Law on Obligations and

PA RT I
Contract
 Introduction
General Classification of Law
1.) Positive or State Law – man-made law
2.) Natural Law – based on the moral
nature of man; concept of right and
wrong; conscience

Definition of Positive / State Law

Law is a rule of conduct, just, obligatory,
laid down by a legislature power for
common observance and benefit.

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General Classification of Obligation

 Civil Obligation – based on Positive / State Distinctive feature of natural obligation

 Natural Obligation – based on equity and natural law  Not compulsory
 Courts have no authority to compel its performance
Distinctive features of civil obligation  If performed voluntarily, what is rendered or
delivered can no longer be recovered.
 Compellability or enforceability
 Compulsory or mandatory

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 Illustrations:
Click icon to add picture
 A borrowed P50,000.00 from B
payable on January 5, 2010 which is
evidenced by a promissory note. On
due date, A failed to pay despite
demand from B. Can B sue A in
court to compel / force him to pay?
Is the obligation of A civil or
natural?

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 Illustrations:
Click icon to add picture
 Suppose A did not pay on due date
despite several demands from B.
Ten (10) years have lapsed without
B filing a suit against A. Meanwhile,
A made a good fortune in one of his
business transactions and paid B
the loan to show his gratitude
(though belatedly). Afterwards, A
learned that his obligation to B was
considered already a natural
obligation. Can A demand for the
return of the P50,000.00?

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 Click icon to add picture

“Every person must,

in the exercise of his
rights and in the
performance of his
duties, act with
justice, give everyone
his due, and observe
honesty and good
Article 19 (NCC)
faith.”
Here is what we learned

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 General Provisions

 Art. 1156 (NCC) defines a civil obligation

Elements / Requisites of civil obligation:

 Juridical / legal tie
 Prestation or subject matter
 Active subject / creditor / obligee
 Passive subject / debtor / obligor

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 Illustrations:
Click icon to add picture
 A and B enter into a contract
wherein the former shall repair the
car of the latter.
 Juridical tie – Contract
 Prestation – To repair the car (to do)
 Creditor – B
 Debtor – A

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 Sources of Obligations

1. Law
2. Contract
3. Quasi – contract
4. Crimes or delicts
5. Quasi-delicts or Culpa Aquiliana

Note: Strictly speaking, there only two (2) major sources of obligation law and
contract

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 Sources of Obligations

Law
 Obligation is not presumed; it must be stated clearly

Contract
 An agreement that gives rise to a civil obligation
 All contracts are agreement but not all agreements are contract

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 Sources of Obligations

Quasi-contract
 this is not a contract
 it refers to a certain lawful, voluntary and unilateral act by one person and another
benefited from it
 - the one who derives benefit must compensate the other under the principle of
unjust enrichment

“No one shall be unjustly enriched or benefited at the expense of another.”

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 Sources of Obligations

Two major forms of Quasi-contract

 Solutio indebiti or payment by mistake
 Negotiorum gestio or the unauthorized management of an abandoned business or
property

Note: Quasi-contracts may exist in other instances where the principle of unjust
enrichment applies

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 Sources of Obligations

Crimes
 One who is criminally liable is also civilly liable

Quasi-delicts
 - Fault or negligence through act or omission which causes damage to another, when
there is no pre-existing contractual relation between the parties.

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 Nature and Effect of Obligations

Obligation to give
 Delivery of physical object
 Physical object may be specific or generic
 Genus or generic things do not die or perish
 The rights and obligations of debtor and creditor vary or differ depending on whether
the thing to be delivered is specific or generic

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 Illustrations:
Click icon to add picture
 A will give B his one and only dog.
 A will give B a horse

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 Nature and Effect of Obligations

Creditor has right to the fruits of a determinate thing, its accessions and accessories
 Before delivery of the thing, creditor has only personal right
 Ownership or real right is transferred / acquired only by means of delivery

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 Illustrations:

 Today, July 7, 2020, A sold to B a

female goat name Angel for
P10,000.00 to be delivered on
August 15, 2020. On July 20, 2020 A
sold the same goat to C for
P15,000.00 who takes possession
thereof in good faith. Between B
and C who has a better right over
the goat?

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 Illustrations:

 A will repair the car of B

 A will paint the picture of B
 A agrees not to build a garage on
B’s property

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 Delay or Default

X borrowed P1,000.00 from Y payable on July 30, 2020. X did not pay on said date. Is X in
legal delay or default?
General rule: No demand, no delay.
Exceptions:
 Agreement / stipulation
 Law
 Time is of the essence
 When demand would be useless
 In reciprocal obligations

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 Sources of liability for damages

1. Fault or negligence
2. Delay
3. Conntravention / violation of the terms / tenor
4. Fraud (incidental fraud / dolo incidente)

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 Kinds of fraud:

1. Incidental fraud – fraud committed in the performance of a valid obligation

2. Causal fraud (dolo causante) – fraud used or employed to convince the other party
to enter into a contract.

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 Fortuitous Event

General rule: No person shall be liable for fortuitous event

Exceptions:
1. Stipulation
2. Law
3. When the nature of the obligation requires the assumption of risk
4. When the object is generic
5. When the object proceeds from a crime
6. When there is contributory negligence

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 Presumption

Presumption – something is considered true until it is proven not to be true

Kind of presumption
1. Rebuttable – can be disputed by introducing evidence to the contrary
2. Conclusive – cannot be contradicted or disputed

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 Different Kinds of Obligation

Pure Obligation
A binds himself to give B P1,000.00. Is this a pure obligation? Why?

Conditional Obligation
X binds himself to give Y P5,000.00 if it rains tomorrow
X will give Y P300.00 each day until B finishes his medical course
X agrees to give Y P10,000.00 if he wins the jackpot price in the lotto draw
X will give Y P1,000 if Y will fly to the moon tonight
X will give Y P100,000.00 if it can be established that the number of Filipino soldiers who died in WWII
exceeds 100,000 in numbers

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 Illustrations:

 Rules on loss, deterioration and

improvement
 On January 7, 2020 A agrees to give
B his one and only house if B passes
the October 2021 CPA exam

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Thank You!