The
obligee (creditor) has the right to expect performance from the obligor (debtor), while the
obligor has the duty to fulfill the obligations agreed upon.

- Example: John is hired by XYZ Corporation as a software developer. Their employment

contract outlines the following rights and duties:
o John's Rights: John has the right to receive a monthly salary, access company
benefits, and a safe working environment. He also has the right to take approved
vacation days.
o John's Duties: John's duties include working full-time, completing assigned
projects on time, maintaining the confidentiality of company information, and
adhering to company policies.
 2. Mutuality: Obligations often require mutual consent. Both parties must agree to the terms
and conditions of the obligation, whether through a contract or other legal relationship.

- Example: Mutuality: Both John and XYZ Corporation have agreed to certain terms and
conditions in the contract. They have mutual obligations and expectations.

3. Reciprocity: Obligations often involve a give-and-take relationship. One party's performance

is often contingent on the other party's performance. This reciprocal aspect is a
fundamental feature of most obligations.

- Example: Reciprocity: In exchange for John's work and adherence to company policies,
XYZ Corporation reciprocates by paying him a monthly salary and providing benefits.

4. Remedies for Breach: If one party breaches the obligation, the other party is entitled to
seek remedies. These remedies might include damages to compensate for losses incurred
due to the breach.

- Example: Breach by John: If John fails to complete his assigned projects on time, XYZ
Corporation may provide him with a warning and, if the breach continues, terminate his
employment.
- Example: Breach by XYZ Corporation: If XYZ Corporation fails to pay John his salary on
time, John can take legal action to recover unpaid wages or file a complaint with labor
authorities.

5. Legal Consequences: Failing to fulfill obligations can lead to legal consequences, such as the
payment of damages or facing legal action. On the other hand, fulfilling obligations generally
results in the discharge of the obligation.

- Example: John's Non-Performance: If John repeatedly fails to meet his work duties, XYZ
Corporation can terminate his employment for cause, and he may lose certain benefits.
- Example: XYZ Corporation's Non-Performance: If XYZ Corporation repeatedly fails to
pay John his salary on time, they could face legal action, fines, or penalties for violating
labor laws.

6. Transferability: In some cases, obligations can be transferred or assigned to third parties

with the consent of the involved parties. This allows for the delegation of duties or the
transfer of rights.

- Example: If XYZ Corporation is acquired by another company, John's employment

contract and related rights and duties may be transferred to the new owner, with John
becoming an employee of the acquiring company.

In summary, obligations create legal relationships between parties, imposing duties and conferring
rights. They are binding and enforceable, and their effects have legal consequences. Understanding
the nature and effect of obligations is crucial in contract law, tort law, and other areas of civil law.

a. Rights of Creditor and Duties of Debtor

In the context of obligations, particularly in creditor-debtor relationships, there are specific rights
that creditors (obligees) possess and corresponding duties that debtors (obligors) are obligated to
fulfill.

Rights of Creditor (Obligee):

1. Personal Right (also called jus in personam or jus ad rem)

o This is a right that may be enforced by one person on another such as the right of
the creditor to demand the delivery of the thing and its fruits from the debtor.
2. Real Right (also called jus in re)
o This refers to the right or power over a specific thing, such as possession or
ownership, which is a right enforceable against the whole world.
o This is the right acquired by the creditor over the thing and its fruits when they
have been delivered to him.

Example: On January 1, 2018, X agreed with Y to deliver and transfer ownership to Y his only parcel
of land on January 14, 2018

- Before January 14, 218, Y had only personal right against X

- On January 14, 2018, Y had a real right that is enforceable against the whole world

Duties of Debtor (Obligor):

1. Duty of Performance: The primary duty of the debtor is to perform the obligations they
have agreed to in the contract or legal arrangement. This could involve making payments,
delivering goods, providing services, or other specific actions.
2. Duty to Perform in Good Faith: Debtors are expected to perform their obligations in good
faith, which means honestly and sincerely fulfilling the terms of the agreement without
attempting to evade responsibilities.

- Example: A business borrower should not provide false financial statements to a lender
to secure a loan. Acting in good faith means providing accurate and truthful information.

In summary, creditors have the right to demand performance and seek remedies in case of a
breach, while debtors have duties to fulfill their obligations, act in good faith, and compensate for
any losses caused by their actions or inactions. These rights and duties are fundamental to
maintaining a fair and equitable contractual and legal relationship.

~ Obligation to give (Arts. 1163-1166, NCC)

Articles 1163 to 1166 of the Civil Code of the Philippines discuss the concept of the obligation to
give. This refers to obligations where the debtor (obligor) is required to deliver or transfer a specific
object, thing, or property to the creditor (obligee).

Article 1163: Obligation to Give: "Every person obliged to give something is also obliged to take
care of it with the proper diligence of a good father of a family unless the law or the stipulation of
the parties requires another standard of care."
Specific/Determinate Thing

- A thing is determinate when it is particularly designated or physically segregated from all

others of the same class.
- It is identified by its individuality. Example: my cat is named “blue”
- The debtor cannot substitute it with another although the latter is of the same kind and
quality without the consent of the creditor

Generic/Indeterminate Thing

- A thing is indeterminate or generic when it is not particularly designated or physically

segregated from all others of the same class
- It is identified only by its species. Example: a horse, a car, a cat, a house
- The debtor can give anything of the same class as long as it is the same kind.

Importance of Knowing whether a thing is Determinate or Generic

- As a rule, the loss of a determinate thing through a fortuitous event extinguishes the
obligation
o Kapag yung determinate thing ay nawala o nasira through fortuitous event ang
obligation ni debtor kay creditor ay matatapos na, that means wala na obligation
si debtor kay creditor

- The loss of a generic thing through a fortuitous event does not extinguish the obligation
o Kasi kahit na mawala or masira yung generic through fortuitous event meron
paring obligation si debtor kay creditor, hindi parin matatapos yung obligation
niya kay creditor
o This rule is based on the principle that the genus of a thing can never perish (kasi
nga 1 of the class siya)

Duties of debtor in obligation to give a specific/determinate thing. They are:

(1) To preserve or take care of the thing due;

(2) To deliver the fruits of the thing (see Art. 1164.);
(3) To deliver its accessions and accessories (see Art. 1166.);
(4) To deliver the thing itself; as to kinds of delivery; and
(5) To answer for damages in case of non-fulfi llment or breach.

Duties of debtor in obligation to deliver a generic thing. They are:

(1) To deliver a thing which is of the quality intended by the parties taking into consideration the
purpose of the obligation and other circumstances; and

(2) To be liable for damages in case of fraud, negligence, or delay, in the performance of his
obligation, or contravention of the tenor thereof.
OBLIGATION TO TAKE CARE OF THE THING DUE

1. To take care good care of things with the diligence of a good father of a family
unless the law or agreement of the parties requires another standard of care.

Diligence of a good father of a family – the ordinary care that an average person exercises in taking
care of his property.

- In obligations to give (real obligations), the obligor has the incidental duty to take care of
the thing due with the diligence of a good father of a family pending delivery.

General Rule: to take good care of the thing with the diligence of a good father of a family

- Exceptions:
o Law requires another standard of care – this is a case where the debtor or
obligor in obligation to give must observe a higher standard of care than ordinary
diligence or diligence of a good father of a family because of specific law
provides.
o The agreement of the parties requires another standard of care – this is the
care where the debtor or obligor and the creditor or obligee agree on a higher
standard of care which is higher than ordinary diligence or diligence of a good
father of a family

2. To deliver the thing

- This involves placing the thing in the possession or control of the creditor either actually
or constructively

- Kinds:
o Actual delivery – the act of giving real and immediate possession to the creditor
▪ Example: S, the seller, entered into a contract of sale with B, the buyer,
involving a particular cellphone. The giving by S to B of that particular
cellphone is actual delivery.
o Constructive Delivery – an act that amounts to a transfer of title by operation of
law when the actual transfer is impractical or impossible.
▪ Example: S sold to B a particular parcel of land. They went to a notary
public to assist them in the execution of the contract of sale. Such
execution of public instruments was done through constructive delivery.

This article establishes the duty of the debtor to take care of the thing that is the subject of the
obligation to give. The debtor is expected to exercise the proper diligence in preserving and
safeguarding the object to be delivered.

Example: Scenario: Sale of a Vehicle - Suppose John decides to sell his car to Mary. They agree on
the terms of the sale, including the purchase price and the date of the transfer of ownership. The
agreement stipulates that John will deliver the car to Mary on a specific date, which is two weeks
from the date of the agreement.
 • Obligation to Give: In this scenario, John has an "obligation to give" the car to Mary as per
their agreement. This obligation is outlined in their contract, and it is the fulfillment of his
promise to transfer ownership of the vehicle to Mary in exchange for the agreed-upon
purchase price.
• Date of Fulfillment: The date specified in the contract for John to give the car to Mary is the
date on which he is legally obligated to transfer possession and ownership of the vehicle.
• Consequences of Non-Performance: If John fails to give the car to Mary on the agreed-upon
date without a valid reason, he may be in breach of his obligation. Mary, as the buyer, can
take legal action to enforce the contract, seek damages, or request specific performance
(i.e., compel John to fulfill his obligation by transferring the car).

Article 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."

This article outlines that even though the creditor has a right to the fruits (benefits or income) of
the thing from the time the obligation arises, they don't gain full ownership until the actual delivery
of the thing.

Example: Scenario: House Repairs - Suppose Mr. Rodriguez rents a house from Ms. Cruz. The lease
agreement specifies that Mr. Rodriguez is responsible for maintaining the house in good condition.
During the rainy season, a severe storm causes significant damage to the roof, making it necessary
to carry out immediate repairs to prevent further damage to the property.

• Expenses for Preservation: According to Article 1164, Mr. Rodriguez has an obligation to
bear the expenses necessary to preserve the property (in this case, the house) from further
damage. Since the repairs are essential to prevent additional harm to the property, Mr.
Rodriguez is obligated to cover the cost of repairing the roof.

Different kinds of fruits. The fruits mentioned by the law refer to natural, industrial, and civil fruits.

(1) Natural fruits are the spontaneous products of the soil, and the young and other
products of animals, e.g., grass; all trees and plants on lands produced without the
intervention of human labor.

(2) Industrial fruits are those produced by lands of any kind through cultivation or labor,
e.g., sugar cane; vegetables; rice; and all products of lands brought about by reason of
human labor.

(3) Civil fruits are those derived by virtue of a juridical relation, e.g., rents of buildings, price
of leases of lands and other property, and the amount of perpetual or life annuities or other
similar income.

Meaning of personal rights and real rights.

(1) Personal Right is the right or power of a person (creditor) to demand from another
(debtor), as a definite passive subject, the Fulfillment of the latter’s obligation to give, to do,
or not to do.
 (2) Real Right is the right or interest of a person over a specific thing (like ownership,
possession, mortgage, lease record) without a definite passive subject against whom the
right may be personally enforced

Ownership Acquired by Delivery

- Ownership and other real rights over property are acquired and transmitted in
consequence of certain contracts by tradition or delivery.
- The meaning of the phrase “he shall acquire no real right over it until the same has been
delivered to him,” is that the creditor does not become the owner until the specific thing
has been delivered to him.

Article 1165, Specific Thing and Generic Thing: "When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to
make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be
complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the
same thing to two or more persons who do not have the same interest, he shall be responsible
for any fortuitous event until he has affected the delivery”

This article explains that when the thing to be given is a specific and identifiable object, the creditor
has the right to compel the debtor to deliver that specific thing.

Example: Scenario: Loan of a Specific Thing vs. Generic Thing - Suppose Maria lends her friend
Juan her specific laptop, a MacBook Air, for a month. During this period, Maria's MacBook Pro, a
different laptop, is stolen.

• Specific Thing: The MacBook Air that Maria lent to Juan is considered a specific thing. It is
identified by its individual characteristics and is the subject matter of a particular contract
(the loan agreement).
• Generic Thing: Maria's MacBook Pro, which was stolen, is considered a generic thing. It is
part of a larger class or category of items (laptops), and it is not the specific subject matter
of any particular contract.

Remedies of creditors in real obligation

1. In a specific real obligation (obligation to deliver a determinate thing), the creditor may
exercise the following remedies or rights in case the debtor fails to comply with his
obligation:
a. Demand specific performance or fulfillment (if it is possible) of the obligation with a
right to indemnity for damages;
b. Demand rescission or cancellation (in certain cases) of the obligation also with a right
to recover damages; or
c. Demand the payment of damages only where it is the only feasible remedy
2. A generic real obligation (obligation to deliver a generic thing), on the other hand, can be
performed by a third person since the object is expressed only according to its family or
genus. It is thus not necessary for the creditor to compel the debtor to make the delivery
although he may ask for performance of the obligation. In any case, the creditor has a right
to recover damages under Article 1170 in case of breach of the obligation.
Article 1166: "The obligation to give a determinate thing includes that of delivering all its
accessions and accessories, even though they may not have been mentioned.”

(1) Accessions are the fruits of, or additions to, or improvements upon, a thing (the
principal). It is the items that become part of or attached to a more substantial
property, often through physical attachment or incorporation and are considered to
be a natural extension of that property.

Example of Accessions: Let's say you own a piece of farmland, and you decide to plant crops like
corn and wheat on it. Over the course of the growing season, the crops naturally become attached
to and integrated with the land. The crops are considered accessions because they have become
part of the real property (the land) through natural growth and attachment.

Another example of accessions could involve fixtures in a house. If you install a built-in bookshelf in
a room, the bookshelf becomes an accession because it is permanently attached to the structure of
the house and is considered part of the real property.

(2) Accessories are things joined to, or included with, the principal thing for the latter’s
embellishment, better use, or completion, it is the items that are not inherently
attached to a property but are associated with it and used in conjunction with it.
Note that while accessions are not necessary to the principal thing, the accessory
and the principal thing must go together but both accessions and accessories can
exist only in relation to the principal.

Example of Accessories: Imagine you purchase a house. Along with the house, the previous owner
included various movable items, such as furniture, appliances, and curtains, as part of the sale.
These movable items are accessories because they are not permanently attached to the property
but are associated with and used within the house.

Similarly, if you buy a car, the car's accessories might include items like the stereo system, floor
mats, or a GPS device. These accessories are not integral parts of the car itself but are additional
items that come with it.

~ Obligation to Do (Art. 1167, NCC)

Article 1167 of the Civil Code of the Philippines pertains to obligations to do, which involve
situations where the debtor (obligor) is required to perform a specific action, task, or service for the
creditor (obligee). Here's what the article states:

Article 1167: "If a person obliged to do something fails to do it, the same shall be executed at his
cost. This 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."

Example: X binds himself to construct a house for B. Among other things, it was stipulated that the
house shall have three bedrooms, each of which to have an area of five meters by four, and that
the kitchen shall be painted in all white. If X does not construct the house, B may ask C to construct
the house at the expense of X.
Remedies of creditor in positive personal obligation.

(1) If the debtor fails to comply with his obligation to do, the creditor has the right:

a) to have the obligation performed by himself, or by another unless personal considerations

are involved, at the debtor’s expense; and
b) to recover damages. (Art. 1170.)

(2) In case the obligation is done in contravention of the terms of the same or is poorly done, it may
be ordered (by the court) that it be undone if it is still possible to undo what was done.

Key points from Article 1167:

1. Failure to Perform: When a debtor who is obligated to perform a certain action or task fails
to do so, the article states that the action shall be executed at the debtor's expense.
2. Contravention of Obligation: If the debtor performs the required action in a manner that
goes against the terms of the obligation (in contravention of the tenor), the same rule
applies – the action will be executed at the debtor's cost.
3. Correction of Poorly Done Work: The article also provides that if the debtor's performance
is done poorly or inadequately, the court can order that the deficient work be undone or
corrected.

In summary, Article 1167 establishes the consequences for a debtor who fails to fulfill their
obligation to perform a specific action or task. If the debtor does not perform the required action,
or if they do it in a way that contradicts the terms of the obligation, the article mandates that the
action be carried out at the debtor's expense. Additionally, if the performance is poorly done, the
court can order corrections to be made. This article emphasizes the principle that obligations to do
require the debtor to fulfill their duties properly and in accordance with the terms of the obligation.

~ Obligations not to do (Arts. 1168)

Article 1168 of the Civil Code of the Philippines deals with obligations not to do, also known as
negative obligations. These obligations involve situations where the debtor (obligor) is required to
refrain from performing a certain action or activity for the benefit of the creditor (obligee). Here's
what the article states:

Article 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."

Example: B bought land from S. It was stipulated that 5 would not construct a fence on a certain
portion of his land adjoining that sold to B. Should S construct a fence in violation of the agreement,
B can bring an action to have the fence removed at the expense of S

Remedies of the creditor in negative personal obligation.

In an obligation not to do, the duty of the obligor is to abstain from the act. Here, there is no
specific performance. The very obligation is fulfilled by not doing what is forbidden. Hence, in this
kind of obligation, the debtor cannot be guilty of delay.
As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages. However,
if it is not possible to undo what was done, either physically or legally, or because of the rights
acquired by third parties who acted in good faith or for some other reason, his remedy is an action
for damages caused by the debtor's violation of his obligation.

Key points from Article 1168:

1. Obligation Not to Do: This article applies specifically to obligations where the debtor's duty
is to abstain from a particular action. Negative obligations require the debtor to refrain from
engaging in certain activities or behaviors.

Example: Non-Compete Agreement - Scenario: Sarah owns a successful bakery called "Sweet
Delights" in a small town. She has built a strong customer base and a unique menu of baked goods
that are highly sought after in the area. Sarah is concerned that if her head baker, Mark, were to
leave and start a competing bakery in the same town, it could significantly impact her business.

To protect her business interests, Sarah asks Mark to sign a non-compete agreement as part of his
employment contract. The non-compete clause stipulates that, for a certain period (e.g., two years)
after leaving employment at Sweet Delights, Mark agrees not to:

• Open or work for a bakery within a 10-mile radius of Sweet Delights.

• Use or disclose any of Sweet Delights' recipes, techniques, or trade secrets to start a
competing bakery.

Consequences of Breach: If Mark were to breach the non-compete agreement by opening a

competing bakery within the specified radius or using Sweet Delights' confidential information,
Sarah could take legal action against him. This could include seeking an injunction to prevent Mark
from operating the competing bakery and potentially pursuing damages for any harm caused to her
business.

In simpler terms, Article 1168 states that if someone has an obligation not to do something and
they go ahead and do it anyway, they must take corrective action to undo the forbidden action, and
they are responsible for the associated expenses.

This article underscores the seriousness of negative obligations and the consequences of their
breach. It serves as a deterrent against engaging in actions that have been expressly prohibited,
even if the action has already been performed. The obligation not to do requires the obligor to
refrain from certain actions, and violating this obligation can result in the obligation to reverse the
prohibited action and bear the related costs.

b. Grounds for liability for damages (art. 1170, NCC)

Article 1170 of the Civil Code of the Philippines pertains to the grounds for liability for damages. It
outlines the conditions under which a person becomes legally liable to pay damages for their
actions or omissions. Here's the text of the article:

"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."
Key points from Article 1170:

1. Fraud, Negligence, or Delay: Liability for damages arises when a person is guilty of one of
the following:
o Fraud: deliberate deception or misrepresentation of facts to gain an unfair
advantage.
1. Example: S obliged himself to deliver to B 20 bottles of wine, of a particular
brand. Subsequently, S delivered 20 bottles knowing that they contained
cheaper wines. S is guilty of fraud and Is liable for damages to B.

o Negligence: failure to exercise reasonable care, resulting in harm or damage to

another party.
1. Example: P is a passenger in a taxi. Here, there is considered a contract of
carriage between P and the owner of the taxi company, In consideration of
the fare to be paid by P, the owner of the taxi company, through the driver,
agrees to safely bring P to his destination. If though, the recklessness of the
driver, like for example, driving at an unjustified rate of speed or entering a
one-way street, an accident occurs, as a result of which P is injured, there is
negligence which would make the owner liable for damages, If the taxi
contained defective parts, the failure to repair the same constitute also
negligence on the part of the owner.
o Delay: Failure to fulfill obligations within the stipulated timeframe, causing harm or
inconvenience to the other party.

2. Contravention of the Tenor of Obligations: Liability can also result from any action or
behavior that goes against the terms or conditions of an obligation. This includes situations
where someone doesn't perform as they are supposed to under a contract or legal
obligation.

In essence, Article 1170 emphasizes that individuals who fail to fulfill their obligations properly and
in good faith, whether due to fraud, negligence, delay, or contravention of the terms, can be held
liable for damages. This article provides a legal basis for seeking compensation when someone's
actions or omissions lead to harm, loss, or inconvenience to another party. It underscores the
importance of performing obligations diligently and in accordance with legal and contractual
standards.

~ Delay (Art. 1169, NCC) - Definition; Kinds; Effects; Rule and Exceptions (When
demand is not necessary to put the debtor in delay)

Article 1169: "Those obliged to deliver or to do something incur a delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation."

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 declares; 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.

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.

Definition of Delay: Delay, also known as default, occurs when a person who is required to deliver
or perform something fails to do so within the specified period or upon demand.
- Is the non-fulfillment of an obligation with respect to time

Ordinary Delay: merely the failure to perform an obligation on time

Example of Ordinary Delay: - Scenario: Construction Project

Suppose a construction company, XYZ Builders, enters into a contract with a property owner to
construct a commercial building. According to the contract, the construction should be completed
within 12 months. However, due to unforeseen weather-related interruptions and minor logistical
issues, the construction company finished the project in 14 months. In this case:

o The delay in completing the construction project by 2 months is considered an

ordinary delay because it resulted from unforeseen but not necessarily unlawful
circumstances.
o While the delay may have inconvenienced the property owner, it was not due to any
breach of contract or legal violation by the construction company.
o The construction company may be subject to any contractual penalties or liquidated
damages specified in the contract for exceeding the time frame, but it is not
necessarily liable for legal delay.

Legal Delay: the failure to perform an obligation on time which failure constitutes a breach of the
obligation

Example of Legal Delay: Scenario: Court Proceedings

In a legal case, a court schedules a trial to begin on a specific date, and both parties are informed of
the trial date well in advance. The plaintiff is required to submit certain documents and evidence to
the court by a specified deadline, which is one month before the trial date. However, the plaintiff
repeatedly failed to provide the required documents despite being aware of the deadline. As a
result, the trial is postponed several times, causing significant delays in the legal proceedings. In this
case:

o The plaintiff's failure to meet the court-ordered deadline and causing repeated
postponements of the trial is considered a legal delay.
o It is a legal delay because it directly relates to a breach of court orders and rules,
which has led to disruptions in the legal process.
o Legal delays can have consequences, including possible sanctions against the party
responsible for the delay and additional legal costs.
Kinds of Delay:

Mora Solvendi (Delay on the part of the debtor): Default in fulfilling a monetary obligation, such as
payment of debt. Delay on the part of the debtor to fulfill his obligation

Example of Mora Solvendi - Scenario: Loan Repayment - Suppose John lends $10,000 to his friend
Alice and they agree that Alice will repay the loan in monthly installments of $1,000. According to
their agreement, the first payment is due on January 1st.

• Mora Solvendi by Alice: If Alice fails to make the first payment on January 1st and doesn't
provide a valid reason for the delay, she is in "mora solvendi." This means she is in default
regarding her obligation to repay the loan on time.

a. Mora Solvendi Ex Re – delay in real obligation (obligation to give)

b. Mora Solvendi Ex Persona – delay in personal obligation (obligation to do)

Mora Accipiendi (Delay of the creditor): Default in receiving or accepting what is due. The delay on
the part of the creditor to accept the performance of the obligation

Example of Mora Accipiendi - Scenario: Goods Delivery - Imagine a company, XYZ Electronics, has
ordered a shipment of electronic components from a supplier. The contract stipulates that the
supplier must deliver the components by December 1st, and XYZ Electronics must inspect and
accept the goods within three days of delivery.

• Mora Accipiendi by XYZ Electronics: If the supplier delivers the electronic components on
December 1st as agreed but XYZ Electronics fails to inspect and accept the goods within the
three-day period without a valid reason, XYZ Electronics is in "mora accipiendi." This means
they are in default regarding their obligation to accept the delivered goods.

Compensatio Morae: the delay of the obligors in reciprocal obligations (like in sale)

- Compensatio morae is a legal doctrine that allows one party to a contract to claim
damages when the other party is in default (morae). It's a principle that typically applies
in situations where both parties owe each other reciprocal obligations, and one party's
failure to perform on time leads to a delay or default by the other party. Here's an
example to illustrate compensatio morae
- Delay in reciprocal obligations
o Reciprocal obligation is an obligation in which each party is a debtor and a
creditor of the other

Requisites of Delay: There are three conditions that must be present before mora solvendi can exist or its
effects arise:

(1) failure of the debtor to perform his (positive) obligation on the date agreed upon;
(2) demand (not mere reminder or notice) made by the creditor upon the debtor to fulfill, perform,
or comply with his obligation which demand, may be either judicial (when a complaint is filed in
court) or extra-judicial (when made outside of court, orally or in writing); and
(3) failure of the debtor to comply with such demand.
The above presupposes that the obligation is already due or demandable and liquidated. There is
no delay if the obligation is not yet due or demandable.

A debt is liquidated when the amount is known or is determinable by inspection of the terms and
conditions of relevant documents. Failure to furnish a debtor with a detailed statement of account
does not ipso facto result in an unliquidated obligation.

The creditor has the burden of proving that demand has been made. It is incumbent upon the
debtor, to relieve himself from liability, and to prove that the delay was not caused by his fault, i.e.,
there was no fraud or negligence on his part.

Effects of delay.

(1) Mora solvendi. — The following are the effects:

(a) The debtor is guilty of breach of the obligation;

(b) He is liable for interest in case of obligations to pay money or damages in other
obligations. In the absence of extrajudicial demand, the interest shall commence from the
filing of the complaint; and
(c) He is liable even for a fortuitous event when the obligation is to deliver a determinate
thing. However, if the debtor can prove that the loss would have resulted just the same
even if he had not been in default, the court may equitably mitigate the damages.
In an obligation to deliver a generic thing, the debtor is not relieved from liability for loss
due to a fortuitous event. He can still be compelled to deliver a thing of the same kind or
held liable for damages.

(2) Mora accipiendi. — The effects are as follows:

(a) The creditor is guilty of breach of obligation;

(b) He is liable for damages suffered, if any, by the debtor;
(c) He bears the risk of loss of the thing due (see Art. 1162.);
(d) Where the obligation is to pay money, the debtor is not liable for interest from the time
of the creditor’s delay; and
(e) The debtor may release himself from the obligation by the consignation of the thing or
sum due.

(3) Compensatio morae. — The delay of the obligor cancels out the effects of the delay of the
obligee and vice versa. The net result is that there is no actionable default on the part of both
parties, such that as if neither one is guilty of delay.

If the delay of one party is followed by that of the other, the liability of the first infract or shall be
equitably tempered or balanced by the courts. If it cannot be determined which of the parties is
guilty of delay, the contract shall be deemed extinguished and each shall bear his own damages.

Rule:

- Delay arises when the obligee (the creditor) demands fulfillment of the obligation either
judicially (through court action) or extrajudicially (outside of court).
Exceptions (When Demand is Not Necessary to Put Debtor in Delay):

o When demand would be useless, such as when the debtor has declared their
intention not to fulfill the obligation.
o When the obligation or the law expressly states that demand is not necessary.
o When the time for performance is essential (e.g., a specific date) and has lapsed.
o When the nature of the obligation requires immediate compliance.

In summary, Article 1169 defines delay as the failure to fulfill obligations within the stipulated
timeframe or upon demand. The obligor is in default when the obligee demands fulfillment, and
this demand can be either judicial or extrajudicial. Delay carries legal consequences, including the
obligation to pay damages due to the delay itself. However, there are exceptions when demand is
not necessary to put the debtor in default, such as when demand would be useless, the obligation
requires immediate compliance, or when the time for performance is essential and has lapsed.

~ Contravention of the tenor of the obligation (Art. 1170, NCC) – Meaning

Article 1170 of the Civil Code: "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."

Meaning: Contravention of the tenor of the obligation occurs when one party to a contract or
agreement does not perform their duties or obligations as stipulated in the contract. It essentially
implies a breach of contract or a failure to meet the agreed-upon terms and conditions.

Example:

Contract for Home Renovation: Suppose Mr. Anderson hires a construction company, ABC
Builders, to renovate his home. They sign a detailed contract specifying the scope of work, the
completion date, and the cost of the project. According to the contract:

• ABC Builders is obligated to complete the renovation within 90 days.

• The total cost of the renovation is PHP 500,000.

However, as the renovation progresses, ABC Builders continually delays the project, extending the
completion date by several months. Additionally, when they presented the final bill to Mr.
Anderson, it exceeded the agreed-upon cost by PHP 100,000. In this scenario,

• ABC Builders has contravened the tenor of the obligation by failing to complete the
renovation within the stipulated 90 days.
• They have also contravened the tenor of the obligation by exceeding the agreed-upon cost
by PHP 100,000.

These contraventions represent breaches of the contract. Mr. Anderson can pursue legal remedies,
such as seeking damages or termination of the contract because ABC Builders did not fulfill their
obligations in accordance with the terms of the agreement.
Key points about contravention of the tenor of the obligation:

1. Breach of Agreement: Contravention of the tenor of the obligation occurs when a party fails
to fulfill their duties as specified in the contract or agreement they have entered into.
2. Types of Contravention: This can include various situations, such as not delivering the
agreed-upon goods, not providing the services as promised, or not adhering to other terms
of the contract.
3. Liability for Damages: Like cases of fraud, negligence, and delay, contravention of the tenor
of the obligation also leads to liability for damages. The party that goes against the terms of
the obligation may be required to compensate the other party for the losses or harm caused
by their failure to perform according to the agreement.

Fraud and negligence are distinguished. Fraud may be distinguished from negligence as follows:

(1) In fraud, there is a deliberate intention to cause damage or injury, while in negligence, there is
no such intention;
(2) Waiver of the liability for future fraud is void (Art. 1171.), while such waiver may, in a certain
sense, be allowed in negligence;
(3) Fraud must be clearly proved, a mere preponderance of evidence not being sufficient, while
negligence is presumed from the breach of a contractual obligation; and
(4) Lastly, liability for fraud cannot be mitigated by the courts, while liability for negligence may be
reduced according to the circumstances.

They are similar in that both are voluntary, that is, they are committed with volition but in fraud, a
party, by his voluntary execution of a wrongful act, or a willful omission, knows and intends the
effects which naturally and necessarily arise from such act or omission which deliberate intent is
lacking in negligence.

~ Fraud (Art. 1171) - Definition; Kinds

Fraud (deceit or dolo) (Article 1171, NCC - Civil Code of the Philippines):

Article 1171 states: "Responsibility arising from fraud is demandable in all obligations. Any
waiver of an action for future fraud is void."

Definition of Fraud: Fraud is the deliberate deception, misrepresentation, or manipulation of facts

with the intent to deceive or gain an unfair advantage. It involves intentional actions that lead to
harm or loss for another party.

A. Kinds of Fraud according to meaning

Fraud in obtaining consent

a. Causal Fraud of Dolo Causante – refers to fraud without which consent would not
have been given. (ito yung fraud na kung saan kung wala yung fraud na yun hindi
sana nagbigay ng consent yung other party)
 i. Renders the contract voidable (mean valid until annulled)

b. Incidental Fraud or Dolo Incidente – refers to fraud without which consent would
have still been given but the person giving it would have agreed on different terms.
(ito yung fraud na kung saan kahit wala yung fraud na to magbibigay parin ng
consent yung another party)
i. Ang contract ay valid and not voidable (pero yung party ay liable for
damages)

Fraud in the performance of the obligation

- This is the deliberate act of evading fulfillment of an obligation in a normal manner.

- This presupposes an existing obligation. Hence; the fraud has no effect on the validity of
the contract since it was employed after perfection. However, the party employing it
shall be liable for damages

B. Kinds of Fraud according to time of commission

a. Future Fraud – a waiver of an action for future fraud cannot be made. If there is an
agreement for its waiver, the same is void.
b. Past Fraud – a waiver of an action for past fraud may be made since the commission
of fraud can no longer be encouraged. Such waiver is an act of liberality on the part
of the creditor.

Examples of Fraud:

• Contract Fraud: An individual lies about their qualifications and experience on their resume
to secure a job position. Their fraudulent misrepresentations lead to their employment but
later result in workplace issues and incompetence.
• Insurance Fraud: A person deliberately stages an accident or submits false insurance claims
for injuries or damages that did not occur. They seek compensation from the insurance
company based on these fraudulent claims.
• Online Scams: Scammers create fake online profiles and websites to deceive individuals into
providing personal information or sending money. These fraudulent schemes can take
various forms, such as phishing scams, advance-fee fraud, or identity theft.

~ Negligence (Arts. 1172-1173, NCC) - Definition; kinds; Negligence vs. Diligence;

Kinds of diligence

Negligence (fault or culpa) (Articles 1172 and 1173, NCC):

Article 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."

(1) In the performance of every kind of obligation, the debtor is also liable for damages resulting
from his negligence or culpa. The courts, however, are given wide discretion in fixing the measure
of damages. The reason is that negligence is a question that must necessarily depend upon the
circumstances of each particular case. Moreover, negligence is not as serious as fraud because, in
the case of the former, there is no bad faith or deliberate intention to cause injury or damages. The
courts, however, may increase the damages.

(2) When both parties to a transaction are mutually negligent in the performance of their
obligations, the fault of one cancel the negligence of the other. Thus, their rights and obligations
may be determined equitably under the law prescribing unjust enrichment. No one shall enrich
himself at the expense of another.

Gross negligence is negligence characterized by want or absence of or failure to exercise even slight
care or diligence, or the entire absence of care, acting or omitting to act on a situation where there
is a duty to act, not inadvertently but willfully and intentionally

Kinds of Negligence

1. Contractual Negligence (culpa contractual) – Negligence in contracts

resulting in their breach. It merely makes the debtor liable for damages in
view of his negligence in the fulfillment of a pre-existing obligation.
1. Example: If S entered into a contract of sale with B to deliver a
specific horse on a certain day and the horse dies through the
negligence of S before delivery, S is liable for damages to B for having
failed to fulfill a pre-existing obligation.

2. Civil Negligence (culpa aqualiana) – Negligence which by itself is the source

of an obligation between the parties not so related before by any preexisting
contract. (Quasi Delict)
1. Example: Assume now, that the horse belongs to and is the
possession of B. The negligence of S which resulted in the death of the
horse is civil negligence. In this case, there is no pre-existing
contractual relation between S and B. The negligence itself is the
source of liability.

3. Criminal Negligence (culpa criminal) – negligence resulting in the

commission of a crime.
1. Example: If B wants, he can bring an action for culpa criminal (damage
to property through simple or reckless imprudence). Here, the crime is
the source of the obligation of S to pay damages.

Validity of waiver of action arising from negligence.

(1) An action for future negligence (not fraud) may be renounced except where the nature of the
obligation requires the exercise of extraordinary diligence as in the case of common carriers. (see
Art. 1733.)

(2) Where negligence is gross or shows bad faith, it is considered equivalent to fraud. Bad faith does
not simply connote negligence or bad judgment causing damages to another. Any waiver of an
action for future negligence of this kind is, therefore, void.
Article 1173: "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 provision of Article
1171 and 2201, paragraph 2, shall apply. 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.”

Definition of Negligence: Negligence refers to the failure to exercise the level of care, prudence,
and diligence that a reasonably prudent person would exercise in similar circumstances. It involves
a breach of duty resulting in harm or damage to another party.

Negligence vs. Diligence:

- Negligence represents a lack of proper care and caution, leading to harm or damage.
Diligence, on the other hand, involves taking appropriate measures to prevent harm or
loss.
- Negligence is a failure to meet the expected standard of care, while diligence is a
commitment to meet or exceed that standard.

Kinds of Diligence:

1. Ordinary Diligence: This is the standard level of care expected from an average person in
similar circumstances.

Example of Ordinary Diligence: Suppose you are driving your car on a city street, adhering to the
posted speed limit, obeying traffic signals, and maintaining a safe following distance. This behavior
demonstrates ordinary diligence in the context of safe driving. It involves the standard level of care
and responsibility expected from an average driver under normal circumstances.

• Key Points:
o Adhering to traffic laws and regulations.
o Avoiding distractions while driving.
o Exercising caution in typical traffic situations.
o Following the rules of the road to prevent accidents.

2. Extraordinary Diligence: This is a higher level of care that is required when dealing with
certain special circumstances or specific activities that involve potential risks.

Example of Extraordinary Diligence: Imagine you work for a chemical manufacturing company, and
your job involves handling highly toxic and volatile chemicals. In this scenario, extraordinary
diligence is required due to the high level of risk involved.

• Key Points:
o Wearing specialized protective gear such as hazmat suits, respirators, and gloves.
o Following strict safety protocols, including using designated containers and
equipment for chemical handling.
o Regularly inspecting and maintaining equipment to ensure it is in proper working
order.
 o Undergoing rigorous training and certification in chemical handling procedures
o Continuously monitoring environmental conditions and chemical reactions to detect
any potential hazards.

Factors to be considered
Negligence is a question of fact, its existence being dependent upon the particular circumstances of
each case. It is never presumed but must be proven by the party who alleges it. In determining the
issue of negligence where loss or damage occurs, the following factors must be considered:

(1) Nature of the obligation. — e.g., smoking while carrying materials known to be
inflammable constitutes negligence;
(2) Circumstances of the person. — e.g., a guard, a man in the prime of life, robust and
healthy, sleeping while on duty is guilty of negligence;
(3) Circumstances of time. — e.g., driving a car without headlights at night is gross
negligence but it does not by itself constitute negligence when driving during the day; and
(4) Circumstances of the place. — e.g., driving at 60 kilometers per hour on the highway is
permissible but driving at the same rate of speed in Quezon Boulevard, Manila, when traffic
is always heavy is gross recklessness.

When the source of an obligation is derived from a contract, the mere breach or non-fulfillment of
the prestation gives rise to the presumption of fault on the part of the obligor.

In summary, fraud involves intentional deception for personal gain, while negligence involves failing
to exercise due care, resulting in harm. Diligence, on the other hand, entails taking appropriate
measures to prevent harm or loss. The degree of diligence expected can vary based on the nature of
the obligation and the circumstances involved.

~ Fortuitous event (Art. 1174, NCC) - Definition; kinds; requisites; rule and
Exceptions

Fortuitous Event (Article 1174, NCC - Civil Code of the Philippines):

Article 1174 states: "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."

Definition of Fortuitous Event: A fortuitous event, also known as force majeure, is an unexpected
and unforeseeable occurrence that is beyond the control of parties involved in an obligation. It is an
event that is outside the scope of what could reasonably have been anticipated and prevented.
(Impossible to foresee or impossible to avoid)

- Fortuitous events can include natural disasters (acts of God) like earthquakes, floods,
lightning, eruption of volcano, rain, shipwreck, and storms

- Events beyond human control (acts of Man) like wars, strikes, fire, robbery, murder,
insurrection and government actions.
Kinds of fortuitous events

2. Ordinary Fortuitous Event – events which are common and which the
contracting parties could reasonably foresee.

▪ Suppose a construction company, ABC Builders, enters into a contract

with a client to build a new house. During the construction process, a
heavy rainstorm occurs, causing delays in the project. Rain is a
foreseeable event in many regions and is considered an ordinary
fortuitous event. In this case:
• ABC Builders and the client may have included provisions in their
contract to account for weather-related delays, such as extensions
of project timelines.
• The construction company would not be held responsible for the
rain delay beyond what is specified in the contract.

3. Extraordinary Fortuitous Events – events which are uncommon and which

the contracting parties could not have reasonably foreseen.

▪ Imagine a shipping company, Global Cargo, enters into a contract to

transport a shipment of goods by sea from one country to another.
During the voyage, the ship encounters a powerful hurricane, leading to
significant damage to the vessel and the loss of the cargo. A hurricane of
such magnitude is an extraordinary fortuitous event because it is beyond
the control of the shipping company and is not a normal part of maritime
operations. In this case:
• Global Cargo may be excused from its contractual obligation to
deliver the goods intact because the extraordinary event (the
hurricane) made it impossible for them to do so.
• The contract may have a force majeure clause that addresses
extraordinary events and specifies how the parties should proceed
or be excused from their obligations in such situations.

Requisites for Fortuitous Event:

For an event to be considered a fortuitous event, it must meet the following requisites: Whether an
act of man or an act of God, to constitute a fortuitous event, it is essential that:

(1) The event must be independent of the human will or at least of the debtor’s will;
(2) The event could not be foreseen (unforeseeable), or if it could be foreseen, must have been
impossible to avoid(unavoidable);
(3) The event must be of such a character as to render it impossible for the obligor to comply with
his obligation in a normal manner; and
(4) The obligor must be free from any participation in, or the aggravation of the injury to the oblige.

The absence of any of the above requisites (all of which must be proved) would prevent the obligor
from being exempt from liability.
Rule and Exceptions:

• Rule: In general, a person is not responsible for damages or non-performance of an

obligation due to a fortuitous event.
1. A person is not, as a rule, responsible for loss or damage caused to another resulting
from the non-performance of his obligation due to fortuitous events. In other words,
his obligation is extinguished.

• Exceptions:
1. When Expressly Specifies by Law: When the law specifically imposes liability despite
a fortuitous event (e.g., common carriers in certain situations).

a. The debtor Is guilty of fraud, negligence, delay, or contravention of the

tenor of the obligation. (Art. 1170, 1165, part 3)
▪ Example: S is obliged to deliver a specific horse to B on August 10. S
did not deliver the horse on said date. If, on August 11, the horse died
because it was hit by lightning, S is not liable if no demand was made
by B. His obligation is extinguished.
▪ Example: If the horse died after a demand was made by B, S is liable
for damages because he is guilty of (legal) delay. In this case, the
obligation of S to deliver the horse is also extinguished but it is
converted into monetary obligation to pay damages.

b. The debtor has promised to deliver the same (specific) thing to two (2) or
more persons who do not have the same interest.
▪ Example: If S sold and promised to deliver the same car to B and C
separately, S is liable even for a fortuitous event. The reason is that it
would be impossible for S to comply with his obligation to both B and
C even without any fortuitous event taking place.

c. The obligation to deliver a specific thing arises from a crime (art. 1268)
▪ Example: S stole the carabao of B. S has the obligation, arising from
the crime, to return the carabao. Even if the carabao dies or is lost
through a fortuitous event, S is still liable for damages unless B is in
mora accipiendi. A person Is responsible for the result of whatever
cause which flows from his criminal act

d. The thing to be delivered generic (art. 1263)

▪ Example: The loss or destruction of a generic thing like rice, corn,
sugar etc. does not produce the extinction of the obligation because
the debtor can still comply with his obligation by delivering another
thing of the same kind in accordance with the principle that “genus
never perishes)

2. When Declared by Stipulation: When the parties have expressly stipulated that
liability will apply even in the case of a fortuitous event.
 ▪ Example: Construction Contract Stipulation - Suppose a construction
company, ABC Builders, enters into a contract with a property owner, Mr.
Johnson, to build a commercial building. The contract contains the
following clause: "Liability for Delays: In the event of any delay in the
construction process, whether caused by a fortuitous event, such as
natural disasters or acts of God, or by any other reason, ABC Builders shall
be liable for any additional costs incurred by Mr. Johnson as a result of
the delay. This liability shall include both direct and consequential
damages." In this example:

• The stipulation is clear and explicit, stating that ABC Builders will
be liable for delays, regardless of whether they are caused by a
fortuitous event or any other reason.
• Even if a natural disaster like an earthquake or a severe storm
delays the construction, ABC Builders is still legally obligated to
cover the additional costs incurred by Mr. Johnson due to the
delay.
• This contract provision overrides the general rule that a fortuitous
event typically excuses a party from liability. The parties have
expressly agreed that liability will apply even in the case of a
fortuitous event.

3. Nature of Obligation: When the nature of the obligation requires the assumption of
risk, such as obligations involving inherently risky activities.
a. Example: B insured his house against fire for 100,000 with C, an insurance
company. Later, if the house was destroyed by an event, It may recover the
amount of the policy. In a contract of insurance, the insurer C, in
consideration of the premium paid by the insured B, undertakes to indemnify
the latter for the loss of the thing insured by reason of the peril insured
against even if the cause of the loss is a fortuitous event.

In summary, a fortuitous event is an unforeseeable and inevitable occurrence beyond the control of
parties that may exempt them from liability for damages or non-performance of obligations. While
such events can excuse parties from fulfilling their obligations, there are exceptions where liability
may still apply based on express law, stipulation, or the inherent risk associated with the nature of
the obligation.

c. Usurious transactions (Art. 1175, NCC) - Meaning of Loan or Mutuum

Usurious Transactions (Article 1175, NCC - Civil Code of the Philippines):

Article 1175 states: "Usurious transactions shall be governed by special laws."

Meaning of Loan or Mutuum: A loan or mutuum is a type of contract where one party, called the
lender or creditor, transfers ownership of a certain amount of money or fungible goods (goods that
are interchangeable and of the same kind) to another party, called the borrower or debtor. The
borrower is obligated to repay an equivalent amount of the same kind and quality.
 - This article pertains to loans or mutuum transactions, where one party lends money or
property to another, usually with the expectation that the borrower will repay the
principal amount along with interest.
- Usury is contracting for or receiving interest in excess of the amount allowed by law for
the loan or use of money, goods, chattels, or credits.

Example of a Loan or Mutuum: Imagine Mr. Garcia needs money to start a small business. He
approaches Ms. Martinez, who has some savings, and asks her for a loan of PHP 50,000 to get his
business off the ground. Ms. Martinez agrees to lend Mr. Garcia the money, and they enter into a
loan agreement.

• Principal Amount: In this case, the principal amount is PHP 50,000, which is the initial
amount borrowed by Mr. Garcia.
• Interest: Ms. Martinez agrees to lend the money to Mr. Garcia on the condition that he will
pay back the PHP 50,000 loan amount plus an additional PHP 5,000 as interest.
• Terms and Repayment: The loan agreement specifies the terms of repayment, including the
timeline and method of repaying the loan. For example, they might agree that Mr. Garcia
will repay the full amount within one year in monthly installments.

In this loan or mutuum transaction, Mr. Garcia borrows money from Ms. Martinez, and Ms.
Martinez expects him to repay the borrowed amount along with interest. This is a common
example of a mutuum or loan arrangement.

Kinds of interest.

(1) Simple interest. — when the rate of interest is stipulated by the parties (Art. 2209.);
(2) Compound interest. — when the interest earned is upon interest due;
(3) Legal interest. — when the rate of interest intended by the parties is presumed by law, as when
the loan mentions interest but does not specify the rate thereof. The same rate is allowed in
judgments where there is no express contract between the parties in anticipation of the same. Its
use is not justified where there is a stipulated rate of interest in the loan contract;
(4) Lawful interest. — when the rate of interest is within the maximum allowed by (usury) law; and
(5) Unlawful interest. — when the rate of interest is beyond the maximum fixed by law.

In summary, a mutuum or loan is a contract where one party lends money or fungible goods to
another, and the borrower is obligated to return an equivalent amount of the same kind and
quality. Usurious transactions, where excessively high interest rates are charged, are subject to
special laws and regulations that aim to prevent the financial exploitation of borrowers.

d. Presumptions (Art. 1176, NCC) - Definition; Kinds; When not applicable

Presumptions (Article 1176, NCC - Civil Code of the Philippines):

Article 1176 states: "The receipt of the principal by the creditor without reservation with respect
to the interest, shall give rise to the presumption that said interest has been paid. The receipt of a
later installment of a debt without reservation as to prior installments, shall likewise raise the
presumption that such installment have been paid."
Definition of Presumptions: Presumptions are legal inferences or assumptions made by the law
based on certain facts or circumstances. They serve as a way to establish a likely fact or truth
without direct evidence. In legal matters, presumptions help streamline the decision-making
process in cases where obtaining direct evidence might be challenging.

- Example: D borrowed 1,000 from C. Later D shows a receipt, signed by C. The fact not
actually known is the payment by D. The fact known is the possession by D of a receipt
signed by C.
o The presumption is that the obligation has been paid unless proved otherwise by
C as, for example, that D forced C to sign the receipt.
- Example: Suppose a child is born to Ms. Rodriguez, and there is a dispute about the
child's paternity. Mr. Martinez claims he is the biological father, while Ms. Rodriguez
denies this and refuses to acknowledge him as the father. In this case,
o Article 1176 may be relevant because, in many legal systems, there is a
presumption of legitimacy. This means that a child born during a marriage is
presumed to be the legitimate child of the husband unless there is strong
evidence to prove otherwise.
o Mr. Martinez, as the presumed father, would need to provide evidence to rebut
the presumption of legitimacy if he wanted to establish his paternity legally. This
evidence might include DNA testing, witnesses, or other documents.

Kinds of Presumptions: There are two main kinds of presumptions:

1. Disputable Presumption: This is a presumption established by law, and the court is required
to apply it unless evidence is presented to rebut it. One which can be contradicted or
rebutted by presenting proof to the contrary.

- Example: D owes C the amount of 10,000 with interest at 15% a year C issued a receipt
for the principal. The interest was not referred to in the payment whether or not it has
been paid. It is assumed that the interest has been previously paid by D because
normally, the payment of interest preceded that of the principal. This, however, is only a
disputable presumption and may be overcome by sufficient evidence that such interest
has not really been paid.

2. Conclusive Presumption: Also known as "irrebuttable presumption," this presumption

cannot be challenged or contradicted by any evidence. It is treated as conclusive proof of
the fact in question. One which cannot be contradicted like the presumption that everyone
is conclusively presumed to know the law.

- Example: E is a lessee in the apartment of R, paying 5,000 rental a month. If you fail to
pay the rent for the months of February and March. In April, E paid 5,000 and R issued a
receipt that the payment was for the month of April. The presumption is that the rents
for the months of Feb and March had already been paid.

When Not Applicable: Presumptions are not applicable when evidence is presented that
contradicts or disproves the presumed fact. If evidence is presented to rebut a presumption, the
presumption is set aside, and the court must decide based on the evidence presented.
(1) With reservation as to interest. — The presumptions established in Article 1176 do not arise
where there is a reservation as to interest or prior installments, as the case may be. The
reservation may be made in writing or verbally.

- Imagine that John lends $10,000 to his friend Sarah, but he specifies in the loan
agreement that he will charge a 5% annual interest rate on the borrowed amount. In this
case, John lends the money with a reservation as to interest, meaning he expects to earn
interest on the loan in addition to the principal amount.

(2) Receipt for a part of principal. — The first paragraph of Article 1176 only applies to the receipt
of the last installment of the entire capital, not to a mere fraction thereof. This is logical. A
receipt for a part of the principal, without mentioning the interest, merely implies that the
creditor waives his right to apply the payment first to the interest and then to the principal, as
permitted by Article 1253. Only when the principal is fully receipted, may failure to reserve the
claim for interest give rise to the presumption that said interest has been paid.

- Suppose Alice borrows $5,000 from a bank to purchase a car. After making her first
payment, the bank issued her a receipt indicating that $1,000 has been credited to the
principal amount of the loan. This receipt acknowledges the payment of a part of the
principal debt.

(3) Receipt without indication of particular installment paid. — It has been held that the
presumption in paragraph 2, Article 1176 is not applicable if the receipt does not recite that it
was issued for a particular installment due as when the receipt is only dated. Thus, in the
preceding example (No. 2), the fact alone that the receipt issued by R is dated April 5, does not
justify the inference that the rents for February and March had been paid.

- Bob has a mortgage on his house and makes monthly payments. When he submits his
payment for the month, the bank provides him with a receipt that simply confirms the
payment but does not specify which installment it covers. This is a receipt without
indication of a particular installment paid.

(4) Payment of taxes. — Article 1176 does not apply to the payment of taxes. Taxes payable by the
year are not installments of the same obligation.

- Every year, Mary pays property taxes to her local government. She receives a tax bill
that outlines the amount due, and she makes the payment on time to avoid penalties. In
this case, the payment is for taxes owed to the government.

(5) Non-payment proven. — Of course, Article 1176 is not applicable where the non-payment of
the prior obligations has been proven. Between a proven fact and a presumption pro tanto, the
former stands, and the latter falls.

- In a legal dispute, it is alleged that Chris owes $2,000 to a vendor for goods received but
has not paid the invoice. The vendor presents evidence, including invoices and
correspondence, to prove that Chris has not made the payment as required. In this case,
non-payment is proven through documentary evidence and testimony.
Interpretation of Article 1176: Article 1176 deals with a presumption related to interest payments.
It states that if a creditor receives the principal amount of a loan from the debtor without explicitly
reserving the right to collect interest, it is presumed that the interest has been paid along with the
principal. This presumption simplifies matters by assuming that interest is included when the
creditor accepts the principal without any reservation.

However, this presumption can be rebutted if the parties can provide evidence that the interest has
not been paid, despite the absence of explicit reservation. For example, if there was an agreement
that the interest would be paid separately at a later date, the presumption may not apply.

e. Remedies available to creditors for the satisfaction of their claims (Art. 1177, NCC)

Remedies Available to Creditors for the Satisfaction of Their Claims (Article 1177, NCC, Civil Code
of the Philippines)

Article 1177 of the Civil Code states: "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."

This article outlines the various remedies that creditors have at their disposal to satisfy their claims
when a debtor defaults on their obligations. These remedies enable creditors to recover their owed
amounts and protect their rights as creditors.

Damages – refers to the harm done and the sum of money that may be recovered in reparation for
the harm done

• Example: Let's consider a situation involving a creditor, Mr. Smith, who provided a loan to a
debtor, Mr. Jones, under a written contract. According to the contract, Mr. Jones was
obligated to repay the loan within a specified period but failed to do so.
1. Filing a Lawsuit (Civil Action):
▪ Mr. Smith may initiate a civil action or lawsuit against Mr. Jones to enforce
the debt. He can file a complaint in court, outlining the terms of the loan
agreement, the amount owed, and Mr. Jones's failure to repay.
▪ The court will then summon Mr. Jones to respond to the lawsuit, and a legal
process will begin.

2. Obtaining a judgment:
▪ If the court finds in favor of Mr. Smith, it will issue a judgment in his favor.
This judgment legally establishes Mr. Jones's debt and the amount he owes
to Mr. Smith.

3. Execution of Judgment:
▪ Mr. Smith, as the creditor, can then seek the execution of the judgment. This
means he can request the court to take measures to satisfy the debt.
▪ The court may issue a writ of execution, which allows Mr. Smith to take
certain actions to collect the debt.
 4. Garnishment of Bank Accounts:
▪ Mr. Smith can apply for a writ of garnishment, which would enable him to
access Mr. Jones's bank accounts to collect the debt directly from those
accounts.

5. Garnishment of Wages:
▪ In some cases, Mr. Smith may request the garnishment of Mr. Jones's wages,
allowing a portion of his income to be deducted and paid to the creditor until
the debt is fully satisfied.

6. Negotiating a Settlement:
▪ Instead of pursuing legal action, Mr. Smith and Mr. Jones may negotiate a
settlement, such as agreeing to a revised payment plan or a reduced amount
to satisfy the debt.

7. Assignment of Rights:
▪ If Mr. Smith wishes to transfer his rights as a creditor to another party, he can
assign those rights to a third party, who would then assume the role of the
creditor and have the legal authority to collect the debt.

Key points from Article 1177:

1. Pursuing Debtor's Property: Creditors have the right to pursue and lay claim to the debtor's
property that is currently in the debtor's possession. This includes assets that can be used to
satisfy the creditor's claims.
2. Exercising Rights and Actions of the Debtor: Creditors can step into the shoes of the debtor
and exercise any rights and actions that the debtor could have taken to recover what is
owed to them. This might include bringing legal action, filing lawsuits, and taking other
measures to secure payment.
3. Limitations to Inherent Rights: Creditors cannot exercise rights that are inherently personal
to the debtor, such as personal privileges or rights that are not transferable.
4. Impugning Fraudulent Acts: Creditors have the right to challenge or impugn any actions
taken by the debtor that are intended to defraud or hinder the creditors from recovering
their claims. This includes acts that unfairly transfer assets to others in order to avoid paying
creditors.

In summary, Article 1177 of the Civil Code outlines the remedies available to creditors to satisfy
their claims when a debtor defaults. These remedies include pursuing the debtor's property,
exercising the debtor's rights and actions, and challenging fraudulent acts. These measures enable
creditors to take legal action to recover what they are owed and protect their interests.

f. Transmissibility of rights (Art. 1178, NCC) - Rule and Exceptions

Transmissibility of Rights (Article 1178, NCC - Civil Code of the Philippines)

Article 1178 states: "Subject to the laws, all rights acquired in virtue of an obligation are
transmissible if there has been no stipulation to the contrary."
 - This article states that, in general, rights acquired through an obligation are transferable
to another person unless there is an explicit agreement stating otherwise. This means
that if you have a right resulting from a contract or obligation, you can typically transfer
that right to someone else unless the contract or agreement specifically prohibits such a
transfer.

Examples:

1. Assignment of a Contract: If you have a contract to sell a piece of property, you can typically
transfer your rights and obligations under that contract to another person, such as a buyer.
This transfer is known as an assignment.
2. Inheritance of Debts: If someone owes you money and you pass away, your right to collect
that debt can be inherited by your heirs, unless there is a clause in the contract that
expressly prohibits it.

Rule: In general, rights acquired in virtue of an obligation are transmissible. This means that if a
person has acquired a right as a result of an obligation, that right can be passed on to another
person in the event of the original person's death or transfer of rights.

• Rights Are Generally Transmissible: Unless there's a clear stipulation in the contract or law
preventing it, most rights and obligations arising from contracts or obligations can be
transferred to another person.
• Stipulation to the Contrary: If the contract includes a specific clause that prohibits the
transfer of rights, then the rights cannot be transferred. Parties to a contract can agree to
limit or restrict the transmissibility of rights.

Exceptions:

1. Prohibited by law. — When prohibited by law, like the rights in partnership, agency,
and commodatum which are purely personal in character.
a. By the contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention
of dividing the profits among themselves.
b. By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent
or authority of the latter.
c. By the contract of commodatum, one of the parties delivers to another
something not consumable so that the latter may use the same for a certain
time and return it. Commodatum is essentially gratuitous.

2. Prohibited by stipulation of parties. — When prohibited by the stipulation of the

parties, like the stipulation that upon the death of the creditor, the obligation shall be
extinguished or that the creditor cannot assign his credit to another. The stipulation
against transmission must not be contrary to public policy. Such stipulation, being
contrary to the general rule, should not be easily implied, but must be clearly proved,
or at the very least, clearly inferable from the provisions of the contract itself.