Professional Documents
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Week 1-2
Week 1-2
Contracts
Concept of Obligation
◈ Article 1156 (NCC) provides:
◈ RIGHT
⬩ Is a privilege granted to a party, guaranteed under the
constitution and statutes, enforceable by law against
another.
Passive Subject
◈ Also referred to as Debtor or Obligor
◈ In an obligatory relationship, is the party who has the
obligation to perform a conduct (to give, to do, or not to do),
as demanded.
Object
◈ Also referred to as a prestation or the subject matter of the
obligation.
◈ It is the act or conduct required from the passive subject to
fulfil the obligation.
◈ Kinds of Object/Prestation:
⬩ To Give - Real Obligation
⬩ To Do - Positive Personal Obligation
⬩ Not to Do - Negative Personal Obligation
Requisites of a Valid Prestation
◈ a. Physically and juridically possible
◈ b. Determinate or at least determinable according to pre-established
elements or criteria
◈ c. Possible equivalent in money
❖ Pecuniary interest need not be for one of the parties, it maybe
for the benefit of 3rd person/s distinct from the parties to the
contract
❖ Prestation need not be of economic character to have
pecuniary value, if it does not have value the law attributes to
it economic value e.g. moral and nominal damages
Juridical Tie
◈ Also referred to as “Legal tie or Vinculum Juris”
◈ Is the reason that binds the parties of the obligation, which
constitutes the concurrence of the essential elements of the
obligation.
❑ Efficient Cause as provided by the source of obligation
❑ Object or prestation of the obligatory relationship
❑ Subject-persons, (Active and Passive Subject)
◈ A relationship between the elements are established:
❑ By-law
❑ Bilateral Acts
❑ Unilateral Acts
Civil Obligation v Natural Obligation
◈ Unlike civil obligations, a Natural Obligation has
no binding force of law and hence does not give a
right of action to enforce its performance. It is
based however, on equity and natural law, and
should be voluntary
Source of Obligation
◈ Article 1157 (NCC), provides:
⬩ Obligations arise from:
❑ (1) Law;
❑ (2) Contracts;
❑ (3) Quasi-contracts;
❑ (4) Acts or omissions punished by law; and
❑ (5) Quasi-delicts.
Law
◈ A rule promulgated by a legitimate authority with the
purpose of common observance and benefit.
◈ Obligations derived from law are not presumed, only those
expressly determined in the New Civil Code or other special
laws, are demandable.
⬩ Examples:
❑ National Internal Revenue Code
❑ Family Code
❑ Labor Code
❑ Traffic Laws
Contract
◈ Is a meeting of the minds, between two persons whereby one
binds himself, with respect to the other, to give something or
to render some service.
◈ Contracts have the force of law between the contracting
parties and is expected to be complied in good faith.
Therefore, the parties are bound to comply with their
obligations as per the contract, as it expresses their
agreement.
Quasi-contract
◈ Certain lawful, voluntary, and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of
another.
◈ Kinds of Quasi-contract:
❑ Negotiorum Gestio
❑ Solutio Indebiti
❑ Other Quasi-Contracts
Acts or omissions punished by law
◈ Also referred to as delict
◈ 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.
◈ Accordingly, the Revised Penal Code states under Article 100
“Every person criminally liable for a felony is also civilly liable”
⬩ Exceptions: (Felony without civil liability)
❑ Criminal contempt
❑ Gambling
❑ Traffic Violations
Quasi-delicts
◈ Article 2176 (NCC), provides:
⬩ 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.
◈ Requisites of Quasi-delict
1. Damage suffered by plaintiff
2. Fault or negligence of defendant
3. Connection of cause and effect between fault/
negligence and the damage suffered
Kinds of Obligation as to Prestation
◈ To Give - Real Obligation
◈ To Do - Positive Personal Obligation
◈ Not to Do - Negative Personal Obligation
Real Obligation
◈ Also referred to as the “obligation to give”
◈ In this type of obligation, the passive subject is expected to
fulfil the obligation by delivering a thing, movable or
immovable, to the active subject.
◈ The fulfilment of a real obligation, creates a real right or for
the use of the recipient or for custody or returning to the
owner, of the thing.
Real Obligation
◈ Kinds of Real Obligation
⬩ Generic (Indeterminate)
⬩ - To deliver a thing that is generic, if it is simply
stated as a class of thing with no specific designation, thus,
cannot be identified and separated from other things of
same class.
Ex: To deliver a P100.00 bill.
⬩ Specific (Determinate)
⬩ - To deliver a thing that is specific, if it can be physically
identified and separated from other things of same class.
Real Obligation
Obligation to give
Real Obligation: Specific and Generic Thing
◈ Specific thing - when the object is particularly designated or
physically segregated from all others of the same class. In
here, the object is concrete, particularized thing, indicated by
its own individuality.
◈ Generic thing - when the object is designated merely by its
class or genus without any particular designation or physical
segregation from all others of the same class. In here, the
object is one whose determination is confined to that of its
nature – to the genus to which it pertains.
DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE A
DETERMINATE THING
◈ 1. To preserve or take care of the thing due with the diligence of a
good father of a family
⬩ Also referred to as “Diligence of a good father of a family”.
The obligor is required by law to practice ordinary diligence or
the diligence of a good father of a family to fulfil its specific
real obligation.
⬩ Exception to the standard diligence of a good father of a
family is the practice of a higher degree of diligence.
DUTIES OF DEBTOR IN AN OBLIGATION TO
GIVE A DETERMINATE THING
◈ 2. To deliver the fruits of the thing: Right to the fruits of the thing
from the time the obligation to deliver it arises.
⬩ GENERAL RULE: From the time of the perfection of
the contract (i.e. meeting of the minds between the
parties)
⬩ EXCEPTIONS
⬩ a. when the parties made a stipulation as regards the
right of the creditor to the fruits of the thing
⬩ b. when the obligation is subject to a suspensive
condition or period; arises upon fulfillment of the
condition or arrival of the period
Kinds of Delivery
◈ Actual Delivery
⬩ The obligor transfers the possession of the thing
immediately to the obligee.
⬩ Ex: The seller of isopropoyl alcohol to the buyer.
◈ Constructive Delivery
⬩ The obligor transfers the control or title of the thing to
the obligee by operation of law.
⬩ Ex: The seller of a parcel of land will transfer ownership
of said land to the buyer by means of a notarized deed of
sale.
Kind of Fruits
◈ Natural fruits are the spontaneous products of the soil, and
the young and other products of animals.
◈ Kinds:
⬩ Mora solvendi
⬩ Mora accipiendi
⬩ Compensatio morae
DEBTOR IN DELAY: REQUISITES
◈ GENERAL RULE:
• Debtor does not perform his obligation on date due
• The creditor demands performance of obligation
• Debtor does not comply with creditor’s demands
◈ EXCEPTION: (Delay exists even without demand)
• When the law so provides
• When the obligation expressly declares so
• When time is of the essence in the contract
• When demand would be useless
• In reciprocal obligations, fulfilment of one obligation requires
the other obligation to be fulfilled, notwithstanding the
absence of demand
EFFECTS OF DELAY
◈ Debtor shall be liable for the payment of
damages
◈ If the obligation consists in the delivery of a
specific thing, he shall be liable until delivery,
despite occurrence of a fortuitous event.
Fortuitous Event
◈ An event which could not be foreseen, or which though
foreseen, was inevitable.
◈ ELEMENTS:
⬩ 1. The cause of the breach of the obligation must be
independent of the will of the debtor
⬩ 2. The event must be either unforeseeable or
unavoidable
⬩ 3. The event must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner
⬩ 4. The debtor must be free from any participation in, or
aggravation of injury to the creditor
RULE ON FORTUITOUS EVENT
◈ GENERAL RULE: No person shall be liable for fortuitous
event
⬩ EXCEPTIONS:
⬩ 1. When the law expressly provides so ( bad faith,
subject matter is generic, debtor is in delay)
⬩ 2. When stipulated in contract of such liability in a
fortuitous event
⬩ 3. When nature of obligation requires assumption of risk
⬩ 4. When the obligor is in default or has promised to
deliver the same thing to two or more persons who do
not have the same interest
USURY
◈ Art. 1175 (NCC), provides:
⬩ Usurious transactions shall be governed by special laws
◈ INTEREST – the income produced by money in relation to its
amount and to the time that it cannot be utilized by its owner. It can
either be moratory or compensatory.
⬩ MORATORY – paid in contractual obligations to pay a sum
of money, either as price for the use of the
⬩ money OR as stipulated advanced determination of the
damages due to the delay in the fulfillment of the obligation.
⬩ COMPENSATORY – interests on obligations which have an
extra-contractual or delictual origin
Presumptions in Usurious Transactions
◈ Presumption No. 1: The receipt of the principal by
the creditor without reservation with respect to the
interest, shall give rise to the presumption that said
interest has been paid
◈ Presumption No. 2: The receipt of a later
installment of a debt without reservation as to
prior installments, shall likewise raise the
presumption that such installments have been paid.
REMEDIES OF CREDITOR TO PROTECT CREDIT: