ART. 1163.

Every person obliged to give something is also

obliged to take care of it with the proper diligence of a good
father of a family, unless the law or the stipulation of the The meaning of the phrase “he shall acquire no real right over
parties requires another standard of care. it until the same has been delivered to him,” is that the creditor
does not become the owner until the specific thing has been
Determinate Thing Indeterminate Thing delivered to him. Hence, when there has been no delivery yet,
Identified by its individuality Identified by its specie. the proper action of the creditor is not one for recovery of
The debtor cannot substitute it The debtor can give possession and ownership but one for specific performance or
with another although the anything of the same class rescission of the obligation.
latter is of the same kind and as long as it is of the same
quality without the consent of kind. ART. 1165. When what is to be delivered is a determinate
the creditor. (Art. 1244) thing, the creditor, in addition to the right granted him by
Article 1170, may compel the debtor to make the delivery.
Duties of the Debtor in Obligation to give a Determinate
Thing: If the thing is indeterminate or generic, he may ask that the
1. To preserve or take care of the thing due; obligation be complied with at the expense of the debtor.
2. To deliver the fruits of the thing;
3. To deliver its accessions and accessories; If the obligor delays, or has promised to deliver the same
4. To deliver the thing itself; and thing to two or more persons who do not have the same
5. To answer for damages in case of non-fulfillment or interest, he shall be responsible for any fortuitous event
breach. until he has effected the delivery.

Duties of the Debtor in Obligation to give an Indeterminate Remedies of Creditor in Real Obligation (To GIVE):
Thing:  Specific Real Obligation:
1. To deliver the thing which is of the quality intended
Any of the following:
by the parties taking into consideration the purpose of 1. Demand specific performance or fulfillment of the
the obligation and other circumstances (see Art.
obligation with a right to indemnity for damages;
1246.); 2. Demand recission or cancellation of the obligation
2. To be liable for damages in case of fraud, negligence,
also with a right to recover damages;
or delay, in the performance of his obligation, or 3. Demand the payment of damages only where it is the
contravention of the tenor thereof. (see Art. 1170.)
only feasible remedy.
ART. 1164. The creditor has a right to the fruits of the thing
In an obligation to deliver a determinate thing, the very
from the time the obligation to deliver it arises. However, he thing itself must be delivered. (Art. 1244.) Consequently,
shall acquire no real right over it until the same has been
only the debtor can comply with the obligation. This is the
delivered to him. reason why the creditor is granted the right to compel the
debtor to make the delivery.
Kinds of Fruits:
1. Natural Fruits – are the spontaneous products of the
It should be made clear, however, that the law does not
soil, and the young. (all trees and plants on lands mean that the creditor can use force or violence upon the
produced without the intervention of human labor)
debtor. The creditor must bring the matter to court and the
2. Industrial Fruits – are those produced by lands of court will be the one to order the delivery.
any kind through cultivation or labor (sugar cane,
vegetables, rice, and all products of lands brought
 Generic Real Obligation:
about by reason of human labor)
He may ask the performance of the obligation by the debtor
3. Civil Fruits – are those derived by virtue of a
or by a third person with a right to recover damages in case
juridical relation (rents of buildings, prices of leases
of breach of obligation.
of lands)
Paragraph 3 of Art. 1165 gives two instances when a fortuitous
Personal Right Real Right
event does not exempt the debtor from responsibility. It
Power of a person to Interest of a person over a
likewise refers to a determinate thing. An indeterminate thing
demand from another, as a specific thing without a
definite passive subject, the definite passive subject cannot be the object of destruction by a fortuitous event
fulfillment of the latter’s against whom the right may because genus nunquam perit (genus never perishes)
obligation be personally enforced.
Binding or enforceable Directed against the whole Art. 1166. The obligation to give a determinate thing
against a particular person world includes that of delivering all its accessions and accessories,
 Definite Active Subject  Definite Active Subject even though they may not have been mentioned.
 Definite Passive Subject No Definite Passive Subject
Accessions – are the fruits of, or additions to, or improvements
Rights of the creditor to the fruits: upon a thing/principal.
By law, the creditor is entitled to the fruits of the thing to be
delivered from the time the obligation to make delivery of the Accessories – things joined to or included with the principal
thing arises. The intention of the law is to protect the interest of for the latter’s embellishment, better use or completion.
the obligee should the obligor commit delay, purposely or The general rule is that all accessions and accessories are
otherwise, in the fulfillment of his obligation. considered included in the obligation to deliver a determinate
thing although they may not have been mentioned. This rule is
based on the principle of law that the accessory follows the
principal.

Art. 1167. If a person obliged to do something fails to do it, ART. 1169. Those obliged to deliver or to do something
the same shall be executed at his cost. incur in delay from the time the oblige judicially or extra-
judicially demands from them the fulfillment of their
This same rule shall be observed if he does it in obligation.
contravention of the tenor of the obligation. Furthermore,
it may be decreed that what has been poorly done be However, the demand by the creditor shall not be
undone. necessary in order that delay may exist:
(1) When the obligation or the law expressly so
Situations contemplated in Remedies declares; or
Art. 1167 (2) When from the nature and the circumstances of
(1) The debtor fails to a. have the obligation the obligation it appears that the designation of the
perform an obligation performed by himself, time when the thing is to be delivered or the
to do; or by another unless service is to be rendered was a controlling motive
personal considerations for the establishment of the contract; or
are involved, at the (3) When demand would be useless, as when the
debtor’s expense;
obligor has rendered it beyond his power to
AND
perform.
b. recover damages
(2) The debtor performs an
In reciprocal obligations, neither party incurs in delay if
obligation to do but
The court may order that it the other does not comply or is not ready to comply in a
contrary to the terms
thereof; be undone if it is still proper manner with what is incumbent upon him. From
possible to undo what was the moment one of the parties fulfills his obligation, delay
(3) The debtor performs an done. by the other begins.
obligation to do but in
a poor manner.
Meaning of Delay:
Can a personal obligation to do be performed by a third 1. Ordinary Delay – merely the failure to perform an
person? YES. obligation on time.
2. Legal Delay – failure to perform an obligation on
When will it not be considered as fulfilled? time which failure, constitutes a breach of the
When the personal qualifications of the debtor are the obligation.
determining motive for the obligation contracted.
Kinds of Delay:
What is the remedy of the creditor in such case? 1. Mora solvendi – delay on the part of the debtor to
Indemnification for damages BUT where the obligation can fulfill his obligation by reason of a cause imputable to
still be performed at the expense of the debtor notwithstanding him.
his failure or refusal to do so, the court is not authorized to 2. Mora accipiendi – delay on the part of the creditor
merely grant damages to the creditor. without justifiable reason to accept the performance
of an obligation; and
Can a debtor be compelled to fulfill an obligation? 3. Compensatio morae – delay of the obligors in
reciprocal obligations.
 Real Obligation to deliver a DETERMINATE THING
– YES (Art. 1165)
Is there a delay in Negative Personal Obligation?
 Positive Personal Obligation – NO. It may amount to
NONE. The debtor fulfills his obligation by not doing what has
involuntary servitude which, as a rule, is prohibited
been forbidden him.
under our Constitution.
Requisites of Delay by the Debtor:
ART. 1168. When the obligation consists in not doing, and
(1) failure of the debtor to perform his (positive)
the obligor does what has been forbidden him, it shall also
obligation on the date agreed upon;
be undone at his expense.
(2) demand made by the creditor upon the debtor to
fulfill, perform, or comply with his obligation which
What is the obligation of the debtor in an obligation not to
demand, may be either judicial (when a complaint is fi
do? To abstain from an act. Here, there is no specific
led in court) or extra-judicial (when made outside of
performance. The very obligation is fulfilled in not doing what
court, orally or in writing); and
is forbidden. Hence, in this kind of obligation the debtor
(3) failure of the debtor to comply with such demand.
cannot be guilty of delay.
There is no delay if the obligation is not yet due and
Remedies of creditor in negative personal obligation
demandable.
Possible to be undone  Undo the Act
 Damages
The creditor has the burden of proving that demand has been
Impossible to undo what was
made.
done either physically or legally Action for damages
or because of the rights of the
third persons It is incumbent upon the debtor, to relieve himself from
liability, to prove that the delay was not caused by his fault,
i.e., there was no fraud or negligence on his part.

Effects of Delay:
Kind of Delay Effects
Mora Solvendi (1) The debtor is guilty of breach
of the obligation;
(2) He is liable for interest in case
of obligations to pay money or
damages in other obligations. In
the absence of extrajudicial
demand, the interest shall
commence from the filing of
the complaint; and
(3) He is liable even for a
fortuitous event when the
obligation is to deliver a
determinate thing. (Arts. 1165,
1170.)
However, if the debtor can
prove that the loss would have
resulted just the same even if he
had not been in default, the
court may equitably mitigate
the damages. (Art. 2215[4].)
In an obligation to deliver a
generic thing, the debtor is not
relieved from liability for loss
due to a fortuitous event. He
can still
Mora Accipiendi (1) The creditor is guilty of breach
of obligation;
(2) He is liable for damages
suffered, if any, by the debtor;
(3) He bears the risk of loss of the
thing due (see Art. 1162.);
(4) Where the obligation is to pay
money, the debtor is not liable
for interest from the time of the
creditor’s delay; and
(5) The debtor may release himself
from the obligation by the
consignation of the thing or
sum due. (see Art. 1256.)
Compensatio The delay of the obligor cancels out
Morae the effects of the delay of the
obligee and vice versa. The net
result is that
there is no actionable default on the
part of both parties, such that as if
neither one is guilty of delay.
If the delay of one party is followed
by that of the other, the liability of
the first infractor shall be equitably
tempered or balanced
by the courts.
If it cannot be determined which of
the parties is guilty
of delay, the contract shall be
Kind of Delay Effects
deemed extinguished and each shall
bear his own damages. (Art. 1192.)
When demand is NOT necessary to put debtor in delay:
(1) When the obligation so provides;
* The mere fixing of the period is not enough. The
arrival of the period merely makes the obligation
demandable. Before its arrival, the
creditor cannot demand performance. The obligation
must expressly so declare that demand is not
necessary or must use words to that effect, as for
instance, “the debtor will be in default” or “I will be
liable for damages.”
(2) When the law so provides;
(3) When the time is of the essence;
*The debtor is fully aware that the performance of the
obligation after the designated time would no longer
benefit the creditor.
When the time of delivery is not fixed or is stated in
general and indefinite terms, time is not of the essence
of the contract. In such cases, the delivery must be
made within a reasonable time, in the absence of
anything to show that an immediate delivery was
intended.
It is not necessary for the contract to categorically
state that time is of the essence; intent is sufficient.
(4) When demand would be useless;
(5) When there is performance by a party in reciprocal
obligations.
* The performance of one is conditioned upon the
simultaneous fulfillment on the part of the
other.
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 a party in reciprocal obligations
fulfills or is ready to fulfill his obligation, delay by the
other begins. Where
the parties fix a period for the performance of their
reciprocal obligations, neither party can demand
performance nor incur in delay before the expiration
of the period. The parties may provide different dates
for performance of their respective obligations.
ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are
liable for damages.
Breach of contract – failure without justifiable excuse to
comply with the terms of the contract.
Grounds for liability for voluntary breach of obligation:
1. Fraud – deliberate or intentional evasion of the normal
fulfillment of an obligation.

As a ground for damages, it implies some kind of
malice or dishonesty and it cannot cover cases of
mistake and errors of judgment made in good faith. It is
synonymous to bad faith in that it involves a design to
mislead or deceive another.
The reason is because negligence is a question which must
necessarily depend upon the circumstances of each particular
case. Moreover, negligence is not as serious as fraud because
in the case of the former, there is no bad faith or deliberate
intention to cause injury or damages. The courts, however,
may increase the damages.

2. Negligence – any voluntary act or omission, there being

no malice, which prevents the normal fulfillment of an When BOTH parties to a transaction are mutually
obligation. negligent in the performance of their obligations:
3. Delay The fault of one cancels the negligence of the other. Thus, their
4. Contravention of the terms of the obligation – rights and obligations may be determined equitably under the
violation of the terms and conditions of stipulated in the law prescribing unjust enrichment - No one shall enrich
obligation.
himself at the expense of another.
Fraud vs. Negligence
An action for future negligence may be renounced EXCEPT
Particulars Fraud Negligence where the nature of the obligation requires the exercise of
As to presence There is There is NO extraordinary diligence.
of intent to deliberate intent such intent
cause damage to cause damage Kinds of Diligence according to source of obligation:
or injury 1. Contractual Negligence (Culpa Contractual)
As to waiver of Waiver for future Waiver may be - negligence in contracts resulting in their breach. This
liability for void is VOID allowed in kind of negligence is not a source of obligation. (Art.
future acts negligence 1157.) It merely makes the debtor liable for damages
Evidence Must be clearly Presumed from in view of his negligence in the fulfi llment of a pre-
proved, mere the breach of existing obligation resulting in its breach or non-
preponderance of contractual fulfillment. (Arts. 1170-1174, 2201.) It is a kind of
evidence is not obligation. civil negligence if it does not amount to a crime;
sufficient.
Mitigation of Cannot be May be reduced 2. Civil Negligence (Culpa Aquilana)
liability mitigated by the according to the - negligence which by itself is the source of an
courts circumstances. obligation between the parties not formally bound
before by any pre-existing contract. It is also called
“tort” or “quasidelict.”
When negligence is equivalent to fraud:
Where the negligence shows bad faith or is so gross that it 3. Criminal Negligence (Culpa Criminal)
amounts to malice or wanton attitude on the part of the - Negligence resulting in the commission of a crime.
defendant.
Can a creditor recover damages if he is also guilty of
Gross negligence is negligence characterized by want or negligence? It depends if the plaintiff’s own negligence was:
absence of or failure to exercise even slight care or diligence,  Immediate and proximate cause of injury – he cannot
or the entire absence of care, acting or omitting to act on a recover the damages
situation where there is a duty to act, not inadvertently but  Only contributory and the immediate and proximate
willfully and intentionally. cause of the injury being the defendant’s lack of due
ART. 1171. Responsibility arising from fraud is care – the plaintiff may recover damages but the
demandable in all obligations. Any waiver of an action for courts shall mitigate the damages to be awarded.
future fraud is void.
ART. 1173. The fault or negligence of the obligor consists
Waiver of action for future fraud is VOID: in the omission of that diligence which is required by the
A contrary rule would encourage the perpetration of fraud nature of the obligation and corresponds with the
because the obligor knows that even if he should commit fraud circumstances of the persons, of the time and of the place.
he would not be liable for it thus making the obligation When negligence shows bad faith, the provisions of Articles
illusory. 1171 and 2201, paragraph 2, shall apply.

Waiver of action for past fraud is VALID:
The waiver can be considered as an act of generosity on the
part of the party who is the victim of the fraud. Here, what is
renounced is the effects of the fraud, that is, the right to
indemnity of the party entitled thereto.
ART. 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.
Courts are given wide discretion in fixing the measure of
damages in cases of responsibility arising from negligence:
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.
Negligence - is conduct that creates undue risk or harm to
another. It is the failure to observe for the protection of the
interests of another person, that degree of care, precaution and
vigilance which the circumstances justly demand, whereby
such other person suffers injury.
Negligence is a question of fact, its existence being dependent
upon the particular circumstances of each case.
Diligence – is the attention and care required of a person in a
given situation.
Kinds of Diligence required:
1. That agreed upon by the parties;
2. That required by law in the particular case; and
3. The diligence of a good father of a family or ordinary
diligence.
ART. 1174. Except in cases expressly specifi ed 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.
Fortuitous event – an extraordinary event which cannot be
foreseen, or which, though foreseen, is inevitable. In other
words, it is an event which is either impossible to foresee or to
avoid.
The essence of a fortuitous event consists of being a happening
independent of the will of the obligor and which happening,
makes the normal fulfillment of the obligation impossible.
Fortuitous Event Force Majeure
Acts of Man Acts of God
Event independent of the Events which are totally
will of the obligor but not independent of the will of
of other human wills every human being
War, fire, robbery, murder Earthquake, flood, rain,
or insurrection shipwreck, lighting,
eruption of a volcano
*In our law, fortuitous evet and force majeure are identical in
so far as they exempt an obligor from liability. Both are
independent of the will of the obligor.
Kinds of fortuitous events:
1. Ordinary fortuitous events – those events which are
common and which the contracting parties could
reasonably foresee; and
2. Extraordinary fortuitous events – those events which are
uncommon and which the contracting parties could not
have reasonably foreseen.
Requisites of fortuitous events:
1. The event must be independent of the human will or at
least of the obligor’s will;
2. The event could not be foreseen (unforeseeable), or if it
could be foreseen, must have been impossible to avoid
(unavoidable);
3. The event must be of such a character as to render it
impossible for the obligor to comply with his obligation
in a normal manner; and
4. The obligor must be free from any participation in, or
the aggravation of the injury to the obligee.
There must be no concurrent or previous negligence or
imprudence on the part of the obligor by which the loss or
injury may have been occasioned.
The loss or injury could have been avoided by human
precaution, the defense of fortuitous event cannot be
successfully invoked. In other words, in order to be exempt
from liability arising from a fortuitous event, there should have
been no human participation amounting to a negligent act.
It should be pointed out that for the purpose of releasing the
debtor from his obligation, the occurrence of the fortuitous
event does not suffice. The impossibility of fulfilling the
obligation must be the direct consequence of the event. If
notwithstanding its occurrence, the obligation can be fulfilled,
it will subsist even if only in part. In order to see whether or
not the fortuitous event produces the impossibility of fulfilling
the obligation, the nature of the obligation must be considered,
and according to whether it be specific or general, etc., it will
or will not be extinguished.
Rules as to liability in case of fortuitous event:
General Rule: A person is not responsible for loss or damage
resulting from fortuitous events. Hence, the obligation is
extinguished.
Exceptions:
(1) When expressly specified by law:
(a) The debtor is guilty of fraud, negligence, or delay,
or contravention of the tenor of the obligation.
(Arts. 1170, 1165, par. 3.)
(b) The debtor has promised to deliver the same
(specific) thing to two or more persons who do not
have the same interest for it would be impossible
for the debtor to comply with his obligation to two
or more creditors even without any fortuitous
event taking place.
(c) The debt of a thing certain and determinate
proceeds from a criminal offense, unless the thing
having been offered by the debtor to the person
who should receive it, the latter refused without
justification to accept it. (Art. 1268.)
(d) The thing to be delivered is generic (Art. 1263.)
for the debtor can still comply with his obligation
by delivering another thing of the same kind in
accordance with the principle that “genus never
perishes” (genus nunquam perit).
(2) When declared by stipulation
(3) When the nature of the obligation requires the assumption
of risk.
Art. 1175. Usurious transactions shall be governed by
special laws.
Simple loan or mutuum – is a contract whereby one of the
parties delivers to another money or other consumable thing,
upon the condition that the same amount of the same kind and
quality shall be paid.
Usury - is contracting for or receiving interest in excess of the
amount allowed by law for the loan or use of money, goods,
chattels, or credits.
Kinds of interest:
1. Simple interest – when the rate of interest is stipulated by
the parties.
2. Compound interest – when the interest earned is upon the
interest due.
3. Legal interest – when the rate of interest intended by the
parties is presumed by law, as when the law mentions
interest but does not specify the rate thereof.
4. Lawful interest – when the rate of interest is within the
maximum allowed by law.
5. Unlawful interest – when the rate of interest is beyond the
maximum fixed by law.

Interest Rules under the Usury Law:
(1) Legal Rate – 12% per annum
The legal rate is 12% (from default until fully paid) if
the transaction is a loan or forbearance of money,
goods, or credits or the judgment involves a loan or
forbearance of money, goods or credits, as prescribed
in Central Bank Circular No. 416 (infra.); otherwise
(e.g., indemnity for damages occasioned by an injury
to person or loss of property), it is only 6% as
provided in Article 2209 of the Civil Code.
(2) Maximum Rate
 12% - if the loan is secured in whole or in
part by a mortgage upon real estate with a
Torrens Title or by any agreement conveying
such real estate or an interest therein.
 14% - if the loan is not secured.
 The rate prescribed by the Monetary Board of
the Central Bank.
Under Section 2 (secured loan) of the Usury Law, the taking or
receiving (not mere agreeing) of usurious interest is the act
penalized. Under Section 3 (unsecured loan), the mere
demanding or agreeing to charge excessive interest is also
punishable. In either case, it is only the creditor who is
criminally liable.
NOTE: By virtue of Central Bank Circular No. 905 (Dec. 10,
1982, effective Jan. 1, 1983.) issued by the Monetary Board
under the authority granted to it by the Usury Law (Secs. 1-a,
4-9, and 4-b thereof.), the rate of interest and other charges on
a loan or forbearance of money, goods, or credit, regardless of
maturity and whether secured and unsecured, that may be
charged or collected shall not be subject to any ceiling
prescribed under the Usury Law. Usury is now legally non-
existent. Interest can be charged as lender and borrower may
agree upon.
According to the Supreme Court, the circular did not repeal or
in any way amend the Usury Law but simply suspended the
latter’s effectivity. Only a law can repeal or amend another
law.
While the Usury Law ceiling on interest rates was lifted by
C.B.
Circular No. 905, nothing in said circular grants lenders carte
blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of
their assets.
Liability for legal interests:
(a) For loan or forbearance of money, the rate of interest
due is that stipulated; otherwise, 12% per annum
computed from judicial or extrajudicial demand until
fully paid. In addition, interest due shall earn legal
interest (compound interest) from the time it is
judicially demanded.
(b) For other than loan or forbearance of money, the
interest shall be 6% as indemnity at the discretion of the
court. When the amount of the obligation is reasonably
established, the interest shall run from judicial or extra-
judicial demand; otherwise, from the time the amount is
finally adjudged.
(c) Where a judgment awarding a sum of money under (a)
or (b) above, has become fi nal and executory, the legal
rate of interest shall be 12% from such fi nality, based
on the adjudged principal and unpaid interest, until full
satisfaction.
Requisites for recovery of monetary interest:
1. The payment of interest must be expressly stipulated;
2. The agreement must be in writing; and
3. The interest must be lawful.
A stipulation for the payment of usurious interest is void, that
is, as if there is no stipulation as to interest.
ART. 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.
Presumption – inference of a fact not actually known arising
from its usual connection with another which is known or
proved.
Two Kinds of Presumption:
1. Conclusive Presumption – one which cannot be
contradicted;
2. Disputable Presumption – one which can be
contradicted or rebutted by presenting proof to the
contrary.
When presumptions under Art. 1176 do not apply:
1. With reservation as to interest;
2. Receipt for a part of principal;
3. Receipt without indication of a particular installment
paid;
4. Payment of taxes; and
5. Non-payment proven.
ART. 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.
Remedies available for the creditors for the satisfaction of
their claims: E P E A
1. Exact fulfillment with the right to damages;
2. Pursue the leviable – those not exempt from
attachment under the law – property of the debtor;
3. Exercise all the rights and bring all the actions of the
debtor except those inherent in or personal to the
person of the latter;
4. Ask the court to rescind or impugn the acts or
contracts which the debtor may have done to defraud
him when he cannot in any other manner recover his
claim.
ART. 1178. Subject to the laws, all rights acquired in virtue
of an obligation are transmissible, if there has been no
stipulation to the contrary.
General Rule: All rights acquired by virtue of an obligation
are transmissible.

Exceptions:
 Those prohibited by law like the rights in partnership,
agency and commodatum
 Those prohibited by the stipulation of the parties.