OBLIGATION AND CONTRACTS

By Atty. Rene Steve A. Garbo

Sources:
o Comments and Jurisprudence on Obligations and Contracts by Jurado 2010
o Obligations and Contracts by Rabuya 2019

Terms:
o Debtor –
o Creditor -

WHAT IS LAW?

Art. 1156. An obligation is a juridical necessity to give to do or not to do.

This provision answered the question “what is obligation?”

The term juridical necessity in Article 1156 of the Civil Code implies the existence of legal
sanctions that may be imposed upon the obligor (debtor) in case of breach of the obligation. Stated
otherwise, the oblige (creditor) may seek appropriate reliefs from the courts in case of such breach 1.

Theses legal sanctions do not include, however, the imprisonment of the debtor for mere non-
payment of a debt or non-performance of an obligation. xxx. Our Constitution, in particular, prohibits the
imprisonment of a person by reason of debt.2

Section 3 of Article III of the 1987 Philippine Constitution provides:

“No person shall be imprisoned for debt or non-payment of a poll tax”

Essential Elements of Obligation:

1) A juridical or legal tie (vinculum juris)
2) Active subject;
3) Passive subject;
4) Object or prestation

Juridical Tie – is that which essentially binds the parties (the passive subject and the active subject)
to the object of the obligation (or prestation), by virtue of which the debtor is bound to the creditor to
fulfill a determinate prestation. 3

As such the, this vinculum juris is the efficient cause or the very reason for the existence
obligation, and it arises from the various sources of obligations enumerated in art. 1157 of the New
Civil Code (law, contracts, quasi-contracts, delict and quasi-delicts) 4

Active Subject – also known as the OBLIGEE or CREDITOR, who can demand the fulfillment of
the obligation.5

Passive Subject – also known as the OBLIGOR or DEBTOR, against whom the obligation is
juridically demandable.6

Object or Prestation – The object of every obligation is always a prestation, which is defined as the
particular conduct required to be observed by the obligor (debtor) and which can be demanded by
the oblige (creditor).7 emphasis and underline supplied

The particular conduct referred to may consist either in GIVING, DOING or NOT DOING. 8

The object of the obligation must not be confused with the object or subject matter of the contract
in those obligations arising from contract as its object or subject matter may either be a thing, a right

1
Rabuya 2019
2
id
3
Rabuya 2019
4
id
5
Jurado 2010
6
Id
7
Rabuya 2019
8
Remember the definition of obligation which is a juridical necessity to give, to do or not to do.
 or a service; but in the case of the former, its object is always a particular conduct of the obligation
called “prestation”.9

De Leon et. al. vs The Manufacturers Life Insurance Company (Phils) et. al.
G.R. No. 243733, January 12, 2021

Facts:
+Edgar H. Sate (Sate), insured, applied for 3 insurance polies however he executed a Beneficiary
Designation Forms (BDFs) modifying his beneficiaries. However, months later he execute another BDFs
and change the beneficiaries.

The insurance company argued that since the 2 nd BDFs failed to comply with the companies
internal rules and procedure in changing beneficiary designation the same has no force and effect. Thus,
the listed beneficiaries in the 1st BDFs has the right to claim the insurance proceeds.

Issue:
Whether or not Sate is obliged to comply with the insurance internal rules and regulation?

Ruling:

No.

An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is
constituted upon the concurrence of the essential elements thereof, viz:

(a) The  vinculum juris or juridical tie which is the efficient cause established by the various

sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); 
(b) the object which is the prestation or conduct, required to be observed (to give, to do or not to do);
and
(c) the subject-persons who, viewed from the demandability of the obligation, are the active (obligee)
and the passive (obligor) subjects

The cause is the vinculum juris or juridical tie that essentially binds the parties to the

obligation. This linkage between the parties is a binding relation that is the result of their bilateral
actions, which gave rise to the existence of the contract.

In this case, the vinculum juris between Sarte and Manulife are the subject policies themselves.
Since the terms of the policies do not mention anything about Manulife's internal rules, there is
no juridical tie that binds Sarte to said internal rules. As such, the policies do not obligate the insured to
designate trustees for minor beneficiaries. Neither was it legally necessary for the July 31, 2002 BDFs to
be registered in Manulife's internal records so that Lara and Renzo may acquire a vested interest in the
subject policies. Simply put, Manulife's internal rules are not a legal norm that has any relevance in the
resolution of the issues of this case. Such internal rules are merely for the guidance of the personnel,
employees, and officers of Manulife.

Form of Obligation
The form in which the obligation is manifested is sometimes added as the fifth requisites. As a
general rule, however, it cannot be considered as essential. xxx It is only in obligations arising from
certain contracts that it becomes essential. 10 Thus in
1) Contract involving a donation of personal property whose value exceeds P5,000.00, the law
requires the donation and the acceptance shall be made in writing 11;
2) Contract involving a donation of immovable property, the law requires that the donation shall
be made in a public document, while the acceptance shall be made either in the same deed of
donation or in a separate public document12;
3) Contract of sale of piece of land or any interest thein through an agent, the law requires that
the authority of the latter shall be in writing13;
4) Contract of simple loan or mutuum, the law requires that any agreement with respect to interest
shall be expressly stipulated in writing14;

9
Rabuya 2019
10
Jurado 2010
11
Art. 748, Civil Code
12
Art. 749, Civil Code
13
Art. 1847, Civil Code
14
Art. 1956, Civil Code
 5) Contract of partnership where immovable property or real rights are contributed to the common
fund, the law requires that the contract shall be in a public instrument to which an inventory of
the property or real rights, signed by the partners, must be attached 15;
6) Contract of chattel mortgage, the law requires that the personal property which is the subject
matter of the contract shall be recorded on the Chattel Mortgage Register as a security for the
performance of an obligation16;
Note:
None compliance with such formalities would have the effect of rendering the contract or
agreement void or inexistent.17

WHAT ARE THE SOURCES OF OBLIGATION?

Art. 1157. Obligations arise from:

1) Law;
2) Contracts;
3) Quasi-contracts;
4) Acts or omissions punished by law; and
5) Quasi-delicts

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this
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 this Book.

Example:
1) The obligation of the taxpayers to pay taxes in accordance with existing tax statutes; and
2) The husband and wife are obliged to live together, observe mutual love, respect, fidelity, and
render mutual help and support18.

Office of the Solicitor General vs Ayala Land Incorporated, Robinson’s Land Corporation,
Shangri-La Plaza Corporation and SM Prime Holdings, Inc.19 (2009)

Facts:
Respondents maintain and operates shopping malls and constructs, operates and leases out
commercial buildings and other structures. The shopping malls operated or leased out by respondents
have parking facilities for all kinds of motor vehicle, by way of parking spaces inside the mall buildings
or in separate buildings and/or adjacent lots that are solely devoted for use of parking spaces.

The Senate Committees on Trade and Commerce and on Justice and Human Rights conducted a
joint investigation to determine among others the legality of the prevalent practice of shopping malls of
charging parking fees. After the said investigation the said committees found that the collection of
parking fees by shopping malls is contrary to the National Building Code and therefore illegal.

Respondents argued that they have clear legal right to lease parking spaces appurtenant to its
malls and other commercial establishment.

Issue:
Whether or not respondents are obligated/mandated by law to provide free parking spaces by the
National Building Code and its IRR?

Ruling:

No. There is nothing in the National Building Code and its IRR pertaining to collection or non-
collection of parking fees by respondents. In fact, the term parking fees cannot even be found at all in the
entire law. Since the said laws does not mentioned parking fees, then simply, said provisions do not
regulate the collection of the same.

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in
this 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 this Book.

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.

15
Art. 771, 1773, Civil Code
16
Art. 2140, Civil Code
17
Jurad0, 2010
18
Art. 68 of the Family Code
19
G.R.No. 177056, September 18, 2009
 A contract is a meeting of minds between two persons whereby one binds himself, with respect
to other to give something or to render some service. 20

Compliance in Good Faith means performance in accordance with the stipulations, clauses,
terms and conditions of the contract.21

*Force of law between the contracting parties – the obligation/s arising from the contract
affects only the contracting parties unless there is an agreement that the benefits thereof be given
to a third person.

In relation to Art. 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.

Example:
A and B entered into a contract of loan whereby A borrowed from B P10,000.00. A
promised to pay B on January 1. However, on January 1 A did not pay B, instead he argued that
he does not have any obligation to pay B P10,000.00 pesos and even if there is a contract such
contract

20
Art. 1305, Civil Code
21
Jurado 2010