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OBLIGATION AND CONTRACTS MEMORY AID

Introduction

LAW: A body of rules of action or conduct prescribed by controlling authority having

binding legal force which must be obeyed and followed by citizens subject to sanctions
or legal consequence is a law.

Basic Kinds of Law:

1. GENERAL LAW is one which embraces a class of subjects or places and does not
omit any subject or place naturally belonging to such class. Constitution is the basic and
fundamental law

Examples General Laws: Act during under United States sovereignty1900–1935; Commonwealth Act
(C.A.) during the Philippine Commonwealth 1935–1946; Republic Act (R.A.) during the Republic 1946–
72, 1987–present; Presidential Decree (P.D.) during the Republic under Martial Law/Fourth Republic
1972–1986; Presidential Proclamation (P.P.) during Republic under Martial Law 1972–1986; Batas
Pambansa (B.P.) during the Modified semi-presidential republic 1978–1985; Executive Order (E.O.)
during Republic under Provisional Constitution 1986–1987.

2. SPECIAL LAW is one which relates to particular persons or things of a class.

Examples of Special Laws: Comprehensive Dangerous Drugs Act of 2002, Republic Act No.
9165; RA 9262: the Anti-Violence Against Women and their Children etc.

3. LOCAL LAWS are Ordinances an act adopted by a municipal/city/provincial

governing body having effect only within the jurisdiction of the local government unit that
imposes a sanction for violation. They are governed by the Local Government Code -
RA 7160.

Important General Laws affecting Obligations and Contracts:

1.The New CIVIL CODE OF THE PHILIPPINES (Republic Act No. 386)

Influenced by the Spanish Código Civil in 1889, being a colony of the Spanish Empire in
1947, President Manuel Roxas of the Third Republic created a new Code Commission,
this time Dean Jorge Bocobo Justice Francisco R. Capistrano, Arturo Tolentino. The
Code Commission completed the final draft of the new Civil Code by December 1947,
and this was submitted to Congress, which enacted it into law through Republic Act No.
386. Among the experts on the Civil Code Justices J. B. L. Reyes, Flérida Ruth P.
Romero, José Vitug, and Edgardo Paras. It is the codification of private law in the
Philippines. It is the general law that governs family and property relations in the
Philippines effective August 30. 1950 comprising of the following five (5) Books:
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I. Persons and Family relations. (Effect and Application of Laws, Human relations,
Civil Personality, Citizenship and Domicile, Funerals, Care and Education of
Children, Use of Surnames, Absence, Civil Register) and Family Code of Executive
Order No. 209 ; Presidential Decree No. 603; (Child and Youth Welfare Code
II. Property, Ownership and its Modifications (Classification of Property, Ownership,
Co-Ownership, Special Properties, Possession, Usufruct, Easement and Servitudes,
Nuisance, Registry of Property)
III. Modes of Acquiring Ownership (Occupation, Intellectual creation, Donation,
Succession, Acquisitive prescription)
IV. Obligations and Contracts (Obligations, Contracts, Special contracts
encompasses several classes of contracts as trusts, sales, barter, lease, loan,
deposit, aleatory contracts, compromises, guaranty, agency, pledges, mortgage,
antichresis, and partnership, Quasi-contract, Quasi-delict)
V. Torts and Damages.
2. The REVISED PENAL CODE (Act No. 3815)

Supplanted the 1870 Spanish Código Penal, contains the general penal laws of the
Philippines enacted in 1930, it remains in effect today, despite several amendments
thereto. It does not comprise a comprehensive compendium of all Philippine penal laws.
It defines crimes or felonies and penalties.

3. Code of Commerce: Mercantile Law

Influenced by the Spanish Code of Commerce, extended by Royal Decree in Dec 10,
1888 is a branch of private law which regulates the juridical relations arising from
commercial acts. Mercantile Laws these are: (Letters of Credit; Warehouse Receipts
Law; Trust Receipts Law; Negotiable Instruments Law; Insurance Code; Transportation
Law; Corporation Law Republic Act 11232; Securities Regulation Code; Banking Laws;
Special Commercial Laws; Intellectual Property Law)

4. Taxation Laws:

National Internal Revenue Code Republic Act No. 8424; TRAIN Law

Basic Principles:

RIGHT is a concept where individuals are granted the autonomy to do or to abstain from
doing a certain thing granted by a certain form of justice. It can be prescribed by the law
of the land or by the principles of natural justice. It cannot be withdrawn by anyone as
its withdrawal shall amount to serious damage to equality and good conscience. Ex.
Right to vote, right to speech, right to education, etc. as rights provide freedom
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PRIVILEDGE is concept that provides certain immunities, permissions, or allowances to

a certain person or group of people based on their class, sex, caste, etc. It can be
revoked at any point in time by the authority that has granted it. Ex. Right not to be
arrested during house proceedings (privilege given to the members of congress)
privileges grant immunity to people)

CLAIM: To demand or assert as a right, facts that combine to give rise to a legally
enforceable right or judicial action, a demand for relief.

CAUSE OF ACTION is an act or omission of one party the defendant in violation of the
legal right of the other.

Parties in Law

(a) COMPLAINANT (nagsasakdal/nagreklamo) vs. RESPONDENT (sumasagot)/

PLAINTIFF (nagsasakdal) vs. DEFENDANT (nasasakdal)
“Plaintiff” is the party who initiates a lawsuit before a court seeking a legal remedy/
a claiming party; while “Defendant” is a person against whom a civil action is
brought; someone who is being sued.
(b) APPELLANT (nag-apela) vs.APPELLEE (sumasagot sa apela)
“Appellant” is a party who appeals a decision of a lower court while “Appellee” the
respondent in a case appealed to a higher court.
(c) PETITIONER (nagpetisyon) vs. RESPONDENT (sumasagot)
“Petitioner" refers to the party who petitioned the Supreme Court to review the case
while Respondent" refers to the party being sued or tried or who has to defend a
case in a law court and is also known as the appellee depending on the remedy.
(d) PEOPLE OF THE PHILIPPINES vs. ACCUSED (akusado)
“Accused” is a person/persons in custody of the law charged with a criminal offense
Legal Latin Maxims Relevant to ObliCon:

Ab initio. – From the beginning.

Accesion continua. – Accession to the products of the thing.
Accion Directa – direct action (not subrogation)
Accession industrial. – (3 forms of building, planting, and sowing.) Those produced by land of any kind
through cultivation or labor.
Accession natural. – (Alluvion) The increase in the area of a land without any act of the owner.
Accion pauliana. – The right of the creditor to set aside or revoke the acts which the debtor may have done
to defraud him.
Accion reivindicatoria. – An action to recover ownership over a real property.
Accion subrogatoria. – (subrogatory action.) – An action which the creditor may exercise his right on the
negligent debtor by taking his abandoned property to satisfy his own credit.
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Ad litem. – (Guardian) Appointed to act in a lawsuit on behalf of a child or other person who is not
considered capable of representing themselves.
Bonos pater familias. – A good father of a family.
Case fortuito, force majeure, fuerza mayor. – (Fortuitous event) An event which takes place by accident
and could have not been forseen. 2 General causes. – By nature and by the act of a man.
Causa debendi/Causa obligationes) - why obligation exists
Compensatio Morae. – Default or delay on both parties on reciprocal obligation.
Culpa contractual. – Contractual negligence. Negligence in the performance of a contract.
Culpa criminal. – Criminal negligence.
Culpa aquiliana. – Civil negligence. (Quasi delict, tort) acts or omission causes damage to another, there
being fault or negligence, is oblige to pay for the damages done. Also know as Culpa extra contractual.
Culpa. – Negligence.
Custodia legis. – In the custody of the law; the taking, seizing or holding of something by lawful authority
Damnum. – To the damage. / damage. A clause in a complaint that states the damage for which the individual
seeks judicial relief.
Disimulados. – Veiled, hidden.
Dolo causante. – Causal Fraud.
Dolo incidente. – Incidental Fraud.
Dolo. – Fraud.
Dolus bonus. – simple cunning or sagacity in bargaining or in other transactions that is not actionable or
punishable as fraud or misrepresentation or ground for rescinding the transaction induced by it.
Ex contractu. – Contracts
Ex die. – (suspensive period) From the day certain.
Ex lege. – Law.
Ex maleficio. – Acts or omission punished by law.
Fideiussoria. – Guarantee.
Fideiussorio. – Guarantor
Genus nun quam perit. – Genus never perishes.
In diem. – (resolutory period) To a day certain.
In toto. – Complete or In total.
In Pari Delicto-“in equal fault", is a legal term used to refer to two persons or entities who are equally at
fault,
Injuria. – Invasion of another’s right for which one may bring an action.
Inter vivos. – (Between the living) A phrase used to describe a gift that is made during the donor’s lifetime.
Ipso Jure. – By law itself; By operation of Law.
Juntos o separadamene. – when written in a promisory note creates a solidary responsibility.
Mancomunada solidaria, Joint and several, or In solidum. – Solidary Obligation.
Mancomunada, macomunada simple. – Joint obligation.
Mora accipiendi. – Default or delay on part of the creditor.
Mora solvendi. – Default or delay on the part of the debtor.
Mora. – Default or delay.
Mortis causa. – (In contemplation of approaching death) A phrase sometimes used in reference to a
deathbed gift, or a gift causa mortis, since the giving of the gift is made in expectation of approaching death. A
gift causa mortis is distinguishable from a gift inter vivos, which is a gift made during the donor’s (the giver’s)
lifetime.
Mutuum. – Simple loan.
Negotiorum gestio. – (management of business) is a type of spontaneous agency or interference by a person,
called a negotiorium gestor, in the affairs of another in his absence.
Non nudis pactis, sed traditione dominia rerum transferentur. – The ownership of a thing is transferred
not by mere agreement but by delivery.
Pacto de retro. – The essence of a pacto de retro sale is that the title and ownership of the property sold are
immediately vested in the vendee a retro, subject to the resolutory condition of repurchase by a vendor a
retro to repurchase the property within the period agreed upon by them, or, in the absence thereof, as
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provided by law, vests upon the vendee a retro absolute title and ownership over the property sold by
operation of law.
Pactum commisorium. – The automatic appropriation by the creditor of the thing pledged or mortgaged
upon the failure of the debtor to pay the principal.
Pater Familias' states that a person should take care of his properties as a good father to his family.
Pollicitatio. – An offer without acceptance is not binding. Not strictly a contract at all but a unilateral
gratuitous obligation.
Pour autrui. – A contract or provision in a contract that confers a benefit on a third-party beneficiary NOTE:
A stipulation pour autrui gives the third-party beneficiary a cause of action against the promisor for specific
performance.
Prima facie. – Based on the first impression; accepted as correct until proved otherwise.
Pro rata. – Proportional.
Quantum meruit. – A reasonable sum of money to be paid for services rendered or work done when the
amount due is not stipulated in a legally enforceable contract.
Quasi contractu. – Quasi contracts.
Quasi excontractu. – An equitable theory that finds an obligation to compensate or restore a benefit
conferred on.
Quasi maleficio. – Quasi delict.
Qui sentit sentire debet et in commodum. – He who enjoys the benefit ought also to bear the burden.
Quien calla otorga. – Silence is consent or whoever is silent, consents.
Ratione Legis. – The reason for a law ceasing, the law itself ceases.
Rebus sic stantibus. – (things standing thus) stipulates that, where there has been a fundamental change of
circumstances, a party may withdraw from or terminate the treaty in question.
Res inter alio acta aliis necque nocet prodest - a contract cannot adversely affect the rights of one who is
not a party to the contract. “A matter between others is not our business."
Res judicata. – A matter already judged. A case in which there has been a final judgement and no longer
subject to appeal.
Res suo domino perit. – The thing is lost or destroyed by the owner.
Simulados. – Simulated.
Solutio indebiti. – The case where one had paid a debt, or done an act or remitted a claim because he thought
that he was bound in the law to do so, when he was not. In such mistake there is an implied obligation. (quasi-
contractu)
Status quo. – Existing state of circumstances.
Vinculum juris. – Legal tie.
Void ab initio. – To be treated as invalid from the outset.

PART I - OBLIGATION

1987 Constitutional Provisions affecting Obligations and Contracts:

(a) Bill of Rights Article III Section (10) “No law impairing the obligation
of contracts shall be passed.”

Reasons. Safeguard integrity of contracts; A Law cannot change a valid contract; Laws cannot
diminish valid obligations of parties. The non-impairment clause is to safeguard the integrity of
contracts against unwarranted interference by the State. As a rule, contracts should not be
tampered with by subsequent laws that would change or modify the rights and obligations of the
parties.
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Exception: Inherent Police Power legislation adopted by the State to promote the health, morals,
peace, education, good order, safety, and the general welfare of the people prevail not only over
future contracts but even over those already in existence, for all private contracts must yield to
the superior and legitimate measures taken by the State to promote public welfare. SC: Surigao
del Norte Electric Cooperative vs Energy Regulatory Commission

(b) Section 18. (2) “No involuntary servitude in any form shall exist
except as a punishment for a crime whereof the party shall have been
duly convicted.” Ex. Anti Human Trafficking Law

Types of Obligations:

(a) Moral obligations – duties of conscience completely outside the field of law
(b) Natural obligations – not sanctioned by any action but have a relative juridical effect
(1) Juridical tie which is not prohibited by law; (2) This tie is not given effect by law
(c) Civil obligations – juridical obligations which apparently are in conformity with positive
law but are contrary to juridical principles and susceptible of being annulled
(d) Mixed obligations – have full juridical effect

Natural Law: (a) Immutable and independent of all human regulations; (b) Includes those rules
which are neither written nor promulgated, but are derived from reason and nature.

CIVIL OBLIGATIONS vs. NATURAL OBLIGATIONS DISTINGUISHED

Civil Obligations (1156/57( Natural Obligations (1423)

arise from law, contracts, quasi-contracts, based not on positive law but on equity and
delicts, and quasi-delicts (1157) natural law

give a right of action in courts of justice to do not grant such right of action to enforce
compel their fulfilment or performance (1156) their performance.

Examples of Natural Obligations:

(a) obligation to pay interest for use of money, even if not agreed upon in writing.
(b) duty to support natural or spurious children (even if not recognized voluntarily or by
judicial compulsion and even if there is a judgment denying recognition).
(c) giving of material and financial assistance to children upon their marriage.

Article 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription,
the obligor who voluntarily performs the contract cannot recover what he has delivered or the
value of the service he has rendered.

Article 1424 provides that if an obligee fails to pursue a cause of action based on a civil
obligation within the period fixed by law, the obligation is extinguished. It cannot be anymore
be enforced in court. It becomes a stale claim.
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While the prescribed cannot be asserted anymore in a court, nevertheless under the rule on
performance of natural obligations it is indirectly resurrected when the obligor voluntarily pays
the stale claim. The payment is valid payment because of the obligors recognition of his debt.
He cannot recover what he paid or the value of the service he had rendered in cases of
obligation to do.

Illustration: A owes B PhP10K under a written contract. After 15 years the debt of A
prescribed for failure of B to file the necessary action for the recovery. If A knowing the
prescription voluntarily pays B, he cannot recover anymore what he has paid.

Article 1425. When without the knowledge or against the will of the debtor, a third person
pays a debt which the obligor is not legally bound to pay because the action thereon has
prescribed, but the debtor later voluntarily reimburses the third person, the obligor cannot
recover what he has paid.

Article 1426 After a contract is annulled, a minor (18-21 years old) is not obliged to make any
restitution except insofar as he has been benefited by the thing or price received by him.
However, should he voluntarily return the thing or price received although he has not been
benefited thereby, he cannot recover what he has returned.

Illustration: A, a minor 17 years old, sold his car for P100K his car to B without securing the
consent of his parents. He lost P20,000.00 to a pickpocket although he was able to deposit
the P80,000.00 in a bank. If the contract is annulled, A is obliged to return only P80,000.00.
However, he has the natural obligation to return P100,000.00. If he voluntarily returns the
whole amount, there is no right to demand the amount.

Article 1427. When a minor between eighteen and twenty-one years of age, who has entered
into a contract without the consent of the parent or guardian, voluntarily pays a sum of money
or delivers a fungible thing in fulfilment of the obligation, there shall be no right to recover the
same from the obligee who has spent or consumed it in good faith..( relate to consent/voidable
recovery)

Article 1428. When, after an action to enforce a civil obligation has failed the defendant
voluntarily performs the obligation, he cannot demand the return of what he has delivered or
the payment of the value of the service he has rendered. (relate to unlawful enrichment)

The performance after action to enforce civil obligation has failed. Since the debtor was
under NO legal obligation to perform the service that the court did NOT require him to
perform, his choice to perform becomes an act of liberality on his part that creates NOT an
obligation on the part of the benefited party to compensate.

Illustration: A has failed to pay his obligation to B. B, creditor sued A. A won the case, but A
voluntarily performs his obligation, A CANNOT demand the return of what he has delivered
OR the payment of the value of the service he has rendered.

Article 1429. When a testate or intestate heir voluntarily pays a debt of the decedent
exceeding the value of the property which he received by will or by the law of intestacy from
the estate of the deceased, the payment is valid and cannot be rescinded by the payer.

Note: An heir is not personally liable beyond the value of the property he received from the
decedent. (Art. 1311, par. 1.) But if he voluntarily pays the difference, the payment is valid
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and cannot be rescinded by him. An heir has a moral duty to perform or pay obligations
legally contracted by his dead relatives.

Illustration: B and S (brother and sister) received PhP50M each as inheritance upon their
mother’s death. But their mother was indebted to XYZ Company in the amount of P60
million. B, solely and voluntarily, paid the P60 million debt of his deceased father. Under
Art. 1429, the payment is valid and cannot be rescinded by B.

Article 1430. When a will is declared void because it has not been executed in accordance
with the formalities required by law, but one of the intestate heirs, after the settlement of the
debts of the deceased, pays a legacy in compliance with a clause in the defective will, the
payment is effective and irrevocable.

Legacy is the act of disposition by the testator in separating from the inheritance for definite
purposes, things, rights, or a definite portion of his property. It is what the testator separates
from his inheritance for a definite purpose like reward friends, servants and others for
services they have rendered, to give charity and other purposes. If the will is void, the legacy
would also be void and the deceased is considered to have died without a will. This is the
reason for the existence of the Article.

Illustration: In a Last Will and Testament that was defective for lack of the needed legal
formalities, B, a friend, was given a legacy. The legacy is void, and the whole estate should
go to the intestate heirs. If however, the intestate heirs give B the legacy, they cannot
recover it provided that the debts of the deceased have been settled.

Civil Obligation: An obligation is a juridical necessity to give, to do or not to do (1156)

ELEMENTS:
1. Active subject (obligee/creditor) – the one in whose favor the obligation is constituted
2. Passive subject (obligor/debtor) – the one who has the duty of giving, doing or not doing
3. Object – prestation; the conduct which has to be observed by the debtor/obligor
4. Vinculum Juris – juridical/legal tie
5. Causa (causa debendi/causa obligationes) - why obligation exists

Requisites of Object:
a. Licit - if illicit, it is void
b. Possible - if impossible, it is void
c. Determinate or determinable - or else, void
d. Pecuniary value

Types of Obligations:
a. Moral obligations – duties of conscience completely outside the field of law
b. Natural obligations – not sanctioned by any action but have a relative juridical effect (1423)
c. Civil obligations – juridical obligations which apparently are in conformity with positive law but
are contrary to juridical principles and susceptible of being annulled
d. Mixed obligations – have full juridical effect

Secondary classification of obligations (according to the involvement of the parties):

a. Unilateral obligation - only one party is bound to perform a prestation.
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b. Bilateral obligation - both parties are bound to each other in performing their respective
prestations.
c. Reciprocal - one party is bound to perform a prestation in exchange for the other party's
performance

SOURCES OF OBLIGATION: (1157)

1. LAW (OBLIGATION EX LEGE) - Must be expressly or impliedly set forth and cannot be
presumed

2. CONTRACT (OBLIGATION EX CONTRACTU) - Must be complied with in good faith

because it is the “law” between parties; neither party may unilaterally evade his obligation in the
contract, unless: (a) contract authorizes it; (b) other party assents.

Parties may freely enter into any stipulations, provided they are not contrary to law, morals, good
customs, public order or public policy (1306)

3. QUASI-CONTRACT (OBLIGATION EX QUASI-CONTRACTU) - That juridical relation

resulting from a lawful, voluntary and unilateral act, and which has for its purpose, the payment
of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of
another.(2164-68)

2 kinds:
a. Negotiorum gestio - unauthorized management; This takes place when a person
voluntarily takes charge of another’s abandoned business or property without the owner’s
authority (2144) If there is express authority, it is a Contract of Agency.
b. Solutio indebiti - undue payment; it takes place when something is received when there
is no right to demand it, and it was unduly delivered thru mistake (2154)

4. DELICTS (OBLIGATION EX MALEFICIO OR EX DELICTO)

1. Pertinent provisions of the Revised Penal Code (RPC) and other penal laws subject to Art
2177 Civil Code; Art 100, RPC – “Every person criminally liable for a felony is also civilly liable.”
2. Chapter 2, Preliminary title, on Human Relations (Civil Code)
3. Title 18 of Book IV of the Civil Code – Damages

What civil liability arising from a crime includes:

a. restitution (restore)
b. reparation (re-compensate) of damage caused
c. indemnity (obtain) for consequential damages

QUASI-DELICT/TORT CRIMES/DELICT
Private, against individual Public, against the State (People of the Phi. vs. xx)
Criminal intent is not necessary Criminal intent is necessary for criminal liability
Present in any act or omission where fault or An act is only punishable when there is a law
negligence intervene penalizing it
Gives rise to liability for damages to the injured There are crimes from which no civil liability arises
party
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Reparation, compensation or indemnification of the Fine, imprisonment or both to public treasury

injury suffered by the injured party
Preponderance of Evidence Proof beyond reasonable doubt
Can be compromised Can never be compromised

Effect of acquittal in criminal case:

-when acquittal is due to reasonable doubt – no civil liability
-when acquittal is due to exempting circumstances – there is civil liability
-when there is preponderance of evidence – there is civil liability

5. QUASI-DELICT/TORTS (OBLIGATION EX QUASI-DELICTO or EX QUASI MALEFICIO)

(2176-2194)
Governing rules: - It is a fault or act of negligence (or omission of care) which causes damage to
another, there being no pre-existing contractual relations between the parties

Elements: (2176)
a) There must be fault or negligence attributable to the person charged;
b) There must be damage or injury;
c) There must be a direct relation of cause and effect between the fault or negligence on the
one hand and the damage or injury on the other hand (proximate cause)

EFFECTS OF OBLIGATION
1. Obligation to give - obligation to deliver the thing agreed upon, good father of a family (1163)
2. Obligation to do/not to do - obligation to do/not to do the service agreed upon (1168)

Distinctions:
Personal Right Real Right
Vested before delivery Vested after delivery
Enforceable only against debtor Enforceable against the whole world
Right of the Creditor to demand from the debtor the Right pertaining to a person over specific thing.
fulfilment of the of a prestation to give, to do or not Without a passive subject individually determined
to do against whom such right may be personally
enforced.

ACCESSORY OBLIGATIONS:
1. Exercise diligence / Preserve the thing – Gen. Rule: Standard of care: that of a good father
of a family – unless the law or stipulation requires another standard of care (1163/1173) Note:
Common carriers on passenger (1733)/Banks (R.A. No. 8791) observe “extraordinary
diligence.” Labor pronouncements “utmost care and caution.”

2. Delivery of fruits (1164)

-When does the right begin to exist: from the time to deliver arises
a) when there is no term/condition – from the perfection of the contract
b) when there is a term/condition – from the moment the term or condition arises

Kinds of Fruits that the debtor is also obliged to deliver: (441-442)

a. Natural Fruits - They are the spontaneous products of the soil, and the young and other
products of animals.
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b. Industrial Fruits - Industrial fruits are those produced by lands of any kind through
cultivation or labor/human labor.
c. Civil Fruits -They are the result of a juridical relation such as the rents of buildings, the
price of leases of lands and other property and the amount of perpetual or life annuities or
other similar income.

3. Delivery of accessories and accessions (obligation to deliver determinate thing, even if the
stipulation does not mention delivery of accessories & accessions) (1166)
-Accessories - those joined to or included with the principal for the latter’s better use, perfection
or enjoyment
-Accessions – additions to or improvements upon a thing

When does right to fruits arise? – from the time the obligation to deliver arises(1164)
a) Conditional – from the moment the condition happens
b) With a term/period – upon the expiration of the term/period
c) Simple – from the perfection of the contract

FAILURE TO COMPLY WITH PERFORMANCE/REMEDIES: (P.R.E.S.S.)

3 kinds of Performance:
1. SPECIFIC PERFORMANCE - performance of the prestation itself
2. SUBSTITUTE PERFORMANCE - someone else performs or something else is performed at
the expense of debtor (generic object)
3. EQUIVALENT PERFORMANCE – damages
4. RESCISSION (restore back to former positions)
5. Pursue Properties (attachment/levy):

(a) Exhaustion of the debtor’s properties still in his possession – writ of attachment (before
judgment) or writ of execution (for final judgment not yet executed) Note: ACCION
REIVINDICATORIA – an action where the plaintiff alleges ownership over a parcel of land
seeks recovery of its possession

(b) ACCION SUBROGATORIA – an action where the creditor whose claims had not been
fully satisfied, may go after the debtors (3rd person) of the defendant debtor.
1. The debtor’s assets must be insufficient to satisfy claims against him; 2. The creditor
must have pursued all properties of the debtor subject to execution;3. The right of action
must not be purely personal; 4. The debtor whose right of action is exercised must be
indebted to the creditor.

(c) ACCION PAULIANA – an action where the creditor files an action in court for the
RESCISSION of acts or contracts entered into by the debtor designed to defraud the
former. Art. 1381 P3 (Rescissible Contracts): “Those undertaken in fraud of creditors when
the latter cannot in any other manner collect the claims due them.” This allows the creditor
to attack contracts contracted by a debtor towards another: Significance:(1) If the debtor
has no property(2) but, saw transactions by the debtor as regards the sale of his property.

Remedies Obligation to give Obligations to do

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(Real Obligation) (Personal Obligation)

Specific generic To do Not to do

SPECIFIC Y Y Y undo the things

PERFORMANCE already done
EQUIVALENT Y Y Can only be Y
PERFORMANCE demanded
if obligation is not
very
personal
SUBSTITUTE No Y Y Undo the things
PERFORMANCE already done at
debtor's expense
RESCISSION/ Y Y Y
CANCELLATION

IRREGULARITY OF PERFORMANCE/BREACH

NO DEMAND, NO DELAY (1169) [no delay in obligations not to do]

A. CAUSES ATTRIBUTABLE TO DEBTOR 1173

1. Contravention of tenor
2. Delay/Mora – Non-performance with respect to time
Mora solvendi – default on the part of the debtor; 2 kinds:
(1) Mora Solvendi Ex re – default in real obligations
(2) Mora Solvendi Ex persona – default in personal obligations

Elements:
(1) The obligation must be due, enforceable and already liquidated or determinate in amount
(2) There must be non-performance
(3) There must be a demand, unless demand is not required

When demand is not necessary:(1169p2)

(1) When law declares;
(2) When obligation expressly declares;
(3) When designation of time of delivery or rendering the service was a controlling motive;
(4) When demand would be useless as when debtor has rendered it beyond his powers to
perform;

Effects:
a. if determinate thing - debtor bears risk of loss (even when there is fortuitous event)
b. debtor liable for damages/interest
c. resolution (art 1170, in proper cases)

3. Fraud/Dolo – Voluntary execution of a wrongful act or willful omission, knowing and intending
the effects which naturally and necessarily arise from such act or omission (1171)
a. Causante (causal) - makes contract voidable; affects consent remedy is annulment
 13

b. Incidente – (incidental) - fraud in performance of obligation; does not affect validity of

obligations; committed in the performance of pre-existing obligation, remedy is damages.

Remedies of Person in fraud under obligations are:

a. insist on specific performance (art 1233)
b. resolve (rescission) contract (art 1191)
c. claim damages, in either case

4. Negligence/Culpa - absence of due diligence (1172)

Elements:
a) Omission of diligence required
b) Diligence required – per nature of obligation, circumstances of persons, time and place

FRAUD NEGLIGENCE

There is deliberate intention to cause There is no deliberate intention to cause

damage damage.
Liability cannot be mitigated Liability may be mitigated
Waiver for future fraud is void. Waiver for future negligence may be allowed
in certain cases:
a) gross – can never be excused in advance; against
public policy
b) simple – may be excused in certain cases

B. CAUSES NOT ATTRIBUTABLE TO DEBTOR

1. Delay/Mora - non fulfillment with respect to time:

Mora accepiendi – default on part of creditor; Creditor is guilty of default when he unjustifiably
refuses to accept payment or performance at the time payment/performance can be done

Effects:
(1) responsibility of debtor is reduced to fraud and gross negligence
(2) debtor is exempted from risk of loss of thing / creditor bears risk of loss
(3) expenses by debtor for preservation of thing after delay is chargeable to creditor
(4) if obligation bears interest, debtor does not have to pay from time of delay
(5) creditor liable for damages
(6) debtor may relieve himself of obligation by consigning the thing

Compensatio morae – both parties are in default (in reciprocal obligations); the effect: is as if
there is no default (1169 p3)

2. Fortuitous Events - event which could not be foreseen, or which though foreseen, were
inevitable

REQUIREMENTS: (1174)
1. The cause of the breach of the obligation must be independent of the will of the debtor
2. The event must be either unforeseeable or unavoidable
3. The event must be such as to render it impossible for the debtor to fulfil his obligation in a
normal manner
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4. The debtor must be free from any participation in, or aggravation of injury to the creditor
(contributory negligence)

Rule on Fortuitous Event Caso fortuito

1. General Rule – no liability for fortuitous event (act of God) vs. forced majeure (act of man)
Exceptions –
(a) Law (Art. 1268 non- fulfilment if proceeds of a crime)
(b) When it is expressly stipulated that he shall be liable even if non-performance of the
obligation is due to fortuitous events;
(c) When the nature of the obligation requires the assumption of risk; (ex. Insurance
contracts)
(d) When the obligor is in delay; Art. 1165 (p3)
(e) When the obligor has promised the same thing to two or more persons who do not have
the same interest; Art. 1165 (p3)
(f) When the possessor is in bad faith and the thing lost or deteriorated due to fortuitous
event;
(g) When the obligor contributed to the loss of the thing. (contributory negligence)
(h) Delivery of Generic thing (An indeterminate thing cannot be object of destruction by a
fortuitous event because genus never perishes)

REMEDIES OF CREDITORS - generally transmissible (except: law, stipulation, personal

obligation):
1. Exact performance - specific, substitute, equivalent
2. Attach and execute debtor's property which is not exempt (art 2236)
3. Accion subrogatoria (art 1171)

Requisites:
a. Creditor must have right of return against debtor
b. The debt is due and demandable
c. There is a failure of the debtor to collect his own debt from 3 rd persons either through malice
or negligence
d. Debtor's assets are insufficient
e. The right of account is not purely personal
4. Accion directa (arts 1729 & 1652)
5. Accion pauliana
Requisites of Accion Pauliana:
1. Defendant must be indebted to plaintiff
2. The fraudulent act performed by the debtor subsequent to the contract gives advantage to
another
3. The creditor is prejudiced by such act.
4. The creditor must have pursued all properties of the debtor subject to execution
5. The creditor has no other legal remedy
Or Requisites:
a. There is a credit in favor of plaintiff
b. The debtor has performed an act subsequent to the contract, giving advantage to other
persons
c. The creditor is prejudiced by the debtor's act which are in favor of 3 parties and rescission
rd

will benefit the creditor

d. The creditor has no other legal remedy
 15

e. The debtor's acts are fraudulent

Mora Solvendi Mora Accipiendi

Requisites: Requisites:
1.Obligation must be liquidated, due and 1.debtor offers performance
demandable 2.Offer must be in compliance with prestation
2.Non-perdormance of the Debtor on period agreed 3.Creditor refuses the performance without just
3.Demand, judicial or extra-judicial by creditor cause
Effects: Effects:
1.debtor is liable for damages 1.the responsibility of the debtor is reduced to fraud
2.debtor is liable even if the loss is due to fortuitous and gross negligence
event 2. debtor is exempt from risk of loss of the thing
3,for determinate objects, the debtor shall bear the which is borne by the creditor
risk of loss 3.expenses incurred by the debtor for the
preservation of the thing after mora shall be
chargeable to creditor
4.if obligation bears interest debtor does not have
to pay from the time of delay
5.creditor is liable for damages
6.debtormay relieve himself of obligation by
consigning the thing

Main Duties of the Parties:

DUTIES OF THE RIGHTS OF THE
DEBTOR CREDITOR
To give Specific Thing -to preserve/take care of -To compel specific
the thing due performance
-to deliver the thing itself -To recover damages in
-to deliver fruits of the case of breach,
thing exclusive or in addition
-to deliver the to specific performance
accessories and -entitlement to fruits and
accessions interests from the time
-to pay damages in the obligation to deliver
case of breach arises
To Give Generic Thing -to deliver the thing of -to ask for performance
the quality intended by of the obligation
the parties taking into -to ask the obligation be
the consideration the complied by a third
purpose of the party at expense of
obligation debtor
-creditor cannot demand -to recover damages in
a thing of superior case of breach
quality neither can
debtor deliver a thing of
inferior quality
-to be liable for
damages in case of
breach
To Do -to do it -to compel performance
 16

-to shoulder cost of -to recover damages

having someone else do where personal
it qualifications of debtor
-to undo what has been is involved
poorly done
-to pay damages in
case of breach
Not To Do -not to do what should -to ask to undo what
not be done should not be done
-to shoulder the cost of -to recover damages
undoing what should not where it would be
have been done physically or legally
-to pay damages in impossible to undo what
case of breach has been undone
because of: the nature
of the act; rights
acquired by third
persons who acted in
good faith; when the
effects of the act
prohibited are definite in
character and will not
cease even if the thing
prohibited be undone

Rules on Mora, Delay, Default

Unilateral Obligations Reciprocal Obligations
Gen. Rule: “no demand no delay” Gen. Rule: Delay occurs from the moment one
The mere expiration of the period fixed by the party fulfils his understanding, while the other does
parties is not enough in order that debtor may incur not comply in a proper manner with what is
delay incumbent upon him.
No delay if neither party performs his undertaking
(1169 p.2)
Exceptions: Exceptions:
1.obligation or law provides Different dates for the performance of respective
2.time is the essence obligations are fixed by the parties
3.demand is useless
4. debt for acknowledgment that he in default

KINDS OF DAMAGES; Keywords: M.E.N.T.A.L

MORAL DAMAGES: Awarded only to enable the injured party to obtain means, diversion or
amusement that will alleviate the moral suffering he has undergone, by reason of
defendants culpable action. (Robleza v. CA, 174 SCRA 354); No proof of pecuniary loss is
necessary. The assessment is left to the discretion of the court according to the
circumstances of each case. However, there must be proof that the defendant caused
physical suffering etc. (Compania Maritima v. Allied Free Worker’s Union, G.R. No. L-
31379, Aug. 29, 1988). Factual basis must be alleged. Aside from the need for the claimant
to satisfactorily prove the existence of the factual basis of the damages, it is also necessary
 17

to prove its causal relation to the defendant’s act (Raagas v. Trava, G.R. No. L-20081, Feb.
27,1968; People v. Manero, G.R. Nos. 86883-85, Jan. 29, 1993).
NOTE: Exception: Criminal cases. Moral damages may be awarded to the victim in criminal
proceedings in such amount as the court deems just without need for pleading or proof of
the basis thereof (People v. Paredes, July 30, 1998).

EXEMPLARY/CORRECTIVE DAMAGES: are intended to serve as a deterrent to serious

wrongdoings. (People v. Orilla, 422 SCRA 620) (1). That the claimant is entitled to moral,
temperate or compensatory damages; and (2) That the crime was committed with 1 or more
aggravating circumstances, or the quasi-‐delict was committed with gross negligence, or in
contracts and quasi-contracts the act must be accompanied by bad faith or done in wanton,
fraudulent, oppressive or malevolent manner. No proof of pecuniary loss is necessary.

NOMINAL DAMAGES : Vindicating or recognizing the injured party’s right to a property that
has been violated or invaded. (Tan v. Bantegui, 473 SCRA 663) No proof of pecuniary loss
is necessary. Proof that a legal right has been violated is what is only required. Usually
awarded in the absence of proof of actual damages.

TEMPERATE DAMAGES: When the court is convinced that there has been such a loss,
the judge is empowered to calculate moderate damages rather than let the complainant
suffer without redress. (GSIS v. Labung-Deang, 365 SCRA 341); May be recovered when
the court finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty. No proof of pecuniary loss is necessary.

ACTUAL/COMPENSATORY DAMAGES: - simply make good or replace the loss caused

by the wrong. Claimant must produce competent proof or the best evidence obtainable such
as receipts to justify an award therefore. Actual or compensatory damages cannot be
presumed but must be proved with reasonable certainty. (People v. Ereno, Feb. 22, 2000)
NOTE: Ordinary Damages are those generally inherent in a breach of a typical contract

LIQUIDATED DAMAGES: Liquidated damages are frequently agreed upon by the parties,
either by way of penalty or in order to avoid controversy on the amount of damages. If
intended as a penalty in obligations with a penal cause, proof of actual damages suffered by
the creditor is not necessary in order that the penalty may be demanded (Art. 1228, NCC).
No proof of pecuniary loss is necessary.

Special/Ordinary: Special Damages are those which exist because of special circumstances
and for which a debtor in good faith can be held liable if he had been previously informed of
such circumstances.

In Determination of Interests (1175; Eastern Shipping Line case)

Stage 1
For loan or forbearance of money, goods or Not for loan or forbearance of money, goods
credit interest rate is 12% or credit the rate is 6%
a. interest=interest rate stipulated in writing + a. if date of demand is certain, compute from
12% legal interest computed from date of the date when demand is made
judicial demand filing of complaint
 18

b. if no stipulated interest rate, the interest rate b. if date of demand is not certain compute
is 12% computed from date of default or from the date of the court decision.
demand
Stage 2
Add 12% from finality of Court decision until fully paid (equivalent to a forbearance credit)

DIFFERENT KINDS OF OBLIGATIONS

CATEGORIES:
a. Demandability - pure, conditional or with a term
b. Plurality of object - simple, alternative or facultative
c. Plurality of subject - simple, joint or solidary
d. Performance - divisible or indivisible
e. Sanctions for breach - with or without a penal clause

(1) PURE – demandable at once, no term, no condition (1179)

(2) CONDITIONAL - A condition is a future and an uncertain event or a past event unknown to
the parties
Kinds:
i. Suspensive – happening of condition gives rise to obligation
Effects:
1. effectivity is retroactive
2. no retroactivity with reference to fruits or interest & prescription
3. creditor may preserve rights
4. debtor – recovery of payment by mistake or even w/o mistake

Before Fulfilment After Fulfilment

The demandability and acquisition or effectivity of The obligation arises or becomes effective. The
rights arising from the obligation is suspended. obligor can be compelled to comply with what is
Anything paid my mistake during such time maybe incumbent upon him
recovered

Rules on loss, impairment, improvement of the subject matter pending the happening of
suspensive condition/term: (1189)

Loss/ Impairment Improvement

w/ fault or at expense of Indemnity & damages specific performance

obligor/ usufructuary rescission & damages
If it improved at the expense of
the debtor, he shall have no
other right than that granted to
the usufructuary. (art 1189)
w/o fault or not at Extinguished Creditor to bear damages
expense of obligor Creditor gets it

REQUISITES FOR THE AFOREMENTIONED RULE:

 19

1. There is a suspensive condition

2. There is an obligation to deliver a determinate thing
3. There is loss, deterioration or improvement before the happening of the condition
4. The condition happens

ii. Resolutory – happening of condition extinguishes obligation (1179)

Effects:
1. no retroactive effect
2. obligation extinguished
3. restore to each other what was received plus interest/fruits

iii. Potestative – dependent on sole will of 1 party; if on part of debtor and suspensive – void
(1180/1182)

iv. Casual – dependent on chance or hazard (1180)

v. Mixed – chance, or any of parties

vi. With term -

a) Positive – extinguished if time expires or indubitable of condition to happen
b) Negative – effective from moment of time elapsed or evident it can't happen

vii. Impossible and illegal –

(1) To do - both the condition and the obligation are void
(2) Not to do –disregard the condition, the obligation is still valid

Impossible condition – physically not feasible; Illegal condition – prohibited by law, good custom,
public policy and morals (1183)

Term/Period Condition
Interval of time which is future and certain Fact or event which is future and uncertain
Must necessarily come although it may not be May or may not happen
known when
Exerts an influence upon the time of demandability Exerts an influence upon every existence of the
or extinguishment of an obligation obligation itself
No retroactive effect unless there is an agreement Has retroactive effect (1187)
to the contrary
When it is left exclusively to the will of the debtor, When it is left exclusively to the will of the debtor,
the existence of the obligation is not affected the very existence of the obligation is affected
“when his means permit him to do so/-little by little Constructive fulfilment (1186)
-as soon as possible/-from time to time/-as soon as
I have the money/-in partial payment/-when in the
position to pay”

(3) WITH A PERIOD – future & certain, past & uncertain ”when stipulation says “payable when
able”– it is with a period, remedies: (1180)
a) agreement among parties
b) court shall fix period of payment when parties unable to agree

Kinds: (1181)
 20

a. Resolutory (in diem) – takes effect at once but terminate upon arrival of the day certain;
Day certain – that which must necessarily come, although it may not be known when
b. Suspensive (ex die) – takes effect on the day stipulated

WHEN COURTS MAY FIX PERIOD:

a) art 1197
b) art 1197, 2nd paragraph
c) art 1191, 3rd paragraph
d) art 1687, 2nd, 3rd, 4th sentence
e) art 1180

WHEN DEBTOR LOSES RIGHT TO PERIOD: (1198)

a. insolvency of debtor, unless security provided
b. did not deliver security
c. impaired security- thru fault or fortuitous event
d. violate undertaking in consideration of extension of period
e. attempts to abscond

(4). FACULTATIVE – only one prestation has been agreed upon but another may be given in
substitution (1206)

Effect of loss or deterioration thru negligence, delay or fraud of obligor:

a) of thing intended as substitute - no liability
b) of the substitute after substitution is made – with liability

(5). ALTERNATIVE – bound by different prestations but only one is due

Right of choice: General rule: right of choice belongs to debtor (1200)

a. the choice is with debtor (1205)

(1) If only 1 is left either because of fortuitous events or due to debtor's acts, perform what is
left. The effect is that the debtor loses the right of choice
(2) if the choice is limited because of the creditor's acts, the debtor has the right of resolution
and damages
(3) if all are lost due to debtor, the creditor is entitled to damages
(4) if some are lost, the debtor can choose from the remaining

b. the choice is with creditor (1205)

(1) if one or some are lost due to fortuitous event, the creditor chooses the remainder
(2) if one or some is lost because of the fault of debtor, the creditor may choose either the
remainder or the value of any which disappeared, and damages in either case
(3) if all is lost due to the debtor's fault, the creditor may choose the value of any
if some is lost due to debtor's fault, the creditor chooses the remainder
(4) if all is lost due to fortuitous event, obligation is extinguished
(5) if all is lost due to creditor's fault, the obligation is extinguished

Requisites for making the choice:

a) Made properly so that creditor or his agent will actually know
b) Made with full knowledge that a selection is indeed being made
c) Made voluntarily and freely
d) Made in due time – before or upon maturity
 21

e) Made to all proper persons

f) Made w/o conditions unless agreed by the creditor
g) May be waived, expressly or impliedly

DISTINCTIONS BETWEEN ALTERNATIVE AND FACULTATIVE OBLIGATIONS

ALTERNATIVE FACULTATIVE

a) Various things are due but the giving a) Only one thing is due but a substitute may be
principally of one is sufficient given to render payment/fulfilment easy
b) If one of prestations is illegal, others b) If principal obligations is void and there is no
may be valid but obligation remains necessity of giving the substitute; nullity of P carries
with it nullity of S
c) If it is impossible to give all except c) If it is impossible to give the principal, the
one, the last one must still be given substitute does not have to be given; if it is
impossible to give the substitute, the principal
must still be given
d) Right to choose may be given either d) The right of choice is given only to the debtor
to debtor or creditor

(6) JOINT – presumption when 2 or more creditors or 2 or more debtors concur in one and the
same obligation (1207)
Effects:
a. Demand on one produces delay only with respect to the debt
b. Interruption in payment by one does not benefit or prejudice the other
c. Vices of one debtor to creditor has no effect on the others
d. Insolvency of one debtor does not affect other debtors

(7) SOLIDARY – must be expressed in stipulation or provided by law or by nature of obligation

(1207 s2)

a. Active – on the part of creditor or obligee

Effects:
1. Death of 1 solidary creditor transmits share to heirs (but collectively)
2. Each creditor represents the other in the act of recovery of payment
3. Credit is divided equally between creditors as among themselves
4. Debtor may pay any of the solidary creditors

b. Passive – on the part of debtors or obligors

Effects:
1. Each debtor may be requested to pay whole obligation with right to recover from co-
debtors
2. Interruption of prescription to one creditor affects all
3. Interest from delay on 1 debtor is borne by all

c. Mixed – on the part of the obligors and obligees, or the part of the debtors and the creditors
d. Conventional – agreed upon by the parties
 22

e. Legal – imposed by law

Instances where law imposes solidary obligation:

1. obligations arising from tort
2. obligations arising from quasi-contracts
3. legal provisions regarding obligation of devisees and legatees
4. liability of principals, accomplices, and accessories of a felony/crimes
5. bailees in commodatum

Effects:
a. payment made before debt is due, no interest can be charged, otherwise – interest can be
charged
b. insolvency of one – others are liable for share pro-rata
c. if different terms & conditions – collect only what is due, later on collect from any
d. no reimbursement if payment is made after prescription or became illegal
d. remission made after payment is made – co-debtor still entitled to reimbursement
e. effect of insolvency or death of co-debtor – still liable for whole amount
f. fault of any debtor – everyone is responsible – price, damage & interest
g. complete/ personal defense – total or partial ( up to amount of share only ) if not personal
to him

Effect of loss or impossibility of the prestation:

a. if without fault – no liability
b. if with fault – there is liability (also for damage and interest)
c. loss due to fortuitous event after default – there is liability (because of default)

(8) DIVISIBLE – obligation that is capable of partial performance

a. execution of certain no. of days work
b. expressed by metrical units
c. nature of obligation – susceptible of partial fulfilment

(9) INDIVISIBLE – one not capable of partial performance

a. to give definite things
b. not susceptible of partial performance
c. provided by law
d. intention of parties

JOINT DIVISIBLE OBLIGATIONS: 1. Each creditor can demand for the payment of his proportionate
share of the credit, while each debtor can be held liable only for the payment of his proportionate share of
the debt. 2. A joint creditor cannot act in representation of the other creditors while a joint debtor cannot
be compelled to answer for the acts or liability of the other debtors

JOINT INDIVISIBLE OBLIGATIONS: 1. If there are 2 or more debtors, the fulfilment of or compliance with
the obligation requires the concurrence of all the debtors, although each for his own share. The obligation
can be enforced only by proceeding against all of the debtors. 2. If there are 2 or more creditors, the
concurrence or collective act of all the creditors, although each for his own share, is also necessary for
the enforcement of the obligation

(10) WITH PENAL CLAUSE - an accessory undertaking to assume greater liability in case of
breach; (1226)
 23

CHARACTERISTICS OF PENAL CLAUSES

1. Subsidiary - As a general rule, only penalty can be demanded, principal cannot be
demanded, except: Penalty is joint or cumulative

2. Exclusive - takes place of damage, damage can only be demanded in the ff. cases:
a. Stipulation – granting right
b. refusal to pay penalty
c. with dolo ( not of creditor )

Causes for reduction of penalty:

a. partial/irregular performance
b. penalty provided is iniquitous/unconscionable