Page |1

MODULE TWO: NATURE AND EFFECTS OF OBLIGATION (PART 1)

Topic two: Nature and Effects of Obligation

Objective:
1. To have a better understanding of the nature of obligation.
2. To have a grasp of effects of obligation.

A. Obligation TO GIVE
a) Type of Things
Specific /Determinate Generic Thing Limited Generic Thing
Thing
Particularly designated or Object is designated only When the generic objects
physically segregated from by its class/ genus/ species are confined to a
all others of the same class particular class
( Art.1460 CC); identified
by individuality
Cannot be substituted Can be substituted by any Can be substituted by any
against the obligee’s will of the same class and of the same particular
same kind class

b) Rights and Duties of Parties

Duties of Debtor Rights of the Creditor

To Give a Specific Thing
1. To preserve or take care of the 1.To compel delivery (Art. 1165, CC)
thing due with the proper
diligence of a good father of a
family
2. To deliver the thing itself (Art. 2.To the fruits from the time the
1165, CC) obligation to deliver arises (Art.1246, CC)
3. To deliver the fruits of the thing 3. To the accessions and accessories,
(Art. 1164, CC) even if not mentioned (Art. 1166, CC)
4. To deliver its accessions and 4.Not to be compelled to receive a
accessories (Art. 1166, CC) different one although of the same value
as, or more valuable than that which is
Accessions – everything which is due (Art. 1244, CC)
produced by a thing or which is
produced by a thing or which is
incorporated or attached thereto,
excluding fruits
 Page |2

Accessories –things designed for

the embellishment, use or
preservation of another thing of
more importance

5. To pay damages in the case of 6. To recover damages in case

breach (1170, CC) breach, exclusive or in addition to
specific performance
(Art.1165,1170, CC)
To Give A Generic Thing
1. To Take care of the thing 1. To ask that
(Art.1163, CC) the obligation
be complied
with [Art.
1165, CC]

2. To deliver a thing of quality 2. To ask that

intended by the parties taking into the obligation
consideration the purpose of be complied
obligation and other with by a third
circumstances (Art.1246, CC) person at the
expense of
the debtor

3. Creditor cannot demand a thing of 3. To recover

superior quality ; neither can the damages in
debtor deliver a thing of inferior case of
quality breach [Art.
1165, CC]

4. To pay damages in case of breach 4. Not to be

(Art.1170, CC) compelled to
receive a different one,
although of
the same
value as, or
more valuable
than that
which is due
[Art. 1244,
CC]

B. Obligation to do or not to do
 Page |3

a. Rights and Duties of Parties

Duties of the Rights of the
Debtor Creditor

Obligation To do
1. To do it [Art. 1. To have the
1167, CC] obligation
2. To shoulder executed at
the cost of the cost of
execution the debtor
should he [Art. 1167,
fail to do it CC]
[Art. 1167, 2. To recover
CC] damages in
3. To undo case of
what has breach [Art.
been poorly 1170, CC]
done [Art. Note: The debtor
1167, CC] cannot be compelled
4. To pay to perform his
damages in obligation. The
case of ultimate sanction of
breach [Art. civil obligations is
1170, CC] indemnification of
damages. This would
be tantamount to
involuntary servitude
Obligation Not to do
1. Not to do what 1. To ask to undo
should not be what should not
done be done, at the
2. To shoulder debtor’s
cost of undoing 2. To recover
what should not damages, where
have been done it would be
[Art. 1168, CC] physically or
3. To pay legally
damages in impossible to
case of breach undo what should
[Art. 1170, CC] not have been
expense. [Art. done, because
 Page |4

1168, CC] of:

• the very nature
of the act itself;
• rights acquired
by third persons
who acted in
good faith;
• when the effects
of the acts
prohibited are
definite in
character and
will not cease
even if the thing
prohibited be
undone.

C. Transmissibility of obligations

General Rule: All rights acquired by virtue of an obligation are transmissible. [Art. 1178, CC];
Contracts take effect only between the parties, their assigns and heirs [Art. 1311, CC]

Exception: Nature of obligation, law or stipulation to the contrary provides otherwise [Art.
1178].

Only personal obligations, or those identified with the persons themselves are
extinguished by death. [Stronghold Insurance Co. v.Republic-Asahi Glass Corp., G.R. No.
147561(2006)]

D. Performance of Obligations
a. Definition
Payment means not only (1) the delivery of money, but also (2) the
performance, in any other manner, of an obligation. [Art. 1232, CC]

b. General Rule/Requirement

The thing or service in which the obligation consists [must be] completely
delivered or rendered, as the case may be. [Art. 1233, CC]
c. Exceptions
1. Substantial performance

TRIGGER: The obligation has been substantially performed in good faith.

 Page |5

EFFECT: The obligor may recover as though there had been a strict and complete
fulfillment, less damages suffered by the obligee. [Art. 1234, CC]

2. Incomplete/irregular performance
TRIGGER: Obligee accepts performance despite knowledge of its incompleteness
or irregularity.
EFFECT: The obligation is deemed fully complied with. [Art. 1235, CC]

3. Partial prestation

General rules:
1. The creditor CANNOT be compelled to receive partial payments.
2. The debtor CANNOT be required to make partial payments.

Exception: when expressly stipulated. [Art. 1248, par. 1, CC]

4. Partial liquidation
TRIGGER: The debt is partly liquidated and partly unliquidated.
EFFECT: The creditor may demand and the debtor may effect the payment of the
liquidated debt without waiting for the liquidation of the unliquidated debt.

E. Breaches of Obligations

Those who in the performance of their obligations are guilty of the following are liable
for damages [Art. 1170, CC]:
a. Fraud (dolo): The fraud contemplated by the foregoing provision is the deliberate and
intentional evasion of the normal fulfillment of obligations.
b. Negligence (culpa): Fault or negligence of the debtor as an incident in the fulfilment
of an existing obligation.
c. Delay (mora): Delay in the fulfillment of the obligation. The delay however must be
imputable to the debtor/obligor.
d. And those who in any manner contravene the tenor thereof: Covers any illicit act
which impairs the strict and faithful fulfillment of the obligation

Degree of diligence required

1. That agreed upon;
2. 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
Exceptions:
 Page |6

a. Common carriers requiring extraordinary diligence (NCC, Arts. 1998-

2002);
b. Banks require the highest degree of deligence, being imbued with
public interest.

Diligence of a good father of a family

That reasonable diligence which an ordinary prudent person would have
done under the same circumstances.

1. Failure to Perform

Effect of Failure to Perform:

Substantial
SUBSTANTIAL BREACH SLIGHT OR CASUAL BREACH

1. Total breach 1. Partial breach

2. Amounts to nonperformance, 2. There is partial/ substantial

basis for rescission under Art. 1191 performance in good faith
and payment of
damages

3. Gives rise to liability for damages

only [Art.1234, CC]

General Rule: Rescission of a contract will not be permitted for a slight or causal breach,
but only for such substantial and fundamental breach as would defeat the very object of
the parties in executing the agreement. [Vermen Realty Corp. v. CA, G.R. No. 101762
(1993)]

Substantial performance contemplates

• an attempt in good faith to perform, without any willful or intentional
departure therefrom
• the deviation from the obligation must be slight, and the omission or defect
must be technical and unimportant, and must not pervade the whole or be so
material that the object which the parties intended to accomplish in a particular
manner is not attained. [International Hotel Corp v. Joaquin, G.R. No. 158361
(2013)]
 Page |7

The question of whether a breach of contract is substantial depends upon the

attending circumstances and not merely on the percentage of the amount not
paid. [Cannu v. Galang, G.R. No. 139523 (2005)]

2. Default, Delay, or Mora

Definition: Failure to perform an obligation on time which constitutes a breach of the

obligation. [de Leon]

Those obliged to deliver or to do something incur in delay from the time the obligee
(creditor) judicially or extrajudicially demands from them the fulfillment of their
obligation.

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 obligations, delay by the other begins (NCC, Art.
1169). (2002 Bar)

Rules on Default, Delay, or Mora

Unilateral Obligation Reciprocal Obligation
General Rule: Neither party incurs in delay if
“No demand, No delay.” the other does not comply or
The mere expiration of the is not ready to comply in a
period fixed by the parties is not proper manner with what is
enough in incumbent upon him. From
order that the debtor may incur the moment one of the
in delay. parties fulfills his obligation,
Those obliged to deliver or to do delay by the other
something incur in delay from begins. [Art. 1169 par. 3, CC]
the time the oblige judicially or No delay if neither performs.
extrajudicially demands from
them the fulfillment of their
obligation. [Art. 1169 par. 1, CC]

When demand is not necessary in order that delay may exist [par. 2, Art. 1169, CC]
1. When demand would be useless, as when the obligor has rendered it beyond his
power to perform; such as:
a. When the impossibility is caused by some act or fault of the debtor (e.g.
debtor absconded or has destroyed the thing to be delivered);
 Page |8

b. When the impossibility is caused by a fortuitous event, but the debtor has
bound himself to be liable in case of such event. [Tolentino]
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 (time is of the
essence);
3. When the law so provides; or
4. When the obligation expressly so declares.
Note: It is insufficient that the law or obligation fixes a date for performance. It
must further state expressly that after the period lapses, default will commence.

Kinds of legal delay or default

1. Mora solvendi – Default on the part of the debtor/obligor
a. Ex re – Default in real obligations (to give);
b. Ex personae – Default in personal obligations (to do);
2. Mora accipiendi – Default on the part of the creditor/oblige;
3. Compensatio morae – Default on the part of both the debtor and creditor in
reciprocal obligations.

Causes of cessation of the effects of mora

1. Renunciation (express/implied); or
2. Prescription.

Brain Exercise:

American Express Card (AMEX) failed to approve Pantaleon’s credit card purchases
which urged the latter to commence a complaint for moral and exemplary damages
against AMEX. He said that he and his family experienced inconvenience and
humiliation due to the delays in credit authorization during his vacation trip in
Amsterdam and in the United States. Did AMEX commit a breach of its obligations to
Pantaleon?

MORA SOLVENDI

Requisites (PDF-MJ)
1. Obligation Pertains to the debtor;
2. Obligation is Determinate, due and demandable, and liquidated;
3. Obligation has not been performed on its Maturity date;
4. There is Judicial or extrajudicial demand by the creditor; and
5. Failure of the debtor to comply with such demand.
 Page |9

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.

Instances when demand by the creditor is not necessary in order that delay may exist
General Rule: No demand = no default [NCC, Art. 1169 (2)].

Exception:
Demand by the creditor shall not be necessary in order that delay may exist when:
1. The obligation or the law expressly so declares; or
2. From the nature and the circumstances of the obligation it appears that the
designation of 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. Demand would be useless, as when the obligor has rendered it beyond his power to
perform [Art. 1169 (2)].

Brain Exercise:

“A” borrowed P2,000 from “B” on December 1, 1956. He executed a promissory note
promising to pay the indebtedness on December 1, 1958. Upon the arrival of the
designated date for payment, is demand necessary in order that “A” shall incur in
delay?

Effects of mora solvendi

1. Debtor may be liable for damages (NCC, Art. 1155) or interests; and

NOTE: The interest begins to run from the filing of the complaint when there is
no extrajudicial demand.
2. When the obligation has for its object a determinate thing, the debtor may bear the
risk of loss of the thing even if the loss is due to fortuitous event;

3. Rescission or resolution.

Debtor’s liability may be mitigated even if he is guilty of delay

If the debtor can prove that loss would nevertheless transpire even if he had not been in
default, the court may equitably mitigate his liability [NCC, Art. 2215(4); Pineda, 2000]

MORA ACCIPIENDI

Requisites:
 P a g e | 10

1. Offer of Performance by a capacitated debtor;

2. Offer must be to Comply with the prestation as it should be performed; and
3. Refusal of the creditor without just cause (Pantaleon v. Amex, supra).

Effects of mora accipiendi

1 Responsibility of debtor is limited to fraud and gross negligence;

2 Debtor is exempted from risk of loss of thing; creditor bears risk of loss;
3 Expenses by debtor for preservation of thing after delay is chargeable to
creditor;
4 If the obligation bears interest, debtor does not have to pay it from time of
delay;
5 Creditor liable for damages; and
6 Debtor may relieve himself of obligation by consigning the thing.
COMPENSATIO MORAE

Reciprocal obligations
Reciprocal obligations are those which arise from the same cause, wherein each
party is a debtor and a creditor of the other, such that performance of one is
conditioned upon the simultaneous fulfillment of the other from the moment
one of the parties fulfills his obligation, delay by the other party begins (ASJ
Corporation v. Evangelista, G.R. No. 158086, February 14, 2008).

Delay in reciprocal obligations

One party incurs in delay from the moment the other party fulfills his obligation, while
he himself does not comply or is not ready to comply in a proper manner with what is
incumbent upon him.
Demand is only necessary in order for a party to incur delay when the respective
obligations are to be performed on separate dates.

Effect of non-compliance of both parties in reciprocal obligations:

If neither party complies with his prestation, default of one compensates for the default
of the other.

Unilateral Reciprocal Obligations

Obligations
Time of Default or delay begins Delay by the other
delay from extrajudicial or party begins from the
judicial demand – mere moment one of the
expiration of the period parties fulfills his
 P a g e | 11

fixed is not enough in obligation.

order that debtor may
incur delay.
Exceptions a. The obligation or the When different dates
law expressly so dictates; for the performance of
b. Time is of the essence; obligation is fixed by
c. Demand would be useless,the parties.
as debtor has rendered it
beyond his power to
perform; or
d. Debtor has
acknowledged that he is
in default.

3. Fraud (Dolo) in the Performance of the Obligation

Art. 1171, CC. Responsibility arising from fraud is demandable in all

obligations. Any waiver of an action for future fraud is void.

Definition: Fraud (dolo) is the deliberate or intentional evasion of the normal fulfilment
of an obligation. [de Leon]

Kinds of fraud

Basis Fraud in the Fraud in the perfection

performance
Time of occurrence It occurs after the valid It occurs before or
execution of the simultaneous with the
contract. It is employed creation or perfection of
in the performance of a the obligation.
pre-existing
Obligation

Consent Consent is free and not Consent is vitiated by serious

vitiated. deception or
misrepresentation.

Effect It is not a ground for It is a ground for annulment

 P a g e | 12

annulment of the contract. of the contract.

Remedy Action for damages only. Action for annulment with

damages.

Dolo causante v. Dolo incidente

Basis Dolo causante Dolo incidente

(causal fraud)
Nature This is the essential cause of
the consent without which
the party would not have
agreed to enter into the
contract (NCC, Art. 1338).
Effect It renders the contract
voidable.
Remedy Annulment with damages.
(incidental fraud)
This is the kind of fraud
which is not the efficient
cause for the giving of the
consent to the contract, as
it refers merely to an
incident therein and, which
even if not present, the
contracting party would
have still agreed to the
contract.
It does not affect the
validity of the contract.
Contract remains valid.
Remedy is claim for
damages only.

Fraud as mentioned in Art. 1171

It is incidental fraud or fraud in the performance of the obligation and not the fraud in
the execution of the contract or causal fraud. It is the intentional evasion of the normal
fulfilment of the obligation (Pineda, 2000).

Waiver of action arising from future fraud

With respect to fraud that has already been committed (past fraud), the law does not
prohibit renunciation of the action for damages based on the same since such can be
deemed an act of generosity. What is renounced is the effect of fraud, particularly the
right to indemnity. However, the law prohibits any waiver of an action for future fraud
since the same is contrary to law and public policy. Waiver for future fraud is void (NCC,
Art. 1171).

Remedies of the defrauded party

 P a g e | 13

2. Specific performance (NCC, Art. 1233); or

3. Resolution of the contract (Art. 1191); and
4. Damages, in either case.

4. Negligence (Culpa) in the Performance of the Obligation

Art. 1172, CC. 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.

Art. 1173, CC. 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.
xxxx
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.

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 the place. When negligence shows bad faith, the provisions of
Art. 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 expected of a good
father of a family shall be required (NCC, Art. 1173).

Test of negligence
Did the defendant in doing the alleged negligent act use the reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If
not, then he is guilty of negligence. (Picart v. Smith, G.R. No. L-12219, March 15, 1918).
Fraud v. Negligence

BASIS FRAUD NEGLIGENCE

As to the intention to There is deliberate There is no deliberate
cause damage intention to cause intention to cause
damage. damage or injury even if
the act was done
voluntarily.
As to the mitigation of Liability cannot be Liability may be
liability mitigated. mitigated.
 P a g e | 14

As to the waiver of Waiver for future fraud is GR: Waiver for future
future fraud void. negligence may be
allowed in certain cases.
XPN: Nature of the
obligation or public policy
requires extraordinary
diligence. (e.g. common
carrier).

Kinds of negligence or culpa

1. Culpa contractual (contractual negligence) - Negligence which results from the breach
of contract;
2. Culpa aquiliana (civil negligence or tort or quasi-delict) Acts or omissions that cause
damage to another, there being no contractual relation between the parties (NCC, Art.
2176); and
CULPA CONTRACTUAL CULPA AQUILIANA/ CULPA CULPA CRIMINAL
(CONTRACT) EXTRA-CONTRACTUAL (DELICT)
(QUASI-DELICT)
Existence of Negligence is merely Negligence is Negligence is
negligence an incident in the substantive and substantive and
performance of an independent. independent.
obligation.

Contractual relations There is always a pre- GR: There is no pre- There is no pre-existing
existing contractual existing contractual contractual relation.
relation. relation.

Source of obligation The source of The source of The source of obligation

obligation of obligation is is an act or omission
defendant to pay defendant’s punishable by law.
damages is the negligence itself.
breach or non-
fulfillment of the
contract.

Proof of negligence Proof of the The negligence of the Accused shall be

existence of the defendant must be presumed innocent
contract and of its proved. until the contrary is
 P a g e | 15

breach or non- proved beyond

fulfillment is reasonable doubt.
sufficient prima facie
to warrant recovery.

Defense available Defense of “good Defense of “good Defense of “good father

father of a family” in father of a family” in of a family” in the
the selection & the selection & selection & supervision
supervision of the supervision of the of the employees is not
employees is not a employees is a a proper defense.
proper complete proper and complete The employee’s guilt is
defense though it defense. automatically the
may mitigate employer’s civil guilt, if
damages. the former is insolvent.
Respondeat superior
or command
responsibility or the
master and servant
rule.

Proof needed Preponderance of Preponderance of Proof of guilt beyond

evidence. evidence. reasonable doubt.
3. Culpa criminal (criminal negligence) – Those which results in the commission of a
crime or a delict.

Brain Exercise

Wenifredo Salvaña was driving the bus owned by Bachelor Express, Inc./Ceres Liner, Inc.
along the national highway when he overtook a PUJ jeepney while negotiating a blind curve
in a descending road causing him to intrude into the opposite lane and bump the 10-wheeler
Hino dump truck of petitioner Cresencio Baño running uphill from the opposite direction. The
collision resulted in damage to both vehicles, the subsequent death of the truck driver,
Amancio Asumbrado, and serious physical injuries to bus driver Salvaña. A complaint for
quasi-delict was filed against Salvaña for negligently driving the bus causing it to collide with
the dump truck. Respondents denied liability, claiming that prior to the collision the bus was
running out of control because of a problem in the steering wheel system which could not
have been avoided despite their maintenance efforts. Instead, they claimed that Asumbrado
had the last clear chance to avoid the collision had he not driven the dump truck at a very fast
speed. Was Salvaña grossly negligent?
P a g e | 16