LAW ON Obligations AND Contracts Chapter 1

Accounting and finance (Union Christian College)

Studocu is not sponsored or endorsed by any college or university

Downloaded by Justine Bianca Jampil (justinebianca.jampil@olivarezcollege.edu.ph)
 TITLE I
OBLIGATIONS
(ARTICLE 1156-1304, CIVIL CODE)

I.GENERAL PROVISIONS

ARTICLE 1156
An obligation is a juridical necessity to give, to do or not to do.

 Obligation
- Derived from the Latin word obligatio which means tying or binding.
- A tie or bond recognized by law by virtue of which one is bound in favor of another to render something
– and this may consist in giving a thing, doing a certain act or not doing a certain act.
- The act or performance which the law is enforced.

 Civil Code
- Stresses the duty under the law of the debtor or obligor when it speaks of obligation as a juridical
necessity.

 Juridical necessity
- In case of noncompliance, the courts of justice may be called upon by the aggrieved party to en force its
fulfillment or, in default thereof, the economic value that it represents.
- In a proper case, the debtor or obligor may also be made liable for damages, which represents the sum of
money given as a compensation for the injury or harm suffered by the creditor or oblige for the violation of his
rights.
- The debtor must comply with his obligation whether he likes it or not; otherwise, his failure will be visited
with some harmful or undesirable consequences.
- If obligations were not made enforceable, people can disregard them with impunity.
- There are obligations that cannot be enforced because they are not recognized by law as binding.

Nature of obligations under the civil code

a) Civil Obligations
- Obligations which give to the creditor or obligee a right under the law to enforce their performance in courts
of justice

b) Natural Obligations
- Not being based on positive law but on equity and natural law, do not grant a right of action to enforce their
performance, but voluntary fulfillment by the obligor, they authorize the retention of what has been delivered
or rendered by reason thereof. (Art. 1423)
-
Essential requisites of an obligation
o Passive subject
- called debtor or obligor; the person who is bound to the fulfillment of the obligation – he who has a duty.
o Active subject
- called creditor or obligee; the person who is entitled to demand the fulfillment of the obligation – he who
has a right.
o Object or prestation
- Subject matter of the obligation; the conduct required to be observed by the debtor.
- It may consists in giving, doing or not doing.
- Without it, there is nothing to perform.
o Juridical or legal tie
- Also called efficient cause; that which binds or connects the parties to the obligation.

Sources: Law on Obligations and Contracts – De Leon; De Leon Jr.

Law on Obligations and Contracts – Suarez

Downloaded by Justine Bianca Jampil (justinebianca.jampil@olivarezcollege.edu.ph)

Form of obligations
- Manner in which an obligation is manifested or incurred.
- May be oral, writing, partly oral and partly in writing

 Right
- The power which a person has under the law, to demand from another any prestation.

 Wrong
- Cause of action
- An act or omission of one party in violation of the legal rights or rights of another.

 Injury
- the wrongful violation of the legal right of another o
Essential elements of a legal wrong or injury
- A legal right in favor of a person (creditor/obligee. plaintiff)
- a correlative legal obligation on the part of another (debtor/obligor/defendant); to resp ect or not to violate
said right; and
- an act or omission by the latter in violation of said right with resulting injury or damage to the former

Kinds of obligation according to the subject matter

1) Real obligation
- Obligation to give
- The subject matter is a thing which the obligor must deliver to the obligee

2) Personal obligation
- Obligation to do or not to do
- The subject matter is an act to be done or not to be done
a) Positive personal obligation (to do)
b) Negative personal obligation (not to do, not to give)

ARTICLE 1157
Obligations arise from:
1. Law - when they are imposed by law itself.
2. Contracts – when they arise from the stipulation of the parties.
3. Quasi-contracts – when they arise 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.
4. Acts or omissions punished by law – when they arise from civil liability which is the consequence of a
criminal offense.
5. Quasi-delicts (1089a) – or torts; when they arise from damage caused to another through an act or
omission, there being fault or negligence, but no contractual relat ion exists between the parties .

Sources classified
1. Those emanating from law; and
2. Those emanating from private acts which may be further subdivided into two:
a) Those arising from licit acts, in the case of contracts and quasi contracts (infra); and
b) Those arising from illicit acts, which may be either punishable in the case of delicts or crimes, or not
punishable in the case of quasi-delicts or torts (infra.)

ARTICLE 1158
Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are
demandable, and shall be regulated by the precepts of the law which establishes them: and as to what has not been foreseen, by
the provisions of this Book. (1090)
Sources: Law on Obligations and Contracts – De Leon; De Leon Jr.
Law on Obligations and Contracts – Suarez

Downloaded by Justine Bianca Jampil (justinebianca.jampil@olivarezcollege.edu.ph)

  Legal Obligation
- Legal obligation or obligation arising from law.
- Not presumed because they are considered a burden upon the obligor.
- Exception, not the rule
- To be demandable, they must be clearly set forth in the law.
(civil code or special laws)

 Special Laws
- All other laws not contained in the Civil Code.

ARTICLE 1159
Obligations arising from contracts have the force of the law between the contracting parties and should be complied with in good
faith (1091a)

Contractual Obligations
- Contractual obligations or obligations arising from contracts or voluntary agreements.
- Presupposes that the contracts entered into are valid and enforceable

 Contract
- Meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service

1. Binding Force
- Obligations arising from contracts have the force of the law between the contracting parties.
- This does not mean, however, that contract is superior to the law.
- As a source of enforceable obligation, contract must be valid and it cannot be valid if it is against the law.

2. Requirement if a valid contract

- A contract is valid if it is not contrary to the law, morals, good customs, public order and public policy.
- It is invalid or void if it is contrary to law, morals, good customs, public order or public policy.

3. Breach of contract
- A contract may be breached or violated by a party in whole or in part.
- Takes place when a party fails or refuses to comply without legal reason or justification, with his
obligation under the contract as promised.

 Compliance in good faith.

- Compliance or performance in accordance with the stipulations or terms of the contract or agreement.

ARTICLE 1160
Obligations derived from quasi -contracts shall be subject to the provisions of Chapter 1, Title XVII of this Book (n)

Sources: Law on Obligations and Contracts – De Leon; De Leon Jr.

Law on Obligations and Contracts – Suarez

Downloaded by Justine Bianca Jampil (justinebianca.jampil@olivarezcollege.edu.ph)

Quasi-contract
- Juridical relation resulting from lawful, volun tary, unilateral acts by virtue of which the parties become bound
to each other to the end that no one will be unjustly enriched or benefited at the expense of another.

Kinds of quasi – contracts  Negotiorum gestio

- voluntary management of the property or affairs of another without the knowledge or consent of the latter

 Soluti indebiti
- Juridical relation which is created when something is received when there is no right to demand it and it was
unduly delivered through mistake.The requisites are:
 There is no right to receive the thing delivered; and  The thing was delivered through mistake.

 Other examples of quasi-contracts

- Provided in Article 2164 to Article 2175 of the Civil Code.

ARTICLE 1161
Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and
of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations and of Title XVII of this Book, regulating
damages (1092a)

Civil liability arising from crimes or delicts

1. The commission of a crime causes not only moral evil but also material damage. From this principle, the rule has been
established that every person criminally liable for an act or omission is also civilly liable for damages. (Art. 100, Revised
Penal Code)

2. In crimes, however, which cause no material damage, there is no civil liability to be enforced. But a person not
criminally responsible may still be liable civilly, such as failure to pay a contractual debt; causing damage to another’s
property without malicious or criminal intent or negligence, etc.

Scope of civil liability

1. Restitution
2. Reparation for the damage caused; and
3. Indemnification for consequential damages. (Art. 104, Revised Penal Code.)

ART. 1162
Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book and by special
laws. (1093a)

Quasi – delict
- an act or omission by a person which causes damage to another in his person, property or rights giving rise to
an obligation to pay for the damage done, there being fault or negligence but there is no pre-existing
contractual relation between the parties. (Art 2176)

Requisites of quasi-delict
1. Act or omission
2. Fault or negligence
3. Damage caused
4. Direct relation or connection of cause and effect between the act or omission and the damage
5. No pre-existing contractual relation between the parties

CRIME QUASI- DELICT

Sources: Law on Obligations and Contracts – De Leon; De Leon Jr.

Law on Obligations and Contracts – Suarez

Downloaded by Justine Bianca Jampil (justinebianca.jampil@olivarezcollege.edu.ph)

1. Criminal or malicious intent or criminal negligence Negligence

2. The purpose is punishment Indemnification of the offended party

3. Affects public interest Concerns private interest

4. Generally two liabilities: criminal and civil Civil liability

5. Cannot be compromised or settled by the parties themselves Can be compromised as any other civil
liability
6. The guilt of the accused must be proved beyond reasonable doubt The fault or negligence of the defendant
need only be proved by preponderance.

Sources: Law on Obligations and Contracts – De Leon; De Leon Jr.

Law on Obligations and Contracts – Suarez

Downloaded by Justine Bianca Jampil (justinebianca.jampil@olivarezcollege.edu.ph)