J.
Dumaual 2020-2021
BREACH OF OBLIGATIONS
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.
Manner of Breach
Fraud
Article 1171 – Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void.
Article 1338 – There is fraud when, through
insidious words or machinations of one of the
contracting parties, the other is induced to enter into
a contract which, without the fraud, the party would
not have entered into.
Article 1344 – In order that fraud may make a
contract voidable, it should be serious and should
have been employed by both contracting
parties.
Negligence
Article 1171 – Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void.
Civil Law Review 2, Atty. Crisostomo Uribe
Article 1172 – Responsibility arising from negligence
in the performance of every kind of obligation is also
demandable, but such liability may be
regulated by the courts, according to the
circumstances.
Article 1173 – The fault or negligence of the obligor
consists in the omission of that diligence which
is required by the nature of the obligation and
corresponds with the circumstance of the persons, of
the time and of the place. When negligence shows
bad faith, the provisions of Article 1171 and 2201
(2)1 shall apply.
Delay
Article 1169 – Those obliged to deliver or to do
something incur in delay from the time the obligee
judicially OR extrajudicially demands from them the
fulfillment of their obligation. However, the demand
by the creditor shall not be necessary in order
that delay may exist under the following
circumstances: (1) When the obligation or the LAW
expressly declares (2) When from the nature and
the circumstances of the obligation, it appears
that the DESIGNATION OF TIME when the thing is to
1
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the
non-performance of the obligation.
Page 1

be delivered or the service is to be rendered was a
controlling motive for the establishment of the
contract; or (3) when DEMAND would be useless,
as when the obligor has rendered it beyond his
power to perform. In reciprocal obligations,
neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment
one of the parties fulfills his/her obligation, delay by
the other begins.
Article 1165 – When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by Article 11702, may compel the
debtor to make the delivery. If the thing is
indeterminate or generic, he may ask 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/she shall be
responsible for any fortuitous event until he/she has
effected the delivery.
Article 1786 – Every partner is a debtor of the
partnership for whatever he may have promised to
contribute thereto. He shall also be bound for
warranty in case of eviction with regard to specific
2
Can hold obligors, who are guilty of fraud, negligence, or delay in the
performance of their obligations, for damages
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
and determinate things which he may have
contributed to the partnership, in the same cases,
and in the same manner as the vendor (seller) is
bound with respect to the vendee (buyer). He shall
also be liable for the fruits thereof from the time they
should have been delivered, without the need of any
demand.
Article 1788 – A partner who has undertaken to
contribute a sum of money and fails to do so
becomes a debtor for the interest and damages from
the time he should have complied with his obligation.
The same rule applies to any amount he may have
taken from the partnership coffers, and his liability
shall begin from the time he converted the amount to
his own use.
Article 1896 – The agent owes interest on the sums
he has applied to his own use from the day on which
he did so, and on those which he still owes after the
extinguishment of the agency.
Article 1942 – The bailee is liable for the loss of the
thing, even if it should be through a fortuitous event
if: (1) he/she devotes the thing to any purpose
different from that which it has been loaned; (2)
he/she keeps it longer than the period stipulated, or
after the accomplishment of the use for which the
commodatum has been constituted; (3) the thing
loaned has been delivered with appraisal of its
Page 2

value, unless there is a stipulation exempting the
bailee from responsibility in case of a fortuitous
event; (4) he/she lends or leases the thing to a third
person who is not a member of his/her household;
(5) he/she does not choose to save the thing
borrowed over his/her own thing even if he/she can
save both
Excuses for Non-Performance
Fortuitous Event
Article 1174 – No person shall be responsible for
those events which could not be foreseen, or which,
though forseen, were inevitable, EXCEPT in cases
expressly specified by the law, or it was otherwise
declared by stipulation, or when the nature of the
obligation requires the assumption of risk.
Article 552 – A possessor in good faith shall not be
liable for the deterioration or loss of the thing
possessed EXCEPT when it is proved that the
possessor has acted with fraudulent intent or
negligence AFTER judicial summons. A money is involved, or shall be liable for the fruits
possessor in bad faith shall be liable for the
deterioration or loss in EVERY CASE, even if it
is caused by a fortuitous event.
Article 1165 – When what is to be delivered is a
determinate thing, the creditor, in addition to the
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
right granted him by Article 11703, may compel the
debtor to make the delivery. If the thing is
indeterminate or generic, he may ask 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/she shall be
responsible for any fortuitous event until
he/she has effected the delivery.
Article 2147 - The officious manager shall be liable
despite a fortuitous event under the following
circumstances: (1) he undertakes risky operations
which the owner was not accustomed, (2) if the
officious manager preferred his own interests over
that of the owner, (3) if the officious manager fails
to return the property or business after the
owner’s demand, and (4) if he assumes such
management in bad faith
Article 2159 – Whoever in bad faith accepts an
undue payment, shall pay legal interest if a sum of
received or which should have been received if the
thing produces fruits. He/She shall furthermore be
answerable for any loss or impairment of the thing
3
Can hold obligors, who are guilty of fraud, negligence, or delay in the
performance of their obligations, for damages
Page 3
 J. Dumaual 2020-2021

from any cause for damages to the person who What is the difference between 1170 and 13380?
delivered the thing until it is recovered.
- Fraud under 1338 is more properly called
Breach of Obligations as DECEIT. Fraud preexists the obligation,
thus the obligation is voidable. Deceit
MANNER OF BREACH
vitiates the consent in contracts. Deceit is
1. Fraud antecedent fraud. Without deceit, the other
party would have entered into the contract.
Atty. Balane Commentary - In 1170 and 1171 (malice), there was
already an obligation before the fraud
What are the two classes of Irregularity of
existed. Malice is subsequent fraud.
Performance?
EXAMPLE:
- Attributable to the debtor
o Fraud FRAUD UNDER 1338
o Negligence
o Delay - Vixen and Karlyn entered into a contract of
- Not attributable to the debtor sale of a diamond necklace; however, the
o Fortuitous Event necklace was really made of glass. Fraud in
the scenario is deceit. There was vitiation of
What is Fraud? consent, hence the contract is VOIDABLE.
- Fraud is the deliberate and intentional FRAUD UNDER 1171
evasion of the normal fulfillment of the
obligation. It is distinguished from - Ellis and Karl entered into a contract. Karl
negligence by the presence of DELIBERATE will deliver furniture made of narra but Karl
INTENT. There is no deliberate intent in deliberately delivered one made of plywood.
negligence. Fraud here is MALICE. It will not affect the
- Fraud under 1170 is more properly called as validity of the contract.
MALICE.
What are the effects of fraud?

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 J. Dumaual 2020-2021

- The creditor may insist on PROPER 3. Delay

SUBSTITUTE or SPECIFIC PERFORMANCE
Atty. Balane Commentary
- Rescission/Resolution
- Damages in EITHER CASE - Delay has nothing to do with quality but only
with PUNCTUALITY.

What is delay?
2. Negligence
- Delay is the non-fulfillment of the
Atty. Balane Commentary:
obligation with respect to TIME. In fraud
What is Negligence? and negligence, the question is the quality
even if the obligation is performed on time. In
- Negligence, under 1173, is the absence of
delay, even if the quality is excellent, but
due diligence.
the performance is not in due time, the
- Like fraud, negligence results in IMPROPER
debtor is liable.
PERFORMANCE, but it is characterized by
- In reciprocal obligations, which require
lack of care unlike in fraud which is
simultaneous performance, demand is still
characterized by malice.
needed.
What is the MEASURE OF DUE DILIGENCE? o Demand can be made through any
form of communication of a party
- Diligence demanded by the circumstances that he/she is ready and willing to
person, place, and time. comply with his/her obligation. If the
- Care required of a good father of a family. other party does not comply after
receipt of the demand, the party is in
What are the effects of Negligence?
delay.
- The creditor may insist on proper
What are the requisites of delay?
SUBSTITUTE or SPECIFIC PERFORMANCE
- Rescission/Resolution - Obligation is DEMANDABLE AND
- Damages in either case LIQUIDATED.

Civil Law Review 2, Atty. Crisostomo Uribe Page 5


- Delay is through FAULT OR NEGLIGENCE.
- Creditor requires performance either
judicially or extrajudicially.
What are the three (3) kinds of delay?
Mora Solvendi - Delay in the performance incurred
by the DEBTOR
Requisites:
- Obligation is demandable and liquidated
- Debtor delays in performance either because
of dolor or culpa
- The creditor demands the performance either
judicially or extrajudicially
o REMEMBER: Demand is NECESSARY.
If there is no demand, there is no delay.
(Mora solvendi ex persona)
o XPNS (Mora solvendi ex re)
 When the obligation or the law
EXPRESSLY SO DECLARES
 Mere setting of due date is
not enough. This does not
constitute automatic delay.
 There must be an express
stipulation: “non-
performance on that day is
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
delay without need of
demand”.
 When it appears from the
NATURE and CIRCUMSTANCES
of the obligation that time was a
controlling motive for the
establishment of the contract.
 When demand would be
USELESS when obligor has
rendered it beyond his/her power
to perform.
Effects of Mora Solvendi
- When the obligation is to deliver a
DETERMINATE THING the risk is placed
on the part of the debtor
- Damages
- Rescission/Resolution
Mora Accipiendi – The creditor incurs delay when
the debtor tenders payment or performance, but
the CREDITOR REFUSES TO ACCEPT it without
just cause.
- Is related to payment (consignation)
Requisites:
- An OFFER OF PERFORMANCE BY THE
DEBTOR who has the required capacity
Page 6

- The offer must be to COMPLY WITH THE
PRESTATION as it should be performed
- The creditor REFUSES THE PERFORMANCE
without just cause.
Effects of Mora Accipiendi:
- Responsibility of debtor for the thing is
limited to fraud and gross negligence
- Debtor is exempted from risk of loss of
thing which shall automatically pass to the
creditor
- Expenses incurred by the debtor for
preservation of the thing after the delay shall
be chargeable to the creditor.
- If the obligation has interest, the debtor
shall not have an obligation to pay the
What are the requisites of a Fortuitous Event?
same from the time of the delay.
- The creditor becomes liable for damages.
- The debtor may relieve himself by
consignation of the thing.
Compensatio Morae – Delay on both sides in
reciprocal obligations, cancel out each other.
EXCUSES FOR NON-PERFORMANCE
1. Fortuitous Event
Atty. Balane Commentary
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
- Also governed by Article 1221 but is called
“loss”
- Also called caso fortuito, force majure, act
of God
- GENERALLY, when a debtor is unable to
fulfill his/her obligation because of a
fortuitous event, he/she cannot be held
liable for damages or non-performance,
EXCEPT:
o When the law so provides
o When there is express stipulation
 Fortuitous event yields to
contrary stipulation
o When the nature of the obligation
requires the assumption of risk
- The cause of the unforeseen and unexpected
occurrence or the failure to comply with
his/her obligations must be INDEPENDENT
OF THE HUMAN WILL.
- It must be IMPOSSIBLE TO FORSEE or,
even if it can be foreseen, it must be
impossible to avoid.
- The occurrence must be such as to render it
impossible for the debtor to fulfill his/her
obligation in a normal MANNER.
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 J. Dumaual 2020-2021

- The obligor must be free from any Payee in Solutio Indebiti – 2159
PARTICIPATION in the aggravation of the
Lessee – 1648, 1671, 552
injury resulting to the creditor.
Independent Contractor – 1727, 1728
EXCEPTION FROM BEING EXCUSED BECAUSE
OF A FORTUITOUS EVENT Common Carrier – 1763
EXAMPLES UNDER THE LAW WHEN IT IS OTHER WISE DECLARED BY
STIPULATION (1174)
Depositary – 1979
- Express Agreement
What if a depositor was in the premises of the bank
o 1306
and was robbed of his/her money which he/she is
about to deposit? WHEN THE NATURE OF THE OBLIGATION
REQUIRESS THE ASSUMPTION OF RISK
- The bank cannot be held liable for a
fortuitous event. - Aleatory Contract
o 2010
What is the kind of diligence required of a
o Usury – 1175
depositary?
 Usury is the contract for or
- Ordinary Diligence receiving something in excess of
o In cases where a SAFETY DEPOSIT the amount allowed by law for
BOX is involved, if the jewelry inside the loan or forbearance or
the box was stolen, the rules on deposit money, goods, or chattels
will not apply because the contract
Case Doctrines:
governing this transaction is the
LEASE of a safety deposit box. Cangco v. MRR
Bailee in Commodatum – 1942 - In the case of Cangco v. MRR, where Cangco
alighted a still moving train and stepped on
Negotiorum Gestio – 2147, 2148

Civil Law Review 2, Atty. Crisostomo Uribe Page 8


watermelons in the platform and was injured,
sued MRR for damages. MRR countered that
the act of Cangco was the cause of his injury
and thus, it should not be held liable.
However, the SC ruled that MRR is negligent
considering the circumstances surrounding the
incident, as follows:
o Person – Cangco was at his prime (20s)
and could’ve alighted safely, as he has
done so in the past, even if the train
was still moving. Moreover, there was a
passenger who alighted earlier when
the train was moving faster as
compared to when Cangco alighted.
o Time – it was nighttime, but the
platform was poorly lit;
o Place – Cangco was familiar with the
place as it was his daily routine to take
the train going home. Moreover, the
employees of MRR were negligent when
they allowed watermelons to be stacked
on the platform which caused the fall of
Cangco.
Standard of Care:
1. Ordinary: that which is expected of a good
father of a family (bonus pater pamilyas);
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
2. Extraordinary: utmost diligence. E.g.,
common carriers, banks, public utility
companies (Meralco vs. Ramoy) and realty
firms.
Telefast v. Castro
- In the case at bar, petitioner and private
respondent Sofia C. Crouch entered into a
contract whereby, for a fee, petitioner
undertook to send said private respondent’s
message overseas by telegram. This, petitioner
did not do, despite performance by said
private respondent of her obligation by paying
the required charges. Petitioner was therefore
guilty of contravening its obligation to said
private respondent and is thus liable for
damages.
Meralco v. Ramoy
- MERALCO is liable for damages to the Ramoys
for the sudden disconnection of their electric
power supply which turned out to be without
any valid ground, pursuant to Articles 1170
and 1173 of the Civil Code. Therefore,
MERALCO failed to exercise the required
utmost diligence as a public utility service
provider, hence, liable for culpacontractual
being negligent in its performance of its
Page 9

obligation derived from the Service Contract
between MERALCO and its consumers, one of
which is the Ramoys.
Mindanao Terminal v. Phoenix Assurance
- Stevedoring companies are required only
to exercise ordinary diligence
- A stevedoring company which was charged
with the loading and stowing the cargoes of
Del Monte Produce aboard M/V Mistrau, had
acted merely as a labor provider in the case at
bar. There is no specific provision of law
that imposes a higher degree of diligence
than ordinary diligence for a stevedoring
company or one who is charged only with
the loading and stowing of cargoes. It was
neither alleged nor proven by Phoenix and
McGee that Mindanao Terminal was bound by
contractual stipulation to observe a higher
degree of diligence than that required of a
good father of a family. We therefore conclude
that following Article 1173, Mindanao
Terminal was required to observe ordinary
diligence only in loading and stowing the
cargoes of Del Monte Produce aboard M/V
Mistrau.
Jimenez v. City of Manila
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
- For the liability under Article 2189 of the Civil
Code to attach, it is not necessary that the
defective public works belong to the province,
city or municipality from which responsibility
is exacted. What said article requires is
that the province, city or municipality
has either "control or supervision" over
the public building in question.
- In the case at bar, there is no question that the
Sta. Ana Public Market, despite the
Management and Operating Contract between
respondent City and Asiatic Integrated
Corporation remained under the control of the
former. As evidenced by:
o contract between the City and
Asiatic (prior approval of the City of
Manila is needed before the program of
improvement, rehabilitation and
reconstruction of the public market may
be made by Asiatic; if the present
employees/personnel of the city public
market will be discharged by Asiatic;)
o fact of supervision and control of
the City over subject public market
was admitted by Mayor Ramon
Bagatsing in his letter to Secretary of
Finance Cesar Virata.
Page 10

o the City employed a market master
for the Sta. Ana Public Market
whose primary duty is to take direct
Gilat Satellite Networks, Ltd. v. UCPB
supervision and control of that
particular market, more specifically,
to check the safety of the place for the
public
Nakpil & Sons v. CA
- To be exempt from liability for loss because of
an act of God, the obligor must be free from
any previous negligence or misconduct by
which that loss or damage may have been
occasioned.
- In this case, both United and Nakpil were
negligent in the plans, designs,
specifications, and construction of the
PBA building is equivalent to bad faith in
the performance of their respective tasks.
As shown in the report by the Commissioner,
United have made substantial deviations from
the plans and specifications and failed to
observe the workmanship in the construction
as well as to exercise supervision in the
construction. For the Nakpils, there were
inadequacies or defects in the plans and
specifications prepared by them. In sum, the
case at bar does not fall under any of the
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
exceptions under Article 1174 of the New Civil
Code.
- Article 2209 of the Civil Code is clear: if
an obligation consists in the payment of a
sum of money, and the debtor incurs a
delay, the indemnity for damages, there
being no stipulation to the contrary, shall
be the payment of the interest agreed
upon, and in the absence of stipulation,
the legal interest.
- Delay arises from the time the obligee
judicially or extrajudicially demands from the
obligor the performance of the obligation, and
the latter fails to comply. Delay, as used in
Article 1169, is synonymous with default or
mora, which means delay in the fulfilment of
obligations. It is the nonfulfillment of an
obligation with respect to time. In order for the
debtor (in this case, the surety) to be in
default, it is necessary that the following
requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that
the debtor delays performance; and (3) that
the creditor requires the performance judicially
or extrajudicially.
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- Having held that a surety upon demand
fails to pay, it can be held liable for
interest, even if in thus paying, its
liability becomes more than the principal
Rivera v. Sps. Chua
obligation. The increased liability is not
because of the contract, but because of
the default and the necessity of judicial
collection.
- However, for delay to merit interest, it must be
inexcusable in nature.
- We agree with petitioner that records are
bereft of proof to show that respondents delay
was indeed justified by the circumstances that
is, One Virtuals advice regarding petitioners
alleged breach of obligations. The lower courts
Decision itself belied this contention when it
said that plaintiff is not disputing that it did
not complete commissioning work on one of the
two systems because One Virtual at that time
is already in default and has not paid GILAT.
Assuming arguendo that the commissioning
work was not completed, respondent has no
one to blame but its principal, One Virtual; if
only it had paid its obligation on time,
petitioner would not have been forced to stop
operations. Moreover, the deposition of Mr.
Erez Antebi, vice president of Gilat, repeatedly
stated that petitioner had delivered all
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
equipment, including the licensed software;
and that the equipment had been installed
and in fact, gone into operation.
- Demand is no longer necessary because the
law is explicit that when the debtor fails to
pay upon maturity date, when the obligation is
due and demandable, he therefore incurs
delay. Art. 1169 of the NCC states, “Those
obliged to deliver or to do something incur in
delay from the time the obligee judicially or
extrajudicially demands from them the
fulfillment of their obligation. However, the
demand by the creditor shall not be necessary
in order that delay may exist: 1) When the
obligation or the law expressly so declare xxx.”
- It is not sufficient that the law or obligation
fixes a date for performance; it must further
state expressly that after the period lapses,
default will commence.
- The clause in the Promissory Note
containing the stipulation of interest
which expressly requires Rivera to pay 5%
monthly interest from the date of default
until the entire obligation is fully paid. It
is evident that the maturity of the obligation on
a date certain, December 31, 1995, will give
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rise to the obligation to pay interest. The date
of default under the Promissory Note is 1
January 1996, the day following 31 December
1995, the due date of the obligation. On that
date, Rivera became liable for the stipulated
interest which the Promissory Note says is
equivalent to 5% a month.
Solar Harvest Inc. v. Davao Corrugated
- In reciprocal obligations, as in a contract
of sale, the general rule is that the
fulfillment of the parties' respective
obligations should be simultaneous.
Hence, no demand is generally necessary
because, once a party fulfills his
obligation and the other party does not
fulfill his, the latter automatically incurs
in delay. But when different dates for
performance of the obligations are fixed, the
default for each obligation must be determined
by the rules given in the first paragraph of the
present article, that is, the other party would
incur in delay only from the moment the other
party demands fulfillment of the former's
obligation. Thus, even in reciprocal
obligations, if the period for the
fulfillment of the obligation is fixed,
demand upon the obligee is still
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
necessary before the obligor can be
considered in default and before a cause
of action for rescission will accrue.
Agcaoili v. GSIS
- When both parties are already in delay,
there is no delay. Accordingly, the debtor
is not liable for interest from the moment
payment was tendered but was not
accepted by the creditor for no justifiable
reason, or when the creditor fails to fulfill
his part of the obligation.
- Respondent did not fulfill its obligation to
deliver the house in a habitable state;
therefore, it cannot invoke the petitioner’s
suspension of payment as a cause to cancel
the contract between them. There was a
perfected contract of sale, it was then the duty
of GSIS as seller to deliver the thing sold in a
condition suitable for its enjoyment by the
buyer and for the purpose contemplated. The
house contemplated was one that could be
occupied for purpose of residence in
reasonable comfort and convenience.
Arrieta v. Naric
- In general, every debtor who fails in
performance of his obligations is bound to
Page 13

indemnify for the losses and damages caused
thereby. The phrase "any manner
contravenes the tenor" of the obligation
includes any illicit act which impairs the
strict and faithful fulfillment of the
obligation or every kind or defective
performance.
Sicam v. Jorge
- Fortuitous events by definition are
extraordinary events not foreseeable or
avoidable. It is therefore, not enough that
the event should not have been foreseen
or anticipated, as is commonly believed
NPC v. CA
but it must be one impossible to foresee or
to avoid. The mere difficulty to foresee
the happening is not impossibility to
foresee the same.
- The burden of proving that the loss was due to
a fortuitous event rests on him who invokes it.
And, in order for a fortuitous event to
exempt one from liability, it is necessary
that one has committed no negligence or
misconduct that may have occasioned the
loss.
- Sicam had testified that there was a security
guard in their pawnshop at the time of the
robbery. He likewise testified that when he
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
started the pawnshop business in 1983, he
thought of opening a vault with the nearby
bank for the purpose of safekeeping the
valuables but was discouraged by the Central
Bank since pawned articles should only be
stored in a vault inside the pawnshop. The
very measures which petitioners had
allegedly adopted show that to them the
possibility of robbery was not only
foreseeable, but actually foreseen and
anticipated. Sicam’s testimony, in effect,
contradicts petitioners’ defense of
fortuitous event.
- If upon the happening of a fortuitous
event or an act of God, there concurs a
corresponding fraud, negligence, delay or
violation or contravention in any manner
of the tenor of the obligation as provided
for in Article 1170 of the Civil Code,
which results in loss or damage, the
obligor cannot escape liability.
- The principle embodied in the act of God
doctrine strictly requires that the act must be
one occasioned exclusively by the violence
of nature and human agencies are to be
excluded from creating or entering into
Page 14

the cause of the mischief. When the effect,
the cause of which is to be considered, is
found to be in part the result of the
participation of man, whether it be from active
intervention or neglect, or failure to act, the
whole occurrence is thereby humanized, as it
was, and removed from the rules applicable to
the acts of God.
- Thus, it has been held that when the
negligence of a person concurs with an act of
God in producing a loss, such person is not
TMBI v. Feb-Mitsui and Manalastas
exempt from liability by showing that the
immediate cause of the damage was the act of
God. To be exempt from liability for loss
because of an act of God, he must be free from
any previous negligence or misconduct by
which the loss or damage may have been
occasioned.
Fil-Estate v. Sps. Ronquillo
- The Asian financial crisis in 1997 cannot be
generalized as unforeseeable and beyond the
control of a business corporation. It is
unfortunate that petitioner apparently met
with considerable difficulty e.g. increase cost
of materials and labor, even before the
scheduled commencement of its real estate
project as early as 1995. However, a real
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
estate enterprise engaged in the pre-selling of
condominium units is concededly a master in
projections on commodities and currency
movements and business risks. The
fluctuating movement of the Philippine
peso in the foreign exchange market is an
everyday occurrence, and fluctuations in
currency exchange rates happen every
day, thus, not an instance of caso
fortuito.
- The theft or the robbery of goods is not
considered a fortuitous event of a force
majeure. Nevertheless, a common carrier
may absolve itself of liability for a
resulting loss: 1. If it proves that it
exercised extraordinary diligence in
transporting and safekeeping the goods;
or 2. If it stipulated with the
shipper/owner of the goods to limit its
liability for the loss, destruction, or
deterioration of the goods to a degree less
than extraordinary diligence. However, a
stipulation diminishing or dispensing
with the common carrier’s liability for
acts committed by thieves or robbers who
do not act with grave or irresistible
Page 15

threat, violence, or force is void under Art.
1745 of the Civil Code for being contrary to
public policy.
Sanico and Castro v. Colipano
- Sanico's attempt to evade liability by arguing
that he exercised extraordinary diligence when
he hired; Castro, who was allegedly an
experienced and time-tested driver, whom he
had even accompanied on a test-drive and in
whom he was personally convinced of the
driving skills, are not enough to exonerate him
from liability - because the liability of
common carriers does not cease upon
proof that they exercised all the diligence
of a good father of a family is the
selection and supervision of their
employees.
- The only defenses available to common
carriers are (1) proof that they observed
extraordinary diligence as prescribed in
Article 1756, and (2) following Article
1174 of the Civil Code, proof that the
injury or death was brought about by an
event which "could not be foreseen, or
which, though foreseen, were inevitable,"
or a fortuitous event.
BPI v. Spouses Quiaoit
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
- It is well-settled that the diligence
required of banks is more than that of a
good father of a family. Banks are
required to exercise the highest degree of
diligence in its banking transactions.
- The SC held that BPI failed to exercise the
highest degree of diligence that is not only
expected but required of a banking institution.
The Court once ruled in one case that banks
are under obligation to treat the accounts of
their depositors with meticulous care. The
diligence required of banks is more than
that of a good father of a family. Banks
are required to exercise the highest
degree of diligence in their banking
transactions.
- In releasing the dollar bills without listing
down their serial numbers, BPI failed to
exercise the highest degree of care and
diligence required of it. BPI exposed not only
its client but also itself to the situation that led
to this case. Had BPI listed down the serial
numbers, BPI’s presentation of a copy of such
listed serial numbers would establish whether
the returned dollar bills came from BPI or not.
Page 16
 J. Dumaual 2020-2021

REMEDIES FOR BREACH OF OBLIGATIONS forbidden him/her, it shall also be undone at

his/her expense.
Article 1165 – When what is to be delivered is a
determinate thing, the creditor, in addition to the Article 1170 – Those who in the performance of their
right granted him by Article 11704, may compel obligations are guilty of fraud, negligence, or
the debtor to make the delivery. If the thing is delay, and those who in any manner contravene
indeterminate or generic, he may ask the the tenor thereof, are liable for damages.
obligation be complied with at the expense of
Article 1177 – After pursuing the property in
the debtor. If the obligor delays or has promised to
possession of the debtor to satisfy their claims,
deliver the same thing to two or more persons who
the creditors may exercise all rights and bring
do not have the same interest, he/she shall be
all the actions of the creditor except those
responsible for any fortuitous event until he/she has
inherent in his/her person. They may also impugn
effected the delivery.
the acts which the debtor may have done to defraud
Article 1166 – the obligation to give a determinate them.
ting includes that of delivering all its accessions
Article 1178 – Subject to the laws, all rights
and accessories even though they may not have
acquired in virtue of an obligation are
been mentioned
transmissible, if there has been no stipulation to
Article 1167 – If a person obliged to do something the contrary.
fails to do it, the same shall be executed at
Article 1191 – The power to rescind obligations is
his/her cost. This same rule shall be observed if
implied in reciprocal ones, in case one of the
he/she does it in contravention of the tenor of
obligors should not comply with what is
the obligation. It may also be decreed that was has
incumbent upon him/her. The injured party may
been done poorly be undone.
choose between the fulfillment and the
Article 1168 – When the obligation consists in NOT rescission of the obligation, with the payment
DOING and the obligor does what has been of damages in either case. He/She may also seek
rescission even after he/she has chosen fulfillment if
4
Can hold obligors, who are guilty of fraud, negligence, or delay in the the fulfillment becomes impossible. The court shall
performance of their obligations, for damages

Civil Law Review 2, Atty. Crisostomo Uribe Page 17


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.
Article 1385 – Rescission creates the obligation
to return the things which were the object of
the contract, together with their fruits, and the
price with its interests; consequently, it can be
carried out only when he/she who demands
rescission can return whatever he/she may be
obliged to restore.
Article 1388 – Whoever acquires in bad faith the
things alienated in fraud of creditors, shall
indemnify the latter for damages suffered by
them on account of the alienation, whenever,
due to any cause it should be impossible for him/her
to return them.
Article 2236 – The debtor is liable with all
his/her property, present and future for the
fulfillment of his/her obligations, subject to the
exemptions provided for by law.
Article 302 - Neither the right to receive legal
support nor any money or property obtained as
such support or any pension or gratuity from
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
the government is subject to attachment or
execution.
Article 1708 - The laborer's wages shall not be
subject to execution or attachment, except for
debts incurred for food, shelter, clothing and medical
attendance.
FAMILY CODE
Article 153 - The family home is deemed constituted
on a house and lot from the time it is occupied as a
family residence. From the time of its
constitution and so long as any of its
beneficiaries actually resides therein, the
family home continues to be such and is
exempt from execution, forced sale or
attachment except as hereinafter provided and to
the extent of the value allowed by law.
Article 155 - The family home shall be exempt
from execution, forced sale or attachment
except: (1) For nonpayment of taxes; (2) For debts
incurred prior to the constitution of the family
home; (3) For debts secured by mortgages on the
premises before or after such constitution; and
(4) For debts due to laborers, mechanics,
architects, builders, materialmen and others
who have rendered service or furnished
material for the construction of the building.
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 J. Dumaual 2020-2021

RULES OF COURT (f) Provisions for individual or family use

sufficient for four months;
Rule 38, Section 13
(g) The professional libraries and equipment of
Property exempt from execution. — Except as
judges, lawyers, physicians, pharmacists,
otherwise expressly provided by law, the following
dentists, engineers, surveyors, clergymen,
property, and no other, shall be exempt from
teachers, and other professionals, not exceeding
execution:
three hundred thousand pesos in value;
(a) The judgment obligor's family home as provided
(h) One fishing boat and accessories not
by law, or the homestead in which he resides, and
exceeding the total value of one hundred
land necessarily used in connection therewith;
thousand pesos owned by a fisherman and by
(b) Ordinary tools and implements personally the lawful use of which he earns his livelihood;
used by him in his trade, employment, or livelihood;
(i) So much of the salaries, wages, or earnings
(c) Three horses, or three cows, or three of the judgment obligor for his personal
carabaos, or other beasts of burden, such as the services within the four months preceding the
judgment obligor may select necessarily used by him levy as are necessary for the support of his family;
in his ordinary occupation;
(j) Lettered gravestones;
(d) His necessary clothing and articles for
(k) Monies, benefits, privileges, or annuities accruing
ordinary personal use, excluding jewelry;
or in any manner growing out of any life
(e) Household furniture and utensils necessary insurance;
for housekeeping, and used for that purpose by
(l) The right to receive legal support, or money
the judgment obligor and his family, such as the
or property obtained as such support, or any
judgment obligor may select, of a value not
pension or gratuity from the Government;
exceeding one hundred thousand pesos;
(m) Properties specially exempted by law.

Civil Law Review 2, Atty. Crisostomo Uribe Page 19


1. Extra-judicial Remedies
A. Expressly Granted by Law
Article 1786 – Every partner is a debtor of the
partnership for whatever he may have
promised to contribute thereto. He shall also be
bound for warranty in case of eviction with
regard to specific and determinate things
which he may have contributed to the
partnership, in the same cases and in the same
manner as the vendor is bound with respect to the
vendee. He shall also be liable for the fruits thereof
from the time they should have been delivered,
without the need of any demand.
Article 1788 - A partner who has undertaken to
contribute a sum of money and fails to do so
becomes a debtor for the interest and damages
from the time he should have complied with his
obligation. The same rule applies to any amount
he may have taken from the partnership
coffers, and his liability shall begin from the
time he converted the amount to his own use.
Article 1526 - Subject to the provisions of this Title,
notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller
of goods, as such, has: (1) A lien on the goods or
right to retain them for the price while he is in
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
possession of them; (2) In case of the insolvency
of the buyer, a right of stopping the goods in
transitu after he has parted with the
possession of them; (3) A right of resale as
limited by this Title; (4) A right to rescind the
sale as likewise limited by this Title. Where the
ownership in the goods has not passed to the buyer,
the unpaid seller has, in addition to his other
remedies a right of withholding delivery
similar to and coextensive with his rights of
lien and stoppage in transitu where the
ownership has passed to the buyer.
2. Judicial Remedies
A. Principal Remedies
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
Page 20
 J. Dumaual 2020-2021

acquired the thing, in accordance with articles 1385 2. Subsidiary Remedies

and 1388 and the Mortgage Law.
Article 1380 - Contracts validly agreed upon may
Article 1385 - Rescission creates the obligation be rescinded in the cases established by law.
to return the things which were the object of
Article 1177 - The creditors, after having
the contract, together with their fruits, and the
pursued the property in possession of the
price with its interest; consequently, it can be
debtor to satisfy their claims, may exercise all
carried out only when he who demands
the rights and bring all the actions of the
rescission can return whatever he may be
latter for the same purpose, save those which
obliged to restore. Neither shall rescission take
are inherent in his person; they may also impugn
place when the things which are the object of the
the acts which the debtor may have done to defraud
contract are legally in the possession of third
them.
persons who did not act in bad faith. In this case,
indemnity for damages may be demanded from REMEDIES FOR BREACH OF OBLIGATION
the person causing the loss.
What are the remedies against a debtor for failure
Article 1388 - Whoever acquires in bad faith the to comply with OBLIGATIONS TO GIVE A
things alienated in fraud of creditors, shall DETERMINATE THING?
indemnify the latter for damages suffered by
them on account of the alienation, whenever, - Specific performance
due to any cause, it should be impossible for
- Equivalent Performance – Damages
him to return them. If there are two or more
alienations, the first acquirer shall be liable first, and o Damages may be obtained exclusively
so on successively. or in addition to the first action

Article 1170 - Those who in the performance of their What are the remedies against a debtor for failure
obligations are guilty of fraud, negligence, or delay, to comply with OBLIGATIONS TO GIVE A
and those who in any manner contravene the tenor GENERIC THING?
thereof, are liable for damages.
- Specific performance

Civil Law Review 2, Atty. Crisostomo Uribe Page 21

 J. Dumaual 2020-2021

- Substitute performance – done by Atty. Balane Commentary

someone else at the expense of the debtor
- Specific performance is the performance of
- Equivalent damages
the prestation itself
o May be obtained exclusively or in
- In obligations to do or not do, specific
addition to the first two actions
performance is not available since it will
What are the remedies against a debtor for failure go against the Constitutional prohibition
to comply with OBLIGATIONS NOT TO GIVE? against involuntary servitude
- Equivalent performance is the payment of
- Substitute performance
damages.
- Equivalent performances
- Substitute performance is when someone
o Damages may be obtained exclusively
else performs or something else is
or in addition to the first two actions
performed at the expense of the debtor.
** The Constitutional Prohibition regarding - In obligations not to do (1168), the debtor
imprisonment for debt applies except in subsidiary may be compelled to undo but in the event
imprisonment when it the civil liability arising from that it is impossible to undo, the only
crime is not paid. remedy is an action for damages.
- Enforcement of Creditor’s Remedies under
Obligation Specific Equivale Substitu 1177:
Perform nt te o To levy by attachment and execution
ance Perform perform upon all the property of debtor
ance ance
except if the property is exempted by
1. To give
Determinate Thing x x law
Determinable thing x x x o Accion Subrogatoria – the debtor of
my debtor, is my debtor. Requisites
2. To do are:
Very personal x  Creditor has a right of credit
Not very personal x x against the debtor
3. Not to do. x x  Credit is due and demandable

Civil Law Review 2, Atty. Crisostomo Uribe Page 22


Failure of debtor collect his/her
 parties and rescission will
own credit from a third person
either through malice or
negligence
 Right (of account) is not intuit
personae (personal in nature)
o Accion Pauliana
 Right of creditors to rescind
alienations by debtors which
are prejudicial to them to the
extent of the prejudice
 EXAMPLE: Van donates land to
Ellize but he owes Ellis. Van has
no other property. Ellis can
rescind the donation to Ellize.
The donation is rescissible to the
extent of the debt.
 Requisites:
 There is credit in favor of
the plaintiff
 The debtor has performed
an act subsequent to the
contract giving
advantage to other
persons.
 The creditor is prejudiced
by the debtor’s acts
which are in favor of third
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
benefit the creditor.
 The creditor has no other
legal remedy.
 The debtor’s acts are
fraudulent.
o Accion Directa – A direct action by
the creditor against his/her debtor’s
debtor; a remedy which gives the
creditor the prerogative to act in
his/her own name, such as the
actions of the lessor against the
sublessee, the laborer of an
independent contractor against the
owner, the principal against the
subagent, and the vender-a-retro
against the transferee of the vendee.
o This is an exception to the relativity
of contracts.
o Example: There are two (2) separate
contracts. There’s a contract of lease
between Abi and Jake and a contract of
sub-lease between Jake and Syd. Syd
owe Jake 7,000 pesos. Jake owes Abi
5,000 pesos. Ordinarily, Abi cannot sue
C since there is no relationship
Page 23
 J. Dumaual 2020-2021

between them but in Article 16525, Abi have against third persons (accion
can sue Syd for 5,000 pesos. subrogatoria). Remember that the creditor is
o Example: There are two separate subrogated with the rights of the debtor.
contracts. The contract for a piece of
What are the personal rights of the debtor?
work between Marc and Frances and
the contract for labor between Frances - Right to subsistence and support he/she
and Airei. Marc owes Frances 10,000 receives
pesos which is not fully paid yet. - Public rights
Frances owes Airei 5,000 pesos for - Rights pertaining to honor
unpaid wages. Airei can go after Marc - Rights to use remaining powers available to
directly for the 5,000 pesos. him/her (SPA, Agency, Deposit,
Administrator)
What kind of properties can the obligee go after for
- Non-patrimonial rights
levy and execution?
- Personal rights arising from patrimomnial
- Non-exempt properties of the debtor sources
- The debtor is liable with all his property,
What is a RESCISSIBLE CONTRACT7?
present and future, for the fulfillment of
his/her obligations, subject to exemptions - A rescissible contract is a contract which
provided for by law.6 is valid because it contains all the
- If the properties are not enough, the creditor essential requisites prescribed by law, but
goes to any claims which the debtor may which is defective because of injury or
damage to either of the contracting
5
Article 1652. The sublessee is subsidiarily liable to the lessor for any rent parties or to 3rd persons, as a consequence
due from the lessee. However, the sublessee shall not be responsible of which it may be rescinded by means of a
beyond the amount of rent due from him, in accordance with the terms of proper action for rescission.
the sublease, at the time of the extra-judicial 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 effected in virtue of the custom of the place.
6 7
Article 2236, NCC Article 1380, NCC

Civil Law Review 2, Atty. Crisostomo Uribe Page 24


- Rescission is a remedy granted by law to the
contracting parties, and even to third
persons, to secure the reparation of
damages caused to them by a contract,
even if the same should be valid, by means
of the restoration of things to their
condition prior to the celebration of the
contract.
- This is not to be confused with resolution,
discussed in Article 1191. This chapter on
rescissible contracts is the proper rescissible.
According to Scaevola, rescission is a process
designated to render inefficacious a contract
validly entered into and normally binding, by
reason of external conditions, causing an
economic prejudice to a party or to his
creditors.
o Similarities between 1380 and 1191
 Both presupposes a valid
contract was entered
What are the signs/badges of fraud in a fraudulent
 Both require mutual restitution
conveyance?
when declared proper
o Differences between 1380 and 1191
 Recsission under 1191 may be
demanded only by the party to
the contract while in 1380, a
third person prejudiced by the
contract may do so.
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
 Rescission under 1191 may be
denied when there is sufficient
reason to justify the extension of
the time to perform while under
1380 such reason does NOT
affect the right to ask for
rescission.
- Rescissible contracts are valid until voided
and can’t be attacked collaterally. Direct
proceeding is necessary.
- Rescission is a subsidiary action which
presupposes that the creditor has exhausted
the property of the debtor. Fraudulent
conveyance must be shown.
- As a rule, Recission benefits only the
creditor who has obtained it. The extent of
the revocation is only to the amount of
prejudice suffered by the creditor. As to the
excess, the alienation is maintained.
- Consideration of conveyance is inadequate
- Transfer made by the debtor after the suit
has begun and while the case is pending
against him
- There is a sale upon credit by insolvent
debtor
Page 25

- Evidence of large indebtedness or complete
insolvency
- Transfer of all or nearly all of the
properties of the debtor who is insolvent
- Transfer made between a father and his
son
- Failure of the vendee to take exclusive
possession of the property
- If the alienation is GRATUITOUS, the good
faith of the transferee does not protect
him/her, otherwise, it is tantamount to
unjust enrichment. When the contract
cannot be rescinded because the party is
in Good Faith, the party who caused the
loss is liable for damages.
- If the alienation is by onerous title, the
transferee must be a party to the fraud to
have a rescissible contract.
** Badges of fraud and 1387 are mere
presumptions and may be rebutted by clear and
convincing evidence.
What are the requisites of Rescission?
- The contact must be a rescissible contract
under Article 1381 or Article 1382.
- The person asking for rescission must have
no other legal means to obtain reparation
for the damages suffered by him.
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
- The person demanding rescission must be
able to return whatever he may be obliged
to restore if rescission is granted.
o This requisite is only applicable if the
one who suffers the lesion is a party
to the contract.
o This requisite does not apply when a
defrauded creditor resorts to accion
pauliana.
- The things which are the object of the
contract must not have passed legally to
the possession of a third person acting in
good faith.
o Whoever acquires in bad faith the
things alienated in fraud of
creditors, shall indemnify the latter
for damages suffered by them on
account of the alienation, whenever,
due to any cause, it should be
impossible for him to return them.
o If there are 2 or more alienations, the
1st acquirer shall be liable 1st, and so
on successively.
- The action for rescission must be brought
within the prescriptive period of 4 years.
Who can bring the action for Rescission?
Page 26

- The person injured by the rescissible
contract
- The heirs of the aforementioned person
- The creditors by virtue of the right granted
under 1177
Cases:
Universal Food Corp v. CA
- 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 fulfillment and
rescission of the obligation, with payment
of damages in either case.
- In this case before us, there is no controversy
that the provisions of the Bill of Assignment
are reciprocal in nature. The petitioner
corporation violated the Bill of Assignment,
specifically paragraph 5-(a) and (b), by
terminating the services of the respondent
patentee Magdalo V. Francisco, Sr., without
lawful and justifiable cause.
Magdalena Estate v. Myrick
- Rescission under Art. 1911 not
necessarily judicial: since it is implied in
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
reciprocal obligations. However,
rescission shall take effect only at the
time notice was given to the other party
but without prejudice to the right of such
party to question the validity of
rescission. Court action here is only to
determine the validity of the rescission, such
as to determine if there was substantial
breach. However still, the rescission takes
effect from notice and not from court
decision.
UP v. De Los Angeles
- Of course, it must be understood that the
act of party in treating a contract as
cancelled or resolved on account of
infractions by the other contracting party
must be made known to the other and is
always provisional, being ever subject to
scrutiny and review by the proper court. If the
other party denies that rescission is
justified, it is free to resort to judicial
action in its own behalf, and bring the
matter to court. Then, should the court,
after due hearing, decide that the
resolution of the contract was not
warranted, the responsible party will be
sentenced to damages; in the contrary case,
Page 27

the resolution will be affirmed, and the
consequent indemnity awarded to the party
prejudiced.
- In other words, the party who deems the
contract violated may consider it resolved
or rescinded, and act accordingly,
without previous court action, but it
proceeds at its own risk. For it is only the
final judgment of the corresponding court
that will conclusively and finally settle
whether the action taken was or was not
correct in law. But the law definitely does
not require that the contracting party
who believes itself injured must first file
suit and wait for a judgment before
taking extrajudicial steps to protect its
interest. Otherwise, the party injured by the
other's breach will have to passively sit and
watch its damages accumulate during the
pendency of the suit until the final judgment of
rescission is rendered when the law itself
requires that he should exercise due diligence
to minimize its own damages.
Zulueta v. Mariano
- A violation by a party of any of the
stipulations of a contract on agreement to
sell real property would entitle the other
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
party to resolved or rescind it. An
allegation of such violation in a detainer suit
may be proved by competent evidence. And if
proved a justice of the peace court might make
a finding to that effect, but it certainly cannot
declare and hold that the contract is resolved
or rescinded. It is beyond its power so to do.
And as the illegality of the possession of realty
by a party to a contract to sell is premised
upon the resolution of the contract, it follows
that an allegation and proof of such violation,
a condition precedent to such resolution or
rescission, to render unlawful the possession
of the land or building erected thereon by the
party who has violated the contract, cannot be
taken cognizance of by a justice of the peace
court.
- True, the contract between the parties
provided for extrajudicial rescission. This
has legal effect, however, where the other
party does not oppose it. Where it is
objected to, a judicial determination of the
issue is still necessary.
- A stipulation entitling one party to take
possession of the land and building if the
other party violates the contract does not
ex proprio vigore confer upon the former
the right to take possession thereof if
Page 28

objected to without judicial intervention
and' determination.
Palay Inc. v Clave
- Well settled is the rule, as held in previous
jurisprudence, that judicial action for the
rescission of a contract is not necessary
where the contract provides that it may
be revoked and cancelled for violation of
any of its terms and conditions.
- However, even in the cited cases, there was
at least a written notice sent to the
defaulter informing him of the rescission.
Boysaw v. Interphil Promotions
As stressed in University of the Philippines vs.
Walfrido de los Angeles the act of a party in
treating a contract as cancelled should be
made known to the other.
Angeles v. Calansanz
- The right to rescind the contract for non-
performance of one of its stipulations,
therefore, is not absolute. The general rule is
that rescission of a contract will not be
permitted for a slight or casual breach,
but only for such substantial and
fundamental breach as would defeat the
very object of the parties in making the
agreement. (Song Fo & Co. v. Hawaiian-
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
Philippine Co., 47 Phil. 821, 827) The question
of whether a breach of a contract is
substantial depends upon the attendant
circumstances.
- The breach of the contract adverted to by the
defendants-appellants is so slight and casual
when we consider that apart from the initial
downpayment of P392.00 the plaintiffs-
appellees had already paid the monthly
installments for a period of almost nine (9)
years. In other words, in only a short time, the
entire obligation would have been paid.
- 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.
- There is no doubt that the contract in
question gave rise to reciprocal
obligations. "Reciprocal obligations are
those which arise from the same cause,
and in which each party is a debtor and a
creditor of the other, such that the
obligation of one is dependent upon the
obligation of the other. They are to be
performed simultaneously, so that the
Page 29
 J. Dumaual 2020-2021

performance of one is conditioned upon the Central Bank v. CA

simultaneous fulfillment of the other".
- The agreement is a loan agreement,
- The power to rescind is given to the
which is a reciprocal obligation. In
injured party. "Where the plaintiff is the
reciprocal obligations, the obligation or
party who did not perform the
promise of each party is the
undertaking which he was bound by the
consideration for that of the other; &
terms of the agreement to perform, he is
when one party has performed or is ready
not entitled to insist upon the
& willing to perform his part of the
performance of the contract by the
contract, the other party who has not
defendant, or recover damages by reason
performed or is not ready & willing to
of his own breach ".
perform incurs in delay. The promise of
Pilipinas Bank v. IAC Tolentino to pay was the consideration for the
obligation of the Bank to furnish the P80,000.
- While it is true that a contractual
When Tolentino executed a real estate
provision allowing "automatic rescission"
mortgage, he signified his willingness to pay
(without prior need of judicial rescission,
the loan. From such date, the obligation of the
resolution or cancellation) is VALID, the
Bank to furnish the P80,000 accrued. The
remedy of one who feels aggrieved because of
Bank’s delay started in 1965, lasted for 3
the recission is to go to Court for the
years or when the Monetary Board issued
cancellation of the rescission itself. In case the
Resolution No. 967 in 1968, which prohibited
rescission is found unjustified under the
the Bank from doing further business.
circumstances, still in the instant case there is
Resolution No. 1049 cannot interrupt the
a clear WAIVER of the stipulated right of
default of the Bank in releasing the P63,000
"automatic rescission," as evidenced by the
because said resolution merely prohibited the
many extensions granted private respondents
Bank from making new loans.
by the petitioner. In all these extensions,
- Since the Bank was in default in
the petitioner never called attention to
fulfilling its reciprocal obligation under
the proviso on "automatic rescission."
the loan agreement, Tolentino may choose

Civil Law Review 2, Atty. Crisostomo Uribe Page 30


between specific performance or
rescission with damages in either case;
but since the Bank is now prohibited from
doing further business, the Court cannot
grant specific performance. Rescission is
the only alternative remedy left. However,
rescission is only for the P63,000 balance,
because the bank is in default only insofar as
such amount is concerned.
Unlad Resources Development v. Dragon
- Rescission under Art. 1301, it shall be the
duty of both parties to return the things
which were the object of the contract as
provided under Art. 1385. This same
article was likewise held applicable to
Rescission under Art. 1911. The SC held
that “mutual restitution is required in
cases involving rescission under Article
1191. This means bringing the parties
back to their original status prior to the
inception of the contract.”
- Rescission has the effect of "unmaking a
contract, or its undoing from the
beginning, and not merely
termination." Hence, rescission creates the
obligation to return the object of the contract. It
can be carried out only when the one who
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
demands rescission can return whatever
he may be obliged to restore. To rescind is
to declare a contract void at its inception and
to put an end to it as though it never was. It is
not merely to terminate it and release the
parties from further obligations to each other,
but to abrogate it from the beginning and
restore the parties to their relative
positions as if no contract has been
made.
Swire Realty Development Corporation v. Jayne Yu
- Basic is the rule that the right of rescission of
a party to an obligation under Article 1191 of
the Civil Code is predicated on a breach of
faith by the other party who violates the
reciprocity between them. The breach
contemplated in the said provision is the
obligor’s failure to comply with an
existing obligation. When the obligor
cannot comply with what is incumbent
upon it, the obligee may seek rescission
and, in the absence of any just cause for
the court to determine the period of
its compliance, the court shall decree the
rescission.
- In the instant case, the CA aptly found that
the completion date of the condominium unit
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 J. Dumaual 2020-2021

was November 1998 but was extended to Olivarez Realty v. Castillo

December 1999. However, at the time of the
- SC characterized the contract as a contract to
ocular inspection conducted by the HLURB, the
sell, not a contract of conditional sale. In a
unit was not yet completely finished as the
contract of conditional sale, the buyer
kitchen cabinets and fixtures were not yet
automatically acquires title to the property
installed and the agreed amenities were not
upon full payment of the purchase price. This
yet available.
transfer of title is “by operation of law without
- From the foregoing, it is evident that the ocular
any further act having to be performed by the
inspection conducted on the subject
seller.” In a contract to sell, transfer of
condominium project and subject unit shows
title to the prospective buyer is not
that the amenities under the approved plan
automatic. “The prospective seller must
have not yet been provided as of May 3, 2002,
convey title to the property through a
and that the subject unit has not been
deed of conditional sale.” The distinction is
delivered to respondent as of August 28, 2002,
important to determine the applicable laws
which is beyond the period of development of
and remedies in case a party does not fulfill
December 1999 under the license to sell.
his or her obligations under the contract. In
Incontrovertibly, petitioner had incurred
contracts of conditional sale, our laws on sales
delay in the performance of its obligation
under the Civil Code of the Philippines apply.
amounting to breach of contract as it
On the other hand, contracts to sell are not
failed to finish and deliver the unit to
governed by our law on sales but by the Civil
respondent within the stipulated period.
Code provisions on conditional obligations.
The delay in the completion of the project
- Specifically, Article 1191 of the Civil Code on
as well as of the delay in the delivery of
the right to rescind reciprocal obligations does
the unit are breaches of statutory and
not apply to contracts to sell. Failure to fully
contractual obligations which entitle
pay the purchase price in contracts to sell is
respondent to rescind the contract,
not the breach of contract under Art. 1191.
demand a refund and payment of
Failure to fully pay the purchase price is
damages.
merely an event which prevents the seller’s

Civil Law Review 2, Atty. Crisostomo Uribe Page 32


obligation to convey title from acquiring
binding force. This is because there can be
no rescission of an obligation that is still
nonexistent, the suspensive condition (the
condition of having the buyer pay the full
purchase price) having not happened.
- In this case, Castillo reserved his title to the
property and undertook to execute a deed of
absolute sale upon Olivarez Realty
Corporation’s full payment of the purchase
price. Since Castillo still has to execute a
deed of absolute sale to Olivarez Realty
Corporation upon full payment of the
purchase price, the transfer of title is not
automatic. As this case involves a
contract to sell, Article 1191 of the Civil
Code of the Philippines does not apply.
The contract to sell is instead cancelled,
and the parties shall stand as if the
obligation to sell never existed.
NCLPI v. Lica and PROTON
- Whether a contract provides for it or not,
the remedy of rescission is always
available as a remedy against a
defaulting party. When done without prior
judicial imprimatur, however, it may still be
subject to a possible court review. x x x
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
- An extrajudicial rescission based on grounds
not specified in the contract would not
preclude a party to treat the same as
rescinded. The rescinding party, however,
by such course of action, subjects himself
to the risk of being held liable for
damages when the extrajudicial
rescission is questioned by the opposing
party in court. This was made clear in the
case of U.P. v. De los Angeles, wherein the
Court held as follows:
- Of course, it must be understood that the
act of a party in treating a contract as
cancelled or resolved on account of
infractions by the other contracting party
must be made known to the other and is
always provisional, being ever subject to
scrutiny and review by the proper court. If
the other party denies that rescission is
justified, it is free to resort to judicial action in
its own behalf, and bring the matter to court.
Then, should the court, after due hearing,
decide that the resolution of the contract was
not warranted, the responsible party will be
sentenced to damages; in the contrary case,
the resolution will be affirmed, and the
consequent indemnity awarded to the party
prejudiced.
Page 33

- In other words, the party who deems the
contract violated may consider it resolved or
rescinded, and act accordingly, without
previous court action, but it proceeds at its
own risk. For it is only the final judgment
of the corresponding court that will
conclusively and finally settle whether
the action taken was or was not correct
in law.
Spouses Batalla v. Prudential Bank
- Under this premise, it is not hard to see
the absurdity in the position of Spouses
Batalla that they could rescind the car
loan agreement and promissory note with
Prudential on the ground of alleged
defects of the car delivered to them by
Honda. The transactions of Spouses Batalla
with Prudential and Honda are distinct and
separate from each other. From the time
Spouses Batalla accepted the loan
proceeds from Prudential, the loan
agreement had been perfected. As such,
Saddul v. Losloso
they were bound to comply with their
obligations under the loan agreement
regardless of the outcome of the contract
of sale with Honda. Even assuming that the
car that Spouses Batalla received was not
Civil Law Review 2, Atty. Crisostomo Uribe
J. Dumaual 2020-2021
brand new or had hidden defects, they could
not renege on their obligation of paying
Prudential the loan amount.
- Spouses Batalla erroneously relies on
Supercars Management & Development
Corporation v. Flores as basis to rescind the
loan agreement with Prudential on account of
the perceived defects of the car delivered to
them. In the said case, only the contract of
sale with the car dealer was rescinded on
account of breach of contract for delivering a
defective vehicle. While therein lendee-bank
was originally impleaded for rescission of
contract, the trial court dropped it as party-
defendant because the breach of contract
pertained to the contract of sale and not to the
car loan agreement. In the same vein,
Spouses Batalla's recourse in case of
defects in the motor vehicle delivered to
them was limited against Honda and does
not extend to Prudential as it merely lent
the money to purchase the car.
- Petitioner filed an amended complaint for
accion pauliana, an action for rescission,
which is subsidiary in nature, and which
may only be filed when the party
Page 34
 J. Dumaual 2020-2021

suffering damage has no other legal

means to obtain reparation for the same.
- It was not shown that [petitioner] has
exhausted other legal remedies to obtain relief
other than the institution of an accion
pauliana. In fact, what appears is that the
loan was secured by a chattel mortgage,
thus, giving [petitioner] another option in
law to satisfy [her] claim against the
Spouses Dela Cruz thereby precluding
them from directly filing a complaint for
accion pauliana. Her claim that the
properties subject of the chattel mortgage [has]
been attached by [other] creditors becomes of
no moment in light of the fact that she did not
exhaust other available remedies before
resorting to accion pauliana. Worse, there is
still no judgment or order of execution for
the satisfaction of her claim against the
Spouses Dela Cruz upon which
[petitioner's] complaint was grounded.
Hence, her accion pauliana case has clearly
no leg to stand on. Besides, the filing of
accion pauliana cannot be justified based
solely on her sweeping conclusion that
her credit cannot be fully satisfied with.
[Petitioner's] suit clearly lacks a cause of
action if not prematurely filed.

Civil Law Review 2, Atty. Crisostomo Uribe Page 35