LAW ON OBLIGATIONS AND CONTRACTS

PRELIMS
Introduction to Law
Law in its broadest sense means any rule of action or norm of conduct applicable to all kinds of
action and to all objects of creation. It is in this sense that law includes all “laws” whether they refer
to state law, physical law, divine law, precepts and others.
In its strict sense, law is an ordinance of reason promulgated by competent authority for the
common good.
- Norms that govern/guide how we should act
- More formal form of norm
Norms – set of rules of conduct
Characteristics:
1. It is a rule of conduct (ordinance).
a. Law serves as a guide of an individual in relation to his fellow and to the community.
b. It is not a mere request, but a decree/order or a command that OUGHT to be
followed or obeyed.
c. obligatory
2. a product of reason (just)
a. law is a result of a deliberate process, not whimsical
b. it is in harmony with higher laws
c. must be practical. Must meet the demands not only of the present time but of the
future
3. promulgated
a. law in order to effect order or to serve as a guide or rule of conduct must be made
known
b. basis of law as obligatory
c. method of promulgation is through publication
d. ignorantia legis non excusat (“ignorance of the law excuses no one”)
- published to Official Gazette (official journal of the Republic of the Philippines)
4. competent authority (source of law)
a. addresses the issue of legitimacy
b. if laws are not prescribed by legitimate authority, the people could not be expected
to observe them.
5. For the common good/benefit
a. Ultimate goal of law
b. Laws should be applied not only to a particular group of people. They should be
applied to all citizens, regardless of religion, political persuasion and status in life
c. Salus populi est suprema lex (“the safety of the people is the supreme law” )
- For the general welfare of the people

Definition of summum bonum

: the supreme good from which all others are derived.

CLASSIFICATION OF LAW
1. Natural law (eternal law) - Laws derive its force and authority from God. It is superior to
other laws. It is binding to the whole world, in all countries at all times
a. Physical law – universal rule of action that governs the conduct and movement of
things which are non-free and material
b. Moral law – set of rules which establishes what is right and what is wrong as
dictated by human conscience and inspired by the eternal law

2. Positive law - enacted (positive act)

a. Divine law
i. Divine positive law (ten commandments)
ii. Divine human positive law (precepts of church authorities or religious leaders)
b. Public law
i. Constitutional law – fundamental law of the land which defines the powers of the
government
ii. Administrative law – fixes the organization and determines the competence of the
administrative authorities and which regulates the methods by which the functions
of the government are performed
iii. International law – body of rules which regulated the community of nations
c. Private (civil) law – body of rights which creates duties, rights and obligations and the
means and methods of setting courts in motion for the enforcement of rights or of a
redress of wrong
1. Substantive private law – rules which declare legal relations of litigants when the
courts have been properly moved to action upon facts duly presented to them
2. Procedural or adjective private law – refers to the means and methods of setting
the courts in motion and making the facts known to them and effectuating their
judgments
NOTES:
- the classification is incomplete, but is sufficient for purposes of introduction to law
- Law on Obligations and Contracts is under private/civil law, it is the law that regulated the
conduct of the rights of every individual as to birth, succession, property, and dealing with
one another

Sources of Law
a. Constitution
b. Statutes/Legislation
c. International treaty
d. Executive issuances
e. Administrative orders
f. Ordinance
g. custom
h. court decisions (precedent/doctrine of stare decisis)

CIVIL LAW
Branch of Law that treats the personal and family relations of a person, his property and
successional rights, and the effects of obligation and contracts. "Civil" is derived from the Latin
"civiles", a citizen. Originally, the word pertained to a member of "civitas" or a free political
community (Black's Law Dictionary)
Four of the most important types of civil law deal with 1) contracts, 2) property, 3) family relations,
and 4) civil wrongs causing physical injury or injury to property (tort).
 CIVIL CODE OF THE PHILIPPINES (Republic Act 386) (June 18, 1949)
History of the Civil Code
The Civil Code is strongly influenced by the Spanish Civil Code, which was first enforced in 1889
within the Philippines, then a colony of Spain. The Spanish Civil Code remained in effect even
during the American colonization of the Philippines. However, by 1940, the Commonwealth
Government of President Manuel Quezon had created a Commission to create a new Civil Code.
The Commission was initially headed by Chief Justice Ramon Avanceña. However, the work of the
Commission was interrupted by the Japanese invasion of the Philippines, and its records were
destroyed during the Battle of Manila in 1945.
In 1947, President Manuel Roxas created a new Code Commission, this time headed by the former
Dean of the University of the Philippines College of Law Jorge Bocobo. Among the members who
sat on the new Commission were future Supreme Court Associate Justice Francisco R. Capistrano,
and future Vice-President Arturo Tolentino. The Commission completed the final draft of the new
Civil Code by December 1947, and this was submitted to Congress, which enacted it into law
through Republic Act No. 386. The Civil Code took effect in 1950.
Features of the Civil Code
The Civil Code is divided into 5 “books”, with a specific book covering persons and family
relations; property; succession; obligations and contracts; and special contracts. Special
contracts encompasses several classes of contracts as sales, agency, and partnership. The
law on torts and damages is found in Book V, although developments in tort and damages law have
been guided less by the Code than by judicial precedents.
NOTES:
- called civil code, code is the short name of the process called codification which means a
process of putting together different laws of related subject

General Principles/Provisions
“The law is the witness and external deposit of our moral life. Its history is the history of the moral
development of the race. The practice of it, in spite of popular jests, tends to make good citizens
and good men.”
― Oliver Wendell Holmes Jr., The Path of the Law

An obligation is a juridical necessity to give, to do or not to do. – Article 1156

The term obligation is derived from the Latin word “obligatio” which means a “tying” or “binding.”
Civil obligation: more formal and legal type of obligation usually encountered in our formal
relationships.
 To give (obligation to turn in your assessments) – real obligation
 To do (obligation to secure covid pass whenever you go out to buy essential goods) –
positive personal obligation
 Not to do (obligation not to cheat) – negative personal obligation
Civil Obligation vs. Moral Obligation (obligation to pray) or Natural Obligation (obligation to take
care of elders/parents)

1) It is a tie of law or a juridical bond by virtue of which one is bound in favor of another to
render something — and this may consist in giving a thing, doing a certain act, or not doing
a certain act.
2) Manresa defines the term as “a legal relation established between one party and another,
whereby the latter is bound to the fulfillment of a prestation which the former may demand of
him.”
3) Article 1156 gives the Civil Code definition of obligation, in its passive aspect. Our law
merely stresses the duty of the debtor or obligor (he who has the duty of giving, doing, or
not doing) when it speaks of obligation as a juridical necessity.
- Concept that separates civil obligation from moral/natural obligation
- Not a juridical necessity, NOT a civil obligation
Obligation is a juridical necessity because in case of non-compliance, the courts of justice
may be called upon by the aggrieved party (creditor) to enforce its fulfillment or, in default
thereof, the economic value that it represents. In a proper case, the debtor may also be made
liable for damages, which represent the sum of money given as a compensation for the injury or
harm suffered by the creditor or obligee (he who has the right to the performance of the obligation)
for the violation of his rights. In other words, the debtor must comply with his obligation whether he
likes it or not; otherwise, his failure will be visited with some harmful or undesirable legal
consequences. If obligations were not made enforceable, then people can disregard them with
impunity. If an obligation cannot be enforced, it may be only a natural obligation.

NATURE OF OBLIGATIONS UNDER THE CIVIL CODE

Obligations which give to the creditor or obligee a right of action in courts of justice to
enforce their performance are known as civil obligations. They are to be distinguished from
natural obligations which, not being based on positive law but on equity and natural law, do not grant
a right of action to enforce their performance although in case of voluntary fulfillment by the debtor,
the latter may not recover what has been delivered or rendered by reason thereof. (Art.* 1423.)
 ESSENTIAL ELEMENTS OF AN OBLIGATION
The following are the essential elements of an obligation: (must be present at once; interdependent)
1. PASSIVE SUBJECT (DEBTOR OR OBLIGOR) - The person bound to perform the
prestation to give, to do, or not to do.
2. ACTIVE SUBJECT (CREDITOR OR OBLIGEE)- The person demanding the performance
of the obligation. It is he in whose favor the obligation is constituted, established, or created.
3. OBJECT OR PRESTATION - The subject matter of the obligation which has a
corresponding economic value or susceptible of pecuniary substitution in case of
noncompliance. It is a conduct that may consist of giving, doing, or not doing something.
- Refers to the conduct to be performed
- In bilateral obligations, the parties are reciprocally debtors and creditors
4. JURIDICAL TIE OR VINCULUM JURIS OR EFFICIENT CAUSE - the efficient cause by
virtue of which the debtor becomes bound to perform the prestation (Pineda, 2000).
- Reason why obligation arise
- Creates relationship between the passive and active subject

NOTE:
- Absence of any of the first three makes the object void.
- There is a possibility of shift of personality depending on the situation/perspective
EXAMPLES
Dazai’s payment of P1000 for a Mango shirt from an online sale by Park Min Young
(Passive subject – Dazai; Active subject – Park Min Young; Prestation – pay P1000;
Juridical tie – contract (perfected sale))
A promises to paint B’s picture for B as a result of an agreement.
(Here A is the obligor, B is the Obligee; the painting of B’s picture is the object or prestation;
the agreement or contract is the efficient cause.)

CONCEPT OF PRESTATION
A prestation is an obligation; more specifically, it is the subject matter of an obligation – and may
consist of giving a thing, doing or not doing a certain act. The law speaks of an obligation as
a juridical necessity to comply with a prestation. There is a “juridical necessity” for non-compliance
can result in juridical or legal sanction.

Reminder: It is NOT THE OBJECT which is the prestation but rather it is the act of giving, doing or
not doing.
* So, using the example above, B’s picture is not the prestation but it is the act of
painting B’s picture.

FORMS OF OBLIGATION
(1) As a general rule, the law does not require any form in obligations arising from contracts for their
validity or binding force.
(2) Obligations arising from other sources do not have any form at all.
 KINDS OF OBLIGATION ACCORDING TO SUBJECT MATTER (PRESTATION)
Note: More of the kinds of obligation will be discussed in the succeeding modules
From the viewpoint of the subject matter, obligation may either be:
1. Real obligation (obligation to give) or that in which the subject matter is a thing which the
obligor must deliver to the obligee; or
2. Personal obligation (obligation to do or not to do) or that in which the subject matter is an
act to be done or not to be done.
Two (2) kinds of personal obligation:
a. Positive personal obligation or obligation to do or to render service (see Art.
1167.); and
b. Negative personal obligation or obligation not to do (which naturally includes
obligations “not to give”). (see Art. 1168.)

SOURCES OF OBLIGATIONS (how obligation arise)

- Article 1157; exclusive (meaning, these are the only sources of obligation)
1. Law (obligation ex lege)- like the duty to pay taxes and to support one’s family
2. Contracts (Obligation ex contractu) – like the duty to repay a loan by virtue of an
agreement
3. Quasi-contracts (Obligations ex quasi contractu) – like the duty to refund an “over
change” of money because of the quasi-contract of solution indebiti or “undue payment”
4. Delict, crimes or Acts or Omissions Punishable by Law (Obligation ex malificio or ex
delicto) – like the duty to return a stolen carabao;
5. Quasi-delicts or torts (obligation ex quasi-delicto or ex-quasi-maleficio, Culpa
aquiliana) – like the duty to repair damage due to negligence.
This enumeration is exclusive. No obligation exists if its source is not one of those
enumerated in Art. 1157 of the NCC (Navales v. Rias, G.R. No. L3489, September 7, 1907).
NOTE: ACTUALLY, THERE ARE ONLY TWO SOURCES (I.E., LAW AND CONTRACTS)
BECAUSE OBLIGATIONS ARISING FROM QUASICONTRACTS, DELICTS, AND QUASI-
DELICTS ARE IMPOSED BY LAW (LEUNG BEN V. O’BRIEN, 38 PHIL. 182).
Time of perfection (when will obligation arise)
General Rule:
 Law – from the time designated by the law creating or regulating them;
 Contracts– from the time of the perfection of the contract e.g. meeting of the minds
Exemptions:
1. When the parties made a stipulation on the right of the creditor to the fruits of the thing;
2. When the obligation is subject to a suspensive condition, from which it arises upon
fulfillment of the condition;
3. When the obligation is with a period; there is already an existing obligation, but it is only
demandable when the period expires or becomes due.
Quasi Contracts, delicts, quasi-delicts – from the time designated by the law creating or
regulating them.
 LEGAL OBLIGATIONS (Article 1158)
Obligations derived from law are not presumed. Only those expressly determined in the
Code or in special laws are demandable and shall be regulated by the precepts of the law
which establishes them and as to what has not been foreseen by the provisions of Book IV
of NCC (NCC, Art. 1158).
Characteristics of a Legal Obligation
1. Does not need the consent of the obligor;
2. Must be expressly set forth in the law creating it and not merely presumed; and
3. In order that the law may be a source of obligation, it should be the creator of the obligation
itself (NCC, Art. 1158).
Determining whether an obligation arises from law or from some other source
1. Arises from law if it establishes obligation;
2. Arises from the act itself if the law merely recognizes the existence of an obligation
generated by an act (Manresa).
Examples:
1. According to Art. 2014 of the NCC, a loser in a game of chance may recover his loss from
the winner, with legal interest from the time he paid the amount lost (Leung Ben v. O’Brien,
G.R. No. L-13602, April 6, 1918);
2. The obligation of the spouses to support each other;
3. The obligation of the employers under the Worker’s Compensation Act;
4. The obligations of the owners of the dominant and servient estates in legal easements and
others scattered in the NCC and in special laws
5. The obligation to pay taxes.
Note: if an obligation is based on law, it does not need the consent of the debtor/obligor.

CONTRACTUAL OBLIGATIONS (Article 1159)

A meeting of minds between two parties whereby one binds himself, with respect to the other, to
give something or to render service.
- Once a contract is perfected, obligation arises
Requisites of a contractual obligation
1. It must contain all the essential requisites of a contract (NCC, Art. 1318); and
2. It must not be contrary to law, morals, good customs, public order, and public policy.
Rules governing the obligations arising from contracts
General Rule: These obligations arising from contracts shall be governed primarily by the
stipulations, clauses, terms, and conditions of the parties’ agreements.
Exemptions: Contracts with prestations that are unconscionable or unreasonable (Pineda,
2009).
Binding force of obligation ex contractu
Obligations arising from contracts have the force of law between the parties and should be complied
with in good faith (NCC, Art. 1159). This is known as the “principle of obligatory force of contracts”
the
Good faith is performance in accordance with the stipulation, clauses, terms, and conditions of the
contract.
General Rule: Neither party may unilaterally evade his obligation in the contract.

Exemptions: Unilateral evasion is allowed when the:

1. Contract authorizes such evasion; or
2. Other party assents thereto.

DIFFERENCE BETWEEN AN OBLIGATION AND CONTRACT

An OBLIGATION is the result of a contract (or some other source). Hence, while a CONTRACT, if
valid, always results in an obligation, not all obligations come from contract.
Be it noted that, however, from another viewpoint that a contract may itself be the result of an
obligation. Thus, if P engages A as the former’s agent, we have the contract of agency. As an agent,
A has the obligation, say to look around for clients or buyers, as in the real estate business. As a
result of such obligation, A may enter into a contract of sale with C, a costumer. The contract of sale
itself results in the obligations to pay and to deliver. The obligation to deliver may result in a contract
of carriage.
The so-called INNOMINATE CONTRACTS
For want of an express name, the following are termed “contratos innominados”
 Do ut des – I gave that you may give.
 Do ut facias – I give that you may do.
 Faciout des – I do that you may give.
 Faciout facias – I do that you may do.

QUASI-CONTRACT (Article 1160) (as if)

A juridical relation arising from lawful, voluntary, and unilateral acts based on the principle that no
one shall be unjustly enriched or benefited at the expense of another (NCC, Art. 2142). Title XVII

Distinguished from “implied contracts”

An implied contract, in the proper sense, is a contract which arises when the intention of the parties
is not expressed, but an agreement in fact, creating an obligation, is implied or presumed from their
acts, or where there are circumstances which show a mutual intent to contract. An implied contract
requires consent while a quasi-contract, being a unilateral contract, does not. The basis of an
implied contract is the will of the parties while the basis of a quasi-contract is law, to the end that
there be no unjust enrichment (Rabuya, 2017).

Characteristics of a quasi-contract
1. It must be Lawful;
2. It must be Unilateral; and
3. It must be Voluntary

Presumptive Consent
Since a quasi-contract is a unilateral contract created by the sole act(s) of the gestor, there is no
express consent given by the other party. The consent needed in a contract is provided by law
through presumption (Pineda, 2000).

Principal forms of quasi-contracts

1. Negotiorum gestio (officious manager) – Arises when a person voluntarily takes charge
of the management of the business or property of another without any power from the latter
(NCC, Art. 2144);
- The unjustly enriched will now have the obligation to reimburse the expense of the
officious manager
2. Solutio indebiti (unjust enrichment) – Takes place when a person received something
from another without any right to demand for it, and the thing was unduly delivered to him
through mistake
- Return what you received by mistake
NOTE: The delivery must not be through liberality or some other cause.

Query: is a Quasi-Contract an Implied Contract?

Ans: No, because in a quasi-contract (unlike in an implied contract) there is NO meeting of
the minds.

Examples of Quasi-Contracts

1. When during a flood, fire, 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. (Article 2168, Civil Code)

2. Any person who is constrained to pay the taxes of another shall be entitled to
reimbursement from the latter. (Article 2175, Civil Code)

DELICT or EX DELICTO (crimes or offenses) (Article 1161)

Pertinent Provision of the Revised Penal Code (RPC)

Article 100, RPC says, “Every person criminally liable for a felony is also civilly liable.” The
reason lies in the fact oftentimes the commission of a crime causes not only moral evil but also
material damage. If no material damage is done, civil liability be enforced.
- The person liable criminally have the obligation to pay the civil liability (damages)

Civil Action Implicitly Instituted in Criminal Case

As a general rule, whenever a criminal action is instituted, the civil action for the civil liability is also
impliedly instituted together with the criminal action. (Rule 3, Section 1, Revised Rules of Court)

Liability of an Insane Criminal

An insane man who commits a crime is exempted from criminal liability, but his guardian can be held
civilly liable unless the latter was diligent in his task of taking care of the insane. If there is no
guardian or the guardian is insolvent, the property of insane man can be held liable. (See Arts. 12
and 101, RPC).

Effect of DEATH of Criminal Offender pending trial

Buenaventura Belama vs. Marcelino Polinar
L-24098, Nov. 18, 1967
FACTS: the defendant in a criminal case for physical injuries died before final judgment.
ISSUE: is his civil liability extinguished?
HELD: No, his civil liability is not extinguished for, after all, in Art. 33 of the Civil Code, there
can, in the case of physical injuries, still be an independent action. The action will be
directed against the administrator of the estate, the obligation having become the obligation
of the heirs; but of course, the liability cannot exceed the value of inheritance.
Effect of ACQUITTAL in criminal Case
Suppose the defendant in a criminal case is acquitted, can he still be held liable civilly?
ANS: it depends
1. If the reason why there was an acquittal was because the accused could not have acquitted
the act, no civil action can later on be brought.
2. If the reason for acquittal was because of exempting circumstance (as in case the defendant
is insane) he would still be civilly liable
3. If there is an independent civil action allowed by the law, civil liability may still arise if this
action is instituted and the defendant’s liability is proved by mere preponderance of
evidence (because while guilt beyond reasonable ground might not have proved, it would be
a simpler matter to prove guilt by mere preponderance of evidence) eg.Estafa case

QUASI-DELICT (Article 1162)

A quasi-delict is a fault or act of negligence (or omission of care) which causes damages to
another, there being no pre-existing contractual relations between the parties.
Culpa Aquiliana (quasi-delicts) can refer to acts which are criminal in character, whether the same
be voluntary or negligent.
Examples
1. While driving a car recklessly, Pedro injured a pedestrian.
2. Pedro while cleaning his window sill, caused a flower pot to fall on the street, breaking the
arms of his neighbor.
Note: in the above examples, Pedro can also be charged with the crime of physical injuries thru
simple or reckless imprudence.
Definition of NEGLIGENCE (Culpa)
1. Negligence is the failure to observe, for the protection of the interest of another person, that
degree of care, precaution and vigilance which the circumstances justly demand, whereby
such other person suffers injury. (U.S. vs Barrias, 23 Phil. 434)
2. As defined by the Civil Code, negligence is the omission of that diligence which is
required by the circumstances of person, place, and time. (Art. 1173)
Test for determination of Negligence
“The test in determining whether a person is negligent…is this: Would a prudent man (in his
position) foresee harm to the person injured as a reasonable consequence of the course about to be
pursued? If so, the law imposes a duty on the actor to refrain from that course, or to take precaution
against its mischievous results, and the failure to do so constitutes negligence. Reasonable
foresight of harm, followed by the ignoring of the admonition born of this provision, is the constitute
fact of negligence.” (Picart vs Smith, 37 Phil. 890)
Requirements before a person can be held liable for Quasi-Delict
1. there must be fault or negligence attributable to the person charged;
2. there must be damage or injury
3. there must be a direct relation of cause and effect between the fault or negligence on the
one hand and the damage or injury on the other hand (proximate cause)
NOTE:
1. Proximate Cause is that adequate and efficient cause, which in the natural
order of events, necessarily produces the damages or injury complained of.
In the case of Tuason vs Luzon Stevedoring Corp..,L-13541, January 28, 1961, the
Supreme Court held that since the plaintiff, Eduardo Tuazon, was travelling at a very high
speed and on the wrong side of the road, his negligence was the proximate cause of the
accident which badly injured him, and therefore he cannot recover damages from the other
party in the collision.
There are instances when “although there is damage, there is no legal injury or wrong” (damnum
absque injuria – damage without legal injury). (Example: if carefully driven car causes damage to a
pedestrian because the driver was suddenly struck by lightning, this is an instance of damage
without injury)

CIVIL CODE OF THE PHILIPPINES

https://drive.google.com/file/d/1w25EP1ccMRQggINiRvMAiEA_fFITRqtJ/view?usp=sharing
LAW ON OBLIGATIONS AND CONTRACTS
Quiz 1

1. According to Art. 1156, obligation consists of the following, EXCEPT:

o To construct a house
o Not to go out during ECQ
o To give an apple
o to kill

2. Which of the following best describes an active subject?

o She has the duty to give

o she in whose favor the obligation is constituted
o she is the debtor
o she is called the obligor

3. Which of the following does not describe a passive subject?

o She has the duty to give

o she is the debtor
o she in whose favor the obligation is constituted
o she is called the obligor

4. The sources of obligation as enumerated in Art. 1157 are exclusive. Hence, no obligation exists
for a child to take care of an old and fragile parent.

- False

5. Takes place when a person received something from another without any right to demand for it,
and the thing was unduly delivered to him through mistake

o obligation ex contractu
o obligation ex delicto
o solutio indebiti
o obligation ex quasi delicto

6. In negotiorum gestio, reimbursement must be made for all necessary and useful expenses

- True

7. Which among the following is not an essential element of an obligation?

o Form of the obligation

o Active and passive subjects
o Prestation
o Juridical tie

8. A promises to paint B’s picture for B as a result of an agreement. Who is the obligee?

- B

9. Laws like any other norm is a rule of conduct.

- True

10. It is the subject matter of an obligation

o Prestation
o Juridical tie
 o Consideration
o Object

11. In an obligation to deliver a generic thing, the debtor is not relieved from liability for loss even if it
is due to a fortuitous event.

- True

12. Obligation arises from contract. Hence, all obligations comes from contracts.

- False

13. Which of the following is NOT a determinate thing?

o a cavan of rice
o the car sold by Bogart
o the money I gave you
o the watch I am wearing

14. A promises to paint B’s picture for B as a result of an agreement. Who is the obligor?

- A

15. When a generic thing is lost, the debtor can replace it with a different thing.

- False

16. What is the nature of the obligation as defined in Art. 1156?

o Political Obligation
o Moral Obligation
o Natural Obligation
o Civil Obligation

17. An object is determinate if it can be similar with other objects of the same kind

- False

18. Obligations derived from law are not presumed. So, we are not therefore bound to wear face
masks as mandated by an ordinance.

- False

19. Which is NOT a generic thing?

o a Siberian husky
o this cavan of rice
o A 2014 Toyota car
o the sum of P1,000,000.00

20. Obligation arises from contract. Hence, all contracts has obligations

- True

21. Obligation arises when a person voluntarily takes charge of the management of the business or
property of another without any authority from the latter

o obligation ex delicto
o solutio indebiti
 o negotiorum gestio
o obligation ex contractu

22. Even if law is obligatory but if one does not know that a particular law exists, then she can be
excused from compliance therewith.

- False

23. Obligation is a juridical necessity because..

o failure to fulfill the obligation shall be met with karma

o in default thereof, the economic value that it represents may be enforced
o in case of non-compliance, the courts of heavens may be called upon to enforce its
fulfillment
o the fulfillment of the obligation will be blessed a hundred fold

24. There is negotiorum gestio when the manager has been tacitly authorized by the owner

- False

25. In solutio indebiti, the duty to return is imperative.

- True
 Nature and Effect of Obligations
Article 1163. Every person obliged to give something is also obliged to take care if 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. (1094a)
- Refers to real obligation (obligation to give/deliver)
 to give specific thing/determinate thing
 to give generic thing/indeterminate thing
Reason behind Art.1163:
 the obligation to deliver a thing would be illusory if the debtor were not also obliged to
preserve it. (Tolentino)
Effect of breach: Debtor who fails to exercise the diligence of a good father of a family in
preserving the thing can be held liable for damages. (Tolentino)
*Note: Art. 1163 can be read in conjunction with Art. 1173.

3 KINDS OF PRESTATION IN OBLIGATIONS

 To give – real (there is some physical thing which may be the subject of possession, the
delivery of which completely discharges the obligation)
 To do – positive personal obligation
 Example: Jewel promised to clean the house on Saturday.
 Not to do – negative personal obligation (non-fulfillment is resolved in the end by the
payment of an indemnification of damages)
 Example: Kevin bound himself not build any structure on the boundary of his
uncle’s property.

Obligation to do or not to do
 Perfection of the obligation devolves upon the person himself who is bound by the
obligation
Obligation to give/to deliver
 Intimately connected with the thing that is the subject matter of relation
 Definition: That which has for its object the delivery of a thing which the obligor must deliver
to the obligee because of whatever right the latter may have acquired over the same
(Caguioa)
Classification of Obligation to give/deliver:(distinction lies purely and exclusively on the will of
parties or under the norms of law)
1. Specific obligation
2. Generic obligation

Why is there a need to determine whether to deliver a specific or generic things?

- To know what the obligation of the debtor
 SPECIFIC OBLIGATION
 an obligation to give a specific or determinate thing
SPECIFIC/DETERMINATE THING
 a thing determined individually in such a manner that it cannot be substituted with another
 object is particularly designated or physically segregated from all others of the same
class; object is a concrete, particularized thing, indicated by its own individuality (Jurado)
 one that is individualized and can be identified or distinguished from others of its kind
(Tolentino)
Examples:
 Yogi obliged himself to gift Kim the only watch he is wearing
 Kanturo bound himself to deliver the Toyota Vios 2020 model with plate no. ABA 2345
 White horse which won the Senior Grand Derby in 1979, Samsung G600 G-660#1-1G-6608
PC
NOTE:
 the very same thing promised must be delivered by the debtor and he cannot substitute said
thing with another although the substitute is more valuable than that agreed upon unless the
creditor agrees to the substitution (Art. 1206 par.1)
3 accessory obligations of debtor in an obligation to give (deliver)
1. obligation to take care of it with the proper diligence of a good father of a family (Art.1163);
2. to deliver the accessions and accessories although the same may not have been mentioned
(Art.1166);
3. to deliver the fruits from the moment the obligation to deliver arises (Art.1164)
Obligations of a debtor: to deliver a specific thing
1. Deliver the thing
- Debtor can be compelled to deliver something different from what the
debtor is bound to deliver
2. To take care of the thing before delivery
- Where standard of care is considered
- Debtor must exercise due diligence (the act of care relevant to the
circumstance of the object
- Diligence of a good father of the family – standard level of diligence
o Dependent on the obligation or the thing to be delivered
- You cannot lower diligence but to increase only
- Increased diligence = Extraordinary diligence (maximum)
o When talking about life
3. To deliver the fruits of the thing (products)
1) Civil fruits – with commercial aspect. Ex. Profit, stocks
 2) Natural fruit – spontaneous products of the land/soil
3) Industrial fruit – produce of the land/soil but entails human intervention
4. To deliver the accessions and accessories (even if not mentioned)
 Accessions – additions attached for embellishment/beautification purposes
 Accessories – useful things included when a thing is delivered; have
something to do for its improvement
5. To pay damages if guilty of fraud, negligence, delay, or contravention of the
term of the obligation
6. Warranty against eviction and hidden defects
- if the thing to be delivered is owned by somebody else
- the one to deliver/debtor will be liable for you

GENERIC OBLIGATION
 has for its object a genus an object that is determined only by the class to which it pertains
(incertum corpus)
 delivery of a thing belonging to a specie stipulated, usually those which are fungible and
those which are determined by amount, number, or measure
 an obligation to give a generic thing
GENERIC/INDETERMINATE THING
 the object is one whose determination is confined to that of its nature – to the genus to
which it pertains (Jurado)
 one that is indicated only by its kinds, without being designated and distinguished from
others of the same kind (Tolentino)
Examples:
 Father promised to end her favorite daughter a cavan of rice
 Tomas will give Nadine a lechon on her birthday
 Ten white horses, Samsung G600, Acer laptop
2 Purposes of obligations to give/deliver: (Caguioa)
1. To transfer title/ownership (e.g. contract of sale or barter)
2. To transfer merely possessions (commodatum—Art. 1933, by the contract of loan, one of
the parties delivers to another, either something not consumable so that the latter may use
the same for a certain time and return it, in which case the contract is called a
commodatum)
Obligations of a debtor: to deliver a generic thing
1. Deliver the thing
- Still constitute due diligence/minimum standard of care
2. To bear the expenses of having someone else to comply with the obligation
- Presupposes that even it is not mentioned, we to perform this obligation
though it is not mandatory for it can be changed/replaced as long as it is the
same, and neither superior nor inferior in terms of quality
 3. To pay damages if guilty of fraud, negligence, delay or contravention of the
term of the obligation

KINDS OF DELIVERY

Delivery may be either actual or constructive.

1. Actual delivery (or tradition) – were physically, the property changes hands. Example: if A
sells B a fountain pen, the giving by A to B of the fountain pen is actual tradition.
2. Constructive delivery – that where the physical transfer is implied. This may be done by:
a. Tradition simbolica (symbolical tradition – (as when the keys of a bodega are
given)
b. Tradition longa manu (delivery by mere consent or the pointing out of the object) –
Example: pointing out the car, which is the object of the sale.
c. Tradition brevi manu (delivery by the short hand; that kind of delivery whereby a
possessor of a thing not as owner, becomes the possessor as owner) (example:
when a tenant already in possession buys the house he is renting)
d. Traditio constitutum possessorium– the opposite of brevi manu; thus, th e
delivery whereby the possessor of a thing as an owner, retains possession no
longer as an owner, but in some other capacity (like a house owner, who sells a
house, but remains in possession as tenant of the same house)
e. Tradition by the execution of legal forms and solemnities (like the execution of
public instrument selling land)
Other form of classifying obligations in general: (Caguioa)
1. Positive – obligations which have for their object to give or to do
2. Negative – restrains the obligor from delivering or doing something which he could do
where it not for the obligation

Diligence of a good father of a family (BONUS PATER FAMILIAS)

 That reasonable diligence which an ordinary prudent person would have done under the
same circumstances
 general legal standard of care or degree of diligence the law requires in obligation to deliver
a thing
Degree of diligence required
 That agreed upon; that which is required by the nature of the obligation and
corresponds with the circumstances of a person, time and place. (Art. 1173, Civil Code).
This is really a diligence of a good father of a family.
 In the absence of such, that which is required by the law;
General Rule: In the absence of the foregoing, diligence of a good father of a family (minimum
standard of diligence)
Exceptions:
1. Common carriers requiring extraordinary diligence (NCC, Arts. 1998-2002);
2. Banks require the highest degree of diligence, being imbued with public interest.
Circumstances that should be taken into consideration in determining the degree of
diligence: (Caguioa)
 nature of the obligation depending on the circumstances of the debtor
 nature of the obligation depending on the time of the performance of obligation
 nature of the obligation depending on the place of the performance of the obligation
OBLIGATIONS OF A DEBTOR IN AN OBLIGATION TO GIVE/DELIVER:

BASIS Specific Generic

Deliver the thing which is neither of
What the superior nor inferior quality if quality
Deliver the thing agreed upon
obligation and circumstances have not been
(NCC, Art 1165).
consists of stated by the parties. (NCC,
Art.1246).
Take care of the thing with the
proper diligence of a good father
Required If the object is generic, but the source
of a family unless the law requires
diligence to be is specified or delimited, the obligation
or parties stipulate another
observed is to preserve the source
standard of care (NCC, A
rt.1163).
Delivery of another thing within the
Deliver all accessions,
same genus as the thing promised if
What delivery accessories, and fruits of the thing
such thing is damaged due to lack of
comprises of even though they may not have
care or a general breach is
been mentioned (NCC, A rt. 1166)
committed.
Pay damages in case of breach of
Pay damages in case of breach of
obligation by reason of delay,
Effects of breach obligation by reason of delay, fraud,
fraud, negligence, contravention
of obligation negligence, contravention of the tenor
of the tenor thereof (NCC, Art.
thereof (NCC, Art. 1170).
1170).
Effect of Obligation is not extinguished (genus
Fortuitous event extinguishes the
fortuitous nun quam peruit – genus never
obligation.
event perishes).
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. (1095)

General rule: The creditor or obligee, in an obligation to deliver a determinate thing, is entitled to the
fruits from the time the obligation to deliver arises.

Kinds of Fruits
1. Natural fruits – spontaneous products of the soil and the young and other products of
animals (Art.442)
2. Industrial fruits – produced by lands of any kind through cultivation or labor (Art. 442)
3. Civil fruits – rents of buildings, price of leases of lands and other property and the amount
of perpetual or life annuities or other similar income (Art.442)

Nature of the right of the creditor with respect to fruits

 Before delivery – Personal right;
 After delivery – Real right.

Distinctions between personal and real rights

Personal Right Real Right
power belonging to a person over a specific
power belonging to one person to demand of
thing, without a passive subject individually
another, as a definite passive subject, the
determined, against whom such right may be
fulfillment of a prestation to give, to do, or not to
personally exercised
do (Tolentino)
- The right over the property in
- The right to compel to deliver
exclusion of everyone
jus in rem – right enforceable against the
jus ad rem – right enforceable only against a
whole world (e.g. right of ownership,
definite person or group of persons
possession, usufruct, or easement)
Rights of Creditor over a thing

Enforceable When Example

against who? acquired?
From the time S is obliged
PERSONA A specific
the obligation to today to give B
L person (debtor)
deliver arises on Sept. 21 a
REAL Anyone (in rem) Deliver particular horse

Note:
 Before delivery, the creditor, in obligations to give, has merely a personal right against the
debtor – a right to ask for delivery of the thing and the fruits thereof; ownership does not
pass to the creditor
 Once the things and fruits delivered, the creditor acquires real right over such which is
enforceable against the whole world à the creditor only acquires the right of ownership over
the thing and the fruits once they are delivered to him.
When does the obligation to deliver the thing and the fruits arise?
1. Obligations arising from contracts
 From the time designated by the provisions of the Civil Code or of special laws
creating or regulating them
 General rule: from the moment of the perfection of contract (basis: Art.1537)
Exceptions to the general rule:
 In case there is a contrary stipulation of the parties with respect to the time when
the thing or fruits shall be delivered.
 If the obligation is subject to a suspensive condition à obligation to deliver the
thing as well as the fruits shall arise only from the moment of the fulfillment of the
obligation; otherwise stated, from the moment the condition happens (Art.1187)
*suspensive condition – the happening or fulfillment of the condition results in
the birth of the obligation
o If the obligation is subject to a suspensive term or period à obligation to
deliver arises only upon the expiration of the designated term or period
o Reason/justification of the article: found in the corresponding liability
of the creditor for any loss that is occasioned to the property, since he
bears the same from the moment of the perfection of the contract.

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.
Remedies of the creditor in case of failure to deliver the thing due:
The following are the remedies of the creditor in case of failure to deliver the thing due (Pineda,
2000)

Determinate
To compel specific performance, for the
debtor to make the delivery of the very thing
agreed upon (when the debtor does not
comply with what he has promised and the
creditor demands that he fulfill the same)
NOTE: Under Art. 1244 par.1, the debtor of a
Generic
To ask for performance of the obligation
NOTE 1: the delivery of a thing belonging to the
species stipulated will be sufficient and hence, it
is not absolutely necessary for the debtor to
make the delivery himself, since the delivery of
anything of the same species will fulfill the
 obligation. It may be performed by another, but
at the expense of the debtor. (substitute
thing cannot compel the creditor to receive a
performance)
different one, although the latter may be of the
NOTE 2: Creditor can only ask for the delivery of
same value as, or more valuable than that
a thing or object belonging to the class or genus
which is due.
stipulated which must be neither of superior nor
inferior quality (Art.1246)
Rescission (action to rescind under NCC, To ask that the obligation to be complied with at
Art.1380). the expense of the debtor
The creditor may ask a third person to perform
Resolution (action for cancellation under NCC,
the obligation and all expenses incurred shall be
Art.1191).
charged against him
To recover damages for breach of the obligation, in both cases (NCC, Art. 1170).
NOTE: May be exclusive or in addition to the above-mentioned remedies

Requisites for substitute performance:

 There be non-fulfillment of the obligation either totally or partially whether non-performance
or mere delay, and the same is imputable to the debtor
 Specific performance is not possible
 There exists a compensable damage or injury
 There is a casual relation as of cause and effect between the non-fulfillment of the obligation
and the damage done. The indemnification for damages covers both the injury suffered
(damnum emergens or daño emergente) and the loss of profits (lucrum cesans or lucro
cesante)

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. (1097a)
 Accessions – those things incorporated or attached to the principal either naturally or
artificially (e.g., alluvion, buildings, constructions, etc.)
 Accessories – those things which although not incorporated to the principal are added to
the same for its completeness, use, perfection or embellishment (e.g., keys to a house, tools
of a car, etc)
General Rule: Everything that is attached, naturally or artificially, to the principal thing, as well as
that which serves to complete it, even if not attached to it, must be delivered together with it.
Exception: When the parties agree to exclude any accession or accessory of the thing.
Right by accession – right corollary to ownership of property which gives the owner the right to
everything produced by the property (FRUITS) or which is incorporated or attached thereto, either
naturally or artificially. (Art.440)
Summary:
1. Obligations of debtor in determinate obligations:
 To perform the obligation specifically.
 To take care of the thing with the proper diligence of a good father of a family.
 To deliver all accessions and accessories of the thing even though they may not
have been mentioned.
 To be liable for damages in case of breach of the obligation by reason of delay,
fraud, negligence or contravention of the tenor thereof.

2. Obligations of debtor in generic obligations:

  To deliver a thing which is neither of superior nor inferior quality. (Art. 1246)
 To be liable for damages in case of breach of the obligation by reason of delay,
fraud, negligence or contravention of the tenor thereof.
 an obligation to deliver a generic thing, the loss or destruction of anything of the
same class or genus as that which constitutes the object thereof shall not
extinguish the obligation (the genus of a thing can never perish) (art. 1263)

Article 1167. If a 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 obligation.
Furthermore, it may be decreed that what has been poorly done be undone. (1098)
Obligation to do
 those obligations which have for their object a prestation consisting of performing a certain
activity, physical or intellectual, distinct from that of the delivery of a thing (Caguioa)
Obligations of a debtor: obligation to do
Example: Jewel promised to clean the house on Saturday
1. To do the obligation
- In case of noncompliance, we cannot compel a person to perform an obligation if
he refuses to perform it because it is equivalent to force labor which is a
constitutional violation.
2. To bear the expenses of having someone else to comply with the obligation
- Since we cannot compel the person if he does not want to comply, he will now be
obliged to bear the expenses or will pay for the other person to do his obligation
3. To undo what has been poorly done
- You can let the person undo or redo his obligation if poorly done, but he does not
want to perform it, still we cannot compel him

4. To bear the expenses of having someone else undo what has been poorly done
- if he then refuses to undo what has been poorly done, we will now suffer the
liability of paying for letting somebody else do it
5. To pay damages if guilty of fraud, negligence, delay, or contravention of the
term of the obligation
Difference from an obligation to give:
 obligee or creditor does not possess the power to compel the obligor to comply with his
obligations
o reason: the law recognizes the individual’s freedom or liberty to choose between
doing that which he has promised to do and not doing it.
General rule in obligations to do (or not to do):
 The debtor must perform the act as promised and cannot substitute the same with another
act of forbearance, unless of course with the consent of the creditor or in case the obligation
is facultative. (Art.1244, par.2)
Note: (from Caguioa)
 The act to be performed is either very personal or not.
o *if very personal – when the qualifications of the debtor are involved; the debtor is
the only one that must perform it (specific singer or painter)
o *if not personal – performance by an agent is permitted (substitute performance)
Effects of breach:
 In positive personal obligations to do, if the obligor fails to do that which he has obligated
himself to do, the obligee can have the obligation performed or executed at the expense of
the former. (Art. 1167, par.2)
 In case the debtor should have performed the act agreed upon in contravention of the
agreement, or in a manner that is improper or inappropriate, the same thing shall be ordered
undone and performed by another at the expense of the debtor should he refuse to do it all
over again.
 Obligee can also demand for damages by reason of the breach. (Art. 1170)

Article 1168. When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall also be undone at his expense. (1099a)
Obligation not to do
Negative personal obligations –
 the object of the obligation is realized or fulfilled so long as that which is forbidden is not
done by the obligor (Jurado)
 those obligations whose object is the abstention of the debtor from whatever act which
otherwise he could perform (Caguioa)
o This type of obligation carries with it no accessory obligation and by its nature is
purely personal to the debtor and consequently, he himself must abstain or refrain
from performing the conditions prohibited and cannot delegate the same to an
agent, except when there is consent from the creditor.
o Delay or mora is NOT possible unlike in positive obligations; obligation is either
fulfilled or not (Jurado)
 General rule: The debtor must perform the act as promised and cannot substitute the same
with another act of forbearance. (Art. 1244, par.2)
Effects of breach:
 In case the debtor breaches the obligation, the same shall be ordered undone at his
expense. (Art.1168)
 In those cases where it is not possible to undo the act done either physically or legally, or
because the rights of third persons are involved, or for some other reason, the only feasible
remedy on the part of the creditor is an indemnification for the damage caused. (Art.1170)

Obligations of a debtor: obligation not to do

Example: Kevin bound himself not build any structure on the boundary of his uncle’s property.
1. Not to do what has been forbidden
2. To undo what has been done that is forbidden
- Yes, but cannot compel the person
3. To bear the expenses of having someone else undo what has been done that
is forbidden
- If the person does not want to perform, he will be held liable in paying the other
person to perform his obligation
4. To pay damages if guilty of fraud, negligence, delay or contravention of the
term of the obligation

Article 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extra-judicially 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 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. (1100a)
Fulfillment of the obligation: (how)
 Performance of the obligation or payment, juridically speaking, presupposes the exact and
complete execution of the prestation on the part of the debtor. (Caguioa)
 Traditionally, performance or fulfillment of the obligation has been expressed in the term
“payment” or “solutio,” which expression has also the concept of extinction of the juridical
relation.
NOTE: The Civil Code regulates fulfillment or payment among the models of extinguishing
obligations.

Default or Mora (1st kind of voluntarily breaching obligation, a defect and partial non-
fulfillment of obligation) (DEBTOR’S DEFAULT)
Principles:
1. covers all non-fulfillment in point of time in its broadest sense; juridically, however, it pertains
only to culpable delay where fulfillment or compliance with the obligation, although late, is
still possible (Caguioa)
2. signifies the idea of delay in the fulfillment of an obligation with respect to time (Jurado)
3. delay in the fulfillment of obligations; it is non-fulfillment with respect to time (Tolentino)
NOTE: There can be delay ONLY in positive obligations (to do and to give); but there can be NO
delay in negative obligations

KINDS OF DELAY
Ordinary delay – This is the mere failure to perform an obligation at the stipulated time.
Extraordinary delay or legal delay – T his delay already equates to non-fulfillment of the obligation
and arises after the extrajudicial or judicial demand has been made upon the debtor (Pineda, 200 0).

Classification of Mora/Default:
 Mora solvendi – delay on the part of the debtor
o mora solvendi ex re – when demand by the creditor is not necessary to make the
debtor in mora (Caguioa) (refers to obligations to give)
o mora solvendi ex persona – if demand by the creditor is necessary in order to
make the debtor in mora (Caguioa) (refers to obligations to do)
 Mora accipiendi – delay on the part of the creditor to accept the delivery of the thing which
is the object of the obligation (Jurado); generally, delay on the part of the creditor
 Compensatio morae – delay of the parties or obligors in reciprocal obligations; where mora
of the creditor neutralizes the mora of the debtor (Caguioa)
3 requisites which should be present in order that the obligor or debtor may be considered in
default (Jurado)
1. Obligation is demandable and already liquidated
2. Obligor or debtor delays performance
3. Creditor requires (demand) the performance judicially or extra-judicially

MORA SOLVENDI
Requisites: (Caguioa)
1. Obligation consists of a positive prestation (to do or to give)
2. Obligation should be demandable, due, determined or liquidated
3. Debtor delays in the performance due to causes imputable to him
4. Creditor should demand performance of the debtor
When does the obligor incur in delay?
 The obligor or debtor incurs in delay from the time the obligee or creditor demands from
him the fulfillment of the obligation;
o the demand may be judicial or extrajudicial
 judicial: if the creditor files a complaint against the debtor for the fulfillment
of the obligation
 extrajudicial: if the creditor demands from the debtor the fulfillment of the
obligation either orally or in writing (Jurado); sending of a bill or demand letter
(Caguioa)
NOTES:
 A mere reminder or any act which cannot be qualified as a demand for payment will not be
considered a demand since the code requires that the tolerance and benevolence of the
creditor has terminated (Castan as cited in Caguioa)
 The proof of the demand will be incumbent upon the creditor (Tolentino)
 Demand is generally necessary even if a period has been fixed in the obligation (Tolentino)
 Where there has been an extrajudicial demand before action for performance was filed, the
effects of default arise from the date of such extrajudicial demand. But where the evidence
does not disclose any particular date on which the creditor made extrajudicial demand upon
the debtor, the payment of interest or damages for the default must commence from the
filing of the complaint. (Tolentino)
 The demand must refer to the prestation that is due and not to another (Tolentino)
When demand is NOT necessary:
 when the obligation or the law expressly so declares
o the obligation or the law itself must expressly declare that the demand is not
necessary in order that the debtor shall incur in delay
o example: in the obligation it is stipulated that, “D shall incur in delay if he does not
pay the obligation upon the arrival of the designated date for payment”.
 when from the nature and the circumstances of the obligation it appears that the designation
of the time when the thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract
o basis: the time element for the fulfillment of the obligation is of the essence of the
contract
o examples:
1) where a building was to be completed on a certain date because it was to be
opened as a school on a fixed date;
2) where goods were to be delivered on a specified date because they were to be
loaded on a boat leaving on such date
  when demand would be useless, as when the obligor has rendered it beyond his power to
perform
o where performance has become impossible either through:
1) some act or fault of the debtor or
2) as that caused by fortuitous event but the debtor has bound himself to be liable
in cases of such events.
*NOTE: 4th instance when demand is not necessary according to some authors (acknowledged by
Tolentino):
 when the debtor expressly recognizes or acknowledges that he has incurred in delay. There
must, however, be an express recognition of the default and not merely requests for
extension to time to perform.
Effects of mora solvendi:
1. to indemnify the creditor for damages which his delay has occasioned in obligations to give
and to do (Caguioa)
2. to answer for the loss or deterioration of the thing due even if caused by fortuitous event
(Caguioa)
3. When it has for its object a determinate thing, the delay places the risks of the thing on the
debtor (Tolentino)
Non-applicability of mora solvendi
 Mora solvendi does not apply in natural obligations because performance is optional or
voluntary on the debtor’s part. One can never be late in not giving or doing something.

MORA ACCIPIENDI
 constitutes non-acceptance (on the part of the creditor) without reason (justifiable)
(Caguioa)
 delay in the performance based on the omission by the creditor of the necessary
cooperation, especially acceptance on his part (Tolentino)
Requisites: (Caguioa)
1. That there exists an obligation which has already matured and for whose fulfillment an act of
cooperation on the part of the creditor is required
2. That the debtor has performed al that is incumbent upon him under the obligation and made
tender of payment to the creditor
3. That the creditor refused to accept payment or to cooperate in the fulfillment of the
obligation without any justifiable reason
When does the creditor incur in delay?
 The creditor incurs in delay when the debtor tender’s payment or performance, but the
creditor refuses to accept it without just cause.
Effects of mora accipiendi:
1. it excludes the mora of the debtor and destroys the effects of the latter (Caguioa)
2. it transfers the risk to the creditor for fortuitous events which formerly belonged to the debtor
(Caguioa & Tolentino)
3. debtor can obtain his freedom from the obligation by the consignation of the thing due, and
consequently, after consignation, his obligation to pay interest is extinguished (Caguioa &
Tolentino)
4. the responsibility of the debtor for the thing is reduced and limited to fraud and gross
negligence (Tolentino)
5. all expenses incurred by the debtor for the preservation of the thing after the mora shall be
chargeable to the creditor (Tolentino)
 6. creditor becomes liable for damages (Tolentino)

COMPENSATIO MORAE
Reciprocal obligations –
 those which are created or established at the same time, out of the same cause, and which
result in mutual relationships of the creditor and debtor between the parties.
 are conditional in the sense that fulfillment of an obligation by one party depends upon the
fulfillment of the obligation by the other
General rule in reciprocal obligations:
 the fulfillment by the parties should be simultaneous. Where both are in default, their
respective liability for damages shall be offset equitably.
When does delay or mora begin?
 Delay or mora begins from the moment the other party fulfills or renders fulfillment of his
obligation in a proper manner (Caguioa); otherwise put, delinquency commences when one
of the contracting parties fulfills his obligation and becomes invested with power to
determine the contract because of failure on the part of the other to carry out the agreement.
(Tolentino)
How is demand made in reciprocal obligations?
 Demand is made in only one way and that is by actual performance or tender of
performance of the obligation of the party claiming delay or default by the other. (Caguioa)

DELAY
– Failure to comply with the obligation on time

UNILATERAL OBLIGATIONS RECIPROCAL OBLIGATIONS

GR:
NO DEMAND, NO DEFAULT
- The debtor is the only one obliged to
perform an obligation
- When still in delay, not yet liable but
when in default (delay+demand), that’s
the time you will be held liable
Exceptions:
1. The law or obligation so declare
2. Time is of the essence (the controlling
motive for the establishment of obligation)
3. Demand would be useless
Default – delay after the demand was made
GR:
Delay occurs from the moment one party fulfills
his undertaking (obligation), while the other
does not comply or is not ready to comply in a
proper manner with what is incumbent upon
him (automatically in default)
- Creditor and debtor are both involved
- Two parties has the respective obligation
(bilateral obligation)
Exceptions:
Different dates for the performance of
respective obligations are fixed by the parties

Illustrative Problems/Situations
Unilateral Obligation
 Kimi promised to give her pet horse named Ritchie to Bogart and to be delivered on
September 30, 2021.
Analysis:
 Obligation to deliver on Time
  Did not deliver on September 30, 2021 (DELAY – failure to deliver at the designated
time); under the exception 2, should be expressed that incase of noncompliance,
will declare in default
 No Demand, No Default
 Demand after September 30, and no delivery – DEFAULT (civilly liable)
(Exceptions) Automatically be in default, need not to make a demand
Analysis:
1. When the obligation or law expressly so declares
 Kimi and Bogart agreed that Bogart need not to make demand to Kimi to be in
default
Ex. Payment of taxes, will be automatically in default
2. Time is the controlling motive for the establishment of obligation (Time is of the
Essence)
 Ritchie is an Olympic Horse and he will compete on September 30, hence Kimi
promised to deliver on September 30
3. Demand would be useless
 Loss of the specific thing to be delivered (Ritchie died before September 30)
Reciprocal Obligation
 Ana sold her only cellphone to Bella for P10,000. No agreement as to time of delivery
and payment.
GR: When one party fulfills his obligation, delay on the other starts if unable to perform his
part
Analysis:
1. If Bella paid P10,000. Ana must deliver the cellphone on the same day, or if Ana
delivers the cellphone, Bella must pay on the same day.
- If either party is unable to perform the obligation, there is delay.
(Exceptions)
 When dates are specified, default will come in only when you will not able to fulfill you
obligation in the date mentioned.

Ex. Ana will sell her phone to Bella for P10,000 and will deliver it September 30. Bella
will pay on October 10.
- If Ana delivered the phone in September 30, Belle is still not considered in default
since is only obliged to pay on the date of October 30
- Can Ana demand payment prior October 10 or can Bella demand the fulfillment of
the obligation of Ana before September 30? NO, because they are only obliged to
pay on the specified date.
- Bella will only be in default when she was not able to pay on October 10.
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable
for damages. (1101)
  enumerated herein are those kinds of voluntary breaches of obligation:
1. through fraud
2. negligence
3. delay
4. contravention of the tenor of the obligation – did not follow what has been
agreed upon
General rule: in cases where there is voluntary breach of obligation, one of the rights of the creditor
is to ask for indemnification of damages under this article.
NOTES:
 “Damages” as used in the above provision include any and all damages that a human
being may suffer in any and all manifestations of his life: physical or material, moral or
psychological, mental or spiritual, financial, economic, social, political and religious.
(Tolentino)
 Breach of contractual obligation entitles the other party damages even if no penalty for such
breach is provided in the contract.
 The responsibility for damages arising from non-fulfillment of a contractual obligation cannot
be divided nor can it be extended to persons who have nothing to do with the obligation
(Tolentino)
Contravention of the tenor of obligation (also another kind of voluntary breach of obligation
or partial non-fulfillment of obligation)
 Any illicit act which impairs the strict and faithful fulfillment of the obligation or every kind of
defective performance.
o example: an architect who made plans that contain defects and inadequacies which
led to the collapse of the building

2 KINDS OF BREACH OF OBLIGATIONS: (Jurado)

Voluntary – if the debtor or obligor in the performance of his obligation is guilty of default, fraud,
negligence, or in any manner contravenes the tenor thereof; debtor is liable for damages.
 Voluntary breach through default or mora (Art.1169)
 Voluntary breach through fraud or dolo (Art. 1171)
 Voluntary breach through negligence or culpa (Art. 1172)
 Voluntary breach through contravention of tenor of the agreement (Art. 1170)
Involuntary – if the non-fulfillment is brought about by circumstances foreign to the will of the debtor
(Caguioa); otherwise put, if the debtor is unable to comply with his obligation because of some
fortuitous event; debtor is NOT liable for damages (Art. 1174)
- Debtor have no participation

DAMAGES (pecuniary loss – measures in terms of amount)

 Actual or compensatory – only kind of damages that you must show proof that there is
pecuniary loss
Ex. receipts
  Moral – value or amount of what you felt when you experienced breach of obligation
Ex. suffering, serious anxiety, besmirched reputation
 Nominal – smallest value among these 6 kinds of damages; there is no damage felt but
your right was violated
Ex. to vindicate or recognize a right
 Temperate or Moderate – loss cannot be proved with certainty; estimation
 Exemplary or Corrective – to set an example
 Liquidated – agreed upon by parties

Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of
an action for future fraud is void. (1102a)
FRAUD or Dolo
 voluntary execution of a wrongful act, or a willful omission, knowing and intending the
effects which naturally and necessarily arise from such act or omission. (Tolentino)
 consists in the conscious and intentional proposition to evade the normal fulfillment of the
obligation (Jurado)
 Deception through insidious machination, manipulation, concealment, misrepresentation
that would lead an ordinary prudent person into error after taking the circumstances into
account

Causal Fraud (dolo Causante)

- Fraud in obtaining/securing consent in a contract
Ex. The person buying a phone was made to believe that the phone is an original one
even if it’s not.
Incidental Fraud (dolo incidente)
- Fraud in the performance of the obligation
Ex. You obliged to deliver 100 çavans of well milled rice. Before actual deliver, you
mixed 20 cavans of poorly milled rice to cut cost.

2 KINDS OF FRAUD: Deceit and Malice

Distinctions:
Deceit (Fraud in the performance)
Exists in the celebration of
contracts/
As to time
Exists ahead of the contractual
obligation, or at the birth of the
obligation
Results in a vitiation of consent and
Consent/Result
a possible annulment of the same
As to purpose Securing the consent of the other
party to enter into the contract
As to rights that Gives rise to a right of the innocent
Malice/Bad Faith (fraud in the
performance)
Exists in the fulfillment of obligations
Present only during the performance
of a pre-existing obligation
Consent is free and not vitiated. there
is no question of annulment and the
remedy granted by law is
indemnification for damages
Evading the normal fulfillment of an
obligation
Gives rise to a right of the creditor or
 party to ask for the annulment of the
arise obligee to recover damages from the
contract if the fraud is causal or to
debtor or obligor
recover damages if it is incidental

What type of fraud is contemplated under Art.1171?

 The fraud referred to in this article is malice or bad faith.
Malice or bad faith
 any voluntary and willful act or omission which prevents the normal realization of the
prestation, knowing and intending the effects which naturally and necessarily arise from
such act. (Tolentino)
 Manresa: deliberate and intentional purpose to evade the normal compliance of an
obligation (as cited in Caguioa)
Responsibility for malice or bad faith:
 For the consequences of his malicious act, the debtor is liable not only for the results
intended but also for their natural and probable consequences even though they haven’t
been foreseen by the debtor or they exceeded its intention
 This responsibility for malice or bad faith is demandable in all kinds of obligations but it is
necessary that it must be proved and not simply presumed and results in an aggravation of
the damages that are recoverable
Waiver of action for malice or bad faith:
 if in advance, e. a waiver for a fraud which has not yet been committed à void; prohibited
because it is against law and public policy
 if past, i.e. a waiver for a fraud already committed à valid; is deemed an act of generosity on
the part of the creditor

Article 1172. Responsibility arising from negligence in the performance of every kind of
obligation is also demandable, but such liability may be regulated by the courts, according
to the circumstances. (1103)
Culpa or fault or negligence
1. consists in the omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstances of the persons, of the time and of the place ( Art.
1173)
2. omission of that diligence required in social relations which if observed would have
prevented the contrary and undesired result (Caguioa)
3. simply the absence of due care required by the nature of the obligation (Jurado)
4. Failure to perform diligence in an obligation

Kinds of Negligence:
 Culpa aquiliana (quasi delict) – negligence in an accident; there is an injury
 Culpa contractual (contact) – negligence in the performance of an obligation arising from a
contract
 Culpa criminal (delict) – negligence results to death
Kinds/classes:
 According to form
o Culpa in faciendo (positive act)
o Culpa in non faciendo (omission)
  According to degree of culpa / diligence
o Culpa lata (grave which is the omission of the most minimum diligence)
o Culpa leve (omission of the diligence of an ordinary layman or bonus pater familias)
o Culpa levissima (omission of the maximum diligence of a very careful man)

Culpa contractual (Most important classification)

 fault or negligence in the performance of a pre-existing contractual obligation resulting in a
breach of obligation (Caguioa & Tolentino)
 fault or negligence of the obligor by virtue of which he is unable to perform his obligation
arising from a pre-existing contract because of the omission of the diligence which is
required by the nature of the obligation and corresponds with the circumstances of the
persons, of the time and of the place (Jurado)
Culpa extra-contractual or aquiliana
 failure to observe the care required by law with respect to other persons not connected by
contract or of any juridical relation whatsoever save the generic one which is common to all
men of not damaging another (Caguioa)
 fault or negligence of a person, who, because of the omission of the diligence which is
required by the nature of the obligation and which must correspond with the circumstances
of the persons, of the time and of the place, causes damage to another. (Jurado)
 fault or negligence which constitutes an independent source of obligation between parties
not previously bound. (Tolentino)
Distinctions:
CULPA CONTRACTUAL CULPA AQUILIANA
There is pre-existing contractual relation None.
The negligence involved is substantive and
The negligence of the defendant is merely an
independent.
incident in the performance of an obligation
Source of liability—breach or non-fulfillment of Source of liability—negligent act or omission
the contract itself
There is presumption of negligence from the Plaintiff must prove the existence of negligence
breach of the contract
The master cannot exempt himself by proving The master is free from liability upon proof of
due diligence in the selection and supervision of such diligence
employee
Damages may be claimed only by the parties, A stranger may claim damages such as the
their heirs and privies relatives and dependents
Negligence referred to in Art.1173 Negligence referred to in Art. 217

FRAUD (DOLO)/DECEIT NEGLIGENCE (CULPA)

There is malice or dolo when there is non-
fulfillment due to a cause of which the debtor is
aware;
There is actual knowledge
Liability cannot be mitigated by the court
- cannot be reduced
Distinguishing element: INTENTION
presence of intent to cause damage or injury to
another
The guilty party is responsible for all the
consequences attributable to his act whether
There is culpa when there is non-fulfillment due
to a cause which the debtor could or ought to
have foreseen;
There is possibility of knowledge
Liability may be mitigated by the court
- can be lessened
Mere abandonment, inattention, carelessness,
lack or insufficiency of diligence required in a
given situation
The guilty party only answers for the damages
which are foreseen or could have been

intended or not or foreseen or not
Waiver in advance (future fraud) is not allowed
or void
foreseen at the time the obligation was
constituted
Allowable (waiver) for future unless contrary to
public policy
- waiver of action for future negligence may
be valid

Responsibility for fault or negligence:

 If the debtor or obligor is unable to comply with his obligation because of his fault or
negligence, the creditor or obligee can hold him liable for damages.
 The liability arising from negligence in the performance of every kind of obligation may be
regulated by the courts. The court may increase or decrease the liability of the party at fault
depending upon the circumstances of each case.
o Exemptions from liability:
 in which a party to a contract is relieved from the effects of his fault or
negligence by a third person
 in which one party to a contract renounce in advance the right to enforce
liability arising from the fault or negligence of the other.
NOTES:
 Test of negligence: If the defendant in doing the alleged negligent act DID NOT use the
reasonable care and caution which an ordinarily prudent person would have used in the
same situation, he is guilty of negligence.
Waiver of action for negligence:
 Future negligence – can be waived, unless the nature of the obligation and public policy
should require extraordinary diligence; or if the negligence is so gross that it amounts to
malice or bad faith
 Past negligence – all the more valid
Effect of good/bad faith:
 If the obligor has acted in good faith, he shall be liable only for natural and probable
consequences of the breach of the obligation and which the parties have foreseen or could
have reasonably foreseen at the time the obligation was constituted.
 If the negligence of the obligor shows bad faith, provisions of Arts. 1171 and 2201, par.2[1]
shall apply. It is in this case that the boundary line, at least with regard to effects, between
negligence and fraud disappears altogether; otherwise put, when negligence shows bad
faith the rules on fraud or dolo shall govern.
Effect of contributory negligence:
 If there was contributory negligence of the obligee or creditor, the effect is to reduce or
mitigate the damages which he can recover from the obligor or debtor as a result of the
breach of the obligation. BUT, if the negligent act or omission of the obligee or creditor was
a proximate cause of the event which led to the damage or injury complained of, he cannot
recover. (Jurado)

Article 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence shows bad faith, the provisions
of Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required. (1104a)
General degree of diligence required:
 When neither the law nor the obligation itself states the degree of diligence required of the
obligor or debtor in the performance or fulfillment of the obligation, the standard diligence
required is “that which would be observed by a good father of a family”.
o Exceptions:
 when the parties stipulated another degree of diligence required
 when the law requires a higher degree of diligence
example: common carriers (Art.1733, par.1)
GOOD FATHER OF A FAMILY (bonos paterfamilias)
 a person of ordinary or average diligence
3 Quantum of Diligence:
 extraordinary diligence
 diligence of a good father of a family (DOAGFOAF)
o A general degree of diligence expected of an owner of a property
 simple diligence

Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not be foreseen, or which, though
foreseen, were inevitable. (1105a)
FORTUITOUS EVENT (Caso Fortuito)
 an event which could not be foreseen, or which, though foreseen, is inevitable.
 includes unavoidable accidents, even if there has been an intervention of human element,
provided fault or negligence cannot be imputed to the debtor. (Tolentino)
Negative Definition: that incident not imputable to the debtor which impedes the exact fulfillment of
the obligation. (Caguioa)
Positive Definition: event not imputable to the debtor which is unforeseen or although foreseen is
inevitable and which renders impossible to exact fulfillment of the obligation (Caguioa)
Distinctions:
fortuitous event proper
act of man
or that which is caused by an “act of God”/
where there is human intervention
force majeure
examples: earthquakes, floods, storms, examples: armed invasion, attack by robbers,
epidemics, fires, etc. attack by bandits

Note: Essentially, there is NO substantial difference between the two, they both refer to an event
or cause which is independent of the will of the obligor.

As to foreseeability:
 ordinary fortuitous event – refers to an event
which usually happens or which could have
been reasonably foreseen
example: tropical storms, floods
extraordinary fortuitous event – refers to an
event which does not usually happen and which
could not have been reasonably foreseen
examples: fire, war, pestilence, unusual flood
(Ondoy), locust, earthquake

Characteristics/requisites in order for fortuitous event excuse a debtor from liability:

1. the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligations, must be independent of the human/ debtor’s will
2. it must be impossible to foresee (unforeseeable) the event which constitute the caso
fortuito, or if it can be foreseen, it must be impossible to avoid (unavoidable)
3. possibility of foreseeing the event – should be appreciated rationally according to the
circumstances
4. inevitableness of the event – varies according to the case and circumstances and must
have a relation with the means of the debtor and therefore with the degree of diligence he
should have exercised.
5. the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner
6. the obligor must be free from any participation in the aggravation of the injury resulting to
the creditor (debtor did not take part in causing the injure to the creditor)
Effects of fortuitous event on liability:
 General rule: The effect of fortuitous event is to exempt the debtor from liability for the
non-fulfillment of the obligation and to the payment of damages to the creditor. His obligation
is extinguished.
 Exceptions: Still held liable
o Law or stipulation expressly so declare
 A possessor in bad faith shall be liable for deterioration or loss in every case,
even if caused by a fortuitous event (Art. 552)
*Possessor in bad faith – someone who have taken something he does
not own (ninakaw)
 Commodatum – you borrowed a thing a promise to return it (Art. 1942)
o Nature of the obligation requires the assumption of risk
 Insurance contracts
- An obligation where the contract/obligation assumes a risk, and when
there is a risk, you cannot be excused from liability
o Obligation is other than obligation to give a specific thing
 Obligation to deliver a generic thing (since it can be replaced with the same
kind)
o Debtor is already in delay
 Kimi promised to give her pet horse named Ritchie to Bogart and to be
delivered on September 30, 2021
 No delivery on Sept 30, 2021
 When deliver is made on Oct 1, Ritchie was swallowed by the ground.
Will now be held liable since there has already been a delay.
o Voluntary breach of the obligation

Assumption of risk
 refers to a situation in which the obligor or debtor, with full knowledge of the risk voluntarily
enters into some relation with the obligee or creditor
 ordinarily requires knowledge and the appreciation of the risk and the voluntary choice to
encounter it.
 doctrinal basis: no wrong is done to one who consents (volenti non fit injuria)
 based on social justice; it is based on an ethico-economic sensibility of modern society,
which has noted the injustices which industrial civilization has created
NOTE:
 The debtor is guilty of dolo, malice or bad faith as when he promises to deliver the same
thing to two or more persons who do not have the same interest (Art. 1165, par.3)
 The debtor is already in mora at the time the fortuitous event happens
 The liability arises from a criminal act unless the loss occurs after the debtor tendered the
thing to the creditor and the creditor refused to accept the same without justifiable cause.
(Art. 1268)
 In order that a fortuitous event may exempt a person from liability, it is necessary that he be
free from any previous negligence or misconduct by reason of which the loss may have
been occasioned. (Southeastern College Inc. vs. CA); otherwise put, the fortuitous event
must not only be the proximate cause of the loss or destruction, but that it must be the
SOLE cause.

Article 1175. Usurious transactions shall be governed by special laws. (n)

 Usury à contracting for or receiving something in excess of the amount allowed by law for
the loan or forbearance of money, goods or chattels; the taking of more interest for the use
of money, goods or chattels or credit than the law allows.
 The special laws referred to are the Usury Law (Act. No. 2655) and the different laws
amending it. Usury Law provided for a legal rate interest of 6% per annum and a contractual
rate not exceeding 12% per annum if the loan is secured by a duly registered real estate,
and 14% if not so secured.
 Usury Law was repealed during the martial law period, leaving parties free to stipulate
higher rates.
 There is now no longer any ceiling in interest rates on loans pursuant to Central Bank
Circular No. 224 issued last Dec.1, 1982.

Article 1176. 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.
 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. (1110a)
 The presumptions enunciated in the above provision are rebuttable and not conclusive
2 presumptions stipulated by Art.1176:
 Par. 1 à If the debtor is issued a receipt by the creditor and on the face of the receipt it is
shown that the principal has been paid without any reservation with respect to the interest,
there arises a disputable presumption that the interest has also been paid.
o Basis: If a debt produces interest, payment of the principal shall not be deemed to
have been made until the interests have been covered. (Art. 1253)
o Ex. If JL presented a receipt showing that he paid P100,000 to Justine then it
means that JL also paid the interest of the P100K
o May be or may not be true; subject to further proof (disputable presumption)
 Par. 2 à If the debtor is issued a receipt by the creditor acknowledging payment of a latter
installment of a specified debt without any reservation with respect to prior installments,
there also arises a disputable presumption that such prior installments have already been
paid. (This rule is in conformity with the rule stated in Rule 131, Sec.5, subsec. (i) of the
New Rules of Court.)
o Ex. If Claudette presented payment of a monthly rental of boarding house of June, it
is presumed that payments from Jan-May has already been paid.
Estoppel (Art. 1431, Civil Code) – a condition or state by virtue of which an admission or
representation is rendered conclusive upon the person making it and cannot be denied or disproved
as against the person relying thereon.
Article 1177. The creditors, after having pursued the property in possession of the debtor to
satisfy their claims, may exercise all the rights and bring all the actions of the latter for the
same purpose, save those which are inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them. (1111)
2 distinct aspects/elements of an obligation: (Caguioa)
 Debtor
- Guaranty/responsibility
- duty of the debtor to answer for his obligation with his entire patrimony
 Rights of creditors in satisfying their claims against the debtor:
- to levy by attachment and execution upon all the property of the debtor, except such
as are exempt by law from execution
- exhausting the property in possession of the debtor
o For the fulfillment of the obligation of the debtor responds with all his property
present and future.
o All the property of the debtor is answerable for the obligation not only those
properties existing at the time of birth of the obligation but also all those which
later on become or form part of the patrimony of the debtor.
o in conformity with Art. 2236 of the Civil Code which states that the debtor is
liable with all his property, present and future for the fulfillment of his obligations
subject to the exemptions provided by law.
- to exercise all the rights and actions of the debtor, except such as are inherently
personal to him
o creditor being subrogated to all of the rights and actions of the debtor save
those which are inherent in his person

Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are
transmissible, if there has been no stipulation to the contrary. (1112)
 General rule: Rights of obligations or those rights which are acquired by virtue of an
obligation are transmissible in character – they may be alienated or assigned to third
persons.
 Exceptions:
o where they are not transmissible by their very nature (personal right)
o where there is a stipulation of the parties that they are not transmissible
o where they are not transmissible by operation of law (exempted by law) ex. Right
to vote
Note: In transmissibility by stipulation of the parties, being exceptional and contrary to the general
rule, should not be easily implied, but must be clearly established, or at the very least, clearly
inferable from the provisions of the contract itself. (Jurado)

Kinds of Obligations
 PURE AND CONDITIONAL OBLIGATIONS (Art. 1179-1192)

PURE OBLIGATION

Article 1179. Every obligation whose performance does not depend upon a future or
uncertain event, or upon a past event or upon a past event unknown to the parties,
demandable at once.

Every obligation which contains a resolutory condition shall also be demandable, without
prejudice to the effect of the happening of the event.

- does not depend upon any condition

- One without a condition or a term (hence, demandable at once), provided there will be no
absurdity.

Examples:

1. I promise to pay you P 1million. [this is demandable at once, unless a period was really
intended, as when a loan has just been contracted (Floriano v. Delgado, 11 Phi.. 154), when
some time is reasonably necessary for the actual fulfillment of the obligation, as when a
person binds himself to pay immediately for the subscription of corporate shares of stock.
(Paul Schenker vs. William F. Gemperle, L-16449, August 31, 1962)
2. “I‟ll pay you P1million on demand.” (Abarri Inc vs Galan, 47 O.B. 6241)
but instant performance is not a necessity, otherwise absurd consequences will.
3. Ex: Izuko promised Gindara to bring a wedding ring

NOTE: Other obligations which are demandable at once are:

1. Obligations with a resolutory condition; and

2. Obligations with a resolutory term or period [NCC, Arts. 1179 (2) and 1193 (2)].

The most distinctive characteristic of a pure obligation is its immediate demandability. This quality,
however, must not be understood in such a way as to lead to absurd interpretations which would
literally require the obligor or debtor to comply immediately with his obligation. A distinction must be
made between:

1. The immediate demandability of the obligation; and

2. Its performance or fulfillment by the obligor or debtor. Although the obligee or creditor can
demand the performance of the obligation immediately, the quality of immediate
demandability is not infringed or violated when a reasonable period is granted for
performance (Jurado, 2009).

CONDITIONAL OBLIGATION

An obligation subject to a condition and the effectivity of which is subordinated to the fulfillment or
non-fulfillment of a future and uncertain event, or upon a past event unknown to the parties
(Pineda,2000).

- Obligation is dependent upon a condition; reliance

- If an obligation has a condition, then that obligation may either arise or extinguished (not
happen at all)
- “If, then”

Condition is an event which is future and uncertain, upon which the efficacy or extinguishment
of an obligation depends. It has two requisites: first, futurity; and second, uncertainty.

Example: Izuko promised Gindara to bring a wedding ring if Ginebra wins its game tomorrow.
Article 1180. When the debtor binds himself to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period, subject to the provisions of Article 1197.
(n)

- Talks of how are we suppose to interpret when the debtor will perform an obligation when
his means permit him to do so

Period – future and certain event

Ex. Jamie asks Lyka if when will she pay her debt of P20,000. Lyka says that if times come
when she already have money, maybe by the end of the year (this is a period since it is
certain to happen).

PERIOD vs CONDITION

BASIS PERIOD CONDITION

May refer to past event unknown
As to time Refers to the future
to the parties
It will happen at an exact date or
As to fulfillment at an indefinite time, but is May or may not happen
definite to arrive
Characteristic Futurity and certainty Futurity and uncertainty
No effect upon the existence ofMay give rise to an obligation
The effect of its happening
the obligation but only in its(suspensive) or the cessation of
to the obligation
demandability. one already existing (resolutory)
If fulfillment is dependent Valid. But the court is
upon the sole will of the empowered to fix the duration ofAnnulled.
debtor the period.
The moment the condition is
fulfilled, the effects will retroact
Retroactivity No retroactivity.
on the day of the constitution of
the obligation.

TYPES OF CONDITIONS

According to Effect on Obligation (Art. 1181)

1. Suspensive Condition

A condition the fulfillment of which will give rise to the acquisition of a right. While the
condition has not arrived yet, in the meantime, the rights and obligations of the parties are
suspended.

- happening of the event or condition will give rise to an obligation

- Condition that cause the birth of the obligation
- Obligation will only arise when the condition is met.

Ex. Mama Mia promised to treat her beautiful daughter-in-law, Mitsuha, a Tokyo Disneyland
vacation if Mitsuha passes the bar exams.

NOTE: In suspensive condition or condition precedent, the efficacy or the obligatory force is
subordinated to the happening of a “future and uncertain event”; if the suspensive condition
does not take place the parties would stand as if the conditional obligation never existed
 (Gaite v. Fonacier, GR L-11827, July 31, 1961; Cheng v. Genato, 300 SCRA 722, GR
129760, December 29, 1998; Pineda, 2000).

Positive Suspensive Condition

 A condition which requires a positive act on the part of the obligor that gives rise to the
acquisition of rights
 In case of a contract to sell, the obligation to deliver the subject properties becomes
demandable only upon the happening of the positive suspensive condition (payment of
full purchase price). Without full payment, there can be no breach of contract to speak
of because the seller has no obligation yet to turn over the title (Reyes v. Tuparan, G.R.
No. 188064, June 1, 2011).

2. Resolutory Condition

A condition where the rights already acquired are lost upon fulfillment of the condition. It is
also known as condition subsequent.

- happening of the event or condition will extinguish the obligation

- Condition that cause the extinguishment of the obligation
- Obligation already exists
- Obligation is demandable at once

Ex. Mama Mia promised to give her beautiful daughter-in-law, Mitsuha, allowance until she
passes Laws 1013

Suspensive Condition vs. Resolutory Condition

BASIS SUSPENSIVE CONDITION RESOLUTORY CONDITION

Obligation arises or becomes
Effect of fulfillment Obligation is extinguished.
effective.
Effect of non- If not fulfilled, no juridical relation is If not fulfilled, juridical relation is
fulfillment created. consolidated.
Rights are not yet acquired, but there
When rights are Rights are already vested, but subject
is hope or expectancy that they will
acquired to the threat or danger of extinction.
soon be acquired.

Negative Resolutory Condition

An act, which if not done, would give rise to a cause of action against the
obligor. It contemplates a situation where rights are already acquired but subject to an
obligation, the non- fulfillment of which does not affect the rights already acquired but merely
gives a cause of action in favor of the other party. In a contract of sale, the buyer’s non-
payment of the price is a negative resolutory condition. In such case, the seller has lost and
cannot recover the ownership of the property unless he takes action to set aside the
contract of sale (Heirs of Atienza v. Espidol, G.R. No. 180665, August 1, 2010).

Effect of loss, deterioration and improvement in an obligation to deliver a determinate thing

subject to a suspensive condition: (Art. 1189)

BASIS WITH DEBTOR’S FAULT WITHOUT DEBTOR’S FAULT

Obligation is not extinguished.
Loss Obligation is extinguished.
Debtor pays damages.
Kinds of Loss:
 1. Physical Loss – when a thing perishes
2. Legal Loss – when a goes out of the commerce
3. Civil Loss – when a things disappears in such a way that its existence becomes unknown
Deterioratio
Creditor may choose
n – when its
between rescission (cancel) of Impairment borne by creditor.
value is
obligation or fulfillment (with - Buyers bears the risk
reduced or
indemnity for damages in either case)
impaired
a. By the thing’s nature or through time – inure to the benefit of the creditor
b. At the debtor’s hand(expense) – Debtor shall have no right other that granted
to a usufructuary
Improvement *Usufruct – the right to enjoy the use and fruits of the thing belonging to
another
Exemption: If both parties are unaware with fruits of the thing, the debtor will
have the right on it.

NOTE: The abovementioned do not apply to indeterminate or generic things on the basis of the
maxim “genus nun quam peruit” (genus never perishes). It will only apply when the object or thing
to be given is specific.

Rules in case of fulfillment of a resolutory condition: (Art. 1190)

1. Obligation is extinguished
2. Return what they have received
3. In case of loss, deterioration, and improvement the aforementioned rules shall apply. The
creditor becomes the debtor.
- Because the creditor will be the one to return

According to whose will it depends (Art. 1182)

1. Potestative Condtion

A condition which depends upon the will of one of the contracting parties.
- Can be either suspensive or resolutory

 Passive potestative – will of the debtor

- Void if suspensive
 Active potestative – will of the creditor
- valid whether suspensive or resolutory

Examples:

1. Mother obliged herself to buy her beautiful daughter a blouse if she (mother) will go to the
ukayan tomorrow.
- suspensive, passive potestative condition
- However, in this example, the obligation is invalid/void because the condition now is
dependent on the sole will of the debtor which means that the validity and compliance
is left to the will of the debtor.
2. Mother obliged herself to give her beautiful daughter load allowance until she wants.
- Resolutory, passive potestative condition
- Sole will of the debtor but it is still valid since the obligation is already on going
3. Pedro obliged himself to pay his debt to Juan when his means permit him to do. (Art. 1180)
4. I will pay Jamie the P10,000 if she already wants to get it.
- Active potestative condition; valid
Effects of potestative conditions upon the obligation:

 If the condition is potestative in the sense that its fulfillment depends exclusively upon the
will of the debtor, and the same is suspensive, both the condition and obligation are VOID.
 However, if the condition is a pre-existing one or the condition is resolutory, only the
condition is void, leaving the obligation itself valid because what is left to the sole will of the
debtor is not the existence or the fulfillment of the obligation but merely its extinguishment.
 If the condition is potestative in the sense that its fulfillment depends exclusively upon the
will of the creditor, the obligation shall be valid. This is so because the provision of the first
sentence of Art. 1182 extends only to conditions which are potestative to the obligor or
debtor. Besides, the creditor is naturally interested in the fulfillment of the condition since it
is only by such fulfillment that the obligation arises or becomes effective (Jurado, 2009 citing
NCC, Art. 1181 and Manresa).

2. Casual Condition

It is the performance or the fulfillment of the condition which depends upon chance and/or the will
of a third person. (suspensive)

Example. I will construct the house of Ann is the materials from Parby Hardware will arrive.

3. Mixed Condition

It is the performance or fulfillment of the condition which depends partly upon the will of a party to
the obligation and partly upon chance and or the will of a third person. (suspensive)

Example: I will let you use my phone if there is a comeback between you and X.

NOTE: Casual and mixed conditions are valid, unlike purely potestative conditions.

Impossible Conditions (Art. 1183)

- If a condition is impossible, the obligation will also be invalid meaning you cannot proceed
with an obligation if it dependent upon an impossible obligation.

General Rule: Impossible conditions annul the obligation which depends upon the parties but not of
a third person.

Exceptions:

1. Pre-existing obligation;
2. Obligation is divisible;
3. In simple or remuneratory donations;
4. In case of conditions not to do an impossible thing; and
5. In testamentary

NOTE:

 In the foregoing, the obligations remain valid, only the condition is void and deemed to have
not been imposed. it is applicable only to obligations not to do and gratuitous obligations.
 A condition not to do an impossible things makes the obligation pure.
Kinds of impossible conditions:

1. Physically impossible conditions – in nature of things, cannot exist or cannot be done

Example: I will pay you P10,000 if it will not rain for one year in the Philippines.

2. Legally impossible conditions – contrary to law, moral, good customs, public order, or
public policy

Example: I will give you P1M if you will kill Mr. Z.

Other types of conditions (All suspensive – Obligation will only arise when the condition is met)

1. Positive – It involves the doing of an act; happens within a span of time

Ex. I will let you use my phone if X marries Y on or before March 31, 2021.
2. Negative –It involves the omission of an act; does not happen within a span of time
Ex. I will let you use my phone if X does not marry Y on or before March 31, 2021.
3. Divisible – It is capable/susceptible of partial performance
4. Indivisible – It is not susceptible of partial performance
5. Conjunctive – There are several conditions in an obligation all of which must be performed
6. Alternative – There are several conditions in an obligation but only one must be performed
7. Possible – Itis capable of fulfillment according to the nature, law, public policy or good
customs
8. Impossible – It is not capable of fulfillment according to nature, law, public policy or good
customs (NCC, Art. 1183).

OBLIGATIONS WITH A PERIOD (Art. 1193-1198)

Obligation with a period or a term

Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that
day comes (NCC, Art.1193).

Term or Period

- A certain length of time which determines the effectivity or the extinguishment of the
obligations.

Requisites of a valid period or term

1. Future;
2. Certain; and
3. Possible, legally and physically (Paras, 2008).

“Day certain”

- It is understood to be that which must necessarily come, although it may not be known
when.

Period vs Condition

a. As to fulfillment – a period CERTAINLY comes

b. As to time – a condition may be past or future, period is always future
c. Effect on the obligation – a condition creates or extinguishes an
obligation, period merely fixes its efficaciousness
 d. A period based on the will of the debtor is fixed by the court. Void if
conditional

Kinds of terms or periods

1. Ex die – This is a term or period with suspensive effect. The obligation begins only from a
day certain, in other words upon the arrival of the
2. In diem – A period or term with a resolutory effect. Up to a certain extent, the obligation
remains valid, but upon the arrival of said period, the obligation
3. Legal – A period granted under the provisions of the law (fixed by law)
4. Conventional or voluntary – The period agreed upon or stipulated by the parties (fixed by
the parties)
5. Judicial – The period or term fixed by the courts for the performance of an obligation
6. Definite – The exact date or time is known and
7. Indefinite – It is something that will surely happen but the date of happening is

e.g. “I will pay when my means permit me to do so.”

When can the court fix a period:

1. No period but based on the nature of the obligation, a period is intended.

2. When the duration depends upon the will of the debtor

When the debtor binds himself to pay when his means permit him to do so, the obligation is
deemed with a period (NCC, Art. 1180). This is valid because it is not the payment itself that is
dependent upon the will of the debtor, but the moment of payment.

As the time of payment is not fixed, the court must fix the same before any action for
collection may be entertained, unless, the prior action of fixing the term or period will only be
a formality and will serve no purpose but delay (Tiglao v. Manila RailroadCo., 98 Phil. 181,
GR. L-7900, January 12, 1956).

Benefit of the Period

General rule: both parties

a. Debtor – cannot be compelled to perform prior the expiration of the term

b. Creditor – cannot be compelled to “accept” performance prior expiration of the term

When will the debtor lose the benefit of the period

- If the benefit of a period is lost, then it becomes Pure Obligation which is demandable at
once and you can no longer make use of the period

1. Insolvency
2. Fails to furnish a security that was promised.
- Ex. collateral
3. Security was impaired, regardless of the reason, and failure to replace with one of equal
satisfaction.
4. Violates any undertaking
5. Intends to abscond*
*escape unknowingly (magtago)

Effect of a fortuitous event to an obligation with a period:

It only relieves the contracting parties from the fulfillment of their respective obligation during the
term or period.
Obligations as to Number of Prestation

1. Simple – only one prestation

2. Compound – several prestation, either:
a) Conjunctive – requires performance of all (and)
b) Disjunctive – either ALTERNATIVE or FACULTATIVE (or)

ALTERNATIVE OBLIGATIONS (Art. 1199-1206)

ALTERNATIVE OBLIGATION

It is one where the debtor is alternatively bound by different prestations but the complete
performance of one of them is sufficient to extinguish the obligation.

- several prestations but the complete performance one extinguishes the obligation

Example: I promise to give you a specific watch, a specific phone, or a specific ring.

Right to choose: DEBTOR if silent. May be given to the creditor.

Limitations on the right to choose:

a. Complete.
b. Choice must be possible

When the obligation ceases to be alternative:

1. When choice is communicated

2. When among the prestations, only one is practicable.

Rules in case of loss or impossibility prior communication:

Right of choice belongs to the debtor vs Creditor

1. One or some are lost through fortuitous event

2. All are lost through a fortuitous event
3. All are lost through the debtor’s fault
4. Some are lost through the debtor’s fault. The last one through fortuitous event.

FACULTATIVE OBLIGATION

It is one where the debtor, who has a reserved right to choose another prestation or thing, is
bound to perform one of the several prestations due or to deliver a thing as substitute for the
principal.

- only one prestation is due but the debtor may render another in substitution

Right of choice: DEBTOR alone.

Rules in case of loss of the principal thing:

 a. Before substitution
i. Fortuitous event
ii. Debtor’s fault

After substitution, the substitute becomes the principal.

ALTERNATIVE
SEVERAL prestations are due, complete
performance of one is enough.
If there are void/impossible prestations, the
remaining still subsists.
Right of choice may be delegated to the
creditor
FACULTATIVE
Only ONE prestation (principal)
If the principal is void/impossible, the
obligation is void.
Right of choice belongs to the debtor
alone

CONJUNCTIVE OBLIGATION

One where the debtor has to perform several prestations; it is extinguished only by the performance
of all of them.

BASIS FACULTATIVE OBLIGATIONS ALTERNATIVE OBLIGATIONS

Number of prestation Only one object is due.
Manner of May be complied with by
compliance substitution of one that is due.
Right to choose Choice pertains only to debtor.
Effect of fortuitous Fortuitous loss extinguishes the
loss obligation.
Culpable loss obliges the debtor
Effect of culpable
to deliver substitute prestation
loss
without liability to debtor.
When substitution has been
made and communicated to the
Liability of the
creditor, the obligor is liable for
debtor
the loss of the thing on account of
delay, negligence or fraud.
If principal obligation is void, the
Void prestation creditor cannot compel delivery of
the substitute.
If there is impossibility to deliver
the principal thing or prestation,
Impossibility of
the obligation is extinguished,
prestation
even if the substitute obligation is
valid.
Loss of the substitute before the
substitution is made through the
Loss of substitute
fault of the debtor doesn’t make
him liable.
Several objects are due.
May be complied with by fulfilling
any of those alternately due.
GR: Choice pertain to debtor.
XPN: Expressly granted to
creditor or third person.
Fortuitous loss of all prestations will
extinguish the obligation.
Culpable loss of any object due will
give rise to liability to debtor.
The creditor shall have the right of
indemnity for damages when,
through the fault of the debtor, all
the things which are alternatively
the object of the obligation have
been lost or the compliance of the
obligation has become impossible.
If one prestation is void, the others
that are free from any vices of
consent preserve the validity of the
obligation.
If some prestations are
impossible to perform except one
– this one must be delivered.
If all prestations are possible to
perform, the obligation is
extinguished.
Where the choice is given to the
creditor, the loss of the alternative
through the fault of the debtor
renders him liable for damages.

Right to choose prestation in an alternative obligation

General Rule: The right of choice belongs to the debtor

 Exception: Unless it has been expressly given to the creditor (NCC, Art. 1200).

Limitations on debtor’s right to choose

1. The debtor must absolutely perform the prestation chosen. He cannot compel the creditor to
receive part of one and part of the other undertaking;
2. The debtor shall have no right to choose those prestation which are impossible, unlawful or
which could not have been the object of the obligation (NCC, Art. 1200);
3. The debtor shall lose the right to choice when among the prestation whereby he is
alternatively bound, only one is practicable (NCC, Art. 1202);
4. The selection made by the debtor (or the creditor when it has been expressly granted to
him) cannot be subjected by him to a condition or a term unless the creditor (or debtor in
case the choice is with the creditor) consents thereto (Tolentino, 2002).

Effectivity of the choice in alternative obligations

The choice made takes effect only upon communication of the choice to the other party and from
such time the obligation ceases to be alternative (NCC, Art. 1201; NCC, Art. 1205).

NOTE: The notice of selection or choice may be in any form provided it is sufficient to make the
other party know that the election has been made (Tolentino,2002).

When alternative obligation becomes a simple obligation

1. When the debtor has communicated the choice to the creditor;

2. When debtor loses the right of choice among the prestations whereby the debtor is
alternatively bound, only one is practicable (NCC, Art. 1202).

NOTE: The choice made by the debtor does not require the concurrence of the creditor.
Otherwise, it would destroy the very nature of the right to select given to the debtor.

Impossibility of choice due to creditor’s acts

When choice is rendered impossible through the creditor’s fault, the debtor may bring an action to
rescind the contract with damages (NCC, Art. 1203).

Plurality of parties

When there are various debtors or creditors and the obligation is joint, the consent of all is
necessary to make the selection effective, because none of them can extinguish the entire
obligation.

If the obligation is solidary and there is no stipulation to the contrary, the choice by one will binding
personally upon him, but not as to the others. Thus, if A and B solidarily bind themselves to deliver a
horse or a carabao to C, the selection of A of the horse, when communicated to C will bind him and
he cannot later on deliver the carabao. But it is not binding on B who may extinguish the obligation
by delivering the carabao (Tolentino, 2002).

Effect of loss of objects in alternative obligations

Due to Fortuitous Event Due to Debtor’s Fault

Choice belongs to Debtor
Creditor shall have a right to be
All are lost Debtor released from the obligation. indemnified for damages based
on the value of the last thing
 which disappeared or last service
which became impossible.
Debtor shall deliver that which he Debtor shall deliver that which he
Some but not all
shall choose from among the shall choose from among the
are lost
remainder. remainder without damages.
Only one remains Deliver that which remains.
Choice belongs to Creditor
Creditor may claim the price or
All are lost Debtor released from the obligation value of any of them with
indemnity for damages.
Creditors mat claim any of those
subsisting OR he may choose
Creditor may choose from among any of those were lost, but it is
Some but not all
the remainder or that which remains
are lost the price or value of which right to
if only one subsist.
damages that can be
claimed.
Deliver that which remains. In case of fault of debtor, creditor has a right
Only one remains
to indemnify for damages.

JOINT AND SOLIDARY OBLIGATIONS (Art. 1207-1222)

JOINT OBLIGATION

One where the credit or debit shall be presumed to be divided into as many equal shares as there
are creditors or debtors, the credit or debts being considered distinct from one another (NCC, Art.
1208). Each debtor is liable only for a proportionate part of the debt and each creditor to his
proportionate share to the credit.

- Joint obligations, whether active or passive, have multiple debtors/creditors. Only ONE for
solidary.

Other terms for joint obligations are:

1. joint simply
2. mancomunada
3. pro rata
4. proportionely
5. mancomunada simple

Rules in joint and indivisible obligations

1. The joint debtors must act collectively

2. The demand must be made against all the debtors
3. The renunciation of a JOINT CREDITOR makes the obligation monetary.
4. Failure of one debtors also converts the obligation to pay the value of the thing. Only the
guilty debtor is liable for damages.

Case: A, B, C are liable to D, E, F to deliver a specific car worth 600,000

Effects of different permutations of joint indivisible obligations

1. If there are two or more debtors, compliance with the obligation requires the concurrence of
all the debtors, although each for his own share. The obligation can be enforced only by
preceding against all of the debtors;
 2. If there are two or more creditors, the concurrence or collective act of all the creditors,
although each of his own share, is also necessary for the enforcement of the obligation;
3. Each credit is distinct from one another; therefore a joint debtor cannot be required to pay
for the share of another with debtor, although he may pay if he wants.

In case of insolvency of one of the debtors, the others shall not be liable for his
shares. To hold otherwise would destroy the joint character of the obligation (NCC,
Art. 1209).

Effect of breach of a joint indivisible obligation by debtor

If one of the joint debtors fails to comply with his undertaking, and the obligation can no longer be
fulfilled or performed, it will then be converted into one of indemnity for damages. Innocent joint
debtor shall not contribute to the indemnity beyond his corresponding share of the obligation.

SOLIDARY OBLIGATIONS

It is where each of the debtors obliges to pay the entire obligation while each one of the creditors
has the right to demand from any of the debtors, the payment or fulfillment of the entire obligation
(NCC, Art. 1207; Pineda, 2000).

Other terms for solidary obligations are:

1. Joint solidarily
2. Jointly and severally
3. In solidum
4. Individually and collectively
5. Mancomunada solidaria
6. Juntos o separademente
7. each will pay the whole value
8. “I promise to pay” and there are two or more signatures

Joint Obligation vs. Solidary Obligation

JOINT OBLIGATION SOLIDARY OBLIGATION

Not presumed. Must be expressly
Presumption by Presumed by law. (NCC, Art. stipulated by the parties, or when the
law 1208). law or the nature of the obligation
requires solidarity (NCC, Art. 1207).
Liability of each Proportionate part of the entire
Obliged to pay the entire obligation.
debtor debt.
Right of the Each creditor has the right to
Each creditor, if there are several,
creditor to the demand from any of the debtors, the
is entitled only to a proportionate
fulfillment of the payment or fulfillment of the entire
part of the credit.
obligation obligation (Tolentino, 1999).

General Rule: When two or more creditors or two or more debtors concur in one and the same
obligation, the presumption is that the obligation is joint. (If the case is silent, the relationship is
JOINT)

Exceptions: The obligation shall only be solidary when:

1. Law requires solidarity / Required by Law

 2. Expressly stipulated that there is solidarity / Stated in the contract
3. Nature of the obligation requires solidarity / Required by the nature of the obligation (e.g.
Civil liability arising from crime.)
4. Charge or condition is imposed upon heirs or legatees and the will expressly makes the
charge or condition in solidum (Manresa); or
5. Solidary responsibility is imputed by a final Judgment upon several defendants (Gutierrez
v.utierrez, 56 Phil 177, GR 34840, September 31, 1931).

Kinds of solidary obligation

1. Passive – Solidarity on the part of the debtors;

2. Active –Solidarity on the part of the creditors ;
3. Mixed –Solidarity on both

In case of solidarity, what is the rule in the following?

1. One creditor makes the demand

2. Partial payment by one debtor
3. One debtor paid the whole amount
4. Payment by a debtor after prescription
5. The prestation is an object indivisible
a. Lost through fortuitous event
b. Lost through ONE of the debtor’s fault

Defenses available to the debtor:

1. Based on the nature of the obligation

2. Personal to the debtor being sued
3. Personal to the other debtors with respect to their own share

Case: A and B are solidarily liable to C in the amount of 20,000.

Assuming:

a. D pays C the entire amount; The debt prescribed

(1)
b. A is insane at the time the obligation was
constituted (2&3)

Active solidarity

The essence of active solidarity consists in the authority of each creditor to claim and enforce the
rights of all, with the resulting obligation of paying every one what belongs to him; there is no
merger, much less a renunciation of rights, but only mutual representation. It is thus essentially a
mutual agency. Its juridical effects may be summarized as follows:

1. Since it is a reciprocal agency, the death of a solidary creditor does not transmit the
solidarity to each of his heirs but to all of them taken together;
2. Each creditor represents the others in the act of receiving payment, and in all other acts
which tend to secure the credit or make it more advantageous. Hence, if he receives only a
partial payment, he must divide it among the other creditors. He can interrupt the period of
prescription or render the debtor in default, for the benefit of all other creditors;
3. One creditor, however, does not represent the others in such acts as novation (even if the
credit becomes more advantageous), compensation and remission. In these cases, even if
the debtor is released, the other creditors can still enforce their rights against the creditor
who made the novation, compensation or remission;
 4. The creditor and its benefits are divided equally among the creditors, unless there is an
agreement among them to divide differently. Hence, once the credit is collected, an
accounting and a distribution of the amount collected should follow;
5. The debtor may pay to any solidary creditor, but if a judicial demand is made on him, he
must pay only to the plaintiff; and
6. Each creditor may renounce his right even against the will of the debtor, and the latter need
not thereafter pay the obligation to the ?

Passive solidarity

In passive solidarity, the essence is that each debtor can be made to answer for the others, with the
right on the part of the debtor-payor to recover from the others their respective shares. In so far as
the payment is concerned, this kind of solidarity is similar to a mutual guaranty. Its effects are as
follows:

1. Each debtor can be required to pay the entire obligation; but after the payment, he can
recover from the co-debtors their respective shares;
2. The debtor who is required to pay may set up by way of compensation his own claim
against the creditor, in this case, the effect is the same as that of payment;
3. The total remission of a debt in favor of a debtor releases all the debtors ; but when this
remission affects only the share of one debtor, the other debtors are still liable for the
balance of the obligation;
4. All the debtors are liable for the loss of the thing due, even if such loss is caused by only
one of them, or by fortuitous event after one of the debtors has incurred in delay;
5. The interruption of prescription as to one debtor affects all the others; but the renunciation
by one debtor of the prescription already had does not prejudice the others, because the
extinguishment of the obligation by prescription extinguishes also the mutual representation
among the solidary debtors; and
6. The interest due by reason of the delay by one of the debtors are borne by all of them.

Case 1: A, B, and C owes X, Y, and Z 9,000.

Case 2: A (40%) , B (35%) , and C (25%) owes X (50%), Y (25%), and Z (25%) 9,000.

1. How many distinct debts exist?

2. How much may X collect from A assuming:
a) The case is taken as is (1,000) -> 9,000/3/3 9,000*50%*40%=1,800
b) Active solidarity (3,000) -> 9,000/1/3 9,000*100%*40%= 3,600
c) Passive solidarity (3,000) -> 9,000/3/1 9,000*50%*100%=4,500
d) Mixed solidarity (9,000) -> 9,000/1/1. 9,000*100%*100%=9,000

FORMULA: Principal Obligation/No. Credits/No. of debts = collectible

3. What happens in case of renunciation? Things to consider:

1) Amount that may be waived by the creditor (solidary or joint) -> 9,000
2) Amount of the debt (solidary or joint) -> 3,000
3) If the amount of 2 is less than the amount of 1, 1 will be the amount renounced. 3,000

Case 3: A (pure), B (On Good Friday), and C (Upon passing the board) owes X, Y, and Z 9,000.

a. How much may Z collect from B today?

 a) The case is taken as is 3,000/3/3 = 333.33 6,000/3/3
b) Active Solidarity 3,000/1/3 = 1,000 6,000/1/3
c) Passive solidarity 3,000/3/1 = 1,000 6,000/3/1
d) Mixed solidarity 3,000/1/1 = 3,000 6,000/1/1

b. If C passes the board, released on Good Friday, how much may Y collect from him?
a) If the obligation of A was already collected = 6,000
b) The obligation of A was not yet collected = 9,000

Solidarity v. Indivisibility

BASIS SOLIDARITY INDIVISIBILITY

As to the kind of Refers to the vinculum existing Refers to the prestation or object
unity it refers to between the subjects or parties of the contract
As to the
requirement of Requires the plurality of parties or Does not require plurality of
plurality of parties or subjects subjects or parties.
subjects
As to the effect of In case of breach, it is converted
In case of breach, the liability of
breach to one of indemnity for damages
the solidary debtors although
and the indivisibility of the
converted into one of the
obligation is terminated and so
indemnity for damages remains
each debtor is liable only for his
solidary
part of the indemnity
As to the effect of Death of solidary debtor
death of a party terminates the solidarity, the ties Heirs of the debtor remain bound
or vinculum being intransmissible to perform the same prestation.
to the heirs

DIVISIBLE AND INDIVISBLE OBLIGATIONS (Art. 1223-1225)

DIVISIBLE OBLIGATIONS

Those which have as their object a prestation which is susceptible of partial performance with the
essence of the obligation being change

Divisible if:

4. Execution in certain number of days

5. Metrical units

Note: Even if physically divisible, it becomes indivisible if stipulated or required by law.

INDIVISIBLE OBLIGATIONS

Those which have as their object a prestation which is not susceptible of partial performance,
because otherwise the essence of the obligation will be changed. The obligation is clearly indivisible
because the performance of the contract cannot be done in parts, otherwise, the value of what is
transferred is diminished (Nazareno v. CA, G.R. No. 138842, October 18, 2000).
 NOTE: The divisibility of the object does not necessarily determine the divisibility of the
obligation; while the indivisibility of the object carries with it the indivisibility of the obligation.

Test of divisibility

Whether or not the prestation is susceptible of partial performance, not in the sense of performance
in separate or divided parts, but in the sense of the possibility of realizing the purpose which the
obligation seeks to obtain. If a thing could be divided into parts and as divided, its value is impaired
disproportionately, that thing is indivisible (Pineda, 2000).

JOINT INDIVISIBLE OBLIGATIONS

 The obligation is joint because the parties are merely proportionately liable. It is indivisible
because the object or subject matter is not physically divisible into different parts. In other
words, it is joint as to liabilities of the debtors or rights of the creditors but indivisible as to
compliance (De Leon, 2010).
 A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the
debtors does not comply with his undertaking. The debtors who may have been ready to
fulfill their promises shall not contribute to the indemnity beyond the corresponding portion
of the price of the thing or of the value of the service in which the obligation consists (NCC,
Art. 1224).

Obligations that are deemed indivisible

1. Obligations to give definite things;

2. Those which are not susceptible of partial performance;
3. Even the object or service may be physically divisible, an obligation is indivisible if so
provided (i) by law or (i) intended by the parties (NCC, Art. 1225).

NOTE: A pledge or mortgage is one and indivisible by provision of law, and the rules apply even
if the obligation is joint and not solidary (NCC, Art. 2089).

Obligations that are deemed divisible

When the object of the obligation involves:

1. Certain number of days of work;

2. Accomplishment of work by metrical unit;
3. Analogous things which are by their nature susceptible of partial performance (NCC,
Art.1225).

Factors to determine whether an obligation is divisible of indivisible

1. The will or intention of the parties (express or implied);

2. The objective or purpose of the stipulated prestation;
3. The nature of the thing; and
4. The provisions of law affecting the ?

OBLIGTIONS TO GIVE OBLIGATIONS TO DO

In obligations to give, those for the delivery of
certain objects such as an animal or a chair are
invisible [(NCC, 1225 (1)]
In obligations to do, invisibility is also
presumed, and it is only when there are under
the exceptional cases mentioned in New Civil
Code (NCC), Art 1225 (2) that they are
divisible.

Effect of Illegality of a part of a contract

1. Divisible contract – The illegal part is void and unenforceable. Legal part is valid and
enforceable (NCC, Art. 1420).
2. Indivisible contract – The entire contract is indivisible and Partial in indivisible obligation
 General Rule: In indivisible obligations, partial performance is equivalent to non-performance.

Exceptions: (NCC, Articles 1234 and 1235).

1. Where the obligation has been substantially performed in good faith, the debtor may
recover as if there had been complete performance, minus the damages suffered by the
creditor; and
2. Where the creditor accepts performance knowing its incompleteness and without
protest, the obligation is deemed fully

OBLIGATIONS WITH A PENAL CLAUSE (Art. 1226-1230)

An obligation with a penal clause is one with an accessory undertaking by virtue of which the obligor
assumes a greater liability in case of breach of the obligations (Jurado, 2009).

Penal clause

A penal clause is an accessory undertaking to assume greater liability in case of breach. It is

attached to an obligation in order to insure performance. The penalty is generally a sum of money.
But it can also be any other thing stipulated by the parties, including an act or abstention.

Double functions:

1. To provide for liquidated damages; and

2. To strengthen the coercive force of the obligation by the threat of greater responsibility in
case of breach

Note: Proof is not required to demand liquidated damages. The stipulation itself is sufficient.

Kinds of penalties

 as to origin
a. Legal – it is legal when it is constituted by law
b. Conventional – it is constituted by agreement of the parties

 as to purpose
1. compensatory – it is compensatory when it is established for the purpose of
indemnifying the damages suffered by the oblige or creditor in case of breach of the
obligation
2. punitive – it is punitive when it is established for the purpose of punishing the obligor or
debtor in case of breach of obligation

 as to effect
1. subsidiary – it is subsidiary when only the penalty may be demanded in case of breach
of the obligation
2. joint – it is joint when injured party may demand the enforcement of both the penalty
and the principal

Can the debtor just choose penalty over non-fulfillment?

General Rule: The debtor cannot exempt himself from the performance of the obligation by
paying the penalty (NCC, Art. 1227).
 Exception: When the right has been expressly reserved to the debtor (NCC, Art. 1227).

Creditor cannot demand both the fulfillment of the principal obligation and the penalty

General Rule: The creditor cannot demand the fulfillment of the obligation and the satisfaction of
the penalty at the same time (NCC, Art. 1227).

Exceptions:

1. When the right has been clearly granted to him;

2. If the creditor has decided to require the fulfillment of the obligation, the performance thereof
should become impossible without his fault, the penalty may be enforced (NCC, Art. 1227).

NOTE: The creditor need not present proof of actual damages suffered by him in order that the
penalty may be demanded (NCC, Art. 1228). In this jurisdiction, there is no difference between a
penalty and liquidated damages, so far as the results are concerned. Whatever differences exist
between them as a matter of language, they are treated the same legally (Rabuya, 2017).

Effect of incorporating a penal clause in an obligation

General Rule: The Penalty fixed by the parties is a compensation or substitute for damages in case
of breach.

Exceptions: Damages shall still be paid even if there is a penal clause if:

1. There is a stipulation to the contrary

2. The debtor refuses/fail to pay the agreed penalty; or
3. The debtor is guilty of fraud in the fulfillment of the obligation (NCC, Art. 1126).

When the court may reduce the penalty:

1. The obligation has been partly or irregularly complied

2. The penalty is iniquitous or unconscionable

NOTES:

 If the principal obligation is void, the penal clause is also void. The nullity of the penal
clause does not affect the validity of the principal obligation
 The nullity of penal clause does not carry with it that of the principal obligation. For
example, the penal clause may be void because it is contrary to law, morals, good
custom, public order or public policy. In such case, the principal obligation subsists if
valid.
 When there are several debtors in an obligation with a penal clause, the divisibility of
the principal obligation among the debtors does not necessarily carry with it the
divisibility of the penalty among them