Week 1 – Welcome / Introduction to Law

I.Introduction to Law1.Not Divine Law, law of religion and faith2.Not Natural Law, justice, fairness and
righteousness3.Not Moral Law, norms of good and right conduct4.Not Physical Law, order or regularity
in nature a.a. Sources of Lawi)i) Constitution – Fundamental Law of the land ii)ii) Legislations – Passed by
Senate and House of Representatives iii)iii) Administrative issuances – Quasi LegislativeFunctions iv)iv)
Jurisprudence – Decisions of the SupremeCourt (SCRA) Stare decisis v)v) Treaties and Generally accepted
principles of International Law - Art II Sec 2, Pacta sundservanda vi)vi) Customs – habits and practices
through longand accepted usage have become binding rules of conduct vii)vii) Principles of Justice and
Equity – common law jurisdiction a.b. Characteristics of Law

- Rule of Conduct

- Obligatory

- Promulgated by legitimate authority

- Of common observance and benefit b.c. Organization of courts

- Supreme Court

- Court of Appeals, Sandiganbayan, Court of Tax Appeals

- Regional Trial Court

- Metropolitan Trial Court, Municipal TrialCourt

- Quasi Judicial Bodies1.1. Comelec2.2. NLRC3.3. LTFRC4.4. ERB c.d. Quantum of Evidence

- Criminal cases: Proof Beyond ReasonableDoubt

-
- Civil cases: Preponderance of Evidence-greater weight of all the evidence which as a wholeshows that
the act sought to be proved is moreprobable than not.

- Administrative cases: Substantial Evidence – Such evidence that a reasonable mind mightaccept as
adequate to support a conclusion d.e. Effects and Applications of law

- Requirement for publication1.1. 15 days after publication in OG ornewspaper2.2. Ignorance of the law
excuses no onefrom compliance3.3. Due Process

- Law is prospective except:1.1. If the law provides for retroactivity2.2. Penal law insofar as it favors
theaccused3.3. Remedial or curative law

- Computing time1.1. Year is 12 calendar months2.2. Month is 30 days, except when it refersto a
calendar month3.3. First day excluded, last day included

- Conflict of Laws Provisionsi.i. Penal laws apply to all who sojourn toPhils

ii.ii. Family Law and inheritance based onnational law of the party regardless of wherehe livesiii.iii.
Forms and solemnities of contracts andother instrument based on the place where itis executed e.f.
Obligations and Contracts Defined The body of rules which deals with the nature andsources of
obligations and the rights and duties arisingfrom agreements and the particular contracts. Obligation – A
Juridical relation whereby a person maydemand from another the observance of a
determinativeconduct (giving, doing, not doing), and in case of breach,may demand satisfaction from
the assets of the latter.Contract – Meeting of the mind between two persons whereby one binds
himself, with respect to the other, togive something or to render some service. A contract necessarily
gives rise to an obligation but anobligation does not always need to have a contract.f.g. Corporation and
Partnership DefinedPartnership – Two or more persons bind themselves tocontribute money, property,
or industry to a commonfund, with the intention of dividing the profits amongthemselves.Corporation –
Artificial being created by operation of law,having right of succession and the powers,
attributes,properties expressly authorized by law or incident to itsexistence.

Weeks 2 to 4 – Obligations

I.General Provisions, Nature and Effects of Obligations a. General Provision

- Juridical Necessity – enforce compliance; seekdamages

-

- To give, to do, and not to do – Examples

- Four essential requisites of an obligation(i)(i) A passive subject (Debtor – to give; Obligor – todo)(ii)(ii)
An active subject (Creditor/Obligee)(iii)(iii) Object (Prestation) – subject matter(iv)(iv) Juridical tie
(Vinculum) – Source of Obligation

- Form as a manifestation of intent; but no specificform unless required by law (b)(b) Kinds of
Obligations1.1. According to subject mattera.a. Real Obligation – to giveb.b. Personal Obligation – to
doi.i. Positive – to give or doii.ii. Negative - not to do or not to give A borrower agreed to pay his debt in
60 days, andin case of non-payment to render free service asdriver/servant. When due date came,
borrowerrefused to render free service. Decide. 2.2. According to person obligeda.a. Unilateralb.b.
Bilateral (Reciprocal or non-reciprocal) (c)(c) Sources of Obligation1.1. LAW – Imposed by law

- A wife was about to deliver a child. Herneighbor brought her to hospital. Who shouldpay the hospital
bill – Husband or Neighbor?

- P.D. 1517 grants the right of first refusalto person who has leased for more than 10 yearsan urban land
and who construct his housethereon. Lessee of a Condo in Manila now claimshis right of first refusal
because he has beenliving in the unit for almost 15 years. Decide. Obligations derived from law are not
presumed.

- In a newspaper ad, there was an offer toreplace 30 sachets of Tide for one Venetian cutGlass until the
end of the year. At the end of the year, you present your tide sachets, but Tiderefused to honor it
anymore since the ad wasposted more than half a year ago. Decide. 657 a.a. Quasi-contracts – Juridical
relations basedon the principle that no one shall be unjustlyenriched or benefited at the expense of
another. i.i. Negotiorum Gestio – When a personvoluntarily takes charge of the managementof a
business or property of another that hasbeen neglected or abandoned, without anypower from the
latter, as a consequence of which, he is obliged to continue the sameuntil the termination of the affair
or torequire the owner to substitute him. Ex. NPAinfested area Fishpondii.ii. Solutio indebiti – When a
personunduly delivers a thing through mistake toanother who has no right to demand it.(melon bank v.
Javier) b.b. Crimes (acts or omission punished by law) If you commit a crime, you are liable
bothcriminally and civilly for the consequence of your acts or omissions such as restitution,reparation
for damages caused andindemnification for consequential damages.Ex. Support for impregnated rape
victim; loss of earning capacity of murder victim
c.

c. Quasi delict or Torts – The fault ornegligence of a person who, by his act oromission, independent
from any contractualrelation, causes damage to another person

A 3-year-old child was bitten by a dogof her neighbor. As a result, she got infected

by rabies and died. Can the neighbor be heldliable for the acts of the dog?

A signboard of hanging out of abuilding dropped on a car resulting in total wreck of the car. The car
owner sues thebuilding owner and demand to replace thecar. Building owner cites the strong wind
asforce majeure condition indicating no fault onhis part. Decide.2.2. Contracts

Have the force of law between thecontracting parties and should be complied with in good faith.

Sincerity and Honesty II. Nature and Effect of Obligations (a)(a) Specific v. Generic Thing1.1. Specific is
designated or physically segregatedfrom others of the same class.2.2. Generic refers to a class or genus
and cannotbe determined with particularity.(b)(b) Duties of debtor in delivery of generic thing1.1. To
delivery a thing which must neither be of superior nor inferior quality (1246)2.2. To pay damages in case
of breach (1170)

(c)

(c) Duties of debtor in delivery of specific thing1.1. To deliver the thing which he has obligatedhimself to
give2.2. To take care of the thing with the properdiligence of a good father of a family

The ordinary care that an average orreasonably prudent person exercises over hisproperty

Another standard of c are may be requiredby law or by stipulation of the parties3.3. To deliver all the
accessions and accessories4.4. To pay damages in case of breach

(d)(d) Remedies of Creditors in breach of obligation

1.

1. To Give Determinate Thinga.a. To compel specific performanceb.b. To recover damages 2.2. To Give
Indeterminate Thinga.a. To ask for performance of the obligationb.b. To ask that obligation be complied
with byanother at expense of debtorc.c. To recover damages 3.3. To Doa.a. To have the obligation
performed atdebtor’s expenseb.b. To recover damages4.4. Not to Doa.a. Undone at his expenseb.b. To
recover damages (e)(e) Rules on Fruits1.1. Kinds of fruitsa.a. Natural – product of the soil, young
andother products of animalsb.b. Industrial – produced thru cultivation orlaborc.c. Civil – derived by
juridical relations 2.2. Creditor has rights to the fruits from the timethe obligation to deliver arises 3.3.
Real rights acquired only when delivered tohima.a. Real rights - right over a specific thing without any
passive subject, directed against the whole word.

b.

b. Personal rights – right to demand fromanother debtor the fulfillment of the latter’sobligation (f)(f)
Accessions and accessories

Accessions – fruits of a thing or additions toor improvement upon a thing

Accessories – joined to or included with theprincipal thing for better use or completion.

1.1. Even if not mentioned, accessories follow theprincipal2.2. But obligation to deliver accessions
oraccessories does not include the principal (g)(g) Legal Delay1.1. From the time obligee judicially or
extra- judicially demand fulfillment; not mere notice 2.2. No demand from creditor necessary
infollowing cases:a.a. When obligation or law expressly sodeclaresb.b. Time is of the essence (controlling
motive)c.c. When demand would be useless 3.3. In reciprocal obligation, from the moment oneparty
fulfills his obligation, delay by the otherbegins.4.4. Kinds of Delaya.a. Mora solvendi – delay on the part
of debtorb.b. Mora acccipiendi – delay of creditorc.c. Compensatio more – delay in
reciprocalobligation 5.5. Effects of Delaya.a. Liable for interest and damagesb.b. Liable even for
fortuitous event when theobligation is to delivery a determinate thing (h)(h) Fortuitous Events1.1. Any
event which cannot be foreseen or whichthough foreseen is inevitable, independent of the will or from
aggravation of the debtor, renderimpossible the fulfillment of obligation2.2. No person shall be
responsible for fortuitousevents, except:a.a. Where expressly specified by law orstipulated in
contractb.b. When nature of the obligation requiresassumption of riskc.c. When debtor incurs delay

d.d. When debtor promises to deliver samething to two or more personse.e. When obligation to deliver
arises fromcriminal offensef.f. When obligation is generic (i)(i) Fraud (deceit or dolo) Deliberate or
intentionalevasion of the normal fulfillment of an obligation;1.1. Dolo incidente (Incidental Fraud) -
committedin the performance of pre-existing obligation,remedy is damages2.2. Dolo causante (Causal
Fraud) – Fraudemployed at the time of the execution of a contractin order to secure consent, remedy is
annulmentbec of vitiation of consent3.3. Demandable in all obligations4.4. Waiver of future fraud is
void (j)(j) Negligence (culpa) Omission of that diligence whichis required by the nature of the obligation,
but no malice1.1. Culpa contractual – Negligence in theperformance of contractual obligation,a.a. Pre-
existing contractb.b. Liable for damages based on breach of contractc.c. Proof of contract and breach is
enough forrecovery of damaged.d. Negligence of employee conclusivepresumption of employer’s
negligencee.e. Proof of due diligence in the selection of employee not a defense 2.2. Culpa aquiliana –
Negligence between partiesnot so related by any pre-existing contract,a.a. Obligation for damages
based on quasidelictb.b. No pre existing contractc.c. Negligence must be proved for recovery
of damaged.d. Negligence of employee prima faciepresumption of employer’s negligencee.e. Due
diligence in the selection andsupervision of employee is a valid defense

3.3. Can be regulated by the Court depending oncircumstance4.4. Waiver of future negligence
allowed (k)(k) Presumptions1.1. Receipt of principal without reservation as tointerest = presumption of
interest paid2.2. Receipt of later installment of debt withoutreservation of prior ones = presumption
that priorones paid (l)(l) Remedies to satisfy claim1.1. Exhaust property of debtor2.2. Subrogated to
rights and actions of debtors,except those inherent to person3.3. Impugn all of acts by debtor done to
defraudcreditor

II.Different Kinds of Obligations (a)(a) Pure and Conditional Obligations 1.1. Pure Obligation – One
whose effectivity orextinguishments does not depend upon thefulfillment or nonfulfillment of a
condition or uponthe expiration of a term or period. Characterized byImmediate Demandability. 2.2.
Conditional Obligation – Effectivity issubordinated to the fulfillment or non-fulfillment of a future or
uncertain fact or event

Future and uncertain event or

Past event and unknown to theparties a.a. Suspensive v. Resolutory

In suspensive condition, fulfillmentgive rise to an obligation – acquisition of rights

In resolutory condition, fulfillmentextinguishes obligation – loss of rightsacquired b.b. Casual,

Potestative, Mixed

Casual – Depends on chance or will of third party (Valid)

Potestative – Depends on the will of one of the contracting parties

(1)

(1) If suspensive conditiondepends on will of debtor, theobligation is void(2)(2) If resolutory condition

dependson will of debtor, the obligation isvalid(3)(3) If depends on will of creditor, itis valid.
Mixed – Depends partly upon the willof a party and partly upon chance or thirdparty (Valid) c.c.
Impossible Conditions

- Physically Impossible or legallyimpossible

- If “to do”, whole obligation is void

- If “not to do”, obligation is valid, as if not written

- If divisible, part not affected byimpossible condition is valid. d.d. Positive v. Negative i.i. Positive
Condition (event will happen)extinguished:

As soon as time expires withoutthe event taking place

As soon as it becomes indubitablethat the event will not take place ii.ii. Negative Condition (event will
nothappen) effective:

As soon as time expired withoutevent taking place

As soon as it becomes evident theevent cannot occur e.e. Reciprocal v. Unilateral i.i. If reciprocal, the
fruits are deemedmutually compensated ii.ii. If unilateral, fruits and interest belongsto debtor

3.

3. Condition deemed fulfilled when obligorprevents its fulfillment

4.4. Creditor may before the fulfillment of thecondition bring appropriate actions for thepreservation of
the rights.5.5. Debtor may recover what he has paid bymistake before the fulfillment of condition. 6.6.
Effects of the fulfillment of a conditionretroacts to the day of the constitution of theobligation.7.7. Rule
on loss or deterioration, improvementsbefore the fulfillment of condition

Lost – when perished, go out of commerce, or disappear in such a waythat its existence unknown or
cannot berecovered a.a. If without the fault of debtor, the obligationis extinguished
b.

b. If lost thru fault of debtor, obliged to paydamagesc.c. When deteriorate without fault of
debtor,creditor bores the impairmentd.d. When deteriorate with fault of debtor,creditor may rescind or
fulfillment with damagese.e. When improved by nature, or by time,inure to the benefit of creditorf.f.
When improved by debtor, no right to beindemnified, but may remove suchimprovement, or set off
against damage 8.8. Remedies in reciprocal obligationa.a. Specific Performance or Rescissionb.b. With
damages in either case c.c. Alternative remedy not cumulative – canchoose one but not both d.d. After
action for specific performanceimpossible, option for rescission

e.e. Injured party must resort to judicialrescission,i.i. Except where automatic rescissionexpressly
stipulatedii.ii. Or where there is no performance yet f.f. Power of the court to fix period g.g. Subject to
right of good faith third partyh.h. Substantial breach not slight breach i.i. Where both parties have
breach, liabilityof first infractor equitably tempered; where firstinfractor not know, both parties bear
owndamages (b)(b) Obligations with a Period 1.1. Demandability or extinguishments subject
toexpiration of a term or period 2.2. Term or period – future and certain event 3.3. Rules on loss,
deterioration, improvements of conditional obligation applicable 4.4. If paid or delivered before period
arrives,debtor may recover the thing, with fruits andinterests.

5.

5. Established for the benefit of both debtor andcreditor, unless otherwise stated 6.6. Court may fix
perioda.a. If obligation does not fix a periodb.b. Depends on will of debtor

“When means permit” not condition,but periodPeriod fixed by court cannot be changed 7.7. Debtor
loses right to make use of the period

a.a. Debtor becomes insolvent, unless he givesguaranty or securityb.b. When debtor does not furnish
guarantiesor securities promisedc.c. When guaranties or securities impaired ordisappeard.d. When
debtor violates an undertakinge.e. When debtor attempts to abscond (c)(c) Alternative Obligations

Alternative – several objects or prestationsbut performance of one sufficient

Facultative – One object or prestation butdebtor may substitute. 1.1. Must completely perform one of
them

2.

2. Right of choice to debtor, unless expresslygranted to creditor

Except those impossible, unlawful, whichcould not have been the object of the obligationor only one
prestation is practicable 3.3. Choice no effect until communicated,irrevocable once communicated

4.

4. Debtor may rescind the contract withdamages if thru creditor’s acts debtor cannot makea choice 5.5.
If lost due to fortuitous event,a.a. If two or objects remain, the obligationsubsistsb.b. If only one object
remain, it becomessimple obligationc.c. If none remains, obligation is extinguished 6.6. If lost due to
fault of debtor,

When right of choice belongs to debtor a.a. If 2 or more objects remain, debtor canchoose from
remaining, not liable for damages

b.b. If only one remain, simple obligation todeliver remaining

c.

c. If none remains, debtor indemnifydamages based on value of last object

When right of choice belongs tocreditor

a.

a. If alternative object still remain, creditorcan choose the one lost and ask value of objectlost and
damages; if creditor choose theremaining object, debtor cannot be liable fordamagesb.b. If none
remains, debtor to indemnify fordamages based on the price of the object chosenby the creditor plus
consequential damages 7.7. Facultative Obligation a.a. Right of choice only to debtorb.b. If lost before
substitution, debtor notliable.c.c. Debtor liable for loss due to his fault oncesubstitution has been
maded.d. If after substitution, it is lost thrufortuitous event, obligation extinguished, debtornot
liable (d)(d) Joint and Solitary Obligations 1.1. Joint Obligation – Each of creditor has rightto demand,
and each debtor is bound to rendercompliance, with his proportionate part of theprestation a.a. Default
rule is obligation is JOINT b.b. Joint creditor cannot act in representationof the other creditors c.c. Joint
debtor cannot be compelled toanswer for liability of other debtors d.d. “Jointly”, “We promise to pay”,
“Pro rata”,“proportionately”

2.2. Solidary Obligation – Each creditor has aright to demand, and each debtor is bound torender
compliance, with the entire prestation; butas to co-debtor he is liable only for his sharea.a. Instances
when obligation is solidary: i.i. When obligation expressly states so ii.ii. When law requires
solidarity: 1.1. If 2 or more heirs take possessionof estate 2.2. Partners in partnership3.3. If principal
allowed agent to actas though he has full power4.4. If 2 or more appointed an agentfor common
undertaking or transaction5.5. 2 or more bailees to whom athing is loaned6.6. 2 or more officious
managers,unless management was assumed tosave thing from imminent danger7.7. 2 or more persons
liable for quasidelict8.8. 2 or more payees when there hasbeen payment of what is not due9.9. Principal,
accomplices, andaccessories of a felony.iii.iii. When nature of obligation requiressolidarity1.1. Ex.
Accident fr “Kabit” systemb.b. “Solidarily”, “Jointly and severally”, insolidum, together and/or
separately, “I promiseto pay” c.c. Creditors and debtors need not be boundin the same manner and by
the same periodsand conditions

d.d. Not same as indivisible obligation i.i. Solidary refers to vinculum;Indivisibility refers to
prestation ii.ii. Solidary requires plurality of subjects iii.iii. In solidary, all debtors liable for breachof
obligation; In indivisibility, only debtorguilty of breach of obligation is liable fordamage iv.iv. In
indivisible obligation, other debtorsnot liable for insolvency; if solidary debtorbecomes insolvent, the co-
debtors bore hisdebt in proportion e.e. Solidary creditors may do whatever may beuseful to others, but
not anything which may beprejudicial to the others f.f. A solidary creditor cannot assign his
rights without the consent of the others, except if toco-creditors g.g. Debtor must pay to the creditor
who madedemand, if none demanded, then he may payany one of the solidary creditor h.h. Novation,
compensation, confusion orremission of a solidary creditor shall extinguishthe obligation but the
creditor who did theseacts shall be liable to the other creditors i.i. No re-imbursement if payment made
afterobligation prescribed or illegal j.j. Remission of the whole obligation obtainedby a solidary debtor
does not entitle him toreimbursement from his co-debtors k.k. Defenses available to solidary debtors i.i.
Derived from nature of obligation

Payment, fraud, prescription,remission, illegality, non performance of condition ii.ii. Personal to the
debtor

Insanity, incapacity, mistake,violence, minority iii.iii. Personal to the other solidary debtors

Partial defense (e)(e) Obligations with a Penal Cause 1.1. With accessory undertaking in case of breachof
obligation a.a. To insure performanceb.b. To liquidate the amount of damage to beawardedc.c. To
punish the obligor in case of breach 2.2. No need to prove actual damage 3.3. Shall substitute for
damages and interest,excepta.a. When there is stipulation to the contraryb.b. When obligor is sued for
refusal to payagreed penaltyc.c. When obligor is guilty of fraud 4.4. When court may reduce penalty a.a.
If principal obligation partly complied withb.b. If principal obligation irregularly complied withc.c. If
penalty is iniquitous or unconscionable
Weeks 5 to 7 - Extinguishments of Obligations

Modes of Extinguishing Obligations 1.Payment or performance2.Loss of the thing due3.Condonation or

remission4.Confusion or merger of the rights of creditor and debtor5.Compensation6.Novation7.Death
of a party in personal obligation8.Annulment or Rescission of contract9.Arrival of Resolutory period or
fulfillment of resolutory conditon10.Impossibility of fulfillment11.PrescriptionI.Payment(a)(a) General
Provisions Payment(i)(i) Complete Delivery of money,performance of obligation (ii)(ii) If substantially
performed in goodfaith, obligor may recover as thoughthere had been complete fulfillmentless
damages (iii)(iii) Third party cannot compel creditorto accept payment or performance,excepta.a. When
there is stipulation tothe contraryb.b. When third person has aninterest in the fulfillment
of obligation (iv)(iv) Rights available to third party whopays:a.a. If payment made with theconsent of the
debtori.i. Recover from debtor theentire amount

ii.ii. Subrogated to all therights of creditor b.b. If payment made withoutthe knowledge or against the
willof debtor, he can recover onlyinsofar as payment has beenbeneficial to the debtor (v)(v) To whom
payment must be made(1240)

a.

a. To the person in whosefavor obligation has beenconstitutedb.b. His Successor in interestc.c. Any
person authorized toreceive it d.d. Third person provided ithas redounded to benefit of creditor. (1241,
1242)Presumption of benefit in thefollowing case:

If after payment, third personacquires creditor’s rights

If creditor ratifies payment to thirdparty

If creditor’s conduct let debtor tobelieve that the third person had authority toreceive payment e.e.
Possessor of the credit

(vi)

(vi) Payment must be in Legal Tendera.a. Foreign currency may beused as currency of contractb.b.
Promissory notes, bills of exchange, checks not legaltender. They produce effect of legal tender only
when encashedor impaired thru the fault of creditor (1249) c.c. In case of extraordinaryinflation or
deflation, the basis is

the value of currency at the timeobligation is established. (1250) (b)(b) Applications of Payments1.1. The
right belongs to thedebtor, but if he does not exercise it,creditor may do it2.2. If creditor issues a
receiptdesignating the debt to be applied,debtor can accept or reject3.3. Where neither debtor
norcreditor made a choice, it shall beapplied on the debt which is mostonerousa.a. Older debts more
onerousthan newer onesb.b. One bearing interest moreonerous than one that is notc.c. Secured debt
moreonerous than unsecuredd.d. Debt as principal moreonerous than debt as guarantor

e.

e. Solidary obligation moreonerous than sole debtor4.4. If similar nature and burden,payment shall be
appliedproportionately (c)(c) Payment by Cession

Assignment or abandonment of all theproperties of the debtor for the benefit of his creditorsin order
that the latter may sell same and applyproceeds thereof to1.1. Cession does not make thecreditors
owners of the property2.2. Unless stipulation to contrary,debtor still required to pay balance 3.3.
Requires two or morecreditors, debtors insolvent, cessionaccepted by creditors (d)(d) Dacion en pago

Dation in payment is the transmission of theownership of a thing by the debtor to the creditor asan
accepted equivalent of the performance of anobligation.

Governed by law on sales 1.1. Difference between Dacionand Cession

a.

a. Dacion usually only onecreditorb.b. Dacion does not requireinsolvencyc.c. Dacion does not involve
allthe property of debtord.d. Dacion makes creditorowner of the propertye.e. Dacion is a novation (e)(e)
Tender of Payment and Consignation

Tender of payment – The act of the debtor of offering to the creditor the thing or amount due

Consignation – Deposit of the object or theamount due with the proper court after refusal orinability of
the creditor to accept the tender of payment1.1. Requisites of Consignationa.a. Debt Dueb.b. Tender of
payment bydebtor and refusal by creditor toaccept it without justifiablereasonc.c. Previous notice of
theconsignation had been given topersons interested in fulfillmentof obligationd.d. Thing or amount
due hasbeen deposited with judicialauthoritye.e. Subsequent notice of consignation to interested
parties 2.2. Exception to requirement fortender of payment:a.a. When creditor is absent orunknown or
does not appear atplace of payment

b.b. When he is incapacitated toreceive paymentc.c. When he refuses to givereceipt, without just
caused.d. When two or more personsclaim same right to collecte.e. When title of the obligationhas
been lost 3.3. Expenses of consignation forCreditor’s account a.a. If creditor allows debtor to withdraw
the consignation, creditorlose preference over the thing. Co-debtor, guarantors, sureties shallbe
released. II.Loss of the Thing Due(a)(a) Lost – when perished, go out of commerce, ordisappear in such a
way that its existence unknown orcannot be recovered Or becomes legally or physically impossible to
perform, orso difficult as to be manifestly beyond the contemplationof the parties (b)(b) The obligation
to deliver specific thing isextinguished if 1.1. Without the fault of debtor, and2.2. Debtor not in
delay(c)(c) No person shall be responsible for fortuitous events,except:1.1. Where expressly specified by
law or stipulatedin contract2.2. When nature of the obligation requiresassumption of risk3.3. When
debtor is at fault, partly4.4. When debtor incurs delay5.5. When debtor promises to deliver same
thingto two or more persons6.6. When obligation to deliver arises fromcriminal offense7.7. When
obligation is generic

(d)(d) In case of partial loss the court shall determine whether it is so important as to extinguish the
obligation

(e)

(e) In case lost when the thing is in the possession of debtor, presumption is it is his fault

Except earthquake, flood, storm or othernatural calamity (f)(f) Creditor shall have right to go against any
thirdperson responsible for the loss.

III.

III. Condonation or Remission of Debt g.h. Act of liberality by virtue of which creditorabandons his right

Gratuitous

Accepted by debtor

Obligation must be demandable

Parties must be capacitated

Donation not inofficious

Forms in express condonation h.i. Implied remission

- Delivery of private document evidencingcredit

- If thing pledge is found in the possessionof debtor or owner of thing

- Renunciation of principal extinguishaccessory obligation IV.Confusion or Merger of Rights

Creditor and Debtor merged in the sameperson1.1. Between principal debtor and principalcreditor2.2.
Complete and definite merger a.a. Merger of debtor and creditor benefits theguarantor

b.

b. Extinguish only the portion of the jointobligation corresponding to the creditor and debtormergedc.c.
Merger of one solidary debtor with creditorextinguishes obligation V.Compensationa.a. Persons who in
their own rights are debtors andcreditors of each other extinguishes the debts to theconcurrent
amountb.b. Guarantor can set up compensation of whatprincipal debtor may owe creditorc.c.
Compensation may be total or partiald.d. Parties may agree to compensate debts not yet due

e.e. When one or both debts are rescissible or voidable,they may be compensated before they are
judiciallyrescinded or avoidedf.f. Requisites of legal compensation (by operation of law ):1.1. Parties are
principal creditors and debtorsof each other2.2. Both debts consist in sum of money orconsumable of
same kind and quality3.3. Both debts are due and demandable4.4. Two debts are liquidated (amount
iscertain)

5.

5. No retention or controversy commenced by3

rd

partyb.g. Compensation after assignmenti.Assignment made with consent of debtor

Debtor cannot set up compensation againstprevious creditor ii.Assignment with knowledge but without
consent

Debtor can set up compensation for debtsbefore the notification

Debtor cannot set up compensation withrespect to debts which matured after notification iii.
Assignment without knowledge of debtor

Debtor can set up compensation for debtsmaturing before he learned of assignmentc.h. Compensation
cannot take place in following case:i. Debtsfrom Contracts of Depositum (A person receives athing
belonging to another for safekeeping and of returning the same; not bank deposits)ii. Debts
fromCommodatum (One person delivers to anothersomething for him to use and return it)iii. Claims
forsupport due by gratuitous titleiv. Debts fromCriminal offensev. Taxes

VI.Novation – extinction of an obligation through the creation of a new one which substitutes ita.a.
Requisites: i. Previous valid obligation ii. Agreement to enter new obligation iii. Extinguishments of
old iv. Creation of new valid obligationb.b. Must be declared in unequivocal termsc.c. Or incompatible
on every point – Test: Whetherold and new contract can stand together each havingits own
independent existenced.d. Substitution of Debtor i. Expromision – Without the knowledgeor consent of
debtor, at the instance of the newdebtor1.1. Payment by new debtor gives himright to beneficial
reimbursment2.2. Insolvency or non fulfillment of obligation by new debtor will not give riseto liability
of old debtor ii. Delegacion – Substitution made at theinstance of old debtor3.1. Payment by new debtor
entitles himto reimbursement and subrogation4.2. Non fulfillment of obligation by newdebtor will not
give rise to liability of olddebtor5.3. Insolvency of new debtor will reviveaction against old debtor if
insolvency wasalready existing and of public knowledge,or known to the debtor when he delegatedhis
debte.e. If new obligation is void, the original one shallsubsistsf.f. If original obligation is void, novation
is void;except when annulment may be claimed only bydebtor or when voidable acts have been
ratifiedg.g. Subrogation – Substitution of Debtor

i. Conventional – By express agreementof the old creditor, debtor and the new creditor ii. Legal –
Without agreement, byoperation of law1.1. When creditor pays another creditor who is preferred, even
without the debtor’sknowledge

2.

2. When a third person, not interestedin the obligation, pays with the express ortacit approval of
debtor3.3. When a third person interested inthe fulfillment of obligation pays, even without the
knowledge of debtor

Definition of a ContractDefinition of a Contract

A meeting of the minds

Between two persons

Whereby one binds himself, with respect to the other

To give something or to render some service

Different phases or stages in the life of a contractDifferent phases or stages in the life of a contract

1.1. Preparation – Preliminary to formation

2.2. Perfection – birth of the contract

3.

3. Consummation - fulfillment Essential characteristics of ContractsEssential characteristics of

Contracts1.1. Obligatory force – must be complied with in good faith 2.2. Autonomy – parties are free to
enter such stipulations,clauses, terms and conditions

– Clauses and condtions must not be contrary to:

LAW

Morals

Good Customs

Public Order

Public Policy

3.3. Mutuality – contract must bind both parties

Determination can be left to third party, whose decisionshall be binding only when communicated to
both parties
Unless such determination be evidently inequitable 4.4. Relativity – takes effect only bet parties, their
assigns andheirs

Stipulation pour autrui accepted by third party

Where third persons comes into possesion of the object of contract creating real rights

Where contract is to defraud a third person

Where third person induces a contracting party to violate hiscontracta.a.Different Classes of

ContractsDifferent Classes of Contracts

According to perfection

– Consensual – Perfected by mere agreement of the parties

– Real – Requires not only consent, but also the delivery of the object

According to form

– Common – Do not require particular form

– Formal – Those which require particular form, likedonation, mortgage

According to nature of vinculum

–
– Unilateral – Obligation of one party only

– Bilateral – Reciprocal obligations for both parties

According to cause

– Onerous – Giving of an equivalent or compensation

– Gratuitous – Given without compensation, just pureliberality

According to risks involved

– Commutative – Prestation is pecuniarily appreciable anddetermined at the moment of celebration of

contract

– Aleatory – Pecuniarily appreciable but not yet determinedat the moment of celebration, since it
depends upon thehappening of an uncertain event. Ex. Insurance

According to name

– Nominate – with specific names or designation in law

– Innominate – no specific nameEssential Requisites of ContractsEssential Requisites of Contracts

Consent of the contracting parties

Object certain subject matter of the contract

Cause of the obligation which is establishedElements of ConsentElements of Consent

Concurrence of the offer and the acceptance

Definite Offer that may be exactly fixed

Assent to the terms without qualifications or conditions

Conveyed before the death, civil interdiction, insanity, orinsolvency

Qualified acceptance is a counter offer

Perfected when acceptance comes to knowledge of offeror

Offer can be withdrawn anytime before acceptance, unlessoption is founded on consideration

If offer made thru agent, accepted when communicated tothe agent

By parties with legal capacity to contract

Not minors, insane or demented, deaf-mutes who do notknow how to write, incompetents under
guardianship, civilinterdiction

Minor can be liable if he misrepresents his age

Prohibited by law from entering into contracts

Husband and Wife to each other

o Insolvents

o Persons prohibited from giving donations

o Adultery, concubinage

o In consideration of criminal offense

o Made to public officer, spouse, by reason of office

o Persons with fiduciary relations

o Guardian, for property under his guardianship

o Agents, for property entrusted to them

o Executor/administrator

Public officers, judges, for property under their jurisdiction

Intelligently, freely given, consciously

- Vices of the will

Mistake - False notion of a thing or a factmaterrial to the contract

•

Simple mistake gives rise to correction

Render voidable in following cases:

Mistake as to object of the contract

Identity of thing, Substance, Condition,

Quantity only if principal reason

Mistake of Law

Will not make it voidable except:Mutual error as to the legal effect of an agreement when the real
purposeof the parties is frustrated

Mistake as to person

If such identity or qualification is principalcause of contract

Violence – Employment of external physicalforce, irresistible and serious to wrest consent

Intimidation – Moral compulsion to influenceanother to give his consent thru fear of imminent orgrave
evil
o

o Force employed must be serious orirresistible

o Determining cause for the party inentering into the contract

Undue Influence – Improper advantage of hispower over the will of another depriving the latter
of reasonable freedom of choice

Confidential, Family, Spiritual and otherrelations or

Person influenced suffering from mental weakness, ignorant, financial distress

Fraud – Insidious words or machinations of oneof the contracting parties induced the other to enterinto
a contract, which without them he would not haveagreed; Failure of one party to disclose facts to
otherparty when there is a duty to reveal them

Dolo incidente (Incidental Fraud) - committed inthe performance of pre-existing obligation,remedy is

damages Dolo causante (Causal Fraud) – Fraud employed at thetime of the execution of a contract in
order to secureconsent, remedy is annulment bec of vitiation of consent

o Must be employed by one of thecontracting parties,

o but not by both or by third parties

o Must be Serious

Must have induced the other party toenter into the contract

- Vices of Declaration
Simulated Contracts

1. Absolute1. Absolute

– Contracting parties do not intend to be boundby the contract at all

–Void2. Relative – Contracting parties conceal their trueintentions – Real agreement binding on the
parties if it doesnot prejudice third person

ObjectsObjects

Thing, right or service which is the subject matter of the obligationcreated or established

Thing or service must be within the commerce of man

o The law prohibits future inheritance as object of contract

o Transmissible and can be appropriated

o Not contrary to Law Moral Good Conduct PublicOrder Public Policy

o Real or possible

o Determinate or determinable CauseCause

Essential reason why the parties enter into the contract

Cause should be in existence

Licit or lawful
o

True

Interchangeable with consideration, but not same as motive

General rule: Particular motive of the party in enteringinto a contract are not material. Except: When
itpredetermines the purpose of the contract

FormForm

Whatever may be the form, Contract shall be obligatory on allprovided all the essential requisites are
present

Two exceptions:

When Law requires a certain form for validity

When Law requires form for enforcement

Must appear in Writing to be valid:

o Donation exceeding P 5,000

o Sale of piece of land or interest therein by an agent

o Antichresis - Creditor acquires rights to fruits of immovable but applying to payment of interest

o Agreement regarding payment of interest

Must appear in Public Instrument to be valid:

Donations of immovable property

Partnership where immovable or real rights arecontributed

Must appear in Public Instrument for Enforcement

Creation, transmission, modification, sales orextinguishments of real rights over immovable properties

Cession, repudiation, or renunciation of hereditaryrights, or those of conjugal partnership of gains

Power to administer property

Cession of actions or rights proceeding from an actappearing in a public

documentReformationReformation

When the true intention of the parties are not expressed in theinstrument, one of the party may ask for
the instrument to bechanged so that true intention may be expressed.

Requisities

Must be a meeting of the minds of the parties

True intention is not expressed in the instrument

Failure due to mistake, fraud, inequitable conduct oraccident

What may be reformed

Mutual mistake of parties cause failure to disclose realagreements

One party mistaken and the other acted fraudulentlyor inequitably

One party was mistaken and the other knew thatinstrument did not state real agreement, yet concealed
it

Ignorance, lack of skill,, negligence or bad faith on thepart of person drafting it

Where parties agree on mortgage, but instrument statesproperty is sold absolutely or with right to
repurchase

o What may not be reformed

o Simple Donations with no condition

o Wills

o Those where real agreement is void Defective ContractsDefective Contracts

o As to defect

o Rescissible - Injury or damage

o Voidable - Vitiation of consent or legal capacity

o
o Unenforceable - In excess of authority or do notcomplyy with S of Fraud

o Void - Lack of an element of a valid contract

o As to effect

o Rescissible and Voidable - Valid until annulled

o Unenforceable - Cannot be enforced by action incourt

o Void - No legal effects at all

o As to parties who can file action

o Rescissible and Void – May be attack directly Bycontracting parties or by third parties

o Voidable and Unenforceable - Cannot beattacked by third persons

Resolution (Rescission of reciprocal obligation

Party who may institute action

For resolution, only party to the contract

Causes

Failure of one party to comply w/ obligation

o

Kind of contract

Reciprocal obligation only

Power of the courts

Can grant extension for performance

Rescissible Contracts

Guardian who represent ward, lession of more than ¼of the value of the thing

In representation of absentee, lession of ¼

In fraud of creditor who is unable to collect

Things under litigation, entered into by defendant without approval of litigants and court

Payment made in state of insolvency where debt not yet due

Those which may be declared by law

Partition (1098)

Result of deterioration (1189)

Unpaid seller (1526 and 1534)

Badges of Fraud

o Cause or consideration is inadequate

o Transfer made after suit has begun or pending

o Sale on credit by an insolvent debtor

o Evidence of large indebtedness or completeinsolvency

o Transfer of all or nearly all of debtor properties

o Between father and son, with any of abovecircumstances

o Failure of vendee to take exclusive possession Voidable ContractsVoidable Contracts

Where one party is incapable of giving consent to a contract

Where the consent is vitiated by mistake, violence,intimidation, fraud, undue influence

ConvalidationConvalidation

Prescription (Four years)

From time incapacity ceases

From discovery of such fraud or mistake

Ratification or confirmation

Loss of the thing by thru the fault of the person who has rightto annul

Effects of annulment of Voidable ContractEffects of annulment of Voidable Contract

– If not consummated, then parties are released from obligation

– If consummated, parties are to restore to each other what theyhave given, with fruits and interests,
plus damages

– If to do or not to do, there will be apportionment of damages

–Incapacitated party not obliged to make restitution except forwhat he was benefited

Unenforceable ContractsUnenforceable Contracts

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

Those not complying with Statute of Frauds.

Statute of FraudStatute of Fraud

–Purpose is to prevent fraud, not to aid the commission of fraud

– Basic and fundamental principles

Applies only to executory contracts

Cannot apply if action is not for damage bec of violation of agreement or for specific performance
Exclusive

May be waived

Personal defense

Contracts are not void

Rule of exclusion

Concerns admissibility of evidence, not credibility

Does not apply if action is to claim reformation

– Following must be in writing or in some notes or memorandum:

– Agreement not to be performed within a year from themaking thereof

– A special promise to answer for debt, defaults ormiscarriage of another

– Agreement in consideration of marriage

– Sales of goods, chattels, things above P500

– Lease of more than one year

–Representation as to credit of another

Void ContractsVoid Contracts

– No concurrence of offer/acceptance

– Cause, object, purpose contrary to law, morals, good customs,public order, or public policy

– Absolutely simulated or fictitious

– Cause or object did not exist at the time of the transaction

– Object outside commerce of men

– Impossible service

– Intention of the parties relative to principal object cannot beascretained

– Prohibited or declared void by law

EstoppelEstoppel

Estoppel in pais - by one’s conduct or acts, representatioons,admissions or silence, culpable negligience

induces another to believe certain facts to exist and such other rightfully relies andacts on such belief.

Estoppel by Deed - A party to a deed, are precluded fromaasserting against the other party to the deed
any right or title inderogation of the deed, or from denying any material fact assertedtherein.

Estoppel by Record - A party precluded from denying the truthof matters set forth in a record, whether
judicial or legislative.

Estoppel by LachesEstoppel by Laches

Estoppel by Laches
Failure or neglect to enforce a right for an

Unreasonable and unexplained length of time

Despite knowledge or noticeEXTINCTIVE PRESCRIPTION(Arts. 1139-1155)

40 daysRedhibitory action based on defectsof animals.6 months(a)(a) Action for reduction of price
forrescission in case of breach of sale of real estate, either with a statementof its area at a certain price
for aunit of measure or number.(b)(b) Action for warranty againsthidden defects of thing sold.1
year(a)(a) Action by husband against wifeto impugn child’s legitimacy if husband is in the same place
as wife.(b)(b) Action for revocation of donationfor acts of ingratitude.(c)(c) Action for forcible entry
orunlawful detainer.(d)(d) Action for defamation.(e)(e) Action for rescission or fordamages if immovable
sold isencumbered with non-apparentburden or servitude.2 yearsAction to impugn child’s legitimacy
if husband is in the Philippines butnot in same place as wife.3 yearsAction to impugn child’s legitimacy
if husband is abroad.4 years(a)(a) Action for revocation orreduction of donation based onsupervening
birth, appearance oradoption of a child.(b)(b) Action for revocation of donationbased on fulfillment of
condition.

(c)

(c) Action for recovery of movable(

replevin

) if possessor is in goodfaith.(d)(d) Action upon injury to rights of plaintiff.(e)(e) Action upon a quasi-
delict.(f)(f) Action for rescission of rescissible contracts.(g)(g) Action for annulment of
voidablecontracts.5 years(a)(a) Action for legal separation.(b)(b) Action for annulment of marriage
based on1. Lack of parental consent.2. Fraud.3. Force, intimidation or undueinfluence.4. Physical
incapacity and afflicted witha sexuality transmissibledisease.(c)(c) Action to claim legitimacy if
childshould die during minority or instate of insanity.(d)(d) Action for declaration of incapacity of
heir.(e)(e) Action for warranty of solvency of debtor if credit is assigned to co-heirduring partition.(f)(f)
All other actions whose periodsare not fixed by law.6 years(a)(a) Action upon oral contract.(b)(b) Action
upon a quasi-contract.8 yearsAction for recovery of movables(

replevin

) if possessor is in bad faith.10 years

(a)

(a) Action for recovery of possessionof immovables (

accion

publiciana

) if real right of possession is lost.

(b)

(b) Action for recovery of ownershipof immovables (

accion reinvindicatoria

) if possessor is ingood faith.(c)(c) Action upon a mortgage contract.(d)(d) Action upon a written
contract.(e)(e) Action upon an obligationcreated by law.(f)(f) Action upon a judgment.Lifetime(a)(a)
Action to claim legitimacy.(b)(b) Action to obtain declaration of illegitimate filiation.