OBLIGATIONS

Damages in Obligations
 An act or omission in breach or violation of said right by the defendant with
consequential injury or damage to the plaintiff for which he may maintain an action for
the recovery of damages or other appropriate relief.
 Sources of obligations (laws, contracts, quasi-contracts, delicts/crimes, and quasi-
delicts) may incur damages if the stipulations hereunder were not complied or if there is
contravention to the tenor of the obligation.
 Compensatio morae or the delay of the obligors in reciprocal obligations (like in sale),
i.e., the delay of the obligor cancels the delay of the obligee, and vice versa.

 Compensatio morae. — The delay of the obligor cancels out the effects of the delay of
the obligee and vice versa. The net result is that there is no actionable default on the
part of both parties, such that as if neither one is guilty of delay.

 If the delay of one party is followed by that of the other, the liability of the first
infractor shall be equitably tempered or balanced by the courts.

 If it cannot be determined which of the parties is guilty of delay, the contract shall be
deemed extinguished, and each shall bear his own damages. (Art. 1192.)

 When there is performance by a party in reciprocal obligations. — In case of reciprocal

obligations (see Art. 1191.), the performance of one is conditioned upon the simultaneous
fulfillment on the part of the other.
o So, 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. (Art. 11699, last par.)
This is compensation morae.
o Thus, where the contract of sale imposes on the seller the obligation to deliver to
the buyer a reasonably habitable dwelling in return for his undertaking to pay the
stipulated price in monthly amortizations, the seller cannot invoke the buyer’s
suspension of payment of amortizations as cause to cancel the contract where the
seller did not fulfill its obligation and is not willing to put the house in
habitable state. (Agcaoili vs. GSIS, 165 SCRA 1 [1988].)
Transmissibility of rights.

 All rights acquired in virtue of an obligation are generally transmissible. (see Art.
1311.) The exceptions to this rule are the following:

1. Prohibited by law. — When prohibited by law, like the rights in partnership, agency,
and commodatum which are purely personal in character.
a. 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. (Art. 1767.)
b. 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. (Art. 1868.)
c. By the contract of commodatum, one of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and return it.
Commodatum is essentially gratuitous. (Art. 1933.)

2. Prohibited by stipulation of parties. — When prohibited by stipulation of the

parties, like the stipulation that upon the death of the creditor, the obligation
shall be extinguished or that the creditor cannot assign his credit to another. The
stipulation against transmission must not be contrary to public policy. (see Art.
 1306.) Such stipulation, being contrary to the general rule, should not be easily
implied, but must be clearly proved, or at the very least, clearly inferable from the
provisions of the contract itself. (Estate of K.H. Hernandez vs. Luzon Surety Co., 100
Phil. 388 [1956].)
 Article 1183 states that “if the impossible conditions oppose the good customs, public
policy and prohibited by law shall nullify the obligation which depends upon them. If the
obligation is divisible the other part that is not affected by impossible conditions will
be valid.”

 Obligation that not to do the impossible things shall not have been agreed upon.

 The impossible conditions have two kinds: Physically impossible conditions and legally
impossible conditions.
o Physically impossible conditions are the conditions that cannot exist, cannot be
done and impossible to happen (beyond the commerce of men). For instance, “I will
pay you P20,000 if it will not be hot for one year in the Philippines.”
o Legally impossible conditions are the conditions that are against the law, morals,
good customs, public order, or public policy. For example, “I will give you
P15,000 if you will threaten X by shooting their house.”

 The effects of impossible conditions

o Conditional obligation void - the impossible condition will nullify the obligation
depends upon them. The obligation and the condition are void because the obligor
knows that his obligation cannot be fulfilled.
o Conditional obligation valid - the condition that nothing to do an impossible thing
because of that, the obligation can be rendered and be fulfilled because nothing to
do to impossible things and there’s like no condition.
 Actions available to obligees/creditors to enforce obligations
1. Action for specific performance-performance by the debtor of the prestation itself
2. Action for substitute performance-someone else performs or something else is performed
at the expense of the debtor
3. Action for equivalent performance- in case of damages
 The right of rescission is implied in every reciprocal obligation where one party fails
to perform what is incumbent upon him while the other is willing and ready to comply.

 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.
 A conjunctive obligation is simply one where the debtor has to perform several
prestations. It is extinguished only by the performance of all of them.

 For example: In order to satisfy his debt to the creditor, the debtor undertook to
deliver his own phone to the creditor. Likewise, he undertook to render free legal
services with the value up to PhP15,000.00. The debt is only extinguished when both the
delivery of the phone and the rendering of the legal services are performed
 A joint obligation is one where the whole obligation is to be paid or fulfilled
proportionately by the different debtors and/or is to be demanded proportionately by the
different creditors. (Art. 1208.)

 In a joint obligation, novation, compensation, confusion, remission, prescription, and

any other cause of modification or extinction does not extinguish or modify the
obligation except with respect to the creditor or debtor affected, without extending its
operation to any other part of the debt or of the credit.
 Delay, extension of payment, and insolvency is only applicable to the one who is the
subject of the demand.
 Application of payments is the designation of the debt to which should be applied the
payment made by a debtor who has various debts of the same kind in favor of one and the
same creditor. (Art. 1252, par. 1.)

 Requisites of application of payments.

1. There must be one debtor and one creditor;
2. There must be two or more debts;
3. The debts must be of the same kind;
4. The debts to which payment made by the debtor has been applied must be due; and
5. The payment made must not be sufficient to cover all the debts.

 Rules on application of payments.

1. The debtor has the first choice; he must indicate at the time of making payment, and
not afterwards, which particular debt is being paid. If, in making use of his right,
the debtor applied the payment to a debt, he cannot later claim that it should be
applied to another debt;
2. The right to make the application once exercised is irrevocable unless the creditor
consents to the change;

3. It is clear from the use of the word “may’’ rather than the word “shall’’ in
Article 122 that the debtor’s right to apply payment is not mandatory but merely
directory. If the debtor does not apply payment, the creditor has the subsidiary right
to make the designation by specifying in the receipt which debt is being paid;

4. If the creditor has not also made the application, or if the application is not valid
(par. 2.), the debt, which is most onerous to the debtor among those due, shall be
deemed to have been satisfied (Art. 1254, par. 1.);

5. If the debts due are of the same nature and burden, the payment shall be applied to
all of them proportionately. (Ibid., par. 2.); and

6. If neither party has exercised its option and there is disagreement as to debts to
which payment must be applied, the court will apply the payment according to the
justice and equity of the case, taking into consideration all its circumstances.

 The rules in Articles 1252 to 1254 apply to a person owing several debts of the same kind
to a single creditor. They are not applicable to a person whose obligation as a mere
surety is both contingent and singular.
 Preference of credits: A preference of credit bestows upon the preferred creditor an
advantage of having his credit satisfied first ahead of other claims which may be
established against the debtor.

 Art. 2246. Those credits which enjoy preference with respect to specific movables,
exclude all others to the extent of the value of the personal property to which the
preference refers.

 Art. 2247. If there are two or more credits with respect to the same specific movable
property, they shall be satisfied pro rata, after the payment of duties, taxes and fees
due the State or any subdivision thereof. (1926a)

 Art. 2248. Those credits which enjoy preference in relation to specific real property or
real rights, exclude all others to the extent of the value of the immovable or real right
to which the preference refers.
 Art. 2249. If there are two or more credits with respect to the same specific real
property or real rights, they shall be satisfied pro rata, after the payment of the taxes
and assessments upon the immovable property or real right. (1927a)

 Art. 2250. The excess, if any, after the payment of the credits which enjoy preference
with respect to specific property, real or personal, shall be added to the free property
which the debtor may have, for the payment of the other credits. (1928a)

 Art. 2251. Those credits which do not enjoy any preference with respect to specific
property, and those which enjoy preference, as to the amount not paid, shall be satisfied
according to the following rules:
1. In the order established in Article 2244;
2. Common credits referred to in Article 2245 shall be paid pro rata regardless of dates.
(1929a)