ECE00: Laws, Contracts,

and Ethics
Nature and Effect of Obligations
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 parties
requires another standard of care. (1094a)
DETERMINATE THING
A thing is said to be specific or determinate when it is particularly
designated or physically segregated from all others of the same
class. (Art. 1460)

A determinate thing is identified by its individuality. The debtor

cannot substitute it with another although the latter is of the same
kind and quality without the consent of the creditor. (Art. 1244)
Examples:
• The watch I am wearing.
• The car sold by X.
• My dog named “Terror.”
• The house at the corner of Rizal and Del Pilar Streets.
• The Toyota car with Plate No. AAV 344.
INDETERMINATE THING
A thing is generic or indeterminate when it refers only to a
class or genus to which it pertains and cannot be pointed out
with particularity. A generic thing is identified only by its
specie. The debtor can give anything of the same class as
long as it is of the same kind.

Examples:
• a Bulova calendar watch.
• a 2006 model Japanese car.
• a police dog.
CASE ANALYSIS 2.1

If Mr. Kopi Ko is obligated to deliver to Ms.

Neska Fe an iPhone 14 Pro Max, the one Mr.
Ko is currently using, can Mr. Ko deliver an
iPhone 15 Pro Max to Ms. Fe instead?
DUTIES OF DEBTOR IN OBLIGATION TO
GIVE A DETERMINATE THING
(1) To preserve or take care of the thing due;
(2) To deliver the fruits of the thing (see Art. 1164.);
(3) To deliver its accessions and accessories (see Art. 1166.);
(4) To deliver the thing itself (refer to Arts. 1163, 1233, 1244; as to
kinds of delivery, Arts. 1497 to 1501.); and
(5) To answer for damages in case of non-fulfillment or breach.
DUTIES OF DEBTOR IN OBLIGATION TO
GIVE A GENERIC THING
(1) To deliver a thing which is of the quality intended by the parties
taking into consideration the purpose of the obligation and other
circumstances (see Art. 1246.); and

(2) To be liable for damages in case of fraud, negligence, or delay, in

the performance of his obligation, or contravention of the tenor
thereof. (see Art. 1170.)
RIGHT OF CREDITOR TO FRUITS
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 thing arises. The
intention of the law is to protect the interest of the obligee should the
obligor commit delay, purposely or otherwise, in the fulfillment of his
obligation.

In case of rescission, the parties are under “obligation to return the

things which were the object of the contract, together with their fruits
and the price with its interest.’’ (Art. 1385.)
KINDS OF FRUITS
Natural fruits are the spontaneous products of the soil, and the young and
other products of animals, e.g., grass; all trees and plants on lands
produced without the intervention of human labor.

Industrial fruits are those produced by lands of any kind through

cultivation or labor, e.g., sugar cane; vegetables; rice; and all products of
lands brought about by reason of human labor.

Civil fruits are those derived by virtue of a juridical relation, e.g., rents of
buildings, price of leases of lands and other property and the amount of
perpetual or life annuities or other similar income. (Art. 442.)
CASE ANALYSIS 2.2

Ms. Gisa Do sold her cow to Mr. Aji Nimoto for

P15,000.00. No date or condition was stipulated for
the delivery of the cow. While still in the possession of
Ms. Do, the cow gave birth to a calf. Who has the right
to the calf?
CASE ANALYSIS 2.2
In a contract of sale “all the fruits shall pertain to the vendee from the
day on which the contract was perfected.” (Art. 1537, 2nd par.)
Hence, Mr. Aji is entitled to the calf. This holds true even if the delivery
is subject to a suspensive condition (see Art. 1179; e.g., upon the
demand of Mr. Aji) or a suspensive period (see Art. 1193; e.g., next
month) if Mr. Aji has paid the purchase price.

But Ms. Do has a right to the calf if it was born before the obligation to
deliver the cow has arisen (Art. 1164.) and Mr. Aji has not yet paid the
purchase price. In this case, upon the fulfillment of the condition or the
arrival of the period, Ms. Do does not have to give the calf and Mr. Aji
is not obliged to pay legal interests on the price since the calf and the
interests are deemed to have been mutually compensated. (see Art.
1187.)
PERFORMANCE OF A THIRD PARTY
While the debtor can be compelled to make the
delivery of a specific thing (Art. 1165.), a specific
performance cannot be ordered in a personal
obligation to do because this may amount to
involuntary servitude which, as a rule, is prohibited
under our Constitution. (Art. III, Sec. 18[2] thereof.)
CASE ANALYSIS 2.3
Aubrey delivered to Boyet, a printer technician, an HP
Deskjet printer for routine cleaning and servicing. Boyet
was not able to finish the job after some time despite
repeated reminders made by Aubrey. Finally, Boyet
returned the printer unrepaired, some of the parts missing.
Aubrey had the printer repaired by G Gadgets, and the
repair job costs her P58.75 for labor or service and P31.10
for the missing parts or a total of P89.85. The lower court
rendered judgment ordering Boyet to pay only P31.10. Is B
liable also for P58.75, the cost of the service expended in
the repair?
DELAY
The word delay, as used in the law, is not to be understood
according to its meaning in common parlance. A distinction,
therefore, should be made between ordinary delay and
legal delay (default or mora) in the performance of an
obligation.

Ordinary delay is merely the failure to perform an

obligation on time.
Legal delay or default or mora is the failure to perform an
obligation on time which failure, constitutes a breach of the
obligation.
KINDS OF DELAY (mora)
Mora solvendi or the delay on the part of the debtor
to fulfill his obligation (to give or to do) by reason of a
cause imputable to him;
Mora accipiendi or the delay on the part of the
creditor without justifiable reason to accept the
performance of the obligation; and
Compensatio morae or the delay of the obligors in
reciprocal obligations (like in sale), i.e., the delay of
the obligor cancels the delay of the obligee, and vice
versa.
NO DELAY IN NEGATIVE PERSONAL
OBLIGATION
In an obligation not to do, non-fulfillment may take
place, but delay is impossible for the debtor fulfills by
not doing what has been forbidden him. (see Art.
1168.)
REQUISITES OF DELAY OR DEFAULT BY
THE DEBTOR
There are three conditions that must be present before mora
solvendi can exist or its effects arise:
(1) failure of the debtor to perform his (positive) obligation on
the date agreed upon;
(2) demand (not mere reminder or notice) made by the
creditor upon the debtor to fulfill, perform, or comply with his
obligation which demand, may be either judicial (when a
complaint is filed in court) or extra-judicial (when made
outside of court, orally or in writing); and
(3) failure of the debtor to comply with such demand.
CASE ANALYSIS 2.4
B obliged himself to pay S the balance of the purchase price
of a subdivision lot within two years from completion by S of
the roads in said subdivision. S brought action to foreclose
the real estate mortgage executed by B to secure the
payment of the unpaid price. B contends lack of previous
notice of the completion of the roads and the absence of a
demand for payment. Is this contention of B tenable?
CASE ANALYSIS 2.4
No. The filing of the foreclosure suit by S is
sufficient notice to B of the completion of the
roads and of S’s desire to be paid the purchase
price. (Enriquez vs. Ramos, 73 SCRA 116
[1976].)
EFFECTS OF DELAY
I. Mora solvendi
(a) The debtor is guilty of breach of the obligation;
(b) He is liable for interest in case of obligations to pay
money (Art. 2209.) or damages in other obligations. (Art.
1170.) In the absence of extrajudicial demand, the interest
shall commence from the filing of the complaint; and
(c) 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].)
EFFECTS OF DELAY
I. Mora solvendi
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 be compelled to deliver a thing of
the same kind (see Art. 1263.) or held liable for
damages. (Art. 1170; see Lee vs. De Guzman, Jr., 187
SCRA 276 [1990].)
EFFECTS OF DELAY
II. Mora accipiendi
(a) The creditor is guilty of breach of obligation;
(b) He is liable for damages suffered, if any, by the debtor;
(c) He bears the risk of loss of the thing due (see Art.
1162.);
(d) Where the obligation is to pay money, the debtor is not
liable for interest from the time of the creditor’s delay; and
(e) The debtor may release himself from the obligation by
the consignation of the thing or sum due. (see Art. 1256.)
EFFECTS OF DELAY
III. Compensatio morae
The delay of the obligor cancels out 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 deemed
extinguished and each shall bear his own damages. (Art.
1192.)
When is the demand not necessary to
put debtor in delay?
The general rule is that delay begins only from the
moment the creditor demands, judicially or
extrajudicially, the fulfillment of the obligation. The
demand for performance marks the time when the
obligor incurs mora or delay and is deemed to have
violated his obligation. Without such demand, the
effect of default will not arise unless any of the
exceptions mentioned below is clearly proved.
CASE ANALYSIS 2.5
B (bank) started a contest of designs and plans for the
construction of a building, announcing that the prizes would
be awarded not later than November 30, 2022. C took part in
the contest, performing work and incurring expenses for that
purpose. B did not name judges and failed to award the
prizes on the date specified. C contended that the said date
was the principal inducement in the creation of the obligation,
because the current cost of concrete buildings at that time
was fixed. Was B in default in not awarding the prizes on
November 30, 2022?
CASE ANALYSIS 2.5
No. The fixation of said price cannot be considered as the
principal inducement of the contract for the contestants;
neither was it for the bank, which could not be certain that
said price would continue to be the current price when it
desired to construct the building designed. There is no
sufficient reason for considering that the date set for the
award of the prizes was the principal inducement to the
creation of the obligation.
The bank cannot be held in default through the mere lapse of
time. There must be a demand, judicial or extrajudicial. (De la
Rosa vs. Bank of the Phil. Islands, 51 Phil. 926 [1928].)
GROUNDS FOR LIABILITY
Article 1170 gives the four grounds for liability which
may entitle the injured party to damages (see Art.
2197.) for all kinds of obligations regardless of their
source, mentioned in Article 1157, whether the
obligations are real or personal (supra). It
contemplates that the obligation was eventually
performed but the obligor is guilty of breach thereof.
Here, the breach of the obligation is voluntary; in
Article 1174, it is involuntary.
GROUNDS FOR LIABILITY
(1) Fraud (deceit or dolo). — As used in Article 1170, it is
the deliberate or intentional evasion of the normal
fulfillment of an obligation.
(a) 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. Moral damages may be
recovered in addition to other damages. (see Art.
2220; Far East Bank & Trust Co. vs. Court of Appeals,
241 SCRA 671 [1995].)
GROUNDS FOR LIABILITY
(b) Article 1170 refers to incidental fraud (dolo incidente)
committed in the performance of an obligation already
existing because of contract. It is to be differentiated from
causal fraud (dolo causante) or fraud employed in the
execution of a contract under Article 1338, which vitiates
consent and makes the contract voidable and to incidental
fraud under Article 1344 also employed for the purpose of
securing the consent of the other party to enter into the
contract but such fraud was not the principal inducement to
the making of the contract.
GROUNDS FOR LIABILITY
(c) Under Article 1170, the fraud is employed for the
purpose of evading the normal fulfillment of an obligation
and its existence merely results in breach thereof giving
rise to a right by the innocent party to recover damages.
The Civil Code refers to civil fraud. Criminal fraud gives
rise to criminal liability.
CASE ANALYSIS 2.6
Mr. Halo Blok, contractor, brought action to recover the actual
costs of the construction of the building of Ms. Hana Bishi,
plus 12-1/2% for and on account of his services and
superintendence of the building, as per contract. Ms. Hana
alleged that through Mr. Blok’s negligence in the construction
of the building and the purchase of materials, she suffered
damages. Ms. Hana’s counterclaims are founded upon Mr.
Blok’s mistakes and errors of judgment in the employment of
labor and the purchase of materials. Assuming that there
were such mistakes or errors of judgment, would Mr. Blok be
liable for them under the contract?
CASE ANALYSIS 2.6
No. The fact that the price of lumber or of labor went up or down, or was
cheaper at a certain time, would not make Blok liable for a breach of
contract, so long as he was exercising his best judgment and acting in
good faith. Under the contract, the materials were to be purchased by Blok
“in such quantities and at such times as may appear to be to your [Hana’s]
interest.” This vested in Blok a discretionary power as to the time and
manner for the purchase of materials. The same thing is true as to the
employment of labor. While it is true that the contract recites that time is an
important provision, it does not say, however, when the building is to be
completed or that time is of the essence of the contract. In other words,
under the terms of the contract, the employment of labor, the
purchase of materials, and the construction and completion of the
building were all matters which were largely left to the discretion of
Blok, for which he should not be held liable for honest mistakes or errors of
judgment.
GROUNDS FOR LIABILITY
(2) Negligence (fault or culpa) — It is any voluntary act or
omission, there being no malice, which prevents the normal
fulfillment of an obligation. (see Arts. 1173, 1174.)
(3) Delay (mora)
(4) Contravention of the terms of the obligation — This is
the violation of the terms and conditions stipulated in the
obligation. The contravention must not be due to a
fortuitous event or force majeure. (Art. 1174.)
RECOVERY OF DAMAGES FOR BREACH
OF CONTRACT OR OBLIGATION

Breach of contract is the failure without justifiable excuse

to comply with the terms of a contract. The breach may be
willful or done unintentionally. It has been defined as the
failure, without legal excuse, to perform any promise which
forms the whole or part of the contract.
RECOVERY OF DAMAGES FOR BREACH
OF CONTRACT OR OBLIGATION
(1) Measure of recoverable damages — The provisions
under Title XVIII on “Damages’’ of the Civil Code govern in
determining the measure of recoverable damages.
Fundamental in the law on damages is that one injured by
a breach of a contract, or by a wrongful or negligent act or
omission shall have a fair and just compensation
commensurate to the loss sustained as a consequence of
the defendant’s act.
RECOVERY OF DAMAGES FOR BREACH
OF CONTRACT OR OBLIGATION
(2) Contractual interests of obligee or promisee,
remedy serves to preserve. A breach upon the contract
confers upon the injured party a valid cause for recovering
that which may have been lost or suffered. The remedy
serves to preserve the interests of the promisee that
may include:
a. Expectation interest, which is his interest in having the
benefit of his bargain by being put in as good a position as
he would have been had the contract been performed; or
RECOVERY OF DAMAGES FOR BREACH
OF CONTRACT OR OBLIGATION
(b) Reliance interest, which is his interest in being
reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been had
the contract not been made; or

(c) Restitution interest, which is his interest in having

restored to him any benefit that he has conferred on the
other party.
RECOVERY OF DAMAGES FOR BREACH
OF CONTRACT OR OBLIGATION
(3) Excuse from ensuing liability — The effect of every infraction is
to create a new duty, that is, to make recompense to the one who has
been injured by the failure of another to observe his contractual
obligation. The mere proof of the existence of the contract and the
failure of its compliance justify a corresponding right of relief to the
obligee unless the obligor can show extenuating circumstance, like
proof of his exercise of due diligence or of the attendance of fortuitous
event, to excuse him from his ensuing liability(Ibid).
(4) Duty of obligee to minimize his damages — An obligee is duty
bound to minimize the damages for which he intends to hold any
obligor responsible. (see Art. 2203.) He cannot recover damages for
any loss which he might have avoided with ordinary care. If his
negligence was contributory to the loss, the court may equitably
mitigate the damages (infra).
FRAUD AND NEGLIGENCE
Fraud may be distinguished from negligence as follows:
(1)In fraud, there is deliberate intention to cause damage or
injury, while in negligence, there is no such intention;
(2)Waiver of the liability for future fraud is void (Art. 1171.),
while such waiver may, in a certain sense, be allowed in
negligence;
(3)Fraud must be clearly proved, mere preponderance of
evidence not being sufficient, while negligence is
presumed from the breach of a contractual obligation;
FRAUD AND NEGLIGENCE
(4) Liability for fraud cannot be mitigated by the courts,
while liability for negligence may be reduced according to
the circumstances. (Art. 1173.)
WHEN NEGLIGENCE IS EQUIVALENT
TO FRAUD
Where the negligence shows bad faith or is so gross that it
amounts to malice or wanton attitude on the part of the
defendant, the rules on fraud shall apply. (see Art. 1173.) In
such case, no more distinction exists between the two at
least as to effects.
Gross negligence is negligence characterized by want or
absence of or failure to exercise even slight care or
diligence, or the entire absence of care, acting or omitting
to act on a situation where there is a duty to act, not
inadvertently but willfully and intentionally.
KINDS OF NEGLIGENCE
Culpa or negligence may be understood in three different
senses.
(1) Contractual negligence (culpa contractual) or
negligence in contracts resulting in their breach Article 1172
refers to “culpa contractual.” This kind of negligence is not a
source of obligation. (Art. 1157.) It merely makes the debtor
liable for damages in view of his negligence in the fulfillment
of a preexisting obligation resulting in its breach or non-
fulfillment. (Arts. 1170-1174, 2201.)
It is a kind of civil negligence if it does not amount to a crime.
KINDS OF NEGLIGENCE

(2) Civil negligence (culpa aquiliana) or negligence

which by itself is the source of an obligation between the
parties not formally bound before by any pre-existing
contract. It is also called “tort” or “quasidelict.” (Art.
2176.10);
KINDS OF NEGLIGENCE
(3) Criminal negligence (culpa criminal) or negligence
resulting in the commission of a crime. (Arts. 3, 365,
Revised Penal Code.) The same negligent act causing
damages may produce civil liability arising from a crime
under Article 100 of the Revised Penal Code (supra) or
create an action for quasi-delict under Article 2176, et seq.,
of the Civil Code.
CASE ANALYSIS 2.7
S discharged a large shipment of potatoes belonging to B
into a lorcha which was then left for two days in the sun
tightly closed and without ventilation. As a result, the potatoes
rotted and became useless. Is S liable for the loss?
CASE ANALYSIS 2.7

Yes. S was guilty of gross negligence with respect to the care

of the potatoes, a perishable property.
CASE ANALYSIS 2.8
R employed a young ignorant boy to do ordinary chores in
the performance of which he did not come in contact with
machinery. Without giving any previous warning, and over the
objections of the boy, the latter was ordered to assist in the
cleaning of a dangerous machine. His fingers were cut in the
machine. Is R liable for damages?
CASE ANALYSIS 2.8

Yes. It was negligence on his part not to warn the boy and
give him instructions to avoid accidents in the cleaning of a
machine with which the boy was unfamiliar.