Art. 1156. An obligation is a juridical
When a minor between eighteen and
necessity to give, to do or not to do.
Kinds of Obligations as to basis & enforceability
Civil Obligation
-one which has a binding force in law, and which
gives to the obligee or creditor the right of enforcing
it against the obligor or debtor in a court of justice.
Natural Obligation
-one which cannot be enforced by action, but which
is binding on the party who makes it in conscience
and according to the natural law.
Title III. - NATURAL OBLIGATIONS
Art. 1423. Obligations are civil or natural. Civil
obligations give a right of action to compel their
performance. Natural obligations, not being based on
positive law but on equity and natural law, do not
grant a right of action to enforce their performance,
but after voluntary fulfillment by the obligor, they
authorize the retention of what has been delivered or
rendered by reason thereof. Some natural obligations
are set forth in the following articles.
Art. 1424. When a right to sue upon a civil obligation
has lapsed by extinctive prescription, the obligor who
voluntarily performs the contract cannot recover
what he has delivered or the value of the service he
has rendered.
Art. 1425. When without the knowledge or against
the will of the debtor, a third person pays a debt
which the obligor is not legally bound to pay because
the action thereon has prescribed, but the debtor
later voluntarily reimburses the third person, the
obligor cannot recover what he has paid.
Art. 1426. When a minor between eighteen and
twenty-one years of age who has entered into a
contract without the consent of the parent or
guardian, after the annulment of the contract
voluntarily returns the whole thing or price received,
notwithstanding the fact the he has not been
benefited thereby, there is no right to demand the
thing or price thus returned.
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Art. 1427.
twenty-one years of age, who has entered into a
contract without the consent of the parent or
guardian, voluntarily pays a sum of money or delivers
a fungible thing in fulfillment of the obligation, there
shall be no right to recover the same from the obligee
who has spent or consumed it in good faith. (1160A)
Art. 1428. When, after an action to enforce a civil
obligation has failed the defendant voluntarily
performs the obligation, he cannot demand the
return of what he has delivered or the payment of the
value of the service he has rendered.
Art. 1429. When a testate or intestate heir voluntarily
pays a debt of the decedent exceeding the value of the
property, which he received by will or by the law of
intestacy from the estate of the deceased, the
payment is valid and cannot be rescinded by the
payer.
Art. 1430. When a will is declared void because it has
not been executed in accordance with the formalities
required by law, but one of the intestate heirs, after
the settlement of the debts of the deceased, pays a
legacy in compliance with a clause in the defective
will, the payment is effective and irrevocable.
Thus, when an action has prescribed in accordance
with the statute of limitations, a natural obligation
still subsists, although the civil obligation is
extinguished.
Essential Requisites of Obligations
1. Active subject
-always a person, juridical or natural
a. creditor – obligation to give
b. obligee – obligation to do
2. Passive subject
-must be determinate or determinable
a. debtor – obligation to give
b. obligor – obligation to do
3. Object of the obligation
In a contract of sale for example, the object of
the obligation is the conduct of the vendor in
delivering the car.
The car, on the other hand, is the object of the
prestation.
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 Art. 1159. Obligations arising from
CONTRACTS have the force of law between
the contracting parties and should be
complied with in good faith.

Who has the burden of proof?

4. Vinculum juris
The vinculum juris is the legal tie. It consists of
the enforceability of the obligation. If the
debtor does not conform, the creditor has the
power to go to court to make the debtor
perform – coercive.
The OBLIGEE has the burden of proof because
obligations arising from law are not presumed.
This provision presupposes that the contract is
valid and enforceable.
When are pre-contractual obligations binding and
when do they give rise to liability?

5. Causa If the offer by one party is clear and definite, leading

The object of an obligation answers the the offeree in good faith to incur expenses in the
question What is owed? expectation of entering into the contract and the
The causa answers the question withdrawal of the offer is without any legitimate
Why is it owed? cause.

For example, A will deliver a car to B since A Art. 1160. Obligations derived from QUASI-
expects to get P300,000. The P300,000 is the CONTRACTS shall be subject to the provisions
causa of the obligation. of Chapter 1, Title XVII, of this Book.

6. Form
Form means some manifestation of intent. Quasi-contracts
a. Negotiorum Gestio
Sources of Civil Obligations b. Solutio Indebiti
c. Other Quasi-contracts
Art. 1157. Obligations arise from:
(1) Law; What is a quasi-contract?
Art. (2)
1158. Obligations derived from LAW are
Contracts; It is a juridical relation which arises from certain
not (3)presumed. Only those expressly
Quasi-contracts; lawful, voluntary and unilateral acts by virtue of
determined
(4) Acts in
orthis Code orpunished
omissions in special
bylaws
law;are which the parties become bound to each other
demandable, and shall be regulated by the
(5) Quasi-delicts. based on the principle that no one shall be unjustly
precepts of the law which establishes them;
enriched or benefit at the expense of another.
and as to what has not been foreseen, by the
provisions of this Book.
A quasi-contract is not an implied contract. There is
no meeting of the minds between parties. A juridical
There is always a concurrence between the law relation is created by a quasi-contract so that nobody
which establishes or recognizes it & an act or shall enrich himself at the expense of another.
condition upon which the obligation is based or
predicated. Is the enumeration exclusive?
No. Article 2143 states that: The provisions for quasi-
contracts in this Chapter do not exclude other quasi-
contracts, which may come within the purview of the
preceding article.

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NEGOTIORUM GESTIO (obligation incident to the
officious management of the affairs of other
persons)
Art. 2144. Whoever voluntarily takes charge of the
agency or management of the business or property of
another, without any power from the latter, is obliged to
continue the same until the termination of the affair and
its incidents, or to require the person concerned to
substitute him, if the owner is in a position to do so. This
juridical relation does not arise in either of these
instances:
(1) When the property or business is not neglected
or abandoned;
(2) If in fact the manager has been tacitly
authorized by the owner.
In the first case, the provisions of Articles 1317, 1403,
No. 1, and 1404 regarding unauthorized contracts shall
govern.
In the second case, the rules on agency in Title X of this
Book shall be applicable.
Illustration:
A abandons his property, a Mango plantation, and his
business therein. B decides to manage the business
and the property so that the business will earn upon
harvest time. B does this without any authority from A.
B therefore becomes an officious manager without
expectation of any profit or remuneration. B must
continue managing the property or the business until
it is terminated. He can also require A to have him (B)
substituted if A is in a position to do so.
If the property is not abandoned, all acts of A
unauthorized and any contract entered into by him
shall be generally unenforceable.
If B were authorized, the law on agency shall apply.
Question:
The owner left his house for a short vacation, the
very night they left, their house was burned, the
neighbors saved some of their appliances. Is there
negotiorum gestio in this case?
No, the appliances were not under the management
of the gestor and there was no abandonment and
neglect of the property.
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This case falls under “other quasi-contracts”
Article 2145
The law requires that the degree of diligence to be
exercised by the officious manager is that exercised by
a good father of a family. This means the ordinary
degree of care which a reasonable and prudent person
will do given the same circumstances the officious
manager is in. If he causes damage to the property of
the owner, he shall be liable to such owner. An
officious manager is in a sense an intruder in the
business or the property of the owner. However, if his
intrusion is with the objective of preserving, managing
and taking care of the property without any intent to
gain, a quasi-contract is created. He cannot escape
liability by stating that there was no obligation on his
part to take over the property or business in the first
place. Once he takes over, he is charged with the
responsibility to take care of it.
On the other hand, if indeed the owner suffers damage
due to the negligence or fault of the officious manager,
the court can increase or moderate the indemnity
according to the circumstances.
Article 2146
The officious manager can delegate the management
of the properties to another. However, he will be
responsible for the acts of the said delegate. Such
person to whom the management has been delegated
shall likewise be directly responsible to the owner.
The liability of two or more officious managers is
solidary. The owner can seek the full amount of
damages from anyone of the officious managers.
In cases of fortuitous events (Article 2147)
The officious manager shall be liable for any fortuitous
event:
(1) If he undertakes risky operations which the
owner was not accustomed to embark upon;
(2) If he has preferred his own interest to that of
the owner;
(3) If he fails to return the property or business
after demand by the owner;
(4) If he assumed the management in bad faith
Illustration:
The first case is when the officious manager
undertakes risky operations which the owner is not
accustomed to embark upon. Thus, if the business of
the owner is simply providing a warehouse for dolls
and other toys, and the officious manager decides to
allow the storing of highly inflammable materials in
3
the warehouse, the officious manager shall be liable if
the warehouse is burned due to a fortuitous event,
such as the striking of lightning.
The second case is when the officious manager has
preferred his own interest to that of the owner. For
example, the officious manager takes over the business
of the owner of warehousing goods. In the meantime,
the officious manager also stores some of his goods in
the warehouse. In the event that a flood occurs, and he
first saves his goods, before the goods of the owner
and the latter’s clients, from being destroyed, the
officious manager will be liable for the loss due to the
fortuitous event.
The third situation is when the officious manager fails
to return the property or business after demand by the
owner. Once the owner demands the return of the
business, the officious manager should readily return
it. He has no right to keep it for himself. Hence, if the
property is destroyed by fortuitous event, the officious
manager will be held liable for his act of unduly
retaining what is not his.
The fourth situation is when the officious manager
assumes the management in bad faith. For example,
the officious manager takes over the warehousing
business of the owner so that he can get the clients of
the owner for his (officious manager’s) own
warehousing business. Such officious manager shall be
liable for the loss of the warehousing business of the
owner caused by a fortuitous event.
Article 2148
Generally, the happening of a fortuitous event affecting
an obligation excuses the person charged from
performing the obligation. In case of negotiorum
gestio, Article 2148 does not excuse the officious
manager from liability due to fortuitous event.
The officious manager has no business taking over the
abandoned property or business of somebody if he has
no knowledge or is not competent to undertake the
management. Hence, if a teacher takes on the farming
business of another, he shall be liable for any damage
caused by a fortuitous event. He should have been
prudent enough to know that he cannot possibly
undertake something, which he has no competence in.
If another person who is competent to take over the
farming business decides to manage the same and the
said teacher prevents him from doing so on the ground
that he has been there first, such teacher will be liable
if the property is destroyed by a fortuitous event.
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However, if the said teacher manages the said farming
business to save it from imminent danger, he will not
be liable for damages caused by a fortuitous event.
Article 2149
The ratification of the management by the owner of the
business produces the effects of an express agency, even
if the business may not have been successful.
Ratification means that the owner agrees to whatever
the officious manager has done. It cures even the
defects, which the officious manager has committed. If
ratification happens, the law on agency applies and
even if the business is not successful, such agency by
virtue of ratification shall be recognized.
Article 2150
The owner must always reimburse the officious
manager for all expenses, which have inured for the
benefit or advantage of the owner.
Hence, if the officious manager pays taxes on the
property so that it will not be foreclosed, the owner
must reimburse the officious manager for the payment
made by the latter.
Even if no benefit has been derived but the officious
manager takes over to save the property or business
from imminent loss, the officious manager should
likewise be reimbursed for obligations incurred for the
owner’s interest, including useful and necessary
expenses.
Article 2151
Whether or not there is benefit and whether or not
there is imminent danger are immaterial for purposes
of reimbursing the officious manager of useful and
necessary expenses and of payment made in
furtherance of the owner’s interest:
a) if the officious manager has acted in good faith
and
b) the property or business is intact, ready to be
returned to the owner.
The very fact that the property is intact means that the
officious manager has prudently and with due
diligence managed the property.
Article 2152
The officious manager is personally liable for contracts
which he has entered into with third persons, even
4
though he acted in the name of the owner, and there
shall be no right of action between the owner and third
persons. These provisions shall not apply:
(1) If the owner has expressly or tacitly ratified the
management; or
(2) When the contract refers to things pertaining to the
owner of the business.
If the officious manager decides to manage the
property or business, and for this reason, he buys
some decorations to be placed in the property, such
officious manager shall be the only one responsible for
the payment of such decorations even if he acts in the
name of the owner. The seller of the decorations has
no right of action against the owner in the event the
officious manager does not pay for them. However, the
owner shall pay for them if he has expressly or tacitly
ratifies the act of the officious manager. If the buying
and selling of decoration is the very object of the
business of the owner, the owner shall be liable.
Article 2153
The management is extinguished:
(1) When the owner repudiates it or puts an end
thereto;
(2) When the officious manager withdraws from
the management, subject to the provisions of
Article 2144;
(3) By the death, civil interdiction, insanity or
insolvency of the owner or the officious
manager.
The management is extinguished if the owner
repudiates it or puts an end to it. The owner still has
the power of dominion over his property or his
business. Hence his decision must prevail over that of
the officious manager. If owner does not want the
officious manager, this decision should prevail.
SOLUTIO INDEBITI (recovery of what has been
improperly paid)
Art. 2154
If something is received when there is no right to
demand it, and it was unduly delivered through mistake,
the obligation to return it arises.
Illustration:
Andres v. Mantrust
Whether or not the private respondent has the right to
recover the second $10,000 remittance it had delivered
to petitioner
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HELD: Yes. Art 2154 of the New Civil Code is
applicable. For this article to apply, the following
requisites must concur: 1) that he who paid was not
under obligation to do so; and 2) that payment was
made by reason of an essential mistake of fact.
There was a mistake, not negligence, in the second
remittance. It was evident by the fact that both
remittances have the same reference invoice number.
Article 2155
Payment by reason of a mistake in the construction or
application of a doubtful or difficult question of law may
come within the scope of the preceding article.
Solutio indebiti, generally involves only a mistake of
fact. However, under Article 2155, a mistake of law is
allowed if the mistake is brought about by the
construction or application of a doubtful or difficult
question of law.
Illustration:
Gonzalo Puyat and Sons, Inc. vs. City of Manila
where the appellee, by mistake paid taxes which were
not due as the appellant was exempted from the same,
and the said mistake in payment was, among others,
the result of a complicated correlation and application
of various municipal and national laws, the Supreme
Court ruled that there was solutio indebiti by stating:
In refutation of the above stand of appellants, appellee
avers that the payments could not have been voluntary.
At most, they were paid “mistakenly and in good faith”
and “without protest in the erroneous belief that it was
liable thereof.” Voluntariness is incompatible with
protest and mistake. It submits that this is a simple case
of “solutio indebiti.”
Appellants do not dispute the fact that appellee-
company is exempted from the payment of the tax in
question. This is manifest from the reply of appellant
City Treasurer stating that sales of manufactured
products at the factory site are not taxable either
under the Wholesalers’ Ordinance or under the
Retailers’ Ordinance. With this admission, it would
seem clear that the taxes collected from appellee were
paid, thru an error or mistake, which places said act of
payment within the pale of the new Civil Code
provision on solutio indebiti. The appellant City of
Manila, at the very start, notwithstanding the
Ordinance imposing the Retailer’s Tax, had no right to
demand payment thereof.
5

Appellee categorically stated that the payment was not
voluntarily made (a fact found also by the lower
court), but on the erroneous belief, that they were due.
Under this circumstances, the amount paid, even
without protest is recoverable. “If the payer was in
doubt whether the debt was due, he may recover if he
proves that it was not due” (Art. 2156, NCC). Appellee
had duly proved that taxes were not lawfully due.
There is, therefore, no doubt that the provisions of
solutio indebiti, of the new Civil Code, apply to the
admitted facts of the case.
Article 2156
If the payer was in doubt whether the debt was due, he
may recover if he proves that it was not due.
For example, a debtor pays a creditor prematurely
because he is not sure whether the debt is already due.
The creditor accepts it . The debtor can recover what
he has paid prior to the due date of the debt provided
that the demand for reimbursement is not made after
the debt has become due. This is a case of solutio
indebiti.
Article 2157
The responsibility of two or more payees, when there
has been payment of what is not due, is solidary.
An illustration of this article is as follows: A is indebted
to B and C for P2,000. The obligation is of a solidary
nature such that A can pay only to one of them the
whole obligation, and the debt is considered paid as to
both. Thus, if A pays B the amount of P2,000, the debt
is considered paid. It is up to C to claim from B his
share of the credit which is P1,000. If there is payment
by mistake, A can recover from either B or C the
amount which he has paid. This is true, even if in the
meantime, C has not yet obtained his P1,000.
Article 2158
When the property delivered or money paid belongs to
a third person, the payee shall comply with the
provisions of Article 1984.
Illustration:
A is obliged to pay B his obligation by giving B a watch.
Despite the fact that the payment is not yet due, A
gives B the watch which turns out to be stolen from X.
At the time of his receipt of the watch, B has no
obligation to ask A questions as to who owns the
watch. However, if B later finds out that X really owns
the watch, B must advise X that he (B) is in possession
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of his (X’s) watch. X must claim the watch within one
month from the advice. If X does not claim the watch, B
is excused from all liability if, A, because of solutio
indebiti, claims back the watch, and B gives back the
watch to A. However, if at the time A gives the watch of
B, the latter has reasonable grounds to believe that it
has been acquired unlawfully, B can return the same to
A.
Article 2159
Whoever in bad faith accepts an undue payment, shall
pay legal interest if a sum of money is involved, or shall
be liable for fruits received or which should have been
received if the thing produces fruits.
If the creditor knows that the payment is not yet due
and payment is tendered to him, he must inform the
debtor that payment is not yet due. Should the creditor
accept such premature payment, he is therefore in bad
faith and shall be liable for interest from the time he
accepts payment up to the time he returns it upon
demand of the debtor.
Article 2160
He who in good faith accepts an undue payment of a
thing certain and determinate shall only be responsible
for the impairment or loss of the same or its accessories
and accessions insofar as he has thereby been benefited.
If he has alienated it, he shall return the price or assign
the action to collect the sum.
An illustration of this article is as follows: A is obliged
to give B a house on January 1, 1997. Believing that it
was due on August 1, 1996, A delivered the house on
said date. B likewise did not know that the house was
still due on January 1, 1997. B was in good faith. On
November 1996, the house was rented in the amount
of P2,000 per hour by a movie producer for a
particular motion picture and, while shooting, the
kitchen was accidentally burned. After the shooting of
the motion picture, B was paid the rent in the amount
of P30,000 for 15 hours. On December 1996, A
discovered that the house was not yet due and
demanded its return. B can return the house and pay
the amount of the kitchen which has been impaired,
because he (B) has been benefited by the house when
he had it rented.
Article 2161
As regards the reimbursement for improvements and
expenses incurred by him who unduly received the thing,
the provisions of Title V of Book II shall govern.
6
Article 2162
He shall be exempt from the obligation to restore who,
believing in good faith that the payment was being
made of a legitimate and subsisting claim, destroyed the
document, or allowed the action to prescribe, or gave up
the pledges, or cancelled the guaranties for his right. He
who paid unduly may proceed only against the true
debtor or the guarantors with regard to whom the
action is still effective.
Illustration:
A is indebted to B in the amount of P1,000. It is an oral
contract of loan and hence it prescribes in 6 years
from the time it falls due.
X is the guarantor of the indebtedness. As guarantor, X
will only pay B if B has unsuccessfully exhausted all
efforts to collect from A upon the maturity of the debt.
The debt becomes due and A fails to pay B. B has not
yet exhausted all efforts to collect from A. Believing
that he is principally liable also for the debt, X pays B
on the fifth year since the debt has become due. B also
believed in good faith that he could collect from X and
hence accepts the payment from X.
In the meantime, more than six years have already
lapsed since the debt has become due. B does not
demand from A anymore because he has already been
paid by X on the fifth year.
In this case, X paid B by mistake. X cannot recover the
money paid by mistake from B because, if this is
allowed, B cannot anymore recover payment from A as
B’s cause of action against A has prescribed. X can only
recover from A, the true debtor. Since a quasi- contract
of solutio indebiti exists from the time X made the
payment on the fifth year, he has six years from such
payment within which to file an action against A, the
principal debtor. This is so because, considering that a
quasi-contract prescribes after six years from the time
the cause of action accrues, the action to collect from A
is still effective.
Article 2163
It is presumed that there is a mistake in the payment if
something which had never been due or had already
been delivered was delivered; but he from whom the
return is claimed may prove that the delivery was made
out of liberality.
A debtor who pays in solutio indebiti may recover what
he has paid by mistake. However, the person to whom
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the payment has been made can show that such
payment is a gift or a donation by showing the proper
evidence like a valid deed of donation.
OTHER QUASI-CONTRACTS (Articles 2164-2175)
Article 2164
When, without the knowledge of the person obliged to
give support, it is given by a stranger, the latter shall
have a right to claim the same from the former, unless
it appears that he gave it out of piety and without
intention of being repaid
Illustration:
“MV Princess of the Stars” incident
One of the deceased caused by the sinking of the ship
was buried by a 3rd person, A. A then asks B,
deceased’s aunt for reimbursement on the burial
expenses. Can B be compelled to reimburse the burial
expenses?
No. Only persons obliged to give support can be
compelled to reimburse.
Article 2165
When funeral expenses are borne by a third person,
without the knowledge of those relatives who were
obliged to give support to the deceased, said relatives
shall reimburse the third person, should the latter claim
reimbursement
The following are obliged to support each other:
1) the spouses;
2) legitimate ascendants and descendants;
3) parents and their legitimate children and the
legitimate and illegitimate children of the
latter;
4) parents and their illegitimate children and the
legitimate and illegitimate children of the
latter; and
5) legitimate brothers and sisters, whether of full
or half-blood.
Whenever two or more persons are obliged to give
support, the liability shall devolve upon the following
persons in the following order:
1) the spouse;
2) the descendants in the nearest degree;
3) the ascendants in the nearest degree; and
4) the brothers and sisters.
7
Illustration:
A was the daughter of X and Y. A died. G was the one
who shouldered the expenses for A’s funeral. If G did
this benevolent act as an act of charity, X and Y need
not reimburse him. If G intended to be reimbursed, he
can only be paid after demanding payment from X and
Y.
Article 2166
When the person obliged to support an orphan, or an
insane or other indigent person unjustly refuses to give
support to the latter, any third person may furnish
support to the needy individual, with right of
reimbursement from the person obliged to give support.
The provisions of this article apply when the father or
mother of a child under eighteen years of age unjustly
refuses to support him.
Article 2167
When through an accident or other cause a person is
injured or becomes seriously ill, and he is treated or
helped while he is not in a condition to give his consent
to a contract, he shall be liable to pay for the services of
the physician or other person aiding him, unless the
service has been rendered out of pure generosity.
Illustration:
A is bumped by a car and is seriously injured. He
becomes unconscious. X sees A and brings him to the
hospital. A’s injuries need immediate treatment but,
since he is in coma, he cannot give his consent. The
doctor nevertheless treats his injuries lest it becomes
more serious. When A recovers, he has the obligation
to pay the services of the doctor unless the latter does
not want to be paid.
Article 2168
When during a fire, flood, storm or other calamity,
property is saved from destruction by another person
without the knowledge of the owner, the latter is bound
to pay the former just compensation.
Illustration:
The house of A starts to catch fire but A is not in the
house. When the garage of the house is already on fire,
Z goes inside the burning garage and pushes the car of
A out of the same without the knowledge of A. The car
is saved from destruction. In this case, A is bound to
pay Z just compensation unless Z does not want to
accept it.
Article 2169
When the government, upon the failure of any person to
comply with health or safety regulations concerning
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property, undertakes to do the necessary work, even
over his objection, he shall be liable to pay the expenses.
For example, a municipal ordinance prohibits the
throwing of spoiled food outside of the house in a
waste can without any plastic bag. A does not abide by
the said ordinance and continually throws spoiled
food in a wooden garbage container. To prevent the
spread of disease, the municipal government can put
the spoiled food inside a plastic bag first and then
provide the owner of the house with a garbage can at
the owner’s expense even if he does not want to.
Article 2170
When by accident or other fortuitous event, movables
separately pertaining to two or more persons are
commingled or confused, the rules on co-ownership shall
be applicable.
The commingling here is unintentional as it is the
result of an accident or fortuitous event.
Article 2171
The rights and obligations of the finder of lost personal
property shall be governed by Articles 719 and 720.
Article 2172
The right of every possessor in good faith to
reimbursement for necessary and useful expenses is
governed by Article 546.
Article 2173
When a third person, without the knowledge of the
debtor, pays the debt, the rights of the former are
governed by Articles 1236 and 1237.
Article 2174
When in a small community a majority of the
inhabitants of age decide upon a measure for protection
against lawlessness, fire, flood, storm or other calamity,
any one who objects to the plan and refuses to
contribute to the expenses but is benefited by the project
as executed shall be liable to pay his share in the
expenses.
For example, the people of a certain barrio decide to
engage a security force to protect their community
because of rampant lawlessness. For this reason, the
people agree to contribute to the expenses of this
security force. G however refuse to make any
contribution. In the event that the security force
apprehend robbers intending to rob the house of G, G
should pay his share in the expenses for the
8
community’s engagement of the security force to
protect the people from criminals.
Article 2175
Any person who is constrained to pay the taxes of
another shall be entitled to reimbursement from the
latter.
For example, A is the neighbor of G whose property is
about to be forfeited to the government because of
unpaid real estate taxes. A can pay the taxes but G
must reimburse him.
Art. 1161. Civil obligations arising from
CRIMINAL OFFENSES shall be governed by the
penal laws, subject to the provisions of
Article 2177, and of the pertinent provisions
of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book,
regulating damages.
General Rule:
If you commit a crime, you are liable both criminally
and civilly.
Exception:
If there is no private offended party.
Article 104 of the RPC states that: The civil liability
established includes:
1. Restitution (restoration)
2. Reparation of damage caused (amount of
damages: price of the thing; sentimental value)
3. Indemnification for consequential damages
(those suffered by family or 3rd persons)
Note that it is not absolute that when a person is
criminally liable, all these 3 would arise.
Illustration:
In justifying circumstances:
GR: No civil liability
E: paragraph 4
Any person who, in order to avoid an evil or injury, does
not act which causes damage to another, provided that
the following requisites are present;
 
First. That the evil sought to be avoided actually exists;
Second. That the injury feared be greater than that done
to avoid it;
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Third. That there be no other practical and less harmful
means of preventing it.
In exempting circumstances:
GR: There is civil liability
E: paragraph 4
Any person who, while performing a lawful act with due
care, causes an injury by mere accident without fault or
intention of causing it.
Article 1167
If the person obliged to do something fails to do it, the
same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligations.
Furthermore, it may be decreed that what has been
poorly done be undone.
When the obligation to do can only be performed by
the debtor, he cannot be compelled to do so by force,
so the only remedy is damages.
Article 2177
Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from
the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages
twice for the same act or omission of the defendant
A person, while not criminally liable may still be civilly
liable. When the acquittal is based on the ground that
the guilt of the accused has not been proven beyond
reasonable doubt, the plaintiff has the right to institute
a civil action for damages.
Art. 1162. Obligations derived from QUASI-
DELICTS shall be governed by the provisions
of Chapter 2, Title XVII of this Book, and by
special laws.
Article 2176
Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
9
Quasi-delict is a civil law term whereas tort is a
common law term.
In quasi-delict, the obligation arises only when there
is a violation. Without violation, there is no obligation.
It is the breach itself which gives rise to the obligation.
In contracts, there is already an obligation which
exists prior to or even without a breach. The breach of
the contract is immaterial to the legal obligation.
Example: Contract of sale of watch. If both parties
perform their obligation, the contract is extinguished.
There is no breach, but there is an obligation.
(Compare the above example with the one below)
Example: Driving recklessly, A hits a child. When did
the obligation came to being? When there was injury
due to negligence. (Negligence per se does not give
rise to a quasi-delict unless there is injury.) Breach and
quasi-delict are inseparable. But contract and breach
may be separable.
Article 2176 is not applicable when there is a pre-
existing contractual relation. However, when such act
of breaching the contract is also tortious, the
contractual relation will not bar the recovery of
damages.
Are contracts and quasi-delicts mutually exclusive?
(When two events are mutually exclusive, the
occurrence of one precludes the other. In short, they
cannot occur at the same time)
No. In Gutierrez v. Gutierrez, there was a collision
between a bus and a car wherein the passenger of the
bus was injured.
It was proven that the driver of the car was a minor
and an incompetent driver. The passenger sued
against them all. The SC held that the bus driver, bus
owner and the driver of the car (through his father)
are jointly and severally liable to the passenger.
The liability of the owner of the bus and the bus driver
rests on that of a contract.
On the other hand, the father is responsible for the
acts of his son and is therefor responsible for the
negligence of the minor. Here, it is clear that breach of
contract and quasi-delict are separate.
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Elements of a Quasi-delict
To sustain a claim based on a quasi-delict, the
following requisites must concur:
1. A duty on the part of the defendant to protect
the plaintiff from the injury of which the latter
complains;
2. A failure to perform that duty; and
3. An injury to the plaintiff through such failure
Test of Negligence
Would a prudent man, in the position of the person on
whom negligence is attributed, foresee harm to the
person injured as a reasonable consequence of the
course about to be pursued?
Kinds of Negligence
1. Culpa Aquiliana or negligence as a source of
obligation
-governed by Articles 2176-2194
-no contractual relation at all
2. Culpa Contractual or negligence in the
performance of a contractual obligation
-governed y Article 1179 and all on contracts
Requisites of liability (imputed):
1. the fault of negligence of the defendant
2. the damage suffered or incurred by the plaintiff
3. the relation of the fault or negligence and
damage incurred by the plaintiff
Damage
It is the loss, hurt or harm which results from injury. It
differs from damages which term refers to the
recompense or compensation awarded for the damage
suffered.
Is fault the same as negligence?
No. Negligence is just an omission of the diligence
required whereas fault covers intentional and
unintentional acts.
One word which would cover both fault and
negligence is Culpa
Fault
It is that condition where a person acts in a way or
manner contrary to what normally should have been
done and ultimately causing damage or injury to
another. (Prescribing the wrong medicine to a patient
causing the latter to suffer injuries)
10

Negligence
It consists in the omission to do acts required under
the attendant circumstances resulting in damage or
injury to another. (Failure of the pilot to provide
sufficient fuel to the helicopter causing it to crash and
injure its passengers)
Balane:
The Code Commission did not choose to use tort. This
is because tort does not exactly have the same
meaning as quasi-delict.
Tort [broader] covers intentional torts which in quasi-
delict is considered as civil liability arising from acts or
omissions punishable by law. There are some QD w/c
are not covered by tort.
A tort is a civil wrong (an actionable wrong) consisting
of a violation of a right or a breach of duty for which
the law grants a remedy in damages or other relief.
The right is created by law in favor of a person called a
creditor to compel another called a debtor to observe
duty or a prestation either to render what is due him
or to refrain from causing him injury.
Classes of Torts According to Manner
Commission
1. Intentional Torts
a. tortfeasor desires to cause the
consequences of his act, or
b. tortfeasor believes that the consequences
are substantially certain to result from it
c. Articles 26, 32 & 33 (CC)
2. Negligent Torts
a. tortfeasor’s conduct merely creates a
foreseeable risk of harm which may or may
not occur;
b. Article 2176 (CC)
3. Strict Liability Torts
Articles 2183 & 2187 (CC)
Q: If there is a contract between the parties, can there
be a quasi-delict committed by one against the other
regarding the area covered by the contract?
A: If you look at Art. 2176, you get the impression that
if there is a contract between the parties, they cannot
be liable for quasi-delict on an area covered by the
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contract. The case of Cangco has not really resolve this
controversy.
Cangco vs. Manila Railroad Co.
Balane: There are two important principles that we
learn fr. this case:
The difference in concept bet. contract & quasi-delict is
that in a contract, there is a pre-existing juridical tie
bet. the parties. Violation of the contract gives rise to
liability but not to the juridical tie. Juridical tie is not
borne by a violation. In quasi-delict, it is precisely the
wrongful act w/c gives rise to the juridical tie.
Liability & juridical tie are simultaneous.
Contracts & quasi-delicts create two concentric circles
w/ quasi-delict as the bigger circle.
[Note: There is a little mistake in Cangco. The SC said
that the driver can be sued under culpa contractual.
This is wrong. The driver cannot be sued as he has no
privity of contract w/ the passenger.]
Facts: Cangco was an EE of MRR Co. He takes the
train going home from work. That day he alighted
from the train while it was still slightly in motion. He
of landed on the elevated platform on top of some sacks
of watermelon which made him fall violently, rolled
away from the platform under the moving train where
he badly crashed and lacerated his right arm. It
happened at night bet 7-8pm and d station was poorly
lit. Cangco’s arm was amputated twice. The
seriousness of his injury made him file a case for
damages vs MRR Co.
Held:
It can not be doubted that the employees of the
railroad company were guilty of negligence in piling
these sacks on the platform in the manner above
stated; that their presence caused the plaintiff to fall as
he alighted from the train; and that they therefore
constituted an effective legal cause of the injuries
sustained by the plaintiff. It necessarily follows that
the defendant company is liable for the damage
thereby occasioned unless recovery is barred by the
plaintiff's own contributory negligence.
          It is important to note that the foundation of the
legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the
damage which plaintiff has suffered arises, if at all,
from the breach of that contract by reason of the
11
failure of defendant to exercise due care in its
performance. That is to say, its liability is direct and
immediate, differing essentially, in legal viewpoint
from that presumptive responsibility for the
negligence of its servants, [RESPONDEAT SUPERIOR],
which can be rebutted by proof of the exercise of due
care in their selection and supervision. (presumption
juris tantum, rebuttable). Imputed liability in NCC is
not applicable to obligations arising ex contractu, but
only to extra-contractual obligations, or to use the
technical form of expression, that article relates only
to culpa aquiliana and not to culpa contractual.
Every legal obligation must of necessity be
extra-contractual or contractual. Extra-contractual
obligation has its source in the breach or omission of
those mutual duties which civilized society imposes
upon it members, or which arise from these relations,
other than contractual, of certain members of society
to others, generally embraced in the concept of status.
The fundamental distinction between obligations of
this character and those which arise from contract,
rests upon the fact that in cases of non-contractual
obligation it is the wrongful or negligent act or
omission itself which creates the vinculum juris,
whereas in contractual relations the vinculum exists
independently of the breach of the voluntary duty
assumed by the parties when entering into the
contractual relation.
The contract of defendant to transport plaintiff carried
with it, by implication, the duty to carry him in safety
and to provide safe means of entering and leaving its
trains (contract of carriage). That duty, being
contractual, was direct and immediate, and its non-
performance could not be excused by proof that the
fault was morally imputable to defendant's servants.
          The railroad company's defense involves the
assumption that even granting that the negligent
conduct of its servants in placing an obstruction upon
the platform was a breach of its contractual obligation
to maintain safe means of approaching and leaving its
trains, the direct and proximate cause of the injury
suffered by plaintiff was his own contributory
negligence in failing to wait until the train had come to
a complete stop before alighting (Doctrine of
comparative negligence, Rakes doctrine). If the
accident was caused by plaintiff's own negligence, no
liability is imposed upon defendant's negligence and
plaintiff's negligence merely contributed to his injury,
the damages should be apportioned. It is, therefore,
important to ascertain if defendant was in fact guilty of
negligence.
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          The test by which to determine whether the
passenger has been guilty of negligence in attempting
to alight from a moving railway train, is that of
ordinary or reasonable care. It is to be considered
whether an ordinarily prudent person, of the age, sex
and condition of the passenger, would have acted as
the passenger acted under the circumstances disclosed
by the evidence. This care has been defined to be, not
the care which may or should be used by the prudent
man generally, but the care which a man of ordinary
prudence would use under similar circumstances, to
avoid injury." (Thompson, Commentaries on
Negligence, vol. 3, sec. 3010.)
RULING:          …that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that
it came to stop within six meters from the place where
he stepped from it. Thousands of person alight from
trains under these conditions every day of the year,
and sustain no injury where the company has kept its
platform free from dangerous obstructions. There is
no reason to believe that plaintiff would have suffered
any injury whatever in alighting as he did had it not
been for defendant's negligent failure to perform its
duty to provide a safe alighting place.
CASE: Where there could still be QD even when there
is contract of carriage
Gutierrez vs. Gutierrez
FACTS:
A truck and a car collided on a narrow bridge. A
passenger of the truck was injured and filed a case.
The owner of the truck was made defendant although
his driver was driving the truck at that time and he
was not a passenger of the truck. The owner of the car
was also made defendant although the driver of the
car at the time of the collision was his son, 18 yrs. of
age, w/ other members of the family accommodated
therein, but not the car owner.
HELD: The court found both drivers negligent. The
owner of the truck was made liable for culpa
contractual, under the contract of carriage. The owner
of the car was made liable under Art. 2180, imputed
liability for culpa aquiliana.
12
 Doctrine of proximate cause  is that which, in
FRAUD NEGLIGENCE natural and continuous sequence, unbroken by any
dolo Culpa efficient intervening cause, produces injury and
Nature of Act involves mere want of without which the result would not have occurred.
willfulness or care or diligence,
deliberate not voluntary act The exemplification by the Court in one case is simple
intent to cause or omission and explicit; viz: "(T)he proximate legal cause is that
damage or acting first and producing the injury, either
injury to immediately or by setting other events in motion, all
another constituting a natural and continuous chain of events,
Gives rise to Ø the act itself the want or care each having a close causal connection with its
or diligence immediate predecessor, the final event in the chain
immediately affecting the injury as a natural and
A single act may be a crime and a QD at the same time; probable result of the cause which first acted under
(Art. 100, RPC) such circumstances that the person responsible for the
Injured party cannot recover damages twice for the first event should, as an ordinarily prudent and
same act or omission of defendant; (must choose 1 intelligent person, have reasonable ground to expect at
Rem.) the moment of his act or default that an injury to some
person might probably result therefrom."

QUASI-DELICT CRIME
As to nature of private right public right
Right violated
Is a Wrong the individual the State
against
Criminal not needed Necessary
Intent
Legal Basis for Broad penal law
liability necessary
Liability for every QD gives there are crimes
Damages rise to liability for without civil
damages liability
Form of reparation for punishment/
Redress injury suffered/ fine/
indemnification/ imprisonment
compensation
Quantum of preponderance beyond
Evidence reasonable doubt
Compromise can be criminal liability
compromised can never be
compromised

Requisites for liability: (onus)

1. Wrongful act or omission imputable to the
defendant by reason of his fault or negligence;
2. Damage or injury proven by the person claiming
recovery; Compliance with Obligations
3. A direct causal connection between the negligent
act and the injury. Article 19
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 faith.

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 Article 1163
Every person obliged to give something is also
obliged to take care of it with the proper diligence of
a good father of a family, unless the law or the
stipulation of the parties requires another standard
of care.
Article 1164
The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until
the same has been delivered to him.
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 effected the delivery.
Article 1166
The obligation to give a determinate thing includes
that of delivering all its accessions and accessories,
even though they may not have been mentioned.
Article 1244
The debtor of a thing cannot compel the creditor to
receive a different one, although the latter may be of the
same value as, or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance
cannot be substituted by another act or forbearance
against the obligee's will.
Article 1246
When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the
debtor deliver a thing of inferior quality. The purpose of
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the obligation and other circumstances shall be taken
into consideration.
Article 1460
A thing is determinate when it is particularly designated
or physical segregated from all others of the same class.
The requisite that a thing be determinate is satisfied if
at the time the contract is entered into, the thing is
capable of being made determinate without the
necessity of a new or further agreement between the
parties
Article 440
The ownership of property gives the right by accession
to everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or
artificially
Article 442
Natural fruits are the spontaneous products of the soil,
and the young and other products of animals.
Industrial fruits are those produced by lands of any
kind through cultivation or labor.
Civil fruits are the rents of buildings, the price of leases
of lands and other property and the amount of
perpetual or life annuities or other similar income
Kinds of Prestations
1. to give;
2. to do; or
3. not to do
Kinds of Performance
1. specific performance
-performance by the debtor himself (applies only
to obligation to give )
2. substitute performance
-performance at the expense of the debtor
3. equivalent performance
-grant of damages
Notes:
Article 1163
Every person obliged to give something is also obliged to
take care of it with the proper diligence of a good father
of a family, unless the law or the stipulation of the
parties requires another standard of care.
14
This article involves the prestation “to give.” The word
“some- thing” connotes a determinate object which is
definite, known, and has already been distinctly
decided and particularly specified as the matter to be
given from among the same things belonging to the
same kind.
Article 1164
The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he
shall acquire no real right over it until the same has
been delivered to him.
This article involves the prestation “to give.” After the
right to deliver the object of the prestation has arisen
in favor of the creditor but prior to the delivery of the
same, there is no real right enforceable or binding
against the whole world over the object and its fruits
in favor of the person to whom the same should be
given. The acquisition of a real right means that such
right can be enforceable against the whole world and
will prejudice anybody claiming the same object of the
prestation. The real right only accrues when the thing
or object of the prestation is delivered to the creditor.
He only has a personal right over the same if it is
enforceable only against the debtor who is under an
obligation to give. This means that the personal right
of the creditor can be defeated by a third person in
good faith who has innocently acquired the property
prior to the scheduled delivery regardless of whether
or not such third person acquired the property after
the right to the delivery of the thing has accrued in
favor of the creditor. In this case, however, the
aggrieved creditor can go against the debtor for
damages as the debtor should have known that the
fruits should have been delivered to the creditor alone
Illustration:
For example, on February 1, 1990, A buys a mango
orchard from X to be delivered on March 1, 1990. On
the latter date, A shall have the right to the fruits of the
mango orchard. If the property is delivered only on
April 1, 1990, A can nevertheless ask that the fruits
accruing since March 1, 1990 be likewise delivered to
him. X cannot resist by saying that he is entitled to the
fruits before the actual delivery on April 1, 1990. If,
however, X sells the fruits on March 20, 1990 to B who
does not know the previous sale to A and who
immediately takes possession of the fruits, B shall have
a better right over the said fruits. Considering that
there is no delivery of the property to A on March 20,
1990, A has no real right over the said property at that
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time binding upon the whole world. A’s remedy is to
seek damages from X in connection with the fruits. If
however, the mango orchard has already been
delivered, A already has a real right binding upon the
whole world. If X sells to B the fruits after delivery to
A, A can recover from B who in turn can seek damages
from X.
Article 1165
This provision involves the prestation “to give.” The
object of the prestation can either be determinate or
generic. A generic object can be any object belonging
to the same kind. In the event that there is non-
delivery of a generic thing, the creditor may have it
accomplished or delivered in any reasonable and legal
way charging all expenses in connection with such
fulfillment to the debtor. The creditor can ask a third
party to deliver the same thing of the same kind with
all the expenses charged to the debtor.
In case of non-delivery of a determinate thing, the
remedy is to file an action to compel the debtor to
make the delivery. This action is called specific
performance. If the debtor is guilty of fraud,
negligence, delay or contravention in the performance
of the obligation, the creditor can likewise seek
damages against the debtor.
A fortuitous event is an event which “could not be
foreseen, or which though foreseen, were inevitable.”6
As a general rule, a debtor is relieved from his
obligation “to give” if the object of such prestation is
lost through a fortuitous event.
The last paragraph of Article 1165 however provides
that a fortuitous event will not excuse the obligor from
his obligation in two cases namely:
1) if the obligor delays; and
2) if he has promised to deliver the same thing to
two or more persons who do not have the
same interest.
In both cases, the obligor will be liable for damages or
will be bound to replace the lost object of the
prestation in cases when the obligee agrees to the
replacement.
How do you comply with the obligation?
If the source of the obligation is the LAW, then the
provisions of the law would provide how this source of
obligation can be complied with.
If it is a CONTRACT, then the stipulation provide how
the contract shall be complied with.
15

If it is an obligation to give, what is the manner of
compliance?
It depends on what is to be given, whether it is a
determinate thing or an indeterminate thing.
than the law, is the stipulation of the parties would
require a higher degree of diligence. In the absence of
a law or a stipulation to that effect, the diligence of a
good father of a family should be observed.

Can there be a valid obligation to deliver a generic

thing?
Yes. This may arise from law and not from a contract
of sale. Sale of a car or of a horse cannot be considered
a valid sale. But a testamentary provision in a will
which is a generic thing is valid disposition. The law
expressly allows this.

A testamentary provision giving an heir a car, is the

testamentary provision allow the heir to reject the
disposition?
He may validly reject or wrongfully reject the
disposition. For obligations to deliver a generic thing,
the debtor cannot deliver a thing which is of inferior
kind, but neither can the creditor demand a thing
which is of superior quality.

However, what is superior or inferior is a very

subjective determination. What may be superior to me
may be inferior to most of you.

Therefore if the purpose of the testator is to give his

car is to allow the grandson to use the car in
competitions, then a car insufficient to perform in race
tracks is improper. Moreover, aside from the purpose
is the value of the estate which should not impair the
legitime of the estate.

In obligations to give a determinate thing, what is

the manner of compliance?
The primary obligation of a debtor is to give the very
same thing which he promised to deliver.

In an obligation to deliver a Kia Pride, the debtor

offered to deliver a BMW, can the obligation be
validly extinguished?
Yes, though the creditor cannot be compelled to
accept, he may however want to accept. Thus, the
obligation will be extinguished.

Article 1167
Is there an exception where a debtor is obliged to If the person obliged to do something fails to do it, the
deliver a thing requires a different kind of diligence same shall be executed at his cost.
in taking care of the thing other than a good father
of a family? This same rule shall be observed if he does it in
Yes, if the law requires a higher degree of diligence contravention of the tenor of the obligations.
such as what is required of common carriers. Other
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Furthermore, it may be decreed that what has been
poorly done be undone.
Article 1168
When the obligation consists in not doing and the
obligor does what has been forbidden, it shall also be
undone at his expense.
The articles deal with the obligations “to do” and “not
to do.” The creditor can ask any third person to
perform the obligation due from the debtor should the
latter fail to do the same. The debtor will be liable for
all expenses in connection with the performance or
fulfillment of the obligation undertaken by the third
person. The words “at his cost” imply both the right to
have somebody else perform the obligation and the
right to charge the expenses thereof to the debtor.
With respect to the situation wherein the debtor
poorly undertook the obligation, the creditor has the
right to have everything be undone at the expense of
the debtor. The reason for this rule is to prevent the
debtor from taking his obligation lightly. He must
exercise due diligence and prudence to see to it that
the prestation is properly performed. In case the
prestation is for the debtor not to do a particular act or
service and he nevertheless performs it, it shall
likewise be undone at his own expense.
In Chaves vs. Gonzales where the repairer of a
typewriter, upon demand of the owner, returned the
typewriter with missing parts and without having it
repaired, and where the owner had another company
fix the typewriter, the Supreme Court ruled that the
original repairer can be held liable not only for the
missing parts but also for the cost of the execution of
the obligation of repairing the typewriter by another
company, thus:
Because the plaintiff appealed directly to the Supreme
Court and the appellee did not interpose any appeal,
the facts, as found by the trial court, are now
conclusive and non-reviewable.
The appealed judgment states that the plaintiff
delivered to the defendant x x x a portable typewriter
for routine cleaning and servicing; that the defendant
was not able to finish the job after some time despite
repeated reminders made by the plaintiff; that the
defendant merely gave assurances, but failed to
comply with the same; and that after getting
exasperated with the delay of the repair of the
typewriter, the plaintiff went to the house of the
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defendant and asked for its return, which was done.
The inferences derivable from these findings of fact
are that the appellant and the appellee had a perfected
contract for cleaning and servicing a typewriter; that
they intended that the defendant was to finish it at
some future time although such time was not
specified; and that such time had passed without the
work having been accomplished for the defendant
returned the typewriter cannibalized and unrepaired,
which itself is a breach of his obligation, without
demanding that he be given more time to finish the
job, or compensation for the work he had already
done. The time for compliance having evidently
expired, and there being a breach of contract by non-
performance, it was academic for the plaintiff to have
first petitioned the court to fix a period for the
performance of the contract before filing his complaint
in this case. Defendant cannot invoke Article 1197 of
the Civil Code for he virtually admitted non-
performance of the contract by returning the
typewriter that he was obliged to repair in a non-
working condition, with essential parts missing. The
fixing of a period would thus be a mere formality and
would serve no purpose than to delay. It is clear that
the defendant-appellee contravened the tenor of his
obligation because he not only did not repair the
typewriter but returned it “in shambles,” according to
the appealed decision. For such contravention, as
appellant contends, he is liable under Article 1167 of
the Civil Code, jam quot, for the cost of he execution of
the obligation in a poor manner. The cost of the
execution of the obligation in this case should be the
cost of the labor or service expended in the repair of
the typewriter, which is in the amount of P58.75
because the obligation or contract was to repair it.
In addition, the defendant-appellee is likewise liable,
under Article 1170 of the Code, for the cost of the
missing parts, in the amount of P31.10, for in his
obligation to repair the typewriter he was bound, but
failed or neglected to return it in the same condition it
was when he received it.
Kinds of Civil Obligations
1. As to Perfection & Extinguishment
17
 a. Pure
-obligations whose performance does not
depend upon a future or uncertain event or
upon a past event unknown to the parties is
demandable at once.
b. Conditional
-obligations in which 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.
c. With a term or period
-obligations whose fulfillment a day certain
has been fixed, shall be demandable only
when that day comes.
PURE 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.
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.
Topic: Uncertainty of the time of fulfillment of the
obligation
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Smith Bell v. Sotelo Matti
Doctrines:
1. As no definite date was fixed for the delivery of
goods, the term which the parties attempted to
establish being so uncertain, that one cannot tell
whether as a matter of fact, the aforesaid goods
could, or could not be imported into Manila, the
obligation must be regarded as conditional and
not one with a term
2. Where the fulfillment of the condition does not
depend on the will of the obligor, but on that of a
3rd person who can, in no way be compelled to
carry it out, the obligor's part of the contract is
complied with, if he does all that is in his power,
& it then becomes incumbent upon the other
contracting party to comply with the terms of the
contract.
Topic: Validity and fulfillment cannot be left to the
exclusive will of the lessee
Encarnacion v. Baldomar
Doctrine:
The continuance and the performance of the contract
of lease cannot be made to depend solely and
exclusively upon the free and uncontrolled choice of
the lessees between continuing paying rentals or not,
completely depriving the owner of all the say in the
matter.
Eleizegui v. Lawn Tennis Club
Article 1581 of the Civil Code, fixing legal terms for
leases in which no conventional term is stipulated, has
no application to a lease whose termination is
expressly left to the will of the lessee.
Lim v. People
It is clear in the agreement, Exhibit “A”, that the
proceeds of the sale of the tobacco should be turned
over to he complainant as soon as the same was sold,
or, that the obligation was immediately demandable as
soon as the tobacco was disposed of. Hence, Article
1197 of the New Civil Code, which provides that the
courts may fix the duration of the obligation if it does
not fix a period, does not apply.
Philbanking v. Lui She
Article 1308 of the Civil Code creates no impediment
to the insertion in a contract for personal services of a
resolutory condition permitting the cancellation of the
contract by one of the parties. Such a stipulation does
not make either the validity or the fulfillment of the
18
contract dependent upon the will of the party to whom
is conceded the privilege of cancellation; for where the
contracting parties have agreed that such option shall
exist, the exercise of the option is as much in the
fulfillment of the contract as any other act which may
have been the subject of the agreement. Indeed, the
cancellation of a contract in accordance with
conditions agreed upon beforehand is fulfillment .
A lease to an alien for a reasonable period is valid. So is
an option giving an alien the right to buy real property
on condition that he is granted Philippine citizenship.
Aliens are not completely excluded by the Constitution
from the use of lands for residential purposes. Since
their residence in the Philippines is temporary, they
may be granted temporary rights such as a lease
contract which is not forbidden by the Constitution.
Should they desire to remain here forever and share
our fortune and misfortune, Filipino citizenship is not
impossible to acquire.
that the parties reserved to themselves the faculty of
agreeing upon the period of the renewal contract. The
second paragraph of Article 1197 is equally clearly
inapplicable since the duration of the renewal period
was not lef t to the will of the lessee alone, but rather
to the will of both the lessor and the lessee. Most
importantly, Article 1197 applies only where a
contract of lease clearly exists. Here, the contract was
not renewed at all, there was in fact no contract at all
the period of which could have been fixed.
It follows that the respondent judge’s decision
requiring renewal of the lease has no basis in law or in
fact. Save in the limited and exceptional situations
envisaged in Articles 1197 and 1670 of the Civil Code,
which do not obtain here, courts have no authority to
prescribe the terms and conditions of a contract for
the parties.

Araneta v. Phil. Sugar Estates

Where the issue raised in the pleadings was whether
the seller of the land was given in the contract of sale a
reasonable time within which to construct the streets
around the perimeter of the land sold, the court, in an
action for specific performance to compel the
construction of said. streets or for recovery of'
damages, cannot fix a period within which the seller
should construct the streets. The court should
determine whether. the parties had agreed that the
seller should have reasonable time to perform its part
of the bargain. If the contract so provided, then there
was a period fixed, a "reasonable time", and all that the
court should have done was to determine if that
reasonable time had already elapsed when the suit
was filed. If it had passed, then the court should'
declare that the petitioner had breached the contract,
as averred in the complaint. and fix the resulting
damages. On the other hand, if the reasonable time had
not yet elapsed, the court perforce was bound to
dismiss the action for being premature. But in no case
can it be logically held that, under the pleadings, the
intervention of the court to fix the period for
performance was warranted, for Article 1197 of the
New Civil Code is precisely predicated. on the absence Suspensive condition
of any period fixed by the parties. 1. A obligates himself to give B P100,000 if the
Millare v. Hernando latter gets married to C.
The first paragraph of Article 1197 is clearly
inapplicable, since the Contract of Lease did in fact fix 2. X obligates himself to give to Y a certain house
an original period of five years, which had expired. It is and lot if the latter passes the bar
also clear from paragraph 13 of the Contract of Lease examinations in his first attempt.
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Resolutory condition
1. When a person donates a parcel of land to the
City of Manila subject to the condition that it
shall be transformed into a public park within
a period of one year
2. In case a person sells a parcel of land with the
right of repurchase
Potestative condition whose fulfillment depends
exclusively upon the will of the debtor
1. Obligor subscribed to 200 shares of capital
stock to a certain college subject to the
condition that she will pay as soon as she had
harvested fish from her fishpond
2. If the debtor binds himself to deliver to the
creditor a certain car by end of December
provided he is in the mood to do so
*If however, the debtor binds himself to pay a previous
indebtedness of P2,000 to the creditor by the end of
December provided he is in the mood to do so, although
the condition is void on the ground that its fulfillment
depends exclusively upon the will of the debtor, the
obligation itself is not void since it refers to a pre-
existing indebtedness.
The rule on potestative (debtor) conditions is
applicable only when the obligation shall depend
for its PERFECTION upon the fulfillment of the
condition and NOT when there is a pre-exisiting one.
Casual Condition
1. If the obligor promises to deliver his car to the
obligee if a certain candidate is elected to the
position of President of the Philippines in
2016, the obligation is valid because the
fulfillment of the condition to which it is
subject depends upon the will of others.
2. If the obligor promises to give P10,000 to the
obligee after the lapse of 2 years, provided
that during such period war shall not break
out between Russia and the United States.
Mixed condition
1. Where the payment of the balance of the
purchase price of a house and lot is subject to
the condition that the premises shall be
vacated by the occupant and that the vendee
shall see to it that the said premises shall be
vacated.
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2. Where the debtor promises to pay his debts to
the creditor as soon as he shall have received
funds derived from the sale of his house
Impossible condition
If A obligates himself to pay to B P100,000 if the latter
can contact the inhabitants of Mars
Contrary to law, food customs and public policy
1. If C promises to give D a parcel of land if the
latter secures a divorce from his wife
2. If E binds himself to deliver to F a car if the
latter will go with him around the world on a
trial honeymoon.
Divisible obligation
If A and B enter into an agreement whereby the former
binds himself to give P5,000 to the latter in 2 equal
installments, the 1st installment to be given if the latter
is able to dispose of illegal drugs belonging to the
former and the 2nd installment to be given if the latter
gets married to C.
Since the obligation if divisible, that part (2 nd part)
which is not affected by the unlawful condition shall be
valid.
Positive Condition
A binds himself to give B P5,000 if the latter passes the
bar exam in his first attempt and B flunks the exam,
the obligation is extinguished.
X binds himself to give a new car to Y if the latter gets
married to Z within a period of 5 years from the time
of the constitution of the obligation, and at the
expiration of 5 years, Y had not yet complied with the
condition, the obligation is extinguished.
Negative Condition
X binds himself to give P5,000 to Y provided that the
latter shall not get married before reaching the age of
25. If B is not yet married at the age of 25, the
obligation become effective.
Article 1186
The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment
20
Doctrine of Constructive Fulfillment (of Suspensive convenience, considers the fruits and interests as the
Conditions) equivalent of each other.

In order that this doctrine can be applied, it is
however, necessary that the obligor must have
actually prevented the obligee from complying with
the condition, and that such prevention must have
been voluntary of willful in character.
Illustration:
Where the conditions which are imposed by a certain
company in order that its employees will be entitled to
retirement benefits can no longer be complied with
because the retirement or pension plan was willfully
abrogated by a unilateral act of the Board of Directors
of the company, it was held that such conditions are
deemed complied with; consequently, such employees
are entitled to retirement benefits.
When the obligation is UNILATERAL
Since the obligor or debtor does not receive any
equivalent or valuable consideration from the obligee
or creditor, it is but logical that he shall be entitled to
all of the fruits or interests of the thing pending the
fulfillment of the condition, unless there is contrary
intention on his part.
If A had obligated himself to give to B a parcel of land if
the latter gets married to C, and the condition is
fulfilled only after 2 years from the time of the
constitution of the obligation, he shall be obligated to
deliver only the land and not the fruits which he may
have gathered or received therefrom during the
pendency of the condition.

Article 1188
If the obligor has promised in writing to sell a parcel of
land to the obligee upon the happening of a certain
condition, and subsequently, before the fulfillment of
the condition, he changes his mind and finally decides
to sell the land to another person, the obligee can
bring an appropriate action such as a petition for the
issuance of a writ of injunction, to prevent the sale in
order to preserve his right.

Retroactive effect
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

A obligated himself to sell a certain parcel of land to B

for P100,000 subject to a condition of a suspensive
character, and such condition was fulfilled 2 years
after the perfection of the contract.

A literal application of the principle of retroactivity

would have the effect of compelling A to deliver to B
not only the land, but also all of the fruits which he
may have gathered or received therefrom during the
time of perfection of the contract to the time of the
fulfillment of the condition.

As far as B is concerned, it would have the effect of 2. As to Plurality of Prestation

compelling him to pay to A not only the P100,000, but a. Conjunctive
also the interest thereon during the same period. b. Alternative
c. Facultative
But because of the reciprocal character of the
obligation, the law, as a matter of justice and Conjunctive (“and”)
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-debtor must perform more than one prestation another or two or more other obligations to be
-no right to choose because all must be performed performed.

Alternative (“or”) In alternative obligations, if there was already a

-debtor must perform any of the several prestations
-right of choice generally belongs to the debtor unless
given to the creditor or 3rd person
Facultative
-only one thing is due but the debtor has reserved the
right to substitute it with another
-right to choose always belongs to the debtor
communication of a choice. By then the obligation is
converted into a simple obligation and the one chosen
was the one impossible to perform especially if it is
due to a fortuitous event. As such, the obligation is
extinguished. If there was already a communication of
a choice but what become impossible was the other
prestation which was not chosen, the obligation is not
extinguished.

Alternative Facultative In facultative obligations, it depends on whether

As to the Effect of Fortuitous Loss there is already substitution at the time of the
Only the impossibility of Impossibility of the impossibility of the performance of one of the
all the prestations due principal prestation is prestation. If before substitution the impossibility of
without the fault of the sufficient to extinguish one of the obligation becomes impossible to perform
debtor extinguished the the obligation, even if the due to a fortuitous event, the obligation is
obligation substitute is possible. extinguished. But if one of the obligation become
impossible to perform due to the fault of the debtor,
As to Choice the obligation is not extinguished (debatable on the
Right to choose MAY be Only the debtor can second scenario).
given to the creditor choose the substitute
If in facultative obligation what was lost or became
As to Nature
impossible to perform was the substitute prestation
Various prestations all of Only the principal
and there was no substitution yet at the time of the
which constitute parts of prestation constitutes the
loss, the obligation is not extinguished because the due
the obligation obligation, the accessory
prestation was the principal prestation.
being only a means to
facilitate payment.
B’s car was lost due to the fault of the debtor, what are
the remedies of the creditor?
As to Effect of the Nullity of Prestations
Nullity of one of the Nullity of the principal It depends on who has the right to choose. If it shows
prestation does not prestation invalidates the that the choice is not expressly granted to the creditor,
invalidate the obligation, obligation. the right of choice pertains to the debtor. Under the
which is still in force with law it was provided that the choice is with the debtor,
respect to those which unless otherwise expressly granted to the creditor.
have no vice.
If the choice is with the debtor, even if it was due to his
fault, he has other prestations to choose from without
In multiple prestations where one of the prestation is being held liable for damages. Anyway, there is no due
impossible to perform even if the other prestation still prestation because the debtor has not made a choice
are possible to perform, may the obligation be yet.
considered to have been extinguished?
If however in alternative obligations, the first two
It depends on the kind of obligation involved. It may prestations become impossible to perform due to the
be a conjunctive obligation, alternative obligation, and fault of the debtor, and the remaining prestation
facultative obligation. becomes impossible to perform due to a fortuitous
event. Can the debtor be held liable for damages?
In conjunctive obligations, the impossibility of
performance of one will not result in the The debtor can be held liable if this is the choice of the
extinguishment of the obligation because there is creditor. However, if the choice is with the debtor, he
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cannot be held liable for damages even if the loss of
the last remaining prestation was due to a fortuitous
event. This is because the debtor diminished the
possibility of the performance of the obligation and
secondly he was at fault therefore he can be held liable
for damages under Art. 1170. However, the provisions
in Art. 1170 presupposes a simple obligation, and thus
not applicable in the present case to make the debtor
liable. Secondly, even if the obligation has diminished
the performance of the obligation imputable to the
debtor, he cannot be held liable because it can be
considered as his choosing to make the first two
prestations impossible to perform, and the last
prestation be considered as his choice. The last though
lost due to fortuitous event, cannot make the debtor
liable.
Art. 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.
The horse died due to the fault of the debtor, this
time the creditor has the right to choose. What are
the rights of the creditor?
He can choose from one of the remaining prestations
or choose the prestatation which was lost due to the
fault of the debtor.
If the creditor choose to demand for the value of the
obligation which was lost due to the fault of the
debtor, the debtor can be held liable for damages.
If the creditor chose to compel performance through
the remaining prestations, the debtor cannot be held
liable for damages.
The horse was lost due to the fault of the debtor,
then after the second prestation was also lost due to
the fault of the debtor, and thirdly a book was lost
due to the fault of the debtor. What is the extent of
the liability of the debtor under the foregoing
circumstances? Can the creditor choose for the
value for any of the three prestations?
It depends on who has the right to choose. If the
creditor has the right of choice, he can choose on the
value of any of the three prestations.
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But if the choice is with the debtor, the liability will be
based on the value of the prestation which was lost
last due to his fault.
Qualification in Alternative Obligation: If one of the
prestations become impossible to perform due to the
fault of the debtor, and the choice is with the creditor:
The creditor can either demand for the value of the
prestation with damages or he can demand for the
performance of one of the remaining prestations
without damages.
Second view: If the creditor can demand for the
performance of one of the remaining prestations, the
creditor may opt to demand for the value of the thing
which was lost due to the fault of the debtor. In this
instance under alternative obligations, it is possible
that the debtor is not the owner of the horse. In
alternative obligations the debtor is not sure whether
he can deliver the horse or not. if the horse was owned
by the creditor, as such he can seek damages. If the
thing lost was owned by the debtor as a valid premise,
the debtor cannot be held liable for damages. In
alternative obligations it must be remembered that the
prestation may either be owned by the debtor or not.
Facultative obligations
In facultative obligations it is improper to say that
there is only one prestation. For how could it be
considered to fall in obligations with multiple
prestations if there is only one prestation involved.
Rather it is better to say that there is only one
prestation due in a facultative obligation. At any given
point in time there can only be one prestation due
unlike the other prestations.
When will the obligation in facultative obligation
become due?
If there is already a communication of the
substitution.
If the principal prestation before substitution
became impossible to perform due to the fault of the
debtor , can the creditor demand to perform the
substitute prestation?
No. This is because in facultative obligation, the choice
is always with the debtor. The remedy of the creditor
is to demand for damages.
23
If before substitution, it became impossible to
perform due to the fault of the debtor, can the
debtor be held liable for damages by the creditor?

The debtor cannot be held liable for damages because

that was not the due prestation. The debtor will bear
the lost, but he cannot be held liable for damages.

When can the debtor make the substitution?

The debtor can make the substitution at any time.

Can the debtor make the substitution if the debtor is

already in delay?
No. Why should the law allow the debtor to make
substitution is he is already in delay. If he is already in
delay he can already be liable for damages. There is no
sense to give him a right if he is already liable for
damages.

If the obligation is already impossible, can the

debtor make a substitution?
No. For how can the debtor make a substitution if the
obligation is already impossible, unless it was really
the agreement or the intention of the parties.
Otherwise, it is considered simply as an obligation
with a penal clause. Upon non-compliance with the
obligation, the debtor can be compelled to perform the
other prestation or the accessory undertaking.

Is the substitute prestation agreed upon by the

parties?
Yes. There can never be a valid facultative obligation
when the substitute prestation has not been agreed
upon. Otherwise if the debtor has the right to make a
substitution without the substitute prestation having
been agreed upon, it may be prejudicial to the creditor
because such will give the right to the debtor to deliver
an inferior prestation.

Villaroel v. Estrada
Whether or not the right to prescription may be waived
or renounced.

As a general rule, when a debt has already prescribed,

it cannot be imposed by the creditor. However, a new
contract which recognizes and assumes the prescribed
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debt is an exception, for it would be valid and
enforceable. Hence, a person who acknowledges the
correctness of the debt and promises to pay it despite
knowing that the debt has already prescribed, such as
the case at bar, waived the benefit of the prescription.
Ansay v. NDC
Whether or not the Christmas bonus is demandable.
The Christmas bonus is not demandable. Appellants
admit that appellees are not under legal obligation to
give such claimed bonus and such grant only arises
from a moral obligation or natural obligation.
However, natural obligation is only enforceable with
the presence of the element of voluntary fulfillment by
the obligor. In the case at bar, there has been no
voluntary performance on the part of the appellees.
DBP v. Confesor
Whether or not a promissory which was executed in
consideration of a previous promissory note which has
already been barred by prescription is valid.
Yes, the second promissory note is valid because the
said promissory note is not a mere acknowledgement
of the debt that has prescribed already. Rather, it is a
new promise to pay the debt. A new promise is a new
cause of action. Although a debt barred by prescription
is unenforceable, a new contract recognizing and
assuming the prescribed debt would be valid and
enforceable.
Cruz v. Tuason
As requested by the Deudors, the family of Telesforo
Deudor who laid claim in question on the strength of
an informacion posesoria, Cruz made permanent
improvements on the said land having an area of more
or less 20 quinones.
The improvements were valued at P30,400 and for
which he incurred expenses amounting to P7,781.74
In 1952, Tuason & Co. availed of Cruz’ services as an
intermediary with the Deudors, to work for the
amicable settlement in a civil case. The said case
involved 50 quiones of land, of which the 20 quiones of
land mentioned formed part.
A compromise agreement between the Deudors and
Tuason & Co. was entered into on 1963 which was
approved by court.
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Cruz alleged that Tuason & Co. promised to convey
him the 3,000 sq. meters of land occupied by him
which was part of the 20 quiones of land within 10
years from the date of signing of the compromise
agreement between the Deudors and the latter as
consideration of his services. The said land was not
conveyed to him by Tuason & Co.
Cruz further alleged that Tuason & Co. was unjustly
enriched at his expense since they enjoyed the benefits
of the improvements he made on the land acquired by
the latter.
The trial court dismissed the case on the ground that
there was no cause of action. Hence, this appeal.
ISSUE: Whether or not a presumed quasi-contract be
emerged as against one part when the subject matter
thereof is already covered by a contract with another
party.
HELD: From the very language of this provision, it is
obvious that a presumed qauasi-contract cannot
emerge as against one party when the subject mater
thereof is already covered by an existing contract with
another party. Predicated on the principle that no one
should be allowed to unjustly enrich himself at the
expense of another, Article 2124 creates the legal
fiction of a quasi-contract precisely because of the
absence of any actual agreement between the parties
concerned. Corollarily, if the one who claims having
enriched somebody has done so pursuant to a contract
with a third party, his cause of action should be against
the latter, who in turn may, if there is any ground
therefor, seek relief against the party benefited. It is
essential that the act by which the defendant is
benefited must have been voluntary and unilateral on
the part of the plaintiff. As one distinguished civilian
puts it, "The act is voluntary. because the actor in
quasi-contracts is not bound by any pre-existing
obligation to act. It is unilateral, because it arises from
the sole will of the actor who is not previously bound
by any reciprocal or bilateral agreement. The reason
why the law creates a juridical relations and imposes
certain obligation is to prevent a situation where a
person is able to benefit or take advantage of such
lawful, voluntary and unilateral acts at the expense of
said actor." In the case at bar, since appellant has a
clearer and more direct recourse against the Deudors
with whom he had entered into an agreement
regarding the improvements and expenditures made
by him on the land of appellees. It Cannot be said, in
25
the sense contemplated in Article 2142, that appellees
have been enriched at the expense of appellant.
Gutierrez v. Orense
Whether or not Orense is bound by his nephew Duran’s
act of selling the former’s property
Yes. It was proven during trial that he gave his consent
to the sale. Such act of Orense impliedly conferred to
Duran the power of agency. The principal must
therefore fulfill all the obligations contracted by the
agent, who acted within the scope of his jurisdiction.
Adille v. CA
Whether or not a co-owner may acquire exclusive
ownership over the property held in common.
Whether or nor Rustico had constituted himself a
negotiorum gestor
HELD: No. The right to repurchase may be exercised
by a co-owner with respect to his share alone.
Although Rustico Adille redeemed the property in its
entirety, shouldering the expenses did not make him
the owner of all of it.
Yes. The petitioner, in taking over the property, did so
on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Art
2144 of the Civil Code, or for his exclusive benefit, in
which case, he is guilty of fraud, and must act as
trustee, the respondents being the beneficiaries,
pursuant to Art 1456.
Andres v. Mantrust
Whether or not the private respondent has the right to
recover the second $10,000 remittance it had delivered
to petitioner
HELD: Yes. Art 2154 of the New Civil Code is
applicable. For this article to apply, the following
requisites must concur: 1) that he who paid was not
under obligation to do so; and 2) that payment was
made by reason of an essential mistake of fact.
There was a mistake, not negligence, in the second
remittance. It was evident by the fact that both
remittances have the same reference invoice number.
Puyat & Sons v. Manila
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Whether or not the defendant is obliged to refund the
amount which the plaintiff paid
HELD: Yes. The plaintiff was actually exempted from
paying the tax assessed, hence, it was clearly an error
or mistake which makes it fall under Art 2154 of
solutio indebiti. Art 2154 provides that if something is
received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation
to return it arises.
Alongside with this, Art 2156 is also applicable which
states that if the payer was in doubt whether the debt
was due, he may recover if he proves that it was not
due. Plaintiff had duly proved that taxes were not
lawfully due. Therefore, there is no doubt that the
provisions of solution indebiti apply in this case.
Sagrada v. NACOCO
Whether or not the defendant is obliged to pay rentals
to the plaintiff
HELD: No. Nacoco is not liable to pay rentals prior the
judgment. If defendant-appellant is liable at all, its
obligations, must arise from any of the four sources of
obligations, namley, law, contract or quasi-contract,
crime, or negligence. (Article 1089, Spanish Civil
Code.) Defendant-appellant is not guilty of any offense
at all, because it entered the premises and occupied it
with the permission of the entity which had the legal
control and administration thereof, the Allien Property
Administration. Neither was there any negligence on
its part.
People’s Car v. Commando Security
Whether or not the defendant is obliged to indemnify
the plaintiff for the entire costs as result of the incident
HELD: Yes. Plaintiff was in law liable to its customer
for the damages caused the customer’s car, which had
been entrusted into its custody. Plaintiff therefore was
in law justified in making good such damages and
relying in turn on defendant to honor its contract and
indemnify it for such undisputed damages, which had
been caused directly by the unlawful and wrongful
acts of defendant’s security guard in breach of their
contract.
Plaintiff in law could not tell its customer that under
the Guard Service Contract it was not liable for the
damage but the defendant since the customer could
not hold defendant to account for the damages as he
had no privity of contract with defendant.
26

Cangco v. MRR
Whether or not there was a contributing negligence on
the part of the plaintiff.
HELD: In determining the question of contributory
negligence in performing such act – that is to say,
whether the passenger acted prudently or recklessly –
the age, sex, and physical condition of the passenger
are circumstances necessarily affecting the safety of
the passenger, and should be considered.
The place was perfectly familiar to the plaintiff as it
was his daily custom to get on and off the train at the
station. There could, therefore, be no uncertainty in his
mind with regard either to the length of the step which
he was required to take or the character of the
platform where he was alighting. The Supreme Court’s
conclusion was that the conduct of the plaintiff in
undertaking to alight while the train was yet slightly
under way was not characterized by imprudence and
that therefore he was not guilty of contributory
negligence.
Thus, the same act, which constitutes a breach of
contract can also be the source of an extra-contractual
obligation, had no contract existed.
In a breach of contract, there is a presumption of
negligence on the part of the defendant once the
breach is established. On the other hand, there is no
such presumption of negligence in quasi-delict.
The Supreme Court reversed the decision of the lower
court holding that it was important to note that the
foundation of the legal liability of the defendant was
the contract of carriage, and that the obligation to
respond for the damage which plaintiff has suffered
arises, if at all, from the breach of that contract by
reason of the failure of defendant to exercise due care
in its performance. That was to say, its liability was
direct and immediate, differing essentially, in legal
viewpoint from that presumptive responsibility for the
negligence of its servants, imposed by article 1903 of
the Civil Code, which can be rebutted by proof of the
exercise of due care in their selection and supervision.
Article 1903 of the Civil Code is not applicable to
obligations arising ex contractu, but only to extra-
contractual obligations, or to use the technical form of
expression, that article relates only to culpa aquiliana
and not to culpa contractual.
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Gutierrez v. Gutierrez
Whether or not both the driver of the truck and
automobile are liable for damages and indemnification
due to their negligence. What are the legal obligations
of the defendants?
HELD: Bonifacio Gutierrez’s obligation arises from
culpa aquiliana. On the other hand, Saturnino Cortez’s
and his chauffeur Abelardo Velasco’s obligation rise
from culpa contractual.
The youth Bonifacio was na incompetent chauffeur,
that he was driving at an excessive rate of speed, and
that, on approaching the bridge and the truck, he lost
his head and so contributed by his negligence to the
accident. The guaranty given by the father at the time
the son was granted a license to operate motor
vehicles made the father responsible for the acts of his
son. Based on these facts, pursuant to the provisions of
Art. 1903 of the Civil Code, the father alone and not the
minor or the mother would be liable for the damages
caused by the minor.
The liability of Saturnino Cortez, the owner of the
truck, and his chauffeur Abelardo Velasco rests on a
different basis, namely, that of contract.
Question: Are contracts and quasi-delicts mutually
exclusive?
Answer: No.
In Gutierrez vs. Gutierrez, there was a collision
between a bus and a car and a passenger of the bus
was injured. It was proven that the driver of the car
was a minor and an incompetent driver. The
passenger sued against them all. The Supreme Court
held that the bus driver, bus owner and the driver of
the car (through his father) are jointly and severally
liable to the passenger. The liability of the owner of the
bus and the bus driver rests on that of a contract. On
the other hand, the father is responsible for the acts of
his son and is therefore responsible for the negligence
of the minor.
Here, it is clear that breach of contract and quasi-delict
are separate.
However, they can overlap as can be seen in the
following example: Bus driver drives recklessly and
the bus hits a tree. A passenger is injured. The
passenger and sue the driver for quasi-delict (due to
negligence) or for crime or the bus company for
breach of contract of carriage or for quasi- delict
(negligence in the selection and supervision).
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HSBC-SRP v. Sps. Broqueza
FACTS:
Petitioners Gerong and Editha Broqueza are
employees of Hongkong and Shanghai Banking
Corporation (HSBC).
They are also members of HSBC, Ltd. Staff Retirement
Plan.
The Plan is a retirement plan established by HSBC
through its BOT for the benefit of the employees.
On Oct. 1, 1990, petitioner Broqueza obtained a car
loan in the amount of P175,000.00.
On Dec. 12, 1991, she again applied and was granted
an appliance loan in the amount of P24,000.00.
Petitioner Gerong, on the other hand applied and was
granted an emergency loan in the amount of
P35,780.00 on June 2, 1993.
The loans were paid through automatic salary
deductions.
A labor dispute arose between HSBC and its
employees.
Majority of HSBCs employees were terminated among
them the petitioners.
The employees filed an illegal dismissal case before
the NLRC against HSBC, which is now pending before
the CA.
Because of the dismissal, petitioners were not able to
pay the monthly amortizations of their respective
loans. They were considered delinquent. Demands to
pay were made.
On July 31, 1996, HSBCL-SRP filed a civil case against
the spouses. On Sept. 19, 1996, HSBCL-SRP filed
another civil case. Both suits were civil actions for
recovery and collection of sums of money.
The MeTC ruled that the nature of HSBCs demands for
payment is civil and has no connection to the ongoing
labor dispute.
The loans secured by their future retirement benefits
to which they are no longer entitled are reduced to
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unsecured and pure civil obligations. They are
immediately demandable.
The RTC reaffirmed the decision but the CA reversed
it.
On Aug. 6, 2007, HSBCL-SRP filed a manifestation
withdrawing the petition against Gerong because she
already settled her obligations.
ISSUE:
Whether or not the loans of the Sps. Broqueza is a pure
obligation and demandable at once even if they were
dismissed by HSBC.
HELD:
The RTC is correct in ruling that since the Promissory
Notes do not contain a period, HSBCL-SRP has the
right to demand immediate payment.
Art. 1179 of the NCC applies.
The spouses obligation to pay HSBCL-SRP is a pure
obligation because they do not contain a period. Once
Editha Broqueza defaulted in her monthly payment,
HSBCL-SRP made a demand to enforce a pure
obligation.
Despite the spouses Broquezas protestations, the
payroll deduction is merely a convenient mode of
payment and not the sole source of payment for the
loans.
HSBCL-SRP never agreed that the loans will be paid
only though salary deductions. The same never agreed
that if Editha Broqueza ceases to be an employee of
HSBC, her obligation to pay the loans will be
suspended.
HSBCL-SRP can immediately demand payment of the
loans anytime because the obligation to pay has no
period. Moreover, the spouses Broqueza have already
incurred in default in paying the monthly installments.
Finally, the enforcement of a loan agreement involves
debtor-creditor relation founded on contract and does
not in any way concern the employee relations. As
such it should be enforced through a separate civil
action in the regular courts and not before the Labor
Arbiter.
Pay v. Palanca
28
The promissory note indicated payment “upon
demand”. Petitioner relied on this to mean that
prescription would not lie unless there is demand
from them. The petition was filed fifteen years after its
issuance.

ISSUE
Whether or not a promissory note to be paid “upon
demand” is immediately due and demandable.

RULING
YES. 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 (Art. 1179 of the New Civil Code). The obligation
being due and demandable in this case, it would
appear that the filing of the suit after fifteen years was
much too late.

February 8, 2016
Make-up class

MODES OF EXTINGUISHMENT
Obligations are extinguished by:
1. Payment or performance
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2. Loss of the thing due likewise be extinguished by their mutual
3. Condonation or remission of the debt disagreement.
4. Confusion or merger of the rights of creditor and
debtor; Tolentino:
5. Compensation; As a rule, death does not extinguish the obligation.
6. Novation
Uribe:
Other causes of extinguishment of obligations such as This rule is only applicable in obligations arising from
Annulment, Rescission, Fulfillment of a resolutory contracts
condition, and Prescription, are governed elsewhere in
this Code. Article 1311
Obligations arising from contracts are transmissible
When the obligation involved is a conditional except when it involves purely personal obligations
obligation, where the condition is suspensive and the (which extinguishes the obligation)
fulfillment of the c is dependent on the sole will of the
debtor, will the discussion on dacion en pago a Is fortuitous event a mode of extinguishment?
relevant matter? NO. Though, it is relevant to loss of the thing due or
impossibility of its performance.
No. Article 1182
The obligation is void. Thus, a discussion on modes of In other words, fortuitous event per se, is not a mode
extinguishment is irrelevant. There can only be a of extinguishment simply because not every time there
relevant discussion of the modes if there is a valid is a fortuitous event that the obligation will be
obligation. extinguished.

Citizen’s Surety v. CA Is compromise agreement among the “other” modes of

In that case, Pascual Enterprises was saying that it extinguishment?
cannot be held liable under the Indemnity Agreement
because the execution of the Deed of Assignment was Uribe:
by way of dacion en pago which it extinguished its I cannot agree to that because it would fall under
obligation under the Indemnity Agreement. condonation or novation.

It turned out that the Indemnity Agreement and the

Deed of Assignment were executed on the very same Tolentino:
day. The implication is that the surety company at the Among the other modes, nullity of contracts
time the Deed of Assignment was executed was not yet
liable under the Suretyship agreement. Uribe:
I disagree. How can nullity of contracts be a mode of
In a Suretyship agreement, you will only be liable if the extinguished if there is no valid obligation?
principal debtor defaulted. Since it was executed on
the same day, there was no default yet. Thus, the
Indemnity Agreement is only to indemnify in case he
cannot pay in the Suretyship agreement.

Since there is no obligation to be extinguished at the

time the Deed of Assignment was executed, it cannot
be considered as dacion en pago. The SC ruled that the
Deed of Assignment is merely another security.
PAYMENT or PERFORMANCE
Saura v. DBP
Mutual desistance is also a mode of extinguishment. Payment is applicable to any kind of obligation. Even
obligations to do or not to do can be extinguished by
Rationale: If an obligation may arise from the mutual this mode because it is synonymous to performance.
agreement f the parties then an obligation may
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4 Rules:
1. Person who pays
2. Person to whom payment is made
3. Thing to be delivered or prestation to be
performed
4. Place, date, time, manner of payment
PAYOR (person who pays)
AB
X (3rd person)
Will an obligation be extinguished if an offer to pay
came from a 3rd person?
It depends on whether B will accept what was being
offered by X because the general rule is that the
creditor cannot be compelled to accept payment from
a third person unless it was stipulated.
P100,000
If X pays B, how much can X validly demand from A?
It depends on whether or not X has an interest in the
fulfillment of the obligation.
Who has an interest?
Those who are subsidiarily obliged have an interest –
pledgors, mortgagors, guarantors, sureties, one made
liable under a penal clause
If X DOES NOT have an interest, X can validly demand
from A to the extent that the latter has benefited.
If A couldn’t pay, can X foreclose the mortgage?
NO (Premise: He is a 3rd person who doesn’t have an
interest in the fulfillment of the obligation and the
payment was made without the knowledge or against
the will of A)
Under the law, he cannot foreclose because he will
never be subrogated in the rights of the creditor
therefore, he cannot exercise whatever right the
creditor had not only against the debtor but every one
of those subsidiarily liable.
If X HAS AN INTEREST and he pays B who accepted
the same. Can X foreclose the mortgage?
Yes, because upon payment he will be subrogated
because this is payment of a person who has interest.
Also, even if X does not have an interest in the
fulfillment of the obligation but when he made the
payment there was consent by A, there will also be
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subrogation. Thus, he can validly demand the entire
amount paid.
What if X and B agreed that upon payment he will be
subrogated?
As long as the payment of a 3 rd person who does not
have an interest was made without the knowledge or
against the will of the debtor, he will NOT be
subrogated even if X and B agreed upon or stipulated
otherwise.
X paid B without the intention of seeking
reimbursement. However, 2 weeks after, X demanded
from B the return of the amount he previously paid,
can he validly demand the return?
NO. The law expressly provides that B can retain the
amount paid. (indirect donation: void donation but
valid payment)
However, if X dies, A would have to return the entire
amount to the estate since the donation was void.
What if a 14-year old minor makes the payment, is it
valid? Can the creditor retain the amount paid?
No. Minor does not have a capacity.
What if the payment was made by a person suffering
from civil interdiction? Valid?
No, the payor must have free disposal of his
properties.
PAYEE (person to whom payment was made)
Payment shall be made to:
1. person in whose favor the obligation has been
constituted; or
2. his successor in interest, or
3. any person authorized to receive it
“in whose favor…”
-creditor
“successor in interest”
-heirs
“authority to receive payment”
-authority by law (sheriff, executors, administrators,
liquidators, receivers, etc)
-agents are creditors (but not in their own right)
*As long as you have the power to demand fulfillment,
you are considered as a creditor.
What if the payment was made to a wrong party?
31
General Rule: Void thus it will not extinguish the
obligation
Exceptions:
1. If it redounded to the benefit of the creditor
2. Payment made in good faith to a person in
possession of the credit
3. Payment was made to the creditor after the
assignment of credit to a 3rd person but without
knowledge of the assignment
“redounded to the benefit of the creditor”
XY
A Y assigned his interest to A but after the assignment, X
X is the debtor of Y but he made the payment to A. As
a general rule, it is void.
As a rule, X has the burden of proving that the
payment made to A redounded to the benefit of Y
Exceptions:
Article 1241
1. If Y ratified the payment;
2. If the payment was made to A because of the
acts of Y which led X to believe that A had the
authority to receive payment (estoppel)
3. If A acquired the rights of Y AFTER the payment
“made in good faith to a person in possession of the
credit”
XY
Promissory Note is with A (wrong party)
Nonetheless, A demanded payment from X who paid
the same. Will that extinguish the obligation of X to Y?
If the name indicated in the promissory note is Y’s
name (without any deed of assignment), then it will
not extinguish the obligation because it was not made
to a person in possession of the credit.
If the promissory note is payable to bearer, then the
obligation of X to Y shall be extinguished as long as
when X paid A, he did it in good faith. (because he paid
to a person in possession of the credit)
As long as X was not aware of the defect of the title of
A, it will extinguish his obligation to Y.
New SC case:
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Plaintiff was the one claiming ownership of the land
which was expropriated by NAPOCOR. SC ordered
NAPOCOR to pay, thereafter, A appeared claiming that
he is the real owner of the land. Can NAPOCOR again
be compelled to pay?
NO. because NAPOCOR paid X in good faith.
“made to the creditor after the assignment of credit
to a 3rd person but without knowledge of the
assignment”
XY
A
paid Y.
Will that extinguish to A even if it was made to a wrong
party?
Yes, as long as the payment was made AFTER the
assignment and without the knowledge of such
assignment.
What is A’s remedy, if any?
He can hold Y liable
X borrowed P20,000 to Y.
Thereafter, X offered to pay Y but only P10,000.
Y refused.
X met the 22-year old son of Y and he offered the
P10,000 to Y which Y accepted but the money which Y
accepted was lost.
How can Y validly demand from X? P20,000
This is clearly a payment to a wrong party and does
not fall under any of the exceptions.
2 Important Principles
1. Substantial Performance (Art. 1234)
Tuason v. Javier
32
 Legarda v. Saldañ a

Debt was payable in 10 years and the debtor

have already paid for 8 years. Thus the creditor
invoked rescission as a remedy.

Was rescission a valid remedy?

NO because there was already a substantial
performance

The remedy can be specific performance plus

damages

Azcona v. Jamandre
As agreed upon in a contract of lease, the amount to be
paid on an annual basis was P7,200. Lessee paid only
P7,000 evidenced by a receipt issued by the lessor “as
per contract”

The SC ruled that applying Article 1235, despite that

the payment was incomplete, the creditor accepted the
payment knowing its incompleteness and without
objection or protest, the obligation is deemed complied
with.

CONTRACTS

If 2 persons had an agreement, does that mean that

they entered into a contract?
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Not necessarily. Because there can be an agreement
but there is no obligation arising from the said
agreement.
Is “dation in payment” a contract?
No. It is a special form of payment, thus it is a mode of
extinguishment whereas a contract is a source of
obligation, it does not extinguish, it creates an
obligation.
Criticisms in the Definition
1. “to give something or to render some service”
Obligations not to do may also arise from
contracts such as obligation not to put up a fence
or obligation not to sell the products of a
competitor companies or not to convert a Honda
car into a taxi
2. “one binds himself with respect to another”
Most contracts would result to reciprocal
obligations; bilateral
3. “two persons”
Is it possible for a contract to be perfected with only
one person participating in the contract such as a
promissory note or a deed of sale?
Yes, in an auto-contract.
One person is responsible for the perfection but
this person is acting in two capacities: one he may
act on behalf of another and the other, on behalf of
himself or a third person
Example: Contract of Agency
If A authorized B to borrow money. May B
himself without the consent of A be the lender in
relation to this contract of loan?
Yes, the only requirement of law is that the
interest rate must be the current rate. Thus, B will
be signing for himself as a lender and also as the
borrower representing A.
Void auto-contracts (Article 1491)
Example: Contract of Sale
The guardian is the buyer and the property
involved belongs to his ward and the seller is also
the guardian representing the ward; the law
expressly provides that the following cannot
acquire by purchase. (void)
Fundamental Characteristics of Contracts
1. Consensuality
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2. Autonomy
3. Mutuality
4. Obligatory force
5. Relativity
Consensuality
For a contract to be valid under this principle, consent
must be freely and voluntary given. It’s not merely
consent.
Republic v. PLDT
The RP filed an action to compel PLDT to enter into an
inter-connection agreement.
During that time, PLDT has absolute monopoly in
telecommunications in the country. It also had
overseas monopoly except for the United States.
The SC held that the government cannot compel
anyone to enter into a contract because a contract
requires consent which must be voluntarily given.
The SC also ruled that the action can be an
expropriation proceeding.
Contract of Adhesion
A contract of adhesion is defined as one in which one
of the parties imposes a ready-made form of contract,
which the other party may accept or reject, but which
the latter cannot modify. One party prepares the
stipulation in the contract, while the other party
merely affixes his signature or his "adhesion" thereto,
giving no room for negotiation and depriving the latter
of the opportunity to bargain on equal footing.
It must be borne in mind, however, that contracts of
adhesion are not invalid per se. The one who adheres
to the contract is, in reality, free to reject it entirely; if
he adheres, he gives his consent.
Thus, even if only one is the “stronger party”, the other
still adhered to the terms and conditions thus it is
valid.
PAL case
A passenger’s luggage was lost so he sued PAL for
damages. PAL raised the defense that it can only be
liable for P100 because it was stipulated in the terms
and conditions. SC sustained.
Leal v. IAC
34
Real estate mortgage, the principal debtor defaulted
and he manifested his intention to redeem but the
mortgagee bank that there was a stipulation in the
contract that the mortgagor waived his right of
redemption. Despite the waiver, the SC held that yes
the mortgagor may redeem. The waiver is void
because it is contained in a contract of adhesion. (it
goes into the voluntariness of the act)
Autonomy
Article 1306
Acceleration clause
A provision in a contract or promissory note that if
some event (such as when the debtor fails to make any
one of the installment payment) occurs, then the
entire amount shall be due and demandable
Banco Filipino v. Navarro
Escalation clause
-it must be based on a valid or reasonable standard
Example: Contract of Loan
If the interest rate is dependent solely on the will of
the bank, then it is void.
If the interest rate is dependent on the market rate,
then it shall be valid. However, the BSP issued a
circular as far as the requirement for an escalation
clause to be valid is that:
1. It must be based on a valid and reasonable
standard;
2. There should be a de-escalation clause;
3. The clause can only be invoked (for the increase
in the rate) only once a year;
4. For the increase of the rate, the remaining
period in the contract must at least be 730 days
Tiu v. Platinum Plans
Non-involvement clause
Daisy Tiu (Asst. VP of Platinum Plans for the entire
Asia-Pacific Region) raised as a defense that the
stipulation is void because it is an unreasonable
restraint of trade.
The SC held that this is a valid stipulation because it is
a reasonable limitation on the rights of the employee
and protection on the part of the employer.
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Bar Question 1996
Alma was hired as a domestic helper in Hongkong by
the Dragon Services, Ltd., through its local agent. She
executed a standard employment contract designed by
the Philippine Overseas Workers Administration
(POEA) for overseas Filipino workers. It provided for
her employment for one year at a salary of
US$1,000.00 a month. It was submitted to and
approved by the POEA. However, when she arrived in
Hongkong, she was asked to sign another contract by
Dragon Services, Ltd. which reduced her salary to only
US$600.00 a month. Having no other choice, Alma
signed the contract but when she returned to the
Philippines, she demanded payment of the salary
differential of US$400.00 a month. Both Dragon
Services, Ltd. and its local agent claimed that the
second contract is valid under the laws of Hongkong,
and therefore binding on Alma. Is their claim correct?
Explain.
Their claim is not correct. A contract is the law
between the parties but the law can disregard the
contract if it is contrary to public policy. Just because a
contract is valid where it was executed doesn’t
necessarily follow that it will be valid here in the
Philippines.
Cui v. Arellano University
SC ruled that it is contrary to public policy.
Scholarships are granted on the basis of merit. It
should not be used to bolster the reputation of the
school. Since it is based on merit, even if the student
will transfer to another law school, he shall not be
required to reimburse the school.
Saura v. Sindico
An agreement between 2 persons who are vying for an
official nomination for the Nacionalista Party in
Pangasinan. They agreed that whoever would lose in
the provincial convention would not run as an
independent or rebel candidate. Subsequently, the
one who lost ran and he won. Thus, the one who won
sued.
SC held that the stipulation is void because it is void as
to public policy:
1. The right of a person to present himself as a
candidate cannot be limited by the mere
agreement of two or more persons;
2. The right of the electorate to choose who among
the candidates is fit for the position
35
At present, only the second is still a public policy.
Under the present Constitution, the first one is no
longer a right since COMELEC can already declare one
as a nuisance candidate.
Article 1306
The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
Examples of void stipulations
1. Pactum Commissiorium
-a stipulation in a contract of pledge or
mortgage to the effect that upon default of the
principal debtor, the property would
automatically belong to the pledgee or
mortgagee
2. Pactum de non aliendo
-a stipulation in a real estate mortgage
wherein the mortgagor is prohibited from
alienating the Property without the consent of
the mortgagee
3. Pactum Leonina
-a stipulation in a contract of partnership
wherein one or some of the partners would be
excluded from sharing in the profits
4. Waiver as to future fraud is also void as
provided by law.
5. In agency, a waiver in relation to the obligation
to render an account, that the agent is not
obliged to render an account is void
6. In succession, a waiver as a right to revoke,
even if in a will it is indicated that the “I will not
revoke this will” is void
7. Public morals: In a contract of loan, where the
interest rate is unconscionable, exorbitant,
excessive, inequitable. (NEVER use the word
usurious)
8. When the court had already declared the
stipulation to be void, it is contrary to law
because the decisions of the SC shall form part
of the law of the land.
Mutuality
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Article 1308
The contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of
them.
Illustration:
If in a contract of lease, there is a stipulation to the
effect that the lessee has the right to terminate the
contract at any time by merely giving notice to the
lessor and the termination takes effect after 15 days
from receipt of notice.
The SC ruled that it is not violative of the mutuality of
contracts principle because it refers to validity and
compliance and NOT to the termination of contracts.
Florendo v. CA
May a bank unilaterally raise the interest rate on a
housing loan granted an employee, by reason of the
voluntary resignation of the borrower?
The SC ruled that the unilateral determination and
imposition of increased interest rates by the herein
respondent bank is obviously violative of the principle
of mutuality of contracts ordained in Article 1308 of
the Civil Code
Obligatory force
Article 1159
Obligations arising from contracts have the force of law
between the contracting parties and should be complied
with in good faith.
Article 1315
Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment
of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be
in keeping with good faith, usage and law.
The premise of this article is that the contract is valid.
When would a contract have the force of law between
the contracting parties?
Upon perfection
Perfection of a contract is subject to the Statute of
Frauds
Can there be a perfected contract if the contract is void?
Never. It is only when the contract is perfected that a
party may demand fulfillment from the other party
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Relativity
Article 1311
Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and
obligations arising from the contract are not
transmissible by their nature, or by stipulation or by
provision of law. The heir is not liable beyond the value
of the property he received from the decedent.
If a contract should contain some stipulation in favor of
a third person, he may demand its fulfillment provided
he communicated his acceptance to the obligor before
its revocation. A mere incidental benefit or interest of a
person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a
third person.
PBQs involve:
1. Who are bound to the contract? May a third
person be bound?
2. Would a third person have a cause of action in
relation to a contract?
3. May a third person be held liable under a
contract?
4. May a third person be benefited by a contract?
Privity of Contracts principle
“Contracts take effect only between the parties, their
assigns and heirs”
Thus, when an action is filed by a third person who is
not privy to the contract against those privies, the
action will be dismissed. However, where an action
for rescission by way of accion pauliana
But remember, contracts is just one of the sources of
obligations. There may not be privity of contract
between two persons but there may be a cause of
action under the other sources.
Intransmissible rights
There are instances when the rights and obligations
arising from such contract would only affect the
parties thus the heirs and assign will not be bound. In
other words, pag namatay ang isang party, his heirs
will not acquire his rights.
Examples:
Law
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In a contract of lease, the right of a lessee to sub-lease
is a right granted by law but by stipulation it may be
prohibited.
Rights of usufructuary upon his death will not be
transmitted to his heirs. The usufruct will be
extinguished upon his death unless the parties
stipulated otherwise.
Nature
Rights and obligations, which are purely personal in
character
When do the rights and obligations become purely
personal?
When the qualifications and skills of the parties have
been considered in the constitution of the obligation.
Ultimately, the relativity of contracts may extend to
third persons.
Article 1312
In contracts creating real rights, third persons who
come into possession of the object of the contract are
bound thereby, subject to the provisions of the Mortgage
Law and the Land Registration Laws.
The premise is that the mortgage is registered.
However, even if it is not registered, if the third person
that actual knowledge then he may still be bound by
the contract.
Real Estate Mortgage executed by A & B involving a
parcel of land thus, whoever will be in possession shall
be bound. If A sells the land to X (third person) then C
shall acquire ownership but he may be bound by the
contract so if the principal debtor defaults, the
mortgagee may have it foreclosed and this land may be
sold in a foreclosure sale and go to the highest bidder,
X’s ownership will be terminated.
Article 1313
Creditors are protected in cases of contracts intended to
defraud them.
Ordinarily, an action is filed by a third person who is
not privy to the contract against those privies, the
action will be dismissed.
However, an action for rescission by way of accion
pauliana may prosper. If the contract was in fraud of a
creditor, such creditor would have the right to rescind.
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Article 1314
Any third person who induces another to violate his
contract shall be liable for damages to the other
contracting party.
Interference by third persons
The law requires malicious inducement. Necessarily,
there should be knowledge. But just because there is
knowledge doesn’t necessarily mean that there is
malice. Read the facts and circumstances carefully.
Note:
This article is considered by the SC as an extension of
quasi-delict
Who would be liable?
Not only the 3rd person who induced. Both the 3 rd
person and the party who himself violated the contract
would be solidarily liable.
Stipulation Pour Atrui
(Stipulation in favor of a 3rd person)
It must merely be a secondary matter in the contract.
PBQ:
What if the beneficiary (3rd person) received a letter
from the obligor saying “the benefit in your favor is
hereby revoked” before he (the beneficiary) could
communicate his acceptance to the obligor. Is it
possible for this beneficiary to be entitled to what was
given to him in the agreement?
Yes. As a rule, the revocation must be made with the
consent of both parties and made before the
communication of the acceptance by the 3 rd person to
the obligor. Otherwise, if the revocation was a
unilateral act of one of the parties it violates the
mutuality of contracts.
Bar Question 1999
Francis Albert, a citizen and resident of New Jersey,
U.S.A., under whose law he was still a minor, being
only 20 years of age, was hired by ABC Corporation of
Manila to serve for two years as its chief computer
programmer. But after serving for only four months,
he resigned to join XYZ Corporation, which enticed
him by offering more advantageous terms. His first
employer sues him in Manila for damages arising from
the breach of his contract of employment. He sets up
his minority as a defense and asks for annulment of
the contract on that ground. The plaintiff disputes this
by alleging that since the contract was executed in the
Philippines under whose law the age of majority is 18
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years, he was no longer a minor at the time of
perfection of the contract. Will the suit prosper?
Suppose XYZ Corporation is impleaded as a co-
defendant, what would be the basis of its liability, if any?
-Article 1314
Bar Question 1991
Roland, a basketball star, was under contract for one
year to play-for-play exclusively for Lady Love, Inc.
However, even before the basketball season could
open, he was offered a more attractive pay plus fringes
benefits by Sweet Taste, Inc. Roland accepted the offer
and transferred to Sweet Taste. Lady Love sues Roland
and Sweet Taste for breach of contract. Defendants
claim that the restriction to play for Lady Love alone is
void, hence, unenforceable, as it constitutes an undue
interference with the right of Roland
to enter into contracts and the impairment of his
freedom to play and enjoy basketball.
1. Can Roland be bound by the contract he
entered into with Lady Love or can he
disregard the same?
2. Is he liable at all? How about Sweet Taste? Is it
liable to Lady Love?
Yes. Article 1159
Roland is bound by the contract he entered into with
Lady Love and he cannot disregard the same, under
the principles of obligatoriness of contracts.
Obligations arising from contracts have the force of
law between the parties.
Yes, Roland is liable under the contract as far as Lady
Love is concerned. He is liable for damages under
Article 1170 of the Civil Code since he contravened the
tenor of his obligation. Not being a contracting party,
Sweet Taste is not bound by the contract but it can be
held liable under Art. 1314. The basis of its liability is
not prescribed by contract but is founded on quasi-
delict, assuming that Sweet Taste knew of the contract.
Article 1314 of the Civil Code provides that any third
person who induces another to violate his contract
shall be liable for damages to the other contracting
party.
Classification of Contracts
1. As to degree of dependence
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 a. Preparatory -commodatum, gratuitous deposit
-those which have for their object the
b. Bilateral
establishment of a condition in law which is
-those which give rise to reciprocal obligations
necessary as a preliminary step towards the
for both parties
celebration of another subsequent contract
-sale, lease
-partnership, agency
6. As to cause
b. Principal
-those which can subsists independently from a. Onerous
-those in which each of the parties aspires to
other contracts and whose purpose can be
fulfilled by themselves procure for himself a benefit through the giving
of an equivalent or compensation
-sale, lease
-sale
c. Accessory b. Gratuitous or lucrative
-those which can exist only as a consequence of, -those in which one of the parties proposes to
or in relation with, another prior contract give to the other a benefit without any
-pledge, mortgage equivalent or compensation
-commodatum
2. As to perfection
c. Remuneratory
a. Consensual 7. As to risk
-those which are perfected by the mere
agreement of the parties a. Commutative
-sale, lease -those where each of the parties acquires an
equivalent of his prestation and such
b. Real equivalent is pecuniarily appreciable and
-those which require not only the consent of already determined from the moment of the
the parties for their perfection, but also the celebration of the contract
delivery of the object by one of the party to the -lease
other b. Aleatory
-deposit, pledge, commodatum, mutuum -those where each of the parties has to his
account the acquisition of an equivalent of his
3. As to solemnity or form prestation, but such equivalent is not yet
a. Informal or any form determined since it depends upon the
-those which require no particular form happening of an uncertain event thus charging
-loan the parties with the risk of loss or gain
-insurance
b. Formal or special 8. As to name
-those which require a particular form
-antichresis, donations, chattel mortgage a. Nominate
-those which have their own individuality and
4. As to purpose are regulated by special provisions of law
a. transfer of ownership - sale -sales, lease
b. conveyance of use - commodatum b. Innominate
c. rendition of service – agency -those which lack individuality and are not
regulated by special provisions of law

9. As to subject matter
a. thing
b. right
c. service
5. As to nature of obligation produced
Questions to ask:
a. Unilateral 1. Why is it a ___ contract?
-those which give rise to an obligation for only
2. Ascertain the basis of the classification
one of the parties
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 3. Who are obliged?
Pag sinabing onerous, this is in relation to others like
gratuitous and remuneratory. This goes into cause.
For example, what is the cause in a contract of sale?
It is essentially onerous. Thus, the cause in such
contract as to each contracting party is the promise or
prestation to be performed by the other party.
If a contract is a gratuitous contract , the cause is the
liberality of the grantor. Example, commodatum.
Cause of Contracts
Article 1350. In onerous contracts the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the other;
in remuneratory ones, the service or benefit which is
remunerated; and in contracts of pure beneficence, the
mere liberality of the benefactor.
Article 1351. The particular motives of the parties in
entering into a contract are different from the cause
thereof.
Article 1352. Contracts without cause, or with unlawful
cause, produce no effect whatever. The cause is unlawful
if it is contrary to law, morals, good customs, public
order or public policy.
Article 1353. The statement of a false cause in
contracts shall render them void, if it should not be
proved that they were founded upon another cause
which is true and lawful.
Article 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary.
Article 1355. Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influence.
A sold his only property to B. But at the time of the
sale, A was indebted to X. Is this sale considered
“creditors”?
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If the question is: Because he sold his only property,
would it raise a presumption that the sale is made in
fraud of creditors?
It depends on the circumstances.
If at the time of the sale, there was already a judgment
against the A in favor of any creditor, or a court order
of garnishment or attachment in relation to the said
property or against him as a debtor, then the law
would already raise a presumption that such sale is in
fraud of creditors because a contract of sale is an
alienation onerous in character.
Thus, if the alienation is onerous in character, there
would be a presumption that it is made in fraud of
creditors.
2012 case
Instead of sale, the debtor mortgaged his property. At
the time of the mortgage, there was already a
judgment against him. Would that raise a presumption
that such is made in fraud of creditors?
-No, mortgage is not a conveyance of ownership; thus,
it is not onerous alienation
On the other hand, if the alienation is gratuitous
A is indebted to X. A donated to B his properties worth
7M. What is left is only P3M. Will the presumption
arise?
-Not necessarily. It depends on the amount of
indebtedness. The presumption only applies that the
alienation, gratuitous in character, is in fraud of
creditors, if the debtor did not reserve sufficient
properties to cover his debts.
In obligation to deliver a specific car: When the debtor
A delivered the car to B. B noticed that the stereo is no
longer there. Who is entitled to this stereo?
It depends on the applicable principle:
a. Greatest reciprocity of interest
-applicable only when the obligation arose
from an onerous contract
b. Least transmission of rights
-if the transaction is gratuitous
In other words, if the obligation of A arose from a
contract of sale (onerous), the first one should be
applied, thus the buyer B, is entitled.
40
On the other hand, if the transaction is a donation
(gratuitous), the donor shall be entitled to the stereo
applying the second principle.
Recall:
Art. 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.
Art. 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.
Art. 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:
(1) When the obligation or the law expressly so
declare; or
(2) When from the nature and the circumstances
of the obligation it appears that the
designation of the time when the thing is to be
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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
obligation, delay by the other begins.
What if in a contract of sale, there is no mention of the
price. Will it be valid?
Yes, because it is presumed to exist and presumed to
be lawful. (disputable presumption)
Rationale: When one enters into a contract, he has a
cause unless the contrary is proven.
What if the price is grossly inadequate? Will it affect the
validity of the contract?
No. The law provides that: “Except in cases specified
by law, lesion or inadequacy of shall not invalidate a
contract, unless there has been fraud, mistake or
undue influence.”
Problem:
A bought a gun for the purpose of killing somebody
else. What is the status of the sale? If the motive is
unlawful, would the at affect the validity of the
contract?
As a rule, no. Motive is different from cause.
The SC ruled that the as a general rule, the illegality of
the motive does not affect the validity of the contract.
However, as an exception, if the motive is illegal or
unlawful because it is contrary to law, it may affect the
validity of the contract if the motive predominates the
purpose of the party in entering into the contract such
as to defraud his creditors making it a Rescissible
contract.
Stages of Contracts
1. Negotiation
2. Perfection
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3. Performance
4. Consummation
Contract of Option
Art. 1324
When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any
time before acceptance by communicating such
withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
Art. 1479
A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promisor if the promise is supported by a
consideration distinct from the price.
Art. 1482
Whenever earnest money is given in a contract of sale,
it shall be considered as part of the price and as proof
of the perfection of the contract.
If it is merely an option agreement, the offerer may
withdraw the offer at anytime before the
communication of the acceptance to him and he
cannot be held liable for whatever damage that may be
caused to the offeree.
Take note, it is from the time the offerer had
knowledge of the acceptance that there would be a
perfected contract (cognition theory)
In an option contract, if there is a consideration paid
or promised but separate and distinct from the price,
the offerer cannot validly withdraw the offer. The
withdrawal has to be made within the period.
If he would withdraw despite the consideration, can the
offeree demand the performance of the obligations
arising from the contract?
-No, if he would withdraw despite the existence of the
option contract, he can be held liable for damages for
breach of the option contract.
In a case, it was held that: Even if there is no
consideration separate and distinct from the price, but
the offeree accepted before the offerer could
withdraw, the contract may be considered as a
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perfected contract. Habang may offer at hindi
winiwithdraw ang offer and there was an acceptance, a
contract may be considered to have been perfected.
Sanchez v. Rigos
Option Money
The SC ruled that the consideration in an option
contract can be any prestation, not necessarily money.
Illustration:
On May 1, 2002, S offered to sell a specific car to B for
P500,000.00. B sent his letter of acceptance to S on
May 8, 2002. On May 10, 2002, however, S died in a
vehicular accident and his secretary received the letter
or acceptance on May 12, 2002 unaware that S had
already died
The contract was not perfected because the offer of S
became ineffective when he died. Death before
knowledge of the acceptance by the offeree
extinguishes the offer; thus, there can be no perfected
contract.
Bar Question 2005
Marvin offered to construct the house of Carlos for a
very reasonable price of P900,000.00, giving the latter
10 days within which to accept or reject the offer. On
the fifth day, before Carlos could make up his mind,
Marvin withdrew his offer.
a. What is the effect of the withdrawal of Marvin’s
offer?
Carlos cannot hold Marvin liable for damages
because the withdrawal was proper. Here there
was merely an offer which was not accepted.
There being no consideration separate and
distinct from the price, the offerer Marvin can
withdraw at anytime before acceptance is
conveyed to him.
b. Will your answer be the same if Carlos paid
Marvin P10,000.00 as consideration for that
option? Explain.
No, in that case, there is an option contract thus,
the offerer cannot validly withdraw the offer
because that would constitute a breach of
contract. The remedy is an action for damages.
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 c. Supposing that Carlos accepted the offer before
Marvin could communicate his withdrawal
thereof?
This is a contract of piece of work, a consensual
contract; thus, if there was an acceptance before
the withdrawal is conveyed to the offeree, there
is a perfected contract.
Bar Question 2013
Sergio is the registered owner of a 500-square meter
land. His friend, Marcelo, who has long been interested
in the property, succeeded in persuading Sergio to sell
it to him. On June 2, 2012, they agreed on the purchase
price of P600,000 and that Sergio would give Marcelo
up to June30, 2012 within which to raise the amount.
Marcelo, in a light tone usual between them, said that
they should seal their agreement through a case of
Jack Daniels Black and P5,000 "pulutan" money which
he immediately handed to Sergio and which the latter
accepted. The friends then sat down and drank the
first bottle from the case of bourbon.
On June 15, 2013, Sergio learned of another buyer,
Roberto, who was offering P800,000 in ready cash for
the land. When Roberto confirmed that he could pay in
cash as soon as Sergio could get the documentation
ready, Sergio decided to withdraw his offer to Marcelo,
hoping to just explain matters to his friend. Marcelo,
however, objected when the withdrawal was
communicated to him, taking the position that they
have a firm and binding agreement that Sergio cannot
simply walk away from because he has an option to
buy that is duly supported by a duly accepted valuable
consideration.
a. Does Marcelo have a cause of action against
Sergio?
Yes, there being a perfected contract (of sale).
b. Can Sergio claim that whatever they might have
agreed upon cannot be enforced because any
agreement relating to the sale of real property
must be supported by evidence in writing and
they never reduced their agreement to writing?
Essential Elements of Contracts
1. Consent of the contracting parties
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2. Object which is the subject matter of the contract
(not necessarily a thing, it may be rights or
services)
3. Cause or consideration
Consent
Scenario 1: Where no consent was given
Where there is no consent of one or both parties, the
contract is VOID.
Fictitious contract
In a deed of sale, consent is manifested by the
signature. If there is a signature above the name of the
person, does that mean that that person gave his
consent?
-Not necessarily because it may have been forged.
Simulated contracts
“Making it appear” that the parties entered into the
contract when in fact, they did not.
1. Absolute
The parties simulated a contract but they never
intended to be bound by such contract
2. Relative
The parties simulated a particular contract but
they actually intended another contract or
transaction
What is the usual proof of simulation?
-the capacity to buy of the buyer
Scenario 2: Where both parties gave consent
If both parties gave consent, does that guarantee that it
is a valid contract?
Not necessarily. Maybe one of the parties is
incapacitated.
a. What kind of incapacity, absolute or relative?
b. What kind of capacity is involved, juridical
capacity or capacity to act?
If there is no juridical capacity, necessarily the
contract is VOID (because technically there’s
only one party and the other does not exist).
If the incapacity affects only the capacity to act,
such as when there are restrictions like civil
interdiction, minority, insanity, etc., the contract
is merely VOIDABLE.
If both parties are incapacitated, then the
contract is UNENFORCEABLE.
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Under 1409, prohibited contracts are void. If there is
relative incapacity in one of the parties in the
contract, it will necessarily be void.
If one of the parties to a contract of sale is an alien,
what would be the status of the contract?
Aliens, as a general rule, are not allowed to own real
property in the Philippines.
(Article XII, Section 7)
“Save in cases of hereditary succession, no private lands
shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire
or hold lands of the public domain.”
It’s clear from this provision that private land may be
transferred only to persons or entities who/which has
the capacity “to acquire or hold lands of the public
domain.”
Those who are qualified to acquire or hold lands of the
public domain are as follows:
1. Filipino citizens.
2. Corporations at least 60% of the capital of which
is owned by Filipinos.
In other words, the Constitution explicitly prohibits
non-Filipinos from acquiring or holding title to
private lands. Among the exceptions are as follows:
(1) transfer to an alien by way of legal succession;
or
(2) if the acquisition was made by a former
natural-born citizen.
Thus, a contract of sale of a private land to an alien for
residential purposes and when the buyer is an alien
who is a former natural-born citizen. - VALID
If land is invalidly transferred to an alien who
subsequently becomes a Filipino citizen or transfers it
to a Filipino, the flaw in the original transaction is
considered cured and the title of the transferee is
rendered valid.
How about condominium units?
The aliens will simply lease the land for a long-term
period such as 25 years or longer. Thus, the 60-40
rule does not apply because it is not land but only
property.
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Ultimately, if the buyer of a parcel of land is an alien
and thereafter an action was filed by the seller for the
recovery of this parcel of land. Will the action
prosper?
On its face, the sale is void unless it falls under any of
the exception. Thus, the seller will have a right to
recover and the action to recover does not pescribe.
The in pari delicto rule does not apply to this
Constitutional prohibition.
PBQ:
If at the time of the filing of the action, this land is no
longer owned by an alien or when the alien is no
longer an alien, the action to recover cannot prosper
anymore.
2009 Bar Question
In 1972, Luciano de la Cruz sold to Chua Chung Chun, a
Chinese citizen, a parcel of land in Binondo. Chua died
in 1990, leaving behind his wife and three children,
one of whom, Julian, is a naturalized Filipino citizen.
Six years after Chua’s death, the heirs executed an
extrajudicial settlement of estate, and the parcel of
land was allocated to Julian. In 2007, Luciano filed suit
to recover the land he sold to Chua, alleging that the
sale was void because it contravened the Constitution
which prohibits the sale of private lands to aliens.
Julian moved to dismiss the suit on grounds of pari
delicto, laches and acquisitive prescription. Decide the
case with reasons.
Will the action to recover the land from this heir who is
a Filipino citizen prosper?
The action will no longer prosper because it is already
owned by the Filipino.
Also, if at the time of the sale, he is an alien but after
some time he acquired Filipino citizenship, the
prohibition is no longer applicable
2012 Bar Question
Jambrich, an Austrian, fell in-love and lived together
with Descallar and bought their house and lots at
Agro-Macro Subdivision.
In the Contracts to Sell, Jambrich and Descallar were
referred to as the buyers. When the Deed of Absolute
Sale was presented for registration before the Register
of Deeds, it was refused because Jambrich was an alien
and could not acquire alienable lands of the public
domain. After Jambrich and Descaller separated,
Jambrich purchased an engine and some accessories
for his boat from Borromeo. To pay for his debt, he
sold his rights and interests in the Agro-Macro
44
properties to Borromeo. Borromeo discovered that Object
titles to the three (3) lots have been transferred in the
name of Descallar. Who is the rightful owner of the 1. Rights must not be intransmissible.
properties? Explain. 2. Services, take note of the rules like the service
must not be contrary to law, morals; it must not
Scenario 3: Where consent is vitiated be impossible, etc.
Vitiation of consent is not the same as lack of consent.
The former has consent but napilitan lang. It is merely 3. The thing must not be outside the commerce of
voidable. men and licit.

If consent was given in the name of the other person
without authority of that person, it is unenforceable
unless the person has the authority under the law such
as when he is the guardian or receiver.
Factors which may vitiate consent:
Affects cognition/awareness as to certain facts
1. Mistake
2. Fraud
Affects volition/voluntariness of the act
3. Violence
4. Intimidation
5. Undue influence
For example, internal organs of human beings are
considered outside the commerce of men.
All of the things owned in common are outside
the commerce of men but once they have already
been appropriated, then they may be the subject
of the contract.
Can future inheritance be the subject of the contract of
sale?
No because the seller has no inheritance while his
predecessor lives.

If X, a 3rd person employed undue influence upon one

of the contracting parties, B without the knowledge of
A. –voidable

“duress”
Does it affect the validity of the contract?
Yes, it covers both violence and/or intimidation

If violence was employed upon the wife of the party

who is invoking vitiation of consent, would that result
in a voidable contract? Upon whom shall violence be
employed for it to be considered voidable?
Yes, because there is more reason to consider the
contract voidable because violence is worse than
intimidation.

What if the violence was employed not upon the party

claiming vitiation, nor upon his wife, ascendants,
descendants? Can he invoke vitiation of consent?
Yes, however he shall prove that indeed his consent
was vitiated. Rule of thumb: the further in degree, the
harder it is to prove vitiation in consent.

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FORM of CONTRACTS
Art. 1356
Contracts shall be obligatory, in whatever form they
may have been entered into, provided all the essential
requisites for their validity are present.
However, when the law requires that a contract be in
some form in order that it may be valid or enforceable,
or that a contract be proved in a certain way, that
requirement is absolute and indispensable. In such
cases, the right of the parties stated in the following
article cannot be exercised.
Art. 1357
If the law requires a document or other special form, as
in the acts and contracts enumerated in the following
article, the contracting parties may compel each other
to observe that form, once the contract has been
perfected. This right may be exercised simultaneously
with the action upon the contract.
Art. 1358
The following must appear in a public document:
(1) Acts and contracts which have for their object
the creation, transmission, modification or
extinguishment of real rights over immovable
property; sales of real property or of an interest
therein are governed by articles 1403, No. 2,
and 1405;
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other
power which has for its object an act appearing
or which should appear in a public document,
or should prejudice a third person;
(4) The cession of actions or rights proceeding
from an act appearing in a public document.
All other contracts where the amount involved exceeds
five hundred pesos must appear in writing, even a
private one. But sales of goods, chattels or things in
action are governed by articles, 1403, No. 2 and 1405.
A document can only be registered if it is in a public
instrument. The Register of Deeds has no business
accepting private instruments for registration.
The form is only for the greater efficacy of the
contract, it is not necessary for the validity neither for
the enforceability.
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A sale of a parcel of land must be in a public
instrument to be valid. – FALSE
A contract of sale involving immovable only has to be
in writing in order to be valid and enforceable and to
bind the parties.
However, if it is merely an oral sale, it would be
unenforceable contract under of the Statute of
Frauds.
Validity
Is a contract of sale required to be in a specific form
for its validity? None.
In a sale of large cattle, the law requires this contract
to be:
1. in a public instrument;
2. registered; and
3. the buyer has to obtain a certificate of title in
order for the sale to be valid.
Enforceability
Statute of Frauds
REFORMATION OF INSTRUMENTS
Reformation as a remedy is only proper when there is
an instrument thus if the contract is verbal, there is
nothing to reform.
This is a remedy in equity because the instrument as
written does not reflect the real intention. In other
words, the parties have already a meeting of minds but
their agreement was not accurately reflected in the
instrument.
If there is no meeting of the minds, reformation is not
the remedy but the declaration of nullity because the
contract would be void.
Art. 1366
There shall be no reformation in the following cases:
(1) Simple donations inter vivos wherein no condition
is imposed;
(2) Wills;
(3) When the real agreement is void.
If the instrument as written on its face is void, can it be
the subject of reformation?
Yes if the real contract intended is the valid contract.
The reverse is not true.
46
INTERPRETATION OF CONTRACTS
If there are obscurities or ambiguities, how should it be
resolved?
The primordial consideration in the interpretation is
the intention of the parties. Even if the instrument as
written is so clear as to their meaning but it does not
reflect the real intention, it will be the latter that
would prevail.
Art.1370
If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the
former.
Art. 1371
In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts
shall be principally considered
Citizens Surety v. CA
Mr. Pascual claims that the deed of assignment which
he executed was by way of Dacion en Pago which
extinguished his obligations under the indemnity
agreement. However, after the execution of the deed
of assignment, he continued to pay the monthly
amortizations.
If it is truly a dacion en pago, why would you continue
to pay? And, why would you execute another real
estate mortgage if your obligation had already been
extinguished?
Clearly, the subsequent acts of this person does not
support his claim that the deed of assignment was by
way of dacion en pago. Thus, the SC ruled that the deed
of assignment was a form of security arrangement.
Art. 1377
The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity.
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2011 Bar Question – MCQ
Lino entered into a contract to sell with Ramon,
undertaking to convey to the latter one of the five lots
he owns, without specifying which lot it was, for the
price of P1 million. Later, the parties could not agree
which of five lots he owned Lino undertook to sell to
Ramon. What is the standing of the contract?
(A) Unenforceable.
(B) Voidable.
(C) Rescissible.
(D) Void.
This is covered not only by Article 1409 but also on
the rules on interpretation of contracts.
STATUS of CONTRACTS
2 Kinds of Valid
1. Valid and binding without any defects
2. Valid but defective:
-Rescissible, Voidable and Unenforceable
Voidable and Unenforceable
-can be ratified
Nothing in the Code tells us that Rescissible is subject
to ratification because there is no defect as far as the
essential requisites are concerned. It’s up to the
person whether or not to invoke the remedy of
rescission.
Void
-cannot be ratified
Unique void contract subject to ratification:
Art. 1898
If the agent contracts in the name of the principal,
exceeding the scope of his authority, and the principal
does not ratify the contract, it shall be void if the party
with whom the agent contracted is aware of the limits of
the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the
principal's ratification.
47

RESCISSIBLE CONTRACTS
When would a contract be Rescissible?
-only when the law provides
Most important:
Those undertaken in fraud of creditors when the latter
cannot in any other manner collect the claims due them
How do you prove fraud?
Determine if there is a presumption that the contract
is in fraud of creditors AND prove certain badges of
fraud (see pages 40-41) But, a single badge of fraud is
NOT sufficient to conclude that there is fraud.
Example of badges of fraud:
1. Close relationship between the parties
2. The debtor-seller continue to be in the
possession of the property
3. When the price in a contract of sale is grossly
inadequate
4. When the debtor is already insolvent and he sells
his property on credit
Cabaliw v. Sadorra
A sale of a parcel of land by the husband is deemed
fraudulent if made about seven months after a
judgment was rendered against the vendor for support
of his wife and the vendor has not paid any part of the
judgment. This sale was entered into after a judgment
was rendered. Take note, the judgment need NOT be
final and executory.
Accion Pauliana
-an action to impugn a contract in fraud of creditores
should be filed within 4 years from the DISCOVERY of
the fraud; however in the Hongkong case, the SC held
that if the contract claimed to be in fraud of creditors
was REGISTERED, then the 4-year period would
commence not from the time of actual knowledge of
the creditor or discovery but from the time of
registration.
Hongkong Shanghai Bank v. Pauli
The four-year period to bring an action for annulment
of deed of sale of lot is computed from the registration
of the conveyance.
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 interest; consequently,
it can be carried out only when he who demands
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rescission can return whatever he may be obliged to
restore.
Neither shall rescission take place when the things
which are the object of the contract are legally in the
possession of third persons who did not act in bad faith.
In this case, indemnity for damages may be demanded
from the person causing the loss.
Illustration:
A is indebted to X. A, in fraud of X, alienated his
property to B. In this scenario, it is B who is
considered as the 3rd person (in relation to the debtor
and creditor)
Thus, X cannot invoke rescission if B is in possession in
good faith (except in case of donation)
2012 Bar Question - MCQs
The following are rescissible contracts, except:
a) Entered into by guardian whenever ward
suffers damage more than 1⁄4 of value of
property
b) Agreed upon in representation of absentees,
if absentee suffers lesion by more than 1⁄4 of
value of property
c) Contracts where fraud is committed on
creditor (accion pauliana).
d) Contracts entered into by minors.
(voidable)
The following are the requisites before a contract
entered into in fraud of creditors may be rescinded,
except:
a) There must be credited existing prior to the
celebration of the contract.
b) There must be fraud, or at least, the intent to
commit fraud to the prejudice of the creditor
seeking rescission.
c) The creditor cannot in any legal manner
collect his credit (subsidiary character of
rescission)
d) The object of the contract must be legally
in the possession of a 3rd person in good
faith
Recall: Article 1191
Rescission in Art. 1191 is a PRINCIPAL remedy
whereas in Rescissible contracts, it may be invoked
only when the creditor does not have any other
available legal remedy.
48
VOIDABLE CONTRACTS c) A threat to enforce one’s claim through
competent authority, if the claim is legal or
There is defect in consent either because: just, does not vitiate consent.
1. The person giving consent is incapacitated d) Absolute simulation of a contract always
because he does not have capacity to act such results in a void contract.
as when he is a minor or when insane, etc.
2. There is vitiation of consent If one of the parties to the contract is without juridical
capacity, the contract is:
Who may ratify? a) voidable
Only the party who has the right to institute the action b) rescissible
for annulment c) void
d) unenforceable
Implied ratification, how made?
When a contract of lease was entered into, the lessor When both parties to the contract are minors, the
was 17 years old. However, even if he is already 20 he contract is:
still continued to receive rentals. Even if within the a) voidable
period for filing the action for annulment, he may no b) rescissible
longer rescind because he has already impliedly c) void
ratified. d) unenforceable

Reasons why an action for annulment may not prosper When the consent of one of the parties was vitiated,
1. Implied ratification the contract is:
2. Prescription a) voidable
3. If the one invoking cannot return what he has b) rescissible
received unless he there’s no fault on his part c) void
d) unenforceable
2012 Bar Question – MCQs
Consent was given by one in representation of
The following are the characteristics of a voidable another but without authority. The contract is:
contract, except: a) voidable
a) Effective until set aside. b) rescissible
b) May be assailed/attacked only in an action for c) void
that purpose. d) unenforceable
c) Can be confirmed or ratified.
d) Can be assailed only by either party.

Guardians may also assail

The following are void contracts, except:

a) Pactum commissorium
b) Pactum de non alienando
c) Pactum leonine
d) Pacto de retro

Which of the following expresses a correct principle

of law? Choose the best answer.
a) Failure to disclose facts when there is a duty
to reveal them, does not constitute fraud
b) Violence or intimidation does not render a
contract annullable if employed not by a
contracting party but by a third person.

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UNENFORCEABLE CONTRACTS
1. When both parties are both incapacitated.
Take note, they may be ratified so when one of
the two parties ratifies, the effect would now
become merely voidable.
2. A contract entered into by an agent where the
agent acted in excess or outside the scope of his
authority.
3. A contract entered into by a person in
representation of another without the authority
of the latter (unless he had authority under the
law-legal representation)
4. Art. 1878
Contracts entered into by agents requiring SPA
Art. 1403
Statue of Frauds is a rule requiring certain contracts to
be in writing in order to be enforceable between the
parties. It does not require the contracts to be in a
public instrument (not needed, but permitted)
Thus, if you already have an agreement in writing and
you want it to be registered, your remedy is Art. 1357,
to compel the other party to have the contract in the
form prescribed by law
2009 Bar Question
True or False. An oral promise of guaranty is valid and
binding.
FALSE. An oral contract of guaranty, being a special
promise to answer for the debt ofanother, is
unenforceable unless in writing
Alternative Answer:
TRUE. An oral promise of guaranty is valid and
binding. While the contract is valid, however, it is
unenforceable because it is not writing . Being a
special promise answer for the debt, or miscarriage of
another, the Statute of Frauds requires it to be in
writing to be enforceable (Article 1403 [2] b, NCC).The
validity of the contract should be distinguished from
its enforceability
Cabague v. Auxilio
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When would a contract of lease be covered by the
Statute of Fraud?
When a contract of lease involves a real property and
the period is for more than one year
Kung car lang ang nili-lease maski naman 3 years pa
yan na verbal agreement, it can be a valid and binding
agreement
Contracts of Sale that are unenforceable if NOT in
writing:
1. If it involves an immovable or real property;
Take note, the price is irrelevant
2. Contracts involving movables are must be in
writing if the price is at least P500.
Take note, it is the PRICE which is relevant and
NOT the value of the thing.
3. Regardless if movable or immovable, if under the
terms of the agreement it is not to be performed
within one year because the agreement is that
the seller will deliver only after 18 months and
the buyer will pay upon delivery, it has to be in
writing otherwise, it is unenforceable.
The Statute of Frauds does not go into the weight of
evidence but to the admissibility of evidence.
In other words, if it is covered by the Statute of Frauds
and there is an effort to prove the existence of the
contract through oral testimony, that evidence will
never be admitted. He should not be allowed to testify.
Ortega v. Leonardo
50
2014 Bar Question
Fe, Esperanza, and Caridad inherited from their
parents a 500 sq. m. lot which they leased to Maria for
three (3) years. One year after, Fe, claiming to have the
authority to represent her siblings Esperanza and
Caridad, offered to sell the leased property to Maria
which the latter accepted. The sale was not reduced
into writing, but Maria started to make partial
payments to Fe, which the latter received and
acknowledged. After giving the full payment, Maria
demanded for the execution of a deed of absolute sale
which Esperanza and Caridad refused to do. Worst,
Maria learned that the siblings sold the same property
to Manuel. This compelled Maria to file a complaint for
the annulment of the sale with specific performance
and damages.
If you are the judge, how will you decide the case?
Answer:
I will decide the case in favor of Maria only as far as
the share of Fe in this parcel of land because this
contract of sale was entered into by a co-owner
without the consent of the other co-owners thus the
latter will not be bound. Only the co-owner who
entered into the contract shall be bound. The fact that
this sale was not reduced into writing cannot be
invoked by Fe as a defense because there were already
partial payments.
2012 Bar Question
Aligada orally offered to sell his two- hectare rice land
to Balane for P 10Million. The offer was orally
accepted. By agreement, the land was to be delivered
(through execution of a notarized Deed of Sale) and
the price was to be paid exactly one-month from their
oral agreement. Which statement is most accurate?
a) If Aligada refuses to deliver the land on the
agreed date despite payment by Balane, the
latter may not successfully sue Aligada
because the contract is oral.
b) If Aligada refused to deliver the land, Balane
may successfully sue for fulfillment of the
obligation even if he has not tendered
payment of the purchase price.
c) The contract between the parties is
rescissible.
d) The contract between the parties is subject
to ratification by the parties
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VOID/INEXISTENT CONTRACTS
Art. 1409
The following contracts are inexistent and void from
the beginning:
(1) Those whose cause, object or purpose is
contrary to law, morals, good customs, public
order or public policy;
(2) Those which are absolutely simulated or
fictitious;
(3) Those whose cause or object did not exist at
the time of the transaction;
(4) Those whose object is outside the commerce
of men;
(5) Those which contemplate an impossible
service;
(6) Those where the intention of the parties
relative to the principal object of the contract
cannot be ascertained;
(7) Those expressly prohibited or declared void
by law.
These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
Lita Enterprises v. IAC
If a contract is void, may an action to recover filed by
one of the parties against the other prosper?
It depends (Arts. 1411, 1412, 1415, 1416)
1999 Bar Question
In 1950, the Bureau of Lands issued a Homestead
patent to A. 3 years later, A sold the homestead to B. A
died in 1990, and his heirs filed an action to recover
the homestead from B on the ground that its sale by
their father to the latter is void under Section 118 of
the Public Land Law. B contends, however, that the
heirs of A cannot recover the homestead from him
anymore because their action had prescribed and that
furthermore, A was in pari delicto. Decide.
I will decide in favor of the heirs. The contract is void
because it is prohibited by law. Any alienation within 5
years from the date of award of the land to A, is a void
alienation.
Secondly, A is not in pari delicto. Article 1416: When
the agreement is not illegal per se but is merely
prohibited, and the prohibition by the law is designed
for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has paid or
delivered.
51
 SALES

Article 1458. By the contract of sale one of the (3) Onerous

contracting parties obligates himself to transfer the The thing sold is conveyed in consideration of the
ownership and to deliver a determinate thing, and the price and vice versa
other to pay therefor a price certain in money or its
equivalent. (4) Commutative
The thing sold is considered the equivalent of the
A contract of sale may be absolute or conditional price paid and vice versa. (see Ibid.) However, the
contract may be aleatory as in the case of the sale
of a hope (e.g., lotto ticket);
Q: A obliged himself to deliver a determinate thing
to B. Upon delivery, B would pay a sum of money to (5) Nominate
A. Is that a contract of sale? It is given a special name or designation in the
A: Not necessarily. Even if there is an obligation to Civil Code, namely, “sale” and specific rules are
deliver, if there is no obligation to transfer ownership, provided by law to govern the rights of the parties
it will not be a contract of sale. It may be a contract of
lease or deposit (for safekeeping) (6) Principal
It does not depend for its existence and validity
From the definition, you will learn a lot. Ordinarily,
upon another contract.
you should know the purpose of the parties. With the
contract of sale, obligations should arise, based on the
premise that there is a valid contract. Kinds of Sale
Factors to consider:
“obligates” 1. Movable or Immovable
The contract will be perfected even if only 1 party 2. Thing or Right
binds himself because it is a consensual contract. 3. Transfer of ownership

“determinate thing” TRUE or FALSE

What if the object is generic thing, may it be a valid Maceda Law only applies if the subject matter or the
sale? Yes object of the contract of sale is an immovable.
Art. 1460 “capable of being made determinate”
Ex. Sale of a bottle of water The law requires realties but not all immovable are
realties. Maceda Law only covers sales on residential
“to pay therefor” realties. Whereas, Recto Law pertains only to personal
This contract is essentially onerous. There is no property.
gratuitous sale.
Transfer of Ownership
Does the law require that the price be paid in Philippine -not a condition for the perfection of the sale but a
Peso? condition for ownership to pass, the premise is there is
Not necessarily. The law only provides “in money”; already a perfected contract
thus, it may be valid even if it is in any other currency.
Contract to Sell (COS) v. Contract of Sale (CTS)
Characteristics of a contract of sale
(1) Consensual Absolute COS
It is perfected by mere consent with- out any Where the sale is not subject to any condition
further act; whatsoever and where title/ownership passes to the
buyer upon delivery of the thing sold.
(2) Bilateral
Both the contracting parties are bound to fulfill Conditional COS
correlative obligations towards each other — the Sale is subject to certain conditions and upon the
seller, to deliver and transfer ownership of the fulfillment of the conditions, ownership is
thing sold and the buyer, to pay the price; automatically transferred without the need of another
contract.
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Contract to Sell (CTS)
SC held that it is a special kind of conditional sale.
Despite the fulfillment of the condition/s, ownership
will not automatically pass. It would only give the
buyer the right to demand the seller to sell the thing.
Thus, the seller is bound to sell and the ownership is
only transferred upon the execution of the deed of
sale. Premise is that the buyer is already in possession
of the property even before the conditions are fulfilled.
In a sale agreement, how do you determine if it’s a ACOS,
CCOS or CTS?
2001 Bar Question
Arturo gave Richard a receipt which states:
"Receipt Received from Richard as down payment For
my 1995 Toyota Corolla with plate No. XYZ-123
P50,000.00 Balance payable 12/30/01 P50,000.00
September 15, 2001.
(Sgd.) Arturo
Does this receipt evidence a contract to sell? Why?
No, because there is nothing in the receipt showing
that the seller reserved ownership over the thing.
Thus, a sale agreement wherein the seller did not
reserve ownership over the thing is an absolute
contract of sale.
2012 Bar Question
A contract to sell is the same as a conditional contract of
sale. Do you agree?
2014 Bar Question
Nante, a registered owner of a parcel of land in Quezon
City, sold the property to Monica under a deed of sale
which reads as follows:
“That for and in consideration of the sum of
P500,000.00, value to be paid and delivered to me, and
receipt of which shall be acknowledged by me to the full
satisfaction of Monica, referred to as Vendee, I hereby
sell, transfer, cede, convey, and assign, as by these
presents, I do have sold, transferred, ceded, conveyed
and assigned a parcel of land covered by TCT No. 2468
in favor of the Vendee.”
After delivery of the initial payment of P100,000.00,
Monica immediately took possession of the property.
Five (5) months after, Monica failed to pay the
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remaining balance of the purchase price. Nante filed
an action for the recovery of possession of the
property. Nante alleged that the agreement was one to
sell, which was not consummated as the full contract
price was not paid. Is the contention of Nante tenable?
Why?
Distinctions:
1. COS v. Dation in Payment (MMN)
2. COS v. Barter
A obliged himself to deliver and transfer
ownership of a watch worth P800,000 to B
whereas B obliged himself to give to A his car
worth P400,000 plus cash worth P350,000.
Quiroga v. Parsons case
2013 Bar Question
Rica petitioned for the annulment of her ten-year old
marriage to Richard. Richard hired Atty. Cruz to
represent him in the proceedings. In payment for Atty.
Cruz’s acceptance and legal fees, Richard conveyed to
Atty. Cruz a parcel of land in Taguig that he recently
purchased with his lotto winnings. The transfer
documents were duly signed and Atty. Cruz
immediately took possession by fencing off the
property’s entire perimeter.
Desperately needing money to pay for his mounting
legal fees and his other needs and despite the transfer
to Atty. Cruz, Richard offered the same parcel of land
for sale to the spouses Garcia. After inspection of the
land, the spouses considered it a good investment and
purchased it from Richard.
Immediately after the sale, the spouses Garcia 
commenced the construction of a three-story building
over the land, but they were prevented from doing this
by Atty. Cruz who claimed he has a better right in light
of the prior conveyance in his favor.
Is Atty. Cruz’s claim correct? No
P2:29:00
53
Rights and Obligations of the Vendor
1. Transfer ownership
2. Deliver
3. Warrant the thing
OBLIGATION TO TRANSFER OWNERSHIP
Who can transfer ownership by way of a sale?
Only those who have a right to sell
May a buyer acquire ownership over the thing sold if
the seller has no right to sell? Yes
General Rule:
The buyer acquires no better title than what the seller
had.
Exceptions:
Estoppel
1. Estoppel in pais (Art. 1431)
By the principle of estoppel, a person is precluded
from denying that another person has authority to sell
because of his acts. Also known as “Estoppel in Pais”
which is a kind of equitable estoppel because of the
acts / representation of the owner, he may not later on
deny the authority of the 3rd person.
2. Estoppel by deed(Art. 1434)
When the seller who was not the owner at the time of
the sale, acquires ownership, automatically, ownership
passes to the buyer by operation of law. However,
Article 1434 requires delivery to the buyer.
3. Estoppel by record
Case where the seller was estopped from denying the
authority to sell due to his prior testimony made in
court.
4. Sale by an Apparent Owner
5. Negotiable Document of Title
6. Purchase from a Merchant Store
In a contract of sale involving a parcel of land, when
would a seller be an apparent owner?
-mere possession does not necessarily mean that the
seller is an apparent owner.
-when the seller has a certificate of title under his
name
An old lady owns a parcel of land. She asked a lawyer
to have the land registered under her name, but the
lawyer registered the land under his own name.
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P.D. 1529
In relation to registered lands, those who are dealing
with these parcels of land has to consider the
certificate of title. They are not required to inquire
into other matters. (“Mirror Principle”)
However, this does not apply to persons who are
required to exercise the exercise the highest degree of
diligence such as banks, or MERALCO.
Are there any other laws that enable the seller to
dispose the thing as if he is the real owner?
Yes. Article 1505
2009 Bar Question
Before migrating to Canada in 1992, the spouses
Teodoro and Anita entrusted all their legal papers and
documents to their nephew, Atty. Tan. Taking
advantage of the situation, Atty. Tan forged a deed of
sale, making it appear that he had bought the couple’s
property in Quezon City. In 2000, he succeeded in
obtaining a TCT over the property in his name.
Subsequently, Atty. Tan sold the same property to
Luis, who built an auto repair shop on the property. In
2004, Luis registered the deed of conveyance, and title
over the property was transferred in his name.
In 2006, the spouses Teodoro and Anita came to the
Philippines for a visit and discovered what had
happened to their property. They immediately hire
you as lawyer. What action or actions will you institute
in order to vindicate their rights? Explain fully.
Suggested Answer:
I will institute the following actions against Atty. Tan:
(a) A civil action for damage for the fraudulent
transfer of the title in his name and to recover
the value of the property;
(b) An action against the National Treasurer for
compensation from the State Assurance Fund
which is set aside by law to pay those who
lose their land suffer damages as a
consequence of the operation of the Torrens
system;
(c) A criminal action for forgery or falsification
of public document;
(d) A complaint with the Supreme
Court/Integrated Bar of the Philippines to
disbar or suspend him or other disciplinary
action for violation or the Code of
Professional Ethics.
54
Any action against Luis will not prosper because he is
an innocent purchaser for value. The Title to the land
he bought was already in the name of the person who
sold the property to him, and there is nothing on the
title which will make him suspect about the fraud
committed by Atty. Tan.
What if there was forgery and the forger sold the
property subject of the deed to a 3rd person?
*A forged document can never convey any title;
however, it may be a root of a valid title if the buyer is
in good faith and for value
P2:1:06:31
1987 Bar Question
Rita owned a valuable painting which was stolen from
her house. The theft was duly reported to the
authorities. A year after, Rita saw the painting hanging
in the office of Mario. When queried, Mario said that
he bought the painting in a gallery auction. The
painting was positively identified as the one which
was stolen from Rita’s house.
a. Could Rita recover the painting? Yes
If so, would Mario be entitled to reimbursement? No
b. Supposing Mario bought the painting from a
friend, would your answer be the same? Yes
Suggested Answers:
Yes, Rita was unlawfully deprived of the thing thus Art.
559 is applicable. When it was sold to the buyer, the
seller did not have a right to sell. The law provides
that the true owner has a right to recover.
As to reimbursement, there are 2 requisites:
a. the buyer must have bought it in a public sale;
b. he must have bought it in good faith
Here it is clear that Mario was in good faith. The issue
here is whether the gallery auction is a public sale.
It is NOT a public sale considering the nature of a
gallery auction, which is often “by invitation only”.
Thus, since it is not a public sale, then the owner who
was unlawfully deprived can recover that property
even without reimbursement.
Note: If the auction sale is considered a public sale, he
can recover as long as he is willing to reimburse the
buyer of the price paid in that sale.
What if the owner is NOT unlawfully deprived? Will Art.
559 be applicable?
Yes, if the movable property was lost.
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What if the owner was NOT unlawfully deprived and the
thing was NOT lost but bought from a seller who has no
right to sell?
Art. 559 will no longer be applicable.
Sun Brothers v. Velasco
Sun Brothers  Lopez  Velasco  Ko Kang Chu
Lopez bought the refrigerator on installment
thereafter, he sold it to Velasco, a store owner, who in
turn sold it to Ko Kang Chu.
Sun Brothers filed an action to recover the said
refrigerator. Will the action prosper? No
When Sun Brothers sold to Lopez, ownership did not
pass because it was a conditional sale and ownership
will pass only upon full payment.
When Lopez sold to Velasco, ownership did not pass
because it falls under the general rule that the buyer
acquires no better title than what the seller had.
When Velasco sold it to Ko Kang Chu, the latter
acquired absolute ownership because it was bought in
a merchant store in good faith and for value. (Art.
1505) Thus, Chu cannot be compelled even if Sun
Brothers are willing to reimburse.
How is transfer of ownership effected?
Actual or Constructive delivery
If there was physical delivery, does that mean that there
was transfer of ownership?
No, it may be a conditional sale or a contract to sell
Delivery of Sale of Things
1. Quasi-tradition
This is used to indicate the exercise of a right by
the grantee with the acquiescence of the grantor.
2. Actual delivery (“Real tradition”)
Delivery or transfer of a thing from hand to hand if
it is movable, or by certain material and
possessory acts of the grantee performed in the
presence and with the consent of the grantor if it
is movable.
3. Traditio longa manu
The grantor pointing out to the grantee the thing
which is delivered which at the time must be
within sight.
4. Traditio brevi manu
55
 Grantee is already in possession of the thing under
a title which is not of ownership, such as when the
lessee purchases from the lessor the object of the
lease.
5. Constitutum possesorium
Vendor remains in possession of the property sold
by virtue of a lease contract agreement with the
vendee.
Delivery of Sale of Rights
1. Execution of a Public Instrument unless the
contrary appears in the deed
2. Placing of the titles of ownership in the possession
of the vendee
3. Use by the vendee of his rights with the consent of
the vendor
Sale
1. Sale on Satisfaction, Approval, Trial
Ownership passes to the buyer when:
a. he signifies his acceptance or does any other
act adopting the transaction;
b. retains the goods without giving notice of
rejection, then if a time has been fixed for the
return of the goods, on the expiration of such
time, and if no time has been fixed, on the
expiration of a reasonable time.
2. Sale or Return
In a sale or return, the buyer acquires ownership
upon delivery of the thing sold and may revest the
ownership to the seller within the time fixed in the
contract or within a reasonable time.
3. Sale of Specific Goods
Where there is a contract of sale of specific goods,
the seller may, by the terms of the contract,
reserve the right of possession or ownership in
the goods until certain conditions have been
fulfilled.
4. Contract to Sell
It is considered a special kind of conditional sale, it
is a peculiar kind of sale because despite the
happening of the condition and actual delivery, the
buyer does not automatically acquire ownership.
If condition happens, the right of the buyer is to
compel the seller to execute a final deed of sale. So
ownership does not automatically pass.
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5. Absolute Sale
Seller does not reserve his title over the thing sold
and thus, upon delivery of the thing, ownership
passes regardless of whether or not the buyer has
paid.
6. Conditional Sale
Conditions are imposed by the seller before
ownership will pass
*Possessory lien and the right of stoppage in transit
can be exercised by the unpaid seller simultaneously
when there is partial delivery
a. SIT – goods he has already parted with
b. PL – on the remainder
“Risk of Loss” (Art. 1504)
-this is relevant only when the loss happened AFTER
the perfection of the contract and before delivery and
due to a fortuitous event
Res perit domino, whoever is the owner at the time of
the loss shall bear loss
Bar Question
S, an American resident of Manila about to leave on a
vacation sold his car to B for $2,000. The payment to
be made 10 days after delivery to X, a third party
depositary agreed upon, who shall deliver the car to B
upon receipt by X of the purchase price. It was
stipulated that ownership is retained by S until
delivery of the car to X.
5 days after the delivery of the car to X, the house of X
was gutted by fire thereby destroying the car without
the fault of X or B. Is buyer B legally obligated to pay
the purchase price? Yes
The car was already delivered to X when it was lost.
Thus, it will be the buyer who bear the risk of loss.
PBQ:
Is it possible that it will not be the owner who will bear
the loss?
Yes. The res perit domino rule has several exceptions
1. when stipulated otherwise;
2. security title
3. delay
Lawyer’s Cooperative v. Atty. Tabora
56
Atty. Tabora (AT) bought a complete set of American
Jurisprudence (Amjur.) from LC payable on
installment. The contract stated that ownership shall
not pass until full payment of the price but upon
delivery, the buyer will be the one to bear the loss
whatever may be the cause of the loss.
On the night when the books were delivered to the
office of Atty. Tabora in Naga City, there was a fire thus
burning all the books.
Atty. Tabora refused to pay thus a case was filed by LC.
AT contended that he was not the owner at the time of
the loss (res perit domino). However, it was stipulated
that the buyer shall bear the loss upon delivery. (1 st
exception)
2nd exception:
The buyer will be the one to bear the loss if the seller
retained title ONLY to secure the fulfillment of the
buyer’s obligation.
3rd exception:
If there was delay in the delivery of the goods, and
thereafter the goods were lost or destroyed due to a
fortuitous event. Whoever was at fault resulting in the
delay of the delivery will be the one to bear the loss.
(whether or not he is the owner).
Premise: The seller is still in possession of the goods.
1st scenario
If the buyer was the one who obtained the goods from
the seller’s place but due to his fault, he was not able to
get it on the date agreed upon and thereafter the thing
was lost due to a fortuitous event. Even if at the time
of the loss, the seller was still the owner, the buyer
shall bear the loss because he caused the delay.
2nd scenario
When the ownership is already transferred to the
buyer by constructive delivery and the seller was at
fault thereby causing delay.
Wrong answers:
Traditio Brevi Manu – the buyer was already in
possession before the sale
Constitutum Possessorium – the seller will not be in
delay because he has a right to possession based on
another contract
Best answer:
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By the execution of a public instrument wherein the
ownership passes to the buyer even if the goods are
still in the possession of the seller. Thus, if the seller
was at fault resulting in the delay, then he shall bear
the loss even if he is not the owner at the time of the
loss.
DOUBLE SALE
Bar Question
In a sale of a parcel of land and there was actual
delivery. The first buyer took possession but he did
not register. Thereafter, the same seller sold the same
parcel of land to a second buyer, who, without
knowledge of the prior sale, registered the sale. Who
will have the better right? The 2nd buyer
P3:5:38
Bar Question
JV, owner of a parcel of land, sold it to PP. But the deed
of sale was not registered. One year later, JV sold the
parcel again to RR, who succeeded to register the deed
and to obtain a transfer certificate of title over the
property in his own name. Who has a better right over
the parcel of land, RR or PP? Why? Explain the legal
basis for your answer.
RR because there is nothing in the facts that would
show that he is a registrant in bad faith. At the time he
registered the deed, he still had no knowledge about
the prior sale. (Good faith is presumed)
Rules on Double Sale:
Movable
The 1st possessor in good faith has the better right
Immovable
1. 1st registrant in good faith
2. 1st possessor in good faith
3. Person who has the oldest title in good faith
(not necessarily the first buyer, he acquired
ownership by other modes of delivery)
*The first buyer can only be in bad faith in relation to
the defect of the title of the seller. The first buyer can
never be a registrant in bad faith in relation to the
second sale (Natural! Nauna siya eh) “priority in time,
priority in right”
*What is important under this article is the
registration in good faith. A buyer may have been in
good faith upon perfection of the sale but became in
bad faith upon registration.
57
 a. Legal
b. Conventional
-contract of sale with a right to repurchase or
pacto de retro sale

2001 Bar Question P6

On June 15, 1995, Jesus sold a parcel of registered land Redemption
to Jaime. On June 30, 1995, he sold the same land to Right of redemption of adjoining lot owners
Jose.
What is the nature of the land?
Who has a better right if: 1. Rural
a. The first sale is registered ahead of the second 2. Urban
sale with knowledge of the latter. Why? Right of pre-emption
b. The second sale is registered ahead of the first -even before the perfection of the contract, the
sale with knowledge of the latter. Why? adjoining lot owner may invoke the right of
redemption
1st scenario
Jaime, even if he registered the sale with knowledge of Requisites:
the second sale, he, as a 1st buyer, would still be The land must be so small in area that there is no
considered as a registrant in good faith. apparent need for the land in the near future. The
purchase is merely for speculation.
2nd scenario
Jaime, because the registration of Jose was done in bad 2005 Bar Question
faith because he was already aware of the prior sale On July 14, 2004, Pedro executed in favor of Juan a
thus he cannot claim to be a registrant in good faith. Deed of Absolute Sale over a parcel of land covered by
TCT No. 6245. It appears in the Deed of Sale that Pedro
Bautista v. Sioson received from Juan P120,000.00 as purchase price.
1st buyer had better right. Legal possession through However, Pedro retained the owner’s duplicate of said
Constitutum Possessorium title. Thereafter, Juan, as lessor, and Pedro, as lessee,
executed a contract of lease over the property for a
Carumba v. CA period of one (1) year with a monthly rental of
1st buyer had better right. Levied parcel of land was P1,000.00. Pedro, as lessee, was also obligated to pay
unregistered under the Torrens system the realty taxes on the property during the period of
lease.
P3:28:04
Subsequently, Pedro filed a complaint against Juan for
P4:8:00 the reformation of the Deed of Absolute Sale, alleging
that the transaction covered by the deed was an
P5 equitable mortgage. In his verified answer to the
Remedies of unpaid seller complaint, Juan alleged that the property was sold to
a. Right to retain the thing in his possession; him under the Deed of Absolute Sale, and interposed
b. Right of stoppage in transitu; counterclaims to recover possession of the property
c. Right of resale; and and to compel Pedro to turn over to him the owner’s
d. Right to rescind duplicate of title. Resolve the case with reasons.
P5:37:00
(2 presumptions that it is an equitable mortgage
Modes of Extinguishment
present in the case)
1. Ordinary modes
-PLC3N
2. Special
-modes of extinguishment under the law on sales
3. Extra-special: Redemption
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 SC ruled that it is lease of service. There is ER-EE
relationship (control test).

Definition
Lease of things (Art. 1643)

Nature
2012 Bar Question Consensual
Spouses Raymundo v. Spouses Bandong Essentially onerous
Eulalia was engaged in the business of buying and (Kung walang bayad, hindi siya lease)
selling large cattle. In order to secure the financial
capital, she advanced for her employees (biyaheros). Lease v. Commodatum
She required them to surrender TCT of their
properties and to execute the corresponding Deeds of Republic v. Bagtas
Sale in her favor. Domeng Bandong was not required Government delivered 3 bulls to Bagtas for breeding
to post any security but when Eulalia discovered that purposes however, one of the bulls was not returned
he incurred shortage in cattle procurement operation,
he was required to execute a Deed of Sale over a parcel Transaction involving safety deposit boxes, is this a
of land in favor of Eulalia. She sold the property to her lease? No, it is a special kind of deposit
grandniece Jocelyn who thereafter instituted an action
for ejectment against the Spouses Bandong. Nielsen v. Lepanto Mining

To assert their right, Spouses Bandong filed an action Frenzel v. Uychaco

for annulment of sale against Eulalia and Jocelyn
alleging that there was no sale intended but only Massachusets Rule
equitable mortgage for the purpose of securing the
shortage incurred by Domeng in the amount of P 70,
000.00 while employed as "biyahero" by Eulalia. Was
the Deed of Sale between Domeng and Eulalia a
contract of sale or an equitable mortgage? Explain.

2011 Bar Question

Raul, Ester, and Rufus inherited a 10-hectare land
from their father. Before the land could be partitioned,
however, Raul sold his hereditary right to Raffy, a
stranger to the family, for P5 million. Do Ester and
Rufus have a remedy for keeping the land within their
family?
(A) Yes, they may be subrogated to Raffy’s right by
reimbursing to him within the required time what
he paid Raul.
(B) Yes, they may be subrogated to Raffy’s right
provided they buy him out before he registers the sale.
(C) No, they can be subrogated to Raffy’s right only
with his conformity.
(D) No, since there was no impediment to Raul selling
his inheritance to a stranger.

P6:12:50
Contract of Lease
Jardin v. NLRC
Taxi drivers complained about a deduction made by
their operator for the “cleaning” of the taxicabs. The

Civil Law Review II For PERSONAL use only 59

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Sublease and Assignment of Lease
Arts. 1649, 1650 & 1670
May a lessee sublease the property leased without the
consent of the lessor?
Yes, as long as he was not prohibited by the lessor in
doing so
May a lessee assign the property leased without the
consent of the lessor?
No, but such right may be granted or assented to by
the lessor
Bar Question
Isaac leased the apartment of Dorotea for 2 years. 6
months later, Isaac subleased a part of the apartment
due to a financial difficulty. Is the sublease valid?
Yes, if there is no express prohibition of subleasing in
the lease contract
Bar Question
In January 1993, A Corporation leased the all the floors
of the GQS Towers for 10 years at a monthly rental of
P3M. It also subleased 5 of the 12 floors to wholly-
owned subsidiaries. The lease contract expressly
prohibits the assignment of the lease contract or any
portion thereof. The rental value of the building has
increased to 50% since it was leased to A Corporation.
Can the building owner ask for the cancellation of the
contract for violation of the provision against
assignment?
No, the prohibition is only as to assignment. In the
case, the lessee only subleased and the law gives him
such right to do so because there is no express
prohibition in the lease contract.
PBQ:
A and B entered into a lease contract. Subsequently, B
entered into an agreement with C wherein he
transferred his rights to C, without the consent of A.
Would this be considered a violation of the contract of
lease?
It depends. If the agreement is merely a sublease,
there is no violation however if it is an assignment of
the lease, then there is a violation thus it can be a basis
of the rescission of the contract.
How to determine?
Malacat v. Salazar
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If in the agreement there is an absolute transfer of
rights of the lessee to the 3rd person such that the
personality of the lessee would disappear practically
making the 3rd person as the new lessee, then it shall
be considered an assignment.
If in the agreement the lessee retained a reversionary
interest, no matter how small, it is merely a sublease.
Bar Question
A leased a condominium unit to B for a period of 5
years. After 1 year, B transferred his rights to C
without the knowledge of A. The agreement between
B & C was for 3 years. Is the contract between B & C
void?
No, it is merely a sublease because B will be reverted
to his right as lessee for a period of 1 year after his
agreement with C is terminated.
Bar Question
Is the buyer of a land bound to respect an existing
contract of lease between the lessor/seller and lessee?
Jude owned a building, which he had leased to several
tenants. He then sold the building to Ildefonso without
the knowledge of the tenants. Ildefonso notified the
tenants that he is the new owner ordering them to
vacate within 30 days from notice. The tenants
refused to vacate insisting that they will only do so
when the term of the lease has expired.
3 instances when the buyer is bound to respect the
existing lease:
1. If it is stipulated in the contract of sale
2. If the lease contract is registered (constructive
notice)
3. If at the time of the sale, the buyer had actual
knowledge of the lease contract (actual notice)
Bar Question
Contract for a Piece of Work
An independent contractor obliged himself not only to
supply labor but also the materials. Subsequently, he
bought the materials from a supplier and the
contractor failed to pay the latter. Can the supplier
validly demand payment from the owner/developer?
Yes. Article 1729. Despite the fact that the
independent contractor is not an agent of the owner, it
is possible for the supplier to be able to hold the
owner liable under the principle of unjust enrichment.
General Rule:
60
The supplier can hold the owner liable only to the
extent of the amount owing to the contractor at the
time of the demand.
Exceptions:
1. The owner is liable if he paid the contractor
even if the debt is not yet due and
demandable
2. If the owner renounced his claim against the
contractor (gratuitous renunciation)
3. If no bond was executed to secure the claims
of the suppliers (Performance Bond)
Frensel v. Ochaco
In the absence of materialmen’s lien, the owner of the
edifice cannot be held liable because there is no privity
of contract between the supplier and the owner.
Termination of the Contract of Lease
Heirs of Dimaculangan v. IAC
Bar Question
A is the owner of a lot on which he constructed a
building for a total cost of P10M. Of that amount, B
contributed P5M provided that the building as a whole
would be leased to him for a period of 10 years at a
rental of P100,000 a year to which A agreed.
However, 2 years into the lease, the building was
totally burned. Soon thereafter, A’s workers cleared
the debris and started construction of a new building.
B then demanded that he should occupy the said
building for the unexpired term of his original lease
explaining that he has spent partly in the construction
of the burned building. A did not agree. Did A do right
in rejecting B’s demand?
Yes, because the contract had been extinguished with
the loss of the thing due to a fortuitous event.
What if the loss due to a fortuitous event is only partial?
The lessee may either:
1. demand for the reduction of the rent; or
2. rescind the contract
*The right of rescission shall only be available if there
is substantial loss or destruction
Implied New Lease “Tacita Reconducion”
1. The lease period has expired
2. The lessee continues to be in possession of the
lease for at least 15 days from the time of the
expiration of the lease; and
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3. No notice for the termination of the contract from
the lessor or the lessee
Rights & obligations of the parties
Memorize Article 1670
If the parties did not stipulate the period of the
contract, the period would depend on the nature of the
object of the contract whether rural or urban.
PFQ:
On November 15, 1999 A leased an urban land to B for
a period of 10 years with a rental payable annually.
On December 5, 2009, B while still possession of the
land, paid the rental to A. After expiration of the lease,
there being no notice given by either party for the
termination of the lease, B will continue to have the
right to use the thing:
a. for a period of another 10 years (applies to the
original period only)
b. for a period of 1 year from November 15,
2009 (because in urban lands, it depends on the
manner of payment of rentals, in the case, the
payment is annually)
c. only with the tolerance of A (it is provided by
law)
d. for all the time necessary for the gathering of
the fruits which the whole estate may yield in
one year (only applicable to rural land)
2011 Bar Question
The term of a 5-year lease contract between X the
lessor and Y the lessee, where rents were paid from
month to month, came to an end. Still, Y continued
using the property with X’s consent. In such a case, it is
understood that they impliedly renewed the lease:
(A) from month to month under the same
conditions as to the rest.
(B) under the same terms and conditions as before
(C) under the same terms except the rent which
they or the court must fix.
(D) for only a year, with the rent raised by 10%
pursuant to the rental control law.
How about the terms and conditions?
All the original terms and conditions are deemed
renewed or revived EXCEPT the term of the original
contract of lease which expired
61
Bar Question
On January 1, 1980 Nestor leased the fishpond of
Mario for a period of 3 years at a monthly rental of
P1,000 with an option to purchase the same during
the period of the lease for the price of P500,000.
After the expiration of the 3-year period, Mario
allowed Nestor to remain in the leased premises at the
same rental rate. On June 15, 1983, Nestor tendered
the amount of P500,000 to Mario and demanded that
the latter execute a Deed of Absolute Sale of the
fishpond in his favor. Mario refused on the ground
that Nestor no longer had an option to buy the
fishpond. Nestor filed an action for specific
performance, will the action prosper?
No, because it is clear in their agreement that Nestor
leased the fishpond with an option to purchase during
the period of the lease. Also, it may be true that there
is an implied new lease in this case because Mario
allowed Nestor to remain in the leased property
however, only those terms and conditions which are
germane to a contract of lease are deemed renewed.
Thus, the action will not prosper because an option to
buy is not germane to a lease contract.

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AGENCY
Article 1868
By the contract of agency, a person binds himself to
render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
The purpose of the contract of agency is the execution
of a juridical act; thus, not all representations result in
a contract of agency, only representations involving a
juridical act results into agency
Juridical Act
-create, modify, extinguish a legal relationship
Bar Question
Joan asked Aiza to buy some groceries for her in the
supermarket. Was there a nominate contract entered
into between Joan and Aiza?
Yes, if Aiza agreed, there is a contract of agency when
Aiza agreed to represent Joan in buying groceries or
there could a contract of lease of service provided there
is no principal-agent relationship between Joan and
Aiza.
Termination
Agency is unique because it may be terminated by the
unilateral act of one of the parties.
Macke v. Camps
Rallos v. Yangco
Yangco wrote a letter to Rallos. In his letter, he told
Rallos that he has an agent, Collantes, who has the
authority to obtain the goods from the former which
would be sold and the proceeds will be remitted to
Rallos less commission.
Rallos delivered the goods to Collantes however, the
latter stopped remitting thus Rallos sued Yangco.
Yangco said that he cannot be held liable because the
agency between him and Collantes was already
revoked. Is Yangco correct?
No, Article 1873
There was no notice given to Rallos that the principal-
agent relationship between Yangco and Collantes has
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been revoked. Yangco should’ve written a letter to
Rallos to inform hi of such revocation.
Dela Peñ a v. Hidalgo
Hidalgo was the agent of DLP in relation to the
properties of DLP here in the Phils. Hidalgo wrote a
letter to DLP informing him that he already appointed
another administrator because he needs to leave the
country for medical reasons.
It was proven that the principal received the letter but
despite knowledge of the appointment of another
administrator, he did not do anything. The SC held
that by the mere silence or inaction or failure to
repudiate, he would be deemed to have impliedly
given his consent to the new agency.
Bar Question
A as principal appointed B as his agent granting him
general and unlimited management over A’s
properties stating that A withholds no power from B
and that the agent may execute such acts as he may
consider appropriate.
Accordingly, B leased A’s parcel of land in Manila to C
for four years at P60,000 per year payable annually in
advance. Also, B leased A’s parcel of land in Caloocan
City to D without a fixed term at P3,000 per month
payable monthly. Both contracts were executed by B
while A was confined in Makati Medical Center due to
illness. Rule on the validity and binding effect of each of
the above contracts upon A, the principal.
1st – no SPA thus unenforceable
2nd – even if no SPA, it is valid and binding
PFQ:
What if the agent was authorized to sell a car and a
SPA was issued to him. Thereafter, he was able to sell
the car to the buyer. A month after, the buyer filed an
action for annulment on the ground that this agent
was a minor at the time the contract of sale was
entered into. Will the action prosper?
No, it is not the capacity of the agent that should be
considered but that of the principal. Also, the only
party who has the right to institute the action for
annulment is the incapacitated person himself.
63

PBQ:
If the contract agency is made orally, would a contract
entered into by the agent bind the principal?
GR: Yes
Exceptions:
Articles 1878 and 1874 –VIPs!
If the agent is authorized to sell a parcel of land and his
authority is not in writing, the sale is void. It is not the
agency, but the sale which is void.
Illustration #1:
The law does not require the SPA to be in a specific
form. It may be a simple note.
Illustration #2:
The seller, Brigida, representing her daughter, sold a
parcel of land but the authority of the mother was not
put in writing. –the sale is VOID.
Bar Question
X was abroad and phoned his brother Y authorizing
him to sell X’s parcel of land in Pasay. X sent the title
to Y by courier service. Acting for his brother, Y
executed a notarized deed of absolute sale of the land
to Z after receiving payment. What is the status of the
sale?
-The sale is void because the authority of Y was merely
a verbal conversation. It must be in writing
P9
2014 Bar Question
Fe, Caridad and Esperanza inherited from their
parents a 500-sq lot which they leased to Maria for 3
years. One year after, Fe claiming to have the
authority to represent her siblings, offered to sell the
leased property to Maria which the latter accepted.
The sale was not reduced into writing but Maria
started making partial payments to Fe which the latter
received and acknowledged. After giving the full
payment, Maria demanded for the execution of a Deed
of Absolute Sale which Esperanza and Caridad refused
to do. Worst, she found out that the siblings sold the
same property to Manuel and this compelled Maria to
file a complaint for the annulment of the sale with
specific performance and damages. If you were the
judge, how will you decide the case?
Obligations of the Agent
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1. Act within the scope of his authority; and
2. Act in representation of the principal
How do you determine if the agent has authority?
Demand for the presentation of the power of attorney,
read the lawand jurisprudence
Katigbak v. Tai Hing
The agent was authorized to sell properties of the
principal but the principal refused to recognize the
contract claiming that the agent only had authority to
sell properties which he already owned at the time of
the issuance of the power of attorney and not those
acquired thereafter.
The SC held that the contract is valid because of a
phrase in the power of attorney “which might belong”
Thus, even those properties acquired by the principal
after the issuance of the power of attorney are
included in the properties which the agent is
authorized to sell.
Municipal Council of Iloilo v. Evangelista
The SC ruled that the “authority to hire includes the
authority to pay” thus when the agent paid the lawyers
he hired, he acted within the scope of his authority
when he paid for their services.
Insular Drug v. PNB
The SC held that the power to collect checks does not
include the power to indorse or encash because the
latter must be in a separate power of attorney.
Fiduciary Obligation
Domingo v. Domingo
Principal Domingo authorized agent Domingo to sell a
parcel of land. Agent Domingo introduced a
prospective buyer, de Leon. While the principal and
the prospective buyer were negotiating, the latter gave
the agent P1,000 as gift. After further negotiations,
they still cannot agree as to the price so de Leon
proposed to just eliminate agent Domingo so they can
finally agree on the price. The SPA was revoked and
the prospective buyer said that he is no longer
interested in buying the property. The agent
subsequently found out that the parcel of land was
registered under the name of de Leon’s wife; thus, he
filed a case.
The SC held that even if the revocation of the SPA was
done in bad faith, all the agent’s commission are
64
forfeited because he failed to comply with his fiduciary
duty of delivering to the principal whatever he might
have received in the contract of agency.
Bar Question
X appoints Y as his agent to sell his products in Cebu
City. Can Y appoint a sub-agent and if he does, what are
the effects of such appointment?
When an agent appoints a sub-agent, he does not
dissociate himself from the agency. He is still the
agent, he will just have another person to help him
accomplish the purpose of the agency thus he is
responsible for the acts of a sub-agent.
Whereas, under Article 1892, if one appoints a
substitute, he will no longer be an agent; the substitute
will become the new agent.
Can the principal hold the substitute liable for the
damage caused to the principal?
Yes, he may do so. But this is not absolute, take note
that the agent is not the insurer of the success of the
principal.
All acts of the substitute appointed against the
prohibition of the principal shall be void. But if the
agent was not prohibited from appointing a substitute,
the law provides that the agent shall be responsible for
the acts of such substitute but it does not mean
automatic responsibility, it depends on the factual
circumstances of each case.
Commission Agent
What if the agent failed to comply with his obligation?
Can he be held liable?
It is not absolute. There is a defense of the exercise of
the diligence required. Again, the agent is not the
insurer of the success of the principal.
Guarantee Commission Agent “del credere agent”
(cannot invoke the exercise of due diligence as a
defense)
As an agent, Al was given a guarantee commission in
addition to his regular commission after he sold 20
refrigerators to a company. The company failed to pay
for the units sold. Al’s principal demanded payment
for the customer’s accountability. Al objected on the
ground that his job was only to sell and not to collect
payment for units bought by the customer. Is Al’s
objection valid? Can his principal collect from him or
not?
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No, his objection is not valid thus his principal can
collect from him. As a guarantee commission agent, he
does not only have the obligation to sell but he also
has the obligation to collect the proceeds of the sale
and he bears the risk of collection.
PBQ: Rights and Obligations of the Principal
The primary obligation is to comply with all the
obligations, which the agent may have contracted
within the scope of his authority and in representation
of the principal
What if the agent assumed the obligation of the
principal to shoulder the expenses in carrying out his
functions? What if he failed to put up the amount, will
he be liable?
Not necessarily. If later on it turned out that the
principal is already insolvent, the agent is not obliged
to advance the amount necessary to carry out his
functions.
General Rule:
The agent may seek reimbursement for the expenses
incurred in carrying out his functions
Exceptions: Article 1918
Example:
If the agent acted in contravention of the principal’s
instructions UNLESS the latter wants to avail of the
benefits derived from the contract
PFQ: The agent, acting within the scope of the
authority and in representation of the principal,
entered into a contract involving a warehouse owned
by the principal. However, the principal also entered
into a contract with a 3rd person involving the same
warehouse. Who has a better right?
General Rule:
Priority in time, priority in right
Exception:
When the transaction involved is a sale, apply the rule
under Article 1544 on double sale.
Modes of Extinguishment
Enumeration under Article 1919 is not exclusive.
[EDWARD]
PBQs: Extinguishment due to death and revocation
Bar Question
65
Mario received from Edgar a pendant with diamonds
valued at P5,000 to be sold on commission basis or to
be returned upon demand. On the evening of August
21, 1987, while he was walking home, two men
snatched his clutch bag containing the pendant and
ran away. Subsequently, the snatchers were
apprehended and charged. During the pendency of the
criminal case, Edgar brought an action against Mario
for the recovery of the pendant or its value and
damages. Mario interposed the defense of fortuitous
event.
Edgar contends:
1. The defense of fortuitous event is untenable
because there was negligence on the part of the
defendant
2. There must be prior conviction of Robbery for
the defense of fortuitous event to be availed of
Decide the case.
The act of the agent in carrying a clutch bag at night
containing diamonds is considered negligent. Thus, he
cannot interpose fortuitous event as a defense in order
to avoid liability.
Austria v. CA (on Edgar’s 2nd contention)
The SC held that for fortuitous event to be invoked as a
defense, it is not necessary that the perpetration of the
act be apprehended or convicted. It is only necessary
that the event be proven by preponderance of
evidence.
What if the principal died, should the agent still carry
out the agency?
General Rule:
No, death of one of the parties extinguishes the
contract and agency is representative in character, if
the principal is already dead, the agent will no longer
represent anyone.
Exceptions:
1. The agent shall continue with task already begun
and delay would entail danger.
2. Article 1930
3. Article 1931 (Rallos v. Go Chan) PBQ
PFQ:
In a phone conversation, A authorized B in 1950 to sell
a parcel of land. A died in 1954. In 1956, A’s children
sold the same land to C. In 1957, B sold the same land
to D.
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It appears that C did not register the sale executed by
the children. D, who was not aware of the previous
sale, registered the sale executed by B whose authority
to sell was annotated at the back of the OCT. Assuming
that B has the authority to sell the land, who has the
better right, C or D?
C has a better right because the sale of B to D is void
because the authority is not in writing.
Article 1874
What if B had an SPA?
Article 1931
It depends on whether B had knowledge of the death
of A at the time that he entered into the contract:
1. If B had knowledge, then C shall have a better
right.
2. Even if B had no knowledge but D acted in bad
faith, C will still have a better right
3. If B had no knowledge and D acted in good faith,
D will have a better right under Article 1544
because D registered the sale.
Bar Question:
An agent authorized by a SPA to sell a parcel of land
belonging to the principal succeeded in selling the
same to a buyer according to the instructions given to
him. The agent executed a deed of sale on behalf of his
principal 2 days after the principal died, and event that
neither the agent nor the buyer knew at the time of the
sale. What is the status of the sale?
The sale is valid (Article 1931)
As long as the agent had no knowledge and the 3 rd
person acted in good faith, the contract, though
entered after the death of the principal, would still
bind the estate of the principal.
Revocation
If the parties agreed that the authority of the agent is
for one year and 3 months into the contract, the
principal revoked the authority of the agent. Can the
agent hold the principal liable for damages for breach
of contract?
Barretto v. Sta. Maria
Obiter: Even if there was a period agreed upon by the
parties as to the authority of the agent, the principal
can revoke the authority of the agent at any time
because agency is based on trust and confidence.
However, having the right to revoke doesn’t
necessarily mean that he will not be liable for damages
under the principle of abuse of right (Human
Relations)
66
Article 1927 (Agency coupled with interest)
Instances when the principal cannot revoke the
authority of the agent

Bar Question
Richard sold a parcel of land in Cebu City to Leo for
P100M payable in annual installments over a period of
10 years but title will remain with Richard until the
purchase price is fully paid. In order for Leo to pay the
price, Richard gave him a power of attorney
authorizing him to subdivide the land, sell the
individual lots and deliver the proceeds to Richard to
be applied to the purchase price.

5 years later, Richard revoked the power of attorney

and took over the sale of the subdivision lots himself.
Is the revocation valid or not?

No, the facts of the case pertain to an agency coupled

with interest because the agency was constituted as a
means of fulfilling an obligation which had previously
been contracted (obligation to pay the price). Thus, as
long as the interest still exists, the principal cannot
validly revoke the authority of the agent.

Coleongco v. Claparols
Claparols is the owner of a nail factory and he badly
needed funds for his business to survive. He applied
for loan with different banks but to no avail.
Coleongco offered to lend money but on several
conditions: that he be appointed as agent of Claparols;
that he be the one to obtain the bills of lading when the
goods are shipped, that he be the one to market the
products, etc.

Subsequently, Claparols revoked the authority of

Coleongco thus the latter sued the former claiming
that the agency is one coupled with interest. Is
Coleongco’s claim correct?

Yes, the contract involves a bilateral contract (loan)

which depends upon the agency. He would not have
lent money if he will not be appointed as agent.

However, the SC held that there could be a valid

revocation despite Article 1927. Thus, even if the
agency is one coupled with interest, the revocation is
valid because there was a just cause.

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P10
PARTNERSHIP
Article 1767
By the contract of partnership, two or more persons
bind themselves to contribute money, property, or
industry to a common fund, with the intention of
dividing the profits among themselves.
Two or more persons may also form a partnership for
the exercise of a profession.
Nature & Characteristics:
Consensual
Essentially onerous
Bar Question
X used his savings from his salaries amounting to
P2,000 as capital in establishing a restaurant. Y gave
the amount of P4,000 to X as “financial assistance” with
the understanding that Y will be entitled to 22% of the
annual profits derived from the operation of the
restaurant. After the lapse of 22 years, Y filed a case
demanding his hare in the said profits. X denied that
there was a partnership and raised the issue of
prescription as Y did not assert his rights at anytime
within 10 years. Is Y a partner of X in the business?
UP: Yes, because they agreed to contribute to a
common fund and there was agreement to divide the
profits.
CU: No, there is no agreement to contribute because it
was only X who established the restaurant. The
financial assistance does not necessarily mean that it is
a contribution to a common fund, it could be by way of
donation or loan.
Under Article 1769, while it is true that when a
person receives profits, it would raise an inference
that he is partner however no inference shall be made
that he is a partner in such business if he received
money in payment of a debt in installment or as
annuity of a widow of a deceased partner, among
others.
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Bar Question -MCQ
Distinguish co-ownership from partnership
A co-ownership is created not only by agreement by
the parties but also by law.
Bar Question
Can a husband and wife form a limited partnership to
engage in real estate business with the wife being a
limited partner?
(Take note: The nature of business is irrelevant and it
doesn’t matter who is the limited partner whether the
husband or wife.)
Yes, because they are not prohibited under the law
since limited partnership is NOT a universal
partnership.
Bar Question
Can 2 corporations organize a general partnership
under the CC? Can a corporation organize a general
partnership under the CC?
In both instances, No,
Tuazon v. Bolañ os
The SC held that while a corporation may enter into a
joint venture agreement, it cannot validly enter into a
contract of partnership.
Oral partnership where no immovable property is
contributed is valid
Article 1772
Every contract of partnership where the capital
contribution in money or property is P3,000 or more
shall be in a public instrument and must be registered
with the SEC.
Even if there is failure to comply with the formalities
prescribed in the preceding paragraph, it will be
without prejudice to the liability of the partnership and
the partners to 3rd persons.
Article 1768
A juridical personality shall be created separate and
distinct from the individual partners.
Articles 1771 v. 1773
If an immovable property is contributed and there is
no inventory signed by all contracting parties, the
partnership is void.
68
What if there is an inventory but the partnership
contract is not in a public instrument?
Dauden Hernaez v. delos Angeles
When the law requires a particular form and such is
not complied with, the contract will only be void if the
law itself provides for the nullity of the contract
P10:28:25
Classification of Partnership
As to the Duration
1. fixed term
2. at will
3. for a particular undertaking
If in the articles of partnership there was no fixed period
as to the term or duration of the partnership, is it a
partnership at will?
Not necessarily. It may be a partnership for a
particular undertaking.
Ortega v. CA
Atty. Misa, one of the senior name partners, dissolved
the partnership. The junior partners opposed and
questioned the validity of the dissolution and wants to
hold Atty. Misa liable. According to them, he cannot
just dissolve the partnership because it is not a
partnership at will since there were several purposes
indicated under the articles of partnership by reason
of which the partnership was formed.
The SC held that despite the fact that several purposes
were enumerated in the articles of partnership, it is
not a partnership for a particular undertaking but a
partnership at will thus the dissolution was proper.
As to the extent of liability
1. General
-all the partners are general partners and each of
them has the right to participate in the
management of the business subject to their
agreement and may be held liable up to his
personal property for partnership obligations
2. Limited
-there should be at least one general partner and
at least one limited partner. The limited partner
does not have the right to participate in the
management of the business but his liability for
partnership obligations is limited to his capital
contribution
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Bar Question
A, B & C formed a partnership for the purpose of
contracting with the Government for the construction
of one of its bridges. On June 30, 1992, after
completion of the project, the bridge was turned over
by the partners to the Government. On August 30,
1992, D, one of the suppliers of the construction
project, sued A for the collection of the indebtedness
to him. A moved to dismiss the complaint against him,
on the ground that it was ABC partnership that was
liable for the debt. D replied that ABC Partnership was
dissolved upon completion of the project for which
purpose the partnership was formed. Will you dismiss
the complaint against A, if you were the judge?
No, the individual partners are subsidiarily liable for
partnership obligations in case the assets of the
partnership are not sufficient to pay the debt.
P10:39:45
Classes of Partners
As to the rights and obligations
-relevant only in limited partnership
2013 Bar Question
As a rule, a limited partner cannot be held liable up to
his personal property
Exceptions:
a. If he actively participates in the management
of the business of the partnership
-he does not become a general partner but he
may be held liable as if he is a general partner
b. If his surname appears in the firm name
Exception to the Exception:
He may not be held liable if that surname is also
the surname of another partner who is a general
partner or if such surname is already in the name
of the partnership even before he entered into
the partnership
c. If he is both a general and a limited partner at
the same time
-the law provides that if such partner is at the
same time a general and a limited partner, he will
have all the rights and obligations of a general
partner however, as he is also a limited partner,
in case of dissolution, he will have preference as
to the assets of the partnership which he would
not have, had he not been a limited partner
69
 d. If there was failure to substantially comply If he is a capitalist, yes he may be compelled. However,
with the formalities prescribed by law for the if he is an industrial partner, he cannot be compelled
creation of a limited partnership: such as to sell his interest to the other partners.
When there is no certificate;
When the certificate is signed but not subscribed; Incoming/New Partner
When the certificate is not signed by all partners; ABC formed ABC partnership. After some time, D
When the certificate does not name the partners became a partner. 6 months thereafter, a partnership
obligation worth P5M became due and demandable.
Effect: Will it result to a void partnership? Can the creditor hold D liable for the said amount? If so,
No, despite such non-compliance, it is a valid up to what extent?
contract among the partners. However, each one
of them can be treated as a general partner as far Yes. The extent of liability depends on when the
as third persons are concerned obligation was incurred. If it was incurred before he
became a partner, then he will only be liable up to his
As to their contribution capital contribution unless he expressly bound himself
to such obligation.
1. Capitalist
2. Industrial
Whereas if the obligation is incurred when he is
already a partner, then he shall be liable up to his
May a partner be both capitalist and industrial?
personal property.
Yes, but the rights & obligations would be different
Managing Partner
2013 Bar Question
X is indebted to the partnership P100,000 and to A,
Joe and Rudy formed a partnership to operate a car
another partner, P50,000. X paid A P30,000. Who is
repair shop in Quezon City. Joe provided the capital
entitled to the P30,000, A or the partnership?
while Rudy contributed his labor and industry.
A may be entitled to the entire amount if he is not the
managing partner in the partnership.
On one side of their shop, Joe opened and operated a
coffee shop while on the other side, Rudy put up a car
The rule on proportional application under Article
accessories store. May they engage in such separate
1792, is only applicable when the partner to whom
businesses without the consent of the other partner?
payment was made is a managing partner because of
conflict of interest. (P20k to the partnership and P10k
As far as capitalist partners are concerned, they may
to A)
not engage in a business similar to the kind of business
with that of the partnership.
However, even if A is the managing partner, A may still
be entitled to the entire amount if the debt to A is
As far as industrial partners are concerned, they may
already due and the debt to the partnership is not yet
not validly engage in any business without the express
due.
consent of the other partner.
If A is a managing partner and both debts are already
PFQ:
due and demandable, if the debt to A is more onerous
The business of a partnership suffered losses. In a
and X invoked his right to have his payment applied to
meeting of the partners, 4 out of 5 of them agreed to
the more onerous debt.
contribute additional capital so the business will
survive. Can the 5th partner who declined to give
If A is a managing partner and both debts are already
additional contribution, compelled to give? No, unless
due and demandable and both are of the same nature
in the articles of partnership it is so stipulated that by
and burden, the entire amount shall be for the
mere agreement of the majority of the partners, each
partnership if A issues a receipt in the name of the
may be compelled to give additional contribution.
partnership.
Can he be compelled to sell his interest?
In other words, for the rule on proportional
It depends if he is a capitalist or industrial.
application to apply, there are 4 requirements:
1. The partner who received is a managing partner
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2. The 2 debts are both due and demandable
3. The debt to A is not the more onerous debt and
the debtor did not choose to have the payment
applied to the more onerous debt
4. The partner who received the payment issued a
receipt in his name
Property Rights
Frequently asked:
1. Partner’s right in specific partnership property
2. Partner’s interest in the partnership
3. Partner’s right to participate in the management
of the business of the partnership
PBQ:
Partner’s right in specific partnership property
If a partnership has a parcel of land, what is a partner’s
right in relation to this property?
Art. 1811
A partner is co-owner with his partners as to specific
partnership property.
This co-ownership is sui generis and it has the
following incidents (it is not the same as that in co-
ownership in property law)
2 most distinct features:
If A, B, & C are co-owners of a parcel of land and A sells
or assigns his interest over the co-owned property
without the consent of the other co-owners. Would it
be a valid sale?
No, it will not bind the partnership or the other
partners
Can the separate creditor of A validly levy upon A’s
interest upon the co-owned property?
No, only partnership creditors m ay validly levy upon
partnership properties
Partner’s interest in the partnership
It is the partner’s share in the profits and the surplus
What will be a partner’s share in the profits?
1. based on stipulation
2. in proportion to their capital contribution
however, if one is an industrial partner, he
shall be given first the just and reasonable
value of his service and the balance shall be
distributed to the capitalist partners in
proportion to their capital contribution
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In relation to a partner’s interest in the partnership
profits, can he assign his whole interest in the
partnership even without the consent of the other
partners?
Yes but such assignment will not result in the
dissolution of the partnership because the assignee
dos not become a partner
2013 Bar Question
In 2005, L, M, N, 0 and P formed a partnership. L, M
and N were capitalist partners who contributed
P500,000 each, while 0, a limited partner, contributed
P1 ,000,000. P joined as an industrial partner,
contributing only his services. The Articles of
Partnership, registered with the Securities and
Exchange Commission, designated L and 0 as
managing partners; L was liable only to the extent of
his capital contribution; and P was not liable for losses.
In 2006, the partnership earned a net profit of
P800,000. In the same year, P engaged in a different
business with the consent of all the partners. However,
in 2007, the partnership incurred a net loss of
P500,000. In 2008, the partners dissolved the
partnership. The proceeds of the sale of partnership
assets were insufficient to settle its obligation. After
liquidation, the partnership had an unpaid liability of
P300,000.
Assuming that the just and equitable share of the
industrial partner, P, in the profit in 2006 amounted to
P1 00,000, how much is the share of 0, a limited partner,
in the P800,000 net profit? (1%)
(A) P160,000
(B) P175,000
(C) P280,000
(D) P200,000
(E) None of the above
SUGGESTED ANSWER:
(C) P280,000
First, deduct the share of P from the profits. P800,000
less P100,000 is P700,000. Next, get the share of O by
following the proportion that the shares of L, M, N, O is
1:1:1:2, respectively.
Bar Question
Diel, Carlo and Una are general partners in a
merchandising firm having contributed equal amounts
to the capital. They also agreed for equal distribution
71
in whatever net profit for every fiscal period. After 2
years, Una conveys her whole interest in the
partnership to Justin without the knowledge and
consent of Diel and Carlo.
1. Is the partnership dissolved? No
2. What are the rights of Justin, if any?
Does he have the right to participate in the
management? How about a right to the net profits
of P360,000?
The assignee does not have the right to participate in
the management.
As to the net profits of P360,000:
It was stipulated that there will be equal distribution,
thus Justin shall be entitled to P120,000.
Partner’s right to participate in the management of the
business of the partnership
PFQ:
W and X are industrial partners; Y and Z are capitalist
partners who contributed P50,000 and P20,000,
respectively. Thereafter, in a unanimous vote of the
partners, W and X were appointed as managing
partners without any specification as to the respective
powers and duties.
A was appointed as secretary by W and X but such
appointment was opposed by Y and Z.
On the other hand, B, the accountant, whose
appointment was made by W and Z but was opposed
by X and Y.
Which appointment will bind the partnership?
Article 1801 – Solidary Management
The law provides that each of the managing partners
may bind the partnership for any act of administration
as long as he is not opposed by any other managing
partner. Thus, the appointment of A is binding.
As to the appointment of B, since it was only acted
upon by one managing partner and opposed by
another managing partner, it shall be resolved by the
vote of all the managing partners.
In case of a tie, then it shall be resolved by the vote of
partners having controlling interest. In this case, Y has
controlling interest thus the appointment of B cannot
bind the partnership.
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Joint Management
2 or more managing partners, none of the partners
shall act without the consent of all. In other words, for
an act to be binding, all the managing partners shall
agree.
Partners as Agents
All partners are managing partners. Whatever any one
of them may do alone shall bind the partnership unless
opposed by another partner.
If there is only one managing partner and his
appointment as such is mentioned in the articles of
partnership such partner cannot be easily removed.
The law requires:
1. there must be a just cause; and
2. it must be by a vote of partners having controlling
interest
Obligations of Partners
Most important: sharing of losses
Was there an agreement as to losses?
Do all partners have a share in the losses?
If yes, then it is a valid agreement
What if 2 or more partners are excluded in the losses?
If who was excluded was a capitalist partner, it shall
be absolutely VOID.
PBQ: If it was an industrial partner who was
excluded, it will be a valid agreement as to the
partners but void as to 3rd persons such as partnership
creditors. Thus, he may be held liable by the
partnership creditors but he may seek reimbursement
from the other partners since the agreement is valid as
to them. (Article 1816)
What if there is no agreement as to losses or if is void?
Determine if there is an agreement as to profits. If
there is, apply the same in the losses.
Is there is no agreement as to profits, the losses shall
be in proportion to their capital contribution. Thus, in
this scenario, the industrial partner shall not be liable
since he does not have capital contribution.
2013 Bar Question (same as above)
In 2007, how much is the share of 0, a limited partner, in
the net loss of P500,000? (1%)
(A) P0
(B) P1 00,000
(C) P125,000
(D) P200,000
72
(E) None of the above

SUGGESTED ANSWER:
(D) P200,000
A limited partner shall not become liable a s a general
partner unless, in addition to the exercise of his rights
and powers as a limited partner, he takes part in the
control of the business (Art 1948). In the absence of
stipulation as to profits and losses, the share of each
partner in the losses shall be proportionate to what he
may have contributed (Art 1797).
P11
Dissolution
Bar Question
Will the death of a partner terminate the partnership?
No, but it may dissolve the partnership.
Article 1829
On dissolution, the partnership is not terminated, but
continues until the winding up of partnership affairs is
completed.
Take note, termination and dissolution are two
different terms with different meanings.
Article 1828
Dissolution of a partnership is the change in the relation
of the partners caused by any partner ceasing to be
associated n the carrying on as distinguished from the
winding up of the business.
If the partnership involved is a general partnership,
the death of one of them will dissolve the partnership.
If it is a limited partnership, it depends if the one who
died is a general or a limited partner:
PFQ:
X, Y & Z are in a partnership business;
X contributed P10,000
Y contributed P5,000
Z contributed his services only.
After payment of partnership debts, what remains in
the partnership assets is P6,000 only. In the absence
of terms to the contrary, the share of Z will be equal to:
a. that of X
b. that of Y
c. nothing
As to preference, the first ones to be paid are creditors
who are not partners. The remaining amount shall be
returned to the capitalist partners in proportion to
their contribution. Thus the industrial partner can
only have a share in the assets if there are profits after
the capital contributions are returned to the capitalist
partners.
T or F:
A partner cannot demand the return of his share or
contribution during the existence of the partnership.
(premise: share or contribution in which the ownership
has passed)

1. If a general partner dies, it will not automatically

dissolve the partnership because it may be
subject to the stipulation of the partners or if the
surviving partners unanimously agreed to
continue with the business of the partnership.

2. On the other hand, if it is the limited partner who

dies, the partnership will not be dissolved and it
shall not affect the management of the
partnership business.

However, if the right of the limited partner to

have himself substituted by another limited
partner was granted to the executor or
administrator, the latter shall appoint a
substitute limited partner.
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 Can cash be a subject matter of commodatum?
Yes, in case of “show-money”

Can the bailor demand for the return of the thing at

will?
Not always. If he has the right to demand at will, it is
called a precarium (special kind of commodatum)
when there was no period agreed upon.

P11:14:35 As a rule, if there is a period agreed upon, the bailor

CREDIT TRANSACTIONS must respect such period and he cannot demand the
return of the thing at any time. However, there are
Most of the bar questions would fall on pledge and exceptions:
mortgage, sometimes loan, rarely deposit.
a. if the use of the bailee is merely tolerated;
What are the credit transactions which do no require b. when the bailor has an urgent need of the
delivery for the perfection? thing, the commodatum is merely suspended
1. guaranty not extinguished
2. suretyship c. when the bailee commits any act of ingratitude
3. mortgage
If B borrowed a van of A and during the period of this
contract, B raped the daughter of A inside the van.
Not all credit transactions are contracts. Like legal Would that give A to demand the return of the thing
pledge, necessary and judicial deposits even before expiration of the period?
It depends if the person raped is under the parental
Which are contracts? authority of the bailor.
Principal
1. Loan Expenses incurred by the bailee in relation to the
2. Deposit thing borrowed
Accessory/Security Arrangements Is he entitled to seek reimbursement for such expenses?
1. Guaranty 1. Use or Preservation
2. Suretyship Ordinary - no
3. Pledge Extraordinary - yes
4. Mortgage 2. Repair – yes
5. Antichresis 100% if not in use
50% if being used
LOAN 3. Ornamentation – no
Article 1933
By the contract of loan, one of the parties delivers to 2013 Bar Question
another, either: Cruz lent Jose his car until Jose finished his Bar exams.
1. something not consumable so that the latter may Soon after Cruz delivered the car, Jose brought it to
use the same for a certain time and return it, in Mitsubishi Cubao for maintenance check up and
which case it is called commodatum; or incurred costs of P8,000. Seeing the car's peeling and
2. money or other consumable thing, upon the faded paint, Jose also had the car repainted for
condition that the same amount of the same kind P10,000. Answer the two questions below based on
and quality shall be paid, in which case the contract these common facts.
is simply called a loan or mutuum.
1) After the bar exams, Cruz asked for the return of
Is it possible for a commodatum to be valid with a his car. Jose said he would return it as soon as
consumable thing as a subject matter? Cruz has reimbursed him for the car maintenance
Yes, as long as the purpose of the parties in the and repainting costs of P 18,000. Is Jose's refusal
delivery of the thing is not for consumption such as justified? (1%)
when the thing is used merely for exhibit
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 (A) No, Jose's refusal is not justified. In this kind of P11:48:22
contract, Jose is obliged to pay for all the PFQ:
expenses incurred for the preservation of the A borrowed B’s truck. During a fire which broke out in
thing loaned. A’s garage, he had time to save only one vehicle and he
(B) Yes, Jose's refusal is justified. He is obliged to saved his car instead of the truck. Is A liable for the loss
pay for all the ordinary and extraordinary of B’s truck?
expenses, but subject to reimbursement from
Cruz.
(C) Yes, Jose's refusal is justified. The principle of
unjust enrichment warrants the Article 1942
reimbursement of Jose's expenses. The premise of the law is that the bailee had a choice
(D) No, Jose's refusal is not justified. The on which thing to save.
expenses he incurred are useful for the
preservation of the thing loaned. It is Jose's Republic v. Bagtas
obligation to shoulder these useful
expenses. Mutuum
Nakar case
In commodatum, the bailee is obliged to pay for the Example:
ordinary expenses for the use and preservation of the If it was incurred in 2011 – apply 12% for loans and
thing loaned (Art 1941, Civil Code). forbearance of money until June 30, 2013. Thereafter,
apply 6% per annum
The bailee, Jose, has no right of retention on the
ground that the bailor owes him something, even if it Macalino v. BPI
may be by reason of expenses. He can only retain it if 3% per month is unconscionable thus the stipulation is
he suffers damages by reason of a flaw or defect in the void
thing loaned of which the bailor knows (Art 1951,
1:05:40
Civil Code).
2) During the bar exam month, Jose lent the car to his Sigaan v. Villanueva
girlfriend, Jolie, who parked the car at the Mall of Is the payment of interest valid?
Asia's open parking lot, with the ignition key No, for the creditor to be entitled to interest, it has to
inside the car. Car thieves broke into and took the be expressly stipulated in writing.
car. Is Jose liable to Cruz for the loss of the car due
to Jolie's negligence? (1%) Is solutio indebiti applicable?
Yes
(A) No, Jose is not liable to Cruz as the loss was
not due to his fault or negligence. DEPOSIT
(B) No, Jose is not liable to Cruz. In the absence of Article 1962
any prohibition, Jose could lend the car to A deposit is constituted from the moment a person
Jolie. Since the loss was due to force majeure, receives a thing belonging to another, with the
neither Jose nor Jolie is liable. obligation of safely keeping it and of returning the same.
(C) Yes, Jose is liable to Cruz. Since Jose lent
the car to Jolie without Cruz's consent, Jose If the safekeeping of the thing delivered is not the
must bear the consequent loss of the car. principal purpose of the contract, there is no deposit but
(D) Yes, Jose is liable to Cruz. The contract some other contract.
between them is personal in nature. Jose can
neither lend nor lease the car to a third 2 kinds:
person. 1. Judicial
2. Extrajudicial
The bailee is liable for the loss of the thing, even if it a. Necessary
should be through a fortuitous event if he lends or b. Voluntary–agreement of the parties
leases the thing to a third person, who is not a member
of his household (Art 1942, Civil Code). Article 1963

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An agreement to constitute a deposit is binding, but the The SC used Article 1998 by analogy. If in the deposit
deposit itself is not perfected until the delivery of the of effects, the depositary is expected to exercise the
thing due diligence required, more so in persons.

Nature: Real contract VIP: Article 1979

The thing is non-fungible, it has to be returned If the thing deposited was lost or destroyed due to a
fortuitous event?
Irregular deposit Yes
-depositary has the right to use because he was
permitted and the use is necessary for the
preservation

GUARANTY & SURETYSHIP

Article 2047
Are bank savings and time deposits considered as By guaranty a person, called the guarantor, binds
deposits? himself to the creditor to fulfill the obligation of the
No, they shall be governed by the law on mutuum principal debtor in case the latter should fail to do so.

Article 1998 If a person binds himself solidarily with the principal

The deposit of effects made by travellers in hotels or inns debtor, the provisions of Section 4, Chapter 3, Title I of
shall also be regarded as necessary. The keepers of this Book shall be observed (solidary oblgiations). In
hotel or inns shall be responsible for them as such case the contract is called a suretyship.
depositaries, provided that notice was given to them, or
to their employees, of the effects brought by the guests Is the principal debtor a necessary party?
and that, on the part of the latter, they take the No, the contract of guaranty or suretyship may still be
precautions which said hotel-keepers or their valid even without his knowledge or against his will
substitutes advised relative to the care and vigilance of
their effects. If the guarantor bound himself solidary with the debtor,
does he become a solidary co-debtor?
Bar Question No
Mr. Jeffrey Sy checked-in to City Garden Hotel
managed by Durban Apartments around midnight and Surety Solidary
gave his car keys to one of the hotel employees. When co-debtor
he woke up, he was told that his car was carnapped.
With that, he filed a claim against his insurance Nature of Accessory, in case Direct and primary;
company and the latter filed a case against Durban liability of default, he he has a share in
Apartments. Is Durban Apartments is liable? doesn’t have a the obligation
share in the
Yes, because there was negligence on the part of principal
Durban. In this case, there was a deposit constituted. obligation
The depositary should have observed the diligence
required for the safekeeping of the thing. The hotel
employee parked the car at the same area where
another car was recently carnapped as well. As a rule, the There is no
surety or subrogation, his
PBQ: guarantor will be only remedy is to
Makati Shangrila v. Harper subrogated in the seek
Effect of rights of the reimbursement
Mr. Harper was found dead inside a room in Makati Payment
Shangrila. Based on the CCTV, a lady entered his room creditor because from his other co-
around 1am and at around 4am a man entered the he has an interest debtors in
room as well. At around 5am, the man and woman left in the fulfillment proportion to their
the room. Is the hotel liable for the death of their guest? of the obligation share in the
obligation

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 Between the Between the Bar Question
Agreemen principal debtor creditor and the Amador obtained a loan of P300,000 from Basilio
t for the and the creditor solidary co-debtor payable on March 25, 2012. As security for the
extension without the without the consent payment of his loan, Amador constituted a mortgage
of the consent of the of the other on his residential house and lot in Basilio's favor.
period for surety: solidary debtors:
the Cacho, a good friend of Amador, guaranteed and
fulfillment The contract of It will not obligated himself to pay Basilio, in case Amador fails to
of the surety will be extinguish the pay his loan at maturity.
obligation extinguished obligation of the
other solidary co- If Amador fails to pay Basilio his loan on March 25,
debtors 2012, can Basilio compel Cacho to pay? (1%)
If there are 2 or more guarantors in one obligation,
each of them shall be called co-guarantors. No, Basilio cannot compel Cacho to pay because
Basilio has not exhausted the available remedies
P11:1:30:45 against Amador. The guarantor cannot be compelled to
Bar Question pay the creditor unless the latter has exhausted all the
X entered into a guarantee without the knowledge of property of the debtor and has resorted to all the legal
A, the principal debtor. The obligation of A in favor of remedies against the debtor (Art. 2058, Civil Code)
B was also secured by a real estate mortgage executed
by Y. Upon default of A, X paid B. A failed to reimburse If Amador sells his residential house and lot to Diego,
X despite demand. If X files an application for can Basilio foreclose the real estate mortgage? (1%)
foreclosure, will it prosper?
No, because the contract of guaranty was entered into Suggested Answer:
without the knowledge of the principal debtor, thus, Yes, Basilio can foreclose the real estate mortgage. It is
despite payment the guarantor will not be subrogated binding upon Diego as the mortgage is embodied in a
in the rights of the creditor. public instrument.Since the mortgage is in a public
instrument, there is constructive notice to Diego, who
If the necessary parties are the guarantor and the is the buyer if the mortgaged property.
creditor, who is the sub-guarantor?
He is the guarantor of the guarantor Alternative Answer:
No, Basilio cannot foreclose the real estate mortgage.
Rights and Obligations The sale confers ownership on the buyer, Diego, who
Sub-guarantors must therefore consent. The mortgage is not
For a guarantor to be held liable, the law requires that registered, thus, cannot be binding against third
the creditor exhaust all the properties of the principal persons (Art. 2125, Civil Code)
debtor first.
Benefit of Division
Thus, the guarantor has the benefit or right of A borrowed P100,000 from B. A’s guarantors are V, W,
excussion or exhaustion, except: X, Y and Z. Under the benefit of division, how much can
a. If the guarantor renounces such right; B validly hold X liable?
b. If the debtor is insolvent; P20,000 because under the benefit of division, each
c. If the guarantor binds himself solidarily guarantor can only be held liable as to his share (just
like joint obligation) without prejudice to the
Does the suretyor sub-surety have the benefit of guarantors binding themselves solidarily
excussion?
No because he binds himself solidarily with the When would the guarantor be held liable?
principal debtor -when the debtor cannot or is unable to pay
The guarantor is the insurer of the solvency of the
How many times can the sub-guarantor invoke the debtor
benefit of excussion?
Twice, first the principal debtor, then the guarantor When would the surety be held liable?
-when the debtor does not pay
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The surety is the insurer of the debt itself
Antichresis
Distinct feature: in this security arrangement, the
entire obligation may actually be extinguished because
the creditor is required to apply the fruits to the
interest if owing and in case of excess, he shall apply it
to the principal.
Pledge
-the only real contract which is an accessory contract
Bar Question
In the province, the farmers borrowed money from the
local merchant. To guarantee payment, they left the
Torrens title of their land with the merchant for him to
hold until they pay the loan. Is there an Antichresis,
Pledge, Mortgage?
-Mortgage
Marcos v. Vda. de Bautista
For a pledge or mortgage to be valid, the pledgor or
mortgagor must be the absolute owner at the time of
the constitution of the pledge or mortgage
Bar Question
In a contract of pledge involving a cow. After the
perfection of the contract, while the cow was in the
possession of the pledgee, the cow gave birth.
Who owns the offspring?
The pledgor because he is the owner of the cow
Being the owner can the pledgor validly demand that
the offspring be delivered to him?
As a rule, No. The offspring of the cow is covered by
the pledge thus the pledgee has the right to retain the
offspring together with the mother cow. If the
principal debtor defaults, the pledgee will have the
right to sell the cow and the offspring in a public
auction
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However, when there is a stipulation that the offspring
is not covered by the pledge, then he may validly
demand for the delivery.
Banco Filipino v. Petersen
The object of the contract is the delivery of
voluminous goods found in a warehouse. The pledgor
delivered the key to the warehouse to the pledgee.
Was there a perfected contract of pledge? Yes
What is the kind of delivery necessary for the perfection
of the contract of pledge?
As a rule, it must be actual delivery, except when it
would be an unreasonable requirement for the
delivery of the thing or the goods to the creditor-
pledgee, constructive delivery may suffice
Take note, if the contract of pledge is not perfected, the
pledgee would not have the right to sell.
Yuliongsiu v. PNB
The object of the contract of pledge is the delivery of
three ships. The parties executed an instrument and
had it notarized providing that the ships will be under
the control and supervision of PNB even if the ships
remain to be manned by the crew of the pledgor-
Yuliongsu.
The SC held that there was a perfected contract of
pledge despite the fact that there was no actual
delivery.
P11:1:45:45
Real Estate Mortgage
-must be in a public instrument in order for a
foreclosure to prosper, if it is in a private instrument
the remedy is Article 1357 to have it in the form
required by law
Chattel Mortgage
Is the affidavit of good faith necessary for the validity of
the mortgage?
No, it is only necessary for the contract to bind 3 rd
persons
Ordinarily, it should only be constituted over
movables. However, it includes growing crops and
large cattle (because the Chattel Mortgage law treats
them as personalty)
While the law requires a chattel mortgage to have a
movable subject matter, if the subject matter is an
immovable, the mortgagor will not be allowed to
78
question the validity of the mortgage as between him
and the mortgagee.
PBQ: Indivisibility Principle
If the debt is in the amount of P100,000 secured by a
mortgage or pledge and the debtor has already paid
for P95,000, can he validly demand for the release of
the property pledged or cancellation of the mortgage?
No, until the entire obligation is extinguished, the
pledge or mortgage will continue to have full force and
effect under the indivisibility principle.
Take note, it is the contract of pledge and mortgage
which are indivisible and it doesn’t matter if the
properties pledged or mortgage are divisible or not.
However, this is without prejudice to any stipulation
between the parties.
Dayrit v CA
Dayrit mortgaged his land to secure the entire
obligation of him and 3 other debtors. When Dayrit
paid his part of the obligation, he demanded for
cancellation of mortgage, the creditor refused because
the entire obligation is not yet fulfilled.
P11:2:05:58
Pactum Commissorium
X borrowed money from Y and gave a parcel a land as
security by way of mortgage. It was expressly agreed
that upon non-payment of the debt on time by X, the
mortgaged land would already belong to Y. If X
defaulted in paying, will Y now become the owner of the
said land?
No, the stipulation as to automatic appropriation is
void being pactum commissorium. The remedy is to
foreclose the mortgage (if it is a pledge, to have the
thing sold by a notary public in a public auction)
What if in the real estate mortgage, upon default of the
principal debtor, the land is deemed sold to the
mortgagee. Does that constitute pactum
commissorium?
No, because upon default, ownership does not pass to
the creditor. The creditor will only have the right to
compel the mortgagor to execute the deed of sale and
until there is delivery, there is no transfer the
ownership.
If there is a deficiency, should the creditor be given the
right to recover?
Yes. However, in pledge when there is a deficiency, the
pledgee has no right to recover the deficiency even if
there is a stipulation to that effect.
If there is an excess, to whom shall it be given?
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To the owner/mortgagor of the property
In pledge, the excess will not go to the pledgor, but to
the pledgee except when there is a stipulation that in
case of excess it will go to the pledgor.
REM covered by Act. 3135 (extrajudicial
foreclosure)
The SC held that even if the law is silent as to whether
the creditor has the right to recover, he has the right to
recover the deficiency.
P11:2:14:55
A lent B P100,000 and as security for the payment of
said amount, B delivered to A 2 rings in pledge. When
B failed to pay, A foreclosed and had the rings sold
through auction. The proceeds amounted only to
P70,000. May A demand for the payment of the
deficiency of P30,000?
No, because it is a contract of pledge and the creditor
is not entitled to such deficiency.
What if the proceeds amounted to P150,000? To whom
shall the excess be given?
To the pledgee unless there is a stipulation that any
excess would go to the pledgor
What if it was a mortgage?
1. To the deficiency, A will have the right to recover
in case the proceeds are less than the debt;
2. As to the excess, it shall be given to B
Equity of Redemption
-can only be exercised before the sale
Right of Redemption
-can only be invoked after the sale
*Ordinarily, if there is already an equity of redemption
in judicial foreclosure, there will no longer be a right of
redemption except in case of bank and financial
institutions.
Period: 1 year from the date of registration of the
certificate of sale
(Review Brondial Notes )
79

TORTS
Article 2176
Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
Even if the act is punished by law, it can also be the
basis of a claim under a quasi-delict but Article 2177
provides a limitation that the injured cannot recover
twice:
Article 2176
Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from
the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages
twice for the same act or omission of the defendant
Illustration:
The injured party filed a criminal complaint and was
awarded by the court P300,000. Thereafter, he filed a
civil action based on quasi-delict. The court awarded
him with the amount of P500,000. How much can the
injured recover?
He may only recover the excess which is P200,000.
Article 2177, the rule on double recovery, is a partial
defense.
What if the first award was for P500,000 and the second
was P300,000?
In this case, Article 2177 will be a total defense and the
injured can no longer recover anything.
Briefly, quasi-delict is fault or negligence. Fault is not
the same as negligence. Fault may be intentional.
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Recall: Cangco v. MRR
Nature of Liability of the Employer
Is it a direct and primarily liability or merely a
subsidiarily liability?
1. Delict – subsidiary
2. Quasi-delict & contract – direct
The employee need not be insolvent in order for
the employer to be liable.
If a criminal case is filed, may a civil action filed by the
injured party prosper?
The civil action may proceed independently of the
criminal action. The fact that a criminal action is
pending will not bar the filing nor will it suspend the
civil action under quasi-delict. They are separate and
distinct proceedings.
What if in the criminal case, the accused was acquitted.
Will the acquittal of the accused result in the automatic
dismissal of the civil action based on a quasi-delict (for
the same act)? No. (Only preponderance of evidence is
required in quasi-delicts)
Essential elements
What are requisites in order that defendant can be held
liable for damages in a quasi-delict case?
1. Act or omission
2. Damage or injury is caused to another
3. Fault or negligence is present
4. Causal connection between damage done and
act/omission
True or False: If before the act was committed, there
was already a pre-existing contractual relation, a claim
under quasi delict cannot prosper. False.
The very act which breaches the contract may by itself
be a tortious act; thus, even if there is pre-exisitng
contractual relation, it may not bar an action under
quasi-delict.
Illustration:
You already have a confirmed airline ticket but you
were told by the ticketing officer at the airport that the
plane is full. Is there a breach of contract? Yes. But the
fact of saying that the plane is full is not considered a
tortious act.
80
Air France v. Carrascoso
The manner by which the airline asked him to transfer
from business class to economy is a tortious act.
Singson v. BPI
Singson was one of the defendants in a civil case and
the trial court decided in favor of the plaintiff. Singson
appealed (3 other defendants did not appeal). The
plaintiff filed for a motion for execution only as to the
other defendants, which the court granted and
ordered for garnishment. When BPI received the
order or garnishment, it freezed the account of
Singson causing some checks issued to his suppliers to
bounce thus cutting the supplies to his business. The
bank was held negligent because the order of
garnishment clearly stated except Singson. The bank
was held liable under quasi-delict despite the fact that
there was a pre-existing contractual relationship.
Why would the injured party file an action under a
quasi-delict when he can file an action under a contract
for breach?
Because the biggest amount that will be awarded in an
action for damages is moral damages.
A claim for moral damages under contract is very hard
to prove because the defendant must have acted in bad
faith or in wanton disregard of his obligations under
the contract. Whereas in quasi-delict, you are almost
always entitled to moral damages.
Dulay vs. CA
Atty. Dulay had an altercation with a security guard
causing the death of Dulay.
The defense of the company was that the act of the
guard was not a negligent act thus they cannot be
liable under quasi-delict. MTD was granted thus the
Petition.
The SC ruled that for an action under quasi-delict to
prosper, the act need not be a negligent act. It can be
an intentional, malicious, wrongful act or an act
punished by law.
There is damage or injury
Can there be damage without injury?
Yes. Damage is just the hurt, the harm or loss. Injury
requires wrongful acts. But if there is already fault or
negligence, damages is the same is injury.
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Causal connection between act or omission
Article 2179
Doctrine of comparative negligence
-if the negligence of the plaintiff was the direct and
proximate cause of the injury sustained by him, he
cannot recover and the action will not prosper.
Doctrine of contributory negligence
-if the negligence of the defendant was the direct and
proximate cause of the injury sustained by the
plaintiff, even if the plaintiff was negligent, the action
can prosper, he can recover from the defendant whose
liability shall me mitigated to due the contributory
negligence of the plaintiff
There is fault or negligence
When would an act be considered as a negligent act?
There is negligence when there is an omission of the
diligence required which corresponds to the
circumstances as to the person, time and place
Degree of diligence required is vital in determining if
there is negligence
Philippine Bank of Commerce v. CA
Plaintiff company asked one of the secretaries to
deposit a sum of money to the account of the company
in PBCom. The secretary instead deposited the said
amount in her husband’s account.
The claim of the company against the bank was that
the direct and proximate caue of the injury sustained
was due to the negligence of the bank for accepting
deposit slips which were not completely filled out.
As a defense, the bank invoked the “doctrine of last
clear chance” because there were monthly financial
statements provided to the account holders; thus, the
company should have noticed that their account was
empty.
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The SC ruled that the negligence of the bank officers
was the direct and proximate cause. Banks are
supposed to exercise the highest degree of diligence.
As a rule, it is the burden of the plaintiff to prove that
the act of the defendant was a negligent act.
Ong v. Metro Water District
One of the children of Spouses Ong drowned in a
swimming pool managed by Metropolitan Water
District. Spouses Ong sued but the SC dismissed
because the spouses failed to prove that there was
negligence on the part of the defendant. In this case, it
was MWD itself, which proved their diligence before,
during and after the incident.
Disputable Presumptions
Article 2183. The possessor of an animal or whoever
may make use of the same is responsible for the
damage which it may cause, although it may escape or
be lost. This responsibility shall cease only in case the
damage should come from force majeure or from the
fault of the person who has suffered damage.
Article 2184. In motor vehicle mishaps, the owner is
solidarily liable with his driver, if the former, who was
in the vehicle, could have, by the use of the due
diligence, prevented the misfortune. It is disputably
presumed that a driver was negligent, if he had been
found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding
two months.
If the owner was not in the motor vehicle, the
provisions of article 2180 are applicable.
Article 2185. Unless there is proof to the contrary, it
is presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was
violating any traffic regulation.
Article 2188. There is prima facie presumption of
negligence on the part of the defendant if the death or
injury results from his possession of dangerous
weapons or substances, such as firearms and poison,
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except when the possession or use thereof is
indispensable in his occupation or business.
Illustration:
One of the vehicles attempted to overtake another
vehicle. The driver who tried to overtake was held
liable because that place where the incident happened
had 2 yellow lines, which means “no overtaking”.
Conclusive Presumptions
Under circumstances, the law would raise a conclusive
presumption that the act is a negligent act:
1. Article 2193: The head of a family that lives in a
building or a part thereof, is responsible for
damages caused by things thrown or falling from
the same.
2. Article 2187: Manufacturers and processors of
foodstuffs, drinks, toilet articles and similar goods
shall be liable for death or injuries caused by any
noxious or harmful substances used, although no
contractual relation exists between them and the
consumers.
When an employee is negligent? Does that mean that
the employer is negligent?
Not necessarily. Philippine law does not adopt the
principle of “respondeat superior”. In this jurisdiction,
“pater familias” prevail.
It would merely raise a disputable presumption and
the employer can raise as a defense that he exercised
the diligence required in the:
a. selection and
b. supervision of employees
Illustration:
Selection
It is not sufficient for the employer to merely demand
for the presentation of a driver’s license. The
employer must investigate as to the driving history of
the applicant driver.
Supervision
1. This may only be raised as a defense if there are
rules promulgated;
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 2. There should be monitoring if the rules are being
followed; and
3. There shall be penalties imposed on violations of
the rules
Vicarious Liability
Article 2180
The obligation imposed by article 2176 is demandable
not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the
mother, are responsible for the damages caused by the
minor children who live in their company.
Guardians are liable for damages caused by the minors
or incapacitated persons who are under their authority
and live in their company.
The owners and managers of an establishment or
enterprise are likewise responsible for damages caused
by their employees in the service of the branches in
which the latter are employed or on the occasion of
their functions.
Employers shall be liable for the damages caused by
their employees and household helpers acting within the
scope of their assigned tasks, even though the former
are not engaged in any business or industry.
The State is responsible in like manner when it acts
through a special agent; but not when the damage has
been caused by the official to whom the task done
properly pertains, in which case what is provided in
article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and
trades shall be liable for damages caused by their pupils
and students or apprentices, so long as they remain in
their custody.
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The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to
prevent damage.
Parents
Can the parents be held jointly liable as a result of the
negligent act of their minor child?
Yes, under the Family Code, the parents can be held
solidarily liable with their child.
Degree of Liability: Direct and Primary
The SC ruled that the liability of the parents is not
merely subsidiary but direct and primary.
Libi v. IAC “Romeo and Juliet”
A female teenager broke up with her boyfriend but the
latter cannot accept it so he stalked her. One day, they
found both teenagers dead through a gunshot. The
parents of the teenager was held liable because it was
the father’s gun that was used in the killing/suicide.
Owners of establishments
PBQ: Article 2184
If the owner of the vehicle was inside the vehicle at the
time of the mishap and the driver caused injury due to
his negligence. Does that mean that the owner shall be
automatically held solidarily liable with his driver?
No, the owner shall be held solidarily liable with the
driver only if he failed to exercise the diligence
required under the circumstances to prevent the
mishap if he had the opportunity to do so.
Managers of establishments
Philippine Rabbit v. Philippine American Forwarders
As a result of the negligence of the driver of PAF,
damage was caused to PR.
PR impleaded as defendant PAF, the driver and also a
passenger, Mr. Balingit, a salary manager.
Mr. Balingit filed a MTD. Trial court granted thus, the
Petition. The SC sustained the decision of the trial
court. The word manager does not include a salary
manager.
Employer
PBQ: When can an employer be held vicariously liable?
Martin v. CA
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MERALCO was the complainant who filed a case
against Martin, the employer of the driver, for causing
damage to the post of MERALCO.
The SC dismissed the action because there was no
proof of the employer-employee relationship. The
cause of action of MERALCO for filing the case was that
Martin was the employer of the driver.
2001 Bar Question
After working overtime up to midnight, Alberto, an
executive of an insurance company, drove a company
vehicle to a favorite videoke bar where he had some
drinks and sang some songs with friends to "unwind".
At 2:00 a.m., he drove home, but in doing so, he
bumped a tricycle, resulting in the death of its driver.
May the insurance company be held liable for the
negligent act of Alberto? Why?
No because even if there is an ER-EE relationship, in
order for the employer to be liable, the employee must
be acting within his assigned task during the incident.
Teachers
Under this source of obligation, may the school itself be
held vicariously liable?
Yes, under the Family Code.
How about for schools which are not for arts and trade?
Yes, it doesn’t matter what kind of school, there is still
vicarious liability
If the student who caused the injury is already of age,
can the administrators still be held vicariously liable?
Palisoc v. Brillantes (1971)
A student punched another student who fell and hit his
head that caused his death. When the parents of the
deceased students sued, one of the defenses raised by
the school was that the student was already of age.
The SC ruled that even if the student is already of age,
the teachers, school and administrators can still be
held vicariously liable.
Under the Family Code today, for the teachers to be
liable, the student has to be a minor.
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Defenses
The act was not a negligent act
Ong v. MWD
Fortuious event
There shall be no concurring negligence on the part of
the person raising such defense
Contributory Negligence
PBCOM v. CA
There can be reduction of amount because there is
contributory negligence on the part of the plaintiff for
asking a secretary to deposit instead of an officer like a
treasurer, finance officer or the like.
PNR v. Tupang and CA
Bicol to Manila. While the train was somewhere in
Quezon, Tupang was sitting in a metal connection of
the two coaches and due to the sharp curve, he fell and
died.
The SC ruled that it was the negligence of PNR which
caused the death of Tupang because the coaches were
overcrowded which is the reason why he outside.
The SC however held that there was contributory
negligence on the part of Tupang because he did not
hold tenaciously to the bar thus the award was
reduced.
Prescription 4 years from the date of the incident
Escueta v. Fandialan
The SC held that the action had long prescribed
because it was filed 15 years after the cause of action
accrued.
Doctrine of Last Clear Chance/Supervening Negligence
Premise: both parties were negligent
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Negligence of one is preceded by negligence of another
by an appreciable amount of time.
If it is simultaneous negligence, this doctrine is not
applicable because one of them should have the
opportunity to prevent the mishap by just exercising
the diligence required
Picart v. Smith
Plaintiff was negligent because he was riding his horse
at the left lane of the bridge. The defendant was at the
right lane. When the car was near the horse, the horse
got startled causing it to jump off the bridge and die.
The SC held that the defendant was liable under the
doctrine of last clear chance for being negligent in the
sense that he had the opportunity to prevent the
misfortune by just exercising the diligence required.
He could’ve stopped the car or moved to another lane.
Anuran v. Buñ o
One of the passengers of an overcrowded jeepney
asked the driver the stop so he can alight but the
driver stopped in the middle of the highway. Another
approaching vehicle, instead of avoiding the said
jeepney, rammed into it causing injuries to the
passengers
The plaintiff sued four parties, the 2 drivers and the 2
employers.
However the owner of the jeepney filed a MTD citing
the doctrine of last clear chance. His argument was
that his driver was negligent but the driver of the
other vehicle had the last opportunity to avoid the
collision.
The SC held that the doctrine may only be invoked if
the case is between those who are all negligent. Thus,
it cannot be invoked by those who are negligent as
against another who is not negligent because it would
be inequitable
DAMAGES
Article 2197
Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.
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May there be a valid award for all these damages?
No. An award for actual damages will preclude the
award for nominal and temperate damages.
In actual damage, there is pecuniary loss whereas in
nominal damage, there is only a violation of a right
which must be indemnified.
Temperate damages is awarded when there is
pecuniary loss but it is so hard to prove.
In case of death, if the injured would not be able to
prove actual damages, the Court shall award by way of
temperate damages in the amount of P25,000.
If there was death as a result of a
quasi-delictual/negligent act, what are the damages?
Article 2206. The amount of damages for death
caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the
earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter;
such indemnity shall in every case be assessed and
awarded by the court, unless the deceased on
account of permanent physical disability not
caused by the defendant, had no earning capacity
at the time of his death;
(2) If the deceased was obliged to give support
according to the provisions of article 291, the
recipient who is not an heir called to the
decedent's inheritance by the law of testate or
intestate succession, may demand support from
the person causing the death, for a period not
exceeding five years, the exact duration to be fixed
by the court;
(3) The spouse, legitimate and illegitimate
descendants and ascendants of the deceased may
demand moral damages for mental anguish by
reason of the death of the deceased.
Indemnity
When the imposable penalty should have been death,
the indemnity to be awarded shall be P100,000
otherwise, P75,000 (indemnity, moral, exemplary +
temperate)
Loss of earning capacity
Gross income in one year – necessary expenses
(amount incurred in earning the amount)
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If there is no proof of necessary expenses, there shall
be a reduction of gross income by ½
GI – NE x (2/3 of 80 – age of the deceased at the time
of death)
However, since there was physical injuries she was
still entitled to moral damages of P200,000.
In relation to Malicious Prosecution as a ground for
the award of moral damages, there has to be a criminal
complaint filed which was found to be malicious.

In a few cases, like a disbarment suit, the SC held that a

clearly unfounded civil suit can be the basis of a claim
for moral damages under malicious prosecution.

Moral Damages
Not every time that a person suffers mental anguish,
serious anxiety, besmirched reputation that he is
entitled to moral damages.

Article 2219. Moral damages may be recovered in the

following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27,
28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or
abused, referred to in No. 3 of this article, may also
recover moral damages.
The spouse, descendants, ascendants, and brothers
and sisters may bring the action mentioned in No. 9 of
this article, in the order named.

Mayo v. People
The driver crossed the island and drove in the
opposite lane. Linda Navarate, one of the injured
parties, filed a claim in the criminal case in relation to
the deformities in her face. According to her, because
of the said deformities, her boyfriend left her so she
demanded for moral damages of P1M. The trial court
granted. The CA reduced by P200,000.

The SC held that since there was no proof that the

boyfriend left her because of the deformities in her
face and even if the boyfriend left her because of it, it is
not a ground for the award of moral damages.

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