BACC 006 – OBLIGATIONS AND CONTRACT

NATURE AND EFFECT OF OBLIGATION

1. Specific/Determinate Thing and Generic/Indeterminate Thing Defines and Compared

ART. 1163. 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. (1094a)

The above provision refers to an obligation to give a specific or determinate thing.

A thing is said to be specific or determinate when it is particularly designated or physically segregated from
all others of the same class. (Art. 1459.)

A thing is generic or indeterminate when it refers only to a class or genus to which it pertains and cannot be
pointed out with particularity.

A determinate thing is identified by its individuality. The debtor cannot substitute it with another although the
latter is of the same kind and quality without the consent of the creditor. (Art. 1244.)

A generic thing is identified only by its specie. The debtor can give anything of the same class as long as it is
of the same kind.

2. Duties of Debtor in Obligation to Give a Determinate Thing

(1) To preserve or take care of the thing due (see Art. 1163);

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. The phrase has been equated with ordinary care
or that diligence which an average (a reasonably prudent) person exercises over his own property. However,
if the law or the stipu- lation of the parties provides for another standard of care (slight or extraordinary
diligence), said law or stipulation must prevail. (Art. 1163.)

(2) To deliver the fruits of the thing (see Art. 1164.);

ART. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it until the same has been delivered to him. (1095)

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

By law, the creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make
delivery of the thing arises.

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 BACC 006 – OBLIGATIONS AND CONTRACT

The obligation to deliver the thing due and, consequently, the fruits thereof, if any, arises from the time of the
perfection of the contract. Perfection in this case refers to the birth of the contract or to the meeting of the
minds between the parties. (Arts. 1305, 1315, 1319.)

(3) To deliver its accessions and accessories (seeArt.1166.);

ART. 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. (1097a)

The general rule is that all accessions and accessories are considered included in the obligation to deliver a
determinate thing although they may not have been mentioned. This rule is based on the principle of law that
the accessory follows the principal. In order that they will be excluded, there must be a stipulation to that
effect. Unless otherwise stipulated, an obligation to deliver the accessions or accessories of a thing does not
include the latter.

(4) To deliver the thing itself (see Arts. 1163, 1233, 1244; as to kinds of delivery, Arts. 1497 to 1501.); and

(5) To answer for damages in case of non-fulfillment or breach. (see Art. 1170.)

3. Duties of Debtor in Obligation to Give an Indeterminate Thing

(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 (see Art. 1246.); 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. (see Art. 1170.)

4. Positive Personal Obligation and Negative Personal Obligation

ART. 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. (1098)

Article 1167 refers to an obligation to do, i.e., to perform an act or render a service. It contemplates three
situations:

(1) The debtor fails to perform an obligation to do; or

(2) The debtor performs an obligation to do but contrary to the terms thereof; or

(3) The debtor performs an obligation to do but in a poor manner.

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.

ART. 1168. When the obligation consists in not doing, and the obligor does what has been forbidden
him, it shall also be undone at his expense. (1099a)

In an obligation not to do, the duty of the obligor is to abstain from an act. Here, there is no specific
performance. The very obligation is fulfilled in not doing what is forbidden. Hence, in this kind of obliga-
tion the debtor cannot be guilty of delay. (Art. 1169.)

As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages. (Art. 1170.) However,
if it is not possible to undo what was done, either physically or legally, or because of the rights acquired by
third persons 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. (see 8 Manresa 58.)

5. Default

ART. 1169. Those obliged to deliver or to do something in- cur in delay from the time the obligee
judicially or extra-judicially 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. (1100a)

The word delay, as used in the law, is not to be understood according to its meaning in common parlance. A
distinction, therefore, should be made between ordinary delay and legal delay (default or mora) in the
performance of an obligation.
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 BACC 006 – OBLIGATIONS AND CONTRACT

(1) Ordinary delay is merely the failure to perform an obligation on time.

(2) Legal delay or default or mora is the failure to perform an obligation on time which failure, constitutes a
breach of the obligation.

There are three conditions that must be present before the debtor be held in default:

(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 following are the effects if debtor is held in default:

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

(b) He is liable for interest in case of obligations to pay money (Art. 2209.) or damages in other obligations.
(Art. 1170.) 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. (Arts. 1165,
1170.) 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. (Art. 2215[4].)

The general rule is that delay begins only from the moment the creditor demands, judicially or extrajudicially,
the fulfillment of the obligation. The demand for performance marks the time when the obligor incurs mora
or delay and is deemed to have violated his obligation. Without such demand, the effect of default will not
arise unless any of the exceptions mentioned below is clearly proved:

(1) When the obligation so provides.

(2) When the law so provides.

(3) When time is of the essence.

(4) When demand would be useless.

(5) When there is performance by a party in reciprocal obligations.

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 BACC 006 – OBLIGATIONS AND CONTRACT

6. Grounds for Liability

ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for dam- ages. (1101)

Article 1170 gives the four grounds for liability which may entitle the injured party to damages (see Art.
2197.) for all kinds of obligations regardless of their source, mentioned in Article 1157, whether the
obligations are real or personal. (supra.) It contemplates that the obligation was eventually performed but the
obligor is guilty of breach thereof. Here, the breach of the obligation is voluntary; in Article 1174, it is in-
voluntary.

Fraud (deceit or dolo). — As used in Article 1170, it is the deliberate or intentional evasion of the normal
fulfillment of an obligation. (see 8 Manresa 72.) As a ground for damages, it implies some kind of malice or
dishonesty and it cannot cover cases of mistake and errors of judgment made in good faith. It is synonymous
to bad faith in that it involves a design to mislead or deceive another. (O’leary Macondray & Co., 45 Phil. 812
[1924]; Solid Bank Corp. vs. Mindanao Ferroalloy Corp., 464 SCRA 409 [2005].) Moral damages may be
recovered in addition to other damages. (see Art. 2220; Far East Bank & Trust Co. vs. Court of Appeals, 241
SCRA 671 [1995].) Article 1170 refers to incidental fraud (dolo incidente) committed in the performance of
an obligation already existing be- cause of contract. It is to be differentiated from causal fraud (dolo causante)
or fraud employed in the execution of a contract under Article 1338, which vitiates consent and makes the
contract void- able and to incidental fraud under Article 1344 also employed for the purpose of securing the
consent of the other party to enter into the contract but such fraud was not the principal inducement to the
making of the contract. Under Article 1170, the fraud is employed for the purpose of evading the normal
fulfillment of an obligation and its existence merely results in breach thereof giving rise to a right by the
innocent party to recover damages. The Civil Code refers to civil fraud. Criminal fraud gives rise to criminal
liability.

Negligence (fault or culpa). — It is any voluntary act or omission, there being no malice, which prevents the
normal fulfillment of an obligation.7 (see Arts. 1173, 1174.) According to our Supreme Court, “negligence is
conduct that creates undue risk or harm to another. It is the failure to observe for the protection of the interests
of another person, that degree of care, precaution and vigilance which the circumstances justly demand,
whereby such other person suffers injury.” (United States vs. Barrias, 23 Phil. 434 [1912], adopting the
definition given by Judge Cooley; Jarco Marketing Corporation vs. Court of Appeals, 321 SCRA 375 [1999].)
It is “the want of care required by the circumstances.’’ (Cortes vs. Manila Railroad Company, 27 SCRA 674
[1969]; Valenzuela vs. Court of Appeals, 253 SCRA 303 [1996]; Smith Bell Dodwell Shipping Agency Corp.
vs. Borja, 383 SCRA 341 [2002].)

Delay (mora). — This has already been discussed under Article 1169.

Contravention of the terms of the obligation. — This is the violation of the terms and conditions stipulated in
the obligation. The contravention must not be due to a fortuitous event or force majeure. (Art. 1174.) The

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 BACC 006 – OBLIGATIONS AND CONTRACT

unilateral act of terminating a contract without legal justification by a party makes him liable for damages
suffered by the other pursuant to Article 1170. (Pacmac, Inc. vs. Intermediate Appellate Court, 150 SCRA
555 [1987].)

7. Fortuitous Event and Rules as to Liability in Case of Fortuitous Event

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be fore- seen, or which, though foreseen, were inevitable.
(1105a)

A fortuitous event is any extraordinary event which cannot be foreseen, or which, though foreseen, is
inevitable. In other words, it is an event which is either impossible to foresee or impossible to avoid. The
essence of a fortuitous event consists of being a happening independent of the will of the obligor and which
happening, makes the normal fulfillment of the obligation impossible.

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 obligor’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 obligee. (see
Lasam vs. Smith, 45 Phil. 657 [1923]; see General Enterprises, Inc. vs. Lianga Bay Logging Co., Inc., 11
SCRA 733 [1964]; Tugade vs. Court of Appeals, 85 SCRA 226 [1978]; Juntilla vs. Fontaner, 136 SCRA 624
[1985].)

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

A person is not, as a rule, responsible for loss or damage resulting from fortuitous events. In other words, his
obligation is extinguished. The exceptions are enumerated below.

8. Remedies Available to Creditors for the Satisfaction of their Claims

ART. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their
claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those
which are inherent in his person; they may also impugn the acts which the debtor may have done to de-
fraud them. (1111)

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 BACC 006 – OBLIGATIONS AND CONTRACT

In case the debtor does not comply with his obligation, the creditor may avail himself of the following
remedies to satisfy his claim:

(1) exact fulfillment (specific performance) with the right to damages;

(2) pursue the leviable (not exempt from attachment under the law) property of the debtor;

(3) “after having pursued the property in possession of the debtor,’’ exercise all the rights (like the right to
redeem) and bring all the actions of the debtor (like the right to collect from the debtor of his debtor) except
those inherent in or personal to the person of the latter (such as the right to vote, to hold office, to receive
legal support, to revoke a donation on the ground of ingratitude, etc.); and

(4) ask the court to rescind or impugn acts or contracts which the debtor may have done to defraud him when
he cannot in any other manner recover his claim. (see Arts. 1380-1389.)

The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subject to
the exemptions provided by law. (see Art. 2236.)

The module is for the exclusive use of the University of La Salette, Inc. Any form of reproduction, distribution, uploading, or
posting online in any form or by any means without the written permission of the University is strictly prohibited.
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