15 Aug 2022

Palomo - #6

Course: Business Law

Objective: Not only to learn but prep for the board exams; Develop critical
thinking

Textbook: Latest edition of Law on Obligations and Contracts by Hector De Leon /

AVOID textbooks for law students

Law
- A rule of action & a system of uniformity
- Everywhere actions are performed, and it is governed by laws
- All of us have activities in life
- We do lots of action/interactions
- In all these activities, we observe certain rules to govern

Rule of action
- Example: traffic lights (Without it, there will be accidents) / keeping right to prevent
accidents
- Criminal laws observed: crime-murder/homicide/robbery/theft
- If a person will commit deception, we call it stafa
- Imprisonment punishes these crimes
- Without these laws, people will continue to commit crimes
- Obligation of parents to children: to give basic needs
- If the father doesn't give support to children, the law can address this.

Importance: Law ensures safety and peace of its citizens, order, and harmony in a
community
- Rule of Conduct (what shall & shall not be done)
- Obligatory (imposes a duty to obey)
- Promulgated by legitimate authority (enacted by the Congress)
- Common observance and benefit (intended by man to serve man)
System of uniformity
- Laws are applicable to everyone
- Not 100% - certain class of group uniformly
- Traffic lights are applicable to ALL drivers
- Inside the church, rules of action are applicable to all attendees
- Parent support should be from both parents all over the country
- Wearing uniforms in f2f is mandatory to all students enrolled

Sources of Law in the Philippines

1) Constitution ● The fundamental law / supreme law / highest

law

2) Legislation ● Declaration of legal rules by a competent

authority
● Enacted / Statute law
● Include ordinances by LGUs

3) Administrative or ● Intended to clarify or explain the law into effect

Executive Orders, its general provisions
Regulations, and Rulings

4) Judicial decisions or ● Doctrine of precedent or stare decisis

Jurisprudence ● Decisions of a superior court on a point of law
● Reversible / modifiable by the Supreme Court
only

5) Custom ● Habits & practices approved by society as rules

of conduct

6) Other sources ● Principles of justice, equity, decisions of foreign

tribunals, opinions of textwriters, religion
● Supplementary only (not binding)

2 kinds of laws

1) Law in its LEGAL-SENSE

- Formally enacted by competent authorities (a person/body with authority to
make laws)
- To make laws: Legislative department
- To enforce laws: Executive department
 - To interpret laws: Judiciary department
- Congress: where we find the legislative department
a. House of Senate (senators)
b. House of Representatives (congressmen & representatives)
- LGUs (Local Government Unit)
a. Ordinances/Resolutions
b. Sangguniang Bayan / Sangguniang Panlalawigan
- Government officials are NOT the only competent authorities
- Corporations
a. Also have laws in its legal sense (dress code, hiring)
b. Competent authorities (Board of Directors)
- Schools
a. Competent authorities (Board of Justice)
2) Law in its NON LEGAL-SENSE
- No formalities and competent authorities
a) Divine laws
● laws of God, religion, and faith;
● spiritual in nature;
● Formally promulgate by God
● Ex: 10 commandments; Catholics & Non-Catholics practice
b) Natural laws
● laws from within; reason;
● dictated by conscience
● Has been regarded as the reasonable basis of state law
c) Moral laws
● laws of sensing right & wrong;
● acceptable norms & conduct in a certain society/community
Examples:
1. Christians can only have one marriage at a time (monogamous); they
can remarry in case of partner’s death – it is their norm of morality
2. While Muslims can practice polygamy – it is their norm of morality
 3. In the Philippines, calling in-laws by their first name is
IMMORAL/disrespectful
d) Physical laws
● law of science & nature
Examples:
1. Gravity
2. If you jump in a building, you will fall & have injuries
3. It is dark outside during daytime because it might rain

Fields of law (IN ITS LEGAL SENSE)

SUBSTANTIVE LAW

1) Civil law
● Family, marriage, support, succession, inheritance
● Parents supporting children
● One parent cannot force another parent to support; they must have a trial
● Private law
2) Commercial law
● Banking laws, insurance companies, negotiable instruments
● Corporation laws
● Private law
3) Criminal law
● Murder, homicide, stafa, damages, fraud
● Public law
4) Law on Taxation
● Income tax, estate tax
● BIR cannot immediately collect properties from a nonpayer of tax; there
should be a case filed against
5) Labor Law
● Corporations not giving benefits to its employees; laborers must undergo due
process to collect these benefits/properties

NON-SUBSTANTIVE / ADJECTIVE LAW

 6) Remedial Law/Procedural law
● Before a person becomes guilty of a crime, there should be DUE PROCESS
1. Hearing
2. Trials
3. Evidences
● Creditor collecting debts
1. Must file a case first in court
2. They cannot collect immediately
● Distinction/Difference between Remedial Statute and Penal Statute - SRD Law
Notes

BUSINESS LAW I
● Course Description: Laws on Obligations & Contracts
● Civil law (substantive)
● Legal sense
● Civil Code of the Philippines – where we find civil law
○ Republic Act No. 386
○ Has 5 volumes (book I, book II, etc.)
○ Labor code
○ Crimes - Penal Code
○ Corporation code
● CODE - Compilation of Laws
● OBLICON can be found in BOOK IV of CIVIL CODE

1 - Obligations
● Etymology: Latin term obligasyo/obligare; means to tie / to bind = panungkulan
● Article 1156 of Civil Code, Book IV: Statutory Definition of Obligation
● Statutory - statue - defined by law
● Obligation is a juridical necessity to give, to do, or not to do (judicial process)
● Coverage: Articles 1156 - 1304
1ST CLASSIFICATION

a) To give — real
b) To do — positive personal
c) Not to do — negative personal

2ND CLASSIFICATION

a) With juridical necessity — judicial/court process; LEGAL/CIVIL obligation

b) Without juridical necessity — NATURAL obligation

Examples:
i. borrowed money from your classmate - obligation: money - kind: to
give
ii. employer-employee - obligation: to pay their salaries - kind: to give
iii. employee - obligation: to work - kind: to do
iv. student - obligation: to study - kind: to do
v. teacher - obligation: to teach - kind: to do
vi. parent-child - obligation: to take care of children - kind: to do
vii. child - obligation: to help parents - kind: to do
viii. going to the store - obligation: to pay / vendor - obligation: to give
goods
ix. exams - obligation: to answer - kind: not to do (cheating)

Exercise:
1) To give
a) Riding a bus; obligation - to pay money
b) A pharmacy store should give the appropriate medicine to the
customer/patient
2) To do
a) A doctor having a patient; obligation - to treat or consult with their
patient
3) Not to do
 a) Attending a mass in church; obligation is to behave; not to do shouting
Exercise:
1) To give (w/ juridical necessity)
a) A house was promised to be turned over to a client
2) To give (w/o juridical necessity)
a) A parent promised to take her child to school
3) To do (w/ juridical necessity)
a) A surgeon agreed to operate on a patient’s injury
b) A police should have a search warrant before inspecting a person’s
house
4) To do (w/o juridical necessity)
a) A friend let you borrow their car to be returned the next day
5) Not to do (w/ juridical necessity)
a) A professional should not leak private information about their clients
6) Not to do (w/o juridical necessity)
a) Not behaving well in a ceremony

Requisites/Elements of a Valid Obligation

1) Passive subject
a) The one with duty
b) debtor/obligor
c) Bound to fulfill an obligation
2) Active subject
a) The one with rights
b) creditor/obligee
c) Entitled to demand the fulfillment of an obligation
3) Prestation/Object
a) Subject matter of the obligation
4) Juridical tie
a) Efficient cause/reason
b) Source of the obligation
c) Why is there an obligation to pay?

Examples: (Debtor/Creditor)
1) Goods were delivered to your house
a) Debtor: Buyer because of duty to pay
b) Creditor: The store has the rights to collect payment
2) The school hired the teacher
a) Debtor: the teacher has the duty to provide teachings
b) Creditor: the school can demand the teacher to teach
3) After a teacher proceeds on teaching in a school
a) Debtor: the school has the duty to pay the teacher’s salaries
b) Creditor: the teacher can demand the salaries to be paid
4) Loan application approved at the bank
a) Debtor: The bank has the duty to give the loan
b) Creditor: The client has the right to demand the loan money
5) A person already received the loan money
a) Debtor: the borrower
b) Creditor: the bank can demand the loan payment
6) A employee was newly hired
a) Debtor: the employee has the duty to work
b) Creditor: employer
7) An employee has been working for weeks
a) Debtor: employer - to pay salaries
b) Creditor: should be paid salaries

Examples: (Prestation)
1) Money
2) Services

Exercise Problems (Identify the obligations and include the ff):

a) to give, to do, or not to do;
b) with or without juridical necessity;
c) who are the parties (debtor/creditor)
d) prestation
Problem:
Bobet is the husband. Betty is the wife.
Betty is pregnant and about to give birth.
When Betty is about to give birth, Bobet is out of the house and can’t be contacted.
So Betty called her parents and then she was brought to the hospital by her parents.
Then she gave birth to a baby boy in the hospital.

Obligations
1) Bobet must be present at the side of his wife who is about to give birth.
a) Type of obligation: To do
b) Without juridical necessity
c) Debtor: Bobet the husband
d) Creditor: Betty the wife
e) Prestation: assistance & support
2) Obligation of Betty’s parents to safely bring Betty to the hospital
a) Type: To do
b) Without juridical necessity
c) Debtor: Betty’s parents - duty to bring Betty safely to the hospital
d) Creditor: Betty the wife
e) Prestation: Car/transportation
3) The nurse’s obligation to show the baby boy to Betty after birth
a) Type: to do
b) Without juridical necessity
c) Debtor: Nurse - duty to show the baby boy
d) Creditor: Betty - entitled to see her baby
e) Prestation: to show the baby
4) The parent’s obligation to inform Bobet about Betty giving birth to their baby
a) Type: to do
b) Without juridical necessity
c) Debtor: Betty’s parents
d) Creditor: Bobet
e) Prestation: information about the Betty and the baby
5) Hospital’s obligation to give Betty a hospital room
a) Type: to give
b) With juridical necessity
c) Debtor: hospital
d) Creditor: Betty
e) Prestation: hospital room
6) Obligation of Bobet to immediately go to the hospital once contacted
a) Type: to do
 b) Without juridical necessity
c) Debtor: Bobet
d) Creditor: betty
e) Prestation: Bobet’s presence
7) Obligation of Bobet & Betty to register a name for their baby
a) Type: to do
b) With juridical necessity
c) Debtor: Parents
d) Creditor: baby - has the right to have a name registered
e) Prestation: the name

Sources of obligation

(why obligations arise/exist)

1) Law
a) Ex: the law requires payment of taxes
i) Effect: obligation to pay taxes (to give)
b) Not to kill
i) Effect: obligation not to kill (not to do)
c) Law saying no sexual harassments
i) Effect: obligation to sexually harass (not to do)
d) Parents should support their children
i) Effect: obligation to support their children (to do)

2) Contract
● Formal agreement
● Results to obligations

Examples
1. Buying goods (contract of sales)
2. Obligation to pay (buyer)
3. employer-employee (contract of employment)
4. Obligation to pay salaries (employer)
5. passenger-jeepney driver (contract of carriage)

3) Quasi-contract
● Quasi: Latin term = as if / semi
 ● Not a contract / no agreement / no meeting of minds or consent
● Like a contract but not really an agreement
● Reason: Principle of no unjust enrichment = no one will be enriched at the
expense of another

i) Solutio indebiti
(1) erroneous payment / wrong delivery
ii) Negotiorum gestio
(1) voluntary management

*there are many legal Latin terms in the Philippines because the
Spanish invoked the laws in the country for how many years

Example
1) you buy in a restaurant / to pay 900 pesos / you gave 1000 peso bill
● Change should be 100 pesos
● The vendor gave you instead a 200 peso bill
● Is the excess change yours? No
● Can you refuse to return the excess change? NO
● The buyer has an obligation to return the change, otherwise they are
liable
● The buyer will be unjustly enriched at the expense of the vendor
2) You found a lost phone
● You have an obligation to return it to the owner

4) Delict
● With intention to hurt/harm
● Resulting to injuries or death
● Crime

5) Quasi-delict
● No intention to commit a crime
● But there will be corresponding payment of damage
● Ex: you accidentally hit a person passing by - not a crime but still liable
because of negligence
Kinds of Object

1) Generic
● Not yet known/separated

Examples:
● Red car
● Red Toyota Car

2) Specific
● Already specified
● Red Vios Car with accessories plate number of ABC123 / motor #3456

Obligation to deliver a SPECIFIC object

To give - type of obligation - to deliver an object

1 - To preserve the object (to do)

● To take care of the object
● Possession - debtor
● Prior to delivery - the obligation to preserve
● DILIGENCE OF A GOOD FATHER - always taking care of the children (degree of care)

2 - To deliver the object (to give)

a) Actual delivery
● physical transfer
● not always the debtor as long as physical transfer
b) Constructive delivery
● nonphysical transfer
● house & lot possession, farm, condo

i) Traditio Symbolica
● Traditio - accepted practice/traditions
 ● By means of symbol/s

Example:
● House turnover = key/title
● Farm = title
ii) Traditio Longamanu
● “Long hand/arm”
● Done by pointing at the object
iii) Traditio Brevi Manu
● “Short hand/arm”
● Done briefly
● Shortcut
● Possessor to owner
Example:
● I borrowed a phone from the owner then i wanted to buy it.
The owner agreed. The ownership is briefly transferred to me
but the possession of the phone is already mine.
iv) Constitutum Possessorium
● Owner to possessor
● Obligation to deliver (if the possessor borrowed first)
v) Formalities
● Bid of sale - document/agreement

3 - To deliver the object - fruits

a) Natural
● Without man’s intervention
● grass, trees, water underground
b) Industrial
● With man’s intervention/efforts
● palay->rice, chicken->food
c) Civil
● Provided by law
● objects processed into products
 Exercise
● Specific Object: Coconut tree
● Natural - Coconut
● Industrial - Coconut juice, cocolumber
● Civil - money

Before there are rights acquired by the creditor, there are no fruits included.

Example:
● The debtor will deliver to the creditor a specific dog. Today is the delivery date.
Yesterday the dog gave birth to puppies. Are the puppies included in the delivery of
the dog? No, because the right will begin today as well.

● Not delivered yesterday as it should. Today it will be delivered. The rights of the
creditor starts yesterday. The puppies were born today. It will be included in the
delivery.

4) To deliver accessions and accessories

Accessions
● major improvements (gate, fences, etc.)

Accessories
● minor improvements (furniture, chairs, etc.)

Principle: The principal carries with it the accessories, but accessories does not
carry with it the principal.

5) Payment of Damages

Obligations to deliver GENERIC Objects

1) To deliver the object
2) Payment of damages

*no need to preserve & no need for fruits because it is replaceable

Remedies in case of failure to perform
1) Performed by debtor (giver, with duty) = liable to creditor
2) Remedies availed by creditor
3) Reason: Breach / violation / failure to perform obligation
4) To give
a) Complied when it is given
b) Breach: not given
5) To do
a) Complied when it is done
b) Breach: not done
6) Not to do
a) Complied when it is not done
b) Breach: it was done
c) Example: cheating

Remedies of creditor (against debtor)

To give / Real

1) Specific performance/object
a) Debtor - to deliver immediately the specific object
i) Can ask generic object from 3rd person (not a party) - cannot deliver
the specific object - possible because it is replaceable
ii) The debtor will pay for the generic object to fulfill his obligation
2) Rescission
a) Cancellation
b) Cannot demand and cancel at the same time
3) Payment of damages
a) Can demand payment & rescission because there is already breach/failure

To do / Positive Personal
1) Same remedies

Breach: when obligation is:

 1. not done
2. poorly done
3. not in accordance with agreement

Example:
● Creditor asked for a wedding dress to be made for her. Delivery is supposedly
yesterday. Wedding is today.
- The retailer failed to deliver the gown yesterday. (not done)
- Delivered but gown does not fit (poorly done)
- Delivered but the gown is not made with the agreed material (not in
accordance w/ agreement)

Exercise:
● Asked a car to be painted red
- Not done - car is not painted on time
- Poorly done - car is painted red but not every part of the car is painted
- Not in accordance w/ agreement - the color of the car is painted orange but
agreed color is red

● A laptop is to be repaired
- Not done - the laptop is not repaired on time
- Poorly done - the laptop is repaired but has scratches
- Not in accordance with agreement - a different model of the laptop is
delivered

Not to do / Negative Personal

1) Payment of damages, if cannot be undone
2) If can be undone, undo

(breach: when it is done)

Example:
no smoking then someone smokes; no cheating but a student cheats

Exercise
- obligation is not to shout in a ceremony - cannot be undone
- Obligation is not to borrow my sister’s clothes - can be undone
- Obligation is not to to counterflow in the highway
- Obligation is not to litter - can be undone by throwing the garbage rightly
- Obligation not to park
GROUNDS FOR LIABILITIES
- Failure to perform

1) Delay = Mora
a) ORDINARY DELAY
i) Failure to perform on time
b) LEGAL DELAY/DEFAULT
i) No performance after demand of creditor
(1) Reminding/telling/expecting/requesting = NOT a demand
(2) Demand is required by law but not necessary
(a) Debtor’s whereabouts are unknown
(b) Abscond = escape
(c) Insolvent
(i) Accounting: liabilities exceed assets
(ii) Debtor - inability to pay
c) Still ordinary if = Failure to perform on time > demand > no performance
d) Delay on the part of: (guilty of delay)
i) Mora Solvendi
(1) Debtor delay (not performing on time)
ii) Mora Accipiendi
(1) Creditor delay (not paying on time)
iii) Compensatio Morae
(1) Both parties delay (creditor cannot pay because obligation is
not done)
Exercise
- Mora solvendi
- the seller did not deliver the product on time
- The attorney did not meet with their client on time
- Mora accipiendi
- the student failed to recite on time when asked by the professor
- The client’s failure to pay the attorney for the service
- Compensatio Morae
- when food ordered is not yet entered by the cashier so the buyer cannot pay
for the food
 - The attorney did not provide his services to the client and the client cannot
pay on time for the services

2) Fraud = Dolo
a) Cheating or bad faith
b) Intentional evasion
c) Constitutes: when a party is guilty of deceit, cheating, or bad faith
d) Tagalog: panloloko, pandaraya, panlalamang
e) Liable due to his act of bad faith
i) Selling a diamond ring but the seller doesn't know it’s not real - no
fraud
ii) The seller informs the potential buyer that they’re selling a look-alike
of a rolex - no fraud because the seller is transparent that it’s
unoriginal

2 kinds of Fraud

● Dolo causante = causal fraud

○ Real / there is intention to commit fraud
○ The other party agrees to have an obligation because of the
deceit/misrepresentation; if they are aware, they would not have
agreed
○ Liability is greater
● Dolo incidente = incidental fraud
● Debtor would still agree despite his awareness of the
fraud/misrepresentation
● Even if he knows it,

3) Negligence = Culpa
a) Lack of (due) care/responsibility of a party
b) Obligation failure: did not take care of the object
c) Voluntary act or omission

3 kinds of Culpa
1) Culpa Contractual - contractual negligence
a) Based on existing contracts
2) Culpa aquiliana - Civil negligence
a) Arise due to Civil liability
 b) Quasi delict
c) No crime, no contract but still liable (payment of damages)
3) Culpa criminal - criminal negligence
a) Results to death and injuries without criminal intent
b) To commit a crime, there must be a criminal intent
i) CULPA CRIMINAL IS AN EXCEPTION
ii) Homicide thru reckless imprudence
c) The law consider it a crime

Problem Solving
Scenario #1: He is a driver. P1 is his passenger. P2 is a pedestrian. DD is driving recklessly, not
observing traffic rules at all, driving without care, resulting in the injuries of B1 and B2.

Kind of culpa: Culpa Negligence because even without criminal intent, the driving behavior
of the driver resulted in injuries of his passenger and the pedestrian.

Who are the parties: D is liable to P2 based on civil negligence / civil liability
Debtor - driver
Creditor - P1 and P2

Kind of culpa: Contractual negligence because D is liable to P1 arising from contract of

carriage

Scenario #2: Bobet is celebrating his party. Bobet contracted the catering services of Boyet
to provide the party food. Bobet invited many guests. During the party, Boyet the caterer
served food that resulted to food poisoning of Bobet and his guests.

Negligence
1) Boyet is liable to Bobet because of contractual negligence & civil negligence
2) Boyet is liable to the guests because of civil negligence
3) Bobet is not liable to his guests because of civil liability arising from civil negligence

Scenario #3: There is a vendor who is preparing a cassava cake and selling it to customers.
His store is in front of a school. The vendor sold cassava cake to the students and some other
customers. Unfortunately, while preparing the cassava cake, a poisonous substance was
accidentally mixed resulting in death and injuries of some students and other customers.

Negligence
1) The vendor is liable to the students and other customers arising from criminal
negligence
 2) The vendor is liable to other customers arising from criminal negligence and
contractual negligence
3) The vendor is liable to all customers because of civil liability (payment of damages)

Wowowee incident: contractual, criminal, civil

Scenario #4: D is a taxi driver. P1 is a passenger. P2 is a pedestrian. While the driver is

driving, he is driving recklessly without care of traffic rules and regulations. P1 while inside
the car, started singing, shouting, and distracting the driver. P2 the pedestrian is a drunk
pedestrian, suddenly crossed the street which resulted to their accident.

Negligence
1) Driver is liable to P1 because of contractual negligence
2) P1 is liable to driver because of contractual negligence
3) Driver is liable to P2 because of civil and criminal negligence
4) P2 is liable to P1 and the driver because of civil negligence
5) Driver is liable to P2 because of criminal negligence

Korique answers
1) If all the parties are guilty of negligence, only one will be liable but with reduced
liabilities (the most guilty) – the proximate cause

Bus driver is driving recklessly. A passenger is near the door because he does not want to get
inside. He is drunk. The driver suddenly turned right, resulting in the injury of the passenger.
- The driver
- Degree of care fails to meet the diligence of a good father
- Care must always be present, but degree is not always the same
- Factors to consider
- Simple / ordinary care – diligence of a good father
- Extraordinary care

Circumstances / factor of negligence

- Degree of care will vary based on different factors
- Ordinary care (diligence of a good father)
- Extraordinary care

1) Nature of the obligation

a) Porcelain delivery vs. construction materials delivery
 2) Circumstances of a person
a) Dentist extracting tooth vs. Construction worker pulling a nail
b) Children vs. Senior citizens
3) Circumstance of the place
a) Driving in a highway vs. driving in the city
4) Circumstance of the time
a) Driving during the day vs. driving during night time

Fortuitous Event
● An event that cannot be foreseen or although foreseen, it is inevitable
● Foreseen - can be predicted
● Examples: rain, typhoon, earthquake, etc.

2 parts of fortuitous event

1) An event that cannot be foreseen

a) Extraordinary fortuitous event
2) Foreseen but inevitable
a) Ordinary fortuitous event

2 Kinds
Act of man - inflation, global warming, pollution, shoplifting
Act of god - earthquake, hurricanes, typhoon, volcanic eruption

Exercise
1) Act of man, ordinary - pollution, overpopulation
2) Act of man, extraordinary - vehicle accidents, crimes, bankruptcy
3) Act of God, ordinary - rain, typhoons
4) Act of God, extraordinary - wildfire, volcanic eruption

Legal implication/requisites of a fortuitous event:

1) Independent of human will
a) Cannot be controlled by man / not man’s fault
b) Beyond man’s control
c) Cannot be stopped
2) Could not be foreseen; although foreseen, but inevitable
3) Impossibility of performance of obligation
4) No negligence
*If all requisites are met, debtor is EXEMPTED from liability

ADDITIONAL OBLIGATIONS

Pure / Conditional / With a Period

a) Pure
i) Plain or simple form of obligation (to give, to do, or not to do)
ii) Examples
(1) Obligation of an employer to pay their employee
(2) Professor obliged to teach
b) Conditional
i) With condition
ii) May refer to past and future events
iii) When the past results are unknown/uncertain to parties
iv) Examples:
(1) “I will give you a passing grade IF you pass the exam”
(2) I will give you 1 million when it rains tomorrow (it’s uncertain to rain
tomorrow)
(3) I will treat you if San Beda won against Letran at the game yesterday
(a) The results are still unknown
(b) It is a valid conditional obligation
2) With a period
a) With a specified date (particular date, month, year, OR a certain event)
b) A certain event (conditions are NOT)
c) Focuses on future events
d) Results are already known to the parties
e) “Immediately,” “as soon as possible,” and “soonest” are considered periods
i) Reason: there is an intention that refers to a future period
f) Examples
i) The employer’s obligation to pay salaries at the end of month
ii) I will give you 1 million when it rains (it will surely rain someday)
Exercise
- Obligation of a teacher to provide the learning materials
- The teacher will provide the learning materials if the students participate during the
class
- The teacher will provide the learning materials at the end of the synchronous class
Kinds of Conditional Obligation

1) Suspensive / Resolutory
a) Suspensive
i) Obligation starts upon the happening of the condition
ii) The general rule
iii) Examples:
(1) I will give you the product if you give me discount
(2) I will hire you if you pass the exam
b) Resolutory
i) An exception
ii) Obligation is already due even before the happening of a condition
iii) Obligation ENDS UPON the happening of the condition
iv) Example
(1) I can use the family car until I get my own car (the obligation
ends when I get my own car)
c) Exercise
i) Suspensive
(1) The police is obliged to investigate the robbery case if the
victim can give the details of the thief
(2) The sales agent is obliged to process the turnover documents if
the client pays for the downpayment of the house
ii) Resolutory
(1) The doctor is obliged to keep the patient in the hospital until
the family pays for the medical fees
2) Expressed / Implied
g) Expressed
i) When clearly stated & known
ii) Both parties AGREED
h) Implied
i) Not clearly stated or clearly agreed by parties / ONLY IMPLIED
ii) Condition already attached
iii) Example:
(1) The apartment under construction is promised to be leased
upon completion of construction (implied condition)
(2) I will hire you as an accountant (implied condition: if you
graduate and become an accountant)
(3) I will finance your travel to the U.S. (implied condition: if you
have a passport and visa)
3) Possible / Impossible
a) Possible
 i) A condition that can happen
ii) Example
(1) I will let you borrow my books if you enroll in San Beda
b) Impossible
i) A condition that cannot happen = no obligation
ii) Example
(1) I will let you borrow my books if you are able to lift an airplane
(2) I will give you 1 million if you can make a dead person alive
iii) Negative impossible condition
(1) There is a due & demandable obligation
(2) As if there is no condition
(3) Example: I will give you 1 million if you cannot fly
4) Potestative / Casual / Mixed
a) Potestative
i) If the condition depends on the will of a party (creditor)
ii) The party refers to the creditor, not the debtor
iii) Reason: If it depends on the will of the debtor, they can easily excuse
themselves from the obligation; the condition is useless.
iv) Example
(1) Prof: I will pass you if you study. The grade of the student
(creditor) depends on their will to study. (if it depends on the
professor, they can easily fail the student even if they study)
(2) Seller: I will sell the product to you with a discount. The
discount depends if the buyer (creditor) has the will to buy.
b) Casual
i) If the condition depends on the will of a 3rd person/chance
ii) 3rd person - neither the debtor nor creditor
iii) Example
(1) I will hire you in my company if the board of directors (3rd
person) will approve (condition).
(2) I will hire you in my company if there is a vacant position
(chance).
(3) I will deliver the products if there is good weather (chance).
c) Mixed
i) If the condition depends on the will of a party and 3rd person/chance
ii) Example

Exercise (w/ juridical necessity)

1) Potestative - The police will conduct an investigation if the victim provides a written
report.
 2) Casual - the police will conduct an investigation if the suspect can be seen in the
CCTVs.
3) Mixed - the police will conduct an investigation if the victim provides details and the
suspect can be seen in the CCTVs.

d)
5) Positive / Negative
a) Positive – positive condition
b) Negative – not / none / never
c)
6) Conjunctive / Disjunctive
a) Conjunctive
i) All conditions must be complied with / happen for an obligation to
start
b) Disjunctive
i) Even if one condition happens, there is an obligation

Exercise: Principal obligation with juridical necessity

Obligation: the obligation of a police to investigate a robbery case
Conditions
1) If the victim writes their written statement at the police station
2) If the CCTV cameras were able to capture the robber’s face
3) If the items stolen are specified by the victim
4) If there are witnesses to come forward

Types of conditional obligation

- Suspensive
- Expressed
- Possible
- Mixed
- Positive
- Disjunctive

Classifications of a Period

1. Suspensive / Resolutory

a. Suspensive

i. The obligation is due and demandable when the period starts/arrives

 ii. Not due and demandable now

iii. Example

1. I will give you 1 million when it rains

b. Resolutory

i. The obligation ends when the period arrives

ii. Due and demandable now until the period arrives

iii. Examples

1. I will give you allowance until the end of this year

2. I will let you borrow my book until the end of the month

2. Conventional / Legal / Judicial

a. Conventional – depends on the agreement of the parties

i. Examples:

1. You and the bank agreed that you will pay on an installment
basis

b. Legal – provided by law

i. Examples

1. The law requires all drivers to renew their license every 3 years

2. The law requires all registered voters to process their

registration upon a certain date

c. Judicial – fixed by the court

3. Definite / Indefinite

a. Definite period
i. Will certainly/surely happen
ii. The date of event is determined
iii. Examples
1. Birthday
2. Holidays
3. Semester dates (will be announced)
b. Indefinite period
i. Will still certainly/surely happen (bcos it is still a period)
 ii. Difference: will surely happen but not sure when
iii. Examples
1. Typhoons
2. Earthquakes
3. Death
4. Rain
5. Rainbows

Rule in counting days or period

● Exclude the 1st day/period
● Include the last day/period
● Examples
○ October 24, 2022 = ten years from now is October October 24, 2032
○ 15 days from now = November 8, 2022

Alternative / facultative obligation

Depending on the number of objects of prestation due

● Alternative
○ There are 2 or more prestation but only 1 is due and demandable
○ Upon agreement of the parties (if no agreement, it is the choice of the
debtor)
○ If 1 prestation is lost, the other prestation are due and demandable
○ All prestation are lost without the debtor’s fault (reason: fortuitous event),
there is no more obligation / not liable
■ Unless there is negligence, the debtor is liable
○ Examples
■ An obligation to deliver a cellphone OR a laptop
■ An obligation to deliver a Honda or Toyota car
● The Toyota was lost
● Honda is still due for delivery
● Facultative
○ Only 1 prestation but upon the agreement of the party, they can
change/substitute the prestation
■ If no agreement, there can be no changes in the prestation
○ If the substituted prestation is lost, the original prestation is not due anymore
○ Examples
 ■ Obligation to deliver a Honda, but the parties agreed to change it to
Toyota. But then the Toyota was lost
● Honda cannot be delivered/demanded anymore

Debtor’s choice, without debtor’s fault

1. All lost - no more obligations
2. Some remaining - deliver one of the remaining
3. One remaining - deliver the remaining

Debtor’s choice, with debtor’s fault

1. All lost - pay for the money value and damages of last object lost
2. Some remaining - deliver one of the remaining
3. One remaining - deliver the remaining

Creditor’s choice, without the debtor’s fault

1. All are lost – no liability
2. Some remaining – deliver one of the remaining (chosen by creditor)
3. One remaining - deliver the remaining chosen by creditor

Creditor’s choice, with debtor’s fault

1. All lost - pay the money value and damages (determined by creditor)
2. Some remaining - deliver one of the remaining / pay money value (determined by
creditor)
3. One remaining - deliver the remaining / pay for money value (determined by
creditor)

Bobet will deliver to Boyet a

1. Honda or;
2. Toyota or;
3. Lancer

Bobet’s choice, without Bobet’s fault

1. All the Honda, Toyota, Lancer are lost - Bobet has no more obligation
2. The Toyota is lost - Bobet has to deliver Honda or Lancer
3. The Honda and Lancer are lost - Bobet has to deliver the Toyota
Bobet’s choice, with Bobet’s fault
1. The Honda, Toyota, Lancer are lost - Bobet has to pay for money value
2.
JOINT/SOLIDARY Obligation
● Always a collective obligation

A. Individual – one debtor / one creditor

B. Collective – two or more debtor and/or two or more creditors
a. Joint
● All debtors will pay
● All creditors will receive payment
● Pro-rata – equally
● Several obligations
b. Solidary
● Only one of the several debtors will pay
○ Other debtors are liable to pay that one debtor their
shares/payment
● Only one of the several creditors will receive the whole/total
payment/obligation
○ The creditor who received the total payment is liable to pay
the shares of other creditors
○ They cannot demand the other debtors for the payment
anymore
● Upon payment of total obligation, the obligation is now extinguished.
● Only one obligation

Exercise: A will pay B and C, 10,000 in a joint obligation.

- A is the debtor who will pay 5,000 to each creditor
- B and C are the creditors who will receive equal payments of 5,000 each
- Incorrect: A will pay B and C, 10.000
- Correct: A will pay B and C, 10,000, divided equally.

A and B will jointly pay C, 10,000.

- A and B will equally pay 10,000 to C.
- Incorrect: A and B will pay C, 10,000

A B and C will pay X Y Z, 9,000. Jointly

- A will pay 3,000 to X Y Z, divided equally into 1,000 each.
- B will pay 3,000 to X Y Z, divided equally into 1,000 each.
- C will pay 3,000 to X Y Z, divided equally into 1,000 each.

A and B will pay X Y Z, 12,000 jointly.

- There are 6 obligations.
a. A will pay X, 2000.
 b. A will pay Y, 2000.
c. A will pay Z, 2000.
d. B will pay X, 2000.
e. B will pay Y, 2000.
f. B will pay Z, 2000.

Solidary Exercises
A and B will pay X and Y, 10000 pesos
- A or B will pay X or Y, 10000 pesos.

A B C are liable to X Y Z for 90,000 pesos (solidarily).

- A, B, or C will pay either X, Y, or Z, 90,000 pesos.

Problem:
D1 and D2 are debtors.
C1, C2, C3, C4 are creditors.
Amount of obligation = 10,000 pesos

D1 and D2 are joint debtors.

C1, C2, C3, C4 are solidary creditors.

D1 to C1: 5,000
D2 to C1: 5,000

- D1 should pay either C1, C2, C3, or C4, 5,000.

- D2 should pay either C1, C2, C3, or C4, 5,000.

Solidary debtors. Joint creditors

- D1 or D2 should pay 2,500 to

Solidary debtors. Solidary creditors

A B are debtors.. X Y are creditors.

Amount = 12,000

1. Joint debtors. Solidary creditors. = 3,000

a. Each debtor has obligation of 6,000
2. Solidary debtors. Joint creditors = 6,000

Part 2 Problem:
A B are debtors. X Y are creditors.
Obligation: to deliver 100 cavans of rice

Joint: A and B delivered to X only. Y did not receive any delivery.

- X Y should receive 50 cavans each.
- A is still liable to Y for 25 cavans of rice.
- B is still liable to Y for 25 cavans of rice.
- Y can demand 25 cavans of rice each from A and B.

Part 3 Problem:
A B are jointly liable to deliver to C a specific car.
Value: 300,000
On delivery day, only A has the money to get the car. B has not enough funds to give his
share on the total obligation. They are not able to get the car for delivery.

How can they perform the obligation:

- The debtor shall be liable for money value
- A will pay the money value to C, 150,000
- B will pay the money value plus damages, 150,000 and more

A B C are debtors. X Y Z are solidary creditors.

Amount = 300,000
● A is due on December 1, 2022 = with a period obligation
● B is due on January 1, 2023 = with a period obligation
● C is due when he passes the CPA board exam. = conditional obligation
Required: Distribute the payment of A B and C.

1st Answer:
- A is due 100,000 to X Y or Z on Dec. 1, 2022
- B is due 100,000 to X Y or Z on Jan. 1, 2023
- If A did not fulfill his obligation, B is due 200,000 to X Y or Z on Jan. 1, 2023
- C will pay 100,000 to X Y or Z when he passes the board exam

Final Answer:
- On Dec. 1, 2022, A B or C shall pay to X Y or Z the corresponding share of A which is
100,000
- On Jan. 1, 2023, A B or C shall pay to X Y or Z the corresponding share of B which is
100,000 plus the 100,000 share of A if it is not yet fulfilled.
- A B or C shall pay the 100,000 share of C to X Y or Z when C passes the board exam.
Divisible / Indivisible Obligations
● Divisible
○ Can be divided (e.g., cake, pad of paper, basket of fruits)
○ Capable of partial performance / fulfillment
○ Ex: to deliver 10 gallons of water
○ By agreement of parties, a divisible obligation can be converted into an
indivisible obligation. However, indivisible obligations cannot be made
divisible because of its nature.
● Indivisible
○ Cannot be divided (e.g., car, machine)
○ NOT capable of partial performance
○ Ex: building a house
○ Ex: preparing annual financial statements

Kinds of Division
1) Quantitative
● By quantity / amount
● Number / weight / measurement
● There are 30 books that are
● There are
2) Qualitative
● By quality
● Color / shape / texture / sizes
3) Intellectual / Ideal
● It is done naturally
● Examples
○ 2 brothers inherited an apartment from their deceased parents
○ You and your friend bought a book for 1,000, paying 500 each.
■ You do not own the physical half of the book only.

PRINCIPLE: QUANTUM MERUIT

● An indivisible that cannot be completed but there should be corresponding
payment because of fairness, justice, and equity

Examples:
- To deliver 100 t-shirts
- Unable to produce the other 50 shirts
 - Not his fault
- The corresponding t-shirts delivered should be paid based on quantum
meruit
- The lawyer cannot complete the services
- The lawyer should be paid a corresponding amount

With a Penal Clause

● Penal clause – an accessory undertaking in case of breach of the principal obligation
○ Breach - violation of the contract
● There are 2 obligations: principal and accessory obligation
● Examples
○ You borrowed a book from the library
■ Principal obligation: to return the book on time
■ Accessory obligation: to pay for the excess time in case the book is not
returned on time
○ House construction
■ Principal obligation: to finish the construction today
■ Accessory obligation: to pay 1,000 for every day exceeding the due
date
● The 1,000 payment is only imposed when the house
construction is not finished on time
○ Borrowed 1 million pesos + 6% interest rate for one year
○ A will deliver to B the 1,000 pieces of shirts
■ Accessory: he will deliver the shirts + 5 grams of shabu
● Purposes
○ To ensure the performance / fulfillment of the obligation
○ By way of penalty
○ For indemnification (by way of giving chance to others; others are deprived of
the right to the object)

All kinds of obligation

1) To give = real obligation
2) To do = positive personal
3) Not to do = negative personal
4) With juridical necessity = civil / legal
5) Without juridical necessity = natural
6) Pure / conditional / with a period
7) Alternative / facultative
a) Alternative - 2 or more prestations; 1 is due
 b) Facultative - 1 prestation but can be substituted
8) Joint / solidary
a) Joint - all debtors will pay; all creditors will receive payment equally
b) Solidary - 1 debtor will pay’ 1 creditor will receive
9) Divisible / indivisible
a) Divisible - capable of partial fulfillment
b) Indivisible - incapable of partial fulfillment
10) Obligation w/ a penal clause
a) Principal obligation
b) Accessory obligation

ANOTHER TERM FOR JOINT & SOLIDARY

● Joint and Several Obligations

LATIN TERMS FOR SUSPENSIVE & RESOLUTORY

● Ex diem – suspensive
● In diem - Resolutory

Extinguishment of Obligations

Grounds for Extinguishment

1) Payment or performance (given, done, not done)
2) Loss of the thing due
3) Condonation or Remission
4) Confusion or Merger
5) Compensation
6) Novation

Payment or Performance
● Legal tender = currency accepted in a certain country
○ Philippines = peso
○ U.S. = US dollars
○ Korean = Korean won
○ Japan = Yen
● One can accept foreign currencies because it is still money
● One can refuse because it is not their legal tender
● PESO: Ang salaping ito ay bayarin ng Bangko Sentral at Pinananagutan ng Republika
ng Pilipinas (what makes peso bill a legal tender)
SPECIAL FORMS OF PAYMENT
● Dacion en pago
○ Payment in time
○ Dation in payment (property, etc.)
○ Creditor CAN REFUSE to accept
○ However, once accepted, the obligation is extinguished
● Payment by cession
○ Insolvent debtor = Assets < Liabilities
○ With several creditors
○ Remedy: creditors will get and sell ALL the debtor’s property
○ Proceeds from sales is used as payment
● Application of payment
○ 1 debtor and 1 creditor
○ With several obligations (same nature)
○ Problem: Debtor makes payment to the creditor
○ No indication of which obligation is paid upon
○ Rules
i. Debtor can indicate which obligations
ii. Creditor can indicate with corresponding receipts
iii. Apply to the most onerous obligation (debtor) – burdensome
● Tender of payment & consignation
○ Tender = offer
○ Consignation = deposit
○ Cavans of rice to be deposited upon approval of the court

Loss of the Thing Due

● There is no more object
● Perish
● Piece of land = debtor will sell it to the creditor
○ The government expropriated the land into a market or building
○ No longer available because it is outside of commerce of debtor
● Must be specific object (cannot be replaced)

Condonation or Remission
● Condonation – Gratuitous abandonment of the creditor’s right in favor of the debtor
● Gratuitous = for free
● Act of liberality
● Extinguishes the obligation because it liberates the debtor from their liability
● Examples
 ○ Donation (donor & donee)
○ Donor = creditor
○ Donee = debtor
● Ex: pay 10,000 to the debtor
○ Debtor will not collect anymore
○ 10,000 is the gift given for free
● Ex: debtor will deliver the car to the creditor
○ Object: the car

DONATIONS

1) Mortis Causa
● Donation after death
2) Inter Vivos
● Donation during lifetime (but to take effect after death)
3) Implied
● Implied donation through action
● “Here is my cell phone. You can use it now.”
4) Expressed

D1 & D2 will pay C 10,000.

- D1 will pay 5,000 to C
- D2 will jointly pay 5,000 to C
C condones the obligation of D2
- D1 will pay 5,000 to C
- D2 will not pay anymore

D1 and D2 are solidarily liable to pay C 10,000

- C condones the liability of D2
- D1 and D2 are no longer liable to C

Confusion or Merger
● Qualities of a debtor and creditor can be found in one person
● Debtor = to perform/fulfill the duty
● Creditor = to demand performance
● Effect to the obligation: extinguishment of the obligation

A is the debtor. B is the creditor. 10,000

B transfers his right to C. C transfers his right to A.
A is paying a monthly installment for a housing loan to B.
B has the right to collect payments from A.

A and B are debtors of C. 10,000 (Joint)

- A is liable to C for 5,000
- B is liable to C for 5,000
C transfers his right to B.
- B is now the creditor.
- A will pay B the 5,000 share.

A and B are debtors of C. 10,000 (Solidary)

C transfers his right to B.
- A will pay 5,000 to B – the new creditor.

Compensation
● 2 persons are debtor and creditor of each other

A will pay B 10,000.

B will pay A, 10,000.

Requisites

1) Both are principal parties

2) Obligations are of same kind & nature
3) Both are due and demandable
4) Both are liquidated

Bobet will pay Boyet 10,000.

Boyet has the obligation to pay Betty, Bobet’s wife. 10,000.
- Bobet and Boyet are the principal parties.

A will pay B 10,000.

B will pay A 5,000.
- There is partial extinguishment (½)

A will deliver a Vios car to B model 2020.

B will deliver to A a Toyota car.
- No compensation
 -

A has the obligation to pay B 10,000.

B will pay A 10,000 but B is questioning the right of A under litigation
- No compensation
- Both are not liquidated

Novation
● A new is created after a previous obligation is extinguished
● Not an absolute extinguishment; it is only a relative extinguishment
○ Personal – change of parties
○ Real – change of object
○ Mixed – both party and object

Kinds of Personal Novation

1) Substitution
● Debtor is substituted
● Has the right to be repaid
● The right to assume the creditor change
○ Expromision
○ Delegacion

2) Subrogation
● Becomes the new creditor
● Stepping into the shoes of another
● The one who made payment becomes the new creditor

II - Contracts

Article 1305 – A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.

Obligation – effect
Contract – source

There can be obligations without a contract.

Contract – agreement, covenant, stipulation, pact

Must be in accordance with law, moral, good customs, public order, and public policy.
Invalid if contrary/against to/the law, morals, good custom, public order, and public policy.

Anyone is free as long there is legal capacity.

Example of two persons in a contract:

1) Sales – seller and buyer
2) Lease – lessor and lessee
3) Donation – donor and donee
4) Contract of carriage – driver and passenger

General Rule: Principle of relativity

● 3rd persons are not involved
● Contracts shall be enforceable between parties and their successors in interest (i.e.
assignee, transferee, heirs). If to transfer, it must a successor (assignee, transferee,
heir) - principle of relativity
● Contract is enforceable only among the parties and the successors and interest (only
if there is transfer) e.g Assignee, transferee, successor, heir.
● EXCEPTION: Por outri
○ Even if he is a 3rd person, the contract is enforceable as long as it is for his
own benefit

A borrows money from B. C is a 3rd person.

C is not part of the contract.

A will pay B. C is the son of B.

Can C collect payment from A? No.
C is a 3rd party.

The son and wife of the employee goes to the employer to ask for the salary.
Invalid contract because son & wife are 3rd parties.
3 Stages of Contract

1) Preparation
● Negotiation stage (until they agree)
● No definite agreement yet
conception

2) Perfection
● Meeting of minds
● Parties already agree
● The beginning of rights and obligations
birth

3) Completion or Consummation
● Delivery and payment
● Obligations are performed
● Contract is fully accomplished
Death or termination

ELEMENTS OF CONTRACT

1) Consent
a) When there is a meeting of minds
b) When the contract is perfected (upon giving of consent)
c) Requisites
i) Offer
(1) Must be certain
ii) Acceptance
(1) Must be absolute

Illustrations

A is selling his land for 1 million pesos.

A sends a letter to B, “buy my land for 1 million pesos.”
B has not yet received the letter, but he sent a letter to A that he will buy the land for 1
million pesos.
- No acceptance yet
- Both were making offers

A is selling his land to B. B is interested in buying. 1,000,000

“I will give you 15 days to buy my land.”
Within the 15-day period, B told A that he will buy the land for 1 million.
A told B that the price is already 1.2 million.
Before the end of the period, B is already buying the land for 1 million.
- There is no perfected agreement yet.
- No meeting of the minds
- A can still increase the contract price.

A applied for insurance, 1M.

Dec 1 – Sent application for coverage 1m, sent premium payment
Dec 3 – received application.
Dec 5 – sent letter of approval of application.
Dec 6 – A died.
Dec 7 – letter arrived.
- Expedition theory: perfected
- Cognition theory: not perfected

Expedition theory
● On its way

Cognition theory (Acceptable in PH Law System)

● Acceptance must be known
● The other party must be aware of the acceptance

PERSONS WHO LACK LEGAL CAPACITY TO GIVE CONSENT

1) Minors
a) Below 18 years old
b) Exceptional Cases – buying daily needs, transportation, etc.
 2) Insane / Demented
a) People of unsound mind; suffering from mental illness
b) Not simply the acts of talking to oneself or smiling alone
c) Period of Lucid Interval – the period/occasion where insane people are
normal
i) Contracts entered during this period: VALID

3) Deaf and dumb

a) Not Able to read and write

Valid Consent must be:

1) Free
2) Real
3) Intelligent

Defective / Vitiated Consent (Grounds)

(not free, not real, not intelligent)

● Mistake / Error
○ Must be a grave error/serious mistake

Illustrations

You are buying an accounting book, but the color given is brown instead of red.
(not a serious mistake)

The right book was given but the receipt showed a different book sold.
(will affect the sales of the bookstore; but will not affect the validity of consent)

Buying a car. You thought the seller was a doctor, but in fact, he’s a lawyer.
(not a serious mistake)

Buying a car to be used for racing. The seller is unaware and sold you an ordinary car,
not suited for racing.
(a serious mistake)
 Seller was unaware that the diamond ring was fake. The seller sold it to the buyer
without knowing that it was fake.
(The sale shall be invalid on the grounds of mistake/error.)

● Force / violence
○ Must be serious/grave physical harm
○ It makes consent not free

Illustrations

There is a wedding ongoing. Behind the groom was the whole family and barangay.
He is being hit to marry the girl.

● Threat / intimidation
○ Verbal / Mental harm
○ Imminent danger (it could happen)
○ Rule: There is valid consent despite threat, IF the person is enforcing their
right
○ Blackmail
■ Not a legal enforcement/exercise of right
■ Leads to illegal leakage of information (?)
■ Will constitute to a crime
■ A criminal offense

Illustrations

There is a wedding ongoing. Behind the groom was the whole family and barangay.
He is threatened to marry the girl.

A man and a woman live together without the benefit of marriage. The man
promised the girl to marry someday. The man did not marry the girl (breach of
promise). The man abandoned the girl. The boy took up and finished the
accountancy. CPALE: requirement must be of good moral character. The woman
threatened him, “marry me or otherwise or I will report you to the proper
authorities.” The boy married the girl. After taking the exam, the man wants
annulment on the ground that it was not freely given.
● Consent is not vitiated
● The person is exercising a right (woman is enforcing her right to demand
marriage from the man)
 ● There was a promise breached by the man
● Rule: there is valid consent despite threat, IF the person is enforcing their
right (does not make the creditor liable for grounds of threat)

● Undue influence
○ A person taking advantage of a certain position / circumstance
○ Affects the reasoning capacity of the other party

Illustrations

A Grade 3 student in school sold his cellphone to the teacher. The teacher paid the
right amount to the student.
- The teacher is liable for undue influence on the grounds of teacher-student
relationship (under authority)
- Even if there is no disadvantage at the side of the student, the teacher is
powerful and of authority to the student.

● Fraud
○ Deceit or bad faith (dolo)
○ Examples
■
■ – no fraud – Advertisements / commercials are allowed by law, as long
as they are marketing strategies (even if there are exaggerations;
illegal if there are misleading claims about the product’s content &
substances)
○ Simulated Contracts / Simulation
■ Not real
■ Kinds of Simulated Contracts
● Absolute Simulation – no legal/valid effect
● Relative Simulation – may have a valid effect

Examples
1) Parents want to transfer ownership of properties to their children.
They do not want to do it until they die (succession after death), but it
is a long process so they use a deed of absolute sale.
● Not actually selling the property to the children
● Intention: to transfer the property only while they are still
living.
● A relative simulation – may have valid effect
 ● The transfer will be done because of the deed; there is no
fraud

2) The value of the property is 1 million pesos. The actual amount is less
than 1 million. Is the contract valid?
● Yes. The contract price need not be equal or more (inadequacy
does not affect validity).
● Reason: that is the intention of the parties.
● Grossly inadequate – still valid. As long as there is intention
(free, real, & intelligent)
● Exception: 1 peso contract – not valid anymore (considered as
donations for tax purposes)
● BIR Ruling: The amount of tax will not be based on contract
prices; it will be based on the appraisal of the property.

2) Object
● Prestation
● All contracts must have object/s
● In a form of a thing, right, service
● Examples: money, land, laptop, cellphone (thing)
● Examples: right to collect money
○ Can be transferred by means of contract (right is the object)
● Example: right to stay in the house (as a lessee) ROUA right of use asset
● Examples of service: CPAs, lawyers, doctors, beauty parlors, etc.

Requisites of an Object:

1) Within the commerce of men

a) Outside the commerce of men
i) Luneta Park
ii) Endangered species
iii) Moon
b) Within the commerce of men
i) Contract of Renovation of a public school building (there is contract
because you are offering services to repair or renovate)
2) Transmissible
a) Transferable (transferable right exclude untransferable)
b) Personal rights are not transmissible
i) Marital rights, CPA practice, etc
c) Contracts involving future inheritance (property, etc.) are prohibited by the
law – the right will only start upon the death of the parent

3) Licit
a) Lawful
b) Examples of Illicit / Unlawful objects
i) Illegal Drugs (shabu, marijuana, cocaine, heroine)
ii) Prostitute (Prostitution is illegal in the Philippines)

Kinds of Illicit Objects

a) Illicit per se
i) Always illicit / unlawful
ii) Cannot be lawful at any time
iii) Per se = “in itself”
iv) Examples
1) Selling fake products( illegal to manufacture, and sell
imitation, fake products)
2) Smuggled goods

b) Illicit per accidens

i) Sometimes lawful, sometimes unlawful
ii) Examples:
1) Drugs (medicinal drugs are lawful, shabu are unlawful)
2) Guns (lawful use for police, unlawful for unauthorized
persons)

4) Determinate
a) Fixed, specified, discernable
b) It is known to both parties involved in a contract to be valid
c) Examples of not determinate objects
i) Buying a plate of food in the canteen (there are many meals that can
be asked when buying)
ii) Buying a pair of rubber shoes in the department store
 5) Possible
a) Legally possible - illegal objects that are possible are considered impossible
b) Should be existing / exist in the future events
i) Harvested rice from a farm

Elements of Contract (Cont.)

3) Cause
a) Consideration / reason
b) Answers: Why a party is entering into a contract
c) Examples
i) Employment contract: employer and employee
ii) Contract of Sales: vendor (seller) and vendee (buyer)
iii) Lease contract: lessor (landlord) and lessee (tenant)
iv) Mortgage contract: mortgagor (borrower) and mortgagee (lender)
v) Pledge contract: Pledgor (giver) and Pledgee (receiver)
vi) Import and Export: Importer and Exporter

Rule: The object of one party is the cause of the other party.

1) Sales: vendor and vendee

a) Object of vendor: property
b) Cause of vendor: money
c) Object of vendee: money
d) Cause of vendee: property of the vendor

2) Lessor and lessee (apartment)

a) Object of the lessor: apartment
b) Cause of the lessor: money
c) Object of the lessee: money
d) Cause of the lessee: apartment

3) Contract of carriage: driver and passenger

a) Object of the driver: service
b) Cause of the driver: money (fare)
c) Object of the passenger: money
d) Cause of the passenger: service
 CAUSE & MOTIVE
● Here is a property owner, selling his property. He will use the proceeds as
capital to start a business
○ Cause: to earn money or proceeds
○ Motif: to use the proceeds as a capital to start new business

● A property owner is selling his property. The proceeds will be used to sell
shabu.
○ Valid contract
○ Cause is legal: property is being sold
○ Motive is bad but it is not part of contract

● A seller is selling unlawful drugs. The proceeds will be used for religious and
community activities.
○ Not a valid contract
○ Cause is Illegal: selling unlawful drugs
○ Motive is good but it is not part of the contract

1. Onerous - burdensome
2. Gratuitous - for free (act of liberty)
3. Remuneratory (salaries, reward, grades)

2 kinds of property
1) Movable – personal (cars, cellphones, laptop)
2) Immovable – real (house, lot, building, farm)

2 ways of entering into contracts

1) Oral – valid and enforceable, there are cases which the law requires it to be written
2) Written – required by law (statute of fraud)

Article 1405 statute of frauds

DEFECTIVE CONTRACTS

1) Rescissible / Voidable
a) Contract is valid unless annulled / rescinded
b) No annulment, no rescission; contract remains valid
c) Extrinsic defect, outside (Rescissible)
i) Defraud the creditor
ii) Prejudicial to the creditor
iii) selling to the third person to defraud the creditor; will be valid if not
annulled
iv) father with properties that can support children. But he will sell all the
properties. Sale will be rescissible for it
d) Intrinsic defect, inside (Voidable)
i) Contract of marriage. The groom, by force, intimidated the woman to
marry him. The marriage remains valid unless the woman annuls the
marriage.
ii) A minor selling property. The contract is voidable because they have
no legal capacity; the contract is valid but voidable.

2) Unenforceable
a) No valid effect
b) But can be ratified/validated and becomes enforceable & valid
c) To make it valid: by making a written contract
d) Examples
i) A guardian is taking care of a minor’s property. Guardians sometimes
ask for court approval. However, the guardian sold the property of the
ward to another person without the court’s approval.
(No legal effect. They can go to court and ask for a written contract)

3) Void
a) No valid and legal effect whatsoever
b) Cannot be ratified/validated
c) Void ab initio = void from the beginning
d) Invalid if contrary/against to/the law, morals, good custom, public order,
and public policy.
e) Examples
i) Outside the commerce of men
ii) Selling illegal drugs (against the law)
 iii) An employee hired but is not offered salary (against the law)
iv) Selling endangered species (outside the commerce of men)

Characteristics of a Contract

1. Consensual or real
a. Contracts are perfected upon the parties’ giving of consent / meeting of
minds
i. Contract of Marriage, Sale
b. Real - perfected upon delivery (invalid unless delivered; despite consent)
i. To give collateral when borrowing money from a pawn shop (contract
of pledge)
2. Onerous or gratuitous
a. Onerous – with a burden
i. Employment contracts, contract of sales, etc.
b. Gratuitous – for free (act of liberty)
i. Donations
3. Unilateral or bilateral
a. Unilateral
i. 2 or more parties
ii. Only one has obligation
iii. Examples: donations (donor has the obligation)
b. Bilateral
i. Also 2 or more parties;
ii. Both parties have obligations
iii. Examples:
● Sale Contract: Seller must deliver, buyer must pay
● Employee Contract: Employer must pay salary, employee must
work
4. Principal or accessories
a. Principal
i. Can stand alone
ii. Lease contracts, loans
b. Accessories
i. Cannot stand alone
ii. Mortgage contract, pledge contract are collaterals and the principal is
Loan
 5. Nominate and Innominate
a. Nominate
i. Has names
b. Innominate (do – give; facio – do)
i. Do ut des
● I give so that you may give
ii. Facio ut facias
● I do that you may do
iii. Do ut facias
● I give so that you may do
iv. Facio ut des
● I do so you will give

– END –

B1 and B2 will pay C1 and C2 in a joint obligation. 10,000

C1 condones his right to collect payment.
B1 will still pay 2,500 to C2
B2 will still pay 2,500 to B1 and C2