Professional Documents
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Essential Elements of Oblicon
Essential Elements of Oblicon
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nature of the obligation depending on the place of the Reason/justification of the article: found in the
performance of the obligation corresponding liability of the creditor for any loss that
is occasioned to the property, since he bears the
Reason behind Art.1163: the obligation to deliver a same from the moment of the perfection of the
thing would be illusory if the debtor were not also obliged contract.
to preserve it. (Tolentino)
Effect of breach: Debtor who fails to exercise the Distinctions between personal and real rights
diligence of a good father of a family in preserving the Personal Right Real Right
thing can be held liable for damages. (Tolentino) power belonging to one - power belonging to a
person to demand of person over a specific
* Note: Art. 1163 can be read in conjunction with Art. 1173. another, as a definite thing, without a passive
passive subject, the subject individually
Art. 1164. The creditor has a right to the fruits of the fulfillment of a determined, against whom
thing from the time the obligation to deliver it arises. prestation to give, to do, such right may be
However, he shall acquire no real right over it until or not to do (Tolentino) personally exercised
the same has been delivered to him. (1095) jus ad rem right - jus in re right
enforceable only enforceable against the
General rule: The creditor or obligee, in an against a definite whole world (e.g. right of
obligation to deliver a determinate thing, is entitled to person or group of ownership, possession,
the fruits from the time the obligation to deliver persons usufruct, or easement)
arises.
Note:
*When does the obligation to deliver the thing Before delivery, the creditor, in obligations to give,
and the fruits arise? has merely a personal right against the debtor – a
Obligations arising from Obligations arising from right to ask for delivery of the thing and the fruits
law, quasi-contracts, contracts thereof; ownership does not pass to the creditor
criminal offenses, quasi- Once the things and fruits delivered, the creditor
delicts acquires real right over such which is enforceable
From the time - General rule: from the against the whole world the creditor only acquires
designated by the moment of the perfection the right of ownership over the thing and the fruits
provisions of the Civil of contract (basis: once they are delivered to him.
Code or of special laws Art.15371)
creating or regulating Art. 1165. When what is to be delivered is a
them determinate thing, the creditor, in addition to the
right granted him by Article 1170, may compel the
Exceptions to the general rule: debtor to make the delivery.
1. In case there is a contrary stipulation of the
parties with respect to the time when the thing or If the thing is indeterminate or generic, he may ask
fruits shall be delivered. that the obligation be complied with at the expense
2. If the obligation is subject to a suspensive of the debtor.
condition obligation to deliver the thing as
well as the fruits shall arise only from the If the obligor delays, or has promised to deliver the
moment of the fulfillment of the obligation; same thing to two or more persons who do not have
otherwise stated, from the moment the condition the same interest, he shall be responsible for any
happens (Art.1187) fortuitous event until he has effected the delivery.
suspensive condition – the happening or
fulfillment of the condition results in the birth of Rights of the creditor in determinate obligations:
the obligation 1. To compel specific performance
3. If the obligation is subject to a suspensive term Such action when the debtor does not comply
or period obligation to deliver arises only with what he has promised and the creditor
upon the expiration of the designated term or demands that he fulfill the same
period The debtor may be compelled to make the
delivery of the very thing agreed upon
Complemented by Art. 1244 par.1 which states
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Art.1537: The vendor is bound to deliver the thing sold and its that the debtor of a thing cannot compel the
accessions and accessories in the condition in which they were upon creditor to receive a different one, although
the perfection of the contract. the latter may be of the same value as, or more
All the fruits shall pertain to the vendee from the day on valuable than that which is due.
which the contract was perfected.
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Implies that its basis is a contractual relation
between plaintiff and defendant (Tolentino) Rights of the creditor in generic obligations:
2. To recover damages for breach of the obligation 1. To ask for performance of the obligation
the delivery of a thing belonging to the species
stipulated will be sufficient and hence, it is not
absolutely necessary for the debtor to make the
delivery himself, since the delivery of anything of
the same species will fulfill the obligation. It may
be performed by another, but at the expense of
the debtor. (substitute performance)
Creditor can only ask for the delivery of a thing
or object belonging to the class or genus
stipulated which must be neither of superior nor
inferior quality (Art.1246)
2. To ask that the obligation to be complied with at the
expense of the debtor
The creditor may ask a third person to perform
the obligation and all expenses incurred shall be
charged against him
3. To recover damages for breach of the obligation
Note:
*Before the thing to be delivered is separated from
others of the same kind (and therefore the obligation
becomes specific), no accessory obligations arise since
the thing has not yet been made determinate; but once
the determination occurs the rules applicable to specific
obligations will immediately follow. (Caguioa)
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iii. Even if the thing is determinate, 3. To deliver all accessions and accessories of the
and the loss occurs by fortuitous event and as a thing even though they may not have been
general rule the creditor should bear the loss, still, mentioned.
in those cases where the debtor is in mora, or 4. To be liable for damages in case of breach of
whose he has promised to deliver the same thing the obligation by reason of delay, fraud,
to two or more persons who do not have the same negligence or contravention of the tenor thereof.
interest, which is equivalent to fraud since there is
present the deliberate intent not to deliver to one Obligations of debtor in generic obligations:
of the two, the law, by way of punishment, shifts 1. To deliver a thing which is neither of superior nor
the burden of loss to the debtor. (Caguioa) inferior quality. (Art. 1246)
2. To be liable for damages in case of breach of
the obligation by reason of delay, fraud,
negligence or contravention of the tenor thereof.
Art. 1166. The obligation to give a determinate thing Deducible from Art. 1263 which states that in an
includes that of delivering all its accessions and obligation to deliver a generic thing, the loss or
accessories, even though they may not have been destruction of anything of the same class or genus
mentioned. (1097a) as that which constitutes the object thereof shall
not extinguish the obligation (the genus of a thing
Accessions—those things incorporated or can never perish)
attached to the principal either naturally or
artificially (e.g., alluvion, buildings, constructions, Dation in payment – property is alienated to the creditor
etc.) in satisfaction of a debt in money
Accessories—those things which although not can be considered as that exception where
incorporated to the principal are added to the an obligor gives something in exchange of
same for its completeness, use, perfection or the “specific” thing to be given, with the
embellishment (e.g., keys to a house, tools of a consent of the obligee
car, etc)
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*if very personal - when the qualifications of the Effects of breach
debtor are involved; the debtor is the only one that must 1. In positive personal obligations to do, if the
perform it obligor fails to do that which he has obligated
*if not personal – performance by an agent is himself to do, the obligee can have the
permitted (substitute performance) obligation performed or executed at the expense
of the former. (Art. 1167, par.2)
2. In case the debtor should have performed the
act agreed upon in contravention of the
agreement, or in a manner that is improper or
inappropriate, the same thing shall be ordered
undone and performed by another at the
expense of the debtor should he refuse to do it
all over again.
3. Obligee can also demand for damages by
reason of the breach. (Art. 1170)
Obligation not to do
- Negative personal obligations – the object of the
obligation is realized or fulfilled so long as that
which is forbidden is not done by the obligor
(Jurado)
- those obligations whose object is the abstention
of the debtor from whatever act which otherwise
he could perform (Caguioa)
- This type of obligation carries with it no
accessory obligation and by its nature is purely
personal to the debtor and consequently, he
himself must abstain or refrain from performing
the conditions prohibited and cannot delegate the
same to an agent, except when there is consent
from the creditor.
- Delay or mora is NOT possible unlike in
positive obligations; obligation is either fulfilled or
not (Jurado)
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2. defects in non-fulfillment
Effects of breach: - those which, without fundamentally affecting the
1. In case the debtor breaches the obligation, the tie of law nor rendering the performance thereof
same shall be ordered undone at his expense. impossible presupposes a defective or an inexact
(Art.1168) performance of what was agreed upon
2. In those cases where it is not possible to undo - example: mora or delay – non-fulfillment in point
the act done either physically or legally, or of time
because the rights of third persons are involved,
or for some other reason, the only feasible OR (other classification of non-fulfillment according to
remedy on the part of the creditor is an Caguioa)
indemnification for the damage caused. 1. total non-fulfillment – no performance
(Art.1170) whatsoever
2. partial non-fulfillment – when there is partial
performance or irregular non-fulfillment when there is
Art. 1169. Those obliged to deliver or to do irregular non-performance.
something incur in delay from the time the obligee - non-fulfillment occurs either at the very moment of
judicially or extra-judicially demands from them the the demand (ordinary breach) or before the maturity
fulfillment of their obligation. of the obligation (anticipatory breach).
However, the demand by the creditor shall not be 2 kinds of Breach of Obligations: (Jurado)
necessary in order that delay may exist: 1. Voluntary – if the debtor or obligor in the
(1) When the obligation or the law expressly so performance of his obligation is guilty of default,
declare; or fraud, negligence, or in any manner contravenes
(2) When from the nature and the circumstances of the tenor thereof; debtor is liable for damages
the obligation it appears that the designation of the Voluntary breach through default or mora
time when the thing is to be delivered or the service (Art.1169)
is to be rendered was a controlling motive for the Voluntary breach through fraud or dolo
establishment of the contract; or (Art. 1171)
Voluntary breach through negligence or
(3) When demand would be useless, as when the culpa (Art. 1172)
obligor has rendered it beyond his power to perform. Voluntary breach through contravention
of tenor of the agreement (Art. 1170)
In reciprocal obligations, neither party incurs in 2. Involuntary – if the non-fulfillment is brought
delay if the other does not comply or is not ready to about by circumstances foreign to the will of the
comply in a proper manner with what is incumbent debtor (Caguioa); otherwise put, if the debtor is
upon him. From the moment one of the parties unable to comply with his obligation because of
fulfills his obligation, delay by the other begins. some fortuitous event; debtor is NOT liable for
(1100a) damages (Art. 1174)
Notes:
“Damages” as used in the above provision
include any and all damages that a human being
may suffer in any and all manifestations of his
life: physical or material, moral or psychological,
mental or spiritual, financial, economic, social,
political and religious. (Tolentino)
Breach of contractual obligation entitles the 10
This type of fraud is that which is contemplated in Art.1338 which
other party damages even if no penalty for such stipulates: “There is fraud when, through insidious words or
breach is provided in the contract. machinations of one of the contracting parties, the other is induced to
enter into a contract which, without them, he would not have agreed
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This right is usually resorted to when other rights are not already to.” (Manresa as cited in Tolentino)
available to the creditor, for instance when a debtor acting in
contravention of the tenor of the obligation cannot physically undo what Deceit is referred to by Jurado as causal or incidental fraud (dolo
he has done. causante or dolo incidente
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Distinctions between the deceit and malice: Responsibility for malice or bad faith:
For the consequences of his malicious
Deceit Malice act, the debtor is liable not only for the results
As to time Exists ahead of the Present only during intended but also for their natural and probable
contractual the performance of consequences even though they haven’t been
obligation, or at the a pre-existing foreseen by the debtor or they exceeded its
birth of the obligation intention
obligation
As to purpose Securing the Evading the normal
This responsibility for malice or bad faith
consent of the other fulfillment of an is demandable in all kinds of obligations but it is
party to enter into obligation necessary that it must be proved and not simply
the contract presumed and results in an aggravation of the
As to result Vitiation of consent Non-fulfillment or damages that are recoverable
of the party upon breach of the Waiver of action for malice or bad
whom it is obligation faith:
employed for o if in advance, i.e. a waiver for a fraud which
entering into the
contract
has not yet been committed void;
As to rights that Gives rise to a right Gives rise to a right prohibited because it is against law and public
arise of the innocent of the creditor or policy
party to ask for the obligee to recover o if past, i.e. a waiver for a fraud already
annulment of the damages from the committed valid; is deemed an act of
contract if the fraud debtor or obligor generosity on the part of the creditor
is causal or to
recover damages if
it is incidental
Art. 1172. Responsibility arising from negligence in
the performance of every kind of obligation is also
What type of fraud is contemplated under demandable, but such liability may be regulated by
Art.1171? the courts, according to the circumstances. (1103)
The fraud referred to in this article is malice or bad
faith. Culpa or fault or negligence
consists in the omission of that diligence which is
Malice or bad faith required by the nature of the obligation and corresponds
any voluntary and willful act or omission which with the circumstances of the persons, of the time and of
prevents the normal realization of the prestation, the place (Art. 1173)
knowing and intending the effects which naturally and omission of that diligence required in social relations
necessarily arise from such act. (Tolentino) which if observed would have prevented the contrary
Manresa: deliberate and intentional purpose to evade and undesired result (Caguioa)
the normal compliance of an obligation (as cited in simply the absence of due care required by the nature
Caguioa) of the obligation (Jurado)
Castan: an act or omission which with awareness and Kinds/classes:12
will to produce an anti-judicial result, prevents the normal a. According to form
compliance of an obligation (as cited in Caguioa) i. Culpa in faciendo (positive act)
2 essential elements: (Caguioa) ii. Culpa in non faciendo (omission)
i. Intellectual awareness (conciencia)
ii. Will (desire to violate a right of credit, “voluntad”) b. According to degree of culpa / diligence13
i. Culpa lata (grave which is the omission of
* Is the intention of the violator determined by the motive the most minimum diligence)
which impelled him to commit the act essential for ii. Culpa leve (omission of the diligence of an
malice or bad faith? ordinary layman or bonus pater familias)
Modern doctrine says that the motive or intention is iii. Culpa levissima (omission of the
irrelevant in civil law. As Diaz Pairo says, there is a maximum diligence of a very careful man)
distinction between a debtor in good faith and a debtor
because of dolo which consequently makes the latter a good faith. (Tolentino & Jurado) The element of intent, and not the
debtor in bad faith. For malice or bad faith to exist, it is degree of actual harm done is the test. (Tolentino)
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sufficient to infringe voluntarily the obligation which falls This classification is patterned after Caguioa’s.
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over the debtor consciously, or with his awareness. The Civil Code follows the modern tendency admitting of no
(Caguioa)11 degrees of culpa but sets up a standard of diligence in that of a good
father of a family, saving agreement to the contrary, and leaving it to
11 the courts either to moderate or aggravate the responsibility of a
In other words, the intention or motive of a debtor in malice is always
irrelevant. It always implies some kind of malice or dishonesty. As person guilty of culpa depending on the circumstances
such, it cannot cover cases of mistake and errors of judgment made in
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c. Most important classification14
i. Culpa contractual Negligence distinguished from fraud
fault or negligence in the performance of a pre- There is malice or dolo when there is
existing contractual obligation resulting in a breach non-fulfillment due to a cause of which the
of obligation (Caguioa & Tolentino) debtor is aware; there is actual knowledge
fault or negligence of the obligor by virtue of There is culpa when there is non-
which he is unable to perform his obligation arising fulfillment due to a cause which the debtor
from a pre-existing contract because of the could or ought to have foreseen; there is
omission of the diligence which is required by the possibility of knowledge
nature of the obligation and corresponds with the There is fortuitous event when there is
circumstances of the persons, of the time and of non-fulfillment for causes which the debtor
the place (Jurado) could not foresee and could not have
ii. Culpa extra-contractual or avoided; there is total absence or
aquiliana possibility of knowledge
failure to observe the care required by law with Distinguishing element of fraud from
respect to other persons not connected by negligence: INTENTION
contract or of any juridical relation whatsoever presence of intent to cause damage or
save the generic one which is common to all men injury dolo
of not damaging another (Caguioa) mere abandonment, inattention,
fault or negligence of a person, who, because carelessness, lack of diligence culpa
of the omission of the diligence which is required
by the nature of the obligation and which must
correspond with the circumstances of the persons, Dolo (malice) Culpa(Fault or
of the time and of the place, causes damage to negligence)
another. (Jurado) The guilty party is The guilty party is not
fault or negligence which constitutes an aware that his conduct aware but should have
independent source of obligation between parties will violate another been aware
not previously bound. (Tolentino) right or duty
There is no There is presumption
Distinctions between culpa contractual and culpa presumption of its because of breach of
aquiliana: existence but it must contract
be proved
CULPA CONTRACTUAL CULPA AQUILIANA The guilty party is The guilty party only
There is pre-existing None. responsible for all the answers for the
contractual relation consequences damages which are
The negligence of the The negligence involved is attributable to his act foreseen or could have
defendant is merely an substantive and whether intended or been foreseen at the
incident in the performance independent. not or foreseen or not time the obligation was
of an obligation constituted
Source of liability—breach Source of liability— Waiver in advance is Allowable unless
or non-fulfillment of the negligent act or omission not allowed contrary to public
contract itself policy
There is presumption of Plaintiff must prove the
negligence from the existence of negligence Responsibility for fault or negligence:
breach of the contract If the debtor or obligor is unable to comply with
The master cannot exempt The master is free from his obligation because of his fault or negligence,
himself by proving due liability upon proof of such the creditor or obligee can hold him liable for
diligence in the selection diligence damages.
and supervision of The liability arising from negligence in the
employee performance of every kind of obligation may be
Damages may be claimed A stranger may claim regulated by the courts. The court may increase
only by the parties, their damages such as the or decrease the liability of the party at fault
heirs and privies relatives and dependents depending upon the circumstances of each
Negligence referred to in Negligence referred to in case.
Art.1173 Art. 217615
15
Art. 2176: Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
14
According to Jurado, negligence may either be criminal or civil. Such fault or negligence, is there is no pre-existing contractual relation
Culpa aquiliana and culpa contractual are the two kinds of civil between the parties, is called a quasi-delict and is governed by the
negligence. provisions of this Chapter.
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Exemptions from liability:
(1) in which a party to a contract is relieved from the If the law or contract does not state the diligence
effects of his fault or negligence by a third which is to be observed in the performance, that
person which is expected of a good father of a family shall
(2) in which one party to a contract renounces in be required. (1104a)
advance the right to enforce liability arising from
the fault or negligence of the other.
General degree of diligence required:
Notes: When neither the law nor the obligation itself states
Test of negligence: If the defendant in doing the degree of diligence required of the obligor or debtor
the alleged negligent act DID NOT use the in the performance or fulfillment of the obligation, the
reasonable care and caution which an ordinarily standard diligence required is “that which would be
prudent person would have used in the same observed by a good father of a family”.
situation, he is guilty of negligence.
Waiver of action for negligence: Exceptions:
o Future negligence can be waived, unless 1. when the parties stipulated another degree of
the nature of the obligation and public policy diligence required
should require extraordinary diligence; or if 2. when the law requires a higher degree of diligence
the negligence is so gross that it amounts to - example: common carriers (Art.1733, par.1)17
malice or bad faith
o Past negligence all the more valid “good father of a family” (bonos paterfamilias)
Effect of good/bad faith a person of ordinary or average diligence
o If the obligor has acted
in good faith, he shall be liable only for
Notes from class:
natural and probable consequences of the
3 quantum of diligence:
breach of the obligation and which the
1. extraordinary diligence
parties have foreseen or could have
2. diligence of a good father of a family (DOAGFOAF)
reasonably foreseen at the time the
general degree of diligence expected of an owner of a
obligation was constituted.
property
o If the negligence of the
3. simple diligence
obligor shows bad faith, provisions of Arts.
1171 and 2201, par.216 shall apply. It is in
this case that the boundary line, at least with
regard to effects, between negligence and Summary of remedies available to the creditor in
fraud disappears altogether; otherwise put, cases of non-fulfillment:
when negligence shows bad faith the rules
on fraud or dolo shall govern. Remedies of creditor for non-fulfillment
Effect of contributory negligence: If there was The creditor may either demand specific performance
contributory negligence of the obligee or and where it is not possible, equivalent or substitute
creditor, the effect is to reduce or mitigate the performance:
damages which he can recover from the obligor a. Remedies in obligations to give:
or debtor as a result of the breach of the The creditor could obtain the same through
obligation. BUT, if the negligent act or omission the exercise of the action known as specific
of the obligee or creditor was a proximate cause performance. If the obligation is to deliver a
of the event which led to the damage or injury generic or indeterminate thing and the same
complained of, he cannot recover. (Jurado) is within the patrimony of the debtor, again
the creditor may demand for specific
performance.
In other cases, the creditor may demand
Art. 1173. The fault or negligence of the obligor
that the obligation be performed at the
consists in the omission of that diligence which is
expense of the debtor, which means to say
required by the nature of the obligation and
that the thing will be acquired at the expense
corresponds with the circumstances of the persons,
of the debtor if that is possible and later on
of the time and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and 2201,
paragraph 2, shall apply. 17
Art.1733, par.1: Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary
16
Art. 2201, par.2: In case of fraud, bad faith, malice or wanton diligence in the vigilance over the goods and for the safety of the
attitude, the obligor shall be responsible for all damages which may be passengers transported by them, according to all circumstances of
reasonably attributed to the non-performance of the obligation. each case.
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delivered to the creditor (substitute Fortuitous Event
performance) an event which could not be foreseen, or which,
though foreseen, was inevitable.
Requisites for substitute performance: includes unavoidable accidents, even if there has
There be non-fulfillment of the obligation either been an intervention of human element, provided fault or
totally or partially whether non-performance or negligence cannot be imputed to the debtor. (Tolentino)
mere delay, and the same is imputable to the Negative Def: that incident not imputable to the debtor
debtor which impedes the exact fulfillment of the obligation.
Specific performance is not possible (Caguioa)
There exists a compensable damage or injury Positive Def: event not imputable to the debtor which
There is a casual relation as of cause and is unforeseen or although foreseen is inevitable and
effect between the non-fulfillment of the which renders impossible to exact fulfillment of the
obligation and the damage done. The obligation (Caguioa)
indemnification for damages covers both the may be:
injury suffered (damnum emergens or daño As to cause
emergente) and the loss of profits (lucrum a. fortuitous event proper
cesans or lucro cesante) – or that which is caused by an “act of God”
– examples: earthquakes, floods, storms,
b. Remedies to obligation to do: epidemics, fires, etc.
When it treats of obligations that are not of b. force majeure
obligations that are not personal and – where there is human intervention
therefore can be performed by anybody, -- examples: armed invasion, attack by robbers,
performance in the specific manner can be attack by bandits
demanded not by the debtor himself, but by *Note: Essentially, there is NO substantial difference
other persons at the expense of the debtor between the two, they both refer to an event or
(substitute performance). This same rule will cause which is independent of the will of the obligor.
apply where the debtor has performed the As to foreseeability18
act in contravention of the obligation in a. ordinary fortuitous event
which case what has been done will be - refers to an event which usually happens
ordered undone and done according to the or which could have been reasonably
obligation, all at the expense of the debtor. foreseen
When it treats of very personal obligations - example: tropical storms, floods
which only the debtor can perform with utility b. extraordinary fortuitous event
to the creditor as for example a work of art, it - refers to an event which does not usually
is not possible to demand specific happen and which could not have been
performance and is substituted by reasonably foreseen
performance by equivalent or - examples: fire, war, pestilence, unusual
indemnification for damages. Where the flood (Ondoy), locust, earthquake
obligation requires the declaration or
performance of a voluntary act by the characteristics/requisites:
debtor, modern doctrine admits of specific (1) the cause of the unforeseen and unexpected
performance in such cases, substituting the occurrence, or the failure of the debtor to
will of the debtor with that of the judge. comply with his obligations, must be
c. Remedies in obligations not to do: independent of the human will
The creditor may ask that the same be (2) it must be impossible to foresee the event which
undone at the expense of the debtor constitute the caso fortuito, or if it can be
Where above is not possible legally or physically, the foreseen, it must be impossible to avoid
only alternative is performance by equivalent or o possibility of foreseeing the event –
damages. should be appreciated rationally
according to the circumstances
o inevitableness of the event – varies
Art. 1174. Except in cases expressly specified by the according to the case and
law, or when it is otherwise declared by stipulation, circumstances and must have a relation
or when the nature of the obligation requires the with the means of the debtor and
assumption of risk, no person shall be responsible therefore with the degree of diligence he
for those events which could not be foreseen, or should have exercised.
which, though foreseen, were inevitable. (1105a)
18
According to Caguioa, this classification must be based on the
frequency of the occurrence.
13
(3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation Notes:
in a normal manner In order that a fortuitous event may exempt a person
(4) the obligor must be free from any participation in from liability, it is necessary that he be free from any
the aggravation of the injury resulting to the previous negligence or misconduct by reason of
creditor which the loss may have been occasioned.
(Southeastern College Inc. vs. CA); otherwise put,
Effects of fortuitous event on liability: the fortuitous event must not only be the proximate
General rule: The effect of fortuitous event is to cause of the loss or destruction, but that it must be
exempt the debtor from liability for the non- the SOLE cause.
fulfillment of the obligation and to the payment of
damages to the creditor. His obligation is
extinguished.
Art. 1175. Usurious transactions shall be governed
Exceptions: by special laws. (n)
b.The law expressly so provides as in the case of
aleatory contracts Usury contracting for or receiving something in
example: Arts. 552, par.219 excess of the amount allowed by law for the loan or
c. The parties expressly so stipulated forbearance of money, goods or chattels; the taking of
d.The nature of the obligation requires the more interest for the use of money, goods or chattels or
assumption of risk as in the case of insurance credit than the law allows.
contracts
Assumption of risk The special laws referred to are the Usury Law
– refers to a situation in which the obligor or (Act. No. 2655) and the different laws amending it.
debtor, with full knowledge of the risk voluntarily Usury Law provided for a legal rate interest of 6%
enters into some relation with the obligee or per annum and a contractual rate not exceeding
creditor 12% per annum if the loan is secured by a duly
- ordinarily requires knowledge and the registered real estate, and 14% if not so secured.
appreciation of the risk and the voluntary choice to Usury Law was repealed during the martial law
encounter it. period, leaving parties free to stipulate higher
- doctrinal basis: no wrong is done to one who rates.
consents (volenti non fit injuria) There is now no longer any ceiling in interest rates
- based on social justice; it is based on an ethico- on loans pursuant to Central Bank Circular No.
economic sensibility of modern society, which has 224 issued last Dec.1, 1982.
noted the injustices which industrial civilization has
created
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