SOUTHERN PENINSULA COLLEGE

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Corner Padre Zamora – Labiano Streets,Gil Sanchez, Labason, Zamboanga del Norte 7117
www.facebook.com/southernpeninsulacollege
spenc.edu.ph@gmail.com
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LEARNING MODULE
 RICO T. LARUYA, A.B., BSEd, MEd., J.D.
rico.laruya@deped.gov.ph/09062730548

About the Author:

Rico Tejero Laruya is a Head Teacher I at Balas National High School, Labason,
Zamboanga del Norte, and the designated Extension Head of Balas NHS La Union Extension.
He obtained his Bachelor’s Degree in Political Science at the Western Mindanao State
University, Zamboanga City in 1998. He got his degree in Bachelor Secondary Education Major
in English at Southern Peninsula College, Labason, Zamboanga del Norte, in 2008, and finished
his Bachelor of Laws (now Juris Doctor) at Philippine Advent College, Sindangan, Zamboanga
del Norte in 2012. He also finished his Master in Education (MEd) at Mandaue City College in
2015, and completed the academic requirement in Master of Education (MAEd) at Saint
Vincent’s College, Dipolog City in 2016.
He has been teaching in tertiary level as his part time job at Southern Peninsula College
for almost twenty (20) years now.

DEDICATION

To my loving wife Juvelisa M. Laruya; my three (3) lovely kids, namely: Chelsea M.
Laruya, Christian Uriel M. Laruya, and Chloe M. Laruya;
To the President of Southern Peninsula College, Col. Romeo E. Delgado (Ret., PA), and
its Vice President, Madam Loida B. Delgado. The Administration and Staff and to all the
students who courageously enrolled amidst this covid 19 pandemic;
And most especially to Almighty God, the source of all my strength, this humble
education literary work is sincerely dedicated.
 ACKNOWLEDGMENT

This humble contribution to knowledge in Business Law (Law on Obligation and

Contracts) would not be possible without friends, relatives, partners and colleagues who
encourage me to teach even amidst this COVID 19 pandemic and be concerned with the
enlightenment of the students whose eagerness to learn is unhampered by any circumstances.

 My family who kept me burning through the nights to finish my deadlines, especially
my ever-supportive wife, Juvelisa M. Laruya;
 The Administration of Southern Peninsula College and its Staff whose
encouragement and support is instrumental in the fulfilment of this humble
undertaking and in my career in teaching;
 And my friends and colleagues in the Department of Education who made some
suggestions to improve this work.

PREFACE

The “New Normal” demands a different approach in teaching at all levels of educative
process. There is that radio-based instruction, modular online learning modality, print modular
learning modality, and etc..
Based on the gathered data, students are more inclined to have the modular learning thru
print since most of them are coming from remote places where internet connectivity is slow or
having no internet access at all, thereby online modular instruction is even impossible.
It is therefore imperative to adopt the print modular learning modality, however, it is
suggested that some activities in the self-learning kit may require the learners to accomplish the
same using multi-media presentation.
This module is written to cover the whole semester and divided into four (4) units to
represent the four major examinations (Preliminary, Midterm, Semi-Final, and Final
Examinations) with lessons so arranged in such a way that the module follows the course of
study particularly for this subject and as mandated under relevant laws.
 TABLE OF CONTENTS
MODULE 1 – PRELIMINARY COVERAGE
UNIT 1  Obligations: General Provisions
Pages
 Topic 1.1: Obligation: Definition, Concept, Kinds
Chapter 1 (Activity 1.1) Week 1
 Topic 2.1: Elements of Obligation
Chapter 2 (Activities 2.1.a & 2.1.b) Week 2
 Topic 3.1: Sources of Obligation
Chapter 3 (Activities 3.1.a & 3.1.b) Week 3
 Topic 4.1: Nature and Effect of Obligations
Chapter 4 (Activities 4.1.a. & 4.1.b) Week 4
Preliminary Examination
UNIT 2 MIDTERM COVERAGE
 Topic 5.1: Article 1165 of the New Civil Code of
the Phils.
Chapter 5  Topic 5.2: Article 1166
 Topic 5.3: Article 1167
 Topic 5.4: Article 1168
(Activities 5.a & 5.b) Weeks 5 & 6
 Topic 6.1: Article 1169
 Topic 6.2: Article 1170
Chapter 6  Topic 6.3: Article 1171
 Topic 6.4: Article 1172
(Activities 6.a & 6.b) Weeks 7 & 8
Midterm Examination
UNIT 3 SEMI-FINAL COVERAGE
 Topic 7.1: Article 1173
 Topic 7.2: Article 1174
Chapter 7  Topic 7.3: Article 1175
 Topic 7.4: Article 1176
(Activities 7.a & 7.b) Weeks 9 & 10
 Topic 8.1: Article 1179
 Topic 8.2: Article 1180
 Topic 8.3: Article 1181
Chapter 8  Topic 8.4: Article 1182
(Activities 8.a & 8.b) Weeks 11 & 12
Semi-Final Examination
UNIT 4 FINAL COVERAGE
 Topic 9.1: Article 1305
 Topic 9.2: Article 1308
 Topic 9.3: Article 1311
  Topic 9.4: Article 1315
Chapter 9  Topic 9.5: Article 1316
 Topic 9.6: Article 1317
(Activities 9.a, 9.b & 9.c) Weeks 13 - 16
FINAL EXAMINATION

PRE-TEST

Please answer the pre-assessment to check your knowledge about obligation.

Directions: From the four given options, encircle the letter of the correct answer.

1. It is something that one must give or do, or not do.

a. contract b. obligation c. debtor d. role

2. Someone who is under the law obliged to perform a certain obligation.

a. creditor b. banker c. debtor d. contractor

3. A legal agreement between companies or individuals.

a. debt b. credit c. contract d. promise

4. A person, bank, or company who can demand performance of an obligation.

a. debtor b. creditor c. promisor d. contractor

5. It is an intentional proposition to evade the normal fulfilment of an obligation.

a. culpa b. fraud c. negligence d. delay

Chapter 1

TOPIC 1.1: OBLIGATION: Its legal definition.

Obligation is a juridical necessity to give, to do, or not to do. (Ar. 1156 of the Civil Code
of the Philippines).
 Juridical necessity is a juridical tie that in case of non-compliance, there will be legal
sanctions.

 An obligation is nothing more than the duty of a person (obligor) to satisfy a specific
demandable claim of another person (oblige) which, if breached, is enforceable in
court.
 A contract necessarily gives rise to an obligation but an obligation does not always
need to have a contract.
 Damages is a sum of money given as compensation for the injury or harm suffered by
the obligee for violation of his right.

KINDS OF OBLIGATION

1. From the viewpoint of ‘sanction’

a. Civil Obligation – that defined in Article 1156; an obligation, if not fulfilled when
it becomes due and demandable, may be enforced in court through action; based
on law; the sanction is judicial due process.
b. Natural Obligation- a special kind of obligation which cannot be enforced in court
but which authorizes the retention to the voluntary payment or performance made
by the debtor; based on equity and natural law. (i.e. when there is prescription of
duty to pay, still, the obligor paid his dues to the oblige- the obligor cannot
recover his payment even there is prescription) the sanction is the law, but only
conscience had originally motivated the payment.
c. Moral Obligation – the sanction is conscience or morality, or the law of the
church. (Note: If a Catholic promises to hear mass for 10 consecutive Sundays in
order to receive P1000.00 this obligation becomes a civil one.

2. From the viewpoint of subject matter

a. Real Obligation – the obligation to give.
b. Personal Obligation - the obligation to do or not to do ( e.g. the duty to paint a
house, or to refrain from committing a nuisance).

3. From the affirmativeness and negativeness of the obligation

a. Positive or Affirmative Obligation – the obligation to give or to do.
b. Negative Obligation – the obligation not to do (which naturally includes not to
give).

4. From the viewpoint of persons obliged

a. Unilateral – where only one of the parties is bound (e.g. Rico owes Rica
P1000.00. Rico must pay Rica.
b. Bilateral – where both parties are bound (e.g. In a contract of sale, the buyer is
obliged to pay the seller and the seller is obliged to deliver the goods to the
buyer).
Activity 1.1: ‘I AM AN OBLIGATION!’

Direction: Do what is required.

1. What is meant by obligation?

2. Give an example of the following:
a. Obligation to give
b. Obligation to do
c. Obligation not to do
3. Explain the essence of juridical necessity.
4. When can the obligee claim damages? Why?

TOPIC 1.2: ELEMENTS OF OBLIGATION

The following are elements of obligation:

1. Active Subject – (creditor/ obligee) the person who is demanding the performance of
the obligation;
2. Passive Subject – (debtor/ obligor) the one bound to perform the prestation or to fulfil
the obligation or duty;
3. Prestation – (to give, to do, or not to do) object, subject matter of the obligation;
conduct required to be observed by the debtor;
4. Efficient Cause – the juridical tie which binds the parties to the obligation; source of
the obligation; and

Prestation (Object)

1. To give – delivery of a thing to the creditor (in sale, deposit, pledge, donation);
2. To do – covers all kinds of works or services (contract for professional services);
3. Not to do – consists of refraining from doing some acts (in following rules and
regulations).

Requisites of Prestation/ Object:

1. Licit (if illicit, it is void)

2. Possible (if impossible, it is void)
3. Determinate or determinable (or else, void)
4. Pecuniary value

 Injury – wrongful act or omission which causes loss or harm to another.

 Damage – result of injury (loss, hurt, harm).
ACTIVITY 1.2.a: “YOU OBLIGE ME”

Direction: Complete the information chart below by giving a concise explanation for each
element.

OBLIGATION
Vinculum Juris/
Juridical Tie/Efficient Active Subject Passive Subject Object/Prestation
Cause

ACTIVITY 1.2.b: “YOU OBLIGE ME”

Direction: Draw a caricature showing the following:

a. Obligation to give
b. Obligation to do
c. Obligation not to do

TOPIC 3.1: SOURCES OF OBLIGATION

Obligation arises from different sources: (1) Law; (2) Contracts; (3) Quasi-contracts; (4)
acts or omission punished by law; (5) Quasi-delicts.

1. Law – (Obligation ex lege) – imposed by law itself; must be expressly or impliedly

set forth and cannot be presumed (Art. 1158).
2. Contarcts (Obligation ex contractu) arise from stipualtions of the parties; meeting of
the minds/ formal agreement; must be complied with in good faith because it is the
law between parties; neither party may unilaterally evade his obligation in the
contract, unless:
a. Contract authorizes it; and
b. Other party assents
Note: Parties may freely enter into any stipulations, provided they are not contrary to
law, morals, good customs, public order or public policy ( Art. 1159).
 Contract – meeting of the minds between two persons whereby one binds himself,
with respect to the other, to give, to do something or to render some service; governed
primarily by the agreement of the contracting parties.

Valid contract – it should not be againsts the law, contrary to law, contrary to
morals, good custom, public order, and public policy.

3. Quasi-contracts ( Obligation ex quasi-contractu) – arise from lawful, voluntary and

unilateral acts and which are enforceable to the end that no one shall be unjustly
enriched or benefited at the expense of another.

Two Kinds:
a. Negotiorum gestio – unauthorized management; this takes place
When a person voluntarily takes charge of another’s abandoned property or
business without owner’s authority.
b. Solutio Indebiti – undue payment; this takes place when something is received
when there is no right to demand it, and it was unduly delivered thru mistake.
(see Art. 1160)

4. Delicts/ Acts or Omission punished by law (obligation ex maleficio or ex delicto) –

arise from civil liability which is the consequence of a criminal offense.

5. Quasi-delicts/Torts (Obligation ex quasi delicto) – arise from damage caused to

another through an act or omission, there being no fault or negligence, but no
contractual relation exists between the parties. (see Art. 1162)
ACTIVITY 3.1.a: “WHY AM I OBLIGED? ”

Direction: Obligations are coming from different sources. Give five (5) sources of obligation.
Write them in the boxes provided below and write a short discussion for each.

OBLIGATION

Activity 3.1.b: ‘WHAT AM I?’

Direction:
 Compare the two kinds of an obligation arising from quasi-contract.

Negotiorum gestio… Solutio indebiti…

vs
  Under Negotiorum gestio, what is the obligation of the owner of the business or
property which he abandoned and managed by someone he didn’t authorize and
incurred expenses in the management of the same?
 What is your obligation when someone gives you something you do not have the right
to demand for it? Why?
 Define contract.
 When is a contract valid?

TOPIC 4.1: NATURE AND EFFECT OF OBLIGATIONS

Art. 1163. Every person obliged to give something is also obliged to take care of
it with the proper diligence of a good father of a family, unless the law of the
stipulation of the parties requires another standard of care.

 Speeaks of an obligation to care of a DETERMINATE thing (that is one which is

specific; a thing identified by its individuality) which an obligor is supposed to
deliver to another.
 Reason: the obligor cannot take care of the whole class/genus.

DUTIES OF DEBTOR:

 Preserve or take care of the things due.

- DILIGENCE OF A GOOD FATHER – A good father does not abandon his
family, he is always ready to provide and protect his family, ordinary care which
an average and reasonably prudent man would do.
- ANOTHER STANDARD OF CARE – Extraordinary diligence provided in the
stipulation of parties.
- FACTORS TO BE CONSIDERED – diligence depends on the nature of
obligation and corresponds with the circumstances of the person, time, and place.

 Debtor is not liable if his failure to deliver the thing is due to fortuitous events or
force majeure.. without negligence or fault in his part.
 Deliver the fruits of the thing
 Deliver the accessions/accessories
 Answer for damages in case of non-fulfilment or breach

Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to
deliver it arises. However, he shall acquire no real right over it until the same has been
delivered to him.
  REAL RIGHT (JUS IN RE) - right pertaining to person over a specific thing,
without a passive subject individually determined against whom such right may be
personally enforced. It is a right enforceable against the whole world.
 PERSONAL RIGHT – (JUS AD REM) a right pertaining to a person to demand
from another, as definite passive subject, the fulfilment of a prestation to give, to do
or not to do. It is a right enforceable only against a definite person or group of
persons.

- Before the delivery, the creditor, in an obligation to give, has merely a personal
right against the debtor – a right to ask for delivery of the thing and the fruits
thereof.
- Once the thing and the fruits are delivered, then he acquires a real right over
them.
- Ownership is transferred by delivery which could be either actual or
constructive (Art. 1477)
- The remedy of the buyer when there is no delivery despite demand is to file a
complaint for ‘SPECIFIC PERFORMANCE AND DELIVERY’ because he is not
yet the owner of the property before the delivery.

ACTUAL DELIVERY – actual delivery of a thing from the hand of the grantor to the
hand of the grantee (personally), or manifested by certain possessory acts executed by the
grantee with the consent of the grantor (realty).

CONSTRUCTIVE DELIVERY – representative of symbolical in essense and with

intention to deliver the ownership.

FRUITS:
 Natural – spontaneous products of the soil, the young and other products of animals.
 Industrial – produced by lands of any cultivation or labor.
 Civil – those derived by virtue of juridical relation.

Activity 4.1.a.: ‘I CARE AS A FATHER!’

Direction:
 Give the two (standards of care of a thing to be delivered. Give their distinction.

1. 2.
  Who is a creditor and debtor?
 When is the debtor not liable for his failure to deliver the thing due?
 When does the right of the creditor to the fruits of the thing due arise?

Activity 4.1.b: ‘YOU FILL ME UP!

Directions:

 Below are incomplete statements, you need to fill in the relevant information to
complete them.

1. Before the delivery, the creditor, in an obligation to give, has….....

2. Spontaneous product of the soil is a ……….
3. Delivery which is symbolical in essence refers to…….
4. Ownership is transferred by………..
5. Right of a person over specific thing without a passive subject…….
6. Debtor is not liable if his failure…..
7. Delivery of a thing from the hand of the grantor to the hand of the grantee is…..
8. Produced by lands of any cultivation is an…..
9. Once the thing and the fruits are delivered, then the creditor has…..
10. Personal right is enforceable …..

ASSESSMENT:

A. Multiple choice

Directions: Read each statement carefully. Write your answers in a separate sheet.

1. It is a juridical necessity to give, to do and not to do.

a. contract b. obligation b. object d. agreement
2. The fact, prestation or service which constitutes the ________ of the obligation.
a. role b. contract c. object d. subject
3. An obligation based on equity.
a. civil obligation b. natural obligation c. legal obligation d. quasi obligation
4. It is something that binds the parties to the contract which may arise from bilateral or
unilateral acts of persons.
a. Active subject b. juridical tie c. obligation d. contract
5. The person who can demand fulfilment of the obligation.
a. debtor b. active subject c. passive subject d. bank
6. Known as the obligor or debtor against whom the obligation is juridically demandable.
a. banker b. passive subject c. active subject d. creditor
7. Obligation which is based on positive law and is enforced by court action.
a. natural obligation b. civil obligation c. actual obligation d. quasi obligation
8. The other term for debtor.
a. creditor b. banker c. obligor d. active subject
9. Creditor is otherwise know as _________.
a. obligor b. obligee c. banker d. debtor
10. An obligation may arise from the crime committed, which among the four is the source of
obligation for the crime committed?
a. contract c. quasi-contracts
b. acts or omissions punished by law d. quasi-delicts