Professional Documents
Culture Documents
Civil Law Review 2
Civil Law Review 2
Civil Law Review 2
ATTY. DECHAVEZ
BEADLE’S NOTES (4B & 4C)
1156 - The definition of this provision is incomplete in that we have to understand that an obligation is a juridical
relation. It is juridical relation as distinguished from any other kind of obligations like for example:
John has a GF, he can replace his GF immediately in the afternoon because their relationship does not
have any juridical tie.
On the other hand, the obligation that we are talking about under 1156 is Civil Obligations. The civil obligations
referred to in 1156 is a juridical relation. Whereby, the creditor, may demand from the other person (debtor) the
performance of the prestation which is to give, to do, or not to do. In the event of a breach committed by either
of them or for instance the debtor, because of the presence of juridical tie, the creditor has the right to seek
redress from the state for the reparation. Meaning, the creditor may pursue the assets of the debtor. The assets
of the debtor, because in civil obligation, it does not involve as a penalty the imprisonment of a person. There is
a penalty, but the penalty includes the forfeiture of assets of the one who is obliged to pay the damages. The
assets here refer to damages.
So here, the civil obligations, it simply boils down to money. Very important that we understand that there are
three elements of an obligation:
This distinction between the active and passive subject is through in the sense that there is one person
who can demand in the other person who has the obligation.
In a bilateral contract which creates a reciprocal obligation, the active subject is also a passive subject
(vice versa)
Example:
Contract of Sale - seller is the active subject and can demand the payment of the price and at the
same time he is the passive subject wherein the buyer may also demand the delivery of the object.
The right contemplated in an obligation is a PERSONAL RIGHT it is enforceable against another person.
So the obligation to give, to do or not to do is enforceable against another person.
3. Vinculum Juris/ Juridical Tie- It is the one that binds the parties in an obligation. It is the one when there
is breach, it gives basis for the party to the obligation to seek redress from the state in order to vindicate his
right.
This provision is the one that we must bear in our minds whenever we encounter any problem in civil law.
5 sources of obligations
1. Law
2. Contracts
3. Quasi-Contract
4. Act or Omissions punished by law
5. Quasi-Delict
These have different rules. Because in 1158, obligations derived from law are not presumed. Only if the law
expressly provides for an obligation only then we can require to perform that obligation. This code refers to the
Civil Code PH and all other laws including Special Laws. If you’re looking at 1158, Civil Code is the general law
and all others are considered special law. Because we live in a civil law country, in correlation in 429, CC as
distinguished from juridical entities with respect to corporation, the corporation is allowed only to perform those
which the articles of incorporation allows it to perform. On the other hand, with respect to human beings, you
can do anything unless there is a law that prevents you from doing it.
In the case of OSG vs. Ayala, Robinsons and SM Prime, OSG filed a case against mall owners to require the
mall owners to provide a parking slot for free. The SC stated that if the basis of solicitor general in filing this case
is the national building code, and the implementing rules and regulations of the national building code, there is
nothing in these rules that requires mall/building owners to provide parking slots for free to anyone and its
customers. While the said law provides provisions of the said parking slots, the national building code and its
officials, will require enough parking spaces for customers. SC said, there is nothing in the National building code
that prohibits the mall owners from imposing parking fees for customers and persons using parking slots of the
mall owners including implementing rules and regulations of the national building code because under 1158,
obligations derived from law are not presumed only those that are expressly determined in this code or in special
laws.
Pelayo vs. Lauron, this is the case where her husband abandoned her in the middle of his pregnancy to the in-
laws wherein Pelayo is the Doctor who undertook the delivery of the fetus which unfortunately died. The in-laws
of the woman who delivered the baby, refused to pay the medical expenses for the reason that the husband is
primarily obliged to pay for these expenses. SC said that the argument of the in-laws is correct because the
rendering of medical assistance in case of illness comprise among the mutual obligation between the spouses
and not to the in-laws. The suit must be filed against the husband and not against the parent in-law even if the
latter called for the physician.
Spouses are the most common characteristics of a contract which is an obligatory force of contracts.Obligations
arising from contracts have the force of law between the contracting parties. And should be complied with in
good faith.
A contract is a source of an obligation by the law. But while the contract has the source of obligation arising from
contracts, have the force of the law, the contract is not a law because the law applies to everyone while contract
applies only to the parties of the contract, their heirs and assigns (privies to the contract). A contract is a meeting
of minds between the contracting parties whereby one binds himself with respect to the other to give something
or to render some service. Good faith refers to an abstract or honest belief in the absence of fraud or malice to
seek advantage. If there is fraud, the party defrauded may seek damages.
In the case of People’s Car Inc. v. Commando Security Service Agency, the commander security and security
agency of a dealer of kia in Davao city undertook within the security to safeguard and to protect the business
premises against unlawful acts of any persons that are prejudicial to the interest of the people’s car to the dealer.
However, while performing it’s duty, one of the security guards drove one of the cars belonging to a customer
supposedly for repair and maintenance and brought the car outside without authorization of the dealer. As a
result, the car met with an accident. The customer complained but while the customer has no privity of contract
between the security agency, SC held that because the dealer is liable to its customer, in turn, the dealer has
the right to ask the commander security as the security agency to pay for the losses that the dealer suffered as
the result of not being able to perform its obligation to its customer. The dealer is liable to its customer for the
damages caused which have been entrusted to its custody. The dealer must ask for indemnity to the security
agency for its undisputed damages have been caused directly by the unlawful acts of the security guard.
Santiago vs. Villar, in a sweepstakes ticket, there is a stipulation that you can only claim your prize if you
surrender the hard copy of the ticket. You are required to surrender the lotto ticket to PCSO. You have to oblige
to what has been stipulated. Otherwise, you cannot claim your prize. The presentation of the ticket is considered
condition precedent to the obligation between the parties. The contract is a kind of aleatory contract in nature
and the contracting parties established by the terms and conditions, they are advisable, provided that it is not
contrary to law, morals or public order.
1306- spouses also another characteristic of the contract which is the autonomy of contracts. Parties may
establish stipulations, clauses etc. as it may deem convenient provided it is not contrary to law, morals and public
order, public policy and good customs. The obligations arising therefrom have the force of law between the
contracting parties.
In relation to 1308, which is the principle of mutuality of contracts, once parties entered into a contract, and
obligations arising therefrom have the effect of the law between contracting parties, the parties are equal before
the provisions they entered into the contract. The effectiveness cannot be left in the will of any part of them. It
must be mutually agreed upon.
1160, obligations derived from quasi-contracts, as mentioned in 1158, in the event that special laws and the
code does not provide for provisions regulating relationship between the parties, then the default provision is the
provisions of book 4 consists of 19 titles. In quasi-contract, no consent nor obligation between the parties.
2 kinds of quasi-contracts: (based on the principle that no one shall unjustly enriched at the expense of another.)
1. Nominate
a. Solutio Indebiti - Obligation to return a mistaken payment. Obligation to return is
immediately demandable once the payment has been paid by mistake.
b. Negotiorum gestio- Gestor or the officious manager. Arises when someone took care of the
property which has been abandoned or neglected by any person then the gestor has the obligation
to take care of it with (DOAGFOAF) diligence of a good Father of a Family. The obligation is until
the neighbor arrives and recovers it from you. If the owner arrives and allows you to continue
taking care of its property, then Negotiorum Gestio converts itself into implied agency. The gestor
is entitled to payment of compensation.
In a contract of loan, for example, there is a debt amounting to 10,000. A contract of loan is referred to
as mutuum or simple loan. The subject matter is consumable. And that, upon receiving the money, he becomes
the owner of 10,000 (promise of ownership). The debtor cannot be charged with Estafa because it is a debt. So
the remedy of the creditor is to demand to the debtor the amount of the borrowed money. Commodatum if it’s
non-consumable. In consumable, you are just required to return the same amount but not the same money.
In a mutuum or simple loan, it is essentially gratuitous. Meaning, it is free. The only need is to return the
borrowed money, except if there is a stipulation for the payment of interest. Because the interest is the
consideration for borrowing an amount of money. It becomes onerous if there’s an interest imposed for borrowing
money. CC, is strict in making a requirement with regard to interest. The legal rate is only 6%. Always divide it
by 12 months. CC requires by simply agreeing on the interest, it is not enforceable unless it is in writing. But it is
a natural obligation and if you pay voluntarily, he has the right to retain the money.
Example:
The money has not been paid despite demand, then, the debtor will be liable for damages. The
damages for which the debtor would be required to pay would be the legal rate. Even if no agreement, if
the debtor defaults, the latter will be liable for 6% interest as payment for damages.
1161 provides that civil obligations make a qualification on what kind of civil obligation may be demanded for
acts arising to criminal offenses shall be governed by the penal laws and other special laws. Subject to provisions
on Art. 2177 on quasi-delict provides that obligations, other than quasi-delict, are entirely separate and distinct
from the civil obligations arising from criminal offenses subject to pertinent provisions on human relations.
Title 18 refers to kinds of damages. When you commit a crime of murder, you commit a breach of the law of the
state. But CC and RPC allows us or the injured party and its relatives for the recovery of civil damages based
on Art. 100, RPC that when a person is criminally liable shall be also civilly liable. Information includes civil action
or civil liability as impliedly included in criminal cases. The quantum of proof in criminal cases is proof beyond
reasonable doubt on moral certainty. Civil code provides that if assuming the accused is acquitted, the injured
party is also not entitled to claim for civil liability. But the injured party may file for separate civil action based on
preponderance of evidence. Separately, the injured party with respect to civil action to claim for civil liability for
civil obligations arising from criminal offenses, may choose to reserve the filing of the separate civil action.
But there are civil actions that do not need to reserve and they are referred to as independent civil actions (art.
32-34 and 2176).
2176 (classic)
Culpa-Acquillana - an independent civil action. The obligations here arise from quasi-delict. In civil obligations
arising from criminal offenses, when the employee is convicted and happens to be insolvent, the liability of the
employer under culpa criminal is subsidiary. The liability of the employee is primary. In the event that the
employee is insolvent, the employer shall be liable to pay.
Vicarious liability of employers, ex: the teacher has vicarious liability to his students. Based on the principle of
bonus pater familias. If respondeat superior, the liability of the employer is conclusive. But in vicarious liability
(2180), there is presumption of negligence but that presumption may be rebutted if it has been proven that there
is DOAGFOAF in selection and supervision of employees. If proven, then, you can be absolved from liability.
Culpa Acquillana - No existing contract between the parties. Negligence must be proven. Not presumed.
Example: Yung dog habang pinapasyal mo, nakakagat ng iba or nalaglag yung paso tas may nataaman,
the owner is liable.
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Administrative Matters:
-Total Number of Students: 47
-Class is every Tuesday and Thursday (10 am to 12 nn)
-When you are trying to remember things, kailangan clear kayo palagi; everything that you say it must be done
consciously; clear yung mind natin
-Article 1156: An obligation is a juridical necessity to give, to do or not to do; this is an incomplete definition,
because the problem with this definition is that only presents one side of the coin = the side of the creditor; the
obligation here is a juridical relation, for one important reason; kung si A may girlfriend ng umaga, pwede niya
palitan sa gabi (it is not a juridical relation that would qualify as a juridical relation under Art. 1156 due to the
absence of a juridical tie)
-one of the elements of an obligation = vinculum juris; a thing that binds the parties to the obligations; the thing
that gives the party in an obligation to give the right to seek redress in order to repair his right or repair an injury
committed by the other when there is a breach of obligation
-Obligation may be classified according to strength in law; either be civil or natural obligation; it can also be a
moral obligation
-Ex.) obligation to attend the mass (if you are a Catholic) = a moral obligations for Catholics
-It is a moral obligation = pag inutusan si B na maghugas ng pinggan; her mother cannot sue B or pursue her
properties (walang magagwa ang nanay dahil moral obligation lang ito; there is no juridical tie)
-Note: If you have to distinguish civil from natural: civil is based on positive law; natural is based on equity, and
that in civil obligation, there is a juridical tie; but that juridical tie, it is effective in law and therefore, it may be
enforced before the courts of law; in a natural obligation, there is also a juridical tie, but it is not given effect in
law; however in the provisions of natural obligations, while it may be true that the JT is not given effect in law -
but if there is voluntary performance by the debtor; it must be distinguished from solutio indebiti (chapter 1 of title
17, extracontractual obligations)
-Solutio Indebiti: there is payment by mistake; so that, kung umutang si A kay B tapos nagbayad si A na may
interest (payment of mistake → case of solutio indebiti); if there is an agreement - simple loan or mutuum
-Commodatum vs. Mutuum
-Commodatum (return of a non-consumable thing)
-Mutuum (money or fungible consumable things becomes your property; you become the owner of that money
that you borrowed)
-You cannot be charged with estafa when it comes to loan; because you will only be charged with estafa if hindi
ikaw yung pera and binulsa ka (ex.) pag ahente ka and pinagtitinda ka ng alahas, tapos binulsa mo yung pera,
estafa yun)
-Kung ang uspapan is of payment of interest and it was not through a written contract (it is not valid; but if the
agreement is verbal or oral, and voluntarily paid the interest - it constitutes a natural obligations); mutuum is
either gratuitous or onerous (payment of interest); it is the consideration for borrowing money (the nature of the
interest); gratuitous = just return the exact amount without interest
-Antichresis: the agreement with respect to the amount loaned and interest must be in writing, otherwise it is
void
*We are going to correlate provisions
*Always approach things in cold blood = do things methodically
*Do it once, do it right, never do it ever again
Contract (requisites)
1. Consent
2. Object
3. Cause
Obligations (elements):
1. Parties:
a. Active (creditor): the one who can demand
b. Passive (debtor): receiving end; the obligor; the person against whom the performance of the obligation
may be demanded
2. The object of the obligation: (prestation); however prestation is a conduct that must be observed (ex.)
pag sinabing gumising ng umaga, that is a kind of behavior that your parents expect from you); it is written
down in 1156 (to give, to do or not to do); they are conduct or actions expected from the debtor; if the
performance will be satisfactory to the creditor, then the conduct will result in the extinguishment of the
obligation; the ultimate objective of the conduct is the extinguishment of the obligation and not
perpetuation
-1157: very important; what is the source of obligation of this problem (whenever you are confronted of a
problem)
-Five (5) sources of obligation; in the case of Makati Stock Exchange vs. Campos: an obligation imposed on a
person and corresponding on the right, must be rooted in one of the five sources; mere assertion of a right in an
initiatory pleading without identifying the basis or source is merely a conclusion of law
-1158 → we live in a civil law country; unlike in a judicial entity like in a partnership where the juridical entities
cannot performed acts unless allowed by the articles; Article 429 of Property = we are born free (“you can use
your property for as long as it does not cause an injury to another person”)
-Obligations derived from law are not presumed, and 1158 refers to the Civil Code of the PH; Civil Code is
considered to be a general law, and all other laws are special laws
-NCC applies suppletorily to all things pertaining to civil obligations that have not been covered; even if it is
something about the Family Code
-Case of OSG vs. Ayala Land Incorporated, Robinsons, Shangrila and SM Prime: OSG filed a case against the
mall owners requiring them to provide the parking spaces for free; according to the SC, the national building
code IRR may have required the building owners anyone constructing a building to provide parking spaces;
however, there is nothing in the NBC that requires or that allows or that provides that the mall owners may be
required to provide such spaces for free; and therefore, the mall owners because they are not prohibited, they
may charge some kind of fee for the use of parking spaces
-Lauron Case: The husband left the wife with his parents-in-law; when the wife was about to give birth, the
parents in law called a doctor (Dr. Pelayo); the child died; the parents in law refused to pay for the medical
expenses of the wife; SC ruled that under the FC, the obligation pertains to the husband; the rendering of medical
assistance is comprised under the obligation of spouses (mutual support)
-Santiago vs. Villar: Lotto ticket bought - there is a stipulation that you will have to physically present the hardcopy
of the ticket; if you cannot produce such, then you will not be given the prize; the presentation of the ticket is a
condition precedent of the payment; obligation arising from contracts; force of law between the contracting
parties and should be compiled with in good faith
-1159: obligatory force of contract; a contract is not a law because it is only enforceable within the privies
-People’s Car vs. Commando Security: Security Agency that was retained by People’s Car in Davao; the
agreement was that the security agency undertook in consideration of the contract and payment for its services,
to safeguard and protect the dealer from theft; one day, the guard drove off with a car and had an accident;
dealer then had to pay damages to the customer; Commando Security alleges that he is not a privy with the
contract between the customer and dealer; the SC stated that the dealer is liable to the customer; dealer was
justified in making good such damages and relying in Commando to honor its contract and to indemnify such
due to the unlawful acts of the security guard in breach of their contract
-Good faith: intangible and abstract; an honest belief, the absence of malice and the absence of design to fraud
(1170 of the NCC)
-Case of Pryce vs. PAGCOR: Pryce Hotel in Cagayan De Oro, and then yung Pryce Hotel entered into a lease
agreement with PAGCOR for the latter to set up a casino in one of the floors of the hotel; however, the
government were constrained to issue a permit to PAGCOR to push through with the putting up of the casino in
the said hotel; because it did not push through regardless of the lease contract for a definite period, PAGCOR
tried to cancel the lease and expecting that they will not be required to pay the rents, lease for the remaining
period of the lease; clearly it does not have a basis because under 1159 is applicable
2. Innominate
-1161: very important; this is the only provision that the obligation is described as civil; only to distinguish it from
another kind of obligation (obligation of the accused to the State for committing a criminal offense); when a
person commits a crime, he commits a crime against the State and also commits an injury to the private person;
to the State he is liable criminally, and to the private person, he will be liable for damages
*Pera pera lang naman itong civil law
-Art. 100 of the RPC - criminally and civilly liable (civil liability ex-delicto); acts and omissions punishable by law
-Civil liability ex-contractu = based on contracts
-Note: merong tinatawag na civil action; ang lahat ng actions natin in order to claim civil liability is a civil action;
When a criminal action is filed, a civil action is impliedly included as well; the problem with that, is the quantum
proof required is proof beyond reasonable doubt (it requires a moral certainty); it is difficult to prove the guilt of
the person; if he is acquitted then you don’t get anything in the civil action included in the criminal action; the
good thing about civil liability arising from criminal liability, if the accused is acquitted, the independent civil
action is still alive
-The proof that you need to claim in the separate civil action is preponderance of evidence
-You may also choose to reserve the civil action
-If the civil action is based on an obligation not from the acts or omissions punishable by law; then it is an
independent civil action (#2 - violation of civil liberties; Article 32); 31, 32, 33 and 34 = independent civil actions
(does NOT HAVE to be reserved); you will only need preponderance of evidence
-Article 33 → based on homicide, or physical injuries or libel or slander; ICA pa rin siya; may proceed
independently from the criminal case
-Article 34 → ICA as well
-1161
-1162 → tort is an Anglosaxon term; “torquere”; intentional tort, negligent and strict liability torts; ex.) naglabas
ng aso may kinagat sa kalsada = papasok sa strict liability tort (no defense at all); ex.) nagtitinda ng fishball and
tapos sira na yung fishball at nasira yung tiyan = strict liability tort; distinguished from negligent tort
Delalano vs. Biong → nakasagasa; considered as a negligent tort (resulted to damage in the property)
-Art. 2176 = torts/quasi delict; fault or negligence by another person; no contractual relationship between the
parties
*Carpio vs Doroja: employer does not have to be included in the criminal case; but during the execution of the
decision for the civil liability, the employer may be made to pay if it is shown that the accused does not have the
property in order to pay for the liability
-doctrine of the last clear chance, discussion on the doctrine of bonus pater familias (it must be distinguished
from respondeat superior - 2180 under quasi delict is bonus pater familia)
-respondeat superior (command responsibility): it is conclusive in nature (this is not applicable in article 2180)
-ex.) Kasambahay → bonus pater familias (2180); negligence of employer is merely presumed; if you are
able to prove that you have exercised ordinary diligence in the actions of your kasambahay, then the
employer may be exculpated for the actions of your employee
-Doctrine of comparative negligence: Cangco vs. Manila Railroad case → contributory negligence ang
injured person; the contributory negligence will be compared with the negligence of the defendant (the
person who caused the injury); if there was contributory negligence and it was the legal and proximate
cause of the injury, then the defendant will be exempt from liability; for as long as you can show that the
negligence of the defendant was still the proximate cause of the injury, then the contributory negligence
of the plaintiff will not result in the defendant exculpated from liability; he will still be liable, but his
liability will be tempered - it will be reduced, by the fact that the plaintiff contributed to his negligence
-If the plaintiff contributed to his injury, but his negligence was merely contributory but not the PROXIMATE
CAUSE and such was still the the negligence of the defendant, then the defendant will still be liable, but his
liability will be reduced proportionately due to the contributory negligence of the plaintiff
HW:
-Read the case of Orient Freight International vs. Keihin-Everett
-Next meeting: recitations will be conducted (the cases will sent through the Viber Group); before we proceed to
start with chapter two; read chapter 2 on the textbook
2/22/2021 - SECOND MEETING- 4C (Caryl)
Elements of Obligations; An obligation is a juridical relation because of juridical tie. It is one that binds the parties
to the obligation so in the event of a breach, the aggrieved party has the recourse to the state.
Obligations arising from contracts have the force of law between the contracting parties and shall be complied
with in good faith.
Example of obligations derived from law: OSG vs. Ayala, SM and Robinsons- discussed
SC cited 1158
Obligations derived from contracts: Case of San Francisco Inn vs. San Pablo water district
-San Pablo entered into MOA with a deep well operator bec the MOA has voluntarily agreed upon and executed
the obligation to pay the production fees on the part of the deep well operator. Discussed
*INTERESTING CASE*
When two parties enter into a contract, even if the contract is not being required by law, but when the parties
agreed, that will have a force of law between the contracting parties.
Case of Macasaet vs. COA: (discussed)
• Macasaet is the architect; the professional fee must be computed in the final and actual cost even if the
orig proj cost is 100M. Entitled to adjustment when agreed upon. The escalation will be added to project
cost because that was agreed upon.
RECIT:
CASE OF:
1. Locsin vs. Mekeni- Unjust for mekeni to appropriate all that Locsin had pay for the payment of the cost
of the car. Otherwise, unjust enrichment.
Main objective of unjust enrichment is to prevent one from enriching himself at the expense of another without
just cause or consideration.
Art. 29- Civil action will survive even if acquitted. (separate civ. action)
Example: Nakabangga yung taxi driver at walang pera, the responsibility of the operator would be subsidiary.
2. Dy vs. People- the crime was non-existent ; not criminal at all. Case of a simple loan or mutum, there is no
estafa there. The debtor will become the owner of the money. Her duty is just to pay.
3. Carpio vs. Doroja- (VICARIOUS LIABILITY) SC distinguished subsidiary liability in 103 of RPC from the
liability of employers under quasi-delict.
In the Quasi-Delict of the employer, basis would be vicarious liability under 2180.
Last statement of 2180:Principle of bonus pater familias
Principle of good father of a family as distinguished from respondeat superior. There is only a presumption of
negligence but may be rebutted from proving DOAGFOAF.
VIP!!
2176->2180: Liability of employer is primary (there’s defense but subj to rebuttal)
365 RPC: Accused - primary ; employer- subsidiary (doesn’t have a defense)
Chapter 2
Articles 1163-1168
• Distinguish between real and personal obli
• Real pertains to give (distinguish between determinate or generic)
• Determinate: takes place where the thing or subject of the obligation is specific or determinate. If
determinate, compelled by specific performance.
• Personal pertains to do or not to do (cannot be compelled by specific performance) run afoul to principle
against involuntary servitude.
• Obligation to provide support can be compelled by court order.
Specific thing can be lost; 1st, always exercise the proper diligence of a good Father of a Family. 2nd,
Deliver the specific thing agreed upon. 3rd, 1166, because it is a specific thing, deliver also the
accessions and accessories.
1164- from the time the obligation has become due or has been perfected, the creditor has the right to
the fruits of the thing. He shall have no real right until it has actually been delivered to him.
Personal and real right:
A is the seller and B is the buyer of a car, if they have agreed and the contract has been perfected that
B will buy the car of A for 100k, the right of B prior to the deliver of the car, is merely a personal right -
right to demand from A the delivery of the car including accessions and accessories. From the moment
it has actually been delivered constructively, then there is the right of possession and ownership which
is actually a real right.
Right to possess and own PRIOR to the delivery is merely a personal right.
Example: A seller, despite the contract of sale to B and prior to delivery to B, he sold to C the same car
and delivered it. The right of B, being a personal right, has no right to recover the car from C if C is a
buyer in good faith. Personal right is a right against the person who is definite passive subject to demand
from that passive subj the performance of the obligation which is to give, to do or not to do.
Laws on property in “real right” is a right over a thing without a definite passive subject against whom to
be enforced that’s why it is a right against the whole world.
If it is a determinate thing, you can demand a specific performance. Alternative remedy: equivalent
performance -> 1170
Specific thing agreed upon cannot be delivered, then he is liable for damages.
Equivalent performance is when you ask another person to do it and you pay a higher price then he will be liable
for damages.
Next meeting:
Recap of 1163-1168
Rest of chapter 2
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Recap of Topics:
General Provisions of Obligations: difference of civil law obligations vs. other obligations → civil obligations; there
is a juridical relation that is created because of the element of vinculum juris or juridical tie which binds the parties
to the obligation; the event of breach, they can seek redress to vindicate the right
-Unlike in the case of a moral obligations: ex.) jowa ng umaga, pwedeng palitan ng hapon; may relationship but
no juridical relation created
-Ex.) obligation na mag-mano sa mga magulang = merely a moral obligation; no juridical relation created
-On the other hand, a natural obligation → there is a vinculum juris of juridical tie; however, it is not given effect
in law because natural obligation is simply based on equity and natural law
-Three elements in a natural and civil obligation are present (except that the vinculum juris in natural law is not
given effect in positive law)
-Take note: there must be voluntary performance; solutio indebiti and negotiorium gestio (considered as quasi-
contracts = not a result of the agreement between the parties) → payment by mistake
-Solutio indebiti: nagbayad ng sobra; it creates an obligation to the person to return the excess payment; if not,
the person will be liable for damages
-Pricniple against Unjust Enrichment → solution indebiti and negotiorium gestio
-The prestation or conduct: conduct is the behavior that the passive subject or debtor must observe to the
satisfaction of the creditor; ultimate objective of the obligation is to extinguish teh obligation
-Art. 1157 (five sources of obligation) → this is very important; because every source of obligation has different
sets of rules and we will learn that in a while
-Law as a source of obligation → they are not presumed (Article 1158); suppletory in character
-Office of the SG vs. Ayala Robinsons SM Prime = when the office of the SG filed a petition requiring the mall
owners to provide parking spaces to its customers for free. The SC said that while the NBC and its IRR requires
mall owners including building owners to provide parking spaces whenever they build their edifice; but there is
nothing in the NBC that states that they shall provide the parking spaces for free; they can therefore demand or
impose parking fees for the use of their parking spaces; Art. 1158 is applied → NBC is a special law vis-a-vis
the NCC
-Case of Pelayo vs. Lauron → pagdating sa wife and health expenses; the husband will pay for the medical bills
-Lotto tickets: actual lotto ticket must be produced; because this is the contract that you entered into
-Art. 1159
Characteristics of a Contract:
1. Obligatory force of a contact (Art. 1159)
2. Principle of Autonomy (Art. 1306)
a. People’s Car vs. Commando Security
b. Pryce Hotel vs. PAGCOR
c. Macasaet vs. COA
d. San Pablo Water District Case: when the parties entered into a MOA, even if there is no law requiring
the MOA, the MOA is a separate source of obligation; it is a contract between the parties; they entered into a
MOA voluntarily and they must comply.
i.The architect will be entitled to a payment of a certain percentage, but then COA disagreed because the
architect’s entitlement is only based on the approved contract cost; but according to the SC, if the parties
provided and stipulated that the professional fee of the architect is based on the total and actual project cost, it
must be saw (obligatory force of a contract)
Recitation of Cases:
-Case of Locsin: Principle of unjust enrichment:
1. Person is benefited without a valid basis or justification
2. That such benefit is derived at the expense of another
-If Mekeni is allowed to appropriate and keep all of the installments that were paid by Locsin, then it will be
unjustly enriching itself at the expense of Locsin
-Prevention of enriching oneself without just cause or consideration
-Article 1161: it talks about civil obligations arising from acts or omissions punishable by law; when a person
commits a crime, two kinds of obligations are created (but both are derived from law): one is that he commits a
breach of the law of the state - might go to prison; the second is, if a person commits a crime, he injures another
person (a private offended party), and such party becomes entitled to a compensation - this latter obligation is
referred to as civil obligations arising from criminal offenses (are impliedly included whenever an information or
complaint is filed before the fiscal as a result of the crime); under article 100 of the RPC; ang civil liability in article
100 of the RPC is NOT QUASI-DELICT AND NOT BASED ON A CONTRACT, but AROSE FROM CRIMINAL
LIABILITY
-However, it is required that before the private offended party may be able to get compensation for the civil action
that is included in the criminal case, the accused must be found guilty and in order to find an accused guilty in a
criminal case, it requires a quantum of proof beyond reasonable doubt; if the accused is acquitted, then the
private offended party will not be able to get paid
-The good thing about this: Articles 29 and 30 of the provisions on Human Relations, if the accused is acquitted,
the civil action will survive - meaning, the private offended party may file a civil action in order to recover
compensation (it will not be a case of res judicata or double jeopardy) → ang quantum of proof: preponderance
of evidence
-Going back, if however, the accused is found guilty and he goes to prison, he will also be required to pay a
compensation to the private offended party; problem: if the accused is insolvent, then walang makokolekta yung
private offended party; except: if the accused has an employer, the employer will be liable subsidiarily
-Case of Dy vs. People: there was no crime committed; liability is ex contractu; walang basis ang court to adjudge
the payment of a compensation or a civil action that supposedly arose from an act or omission punished by law;
in order to have a judgment on civil liability for a civil obligation for acts and omissions arising from law, there
must be a finding of guilt; if the accused is not guilty, lalong walang dahilan mag issue ng judgment ang court for
the civil liability
-Carpio case: subsidiary liability case (no defense of ordinary diligence); distinguish Article 103 of the RPC from
Art. 2180 of the NCC
-Art. 2180 → take note of the order provided for under the first paragraph (father first)
-paragraph 3: kailangan negosyante ka dito
-paragraph 4: hindi kailangan dito na negosyante ka (ex.) kasambahay na nakipag-sampalan sa palengke ng
isda)
-paragraph 5: you can sue the state if the person who committed the act happens to be a consultant; but if the
person who committed the act is a permanent or regular employee, then he alone shall be liable under Article
2176 (hindi yung state ang magiging liable); liable lang ang state sa mga casual and contractual
-paragraph 6: under the FC, this was qualified → the schools, administrators and teachers; ang requirement is
that the student is minor
-last paragraph: most important in 2180 → first, espouse the principle of bonus pater familia; under this principle,
sa 2180, hindi applicable yung principle of respondeat superior (pagka guilty siya, guilty ka na rin); pero dito sa
bonus pater familia, there is only a presumption of negligence, but you can rebut it with the defense that you
have exercised diligence in the selection and supervision of the employees; in respondeat superior, hindi mo
marerebut halos
-2180 (basis) is the principle of bonus pater familias
-Dela Llana vs. Biong (whiplash injury due to a collision; proximate cause and elements of quasi-delict) → the
case laid down the three requisites in order to prove quasi-delict; what are the three requisites?
1. Damage to the plaintiff;
2. Negligence brought about by the act or omission by the defendant; and
3. Causal relation between the damage and the act or omission
-Was Dra. Dela Llana able to prove the presence of the three elements? = No.
-Note: in a quasi-delict, do not forget the three requisites:
1. ) presence of damage or injury
2.) negligence on the part of the defendant
3.) connection between negligence and the injury or damage sustained by the plaintiff
*must be able to satisfy or show that such connection is the legal and proximate cause (the negligence of the
defendant); do not skip and fail to make an analysis whenever there is a problem pertaining to quasi-delict (start
your answer by providing the three elements of quasi delict, then after providing such elements, check the facts
to see if the presence of the three elements are there)
Chapter 2:
Articles 1163- 1168: when approaching these provisions, if you will note in the textbook, it made a distinction
between a real and a personal obligation → so that it is easier to approach the distinction
-Real Obligation: obligation to give
-Personal Obligation: obligations to do and not to do → they cannot be compelled (the performance of these
obligations) cannot be compelled by a specific performance in order to compel a person to perform an act; so
that if you hire the services of Sarah Geronimo to sing in your wedding; kung sinabi niya hindi siya makakarating
kasi may lakad siya, wala kang magagawa; your only recourse is to ask for substituted performance or to ask
for an equivalent performance (claim for damages)
-Rights and Obligations (H and W) under the FC → (except for the obligation to give); all other obligations are
obligations to do (personal obligations)
-Personal obligations → cannot be compelled by specific performance
-Real obligations on the other hand: you can file an action for a specific performance if it is an obligation to give
a specific or determinate thing
-Obligation to give is a determinate thing: demand specific performance or file an action for specific performance
-If the obligation is determinate/specific → the number one obligation is article 1163
-A thing is determinate: when a thing is particularly designated (ex.) Model Honda Car CRV model 2021, with a
plate number) belonging to the same class
Ex.) May 50 Honda Model CRV ang isang dealer = generic yung mga Honda na ito; but if you point to one of
them and you told the dealer “i am buying that car,” then you have physically segregated such car to that class
Ex.) 10 bags of cement have been physically segregated from the bodega; then the 10 bags become determinate
or specific = Art. 1163 is applicable
-If the thing is lost: you are liable for damages → article 1170 (Action for Equivalent Performance = damages)
-Generic: obligation will be complied with at the expense of the debtor → action for substituted performance +
action for equivalent performance → you can get from another supplier; the damage you suffer, he will have to
be liable
-3rd paragraph of 1165: determinate obligation; that if the obligor delays or has promised to deliver the same
thing to two or more persons who do not share the same interest = fraud; the person will be liable even on a
fortuitous event (it is a universal defense)
-Art. 1174: fortuitous event (universal defense); pag may guilt ka ng fraud or delay, or negligence, you cannot
invoke fortuitous event; you can only invoke this if you are on time, or if you are ready and you were prevented
from making the delivery due to a fortuitous event (but you were not in delay, not guilty of fraud)
-Art. 1167: same shall be executed at his cost (parehas ito sa 1165 (2)); it doesn’t have to be the same person
- it can be done by another person
HW:
-We will finish Chapter 2
-We will move to Different Kinds of Obligations Next Week
-Viber message of Sir: of the assigned cases
2/24/21- THIRD MEETING (CARYL)
Recit:
Case of Abrugar vs. Cosmos bottling corp.
• Requisites of quasi delict and claim for compensation.
• Legal and proximate cause
• Doctrine of comparative negligence
• Doctrine of contributory negligence
1169
• Delay or mora
2 kinds
Mora accipiendi
Mora solvendi
In case of doubt, apply the general rule. Req. of judicial demand must be complied with unless it is clear from
the facts.
Extrajudicial demand
• Complying with the obligation without any court intervention.
Example of law that will make an obligor in delay without the need of demand:
1. Case of Rivera vs. Sps. Chua
• If it’s 5% per month, how much would that be per annum? 60% per annum (usurious)
• Even if usury law was suspended, doesn’t mean that an interest may not be adjudged as usurious. The
court will still reduce if it’s excessive.
Reciprocal obligation
• Either party incurs in delay if the other does not comply with what is incumbent upon him. (kaliwaan)
Kinds of dolo?
1st kind of Fraud takes place in the performance of the existing obligation - 1170
2nd kind of Fraud takes place at the birth of the obligation or the contract which could either be
Causal or incidental. Fraud that will shake consent.
1344
• Encircle incidental fraud (*)
• Example you are selling a house then there is termite, the fraud is merely incidental. The party guilty of
fraud will be liable to payment of damages.
• Dolo incidente
1388
• Causal fraud (result to annulment of the contract)
• Dolo Causante
1173
• It provides the def. Of negligence.
• Negligence will depend on the situation (omission of that diligence which is required by the nature of the
obligation)
• Degrees of diligence
• DOAGFOAF (default)
• Extraordinary (common carriers and hotels/inns as long as declared)
• Utmost (banks; fiduciary)
If the negligence is gross, there is fraud.
Case of Servando
• Can you stipulate negligence?
Next meeting:
Yanez, Justin- Culpa contractual vs. Acquillana;
Yan, Lucas - Case of Valenzuela hardwood and the possibility of parties varying the degree of diligence. Can
you stipulate the diligence required?
Villaflor, Priscilla - Case of Philcomsat vs. Globe (fortuitous event) and Lasang vs. Smith (1994)
Santotome, Janna- Jimmy co. vs. CA (landmark case- VIP)
1177 then Chapter 3
____________________________________________________________________________
1173
• When it shows bad faith (gross negligence)
Negligence is an option of the req. By law that a party must exercise the degree of diligence in the performance
of the obligation. Diligence required is DOAGFOAF.
Ordinary diligence
Extraordinary
Utmost
Ordinary negligence
Gross negligence
Even in contract of common carriage of goods via ticket in airplane or vessel. There is a stipulation in limiting the
value of liability. Unless you declare a higher value.
1174*****
Fortuitous event definition
2 kinds:
1. Acts of God (fortuitous event proper)
2. Acts of Man (force majeure)
F.E is a defense in all obligations
1171-1174 - Applicable to culpa aquiliana.
Exceptions to FE:
Jimmy co vs. CA
• Exceptions to FE
1177- explain
Remedies of the creditor depends on whether the obli is real or personal and if its real check if its determinate
or indeterminate.
Chapter 3
2 kinds of conditions:
1. Resolutory - effective immediately but upon fulfillment, it is subject to extinguishment.
2. Suspensive - Depends upon fulfillment of condition
Garcia vs. CA - In a contract to sell, payment of the full purchase price, is a positive suspensive condition. Once
fully paid, there is an obligation to execute the Deed of Sale and to deliver the title. If there is failure to pay the
full price, there is a breach and will prevent the obligation of the seller for the seller to execute the deed and to
deliver the title. Subject to the provision of Maceda Law.
Contract of sale and you fail to perform the obli (full payment) but the prop is transferred to you but haven't paid
the full price, the non payment is a resolutory condition which results in the extinguishment of the sale. Non-
payment is equivalent to foreclosure of property and cancels the sale if the creditor is a bank.
Contract of sale subject to reso condition - Upon full payment of the purchase price, the obligation will extinguish.
If positive suspensive obli - the fulfilment of the condition will give rise to the obligation.
Assignment:
Cases assigned
Chapter 3
____________________________________________________________________________
-Culpa Contractual; law presumes negligence from the fact that the contract is not performed; if there is an
existing contract and you committed negligence, here there is no malice (it is not intentional); but there is want
of care and therefore, he was not able to perform his obligation
ex) contract of carriage; if you are injured, then therefore, the common carrier failed to bring you safely to your
destination → violation of a contract
-Negligence is presumed because you failed to perform your obligation
-CC: law presumes negligence from the fact that the contract is not performed
*Dalawa lang papatunayan: contract is not performed and you suffered damages
-CA: negligence is not presumed; the plaintiff must prove negligence (Dela llana vs. Biong → three requisites:
1.) damages or injuries sustained by plaintiff; 2.) there was negligence committed by the defedndant; 3.) legal
and proximate cause: connection between the act of negligence and injuries sustained by the plaintiff)
-CA: the plaintiff must prove negligence
-CC: if there is an employer; it does not talk about vicarious liability (2180)
*If there is an employer in culpa contractual → the employer cannot invoke the defense that he exercised the
ordinary diligence in selection and supervision (this defense is not present in CC)
*Bonus pater familias = present in 2180 (vicarious liability; presumption of negligence on the part of the employer,
but the employer may invoke the defense of ordinary diligence in selection and supervision of the employees)
*2180 (last paragraph; defense)
-Note: 1173 (2) → the good father of the family is an ordinary diligence expected from a person who is taking
care of his property; that with respect to his proeprty, he exercises ordinary diligence; it is as if he is taking care
of his own property as to how he is taking care of his relationship to other persons
-Philcomsat vs. Globe Telecom: non-ratification of the RP-US treaty with respect to the continued existence of
US bases in the PH was considered as a FE becuase it is beyond the control of the parties; therefore, it exempted
the party required to perform an obligation from performing his obligation due to a FE
-Note: there are several exceptions to FE (regardless of a FE, the obligor may still be liable)
1. By law: if the law provides that hte obligor will still be liable regardless of an FE
2. Parties may also stipulate (by stipulation): obligor is still liable
-Note: Victorias Planters vs. Victorias Milling → SC stated that the FE, while it will exempt the obligor, during the
existence of the FE, it will not stop the running of the period as to extend the contract period between the
contracting parties
-Obligor, in order to prevent the creditor from being able to collect what is due to him (such as damages under
1170), and the obligor has entered into contracts with 3rd persons to dispose whatever assets he has, and
because of that, the creditor is not able to collect what is due to him, then he may resort to accion pauliana →
may file an action for the rescission of the contracts entered into which are intended to defraud him; also
governed by chapter on rescissible contracts
Chapter 3:
-What is a pure obligation? → performance of an obligation that is not subject to a condition or a period;
performance of the obligation is not dependent upon a condition or a period
-Condition may be: suspensive or resolutory
-What does suspensive condition mean and how is this in comparison to resolutory condition?
-On the other hand, if it is in the latter with respect to the condo unit; you opted for a bank financing; developer
will enter into a deed of absolute sale because it will be required by the bank; the bank will pay in full, and
therefore the bank will require a copy of the CCT that is already delivered to you; that is why in an obligation
subject to a resolutory condition, it is demandable at once; the developer is bound to deliver immediately the
deed of absolute sale and the CCT, and the property will be transffered in your name; considered as a CTS but
is subject to a resolutory condition → for you to pay your installments on the loan to the bank; and if you fail to
pay the balance of the loan then the bank may pursue a foreclosure; the sale will be cancelled
-ex.) resolutory condition: A will give B allowance on a condition that B will not get married; allowance will cease
upon the happening of the event; B will get married to C
*obligation may be subject to a condition
-Case of Plazo vs. Lipat (with respect to a contract to sell -page 139 of the book)
*Suspensive condition → payment in full of the purchase price (considered as a positive suspensive condition)
by the buyer prior to the period agreed upon; which in this case, the buyer failed to do so
-1181: obligation is subject to a condition → prior to the happening of the event, there is no obligation and once
that event happened or occured, it will result in the acquisition of rights on the part of the creditor or obligee and
it will give rise to an obligation; meaning, the obligation will come into being
-On the other hand, if the obligation is subject to a period, prior to the arrival of the period, there is already an
obligation or a right, except that the performance of the obligation is not yet demandable; merely to suspend the
emandability of an obligation
-Effect of condition to obligation: prior to the happening of the event which is the condition, there is no obligation
yet
-Note: condition may either be → postestative = depends upon the sole will of the debtor; distinguished from
1180
-1182: no obligation (presupposed); postestative
-1188: if an obligation is subject to a condition, even if, prior to the happening of the event in a condition, no right
has yet been acquired; however under 1188, even if that is so, the law provides that the creditor may before the
fulfillment of condition, bring appropriate actions for the preservation of his right (even if there is no obligation
yet); recognizes the right of the creditor to protect his interest even before the happening of the condition; he
may choose to have his right annotated at the back of the title of the property
(Wills and succession → case of reserva troncal: the relative belogning to the line where the property came, may
bring an action to protect his right in order to ensure that the property will be returned to the family, even for the
time being the property is in the name and position of the ascendant of the child that does not have an issue)
-Definition of legal loss: when the thing deteriorates, goes out of commerce, existence is unknown or cannot be
recovered
-Deterioates without the fault of the debtor → obligee will have to bear the impariment; it is part of the risk that
he assumed when he bought the thing; ex.) pag bumili ka ng sasakyan, madudumihan ang sasakyan mo
-Deteriorates through the fault of the debtor → obligee may choose the recission of the fulffilment (Article 1191
→ reciprocal obligation; power to rescind the obligation; in case one of the obligors would not comply what is
incumbent upon him)
-1191: if you are not able to perform the obligation or deliver the thing as exactly as agreed upon, then becuase
it is a determinate thing, then the creditor may not choose to accept what has been delivered and may opt for
rescission with damages; which is recognized under 1165
-Improved by its nature and time → inure to the benefit of creditor
-Gotesco Properties vs. Fajardo: SC stated that once the buyer has fully paid its price, then the seller’s obligation
now is to deliver the CTC which in this case, Gotestco was not able to do so; therefore, it breached the contract
to sell and therefore the buyer may choose to rescind the contract with damages (1191); alternative remedies
available to the party:
1. Choose to rescind the contract; obligor should not comply what is incumbent upon him
2. Choose fulfillment of the obligation = payment for damages
3. Even after he has chosen fulfillment, and has become impossible, may still opt for rescission
-Republic vs. David: (page 165) SSS has awarded housing units to the employees of the SSS, although the
properties have been transferred to employee lot buyers but the contract provides for a condition that the buyer
will use the housing units as their residence, and because when the SSS investigated and found out the some
of them are not actually residing in the units awarded to them and instead are leasing out the units to third
persons, and according to the SSS, these acts violated the terms of award to them; gave the SSS the right to
rescindg the contract even if it is already a contract of sale and even if the titles have been transferred to the
buyers of a property; under 1191, the non-compliance with the condition constituted a breach of reciprocal
obligations under the deed of sale; deed provides for the annulment and cancellation in case of breach
-Note: 1191 → generally speaking, the decree of rescission must be sought from the Court
-However in the cse of province of Camarines Sur vs. Bodega → automatic revocation clause; express stipulation
in case of breach; the need to go to court to decree the rescission will no longer be necessary; action of
Camarines Sur when it opted to rescind the donation made to CASTEA
-Case of Song Fo and Co. vs. Hawaiian (page 173 of the textbook) → HPC has no right to rescind the contract;
there was only a slight breach in the contract; the rule is that the recission will not be permitted for a slight or
casual breach
*only for breaches which are substantial will rescission be upheld
-Universal Foods Coproration vs. CA: SC reiterated the GR of rescission (1191) (page 175 of the texbook)
*substantial = depends on the circumstances
-UP vs. Delos Angeles → party to a contract with an automatic rescission clause; may consider the contract
rescinded without the need of filing a court action
*Other party may contest the extrajudicial rescission (automatic revocation clause)
*Clemente vs. Republic: donation and subject to a donation of a property to the Republic through the DPWH
was subject to a condition that a hospital will be built on the proeprty, and despite the lapse of more than 30
years, no hospital by the DPWH, the SC stated that if a contract of donation provides for AR or reversion (non-
construction of a hospital amounts to a resolutory condition; and the failure of the part of the Republic to construct
a hospital, will give the right to the donees the right to rescind the donation
*If a contract for donation provides for an AR and the donee violates and fails to comply → automatic reversion;
no need for judicial declaration
*But if the donee denies the rescission, he may file an action in court to challenge the rescission
-Lam vs. Kodak: what is the effect of rescission in such case? → mutual restitution of the parties
-Note: in the case of Lam vs. Kodak PH, the rescission was a decision by both parties; when the decision was
reached by both parties, according to the SC, because they have agreed to rescind the contract, they do not
have to go to court
*On the other hand, if only one of them will rescind the contract, and there is no AR, one has to go to court in
order to seek the court’s decree
-If there is an AR, then the party rescinding is authorized to rescind the contract; but the other party may contest
the rescission, so that at the end of day, when one challenges the rescission, the Court will either uphold the
rescission or deny the rescission based on certain grounds (ex.) breach is merely slight or casual)
-PEZA vs. Philhino → agreement between the parties with respect to damages in case of breach, may still be
demanded and awarded; because it is a stipulation agreed upon between the parties; the mutual restitution, will
not negate the contractually stipulated liquidated damages; 1191 clearly states that the options of recission and
specific performance come with it the payment of damages in either case
HW: wrap up pure and conditional and move on obli subject to a period and alternative and the joint and solidary
obligations
-----------------------------
3/8/21 - Caryl
1191 - obli is reciprocal, the option of the agreed party is the performance of the obli and rescission with the
payment of damages in either case.
If rescission is just one of the options, while the rescission is not stipulated, the court may choose between
rescission and payment of damages. (effect of rescission)
Next meeting:
Art. 1191 up to obligations with a penal clause.
Pls. read part of 1191 cases and annotations and master the intricacies of 1191.
_________________________________________________________________________
-Art. 1191 → the obligation is reciprocal and one of the parties failed to performed what is incumbent upon
him; the other may, according to the law may seek rescission
-the law also provides that the court may decree the rescission claimed; may opt to grant an extension →
what could be the possible ground that the court may grant an extension and deny the rescission?
-Case of Gotesco vs. Fajardo (reciprocal obligation; deed of sale was not delivered by Gotesco; Action for
Rescission is applicable in accordance with Article 1191 of the NCC); the defense of Gotesco is fortuitous
event; meaning, it invoked the fact that there were circumstances that prevented it from performing the
obligation; beyond its control; in this case, the court pointed out that in a contract to sell, there is a reciprocal
obligation that is created as a result of the contract; the full payment of the price in exchange for an execution
of a deed and surrender of title; failure of one to perform the obligation, which is the execution of the deed
of sale, would put Gotesco in delay
*The first time we came across reciprocal obligation → Article 1169; in delay, the general rule with respect
to delay, there should be a judicial or extrajudicial demand from the creditor in order to put the obligor in
delay; exception: when the law or stipulation so declares; time is of the essence of the obligation; demand
would be useless as when the obligor has sold the same property to another person and delivered it to him,
and there is no way to perform the obligation because he has committed an anticipatory breach
-Reciprocal obligation → also an exception to 1169 on the rule on the requirement to put the obligor in legal
delay; in reciprocal obligation, neither party is in delay if one of them or if either of them is not ready or is
not yet ready to perform the obligation; but when one has performed the obligation, delay begins;
performance of one, would put the other in delay (Gotestco properties)
-When spouses Fajardo were already able to complete the payment of the price for the subdivision lot, then
it puts Gotesco in delay because the obligation of Gotesco to execute the deed and to deliver the TCT have
become due and demandable
-Compare case of Gotesco to the case of Republic vs. David: in the case of RP vs. David, a conditional sale
was entered into between the parties; the SC said that a conditional sale is akin to a contract to sell, because
a conditional sale is a sale subject to a condtiion; the conditions are the full payment of the purchase price
+ there are other stipulations agreed upon for which the buyer agreed to, and which is that the housing unit
must be occupied only by the buyer and his family; upon investigation, the SSS foudn out that the property
is being leased by another person or family, which amounted to a violation of what they have agreed upon;
according to the SC, this is a ground for the rescission of a conditional sale and because this is also a
contract that created a reciprocal obligation between the pirates, and the failure of the part of the buyer
(buyer committed the breach), gave the seller a ground to cancel and rescind the conditional sale
-Article 1191 → rescission must be declared by the court; is this an absolute rule? = No. Case of Province
of Camarines Sur (automatic revocation clause)
-Case of Province of Camarines Sur: the government, when it donated the lot to CASTEA, it is subject to a
condition; note: the condition here, is resolutory, because pag donation kagayan ng Parks vs. Province of
Tarlac (hindi pwede maging suspensive yung pagtayo ng park, dahil hindi ito magagawa kapag subject to
suspensive condition; the only plausible situation is to have the donation immediately executory but subject
to the resolutory condition (the non-happening of the event)); donation may be cancelled if the park is not
built - exactly what happened in the case of Camarines Sur
*proper action = unlawful detainer against Bodega (donation has already been cancelled)
-Automatic revocation clause: 1306 of NCC will be applicable
-Page 166: mere notice of rescission will be insufficient as a GR; because the court must declare;
exceptions: 1.) resale or rescission by an unpaid seller; 2.) sales of personalty; 3.) Under Art. 1592 of the
NCC, in sales of realty the demand for rescission must be judicial or notarial
-Case of Song Fo vs. HPC; slight or casual breach vs. substantial breach of the obligation; right to rescind
the contract under Article 1191
Section 2:
-What is a period?
*Unlike in a condition, the obligation does not yet exist; happening of the condition will result in the
acquisition of rights
*Obligation subject to a period: even before the arrival of the due date, there is already an obligation; benefit
of the period is more of an act of generosity on the part of the creditor; in the case of Gaite, dahil nag-expire
yung security, the obligor in that case lost the right to the benefit of the period; loses such benefit, then it
will make the obligation demandable; the only effect of the period to the obligation is on demandability; but
existence of the obligation will be there
ex.) utang = it is not demandable prior to the period
ex.) magbibigay ng sasakyan pag nag-top sa bar = condition ang pag top sa bar exam; prior to topping the
bar, there is no obligation → effect of a condition
-Case of Clemente vs. Republic; what period is contemplated in this case? → resolutory period
-What are the three kinds of period? → Legal, judicial and conventional: what do these mean?
-What are the instances wherein which the courts will fix the period?
Section 3:
Alternative Obligations
-What happens if you will lose the substitute due to negligence? → the obligor is liable
-The GR, is that the debtor has the right to choose which of the several prestations that are due, he must
perform (unless there is a stipulation that the creditor is the one that is going to choose which of the
prestations which are due must be performed); there is no problem is the debtor is the one going to choose
among the several prestations, which means that for as long as there is a prestation to deliver, he will not
yet be liable even if the loss of one or several of the prestations that are due were due to his fault or
negligence, for as long as there is still a prestation that he can perform; however, if the right of choice has
been granted to the creditor, can you give us the rule? → Article 1205 of the NCC
-Article 1205: right of choice belongs to the creditor → when confronted with an alternative obligation, you
will have to check it is the debtor or creditor who is given the choice; if the creditor is the one given the right
to choose, then you have to take into consideration that the loss of a prestation may have repercussions on
the right of the creditor to choose, and the cause of the loss must be taken into consideration
-Note: when the choice has already been communicated (debtor or creditor); the alternative obligation shall
cease; it then now becomes a simple obligation; then the rules with respect to simple obligation will be
applicable; and the loss of the through the fault or negligence of the obligor will make him liable for damages
(it will not excuse him from liability)
-Note: when we talk of loss → make a qualification: due to a FE or negligence; requisites of FE (case of
Philcomsat vs. Globe Telecom and Lasam vs. Smith)
HW:
-Study and read the cases very well
------------------------
Caryl
Conjunctive
Alternative - One obli but several obligations. Several pres are due but the performance of one of them will
result to the extinguishment of the obli.
Obli to take care of the thing and delivers what has been exactly agreed upon.
_________________________________________________________________________
-We started talking about joint and solidary obligation, and the first thing that Sir said in this kind of
obligations → we apply the rule on joint and solidary obligation when there are several creditors and debtors
in one and the same obligation; note however, that the GR is that the obligation is joint - if there are two
creditors in one obligation, each one of them may only demand a proportionate part of the credit; if they lent
an amount of 100k, then the two creditors are only entitled to collection 50k from the debtors in a joint
obligation; because the credit will be considered as joint in the absence of a law that requires that the
obligation is solidary, and in the absence of clear stipulation of agreement; or when the nature of the
obligation does not require solidary; so that A cannot represent B, B cannot represent A
-If however, from the law or nature of the obligation, or the wordings of the obligation, require that it is
solidary, then we have to check what kind of solidary obligation: active, passive
-Active solidary = credit is solidary; credit of creditors is under a mutual agency;
-Passive solidary = debt is solidary amongst the debtors
-Feature of an active solidary = relationship of creditors is characterized by mutual agency; each one of
them may represent the others (ex.) ABC have a credit of 90k, A may be able to collect the entire amount
of 90k due to mutual agency and A may demand for the payment of the entire amount of the obligation)
-If the effect of mutual agency is that after one of them is able to collect, then there is an obligation on the
creditor that was able to collect the debt or any portion of the debt to account to the other creditors what he
has collected; so that, in active solidary, there is an obligation to make an accounting
-Mutual guaranty on passive solidary = each co-debtor guarantees the payment of the entire obligation (ex.)
XYZ are solidarily liable, X may be made to pay for the entire obligation, so that the demand to him may be
sufficient; creditor does not have to send a demand letter to XYZ and the demand may be addressed to one
of them, and one of them may be liable; if the others are insolvent, then one of them may be made to pay
the entire obligation) → this is the reason why that the banks would require that the relationship amongst
the debtors would be solidary so that when one of the debtors is insolvent or cannot be found, then the
remaining ones will be made to pay the obligation
-After one of the co-debtors paid the obligation; the other co-debtors must reimburse the debtor who has
effected payment to the creditor
-Suretyship vs. Guaranty: in a solitary obligation, if a solidary debtor pays the entire amount of the obligation,
he can only ask for contribution; whereas a surety does not contribute - once paid, he can demand
reimbursement the entire amount that he has paid (if A is the surety of a debt incurred by XYZ, and A was
required to pay because XYZ were not able to pay, then if A paid 90k, he can recover from XYZ the entire
amount of 90k; on the other hand if there is no surety and only XYZ are solidarily liable, if X pays the entire
amount of 90k, he can only ask contribution from YZ 30k each, because X is also required to contribute the
amount of 30k).
-1211 and give an example → obligation to pay is subject to the condition that X will pass the 2021
bar examination (subject to a period and a condition); A and B are certain to be liable to the creditors
because the obligation with a period, while C is liable when the condition happens (if X passes the
2021 bar examinations)
*X addressed the demand to C on January 1 = C may not be required to pay for his portion, but C is
required to pay for A and B’s portion; the portion of A and B is due and demandable; the essence
of 1211 you do not need to another debtor, you can go back to the same debtor again and again due
to the fact that the obligation is solidary (mutual guaranty) - anyone may be made to pay
*there is solidary even if the creditors may not be bound in the same manner, periods and
conditions
-Art. 1213 → what does this mean? = relationship is of mutual agency and is fiduciary in nature
Second paragraph of 1221: if one of them is at fault, then they will still be required to perform the obligation;
the solidary character of the obligation remains; insofar as the creditor is concerned, anyone of them is still
liable to perform the obligation (hindi sila pwede magsisihan sa harapan ng creditor; in front of the creditor,
the co-debtors are solidary)
HW: please study the rest of the cases; will be reciting the cases; move on to extinguishment of obligations
(specially on payment)
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March 15, 2021 - Caryl
The Credit or debt referring to D, the debt is divided into as many debtors in an obligation. Under 1209,
while obli is joint, the prestation is incapable of partial performance.
The debt can only be enforced by proceeding against all the debtors. The C must make a demand to all of
the D and perform the obli together.
1209-> 1224
• Since the obli in joint and solidary binds all D, If one of them is insolvent, then 1224 the obli becomes
the obli for the payment of damages.
• 1165, Determinate obli, if the unique thing cannot be delivered, then the obli will become payment
for damages.
• For example, if there are 7 debtors obliged to deliver a car to the creditor, then if one of them refused
to deliver, you cannot compel the one who refused to make payment for the contribution of the
delivery of the said car. Here, your remedy will be an obligation for the payment for damages.
• The other persons who are willing to share, they will contribute for the payment of purchase price.
• No mutual guarantee.
• If the other person is insolvent, then the other debtor will not pay for the insolvent debtor’s liability for
damages only liable for the portion of the price.
1217 (2)
• If one of the D paid the entire obli, then he can claim contribution and demand from another D.
• Solidarity from suretyship
• In solidarity, there are 3 D, X paid the entire amount then he can ask to other D the portion of the
amount of their respective shares.
• In surety, the surety must pay the entire amt and goes back to principal debtor and demands the
latter the reimbursement of the entire amt that he has paid plus interest and expenses.
1221
• Don’t forget 1217 (2); The obligation to contribute.
• 1217 (3) ; insolvency
• Example: A,B,C have an obligation to deliver the car then the car was stolen so what happens in
case of loss without the fault of the debtor then it becomes possible, the obli shall be extinguished.
(insert 1174)
• 1210-1222 - ALL SOLIDARY OBLIGATION there is a mutual guarantee.
• 1221 (3) -> 1165 (3) liable for damages even if there’s a FE and there is delay which is due and
demandable.
• 1221(2) - If one of them is at fault and all of them will be liable for the price plus damages and interest.
1222
• Example
Case of Lam vs. Kodak
Case of Lou vs. BPI
Case of Pryce hotel vs. PAGCOR
2. Compensatory
• If there will be delay in the payment of the debt, then we will apply now compensatory interest
(2209) application in the payment of money if the debtor incurs in delay.
• If there is stipulation with payment of interest like example: If the monetary interest is 10%
based on their agreement, then, the compensatory interest will also be 10%. If there is no
agreement for the payment in interest, and there is a delay on the part of the debtor, 6% legal
interest.
1226
• If there is breach, then you will have to prove two things:
1. Breach
2. Suffered damages
If there is a penalty clause, then there is a breach, the only thing that you will have to prove is the presence
of the breach. Because what you stipulated is the penalty clause.
1306
• If you agreed to pay the penalty, then you are bound to pay it whether you like it or not.
• Example: Pryce vs. PAGCOR & Lou vs. BPI
• Usury law is suspended but if the court finds the interest usurious it will reduce the interest rate
agreed upon by the parties.
1229
• The court may reduce the penalty if:
1. Partial performance
2. Even if there’s no performance but iniquitous and unconscionable
1228
• Obli has a penalty clause, the only item that the creditor has to prove is the fact of breach he doesn’t
have to prove that he suffered damage. Because they already stipulated what it has to be paid in
damages.
Midterm coverage:
Obligations and Contracts
_________________________________________________________________________
Class Notes for March 16, 2021: (Sha)
-1211: solidarity may exist even if the debtors and creditors may not be bound in the same manner, period
or condition (ex.) ABC (creditors of 90k) and XYZ and debtors of the 90k; if this is solidary obligation,
meaning each of the creditors may demand the payment of the entire obligation and the debtors may be
required to pay the entire obligation; however, it is possible that the obligation of X, binds himself to pay the
end of the year (dec. 31. 2021); whereas Y bounds to pay when he passed the 2022 bar exam; and Z
bounds himself to pay at June 2021; if the creditor chooses to pay the obligation, X may not be required to
pay the 30k which is due, but on June 2021 demand is made upon him, then he is required to pay the 30k;
if by december 31, 2021 A may go to the same debtor (x) and X by December 31, 2021 may be required to
pay the 30K and if Y will pass the 2022 bar exams, then the balance may be demanded from the same
solidary debtor (x))
Note: 1216 → essence of solidary obligation: anyone of the solidary creditors may demand from anyone of
the solitary debtors over and over again until the whole obligation is paid
Note: 1213 → fiduciary relationship amongst the creditors; mutual agency (correlated with 1215); any of the
creditors may make the demand
Ex.) If A makes a demand on X for the payment of the entire 90k, that demand will benefit B and C; however
A will remit the entire obligation, and inform X about it; remission will benefit all of the debtors; but remission
is prejudicial to the other creditors, then A will be liable to account (mutual accounting amongst the creditors,
if one of them will be able to collect) → A will be required to pay them; except that in his case, because he
remitted his share, he will not be able to get anything
-Article 1215:
-Because of mutual guaranty, payment by one of the solidary debtors extinguishes the obligation
-If there is a rate of interest agreed upon, that is to be paid; except when stipulated
-Take note of the difference between guaranty and suretyship (in relation to solidary obligations)
-1217: if one of the debtors is insolvent → X will be able to collect from Z 45k and his share will increase to
45k to 30k, because the share of the insolvent debtor, will be borne by each of them; when one of the
solidary debtors cannot, due to insolvency, reimburse, such share shall be borne by his co-debtors in
proportion to the debt of each
-Article 1221 (in relation to Article 1189 (1) → general rule); in relation to Article 1174 (fortuitous event)
-Among the solidary debtors, if only one of them is at fault, then he will be held liable to the other solidary
debtors not only for the price, but also for the damages and interest
-1221 → similar to the rule on 1189 (1) (second and third paragraph)
→ 1165 (3) = falls under the exception of fortuitous event
=Article 1222: Solidary debtor may avail from defenses (derived from the nature of the obligation) → ex.)
payment (bayad na); can invoke that kind of defense; those that are personal to him (ex.) minority)
-Case of Lam vs. Kodak → contract provides that Kodak bound itself to deliver three minilabs; after the
delivery of one minilab unit, the spouses issued a post-dated cheques, and one of the cheques bounced,
Kodak cancelled the sale; the Lam spouses contended that the prestation is indivisible; while the three
minilabs are physically divisible, the performance of delivering such obligation is indivisible (therefore, kodak
failed to perform its obligation); the parties agreed to rescind the contract, but kodak being at fault, was
made to pay damages by the court in favor of the Lam spouses
-Note: 1226 → it talks about obligations with a penal clause; not all obligations has a penal clause; so in
obligations that do not have a penal clause, in case of breach, then we apply Article 1170
-But under 1226, if there is a penal clause: the penalty shall substitute the indemnity for damages
1. Obligation was breached
2. That you suffered damage or injury as a result of the breach
*This is why we need a police report and have a damage appraised (at a car dealer) and other receipts for
expenses
-In order to recover compensation as a result of the breach → the obligation was breach; and we suffered
damage
-What is the interest here? → the penalty shall substitute the indemnity for damage and payment for interest
-Example: A umutang kay B ng 1k; in mutuum (a loan); it is a simple loan; pag umutang si A ng 1k, if they
have no agreement with respect to payment of interest; if for instance, the 1k is payable after 30 days, then
on the 30th day, when A pays the 1k, she is not required to pay any interest; because simple loan is
essentially gratuitous; the rule is, if there is no stipulation in writing with respect to the payment of interest,
then A is not required to pay any interest for the 1k that she borrowed from B. However, if assuming, that
they agreed on 10% interest, on the 1k, then she will have to add the 10%; if they have no agreement in
writing to that effect, she is not required to pay the 10%. Assuming that they have no agreement with respect
to the payment of 10% - obligation is only to return the 1k; however, assuming that she was in delay, if she
was in delay (she is in delay and did not pay the 1k and did not return the 1k by the end of the 30 days) -
then we apply 2209 which is the compensatory interest in relation to Article 1170 (because she was in delay,
then she is liable for damages and the obligation is the payment of the amount of money which is the debt,
then she is required to pay the interest which is compensatory)
-Monetary interest = payment for compensation for borrowing money (provided she pays on time)
-Delay = liable for 10% damages (compensatory) (if no agreement)
-If there is no agreement on the rate: 2209, it is 6%
-Agreement on 10% → she is liable for the 10% monetary interest + 10% compensatory interest
-If there is a penalty clause (Article 1226) → the penalty shall substitute the damages
-Basis for the penalty clause: Article 1306, in relation to Article 1159 of the NCC
-Ang penalty, while it is true that under 1306, if the penalty is unconscionable, it may be reduced by the
court:
1. If the obligation has been partially and irregularly performed; or
2. Even if there is no performance = iniquitous or unconscionable
-Usurious interest → while it is true that the usury law is suspended, and therefore the parties are free to
agree on the weight of interest; the courts, if the agreed upon rate of interest is unconscionable, the court
may still consider it usurious and may reduce the interest or the total imposition of interest
HW: Extinguishment of obligations (good for two meetings); contracts (three meetings)
5 more meetings before MTE
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3/17/2021 - Caryl
Extinguishment of obligations
1232-1235
1232- It is not limited to the payment of money but also performance of the obligation.
1233- GR: talking of payment it means there is payment or performance only when the obligation has been
performed/delivered in order to resolve the extinguishment of the obligation. (provides for the GR for the
performance)
1. 1234- When there is substantial performance, the obligor can collect less damage.
Encircle good faith. Obligor may be able to recover what is subject to collection.
2. 1235- Basis: Waiver & Estoppel; when the obligee accepts the performance knowing the irregularity.
2. Simply paid without the knowledge or consent of the debtor- Limited right of
reimbursement, you cannot ask the creditor to subrogate his rights.
1236- who shall make payment/ perform the obli -> full and limited reimbursement
1237- right of subrogation
1239- capacity to make payment
1240- payment must be made to the proper person
1244, 1245,1246:
• What must be performed
Dation in payment?
In facultative- there is only one prestation agreed upon, then subject for substitution in case the prestation
agreed upon cannot be delivered. Creditors are not allowed to refuse the substituted thing because it is
agreed upon by the parties.
DIP- Payment in money but the debtor proposes the delivery of a thing. There’s a right of the creditor to
refuse the delivery of the thing.
Modes of payment
Payment by cession - several creditors one debtor in this case he proposes to transfer the possession of
his properties to creditors so the latter may sell the debtors properties in order to satisfy debt.
Under payment by cession, if the obligor assigned his properties to the several creditors; subject to approval
by the creditors if they will agree to sell the debtors’ properties. In case there’s balance, he will remain the
debtor with respect to his balance.
Among these 3 special modes of payment - tender of payment and consignation is the most technical and
complicated.
1256- (*****)
Requisites of consignation
In order to be valid, it must be deposited with the court.
1262-
Exception
Define loss
Kinds of condonation?
• 1270
• Express & implied
• Express: Rule with ordinary donation
• Implied: Mentioned in sec 3
Next meeting:
Read compensation novation
Then move on to contracts
Gen prov
Then requisites of contracts
Read the cases - lalabas sa exam
________________________________________________________________________
Extinguishment of Obligations:
-Ultimate objective of obligation is extinguishment; there are many ways in which an obligation may be
extinguished; but we will concentrate on the Sections in the Civil Code on Chapter 4
Payment or Performance:
-Article 1232 → when you say payment, it is not limited to monetary obligation; but it includes the
performance in any other manner of the obligation; when you say “payment” it refers to performance and
the delivery
-Note: 1233 → what kind of performance will result in the extinguishment of the obligation? = answer: it
must be complete, 100 percent; the obligation must be completely delivered or rendered
-If it is not 100 percent performance = it will result in the breach of the obligation
-2 Exceptions: 1234 and 1235:
1. There should be complete, 100 percent performance → 1234: substantial performance in good faith;
may give the obligor the right to collect as if there is strict and complete fulfillment (ex.) if 90 percent
of the project has been delivered or performed; the obligor may still be able to collect the 1 Million,
but less damages suffered by the obligee); if you enter into a contract for the construction of the
house, and the contractor became insolvent, and for reason or as a result of a FE he was not able
to complete the performance of the obligation 100%; if the construction has been substantially
performed in good faith, then the contractor may still be able to collect as if there has been complete
performance of the obligation (ex.) if the painting of the kitchen was unfinished; he may be able to
collect the payment); the cost of the painting of what was not completely performed will be deducted
from the total amount of he will be able to collect; as a result, the obligation will be extinguished
(ultimate objective of obligation is extinguishment)
2. Obligee accepts the performance or irregularity → estoppel or waiver the right to protest or right to
object; obligee is estopped from protesting thereafter because he already accepted the delivery of
the project or goods; as a result, the obligor may be able to collect as if he has fully complied with
the obligation
-If a third person pays the obligation of a debtor, and the creditor accepts the performance or the payment,
what could possibly be the effect? → Article 1236 (2)
-Under 1237 → what is subrogation?
-1236 = reimbursement; any third person who made the payment is entitled to reimbursement; with
knowledge and consent of the debtor then the third person gets the whole payment
-In 1237 = right of subrogation; in addition to reimbursement, subrogation refers to the right of the accessory
obligations (ex.) if there are securities, guaranties, penalties = attached to the principal obligation; or if there
is a guarantor); then you step into the shoes of the creditor; if you made the payment and the payment is
with knowledge and consent of the debtor, then the debtor agrees that all the accessory obligations that he
entered into, will benefit you as well (ex.) if a loan is subject to a mortgage, then such is also his benefit);
there is a change in the active party
-If the loan is subject to a penalty, then it is an accessory obligation (a stipulation included in the principal
obligation); if there is a mortgage to the debtor, then you can also go after the guarantor the payment of the
debt if assuming the debtor was not able to reimburse you (you can go after the guarantor’s assets)
-1237 → change in the active party (the right to replace the creditor, so that whatever the rights the creditor
has against the debtor, then, you get all of those rights, you assume all of those rights)
-1239: what is the contract when you enter into a sale with a 12 year old?
-Incapacity of the person who does not have a free disposal of the thing, cannot make payment
-1248:
-Note: 1244 (1) → determinate obligation; second paragraph refers to personal obligation
-Dation in Payment: a special mode of payment
-1246: (generic or indeterminate obligations)
-What do you mean when it is liquidated? (1248) → the amount of the obligation may be determined through
simple mathematical computation
Application of Payments:
-Distinction of dation in payment and facultative
-Facultative: obligor has the right or discretion or has been given the option to substitute the prestation with
another prestation
-DIP: proposal to replace or substitute the prestation, is subject to approval by the creditor; in DIP there is
a novation by the change of the object of the obligation
-1252: what are the requisites for the application of the payment? Can you give an example?
ex.) A is the debtor, B is the creditor; what are the debts of the debtor? How many obligations does she
have? How much are they and how much are due with respect to the three obligations? → all of the debts
must be due here
-The last requisite = the payment that he tendered is not sufficient to cover all the debts that are due; the
payment that she tendered is not sufficient to cover all debts that are due
ex.) 10, 15, and 15; and the amount she tendered is only 10k = it is not enough to cover all of the debts →
what is the first thing that will happen? = she must choose to which among the payment shall apply; if she
does not do this, what could happen next? = if she does not make the application (to which you want the
payment to be applicable) then the creditor will issue a receipt; creditor will choose which among the debts
she would want your payment to be applied
Payment by Cession:
-1255
-What is payment by cession? Give an example?
-What are the requisites of payment by cession?
-How many creditors are there? → two or more creditors/several
-How many debtors? → only one
-How many debts? → Many debts
-DIP: identifies the property that he owns, and proposes to use that as payment in the obligation if he is not
liquid or partially insolvent (replacement of a prestation)
-When you say tender of payment, what does this mean? = it is the manifestation of the debtor signifying
his readiness to pay the obligation, and if he does that, and the creditor fails to accept, then there is mora
accipiendi (creditor is in delay); so that if he will refuse to accept the performance, then the debtor may
proceed to consignation; there are also instances wherein tender of payment need not be done in order to
effect payment and proceed immediately to consignation
1. Creditor is absent; does not appear at the place of payment
2. Incapacitated to receive payment (unjustified refusal)
3. Two or more persons are claiming the payment (consign payment in court)
-Consignation through the court → you would like the obligation to be extinguished and to avoid the running
of the interest; if the court approves the consignation = the obligation shall be extinguished
-Note: implied condonation → it is limited to 1271 up to 1274; this is an exclusive list; there are no other
kinds of implied condonation
_________________________________________________________________________
2. Conventional (1282)
3. Judicial or set-off: under 1283, takes effect by judicial decree or by judgment; takes place when
there is a suit and in the answer, there is a counterclaim
a. Note: reason why it is judicial compensation, because it presupposes that the claim is not yet
liquidated, in the sense that it will have to go through the trial and proof; once the claim has been proven
and adjudge or a judgment has been issued, then there is judicial compensation; in the decree by the court,
the court will make a determination how much of the claim for damages will be paid after deducting what he
is supposed to pay the other side, the court will deduct therefrom the claim by the defendant; the plaintiff
making a claim, and the defendant making a counterclaim - in the end the court will issue a decision
deducting from the claim and counterclaim; the claims for damages; and therefore, the compensation has
taken effect, but as a result of a court judgment; if a plaintiff is claiming for 100k and the other party is
claiming that he suffered an injury of 20k; subject to trial and proof, the court will make a determination how
much should be paid; from the POV of law, it is a compensation, but it has taken effect as a result of a court
judgment
b. Reason: the claim of each other are not yet liquidated; meaning, they have not yet been determined
how much is due; that is why it is judicial
Note: obligations that may not be compensated or not subject to compensation (1288)
1. Claims for support
2. Depositum and commodatum
3. Claims for support due by gratuitous title
4. Criminal offenses
5. Obligations in favor of the government (because taxes are the lifeblood of the government and their
immediate collection is an imperious need)
a. Francia vs. CA: a person cannot invoke compensation and refuse to pay a tax on the ground that
the gov’t. Also owes him an amount that is greater or lesser than the tax he should pay (page 393 of the
book)
Recapitulate:
1. Legal Compensation (1279 requisites should be present; takes effect by operation of law and
extinguishes both debts to the concurrent amount; even though the creditors and debtors are NOT
aware with the compensation)
2. Conventional (1279 requisites are NOT present; agreement between the parties)
3. Judicial: takes effect by the issuance of a final judgment (final and executory judgment)
Novation:
-1236 and 1237
-1236: who can pay the obligation? → debtor or the third person (third person pays obligation; creditor can
refuse to accept payment; unless the third person has an interest in the payment or fulfillment of the
obligation or a stipulation to the contrary)
-There is a consequence if a third person pays the obligation → (w/o knowledge or against the will of the
old debtor) = new debtor (third person comes in); the rule is, the creditor may choose not to accept the
payment because of 1311 (relativity of the contracts = he does not know him; not a privy of the contract);
subject to exceptions
*Consequences differ as to WON the payment was with the knowledge or consent of the old debtor or the
payment was without the knowledge or against the will of the old debtor
-If payment was without knowledge or against the will of the old debtor: the 3rd person paying the obligation
of the old debtor, can only ask from the old debtor reimbursement of what he has paid to the extent that it
resulted to the benefit of the old debtor (if the obligation is 1 million, but the old debtor has only paid 100k,
then new debtor can only recover 900k - cannot recover 1 million; he has to go back to the creditor and tell
him that there was a solutio indebiti)
-If the third person paid with the knowledge or consent of the old debtor = he can demand reimbursement
of the entire amount paid; so that if he paid 1 million in spite of the fact that the balance is only 900k, he can
still ask reimburse the entire 1 million
-In addition under 1237: if a third party paid the obligation of an old debtor (with knowledge and consent) =
he has the right of subrogation = steps into the shoes of the creditor; which means, that he can run after the
accessory obligations (ex.) mortgage, guaranty, penalty)
-1236 and 1236 = there is novation; because there is a substitution of the debtor (change in the passive
party)
-In novation (three types)
1. When you change or replace the object or a principal condition of the obligation: if you replace the
object of the obligation (ex.) dation in payment → imbis na pera ibabayad, ang ibabayad ay bagay
such as a car); novation is a result of changing the object of the obligation
a. Change of principal condition: ex.) the promise to pay 100k is subject to the condition that you will
pass the 2021 bar examinations; but instead of that, you agreed “wag na lang yung 2021, pwede 2022
exam?” → there is a novation
2. When you substitute the person of the debtor then there is novation (someone will come in to replace
the debtor - expromission and delegacion); if the initiative will come from the new debtor - expromission;
initiative is from old debtor = delegacion
a. 1236 and 1237 → if you allow your friend to pay the obligation and his payment is accepted by the
creditor; then there is a novation by substituting a person in the person of the debtor (replacement of the
debtor)
b. Expromission: initiative is coming from the new debtor
c. Delegacion: old debtor finds a person that will replace him (he delegates to another person, the
performance of the prestation); delegado = pinapasa niya yung obligasyon niya na bayaran yung utang
d. Generally speaking, because the creditor accepted him as replacement, then the rule is, it will result
in the extinguishment of the obligation of the debtor and that obligation by the old debtor will be replaced by
the obligation of the new debtor; however, if it turns out that the new debtor is insolvent (he is a dud; peke
at wala pa lang pambayad) - the effect is different; in delegacion, it is subject to a qualification; the initiative
is from the new debtor, it will not result in the revival of the liability or obligation of the old debtor in
expromission (because the substitution was done without his initiative
i.In expromission = third person ang nag-volunteer at hindi naman ang old debtor (remember 1236 - there is
limited reimbursement on the part of the new debtor)
ii.In delegacion = generally, it will extinguish the old obligation; however if he turns out that new debtor turns
out to be insolvent or dud, it will not also result in the revival of the obligation, unless his insolvency is known
to him; or the insolvency of the new debtor is already of public knowledge at the time of the substitution
-When the novation has taken place with the replacement of the object or the principal condition of the
obligation = objective novation
-When the novation constitutes in the substitution of the debtor or the subrogation of the debtor in place of
the creditor (new debtor in place of the creditor) = subjective novation
Express or Implied novation
-Tacit or implied: when both obligations cannot stand; they are incompatible with each other in every point
-Express: declares in unequivocal terms that the old obligation is extinguished
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CONTRACTS:
-1305: gives the definition of contracts; in this chapter, the general provisions: we will talk about the 5
fundamental characteristics of a contract
1. 1159 → obligatory force of law between the parties; obligatory force of contracts
2.) 1306 → Autonomy of contracts: freedom of the parties to determine the conditions and terms of the
contract; provided they are not contrary to law, morals, customs or public policy or order
3.) 1307 → two kinds of contracts = innominate and nominate (nominate = given a special name or
designation of law (ex.) sale, lease, commodatum) - they shall be regulated by the special provisions of title
under which they fall; in the absence of applicable provisions, by the provisions of Title 2 of Book 4;
innominate = i give that you give, i do that you give, i do that you do; if they do not fall under the nominate
contracts; therefore, they shall be regulated still by the provisions of Titles 1 and 2 of Book 4 and by the
Rules governing the most analogous nominate contracts and customs of the place
4.) 1308 → Mutuality of contracts = the contract must bind both contracting parties; even if the lessee is
willing or is paying the rent, if the contract of lease has expired, you cannot compel the lessor to renew the
lease contract; the same manner, the bank cannot unilaterally increase the interest of the loan without the
prior consent or agreement by the borrower; because it goes against the principle of mutuality of contracts;
when you say mutuality, the parties must in essence be equal before the contract, so that it is not right
where only one party is tied to an obligation to the contract, and the other is free to accept or not to accept
a term or obligation arising from a contract
-Note: items that must bind the contracting parties = validity; not correct to negate or deny liability the
condition in a contract, and tie the other party to it; similarly the compliance or performance of the obligation;
it must bind both contracting parties; exception: 1309 and 1310
-1309 → ex.) the determination may be assigned to a third party evaluator or auditor; such decision must
be made known to both contracting parties
-If the determination is evidently inequitable = aggrieved party may still go to court; going to court is always
an option
5.) Relativity of Contracts (1311) (root word: relative) → principle of relativity of contracts; teaches us the
principle that contracts will take effect only between the parties → if you are an heir and your parent died,
such obligation is part of estate that you inherit; you succeed to the property, rights and obligations (will
pass on to the heir); it will also pass on to an assign - if the credit is assigned (assignee will be able to collect
the credit assigned to him);if the credit is assigned to you, not only the right is assigned, but obligations as
well
-Contracts take effect not only between the contracting parties, but also to the heirs and assigns
-Note (limitation): obligation → heir is not liable to the property
7. 1313
8. 1314
HW: the list of cases will be texted via Viber; start with essential requisites of contracts next meeting
_________________________________________________________________________
-1311: relativity of contracts: (root word: relative); under 1311, contracts take effect only between contracting
parties, their heirs and assigns; this is subject to exceptions
*Heirs cannot be held liable for the property inherited by the decedent (which exceeds it)
-1314
Note: there are essential elements of obligations → subject (active and passive subject); the prestation
(object of the obligation); vinculum juris (binds the parties to the obligation)
-1319: consent is manifested by the meeting of the offer and the acceptance of the thing which constitutes
the contract → when you say ‘offer’ and ‘acceptance of the offer’; we need the offer and the offer must be
accepted, and in order to have consent in the contracting parties; note: what are they trying to offer and
accept? → the items that they should have consent, would be the thing and the cause (consideration)
-meeting of the offer and acceptance = thing + cause → constitutes a contract
-If one is making the offer to sell you the car, the offer must be complete → he should be able to identify
which thing he is selling and how much
-Note: distinctions between an offer that is made inter presentes (face to face) and where the offeror and
the offeree are not in face to face (or a contract inter absentees) → 2 kinds of offer
1. Inter presentes (face to face offer): the offer must be accepted immediately; this is especially true if
the offer did not provide for a period within which to accept; in the absence of a period, it must be
understood that the offer requires an immediate answer
2. Inter absentees: (not face to face) offeror has given the offeree a period within which to accept; then
the offeree may accept within the period; provided that the offeree accepts within the period, and
provided that the offer was not yet withdrawn
*If however, there is an option money that is paid (there is a consideration for the period), then within the
period, the offeror cannot withdraw; if there is no consideration, then the offeror may withdraw; however if
the offeree accepts prior to withdrawal, there is a perfected contract
-Remember: we follow the mirror image rule → 1319: acceptance must be absolute; because a qualified
acceptance constitutes a counter offer (acceptance must mirror the offer); if there is a qualification, then it
is a rejection of the offer; where there is a qualified acceptance, it is a rejection
-If the offer is rejected, then there is no more offer (offeror may not be required to go back to you to make
another offer)
-Note: the offer must be certain, complete and must have an intention and must be serious (not in jest);
acceptance is absolute
-If the offer prescribes the manner of acceptance; that manner of acceptance must be followed; otherwise
it is a qualified acceptance and a rejection
-Offer or acceptance by letter or telegram → acceptance comes to the knowledge of the offeror; if the offeror
dies
-1323 → before acceptance is conveyed; A wrote a letter to B offering to sell his car to B, and B accepts
but prior to A receiving the letter of acceptance from B, and then either of them dies or either of them
becomes insane or subject to civil interdiction, then the offer becomes ineffective (will not result to the
perfection of the contract) → the sale did not come into fruition (no perfected contract of sale that we can
talk about)
-Note: if either of them will die prior to the offeror learning of the acceptance of the offeree = no perfected
contract of sale
-At the moment of acceptance of the offer, both of them must be capacitated (indispensable to consent)
-Note: where there is consent, there could be a contract even if the one giving the consent is a minor, insane
→ except that the contract is voidable
-Absence of any of the essential requisites in the contract = then there is no contract (the contract is
inexistent and therefore void)
-1327→ while they cannot give consent to the contract, if they enter into a contract, the contract is voidable
(consent is vitiated by capacity)
-Note; exceptions → even if the party to a contract is a minor, if it is with respect to necessaries for life, then
the contract is valid → they are enforceable against the parents or guardians of the minors
*necessaries for life: everything that is indispensable for sustenance (clothing, food, education)
-Minor is guilty of active representation → (represented himself to be of majority age) → Braganza vs. Villa-
Abril
Vices of Consent?
-When you say vices of consent, they are circumstances affecting adversely the parties entering into the
contract; annulment and defectiveness of the contract
1. Vices of cognition → they include the incapacity of a party to enter into a contract he enters into
2. Vices of volition (It’s about the freedom of the person to enter into a contract, transaction or perform
an act) → prevents the party from understanding or from being fully informed
a. Violence, intimidation or undue influence → prevents a person or party from being free to enter into
a contract
b. Note: mistake → inadvertent and excusable disregard of a circumstance material to a contract
(substance of the thing - object; or to those conditions which have principally moved one of the parties to
enter into the contract)
i.Mistake of identity and qualifications of the parties → only vitiated if it is the principal cause of the contract
(must be the cause or reason of the constitution of the contract)
ii.Distinction: mistake of law vs. mistake of fact → the mistake of fact must not be a result of a neglect of a
duty; and with respect of mistake of law, the person has knowledge of all the facts, but comes to the
erroneous conclusion as to the legal effect → if you know that the person who is going to marry you is a
notary public, but you erroneously thought that he is authorized to marry you, then it is a mistake of law and
it will not excuse you; if you know that the person who is going to marry you is a consul, but you thought
erroneously that because he is a consul he is authorized to marry you → mistake of law (because you know
that he is a consul or a notary public) → the error is with respect to the conclusion as to the legal effect
1. If you are inside the chamber of the judge and scheduled to be married by the
judge → the judge got sick that morning and here comes the clerk of court
(wore the robe of the judge) and conducted the marriage → there is a mistake
of fact; someone misrepresented to be the judge (here, if there is mistake of
fact, then the person may be excused - putative marriage)
*distinguishing mistake of fact and mistake of law → (make up an example)
3. Vices of fraud
*Consent = must be free, intelligent and spontaneous
-1333
-Distinction between violence and intimidation → fall under the general term ‘duress’; violence is external
and intimidation is internal; but similar as regard to the effects and the will of the person, and the contracts
that are produced (1335)
-Undue influence: when a person takes improper advantage of his power over the will of another; deprivation
of a freedom of choice; depends upon the circumstances of each case; the elements:
1. Person who can be influenced
2. Improper influence was exerted
3. Person has submitted to the overwhelming effect of such unlawful conduct
-Loyola vs. CA → a person who is of old age; not sufficient to show that the relationship was confidential
and that the latter can be influenced; to prove a confidential relationship from which undue influence may
arise; the relationship must reflect a controlling dominant relationship over the person; undue influence is
not to be inferred from age, sickness or debility of body, if sufficient intelligence still remains
-Concept of contracts of adhesion → is generally speaking, valid; not per se an inefficacious, or not
defective; however, with respect to a contract of adhesion → while a contract of adhesion is valid and
effective and binding; if there are ambiguities in the terms of that contract of adhesion, those ambiguities
are to be construed against the party who prepared the adhesion contract → ex.) plane ticket (take it or
leave it contract) → the terms in the plane ticket are valid and effective; however if there are ambiguities,
usch can be construed against the party who crafted or prepared the contract; if however, the stipulations
therein are not obscure but they are clear and leave no doubt of the intention of the parties, the literal
meaning of the stipulations must be held controlling and binding upon the parties
*Do not conclude that because it is a contract of adhesion, it is invalid → it is valid and binding upon the
parties per se (subject to exceptions)
* 1344 → a fraud was made, there was fraud; however, the party will nevertheless enter into a contract with
or without that fraud
-1340: the usual exaggerations in trade, when the other party had an opportunity to know the facts → the
seller of a condominium will tell you a lot about the condo; take note that the buyer of the condo has a way
to verify because the master deed is available for inspection (can go and check the master deed and validate
whether the facilities mentioned by the seller are indeed included in the blueprint of the condominium)
-1341: mere expression of an opinion → if an agent who is selling to you a gold ring, will tell you the karat
of the gold ring, a mere expression of an opinion does not signify fraud, unless he happens to be an expert
and the other party relies on the former’s special knowledge
-Take note of simulation of contracts → another requirement of consent is that, the consent must not only
be intelligent, must not only be free, and spontaneous; if the consent is not intelligent, then probably the
consent is vitiated; the last element that must be present for a consent to be valid: it must be true → if the
consent was made in jest or it is simulated, therefore, it is not true
*For a consent to be valid: intelligent, free and spontaneous, and it must be true
-if it is not true, then the consent is simulated → there is a distinction:
1. Relatively simulated contract → the contract is valid, but parties is bound by their true agreement; if
the true agreement is donation, but they made it appear that there is a sale, then they are bound by
their true agreements which is donation; a relatively simulated contracts binds the contracting parties
to their true agreement; except if it will prejudice a third person or if it is intended for a purpose that
is contrary to laws, morals, public order and policy
a. Avoid the payment of taxes = altered the consideration of the contract of sale (there is a relative
simulation -- consideration is simulated) = the parties are bound by their true agreement which is five million;
except: prejudices the government → then, insofar as the government is concerned, the relatively simulated
contract will not be binding upon the government (cannot be prevented from investigating in determining
the true agreement of the parties; zonal valuation ang susundin ng government)
2. Absolutely simulated contract → the parties do not intend to be bound at all; so that, the contract is
void, because of absence of consent (when a party does not intend to be bound at all, there is no consent)
→ ex.) Tanchuling vs. Cantela = the subject deed was absolutely simulated, because it was executed merely
as a front to show the public that Tanchuling was the owner of the property in order to prevent another group
from illegally selling the same
a. A simulation may also be relatively simulated
Object of Contracts:
-Prestation or conduct required to be observed; to give, to do or not to do
-For instance, in a contract of sale of a determinate car, the prestation is to deliver the car and to pay the
price; object of the contract is the determinate car
-The car is the object of the contract
-Pretation differs depending on which party you are talking about
-Valid: object must be transmissible and within the commerce of man (ex.) ocean, road are not within the
commerce of man)
-Object must be transmissible → must not be contrary to law, morals and public policy; it must be possible
and determinate as to its kind; the object being offered must be determinate as to its kind (should be able
to determine what is being sold)
-Future things may be a valid object of a contract → so, generally speaking, the object must be in existence
at the time of the perfection of the contract; or must be in existence in the future (things that have yet to be
manufactured) → you can actually sell a property that you do not own, for as long as the thing can be
delivered to the buyer at the time of delivery
Exception: future inheritance is not a valid object of a contract → a property of a decedent prior to the
opening of the succession; succession opens at the time of the death of the decedent; exception → in case
of absence of 10 years (estate may be settled)
Cause of Contracts:
-Distinction between the kind of contract:
1. Onerous = cause for each contracting party; the prestation or promise of a thing or service by the
other
2. Remuneratory = there is a previous service that was done which does not constitute an obligation,
and thereafter, a reward was made → service is benefit which si remunerated
3. Pure Beneficence = (donation) → liberality of the benefactor
-Cause vs. particular motives of the parties in entering into the contract
-Cause: essential reason to move the parties in a contract; immediate, direct and proximate reason which
justifies the creation of the obligation through the will of the parties
-Motive: emotional, psychological reason as to why the person enters into a contract
ex.) purchase of a land, the land itself is the consideration as regard to the vendee; the vendor = payment
of the price; motive = buyer’s motive is to use the land to construct a warehouse
-Liguez vs. CA (page 565) = while there is a distinction between the cause and the motive; where the cause
and the motive has merged, or have merged, because the cause has predetermined the purpose of the
contract → yung matandang DOM, nag donate ng 14 year old na bata, because gusto niya maging mistress
yung bata, the old man’s motive is bad; and donation is the liberality of the benefactor, but in this case, the
cause has predetermined the purpose of the donor in entering into the contract, and the cause and motive
have merged, and considering that the motive here which became the cause is immoral, therefore, the
donation is void but even if it is void, the the DOM who died including the heirs of the DOM cannot file an
action in order to annul the contract of donation because, they are estopped from filing the action because
they are bound by the fact that the donor was the one who caused the donation, and are bound by the
action of the donor → when the motive predetermines the cause, then the motive can be regarded as the
cause
-The cause must exist in order to be valid (must also be true and legal) → Ligas vs. CA: cause is not legal
because the motive predetermines the cause (and the motive was immoral) → therefore the cause is invalid
Forms of Contracts:
-1356: general rule → with respect to form, contracts shall be obligatory in whatever form they may have
been entered into (all requisites for validity are present) → a contract may be entered into in any form (may
be oral or in writing)
-If the law requires that a contract be in some form (ex.) deed of donation or a marriage settlement) → that
requirement is absolute and indispensable
-with respect to form, we should understand that generally speaking a form is not required in order that the
contract will be obligatory
-sale of a real property → it is not required to be in a public instrument in order to be valid; if you want to
register that sale, then you can demand that the sale be notarized; similarly the sale of a car (it does not
have to be notarized in order to be valid; but it requires to be in writing in order to be enforceable) →
enforceability = the limitations of the statute of frauds will apply if the contract is merely executory (once it
is executed already, then kahit oral contract of a sale of a car, it is valid) → the problem is, if you want to
register it, then you have to demand that it be notarized (1357)
-1358: merely formalities for the purpose of making the contract efficacious (for efficacy; but not formalities
for validity and enforceability)
-Validity → contract of donation and other contracts (ex.) marriage settlement under the Family Code)
-Form is not required for the validity of a transaction or contract → as a general rule under 1356
-1358: contracts whose formalities are merely required for purposes of efficacy but not for validity or for
enforceability
-1358 (1) → covered siya ng 1403 (2) on statute of frauds (required to be in writing); but only applies to
executory contracts = pag may binayaran na, then the statute of frauds do not apply anymore
3 essential req.
• Consent
• Object
• Cause
Consent
Req.
1. Presence of 2 parties plurality
2. Giving them consent must possess the capacity
3. There should be no vice or defect in the wills of the contracting parties
4. Express consent
5. No conflict between the parties
1319
Offer must be complete and definite
He has an intention to enter in a contract must be serious.
Necessary that acceptance must be absolute. If the acceptance will vary the terms, it is a counter-offer or a
rejection of the offer.
Mirror image rule - acceptance must be identical such acceptance must be qualified.
Acceptance must not contain any variation.
Distinguish from contract inter absentees - offeror and offeree are in different places.
Letter by telegram does not bind the parties until it comes to the knowledge of the offeree. April 5 the offeror
makes an offer to the offeree in manila by email and the offeror sends a letter to the offeree if offeree
receives the letter on apr. 6 and the same day he writes the letter to oferror and a receives the letter on 7th
then the contract is perfected on the 7th.
Art. 1323 - we follow the cognition theory - from the moment the knowledge comes from the offeree.
Offer becomes ineffective upon the death, incapacity, insanity or civil interdiction. Both must have the
capacity to enter in a contract.
1321 - (VIP)
• In relation to consent
• Acceptance must be absolute
• (Contract of sale) Must agree not only the price but also the manner.
If there is an agreement between the parties with respect to how much is the price of the sale, it doesn’t
mean that there is no consent but just defect as to the price.
Option to sell is given without consideration, it is an offer to sell until accepted. Once accepted, it is a binding
contract of sale.
1327
1328
1329
E: If the minor misrepresented his minority, no negligence on the other party and the other party has
no way to discern the minority. The minor is bound by the contract through estoppel (art. 1421)
Mistake of fact- when the marriage is celebrated with the one who does not have authority to
solemnize marriage (void); could be valid if the contracting parties believes that he has the capacity
to solemnize marriage.
Mistake of law - mistakenly thought because although he is a consul, because a consul cannot validly
celebrate the marriage in a country where he is not assigned.
Party knew the doubt was being sold, so there was no mistake.
Undue influence, take a look at the contract of adhesion. Example of this is a plane ticket.
1337 - if a person is in need of money and contracted a loan and misrepresented himself. There’s
undue influence because there’s an undue use of power.
Contracts of adhesion are not illegal per se. The stipulations or the terms are not obsque and no
doubt on the intention of the parties.
If the contract has ambiguities, it shall be construed against the one who drafted the contract.
Fraud
2 kinds of fraud
1. Fraud committed during the performance of an existing obligation (1170 & 1171) - payment
of damages
2. Fraud committed at the birth of the contract (dolo causante) (dolo incidente)
(dolo causante)- 1338 (VIP)
(dolo incidente) - 1344
1345
1346
1349 - you should know that the object is determinate as to its kind, otherwise the offer is not certain
and therefore the offer is void.
If the object is uncertain, then the absence of object will result in the contract becoming void. Also
impossible things and outside the commerce of man.
Lesion or inadequacy of cause shall not invalidate the contract except if there is fraud, mistake or
undue influence. In such cases, the contract is merely voidable.
If the donation is real prop regardless of the value, the donation must be in a public instrument.
Formalities
_________________________________________________________________________
-The person must also have the capacity to act (has something to do with the capacity of the person) →
when a person is born, has the juridical capacity; but before acquiring the capacity to act, he must reach
the age of majority; there are limitations on capacity to act such as marriage, insanity or the state of being
deaf mute, intoxication, or when a person is under hypnotic spell: then his capacity to act is restricted or
limited; when a person’s capacity to act is defective, then it vitiates the consent
-For consent to be valid: intelligent, free and true; when you say the consent is intelligent = the consent
must not be vitiated by the vices of cognition
-Note: while the general rule is, where for instance, the capacity to act → one of the restrictions is marriage:
but remember, if you will still remember in the Family Code, a contract entered into by a spouse, an act of
disposition or dominion, sale or encumbrance of a property belonging to the ACP or CPG = the contract is
void; generally speaking, if there is no authority, it is like the rules of co-ownership that will apply
-However what is odd with respect to the FC: when the contract entered into by the husband without the
written signature of the wife, is void; but it will have the effect of a continuing offer which may be ratified if
later on, the wife will agree to the sale earlier entered into by the husband (this is the only exception of a
void contract which is subject to ratification)
-1319: (VIP) → mirror image rule doctrine: provides that when there is an offer, the acceptance musst be
identical so as to produce consent and meeting of the minds; the acceptance must mirror the offer; that is
the reason for 1321
-1321: (VIP) → in other words, even if the offer is to sell a car for P100k, but the acceptance states “he
accepts but would like to pay in two installments,” then it is a qualified acceptance; if is a qualified
acceptance, it is a counter offer; a counter offer is a REJECTION
-Where the acceptance is qualified, then the offer is rejected; when the offer is rejected, the offer is
extinguished → you cannot go back; there is no more offer; the offer is extinguished is withdraw, when there
is a qualified acceptance, or revoked
-Note: (General Rule): the rule is, if the offer is made inter praesentes, the acceptance must be immediate;
pag tumalikod siya at hindi mo inaccept, there is no more offer → you have to accept it on that occasion
-Exception: when there is an option → a contract of option is a preparatory contract, which one party grants
to another for a fixed period; the power to decide whether or not a principal contract shall be entered into
-Option period: where the offeror merely gives the offeree a period, it is an option period, but not necessarily
an option contract; for the period to become an option contract, it must be supported by a consideration of
something paid or promised; if the offer is made interpresentes, it must be accepted immediately, unless
there is a period called an option period → giving the offeree a certain period within which to accept
-Now, what is the purpose of the period? → a time given to the offeree to decide; it is also a time during
which the offer is still available and open; but because the option period is not supported by a consideration,
it may be withdrawn anytime by the offeror by informing the offeree of his withdrawal (he cannot abuse
without simply withdrawing it without informing the offeree)
-if the offeree accepts during the option period: results in a perfected contract (even if not supported by a
consideration); for as long as the acceptance is done prior to the expiration of the option period
-If there is a consideration, then the power is transferred to the offeree → has the privilege of contemplating
during that period; the period may not be withdrawn prior to the expiration
-Note: the consideration is called “option money” → different form an earnest money
-Option money: consideration for the option contract → the offeror cannot withdraw that option prior to the
expiration; therefore, he cannot offer it to other persons; he has given the offeree the exclusive right whether
to accept or not to acept the offer during that option period; the option money supporting the contract (should
be distinguished from an earnest money)
-Earnest money: forms part of the price (advance payment)
-Consideration for the option: either be paid or promised → it is possible that the consideration has not yet
been hounded (the law is clear: the consideration in the contract of option, is something paid or promised;
so either the consideration could be money that is paid or pinakape ka, or promised na babayaran ng P1k
basta hold on to the option) → that is a sufficient consideration to perfect a contract of option
-A contract entered into inter absentes: not face to face (Article 1319 (2) in relation to Article 1323) → where
the offer is made inter presentes, unusual na mangyari ito (bago umoo siya, bigla na lang siyang namatay
= hindi normal na mangyayari kapag inter presentes)
-If A is in Davao and he made an offer to sell his house in Manila due to the pandemic; and he made an
offer to sell his house for P5M; and the offer was written and sent in a mail on April 6 and received on the
7th and on the same day, B mails his acceptance; and after mailing, B was on his way home and got into
an accident and died; following day after mailing acceptance; A received the acceptance: question → was
there a perfected contract of sale? = No. We follow the cognition theory → contract is perfected when the
acceptance comes to the knowledge of the offeror
-Prior to A’s receiving the acceptance of B, there is no perfected contract of sale; 1323, the offer is ineffective
upon the death of B → before acceptance is conveyed (both parties must be alive and are capable of giving
consent)
*Either of them will die, then there is no perfected contract of sale = at that point in time, both of them must
be alive because he died prior to the offeror learning of the acceptance of the offeree then there is no
perfected contract of sale
-Note: with respect to consent → very important (1319) for the offer to be certain, it must be complete; it
must contain the object and the cause; if the object is being sold without a price, then the offer is not certain,
then it is not possible for the offeree to be able to accept it
-similarly, under 1321: if the offeror prescribes the exclusive manner in which acceptance of his offer shall
be indicated by the offeree, the acceptance must be in accordance with the prescribed manner as
prescribed by the offeror; otherwise, there is no perfected contract; acceptance must be unequivocal and
unconditional
-In a contract of sale: the parties must agree not only as to the price, but also as to the manner of the
payment of the price; here, it is again related to consent; if the manner as to the payment to the price is not
complied with, then there is no consent and perfected contract (due to the absence of consent)
Vices of Consent:
1. Cognition: three vices of cognition
2. Volition:
a. Violence and intimidation = duress
b. The other thing that we will have to take note: undue influence → remember in undue influence, the
idea of this is that one party taking advantage of his power over the will of another, depriving the latter of
the reasonable freedom of choice; the consent of the party was not anymore free; where the consent is
vitiated, then the consent is not free
*Favorite dito: is the contract of adhesion
-Contract of Adhesion → ex.) airline tickets or boat tickets: one party preparing the terms of the contract,
and he has taken advantage over the will of another because when you buy an airplane ticket, it is a take it
or leave it situation
*due to this situation, the one who prepared the contract has taken advantage of the will of another
-Contracts of adhesion are valid and binding per se; if the terms of the contract are not obscure and are
clear, then they will be given effect; if the terms of the these contracts are clear and not obscure and leave
no doubt as to the intention of the parties, then they are binding; however if there are terms in these contracts
that are ambiguous, then the rule is, because of the nature of the contract, the ambiguities shall be construed
against the person who prepared the contract
-Fraud in 1171 = committed in the performance of an existing obligation, and the result is that under 1170,
the party guilty of that fraud shall be liable for damages
-On the other hand, the fraud that we are talking about which will vitiate consent: committed at the birth of
the obligation which in the case of contract (at the time of the perfection of the contract) → committed at the
birth of the obligation (perfection of the contract); this is 1338 (casual fraud)
-1338: because of that fraud, the party who agreed is induced to enter into the contract → this is the fraud
that will result in the contract becoming voidable
-Incidental fraud (1344 (2)) → fraud was committed still; it will result in the payment of damages; it will make
the party guilty and liable for damages
-1340: usual exaggerations in trade → when an agent sells a condo; we have a way of validating and
checking the master deed, whether or not the facilities are going to be included in the condo; they are mere
exaggerations in trade (is not fraudulent)
-1341: person making the opinion is not the expert (ex.) trying to sell gold) → also not fraudulent
Mistake:
-It is a vice of cognition also, because when a person or a party entering into a contract is mistaken; there
was a mistake; then, he could not intelligently understand the true nature of the contract that he entered
into; he is operating under a mistake of fact
-When it is a mistake of fact, it might excuse him of liability → ex.) putative marriage
-Mistake of Law (your understanding of the law) → ex.) A marriage is void when there is a lack of authority
of the solemnizing officer → akala mo notario ay pwede magkasal, it is a mistake of law; it will make the
marriage void
-Remember: the mistake must refer to the object of the contract; yung tinatawag ditong 'substance of the
thing’ = object
*And also remember the cause → 1319
-1331
-Mistake: either the object or the cause (principal conditions or most probably it has something to do with
the consideration or price of the contract)
-For a consent to be valid, the consent must not only be intelligent, but it must also be free and be
true; when you say true, it must not be simulated or in jest (if this is the case, then there is no real
consent)
-Simulated: absolute and relatively simulated
1. Absolute: the parties do not intend to be bound at all, and the contract is void due to lack of
consent → ex.) marriage in jest (kasal-kasalan lang)
2. Relatively simulated → the parties merely wanted to conceal their true agreement → ex.) they put
a price to the contract instead of making it appear that they really entered into a contract of donation;
when such is relatively simulated, the parties will be bound by their true agreement (which is the
deed of donation); except when the intention of the parties is for a purpose that is contrary to morals,
public order or policy
OBJECT:
-1349 = when you say determinate, what does it mean? → it must be determinate as to its kind; you know
that what you are selling is a car and there is no ambiguity; it could not be understood as any other
thing; it does not have to be the exact unique car, but determinate up to its kind (ex.) a horse or a
carabao)
*Note: This is different from a determinate obligation
CAUSE:
-The proximate reason; justifies the creation of the will of the contracting parties
*Note: distinguish 1350, 1355
-Lesion or inadequacy of cause = there is an indication that the price does not correspond to the value of
the thing subject to the contract of sale; while the cause there is inadequate, it will not invalidate the contract
→ except when the consent is vitiate (fraud, mistake or undue influence)
-There is absence of cause → the contract is void because of lack of one of the essential requisites of a
contract; but even if the cause is not stated, the cause is presumed → when parties enter into a contract
-One of the grounds to be rescissible is lesion → 1381 and 1382 (rescissible contracts)
FORM:
-1356: (VIP) → contracts shall be obligatory = due to 1159 (obligatory force of a contract)
-1356 in relation to 1306 (autonomy of contracts)
-The premise is contracts shall be obligatory in whatever form they are entered into between the contracting
parties (it will bind them)
-We are not talking of the other persons around them
-When we are referring to the contracting parties and their heirs and assigns (principle of relativity of
contracts)
-Subject to one condition: all the essential requisites for their validity are present: consent, object and cause
*Form is not an essential requisite of a contract
-Exceptions: if the law requires that a contract be in some form, in order for it to be valid (ex.) contract of
donation → must comply with certain formalities and solemnities - delivery as well)
-Spouses will enter into a prenup = it must be in writing as well (or else the marriage settlement is void)
-A form is required in order for it to be proved in a certain way (1403 (2) - statute of frauds = applies to
executory contracts and NOT TO EXECUTORY CONTRACTS)
*The form is a requirement for enforceability or validity
-1357: when there was an oral sale of a car → obligatory between the two parties; in order for the sale to
be registered, you can demand from the seller to have it in writing and be notarized (it is obligatory); will not
fall under statute of frauds
*if there is a partial payment or delivery, statute of frauds will no longer apply
-1358: forms are required for efficacy but not for validity and enforceability → the contract is valid, but it
cannot be registered kasi kailangan panotariohan mo (ex.) waiver of inheritance must be in a public
instrument)
April 7, 2021 - Caryl
1356 contracts shall be obligatory between the contracting parties whether it is oral or written -> conssent,
object and cause are present.
1357 - If the law requires that form shall be complied with, you may compel the other party to fulfill the
contract for the purpose of efficacy
1357& 1358 = For efficacy (once the contract has been perfected, the party may require the other for the
purpose of efficacy)
REFORMATION OF INSTRUMENTS
Defective contracts:
Recissible, voidable, unenforceable and void & inexistent contracts
If the suffering is too low, we cannot invalidate a contract unless there is undue influence, fraud or vitiated
consent. (contract is voidable)
1177
1380, 81,82 & 83 - Rescissible contract
1381-
1382 -
1: Minor, insane person.
Recission will not take place to those who acted in bad faith.
Remedy: Damages
Creditor running after the debtor who entered into fraudulent contract, the 4 yr pres period shall be counted
from the day that C has no more other legal remedies to collect his credit.
Person who can file for annulment must have an interest in the contract.
Similar to rescission when the contract is annulled, there should be a restoration of what they may have
received.
Incapacitated person
1399
Exception when a contract has been entered into by a minor is voidable:
1. When the object of the contract entered into is necessary or susceptible.
2. Estoppel by active misrepresentation.
3. No negligence of the other party and has no knowledge with his minority.
Next meeting:
Consequences of annulment of contracts (Art 1400)
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-1356: forms of contracts and the rule with respect to forms, is that generally speaking, contracts shall be
obligatory in whatever form it has been entered into; provided that all the essential requisites for validity of
a contract are present; obligations is under 1159 and in relation to 1306
Reformation of Instruments:
-instrument: piece of paper where the contract is embodied or written; contract per se does not have to be
in writing; but in reformation, the premise is, there is a meeting of the minds between the contracting parties
(there is a valid contract), but the instrument or paper which is supposed to embody the agreement, failed
to contain what they have agreed upon, due to a mistake (typographical error), fraud (nanloko), or due to
inequitable conduct or accident; it does not have to do anything with the validity of the contract; the contract
is considered to be valid
-If the other will refuse to amend the contract, then go to court to file an action for reformation (correction of
the instrument)
-Note: if the problem is because the consent is vitiated due to mistake, fraud, undue influence → remedy is
not reformation, but the remedy is annulment of the contract
-Reformation: the premise is that there is a meeting of the minds between the contracting parties; except
that their true intention was not reflected in the instrument that is supposed to embody the terms that the
have agreed upon (mutual mistake or mistake of the contracting parties; or mistake of a third person like a
clerk)
-1366 (VIP) → instances wherein the real agreement is void: it will be void if one or two of the essential
requisites of a valid contract are not present or when it is illegal, or when the COP of the contract is contrary
to laws, morals, public order and policy; there is nothing you can do about it because the the contract is
void or inexistent
Rescissible Contracts:
-Four kinds of defective contracts:
1. Rescissible
2. Voidable
3. Unenforceable
4. Void or inexistent
Rescissible Contracts:
-1177 → very important provision; it provides the creditor the remedies when the principal actions have
failed
-Principal and subsidiary actions
-Principal actions → 1165: the action we can pursue is to demand specific performance or if the thing agreed
upon cannot be delivered, the only recourse is to file an action for equivalent performance (payment of
damages)
-Obligation to deliver a generic thing → demand the performance of the obligation; otherwise, the recourse
is to file an action for a substituted performance; but if you suffer damages as a result because the substitute
is more expensive, you can also file an action for equivalent performance as an alternative remedy
*Action for equivalent performance = universal action available → 1177; you are demanding for the payment
of hte money; if no cash, you run after the property; pag walang pera, then you exhaust the assets of the
debtor; if no tangible property, then you go after his intangible properties → that is what you do when you
explore the subsidiary remedy of accion subrogatoria (1177 → you step into the shoes of the debtor, and
to file an action against the debtor’s debtors)
-Last remedy: if your debtor will transfer his properties ahead; and the transfer of those properties were
fraudulently done, then the last remedy available = subsidiary remedy (accion pauliana) → this may be filed
by a creditor, if it has been found that 1381 (3) is related to 1177
-1355: Lesion or inadequacy of cause shall not invalidate a contract; unless: there has been fraud, mistake
or undue influence → lesion or inadequacy of cause (substantially low price of the sale of a property) would
not mean that the contract is invalid or defective; because if there is consent, object and cause, then the
contract is valid; but if the cause is simply low, it does not mean that the contract is void; exception is 1355
→ if consent is vitiated by mistake, fraud or undue influence = kasi baka nagkamali or may panloloko
-Undue influence ang vice that made the contract defective → the contract is voidable in this case
-1381: lesion, particularly in paragraph 1 and 2 → lesion will make the contract rescissible; with respect to
the sale done by a guardian on behalf of his ward
-Family Code: when the H or W is absent; the acts of administration can be performed by the other spouse
-Here under 1381 (2) → if someone is absent and the representative does something (selling the property
of the absentee, and the absentee suffers a lesion of more than ¼ of the property) = it is rescissible
-Note: 1380 → premise is that the contract is valid; rescissible contracts are considered as valid contract
-Resscisible contracts are valid contracts, but there was an injury that is suffered; due to this, he files
rescission as a subsidiary remedy (not a principal action, unlike in 1191); plaintiff must be able to return
what he has received also (status quo ante)
-The reason why the code commission considered it as defective contracts: even if they are valid contracts,
there is an injury was suffered by either the parties
-Lesion = subsidiary remedy; and not a principal action → you only resort to this, when the principal action
has already been exhausted and it did not return to the status quo ante
-1382 → payment made by the debtor in the state of insolvency = person is bankrupt and despite his
bankruptcy, if the money left has been paid to the preferred creditor, even if his debt is not yet due (could
not be compelled = it is fraudulent); purports that the payment made is fraudulent in nature
-Lesion: injury suffered by the person who did not receive the equivalent for what he gave in a commutative
contract
-Rescission is subject to prescription = it cannot be ratified, because you cannot ratify a perfectly valid
contract; you only have a window of four 4 years (with respect to a ward, insane person or minor) (absentee
= from the time the domicile is made known; within 4 years) (creditor = from the time the cause of action
accrues; it is clear that he could not anymore collect to what is due to him - very subjective, but it means
that he pursued a principal action, and therefore, the 4 year prescriptive period shall start to run, not from
the time of the registration of the sale that prescriptive period with respect to that, pertains to voidable
contract → where the vice that vitiated the consent is fraud)
-Note: another thing to consider → the rescission shall only be to the extent to cover the damages caused
→ the entire contract is nullified, but you only get to the extent of what is needed to pay you for the damages
that is due to you; but the effect of rescission is to declare the contract as void; the consequence also, is
that it requires the applicant must be able to return what he has received; effect of rescission is that they
will have to restore each other, as if there is no contract to begin with (status quo ante) (1385)
-Rescission is available only and it will be granted only when the plaintiff who is demanding for rescission
can return whatever he may be obliged to restore; cannot take place where the property is already in
possession of a third person who did not act in bad faith (if the property has been transferred to a third
person who is not aware or not in BF, then you cannot recover that property; your recourse is to demand
the payment of damages)
-Distinction rescission (1381) and rescission of reciprocal obligations (1191) → remember in 1191
-Note: 1386: contract is approved by the court, then rescission will not prosper and this applies to contracts
entered into by the guardians or by the representative on behalf of the absentee (if the guardian can
administer the properties of the ward, he does not need court approval; but if the selling of the property is
the case, then there is a need for approval of the court) → if it is approved by the court, the contact cannot
be rescinded
-1387: badges of fraud → if the contract is gratuitous (note: regarding donation); 759 = considered as
fraudulent donations); donation may be revoked or reduced in the following cases:
1. If after the donation, it turns out that the donor eventually has a child
2. If he did not reserve sufficient property to support himself and those that are entitled to support
3. Case of 759 → did not reserve sufficient property to pay his debts that he incurred prior to his
donation (fraudulent donations)
(donation may be reduced and revoked → inofficious donations)
-1387(2) → if the debtor receives a decision or a Writ of Attachment; despite receipt of orders, he
nevertheless transfers the property even if that such decision of WoA does not specifically refer to the
property that he transferred → act of transfer is fraudulent and malicious
Voidable Contracts:
-Very simple and elementary
-It has something to do with consent; it is vitiated
-A consent is valid: intelligent, free and true; when it is not intelligent, the consent is vitiated by vices of
cognition (mistake, fraud or incapacity)
-When vitiated with fraud → contract is voidable
-The other vice of consent → vice of volition= prevents you from freely entering into a contract (violence,
intimidation and undue influence)
Reasons (1390)
1. Where one of the parties is incapable of giving consent to a contract = does not have the capacity
(ex.) minor, or insane person)
*Absence of consent is different = it makes the contract void (ex.) death)
2. Those where the consent is vitiated by mistake, violence, intimidation, UI or fraud
-Voidable contracts are VALID contracts (even if there is a defect); simply annullable; until they are annulled,
they are valid contracts
-If the contract is voidable and later on, the property you sold is sold to another person is in good faith, you
cannot anymore recover that property (at the time you sold the property, the earlier contract was merely
voidable - valid until annulled)
-Voidable contract is susceptible of ratification
-Ratification = expressly or tacitly
-1391: may prescribe in four years (take note of the commencement of the prescription period in each case)
-When the person reaches the age of majority, and then, later on, there is a possibility that he may tacitly
ratify the contract (especially when he accepts benefits)
-Fraud = four year prescriptive period; reckoned from the time of the registration of property (constructive
notice to the whole world)
-Voidable contract = susceptible of ratification and annulment, and a voidable contract may also be
extinguished by prescription
-Note: 1398 (VIP) → almost similar with 1385 (pagdating sa rescissible); the effect of rescission and
annulment is to nullify a previously valid contract;with respect of voidable contract, it is valid until annulled
contract → effect of annulment is to declare the contract void and once it is annulled, the contracting parties
must be restored status quo ante (together with the fruits and interest) → once the contract is nullified, the
parties should be able to restore what they have received
-1399 (exception) → if the plaintiffi s an incapacitated person: he is not required to return what he
has received; two exceptions to the exception: 1.) where the thing that the minor received was used
to procure necessaries for life → kahit na voidable yung contract, the minor is required to pay a
reasonable price; 2.) if the thing he received is still in his possession (hindi ito totally absolute
exception due to unjust enrichment)
_________________________________________________________________________
If legally in possession of 3 parties who are not in bad faith; no rescission can be made.
rd
Art. 1402 – ASA one of the parties do not restore, the other party is not required to restore with what is
incumbent upon him.
Art. 1400 – Defendant; person referred here in case of annulment. If it is lost through his fault, he shall be liable
to pay damages (value of the thing at the time of the loss, with interest, and the fruits he received) – YOU ARE
NOT EXCUSED
- If u did not lose it through your fault – you are not required to pay the value of the thing lost or its interest
(rule on fortuitous event applies)
Implication is that we must make a distinction if the defendant lost it through his fault or not
Art. 1401 – Plaintiff; if the thing is lost through the fault of the plaintiff, he shall bear the loss. Exception: if he is
an incapacitated person, he can still bring an action. Exception to the exception: even if you are an incapacitated
person, if you lost it through fault or fraud, you will forfeit/be precluded to bring an action.
Emphasis on “incapacity”
But, when u are confronted with a problem, always recall the things you have read and what we have discussed.
No need to discuss complicated matters. Start with the basis.
Unenforceable contracts
3 kinds:
- When a person acted on behalf of another outside/in excess/ without authority of another person; that
person will not be bound by the acts of that person; unenforceable against him. He will not be affected and
he does not have to do anything. It is unenforceable against him.
i.e. a person claiming as your agent and contracted on your behalf is unenforceable. Assuming he has an
authority and he acted beyond the authority given to him. That is also unenforceable. Co-owner who sold more
than his share is only valid insofar as his share is concerned. It is unenforceable insofar as the share of the other
co-owners are concerned.
- When both parties are incapacitated. Where only one of them are incapacitated, it is only voidable. When
the act is ratified by the guardian, then the contract is voidable (valid until annulled)
Statute of frauds. (1356) provided the essential requisites for their validity are present.
- Art. 1403 par. 2 (statute of frauds) for enforceability, it requires that it be in some form or that it be proved
that it be in some way, then that form is indispensable for its enforceability.
“by action” – by case in court. Even if you bring a case against me. But because the contact did not comply
with the SOF. I can file a MTD.
Requirement: There must be some writing or memorandum subscribed (signed) by the party charged/his
agent.
EXECUTORY – because this contract has not been performed; either wholly or partially.
Par. D – sale of personal property/ movable, goods chattels or things in action – pag 500 pesos or above,
there must be some writing or memorandum, otherwise, it is unenforceable. Unless, there is a partial
payment/partial delivery, then it will no longer fall under the SOF. Emphasis on “part of such goods..”
Par. B – contract of guarantee; applies only to collateral contracts; guarantor will only pay when the
principal debtor will not be able to.
Emphasis on “guarantee”
Bigay mo materyales ako magbabayad – ordinary loan/mutuum does not fall under the staute of frauds.
GR: you can only donate properties you can transfer at the time of donation
Exception: FC
Par. E. emphasis on “sale or lease” - lease more than 1 year; renewable every one year. If it exceeds 1 year,
it must comply w SOF; it also becomes a real right.
Par. F – representation as to the credit of a 3 person. That representation MUST be in writing. A lawyer in
rd
order to obtain a loan made in representation of his client falls under the SOF and, therefore, MUST be in
writing.
*****Art. 1405 – SOF= defense in an action; defendant may invoke this by simply moving for dismissal for
non-compliance. Title “defense in an action to enforce the contract” HOWEVER, ALL unenforceable
contracts may be ratified. It will be ratified in the event that defendant fails to object to the presentation
of evidence to prove the same or he accepts benefits under them (he accepts partial performance).
Oral evidence ->testimony
Art. 1408 -> same with voidable; 3 persons cannot assail; rescissible may be assailed by some; void may be
rd
assailed by anyone
Void/inexistent contracts
Art. 1409 – inexistent – does not exist as a contract because of absence of consent, or object or cause.
- Par. 1 – has one or some of the elements; VOID for being an illegal contract BUT it exist.
In pari delicto - equal fault If you are equally at fault If the contract entered into constitutes a crime, both of you
must be prosecuted. Shall be disposed in accordance with rpc or roc
Exceptions: 1412- does not constitute a criminal offense but just unlawful.
Liguez vs. CA - Motive is immoral because Lopez donated the property to his 16 y/o mistress. - Void contract
- 3 person may raise the defense of illegality. BUT it is required that his interest must be DIRECTLY AFFECTED.
rd
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-Rescissible contract: contract is perfectly valid except that there is a lesion or injury suffered by a third
person as a result of a contract entered into
-Voidable: defect in the capacity or such consent is vitiated by undue intimidation; prior to the annulment of
the contract, the contract is valid
-1385: as a result of rescission or declaring the contract as void, or nullified, the parties are required to
return the things which were the object of the contract, as well as the fruits and price, and interest (saulian
of what they received previously)
-Resicssion → you cannot avail of this if the object of the contract is already in the hands of a good faith
third person (kailangan may fraud yung debtor and third person - who was the transferee of the property)
A is the creditor and B is the debtor; B in order to prevent the collection, transferred his property to X; in
rescission, the transfer of the property to X, should have fraud and bad faith of the transferee
-General Rule → 1398: if the obligation is annulled; the contracting parties must also restore to each other
what they have received (similar to 1385) → 1402: if you cannot return the price, he cannot require you to
return the object
*Exception = 1399 → talks of incapacitated persons; the incapacitated person cannot be obliged to make
restitution
Two exceptions:
1. Monies used to procure necessaries for life
2. If the incapacitated person still has in his possession the thing or the money
1400: (defendant; guilty party) → if you are the defendant and you lost, and you are supposed to return the
thing, then you will still be required to pay an indemnity for damages; you will not be excused → what does
this mean? = if you are not at fault (fault is negligence), then it means that you will not be required to return,
due to the contract being voidable (we follow 1189 (1) = if the thing is lost, without the fault of the debtor,
then the obligation is extinguished)); if the thing is lost while the contract is not yet nullified, but if the thing
is lost through his fault, then we follow 1189 (2) = if the thing is lost through the fault of the debtor, he will
be liable for damages
1401: speaks of the plaintiff; if you are the plaintiff and you lost the thing through fraud (malice; intentional
avoidance to perform an obligation) or fault (negligence); if you file an action, it will not prosper; you lost the
thing you’re supposed to return; under 1402, as long as one of the contracting parties does not restore is
bound to return, then the other cannot be compelled
Exception; if you are an incapacitated person and you are the plaintiff; you can still file an action; except:
you will lose it through your fault and fraud → basta nawala mo through fault or fraud, even if you are an
incapacitated person, you cannot file an action for annulment
*Incapacitated person → if you lost it either through fault or fraud, action for annulment will not prosper at
all; however, If you did not lose it through fault or fraud, you can still file an action for annulment
*Necessaries for life = *we go to the Family Code* → title under Support: indispensable for dwelling,
sustenance, education, transportation
-If you happen to still be in possession of the thing
Unenforceable Contracts:
-We should always remember as a premise 1356 → general rule: contracts shall be obligatory, in whatever
form they may have been entered into, provided that all the essential requisites for their validity are present
Two exceptions:
1. If the law requires that the contract be in some form in order to be valid
2. Case of unenforceable contracts
*Rescissible contracts = 5 (Lesion: minor and incapacitated person and absentee, and creditors - pag
nagtransfer ng properties yung debor; if the property is subject of litigation is transferred by the defendant
without the permission of the court; insolvent and pays before debt becomes due)
*Voidable contracts = 2 (incapacitated or consent is vitiated)
*Unenforceable contracts = 3 (contract entered into by one that does not have authority or has exceeded
authority → agent or another person enters into a contract on your behalf but without your authority or has
exceeded such authority, then the contract is unenforceable; but there are some contracts that are void =
FC, if the husband and wife into a contract of sale without the written consent of the W; the contract is
considered to be void; or if the contract is entered into a co-owner with respect to the property subject of
co-ownership and under a contract of sale → it is valid insofar as the share of the co-owner selling the
property = in both cases, parehas na walang authority, but the contract is void)
1. 1403 (1) →
2. 1403 (3) → both parties are incapacitated; if the parent or guardian of one of the parties will ratify,
then the contract will become voidable
STATUTE OF FRAUDS:
-1403 (2) → statute of frauds
-the provision on the statute of frauds: if you do not comply with the SoF with respect to the enumerated
contracts, then the agreement shall be unenforceable by action (referring to a civil case; not just an ordinary
demand letter)
-Unless: there is a note or memorandum = must be complete by itself (it must identify the object and
cause/consideration) → it is like a contract, but a note or memorandum is sufficient and such note
or memorandum should be in writing, and must be subscribed by the party charged → two main
requisites
-Subscribed = signed
-Party charged = the signature of the one being charged or the defendant in the civil case; if you are trying
to enforce an agreement against you, you will ask where did I sign (because that is the most important
insofar as the plaintiff is concerned; he does not need to sign because he is agreeable to the transaction,
but has to show some proof that the other person has signed it - the defendant)
-If you cannot show that document or note or memorandum in writing subscribed by the party charged, then
nothing will be acceptable before the court; you cannot call a witness to prove that because that is the only
acceptable proof which will be accepted before the Court
When we talk of agreements made in consideration of marriage, the requirements now are not only
for enforceability but they are required in order to be valid
4. Goods, chattels or things in action: (sale of personal property) → if it is a sale of goods, chattels
and things in action at a price of P500 and above = there are two exceptions: (falls outside SoF)
a. There is partial performance
b. Partial payment
*Then it will not anymore fall in the statute of frauds
-Earnest money is very important = mag-advance ka kaagad, as a symbol of the agreement; pag
tinanggap na yan, it is not anymore within the statutory frauds
*SoF applies to executory contracts
-Excecutory = SoF applies
-Executed = SoF does NOT APPLY
5. Lease and sale of a real property → if it is less than a year, then it will not become a real right; and
if it is a lease over a year, because it creates a real right in favor of the lessee; and if the lease is not over
a year, then it will not fall under the SoF
6. Two persons: the one who made the representation and the third person whose credit
worthiness he is vouching → there is a case wherein which a lawyer who borrows money in behalf of his
client and vouches that his client has the capacity to pay (lawyer and creditor is entering into a contract of
loan; and the lawyer is telling the creditor that the client or third person has a capacity to pay; vouching for
another person’s credit worthiness) → such must be in writing and must be subscribed by him
1405: (VIP) → it refers to the SoF; those contracts that are unenforceable may be ratified, and also including
who have been entered into in excess of authority and also contracts entered into by incapacitated persons;
but with respect to SoF = it may be ratified in two ways: 1.) if you’re stupid: failure to object the presentation
of oral evidence to prove the same; if you do not object timely (if you do not object, then you waive your
right and such has an effect of ratification; and you become a stupid lawyer); failure to object the
presentation of oral evidence, has the effect of a waiver and such will effectively ratify the contract which
supposedly is an unenforceable contract (it will become enforceable); 2.) if you accept a benefit: such as
partial delivery of goods; pag tumanggap ka at hindi ka pumirma pero tinanggap mo nung nag deliver tapos
umorder ka, at tinanggap mo; it will also have the effect of a waiver and such waiver will ratify a contract
which is supposedly unenforceable
*The ratification will prevent you from invoking the defense of statute of frauds
1406 → 1357; if the contract is enforceable but in order to register it, you need to have it reduced to a public
instrument, then you can compel the other party to have it notarized (a formality)
1408 → unenforceable contracts; it can be assailed or attacked by a person against whom it is enforced
(third persons cannot attack by a third person)
Voidable = person against whom it is enforced
Recsission = incapacitated person, absentee or creditor
Seven Items:
1. Void but existing
2. 1345 and 1346 → simulated contracts: absolutely simulated - under 1346, the parties do not intend
to be bound at all; meaning, there is absence of consent (void and inexistent); ex.) marriage in jest
3. Cause or Object: inexistent; lacking yung object or cause (there is no contract at all)
4. Void because it is illegal
5. Impossible service: “impossible” → physically or legally impossible (ex.) immoral service) = void
6. Void because it is illegal
7. Void and inexistent contracts CANNOT be ratified
*If it is a void contract it cannot be ratified; right to set up the defense of illegality cannot be waived (you can
still file a complaint)
1410: does not prescribe; the four year period will not apply in void and inexistent contracts
1411: the other side of void contracts → why is it the other side? = it talks about the doctrine of in pari delicto
(the consequence of entering into a void contract and exceptions)
-In pari delicto: equal fault
-1411: act constitutes a criminal offense
-1412: the act does not constitute a criminal offense
Ex.) Lupa binenta sa Amerikano; prohibited because foreigners cannot own land in the PHw with
exceptions
*Regarding foreigners purchasing a condominium unit: the shares do not exceed 40% of the equity of the
corporation = foreigners in buying a condominium (take note of the master deed; the common areas should
not be registered through the individual owners; the common areas should be registered under the name
of the condominium corporation) -common areas should be owned by the condo corpo.; then 40
percent of such condo may be owned by foreigners; if it is included in the master deed that the
common areas of the condo would be owned by the unit owners, then foreigners cannot own
the unit
In pari delicto = presumption is that both parties are guilty, because you are aware that the contract you
have entered into is prohibited by law
1411 → illegal dito is cause or object; and both parties are in pari delicto; effect of such, is that they will not
have any action against each other; the buyer cannot demand the delivery of what he bought and the seller
cannot recover what he has delivered if he had made the delivery and the buyer cannot recover what he
has paid
-Theoretically, they will freeze at that point; they cannot do anything anymore; they cannot recover; RPC
will handle the disposal of the effects or instruments of the crime and the price of the contract
Note: 1421 → void contract: it may be assailed by a third person or by anyone; but his interest must be
directly affected; ex.) H and W: the H is selling a property to the W; this is prohibited under the law on Sales;
the question is: who can assail? → no one can simply assail this contract, except the heirs and the heirs,
their right prior to the death is simply inchoate
*While there is a prohibition with regard to the sale between the H and W, the problem is, who can assail
the contract?
_________________________________________________________________________
Class Notes for April 14, 2021: (Roseanne)
there is a juridical tie, an obli payment in excess of what should have been paid, the payor Obli to wash the dishes,
based on equity and natural or debtor unwittingly paid in excess and there is no obli to to go to church. There is
law. It is not given effect by make the payment. the creditor or the one who received no juridical tie
law payment has the obligation to return. There is no juridical tie
Remember in ART 1311, Relativity Principle, The heir is not liable beyond the value of the property he received from the
decedent.
VOID WILL
Article 1430. When a will is declared void because it has not been executed in accordance with the formalities required
by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with
a clause in the defective will, the payment is effective and irrevocable.
A will cannot pass the prop without being probated. A will that is void cannot pass prop to the heirs.
If the will of your parents is void because it did not comply with the formalities under ART 804-809 of the Wills but
nevertheless you complied with the testamentary disposition written by your father saying that he is giving 5k or 10k to
his neighbor who is his constant companion and you voluntarily paid that legacy or money, that payment is effective and
irrevocable as a natural obli of the heir based on the will of the father.
Article 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.
The parties are similar but the cause of action is different but you are a. The former judgment must be final
in estoppel to raise an issue that has already been resolved in a b. Judgment must be on the merits of the case
previous case involving the same parties even if it is of different cause c. The former decision is rendered by the court
of action having jurisdiction over the subject.
ex. You filed a claim for 100k, a claim against another person. A and d. There is similar identity of parties, subject
B. The claim of the creditor was denied by the RTC but one of the matter and cause of action for both cases.
matters raised there is the filiation of a child. Later on, you filed a case
of annulment and between the same parties, you cannot raise Same with that of litis pendentia and forum
anymore the filiation of the child which has already been in the shopping. This is a bar to a subsequent action
previous case even if the cause of action is different. In the first case, for the same cause of action.
the cause of action is collection and in the second case, it is ex. RTC QC you filed a collection suit for a credit
annulment of marriage. that you extended to another person and there
is a decision denying your claim, you cannot file
involving the same case and the same party
because there is res judicata there.
With respect to the government, the government officials will not stop the government from asserting a claim. It will not
operate as estoppel. If it is not mere negligence and they made affirmative acts (executed a document), the government
has issued a declaration recognizing your right, and you relied on the affirmative acts, later on the govt cannot assert a
different position in order to claim a right that it previously abandoned in your favor. Estoppel may be raised.
3. Estoppel by Laches
Estoppel by Laches- the failure or neglect for an unreasonable and unexplained length of time to assert a right to do that
which is by exercising diligence or which should have been done earlier
-based on grounds of public policy which is required the peace of the society; the discouragement of stale claims
TITLE V. TRUSTS
CHAPTER 1. General Provisions
Article 1440. 3 Personalities in a Trust:
1. TRUSTOR- a person who establishes a trust
2. TRUSTEE- one in whom confidence is reposed as regards property for the benefit of another person is known as the
trustee; legal owner of the prop, must have the capacity to hold the prop
3. BENEFICIARY- the person for whose benefit the trust has been created; the acceptance is required; must have the
capacity to acquire the prop gratuitously
Ex. If the father- husband will establish a trust making his mistress as the trustee, the mistress cannot qualify as the trustee
because she does not have the capacity to hold the prop gratuitously and to transfer the prop to the father-husband. (ART
739)
A trust is a right of prop, real or personal, held by one party for the benefit of another. It is a right enforceable solely in
equity for the beneficial enjoyment of the property the legal title to which is vested in another. This pertains to Duties,
relations and responsibilities. This is a fiduciary relationship between the trustee and the beneficiary as regards the
property real, personal or choses in action and between the trustor.
Ex. A and B are friends and A has the money and entrusted the money to B for B to use the money to buy a subd lot and
place the title in the name of B. B is the trustee of the prop for the benefit
Article 1441. 2 KINDS OF TRUST:
1. EXPRESS- created by the intention of the trustees; if the intention is clear
2. IMPLIED- created by operation of law
a. RESULTING- A entrusted B to buy a prop and have the title registered in the name of B. The intention to create the trust
is not expressed in the deed or instrument of conveyance but it is deduced from the nature or circumstances of the
transaction. It must have been contemplated by the parties to create a trust though not expressed in any instrument.
ex. Article 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price
is paid by another for the purpose of having the beneficial interest of the property.
Article 1449. There is also an implied trust when a donation is made to a person but it appears that although the legal
estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof. (The
person is made a donee the prop but the one enjoying the prop is another person, the donee is a mere trustee. The trustee
holds a legal title) ex. Yung mga nagtatago ng pera na ninakaw nila sa gobyerno. Nakatago sa magarang bahay,
nakarehistro sa kamag-anak nila. Yung trustee is kamag-anak nila. The trustor is the govt official who hides his ownership
of the property.
ex. Iba iba ang ginagamit na mamahaling sasakyan. None of those vehicles are registered in the tagagobyerno's name. It
is registered in the name of his cousins, relatives. Clearly, there is a trust created.
Art 1450.If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance
is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person
to whom the money is loaned or for whom its is paid. The latter may redeem the property and compel a conveyance
thereof to him.
Art 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a
trust is established by implication of law for the benefit of the true owner.
Art 1452. If two or more persons agree to purchase property and by common consent the legal title is taken in the name
of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest
of each.
Art 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to
another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated.
b. CONSTRUCTIVE- if there is mistake or fraud. The reason why the law will interpret a transaction as constructive trust
because the law would like to avoid an injustice as a result of a person taking advantage or using fraud to defraud of the
confidence of anothe person in order to use his prop or money to buy prop. It comes into being by operation of law or by
construction of law.
ex. If A and B are partners and B by fraud took out money from the partnership and used it to buy a car and registered it
in his name.
ex. Article 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the
purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation
of law in favor of the person to whom the funds belong.
Article 1456. If property is acquired through MISTAKE or FRAUD, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.
It is a consensual contract. The sale is perfected by mere consent. Delivery is not a part of a requirement in entering a
contract.
Essential Elements of a Contract of Sale:
1. Consent of the contracting parties
2. Object Certain
3. Price
Sale of objects which has potential existence with the Hope or expectancy which has a potential existence.
exception of future inheritance Note that if it is a sale of a vain hope, there is a fraud. ex.
It is subject to the condition that the thing must come into Lotto ticket na nabola na
existence , so that if it does not , the sale will not be effective
for not having an object. It is effective even if the thing hoped for does not come
into existence.
Ex. The future wool grown on a sheep. Ex. Sale of sweepstakes or raffle ticket that is yet to be
drawn.
The object is manufactured for the general market ex. Ang shoe size Manufactured Upon a special order ex. Ang shoe
mo is 6 kahit naubusan, when you ordered that size at dahil generally size mo is 14 hindi nagmamanufacture ng ganun
manufactured naman to.
Sale vs Barter
Depends on the Intention of the parties- The consideration is partly in money and partly in another thing
If the intention is not clear, it is barter if the value of the thing given has exceed the monetary consideration; otherwise,
it is a sale.
Kinds of Elements of a Contract of Sale:
A. Essential Elements
1. Consent of the contracting parties
2. Object Certain
3. Price- in money or equivalent in money
B. Natural Elements - even if not mentioned in the contract, they are impliedly included in the contract of sale
1. Warranty against eviction
2. Warranty against Hidden defects
C. Accidental Elements- may or may not be present in a contract of sale, based on the stipulation of the parties.
1. place and time of the delivery
_____________________________________________________________________________________
Class Notes for April 15, 2021:
Natural Obligations:
-Is based on equity and natural law; whereas civil obligation is based on positive law
-Four elements of an obligation:
1.) active subject
2.) Passive subject
3.) Prestation
4.) Juridical tie
-But you will be surprised that natural obligations have the same elements and requisites as an obligation;
only distinction = juridical tie in natural obligations cannot be enforced by law; while remember that the
juridical tie is the one that binds the parties to the obligation; where there is a breach in a civil obligation,
the aggrieved party may file an action in court to seek grievance to repair damage
-Natural obligation: while there is a juridical tie that binds parties to obligation; because it is based on equity
and natural law, that juridical tie is not given effect by law; you cannot go to court in order to demand
performance of an obligation; not being based on positive law, it is not given effect by law; ex.) If there is a
credit, and the credit is based on a written contract, the prescriptive period to collect is 10 years - and has
prescribed → it ceased to be a civil obligation, but remains as a natural obligation; between the parties,
there is still an obligation
-If the debtor in such example will voluntarily pay the obligation even after the 10 year prescriptive period,
the law authorizes the creditor to retain what has been paid; debtor cannot demand the reimbursement or
cannot recover what he has paid, because in Natural Obligations. if there is a voluntary performance
knowing that the obligation may not be enforced, the law authorizes the retention of what has been paid
-1311: relativity of contracts = heir cannot be liable beyond the value property he received from the
decedent; we inherit not only properties, but obligations → subject to the limitation that we can only be liable
for the extent of the value of the property inherited
-Natural obligations (1429) → heir cannot recover what he has paid; it always happens to heirs (akala nila
ang utang ng mga parents nila babayaran nila hanggang wala na parents nila; but such is not supposed to
be the case)
-1430: (remember a will must be probated in order to pass the property to the heirs; however, if the will is
denied due to the noncompliance with the formalities of the will, it cannot pass property to the heirs);
however if the heir, regardless of the fact that the will is declared as void or invalid, but voluntarily pays a
legacy contained in the will, then that payment is valid (ex.) if your father executed a will, and the will contains
a testamentary disposition giving P50k to his friend, but it turns out the will is not invalid due to
noncompliance of the formalities of the will; if the heir voluntarily pays the legacy, such is valid) - valid = it
cannot be recovered
*Distinguish from solutio indebiti = payment by mistake (there is no obligation at all); therefore, you can
recover what you have paid by mistake (because there is an obligation on the part of the person who
received the payment, to return what he has received)
*Natural obligation = there is an obligation; but cannot be given or enforced by law and the courts; however,
there is an obligation and therefore, such obligation is based on equity and natural law; if there is voluntary
payment with knowledge that the obligation has prescribed or cannot be enforced in the courts of law, then
the law authorizes the retention of what has been paid
Estoppel:
-A person’s admission or representation, is rendered conclusive upon him; upon that person making it, and
he cannot deny or disproved as against the person relying thereon
-A simple example: 1436 → estoppel by deed; deed or instrument of lease; if you sign the deed as a lessee,
a person who is the owner, you cannot later on, claim to be the owner and deny the fact that you’re a lessee,
because you have signed as a lessee; you recognize the existence of another person as an owner;
therefore, you are in estoppel
Ex.) When you have eaten everything and enjoyed the meal, you are estopped from complaining and claim
that it is not delicious
-Note: elements of estoppel:
1. From the POV, the elements must be read from the POV who is estopped
a. The person lacks knowledge or has no means of gaining knowledge about the facts of the situation
or about the circumstances of the situation;
b. Does not have knowledge and not negligent
c. No way of making himself informed
d. Relies in good faith upon the conduct or statement of another person or party
e. Because of this knowledge and due to reliance on another person’s representation, he acted or did
not act, which changed his position and that if you will be allowed to assert a contrary position, it will result
in injustice or injury upon himself
-Ex.) Estoppel by laches = there is an old law, which requires that if a member of the Muslim or ethnic
cultural communities will sell a land, that sale must also be approved by the Secretary of Agriculture and
Natural Resources; where the sale was done in the 1920s and the sale resulted in the buyer taking over the
property, and the buyer has taken possession of hte property for more than 40 years; after 50 years, here
comes the heir of the seller, claiming that the sale was void due to the non approval of DENR; SC: that heirs
of the seller is estopped by laches = when a person by his negligence or omission, for an unreasonable
length of time, he failed to assert his right where he could have, and if he would be allowed to assert his
right now, it would result to an injury, because the person who acquired right from them, has already
changed has position, which will result to his injurty and injustice upon him
-Government → cannot be raised against the government; if only it is about the negligence and omission
against the officers; if there is an affirmative act on the government, then it cannot be estopped (affirmative
act done by its officials)
-Estoppel by deed: party to a contract → parties cannot deny what they have agreed upon in the contract;
they are already in estoppel
Ex.) A and B inherited a property from the father; A, because she was still single, she does not want the
property to be registered in her name; A wants B to have the property registered under his name → resulting
trust; there is an intention between the two of them to create a trust (but not expressed in the agreement;
pinangalan lang; they did not enter into a trust agreement)
-In a resulting trust, the intention to create the trust is deducible from the nature of their agreement →
distinguished from a constructive trust
-Constructive trust: a trust created by operation of law in order to avoid a commission of fraud or injustice;
ex.) A and B are partners in a business, but B using the money of the partnership, buys a house and lot,
without the permission of the partnership = the law will interpret that there is a trust between the partnership
and B who bought a property using the money of the partnership; the trust is construed, and created by
operation of law in order to prevent an injustice as a result of the fraud committed by a party in a contract
of partnership
-Examples of implied trust → basta yung 1455 and 1456 = examples of constructive trust
-In 1448: a resulting trust is created because they bought a property and, the property however is registered
in the name of the trustee for a benefit of another person
-Case of 1449 → when a donation is made, in the name of a person (A) but the possession and enjoyment
of the property is by another person; therefore, the person holding the legal title, is merely holding it as a
trustee for the benefit of another person (ex.) pinapahawak lang itong property, pero hindi talaga ako yung
may-ari) = simply a trustee
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SALES:
(CoS = Contract of Sale)
-1458: most important provision of the contract of sale; gives not only the definition of sale, but exemplifies
the concept of the contract of sale
-Reading it critically: it provides → when a person enters into a CoS, he commits to deliver and to transfer
the ownership of a determinate thing, and the other to pay for a price certain in money or its equivalent
-A Contract of Sale, being consensual, is perfected by mere consent; does not require at the time of the
perfection of the contract, that the thing be delivered or paid; nothing needs to be done yet; they just need
to agree; it is perfected by mere consent - parties are bound not only to the performance, but also to all
consequences which are in keeping
-After they have entered into a contract of sale, then the parties are bound with respect to the seller to
transfer the ownership of the thing, and to deliver the determinate thing; that is why, while there are three
essential elements of a CoS (consent, object/determinate, price = hindi cost but price; consideration is
price); on the other hand, CoS has natural elements: they are the implied warranties against eviction and
implied warranties against hidden defects; because, yung eviction, why is it a natural element? = because
even if they are not stated or agreed upon the CoS, and in any sale, there is an implied warranty of eviction
included in the agreement → 1458, that is your commitment as a seller which is to transfer the ownership
and to deliver the determinate thing; if you cannot transfer the ownership of the thing that you have sold,
then you violate the warranty against eviction; yung binenta mo hindi ka may-ari, this means that the buyer
will be evicted from the property - siempre, may problema; you violate the warranty against eviction
-Warranty against hidden defects = while it is true that in economics (caveat emptor); but the truth is in law,
there is a warranty against hidden defects; caveat emptor applies only to defects that are patents (that you
can discern or can see); but defects that are hidden = if you sell something and there is a hidden defect,
you can be liable for violating implied warranties → considered as natural elements even if not agreed and
not provided upon
*yung dalawang implied warranties kahit hindi ninyo nakita sa kontrata; because they are implied warranties
in a CoS (eviction and hidden defects) → it does not have to be agreed upon; they are included in every
CoS
-Exceptions:
1. Sale on as is where is (second hand articles) → wala siyang warranties
Characteristics:
1. Consensual → perfected by mere consent (distinguished from a real contract = which is perfected
upon delivery; like deposit, mutuum or pledge; or a contract of donation (not valid until complied with
formalities)
2. Onerous → one of the elements is the price; when you say onerous, to acquire a right and ownership,
valuable consideration must be given; valuable consideration in a CoS is the price
3. Commutative → exchange of almost equivalent prestations; object and price are almost equivalent
a. Exception: aleatory contract of sale = remember in sale, a hope or expectancy may be a proper
object of CoS because in sale, objects capable of potential existence may be a proper object; pag sinabing
objects, it may either be future goods, or it may also be hope or expectancy
b. Future Goods (goods that are to be manufactured; fruits that have yet to grow) → emptio rei
espiritei
c. Emptio spei = objects capable of potential existence (referring to hope or expectancy) - you can
buy hope or expectancy, such as a lotto ticket; such ticket is not equivalent in value to the P25 you are
paying for the ticket; but it is an aleatory contract of sale and a hope or expectancy; that hope has the
possibility of coming into existence; that hope or expectancy is possible that your hope of winning P250
million; there is a possibility that your P25 will turn into a P250 million; but the law prohibits an object - it is
illegal to sell a vain hope or expectancy; and such CoS is void because when you say you are selling vain
hope or expectancy it is like selling a lotto ticket that has been drawn (paso na kasi na-bola na) = there is
no possibility of the lotto ticket of getting a price, because it is a vain hope or expectancy
4. Principal contract → does not depend on any contract to exist
5. Nominate contract → given a name and designation; provisions governed under the NCC
-In a CoS, do not forget that while in a CoS, you can sell something that does not yet exist; but subject to a
condition that at the time you deliver, that thing will exist and that you will have the capacity to transfer
ownership over that thing; unlike in a contract of donation or wills, in wills and in donation, you cannot
dispose a property that you don’t have
-Sale is not a mode of acquiring ownership → the mode of acquiring ownership in sale is tradition or delivery;
if you will note, under 1458, it is obvious that by the CoS, one of the contracting parties shall deliver a
determinate thing → it is implied and may be deduced therefrom that generally speaking in sale, the
ownership is transferred once the thing is delivered; prior to delivery of thing, the buyer only has a personal
right which is to demand the delivery of the thing; once the thing is delivered, the buyer now acquires a real
right; becomes an owner of that thing (general rule ito) (there are exceptions under the CoS)
-Absolute or conditional: If the sale is not subject to a condition, then the sale is absolute; if the sale is
subject to a condition (ex.) pacto de retro sale = giving the seller the right to redeem within 5 years; therefore,
the sale is conditional)
-Note: Contract to Sell → the payment of the price is a positive suspensive condition; on the other hand,
there is a contract of sale subject to a resolutory condition (in a contract of sale, the ownership is transferred,
the title is transferred, but the payment of the price is a resolutory condition; meaning, if the price is not paid
in full, then the seller may demand the rescission of the contract; without the contract being rescinded, the
ownership remains with the buyer; on the other hand, in a contract to Sell, the payment of hte price is a
positive suspensive condition, and in case the price is not paid, then the obligation of the seller to deliver
the thing, or to deliver the title, does not become effective and binding; seller will not be required to execute
a deed of absolute sale
-If you buy a condo, the developer will normally require you to sign a contract to sell; will only execute a
deed of absolute sale or transfer to you the title in your name after the full payment of hte price; on the other
hand, instead of entering into a CTS, you applied for a loan with the bank, and with the loan that you applied
in the bank is approved, the bank will pay the developer in full; the full purchase price, the developer will
execute a deed of AS, and will transfer it in your name; you deliver the title to the bank and execute as a
collateral or security to the loan, a deed of mortgage (you will mortgage the property that you bought with
the bank and you will be paying the bank the installment) → if unable to pay the loan: bank may foreclose
the property and cancel, and sell the property by auction = this is similar to what will happen in the event
you buy a property from a friend, and the payment of the price is a resolutory condition; your friend will have
to file an action for rescission of the contract, because you violated a principal obligation which is the
payment of the price; The power to rescind obligations is implied in reciprocal ones (due to failure to comply
with the obligations agreed upon in the contract)
-Conditional din yung sale of a property if the property is capable of potential existence → future goods;
sale is conditional in nature; subject to the condition, that the property being sold, you will be able to
manufacture or fruits that are sold, will really be there at the time you agreed upon or at the time of the
agreement
-1477 (VIP) → when we talk about delivery (ways of delivery of a contract of sale); delivery can be actual
or constructive
-1477 → actual or constructive
-Actual = 1497 (placed in the control and possession of the vendee = considered sold and delivered)
-Constructive =1498; Generally speaking, the execution of a public instrument will have the effect of a
delivery
-Note: while the execution of a public instrument has the effect of delivery; may give way to the reality that
even if the public instrument is executed, but if the transferee could not possession over it in reality due to
someone being in adverse possession of the property → there is no delivery subject to the CoS (traditio
longa manu)
-Traditio Symbolica (delivery of the key) = delivery of personal property
-Traditio consituto possessorium (used to be the lessee, and later on become the owner of the property)
-Traditio brevi manu (used to be the owner and later on you transfer the ownership, but remain in the
property as the lessee)
MTE coverage: Obligations and Contracts, Natural Obligations, Estoppel and Trusts
4/19/2021- Caryl
CIVREV – SALES
When we prepare deed of sale, we specifically indicate whether or not that deed is deed of conditional,
absolute or contract to sell.
Most common is contract to sell. When we buy condo, if we do not pay the purchase price then there will
be turnover of unit.
Remedy of the seller: is to recover the property if the property has been turned over. Otherwise, there will
be no action.
1459 – licit
Case of future goods referring to goods to be acquired by the seller after the perfection of the contract.
The contract of sale is subject to a condition that the goods will be available.
In the case of a lotto ticket, what you’re buying is an existing good. The ticket is an existing good.
What is prohibited is a sale of vague hope. Example: If the lotto ticket has been drawn.
You cannot sell a future inheritance but you can sell hereditary rights because in the latter, the rights are
already vested even if the property is still undivided among the heirs.
When it comes to price, price is an element in a contract of sale. The price must be certain at the time of
the perfection in order to be valid. The price must be real and not simulated. The price must be paid in
money or its equivalent.
1355 – Lesion or inadequacy of the price, will not invalidate the contract of sale. But take note of the
ramnifications. If the price is absent, the contract of sale is void for absence of consideration.
2 instances of lesion:
If the minor, incompetent suffers a lesion more than ¼ of the property, the contract of recissible.
Cachola vs. CA
- Mere inadequacy of the price will not invalidate the contract of sale.
- But if the price is so low as it’s shocking to the conscience, it will not validate the contract of sale.
Navarra vs. Planters Dev Bank, the SC said: Befrore a valid contract of sale, the agreement and manner of
payment must first be established because it affects the consent of the contracting parties.
1475 ***
1478 – Exception to 1477: conditional sale or contract to sell (ownership will not pass/transferred until fully
paid)
1479 (1) there is perfected contract of sale. So under 1324, case of option contract.
If the seller offers to sell, then the buyer is given notice of withdrawal. Otherwise, he will be abussive of his
right under Art. 19.
Option contract -> option period -> option money vs. earnest money
If there is no option money, option period may be withdrawn anytime. Otherwise, liable under Art. 19.
Capacity to buy and sell then cases sa 1484 and its variations.
1489
In case of incapacitated person under 1327, (necessaries are sold.) Not voidable
1490 – prohibition
If the thing is generic, the loss or destruction, will not extinguish the obli.
3rd column: The thing is lost after the perfection but prior to the delivery. – GR is the responsibility depends
on stipulation of the parties in the contract. In the absence of stipulation, the seller bears the loss.
Remember 1458
4 Column: After the ownership is already transferred, who bears the loss? Res perit domino.
th
1484 cases
Contract to sell – owner bears the risk of loss because the ownership is reserved before the payment of the
full purchase price.
________________________________________________________________________
-Under 1458 → the last time we made it clear, that a CoS is consensual; on the other hand once the contract
is perfected, it creates a reciprocal obligation; and, it is considered as a bilateral obligation; reciprocal
obligation: seller → to transfer the ownership and deliver a determinate thing; buyer → pay a price certain
in money or its equivalent
-Note: this obligations of the seller to transfer the ownership and to deliver the thing (object of contract), is
covered by the implied warranties against eviction and hidden defects (implied - even without the agreement
or CoS stipulating on them, they are included in the CoS; subject to exceptions)
-Second paragraph of 1458: CoS may be absolute or conditional; when you absolute, you try to recall in
obligation - it is akin to a pure obligation → when it is pure, it is not subject to a condition or a period = it is
demandable at once; it may either be suspensive or resolutory condition; period: either be suspensive or
resolutory
-Note: if the obligation is subject to condition prior to the fulfillment; there is no obligation; on the other hand,
the obligation is merely subject to a period; purpose of period is to suspend the demandability, but there is
no obligation in this case
-Effect of resolutory condition: in both cases, the obligation is immediately demandable, but once the
condition is fulfilled, then it will be extinguished; the obligation is demandable already, but upon the arrival
of the period, it will also be extinguished
-Contract to sell: the agreement; there is a perfected contract between the parties, but mostly in a CoS, the
obligation of the seller is subject to a positive suspensive condition; full payment of the purchase price, so
that if on the other hand, the full purchase price is not yet paid (ex.) period of fix months) what happens to
the contract to sell?
-A and B entered into a CoS for a condominium; subject to a positive suspensive condition (full payment of
purchase price within 6 months); what happens if the full purchase price is not yet paid within the 6 month
period agreed upon? → because the full payment of the PP is a positive condition, if not fulfilled or complied
or not performed by the buyer, the contract to sell will expire; if it expires, there is nothing that the seller is
required to do, because the contract will expire functus officio
-There are situations where the seller has already delivered the possession of the property; ex.) the condo
unit is delivered by developer, upon the payment of equity, but the installment or subsequent ones have not
been paid by the buyer, and the contract to sell has expired; then developer is not required to execute a
deed of absolute sale; if the full PP is paid, then seller, is required to execute a deed of absolute sale and
to deliver the CTS; if the full PP is not paid within the agreed period, and buyer defaulted in payment of
installments, the contract of sale will expire; remedy of seller is to recover the property by filing an ejectment
suit against the buyer; on the other hand, if it is a contract of sale, then it is immediately executory but it is
subject to a resolutory condition, that the PP is not paid, because there is a cos that is executed, then the
remedy of the seller is rescission → there is a breach of contract; on the other hand, in a CTS, there is a
breach, but the non-payment of PP would not extinguish the obligation of the seller to execute the deed of
absolute sale; 1458 → CoS (Contract of Sale) may be absolute or conditional; either absolute or CTS
(Contract to Sell); but developers are wise enough not to execute the CoS prior to the payment of full pp;
unless a loan with the bank is done (execute a deed of mortgage of property with the bank) → obligation of
seller is to pay the bank of the installments of the loan; deed of mortgage is the remedy of the bank in the
event that the buyer fails to pay the installments agreed upon
-Remember: three essential elements of a contract → consent, determinate object and the price (in money
or in equivalent); consent = we also talk about that the manner of payment of hte price goes into the consent
of contracting parties; if the seller has specified the manner of payment of price, it must be complied with
buyer, otherwise, there is no agreement or consent between the parties
-With object = apart from the fact that the object should be licit, the good thing about the CoS, the object
may include future goods and existing goods; when you say future goods (emptio rei spirit) → a case of a
conditional sale; because when the object is a future good, it does not yet exist at the time of the perfection
of the contract, however, it is subject to a condition that the goods will come into existence; on the other
hand, one of the characteristics of a CoS is that it is commutative (exchange of goods or things of equivalent
values): exception → aleatory contract of sale: emptio spei → it is a sale of existing goods,but it is a sale of
a hope or expectancy (ex.) lotto ticket); what you’re buying is a change or something that upon a happening
of a contingency will become greater; empio ispei (it is a hope or sale of existing goods; buying a lotto ticket
→ buying the existing good or the ticket itself; but subject to contingency that it might win); vain hope or
expectancy = not a proper object of CoS due to presence of fraud
-Future inheritance; not a proper object of Contract of Sale; hereditary rights however, may be a proper
object of Contract of Sale; distinction of FI (Future Inheritance) and HR (Hereditary Rights) → FI: on the
grounds of public policy, may not be a proper object of CoS (merely inchoate); HR: the rights of an heir,
although his hereditary rights is still undivided, but it is vested upon him and may already be transferred to
another person (parang sale of an undivided property)
-Price: must be certain at the time of the perfection of the contract; must be real and not simulated; if it is
simulated, and it is absolutely simulated - the CoS is void; if it is relatively simulated, it will only bind the
parties to what they have agreed upon, unless the purpose is contrary to law
-Generally speaking, lesion or inadequacy of price = will not affect validity of contract
-However: vitiation of consent → the contract is voidable
-1381: where there is lesion suffered by an unemancipated minor, absentee, or incapacitated where the
value of the property suffered is more than 1/4th of the value of property → contract is rescissible
-Note: Cachola vs. CA → the SC said: while it may be true that generally speaking that lesion will not affect
the validity of CoS; where the price is so low as to be shocking to the conscience, sale may be set aside
-Note: price may be paid in money or its equivalent; on the other hand, if it is a thing in exchange with
another thing = considered as a barter
-1477 → *The general rule with a CoS → the ownership of the property sold, will be transferred to th buyer
upon the delivery of the thing; prior to the delivery of the thing, the buyer does not have yet a real right over
it; 1164 → creditor has right to fruits of thing, but no real right over it until the thing is delivered to him
-1478 → exception: when the CoS may be absolute or conditional; there is no transfer of ownership until
full payment of the PP; this is an exception → the parties may agree that despite the delivery, the ownership
of the unit is not yet owned until the full payment of the purchase price
-Note: option money is not synonymous with earnest money (forms part of purchase price); OM is just a
reservation fee; gives you a period and an exclusive right to have a limited time to decide; if you will decide
within 30 days for example, then you will have to bring your earnest money or downpayment o paunang
bayad sa equity; but that is an earnest money because it forms part of the purchase price; reservation fee
is an OM, does not form part of the PP; but it is a separate consideration in a separate contract, called an
option contract
-1484, 1485, and 1486 (VIP) → already amended by Recto Law (sales of personal property by installment
→ pinsan nito is the Maceda Law - Realty Buyer’s Installment Act)
Requisites of 1484:
1. Object is personal property (Amended by Recto Law)
2. Installment: pag bumili tayo ng washing machine sa SM, the usual question of the saleslady “ano po
yung mode of payment? Cash, installment, or straight sale?” → pag cash, ayaw nila, gusto nila
gumagamit ka ng card; pag installment it means: ang bayad mo, for example, 6 equal tranches; pag
magdown ka ngayon or ang balance mo after 6 months = hindi ito installment
a. Ang covered ng 1484: 12 mos. To pay or 6 equal installments
3. 3 options on the part of the seller when confronted with a situation when the buyer is not able to pay
the purchase price:
. Kahit isang installment na hindi ka pa nagbayad, pwede ka mag-demand ng performance of the
obligation; on the other hand, (2 and 3), before you can cancel and foreclose, kailangan default siya in
paying two or more installments
a. On the other hand (the three are alternative options) → they are exclusive and not cumulative; if you
choose one, you forego the others; they are alternative remedies
b. Paragraph 3: if you buy a car, and you are not able to pay 2 or more installments, and the bank for
instance, foreclosed the chattel mortgage on the thing, then he shall have no further action against the
purchaser; pag finorclose mo na yung car, wala ka nang utang (ibigay mo na) → this is the Recto Law; hindi
pwedeng that the mortgage has been foreclose and you still have a balance and you are liable (hindi na:
hindi ka na liable; no further action against the purchaser against the balance)
-1485: applicable din ito sa lease with option to buy; yung umuupa ka tapos yung upa mo will form part of
the PP (it is like an installment or akin to installment siya); to avoid the scurting, the prohibition of Recto
Law
-1486: yung paragraph 2 ng 1484 → cancellation of sale; nagkaroon ng rescission; give rise of the obligation
of the parties to return to each other what they have received (restoration under status quo)
-Generally speaking: if you cancel, magsosoli din siya ng binayad mo; ibabalik mo rin yung washing machine
then the sales person will return the money; but subject to the exception of 1486 → stipulate na hindi dapat
nagsosoli ng bayad, regarding forfeiture (installments or rents paid shall not be returned and shall be valid;
for as long as it is not unconscionable)
Chapter 2:
-1489 = 194 of the Family Code (definition of support); when a party enters into a CoS he must be
capacitated
-Unde the section of voidable contract: effect is if the party is incapacitated, the contract is merely voidable
(valid until annulled) → exception: necessaries are the subject of sale; then this sale is not voidable,
because here, the buyer cannot ask for the annulment of contract of sale, because the object is necessaries
for life and falls under the exception
-Even if the goods are sold to minor or other person without capacity to act, necessaries are part of the
exception
-1490: H and W cannot really sell to each other property (as a general rule)
-Case of Calimlim Canulias vs. Fortun → it applies to common law spouses; the prohibition applies to
common law spouses; exception: when the spouses entered into a marriage settlement where the property
relation is governed by complete separation or during the marriage, they were able to obtain a judicial
separation of property (involuntary or voluntary; for as long as it is approved by the court)
Chapter 3
(Risk of Loss due to fortuitous event; who will be liable and responsible in case the object of the
sale is lost)
-Note: if the thing is lost after the perfection but before the
delivery: the responsibility will depend upon the stipulation of
the parties; in the absence of stipulation, then you apply res
perit domino (which means that because the ownership is not
yet transferred prior to delivery of thing, then the seller bears
the risk of loss)
If after the Then the buyer will bear the risk lost (ownership is already
ownership is transferred)
transferred, the
thing is lost
*Kapag bibili ng bahay or condo: part of the CoS, or when the house is mortgaged → kasama ang pag aaply
ng mortgage redemption insurance; so that if the property has been raised by fire, instance has been, then
the insurance will pay the balance of the loan subject of the mortgage
*kasama sa premium yung payment of insurance
-CoS and is subject to a resolutory condition, the payment of the PP; not able to pay in full the PP: remedy
→ performance to pay the PP + interest + damages or demand for rescission (1191) (you failed to perform
the reciprocal prestation)
-perfection of CoS will give rise to the reciprocal presentation of the seller and buyer to perform their
respective obligations
4/21/2021 - Caryl
The Recto Law amended these provisions. The Recto Law applies to:
1. Contract of Sale
1485 - Also applies to contract of lease with option to buy.
2. Contract of Lease
It applies to personal property. The price is payable on installments. The sale is payable in straight terms wherein
there is initial payment and the balance is payable on a future date.
Under 1484, there are 3 paragraphs and as referred to remedies of the seller.
(Alternative remedies) - If you choose 1, you forego the others.
1. A failure to pay 1 installment, would already give the seller the right the exact fulfillment of the obli
2. - 3 . two or more installments of failure to pay.
1484- If you choose to foreclose, you shall have no further actions to recover any unpaid balance of the purchase
price.
If the bank get your car, they cannot anymore collect the unpaid balance.
Foreclosure on chattel mortgage (1484-86) vs. Replevin
Recto law does not apply to a contract to sell ; it must be contract of sale.
Should the vendees fail to pay two or more ins. When a contract is rescinded, the contract will become void.
The parties will return what they have received.
In Recto Law, if the seller will opt to cancel, there will be no requirement that the cancellation must be in notarial
act. But in Maceda law, it must be in notarial act with respect to the cancellation. With respect to Maceda law,
it applies to transaction involving the sale of real property or financing of real estate including residential
condominium. But it does not include sale to tenants under the Agrarian reform laws. 2nd, commercial bldgs,
lots and industrial lots also not included. Under the Maceda law (realty buyer’s protective act), if the buyer has
been paying the price on installments for less than 2 yrs, he is not entitled for refund if he cancelled it but will
be given a grace period of 60 days but no refund. It is like a penalty clause. If the buyer pays for more than 2 yrs,
he will be entitled to an additional 30 days. The seller will forfeit 10% of what he paid.
CHAPTER 4
Talks about the obligations of the vendor
1495 - The obligations of the vendor
1. To transfer ownership
2. To deliver
3. To warrant - encircle
The obligation of the vendor to warrant is a natural element and may be waived. The buyer may waive the so
called implied warranties imposed by law.
1497- Manner of the delivery (actual or real delivery) -> mode of acquiring ownership is tradition.
559 - Acquires no better title if he does not have any right with respect to the property.
Exceptions:
1. Sale made by a registered or apparent owner in accordance with registration laws.
2. Sale sanctioned by judicial authority (auction)
3. If you buy it from the merchant stores (SM/Lazada) actually selling
4. 1596 - if the seller has a voidable title (if he is not aware of the defect of the title; without notice)
With respect to immovable property - requires registration. If he was the second buyer but first registered the
prop, then he acquires better title. If none, the one who can present oldest title but it must be in good faith.
The both sales must be valid and it will apply only and covered under torrens title.
Double sale must be same seller. In the same manner it must have conflicting interest.
With respect to personal property - It is raised to possession because in 559 possession alone is equivalent of
transfer of ownership.
2 kinds of warranties
1. Express - If it is included in the agreement between the parties; natural tendency is to induce. Warranties
is akin to fraud if not truthful.
2. Implied - Is imposed by law. Law provides for these warranties even if the seller was silent about it.
Kinds:
a. Warranty as to the seller’s title (eviction)
• The seller must be the owner and has the capacity to transfer ownership to you. Will give
you the title over property.
• 1557
• 1549 = you will be evicted as a result of a final judgment
• 1558
• 1571 **** 6 months prescriptive period against hidden defects
• 1577
Warranty is a representation or statement with respect to character or quality of the goods. The person selling
must make a representation of the quality of the product.
Next meeting
Remedies of unpaid seller, redemption like pacto de retro.
Syllabus - wait for cases
-1498: execution of a public instrument = refers to an immovable property; if it is registered, then coupled
with registration + public instrument
-1499: by mere consent or agreement = traditio longa manu (by mere consent or by mere pointing at it)
-Second paragraph: traditio brevi manu → lessee turns into an owner
-1501: quasi-traditio
-1477 and 1478 → GR is under 1477 (ownership is transferred when the thing is delivered by the seller to
the buyer)
-Exceptions:
1. 1478 = there is a condition that despite delivery, the ownership will not be transferred until the full
payment of the price; it happens in a contract to sell or a reservation of ownership despite delivery
2. 1502 = sale or return → pwedeng isuoli yung floor polisher kahit dineliver; or delivery on approval,
trial or on satisfaction (no transfer of ownership); sale or return there is transfer of of ownership, but
the ownership will vest on the seller if the buyer will decide not to push through with the purchase of
the thing - part of the marketing strategy (may delivery pero pwede naman ibalik - ex.) within 20 days
you try the product); benta then the buyer may re-vest the ownership from the seller after a certain
period of time
a. Approval, trial or satisfaction: only a transfer of temporary possession: pag nagustuhan, then within
a certain period tapos hindi sinauli, babayaran na yan
1503 - the delivery to shipper is delivery to buyer (general rule); unless, there is an implied reservation of
ownership (implied - because it is not expressed in the bill of lading)
-Bill of Lading → only one of the variations nung tinatawag nating document of title
-Document of Title: (nothing but a proof of possession or control of the goods); yung may hawak ng
document of title, it shows that he has control or possession over the goods referred in the DoT; it is a
negotiable document of title, if based on the DoT, the goods are deliverable to the bearer or to the person
named in the bill
1. Negotiable → the goods therein may be delivered to the bearer (kung sino may hawak ng DoT, the
goods may be delivered to that person; or to the order of the person named in the negotiable
document of title); that DoT, may be negotiated either by deliver of that title, or by indorsing (pirma)
+ delivery of the document
2. Non-Negotiable → deliverable to the depositor; and not to the bearer; the goods represented by that
non negotiable document of title, must be delivered to the depositor or to the person mentioned in
such title (hindi pwedeng magpa-lipat lipat)
3. Other forms: warehouse receipts, quedan
-Negotiation: negotiated through deliver of the document of title or by endorsing that document of title +
delivery of the document of title
We will just read this over (through a reviewer); just know the concept of the Document of Title
Remedies of the Unpaid Seller:
-1524: this is the general rule → CoS generates reciprocal prestation; pag tanga ka, mag-deliver ka kahit
walang bayad
-If you are the vendor, you are not supposed to just make a delivery, unless you are paid of the price
-If there is an agreement with respect to when the person is going to make the payment
-1525: (what constitutes an unpaid seller) → hindi pa nababayaran ng buo (when the whole of the price not
paid or tendered) - kung partial pa lang natanggap mo, you are an unpaid seller; or when the check you
presented was dishonored; but if you accept the check, prior to the due date of the check (there is an implied
waiver that you will not do anything until the due date of the check and until the check is presented, paid or
dishonored; there is nothing that you can do; any action in the check shall be held in abeyance - clear under
the rules on payment, under 1249 (3) - suspended ang lahat ng pwedeng gawin once you accept the check;
you have to wait until the due date of that check or has been dishonored; in the meantime, any action
derived from the original obligation shall be held in abeyance, dahil tumanggap ka ng cheke)- there is a
danger when you accept a check and you fail to present the check to the drawee bank within the 6 month
period, you presented it thereafter, then the debtor can claim that it is because of your fault that the check
has been dishonored, and so far as he is concerned he has paid the obligation
-What are the remedies of the unpaid seller? → 1526; which means, if generally speaking, if you are not
paid, you have the right not to make a delivery; even if the ownership is transferred, if you are not yet paid
in full, as the unpaid seller, you have these rights under 1526
1. Right of lien
2. Right to rescind the sale
3. Right to resale
4. Right of stoppage of intransit
-1527: Right of Lien → when the law says this, you have the right to retain; not required to make the delivery;
what are those instances?
1. Ang usapan ninyo is cash, pero hindi pa nagbabayad ng cash, walang usapan ng utang; then you
can retain
2. Usapan kayo na utang yan, but the term has expired and is supposed to pay the seller
3. Kapag nabalitaan mo na tumalbog yung cheke niya (insolvency)
-1528: part delivery; and there are indications that you should not proceed with the delivery of the rest, then
you may choose not to deliver the rest of the goods
-1529: instances when the unpaid seller loses his right of lien; if he loses his right of lien, then he loses his
right to retain
-1530: right of stoppage in transitu; grounds for exercising the rights in transitu = if the buyer becomes
insolvent (kahit pinatakbo mo na siya sa lalamove, pwede mo pang tawagan yung lalamove and give notice
not to hand the goods to the buyer → the goods are still in transit, prior to the goods being handed to the
buyer)
-Normally, the goods are in transit: when they are in the possession of the carrier, for the purpose of
delivering to the buyer
-How do you exercise stoppage in transitu? = you take actual possession of the goods (ex. Kung nasa pier
pa siya, bawiin mo), or you give notice to the claim to carrier
-Third remedy: right of resale → 1533; you can exercise this right (two instances):
1. You have a lien on the goods (you still have possession of the goods)
2. If you have exercised stoppage in transit, then you have possession and control of the goods; and
therefore you can exercise this right
a. If the goods are perishable → kailangan i-resale (1533)
b. Where that right of resale is agreed upon
c. Right is expressly reserved on the agreement (for re-sale)
*if the item is not yet with the carrier, you cannot exercise stoppage in transit because you still can avail the
right of lien (because you have the item under your possession)
-Right to Rescind: the power to rescind obligations (1191; general rule → the power to rescind obligations
is implied in reciprocal once; a CoS creates reciprocal obligations); 1191, applies to a CoS; however under
1191, the decree of rescission will have to be issued by the Court (you go to court if you want to rescind);
unless, there is an automatic revocation clause (expressly provided in the agreement, that in case one of
the parties will fail to comply with the performance of his prestation, then the other may automatically
rescind); however, in sale, in a CoS, (1534)
-719: rules tungkol sa lost and found → pag may napulot ka, kailangan isurrender sa proper authority,
dumaan sa publication, then pag hindi sumipot yung may-ari then that’s the only time you’ll be able to
acquire the ownership of the thing
Double Sale:
-Real property or estate → then remember, the first rule is the first registrant (person who registers it first in
good faith), acquires the title over the others; if no one has made registration, then the first who acquired
possession will acquire ownership or title over the others who are not in possession of the property; if no
one is in possession, the first one who presents the oldest title → all cases: person claiming ownership,
must have done these things in good faith; otherwise, even if you are the first to register the sale, but when
you registered it you are aware that there was a prior sale, then knowledge of prior sale is equivalent to
registration, and therefore because you registered it after you have been aware of a prior sale, then that
person where the sale you have acquired knowledge ahead of registration → will have a better title
-Don’t talk about a DS, unless seller is the same person (the seller should be the same person, not two
persons making the sale); two buyers must have bought the property from the same seller
-Both sales must be valid
-Note: the rule in 1544 does not apply when the property is not registered under the Torrens System of
Registration; Registration is under Act no. 3344 (walang epekto iyan; not effectively a registration that will
give the buyer a title over the property; hindi siya yung first registrant)
-If the condition is in the nature of a promise: then the buyer for instance, may treat the condition as a
warranty and sue the seller for breach of warranty
-1549, 1557 and 1558 (VIP) (under warranties against eviction) → 1548 (kapag nag double sale si vendor,
he can be sued for violating the warranty against eviction; kapag binenta sayo na nabenta na or naunang
nag-register yung second buyer = then you are ousted from the property, and due to this, you can sue the
seller for the breach of warranty against eviction)
-Before invoking the warranty against eviction: you must be ousted through final judgment; no need to
appeal; just need to lapse the appeal and the judgment is final and executory; and kailangan nasama yung
seller sa suit; kailangan maka receive ng summons ang vendor of the suit that ousted you from the property
-1571 and 1577 (40 days and 6 months rule) (VIP) → for hidden defects
HW: cases pertaining to 1544; tatapusin na ang sales (wrap up); pacto, conventional, legal redemption,
extinguishment of sale (equitable redemption or equitable mortgage, different kinds of legal redemption)
also cover lease.
------------------------------------------------------------------------------------------------------------------
4-26 (Caryl)
1526*****
Remedies of unpaid seller
1. Even if the ownership has been passed, the seller may still exercise these rights.
1528- You can choose not to deliver the rest even if there is already partial delivery.
1529
1. -> 1503 = talks about exceptions to the rule of delivery to the carrier will not have the effect of delivery
to the buyer.
1530 - insolvent
2 ways:
1. Retake possession
2. Send notice to the carrier
If he proceeds with the delivery, he will be in the situation that the seller will not be paid.
1531-
Bailee-Depositary
Pier - Arrastre operator
Until you have not paid the goods in the arraste op, you cannot claim it.
Bailee is not necessarily the consignee.
1532- The unpaid seller may exercise his right of stoppage in transitu; giving notice of his claim to the carrier
or other in whose possession the goods are.
1; right of lien
2; In transitu
3; sale
You have retaken the possession of the goods;
Goods are perishable, right of resale is reserved expressly by the contract of seller, buyer does not pay for
unreasonable time.
Extinguishment
Conventional redemption and legal redemption and conventional subrogation
Conventional - resulted from an agreement.
1603 *****
Pactum commisorium prohibits automatic transfer of ownership as a payment of an obligation.
Dacion en Pago, there is a transfer of ownership. The borrower is the one proposing.
Facultative obligation, the obligor has a choice whether to substitute it with another substitution.
1616- ****
The price of the sale
The expenses of the contract which is necessary and useful expenses that were introduced by the buyer
Extinguishment of Sale:
-1600: simply says that; remember we have taken up most of the modes of extinguishing obligations
(payment, remission, compensation, confusion, fulfillment of resolutory condition); if you will note in sales,
we have this so-called conventional or legal redemption
-1601: can you give me an example of a sale that has a conventional redemption included?; conventional
= the redemption is a result of a voluntary agreement between the parties; vs. legal redemption = right is
provided by law; in conventional redemption however, you will have to distinguish it with option to buy
-Option contract → generally speaking, when the seller and the buyer are in face to face, then the
prospective buyer will have to decide if he is buying it; otherwise, the offer will expire
-On the other hand, if the seller includes an option to the buyer within which to decide, it is an option (buyer
is given the exclusive right to decide whether or not to buy the property or not); under the Civil Code, a
simple option without a consideration will not result in a contract (option must be supported by a
consideration; the seller in this case cannot withdraw the offer, until the expiration of the period given to the
prospective buyer to decided WoN to purchase the property) → vs. conventional redemption = otherwise
referred to as “pacto de retro sale” → sale with conventional redemption; in the same contract of sale, an
agreement which is known as conventional redemption (collateral agreement) is included
-Sale with conventional redemption → included in one and in the same agreement
-Simple option contract → it must have a consideration separate and distinct from the purchase price
-Conventional redemption: there is a prescriptive period within which the seller or the vendor may redeem
the property; if there is no express term, the period under the law is four years; while if there is an agreement
with the period of redemption; the law provides that it could not exceed 10 years
-1602: you will be surprised that 1601 and 1602 are directly related; pacto de retro sale is normally used as
a subterfuge or a disguise to hide an agreement between for instance, a rich man will lend to a farmer, and
if the farmer keeps on borrowing money from the rich man, the rich man will not be contented with a promise;
instead will require the farmer will sign a pacto de retro sale; the farmer who keeps on borrowing would
want that he continues to farm on his land; one of the indication of an equitable mortgage under 1602(2)
when the vendor remains in possession as lessee or otherwise → selling the property to someone; the
buyer will not be contented unless he takes possession of the property
-Pacto de retro sale used as a disguise to hide the true agreement (which is the equitable mortgage) →
required to sign a pacto de retro sale; the truth is, the reason why the farmer is required to sign the pacto
de retro sale, this agreement is to avoid the prohibition against pactum commissorium
-Pactum commissorium → where there is the mortgage, and failure to pay of the mortgagor, the mortgagee
automatically becomes the owner of the property; this is prohibited; you cannot do this is mortgage and
pledge (law requires that when the mortgagor is in default of his loan or obligation, then he has to follow the
procedure - which is to foreclose the mortgage and conduct a public auction to get the payment of the
proceedings); otherwise, becoming an automatic owner of the property amounts to pactum commissorium,
which is illegal
-Distinguish: pactum commissorium vs. dacion en pago (1245) → remember in dation in payment (1245),
the borrower, when the debt becomes due, he does not have the money to pay his monetary obligation
offers to sell his property and as payment for his monetary obligation - not a pactum commissorium, because
here there is no automatic transfer of ownership; borrower offers to sell his property with the loan as the
consideration; normally the situation with respect to central bank or the PDIC and the smaller banks like
rural banks (while they borrow money from bigger banks and when they could not pay their obligations, they
offer to transfer property by way of dacion en pago) - not a mortgage (no prior REM entered into); in pledge,
it is prohibited that in case of default, will become automatically the owner of the property; dacion en pago
not an automatic transfer of property
-Facultative obligation ;where the obligor has the discretion to substitute an original prestation with another
prestation it is also not a PC because there, the obligor has the discretion on the other hand, in the case of
PC, the mortgagee will automatically become the owner of the property without going through the process
of foreclosure and auction
-1602 (1) → indication that it is an equitable mortgage; case of a loan with a mortgage
-(2) → explained earlier
-(3) → very unusual for the buyer, if the buyer will keep on extending or entering into a new agreement after
the seller has defaulted
-(4)
-(5) → again it is unusual; buyer of the property will be the one responsible or liable to pay for the real
property tax; in the case of equitable mortgage, where the seller did not transfer ownership but was merely
used to simulate the equitable mortgage making it appear that there was a sale, then the real intention of
the parties is to hide their true agreement
*Equitable mortgage → although it lacks some formality, form of words or other requisites prescribed by
statute, it shows the true intention; security of a debt which is actually their true agreement
-Case of Pacto De Retro Sale, the buyer gives the seller or vendor a certain period within which to redeem
the property; in case he fails to redeem within the period agreed upon, then the buyer automatically
becomes owner of the property
-Sale of conventional redemption → an obligation subject to a resolutory condition; period expires without
fulfillment of resolutory condition, then the right of vendor is forever precluded from exercising the right to
redeem the property
-1603 (VIP)
-Remedy under 1605 → so reformation of instrument is one of the remedies available to the vendor,because
in this case, the parties have agreed but the instrument did not reflect the true agreement between them
Legal Redemption:
- 1619 → so, legal redemption is provided by law
-1620 → co-owners; if there are three siblings in the family and they inherited property from parents, and
the three siblings are the undivided co owner of property; if one of them will sell his undivided
portion/ownership, the others may exercise the right of redemption; the two of them will decide to exercise,
then they will have their right to redeem will only be proportionate to their own shares; if they own ⅓ each,
and ⅓ will sell, then they are all entitled to ½ right of the ⅓ that was sold of the undivided property that was
sold by one of their siblings
-Note: here, they can only exercise the right of legal redemption if the buyer is a stranger; when the portion
is sold to another co-owner, the right of legal redemption does not arise because it is not a new owner (he
is not a stranger); if the buyer is one of the three siblings, then the right of legal redemption may not be
exercised (no right of legal redemption)
-1088: what we are talking about in this article is hereditary rights (distinguished from future inheritance -
not a proper object of a contract of sale); the other heirs may exercise the right of legal redemption in HR
-1623: pre-emption (exercised before the sale; and there is no rescission of sale because no sale exists;
action is directed against prospective seller; effect is to prevent the birth or perfection of the contract)
-Note: in order to be valid, or to bind the co-owner with the right of redemption or pre-emption, the notice
must come from the vendor or prospective vendor and not from the buyer; if it comes from the buyer, then
it will not bind the co-owner with the right of legal redemption; cannot come from the register of deeds; must
come from the vendor or prospective vendor
_________________________________________________________________________
When you are writing an essay, you are writing to someone; stop being self-centered; think that you are
trying to explain to another person. Do not assume that the person knows what you are talking about; when
you are trying to explain something, you are explaining something to a high school student. Just because
you mentioned a case that is probably similar, you are already okay - you are not. I would not advise you to
cite any case just to convince Sir what we are talking about.
A lot of the answers do not contain an analysis. It is what you should do: you follow the formula (CRAC) -
conclusion or rule, A means analysis and the last is conclusion.
When you are writing an essay; first statement should be your answer.
You divided your answers into several small paragraphs; when you divide your answers in several divisions,
it is easier and better to appreciate instead of one paragraph answer for the entire answer to the problem:
The first part of the answer would be your conclusion (referring to your decision or answer).
Ex.) In number one of your examination, it is about covina → compromise agreement (is a contract entered
into); penalty is like a liquidated damage agreed upon. Despite the fact that he entered into a compromise
agreement, when he was not able to pay the entire amount of compensation and was being asked to pay
the penalty of P2k, he refuses to pay the penalty, which prompted Covina to go to court.
Remember: when the obligation involves the payment of sum of money, the damages that may be
demanded or that should be paid would be in the form of interest. Here the obligation is the payment of a
sum of money; damages will be in the form of interest → WoN the argument of Pulong is Correct? →
answer: correct, incorrect; valid or invalid; tenable or untenable.
If our answer is “Pulong’s argument is invalid” → this is the conclusion that you have arrived in this case.
You end it with a period. Then follow it with the rule → the rule is either jurisprudence or a principle of law
or a law or a definition or a provision of law.
The penalty substitutes the indemnity or damages or the payment of interest in case of non-compliance (if
there is an obligation and obligor fails to perform the obligation; then, because of that breach, the obligor
will be liable for a penalty; the penalty will substitute the indemnity for damages and payment of interest;
generally when there is a breach of an obligation then under Article 1170, then the obligee will demand for
the payment of damages and usually in order to be entitled to damages, the obligee will have to prove the
breach and amount of damage he suffered as a result of breach; but where the obli. Is with a penal clause,
the penalty will substitute the indemnity for damages and payment of interest; however, we can add, as a
third sentence, if the obligor is guilty of fraud or refuses to pay the penalty, then he will still be liable for
damages)
Second paragraph: contains the analysis → if you do not have this, then you did not make an analysis →
no analysis, no perfect credit. Conclusive pagka walang basis. Explain the facts of the law.
Conclusion → Therefore, Pulong’s argument is invalid because of his refusal to pay the penalty and
accordingly, he will be liable for interest; for the balance and penalty that he refused to pay by way of
damages.
We have to make sure that we explain and gather and recapitulate the facts → apply to the law. (synthesis
of the facts of the case and the law)
LEASE:
-1643 → remember usufruct in civil law review one?; how do you distinguish, if you can recall, how can you
distinguish usufruct from lease?
-Remember easement? → what makes lease different from easement?
-In easement, the dominant estate does not have possession over the property or the portion of the property
subject of the easement; whereas lease, the lessee has possession over the property subject of lease;
lease has a right to limited use of property; whereas easement has a right to a particular use of property but
without possession
-In lease the lessee, only has a personal right; what does personal right mean? → there is a definite passive
party or subject
-Real right → right over a thing (enforceable against the whole world)
-Why did she mention that the lessee and lease when entering into a contract of lease, she was saying that
what the lessee has
-Lease only creates a personal right; lessee acquires a right only against the the lessor to demand from the
lessor to allow him to possess the property owned by the lessor; which means that because the lessee only
has a personal right, that right cannot be enforced by the lessee against a third person or others unlike
when it is a real right, where grants a person possessing the real right the right over the thing enforceable
against the whole world
-Is there an instance where a lease will become a real right? → Yes. When the lease is registered, it shall
become a real right
-Two instances wherein the personal right becomes a real right of lessee:
1. If the lease is for a period of more than one year, then the lease partakes the nature of a real right;
2. Even if it is less than one year, if the lease is recorded, or registered, regardless of the duration of
the lease, the lease becomes a real right; which means, it is enforceable against third persons; it is
enforceable even against those who is not parties to such contract of lease
-The reason why lease is referred to a personal right → because, the leasehold right of the lessee is
enforceable only against the lessor; and vice versa. The rights generated in the contract of lease is
enforceable only between the contracting parties
-Real right → enforceable against the whole world (ex.) chattel mortgage → enforceable against anyone
who will become the owner of the property; example, if you borrow money from the bank in order to purchase
a car, and the bank will require you to sign not only the loan agreement, but also to sign a chattel mortgage
agreement; and once the chattel is registered with the registry, then it creates a real right in favor of the
bank; if even if you sell the car to a third person, the bank can always enforce its right to foreclose the chattel
mortgage on the car; no matter how you transfer the car to another or third person, the right of the bank
may be enforced against the third person who subsequently became the owner or is now the new owner of
the car due to the fact that the chattem mortgage created a real right or favor of bank → apply to lease: if
lessee has registered his lease, in the registry of property, now even if the lessor will sell the apartment,
then the new owner will be bound by the lease that you entered into because what you have is a real right
which is enforceable against the whole world; it is a right over the thing, subject of the lease)
-Can the lessor sue the sub-lessee? → if the lessee will sublease the property subject of his lease; question
is, can the lessor sue the sub-lessee? → Generally no, because there is no privity of contract
-1651 and 1652 → 1651: there are two instances when the lessor may sue the sub-lessee; what are these
instances? → use and preservation of the thing leased (directly sue the sub-lessee)
-With respect on matters pertaining to use and preservation of thing leased → the lessor may file an action
directly against the sub-lessee; 1651 → a person who is not privy into a contract may sue a party to such
contract; the lessor does not have to pass through the lessee,but can go to the sub-lessee and make him
liable in the manner in which he is using and preserving the subject lease
-What is subsidiary liability? → in case of insolvency, or failure to pay the rental by the lessee, then the
lessor may demand from the sub-lessee the payment of the rental to which he is supposed to pay the
lessee; to the extent only of the amount to which he is liable
-1654 → that is the reason why under 1654 it provides for the obligations of the lessor; related to 1653,
whereby it provides that the lessor is liable also for the warranties similar to the implied warranties in a
contract of sale; so if you will relate those warranties with 1654; remember in sales, there is the warranty
whereby the seller warrants that at the time he delivers the property, he can transfer ownership; in a contract
of lease, the lessor also warrants that he can transfer possession of property → 1654: lessor has the
obligation to ensure that he maintains the lessee in peaceful possession of the lease (similar to warranty
against eviction; lessee may sue lessor for violating this warranty against eviction in the contract of lease;
also a warranty against hidden defects under a contract of lease; item one of paragraph of of 1654 →
obligation to deliver the thing; in a contract of sale, there is a warranty against hidden defects and as to
merchantability subject to a contract of lease)
-Note: 1657 → obligations of the lessee; the lessee has the obligation to pay the expenses for the contract,
for the notary fees, registration if the deed of lease will have to be registered
-Question: If the lessor finds it necessary to undertake a repair subject of lease; can the lessee refuse and
tell the lessor and if repair will have to be done, then the lessor will have to provide another place for the
lessee? → Article 1662; if the repair is urgent, then the lessee cannot refuse the lessor to undertake the
repair; the lessee will have to tolerate the work to be done on the property. Except if it would fall under the
second paragraph (if it is more than 40 days, then in such instance, there should be proportionment
reduction in the rent);under the 3rd paragraph, if the leased place is uninhabitable, then the lessee has the
option to rescind the contract. But in all these instances, the lessor may undertake that repair, if such repair
is urgent
Art. 1643 - In the lease of things, one of the parties binds himself to give to another the enjoyment or use
of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for
more than ninety-nine years shall be valid.
1. Consensual
2. Principal
3. Nominate
4. Purpose is to allow enjoyment or use of a thing
5. Purpose to which the thing is devoted should not be immoral
6. Period is temporary
7. Period is either definite or indefinite
8. Lessor need not be owner
In some instances, in a contract of lease, it creates a personal right and in some instances, it creates a real
right. What does this mean?
1. If the lease is for a period of more than one year, then the lease partakes the nature of a real right;
2. Even if it is less than one year, if the lease is recorded, or registered, regardless of the duration of
the lease, the lease becomes a real right; which means, it is enforceable against third persons; it is
enforceable even against those who is not parties to such contract of lease
Example of personal right: Binding only between the parties. Lessor and Lessee entered into a contract of
lease and the lessor leased the property to the third person. The lessor cannot execute the contract with
the third party because it is a personal right as against the lessor and the lessee.
When the lease is a personal right, it is binding only between the parties and their heirs and assigns. So if
the lessor will use the property by way of mortgage, and the bank forecloses the mortgage and sells it in
public auction, the buyer of the property can eject the lessee because it cannot be enforced on a third
person who bought the property. On the other hand, when the buyer is aware of the existing lease, and the
property or info amounts to registration, then the said property binds the lessee. Because registration of the
contract of lease becomes a real right which binds the whole world.
What are the instances that a contract of lease becomes a real right?
1. If the lease is for a period of more than one year, then the lease partakes the nature of a real right;
2. Even if it is less than one year, if the lease is recorded, or registered, regardless of the duration of
the lease, the lease becomes a real right; which means, it is enforceable against third persons; it is
enforceable even against those who is not parties to such contract of lease
Article 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a
stipulation to the contrary. (n) (ASSIGNMENT)
Article 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet
the thing leased, in whole or in part, without prejudice to his responsibility for the performance of the contract
toward the lessor. (1550) (SUB-LEASE)
Difference between 1649 & 1650?
• In 1649, when the lessee assigned the lease, the lessor would give prior consent to the lessor. Under
1650, if the lessee would sublease the property, it does not mean to get the prior approval of the
lessor.
• Exception: Express prohibition
• It is the right of the lessor to go directly against the sublessee for unpaid rents of the lessee.
Article 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However,
the sublessee 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.
Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the
lessor's claim is concerned, unless said payments were affected in virtue of the custom of the place. (1552a)
What is a subsidiary liability? the lessor may demand from the sub-lessee the payment of the rental to which
he is supposed to pay the lessee; to the extent only of the amount to which he is liable.
Who declares insolvency?
• Lessor
Article 1653. The provisions governing warranty, contained in the Title on Sales, shall be applicable to the
contract of lease.
In the cases where the return of the price is required, reduction shall be made in proportion to the time
during which the lessee enjoyed the thing.
Explain 1653
Article 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use
intended;
(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use
to which it has been devoted, unless there is a stipulation to the contrary;
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of
the contract.
1654 relates to the right of the lessee against eviction.
Article 1662. If during the lease it should become necessary to make some urgent repairs upon the thing
leased, which cannot be deferred until the termination of the lease, the lessee is obliged to tolerate the work,
although it may be very annoying to him, and although during the same, he may be deprived of a part of the
premises.
If the repairs last more than forty days the rent shall be reduced in proportion to the time - including the first
forty days - and the part of the property of which the lessee has been deprived.
When the work is of such a nature that the portion which the lessee and his family need for their dwelling
becomes uninhabitable, he may rescind the contract if the main purpose of the lease is to provide a dwelling
place for the lessee.
May the lessee refuse to allow the lessor repair the property subject of lease?
1. If repairs last for NOT MORE THAN 40days
Lessee is obligated to tolerate the work, although it may be annoying to him and although during the same
time he may be deprived of a part of the premise.
2. If repairs last for 40 DAYS OR MORE
Lessee can ask for reduction of the rent in
proportion to the time (including the 1st 40 days and the part of the property of which he is deprived).
If the lessor is introducing an improvement, can he refuse?
Can the lessor inspect if he wants to? Can the lessee refuse? So he can choose not to open his door to the
lessor?
• This provision talks about security made by a third person. What does it refer to?
The lessee puts up a bond to secure his payment to the lessor. That surety of guarantee will be released.
It will not be renewed together with the implied new lease. While the implied new lease provides that all the
terms in the contract will be reinstated. But security agreements with the third persons will not be affected.
Article 1673. The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases under articles 1682 and
1687, has expired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not stipulated which causes the
deterioration thereof; or if he does not observe the requirement in No. 2 of article 1657, as regards the use
thereof.
The ejectment of tenants of agricultural lands is governed by special laws.
1673- Judicially eject
Article 1676. The purchaser of a piece of land which is under a lease that is not recorded in the Registry of
Property may terminate the lease, save when there is a stipulation to the contrary in the contract of sale, or
when the purchaser knows of the existence of the lease.
If the buyer makes use of this right, the lessee may demand that he be allowed to gather the fruits of the
harvest which corresponds to the current agricultural year and that the vendor indemnify him for damages
suffered.
If the sale is fictitious, for the purpose of extinguishing the lease, the supposed vendee cannot make use of
the right granted in the first paragraph of this article. The sale is presumed to be fictitious if at the time the
supposed vendee demands the termination of the lease, the sale is not recorded in the Registry of Property.
1676- Effect of lease creates only a personal right. If the lease creates a personal right, the buyer of the
property sold can eject the lessee anytime. That is why a lot of lessors do not let it become a real right save
for instance if it's recorded in the registry of property or if he is aware of the existence of the lease.
Exception: Rural land
He can stay at the property until the end of the agricultural year or season.
Article 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which
the lease is intended, without altering the form or substance of the property leased, the lessor upon the
termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should
the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the
principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the
property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may
remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does
not choose to retain them by paying their value at the time the lease is extinguished.
When you say good faith, what does it mean?
Lessee is in good faith at the time when the improvements do not cause any harm.
1678 IS VIP - Useful improvements that must be refunded or reimbursed.
1678 (2) - Ornamental expenses
If it is the useful improvement and the lessor has two options:
If it is an ornamental expenses introduced to the prop, the lessee is not entitled to be reimbursed of the
value or cause those introducing the value of the ornamental expenses. But the lessee may remove them.
Provided, it will not result in destruction or damage to the principal thing.
Next meeting:
Therese- Report the status of the Rental Law if we still have rental law and who is now the office/department
in charge of that (Department of Housing and Human Settlement)
Theresa- Give the salient provisions of Rental Law. When do we apply the Civil Law & the Rental Law?
Assignment - Art. 1679 -> Contract of a Piece of Work -> The Common Carriers -> Safety of the Passengers
up to Art. 1766
2 recits needed for the Final round.
When you say Residential unit, what does it mean? Including dormitories, bed spaces except hotel rooms.
Rent Control Act of 2009 (RA 9653)
Purpose
- protects housing tenants (especially in the lower-income class) against unreasonable rent increases
- encouraging the development of affordable housing for the lower income brackets and other
beneficiaries
Coverage/Scope
- covers housing units with a monthly rent of up to PHP 10,000 in Metro Manila and other highly
urbanized cities nationwide not exceeding P5000
- Apartments
- Boarding houses, bedspaces, dormitories, and rooms for rent
- Houses and/or land
Not covered
- motels, motel rooms, hotels, hotel rooms
- Rent-to-own schemes
Office/Department in charge
- RA 9653 authorizes the Housing and Urban Development Coordinating Council (HUDCC), now the
Department of Human Settlements and Urban Development (DHSUD), to continue the regulation
of the rental of certain residential units, determine the period of regulation and its subsequent
extensions if warranted, determine the residential units covered, and adjust the allowable limit on rental
increases per annum
- Department of Human Settlements and Urban Development (DHSUD) or Kagawaran ng Pananahanang
Pantao at Pagpapaunlad ng Kalunsuran is the central government authority on the management of
Housing, Human Settlements and Urban Development
- DHSUD is created through RA 11201 in February 14, 2019
- DHSUD performs the consolidated functions of the defunct Housing and Urban Development
Coordinating Council (HUDCC) and Housing and Land Use Regulatory Board (HLURB), except
adjudication
- DHSUD primarily focuses on providing access to decent, affordable, resilient and sustainable housing
communities to all Filipinos, particularly the underprivileged and those in the low-income bracket
- Secretary Eduardo D. Del Rosario currently leads and is the first ever head of the DHSUD
History of extension of RA 9653
- RA 9653 was approved on July 14, 2009 and expired on December 31, 2013
- HUDCC issued Resolution No. 2 in December 2013 extending the Rent Control Act for another two
(2) years (January 1, 2014 – December 31, 2015) at status quo rates of not more than seven percent
(7%) per annum for:
Ø Renters in Metro Manila and highly urbanized areas whose monthly rates are P10,000
and below; and
Ø Renters in other areas whose monthly rental rates are P5,000 and below
- HUDCC issued Resolution No. 1 in June 2015 which extended the Rent Control Act for a period of
another two (2) years (January 1, 2016 – December 31, 2017), that the rent of any residential unit shall
be increased by not more than:
Ø Four percent (4%) annually for those paying a monthly rent/ ranging from Php1.0 to
Php3,999 per month; and
Ø Seven percent (7%) for those paying a monthly rent of Php4,000 up to Php1O, OOO
per month
Ø More than two percent (2%) annually for those paying a monthly rent/ranging from
Php1.0 to Php3,999 per month; and
Ø More than seven percent (7%) for those paying a monthly rent of Php5,000 up to
Php8,999 for as long as the unit is occupied by the same lessee; and
Ø More than eleven percent (11%) for those paying a monthly rent of Php9,000 to
Php10,000 for as long as the unit is occupied by the same lessee
- (STATUS NOW) National Human Settlement Board issued Resolution No. 2020-04 that extends
and continues the rental regulation for one (1) year (January 1,2021 to December 31, 2021), under the
same terms and conditions provided under HUDCC Resolution No. 01, Series of 2017, that for as long
as the unit is occupied by the same lessee, the rent of any residential unit shall not be increased by:
Ø More than two percent (2%) annually for those paying a monthly rent ranging from P
1.00 to P 4,999.00;
Ø More than seven percent (7%) for those paying a monthly rent ranging from P 5,000.00
to P 8,999.00; and
Ø More than eleven percent (11%) for those paying a monthly rent ranging from P
9,000.00 to P 10,000.00
Note: There are 3 tiers now compared to RA 9653(which originally provided a 7% limit on increase of
rent per annum regardless of amount of rent being paid monthly, as long as it is P10,000 and below)
to provide lower rates of increase to low income renters.
The 3 tiers were based on study and research conducted in 2017, the HUDCC then engaged the
Philippine Statistical Research and Training Institute (PSRTI) to undertake a technical rental study
based on the 2015 Census of Population, which yielded the following findings:
1. A total of 1,752,801 renter families in 2015 representing 7.7% of the total 22,730,410 families; and
2. Of the 1.7 million renting families in the country, a total of 1,434,348 or 81.38% of the total renters
are paying a rent of less than P4,000 a month; 278,791 or 15.91% of the total renters are renting P4,000
to P9,999 per month; and 38,656 or 2.26% are paying rent of P10,000 or more per month.
Sources:
https://dhsud.gov.ph/about-us/
https://hudcc.gov.ph/QandA
https://hudcc.gov.ph/sites/default/files/styles/large/public/document/HUDCC%20Resolution%20No.%
201%20Series%20of%202015.pdf
https://hudcc.gov.ph/sites/default/files/styles/large/public/document/HUDCC%20Resolution%20No%2
01%20-%20Extending%20the%20Rent%20Control%20Act.pdf
https://dhsud.gov.ph/wp-content/uploads/2021/02/NHSB_Reso_No._2020-
04_Extension_of_Rent_Control.pdf
https://www.moneymax.ph/personal-finance/articles/rental-law-philippines
https://www.pinoymoneytalk.com/rent-control-in-the-philippines/
Salient Provisions of Rental Control Act 2009
Salient provisions of the rental law - RA 9653 - AN ACT ESTABLISHING REFORMS IN THE
REGULATION OF RENT OF CERTAIN RESIDENTIAL UNITS PROVIDING THE MECHANISMS
THEREFOR AND FOR OTHER PURPOSES
section 4 - limit on increase of rent, - > status now is different
- National Human Settlement Board issued Resolution No. 2020-04 that extends and continues the rental
regulation for one (1) year (January 1,2021 to December 31, 2021), under the same terms and conditions
provided under HUDCC Resolution No. 01, Series of 2017, that for as long as the unit is occupied by the
same lessee, the rent of any residential unit shall not be increased by:
➢ More than two percent (2%) annually for those paying a monthly rent ranging from P 1.00 to
P 4,999.00;
➢ More than seven percent (7%) for those paying a monthly rent ranging from P 5,000.00 to P
8,999.00; and
➢ More than eleven percent (11%) for those paying a monthly rent ranging from P 9,000.00 to
P 10,000.00
Note: There are 3 tiers now compared to RA 9653 to provide lower rates of increase to low income renters
- Limit on Increases in Rent. – For a period of one (1) year from its effectivity, no increase shall
be imposed upon the rent of any residential unit covered by this Act: Provided, That after such period until
December 31, 2013, the rent of any residential unit covered by this Act shall not be increased by more than
seven percent (7%) annually as long as the unit is occupied by the same lessee: Provided, further, That
when the residential unit becomes vacant, the lessor may set the initial rent for the next lessee: Provided,
however, That in the case of boarding houses, dormitories, rooms and bedspaces offered for rent to
students, no increase in rental more than once per year shall be allowed.
Section 6 - authority to continue rental regulation
- Authority to Continue Rental Regulation. – Notwithstanding the lapse of the period
provided in Section 4 of this Act. the Housing and Urban Development Coordinating Council (HUDCC) is
hereby granted the authority to continue the regulation of the rental of certain residential units, to determine
the period of regulation and its subsequent extensions if warranted, to determine the residential units
covered and to adjust the allowable limit on rental increases per annum, taking into consideration, among
others, National Statistics Office (NSO) census on rental units, prevailing rental rates, the monthly inflation
rate on rentals of the immediately preceding year, and rental price index.
Section 7. Rent and Requirement of Bank Deposit. – Rent shall be paid in advance within the first five (5)
days of every current month or the beginning of the lease agreement unless the contract of lease provides for a
later date of payment. The lessor cannot demand more than one (1) month advance rent. Neither can he/she
demand more than two (2) months deposit which shall be kept in a bank under the lessor’s account name during
the entire duration of the lease agreement. Any and all interest that shall accrue therein shall be returned to the
lessee at the expiration of the lease contract.
In the event however, that the lessee fails to settle rent, electric, telephone, water or such other utility bills or
destroys any house components and accessories, the deposits and interests therein shall be forfeited in favor of
the latter in the amount commensurate to the pecuniary damage done by the former.
Section 8. Assignment of Lease or Subleasing. – Assignment of lease or subleasing of the whole or any
portion of the residential unit, including the acceptance of boarders or bedspacers, without the written consent
of the owner/lessor is prohibited.
Section 9. Grounds for Judicial Ejectment. – Ejectment shall be allowed on the following grounds:
Assignment of lease or subleasing of residential units in whole or in part, including the acceptance of boarders
or bedspaces, without the written consent of the owner/lessor;
Arrears in payment of rent for a total of three (3) months: Provided, That in the case of refusal by the lessor to
accept payment of the rent agreed upon, the lessee may either deposit, by way of consignation, the amount in
court, or with the city or municipal treasurer, as the case may be, or barangay chairman, or in a bank in the name
of and with notice to the lessor, within one (1) month after the refusal of the lessor to accept payment.
The lessee shall thereafter deposit the rent within ten (10) days of every current month. Failure to deposit the
rent for three (3) months shall constitute a ground for ejectment.
The lessor, upon authority of the court in case of consignation or upon joint affidavit by him and the lessee to be
submitted to the city or municipal treasurer or barangay chairman and to the bank where deposit was made,
shall be allowed to withdraw the deposits;
Legitimate need of the owner/lessor to repossess his or her property for his or her own use or for the use of an
immediate member of his or her family as a residential unit: Provided, however, That the lease for a definite
period has expired: Provided, further, That the lessor has given the lessee the formal notice three (3) months in
advance of the lessor’s intention to repossess the property and: Provided, finally, That the owner/lessor is
prohibited from leasing the residential unit or allowing its use by a third party for a period of at least one (1) year
from the time of repossession;
Need of the lessor to make necessary repairs of the leased premises which is the subject of an existing order of
condemnation by appropriate authorities concerned in order to make the said premises safe and habitable:
Provided, That after said repair, the lessee ejected shall have the first preference to lease the same premises:
Provided, further, That the new rent shall be reasonably commensurate with the expenses incurred for the repair
of the said residential unit and: Provided, finally, That if the residential unit is condemned or completely
demolished, the lease of the new building will no longer be subject to the aforementioned first preference rule in
this subsection; and
Expiration of the period of the lease contract.
Section 11. Rent-to-Own Scheme. – At the option of the lessor, he or she may engage the lessee in a written
rent-to-own agreement that will result in the transfer of ownership of the particular dwelling in favor of the latter.
Such an agreement shall be exempt from the coverage of Section 5 of this Act.
WHEN TO APPLY CIVIL CODE AND THE RENTAL LAW
Section 12. Application of the Civil Code and Rules of Court of the Philippines. – Except when the lease
is for a definite period, the provision of paragraph (1) of Article 1673 of the Civil Code of the Philippines, insofar
as they refer to residential units covered by this Act, shall be suspended during the effectivity of this Act, but
other provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they are not in conflict
with the provisions of this Act shall apply.
Article 1673. The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases under articles 1682 and
1687, has expired;
(1682 - . The lease of a piece of rural land, when its duration has not been fixed, is understood to have been for
all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, or
which it may yield once, although two or more years have to elapse for the purpose.
1687 - If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed
upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to
day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has
been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one
year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in
possession for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has
stayed in the place for over one month.)
Section 13. Penalties. – A fine of not less than Twenty-five thousand pesos (P25,000.00) nor more than Fifty
thousand pesos (P50,000.00) or imprisonment of not less than one (1) month and one (1) day to not more than
six (6) months, or both, shall be imposed on any person, natural or judicial, found guilty of violating any provision
of this Act.
Sec. 6 - Authority to continue the Rental regulation
Sec. 7 - Rent shall be paid in advance for 1 month
Requiring the deposit is okay provided it shall not exceed 2 months.
The deposit must be deposited in a separate bank account.
When the lease expired, the interest and the deposit must be returned to the lessee.
What is the deposit for? Used for maintenance or unpaid utility bills or may be forfeited in favor of the lessor
in case there is damage.
Assignment of Lease or Subleasing is generally prohibited.
E: With consent
Sec. 9 of the Rental Law
Under the rules on consignation, the only way to be valid, must be made before the court. But in rental law,
it must be deposited in court, treasurer, brgy. Chairman and the bank.
In the name of the lessor and with notice to the lessor.Non payment within 3 months, is a ground to eject
the tenants.
1682 & 1687
1682 - Applies to Rural lands; the duration has not been fixed.
1687 - Applies to the rule on implied new lease or if the period for the lease has not been fixed. Applies the
instance wherein there is a fixed period but the period has not been expired. In relation to 1670.
Court may fix a longer period, taking into consideration that the tenant is in property.
In lease, when there is a need to file an unlawful detainer, then the issuance of the notice to vacate is
jurisdictional or mandatory.
When there is a lease period and it has expired, no need to issue a demand to vacate if you will not file a
case for unlawful detainer.
Skip working labor
Contract for a Piece of Work and Carriage
In contract for a piece of work, the focus is the result of the work. The distinction between a contract of labor
and a contract of sale.
If the product is currently being kept in stock even if not available at the time, it is a contract of sale.
If the shoes you’re looking for are not regularly manufactured by the company, and you ordered those
shoes, then that is a contract for the piece of work. (Art 1717)
Meaning of Art. 1717
1174
Laborer assumes the risk of loss prior to delivery.
1718 & 1717 - In 1717, the contractor is the one who is going to furnish the materials. In 1718, the owner
was going to furnish the materials. In both cases, they will both assume the risk of loss prior to delivery.
1723 - Who are liable under this provision?
1. Engr.
2. Arch.
3. Contractor
When there is a contract for the piece of work, there is assumption of risk. 1717 - 1718 is an exception to
fortuitous event.
Another exception: 1719
GR: Acceptance extinguishes the liability
E: Hidden defects
Or exception to the stipulation to the contrary
1723: Even though it is accepted, they will wait for 15 yrs to avoid liability. Then additional 10 yrs before the
action may be filed against them.
1724: If the contractor enters into the contract to build a bldg, he cannot withdraw from the contract of
demand increase once he agreed. Except when it is authorized by the owner or agreement by the parties.
1726: *** exception in obligation to do. It cannot be passed on to another person. If he dies, automatically
rescinded.
1728 & 1727: The proprietor will include an affidavit at the time he submitted a bill. It’s a usual requirement
in a contract,
1731 *** - Mechanics lien ; he cannot be compelled to release. It is a legal pledge. If you fail to pay, he can
auction your property without violating the prohibition against pactum commissorium.
Common Carriers consists of 2:
Vigilance over goods and safety of passengers = extraordinary diligence
Ordinary standard of care = DOAGFOAF
1733- *** Extraordinary Diligence - if the common carrier fails to deliver the goods to its destination safely,
presumption is the common carrier is negligent or liable.
1734 -
1. Acts of God
2. Force Majeure
3. If there is negligence of the shipper. Proximate cause of the loss, is the act or omission of the shipper.
4. Character of the goods or defects.
5. Competent public authority
-Does it mean that if the lease expired after one year, it will automatically be renewed?
-1670 → -What is the implied new lease?
Requisites of Implied New Lease under Article 1670:
1. The term of the original contract of lease are:
a. The lessee continues enjoying the thing leased for at least 15 days;
b. The continuation of the occupation by the lessee is with the acquiescence of the lessor; and
c. The lessor or lessee has not previously given a notice to vacate
*The notice required under Article 1670 is the one given after the expiration of the lease period for the
purpose of aborting an implied renewal of lease. The notice to vacate constitutes an express act on the part
of the lessor that he no longer consents to the continued occupation by the lessee of the leased property.
-If the existing contract of lease includes a right of first refusal by the property; and the lease has expired,
but the lessee continues to occupy the property, without the objection of the lessor and with the
acquiescence of the lessor; under 1670, it provides that the other terms of the original contract shall be
revived; would that include the right of first refusal?
-1669: does this mean that the lessor can eject the lessee without the need of giving the lessee a notice to
vacate? - Yes.
*Note: while it may be true that when the period of the lease is fixed, and upon expiration, the lease ceases
automatically without need of demand; but if there is a need to file an action for unlawful detainer, there is
a need is a notice to vacate (such is a jurisdictional requirement; time of the receipt of the last notice to
vacate when the one year prescriptive period to file an action for unlawful detainer shall be counted); two
notices to vacate to send upon the lessee, the one year prescriptive period shall be counted from the last
of the two notice to vacate
ex.) first notice was dated or received on june 1 and the second one is october 1, 2021 → the one year
prescriptive period to file for an action for unlawful detainer shall be counted from october 1, 2021
-Remember that the case of unlawful detainer (similar to forcible entry) → there is a prescriptive period of
one year; except that in forcible entry is counted from the time of entry (violence or intimidation) or discovery
(is through stilt or strategy)
-Accion publiciana → action to claim a better right of a possession of a property (real right of possession);
ito yung recourse
*Lose an opportunity of a summary proceedings
-1672: what does this mean? (guaranty) → hindi mo kilala yung lessee; yung kaibigan mo yung-nagrefer sa
akin, so make your friend the guarantor so that he will be subsidiarily liable in case you are not able to pay
*This one is the contract of guaranty → will take effect during the period of the lease; once expired, the
guaranty ceases to be in effect; marerelease yung guaranty sa implied new lease
-similar to the right of first refusal (not related to a lease agreement); it is not revived
-with respect to a guaranty; the guarantor will be released because it is not covered by the guaranty (the
implied new lease is not covered by guaranty)
-1678: when you say good faith, what does this mean?
-1717:
-Distinguish 1717 and 1718
-What happens if the thing is lost because of a fortuitous event? Like a typhoon or flood? → obligation is
extinguished due to a fortuitous event (in accordance with Article 1174, in relation to the last sentence of
Article 1718)
-So if the thing you ordered is lost due to a fortuitous event, what happens to the obligation? Is the obligor
released due to the extinguishment of the obligation?
-Assumption of risk: the obligor is still liable (exception to 1174); the obligation will not be extinguished and
it shall remain due to the nature of the obligation
-1717 → the contractor here bound himself that he will suffer the loss; if the work is destroyed prior to the
delivery. Because the nature of the obligation requires the assumption of risk
-In the following instances, the obligation, the obligor will be liable; kahit may fortuitous event, liable siya;
exception dito: kung may delay on the part of the proprietor or the owner, or under 1719 (1 and 2) kung may
hidden defects; or kung walang hidden defects, if it is expressly stipulated in the contract that the worker
will still be liable because of a defect, regardless of the nature of the defect
-Yung contract for a piece of work is a kind of obligation where the worker assumes the risk of loss prior to
the delivery; so the one who ordered the work to be done, can simply await for the delivery of the work; the
focus is on the result; this is distinguished from a contract of labor, where the focus is on the labor being
performed. Sa sale, it is different; because the item subject of the sale is on stock or even if it is not on
stock, it is regularly being manufactured; here the work is not regularly being manufactured
-1723 (liability for collapse of building): who will be liable under this article? What makes this article different
from 1717 and 1718?
-The reason here is collapse of the building or edifice(and not any other cause)
-Note: 1717 and 1718 = once accepted, the liability will cease, except if there is a hidden defect or if there
is an express stipulation on the part of the proprietor, that the contractor will remain liable due to a defect
-1723 = acceptance will not exculpate the architect, engineer or contractor for the next 15 years; if the
building collapses within 15 years, there will be a 10-year prescription period
-2 periods: 10 and 15 period
-15th year nag collapse yung building → may 10 year prescription period to file an action
-10 year period naman talaga = if based on a written contract (10 year period yung contractor)
-The problem with contracts like these, if you read 1724 → the contractor who entered into a contract to
build a building with the owner; once he enters into the contract, he cannot withdraw from that contract or
demand an increase in the price; you cannot say na tumaas yung presyo yung bilihin ng materyales; that is
why when you enter into a contract, you have to come up with a very good estimate to cover fluctuations in
the prices of the materials because you cannot anymore ask for an increase or withdraw from the contract
(you are bound) → kung ang usapan ay 200 million pesos, kahit nagkamali ka or tumaas yung price ng
bakal, wala ka nang magagawa; the only option is to plead to the owner and if he will agree in writing or if
both of you will agree for an increase in price and it must be in writing; otherwise, later on, once the building
is done, you cannot ask or bill for a higher price - kailangan papirmahin mo siya na pumapayag siya na
magbabago yung price; that is why a contract with respect to building is the hardest contract
-1731: (VIP) Mechanic’s Lien; can you give an example? - that is why if you go to a watch repair shop, or
gumagawa ng TV or electric fan; makikita mo andami nilang nagawa doon; ang mekaniko andaming
nakasabit na gumagana na relo - hindi ito binebenta and may-ari neto; kahit balik-balikan mo andon pa rin
- until he is paid of the price of the repair, he will hold onto it because it is a case of a legal pledge; effectively
once nakapag repair ka ng isang bagay, wala siyang obligation na irelease sayo hangga’t hindi mo
mabayaran; the law gives him the right to hold onto it; if after a certain period na hindi mo siya nabayaran,
he can conduct an auction (how many times the pledgee will conduct an auction for him to become an
owner kapag wala talagang benta - it will not anymore violate the act of pactum commissorium)
*Hindi matubos yung na-repair = it is like a pledge (a security for the loan that is created as a result of the
contract for a piece of work that you entered into)
Common Carriers:
-Remember: in a contract with a common carrier, dalawang klaseng contracta ang covered neto:
1. Contract over vigilance or carriage of goods
2. Contract over carriage of passengers → requirement: safety of the passengers
-The main obligation of the common carrier, is to carry or transport passengers or goods (either by land,
water or air) for compensation, and transporting them to their destination safely
-1733: with respect to the contract of carriage, eto yung pinaka mabilis na example (culpa-contractual =
there is a contract)
-When you ride the bus, or a jeepney, there is a contract that there is entered into between you and the
owner or operator of the common carrier; because there is a contract, if there is failure on the part of the
common carriage to bring you to your destination safely, then there is breach; and the breach (1170); the
main obligation of common carriage is to transport you to your destination safely or to carry your goods to
the destination safely and without incurring any damage to the goods
-In both cases (goods or passengers) the standard of care is extraordinary diligence; generally under 1163
is ordinary diligence. But in this case, because of the nature of their business and for reasons of public
policy, standard of diligence imposed is extraordinary diligence
-Nature of business: public utility siya holding itself out to the public for compensation (meron siyang
franchise)
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May 19, 2021 – Caryl
Art. 1739
- The common carrier must be free from any act of negligence.
- 1734 (force majeure) Necessary for the common carrier to be free from any liability.
- The CC must exercise due diligence to prevent or minimize loss. Before, during or after.
- Must be the only proximate cause of the loss.
- It must not also be guilty of delay (1740)
- Applies to 1734 (1 & 2)
- 1734 (3) -> 1741
What is contributory negligence?
- The failure of a person who has been exposed to injury by the fault or negligence of another, to use
such degree of care for his safety and protection an ordinarily prudent man would use under the
circumstances (Martin, 1989, citing Rakes v. Atlantic Gulf Co., G.R. No. 1719, January 23, 1907).
- Liability for loss = the act or negligence of persons or entity must be the proximate cause of the loss.
1734 = if there is a loss of the goods, the common carrier was negligent unless there’s an extraordinary
diligence.
Exception: 1734
If the proximate cause is attributable to the act or omission of the shipper, the liability will shift from the
common carrier to the shipper. In 1741, is in the middle. The proximate cause is still in the negligence of
the common carrier but there is contributory negligence on the part of the shipper. If the negligence of the
shipper merely contributed to the loss, then it will not totally exculpate the common carrier but will merely
reduce his liability.
Contributory negligence = comparative negligence
Case: Rakes vs. Atlantic Gulf
If the proximate cause of the loss is still in the negligence of the common carrier, even if the shipper or
owner is also guilty of contributory negligence, the contributory negligence will only reduce proportionately
the liability.
1734 is the proximate cause of the loss is the cause of the act of the shipper or the owner. Totally, the
common carrier will be exempted similar when the proximate cause of the loss is the fortuitous event.
But in 1741, contributory negligence. (Jose Cangco vs. Manila Railroad & Rakes vs. Atlantic Gulf)
If the shipper or owner merely contributed to the loss, destruction, the common carrier may still be liable to
the negligence for damages. However, the liability will be equitably reduced.
Art. 1742 & give an example
- Related to 1734 (4) – Character of the goods
- 1741 = contributory negligence
- 1740 = delay
Art. 1743 -> 1734 (5) = Order of public authority
Art. 1744
Art. 1745 public policy
The shipper or owner and common carrier can agree to lower the standard of care that the common carrier
may be liable. (it could be ordinary diligence but cannot be below DOAGFOAF)
There is a lease or agreement what could be agreed upon.
Art. 1744 – requisites
Can the common carrier agree to lower the standard of care? Yes, provided the ff requirements are present.
And under 1745, cannot be stipulated upon bec they are contrary to public policy.
Art. 1746 – contract of adhesion
Art. 1749
Art. 1750 - very common to common carriers.
Contracts of Adhesion, while is it valid and binding, when there is provision that is difficult to understand, it
will be taken against the common carrier who drafted the contract.
Common carrier offers itself indiscriminately the services to the public for compensation is not a common
carrier or if its available only to portion of the population.
Art. 1754*** – understanding of this provision
2 kinds of baggage:
1. The baggage which is not in passenger’s personal custody or the one entrusted to the common
carrier
2. The baggage that remains in passenger’s possession.
The one that is entrusted to the common carrier’s employees, they shall be governed by the rules of common
carriers with respect to vigilance over the goods.
With respect to the baggage that remains in his custody of the passenger, they be considered as bailee of
necessary deposit.
Safety of passengers
Art. 1755 – If there is a passenger of a bus, if the passenger is injured, who will be liable? The common
carrier or the bus owner.
What is the source of obligation? Culpa contractual
In culpa aquillana, there is no presumption of negligence. In culpa contractual, there is presumption of
negligence.
In the event that the common carrier fails to bring you to the destination, there is a presumption of negligence
unless there is extraordinary diligence.
In culpa acquillana, there is no presumption of negligence because there is no existence contractual relation
between the parties.
2180, if can show that there is diligence in the supervision and selection of the employee.
Art. 1756 presumed to have been at fault or acted negligently ***** the obli of CC is to carry the passengers
safely.
Art. 1757 – compare with respect to carriage of goods. In carriage of goods can be stipulated but here
cannot be agreed upon.
Give an example 1757
Art. 1758 – Example: Students’ fare discount
If it is gratuitous, the extraordinary diligence, may be reduced but the CC will not be excused of the liability.
1759***VIP - What makes this different from culpa acquillana? In culpa acquillana, the employer may invoke
the defense that he exercised due diligence in selection of employees but in contractual, it does not.
The liability of the CC does not cease. It will not be removed or excused even if the CC exercised due
diligence in the selection and supervision of the employees.
Art. 1762 – explain
Art. 1763 – example
If the injury is caused by the willful acts of the negligence of employees, liable ang CC.
It is because of the standard of care required in the CC which is extraordinary diligence.
PARTNERSHIP
Art. 1767 – Distinguish Partnership vs. Co-Ownership
Take note the ff characteristics of Partnership
1. Created solely by agreement of the partners which gives rise to a distinct personality.
2. The agreement is intended for the purpose of conducting business transaction. Each of the partners
are agents of the partnership.
- In ACP of the Fam Code, It is stated there that the rules of co-ownership must be applied suppletory.
In CPG, exclusive prop at the time of the marriage, and the fruits of income of their separate prop shall
govern.
Co – ownership does not of itself establish even if the share profits of the use of the property.
In partnership, the most important is agreement, when there is no contract, there is no partnership.
Several causes of partnership
Formalities required in order to form a partnership
Arts. 1771,1772 & 1773
Partnership in any form. Oral or in writing as long as there is an agreement
If it is not registered with SEC, what is the status? Valid.
If an immovable prop is contributed and not registered with SEC, what happens?
If real prop or interest in real prop is contributed, there are 2 additional req
1. Public Ins
2. Inventory
Take note Art. 1775
Classify Partnership? Art. 1776
Universal Partnership of Present property – includes the present prop of the partners including future prop
except inheritance. With respect to inheritance, the fruits will go to the partnership but not the prop itself.
vs.
Universal Partnership of Profits – if a partner has contri a prop, what he actually contributed is only usufruct
of the property.
Why husband and wife cannot enter the universal partnership? Because they cannot donate to each other;
they will circumvent this prohibition if they will give each other a donation.
The law of partnership provides that every partner is a debtor of the partnership with respect to the property
he promised to contribute to the partnership. What does it mean?
- Every partner is a debtor of the partnership
Correlate to 1169 where the demand is necessary except there is a law or stipulation providing that demand
is not necessary in order for the delay to happen.
Art. 1786 ***VIP obligations of the partners without the need of any demand.
Art. 1788 – by express prov of the law, he is in delay when he fails to contribute to the partnership on the
time agreed upon in their partnership or the obli has become due.
What is the reason for this? Bec. When the partner fails to deliver what has promised, then he deprived the
partnership on the earnings as well as fruits and use by reason of his supposedly contribution/property.
Liable for interest and damages.
________________________________________________________________________
Class Notes for May 20, 2021: (Sha)
PARTNERSHIP:
-What is partnership of present property?
-In order to form a partnership, do you need to comply with certain requirements? Any exceptions?
-Immovable property contributed to the partnership; inventory attached to a public instrument creating the
partnership; otherwise partnership is void; if an IP is contributed or for instance the partnership will fall under
the agreement or statute of frauds, then it must be in writing; while generally, to form a partnership it may
be oral or in writing; but if it falls under SOF (ex.) partnership for a period beyond one year - falls in SOF);
if a IP will be contributed, then it falls under SOF; under the NCC, if an IP is contributed, then there should
be an inventory which must be attached to a public instrument (not simply a written instrument, but a public
instrument (must be notarized))
-If a partnership stipulates terms to keep the purpose of the partnership a secret, is that valid?
-If a partnership is limited (partners), is that valid? (Article 1776 → yes. There is a limited partnership)
-Limited partner is only required to pay the obligations of the partnership, to the extent of what he may have
contributed to the partnership; if the contribution is only 100k but liability is 1million, he cannot be made
liable beyond 100k; the law does not allow that → who will be made liable, to the extent of the liabilities of
the partnership?; if you are a general partner, after the assets of partnership have been exhausted, then
the general partner may be held liable beyond that, to the extent of what they own; that is why partnership
is not a good form of juridical entity, because you may be bankrupt, including what your family owns, if you
are a general partner → in corporations, all the members or shareholders are akin to a limited partner - to
the extent of their assets of the corporation;a partnership is supposed to be a juridical entity with a
personality distinct that of each partner (similar to a corporation); if a general partner like the present set-up
under the law, will be held liable beyond, then that is no distinction between a personality of a general
partner and a partnership (the general partner will be held liable to the extent of his own personal property)
-The law says: husband and wife, they cannot form a universal partnership or cannot enter into a universal
partnership - is this true?
-Agreement is that partners will be transferring their properties to serve as a common fund of partnership:
basically they will be donating these properties; persons who are prohibited from donating each other (such
as husband and wife) → prohibited from entering into a universal partnership (either UP of present property
or profits) → why? = UPPP lahat ng properties nila will be contributed to form part of the common fund; only
exception sa common fund are future property like inheritance, meaning those that they will inherit they will
receive by gratuitous title (such as ACP and CPG = yung matatanggap mo by inheritance will not form part
of these regimes, and remain as your separate property); similarly in UPPP, your present property will
become part of the common fund, with the exception of future property, except of the fruits of the inheritance
- will go to the common fund
-UPP of Profits = present property will not form of the common fund; what will form part will be the usufruct;
H and W are not allowed to give direct and indirect benefits; usufruct is interest in real property; H and W
cannot form Universal Partnership of Present Property, or UPP of Profits
-What is a partnership by estoppel? = one which in reality is not a partnership, but is considered a
partnership only in relation to those who, by their conduct or admission, are precluded to deny or disprove
its existence
-Contract of agency → each of the partners are agents of the partnership; they can represent the
partnership, with respect to the ordinary business of the partnership. It is also possible that, a partnership
may have a managing partner and there are two kinds of such: a managing partner that is appointed as
such, meaning appointed as managing partner in the articles of partnership (from the start, he is appointed
as such in the articles of partnership itself) or he could be a managing partner appointed as managing
partner AFTER the articles of partnership has been registered or agreed upon - he is appointed thereafter;
if he is appointed as managing partner in the articles of partnership, his power is absolute with respect to
the acts of administration - he does not need the consent of any other partners when it comes to managing
the business of the partnership, appointing employees; if he is a managing partner, appointed as such, in
the article of partnership, his power is irrevocable meaning his acts are irrevocable, except for a just and
lawful cause (may execute all acts of administration, regardless of the refusal of other partners)
-if however he is appointed thereafter: his power is revocable anytime, and he can be removed anytime; on
the other hand if he is the former, you cannot just be removed as the managing partner, except for a just or
lawful cause; on the other hand, if he is a managing partner thereafter, he can be removed anytime
-Partner by estoppel → two considerations: not a partner, but allows his name to be included in the
partnership and subjects himself to the liabilities of a partner.
-Note: an industrial partner cannot engage in any kind of business for himself; unless the partnership gives
him permission → because an industrial partner is required to work full time in the partnership; required to
be full time in the pursuit of the partnership business
-On the other hand, it must be distinguished from a capitalist partner → contribution is money or property;
not required to work for them full time, therefore, he can engage in other kinds of business, provided it is
not in conflict with the business of the partnership; otherwise the partnership may require him to bring the
profits that he may earn from that business
-A limited partner, can he be held liable to pay for the obligations of the partnership beyond his contribution?
→ two instances wherein a LP can be held liable: 1.) if he allows his name to be included in the partnership
name, even if he is a limited partner (general partner by estoppel); 2.) if he takes part in the control of the
business, even if he is a limited partner, then he will be liable as a general partner
-The partner is a debtor of the partnership, is this true? What is the repercussion of this one? (1786 and
1788); what does it mean when the law said that he shall be liable for the interest of damages?
-The law says: in case of imminent loss, the general partners are required to contribute more
-1813: does not necessarily dissolve partnership; does not give assignee the right to participate in the
management and administration; it merely entitles the assignee to receive the profits to which the assigning
partner would otherwise be entitled; only in the case of dissolution can he demand or require an account of
the last account agreed to by all of the partners
-Article 1816 (VIP) → all partners including industrial partners shall be liable pro rata; with all their property
and after the partnership assets have been exhausted; liable pro rata = joint obligation (to the extent of their
share in the partnership; if the liability is proportionate to what they have contributed, after the partnership
assets have been exhausted); proportionate to their contribution
-With respect to industrial partner = can ask for reimbursement from capitalist partners
-1818 (VIP) → talks about the fact that, a partnership agreement is at the same time a contract of agency;
generally, an agency authorizing every partner to form acts of administration - that is why, doon sa listahan
ng 1818, they are considered as acts of strict dominion = they are not acts of administration; meaning, they
need a special authority from the other partners before they can perform those acts
-1825 (estoppel) → a partner by estoppel
Next meeting: finish partnership with dissolution and limited partnership; then we move on to
agency
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May 24, 2021 - Caryl
1789
An industrial partner cannot engage in any kind of business unless the partnership expressly permits him
to do so.
You will get a share of profits from the contribution of capitalist partners
1. Managing Partner appointed in the articles of partnership – absolute to execute acts of management like
making decision despite the opposition of other partners. Except If you acted in bad faith.
2. Managing partner appointed after he iissuance of the articles of partnership – the managing partner may be
removed with or without cause.
All partners are liable for the debts of the partnership (pro-rata) of their properties.
Liable jointly to the extent of contribution. Partners may also be sued beyond what they have contributed
even if there is an industrial partner.
The liability becomes solidary when: (this will come only if their properties have been exhausted)
With respect to industrial partner, he is also liable to creditors but he is not liable to the losses.
A partner by estoppel is not member of the partnership, except if he includes his name in the firm name, he
becomes liableas a partner.
If not all the partners have given their consent, only estoppel by partners and partners who gave their
consent will be liable.
With respect to debts prior to his admission, will not be included for the creditors of the new partners
- Takes away the rights of the partners to represent the partnership and to bind the partnership
1843
The limited partners shall not be bound by the obligations of the partnership.
Limited partner may leave the partnership anytime or assign interest without having the partnership being
dissolved.
The only condition is that the limited partner cannot simply withdraw his capital from the partnership until
the creditor’s claim.
Limited partners are only liable to partners not to the creditors. Except to the extent of their obli, they are
not individually liable with their separate properties.
All partners ncluding industrial, are all liable pro-rata with their individual properties after partnership assets
have been exhausted
What is agency?
E: negotiorum gestio
- When a person takes care of an abandoned business of another, even if the owner does not give authority,
the law gives it.
GR : Agency is consensual.
E: 1869
Example of an implied agency
In agency, there is a juridical acts includes creation or distinction of relations with third parties.
In lease of service, an employee when employed by employer, performs only material acts.
Fiduciary relationship between the agency and principal, what does it mean?
An agent cannot claim to be an owner. The fiduciary rel of the agent or principal as a result of the contract
of agency.
In partnership by estoppel, if the person includes his name in the partnership, then he becomes a partner
by estoppel. He becomes liable as partner together with partners who have given consent.
In agency by estoppel, if A informs B, or advertised (informed or advertised to everyone) that X is his agent.
And X acts upon him (becomes agent) then there is agency by estoppel with respect to B who has been
informed that X is his agent or with respect to public at large so that agency cannot be simply be revoked
anymore except revocation.
The company is estopped from denying to the person for appointing him as your agent especially if there is
a calling card given to that agent.
1876
1878 – SPA
Basics of Partnership:
-when you say general partner; the liability extends to his own private properties; but the liability (creditors)
will go after the private properties of the general partner, only after the properties of the partnership have
been exhausted; liabilities of GP with respect to his individual private properties is pro rata or joint with the
other GPs, subject to two exceptions (in which a GP may be held liable not pro rata, but solidarily with other
partners):
1.) for wrongful acts or omissions causing loss to a non partner or third person;
2.) one of the partners is guilty of conversion or misappropriation of the funds of a stranger
-GP → the GP which includes industrial partners, because partnership may be classified either GP or limited
partner insofar as liabilities to creditors or third persons, so that, the industrial partner is classified under GP
when it comes to liabilities to 3rd persons or creditors; so they are liable to creditors or third persons insofar
as the debts of the partnership, to the extent of their individual properties after the properties of the
partnership have been exhausted (meaning, their liability is subsidiary; the partnership is liable primarily,
and the GPs including the industrial partners will be liable subsidiarily once the properties of the partnership
have been exhausted)
-GR: liable pro rata (proportionate to their respective contribution) : ex.) 20% each contribution; only made
to pay 20% because that is their proportionate share to their indebtedness (liability is joint pro rata)
-Two exceptions: (solidarily liable)
1. Wrongful acts and omissions causing loss to a non-partner
2. Conversion or misappropriation of funds of a stranger
(The nature of liability is solidary in this case)
-Notice to the world that there is a partner there, when there is an addition to the name “Ltd.” meaning it
announces to the world that there is a partner, and the partner’s liability is limited (or one of the partners is
a limited partner)
-Insofar as contribution, a partner may either be: capitalist (who contributes money or property); or industrial
partner who contributes services
-We also have what is referred to as “a partner by estoppel” → a partner, who allows his name to be included
in the firm name or in the name of the partnership and therefore, he is liable as a partner; provided that, the
other partners have consented; if not all partners have consented, then he will be liable together with the
other partners who have given their consent to allow him to include his name in the partnership (1825);
- if a capitalist partner, has committed or promise to contribute a property to the partnership (either property
or money) the effect of that is that he becomes a debtor of the partnership; second, he is bound by warranty
in case of eviction (with respect to specific or determinate thing he promised to contribute)
-He is liable for the fruits on the property or money that he contributed, without the need of demand; reason
for liability: because, he deprives the partnership which is a separate juridical entity the opportunity to make
profit, and deprives the partnership the opportunity to use the property or the money to further the business
of the partnership
-If a partner is obliged to contribute, and it has contributed, in case of imminent loss of partnership, he may
be required to give additional contribution or capital to the partnership (with the exception of an industrial
partner); if he refuses to contribute as required he must sell his interest
-Industrial partner: an industrial partner cannot engage in any kind of business; whether it is related to the
business of partnership; who committed to contribute his services is required to devote his full time to the
partnership; otherwise, the capitalist partners may exclude him from the partnership and demand payment
of damages or avail themselves of the benefits obtained by him in his separate business, with right to
damages
-If a partner is a capitalist partner: he cannot engage in any operation of the same kind, as that of the
partnership (cannot engage in the business similar to the business engaged by the partnership) otherwise,
he is required to bring the profits that he may derive from that business to the common fund, and on the
other hand if his separate business will suffer a loss, he will bear the loss alone
-If the management of the partnership is entrusted to a specified partner/s who are called as “managing
partner”, there are two kinds of managing partner:
1. MP conferred in the articles of partnerships: meaning, the managing partner is appointed in the
articles of partnership when the partners have executed the articles of partnership and registered
the same with the SEC; if you are a MP appointed under this nature, then, you may execute all acts
of administration despite the opposition of other partners unless you acted in bad faith (practically
the power of the managing partner in this nature, is absolute - he can hire and fire people; presumed
to be regular acts and done in good faith); so that the power of such is irrevocable, without just or
lawful cause; if there is a just and lawful cause to remove him, the vote of the controlling partners is
necessary for such revocation or for his termination or removal
2. MP appointed after the issuance of the articles of partnership: it may be revoked at any time and
with or without just cause
-If a partnership is created, and a new partner is admitted after the creation of the partnership and after the
partnership has started doing business, the partnership may admit new partners; but, the new partner, will
be liable as a general rule, to obligations of the partnership arising even before his admission to the
partnership as a new partner; if you are a partner admitted today, you are already liable for the indebtedness
of the partnership that is already in existence or debts incurred prior to your admission; however, the liability
of that new partner is limited to the property that he contributed; which means, that the new partner cannot
be held liable with his individual property;
-Industrial partner → liable to third party creditors with his individual property; however, among them the
partners (the capitalist and industrial) the capitalist will be required to reimburse the industrial partner for
losses suffered by the industrial partner (because the industrial partner will not be liable for the losses); he
can demand reimbursement of what he has paid to the third persons or creditors; insofar as creditors are
concerned, the IP will be liable like a general partner
-When partnership or partner may still bind the partnership after dissolution: if the act performed by a partner
is appropriate to winding up the business of the partnership; or any transaction would bind the partnership,
provided that the third person is in GF and without notice of dissolution
Limited Partnership:
-What is a limited partnership?
-Question: is a limited partner liable for the obligations of the partnership?
-A limited partner is liable with respect to his contribution; but not liable for the obligations of the partnership;
the partnership shall be liable for its obligations and after the exhaustion of partnership property; GPs
including IPs shall be liable with their individual properties
-A limited partner shall not be bound by the obligations of the partnership; a limited partner however, is liable
to the partnership, for the amount that he promised to contribute;
-The partnership, being a separate entity, will be liable for the obligations of the partnership; and to the
extent of the properties of partnership; if the properties of the partnership have been exhausted, they shall
be liable pro rata with their individual properties (GPs and IPs)
-Subsidiary, Joint and Solidary: subsidiary (liable only after the partnership properties have been exhausted;
liability of an employer in the civil liability arising from criminal liability); under torts, the nature of the liability
of employer is solidary with his employee
-Acts and omissions punishable by law = nature of liability of employer is subsidiary; if the accused was
found guilty, is found to be insolvent; on the other hand, in quasi delicts = the negligence of employee must
be proved; if the employee is found to be negligent, there is a presumption under 2180 that the employer is
also negligent (there is a presumption of negligence under bonus pater familias - doctrine of imputed
negligence; which the employer may rebut by proving bonus pater familias; this defense is not available in
culpa contractual and acts in omissions punishable by law due to the nature of the liability)
-A limited partner may be liable as a general partner in certain instances? → Yes. When he takes part in
the control of the business (Article 1848) and when his surname appears in the name of the partnership
-A limited partner’s name or surname should not appear in the partnership name, except if there is another
partner who has the same surname; if he participate in the management of the business or his name
appears in the partnership, then he will be liable like a general partner
-Must not intervene in the management or control of the business; note: in a Ltd partnership, there must
always be one general partner; what is the reason for this? - this is because in case the partnership will no
longer afford to pay off the creditors and all of their properties have been exhausted, then the general partner
shall be held liable up to the extent of their personal property; the reason is that the general partner will
protect the creditors of the partnership; remember that the Ltd. Partner is not really a partner, but only a
contributor to the partnership, and can loan money and transact business with partnership, provided that he
does not accept partnership property as security to the prejudice of the creditors; because the creditors will
still be given preference over a limited partner to withdraw what he contributed to the ltd. partnership; cannot
waive liability of a limited partner - only a contributor to the partnership, he cannot withdraw what he
contributed anytime, because the creditor’s right to the assets of the partnership will still be preferred over
the right of the limited partner
-Ltd. Partners are not bound for the obligations of the partnership, except to the contribution they give; they
are not individually liable with their separate properties; so their obligation is merely to comply with what
they have promised to contribute to the partnership
-Note: substitution, withdrawal of a Ltd. partner or addition of another Ltd. partner, will not have the effect
of dissolving the partnership; unlike the withdrawal of a general partner from the partnership
-The ltd. partner can withdraw its capital but only after the creditors are paid of their credits
Agency:
-What is agency?
-Read 1317 → related to 1868 and 1317 is also related to 1403 (1) on unenforceable contracts; one of the
unenforceable contracts is when an agent or a person acts for someone without authority, or acted outside
his authority given to him; the contract is unenforceable against htep principle
-Question: agency is consensual right?
-1874 (VIP) → becomes a formal or a solemn contract (need not be notarized); even an assignment of
lease, then that authority must be in writing, because it is an interest in an immovable property; otherwise,
the authority is void; the agency then is void, unless the authority is in writing; the GR is an agency is
perfected by mere consent (consensual) except under article 1874
-1869 → remember that i explained that, in relation to 1317, if a person will represent someone, and act for
someone, he must be authorized by that person or by the principal; or if he is not authorized, then his
authority must be ratified; because, the good thing about unenforceable contracts is that they may be
ratified; void contracts cannot be ratified as well as rescissible contracts; but when it comes to lack of
authority may be ratified; exception: quasi contract - negotiorum gestio
1. Quasi-contract → three kinds: solutio indebiti, negotiorum gestio, innominate quasi contracts
a. Negotiorum gestio: the gestor or officious manager, takes care of an abandoned or neglected
property or business of another person, without the knowledge of the owner; and therefore, without the
authority of the owner. But, even if the action of the gestor or the officious manager in these cases are not
authorized and without the knowledge of the owner; teh contracts entered into by the gestor will bind the
owner; because, negotiorum gestio is sanctioned by law; when a person takes care or attends to a business
or property which is abandoned by the owner, the law gives him the authority to continue taking care of it
until the owner arrives; and the owner is required to compensate him for his acts, or for his services; what
is very important in NG is that the contracts entered into by the gestor with third persons, are binding upon
the owner of the properties; and the gestor is also required to continue taking care of it; he cannot take care
of it initially and later on, forget about it or neglect them (he will be liable for damages; and required to
exercise standard diligence in taking care of the business of the property of the owner); if the owner arrives,
in relation to 1869, and the owner sees that the gestor is taking care of his property well and satisfied and
allows him to continue what he is doing, then the NG becomes an implied agency under 1869; the NG is
transformed from a quasi-contract into a contract of agency; it becomes an implied agency because the
owner becomes aware that someone is taking care of his property and allows him to continue taking care
of it (1869 → agency may be expressed or implied from the acts of the principal, his silence or lack of action
or failure to repudiate the agency knowing that another person is acting on his behalf without authority); vIP
that you realize that by mere inaction or failure to repudiate the act of someone who is representing you,
will make you liable as the principal for the acts committed by your agent
2. Quasi-Delict
-What is agency by estoppel? → Article 1873; there are two situations; the person here is the principal
(either especially informs another person; that other person is third person) ex.)A informs B that C is her
agent, then that is binding on C; then A is estopped from denying it to B, unless she also informs B in the
same manner
-Second situation: if that person who is the principal advertised in a newspaper that he is appointed as the
manager or president of the company, then he has the duly authorized agent to represent the company; or
if the company hires 100 marketing agents and procures calling cards for them, then the company is bound
by the acts of the 100 marketing agents and if 10 of them will resign, then the company will be required to
place an advertisement in the newspaper that they are no longer bound by the company - if the company
does not do this, then the company is still bound by the 10 resigned employees (power of estoppel continues
until the power is rescinded); the power is in full force, until notice is rescinded in the same manner it was
given
-To advertise in the newspaper → it does not mean that the person has committed a crime; this is just
necessary to comply with 1873 on the law on Agency
-An Agency may be oral, unless there is a requirement for a specific form
-How do you distinguish agency from the lease of service? → when you say agency, an agent is destined
to execute juridical acts; whereas an employee, contemplates only the performance of material acts, so that
with respect to a teller; the teller in a bank - the teller in the bank is an employee, because she performs
material acts, and if she for instance, takes some of the bills and PUTS THEM in her pocket, then she could
be guilty only of qualified theft; on the other hand, if you happen to be the president of the bank and you
misappropriate or steal money from the company and encash the check, then you will be liable for estafa
and not for qualified theft - because the key with respect ot estafa, is that the person who is liable for estafa
performs juridical acts; juridical acts includes acts that will result in the creation, modification, or extinction
of relations with third persons or third parties; for instance, if you have been authorized to represent the
owner in order to enter into a lease contract with lesses, remember that a lease will result in the creation of
a juridical title in favor of a lessee; juridical acts = we came across this the first time when we started talking
about obligations (one of the elements of an obligation); where there is juridical tie, when it will result in the
creation of an obligation; so juridical acts, includes creation, modification and extinction of relations with
third persons or third parties; on the other hand, janitors, clerks, ordinary employees of companies, their
acts in the office are material acts - will not result in juridical acts
------------------------------------------------------------------------------------------------------------------
MAY 26, 2021 - CARYL
1883 – example
already contracted.
interest of the principal and the agent, or in the interest of a third person who has accepted the stipulation
in his favor (NCC, Art. 1930).
May a commission agent sell on credit without the consent of the principal? What is the effect?
1892 ***** – the agent will if he is not given the power to appoint a substitute without authority given by his
princiipal, all acts of the substitute, shall inure to the liabily of the agent alone. Contract entered into by the
sub-agent (void)
Acts of the sub-agent can be ratified. (take note 1892 – difficult provision)
1403 –
If the agent converts the money of the principal, what is the effect?
1896 **** – one of the exceptions to the GR that a demand is necessary that the obligor may incur in delay.
- The agent appropriates a money that he owes to the principal, there is no need for demand. He is liable to
the interest.
1898 –
1926 –
1922 –
Inform also tird persons that authority of the agent has been revoked.
1929 –
1885 – there is an appointment given by the princiipal but the agent declined such appointment.
1930 – agent is the extension of the personality of the principal.
Provides exception thet even after the death of the principal, the agent will continue.
1933
Credit
Mutuum – loan on consumption ; if you borrow money, you will become the owner of the money.
An accepted promise to deliver a thing by way of commodatum or mutuum is perfected contract by mere
consent.
You may enter a contract with a bank in exchange to secure by way of contract of mortgage.
1947***** - Precarium
What are the instances that bailee in commodatum may be held liable for fortuitous events? 1942
If those instances when the borrower allow the 3 person who is not the member of the same household, it
rd
Next meeting:
Deposit
_____________________________________________________________________
-Is it possible for a special agency and a GPA to exist at the same time in one agent? Or who represents
the same principal? → Yes.
-May an agent appoint a substitute? → Yes.; If he violates that provision, what shall happen? → liable to
damages against the principal
-Duty of an agent who declines the agency? → proper diligence of a good father of a family in cases of the
property held in his custody
-If the agent appoints a substitute, can the principal sue the substitute? → 1893
-In lease, there is what we refer to accion directa: the lessor may directly sue the sub-lessee but only on
certain instances; with respect to the use and the other is with respect to preservation of thing subject to
lease; and only if the lessee has not paid his rent and in this regard, the lessor may directly sue also the
sub-lessee to collect the rent owing to the lessor from the lessee, and the lessor may collect the rentals
which the sub-lessee owes the lessee, to cover for the rentals not paid by lessee; on the other hand, or
similarly in 1893 and 1892 in those instances when the agent appoints a substitute, when he was not given
the power to appoint one, and even in the instance he was given the power to appoint but turns out that the
substitute was notoriously incompetent or insolvent, in these cases the law gave authority even if there is
no contract between the substitute and the principal because the contract here is between the agent and
substitute pursuant to law, the law authorized the principal the right to have an action against the substitute
with respect to obligations which the substitute has entered into under the substitution (another case of
accion directa - notwithstanding the absence of a contract)
-In agency by estoppel, how can the principal effect revocation of the agency? → by publication
-There are certain instances wherein an agency is irrevocable? → Yes. Article 1927 (agency is irrevocable
at these instances)
-when a special power of attorney is issued as well → considered as implied revocation; it will revoke in part
the GPA with respect to the special matter involved in the SPA
-1922; what does this mean? (2) Agent authorized to contract with public in general. — In case the agent
has general powers (as when the agent has been appointed to manage a business), innocent third persons
dealing with the agent will not be prejudiced by the revocation before they had knowledge thereof. In this
case, however, the fact that the revocation was advertised in a newspaper of general circulation would be
suffi cient warning to third persons (Art. 1922; see Rammani vs. Court of Appeals, 196 SCRA 731 [1991].),
for the publication constitutes notice upon everybody and this is true whether or not such third persons have
read the newspaper concerned.
-1930 → agency shall remain in full force and effect even after the death of the principal
-1931
-1873 → introduced to the concept of agency by estoppel; that if the principal sepcifially informed a third
person or announces a public instrument, then he is going to be estopped from denying; unless he goes to
rewinding the process and publishing an advertisement in the newspaper, that his relationship with that
agent is already terminated; two phases in the revocation of an agency because of the fact that an agency
is apreparatory contract: 1.) you revoke it and; after revoking - relationship with agent has been terminated,
but the other phase is you need to inform the public that such agency is terminated; otherwise, the
termination cannot be said to be effective; it must be effective = to be effective, you must revoke the agency
and inform all of those who have possibly come into knowledge about the appointment of such agent and
the authority of the agent to deal with third persons; otherwise, a third person who is in GF without notice of
revocation, the contract entered into by him with the agent, will bind the principal insofar as the third person
is concerned; the principal may sue the agent and the substitute, but the principal will be bound by the
contract entered into by the agent or the substitute with third persons; the recourse of hte prpcinpla is to
sue the agent or the substitute; third person is without notice of revocation, the principal will be liable
CREDIT TRANSACTIONS:
-Article 1933
-The law says that commodatum is essentially gratuitous; what does that mean? → there is a consideration;
contract of beneficence (liberality of benefactor); generosity in this case is the consideration (distinguished
from an onerous contract → a valuable consideration must be given in this case); in commodatum, it is
essentially gratuitous because in order to borrow or to lend a thing to you, it is out of one’s generosity of the
lender
-A real contract (commodatum) what does this mean? → Article 1315 and 1316 (delivery of the object of
the obligation); what is this distinguished from a consensual contract
*Generally, contracts are perfected by mere consent; but there are contracts for instance, while agency is
a consensual contract; exception to this is 1874 - it becomes a formal contract because if the agency is for
the sale or interest of a land, it requires that the authority of agent must be in writing, otherwise, the agency
is void (it is a formal contract → formality or solemnity is a requirement for the perfection and validity of a
contract); in commodatum, commodatum is not a consensual contract because it is not perfected by mere
consent - apart from consent, it required delivery: there is consent, object and consideration (which is
gratuitous) - in addition to that, for it to be perfected, the contract requires the delivery of the thing borrowed
*Referred to as consensual contract of an accepted promise to deliver a thing by commodatum → enter into
an agreement with your sister, that your sister is going to let you borrow her sneakers; this is a consensual
contract (1934)
-1934→ first part: a consensual contract (accepted promise to deliver something by way of commodatum -
they both apply to commodatum and mutuum (very important ang mutuum)); it is like a contract to sell (a
contract entered between you and the seller, but this is apart form the absolute deed of sale that the seller
will be required to execute once full price has been paid; but the CoS is a consensual and separate contract
and if you have fully paid the price, you can demand from the seller to execute the absolute deed of sale
and to deliver the property and titles; otherwise you may be held liable for damages)
ex.) you have entered into a contract; the bank and you as borrower, have entered into and there is an
agreement to give you a credit line of P1 million, it is a consensual contract but there is no real contract of
mutuum until the money has been actually delivered to you; but, in the meantime there is a consensual
contract which is demandable upon becoming due; you can demand specific performance
-Commodatum and mutuum; they are unilateral contracts; what does this mean? → loan produces
obligations only for the borrower (to return the thing borrowed); remember, commodatum and mutuum, they
are real contracts; so they are not perfected until the lender has actually delivered the thing being borrowed;
in other words, there is no perfected contract until the person has delivered the object that the bailee is
borrowing; it is a real contract = there is no contract of commodatum yet until the thing you are borrowing
has actually been delivered; in a contract of pledge, walang kontrata hangga’t hindi mo binibitawan yung
sinasangla mo na cellphone
-It is unilateral in the sense that, both mutuum and commodatum, it involves the obligations on the part of
the borrower or the bailee; the bailee has the obligation principally, and is focused on the obligation of the
borrower to return the thing borrowed in case of commodatum; in mutuum, the contract is focused on the
obligation of borrower to pay the amount of money he borrowed; any other obligations are incidentals; that
is why it is unilateral; as distinguished from a bilateral contract, it creates reciprocal obligations such as in
the contract of sale (palitan); in commodatum and mutuum, it will not in fact exist without the delivery or
giving up the possession of property; so, the contract presupposes that the lender has given up the
possession of the property to you (pinahiram na ng lender sayo yung golf set or yung book); once the
contract is perfected - now, the contract is unilateral because, it is practically all about the duty of the
borrower to return what he borrowed in case of commodatum and to pay, the money that he borrowed in
case of simple loan; any other obligations such as payment of interest (pagdating sa simple loan) or yung
obligation na hindi mo dapat ipahiram sa ibang tao yung hiniram na damit, then those are incidental terms;
but the main contract pertains essentially to the obligation of the borrower to return what he borrowed
Commodatum:
-object of contract is a non-consumable thing; borrower is required to return the same thing he borrowed (if
hindi binalik, liable for estafa)
-Essentially gratuitous; if any compensation shall be paid, then the contract ceases to be a commodatum
-Case of Catholic Vicar vs. CA → a long time ago, the church of catholics, may nagpahiram ng bahay
because after the church and convent were destroyed, they were allowed to use the house for free (the
house of the bailor); page 8 of Sir’s book
*if you are a borrower, you do not have a just title (just like in lease, you can never become an owner;
someone with a superior right); when you are merely a borrower, you are not in possession of a thing in the
concept of an owner; hindi just title ang borrower- only a juridical title; that is why, a borrower in
commodatum may be liable for estafa, because you are required to return the same thing - you did not
become the owner of that property (you merely borrowed the property); you can never be its owner, because
you recognize that your right is subordinate to the true owner of the property
-If you borrow something in commodatum, you cannot sell it; it will result to misappropriation subject to the
case of estafa
Mutuum:
-subject matter is money or other consumable things; in mutuum, the borrower is only required to pay the
equivalent amount; does not have to return exactly the bills he borrow; only needs to return an equivalent
amount (it is to pay the money that you borrowed)
-Gratuitous or onerous; when you say onerous (the consideration; there is a valuable consideration) and
the consideration in a contract of simple loan is referred to as monetary interest
-Ownership of money or other fungible things borrowed is transferred to borrower (bailee becomes the
owner of the money that he or she borrowed)
-Ownership passes to borrower; the borrower is not under any obligation to return the exact bills received
by lender; the borrower can disposed of the thing borrowed; not a case of misappropriation (consumable
thing)
-Producer’s Bank of the PH vs. CA → although the object of the loan is money, the SC recognized an
exception that where the purpose of the money (even if it is consumable) if the purpose is merely for
exhibition, then it is considered as a non-consumable item and must be returned to the bailor
-If the consumable goods are loaned only for the purposes of exhibition; the loan is a commodatum and not
a mutuum
-1942 (related to article 1939) → an additional exception to 1174 on fortuitous event (1174 talks about a
concept that when a thing is lost due to a FE, the obligation shall be extinguished and the debtor shall not
be liable for the performance of the obligation; several exceptions to 1174, and 1942 is an additional
exception to 1174)
1. ex.) Bridal gown = pinahiram sa iba; it is clearly a violation of the bailor and bailee’s agreement
Instances when a bailor may demand for the return of the thing?
In mutuum, the borrower becomes the owner of the thing borrowed. Give a legal effect pertaining thereto.
In the case of Rep vs. Sandiganbayan, in mutuum he becomes the borrower, he cannot be liable because
he can appropriate it or dispose of it and cannot be liable for estafa. The only liability is to pay the loan and
pay the interest.
2209 – what do you call the interest in 2209? Compensatory interest ; it is a form of damage.
If you borrowed money from J (10,000) payable in 1 year,you borrowed June 2, 2021. When is the 10,000
due?
If, assuming, that when you borrow 10k, you agreed to pay an interest of 6% per annum, and you paid on
June 2, 2022. How much are you going to pay?
1. Stipulated in writing
2. Must be due
Loan in discounting, the interest is deducted in advance. The lender deducts a certain amount from the
amount deducted from the loan. He doesn’t get the exact amount because there is a loan and discount at
the same time.
In ordinary loan with interest, the payment of interest shall be done after the loan amount became due or
as stipulated in writing.
If it is payable one time per annum, multiply the total amount of interest agreed upon.
How about if the parties did not agree to pay the interest? 6% legal rate by BSP.
2 kinds of interest
2. Compensatory – If you are in delay, 2209. Liable not only to principal as well as monetary, if there is no
monetary, then, legal rate.
Assuming that Iris borrowed 10k from Jonathan, there is no agreement in writing in monetary interest.
Simple loan is either gratuitous or compensatory.
You can still pay interest even if there is no agreement subject to delay.
In guarantee, the guarantor cannot be liable beyond the loan except when there is obligation to pay
damages.
2212
Interest
The borrower is given a grace period to pay the interest by the bank but there is always an accrued interest.
The interest will form part of the principal debt.
Once there is a complaint filed the interest will run from the time of demand
But if you still did not pay, summons will be served, then court will compute interest on the interest by 2212.
Guidelines in the case of Nacar vs gallery frames which modified the decision of the Eastern shipping lines.
2209 applies when the obligation is breached.
The SC in several cases has declared an interest that is excessive or unconscionable which is illegal.
The court has the ultimate authority of determining whether the interest is excessive or unconscionable.
Under the usury law, the monetary board has stipulated a fixed amount rate of interest which shall be
imposed upon the parties.
The Central bank did not appeal in the case of Bangko Central. According to SC, banko central, the usury
law has been rendered ineffective.
Th Central bank merely suspended the usury law. Lifted the interest ceiling but does not authorize stipulation
that is excessive and renders it illegal, immoral and unjust.
Because it is immoral, therefore it is illegal, then it may be struck down. Even if the interest is void, it doesn’t
mean that the court cannot fix the interest. The borrower may still be required to pay an amount of interest
fixed by the court this time.
In such an instance, it is the court that determines the validity of the interest stipulated agreed upon by the
parties.
- You may tell your client not to pay the interest and litigate to let the court decide.
_________________________________________________________________________
Commodatum:
-Can you give the instances wherein the lender in commodatum may demand the return of the thing he lent to
the bailee? → Answers: precarium (exception to stipulation of period; in precarium, no period is stipulated)
(Article 1947); when the period of borrowing the said item has already expired; when the purpose stipulated
has been accomplished; Article 1948 (acts of ingratitude: the bailor may demand the immediate return of
the thing, if the bailee commits any act of ingratitude specified in Article 765)
-What is a precarium? → it's like a tenancy at will; the lender may demand the return of the thing borrowed,
at will, and especially in instances where there is no fixed period for the loan; also, if the thing is merely
tolerated (the use of which)
-Other instances where the lender may demand return of thing borrowed: instances where the borrower is
guilty of acts of ingratitude; also in case of urgent need; reason is that the nature of commodatum is personal
- theer is a personal relationship between the lender and the borrower (bailor and bailee) - Article 1939 -
this is also the reason why the commodatum is gratuitous, and that if the thing is being lent for
compensation, then it ceases to be commodatum; what will it become in this case? → Answer: it can be a
contract of lease
-Distinguish commodatum from mutuum: gratuitous vs. onerous; transfer of ownership and possession; the
object of the contract (consumable, non-consumable, fungible and non-fungible); commodatum = both real
and personal property; mutuum = only personal property (such as money or banknotes); in mutuum,
because ownership and possession is transferred to the borrower, the borrower cannot be charged with
misappropriation or estafa. The only liability is to pay the loan and the interest
-If it is for exhibit, then it is commodatum; if the thing borrowed will be the exact thing that must be returned
- it is not mutuum; because mutuum a loan of a thing for consumption (its like you borrow rice, sugar or
money); but if the sugar is for exhibition, then the exact sugar is the one that you must return, then it is not
mutuum (it is commodatum); why? What is the reason why? → because in mutuum, the borrower becomes
the owner of the thing he borrows; so if you borrow money, you become the owner of the money and you
can use it for any purpose you want to; your only obligation is to pay (not return) the money you borrowed
-The perfect example: case of Catholic Vicar vs. CA → in such case, the respondents in this case, native
of Mountain Province, allowed the use of their house to the Catholic Vicar, to the Monsignor assigned in the
mountain province; when the church was destroyed, and the convent was destroyed; the respondents
allowed his house to be used by the catholic church; and, because of the goodness of the heart of the
respondents, the respondents did not demand the return and, because the catholic church had been using
the property for so long, the catholic church applied title to the property, on the ground that it has occupied
the property and has acquired ownership by prescription (basis of ownership to register the title under the
Land Registration Law, Property Registration Decree and Public Land Act); But the SC denied the
application of the roman catholic vicar of mountain province = as per the SC, you never had title over the
property, because you were simply in possession of that property as a borrower by way of commodatum -
so the borrower of the property by way of commodatum will never acquire title over it by prescription; in
order to acquire title over property by prescription, you must have been in possession of property by
prescription, and you must have a just title; if what you have is a juridical title, then you are similar to a
lessee in a contract of lease → the bailee in a contract of commodatum, is similar in nature (the possession)
to a lessee (can never acquire title of property subject of its lease by prescription, because he is not in
possession of the property in the concept of the owner); no matter how long a time, a lessee, a bailee, or
squatter stay on property of a person, he will never acquire ownership by prescription
-Case of Yong Chang Kin vs. People → in the case of mutuum: the money that a person borrows, becomes
his property; because it becomes his property, he cannot be made liable for estafa or for misappropriating
that money, because he becomes the owner of it; if you are simply a borrower of the money, you cannot be
charged of misappropriating it; on the other hand, if you are in possession of a property by way of
commodatum, then if you misappropriate it (if you sell it) then you can be charged of estafa - because it is
not your property and you pretended to be an owner of it and sold it to another person, and appropriated it
for your benefit; on the other hand, if you borrow money from your friend the 10k, you are not required to
account for it - the only obligation is to pay the 10k
-Loan is unilateral; what does this mean? What is a unilateral contract? (this is with respect to commodatum)
→ in commodatum: it is unilateral, because the contract of loan produces obligations only for the borrower,
which is to return the thing borrowed; if there are obligations to be performed by lender, they are simply
incidental to the ownership or consequences of borrower’s rights and duties; for instance the obligation of
the bailor to refund the extraordinary expenses during the contract for the preservation of the thing loaned,
there is an obligation on the part of the bailor to refund extraordinary expenses - but there is a requirement
on the part of the bailee to inform him about it, but the obligation of the bailee to inform him of extraordinary
expenses may be dispensed with, if the need to undertake the repair is urgent
-In mutuum, the obligation is bilateral in nature → because the lender in mutuum delivers the money
borrowed by the borrower, in consideration of the promise of the borrower to pay
-The bailee in commodatum is not entitled to the fruits, what does it mean?
-How do you distinguish commodatum from lease? (lease is a consensual contract and commodatum is a
real contract - one important distinction)
-Commodatum is a real contract right? Which means that? → this means that it is perfected by the delivery
of the thing borrowed; in addition to consent, there is an additional requirement which is the delivery
-But there is also such a thing as a consensual contract to lend a thing to another person; what is that?
What do you call this consensual contract?
-The so-called perfected contract to deliver a thing to another person; can you give an example?
-1955
-In the case of Republic vs. Sandiganbayan → in a contract of loan or mutuum, the debtor can appropriate
the thing loaned without any responsibility or duty to his creditor to return the very thing that was loan, or to
even report to the proceeds used; he is not compelled to return the fruits and proceeds loaned for there is
nothing under our laws to compel the debtor to do so; as the owner of the money he borrowed, the debtor
can dispose of it, and his act will not be considered as misappropriation of money - only liability is to pay
the loan along with interest that is either stipulated or provided under existing laws
-In a contract of loan or mutuum: the only liability on the part of the debtor, is to pay the loan, together with
the interest; which is either stipulated or provided under existing laws
2. Compensatory – If you are in delay, 2209. Liable not only to principal as well as monetary, if there is no
monetary, then, legal rate; such interest may be imposed even in the absence of express stipulation, verbal
or written (this cannot be charged as a compensation for the use or forbearance of money)
-Is the monetary interest an obligation of the debtor, even if he paid his loan on time? → Yes. Provided that it
is stipulated in writing.
-If it is stipulated in writing, then it must be paid even if the debtor pays his loan on the due date, and even if he
is in delay (monetary interest)
-VIP: 1956 → monetary interest: which requires before it could be demanded, that there should be an
agreement; and the agreement must be in writing; it doesn’t have to be notarized but it must be in writing
-Does this mean that the interest, the payment of monetary interest, falls under the statute of frauds? → No.
-If the interest does not comply with Article 1956, what is the status of the interest? → it shall be considered
as a void stipulation, if the payment of interest is not stipulated in writing
-So, what happens if there is an agreement but the agreement was not in writing? → the provisions that
may control are the provisions on solutio indebiti and natural obligations
*If solutio indebiti controls, the lender would be required to pay back the interest which was paid back by
the borrower
-What is the requirement if it is solutio indebiti? → loaner has no right to receive interest (there is no right to
receive interest, because the interest is supposed to be stipulated in writing. In such case, there was no
agreement made in writing that there would be interest paid) → therefore natural obligations will apply:
borrower will voluntarily pay interest; even if it was not stated in writing, it constitutes a voluntary obligation
on the borrower’s part, and the lender will be entitled to interest (voluntary payment)
-It was agreed upon, but it was not stated in writing; therefore, the provisions on natural obligations will
apply; and therefore, there is a defect in the stipulation of interest - it may not be demanded as a civil
obligation, but if there was voluntary payment then payment may be retained (lender may retain the
payment)
-Monetary interest → so if for instance, A borrows 100k from B, payable in one (1) year and she borrowed
today; when is it payable? → It will be due on June 3, 2022
-If there is no stipulation as to interest, how much is A going to pay B? → liable only to pay 100k as agreed
-If A agrees to pay B 12% interest per annum; then on June 3, 2022, how much is A going to pay B? →
112k; because they agreed in writing the 12% interest
-But if the loan is payable in 6 months, how much is A going to pay when the obligation becomes due after
6 months with the interest of 12% per annum → A will be liable to pay 106k, because the interest is
computed per annum; and, the loan agreement is only for half a year → divide 12 percent by 12 months
and since the loan is only for 6 months, so the interest is 6%
-Assuming that there is an agreement and it was in writing, that A shall pay B on the due date after 6 months
the entire amount of P100k but they did not agree on the rate of interest; how much is A going to pay to B
after 6 months? → legal interest shall apply which is 6% per annum; at this rate, A shall be liable to pay
103k which is half of the 6% per annum; interest that shall apply is 6% per loan; 6% is divided to 12 and
multiplied by 6
-2209 → compensatory interest: a form of damage, and in order to qualify thereunder, the obligation is an
obligation is a loan or forbearance of money; meaning, it is a loan of money; a simple loan or mutuum; and
the second qualification to fall under compensatory damage is that there should be delay; 2209 is related
to what is referred to equivalent performance, but limited to loan or forbearance of money; so it is also
related Article 1170, where in case the obligor is guilty of breach as a result of delay, or there is mora under
1169, then that is the time when the obligor is liable for compensatory interest
-Is this separate and distinct from monetary interest? → Yes. Compensatory interest is different from
monetary interest
-Compensatory Interest Problem: The loan of A from B (the 100k) payable in 6 months; and they agreed
in writing between them, as monetary interest, was 6%; the money that should be returned after 6 months
is 103k, because the agreed rate was 6%; assuming that the stipulated interest was 12%, then it should be
106k that must be returned because we should divide the 12% per annum by the 12 month period - so 1%
interest per month; then if it is 6 months, 1% is 1k; for a 6 month period, it will be 6k; if A pays on the due
date, she will pay 106k; assuming that A incurred delay and she incurred in delay for another 6 months (she
was only able to pay on the end of the 12th month despite the demand); assuming may demand or i-waive
yung demand, it falls under the exception → Will A be liable to pay compensatory interest on the end of the
12 month period when A paid the loan obligation? And how much?; instead of paying at the end of the 6th
month, A paid at the end of the 12th month; Article 2209; what is the interest rate that must be followed? =
the 12% interest paid that was agreed upon = 112k is the payment of A (additional 6k due to the 6 months
delayed); the monetary interest is 6k and compensatory interest is another 6k, so the total interest is 12k;
The monetary interest is 6k; Compensatory interest is another 6k → 2209 (when A will be able to pay, it
should be 112k already)
-Read 1959
-What is the current status of the Usury Law? → considered to be legally inexistent; merely suspended; the
effectivity of the Usury Law has been suspended by Central Bank Circular No. 905, series of 1982, effective
January 1, 1983; under Section 1-a of the Usury Law, the Monetary Board is authorized to prescribe the
maximum rate(s) of interest for the loan or renewal thereof or the forbearance of any money, goods or
credits and to change such rate(s) whenever warranted by prevailing economic and social conditions; The
Central bank merely suspended the usury law. Lifted the interest ceiling but does not authorize
stipulation that is excessive and renders it illegal, immoral and unjust; with the promulgation of the
circular, the usury has become legally inexistent
*Effectivity of Usury Law, is at present, suspended; while the BSP provides for what is the legal rate, the
purpose of the legal rate is only to provide for a rate of interest, if the parties fail to provide for a rate although
they have agreed to the payment of interest or in the case of compensatory interest, in the event that there
is no agreed rate, then under 2209, the interest will be imposed will be the legal rate and the one provided
by the BSP
*Due to the suspension of the effectivity Usury Law, the parties are allowed to stipulate higher rates of
interest; higher rates than what is provided by the BSP; so that, even if the legal interest prevailing now is
6%, there is nothing that will prevent the parties, pursuant to the autonomy of contracts, or the freedom of
the parties to enter into a contract under 1306 to stipulate on any interest that may deem would be to the
interest of the parties in loan or forbearance of money
*****Guidelines in the case of Nacar vs gallery frames which modified the decision of the Eastern
shipping lines.
1. When an obligation, regardless of its source is breached, the contravenor can be held liable
for damages. The provisions on Damages of the NCC govern in determining the measure of
recoverable damages
2. With regard to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed as follows:
a. When the obligation is breached, and it consists in the payment of a sum of money (i.e. a loan
or forbearance of money), the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.
In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default
(judicial or extrajudicial demand) - in accordance with Article 1169 of the NCC
b. When an obligation, not constituting a loan or forbearance of money, is breached: an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate 6% per
annum.
i.No interest shall be adjudged on unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty
ii.Where the demand is established with reasonable certainty: the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169)
iii.When such certainty cannot be so reasonably established at the time the demand is made: interest
shall begin to run only from the date the judgment of the court is made (at which time the
qualification of damages may be deemed to have been reasonably ascertained)
c. Actual base for the computation of legal interest shall, be on the amount finally adjudged
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph two (above), shall
be 6% per annum from such finality until its satisfaction, this interim period being deemed to
be by then an equivalent to a forbearance of credit
-VIP: 1959 → what do you call this interest? = it is called compounded interest
-What is the general rule with respect to compounded interest? → it presupposes that there is interest; so
if there is a stipulated interest in writing, what is the next rule that we must follow? Does that mean that it
may be compounded?
-Is it correct to say that 2209 applies to the debt itself, whereas 2212 applies to the interest on the debt?
-2212 = compounded → the general rule under 1959 with respect to compounding of interest, if you read
the case of Mambolao Lumber = generally speaking, interest shall not earn interest; when it is imposed on
the debt, it will not earn interest; in other words, it is prohibited under our law for interest to earn interest;
except in two instances mentioned in 1959: 1.) If there is an agreement or stipulation, to capitalize the
interest; this happens when a businessman borrows money from the bank to be used for a project and the
bank would normally give the businessman a grace period within which during that period he will not start
paying any installment on the loan; but it does not mean the bank being a wise institution, it does not mean,
that the obligation will not earn an interest; the bank will propose to the businessman that you will not pay
any installment you will not also pay any interest - but the loan will earn interest, and at the end of the grace
period (for instance, 2 years), when you are already expected to start earning, or getting revenue from your
business, then we will capitalize the interest = meaning, the interest that has accrued, it is referred to as
“accrued interest,” will be added to the principal and it will be capitalized; by the end of that grace period,
the interest will be computed based on the debt plus the interest that has been capitalized; so that if the
principal debt was 400k and after the two year period, there is an additional interest of 12k that has been
added, then, the monetary interest will be computed on the 112k and not on the 100k; the interest has been
compounded; 2.) under 2212 = the interest on the interest here, is another form of damage; but it will be
computed and reckoned from the time the payment of the obligation has been judicially demanded - the
payment of an obligation, before the obligor will be considered in delay, there should be a demand which is
either extrajudicial or judicial (unless if falls under the exceptions); so from the time of the receipt of the
extrajudicial demand, then the obligor will start to pay compensatory interest; but, if despite the extrajudicial
demand the obligor refuses to heed and pay his obligation, which constrained the obligee to file a collection
case, then he will be liable in addition to that compensatory interest, an interest on the interest which is a
form of damage from the time the obligor receives summons from the court - that is the time to reckon the
judicial demand
-VIP: 2212 → from the time it is judicially demanded (you don’t compute an interest on the interest as a
compensatory damage until there is a judicial demand); so the compensatory interest is supposed to be
imposable on the principal obligation or debt based on 2209; however, when the obligee is compelled to file
a case in order to collect indebtedness, then from the time of the receipt of summons, it is judicial demand
and the obligor will be liable in addition to the compensatory interest - liable to pay interest on interest; so
that if the interest is computed as 6k, then you will have to compute an interest on that interest - this is
different form the capitalized (ito, pag sinabing capitalized, inadd mo yung interest on the principal debt,
before you compute the monetary interest or before your compute the compensatory interest if assuming in
the latter case, there was delay)
-Note: Even if the usury law is suspended, and the parties to a contract may stipulate on the rate of interest
higher than the legal rate posted by the BSP, there is what is referred to as interest that the court may
declare as illegal, because is is unconscionable, excessive and iniquitous; the reason for the court is while
it is not usurious, if it is excessive and unconscionable and iniquitous, the court will not hesitate to declare
such interest as illegal because the reason cited by the SC: if the interest is excessive and
unconscionable, it is contrary to moral and therefore unjust; and because it is declared as contrary
to moral and unjust, it will be declared as illegal; however, even if it will be declared as illegal, it will
not enable the obligor to be free to pay any interest at all (case of Spouses Andal vs. CA → even if
the interest is declared as illegal for being excessive and unconscionable, the obligor will still be
required to pay interest but, the rate will be the legal rate which is 6% per annum; but it does not
mean that the obligor will be exempt from his obligation to pay interest, if there is a stipulation for
the payment of interest although that agreed rate is considered as excessive, unconscionable and
iniquitous and therefore it is illegal
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June 7, 2021 - Caryl (Transcribed with permitted recording for this session only)
USURY
Last time we ended up in the matter of interest being excessive. And it also mentioned that Usury law is
effectively suspended by the BSP and that the legal rate of interest provided by the BSP will not limit the
parties in the contract to fix the rate of interest that they will deemed convenient and protecting their
respective interest, which means that when the legal rate of interest is 6% parties may fix a higher rate of
interest. Note, however, that if there is a fixed rate of interest by the parties, that rate of interest will generally
speaking, be followed in computing the monetary interest including the compensatory interest. It is only
when there is no interest agreed upon by the parties, will the legal rate of interest be applicable. Take note
that even if the Usury law is suspended, so technically speaking, an interest may not be said usurious,
however, the court ultimately has a discretion of making a determination as to whether or not an interest will
be considered as excessive, unconscionable and iniquitous or it is illegal.
An interest may be declared excessive and unconscionable on the ground citing as reason that if it is
excessive, then it is immoral and unjust and therefore, the court may declare that the interest is illegal. Note,
however, that in the case of Sps. Andal vs. Philippine National Bank, where the parties agreed that an
interest shall be imposed on the loan obligation. If, in the situation where the court found that the computed
interest is found to be excessive, it doesn’t mean that the borrower, will not anymore be required to pay the
interest. According to the Supreme Court, the stipulation requiring the borrower to pay interest on his loan,
remains valid and binding. And because the computed interest declared illegal, because it is excessive and
unconscionable, the borrower will be liable to pay the interest from the time he defaulted on payment, until
the loan is fully paid, based on the legal rate which is 6%.
DEPOSIT
Art. 1968 - A voluntary deposit is that wherein the delivery is made by the will of the depositor. A
deposit may also be made by two or more persons each of whom believes himself entitled to the
thing deposited with a third person, who shall deliver it in a proper case to the one to whom it
belongs.
Take note the most important characteristic of a deposit is the fact that the principal purpose of the contract
is for safekeeping if the safekeeping is not the principal purpose of the contract, there is no deposit but other
contract.
For instance in commodatum, the principal purpose is the gratuitous and temporary use of the thing by the
borrower. In lease of things, it is a consensual contract whereby, the lessee is given the temporary
enjoyment of the property, in exchange for the payment of a rent or a price. In the case of agency, the agent
of a thing for sale is given the custody or possession of the property and the agent is given the authority to
represent the principal and to perform juridical acts on behalf of the principal. Generally speaking, agency
is onerous or for compensation.
In the case of Mamaril vs. Boy Scouts of the Philippines, the owners of Jeepneys, had an arrangement
with the security agency that he is taking care of the security of the Boy Scouts of the Philippines Compound
and allowed 6 jeepneys to be parked at the end of the day for a monthly fee. According to the Supreme
Court, the relationship between the lessor and the lessee here, is a lease and not deposit.
In the case of the OSG vs. Ayala, with respect to the arrangement between the owner of cars that are being
parked in the malls. According to the Supreme Court, it could either be lease or deposit but it is lease in the
sense that the owner of the car continuous to have the control of the car in the sense that he brings the key
with him and it is a lease of a parking space. But where the owner of the car, leaves the car with parking
attended together with his key, the parking attendant chooses where to bring the car, where to park the car,
where to safely keep the car, then it is deposit for compensation. This is a deposit for compensation.
In the case of People of the Philippines vs. Montemayor, the deposit of students in school, in to answer
for broken materials for the equipment of the laboratory, according to the Supreme Court, it is not a contract
of deposit but it is a deposit of money, it is consumable, it is termed as deposit but is actually a loan and not
a deposit which means the school becomes the owner of the money that is deposited.
Take note also under the Rent Control Act, there are two deposits mentioned in the Rent Control Act, the
first one is:
1. The deposit under section 7, 2 months deposit is the maximum amount that the lessor may require the
lessee to deposit and the principal purpose is not for safekeeping, but to answer for unpaid utilities and to
answer for unpaid rents.
2. There is also a deposit mentioned in section 8 or 9 of the Rent Control Act, pertaining to the rent in arrears,
which may be paid by the lessee by depositing the rent in arrears with either way of consignation with the
court with the Barangay or with a Bank.
Again, this is not a deposit because the principal purpose is not for safekeeping but in order to pay to serve
as payment or the rent that have accrued and unpaid. Always remember that in deposit, the principal
purpose must be for safekeeping. If the principal purpose is not for safekeeping, then it is not for deposit
and could it be any other kind of contract although it is called as deposit.
So when we attack, or when we analyze whether or not it is deposit, check what is the principal purpose of
the relationship. If the principal purpose is deposit or rather for safekeeping, then it may qualify as a deposit.
Also, the deposit that the prospective buyer of a condo or a house and lot pays to the developer or to the
seller of a condo or the house and lot in order to reserve the identified condo unit that he prefers to buy, it
is not a deposit, it may qualify as an option money in an option contract or if it forms part of a purchase price
then it is an earnest money and it is an evidence of a perfection contract.
San Miguel Properties vs. Sps. Juan, the 1M peso money given by the prospective buyer of a property,
is not a deposit but only to serve as a guarantee to ensure that the prospective buyer will not backout from
the sale. If it is given prior to the perfection of the contract, then it is an option money if it serves as an
evidence of a perfection contract then it is an earnest money and will form part of the purchase price.
BPI vs. IAC, the action star Rizaldy entrusted to contrast which eventually was acquired by the BPI
3,000USD for safekeeping. Based on the agreement executed between Garcia as an officer of the bank/
Rizaldy that 3,000 pesos is the document which embodies the contract states that the USD 3,000 pesos
was received by the bank for safekeeping. And the subsequent acts that the parties show that the intent by
the parties was to safely keep the dollars and to return it to Zshornack at a later time.
A contract of deposit is a real contract, therefore it is perfected upon the delivery of the thing deposited
although there is an agreement to constitute a deposit which is a consensual contract; an agreement to
constitute a deposit is a consensual contract and it is binding between the parties. However, the contract of
deposit will not be perfected until the delivery of the thing deposit.
In other words, pwede kayo magkaroon ng usapan na mag de deposito ka, and it is a binding consensual
contract of deposit. However, the contract of deposit is not perfected until the thing deposited is delivered
by the depositor to the depositary.
CA – Agro Industrial Corporation vs. CA, the issue is the contractual relation between a commercial bank
and in other party of the contract of rent in a safety deposit box with respect to the content of the deposit
box placed by the latter, one of bailor and bailee or one of lessor and lessee. The question is, when you
apply and if you are renting a safety deposit box in the bank, what is your relationship with the bank, is it a
contract of deposit or a contract of lease?
The arrangement when one rents a safety deposit box, every safety deposit box in the bank, has two kinds
of keys:
So that if you would like to put in something in the safety deposit box, you will have to go to the officer of
the bank and tell him that you would like to open your safety deposit box, because you cannot open your
safety deposit box without the officer of the bank getting his key and using it in order to open the safety
deposit box at the same time you also key in your key which is also necessary to open your box. So there
are two keys that must be keep in the safety deposit box in order to open it and for you to be able to place
anything in the safety deposit box. Now what happens in case the safety deposit box is loss or destroyed?
Will the bank be liable as the depositary or what is the liability of the bank as a depositary or as a lessor?
According to the Supreme Court, the contract of rent for safety deposit box is not an ordinary contract of
lease. It is not also a contract of deposit it is a special kind of deposit; it cannot be characterized as a
contract of lease because the full and absolute possession and control of the deposit box was not given to
the joint renters or was not given to the renter. Meaning, the renter or the lessee does not have the full and
absolute possession and control over the safety deposit box. The guard key of the box remains with the
bank. Without this key, the renter could not open the box. Similarly, the bank could not also open the box
without the renter’s key. However, it is a special kind of deposit, because the primary function of the safety
deposit box is still for the safekeeping of the valuable objects placed inside the safety deposit box by the
renter. Because it is a special kind of deposit, the depositary would be liable if in performing its obligation,
it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. In the absence
of any stipulation prescribing the degree of diligence required, that which is expected that good father of the
family is to be observed, so that any stipulation which was provided in the contract of deposit that the bank
normally would make the renter sign. Any stipulation exempting depository from any liability arising from the
loss of the thing deposited on the account of fraud, negligence or delay, would be void for being contrary to
law and public policy. In this case, the bank made the renter sign a contract of lease but which is actually a
contract of deposit exempting the bank from liability arising from its negligence and the contract obtained a
waiver stating the bank is not a depositary of the contents of the same and has neither the possession nor
control of the same. The bank has no interest whatsoever in said contents except herein expressly provided
and it assumes absolutely no liability in connection therewith. According to the Supreme Court, this
stipulation is contrary to public policy and therefor, it is void. So to recapitulate, the relationship between the
bank and the renter of the safety deposit box is special kind of deposit. It is not strictly speaking a deposit.
It is a special kind of deposit and it is not a contract of lease and because it is a special kind of deposit, the
depository is required to observe the diligence of the good father of a family in ensuring that the contents of
the safety deposit box although it requires another key from the renter is protected and the primary function
of the safety deposit box is still for the safekeeping of the valuable inside. A contract of deposit may be
entered into orally or in writing. But the contract of deposit is not perfected until the delivery of a thing
deposited.
In the case of Triple V food services vs. Filipino Merchants Insurance, the Supreme Court held that in
a contract of deposit, a person receives an object belonging to another with the obligation of safekeeping it
and returning the same. A deposit may be constituted even without any consideration. It is not necessary
that a depositary receives a fee before it becomes obligated to keep the items for safekeeping and to return
it later to the depositor. So in the case of Triple V, when the owner of the car entrusted his car to the Triple
V restaurant to a valet attendant while eating at the Kamayan restaurant, the owner of the car has a
customer expected that the car will be returned to him safely at the end of her meal. So that the Triple V, as
the owner of Kamayan restaurant, was constituted as the depositary of the said car. So that the Triple V,
the Kamayan restaurant cannot avail the liability by arguing that neither a contract of deposit nor that
insurance, guaranty or surety for the loss of the car was constituted when the owner as customer, availed
of its free valet parking service. In other words, the obligation of the depository of safely keeping the car
with the diligence of a good father of the family, stands notwithstanding that the deposit made gratuitously
whether it may be it is gratuitous or for compensation. The obligation of the depository is to take care of the
thing deposited with the diligence of a good father of the Family. Here, the parking claim stub embodying
the terms and conditions of the parking, including the stipulation relieving the Triple V or the Kamayan
restaurant for any loss or damage to the car, is essentially a contract of adhesion which is drafted or
perfected as it is by the Triple V Kamayan with no participation whatsoever on the part of their customers
who merely adheres for the printed stipulation therein which appears the claim stub. While contracts of
adhesion is not void per se, courts will not hesitate to ruled out blind adherence thereto which they proved
to be one-sided under the facts and under the attended facts and circumstances. So it appears here that
the valet parking, free parking service being provided by the restaurant, is a way in order to entice its
customers. So a safe parking space is an added attraction to the restaurant business because customers
are thereby somehow assured that their vehicles are safely kept rather than parking it elsewhere at their
own risk having entrusted the car to the valet attendant of triple V, the owner of the car as the customer of
the restaurant, fully expects the security of the car while of the premises of the restaurant expects the same
return at the end of the visit to the restaurant.
Article 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit the thing
with a third person. If deposit with a third person is allowed, the depositary is liable for the loss if
he deposited the thing with a person who is manifestly careless or unfit. The depositary is
responsible for the negligence of his employees.
The reason is ilagay natin sa ibabaw ng 1973, a contract of deposit is a contract of confidence. Note that
the depositary is liable for his employees negligence. Take note that if it is the case of culpa-contractual,
the principle applicable is the principle on the rule on Respondeat Superior. Which means, If in the case of
Respondeat Superior, (always remember this) applies in culpa contractual. In culpa contractual, the obligor
is liable for negligence in case there is breach of obligation or if there is breach of a contract. For instance
in this case, when there is a breach of a contract when the depositary is liable and the negligence of the
depositary is presumed because there is negligence in the performance of the contract. It is presumed that
the contract is not performed. Once the contract is not performed, then negligence is presumed. On the
other hand in quasi-delict when someone is injured, negligence is not presumed, negligence must be
proved. There is no presumption of negligence because there is no pre-existing contract of relationship. On
the other hand, in the case of a breach of contract, negligence is presumed by the fact that the contract was
breached. In other words, because of the agreement between the parties whereby the obligor, commits to
perform his obligation in the contract. For instance, in the case of deposit, there is a contract of the depositor
and the depositary, and the depositary commits that he will safely keep the thing deposited to them. In case
the thing deposited is lost or damaged, then he fails to perform his obligation in the contract and is liable for
breach of contract and his negligence is presumed.
Where does the rule of Respondeat Superior comes in? The rule of respondeat superior will come in if there
is vicarious liability. In other words, where there is employer- employee relationship. Wherein the employee
was the one who committed negligence where the employee committed the negligence and as the result of
the negligence of the employee, the contract was breached. Then the rule on Respondeat Superior arise
when the negligence of the employee will be considered as the negligence of the employer. And under the
Rule on Respondeat Superior, the employer cannot invoke the defense that he exercise the diligence in the
selection and supervision of the employee. That is irrelevant.
Article 1977. The depositary cannot make use of the thing deposited without the express permission
of the depositor.
However, when the preservation of the thing deposited requires its use, it must be used but only for
that purpose.
Article 1978. When the depositary has permission to use the thing deposited, the contract loses the
concept of a deposit and becomes a loan or commodatum, except where safekeeping is still the
principal purpose of the contract.
The permission shall not be presumed, and its existence must be proved.
This is 1977 and 1978 refers to irregular deposit. Take note that under 1978, when the depositary has been
given the use of the thing deposited, then the contract losses the contract of deposit and beomes a
commodatum except where safekeeping is still the principal purpose. Where the principal purpose is still
the safekeeping then it remains the contract of deposit.
Underline the except where safekeeping is still the principal purpose of the contract.
Article 1979. The depositary is liable for the loss of the thing through a fortuitous event:
(1) If it is so stipulated;
Take note, again, put an asterisk in 1979, this is again an exception to 1174, this would qualify as an
exception whereby here, the depositary shall be liable for loss of the thing even if it is through a fortuitous
even. So if it is stipulated, if he uses the thing without the depositor’s permission, if he delays his return and
allows others to use it.
Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan.
So take note the relationship between the depositor of the money and the bank and the bank is a contract
of simple loan and contract of deposit. The fiduciary nature of a bank-depositor relationship does not convert
between the bank and its depositors from simple loan to a trust agreement whether express or implied. So
the failure of the bank to pay the depositor is a failure to pay a loan and not a breach of trust. The lost on
the other hand, imposes upon the bank a higher standard of integrity and performance in complying in its
obligation under the contract of loan beyond those non-bank debtors in the contract of simple loan. It is
simply because of importance of banking industry in our society so that, the banks’ banks are required to
exercise utmost diligence in taking case of the money deposited by the depositor with the bank but the
relationship between the depositor of the money of the bank is still a contract of simple loan.
(2) When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck,
or other similar events.
Article 1994. The depositary may retain the thing in pledge until the full payment of what may be due
him by reason of the deposit.
This is a case of legal pledge. Remember we talked about the mechanics lien last time whereby the
mechanic may hold the thing, the key repaired as a pledge and he may not be required to return the
appliance until the fee for which he is entitled is paid and he may under 2121.
Article 2121. Pledges created by operation of law, such as those referred to in articles 546, 1731,
and 1994, are governed by the foregoing articles on the possession, care and sale of the thing as
well as on the termination of the pledge. However, after payment of the debt and expenses, the
remainder of the price of the sale shall be delivered to the obligor.
In other words, the pledge here is created by operation of law. Which means that the thing deposited on his
own, in accordance with the procedure of a devotion of thing subject of pledge. The proceeds thereof under
2121 shall be used in order to pay the unpaid obligation to depositary and the expenses for the same.
Article 1997. The deposit referred to in No. 1 of the preceding article shall be governed by the
provisions of the law establishing it, and in case of its deficiency, by the rules on voluntary deposit.
The deposit mentioned in No. 2 of the preceding article shall be regulated by the provisions
concerning voluntary deposit and by article 2168.
Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as
necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided
that notice was given to them, or to their employees, of the effects brought by the guests and that,
on the part of the latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.
Article 1999. The hotel-keeper is liable for the vehicles, animals and articles which have been
introduced or placed in the annexes of the hotel.
Underline annexes of the hotel which includes the parking lot. So there are 3 instances that would qualify
as necessary deposit:
2. Takes place on the occasion of the calamity such as fire, storm flood and other similar events.
An example of item number one is in pledge. Under the law on pledge, under 2104, when the creditor, uses
the thing pledged without the authority of the owner, the owner or the pledgor may ask that it may be
judicially and extrajudicially deposited. So, the deposit here is made in compliance of the law. Therefore, it
will fall under the necessary deposit. When during the fire, storm or other calamity and a property is saved
by the person without the knowledge of the owner, an obligation is created from quasi-contract. In other
words, when thing is abandoned in the calamity, then the quasi-contract of negotiorum gestio is created.
Likewise the person who has come into the possession of the thing belonging to another, as a result of the
calamity is constituted as depositary and therefore obliged to safely keep the thing and to return the same
to the owner.
1. Quasi-contract of negotiorum gestio – When the gestio or officious manager takes care of the property
which is abandoned or neglected. Also, during a calamity by express provision of law, a person who has
come into possession of a thing belonging to another during the calamity is constituted as depositary and
thus he is obliged to take care of it. With respect to hotel keepers, there is the hotels or inns are constituted
as depositaries of things or valuables that you bring inside the hotels or inns. Provided, the following
requisites are complied with:
1. Notice was given to the hotel or its employees of the effects that are brought by the guest. That notice is
given to the hotel or its employees that the fact certain valuables have brought by the guest inside the hotel.
2. That the guest takes the precautions which the hotel keepers that the substitute advised them relative to
the care and vigilance of their effects. In other words if there are instructions, for instance, the instructions
provides that if you have brought inside the hotel the jewelries, then you must use the vault provided in the
hotel room. Therefore, that would constitute precaution or additional instruction given by the hotel.
Note that a restaurant where meals are only furnished is not an inn or tavern. An inn must be distinguished
from a private boarding house because in the inn, the hotel-keeper does not have the discretion of choosing
his guest. On the other hand, in a private boarding house, the keeper of the boarding house is at liberty to
choose his guest.
Take note in the case of YHT vs. CA, the Supreme Court declared that the actual delivery of goods to the
inn-keepers or their employees, is not necessary before liability would attach to the hotel keepers.
Remember we mentioned that the law requires that before the liability of the hotel keeper will attach, certain
requisites must be complied with:
In the case of YHT Realty Corporation, it is not necessary that the guest actually delivers the valuables to
the hotel or its employees. It is not therefore necessary that these valuables are actually turned over to the
hotel before they can be held liable.
In fact, in the case of Sulpicio Lines vs. Sessante, the rule on necessary deposit applies to passengers
of common carriers. It states that the law is required as the hotel keeper. This what we discussed last time
that the passenger of a common carrier would bring with him:
1. The baggage that he turns over to the common carrier for safekeeping;
2. The hand carried luggage of the passenger that he retains with him and which he does not turn over to the
common carrier.
The former is governed by the common carriers with respect to the safekeeping of goods; the latter is
governed by the rule on necessary deposits. The latter refers to hand carried luggage referring to
passengers.
Similarly, both the hand carried luggage of the passenger and the valuables that guest would bring in the
hotels, they are not actually the turn over of these items are not necessary. Both in the case of YHT Realty
and in the case of Sulpicio Lines vs. Sessante.
In the case of Durban Apartments Corporation vs. Pioneer Insurance, the ponente of this case is Justice
Nachura. The records reveal that upon arrival in the City Garden Hotel in Makati, the owner of the car who
is a customer in the hotel, gave notice to the doorman and parking attendant of the said hotel about his
Suzuki Vitara when he entrusted his ignition key to the latter. So the employee of the hotel issued a valet
parking customer claim stub and the employee of the hotel brought the car to a parking area near the hotel
not exactly in the annex of the hotel. However, the parking area is the parking area of equitable PCI Bank
which became the annex of the City Garden Hotel when the management of the bank allowed the parking
of the vehicles of the hotel guests in the evening after the banking hours. In other words, the parking area
does not have to be owned by the hotel for as long as there is a permission by the owner of the parking
area being used by the hotel as a parking area or additional parking area of the hotel. Later, the owner of
the car was informed that his car was being carnapped while parked at the said parking area based on the
facts as found by the lower court, the Supreme Court affirmed that the claim stub issued by the City Garden
Hotel, served as a contract of deposit and that contract of deposit was perfected between the City Garden
Hotel and the owner of the car upon the delivery of the car to the hotel parking valet attendant of the car.
And, meaning the delivery of the key and the car and therefore the depositary, the City Garden Hotel is
bound to observe the diligence of a good Father of the Family of safely keeping it and therefore, when then
car was carnapped, the City Garden Hotel is liable for the loss of the owner of the car.
Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or
injury to the personal property of the guests caused by the servants or employees of the keepers of
hotels or inns as well as strangers; but not that which may proceed from any force majeure. The
fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall
be considered in determining the degree of care required of him.
Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure,
unless it is done with the use of arms or through an irresistible force.
In other words the hotel keeper shall be liable if the loss or injury to the personal property caused by the
servants or employers or the keepers of the hotels or inns as well as strangers. So this is more than the
case of respondeat superior because in the respondeat superior the employer is liable for the negligence
of his employees. Here, the hotel keeper is liable not only for the negligence of its employees, but also by
strangers. So underline “as well as strangers” because this is unusual. The exception is in case of force
majeure.
The fact that the personal property of the guest was stolen, it would fall under acts and another exception
is if the cause of loss.
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the
guest, his family, servants or visitors, or if the loss arises from the character of the things brought
into the hotel.
Exceptions:
2. If it is due to the act of the guest himself or his Family or servants or visitors;
In order words, kung ang dala mo ay nabubulok, the hotel cannot be made answerable for that. So, the rule
is, the hotel keeper or inn shall be liable for the loss of or injury of the personal property of the guest even
if it is caused by the servants or the employees of the hotel, or even if it is caused by strangers; except:
1. Force Majeure
Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the
effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-
keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is
suppressed or diminished shall be void.
Take note in this necessary deposit, you have to give this to this Chapter more importance – the necessary
deposit. Also with respect to 2004,
Article 2004. The hotel-keeper has a right to retain the things brought into the hotel by the guest, as
a security for credits on account of lodging, and supplies usually furnished to hotel guests.
2004 is to retain. Again, this is a kind of pledge by operation of law. 2003 is an exculpatory notices and
conditions will not exempt the hotel from liability. Take note that under 2004, in order for the hotel to exercise
his so-called right of retention, 2004 lagay sa ibabaw right of retention. Note that in order for the hotel keeper
to exercise his right of retention, it is not necessary that the hotel keeper has acquired physical or
constructive possession of the things brought into the premises of the hotel or inn. It is enough that these
things are brought in the hotel. It is not necessary that the hotel keeper is able to take physical possession
pr constructive possession of the things brought in the premises of the hotel. It is enough that it is brought
into the hotel.
On the matter of judicial deposit or sequestration, read the case of Superlines Transportation vs. PNCC,
that according to the Supreme Court in this case, if in this case the car or the bus was involved in an accident
and therefor subject to investigation. The SC in this case found that the act of the police of impounding the
car, has being violative of the constitutional provision of unreasonable search and seizures which means
that before a thing may desist, there should be a warrant of seizure issued by the judge after showing
probable cause that a crime has been committed. However, in this case, while the act of impounding the
bus by a patrolman conducting an investigation of the accident was not valid. However, SC said that the act
of patrolman in turning over the bus with the PNCC storage area is a contract of deposit. So the police
authorities to patrolman having turned over the bus to the PNCC to safety, the contract of deposit was
perfected between them and the respondents.
We have personal securities which are guarantees and sureties and the second kind will be real securities
including pledge, chattel mortgage, real estate mortgage and antichresis.
_________________________________________________________________________
DEPOSIT:
-1962: focus on the fact that the contract of deposit is intended for the purpose of safekeeping of the thing
delivered by the depositor to the depositary
-Note: remember in commodatum, the principal purpose of the contract is the gratuitous and temporary use
of the property lent by the lender to the borrower; in the case of lease, it is a consensual contract, whereby
the lessor binds himself to allow the lessee the temporary use of his property in exchange for a price called
the rent; take note also that in agency, if you distinguish agency from deposit, the agent of a thing entrusted
to the agent for sale, the agent is given the custody of the thing and the agent is given the authority by the
principal, in order to represent and for the agent to act on behalf of the principal, to perform juridical acts;
-Mamaril vs. Boy Scouts of the PH → owners of six jeepneys entered into a relationship with the BSPH to
allow its jeepnesy to be parked at the end of the day for the monthly rent of P300 per unit; the owner of the
jeepney would take the keys home (they would bring the keys home and would not leave the keys to the
security); according to the SC the contract entered, is a contract of lease of a parking space; similarly in the
case OSG vs. Ayala Land, the SC said that in the case of vehicles parked in the mall parking areas, the
contract entered into would either be a deposit or a lease; it is a deposit in the case of valet parking
relationship whereby the owner of the vehicle would entrust the vehicle plus the key to the attendant, in
exchange for compensation because deposit although it is essentially gratuitous, can also be a business;
in OSG vs. Ayala, the SC said it is a lease if the owner of the vehicle would leave the vehicles in the parking
areas of the mall taking with them the key in that instance, the owner of the vehicle is simply leasing a
parking space from the mall
-PH vs. Montemayor → the students who are being required to make a deposit by teh school for a sum of
money as security or guaranty for the equipment that may be broken in the laboratory of the school; the SC
said it is a contract of loan ,because the university acquires ownership of the money and apply the same to
the cost that will be incurred by the university for broken equipment and materials of the university
-Rental Control Act → two instances where the term deposit was mentioned
1. Section 7: the lessor may be allowed to in addition for asking for advance rental; allowed to ask from
the lessee a deposit not exceeding two months; the principal purpose of the deposit under this act,
is not for the safekeeping of the money but to serve as a security in the event that the lessee fails to
settle the rent, electric, etc. bills or if any components or accessories will be destroyed during the
occasion of the lease
2. “Deposit” → that the lessee may consign, may deposit by way of consignment, rent in arrears and
the deposit or consignment may be made either with the court, barangay chairman, or with the bank
→ here, the principal purpose is not for safekeeping, but for the payment of the rent in arrears
-Case of San Miguel vs. Sps. Juang → the SC said that the deposit given by a prospective buyer of a
property (condo or house and lot) to developer or seller of condo or house or the subdivision developer,
although termed as deposit, but the principal purpose is option money; the deposit was given in order to
guarantee that the buyer will not back out of the sale and eventually the 1 million given as deposit will serve
as earnest money → note: option money is a consideration in a option contract when the buyer is given the
option within which to decide, and the seller will hold the option in favor of the buyer during the period and
that the seller will not offer the property to other individuals; on the other hand, here it is an option money it
is a money deposited prior to perfection; earnest money if it is paid at the time for the consideration -
downpayment and forms part of the purchase price of the sale
-BPI vs. IAC → Bobby Rizaldy (a movie actor), entered into a contract with commercial bank and trust
(acquired by BPI), and he deposited with commercial bank an amount of three thousand USD and it is for
safekeeping; according to SC: the subsequent acts of the parties show that the intent of the parties was to
safekeep the dollars and to return it at a later time; so that the acts of the bank and not being able to return
when demanded, would constitute in a case of misappropriation of money considering that in deposit, the
act of the depositary in appropriating the thing deposited, will amount to estafa; while in loan or in simple
loan, or mutuum, the borrower becomes the owner of the property and only obligation is to pay the money
borrowed
-A deposit is a real contract which means that it is perfected upon the delivery of the thing deposited; there
is a however also, although the contract of deposit requires the delivery of the object, parties may
nevertheless enter into an agreement to deposit something in the future; prospective depositor
binds himself to deposit something in the future; here, there is a consensual contract that is
perfected to deposit in the future; it is binding upon the parties, and may result in the parties who
failed to perform his obligation to be liable for damages
-Deposit is a gratuitous contract, unless the depository is engaged in the business of storing goods
-Types of deposit:
1. Voluntary
2. Necessary
3. Judicial or sequestration
4. Irregular deposit
-1968: when two persons are contending to ownership of thing and agree to deposit it with third person
within the meantime = action for interpleader; they file an action for interpleader; they place the thing with a
third person, so that after the action has been decided or in the event that they will agree to compromise,
then that is the only time that the depository may be required to deliver to the party that the favorable
decision is with - to recover the thing deposited
-Case of CA-Agro Industrial vs. CA → question: is the contractual relation between a commercial bank and
another party in the contract of rent of a safety deposit box, with respect to the contents, one of bailor or
bailee, or one of lessor or lessee ( whenever we rent a safety deposit box; what is the contract we enter
with the bank?)
In this case, the renter entered into or was asked by the bank to sign a contract of lease, which provides
that among others, 1.) bank is not a depositary of the contents of the safe - not a contract of deposit; and it
neither has possession or control of the safety deposit box; 2.) bank has no interest in said contents of the
safety deposit box, expect as provided and it assumes no liability in connection therewith; the intention of
the bank is to agree with the renter that the contract entered into between them is lease;
-Note: when we rent a safety deposit box: there are two keys → given to the renter and the other one is
kept by the bank (not for the same hole, but for different holes but they must be used if both keys must be
available if the renter would like to open and put something in the SDB); you need to ask permission of the
bank officer and will send someone with you to lead you to the SDB and will key in the key apart from the
renter’s key →
- in this case, the renter has placed inside the SDB certificates of title; after some time the certificates of
titles were lost while inside the SDB; question: if it is a deposit, then we will apply the rules on deposit; if it
is a lease, then the lessor will not be liable for the lessor of the thing (the possession of the property subject
of the lease is with the lessee during the period of the lease)
-According to SC: the contract for the rent of SDB is not an ordinary contract of lease - the SC also said that
it is not also strictly speaking a contract of deposit; it is not a contract of lease because the full and absolute
possession and control of the SDB was not given to the renter - the guard key remained with the bank
(without the guard key, the renter could not open the box) on the other hand, the bank could not also open
the box without the renter’s key; note: in this case, the primary function as found by the SC still falls within
the parameters within the contract of deposit (receiving objects for safekeeping); the renting out the SDB is
not independent but related to the function of safekeeping; according to the SC, the SC tilted its decision in
favor of a contract of deposit and not of lease - in addition, the SC said being the depositary, the bank is
required to observe standard diligence in ensuring that the objects deposited in it will be kept safely and
protected; besides, the SDB remained in the custody of the bank except that the renter has a key; but
overall, it is a contract of deposit and the depositary, if he commits a breach of his obligation as a depositary
(delay, fraud, negligence) he shall be liable for damages; in the absence of any stipulation for the degree of
diligence, standard diligence is observed - stipulations that the bank made the renter sign exempting the
depository from liability arising from the loss of the thing on account of fraud, etc. → they are void for being
contrary to law and public policy; it is not correct to assert that the bank has neither the control or the
possession of the SDB, because the SDB is within the premises of the bank (the renter cannot just simply
open the SDB without the bank’s guard key)
-1972:
-1977:
-Triple V food services vs. PH Merchants → Triple V is the owner of Kamayan Restaurant, and that
sometime in 1997 a customer went to Triple V and the Kamayan Restaurant provided a valet parking
service, whereby the customer of Kamayan would leave its vehicle together with the key to the valet parking
attendant, so that it would be convenient for a customer who will just simply get inside and have his meal,
and when he gets out, the car would be returned to him when he gets out of the restaurant of the front door
of the restaurant (it is an enticement to the customers) → the problem with the case of this customer; after
her meal, it was found that her vehicle was carnapped and was never recovered; according to the SC, when
the customer entrusted the car to the valet parking attendant, the customer expected the car’s safe return;
so the restaurant was constituted as a depositary of the said car; and the business cannot evade liability by
arguing that the contract of deposit which is the parking claim stub that it issued to the customer, contained
a stipulation exempting the restaurant from liability and that the customer waives any claim to indemnity for
the loss or damage of vehicle; the parking claim stub according to the SC, is essentially a contract of
adhesion (customer merely adheres to the stipulation) → while contracts of adhesion are not void per se,
the SC however will not hesitate to rule out blind adherence thereto if they prove to be one-sided under the
attendant facts and circumstances; so according to the SC, the business must not be allowed to use the
parking claim stubs as a shield from any responsibility or liability; the SC also noted that the valet parking
fee services of the business or was part of the enticement for customers; a safe parking space served as
an added attraction to Kamayan’s restaurant
-Rule of respondeat superior vs. bonus pater familias → rule of respondeat superior is the principle
being adhered to in culpa contractual; the reason why the rule of respondeat superior is applicable,
because in culpa contractual where there is negligence on the part of the obligor in the performance
of his contract, there is a presumption of negligence; the negligence is presumed. Unlike in the case
of torts, where the negligence must be proved and not presumed; so that, in the case of a depositary,
if an employee meaning if the obligor uses an employee as the actor (the employee committed
negligence), the presumption is, the negligence of the employee will also be the negligence of the
employer; in the case of quasi-delict, if the employee is also negligent, employer is also presumed
to be negligent
-Culpa contractual → employer cannot assert the defense of a good father of a family in the selection
and supervision of employees
-2180 = employer may invoke defense; can be exempted from liability if he is able to prove that he
is able to exercise the diligence of a good father of a family
-Deposit → employer cannot exercise the defense of bonus pater familias under Article 2180;
because the rule applicable to deposit is the respondeat superior (Article 1973); however, bonus
pater familias will only reduce liability but not exempt him
-Huang vs. PH Hoteliers Inc. → in breach of contract, negligence is presumed so long as it can be proved
that there was a breach of contract and the burden is on the defendant (obligor) to prove that there was no
negligence in carrying out the terms of contract; rule of respondeat superior is followed; liability involved
derived from breach of obligation - irrelevant for the employer to prove that it had exercised due care in the
selection and instruction of the employee; once employee is negligent, conclusively, the employer is
negligent
-2180 = employee is negligent, the employer IS ONLY PRESUMED TO BE NEGLIGENT; the employer
may still be exempted from liability if he can show that he exercised diligence in the selection and
supervision of employees (applicable lang ito sa quasi-delict)
-contract of deposit → negligence of the obligor will fall under the rule of respondeat superior
-1977 and 1978 → refers to irregular deposit; meaning, generally speaking the depositary cannot use the
thing deposited without the express permission of the depositor; otherwise liable for damages; when the
preservation of the thing deposited requires its use, it must be used but only for that purpose (ex.) car or
machine that must be checked operated upon once in a while, then the use is authorized but only for that
purpose)
-Under 1978: when the depository has permission (irregular deposit) → becomes a loan or commodatum;
except when safekeeping is still the principal purpose of contract
-1979: (similar to the case of commodatum) → where the borrower may be liable for fortuitous event; the
depositary may also be liable regardless of the fortuitous event (additional exceptions to 1174)
-1994: (case of pledge constituted by operation of law) → we talked about the mechanic’s lien; this is another
situation when a legal pledge is constituted in favor of the depositary (1994); here, the depositary may retain
the thing in pledge until the full payment what may be due to him by reason of deposit by operation of law
(retain the thing as form of security); even if the contract of deposit is gratuitous but expenses for
preservation for thing deposited will be charged against depositor; so if the depositor will not reimburse, for
that reason the depositary may retain thing by way of pledge
Necessary Deposit:
-1996:
-1997:
-1998:
-1999:
-Necessary deposit vs. voluntary deposit → the first situation is, when the deposit is made in compliance
with a legal obligation; an example would be in the case of pledge, when the pledgee is using the thing
pledged, then the pledgor may ask that the thing pledged, will be placed in extrajudicially deposited in order
to protect the thing pledged; so it is in compliance with a legal obligation; second: when it takes place in a
calamity → a property is saved from destruction by another person, without the knowledge of the owner, a
obligation created in the source of which is quasi-contract (in quasi contract of negotiorum gestio =
abandoned business is taken care of by an officious manager; the manager is required to observe ordinary
diligence in taking care of the property that is placed in his custody)
-In addition, under the chapter 2 on necessary deposit: the person who has taken the custody of a property
which was saved from a calamity, he is constituted as a depository → he is also required to exercise due
diligence in the safekeeping of the property that was placed in his custody, whether voluntarily or
accidentally for as long as he has come into possession of the thing in the occasion of the calamity, he is
required to keep the thing safely until the owner arrives
*in both cases, the officious manager are required to exercise ordinary diligence in the safekeeping of the
property
3. Hotel keepers → if a valuable thing is brought inside the hotel guest in the premises of the hotel, it
is not necessary that the valuable is turned over to the hotel or to the hotel employees; it is enough that the
thing is brought inside the premises of the hotel; once brought inside, the hotelkeepers shall be liable for
loss or damage or that thing, provided these two requisites are compiled by the guest:
a. 1.) the guest has given notice to the hotelkeeper or its employees of the effects that are brought
inside the hotel; (no need to turn over to hotel; may remain in the room)
b. 2.) that the guest has taken precautions which the hotelkeepers have advised them relative to the
care and vigilance to their effects
Example of second requisite: The hotel will advise you that if you have jewelries, please place them in the
vault; if you do not comply with the precaution, then you failed to comply with one of the requisites for the
hotel keeper to be liable for the loss and damages brought inside the hotel
-YHT Realty Corp. → the actual delivery to the goods to innkeepers or employees is not necessary before
liability could attach in the event of loss of personal belongings of guests;
-Sulpicio Lines vs. Sesante → when we discuss 1754 on common carriers, that there are two kinds of
luggages that are brought by the passenger of common carrier: 1.) actually turned over and placed in the
cabin of the ship or plane; 2.) hand carried luggage that are not turned over to the plane or ship = the first
kind of luggage will be covered by the common carrier’s responsibility to ensure the safety of the goods and
to ensure that the goods are brought to the destination safely; second kind of luggage: governed by the rule
on necessary deposit in the case of valuables brought inside the hotel premises; common carrier in this
case is constituted as a depositary with respect to the personal luggages and that remain in the passenger’s
possession → notification was not necessary to render the common carrier liable for the loss of personal
belongings by allow him to board in the same manner that a guest was allowed to check in the hotel, by
allowing a passenger to board the vessel with his belongings without any protest, the vessel became
sufficiently notified with regard to the belongings; for as long as the belongings are brought inside the vessel,
the owner of the vessel is therefore informed and must ensure the safety of the belongings during the
voyage
-Durban Apartments vs. Pioneer Insurance → (Justice Nachura): one evening, a hotel guest, checked in
City Garden Hotel in Makati; and turned over to the valet parking or to the valet parking attendant a Suzuki
Vitara upon whom he also entrusted the key; the hotel parking attendant gave the customer a customer
claim stub; brought the vehicle and parked the same in the parking area of Equitable PCI Bank near or
beside the City Garden Hotel; it turns out that the City Garden Hotel (there was an arrangement between
the bank and CGH = in the evening is being allowed by the bank to use its parking area when the bank is
closed); the car was carnapped and was never returned to the customer of the hotel → according to the
SC, there was a contract of deposit; the PCI bank parking area operated as an annex of the hotel, and
therefore the responsibility of the hotel extended to the parking area to ensure that the parked vehicles of
its hotel guests will be kept safely and returned to hotel guests when needed and when he checks out from
the hotel; clearly, the SC said that the CGH is liable for the loss of the hotel guest vehicle
-2000
-2001
-2002
-2003
-The rule is clear that the hotel keeper is liable for the loss or damage or injury to the personal property of
the guest which includes vehicles; and, it is liable even if it is caused by the servants or employees of the
hotel; it is also liable even if it is caused by strangers (additional responsibility); the same is true with respect
to common carriers (even if caused by employees or strangers; if by the exercise of diligence, it could have
prevented the injury) → similarly, there is no exempting circumstance except force majeure; in fact, the
notices will not exempt the hotelkeeper from liability (it is still liable for the loss or injury of personal property
of the guests; not exempt even if it is caused by employees, strangers, exculpatory notices placed in the
hotels) → only exempting circumstances: 1.) case of force majeure (not a case of force majeure if it is an
act of a thief or robber = considered as a stranger; unless used firearms or through irresistible force); 2.) if
under 2002, the loss is due to the acts of hotel guests himself, family, servants or visitors; 3.) if the loss is
due or arose from the character of the thing brought inside of the hotel
-2004 (VIP) → right of retention is a nature of a pledge and therefore under article 2121 and 2122 (similar
to the case of commodatum and depositum) the hotel keeper may undertake an auction of the personal
property of the hotel guests in case the hotel guests fails to settle his bills and he needs to pay to stay; note:
not necessary to exercise the right of retention that the hotel has acquired physical or constructive
possession of the things brought in the premises of the hotel before it can exercise the right of
retention; enough that these belongings are brought inside the premises of the hotel
-Matter of sequestration and deposit → superlines transport. Vs. PNCC = a bus was involved in an accident
and while it was being investigated, it was impounded by the police; according to the SC: the right of the
police to impound a vehicle is governed by the provisions of the Constitution on unreasonable searches
and seizure (before one could search or seize a vehicle or property, then generally speaking, there should
be a warrant issued by the court after finding probable cause); in this case, the patrol man who conducted
the investigation, impounded the vehicle and turned over the vehicle to the PNCC storage area; SC: while
it may be true that seizure when the policeman who seized the bus was probably without a warrant, and
illegal → however, when he turned over the same to the PNCC, a contract of deposit was entered into, and
it is presumed to be valid; PNCC storage had legal basis to hold onto the bus until the expenses in the
safekeeping of the bus are settled
________________________________________________________________________
June 9 , 2021 - Caryl
2047
2 kinds of security
1. Personal
2. Real
Guaranty is personal
Whereas, pledge, mortgage, CM are real securities because there is a property identified or delivered to
the in case of pledge, delivered to the pledgee. In CM, an instrument off CM is executed or registered in a
Chattel Mortgage Registry.
Because it is an accessory contract, it depends upon the existence of principal obligation and the same is
both for both the guaranty and suretyship.
It is subsidiary and conditional because the guarantor is liable only on the inexistence of the principal
contract. The guarantor is entitled to the benefit of excussion.
The guarantor may only be required to pay if the writ of execution against the principal creditor is returned
unsatisfied. It means that the guarantor is entitled to benefit of excussion. That is why it is subsidiary and
conditional.
The contract of guarantor is consensual. It is perfected by mere consent. Guaranty is enforceable only if it
is in writing. In statute of frauds, stated the special promise to answer the default of the debt of the other.
Obligation of the guarantee became effective only if the principal debtor cannot pay the loan subject of the
obligation.
Under 2047 (2 par) , referring to solidary obligations, in such a case called contract of suretyship. In
nd
suretyship, a person binds himself solidarily liable with the principal debtor. The creditor may proceed to
any solidary debtors all or simultaneously. The suretyship is also covered by statute of frauds. Surety is also
an accessory contract of a collateral of the principal obligation. However, his liability to the creditor is direct
and/or equally bound to the obligation to the principal creditor. However, before the law, looks at surety as
being the same party as the debtor himself. A surety is not entitled to the benefit of excussion. The liability
of the surety is joint and several with the principal debtor.
When the surety pays the principal obligation , he is entitled to the entire amount of the debt. Whereas, a
solidary debtor is only entitled to his share in the obligation. He can only demand his proportionate pay.
A performance bond is a kind of surety agreement that will faithfully comply in case of the contractors failure
to perform.
Surety is liable to the debtor without the benefit of excussion. After he sued and there is a judgment, the
debtor has to be notified of the suit.
In the case of the surety, the moment the debtor fails to pay, you may demand the surety of the payment.
Both the guarantor and surety are accessory obligations. Both as principal debtor. If you go to the
guarantee, the latter may raise the benefit of excussion and needs judgment before you can go after him.
2 things:
On surety and guaranty, both are collateral and conditional. In fact, with respect to the surety, the creditor
is not required to send a notice of default; the filing of a suit is sufficient notice; the creditor can always go
after directly to the surety. The surety has a direct contract to pay the creditor. Liable without any demand.
Considered a debtor from the very beginning. Considered to know the default of the principal.
Both are guaranteed. The surety binds himself solidarity with the principal debtor. A surety promises to pay
the debt directly. In guarantee, if the principal debtor is unable to pay, the solidary guarantor will be released
from his obligation if the creditor extends his credit to the principal debtor without the knowledge of the
guarantor.
A guaranty may be conventional.May be entered into even without the knowledge of the debtor; the guaranty
may be legal if required by law; judicial if by court; indefinite if it covers principal obligations and after it is
used to pay. Limited to the amount fixed on the agreement of the guaranty. He may be liable to damages if
there is delay. Remember 2209. This does not violate the contract of guaranty.
2054 – meaning the guarantor cannot be made to pay more than the amount agreed upon to pay. An
exception is that if he is in delay or refuses to pay, the interest or damages.
2053 – Continuing guaranty – A guaranty may be entered into today but may also cover the debts incurred
in the future. You can only be made to pay for the amounts liquidated.
2049 – Take note that a guaranty is a personal security. With respect to ACP/CPG, the spouses cannot
enter into a contract of dominion or sale. Husband and wife may enter into a contract of guarantee but they
cannot bind the properties in acp/cpg unles redounded to the benefit of the family.
With respect to the exclusive prop of the other spouse, either of them may dispose without getting the
consent of the other.
2050 – Rule on 1236 & 1237 on payment. He can only demand payment if the debtor is entitled to the
benefit.
Not that the guaranty cannot exist without the principal obligation. Voidable or unenforceable may be an
object of guaranty.
The rule is, the guarantor can bind himself for less but not more than he can bind the debtor. If he is
required to bind more, it will simply be reduced but not more. It is illegal if he guarantees a larger amount.
The guarantor cannot be also made to pay off the prior obligations.
2 privilege of guarantor
1. Excussion
2. Division
Benefit of ecussion prvides that no execution until the writ of execution has not been satisfied. The writ must
be returned unsatisfied. The guarantor must interpose it as soon as the debtor be required to pay. Properties
must be in the PH. If the creditor neglects the property, then the C is liable for the value of the property. The
benefit of excussion may be waived or if he is solidarily bound or declared insolved. Cannot be sued
because the guarantor absconded; or would not resolve to the satisfaction. When the guarantor interposed
the benefit of excussion.
Benefit of division is present when there are several guarantors with respect to one or the same debts. He
can claim because there are several uarantors, each of them shall be liable jointly. If there are 5 guarantors
of the same debt then it must be divided into 5. The creditor may claim only the proportionate share of the
debt unless they bound themselves liable solidarily. Once the guarantor paid the debt, he is entitled to be
indemnified even if without informing the debtor of the total amount, the legal interest and expenses,
including lossess and damanges. He is also entitled to be indemnified of the legal interest plus expenses
incurred by the guarantor plus damages. Entitled to be subrogated to all the rights of the creditor.
Subrogation takes effect by operation of law (legal subrogation).
There is also counter guarantee or co- guarantee and they may claim the benefit of division. Sub-guarantee
is entitled to the benefit of excussion before the creditor may go after the sub guarantor.
2. Impossibility of subrogation
3. Where there is extension of payment which deprives the debtor to sue, then the guarantee is released. Only
without the consent of the guarantor.
4. Proposes a dation of payment. Even if the debtor is evicted from the property. The only recourse is to run
after the principal debtor. But the guarantor will be released.
Pledge
The things pledged or mortgage may be sold at the instance of the creditor. Not allowed if the pledge is in
pactum commissoum. Allowed for the debtor to propose a dation in payment that the property will replace
the payment that will have to be respected by the debtor. A pactum commissorium is a pledge or contract
that the pledgee will automatically acquire the property upon insolvency. In dation, the proposal must first
be made. No stipulation of automatic ownership.
The creditor must apply the fruits to the interest for the principal of the debt. Pledge and mortgage are
indivisible. Partial payment does not entitle discharge except the property subject of the pledge specifically
pertains to the determinate portion of the credit.
Only movables may be subject of the pledge. A pledgor is like a guarantor. In guaranty, once the guarantor
has paid the principal debtor, he is entitled to be subrogated of all the rights of the debtor Similarly, the
pledgor, has the rights of the guarantor. Pledgor is entitled to reimbursement and subrogation. Movable
properties may be subject of pledge. Documents may be subject of a pledge.
Pledgor or the owner must be given notice and should participate in the bid. Pledgee may also bid, but his
offer shall not be valid if he is the only bidder.
*****2115 – not entitled to the excess ; if there is deficiency, the pledgee is not entitled to recover.
2102 – Fruits and animals will also be subject of the pledge if the thing is pledge also its accessories.
The pledgee has the right of retention until the debt is paid.
Note the rights of the pledgor. If you are the owner of the thing pledged, you are entitled to his right.
2097 –
2096 – The possession of the thing subject of the pledge remains with the pledgee. Entitled to preference
at the foreclosure sale. He may also demand either judicially or extrajudicially. Lastly, he may substitute if
endangered without the fault of the pledgee.
2104 – Deposit
Mortgage, chattel and rem the gen pri and antichresis and extra contractual quasi c and delict damages
________________________________________________________________________
GUARANTY:
-Guaranty → subsidiary = because of the benefit of excussion; when debtor demands the payment of obligation,
it may interpose as a defense the benefit of excussion (to require the creditor to exhaust properties of the debtor
before it can be proceeded upon); when the guarantor interposes the benefit of excussion it should also be able
to point out properties leviable properties within the jurisdiction of the RP → if you guaranty for someone of a
loan, then the creditor demands from you the payment of the obligation (if it claims that the debtor is unable to
pay) you should be able to interpose or invoke the benefit of excussion but at the same time, point out available
properties sufficient in value that may be levied upon by the creditor; otherwise, you cannot impose the benefit
of excussion if the debtor is insolvent = this is when the guarantor cannot interpose the benefit of excussion
-Obligation is simply subsidiary = you can guaranty the obligation of your friends, for as long as you know your
friends have the capacity to pay the obligation; the scary thing is if you put up a surety bond in favor of your
friend then this is a different story → surety: liable solidarily with the principal debtor
-Guaranty → unilateral contract: derives obligations on the part of guarantor in relation to creditor; although, the
fulfillment gives rise to obligations of guarantor with respect to debt; takes place without intervention of debt; it is
unilateral because if the obligation is only on the part of the guarantor, then there is what is referred to as right
to claim for indemnity (subrogation), but mainly, guarantee is unilateral because it is one sided (guarantor alone,
who commits that in the event that the principal debtor will not pay, he will pay → even if the debtor is not aware;
you’re parents would normally do this if they will indorse you to a friend to borrow if you have a project, and your
parents will say “don’t worry pautangin mo sila and i will guarantee”); the guarantor does not need to secure the
consent of the debtor → a guarantee may even exist even when the debtor is not aware of it; even if the creditor
will not accept it
-1236 and 1237 → the implications differ if the payment is with the knowledge or consent of debtor; but the third
person may pay the obligation of another person provided that if he pays without the knowledge or against the
will of debtor → limited reimbursement (no subrogation in the rights of creditor)
-VIP → take into consideration; guaranty is consensual but it is an unenforceable unless in writing; because a
guaranty falls under the ambit of statute of frauds (1403 (2)); a special promise to answer the debt default or
miscarriage of another person; this item under 1403 is a guaranty → it is a conditional promise, it will not arise
unless and until the principal debtor fails to perform his obligation
-What is a surety? → also a special kind of guaranty = guaranty and suretyship falls under the generic term
“guarantee”; except that it is called a suretyship if the guarantor (the person - also a guarantor) is now called a
surety; under the contract suretyship → the surety or the obligor binds himself solidarily with the principal debtor,
and because he binds himself solidarily then the provisions on solidary obligations (section 4, Chapter 3) applies
to him; the creditor may proceed against him without joining the principal debtor; and, because he is solidarily
liable, he is not entitled to the benefit of excussion
-Simply: the guarantor is liable if the principal debtor is unable to pay his obligation or insolvent; on the other
hand, the surety is liable if the principal debtor fails to pay or rather, even if he simply decides not to pay = no
need of proof that he does not have property or he is insolvent; on the other hand, in guaranty, the guarantor is
liable only if the principal debtor is unable (does not pay and could not pay); surety is liable if the principal debtor
does not pay his obligation (even if he is solvent)
-The guarantor may only be proceeded against by the creditor, after a judgment is obtained with finality against
the debtor and a writ of execution is issued and returned and satisfied; when is the guarantor liable to the
creditor? → only after there is a final judgment rendered against principal debtor and writ of execution is returned
and satisfied = meaning, only if it is shown that he could not or unable to pay his obligation
-In suretyship: surety becomes liable to creditor without the benefit of excussion; he may be sued independently;
an insurer of the debt (assumed or undertaken a responsibility greater or more onerous than that of a guarantor,
who is merely an insurer of the insolvency of the debtor)
-In fact with respect to surety, the demand or notice of default on the part of the principal debtor is not required
→ Prior to filing an action against surety to claim payment of debt, the creditor is not required to give the surety
a notice of default or a demand; because he is a principal debtor himself (liable solidarily); presumed to be aware
with what is happening to the affairs of the principal debtor → he is as liable as a principal debtor
-Note: a surety may be released from obligation → material alteration of the contract in connection with the surety
bond; for instance if there is a change which imposes new obligation on the surety changing the legal effect of
the contract and not merely a form
-Surety assumes liability as a regular party to the undertaking; liability of guarantor on the other hand, is
subsidiary and it depends on the primary debtor’s ability to pay the obligation → so the obligation of the surety
is primary while the obligation of the guarantor is merely secondary; so the surety being a primary obligor, he is
held to know or presumed to know every default or the fact of the default of the principal; guarantor is not bound
to take notice of the non performance of the principal
-2049: except in case provided by law → phrase in the FC, that a spouse generally speaking without the consent
of the other, cannot bind the property of the ACP or CPG, without the written consent of the other; except if it
has redounded to the benefit of the family; remember with respect to administration, the H and W shall jointly
administer the ACP or CPG of the family, with respect to performing acts of dominion (requires the written
consent of the other); with respect to entering into any contract, they can enter into any contract, but cannot
obligate the property belonging to the ACP because it is an act of dominion without written consent of the other;
simply a contract of guaranty (personal commitment and no property encumbered) = the H and W (no distinction
under the FC), then it will only result in the ACP or CPG being bound if the contract redounds to the benefit of
the family; otherwise, it is charged against the H or W’s exclusive or paraphernal property → the rule is, they can
enter into a contract of guaranty, provided that it will bind the property of the ACP or CPG for as long as the
contract shall redound to the benefit of the family (charges in the ACP)
-2050 → in relation to 1236 and 1237 = limited reimbursement; recovery to the extended to the benefit of the
debtor; if consent is there = entitled to full reimbursement (indemnification + subrogation of the rights of the
creditor, including accessory obligations attached)
-2052: guaranty is merely an accessory contract → cannot exist without a principal obligation; on the other hand,
if it is a voidable contract (entered into a minor) can be subject to a guarantee (valid until annulled); unenforceable
contract = perfectly valid (but cannot be enforced before the court); natural obligation = voluntary performance
(creditor may retain what has been delivered or paid)
-2053: guaranty given to secure future debts → secures all transactions including the future; description and
contemplation of the contract of guaranty until the expiration or termination of guaranty; not limited to a single
transaction; in modern business scenario, continuing guarantee is usually being availed of by a businessman if
they are getting supply from another company (manufacturing company) → everytime the retailer would get
supply from the manufacturing company or dealer, then he cannot be issuing a guaranty every time he will do
that, so instead, he chooses to put up a continuing guaranty → not limited to a single transaction - contemplates
future dealings, covering a series of transactions; prospective in operation and provides security for obligations
arising in the future; future = amounts are not known, provided that there can be no claim against the guaranty,
unless the amount is certain and demandable (amount is liquidated and amount is due)
-2054: (VIP) → guaranty is an accessory contract; it cannot rise higher than the source; the rule under 2054 is
that it is a general rule that the guarantor cannot be made to pay for more than the amount of the principal debt,
and its obligation cannot be more burdensome than the debt itself that he is committing to perform in the event
that the principal debtor is unable to perform; it will be made to pay for more; does not mean that the guarantee
is void → simply not required to pay more than the amount of the debt
*Exception: if we apply 2209 and 2212 → forms of damages; in the event that the guarantee or the guarantor
has delayed in performing its obligation to pay the debt of the principal debtor, then he will be liable for
compensatory damages → the liability of the guarantor may exceed the amount of the debt that he has
guaranteed; the excess pertains to damages and interest that he will have to also cover because they were
incurred by the creditor due to his refusal → if a surety or guarantor upon demand, fails to pay, he can be held
liable for interest even if in paying these interests the total amount of liability of the guarantor or surety becomes
more than that of the principal → not because of the contract, but due to necessity of judicial collection and
default
-Note about Interest: runs from time the complaint is filed, not from the time the debt becomes due and
demandable
-A surety or guaranty may be held liable for the penalty; provided in the contract of guaranty if there is a penalty
provided there for violation of the condition even if its value has exceeded the amount of principal debt
-2055: a contract of guaranty or suretyship cannot extend beyond its specified limits; not given retroactive effect
as to make the surety or guarantor liable for default of the principal debtor prior to the contract being entered into
→ idea: the guaranty must be expressed and cannot be presumed; obligation is limited to what he has stipulated
- it will agree to commit; a guaranty must be expressed + writing (falls under the statute of frauds)
-2056: Qualifications of guarantors → three requirements for a guarantor to qualify that he must possess:
1. He must have the capacity to bind himself: meaning he should have the authority to enter into the
contract; capacity of a married person is subject to the limit provided in 2049 for a married person;
2. He must have the integrity: if he is convicted of a crime involving moral turpitude or dishonesty, estafa,
BP 22, then he does not have the integrity;
3. Must have sufficient property to answer for the obligation he guarantees → if he becomes insolvent later,
then the creditor may demand for his replacement unless of course, the guarantor that was appointed
was pre-selected by the creditor in the first place
-Estate of Hemady vs. Luzon Surety → the contract of guaranty or suretyship is intransmissible by the debt of
guarantor; even if the guarantor dies, the guarantor’s liability will continue and shall be passed upon his heirs,
even if one of the requisites of guaranty is integrity - in that case, the contention of the guarantor is that because
of the debt of guarantor and because the guarantor should possess integrity then the guaranty terminates upon
death of guarantor; as per SC, it is not correct and declared that the guarantor’s obligation is transmissible to his
heirs
-2060: two requirements→ not automatic; guarantor must set if up and point out to the creditor available
properties within the jurisdiction of the RP;
-What is the repercussion on the part of the creditor if he does not run after the properties? → 2061; if you have
pointed out properties and the creditor fails to run after such properties, he will suffer the loss to the extent of the
value (it will be taken away from the liability of the guarantor = already paid; cannot be made to pay for the portion
equivalent to the value of the property)
-2062: when the creditor files a case against the principal debtor; guarantor does not need to be included but
must be notified
-2065: several guarantors → 1207 (concurrence of several debtors or creditors in one and the same obligation,
the presumption is that it is joint; solidary only when stipulated by parties or the law or the nature of the obligation)
= here, where there are several guarantors in the same debt, the obligation or liability shall be divided among
them; creditor cannot demand from one of them the payment of the entirety of the debt; unless solidarity has
been stipulated; similar to benefit of excussion
-2068: (related to 1236 and 1237) → if guarantor pays without informing the debtor, 1236 and 1237 will apply
=debtor may set up against him all the defenses that may be available to the creditor (like a third person who
pays without the knowledge or against the will of the debtor)
-2073: (benefit of contribution) if there are several debtors and the amount of the debt that they guaranteed is
P120k and one of them paid the full amount, then he can demand from his co-guarantors contribution, like in the
case of a solidary debtor (contribution proportionate to the debt) → 120k will be divided amongst the three of
them (if A makes the payment of the full amount, he can demand contribution from B and C 40k each) → benefit
of contribution
-2077: unusual case of dacion in payment → guarantor is supposed to pay to creditor (to pay in money
supposedly - a loan); but if he proposes and delivers a property and gets accepted by creditor, then it is a case
of dation in payment and under dation in payment in 1245, if a property is alienated to a creditor for the
satisfaction of debt; the guarantor proposes to pay an immovable property or any other property then the creditor
accepted it - when accepted, then the losses under 1277, later on the creditor is evicted from the property, the
guarantor is released; only remedy is go after the debtor (can be claimed that he is not paid) - there is a novation
and accepted it - he suffers the loss for taking the risk in accepting the payment by the guarantor in the form of
a property
-2079: the last of the important provision in guaranty → so, there are two situations in this article: for instance
there is a loan in savings association in your office, and you have an officemate who borrowed 100k and you
signed as a guarantor; under 2079 if the loan and savings association granted your officemate an extension of
time, and you were not informed about it, and your consent was not obtained; then you are released from the
obligation as a guarantor -- cannot be proceeded against; because, the creditor chooses not to enforce the
original agreement so, under 2079, if the creditor grants an extension to creditor, without consent to guarantor =
guaranty is extinguished
Second situation: the mere failure on the part of the creditor to demand payment after debt becomes due, does
not mean an extension of time → if it is an extension of time, there should be an express extension extending
the due date of the loan and not the failure to demand on the due date
PLEDGE:
-2085: the pledgor or mortgagor does not have to be the borrower; can be a third person; but must be owner of
the property being mortgaged or pledged
-A pledge or mortgage may secure all kinds of obligations (pure or conditional obligation)
-Principal obligation may be in the future → it could be a continuing guaranty; to cover future obligations
-May only be constituted by the absolute owner of the thing; but the pledgor or mortgagor do not have to be
parties to the principal obligation; should also have the free disposal of the property or legally authorized for such
purpose
*2145: dation in payment → the dation in payment is not pre-agreed in the contract of mortgage or
pledge; in the event that the debtor will not be able to pay his loan obligation, he proposes to creditor
that he will sell to him his property the price is the loan the unpaid amount of the obligation → separate
contract they will enter into after the debtor is in default
-2087: the word “alienated” is mentioned; it may be sold which based on the provisions here, it will be sold
through public auction
-2089: indivisible → there is a thing mortgaged, and the value of such thing is P1 million, and the loan obligation
is for instance, 500k, and half of the 500k or 250k has been paid, the mortgagor cannot demand the release of
the ½ of the portion of the property mortgaged; subject of pledge or mortgage = if a portion of the loan has been
paid, it does not give the debtor or mortgagor the right to demand the release of the sum of the things that have
been pledged or mortgaged
-Pledge is a real contract → perfected upon the delivery of the thing and only movables or incorporeal rights
evidenced by documents (like title or negotiable instruments) may be subject of a pledge
-2096: requires that the pledge must appear in a public instrument to create a real right; in 2097, even if the
property is sold which is the subject of the pledge, the pledgee retains possession to the property and remains
to be subject of pledge; but in the event that the pledge or wishes to sell such property, then he must obtain the
consent of the pledgee
-2097:
*always being used by examiners as a trick question
-2102: (VIP) → pledge extends to accessions and accessories = if the thing pledge is an animal, the offspring
shall be subject to the pledge (historical background: before, it may be traced to slavery; because before, when
the father is the slave, the mother is the slave, the children will remain to be slaves and shall be owned - they
will not be free and be part and parcel of the properties of the owner); similarly if a thing is subject of a pledge,
the interest, fruits and things shall be subject to pledge; the pledgor cannot claim them until the debt is
extinguished or fully paid
-2112: (highlight of a pledge); applicable to legal pledge (mechanic’s lien; right of retention of deposit) →
extrajudicial foreclosure done by the notary public; double auction = two auctions that must be done; the pledgor
may participate and given preference in case his bid is equal to the highest bid - the pledgee may also bid but
his bid shall not be valid if he is the only bidder (his offer will not be valid if he is the only bidder); the concept of
double auction is that, it is again an exception to pactum commissorium, because there are two auctions that
must be conducted and if such results in failure, then the creditor may be able to appropriate the thing pledged
and 2115 (VIP)
-2115 (VIP): the rule in this, is once the thing pledge is sold, it will extinguish the obligation; if there is an excess
(price is more than the amount of debt), the creditor gets it and benefits; if there is a deficiency, the creditor
suffers the loss
Mortgages. They are indivisible. Which means that if there are several properties encumbered in order to secure
the principal obligation, all of them are liable.
Debtor, pledgor or mortgagor, cannot demand the release of the mortgage without sufficient payment.
REM must be constituted in a public instrument otherwise, void. Meaning, notarized. In order to have an effect
on the 3 person, it must be registered in order to be valid.
rd
The mortgagee may demand its registration. The creditor may demand to recover the loan in lieu of the absence
of a security.
When a REM is entered into, it creates a real right in favor of the mortgagee. There is a right encumbered on the
property in favor of the mortgagee.
2130 **** Pactum de non aliendo must be distinguished to pactum commissorium. Even if the prop is alienated
to 3 p. The mortgagee’s right over the thing, remains the right.
rd
Whoever is in possession of the property, may be required to fulfill the obligation, otherwise may be subject to
foreclosure.
Take note of the doctrine of mortgagee in good faith. If the mortgagee is in good faith, they simply rely on the
certificate of registration that a transferee covered by Torrens title may rely on GF and in the absence of any
suspicion, he doesn’t need to conduct investigation. Is like money in possession which doesn’t need to look
beyond it. The doctrine of mortgagee in GF may rely on the certificate of title but does not apply to banking
institutions. Because banks should diligently conduct investigations of lands. Will not be entitled to protection
under the law.
Mortgage includes fruits of the land including compensation or improvement of the land.
Properties under 415 which have become immobilized either by manner or intention or because of the fact that
it is the improvement of the property.
In the mortgage contract, there are stipulations that are acknowledged by the law like after – acquired property.
That concept and principle Is being adopted in modern business transactions. So that they can stipulate that if
there are improvements, those improvements will be included in the mortgage. With respect to obli, it may include
obli called dragnet clause/mortgage.
Pactum commissorium is prohibited. Stipulation requiring mortgagor to ask consent to the mortgagee is allowed.
1. Granting the mortgagee, the right to appropriate the property subject of the pledge.
A contract of mortgage, may contain stipulation in case of default. This is not automatic transfer of ownership in
case of default.
In case of default, the effect of the mortgage is to give notice either judicially or extra-judicially.
Extra- judicial, it requires that Real estate contract authorizing the mortgagee to sell by public auction before
foreclosing the property.
If it is judicial, filing of the foreclosure must be in the proper court exercising quasi-judicial function. Will have the
effect of creating lien.
The guidelines in judicial law are the rules of court and require a decision by the court to confirm the result of the
sale. The losing party may file an appeal. Includes SPA granting the mortgagee to sell the property by
public auction.
If it is extra judicial, it does not need court interventions but has to submit the req by the court. File this before
the exec judge of the rtc to conduct the foreclosure or may be done by the notary public.
Redemption:
Judicial- the redemption available is equitable redemption which must be exercised within 90-120 days after
receipt of the notice of foreclosure.
In the equity of redemption, it is the right of the mortgagor, to extinguish the mortgage by paying the mortgage.
Provided it is done prior to the confirmation of the sale.
In the case of extra-judicial foreclosure, the redemption available is the right of redemption. The right of
redemption is the period from the date of registration of the certificate of sale. 1 year period to redeem the
property subject of the mortgage.
If the mortgagor fails to redeem, then the sale will be consolidated. And will have the effect of possession of the
property.
The purchaser of the property in the auction sale may sell the property in the auction sale. Whoever the
transferee, the interest of the previous possessor must give up any interest to the prop.
In extrajudicial foreclosure, what is important is the compliance with the publication req. which is the essence of
publication.
Law mandates the posting of the notice of the sale in 3 public places in the newspaper of general circulation in
the prov. Where the prop is located.
Chattel Mortgage
Important here is the doctrine of mortgagee in good faith. The mortgagee may rely on the face of the certificate
of the title. Once it is executed in the public ins, it creates a real right in favor of the mortgagee to bind against
the whole world. Registration is required to extend to 3 per.
rd
CM , the prop subject of the lien is a personal prop or immovable. Governed by 1508 and by the CC.
In tangible, may be shares of stocks, machineries, motor vehicles and vessels. A house on a rented land is an
immovable property. Provided it is a house of immovable materials.
If it is a house that is going to be demolished then it will be a proper chattel mortgage of a contract. Act. No.
1508, the registration in Chattel Mortgage Registry is a mandatory requirement for a CM to be valid. While in
REM, it is sufficient to be in a public instrument. Registration will have the effect on the 3 parties. Minimum req.
rd
In C.M contract, when parties enter into, they enter in conditional sale of the prop. In REM, if the mortgagee
elects to foreclose the prop subj of mortgage, he may still file an action to recover if there is deficiency. If there
is excess, the excess shall be paid to the mortgagor. If there is surplus money, the mortgagor is entitled to him.
With respect to CM, if there is an excess after the sale, the excess goes to the debtor.
If there is a deficiency in CM, generally, the debtor is entitled to go after the creditor , except if it falls under Recto
Law (1484).
Amendment of 1484, as amended by Recto Law, in sale of personal prop by installment, then the debtor is not
entitled to collect to the creditor the deficiency.
Affidavit in good faith. The affiants there are the parties both the mortgagor and the mortgagee swear under
oath. For the purpose of securing the conditions of the same or just or valid obligations in order to avoid fraud.
Antichresis
If the property subject of the security is immovable, it must be delivered in order to bind the parties in the contract.
Gives symbolic possession over the properties subject of the mortgage.
Both are immovable in REM. The distinction is that, in REM, it must be in public instrument. In antichresis, it
must be delivered in possession of an antichretic creditor. The formal requirement must be in writing specifying
the principal amount. If it is not in writing, the antichresis shall be void.
Pledge, mortgage and antichresis, the possession of the mortgagee creditor and the antichretic creditor, only
acquires juridical title over the prop. Does not possess the same in any other nature in the concept of an owner.
In fact if the mortgagee sends the prop to another person, he will be liable for estafa.
If, assuming the property is subject of antichresis and in possession of another person and you subjected it for
antichresis without declaring its encumbrance, you will also be liable to estafa.
In antichresis, 2137 & 2137 – In antichresis, the antichretic creditor is liable for the taxes of the property. The
rule is, the debtor cannot reacquire unless he has fully paid the indebtedness.
The fruits of the prop will still be subject of the obli will be used to the principal interest of the obli.
2137 is a provision against pactum commissorium – the non-payment of the debt will not automatically be
acquired by the creditor without foreclosure.
Concurrence and preferences of credit, there are several creditors who have equal rights of the property claimed.
Must be distinguished to payment of cession. Here, in payment of cession, there is an agreement between the
debtor and the several creditors. If there is a deficiency, the debtor will still be liable. Will only be released up to
the net proceeds subject to the sale.
In concurrence, there are formal insolvency proceedings under FRIA. The result of the sale from the proceeds
of the sale, the creditors may be satisfied depending on their order of preference.
Preference of credit is not a lien unlike in a case of mortgage or pledge. In case of pledge or mortgage, that lien
is preferred to all other creditors.
____________________________________________________________________________
MORTGAGE:
-Remember: all contracts of security; they are indivisible → which means that, even if a portion of the loan has
been settled or paid, the mortgagor cannot demand release of a portion or if several properties have been given
a security or identified as securities, the mortgagor cannot demand the release of one or two of them
-There are certain stipulations that they cannot include in a contract of mortgage; for instance, they cannot
include (2130) → which means that - this means pactum de non aliendo = prohibiting the alienation of the
property given as security, even if the property is subject of a mortgage or a pledge; the parties cannot stipulate
prohibiting the mortgagor from alienating the property - they can agree that before alienation be made, the
consent be secured from the mortgagee - Note: even if the property subject of mortgage is alienated by
mortgagor, the mortgage considering that it creates a real right, in favor of the creditor-mortgagee, kahit ibenta
mo yung property, the mortgage right of the mortgagee shall remain on the property (real right = has no definite
passive subject; enforceable against the whole world); the mortgage remains on the property and mortgagee
may even require the subsequent transfer to fulfill the obligation of the debtor (may elect to foreclosure the
property → also true in CM, antichresis, pledge, and REM)
-The most popular stipulation that the parties cannot include in the contract of REM, pledge, and antichresis is
pactum commissorium (2088 in relation to 2137)
-What is prohibited is automatic transfer of ownership; so that if for instance, that is the reason why dacion en
pago is not a case of pactum commissorium or a cession of property agreement to cede the property after the
default of the debtor, would not amount to a PC; there are many faces of PC; the classic disguise of PC is Pacto
De Retro Sale (which does not appear to be a mortgage, but an equitable mortgage, but under the guise of a
sale; because it is disguised as a sale, it will grant the buyer the ownership of the property)
-REM: must be contained in a public instrument; it must appear in a public instrument and it must be notarized
-Hechanova vs. Adeal → SC said that no valid mortgage is constituted if the REM does not appear in a public
instrument; if there is no valid mortgage, the SC said that the creditor may therefore recover the loan in view of
the absence of security as agreed upon, and the creditor may demand the execution of a REM in a public
instrument; a REM must be recorded in the registry of property (annotated at the back of the title of the property)
to bind third persons - not necessary for the validity of the contract → what is necessary for the validity of the
contract = executed in a public instrument; requirement of registration is necessary to bind third persons
-Remember that under 1357, if the contract is valid, the parties may avail of the remedies provided under 1357
and 1358 = anyone may demand the compliance with the form, for purpose of efficacy
-REM must be distinguished from antichresis (AC) → REM and antichresis, the object of encumbrance are
immovable properties; distinction: REM = immovable property remains with the mortgagor (possession); on the
other hand, an antichresis = possession of immovable property must be delivered to antichretic creditor (sistema
ng pagsasangla sa province)
*In antichresis, the payment will be taken from the fruits of the property; the antichretic creditor will be given the
right not only to the possession of property, but to use the property and to gather the fruits from the property,
and will be taken the payment for the interest on the loan and secondarily, if there is still excess, the same must
pertain to payment of principal
-AC is not valid unless in writing (will be void if not in writing); specifying the amount of the principal of the loan
and the amount of interest, otherwise the AC contract is void
-REM → if you execute a REM, the rule on mortgagee in good faith (akin to a buyer in good faith) under Property
Registration Decree (pinaka concept ng Torrens System of Registration); anyone who deals with the property
does not need to go beyond the face of the title of the property; the principle provides that a mortgagee has the
right to rely on good faith on the CTC of the mortgagor of the property given as security , and in the absence of
any sign that may arouse suspicion, he does not have any obligation to take any further investigation
*Principle = a mortgagee of the property, has the right to rely in good faith on the TCT of the mortgagor given as
security; in the absence of any indication or sign that might give rise to suspicion, he has no obligation to
undertake further investigation; does not need to conduct further investigation
-however, this doctrine or principle of MIGF, does not apply to a banking institution = required to exercise utmost
diligence in the performance of his services or obligation to its customer
-In case of mortgage in favor of the bank = bank is required to conduct due diligence and it must exercise
prudence; general rule that a purchaser or mortgagee of the land is not required to undertake further
investigation, other than what appears on the TCT does not apply to banks and financing institutions, because
it is their business and job (providing loan and getting security from the borrower)
-Remember that monies that it lends to borrowers come from its depositors; so the bank is required to exercise
utmost diligence and prudence in making sure and to ensure that these monies are taken care of
-Remember that in pledge: if the debtor fails to pay his obligation, the pledgee may foreclose by conducting an
auction; sa pledge may tinatawag na double auction; so, that double auction after such, the pledgee may
appropriate the property that is not sold after the second auction
-After the sale =debt is extinguished (once the thing pledge is sold); if there is an excess of payment and price
(price for sale is higher than balance of indebtedness) it benefits the pledgee; if there is deficiency, the deficiency
= pledgee suffers the loss
-Case of REM = if the mortgagee elects to foreclose, he may still file an independent civil action for the recovery
of whatever deficiency may remain; and, if there is a surplus money or an excess; the excess pertains to
mortgagor-debtor
-If the mortgagee elects to foreclose, there are two ways by which foreclosure may be done:
1. Judicially → An action must be filed in court under Rule 68 of the rules of court (judicial foreclosure); and
such foreclosure will be undertaken under the supervision of the court
a. Because it is an action (a case that will be filed in court); similar in the case of AC (pag hindi nakabayad
yung AC, ang way to foreclose is judicial foreclosure); it may be appealed (until matapos yung kaso, the debtor
remains to be in possession of property)
b. Equitable redemption → must be exercised within 90 to 120 days from the time that the mortgagor
receives the notice of foreclosure or until the CoS is issued
2. Extrajudicially → if the REM contract that they have executed contains an authorization or a special
power of attorney granting the creditor the authority to sell the property via public auction
a. Absence of stipulation giving the mortgagee the SPA in the contract of REM, in case of default, the
mortgagee may only pursue the sale via judicial foreclosure
b. What is most important in extrajudicial foreclosure = notice of the sale by publication (done once a week,
for three consecutive weeks; general circulation, in the city or municipality where the property is situated) - must
be compiled with to the letter
c. Good thing about EJF: unlike in the case of judicial foreclosure, where it is subject to an appeal, the sale
in EJF is final and executory; and once a certificate of sale is issued and registered, that certificate of sale will
be registered in the RD; only remedy of debtor is right of redemption → one year from the time the CoS is
registered and not from the time of the issuance of the CoS - with the RD (yun yung notice to the whole world)
***Remedy of mortgagor depends on the kind of foreclosure = extrajudicial foreclosure (exercise right of
redemption; done one year from the time of the registration of the CoS); if done judicially = then the mortgagor
may exercise equity of redemption; within the period of 90 to 120 days from the date of the service (date that he
receives) the order of foreclosure (iniissue ng court kapag proper yung fi-nile na action then magconnect ng sale)
and until (or even thereafter) his receipt of the service of foreclosure, but before the order of confirmation of the
sale = mag file ka muna ng action to foreclose property, then the court will examine whether the complaint that
you filed is in order, then the court will issue a summons to the mortgagor debtor, and then the court will require
the mortgagor to pay; if mortgagor does not pay, then the court will issue an order of foreclosure, then the court
will conduct a sale → time of service of order of foreclosure, you have a period of 90 to 120 days to redeem the
property or even afterwards, until or before the order confirming the sale is issued (dalawa yung order: from the
time of the service of order of foreclosure until the order confirming the sale is issued = shorter than EJF)
CHATTEL MORTGAGE:
-CM must be distinguished from pledge = similarity: property encumbered is a movable property; it could be
tangible or intangible (an interest in business which is an intangible movable property or shares of stock, may
be a proper object subject of a CM); vehicles, machineries may be proper object of a CM; or a house intended
to be demolished (proper object)
-A house built on a rented land, and it is built using strong materials, that house is an immovable property; and,
a CM constituted over that property is void insofar as third persons are concerned; it is valid between the
contracting parties simply due to the principal of estoppel (they are estopped from denying)
*House built using strong materials, may be subject of a transaction separate from the land on which it is situated
→ a house has a separate tax declaration from the land to which it is situated
-A CM must be registered under Act No. 1508 (CM Registry) to bind third persons; but between the parties, the
CM not registered will remain to be valid
-A CM = the movable is not delivered or transferred; the possession of the movable is not transferred; that is
why the registration of the CM is required, because by the registration of the contract, the mortgagee is given
the symbolic possession and will bind third persons; gives the mortgagee the real right which means that even
if the property is subsequently transferred to a third person, the mortgagee’s real right’s subject of the property
remains, and the creditor may run after the property (not after the debtor) to enforce or to require the performance
of the obligation
***In a CM, under Act No. 1508 → Affidavit of Good Faith = an oath, that must be executed together with the
CM contract; kasi yung CM contract appears like a sale of a property but the sale will be considered extinguished
or void once the loan obligation is paid; in the CM contract, the parties are also required to execute an AGF (an
oath in the CM wherein the parties severally swear - both of them - that the mortgage is made for the purpose of
securing an obligation and for no other purposes and that it was not entered into for the purpose of fraud; that it
is entered into for the purpose of securing an obligation and for no other purpose)
-What happens if an AGF is not included in a CM contract? → nothing. The AGF is only required for the purpose
of transforming an already valid mortgage into a preferred mortgage; not necessary for the validity of the CM but
only to give it a preferred status; pero under the FRIA wala namang may preferred kahit na subject siya sa
mortgage or pledge, pwede siya kunin ng liquidator at ibenta under FRIA
-Bawal din sa CM yung pactum commissorium (2141 of the NCC); provision of pledge referring to 2088 will also
apply to CM
-1508 = the mortgagee may after 30 days from the time the mortgagor the borrower, fails to pay his obligation
or violates the condition of the CM, may pursue the foreclosure of the mortgage and sell the mortgage by
public auction by a public officer or by a notary public
ANTICHRESIS:
-2132:
-2134: considered as a formal contract
-What is bad to the creditor is 2135 → in antichresis, the contract of AC takes place by the creditor acquiring the
possession of the property which was given as a security for the loan, and from there, the creditor acquires the
right to the fruits, and shall be applied to the interest and principal of the obligation
-The antichretic creditor = is in possession of the property; he will be liable for the taxes that are imposed on the
property and he will also be responsible for the expenses in the preservation of the property; the cost may be
deducted by him from the fruits; the fruits of the property will be used to pay for the taxes, preservation and
thereafter, it will be used and applied to compensate the interest and the principal
*Under 2136 = Generally, the debtor cannot recover the possession of the property until the loan is paid; it is the
discretion of the creditor whether to return the possession or not prior to the debt being fully paid; but the creditor
has the option of returning the possession of the property - does not mean that debtor is released of his obligation;
only reason that the creditor may return possession, because if he does not want to shoulder the responsibility
of the costs of taxes and preservation of property
-2137 = in case the debt remains unpaid, then the antichretic creditor may foreclose the property - file an action
in court for its judicial foreclosure (under Rule 68 of the RoC)
-Concurrence of credits = it presupposes that there are two or more creditors who have equal rights and
privileges over the sam property; they concur; and the property = specific movable or specific immovable or with
respect to general property (the entire patrimony of the debtor)
-When does preference arise therefore? → where the total value of the properties of the debtor is sufficient to
pay all his indebtedness then concurrence and preference of credit is of no relevance (pwede bayaran lahat);
Preference or priority arises = excess of concurring credits over the value of the property (law determines which
should be paid ahead of others; taxes are given preference) - if the assets are not enough and they have been
liquidated, the first in line are taxes due to government
-Note: there are properties that are exempted; like, the Family Home to the extent of the value allowed under the
law
Next meeting: finish our coverage next meeting on concurrence and preference, extracon, quasicon, delict
(concentrate sa quasi = contributory, damnum absque injuria, and doctrine of the last clear chance; attractive
nuisance as exceptions to the doctrine of contributory negligence - yung abuse of right doctrine as exceptions to
the principle of damnum absque injuria)
*60 items yung MCQ = limang choices for each question; by exclusion pag sumasagot ng MCQ
*Essay = IRAC method (ayusin yung presentation -form is as important as the substance)
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2176
Culpa – Acquillana-the driver is first sued, then if insolvent, the owner of the bus will be subsidiarily
liable; Preponderance of evidence.
1. Fault or negligence
2. Proximate cause must be shown (Causal connection between the negligence and the damages)
2177 – Recognizes the fact even if the crime resulted in violation of criminal act, a civil action is included
under art 100.
2177, he may also be charged under quasi delict. The two actions may exist independently with each other.
Limitation is that the injured party cannot recover damages twice for the same act or omission by the act.
Art. 33 – Criminal action arising from similar offense. The basis is fault or negligence or negligence of
the defendant.
1173 – Quasi delict , a person has the obligation to exercise care and there is no pre-existing contractual
obligation between the parties.
1173 is a general definition of negligence. (applies to all kinds of obli when there is a breach in case of
failure to exercise diligence.
Under Quasi – Delict negligence is not presumed. But, there are instances when negli is presumed in res
ipsa loquitur – Africa vs. Caltex – A fire resulted in the Caltex station the SC applied Res Ipsa Loquitur when
the effect is shown to be under the control of the management of the defendant as will not happen if the
defendant used proper care. Absence of explanation, the accident will arise from want of care
In this case- Doctor left inside the uterus of the woman who delivered CS, it was shown that some materials
were left behind while the operation is being done; presumption of negligence
Breach of contract of carriage, the employees of CC committed negligence, the employer is presumed to
be negligent because of the rule of Respondeat Superior. In case of death, CC are presumed to have been
at fault through the negligence or willful acts although such authorities have acted beyond the scope of
authority.
2184 – driver is presumed negligent if within 2 months, he was recklessly driving twice.
2185 – driver if at the time of the accident he was violating a traffic regulation.
In these two articles, there is presumption of negligence in the case of violation of traffic rules when there
is presumption of negligence.
Exceptions to GR that in quasi delict, negligence is not presumed. E: if the debt or injury comes possession
like firearms and except if it is in relation to his duty.
The defense of the defendant is indispensable in his occupation or business.What are the defenses
available or may be used in quasi- delict esp if presumed?
2179 – 2 cases:
1. The proximate cause was the negligence of the plaintiff himself. Damage, fault or negligence or
proximate cause causal connection.
If the defendant can show that the immediate cause was from the plaintiff, then the defendant
will be exempt from liability.
And if the plaintiff contributed to negligence, the defendant is still liable, the liability shall be
mitigated by the court.
The case of Rakes vs. Atlantic Gulf – carrying iron rails from the barge using a railroad hand card, broke
his leg. It appears that Atlantic knew and did not do any part to repair it. There is presumed negligence of
Atlantic Gulf.
1174 – Action to which one consents in the injury suffered. Co vs. CA – where Co entrusted his Nissan
pickup, the car was carnapped when the car was tested. The repair shop, they invoked FE. 1174 attaches
even if the FE is present if nature requires assumption of risk.
Doctrine of the last clear chance is another defense by the defendant. Negligent acts by the 3 person is
rd
The prescrptive period in q. delict is 4 years from the time of the accident.
Discovery rule – if the injury is discovered after 4 yr period, the 4 yr period is the date from which the
discovery occurred.
Consumer act of the PH, The consumer may sue the one whom the product was manufactured or made; f
the defect if apparent – 4 yrs. ; if the defect is hidden, 2 yrs from the discovery of the hidden defect. There
Should be no concurrent part of the party.
Negligence must be proved, and even in those cases, the defendant may exempt himself from liability if he
exercised diligence.
Other defenses available: “Damnum absque injuria'' Even if a person suffers a damage or injury, the person
who caused the injury or damage, will not be liable if the person was exercising a legal right.
In the absence of proof that the prosecutor was guilty of bad faith, he was exercising a right pursuant to an
authority granted to him by law.
However, even if the acts will legally justify the outset of its continuation, may constitute an abuse of the
right esp when there is a prejudice of other rights.
Art. 19 – Does not mean when a person exercising a legal right, will not incur a liability. Abuse of the right
of doctrine.
Vicarious liability –
Solidary liability –
2181 –
First par. Is demandable by one’s own ats or omission, the phrase those who are responsible –
234 of FC as amended by RA
236 of FC - > 2180, it appears that the responsibility of the parent applies even if the minor reaches the
age of majority.
With respect to the 3 one, the owner and manager, the negligent one here is an employee. 3 par.
rd rd
Employers will be liable if the negligent act of the employee is done within the scope of his assigned tasks.
Teachers are liable provided that it is under the provision and the school is liable when it is under its
institution.
With the state, the state cannot be sued without its consent.
Except:
1. Proprietary
2. Private person
3. Acts through a special agent but not when act is by an employee duly appointed.
2183 – Primary liability when the damage was caused by the animal.
2184 – Solidary liability between the driver and the owner of the vehicle. Encircle solidary liability.
2193
Chattel Mortgage - The registration of the CM is a requirement for validity and under Sec. 5 of 1508, The
CM even if it is not registered, it is still valid between the parties. The requirement of the registration is a
requirement in order for it to be binding against 3rd per. Pursuant to 1357, the mortgagee in a CM may
demand the registration of the CM, the same way in REM, the requirement of the public instrument for the
validity but pursuant to 1357, the annotation of the REM at the back of the title and the registry of the
property is a requirement in order to bind the 3rd persons.
Exam:
30 MCQ was allocated to Obligations and Contracts and the remaining 30 was allocated to Special
Contracts.
Platform: LMS
30 MCQ + 2 essays will come from Atty. Dechavez and then 30 from Dean Delson + 2 essays.
_________________________________________________________________________
Quasi-Delict (Torts): it is easy to come up with MCQ on Torts, so we need to talk about it; there are 60
MCQs (Sir submitted 30 MCQs yesterday and including the essay question, and divided it equally - the
coverage (between Sir and Dean Delson); coverage will start from oblicon, until where we are now)
-The first time we learned about or came across quasi-delict was when we started looking into the sources of
obligations; one of the sources of obligations is quasi-delict, and on the other hand when we talk about quasi-
delict, there are several kinds while quasi delict is referred to as one of the sources of obligations, tort has many
kinds: we have the so-called negligent tort, which is the one referred to as one of the sources of obligations; we
realized that when we studied torts, we have strict liability tort, and we also have intentional tort → when we talk
about tort and when we talk about quasi-delict, we cannot simply limit tort to the quasi-delict referred to in 2176
-2176: quasi delict - aka: culpa aquiliana (culpa = negligent); differentiate culpa aquiliana vs. culpa criminal
-Based on the negligence committed (which resulted into an injury or damage to a person); when we talk of
damage = refer to two things: injury suffered or compensation paid for the loss or injury sustained by a person,
as a result of the fault or negligence of another
-Culpa contractual = we talk about violation of contract of common carriage; we discussed this last time
-Culpa criminal = (criminal negligence); which is an injury that resulted from an act or omission punished by law
-remember that a single act may give rise to various liabilities and may result to different causes of action;the
action that may be filed if the injury is caused by 2176 = quasi-delict
-Teh action that will be filed as a result of negligence + performance of obligation in a contract = breach of
contract with damages; contract of carriage = fault on the common carrier to bring the passenger safely to its
destination
-Culpa criminal → criminal liability of the accused (result to imprisonment) + civil liability arising from criminal
liability; which is included in the criminal offense (pursuant to Art. 100 of the RTC)
-Quantum of evidence = proof beyond reasonable doubt (criminal liability + civil = Article 100 of RPC)
-Civil action that is included in the criminal Offense; accused is acquitted due to lack of proof or failure to prove
(lack of quantum of proof) - separate civil action may be filed; with respect to civil action, if it is prosecuted
separately, the quantum of evidence is preponderance of evidence
-The filing of the criminal information will include the filing of the civil action; for the civil liability arising from
criminal liability (Article 100 of the RPC)
-Note: 2177 → the reason why a single act may give rise to various causes of action and to various liabilities;
2177 itself recognizes that; a single act may give rise to a criminal prosecution and also to an action for quasi
delict; because there is a criminal prosecution and quasi delict and shall include civil liability, it is possible that
the plaintiff in the QD and the private complainant in the civil action in Art. 100 of the RPC, will be awarded
damages
-limit in 2177 → even if we recognize a single act may give rise to different causes of action and possible to
double award; plaintiff cannot recover damages twice for the same act; hindi pwedeng kapag may nasagasaan
ka (reckless imprudence with serious physical injury) = you cannot recover both→ you can only choose the
higher of the two awards (bawal double recovery)
-Defenses → in culpa aquiliana, take note that in such, if there is a drive that caused an accident to someone; if
the driver is proven negligent, and he has an employer (nagpapasahod sa kanya); it does not mean that the
employer is conclusively negligent; the employer is merely presumed negligent
*Remember that in quasi delict, the negligence must be proved; the negligence is nOT presumed; due to the
absence of the pre-existing contractual relation between the parties; the only obligation that will give rise to
liability of quasi-delict (taga-salo siya ng lahat yung quasi-delict kung hindi mapupunta sa ibang sources of
obligation yung offense) → ito yung buon univers = but, it is not as easy as it appears to be; in QD, you have to
prove the negligence of the defendant (patunayan mo na negligent siya); the obligations of QD that will give rise
to it, is the obligation of every person to exercise due care when moving around in the community; you cannot
wantonly or carelessly move around and cause an injury and you claim that it falls under damnum absque injuria
= it will give rise to liability under QD in the absence of a pre-existing contractual relation
*Case of Air France vs. Carrascoso → the fact that the action of the crew of the airplane (promised a first class
seat and that he bought that seat and you bumped him off while aboard); that amounts to a violation to public
policy; considered a tort even if there is a pre existing contractual relation between the parties
-Elements of QD based on negligence → 1.) there must be an injury (may nasaktan); 2.) someone was negligent;
you have to prove negligence; 3.) you will have to prove proximate cause (causal connection between negligent
act and injury); generally speaking, when you are talking of QD based on negligence, the burden of proving that
the defendant was negligent is on the plaintiff, subject to exceptions
-If there is a driver who has an employer, and injured someone, and the drive is negligent, under 2180, the
employer is presumed to be negligent = vicarious liability (hindi lang empleyado pwede pagbayarin; employer is
also responsible for the injury done by employee)
-QD may tinatawag na vicarious liability, solidary liability (employer ay nakasakay sa sasakyan and pwede
mapigilan yung bangga) - 2184 = if the employer is inside the vehicle and could have prevented the accident
with use of diligence (solidary liability on the employer)
-Primary liability = naglakad ka ng aso mo, tapos nakakagat aso mo, then pasok siya sa strict liability tort (unless
may force majeure or yung nakagat niya ay siya nagpa-kagat ng kusa)
-Manufacturers and processors = pag nakalason sila, papasok sa strict liability tort (primary liability)
-Difference between solidary and vicarious = if the employer pays, he can reimburse 100 percent
(vicarious liability - parang surety or guaranty ito); solidary = solidary debtor pays entire amount of
obligation, under the chapter of solidary obligation, he can only recover a proportionate share of his
credit (ex.) marerecover mo lang is 50k out of 100k)
-Subsidiary liability (only applies under Article 100 of the RPC) = do not talk about this pagdating sa QD;
we talk about this during civil action arising from criminal offense
-Negligence → kahit saan, kailangan siksikan mo siya ng proximate cause; you do not talk about this, and not
talk about proximate cause; kailangan may proximate cause lagi;
*Definition of proximate cause (remember) → three elements to prove negligence is quasi delict: 1.) injury
suffered plaintiff
-In QD, negligence must be proved; in breach of contract of carriage (culpa contractual - negligence is presumed
because there is a predetermined result expected when you enter into a contract; when you enter into a contract,
from the beginning you know what you expect to get, and if you don’t expect to get it, then somewhere somehow,
someone committed breach; and if the obligor fails to perform the obligation in the contract, then possibly he
committed negligence or fraud (mamimili ka)) - how do you define negligence? → Article 1173
-In CC, negligence is presumed, because in breach of contract of carriage, because of the existence of a
contract, the obligee expected the result; pag sumakay ka ng bus, inaasahan mo na makakarating ka ng buhay
-Even if under the breach of contract of carriage (extraordinary diligence); unless the bus company is able to
prove that it exercised extraordinary diligence (standard of care required)
1. Res Ipsa Loquitur = the thing speaks for itself; the thing which caused the injury to the person is under
the exclusive control of the defendant; ordinarily, such even will not happen unless there is negligence;
the first requisite is, that the thing which caused the injury is under the exclusive control of defendant; 2.)
ordinarily, injury will not happen unless there is negligence; 3.) defendant fails to give explanation for the
happening of the event → the case of Africa vs. Caltex (yung Caltex dito sa Manila, na naglilipat ng
gasolina, biglang nag spark and caused a fire; and someone was injured = res ipsa loquitur; it does not
normally happen and the equipment was under the exclusive control of defendant); and Batiquin vs. CA
= cesarean operation; may gloves na naiwan sa uterus
2. Respondeat Superior = sa breach of contract of carriage, the employer cannot invoke the defense that
he exercised diligence in the supervision of the employees; what is being followed is the principle of
respondeat superior (command responsibility); employer + employee = both negligent; HINDI ITO QD!;
if the negligence of employee has been proved, no need to prove the negligence of employer = the
employer is already negligent in the hiring and supervision of employee; applies to common carriers
a. Compared to 2180 = merely presumed to be negligent ang employer dito
b. 2180 = negligence is merely presumed; it will cease if he can prove otherwise
c. What is being applied in 2180 (vicarious liability) = NOT respondeat superior, but bonus pater familias
3. Violation of Traffic Rules (Articles 2184 - 2185): there are two paragraphs in 2184; the first paragraph,
the owner was inside the vehicle; second paragraph: owner is not inside the vehicle ;and if the owner is
inside the vehicle, the owner is solidarily liable; on the other hand, if the owner is not inside the vehicle,
you apply 2180 which means that the owner is vicariously liable (2180= vicarious liability lang) - the law
made a distinction, because the vicarious liability must be distinguished from solidary liability (in terms of
getting the payment back or not)
. 2184: presumption of negligence; if the driver two months prior to the accident, has committed a violation
or was recklessly driving = then presumed negligent siya
a. 2185: ganon din; but in this case, presumed din ang negligent ng drive if at the very time of the accident,
you crossed or beat the red light, you violated a traffic rule (mishap (someone was negligent) = baka
mamisinterpret pag sinabing accident)
4. 2188 (Possession of Dangerous Weapons and Substances) = there is a presumption of negligence here
-Generally in QD, negligence is not merely presumed; except for the four exceptions (mentioned above in the
enumeration)
-In QD, what are the defenses available to defendant? → defenses available to the defendant:
1. Contributory Negligence (2179) → 2179 talks of two situations: 1.) the defendant can show or was able
to show that the immediate and proximate cause of injury was the negligence of plaintiff himself; in this
case, the defendant is totally exempt from liability - this is the first situation; 2.) if the defendant can show
that although the proximate cause (you always discuss proximate cause when you are discussing
negligence), the defendant was able to prove that although the proximate cause of the injury was his lack
of due care, the plaintiff also contributed to injury with his own negligence; contributory negligence on the
part of the plaintiff - defendant is liable, but his liability will be mitigated or will be reduced by the court →
case of Rakes vs. Atlantic Gulf = Rakes was also at fault, because he did not follow the guidelines; and
negligence of Atlantic Gulf na hindi pinarepair yung rails = equally negligent; and Cangco vs. Manila
Railroad = MRR was negligent dahil bakit walang ilaw doon sa lugar, and may naiwan na sack of
watermelons doon sa pavement; there was contributory negligence, but the proximate cause was caused
by the negligence of the MRR (defendant)
2. Assumption of Risk (1174): involves an action to which one consents; when the plaintiff assumes the
risk with the possibility of meeting an accident (ex.) there was an ongoing strike or riot in the street and
proceeded to do his act, then suffered an injury - he cannot claim that someone was negligent); also a
defense available to defendant; Austria vs. CA = there is an assumption of risk in this case - nagdala ng
alahas pauwi in the middle of the night
3. Last Clear Chance: this principal provides that a person who has the last clear chance of avoiding an
accident, regardless of the negligent act of another who is imputed, is considered by law, solely
responsible for the consequences of the accident - case: anak ni Lydia De Vega - nasagasaan yung anak
niya = negligence on the part of the mother (hindi binantayan); the three year old was attracted to going
out of the street - who had the last clear chance of avoiding the accident? = if you apply the doctrine of
the last clear chance, there is prior negligence on the part of the plaintiff (on the part of Lydia); in this
case, the person who had the last clear chance of avoiding the accident was still the drive of the jeepney
- the application of LCC: 1.) there is prior negligence on the part of plaintiff; 2.) defendant was aware of
the existence of plaintiff (defendant saw that there was a child on the street); 3.) defendant had the LCC
to avoid the peril, but failed to do so; 4.) accident occurs due to negligence of defendant
4. 1146 Prescription: 4 years - 4 year prescriptive period is counted from the date the tortious act is
committed; exception: discovery rule = if the injury is discovered after the 4 year period; date of the
discovery will be taken into consideration; if X worked in an asbestos factory, and 10 years after his
continuous exposure to asbestos, he showed signs of asbestosis caused by the chemicals; can he still
file an action? - Yes. due to the discovery rule
*Consumer Act of PH: sue Manufacturer + importers or sellers; prescriptive period is counted if the defect is
apparent (4 years from purchase); defect = 2 years from the discovery of the defect
5. Fortuitous Event: no person may be held liable for a FE; the elements of FE; another defense that may
be used by defendant is QD is diligence (under 2180 → the responsibility treated in this article shall cease, if
they have observed the diligence of a good father of a family to prevent the damage)
*2180 = talks about vicarious liability; certain persons that if they commit negligence and that negligence resulted
in injury, then persons that are responsible for them will also be liable; precisely the provision of 2180 states that
the obligation imposed by article 2176 is demandable not only for one’s owns acts, but also for those persons
for whom one is responsible → if the father is responsible for taking care of his child, then if the child commits
an act of negligence that resulted to injury to another person, then the father, or the mother is responsible for the
damages caused by the children (same is true with guardians; liable for damages caused by minors or
incapacitated persons)
*Primary liability → instances wherein the person is primarily liable for damages under QD:
1. 2183 = whether or not the dog is on leash, or he strayed or got lost, or may hinabol sa kalsada; then the
possessor of the animal- pwedeng managot (kahit yung dog handler - primarily liable)
2. Owner of vehicles (under 2184) = so we discussed this; solidary liable - but both are primarily liable
(liability of owner is similar to the driver = primary and solidarily liable)
3. 2187: (strict liability) = in other words, when you eat in a restaurant and drank soda, and it turns out na
may ipis sa loob - kahit na hindi ikaw ang nagbayad or walang contractual relation with the processors of
the drinks, they will be liable to you; you can sue them pursuant to this provision (ex.) coca-cola can be
held liable for having ipis inside the coke can)
4. 2189: provinces, cities and municipalities (defective conditions of roads, etc. - under their control or
supervision) = kapag bumaha and nahulog yung tao sa imbornal = liable yung LGU - HINDI BARANGAY
yung liable
5. 2190 and 2091: if you own something and you do not take care of it (it could be any property and could
even be a tree, and you don’t trim it and someone passed under it and someone was injured, then you
can be liable for it → primary liability on the part of the proprietor)
6. 2193: walang defense dito; anything that falls from your house or thrown from the same (strict liability tort
ito)
*may special torts under human relations → general rule ang damnum absque injuria: if someone suffers an
injury and even if it is painful to that person; if you acted within your legal right, then you will not be liable (classic
example: breach of mutual promise to marry is not actionable generally speaking); there is injury, but you cannot
claim for liability → not an absolute rule: exceptions → under Article 19, 20 and 21 (abuse of rights doctrine); if
you abuse your right, you can be held liable for damages
*Fraud, or you took advantage of the kindness of your girlfriend and pinaasa mo siya = exceptions to the breach
of promise to marry