OBLIGATIONS and CONTRACTS

ATTY. SIEGFRED B MISON

2nd Semester, 2016
COURSE OUTLINE: (RELEVANT CASES AND READINGS)
Part One
General Provisions: (Articles 1156 1162, 31 34, 2014 - 2015,
2142 2175, 2176, 2202 - 2230 of the New Civil Code, and Articles
100 - 113 of the Revised Penal Code.)
1. Concept, Requisites, and Classification: (Leung Ben vs.
OBrien, 8 Phil 102; Bautista vs. F.O. Borromeo, Inc., 30 SCRA
119; Dela Cruz vs. Northern Theatrical, 50 O.G. 4225, Sept
1954)
2. Examples and Distinctions of Sources of Obligations: (Pichel
vs. Alonzo, 111 SCRA 341; Licudan vs. Court of Appeals, Jan
24, 1991; Barredo vs. Garcia, 73 Phil 607; Gutierrez vs.
Gutierrez, 56 Phil 177)
Nature and Effect of Obligations: (Articles 1163-1178 and Article
440 of the New Civil Code)
1. Diligence: (Bishop of Jaro, 26 P 144)
a. Ordinary v. Extraordinary
b. Diligence of a Good Father of the Family
c. Diligence in accordance with circumstances as to person,
time, and place. (Obejera v. Iga Sy, 76 P 580; Africa v.
Caltex, March 31, 1966)

2. Delivery: (Sampaguita Pictures v. Jalwindor Manufacturers, 93

S 420)
a. Real right vs. Personal Right
b. Kinds of Delivery (Gatchalian v. Arlegui, 75 S 234)
3. Obligations to Give:
a. Generic v. Specific
b. Effects of fortuitous events (Yu Tek v. Gonzales, 29 P 384)
c. Accessions v. Accessories
d. Remedies in case of Breach (Quemel v. CA, Jan 16, 1968)
4. Obligations to Do and Not to Do:
a. Remedies in case of Breach (Chavez v. Gonzales, April 30,
1970)
5. Delay in the Compliance:
a. Necessity for Demand:
b. Exceptions:
c. Kinds of Mora:
d. Delay in Reciprocal Obligations: (Rodriguez v. Belgica,
Feb 28, 1961; Causing v. Bencer, 37 S 417)
6. Breach of Obligation:
a. Fraud (Dolo): Extent of Liability
b. Negligence (Culpa):
i. Respondeat Superior
ii. Bonus Pater Familias
iii. Waiver (People v. Verano, Feb 28, 1961)
iv. Contributory Negligence: (Picart vs. Smith, 37 P
809; Cangco vs. Manila Railroad, 38 P 763; Rakes
vs. Atlantic Gulf, 7 P 359; Spouses Guanio vs.
Makati Shangrila Hotel, February 7, 2011)
c. Delay (Mora):
d. In Contravention (substantial deviation):

e. Culpa Criminal vs.

Aquiliana
f. Kinds of Damages:

Culpa

Contractual

vs.

Culpa

7. Fortuitous Event:
a. Essential Conditions: (Nakpil vs. CA, 144 SCRA 596;
Lasam v. Smith, 45 P 657; Gatchalian v. Delim, Oct 21,
1991)
b. Exceptions: (Sia vs. CA, 222 SCRA 24; RP vs. Luzon
Stevedoring, 21 SCRA 279; NPC vs. Philipp Brothers, 369
S 629)
c. Fortuitous But Still Liable: (Tan Chiong San v. Inchausti,
22 P 152)
8. Usury and Interest: (Medel vs. CA, 299 S 481, Rosete v.
Perober Dev. Corp, July 31, 1981)
9. Other Remedies for Breach of Obligations:
a. Extrajudicial and Judicial: Demand, Attachment,
Subrogatory Action
b. Principal v. Subsidiary: Accion Pauliana
c. Transmissibility of Obligations and Exceptions: Inherent
rights of the Debtor
DIFFERENT KINDS OF OBLIGATIONS
Pure and Conditional Obligations: (Articles 1179 1192)
1. Classifications:
2. Pure Obligations: (HSBC vs. Spouses Broqueza, November 17,
2010)

3. When his means permits him to do so:

4. Kinds and Effects of Conditions:
a. Suspensive vs. Resolutory: (Santiago vs. Millar, 68 P 39;
Patente vs. Omega, 93 P 218; Gaite vs. Fonacier, 2 SCRA
831; Coronel vs. Court of Appeals, Oct 7 1996; Javier vs.
Court of Appeals, 183 S 171, Heirs of Atienza vs. Espidol,
August 11, 2010)
b. Potestative, Casual or Mixed Conditions: (Parks vs.
Province of Tarlac, 49 P 142; Smith Bell vs Matti, 44 P
875; Lao Lim vs. Court of Appeals, 191 S 150; Catungal
vs. Rodriguez, March 23, 2011)
c. Solely Upon the Debtor: (Osmena vs. Rama, 14 P 99;
Trillana vs. Quezon Colleges, 93 P 383; Hermosa vs.
Longara, 93 P 971;
d. Possible or Impossible Conditions: (Luneta Motor vs.
Abad, 67 P 32; Litton v. Luzon Surety, 90 P 783)
5. Constructive Fulfillment of Condition:
a. Prevented by the Debtor: (Valencia vs. RFC, 103 P 444;
Labayen vs. Talisay, 52 P 440)
b. By Stipulation (Taylor v. Yu Tieng Piao, 43 P 873)
6. Rights of Creditors Prior to Condition: (PLDT vs Jeturian, 97 P
981)
7. Rules in Cases of Improvement, Deterioration, or Loss:
8. Power to Rescind in Reciprocal Obligations: (Ang vs. Court of
Appeals, 170 S 286; Heirs of Gaite vs. The Plaza Inc, January
26, 2011;Lalicon vs. NHA, July 13, 2011, Spouses Fernando

vs. Continental Airlines, January 16, 2012; F.F. Cruz vs. HR

Construction, March 14, 2012)
a. Characteristics:
b. Specific Performance v. Rescission (Rios v. Jacinto Palma,
49 P 7)
c. Rescission vs. Resolution: (Magdalena Estate v. Myrick,
71 P 344)
d. Restrictions on the Power: (Alcaraz v. Tangga-an, April 9,
2003; Tan vs. Court of Appeals, 175 S 656)
e. Necessity of Judicial Approval; Exceptions: (Consing v.
Jamandre, May 12, 1979; Heirs of JBL Reyes vs. CA, 338
S 282)
f. Effects of Slight Breaches: (Song Fo vs. Hawaiian Phil, 47
P 821; Filoil vs. Mendoza, 150 S 632)
Obligations with a Period: (Articles 1193 1198)
1. Classification:
a. Condition v. Term (Berg v. Magdalena Estate, 92 P 110)
b. In diem vs. Ex die:
c. Legal, Conventional, Judicial: (PNB vs. Lopez Vito, 52 P
41; Victorias Planters vs. Victorias Milling, 97 P 318)
2. Payment or Performance Prior to the Period:
3. Benefit of the Period: (Ponce de Leon vs. Syjuco, 90 P 311)
4. When Courts May Fix a Period: (Barretto vs. City of Manila, 7
P 416; Peoples Bank vs. Odom, 64 P 126; Gonzales vs. Jose,
66 P 369; Eleizegui vs. Manila Lawn Tennis Club, 2 P 309;
Araneta vs. Phil Sugar, 20 SCRA 330; Soriano v. Abalos, 84 P
206)

5. Loss of Benefit of the Period: (Gaite vs. Fonacier, 2 SCRA 831;

Abesamis vs. Woodcraft, 166 SCRA 577; Song Fo vs. Oria, 33
P 3)
Alternative and Facultative Obligations: (Articles 1199 1206)
1. Concept and Features: (Agoncillo v. Javier, 30 P 124)
2. Limitations of the Right of Choice:
a. By the Debtor: (Reyes vs. Martinez, 55 P 492)
b. How Communicated?
3. Purpose of Choice: (Ong Guan Can vs. Century Insurance, 46
P 592)
a. Requisites:
b. Effect of Notice of Choice:
4. Rights of the Creditor Prior to Choice:
a. Loss or impossibility:
b. Extent of Indemnity; Damages:
5. Choice Given to the Creditor:
6. Alternative vs. Facultative Obligations: (Quizana v. Redugerio,
94 P 218)
Joint and Solidary Obligations: (Articles 1207 1222, 1822-1823;
2088, 2137, 2226 of the New Civil Code, Articles 94 and 121 of the
Family Code)
1. Definition and Distinction:

2. Conditions of Solidary Liability: (De Leon v. Nepomuceno, 37 P

180; Parot v. Gemora, 7 P 84)
3. Presumption of Joint Liability: (Oriental v. Abeto, 60 P 723)
4. Comparative Jurisprudence: (Jaucian vs. Querol, 38 P 707;
Borromeo vs. Court of Appeals, 47 S 65; PNB vs. Sta Maria, 29
S 303; Ronquillo vs. Court of Appeals, 132 S 274, Marsman
vs. Philippine Geoanalytics, June 29,2010)
5. Joint Divisible Obligations: (Agoncillo vs. Javier, 38 P 424)
6. Indivisibility vs. Solidarity, Passive vs. Active Solidarity:
7. Consequences of Solidarity: (Inchausti vs. Yulo, 34 P 978;
Quiombing vs. Court of Appeals, 189 S 325; Imperial
Insurance vs. David, 133 S 317)
a.
b.
c.
d.

Useful But not Prejudicial:

Assignment of Rights:
Extinguishment of Obligation:
Sue any or all: (Amor de Castro v. CA, July 18, 2002)

8. Effect of Payment; Right of Reimbursement:

9. Defense by the Solidary Debtor:
a. Real or Complete: (Braganza v. De Villa Abrille, 105 P
456)
b. Personal: (Ouano Arrastre v. Aleonor, Oct 10, 1991)
Divisible and Indivisible Obligations: (Articles 1223 1225)

1. Indivisibility of Obligation vs. Indivisible Thing: (Blossom v.

Manila Gas, 55 P 226)
2. Test of Indivisibility:
a. Definite Things
b. Not Susceptible to Partial Performance
c. Stipulation or by Law
Obligations with a Penal Clause: (Articles 1226 1230)
1. Definition; Kinds:
2. Purpose of Penal Clause: (Manila Racing Club vs. Manila
Jockey Club, 69 P 55; SSS vs. Moonwalk, 221 S 119; Caridad
Estate vs. Santero, 71 P 114)
3. Exception to the Purpose of Penal Clause: (Bachrach vs.
Espiritu, 52 P 346)
4. Penalty Plus Fulfillment: (Siy v. CA, 138 S 536, Cui v. Sun
Chan, 41 P 523; Cabarroguis vs. Vicente, 107 P 340;
Dimatulac v. Coronel, 40 P 686)
5. Difference with Facultative Obligation:
6. Reduction of Penalty: (Jison vs. Court of Appeals, 164 S 339;
Umali vs. Miclat, 105 P 1007)
7. Proof of Actual Damages: (Lambert vs. Fox, 26 P 558)

EXTINGUISHMENT OF OBLIGATIONS

Payment or Performance: (Articles 1232 1261, Rule 57 of

the Rules of Civil Procedure, R.A. 529 Uniform Currency
Act, Insolvency Law)
1. Classifications of Extinguishment: (Torrijos vs. CA, October 24,
1975)
2. Definition of Payment:
a. Completeness:
b. To Whom Made: (Haw Pia vs. China Bank, 80 P 604;
Crisol v. Claveron, 38 O.G. 156, p. 3734; Arcache v.
Lizares, 91 P 348)
c. How and When Made; Identity of Payment:
d. Proof of Payment: (Ormachea v. Trillana, 13 P 194)
e. Burden of Proof: (Panganiban v. Cuevas 7 P 477)
3. Substantial Performance in Good Faith: (Angeles vs. Calasanz,
135 S 323; Pagsibigan vs. Court of Appeals, 221 S 202; JM
Tuason vs. Javier, 31 S 829)
4. Completeness by Estoppel: (Esguerra vs. Villanueva, 21 S
1314)
5. Effect of Payment by and to Third Persons: (Tanguilig vs. Court
of Appeals, Jan 2, 1997; PNB vs. Court of Appeals, 256 S 44;
Mitsui Busan v. Meralco, 39 P 624)
6. Dation in Payment: (Caltex vs. IAC, 215 S 580)

a. Sale v. Dation: (Yuson v. Vitan, 496 S 540; Luzon

Development Bank vs. Enriquez, January 12, 2011; Tan
Shuy vs. Spouses Maulawin, February 8, 2012)
7. Effects of Partial Payment: (Nasser vs. Cuevas, 188 S 812)
8. Currency of Payment: (Fortunado vs. Court of Appeals, April
25, 1991; Tibajia vs. Court of Appeals, Jun 4, 1993;)
a. Legal Tender: (New Pacific Timber v. Seneris, 101 S 686)
b. Japanese Transactions: (Gibbs v. Rodriguez, Aug 3, 1949)
c. By stipulation: (General Insurance vs. Union Insurance,
179 S 530; R.A. 529, R.A. 4100 and R.A. 8183)
d. Conversion: (Zagala v. Jimenez, Jul 23, 1987)
9. Extraordinary inflation or deflation of currency: (Gonzalo
Maluel Co. vs. Central Bank, 38 S 533)
a. Inflation v. Deflation (Filipino Pipe Foundry vs. NAWASA,
161 S 32; Almeda v. Bathala Marketing, 542 S 470)
b. When Applicable: (Velasco vs. Meralco, 42 S 556;
Commissioner v. Burgos, Mar 31, 1980)
10.
Place of Payment (Manalac v. Garcia, 76 P 216; Eastboard
Navigation v. Ysmael, Sept 10, 1957)
11.

Application of Payments:
a. When Applicable: (Magdalena Estates vs. Rodriguez, 18 S
967)
b. Requisites: (Baltazar Vs. Lingayen Gulf Inc., 14 S 522)
c. Rights of Debtor:
d. Application By the Creditor: (Powell v. National Bank, 54
P 54)

e. Special Rules re Onerous Debt: (Espina v. CA, 334 S 186)

12.

Cesion:
a. Definition:
b. Difference with Dation in Payment:
c. Application: (Lopez vs. Court of Appeals, 114 S 671)

13.

Tender of Payment and Consignation

a. Definition: (Soco vs. Militante, 123 S 160)
b. How Made: (Adelfa Properties vs. Court of Appeals, 240 S
565; Far East Bank v. Diaz Realty, Aug 23, 2001;
Torcuator v. Bernabe, 459 S 439)
c. Proof of Tender: (Sering v. CA, 371 S 151)
d. When Tender of Payment is not Required:
e. Consignation v. Redemption v. Option: (Vda. De Quirino
v. Palarca, 29 S 1; Badayos v. CA, March 13, 1992)
f. Requisites of Consignation: (Ponce De Leon vs. Syjuco, 90
P 311; Hulganza v. CA, Jan 7, 1987)
g. Notice of Consignation, When Excused: (Southwestern
University v. Salvador, 90 S 318)
h. Effects of Consignation:

Loss of the Thing Due: (Articles 1262 1269)

1. Generic v. Specific: (RP v. Grijaldo, Dec 31, 1965)

1. Exceptions:
(Federation
of
United
NAMARCO
Distributors vs. National Marketing, 4 S 867)
2. Rebus Sic Stantibus: (PNCC vs. Court of Appeals, May
5, 1997; Naga Telephone vs. Court of Appeals, 73 S
637; U.S. v. Varadero dela Quinta, 40 P 48; Magat v.
CA, 337 S 298)
3. Loss v. Inconvenience: (Labayen vs. Talisay-Silay
Milling, 52 P 440)

Condonation or Remission: (Articles 1270 1274 and 748

752)

1. Requisites and Classes:

2. Write-Off v. Condonation: (Soria vs. COA, February 8,
2011)
3. Waiver v. Condonation: (Puzon v. Gaerlan, Dec 31,
1965)
4. Delivery of Private Document: (Lopez Vito v.
Tambunting, 33 P 226)

Confusion: (Articles 1275 1277)

1. Illustration: (Chittick vs. Court of Appeals, 166 S 219)

2. Requisites: Estate of Mota v. Serra, 47 P 464)
3. Effects: (Sochayseng vs. Trujillo, 31 P 153; Yek Ton Lin
vs. Court of Appeals, 46 S 473; Enriquez v. Ranola, 60
P 219)

Compensation: (Articles 1278 1290, Rule 6 of the Rules of

Civil Procedure)
1. Concept and Distinctions with Other Means of Extinguishing
an Obligation: (Insular Investment vs. Capital One, April 25,
2012)
2. Requisites:

a. Debtor and Creditor Relationship: (Garcia vs. Lim Chu

Sing, 59 P 562; Soriano vs. Compaia General, 18 S 999;
Republic vs. Mambulao, 4 S 622; Tan v. Mendez, Jun 6,
2002; Francia v. IAC, Jun 28, 1988)
b. Sum of Money: (Ong vs. Court of Appeals, 177 S 402;
Dalton vs. FGR Realty, January 19, 2011)
c. Two Debts Due: (Domingo vs. Garlitos, 8 S 443; Perez vs.
Court of Appeals, 127 S 636)
d. Liquidated and Demandable: (Mialhe vs. Manalili, 6 S
453)
e. No Controversy: (PNB v. Madecor, 363 S 128)
3. Legal Compensation:
a. By Operation of Law: (Pioneer Insurance vs. Court of
Appeals, 180 S 156; Mindanao Portland Cement v. CA,
120 S 930)
b. Requisites: (Sesbreo vs. Court of Appeals, 222 S 466)
c. When Not Applicable: (Gullas vs. PNB, 62 P 519; ICB v.
IAC, Jun 30, 1988)

Novation: (Articles 1291 1304)

1. Concept: (Ajax Marketing vs. Court of Appeals, 248 S 222;

Garcia v. Llamas, 417 S 292)
2. Requisites: (Garcia vs. Court of Appeals, 191 S 493; Heirs of
Servando Franco vs. Spouses Gonzales, June 27, 2012)
3. Extent: (Velasquez v. CA, 309 S 514; Republic Glass v. Qua;
435 P 480)

4. Presumption: (Martinez v. Cavives, 25 P 181; NPC v. Dayrit,

125 S 849; Magdalena Estates v. Rodriguez, 18 S 967)
5. Authority: (Banate vs. Philippine Countryside Rural Bank,
July 13, 2010; Hernandez-Nieverra vs. Hernandez, February
14, 2011)
6. Kinds:
a. As to Form:
i. Express: (California Bus Lines v. State Investment,
418 S 297; Guerrero vs. Court of Appeals, 29 S 791)
ii. Implied: (Ramos vs. Gibbon, 67 P 371; National
Exchange Co. v. Ramos, 51 P 310)
b. As to Effects:
i. Partial or Modificatory: (Bisaya Land Transportation
v. Sanchez, Aug 31, 1987)
ii. Total or Extinctive: (Fua Cam Lu v. Yap Fauco, 74 P
287)
c. As to Essence: (Cochingyan vs. R & B Surety, 151 S 339)
7. Objective Novation:
8. Subjective or Personal Novation:
a. Change in the Debtor:
i. Delegacion:
ii. Expromission: (Bangayan v. CA, 278 S 379; Gaw vs.
IAC, 220 S 405; Asia Bank vs. Elser, 54 P 994)
b. Change in the Creditor, Subrogation: (Lorenzo Shipping v.
Chubb and Sons, 431 S 266)
9. Legal Subrogation:

a. Presumption: (Chemphil vs. Court of Appeals, 251 S 257)

10.

Subrogation v. Assignment of Credit