OBLIGATIONS & CONTRACTS Under the Revised Penal Code, “every person criminally liable for a felony
Week 1 Module (crime) is also civilly liable.”
(Arts. 1156 -1198)
Prepared by Mark Oliver V. Estavillo in collaboration with Alexander B.
Ricafort
DISCLAIMER:
1. This module is intended as an easy reference for students.
Due to space limitations, not everything will be discussed
here.
2. Students are encouraged to read the codal provisions
wherein this module is based. Please refer to any book or
material for further learning.
Title I
OBLIGATIONS
Chapter 1
GENERAL PROVISIONS
Art. 1156. Obligations defined.
Obligation comes from the latin word “obligare” which means “to bind”.
A person may bind himself to perform an obligation which may consist in
giving, doing or not doing something.
Although the article specifically enumerates three (3) acts (i.e. to give, to
do or not to do), it is submitted that “not to give” is also included in the
definition.
“Juridical Necessity.” The rights and duties arising from obligations are
legally enforceable in case of non-compliance.
Essential requisites of an Obligation:
1. Juridical or legal tie: This is the vinculum or the link which
binds the parties to an obligation.
2. Prestation: This may consist in giving, not giving, doing or not
doing something.
3. Active subject: The person who can demand the
performance of an obligation otherwise known as the
CREDITOR or OBLIGEE.
4. Passive subject: The person from whom the prestation (duty)
is demandable, otherwise known as the DEBTOR or
OBLIGOR.
Art. 1157. Sources of Obligation
There are five (5) sources of obligations namely: Law, Contracts, Quasi-
Contracts, Acts or Omissions punished by Law and Quasi-delicts.
Art. 1158. Legal Obligations or Obligations Ex Lege
These obligations are not presumed inasmuch legal obligations create
burdens upon the obligor.
Art. 1159. Obligations Ex-Contractu or Contractual Obligations
It is an established doctrine of law and sustained by the settled practice of
the courts, that a man obligates himself to do that to which he promises to
be bound, because that which is agreed to in a contract is the law
between such contracting parties. This rule is however subject to the
condition that the contract is not contrary to law, morals, good customs,
public order or public policy.
Art. 1160. Quasi-Contract
A quasi-contract is not the same as a contract because in a quasi-
contract, there is no consent and the same is supplied by fiction of law
while in the case of a contract, consent is essential for validity. The
principle involved in a quasi-contract is that no person shall be unjustly
enriched or benefitted at the expense of another.
Two Principal Kinds of Quasi-Contract
1. Negotiorum Gestio (unauthorized management)
2. Solutio Indebiti (undue payment)
Art. 1161. Civil Obligations arising from Crimes
The civil liability arising out of the commission of a crime includes the
following:
1. Restitution;
2. Reparation of damage caused; and
3. Indemnification of consequential damages.
Art. 1162. Obligations derived from Quasi-Delicts
The obligations arising from quasi-delicts are those done without
malicious intention. In order that an act or omission can be considered as
a quasi-delict, it is necessary that the negligence or fault in question is not
punished by law. It the fault or negligence is punished by law, it ceases to
be a quasi-delict and becomes a crime or misdemeanor.
CHAPTER 2
NATURE AND EFFECT OF OBLIGATIONS
Art. 1163. Obligation to Give; Diligence to be Observed
“Good father of a Family”
Pending the deliver of a thing, the law requires of the giver to take care of
it with the proper diligence of a good father of a family meaning, the
ordinary diligence that a prudent man would exercise in taking care of his
own property and which depends upon the nature of the obligation and the
circumstances of the person, time and place.
This standard of care prescribed by law may be changed if the law itself or
the parties stipulate otherwise.
Art. 1164. When Creditor is Entitled to the Fruits
The creditor or oblige does not acquire a real right or the right of
ownership until the property has been delivered to him.
Take note that the delivery of thing includes fruits because the obligation
to give a determinate thing includes the deliver of its accessions and
accessories. Fruits may refer to natural, industrial and civil fruits.
Art. 1165. Classification of Obligation from the Viewpoint of Subject
Matter or Object
From the viewpoint of subject matter or object of the obligation, obligations
are divided into:
a. Real Obligations (to give)
1. Specific or Determinate thing. A thing is determinate
when it is particularly designated or physically
segregated from all others of the same class.
2. Generic or Indeterminate thing. A thing is generic when
it refers to a class of things or genus and is so indefinite
that it cannot be designated specifically.
b. Personal Obligations (to do or not to do)
Remedies of the Creditor when the Debtor fails to comply with his
obligation
1. Demand specific performance. This is true whether the
obligation is specific or generic.
2. Demand rescission or cancellation.
3. Demand damages either with or without the first two
mentioned remedies earlier.
Art. 1166. What the Obligation to Give a Determinate Thing Includes
It includes all its accessions and accessories even though no mention of
them was made in the contract.
Art. 1167. Positive Personal Obligations
This provision refers to a personal obligation “to do.” If the obligor fails to
comply with his obligation to do a particular thing, the same shall be
executed at his cost. This is so for the reason that a person cannot by
means of force or violation be compelled to do an act against his will.
Art. 1168. Negative Personal Obligations
As a rule, the remedy is the undoing of the prohibited thing plus damages.
Art. 1169. When Obligor Incurs in Delay.
Two conditions that must be complied with before an obligor can be
considered to have delayed the performance of his obligation.
 1. The obligor fails to fulfill the obligation on the date agreed
upon; AND However, if the thing lost by reason of a fortuitous event is generic, its loss
2. There must have been a DEMAND by the creditor either does not produce the extinction of the obligation because in such case the
judicially or extra-judicially, which may be made orally or in principle will be genus nunquam perit (the genus never perishes).
writing, personally or through an authorized agent.
Art. 1175. Usury Defined.
Cases where demand is not necessary
It is contracting for or receiving something in excess of the amount
1. When the obligation expressly so declares. allowed by law for the loan or use of money, goods, chattels, or credits. In
2. When the law expressly so declares. other words, usury is the exaction of excessive interest.
3. When time is of the essence of the contract.
4. When demand will be useless. Rule on Interest Payments

Kinds of Delay (Mora) The rule is “no interest shall be due unless it has been expressly
stipulated in writing.”
1. Mora Solvendi ex re – Delay in giving or delivering a thing.
2. Mora Solvendi ex persona – Delay in obligations to do or If there is a stipulation as to the interest but the rate is not fixed, then the
perform personal service. creditor may recover only the legal rate. The legal rate of interest at
3. Mora Accipiendi – Delay in accepting the delivery of the present as fixed by the Monetary Board of the Bangko Sentral ng Pilipinas
is 12% per annum.
object or thing due.
4. Compensatio Morae – Delay in reciprocal obligations.
Therefore, to entitle the creditor to recover interest, three (3) requisites
must be complied with:
In reciprocal obligations, the performance of one is conditioned on the
simultaneous fulfillment of the other. When one party to a reciprocal
1. It must be stipulated in the contract;
obligation refuses to assume and perform the obligation imposed on him, 2. It must be in writing; and
the other party does not incur in delay. But the moment one performs his 3. It must be lawful and not usurious.
obligation and the other does not, then the latter incurs in delay.
Art. 1176. Presumption as to the Receipt of Principal Without
Art. 1170. Grounds for Liability in the Performance of Obligation Reservation as to Interest and Receipt of Later Installment
1. Fraud (deceit or dolo) By presumption, it means that the inference as to the existence of certain
2. Neglience (fault or culpa) facts which if not contradicted is considered true.
3. Default (or mora)
4. Violation of the terms of the obligation Two Kinds of Presumption
Art. 1171. Liability for Fraud or Dolo 1. Conclusive – a presumption which is conclusive is one which
cannot be contradicted.
Any waiver of an action for future fraud is void. 2. Disputable – a presumption which is disputable is one which
can be contradicted by presenting satisfactory proof to the
Art. 1172. Liability for Negligence or Culpa contrary.
Fraud distinguished from Negligence
Example of Receipt of Principal Without Reservation as to Interest
DOLO CULPA
A owes B the amount of PHP 100,000.00 with interest at 10% per annum
a. There is deliberate intention to a. No deliberate intention to (year). A paid the amount of the principal (PHP 100,000.00) and for which
cause damage or prejudice cause damage B issued a receipt without stating whether or not the interest has been
b. Liability arising from dolo b. Liability due to negligence paid. Under the circumstances, the law presumes that A has paid the
cannot be mitigated or reduced may be reduced in certain cases. interest because normally the interest is paid ahead of the principal. This,
by the Courts. however, is only a disputable presumption for the reason that evidence is
c. Waiver of an action to enforce c. Waiver of an action to enforce admissible to show that such interest had not been paid.
liability due to future fraud is liability due to future culpa may in
void. certain sense be allowed Example of Receipt of a Later Installment

If a creditor receives the fourth (4th) installment of a debt, it is understood

Art. 1173. Kinds of Diligence under the Civil Code
1. That agreed by the parties.
2. If there is no agreement, what is required by law.
3. In the absence of number (1) or (2), that expected of a good
father of a family (bonum pater familia).
Art. 1174. General Rule for Fortuituous Events
A fortuitous event is defined as an unexpected event or act of God which
could neither be foreseen nor resisted, such as floods, torrents,
shipwrecks, conflagrations, lightning, compulsion, insurrections,
destruction of buildings by unforeseen accidents and other occurrences of
a similar nature.
that the first three installments have been paid.
Art. 1177. Remedies of the Creditor in case the Debtor cannot pay his
debts
As a rule, the debtor is liable with all his property, present and future, for
the fulfilment of his obligations, subject to exemptions provided by law.
If the debtor fails to pay, the following are the remedies of the creditor:
1. Exact payment.
2. Exhaust debtor’s properties, generally by attachment.
3. Impugn or rescind acts or contracts done by the debtor to
defraud the creditors (accion pauliana).

General Rule (GR): No liability for a fortuitous event ( caso fortuito) (that Art. 1178. Transmissibility of Rights
which could not be foreseen, or which even if foreseen, was inevitable.
GR: Rights are transmissible
Exceptions (EX): The debtor is responsible for a fortuitous event in the
following cases: EX: 1. If the law provides otherwise;
2. If the contract provides otherwise;
1. When expressly declared by law. 3. If the obligation is purely personal.
2. When expressly declared by stipulation or contract.
3. When the nature of obligation requires the assumption of risk. CHAPTER 3

Essential Characteristics of a Fortuitous Events DIFFERENT KINDS OF OBLIGATIONS

1. The cause must be independent of the will of the debtor. Section 1

2. Impossibility of foreseeing or impossibility of avoiding it, even
in foreseen. PURE AND CONDITIONAL OBLIGATIONS
3. The occurrence must be such as to render it impossible for
the debtor to fulfil his obligation in a normal manner. Art. 1179. Definition of Pure and Conditional Obligations

Effect of Fortuitous Event upon the thing to be delivered
The happening of a fortuitous event extinguishes the obligation to deliver,
yet that is true only when the thing to be delivered is a specific or
determinate thing, following the principle of res perit domino (the thing
perishes with the owner).
Pure Obligation – one without a condition or a term hence it is
demandable at once, provided there will be no absurdity.
Example: I promise to pay you PHP 1,000.000.00.
Conditional Obligation – when there is a condition.

Example: I’ll buy you a Slurpee if you do a Tiktok video of “It Really
Hurts.”
A condition is defined as an uncertain event which wields an influence on
a legal relationship.
On the other hand, a term or period is defined as that which necessarily
must come (i.e. like 25 December 2020) whether the parties know when it
will happen or not (i.e. like death of a person since this is not sure).
When is an Obligation Demandable at Once?
1. When it is pure; or
2. When it has a resolutory condition.
Classification of Conditions
1. Suspensive – the happening of the condition gives rise to the
obligation.
2. Resolutory – the happening of the condition extinguishes the
obligation.
3. Potestative – depends upon the will of the debtor.
4. Casual – depends on chance or hazard or the will of a third
person.
5. Mixed – depends partly on the will of one of the parties and
partly on chance or the will of a 3rd person.
6. Divisible – capable of partial performance.
7. Indivisible – not capable of partial performance because of
the nature of the thing, or because of the intention of the
parties.
8. Positive – an act is to be performed.
9. Negative – something will be omitted.
10. Express – the condition is stated.
11. Implied – the condition is merely inferred.
12. Possible – capable of fulfilment in nature and in law.
13. Impossible – not capable of fulfilment due to nature or due to
the operation of the law or morals or public policy; or due to a
contradiction in its terms.
14. Conjunctive – if all the conditions must be performed.
15. Alternative – if only a few of the conditions have to be
performed.
Art. 1180. Debtor to Pay “When His Means Permit”
In this provision, what depends really on the debtor is not his payment but
the time when payment is to be made. Hence, the law considers this
obligation as one with a term or period.
In determining the term or period of payment, the general rule is, the
creditor should ask the Court first for the fixing of the term, and it is only
when that term set arrives that he can demand fulfilment.
Art. 1181. Suspensive and Resolutory Conditions
Suspensive Condition: It is a condition which suspends the demandability
of the obligation until the fulfilment of the condition. It is also known as
condition precedent.
Example: I will give you a brand new Toyota Vios if you finish your
Financial Management course in the Pamantasan ng Lungsod ng
Valenzuela (PLV).
Here the obligation to give you a car is not demandable at once but
depends upon the event of your graduation in PLV.
Resolutory Condition: It produces the extinguishment of an obligation
upon the happening of an event.
Example: You may use my car until you finish your degree in Financial
Management at the Pamantasan ng Lungsod ng Valenzuela (PLV).
Unlike an obligation with a suspensive condition, an obligation subject to a
resolutory condition is demandable at once. So in the example above,
you may immediately use my car. But upon the happening of the event
(i.e. graduation from PLV), the obligation is extinguished.
Art. 1182. Potestative, Casual, Mixed Conditions
A potestative condition depends on the exclusive will of the debtor and
hence, it is void. This is due to the fact that the debtor will be placed in a
position where he can dictate whether he should or should not perform the
obligation.
Example: “I will give you 1 million pesos if I so desire.”
A casual condition depends on chance or upon the will of a third person.
Example: “I’ll give you 1 million pesos if I win the lotto.”
A mixed condition depends partly on the will of one of the parties and
partly on chance or the will of a 3rd person.
Example: “I will give you 1 million pesos if you get accepted as an
employee at the Asian Development Bank (ADB).” It can be seen that the
condition here depends partly upon the will of the obligor and so also
partly upon the will of the third party, ADB. Even if you apply as an
employee, you may not be hired by ADB.
Art. 1183. Impossible and Illegal Conditions
An impossible condition may refer to physical impossibility (i.e. to make a
rooster lay eggs or logical impossibility (i.e. to draw a circle at the same
time a square).
An illegal condition may either be prohibited by law, good customs, public
policy, either directly or indirectly like the killing of a person.
Art. 1184. Positive Conditions
This provision has reference to a positive condition that some event will
happen at a determinate time. The obligation shall be extinguished if the
time specified expires with the condition unfulfilled or even it the period
has not expired if it is certain that the event will not take place.
Example: I’ll give you my car if you marry Maria O this year. If by the end
of the year, Maria O is already dead, or you have not yet married her, the
obligation is extinguished.
Art. 1185. Negative Conditions
This has reference to a negative condition that some event will not happen
at a determinate time. The obligation will arise after the lapse of the
determinate time and it is evident that the event will not happen.
Example: Pedro bound himself to give Juan a NMAX motorcycle if Juan
would not make “ligaw” to Maria before the end of the year. If after the
year Juan had not proposed love to Maria, then the obligation of Pedro to
give Juan a NMAX motorcycle arose.
Art. 1186. Rule When Debtor Voluntarily Prevents Fulfillment of the
Condition
This provision contemplates of a case where the obligor intentionally
prevents the fulfilment of a condition which would entitle the oblige to
exact performance from the obligor; and an assumption underlying the
provision is that the obligor prevents the oblige from performing some act
which the oblige is entitled to perform as a condition precedent to the
exaction of what is due him.
Example: A engaged the services of B to construct a road. Without
justification, A ordered the construction stopped when it was almost
finished. B demanded payment from A for the whole price of the
construction. A refused to pay on the ground the construction was not
finished. Should A pay in full or not? A should pay in full for it was he who
voluntarily prevented the fulfilment of the condition (i.e. construction of the
entire road) and so is as if the work had been completed.
Art. 1187. Effects of Fulfillment of a Suspensive Condition
What is the effect once a suspensive condition is fulfilled? The obligation
becomes effective.
From what day? It RETROACTS as a general rule to the day of the
obligation was constituted.
Example: On 01 December 2018, A obliged himself to give B a house
and lot if B passed the CPA examinations. In May 2019, B passed the
CPA examinations. The obligation of A to deliver the house of lot became
effective on the day the obligation was constituted (01 December 2018)
and not on B’s passing the CPA examination in May 2019.
Note: No retroactivity with regard to fruits and interests.
As regards reciprocal obligations, the fruits and interests mutually
compensate each other during the pendency of the condition.
Example: In the previous example, supposed A offered to sell a house
and lot for PHP 1,000,000.00 to B and B agreed to buy the same if he
pass the CPA examination in 2019. A did pass the CPA examination in
2019. Therefore, A is obliged to deliver the house and lot to B and B shall
pay A the sum of PHP 1,000,000.00.
With regard to the fruits, who shall own them?
The fruits from 01 December 2018 up to May 2019 should belong to A.
On the other hand, in case interest was agreed by the parties, B is not
obliged to pay the interest on the principal amount of PHP 1,000,000.00.
Art. 1188. Action to Preserve Creditor’s Rights & Right of Debtor to
Recover What Was Paid by Mistake
Action to Preserve Creditor’s Rights
Pending the fulfilment of the condition, the law gives the creditor certain
measures of protection for the preservation of his rights so that his right
may not be defeated by the dispositions or alienations that the debtor may
make before the happening of a condition.
Example: Pedro obliges himself to deliver to Juan a one hectare lot in
Arbortown, GTDL, Valenzuela City if Juan marries Maria. Juan, in order
to preserve his right against Pedro, may cause the annotation of Pedro’s
obligation at the back of the Torrens Certificate of Title of the land
promised by Pedro to Juan so that even if Pedro decides to sell or
alienate the lot, Juan can legally claim the lot upon marrying Maria.
Payment by Mistake in a Suspensive Condition
When a suspensive condition is imposed, the law also allows the debtor to
recover what he has paid by mistake similar to solution indebiti in quasi-
contracts.
Example: Suppose A promised to give B a 2020 Mitsubishi Expander if a
Cebu Pacific plane crashes on Mt. Apo. Now, a PAL plane crashes on Mt.
Pinatubo, and A mistakenly believes the condition to have been fulfilled,
so he delivers the car to B. In this case, A can recover that car, under the
second paragraph of this article.
Art. 1189. Loss, Deterioration and Improvement During the Pendency of a
Condition
Take note that this Article applies only if:
1. The suspensive condition is fulfilled; and
2. The object is specific (not generic).
What are the three (3) things that may happen to the object of an
obligation pending the fulfilment of a suspensive condition?
The object may be: 1. Lost;
2. Deteriorate (the value is reduced or impaired);
3. Improved.
The object may be lost:
1. Without the fault of the debtor.
Example: A obliges himself to give his one and only violin to B if B
finishes his Financial Management course in PLV. If through a
fortuitous event, A’s violin disappears without his fault, A’s obligation
to B is extinguished.
2. With fault of the debtor.
Example: In the preceding example, if A negligently leaves the
violin in an E-trike and it is lost, certainly the loss is due to his fault
and would entitle B to demand damages.
When is a thing considered “Loss?”
1. When it perishes (such as when a house is burnt to ashes).
2. When it goes out of commerce (when an object which is not
prohibited becomes prohibited).
3. When it disappears in such a way that its existence is
unknown (ex. carnap vehicle; it has been missing for some
time).
4. When it disappears in such a way that it cannot be recovered
(ex. diamond in Titanic).
The object may deteriorate:
3. Without the fault of the debtor.
Example: In the previous example, supposing the violin is tarnished
through no fault of A, then the impairment should be borne by B.
4. With the fault of the debtor.
Example: In the same example, if A fails to keep the violin in a
proper place, and it is eaten by termites before delivery, B may
choose between the following:
a. Rescission of the obligation; or
b. Fulfillment of the obligation
With indemnity for damages in either case.
The object may improve:
5. By nature or by time.
Example: The sound that a violin produces improves as the
violin grows older, so that if it takes B eight years to finish his
Financial Management course in PLV and in the intervening
period the sound of the violin is improved by time, the
improvement shall inure to the benefit of B.
6. Through the expense of the debtor.
Example: If during the period that B has not yet finished his
Financial Management course, A had the violin varnished and
its parts adjusted so as to produce the desired sound at A’s
expense, A shall have no other right than that granted to a
usufructuary, that is, A may use the violin in the meantime
that B is finishing his course in PLV.
Art. 1190. Effects When a Resolutory Condition is Fulfilled
The obligation is extinguished. Since the obligation had been
extinguished and considered to have had no effect, the parties should
restore to each other what they received.
The parties are also obliged to make mutual restitution of whatever may
have been received by reason thereof.
Example: A gave B a parcel of land on the condition that B will never go
to the casino. A month later, B went to the casino. What happens to A’s
obligation?
Answer: A’s obligation is extinguished, and therefore it is as if there
never was an obligation at all. B will therefore have to return both the land
and the fruits he had received therefrom from the moment A had given
him the land.
Art. 1191. Meaning of Reciprocal Obligations
A reciprocal obligation is one where two parties are mutually obliged to do
or give something.
Example: In a contract of sale, the buyer can rescind or cancel the
contract if the seller does not deliver the thing sold, or the seller can
rescind if the buyer does not pay the purchase price.
Take note that the right to rescind is implied or presumed to exist and
therefore, need not be expressly stipulated upon.
Art. 1192. Rule if Both Parties Have Committed a Breach
The rules enunciated under this provision are deemed just. The first one
is fair to both parties because the second infractor also derive or thought
he would derive some advantage by his own act or neglect. The second
rule is likewise just, because it is presumed that both at about the same
time tried to reap some benefit.
Section 2
OBLIGATIONS WITH A PERIOD
Art. 1193. Meaning of a Period
A period is a certain length of time which determines the effectivity or the
extinguishment of obligations.
Kinds of Period
1. Ex Die – It is a period with a suspensive effect. The
obligation begins upon the arrival of a day certain.
Example: “I will support you, beginning the first day of next
year.” Here, the obligation only becomes effective on the day
stipulated.
2. In Diem – It is a period with a resolutory effect. The validity of
the obligation is up to a certain date. Upon the arrival of the
date, the obligation is extinguished.
Example: “I will support you until January 01 of next year.”
Here, the obligation is immediately demandable and will end
only on January 01 of the next year.
3. Other Kinds:
a. Legal Period – the period established by law.
b. Voluntary Period – the period agreed to by the parties.
c. Judicial Period – the period authorized by the court.
Differences between Condition and Period
Condition Period
1. As to fulfillment A condition is an A period is an event
uncertain event. which must happen
sooner or later, at a
date known
beforehand or at a
time which cannot be
 determined.
2. As to time: A condition may refer A period always refer
to the past. to the future.
3. As to influence on A condition causes an A period fixes the
the obligation: obligation to arise or time for the
to cease. efficaciousness of an
obligation.

Art. 1194. Rules in Case of Loss, Deterioration or Improvement

Note the cross-reference to Art. 1189 of the Civil Code.

Example: If A is supposed to deliver to B a particular car on 01 March

2020 but the car is destroyed by a fortuitous event on 15 December 2019,
the obligation is extinguished.

Art. 1195. Payment or Delivery Made Before the Arrival of the Period

Example: A borrowed PHP 50,000.00 from B payable on 01 January

next year. Believing that his debto to B was already due, A paid B PHP
50,000.00 today. B knew it was not yet due, but he kept quiet. In such a
case, A could recover the amount paid together with the interest up to the
time the amount was returned by B.

Art. 1196. For Whose Benefit a Term Has Been Established

This article establishes a legal presumption that when a period is

expressly agreed by the parties, it is for the benefit of the creditor and the
debtor, unless it appears that they have intended otherwise. In other
words, the debtor cannot pay prematurely, and the debtor cannot demand
prematurely.

Art. 1197. When the Court May Fix a Period

Generally, if there is no period intended by the parties, not even the

Courts may fix a period. Under this article, there are two situations when
the Court may fix a period:

1. From its nature and the circumstances it can be inferred that

a period was intended; and
2. When the period depends upon the will of the debtor.

Art. 1198. When the Debtor Loses the Benefit of the Period

With reference to obligations with a period, the general is that the

obligation can not be demanded until after the lapse of the prescribed
time. However, when the debtor commits any of the acts mentioned in
this article, the period is disregarded and the creditor is entitled to demand
the fulfilment of the obligation. The obligation thus becomes a pure
obligation which is immediately demandable.

END OF MODULE PART 1