V. Obligations A. General Provisions

V.
OBLIGATIONS
A. GENERAL PROVISIONS
1. Definition
Q: What is an obligation?
ANS: An obligation is ajuridical necessity to give, to do, or not to do (Civil Code, Art.
1156).
Q: Does the law require a particular form of obligations?

ANS: For obligations arising from contracts, the law does not require any form because
contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the
law requires that a contract be in some form in order that it may be valid or
enforceable, or that a contract be in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain way, that requirement is absolute
and indispensable (NCC, Art. 1356).
For obligations arising from other sources, they do not have any form at all (De Leon,
Comments and Cases on Obligations and Contracts, 2014, p. 3) [hereinafter De Leon,
Obligations and Contracts].
Q: Are legal obligations presumed and how do they become demandable?

ANS: Obligations derived from law are not presumed. Only those determined in the Civil
Code or in special laws are demandable, and shall be regulated by the precepts of the
law which established them; and as to that has not been foreseen, by the provisions of
Book IV (Civil Code, Art. 1158).
2. Elements of an obligation
Q: What are the elements of an obligation?

ANS: The obligation is constituted upon the concurrence of the following elements:
(JAPO)
1. The Vinculuimn Juris or Juridical tie the efficient cause established by the various
sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts);
2. The subject persons who, Viewed from the demandability of the obligation, are
the:
a. Active subject – known as the oblige or creditor, which can demand
fulfillment of the obligation;
b. Passive subject – known as the obligor or debtor, against whom the
obligation is juridically demandable; and
3. Objects the prestation or conduct, required to be obvserved such as to give, to
do, or not to do (The Wellex Group, Inc. v. U-Land Airlines, Co. Ltd., G.R. No.
167519, Jaunary 14, 2015).
3. Sources of obligations
Q: What are the source of obligations? (LC-QAO)

ANS: Obligations arise from:
1. Law;
2. Contracts;
3. Quasi-contracts
4. Acts or omissions punished by law; and
5. Quasi-delicts (New Civil Code NCC, Art. 1157)
Note: The list of sources is exclusive (Sagarda Orden v. NACOCO, G.R. No. L-3756, June
30, 1952).
Q: What is a quasi-contract?
ANS: Quasi-contracts are judicial relations arising from certain lawful, voluntary and
unilateral acts, by virtue of which the parties become bound to each other, based on the
principle that no one shall be unjustly enriched or benefited at the expense of another
(Civil Code, Art. 2142).
Q: What aret he kidns of quasi-contracts?

ANS: The kinds of quasi-contracts are as follows:
1. Negotiorum Gestio, which exists when one:
a. Voluntarily takes charge of the agency or management of the business or
property of another; and
b. Without any power from the latter.
Note: The officious manager is obliged to continue the same until the termination
of the affair and its incidents, or to require the person concerned to substitute
him, if the owner is in a position to do so (Civil Code, Art. 2144).
2. Solution indebiti which exists when:
a. Something is received;
b. When there is no right to demand it; and
c. It was unduly delivered through mistake.
Note: Consequently the obligation to return it arises (Civil Code, Art. 2154).
Q: When is negotiorum gestio not applicable?

ANS: Negotiorum gestio is not applicable in the following cases:
1. When the property or business is not neglected or abandoned, in which case the
following provisions of the Civil Code regarding unauthorized contracts shall
govern:
a. No one may contract in the name of another without being authorized by
the latter, or unless he has by law a right to represent him. A contract
entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the other
contracting party (Civil Code, Art. 1317).
b. Contracts entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted beyond
his powers are unenforceable, unless they are ratified (Civil Code, Art.
1403, no.1); and
c. Unauthorized contracts are governed by article 1317 and the principles of
agency in Title X of Book IV. (Civil Code, Art. 1404); or
2. The manager has been tacitly authorized by the owner, in which case the rules on
agency shall govern (Civil Code, Art. 2144).
Q: Does criminal liability entail civil liability?

ANS: Yes. Every person criminally liable for a felony is also civilly liable (Revised Penal
Code, Art. 100). Every crime gives rise to (1) a criminal action for the punishment of the
guilty party and (2) a civil action for the restitution of the thing, repaid of the damage,
and indemnification for the losses (Romero v. People of the Philippines, G.R. No.
167546, July 17, 2009).
Note: Underlying this legal principle is the view that from the standpoint of its effects, a
crime has dual character: (1) as an offense against the state because of the disturbance
of the social order; and (2) as an offense against the private person injured by the crime
(Occena v. Icamina, G.R. No. 82146, January 22, 1990).
Q: Can there be a case when there is criminal liability but no civil liability?
ANS: Yes. Criminal liability will give rise to civil liability ONLY if the felonious act or
omission results in damage or injury to another and is the direct and proximate cause
thereof (Romero v. People of the Philippines, G.R. No. 167546, July 17, 2009). Hence,
where there are no damages to be compensated or there is no private person injured by
the crime (e.g. crime of treason, rebellion, espionage, and contempt), no civil liability
arises on the part of the offender (Oceana v. Icamina, G.R. No. 82146, January 22, 1990).
Note: The civil liability for crimes is extinguished by the same causes provided by the
Civil code for the extinguishment of other obligations. Such liability continues
notwithstanding the fact that the offender has served his sentence or has not been
required to serve the same by reason of amnesty, person, commutation of sentence, or
any other reason (4 Tolentino, commentaries and Jurisprudence on the Civil Code, p. 75)
[hereinafter 4 Tolentino, Civil Code].
Q: What is the scope of civil liability arising from crimes?

ANS: Civil liability includes restitution reparation of the damage caused, and
indemnification for consequential damages (Revised Penal Code, Art. 104).
Q: What is a quasi-delict?
ANS: It is an act or omission by a person (tortfeasor) which causes damage to another in
his person, property, or rights giving rise to an obligation to pay for the damage done,
there being fault or negligence but no pre-existing contractual relations between the
parties (Civil Code, Art. 2176).
Q: What are the requisites of quasi-delict?

ANS: To sustain a claim based on a quasi-delict, the following requisites must concur;
DFC)
1. Damage suffered by the plaintiff;
2. Fault or negligence of the defendant;
3. Casual connection between the fault or negligence of defendant and the damage
incurred by the plaintiff (Guillang v. Bedania, G.R. No. 162987, May 21, 2009).
B. NATURE AND EFFECT OF OBLIGATIONS

1. Obligation to give
Q: Can a single act or omission give rise to different causes of action?

ANS: Yes. A single negligent act may give rise to at least two separate and independent
liabilities, namely the civil liability arising from a crime and the liability arising from
negligence. These concepts of faults are so distinct from each other that the
exoneration of one does not result to the exoneration of the other (Cancio, Jr. v. Isip,
G.R. No. 133978, November 12, 2002).
Note: The civil action based on Article 2117 of the Civil Code shall proceed
independently of the criminal action and shall require only a preponderance of
evidence. In no case, however, may the offended party recover damages twice for the
same act or omission charged in the criminal action (Rules of Court, Rule 111, Sec. 3).
Q: When is a thing specific or determinate?

ANS: A thing is determinate when it is particularly designated or physically segregated
from all other of the same class (NCC, Art. 1460, par. 1).
Q: What are the obligations of a debtor obliged to give a determinate or specific

thing?
ANS: The following are the duties of a debtor in obligation to give a determinate thing:
(CFAT-D)
1. To preserve or take care of the thing due with the proper diligence of a good
father of family unless another standard of care is required by law or stipulated
by the parties (NCC, Art. 1163);
2. To deliver the fruits of the thing (NCC, Art. 1164);
3. To deliver all accessions and accessories of the thing although not mentioned
(NCC, Art. 1166);
4. To deliver the things itself. The debtor of a thing cannot compel the creditor to
receive a different one, although the latter may be of the same value as, or more
valuable than that which is due (See NCC Arts. 1163, 1233, 1244; as to kinds of
delivery, Arts. 1497-1501); and
5. To be liable for damages in case of delay, fraud, negligence, or contravention of
tenor thereof (Civil Code, Art. 1170).
Note: Accession signifies all of those things which are produced by the thing which is the
object of the obligation as well as all of those which are incorporated or attached
thereto, either natural y or artificially (NCC, Art. 440). Accessories signifies all of those
things which have for their object the embellishment use or preservation of another
thing which is more important and to which they are no incorporated or attached
(Jurado, Obligations and Contracts, 2010, p. 48), [hereinafter Jurado, Obligations and
Contracts].
Q: What are the rights of the obligee or creditor in an obligation to give a determinate
or specific thing?
ANS: The rights are the following: (SF2RD)
1. To compel, Specific performance with the right to be indemnified for damages
(NCC, Art. 1165);
2. Right to the Fruits of the thing from the time the obligation to deliver it arises
(NCC, Art. 1164);
3. If the obligor delays, or has promised to deliver the same thing to two or more
persons who do not have the same interest, the creditor has the right to hold the
obligor responsible for any fortuitous event until the latter has effected delivery
(NCC, Art. 1165, par. 3);
4. To demand Recission of the obligation with right to recover damages, should the
obligation be reciprocal (Civil Code, Art. 1191); and
5. To demand payment of damages if the other party is guilty of fraud, negligence,
or delay in the performance of their obligation, and those rules in any manner
contravene the tenor thereof (NCC, Art. 1170).
Q: When is a thing generic or indeterminate?

ANS: A thing is generic or indeterminate in the sense that it is designated merely by its
class or genus without any particular designation or physical segregation from all others
of the same class, the loss or destruction of anything of the same kind even without the
debtor’s fault and before he has incurred in delay will nothave the effect of
extinguishing an obligation (Gaisano Cagayan, Inc. v. Insurance Company of North
America, G.R. No. 147839, June 8, 2006).
Q: What are the duties of a debtor in an obligation to give an indeterminate or generic

thing?
ANS: The duties are the following:
To deliver a thing which is neither of superior nor inferior quality, taking into
consideration the purpose and circumstances of the obligation (NCC, Art. 1246); and
To be liable for damage in case of delay, fraud, negligence, or contravention of the tenor
thereof (NCC, Art. 1170).
Q: What are the rights of the creditor in an obligation to give an indeterminate or

generic thing?
ANS: The rights are the following:
1. To ask for performance of the obligation (Jurado, Obligations and Contracts,
supra at 46);
2. To ask that the obligation be complied with at the expe nse of the debtor (NCC,
Art. 1165, par. 2); and
3. To recover damages in case of fraud, negligence, delay, or contravention of the
tenor of the obligation (Civil Code, Art. 1170).
Q: when does the obligation to deliver arise?

ANS: The obligation to deliver arises:
1. Generally, the obligation to deliver the thing due and, consequently, the fruits
thereof, if any, arises from the time of the perfection of the contract;
2. If the obligation is subject to a suspensive condition or period, it arises upon the
fulfillment of the condition or arrival of the period;
3. In a contract of sale, the obligation arises from the perfection of the contract
even if the obligation is subject to a suspensive condition or a suspensive
condition or a suspensive period where the price has been paid;
4. In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts,
the time of performance is determined by the specific provisions of law
applicable (De Leon, Obligations and Contracts, supra at 36-37).
Q: What are the fruits contemplated under Article 1164?

ANS: The fruits contemplated under Article 1164 are the following:
1. Natural fruits which are the spontaneous products of the soil and the young and
other products of animals;
2. Industrial fruits which are those produced by lands of any kind through
cultivation or labor; and
3. Civil fruits which may be the rents of buildings, the price of leases of lands and
other property and the amount of perpetual or life annuities or other similar
income (Civil Code, Art. 442).
2. Obligation to do or not to do
Q: If the person obliged to do something fails to perform the obligation, or does it in
contravention of the tenor of the obligation, what are the remedies of the obligee or
creditor?
ANS: The obligee or creditor has the right:
1. To have the same executed at the cost of the obligor (NCC, Art. 1167);
2. He may ask that it may be decreed that what has been poorly done be undone
(NCC, Art. 1167); and
3. To recover damages because of breach of obligation (NCC, Art. 1170).
Note: A specific performance cannot be ordered in personal obligation to do because
this may amount to involuntary servitude which, as a rule is prohibited under Article III,
Sec. 18(2) of the Constitution (De Leon, Obligations and Contracts, supra at 43).
Q: When the obligation consists in not doing and the obligor does what has been
forbidden, what is the remedy of the obligee?
ANS: The obligee has the right:
1. To have the same undone at the expense of the obligor (NCC, Art. 1168); and
2. To ask for damages because off breach of obligation (NCC, Art. 1170).
Q: Are there cases where the remedy granted under Article 1168 of the Civil Code (to
have it undone at the expense of the debtor) NOT available?
ANS: Yes. The following are:
Where the effects if the act which is forbidden are definite in character – even if it is
possible for the oblige to ask that the act done be undone at the expense of the obligor,
consequences permanent in character and contrary to the object of the obligation will
be produced.
Where it is physically or legally impossible to undo what has been done because of the
very nature of the act itself or of a provision of law, or because of confliction rights of
third persons (Jurado, Obligations and Contracts, supra at 55).
Q: What are the different modes of breach of obligations? (FNDC)

ANS: Those who in the performance of their obligations are guilty of (1) Fraud, (2)
Negligence, or (3) delay, and (4) those who in any manner contravene the tenor
thereof, are liable for damages (NCC, Art. 1170).
Q: What is the fraud contemplated under Article 1170 of the Civil Code?
ANS: It is the deliberate or intentional evasion of the normal fulfillment of an obligation.
Article 1170 refers to incidental fraud (dolo incidente) committed in the performance of
an obligation already existing because of contract. It is to be differentiated from causal
fraud (dolo causante) or fraud employed in the execution of a contract under Article
1338, which vitiates consent and makes the contract voidable and to incidental fraud
under Article 1344 also employed for the purpose of securing the consent of the other
party to enter into the contract but such fraud was not the principal inducement to the
making of the contract (De Leon, Obligations and Contracts, supra at 56-57).
Q: What are the classifications of civil fraud and their distinctions?

ANS: Civil fraud may be classified into:
Fraud or dolo in the performance of an obligation (dolo incidente); and
Fraud or dolo in the constitution or establishment of an obligation (Dolo causante).
The two may be distinguished from each other as follows:
1. As to commencement of existence
 Dolo incidente – Present only during the performance of a pre-existing

obligation.
 Dolo causante – Present only at the time of the birth of the obligation.
2. As to purpose of employment
 Dolo incidente – Employed for the purpose of evading the normal

fulfillment of an obligation.
 Dolo causante – Employed for the purpose of securing the consent of the
other party to enter into the contract.
3. As to result
 Dolo incidente – Results in the non-fulfillment of the obligation.
 Dolo causante – Results in the vitiation of consent; it is the reason for the
other party upon whom it is employed for entering the contract
4. As to remedy
 Dolo incidente – It gives rise to a right of the creditor or oblige to recover

damages from the debtor or obligor
 Dolo causante – It gives rise to a right of the innocent party to ask for the
annulment of the contract if the fraud is causal (dolo causante) or to
recover damages if it is incidental (dolo incidente).
Q: Is the responsibility arising from fraud in the performance of an obligation

demandable?
ANS: Yes. Responsibility arising from fraud is demandable in all obligations. Any waiver
of an action for future fraud is void (Civil Code, Art. 1171).
Q: What is fault or negligence?

ANS: The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place (NCC, Art. 1173). It is the
failure to observe for the protection of the interests of another person, that degree of
care, precaution and vigilance which circumstances justly demand, whereby such other
person suffers injury. Verily, foreseeability is the test of negligence. It is the omission to
do something which a reasonable man, guided by those considerations, which ordinarily
regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do (R Transport Corporation v. Luisito G. Yu,
G.R. No. 174161, February 18, 2015).
Q: What is the diligence of a good father of a family?

ANS: The concept of diligence of a good father of a family connotes reasonable care
consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation (G.V. Florida Transport, Inc. v. Heirs of Battung, Jr.,
G.R. No. 208802, October 14, 2015).
Q: When is negligence considered equivalent to fraud?

ANS: Where the negligence shows bad faith or is so gross that it amounts to malice or
wanton attitude on the part of the defendant, the rules on fraud shall apply (Civil Code,
Art. 1173).
Q: What are the kinds of negligence according to source of obligation?
ANS: The kinds of negligence are the following:
1. Civil Negligence, which may be:
a. Culpa contractual – fault or negligence of obligor by virtue of which he is
unable to perform his obligation arising from a pre-existing contract, or
b. Culpa aquiliana/ quasi-delict – fault or negligence of a person, whose
failure to observe the required diligence to the obligation causes damage
to another.
2. Culpa Criminal – dault or negligence which results in the commission of a crime
(Jurado, Obligations and Contracts, supra at 65-66).
Q: Does a pre-existing contractual relation preclude the existence of culpa aquiliana?

ANS: No. there may be an action for quasi-delict notwithstanding that there is a
subsisting contract between the parties. A liability for tort may raise even under a
contract, where tort is that which breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself constituted the source of a
quasi-delictual liability, the contract can be said to have been breached by tort, thereby
allowing the rules on tort to apply (American Express International, Inc. v. Cordero, G.R.
No. 138550, October 14, 2005).
Q: When does a person obliged to deliver or to do something incur in delay?

ANS: Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extra-judicially demands from them the fulfillment of their
obligation. However, the demand by the creditor shall not be necessary in order that
delay may exist: (LOTUR)
1. When the obligation or the law expressly so declares;

2. When from the nature and the circumstances of the obligation it appears that the
designation of time when the thin is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract; and
3. When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
Note: In reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon him. From
the moment one of the parties fulfills the obligation, delay be the other begins (NCC,
Art. 1169).
Q: How is demand made?

ANS: A demand may be made judicially or extrajudicially. It is judicial if the creditor files
a complaint against the debtor for the fulfillment of the obligation, it is extrajudicial if
the creditor demands from the debtor the fulfillment of the obligation either orally or in
writing (Jurado, Obligations and Contracts, supra at 58). The demand must refer to the
prestation that is due and not to another (4 Tolentino, Civil Code, supra at 104).
Q: In reciprocal obligations, when is demand still necessary in order the other may
incur delay?
ANS: The general rule is that the fulfillment of the parties’ respective obligations should
be simultaneous. Hence, no demand is generally necessary because, once a party fulfills
his obligation and the other party does not fulfill his, the latter automatically incurs in
delay. But when different dates for performance of the obligations are fixed, the default
for each obligation must be determined by the rules given in the first paragraph of the
Article 1169, that is, the other party would incur in delay only from the moment the
other party demands fulfillment of the former’s obligation (Solar Harvest, Inc. v. Davao
Corrugated Carton Corp., G.R. No. 176868, July 26, 2010).
Q: What are the kinds of default or mora?

ANS: The kinds of default are the following:
1. Mora Solvendi – delay of the debtor to perform his obligation. It may be:
a. Ex re – in obligations to give; or
b. Ex persona – in obligations to do.
2. Mora Accipiendi - delay of the creditor in accepting delivery of the thing which is
the object of the obligation. The requisites are:
a. Offer of performance by the debtor who has the required capacity;
b. Offer is to comply with the prestation as it should be performed; and
c. Creditor refuses the performance without just cause.
3. Compensatio Morae – Delay of the parties or obligors in reciprocal obligations
(Jurado, Obligations and Contracts, supra at 57).
Q: What are the requisites of default by the debtor?

ANS: The following are the three requisites for the finding of default: (D3)
1. The obligation is demandable and liquidated;
2. The debtor delays performance;
3. The creditor judicially or extra-judicially demands the debtor’s performance
(General Milling Corporation v. Spouses Ramos, G.R. No. 193723, July 20, 2011).
Q: What are the effects of delay?

ANS: The following are the effects of delay:
1. In case of mora solvendi:
a. The debtor is guilty of breach of obligation;
b. He is liable for interest in case of obligation to pay money or for damages
in other obligations (NCC, Arts. 2209 and 1170); and
c. He is liable even for a fortuitous event when the obligation is to deliver a
determinate thing (NCC, Arts. 1165 and 1170).
2. In case of mora accipiendi:

a. The creditor is guilty of breach of obligation;
b. He is liable for damages suffered, if any, by the debtor;
c. He bears the risk of loss of the thing due (NCC, Art. 1162);
d. Where the obligation is to pay money, the debtor is not liable for interest
from the time of the creditor’s delay; and
e. The debtor may release himself from the obligation by the consignation of
the thing or sum due (NCC, Art. 1256).
3. In case of compensation morae:

a. The delay of the obligor cancels out the effects of the delay of the oblige
and vice versa;
b. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equally tempered or balanced by the
courts. If it cannot be determined which of the parties is guilty of delay,
the contract shall be deemed extinguished and each shall bear his own
damages (NCC, Art. 1192).
Q: What acts are included in the phrase “in any manner contravene the tenor” of the
obligation?
ANS: It includes not only any illicit act which impairs the strict and faithful fulfilment of
the obligation, but every kind of defective performance (Castro v. Colipano, G.R. No.
209969, September 27, 2017).
Q: What is a fortuitous event?
ANS: Fortuitous events by definition are extraordinary events not foreseeable or
avoidable. It is therefore, not enough that the even should not have been foreseen or
anticipated as is commonly believed but it must be one impossible to foresee or to
avoid. The mere difficulty to foresee the beginning is not impossibility to foresee the
same (Sicam v. Jorge, G.R. No. 159617, August 8, 2007).
Q: What are the requisites for a fortuitous event to excuse the performance of an
obligation?
ANS: The following are the requisites of a fortuitous event: (IFIF)
The even must be independent of the human will or at least of the obligor’s will;
The event could not be foreseen, or if it could be foreseen, it must have been
impossible to avoid;
The event must be of such a character as to render it impossible for the obligor to fulfill
his obligation in a normal manner; and
The obligor must be free from any participation in the aggravation of the injury resulting
to the obligee (Philippine Realty and Holdings Corp., G.R. No. 165548, June 13, 2011).
Q: Are there exceptions to the rule that the obligor is not responsible for those acts
which, could not be foreseen, or which though foreseen, were inevitable?
ANS: Yes. The following are the exceptions to the rule:
1. When expressly specified by law;
a. The debtor is guilty of fraud, negligence, or delay, or contravention of the
tenor of the obligation (NCC, Art. 1170);
b. The debtor has promised to deliver the same (specific) thing to two or
more persons who do not have the same interest for it would be
impossible for the debtor to comply with his obligation to two or more
creditors even without any fortuitous event taking place (NCC, Art. 1165,
par. 3);
c. The debt of a thing certain and determinate proceeds from a criminal
offense (NCC, Art. 1263).
d. The thing to be delivered is generic in accordance with the principle that
genus never perishes (NCC, Art. 1263).
2. When declared by stipulation – the basis for this is the freedom of contract but
there shall be clear stipulation.
3. When the nature of the obligation requires the assumption of risk – risk of loss
or damage is essential element of obligation (De Leon, Obligations and Contracts,
supra at 82-84).
Q: What is the current rate of legal interest?

ANS: With the amendment introduced by the Bangko Sentral ng Pilipinas Monetary
Board in BSP-MB Circular No. 799, in the absence of an express stipulation as to the rate
of interest that would govern the parties, the rate of legal interest for loans or
forebearance of any money, goods, or credits and the rate allowed in judgments shall be
6% per annum effective July 1, 2013. This applies prospectively (Dario Nacar v.Gallery
Frames, G.R. No. 189871, August 13, 2013).
Note: When an obligation, not constituting a loan or forebearance of money, is

breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages, except when the demand can be
established with reasonable certainty (Ibid).
Q: What is presumption when there is a receipt of the principal obligation by the

creditor?
ANS: The receipt of the principal by the creditor, without reservation with respect to the
interest, shall give rise to the presumption said interest has been paid (Civil Code, Art.
1176, par. 1).
Q: What is the presumption when there is a receipt of a later installment of a debt?

ANS: The receipt of a later installment of a debt without reservation as to prior
installments, shall likewise raise the presumption that such installments have been paid
(Civil Code, Art. 1176, par. 2).
Q: What are the remedies of the creditor should the obligor fail to perform his
obligation?
ANS: It must be qualified. The following are the remedies:
In specific real obligation, the creditor may exercise the following remedies:
In generic real obligation, the creditor may ask that the obligation may be performed by
a third person at the expense of the debtor since the object is expressed only according
to its family or genus
Note: If the prestation consists of an act where the personal and special qualification of
the obligor is the principal motive for the establishment of the obligation, the remedy of
the obligee is to proceed against the obligor for damages under Article 1170 (Jurado,
Obligations and Contracts, supra at 52-53).
Q: What are the remedies available to the creditors for the satisfaction of their claims?
ANS: The remedies of the creditors for the satisfaction of their claims are the following:
(SPA2)
1. Specific performance, or the exact fulfillment of the obligation with the right to
damages;
2. Pursue the leviable, or to exhaust the property in possession of the debtor which
are not exempt from attachment under the law;
3. Accion subrogatoria, or to be subrogated to all the rights and actions of the
debtor except purely personal rights in the sense that they are inherent in the
person of the debtor, such as rights arising from purely personal or family
relations or which are public or honorary in characters (8 Manresa. Fifth ed. Bk. 1,
p. 267) [hereinafter 8 Manresa).
4. Accion Pauliana or to impugn all the acts which the debtor may have done to
defraud the creditor by means of rescissory action at the instance of the creditor
who is prejudiced (NCC, Art. 1177).
Note: 3rd and 4th remedies are subsidiary to the 1 st and 2nd. It can only be availed of in
the absence of any other legal remedy to obtain reparation for the injury (Jurado, Civil
Law Reviewer, supra at 717).
Q: What are the requisites of accion subrogatoria?

ANS: The following are the requisites: (IPE)
1. Debtor to whom the right of action properly pertains must be indebted to the
creditor;
2. Creditor must be prejudiced by the inaction or failure of the debtor to proceed
against the third person; and
3. Creditor must have first pursued or exhausted all the properties of the debtor
which are not exempted for execution (Jurado, Obligations and Contracts, supra
at 104).
Q: What are the requisites of accion pauliana?

ANS: The following are the requisites: (C-SOFA)
1. Plaintiff asking for rescission has credit prior to the alienation, although
demandable later;
2. Debtor has made a subsequent contract conveying a patrimonial benefit to a
third person;
3. Creditor has no other legal remedy to satisfy its claim, but would benefit by
rescission of the of the conveyance to the third person;
4. Act being impugned is fraudulent; and
5. Third person who received the property conveyed, if by onerous title, has been
an accomplice in the fraud (Holcim Phils., Inc. v. Losloso, G.R. No. 203871,
January 14, 2014).
Q: What are the instances when a right of action is granted even in the absence of
privity of contract between the parties?
ANS: A right of action is granted even in the absence of privity of contract between the
parties in the following cases:
1. In case of SUBLEASE, the sub-lessee is subsidiarily liable to the lessor for any rent
due from the lessee. However, the sub-lease shall not be responsible beyond the
amount of rent due from him, in accordance with the terms of the sublease, at
the time of the extrajudicial demand by the lessor;
Note: Payments of rent in advance by the sub-lessee shall be deemed NOT to
have been made, so far as the lessor’s claim is concerned, unless said payments
were effected in virtue of the custom of the place (NCC, Art. 1652).
2. In case of CONVENTIONAL REDEMPTION, the vendor may bring his action against
every possessor whose right is derived from the vendee, even if in the second
contract no mention should have been made of the right to repurchase, without
prejudice to the provisions of the Mortgage Law and the Land Registration Law
with respect to third persons (NCC, Art. 1608);
3. In case of CONTRACT FOR A PIECE OF WORK, subject to the provisions of special
laws, those who put their labor upon or furnish materials for a piece of work
undertaken by the contractor have an action against the owner up to the amount
owing from the latter to the contractor at the time the claim is made. However,
the following shall not prejudice the laborers, employees, and furnishers of
materials:
a. Payments made by the owner to the contractor before they are due;
b. Renunciation by the contractor of any amount due him from the owner
(NCC, Art. 1729).
4. In case of SUB-AGENCY UNDER ART. 1892, the principal may bring an action
against the substitute with respect to the obligations which the latter has
contracted under the substitution (NCC, Art. 1893).
3. Transmissibility of obligations
Q: Are the rights acquired by virtue of an obligation transmissible?

ANS: Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if
there has been no stipulation to the contrary (NCC, Art. 1178).
Q: What are the classifications of obligations?

ANS: The classifications of obligations are the following:
1. As to the primary classification under the Civil Code:
a. Pure and conditional (NCC, Arts. 1179-1192);
b. Obligations with a period (NCC, Arts. 1193-1198);
c. Alternative and facultative (NCC, Arts. 1199-1206);
d. Joint and solidary (NCC, Arts 1207-1222);
e. Divisible and indivisible (NCC, Arts. 1223-1225); and
f. With a penal clause (NCC, Arts. 1226-1230).
2. Classification of a secondary a character under Civil Code:
a. Legal, conventional, and penal (NCC, Arts. 1158-1162);
b. Real and personal (NCC, Arts. 1163-1168);
c. Determinate and generic (NCC, Arts. 1163-1166);
d. Positive and negative (NCC, Arts. 1167-1168);
e. Unilateral and bilateral (NCC, Arts. 1169-1191);
f. Individual and collective (NCC, Arts. 1207, 1223); and
g. Accessory and principal (NCC, Arts. 1166, 1226).
3. Classification according to Sanchez Roman:
a. By their judicial quality and efficaciousness
i. Natural – the obligation is based on equity and natural law;
ii. Civil – the obligation is in accordance with positive law; and
iii. Mixed – the obligation is in accordance with both natural and
positive law.
b. By parties or subject
i. Unilateral or bilateral – unilateral where only one party is bound, or
bilateral, where both parties are mutually and reciprocally bound,
and
ii. Individual or collective – individual, where there is only obligor; or
collectively where there are several obligors.
iii. Joint of solidary – joint, when each debtor is liable only for his
proportionate share of the obligation, or solidary, when each
obligor may be held liable for entire obligation.
c. By the object of the obligation or prestation
i. Specific or generic – specific when the object is determinate; or
generic, when the object is designated by its class or genus;
ii. Simple or compound – simple, when there is only one obligor
undertaking; and compound, when there are several undertakings.
Multiple obligations may be:
1. Conjunctive – when all the undertakings are demandable at
the same time; or
2. Distributive – when only one undertaking out of several is
demandable. Distributive obligations may be:
a. Alternative – when the obligor is allowed to choose
one out of several obligations which may be due and
demandable; or
b. Facultative – when the obligor is allowed to substitute
another obligation for one which is due and
demandable.
iii. Positive or negative – positive, when the obligor is obliged to give or
do something; or negative, when the obligor must refrain from
giving or doing something;
iv. Real or personal – real, when the obligation consists in giving
something; or personal, when the obligation consists in doing or not
doing something;
v. Possible or impossible – possible, when the obligation is capable of
fulfillment in nature as well as in law; or is impossible, when the
obligation is not capable of fulfillment either in nature or in law;
vi. Divisible or indivisible – divisible, when the obligation is susceptible
of partial performance; or indivisible, when the obligation is not
susceptible of partial performance; and
vii. Principal or accessory – Principal or accessory – principal, when it is
the main undertaking or accessory, when it is merely an
undertaking to guarantee the fulfillment of the principal obligation.
d. By their juridical perfection and extinguishment
i. Pure – the obligation is not subject to any condition or term and is
immediately demandable;
ii. Conditional – the obligation is subject to a condition which may be:
1. Suspensive – in which case the happening or fulfillment of
the condition results in the birth of the obligation; or
2. Resolutory – in which case the happening or fulfillment of
the condition results in the extinguishment of the obligation.
iii. With a term or period – the obligation is subject to a term or period
which may be:
1. Suspensive or from a day certain – the obligation is
demandable only upon the expiration of the term; or
2. Resolutory or to a day certain – the obligation terminates
upon the expiration of the term (Jurado, Obligations and
Contracts, supra at 3-6; De Leon Obligations and Contracts,
supra at 103-104).
4. Performance of obligations
Q: What is the classification of obligations based on the prestation?

Ans: The classifications are:
a. Real obligation – which involves an obligation to give or to deliver. A real

obligation, in turn, is either:
Determinate or Specific Obligation – which involves an obligation to deliver a

determinate or specific thing; or
Indeterminate or Generic Obligation – which involves the obligation to deliver an

indeterminate or generic thing.
b. Personal obligation – which involves an obligation to do or not to do. A personal
obligation, in turn, is either:
Positive – which involves an obligation to do; or
Negative – which involves an obligation not to do.
5. Breaches of obligations
Q: What are the causes of non-performance of obligations?

Ans: the non-causes may either be:
1. Involuntary – Those causes which are independent of the will of the parties, such
as fortuitous event and force majeure; or
2. Voluntary – those causes which arise from the will of the parties, such as: (1)
Mora or delay’ (2) dolo or fraud, (3) culpa or negligence; and (4) contravention of
the tenor of the obligation.
Q: What are the kinds of delay or mora?

Ans: The kinds of delay or mora are:
a. Mora solvendi – (or debtor’s default), is defined as a delay in the fulfillment of an

obligation, by reason of a cause imputable to the debtor.
b. Mora accipiendi – (or creditor’s default), it relates to delay on the part of the
obligee, in accepting the performance of the obligation by the obligor. The
requisites of mora accipiendi are the following:
1. An offer of performance by the debtor who has the required capacity;
2. The offer must be to comply with the prestation as it should be

performed; and
3. The creditor refuses the performance without just cause.

c. Compensation morae – default on the part of both parties because neither has
completed their part in their reciprocal obligation.
Q: What are the requisites of a fortuitous event?

Ans: The requisites are:
1. Cause is independent of the will of the debtor;
2. The event is unforeseeable or unavoidable;
3. Occurrence renders it absolutely impossible for the debtor to fulfill his obligation
in a normal manner; impossibility must be absolute not partial, otherwise not
force majeure; and
4. Debtor is free from any participation in the aggravation of the injury to the
creditor.
Note: The fortuitous event must not only be the proximate cause but it must also be the
only and sole cause. Contributory negligence of the debtor renders him liable despite
the fortuitous event. (Pineda, Obligations and Contracts, 2000 ed, p. 62)
Q: Is there liability for loss due to fortuitous event?

Ans: The rules are:
General Rule:
There is no liability for loss in case of fortuitous event.
Exceptions:
1. Law
2. Nature of the obligation requires the assumption of risk
3. Stipulation
4. The debtor is guilty of dolo, malice or bad faith, has Promised the same thing to
two or more persons who does not have the same interest
5. The debtor Contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472, Mar.
7, 1912)
6. The possessor is in Bad faith (Art. 552)
7. The obligor is Guilty of fraud, negligence or delay or if he contravened the tenor
of the obligation (Juan Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L-
47851, Apr. 15, 1988)
6. Remedies available to creditor in cases of breach

Q: What is meant by reciprocal obligations?
ANS: Reciprocal obligations are those which arise from the same cause, and which each
party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed simultaneously,
so that the performance of one is conditioned upon the simultaneous fulfillment of the
other (Cortes v. Hon. Court of Appeals, G.R. No. 126083, July 12, 2006).
Q: When is the remedy of rescission under Article 1191 available?

ANS: The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him (Civil Code, Art. 1191).
Q: Can the injured party choose rescission after he has chosen fulfillment of the
obligation?
ANS: Generally, the injured party must choose between fulfillment and rescission of the
obligation, with payment of damages in either case. However, he may also seek
rescission even after he has chosen fulfillment of the latter should become impossible
Q: Is rescission available to casual breaches of contract?

ANS: No. For a contracting party to be entitled to rescission (or resolution) in
accordance with Article 1191 of the Civil Code, the other contracting party must be in
substantial breach of the terms and conditions of their contract. A substantial breach of
a contract, unlike slight and casual breaches thereof, is a fundamental breach that
defeats the object of the parties in entering into an agreement (Maglasang v.
Northwestern University, Inc., G.R. No. 188986, March 20, 2013).
C. KINDS OF OBLIGATIONS
1. Pure
Q: What is pure obligation?

ANS: A pure obligation is one wherein its effectivity or extinguishment does not depend
on the fulfillment or non-fulfillment of a condition or on the expiration of a term or
period, and hence said obligation is immediately demandable. *(Jurado, Obligations and
Contracts, supra at 197).
Note: The quality of immediate demandability is not violated when a reasonable period
is granted for performance (Jurado, Obligations on Contracts, supra at 108).
Q: What are the obligations that are immediately demandable? The following
obligations are demandable at once?
ANS: The following obligations are demandable at once:
1. Pure obligations (NCC, Art. 1179, par. 1);
2. Obligation subject to resolutory condition (NCC, Art. 1179, par. 2);
3. Obligations with a resolutory period (NCC, Art. 1193, par. 2); and
4. Obligations subject to a condition not to do an impossible thing (NCC, Art. 1183,
par. 2).
2. Conditional
Q: What is conditional obligation?

ANS: A conditional obligation is one wherein the acquisition of rights, or the
extinguishment or loss of those already acquired, depends upon the happening of the
event which constitutes the condition (NCC, Art. 1181).
Q: What is a condition?
ANS: A condition may be defined as a future and uncertain fact or event upon which an
obligation is subordinated or made to depend. (Jurado, Obligations and Contracts, supra
at 108).
Q: When is a condition potestative, casual, or mixed?

ANS: A condition is potestative when the fulfillment of which depends upon the will of a
party to the obligation. A condition is casual when its fulfillment depends on chance
and/or the will of a third person. Lastly, a condition is mixed when its fulfillment
depends partly on the will of a party to the obligation and partly on chance and/or will
of a third person (Jurado, Civil Law, Reviewer, supra at 720).
Q: Is the conditional obligation void it its fulfillment depends upon the will of the
debtor?
ANS: It depends.
1. When the fulfillment of the condition depends upon the sole will of the debtor,
the conditional obligation shall be void (Civil Code, Art. 1182); and
2. When the fulfillment depends upon the will of a party to the obligation and partly
upon chance and/or the will of a third person, the obligation including such
condition shall take effect (Jurado, Obligations and Contracts, supra at 118).
Note: Although the law is silent with regard to potestative conditions whose fulfillment
depends exclusively upon the will of the creditor, it is undeniable that it cannot have the
effect of nullifying the obligation to which it is attached. This is so because the creditor is
naturally interested in the fulfillment of the condition since it is only by such fulfillment
that the obligation can become effective (Jurado, Obligations and Contracts, supra at
116).
Q: What is the rule in a mixed conditional obligation?

ANS: The rule in a mixed conditional obligation is that when the condition was not
fulfilled but the obligor did all in his power to comply with the obligation, the condition
should be deemed satisfied (International Hotel Corporation v. Francisco Joaquin, Jr.,
G.R. No. 158361, April 10, 2013).
Q: What are impossible conditions?

ANS: Impossible conditions are those contrary to good customs or public policy and
those prohibited by law (Civil Code, Art. 1183).
Q: When does Article 1183 on impossible conditions apply?

ANS: Article 1183 refers to suspensive conditions. It applies only to cases where the
impossibility already existed at the time the obligation was constituted. If the
impossibility arises after the creation of the obligation, Article 1266 governs (De Leon,
Obligations and Contracts, supra at 134).
Q: What are the effects of impossible conditions?

ANS: The following are the effects of impossible conditions:
1. In an obligation with a suspensive condition, impossible conditions annul the
obligation which depends upon them (Civil Code, Art. 1183, par. 1);
2. If the condition is negative, that is, not to do an impossible thing, it is disregarded
and the obligation rendered pure and valid (Civil Code, Art. 1183, par. 2);
3. If the obligation is divisible, that part thereof which is not affected by the
impossible or unlawful conditions shall be valid (Civil Code, Art. 1183, par. 1); and
4. In an obligation with a resolutory condition, where the obligation is pre-existing,
and therefore, does not depend upon the fulfillment of the condition for its
existence, only the impossible condition is void (Jurado, Obligations and
Q: When is a condition suspensive?

ANS: A condition is suspensive e when tis fulfillment results in ACQUISITION OF RIGHTS
arising out of the obligation (Jurado, Obligations and Contracts, supra at 109).
Q: When is a condition resolutory?

ANS: A condition is resolutory when its fulfillment results in EXTINGUISHLMENT OF
RIGHTS arising out of the obligation (Jurado, Obligations and Contracts, supra at 110).
Q: What is the extent of retroactivity in case of fulfillment of a suspensive condition?

ANS: In case of a suspensive condition:
1. In obligations to give, once the condition has been fulfilled, it shall retroact to the
day of the constitution of the obligation. Nevertheless, when the obligation
imposes RECIPROCAL prestations upon the parties, the fruits and interests during
the pendency of the condition shall be deemed to have been mutually
compensated. If the obligation is UNILATERAL, the debtor shall appropriate the
fruits and interests received, unless from the nature and circumstances of the
obligation it should be inferred that the intention of the person constituting the
same was different; or
2. In obligation to do and not to do the courts shall determine, in each case, the
retroactive effect of the condition has been complied with (Civil Code, Art. 1187).
Note: The principle of retroactivity can only apply to consensual contracts. It can have
no application of real contacts, such as deposit, pledge or commodatum which can only
be perfected by delivery. Neither can it have any application to those contracts in which
the obligation arising therefor can only be realized within successive period or intervals,
such as lease, hire of service, life annuity, and similar contracts (Jurado, Obligations and
Q: What is the extent of retroactivity in case of fulfillment of a resolutory condition?

ANS: In case of a resolutory condition:
When the conditions have for their purpose the extinguishment of an obligation to give,
the parties, upon the fulfillment of said conditions, shall return of each other what they
have received (Civil Code, Art. 1190k, par. 1); or
In obligations to do and not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with (Civil Code, Arts. 1190
and 1187).
Note: An examination of Article 1190 reveals that in obligations with a resolutory

condition, the fulfillment of the condition and its retroactivity have the effect of
signifying the non-existence of the obligation and what is nonexistent must not give rise
to any effect whatsoever. Consequently, the fiction of retroactivity must be carried to its
full consummation (Jurado, Obligations and Contracts, supra at 135).
Q: When is there a constructive fulfillment of a suspensive condition?

ANS: The condition shall be deemed when the obligor voluntarily prevents its fulfillment
Q: What are the requisites of constructive fulfillment?

ANS: For the application of Article 1186, the following must concur:
1. The intent of the obligor to prevent the fulfillment of the condition; and
2. The actual prevention of the fulfillment.
Note: Mere intention of the debtor to prevent the happening of the condition, or to
place ineffective obstacles to its compliance, without actually preventing the fulfillment,
is insufficient (International Hotel Corporation v. Joaquin, Jr., G.R. No. 158361, April 10,
2013).
Q: When the conditions have been imposed with the intention of suspending the
efficacy of an obligation to give, what are the rules that must be observed in case of
improvement, loss, or deterioration of the thing during the pendency of the
condition?
ANS: The rules are the following:
1. If the thing is lost without the fault of the debtor, he shall be obliged to pay
damages; it is understood that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknown or it cannot
be recovered;
2. When the thing deteriorates without the fault of the debtor, the impairment is to
be borne by the creditor;
3. If it deteriorates through the fault of the debtor, the impairment is to be borne
by the creditor;
4. If it deteriorates through the fault of the debtor, the creditor may choose
between the recission of the obligation and its fulfillment, with indemnity for
damages in either case;
5. If the thing is improved by its nature or by time, the improvement shall inure to
the benefit of the creditor; or
6. If it is improved at the expense of the debtor, he shall have no other right than
that granted to the usufructuary (Civil Code, Art 1183).
Q: What are the requisites for the abovementioned rules to be applicable?

ANS: The following are the requisites for the rules mentioned in Article 1189 to apply:
(RSS-FP)
1. The obligation is a real obligation;
2. The object is a specific or determinate thing;
3. The obligation is subject to a suspensive condition;
4. The condition is fulfilled; and
5. There is loss, deterioration, or improvement of the thing during the pendency of
the happening on one condition (De Leon, Obligations and Contracts, supra at
147).
Q: What is the effect when a resolutory condition in obligation to do or not to do

happens and there is improvement, loss, or deterioration of specific thing?
ANS: In case of the loss, deterioration, or improvement of the thing, the provisions with
respect to the debtor laid down in Art. 1189 shall be applied to the party who is bound
to return (Civil Code, Art. 1190, par. 2).
Note: The “debtor” in this case is the person obliged to return, while the “creditor” is
the person to whom the thing must be returned.
3. Obligation with a period or a term
Q: What is a period or term?

ANS: A period is a future and certain event upon the arrival of which the obligation (or
right) subject to it either arises or is terminated (De Leon, Obligations and Contracts,
supra at 190). It is a day certain which must necessarily come, although it may not be
known when, like the death of a person (Civil Code, Art. 1183, par. 3).
Q: What are the distinction between a condition and a term or period?

ANS: They may be distinguished as follows:
1. In general
 Condition – Refers to an event
 Term/Period – Refers to an interval of time
2. As to requisites
 Condition – Requires futurity and uncertainty
 Term/Period – Requires futurity and certainty
3. As to fulfillment
 Condition – May or may not happen
 Term/Period – Will surely come to pass, although it may not be known

when
4. As to influence upon obligation
 Condition – Exerts an influence upon the very existence of the obligations

itself
 Term/Period – Exerts an influence only upon the time of demandability or

extinguishment of an obligation
5. As to as to retroactivity of effects
 Condition – Has retroactive effects
 Term/Period – Does not have retroactive effects unless there is an

agreement to the contrary
6. As to effect of will of debtor

 Condition – When condition is left exclusively to the will of the debtor, the
very validity of the obligation is affected.
 Term/Period – When the duration of a term or period is left exclusively to

the will of the debtor, the obligation is still valid
Q: Whenever a period has been designated in an obligation, for whose benefit is it

presumed?
ANS: Whenever in an obligation a period has been designated, it shall be pr4sumed to
have been established for the benefit of both the creditor and the debtor (Civil Code,
Art. 1196). Consequently, the creditor cannot demand the performance of the
obligation before the expiration of the designated period; neither can the debtor
perofrm the obligation before the expiration of the period. This rule, however is not
absolute (Jurado, Obligations and Contracts, supra at 152-153). If from the tenor of the
obligation or other circumstances it should appear that the period has been established
in favor of one or of the other, the general rule is no longer applicable (Civil Code, Art.
1196).
Note: In contracts of loan, if the loan is gratuitous or without interest, the term is
ordinarily for the exclusive benefit of the debtor, who may therefore pay in advance.
But if interest is stipulated, the period is generally for the benefit of both parties, and
the debtor cannot pay in advance unless he pays the full interest for the period agreed
upon (4 Tolentino, Civil Code, supra at 194).
Q: When the period should appear to have been established for the benefit for the
debtor, what are the effects?
ANS: The effects are the following:
1. He may oppose any premature demand on the part of the creditor for
performance of the obligation; or
2. If he so desires, he may renounce the benefit of the period by performing his
obligation in advance (Jurado, Obligations and Contracts, supra at 154).
Q: What are the instances when the debtor loses the benefit of the period?
ANS: The debtor shall lose every right to make use of the period: (IF-IF-VA)
1. When AFTER the obligation he has been contracted he becomes insolvent, unless
he gives a guaranty or security for the debt;
2. When he does not furnish to the creditor the guaranties or securities which he
has promised;
Note: The insolvency need not be judicially determined in an insolvency
proceeding.
3. When by his own acts he has impaired said guaranties or securities after their
establishment and when through a fortuitous event they disappear, unless he
immediately gives ones equally satisfactory;
Note: Should the loss of the securities be by reasons of a FORTUITOUS EVENT;
there must be a total disappearance in order to deprive the debtor of the benefit
of the term.
4. When the debtor violates any undertaking, in consideration of which the creditor
agreed to the period; or
5. When the debtor attempts to abscond (Civil Code, Art. 1198).
Q: When does the obligation with a resolutory period take effect?

ANS: Obligations with a resolutory period take effect at once, but terminate upon arrival
of the day certain (Civil Code, Art. 1193).
Q: When can the court fix a period?

ANS: The court may fix the period:
1. If the obligation does not fix a period, but from its nature and the circumstances
it can be inferred that a period was intended; or
2. When it depends upon the will of the debtor (i.e., under Art. 1180, when the
debtor binds himself to pay when his means permit him to do so) (Civil Code, Art.
1197).
Note: In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed by the
courts, the period cannot be changed by them (Civil Code, Art. 1197). The prohibition
against changing the period refers to the courts, not to the parties. The period fixed in a
final judgment is res judicata, and as such forms an integral part of the imperfect
contract which gave rise to its designation by the court, and thenceforward part of a
perfect and binding contract (Barretto v. City of Manila, G.R. No. 4372, March 27, 1908)
Q: When the obligation fails to fix a period, or when it depends upon the will of the
debtor, what should the creditor do before he can demand payment?
ANS: The creditor must ask the court to set the period before he can demand payment.
The period to be fixed by the court becomes part of the contract and until it has expired
no action to enforce payment can be maintained (Civil Code, Art. 1197).
Q: Are there instances when the courts cannot change the fixed period?
ANS: Yes. The courts cannot change the fixed periods in the following cases:
1. Period agreed upon by the parties – if it has already lapsed or expired, the court
cannot fix another period.
2. Period fixed by the court – it becomes the law governing the parties’ contract.
3. Period fixed in a final judgment – res judicata effect (De Leon, Obligations and
contracts, supra at 212-213).
4. Alternative or facultative
Q: What are the differences between alternative and facultative obligations?

ANS: The differences are the following:
1. As to number of objects
 Alternative obligation – Several objects are due.
 Facultative obligation – Only one object is due.
2. As to compliance
 Alternative obligation – It may be complied with by delivery of one of the

objects or by performance of one of the prestation which are alternatively
due.
 Facultative obligation – It may be complied with by the delivery of another

object or by the performance of another prestation in substitution of that
which is due.
3. As to the right of choice
 Alternative obligation – Choice generally belongs to the debtor unless it

has been expressly granted to the creditor (Civil Code, Art. 1200).
 Facultative obligation – Choice pertains only to the debtor.
4. As to extinguishment in case of loss
 Alternative obligation – Loss/impossibility of ALL objects/prestations due

to fortuitous event shall extinguish the obligation.
 Facultative obligation – Loss/impossibility of the object/prestations due to

fortuitous event is sufficient to extinguish the obligation.
5. As to culpable loss before choice
 Alternative obligation – It may give rise to liability on the part of the

debtor.
 Facultative obligation – It does not give rise to any liability on the part of
the debtor.
Q: what are the limitations on the debtor’s right to choose?

ANS: The following are the limitations on the debtor’s right to choose:
1. The debtor cannot choose prestation which are impossible, unlawful, and could
not have been the object of the obligation (Civil Code, Art. 1200, par. 2).
2. No more right of choice when among the prestations whereby he is alternatively
bound, only one is practicable (Civil Code, Art. 1202).
3. The debtor cannot choose part of one and part of another prestation (Civil Code,
Art. 1199, par. 2).
Q: What are the effects in case of loss of specific things in an alternative obligation?
ANS: The effects are as follows:
1. When choice belongs to debtor:
a. Due to fortuitous event:
i. All are lost – debtor is released from the obligation;
ii. Some but not all are lost – deliver that which he shall choose from
among the remainder; or
iii. Only one remains deliver that which remains.
b. Debtor’s fault:
i. All are lost – creditor shall have a right to indemnity for damages
based on the value of the last thing which disappeared or service
which becomes impossible;
among the remainder without damages; or
iii. Only one – deliver at which remains
2. When choice belongs to creditor:

a. Due to fortuitous event:
i. All are lost – debtor is released from the obligation;
among the remainder; or
iii. Only one remains deliver that which remains.
b. Debtor’s fault:
i. All are lost – creditor may claim the price/value of any of them with
indemnity for damages;
ii. Some but not all are lost – creditor may claim any of those
subsisting without a right to damages OR price/value of the thing
lost with the right to damages (Civil Code, Arts. 1204-1205).
Q: What is the effect of loss in case of facultative obligation?

ANS: The following is the effect of loss in case of facultative obligation:
1. Before substitution – The loss of the thing intended as a substitute with or
without the fault of the debtor does not render him liable since it is not due.
2. After substitution – If the substitute is lost, the liability of the debtor depends
upon whether or not the loss is due to his fault or not. The substitution becomes
effective from the time it has been communicated (Civil Code, Art. 1206).
5. Joint and solidary obligations
Q: What is the liability when there is concurrence of two or more creditors or of two
or more debtors in one and the same obligation?
ANS: As a general rule, the obligation is presumed to be joint (Civil Code, Art. 1208).
Consequently:
1. There are as many debts as there are debtors;
2. There are as many credits as there are creditors;
3. The debts and/or credits considered distinct and separate from one another;
4. Each debtor is liable only for a proportionate part of the debt;
5. Each creditor is entitled only to a proportionate part of the credit (De Lon,
Obligations and Contracts, supra at 231-232).
Note: The presumption, however is disputable in character, as when the obligation is

solidary (Jurado, Civil Law Reviewer, supra at 743).
Q: When is an obligation solidary?

ANS: The obligation is solidary when: (LON)
The law requires solidarity (e.g. Civil Code, Arts. 927, 1824, 1911, 2146, 2157, and 2194)
tort, quasi-contracts, liability of principals, accomplices and accessories of a felony,
obligations of devisees and legatees, bailees in commodatum;
Q: What are the differences between joint and solidary obligations?

ANS: The following are the differences between joint and solidary obligations:
1. As to definition
 Joint Obligations – One in which each of the debtor is liable only for a
proportionate part of the debt, and each creditor is entitled only to
proportionate part of the credit (4 Tolentino, Civil Code, supra at 217).
 Solidary Obligations – One in which is liable for the entire obligation and
each creditor is entitled to demand the whole obligation (Id. at 217).
2. As to demand by the creditor
 Joint Obligations – The demand by one creditors produces the effects of

default only with respect to the creditor who demanded and the debtor
on whom the demand was made (Id. at 219).
 Solidary Obligations – Each one of the solidary creditors may do whatever

may be useful to others, but not anything which may be prejudicial to the
latter (Civil Code, Art. 1212). Hence, each solidary creditor may constitute
the debtor in default (Id. at 232).
3. As to breach of obligation by reason of the act of one
 Joint Obligations –
1. In case of a joint divisible obligation, the other debtors cannot be
compelled to answer for the liability of others as the debt is divided
into as many equal shares as there are debt (Civil Code, Art 1208);
or
2. In case of a joint indivisible obligation, it gives rise to indemnity for
damages from the time any one of the debtors does not comply
with his undertaking. The debtors who may have been ready to
fulfill their promises shall NOT contribute to the indemnity beyond
the corresponding portion of the price of the thing or of the value
of the service in which the obligation consists (Civil Code, Art.
1224).
 Solidary Obligations – If there was fault on the part of any one of the
solidary debtors, all shall be responsible to the creditor, for the price and
the payment of damages and interest, without prejudice to their action
against the guilty or negligent debtor (Civil Code, Art. 1221, par. 2).
4. As to insolvency of one debtor
 Joint Obligations – If one of the joint debtors should be insolvent, the

others shall not be liable for his share (Civil Code, Art. 1209).
 Solidary Obligations – When one of the solidary debtors cannot, because

of his insolvency, reimburse his share to the debtor paying the obligation,
such share shall be borne by all his co-debtors, in proportion to the debt of
each (Civil Code, Art. 1217, par. 3).
5. As to personal defenses
 Joint Obligations – The vices of each obligation arising from the personal
defect of a particular debtor or creditor do not affect the obligation or the
right of the others (4 Tolentino, Civil Code, supra at 219).
 Solidary Obligations – A solidary debtor may avail himself of all defenses
which personally belong to the others only as regards that part of the debt
for which the latter are responsible (Civil Code, Art. 1222).
Q: When is there a joint indivisible obligation and what are the effects?
ANS: If the division is impossible, the right of the creditors may be prejudiced only by
their collective acts, and the debt can be enforced only by proceeding against all the
debtors. If one of the latter should be insolvent, the others shall not be liable for his
share (Civil Code, Art. 1209).
Note: The indivisibility of an obligation does not necessarily give rise to solidarity. Nor
does solidarity of itself imply indivisibility (Civil Code, Art. 1210).
Q: What are the effects of mutual agency among solidary creditors?

1. The debtor may pay one of the solidary creditors; but if any demand, judicial, or
extrajudicial, has been made by one of them, payment should be made to him
(Civil Code, Art. 1214); and
2. Novation, compensation, confusion, or remission of the debt, made by any of the
solidary creditors or with any of the solidary debtors, shall extinguish the
obligation, without prejudice to the provisions of Art. 1219, which provides that
the remission made by the creditor of the share which affects one of the of the
solidary debtors does not release the latter from his responsibility towards the
co-debtors, in case the debt had been totally paid by anyone of them before the
remission was effected. The creditor who may have executed any of these acts,
as well as he who collect the debt, shall be liable to the others for the share in
the obligation corresponding to them (Civil Code, Art. 1215).
Q: What are the effects of mutual guaranty among solidary debtors?

1. The creditor may proceed against any one of the solidary debtor or some or all of
them simultaneously. The demand made against any one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long
as the debt has not been fully collected (Civil Code, Art. 1216);
2. Payment made by one of the solidary debtors extinguishes the obligation, this is
subject to the following rules:
a. If two or more solidary debtors offer to pay, the creditor may choose
which offer to accept;
b. He who made the payment may claim from his co-debtors only the share
which corresponds to each, with the interest for the payment already
made;
c. If the payment is made before the debt is due, no interest for the
intervening period may be demanded; and
d. When one of the solidary debtors cannot, because of his insolvency,
reimburse his share to the debtor paying the obligation, such share shall
be borne by all his co-debtors, in proportion to the debt of each (Civil
Code, Art. 1217).
3. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses
which are derived from the nature of the obligation and of those which are
personal to him, or pertain to his own share. With respect to those which
personally belong to the others, he may avail himself thereof only as regards the
part of the debt for which the latter are responsible (Civil Code, Art. 1222).
Q: What are the effects of prejudicial acts committed by a solidary creditor?

1. As far the debtor or debtors are concerned, a prejudicial act performed by a
solidary creditor shall be valid and binding because of the principle of mutual
representation which exists among the creditors; and
2. As far as the solidary creditors are concerned, the creditor who performed the
act shall incur the obligation of indemnifying the others for damages (Jurado,
Obligations and Contracts, supra 195).
Q: What is effect of any novation, compensation, confusion or remission of debt

executed by a solidary creditor?
In case of novation:
a. If prejudicial; the solidary creditor who effected the novation shall reimburse the
others for damages incurred by them;
b. If beneficial and the creditor who effected the novation is able to secure
performance of the obligation, such creditor shall be liable to the others for the
share which corresponds to them, not only in the obligation, but also the
benefits;
c. If effected by substituting another person in place of the debtor, the solidary
creditor who effected the novation is liable for the acts of the new debtor in case
there is deficiency in performance or in case damages are incurred by the
solidary creditors as a result of the substitution; and
d. If effected by subrogating a third person in the rights of the solidary creditor
responsible for the novation, the obligation of the debtor or creditors is not in
reality extinguished; the relation between the other creditors not substituted and
the debtor/s is maintained.
In case of compensation and confusion:

a. Partial rules on application of payment shall apply, without prejudice to the right
of other creditors who have not caused the confusion or compensation to be
reimbursed to the extent that their rights are diminished or affected; and
b. Total: obligation extinguished, what is left is the ensuing liability for
reimbursement within each group – the creditor causing the confusion or
compensation is obliged to reimburse the other creditors; the debtors benefited
by the extinguishment of the obligation are obliged to reimburse the debtor who
made the confusion or compensation possible.
In case of remission:
a. Entire obligation: obligation is totally extinguished but the solidary debtor who
obtained it does not entitle him to reimbursement from his co-debtors;
b. For the benefit of one of the debtors covering his entire share: he is completely
released from the creditor/s; and
c. For the benefit of one of the debtors and it covers only part of his share: his
charater as a solidary debtor is not affected (Jurado, Obligations and Contracts,
supra at 197-201).
Q: What are the differences between divisible and indivisible obligations?

ANS: The differences between divisible and indivisible obligations are:
1. As to object
 Divisible Obligations – Those which have as their object a prestation which

is susceptible of partial performance without the essence of the obligation
being changed (Jurado, Obligations and Contracts, supra at 212).
 Indivisible Obligations – Those which have as their object a prestation
which is not susceptible of partial performance, because, otherwise, the
essence of the obligation will be changed (Id, at 212).
2. As to when deemed divisible/indivisible
 Divisible Obligations – An obligation is deemed divisible when:

1. The obligation has for its object the execution of a certain number
of days of work;
2. The obligation has for its object the accomplishment of work by
metrical units; and
3. The obligations which is by its nature is susceptible of partial
performance (Civil Code, Art. 1225, par. 2).
Note: in obligations not to do, divisibility or indivisibility shall be

determined by the character of the prestation in each particular case (Civil
Code, Art. 1225, par. 4).
 Indivisible Obligations – An obligation is deemed indivisible win the

following: (D-NIL)
1. Obligations to give definite things;
2. Obligations which are not susceptible of partial performance;
3. Obligations intended by the parties to be indivisible even if thing or
service uis physically divisible;
4. Obligations provided by law to be indivisible even if thing or service
is physically divisible (Civil Code, Art. 122, pars. 1 and 3).
6. Obligations with a penal clause
Q: Is the obligor liable for damages despite the fact that the obligation is with a penal
clause?
ANS: No. the penalty shall substitute the indemnity for damages and the payment of
interests in case of non-compliance. However, there are exceptions:
1. If there is stipulation to the contrary;
2. If the obligor refuses to pay the penalty; or
3. The obligor is guilty of fraud in the fulfillment of the obligation.
Note: The penalty may be enforced only when it is demandable in accordance with the
provisions of the Civil Code (Civil Code, Art. 1226).
Q: Can the debtor exempt himself from the performance of the obligation by paying
the penalty?
ANS: No. The debtor cannot exempt himself from the performance of the obligation by
paying the penalty, EXCEPT when this right has been expressly reserved for him (Civil
Code, Art. 1277).
Q: Can the creditor demand the fulfillment of the obligation and the satisfaction of the
penalty at the same time?
ANS: No. The creditor cannot demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, UNLESS this right has been clearly granted
him. However, if after the creditor has decided to require the fulfillment of the
obligation, the performance thereof should become impossible without his fault, the
penalty may be enforced (Civil Code, Art. 1277).
Q: Is proof of actual damages necessary to demand the penalty?

ANS: Proof of actual damages suffered by the creditor is NOT necessary in order that the
penalty may be demanded (Civil Code, Art. 1228).
Q: What are the instances when the penalty may be reduced?

ANS: Penalty may be reduced in any of the following: (PIU)
1. When the principal obligation has been partly complied with;
2. When the principal obligation has been irregularly complied with; and
3. Even if there has been no performance, if the penalty in iniquitous or
unconscionable (Civil Code, Art. 1229).
Q: What is the effect of the nullity of the penal clause to the principal obligation?
ANS: the nullity of the penal clause does not carry with it that of the principal obligation
Q: What is the effect of the nullity of the principal obligation to the penal clause?
ANS: The nullity of the principal obligation carries with it that of the penal clause (Civil
D. EXTINGUISHMENT OF OBLIGATIONS
1. Payment or performance
Q: When is an obligation understood to be paid or performed?

ANS: A debt shall not be understood to have been paid unless the thing or service in
which the obligation consists has been completely delivered or rendered, as the case
may be (Civil Code, Art. 233).
Exceptions:
1. When the obligation has been substantially performed in good faith (Civil Code,
Art. 1234); and
2. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection (Civil Code, Art.
1235).
Q: Can the debtor make partial payments?

ANS: No. Unless there is an express stipulation to that effect, the creditor cannot be
compelled partially to receive the prestation in which the obligation consists. Neither
may the debtor be required to make partial payments. However, when the debt is part
liquidated and in part unliquidated, the creditor may demand and the debtor may effect
the payment of the former without waiting for the liquidation of the latter (Civil Code,
Art. 1248).
Q: Who are the persons from whom the creditor must accept payment?
ANS: The creditor is bound to accept payment or performance from the following:
1. Debtor;
2. A third person who has an interest in the fulfillment of the obligation; or
3. A third person who has no interest in the obligation when there is stipulation that
he can make payment (Civil Code, Art. 1236, par. 1).
Q: What is the effect of payment made by a third person in order to extinguish the
obligation?
1. The creditor is not bound to accept payment or performance by a third person
who has no interest in the fulfillment of the obligation, unless:
a. There is a stipulation to the contrary (Civil Code, Art. 1236, par. 1); or
b. When it is made by a third person who has an interest in the fulfillment of
the obligation, such as joint debtor, guarantor, or surety (Jurado,
2. Whoever pays for another may demand from the debtor what he has paid,
except that if he paid:
a. Without knowledge; or
b. Against the will of the debtor.
Note: He can recover only insofar as the payment has been beneficial to the
debtor (Civil Code, Art. 1236, par. 2).
3. When a person pays on behalf of the debtor without the knowledge or against
the will of the latter, he cannot compel the creditor to subrogate him in his rights,
such as those arising from a mortgage, guaranty, or penalty (Civil Code, Art.
1237); and
Note: Partial payment by a stranger without the authorization of the debtor will
not stay the running of the prescriptive period.
4. When payment is made by a third person who does not intend to be reimbursed
by the debtor, it is deemed to be a donation, which requires the debtor’s
consent. But the payment is in any case valid as to the creditor who has accepted
it (Civil Code, Art. 1238).
Note: Once the debtor’s consent is secured, then the rules on ordinary donations
will apply. Otherwise, the rules stated in Article 1236 and 1237 will still apply.
Q: Who has the burden of proving payment?

ANS: As a general rule, one who pleads payment has the burden of proving it. Even
when the plaintiff must allege non-payment, the general rule is that the burden rests on
the defendant to prove payment, rather than on the plaintiff to prove non-payment.
When the existence of a debt is fully established by the evidence contained in the
record, the burden of proving that it has been extinguished by payment devolves upon
the debtor who offers such a defense to the claim of the creditor (BPI v. Spouses
Royeca, G.R. No. 17664, July 21, 2008).
Q: To whom must payment be made?
ANS: Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it (Civil
Code, Art. 1240).
Q: What is the effect of payment to an incapacitated person?

ANS: Payment to an incapacitated person is not valid unless such incapacitated person
kept the thing pair or delivered (so that is not necessary that it should have been
invested in some profitable venture) or was benefited by the payment (Civil Code, Art.
1241 par. 1).
Q: What is the effect of payment to a third person?

ANS: Payment to a third person is not valid unless it has redounded to the benefit of the
creditor. However, benefit to the creditor need not be proved in the following cases:
1. Subrogation of the player in creditor’s right;
2. Ratification by the creditor; or
3. Estoppel on the part of the creditor (Civil Code, Art. 1241, par. 2).
Q: Can payment be made through a promissory notes or bills of exchange?

ANS: Generally, payment must be made in legal tender in the Philippines. However, the
delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only:
When they have been cashed; or
When through the fault of the creditor they have been impaired.
Note: In the meantime, the action derived from the original obligation shall be held in
abeyance (Civil Code, Art. 1249).
Note: The rule that the fault of the creditor, which impairs the instrument, produces the
effect of payment is applicable only to a paper or document executed by the debtor
himself (Compania General de Tabacos v. Molina, G.R. No. 2091, October 19, 1905).
Q: Is the requirement of payment in the Philippine currency absolute?

ANS: No. As a general rule, all monetary obligations shall be settled in the Philippine
currency which is legal tender in the Philippines. However, the parties may agree that
the obligation or transaction shall be settled in any other currency at the time of
payment (R.A. No. 8183, otherwise known as An Act to Assure the Uniform Value of
Philippine Coin and Currency, Sec. 1).
Q: What is the rule in payment in case of extraordinary inflation or deflation?
ANS: The value of the currency at the time of the establishment of the obligation shall
be the basis of payment, unless there is an agreement to the contrary (Civil Code, Art.
1250).
Note: In order that this may occur, it is essential that:
1. There must be a decrease or increase in purchasing power of the currency which
is unusual or beyond the common fluctuation in the value of said currency; and
2. Such decrease or increase could not have been reasonably foreseen or was
manifestly beyond the contemplation of the parties at the time of the
establishment of the obligation (Jurado, Obligations and Contracts, supra at 262).
Q: Where shall be obligations be paid?

ANS: The following are the places where obligations shall be paid:
1. If there is a stipulation, the payment shall be made in the place designated.
2. If there is no stipulation and the thing to be delivered is specific, the payment
shall be made at the place where the thing was, at the perfection of the contract.
3. If there is no stipulation and the thing to be delivered is generic (and in any other
case), the place of payment shall be the domicile of the debtor (Civil Code, Art.
1251).
Q: What is the effect if the debtor changes his domicile in bad faith or after incurring
in delay?
ANS: If the debtor changes his domicile in bad faith or after he has incurred in delay, the
additional expenses shall be borne by him (civil Code, Art. 1251, par. 4).
Q: What is the concept of application of payment?

ANS: It is the designation of the debt to which the payment must be applied when the
debtor has several obligations of the same kind in favor of the same creditor (Jurado,
Q: What are the requisites in order that there will be an application of payment?
ANS: The requisites are the following: (OSDI)
1. There must be only one debtor and only one creditor; an exception is provided
under Article 1792, whereby application of payment may be had even if there are
two creditors – the partnership and the managing partner (Jurado, Obligations
and Contracts, supra at 269). But the law allows such application in favor of the
managing partner only if the personal creditor of the partner should be more
onerous to him;
Note: Neither the requirement that there must be only one debtor militates
against the possibility of extending the rules on application of payment to
solidary obligations (Jurado, Obligations and Contracts, supra at 268).
2. There must be two or more debts of the same kind;
Note: The fact that the debts are of the same kind is reckoned from the time of
the application of payment, not from the time of constitution of the obligation. A
non-monetary obligation, for instance, may be converted into one of damages at
the time of application of payment.
3. All the debts must be due, except:
a. If there is stipulation to the contrary; or
b. Application of payment is made by the party for whose benefit the term
has been constituted (Civil Code, Art. 1252); and
4. Amount paid by the debtor is insufficient to cover the total amount of all the
debts (Jurado, Obligations and Contracts, supra at 268).
Q: Is the creditor also given the right to apply payment?

ANS: Yes. Article 1252 give the right to the debtor to choose to which several obligations
to apply a particular payment that he tenders to the creditor. But likewise granted in the
same provision is the right of the creditor to apply such payment in case the debtor fails
to direct his application. It is the directory nature of this right and the subsidiary right of
the creditor to apply payments when the debtor does not elect to do so that makes this
right waivable (Premiere Development Bank v. Central Surety & Insurance Company,
Inc., G.R. No. 176246, February 13, 2009).
Q: What are the rules in application of payment?

ANS: The following rules shall be applied:
1. The payment shall be applied according to the designation of the debtor (Civil
2. If the debtor accepts from the creditor is a receipt in which an application of the
payment is made, the former cannot complain of the same, unless there is a
cause for invalidating the contract (Civil Code, Art. 1252 par. 2).
3. When the payment cannot be applied in accordance with the preceding rules, or
if application cannot be inferred from other circumstances, the debt which is
most onerous to the debtor, among those due, shall be deemed to have been
satisfied (Civil Code, Art. 1254, par. 1).
4. If the debts due are of the same nature and burden, the payment shall be applied
to all of them proportionately (Civil Code, Art. 1254 par. 2).
Note: If the debt produces interest, payment of the principal shall not be deemed to
have been made until the interests have been covered (Civil Code, Art. 1253).
Q: What is dation in payment? What law governs the same?

ANS: Dation in payment is where property is alienated to the creditor in satisfaction of a
debt in money. It shall be governed by the law of sales (Civil Code, Art. 1245).
Q: What are the requisites of dation in payment?

ANS: The following are the requisites of dation-in-payment: (PDA)
1. There must be performance of the prestation in lieu of payment (Animo solvendi)
which may consist in the delivery of a corporeal thing or a real right or a credit
against a third person.
2. There must be some difference between the prestation due and that which is
given in substitution (aliud pro alio).
3. There must be an agreement between the creditor band the debtor that the
obligation is immediately extinguished by reason of the performance of a
prestation different from that due (Lo v. KJS Eco-Formwork System Phil., Inc., G.R.
No. 149420, October 8, 2003).
Q: What is payment by cession? What are its requisites?

ANS: Cession or assignment may be defined as a special form of payment whereby the
debtor abandons all of his property for the benefit of his creditors in order that from the
proceeds thereof the latter may obtain payment of their credits (8 Manresa, supra at
605). In order that the debtor can avail of this form of payment, it is essential that the
following requisites must concur: (PIPA)
1. Plurality of debts;
2. Partial or relative insolvency of the debtor;
3. The assignment must involve all the properties of the debtor; and
4. Acceptance of the cession by the creditors (Jurado, Obligations and Contracts,
supra at 275).
Q: What are the effects of payment by cession?

ANS: The following are the effects of payment by cession:
1. Unless there is a stipulation to the contrary, the assignment does not make the
creditors the owners of the property of the debtor.
2. The debtor is released from his obligation only up to the net proceeds of sale of
the property assigned. The debtor is still liable if there is a balance.
3. Creditors will collect credits in the order of preference agreed upon, or in default
of the agreement, in the order ordinarily established by law (Paras, Obligations
and Contracts, supra at 417).
Q: What is payment by cession? What are its requisites?

ANS: Cession or assignment may be defined as a special form of payment whereby the
debtor abandons all of his property for the benefit of his creditors in order that from the
proceeds thereof the latter may obtain payment of their credits (8 Manresa, supra 606).
In order that the debtor can avail of this form of payment, it is essential that the
following requisites must concur: (PIPA)
1. Plurality of debts;
2. Partial or relative insolvency of the debtor;
3. The assignment must involve all the properties of the debtor; and
4. Acceptance of the cession by the (Jurado, Obligations and Contracts, supra at
275).
Q: What are the effects of payment by cession?

ANS: The following are the effects of payment by cession:
1. Unless there is a stipulation to the contrary, the assignment does not make the
creditors the owners of the property of the debtor.
2. The debtor is released from his obligation only up to the net proceeds of sale of
the property assigned. The debtor is still liable if there is a balance.
3. Creditors will collect credits in the order of preference agreed upon, or in default
of the agreement, in the order ordinarily established by law (Paras, Obligations
and Contracts, supra at 417).
Q: What is the difference between a tender of payment and a consignation?

ANS: Tender of payment is the manifestation of the debtor to the creditor of his
decision to comply immediately with his obligation; preparatory act and extrajudicial in
character; whereas consignation is the deposit of the object of the obligation in a
competent court in accordance with the rules prescribed by law, after refusal or inability
of the creditor to accept the tender of payment; principal act and judicial in character.
Note: In case of exercise of right of repurchase by tender of check, such tender is valid
because it is an exercise of a right not made as mode of payment of an obligation.
Article 1249 is not applicable (Adelfa Properties, Inc. v. Court of Appeals, G.R. No.
111238, January 25, 1995).
Q: What are the requisites of consignation?

ANS: The requisites of consignation are the following: (DT-NDN)
1. A debt is due;
2. The creditor to whom tender of payment was made refused without just cause to
accept the payment, or the creditor was absent, unknown or incapacitated, or
several persons claimed the same right to collect, or the title of the obligation
was lost;
3. The person interested in the performance of the obligation was given notice
before consignation was made;
4. The amount was placed at the disposal of the court; and
5. The person interested in the performance of the obligation was given notice after
the consignation was made (Dalton v. FGR Realty and Development Corporation,
G.R. No. 172577, January 19, 2011).
Q: What are the instances where a consignation produces the effect of payment even
without prior tender of payment?
ANS: The instances are the following: (AIR-CL)
1. The creditor absent or unknown, or does not appear at the place of payment;
2. The creditor is incapacitated to receive the payment at the time it is due;
3. When without just cause, the creditor refuses to give a receipt;
4. When two or more persons claim the right to collect (as in the case of
interpleader); and
5. When the title of the obligation has been lost (Civil Code, Art. 1256).
Note: The list is not exclusive. The rule also applies if the creditor, prior to the tender of
payment, intimated that he will not accept the debtor’s payment.
2. Loss of determinate thing due or impossibility or difficulty of performance
Q: Does the loss of a determinate thing due to fortuitous event in an obligation to give
result in the extinguishment of the obligation?
ANS: It depends:
1. The obligation shall be extinguished if:
a. It should be lost or destroyed without the fault of the debtor; and
b. Before he has incurred in delay (Civil Code, Art 1174 and Art. 1262, par. 1).
2. The obligation shall not be extinguished:
a. When the law so provides (Civil Code, Arts. 1174 and Art. 1262 par. 2);
b. When it is stipulated that the obligor shall be liable even for fortuitous
event; (Civil Code, Art. 1174 and Art. 1262, par. 2);
c. When the nature of the obligation requires the assumption of risk (Civil
Code, Art. 1262, par. 2);
d. Loss of the thing is partly due to the fault of the debtor (Tan Chiong Sian v,
Unchausti & Co., G.R. No. L-6092, March 8, 1912);
Note: Whenever the thing is lost in the possession of the debtor, it shall be
presumed that the loss was due to his fault, unless there is proof to the
contrary. This presumption does not apply in case of earthquake, flood,
storm, or other natural calamity (Civil Code, Art. 1265)
e. Loss of thing occurs after the debtor incurred in delay (civil Code, Arts.
1262m par. 1 and 1165 par. 3);
f. When the debtors promises to deliver the same thing to two or more
persons who do not have the same interest (Civil Code, Art. 1165, par. 3);
g. When the obligation to deliver arises from a criminal offense (Civil Code,
Art. 1268); or
Note: Unless the thing having been offered by the debtor to the person
who should receive it, the latter refused without justification to accept it
h. When the obligation is to deliver a generic thing (Civil Code, Art. 1263).
Q: When shall a debtor in an obligation to do be released from non-performance of his

obligation?
ANS: The instances are the following:
1. When the prestation becomes legally or physically impossible without the fault of
the debtor (Civil Code, Art. 1266); and
2. When the service has become so difficult as to be manifestly beyond
contemplation of the parties, the court should be authorized to release the
obligor in whole or in part (This is also referred to as the Doctrine of Frustration
of Enterprise or Doctrine of Unforeseen Events) (Civil Code, Art. 1267).
3. Condonation or remission of debt
Q: What is condonation or remission?

ANS: As a mode of extinguishing an obligation, condonation or remission of debt is an
act of liberality, by virtue of which, without receiving any equivalent, the creditor
renounces the enforcement of the obligation, which is extinguished in its entirety or in
that part or aspect of the same to which the remission refers (Dizon v. Court of Tax
Appeals, G.R. No. 140944, April 30, 2008).
Note: It is an essential characteristic of remission that it be gratuitous, that there is no
equivalent received for the benefit given; once such equivalent exists, the nature of the
act changes. It may become dation in payment when the creditor receives a thing
different from that stipulated; or novation, when the object or principal conditions of
the obligation should be changed; or compromise, when the matter renounced is in
litigation or dispute and in exchange of some concession which the creditor receives
(Dizon v. Court of Tax Appeals, G.R. No. 140944, April 30, 2008).
Q: What is the effect of renunciation of principal debt on accessory obligation?

ANS: The renunciation of the principal debt shall extinguish the accessory obligations;
but the waiver of the latter shall leave the former in force. (Civil Code, Art. 1273).
Note: If the obligation is joint, the remission can only affect the share of the creditor
who makes the remission and the corresponding share of the debtor in whose favor the
remission is made, since the peculiar feature of this type of obligation is the division of
the credit or of the debt into as may equal shares as there are creditors or debtors, the
credits or debts being considered distinct from one another (Civil Code, Art. 1208).
Q: What are the requisites in order that there will be a remission or condonation
which will result in the total or partial extinguishment of the obligation?
ANS: The requisites are: (GADCIF)
1. It must be gratuitous;
2. It must be accepted by the obligor;
3. The obligation must be demandable;
4. Parties must have the capacity;
5. Not inofficious (governed by rules regarding inofficious donations – Civil Code,
Arts. 750-752 and 771); and
6. Must comply with the formalities prescribed for donation (Civil Code, Art. 748-
749) if remission is express (Civil Code, Art. 1270).
Q: What are the instances of implied condonation or remission of debt?

ANS: The instances are:
1. The delivery of a private document evidencing the credit, made voluntarily by the
creditor or debtor (Civil Code, Art. 1271, par. 1)
Note: If in order to nullify this waiver it should be claimed to be inofficious, the
debtor and his heirs may uphold it byu proving that the delivery of the document
was made in virtue of payment of the debt (Civil Code, Art. 1271, par. 2); and
2. It is presumed that the accessory obligation of pledge has been remitted when
the thing pledged, after its delivery to the creditor, is found in the possession of
the debtor, or of a third person who owns the thing (Civil Code, Art. 1274).
Q: What are the requisites for the implied condonation or remission of debt?
ANS: The requisites are: (DPV)
1. The document evidencing credit was delivered by the creditor to the debtor;
2. Such document is a private document; and
3. The delivery was voluntary (Civil Code, Art. 1271).
Note: Whenever the private document in which the debt appears is found in the
possession of the debtor, it shall be presumed that the creditor delivered it voluntarily,
unless the contrary is provided (Civil Code, Art. 1272).
4. Confusion
Q: What are the requisites of confusion or merger of rights?

ANS: The requisites are the following: (MPC)
Merger of the characters of the creditor and debtor must be in the same person (Cuivil
Code, Art. 1275);
Must take place in the person of either the principal creditor or the principal debtor
(Civil Code, Art. 1276); and
Must be complete and definite (Valmonte v. Court of Appeals, G.R. No. L-41621,
February 18, 1990).
Note: Third requisite means that whether the merger refers to the entire obligation or
only part thereof, it must be of such character that there will be complete and definite
meeting of all qualities of creditor and debtor in the obligation or in the part thereof
affected by the merger (Jurado, Obligations and Contracts supra at 307).
Q: What is the effect of merger in the person of the principal debtor or creditor?
ANS: Merger in the person of the principal debtor or creditor extinguishes the
obligation. Hence, the accessory obligation of guaranty is also extinguished in
accordance with the principle that the accessory follows the principal (De Leon,
Q: What is the effect of merger in the person of the guarantor?

ANS: The extinguishment of the accessory obligation does not carry with it that of the
principal obligation. Consequently, merger which takes place in the person of the
guarantor, while it extinguishes the guaranty, leaves the principal obligation in force (Id.
at 412).
5. Compensation
Q: When does compensation take place?

ANS: It takes place when two persons, in their own right are creditors and debtors of
each other (Civil Code, Art. 1278).
Q: Wahta re the kinds of compensation?

ANS: The kinds of compensation are the following:
1. As to cause, compensation may be:
a. Legal, when it takes effect by operation of law from the moment all of the
requisites are present (Cviil Code, Arts. 1286-1290);
b. Voluntary, when the parties who are mutually creditors and debtors agree
to compensate their respective obligations, even though all of the
requisites for compensation mayu not be present (Civil Code, Art. 1282);
and
c. Judicial when it takes effect by judicial decree (Civil Code, Art. 1283).
2. As to effect, compensation may be:

a. Total, when the two debts are of the same amount; and
b. Partial, when the debts to be compensated are not equal in amount (Civil
Code, Art. 1281).
Q: What are the requisites of legal compensation?

ANS: The requisites are the following: (PS-DL-NoNo)
1. There must be two (2) parties, who, in their own right are PRINCIPAL creditors
and PRINCIPAL debtors of each other (Civil Code, Art. 1279) except in case of a
guarantor (Civil Code, Art. 1280);
2. Both debts must consist in sum of money, or if the things due are consumables,
they must be of the same kind and quality (Civil Code, Art. 1279);
3. Both debts must be due (Civil Code, Art. 1279), except voluntary compensation
(Civil Code, Art. 1282);
4. Both debts must be liquidated and demandable (Civil Code, Art. 1279);
5. There must be no retention or controversy commenced by third persons over
either of the debts and communicated in due time to the debtor (Civil Code, Art.
1279); and
6. The compensation must not be prohibited by law (Civil Code, Arts. 1287-1288).
Note: Requisite No. 2 contemplates only obligations to give for the reason that
compensation is as a general rule not possible in obligations to do because of the
differences in the capacities of the obligor (Jurado, Obligations and Contracts, supra at
317).
Q: What is the effect when all the requisites for compensation are present?
ANS: When all the said requisites are present, compensation takes effect by operation of
law, and extinguishes both debts to the concurrent amount, even though the creditors
and debtors are not aware of the compensation (Civil Code, Art. 1290). It takes place
even though the debts may be payable at different places, but there shall be an
indemnity for expenses of exchange or transportation to the place of payment (Civil
Code, Art. 1286).
Note: If a person should have against him several debts which are susceptible of
compensation, the rules on the APPLICATION SHALL APPLY to the order of the
compensation (Civil Code, Art. 1289).
Q: Can a claim for damages be used to off-set an obligation?

ANS: Yes. If one of the parties to a suit or an obligation has a claim for damages against
the other, the former may set it off by proving his right to said damages and the amount
thereof (Civil Code, Art. 1283).
Note: The relationship between a bank and its depositor is that of creditor and debtor.
For this reason, a bank has the right to set-off the deposits in its hands for the payment
of a depositor’s indebtedness (Equitable PCI Bank v. Ng Sheung Ngor, G.R. No. 171545,
December 19, 2007).
Q: When is compensation facultative?

ANS: Compensation is facultative when it is effected by a party who is entitled to oppose
the compensation because he would be prejudiced thereby. It differs from conventional
compensation because it is unilateral while the latter depends upon the agreement of
both parties (4 Tolentino, Civil Code, supra at 367).
Example: When the obligation of one is with a term, while that of the other is pure, and
the former renounces the benefit of the term, consequently making the compensation
possible (Jurado, Obligations and Contracts, supra at 311).
Q: When is compensation not proper?

ANS: Compensation shall not be proper:
1. When one debt arises:
a. From contracts of depositum;
b. From the obligations of a depository; or
c. From contracts of commodatum.
Note: the law uses the word “depositum” and not deposit so as not to confuse it
with “bank deposits” which can be subject to compensation. In (b) and (c), the
depositor and the lender may claim facultative compensation.
2. Neither can compensation be set up against a creditor who has a claim for
support due by gratuitous title, without prejudice to the provisions of paragraph
2 of Article 301 (Civil Code, Art. 1287);
Note: Support in arrears, however, can be compensated.
3. If one of the debts consists in civil; liability arising from a penal offense (Civil
Code, Art. 1288);
4. Certain obligations in favor of the government, such as taxes, fees, duties, and
others of similar nature; or
5. A partner is responsible to the partnership for damages suffered by it through his
fault, and he cannot compensate them with the profits and benefits which he
may have earned for the partnership by his industry (Civil Code, Art. 1794).
Note: Only the offender is barred to set-up compensation.
6. Novation
Q: What are the instances when novation takes place?

ANS: The instances are the following:
1. Changing their object or principal conditions;
2. Substituting the person of the debtor; and
3. Subrogating a third person in the rights of the creditor (Civil Code, Art. 1291).
Q: In order for an obligation to be extinguished by reason of novation, what form of

extinguishment is required?
ANS: It may either be:
1. Express, wherein the extinguishment by reason of novation must be so declared
in unequivocal terms; or
2. Implied, when the old and the new obligations be on every point incompatible
with each other (Civil Code, Art. 1292).
Q: What are the two forms of novation by substitution of debtors?

ANS: the two forms of novation are:
1. Expromision is the substitution of debtors with the consent of the creditor at the
instance of the new debtor even without the knowledge or against the will of the
old debtor (beneficial reimbursement).
2. Delegacion is the substation of debtors is effected with the consent of the
creditor at the instance of the old debtor with the concurrence of the new
debtor.
Note: Kinds of Expromision:

1. Substitution with the knowledge and consent of the old debtor; and
2. Substitution without the knowledge or against the will of the old debtor (Jurado,
Q: Can a substitution of a new debtor in the place of the original one be made without
the knowledge or against the will of the latter?
ANS: Yes. Novation which consists in substituting a new debtor in the place of the
original one may be made even without the knowledge or against the will of the latter,
but not without the consent of the creditor. Payment by the new debtor gives him the
rights mentioned in Articles 1236 and 1237 (Civil Code, Art. 1293).
Q: What are the effects of a substitution of a new debtor without the knowledge or
against the will of the original debtor?
1. The new debtor can recover only insofar as the payment has been beneficial to
the debtor (Civil Code, Art. 1236);
2. The new debtor’s insolvency or non-fulfillment of the obligation shall not give rise
to any liability on the part of the original debtor (Civil Code, Art. 1294).
Note: In expromision, should the substitution be with the knowledge or consent of the
old debtor, the insolvency or non-fulfillment of the new debtor shall REVIVE the liability
of the original debtor to the creditor (Jurado, Obligations and Contracts, supra at 345).
Q: When the substitution of the debtor was proposed by the original debtor and
accepted by the creditor, what is the effect of insolvency of the new debtor?
ANS: The insolvency of the new debtor who has been proposed by the original debtor
and accepted by the creditor, shall not revive the action of the latter against the original
obligor, except when:
1. Said insolvency was already existing and of public knowledge; or
2. Known to the debtor, when he delegated his debt (Civil Code, Art. 1295).
Q: May an accessory obligation subsist when the principal obligation is extinguished?

ANS: Yes. As a general rule, extinguishment of principal obligation extinguishes the
accessory obligation. The exception is provided in Article 1296 of the Civil Code that
accessory obligations may subsist when the principal obligation is extinguished in
consequence of a novation, but only insofar as they may benefit third persons who did
not give their consent (Civil Code, Art. 1296).
Note: The qualification has reference to a stipulation pour atrui (Civil Code, Art. 1311,
par. 2).
Q: What is the effect if the new obligation is void?

ANS: If the new obligation is void, the original one shall subsist, unless the parties
intended that the former relation should be extinguished in any event (Civil Code, Art.
1297).
Q: What is the effect if the original obligation is void?

ANS: If the original obligation is void, the novation is void, except when:
1. Annulment may be claimed only by the debtor; or
2. When ratification validates acts which are voidable (Civil Code, 1298).
Q: If the original obligation was subject to a condition, should the new obligation be
under the same condition?
ANS: Yes. When the original obligation was subject to a suspensive or resolutory
condition, the new obligation shall be under the same condition, unless it is otherwise
stipulated (Civil Code, Art. 1299).
Q: What are the kinds of subrogation of a third person in the rights of the creditor?
ANS: Subrogation of a third person in the rights of the creditor is either:
1. Legal; or
2. Conventional.
Note: Legal subrogation is not presumed and it takes place by operation of law, except
in cases expressly mentioned in this Code; conventional subrogation must be clearly
established in order that it may take effect (Civil Code, Art. 1300). Conventional
subrogation of a third person requires the consent of the original parties and of the
third person (Civil Code, Art. 1301).
Q: When is legal subrogation presumed?

ANS: It is presumed that there is legal subrogation: (PAI)
1. When a creditor pays another creditor who is preferred, even without the
debtor’s knowledge;
2. When a third person, not interested in the obligation, pays with the express or
tacit approval of the debtor; and
3. When, even without the knowledge of the debtor, a person interested in the
fulfillment of the obligation pays, without prejudice to the effects of confusion as
to the latter’s share (Civil Code, Art. 1302).
Q: What are the effects of subrogation?

ANS: Subrogation shall have the following effect:
1. Subrogation transfers to the persons subrogated the credit with all the rights
thereto appertaining either against the debtor or against third persons, be they
guarantors or possessors of mortgages, subject to stipulation in a conventional
subrogation (Civil Code, Art. 1303); and
2. A creditor, to whom, partial payment has been made, may exercise his right for
the remainder; and he shall be preferred to the person who has been subrogated
in his place in virtue of the partial payment of the same credit (Civil Code, Art.
1304).
Note: Unlike the other forms of novation, accessory obligations are not extinguished
because in such obligations the person subrogated also acquires all of the rights which
the original creditor hjad against third persons. The application of this rule is absolute
with respect to legal subrogation, however, with respect to conventional subrogation,
such accessory obligation may be increased or reduced depending upon the agreement
of the parties (Jurado, Obligations and Contracts, supra at 353).

V. Obligations A. General Provisions

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V. Obligations A. General Provisions

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V.

Q: Does the law require a particular form of obligations?

Q: Are legal obligations presumed and how do they become demandable?

Q: What are the elements of an obligation?

Q: What are the source of obligations? (LC-QAO)

Q: What aret he kidns of quasi-contracts?

Q: When is negotiorum gestio not applicable?

Q: Does criminal liability entail civil liability?

Q: What is the scope of civil liability arising from crimes?

Q: What are the requisites of quasi-delict?

B. NATURE AND EFFECT OF OBLIGATIONS

Q: Can a single act or omission give rise to different causes of action?

Q: When is a thing specific or determinate?

Q: What are the obligations of a debtor obliged to give a determinate or specific

Q: When is a thing generic or indeterminate?

Q: What are the duties of a debtor in an obligation to give an indeterminate or generic

Q: What are the rights of the creditor in an obligation to give an indeterminate or

Q: when does the obligation to deliver arise?

Q: What are the fruits contemplated under Article 1164?

Q: What are the different modes of breach of obligations? (FNDC)

Q: What are the classifications of civil fraud and their distinctions?

The two may be distinguished from each other as follows:

 Dolo incidente – Present only during the performance of a pre-existing

 Dolo incidente – Employed for the purpose of evading the normal

 Dolo incidente – Results in the non-fulfillment of the obligation.

 Dolo incidente – It gives rise to a right of the creditor or oblige to recover

Q: Is the responsibility arising from fraud in the performance of an obligation

Q: What is fault or negligence?

Q: What is the diligence of a good father of a family?

Q: When is negligence considered equivalent to fraud?

Q: Does a pre-existing contractual relation preclude the existence of culpa aquiliana?

Q: When does a person obliged to deliver or to do something incur in delay?

1. When the obligation or the law expressly so declares;

Q: How is demand made?

Q: What are the kinds of default or mora?

Q: What are the requisites of default by the debtor?

Q: What are the effects of delay?

2. In case of mora accipiendi:

3. In case of compensation morae:

Q: What is the current rate of legal interest?

Note: When an obligation, not constituting a loan or forebearance of money, is

Q: What is presumption when there is a receipt of the principal obligation by the

Q: What is the presumption when there is a receipt of a later installment of a debt?

Q: What are the requisites of accion subrogatoria?

Q: What are the requisites of accion pauliana?

Q: Are the rights acquired by virtue of an obligation transmissible?

Q: What are the classifications of obligations?

Q: What is the classification of obligations based on the prestation?

a. Real obligation – which involves an obligation to give or to deliver. A real

Determinate or Specific Obligation – which involves an obligation to deliver a

Indeterminate or Generic Obligation – which involves the obligation to deliver an

Positive – which involves an obligation to do; or

Negative – which involves an obligation not to do.

Q: What are the causes of non-performance of obligations?

Q: What are the kinds of delay or mora?

a. Mora solvendi – (or debtor’s default), is defined as a delay in the fulfillment of an

1. An offer of performance by the debtor who has the required capacity;

2. The offer must be to comply with the prestation as it should be

3. The creditor refuses the performance without just cause.

Q: What are the requisites of a fortuitous event?

Q: Is there liability for loss due to fortuitous event?

There is no liability for loss in case of fortuitous event.