LAW ON OBLIGATIONS AND CONTRACTS - it has already been 12 years since the debt

was issued to the debtor and the creditor

MODULE 1: OBLIGATIONS
still has not collected from the debtor.
- using the New Civil Code of the
▪ What if, after 12 years, the debtor
Philippines (following the old Civil Code
suddenly remembers to pay the creditor?
adapted from the time of the Spanish
Collonialism) - the debtor may still pay his debt. (as
long as it is voluntarily done)
- took effect in August 30, 1950.

Article 1156: “An obligation is a juridical

necessity to give, to do, or not to do.” ▪ What if, after paying, the debtor suddenly
needs money and thinks of getting back
- (juridical necessity) upon non-exercise of
what he paid to the creditor?
an obligation, the act is punishable by
court by filing a case. - the debtor can no longer get back the
money paid from a prescribed contract of
“A civil obligation is enforceable by court
loan/natural obligation.
action, unlike natural obligations.”
- the act of the debtor, paying the
- (natural obligation) obligations with
outstanding amount after the right of the
prescriptive period (e.g., written contracts
creditor to collect expires, is considered
expire after 10 years)
valid.
- e.g., you lent money with a written
- it is an admission/acknowledgement on
contract; within 10 years, you have to make
the part of the debtor that he needs to
an effort to collect or demand collection
pay his outstanding loan even though it
from the debtor before your right to collect
already prescribed/expired.
prescribes after 10 years.

within 10 years – debtor has a civil

obligation to pay the creditor. o Requisites/Elements of an Obligation:

after 10 years – debtor has a natural a. Active Subject (creditor/obligee) – the

obligation to pay the creditor. party who has the right to demand
performance of the obligation.
- the debtor still has the present debt to
the creditor, which the debtor may pay - (active) the creditor takes more interest
voluntarily, but the creditor cannot and effort to collect the outstanding debt
compel the debtor to pay nor seek the of the debtor.
help of the court to demand payment
b. Passive Subject (debtor/obligor) – the
from the debtor.
party who is obliged to perform the
Continuation of Illustrative Example: (rule obligation.
on natural obligations)

1
 - (passive) until the creditor demands b. Personal Obligations
payment, the debtor silences because he
b.1. Positive – it is the obligation to do
is the one who will lose money due to
something.
payment of debt.
b.2. Negative – it is the obligation not to
c. Prestation (object/subject matter) – it
do something. (e.g., do not block the
may consist of giving, doing, or not doing
driveway of your neighbors)
something.

d. Efficient Cause (vinculum juris/juridical

tie) – that which binds the parties to an o Sources of Obligations:
obligation.
Article 1157: Obligations arise from:

- Law
Illustrative Example: (elements of an
- Contracts
obligation)
- Quasi-Contracts
- Through a contract of loan, Diego borrowed
P 1,000,000 from Cardo a year ago. - Delicts

On the maturity date, who/what is the active - Quasi-Delicts

subject, passive subject, prestation, and
efficient cause?
a. Law – it is a rule of conduct, just and
▪ Active Subject: Cardo
obligatory, laid down by legitimate
▪ Passive Subject: Diego
authority for common observance and
▪ Prestation: P 1,000,000
benefit.
(exact answer) the giving of P 1,000,000.
▪ Efficient Cause: contract of loan Article 1158: Obligations derived from law
are not presumed. Only those expressly
determined in this Code or in special laws
o Forms of an Obligation: are demandable, and shall be regulated by
- oral the precepts of the law which establishes
- in writing them; and as to what has not been foreseen,
by the provisions of this book.
- partly oral and partly in writing
- (not presumed) there is a specified law
promulgated before claiming that a person
o Kinds of Obligation According to Subject
has an obligation to give, to do, or not to do
Matter:
something.
a. Real Obligations – from the latin word
- (special laws) tax laws (NIRC,
“res,” which means object; this is the giving
TRAIN/CREATE), Family Code of the
of an object.

2
 Philippines (obligations of each family - (unilateral) unlike in a normal contract
member) which is bilateral, in quasi-contracts, only
one party can decide to push through with
- e.g., the obligation of the parents to take
the contract.
care of their children while they are still
underaged (below 18 years old) and to
give support.
a. Negotiorum Gestio – this refers to the
- this is not only considered a moral voluntary administration of the property,
obligation, not only a civil obligation, but business, or affairs of another without
failing to do this obligation is considered his consent or authority. There is now an
a criminal liability. obligation to reimburse the gestor for
the necessary and useful expenses.

- e.g., Your neighbor took a vacation.

b. Contracts – it is the meeting of the
Unknowingly, the village experienced
minds between two or more persons
heavy storm and flooding a day after
whereby one binds himself with respect to
your neighbor left. You noticed that the
the other, to give something or to render
roof is about to be detached,
some service.
jeopardizing the lives of your neighbor’s
Article 1159: Obligations arising from pet animals.
contracts have the force of law between the
- As a concerned citizen, after the storm,
contracting parties and should be complied
you took the initiative to have the rook
with in good faith.
fixed by a carpenter. Once the neighbor
- both parties can stipulate any provisions comes back from his vacation:
within the contract, as long as it is not
▪ the neighbor now has the obligation to
contrary to law, public morals, public
reimburse all the expenses you incurred
policy, and good customs.
in voluntarily fixing his roof even though
your neighbor did not signify his
approval or consent.
c. Quasi-Contracts – they refer to certain
lawful, voluntary, and unilateral acts giving What/Who gave the consent of the
rise to a juridical relation to the end that no neighbor to fix his broken roof?
one shall be unjustly enriched at the
- the law gave the consent; giving the
expense of another.
premise that if the neighbor is present
The two most common examples are: during the storm, he would have done
the same thing of fixing the roof.
- negotiorum gestio
- if there was another person who did
- solutio indebiti
it for the neighbor, the neighbor has
the obligation to reimburse.

3
 - (quasi) one element missing in quasi-
delicts is the intent. (however, there was
b. Solutio Indebiti – this refers to the
still damage done)
payment by mistake, of an obligation in
excess of what should have been paid or - for crimes, there is the person’s intention
payment to a person not due to receive to commit the act. (e.g., hurting someone,
it. killing someone, buying illegal drugs, etc.)

- an obligation arises to return what was - e.g., You are driving at night. Accidentally,
not ours (excess of what should have you bumped into someone and caused
been paid or amount we are not due to injuries on that person.
receiving)
- due to this act, you now have the
obligation to pay for damages. (hospital
bills)
d. Delicts – these are acts or omissions
punishable by law. This refers to crimes
(more common term) or felonies defined
o Nature and Effect of Obligations:
under the law to be punishable as such.
Article 1163: Every person obliged to give
- these laws are under the Revised Penal
something is also obliged to take care of it
Code (includes special penal laws and
with proper diligence of a good father of a
criminal laws)
family, unless the law or stipulation of the
- each crime has a corresponding criminal parties requires another standard of care.
liability (imprisonment) and civil liability
- this is concerned about giving a
(payment of fine); “a person who is
determinated/specific object.
criminally liable is also civilly liable.”
- (diligence of a good father) doing
- e.g., crime of arson (incineration of
everything in your ability/power to avoid
other people or properties of others);
harm or damage on the person/object you
upon proving someone is guilty, aside
are taking care of.
from imprisonment, that person is also to
pay charges equivalent to the value of the - e.g., You own a pet shop and somebody
property damaged by fire. bought a specific dog. The buyer already
paid and asked for the dog to be delivered
next week.
e. Quasi-Delicts – these are acts or
- even though the buyer has already paid,
omissions that cause damage to another
as the owner, you are still bound to take
there being fault or negligence but without
care of the dog up until you deliver it
any existing contractual relation between
safely to the buyer.
the parties. There is now an obligation to
pay for damages. - feed the dog, clean the dog, provide
vitamins and supplements, etc.
- it is also known as tort or culpa aquiliana.

4
 - minimum is taking care of it with the - a generic thing is identified only by its
proper diligence of a good father of a specie. The debtor can give anything of the
family, unless another standard of care is same class as long as it is of the same kind.
required. (general rule)
▪ I will give you a car.
- (other law or stipulation for another
▪ I will give you a house.
standard of care) contract of carriage:
everytime we ride any mode of ▪ I will give you a ballpen.
transportation (extraordinary diligence;
higher level of care needed to be
exercised by operators of transportation Connection with Article 1163:
vehicles)
- e.g., I will give you a dog.
- (extraordinary diligence) the driver
- this is only a generic thing, therefore, it
should promise the safe arrival of its
may not be taken cared of with the proper
passengers from the pickup point to their
diligence of a good father of a family.
destination.
- if a certain dog died or gets sick, the
- e.g., the driver should not move
person may still fulfill its obligation to give
forward if a passenger is still on its way
another dog because no specification was
to find a seat.
given as to what dog to give.

- genus nunquam perit (genus never

o Determinate (Specific) Thing vs. Generic perishes)
Thing:
- e.g., I will give you a dog named Casper, a
- a thing is considered to be determinate if it Siberian Husky.
is particularly designated and physically
- this is a specific thing, therefore, it
segregated from all other objects of the
requires to be taken cared of with the
same class.
proper diligence of a good father of a
▪ I will give you a Toyota Vios with plate family.
number AVC123. (the plate number is a
- failure to comply will make the person
distinct characteristic of each car)
liable for damages. (Casper is a unique
▪ I will give you a house located in a being, therefore, a specific thing)
specific address. (the house address is a
distinct element of each house)
What are the obligations of a debtor obliged
▪ I will give you this ballpen I am holding
to give a determinate thing?
right now. (even though these is no
number or label on the object, it is still 1. To take good care of the thing with the
considered distinct) diligence of a good father of a family
unless the law or agreement of the

5
 parties requires another standard of - e.g., interest income (fruit from a loan
care. receivable), rent income (fruit from giving
2. To deliver the thing. rentals)

- the delivery of the subject matter

signifies the transfer of ownership. (not
Article 1164: The creditor (buyer) has a right
during payment)
to the fruits of the thing from the time the
3. To deliver the fruits of the thing. obligation to deliver it arises. However, he
shall acquire no real right over it until the
same has been delivered to him.
o Kinds of Fruits:
a. Natural Fruits – they are the
spontaneous products of the soil and the Illustrative Example: (real vs. personal right)
young and other products of animals.
On August 1, Mr. A promised to give a
- (for plants) these are plants that grew specific dog to Mr. B. Based on their
spontaneously without the help of agreement, the dog should be delivered to
human labor. Mr. B on August 15. Unfortunately, the dog
was only delivered on August 31. Unknown
- e.g., wild grass.
to Mr. B, the dog gave birth to 3 puppies on
- (young) also includes the young born August 21.
from animals. (e.g., calves, puppies)
1. Who should be entitled to the three
- (young) includes young born from puppies?
animals with the help of a veterinary.
- Mr. B has a right to the fruits (3 puppies)
(even if with human intervention)
of the dog from August 15 onwards. (time
the obligation to deliver it arises)

b. Industrial Fruits – they refer to those - even though it was not yet delivered when
produced by land of any kind through the dog gave birth, Mr. B still has the right
cultivation or labor. over the 3 puppies.

- (for plants) these plants grew with the - on the reverse, if Mr. A delivered the dogs
help of human intervention. on or before August 15, the dog would still
give birth on August 21, this time on Mr. B’s
- e.g., agricultural crops like rice, corn,
house.
wheat, and tobacco.
- absence of this rule would imply that Mr.
A’s negligence for the late delivery will bear
c. Civil Fruits – they refer to fruits that are benefits on his part if he takes ownership
the results of a juridical relation. of the 3 puppies.

6
2. If the dog gave birth on August 10, who all its accessions and accessories, even
should be entitled to the 3 puppies? though they may not have been mentioned.

- the ownership goes to Mr. A because the - if it has been explicitly agreed upon that
delivery date has not yet lapsed when the the accessions or accessories should not
dog gave birth. be delivered along with the thing, that is
the only time they are not included.

3. What if there is no expressed date or date

agreed upon by the parties for the dog’s a. Accessions – they are everything that is
delivery to Mr. B? incorporated or attached to a thing, either
naturally or artificially.
- under the rules, the thing should be
delivered immediately (due and - e.g., in buying a land, there may be a
demandable) and the creditor shall have mango tree planted along or a nipa hut
right to its fruits. built.

o Personal vs. Real Right: b. Accessories – those joined to or

included with the principal thing for the
- personal right is the right to demand from
latter’s better use, perfection, or
another, the fulfillment of the latter’s
enjoyment.
obligation to give, to do, or not to do.
- e.g., in buying a wrist watch, the
- right gained by the creditor (buyer) until
principal thing is the watch/clock and the
the delivery of the thing happens.
accessory is the strap.
- right to demand delivery against the seller
- with the strap, a person can better use
of the thing.
the watch.
- real right is the right or interest of a person
- e.g., when buying a violin, it always
over a specific thing, without a definite
comes with a bow.
passive subject against whom the right may
be personally enforced. It is binding against
the whole world.
main difference: if the accession is taken
- ownership over properties are acquired out of the principal thing, the thing can still
and transmitted by delivery. function on its own; if the accessory is taken
out of the principal thing, the thing may not
function well like before.
o Accessions vs. Accessories:
- jelly case of phone (accession)
Article 1166: The obligation to give a
- mango plant in land (accession)
determinate thing includes that of delivering
- strap in a wrist watch (accessory)

7
o Remedies of the Creditor: (buyer) - violation of right against involuntary
▪ If the debtor (seller) fails to perform his servitude.
obligation to deliver a determinate thing:
- if the debtor performs the obligation
- to compel the debtor to make the but does it poorly, the creditor may have
delivery. the same be undone at the debtor’s
expense or he may also demand
- to demand damages from the debtor. (if
damages from the debtor.
the debtor does not want to deliver)

- since this is a specific thing, buying

from another seller is not an option. ▪ If the debtor does what has been
forbidden to him:

- the creditor may demand that what has

▪ If the debtor (seller) fails to perform his
been done be undone.
obligation to deliver a generic thing:
- he may also demand damages from the
- to ask that the obligation be complied
debtor.
with at the expense of the debtor.
(buying from another seller charged to
the original debtor)
o Grounds for Liability to Pay Damages:
- since this is a generic thing, buying
Article 1170: Those who in the performance
from another seller can be an option.
of their obligations are guilty of fraud,
- to demand damages from the debtor. negligence, or delay, and those who in any
manner contravene the tenor thereof, are
liable for damages.
▪ If the debtor fails to perform his
obligation in obligations to do:
o Damages vis-à-vis Injury:
- if the debtor fails to perform the
▪ Damages – refer to the harm done or the
obligation or performs it but
sum of money that may be recovered in
contravenes the tenor thereof, the
reparation for the harm done.
creditor may have the obligation
executed at the expense of the debtor or - e.g., A man committed arson by getting
he may also demand damages from the your car on fire. The damages
debtor. considered are the properties destroyed
by the man using fire.
- making the court demand
performance from the debtor is
against the law. (do not make a person ▪ Injury – refers to the wrongful, unlawful,
do something against his will) or tortuous act which causes loss or
harm to another. It is the legal wrong to
be redressed.

8
 - usually refers to a person’s right actual value of loss suffered or expenses
violated by the wrongful act of a person. incurred.

- e.g., A man committed arson by getting

your car on fire. The injury pertains to the
b. Moral – they include physical suffering,
violation of your right as a car owner.
mental anguish, fright, serious anxiety,
besmirched reputation, wounded
feelings, moral shock, and social
What is the concept of “damnum absque
humiliation.
injuria?”
- usually for victims who experienced
- it means damage without injury. (exception
injustices or suffered great suffering due
to the rule)
to the circumstances the happened.
- e.g., You live in the squatters area. One day,
- e.g., You are an accountancy student of
the owner of the private land decided to turn
UST-AMV. Due to your low grades, you
the property into a park and encouraged all
suffered from mental health instability.
inhabitants to evacuate. The owner also
sent a demolition team to destroy all houses - this is included in the concept of
built on the land. damnum absque injuria; the student
suffered damages but there is no
Damage: The damage pertains to the
injury.
destruction of your house located in the
squatters area.

Injury: No injury, legally speaking, since c. Nominal – damages awarded to a party

you are not the owner of the land. whose right has been violated.

- “areglo,” instead of filing for a police

report and computing for the actual
o Kinds of Damages:
value of loss suffered, both parties will
a. Actual or Compensatory – these refer to
just arrange a certain amount to
the pecuniary loss that was actually
compensate for the damages incurred.
incurred by the plaintiff. It includes the
(no need for proof)
actual value of the loss suffered and
profits not realized.

- e.g., You bumped into a person while d. Temperate or Moderate – they are more
driving at night. The hospital bills than nominal but less than actual
incurred will be considered as your damages. They court may award
actual damages. temperate damages if the court finds
some pecuniary loss has been
- before acquiring payment of damages,
sufferred but its amount cannot, from
the victim must first present proof of the
the nature of the case, be proved with
certainty.

9
e. Liquidated – damages agreed upon by - the consent would not have been given
the parties to a contract; to be paid in if the fraud was not done.
case of breach.
- e.g., You want to drink so you went to
the store and bought a bottle of gin.
However, the store already ran out of
f. Exemplary or Corrective – these are
gin. The seller, because she wants to
imposed by way of example or
get your money, refilled an empty bottle
correction for public good, in addition to
of gin with white vinegar.
the moral, temperate, liquidated, or
compensatory damages. - there is fraud because you thought
that you bought gin but the seller gave
- e.g., Your group initiated a massacre.
you white vinegar.
Part of the damages is payment that
will be used to warn the public that your - this is an example of causal fraud
group’s act should not be repeated by because the seller made you believe
others. that you bought gin; however, when
you got home, you realized it was
vinegar.
I. Fraud – the deliberate or intentational
- without this act, you would have not
evasion by the debtor of the normal
agreed on buying the “gin” offered by
compliance of his obligation. (Article 1170)
the seller.
Article 1170: refers to the fraud
committed by the debtor at the time of
the performance of the obligation. b. Incidental Fraud (Dolo Incidente) – this
refers to fraud without which consent
Article 1338 – 1344: refers to fraud
would have still been given but the
employed in obtaining consent.
person giving such consent would have
- this comes first; obtaining consent agreed on different terms. It would not
before perfecting the contract in the render the contract void (valid) but the
beginning. party committing the fraud shall be liable
for damages.

- e.g., You want to drink so you went to

▪ Kinds of Fraud:
the store to buy a bottle of gin. Upon
A. Fraud in Obtaining Consent checking the store’s inventory, the seller
found a bottle. But upon asking the
a. Causal Fraud (Dolo Causante) – fraud
price, the seller said the gin costs P
of a serious kind, without which, consent
10,000 because the gin is already 20
would not have been given. It renders the
years old. Even though you cannot
contract voidable for it is a defect in one
believe the seller’s claims, you still
of the essential elements of a contract,
bought the bottle of gin.
consent.

10
 - there is fraud because the seller lied - meanwhile, there is fraud in the
to you about the price of the gin and performance of the seller’s obligation
its condition (20 years old claim) just because she poured water to fill the
to earn more. bottle of gin and compensate for the
amount consumed.
- this is an example of incidental fraud
because the seller made you believe
that the gin is 20 years old and earned
o Rules in Waiver of Fraud:
more for its real price.
▪ Past Fraud – fraud committed in the
- in contrary, without this act, you past can be waived. Such act is
would have still bought the gin but in considered as liberality on the part of the
its real/cheaper price and knowing creditor.
that it is only 2 months old.
▪ Future Fraud – fraud still to be
- (damages) for example, the real price
committed cannot be waived even if
of the gin is P 500, the seller shall
there is an agreement to that effect.
return the excess P 9,500 from the
Such stipulation is void for being
original payment of P 10,000.
contrary to public policy.

B. Fraud in the Performance of the

II. Negligence – the omission of that
Obligation – this is the deliberate act of
diligence which is required by the nature of
evading fulfillment of an obligation in a
the obligation and corresponds with the
normal manner. The party committing
circumstance of the person, time, and place.
fraud shall be liable for damages.
It is the failure to observe the required
- e.g., You want to drink so you went to the degree of care, precaution, and vigilance
store to buy a bottle of gin. Upon checking that the circumstances justly demand.
the store’s inventory, the seller found a
- a security guard falling asleep at work.
bottle. The seller made you pay the right
(circumstance of the person)
amount, also knowing that the gin is in its
actual condition of 5 years. - a jeepney driver operating a vehicle with
defective lights at night. (circumstance of
- there is no fraud in getting the buyer’s
the time)
consent because the seller told the truth
about the gin’s age and price. - a car driver running at a speed of 80 km/h
along the vicinity of a school. (circumstance
- However, due to curiosity, the seller tasted
of the place)
a bit of the gin. To cover up the amount
consumed, the seller filled the bottle with ▪ Diligence to be Observed – if the law or
water. contract does not state the diligence
which is to be observed in the
performance of the obligation, the

11
 debtor must observe the diligence of a III. Delay (Mora or Default) – is the non-
good father of a family, as required by fulfillment of an obligation with respect to
the nature of the obligation and which time or delay in the fulfillment of an
corresponds with the circumstances of obligation, contrary to what was agreed
the person, time, and place. upon.

▪ Kinds of Negligence: ▪ Kinds of Delay:

a. Culpa Contractual – negligence in the a. Mora Solvendi – delay on the part of the
performance of a contract. It supposes a debtor.
preexisting contractual relationship
- the debtor may still lack the money or
between parties. This negligence in the
refuses to let go of the money for the
performance of the obligation arising from
payment of the debt.
a contract results to damages.
b. Mora Accipiendi – delay on the part of
b. Culpa Aquiliana – this is quasi-delict,
the creditor. It exists when the creditor
where the negligence itself is the
unjustly refuses to accept the thing.
independent source of the obligation. (civil
negligence, tort, quasi-delict, or culpa extra - the creditor does not want to accept
contractual) payment so the interest gets bigger.

- before the due date, creditors can still

refuse payment from the debtor; but on
Illustrative Example: (difference of culpa
the due date, creditors should accept
contractual and culpa aquiliana)
payment.
- in a contract of carriage, the driver has the
c. Compensatio Morae – delay in
obligation to deliver his passengers safely
reciprocal obligations, wherein both
to their respective destinations.
parties are in default. It is as if there is no
- if a passenger get injured due to the delay.
driver’s negligence, it is an example of
- (e.g., contract of sale) the buyer is not
culpa contractual.
yet ready to pay and the seller is not yet
- additionally, if the driver bumps the car to ready to deliver the good.
a pedestrian and the person gets injured, it
is an example of culpa aquiliana.
When is there delay? (legal delay)

- as a rule, the debtor incurs delay from the

c. Culpa Criminal – this is negligence that
time the creditor demands fulfillment of the
results in the commission of a crime.
obligation (either judicially or extra-
(criminal negligence)
judicially) and the debtor fails to comply

12
with such demand. Hence, no demand, no - e.g., You asked for your wedding gown to
delay. be made because you want a specific
design. You said that your wedding will take
- (ordinary delay) delay pertaining to a
place on August 15. Even without demand,
period of time after the agreed due date of
the seamstress must fulfill her obligation to
both parties.
finish your wedding gown on or before your
- e.g., The due date for your debtor’s loan is wedding day.
on December 31. It is already January 1
c. when demand would be useless as when
and the debtor has not yet paid. You have
the obligor has rendered it beyond his power
not yet demanded for payment, still
to perform
waiting for the debtor.
- in reciprocal obligations, from the moment
- during this time, the debtor is said to be
one of the parties fulfills his obligation, delay
in ordinary delay.
by the other begins notwithstanding the
- (continuation) You waited until January 5 absence of a demand.
for his payment. On the same day, you
- e.g., The seller of a specific dog you want
called and demanded for payment.
has already sold the dog to another buyer.
- during this time, the debtor is not in legal There is now delay on the part of the seller.
delay. (start of computation for interest
and damages)
o Effects of Delay: (on the part of the
debtor/seller)
o Exceptions to the “No Demand, No Delay”
- the debtor shall be liable for the payment of
Rule:
damages.
a. when the law or the obligation so provides
- if the obligation consists of the delivery of
- when there is an express provision of the a determinate thing, he shall be liable even if
law or stipulation by the parties that there is the thing is lost due to a fortuitous event.
no need for a demand for the performance
- e.g., The seller is to deliver a specific dog
of the obligation.
to you on or before September 1. The seller
- e.g., payment of taxes on or before April 15 was able to deliver on September 15.
of every year.
a. The dog got struck by lightning on
b. when the time is of the essence of the August 1.
contract
- the obligation of the seller will be
- when the designation of the time for the extinguished and the seller is not liable
performance of the obligation is the for damages.
controlling motive for the establishment of
the obligation.

13
 b. The dog got struck by lightning on - The cause must be independent of the
September 3. You already demanded for debtor’s will.
the delivery last September 1.
- There must be impossibility of foreseeing
- the seller is already liable for damages the event or if it can be foreseen, it must be
even though the death of the dog is impossible to avoid.
primarily caused by a fortuitous event.
- The occurrence must be of such
- it is important that the seller should be magnitude as to render it impossible for
in legal delay for this to take effect. the debtor to perform his obligation.

- The debtor must be free from

participation in the non-performance,
o Effects of Delay: (on the part of the
damage, or loss of the property brought
creditor/buyer)
about by the fortuitous event.
- the creditor shall bear the risk of loss and
shall shoulder the expenses for the
preservation of the thing. General Rule: If the foregoing requisites are
present in a case, then the debtor shall not
- the debtor may resort to the consignation
be liable for non-performance of the
of the thing due.
obligation due to a fortuitous event. The
debtor’s obligation is extinguished.

o Fortuitous Events: ▪ Exceptions:

Article 1174: Except in cases expressly - when the debtor is in legal delay
specified by the law, or when it is otherwise
- when the debtor promised the same
declared by stipulation, or when the nature
thing to two or more persons who do not
of the obligation requires the assumption of
have the same interest
risk, no person shall be responsible for those
events which could not be foreseen, or - when the parties stipulate or agree that
which, though foreseen, were inevitable. the debtor will not be exempted from
liability even if non-performance of the
- it is not enough that the event should not
obligation is due to a fortuitous event
be foreseen or anticipated, but it must be
impossible to foresee or avoid. - when the nature of the obligation
requires the assumption of risk
- e.g., earthquakes, typhoons, etc.
- e.g., insurance companies

- when the thing to be delivered is generic

o Requisites of Fortuitous Events to be
Accepted as a Justification for the Non-
Performance of an Obligation to Deliver a
Article 1175: Usurious transactions shall be
Determinate Thing:
governed by special laws.

14
 - usury is contracting for or receiving - the receipt of a later installment without
interest in excess of the amount allowed reservation as to prior installments, shall
by law for the loan or use of money, goods, give rise to the presumption that prior
chattels, or credits. installments have been paid.
- e.g., You are running rentals for students.
- usury is now legally non-existent. Parties
The rate of your rentals is P 5,000 per
are now free to stipulate any amount of
month. You have one tenant who has not
interest. This is due to Central Bank
yet paid for 3 months (January to March).
Circular No. 905 (BSP) that took effect on
Upon bumping to him, the tenant gave only
January 1, 1983.
P 5,000 as payment.
- it does not, however, give absolute right to
the creditor to charge the debtor interest P 5,000 – payment for January
that is iniquitous or unconscionable.
(interest that is too high) - if the receipt indicates that the payment
is for either February or March, a
presumption arises that the prior
o Presumptions on Receipt of Principal and installments have already been paid.
Installment Payments: (Article 1176)
- the receipt of the principal without - indicate in the receipt the following:
reservation as to interest, shall give rise to - the P 5,000 payment is for the rent in the
the presumption that the interest has been month of March.
paid. - the P 10,000 rent is not yet paid.
- e.g., You have an outstanding loan with a
principal amount of P 1,000 and interest of - the foregoing are mere disputable
P 100. On the day of payment, you only presumptions (not conclusive) and the
presented payment of P 1,000. creditor may rebut such with clear and
convincing evidence to the contrary.
P 100 – payment on the interest
P 900 – payment on the principal o Different Remedies of the Creditor to
Enforce Payment of His Claims Against
- if the whole P 1,000 is only attributable to the Debtor: (Article 1177)
the principal, then a presumption arises
that the interest of P 100 has already been a. Specific Performance – exact fulfillment
paid. (interest should always be paid first) of the obligation by specific or substitute
performance with a right to damages in
- indicated in the receipt are the following: either case.
- the P 1,000 payment is attributable to b. Attachment – pursue the property in the
the principal. possession of the debtor, except those
- the P 100 interest is not yet paid. exempt by law. (e.g., family home, unless
(reservation) it is the property mortgaged; those used

15
 in livelihood; clothes; provision for three consequence, such contract can neither
months; etc.) favor nor prejudice a third person.
c. Accion Subrogatoria – to be subrogated
- successors should not have negative
to all the rights and actions of the debtor,
inheritance, or use their personal assets to
save those which are inherent in his
pay for the remaining debt of their
person.
deceased loved ones.
- e.g., Mr. B has an outstanding debt to
- succession includes the following:
Mr. A. Likewise, Mr. C has an outstanding
debt to Mr. B. (1) before receiving the share, the
outstanding debt of the deceased person
- as a remedy, Mr. A may request the
should be paid using his assets.
court to release an order that instead of
paying directly to Mr. B, the court may (2) if the liabilities is too big for the amount
advise Mr. C to pay Mr. A directly. of assets he has, then the successor will
(process of garnishment) receive 0 and the remaining debt should be
written off by the creditor.
d. Accio Pauliana – asking the court to
rescind or to impugn all the acts which (3) some may wish to pay the remaining
the debtor may have done to defraud the debt with their personal assets.
creditors. (last resort)
- this is not a civil obligation but more of
- e.g., Mr. A has an outstanding loan to a moral obligation on their part.
Mr. B. Mr. B has already sought the help
of the court to demand payment from Mr.
A. Mr. A has received notification that if Exceptions are intransmissible rights and
he cannot pay, Mr. B will move on with the obligations:
remedy of attachment. As a result, Mr. A
- by their nature as when the special or
entered into a fictitious contract of sale
personal qualification of the obligor
with Mr. Z to sell his car.
constitutes one of the principal motives for
- as remedy, Mr. B can seek the help of the establishment of the contract.
the court to cancel all contracts that
- by stipulation of the parties, as when the
Mr. A entered into. This will return the
contract expressly provides that the obligor
ownership of the car to Mr. A,
shall perform an act by himself and not
therefore, attachment will be possible.
through another.

- by provision of law, as in the case of those

o Relativity of Contracts: arising from a contract of partnership or
agency.
- a contract can only bind the parties who
had entered into it or their successors who
have assumed their personality or their
juridical position and that, as a

16