KINDS OF OBLIGATION

1. PURE

2. Conditional

3. Obligations with a period or term

4. ALTERNATIVE

5. Joint or Solidary

6. Divisible or Indivisible Obligation

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1. PURE - does not depend on any condition or term.

2. Conditional - subject to a condition and the effectivity of which is subordinated to the fulfillment or
non-fulfillment of a future and uncertain event

PAG MUINGON OG CONDITION MAO NI SILA ANG MGA FUTURE AND UNCERTAIN EVENT THAT UPON
HAPPENING OF WHICH MAG DEPENDE ANG ACQUISITION OR EXTINGUISHMENT OF AN OBLIGATION
OR RIGHT.

Types of Condition:

*Suspensive Condition - shall only be effective upon the fulfillment of the condition

Ex. “I will give you a car if you pass the GE Board exam.”

*Resolutory Condition - immediately demandable but subject to threat by the happening of the
resolutory condition.

Ex. “You can stay in my house until you get a job.”

DAGHAN SAB CLASSIFICATION OF CONDITIONS DEPENDE AS TO ITS EFFECT, FORM, POSSIBILITY, MODE,
NUMBERS, DIVISIBILITY AND THEN TONG AS TO CAUSE OR ORIGIN WHICH ARE THE FOLLOWING:

*Potestative Condition - fulfillment of the condition depends upon the will of one of the contracting
parties

Ex. “A musician agrees to perform at a concert if they feel like it on the scheduled day.”

*Casual Condition- depends on chance or will of a third person

A bet between friends where one pays the other if it rains tomorrow. The occurrence depends on
chance.

*Mixed Condition- partly potestative and partly casual

Ex. “A contractor receives a bonus if they finish a project on time and if the required permits are
obtained from the city. The timing is partly within the contractor's control and partly dependent on the
city's actions.”

3. Obligations with a period or term - subject to a specific time frame.

Ex. “A lease agreement where a tenant is obligated to pay rent monthly for a fixed term of one year.”
4. ALTERNATIVE OBLIGATIONS

ART. 1199. A person alternatively bound by different prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131)

KINDS OF OBLIGATIONS ACC TO OBJECT:

1. SIMPLE - one where there is only one prestation,

Ex. “S obliged himself to deliver to B a piano”

2. COMPOUND - one where there are two or more prestations. There are multiple acts or performances
required to fulfill the obligation.

It may be.

2.a. CONJUCTIVE - several prestations are due, and all of them must be performed to fulfill the obligation

Ex. “John agrees to deliver both a laptop and a printer to Mary as part of a sales contract. “

The conjunctive obligation requires John to provide both the laptop and the printer for the contract to
be considered fulfilled. If he delivers only one of the items, the obligation remains unfulfilled.

2.b. DISTRIBUTIVE OBLIGATION - In distributive obligations, two or more prestations are due, but each
of them is a separate and independent obligation. Fulfilling one prestation satisfies the obligation.

Ex. “Sarah, a landlord, agrees with her tenant, Tom, to provide either a refrigerator or a microwave for
the apartment.”

IT MAY BE:

2.b.1. Facultative (one object and can be substituted by another)

-The debtor has the option to substitute the original object with another if they choose to.

Ex. “A debtor owes money but has the option to provide a piece of art instead.”

2.b.2. Alternative (several objects)

- The debtor can choose from several objects to fulfill the obligation.

Ex. “A contract may specify the delivery of either a laptop or a tablet.”

5. Joint (liable to proportionate share only) and Solidary (all for one, one for all) obligations

ARTICLE 1207: The concurrence of two or more creditors or of two or more debtors in one and the same
obligation does not imply that each one of the formers has a right to demand, or that each one of the
latter is bound to render, entire compliance with the prestations. There is a solidary liability only when
the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
(1137a)

Joint - Each debtor is liable for a proportionate share of the obligation. If there are two debtors, each is
responsible for half.

Ex. “Two business partners jointly owe a debt to a supplier.”

Solidary - Each debtor is individually responsible for the entire obligation. If one fails, the others must
cover the shortfall.
Ex. “A solidary obligation, two friends jointly borrow money, and if one cannot pay, the other is
responsible for the full amount.”

6. Divisible or Indivisible Obligation

ARTICLE 1223: The divisibility or indivisibility of the things that are the object of obligations in which
there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this
Title. (1149)

Divisible - The obligation can be performed in separate parts, and each part is treated independently.

Ex. “Delivering goods in installments in a sales contract.”

Indivisible- The obligation must be performed as a whole. If one part is not fulfilled, the entire obligation
is considered breached.

Ex. “Selling a unique painting where delivery must be of the entire artwork.”

EXTINGUISHMENT OF OBLIGATION

ART. 1231. Obligations are extinguished:

(1) By payment or performance;

(2) By the loss of the thing due;

(3) By the condonation or remission of the debt;

(4) By the confusion or merger of the rights of creditor and debtor;

(5) By compensation;

(6) By novation.

Other causes of extinguishment of obligations, such as annulment, rescission, fulfilment of

condition, and prescription, are governed elsewhere in this Code. (1156a)

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(1) By payment or performance (obligation has been done)

This occurs when the debtor fulfills their obligation by delivering the agreed-upon payment or
performance.

*CONSIGNMENT - it is a form of payment where a debtor deposits the amount owed with a third party,
known as a consignee, when the creditor refuses to accept the payment.

* Consignation - the act of depositing the thing due with the court or judicial authorities whenever the
creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment

Ex. “If a tenant attempts to pay rent, but the landlord refuses to accept the payment, the tenant can
consign the money in a court account.”

(2) By the loss of the thing due

Discharge or release of a contractual or legal obligation when the subject matter of the obligation is lost
or destroyed, performance of the obligation becomes impossible due to an unforeseen event, such as
natural disasters, accidents, or other unavoidable circumstances.
(3) By the condonation or remission of the debt

In legal terms, "condonation" and "remission" are often used interchangeably to describe this act of
forgiveness. The creditor voluntarily forgives or cancels the debt owed by the debtor.

This can occur through a formal agreement between the creditor and debtor, or it may be an informal
arrangement where the creditor communicates the intention to forgive the debt.

Ex. “A lender forgives a portion of a friend's loan, and the friend is no longer required to repay that
forgiven amount.”

(4) By the confusion or merger of the rights of creditor and debtor;

* Confusion/Merger - creditor and debtor becomes one person

This occurs when the qualities of creditor and debtor are merged in the same person, extinguishing the
obligation.

Ex. “If you owe money to your own business, and you decide to forgive the debt, confusion occurs, and
the obligation is extinguished.”

(5) By compensation;

- when both parties owe each other money or have reciprocal debts, they may offset or compensate
these debts against each other.

Key Elements of Compensation:

• Reciprocal Debts
• Mutual Consent or Legal Grounds
• Equality of Amounts: The debts being compensated must be of equal value, or the lesser debt
will be compensated to the extent of the greater one.

Ex. “Let's say Person A owes 500 pesos to Person B, and at the same time, Person B owes 500 pesos to
Person A. Instead of both parties making separate payments, they can agree to offset their debts
through compensation. In the end, neither party needs to pay the other in cash since their obligations
offset each other.”

(6) By novation.

Novation - substitution or change of the obligation by subsequent one

The original obligation is replaced by a new one, with the consent of all parties involved.

Novation requires the consent of all parties involved, and it typically involves the introduction of a new
party or a substantial change in the terms of the agreement.

Key Elements of Novation:

Consent of All Parties

Replacement of Obligation: The existing obligation is extinguished, and a new obligation with different
terms is created.

Legal Intent: The parties must have the intention to replace the old obligation with a new one.
Ex. “Suppose Person A owes a debt to Person B. Instead of Person A repaying the debt directly, they may
negotiate with Person B to replace the existing obligation with a new one. “

This new agreement might involve a different amount, payment schedule, or even a different form of
consideration. Once both parties agree to the novation, the original obligation is extinguished, and the
new terms take effect.

CONTRACTS

THREE (3) ESSENTIAL Requisites of Contracts [COC]

1. Consent of the contracting parties;

(Meeting of the Minds) There must be a mutual agreement between the parties involved.

This means that the offeror (the one making the offer) and the offeree (the one accepting the offer)
must have a common understanding of the terms and subject matter of the contract.

The following cannot give consent to a contract:

1.) Minors

2.) Insane or demented persons, and deafmutes who do not know how to write.

EXCEPTIONS:

(1) Formal contracts

Contracts for which a special form is necessary for its perfection

Example:

The donation of a movable may be made orally or in writing. If the value of the personal property
donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing,
otherwise, the donation shall be void.

Donation of immovable property (ex. Land) of any value must be in a public document (notarized).

(2) Real contracts

Contracts which are perfected not merely by consent but by delivery, actual or constructive, of the
object of the obligation.

Ex. Contract of sale

"FORMS OF CONTRACT"

ARTICLE 1356: CONTRACTS SHALL BE OBLIGATORY IN WHATEVER FORM THEY MAY HAVE BEEN ENTERED
INTO PROVIDED THAT ALL THE ESSENTIAL REQUISITES FOR THEHIR VALIDAITY ARE PRESENT.

GENERALLY, form is not required for a contract to be valid. It can be done orally. It is enough that there
be consent, subject matter and consideration.

IT MAY BE ORAL, WRITTEN OR IN WRITING OR PARTLY ORAL AND PARTLY IN WRITING. If its in writing, it
may be in a Public or Private Instrument

2. OBJECT certain which is the subject matter of the contract;

The contract must have a specific object or subject matter that is the focus of the agreement. This could
be a product, service, or any other item of value that is the subject of the contract.

IN REALITY, OBJECT OF EVERY CONTRACT IS THE OBLIGATION CREATED PERO SINCE KAY ANG CONTRACT
KAY DI MAN MAG EXIST IF WALAY OBLIGATION MAO NG MAINGON NA OBJECT OF OBLIGATION IS ALSO
THE OBJECT OF THE CONTRACT

3. Consideration/ CAUSA/CAUSE OF CONTRACTS

THE ESSENTIAL REASON/PURPOSE WHICH THE CONTRACTING PARTIES HAVE IN VVIEW AT THE TIME OF
ENTERINGT INTO RHE CONTRACT

There must be a lawful reason or consideration for the contract. Each party must give something of
value, whether it be goods, services, money, or a promise, in exchange for what the other party is
providing.

ARTICLE 1350: In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit
which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor.
(1274)

Note: DISTINCTION FROM OBJECT THOUGH IS ONLY A MATTER OF VIEWPOINT

Defective Contracts (VURV)

1) VOID Contracts

2) UNENFORCEABLE Contracts

3) RESCISSIBLE Contracts

4) VOIDABLE Contracts

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1) VOID Contracts

Definition: A void contract is intrinsically invalid and has no legal effect from the beginning.

Characteristics:

• Typically involves an illegal purpose or violates public policy.

• Courts will not enforce or uphold void contracts.

Examples:

-Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public

policy;

-Those which are absolutely simulated or fictitious;

-Those whose object is outside the commerce of men;

-Those which contemplate an impossible service;

2) UNENFORCEABLE Contracts
Those that cannot be enforced in court by reason of certain defects provided by law until and unless
they are ratified according to law.

Definition: Legally valid but cannot be enforced due to a technicality or procedural issue.

Characteristics:

• Not inherently invalid, but some legal impediment prevents enforcement.

• Might be due to statutes of limitations or a lack of required formality.

Example Scenario: A contract that exceeds the legal time limit for enforcement due to the expiration of
the statute of limitations.

Examples:

-Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers;

-Formal contracts not made in writing;

-Both parties are incapable of giving consent

3) RESCISSIBLE Contracts

Valid until rescinded.

Definition: Contracts that, while valid, may be set aside by a party for equitable reasons, typically to
prevent undue prejudice or disadvantage.

Characteristics:

• Involves injury or damage to one of the parties.

• The injured party has the option to seek rescission.

Example Scenario: A contract where one party takes advantage of the other's urgent financial situation,
leading to unfair terms.

All essential requisites of a contract exist but there is injury or damage to one of the parties or to third
persons.

RESCIND - To cancel a contract, putting the parties back to the position as if the contract had not existed.

Example of Rescissible contracts:

1) When the acts of administration, carried out by the appointed guardian or representative, result in
harm or financial loss (lesion) to the ward, legal consequences may arise

2) When the representative's actions cause harm or financial loss to the absentee (someone who is not
physically present), legal issues may arise. This situation commonly occurs in power of attorney or
agency relationships.

3) When the creditors cannot in any other manner collect the claims due them

4) If entered into by the defendant without the knowledge and approval of the litigants or competent
judicial authority

4) VOIDABLE/ANNULABLE Contracts
Definition: Initially valid but can be voided by one party due to a specific defect, such as coercion, fraud,
misrepresentation, or undue influence.

Characteristics:

• Valid until the affected party chooses to void it.

• The party with the power to void is usually the one harmed by the defect.

Example Scenario: A contract where one party was coerced into signing under threat of harm.

The following contracts are voidable or annullable:

- Those where one of the parties is incapable of giving consent to a contract;

- Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

Examples:

 Contract with a Minor

 Duress - If one party is forced or threatened into entering a contract, the affected party can
choose to void the contract. For instance, signing a contract under threat of physical harm.
 Fraudulent Misrepresentation
 Undue Influence
 Mistake
 Lack of Capacity

Distinguishing Factors (VS)

Void vs. Unenforceable: Void contracts are inherently invalid, while unenforceable contracts are valid
but face obstacles in enforcement.
Void vs. Voidable: Void contracts are illegal or against public policy, whereas voidable contracts have a
specific defect that allows one party to void them.

Determining whether the contract is inherently invalid (void) or can be voided by one party due to a
defect (voidable).
Example: A contract for an illegal purpose (void) versus a contract entered into under undue influence
(voidable).

Unenforceable vs. Rescissible: Unenforceable contracts face legal obstacles, while rescissible contracts
involve equitable reasons for setting them aside.