Dean LR Notes

OBLIGATIONS AND CONTRACTS LAW REVIEWER
DEAN MA. LIZA A. LOPEZ-ROSARIO LECTURES (A.Y. 2020 – 2021)
OBLIGATIONS
Natural Obligations .............................................. 57
PRESCRIPTION ...................................................... 57
TRUSTS ..................................................................... 60
AND Page | 1
CONTRACTS PRELIMINARY MATTERS
Disclaimer:
The contents of this reviewer were not purely
Q: What is the import of studying Articles 37-
based on Dean LR’s verbatim discussion. Some
discussions on different commentaries and 47 of the Civil Code in the study of Obligations
reviewers were included to fill the gaps in the
and Contracts?
discussions.
Use at your own peril! Good luck! A: Juridical relation arising from an obligation be it
2 or more-person Art. 37-47 lays down the classes
Dean LR Notes 2021
of persons who can be parties of a contract.
Table of Contents Art. 40-47 classifies person into to kinds 1. Natural

persons- civil personality arises from birth 2.
PRELIMINARY MATTERS ..................................... 1 Juridical persons are obliged to follow the law in
OBLIGATIONS .......................................................... 4 order to maintain their existence.
Nature and Effect of Obligations .......................... 4 Art. 37-39 defines what is juridical capacity and
Philippine Usury Law ........................................... 17 capacity to act, in relation to obligation and
Classifications Of Obligations ............................. 22 contracts, it states certain restrictions which may
Modes of Extinguishment of Obligations .......... 33 limit to an extent those capacity to act that are
CONTRACTS............................................................ 39 considered restricted.
Essential Elements of a Contract......................... 41
There also expounds certain modifying
Forms...................................................................... 42
circumstances of capacity to act which limits their
Reformation ........................................................... 44
capacity to enter to a contract.
Interpretation of Contracts ................................... 45
Defective Contracts ............................................... 46 Put it short, said provisions speak of the parties
Matrix of Defective Contracts .......................... 52 (persons) in Obligations and Contracts, and their
DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

capacity to enter into such legal relations and also Q: When you attend a baby shower and bring
circumstances which limit or modifies such a gift, is the baby being conceived capacitated
capacity. to accept your gift?
Q: When you buy from Jollibee, who do you A: YES. The donation given to a conceived child Page | 2
transact with? The cashier or Jollibee itself? is considered valid. There is a juridical relationship
created between the guest who intends to donate
A: You may transact with Jollibee because he may
an object to a fetus which is still being conceived.
enter legal relations for being a juridical person.
There is a contract of donation but the problem is
He may sue and be sued.
not yet born Art. 40 is very clear birth determines
Juridical relationship arising from an obligation, personality unless or until you are born you are not
means juridical necessity arises from two yet a natural person. Only upon birth you are
persons where one is required to give, to do considered a natural person. By analogy if talking
and not to do. about juridical person, definitely a juridical person
has not any physical existence the birth of juridical
KINDS OF JURIDICAL PERSONS
person it commences upon the time that a cert of
1. Public Juridical Person – includes registration is issued but it is referring to a private
government agencies and bodies. person but on public person at the time a charter
2. Private Juridical Person is enacted by Congress or Senate.
a. Private Corporation – Inception is
RH law is opposed by the church as the hospitals
from the grant of its certificate of
would legalize giving contraceptives. POV of
incorporation from the SEC.
church fetus is already a natural person but civil law
Governed by the Corporation Code
has different position that a child should be born
and the Civil Code.
to be considered as natural person as a general rule.
b. Partnership – Inception is from the
ART. 40 but a conceived child shall be considered
meeting of the minds of the partners
born for all the purposes favorable to it. Which is
and is governed by the terms and
mandatory “shall”. A conceived child shall be
conditions of the partnership, akin to a
considered natural person for all the purposes
contract.
favorable to it. The fetus is not always given a
presumptive/ provisional personality as it would
only be given upon the presence of the condition

that there is an act favorable to the fetus. If there (NOTA BENE: Definitions of the words
is none the mother would still need to wait for the immediately below were taken from the LR Notes
birth of the baby to have the provisional or for Property.)
presumptive personality.
Accession - Article 440 of the Civil Code, Page | 3
In the baby shower the donation is intended to the accessions are the fruits of a thing or additions to
fetus which is favorable for that to be valid there or improvements upon a thing or the principal. It
should be a recipient. Donation is perfected upon is not a mode of acquiring ownership for it is
the acceptance of the donee reaches the knowledge simply an extension of ownership over a thing to
of the donor. In this case the fetus cannot accept whatever is incorporated thereto naturally or
the donation so in this case it is accepted by the artificially, with or without human labor.
mother but then, the personality given to the fetus
Accessory - Accessories are ornaments to add
is only provisional for the donation to be perfectly
beauty and may be removed without causing injury.
valid the baby should comply in the requirement in
They are things joined to, or included with the
Art. 41.
principal for the latter’s embellishment,
Donation was often use to a church or charitable completion, or better use.
institution but in the point of view of civil law,
Ordinary Expenses - Ordinary expenses are
donation is the act of liberality anything that is
those which arise due to the ordinary wear and tear,
a gift is a donation.
shouldered by the person enjoying the possession
Q: Why do you have a cause of action against of the property.
Jollibee if your food was served with a foreign
Extraordinary Expenses - Extraordinary
element?
expenses are those which are equivalent to
A: Because the contract of sale in the transaction necessary expense, owner will be responsible.
requires that diligence be exercised as they have a
Necessary Expenses - Necessary expenses refer
duty to serve quality food.. This is why the waiter
to those expenses which without it the thing will
or manager will apologize to you and tell you
physically deteriorate or perish.
‘palitan ko nalang po sir’. Because they are aware that
such breach gives you a cause of action against Usual Expenses - Useful expenses refer to those
them. which increase the productivity or raise the value
of the thing.

Luxury Expenses - Luxury expenses refer to Non-Fungible Property - Non-fungible property

those which add to the value of the thing but is are those which may not be easily replaced or
neither essential to the preservation nor useful to exchanged by similar kind or quality. Often times,
anybody in general. these are unique limited in time or location or Page | 4
source or accessibility, and generally, but not
Immovable Property - Immovable property or
always, are not essential to life.
real property are those which may not be
transferred from one place to another without
OBLIGATIONS
Nature and Effect of Obligations
destruction to itself. Those are property which fall
under the enumeration provided in Article 415 of SUBJECTS OF AN OBLIGATION
the Civil Code.
1. Active (Creditor/Obligee) - one who
Movable Property - Movable or Personal demands the fulfillment of an obligation
property are those which can be transferred from 2. Passive (Debtor/Obligor) - one who has
one place to another. the duty to fulfill an obligation.
Consumable Property – According to Article 418 Q: During Holy Week, you have the duty to
of the Civil Code, consumable property refers to fast and observe abstinence, may the Church
those movables which cannot be used in a manner penalize you in case of non-observance?
appropriate to their nature without their being
A: NO. The said obligation is of moral character
consumed.
and does not fall within the enumerations of Art.
Non-Consummable Property – According to 1157 of the Civil Code which treats of the sources
Article 418 are all other movable properties which of obligations.
do not require consumption in usage.
Juridical necessity means that the obligation
Fungible Property – Fungible property are those must be fulfilled, non-fulfillment would lead to
property that can be replaced by another property legal sanctions enforceable against the breach.
of the same kind or quality. These are replaceable
Juridical Necessity is important because in every
by equal quantity either by agreement or by nature.
obligation that needs to be delivered is binding

enforced to the obligor and obligee that is governed by precepts of such law or
regulated and protected by the law. provision. (Art. 1158).
2. Contracts – Law between parties.
Personal vs. Moral Obligation
Stipulations (as long as not contrary to law, Page | 5
In Personal obligation there is a thing that need to public order, public policy, morals, and
be done or not to be done which can result to custom) shall be the governing law. Must
sanction as moral obligation would not have a be complied with in good faith (Art. 1159).
binding effect as it does not have a particular law 3. Quasi-Contracts – governed by Chap. 1,
that enforce it. Title XVII of the Civil Code. (Art. 1160)
4. Acts or Omissions Punished by Law
i.e. You cannot be sued in court for not
(delicts) – Governed by penal laws subject
going to church (moral obligation) as it is
to the provisions of Art.2177 and other
not considered as a juridical necessity.
pertinent provisions on Human Relations
and Title XVIII of the Civil Code. (Art.
1161)
PRESTATIONS (OBJECTS OF
5. Quasi-delicts – Governed by Chap. 2,
OBLIGATIONS) – the method or mode by
Title XVII of the Civil Code and Special
which an obligation is to be satisfied.
Laws. (Art. 1162)
1. To Give – Real Obligation
Q: Can you file an independent civil action
2. To Do – Positive Personal Obligation
without filing any reservation?
3. Not to Do – Negative Personal Obligation
A: YES. An independent civil action may still be
VINCULUM JURIS (Juridical Tie / Efficient
filed regardless of the lack of the reservation
Cause) - It is that which binds or connects the
requirement so long as it is still within the
parties to the obligation. (De Leon) In other words,
prescriptive period. This is especially true in cases
it is the legal relation between the debtor and the
of liabilities falling under quasi-delicts. Under
creditor (or obligor and obligee).
Section 1 of the present Rule 111, what is "deemed
SOURCES OF OBLIGATION (Art. 1157) instituted" with the criminal action is only the
action to recover civil liability arising from the
1. Law – Not presumed. Must be expressly
crime or ex-delicto. Reservation is only required
stated in the Code or special laws and is
for liabilities falling under delicts.

NOTE: All the other civil actions under Articles Q: If the accused died, is the civil liability
32, 33, 34 and 2176 of the Civil Code are no longer arising from the crime committed
"deemed instituted," and may be filed separately extinguished?
and prosecuted independently even without any
A: YES. According to Sec. 4 of Rule 111 of the Page | 6
reservation in the criminal action. The failure to
Rules of Court, the death of the accused after
make a reservation in the criminal action is not a
arraignment and during the pendency of the case
waiver of the right to file a separate and
extinguishes the liability ex delicto as the civil
independent civil action based on the
liability arising therein is dependent on the criminal
abovementioned provisions of the Civil Code.
action. However, those other liabilities arising from
Since the reservation requirement sought to
the crime which are instituted as independent civil
prevent double claims for damages, it may already
action shall be enforceable upon the estate of the
be dispensed with because Art. 2177 of the Civil
deceased accused. (See ruling in PEOPLE v.
Code specifically prohibits double claims for civil
BAYOTAS)
liabilities.
NOTE: The pronouncements of the Court in
GR: Civil case is deemed instituted in a
People v. Sendaydiego.
criminal case.
PEOPLE v. SENDAYDIEGO
XPN: As provided in Rule 111 of Sec.1 of
The civil liability was allowed to survive
the Rules of Court had lay down:
although it was clear that such claim thereon was
1. It is automatic that the Civil liability is exclusively dependent on the criminal action
already attached to the criminal case is that already extinguished.
you already waived (if the civil case is filed The claim of complainant Province of
ahead of the criminal case) Pangasinan for the civil liability survived
2. There is a waiver to file a civil case. Sendaydiego because his death occurred after
3. There is a reservation to file a civil action final judgment was rendered by the Court of
to the delict that is committed. First Instance of Pangasinan, which convicted
him of three complex crimes of malversation
But if the source is law, contract, quasi-contract
through falsification and ordered him to
and quasi-delict you can file a civil action without a
indemnify the Province in the total sum of
reservation.
P61,048.23 (should be P57,048.23).

The civil action for the civil liability is deemed Q: Why can the estate be sued in place of a
impliedly instituted with the criminal action in deceased who has an unsatisfied obligation?
the absence of express waiver or its reservation
A: Under the regime of the Civil Code and before
in a separate action (Sec. 1, Rule 111 of the Rules
the enactment of the Code of Civil Procedure, the Page | 7
of Court). The civil action for the civil liability is
heirs of a deceased person were considered in
separate and distinct from the criminal action
contemplation of law as the continuation of his
(People and Manuel vs. Coloma, 105 Phil. 1287; Roa
personality by virtue of the provision of article 661
vs. De la Cruz, 107 Phil. 8).
of the first Code that the heirs succeed to all the
When the action is for the recovery of money
rights and obligations of the decedent by the mere
and the defendant dies before final judgment in
fact of his death. It was so held by this Court
the Court of First Instance, it shall be dismissed
in Barrios vs. Dolor, 2 Phil., 44, 46. However, after
to be prosecuted in the manner especially
the enactment of the Code of Civil Procedure,
provided in Rule 87 of the Rules of Court (Sec.
article 661 of the Civil Code was abrogated, as held
21, Rule 3 of the Rules of Court).
in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13, 22. In
The implication is that, if the defendant dies
that case, as well as in many others decided by this
after a money judgment had been rendered
Court after the innovations introduced by the
against him by the Court of First Instance, the
Code of Civil Procedure in the matter of estates of
action survives him. It may be continued on
deceased persons, it has been the constant doctrine
appeal (Torrijos vs. Court of Appeals, L-40336,
that it is the estate or the mass of property, rights
October 24, 1975; 67 SCRA 394).
and assets left by the decedent, instead of the heirs
The accountable public officer may still be civilly
directly, that becomes vested and charged with his
liable for the funds improperly disbursed
rights and obligations which survive after his
although he has no criminal liability (U.S. vs.
demise.
Elvina, 24 Phil. 230; Philippine National Bank vs.
Tugab, 66 Phil. 583). The heirs were formerly considered as the
continuation of the decedent's personality simply
by legal fiction, for they might not have been flesh
and blood — the reason was one in the nature of a
legal exigency derived from the principle that the
heirs succeeded to the rights and obligations of the
decedent. Under the present legal system, such

rights and obligations as survive after death have to which the civil liability may arise did not
be exercised and fulfilled only by the estate of the exist.
deceased. And if the same legal fiction were not • IF ACQUITTAL IS BASED ON
indulged, there would be no juridical basis for the REASONABLE DOUBT – Page | 8
estate, represented by the executor or NO. In this case, mere preponderance of
administrator, to exercise those rights and to fulfill evidence will suffice.
those obligations of the deceased. The reason and
NOTE: Liability of a 3rd person who did not
purpose for indulging the fiction is identical and
commit the act, the act was committed by a 3rd
the same in both cases. This is why according to
person but they had the control or supervision by
the Supreme Court of Indiana in Billings vs.
that 3rd person called vicarious liability. The
State, supra, citing 2 Rapalje & L. Dictionary, 954,
ground for liability is the negligence of selection of
among the artificial persons recognized by law
a good driver.
figures "a collection of property to which the law
attributes the capacity of having rights and duties",
as for instance, the estate of a bankrupt or deceased
Quasi-Contracts - Certain lawful, voluntary and
person. (LIMJOCO V. ESTATE OF PEDRO
unilateral acts give rise to the juridical relation of
FRAGANTE)
quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of
another. (Art. 2142)
Q: If the criminal case is dismissed, is the civil
liability from that case extinguished? KINDS OF QUASI-CONTRACTS
A: DEPENDS. 1. Solutio Indebiti (Undue Payment) -

Payment of what was not due. From the
• IF ACQUITTAL IS BASED ON THE
payment of what was not due arises an
FACT THAT THE ACCUSED DID
obligation quasi ex contractu. When one has
NOT COMMIT THE CRIME – YES.
erroneously given or performed something
The civil action ex delicto may be deemed
to or for another, for which he was in no
extinguished if there is a finding in the final
wise bound, he may redemand it, as if he
judgment that the act or omission from
had only lent it. The term "solutio indebiti" is
here used in a very wide sense, and includes

also the case where one performed labor charge of the agency or management of the
for another, or assumed to pay a debt for business or property of another, without
which he was not bound, or relinquished a any power from the latter, is obliged to
right or released a debt, under the continue the same until the termination of Page | 9
impression that he was legally bound to do the affair and its incidents, or to require the
so. person concerned to substitute him, if the
owner is in a position to do so.
ELEMENTS:
XPNS to the applicability of
(1) payment is made when there exists no
Negotiorum Gestio:
binding relation between the payor, who
has no duty to pay, and the person who (1) When the property or business is not
received the payment; and (2) the payment neglected or abandoned;
is made through mistake, and not through
liberality or some other cause. (2) If in fact the manager has been tacitly
i.e. If you happen to find a authorized by the owner.
PhP1000 lying on the floor, you
Q: What is the effect of a negotiorum gestio?
have the duty to return it. In the
Philippines, the rule is you have to A: The owner shall be liable for the improvements
surrender it to the proper to his property or any damage that incurs to the
authorities and the latter should voluntary agent or manager.
publish its founding. Should there
i.e. In the Philippines Jericho Rosales
be no claimants after the proper
always volunteers for rescues during
period has elapsed, you have the
typhoon. Whatever happens to Jericho
right to demand it.
Rosales during such endeavor, his heirs
REASON: Claiming ownership of
shall be compensated.
it when there is no right to it, leads
to unjust enrichment.
Q: If you were exacted by the BIR for an

2. Negotiorum Gestio (Voluntary
additional tax of which you have already paid
Agency) - Whoever voluntarily takes
prior, can you recover it?

A: YES. You have the right to recover. This case INDETERMINATE OR GENERIC
falls under solutio indebiti which provides that that THING - is the opposite of determinate or
which is collected without the right to demand it specific thing; that is, generic or indeterminate
and was delivered through mistake, should be thing is not particularly designated or physically Page | 10
returned. segregated from all others of the same class. It
means that a thing cannot be specifically
determined from things of the same class. The
DEGREES OF DILIGENCE thing can be replaced by another thing that is of the
same quality.
1. Extraordinary Diligence (ex: common
carriage)
2. Slight Diligence
Q: What is the significance in distinguishing
3. Diligence of a good father of the family
whether the thing is determinate or generic in
relation to Oblicon?
Q; Why does the law require “diligence of a
A: Art. 1262 states that the loss of a determinate
good father of the family” as the basis of
thing through a fortuitous event extinguishes the
diligence, are mothers not diligent?
obligation. Meaning that the thing is lost without
A: Diligence of a good father of a family simply the fault of the debtor. This is the general rule. But
means ordinary care. Just like a father of a family, when it comes to Indeterminate thing, such loss of
it is a care that an average person would do in the thing does not extinguish the obligation (genus
taking care of his property. nunquam perit).
DETERMINATE OR SPECIFIC THING - A Fortuitous Event – An event which could not be

thing is determinate when it is particularly foreseen, or which, though foreseen, were
designated or physically segregated from all others inevitable (Art. 1174).
of the same class. (Art. 1460) It is determinate or
Elements to exempt the obligor from liability for a
specific if it is distinct from all others and can
breach of an obligation by reason of a fortuitous
individually be classified or determined. From the
event, the following requisites must concur:
word itself determinate meaning can be
determined from all others.

a. the cause of the breach of the By nature, pertains to things that are at risk. (i.e.,
obligation must be independent of the obligation consists of transport of flammable
the will of the debtor; substances; if the truck explodes causing damage
b. the event must be either to property, the one responsible cannot invoke Page | 11
unforeseeable or unavoidable; immunity from liability arising from a fortuitous
c. the event must be such as to render event.)
it impossible for the debtor to
Q: What are the obligations of someone
fulfill his obligation in a normal
obliged to give a determinate thing?
manner; and
d. the debtor must be free from any A:
participation in, or aggravation of
I. To take good care of the thing with the
the injury to the creditor
diligence of a good father of a family.
GR: No one should be liable for a
Diligence of a good father of a family means an
fortuitous event.
ordinary care. Just like a father of a family, it is a
XPNs: care that an average person would do in taking care
of his property.
(1) law provides, or
II. To deliver the thing.
(2) under a stipulation in the contract.
Delivery is placing the thing in the possession or
NOTE: Art. 1174 is only applicable to real
control of the active subject (obligee) by the
obligations.
passive subject (obligor) either actually or
Effect of Fortuitous Event constructively.
a. If DETERMINATE, if lost, then the III. To deliver the fruits of the thing.
obligation is extinguished.
The creditor has a right to the fruits of the thing
b. If the object is GENERIC, even if there’s
from the time the obligation to deliver the thing
a fortuitous event, the debtor is liable.
arises. However, such creditor has no real right
Assumption of Risk (Created Risk Doctrine) over the thing unless such it has been delivered to
him.

Rights of the creditor (obligee) such as those plants sown on a parcel of land sold
to a buyer.
a. Personal right - a right that may be enforce by
one person on another, such as the right of a b. Accessories - joined to or included in the
creditor to demand delivery of the thing and its principal thing for the latter's better use. Example: Page | 12
fruits from the debtor. keys to the car or house.
b. Real right - a right or power over a specific Q: What are the remedies of the creditor when
thing which is enforceable against the whole world. the debtor fails to perform his obligation?
It is acquired by the creditor from the delivery of
1. If to deliver a determinate thing
the thing and its fruits unto him.
a. compel the debtor to make the delivery (Art.
Kinds of fruits (Art. 441) that the debtor is also
1165)
obliged to deliver:
b. demand damages from the debtor (Art. 1170)
a. Natural Fruits - They are the spontaneous
Q: What if in the case to deliver an
products of the soil, and the young and other
indeterminate thing?
products of animals. (Art. 442).
A:
b. Industrial Fruits - Industrial fruits are those
produced by lands of any kind through cultivation a. ask that the obligation be complied with at
or labor. (Art. 442). the expense of the debtor (Art. 1165)
b. demand damages from the debtor (Art.
c. Civil Fruits -They are the result of a juridical
1170)
relation such as the rents of buildings, the price of
leases of lands and other property and the amount Q: What are the remedies of a creditor if the
of perpetual or life annuities or other similar debtor fails to perform his obligation?
income. (Art. 442)
1. If an obligation to do
IV. To deliver its accessories and accessions
When the debtor fails to perform his obligation
even though not mentioned.
to do or performs it but contravenes the tenor
a. Accessions - everything which is produced thereof:
thereby, or which is incorporated or attached
thereto, either naturally or artificially, (Art. 440)

a. The creditor may have the obligation executed at Q: If you fail to pay our tuition fees, can UST
the expense of the debtor. (Art. 1167) hold you on delay of your obligation?
b. The creditor may demand damages from the
A: NO. Because under a reciprocal obligation,
debtor. (Art. 1170)
neither party is in delay when one party does not Page | 13
In obligation to do, the obligor (debtor) cannot be or is not ready to comply with its obligation. Delay
forced to perform his obligation as it will constitute only begins when one party has already complied
an involuntary servitude. The only remedy of the with his obligation. In the case at bar, UST may
creditor is to have the obligation executed by refuse to provide its services if the student does not
another at the expense of the debtor or ask for pay his tuition fees.
damages. Moreover, the obligor cannot substitute
Delay - or default or mora is the non-fulfillment of
others to perform his obligation to do without the
an obligation with respect to time. It is when
consent of the obligee (creditor) because the
someone does not fulfill an obligation within the
obligation is personal in nature.
time given unto him.
When the debtor performs his obligation but
I. Mora solvendi - it is a delay on the
poorly done
part of the debtor.
a. The creditor may have the same be undone at
the debtor's expense (Art. 1167)
b. The creditor may demand damages from the a. Ex re - delay in real obligations (to give)
debtor. (Art. 1170)
b. Ex persona - delay in personal obligations (to
2. If an obligation not to do do)
When the debtor performs what has been Tips: to easily memorize the two, re for real,
forbidden of him persona for personal. Always keep in mind that the
debtor can only have an obligation to give, to do,
a. The creditor may demand what has been done
and not to do, so he can only be delayed between
be undone.
the two, to give and to do, because there is no delay
b. The creditor may demand damages from the
in not to do. One cannot be in delay for not doing
debtor.
at all.

II. Mora accipiendi - it is a delay on the was a controlling motive for the establishment
part of the creditor. of the contract; or
Q: How can a creditor be in delay? (3) When demand would be useless, as when
the obligor has rendered it beyond his power Page | 14
A: A creditor can be in delay if the debtor fulfills
to perform.
his obligation but the creditor refuses to accept the
thing due without justifiable reason. It must be an There is delay when:
unjustifiable reason so as delay to exist.
a. The obligation must be due and demandable
Tips to easily remember: accipiendi sounds the
b. The debtor does not perform his obligation
same with accept. And who accepts? it is the
creditor. So accipiendi is delay in accepting a c. The creditor demands for the performance
fulfillment of an obligation by the creditor. of the obligation judicially or extra-judicially
III. Compensatio morae - it is a delay in d. The debtor fails to comply to such demand
reciprocal obligations. It is therefore
Q: If you ride a jitney along España Blvd. and
the creditor and debtor who are in
asked the driver to drop you exactly in front of
default. If both is in delay therefor in
UST, does he need to demand payment of your
effect there is no delay at all.
fare upon arrival?
Rules on Delay:
A: NO. Because there is a reciprocal obligation
GR: No demand. no delay between you and the driver; therefore, demand is
not required to hold you in delay of your obligation
XPNs: (Art. 1169)
should you not pay.
(1) When the obligation or the law expressly so
In a contract of carriage, no delay incurred. For as
declare; or
long as one party fulfills the obligation, it is
(2) When from the nature and the automatic that the party performs the obligation.
circumstances of the obligation it appears that There’s already fulfillment of one party to perform.
the designation of the time when the thing is to
Q: What are the effects of delay?
be delivered or the service is to be rendered
A: As to debtor:

a. Debtor shall be liable for damages (Art. 1170) a. dolo causante or causal fraud - fraud
used to obtain the consent of the other
b. If obligation to deliver determinate thing, debtor
party. It refers to fraud without which
shall be responsible for any fortuitous event until
consent would not have been given. It Page | 15
he has effected the delivery. (Art. 1165)
makes a contract voidable.
As to creditor: b. dolo incidente or incidental fraud -
refers to fraud without which consent
a. Debtor may resort to consignation of the thing
would still been given but the person giving
due. (Art 1258)
it would not have agreed but may agree on
b. Creditor shall bear the risk of loss and shoulders different terms. The person employing
the expenses for preservation of the thing. fraud will be liable for damages.
Grounds for liability to pay damages (Art. 1170)

2. Fraud employed in the performance of
a. Fraud an obligation - the deliberate or intention
act to evade the performance of an
b. Negligence
obligation in a normal manner. This will
c. Delay not have any effect on the validity of a
contract since it was employed after the
d. Contravene the tenor of an obligation.
perfection of such contract. The party
Fraud is the intentional deception of a person or employing such fraud will be liable for
entity by another made for monetary or personal damages.
gain. Also, fraud is the deliberate or intentional
Fraud according to time of commission
evasion by the debtor to perform his obligation on
a normal way. Fraud when, through insidious 1. Past Fraud - Past fraud committed can be
words or machinations of one of the contracting waived by the creditor. The waiver of such
parties, the other is induced to enter into a contract fraud is an act of liberality on the part of
which, without them, he would not have agreed to. the creditor.
(Art. 1338)
2. Future Fraud - Any waiver of an action
Fraud or dolo for future fraud is void. If the parties
agreed for a wiaver of a fraud that is to be
1. Fraud employed in obtaining consent

committed is void. The law discourages the A: YES. There is a COMMODATUM

employment of fraud even if consent for its relationship in this case. The bailor/creditor has
commission has been granted. Thus, a given you (1) the right to use his or her
debtor will still be liable for fraud unconsumable thing under the (2) obligation to Page | 16
committed even if there is such a waiver. return it someday. The loan is generally gratuitous
in nature.
Negligence - A failure to behave with the level of
care that someone of ordinary prudence would NOTE: Although usage is a manifestation of
have exercised under the same circumstances. The ownership, commodatum does not transfer
behavior usually consists of actions, but can also ownership.
consist of omissions when there is some duty to act
Ex: When you borrow the car of your brother or
(e.g., a duty to help victims of one's previous
sister to go to the University, because a
conduct). Negligence consists in the omission of
commodatum is gratuitous you don’t have to pay
that diligence which is required by the nature of the
rent. All you are asked to do is pay for the gas you
obligation and corresponds with the circumstances
consume and return it in the same conditions as of
of the persons, of the time and of the place. (Art.
the time it was lent to you.
1173)
Q: What if you took a loan in the bank, is there
1. Culpa Contractual (contractual
a juridical relationship established? And if it
negligence)
was acquired through a housing loan, is it
2. Culpa Aquiliana (tort or quasi-delict) mandatory to be used exclusively for that
purpose?
3. Culpa Criminal (criminal negligence)
A1: YES. MUTUUM is established. In this kind
of loan, one of the parties delivers to another
KINDS OF LOANS money or another consumable thing (fungible
property) with the understanding that the same
1. Commodatum (Loan for Use) – Art. 1933
amount of the same kind and quality shall be paid.
2. Mutuum (Simple Loan) – Art. 1953
Ownership is transferred upon conferring of the
thing and creates the obligation to be paid in the
Q: If you borrow your classmate’s notes, is future. A simple loan may be onerous or gratuitous.
there a juridical relationship established?

A2: In mutuum, a generic thing is given; thus, it b. an understanding between the parties that
involves the return of the equivalent only and not the loan shall or may be returned;
the identical thing because the debtor acquires
c. an unlawful intent to take more than the
ownership of the property given regardless if the
legal rate for the use of money or its Page | 17
full amount has yet to be paid. In the case, the
equivalent;
debtor has the right to use it however he wishes.
Therefore, even if the loan was acquired under a d. the taking or agreeing to take for use of the
housing loan contract, being the owner already, he loan of something in excess of what is
may use it elsewhere. allowed by law.
NOTE: In mutuum, the loan becomes gratuitous Applicability of Usury Law

if it was borrowed without a consideration of
Loan - mutuutum but does not apply to
interest or any other thing additional to the
commodatum because there is no interest in
principal.
commodatum as it is purely gratuitous.
NOTE: Interest may only be charged if it was
Forbearance - a contractual obligation of the
expressly stipulated at the time of perfection.
creditor to forbear during given period to
Philippine Usury Law require the debtor, payment of an existing
(Act 2655)
debt then dean payable.
Effectivity: May 1, 1916
KINDS OF INTERESTS
Suspended: January 1, 1983 (Sec. 1, CB Circular
Simple interest - that which is paid for the
No. 905, Series of 1982)
principal at a certain rate fixed or stipulated by
Usury - Usury may be defined as contracting for the parties.
or receiving something in excess of amount
Compound interest - that which is imposed
allowed by law for the loan or forbearance of
upon interest due and unpaid. The accrued
money, goods or chattels. (Tolentino v. Gonzales,
interest is added to the principal sum and
50 Phil. 558)
whole is treated as a new principal upon which
Elements of usury the interest for the next period is calculated.
a. a loan or forbearance;

Legal interest - that which the law directs to A: Effectivity: May 1, 1916
be charged in the absence of any agreement as
Suspended: January 1, 1983 (Sec. 1, CB Circular
to the rate between the parties.
No. 905, Series of 1982)
Lawful interest - that which the law allows or Page | 18
Q: Why was the Usury Law enacted during the
does not prohibit, that is, the rate within the
American Era?
maximum prescribed by law.
A: Transition of power from the Spaniards to the
Unlawful or usurious interest - that which
Americans produced changes in the political
is paid or stipulated to be paid beyond the
landscape. At that time, the Spanish Civil Code was
maximum fixed by law.
still in effect. And so, the Americans introduced
Q: What is the rate of interest prescribed under changes based on their own laws.
the Usury Law?
NOTE: According to public international law,
A: Under the Usury Law, the rate of interest for the non-political laws in case of state succession are
loan or forbearance of any money goods, or credits not automatically abrogated. Hence, without a
and the rate allowed in judgments, in the absence positive act removing such, we retain the American
of express contract as to such rate of interest, shall usury law.
be six per centum (6%) per annum or such rate as
NOTE: The Usury Law may not be applied to
may be prescribed by the Monetary Board of the
commodatum for they are essentially gratuitous.
Central Bank of the Philippines for that purpose in
Simple loans (mutuum), on the other hand, may be
accordance with the authority hereby granted (Sec.
onerous which imposes interests.
1, Act 2655).
Q: What amendment was made into the law?
NOTE: The Usury Law is still existing and not yet
repealed as it was only rendered suspended by A: The Central Bank was given authority by virtue
virtue of CB Circular 905 (ADVOCATES IN of PD 116 to fix or change the legal interest rate.
TRUTH IN LENDING INC. V BSP
NOTE:
MONETARY BOARD).
1. CB No. 416 – 12 % interest
Q: What is the date of effectivity of the Usury
2. CB No. 799 – 6% interest (current rule)
Law and when was it suspended?

NOTE: Imposition of Legal Interest not only make good the loss sustained by the landowner,
applicable to loans and forbearances of money. with due consideration to the circumstances
availing at the time the property was taken.
SITUATIONS WHERE LEGAL
In addition, the Court also recognizes that the Page | 19
INTERESTS APPLY AS PER CB NO. 799:
owner's loss is not only his property, but also its
1. Breach of Contract on Loans and income-generating potential. Thus, when
Forbearances property is taken, full compensation of its value
must be immediately paid to achieve a fair
GR: 6% p.a. apply exchange for the property and the potential
XPN: Express Contractual income lost. The value of the landholdings
Stipulations should be equivalent to the principal sum of the
just compensation due, and interest is due and
2. Breach of Contract on obligations NOT should be paid to compensate for the unpaid
constituting Loans and Forbearances balance of this principal sum after taking has
3. Judgment of the Court becoming Final and been completed. This shall comprise the real,
Executory (6% p.a.) substantial, full, and ample value of the
expropriated property, and constitutes due
REPUBLIC v. MACABAGDAL
compliance with the constitutional mandate of
ISSUE: WON interest rate applicable is that
just compensation in eminent domain.
which was set during the date of filing of
Legal interest shall run not from the date of the
complaint or the issuance of the Writ of
filing of the complaint but from the date of the
Possession.
issuance of the Writ of Possession on May 5,
HELD: The purpose of just compensation is
2008, since it is from this date that the fact of the
not to reward the owner for the property taken,
deprivation of property can be established. As
but to compensate him for the loss thereof. As
such, it is only proper that accrual of legal
such, the true measure of the property, as upheld
interest should begin from this date.
in a plethora of cases, is the market value at the
time of the taking, when the loss
resulted. Indeed, the State is not obliged to pay
premium to the property owner for CONCURRING AND DISSENTING
appropriating the latter's property; bound to OPINION OF J. CAGUIOA ON LARA’S

GIFTS AND DECORS INC. V. MIDTOWN NOTE:

INDUSTRIAL SALES INC.
GR: In payment of debts, the payment will be
NOTE: Forbearance – Akin to mutuum or simple credit against the interest incurred first, before the
loan (J. Caguioa on Lara’s Gifts v. Midtown) principal. Page | 20
“Further like the differential treatment under Art. HOWEVER, some banks may be open to
2209 with respect to the imposable rate of interest, crediting the payment on the principal first before
the BSP-prescribed rate of interest must be the interest.
imposed on any accrued interest under Art. 2212
Q: What are the Remedies of a Creditor to
(even if it doesn’t technically constitute a loan or
enforce his claims? (Art. 1177)
forbearance) because the Usury Law likewise
expressly authorizes the BSP to prescribe the rate a) Pursue the properties of the debtor except
allowed in judgments in litigations involving such those exempt by law.
loans and forbearances. In all other types of b) Exercise all the rights and bring all the
monetary obligations involving stipulated accrued actions of the latter for the same purpose,
interest however, the rate of 6% per annum under save those which are inherent in his person
the Civil Code applies.” (J. Caguioa on Lara’s (accion subrogatoria).
Gifts v. Midtown) Dean LR’s Commentary:
In essence, you will step into the shoes of
INTEREST ON ACTUAL AND
the debtor to be the creditor of his debtors
COMPENSATORY DAMAGES
(creditor of your debtor’s debtor) for the
1. Art. 2209 – interest for damages for delay purpose of collecting what he ought to
GR: 6% per annum collect.
XPN: Express Stipulation Ang scenario ‘jan isyung debtor mo ayaw singilin
2. Art. 2210 – interest for damages on breach yung may utang sa kanya dahil kapag nalaman
of contract (Court discretion) ng creditor niya na may ganun, it goes as payment
3. Art. 2211 - interest for damages based on to his creditor.
delicts and quasi-delicts (Court discretion) c) Impugn the acts which the debtor may
4. Art. 2212 – for damages on interest due have done to defraud his creditors (accion
after judicial demand has been made. pauliana).

The first remedy of a creditor to enforce payment In a Collection Case:

of his claims is to pursue the properties of the
If debtor is insolvent, there must be real property.
debtor. He must have to secure the properties of
the debtor in order to satisfy his claims. It is where If in the absence of real property, a collection case Page | 21
the creditor files to a court to set aside the will be in vain.
properties belonging to the debtor to satisfy his
Recission – The act of unmaking of a contract, or
claims. This is called attachment. If the creditor
its undoing from the beginning, and not merely its
does pay, then the court may order that the
termination. Rescission may be affected by both
properties attached be sold and the proceeds
parties by mutual agreement; or unilaterally by one
thereof be applied to the claims of the creditor.
of them declaring a rescission of contract without
After pursuing the debtor’s properties, the creditor the consent of the other, if a legally
can exercise all the rights and bring all the actions
Recission under Art. 1190 vs. Art. 1380
of the latter for the same purpose, save those which
are inherent in his person. Art. 1190 – For breach of obligation
Accion pauliana is the last resort of the creditor. He Art. 1380 – Contracts validly agreed upon may be
must have to exhaust the first two remedies before rescinded in the cases established by law under Art.
he can resort to accion pauliana. 1381 (Rescissible Contracts).
Rules on the Transmissibility of Rights Article 1381. The following contracts are
rescissible:
GR: All rights acquired in virtue of an
obligation are transmissible. (1) Those which are entered into by
guardians whenever the wards whom they
XPNs:
represent suffer lesion by more than one-
1. If the law so prohibits the transmission of fourth of the value of the things which are
rights. the object thereof;
2. If there is a stipulation or the parties agreed
(2) Those agreed upon in representation of
against transmission of rights
absentees, if the latter suffer the lesion
3. When the nature of such right is not
stated in the preceding number;
transmissible

(3) Those undertaken in fraud of creditors 6. Right is waivable wither expressly or

when the latter cannot in any other manner impliedly.
collect the claims due them;
Classifications Of Obligations
(4) Those which refer to things under CLASSIFICATIONS OF OBLIGATIONS Page | 22
litigation if they have been entered into by 1. Pure – Performance doesn’t depend on a
the defendant without the knowledge and happening of a certain event and is
approval of the litigants or of competent demandable at once.
judicial authority; 2. Conditional – Performance is dependent
(5) All other contracts specially declared by upon a future event.
law to be subject to rescission. (1291a) a. Suspensive Condition– The

condition the fulfillment of which will
Characteristics of the Right to Recission give rise to the acquisition of a right.
1. Exclusive to reciprocal obligations b. Resolutory Condition - The

condition the fulfillment of which will
2. Demandable only if the plaintiff is ready, end the possession of a right.
willing, and able to comply with his
obligation while the other is not. i.e. COD is a good example of Pure
Obligation. “You deliver, I pay”
3. Not Absolute. What the law requires is
substantial breach of obligation. Mere Article 1180. When the debtor binds himself to pay when
slight delay would not suffice. (Marcaida v. his means permit him to do so, the obligation shall be deemed
PEC). to be one with a period, subject to the provisions of article

1197. (n)
4. Needs judicial approval.
Period – An event that is certain to happen which
XPNs: may affect the obligation. The happening of the
a. When there is no delivery of the event will give rise to the demandability of the
thing yet obligation.
b. The contract stipulates that either Condition - An event that is not certain to happen.
party may rescind.
The happening of the event will give rise to the
5. Right to rescind is implied to exist. obligation itself.

NOTE: As to uncertainty:
The effects of suspensive and resolutory events Condition – not sure IF something will happen as
vary between PERIODS or CONDITIONS. a fact or not.
Page | 23
Period – Demandabillity. Period - sure if something will happen but
uncertain as to WHEN.
Condition – Acquisition or Extinguishment of a
right. NOTE: Condition and period is exclusive from
the obligation. They only have an effect to an
Period vs. Condition
obligation.
1. in terms of fulfillment:
Requisites of a Valid Period or Term
c. period is a future and certain
event. 1. Refers to a future time or event.
d. condition is an uncertain event. 2. Certain to come but can be extended.
2. in terms of time: 3. Must be physically and legally possible.
a. period refers only to the future.
Kinds of Period
b. condition may refer also to the
past. 1. As to effect:
3. in terms of influence on the obligation: a. Suspensive period (ex die) - wherein the
a. period fixes the time for the obligation begins only from a day certain or
performance of an obligation. It upon the arrival of the period; as in:
does prevent its existence
b. Resolutory period (in diem) - wherein
(suspensive) and conception in due
the obligation is performed only up to a day
time (resolutory).
certain and terminated upon the arrival of
b. condition causes the existence or
the period; as in:
the extinguishment of an
obligation. 2. As to source:
a. Legal period - when it is provided by law.
Both a period and a condition are required to be
legally and physically possible to be valid. b. Conventional/Voluntary period – when
it is agreed upon by the parties.
Condition vs. Term

c. Judicial period - when it is fixed by the c. Days - of twenty-four (24) hours.

courts.
d. Nights - from sunset to sunrise.
3. As to definiteness:
e. Calendar month - without regard to the Page | 24
a. Definite period - when it is fixed and its
number of days it may contain.
exact date or time is known.
NOTE: In computing a period, the first day shall
b. Indefinite period - when it is not fixed
be excluded, and the last day included.
and its exact date or time is unknown, but
surely happen. Judicial Periods
NOTE: Art. 1180 is akin to a potestative The Court may fix a period:
condition because it is dependent upon the will of
1. When there is no fixed period, but it can be
the debtor.
inferred that a period was intended by the
NOTE: In order for Art. 1189 to apply, it must be: parties from its nature and the
circumstances.
1. A real obligation
2. Concerns a specific thing. 2. When the duration of the period depends
upon sole will of the debtor.
Computation of Period (Art. 13)
In determining a period, the court aims:
A period shall be based on time as defined by the
law in terms of: 1. To enforce the intention of the parties, not
to modify the obligation.
a. Years - are of three hundred sixty-five
(365) days each, whether it is a regular year 2. To prevent the possibility of breach of
or a leap year; or twelve (12) calendar obligation.
months.
A complaint for right of action (to fix a period)
b. Months - are of thirty (30) days; unless it should be supported by:
refers to a specific calendar month in which
1. Facts showing or inferring that a period for
case it shall be computed according to the
the performance of obligation was
number of days the specific month
intended by the parties.
contains.

2. Facts showing that obligation is favorable Benefits of a Designated Period or Term –

to one party but forced upon unfavorably applicable only to conventional or voluntary
to the other. periods (Orit v. Balrodgan)
Such complaint must EXPRESSLY ask for the GR: Both the debtor and creditor (debtor Page | 25
court for a period, unless the facts are sufficient to cannot pay prematurely and creditor
show the need for such right of action. cannot demand prematurely)
A period cannot be fixed by the court: XPNs: (Only applicable if intended by the
parties)
1. If such period is agreed upon by the parties
and has already lapsed or expired. e. Benefit of Debtor – Debtor may
only be required to pay only at
2. If such period was already (previously)
maturity or before.
fixed by the court with the consent and
f. Benefit of the Creditor – Creditor
acceptance by the parties.
may demand anytime even before
NOTE: However, the parties may create a new maturity and cannot be compelled
period under a new agreement. to accept premature payment.
Conditions for Recovery for Premature Q: How do you determine to whose benefit it
Payment (Real Obligations) – Art. 1195 should redound? (Art. 1196)
a. Debtor mus be unaware of the period; or A:

b. Debtor must believe that the obligation is
a. For BOTH – if there is stipulated interest.
already due and demandable.
b. For CREDITOR – when stipulated that no
RATIO: By the principle of equity, it would be payment is to be made until the period
unjust to deprive the debtor of the thing and matures.
the fruits thereof without the arrival of the c. For DEBTOR –
maturity date. (1) when there is no stipulated interest; and
NOTE: HOWEVER, this is not absolute
There is a prima facie presumption of knowledge of
as even if there is no stipulation of interest,
prematureness. The burden of proof of
if the creditor has intended to protect
unknowingness is on the one who alleges.
himself from decline of the purchasing

power of the currency, the benefit may not the Civil Code gives the obligor the privilege to
redound to the debtor. substitute that prestation with another prestation.
(2) when it is stipulated that payment is to
i.e. You may be given a thing instead of
be made within the period.
paying in cash in pro bono cases such as Page | 26
The 10-year Prescriptive Period (Art. 1144) runs giving of apple or orange. (Although there
after the period provided has elapsed. is no obligation to pay in PAO).
Class Suits – Cases with multiple petitioners NOTE: For facultative obligations, only when the
seeking for the same damage, or that with multiple first obligation cannot be fulfilled that the debtor
same respondents. has the choice to substitute the prestation.
The case of Tañada v. Tuvera is an illustration of a Commentary of Dean LR:

case with multiple parties. Not just Tañada and
In Labor law, the labor code is pro-laborer. Right
Tuvera.
now we can see that under alternative and
Alternative obligation - There is a plurality of facultative, Civil Law is favoring the obligor or the
prestations but only one is due. Debtor is given a debtor, just like an employee.
right to choose with a different thing.
It’s because, in accordance with the civil code in
Here, all prestations are due, but since debtor alternative, although there are prestations involved,
cannot fulfill all of them, Civil Code gives obligor if there’s inability to fulfill all, debtor can choose.
a chance to fulfill at least one. Rationale: It is giving debtor all the chances. Para
mawala na yung obligasyon, mamili ka na lang. It is only
when the debtor he does not want to exercise that
Facultative obligation -
privilege that the same is given to creditor.
type of obligation where one thing is due, but
Dation in Payment (Art. 1245)
another is paid in its place. In such type of
obligations there is no alternative provided. The When property is alienated to the creditor in
debtor is given the right to substitute the thing due satisfaction of a debt in money. Here, the debtor
with another that is not due. delivers and transmits to the creditor the former's
ownership over a thing as an accepted equivalent
Here, there’s one prestation involved, when
demandable, and obligor cannot fulfill, however,

of the payment or performance of an outstanding former or of the latter may demand the fulfillment
debt. of or must comply with the whole obligation.
“Kapag hindi nakabayad ng pera, object na lang.” You will be assuming temporarily the obligation of
your other co-debtors and it will be your Page | 27
Obligations with Plurality of Parties
responsibility to demand to your co-debtors,
Joint Obligation – Even if there are multiple reimbursement. SC will always render a solidary
parties involved, the complainants may only go liability. Because that is one way of helping the
after the share of a joint respondent. complainant, so he will not implead all
respondents. For as long as a complainant can file
Solidary Obligation – Even if the share of the
against one debtor, even if he has other co-debtors,
debtor is apportioned, the complainant may
still, SC will render a decision making the liability
demand to the payment from one party solidarily
solidary. Between a joint and solidary, “onerous
liable.
yung solidary”.
NOTE: Joint obligation is more “humanitarian”
NOTE TO REMEMBER:
towards the debtor for he is only liable for his
share. 1. (a) Joint Obligations — “To each his own.’’
The presumption favors a joint2.liability in the Obligations — “One for all, all for one.”
(b) Solidary
absence of express stipulation.
Rules where there are two or more debtors OR
HOWEVER, the Court is highly inclined in ruling two or more creditors, the obligation is:
for a solidary liability for the more practical and
GR: Joint
speedy dispensation of the case.
XPNs:
Joint vs. Solidary Obligations
1. when there is a stipulation in the contract
Joint obligation - each obligor answers only for a
that the obligation is solidary
part of the whole liability and to each obligee
2. when the nature of the obligation requires
belongs only a part of the correlative rights.
liability to be solidary
Solidary (joint and several) obligation (in 3. when the law declares the obligation to be
solidum) - the relationship between the active and solidary
the passive subjects is so close that each of the

Instances where the law provides solidary 1. Agents

liability GR; Joint
XPN: Solidary on stipulation
1. Obligations from Torts
2. Co-Principals – solidary Page | 28
2. Obligations from Quasi-contracts
C. Employer-Employee for the latter’s
3. Provisions on devisees and legatees
Tortious Act – Primary as to employer;
4. Liabilities of principals, accomplices, and
Solidary as to Employee
accessories
D. Violations of Provisions of the Civil
5. Bailees in commodatum
Code on Human Relations – Solidary
NOTE:
Instances where the Law provides Solidary
There could be a valid stipulation that obligation Liability
on the part of the creditors be joint, and solidary
1. Art. 219 of the Family Code (Special
on the part of the debtor, and vice versa. In this case,
Parental Authority – only applicable to
the rule which applies is that which governs the
minors.
appropriate party or subject.
Who are liable?
Liabilities a. The school
b. Administrators
A. Partnerships
c. Teachers
1. Liabilities arising from Contracts –
d. the individual, entity or institution
Joint
engaged in child
XPN: In cases of employees
compensations for death in the line of *while under their supervision, instruction
duty. The liability is solidary so as to or custody.
prevent a situation wherein there is
2. Art. 2180 of the Civil Code (Vicarious
insolvency of one pf the partners and the
Liability) – Liability is based on the lack of
compensation would just be partially
failure to observe the diligence of a good
satisfied. (Liwanag v. WCC)
father of the family.
2. Liabilities arising from a delict or a quasi-
NOTE: This provision is applicable to
delict. – Solidary
legal-aged students notwithstanding
B. Agency

Special Parental Authority being no longer corresponding share. Going back to the indemnity
applicable. for damages, that’s the solution if the thing to be
3. Art. 2194 of the Civil Code - delivered is indivisible. If it joint and indivisible,
Responsibility of two or more persons who and only one debtor is willing to perform, it will be Page | 29
are liable for quasi-delict. converted into a singil for damages, it will be
quantified.
Indivisible Joint Obligation – the object is
indivisible (meaning it cannot be divided). NOTE: Although the law is silent, if the insolvent
Indivisibility does not refer to the obligation but co-debtor becomes capable, it should be upon his
the object (prestation to give). good faith to pay or reimburse. You may argue
under the principle of unjust enrichment.
Q: A, B, C all of them have obligation to delivery
one carabao to Miguel. But unfortunately, only B is Characteristics of Indivisible Joint Obligations
willing to deliver the carabao. But how can B (Art. 1209)
deliver it if A and C are opposing the former.
1. Although JOINT, creditor must proceed
Object is indivisible. Does it mean to say that B will
against ALL debtors since compliance of the
suffer the consequences?
obligation is only possible if all of them acted
A: NO. The cause of action that the Court may together.
give to satisfy the shares on an indivisible thing is 2. Demand must be made to ALL debtors.
to liquidate the share into the form of damages.
NOTE: A demand by one joint creditor is not a
In case of Insolvency, there will be as if there is an demand by all other co-creditors. While it would
accretion to the debt with the co-debtors as to the appear that by implication this should have been
insolvent debtor in proportion to the debt of each so, because it benefits and does not prejudice the
co-debtor. (Art. 1217) other creditors (Art. 1212), the share of credits is
independent with each other (Buard v. Lemes
Commentary of Dean LR:
Syndicate).
One person may be demanded for the entire, if the
3. There is indemnity for damages from the
object to be delivered is indivisible, it is better that
time anyone of the debtors does not comply
the obli is solidary. Pwedeng B can deliver agad.
with his undertaking (Art. 1224).
Problem will arise if liablity if joint. In a joint
relation, only required ka lang to deliver your

4. Insolvency of one of the debtors will not and conditions of his obligation. Once the others
make the others liable for his share. have fulfilled theirs, the creditor may then recover
5. Delivery must be made to ALL creditors in from them.
case the latter is joint.
Rule: Creditor can recover the whole solidary Page | 30
XPN: If one is an authorized representative
obligation from ANY of the solidary debtors
of the others.
MINUS the share of those unmatured terms and
6. A joint creditor is allowed to renounce his
conditions.
proportionate credit.
Assignment of Rights of a Solidary Creditor
Indivisibility of an obligation does not necessarily
(Art. 1213)
give rise to solidary liability or vice versa. (Art.
1210) GR: Solidary Creditor cannot assign his
rights.
NOTE: Not to be confused with the previous
Article on Indivisible Joint (or Solidary) XPN: If given consent by co-creditors.
Obligations. Here, what is indivisible is the subject
RATIO: Solidarity brings about
matter of obligation. (i.e., Joint Divisible, Joint
representation and confidence of all
Indivisible, Solidary Divisible, Solidary Indivisible)
involved parties.
Kinds of Solidarity
Payment on a Solidary Creditor
I. First Classification
GR: ANY solidary creditor.
1. Active - part of creditors or obligees.
2. Passive - part of debtors or obligors. XPN: To the one who made demand (judicial or
3. Mixed – on the part of either or both. extrajudicial).
II. Second Classification
Circumstances which Extinguish Obligations
4. Conventional – What was agreed upon.
5. Legal – What is imposed by law. A. Novation – Modification of obligation by
changing the object or principal conditions,
NOTE: There may be solidarity even if parties are
or substituting the debtor, or subrogating the
bound by different terms and conditions (Art.
debtor or a third person in the rights of a
1211). Thus, a creditor may only come after a
creditor. (i.e., substituting the payment of a
debtor’s share who has already fulfilled the terms
debt for rendering of services)

Here, the old contract is extinguished in A. If the remission by the creditor extended
lieu of the new one established. ONLY AFTER the whole obligation has
been paid – He has obligation to reimburse
NOTE: However, solidary creditors are
the one who paid. Reimbursement is a Page | 31
entitled to reimbursement by the accepting
matter of right because here remission is
creditor.
useless in lieu of complete payment of the
B. Compensation – occurs when parties in debt. Without reimbursement, there will be
their own rights are debtors and creditors to unjust enrichment.
each other. B. If the remission by the creditor extended
1. Total – When their mutual debt is equal. PRIOR to the full payment – No more
liability is extinguished totally. obligation to reimburse.
2. Partial – When their mutual debt in NOT
NOTE: Remission of the whole obligation
equal, liability is partially extinguished
obtained by one of the solidary creditors does
without prejudice to the remaining balance.
not entitle him to reimbursement (Art. 1220) as
C. Confusion or Merger – When the debtor
remission is essentially gratuitous.
and creditor becomes one and the same
person. i.e. When you advance payment for your friends
D. Remission or Condonation -Act of while buying a meal in a fastfood, upon delivery of
liberality where the creditor waives his right the order,“Sisingilin lang ng kaklase mo kung ano yung
to demand payment. meal na in-order mo”.
1. Total – Waiver of the entire amount of
NOTE: In all cases, mentioned above, the rights
the debt.
of a solidary creditor shall not be impaired. He is
2. Partial – Waiver of a portion of the debt.
subject to reimbursement by the co-creditor who
Q: “Kung 3 kayong may utang. Creditor extinguished the obligation.
remissed A’s share, does it mean to say A does
Enforcement of Liability from a Dispositive
not have the obligation? When is
Portion of the Decision by the Court
reimbursement an obligation in condonation?
If the decision provides liability to be “joint and
A: It depends.
several”, the judgment may be enforced against
ANY of the debtors.

Effect of Loss or Impossibility of Performance rate. The penal clause adds pressure to the obligor
in Solidary Obligations to fulfill his obligation.
1. Without Fault – No liability. NOTE: The stipulation of no demand needed

2. With Fault – there is liability (also for renders the obligation delayed without need of Page | 32
damages and interests). demand. The purpose of the penal clause is
3. Loss due to a fortuitous event considered as damages and of course to add
a. AFTER default – there is liability pressure on the lessee that “if you don’t pay on
because of delay. time, your bill will balloon”.
b. BEFORE default – no liability
Q: There are 4 solidary debtors, one of them
Kinds of Defenses in Solidary Liability (Art. paid the full amount of what was due, are the
1220) other three solidarily liable to pay him?
A: NO. By way of reimbursement, they are jointly
1. Those derived from the nature of
liable in proportion to their shares to the one who
obligation (complete defense)
paid in full (Art.1212).
2. Those personal to the debtor
GR: Complete Defense NOTE: In this case, it is not an ordinary joint
XNPs: If defense is non-fulfillment of liability; for insolvency of one brings the liability to
condition or prematurity of the term – be shouldered by the rest.
Partial Defense
Voluntary payment by a solidary creditor of a
3. Those personal to others (same rules as the
prescribed debt or an illegal obligation (Art.
second).
1218) will not entitle him to reimbursement; for
Penal Clause - A stipulation in a contract which there is no longer any obligation to pay, or that the
serves as an accessory undertaking to substitute prohibited transaction does not entitle a person to
indemnity for damages and payment of interest for any right (ex turpi causa non oritur). If by mistake he
non-compliance. (Art. 1226) was reimbursed of this, the unknowing debtor may
recover through a solutio indebiti.
In a lease contract. lessee shall pay monthly rental
without need of demand. No demand no delay. For Q: Is the penalty imposed in the penal clause
every day of delay there is a penalty of the rental subject to the Court determination of
unconscionability?

A: NO. Penalty is different from interest. The law Payment - Termination of the obligation not only
regulates imposition of interest not the penal through delivery of money but also performance of
clause. Interest is income generation; penalty is not obligation (Art. 1231).
meant to be the same. Page | 33
Q: Why performance also?
Q: Does payment of the principal obligation
A: Payment cannot be restricted to giving because
without the creditor demanding for the
there are other prestations other than to give.
payment of the penalty a waiver?
i.e., As a student, aside from payment of tuition, the
A: NO. Although there are latches, it is not
obligation is also to study. Answering the questions
tantamount to an express waiver thereof. Payment
right is tantamount to a payment of the obligation
of the penalties should still be on good faith.
which is a prestation to do.
Q: In debts with interests the interest is
Q: Does payment really extinguish the
effected on the interest first before the
obligation?
principal (Art. 1253), what rule is applicable as
to penalties? A:
A: The penalty is not considered an interest but It depends. Who makes the payment?
payment of damages for delay of payment. It will
1. If the payee is the debtor/obligor – YES.
be included in the principal amount to be paid.
2. If the payee is a third person
Proof of actual damages is not necessary to entitle a. If with knowledge and consent of
the demandability of the penalty imposed by the debtor – YES but with
penal clause. (Art. 1228). REIMBURSEMENT and
SUBROGATION
Modes of Extinguishment of Obligations
b. If without knowledge and consent of
debtor- YES but with BENEFICIAL
We must go back to the definition of obligations…
REIMBURSEMENT
Obligations is the juridical necessity to give, to do,
or not to do. It is not merely a necessity to give? Q: What is beneficial reimbursement?
A: Only to the extent of the amount actually

benefitted to the debtor or obligor.

A person who pays a debt for the account of Q: What remedy does the third person have
another may recover from the debtor the sum so against the creditor?
paid out, at least to the extent in which the payment
A: Solutio indebiti because there would be unjust
may have been beneficial to the debtor. Such a Page | 34
enrichment on the part of the creditor.
payment cannot be considered as a payment of
what is not due under Article 2154, and cannot be Q: Who may receive payment to extinguish the
recovered from the creditor by the person who obligation?
paid; the right of the payor in such case is against
A: (Art. 1240)
the debtor whose obligation he has paid. The
debtor who knows that another has paid his 1. To the one whose obligation has been
obligation for him, and who does not object constituted.
thereto or repudiate the same at any time, must pay 2. His successor in interest,
the amount advanced by the third person 3. Any person authorized to receive it.
Generally, the third person who paid another’s
Q: Does the receipt of payment by those third
debt is entitled to recover the full amount he had
parties excluded from the enumeration
paid. The law, however, limits his recovery to the
invalidate the payment?
amount by which the debtor has been benefited, if
the debtor has no knowledge of, or has expressed A: Not all the time. If paid by an unauthorized
his opposition to such payment. person or incapacitated person, shall also be valid
insofar as it has redounded to the benefit of the
It is optional for the creditor to accept payment
creditor.
from a third person. If the debtor opposes the
payment by a third person, the latter will be entitled Such benefit to the creditor need not be proved in
to recover from the debtor only to the extent that the following cases: (Art. 1241)
the payment has benefited him. But as between the
1. If after the payment, the third person
debtor and the creditor, the obligation is
acquires the creditor's rights;
extinguished.
2. If the creditor ratifies the payment to the
Note: The obligation between the creditor and third person;
debtor is already extinguished, but no prejudice 3. If by the creditor's conduct, the debtor has
against the third person who paid on his behalf. been led to believe that the third person had
authority to receive the payment.

Kinds of Payment
4. Consignation - manifestation made by the
1. Dacion en pago – alienating another
debtor to the creditor of his desire to
property in lieu of payment.
comply with his obligation, with the offer of Page | 35
NOTE: Pactum commissorium is prohibited
immediate performance. Consignation is
by law (Art. 2088). In this practice,
the deposit of the object of the obligation in
alienation is involuntary on the part of the
a competent court in accordance with rules
debtor.
prescribed by law, after the tender of
2. Application of Payment - The designation
payment has been refused or because of 35
of the debt which is being paid by a debtor
See page 317 circumstances which render
who has several obligations of the same kind
direct payment to the creditor impossible or
in favor of the creditor to whom payment is
inadvisable The tender of payment,
made.
therefore, is a preparatory act which
Q: Who has the preferential right to
precedes consignation. The tender of
choose application of payment?
payment by itself does not cause the
A:
extinguishment of the obligation, unless
1. Preferential right is on the debtor.
completed by consignation. It is the
2. Only when the debtor does not exercise
consignation which constitutes a form of
the right, then the creditor may exercise.
payment, and must follow, supplement or
3. If neither exercise, it is applied to the most
complete to the tender of payment in order
onerous and so on.
to discharge the obligation In instances
where no debt is owing, consignation is not
3. Cession – Debtor may cede or assign his
proper
property to his creditors in payment of his
debts. This cession, unless there is Circumstances where creditor may refuse
stipulation to the contrary, shall only release payment
the debtor from responsibility for the net
1. Not legal tender
proceeds of the thing assigned. The
2. Without interest
agreements which, on the effect of the
3. Conditional payment
cession, are made between the debtor and
4. Due obligation
his creditors (Art. 1255).

obligation is recreated in the same condition that it

had when the merger took place.
Merger or Confusion -the meeting in one person
of the qualities of creditor and debtor with respect NOTE: Under the commentaries, an example of
to the same obligation. It erases the plurality of confusion is often represented in cases of Page | 36
subjects of the obligation, and extinguishes the Negotiable Instruments where the instrument is
obligation because it is absurd that a person should indorsed back to the drawer or maker. Although,
enforce an obligation against himself. so far, no Supreme Court case has yet been decided
Furthermore, the purpose for which the obligation with regards to this method of extinguishment of
may have been created are considered as fully obligation.
realized by the merger of the qualities of debtor
NOTE: The extinguishment of the principal
and creditor in the same person.
obligation through confusion releases the
Elements of Confusion guarantors, because the obligation of the latter is
merely accessory When the merger takes place in
1. It must take place between the creditor and
the person of a guarantor, the obligation is not
the principal debtor.
extinguished. Thus, if the guarantor acquires the
2. The very same obligation must be involved,
credit, his obligation as a guarantor is extinguished,
for if the debtor acquires rights from the
but the principal obligation subsists and can be
creditor, but not the particular obligation in
enforced by him against the debtor and other co-
question there will be no merger.
guarantors The same rule applies in cases of surety.
3. The confusion must be total or as regards
the entire obligation. Compensation is a mode of extinguishment to the
concurrent amount, the obligation of those
NOTE: Merger or confusion arises from any act
persons who in their own right are reciprocally
which brings about a succession to the credit,
debtors and creditors of each other. It is the
whether it be universal or particular, inter vivos or
offsetting of two obligations which are reciprocally
mortis causa. The most frequent, however, is by
extinguished if they are of equal value, or
way of testate or intestate succession in which the
extinguished to the concurrent amount if of
debtor inherits the credit from the creditor When
different values. As its name indicates,
the act which occasions the merger is susceptible
compensation is a sort of balancing between two
of termination or revocation, the merger that has
obligations; it involves a figurative operation of
taken place is also terminated or revoked, and the

weighing two obligations simultaneously in order of the condition A debt is liquidated when its
to extinguish them to the extent in which the existence and amount are determined.
amount of one is covered by the other. By this
5. Neither of them there be any retention or
means, payment is simplified and assured between
controversy, commenced by third persons Page | 37
persons who are indebted to each other.
and communicated in due time to the debtor.
Elements of Compensation NOTE: There can be no legal
compensation if either of the
1. Debtor-Creditor Relationship of the same
obligations is alternative or facultative.
level.
But the mere fact that one obligation
NOTE: The relationship must be pertaining has a penal clause, while the other has
to either mutually the principal or mutually the none, will not prevent legal
accessory contract. compensation, because the penal clause
is a mere guaranty of fulfillment and
2. Both debts consist in a sum of money, or if
does not affect the object of the
the things due are consumable, they be of the
obligation.
same kind, and also of the same quality if the
latter has been stated; NOTE: Compensation may be total or partial.
3. Obligations are both due and demandable.
NOTE: Compensation has two advantages over
4. Obligations are liquidated and demandable.
payment. In the first place, it is simple, taking effect
NOTE: Debts must be enforceable (there is without action by either party to extinguish their
already demand made, if needed) in court, respective obligations. In the second place, there is
there being no apparent defenses inherent in more guaranty in making the credit effective,
them. The obligations must be civil because there is less risk of loss by the creditor due
obligations, excluding those that are purely to insolvency or fraud of the debtor.
natural. Obligations which are subject to
NOTE: Taxes cannot be subject to
suspensive conditions cannot be set up by way
Compensation. As held in Corders v. Ganda, internal
of compensation before the fulfillment of the
revenue taxes cannot be the subject of
condition, although once fulfilled, the
compensation:
provisions of article1187 should be observed
as to the retroactive effect of the happening

RATIO: government and taxpayer are not is implied, the acts of the parties must clearly
mutually creditors and debtors of each demonstrate their intent to dissolve the old
other'…and a "claim for taxes is not such a obligation as the moving consideration for
debt, demand, contract or judgment as is the emergence of the new one. Page | 38
allowed to be set-off."
Implied novation necessitates the incompatibility
Pledge vs. Chattel Mortgage between the old and new obligation be total on
every point such that the old obligation is
Physical Possession transferred – Pledge
completely superseded by the new one. The test
No Physical Possession transferred– Chattel of incompatibility is whether they can stand
Mortgage. together, each one having an independent
existence; if they cannot and are irreconcilable,
NOTE: The newly-enacted Personal Property
the subsequent obligation would also extinguish
Security Law repealed Chattel Mortgage and
the first “An extinctive novation would thus have
Pledge Law.
the twin effects of, first, extinguishing an existing
Novation – the extinguishment of an obligation by obligation and, second, creating a new one in its
the substitution or change of the obligation by a stead.
subsequent one which extinguishes or modifies the
2. Modificatory novation - the change
first, either by changing the object or principal
brought about by any subsequent agreement
conditions, or by substituting the person of the
is merely incidental to the main obligation
debtor, or by subrogating a third person in the
(e.g., a change in interest rates or an
rights of the creditor.
extension of time to pay); in this instance, the
NOTE: Novation may either be extinctive or new agreement will not have the effect of
modificatory, much being dependent on the nature extinguishing the first but would merely
of the change and the intention of the parties. supplement it or supplant some but not all of
its provisions.
1. Extinctive novation – obligation is
terminated by the creation of a new Elements of Novation
obligation that takes the place of the former;;
1. A previous existing valid obligation - There
it is never presumed there must be an
must be an original existing obligation at
express intention to novate; in cases where it
the time of novation. This means that the

obligation must not only be valid, but also themselves in favor of another or others, or
that it has not been extinguished by any reciprocally, to the fulfillment of a prestation to
cause. give, to do or not to do” As a consensual relation,
2. The agreement of all the parties to the new a contract must be shown to exist as a fact, clearly Page | 39
obligation - Novation requires the creation and convincingly.
of a new contractual obligation, as well as
NOTE: There must be at least two parties to every
the extinguishment of the old. There must
contract, and their capacity and consent are
be consent of all the parties to the
essential to its existence. The number of parties,
substitution, resulting in the extinction of
however, should not be confused with the number
the old obligation and the creation of a
of persons. A single person can represent two
valid one.
parties, and one party can be composed of two or
3. The extinguishment of the old contract -
more persons.
This extinguishment may take place by
express stipulation in the new agreement, NOTE: The legal capacity of the parties is an
or by implication from the incompatibility essential element for the existence of the contract.
between the old and the new contracts. More accurately, it is an indispensable condition
4. The validity of the new one. for the existence of consent, because there is no
effective consent in law without the capacity to
give such consent. Because of this connection of
cause and effect between capacity and consent, the
CONTRACTS law does not expressly enumerate the former as a
separate requisite for the validity of contracts; legal
consent presupposes capacity Want of consent;
Contract - an agreement on the declaration of a
Consent is essential for the existence of a contract,
common will. It has been defined in other codes as
and where it is wanting, the contract is non-
“a bilateral legal transaction to create, modify or
existent.
terminate a legal tie between the parties”.
Characteristics of a Contract
According to Sanchez Roman, who defines it as “a
juridical convention manifested in legal form, by 1. Freedom – the right of parties to enter
virtue of which one or more persons bind into contractual relations.

NOTE: In labor law, in regards to mandated which, according to their nature, may be in
benefits, it is the law which provides such not keeping with good faith, usage and law.
the freedom the parties exercised in the (1258).
execution of the employment contract. Page | 40
2. Mutuality - its validity and performance Kinds of Elements of Contracts

cannot be left to the will of only one of the
1. The essential elements or those without
parties.
which there can be no contract; these are
Contracts of adhesion – Contract is already consent, subject matter, and cause.
prepared by one of the contracting parties. 2. The natural elements or those which exist
as part of the contract even if the parties do
NOTE: Since it is only by one of the
not provide for them, because the law, as
parties, in cases of ambiguity, it will be
suppletory to the contract, creates them;
strictly construed against the
the warranty against eviction in contract of
formulator.
purchase and sale is an example.
3. Relativity - it is binding only upon the 3. The accidental elements or those which
parties and their successors. are agreed upon by the parties and which
4. Obligatory force - it constitutes the law as cannot exist without being stipulated.
between the parties.
NOTE: Perfection is different from validity.
NOTE: The obligatory force of contracts
Validity may be effected by non-compliance with
is embedded in Arts. 1315 and 1159.
formal requirements.
Article 1159. Obligations arising from Formal requisites in **** contracts, it is void ab
contracts have the force of law between the initio (i.e., Donations not put in a public
contracting parties and should be complied instrument.)
with in good faith. (1091a).
Stages of Contract
Article 1315. Contracts are perfected by
mere consent, and from that moment the 1. Preparation, conception, or generation,
parties are bound not only to the which is the period of negotiation and
fulfillment of what has been expressly bargaining, ending at the moment of
stipulated but also to all the consequences agreement of the parties.

2. Perfection or birth of the contract, which is GR: All things or services may be the object of
the moment when the parties come to agree contracts.
on the terms of the contract.
XPNs:
3. Consummation or death, which is the Page | 41
fulfillment or performance of the terms 1. Things outside the commerce of men (Art.
agreed upon in the contract. 1347)
2. Intransmissible rights
Essential Elements of a Contract
3. Future inheritance, except in cases
expressly authorized by law
According to Art. 1318, There is no contract
unless the following requisites concur: 4. Services which are contrary to law, morals,
good customs, public order or public
1. Consent of the contracting parties;
policy
2. Object certain which is the subject matter of
5. Impossible things or services
the contract;
6. Objects which are not possible of
3. Cause of the obligation which is established.
determination as to their kind.
Object
Q: What about future inheritance? May it be an
Refers to the subject matter of the contract. object of a contract?
The object of a contract is not limited to things but A: YES.

also services.
1. Under Art. 130 of the Family Code, which
Requisites of a Valid Object allows the future spouses to give or donate
to each other in their marriage settlement
1. Determinate as to kind
their future property to take effect upon the
NOTE: Even if not determinate, provided
death of the donor and to the extent laid
it is possible to determine the same without
down by the provisions of the NCC relating
the need of a new contract);
to testamentary succession; and
2. Existing or the potentiality to exist
2. Under Art. 1080 of the Civil Code, which
subsequent to the contract
allows a person to make a partition of his
3. Must be licit or legal
estate among his heirs by an act inter vivos,
4. Within the Commerce of man
5. Transmissible

provided that the legitime of the 4. For Accessory Contracts - identical with cause
compulsory heirs is not prejudiced. of principal contract, the loan which it derived
its life and existence
NOTE: Except in cases authorized by law,
future inheritance cannot be an object of Rules Relative to Cause Page | 42
contract because its extent, amount or quantity

1. Absence of cause – confers no right and
is not determinable.
produces no legal effect.
NOTE: If asked regarding the status of the 2. Failure of cause – does not render the contract
contract, go to your “check-list”. Are the elements void.
concurrent? If one of the elements is absent, 3. Illegality of cause – contract is null and void.
then the contract is VOID. 4. Falsity of cause – contract is void; unless the
parties show that there is another cause which
Cause
is true and lawful.
Refers to the essential reason which moves the 5. Lesion or inadequacy of cause – does not
parties to enter into the contract It is the invalidate the contract, unless:
immediate, direct and proximate reason which a. there is fraud, mistake, or undue influence;
justifies the creation of an obligation through the b. when the parties intended a donation or
will of the contracting parties. some other contract;
c. in cases specified by law
Requisites of a Valid Cause
Q: Can the motive and cause be the same in
1. Existence
entering in the contract?
2. Truthfulness
3. Lawful A: YES. In the case of community pantries, “to
help” is both the cause and motive in the act of
Kinds of Cause
donation.
1. For Onerous Contacts – the prestation or
Forms
promise of a thing or service by the other
2. For Remuneratory Contracts - the service or Kinds of Contracts
benefit remunerated 1. Consensual contracts - perfected by the
mere meeting of the minds of the parties
3. For Gratuitous Contracts – the mere liberality
of the donor or benefactor

2. Real contracts - require for their perfection c. Antichresis - the amount of the principal
both the consent of the parties and the and interest must be in writing (Art. 2134).
delivery of the object by one party to the 3. Agency to sell real property or an interest
other. therein - authority of the agent must be in
3. Solemn or Formal contracts – contracts writing (Art. 1874). Page | 43
which must appear in writing 4. Stipulation to charge interest - interest must
GR: Form is not required in consensual contracts be stipulated in writing (Art. 1956).
(as long as all the essential requisites are present) 5. Stipulation limiting common carrier's duty of
extraordinary diligence to ordinary diligence:
XPN: When the law requires it to be in writing for
a. Must be in writing, signed by shipper or
validity, enforceability, or convenience.
owner
Formalities Required in Specific Contracts b. Supported by valuable consideration other
than the service rendered by the common
1. Donations carrier
a. Personal property – if value exceeds c. Reasonable, just and not contrary to public
5,000, the donation and acceptance must policy (NCC, Art. 1744).
both be written (Art. 748). 6. Chattel mortgage - personal property must
b. Real property: be recorded in the Chattel Mortgage Register.
i. Donation must be in a public (Art. 2140)
instrument, specifying therein the
property donated and value of Contracts which require to be in WRITING
charges which donee must satisfy.
1. Donation of personal property whose value
ii. Acceptance must be written,
exceeds five thousand pesos
either in the same deed of
2. Sale of a piece of land or any interest therein
donation or in a separate
through an agent
instrument.
3. Agreements regarding payment of interest in
iii. If acceptance is in a separate
contracts of loan
instrument, the donor shall be
4. Antichresis
notified thereof in authentic form,
and this step shall be noted in Contracts which require to be in a PUBLIC
both instruments (Art. 749). INSTRUMENT
2. Partnership where real property contributed
1. Donation of real properties
a. There must be a public instrument
2. Partnership where immovable property or
regarding the partnership;
real rights are contributed to the common
b. The inventory of the realty must be made,
fund
signed by the parties and attached to the
3. Acts and contracts which have for their
public instrument (Art. 1773).
object the creation, transmission,
modification or extinguishment of real rights

over immovable property; sale of real 1. Meeting of the minds

property or of an interest therein is governed NOTE: If there is no meeting of the minds,
by Arts. 1403 (2), and 1405 the proper remedy is annulment and not
4. The cession, repudiation or renunciation of reformation.
hereditary rights or of those of the conjugal 2. True intention is not expressed in the Page | 44
partnership of gains. instrument
5. The power to administer property or any 3. By reason of:
other power which has for its object an act a. Mistake;
appearing or which should appear in a public b. Accident
document or should prejudice a third person c. Relative simulation
6. The cession of actions or rights proceeding d. Fraud
from an act appearing in a public document. e. Inequitable conduct
4. Strong, clear and convincing proof (of the
NOTE: Article 1358 of the Civil Code which
third requisite)
requires the embodiment of certain contracts in a
public instrument is only for convenience, and Instances where Reformation is
registration of the instrument only adversely, APPLICABLE
affects third parties. Formal requirements are,
1. Mutual mistake
therefore, for the benefit of third parties. Non-
compliance therewith does adversely affect the 2. Mistake on one party and fraud on the other
validity of the contract nor the contractual rights (Art. 1362)
and obligations of the parties.
3. Mistake on one party and concealment on the
Contracts which require REGISTRATION other (Art. 1363).
1. Chattel mortgage 4. Ignorance, lack of skill, negligence or bad faith
2. Sale or Transfer of Cattle (Art. 1364).
Reformation 5. Right of repurchase (Art. 1365).
It is a remedy to conform to the real intention of
the parties due to mistake, fraud, inequitable Instances where Reformation of instruments;
conduct, accident (Art. 1359). is INAPPLICABLE
RATIO: It would be unjust and 1. Simple, unconditional donations inter vivos

inequitable to allow the enforcement of a
written instrument which does not reflect 2. Wills
or disclose the real meeting of the minds of 3. When the agreement is void (Art. 1366).
the parties.
4. When an action to enforce the instrument is filed
Requisites of Reformation (estoppel)

5. If mistake, fraud, inequitable conduct, or 3. If some stipulation of any contract should

accident has prevented a meeting of the minds of admit of several meanings, it shall be
the parties understood as bearing that import which is
most adequate to render it effectual (, Art.
NOTE: The remedy here is annulment of
1373). Page | 45
contract.
Principle of Effectiveness
6. When the contract is unenforceable because of
failure to comply with the statute of frauds.’ Posits that where two interpretations of the same
contract language are possible, one interpretation
NOTE: The prescription for filing is 10 years
having the effect of rendering the contract
from the date of the execution of the instrument at
meaningless while the other would give effect to
the instance of:
the contract as a whole, the latter interpretation
1. Either party or his successors in interest (if must be adopted.
the mistake is mutual);
The various stipulations of a contract shall be
2. Upon petition of the injured party
interpreted together, attributing to the doubtful
3. His heirs and assigns
ones that sense which may result from all of them
Interpretation of Contracts taken jointly.
Rules:
Doctrine of Complementary Contracts
1. If the terms of a contract are clear and leave Construed Together
no doubt upon the intention of the
contracting parties, the literal meaning of • The various stipulations of a contract shall be
its stipulations shall control. interpreted together, attributing to the
2. If the words appear to be contrary to the doubtful ones that sense which may result
evident intention of the parties, the latter from all of them taken jointly (Art. 1374).
shall prevail over the former (NCC, Art. • When there are several provisions in a contract,
1370). the construction to be adopted should be that
NOTE: In order to judge the intention of one which will give effect to all provisions.
the contracting parties, their • A contract must be read in its entirety.
contemporaneous and subsequent acts Piecemeal interpretation must be avoided.
shall be principally considered (Art. 1371). • Under this doctrine, an accessory contract
However, the general terms of a contract must be read in its entirety and together with
may be, they shall not be understood to the principal agreement.
comprehend things that are distinct and • Words which may have different significations
cases that are different from those upon shall be understood in that which is most in
which the parties intended to agree (Art. keeping with the nature and object of the
1372). contract (Art. 1375).

• The usage or custom of the place shall be 2. Expressio Unius est exclusion alterius- The
borne in mind in the interpretation of the express mention of one person, thing or
ambiguities of a contract, and shall fill the consequence implies the exclusion of all
omission of stipulations which are ordinarily others.
established (Art. 1376). Page | 46
• The interpretation of obscure words or 3. Noscitur a sociis – Interpretation should be
stipulations in a contract shall not favor the determined by considering the words with
party who caused the obscurity (Art. 1377). which it is associated in the context.
• When it is absolutely impossible to settle
doubts by the rules established in the preceding 4. Casus omissus – (similar to expressio unius)
articles, and the doubts refer to incidental
circumstances of a gratuitous contract, the least Dean LR’s Commentary:
transmission of rights and interest shall prevail.
• If the contract is onerous, the doubt shall be As to the status of contracts, just go back to the
settled in favor of the greatest reciprocity of provisions of the Family Code on Marriage. What
interests. is a ground for nullity, annulment, and the validity
• If the doubts are cast upon the principal object of marriage may be the same for an ordinary
of the contract in such a way that it cannot be contract.
known what may have been the intention or XPN: Fraud in ordinary contracts
will of the parties, the contract shall be null and
void (NCC, Art. 1378). Defective Contracts
• The principles of interpretation stated in Rule
123 of the Rules of Court shall likewise be Degree of Defectiveness in Contracts
observed in the construction of contracts (in descending manner as to validity)
NOTE: The provisions of Rule 123 of the 1. Rescissible Contracts
Rules of Court referred to are Secs. 58-67, 2. Voidable Contracts
now Secs. 8-17, Rule 130, New Rules of 3. Unenforceable Contracts
Court. 4. Void or Inexistent Contracts
Rescission
Some of the more common rules of statutory
Contracts validly constituted but nevertheless
construction used in interpreting contracts…
maybe set aside due to a particular economic
1. Ejusdem generis – General terms following damage or lesion caused to either to one of the
an enumeration of specific terms must parties or to a third person. It may be set aside in
necessarily be included in the class. (e.g., whole or in part, or up to the extent of the damage
Tocino, longganisa, ham, and other frozen caused.
processed foods)

Rescissible Contracts c. The things must not have been passed

A. Under Art. 1381: to third persons in good faith;
1. Entered into by guardians whenever the d. It must be made within 4 years.
wards whom they represent suffer lesion by Elements of Rescission
more than ¼ of value of the property 1. The contract must be valid or voidable (not Page | 47
2. Agreed upon in representation of absentees, void)
if absentee suffers lesion by more than ¼ of 2. There is economic lesion or financial
value of property prejudice to a party or a third person.
3. Contracts where rescission is based on fraud 3. Rescission requires mutual restitution.
committed on creditor and cannot collect the NOTE: Voidable contracts may also be subjected
claim due (accion pauliana) to rescission by prejudiced creditors. This is an
NOTE: Contracts which are rescissible alternative remedy if the injured party fails in the
under the third paragraph of Art. 1381 are annulment of the contract.
valid contracts, although undertaken in fraud Rescission Rescission
of creditors. If the contract is ‘‘absolutely (Art. 1380) (Art. 1191)
simulated’’, the contract is not merely Purpose Rescission of Resolution of
Contracts obligations
rescissible but inexistent, although
Basis Lesion or Non-
undertaken as well in fraud of creditors. Fraud upon performance
4. Contracts where the object involved is the creditors or non-
subject of litigation; contract entered into by fulfillment of
defendant without knowledge or approval of obligation
Proper Party Either Injured Party
litigants or judicial authority
contracting
5. Payment by an insolvent – on debts which parties or third
are not yet due; prejudices the claim of others persons
6. Provided for by law Court grant Cannot Can
B. Under Art. 1382: of term or
Payments made in the state of insolvency to period for
compliance
whose fulfillment the debtor could not be Materiality Immaterial Material
compelled at the time they were effected of Non-
(Premature payment under state of Performance
insolvency).
NOTE: Under this rescissible contract, NOTE: Rescission is a subsidiary remedy. There
a. Debtor has no other means to maintain must be no other remedy left for the prejudiced
reparation; creditor and that there is inability to collect the
b. Debtor must be able to return claims (Art. 1383).
whatever he may be obliged to return
Voidable Contracts
due to rescission;

Contracts where consent is vitiated either by the Kinds of Voidable Contracts

incapacity of one of the contracting parties or by
1. Those where one of the parties is incapable of
mistake, violence, intimidation, undue influence or
giving consent;
fraud. These contracts are binding, unless they are
NOTE: If both parties are incapacitated to
annulled by a proper action in court. It is Page | 48
give consent, the contract is unenforceable and
susceptible of ratification.
not merely voidable.
Ratification 2. Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or
The act or means by virtue of which, efficacy is
fraud.
given to a contract which suffers from a vice of
curable nullity. Ratification extinguishes the action Unenforceable Contracts
to annul a voidable contract (Art. 1392).
Contracts which cannot be enforced by action or
NOTE: Ratification cleanses the defective complaint, unless they have been ratified by the
contract from its inception. party or parties who did not give consent thereto.
Kinds of Ratification NOTE: An unenforceable contract is

valid although it produces no legal effect.
1. Express –the desire of the innocent party to
convalidate the contract, or his waiver or Kinds of Unenforceable Contracts
renunciation of his right to annul the contract
1. Those entered into the name of another
is clearly manifested verbally or formally in
person by one who has been given no
writing.
authority/legal representation or acted
2. Implied (tacit) – it is the knowledge of the
beyond his powers;
reason which renders the contract voidable and
NOTE: This is otherwise referred to as
such reason having ceased, the person who has
Unauthorized contracts
a right to invoke it should execute an act which
2. Those that do not comply with the Statute of
necessarily implies an intention to waive his
Frauds
right.
3. Those where both parties are incapable of
e.g., Accepting a new serving from Jollibee after
giving consent to a contract
complaining.
Q: If by its nature an unenforceable contract
GR: Retroactivity applies in ratification of
may not be assailed in a court proceeding,
contracts.
what is the remedy available to the creditor?
XPN: When the rights of innocent third persons
A: The creditor may compel the debtor to reduce
will be prejudiced, ratification will not take effect.
the agreements in writing to comply with the
NOTE: Ratification does not require the
Statute of Frauds.
conformity of the contracting party who has no
right to bring the action for annulment.

Statue of Frauds 2. A special promise to answer for the debt,

default or miscarriage of another;
Refers to statutes which require certain classes of
3. An agreement made in consideration of
contracts to be in writing. It requires certain
marriage, other than a mutual promise to
contracts enumerated therein to be evidenced by
marry; Page | 49
some note or memorandum subscribed by the
4. An agreement for the sale of goods, chattels
party charged or by his agent in order to be
or things in action, at a price not less than
enforceable. The Statute does not deprive the
500 pesos, unless the buyer accepts and
parties of the right to contract with respect to the
receives part of such goods and chattels, or
matters therein involved, but merely regulates the
the evidences, or some of them, of such
formalities of the contract necessary to render it
things in action, or pay at the time some part
enforceable. Evidence of the agreement cannot be
of the purchase money; but when a sale is
received without the writing or a secondary
made by an auction and entry is made by the
evidence of its contents.
auctioneer in his sales book, at the time of
RATIO: To prevent fraud and perjury in the sale, of the amount and kind of property
the enforcement of obligations depending sold, terms of sale, price, names of the
for their evidence on the unassisted purchasers and person on whose account
memory of witnesses, by requiring certain the sale is made, it is a sufficient
enumerated contracts and transactions to memorandum;
be evidenced by a writing signed by the NOTE: “Things in action” refer
party to be charged. to those incorporated or intangible
personal property (e.g., one’s
Q: Name an instance wherein an personal credit).
unenforceable contract may be excluded from NOTE: In cases of auction sale,
the Statute of Frauds. the auctioneer has made an entry at
the time of the sale as to the:
A: If it has already been subjected to partial
a. Amount
fulfilment. The Statute of Frauds applies only to
b. Terms of the sale
executory contracts, not to those that are partially
c. Price
or completely fulfilled.
d. Names of purchasers
Contracts Covered under the Statute of A valid memorandum has been
Frauds made.
5. An agreement for the leasing for a longer
Pursuant to Art. 1403 (2); period than one (1) year, or for the sale of
1. An agreement that by its terms is not to be real property or of an interest therein;
performed within a year from the making 6. A representation as to the credit of a third
thereof; person

NOTE: Applying the exclusio unius rule, the Q: How are unauthorized contracts ratified?
enumeration is exclusive.
A:
Principles Governing the Statute of Frauds
1. By failing to object to the presentation of
1. It only applies to executory contracts and not oral evidence. Page | 50
partially or completely executed. 2. By accepting benefits arising from the
2. It cannot apply if the action is neither for unauthorized contract.
damages because of violation of an
Q: What constitutes sufficient memorandum?
agreement nor for the specific performance
of said agreement. A:
3. It is exclusive as it applies only to the
agreements or contracts enumerated in Art. 1. No Particular Form needed (in terms of
1403. language used or kind of instrument)
4. The defense of Statute of Frauds may be 2. MUST only be sufficient in terms (all the
waived. appropriate information) and signature.
5. It is a personal defense; it cannot be assailed
Void and Inexistent Contracts
by third persons.
6. Contracts infringing the Statute of Frauds are Contracts which lack absolutely either in fact and
not void; they are merely unenforceable. or in law one or some or all of those elements
7. It is a Rule of Exclusion as it excludes oral which are essential for its validity. Void contracts
testimony. have no force and effect from the beginning and
8. It does not determine the credibility or which cannot be ratified or validated by lapse of
weight of evidence. It merely concerns itself time.
with the admissibility.
9. It does not apply if the claim is that the Kinds of Void Contracts
contract does not express the true agreement 1. Those lacking in essential elements
of the parties. a. Those whose cause, object or purpose is
NOTE: If the contract is enforceable under contrary to law, morals, good customs,
Statute of Frauds because it is duly evidenced by public order or public policy: illicit cause, or
writing, note, or memorandum, but it cannot be object
registered because it not in a public instrument, the b. Those which are absolutely simulated or
party concerned may compel the opposite party to fictitious: no cause
formalize it in the proper form required by law. If c. Those whose cause or object did not exist at
the latter refuses, the court will issue necessary the time of the transaction: no cause or
order to that effect (Art. 1406). object
d. Those whose object is outside the
NOTE: An unenforceable contract may be commerce of man: no object
subjected to ratification pursuant to Art. 1317.

e. Those which contemplate an impossible Q: May a void contract, being imprescriptive,

service: no object be subject to laches and estoppel?
f. Those where the intention of parties relative
A: YES. As a general rule, the action or defense for
to principal object of the contract cannot be
the declaration of the ineistnce of a contract does
ascertained Page | 51
not prescribe (Art. 1410). However, when there is
2. Those prohibited by Law
laches on the part of the party assailing this
a) Pactum commisorium – the creditor
contract, he may no longer use the action or
appropriates to himself the things given by
defense.
way of pledge or mortgage to fulfill the debt.
b) Pactum de non alienando – an agreement RATIO: Clean hands doctrine
prohibiting the owner from alienating the
mortgaged immovable. Clean Hands Doctrine
c) Pactum leonina – a stipulation in a partnership
“He who comes into equity, must come with clean
agreement which excludes one or more
hands”. You may not go to Court to seek redress
partners from any share in the profits or
if you are at fault.
losses.
d) Illegal or illicit contracts (e.g., contract to sell NOTE: Remedy is important for you may not get
marijuana) a judgment filing the improper remedy in Court.
Filing the improper remedy may deem your
Q: What if a contract is valid to one part and
petition ripe for outright dismissal.
void as to the others?
Doctrine of Pari Delicto
A: In case of a divisible contract, if the illegal terms
can be separated from the legal ones, the latter may When the defect of a void contract consists in the
be enforced. illegality of the cause or object of the contract, and
both of the parties are at fault or in pari delicto, the
GR: They produce no legal effect whatsoever in
law refuses them every remedy and leaves them
accordance with the principle quod nullum est nullum
where they are.
producit effectum.
Exceptions to the Pari Delicto Rule
XPN: In case of pari delicto since it will refuse legal
remedy to either party to an illegal agreement and 1. Interest paid in excess of the interest allowed
leaves them to where they were. Hence, if a void by usury laws may be recovered by the
contract is already executed, neither of the parties debtor, with interest thereon from the date
can recover from each other. of payment (Art. 1413).
2. Payment of money or delivery of property
NOTE: A party has a right to unilaterally cancel
for an illegal purpose, where the party who
and treat as avoided a void contract. However, an
paid or delivered repudiates the contract
action to declare its inexistence is necessary to
before the purpose has been accomplished,
allow restitution of what has been given under it.

or before any damage has been caused to a Inapplicability of Pari Delicto Rule
third person. In such case, the courts may
1. Breach of warranty cases
allow such party to recover what he has paid
2. Simulated contracts
or delivered, if the public interest will thus be
3. When parties are not equally guilty
subserved (Art. 1414). Page | 52
4. Against the government
3. Payment of money or delivery of property by
5. Prohibted conveyances under the law
an incapacitated person. In such case, the
6. Constitutional prohibition against alien
courts may allow such person to recover
landholding.
what he has paid or delivered, if the interest
of justice so demands (Art. 1415). Q: Given the problem of the recent Jollibee
4. Agreement or contract which is not illegal conundrum, where the supposed fried chicken
per se but is merely prohibited by law, and was replaced with a fried cleaning towel, what
the prohibition is designed for the protection is the status of the contract?
of the plaintiff. In such case, such plaintiff, if
public policy is thereby enhanced, may A: It depends how you argue.
recover what he has paid or delivered (Art.
VOIDABLE – the complainant may try to prove
1416).
that there is deceit or mistake which vitiated their
5. Payment of any amount in excess of the
consent.
maximum price of any article or commodity
fixed by law. In such case, the buyer may NOTE: As a general rule, moral damages only
recover the excess (NCC, Art. 1417). apply to natural persons. As an exception, if the
6. Contract whereby a laborer undertakes to juridical person suffers a bad reputation, it may be
work longer than the maximum number of awarded.
hours fixed law. In such case, the laborer may
demand for overtime pay (Art. 1417).
7. Contract whereby a laborer accepts a wage
lower than the minimum wage fixed by law.
In such case the laborer may demand for the
deficiency (Art. 1418).
Matrix of Defective Contracts

Status of
Contracts Void Voidable Rescissible Unenforceable

Contract has never Valid until annulled; Refers to a valid Valid Contract
existed (Void ab Contract existed contract; and executory
Initio). although it may be contract although
annulled. parties cannot go
Characteristics CAUSE: Absence of to court as the Page | 53
any of the elements CAUSE:
parties failed to
of a contract. 1. Incapacity to give
comply with the
consent.
formality of the
2. Vitiated consent.
Statute of Frauds.
A petition for a GR: Rescission – To compel the

declaration of nullity Subsidiary remedy other party to
Annulment of reduce into
of a contract. (Art.1383) Last resort
Contract writing.
Proper If there is partial
XPN: execution of the
Remedy
contract, it ceases
Ratification of
to be covered by
Contract
the Statute of
Frauds.
GR: The real party who is Remedy is not limited Only one of the
not at fault. The to Contracting parties contracting parties
-Can be assailed by
party who did not but it also extends to and it cannot be
ANY of the
exert undue the injured third assailed by a third
contracting party
influence, person. person. (Art.1408)
Real Party in UNLESS, he is in
intimidation or
bad faith or at fault.
interest violence.
XPN:
-Third person whose

interest is affected
(Art. 1421).
(Art. 1410) Action 4 years unless there (Art.1389) 4 years N.A.

does not prescribe. is a special law with exceptions
providing otherwise provided by special
Prescription law.
(Art. 1391)
NOTE: For
guardianship and

NOTE: Counted absentees, the

from the cessation inception of the
of the grounds for prescription period
from the termination
annulment. of incapacity ot until
the domicile of the Page | 54
absentee is known.
Art. 1409 Art. 1390 Art. 1381) (Art.1403)
1. Guardians -(1) Those entered
- Contrary to -Those where one of when wards into the name of
law, good the parties is suffer lesion other person
customs, incapable of giving which has not
of more than given no authority
public order, consent to a ¼ of the or legal
public policy contract; value. representation
2. Representation (Principle of
- Simulated or - Those where the Agency).
of Absentees
fictitious consent is vitiated by -(2) Covered by
who suffer the the Statute of
mistake, violence,
- Cause or lesion of more Frauds
intimidation, undue
object did than ¼ of the (a) Surety and
influence or fraud.
value. Guaranty
not exist
3. Creditor (in (b)Marriage
settlement
- Outside the relation to
Grounds -(3) parties are
commerce of Art.1177) both incapable of
men remedy given giving consent to a
to the contract
- Impossible
creditors.
service
4. Things
- Void by law involved in
litigation (lis
pendens) of
defendants
without
knowledge and
approval of
litigants and
Judicial
Authority

5. Declared by
Law
Art. 1382
Payments made in the Page | 55

state of insolvency to
whose fulfillment the
debtor could not be
compelled at the time
they were effected.
-Both parties will Contracting parties -(Art.1385) Art. 1407

simply return to shall restore to each obligation to return It has a retroactive
what was given to other the things the things which are effect.
object of the contract Ratification
him or her. which have been the with their Fruits
subject matter of the -indemnity for May not go to
-For services, the
Contract except as damages may be Court.
services are formed
provided in the law demanded.
and it cannot be
(Art. 1398).
undone, recovery for
damages as a remedy XPNs:
1. Defect is the
incapacity of
one (Art.
Effect
1399).
2. Loss of the
thing
through
fault/fraud
of party
obliged to
return the
thing but has
no right to
institute
proceeding,
he shall

return the
fruits and the
value of the
thing (Art.
1400). Page | 56
3. Loss of the
thing
through
fault/fraud
of the person
who may
institute the
proceeding -
action for
annulment is
extinguished
(Art. 1401).
4. One does
not restore –
the other
cannot be
compelled to
comply (Art.
1402).

Natural Obligations
Natural obligations, not being based on positive NOTE: What is important to note is the fact
Page | 57
law but on equity and natural law, do not grant a fulfillment is
right of action to enforce their performance, but
Q: What separates Natural Obligations from
after voluntary fulfillment by the obligor, they
Unjust Enrichment?
authorize the retention of what has been delivered
or rendered by reason thereof (Art. 1423). A: In Natural obligations there is a right. It just so
happens that the right has already been lost by
NOTE: Natural obligations are real obligations
prescription. In Solutio Indebiti, there is no right to
which cannot be taken to court but voluntary
demand it in its inception.
performance may be allowed.
Voluntary Fulfillment
Dean LR’s Commentary:
Debtor complied with an obligation
Looking back to the definition of Obligation under
notwithstanding the fact that he may not be legally
Art. 1156, juridical necessity is what separates a
compelled to do so.
civil obligation from a moral obligation. The mere
fact that Natural Obligations have a separate
chapter under the Civil Code means that it does not
fall under the obligations under Art. 1156.
However, despite of the fact that there is no civil PRESCRIPTION
obligation, if there is voluntary fulfillment the other
party secures a right to retain the thing.
Prescription
“So kapag nagbigay ka without the civil obligation to
do so, you cannot later on recover that. Di mo na The means of acquiring ownership and other real
pwede bawiin” rights or losing rights or action to enforce such
rights through lapse of time in the manner and
Requisites of Natural Obligations
under the conditions laid down by law.
1. The obligation is not prohibited by law or
Dean LR’s Commentary:
contrary to morals and good customs.
2. There must be a previous juridical When you study Remedial Law, the period for
relationship between two persons but due to filing an answer within 10 days from receipt. It may
certain intervening circumstances, it lost its be in a form of reply. Sometimes instead of
legal enforceability leaving its fulfillment answering one by one the allegations, you can file
entirely to the free will or discretion of the a motion to dismiss on the ground of (1) action has
supposed debtor. prescribed, (2) complainant is in estoppel, (3)

complainant is bound by laches. These are valid 3. Possession of the thing under certain conditions
defenses in an allegation. This is the significance of 4. Lapse of time provided by law.
this chapter.
Estoppel
Kinds of Prescription
A plain and clear admission or representation Page | 58
1. Acquisitive (Adverse Possession) - rendered conclusive upon the person making it and
acquisition of ownership and other real rights cannot be denied or disproved as against the
through possession of a thing in the manner person relying thereon (Art. 1431).
and under the conditions provided for by law.
NOTE: Estoppel is effective only between the
a) Ordinary - requires possession of things
parties thereto or their successors in interest (Art.
in good faith and with just title for the
1439).
time fixed by law which is 10 years.
b) Extraordinary – does not need of title or RATIO: Based on public policy, fair dealing, good
of good faith or any other condition and faith and justice and its purpose is to forbid one to
would prescribe in 30 years. speak against his own act, representation or
commitments to the injury of one who reasonably
Dean LR’s Commentary: Under Political
relied thereon.
Law, there is what we call Regalian Doctrine.
Everything is property of the State except Waiver
those which maybe proven as private.
Government lands (patrimonial lands) which Rights which are not contrary to law, public policy,
are declared alienable land of the public public order, morals, customs, or prejudicial to a
domain which may be transferred to a natural person whose rights are protected by law may be
person under Adverse Possession (Acquisitive waived (Art. 6).
Prescription).
Such waiver is treated as an estoppel for future
2. Extinctive - loss of property rights or actions claims under such rights previously waived.
through the possession by another of a thing
NOTE: In the case of Lopez v. Ochoa, the
for the period provided by law or failure to
Supreme Court went as far as to iterate that the
bring the necessary action to enforce one’s
essence of waiver is estoppel and there is no
right with in the period fixed by law. Rights
estoppel if there is no waiver was made. So it may
and actions are lost by the lapse of time (Arts.
be inferred that a “party in estoppel” is someone
1106 and 1139).
who has made a waiver.
Requisites of an Acquisitive Prescription
Kinds of Estoppel
1. Capacity of person to acquire by prescription.
1. Estoppel in PAIS (Equitable)– a person is
2. The thing must be capable of acquisition by
considered in estoppel if by his conduct,
prescription.
representations, admissions or silence when

he ought to speak out, whether intentionally certain facts to exist and such other relies
or through culpable negligence, "causes and acts on such belief, as a consequence
another to believe certain facts to exist and of which he would be prejudiced if the
such other rightfully relies and acts on such former is permitted to deny the existence
belief, as a consequence of which he would be of such facts. Page | 59
prejudiced if the former is permitted to deny
c) Estoppel by Laches – Arises when a
the existence of such facts.
person who has failed or neglected to assert
2. Estoppel by DEED (Technical) – a party to a
a right for an unreasonable and unexplained
deed and his privies are precluded from
length of time is presumed to have
denying any material fact stated in the deed as
abandoned or otherwise declined to assert
against the other party and his privies.
such right and cannot later on seek to
enforce the same, to the prejudice of the
1. Under Estoppel in PAIS:
other party, who has no notice or
a) Estoppel by Conduct or Acceptance of knowledge that the former would assert
Benefits (Art. 1438) - Arises when a party, such rights and whose condition has so
by accepting benefits derived from a certain changed that the latter cannot, without
act or transaction, intentionally or through injury or prejudice, be restored to his former
culpable negligence, induces another to state.
believe certain facts to exist and such other
NOTE:
relies and act on such belief, as a
consequence of which he would be In laches, the right has not yet prescribed
prejudiced if the former is permitted to deny but using it as a defense may give rise to
the existence of such facts. doubt to the claim of the complainant. “If
he really has a right to the property, why did
b) Estoppel by Representation or
he wait for 9 years to file it?”
Concealment (Art. 1437) - Arises when a
party made a representation or concealment 2. Under Estoppel by DEED:
of fact to another person in words or by acts a) Estoppel by Deed Proper - Arises when
or conduct, or with the result of inducing a party made admissions expressly or
the other on the faith of such representation implied by executing a written instrument,
to alter his position to his detriment. or in the form of a bond or a mortgage.
b) Estoppel by Judgment - The preclusion
c. Estoppel by Inaction or Silence - Arises
of a party to a case from denying the facts
when a party, who has a right and
adjudicated by a court of competent
opportunity to speak or act as well as a
jurisdiction. It must not be confused with
duty to do so under the circumstances,
res judicata. Estoppel by judgment bars the
intentionally or through culpable
parties from raising any question that
negligence, induces another to believe
might have been put in issue and decided

in a previous litigation whereas, res judicata 3. Lack of knowledge or notice on the part of
makes a judgment conclusive between the the defendant that the complainant would
same parties as to the matter directly assert the right on which he bases his suit.
adjudged. 4. Conduct on the part of the defendant or one
under whom he claims, giving rise to the Page | 60
Sale of After-Acquired Property
situation complained of
The subsequent acquisition of title of a thing in
Laches Prescription
favor of a party who made a sale or alienation of Concerned with the Concerned with the
the same despite not being the owner of the effect of delay fact of delay
property would pass title to the buyer or grantee by Principally a question It is a matter of time
operation of law (Art. 1434).. of inequity of
permitting a claim to
(e.g., Maria sold Jessie’s house to Josie. Then later be enforced
on Josie donated the same house back to Maria. By Not statutory Statutory
Applies in equity Applies at law
the principle of estoppel, the title will belong to
Not based on fixed of Based on fixed of time
Josie by operation of law and not to Maria.) time
Laches
NOTE: Estoppel is a question of fact.
The failure or neglect, for an unreasonable length
of time, to do that which by exercising due NOTE: Estoppel cannot validate a void contract.
diligence could or should have been done earlier; it
is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the TRUSTS
party entitled to assert it either has abandoned it or
declined to assert it. It is also known as stale
Trusts
demands.
The right of beneficial enjoyment of property.
RATIO: It is based upon grounds of public policy
Fiduciary in nature which obliges the person
which requires for the peace of society,
holding it to deal equitable ownership in a certain
discouragement of stale claims.
property and another person owning the legal title
Elements of Laches to such property.
1. Delay in asserting complainant’s right after he NOTE: A trust is founded on principles of equity
had knowledge of the defendant’s conduct and can never result from illegal acts.
and after he has opportunity to exercise it.
Characteristics of a Trust
2. Injury or prejudice to the defendant in the
event relief is accorded to the complainant. 1. Fiduciary
2. Created by law or agreement

3. Legal title is held by one, while an equitable or Created by the Comes into being by
beneficiary title to the other intention of the trustor operation of law. It
or of the parties. may be either resulting
Parties to a Trust or constructive
Created by the direct Those which, without
1. Trustor – the person who establishes the trust. and positive acts of the being expressed, are Page | 61
2. Trustee – one in whom confidence is reposed parties, by some deducible from the
as regards property for the benefit of another writing or deed or will nature of the
or by words transaction by
person. evidencing an operation of law as
3. Beneficiary or cesti que trust – person for intention to create a matters of equity,
whose benefit the trust has been created (Art. trust. independently of the
1440). particular intention of
the parties.
Elements of a Trust An express trust An implied trust
concerning an concerning an
1. Parties to the Trust immovable or any immovable or any
2. Trust Property interest therein cannot interest therein may be
be proved by parole proved by parole
NOTE: The subject-matter (Trust Property) of evidence (Art. 1443). evidence. (Art. 1457).
trust may be any property of value- real, personal, An action to enforce An action to enforce
an express trust, so an implied trust even
funds or money, or choses in action. long as there is no when there is no
express repudiation of express repudiation of
Trust Stipulation Pour the trust by the trustee the trust by the trustee
Autrui
and made known to and made known to
Based on law or Based on agreement the beneficiary, cannot the beneficiary, may be
agreement only be barred by laches or barred by laches or by
Refers to a right to a May refer to a specific extinctive prescription. extinctive prescription.
specific property property or other
things
Express Trust
NOTE: The principles of the law on trust is A trust which come into existence only by the
merely suppletory to the Civil Code, Special Laws, execution of an intention to create it by the trustor
and the Rules of Court (Art. 1442). or the parties.
Kinds of Trust NOTE: The defense that express trusts cannot be
1. Express Trust proved by parol evidence may be waived, either by
2. Implied Trust failure to interpose timely objections against
a) Resulting Trust presentation of oral evidence not admissible under
b) Constructive Trust the law or by cross- examining the adverse party
and his witnesses along the prohibited lines. An
Express Trust Implied Trust express trust over personal property or any interest

therein, and an implied trust, whether the property 2. Accumulation trust- one that will accumulate
subject to the trust is real or personal, may be income to be reinvested by the trustee in the trust
proved by oral evidence (Art. 1457). for the period of time specified.
NOTE: The general rule is that the burden of 3. Spendthrift trust- one established when the
Page | 62
proving the existence of a trust is on the party beneficiary need to be protected because of his
alleging its existence; and to discharge the burden, inexperience or immaturity from his imprudent,
it is generally required that his proof be clear and spending habits or simply because the beneficiary
satisfactory and convincing. is spendthrift.
NOTE: To affect third persons, a trust concerning 4. Sprinkling trust- one that gives the trustee the
an immovable or any interest therein must be right to determine the income of the beneficiaries
embodied in a public instrument and registered in who should receive income each year and the
the Registry of Property. Creation of express trust amount thereof.
Express trust are those trust voluntarily and
Termination of Express Trust
intentionally, created by direct and positive act of
the trustor, by some writing, deed, will, or oral 1. Destruction of the Corpus
declaration evincing an intention to create trust
(Art. 1444). 2. Revocation by the trustor
NOTE: Technical or particular form of words or 3. Achievement of the objective, or happening of

phrases are not essential to the manifestation of an the condition, provided for in the trust instrument
intention to create a trust. It is possible to create a
4. Death or legal incapacity of the trustee
trust without using the word “trust” or “trustee”.
No trust shall fail because the trustee appointed 5. Confusion or merger of legal title and beneficial
declines the designation, unless the contrary should title in the same person
appear in the instrument constituting the trust (Art.
1445). Acceptance by the beneficiary is necessary. 6. Breach of trust.
Nevertheless, if the trust imposes no onerous Requisites For Acquisition Of Property By
condition upon the beneficiary, his acceptance Trustee Through Prescription
shall be presumed, if there is no proof to the
contrary (Art. 1446). 1. The trustee must expressly repudiate the rightof
the beneficiary
Kinds of Express Trust
2. Such act of repudiation must be brought to the
1. Eleemosynary or Charitable trust- one designed knowledge of the beneficiary
for the benefit of a segment of the public or of the
public in general. Created for charitable, 3. The evidence thereon must be clear and
educational, social, religious, or scientific purposes, conclusive
or for the general benefit of the humanity

4. Expiration of the period prescribed by law.
Implied Trust
Those which, without being express, are deducible

from the nature of the transaction as matters of Page | 63
intent, or which are superinduced on the
transaction by operation of law, as matters of
equity, independently of the particular intention of
the parties.
Kinds of Implied Trust
1. Resulting trust – broadly defined as a trust

which is raised or created by the act or
construction of law, but in its more restricted
sense, it is a trust raised by implication of law
and presumed always to have been
contemplated by the parties, the intention as to
which is to be found in the nature of their
transaction, but not expressed in the deed or
instrument of conveyance.
2. Constructive trust – a trust raised by
construction of law or arising by operation of
law. It is a trust not created by any words, either
expressly or impliedly evincing a direct
intention to create a trust, but by the
construction of equity in order to satisfy the
demands of justice. It does not arise by
agreement or intention but by operation of law.
NOTE: An action for reconveyance of real

property based upon a constructive or implied
trust, resulting from fraud, may be barred by the
statute of limitations. An action may be filed from
the discovery of the fraud. In some cases, the
discovery is deemed to have taken place when new
certificates of title were issued exclusively in the
name of another person.

Dean LR Notes

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OBLIGATIONS AND CONTRACTS LAW REVIEWER

DEAN MA. LIZA A. LOPEZ-ROSARIO LECTURES (A.Y. 2020 – 2021)

CONTRACTS PRELIMINARY MATTERS

Table of Contents Art. 40-47 classifies person into to kinds 1. Natural

OBLIGATIONS .......................................................... 4 order to maintain their existence.

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

Luxury Expenses - Luxury expenses refer to Non-Fungible Property - Non-fungible property

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

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DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

A: DEPENDS. 1. Solutio Indebiti (Undue Payment) -

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

Q: If you were exacted by the BIR for an

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DETERMINATE OR SPECIFIC THING - A Fortuitous Event – An event which could not be

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

Grounds for liability to pay damages (Art. 1170)

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

committed is void. The law discourages the A: YES. There is a COMMODATUM

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

NOTE: In mutuum, the loan becomes gratuitous Applicability of Usury Law

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

GIFTS AND DECORS INC. V. MIDTOWN NOTE:

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

The first remedy of a creditor to enforce payment In a Collection Case:

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

(3) Those undertaken in fraud of creditors 6. Right is waivable wither expressly or

(5) All other contracts specially declared by upon a future event.

law to be subject to rescission. (1291a) a. Suspensive Condition– The

1. Exclusive to reciprocal obligations b. Resolutory Condition - The

PEC). to be one with a period, subject to the provisions of article

thing yet obligation.

5. Right to rescind is implied to exist. obligation itself.

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

c. Judicial period - when it is fixed by the c. Days - of twenty-four (24) hours.

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

2. Facts showing that obligation is favorable Benefits of a Designated Period or Term –

a. Debtor mus be unaware of the period; or A:

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

The case of Tañada v. Tuvera is an illustration of a Commentary of Dean LR:

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

Instances where the law provides solidary 1. Agents

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

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DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

1. Without Fault – No liability. NOTE: The stipulation of no demand needed

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

A: Only to the extent of the amount actually

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21

DEAN LR NOTES 2021 UST FACULTY OF CIVIL LAW JADE ROXAS - 21