Saint Joseph College

Business Administration Department

Maasin City, Southern Leyte

MODULE I

( - OBLIGATIONS AND CONTRACT )

1ST Semester, AY 2020-2021

Prepared by

Atty. Mirzi Rio M. Damole

Instructor

Course Description

An in depth study of the nature, kinds, and effects of obligations and their extinguishments;
contracts, their requisite, form, and interpretation; and defective contracts, quasi-contracts, natural
obligations, and estoppel.

Grading System

Each student shall be assessed on the following:

1.

Learning Outcomes

At the end of the semester, the students must be able to:

 Know the Law and the Philippine Legal System

 Discuss the Law on Obligations and Contracts
 Know the meaning of Obligation, nature of it under the civil code
 Differentiate the elements, sources and its effect
 Discuss the Contracts and its concepts (elements, Consent, Object, Cause and Forms)
 MODULE 1
Topics:
1. Introduction to Law and the Philippine Legal System
2. Law on Obligations and Contracts
3. Obligations
- General Provisions on Obligations
- Definition of Obligation
- Elements
- Sources of Obligations
a. Law
b. Contract
c. Acts or omissions punishable by law
d. Quasi Contract
e. Quasi delict
4. Nature and effect of Obligations
5. Classification of Obligations

LESSON 1

I. Objectives

At the end of the lesson, you should able to:

1. Provide an overview the importance of the course

2. Analyze the problem of the case given

II. Introduction

Instruction: Arrange the jumbled word to form a new word.

LIGATIONOBS
Questions:
1. What was the word?
2. Do we have obligations to take responsibility in our life?
3. Do obligations really matter?

Discussion:
OBLIGATIONS
General Provisions
Article 1156. An obligation is a juridical necessity to give to do or not to do. (n)

OBLIGATION – The term obligation is derived from the latin word “obligation” which means a
“tying” or binding.
- It is a tie low or a juridical bond by virtue of which one is bound in favor of
another to render something – and this may consist in giving a thing, doing a
certain act, or not doing a certain act
- Manresa defines the term as a “ legal relation established between one party
and one another, whereby the latter is bound to the fulfillment of a prostration
which the former may demand of him.
- Article 1156 gives the Civil Code definition of obligation, in its passive aspect.
Meaning of Juridical Necessity
- Obligation is a juridical necessity because in case of non- compliance, the courts
of justice may be called upon to enforce its fulfillment or, in default thereof, the
economic value that it represents.
Nature of obligations under the Civil Code
- Obligations which give to the creditor or oblige a right of action in courts of
justice to enforce their performance are known as civil obligations. They are to
be distinguished from natural obligations which not being based on positive law
but on equity and natural law.
Essential requisites of an obligation
- An obligation as defined in Article 1156 is constituted upon the concurrence of
the four (4) essential elements thereof, namely:

(1) A passive subject (called debtor or obligor) or the person who is bound to the
fulfillment of the obligation; he who has a duty;
(2) An active subject (called creditor or oblige) or the person who is entitled to
demand the fulfillment of the obligation; he who has a right
(3) Object or prostration (subject matter of the obligation) or the conduct
required to be observed by the debtor. It may consist in giving, doing or not
doing.
(4) A juridical or legal tie (also called efficient cause) or that which binds or
connects the parties to the obligation.
Form of obligation
- As a general rule, the law does not require any form in obligations arising from
contracts for their validity or binding force.
- Obligations arising from other sources do not have any form at all

Obligation, right and wrong (cause of action) distinguished

(1) Obligation is the act or performance which the law will enforce
(2) Right, on the other hand, is the power which a person has under the law, to demand
from another any prostration
(3) A wrong, (cause of action), according to its legal meaning, is an act or omission of one
party in violation of the legal right or rights of another, causing injury to the latter;

Essential elements of cause of action

(1) Its essential elements are:
(a) A legal right in favor of a person (creditor/plaintiff) by whatever means and under
whatever law it arises or is created
(b) A correlative legal obligation on the part of another (debtor/defendant) to respect
or not to violate said right;
(c) An act or omission in breach or violation of said right by the defendant with
consequential injury or damage

Injury, damage and damages distinguished

The words “injury”, “damage” and “damages” are sometimes used synonymously,
although there is material difference among them.
Injury – is the illegal invasion of a legal right; it is the wrongful act or omission which causes loss
or harm to another, while damage is the loss, hurt or harm which results from the injury. On
the other hand, damages, denote the sum of money recoverable as amends for the wrongful
act or omission. Injury is the legal wrong to be redressed, while damages are the recompense
or compensation awarded or recoverable for the damage or loss suffered.
Kinds of obligation according to subject matter
Real Obligation - (obligation to give) or that in which the subject matter is a thing which
the obligor must deliver to the oblige
Personal Obligation – (obligation to do or not to do) or that in which the subject matter
is an act to be done or not to be done
2 Kinds of Personal Obligation:
a. Positive Personal Obligation or Obligation to do or to render service
b. Negative Personal obligation or obligation not to do (which naturally includes
obligations)
Obligations arise from:
1. Law – when they are imposed by the law itself,e.g., obligation to pay taxes; obligation to
support one’s family

2. Contracts – when they arise from the stipulation of the parties,e.g., the obligation to
repay a loan by virtue of an agreement

3. Quasi-contracts – when they arise from lawful, voluntary and unilateral acts which are
enforceable to the end that no one shall be unjustly enriched or benefited at the
expense of another

4. Crimes or acts or omissions punished by the law – when they arise from civil liability
which is the consequence of a criminal offense

5. Quasi- delicts or torts – when they arise from damage caused to another through an act
or omission, there being fault or negligence, but no contractual relation exists between
the parties

The enumeration by the law is exclusive; hence, there is no obligation as defined in Article
1156, if its source is not any of those enumerated.

Sources classified
The law enumerates five (5) sources of obligations. They may be classified as
follows:
1. Those emanating from law; and
2. Those emanating from private acts which may be further subdivided into:
- Those arising from licit acts; in the case of contracts and quasi-contracts; and
- Those arising from illicit acts, which may be either punishable by law in the case of
delicts, or not punishable in the case of quasi-delicts
Legal Obligations
- Article 1158 refers to legal obligations or obligations arising from law. They are not
presumed because they are considered a burden upon the obligor. They are
 exception, not the rule. To be demandable, they must be clearly set forth in the
law.
1. An employer has no obligation to furnish free legal assistance to his
employees because no law requires this, and therefore, an employee may
not recover from his employer the amount he may have paid a lawyer hired
by him to recover damages caused to said employee by a stranger or
strangers while in the performance of his duties.
2. A private school has no legal obligation to provide clothing allowance to its
teachers because there is no law which imposes this obligation upon schools.

Contractual Obligations
A contract is a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service.
1. Binding Force – Obligations arising from contracts are governed primarily by the
agreement of the contracting parties. Once perfected, valid contracts have the force of
law between the parties who are bound to comply therewith in good faith, and neither
one may without the consent of the other, renege therefrom.

2. Requirements of a valid contract – As a source obligation, a contract must be valid and

enforceable. A contract is valid if it is not contrary to law, morals, good customs, public
order and public policy.

3. Where contract requires approval by the government – Where a contract is required to

be verified and approved by the government before it can take effect such contract
becomes the law between the contracting parties only when approved and where there
is nothing in it which is contrary to law, etc, its validity must be sustained.

4. Compliance in good faith – it means compliance or performance in accordance with the

stipulations or terms of the contractor agreement. Good faith and fair dealing must be
observed to prevent one party from taking unfair advantage over the other.

5. Liability for Breach of Contract – the contract imposes no penalty for its violation, a
party cannot breach it with impunity. Our law on contracts recognizes the principle that
actionable injury inheres in every contractual breach.

6. Preservation of interest of promise – a breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost or suffered.
Quasi-contractual obligations
- A quasi-contract is that juridical relation resulting from certain lawful, voluntary
and unilateral acts by virtue of which the parties become bound to each other to
the end that no one will be unjustly enriched or benefited at the expense of
another.
Kinds of Quasi-contracts
The principal kinds of quasi-contracts are negotiorum gestio and solutio indebiti.
1. Negotiorum gestio - is the voluntary management of the property of affairs of another
without the knowledge or consent of the letter. Thus, if through the efforts of X, a
neighbor, the house of Y was saved from being burned, Y has the obligation to
reimburse X for the expenses X incurred although Y did not actually give his consent to
the act of X in saving his house on the principle of quasi-contract.

2. Solutio indebiti - is the juridical relation which is created when something is received
when there is no right to demand it and it was unduly delivered through mistake.

3. Other cases – Other of quasi-contracts are provided in Article 2164 to 2175 of the Civil
Code.

Civil liability arising from crimes or delicts.

This article deals with civil liability arising from crimes or delicts.
(1) The commission of an offense has a two-pronged effect: one, the public as it breaches
the social order and the other, upon the private victim as it causes personal sufferings
or injury, each of which is addressed, respectively, by the imposition of heavier
punishment on the accused and by an award of additional damages to the victim.

(2) Oftentimes, the commission of a crime causes not only moral evil but also material
damage. From this principle, the rule has been established that every person criminally
liable for a felony is also civilly liable.

Reservation of right recover civil liability.

Under the present rule, only the civil liability arising from the offense charged is deemed
instituted with the criminal action unless the offended party waives the civil action, reserves his
right to institute it separately, or institutes the civil action prior to the criminal action.
Scope of civil liability.
The extent of the civil liability arising from crimes is governed by the Revised Penal Code
and the Civil Code.
(1) Restitution;
(2) Reparation for the damage caused; and
(3) Indemnification for consequential damages.

Obligations arising from quasi-delicts.

The above provision treats of obligations arising from quasi-delicts or torts.
A quasi-delict – is an act or omission by a person which causes damage to another in his person,
or rights giving rise to an obligation to pay for the damage done, there being fault or negligence
but there is no pre-existing contractual relation between the parties.

Requisites of quasi-delict.
Before a person can be held liable for quasi- delict, the following requisites must be present:
(1) There must be an act or omission by the defendant;
(2) There must be fault or negligence of the defendant;
(3) There must be damage caused to the plaintiff;
(4) There must be a direct relation or connection of cause and effect between the act or
omission and the damage; and
(5) There is no pre-existing contractual relation between the parties.
Crime distinguished from quasi-delict.
The following are the distinctions:
(1) In crime or delict, there is criminal or malicious intent or criminal negligence, while in
quasi-delict, there is only negligence;
(2) Crime affects public interest, while quasi-delict concerns private interest;
(3) In crime, there are generally two liabilities: criminal and civil, while in quasi-delict, there
is only civil liability;
(4) In crime or delict, the purpose is punishment, while in quasi-delict, indemnification of
the offended party;
(5) Criminal liability can not be compromised or settled by the parties themselves, while
the liability for quasi-delict can be compromised as any other civil liability;
 (6) In crime, the guilt of the accused must be proved beyond reasonable doubt, while in
quasi-delict, the fault or negligence of the defendant need only be proved by
preponderance of evidence; and
(7) In crime, the liability of the person responsible for the author of the negligent act or
omission is subsidiary, while in quasi-delict, it is direct and primary.
Recovery of damages twice for the same act or omission prohibited.
The same negligent act or omission causing damage may produce civil liability arising from
a crime under Article 100 of the Revised Penal Code or create an action for quasi-delict under
Article 2176.
Activity 1:
1. What are the sources of Obligations? Explain each one of them

2. In your own opinion, what is Obligations and how does it affects your daily life?

3. Discuss what is a Quasi-Contractual Obligations and its kinds?