NOTES ON OBLIGATIONS AND CONTRACTS

Law is the rule of action or any system of UNIFORMITY.

Law can be divided into two categories:

(1) Law enforced by the state.

a. State Law (Law promulgated by the state)
(2) Law not enforced by the state.
a. Divine Law (Law promulgated by God)
b. Natural Law (Law base on human nature)
c. Moral Law (Law base on Societal Image)
d. Physical Law (The order and regulations of science and the universe)

There are two concepts of state law:

(1) General or Abstract Sense – when referring to law in its entirety as a concept for governing
relationships between persons in society.
(2) Specific Sense – when referring to a particular law; to refer to one particular law in a certain
scenario to present a common observance.

Law is made by men to serve men. Therefore, all men should observe adherence to these rules to
maintain order. A world without law is full of anarchism in which no means of control will govern the
relationship between men. Law exists to maintain a sense of order and to facilitate a means to resolve
issues and society and protect the common good of men.

Sources of Law:

(1) The Constitution – the supreme law of the land as it is promulgated by the people themselves
and is binding on all.
(2) Legislation – the laws promulgated by Congress, the legislative branch of the government, and
referred to as stature law or enacted law.
(3) Administrative or Executive Orders, Regulations, and Rulings – rules promulgated by the
executive branch of the government to clarify or explain the law and are used to carry out its
general provisions. This must conform to the law and the constitution.
(4) Judicial Decisions or Jurisprudence – the decisions rendered by the Supreme Court on the
interpretation or application of a law shall be considered as law and shall be in effect until
reversed or modified by the court itself. The decisions or rulings of the Supreme Court are
binding upon all.
(5) Custom – a supplementary basis of law and shall only be used upon the absence of the
preceding examples.
(6) Other Sources – these sources can be (a) principles of justice and equity, (b) decision of foreign
tribunals, (c) opinion of text writers, (d) and religion. These sources can also be used upon the
total absence of the preceding sources.
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The judicial system of the government shall render judgement in favor of upholding justice. The courts in
the Philippines are not only court of law but also court of justice. In cases where there is doubt in the
interpretation or application of law, courts must presume that lawmaking body intended right and
justice to prevail. After all, THE ULTIMATE END OF THE LAW IS JUSTICE.

Organization of Courts in the Philippines:

(1) Regular Courts

a. Supreme Court
b. Court of Appeals
c. Regional Trial Courts
d. Metropolitan Trial Courts – In cities and metropolitan areas.
e. Municipal Trial Court – In cities not part of metropolitan areas.
f. Municipal Circuit Trial Court – has jurisdiction over two or more cities or municipalities.
(2) Special Courts
a. Sandiganbayan – A graft court created by the Constitution.
b. Court of Tax Appeal – A court created by law on the same level as the Court of Appeals.
(3) Quasi-Judicial Agencies – Administrative bodies that perform judicial functions and are involved
in settlement or adjudication of controversies or disputes.

Classification of Law

(1) Purpose (Private and Public)

a. Substantive Law – creates, defines, and regulates the right and duties of men.
b. Adjective Law – prescribes the manner or procedure to enforce a right or to redress
a violation.
(2) Subject Matter
a. Public Law – law that regulates the relationship of the state to the people. An
example of this is criminal law. These laws are usually for the benefit of the state as a
whole rather than a particular individual.
i. International Law – relationship between nations.
ii. Constitution Law – relationship between the state and its citizens.
iii. Administrative Law – defines the functions of administrative authorities.
iv. Criminal Procedure – a branch of private law that governs methods of trial
and punishments.
b. Private Law – law that regulates the relationship between private individuals. The
state may only be involved as an enforcer or arbiter.

The Law governing the Law on Obligations and Contracts is found in Republic Act No. 386, otherwise
known as the Civil Code of the Philippines. The particular provisions relating to Obligation and Contracts
are in Book 4 Title 1-3.
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Article 1156. An obligation is a juridical necessity to give, to do, or not to do.

The requisites for an obligation:

(1) Passive Subject – The debtor or obligor. The one who the contract is enforceable.
(2) Active Subject – The creditor or oblige. The person entitled to enforce the contract.
(3) Object or Prestation – The necessity to give something, to do or not do something.
(4) Juridical Tie – The source of the obligation, i.e., contract.

An obligation is generally a bond between two individuals in which one is bound to render something in
favor of another. An obligation is a juridical necessity since the Court of Justice may be called to fulfill the
obligation in the event of noncompliance. This right to call the court for noncompliance is known as Civil
Obligation.

An obligation may either be in Writing, Oral, or Partly in Writing and Partly Oral.

Definition:

(1) Obligation – the act or performance which the law will enforce.
(2) Right – the power of a person under the law to demand from another ANY prestation.
(3) Wrong or Legal Wrong – the act or omission of one party in violation to the legal right of another

Elements of a Legal Wrong:

(1) Legal Rights (Creditor, Obligee, or Plaintiff)

(2) Correlative Legal Obligation (Debtor, Obligor, or Defendant)
(3) The act or omission by the latter in violation of the former’s legal rights resulting in injury or
damages.

Kind of Obligation:

(1) Real Obligation – an obligation to give or deliver a THING or OBJECT to the oblige.
(2) Personal Obligation – an obligation to do or not do something.
a. Positive Personal Obligation – an obligation to give or do something.
b. Negative Personal Obligation – an obligation not to give or do something.

Article 1157. Obligations arise from: Law, Contract, Quasi-Contract, Acts or Omissions Punished by
Law, and Quasi-Delicts.

An obligation is something that can be enforced by the courts and they arise from various sources and
they can be enumerated as such:
 NOTES ON OBLIGATIONS AND CONTRACTS

(1) Law – when the obligation will be imposed by the law or state.
a. Obligation to pay taxes.

(2) Contract – an obligation arising from the stipulation of parties.

a. Obligation to pay a loan or indebtedness.

(3) Quasi-Contract – an obligation that arises from lawful, voluntary, and unilateral acts which are
enforceable to the end that no one shall be unjustly enriched or benefited at the expense of
another.
a. Obligation to return money paid by mistake.

(4) Crimes or acts or omission punished by law – an obligation arising from civil liability.
a. Obligation of a thief to return a stolen item.

(5) Quasi-Delict or Torts – an obligation that arises from damage caused to another through an act
or omission, there being fault or negligence.
a. Obligation of an owner to pay damages caused by their pet.

These sources can be classified into:

(1) Those Emanating from Law

(2) Those Emanating from Private Acts
a. licit acts such as contracts and quasi-contracts
b. illicit acts such as crimes and quasi-delicts

This classification can be further summarized into obligation arising from LAW and CONTRACTS. This is
because quasi-contracts, quasi-delicts, and delicts are enforceable by law which means they arise from
law.

Article 1158. Obligations derived from Law are not presumed.