1.

Different Kinds of Obligations

(https://www.trans-lex.org/602450/_/philippines-republic-act-386-/#toc_5)

SECTION 1 Pure and Conditional Obligations

Article 1179. Every obligation whose performance does not depend upon a future or
uncertain event, or upon a past event unknown to the parties, is demandable at once.

Every obligation which contains a resolutory condition shall also be demandable, without
prejudice to the effects of the happening of the event. (1113)

Article 1180. When the debtor binds himself to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period, subject to the provisions of article 1197.
(n)

Article 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition. (1114)

Article 1182. When the fulfillment of the condition depends upon the sole will of the debtor,
the conditional obligation shall be void. If it depends upon chance or upon the will of a third
person, the obligation shall take effect in conformity with the provisions of this Code. (1115)

Article 1183. Impossible conditions, those contrary to good customs or public policy and
those prohibited by law shall annul the obligation which depends upon them. If the obligation
is divisible, that part thereof which is not affected by the impossible or unlawful condition
shall be valid.

The condition not to do an impossible thing shall be considered as not having been agreed
upon. (1116a)

Article 1184. The condition that some event happen at a determinate time shall extinguish
the obligation as soon as the time expires or if it has become indubitable that the event will
not take place. (1117)

Article 1185. The condition that some event will not happen at a determinate time shall
render the obligation effective from the moment the time indicated has elapsed, or if it has
become evident that the event cannot occur.

If no time has been fixed, the condition shall be deemed fulfilled at such time as may have
probably been contemplated, bearing in mind the nature of the obligation. (1118)

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment. (1119)
Article 1187. The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the
obligation imposes reciprocal prestations upon the parties, the fruits and interests during the
pendency of the condition shall be deemed to have been mutually compensated. If the
obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless
from the nature and circumstances of the obligation it should be inferred that the intention of
the person constituting the same was different.

In obligations to do and not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with. (1120)

Article 1188. The creditor may, before the fulfillment of the condition, bring the appropriate
actions for the preservation of his right.

The debtor may recover what during the same time he has paid by mistake in case of a
suspensive condition. (1121a)

Article 1189. When the conditions have been imposed with the intention of suspending the
efficacy of an obligation to give, the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the pendency of the condition:

(1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;

(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it cannot be recovered;

(3) When the thing deteriorates without the fault of the debtor, the impairment is
to be borne by the creditor;

(4) If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for damages in
either case;

(5) If the thing is improved by its nature, or by time, the improvement shall inure
to the benefit of the creditor;

(6) If it is improved at the expense of the debtor, he shall have no other right than
that granted to the usufructuary. (1122)

Article 1190. When the conditions have for their purpose the extinguishment of an obligation
to give, the parties, upon the fulfillment of said conditions, shall return to each other what
they have received.

In case of the loss, deterioration or improvement of the thing, the provisions which, with
respect to the debtor, are laid down in the preceding article shall be applied to the party who
is bound to return.
As for the obligations to do and not to do, the provisions of the second paragraph of article
1187 shall be observed as regards the effect of the extinguishment of the obligation. (1123)

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired
the thing, in accordance with articles 1385 and 1388 and the Mortgage Law. (1124)

Article 1192. In case both parties have committed a breach of the obligation, the liability of
the first infractor shall be equitably tempered by the courts. If it cannot be determined which
of the parties first violated the contract, the same shall be deemed extinguished, and each
shall bear his own damages. (n)

SECTION 2 Obligations with a Period

Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be
demandable only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day
certain.

A day certain is understood to be that which must necessarily come, although it may not be
known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional,
and it shall be regulated by the rules of the preceding Section. (1125a)

Article 1194. In case of loss, deterioration or improvement of the thing before the arrival of
the day certain, the rules in article 1189 shall be observed. (n)

Article 1195. Anything paid or delivered before the arrival of the period, the obligor being
unaware of the period or believing that the obligation has become due and demandable,
may be recovered, with the fruits and interests. (1126a)

Article 1196. Whenever in an obligation a period is designated, it is presumed to have been

established for the benefit of both the creditor and the debtor, unless from the tenor of the
same or other circumstances it should appear that the period has been established in favor
of one or of the other. (1127)
Article 1197. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may fix the duration
thereof.

The courts shall also fix the duration of the period when it depends upon the will of the
debtor.

In every case, the courts shall determine such period as may under the circumstances have
been probably contemplated by the parties. Once fixed by the courts, the period cannot be
changed by them. (1128a)

Article 1198. The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless
he gives a guaranty or security for the debt;

(2) When he does not furnish to the creditor the guaranties or securities which he
has promised;

(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, in consideration of which the
creditor agreed to the period;

(5) When the debtor attempts to abscond. (1129a)

SECTION 3 Alternative Obligations

Article 1199. A person alternatively bound by different prestations shall completely perform
one of them.

The creditor cannot be compelled to receive part of one and part of the other undertaking.
(1131)

Article 1200. The right of choice belongs to the debtor, unless it has been expressly granted
to the creditor.

The debtor shall have no right to choose those prestations which are impossible, unlawful or
which could not have been the object of the obligation. (1132)

Article 1201. The choice shall produce no effect except from the time it has been
communicated. (1133)
Article 1202. The debtor shall lose the right of choice when among the prestations whereby
he is alternatively bound, only one is practicable. (1134)

Article 1203. If through the creditor's acts the debtor cannot make a choice according to the
terms of the obligation, the latter may rescind the contract with damages. (n)

Article 1204. The creditor shall have a right to indemnity for damages when, through the
fault of the debtor, all the things which are alternatively the object of the obligation have been
lost, or the compliance of the obligation has become impossible.

The indemnity shall be fixed taking as a basis the value of the last thing which disappeared,
or that of the service which last became impossible.

Damages other than the value of the last thing or service may also be awarded. (1135a)

Article 1205. When the choice has been expressly given to the creditor, the obligation shall
cease to be alternative from the day when the selection has been communicated to the
debtor.

Until then the responsibility of the debtor shall be governed by the following rules:

(1) If one of the things is lost through a fortuitous event, he shall perform the
obligation by delivering that which the creditor should choose from among the remainder, or
that which remains if only one subsists;

(2) If the loss of one of the things occurs through the fault of the debtor, the
creditor may claim any of those subsisting, or the price of that which, through the fault of the
former, has disappeared, with a right to damages;

(3) If all the things are lost through the fault of the debtor, the choice by the
creditor shall fall upon the price of any one of them, also with indemnity for damages.

The same rules shall be applied to obligations to do or not to do in case one, some or all of
the prestations should become impossible. (1136a)

Article 1206. When only one prestation has been agreed upon, but the obligor may render
another in substitution, the obligation is called facultative.

The loss or deterioration of the thing intended as a substitute, through the negligence of the
obligor, does not render him liable. But once the substitution has been made, the obligor is
liable for the loss of the substitute on account of his delay, negligence or fraud. (n)

SECTION 4 Joint and Solidary Obligations

Article 1207. The concurrence of two or more creditors or of two or more debtors in one and
the same obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the prestation. There is
a solidarity liability only when the obligation expressly states, or when the law or the nature
of the obligation requires solidarity. (1137a)

Article 1208. If from the law, or the nature or the wording of the obligations to which the
preceding article refers the contrary does not appear, the credit or debt shall be presumed to
be divided into as many shares as there are creditors or debtors, the credits or debts being
considered distinct from one another, subject to the Rules of Court governing the multiplicity
of suits. (1138a)

Article 1209. If the division is impossible, the right of the creditors may be prejudiced only by
their collective acts, and the debt can be enforced only by proceeding against all the debtors.
If one of the latter should be insolvent, the others shall not be liable for his share. (1139)

Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity.
Nor does solidarity of itself imply indivisibility. (n)

Article 1211. Solidarity may exist although the creditors and the debtors may not be bound
in the same manner and by the same periods and conditions. (1140)

Article 1212. Each one of the solidary creditors may do whatever may be useful to the
others, but not anything which may be prejudicial to the latter. (1141a)

Article 1213. A solidary creditor cannot assign his rights without the consent of the others.
(n)

Article 1214. The debtor may pay any one of the solidary creditors; but if any demand,
judicial or extrajudicial, has been made by one of them, payment should be made to him.
(1142a)

Article 1215. Novation, compensation, confusion or remission of the debt, made by any of
the solidary creditors or with any of the solidary debtors, shall extinguish the obligation,
without prejudice to the provisions of article 1219.

The creditor who may have executed any of these acts, as well as he who collects the debt,
shall be liable to the others for the share in the obligation corresponding to them. (1143)

Article 1216. The creditor may proceed against any one of the solidary debtors or some or
all of them simultaneously. The demand made against one of them shall not be an obstacle
to those which may subsequently be directed against the others, so long as the debt has not
been fully collected. (1144a)

Article 1217. Payment made by one of the solidary debtors extinguishes the obligation. If
two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds
to each, with the interest for the payment already made. If the payment is made before the
debt is due, no interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to
the debtor paying the obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each. (1145a)

Article 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his
codebtors if such payment is made after the obligation has prescribed or become illegal. (n)

Article 1219. The remission made by the creditor of the share which affects one of the
solidary debtors does not release the latter from his responsibility towards the co-debtors, in
case the debt had been totally paid by any of them before the remission was effected.
(1146a)

Article 1220. The remission of the whole obligation, obtained by one of the solidary debtors,
does not entitle him to reimbursement from his co-debtors. (n)

Article 1221. If the thing has been lost or if the prestation has become impossible without
the fault of the solvent debtors, the obligation shall be extinguished.

If there was fault on the part of any one of them, all shall be responsible to the creditor, for
the price and the payment of damages and interest, without prejudice to their action against
the guilty or negligent debtor.

If through a fortuitous event, the thing is lost or the performance has become impossible
after one of the solidary debtors has incurred in delay through the judicial or extrajudicial
demand upon him by the creditor, the provisions of the preceding paragraph shall apply.
(1147a)

Article 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all
defenses which are derived from the nature of the obligation and of those which are personal
to him, or pertain to his own share. With respect to those which personally belong to the
others, he may avail himself thereof only as regards that part of the debt for which the latter
are responsible. (1148a)

SECTION 5 Divisible and Indivisible Obligations

Article 1223. The divisibility or indivisibility of the things that are the object of obligations in
which there is only one debtor and only one creditor does not alter or modify the provisions
of Chapter 2 of this Title. (1149)

Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the time
anyone of the debtors does not comply with his undertaking. The debtors who may have
been ready to fulfill their promises shall not contribute to the indemnity beyond the
corresponding portion of the price of the thing or of the value of the service in which the
obligation consists. (1150)

Article 1225. For the purposes of the preceding articles, obligations to give definite things
and those which are not susceptible of partial performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain number of days of work, the
accomplishment of work by metrical units, or analogous things which by their nature are
susceptible of partial performance, it shall be divisible.

However, even though the object or service may be physically divisible, an obligation is
indivisible if so provided by law or intended by the parties.

In obligations not to do, divisibility or indivisibility shall be determined by the character of the
prestation in each particular case. (1151a)

SECTION 6 Obligations with a Penal Clause

Article 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of noncompliance, if there is no stipulation to
the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or
is guilty of fraud in the fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the provisions
of this Code. (1152a)

Article 1227. The debtor cannot exempt himself from the performance of the obligation by
paying the penalty, save in the case where this right has been expressly reserved for him.
Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the
penalty at the same time, unless this right has been clearly granted him. However, if after the
creditor has decided to require the fulfillment of the obligation, the performance thereof
should become impossible without his fault, the penalty may be enforced. (1153a)

Article 1228. Proof of actual damages suffered by the creditor is not necessary in order that
the penalty may be demanded. (n)

Article 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable. (1154a)

Article 1230. The nullity of the penal clause does not carry with it that of the principal
obligation.

The nullity of the principal obligation carries with it that of the penal clause. (1155)

2. ELEMENTS OF OBLIGATION
Article 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

Every obligation has four essential elements: an active subject; a passive subject; the
prestation; and the legal tie.

The ACTIVE SUBJECT is the person who has the right or power to demand the
performance or payment of the obligation. He is also called the obligee or the creditor.

The PASSIVE SUBJECT is the person bound to perform or to pay. He is the one against
whom the obligation can be demanded. He is also called the obligor or the debtor.

The PRESTATION is the object of the contract. It is the conduct required to be observed by
the debtor or the obligor. It may be an obligation to give, to do, or not to do.

The VINCULUM JURIS is also known as the juridical or legal Tie. Other authors call it the
efficient cause. It is that which binds or connects the parties to the obligation. (De Leon) In
other words, it is the legal relation between the debtor and the creditor (or obligor and
obligee).

- https://www.projectjurisprudence.com/2019/11/elements-of-obligation.html

3. SOURCE OF OBLIGATION
Article 1157. Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (1089a)

4. DIFFERENTIATE ACTUAL DELIVERY AND CONSTRUCTIVE DELIVERY

- Actual Delivery: When the items are literally handed over to the buyer, it is referred to
as an actual delivery. Constructive delivery: The transfer of goods can be carried out
even if there is no change in the possession or custody of the commodities.It's a term
used when an item isn't actually delivered, but only a symbol or sign of it is. It's a
term used when an item isn't actually delivered, but only a symbol or sign of it is.
5. WHEN WHAT IS TO BE DELIVERED IS A DETERMINE THING, A CREDITOR
MAY COMPEL THE DEBTOR TO MAKE DELIVERY. IF THE THING IS
INDETERMINATE OR GENERIC, HE MAY ASK THE OBLIGATION TO BE
COMPLIED WITH AT THE EXPENSES OF THE DEBTOR. IF THE OBLIGOR
DELAYS OR HAS SAME INTEREST, HE SHALL BE RESPONSIBLE FOR ANY
FORTUITOUS EVENT HE HAS AFFECTED THE DELIVERY. EXPLAIN.
Article 1165. When what is to be delivered is a determinate thing, the
creditor, in addition to the right granted him by article 1170, may compel the debtor to
make the delivery.

- If the thing is indeterminate or generic, he may ask that the obligation be complied
with at the expense of the debtor.
- If the obligor delays, or has promised to deliver the same thing to two or more
persons who do not have the same interest, he shall be responsible for any fortuitous
event until he has affected the delivery. (1096)
Article 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages. (1101)

6. DIFFERENTIATE A DETERMINATE THING FROM INDETERMINATE OR

GENERIC THING. GIVE AN EXAMPLE.

- A thing is determinate when it is particularly designated or physically segregated from

all others of the same class. (Art. 1460) It is determinate or specific if it is distinct
from all others and can individually be classified or determined. From the word itself
determinate meaning can be determined from all others.
Examples: Romeo's only horse named Alden, Kawasaki Raider with engine
number 12345 and plate number HX1123, and Romeo's one and only Rolex 3310
made in China with serial number 265747.
- In contrast, indeterminate or generic thing is the opposite of determinate or specific
thing; that is, generic or indeterminate thing is not particularly designated or
physically segregated from all others of the same class. It means that a thing cannot
be specifically determined from things of the same class. The thing can be replaced
by another thing that is of the same quality.
Examples: a horse, a motorcycle, a sack of rice, a car, and USD 100, 000.

7. DIFFERENTIATE FRAUD VS. NEGLIGENCE.

- They purposefully provide information that is false with intent to deceive and harm
either their business or another company. Negligent misrepresentation involves
businesses and individuals that claim to provide certain skills, but cannot fully follow
through on their end.

8. KINDS OF DILIGENCE (EXPLAIN)

- DILIGENCE OF A GOOD FATHER
- DILIGENCE REQUIRED BY LAW GOVERNING THE PARTICULAR OBLIGATION
- DILIGENCE STIPULATED BY PARTIES

9. DISTINGUISH PURE AND CONDITIONAL OBLIGATION

- The first paragraph of Article 1179 refers to a legal requirement. A pure obligation is
one that can be enforced immediately since it is not contingent on a future or
uncertain event, a prior event unknown to the parties, or a resolutory condition. A
pure obligation is a basic promissory note that promises to pay a specified sum within
a certain time frame. A conditional obligation is one whose fulfillment is contingent on
the occurrence of a specific event, which may or may not occur. It could be resolutory
or suspensive. A suspensive situation is a future or uncertain event that gives rise to
an obligation if it occurs.

10. EXPLAIN JOINT AND SOLIDARY OBLIGATION

- Each obligor answers only for a part of the entire liability, and each obligee belongs
only to a part of the corresponding rights, under a joint obligation. For example, A
and B are joint debtors of C to the amount of P500,000. C can demand only
P250,000 from A, and only P250,000 from B.
- In a solidary or joint and several obligations, the relationship between the active and
passive individuals is so intimate that each of the former or latter may demand or
must comply with the entire obligation. For example, A and B are solidary debtors of
C to the amount of P500,000. C can demand the whole P500,000 from A. A in turn,
after paying C, can ask reimbursement from B to the amount of P250,000.

11. DIVISIBLE AND INDIVISIBLE OBLIGATION

- THE DIVISIBILITY OR INDIVISIBILITY OF THE OBJECTS OF OBLIGATION IN
WHICH THERE IS ONLY ONE DEBTOR AND ONE CREDITOR DOES NOT ALTER
OR MODIFY THE PROVISIONS OF CHAPTER 2.
A divisible obligation is one whose object is capable of partial fulfillment in
terms of delivery or performance.
An indivisible obligation is one whose purpose is incapable of partial
fulfillment in terms of delivery or performance.

12. ENUMERATE AND DISCUSS WHEN ARE OBLIGATION EXTINGUISHED?

ARTICLE 1231. Obligations are extinguished:

(1) By payment or performance;

Article 1232. Payment means not only the delivery of money but also the
performance, in any other manner, of an obligation.
 Repayment is not only in bringing money but also in fulfilling the obligation in
the proper manner in the obligation.

This article demonstrated that an obligation can be paid in a variety of ways,

including by the transfer of money or the execution of the obligation in any way.

Payment can take several forms, including the delivery of money, the providing of a
thing (other than money), the performance of an act, or the failure to perform an act.

Example:

Payment is made by providing the car if D is bound to supply E a specified car.

Article 1233. A debt shall not be understood to have been paid unless the thing
or service in which the obligation consists has been completely delivered or
rendered, as the case may be.

A debt shall not be construed as payment unless the object or service for
which the obligation has been fully delivered or performed in either.

A debt can be defined as an obligation to deliver money, a thing (other than money),
or to do or not do anything.

It must be in the agreed-upon currency and at the agreed-upon time and location.
The item supplied or the service rendered must be identical to what was negotiated.

For instance, Sioti pledged to pay Nicco P1,250.00 for a Ukulele. Nicco will receive
only P1,000.00 from Sioti. Nicco has the right to refuse the P1,000.00 if the fulfillment
is incomplete.

Article 1234. If the obligation has been substantially performed in good faith,
the obligor may recover as though there had been a strict and complete
fulfillment, less damages suffered by the obligee.

When the obligation is about to be fulfilled in good faith, the holder of the
obligation can collect as if in strict and complete fulfillment, deducting the damage
suffered by the person to whom the obligation applies.

When the debtor has sought to perform the contract or prestation in good faith but
has failed to do so due to excusable negligence or oversight for which the other party
may be compensated, there is considerable compliance.

If there is considerable compliance, the obligor may be compensated as if the

obligation was fully fulfilled, less the amount of losses experienced by the obligee.

EXAMPLE:
Mark promised Allen that he would sell 1,000 bags of cement for a specific amount.
However, due to a cement shortage, Mark was only able to deliver 950 bags despite
his best efforts. Mark wants to fulfill his commitment to deliver the complete
obligation, but due to circumstances beyond his control, he is unable to do so.

Mark can recoup as if there had been an entire delivery less the cost of the fifty bags
under the law. Allen is unable to impose a condition on Mark's accountability for the
payment that he delivers the remaining fifty bags first. He must pay for the 950 bags,
as well as pursue his entitlement to damages if Mark fails to produce the difference.
Mark, on the other hand, must provide a satisfactory explanation for his failure to
complete delivery.

Article 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.

When the obligee accepts the performance, while it knows that it is

incomplete or irregular, and without expressing any protest or objection, the
obligation will be deemed to have been fully complied with.

Article 1236. The creditor is not bound to accept payment or performance by a

third person who has no interest in the fulfillment of the obligation, unless
there is a stipulation to the contrary.

Whoever pays for another may reclaim what he has paid from the debtor, except if he
paid without the debtor's knowledge or against his will, in which case he can only
recover if the payment was advantageous to the debtor.

Article 1237. Whoever pays on behalf of the debtor without the knowledge or
against the will of the latter, cannot compel the creditor to subrogate him in his
rights, such as those arising from a mortgage, guaranty, or penalty.

Article 1238. Payment made by a third person who does not intend to be
reimbursed by the debtor is deemed to be a donation, which requires the
debtor’s consent. But the payment is in any case valid as to the creditor who
has accepted it.
Article 1238 "encapsulates the concept that no one should be forced to accept
another's kindness." If the paying third party does not expect to be reimbursed, the
payment is considered a contribution, and the debtor's approval is required for it to
be lawful. Though the creditor accepts the payment, it is legitimate for both the
creditor and the payor, even if the debtor did not consent to the contribution.

EXAMPLE
Crystal owes James P500.00. Janice paid James' commitment without expecting to
be compensated. Janice' kindness had already been welcomed by James. James is
no longer obligated to Janice, and his commitment to Crystal has ended. However, if
James refused to assent to the donation, Janice may be able to recover from him
because there was no donation, even though James did not expect to be reimbursed.
However, James commitment to Crystal is discharged because the payment is
legitimate only for Crystal who has received it.

Article 1239. In obligations to give, payment made by one who does not have
the free disposal of the thing due and capacity to alienate it shall not be valid,
without prejudice to the provisions of Article 1427 under the Title on “Natural
Obligations.”

In an obligation to give, the compensation given by a person who is incapable

of deciding what to give and the ability to transfer to another of the said is void.

This essay is about the responsibility to give. Otherwise, the payment is not
legitimate since the payor does not have free disposal of the item paid. The payment
is not valid and can be annulled if the payor does not have the capacity to alienate
the thing, such as when he is a non-compos mentis (not of sound mind), unless it is
made by minors, in which case the payment is valid and can be annulled under
article 1427, which states that "money or fungible goods delivered by a minor can no
longer be recovered if they have been consumed by the creditor in good faith."

Article 1240. Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or any person
authorized to receive it.

To Whom payment Must Be made

a. To the person in whose favor the obligation has been constituted (the creditor);

b. to the successor-in-interest (like the heirs); or

c. to any person authorized to receive it.

Arcache v. Lizares & Co.

91 Phil. 348

FACTS: D owed C. Instead of paying C, D deposited the money in a bank in the

name and for the credit of C. All these were done without C’s permission.

ISSUE: Has the debt been extinguished?

HELD: No. But if after efforts had been made, the creditor could not be found,
particularly at the place where payment is supposed to be made, the debtor cannot
be held guilty of default.
 Article 1241. Payment to a person who is incapacitated to administer his
property shall be valid if he has kept the thing delivered, or insofar as the
payment has been beneficial to him.

If a payment made to an incapacitated creditor who is unable to administer his

property did not benefit him or he did not keep the thing delivered, the debtor may be
obliged to pay a new amount when the creditor regains capacity, or by the latter's
agent during the creditor's incapacity.

In contrast, the debtor is relieved from his obligation by virtue of payment if the
incapacitated creditor has kept the thing given or has profited from the amount he
received.

If a creditor becomes incapacitated and is unable to manage his own property, it

should be delivered to his legal representative; if none exists, the debtor may consign
the item to the court.

Example

If A owes B, the obligation matures; however, B was injured in a car accident and
went into a coma. Either A or B can compensate B by paying his medical bills or by
consigning his payment to the court. A's payment will be legal as long as the benefit
to the incapacitated creditor outweighs the cost.

Article 1242. Payment made in good faith to any person in possession of the
credit shall release the debtor.

Payment by the debtor made without deceit or malice to the person holding the debt
will release the debtor from his obligation.

Example

Kane owes Mikko P200.00. Mikko's promissory note was misplaced by Kane. Mother
discovered the promissory note and demanded Mikko's payment.

The genuine creditor, his heirs, or the person authorized by him or by law under
Article 1240 are not considered to be in possession of credit. It refers to someone
who has the appearance of being a creditor but isn't.

The credit documentation is not the credit itself.

Article 1243. Payment made to the creditor by the debtor after the latter has
been judicially ordered to retain the debt shall not be valid.

The debtor's payment to the creditor after the debtor has been ordered by the court
to retain the debt is void.
Examples

Richard owes Janine P1,000,000.00. Leo, in turn, owes Richard P100,000.00. Leo
files a lawsuit against Richard, who claims insolvency but acknowledges his credit
with Janine. Janine is summoned into the process before she can pay Richard, and
she is asked to keep the debt in the interim. As a result, the debt is "garnished." The
reason for this is that Janine should not pay Richard and should instead pay Leo,
should Leo be adjudged Richard's creditor in the meanwhile, which is illegal.

(2) By the loss of the thing due;

Article 1262. An obligation which consists in the delivery of a determinate thing

shall be extinguished if it should be lost or destroyed without the fault of the
debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the
loss of the thing does not extinguish the obligation, and he shall be
responsible for damages. The same rule applies when the nature of the
obligation requires the assumption of risk.

An obligation consisting of the delivery of a specific object must be terminated if it is

lost or destroyed through no fault of the debtor, and before he can delay.
When it is in the law or stipulation that the obligor is liable even in unforeseen
circumstances, the loss of the object does not terminate the obligation, and he is
liable for damages. The same rule also applies if the nature of the obligation calls for
a presumption of risk.

Article 1263. In an obligation to deliver a generic thing, the loss or destruction

of anything of the same kind does not extinguish the obligation.

Article 1264. The courts shall determine whether, under the circumstances, the
partial loss of the object of the obligation is so important as to extinguish the
obligation.
Depending on the situation, the courts will determine whether partial damage or loss
of the object of the obligation is essential to rescind the obligation.
When only a portion of something is lost or destroyed, or when it depreciates or
deteriorates, it is referred to as partial loss. Partial loss is the equivalence of difficulty
in fulfilling one's responsibilities. (See Article 1267.)

In the event of a partial loss, the court has the power, in the event of a disagreement
between the parties, to evaluate whether the partial loss is so essential in
comparison to the total that the obligation should be extinguished. In other words, the
court will determine whether the partial loss is comparable to a total or complete loss.

Article 1265. Whenever the thing is lost in the possession of the debtor, it shall
be presumed that the loss was due to his fault, unless there is proof to the
contrary, and without prejudice to the provisions of article 1165. This
 presumption does not apply in case of earthquake, flood, storm, or other
natural calamity.
When the thing to be given is missing in the possession of the debtor, the article
establishes a debatable presumption of fault. Because the debtor who has custody
and care of the item can easily explain the circumstances of the loss, this inference is
reasonable. The creditor is under no need to prove that the debtor is at fault.
The obligor who is not at fault is still liable if he is late or has pledged to supply the
same product to two or more people who do not have the same interest, according to
Article 1165, third paragraph.
The presumption of fault does not apply in the case of natural disasters. It's more
likely that the debtor isn't at fault. So it is unjust to presume negligence on his part.

Article 1266. The debtor in obligations to do shall also be released when the
prestation becomes legally or physically impossible without the fault of the
obligor.
This article only relates to tasks that must be completed. To cancel the obligation, the
prestation that the debtor is obliged to personally undertake after the contract's
execution must have become impossible to accomplish. Otherwise, if the
impossibility existed from the beginning of the deal, the contract is worthless, and the
obligation to perform is logically void.

Article 1267. When the service has become so difficult as to be manifestly

beyond the contemplation of the parties, the obligor may also be released
therefrom, in whole or in part.

The usual norm is that if performance is impossible, the obligor is released. This is
also known as the doctrine of "business object frustration" or "enterprise frustration."
This article discusses moral impossibility or impracticability as a result of changing
circumstances.

Note that this article refers to "service" as a personal commitment rather than a
genuine requirement to give.

Article 1268. When the debt of a thing certain and determinate proceeds from a
criminal offense, the debtor shall not be exempted from the payment of its
price, whatever may be the cause for the loss, unless the thing having been
offered by him to the person who should receive it, the latter refused without
justification to accept it.

When a debtor agrees to pay a bill but the creditor refuses to accept it.

1. To commit the item and thereby absolve himself of all responsibility for the item.
2. To retain it in his possession, subject to normal principles of obligation, with
reasonable diligence.

Article 1269. The obligation having been extinguished by the loss of the thing,
the creditor shall have all the rights of action which the debtor may have
against third persons by reason of the loss.
When a trust is agreed upon, the lender has the right to repay the debtor, he may
lose the right to whatever he wishes in this matter. His fellow creditors, guarantors
and guarantors will be independent.
Example:
Bubuli agreed to provide a Ferrari car to Bibilu, for example. Bilulu, a third party, was
responsible for the car's disappearance. Bibilu has the right to sue Bilulu for the cost
of the car plus damages.

(3) By the condonation or remission of the debt;

Article 1270. Condonation or remission is essentially gratuitous, and requires
the acceptance by the obligor. It may be made expressly or impliedly.
One and the other kind shall be subject to the rules which govern inofficious
donations. Express condonation shall, furthermore, comply with the forms of
donation.

Condemnation or pardon does not require recompense, and requires acceptance by

the obligor. It may have been made explicitly or implied.

This and another type must be subject to the rules governing “inofficious” donations.
Explicit condonation, in addition, must comply with donation procedures.

Article 1271. The delivery of a private document evidencing a credit, made

voluntarily by the creditor to the debtor, implies the renunciation of the action
which the former had against the latter.
If in order to nullify this waiver it should be claimed to be inofficious, the
debtor and his heirs may uphold it by proving that the delivery of the document
was made in virtue of payment of the debt.

The delivery of a private document proving a credit, voluntarily made by the creditor
to the debtor, indicates his waiver of action against the latter.

If to invalidate this waiver it is claimed to be absurd, the debtor and his heirs may
uphold it by certifying that the delivery of the document was made as compensation
to the indebtedness.

Article 1272. Whenever the private document in which the debt appears is
found in the possession of the debtor, it shall be presumed that the creditor
delivered it voluntarily, unless the contrary is proved.

Article 1273. The renunciation of the principal debt shall extinguish the
accessory obligations; but the waiver of the latter shall leave the former in
force.
The revocation of the principal debt will void the affiliated obligations, but the
revocation of the affiliated obligations cannot invalidate the principal obligation.
The above provision follows the rule that the accessory follows the principal. While
the accessory obligations cannot exist without the principal obligation, the latter may
exist without the former. (see Art. 1230.)

Article 1274. It is presumed that the accessory obligation of pledge has been
remitted when the thing pledged, after its delivery to the creditor, is found in
the possession of the debtor, or of a third person who owns the thing.
It is a requirement of a pledge contract that the pledged item be placed in the custody
of the creditor or a third party by mutual consent. A third party who isn't a party to the
primary obligation can secure it by pledging his own assets.

If the pledged item is later discovered in the possession of the debtor or a third party,
only the accessory obligation of pledge, not the obligation itself, is assumed remitted.
The debtor is still liable for the obligation, but he is not required to return the pledged
item. Contrary evidence overcomes the presumption.

(4) By the confusion or merger of the rights of creditor and debtor;

Article 1275. The obligation is extinguished from the time the characters of
creditor and debtor are merged in the same person.

Article 1275 refers to a conflict of rights or a merger of rights. The meeting of the
traits of obligee and obligor in one individual with respect to the same obligation is
known as confusion or merger of rights. The creditor and debtor traits are mingled in
the same person. The merging results in the extinguishment of the obligation
because it is illogical for the mentioned person to pursue a claim against himself.

Article 1276. Merger which takes place in the person of the principal debtor or
creditor benefits the guarantors. Confusion which takes place in the person of
any of the latter does not extinguish the obligation.
A merger is the coming together of two people who have the traits of creditor and
debtor in relation to the same obligation.
A guarantor is a person or an organization who agrees to pay a debt due by another
person if that person fails to do so.
Merger's Impact on Guarantors
"The principal is followed by the accessory" (the guaranty being considered as the
accessory obligation). The termination of the accessory obligation (guaranty) does
not result in the termination of the primary commitment (debt).

Article 1277. Confusion does not extinguish a joint obligation except as

regards the share corresponding to the creditor or debtor in whom the two
characters concur.

The joint obligation of merging the character of the creditor and the debtor shall not
be void, except for the parts which are owned or which are imposed on these
characters.
(5) By compensation;

Article 1278. Compensation shall take place when two persons, in their own
right, are creditors and debtors of each other.
Compensation is the extinguishment to the concurrent amount of the debts of two
persons who, in their own right, are debtors and creditors of each other.

Kinds of Compensation

1. By its effect or extent.

2. Total- when both obligations are of the same amount.
3. Partial- when the two obligations are of different amounts.
4. By its cause or origin:
5. Legal- when it takes place by operation of law even without the knowledge of
the parties.
6. Voluntary- when it takes place by agreement of the parties.
7. Judicial- when it takes place by order from a court of litigation.
8. Facultative- when it can be set up only by one of the parties.

Article 1280. Notwithstanding the provisions of the preceding article, the

guarantor may set up compensation as regards what the creditor may owe the
principal debtor.

Notwithstanding the provisions of the preceding article, the guarantor may arrange
compensation on what the creditor may provide to the principal debtor.

Article 1281. Compensation may be total or partial. When the two debts are of
the same amount, there is a total compensation.

Article 1282. The parties may agree upon the compensation of debts which are
not yet due.

This law creates an exemption to the normal rule that only due and demandable
debts can be paid. (Article 1279, paragraphs 3, 4, and 5.)
Any compensation that takes place by agreement of the parties, even if all of the
requirements for legal compensation are not met, is referred to as voluntary or
conventional compensation. There are no specific requirements for this type of
compensation. It is sufficient that the parties' contract, which establishes the
compensation, is legitimate. (Article 1306) As a result, the lack of a mutual creditor-
debtor relationship does not nullify the traditional compensation.

Article 1283. If one of the parties to a suit over an obligation has a claim for
damages against the other, the former may set it off by proving his right to said
damages and the amount thereof.

Compensation may also take place when so declared by a final judgment of a court
in a suit. A party may set off his claim for damages against his obligation to the other
party by proving his right to said damages and the amount thereof.

Article 1284. When one or both debts are rescissible or voidable, they may be
compensated against each other before they are judicially rescinded or
avoided.

Rescindible (Art. 1381) and voidable (Art. 1390) contracts are valid until judicially
revoked or annulled. Debts may be reimbursed against each other prior to rescission
or annulment.

Article 1285. The debtor who has consented to the assignment of rights made
by a creditor in favor of a third person, cannot set up against the assignee the
compensation which would pertain to him against the assignor, unless the
assignor was notified by the debtor at the time he gave his consent, that he
reserved his right to the compensation.

If the creditor communicated the cession to him but the debtor did not consent
thereto, the latter may set up the compensation of debts previous to the
cession, but not of subsequent ones.

If the assignment is made without the knowledge of the debtor, he may set up
the compensation of all credits prior to the same and also later ones until he
had knowledge of the assignment.

A debtor who consents to another person designated as entitled to collect by the

creditor, shall not be paid against the designated person to collect the fee
corresponding to the debtor against the creditor, unless the creditor has informed him
by the debtor at the time it consented, that reserved his right to be paid.

If the creditor notifies the appointment of another person entitled to collect but the
debtor does not consent, the debtor may claim that he will be paid on his creditors
prior to the appointment of the collector, but he will not be paid on arrears owed to
him.

Article 1286. Compensation takes place by operation of law, even though the
debts may be payable at different places, but there shall be an indemnity for
expenses of exchange or transportation to the place of payment.

Indemnity for expenses of transportation ( This apply for the transportation of goods
or of an object)

Article 1287. Compensation shall not be proper when one of the debts arises
from a depositum or from the obligations of a depositary or of a bailee in
commodatum.

Neither can compensation be set up against a creditor who has a claim for
support due by gratuitous title, without prejudice to the provisions of
paragraph 2 of Article 301.

In Article 1287, the word "depositum" is used instead of "deposit," which is the word
for a regular bank deposit. A bank deposit is not a depositum in the sense of the
term. It is a loan that establishes the debtor-creditor relationship. A bank's failure to
fulfill a money deposit is a breach of faith arising from the depositary's failure to
return the thing placed, not a breach of trust arising from the depositary's failure to
return the thing deposited.

Article 1288. Neither shall there be compensation if one of the debts consists
in civil liability arising from a penal offense.

When the debt proceeds fr. a criminal offense

The debtor shall NOT be exempted fr. the payment of the penalty, NOR fr. the
indemnity arising fr. his own crime

Compensation action/process of awarding someone money as a recompense for

loss, injury, or suffering

NOTE: Compensation of debt arising fr. a penal offense is improper/inadvisable

bcos. The satisfaction of such an obligation is imperative. However, the offender is
the ONLY party who CANNOT set up the compensation. The offended party who is
entitled to indemnity can set up his claim in compensation of his debt.

Article 1289. If a person should have against him several debts which are
susceptible of compensation, the rules on the application of payments shall
apply to the order of the compensation.

Compensation is akin to remuneration. If a debtor has many debts that are eligible for
compensation, he must advise the creditor which ones will be compensated. If he
does not comply, the compensation will be allocated to the most difficult duty.

Article 1290. When all the requisites mentioned in Article 1279 are present,
compensation takes effect by operation of law, and extinguishes both debts to
the concurrent amount, even though the creditors and debtors are not aware of
the compensation.

Compensation is automatic as a result of the functioning of the legislation. — Legal

compensation occurs automatically, even in the absence of agreement between the
parties and even against their will, when all of the requirements listed in Article 1279
are met, and extinguishes both debts as soon as they exist simultaneously, to the
amount of their respective sums. It occurs ipso jure on the day that all of the relevant
requisites coincide, without the parties' conscious intent or even their knowledge, at
the moment of the co-existence of such cross debts. The enactment of a subsequent
law will not prevent legal compensation from occurring prior to its effective date, even
if it occurs against the will of the parties involved.

(6) By novation.

Article 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.

The whole or partial extinction of an obligation by the introduction of a new one that
replaces it is known as novation.
It is the replacement or modification of one obligation by another, which extinguishes
or modifies the first, either by changing the object or principal circumstances, by by
substituting another in place of the debtor, or by subrogating a third party to the
creditor's rights.

Article 1292. In order that an obligation may be extinguished by another which

substitute the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible
with each other.

There was no mention of a certain type of effecting novation in this article. The law,
on the other hand, specifies the necessary conditions for novation, whether express
or inferred.

If the novation is done in writing, it must be declared in clear words to avoid any
ambiguity.

And, in order for implicit novation to occur, the old and new obligations must be
irreconcilable in all material respects.

Article 1293. Novation which consists in substituting a new debtor in the place
of the original one, may be made even without the knowledge or against the
will of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him the rights mentioned in Articles 1236 and 1237.

The term "passive subjective novation" (debtor substitution) is used in Article 1293,
not "active subjective novation" (substitution of the creditor)

Novation is the process of replacing an old contract with a new one, usually by
replacing one of the original parties with a new one. It is the complete or partial
abolition of one obligation by the establishment of a new one to replace it.

Expromission and Delegacion are examples of passive Subjective Novation.

The initiative for experimentation comes from a third party. There must be a release
of the former debtor from his duty; otherwise, there will be no expromission and only
novation.

Article 1294. If the substitution is without the knowledge or against the will of
the debtor, the new debtor’s insolvency or non-fulfillment of the obligations
shall not give rise to any liability on the part of the original debtor.
Because the debtor's substitute is done without his or her knowledge or agreement.
Because the substitution was made without the debtor's consent or even knowledge,
the new debtor's inability to pay the obligation he has assumed has no bearing on the
old debtor, who is now free of liability, nor must the original debtor be affected by the
insolvency of the new debtor in whose selection the former never took part.
Expromision — when a creditor takes a new debtor and binds him instead of
releasing the existing debtor.

Article 1295. The insolvency of the new debtor, who has been proposed by the
original debtor and accepted by the creditor, shall not revive the action of the
latter against the original obligor, except when said insolvency was already
existing and of public knowledge, or known to the debtor, when the delegated
his debt.
This article solely refers to delegacion, in which the old debtor is replaced at the
request of the old debtor (delegante), and the proposal is accepted by the new debtor
(delegado), as well as the creditor (delegatario)

If the creditor accepts a new debtor who is insolvent and unable to perform the
obligation transferred to him, the original debtor is no longer responsible for payment
of the obligation.

Article 1296. When the principal obligation is extinguished in consequence of a

novation, accessory obligations may subsist only insofar as they may benefit
third persons who did not give their consent.

Article 1296 NCC | mentions...

Changes in accessory obligations as a result of novation
GENERAL RULE | When the major debt is discharged, the accessory obligations are
discharged as well.
EXCEPTION | Accessory obligations exist to the extent that they benefit third parties
who have not agreed to the novation.
Because no one should be harmed by another's actions without their consent.

Article 1297. If the new obligation is void, the original one shall subsist, unless
the parties intended that the former relation should be extinguished in any
event.

One of the most important prerequisites of a novation, according to Article 1297, is

that the new obligation be valid. The general rule is that if the new duty is void, the
original obligation will continue to exist because the second obligation cannot
eliminate or change the first because it does not exist.

Article 1298. The novation is void if the original obligation was void, except
when annulment may be claimed only by the debtor or when ratification
validates acts which are voidable.

The former duty becomes void or voidable as a result of this effect. This essay is also
founded on the requirements for a legitimate novation. There is no way to novate a
void obligation because there is nothing to novate. The novation is valid, however, if
the original obligation is solely voidable or if the voidable obligation is validated by
ratification.
Article 1299. If the original obligation was subject to a suspensive or resolutory
condition, the new obligation shall be under the same condition, unless it is
otherwise stipulated.

If the first obligation is subject to a suspensive or resolutory condition, the second

obligation is deemed subject to the same condition unless the contrary is stipulated
by the parties in their contract. The reason for the rule contained in Article 1299 is
that the efficacy of the new obligation depends upon whether the condition which
affects the old obligation is complied with or not. If the condition is suspensive, and it
is not complied with, no obligation arises; and if it is resolutory and it is complied with,
the old obligation is extinguished.

Article 1300. Subrogation of a third person in the rights of the creditor is either
legal or conventional. The former is not presumed, except in cases expressly
mentioned in this Code; the latter must be clearly established in order that it
may take effect.

Subrogation is the transfer of all rights belonging to the creditor in the transaction to a
third party, including the right to pursue the guarantors and similar parties, subject to
any applicable legal provisions.

There are two types of third-party subrogation:

1. Legal subrogation refers to a subrogation created by law. It happens as a result of

the law.

Article 1301. Conventional subrogation of a third person requires the consent

of the original parties and of the third person.

The permission of all parties is required for Conventional or Voluntary Subrogation:

a) the debtor—since he is now liable under the new duty, and because his previous
obligation has come to an end.

b) an old creditor, whose credit has been harmed.

c) the new creditor, who is now a party to the obligation.

NOTE: In most cases, the debtor loses the right to offer whatever defense he or she
may have had against the former creditor against the new creditor.

Article 1302. It is presumed that there is legal subrogation:

(1) When a creditor pays another creditor who is preferred, even without the
debtor’s knowledge;
(2) When a third person, not interested in the obligation, pays with the express
or tacit approval of the debtor;
 (3) When, even without the knowledge of the debtor, a person interested in the
fulfillment of the obligation pays, without prejudice to the effects of confusion
as to the latter’s share.

Subrogation is the act of substituting one claim for another, particularly the transfer of
the right to receive payment of a debt to someone other than the original creditor.
Article 1302 allows a third party to pay a debtor's obligation to a creditor even if the
debtor is unaware of it.

When a creditor, even without the debtor's knowledge, pays a favored creditor.

Article 1303. Subrogation transfers to the persons subrogated the credit with
all the rights thereto appertaining, either against the debtor or against third
person, be they guarantors or possessors of mortgages, subject to stipulation
in a conventional subrogation.

The impact of legal subrogation is that the credit and any rights and actions that the
former creditor may have taken against the debtor or other parties, such as
guarantors or mortgagor, are transferred to the new creditor. Simply said, except for
a change in the creditor's name, the obligation continues to exist in all respects as it
did before the novation.

If a suspensive condition is attached to the credit transferred to the new creditor, the
credit cannot be collected until the condition is met.

Article 1304. A creditor, to whom partial payment has been made, may exercise
his right for the remainder, and he shall be preferred to the person who has
been subrogated in his place in virtue of the partial payment of the same credit.

Article 1304 NCC | mentions...

Partially subrogation's impact

The creditor to whom the new creditor has made partial payment remains a creditor
to the extent of the debt's balance.
In the event that the debtor becomes insolvent, he is given a preferential right to
reclaim the remaining debt against the new creditor.

- https://jurisdoctor1a.wordpress.com

13. WHAT DO YOU MEAN BY NOVATION?

- By modifying the purpose or principal conditions, substituting the debtor's person,
and subrogating a third person in the creditor's right, an old contract is replaced with
a new one.

14. HOW OBLIGATIONS ARE MODIFIED?

 Art. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;

(2) Substituting the person of the debtor;

(3) Subrogating a third person in the rights of the creditor.

- https://jurisdoctor1a.wordpress.com/2019/04/03/section-6-novation/

15. DEFINE A CONTRACT. GIVE EXAMPLE.

- A contract is a legally binding agreement between two or more parties. Contractual
rights and duties are legal obligations that can be enforced in a court of law. A court
may require particular execution of the duties or award damages for financial losses
incurred as a result of the breach of contract.
A contract is formed by the parties' mutual promise or consideration. These promises
outline the scope of the contractual parties' rights and obligations. If one party
performs its contractual commitments while the other fails to do so, the fulfilled party
may seek redress from the court.
For example, a web developer paid a graphic designer ₱152,371.50 to design some
advertising material. The material was prepared and supplied by the designer, and
the developer validated that it complied with the contract's terms. If the web
developer fails to pay the designer, the designer can now sue for breach of contract
in court.

16. WHAT ARE THE STAGES OF THE CONTRACT?

- Preparation, perfection, and consummation are the three stages of a contract. The
process of contract preparation or negotiation begins when the prospective
contracting parties express interest in the contract and ends when they reach an
agreement. When they agree on the basic features of the contract, it is perfected or
born. The final stage is consummation, which occurs when the parties "fulfill or
perform the provisions agreed upon in the contract, ending in the contract's
extinguishment."

- https://lawphil.net/judjuris/juri2008/feb2008/gr_164587_2008.html#:~:text=A
%20contract%20has%20three%20distinct,the%20moment%20of%20their
%20agreement.

17. DISCUSS THE REQUISITE OF A CONTRACT.

Article 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Consent must be given freely and by someone who is sui juris, or who has the legal capacity
to act. As a result, it must be freely supplied by the party and intellectual consent, meaning
the party must understand what he is consenting to.

The contract is voidable if one party's consent was not freely provided because it was
obtained through fraud, violence, intimidation, or undue influence. When this happens, the
permission is said to be void.

The object of a contract must be distinct or determinate in nature; it must be legal or within
man's reach. It must be possible in the same way, and it must not be detrimental to good
customs, morals, public order, or public policy in any way.

It has to be true and legal. A contract with an illegal reason has no impact at all.

A contract based on a false cause is void unless it is lawfully reset on a true cause.

Examples:

For Consent of the contracting parties

Ricky makes an offer to purchase Martin's automobile. Over the phone, the offer is made.
Ricky is unaware that the person on the other end of the telephone is not Martin, but his
younger brother Ariel, who can precisely imitate his elder brother's voice. Ricky offers Ariel a
job, and Ariel takes it after successfully impersonating his older brother's voice. There was
no assent on Martin's behalf, hence there was no contract.

For Object certain which is the subject matter of the contract

When a student enrolls in a university, she answers "anything" when asked what course she
wants to take. The registrar accepts the form with carelessness and causes the student's
name to be entered into the university's registry. Again, there can be no contract because it
is unclear what the university is required to educate or prepare the student for.

For Cause of the obligation which is established

When Marsha envies John's house, she won't be able to have it until John donates it to her
(in which case, John's liberality or generosity would be the reason for the contract). For
Marsha and John to have signed a contract. Marsha must give John something he wants in
exchange (money or another piece of property), and this will be the basis of the contract.
- https://jurisdoctor1a.wordpress.com/2019/04/03/chapter-2-essential-requisites-of-
contracts/

18. CITE AND DISCUSS DEFECTIVE CONTRACTS.

These defective contracts are arranged, presented, and regulated in escalating order of
defectiveness (Articles 1380 to 1422).
The classification was completed with a significant amount of effort and a desire to be
thorough. As a result, each of these faulty contracts has its own set of requirements and
consequences. The distinctions, one would think, should act as watertight chambers. They
have mostly — but not always — worked successfully in the jurisprudence that has been
established in the six-and-a-half decades since the Code became effective.

A rescissible contract is one that, despite meeting all of the essential contracting
requirements, has resulted in a specific economic loss to one of the contracting parties or to
a third party.

A voidable contract is one in which one party's consent is invalid, either due to a lack
of ability or because consent has been revoked.

An unenforceable contract is one that cannot be given effect unless properly ratified
due to a lack of power or the needed writing, or both parties' ineptitude.

A void contract is one that lacks an object or cause, making it a complete nullity with
no impact.

- https://www.eumed.net/libros-gratis/2015/1458/philippine-law.htm

19. DISTINGUISH THE FOLLOWING:

- NATURAL OBLIGATION;
- CIVIL OBLIGATIONS;
- MORAL OBLIGATIONS

A natural obligation is one that cannot be imposed through action but is enforceable on the
party who creates it in good conscience and in accordance with natural justice. Civil
obligation, on the other hand, is a legal tie that allows the party with whom it is committed the
authority to enforce its performance through the courts. And a moral obligation is what you
must do in accordance with a set of ethical principles. When you sign a contract, the contract
contains certain legal provisions that must be followed. Contracts may compel you to do
things you believe are unethical, but they rarely compel you to break the law.

20. EXPLAIN SALES CONTRACT AND PARTNERSHIP.