Oblicon Jurado Final PDF

AUF School of Law Obligations and Contract
BOOK IV
OBLIGATIONS and CONTRACTS
TITLE I OBLIGATIONS
Art. 1156. Obligation is a !ridi"al n#"#ssit$ to
gi%#& to do or not to do.
Juridical necessity to comply with a prestation-
Sanchez Roman
Legal relation established between one person and
another, whereby the latter is bound to the
fulfillment of a prestation which the former may
demand from him. - Manresa
Ci%il obligation %s Nat!ral
obligation
Gives to the obligee
or creditor the right
of enforcing it
against the obligor
or debtor in a court
of justice.
(right of action)
#''#"t annot be
enforced by court
action
!ositive law so!r"# "#uity and natural
law.
$e#uisites of %bligation
juridical or legal tie
-bilateral
-unilateral
active subject
passive subject
fact, prestation or service
&&'s a general rule, the form of the obligation is not
an essential element(re#uisite. E("#)t (the non-
compliance of the following formalities would have
the effect of rendering the contract agreement void
or ine)istent)*
---donation of personal property whose
value e)ceeds !+,,,,.,,, contract in
writing. ('rt. -./, )
---sale of a piece of land or any interest
therein through an agent, authority of such
agent be in writing. ('rt. 0/-., )
---1nterests in a contract of simple loan or
mutual, agreement with respect to such be
in writing. ('rt. 02+3, )
---anticheresis, principal amount and
interest be specified in writing. ('rt. 405.,
)
---6onation of immovable property be made
in a public document and the acceptance
be made in the same document or separate
public document ('rt. -.2, )
---contribution of immovable property or
real rights to common fund (partnership)
must be in a public instrument with
attached inventory signed by the parties.
('rt. 0--0, 0--5, )
---hattel 7ortgage, personal property
must be recorded in the hattel 7ortgage
$egister ('rt. 40.,, )
---sale or transfer of large cattle, such
transfer or sale must be registered. (8ec.
44, 'ct 9o. 00.-, 'rt. 0+/0, )
Classi'i"ations o' obligation
!rimary 8econdary
pure and conditional
with a period
alternative and
facultative
joint and solidary
divisible and indivisible
with a penal clause
legal, conventional,
penal
real and personal
determinate and
generic
unilateral and bilateral
individual and
collective
accessory and
principal
"lassi'i"ations a""ording to *anr#sa
As to !ridi"al +!alit$ -9atural
-civil
-mi)ed
As to )arti#s -:nilateral and bilateral
-individual and
collective
As to ob#"t -6eterminate and
generic
-simple and multiple
-positive and negative
-real and personal
-possible and
impossible
-divisible and divisible
-principal and accessory
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As to )#r'#"tion and
#(ting!is,-#nt
-!ure
-conditional
-with term or period
Art. 115.. Obligations aris# 'ro-/
la0
"ontra"ts
+!asi "ontra"ts
a"ts or o-issions )!nis,#d b$ la01 and
+!asi2d#li"ts
&&;he addition of lege has been critici<ed as
theoretically erroneous.
&&;he enumeration is e)clusive.
Art. 1153. Obligations d#ri%#d 'ro- la0 ar# not
)r#s!-#d. Onl$ t,os# #()r#ssl$ d#t#r-in#d
in t,is Cod# or in s)#"ial la0s ar#
d#-andabl#& and s,all b# r#g!lat#d b$ t,#
)r#"#)ts o' t,# la0 0,i", #stablis,#s t,#-1
and as to 0,at ,as not b##n 'or#s##n& b$ t,#
)ro%isions o' t,is Boo4. 516768
&&obligations derived from law cannot be
presumed. (unli=e other obligations)
&&re#uisites to determine whether an obligation
arises from law or from other sources.
law that establishes or recogni<es the obligation
act or condition upon which the obligation is
based.
&& when the law merely recogni<es the e)istence of
an obligation generated by an act which may
constitute a contract, #uasi-contract, criminal
offense, or #uasi-delict and its only purpose is to
regulate such obligation, then the '; itself is the
source of the obligation and 9%; the law.
!elayo vs Llauron-obligation of support between
spouses.
'rt. 4,0. obligation of the winner in a gambling to
return the money to the one who lost.
Art. 1157. Obligations arising 'ro- "ontra"ts
,a%# t,# 'or"# o' la0 b#t0##n t,# "ontra"ting
)arti#s and s,o!ld b# "o-)li#d 0it, in good
'ait,. 51671a8
Contra"t-meeting of minds between two persons
whereby one binds himself, with respect to the
other, to give something or to render some service.
Cons#ns!al "ontra"ts- contracts perfected by
mere consent, and from that moment the parties
are bound not only to the fulfillment of what has
been e)pressly stipulated but also to all of the
conse#uences which according to their nature may
be in =eeping with good faith, usage and law.
R#al Contra"ts2 perfected upon the delivery of
the obligation.
Obligation aris#s 'ro- t,# -o-#nt o'
)#r'#"tion o' t,# "ontra"t.
R#"i)ro"al obligation- parties are mutually
obliged to do or to give something.
9nilat#ral obligation- only one party (obligor) is
obliged to do or to give something.
&&%bligations arising from contract are governed
primarily by the agreement of the contracting
parties.
Co-)lian"# in good 'ait,- performance in
accordance with the stipulations, clauses, terms
and conditions of the contract.
:njust enrichment
&&1n default of agreement, the provisions of the
ivil ode regulating such obligations are
applicable.
G#n#ral R!l#/ ;he contract is the law between the
contracting parties.
")* 7acasaet vs %'
#("#)tion to g#n#ral r!l#/ 'gcaoili vs G818
Art. 1166. Obligations d#ri%#d 'ro- +!asi2
"ontra"ts s,all b# s!b#"t to t,# )ro%isions o'
C,a)t#r 1& Titl# :VII& o' t,is Boo4. 5n8

;!asi2"ontra"ts2 juridical relations arising from
lawful, voluntary, and unilateral acts, by virtue
which the parties become bound to each other,
based on the principle that no one shall be unjustly
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enriched or benefited at the e)pense of others.
ase* ;raders :nion vs 9L$
N#gotior!- g#stio Sol!tio ind#biti
'rises whenever a
person voluntarily ta=es
charge of the agency or
management of the
business or property of
another without
authority from the latter
'rises whenever a
person unduly delivers
a thing through mista=e
to another who has no
right to demand it.
;he gestor or officious
manager shall be
obliged to continue such
agency or management
until the termination of
the affair and its
incidents
;he person to whom the
delivery has been
unduly made shall
return the property
delivered or the money
paid.
<r#s!-)ti%# "ons#nt2 consent given by law if
there is no e)press consent given by the other
party
--gives rise to multiple juridical relations resulting in
obligations for delivery of the thing or rendering of
service.
Art. 1161. Ci%il obligations arising 'ro-
"ri-inal o''#ns#s s,all b# go%#rn#d b$ t,#
)#nal la0s& s!b#"t to t,# )ro%isions o' arti"l#
=1..& and o' t,# )#rtin#nt )ro%isions o'
C,a)t#r =& <r#li-inar$ Titl#& on >!-an
R#lations& and o' Titl# :VIII o' t,is Boo4&
r#g!lating da-ag#s. 5167=a8
'rt. 0,,, $!
e)cept* treason, rebellion, illegal possession of
firearms and gambling.
"nforcement of civil liability
0. institution of criminal and civil actions- civil
action impliedly instituted, e)cept*
i. e)press waive of the civil action
ii. reservation of right to institute it
separately, or
iii. institution of the civil action prior to the
criminal action.
4. independent civil action
5. other civil actions arising from offense
E''#"t o' A"+!ittal
Gro!nd 'or
a"+!ittal
effect E%id#n"#
n##d#d
Guilt not
proven beyond
reasonable
doubt
ivil action to
recover
damages
based on the
same act or
omission *A?
still be
instituted
!reponderance
of evidence
9on-e)istence
of facts for the
commission of
the offense
ivil action to
recover
damages is no
longer possible.
E''#"t o' Ind#)#nd#nt Ci%il A"tion
G#n#ral r!l#/ ;he civil action to recover from the
person criminally liable is not independent from the
criminal action.
8eparate civil action- the right to file a civil action
shall depend upon the result of the criminal action.
ommencing the civil action prior the criminal
action- once the criminal action is instituted, the
action to recover damages shall be suspended.
")amples of entirely separate and independent
civil action*
the civil action is based on an obligation
not arising from the act complained of as
offense or felony.
8uch action may proceed
independently of the criminal action
and regardless of the result of the
latter.
Culpa contractual- 9egligence in the
performance of a contract
culpa aquiliana- 9egligence as a
source of obligation (#uasi-delict)
Law grants to the injured party the right to
institute a civil action separate and distinct
from the criminal action.
1nterferences by public officers or
employees or by private individuals
with civil rights and liberties
defamation
fraud
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physical injuries
refusal or neglect of a city or municipal
police to render aid or protection in
case of danger to life or property.
R#s#r%ation o' rig,t to 'il# s#)arat# and distin"t
"i%il a"tion2 is a substantive right>
-procedural re#uirement under 8ec. 4 of
$ule 000 of the 9ew $ules of ourt is not
mandatory.
-this was amended by 8ec. 5 of $evised $ules of
criminal !rocedure 4,,,.
Art. 116=. Obligations d#ri%#d 'ro- +!asi2
d#li"ts s,all b# go%#rn#d b$ t,# )ro%isions o'
C,a)t#r =& Titl# :VII o' t,is Boo4& and b$
s)#"ial la0s. 5167@a8
;!asi2d#li"t2 fault or negligence of a person who,
by his acts or omission, connected or unconnected
with, but independent from, any contractual
relation, causes damage to another person.
-covers not only those that are not punished by law
but also those acts which are voluntary and
negligent
. reasons* "it#d in Barr#do %s Gra"ia
&&&' single act can give rise to various obligations
!ersons liable- the person directly responsible for
the damage incurred and*
;he father, and, in case of his death or
incapacity, the mother, are liable for any
damages caused by the minor children
who live with them.
Guardians are liable for damages done by
minors or incapacitated persons subject to
their authority and living with them.
%wners or directors of an establishment or
business are e#ually liable for any
damages caused by their employees while
engaged in the branch of the service in
which employed, or on occasion of the
performance of their duties.
"mployers with respect to damages
caused by their employees and household
helpers acting within the scope of their
assigned tas=s, even though the former are
not engaged in any business or industry.
;he 8tate when it acts through a special
agent, but not if the damage shall have
been caused by the official upon whom
properly devolved the duty of doing the act
performed, in which case the provisions of
the ne)t preceding article shall be
applicable.
?inally, teachers or directors of arts and
trades are liable for any damages caused
by their pupils or apprentices while they are
under their custody.
;he liability shall cease in case the persons
mentioned therein prove that they e)ercised all the
diligence of a good father of a family to prevent the
damage.
R#+!isit#s o' liabilit$
;here e)ist a wrongful act or omission
imputable to the defendant by reason of his
fault or negligence.
;here e)ist a damage or injury which must
be proved by the person claiming recovery.
;here must be a direct causal connection
between the fault or negligence and the
damage or injury. (proximate cause)
;!asi2d#li"t %s Cri-#
!rivate right Nat!r# o'
rig,t
%iolat#d
!ublic right
ompensation
or
indemnification
(reparation of
injury suffered
by the
individual)
Aor- o'
r#dr#ss
!unishment
(fine,
imprisonment, or
both)
1t e)ist in any
act or omission
wherein fault or
negligence
intervenes
L#gal basis
o' liabilit$
")ists when there
are penal laws
clearly penali<ing
such crime
ivil liability liabilit$ riminal and civil
liability
riminal intent
not necessary
ondition of
the mind
riminal intent
necessary
!reponderance
of evidence
evidence @eyond
reasonable doubt
an be compromise an never be
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compromised compromised.
Auasi-delict covers not only acts not punishable by
laws but it also includes acts which are criminal in
character, whether intentional, voluntary or
negligent. 5El"ano %s >ill8
T0o distin"t 'a!lts
(!adua vs $obles, Justice @arredo)
"!l)a "ri-inal2 civil liability arising from
crimes
"!l)a2a+!iliana- liability arising from civil
negligence.
-recovery of damages twice for the same negligent
act is omission is precluded.
-the e)tinction of the civil liability referred in !ar (e)
of 8ec. 5, $ule 000 refers e)clusively to liability
founded on 'rt. 0,, of $!, whereas the civil
liability for the same act considered as #uasi delict
is not e)tinguished even by a declaration in the
criminal case that the criminal act charged has not
happened or has not been committed by the
accused.("lcano vs Bill)
6iligence of employers*
;!asi2d#li"t Cri-#s
'rt. 40/, of 'rt. 0,5 of $!
!rimary liability 8ubsidiary liability
"mployer can avoid
liability after proving that
he e)ercised due
diligence
Liability is absolute and
cannot be avoided by
proof of diligence.
'pplies to all employers
whether they are
engaged in enterprise
or not.
'pplies only to
employers engaged in
some =ind of business
or industry.

ubi jus ibi remedium- unvindicated civil wrongs
--;he death of the accused after arraignment and
during the pendency of the criminal action shall
e)tinguish the civil liability arising from the delict.
&&'lthough the relation between the contracting
parties is purely contractual a #uasi-delict can still
be committed in view of the manner in which the
contract is violated.
Neglect or malfeasance of the
carrier's employees could give
ground for an action for damages.
Damages here are proper because
the stress of respondent's action is
placed upon his wrongful
expulsion, which is a violation of a
public duty by petitioner- air carrier
a case of !uasi-delict." #$ir
%rance vs &arrascoso, G.R. No. L2
=1B@3. S#)t#-b#r =3& 1766.'
C,a)t#r =
NAT9RE ANC EAAECTS OA OBLIGATION
Art. 116@21166 Obligation to Gi%#
Ddilig#n"# o' a good 'at,#r o' a 'a-il$E
- standard normal state of diligence
-ordinary diligence
-
obligations to gi%#
d#t#r-inat#2 the object is particularly
designated or physically segregated from
all others of the same class ('rt. 0035
applies particularly to determinate object)
g#n#ri"2 the object is merely designated
by its class or genus without any particular
designation or physical segregation from all
others of the same class. (e.g. money)
&&&'rt. 0035 is a guaranty that the debtor will
comply with the obligation.
9ature of right of the creditor
--;he obligee(creditor has the right to the
thing which is the object of the obligation as
well as the fruits thereof from the time the
obligation to deliver it arises. ('rt. 003.)
Obligation F,#n obligation to
d#li%#r aris#s
;hose arising from
law
#uasi-delicts
#uasi-contracts
;he specific provisions
of law determine when
the delivery should be
made.
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crimes
contracts 7oment of perfection of
the contract. ('rt. 0+5-)
8ubject to a
suspensive
condition
?rom the moment the
condition happens.
Cith suspensive
term or period
:pon the e)piration of
the term or period
<#rsonal rig,t- a right pertaining to a person to
demand from another the fulfillment of a prestation
to give, to do, or not to do.
(jus ad rem) right enforceable only
against a definite person or group
of persons
before delivery in obligations to
give
R#al rig,t2 right pertaining to a person over a
specific thing, without passive subject individually
determined against whom such right may be
personally forced. (ownership, possession,
easement)
#jus in re' right enforceable against the
whole world
ac#uired once the thing and the fruits
are delivered.
Rig,ts o' Cr#ditor Obligations o' C#btor
d#t#r-inat# obligations
0. to compel specific
performance
4. to recover damages
for breach of the
obligation.
5. "ntitlement to fruits
and interests of the
thing at the time
the obligation to
deliver it arises.
0. to perform the
obligation
specifically
4. to ta=e care of the
things with proper
diligence of a good
father of a family.
5. ;o deliver all
accessions and
accessories of the
things even though
they may not have
been mentioned.
.. ;o be liable for
damages in case of
breach of obligation
by reason of delay,
fraud, negligence or
contravention of the
tenor thereof.
G#n#ri" obligations
0. to as= for
performance of
the obligations
4. to as= that the
obligation be
complied with at
the e)pense of
the debtor.
5. ;o recover
damages for the
breach of
obligation.
0. ;o deliver a thing
which is neither of
superior nor inferior
#uality.
4. ;o be liable for
damages in case of
Non# #(#-)tion 'ro- liabilit$ b#"a!s# o' caso
fortuito/
d#la$
r#ason/ ;here would have been no loss if the
debtor had complied with the obligation to deliver
the object without delay.
)ro-is# to t0o or -or# di''#r#nt )#rsons
r#ason/ 1t would be impossible to comply with both
obligations therefore the debtor already made
himself liable for damages.
A""#ssions- all of those things which are
produced by the object of the obligation as well as
all of those which are naturally or artificially
attached thereto.
Accession discreta- natural, industrial and
civil fruits
accession industrial D building, planting,
and sowing
accession natural- allusion, alvusion,
abandoned river beds, and islands formed
in navigable rivers.
'ccession with respect to movable
property.
A""#ssori#s- all of the things which have for their
object the establishment, use or preservation of
another thing which is more important and to which
they are not incorporated or attached.
embellishments
&&;he liability of debtor for damages in case of
breach of obligation, e)tends only to breach which
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is voluntary in character and not to one which is
involuntary (fortuitous event)
&&%nly a determinate thing can be destroyed by a
fortuitous event, generic things can never perish.
(genus nun!uam peruit)
Art. 116..
Obligation to Co
(positive personal obligation)
&&1f the obligor fails to do what he has obligated
himself to do, the obligee can have the obligation
performed or e)ecuted at the e)pense of the latter
and recover damages .
&&;his type of obligation recogni<es individual
freedom, the obligor cannot be compelled to do
what he has obligated himself to do.
$emedy for obligee(creditor* performance of the
obligation at the e)pense of the obligor
&&1f the object of the prestation is the personal and
special #ualification (i.e. artist) of the obligor, the
r#-#d$ for the obligee is to recover damages
under 'rt. 00-, of the ivil ode.
Rig,ts a%ailabl# to t,# oblig##
(in case there has been a performance of the
obligation but in contravention of the tenor thereof)
to have the obligation performed at the
e)pense of the obligor
to as= that what has been poorly done be
undone
to recover damages for breach of
obligation
ase*
have< vs Gon<ales
;anguilig vs ourt of 'ppeals
Arti"l# 1163.
Obligation NOT to Co
(negative personal obligation)
-fulfilled or reali<ed so long the obligor does not do
what is forbidden
$emedy for obligee in case of breach*
to have it undone at the e)pense of the
obligor ('rt. 003/)
e)ception (cannot be undone)*
effects of the act are definite in
character.
physical and legal impossibility
to as= for damages ('rt. 00-,)
mora is not applicable
&&1n obligation not to do, the obligation is either
fulfilled or not fulfilled
Art. 1167.
C#la$ in t,# '!l'ill-#nt o' obligation
Vol!ntar$ In%ol!ntar$
6efault (mora),
deceit(fraud (dolo),
negligence (culpa), or in
manner that
contravenes the tenor
thereof
1nability to comply
because of an
unforeseen event, or
which though foreseen
is inevitable.
%bligor is liable for
damages
%bligor has no liability
for damages
G#n#ral R!l#/ :nless there is no demand there is
no delay.
&&&1n reciprocal obligation, the moment the other
party complied with his obligation failure to comply
will cause the other party to be in delay
C#'a!lt(mora)- signifies delay in the fulfillment of
an obligation with respect to time.
&&&;he mere stipulation of a date when the
obligation is due does not by itself dispense with
the necessity of a demand, unless there is an
e)press stipulation (either by law or contract) that
the debtor will incur delay without need of a
demand.
Kinds o' -ora
mora solvendi- default on the part of the
debtor
4inds o' -ora sol%#ndi
ex re-refers to obligation to give
ex persona- refers to obligation to do
mora accipiendi- default on the part of the
creditor to accept the delivery of the object
of the obligation
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compensatio morae- default of both parties
in reciprocal obligations
$e#uisites to declare in default
that the obligation be demandable and
already li#uidated
that the debtor delays performance
that the creditor re#uires the
performance judicially or e)tra judicially
&&1n positive obligation, default arises from the
moment the creditor demands the performance of
the obligation.
Judicially- through a complaint
e)tra-judicially- oral or written demand
Chen demand not necessary
when there is an e)press stipulation to that
effect
where the law so provides
when the period is the controlling motive or
the principal inducement for the creation of
the obligation (when time is of the essence)
where demand would be useless
&&9egative obligations are not subject to delay.
R#"i)ro"al obligation-created or established at
the same time, out of the same cause and which
results in the mutual relationship of creditor and
debtor between the parties.
-obligations which are conditioned upon
each other
-conditional obligation
&&1n case of delay, the liability of the obligor subsist
even if the thing which constitutes the object of
obligation may have been destroyed or lost
through fortuitous events.
;he moment the other party has complied with his
obligation, delay on the other begins.
E("#)tion/ 1f there are different dates for the
performance of the obligation, apply the general
rule in 0032 (demand is needed).
5Art. 11.6211.@8
Ara!d 5dolo8- consist in the conscious and
intentional proposition to evade the normal
fulfillment of an obligation
-present at the time of birth of an
obligations
4inds o' 'ra!d
criminal fraud
civil fraud
Ara!d in t,#
)#r'or-an"# o'
an obligation
%s Ara!d in t,#
"onstit!tion or
#stablis,-#nt o'
an obligation
6uring the
performance of an
e)isting obligation
F,#n
)r#s#nt
't the time of the
birth of an
obligation.
"vading normal
fulfillment of an
obligation
)!r)os# 8ecuring the
consent of the
other party to
enter into the
contract
9on-fulfillment or
breach of the
obligation
r#s!lt Eitiation of the
consent of the
other party
$ecover damages
from the
debtor(obligor
R#-#d$
'or t,#
inno"#nt
)art$
Causal fraud-
'nnulment of the
contract.
Incidental fraud-
recover damages
&&&7alice or dishonesty is implied as a ground for
damages.
&&&?raud or dolo is synonymous with bad faith.
&&&Caiver or renunciation of liability made in
anticipation of the fraud is VOIC. ('rt. 00-0)
&&&Caiver or renunciation of liability made after the
fraud has already been committed is VALIC.
&&&Chat is renounced is the effect of fraud or the
right of the party to indemnity.
E(t#nt o' r#"o%#rabl# da-ag#s/
all damages which may be attributable to
the breach or non-fulfillment of the
obligation, regardless of whether such
conse#uences are natural or unnatural,
probable or improbable, foreseeable or
unforeseeable.
7oral and e)emplary damages
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9egligence (culpa)- omission of that diligence
which is re#uired by the nature of the obligation
and corresponds with the circumstances of the
person, the time, and of the place.
-absence of due care re#uired by the
nature of the obligation
&&&6iligence of good father of a family (pater
familias) is the standard diligence re#uired if the
contract does not state the diligence which is to be
observed in the performance of the obligation.
Finds of negligence
&ulpa
contractual
%s &ulpa
a!uiliana
9egligence in
the performance
of a contract
d#'inition 9egligence as a
source of
obligation.
(#uasi-delict)
1ncident of the
performance of
an obligation
",ara"t#risti
"
8ubstantive and
independent
!re-e)isting
contractual
relation
<art$
r#lations,i)
;here may or
may not be a
pre-e)isting
contractual
relationship
@reach of
contract
So!r"# o'
obligation
6efendantGs
negligent act or
omission
")istence of the
contract and its
breach
F,at n##ds
to b# )ro%#n
9egligence of
the defendant
!roof of
diligence is not
a defense
A%ailabilit$
o' dilig#n"#
!rof of diligence
is a %alid
defense
N#glig#n"# %s Ara!d
N#glig#n"# %s Ara!d
ulpa 6olo
Eoluntary act or
omission
characteristic onscious and
intentional
proposition to
evade the
fulfillment of an
obligation
'rt. 00-5 (if the
negligence
shows bad faith)
Governing rule 'rt. 00-5, par.0
Ealid (unless the
nature of the
waiver is against
public policy)
Caiver of
action (future)
Eoid
)ro(i-at# "a!s#2 cause which is a natural and
logical conse#uence uninterrupted by an
intervening cause, without which the damage will
not have happened.
N#glig#n"#
Bad 'ait, Good 'ait,
1f present, the
provisions of 'rt. 00-5
and 'rt 44,0, par.4 will
apply.
Liability will only be on
natural and probable
conse#uences of the
&&&6amages resulting from negligence is reduced
or mitigated if there was contributory negligence of
the obligee.
%ther circumstances that can mitigate the
damages*
when the plaintiff himself contravenes the
terms of the contract>
where the plaintiff has derived some benefit
as a result of the contract>
in cases where e)emplary damages are to
be awarded, where the defendant acted
upon advice of counsel>
where the loss would have resulted in any
event>
where upon filing of the action, the
defendant has done his best to lessen the
plaintiffGs loss or injury.
&&&1f the negligent act of the obligee is the
pro)imate cause of the event which led to the
damage or injury complained of, he cannot
recover.
&&&;he phrase in any manner that contravenes
the tenor" of the obligation includes not only any
illicit act which impairs the strict fulfillment of the
obligation but also every =ind of defective
performance.
T#st o' n#glig#n"#/
:se the reasonable care and caution which an
jmvdg 9 2
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Semester/2009-2010
ordinary prudent person would have used in the
same situation.
5Art. 11.B8
Aort!ito!s #%#nt (caso fortuito)- event which
could have not been foreseen, or though foreseen,
were inevitable.
A"t o' God Aor"# -a#!r#
1ndependent of human
intervention
events that arise from
legitimate or illegitimate
acts of persons other
than the obligor.
As to 'or#s##abilit$
%rdinary e)traordinary
G#n#ral r!l#/ 1f the reason for the non-compliance
in the obligation is a fortuitous event, the obligor is
e)empted from liability whatsoever.
E:CE<T/
0. where such liability is e)pressly specified
by law>
4. where it is declared by stipulation of the
parties>
5. where the nature of the obligation re#uires
the assumption of ris=.
-(volenti non fit injuria) no wrong is
done to one who consents
&&&'rt. 00-. applies only to determinate obligations
and not to generic ones.
***res ipsa loquitur
&&&;he caso fortuito must me the 8%L" and
pro)imate cause of the incident, to avail of it as a
defense.
&&&o-mingling negligence on the part of the
obligor forfeits the defense of caso fortuito.
Ess#ntial "onditions 'or Art. 11.B to a))l$/
0. that the event must be independent of the
will of the obligor>
4. that the event must be either foreseeable
or inevitable>
5. that the event must be of such a character
as to render it impossible for the obligor to
fulfill his obligation in a normal manner>
.. that the obligor must be free from any
participation in the aggravation of the injury
to the obligee.
&&&#()iration o' agr##-#nt/
;he case of Ba"olod2*!r"ia %s CA compared
and contrasted with <,ilCo-Sat %s Glob#.
&&&8outheastern ollege vs '- typhoon is a caso
fortuito
&&&o vs '- carnapping of a vehicle is not
considered a caso fortuito
&&&;anguilig vs ' D windmill case
5Art. 11.58
9s!r$2 contracting for or receiving something in
e)cess of the amount allowed by law for the loan
or forbearance of money, goods or chattels.
-ta=ing of more interest for the use of money,
goods, or chattels or credits than the law allows.
:sury Law ('ct 9o. 43++) and other laws
amending it- special law referred to in 'rt. 00-+.
entral @an= ircular 9o. 44. (6ec. 0, 02/4)- no
more ceiling in interest rates on loans.
&&&Loan or forebearance of money-04H interest in
the default of interest stipulated by law or the
parties, 3H interest for obligation not involving
forbearance or loan.
&&&04H interest per annum from the time the
judgment has become final if t.
5Art. 11.68
&&&;here is a presumption that the interests has
been paid if on the face of the receipt that the
creditor issued to the obligor that the principal has
been paid without reservation with respect to the
interest. (in accordance with 'rt. 04+5)
&&&1f the debtor is issued a receipt by the creditor
ac=nowledging payment of a latter installment
without reservation to prior installments, there is
also a presumption that such prior installments
have already been paid.
GGG?or the presumption to arise, the receipt should
clearly state that the payment is for the installment
for a latter installment or as payment for the
jmvdg 10 2
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Semester/2009-2010
interest. (*anila Trading %s *#dina)
5Art. 11..8
$emedies of creditor to protect credits*
0. to e)haust the property in possession of
the debtor>('rt. 4453, )
4. to be subrogated to all of the rights and
actions of the debtor to save those which
are inherent in hi person. (accion
su!ro"atoria)
onditions*
that the debtor is indebted to the
creditor>
the creditor must be prejudiced by
the inaction of the debtor to
proceed against the third person>
the creditor must have first pursued
all of the properties of the debtor
which are not e)empt from
e)ecution.
5. to impugn all of the acts which the debtor
may have done to defraud him. (accion
pauliana)
$ccion subrogotoria- the right of the creditor to
e)ercise all of the rights of the debtor to bring all of
the actions against third persons.
-the creditor merely acts in the name and for the
account of the debtor.
E:CE<TION* $ights which are purely personal in
the sense that they are inherent n the person of the
debtor. (i.e. family rights)
$ccion pauliana- impugning or attac=ing fraud
directly by means of a rescissory action at the
instance of the creditors who are prejudiced.
-subsidiary in character.
5Art. 11.38
G#n#ral r!l#* $ights of obligations or those rights
which are ac#uired by virtue of an obligation are
transmissible in character.
E("#)tions*
0. where they are not transmissible in their
very nature (i. e. purely personal rights)>
4. where there are stipulations by the parties
that they are not transmissible>
5. where they are not transmissible by
operation of law.
C>A<TER T>REE
CIAAERENT KINCS OA OBLIGATIONS
Sec # - $ure and Conditional %!li"ations
5Art. 11.78
<!r# Obligation2 one whose effectivity or
e)tinguishment does not depend upon the
fulfillment or non-fulfillment of a condition or upon
the e)piration of a term or period>
characteri<ed by the #uality of
immediate demandability, but there
must be a reasonable period of grace.
Condition2 future and uncertain fact or event upon
which an obligation is subordinated or made to
depend.
T#r-H)#riod2 a term will surely pass and may or
may not =now when e)actly> characteri<ed by
futurity and certainty
"ondition2 it may or may not happen
Conditional obligations2 one whose effectivity is
subordinated to the fulfillment or non-fulfillment of a
future and uncertain act or event.
(inds of conditional obligation)
1. S!s)#nsi%# %s R#sol!tor$
5Art. 11318
S!s)#nsi%# R#sol!tor$
ondition precedent ondition subse#uent
$esults in the
ac#uisition of rights
arising out of the
obligations
$esults in the
e)tinguishment of rights
arising out of the
obligations
;he happening of the
condition gives birth to
the obligation.
;he happening of the
condition e)tinguishes
obligation
1f the condition is not
fulfilled, no juridical tie is
created.
1f the condition is not
fulfilled, juridical relation
is consolidated.
Chat is ac#uired by the
obligee in the
constitution of the
obligation is only mere
hope and e)pectancy,
protected by law.
Chat is ac#uired by the
obligee in the
constitution of the
obligation are rights that
are subject to threat or
danger of e)tinction.
jmvdg 11 2
nd
Semester/2009-2010
=. <ot#stati%#& "as!al& and -i(#d
(cause upon which the fulfillment depends)
('rt. 00/4)
<ot#stati%# "as!al -i(#d
fulfillment of
the obligation
depends upon
the will of a
party to the
obligations
fulfillment of the
condition
depends upon
chance(or upon
the will of a
third person
fulfillment of the
obligation
depends upon
the will of a
party to the
obligation and
partly upon
chance and(or
will of a third
person.
E ' ' # " t s
dependent on
the "r#ditor-
condition and
obligation,
VALIC
dependent on
the d#btor2
condition and
obligation,
VOIC
;he obligation
and the
condition shall
ta=e effect.
(valid and
enforceable)
;he obligation
and the
condition shall
ta=e effect.
(valid and
enforceable)
&&&;he precept in the first sentence of 'rt. 0/4 is
applicable only to a suspensive condition. Bence,
R#sol!tor$ I <ot#stati%# J VALIC obligation and
condition (e)planation at pp.00., Jurado)
&&&to avoid illusory obligation- $eason for the
invalidity of potestative condition dependent on the
debtor.
&&&!ayment for previous indebtedness(pre-e)isting
obligation although the condition is purely
potestative, affects the validity of the condition but
=eeps the validity of the obligation because the
obligation is not dependent upon the condition.
Si-)l# )ot#stati%# - valid> presupposes not just
the manifestation of the will but also the reali<ation
of an e)ternal act.
)!r# )ot#stati%# void> envisioned by 'rt. 00/4
@. <ossibl# %s I-)ossibl#
5Art. 113@8
<ossibl# I-)ossibl#
when the condition is
capable of reali<ation
according to nature,
law, public policy, or
good customs.
when the condition is
not capable of
reali<ation according to
nature, law, public
policy, or good customs.
(contrary to good
customs or public policy,
illicit, illegal)
E ' ' # " t s
;he obligation and the
condition is valid and
enforceable.
'nnulment of the
obligation that are
dependent of such
impossible condition
&&but is there is a pre-
e)isting obligation,
therefore not dependent
upon the fulfillment of
the obligation for its
perfection, only the
%961;1%9 is void, not
the obligation.
&&&1f the impossible condition is attached to an
obligation, the obligation itself is Void.
&&&1f the impossible condition is attached to a
simple donation or testamentary disposition, the
condition is not i-)os#d, although the donation
or testamentary disposition itself is %alid.
&&&;otal 'bsence of seriousness- reason why the
law invalidate the impossible condition I the
dependent obligation.
E:CE<TION/ gratuitous disposition(donation>
because the moving force here is the generosity of
the donor.
&&&;he impossibility of the condition should be
determined at the time the obligation is made or
constituted.
B. <ositi%# %s N#gati%#
5Art. 11358
<ositi%# N#gati%#
condition involves the
performance of an act
condition involves the
omission of an act.
;he event will happen ;he event will 9%;
jmvdg 12 2
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Semester/2009-2010
or ta=e place. happen or ta=e place.
E ' ' # " t s
;he obligation is
#(ting!is,#d as soon
as the time e)pires or if
it becomes indubitable
that the event will not
ta=e place.
;he obligation is
rendered #''#"ti%# from
the moment the time
indicated has elapsed,
or if it has become
evident that the event
cannot occur.
&&&;he intention of the parties, ta=ing into
consideration the nature of the obligation, shall
govern if no time has been fi)ed for the fulfillment
of the condition. ;he same rule applies to
<OSITIVE CONCITION.
Constr!"ti%# A!l'ill-#nt o' S!s)#nsi%#
Condition- ;he condition shall be deemed fulfilled
when the obligor voluntarily prevents &the o!li"ee
from' its fulfillment &of the condition'.('rt. 00/3)
-applicable only to S!s)#nsi%# "onditions
and not to $esolutory conditions.
&&&;he prevention must have been done for the
precise purpose of preventing the condition.
E''#"ts o' S!s)#nsi%# Condition 5Art. 11338
B#'or# A!l'ill-#nt A't#r A!l'ill-#nt
6emandability as well
as the ac#uisition or
effectivity of rights
arising from the
obligation is suspended.
;he obligation arises
and becomes effective.
;he right of the creditor
is mere hope I
e)pectancy.
;he right of the creditor
is perfected. (becomes
effective I demandable)
"ffects are retroactive
(applicable only to
consensual contracts)
'rt. 00//, par. 0- !rotection for the creditor
file an injunction to stop the debtor
does not necessarily always
involves court action in spite the
wordings of the law.
i.e. registration
'rt. 00//, par. 4- protection for the debtor
%bligation subject to
suspensive condition
%bligation subject to
period(term
;here is no certainty if
the obligation will be
fulfilled
1t is certain that the
obligation will be fully
demandable and
enforceable.
1nterests and fruits shall
also be delivered when
the debtor
paid(delivered by
mista=e.
1nterests and fruits shall
also be delivered when
the debtor
paid(delivered by
mista=e.
R#ason 'or r#troa"ti%it$/ ;he condition is only
accidental, not essential element of the obligation.
&&& ;he principle of retroactivity must be tempered
by principles of justice and practicability.
1n obligations to give
the principal obligation as well as the
fruits should be delivered
in unilateral obligations, the debtor
shall appropriate the fruits and interests
received, unless there is a contrary
intention on his part
in obligations to do or not to do
ourts shall determine in each case the
retroactive effect of the condition that
has been complied with.
&&&1n reciprocal obligations the fruits and interest
must be e#ually compensated between the parties.
&&&1n unilateral obligation, the debtor shall
appropriate the fruits and interests received unless
the intention is different.
&&&1n personal obligations, the courts will have to
determine in each case the retroactive effect of the
condition that has been complied.
E''#"t o' Loss& C#t#rioration& or I-)ro%#-#nt
5Art. 11378
0. 1f the thing is lost without the fault of the
debtor, the obligation shall be
#(ting!is,#d>
4. 1f the thing is lost through the fault of the
debtor, he shall be obliged to )a$
da-ag#s> it is understood that the thing is
lost when it perishes, or goes out of
jmvdg 13 2
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commerce, or disappears in such a way
that its e)istence is un=nown or it cannot
be recovered>
5. Chen the thing d#t#riorat#s without the
fault of the debtor, the i-)air-#nt is to b#
born# b$ t,# "r#ditor>
.. 1f it d#t#riorat#s through the fault of the
debtor, the creditor may choose between
the r#s"ission o' t,# obligation and its
'!l'ill-#nt, with ind#-nit$ 'or da-ag#s
in either case>
+. 1f the thing is i-)ro%#d by its nature, or by
time, the improvement shall in!r# to t,#
b#n#'it o' t,# "r#ditor>
3. 1f it is i-)ro%#d at the e)pense of the
debtor, he shall have no other right than
that granted to the !s!'r!"t!ar$.
&&&$ule in 'rt. 00/2 are natural conse#uences of
the principle of retroactivity.
&&&!redicated on the fulfillment of the condition.
&&&$efer only to conditional obligations to give a
determinate thing
!s!'r!"t- right or enjoyment of a thing, the
property of which is vested in another and to draw
from the same all the profit, utilities, and advantage
it may produce without altering the form(substance
of the thing.
Loss
a thing is considered lost when it*
0. perishes>
4. goes out of commerce D impossible to
legally transfer or re-ac#uire
5. disappears in such a way that its e)istence
is un=nown or it cannot be recovered
I-)ro%#-#nts
nat!ral a""#ssions/ alluvion, avulsion,
abandoned river beds, island formed
&&&;he debtor cannot as= for reimbursement for
e)penses incurred for useful improvements or
improvements for pleasure.
&&&the debtor may have the right to remove such
improvements provided it is possible to do so
without damage to the thing or property.
E''#"t o' R#sol!tor$ Condition/
B#'or# A!l'ill-#nt A't#r A!l'ill-#nt
;he obligation is subject
to the threat of
e)tinction.
;he rights vested in the
obligation is
e)tinguished.
!laced in the same
position with creditor in
obligation with
suspensive condition.
Chatever is paid or
delivered to any of the
parties should be
returned (return to
status #uo)
&&&;here are no e)ceptions in the retroactive effect
of resolutory condition> what was delivered need to
be returned.
&&&;he fulfillment of a resolutory condition signifies
the none)istence of the obligation, what is
none)istent must no give rise to any effect
whatsoever.
&&&&&&;here is no provision of mutual compensation
of fruits and interests but in connection with the
concept of justice, restitution in 'rt. 002, carries
with it the conse#uence of reimbursement for all
the e)penses incurred for the production,
gathering, and preservation of the fruits.
&&&7utual restitution is absolute in resolutory
conditions because the obligation is e)tinguished,
and it ceases to have effect thus does not carry
with it fruits and interests.

&&&1n obligations to do or not to do, the retroactive
effects shall depend upon the discretion of the
courts.
&&&'rt. 00/2 is also applicable with regard the
effects of loss, deterioration, and improvements of
things during the pendency of resolutory condition.
&&&1n R#sol!tor$ "ondition the Dd#btorE is the
person obliged to return while the D"r#ditorE is the
person to whom the thing must be returned.
R#"i)ro"al obligations
5Art. 11718
remedy for the injured party* rescission or
fulfillment
jmvdg 14 2
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Semester/2009-2010
R#"i)ro"al obligation-created or established at
the same time, out of the same cause and which
results in the mutual relationship of creditor and
debtor between the parties.
-characteri<ed by reciprocity> one obligation
is correlative of the other.
-bilateral in character.
-tacit resolutory condition.
&&&G#n#ral r!l#* 1f one of the parties fails to
comply with what is incumbent upon him,there is a
right on the part of the other to rescind (or resolve)
the obligation.
Rig,t o' r#s"ission- belongs to the injured party
alone.
-must be invo=ed judicially by filing the
proper action of rescission.
not absolute> the court is given the
discretionary power to fi) a period
within which the obligor in default may
be permitted to comply with what is
incumbent upon him.
implied in reciprocal obligations('rt.
0020, par. 0)
&&&1f the contract contains a resolutory provision by
virtue of which the obligation may be canceled or
e)tinguished by the injured party in case of breach
of obligation, judicial permission to cancel or
rescind the contract is no longer necessary. @ut the
ourt may confirm such e)tra judicial rescission.
&&&1f there is no e)press provision of rescission in
the contract, rescission should be invo=ed
judicially.
&&&;he termination of a contract must not be
contrary to law, morals, good customs, public
order, or public policy.
&&&9otice is always important in rescission so the
alleged infractor can #uestion the propriety of the
rescission.
&&&'rt. 0020 is not applicable to contracts of
partnership. ;here are special provisions that
govern the latter, thus the general provision will not
prevail. ;he same applies to sales of real property
($ecto Law) and sales of personal property by
installment (7aceda Law).
&&&$escission will only be rendered when the
breach is s!bstantial so as to defeat the object of
the parties in entering into the agreement.
ase* *ong %o + &o. vs ,awaiian--hilippine
&o.
'lternative remedies to the injured party*
--fulfillment of the obligation with payment for
damages (8pecific performance with damages)
--rescission of the obligation with payment for
damages (resolution with damages)
ase* *ongcuan vs .$&
&&&;he injured party can still see= the rescission or
resolution of the obligation even if he has opted to
choose the fulfillment of such obligation if
fulfillment should become impossible.
ase* $yson-*imon vs $damos
&&&1n awarding damages...
1n case or
rescission
only those elements of
damages can be admitted that
are compatible with the idea of
rescission.
1n case of specific
performance
%nly the elements of damages
can be admitted which are
compatible with the idea of
specific performance.
E''#"ts o' R#s"ission*
it is the duty of the court to re#uire the
parties to surrender whatever they may
have received from the other (without
prejudice to the obligation of the party who
was not able to comply with what is
incumbent upon him).
$escission can no longer be demanded
when he who demands is no longer in the
position to return whatever he may be
obliged to restore> neither can it be
demanded when the thing which is the
object of the contract is already in the
possession of a 5
rd
party who obtained it in
good faith.
$emedy for the latter will be an action
for the transfer or conveyance for
damages.
1f 5
rd
person obtained the property in bad
faith, the injured party can still go after the
jmvdg 15 2
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Semester/2009-2010
property.
1f it canGt really be recovered, the
remedy is for the injured party to
proceed against 5
rd
person who acted
in bad faith for damages.
&&&;here can be partial rescission or fulfillment
under 'rt. 0020.
ase* &entral /an0 vs &$
&&&$escission calls for mutual restitution. (1aperal
vs *olid ,omes)
&&&1f there is arbitration in the contract, arbitration
should be resorted to before as=ing for rescission
((orean 2echnology vs 1erma)
E''#"t o' br#a", b$ bot, )arti#s
5Art. 117=8
R!l#s*
0. the liability of the first infractor shall be
e#uitably tempered by the courts.
-fair to both parties because the
second infractor also derived, or
thought he would derive, some
advantage for his own act or
neglect
4. 1f it cannot be determined which of the
parties first violated the contract, the same
shall be deemed e)tinguished, and each
shall bear his own damages
-it is presumed that both at about
the same time tried to reap some
benefit
Sec ) - %!li"ations *ith a $eriod
T#r- or <#riod- interval of time, which e)erting an
influence on an obligation as a conse#uence of a
juridical act, either suspends its demandability or
produces its e)tinguishment.
Obligations 0it, a )#riod- obligations whose
demandability or e)tinguishment is subject to the
e)piration of a term or a period.
T#r-H<#riod Condition
1nterval of time r#+!isit#s $efers to a fact
which is future
and certain
or event which is
future and
uncertain
1nterval of time
that must
necessarily
come, although it
may not be
=nown when
'!l'ill-#nt ' future and
uncertain fact or
event that may
or may not
happen.
7erely e)erts an
influence upon
the time of the
demandability or
e)tinguishment of
an obligation.
In'l!#n"#
on
obligation
")erts an
influence upon
the very
e)istence of the
obligation itself.
9o retroactive
effects unless
there is an
agreement to the
contrary.
R#troa"ti%#
#''#"ts
Bas retroactive
effects
Chen a term or a
period is left
e)clusively to the
will of the debtor,
the e)istence of
the obligation is
not affected
(potestative term
or period)
E''#"t o'
0ill o' t,#
d#btor
Chen a
condition is left
on the e)clusive
will of the debtor,
the e)istence of
the obligation is
affected (Eoid)
(potestative
condition)
Classi'i"ation o' t#r- or )#riod
0. suspensive or resolutory
a) suspensive (e) die) - demandable only
upon the arrival of a day certain.
b) resolutory (in diem) D demandable at
once, although it is terminated upon the
arrival of a day certain
&&&da$ "#rtain- which must necessarily
come, although it may not be =nown when.
4. legal, conventional, or judicial
a) legal- term or period granted by law
b) conventional- stipulated by the parties
c) judicial- fi)ed by the courts
5. definite or indefinite
a) definite- the date or time is =nown
beforehand
b) indefinite- can only be determined by
an even which must necessarily come
to pass, although it may not be =nown
jmvdg 16 2
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Semester/2009-2010
when
#''#"ts o' t#r- or )#riod/
suspensive
term or period
the demandability of the obligation
is e)tinguished, not the ac#uisition
of right or the effectivity of the
obligation.
$esulotory
term or period
;he fulfillment or performance of
the obligation is demandable at
once, but it is e)tinguished or
terminated upon the arrival of the
day certain or the e)piration of the
term.
ase* -N/ vs 1ope3 4ito
&&&'cceleration clause is a clause where upon
default of the debtor with one or more payment will
ma=e the whole obligation demandable. ;his is a
valid provision in contracts.
"ffect of fortuitous event- relieve the contracting
parties from the fulfillment of their respective
obligations during the term or period.
ase* 4ictoria's -lanters vs 4ictorias 5illing
&o.
#''#"t o' ad%an"# )a$-#nt or d#li%#r$- obligor
can recover what he has paid or delivered with
fruits or interests. ('rt. 002+)
-applicable only to obligations to give
&&&;here can be no right of recovery if the obligor
delivers the thing voluntarily or with =nowledge of
the period or term or the fact that the obligation has
not yet become due and demandable.
('rt. 0023)
G#n#ral r!l#/ a period designated for the
performance or fulfillment of an obligation is
presumed to have been established for the benefit
of both the creditor and the debtor.
ase* de 1eon vs *yjuco
&&&1f the tenor of the obligation or from other
circumstances that the term or period has been
established in favor of the creditor or of the debtor,
the general rule will not apply.
K!di"ial t#r- or )#riod
('rt. 002-)
K!di"ial t#r- or )#riod- when fi)ed by a
competent court, the period can no longer be
judicially changed ('rt. 002-, par. 5).
-becomes a law governing the contract
between the party
ases when court can fi) term*
if the obligation does not fo) a period, but it
can be inferred that a period was intended
by the parties
cannot be applied to contract for
services in which no period was fi)ed
by the parties. 1n such contracts the
period of employment is understood to
be implicitly fi)ed, in default of e)press
stipulation, by the period of the
payment of the salary of the employee,
in accordance with the custom
universally observed throughout the
world.
cannot be applied to pure obligations
if the duration of the period depends upon
the will of the debtor
just and logical, because otherwise,
there would always be the possibility
that the obligation will never be fulfilled
or performed.
if the debtor binds himself to pay when his
means permit him to do so.
ase* 6on3ales vs 7ose
&&&9o other action can prosper unless the court
has fi)ed the duration of the term or period.
&&&1n potestative term or period, in order to prevent
the obligation contracted from becoming ineffective
by non fulfillment, the courts must fi) the duration
of the term or period.
&&&8o long as such period has not been fi)ed by
the court, legally there can be no possibility of any
breach of contract or of failure to perform the
obligation. 8uch cannot be raised for the first time
on appeal.
&&&'rt. 002- applies to a lease agreement, where a
contract of lease clearly e)ists.
jmvdg 17 2
nd
Semester/2009-2010
&&&1t is not necessary that the creditor will e)pressly
as= in the complaint for the court to fi) the period,
such may be granted although the complaint does
not as= for such relief.
&&&;wo ultimate facts that need to be alleged in the
complaint to describe an obligation with an
indefinite period.
0. ?acts showing that the contract was
entered imposing on one of the parties an
obligation in favor of the other
4. facts showing that the performance of the
obligation was left to the will of the obligor,
or clearly showing, or from which an
inference can be reasonably drawn that a
period was intended.
&&&;he action recogni<ed by 'rt. 002- may also
prescribe li=e any ordinary civil action. (6on3ales
vs 7ose'
E(ting!is,-#nt o' C#btorLs rig,t to <#riod
('rt. 002/)
(0) Chen after the obligation has been
contracted, he becomes insolvent, unless
he gives a guaranty or security for the debt>
(a) insolvency needs no judicial declaration
(b) includes any case in which it would be
impossible financially for the debtor to
comply with his obligations
(c) such insolvency must not be pre-
e)isting> arose after the constitution of
the obligation
(d) if there is a guaranty or security for the
debt, the debtor, in spite of insolvency,
does not lose his right to the period.
(4) Chen he does not furnish to the creditor
the guaranties or securities which he has
promised>
(a) such failure renders the original
obligation pure and without any
condition, and conse#uently, the loan
become due and demandable.
(5) Chen by his own acts he has impaired said
guaranties or securities after their
establishment, and when through a
fortuitous event they disappear, unless he
immediately gives new ones e#ually
satisfactory>
(a) there is a difference between effects of
impairment and effects of
disappearance
0. if the guaranty or security is
impaired through the fault of the
debtor, he shall lose his right to the
benefit of the period>
4. if it is impaired without his fault, he
shall retain his right>
5. if the guaranty or security
disappears through any cause,
even without the fault of the debtor,
he shall lose his right to the benefit
of the period
.. in either case of impairment or
disappearance, the debtor will not
lose his right to period if he gives a
new guaranty or security which is
e#ually satisfactory.
(.) Chen the debtor violates any underta=ing,
in consideration of which the creditor
agreed to the period>
(+) Chen the debtor attempts to abscond.
(a) 7ere attempt of the debtor disappear
or run away from his obligation.
Sec + - Alternative and ,acultative %!li"ations
5. Con!n"ti%# %s Alt#rnati%#
Con!n"ti%# Alt#rnati%#
there are several
conditions, all of which
must be reali<ed
there are several
conditions but only one
must be reali<ed.
Con!n"ti%# obligation2 all of the objects of the
obligation are demandable at the same time
distrib!ti%# obligation- when only one object of
the obligation is demandable.
Alt#rnati%# - comprehends several objects
or prestation which are due, but it may be
complied with by the delivery or
performance of only one of them.
!erformance of one of the obligation is
sufficient
jmvdg 18 2
nd
Semester/2009-2010
Aa"!ltati%# - comprehends only one object
or prestation which is due, but it may be
complied with by the delivery of another
object or the performance of another
prestation in substitution.
Alt#rnati%# Obligations
('rt. 04,,)
G#n#ral r!l#/ ;he right of choice belongs or
pertains to the debtor.
&&&%nce the debtor has made the choice, and such
choice is duly communicated to the creditor, the
obligation becomes simple.
")ceptions*
when the right of choice belongs or
pertains to the creditor
when it has been e)pressly granted to a
third person.
Limitation to the right of choice*
debtor cannot choose those prestations or
underta=ings that are impossible, unlawful,
or which could not have been the object of
the obligation.
J!restations which could not have been the object
of prestationK
underta=ings that are not included among
others those from which the obligor may
select, or
those which are not yet due and
demandable at the time the selection is
made, or
those by reason of accident or some other
cause, have ac#uired a new character
distinct or different from that contemplated
by the parties when the obligation was
constituted.
&&&!ar. 4 of 'rt. 04,, contemplates a case in which
the right to choose or select is 9%; lost or
e)tinguished altogether.
('rt. 04,0)
&&&'pplicable to cases in which the choice is
dependent on the debtor, creditor, or third person.
&&&ommunication is needed to ma=e the choice
effective.
&&&9o special form for the communication or
notification of choice, although it is always better to
ma=e the notification either in a notari<ed
document or in any other authentic writing.
&&&6ebatable* an the creditor to whom the
selection has been duly communicated impugn
such selectionL
&&&%nce the choice is made by the debtor (or
creditor, or 5
rd
person) and such selection has been
communicated, the obligation ceases to be
alternative. ;he loss of the object of prestation
chosen and communicated e)tinguishes the
liability.
('rt. 04,4)
&&&Chen only one prestation is practicable, the
debtor loses his right of choice altogether. ;he
obligation becomes simple.
Art. 1=6= Art. 1=66& )ar. =
%nly one prestation
which can be performed
;here are still two or
more prestations that
can be performed.
%bligation is converted
to a simple one
because the debtor
loses his right of
election
;he obligation is still
alternative because the
debtor can still e)ercise
his right of election.
&&&Chen the debtorGs right of choice is rendered
ineffective through the creditorGs fault, the only
possible remedy for the debtor is to bring an action
for the rescission of the contract with damages.
('rt. 04,5)
Art. 1=6B Art. 1=65
$ight of choice of
debtor
$ight of choice of
reditor
General rule e)ception
jmvdg 19 2
nd
Semester/2009-2010
?actors to consider in =nowing the effect of loss of
the object of prestation
to whom the right of choice belongL
Chat is the cause of the loss of the object
of prestationL (fortuitous event or fault of
the debtor)
(for Summar- of .ffects of /oss of %!li"ation0 see
Annex 1A2 )
Aa"!ltati%# Obligations
('rt. 04,3)
Aa"!ltati%# obligation- obligation wherein only
one object or prestation has been agreed upon by
the parties to the obligation, but which may be
complied with by the delivery of another object or
the performance of another prestation in
substitution.
Aa"!ltati%# %s Alt#rnati%#
%nly one object Ob#"t d!# 8everal objects
@y the delivery
of another object
or by the
performance of
another
prestation in
substitution
"o-)lian"# @y the delivery of
one of the
objects or by the
performance of
one of the
prestations which
are alternatively
due.
!ertains only to
the debtor
",oi"# 7ay pertain to
the debtor, or
creditor, or third
person
Loss or
impossibility of
the object
e)tinguishes the
obligation
E''#"t o'
'ort!ito!s
loss
Loss of all the
objects of
prestation is
necessary to
e)tinguish the
obligation
6oes not give
rise to liability on
the part of the
debtor
E''#"t o'
"!l)abl#
loss
7ay give rise to
a liability on the
part of the debtor
&&&'rt. 04,0 is applicable by analogy with respect
to the time or moment when the substitution will
ta=e effect.
&&&ommunication is needed to ma=e the
substitution effective.
&&&Chatever may be the cause of the loss or
deterioration of the thing intended as a substitute,
such loss shall not render the debtor liable. - 3ean
Capistrano
&&&%nce the substitution has been made, the
debtor shall be liable for the loss or deterioration of
the substitute on account of his delay, negligence,
or fraud.
&&&%nce the substitution is made, the obligation is
converted into a simple one.
Sec 4 - 5oint and Solidar- %!li"ations
Koint obligation - obligation where there is a
concurrence of several creditors, or of several
debtors, or of several creditors and debtors, by
virtue of which each of the creditors has a right to
demand, and each of the debtors is bound to
render, compliance with his proportionate part of
the prestation which constitutes the obligation
o!li"acion mancomunada
Solidar$ obligation D obligation where there is a
concurrence of several creditors, or of several
debtors, or of several creditors and debtors, by
virtue of which each of the creditors has a right to
demand, and each of the debtors is bound to
render, entire compliance with the prestation which
constitutes the obligation
o!li"acion solidaria
Coll#"ti%# Obligations
('rt. 04,-)
General rule* 1f there is a concurrence of several
creditors, or of several debtors, or of several
creditors and debtors,the presumption is that the
obligation is J%19; and not solidary.
")ceptions*
0. when the obligation e)pressly states that
there is solidarity>
Jjointl- and severall-2
1individuall- and collectivel-2
jmvdg 20 2
nd
Semester/2009-2010
4. when the law re#uires solidarity> and,
Art 6)70 #8)40 #6##0 #6#90 )#4:0
)#970 and )#64 ;CC
Art ##<0 R$C
5. when the nature of the obligation re#uires
solidarity.
%!li"ations arisin" from criminal
offenses or torts
Koint Ci%isibl# Obligations
('rt. 04,/)
&&&"ach creditor can demand only for the payment
of his proportionate share of the credit, while the
debtors can be held liable only for the payment of
his proportionate share of the debt.
&&&Joint creditor cannot act in representation of the
others> neither can debtor be compelled to answer
for the liability of the others.
&&&;he payment or ac=nowledgement by one of the
joint debtors will not stop the running of the period
of prescription as to the others.
Koint Indi%isibl# Obligations
('rt. 04,2)
-midway between joint and solidary obligations
characteristics*
no creditor can act in representation of the
other
no debtor can be compelled to answer for
the liability of the others.
joint with respect of the parties
indivisible with respect the fulfillment of the
obligation
= or -or# d#btors = or -or# "r#ditors
;he fulfillment of or
compliance with the
obligation re#uires the
concurrence of all the
debtors, although each
for his own share
;he concurrence or
collective act of all the
creditors, although
each for his own share,
is necessary for the
enforcement of the
obligation.
;he obligation can be
enforced only by
proceeding against all
9ot susceptible of
partial fulfillment.
the debtors
&&&1f one of the joint debtors fails to comply with his
underta=ing, the obligation can no longer be
fulfilled or performed.
&&&;he debtors who are ready to fulfill what was
incumbent upon them shall not contribute to the
indemnity beyond the corresponding portion of the
price of the thing or of the value of the service in
which the obligation consists. ('rt. 044.)
&&&1f one of the joint debtors be insolvent, the
others shall not be liable for his share.
&&&6ebatable* 1f there are two or more creditors or
debtors, will the claim of a creditor addressed to a
single debtor or the ac=nowledgment made by one
of the debtors in favor of one or more creditors be
sufficient to interrupt the period of prescriptionL
&&&1ndivisibility and solidarity are 9%; identical.
Indi%isibilit$ %s Solidarit$
!restation
which
constitute the
object of the
obligation.
nat!r# Legal tie or
vinculum, and
conse#uently to
the parties of
the obligation.
!lurality of
subjects not
re#uired
r#+!isit#s !lurality of
subjects is
indispensable.
;erminated
when the
obligation is
converted into
one of
indemnity for
damages
E''#"t o'
br#a",
$emains even
though there is
a liability on the
part of the
debtors
because of
breach.
Finds of solidarity
active D among creditors
tie or vinculum e)isting among several
creditors of one and the same
obligations by virtue of which each of
them, in relation to his co-creditors,
possesses the character of a creditor
only with respect to his share of the
obligation but in relation to other debtor
jmvdg 21 2
nd
Semester/2009-2010
or debtors, represents all other
creditors.
7utual representation
passive D among debtors
tie or vinculum e)isting among several
debtors of one and the same
obligations by virtue of which each of
them, in relation to his co-debtors,
possesses the character of a debtor
only with respect to his share of the
obligation, but in relation to other
creditor or creditors, represents all
other debtors.
each solidarity debtors, as far as the
creditors are concerned, is the debtor
to the entire amount
mi)ed D among creditors and debtors
'!nda-#ntal #''#"t o' a"ti%# solidarit$- creation
of a r#lations,i) o' -!t!al ag#n"$ among
solidary creditors by virtue of which the creditor is
empowered against the debtor or debtors not only
the rights which corresponds to him, but also all
the rights which correspond to the other creditors,
with the conse#uent obligation to render an
accounting of his acts to such creditors.
(e#ual mutual representation)
&&&relationship of mutual agency, basis of the
difference of the rules in 'rt. 0404 and 040+.
'!nda-#ntal #''#"t o' )assi%# solidarit$2 liability
of each debtor for the payment of the entire
obligation, with the conse#uent right to demand
reimbursement from the others for their
corresponding shares, once payment has been
made.
<assi%# solidar$
d#btor
S!r#t$
@oth are solidarily liable to the creditor for the
payment of the entire obligations
Liable for the payment
of the debt of another
but also for the payment
of a debt which is
properly his own.
Liable for the debt of
another.
1f he pays the entire 1f the surety pays the
obligation, he has a
right to demand
reimbursement from his
co-debtor of their share
in the obligation.
entire obligation, he
ac#uires a right to
reimbursement from the
principal debtor of the
entire amount he has
paid.
'n e)tension of time
granted by the creditor
to one of the solidary
debtors without the
=nowledge of the other
solidary debtors would
not have the effect of
releasing the latter from
their obligation.
'n e)tension of time
granted by the creditor
to the principal debtor
would release the
surety from the
obligation.
&&&:niform bond or tie- when the creditors and
debtors are bound in the same manner and by the
same conditions or periods.
&&&Earied bond or tie- when the creditors and
debtors are not bound in the same manner and by
the same conditions or periods.
&&&1n 'rt. 0400, the right of the creditor is limited to
the recovery of the share owed by the debtor
whose obligation has become mature leaving in
suspense his right to recover the shares
corresponding to the debtors whose obligations
have not yet matured.
ase* .nchausti + &o. vs 8ulo
('rt. 0404)
"ffects of !rejudicial acts of a creditor to...
debtor(debtors D valid and binding because
of the principle of mutual representation
which e)ists among the creditors
solidary creditors D the creditor who
performed the act shall incur the obligation
of indemnifying the others for damages.
&&&'rt. 0404 refers to effect of prejudicial acts upon
the relationship of the creditor among themselves.
&&&'rt. 040+ refers to the effect of prejudicial acts
upon the entirely different relationship of the
creditors with the debtor or debtors. 8hall result in
the e)tinguishment of the obligation
jmvdg 22 2
nd
Semester/2009-2010
&&&!rejudicial acts*
novation
compensation
confusion
remission
&&&;he act of e)tinguishment, which is prejudicial to
the co-creditors, will be valid so as to e)tinguish
the claim against the debtors, but not with respect
to the co-creditors whose right subsists and can be
enforced against the creditor who performed the
act alone.
Assign-#nt o' rig,t
('rt. 0405)
&&&onsent of other creditors in the assignment of
rights by another solidary creditor is needed.
&&&mutual agency
"ffects if assigned without the consent*
0. if assigned to another co-creditor, there is
no violation of the precept stated in 'rt.
0405> Ealid assignment
4. if the assignment is made to a third person,
there is a violation of the precept in 'rt.
0405> 1nvalid assignment
('rt. 040.)
&&&'ny creditor may demand (judicial or e)tra
judicial) the payment or performance of the
obligation from one, some, or all of the debtors.
&&&!ayment to be made on the creditor who made
the demand and to no other. 1f there is no demand,
payment may be made by the debtor to anyone of
the solidary creditors.
&&&1n mi)ed solidarity, judicial or e)tra judicial
demand prohibits the debtor upon whom the
demand is made from ma=ing payment to any
creditor other than to the one who made the
demand> does not e)tend to other debtors upon
whom no demand has been made.
('rt. 040+)
No%ation D change or substitution of an obligation
by another, resulting in its e)tinguishment or
modification, either by...
changing its object or principal condition, or
if prejudicial D the creditor who effected
the novation shall reimburse the others
for damages incurred by them
if beneficial D the creditor who effected
the novation is able to secure
performance of the new obligation,
such creditor shall be liable to the
others for the share which corresponds
to them, not only in the obligation, but
also in the benefits.
substituting another in place of the debtor,
or creditor shall be liable to the acts of the
new debtor in case there is a deficiency in
performance or in case damage is incurred
by the other solidary creditors
subrogating a third person in the rights of
the creditor.
;he obligation of the debtor and
creditor is not in reality e)tinguished.
1f effected by subrogating a third
person in the rights of all the solidary
creditors, the creditor liable for such
novation is liable to the creditors for the
share which corresponds to them in the
obligation.
e)tinguishes the obligation but it creates a
new one in lieu of the old.
;he co-creditor who does not participate in
the novation of the obligation can have a
share in the benefits of the modification but
not in possible losses.
General rule* ")tension of time for the payment of
the obligation does not constitute novation.
&&&needed in order that an obligation may be
e)tinguished by another which substitutes it.
")press declaration of novation
incompatibility of the old and new
obligation.
&&&1n suretyship, e)tension of time given to the
principal debtor by the creditor without the consent
of the surety e)tinguishes the latterGs liability,
e)cept when the surety is liable for different
payments or upon series of installments.
jmvdg 23 2
nd
Semester/2009-2010
Co-)#nsation D weighing two obligations
simultaneously in order to e)tinguish them to the
e)tent that the amount of one is covered by the
amount of the other.
Con'!sion D refers to the merger of the #ualities of
creditor and debtor in one and the same person
with respect to one and the same obligation.
!artial compensation or confusion*
there may be some doubt as to the part of
the obligation to which the confusion or
compensation shall be applied.
'pply the rules on 'pplication of payment
;otal compensation or confusion*
obligation is e)tinguished altogether and
what is left is the ensuing liability for
reimbursement within each group
R#-ission act of pure liberality by virtue of
which the creditor, without having received any
compensation or e#uivalent, renounces his right to
enforce the obligation, thereby e)tinguishing the
same either in its entirety or in the part or aspect
thereof to which the remission refers.
"ffects*
"o%#rs #ntir# obligation/
total e)tinguishment of the obligation.
the entire juridical relation is terminated
for the benefit of one of the debtors and
covers his entire share of the obligation.
;otally releases the debtor from the
creditors.
@ut the debtor is still bound to his co-
debtors
for the benefit of one of the debtors and
covers only a part of his share of the
obligation.
Bis character as a solidary debtor is not
affected
covers the entire share of a solidary debtor
in the obligation or only part thereof.
!artial remission is a valid defense if
the creditors proceed against any one
of the solidary debtors for the payment
of the entire obligation.
&&&8uch rules cannot be applied if the debt had
already been totally paid by anyone of the solidary
debtors before the remission is effected.
&&&1f one of the solidary creditor was able to collect
the entire amount from one or some, or all of the
solidary debtors, the obligation is totally
e)tinguished and that creditor must render an
account to his co-creditors.
('rt. 0403)
&&&reditor may proceed against any one, or some,
or all of the solidary debtors simultaneously.
&&&@ringing of an action against the principal debtor
to enforce the payment of the obligation is not
inconsistent with, and does not preclude the
bringing of another to compel the surety to fulfill hid
obligation under the surety agreement.
&&&' creditorGs right to proceed against the surety
e)ist independently of his right to proceed against
the principal.
&&&if the obligation is joint and several, the surety
has the right to proceed even against the surety
alone.
&&&obligation of the surety is the same as that of a
principal.
&&&;he surety is not entitled, as a matter of right, to
be given notice of the principalGs default.
ommencement of the suit is a sufficient demand.
('rt. 040-)
&&&Chere payment is made by one of the solidary
debtors, the effect is either the total of partial
e)tinguishment depending upon whether the entire
amount of the debt is paid or only part thereof.
&&&%nce payment is made by one of the solidary
debtors of the entire obligation,, there arises
immediately a conse#uent right of such debtor to
jmvdg 24 2
nd
Semester/2009-2010
claim from his co-debtors the share which
corresponds to them, with interest for the payment
already made.
&&&the right is not available to a debtor who ma=es
the payment after the obligation has prescribed or
has become illegal.
&&&;he interest shall be computed not from the time
payment was made, but from the time the debt
became due.
1f one of the solidary debtors become insolvent, his
share shall be borne by all his co-debtors, in
proportion to the debt of each. (par. 5, 'rt. 040-)
('rt. 0402 D 0440)
E''#"t o' Loss or I-)ossibilit$ o' <#r'or-an"#
1. NOT d!# to t,# 'a!lt o' t,# solidar$
d#btors
%bligation is e)tinguished
=. C!# to t,# 'a!lt o' on# o' t,# solidar$
d#btors
the obligation is converted into an
obligation of indemnity for damages,
but the solidary character of the
obligation remains
@. Aort!ito!s #%#nt
the obligation is converted into an
obligation of indemnity for damages,
but the solidary character of the
obligation remains
unjust enrichment D reason or philosophy behind
'rt. 044,
&&&a solidary debtor who paid the entire amount of
the obligation does not step into the shoes
(subrogation) of the creditors because he does not
ac#uire the same right to collect the entire amount
of the obligation from his co-debtors. Be is only
entitled to the proportionate share of each of the
co-debtors.
('rt. 0444)
&&&;he creditor(s may proceed against any of the
solidary debtors or all of them simultaneously for
the payment of the obligation, but whether only one
or all of the solidary debtors are sued jointly, any
soliadary debtor may interpose against the claim of
the creditor or creditors*
6efenses available to a solidary debtor
defenses derived from the very nature of
the obligation
payment or performance> res judicata>
prescription> those which invalidate the
contract such as mista=e, violence,
undue influence, fraud, etc...
defenses personal to him or pertaining to
his own share
minority> insanity, etc..
defenses personal to the others, but only
as regards that part of the debt for which
the latter are responsible.
7erely a partial defense
Sec 9 = 3ivisi!le and Indivisi!le %!li"ations
6. Ci%isibl# %s Indi%isibl#
Ci%isibl# Indi%isibl#
condition is susceptible
of partial reali<ation or
performance without the
obligation in essence
being changed.
condition is not
susceptible to partial
reali<ation or
performance because,
otherwise, the essence
of the obligation will be
changed.
1f separated into parts,
its essence is not
changed or its value is
not decreased
disproportionately,
because each of the
parts into which it is
divided are
,o-og#n#o!s and
analogo!s to each
other as well as the
thing itself.
1f separated into parts,
its essence is changed
or its value decreased
disproportionately.
;he divisibility of the MperformanceN obligation IS
NOT divisibility of the thing or the prestation which
constitutes the object of the obligation.
&&&;he divisibility or indivisibility of the object itself
is a very important factor, probably the most
important, in determining whether the prestation
which constitutes the object of the obligation is
susceptible to partial performance, or not.
jmvdg 25 2
nd
Semester/2009-2010
&&&?or a thing to be considered divisible, it is
important that it must be possible for reconstruction
into its condition prior the division, by uniting the
different parts into which it had been divided.
T,r## 4inds o' Ci%ision
Auantitative D when the thing can me
materially divided into parts and such parts
are homogeneous to each other.
7ovable- parts are actually separated
from each other
immovable- the limits of the parts are
fi)ed by metes and bounds
Aualitative D the thing can be materially
divided but the parts are not e)actly
homogeneous. (i.e inheritance)
1deal(1ntellectual D the thing can only be
separated into ideal or intellectual parts,
not material parts. (i.e. co-ownership)
('rt. 0445)
%ne debtor one creditor- the divisibility is of little
significance.
G#n#ral R!l#/ the creditor cannot be compelled to
partially receive the prestation in which the
obligation consists> neither may the debtor may the
re#uired to ma=e partial fulfillment.
E("#)tions/
when the obligation e)pressly stipulates
the contrary
when the different prestations constituting
the objects of the obligation are subject to
different terms and conditions.
Chen the obligation is in part li#uidated
and in part unli#uidated.
!lurality of debtors and creditors- the effect of the
divisibility or indivisibility of the obligation shall
depend whether the obligation is joint or solidary.
Joint D
6ivisible- 'rt. 04,/ shall apply
1ndivisible- 'rt. 04,2 and 044.
8olidary D 'rt. 0400- 0444 shall apply
5'rt. 044.)
@reach of joint indivisible obligation
the obligation can be enforced only by
proceeding against all of the debtors
if any of the debtors fails or refuse to
comply with the obligation, it is converted
into indemnity for damages
the debtor who failed or refused to comply
with his obligation shall bear the burden of
paying all of the damages suffered by the
creditors
the other debtor may also recover for
damages form the debtor at fault.
('rt. 044+)
;rue test of divisibility* FON t,# obligation is
s!s"#)tibl# o' )artial "o-)lian"#.
&&&;he susceptibility of partial compliance should
be understood in the sense of the possibility of
reali<ing the end or purpose which the obligation
see=s to attain. ('pplies to obligations to give, to
do, or not to do)
To gi%#
;he divisibility or indivisibility of the obligation is the
most important factor.
definite I indivisible obje ct- not susceptible
of partial fulfillment ('bsolute rule)
divisible object - susceptible of partial
performance. e)cept*
when the law provides for its
indivisibility which may be inferred or
presumed either>
from the fact that although the
object of the obligation can be
separated in parts, yet each part
constitutes a necessary
complement of the other parts
from the very purpose of the
obligation itself
it is so intended by the parties
e)press
implied
To Co
indivisible prestation - not susceptible of
partial fulfillment ('bsolute rule)
1n order to determine whether the
prestation is divisible or not, the object
or purpose of the obligation must
always be considered
it is divisible when it has for its
jmvdg 26 2
nd
Semester/2009-2010
object...
0. the e)ecution of a certain number or
days of wor=,
4. the accomplishment of wor= by
metrical units> or
5. the accomplishment of analogous
things which by their nature are
susceptible of partial performance.
6ivisible prestation - susceptible of partial
fulfillment, with certain #ualifications.
when the law provides for its
indivisibility
it is so intended by the parties
Not to Co
;he determination of the character of the
obligation will depend upon the sound
discretion of the court
Sec : = %!li"ations *ith $enal Clause
one in which an accessory underta=ing is
attached for the purpose of insuring its
performance by virtue of which the obligor
bound to pay a stipulated indemnity or
perform a stipulated prestation in case of
breach.
!enalty or penal clause is an accessory
obligation attached to the principal
obligation
<!r)os#s o' )#nalt$/
insure the performance of the obligation
(funcion coercitiva o de "arantia)> general
purpose
li#uidate the amount of damages to be
awarded to the injured party in case of
breach of the principal obligation (funcion
liquidatoria)> compensatory> pre-agreed
amount for the damages
to punish the obligor in case of breach of
the principal obligation (funcion
estrictamente penal)> punitive
Kinds o' )#nalt$
's to origin
L#gal Con%#ntional
onstituted by law onstituted by
agreement of the
parties
's to purpose
Co-)#nsator$
(for reparation)
<!niti%#
"stablished for the
purpose of indemnifying
the damages suffered
by the obligee or
creditor in case of
breach
"stablished for the
purpose of punishing
the the obligor or debtor
in case of breach
's to "ffect
S!bsidiar$('lternative KointHumulative
%nly the penalty may be
demanded in case of
breach
both the penalty and the
principal obligation may
be demanded
('rt. 0443)
&&&!enalty may be considered as reparation or
substitute for damages or as a punishment in case
of breach of the obligation.
R#)aration D the #uestion of damage is resolved,
since the stipulated indemnity or prestation
represents a legitimate estimate made by the
contracting parties of the damages caused by the
breach of the obligation.
proof of actual damage is not needed
general rule
<!nis,-#nt D the #uestion of damage is not yet
resolved
t,# rig,t to da-ag#s& asid# 'ro-
)#nalt$& still s!bsists
if the injured party desires to recover the
damages actually suffered by him in
addition to the penalty, he must prove such
damages.
")ception to the general rule
G#n#ral R!l#* the penalty is fi)ed by the parties as
a compensation or substitute for damages in case
of breach.
E("#)t/
0. when there is a stipulation to the contrary
4. when the obligor is sued for refusal to pay
the agreed penalty
5. when the obligor is guilty of fraud
jmvdg 27 2
nd
Semester/2009-2010
(see Art ##7<)
(the purpose of the penalty is to punish the obligor)
&&&;he obligee can recover from the obligor not
only the penalty, but also the damages or interests
resulting from the breach of the principal obligation
where both parties were unable to comply with
their obligation (fortuitous event), th penal clause
cannot be invo=ed by anyone of them to the
prejudice of the other.
('rt. 044-)
&&&;he debtor cannot e)empt himself form the
performance of the principal obligation by paying
the stipulated penalty. :nless the right has been
e)pressly and clearly granted to him.
&&&(*hat happens to the o!li"ation if the ri"ht to
choose to pa- the penalt- in su!stitute of the
principal o!li"ation has !een "ranted to the de!tor0
is the o!li"ation converted to facultative o!li"ation
or does it remain an o!li"ation *ith a penal
clause?)
&&&;he creditor cannot demand the fulfillment of the
principal obligation and the satisfaction of the
stipulated penalty at the same time. :nless the
right must be clearly granted to him.
if there is fault on the part of the debtor, the
creditor can demand not only the
satisfaction of the penalty but also the
payment for damages.
('rt. 044/)
&&&'pplicable only to the general rule in 'rt 0443
and not to the e)ceptions.
('rt. 0442)
t,# )#nalt$ -a$ b# r#d!"#d/
if the principal obligation has been partly
complied with
some but not all the prestation are
complied with by the debtor
refers to the #uantity or #uality of the
performance
if the principal obligation has been
irregularly complied with
all the prestations were complied with
but not in accordance with the tenor of
the agreement
refers to the form
if the penalty is ini#uitous or
unconscionable.
&&&;he creditor cannot recover more than the
penalty stipulated even if he proves that the
damage suffered by him e)ceed in amount such
penalty.(the amount is already agreed upon)
('rt. 045,)
&&&1f the principal obligation is void, the penal
clause is also void.
&&&if the penal clause is void, the principal
obligation is not affected.
C,a)t#r B
E:TING9IS>*ENT OA OBLIGATIONS
('rt. 0450)
-od#s o' #(ting!is,ing obligations
payment or performance
loss of the thing due
condonation or remission of the debt
confusion
compensation
novation
annulment
rescission
fulfillment of a resolutory condition
prescription
--renunciation or waiver by the creditor
compromise
e)piration of the resolutory term or
condition
death of one of the contracting parties
(personal obligations)
will of one of the contracting parties
mutual assent or dissent
*ection. 9 : -ayment or -erformance
('rt. 0454)
<a$-#nt D
fulfillment of the obligation either voluntarily
or involuntarily, including its e)tinguishment
by any means or modes
"onsists in t,# nor-al and %ol!ntar$
'!l'ill-#nt o' t,# obligation b$ t,#
r#aliMation o' t,# )!r)os# 'or 0,i", it
0as "onstit!t#d.
jmvdg 28 2
nd
Semester/2009-2010
1ncludes )#r'or-an"# in any other
manner, of an obligation.
?ulfillment of the obligation by the delivery
of a sum of money.
('rt. 0455-045+)
General $ule* there should be "o-)l#t#
performance. ('rt. 0455)
E("#)t/
substantial performance in good faith
the debtor may recover as though there
has been a strict and complete
fulfillment, less damages suffered by
the creditor. ('rt. 045.)
ase* Diesel &onstruction vs ;-*.
Chen the obligee accepts the performance
=nowing its incompleteness or irregularity,
without e)pressing any objection or protest.
('rt. 045+)
@ased on the principle of estoppel
when the obligation has been converted
into an indemnification (falls under 'rt.
0455)
('rt. 0453-045/)
G#n#ral R!l#/ reditor is not bound to accept
payment or performance by a third person. @his is
!ecause the creditor ma- not have confidence in
the honest- of the +
rd
person *ho mi"ht deliver a
defective thin" or pa- *ith a checA *hich ma- not
!e honored
")cept*
when it is made by a 5
rd
person who has
interest in the fulfillment of the obligation.
(joint debtor, guarantor, surety)
when there is a stipulation to the contrary
)#rsons 0,o -a$ )a$ obligation/
the debtor himself or his legal
representatives
any third person who have an interest in
the fulfillment of the obligation. (subject to
some juridical effects)
'rt.0453-045- are not applicable to a third
person who pays the redemption price in
sales with right to repurchase, because a
vendor a retro is not a debtor within the
meaning of the law.
Rig,ts o' a @
rd
)#rson
(with the =nowledge and consent of the debtor)
right of reimbursement D recover from the
debtor the #ntir# a-o!nt which he has
paid.
right of subrogation
(without the =nowledge and consent of the debtor)
right of reimbursement D recover only
insofar as the payment has been beneficial
to the debtor
&&&1f the obligation has been previously
e)tinguished by any mode, the 5
rd
person may
proceed against the creditor based on the principle
of unjust enrichment.
Gratuitous payments D payments effected by a
third person who does not intend to be reimbursed
by the debtor.
consent of the debtor is
necessary. ;here is no gift if the
gift was not accepted by the
debtor.
1f the consent is 8":$"6
rules on ordinary donation will
apply
if the consent is 9%;
8":$"6, 'rt. 0453 and 045-
will apply.
8uch gratuitous payments are
valid as far as the creditor is
concerned.('rt. 045/) so the 5
rd
person who offered the gift but
was declined by the debtor can
compel the debtor to reimburse
him (5
rd
person) the amount
accepted by the creditor.
('rt. 0452)
&&&1t is essential that the person who pays the
obligation should have the necessary legal
capacity to effect such payment.
free disposal of the thing due
capacity to alienate the thing
effect of absence of one or another will effect the
invalidity of payment
&&&"ven if the creditor has already accepted the
payment, it may still be annulled by proper action
in court, subject to the e)ception provided in 'rt.
0.4-.(But such provision has alread- !een
modified *hen the a"e of majorit- has !een
jmvdg 29 2
nd
Semester/2009-2010
lo*ered to #8 -o )
('rt. 04.,)
to 0,o- )a$-#nt -!st b# -ad#
person in whose favor the obligation has
been constituted
his successor in interest
any person authori<ed to receive payment
by the creditor himself (conventional
authority)
by law or legal authority (guardian,
e)ecutor or administrator of the estate
of a deceased person, assignee or
li#uidator of a partnership or
corporation)
General rule*payment to unauthori<ed person is
invalid. ")ceptions*
payment made to a 5
rd
person, provided
that it has redounded to the benefit of the
creditor. ;his can be invo=ed through the
following proofs* (Art #)4#)
if after payment, the 5
rd
person
ac#uires the creditorGs rights
if the creditor ratifies the payment to the
5
rd
person
if by the creditorGs conduct, the debtor
has been led to believe that the 5
rd
person has authority to receive the
payment
!ayment made to the possessor of the
credit, provided that it was made in good
faith. (Art #)4))
Ealid payment to the )oss#ssor o' t,#
"r#dit does not refer to possessor of
the document evidencing it.
the remedy of the creditor would be to
proceed against the possessor if credit
to whom payment was improperly
made.
&&&'lthough the payment is not valid because it is
not made to a person authori<ed to receive
payment, nevertheless it is clear that the vendee
had acted in good faith> he can not therefore be
said to have incurred in delay> conse#uently, the
vendor cannot as= for rescission of the contract.
('rt. 04.0)
payment to incapacitated person is valid*
if he has =ept the amount or thing paid or
delivered
insofar as the payment has been beneficial
to him.
;he payment is beneficial to him
(incapacitated) when that which has
been paid or delivered is applied or
spent for some rational, necessary or
useful purpose for his benefit.
&&&;hese rules are applicable only to obligations to
give.
('rt. 04.5)
&&&!ayment by the debtor to the creditor after
having been judicially ordered to retain the debt is
invalid.
such payment must be made to the proper
officer of the court issuing the writ of
attachment or garnishment in conformity
with the $ules of ourt.
('rt. 04..-04.3)
obligation to give specific or determinate thing D
the debtor cannot fulfill his obligation by delivering
a thing which is different from what is due although
such may be of the same value or even more
valuable than that which is due.
%bligation to do or not to do D the obligor cannot
fulfill his obligation by substituting another act or
forbearance.
&&&if the creditor or obligor accepts the delivery or
substitution, such acceptance shall give the same
effect as a fulfillment or performance of the
obligation.
Cation in )a$-#nt (dacion en pa"o) =
transmission of the ownership of a thing by the
debtor to the creditor as an accepted e#uivalent of
the performance of the obligation.
!roperty is alienated to the creditor in
satisfaction of a debt in money>
law on sales shall govern ('rt. 04.+)>
e)ception in 'rt. 04..
('rt. 04.-)
e)tra judicial e)penses D for the account of the
debtor
judicial costs D $ules of ourt will govern
&&&1f the debtor changed his domicile in bad faith or
after he has incurred in delay, the additional
jmvdg 30 2
nd
Semester/2009-2010
e)penses shall be borne by him.
('rt. 04./)
5 conditions or characteristics of payment*
identity D only the prestation agreed upon
and no other must be complied with
completeness D the thing or service in
which the obligation consists must be
completely delivered or rendered
indivisibility D the payment or performance
must be indivisible
General $ule* 'rt. 04./ is applicable only to
obligation where there is one debtor and one
creditor. ")ceptions*
when the obligation e)pressly states the
contrary
when the different prestations which
constitutes the objects of the obligation are
subject to different terms and conditions
when the obligation is in part li#uidated and
in part unli#uidated.
('rt. 04.2)
&&&' judgment awarding an amount in :8 dollar
may be made with its e#uivalent amount in local
currency in the conversion rate prevailing at the
time of payment. ;he trial court should determine
the the conversion rate if the parties cannot agree
on the same. (Ca"ala vs 5imenez)
$' +42 D 'n 'ct to assure the uniform value of
!hilippine oins and urrency.
the rule that payment of debts imoney shall
be made in the currency stipulated was
completely abrogated.
$' .0,, D amending $' +42
the law prohibiting stipulations in domestic
monetary obligations purporting to give the
obligee the right to re#uire payment in
currency other than the !hil. currency does
not apply to transactions listed on pp. 4.3,
%bligations and ontracts, 5urado
Legal tender D currency which may be used for the
payment of all debts, whether public or private
in the !hil., legal tender would be notes
and coins issued by the entral @an=.
!romissory notes payable to order or bills
of e)change, chec=s, etc. are not legal
tender
$ule* the debtor cannot compel the creditor to
accept a chec= or draft. ")cept*
when the document has been cashed
when it had been impaired through the fault
of the creditor.
('rt. 04+,)
&&&1n case of e)traordinary inflation or deflation, the
value of the currency at the time of the
establishment of the obligation would be the basis
of payment.
")traordinary inflation or deflationO
unusual or beyond the common fluctuation
in the value of the currency which the
parties could not have been foreseen when
the obligation was established. (;olentino)
uncommon decrease or increase in the
purchasing power of the currency which
could not have been reasonably foreseen.
(6ean apistrano)
&&&'rt. 04+, is applicable only to contractual
obligations and not to obligations arising from torts.
&&&re#uisites for @allantyne schedule to apply*
obligation should have been contracted
during the Japanese occupation
it could have been paid during the
Japanese occupation
it could have been paid with Japanese
military notes
('rt. 04+0)
!lace of payment*
Obligation <la"# o' )a$-#nt
deliver a determinate
thing
!lace where the thing
might be at the time the
obligation was
constituted
'ny other case 6omicile of the debtor
(unilateral obligations)
Su!section # - Application of $a-ment
('rt. 04+4)
a))li"ation o' )a$-#nt- designation of the debt
to which the payment must be applied when the
debtor has several obligations of the same =ind in
favor of the same creditor.
jmvdg 31 2
nd
Semester/2009-2010
$e#uisites*
one debtor, one creditor
4 or more debts of the same =ind
")ception* if at the time the designation
or application is made, such obligations
had already been converted into
obligations to indemnify with damages
by reason of breach or nonfulfillment.
all debts must be due
")ception*
when there is a stipulation to the
contrary
the application of payment is made
by the party for whose benefit the
term or period has been
constituted.
amount paid by the debtor not sufficient to
pay the total amount of the debt
right to designate belongs primarily to the debtor,
only at the time when payment is made.
$ight of creditor to ma=e application of payment is
merely a <RO<OSAL of the application of
payment. (this is done !- "ivin" to the de!tor a
receipt in *hich the application of pa-ments is
made su!ject to the express or tacit approval of
the de!tor)
-ista4#& 'ra!d& 'or"#& or inti-idation- causes
that will invalidate or grounds to impugn the
application of payments
ti-# o' )a$-#nt -ad#- when the debtor may
e)ercise the right to ma=e an application of
payment.
&&&'! is important so as to =now which among the
obligations will be e)tinguished.
('rt. 04+5)
payment of interest first before payment of
principal.
7anresa* the rule is obligatory because it is more
in consonance with justice.
8upreme ourt* such rule is only directory and not
mandatory. 'pplies only in the absence of a verbal
or written contract.
<r#!di"ial to t,# "r#ditor/ @y applying the
payment to the principal, the value of the principal
will be decreased and the value of the interest will
also be decreased.
('rt. 04+.)
applicable only when payment cannot be applied in
accordance with the rules.
Chen the debt due are not of the same burden, the
rule that the debt which is -ost on#ro!s to the
debtor shall be deemed to have been satisfied.
$ules to =now the most onerous*
T$)#s o' C#bts F,i", is -or#
On#ro!s
1ncurred at different
dates
%ldest ones
6ebts bearing interest
against those which are
not
6ebt which incurs the
interest
4 debts both incurring
interest
6ebt with higher interest
8ecured and not
secured debts
8ecured ones
!rincipal vs surety 6ebt covering that of
the principal
8olidary debtor vs sole
debtor
8olidary debtor (Jurado)
Sol# d#btor
5Tol#ntino8
8olidary obligation 8hare corresponding to
the solidary debtor
1ndemnity vs penalty
obligation
1ndemnity
Li#uidated vs
unli#uidated
li#uidated
$ro rata- in proportion
what to apply when the obligations are due
of the same nature or burden
&&&1f the debtor ma=es a proper '!, but the creditor
refuses to accept it because he wants to apply it to
another debt, such creditor incurs in delay (mora
accipiendi)- ;olentino
pro rata rule is applied
&ase) -aculdo vs <egalado
jmvdg 32 2
nd
Semester/2009-2010
Su!section ) - $a-ment !- Cessation
('rt. 04++)
C#ssion or assign-#nt- special form of payment
whereby the debtor abandons all of his property for
the benefit of the creditor in order that from the
proceeds thereof the latter may obtain payment of
their credits.
$e#uisites*
plurality of debts
partial or relative insolvency of the debtor
acceptance of the cession by the creditor
insolvency Law- applicable if the
creditor did not accept the cession
Kinds o' C#ssion/
contractual- 'rt. 04++, 9
judicial- 1nsolvency Law
C#ssion %s Cation in
<a$-#nt
!lurality of
creditors is
essential
N!-b#r o'
)arti#s
;here may be
only one creditor
6ebtor is in
partial or relative
insolvency
Ainan"ial
"ondition
o' t,#
)arti#s
6ebtor not
necessarily in
financial difficulty
:niversality of
debtorGs property
Ob#"t ;hing e#uivalent
of the
performance of
the obligation
$elease the
debtor for the net
proceeds of the
things ceded or
assigned, unless
there is a
contrary
intention.
E''#"t ")tinguishes the
obligation to the
e)tent the value
of the thing
delivered (as
e#uivalent of the
performance of
the obligation)
E''#"ts o' "#ssion/
partial e)tinguishment
no transfer of ownership to the creditors
only transfer of possession including
administration
Su!section + - @ender of $a-ment and
Consi"nation
('rt. 04+3-04+/)
t#nd#r o' )a$-#nt D manifestation made by the
debtor to the creditor to immediately comply with
the obligation
"onsignation D deposit of the object of the
obligation in a competent court in accordance with
the rule prescribed by law after refusal or inability
of the creditor to accept the tender of payment.
T#nd#r o' <a$-#nt Consignation
!reparatory act !rincipal act
")tra judicial in
character
Judicial in character
@ender of pa-ment does not !- itself produce le"al
pa-ment0 unless it is completed !- consi"nation
G#n#ral r#+!isit#s o' "onsignation D relative to
payment. ('rts. 0454-04+0)
those which ave already ta=en up in
connection with payment in general.
!erson who pays
person to whom payment must be
made
object of the obligation to be paid
time when payment or performance
becomes demandable.
S)#"ial r#+!isit#s D prescribed by 'rt. 04+3-
04+/
0. there is a thing due ('rt. 04+/, par. 0)
4. that the payment or performance was
refused or the creditor was incapable of
accepting payment
tender of pa-ment must !e made
!efore the consi"nation
tender of pa-ment must have !een
unconditional
that the creditor must have refused to
accept the pa-ment.
(S- vs .ufemio)
5. previous notice has been given to the
)#rsons int#r#st#d (ie suret- or
jmvdg 33 2
nd
Semester/2009-2010
"uarantor or a solidar- co-de!tornot just
to the creditor) in the fulfillment of the
obligation D a formal act
- to allo* the creditor to reconsider his
refusal> to sho* the de!torDs serious
desire to extin"uish his o!li"ation
.. that the thing or amount due has been
placed at the disposal of judicial authority
deposited *ith the ClerA of Court
usuall- accompanied !- the filin" of the
complaint for action for
consi"nationEaction for specific
performanceEaction for cancellation of
the o!li"ation.
+. after consignation has been made, the
persons interested in the fulfillment of the
obligation had been notified thereof.
reason* to enable the creditor to
withdraw the goods or money
deposited.
.ffectsF see Art #):<-#):#
Cas#/ ($once de /eon vs S-juco0 Inc)
G#n#ral R!l#/ re#uisites must be strictly complied
E("#)tion* in consideration of justice and e#uity
(Cas#/ $ural @an= of aloocan vs ')
&&&8ince consignation is a special form of payment,
it must conform not only with the special
re#uirements prescribed by law, but also with all
the re#uisites of a valid payment.
")ceptions to the rule that there must be a
previous tender of payment*('rt. 04+3)
0. when the creditor is absent or un=nown
4. when the creditor is incapacitated
5. when the creditor refused to give a receipt
.. when 4 or more person claim the right to
collect
+. when the title of the obligation has been
lost
R#ason 'or t,# #("#)tions/
G) incapacitated persons do not have the capacit-
to administer their propert-> the de!tor *ill !e
made to pa- a"ain !ecause the pa-ment is invalid
su!ject to the exception provided in Art #)4#
(protection to the de!tor)
G+ *ould mean that there has !een a previous
tender of pa-ment or it *as alread- said !- the
creditor that he *ill not accept an- tender of
pa-ment
G4 protection to the de!tor0 to avoid tender of
pa-ment to the *ron" individual
&&&Chen valid tender of payment is made, the
obligation is not e)tinguished unless it is completed
by consignation.
E''#"t/ e)emption of the debtor from payment of
interest and(or damages
&&&onsignation is applicable to both movable and
immovable objects.
E''#"t o' t#nd#r o' )a$-#nt/
stops the accrual of interest
release the debtor from liability over the
thing due
as= the judge to order the cancellation of
the obligation
preserve the right of the debtor (?rancisco
vs @autista)
('rt. 04+2)
e)penses of consignation shall be charged against
the creditor only when consignation have been
properly made
0. when the creditor accepts the thing or
amount deposited
4. when the court decided that consignation
have been properly made or cancels the
obligation at the instance of the debtor in
accordance with 'rt. 043,, par. 0.
('rt. 043,-0430)
E''#"ts o' "onsignation*
if the creditor finally a""#)ts the thing or
amount deposited, the payment is settled
altogether
if the creditor r#'!s#s to accept the thing
deposited, litigation for the e)tinguishment
or cancellation of the obligation on the
ground of a valid and effective consignation
will arise.
If the creditor neither refuses nor accepts0
the de!tor ma- asA the court to cancel the
o!li"ation after sho*in" the the requisites
of consi"nation have !een complied *ith
(Art #):<)- tolentino
E''#"ts o' 0it,dra0al b$ t,# d#btor/
jmvdg 34 2
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Semester/2009-2010
made before the creditor has accepted the
consignation or before judicial declaration,
the obligation remains in force
made with the consent of the creditor, the
creditor loses every preference which he
may have over the thing. 8olidary co-
debtors, guarantors and sureties, shall be
released.
;he solidary co-debtors are released
only with regard to their solidarity but
not with their respective share in the
obligation
the guarantors and sureties are
released from the obligation since the
obligation could have been
e)tinguished if not for the consent of
the creditor to withdraw the thing from
consignation>
!rayer of the creditor that the thing be adjudicated
in his favor is already an acceptance on the part of
the creditor, the debtor cannot withdraw the thing
anymore.
&&&?or immovable objects or other real properties,
the court will assign a receiver to consider the
object consigned or deposited.
*ection =. : 1oss of the 2hing Due
Loss o' t,# t,ing d!#- impossibility of compliance
with the obligation through any cause
impossibility of performance
perishes
goes out of commerce
disappears
('rt. 0434)
effect of loss in obligation to give a determinate
thing* e)tinguishment of the obligation
r#+!isit#s/
thing lost must be determinate
the thing was lost without the fault of the
debtor (if it is lost throu"h the fault of the
de!tor0 the o!li"ation is converted into an
o!li"ation to indemnif- the creditor for
dama"es)
the thing lost before the debtor has
incurred in delay (if it is lost after the de!tor
has incurred in dela-0 the de!tor *ill !e
held lia!le for indemnit- for dama"es)
#''#"t o' 'ort!ito!s #%#nt* e)tinguishment of the
obligation, ")ceptions*
when by law, the debtor is still liable even
for fortuitous events
when stipulated by the parties
when the nature of the obligation re#uires
the assumption of ris=
when the loss of the thing is due partly to
the fault of the debtor
when the loss of the thing occurs after the
debtor has incurred in delay
when the debtor promised to deliver the
same thing to 4 or more persons who do
not have the same interest
when the obligation arises from a criminal
offense
when the obligation is generic
('rt. 0435)
loss of a generic thing does not e)tinguish the
obligation because generic things do not perish
("enus nunquam peruit)
#''#"t o' loss in r#"i)ro"al obligation* if one of
the reciprocal obligation is e)tinguished the other
must also be e)tinguished. (;olentino)
('rt. 043.)
court granted discretion to determine whether a
partial loss or destruction of the thing is important
as to e)tinguish the obligation
('rt. 043+)
presumption of fault on the part of the debtor if the
thing is lost while in his possession. 1n such case,
the obligation is 9%; e)tinguished.
8uch presumption does not apply in case of
earth#ua=e, flood, storm, or other calamity.
('rt. 0433)
impossibility of performance in obligations to do
e)tinguishes the obligation.
&&&8ame re#uisites provided in 'rt. 0434
&&&Legal and physical impossibility must have
occurred AATER the constitution of the obligation.
= "a!s#s o' i-)ossibilit$
l#gal i-)ossibilit$- (direct) when the law
prohibits the performance or e)ecution of
the wor= agreed upon (immoral or
jmvdg 35 2
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dangerous)
- (indirect) the law imposes duties of a
superior character upon the obligor which
are incompatible with the wor= agreed
upon.
<,$si"al i-)ossibilit$ D arises principally
from the death of the obligor, when the act
to be performed re#uires his personal
#ualifications, or from the death of the
obligee, when the act can be of possible
benefit only to him.
- it can also arise from mere accident, or
from the acts of the debtor himself in which
there is no fault, or from the acts of 5
rd
person affecting the debtorGs capacity
&&&8eldom that impossibility of performance may
arise in obligation not to do. in rare e)ceptional
cases, 'rt. 0433 is also applied.
&&&annot be applied to obligations to give
(ase* $;CC vs CA)
('rt. 043-)
relative impossibility- service has become so
difficult as to be manifestly beyond the
contemplation of the parties, the court should be
authori<ed to release the obligor in 0,ol# or in
)art.
8ervice P performance
rebus sic stantibus = the parties stipulate in the
light of certain prevailing conditions and once these
condition cease to e)ist, the contract also ceases
to e)ist.
&aseF ;a"a @elephone Co et al vs CA
('rt. 043/)
A))li"abilit$*
obligation of restitution of a certain
determinate thing on the part of the person
criminally liable
cases where such obligation arises by
virtue of reparation or indemnification
persons who are principally and
subsidiarily liable
&&&the debtor shall not be e)empted from the
payment of the price of the thing, whatever may be
the cause of the loss. e)cept*
when he offered the thing to the obligee
and the latter refused to accept it without
justification.
O''#r
('rt. 043/)
Consignation
('rt. 04+3-0430)
")tinguishment of the
obligation through loss
by a fortuitous event
!ayment of the
obligation.
9ecessary that the
creditor refused to
accept the offer of the
debtor without just
cause to release the
latter from liability
%ffer is just a step to the
payment.
"ffect of creditorGs refusal without just cause*
debtor may ma=e a consignation of the
thing and thereby relieve himself of further
liability
=eep the thing in his possession, in which
case, the obligation still subsists, but if the
thing is lost through fortuitous event, 'rts.
0434-043+ shall govern.
'rt. 043/ is not applicable to cases where an offer
is not possible, since offer by the debtor is an
essential re#uisite.
('rt. 0432)
&&&'ll the rights of action which the debtor may
have against 5
rd
persons by reason of the loss of
the thing are transmitted by operation of law to the
creditor.
;ransmission made from the moment the
obligation is e)tinguished.
")ample*
insured object which is lost or destroyed,
creditor may collect from the insurer.
")propriated land, the creditor may collect
the compensation due by reason of the
e)propriation.
jmvdg 36 2
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*ection >. - &ondonation or
<emission of the Debt
R#-ission- an act of liberality by virtue of which,
the obligee without receiving any price or
e#uivalent, renounces the enforcement of the
obligation
as a result, the obligation is e)tinguished
totally or partially
gratuitous abandonment by the creditor of
his rights (8anche< $oman)
R#+!isit#s/
it must be gratuitous
must be accepted by the obligor
the obligation must be demandable
"lassi'i"ation o' r#-ission/
's to form E()r#ss2 made with the formalities
prescribed by law for donations
I-)li#d- can be deduced from the
acts of the obligee or creditor.
's to e)tent Total entire obligation is
e)tinguished
)artial refers only to the principal
or to accessory obligation or to an
aspect thereof which affects the
debtor (solidarity)
's to
constitution
.nter vivos : constituted by
agreement of the obligee and the
obligor
5ortis causa- constituted by last
will and testament
('rt. 04-,)
gratuitous D most essential characteristics of
remission
&&&ondonation must necessarily be accepted by
the debtor.
&&&ondonation is a bilateral act because our ode
re#uires its acceptance by the debtor
A))li"abilit$ o' t,# R!l#s on Conations
rules on acceptance of the debtor
rules on forms of donation in e)press
condonation
'rt.-./, ivil ode-movable property I
obligations to do or not to do
personal property *
verbal remission shall not be
re#uired since there is no
transfer of property but merely
a remission or condonation of
an obligation to give a personal
property.
6ebtor is relieved from ma=ing
conveyance of the property.
")press remission* acceptance
by the debtor may be implied or
tacit, provided that the value of
the thing condoned does not
e)ceed !+,,,,
'rt.-.2, ivil ode-immovable property
rules on e)tent of the amount of donation
'rt. -+,-'rt. -+4, ivil ode
'rt. --0, ivil ode
rules on revocation of the donation
1mplied remission may be deduced form the act or
acts of the creditor which clearly show the intent to
condone the obligation.
")press or implied acceptance is also
necessary
&&&Cill an ")press remission which fails to comply
with the forms prescribed in 'rts. -./ and -.2 of
the ode be enforced as a ;acit remissionL
'ns* 9egative, to rule otherwise would defeat the
purpose of 'rt. 04-,.
r#-#d$ 'or %oid donation/
reduction of the donation> or
suppression of the donation
('rt. 04-0-04-4)
6elivery of the private document evidencing debt is
a presumption of creditorGs renunciation of any right
of action for the collection of the debt.
<eason) private document is the !est evidentiar-
proof to sho* that the o!li"ation has not !een
paid
R#+!isit#s*
document evidencing the credit has been
delivered by the creditor to the debtor
document must be a private document
jmvdg 37 2
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delivery must be voluntary
presumption of voluntary delivery by the creditor
unless the contrary is proved
heirs of the creditor may impugn
condonation by establishing that it is
inofficious in conformity with 'rt. --0, ivil
ode.
legitime is part of persons estate reserved
by law for his compulsory heirs.
Q of the entire estate reserved for the
legitimate child(children
other half is free portion, may be
distributed to anybody
1nofficious donation are those which
e)ceeds the free portion of the estate
ollation the value of all gratuitous
disposition are added to the estate of a
person for the benefit of his compulsory
heirs.
('rt. 04-5-04-.)
effect of remission* ")tinguishment of the
obligation in its entirety or aspect thereof
in joint obligation, the remission only affect
the share of the creditor who ma=es the
remission and the corresponding share of
the debtor in whose favor the remission is
made.
1n solidary onligation, 'rts. 040+, 0402, and
044, of the ode shall govern.
&&&$emission of the principal obligation is
remission of the accessory obligation but remission
of the accessory obligations is not remission of
principal obligation.
accessory obligation is just dependent on
the principal obligation for their e)istence
and efficacy.
!resumption of remission of accessory obligation
of pledge e)ist when the thing, after its delivery to
the creditor, was found at the possession of the
debtor.
*ection ?. : &onfusion or 5erger
('rt. 04-+)
onfusion D merger of the characters of the
creditor and debtor in one and the same person, by
virtue of which, the obligation is e)tinguished.
meeting in one and the same person the
#ualities of a creditor and debtor with
respect to one and the same obligation.
R#+!isit#s*
merger of characters of debtor and creditor
must be in the same person
it must ta=e place in the person of either
the principal creditor or principal debtor
there must be complete and definite
merger of the #ualities
Kinds o' *#rg#r or Con'!sion/
's to cause or
constitution
.nter vivos- constituted by
agreement of the parties
mortis causa- constituted by
succession.
's to e)tent or
effect
Total- e)tinguishes the entire
obligation
<artial-e)tinguishes only a part
or aspect of the obligation or only
the shares in joint obligation.
('rt. 04-3)
1f the merger will ta=e place in the person of the
subsidiary creditor and subsidiary debtor
(guarantor), principal obligation is not e)tinguished,
there will only be 8:@8;1;:;1%9 of creditor or
debtor.
In "as# o'/
Guarantor-creditor D can demand the
performance of the obligation from the
debtor, in case of default, even from his co-
guarantors
Guarantor-debtor D the creditor can
demand the performance of the obligation
directly from the guarantor.
('rt. 04--)
there is only a partial e)tinguishment of obligation
in case of confusion between one joint debtor and
one joint creditor.
Cith regard to solidary obligations, the obligation is
altogether e)tinguished without prejudice to the
jmvdg 38 2
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rights and obligations of the solidary creditors and
debtors among themselves.
onfusion may be revo=ed
agreement* presence of any of the causes
of rescission, annulment, etc.
inheritance* nullity of the will, subse#uent
appearance of an heir with better right
"ffect* the obligation is recreated in the same form
and under the same condition in which it was found
before the merger too= place.
period which has elapsed from the moment
the merger too= place until its revocation
cannot be computed in the determination of
the period of prescription
*ection @. : &ompensation
('rt. 04-/)
Co-)#nsation- mode of e)tinguishing in their
concurrent amount those obligations of persons
who in their own right are creditors and debtors to
each other.
weighing two obligations simultaneously in
order to e)tinguish them to the e)tent in
which the amount of one is covered by the
amount of the other.
8implified payment (pa"o a!reviado)
do!bl# ad%antag# o%#r )a$-#nt/
facility of payment- ta=es effect by
operation of law
guaranty for the effectivity of the credit-
may avoid prejudice to one party by
fraud or insolvency of the other.
<a$-#nt Co-)#nsation
;a=es effect by acts of
parties
;a=es effect by
operation of law
apacity to give and to
ac#uire are necessary
apacity to give and to
ac#uire not essential
omplete and
indivisible payment
!artial payment
Con'!sion Co-)#nsation
%ne person in whom is
merged the #ualities of
creditor and debtor
4 persons who are
creditors and debtors of
each other
%nly one obligation 4 obligations
Co!nt#r"lai- Co-)#nsation
8imilarity of debts is not
necessary
4 debts must consists in
money or if not, they
must be of the same
=ind and #uality
6oes not re#uire
li#uidation of debts
6ebts must be
li#uidated
9eed to be pleaded to
be effectual
9eed not be pleaded
Kinds o' Co-)#nsation/
's to cause
L#gal- ta=es effect by operation of law
when all the re#uisites are present ('rt.
04-/-04-2, ivil ode)
Vol!ntar$- agreement of the parties who
are mutually creditors and debtors to
compensate their respective obligations,
re#uisites may not all be present
ta=es effect the moment the parties
agree
Aa"!ltati%#- by the will of only one party
and the other one cannot choose
compensation because of any impediment.
('rt. 04/--04//)
K!di"ial- ta=es effect by judicial decree
ta=es effect the moment the judicial
decree becomes final and e)ecutory
's to effect
Total D compensation of 4 e#ual debts
<artial - compensation of two une#ual
debts.
('rt. 04-2)
r#+!isit#s o' "o-)#nsation*
0. 4 parties are principal creditors and
principal debtors of each other
4. both debts must consist in money, or if the
things due are consumables, they must be
of the same =ind and #uality
limited to obligations to give
consumables- movables which cannot
be used in a manner appropriate to
their nature without being consumed
fungibles- may be e)changed or
compensated by another of the same
=ind and #uality
jmvdg 39 2
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Semester/2009-2010
5. both debts must be due
.. both debts must be li#uidated and
demandable
li#uidated debts- those that may be
determined by simple arithmetical
operation
+. no retention or controversy commenced by
5
rd
persons over either of the debts and
communicated in due time to the debtor
retention D application of the credits of
one of the parties to the satisfaction of
the claims of a 5
rd
person
controversy D refers to a case in which
5
rd
persons claim to be the creditor
3. compensation must not be prohibited by
law
G) compensation cannot !e applied to o!li"ations
to do !ecause of the differences in the respective
capacities of the o!li"ors
G9 controvers-F the effect is provisional
suspension of the compensation If the credit is
adjudicated to the part- interested in the
compensation0 compensation ma- taAe place0 !ut
if the credit *as adjudicated to the +
rd
person *ho
claims to !e the creditor0 compensation cannot
taAe place
('rt. 04/,)
right of guarantor to set up compensation, not only
for what such creditor owes him, but also for what
such creditor owes the principal debtor.
e)ception to 'rt. 04-2, 9o. 0
Basis/
@ond of the guarantor cannot be resorted
to so long as the debtor can pay
Chen principal obligation is e)tinguished,
the accessory obligation of the guarantor is
also e)tinguished since it is subordinate
thereto.
('rt. 04/0-'rt. 04/4)
'rt. 04/4, e)ample of voluntary obligation
&&agreement to compensate debts which are not
yet due
('rt. 04/5)
when the defendant who has an unli#uidated claim
for damages against the plaintiff sets it off by
proving his right to said damages and the amount
thereof, it is converted into a li#uidated claim by a
court decree, in which case, compensation may
ta=e place
('rt. 04/.)
e)ception to rule 9o.5, 'rt. 04-2
rescissible(voidable obligations (considered
demanda!le) may be compensated against each
other before they are judicially rescinded or
avoided.
('rt. 04/+)
E''#"ts o' "#ssion/
F,#n t,# "o-)#nsation ,as ta4#n )la"#/
%ne or other obligation is e)tinguished,
subse#uent assignment of rights by the
creditor to a 5
rd
person "annot a''#"t the
debtor with respect to the compensation
which has already ta=en place.
'ssignee can just demand indemnity
for damages on the ground of fraud
E("#)t* when the debtor consented to
the assignment, in which case, the
assignee can still demand for the
payment of the credit
F,#n t,# "o-)#nsation ,as not ta4#n )la"#
-effects depend on whether the assignment was
made...
with the consent of the debtor D the debtor
cannot set up against the assignee the
compensation
e)cept* if he notified the assignor that
he reserves his right to the
compensation, he can still set up
compensation as a defense when the
assignee demands the payment of the
credit.
Cith =nowledge but without consent of the
debtor D the debtor may set up the defense
of compensation of debts prior to the
assignment but not subse#uent ones.
!urpose* to prevent fraud.
Cithout =nowledge of debtor - the debtor
may set up the defense of compensation of
all credits which he may have against the
assignor and which may have become
demandable, before he was notified of the
assignment.
$emedy for the assignee* action for
jmvdg 40 2
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Semester/2009-2010
indemnification against the assignor
('rt. 04/3-'rt. 04//)
C#bts 0,i", "annot b# "o-)#nsat#d/
0. debts arising from contracts of depositum
4. debts arising from contracts of
commodatum
5. claims for support for gratuitous title
cannot be applied to support in arrears
.. obligations arising from criminal offenses
+. certain obligations in favor of the
government, such as ta)es, fees, duties,
and others of a similar nature.
@ased on justice, trust and confidence, and sel-
preservation.
('rt. 04/2-042,)
effect of compensation D e)tinguishes both debts
to the e)tent that the amount of one is covered by
the amount of the other
compensation ta=es place by operation of law
(ipso jure)- its effects arise on the very day on
which ALL re#uisites are fulfilled.
- applicable only to legal compensation
*ection A. : Novation
9ovation D (extinctive) substitution or change of an
obligation or change of an obligation by another,
resulting in its e)tinguishment or modification,
either by
changing its object or principal conditions,
or
by substituting another in place of the
debtor, or
by subrogating any 5
rd
person in the rights
of the creditor.
- mode of e)tinguishing obligations through the
"r#ation o' a n#0 on# effected by the change or
substitution of an obligatory relation by another
with the intention of substantially e)tinguishing or
modifying the same.
- two-fold purpose*
e)tinguishing the old obligations
giving birth to a new obligation to ta=e
place of the old
re#uisites*
previous valid obligation
agreement of the parties to the new
obligation
e)tinguishment of the old obligation
validity of the new obligation
E(tin"ti%# *odi'i"ator$
%ld obligation is
terminated by the
creation of a new
obligation that ta=es the
place of the former
%ld obligation subsists
to the e)tent it remains
compatible with the
amendatory agreement
Kinds o' No%ation/
's to essence ob#"ti%#Hr#al D change
either in the cause,
object, or principal
conditions of the
obligation
s!b#"ti%#H)#rsonal
substitution of the person
of the debtor (passive) or
to the subrogation of a 5
rd
person in the rights of the
creditor (active).
*i(#d combination of
objective and subjective
novation.
's to form or
constitution
E()r#ss D declared in
une#uivocal terms that
the old obligation is
e)tinguished by a new
one which substitutes the
same
ta"it- old and new
obligations are
incompatible with each
other on every point
's to e)tent or
effect
Total D absolute
e)tinguishment
)artial D mere
modification
%bjective 9ovation*
",ang# in t,# "a!s# D e.g. contract of
sale or a contract of lease in which the
price has not yet been pad to the vendor or
lessor. 1f the the parties to the contract
subse#uently entered into a new
jmvdg 41 2
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Semester/2009-2010
agreement whereby the obligation to pay is
converted into a loan made to the vendee
or lessee, the result is real or objective
novation
",ang# in ob#"t D e. g. certain amount is
due or any change whereby the obligation
to pay is converted into an obligation to
render a personal service. 8imilar with
dation in payment.
",ang# in )rin"i)al "onditions o' t,#
obligation only those changes of an
essential character can effect a novation of
the previous or original obligation.
('rt. 0424)
&&&refers to forms of novation
novation by presumption has never been favored
animus novandi D intent to substitute a new
obligation for the old one> must be clearly
established before we can say that there is a
novation resulting in the e)tinguishment of the old
obligation and in the creation of a new one.
(3ele"atus de!itor est odiosus in le"e)
")press novation- declared in une#uivocal terms*
clearly results from the agreement, or
shown by full discharge of the original debt
otherwise the old contract remains in force and the
new one is added to it
1mplied novation D test of incompatibility
&&&C%9 the 4 obligations can stand together, each
having its own independent e)istence.
9o incompatibiliy P 9o novation
reiteration or ratification of the old contract
with slight modifications or alterations
4
nd
contract provides for another method of
payment
4
nd
contract provides for additional security
4
nd
contract provides for postponement of
the date of payment
creditor receives another guaranty or
accepts payment from 5
rd
person, so long
as there is no agreement that the principal
debtor shall be released from the
obligations
filing of a surety bond
effect in obligation with a term or period*
postponement of term or period D there is
no novation
reason* there is no incompatibility
reduction of the duration of the term D there
is a novation
reason* clear case of incompatibility
and change of the principal condition of
the old obligation.
('rt. 0425)
novation by substitution of the debtor D personal
novation
effected with the consent of the creditor
expromision D effected with the
consent of the creditor at the instance
of the new debtor even without the
=nowledge or against the will of the old
debtor
substitution with the =nowledge and
consent of the old debtor
substitution without the =nowledge
and consent of the old debtor
delegacion - effected with the consent
of the creditor at the instance of the old
debtor with the concurrence of the new
debtor> refers to the substitution of
debtors effected when the original
debtor offers and the creditor accepts a
5
rd
person who consents to the
substitution
re#uisites* initiative of the
substitution must emanate from the
original debtor
consent of the new debtor
acceptance by the creditor
difference according to 7anresa
Bxpromision Delegacion
1nitiative for the change
does not emanate from
the debtor
1nitiative for the change
emanates from the
debtor
may be made without
the consent of the
debtor since it consists
in a 5
rd
person
assuming his obligation
7ust be made with the
concurrence of the
original debtor since it is
he who offers the
substitution
8ubstitution may be
effected even without
consent of the debtor
(dele"ante), creditor
jmvdg 42 2
nd
Semester/2009-2010
the consent of the
original debtor
(dele"atorio), and 5
rd
person (dele"ado) to be
substituted is necessary
difference according to the case Auinto vs !eople*
Bxpromision Delegacion
1nitiative does not come
from the debtor and
may be made without
his =nowledge
;he debtor offers, the
creditor accepts a 5
rd
person who consents to
the substitution and
assumes the obligation
&&&1n either mode of substitution, the "ons#nt o'
t,# "r#ditor is INCIS<ENSABLE.
- no time nor form prescribed when such consent
must be given and ow it must be given.
E''#"t o' )a$-#nt b$ n#0 d#btor/
old debtor must reimburse to the new
debtor whatever benefits he may have
derived therefrom.
Bxpromision- relationship shall be
regulated by the rules regarding payment
of a debt by a 5
rd
person
0it, debtorG consent D new debtor can
demand the reimbursement of the
entire amount which he has paid, and
at the same time be subrogated in all of
the rights of the creditor
0it,o!t the =nowledge and consent of
the debtor (pa-ment *ithout Ano*led"e
and consent)D new debtor can demand
reimbursement from the old debtor only
insofar as the payment has been
beneficial to such debtor, no
subrogation
0it,o!t the =nowledge and consent of
the debtor (pa-ment *ith Ano*led"e
and consent) D new debtor can
demand the reimbursement of the
entire amount which he has paid, and
at the same time be subrogated in all of
the rights of the creditor
Delegacion D relationship between the
parties shall be regulated by their
agreement> in the absence thereof, the
relationship shall be governed by the rules
regarding payment of a debto by a 5
rd
person with the debtorGs consent.
new debtor can demand the
reimbursement of the entire amount
which he has paid, and at the same
time be subrogated in all of the rights of
the creditor
('rt. 042.-042+)
E''#"t o' non2)a$-#nt o' t,# n#0 d#btor/
general rule* novation by substitution of the debtor
whether by expromision or dele"acion has the
effect of releasing the original debtor from his
obligation to the creditor, and the same time of
substituting the new debtor thereto.
&&&'rt. 042. is applicable only to expromision
1f the substitution is without the =nowledge
or against the will of the original debtor, the
new debtorGs insolvency 8B'LL 9%;
$"E1E" the original debtorGs liability to the
creditor
if the substitution is with the =nowledge and
consent of the original debtor, the new
debtorGs insolvency 8B'LL $"E1E" the
original debtorGs liability to the creditor
&&&'rt. 042+ is applicable only to dele"acion
$ight of action of the creditor against the original
debtor can no longer be revived E:CE<T in the
ffg. cases*
when the insolvency of the delegado was
already e)isting and of public =nowledge at
the time the delegante delegated his debts
when such insolvency was already e)isting
and =nown to the original debtor when he
delegated his debt.
('rt. 0423)
a))li"abl# to/
objective novation
novation by substituting the person of the
debtor
#''#"t !)on a""#ssor$ obligations/
it may subsist if there is a stipulation
constituted in favor of a 5
rd
person which
may be demanded separately from the
principal obligation, although subordinated
to the latter
pour autrui D beneficial stipulation>
stipulation in a contract, clearly and
deliberately conferred by the
jmvdg 43 2
nd
Semester/2009-2010
contracting parties as a favor upon a 5
rd
person, who must have accepted it
before it could be revo=ed ('rt. 0500)
('rt. 042--042/)
- re#uisite of a valid new and old obligation before
effecting novation is logical because the purpose of
novation is substitution of the new obligation for the
old.
Old obligation
void D there is nothing to novate> new
obligation cannot ta=e effect
voidable D when annulment depends upon
the debtor or when a voidable obligation is
ratified, novation is valid
expromision without the consent of the
debtor D debtor can still avail himself of
the right to invo=e the voidable
character of the obligation against any
claim of the 4
nd
debtor
if the new debtor is aware of the defect
of the old obligation at the time when
he assumed payment, he cannot avail
himself of the right to invo=e the
voidable character of the obligation
against any claim of the creditor.
n#0 obligation
void D old obligation subsist, unless the
parties intended that the former relation
should be e)tinguished in any event
('rt. 0422)
1f the original obligation was subject to a
suspensive or resolutory condition, the new
obligation shall be under the same condition,
unless it is otherwise stipulated.
E''#"t i' old and n#0 ar# s!b#"t to a di''#r#nt
"ondition/
both condition can stand together D both
the condition in the original and new
obligation must be fulfilled> the new
obligation becomes demandable
only the condition affecting the 0
st
obligation is fulfilled D previous obligation is
revived, new obligation loses its force
only the condition affecting the 4
nd
obligation is fulfilled D there is no novation
since the re#uisite of a valid previous
obligation would be lac=ing
if conditions of both obligations are
incompatible D 0
st
obligation is
e)tinguished, new obligation remains (as
the latest e)pression of the will or intent of
the parties)
('rt. 05,,)
novation by subrogation
conventional subrogation D ta=es place by
agreement of the original creditor, the 5
rd
person, and the debtor
legal subrogation D ta=es place by force of
law.
('rt. 05,0)
conventional subrogation D must be clearly
established in order to ta=e effect.
"on%#ntional
s!brogation
Assign-#nt o' rig,ts
Governed by 'rt. 05,,-
05,.
Governed by 'rt. 034.-
034-
6ebtorGs consent is
re#uired
6ebtorGs consent is not
re#uired
Bas the effect of
e)tinguishing the old
obligation and gives rise
to a new obligation
Bas the effect of
transmitting the rights of
the creditor to another
person without
modifying or
e)tinguishing the
obligation
6efects or vices in the
original obligation are
cured
6efects or vices in the
original obligation are
not cured
"ffect arises from the
moment of novation or
subrogation
'rises form the moment
the debtor is notified of
the cession.
('rt. 05,4)
General rule* Legal subrogation is not presumed,
#("#)t/
0. Chen a creditor pays another creditor who
is preferred, even without the debtorGs
=nowledge>
the 4 obligations remain distinct and
jmvdg 44 2
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Semester/2009-2010
separate.
4. Chen a third person, not interested in the
obligation, pays with the e)press or tacit
approval of the debtor>
apply 'rt. 0453-045-
5. Chen, even without the =nowledge of the
debtor, a person interested in the fulfillment
of the obligation pays, without prejudice to
the effects of confusion as to the latterGs
share.
!ayment made by a co-debtor cannot
produce the effect of subrogation
because he cannot enforce against his
co-debtors the payment of the original
obligation
('rt. 05,5-05,.)
E''#"t o' total s!brogation/
transfer of all the rights which the original creditor
had against the debtor or against 5
rd
persons
accessory obligations are not e)tinguished.
;his rule is absolute in legal
subrogation
in conventional subrogation D such
accessory obligation may be increased
or reduced depending upon the
agreement of the parties.
E''#"t o' )artial s!brogation/
- both the rights of the 5
rd
person and that of the
creditor shall co-e)ist.
1n case of conflict, creditorGs right shall be
preferred.
TITLE II
CONTRACTS
C>A<TER 1
('rt. 05,+)
Contra"t 5cum traho8- meeting of the minds
between 4 persons whereby one binds himself,
with respect to the other, to give something or to
render some service.
agreement
limited e)clusively to those agreements
which produce patrimonial obligations
specie
juridical convention manifested in legal
form, by virtue of which one or more
persons bind themselves in favor of
another or others, or reciprocally to the
fulfillment of a prestation to give, to do, or
not to do.
"on%#ntion D includes any =ind of agreement
which may create,modify, or e)tinguish patrimonial
and even family relations
genus
ontract distinguished from other terms*
8ource of rights
and obligations
ontract-agreement of the
parties
%thers - law
9ature of the rights
and obligations
ontract- concrete, limited,
and transitory
others- elastic, absolute,
permanent
Contra"t *arriag#
!arties may be 4 or
more persons of the
same or different se)es
9ecessary that parties
must be one man and
one woman
Governed primarily by
the agreement of the
parties
Governed by law
Chen e)ecuted, the
result is contract
Chen celebrated, the
result is status
an be terminated or
dissolved by mere
agreement
annot be dissolved or
terminated
1n case of breach,
remedy is to institute an
action for damages
1n case of breach,
remedy is to institute an
action for legal
separation, or adultery
or concubinage
El#-#nts o' "ontra"ts/
Ess#ntial #l#-#nts-
without which there can
be no contracts
ommon D present in all
contracts (consent of
both parties, object of
the contract, cause of
the obligation, parties)
jmvdg 45 2
nd
Semester/2009-2010
special D present only in
certain contracts
(delivery in real
contracts, form in
solemn contracts)
e)traordinary D uni#ue
to a specific contract
(price in a contract of
sale)
Nat!ral #l#-#nts derived from the nature
of the contract and
ordinarily accompany
the same
presumed by law
although can be
e)cluded by the
contracting parties
A""id#ntal #l#-#nts ")ist only when the
parties e)pressly
provide for them for the
purpose of limiting or
modifying the normal
effects of the contract.
a!to2"ontra"t D there is only one party involved
but said party merely acts in the name and for the
account of two distinct contracting parties.
0. Chen a representative of another contracts
with himself
4. when as representative of 4 persons brings
about contract with himself and the
principals
",ara"t#risti"s o' "ontra"ts 5O*AR8
0
st
* obligatory force or character
contracting parties are bound, not only to
the fulfillment of what has been e)pressly
stipulated, but also to all of the
conse#uences thereof.
4
nd
-utuality of contracts
contracts are binding upon both of the
parties
5
rd
autonomy of contracts
parties may establish such agreements as
they may deem convenient, provided they
are not contrary to law, morals, good
customs, public order, or public policy.
.
th
relativity of contracts
ta=e effect only between the parties, their
assigns and heirs.
@ ),as#s or stag#s o' t,# li'# o' "ontra"t
0
st
stage*G"9"$';1%9
preliminary preparation, conception of
generation, period of negotiation, ending at
the moment of agreement of the parties
4
nd
stage* !"$?";1%9
moment when parties come to agree on
the terms of the contracts
5
rd
stage* %98:77';1%9
fulfillment or performance of the terms
agreed upon in the contract
Classi'i"ation o' "ontra"ts/
'ccdg to their
relation to
other
contracts
<r#)arator$ D necessary
as a preliminary step
towards the celebration of
another subse#uent
contract
)rin"i)al D can subsist
independently
a""#ssor$ D can e)ist
only as a conse#uence of
another prior contract.
'ccdg. to their
perfection
Cons#ns!al D perfected
by mere agreement of the
parties
r#al D perfected with the
consent of the parties and
the delivery of the object
by one party to the other.
'ccdg. ;o
form
Co--on or in'or-al D
no particular form
s)#"ial or 'or-al D
re#uire some particular
form
'ccdg. ;o their
purpose
Trans'#r o' o0n#rs,i)
"on%#$an"# o' !s#
r#ndition o' s#r%i"#
'ccdg. ;o T,ings
jmvdg 46 2
nd
Semester/2009-2010
subject matter s#r%i"#s
9ature of the
vinculum
which they
produce
9nilat#ral D gives rise to
an obligation for only one
of the parties
bilat#ral D gives rise to
reciprocal obligation
'ccdg. ;o
cause
On#ro!s D 0 of the
parties aspire to procure
for himself a benefit
through the giving of an
e#uivalent or
compensation
grat!ito!s D 0 of the
parties proposes to give
to the other a benefit
without e#uivalent or
compensation.
'ccdg. ;o ris=
involved
Co--!tati%# D each of
the parties ac#uires an
e#uivalent of his
prestation and such
e#uivalent is pecuniarily
appreciable and already
determined.
al#ator$ D which each of
the parties has to his
account the ac#uisition of
an e#uivalent of his
prestation although
pecuniarily appreciable
and such is not yet
determined.
'ccdg. to
norms
No-inat# D have their
own individuality,
regulated by special
provisions of law
inno-inat# D lac=
individuality, not regulated
by special provisions of
law
('rt. 05,3)
&&&right of the contracting parties to establish any
stipulation, clause, term or condition as they may
deem convenient. (constitutional and statutory
right)
limitations* stipulation, clause, term or condition
established must not be contrary to*
la0
mandatory or prohibitive in character
e)pressive of fundamental principles of
justice
impose essential re#uisites
-orals
principles which are incontrovertible
and are universally admitted and which
have received social and practical
recognition
good "!sto-s
includes even those moral precept not
recogni<ed universally but is
sanctioned by the practice of a certain
community
)!bli" ord#r
safety, peace and order of the country
or of any particular community
)!bli" )oli"$
no person can lawfully do that which
has a tendency to be injurious to the
public or against public good.
t#st* C%9 restraint is reasonably necessary for
the protection of the parties
('rt. 05,-)
inno-inat# "ontra"ts- lac= individuality
not regulated by special provisions of law
covered by*
provisions of ;itles 1 and 11 of @oo= 1E of
ivil ode, (stipulation of the parties,
general provisions or principles)
rules governing the most analogous
nominate contracts
customs of the place
B 4inds o' inno-inat# "ontra"ts
do ut des
do ut facias
facio ut des
facio ut facias
no-inat# "ontra"ts - have their own distinctive
individuality and are regulated by special
provisions of law
sales ('rts. 0.+/-035-)
barter ('rts. 035/-03.0)
jmvdg 47 2
nd
Semester/2009-2010
lease ('rts. 03.4-0-33)
partnership ('rts. 0-3--0/3-)
agency ('rts. 0/3/-0254)
loan ('rts. 0255-0230)
deposit ('rts. 0234-4,,2)
insurance, gambling, annuity ('rts. 4,0,-
4,4-)
compromise and arbitrartion ('rts. 4,4/-
4,.3)
guaranty ('rts. 4,.--4,/.)
pledge, mortgage, antichresis ('rts. 4,/+-
40.0)
&&&;he contract which is in restraint of trade is
%alid as long as there is a stipulation as to time
and place especially if for the protection of the
parties. (3el Castillo vs Richmond0 .+ !hil. 3-2)
Cas#s/
;iu vs !latinum !lans, +0- 8$' 0,0
'von osmetics vs Luna, +00 8$' 5-3
('rt. 05,/-050,)
-!t!alit$ o' "ontra"ts D e#uality of the
contracting parties
"ons#+!#n"#s/
0. the fulfillment of a contract cannot be left to
the will of one of the contracting parties
power to determine the %alidit$ of the
contract
power to determine C%9 the contract
s,all b# '!l'ill#d
4. validity or fulfillment may be left to the will
of a 5
rd
person, such decision will only be
binding when it has been made =nown to
the contracting parties
5. validity or fulfillment can be left to chance
(sensu contrario in 'rt. 05,/)
contracts where mutuality is illusory because one
of the contracting parties is placed in a position of
superiority
obligor promises to pay certain amount
which is not determined (Liebenow vs !hil.
Eegetable %il, 52 !hil. 3,)
agreement where the fulfillment of the
contract is left to the will of the contracting
parties in the negative form of rescission ()
&&&?or an escalation clause to be valid, there must
also be a de-escalation clause.
('rt. 0500)
R#lati%it$ o' "ontra"ts D 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 conse#uence,
such contract can neither favor nor prejudice a 5
rd
person.
#("#)tion* if the rights and obligations arising from
the contract are not trans-issibl#.
@y their nature
(e.g. personal or special #ualifications
of the obligor)
by stipulation of the parties
(e.g. contract provides that the obligor
shall perform an act by himself and not
through another)
@y provision of law
(e.g. those arising from contract of
partnership or of agency)
<#rsons bo!nd b$ "ontra"ts/
)arti#s
t,#ir assigns
t,#ir ,#irs D by virtue of the right of
succession, are subrogated to all the
rights and obligations of the deceased
and can not be regarded as 5
rd
parties
with respect to a deceased
monetary obligation which the decedent may have
incurred during his lifetime cannot be transmitted to
his heirs through succession. - such obligation
must be li#uidated in the testate or intestate
proceeding for the settlement of the estate of the
decedent.
1t is the estate, rather than the heir , which must be
considered as the continuation of the decedentGs
personality.
%bligations not monetary in character, and which
will therefore constitute part of the inheritance are
chargeable against the heirs, but only to the e)tent
of the value of the property which they may have
received from the decedent.
G#n#ral r!l#/ ontracts cannot produce any effect
whatsoever as far as third persons are concerned
jmvdg 48 2
nd
Semester/2009-2010
E("#)tion*
0. 0,#r# t,# "ontra"t "ontains a
sti)!lation in 'a%or o' a @
rd
)#rson
(stipulation pour autrui)
if a contract should contain some
stipulation in favor of a 5
rd
person, he
may demand its fulfillment provided he
communicated his acceptance to the
obligor before its revocation ('rt. 0500,
par. 4)
revocation must be done by mutual
agreement or at least by direction of
the party purchasing the e)change or
who initiated the insertion of the
stipulation ((auffman vs -N/)
corresponds almost always to the
juridical conception of a gift or donation
beneficial stipulation (pour autrui) D
stipulation in a contract, "l#arl$ and
d#lib#rat#l$ "on'#rr#d by the
contracting parties as a favor upon a 5
rd
person who must have accepted it
before it could be revo=ed and not just
mere incidental interest
Kinds o' )o!r a!tr!i
those where the stipulation is
intended for the 8%L" benefit
of the 5
rd
person (gratuitous in
character)
those where an obligation is
due from the promisee to a 5
rd
person which the former see=s
to discharge by means of such
stipulation.
R#+!isit#s o' pour autrui)
stipulation in favor of the 5
rd
person
stipulation must be part, not a whole of the
contract
contracting parties must have clearly and
deliberately conferred a favor upon a 5
rd
person
the 5
rd
person must have communicated
his acceptance to the obligor before its
revocation
neither of the contracting parties bears the
legal representation of authori<ation from
the 5
rd
party.
T#st o' b#n#'i"ial sti)!lation/ the intention of the
parties as disclosed by their contract.
C%9 the contracting parties desired to
tender him such an interest.
4. 0,#r# t,# @
rd
)#rson "o-#s in
)oss#ssion o' t,# ob#"t o' a "ontra"t
"r#ating a r#al rig,t (Art #+#))
5. 0,#r# t,# "ontra"t is #nt#r#d into in
ord#r to d#'ra!d a @
rd
)#rson (Art #+#+)
covered !- topic on rescissi!le contracts
.. 0,#r# t,# @
rd
)#rson ind!"#s a
"ontra"ting )art$ to %iolat# ,is "ontra"t
(Art #+#4)
9 contracts creatin" status (e" contract of
marria"e)
: "roup contracts (e" Collective Bar"ainin"
A"reement)
;he voidable character of the contract cannot be
asserted by one who is not a party to the
transaction or his representative.
('rt. 0504)
r#al rig,t D right belonging to a person over a
specific thing without a passive subject individually
determined against whom such right may be
personally enforced
enforceable against the whole world
5
rd
person who come to be in possession of
the object of the contract creating a real
right will have to be bound by the right,
subject to the provisions of the 7ortgage
Law and the L$ law
('rt. 0505)
creditors are protected in cases of contracts
intended to defraud them
must be read in relation to 'rts. 05/, I
00-- of the ivil ode
('rt. 050.)
any person who induces another to violate
the contract shall be liable for damages to
the other contracting party
the right to perform a contract and to reap
from such performance, and also the right
to performance by the other party are
property rights which entitle each party to
protection and to see= compensation by an
action in tort for any interference therewith.
R#+!isit#s/
jmvdg 49 2
nd
Semester/2009-2010
e)istence of a valid contract
=nowledge on the part of the 5
rd
person of
the e)istence of such contract
interference of the 5
rd
person without legal
justification or e)cuse
malice is generally implied
('rt. 050+-0503)
)#r'#"tion o' "ontra"ts D moment in the life of the
contract where the parties come to an agreement
with respect to the object or cause of the contract.
signifies the birth of the contract as
obligatory tie, resulting from the
concurrence of th wills of the contracting
parties.- 7anresa
G#n#ral r!l#/ !erfection of a contract is produced
by mere consent.
E("#)tion*
contracts of commodatum, pledge, and
deposit are perfected upon delivery of the
object by one of the contracting parties.
"ons#ns!alit$ D some submit that this is one of
the fundamental characteristic of a contract B!t
this does not hold water in those $eal contracts
which re#uires delivery before its perfection.
Cons#ns!al "ontra"ts D perfected by mere
consent of the parties
r#al "ontra"ts D perfected after delivery of the
object (pledge, commodatum0 depositum0 mutuum)
1t is only when there is a complete manifestation of
the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the
contract.
('rt. 050-)
9o person may enter into a contract in the
name of another without the proper
authority from the latter or from law.
based on the principle of obligatory force
and relativity of a contract.
E''#"t upon the contract when a person
acted without the proper authority re#uired/
$enders the contract !n#n'or"#abl# but
the 8 in some case held that these
contracts are Void ab initio (CasesF
$alu*a"an" Ba-an vs Hin" and Ieirs of
Jilliam Sevilla vs Sevilla)
1n recent cases decided by the 8, the
tribunal went bac= to the doctrine applying
the principle that those contracts entered
into without being clothed the proper
authority are !n#n'or"#abl# (CasesF
.scueta vs /im and Kozun vs Mercado)
Voidabl# "ontra"ts 9n#n'or"#abl#
"ontra"ts
@inding unless annulled annot be sued upon
unless they are ratified
?arther away from
absolute nullity
1ntermediate ground
between voidable and
void contract.
:nenforceable contracts are susceptible of either
e)press or implied ratification by the one in whose
behalf it was e)ecuted before it is revo=ed by the
other contracting party.
C>A<TER =
ESSENTIAL RE;9ISITES OA CONTRACTS
('rt. 050/)
bas#s o' "ontra"t/
elements la0 0ill o' t,#
"ontra"ting
)arti#s
"ssential are... 1mposed onformed to.
9atural are... presumed 'ccepted or
repudiated
'ccidental are... 'uthori<ed established
*ec. 9. : &onsent
('rt. 0502)
"ons#nt 5cum sentire8 D most important element
constitutes the very heart and soul of
contracts
agreement of wills.
oncurrence of the wills of the contracting
parties with respect to the object and cause
which shall constitute the contract.
R#+!isit#s/
1. "ons#nt -!st b# -ani'#st#d b$ t,#
"on"!rr#n"# o' t,# o''#r and t,# a""#)tan"#
5Art. 1@1721@=68
jmvdg 50 2
nd
Semester/2009-2010
once there is such a manifestation of the
concurrence of the wills of the contracting
parties, the period or stage of negotiation is
terminated.
%ffer D proposal to ma=e contract
must be certain or definite
acceptance D must also be certain and definite
must also be absolute
counter-offer D #ualified acceptance> involves a
new proposal> rejection of the original offer
amplified acceptance D there is a perfected
contract with regard the original offer> but with
regard to the additional, the offeree is now ma=ing
a counter-offer.
omple) offers D rule depends whether the offers
are interrelated or not.
")ample*
- offer to sell lot no0, and lease on lot no4...the
offeree accepted only the 0
st
offer, is there a valid
contractLR"8 with regard the 0
st
offer..
- offer to mortgage the property and loan 07...the
offers are interrelated, they may not be separately
accepted.
!ublic offer D offer made to the public gives rise to
a perfected contract the moment it is accepted.
contracts that are consensual in nature are
perfected upon mere meeting of the minds
acceptance by letter or telegram*
the contract is perfected the moment....
theories*
(a) *ani'#station t,#or$ D ...the acceptance
is declared or made
(b) E()#dition t,#or$ - S the offeree
transmits(sents the notification of
acceptance to the offeror.
(c) R#"#)tion t,#or$ D... the notification is in
the hand of the offeror or delivered to the
offeror, in such a manner that he can
procure the =nowledge of its content.
(d) Cognition t,#or$ - S the acceptance
comes to the =nowledge of the offeror
par. 4, 'rt. 0502 said that acceptance made by
letter or telegram does not bind the offeror e)cept
from the time it came to his 4no0l#dg#.
'ctual =nowledge D re#uired by law> offeror must
have read the contents of the letter or telegram
accepting his offer.
mere receipt of the letter is not sufficient.
!resumption that once the offeror has
received the letter, he already had read the
contents thereof, e)cept*
when he is absent
when he is incapacitated (at the time of
the receipt of the letter)
8ame rule applies in case where the acceptance is
made by a person who is not in the presence of the
offeror (contratacion entre ausentes)
cognition theory will not apply if the offeror himself
refused to open the telegram for some reason or
another.
Cfferor withdraws offer)
&&&offeror -a$ still 0it,dra0 t,# o''#r so long as
he still has no =nowledge of the acceptance by the
offeree. (ase* /audico vs Arias)
effect of withdrawal is immediate
Cfferee withdraws acceptance)
&&&t,# a""#)tan"# -a$ b# r#%o4#d before it
comes to the =nowledge of the offeror, because in
such case there is still no meeting of the minds,
since the revocation has canceled or nullified the
acceptance which thereby ceased to have any
legal effect. (2olentino)
- vs -
&&&the offeree loses the power to retract the
acceptance from the moment that he accepts.
$eason* since the offeree is the first person who
=nows of the concurrence of wills of the parties, as
a conse#uence, the obligation, as far as he is
concerned, must also commence earlier.
#5anresa'
the view of 2olentino is more logical0 the onl-
decisive moment to consider (moment of
perfection) is the moment *hen the offeror has
Ano*led"e of the acceptance made !- the offeree
=. t,# "ontra"ting )arti#s -!st )oss#ss t,#
n#"#ssar$ l#gal "a)a"it$ 5Art. 1@=.21@=78
jmvdg 51 2
nd
Semester/2009-2010
@. t,# "ons#nt -!st b# int#llig#nt& 'r##&
s)ontan#o!s and r#al 5Art. 1@@621@B68
('rt. 054,)
?orm of acceptance*
e)press
implied
!resumptive consent is the basis of #uasi-
contracts (-ere3 vs -omar)
&&&the form prescribed by law should be followed,
otherwise, there will be no valid and binding
acceptance
('rt. 0540-0545)
the person who ma=es the offer has the right to
specify the manner, time and place of acceptance
'rt. 0544 is not applied when what is referred to is
a mere messenger and not an agent who has the
capacity to negotiate and represent the principal.
'n offer becomes ineffective upon the death, civil
interdiction, insanity, or insolvency of either party
before acceptance is conveyed.
Con%#$#d D moment when the offeror has
=nowledge of the acceptance by the offeree.
R#asons 'or Art. 1@=@/
d#at, e)tinguishes personality and juridical
capacity
"i%il int#rdi"tion (accessory penalty for
$;) person is deprived of parental
authority, guardian, and also deprived of
the right to manage or dispose of his
property, he cannot e)ecute acts inter
vivos.
Insanit$ D insane person cannot give a
valid consent to a contract. Be loses the
capacity to do acts with legal effects
insol%#n"$ D modifies or limits capacity to
act.
('rt. 054.)
if the option is 0it,o!t "onsid#ration, the offeror
may withdraw his offer by communicating such
withdrawal to the offeree at any time before
acceptance.
1f it is 'o!nd#d !)on a "onsid#ration, the offeror
cannot withdraw his offer
article contemplates an option contract D a
preparatory contract.
('rt. 054+-054+)
'dvertisements for bidders are simply invitations to
ma=e proposals, and the advertiser is not bound to
accept the highest or lowest bidder, unless the
contrary appears.
('rt. 054-)
capacity of the contracting parties D essential
element of a contract
indispensable re#uisite of a consent
In"a)a"itat#d to gi%# "ons#nt/
1. !n#-an"i)at#d -inors
e)ception*
when it is entered into by a minor who
misrepresents his age
based on the principle of estoppel
must be active not merely
constructive
when it involves the sale and delivery
of necessaries to the minor ('rt.0..2)
when it involves a natural obligation
and such obligation is fulfilled
voluntarily by the minor (0/-40 y.o)
when it is a marriage settlement or
propter nuptias (4,-40 male> 0/-40
female)
when it is a life, health, or accident
insurance ta=en on the life of the minor
(0/ y.o above) with minorGs estate,
father, mother, husband, wife, child,
brother or sister as beneficiary.
&&&there are no more emancipated minors since the
age of majority has been raised to 0/ y.o.
=. insan# or d#-#nt#d )#rsons
contracting parties are unable to
understand the nature and
conse#uences of the contract at the
time of its e)ecution by reason of any
cause affecting his intellectual or
sensitive faculties. (includes
drun=enness, or under hypnotic spell)
contracts entered into during lucid
interval is valid.
' #uestion of cat which must be
decided by the court
jmvdg 52 2
nd
Semester/2009-2010
@. d#a'2-!t#s 0,o do not 4no0 ,o0 to
0rit# there is no way that the stipulations
in the contract be e)plained to them to
insure that they understand what they are
entering into.
B. ot,#r in"a)a"itat#d )#rsons
married woman in cases specified by
law
incompetent (8ec. 4 of $ule 24 of the 9ew $ules
of ourt) includes*
persons suffering from civil interdiction
hospitali<ed lepers
prodigals
deaf and dumb who are unable to read
who are of unsound mind
those who by reason of age, wea= mind or
other similar cases, cannot, without aid
from other, ta=e care of themselves and
manage their property becoming thereby
easy prey fro deceit and e)ploitation.
these incapacitated persons can enter into a
contract only through a parent or guardian.
E''#"ts/
C#'#"ti%# "ontra"t D effect of incapacitated
persons entering into a contract not through a
parent or agent.
Voidabl# "ontra"ts D only one of the contracting
parties is incapacitated to give consent.
9n#n'or"#abl# "ontra"ts D when both parties are
incapacitated to give consent..
('rt. 054/-0542)
contracts entered into during a lucid interval are
valid.
&&&;hose referred to in 'rt. 0542 are those who are
prohibited from entering into a contract with certain
persons with regard to certain property under
certain circumstances.
In"a)a"it$ to gi%#
"ons#nt to a
"ontra"t
Cis+!ali'i"ationH)ro,ibit
ion to "ontra"t
$estrains the right to
contract
$estrains the very thing
itself
@ased upon
subjective
circumstances of
certain persons which
compel the law to
suspend the personGs
right to contract
@ased upon public policy
and morality
"ffect is a Eoidable
contract ('rt. 052,)
"ffect is a void contract
('rt. + I 'rt. 0.,2 9o. -
of the ivil ode)
('rt. 055,)
%i"#s 0,i", -a$ %itiat# "ons#nt/
vices of the will (vicios de la formacion de la
voluntad)
mista=e
violence
intimidation
undue influence
fraud
vices of declaration (vicios de la declaracion)
simulation of contracts
'ccdg. to 7anresa, 'rt. 055, is a negative
enumeration of the re#uisites of consent.
1ntelligent (mista=e)
free (violence, intimidation I undue
influence)
spontaneous (fraud)
real (simulation of contracts)
&&&in the absence of the 0
st
5 re#uisites, the
contract is %oidabl#.
&&&in the absence of the .
th
re#uisite, the contract
may be either %oid ab initio or %alid as 'ar as t,#
r#al agr##-#nt is "on"#rn#d, depending upon
whether the simulation is absolute or relative.
('rt. 0550)
-ista4# D wrong conception of a thing and the
lac= of =nowledge with respect to a thing.
= 4inds/
-ista4# o' 'a"t D when one or both of the
contracting parties believe that a fact e)ist
when in fact it does not
mista=e as to object
identity of the thing (error in
corpore)
jmvdg 53 2
nd
Semester/2009-2010
substance of the thing (error in
su!stantia)
conditions of the thing (provided
such condition principally moved
one or both of the parties to enter
into the contract)
#uantity of the thing (error in
quantitate)
mista=e as to person
name of a person.
1dentity of a person D effect is
voidable contract
#ualification of a person
re#uisites*
the mista=e must be either with regard
to the identity or with regard to the
#ualification of the person
such identity or #ualification must have
been the principal consideration for the
celebration of the contract
&:sually, these mista=es occur in
obligations to do.
-ista4# o' la0 D when one or both f the
contracting parties arrive at an erroneous
conclusion regarding the interpretation of a
#uestion of law or the legal effects of a
certain act or transaction.
G#n#ral r!l#* only mista=e of fact which will vitiate
consent renders the contract voidable. ' mista=e of
law does not render the contract voidable
(i"norantia le"is non excusat)
Cas#/ 'siain vs Jalandoni
('rt. 0554)
intended for the protection of a party to a contract
who is at a disadvantage due to his illiteracy,
ignorance, mental wea=ness, or handicap.
?raud is present when there is an insidious words
or machinations of one of the contracting parties,
the other is induced to enter into the contract which
without them, he would not have agreed to it.
('rt. 0555-055.)
General rule* mista=e of law will not vitiate consent.
")ception* mutual error
re#uisites*
mista=e must be with respect to the
legal effect of the agreement
mista=e must be mutual
the real purpose of the parties must
have been frustrated.
('rt. 055+-0553)
%iol#n"# D use of irresistible force
re#uisites*
force employed to wrest consent must be
serious or irresistible
it must be the determining cause for the
party upon whom it is employed in entering
into the contract.
inti-idation D compelling by reasonable and well
grounded fear of an imminent or grave evil upon
his person, property, or upon the person or
property of his spouse, descendants, or
ascendants
violence and intimidation are sometimes called
duress.
$e#uisites*
one of the contracting parties is compelled
to give consent by a reasonable and well
grounded fear of an evil
the evil must be imminent and grave
the evil must be unjust
the evil must be the determining cause for
the party upon whom it is employed in
entering into the contract.
C,ara"t#r o' inti-idation/
actual
serious
possible of reali<ation
and that the actor can and still carry out his
threat
d#t#r-ination o' t,# d#gr## o' inti-idation/
age
se)
condition of the person
#''#"t o' !st or l#gal t,r#at/
-it does not vitiate consent
the contract would still be perfectly valid and not
voidable.
Viol#n"# inti-idation
")ternal
(physical compulsion -
1nternal
(moral compulsion-
jmvdg 54 2
nd
Semester/2009-2010
astan) astan)
!revents the e)pression
of the will substituting it
with a material act
dictated by another
1nfluences the will,
inhibiting it in such a
way that the e)pression
therefor is apparently
that of a person who
has freely given his
consent.
&ase* 7artine< vs Bong=ong I 8hanghai @an=
distinction between vitiated consent and reluctant
consent
('rt. 055-)
!nd!# in'l!#n"# D ta=ing improper advantage of
oneGs power over the will of another, depriving the
latter of a reasonable freedom of choice.
;est* C%9 the the influence e)erted has
overpowered or subjugated the mind of a
contracting party as to destroy his free agency,
ma=ing him e)press the will of another rather than
his own.
;hing to be considered*
confidential, spiritual, family, and other
elations between parties
('rt. 055/)
'ra!d D insidious words or machinations employed
by one of the contracting parties in order to induce
the other to enter into a contract, which, without
them, he would not have agreed to.
Kinds o' 'ra!d/
Art. 1@@3& Ci%il Cod# Art. 11.6211.1& Ci%il
Cod#
?raud in the perfection
of the contract
?raud in the
performance of the
obligation
"mployed in securing
the consent of the other
party
?raud employed by the
obligor in the
performance of a pre-
e)isting obligation
Dolo causante D causal fraud> deceptions or
misrepresentation of a serious character employed
by one party and without it, the other party 0o!ld
not ,a%# entered into the agreement ('rt. 055/)
dolo incidente D incidental fraud> deceptions or
misrepresentation 9%; of a serious character
employed by one party and without it, the other
party 0o!ld still have entered into the agreement
Dolo causante dolo incidente
?raud 8erious in
character
9ot so serious
ause which induces
the party upon whom it
is employed in entering
the contract
9ot the cause
"ffect is a voidable
contract
"ffect is liability for
damages
R#+!isit#s*
insidious words
insidious words must be serious
insidious words must have induced the
other party to enter into the contract D such
fraud must be the principal or causal
inducement or consideration for the
consent of the other party.
fraud should not have been employed by
the contracting parties or by third persons
t#st* there must be proof of concrete facts
constituting the fraud or insidious words or
machinations employed by one of the contracting
parties
('rt. 0552)
?ailure to disclose facts, when there is a duty to
reveal them, as when the parties are bound by
confidential relations, constitutes fraud.
('rt. 05.,)
;he usual e)aggerations in trade, when the other
party had an opportunity to =now the facts, are not
in themselves fraudulent.
('rt. 05.0)
' mere e)pression of an opinion does not signify
fraud, unless made by an e)pert and the other
party has relied on the formerGs special =nowledge.
&ase) 8ongco vs 8ellner
('rt. 05.4)
7isrepresentation by a third person does not vitiate
jmvdg 55 2
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Semester/2009-2010
consent, unless such misrepresentation has
created substantial mista=e and the same is
mutual.
&ase) $ural @an= of aloocan vs '
('rt. 05.5-05..)
serious character of fraud D refers to the
magnitude and importance of the fraud in securing
the consent of the other party.
('rt. 05.+-05.3)
si-!lation o' "ontra"ts
absol!t# R#lati%#
ontracting parties do
not intend to be bound
by the contract at all
!arties conceal their
true agreement
ontract is not really
desired or intended to
produce legal effects or
in any way alter the
juridical situation of the
parties
8till has legal effects
"ffect* void contract 8till binds the
contracting parties to
their real agreement,
when it does not
prejudice a 5
rd
person
and is not intended for
any purpose contrary to
law, morals, good
customs, public order,
or public policy
&ase* Loyola vs '
*ec. =. : Cbject of contract
Ob#"t D most fundamental and indispensable
re#uisite of a contract.
the thing, right or service which is the
subject matter of the obligation which is
created or established.
;he what of the contract.
('rt. 05.- D 05.2)
General rule* 'll things or services may be the
object of contracts
$e#uisites*
1. t,# ob#"t s,all b# 0it,in t,# "o--#r"#
o' -#n
- appropriability and transmissibility
=. t,# ob#"t s,o!ld b# r#al or )ossibl#
- objects that are ine)istent cannot be the
object of contracts.
- future things may be the object of
contracts
conditional contract D presumption in
case of doubt about the nature of
contract
aleatory contract
e)ception* future inheritance may not
be the object of contract ('rt. 05.-)
exception to exceptionF 'rt. 0,/, of the
ivil ode> partition of estate inter
vivos, provided that the legitime of
compulsory heirs is not prejudiced
3. the object shall be licit
B. t,# ob#"t s,o!ld b# d#t#r-inat#
- the genus of the object should be
e)pressed although there might be no
determination of the individual specie
&&&;he fact that the #uantity is not determinate
shall not be an obstacle to the e)istence of the
contract, provided it is possible to determine the
same, without the need of a new contract between
the parties.
"annot b# ob#"ts o' "ontra"ts/
outside the commerce of men
intransmissible rights
future inheritance, e)cept in cases
e)pressly authori<ed by law
reason*
possibility that one of the
contracting parties may be tempted
to instigate the death of the other in
order that inheritance will become
his
probability that fraud and prejudice
may be committed or occasioned
thereby
services which are contrary to law, morals,
good customs, public order, public policy
impossible things or services
a!solute impossi!ilit- of service D
arises from the nature or essence of
the act or service itself> void contract
relative impossi!ilit- of service D arises
jmvdg 56 2
nd
Semester/2009-2010
form the circumstances or #ualifications
of the obligor rendering him incapable
of e)ecuting the act or service, allows
the perfection of the contract, although
the fulfillment thereof is hardly
probable.
1f impossibility may permanent in
character, contract is void
objects which are not of possible
determination as to its =ind
*ec. >. : &ause of &ontracts
('rt. 05+,-05+0)
Ca!s# D the why of the contract
juridical reason why the parties entered
into the contract
essential reason which moves the
contracting parties to enter into a contract.
1mmediate, direct, or most pro)imate
reason which e)plains I justifies the
creation of the obligation through the will of
the contracting parties.
On#ro!s "ontra"ts ;he prestation or
promise of a thing or
service by the other
R#-!n#tor$ "ontra"ts 8ervice or the benefit
which is remunerated or
compensated
<!r# b#n#'i"#n"# Liberality or generosity
of the benefactor
1n onerous contracts, even a mere promise is a
sufficient causa or consideration.
$emedy* rescission or specific performance.
&&&the object of an onerous contracts is the same
as to both parties, although the cause is different. -
;olentino
Ca!s# *oti%#s
6irect, pro)imate
reason of a contract
1ndirect and remote
%bjective or juridical
!sychological and
purely personal reasons
'lways the same 6iffers for each
contracting parties
1ts legality or illegality 1ts legality or illegality
will affect the validity of
the contract
will not affect the
e)istence of the
contract
&&&;he motives of the contracting parties are as
different or comple) and as capable of infinite
variety as the individual circumstances which may
move men to ac#uire things or ma=e money.
&&&;he motives may be regarded as the causa
when the contract is conditioned upon the
attainment of the motive of either contracting
parties.
&ases* Ligue< vs ', $odrigue< vs $odrigue<,
!hil. @an=ing orp. vs Lui 8he
&&&;he cause of the accessory contract is identical
with that of the principal contract.
&&&Chen a moral obligation arises wholly from
ethical considerations, unconnected with any civil
obligation and as such, is not demandable in law
but only in conscience, it can not constitute a
sufficient cause or consideration supporting an
onerous contract.
&ases* ?isher vs $obb, Eillaroel vs "strada
R#-!n#tor$ "ontra"ts D one in which one of the
contracting parties compensates the service or
benefit rendered by the other party, although such
service or benefit does not constitute a
demandable debt.
('rt. 05+4-05++)
essential re#uisites of cause* (#lt)
the cause should be in #)istence at the
time of the celebration of the contract.
;he cause should be licit or lawful
the cause should be true.
&&&;he cause is presumed to be e)isting and
licit(lawful. ('rt. 05+.)
&&&ine)istent cause, false, or unlawful(illicit cause
produces no effect (void a! initio)
&ase* arantes vs ' D inade#uate causa or
consideration
lesion or inade#uacy of cause will not invalidate
the contract, unless there be fraud, mista=e, or
undue influence
(%oidabl# contract if any of the 5 is present)
. ('rt.
jmvdg 57 2
nd
Semester/2009-2010
05++)
!nla0'!l "a!s# D contrary to law, morals, good
customs, public order, public policy
effect* contract void ab initio
&ases* Eeles vs $amas as compared with 7actal
vs 7elegrito (incipient criminal liability)
C>A<TER @
AOR*S OA CONTRACTS
('rt. 05+3)
spiritual system of the 8panish ode D the law
loo=s more at the spirit(intent rather than at the
forms of the contract.
General $ule* contracts shall be obligatory,
provided all the essential elements of a contract
are present.
")ceptions*
0,#n t,# la0 r#+!ir#s t,at t,# "ontra"t
-!st b# in a "#rtain 'or- in ord#r to b#
%alid
must appear in writing
donation and acceptance of
personal property whose value
e)ceeds !+,,,,.,,
sale of a piece of land or any
interest therein through an agent
agreements regarding payment of
interest in contract of loan
antichresis
must appear in public document
donations of immovable properties
regardless of value
partnerships where immovable
property or real rights are
contributed to the common fund
must be registered
chattel mortgages
sales or transfer of large cattle
0,#n t,# la0 r#+!ir#s t,at t,# "ontra"t
-!st b# in a "#rtain 'or- in ord#r to b#
#n'or"#abl#.
overed by the 8tatutes of ?rauds
&ase* @? orp vs ' D contract may not be limited
in a single document or writing
'or-s o' "ontra"ts*
necessary for the convenience of the
contracting parties or for the efficacy of the
contract ('rts. 05+3-05+/)
necessary for the validity of the contract
(scattered provisions of the ode and
some special laws)
necessary for the enforceability of the
contract (8tatute of ?rauds)
('rts. 05+--05+/)
)rin"i)l#s d#d!"ibl# 'ro- !ris)r!d#n"#
'rts. 053+--05+/ re#uire the e)ecution of
the contract in a private or public document
to insure its efficacy.
@oth articles presupposes the e)istence of
a contract which is valid and enforceable.
1nvo=ing 'rts. 05+--05+/ place the
e)istence of the contract in issue, which
must be resolved by the ordinary rules of
evidence
'rt. 05+- does not re#uire that the action to
compel the e)ecution of the necessary
document must precede the action upon
the contract.
'rt. 05+/ does not affect the validity or
enforceability of the contract. !resent for
mere convenience
&ase* 6auden-Bernae< vs 6e Los 'ngeles
C>A<TER B
REAOR*ATION OA INSTR9*ENTS
('rt. 05+2)
$"?%$7';1%9 D used when the true intention of
the parties to a perfected and valid contract are not
e)pressed in the instrument purporting to embody
their agreement by reason of mista=e, fraud,
ine#uitable conduct or accident
based on justice and e#uity
r#+!isit#s*
meeting of the minds of the contracting
parties
true intention not e)pressed in the
instrument
such failure to e)press their true intention
is due to mista=e, fraud, ine#uitable
conduct, or accident.
R#'or-ation o'
"ontra"t
Ann!l-#nt o' "ontra"t
jmvdg 58 2
nd
Semester/2009-2010
!resupposes a valid
contract in which there
has already been a
meeting of the mind
@ased on a defective
contract in which there
has been no meeting of
the minds because the
consent of one or both
of the contracting
parties has been
vitiated.
9ot a remedy when
there has been fraud,
mista=e, ine#uitable
conduct or accident.
$emedy when there has
been no meeting of the
minds because of
mista=e, fraud,
ine#uitable conduct, or
accident
('rt. 053,-0532)
0,#n "an on# )art$ as4 'or t,# r#'or-ation o'
t,# "ontra"t/
mutual mista=e of the parties ('rt. 0530)
one party was mista=en and the other party
acted fraudulently('rt. 0534)
one party mista=en, the other =new or
believed that the instrument does not show
their real intent but concealed that fact to
the former ('rt. 0535)
through the ignorance, lac= of s=ill,
negligence or bad faith on the part of the
person drafting the instrument or the cler=
or typist. ('rt. 053.)
!arties agree upon the mortgage or pledge
of a real or personal property, but the
instrument states that the property is sold
absolutely or with a right of repurchase
('rt. 053+)
0,#n t,#r# "an b# no r#'or-ation/
simple donation inter vivos wherein no
condition is imposed
wills
when the real agreement is void ('rt. 0533)
when one of the parties brought an action
to enforce the instrument ('rt. 053-)
"ontra"t o' ad,#sion D one in which one of the
parties imposes a ready made form of contract,
which the other party may accept or reject, but
which the latter cannot modify
as binding as a mutually e)ecuted
transaction (A-ala Corp vs Ra- Burton
3evDt Corp)
the one who adheres to the contract is in
reality free to reject it entirely, if he
adheres, he gives his consent. (%n" Liu vs
CA)
its enforceability will have to be determined
by the peculiar circumstances obtaining in
each case and the situation of the parties
concerned
in case of conflict, the contract will be
interpreted against the one who drafted the
contract.
4steps needed to follow(contracts of credit cards)
to absolve a card holder from liability for
unauthori<ed purchase made through lost or stolen
card
0. the card holder must give a written notice
to the credit card company
4. credit company must give notice to all its
member establishments of such lost or
theft
C>A<TER 5
INTER<RETATION OA CONTRACTS
('rt. 05-,-05-0)
&&&1ntention of the contracting parties always
prevail because their will has the force of law
between them.
&&&Literal sense of the stipulations shall be
followed.
&&&%nce the intention has been ascertained, it
becomes an integral part of the contract as though
it had been originally e)pressed therein in
une#uivocal terms.
;he character of the transaction between the
parties is not determined by the language used in
the document but by their intention. (Manila
BanAin" Corp vs @eodoro0 5r)
contemporaneous and subse#uent acts of the
parties must be considered in order to judge the
intention of the contracting parties.
&ase* ;anguilig vs '
('rt. 05-4-05-2)
'$;1L" 05-4. Bowever general the terms
of a contract may be, they shall not be understood
jmvdg 59 2
nd
Semester/2009-2010
to comprehend things that are distinct and cases
that are different from those upon which the parties
intended to agree. (04/5)
'$;1L" 05-5. 1f some stipulation of any
contract should admit of several meanings, it shall
be understood as bearing that import which is most
ade#uate to render it effectual. (04/.)
'$;1L" 05-.. ;he various stipulations of a
contract shall be interpreted together, attributing to
the doubtful ones that sense which may result from
all of them ta=en jointly. (04/+)
'$;1L" 05-+. Cords which may have
different significations shall be understood in that
which is most in =eeping with the nature and object
of the contract. (04/3)
'$;1L" 05-3. ;he usage or custom of the
place shall be borne in mind in the interpretation of
the ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily
established. (04/-)
'$;1L" 05--. ;he interpretation of
obscure words or stipulations in a contract shall not
favor the party who caused the obscurity. (04//)
'$;1L" 05-/. Chen it is absolutely
impossible to settle doubts by the rules established
in the preceding articles, and the doubts refer to
incidental circumstances of a gratuitous contract,
the least transmission of rights and interests shall
prevail. 1f the contract is onerous, the doubt shall
be settled in favor of the greatest reciprocity of
interests.
1f the doubts are cast upon the principal object of
the contract in such a way that it cannot be =nown
what may have been the intention or will of the
parties, the contract shall be null and void. (04/2)
'$;1L" 05-2. ;he principles of
interpretation stated in $ule 045 of the $ules of
ourt shall li=ewise be observed in the
construction of contracts.
C>A<TER 6
RESCISSIBLE CONTRACTS
lasses of defective contracts*
rescissible contracts
voidable contracts
unenforceable contracts
void or ine)istent contracts
r#s"issibl# %oidabl# !n
#n'or"#abl
Void
#
's to C#'#"t
;here is
da-ag# or
in!r$
either to 0
of the
parties or
to 5
rd
persons
;here is
%itiation o'
"ons#nt or
legal
capacity of
0 of the
parties
ontract
entered
into
0it,o!t
a!t,ority>
does not
comply
with
8tatute of
?raud> both
parties are
legally
incapacitat
ed
La"4 o'
one or
some of
the
#ss#ntial
r#+!isit#s
of a valid
contract.
's to E''#"t
Ealid and
enforceabl
e until they
are
rescinded
by a
competent
court
Ealid and
enforceabl
e until they
are
annulled by
a
competent
court
annot be
enforced
by a proper
action in
court
!roduce no
legal effect
's to )r#s"ri)tibilit$ of action or defense
'ction of
rescission
may
prescribe
'ction for
annulment
may
prescribe
?or total or
partial
performanc
e, the
action for
recovery
may
prescribe
'ction for
declaration
of nullity
does not
prescribe.
's to susceptibility of rati'i"ation
9ot
susceptible
of
ratification
susceptible
of
ratification
susceptible
of
ratification
9ot
susceptible
of
ratification
's to 0,o -a$ assail contracts
ontracting
parties> 5
rd
person
prejudiced
ontracting
party
ontracting
party
ontracting
parties> 5
rd
person
whose
interest is
directly
jmvdg 60 2
nd
Semester/2009-2010
affected.
's to ,o0 contracts may be assail#d
6irectly 6irectly or
collaterally
6irectly or
collaterally
6irectly or
collaterally
('rt. 05/,)
r#s"issibl# "ontra"ts D all of the essential
elements of a contract are present> contract is
valid, but by reason of injury or damage to either of
the contracting parties or to 5
rd
persons, it may be
rescinded.
C,ara"t#risti"s/
defects consists in injury or damage to
either of one of the contracting parties or to
5
rd
persons.
@efore rescission, they are valid and
therefore legally effective
can only be attac=ed directly
can be attac=ed by 1 of the contracting
parties or the 5
rd
person injured or
defrauded.
8usceptible of convalidation only by
prescription and not by ratification
r#s"ission remedy to secure the reparation of
damages caused to the contracting party or 5
rd
person by a contract> by means of restoration of
things to their condition prior to the celebration of
the contract.
R#s"ission o'
"ontra"ts
5Art. 1@3621@378
R#sol!tion o'
r#"i)ro"al obligations
5Art. 11718
7ay be instituted by a
party to the contract
and(or even @
rd
)#rson
7ay be instituted onl$
by a )art$ to the
contract
S#%#ral "a!s#s or
grounds* lesion, fraud,
and other e)pressly
specified by law
Gro!nd* failure of one
the contracting parties
to comply with what is
incumbent upon him.
ourt has no )o0#r to
grant an e)tension of
time for performance of
the obligation
;he court ,as
dis"r#tionar$ )o0#r to
grant an e)tension for
performance provided
that there is just cause.
7ay apply to :nilateral
and reciprocal contracts
'pplies only to
reciprocal contracts
R#s"ission o'
"ontra"ts
R#s"ission b$ -!t!al
"ons#nt
auses mentioned in
'rts. 05/0 and 05/4
'greement of the
parties to rescind the
contract.
$estoration to the
condition of the parties
prior to the constitution
of the contract
"ffects should be
determined by the
agreement made by the
parties, or by the
application of other
legal provisions e)cept
'rt. 05/+
&ase* '#uino vs ;anedo
('rt. 05/0-05/4)
rescissible contracts are*
1. "ontra"ts in b#,al' o' 0ard
entered into by guardians whenever their
wards suffer lesion or damages by more
than T of the value of the thing which are
the object thereof.
$ules of ourt* judicial guardian entering
into a contract with respect to the property
of his ward must ordinarily secure the
approval of a competent court.
'pply 'rts 543, > $ules 2+-23 9ew
$ules of ourt
=. "ontra"ts in b#,al' o' abs#nt##s
rescissible if the absentee suffer the lesion
or damage by more than T of the value of
the thing which are the object thereof.
principles applicable in 'rt. 05/0, par 0 are
applicable to this provision since the
powers and duties of representatives are
the same as that of the guardian.
$e#uisites for par. 0 I 4 of 'rts. 05/0
contract must have been entered into by
the guardian in behalf of his ward or a legal
representative in behalf of an absentee
ward or absentee must have suffered
lesion of more than T of the value of the
property which is the object of the contract.
ontract must have been entered into
without court approval
there must be no other means for obtaining
reparation for the lesion
the person as=ing for the rescission must
be able to return whatever he may be
jmvdg 61 2
nd
Semester/2009-2010
obliged to restore.
%bject of the contract must not be legally in
the possession of 5
rd
person who acted in
good faith. (otherwise, remedy is
indemnification for damages)
@. "ontra"ts in 'ra!d o' "r#ditors
when the creditor cannot in any manner
collect the claims due them.
$e#uisites*
e)isting credit prior to the celebration of
the contract.
?raud or at least an intent to commit
fraud to the prejudice of the creditor
see=ing rescission.
9o other manner by which the creditor
can collect the credit
object of the credit is not in legal
possession by 5
rd
person who acted in
good faith.(otherwise, remedy is to
proceed against the person causing the
loss for damages)
accion pauliana- action to rescind contracts
in fraud of the creditors
re#uisites*
plaintiff as=ing for the rescission
has a credit prior to the alienation
debtor has made a subse#uent
contract conveying patrimonial
benefit to a 5
rd
person
creditor has no other legal remedy
act being impugned is fraudulent.
5
rd
person has been an accomplice
in the fraud.
!urpose is to guarantee an e)isting debt
there is personal right that deserves the
protection of law
B. "ontra"ts r#'#rring to t,ings in litigation
if entered into by the defendant without the
=nowledge and approval of the litigants or
of competent judicial authority.
!urpose is to secure the possible effectivity
of a claim
there is a real right involved that deserves
the protection of law
+. "ontra"ts b$ insol%#nt ('rt. 05/4)
insolvency D refers to the financial situation
of the debtor in which it is impossible for
him to fulfill his obligations.
re#uisites*
it must have been made in a state of
insolvency
the obligation must have been one
which the debtor could not be
compelled to pay at the time such
payment was effected.
@asis of the rescissible character is fraud
contemplates obligations with terms or are
subject to suspensive condition> void and
natural obligations> and those condoned or
have prescribed.
6. ot,#r "ontra"ts d#"lar#d b$ la0 to b#
r#s"issibl#
'rts. 0,2/, 00/2, 0+43, 0+5., 0+52, 0+.4,
0++3, 0+3,, 0+3-, and 03+2 of the ivil
ode
('rt. 05/5)
&&&'ction for rescission is s!bsidiar$ it cannot be
instituted e)cept when the party suffering damage
has no other legal means to obtain reparation for
the same.
F,o -a$ instit!t# a"tion*
person prejudiced
party suffering the lesion in the
rescissory action on the ground of fraud
creditor who is defrauded in rescissory
actions
other persons authori<ed to e)ercise
the same in their rescissory actions.
representatives of those prejudiced
heirs of those prejudiced
creditors by virtue of the subrogatory action
('rt. 00--)
&&&1f the decedent himself does not have the right
to institute the action, the heir acting as
representative of the decedent also does not have
the right to institute the action> however, it will be
possible for him to institute the action in his own
right (9o.5 'rt. 05/0, ivil ode)
&ase* oncepcion vs 8ta. 'na
('rt. 05/.)
purpose of rescission* reparation of damage or
injury suffered by one of the contracting parties or
5
rd
person.
")tent of rescission shall be only be to that
necessary to cover the damage caused.
jmvdg 62 2
nd
Semester/2009-2010
('rt. 05/+)
par. 0 of the provision applies only to rescissory
actions on the ground of lesion and not to
rescissory action based on fraud.
"ffect of rescission*
return the things which were the object of
the contract (1ncludes fruits or interests)
fruits D natural, industrial, civil, and
other accessions obtained by the thing
interest D legal interest
&&&rescission cannot apply if the one who demands
cannot return what he may be obliged to restore.
;he determination of good or bad faith of the
contacting parties is important in order to assess
the fruits or the value thereof which must be
returned as well as the e)penses which must be
reimbursed.
1n transfer of properties through grat!ito!s titl#,
good faith of the transferee is not a defense.
$escission shall not ta=e effect upon 5
rd
person, 4
re#uisites*
the thing must be legally in the possession
of 5
rd
person (immova!le0propert-F the
thin" must !e re"istered in the name of the
+
rd
person for the requisite to appl-)
&ase* 8i=atuna vs Guevarra
such 5
rd
person must not have acted in bad
faith.
$emedy if maintaining an action for the rescission
is impossible is to bring an a"tion 'or ind#-nit$
'or da-ag#s against the person who caused the
loss.
('rt. 05/3-05//)
proof of fraud- needed to be established in order
that a contract may be rescinded
presumption of fraud*
0. alienation of property by gratuitous title if
the debtor has not reserved sufficient
property to pay all of his debts contracted
before such alienation(donation
4. 'lienations by onerous title when made by
persons against whom some judgment has
been rendered in any instance (even if not
yet final and e)ecutory) or some writ of
attachment has been issued. ;he decision
or attachment need not refer to the
property alienated, and need not have
been obtained by the party see=ing the
rescission.
5. 'ny other manner recogni<ed by law of
evidence
&&&Chere no judgment or preliminary attachment
e)ists against the debtor, the 4
nd
presumption is not
applicable.
&&&;he presumptions are disputable and may be
rebutted by satisfactory and convincing evidence to
the contrary. &ase* Bonrado vs 7arcayda et al.
@adges of fraud* (conveyance)
0. inade#uate cause or consideration
4. transfer made by a debtor after the suit has
been begun and while it is pending against
him
5. sale on credit by an insolvent debtor
.. evidence of large indebtedness or large
insolvency
+. transfer of all of the property of a debtor
when he is insolvent
3. transfer made between father and son
-. failure of vendee to ta=e e)clusive
possession of all property
&&&1f it happens that there are 4 or more alienation,
the 0
st
ac#uirer shall be liable first, and so on
successively.
!ar. 4 of 'rt. 05// seems to have forgotten the
debtor> this is because the debtor is already
presumed to be insolvent.
('rt. 05/2)
.year-prescriptive period for commencement of
action for rescission.
this period must be counted from the time
of the termination of the incapacity of the
ward ('rt. 05/0, par.0)
the domicile of the absentee is =nown ('rt.
05/0, par.4)
of the discovery of fraud ('rt. 05/0 par.
5I.> 'rt. 05/4)
in certain cases of rescissible contracts of
ale, the prescriptive period is 3 months or
even ., days from the day of delivery.
jmvdg 63 2
nd
Semester/2009-2010
C>A<TER .
VOICABLE CONTRACTS
Voidabl# "ontra"ts D element of consent of one of
the contracting parties is vitiated either by lac= of
legal capacity of one of the contracting parties, or
by mista=e, violence, intimidation, undue influence,
or fraud.
binding until annulled by a competent court
R#-#di#s*
attac= the validity of the contract
direct D by means of proper action
(annulment)
indirect D as a defense (annulability or
relative nullity)
convalidate it either by ratification or
prescription.
haracteristics*
0. defect consists in the vitiation of consent of
one of the contracting parties
4. binding until annulled by a competent court
5. susceptible of convalidation by ratification
or by prescription
.. defect or voidable character cannot be
invo=ed by 5
rd
persons
Voidabl# "ontra"ts R#s"issibl# "ontra"ts
1ntrinsic defect (vitiation
of consent)
")ternal defect
(damage or prejudice
either to one of the
contracting parties or to
a 5
rd
person)
ontracts are voidable
even if there is no
damage or injury
;here should be
damage or injury
caused to consider a
contract rescissible.
'nnulability 1s based on
the law
$escissibility is based
on e#uity
$emedy and sanction 7ere remedy
!redominated by public
interest
!redominated by
private interest
8usceptible of
ratification
9ot susceptible to
ratification
7ay be invo=ed only by
the contracting arty
7ay be invo=ed by the
contracting party or by a
5
rd
person who is
prejudiced.
('rt. 052,)
Eoidable contracts*
0. ;hose where one of the parties is
incapable of giving consent to a contract>
4. ;hose where the consent is vitiated by
mista=e, violence, intimidation, undue
influence or fraud.
&&&if the consent is absolutely lac=ing or simulated,
the contract is ine)istent, not voidable.
('rt. 0520)
B $#ars )r#s"ri)ti%# )#riod s,all "o--#n"#/
from the time the defect of the consent
ceases (intimidation, violence, or undue
influence)
from the time of the discovery of mista=e or
fraud
from the time the guardianship cease
(contracts entered into by the minors or
other incapacitated persons)
4 conflicting views*
prescription applies only to ';1%9
and 9%; defense
prescription applies to @%;B action
and defense D this one is more
logical
ase* &arantes vs &$
('rt. 0524-0523)
Rati'i"ation D confirmation> act or means by virtue
of which efficacy is given to contract which suffers
from a vice of curable nullity.
$e#uisites*
0. contract should be tainted with a vice which
is susceptible of being cured
4. the confirmation should be effected by the
person who is entitled to do so under the
law
5. it should be effected with =nowledge of the
vice or defect of the contract
.. the cause of the nullity or defect should
have already disappeared
&&&if the person entitled to effect the confirmation
jmvdg 64 2
nd
Semester/2009-2010
ratifies or confirms the contract with =nowledge of
the mista=e, but not of the fraud, his right to as= for
an annulment is not e)tinguished thereby since the
ratification has only purged the contract of mista=e,
but not the fraud.
Aor-s o' rati'i"ation/
(with =nowledge of the reason which renders the
contract voidable and such reason having
ceased...)
e)press D declaration of desire to
convalidate the contract and e)press
declaration to renounce his right to annul
the contract.
;acit D e)ecuting an act which necessarily
implies an intention to waive his right to
annul the contract.
E''#"ts o' rati'i"ation*
e)tinguishes the action to annul the
contract.
leanses the contract of its defects from
the moment it was constituted.
('rt. 052-)
re#uisites to confer the necessary capacity for the
e)ercise of action to annul*
plaintiff must have an interest in the
contract
the E1;17 and not the party responsible
for the vice or defect must be the person
who must assert the same
G#n#ral r!l#* a third person who is a stranger to
the contract cannot institute an action for
annulment.
E("#)tion* when the 5
rd
person is prejudiced in his
rights with respect to one of the contracting parties,
and can show detriment which would positively
result to him from the contract in which he has no
intervention.
CaseF 2eves vs -eople's ,omesite + ,ousing
&orp.
('rt. 052/-0522)
#''#"ts o' ann!l-#nt
contracting parties are released from their
obligations (contract not -et consummated)
apply 'rt. 052/-0.,4 of the ivil ode
(consummated contract)
mutual restitution
to give* things subject matter of the
contract, its fruits, and the price with
interest, e)cept in cases provided by
law
to do* apportionment of damages
based on the value of the prestation
with corresponding interests.
&&&when the defect of the contract
consists in the incapacity of one of the
contracting parties, the incapacitated
person is not obliged to ma=e any
restitution e)cept insofar as he has
been benefited by the thing or price
received by him.
&&&1n the obligation of the incapacitated person to
ma=e restitution, it is sufficient that there has been
a prudent and beneficial use by him of the thing
which he has received. (food, clothing, shelter,
health, etc.)
presumption that no benefit has accrued to
the incapacitated person
burden of proof of benefit is casted upon
the person who has capacity.
'rt. 0522 is not applicable in cases where
the incapacitated person can still return the
thing that he received.
;here is 17!L1"6 ratification when the
incapacitated person failed to as= for the
annulment of the contract and also
s#uandered that part of the consideration
which remained.
1n consonance with the principle
enunciated in 'rt. 04.0 (payment made to
an incapacitated person)
('rt. 0.,,-0.,4)
E''#"t o' 'ail!r# to -a4# r#stit!tion b#"a!s# o'
loss/
d!# to t,# 'a!lt o' t,# d#'#ndant
return the fruits received and the value
of the thing at the time of the loss, with
interests on the same date
action for annulment not e)tinguished
instead of being compelled to restore
the thing, the defendant can only be
compelled to pay the value thereof at
the time of the loss
d!# to t,# 'a!lt o' t,# )lainti''
jmvdg 65 2
nd
Semester/2009-2010
'rt. 0.,0 shall apply> action for
annulment shall be e)tinguished,
regardless as to whether the loss
occurred during the plaintiffGs incapacity
or after he had ac#uired capacity.
'ort!ito!s #%#nt
contract can be annulled> the
defendant(plaintiff can be held liable
only for the value of the thing at the
time of the loss, but without interest
thereon
C>A<TER 3
9NENAORCEABLE CONTRACTS
('rt. 0.,5-0.,/)
9n#n'or"#abl# "ontra"ts D cannot be enforced
by a proper action, unless ratified>
Class#s/
1. "ontra"ts #nt#r#d into 0it,o!t or in
#("#ss o' a!t,orit$ ('rt. 0.,5, 9o.0) or>
there is absolutely no consent
applicable principles*
no one may contract in the name of
another without being authori<ed by
the latter or unless he has right to
represent him. 1f he is duly
authori<ed, he must act within the
scope of his powers
such contracts are unenforceable
as reiterated in the law on agency
such contract may be ratified by the
person in whose behalf it has been
e)ecuted, before it is revo=ed by
the other contracting party
***Confirmation and ratification *ere not used
interchan"ea!l- in the old la*0 !ut in the ne* la*0
the term ratification is no* used to desi"nate the
act of validatin" an- Aind of defective contract
Reco"nition0 on the other hand0 is merel-
to cure a defect of proof
=. "ontra"ts 0,i", do not "o-)l$ 0it,
t,# stat!t# o' 'ra!ds ('rt. 0.,5, 9o. 4)
there is no 0riting& not#& or
-#-orand!- by which the contract
may be proved
8tatute of ?rauds was enacted for the
purpose of )r#%#nting 'ra!ds
such statute states that evidence of the
agreement cannot be received without
the writing or a secondary evidence of
its contents
statute simply provides the method by
which the contracts enumerated therein
may be proved.
"ffect* no action can be enforced
unless the re#uirement that the
contract be in writing be complied with.
?orm re#uired is for evidentiary
purpose
8tatute of ?rauds is applicable only to
those contacts which are purely
e)ecutory and not to those which have
been consummated either totally or
partially. (ase* &arbonnel vs -oncio)
et al.D .nigo vs Bstate of 5aloto'
3 contracts covered*
'n agreement that by its terms is
not to be performed within a year
from the ma=ing thereof>
limit of human memor- is #
-ear
if one of the contractin" parties
has alread- complied *ith the
o!li"ations imposed upon him
!- said contract *ithin the
-ear0 the other part- cannot
invoAe the Statute of ,raud
' special promise to answer for the
debt, default, or miscarriage of
another>
such promise must !e
collateral0 not independent or
ori"inal for Statute of ,rauds to
appl-
'n agreement made in
consideration of marriage, other
than a mutual promise to marry>
marria"e settlements and
donations propter nuptias are
covered !- the statute of fraud
'n agreement for the sale of
goods, chattels or things in action,
at a price not less than five hundred
pesos
loan is not covered0 provision
applies onl- to SA/. of "oods0
jmvdg 66 2
nd
Semester/2009-2010
chattels0 and thin"s in action
if the transaction involves
insepara!le "oods0 the prices
of the items shall !e
considered as a *hole
if the transaction separa!le
"oods0 the prices of the items
shall not !e less than $9<<
'n agreement for the l#asing for a
longer period than one year, or for
the sal# of real property or of an
interest therein>
oral a"reement to extend the
lease is covered !- the Statute
' representation as to the credit of
a third person.
Muasi-delict
misrepresentation !- a +
rd
person *ill maAe him lia!le
onl- if he has si"ned a
document in representin" the
credit of another person
;hese contracts are susceptible to
ratification
by the failure to object to the
presentation of oral evidence to
prove the same
by the acceptance of the benefits
under them.
@. "ontra"ts 0,#r# bot, t,# "ontra"ting
)arti#s do not )oss#ss t,# r#+!ir#d
l#gal "a)a"it$.
'bsolutely vitiated consent
if only one party is incapacitated, the
contract is voidable
may be ratified by the parents or
guardians of the incapacitated persons,
in effect, the contract becomes
voidable
if ratified by the parties themselves
after gaining the capacity, the contract
shall be validated from its inception
C,ara"t#risti"s o' !n#n'or"#abl# "ontra"ts/
cannot be enforced by proper action
susceptible of ratification
cannot be assailed by 5
rd
persons
C>A<TER 7
VOIC OR INE:ISTENT CONTRACTS
Void or In#(ist#nt "ontra"t D lac=s absolutely
either in fact or in law one or some of the elements
which are essential for its validity.
Void In#(ist#nt
all o' t,# r#+!isit# of a
contract ar# )r#s#nt,
but the cause, object, or
purpose is contrary to
law, morals, good
customs, etc..
one or some or all of the
re#uisites which are
essential for the validity
of a contract are
absol!t#l$ la"4ing&
such as those simulated
, or those which cause
or object did not e)ist at
the time of the
transaction
9either party may be
heard to invo=e its
unlawful character
(certain provisions of
ivil ode)
%pen to attac= even by
the parties thereto
!rinciple of in pari
delicto is applicable
!rinciple of in pari
delicto is not applicable
7ay produce legal
effects
annot produce any
effect whatsoever
('rt. 0.,2)
In#(ist#nt and %oid 'ro- t,# b#ginning
cause, object, purpose are contrary to law,
public morals, good customs, public order,
public policy
absolutely simulated or fictitious
cause or object did not e)ist at the time of
transaction
e)cept if the object is possible to come
into e)istence (this is to harmoni<e 'rt.
0.,2 with the provision that future
objects may be some future thing)
object is outside the commerce of man
contemplates an impossible service
where the intention of the parties relative to
the principal object of the contract cannot
be ascertained
e)pressly prohibited or declared void by
law
&&&cannot be ratified> defense of illegality cannot be
waived
jmvdg 67 2
nd
Semester/2009-2010
C,ara"t#risti"s o' %oid and in#(ist#nt
"ontra"ts/
produce no legal effect (quod nullum est
nullum producit effectum)
")cept* 'rt. 0.00-0.04 D nullity is
based on the illegality of the cause> any
action by a guilty party to recover
whatever he has already given under
the contract is barred
not susceptible of ratification
right to set up the defense of ine)istence or
absolute nullity cannot be waived
action or defense for the declaration of
their ine)istence or nullity is imprescriptible
('rt. 0.0,)
ine)istence or absolute nullity cannot be
invo=ed by a person whose interests are
not directly affected.
('rt. 0.0,)
action or defense of declaration of nullity is
imprescriptible D because the defects are more or
less permanent, thus cannot be cured by
prescription
ase* &astillo vs 6alvan
&&&'n action to declare the nullity of a void
judgment does not prescribe (-aluwagan ng
/ayan /an0 vs (ing)
ase* $3nar /rothers <ealty vs ,eirs of
$ugusto : no unreasonable delay in asserting
their rights
in spite the imprescriptibility, laches may
bar the action of a party in asserting the
nullity of the contract
('rt. 0.00-0.44)
in pari delicto D e#ually at fault
the law will not aid either party to an illegal
agreement, it leaves them where they are.
'pplies only to cases of e)isting contracts
with an illegal cause or object and not to
simulated or fictitious contracts nor to those
which are ine)istent
ase* <odrigue3 vs <odrigue3
circumvention of provision on prohibited
donation between spouses
appellant is clearly as guilty as her
husband in the attempt to circumvent the
law
rule of in pari delicto is applicable because
there is an illegal cause
onl$ 1 )art$ is at 'a!lt*
e)ecuted contract
guilty party is barred from recovering
what he has given to the other party by
reason of the contract
innocent party may demand the return
of what it has given
e)ecutory contract
contract cannot produce any legal
effect whatsoever
parties cannot demand for the
fulfillment of any obligation arising from
the contact nor be compelled to comply
with such obligation
E("#)tions in a))li"abilit$ o' in pari delicto/
payment in usurious interest ('rt. 0.05)
1interest paid in excess of the interest
allo*ed !- the usur- la*2 - means the
whole usurious interest> with interest
thereon from the date of payment
payment of money or delivery of property
for an illegal purpose ('rt. 0.0.)
payment of money or delivery of property
by an incapacitated person ('rt. 0.0+)
agreement that is not illegal per se but is
prohibited by law ('rt. 0.03)
in pari delicto is not applicable to a
homestead> the purpose of the law is to
give land to a family for home and
cultivation, conse#uently, the law
allows the homesteader to reac#uire
the land even if it has been sold.K
($ngeles vs &$, 9E= -hil. 9EEA)
rule of in pari delicto is inapplicable
where the same violates a well-
established public policy ($ngeles vs
&$, 9E= -hil. 9EEA) and -hil. /an0ing
vs 1ui *he
payment of any amount in e)cess of the
ma)imum price of any article or commodity
fi)ed by law. ('rt. 0.0-)
ontract where by a laborer underta=es to
wor= longer than the ma)imum number of
hours fi)ed by law ('rt. 0.0/)
contract whereby a laborer accepts a wage
jmvdg 68 2
nd
Semester/2009-2010
lower than the minimum wage fi)ed by law
('rt. 0.02)
ARTICLE 1B=1
;he defense of illegality of contract is not available
to third persons whose interests are not directly
affected.
ARTICLE 1B==
' contract which is the direct result of a previous
illegal contract, is also void and ine)istent.
TITLE III
NAT9RAL OBLIGATIONS
('rt. 0.45-0.5,)
Nat!ral obligations D obligations without a
sanction> susceptible of voluntary performance
once there is voluntary performance or
fulfillment, one cannot recover what he has
delivered.
Nat!ral obligations Ci%il obligations
based on e#uity and
natural law
@ased on positive law
do not grant a right of
action to enforce their
performance
enforceable by court
action
Nat!ral obligations *oral obligations
;here is a juridical tie
between the parties
which is not enforceable
by court action
9o juridical tie
whatsoever
Eoluntary performance
by the obligor produces
legal effect which the
courts will recogni<e
and protect
Eoluntary fulfillment
does not produce legal
effect which courts will
recogni<e and protect
TITLE IV
ESTO<<EL
('rt. 0.50-0.52)
Esto))#l D a condition or state by virtue of which
an admission or representation is rendered
conclusive upon the person ma=ing it and cannot
be denied or disproved as against the person
relying thereon.
such principle will afford solution to many
#uestions which are not foreseen in our
legislation
person is not allowed to ta=e inconsistent
positions
Kinds o' Esto))#l
estoppel in pais (e#uitable estoppel)
arises by acts, representations, or
admissions, or by his silence induces
another to believe certain acts to e)ist
and such other rightfully relies and acts
on such belief, as a conse#uence of
which he will be prejudiced if the former
is permitted to deny the e)istence of
such facts
estoppel by silence D inaction>
estopel by acceptance of benefits
estoppel by deed or by record (technical
estoppel)
estoppel by deed D type of technical
estoppel by virtue of which a party to a
deed and his privies are precluded from
asserting as against the other party or
his privies any right or title in
derogation of the deed or from denying
any material fact therein.
"stoppel by record D parties are
precluded from denying the truth of
matters set forth in a record whether
judicial or legislative.
"stoppel by judgment D bars the
party from raising any #uestion that
might have put in issue and
decided in the previous litigation
estoppel by laches
failure or neglect, for an unreasonable
and une)plained length of time, to do
that which, by e)ercising due diligence,
could or should have been done earlier
presumption that the party entitled to
assert it either has abandoned it or
declined to assert it.
8tale demands
not a mere #uestion of time but is
principally a #uestion of the ine#uity or
unfairness of permitting a right or claim
to be enforced or asserted
El#-#nts o' la",#s/
conduct on the part of the defendant, or of
jmvdg 69 2
nd
Semester/2009-2010
one under whom he claims, giving rise to
the situation of which complaint is made
and for which the complainant see=s a
remedy
delay in asserting the complainantGs right>
having =nowledge and opportunity to
assert his right
lac= of =nowledge or notice on the part of
the defendant that the complainant would
assert the right on which he bases his suit
injury or prejudice to the defendant in the
event relief is accorded to the complainant,
or the suit is not held to be barred
&&&9o definite period for laches to ta=e in unli=e in
prescription.
ase* /ucton vs 6abar
2he action here although one for
reconveyance is actually one for
!uieting of title : when the plaintiff is in
possession is actually imprescriptible."
- 5ustice 5B/ Re-es
- e n d -
jmvdg 70 2
nd
Semester/2009-2010

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AUF School of Law Obligations and Contract

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