UST Golden Notes in Obligations and Cont PDF

OBLIGATIONS
OBLIGATIONS ACTIVESUBJECT

I.DEFINITION Q:Whoisanactivesubject?

Q:Whatisanobligation? A:Onewhoisdemandingtheperformanceofthe
obligation.Itishewhoinhisfavortheobligation
A:Itisajuridicalnecessitytogive,todo,ornotto isconstituted,establishedorcreated.Heiscalled
do.(Art.1156,NCC) thecreditor(CR)orobligee.

It is a juridical relation whereby a person PASSIVESUBJECT
(creditor)maydemandfromanother(debtor)the
observance of a determinative conduct (giving, Q:Whoisapassivesubject?
doing, or not doing), and in case of breach, may
demandsatisfactionfromtheassetsofthelatter. A: One bound to perform the prestation to give,
(AriasRamos) todo,ornottodo.Heiscalledthedebtor(DR)or
obligor. (Pineda, Obligations and Contracts, p. 2,
Note:Art.1156refersonlytocivilobligationswhich 2000ed)
areenforceableincourtwhenbreached.Itdoesnot
cover natural obligations (Arts. 14231430, NCC) Note:Whenthereisarightthereisacorresponding
because these are obligations that cannot be obligation.Rightistheactiveaspectwhileobligation
enforcedincourtbeingbasedmerelyonequityand is the passive aspect. Thus, it is said that the
natural law and not on positive law. (Pineda, conceptsofcreditanddebtaretwodistinctaspects
ObligationsandContracts,2000ed,p.3) ofunitaryconceptofobligation.(Pineda,Obligations
andContracts,p.2,2000ed)
II.ELEMENTSOFANOBLIGATION
OBJECT
Q:Whataretheelementsofanobligation?
Q:Whataretherequisitesofavalidobject?
A:JAPOC
1. Juridicalorlegaltievinculumjuris; A:Theobjectmustbe:
2. Activesubjectobligeeorcreditor; 1. licitorlawful;
3. Passivesubjectobligorordebtor; 2. possible,physically&judicially;
4. Objectprestation;and 3. determinateordeterminable;and
5. Causeefficientcauseisthesamewith 4. pecuniary value or possible equivalent
vinculumjuris. inmoney.

VINCULUMJURIS Note: Absence of either of the first three (licit,
possibleand/ordeterminate)makestheobjectvoid.
Q:Whatisvinculumjuris?
Form is not generally considered essential, though
A:Itistheefficientcauseorjuridicaltiebyvirtue sometimesitisaddedasthe5threquisite.Thereisno
of which the debtor has become bound to particular form to make obligations binding, except
performtheprestation. in certain rare cases. (Tolentino, Civil Code of the
Philippines,Vol.IV,2002ed.p.57)
Q:Howisvinculumjurisestablished?
III.DIFFERENTKINDSOFPRESTATION
A:By:
1. law(i.e.relationofhusbandandwife Q:Whatisprestation?
forsupport)
2. bilateralacts(i.e.contracts) A:Itisaconductthatmayconsistofgiving,doing,
3. unilateral acts (i.e. crimes and quasi ornotdoingsomething.
delicts)(Tolentino, Civil Code Vol. IV, p.
Note:Itistheconductthatmustbeobservedbythe
59,1999ed)
debtor/obligor.
173
ACADEMICSCHAIR:LESTERJAYALANE.FLORESII UNIVERSITYOFSANTOTOMAS
VICECHAIRSFORACADEMICS:KARENJOYG.SABUGO&JOHNHENRYC.MENDOZA
VICE C HAIRFORA DMINISTRATIONANDF INANCE : JEANELLE C. LEE Facultad de Derecho Civil
VICECHAIRSFORLAYOUTANDDESIGN:EARLLOUIEM.MASACAYAN&THEENAC.MARTINEZ
UST GOLDEN NOTES 2011

Q: What are the different kinds of prestation? 2. Performance
Distinguish. a. Positivetogive;todo
b. Negativenottodo
A:
OBLIGATION OBLIGATIONTO OBLIGATION 3. Subjectmatter
TOGIVE DO NOTTODO a. Personaltodo;nottodo
Consistsinthe Coversallkinds b. Realtogive
deliveryofa ofworksor
Consistsin 4. Object
movableor services
refrainingfrom a. Determinate/specific
immovable whether
doingsomeacts particularlydesignatedor
thingtothe physicalor
creditor mental physicallysegregatedfromall
i.e.Easement othersofthesameclass.
prohibiting b. Generic is designated merely by
building itsclassorgenus.
proprietoror c. Limited generic generic objects
i.e.Contract possessorfrom confined to a particular class (e.g.
i.e.Sale,
forprofessional committing an obligation to deliver one of my
deposit,
serviceslike nuisance(Art. horses)(Tolentino,CivilCodeofthe
pledge,
painting, 682,NCC), Philippines,Vol.IV,2002ed,p.91)
donation,
modeling, restrainingorder
antichresis
singing,etc. orinjunction 5. Personobliged
(Pineda, a. Unilateral only one party is
Obligationsand bound
Contracts,p.3, b. Bilateralbothpartiesarebound
2000ed)

6. Creation
Q:Whataretherequisitesofavalidprestation? a. Legalimposedbylaw(Art.1158,
NCC)
A: b. Conventional established by the
1. Possible,physicallyandjuridically; agreement of the parties like
2. Determinate, or at least determinable contracts
according to preestablished elements
orcriteria;and 7. Susceptibilityofpartialfulfillment
3. Has a possible equivalent in money a. Divisibleobligationissusceptible
(Tolentino,CivilCodeVol.IV,p.58,1999 ofpartialperformance
ed). b. Indivisible obligation is not
susceptible
IV.CLASSIFICATIONOFOBLIGATIONS
8. Existenceofburdenorcondition
Q:Whatarethekindsofobligation? a. Pure is not burdened with any
conditionorterm.Itisimmediately
A:Fromtheviewpointof: demandable.
1. Sanction b. Conditional is subject to a
a. Civil gives a right of action to conditionwhichmaybesuspensive
compeltheirperformance (happeningofwhichshallgiverise
b. Naturalnotbasedonpositivelaw to the obligation) or resolutory
but on equity and natural law; (happening terminates the
does not grant a right of action to obligation).
enforce their performance, but
after voluntary fulfillment by the 9. Characterofresponsibilityorliability
obligor,theyauthorizeretentionof a. Joint each debtor is liable only
whathasbeendelivered/rendered forapartofthewholeliabilityand
byreasonthereof. toeachcreditorshallbelongonlya
c. Moral cannot be enforced by partofthecorrelativerights
actionbutarebindingontheparty b. Solidary a debtor is answerable
who makes it in conscience and for the whole of the obligation
naturallaw. without prejudice to his right to

174 CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

OBLIGATIONS
collect from his codebtors the substitution of the first one (Art.
latters shares in the obligation 1206,NCC)
(Art.1207,NCC)
11. Impositionofpenalty
10. Righttochooseandsubstitution a. Simple there is no penalty
a. Alternative obligor may choose imposed for violation of the terms
to completely perform one out of thereof
the several prestations(Art. 1199, b. Obligation with penalty
NCC) obligationwhichimposesapenalty
b. Facultative only one prestation for violation (Art. 1226, NCC)
has been agreed upon, but the (Pineda,ObligationsandContracts,
obligor may render one in 2000ed,p.57)
V.SOURCESOFOBLIGATIONS
Q:Whatarethesourcesofobligations?Distinguish.
A:LCQDQ
Sources Obligations Perfection
Law exlege Fromthetimedesignatedbythelawcreatingorregulatingthem.
GR:Fromthetimeoftheperfectionofthecontract(i.e.meetingof
theminds)

XPNs:
Contracts excontractu 1. Whenthepartiesmadestipulationontherightofthecreditor
tothefruitsofthething
2. When the obligation is subject to a suspensive condition or
period;arisesuponfulfillmentoftheconditionorexpirationof
theperiod.
Quasi
exquasicontractu
contracts
exmaleficioorex
Delicts Fromthetimedesignatedbythelawcreatingorregulatingthem.
delicto
Quasi exquasimaleficioorex
delict quasidelicto
Note:Theenumerationisexclusive.

A.OBLIGATIONEXLEGE B.OBLIGATIONEXCONTRACTU

Q: What are the characteristics of a legal Q:Whataretherequisitesforacontracttogive
obligationoranobligationexlege? risetoobligationsexcontractu?

A: A:
1. Does not need the consent of the 1. It must contain all the essential
obligor; requisitesofacontract
2. Must be expressly set forth in the law 2. It must not be contrary to law, morals,
creating it and not merely presumed; good customs, public order, and public
and policy
3. Inorderthatthelawmaybeasourceof
obligation, it should be the creator of Q:Whatiscomplianceingoodfaith?
theobligationitself.
A: It is performance in accordance with the
Q:Whatgovernsobligationsarisingfromlaw? stipulation, clauses, terms and conditions of the
contract.
A: These obligations shall be regulated by the
provisionsofthelawwhichestablishesthem.The Note:Thecontractisthelawbetweentheparties.
CivilCodeisapplicablesuppletorily.
175

Q: May a party unilaterally evadehis obligation 1. Negotiorium gestio (inofficious
inthecontract? manager) arises when a person
voluntarily takes charge of the
A: management of the business or
GR:Neither party may unilaterally evade his propertyofanotherwithoutanypower
obligationinthecontract. fromthelatter.
2. Solutio indebiti (unjust enrichment)
XPNs:Unilateralevasionisallowedwhenthe: takes place when a person receives
1. contractauthorizessuchevasion something from another without any
2. otherpartyassentsthereto right to demand for it, and the thing
was unduly delivered to him through
Q:Istherealimitationontherightoftheparties mistake.
tofreelyenterintostipulations?
Note:Thedeliverymustnotbethroughliberalityor
A: Yes. Parties may freely enter into any someothercause.
stipulations provided such are not contrary to
law,morals,goodcustoms,publicorderorpublic NEGOTIORUMGESTIO
policy
Q: Upon the declaration of martial rule in the
Q: What governs obligations arising from Philippines, X, together with his wife and
contracts? children, disappeared from his residence along
Ermita, Manila. Years passed without Y hearing
A: fromXandhisfamily.Ycontinuedtakingcareof
GR:These obligations shall be governed Xshouse,evencausingminorrepairstobedone
primarily by the stipulations, clauses, terms at his house to preserve it. In 1976, when
andconditionsofthepartiesagreements. business began to perk up in the area, Z,
approached Y and proposed that they build
XPN: Contracts with prestations that are stores at the ground floor of the house and
unconscionableorunreasonable. convertitssecondfloorintoapensionhouse.Y
agreed to Zs proposal and together they spent
Note: In case of unconscionable penalty for fortheconstructionofstoresatthegroundfloor
breachofcontract(Art.1229,NCC),orliquidated and the conversion of the second floor into a
damages (Art. 2226, NCC), the same may be pensionhouse.Whileconstructionwasgoingon,
reduced by the court. (Pineda, Obligations and fire occurred at a nearby house. The houses at
Contracts,p.13,2000ed) the entire block, including Xs, were burned.
After the EDSA revolution in February 1986, X
and his family returned from the United States
C.OBLIGATIONEXQUASICONTRACTU wheretheytookrefugein1972.

Q:Whatisquasicontract? Uponlearningofwhathappenedtohishouse,X
suedYfordamages.Ypleadedasadefensethat
A: It is a juridical relation arising from lawful, he merely took charge of his house under the
voluntary and unilateral acts based on the principleofnegotiorumgestio.Hewasnotliable
principle that no one should unjustly enrich astheburningofthehouseisafortuitousevent.
himselfattheexpenseofanother.
IsYliabletoXfordamagesundertheforegoing
Q:Whatispresumptiveconsent? circumstance?

A: Since a quasicontract is a unilateral contract A:No.Yisnotliablefordamages,becauseheisa
createdbythesoleactoractsofthegestor,there gestor in negotiorum gestio(Art. 2144,
is no express consent given by the other party. NCC).Furthermore, B is not liable to A for any
The consent needed in a contract is provided by fortuitous event because he did not commit any
law through presumption. (Pineda, Obligations of the instances provided under Art. 2147 of the
andContracts,p.15,2000ed) CivilCode:
1. He did not undertake risky operation
Q: What are the principal forms of quasi which the owner was not accustomed to
contracts? embarkupon;
2. He has not preferred his own interest to
A: thatoftheowner;
176 CIVILLAWTEAM:

OBLIGATIONS
3. Hehasnotfailedtoreturnthepropertyor officers. GSIS sought the restoration of the said

businessafterdemandoftheowner;and disallowedbenefitsbutthecourtruledthatsuch
4. He has not assumed the management in restoration cannot be enforced against Xs
badfaith.(1993BarQuestion) retirement benefits as this is expressly
prohibited by law under R.A. 8291. Is X obliged
Q: In fear of reprisals from lawless elements to return the benefits improperly received by
besieging his barangay, X abandoned his himundertheprincipleofsolutioindebiti?
fishpond, fled to Manila and left for Europe.
Seekingthatthefishinthefishpondwereready A:Yes.ItcannotbedeniedthatXwasarecipient
for harvest, Y, who is in the business of of benefits that were properly disallowed by the
managingfishpondsonacommissionbasis,took COA. These COA disallowances would otherwise
possession of the property, harvested the fish have been deducted from his salaries. The GSIS
andsoldtheentireharvesttoZ. can no longer recover these amounts by any
administrative means due to the specific
Thereafter,YborrowedmoneyfromWandused exemption of retirement benefits from COA
themoneytobuynewsuppliesoffishfryandto disallowances. X resultantly retained benefits to
preparethefishpondforthenextcrop. which he was not legally entitled which, in turn,
gaverisetoanobligationonhisparttoreturnthe
1. What is the juridical relation between amounts under the principle of solutio indebiti.
XandYduringX'sabsence? (GSIS v. COA, G.R. No. 138381, Nov. 10, 2004;
2. Upon the return of X to the barangay, GSIS v. Pineda, et. al., G.R. No. 141625, Nov. 10,
what are the obligations of Y to X as 2004).
regardsthecontractwithZ?
3. Upon X's return, what are the D.OBLIGATIONSEXDELICTO
obligationsofXasregardsY'scontract
withW? Q:Whatisthebasisforcivilliabilityarisingfrom
4. What legal effects will result if X delictsasaccordingtothepenalcode?
expressly ratifies Y's management and
what would be the obligations of X in A: Art. 100 of the Revised Penal Code provides
favorofY? that:Everypersoncriminallyliableforafelonyis
alsocivillyliable.
Explainallyouranswers.
Q:Whatisdelict?
A:
1. The juridical relation is that of the A:Itisanactoromissionpunishedbylaw.
quasicontractof"negotiorumgestio".Y
is the "gestor" or "officious manager" E.OBLIGATIONSEXQUASIDELICTO
andXisthe"owner"(Art.2144,NCC).
2. Y must render an account of his Q:Whatisquasidelictortort?
operationsanddelivertoXthepricehe
received for the sale of the harvested A: It is an act or omission arising from fault or
fish.(Art.2145,NCC). negligence which causes damage to another,
3. XmustpaytheloanobtainedbyYfrom there being no preexisting contractual relations
W because X must answer for betweentheparties.
obligations contracted with third
persons in the interest of the owner Q:Whataretheelementsofaquasidelict?
(Art.2150,NCC).
4. Express ratification by X provides the A:
effects of an express agency and X is 1. Actoromission;
liabletopaythecommissionshabitually 2. Fault or negligence attributable to the
receivedbythegestorasmanager(Art. personcharged;
2149,NCC).(1992BarQuestion) 3. Damageorinjury;
4. Direct relation of cause and effect
SOLUTIONINDEBITI between the act arising from
fault/negligence and the damage or
X received his full retirement benefits including injury(proximatecause);and
those monetary benefits that were properly 5. No preexisting contractual relation
disallowed by COA to be granted to public betweentheparties.
177

Q:Whatisthescopeofcivilliability? VI.NATUREANDEFFECTSOFOBLIGATIONS

A:RRI A.OBLIGATIONTOGIVE
1. Restitution;
2. Reparationfordamagecaused;and Q: In an obligation to deliver a thing, what are
3. Indemnityforconsequentialdamages. theobligationsofthedebtor?

F.NATURALOBLIGATIONS A:Itdependsuponthekindofobligation.

Q:Whatarenaturalobligations? SPECIFIC GENERIC
Deliverthethingwhichis
A: They are real obligations to which the law Deliverthethingagreed
neitherofsuperiornor
denies an action, but which the debtor may upon(Art.1165,NCC)
inferiorquality
performvoluntarily.
Takecareofthething Specificperformancei.e.

withtheproperdiligence deliveryofanotherthing
Q:Whataretheinstancesofnaturalobligations? ofagoodfatherofa withinthesamegenusas
familyunlessthelaw thethingpromisedif
A: requiresorparties suchthingisdamaged
1. Performance after the civil obligation stipulateanother duetolackofcareora
hasprescribed; standardofcare(Art. generalbreachis
2. Reimbursement of a third person for a 1163,NCC) committed
debtthathasprescribed; Iftheobjectisgeneric,
3. Restitutionbyminorafterannulmentof Deliverallaccessions, butthesourceis
contract; accessoriesandfruitsof specifiedordelimited,
4. Deliverybyminorofmoneyorfungible thething(Art.1166,NCC) theobligationisto
thinginfulfillmentofobligation; preservethesource
5. Performance after action to enforce
Paydamagesincaseof Paydamagesincaseof
civilobligationhasfailed; breachofobligationby breachofobligationby
6. Payment by heir of debt exceeding reasonofdelay,fraud, reasonofdelay,fraud,
valueofpropertyinherited;and negligence, negligence,
7. Payment of legacy after will has been contraventionofthe contraventionofthe
declaredvoid. tenorthereof tenorthereof(Art.1170)
Obligationisnot
Q:Distinguishnaturalfromcivilobligation. Fortuitousevent
extinguished(genus
extinguishesthe
nunquamperuitgenus
A: obligation
neverperishes)
NATURALOBLIGATION CIVILOBLIGATION

Basedfromlaw,
Basedonequityand contracts,quasi
naturallaw contracts,delicts,and
quasidelicts
Canbeenforcedincourt
Cannotbeenforcedin
becausetheobligeehasa
courtbecausethe
rightofaction
obligeehasnorightof
(Pineda,Obligationsand
actiontocompelits
Contracts,2000ed,p.
performance
636)

Q: May natural obligations be converted into
civilobligations?

A:Yes,bywayofnovation.Thenaturalobligation
becomesavalidcauseforacivilobligationafterit
hasbeenaffirmedorratifiedanewbythedebtor.
(Pineda, Obligations and Contracts, 2000 ed, p.
634)

178 CIVILLAWTEAM:

OBLIGATIONS
Q: In failing to deliver a thing, what are the Q: What is the principle of balancing of
remediesofthecreditor? equities as applied in actions for specific
performance?
A:
SPECIFICOBLIGATION GENERICOBLIGATION A: In decreeing specific performance, equity
Specificperformance requires not only that the contract be just and
(deliveryofanything equitable in its provisions, but that the
Specificperformance consequencesofspecificperformance,islikewise
belongingtothesame
species) bejustandequitable.Thegeneralruleisthatthis
equitable relief will not be granted if, under the
Rescission(actionto Askthattheobligation
circumstances of the case, the result of the
rescindunderArt.1380, becompliedwithatthe
NCC) debtorsexpense specific performance of the contract would be
harsh,inequitable,andoppressiveorresultinan
Resolutionor specific
Resolution(actionfor unconscionable advantage to the plaintiff
performance,with
cancellationunderArt. (Agcaoiliv.GSIS,G.R.No.30056,Aug.30,1988).
damagesineithercase
1191,NCC)
(Art.1191,NCC)
B.OBLIGATIONTODOORNOTTODO
Damages,inbothcases(Art.1170,NCC)
Q:Whatarethetypesofpersonalobligations?
Note:Maybeexclusiveorinadditiontotheabove

mentionedremedies(Pineda,Obligationsand
A:
Contracts,2000ed,p.37)
1. positivetodo
2. negativenottodo
Note: In obligation to deliver a specific thing, the

creditorhastherighttodemandpreservationofthe
Q:Whataretheremediesinpersonal
thing,itsaccessions,accessories,andthefruits.The
obligations?
creditor is entitled to the fruits and interests from
thetimetheobligationtodeliverthethingarise. A:
Q:Whatisthenatureoftherightofthecreditor 1. positivepersonalobligations
withrespecttothefruits? a. notpurelypersonalactto
haveobligationexecutedat
A: debtor'sexpenseplus
1. Beforedeliverypersonalright damages
2. Afterdeliveryrealright b. purelypersonalactdamages
only.
Note: The creditor has a right to the fruits of the
thingfromthetimetheobligationtodeliveritarises. Note;sameruleappliesifobligationisdonein
However, he shall acquire no real right over it until contraventionofthetermsoftheobligation.
thesamehasbeendeliveredtohim(Art.1164,NCC).
2. Negative personal obligation to have
Q:Distinguishpersonalrightfromrealright. the prohibited thing undone plus
damages. However, if thing cannot be
A: physically or legally undone, only
damagesmaybedemanded.
PERSONAL REAL

Jusadrem Jusinre Q:Isspecificperformancearemedyinpersonal
Enforceableonlyagainst obligations?
Enforceableagainstthe
adefiniteperson/group
wholeworld
ofpersons A:No.Otherwisethismayamounttoinvoluntary
Righttodemandfrom servitudewhichisprohibitedbytheConstitution.
Rightoveraspecific
another,asadefinite
thing,withoutadefinite
passivesubject,the Q:Whenmayathingbeorderedundone?
passivesubjectagainst
fulfillmentofthe A:
whomtherightmaybe
prestationtogive,todo 1. ifmadepoorly
personallyenforced.
ornottodo. 2. negativepersonalobligations
Hasadefinitepassive Nodefinitepassive
subject subject

179

C.BREACHESOFOBLIGATIONS 2. Where it would be physically or legally
impossible to undo what has been
Q:Whataretheformsofbreachofobligations? undonebecauseof:
a. theverynatureoftheactitself;
A: b. aprovisionoflaw;or
1. Voluntarydebtorisliablefordamages c. conflictingrightsofthirdpersons.
ifheisguiltyof:
a. default(mora) Note:Ineithercase,theremedyistoseekrecovery
b. fraud(dolo) fordamages.
c. negligence(culpa)
d. breach through contravention of DEFAULT(MORA))
thetenorthereof
Q:Whendoesdelayordefaultarise?
2. Involuntary debtor is unable to
performtheobligationduetofortuitous A: Those obliged to deliver or to do something
eventthusnotliablefordamages incurindelayfromthetimetheobligeejudicially
or extrajudicially demands from them the
Q: What is the concept of a good father of the fulfillmentoftheirobligation.
family?
In reciprocal obligations, neither party incurs in
A:TheSupremeCourtdescribedagoodfatherof delay if the other does not comply in a proper
afamilybyfirststatingwhoisnot.Heisnotandis manner with what is incumbent upon him. From
not supposed to be omniscient of the future; the moment one of the parties fulfills his
rather, he is one who takes precautions against obligations,delaybytheotherbegins.(Art.1169,
anyharmwhenthereissomethingbeforehimto NCC)
suggest or warn him of the danger or to foresee
it(Picart v. Smith, G.R. No. L12406, Mar. 15, Q:Whataretherequisitesofdelay?
1918).
A:
1.COMPLETEFAILURETOPERFORM 1. Obligation must be due, demandable
andliquidated;
Q:Whataretheeffectsofbreachofobligation? 2. Debtor fails to perform his positive
obligationonthedateagreedupon;
A:Ifapersonobligedtodosomethingfailstodo 3. Ajudicialorextrajudicialdemandmade
it,orifhedoesitincontraventionofthetenorof by the creditor upon the debtor to
the obligation, the same shall be executed at his fulfill, perform or comply with his
cost.Andwhathasbeenpoorlydone,beundone. obligation;and
(Art.1167,NCC) 4. Failure of the debtor to comply with
suchdemand.
When the obligation consists in not doing, and
theobligordoeswhathasbeenforbiddenhim,it Note: In reciprocal obligations, the moment one
shall also be undone at his expense. (Art.1168, partyisreadytocomplywithhisobligation,delayby
NCC) theotherbegins.Thereisnoneedfordemandfrom
eitherparty.
Q: What are the instances where the remedy
underArt.1168isnotavailable? 2.DELAY

A: Q:Whatarethekindsofdelayordefault?
1. Where the effects of the act which is
forbidden are definite in character A:
even if it is possible for the creditor to 1. Mora solvendi default on the part of
ask that the act be undone at the thedebtor/obligor
expense of the debtor, consequences a. Ex re default in real obligations
contraryto theobjectoftheobligation (togive)
will have been produced which are b. Ex personae default in personal
permanentincharacter. obligations(todo)

2. Moraaccipiendidefaultonthepartof
thecreditor/obligee
180 CIVILLAWTEAM:

OBLIGATIONS
3. Compensatio morae default on the MORAACCIPIENDI

part of both the debtor and creditor in
reciprocalobligations Q:Whataretherequisitesofmoraaccipiendi?

MORASOLVENDI A:
1. Offer of performance by a capacitated
Q:Whataretherequisitesofmorasolvendi? debtor;
2. Offermustbetocomplyprestationasit
A: shouldbeperformed;and
1. Obligationpertainstothedebtor; 3. Refusal of the creditor without just
2. Obligation is determinate, due and cause.
demandable,andliquidated;
3. Obligation has not been performed on Q:Whataretheeffectsofmoraaccipiendi?
itsmaturitydate;
4. Thereisjudicialorextrajudicialdemand A:
bythecreditor; 1. Responsibility of DR is limited to fraud
5. Failure of the debtor to comply with andgrossnegligence
suchdemand 2. DR is exempted from risk of loss of
thing;CRbearsriskofloss
Q: Does mora solvendi apply in natural 3. Expenses by DR for preservation of
obligations? thingafterdelayischargeabletoCR
4. Iftheobligationbearsinterest,DRdoes
A: No (Art. 1423, NCC), because performance is nothavetopayfromtimeofdelay
optionalorvoluntaryonthedebtorspart. 5. CRliablefordamages
6. DRmayrelievehimselfofobligationby
Q: Does mora solvendi apply in negative consigningthething
obligations?
Q:Whataretherulesondefault?
A:Nobecauseonecanneverbelateinnotgiving
ordoingsomething. A:
1. Unilateralobligations
Q:Whataretheeffectsofmorasolvendi? GR: Default or delay begins from
extrajudicial or judicial demand mere
A: expiration of the period fixed is not
1. Debtor may be liable for damages or enough in order that DR may incur
interests;and delay.
2. Whenithasforitsobjectadeterminate
thing, debtor may bear the risk of loss XPNs:
of the thing even if the loss is due to a. Theobligationorthelawexpressly
fortuitousevent(Art.1165,NCC). sodictates;
b. Timeisoftheessence;
Q:Maythedebtorsliabilitybemitigatedevenif c. Demand would be useless, as DR
heisguiltyofdelay? has rendered it beyond his power
toperform;or
A: Yes. If the debtor can prove that loss would d. DRhasacknowledgedthatheisin
neverthelesstranspireevenifhehadnotbeenin default.
default, the court may equitably mitigate his
liability. (Art. 2215 (4), NCC; Pineda, Obligations 2. Reciprocalobligations
andContracts,2000ed.,p.47) GR: Fulfillment by both parties should
besimultaneous.

XPN: When different dates for the
performance of obligation is fixed by
theparties.

181

Q:Whatarereciprocalobligations? WAIVEROFFUTUREFRAUD

A: These are obligations created and established Q:Mayanactionarisingfromfraudbewaived?
at the same time, out of the same cause and
whichresultsinthemutualrelationshipbetween A: With respect to fraud that has already been
theparties. committed, the law does not prohibit
renunciationoftheactionfordamagesbasedon
Q:Inreciprocalobligations,whendoesaparty the same. However, the law does prohibit any
incurindelay? waiver of an action for future fraud since the
sameiscontrarytolawandpublicpolicy.
A: In reciprocal obligations one party incurs in
delayfromthemomenttheotherpartyfulfillshis Note:Waiverofpastfraudisvalidsincesuchcanbe
deemed an act of generosity. What is renounced is
obligation,whilehehimselfdoesnotcomplyoris
the effect of fraud, particularly the right to
not ready to comply in a proper manner with
indemnity.
whatisincumbentuponhim.

Q:Whatarethekindsoffraud?Distinguish.
Q: In reciprocal obligations, when is demand

necessaryinorderforapartytoincurindelay?
A:

FRAUDDURINGTHE FRAUDDURINGTHE
A:Onlywhentherespectiveobligationsaretobe
PERFECTIONOFTHE PERFORMANCEOFTHE
performedonseparatedates. CONTRACTORCAUSAL OBLIGATIONOR
FRAUD INCIDENTALFRAUD
Q:Whatistheeffectofnoncomplianceofboth (ART.1338) (ART.1344)
partiesinreciprocalobligations? WhenEmployed
Duringtheperformance
A: If neither party complies with his prestation, Beforeorduringthe
ofa
defaultofonecompensatesforthedefaultofthe perfectionofacontract
preexistingobligation
other. PurposeofExecution
Tosecuretheconsentof Toevadethenormal
Q: What may cause the cessation of the effects anothertoenterintothe fulfillmentofthe
ofmora? contract obligation
ResultantEffect
A:
Vitiationofconsent Breachofanobligation
1. Renunciation(express/implied);or
2. Prescription. StatusoftheContract
Voidable Valid
3.FRAUD
RightorRemedyofAggrievedParty

Rightofinnocentparty Rightofinnocent
Q:Whatisfraud?
toannulthecontract party/creditortoclaim

withdamages fordamages
A: It is an intentional evasion of the faithful

performanceoftheobligation(8Manresa72).
Q: What are the remedies of the defrauded

party?
Q:Whattypeoffraudmustbepresentinorder

thattheobligormaybeheldliablefordamages?
A:

1. Specificperformance(Art.1233,NCC)
A: The fraud must be incidental fraud, or that
2. Resolution of the contract (Art. 1191,
which is present during the performance of the
NCC)
obligation, and not causal fraud, or fraud
3. Damages,ineithercase
employed in the execution of a contract, which

vitiatesconsent.

182 CIVILLAWTEAM:

OBLIGATIONS
4.NEGLIGENCE relation contractualrelation

Thesourceof
Q:Distinguishfraudfromnegligence. obligationof
Thesourceofobligation
defendanttopay
A: isdefendants
damagesisthebreach
negligenceitself
Fraud Negligence ornonfulfillmentof
Thereisnodeliberate thecontract
Thereisdeliberate intentiontocause Proofoftheexistence
intentiontocause damageorinjuryevenif ofthecontractandof
Thenegligenceofthe
damage theactwasdone itsbreachornon
defendantmustbe
voluntarily fulfillmentissufficient
proved
primafacietowarrant
Liabilitycannotbe Liabilitymaybe recovery
mitigated mitigated Proofofdiligencein
Proofofdiligenceinthe
GR:Waiverforfuture theselection&
selection&supervision
negligencemaybe supervisionofthe
oftheemployeesisa
allowedincertaincases employeesisnotan
defense
availabledefense
Waiverforfuturefraud
XPN:Natureofthe
isvoid
obligationorpublic Q:Whatisthedegreeofdiligencerequired?
policyrequires
extraordinarydiligence A:
(e.g.commoncarrier) 1. Thatagreedupon
2. In the absence of such, that which is
Note:Whennegligenceissogrossthatitamountsto requiredbythelaw
wantonattitudeonthepartofthedebtor,thelaws 3. In the absence of the foregoing,
incaseoffraudshallapply. diligence of a good father of afamily
that reasonable diligence which an
Wherenegligenceshowsbadfaith(i.e.,deliberately ordinary prudent person would have
committed)itisconsideredequivalenttofraud.Any done under the same circumstances.
waiverofanactionforfuturenegligenceofthiskind XPN:Common carriers requiring
isthereforevoid.(DeLeon,ObligationsandContract, extraordinary diligence (Arts. 1998
2003ed.,p.57)
2002)

Q: What are the effects of contributory
5.CONTRAVENTIONOFTENOROFOBLIGATION
negligenceofthecreditor?
(VIOLATIO)

A:
Q: What is violation of the terms of the
GR:Itreducesormitigatesthedamageswhich
contract?
hecanrecover.

A:Itistheactofcontraveningthetenororterms
XPN:If the negligent act or omission of the
or conditions of the contract. It is also known as
creditor is the proximate cause of the event
violatio,i.e.failureofcommoncarriertotakeits
whichledtothedamageorinjurycomplained
passenger to their destination.(Pineda,
of,hecannotrecover.
ObligationsandContracts,2000ed,p.50)

Q: Distinguish culpa contractual from culpa Note: Under Art. 1170, NCC, the phrase in any
aquiliana. manner contravene the tenor of the obligation
includes any illicit act which impairs the strict and
A: faithfulfulfillmentoftheobligation,oreverykindof
CULPA defectiveperformance.
CULPACONTRACTUAL
AQUILIANA(QUASI
(CONTRACT)
DELICT)
Negligenceismerely
Negligenceis
anincidentinthe
substantiveand
performanceofan
independent
obligation
Thereisalwaysapre Theremayormaynotbe
existingcontractual apreexisting
183

6.FORTUITOUSEVENT Q: Is there liability for loss due to fortuitous
event?
Q:Whatisfortuitousevent?
A:
A: It is an occurrence or happening which could GR: There is no liability for loss in case of
notbeforeseen,orevenifforeseen,isinevitable fortuitousevent.
(Art.1174,NCC).
XPNs:LaNSPCBaG
Q:Whataretherequisitesofafortuitousevent? 1. Law
2. Nature of the obligation requires the
A: assumptionofrisk
1. Cause is independent of the will of the 3. Stipulation
debtor; 4. The debtor is guilty of dolo, malice or
2. The event is unforeseeable or badfaith,hasPromisedthesamething
unavoidable; to two or more persons who does not
3. Occurrence renders it absolutely havethesameinterest
impossible for the debtor to fulfill his 5. ThedebtorContributedtotheloss(Tan
obligation in a normal manner; v.Inchausti&Co.,G.R.No.L6472,Mar.
impossibility must be absolute not 7,1912)
partial, otherwise not force majeure; 6. ThepossessorisinBadfaith(Art.552)
and 7. TheobligorisGuiltyoffraud,negligence
4. Debtor is freefrom any participation in or delay or ifhe contravened the tenor
the aggravation of the injury to the of the obligation (Juan Nakpil v. United
creditor. Construction Co., Inc. v. CA, G.R. No. L
47851,Apr.15,1988)
Note: The fortuitous event must not only be the
proximate cause but it must also be the only and Q: Philcomsat contends that expiration of the
sole cause. Contributory negligence of the debtor RPUS Military Bases Agreement and non
renders him liable despite the fortuitous event. ratification of the treaty is not a fortuitous
(Pineda,ObligationsandContracts,2000ed,p.62) event.Decide.

Q: If the happening of an event is difficult to A: No. The requisites for fortuitous events are
foresee,isitafortuitousevent? presentintheinstantcase.PhilcomsatandGlobe
hadnocontroloverthenonrenewaloftheterm
A: No. The mere difficulty to foresee the oftheRPUSMilitaryBasesAgreementwhenthe
happening is not impossibility to foresee the sameexpiredin1991,becausetheprerogativeto
same. (Republic v. Luzon Stevedoring Corp., G.R. ratify the treaty belonged to the Senate. Neither
No.L21749,Sept.29,1967) didthepartieshavecontroloverthesubsequent
withdrawal of the US military forces and
Q:DistinguishActofGodfromActofMan personnel from Cubi Point. The events made
impossible the continuation of the agreement
A: without fault on the part of either party. Such
ACTOFGOD ACTOFMAN fortuitous events rendered Globe exempt from
Fortuitousevent Forcemajeure paymentofrentalsfortheremainderoftheterm
Eventcausedbythe of the agreement. (Philippine Communications
Eventwhichis
legitimateorillegitimate Satellite Corp.v.Globe Telecom, Inc.,G.R. No.
absolutelyindependent
actsofpersonsother
ofhumanintervention 147324,May25,2004)
thantheobligor

i.e.armedinvasion,
i.e.earthquakes, Q: MIAA entered into acompromise agreement
robbery,war(Pineda,
storms,floods, with ALA. MIAA failed to pay within the period
Obligationsand
epidemics stipulated. Thus, ALA filed a motion for
Contract,2000ed,p.60)
execution to enforce its claim. MIAA filed a
Note: There is no essential difference between commentandattributedthedelaystoitsbeinga
fortuitouseventandforcemajuere;theybothrefer government agency and the Christmas rush. Is
to causes independent of the will of the obligor. thedelayofpaymentafortuitousevent?
(Tolentino,CivilCodeofthePhilippines,Vol.IV,2002
ed,p.127) A:No.TheactofGoddoctrinerequiresallhuman
agencies to be excluded from creating the cause
184 CIVILLAWTEAM:

OBLIGATIONS
ofthemischief.Suchdoctrinecannotbeinvoked 2. Ongenericobligationtheobligationis
to protect a person who has failed to take steps not extinguished (genus nun quam
toforestallthepossibleadverseconsequencesof peruitgenusneverperishes)
loss or injury. Since the delay in payment in the
present case was partly a result of human Q: AB Corp. entered into a contract with XY
participation whether from active intervention Corp. whereby the former agreed to construct
orneglectthewholeoccurrencewashumanized the research and laboratory facilities of the
and was therefore outside the ambit of a caso latter.Underthetermsofthecontract,ABCorp.
fortuito. agreedtocompletethefacilityin18months,at
the total contract price of P10 million. XY Corp.
First, processing claims against the government paid50%ofthetotalcontractprice,thebalance
arecertainlynotonlyforeseeableandexpectable, to be paid upon completion of the work. The
butalsodependentuponthehumanwill.Second, work started immediately, but AB Corp. later
the Christmas season is not a casofortuito, but a experienced work slippage because of labor
regularly occurring event. Third, the occurrence unrest in his company. AB Corp.s employees
of the Christmas season did not at all render claimed that they are not being paid on time;
th
impossible the normal fulfillment of the hence, the work slowdown. As of the 17
obligation. Fourth, MIAA cannot argue that it is month,workwasonly45%completed.ABCorp.
freefromanyparticipationinthedelay.Itshould asked for extension of time, claiming that its
have laid out on the compromise table the laborproblemsisacaseoffortuitousevent,but
problems that would be caused by a deadline this was denied by XY Corp. When it became
fallingduringtheChristmasseason.Furthermore, certain that the construction could not be
it should have explained to ALA the process finished on time, XY Corp. sent written notice
involved for the payment of ALs claim. (MIAA v. cancellingthecontractandrequiringABCorp.to
Ala Industries Corp., G.R. No. 147349, Feb. 13, immediatelyvacatethepremises.
2004)
Can the labor unrest be considered a fortuitous
Q:JALcancelledallitsflighttoManiladuetothe event?
Mt. Pinatubo eruption and NAIA's indefinite
closure.Thepassengerswerethenforcedtopay A:Laborunrestisnotafortuitouseventthatwill
for their accommodations and meal expenses excuse AB Corp. from complying with its
from their personal funds. Thus, they filed an obligation of constructing the research and
action for damages against JAL. Can JAL avoid laboratory facilities of XY Corp.The labor unrest,
liability by invoking that delays were caused by whichmayevenbeattributedinlargeparttoAB
forcemajeure? Corp. itself, is not the direct cause of non
compliance by AB Corp. It is independent of its
A:Yes.TheMt.PinatuboeruptionpreventedJAL obligation. It is similar to the failure of a DBP
from proceeding to Manila on schedule. Such borrower to pay her loan just because her
eventcanbeconsideredas"forcemajeure"since plantation suffered losses due to the cadang
the delayed arrival in Manila was not imputable cadang disease. It does not excuse compliance
toJAL. withtheobligation(DBPv.Vda.DeMoll).

WhenJALwaspreventedfromresumingitsflight Additional Answer: The labor unrest in this case
to Manila due to the effects of Mt. Pinatubo is not a fortuitous event. The requisites of
eruption,whateverlossesordamagesintheform fortuitous event are: (1) the event must be
of hotel and meal expenses the stranded independent of human will or at least of the
passengers incurred, cannot be charged to JAL. debtorswill;(2)theeventcouldnotbeforeseen,
Indeed,intheabsenceofbadfaithornegligence, or if foreseen is inevitable; (3) the event must
JAL cannot be liable for the amenities of its haverenderedimpossibledebtorscomplianceof
stranded passengers by reason of a fortuitous the obligation in a proper manner; and (4) the
event.(JapanAirlinesv.CA,G.R.No.118664,Aug. debtor must not be guilty of concurrent
7,1998). negligence. All the requisites are absent in this
case. AB Corp. could have anticipated the labor
Q:Whataretheeffectsoffortuitousevent? unrestwhichwascausedbydelaysinpayingthe
laborers wages. The company could have hired
A: additional laborers to make up for the work
1. On determinate obligation the slowdown.
obligationisextinguished
185

CanXYCorp.unilaterallyandimmediatelycancel a. personalrightsofthedebtor
thecontract? b. rightsinherentinthepersonofthe
debtor
A: No. XY Corp. cannot unilaterally and c. properties exempt from execution
immediatelycancelthecontractbecausethereis (e.g.familyhome)
need for a judicial action of rescission. The
provisionsofArt.1191oftheCivilCodeproviding 3. Accionpauliana(rescissoryaction)an
forrescissioninreciprocalobligationscanonlybe actiontoimpugnorassailtheactsdone
invokedjudicially. orcontractsenteredintobythedebtor
infraudofhiscreditor;
Alternative Answer: Yes, XY Corp. may
unilaterally cancel the obligation but this is Note: Must be a remedy of last resort,
subject to the risk that the cancellation of the availed of only after all other legal
reciprocal obligation being challenged in court remedies have been exhausted and have
and if AB Corp. succeeds, then XY Corp. will be beenprovenfutile.
declaredindefaultandbeliablefordamages.
Presupposesajudgmentandtheissuance
bythetrialcourtofawritofexecutionfor
MustABCorp.returnthe50%downpayment?
the satisfaction of the judgment and the

failureoftheSherifftoenforceandsatisfy
A:No,undertheprincipleofquantummeruit,AB thejudgmentofthecourt.
Corp. had the right to retain payment
corresponding to his percentage of Note: Resort to the remedies must be in the order
accomplishment less the amount of damages statedabove.(Art.1177,NCC)
suffered by XY Corp. because of the delay or
default.(2008BarQuestion) Q: Saturnino was the registered owner of two
parcelsofland.TheAdorableswerelesseesofa
D.REMEDIES portion of Lot No. 1. Saturnino and his son,
Francisco, obtained a loan from Salvador, in
Q:Whataretheremediesthatmaybeavailedof considerationofwhichtheypromisedtotransfer
incaseofbreach? thepossessionandenjoymentofthefruitsofLot
No.2.SaturninosoldtoFranciscopartofLotNo.
A: 1, which Francisco sold to Jose Ramos. The
1. Specific performance, or substituted portion of land being rented by Salvador was
performance by a third person in case includedintheportionsoldtoRamos.Thedeeds
of an obligation to deliver a generic of sale evidencing the conveyances were not
thing,andinobligationstodo,unlessit registered in the office of the register of deeds.
isapurelypersonalact;or WhenSaturninoandFranciscofailedtopaytheir
2. Rescission (or resolution in reciprocal loan,ademandletterwassenttoFrancisco,but
obligations); herefusedtopay.
3. Damages,inanycase;
4. Subsidiaryremediesofcreditors: When Salvador learned of the sale made by
a. Accionsubrogatoria Francisco to Ramos, Salvador filed a complaint
b. Accionpauliana for the annulment or rescission of the sale on
c. Acciondirecta the ground that the sale was fraudulently
prepared and executed. Can Salvador file an
1.SPECIFICPERFORMANCE action for the rescission or annulment of the
sale?
Q: What are the remedies in connection with
specificperformance? A: No. As creditor, Salvador does not have such
material interest as to allow him to sue for
A: rescission of the contract of sale. At the outset,
1. Exhaustion of the properties of the Salvadors right against Francisco and Ramos is
debtor (not exempt from attachment only a personal right to receive payment for the
underthelaw) loan; it is not a real right over the lot subject of
2. Accion subrogatoria (subrogatory thedeedofsale.
action) an indirect action brought in
thenameofthedebtorbythecreditor Thesalewasnotmadeinfraudofcreditors.Art.
toenforcetheformersrightsexcept: 1177 of the Civil Code provides for successive
186 CIVILLAWTEAM:

OBLIGATIONS
measuresthatmustbetakenbyacreditorbefore Q:Whatissubstituteperformance?
he may bring an action for rescission of an
allegedly fraudulent sale. Without availing of the A: It is a remedy of the creditor in case of non
first and second remedies, Salvador simply performancebythedebtor;whereanotherparty
undertook the third measure and filed an action performstheobligationorthesameisperformed
forannulmentofthesale.Thiscannotbedone. attheexpenseofthedebtor.

Anactionforrescissionisasubsidiaryremedy;it Q:Whenmaytherebesubstituteperformance?
cannot be instituted except when the party A:
suffering damage has no other legal means to 1. Positivepersonalobligation:
obtain reparation for the same. Considering a. If not purely personal
Article 1380 of the Civil Code, which states that substitute performance; the
contractvalidlyagreeduponmayberescindedin obligation shall be executed
thecasesestablishedbylaw,Salvador,etal.have at debtors cost if he fails to
not shown that they have no other means of doit.(Art.1167,NCC)
enforcingtheircredit.(Adorable,et.al.v.CA,G.R. b. Purelypersonalnosubstitute
No.119466,Nov.25,1999) performance may be
demanded because of the
Q:Whilethecasewaspending,Felixdonatedhis personal qualifications taken
of parcels of land in favor of his children. into consideration. The only
JudgmentwasrenderedagainstFelix.Whenthe remedyisdamages.
sheriff, accompanied by counsel of Philam, 2. Realobligation:
sought to enforce the alias writ of execution, a. Generic thing substitute
they discovered that Felix no longer had any performance;deliverymaybe
property and that he had conveyed the subject made by a person other than
properties to his children. Thus, Philam filed an the debtor since the object is
accionpauliana for rescission of the donations. merelydesignatedbyitsclass
Felix countered that an action for rescission of or genus. The creditor may
the donation had already prescribed since the ask that the obligation be
timeofprescriptionhastorunfromthedateof complied with at the expense
registration. Has the action filed by Philam ofthedebtor.(1165,NCC)
prescribed? b. Specific thing specific
performance may be
A: No. Philam only learned about the unlawful demanded, that is, the
conveyancesmadebyFelixmorethanfouryears creditor may compel the
after the donations were effected, when its debtortomakethedelivery.
counselaccompaniedthesherifftoButuanCityto
attach the properties. There they found that he 2.RESCISSION
nolongerhadanypropertiesinhisname.Itwas
onlythenthatPhilam'sactionforrescissionofthe Q:WhatisrescissionunderArticle1191?
deedsofdonationaccruedbecausethenitcould
besaidthatPhilamhadexhaustedalllegalmeans A: It refers to the cancellation of the contract or
to satisfy the trial court's judgment in its favor. reciprocalobligationincaseofbreachonthepart
Since Philam filed its complaint for accion ofone,whichbreachisviolativeofthereciprocity
paulianaagainstpetitionersbarelyamonthfrom between the parties. This is properly called
its discovery that Felix had no other property to resolution.
satisfythejudgmentawardagainsthim,itsaction
forrescissionofthesubjectdeedsclearlyhadnot Note: The rescission under Art. 1380 is rescission
yet prescribed.(Khe Hong Cheng v. CA,G.R. No. basedonlesionorfrauduponcreditors.
144169,Mar.28,2000)
Q: To what kind of obligation is resolution
Note: The debtor is liable with all his property, available?
present and future, for the fulfillment of his
obligations, subject to the exemptions provided by A: Reciprocal obligation, since resolution is
law (De Leon, Obligations and Contracts, 2003 ed, impliedtherein.
p.71)

187

Q:Whomaydemandresolution? Q:Whatisacciondirecta?

A:Injuredparty. A:Itistherightofthelessortogodirectlyagainst
thesublesseeforunpaidrentsofthelessee.
Q: May the injured party demand resolution
afterheelectsspecificperformance? Note: Under Art. 1652 of the Civil Code, the
A: sublessee is subsidiarily liable to the lessor for any
GR:No.Hisrightisnotconjunctive,thus,hemay rentduefromthelessee.
not choose both remedies of resolution and
specificperformance. VII.KINDSOFCIVILOBLIGATIONS
XPN:Yes,ifspecificperformanceshouldbecome
impossible Q:Whatarethekindsofcivilobligations?

Q:Whendoesliabilityfordamagesarise? A:
1. Pureobligations;
A:ThoseliableunderArt.1170shallpaydamages 2. Conditionalobligations;
onlyifasidefromthebreachofcontract, 3. Obligationswithaperiodorterm;and
prejudiceordamagewascaused.(Bergv.Teus, 4. AlternativeorFacultativeobligations
G.R.No.L6450,Oct30,1954)
Q:Differentiateacivilobligationfromanatural
Q:Whatarethekindsofdamages? obligation.
A:
1. Moral A:
2. Exemplary CIVILOBLIGATION NATURALOBLIGATION
3. Nominal Astobindingforce
4. Temperate Arisesfromequityand
Arisesfrompositivelaw
5. Actual justice
6. Liquidated4.SUBSIDIARYDEMEDIES Astoenforcementincourt
Cannotbeenforcedin
Q: What are the requisites of accion court.Itdepends
Canbeenforcedbycourt
subrogatoria? exclusivelyuponthe
action
goodconscienceofthe

debtor.
A:

1. Thedebtorsassetsmustbeinsufficient
A.PUREOBLIGATIONS
tosatisfyclaimsagainsthim
2. The creditor must have pursued all
properties of the debtor subject to Q:Whatispureobligation?
execution
3. The right of action must not be purely A:Onewhoseeffectivityorextinguishmentdoes
personal not depend upon the fulfillment or non
4. The debtor whose right of action is fulfillment of a condition or upon the expiration
exercised must be indebted to the ofaperiodandisdemandableatonce.(Art.1179,
creditor. NCC)

Q:Whataretherequisitesofaccionpauliana? B.CONDITIONALOBLIGATIONS

A: Q:Whatisconditionalobligation?
1. Defendantmustbeindebtedtoplaintiff
2. The fraudulent act performed by the A: It is an obligation subject to a condition and
debtorsubsequent to the contractgives the effectivity of which is subordinated to the
advantagetoanother fulfillment or nonfulfillment of a future and
3. Thecreditorisprejudicedbysuchact. uncertain event, or upon a past event unknown
4. Thecreditormusthavepursuedall totheparties.
propertiesofthedebtorsubjectto
execution
5. Thecreditorhasnootherlegalremedy.

188 CIVILLAWTEAM:

OBLIGATIONS
Q: Ramon, the judicial administrator of the Q: Distinguish suspensive from resolutory

estate of Juan, found out that Rodriguez had conditions.
enlarged the area of the land which he
purchased from Juan before his death. Thus, A:
Ramon demanded Rodriguez to vacate the RESOLUTORY
SUSPENSIVECONDITION
portion allegedly encroached by him. Rodriguez CONDITION
refused and contested there was indeed a EffectofFulfillment
conditional sale with the balance of the Obligationarisesor Obligationis
purchase price payable within five years from becomeseffective extinguished
the execution of the deed of sale. Ramon then EffectofNonfulfillment
filedanactionforrecoveryofpossessionofthe Ifnotfulfilled,no
Ifnotfulfilled,juridical
disputedlot.Isthecontractofsaleaconditional juridicalrelationis
relationisconsolidated
one? created
WhenRightsareAcquired
A: No. The stipulation that the "payment of the Rightsarenotyet
Rightsarealready
fullconsiderationbasedonasurveyshallbedue acquired,butthereis
acquired,butsubjectto
hopeorexpectancythat
and payable in 5 years from the execution of a thethreatordangerof
theywillsoonbe
formal deed of sale" is not a condition which extinction
acquired
affects the efficacy of the contract of sale. It

merely provides the manner by which the full
Q: In cases of obligations with a suspensive
consideration is to be computed and the time
condition, what are the effects of loss,
within which the same is to be paid. But it does
deterioration, and improvements in real
not affect in any manner the effectivity of the
obligations?
contract. (Heirs of San Andresv.Rodriguez, G.R.

No.135634,May31,2000)
A:
WITHDRSFAULT WITHOUTDRSFAULT
Q:Distinguishperiodfromcondition.
Loss
DRpaysdamages Obligationextinguished
A:
Deterioration
PERIOD CONDITION
CR chooseb/w
AstoTime
rescissionofobligation
Mayrefertopastevent
Referstothefuture orfulfillment(with ImpairmentbornebyCR
unknowntotheparties
indemnityfordamagesin
AstoFulfillment
eithercase)
Itwillhappenatan
Improvement
exactdateoratan
Mayormaynothappen 1. By the things nature or bytime inure to the
indefinitetime,butis
benefitoftheCR
suretoarrive
2. AtthedebtorsexpenseDRshallhavenoright
AstoitsInfluenceontheObligationtobeFulfilledor
otherthanthatgrantedtoausufructuary
Performed

Noeffectorinfluence Maygiverisetoan
upontheexistenceof obligation(suspensive)
Q:WhataretherequisitesforArt.1189toapply?
theobligationbutonlyin orthecessationofone
itsdemandabilityor alreadyexisting A:
performance (resolutory) 1. Mustbearealobligation;
2. Objectisaspecific/determinatething;
1.SUSPENSIVECONDITION 3. Obligation is subject to a suspensive
condition;
Q:Whatisasuspensivecondition? 4. Theconditionisfulfilled;and
5. There is loss, deterioration or
A: A condition the fulfillment of which will give improvement of the thing during the
risetotheacquisitionofaright. pendency of the happening of the
condition.

Note: The same conditions apply in case of an
obligorinobligationswitharesolutorycondition.In
suchcases,thethirdrequisitemustread,subjectto
aresolutorycondition.

189

Q:GSISapprovedtheapplicationofAgcaoilifor Q:Xdonatedaparceloflandtothemunicipality
the purchase of a house and lot in the GSIS of Tarlac under a condition that a public school
Housing Project; it is subject to the condition shall be erected and a public park be made
that he should immediately occupy the house. within6monthsfromthedateoftheratification
But he could not because the house was of the donation by the parties. After the
uninhabitable. He paid the first installment and registration of the said donation, X sold the
otherfeesbutrefusedtomakefurtherpayment same land to Y. Thereafter, Ybrought an action
until GSIS had made the house habitable. GSIS against the Province of Tarlac, alleging that the
refused and opted to cancel the award and conditions of the donation is a condition
demand the vacation by Agcaoili of the precedent, thus, the municipality of Tarlac did
premises.CanGSIScancelthecontract? not acquire ownership over the land when it
failed to comply with the saidcondition. Is the
A: No. There was a perfected contract of sale contentionofYcorrect?
betweentheparties;therehadbeenameetingof
the minds upon the purchase by Agcaoili of a A: No. In this case, the condition could not be
determinatehouseandlotatadefinitepriceand complied with except after giving effect to the
fromthatmoment,thepartiesacquiredtheright donation.TheMunicipalityofTarlaccouldnotdo
to reciprocally demand performance. Based on anyworkonthedonatedlandifthedonationhad
their contact, it can only be understood as not really been effected, because it would be an
imposing on GSIS an obligation to deliver to invasion of another's title, for the land would
Agcaoiliareasonablyhabitabledwellinginreturn havecontinuedtobelongtothedonorsolongas
for his undertaking to pay the stipulated price. the condition imposed was not complied with.
Since GSIS did not fulfill that obligation, and was Thus,consideringthattheconditionitselfwasfor
notwillingtoputthehouseinhabitablestate,it apublicschooltobebuiltmeansthatownership
cannot invoke Agcaoili's suspension of payment of the land was already with the Municipality.
of amortizations as cause to cancel the contract (Parksv.ProvinceofTarlac,G.R.No.L24190,July
betweenthem. 13,1926)

Note: In reciprocal obligations, neither party incurs Q: The late Don Lopez, Sr., who was then a
indelayiftheotherdoesnotcomplyorisnotready member of the Board of Trustees of CPU,
to comply in a proper manner with what is executed a deed of donation in favor of the
incumbent upon him. (Agcaoili v. GSIS, G.R. No. L latterofaparceloflandsubjecttothecondition
30056,Aug.30,1988) thatitshallbeutilizedfortheestablishmentand
use of a medical college. However, the heirs of
2.RESOLUTORYCONDITION Don Lopez, Sr.,filed an actionfor annulment of
the donation, reconveyance and damages
Q:Whatisaresolutorycondition? againstCPUallegingthatCPUhadnotcomplied
withtheconditionsofthedonation.
A:Aconditionwheretherightsalreadyacquired
arelostuponfulfillmentofthecondition. Are the conditions imposed resolutory or
suspensive?
Q:Whataretheeffectsoffulfillmentof
resolutorycondition? A: Under Art. 1181 of the Civil Code, on
A: conditional obligations, the acquisition of rights,
1. Realobligations: as well as the extinguishment or loss of those
a. Thepartiesshallreturntoeach already acquired, shall depend upon the
otherwhattheyhavereceived. happening of the event which constitutes the
b. Obligationisextinguished. condition. Thus, when a person donates land to
c. Incaseoftheloss,deteriorationor another on the condition that the latter would
improvementofthething,Art. build upon the land a school, the condition
1189,withrespecttothedebtor, imposed was not a condition precedent or a
shallbeappliedtothepartywhois suspensive condition but a resolutory one. It is
boundtoreturn. notcorrecttosaythattheschoolhousehadtobe
constructed before the donation became
2. Personalobligationsthecourtsshall effective,thatis,beforethedoneecouldbecome
determine,ineachcase,theretroactive the owner of the land, otherwise, it would be
effectoftheconditionthathasbeen invading the property rights of the donor. The
compliedwith. donationhadtobevalidbeforethefulfillmentof

190 CIVILLAWTEAM:

OBLIGATIONS
the condition. If there was no fulfillment or Q: What are the effects of the fulfillment of a
compliancewiththecondition,thedonationmay resolutorycondition?
now be revoked and all rights which the donee A:
mayhaveacquiredunderitshallbedeemedlost 1. Realobligations:
andextinguished.(CentralPhilippineUniversityv. a. obligationisextinguished
CA,G.R.No.112127,July17,1995) b. Parties shall return to each other
whattheyhavereceived.
Q: What does a constructive fulfillment of a 2. Personal obligations the court
conditionentail? determinestheretroactiveeffectofthe
conditionfulfilled.
A:When the debtor actually prevents the
fulfillment of the condition, then said condition Q:Whataretheothertypesofconditions?
shallbedeemedfulfilled.
A:CaMPNIDCAPI
2.POTESTATIVECONDITION 1. Casualtheperformanceorfulfillment
of the condition depends upon chance
Q:Whenisaconditionsaidtobepotestative? and/orthewillofathirdperson
2. Mixed the performance or fulfillment
A: When the condition depends upon the will of of the condition depends partly upon
oneofthecontractingparties. thewillofapartytotheobligationand
partlyuponchanceand/orthewillofa
Q:Doesaconditionwhichdependsuponthewill thirdperson
of the debtor invalidate both the condition and 3. Positiveinvolvesthedoingofanact
the obligation? What about a condition which 4. Negative involves the omission of an
dependsuponthewillofthecreditor? act
5. Divisible is susceptible of partial
A:Yes.Thisisbecauseitsvalidityandcompliance performance
is left to the will of the debtor, and cannot 6. Indivisibleisnotsusceptibleofpartial
therefore be easily demanded. But if the performance
conditionisapreexistingone,onlythecondition 7. Conjunctive there are several
isvoid,leavingtheobligationitselfvalid.Further, conditions in an obligation all of which
if the condition is resolutory, it is valid because mustbeperformed
whatislefttothesolewillofthedebtorisnotthe 8. Alternative there are several
existence or the fulfillment of the obligation but conditionsinanobligationbutonlyone
merelyitsextinguishment. mustbeperformed
9. Possible is capable of fulfillment
If the fulfillment depends upon the will of the according to the nature, law, public
creditor, in any case, both the condition and the policyorgoodcustoms
obligationarevalid. 10. Impossibleisnotcapableoffulfillment
according to nature, law, public policy
Q: What are the effects of the fulfillment of a orgoodcustoms(Art.1183,NCC)
suspensivecondition?
A: Q: What is the effect of an impossible or
1. Realobligations: unlawfulcondition?
GR: Effects retroact to the day of
constitutionoftheobligation. A:
XPN:Noretroactivityasto; GR: Impossible conditions annul the
a.fruits obligation which depends upon the parties
b.interests butnotofathirdperson.

XPN to the XPN: There may be XPNs:PDDoNT.
retroactivity as to the fruits and 1. Preexistingobligation
interestsinunilateralobligationsifsuch 2. ObligationisDivisible
intentionappears 3. InsimpleorremuneratoryDonations
4. In case of conditions Not to do an
2. Personal obligations the court impossiblething
determinestheretroactiveeffectofthe 5. InTestamentarydispositions
conditionfulfilled.
191

Note: In the foregoing, the obligations remain Q:Forwhosebenefitistheperiodconstituted?
valid,onlytheconditionisvoidanddeemedto
havenotbeenimposed.Itisapplicableonlyto A:
obligations not to do and gratuitous GR:Whenaperiodhasbeenagreeduponfor
obligations. the performance or fulfillment of an
obligation, it is presumed to have been
Q: When will the effect of fulfillment of a established for the benefit of both the
conditionretroact? creditorandthedebtor.

A: XPN: When it appears from the tenor of the
1. Inanobligationtogiveitretroactsto period or other circumstances that it was
the day of the constitutionof the established for the benefit of one of the
obligation parties.
2. Inanobligationtodoornottodothe
court may determine to what date Q: What is the effect of the term being for the
retroactivityshallbeallowed,oritmay benefitofeithertheCRortheDR?
even refuse to permit retroactivity
(Tolentino,Civil CodeofthePhilippines, A:
Vol.IV,2002ed,p.166) 1. WhenitisforthebenefitoftheCreditor
Creditor may demand the
performance of the obligation at any
C.OBLIGATIONSWITHAPERIOD time but the DR cannot compel him to
accept payment before the expiration
Q:Whatisanobligationwithaperiodoraterm? oftheperiod(e.g.ondemand)
2. WhenitisforthebenefitoftheDebtor
A: It is an obligation whose demandability or
extinguishment is subject to the expiration of a Debtor may oppose any premature
periodoraterm.(Art.1193,NCC) demand on the part of the CR for
performance of the obligation, or if he
Q: What are the requisites of a valid period or sodesires,hemayrenouncethebenefit
term? of the period by performing his
obligationinadvance.(Manresa)
A:
1. Future Q:Whatistheeffectofafortuitouseventinan
2. Certain obligationwithaperiod?
3. Possible,legallyandphysically
A:Itonlyrelievesthecontractingpartiesfromthe
Q:Isthestatementofadebtorthathewillpay fulfillment of their respective obligation during
whenhismeanspermithimtodosorelatetoa thetermorperiod.
periodoracondition?Issuchastatementvalid
considering that the same is left to the will of Q:Whenmaythecourtfixtheperiod?
thedebtor?
A:
A:Whenthedebtorbindshimselftopaywhenhis 1. If the obligation does not fix a period,
means permit him to do so, the obligation is butfromitsnatureandcircumstancesit
deemed with a period or term. This is valid can be inferred that a period was
because it is not the payment itself that is intendedbytheparties
dependent upon the will of the debtor, but the 2. If the duration of the period depends
momentofpayment. uponthewilloftheDR

3. In case of reciprocal obligations, when
As the time of payment is not fixed, the court
thereisajustcauseforfixingtheperiod
mustfixthesamebeforeanyactionforcollection
4. IftheDRbindshimselfwhenhismeans
may be entertained, unless, the prior action of
permithimtodoso
fixing the term or period will only be a formality

andwillservenopurposebutdelay.

192 CIVILLAWTEAM:

OBLIGATIONS
Q:Whenmayadebtorlosehisrighttomakeuse Q: In alternative obligations, when does the

oftheperiod? choicemadetakeeffect?

A: A: The choice made takes effect only upon
1. Insolvency of the DR, unless security is communication of the choice to the other party
provided and from such time the obligation ceases to be
2. Didnotdeliversecuritypromised alternative(Art.1205,NCC).
3. Impaired security through his own acts
or through fortuitous event, unless he Note:Thenoticeofselectionorchoicemaybeinany
givesanewsecurityequallysatisfactory formprovideditissufficienttomaketheotherparty
(if impairment is without the fault of know that the election has been made. (Tolentino,
DR,heshallretaintheright) CivilCodeofthePhilippines,2002ed,p.205)
4. Violatesundertakinginconsiderationof
extensionofperiod Q:DoesthechoicemadebytheDRrequirethe
5. DR attempts to abscond (Art. 1198, concurrenceoftheCR?Whathappenswhen
NCC) throughtheCRsfault,selectionisdeemed
impossible?
D.ALTERNATIVEOBLIGATION

A:No.Toholdotherwisewoulddestroythevery
Q: Distinguish facultative from alternative
natureoftherighttoselectgiventotheDR.Once
obligations.
a choice is made, it can no longer be renounced

andthepartiesareboundthereto.
A:

FACULTATIVE ALTERNATIVE
When choice is rendered impossible through the
OBLIGATIONS OBLIGATIONS
Fortuitouslossofall
CRsfault, theDRmaybringanactionto rescind
Fortuitouslossextinguishes thecontractwithdamages(Art.1203,NCC).
prestationwillnot
theobligation
extinguishtheobligation
Culpablelossobligesthe Q: What are the limitations on the right of
Culpablelossof choiceofthedebtor?
debtortodeliversubstitute
anyobjectduewillgive
prestationwithoutliability
risetoliabilitytodebtor A:Debtorcannotchooseprestationswhichare:
todebtor
GR:Choicepertainto 1. Impossible;
debtor 2. Unlawful;and
Choicepertainsonlyto 3. could not have been the object of the
debtor XPN:Expresslygranted obligation.
tocreditororthird
person Q: When is an alternative obligation converted
Onlyoneobjectisdue Severalobjectsaredue toasimpleobligation?
Maybecompliedwithby Maybecompliedwith
substitutionofonethatis byfulfillinganyofthose A:When:
due alternatelydue 1. thepersonwhohasarightofchoicehas
Ifprincipalobligationis Ifoneprestationisvoid, communicatedhischoice;or
void,thecreditorcannot theothersfreefrom 2. onlyoneispracticable.(Art.1202,NCC)
compeldeliveryofthe vicespreservethe

substitute validityoftheobligation

Ifvariousprestationsare
impossibletoperform
Ifthereisimpossibilityto
exceptone,thisone
delivertheprincipalthingor
mustbedelivered.
prestation,theobligationis
Ifallprestationsare
extinguished,evenifthe
impossibletoperform,
substituteobligationisvalid
theobligationis
extinguished
Wherethechoiceis
Lossofsubstitutebefore
giventothecreditor,the
thesubstitutionthroughthe
lossofthealternative
faultofthedebtordoesnt
throughthefaultofthe
makehimliable
debtorrendershim

liablefordamages
193

Q: What are the effects of loss of objects of Q:Distinguishjointfromsolidaryobligation.
alternativeobligations?
A:
A: JOINTOBLIGATION SOLIDARYOBLIGATION
DUETO Notpresumed.Mustbe
DUETODEBTORS
FORTUITOUS expresslystipulatedby
FAULT
EVENT theparties,orwhenthe
ChoiceBelongstoDebtor Presumedbylaw laworthenatureofthe
CRshallhavearight obligationrequires
toindemnifyfor solidarity.(Art.1207,
damagesbasedon NCC)
DRreleased
Allare thevalueofthelast Eachdebtorisliableonly
fromthe Eachdebtorisobligedto
lost thingwhich foraproportionatepart
obligation paytheentireobligation
disappeared/service oftheentiredebt
whichbecome Eachcreditorhasthe
impossible righttodemandfrom
Eachcreditor,ifthereare
DRshalldeliver DRshalldeliverthat anyofthedebtors,the
Some several,isentitledonly
thatwhichhe whichheshallchoose paymentorfulfillmentof
butnot toaproportionatepart
shallchoose fromamongthe theentireobligation
allare ofthecredit
fromamong remainderwithout (Tolentino,CivilCodeVol
lost
theremainder damages IV,1999ed.p.217)
Only
one Deliverthatwhichremains Q: What is the rule as regards the joint or
remains solidarycharacterofanobligation?

ChoiceBelongstoCreditor A:
CRmayclaimthe GR: When two or more creditors or two or
DRreleased
Allare price/valueofanyof more debtors concur in one and the same
fromthe
lost themwithindemnity obligation, the presumption is that the
obligation
fordamages obligationisjoint.
CRmayclaimanyof
DRshalldeliver thosesubsisting
Some XPNs: The obligation shall be solidary when:
thatwhichhe withoutarightto
butnot ELNCJ
shallchoose damagesOR
allare 1. Expressly stipulated that there is
fromamong price/valueofoneof
lost solidarity;
theremainder thoselostwithright
todamages 2. Lawrequiressolidarity;
Only Deliverthatwhichremains.Incaseof 3. Nature of the obligation requires
one faultofDR,CRhasarighttoindemnity solidarity;
remains fordamages 4. Charge or condition is imposed upon
heirs or legatees and the will expressly
VIII.JOINTANDSOLIDARYOBLIGATIONS makes the charge or condition in
solidum(Manresa);or
Q:Whatarejointobligations? 5. solidary responsibility is imputed by a
final Judgment upon several
A:Itiswheretheentireobligationistobepaidor defendants.(Gutierrez v. Gutierrez, 56
performed proportionately by the debtors (Art. Phil177)
1208,NCC).
Q:ChuaboughtandimportedtothePhilippines
Q:Whataresolidaryobligations? dicalciumphosphate.Whenthecargoarrivedat
thePortofManila,itwasdiscoveredthatsome
A: It is where each of the debtors obliges to pay wereinapparentbadcondition.Thus,Chuafiled
theentireobligation,andwhereeachoneofthe withSmith,Bell,andCo.,Inc.,theclaimagentof
creditorshastherighttodemandfromanyofthe First Insurance Co., a formal statement of claim
debtors, the payment or fulfillment of the entire for the loss. No settlement of the claim having
obligation (Art. 1207, NCC; Pineda, Obligations been made, Chua then filed an action. Is Smith,
andContracts,2000ed,p.139). Bell, and Co., solidarily liable upon a marine
insurance policy with its disclosed foreign
principal?

194 CIVILLAWTEAM:

OBLIGATIONS
A: No. Article 1207 of the Civil Code clearly 5. Insolvencyofadebtorwillnotincrease

provides that "there is a solidary liability only theliabilityofhiscodebtors;
whentheobligationexpresslysostates,orwhen 6. Vicesofeachobligationemanatingfrom
the law or the nature of the obligation requires a particular debtor or creditor will not
solidarity." The wellentrenched rule is that affecttheothers;and
solidary obligation cannot lightly be inferred. It 7. In indivisible or joint obligation, the
must be positively and clearly expressed. (Smith, defenseofresjudicataofonedoesnot
Bell & Co., Inc. v. CA,G.R. No. 110668, Feb. 6, extendtotheothers.
1997)
B.JOINTINDIVISIBLEOBLIGATIONS
Q: The labor arbiter rendered a decision, the
fallo of which states that the following Q: What are the different permutations of joint
respondents as liable, namely: FCMC, Sicat, indivisibleobligations?Whataretheireffects?
Gonzales, Chiu Chin Gin, Lo Kuan Chin, and
INIMACO. INIMACO questions the execution, A:
alleging that the alias writ of execution altered 1. If there are two or more debtors,
and changed the tenor of the decision by compliancewiththeobligationrequires
changingtheirliabilityfromjointtosolidary,by the concurrence of all the debtors,
the insertion of the words "AND/OR". Is the although each for his own share. The
liability of INIMACO pursuant to the decisionof obligation can be enforced only by
thelaborarbitersolidaryornot? precedingagainstallofthedebtors.
2. If there are two or more creditors, the
A: INIMACO's liability is not solidary but merely concurrence or collective act of all the
joint. Wellentrenched is the rule that solidary creditors, although each of his own
obligation cannot lightly be inferred. There is a share, is also necessary for the
solidary liability only when the obligation enforcementoftheobligation.
expressly so states, when the law so provides or 3. Eachcreditisdistinctfromoneanother;
whenthenatureoftheobligationsorequires.In therefore a joint debtor cannot be
the dispositive portion of the labor arbiter, the requiredtopayfortheshareofanother
word "solidary" does not appear. The said fallo withdebtor,althoughhemaypayifhe
expressly states the following respondents wantsto.
thereinasliable,namely:FilipinasCarbonMining 4. In case of insolvency of one of the
Corporation, Sicat, Gonzales, Chiu Chin Gin, Lo debtors, the others shall not be liable
Kuan Chin, and INIMACO. Nor can it be inferred forhisshares.Toholdotherwisewould
therefromthattheliabilityofthesixrespondents destroy the joint character of the
in the case below is solidary, thus their liability obligation.
shouldmerelybejoint.(INIMACOv.NLRC,G.R.No.
101723,May11,2000) Q: What is the effect of breach of a joint
indivisibleobligationbyonedebtor?
A.JOINTOBLIGATIONS
A:Ifoneofthejointdebtorsfailstocomplywith
Q: What are the legal consequences if the his undertaking, the obligation can no longer be
obligationisjoint? fulfilledorperformed.Itistheconvertedintoone
ofindemnityfordamages.InnocentjointDRshall
A: not contribute to the indemnity beyond their
1. Each debtor is liable only for a correspondingshareoftheobligation.
proportionatepartoftheentiredebt;
2. Each creditor, if there are several, is C.SOLIDARYOBLIGATIONS
entitledonlytoaproportionatepartof
thecredit; Q:Whatistheeffectofsolidaryobligation?
3. Thedemandmadebyonecreditorupon
onedebtor,produceseffectsofdefault A: Each one of the debtors is obliged to pay the
onlyasbetweenthem; entire obligation, and each one of the creditors
4. Interruption of prescription caused by hastherighttodemandfromanyofthedebtors
thedemandmadebyonecreditorupon thepaymentorfulfillmentoftheentireobligation
one debtor, will NOT benefit the co
creditorsorthecodebtors;
195

Q:Joey,JovyandJojoaresolidarydebtorsunder Q:Whataretherulesinasolidaryobligation?
a loan obligation of P300, 000.00 which has
fallendue.Thecreditorhas,however,condoned A:
Jojo's entire share in the debt. Since Jovy has
becomeinsolvent,thecreditormakesademand 1. Anyone of the solidary creditors may
onJoeytopaythedebt. collect or demand payment of whole
obligation; there is mutual agency among
1. How much, if any, may Joey be solidarydebtors(Arts.1214,1215)
compelledtopay?
2. To what extent, if at all, can Jojo be
2. Any of the solidary debtor may be
compelled by Joey to contribute to
required to pay the whole obligation; there
suchpayment?
is mutual guaranty among solidary debtors

(Arts.1216,1217,1222)
A:
1. Joey can be compelled to pay only the
remainingbalanceofP200,000, inview 3. Each one of solidary creditors may do
of the remission of Jojos share by the whatever maybe useful to the others, but
creditor.(Art.1219,NCC) notanythingprejudicialtothem(Art.1212);
2. Jojo can be compelled by Joey to however, any novation, compensation,
contribute P50,000. When one of the confusion or remission of debt executed by
solidary debtors cannot, because of his any solidary creditor shall extinguish the
insolvency, reimburse his share to the obligation without prejudice to his liability
debtorpayingtheobligation,suchshare forthesharesoftheothersolidarycreditors.
shall be borne by all his codebtors, in
proportion to the debt of each.(par. 3, Q:Incasesofsolidarycreditors,mayoneactfor
Art.1217,NCC) all?Whatarethelimitations?
Sincetheinsolventdebtor'ssharewhichJoey
paid was Pl00,000, and there are only two A: Yes. However, while each one of the solidary
remaining debtors namely Joey and Jojo creditors may execute acts which may be useful
these two shall share equally the burden of or beneficial to the others, he may not do
reimbursement.Jojomaythusbecompelled anything which may be prejudicial to them. (Art.
by Joey to contribute P50,000. (1998 Bar 1212,NCC)
Question)
Note: Prejudicial acts may still have valid legal
Q:Whatarethekindsofsolidaryobligation? effects,buttheperformingcreditorshallbeliableto
his cocreditors. (Pineda, Obligations and Contracts,
A: 2000ed,p.157)
1. Passive solidarity onthe part of the
debtors Q: What are the effects of assignment of rights
2. Active solidarity on thepart of the inasolidaryobligation?
creditors
3. Mixedsolidarityonbothsides A:
GR: Solidary creditor cannot assign his right
Q:Distinguishsolidarityfromindivisibility. because it is predicated upon mutual
confidence,meaningpersonalqualificationof
A: each creditor had been taken into
INDIVISIBILITY SOLIDARITY consideration when the obligation was
Referstothevinculum constituted.(Art.1213,NCC)
Referstotheprestation
existingbetweenthe
orobjectofthecontract
subjectsorparties XPNs:
Doesnotrequire 1. Assignmenttococreditor;or
Requiresthepluralityof
pluralityofsubjectsor 2. Assignment is with consent of co
partiesorsubjects
parties creditor.
Incaseofbreach,itis
convertedtooneof Incaseofbreach,the
indemnityfordamages liabilityofthesolidary
andtheindivisibilityof debtorsfordamages
theobligationis remainssolidary
terminated
196 CIVILLAWTEAM:

OBLIGATIONS
Q: To whom must payment be made in a A:Itistantamounttononperformance.(Pineda,

solidaryobligation? ObligationsandContracts,2000ed,p.179)

A: E.OBLIGATIONSWITHAPENALCLAUSE
GR:Toanyofthesolidarycreditors.
Q:Whatisapenalclause?
XPN: If demand, judicial or extrajudicial, has
been made by one of them, payment should A: It is an accessory obligation attached to the
bemadetohim.(Art.1214,NCC) principal obligation to assure greater
responsibilityincaseofbreach.
D.DIVISIBLEANDINDIVISIBLEOBLIGATIONS
Note: Proof of actual damages suffered by the
Q: What is the primary distinction between creditor is not necessary in order that the penalty
divisibleandindivisibleobligations? maybedemanded.(Art.1228,NCC)

A: Q: What is the effect of incorporating a penal
DIVISIBLE INDIVISIBLE clauseinanobligation?

Nonsusceptibility tobe
A:
Susceptibilityofan performedpartially
GR: The penalty fixed by the parties is a
obligationtobe Partialperformanceis
compensation or substitute for damages in
performedpartially tantamounttonon
performance caseofbreach.

XPNs:Damagesshallstillbepaidevenifthere
isapenalclauseif:
Q: What is the true test in determining
1. thereisastipulationtothecontrary
divisibility?
2. the debtor refuses to pay the agreed
penalty
A:Whetherornottheprestationissusceptibleof
3. the debtor is guilty of fraud in the
partial performance, not in the sense of
fulfillmentoftheobligation.(Art.1126,
performance in separate or divided parts, but in
NCC)
the sense of the possibility of realizing the
purposewhichtheobligationseekstoobtain.Ifa
thing could be divided into parts and as divided, Note:Thenullityofthepenalclausedoesnotcarry
itsvalueisimpaireddisproportionately,thatthing withitthatoftheprincipalobligation.
is indivisible. (Pineda, Obligations and Contracts,
2000ed,p.174) The nullity of the principal obligation carries with it
thatofthepenalclause.(Art.1230,NCC)
Q:Whenmayanobligationtodeliveradivisible
thingbeconsideredindivisible? Q:Whenmaypenaltybereducedbythecourts?

A: A:PIU
1. Whenthelawsoprovides;or 1. Partialperformanceoftheobligation;
rd
2. By stipulation of the parties.(3 par., 2. Irregularperformanceoftheobligation;
Art.1255,NCC) or
3. PenaltyisUnconscionableevenifthere
Q: What is the effect of illegality of a part of a hasbeennoperformance.
contract?
A:
1. Divisible contract illegal part is void
and unenforceable. Legal part is valid
andenforceable.(Art.1420,NCC)
2. Indivisible contract entire contract is
indivisibleandunenforceable.
Q:Whatistheeffectofpartialperformancein
indivisibleobligation?
197

IX.EXTINGUISHMENTOFOBLIGATIONS Q: Is the creditor bound to accept payment or
performancebyathirdperson?
Q:Whatarethemodesofextinguishmentofan A:
obligation? GR:No,thecreditorisnot.

A: XPNs:
1. Paymentorperformance 1. Whenmadebyathirdperson whohas
2. Lossofthethingdue interest in the fulfillment of the
3. Condonationorremissionofdebt obligation
4. Confusionormerger 2. Contrarystipulation
5. Compensation
6. Novation Q: What are the rights of a third person who
7. Annulment paidthedebt?
8. Rescission
9. Fulfillmentofaresolutorycondition A:
10. Prescription(Art.1231,NCC) 1. With knowledge and consent of the
debtor:
Note:Theenumerationisnotexclusive. a. can recover entire amount paid
(absolutereimbursement)
MUTUALDESISTANCE b. can be subrogated to all rights of
thecreditor
Q:Ifthepartiesmutuallydisagreeasregardsthe 2. Without knowledge or against the will
obligation,mayitbecancelled? ofthedebtorcanrecoveronlyinsofar
as payment has been beneficial to the
A: Yes. That is in the nature of mutual debtor (right of conditional
desistance which is a mode of extinguishing reimbursement)
obligations. It is a concept that derives from the
principlethatsincemutualagreementcancreate NOTE: Payment made by a third person who does
a contract, mutual disagreement by the parties not intend to be reimbursed by the debtor is
can cause its extinguishment.(Saura v. deemed to be a donation, which requires the
Development Bank of the Phils., G.R. No. 24968, debtor's consent. But the payment is in any case
Apr.27,1972) valid as to the creditor who has accepted it. (Art.
1238,NCC)
A.PAYMENTORPERFORMANCE
Q:Statetherequisitesofavalidpayment.
Q: Is the term payment, as used in the Code,
limitedtoappreciablesumsofmoney? A:CCPAD
1. Capacityofthepayor
A:No. Payment may consist not only in the 2. Capacityofthepayee
delivery of money but also the giving of a thing 3. Proprietyofthetime,place,mannerof
(other than money), the doing of an act, or not payment
doingofanact. 4. Acceptancebythecreditor
5. Delivery of the full amount or the full
Q:Whatistenderofpayment? performanceoftheprestation

A: Tender of payment is the definitive act of Q:Whatarethecharacteristicsofpayment?
offering the creditor what is due him or her,
together with the demand that the creditor A:
acceptthesame. 1. Integrity;
2. Identity;and
Note: There must be a fusion of intent, ability and 3. Indivisibility.
capability to make good such offer, which must be
absoluteandmustcovertheamountdue.(FEBTCv.
DiazRealtyInc.,G.R.No.138588,Aug.23,2001)

198 CIVILLAWTEAM:

OBLIGATIONS
INTEGRITY Q: Is the acceptance by a creditor of a partial

paymentanabandonmentofitsdemandforfull
Q:Howshouldperformancebemade? payment?

A: A: No. When creditors receive partial payment,
GR:Performanceshouldalwaysbeinfull. they are not ipso facto deemed to have
abandonedtheirpriordemandforfullpayment.
XPNs:
1. Substantial performance performed in Toimplythatcreditorsacceptpartialpaymentas
goodfaith complete performance of their obligation, their
2. Creditor accepts the performance acceptance must be made under circumstances
knowing its incompleteness or that indicate their intention to consider the
irregularitywithoutprotestorobjection performance complete and to renounce their
3. Debt is partly liquidated and partly claimarisingfromthedefect.
unliquidated, but the liquidated part of
thedebtmustbepaidinfull Note:WhileArticle1248oftheCivilCodestatesthat
creditors cannot be compelled to accept partial
IDENTITY payments,itdoesnotprohibitthemfromaccepting
such payments. (Selegna Management and
Q: What should be given as payment of an Development Corp. v. UCPB, G.R. No. 165662, May
obligation? 30,2006)

A:
GR:Thingpaidmustbetheverythingdueand Q:Towhompaymentshouldbemade?
cannot be another thing even if of same
qualityandvalue. A:Paymentshallbemadetothepersoninwhose
favor the obligation has been constituted, or his
XPNs: successorininterest,oranypersonauthorizedto
1. Dationinpayment receiveit.(Art.1240)
2. Novationoftheobligation
3. Obligationisfacultative Q:Ispaymenttoanunauthorizedpersonavalid
payment?

INDIVISIBILITY A:
GR:Paymenttoanunauthorizedpersonisnot
Q: Can the debtor or creditor be compelled to avalidpayment.
perform/acceptpartialprestations?
XPNs:
A: 1. Paymenttoanincapacitatedpersonif:
GR: Debtor cannot be compelled by the a. hekeptthethingdelivered,or
creditor to perform obligation in parts and b. ithasbeenbeneficialtohim
neithercanthedebtorcompelthecreditorto 2. Payment to a third person insofar as it
acceptobligationinparts. redoundedtothebenefitoftheCR
3. Paymentingoodfaithtothepossessor
XPNs:When: ofcredit
1. partial performance has been agreed
upon
2. part of the obligation is liquidated and
partisunliquidated
3. torequirethedebtortoperforminfull
isimpractical
199

SPECIALFORMSOFPAYMENT Assuch,theessentialelementsofacontractofsale,
namely, consent, object certain, and cause or
Q:Whatarethespecialformsofpayment? considerationmustbepresent.

A: In its modern concept, what actually takes place in
CONCEPT dacion en pago is an objective novation of the
DationinPayment obligation where the thing offered as an accepted
equivalent of the performance of an obligation is
AlienationbytheDRofaparticularpropertyinfavor
considered as the object of the contract of sale,
ofhisCR,withthelattersconsent,forthe
whilethedebtisconsideredasthepurchaseprice.In
satisfactionoftheformersmoneyobligationtothe
any case, common consent is an essential
latter,withtheeffectofextinguishingthesaid
prerequisite, be it sale or novation, to have the
moneyobligation(Pineda,Obligationsand
effectoftotallyextinguishingthedebtorobligation.

ApplicationofPayment
Designationoftheparticulardebtbeingpaidbythe
Q: Lopez obtained a loan in the amount of
DRwhohastwoormoredebtsorobligationsofthe P20,000.00 from the Prudential Bank. He
samekindinfavorofthesameCRtowhomthe executedasuretybondinwhichhe,asprincipal,
paymentismade(Pineda,ObligationsandContracts, and PHILAMGEN as surety, bound themselves
2000ed,p.229) jointlyandseverallyforthepaymentofthesum.
PaymentbyCession Healsoexecutedadeedofassignmentof4,000
DRcedeshispropertytohisCRssothelattermay sharesoftheBaguioMilitaryInstitutioninfavor
sellthesameandtheproceedsrealizedappliedto ofPHILAMGEN.Isthestockassignmentmadeby
thedebtsoftheDR Lopezdationinpaymentorpledge?
TenderofPayment
VoluntaryactoftheDRwherebyheofferstotheCR A:Thestockassignmentconstitutesapledgeand
foracceptancetheimmediateperformanceofthe not a dacion en pago. Dation in payment is the
formersobligationtothelatter deliveryandtransmissionofownershipofathing
Consignation by the debtor to the creditor as an accepted
Actofdepositingtheobjectoftheobligationwith equivalent of the performance of the obligation.
thecourtorcompetentauthorityaftertheCRhas Lopezs loan has not yet matured when he
unjustifiablyrefusedtoacceptthesameorisnotina "alienated" his 4,000 shares of stock to
positiontoacceptitduetocertainreasonsor Philamgen. Lopez's obligation would arise only
circumstances when he would default in the payment of the
principal obligation which is the loan and
1.DATIONINPAYMENT Philamgenhadtopayforit.Sinceitiscontraryto
thenatureandconceptofdationinpayment,the
Q: What does dation in payment or dacion en same could not have been constituted when the
pagoentail? stockassignmentwasexecuted.Incaseofdoubt
astowhetheratransactionisapledgeoradation
A: Dacion en pago is the delivery and inpayment,thepresumptionisinfavorofpledge,
transmission of ownership of a thing by the the latter being the lesser transmission of rights
debtor to the creditor as an accepted equivalent andinterests.(Lopezv.CA,G.R.No.L33157,June
of the performance of the obligation. The 29,1982)
propertygivenmayconsistnotonlyofathingbut
also of a real right. (Tolentino, Civil Code of the Q: Cebu Asiancars Inc., with the conformity of
Philippines,Vol.IV,2002ed,p.293) the lessor, used the leased premises as a
collateral to secure payment of a loan which
Note:Theconsentofthecreditorisessential. Asiancars may obtain from any bank, provided

thattheproceedsoftheloanshallbeusedsolely
It is a special mode of payment where the debtor
for the construction of a building which, upon
offersanotherthingtothecreditorwhoacceptsitas
the termination of the lease or the voluntary
equivalentofpaymentofanoutstandingdebt.
surrender of the leased premises before the
Theundertakingpartakesofthenatureofsale,that expiration of the contract, shall automatically
is,thecreditorisreallybuyingthethingorproperty become the property of the lessor. Meeting
of the debtor, payment for which is to be charged financialdifficultiesandincurringanoutstanding
againstthedebtorsdebt. balance on the loan, Asiancars conveyed
ownership of the building on the leased
premises to MBTC, by way of "dacion en
200 CIVILLAWTEAM:

OBLIGATIONS
pago."IsthedacionenpagobyAsiancarsinfavor Yenanddamagesforthedelayattherateof6%
ofMBTCvalid? per annum. Unable to execute the decision in
Japan,NorthwestAirlinesfiledacasetoenforce
A: Yes. MBTC was a purchaser in good faith. said foreign judgment with the RTC of Manila.
MBTChadnoknowledgeofthestipulationinthe What is the rate of exchange that should be
lease contract. Although the same lease was appliedforthepaymentoftheamount?
registered and duly annotated, MBTC was
charged with constructive knowledge only of the A: The repeal of R.A. 529 by R.A. 8183 has the
fact of lease of the land and not of the specific effect of removing the prohibition on the
provisionstipulatingtransferofownershipofthe stipulation of currency other than Philippine
building to the Jaymes upon termination of the currency, such that obligations or transactions
lease.Whilethealienationwasinviolationofthe maynowbepaidinthecurrencyagreeduponby
stipulation in the lease contract between the the parties. Just like R.A. 529, however, the new
Jaymes and Asiancars, MBTCs own rights could law does not provide for the applicable rate of
notbeprejudicedbyAsiancarsactionsunknown exchange for the conversion of foreign currency
to MBTC. Thus, the transfer of the building in incurred obligations in their peso equivalent. It
favor of MBTC was valid and binding. (Jayme v. follows, therefore, that the jurisprudence
CA,G.R.No.128669,Oct.4,2002) established in R.A. 529 regarding the rate of
conversion remains applicable. Thus, in Asia
2.FORMOFPAYMENT World Recruitment, Inc. v. National Labor
RelationsCommission,theSC,applyingR.A.8183,
Q: What are the rules as regards payment in sustained the ruling of the NLRC that obligations
monetaryobligations? in foreign currency may be discharged in
Philippine currency based on the prevailing rate
A: at the time of payment. It is just and fair to
1. Payment in cash all monetary preserve the real value of the foreign exchange
obligations shall be settled in the incurredobligationtothedateofitspayment.
Philippinecurrencywhichislegaltender
inthePhilippines.However,theparties If the rate of interest is not stipulated, what
may agree that the obligations or shouldbetherateofinterestthatshouldapply?
transactions shall be settled in any Whenshouldtheinterestbegintorun?
othercurrencyatthetimeofpayment.
(Sec.1,R.A.8183) A:InEasternShippingLines,Inc.v.CA,itwasheld
that absent any stipulation, the legal rate of
Note: R.A. 8183 amended the first interest in obligations which consists in the
paragraph of Art. 1249 of the Civil Code, paymentofasumofmoneyis12%perannumto
but the rest of the article remain be reckoned from the time of filing of the
subsisting. (Pineda, Obligations and complaintthereinuntilthesaidforeignjudgment
Contracts,2000ed,p.221) is fully satisfied. (C.F. Sharp & Co., Inc. v.
NorthwestAirlines,Inc.,G.R.No.133498,Apr.18,
2. Payment in check or other negotiable 2002)
instrument not considered payment,
they are not considered legal tender PAYMENTBYNEGOTIABLEINSTRUMENT
and may be refused by the creditor
exceptwhen: Q:Diaz&CompanyobtainedaloanfromPacific
a. thedocumenthasbeencashed;or BankingCorpwhichwassecuredbyarealestate
b. it had been impaired through the mortgageovertwoparcelsoflandownedbythe
faultofthecreditor. plaintiffDiazRealty.ABCrentedanofficespace
in the building constructed on the properties
PAYMENTINCASH covered by the mortgage contract. The parties
then agreed that the monthly rentals shall be
Q:NorthwestAirlines,throughitsJapanBranch, paid directly to the mortgagee for the lessor's
entered into an International Passenger Sales account, either to partly or fully pay off the
Agency Agreement with CF Sharp, authorizing aforesaid mortgage indebtedness. Thereafter,
thelattertosellitsairtransporttickets.CFSharp FEBTC purchased the credit of Diaz & Company
failed to remit the proceeds of the ticket sales, in favor of PaBC, but it was only after 2 years
thus, Northwest Airlines filed a collection suit thatDiazwasinformedaboutit.Diazaskedthe
before the Tokyo District Court which rendered FEBTC to make an accounting of the monthly
judgment ordering CF Sharp to pay 83,158,195
201

rental payments made by Allied Bank. Diaz 4.APPLICATIONOFPAYMENTS
tenderedtoFEBTCtheamountofP1,450,000.00
throughanInterbankcheck,inordertoprevent Q: What does the concept of application of
the imposition of additional interests, penalties paymentsmean?
and surcharges on its loan but FEBTC did not
acceptitaspayment,instead,Diazwasaskedto A: It is the designation of the debt to which the
deposittheamountwiththeFEBTCsDavaoCity payment must be applied when the debtor has
Branch Office. Was there a valid tender of several obligations of the same kind in favor of
payment? thesamecreditor.

A:Yes.True,jurisprudenceholdsthat,ingeneral, Q: What are the requisites of application of
acheckdoesnotconstitutelegaltender,andthat payments?
a creditor may validly refuse it. It must be
emphasized, however, that this dictum does not A:
prevent a creditor from accepting a check as 1. Onedebtorandonecreditor
payment. In other words, the creditor has the 2. Twoormoredebtsofthesamekind
optionandthediscretionofrefusingoraccepting 3. Amountpaidbythedebtormustnotbe
it. (FEBTC v. Diaz Realty Inc., G.R. No. 138588, sufficienttocoveralldebts
Aug.23,2001) 4. Debtsarealldue
5. Parties have not agreed previously on
Q:Whohastheburdenofprovingpaymentinan theapplication
actionforsumofmoney?
Q:Whatisthegoverningruleincasethedebtor
A:Thepartywhopleadspaymentasadefensehas failstoascertainwhichdebthispaymentistobe
the burden of proving that such payment has, in applied?
fact,beenmade.
A:Thechoicemaybetransferredtothecreditor
Q: Are receipts the only evidence that can be aswhenthedebtormakespaymentanddoesnot
presentedtoprovepayment? makeapplicationanddebtoracceptsareceiptin
whichtheapplicationismade.Insuchacase,the
A: No. Receipts of payment, although not debtor cannot complain of the application the
exclusive, are deemed the best evidence of the creditor has made unless there be a cause for
fact of payment. (Dela Pea and Villareal v. CA invalidatingthecontract.
andRuralBankofBolinao,Inc.,G.R.No.177828,
Feb.13,2009
Q: If both the creditor and the debtor fail to
EXTRAORDINARYINFALTIONORDEFLATION applypayments,whatrulegoverns?

Q: What is the rule in payment in case of an A:Legalapplicationofpaymentgovernswherein
extraordinaryinflationordeflation? thelawmakestheapplication.

A: In case an extraordinary inflation or deflation The payment should be applied to the more
of the currency stipulated should supervene, the onerousdebts:
value of the currency at the time of the 1. When a personis bound as principal in
establishmentoftheobligationshallbethebasis oneobligationandassuretyinanother,
of payment, unless there is an agreement to the theformerismoreonerous.
contrary.(Art.1250,NCC) 2. When there are various debts, the
oldestonesaremoreburdensome.
Q: Does the exchange rate at the time of the 3. Whereonebearsinterestandtheother
establishment of the obligation apply in all does not, even if the latter is the older
cases? obligation, the former is considered
moreonerous.
A:No.Therule thatthevalueofthecurrencyat 4. Where there is an encumbrance, the
the time of the establishment of the obligation debt with a guaranty is more onerous
shall be the basis of payment finds application thanthatwithoutsecurity.
only when there is an official pronouncement or 5. Withrespecttoindemnityfordamages,
declaration of the existence of an extraordinary thedebtwhichissubjecttothegeneral
inflationordeflation. rules on damages is less burdensome
202 CIVILLAWTEAM:

OBLIGATIONS
than that in which there is a penal latter.(Pineda, Obligations and Contracts, 2000
clause. ed,p.241)
6. The liquidated debt is more
burdensomethantheunliquidatedone. Tender of payment is the manifestation by
7. An obligation in which the debtor is in debtors of their desire to comply with or to pay
default is more onerous than one in their obligation. (Sps. Benosv.Sps.Lawilao, G.R.
whichheisnot.(Tolentino,CivilCodeof No.172259,Dec.5,2006)
thePhilippines,Vol.IV,2002ed,p.314
315) Note: If the creditorrefuses the tender ofpayment
withoutjustcause,thedebtorsaredischargedfrom
Note:Ifthedebtshappentobeofsamenatureand the obligation by the consignation of the sum due.
burden, the payment shall be applied (Sps. Benosv.Sps.Lawilao, G.R. No. 172259, Dec. 5,
proportionately. 2006)

PAYMENTBYCESSION CONSIGNATION

Q: What are the circumstances evidencing Q:Whatisconsignation?
paymentbycession?
A: Act of depositing the object of the obligation
A: Debtor abandons all of his property for the with the court or competent authority after the
benefit of his creditors in order that from the CRhasunjustifiablyrefusedtoacceptthesameor
proceedsthereof,thelattermayobtainpayment is not in a position to accept it due to certain
ofcredits. reasons or circumstances. (Pineda, Obligations
andContracts,2000ed,p.241)
Note: It presupposes insolvency of the debtor. All
the debtors creditors must be involved and the Q:Whenandwhereisconsignationmade?
consentofthelattermustbeobtained.
A:Consignationismadebydepositingtheproper
Q: What are the difference between Dation in amount to the judicial authority, before whom
PaymentandPaymentinCession? thetenderofpaymentandtheannouncementof
the consignation shall be proved. (Sps.
A: Benosv.Sps.Lawilao, G.R. No. 172259, Dec. 5,
DATIONINPAYMENT PAYMENTINCESSION 2006)
Maybeonecreditor Pluralityofcreditors
Notnecessarilyinstate Debtormust bepartially Note: Once the consignation has been duly made,
offinancialdifficulty orrelativelyinsolvent the debtor may ask the judge to order the
Thingdeliveredis Universalityorproperty cancellationoftheobligation.
consideredasequivalent ofdebtoriswhatis
ofperformance ceded Q: When will consignation produce effects of
Paymentextinguishes payment?
obligationtotheextent Merelyreleasesdebtor
ofthevalueofthething fornetproceedsof A:
deliveredasagreed thingscededor GR: Consignation shall produce effects of
upon,provedorimplied assigned,unlessthereis payment only if there is a valid tender of
fromtheconductofthe contraryintention payment.
creditor
Ownershipistransferred Ownershipisnot XPNs:When:ARTIT
toCRupondelivery transferred
1. Creditor is Absent or unknown,
Anactofnovation Notanactofnovation
ordoesntappearatplaceofpayment
Doesnotpresuppose
Presupposesinsolvency 2. Creditor Refuses to issue a receipt
insolvency
withoutjustcause
3. Titleoftheobligationhasbeenlost
5.TENDEROFPAYMENT
4. Creditor is Incapacitated to
receivepaymentatthetimeitisdue
Q:Whatconstitutesavalidtenderofpayment?
5. Twoormorepersonsclaimtherightto
collect
A:Voluntaryactofthedebtorwherebyheoffers

to the creditor for acceptance the immediate Note:Theexpensesofconsignation,whenproperly
performance of the formers obligation to the made,shallbechargedagainstthecreditor.
203

Q:Whataretherequisitesofconsignation? Q:Inanejectmentcase,Xrefusedtovacatethe
land alleging that Y had sold to him the
A:VPCPAS additionalarea,thepaymentofwhichwouldbe
1. Validexistingdebtwhichisalreadydue; effected five years after the execution of a
2. Prior valid tender except when prior formaldeedofsale.However,thepartiesfailed
tenderofpaymentisdispensable; to execute a deed of sale. During the pendency
3. Creditor unjustly refuses the tender of of the action, X deposited the payment for the
payment; additiontothelotwiththecourt.Isthereavalid
4. Prior notice of consignation given to consignation?
persons interested in the fulfillment of
theobligation; A: No. Under Art. 1257 of this Civil Code,
5. Amount or thing is deposited at the consignation is proper only in cases where an
disposalofjudicialauthority;and existing obligation is due. In this case, the
6. Subsequent notice of the fact of contracting parties agreed that full payment of
consignation to persons interested in purchasepriceshallbedueandpayablewithin5
thefulfillmentoftheobligation. yearsfromtheexecutionofaformaldeedofsale.
At the time Rodriguez deposited the amount in
Q:Canthedebtorwithdrawthething court, no formal deed of sale had yet been
deposited? executed by the parties, and, therefore, the 5
year period during which the purchase price
A:Before the creditor has accepted the shouldbepaidhadnotcommenced.Inshort,the
consignation,orbeforeajudicialdeclarationthat purchase price was not yet due and payable.
the consignation has been properly made, the (HeirsofSanAndresv.Rodriguez,G.R.No.135634,
debtor may withdraw the thing or the sum May31,2000)
deposited, allowing the obligation to remain in
force.(Art.1260,NCC) Q:Underapactoderetrosale,XsoldtoYhislot
and the building erected thereon. They agreed
NOTE: If, the consignation having been made, the thathalfoftheconsiderationshallbepaidtothe
creditor should authorize the debtor to withdraw bank to pay off the loan of X. After paying the
the same, he shall lose every preference which he firstinstallment,Y,insteadofpayingtheloanto
mayhaveoverthething.Thecodebtors,guarantors the bank, restructured it twice. Eventually, the
andsuretiesshallbereleased.(Art.1261,NCC) loanbecamedueanddemandable.Thus,Xpaid

the bank. On the same day, Y also went to the
Q: Distinguish tender of payment from
bank and offered to pay the loan, but the bank
consignation.
refusedtoacceptthepayment.

A:
Y then filed an action for consignation without

notifyingX.IsthereavalidconsignationbyYof
TENDEROFPAYMENT CONSIGNATION
thebalanceofthecontractprice?
Nature

Antecedentof Principalor
A:No.Yfiledthepetitionforconsignationagainst
consignationor consummatingactfor
thebankwithoutnotifyingtheX,resultingtothe
preliminaryactto theextinguishmentof
consignation theobligation formers failure to prove the payment of the
Effect balance of the purchase price and consignation.
Itdoesnotbyitself Itextinguishesthe Infact,evenbeforethefilingoftheconsignation
extinguishthe obligationwhendeclared case, Y never notified the X of their offer to
obligation valid pay.(Sps. Benosv. Sps.Lawilao, G.R. No. 172259,
Character Dec.5,2006)
Judicialforitrequiresthe
filingofacomplaintin
court(Pineda,
Extrajudicial
Obligationsand
Contracts,2000ed,p.
242)

204 CIVILLAWTEAM:

OBLIGATIONS
Q: Because of Ligayas refusal to accept several f. When debtor Promised to deliver

tendersof payment and notices ofconsignation the same thing to two or more
given by OSSA in its desire to comply with its personswhodonothavethesame
obligationtopayoninstallments,OSSAbrought interest
a complaint for consignation against Ligaya g. When the debt of a certain and
before the RTC. The RTC allowed OSSA, among determinatethingproceedsfroma
others,todepositwithit,bywayofconsignation, Criminaloffense
allfuturequarterlyinstallmentswithoutneedof h. WhentheobligationisGeneric
formaltendersofpaymentandserviceofnotices
ofconsignation. 2. Genericobligationtogive:

Ligayaassailsthevalidityoftheconsignationon GR: The obligation is not extinguished
the ground that there was no notice to her becauseagenericthingneverperishes.
regarding OSSA's consignation of the amounts
corresponding to certain installments. Is Ligaya XPN:In case of generic obligations
correct? whose object is a particular class or
group with specific or determinate
A: No. The motion and the subsequent court qualities(limitedgenericobligation)
order served on Ligaya in the consignation
proceedingssufficientlyservedasnoticetoLigaya 3. An obligation to do the obligation is
of OSSA's willingness to pay the quarterly extinguished when the prestation
installments and the consignation of such becomes legally or physically
payments with the court. For reasons of equity, impossible.
the procedural requirements of consignation are
deemed substantially complied with in the Q:Differentiatelegalfromphysicalimpossibility
present case (De Mesa v. CA, G.R. Nos. 106467 toperformanobligationtodo.
68,Oct.19,1999).
A:
B.LOSSOFTHETHINGDUE 1. Legalimpossibilityactstipulatedtobe
performed is subsequently prohibited
Q:Whenisathingconsideredlost? bylaw.
2. Physical impossibility act stipulated
A:When:DOPE could not be physically performed by
1. It Disappears in such a way that its the obligor due to reasons subsequent
existenceisunknown; to the execution of the contract.
2. ItgoesOutofcommerce; (Pineda, Obligations and Contracts,
3. ItPerishes;or 2000ed,p.261)
4. ItsExistenceisunknownorifknown,it
cannotberecovered. Q:Whatistheeffectofpartialloss?

Q:Whatistheeffectoflossofthethingwhichis A:
theobjectoftheobligation? 1. Due to the fault or negligence of the
debtor Creditor has the right to
A:Iftheobligationisa: demandtherescissionoftheobligation
1. Determinateobligationtogive: or to demand specific performance,
plusdamages,ineithercase.
GR:The obligation is extinguished when 2. Duetofortuitousevent:
theobjectoftheobligationislost. a. Substantial loss obligation is
extinguished.
XPNs:LASCDPCG b. Unsubstantial loss the CR shall
a. Lawprovidesotherwise deliver the thing promised in its
b. Nature of the obligation requires impairedcondition.
theAssumptionofrisk
c. Stipulationtothecontrary
d. DebtorContributedtotheloss
e. Loss the of the thing occurs after
thedebtorincurredinDelay
205

Q:Whatistheeffectwhenthethingislostinthe (Pineda, Obligations and Contracts, 2000 ed, p.
possessionofthedebtor? 267)
EXPRESSCONDONATION
A:
GR: It is presumed that loss is due to DRs Q:Whataretherequisitesofcondonation?
fault.
A:GAIDE
XPN:Presumptionshallnotapplyincaseloss 1. MustbeGratuitous;
is due to earthquake, flood, storm or other 2. Acceptancebythedebtor;
naturalcalamity. 3. MustnotbeInofficious;
4. Formalities provided by law on
XPNtotheXPN:Debtorstillliableevenifloss Donations must be complied with if
isduetofortuitouseventwhen: condonationisexpress;and
1. Debtorincurredindelay;or 5. AnExistingdemandabledebt.
2. Debtorpromisedtodeliverthethingto
two or more persons with different IMPLIEDCONDONATION
interests(par.3,Art.1165,NCC)
Q:Whatistheeffectofthedeliveryofaprivate
Q:Whatdoesrebussicstantibusmean? documentevidencingacredit?

A: A principle in international law which means A:Thedeliveryofaprivatedocumentevidencinga
that an agreement is valid only if the same credit, made voluntarily by the creditor to the
conditions prevailing at time of contracting debtor, implies the renunciation of the action
continuetoexistatthetimeofperformance.Itis whichtheformerhadagainstthelatter.
the basis of the principle of unforeseen difficulty
ofservice.
If in order to nullify this waiver it should be

Note: However, this principle cannot be applied
claimedtobeinofficious,thedebtorandhisheirs
absolutely in contractual relations since parties are mayupholditbyprovingthatthedeliveryofthe
presumed to have assumed the risk of unfavorable documentwasmadeinvirtueofpaymentofthe
developments. (Pineda, Obligations and Contracts, debt.(Art.1271,NCC)
2000ed,p.264)
NOTE:Whenevertheprivatedocumentinwhichthe
Q:Whataretherequisitesinordertorelievethe debt appears is found in the possession of the
debtor from his obligation, in whole or in part, debtor, it shall be presumed that the creditor
basedonunforeseendifficultyofservice? delivered it voluntarily, unless the contrary is
proved.(Art.1272,NCC)
A:
1. Event or change in circumstance could It is presumed that the accessory obligation of
not have been foreseen at the time of pledge has been remitted when the thing pledged,
theexecutionofthecontract; after its delivery to the creditor, is found in the
possession of the debtor, or of a third person who
2. Such event makes the performance
ownsthething.(Art.1274,NCC)
extremelydifficultbutnotimpossible;

3. Theeventmustnotbeduetotheactof
Q:Whatistheeffectofinofficiouscondonation?
anyoftheparties;and

4. The contract is for a future prestation.
A: It may be totally revoked or reduced
(Tolentino,Civil CodeofthePhilippines,
depending on whether or not it is totally or only
Vol.IV,2002ed,p.347)
partly inofficious. (Pineda, Obligations and

C.CONDONATION

Q:Cantherebeaunilateralcondonation?
Q:Whatiscondonation?

A:No.Sinceitisadonationofanexistingcredit,
A: It is an act of liberality by virtue of which the
considered a property right, in favor of the
creditor, without receiving any price or
debtor,itisrequiredthattheDRgiveshisconsent
equivalent, renounces the enforcement of the
thereto by making an acceptance. If there is no
obligation, as a result of which it is extinguished
acceptance, there is no condonation. (Pineda,
initsentiretyorinthatpartoraspectofthesame
ObligationsandContracts,2000ed,p.267)
to which the condonation or remission refers.
206 CIVILLAWTEAM:

OBLIGATIONS
D.CONFUSIONORMERGER not extinguish the obligation. (Art.

1276,NCC)
Q: When is there a confusion or merger of
rights? Q: In a joint obligation, what is the effect of
confusionormergerinonedebtororcreditor?
A:Themeetinginonepersonofthequalitiesofa
creditoranddebtorofthesameobligation. A:
GR: Joint obligation is not extinguished since
Q: What are the requisites of confusion of confusion is not definite and complete with
rights? regard to the entire obligation. A part of the
obligationstillremainsoutstanding.
A:
1. Merger in the same person of the XPN: Obligation is extinguished with respect
characters of both a creditor and d onlyto thesharecorrespondingtothe DRor
debtor; CR concerned. In effect, there is only partial
2. Must take place in the persons of a extinguishment of the entire obligation.
principal creditor and a principal (Pineda, Obligations and Contracts, 2000 ed,
debtor;and p.281)
3. Mergerisdefiniteandcomplete.
E.COMPENSATION.
Q: What is the effect of confusion or merger of
rights? Q:Whatiscompensation?

A: The creditor and debtor becomes the same A:Itisamodeofextinguishingtotheconcurrent
personinvolvingthesameobligation.Hence,the amount, the obligations of those persons who in
obligationisextinguished.(Art.1275,NCC) their own right are reciprocally debtors and
creditors of each other (Art. 1232, NCC). It
Q:Cantherebepartialconfusion? involves the simultaneous balancing of two
obligations in order to extinguish them to the
A:Yes.Itwillbedefiniteandcompleteuptothe extentinwhichtheamountofoneiscoveredby
extentoftheconcurrentamountorvalue,butthe thatoftheother.
remaining obligation subsists. (Pineda,
ObligationsandContracts,2000ed,p.278) Q:Whataretherequisitesofcompensation?

Q:Whatistheeffectwhenconfusionormerger A:
isrevoked? 1. Bothpartiesmustbemutuallycreditors
and debtors in their own right and as
A: If the act which created the confusion is principals;
revoked for some causes such as rescission of 2. Both debts must consist in sum of
contracts, or nullity of the will or contract, the money or if consumable, of the same
confusion or merger is also revoked. The subject kindorquality;
obligation is revived in the same condition as it 3. Bothdebtsaredue;
wasbeforetheconfusion. 4. Both debts are liquidated and
demandable;
Note: During such interregnum, the running of the 5. Neither debt must be retained in a
periodofprescriptionoftheobligationissuspended. controversy commenced by third
(Pineda,ObligationsandContracts,2000ed,p.279) person and communicated with debtor
(neitherdebtisgarnished);and
Q:Whatistheeffectofconfusionormergerin 6. Compensation must not be prohibited
relationtotheguarantors? bylaw.

A: Note:WhenalltherequisitesmentionedinArt.1279
1. Mergerwhichtakesplaceintheperson of the Civil Code are present, compensation takes
of the principal debtor or principal effectbyoperationoflaw,evenwithouttheconsent
creditor benefits the guarantors. The orknowledgeofthecreditorsanddebtors.
contractofguarantyisextinguished.
2. Confusion which takes place in the
person of any of the guarantors does
207

1.KINDSOFCOMPENSATION CONVENTIONAL

Q:Whatarethekindsofcompensation? Q:Whatisconventionalcompensation?

A: A:Itisonethattakesplacebyagreementofthe
1. Legal compensation by operation of parties.
law
2. Conventional by agreement of the JUDICIALCOMPENSATION
parties
3. Judicial by judgment of the court Q:Whatisjudicialcompensation?
when there is a counterclaim duly
pleaded, and the compensation A: One made by order of a court based on a
decreed permissive counterclaim. Pleading and proof of
thecounterclaimmustbemade.
LEGALCOMPENSATION
FACULTATIVECOMPENSATION
Q: What are the debts not subject to
compensation? Q:Whatisfacultativecompensation?

A: A: One of the parties has a choice of claiming or
1. Debtsarisingfromcontractsofdeposit opposingthecompensation.
2. Debts arising from contracts of
commodatum Q: What are the obligations subject to
3. Claims for support due by gratuitous facultativecompensation?
title
4. Obligations arising from criminal A:Whenoneofthedebtsarisesfrom:
offenses 1. Depositum
5. Certain obligations in favor of 2. Obligationsofadepositary
government (e.g. taxes, fees, duties, 3. Obligationsincommudatum
andothersofasimilarnature) 4. Claimofsupportduetogratuitoustitle
XPN:Futuresupport.
Note: If a person should have against him several 5. Civilliabilityfromacrime
debts which are susceptible of compensation, the
rules on the application of payments shall apply to Q:Distinguishcompensationfrompayment.
theorderofthecompensation.(Art.1289,NCC) A:
COMPENSATION PAYMENT
Q:DeLeonsoldanddeliveredtoSilahisvarious Amodeofextinguishing
merchandise. Due to Silahis' default, De Leon totheconcurrent
Paymentmeansnotonly
amount,theobligations
filed a complaint for the collection of said deliveryofmoneybut
ofthosepersonswhoin
accounts.Silahisasserts,asaffirmativedefense, alsoperformanceofan
theirownrightare
a debit memo as unrealized profit for a obligation
reciprocallydebtorsand
supposed commission that Silahis should have creditorsofeachother
received from De Leon. Was there legal Capacityofpartiesnot Debtormusthave
compensation? necessary capacitytodisposeof
thethingpaid;
A: Silahis admits the validity of its outstanding Reason:Compensation creditormusthave
accounts with De Leon. But whether De Leon is operatesbylaw,notby capacitytoreceive
liable to pay Silahis a commission on the subject theactoftheparties payment
sale to Dole is disputed. This circumstance Therecanbepartial Theperformancemust
prevents legal compensation from taking place. extinguishmentofthe becompleteunless
(SilahisMarketingCorp.v.IAC,G.R.No.L74027, obligation waivedbythecreditor
Dec.7,1989) Legalcompensation
takesplacebyoperation Involvesdeliveryor
Note: Compensation is not proper where the claim oflawwithout action
ofthepersonassertingthesetoffagainsttheother simultaneousdelivery
is not clear nor liquidated; compensation cannot Itisnotnecessarythat
Partiesmustbemutually
extendtounliquidated,disputedclaimexistingfrom thepartiesbemutually
debtorsandcreditorsof
breachofcontract.(SilahisMarketingCorp.v.IAC,G. debtorsandcreditorsof
eachother
R.No.L74027,Dec.7,1989) eachother
208 CIVILLAWTEAM:

OBLIGATIONS
Q:Distinguishcompensationfromconfusion. has beenheld that the relation existing between

a depositor and a bank is that of creditor and
A: debtor.Asageneralrule,abankhasarightofset
COMPENSATION CONFUSION offofthedepositsinitshandsforthepaymentof
(Arts.12781279) (Arts.12751277) anyindebtednesstoitonthepartofadepositor"
Twopersonswhoare Onepersonwhere (Gullas v. PNB, GR No. L43191, November 13,
mutualdebtorsand qualitiesofdebtorand 1935). Hence, compensation took place between
creditorsofeachother creditoraremerged themutualobligationsofXandYbank.(1998Bar
Atleasttwoobligations Oneobligation Question)

Q: Atty. Laquihon, in behalf of Pacweld, filed a Q: Eduardo was granted a loan by XYZ Bank for
pleading addressed to MPCC titled motion to the purpose of improving a building which XYZ
direct payment of attorney's fee, invoking a leased from him. Eduardo executed the
decision wherein MPCC was adjudged to pay promissory note in favor of the bank, with his
Pacweld the sum of P10,000.00 as attorney's friend Ricardo as cosignatory. In the PN, they
fees. MPCC filed an opposition stating that the both acknowledged that they are individually
said amount is setoff by a like sum of andcollectivelyliableandwaivedtheneedfor
P10,000.00,collectibleinitsfavorfromPacweld prior demand. To secure the PN, Ricardo
also by way of attorney's fees which MPCC executed a real estate mortgage on his own
recovered from the same CFI of Manila in property. When Eduardo defaulted on the PN,
another civil case. Was there legal XYZstoppedpaymentofrentalsonthebuilding
compensation? on the ground that legal compensation had set
in.SincetherewasstillabalancedueonthePN
A:MPCCandPacweldwerecreditorsanddebtors after applying the rentals, XYZ foreclosed the
ofeachother,theirdebtstoeachotherconsisting real estate mortgage over Ricardos property.
infinalandexecutoryjudgmentsoftheCFIintwo Ricardo opposed the foreclosure on the ground
separate cases. The two obligations, therefore, that he is only a cosignatory; that no demand
respectively offset each other, compensation wasmadeuponhimforpayment,andassuming
having taken effect by operation of law and he is liable, his liability should not go beyond
extinguished both debts to the concurrent halfofthebalanceoftheloan.Further,Ricardo
amountofP10,000.00,pursuanttotheprovisions said that when the bank invoked compensation
of Arts. 1278, 1279 and 1290 of the Civil Code, betweentherentalsandtheamountoftheloan,
since all the requisites provided in Art. 1279 of itamountedtoanewcontractornovation,and
thesaidCodeforautomaticcompensation"even hadtheeffectofextinguishingthesecuritysince
though the creditors and debtors are not aware he did not give his consent (as owner of the
of the compensation" were present. (Mindanao property under the real estate mortgage)
Portland Cement Corp. v. CA,G.R. No. L62169, thereto.
Feb.28,1983)
CanXYZBankvalidlyassertlegalcompensation?
Q: X, who has a savings deposit with Y Bank in
the sum of PI,000,000.00, incurs a loan A: XYZ Bank may validly assert the partial
obligation with the said bank in the sum of compensation of both debts, but is should be
P800,000.00 which has become due. When X facultative compensation because not all of the
triestowithdrawhisdeposit,YBankallowsonly five requisites of legal compensation are present
P200,000.00 to be withdrawn, less service (Art. 1279, NCC). The payment of the rentals by
charges, claiming that compensation has XYZ Bank is not yet due, but the principal
extinguished its obligation under the savings obligation of loan where both Eduardo and
accounttotheconcurrentamountofX'sdebt.X Ricardoareboundsolidarilyandthereforeanyof
contends that compensation is improper when themisboundprincipallytopaytheentireloan,is
oneofthedebts,ashere,arisesfromacontract due and demandable without need of demand.
of deposit. Assuming that the promissory note XYZBankmaydeclareitsobligationtopayrentals
signed by X to evidence the loan does not asalreadydueanddemandpaymentfromanyof
provideforcompensationbetweensaidloanand thetwodebtors.
hissavingsdeposit,whoiscorrect?
Alternative Answer: Legal compensation can be
A:Ybankiscorrect.AlltherequisitesofArt.1279, validly asserted between the bank, Eduardo and
Civil Code are present. Compensation shall take Ricardo. This is a case of facultative obligation,
placewhentwopersonsarereciprocallycreditor thus, the bank can assert partial compensation.
and debtor of each other. In this connection, it
209

Banks have an inherent right to set off where intheobligationunderArt.1302,NCC.(2008Bar
both obligations are due and demandable (Art. Question)
1279,NCC).
F.NOVATION
CanRicardospropertybeforeclosedtopaythe
fullbalanceoftheloan? Q:Whatisnovation?

A: No, because there was no prior demand on A: It is the change of an obligation by another,
Ricardo, depriving him of the right to reasonably resulting in its extinguishment or modification,
block the foreclosure by payment. The waiver of either by changing the object or principal
prior demand in the PN is against public policy conditions,orbysubstitutinganotherintheplace
and violates the right to due process. Without ofthedebtororbysubrogatingathirdpersonto
demand,thereisnodefaultandtheforeclosureis the rights of the creditor. (Pineda, Obligations
null and void. Since the mortgage, insofar as andContracts,2000ed,p.298)
Ricardo is concerned is not violated, a
requirement under Act 3135 for a valid Q:Whataretherequisitesofnovation?
foreclosureofrealestatemortgageisabsent.
A:
In the case of DBP v. Licuanan, it was held that: 1. Previousvalidobligation;
the issue of whether demand was made before 2. Anagreementbythepartiestocreatea
the foreclosure was effected is essential. If newoneoramodifiedversion;
demand was made and duly received by the 3. Extinguishment or modification of the
respondentsandthelatterstilldidnotpay,then oldobligation;and
theywerealreadyindefaultandforeclosurewas 4. Validnewobligation.
proper.However,ifdemandwasnotmade,then
the loans had not yet become due and Q:Isnovationpresumed?
demandable. This meant that the respondents
had not defaulted in their payment and the A: No. Novation is never presumed, it must be
foreclosurewaspremature. provenasafacteitherby:
1. Explicitdeclarationifitbesodeclared
Alternative Answer 1:No. Although the principal inunequivocalterms;or
obligationofloanisdueanddemandablewithout 2. Material incompatibility that the old
need of further demand the foreclosure of the and the new obligations be on every
accessorycontractofrealestatemortgage,there point incompatible with each other.
isaneedofnoticeanddemand. (Art.1293,NCC)

AlternativeAnswer2:Yes.Ricardospropertycan Q: SDIC issued to Danilo a Diners Card (credit
beforeclosedtopaythefullbalanceoftheloan. card) with Jeannete as his surety. Danilo used
He is admittedly individually and collectively this card and initially paid his obligations to
liable. His liability is solidary. He and Eduardo SDIC. Thereafter, Danilo wrote SDIC a letter
have waived notice for a prior demand as requestingittoupgradehisRegularDinersClub
providedinthepromissorynote. Card to a Diamond (Edition) one. As a
requirement of SDIC, Danilo secured from
DoesRicardohavebasisundertheCivilCodefor Jeanette her approval and the latter obliged.
claimingthattheoriginalcontractwasnovated? Danilo'srequestwasgrantedandhewasissued
aDiamond(Edition)DinersClubCard.Danilohad
A: None of the three kinds of novation is incurredcreditchargedplusappropriateinterest
applicable. There is no objective novation, andservicecharge.However,hedefaultedinthe
whether express or implied, because there is no paymentofthisobligation.Wastheupgradinga
changeintheobjectorprincipalconditionsofthe novation of the original agreement governing
obligation. There is no substitution of debtors, the use of Danilo Alto's first credit card, as to
either. Compensation is considered as extinguishthatobligation?
abbreviated or simplified payment and since
Ricardo bound himself solidarily with Eduardo, A: Yes. Novation, as a mode of extinguishing
any facultative compensation which occurs does obligations,maybedoneintwoways:byexplicit
not result in partial legal subrogation. Neither declaration,orbymaterialincompatibility.
Eduardo nor Ricardo is a third person interested
There is no doubt that the upgrading was a
novation of the original agreement covering the
210 CIVILLAWTEAM:

OBLIGATIONS
first credit card issued to Danilo Alto, basically b. ifsuspensiveanditdidnotoccur

since it was committed with the intent of it is as if there is no obligation;
cancelling and replacing the said card. However, thus,thereisnothingtonovate
the novation did not serve to release Jeanette Did the assignment amount to payment by
fromhersuretyobligationsbecauseinthesurety cession?
undertaking she expressly waived discharge in
case of change or novation in the agreement A:No.There was only one creditor, the DBP.
governingtheuseofthefirstcreditcard.(Molino Article1255contemplatestheexistenceoftwoor
v. Security Diners International Corp.,G.R. No. morecreditorsandinvolvestheassignmentofall
136780,Aug.16,2001) thedebtor'sproperty.

Q:Whataretheeffectsofnovation? Did the assignment constitute dation in
payment:
A:
1. Extinguishment of principal also A: No. The assignment, being in its essence a
extinguishestheaccessory,except: mortgage, was but a security and not a
a. Mortgagor, pledgor, surety or satisfactionofindebtedness.(DBPv.CA,G.R.No.
guarantor agrees to be bound by 118342,Jan.5,1998)
thenewobligation(Tolentino,Civil
Code of the Philippines, Vol. IV,
1999ed,p.395)
b. Stipulationmadeinfavorofathird
person such as stipulation pour
atrui(Art. 1311, NCC), unless
beneficiary consents to the
novation.
2. Ifthenewobligationis:
a. Void old obligation shall subsist
since there is nothing to novate,
except when the parties intended
that the old obligation be
extinguishedinanyevent.
b. Voidable novation can take
place, exceptwhen such new
obligationisannulled.Insuchcase,
oldobligationshallsubsist.
c. Pureobligationconditionsofold
obligationdeemedattachedtothe
new, unless otherwise stipulated
(Tolentino, Civil Code of the
Philippines, Vol. IV, 1999 ed, p.
399)
d. Conditionalobligation:
i. if resolutory valid until
the happening of the
condition
ii. if suspensive and did
not materialize no
novation, old obligation
isenforced

3. If old obligation is conditional and the
newobligationispure:
a. if resolutoryand it occurred old
obligationalreadyextinguished;no
new obligation since nothing to
novate
211

CONTRACTS Note:Wefollowthetheoryofcognitionandnotthe
theory of manifestation. Under our Civil Law, the
Q:Whatisacontract? offer & acceptance concur only when the offeror
comes to know, and not when the offeree merely
A: It is a meeting of the minds between two or manifestshisacceptance.
more persons whereby one binds himself, with
respect to the other, or where both parties bind Q:Whataretherequisitesofavalidconsent?
themselves reciprocally in favor of one another,
tofulfillaprestationtogive,todo,ornottodo. A:Itshouldbe:
(Pineda, Obligations and Contracts, 2000 ed, p.
328) 1. Intelligent, or with an exact notion of
themattertowhichitrefers;
Q:Whatisthedifferencebetweenanobligation
andacontract? Note:Intelligenceinconsentisvitiatedby
error; freedom by violence, intimidation
or undue influence; and spontaneity by
A: While a contract is one of the sources of
fraud.
obligations, an obligation is the legal tie or

relations itself that exists after a contract has
2. Free;and
beenenteredinto.
3. Spontaneous.

Hence, there can be no contract if there is no
Q:Whatistheeffectonthevalidityofacontract
obligation. But an obligation may exist without a
ifconsentisreluctant?
contract. (De Leon, Obligations and Contracts,

2003ed,p.283284)
A: A contract is valid even though one of the

parties entered into it against his wishes and
I.ESSENTIALREQUISITESOFACONTRACT
desires or even against his better judgment.

Contracts are also valid even though they are
Q:Statetheessentialelementsofcontracts.
entered into by one of the parties without hope

ofadvantageorprofit(Martinezv.Hongkongand
A:COC
Shanghai Banking Corp., GR No. L5496, Feb. 19,
1. Consent;
1910).
2. Objectorsubjectmatter;and

3. Causeorconsideration.
Q:Whatarethekindsofsimulationofcontract?

Q:Statethecharacteristicsofacontract.
A:

1. Absolute the contracting parties do
A:ROMA
notintendtobeboundbythecontract
1. Relativity(Art.1311,NCC)
atall,thusthecontractisvoid.
2. Obligatoriness and consensuality(Art.

1315,NCC)
2. Relativetherealtransactionishidden;
3. Mutuality(Art.1308,NCC)
the contracting parties conceal their
4. Autonomy(Art.1306,NCC)
true agreement; binds the parties to

their real agreement when it does not
CONSENT
prejudice third persons or is not

intended for any purpose contrary to
Q:Whataretheelementsofconsent?
law, morals, etc. If the concealed

contract is lawful, it is absolutely
A:LMCR
enforceable, provided it has all the
1. Legal capacity of the contracting
essential requisites: consent, object,
parties;
andcause.
2. Manifestation of the conformity of the

contractingparties;
As to third persons without notice, the
3. PartiesConformitytotheobject,cause,
apparent contract is valid for purposes
terms and condition of the contract
beneficial to them. As to third persons
must be intelligent, spontaneous and
with notice of the simulation, they
freefromallvicesofconsent;and
acquirenobetterrighttothesimulated
4. TheconformitymustbeReal.
contractthantheoriginalpartiestothe

same.
212 CIVILLAWTEAM:

CONTRACTS
Q:Tiroisaholderofanordinarytimberlicense Q:Whataretherequisitesofavalidoffer?
issuedbytheBureauofForestry.Heexecuteda
deedofassignmentinfavoroftheJaviers.Atthe A:
timethesaiddeedofassignmentwasexecuted, 1. Mustbecertain
Tirohadapendingapplicationforanadditional 2. Maybemadeorallyorinwriting,unless
forest concession. Hence, they entered into thelawprescribesaparticularform
anotheragreement.
Q:Whendoesofferbecomeineffective?
Afterwards, the Javiers, now acting as timber
license holders by virtue of the deed of A:
assignment entered into a forest consolidation 1. Death, civil interdiction, insanity or
agreement with other ordinary timber license insolvency of either party before
holders. For failure of the Javiers to pay the acceptanceisconveyed
balancedueunderthetwodeedsofassignment,
Tirofiledanactionagainstthem.Arethedeeds 2. Express or implied revocation of the
ofassignmentnullandvoidfortotalabsenceof offerbytheofferee
consideration and nonfulfillment of the
conditions? 3. Qualified or conditional acceptance of
theoffer,whichbecomescounteroffer
A:Thecontemporaneousandsubsequentactsof
Tiro and the Javiers reveal that the cause stated 4. Subject matter becomes illegal or
inthefirstdeedofassignmentisfalse.Itissettled impossible before acceptance is
that the previous and simultaneous and communicated
subsequent acts of the parties are properly
cognizable indicia of their true intention. Where Q:Whatistheruleoncomplexoffer?
thepartiestoacontracthavegivenitapractical
constructionbytheirconductasbyactsinpartial A:
performance, such construction may be 1. Offers are interrelated contract is
considered by the court in construing the perfectedifalltheoffersareaccepted
contract, determining its meaning and 2. Offers are not interrelated single
ascertainingthemutualintentionofthepartiesat acceptance of each offer results in a
the time of contracting. The first deed of perfected contract unless the offeror
assignment is a relatively simulated contract hasmadeitclearthatoneisdependent
which states a false cause or consideration, or upontheotherandacceptanceofboth
one where the parties conceal their true isnecessary.
agreement. A contract with a false consideration
isnotnullandvoidperse.UnderArticle1346of Q:Whatistheruleonadvertisementsasoffers?
the Civil Code, a relatively simulated contract,
when it does not prejudice a third person and is A:
not intended for any purpose contrary to law, 1. Businessadvertisementsnotadefinite
morals, good customs, public order or public offer, but mere invitation to make an
policy binds the parties to their real agreement. offer,unlessitappearsotherwise
(Javierv.CA,G.R.No.L48194,Mar.15,1990) 2. Advertisement for bidders
onlyinvitation to make proposals and
Q:Whatarecontractsofadhesion? advertiser is not bound to accept the
highest or lowest bidder, unless it
A: One party has already a prepared form of a appearsotherwise.
contract, containing the stipulations he desires,
and he simply asks the other party to agree to Q:Whataretheeffectsofanoption?
themifhewantstoenterintothecontract.
A: Option may be withdrawn anytime before
Q: What are the elements of a valid offer and acceptance is communicated but not when
acceptance? supportedbyaconsiderationotherthanpurchase
priceoptionmoney.
A:
1. Definiteunequivocal
2. Intentional
3. Completeunconditional
213

Q:Whataretherequisitesofavalidacceptance? Note: The most evident and fundamental requisite
in order that a thing, right or service may be the
A: objectofacontract,itshouldbeinexistenceatthe
1. Must be absolute; a qualified moment of the celebration of the contract, or at
acceptanceconstitutesacounteroffer least,itcanexistsubsequentlyorinthefuture.
2. Nospecifiedformbutwhentheofferor
specifies a particular form, such must Q: What are the thingswhichcanbe the object
becompliedwith ofcontracts?

Note: Offer or acceptance, or both, expressed in A:
electronicform,isvalid,unlessotherwiseagreedby GR:Allthingsorservicesmaybetheobjectof
theparties(electroniccontracts). contracts.
Q:Whatistheperiodforacceptance?
XPNs:
A: 1. Thingsoutsidethecommerceofmen;
1. Statedfixedperiodintheoffer 2. Intransmissiblerights;
a. Must be made within the period 3. Future inheritance, except in cases
givenbytheofferor expresslyauthorizedbylaw;
i. Astowithdrawaloftheoffer: 4. Services which are contrary to law,
morals, good customs, public order or
GR: It can be made at any time publicpolicy;
before acceptance is made, by 5. Impossiblethingsorservices;and
communicatingsuchwithdrawal 6. Objects which are not possible of
determinationastotheirkind.
XPN: When the option is founded
upon a consideration, as something Q: A contract of sale of a lot stipulates that the
paid or promised since partial "payment of the full consideration based on a
payment of the purchase price is surveyshallbedueandpayablein5yearsfrom
consideredasproofoftheperfection
theexecutionofaformaldeedofsale".Isthisa
ofthecontract
conditionalcontractofsale?

2. Nostatedfixedperiod
a. Offerismadetoapersonpresent
A:No,itisnot.Thestipulationisnotacondition
acceptance must be made
whichaffectstheefficacyofthecontractofsale.
immediately It merely provides the manner by which the full
b. Offerismadetoapersonabsent consideration is to be computed and the time
acceptance may be made within within which the same is to be paid. But it does
such time that, under normal
not affect in any manner the effectivity of the
circumstances, an answer can be contract. (Heirs of San Andresv.Rodriguez, G.R.
receivedfromhim No.135634,May31,2000)

Note: Acceptance may be revoked before it comes
CAUSE
totheknowledgeoftheofferor(withdrawalofoffer)

Q:Whataretherequisitesofacause?
OBJECT

A:Itmust:
Q:Whataretherequisitesofanobject?
1. exist

2. betrue
A:
3. belicit
1. Determinate as to kind (even if not

determinate, provided it is possible to
Q: What are the two presumptions in contracts
determine the same without the need
astocause?
ofanewcontract);

2. Existing or the potentiality to exist
A:
subsequenttothecontract;
1. Every contract is presumed to have a
3. Mustbelicit;
cause;and
4. Withinthecommerceofman;and
2. Thecauseisvalid.
5. Transmissible.

214 CIVILLAWTEAM:

CONTRACTS
Q:Whatarethekindsofcauses? c. in cases specified by law

(e.g.contracts entered when ward
A: sufferslesionofmorethan25%)
1. Cause of onerous contracts the
prestation or promise of a thing or II.KINDSOFCONTRACT
servicebytheother
2. Cause of remuneratory contracts the Q:Whatarethekindsofcontracts?
serviceorbenefitremunerated
3. Cause of gratuitous contracts the A:
mere liberality of the donor or 1. Consensual contracts which are
benefactor perfected by the mere meeting of the
4. Accessory identical with cause of mindsoftheparties
principal contract, the loan which it
derived its life and existence (e.g.: 2. Real contracts that require delivery for
mortgageorpledge) perfection creation of real rights over
immovablepropertymustbewritten
Q:Distinguishcausefrommotive.
3. Solemn contracts contracts which
A: mustappearinwriting,suchas:
CAUSE MOTIVE
Directandmost a. Donations of real estate or of
Indirectorremote
proximatereasonofa movables if the value exceeding
reasons
contract P5,000;
Objectiveandjuridical Psychologicalorpurely b. Transferoflargecattle;
reasonofcontract personalreason c. Stipulationtopayinterestinloans;
Legalityorillegalityof Legalityorillegalityof d. Saleoflandthroughanagent;
causeaffectsthe motivedoesnotaffect e. Partnership to which immovables
existenceorvalidityof theexistenceorvalidity arecontributed;
thecontract ofcontract f. Stipulationlimitingcarriersliability
Causeisalwaysthesame to less than extraordinary
Motivediffersforeach
foreachcontracting
contractingparty diligence;or
party
g. Contractsofantichresisandsaleof
vessels.
Q: What is the effect of the error of cause on

contracts?

Q: What is the principle of relativity of

A:
contracts?
1. Absenceofcause(wantofcause;there

is total lack or absence of cause)
A:
Confers no right and produces no legal
GR: A contract is binding not only between
effect
partiesbutextendstotheheirs,successorsin
2. Failure of cause Does not render the
interest, and assignees of the parties,
contractvoid
provided that the contract involves
3. Illegalityofcause(thecauseiscontrary
transmissible rights by their nature, or by
to law, morals, good customs, public
stipulationorbyprovisionoflaw.
orderandpublicpolicy)Contractisnull

andvoid
XPNs:
4. Falsityofcause(thecauseisstatedbut
1. Stipulation pour autrui (stipulation in
the cause is not true)Contract is void,
favor of a third person) benefits
unless the parties show that there is
deliberately conferred by parties to a
anothercausewhichistrueandlawful
contractuponthirdpersons.
5. Lesion or inadequacy of cause Does

notinvalidatethecontract,unless:
Requisites:
a. there is fraud, mistake, or undue
a. The stipulation must be part, not
influence;
wholeofthecontract;
b. when the parties intended a
b. Contracting parties must have
donation or some other
clearly and deliberately conferred
contract;or
afavoruponthirdperson;
215

c. Third person must have hisdebtassoonasheisable,evenafter10years
communicatedhisacceptance;and and that he waives his right to prescription.
d. Neither of the contracting parties What are the effects of said stipulation to the
bears the legal representation of actionforcollectionfiledbyBorromeo?
thethirdperson.
A: None. The rule is that a lawful promise made
2. Whenathirdpersoninducesapartyto for a lawful consideration is not invalid merely
violatethecontract because an unlawful promise was made at the
same time and for the same consideration. This
Requisites: rule applies although the invalidity is due to
a. Existenceofavalidcontract violation of a statutory provision, unless the
b. Third person has knowledge of statute expressly or by necessary implication
suchcontract declarestheentirecontractvoid.Thus,evenwith
c. Third person interferes without such waiver of prescription, considering that it
justification was the intent of the parties to effectuate the
3. Thirdpersonscomingintopossessionof terms of the promissory note, there is no legal
the object of the contract creating real obstacle to the action for collection filed by
rights Borromeo. (Borromeo v. CA,G.R. No. L22962,
Sept.28,1972)
4. Contracts entered into in fraud of
creditors Note: Where an agreement founded on a legal
consideration contains several promises, or a
Q:Fieldmen'sInsuranceissued,infavorofMYT, promisetodoseveralthings,andapartonlyofthe
a common carrier, accident insurance policy. thingstobedoneareillegal,thepromiseswhichcan
50%ofthepremiumwaspaidbythedriver.The be separated, or the promise, so far as it can be
policyindicatedthattheCompanywillindemnify separated, from the illegality, may be
the driver of the vehicle or his representatives valid.(Borromeo v. CA,G.R. No. L22962, Sept. 28,
upon his death. While the policy was in force, 1972)
the taxicab driven by Carlito, met with an
accident.Carlitodied.MYTandCarlito'sparents Q: What is the principle of mutuality of
filedacomplaintagainstthecompanytocollect contracts?
theproceedsofthepolicy.Fieldmensadmitted
theexistencethereof,butpleadedlackofcause A: Contract must be binding to both parties and
ofactiononthepartoftheparents.Decide. itsvalidityandeffectivitycanneverbelefttothe
willofoneoftheparties.(Art.1308,NCC)
A:Yes.Carlitosparentswho,admittedly,arehis
soleheirshaveadirectcauseofactionagainstthe Q:Whatistheprincipleofautonomyof
Company. This is so because pursuant to the contracts?
stipulations, the Company will also indemnify
A:Itisthefreedomofthepartiestocontractand
third parties. The policy under consideration is
includes the freedom to stipulate provided the
typical of contracts pour autrui, this character
stipulationsarenotcontrarytolaw,morals,good
being made more manifest by the fact that the
customs,publicorderorpublicpolicy.(Art.1306,
deceased driver paid 50% of the premiums.
NCC)
(Coquia v. Fieldmens Insurance Co., Inc.,G.R. No.

L23276,Nov.29,1968)
A.CONSENSUALCONTRACTS

Q:Whatistheobligatoryforceofcontracts?
Q:Whatareconsensualcontracts?

A: The parties are bound not only by what has
A:Theyarecontractsperfectedbymereconsent.
been expressly provided for in the contract but

alsotothenaturalconsequencesthatflowoutof
Note:Thisisonlythegeneralrule.
suchagreement.(Art.1315,NCC)

B.REALCONTRACTS
Q: Villamor borrowed a large amount from

Borromeo,forwhichhemortgagedhisproperty
Q:Whatarerealcontracts?
but defaulted.Borromeo pressed him for

settlement.Thelatterinsteadofferedtoexecute
A:Theyarecontractsperfectedbydelivery
a promissory note containing a promise to pay

216 CIVILLAWTEAM:

CONTRACTS
C.FORMALCONTRACTS 7. Chattel mortgage personal property

must be recorded in the Chattel
Q:Whatareformalcontracts? MortgageRegister

A: Contracts which require a special form for III.FORMOFCONTRACTS
perfection.
Q:Whatarerulesontheformofcontracts?
Q: What are the formalities required in the
followingcontracts? A:
A: 1. Contracts shall be obligatory, in
1. Donations: whatever form they may have been
a. personal property if value entered into, provided all essential
exceeds 5000, the donation requisitesfortheirvalidityarepresent.
andacceptancemustbothbe
written. 2. Contracts must be in a certain form
b. b.realproperty: when the law requires that a contract
i. donation must be in a public beinsomeformtobe:
instrument, specifying therein the a. valid;
property donated and value of b. enforceable;or
chargeswhichdoneemustsatisfy. c. fortheconvenienceoftheparties.
ii. acceptance must be written, either
inthesamedeedofdonationorina 3. The parties may compel each other to
separateinstrument. reduce the verbal agreement into
iii. If acceptance is in a separate writing.
instrument, the donor shall be
notified therof in authentic form, Note:
andthisstepmustbenotedinboth GR:Formisnotrequiredinconsensualcontracts.
instruments.
Note: The acceptance in a separate XPNs: When the law requires a contract be in
documentmustbeapublicinstrument. certainforits:
1. validity(formalcontracts);or
2. Partnership where real property 2. enforceability(underStatuteofFrauds).
contributed:
i. there must be a public instrument Q: What are the acts which must appear in a
regardingthepartnership. publicdocument?
ii. the inventory of the realty must be
made, signed by the parties and A:
attachedtothepublicinstrument. 1. Donationofrealproperties(Art.719);
2. Partnership where immoveable
3. Antichresistheamountoftheprincipal property or real rights are contributed
andinterestmustbeinwriting. to the common fund (Arts. 1171 &
1773);
4. Agency to sell real property or an 3. Actsandcontractswhichhavefortheir
interestthereinauthorityoftheagent object the creation, transmission,
mustbeinwriting. modification or extinguishment of real
rights over immovable property; sales
5. Stipulation to charge interest interest ofrealpropertyorofaninteresttherein
mustbestipulatedinwriting. is governed by Arts. 1403, No. 2, and
1405[Art.1358(1)];
6. Stipulation limiting common carrier's 4. The cession, repudiation or
duty of extraordinary diligence to renunciation of hereditary rights or of
ordinarydiligence: those of the conjugal partnership of
i. must be in writing, signed by gains[Art.1358(2)]
shipperorowner 5. The power to administer property or
ii. supportedbyvaluableconsideration anyotherpowerwhichhasforitsobject
other than the service rendered by an act appearing or which should
thecomoncarrier appear in a public document or should
iii. reasonable,justandnotcontraryto prejudiceathirdperson[Art.1358(3)];
publicpolicy.
217

6. The cession of actions or rights A:Itmaybeorderedattheinstanceof:
proceeding from an act appearing in a 1. ifthemistakeismutualeitherpartyor
publicdocument[Art.1358(4)]. hissuccessorsininterest;otherwise;
2. uponpetitionoftheinjuredparty;or
Q:Whatarecontractsthatmustberegistered? 3. hisheirsandassigns.

A: Note:Whenoneofthepartieshasbroughtanaction
1. Chattelmortgages(Art.2140) to enforce the instrument, no subsequent
2. Sale or transfer of large cattle (Cattle reformationcanbeasked(estoppel).
RegistrationAct)
Q: In case of reformation of contracts, is the
REFORMATION prescription period in bringing an action for
reformation run from the time the contract
Q:Whatisreformationofinstruments? becamedisadvantageoustooneparty?

A:Itisaremedytoconformtotherealintention A: In reformation of contracts, what is reformed
of the parties due to mistake, fraud, inequitable is not the contract itself, but the instrument
conduct,accident.(Art.1359) embodying the contract. It follows that whether
the contract is disadvantageous or not is
Note:Reformationisbasedonjusticeandequity. irrelevant to reformation and therefore, cannot
beanelementinthedeterminationoftheperiod
Q: What are the requisites in reformation of forprescriptionoftheactiontoreform.
instruments?
IV.DEFECTIVECONTRACTS
A:
1. Meetingofthemindstothecontract Q:Whatmaybethestatusofcontracts?
2. True intention is not expressed in the
instrument A:
3. ByreasonofMARFI: 1. Valid
a. Mistake, 2. Void
b. Accident, 3. Voidable
c. Relativesimulation, 4. Rescissible
d. Fraud,or 5. Unenforceable
e. Inequitableconduct 6. Inexistent
4. ClearandconvincingproofofMARFI
A.RESCISSIBLECONTRACTS
Note: When there is no meeting of the minds, the
properremedyisannulmentandnotreformation. Q:Whatarerescissiblecontracts?

Q: In what cases is reformation of instruments A: Those which have caused a particular
notallowed? economicdamageeithertooneofthepartiesor
to a third person and which may be set aside
A: even if valid. It may be set aside in whole or in
1. Simple, unconditional donations inter part, to the extent of the damage caused. (Art.
vivos 1381,NCC)
2. Wills
3. Whentheagreementisvoid Q:Whichcontractsarerescissible?
4. When an action to enforce the
instrumentisfiled(estoppel) A:
1. Entered into by persons exercising
Q:Whatistheprescriptiveperiodinreformation fiduciarycapacity:
ofinstruments? a. Enteredintobyguardianwhenever
ward suffers damage more than
A:10yearsfromthedateoftheexecutionofthe ofvalueofproperty.
instrument. b. Agreed upon in representation of
absentees, if absentee suffers
Q: Who may ask for the reformation of an lesion by more than of value of
instrument? property.

218 CIVILLAWTEAM:

CONTRACTS
c. Contractswhererescissionisbased Applicability
on fraud committed on creditor Appliestobothunilateral
Appliesonlytoreciprocal
(accionpauliana) andreciprocal
obligations
d. Objects of litigation; contract obligations
enteredintobydefendantwithout PersonwhocanInitiatetheAction
knowledge or approval of litigants Eventhirdpersons
Onlytheinjuredparty
orjudicialauthority prejudicedbythe
whoisapartytothe
e. Payment by an insolvent on contractmaybringthe
contract
debts which are not yet due; action
prejudicesclaimofothers FixingofPeriodbytheCourt
f. Provided for by law (Arts. 1526, Courtmayfixaperiodor
1534, 1538, 1539, 1542, 1556, grantextensionoftime
1560,1567&1659,NCC) forthefulfillmentofthe Courtcannotgrant
obligationwhenthereis extensionoftime
sufficientreasonto
2. Paymentsmadeinstateofinsolvency:
justifysuchextension
a. Plaintiff has no other means to
Purpose
maintainreparation
Reparationfordamage
b. Plaintiff must be able to return Cancellationofthe
orinjury,allowingpartial
whatever he may be obliged to contract
rescissionofcontract
returnduetorescission

c. The things must not have been Note:WhileArticle1191usesthetermrescission,
passed to third persons in good the original term which was used in the old Civil
faith Code, from which the article was based, was
d. Itmustbemadewithin4yrs. resolution.(Ongv.CA,G.R.No.97347,July6,1999)

Q: What are the requisites before a contract Q: What is the obligation created by the
entered into in fraud of creditors may be rescissionofthecontract?
rescinded?
A: Mutual restitution of things which are the
A: objectsofthecontractandtheirfruitsandofthe
1. There must be credit existing prior to pricewithinterest.
thecelebrationofthecontract;
2. There must be fraud, or at least, the Q:Whenismutualrestitutionnotapplicable?
intenttocommitfraudtotheprejudice
ofthecreditorseekingrescission; A:
3. Thecreditorcannotinanylegalmanner 1. Creditor did not receive anything from
collecthiscredit(subsidiarycharacterof contract;or
rescission);and 2. Thing already in possession of third
4. The object of the contract must not be persons in good faith; subject to
legallyinpossessionofathirdpersonin indemnityonly,iftherearetwoormore
goodfaith. alienationsliabilityoffirstinfractor.

Note: Rescission is possible only when the person
Q:Distinguishrescissionfromresolution. demanding rescission can return whatever he may
be obliged to restore. A court of equity will not
RESOLUTION RESCISSION rescindacontractunlessthereisrestitution,thatis,
(ART.1191) (ARTICLE1381) the parties are restored to the status quo
Bothpresupposecontractsvalidlyenteredintoand ante.(Article1385)
subsistingandbothrequiremutualrestitutionwhen
proper Q: Reyes (seller) and Lim (buyer) entered intoa
Nature contract to sell of a parcel of land. Harrison
Principalaction. Lumber occupied the property as lessee. Reyes
Subsidiaryremedy
retaliatoryincharacter offeredtoreturntheP10milliondownpayment
GroundsforRescission to Lim because Reyes was having problems in
5groundsunderArt. removing the lessee from the property. Lim
Onlygroundisnon 1381.(lesionsorfraudof rejectedReyesoffer.LimlearnedthatReyeshad
performanceof creditors) alreadysoldthepropertytoanother.
obligation Nonperformanceisnot
important
219

Trialcourt,inthiscase,directedReyestodeposit Q: What are the characteristics of the right to
the P10 million downpayment with the clerk of rescind?
court but Reyes refused. Does Reyes have the
obligation to deposit the P10 million A:
downpaymentinthecourt? 1. Can be demanded only if plaintiff is
ready, willing and able to comply with
A: Yes. There is also no plausible or justifiable hisownobligationanddefendantisnot;
reason for Reyes to object to the deposit of the 2. Notabsolute;
P10milliondownpaymentincourt.Thecontract 3. Needs judicial approval in the absence
to sell can no longer be enforced because Reyes of a stipulation allowing for extra
himselfsubsequentlysoldtheproperty.BothLim judicial rescission, in cases of non
and Reyes are seeking for rescission of the reciprocalobligations;
contract. 4. Subject to judicial review if availed of
extrajudicially;
Byseekingrescission,asellernecessarilyoffersto 5. May be waived expressly or impliedly;
returnwhathehasreceivedfromthebuyer.Such and
a seller may not take back his offer if the court 6. Impliedtoexistinreciprocalobligations
deemsitequitable,topreventunjustenrichment therefore need not be expressly
and ensure restitution, to put the money in stipulatedupon.
judicialdeposit.
Q:Mayaninjuredpartyavailofbothfulfillment
Note:Inthiscase,itwasjust,equitableandproper andrescissionasremedy?
forthe trialcourt to order the deposit ofthedown
payment to prevent unjust enrichment by Reyes at A:
theexpenseofLim.Depositingthedownpaymentin GR:The injured party can only choose
courtensureitsrestitutiontoitsrightfulowner.Lim, between fulfillment and rescission of
ontheotherhand,hasnothingtorefund,ashehas theobligation,andcannothaveboth.
not received anything under the contract to sell.
(Reyes v. Lim, Keng and Harrison Lumber, Inc., G.R. Note: This applies only when the
No.134241,Aug.11,2003) obligationispossibleoffulfillment.

Q:Whatarethebadgesoffraudattendingsales, XPN: If fulfillment has become
asdeterminedbythecourts? impossible,Article1191,NCCallowsthe
injured party to seek rescission even
A: afterhehaschosenfulfillment.(Ayson
1. Consideration of the conveyance is Simonv.Adamos,G.R.No.L39378,Aug.
inadequateorfictitious; 281984)
2. TransferwasmadebyaDRafterasuit
hasbeenbegunandwhileitispending Q: Vermen and Seneca entered into an
againsthim "offsettingagreement",whereSenecaisobliged
3. SaleuponcreditbyaninsolventDR; to deliver construction materials to Vermen,
4. The presence of evidence of large who is obliged to pay Seneca and to deliver
indebtednessorcompleteinsolvencyof possession of 2 condominium units to Seneca
thedebtor; uponitscompletion.Senecafiledacomplaintfor
5. Transfer of all his property by a DR rescission of the offsetting against Vermen
when he is financially embarrassed or alleging that the latter had stopped issuing
insolvent; purchase orders of construction materials
6. Transfer is made between father and without valid reason, thus resulting in the
son, where there are present some or stoppage of deliveries of construction materials
anyoftheabovecircumstances;and on its part, in violation of the Offsetting
7. Failure of the vendee to take exclusive Agreement.Cantheagreementberescinded?
possessionoftheproperty.
A: Yes, because the provisions of the offsetting
agreement are reciprocal in nature. Article 1191
of the Civil Code provides the remedy of
rescission (more appropriately, the term is
"resolution") in case of reciprocal obligations,
where one of the obligors fails to comply with
thatisincumbentuponhim.
220 CIVILLAWTEAM:

CONTRACTS
The question of whether a breach of contract is In a contract to sell, the payment of the purchase
substantial depends upon the attendant priceisapositivesuspensivecondition,thefailureof
circumstances. Seneca did not fail to fulfill its which is not a breach, casual or serious, but a
obligation in the offsetting agreement. The situationthatpreventstheobligationofthevendor
discontinuance of delivery of construction to convey title from acquiring an obligatory force.
materialstoVermenstemmedfromthefailureof (Ongv.CA,G.R.No.97347,July6,1999)
Vermen to send purchase orders to Seneca.
Vermen would never have been able to fulfill its Q: Goldenrod offered to buy a mortgaged
obligation in allowing Seneca to exercise the property owned by Barreto Realty to which it
optiontotransferfromPhaseItoPhaseII,asthe paidanearnestmoneyamountingtoP1million.
construction of Phase II has ceased and the It was agreed upon that Goldenrod would pay
subject condominium units will never be the outstanding obligations of Barreto Realty
available. The impossibility of fulfillment of the with UCPB. However, Goldenrod did not pay
obligation on the part of Vermen necessitates UCPBbecauseofthebanksdenialofitsrequest
resolution of the contract, for indeed, the non for the extension to pay the obligation.
fulfillment of the obligation aforementioned Thereafter, Goldenrod, through its brocker,
constitutes substantial breach of the agreement. informed Barreto Realty that it could not go
(Vermen Realty Development Corp. v. CA and through with the purchase of the property and
Seneca Hardware Co., Inc., G.R. No. 101762, July alsodemandedtherefundoftheearnestmoney
6,1993) it paid. In the absence of a specific stipulation,
maythesellerofrealestateunilaterallyrescind
Q: Ong and spouses Robles executed an the contract and as a consequence keep the
"agreementofpurchaseandsale"of2parcelsof earnest money to answer for damages in the
land. Pursuant to the contract they executed, event the sale fails due to the fault of the
Ongpartiallypaidthespousesthebydepositing prospectivebuyer?
it with the bank. Subsequently, Ong deposited
sumsofmoneywiththeBPIinaccordancewith A: No. Goldenrod and Barretto Realty did not
their stipulation that Ong pay the loan of the intend that the earnest money or advance
spousewithBPI.ToanswerforOngsbalance,he payment would be forfeited when the buyer
issued 4 postdated checks which were should fail to pay the balance of the price,
dishonored.Ongfailedtoreplacethechecksand especially in the absence of a clear and express
topaytheloaninfull.Canthecontractentered agreementthereon.
intobyOngandthespousesberescinded?
Moreover, Goldenrod resorted to extrajudicial
A: No. The agreement of the parties in this case rescission of its agreement with Barretto Realty.
maybesetaside,butnotbecauseofabreachon Under Article 1385, NCC, rescission creates the
the part of Ong for failure to complete payment obligation to return the things which were the
ofthepurchaseprice.Rather,hisfailuretodoso object of the contract together with their fruits
brought about a situation which prevented the and interest. Therefore, by virtue of the
obligation of the spouses to convey title from extrajudicial rescission of the contract to sell by
acquiringanobligatoryforce. Goldenrod without opposition from Barretto
Realty, which in turn, sold the property to other
Theagreementofpurchaseandsaleshowsthatit persons, Barretto Realty, had the obligation to
isinthenatureofacontracttosell.Ongsfailure return the earnest money which formed part of
to complete payment of the purchase price is a the purchase price plus legal interest from the
nonfulfillment of the condition of full payment date it received notice of rescission. It would be
which rendered the contract to sell ineffective most inequitable if Barretto Realty would be
and without force and effect. The breach allowed to retain the money at the same time
contemplatedinArticle1191,NCCistheobligors appropriate the proceeds of the second sale
failuretocomplywithanobligation.Inthiscase, madetoanother.(Goldenrod,Inc.v.CA,G.R.No.
Ongs failure to pay is not even a breach but 126812,Nov.24,1998)
merely an event which prevents the vendors
obligation to convey title from acquiring binding
force.
Note:Thecontractenteredintobythepartiesinthe
case at bar does not fall under any of those
mentioned by Article 1381. Consequently, Article
1383isinapplicable.
221

Q: What is the prescriptive period of action for Q:Whatarethevicesofconsent?
rescission?
A:MIVUF
A: 1. Mistake substantial mistake and not
1. Under Art. 1381, no.1 within 4 years merely an accidental mistake; must
from the time the termination of the refertothe:
incapacityoftheward; a. substanceofthethingwhichisthe
2. Under Art. 1381, no. 2 within 4 years subjectofthecontract;or
from the time the domicile of the b. to those conditions which have
absenteeisknown;or principally moved one or both
3. UnderArt.1381,nos.3&4&Art.1382 partiestoenterthecontract.
within 4 years from the time of the
discoveryoffraud. Note: Mistake as to identity or
qualifications of one of the parties
B.VOIDABLECONTRACTS will vitiate consent only when such
identity or qualifications have been
Q: What are the characteristics of a voidable theprincipalcauseofthecontract.
contract?
A: 2. Intimidation An internal moral force
1. Effectiveuntilsetaside; operating in the will and inducing
2. May be assailed or attacked only in an performanceofanact.
actionforthatpurpose; 3. Violence An external, serious or
3. Canbeconfirmed;and irresistible physical force exerted upon
4. Canbeassailedonlybythepartywhose a person to prevent him from doing
consent was defective or his heirs or something or to compel him to do an
assigns. act.
4. UndueinfluenceAnymeansemployed
Q:Whenisthereavoidablecontract? upon a party which, under the
circumstancescouldnotberesistedand
A:When: hastheeffectofcontrollinghisvolition
1. one of the parties is incapacitated to andinducinghimtogivehisconsentto
giveconsent;or the contract, which otherwise, he
2. consentwasvitiated. wouldnothaveenteredinto.
5. Fraud Use of insidious words or
Q: Who are the persons incapacitated to give machinations in inducing another party
consent? to enter into the contract, which
without them, he would not have
A:DIM agreed.
1. Deafmutes who do not know how to
readandwrite(illiterates) Q:Whatarethekindsofmistake?
2. Insaneordementedpersons,unlessthe
contractwasenteredintoduringalucid A:
interval 1. Mistake of fact When one or both of
3. Minorsexcept: the contracting parties believe that a
a. Contractsfornecessaries factexistswheninrealityitdoesnot,or
b. Contracts by guardians or legal that such fact does not exist when in
representatives&thecourthaving realityitdoes.
jurisdictionhadapprovedthesame
c. When there is active 2. MistakeoflawWhen1orbothparties
misrepresentation on the part of arrive at erroneous conclusion or
theminor(minorisestopped) interpretation of a question of law or
d. Contracts of deposit with the legal effects of a certain act or
Postal Savings Bank provided that transaction.
theminorisover7yearsofage
e. Upon reaching age of majority Note:
theyratifythesame GR: Mistake as a vice of consent refers to
mistakeoffactsandnotoflaw.

222 CIVILLAWTEAM:

CONTRACTS
XPN:Whenmistakeoflawinvolveserrorasto mental weakness or some other handicap. It

the effect of an agreement when the real contemplates a situation wherein a contract is
purpose of the parties is frustrated (Art. 1334, entered into but the consent of one of the
NCC). contracting parties is vitiated by mistake or fraud
committed by the other.(Leonardo v. CA, G.R. No.
Todeterminetheeffectofanallegederror,boththe 125485,Sept.13,2004)
objectiveandsubjectiveaspectsofthecasewhichis
the intellectual capacity of the person who Q: What are the requisites that ignorance of or
committedthemistake. erroneousinterpretationoflaw(mistakeoflaw)
mayvitiateconsent?
Q:Whenwillmistakeinvalidateconsent?
A:
A:Mistake,inordertoinvalidateconsent,should 1. Mistake must be with respect to the
refer to the substance of the thing which is the legaleffectoftheagreement;
object of the contract, or to those conditions 2. Itmustbemutual;and
whichhaveprincipallymovedoneorbothparties 3. Real purpose of the parties must have
to enter into the contract.(Leonardo v. CA, G.R. beenfrustrated.
No.125485,Sept.13,2004)
Q:Whataretherequisitesofintimidation?
Q: Leonardo is the only legitimate child of the
late spouses Tomasina and Balbino. She only A:
finished Grade three and did not understand 1. One of the parties is compelled to give
English. The Sebastians, on the other hand, are his consent by a reasonable and well
illegitimate children. She filed an action to groundedfearofanevil;
declarethenullityoftheextrajudicialsettlement 2. Theevilmustbeimminentandgrave;
of the estate of her parents, which she was 3. Itmustbeunjust;and
made to sign without the contents thereof, 4. Theevilmustbethedeterminingcause
which were in English, explained to her. She forthepartyuponwhomitisemployed
claimsthatherconsentwasvitiatedbecauseshe inenteringintothecontract.
was deceived into signing the extrajudicial
settlement. Is the extrajudicial settlement of Q:Whataretherequisitesofviolence?
estateofTomasinavalid?
A:Itmustbe:
A:No.Whenoneofthepartiesisunabletoread, 1. seriousorirresistible;and
orifthecontractisinalanguagenotunderstood 2. the determining cause for the party
by him, and mistake or fraud is alleged, the upon whom it is employed in entering
personenforcingthecontractmustshowthatthe intothecontract.
terms thereof have been fully explained to the
former. (Art. 1332, NCC) Leonardo was not in a Q:Whatarethekindsoffraud?
position to give her free, voluntary and
spontaneous consent without having the A:
document,whichwasinEnglish,explainedtoher. 1. Fraudintheperfectionofthecontract
Therefore, the consent of Leonardo was a. Causalfraud(dolocausante)
invalidated by a substantial mistake or error, b. Incidentalfraud(doloincidente)
rendering the agreement voidable. The
extrajudicial partition between the Sebastians 2. Fraud in the performance of an
and Leonardo should be annulled and set aside obligation(Art.1170,NCC)
on the ground of mistake. (Leonardo v. CA, G.R.
No.125485,Sept.13,2004) Requisites:
a. Fraud, insidious words or
Note: Contracts where consent is given by mistake machinations must have been
or because of violence, intimidation, undue employed by one of the
influenceorfraudarevoidable.Thesecircumstances contractingparties;
are defects of the will, the existence of which b. Itmusthavebeenserious;
impairs the freedom, intelligence, spontaneity and
c. Itinducedtheotherpartytoenter
voluntariness of the party in giving consent to the
intoacontract;and
agreement.
d. Shouldnothavebeenemployedby
Art. 1332 was intended to protect a party to a bothcontractingpartiesorbythird
contract disadvantaged by illiteracy, ignorance, persons.
223

Q: Distinguish dolo causante from dolo thissuspensivecondition.(Samsonv.CA,G.R.No.
incidente. 108245,Nov.25,1994)

A: Q:Whatarethecausesofextinctionofactionto
DOLOCAUSANTE DOLOINCIDENTE annul?
(ART.1338) (ART.1344)
Referstofraudwhichis Referstofraudwhichis A:
seriousincharacter notseriousincharacter 1. Prescription the action must be
Itisthecausewhich Itisnotthecausewhich commenced within 4 years from the
inducesthepartyto inducesthepartyto timethe:
enterintoacontract enterintoacontract a. incapacity ends; guardianship
Rendersthecontract Rendersthepartyliable ceases;
voidable fordamages b. violence, intimidation or undue
influenceends;or
Note:Incontracts,thekindoffraudthatwillvitiate c. mistakeorfraudisdiscovered
consent is one where, through insidious words or
machinations of one of the contracting parties, the
2. Ratificationcleansesthecontractofits
other is induced to enter into a contract which,
defects from the moment it was
withoutthem,hewouldnothaveagreedto.Thisis
known as dolo causante or causal fraud which is
constituted
basicallyadeceptionemployedbyonepartypriorto
or simultaneous to the contract in order to secure Requisites:
the consent of the other. (Samson v. CA, G.R. No. a. there must be knowledge of the
108245,Nov.25,1994) reason which renders the contract
voidable;
Q: Santos lease contract was about to expire b. suchreasonmusthaveceased;and
butitwasextendedandhecontinuedtooccupy c. the injured party must have
theleasedpremisesbeyondtheextendedterm. executedanactwhichexpresslyor
Samson offered to buy Santos store and his impliedly conveys an intention to
right to the lease. Santos stated that the lease waivehisright
contract between him and the lessor was
impliedly renewed and that formal renewal 3. By loss of the thing which is the object
thereof would be made upon the arrival of a ofthecontractthroughfraudorfaultof
certain Tanya Madrigal, based on the letter to thepersonwhoisentitledtoannulthe
himgivenbythelessor.WhenSamsonoccupied contract
the premises, he was forced to vacate for
Santos failure to renew his lease. He filed an Q:Whomayinstituteactionforannulment?
actionfordamagesagainstSantosforfraudand
bad faith claiming that the misrepresentation A: By all who are thereby obliged principally or
induced him to purchase the store and the subsidiarily.
leaseholdright.Decide. Note: He who has capacity to contract may not
invoketheincapacityofthepartywithwhomhehas
A:No,Santoswasnotguiltyoffraudnorbadfaith contracted.

inclaimingthattherewasimpliedrenewalofhis
A third person who is a stranger to the contract
contractof leasewithhislessor.Thelettergiven
cannotinstituteanactionforannulment.
by the lessor led Santos to believe and conclude

thathisleasecontractwasimpliedlyrenewedand
Q:Whataretheeffectsofannulment?
thatformalrenewalthereofwouldbemadeupon

the arrival of Tanya Madrigal. Thus, from the
A:
start,itwasknowntobothpartiesthat,insofaras
1. If contract not yet consummated
the agreement regarding the transfer of Santos
parties shall be released from the
leasehold right to Samson was concerned, the
obligationsarisingtherefrom.
object thereof relates to a future right. It is a
2. If contract has already been
conditional contract, the efficacy of which
consummated rules provided in Arts.
dependsuponanexpectancytheformalrenewal
13981402,NCC,shallgovern.
oftheleasecontractbetweenSantosandlessor.

The efficacy of the contract between the parties

wasthusmadedependentuponthehappeningof
224 CIVILLAWTEAM:

CONTRACTS
Q:Whatisconfirmation? involved, but merely regulates the formalities of

the contract necessary to render it enforceable.
A: It is an act by which a voidable contract is Evidence of the agreement cannot be received
curedofitsviceordefect. withoutthewritingorasecondaryevidenceofits
contents. (Swedish Match, AB v. CA, G.R. No.
Q:Whatisrecognition? 128120,Oct.20,2004)

A:Itisanactwherebyadefectofproofiscured Note: The Statute of Frauds applies only to
such as when an oral contract is put into writing executorycontracts,nottothosethatarepartiallyor
orwhenaprivateinstrumentisconvertedintoa completely fulfilled. Where a contract of sale is
publicinstrument. alleged to be consummated, it matters not that
neitherthereceiptfortheconsiderationnorthesale
Q:Whatisratification? itself was in writing. Oral evidence of the alleged
consummatedsaleisnotforbiddenbytheStatuteof
Fraudsandmaynotbeexcludedincourt.(Victoriano
A:Itisanactbywhichacontractenteredintoin
v.CA,G.R.No.87550,Feb.11,1991)
behalf of another without or in excess of

authorityiscuredofitsdefect.
Q:WhatisthepurposeoftheStatuteofFrauds?

Q:Whatarethemodesofratification?
A: It is to prevent fraud and perjury in the
enforcement of obligations depending for their

A:
evidenceontheunassistedmemoryofwitnesses,
1. For contracts infringing the Statute of
by requiring certain enumerated contracts and
Frauds:
transactions to be evidenced by a writing signed
a. expressly
bythepartytobecharged.(SwedishMatch,ABv.
b. impliedly by failure to object to
CA,G.R.No.128120,Oct.20,2004)
the presentation of oral evidence

to prove the contract, or by the
Q: What are the contracts or agreements
acceptance of benefits under the
coveredbytheStatuteofFrauds?
contract.
2. If both parties are incapacitated,
ratificationbytheirparentsorguardian A:
shallvalidatethecontractretroactively 1. Anagreementthatbyitstermsisnotto
be performed within a year from the
C.UNENFORCEABLECONTRACTS
makingthereof;
2. A special promise to answer for the
Q:Whatareunenforceablecontracts? debt,defaultormiscarriageofanother
3. Anagreementmadeinconsiderationof
A: The following contracts are unenforceable marriage, other than a mutual promise
unlesstheyareratified: tomarry;
1. Thoseenteredintowithoutorinexcess 4. An agreement for the sale of goods,
ofauthority; chattels or things in action, at a price
2. Those that do not comply with the not lower that 500 pesos, unless the
StatuteofFraudsi.e.,arenotinwriting
buyeracceptsandreceivespartofsuch
nor subscribed by the party charged or goodsandchattels,ortheevidences,or
byhisagent;or someofthem,ofsuchthingsinaction,
3. Those where both contracting parties or pay at the time some part of the
areincapableofgivingconsent. entry is made by the auctioneer in his
sales book, at the time of the sale, of
Q:WhatisStatuteofFrauds? the amount and kind of property sold,
terms of sale, price, names of the
A: The Statute of Frauds [Article 1403, (2)] purchasers and person on whose
requirescertaincontractsenumeratedthereinto account the sale is made, it is a
be evidenced by some note or memorandum in
sufficientmemorandum
order to be enforceable. The term "Statute of 5. An agreement for the leasing for a
Frauds" is descriptive of statutes which require longer period than one year, or for the
certain classes of contracts to be in writing. The sale of real property or of an interest
Statute does not deprive the parties of the right therein;
to contract with respect to the matters therein
225

6. Arepresentationtothecreditofathird D.VOIDCONTRACTS
person
Q:Whatarethekindsofvoidcontracts?
Q:Cenido,asanheirofAparatoandclaimingto
be the owner of a house and lot, filed a A:
complaint for ejectment against spouses 1. Thoselackinginessentialelements:
Apacionado. On the other hand, spouses Noconsent,noobject,nocausesomeor
Apacionado allege that they are the owners allelementsofavalidcontractareabsent
whichareunregisteredpurchasedbythemfrom a. Thosewhichareabsolutelysimulated
its previous owner, Aparato. Their claim is orfictitious:nocause
anchored on a 1page typewritten document b. Thosewhosecauseorobjectdidnot
entitled "Pagpapatunay," executed by Aparato. exist at the time of the transaction:
IsthePagpapatunayenteredintobyBonifacio nocauseorobject
andspouseApacionadovalidandenforceable? c. Those whose object is outside the
commerceofman:noobject
A: It is valid but unenforceable. Generally, d. Those which contemplate an
contracts are obligatory, in whatever form such impossibleservice:noobject
contracts may have been entered into, provided e. Those where the intention of parties
all the essential requisites for their validity are relative to principal object of the
present.When,however,thelawrequiresthata contractcannotbeascertained
contract be in some form for it to be valid or
enforceable, that requirement must be complied 2. Contractsprohibitedbylaw
with. a. Pactum commisorium the creditor
appropriates to himself the things
Thesaleofrealpropertyshouldbeinwritingand given by way of pledge or mortgage
subscribed by the party charged for it to be tofulfillthedebt
enforceable.The"Pagpapatunay"isinwritingand b. Pactum de non alienando an
subscribed by Aparato, hence, it is enforceable agreement prohibiting the owner
under the Statute of Frauds. Not having been from alienating the mortgaged
subscribed and sworn to before a notary public, immovable
however, the "Pagpapatunay" is not a public c. Pactum leonina a stipulation in a
document, and therefore does not comply with partnership agreement which
par.1,Art.1358,NCC. excludes one or more partners from
Moreover,therequirementofapublicdocument anyshareintheprofitsorlosses
in Article 1358 is not for the validity of the
instrument but for its efficacy. Although a 3. Illegalorillicitcontracts(e.g.contractto
conveyance of land is not made in a public sellmarijuana)
document, it does not affect the validity of such
conveyance.Theprivateconveyanceofthehouse Q: On July 6, 1976, Honorio and Vicente
and lot is therefore valid between Aparato and executed a deed of exchange. Under this
the spouses. (Cenidov.Spouses Apacionado,G.R. instrument,Vicenteagreedtoconveyhis64.22
No.132474,Nov.19,1999) squaremeter lot to Honorio, in exchange for a
500squaremeter property. The contract was
Q:Whatarethetwowaysofratifyingcontracts entered into without the consent of Honorios
whichinfringetheStatuteofFrauds? wife.Isthedeedofexchangenullandvoid?

A: A:Thedeedisvaliduntilandunlessannulled.The
1. Failure to object during the trial to the deedwasenteredintoonJuly6,1976,whilethe
admissibility of parol evidence to Family Code took effect only on August 3, 1998.
support a contract covered by the Lawsshouldbeappliedprospectivelyonly,unless
StatuteofFrauds. alegislativeintenttogivethemretroactiveeffect
2. Acceptance of benefits when the is expressly declared or is necessarily implied
contract has been partly executed fromthelanguageused.Hence,theprovisionsof
because estoppel sets in by accepting theCivilCode,nottheFamilyCodeareapplicable.
performance. According to Article 166 of the Civil Code, the
husband cannot alienate or encumber any real
property of theconjugal partnership without the
wifes consent. This provision, however, must be
226 CIVILLAWTEAM:

CONTRACTS
read in conjunction with Article 173 of the same ininterestnotprotected

Code.Thelatterstatesthatanactiontoannulan bylaw
alienation or encumbrance may be instituted by Actiontoannul
thewifeduringthemarriageandwithintenyears contractprescribesin4
fromthetransactionquestioned.Hence,thelack Actiontodeclarenullity years(Pineda,
of consent on her part will not make the doesnotprescribe Obligationsand
husbands alienation or encumbrance of real Contracts,2000ed,p.
property of the conjugal partnership void, but 606)
merelyvoidable.(Villarandav.Villaranda,G.R.No.
153447,Feb.23,2004) Q:Distinguishvoidcontractfromrescissible
contract.
Q: Judie sold onehalf of their lot to Guiang
under a deed of transfer of rights without the A:
consentandovertheobjectionofhiswife,Gilda VOID RESCISSIBLE
and just after the latter left for abroad. When Defectisinherent Defectisinitseffects,either
Gilda returned home and found that only her inthecontract againstoneofthepartiesora
itself thirdperson
son, Junie, was staying in their house. She then
Nullityisamatter
gatheredherotherchildren,JojiandHarrietand Basedonequityandmatterof
oflawandpublic
went to stay in their house. For staying in their privateinterest
interest
alleged property, the spouses Guiang
Nolegaleffects Produceslegaleffectsand
complained before the barangay authorities for evenifnoactionis remainsvalidifnoactionis
trespassing. filedtosetitaside filed
Actiontodeclare Actiontorescindprescribes
Is the deed of transfer of rights executed by itsnullitydoesnot within4years(Art.1389,NCC;
Judie Corpuz and the spouses Guiang void or prescribe(Art. Pineda,Obligationsand
voidable? 1410,NCC) Contracts,2000ed,p.605)

A: Q: Distinguish void contract from inexistent
Itisvoid.Gildasconsenttothecontractofsaleof contract.
their conjugal property was totally inexistent or
absent. Thus, said contract properly falls within A:
theambitofArticle124oftheFC. VOIDCONTRACT INEXISTENTCONTRACT
Thosewhereallthe
The particular provision in the old Civil Code requisitesofacontract
which provides a remedy for the wife within 10 arepresent,butthe
Thosewhereoneor
years during the marriage to annul the cause,objectorpurpose
someoftherequisites
encumbrance made by the husband was not iscontrarytolaw,
whichareessentialfor
carried over to the Family Code. It is thus clear morals,goodcustoms,
validityareabsolutely
that any alienation or encumbrance made after publicorderorpublic
lacking
theFamilyCodetookeffectbythehusbandofthe policyorthecontract
conjugal partnership property without the itselfisprohibitedor
consent of the wife is null and void. (Spouses declaredprohibited.
Guiangv.CA,G.R.No.125172,June26,1998) Principleofinpari
Principleofinpari
delicto
delictoisapplicable.
isnotapplicable.
Q: Distinguish void contract from voidable

contract.
V.EFFECTOFCONTRACTS

A:
VOID VOIDABLE
Q:Betweenwhomdocontractstakeeffect?
Consentisvitiatedor

Absenceofessential A:Contractstakeeffectonlybetweentheparties,
thereisincapacityto
element/sofacontract andtheirassignsandheirs,thelatterbeingliable
giveconsent
Noeffectevenifnotset Validcontractuntilset only to the extent of the property received from
aside aside thedecedent.
Cannotberatified Canberatified
Nullitycanbesetup Q: What are the instances when the heirs may
Nullitycanbesetup be liable for the obligation contracted by the
againstanyperson
onlyagainstaparty decedent?
assertingrightarising
thereto
fromit,andhissuccessors
227

A: When the rights and obligations arising from
thecontractaretransmissible:
1. Bytheirnature;or
2. Bystipulation;or
3. Byprovisionoflaw.

Q: What are the requisites in order that a third
person may demand the fulfillment of the
contract?

A:
1. The contracting parties must have
clearly and deliberately conferred a
favoruponthethirdperson;
2. Thethirdpersonsinterestorbenefitin
such fulfillment must not be merely
incidental;and
3. Such third person communicated his
acceptance to the obligor before the
stipulationsinhisfavorarerevoke.

228 CIVILLAWTEAM:

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OBLIGATIONS

3. Hehasnotfailedtoreturnthepropertyor officers. GSIS sought the restoration of the said

3. Compensatio morae default on the MORAACCIPIENDI

4.NEGLIGENCE relation contractualrelation

Q: Ramon, the judicial administrator of the Q: Distinguish suspensive from resolutory

Q:Whenmayadebtorlosehisrighttomakeuse Q: In alternative obligations, when does the

A: No. Article 1207 of the Civil Code clearly 5. Insolvencyofadebtorwillnotincrease

Q: To whom must payment be made in a A:Itistantamounttononperformance.(Pineda,

INTEGRITY Q: Is the acceptance by a creditor of a partial

Q: Because of Ligayas refusal to accept several f. When debtor Promised to deliver

D.CONFUSIONORMERGER not extinguish the obligation. (Art.

Q:Distinguishcompensationfromconfusion. has beenheld that the relation existing between

first credit card issued to Danilo Alto, basically b. ifsuspensiveanditdidnotoccur

Q:Whatarethekindsofcauses? c. in cases specified by law

Q: What is the principle of relativity of

C.FORMALCONTRACTS 7. Chattel mortgage personal property

XPN:Whenmistakeoflawinvolveserrorasto mental weakness or some other handicap. It

Q:Whatisconfirmation? involved, but merely regulates the formalities of

enforcement of obligations depending for their

read in conjunction with Article 173 of the same ininterestnotprotected

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