University of the Cordilleras

College of Accountancy
Obligations and Contracts

Teaching and Learning Objectives:

At the end of this module, the student must be able to grasp the following
concepts:

1. The concept of Obligation

2. Essential Requisites of an Obligation
3. The Different Kinds of Obligations
4. The Sources of Obligations.

Obligations
Art 1156. New Civil Code.

An Obligation is a Juridical necessity to give, to do or not to do.

An obligation is a juridical relation (legal relation between people or a

relationship created by law), whereby a person (called the creditor / Obligee)
may demand from another person(called the debtor /obligor) the
observance of a determinative conduct, and in case of breach, may obtain
satisfaction from the assets of the latter. (Makati Stock Exchange v. Campos,
G.R. No. 138814 (2009)).

An obligation is a Juridical Necessity or a legally necessary act because

incase of noncompliance, the debtor may be held liable by the court.

From the definition above and in relation to Article 1156 of the Civil Code
of the Philippines, we can say that in an Obligation, a person called the
Creditor or Obligee may demand from another person called the Debtor or
obligor the performance of an act which can either be an act “to give”, “to
do”, or “not to do”.

An obligation may consist of an act “to give”, “to do”, or “not to do”. One
who has an obligation must comply with such obligation because in case of
non fulfillment the courts may enforce it against him that is why it is called a
Juridical Necessity.

In an Obligation, the CREDITOR / OBLIGEE will have the RIGHT to DEMAND

compliance with the obligation from the DEBTOR / OBLIGOR. The DEBTOR /
OBLIGOR will have the duty to comply or to fulfill the obligation otherwise he
might be subjected to damages and to liabilities under the law.
 Essential Requisites of an Obligation
These essential requisites are required to be present in order for there to be
a Valid Obligation. Without a valid obligation, there can be no right acquired
by the creditor and likewise there will be no act required of the debtor.

The following are the Essential requisites of an Obligation:

1. Passive Subject
The passive subject refers to the Debtor or the Obligor. He is the person
who is bound to comply with the obligation.

2. Active Subject
The Active subject refers to the Creditor or the Obligee. He is the person
who is entitled to demand fulfillment of the obligation from the Debtor /
obligor.

3. Object or Prestation / Subject

This refers to the subject matter of the obligation. It is the one which is
required to be given, to be done, or not to be done.

4. Legal Tie
This refers to what binds the parties together in the obligation. The legal tie
can be determined by looking into what is the source of obligation under
Art 1157 of the Civil Code.

Example: Jose and Brian entered into a contract where Jose obliged himself
to fix the house of Brian for a sum of money. Here, the passive subject is Jose
since he is the one who is bound to comply with the obligation. He can also be
referred to as the Debtor or Obligor. Brian on the other hand is the Creditor or
the Obligee thus, he is the Active subject since he is the one who has the right
to demand fulfillment of the obligation from Jose. The object of the obligation
here is the “fixing of the house”. The legal tie is the Contract since it is the one
which creates a legal tie between Jose and Brian. This legal tie is found under
Article 1157.

Note: Remember that if any of these requisites are absent then there can be
no valid obligation. Without a valid obligation, the parties would not have their
respective duties and rights. None of them may demand from the other.

Kinds of Obligations according to Subject

1. Real Obligations
These are obligations TO GIVE something to another person. The thing to
be given can either be a SPECIFIC object or a GENERIC object, which will be
discussed in the later portions.

Ex. Jose sold his Piano to Brian. Here , Jose has the obligation to give the Piano
to Brian
2. Personal Obligations
These are obligations TO DO and NOT TO DO. We can further classify it as:

A. Positive Personal Obligation - these are obligations TO DO. These

includes the performance of an act or the rendering of some service.

Ex. Jose and Brian entered into a contract where Jose obliged himself
to paint Brian’s house. This is an obligation TO DO since the obligation
is to do something which is to paint the house.

B. Negative Personal Obligation - these are obligations NOT TO DO. Here,

the Creditor and Debtor enter into an agreement regarding not doing
something.

Ex. Jose and Brian entered into a contract where they both agreed
that they both CANNOT build anything within one meter from each of their
land’s border.

Sources of obligations (Art. 1157, NCC)

The following are the sources of an obligation:

1. Law - These are obligations created by the law.

Ex. A. The obligation to pay business taxes. This obligation is provided for
in our tax laws.
B. Obligation to support the family. This obligation is imposed by the
Family Code of the Philippines.

2. Contracts - A contract is the meeting of the minds of two parties. If they

have agreed as to the object and the consideration of the contract then
there is already a perfected contract which gives rise to an obligation.

Ex. Jose and Brian entered into a contract of sale of a parcel of land. Here
because of the contract, Jose and Brian will have their own respective
obligations to each other.

3. Quasi Contracts - Lawful, Unilateral voluntary acts which are enforceable so

that no one shall be unjustly enriched or benefited at the expense of another
person. In quasi contracts, although there is no formal agreement between
the parties, the law treats it as if there is a contract. An obligation is formed
between two people despite not having an agreement. There are two kinds
of Quasi Contracts:

Two Kinds of Quasi-Contracts

A. Negotiorum Gestio - The voluntary management of the property of
another person without the knowledge or consent of the other person.
Here the person whose property was managed by another will have the
obligation to reimburse the managing person any amount that he might
have incurred in managing the property.
 Ex. Jose and Brian are neighbors. One day Jose went to Manila, he left
his house without any person to watch over it. While in Manila, a fire
broke out of Jose’s house. His neighbor Brian went to his house and
took out the fire.

Here, there was VOLUNTARY MANAGEMENT of the property of another

as can be seen from the management of Brian of Jose’s house. Brian,
in saving Jose’s house, managed his property without his consent.

This voluntary management gives rise to an obligation. The obligation

of Jose in reimbursing Brian any amount that he might have incurred in
saving his property.

B. Solutio Indebiti - There is solutio indebiti when a person received

something when he has no right to receive such thing like when it was
delivered to him by mistake. Here, the obligation to return the thing to its
rightful owner is formed.

Ex. Jose and Joseph are neighbors. One day a package arrived with
the name of Joseph in it. However the delivery man got confused and
delivered it to Jose instead. Here, since there was delivery by
mistake , and Jose has no right over the thing, he will have the
OBLIGATION to return it to the rightful owner.

4. Acts or Ommissions punishable by law - Obligations may also be derived

from crimes.

Ex. Jose stole Brian’s motorcycle. The court found Jose guilty of Theft.
Here, Jose has the obligation to return the motorcycle of Brian.

5. Quasi delicts - Damage caused by negligence gives rise to an obligation.

Ex. Jose was driving his car on a foggy night when he accidentally hit
the fence of Brian. Here his negligence will give rise to an obligation to
pay the damages he had caused.

Sources

Civil Code of the Philippines

De Leon and De Leon Jr. (2014). The Law on Obligations and Contracts, Rex Book
Store, Manila.

Domingo (2018), Obligations and Contracts, Coaching for Results Publishing,

Itogon Benguet.