14 18 6 Notes: ALA Law TA Covered sctions 742 Sapicou weno 743 Rept Reon Tene Coal ia Ac tal ender owes ver coins and nate 132 Conserstrsip ea 753, Reeherpan Coss inlet Proper sw eet provisos under Pat Ciel Pope Oris)» el The Ln on Pants 742 Tey oom, Seve Marsan Tie 763, The aon Copyright * Effective October 2017 CPA Board Exam “The following tems canbe iacrparne in the slbis of Partnership and Corporation ee . 4 Sterites Regulation Cose SEC Cirelars and Isiance © Cooperatives ‘The Insolvency Law and Corporate Rehabilitation can be incorporated Inthe syllabus of Medge & Mortgage “he Boing Checks Law nd Banking Laws canbe atin ‘the Negoriable Instruments Law. Z = Ieelecal Property Law abe issussodin Financial Reporting re'latargible Asset >o Revawees) PART! OBLIGATIONS AND CONTRACTS ‘OBLIGATIONS. What is the law on “Obligations and Contracts”? ‘Thelaw on obligations and contracs is the body of rules which deals with the nature and sources of obligations and rights end duties arising trom ‘agreements and contacts Source of the “Law on Obligations and Contracts’ ‘The source ofthe Law on Obligations and Contracts is the Civil Code of the Philippines (Republic Act ‘No, $86), which was approved on June 16, 1949, ‘and tok effect on August 30, 1950. The CiviiCode of the Philippines is based on the Civil Code of Spain which took effect in the Philippines on December 7, 1883. What is an obligation? 4. Civil Code Definition ~ An obligation is @ juridical necessity to give, to do, ornatto do. (Art. 1158) 2. Manresa's Definition ~ ‘Anobligation the legal elation between one party and another, the latter is bound to the fulfllmentof the prestaton which the former may demand of him.Pent 1Onlgatene and Contacte Poin Busioss Law (For CPA Reviews) 3 4, Roquisites or olomonts of an obligation. ‘Active subject known as the creditor or obliges; the Person who is entiled to demand the fulfilment of an ‘biigation, Passive subject~known as the debtor or obligor, the person who s bound tothe fufllment of an obligation. Prestation — the promise or the particular contract to bbe observed in the performance of an obligation, and may consist of giving, doing, ornot doing a thing, Efficient cause ~ the legal tie which binds the parties to the obligation, otherwise known as juridical te oF vinculun juris. Example; D promises to buy C's car as a result of an agreement, (Here Dis the obligor, Cis the obigee; the ‘aris the abject or prestaion; the agreement or contract 's theefficient cause ) Kinds of obligations: A. Viewpoint of sanction 2. Civil Obligations give a right of action to compel theicpertormance. . Natural Objigations-—notbased on postive law but ‘on equity ané natural law; do net grant a right of action fo enforce their performance, but after . ‘Voluntary fulfilment bythe obigor, they authorize the Fetention of what has been delivered or rendered by reason thereof ‘Moral Obligations —those that cannot be enforced by action But waich is binding on the party who makes itn conscience and natural law, Under our law, moral obigations are now merged with natural ‘obligations. Civil Obligations — Example~ D promise to pay G his (0's) debt of ‘Natural Obligations ~ Example — D i Moral Obligations ~ Example The duty of a husband and wife to B. Viewpoint of performance Positive ~ to give or to do . Negative ~ nottode C. Viewpoint of subject matter a. Real obligation - to ive », Personal obligation = to do or not o do D. Viewpoint of persons obliged Unilateral where only one ofthe patiesis bound Biateral—where both parties are bound. b. ea- shone ‘Sources of obligations: (Art. 1187, CC) 50,000, febted to C in the amount of 50,000. But the debt has already prescribed. Stil, D paid C. D cannot later on get back what he voluntarily aid, ‘observe idly, The duty of Catholics tohhearmass on Sundays and holy days of obligations, Law Contracts Quasi-contracts ‘Actor omission punishable by aw Quasi-delcts40. Patt Obigsions an Contace Law as.a source of obligation ‘Obligation derived from law are not presumed. Only those expressly determined in this code orby special laws are demandable, ad shall be regulated by the precepts of the law which established them-and as towhathas not been foreseen, by the provsions ofthis book. (rt. 1158, CO) Contract ae a source of obligation (Obligations arising from contracts have the ful force of law between the coniractng patie and should be complied vith in good fath, (Art. 1159, CC) 1. Quasi-contract as a source of obligation Its the jurideal relation resulting from lawl, voluntary ‘and unilateral acts by vitue of which the parties become ‘ound to each other to the end that no one will be unjustly enriched or benefited a the expense of another. (Art 2142, ce) Kinds of quasi-contracts 4. Negotiorum Gestio—the voluntary management ofthe property or affairs of another without the knowledge or ‘consent of he latter. (Art. 2144, Civil Code) 2, Solutio Indopit—the juridical relation which is created when something is received when there is no right to ‘demand itand twas unduly deivered through mistake, (art 2154, C0) Dolict a8 a source of obligation Every person criminally liable fora felony i also cil liable. ((riele 100, Revised Penal Code) Pontus Busnes Law (Fe CPA Revewoes) 5 41. Quasi-dlict or culpa aquliana ortortas a sourcy of obligation Dae ‘ne which causes camagetoanote ther being futor nepigenee, bl thece snapre-exsng conection Befweonthe partes. (rt 2176, Gif Gods) 12. Obligations ex lege not presumed, Obligations arising from law are not presumed, Tobe demandable and enforceable, the obligation must be. Stated by the law which created the obligation. Such being the case, the agreement ofthe partis under his obigation fsnolonger necessary because itis the lw which gavems. their obligation 48, Law governing obligations doived rom law Obigston ered rom iw shale governed by he law wiih exabiones them mente feuioeney same shal be supplemented by the prowisions of he Cai are bythe pr i Examples: The obligation of husband and wife to support each ther. (An. 68, Family Code) , The obligation ofa taxpayer to flehis income taxretu. {Mile Vi, Section 44, NIRC) @ The obligation ofthe legitimate asoendants and lescendants to Support each other Fam mr PP (Art 70, Famly 44, Meaning ofthe article “Obligations derive from law are not presumed. Tho law saya “obigntions derived from law are not presumed’. This merely mesns that the obigation must be leary setforhinthe Chil Code or special law,18. Pon 1 LObtgutons and Cotas ILLUSTRATIVE CASE. SG while employed as a guard ‘fa moviehouse by O, shot and kiled a gatecrasher,X.. ‘who attacked SG with a knife after having been refused tentrance without frst providing himself witha ticket. SG ‘was criminally charged with homicide but the case was dismissed by the tral cour, Forthe expenses incurred in his defense, SG demranded.eimbursementfrom the owner ‘When the owner refused, he fledhis action forthe recovery ‘ofthe amount pai to his lawyer plus moral damages. HELD: The owner, "0", isnot lable because the giving oflegalassistance to an employee isnot alegal obligation, ‘While it may be true thatit may te considered as ‘moral obligation, t does not. atpresent, countwith the legal ‘sanction of any man-made law. Ifthe owner isnot legally ‘obliged to give legal assistance to the employes, then the Tatler cannot recover the amount pad by him this lawyer Inshort, obligations arising from law cannot be presumed itmustbe stated before itbecomes obligatory. (Dela Cruz vs Northem Theatrical Ent, 800.6. 422, Sept. 1954) Validity of Contracts, In contracts, as to theirgeneral formation, itis what callfreedom to contract or autonomy of wil The “contra Entered into between the partes shallhave the fore of aw between them. Any violation by efter party shal produce ‘cause of action against the violator. However, inorder for 8 contract to be val and enforceable it must not be Contrary to law, morale, good customs, public order or public policy, otnerwise, the contract is void (Arts. 1306, 1408, Civil Code) Parts in Business La (For CPA Revienes) 46. Effectit partof the contractis vold. If part of the contract is void but the contract is susceptible of division, that part whichis not affected may be enforced disregarding that part whichis void. Such that. ifthe contract falsified by the unauthorized insertion of additional stipuiation, this falsified insertion shall be Considered inexistent and the part unaffected shall be ‘enforced, 47, Concept of Quasi— Contracts {tis juridical retaion which arses from certain lawful voluntary, and unatera acts, tothe end that no one may be Unjustly enriched or beneftedat the expense of another. ‘Aquasi-contractis not an implied contract because in ‘a quasi-contract (unlike in an implied contrac!) there is no ‘meeting ofthe minds. ‘Two principal kinds of Quasi-Contracts. 1. Negotiorum Gestio voluntary administration of the propery, Business or afais ofa third person without the consent or authority of ts ower. 2. Solutio Indebit~ payment by mistake of an obigation ‘which was not due when paid ‘The distinctive mark ofa quasi-contract from contract Js that in contract, there is consent ofthe partes, while in |quasi-contract, the obligation arises without a contract. 48. Some examples of Quasi-Contracts 4) Art, 2144. Whoever voluntarily takes charge of the ‘agency of managementof the business or property ofPatt Obliptons snd Contacte ‘another, without any power from the late, is obliged to Continue the same until he termination ofthe affar and its incidents, oF to require the person concerned to substitute him, ifthe owner isin a postion to doo. Example: D, amerchant farmer and owner ofa ten-hectare sgricutura and, let for USA on a pleasure trip. Whi ‘enroute to USA, typhioon Yolanda’ devastated the entire Philippines, incuing the land owned by D, Before the. typhoon reached our area of responsibilty, C, 2 neighbor of D, employed sx (8) farmers to harvest the play planted on the land of D. The exoenses incurred 's POD, In here, the obligation of D upon arrival is to reimburse C P600 because he must not be enriched atte expense of another. 2) Art 2164 It something is received when there is no righttodemand it, and il was unduly delivered through mistake, the obigation fo eluin arses, Example: owes C P10,000 payable on December 25, 2018 (On Desember 10, 2018, 0, thinking thatthe obligation was aleady due paid the full amount ofthe obigation. Inthis case, C's obligation isto return the amount paid because the obligation is not yet due and the obigee (C) nas no rightto demand it 3) Art 2164. When, without the knowledge ofthe person. ‘obliged to give Support itis given by a stranger, the later shallhavea rightto clam the same fom the former, Unless ft appears thathe gavel out of piety and without intention of being repaid. eit Bins Law For CPA Review) 9 19 20. 4) Art 2567, When, through an accident or other cause, & person Is injured of becomes seriously il, and he is freated or helped while he is natin aconcition to give Consent to a contract, he shal be liable to pay for the Services of the physician or other person aidng him, Unless the service has been rendered out of pure generosity, 5) Art, 2168. When, during afte, lood, storm, of other ‘calamity, property's saved fom destruction by another person without the knowledge ofthe owner, the late is Bound to pay the former just compsnsaton. 6) Art. 2174. When, in a small community, a majority of the inhabitants of age decides upon 3 measure for protection againstlawlessness, re, lod, storm or other Ealamity, anyone wo abject fo the plan and refuses to Contbuteto te expanses buts benefited by the project fas executed shall be liable to pay his share of sald expenses. Rules governing obligation ex dolloto or ex maleficio. 4) Philippine Revised Penal Code and other penal laws, ‘subject to the provisions of Aticle 2177 of the Civil Code. 2) Chapter, Preliminary Tite, on Human Relations ofthe iil Code. 3) Givil Code on damages, Tile 18 of Book IV. Commission of a erlme as a source of an obligation Every person who is riinally able also cvily able ‘under At 100 of the Revised Penal Code. Ifa person therefore guity ofthe crme charged, he must notonly be imprisoned buthe shal also answer for damages as a cv Obligation, Sueh civil obligation is a necessary10. a. 22, Pant Obiatons and Contract consequence of criminal responsibilty, and is to be ‘declared and enforced in the same criminal proceeding ‘except when the injured party roserved his right to fle the civil action independently from the criminal action. (Seo. Rule 111, Revised Rules of Cour}. Commission ofa crime or felony will notalways make a person civilly liable. ‘As aul, when a person commits a crime, he can be held cximinaly liable and in adition, he can also be held cil able because most often the commission ofa crime ‘causes not only moral evil but also material damage. However, notallcimes cause material njury. Therefore, if there is no material damage to be compensated or to be Indemnified, there is no civ Fabilty tobe indemnified, Whatis included in eivil lability? 1) Restitution — At. 108, Revised Penal Code - The ‘esttution ofthe thing itself must be made whenever possible, with allowance for any daterioration or ddimination of value as determined by the cour. ‘The thing lise shallbe restored, even though tbe found in the possession of a thitd person who has cquied tb lavfulmeans, saving to theater his acton ‘against the proper person who may be lable fo hi. ‘This provision is not applicable in cases in which the thing has been acquired by the third person in the manner and under the requirements which, bylaw, tar an action forits recovery. 2) Reparation ofthe damage caused Art 108, Revised Penal Code The court shall determine the amount of «damage, taking into consideration the price ofthe thing, otters in Business Law (Far CPA Reviene) ‘whenever possible, and its special sentimental value to the injured party, and reparation shall be made ‘accordingly, 8) Indemnification for consequential damages Art, 107, Revised Penal-Code - Indemnification for consequential damages shall include not only those caused by the injured party, but also those suffered by his family or by a third person by reason ofthe crime, Example: D stole the car of C. While driving the stolen car looking for a buyer, a 6 x6 truck sideswiped the car causing a damage of P50,000. In this case, the ‘obligation of Dis torestore or retum the carto the owner and to pay the damage caused amounting to P50,000. D must also pay the consequential damage suffered by C, and those suffered by his family or by third persons by reason of the crime. 23. Proof or evidence required. 41. Proof or evidence beyond reasonable doubt — when ii labilty for damage is included inthe criminal case, 2, Mere preponderance of evidence ~ when claim for ‘damages fled separately withthe erminal action, 24. Effectif the guilty party died pending trial The civ obligation is not extinguished. The injured party ‘may fie his claim against the estate ofthe offender, butthe heirs are not able beyond the value ofthe property they received from the decedent. (Arts. 178 and 1311, CC)2 26. 5. Effect ifthe guilty party is acquitted of the criminal action filed. ‘The extinction ofthe penal action dose net cary withit extinction ofthe cviaction. However, the cvil action based. con delict shall be deemed extinguished f theresa finding in final judgment in the criminal action thatthe act or ‘omission from which the cli iabilty may aise did not exist (Section 2, Rule 111, Revised Rules of Coun). Minimum amount recoverable in case of death. The minimum amount of damages recoverablein case of death caused by a crime or quasl-delic is P75,000 without the need of presenting evidence or proof of damages. However, other damages may be recovered by the injured party. (People vs, Mariano Dandasan, Jr, GR No, 184605, June 14,2016) ‘May a person who committed an act constituting a crime be exempted! from criminal liability? Yes, this is provided for in Arte 12 of the Revised Penal Code. The following persons are exempted from crimina’ iabilty evan if the act committed constitutes & 4. Animbicleorinsane person, unless he acted during ‘lucid interval person under 9 years old ‘A person over 9 years old but below 15, unless he ‘acted with discernment. Accident Persons acting under the compulsion of an inesistable force. Persons acting under the impulse of an Uncontrobable fear ofan equal or greater injury ois n Busine Law (For CPA Reviews) 43 20, 7. Persons who fallto perform an act required by law ‘when prevented by some lawl or insuperable Note’ These persons are exempted from criminal iabilty ‘but not from civ lability, except paragraphs 4 and 7. This civil liability shall devolve upon their {Quardians or persons whom theyare under control rauthoniy Concept of quasi-delict or culpa aquiliana Quas*-delict, or tor, or Culpa Aquilana, isthe wrong committed against a person independent of contract and wathoutcrimina intent. ~~", while driving his car negiigenty hit pedestrian X, inflicting upon the latter bodily injury, In here, O is liable because of his negligent act and this scaled quasi-szme 1 DAMAGE: Refers to the harm done and what may be recovered INJURY. Refers tothe wrongful or unlawful act.2 Pat bgstons a Cartacts Fraud or dolo consists in the conscious and Intentional proposition to evade the normal fulfilment of anobiigation (8 Manresa Bk. 1. P1683). B. Kinds of Fraud 4. Fraud in obtaining consent, 2. Fraud in performing acontract. 65. Example of Fraud in obtaining consent. '$ sold to B for P10,000 a specficring misrepresenting itap.adiamond ring when infact tis a fake. B bought the fing because ofthe misrepresentation ofS. Later, ituins ‘utthat the ring is only made a glitering glass. Inher, the right of Bis to annul the contract because the fraud is Committed atthe time the contract is perfected. This is ‘called dolo causanti The fraud employed the very reason wy B entered into the contract. Example of Fraud in performing a contract. ‘Today, D promised to deliver to C 100 cavans of C-4 variety rae, dalivery to take place after 10 days. Upon delivery D delivered the C-4 variety but mixed them with 8, aninforior variety In here, the right of Cis to ask for ‘damages, C cannot ask for annulment or cancelation of the contract because the fraud is committed at the time of performance. This fraud is called dolo incident. 66. Renunciation of Fraud 4,Futue fraud cannot be renounced because the ‘advance renunciation ofthe creditor would practically Jeave the obligation withoutefect. Art. 1171, CC) Potts n Busine Law (For CPS Reviwees) 33 2, Past fraud can be renounced. The fraud referedto is fraudin ticle 1170, whichis the malice or bad faith in the performance ofthe obligation, 67. Test of Negligence. The test of negligence is: Did the actor in doing the alleged negligent act use the reasonable care and caution which an ordinarily prudent person would have used n the same situation? Ifnot, then he is guilty of negligence. 68. Kinds of Culpa or Negligence 4, Culpa aquiliana—the wrong or negligence committed independent of contract and without criminal intent. 2, Culpa contractual ~ the wrong or negligence in the performance ofa contract. 3, Culpa criminal ~ the wrong or negligence in the commission ofa crime. 69, Distinguish Culpa Aquiliana from Culpa Contractual, 4. Inculpa contractual, there is a pre-existing contractual ‘elation between the patios; while in culpa aquliana, there sno contractual relation, 2. Inculpa contractual the negigence ofthe actoris merely ‘an incidentin the performance ofthe obligation; while in culpa aquilana, itis substantive and independent. 3, Inculpa contractual, the source of iabilty ofthe actoris the breach of contract, while in culpa aqullana, itis the reglgentact orthe omission itselfPat 1 /Obigatons an Conacs 4. Inciipa contractual, the proof of contract and he breach is sufficient proofto warrant recovery of damages; while in cuipa aqullana, the negligence of the actor must be proved. Mlustrative Case: “Texi river D, driving recklessly, kiled pedestrian X and his passenger P. What are the sources of te obligation of Dand that of his employer to P and to X? 41. Tho ightof the heirs of, the pedestian sto proceed againstD or his employer and this is based on quasi- Selict or culpa aquliana because there is no existing Contact between D and X. The liabiityofboth is dect and primary. yer oF operator can relieve lablity by proving that dus ciigence of ‘900d father of a family is made in the selection and ‘Supervision of his driver and ths is based on Article 2180, Civil Code. 2. Theheirs of P may proceed against D's operator only. ‘The source ofthe llably ofD's employer isthe breach ‘ofcontractof cariage with P, and his is nownas Culpa Contractual Attcle 1755 of the Civil Code provides that @ ‘common catiar is bound o cary the passengers safely ‘as faras human care and foresight can provide using the utmost dligence of very cautious persons, with 2 ‘due regard for all the circumstances. Be itroted thatthe heirs of P must bring the action against the owner-operator of the tai, and not against the driver, because the contract is between the passenger and the owner, and not between the n 72. 7. 1 Law (For CPA Rees) 35 passenger and the driver, who merely represents the ‘Owner. OF course the owner can later on ask reimbursement from the drives, Likewise, the operator cannot escape from his labiity By proving that he exercised due diigence in the selection and supervision of the driver, butt might mitigate hs culpabaity.This's based on thelegalmaxim "Tespondeat stperior”orthe master-servantrul, that the negligence of the servantis the negligence of the master Degree of diligence required. 4, Diligence required by law, Fany. 2) Diligence required by the parties. 3. Intheabsence ofboth, cigence ofa goodatherof fem. Distinguish fraud from negligence. 4. Infrau, there isa deliberate iniention to cause damage, \whie in negligence, there is nointentto cause damage. 2. Infraud, the tailtyof the actor cannot be reduced by the coult: while in negligence, the labilty may be reduced by the cout. A. Concept of fortuitous events. Fortuitous events or caso fortuto are events which cannot be foreseen or which, though foreseeable are inevitable, These are acts of God which could neither be foreseen nor resisted, such as floods, storm, lightning, typhoon and penis of the sea and eruptions ofvoleanoes. B, Requisites of Fortuitous Events or Caso Fortuito. 4. Thatthe event musts independent ofthe wil ofthe debtor36 Pa 1 Obligations oné Contracts 2, ‘Thatit must be elther unforseeable or unavoidable. 3, That the occurrence must render itimpossibie for ‘the debtor tofuflhe obgation n anormal manner. 4, That the debtor must be fee of participation in, or ‘aggravation of, the injury tothe creditor (Austria vs, Court of Appeals, 39 SCRA 527) 74, Fortuitous event distinguished from force majeure. Force majeure's @ superior or resistible force which is essentially an act of man, such as wars, strikes, rots, ‘acts of robbers, pirates and brigands. 76. Effects of fortuitous events in the performance of an obligation, When a debtor is unable to fulfil his obigation because of fortuitous event, his obligation to comply is extinguished. subjectto the folowing exceptions: 4. Whea stipulated by the parties that the happening ofan event fortuitous in nature shall not exempt the debtor from his abil. 2, Whentthe law expressly so provides. a. Artiolo1165--Ifthe debtor delays, orhas promised {o deliver the same thing fo two or more persons ‘who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery ', Artiole1268--When the debt of thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of Poms Busnes Law (or CPA Ravens 37 the price, whatever may be the cause for the loss, Unless there refusal withoutjustfeaton onthe part ‘ofthe credior to accept the thing, © Attile 1942, Paragraph 1—The baile s lable for the loss ofthe thing even ifit should be through a fortuitous event, if he devotes the thing to any [purpose different from that for which it has been loaned, 3. Where the nature of the agreement requires the assumption of isk. Thisis Known as the doctrine of “assumption ofrsk" Itrefers toa stvationin which the obligor or debtor with {ullknowledge ofthe risk, voluntarily assumes such sk ‘This isbased on the principle no wrong is done toon who consents" Ths is ilusated in insurance contracts, whereby the obligor as insurers lable to pay even if the propery i lostby fre and thisis fortuitous in iaturo. 76. llustrative Cat wasinjured while he was a passenger ofa Love Bus ‘operated by O and company. The proximate cause of the accident was the failure of the steering wheel to work ‘causing the driver to lose control ofthe bus the result of Which fel into a atch 4. Canthe operator exempt himself due to fortutous event? ANSWER: The weight of authority sustains the view ‘hata passengeris entilled to recover damages trom {the carrer for an injury resulting from a defect in an equipment purchased from @ manufacturer, unless38 a Pat 1 Oblatons an Canrace extraordinary diligence ha’. “een exercised with regard to inspection and application of the necessary fests, 2. Suppose the proximate cause of the accident was a tire blowout, is that fortuitous in nature? ANSWER: Our Supreme Court repeatedly stated in its decisions that defective Brakes, the blowout of tres ‘and others of similar nature cannot be classified as fortuitous event per se within the meaning ofthe law. 7. Receiptof the Principal without reservation as to the Interest This article must be gleaned with Aile 1253 which provides that fa debt produces interest, payment ofthe principal shall notbe deemed to have been made until the interest has been covered. This article therefore raises a Tebuttable presumption that the receipt of the prinepal without reservation aso the payment of ilerest shal ion the presumption thatthe sad interest has been paid Example: D borrowed from © P10,000 at 12% interest per annum. Onthe date of maturty O paid C, and thelatter Issued a receipt under the following tenor: Received from (0 P10,000 in payment of his obligation (Sgd.C) In here, the aw presumes thatthe interest of 12% was already paid because in the payment of an obligation in money, the Payment is applied fist to cover the interes, then the principal obligation, {f the interest has not yet been paid, C should have reserved the payment of interest the receipt, toread as follows: Received from D 10,000 in payment of his ‘obligation, Interest unpaid. (Sod. C) Posi Busines Law For CPA Revives) 39 78. Receipt of a later installment without reservation as toprior installments. ‘A receipt acknowledging the payment of a later installment without reservation as tothe eater installment ‘due, wil aise the presumption that the prior instalment is. also paid, Butthis presumption isnot conclusive. Itcan be conitoverted by proof tothe contrary, (Art. 1176, CC) Example: § sold to B a specific car for P20,000 payable infourequalinstallments: January. — P5,000 February = 5,000 March? — — 5,000 Apri t = 5,000 paid S the frst and second installments, but falled to ‘pay the third ithe tenders payment on Apri the payment ‘must be applied on the third installment, otherwise tll. rise presumption that the laterinstallment was already Paid. However, he may accent he fourth instalment but he ‘must make a’reservation in the receipt that the third installmentisnot yet paid 79. The rightof the creditor as against the debtor. In order to satisty his claim against the debtor, the creditoras the following successive rights. 4, To demand futfiment of the obligation or specific performance. 2. To attach the properties of the debtor, except those ‘exemptby law from execution,40. 82, Part /Obigatons ond Gonads 3. To exercise all the rights of the debtor except those inherent and personal to him. This is Accion Subrogatoria 4, Toask forthe rescission of contracts intended to defraud him. This is Accion Pauiiana, 1. Accion Subrogatoria or the right to be subrogated. ‘The-action which the creditor may exercise inthe place ‘of is debtor in order to preserve or recover the property lost or transferred so that he can satisfy his own credits called Accion Subrogatoria or subrogatory action, ‘Accion Pauliana or the right to rescind or impugn fraudulentacts. ‘Tne creditor asa last resorts the right to set aside oF evoke or cancel the acts which the debtor may have done to defraud him and this is called Accion Pautlana or the Fight to rescind. Remedios which are avallable to the creditor in order ‘to protect his rights against the debtor. 41, Exhaust the property in possession ofthe debtor 2. Tobe subrogated o al ofthe ights and actions of the debior save thase which are inherent in his person (Gccion subrogatora). 3, To impugn all ofthe acts which the debtor may have done to defraud him (accion pauliana) "Note: The second and third are subsidiary tothe frst. Pntarsn Busines Low (For CPR Reveweos) rl liustrative case exemplifying the rights of the creditor: D owns a specific parcel of land and at the same time owes C P'100,000 payable on December 25. On the due date, D failed to pay. Whatare the successive rights of C7 41, Todemand payment 2, To bring an action against D ifthe latter falls to pay. after demand, Ifjudgment was favorable, to attach he ‘roperties of Din satisfaction ofthe obligation, except those exempt from attachment 3, TocompelD to assign to C whateverrights D may have against thitd person and this is called Accion ‘Subrogatoria. 4, To rescind or impugn acts executed by D in order to defraud C, This called Accion Pauliana. Such hatin the ilustration given, D sol the lanito X on December 20 without reserving properties to answer for his ‘obligation to C, the tight of Cisto rescind or cancel the sale between D and X because this is considered 2 fraudulentact. Ths ight of rescission applicable only ifXiein bad faith NOTE: There are, however, some personal rights of the debtor which the creditor cannot exercise, Examples: ‘a, The ightof existence or support b, Therightof an honorary character The powerte cary out the contract of agency 4. The rightorrelation as pubic character . Therightto a government gratuity or pension2 Par 1 ntgaons and Contos 83. Transmissibility of rights. ‘As aul, all rights acquired in vue of an obligation are transmissible, f there has been no stipulation to the Contrary Be it noted that itis the right ofa person thats transmissible, the obigationisnot transmissible. (Act. 1178, cc) Example: D owes © P10,000 payable on December 25. His would be-heirs are X.Y, Z. ID dies on December 20, D's obligation toC to pay P10,000 is extinguished. Hence, CC's rights to fle an action or claim against the estate of the deceased debtor However, the heits are not lable beyond the value of the property received from theit decedent. f, however, twas C wi dies and he's survived by hisonlyheis S, and N, the heirs can demand payment, from D because rights are transmissible ‘84. Excoption to transmissibility of rights. 41. When the parties agreed against transmission. 2. When the law prohibits the transmission of rights. 3. When the nature of the obligation does not permit transmission of rights, such as when the right Is. personal 85, Classification of Obligations 4. PRIMARY classification according tothe CivilCode. pure and conditional With a period orwith aterm allenative and facultative jointand solidary divisible and indivisible with a penal clause spapoe 43 Potts Busse Law For CPA Revo 2, SECONDARY classification according tothe Civil Code. unilateral and bilateral ‘ealand personal determinate and indeterminate positive and negative legal and conventional ‘iil and natural 86, Concept of pure and conditional obligations 4. Pure obligation — one without a condition or a term, therefore demandable at once Example: '._| promise to give youa specific car ' Lobiged to give you P10,000 on demand. 2. Conditional obligation ~ when there is a condition imposed inits performance. 87. 1. Q ~ Whatis acondition? ‘A = Acondiion sa future and uncertain event upon lwhich an obligation is subordinated ormade to depend, (Esriche, Law Dictionary) 2. Q — Whatare the requisites of condition? A= a Futurity Uncertainty 3. Kinds of conditions 4. Suspensive —one which suspends the effectivity of the obligation unt the condition isfulfiled. tis the fuffilment of the condition that produces the efficacy ‘ofthe obligation. No fulfilment, no obigation,44 Pan 1 Onigaters and Conrats Ponts Busnes Low ForCPARevewsos) AB. Example: |willgive you P10,000ifyou wllpass the the obligation is not conaitional but with a period. The next CPA examination. This is suspensive because payment here does not depend upon the wll ofthe debtor itsuspends the demandabiliy ofthe obligation. itis only the time when payment is tobe made, Since we ‘are referring othe time of effectivity, we considerita term. 2. Resolutory-one which extinguishes the obligation (of a period. ‘upon the happening ofthe condtion. The obligation takes effect ai once, but wil terminate upon the 90. When is the obligation demandable? happening ofthe event ‘Since the time for payment (note payment) depends upon the willof the debtor, immediate performance cannot be enforced the right ofthe creditors to go to court andlet. the cour fixthe date for payment. The creditor in this case isnot demanding payment, he isonly asking the courtto fhe the date for payment. Once feed by the cout, the obigation becomes demandable onthe date fixed. Exempe: wil et you use my car untilyou pass the next CPA examinations. The promise is made today. Tomorrow you can demand delivery fom me. ‘Butif you pass the examination, lat us say on May 30, my obligation is already extinguished because the event ready happened and om thattime there Is a revertion of personally, the “debtor becomes the creditor and the creditor becomes the debtor" eer Ras br eon ition unde Armless bes penp eadetinl er te erienoore 4, Polestatve one which depends upon the wil of one ‘extinguished since the event already happened, Robi Adler ls tal 2. Polesave onthe partothe debtor fsuspense £88, When an obligations demandable at once. bath the condion andthe obigaton re vos AT vaanneees Example give you P0,000 ie, 2. When ne Soigaton i sbjettoaresoktory conten b. Potestative onthe pat ofthe debtor resolute or petod theobigaton andthe conto ar val Example Figie you 10,000 unt return from Tarlac. «. Potestaive on the partof he creditor, the obligation 189. Debtor to pay the creditor “when his means permi Ifthe debtor willpey when his means permit him todo ‘and the condition are valid. Example: will ave you 0, or words of similar import, such as, 10,000 ifyoulike. aetna 2. Casual--one which depends exclusively upon chance. 2. when am able to" : Ths is aval obligation. Example: Iilgive you P10,000 ‘3. “when Ihave money iftwin the Lotto draw next Wednesday.48 Pant 1 bigutons ad Contacts 3 Mixed—one which demands upon the wil ofone ofthe Contracting paties and partly upon chance orthe will of ‘third person. Tisis alsa a valid obligation. Example: {ill give you P10,000ifyou'll mary X this year Mustrative Case: | will ve you P10,000 1 can sell my land this year fl succeedin seling my land this year, am! under obligation to give you P10,0007 It is suomited that the answer is yes, because the ‘onlin attached inthe obligation isnot entrely dependent ‘upon the will ofthe debtor, but instead itis considered rized, dependent upon the will ofthe debtor and a third person, that, the buyer, his availabilty and wilingness to buy Effects of Potestative, Casual, and Mixed Conditions. A. Potestative If the condition is potestative and the fuflment depends exclusively upon the wil of the debtor the conditional obligation shall be void. Ifthe condition is. potestatve and he fullimentdepends exclusively upon ‘the will ofthe creditor the conditional obligation shall be valid B. Casual Ifthe consition i casual anditsfufllment depends ‘upon chance andior upon the will ofathird person, the obligation shall be vali ©. Mixed. Ifthe condition is mixed and its fuflment depends partly upon the will ofa party tothe cbigation and partly Pots Bune Law (Fr CPA Reviewoes) 92. When does an obi ‘upon chance andlor the will of a third obligation shall be val. ‘Exceptions to the rule that when the fulfillment of Condition depends upon the sole wil of the debi, Conditional obligation shall be voi, 4. If the condition is resolutory end potestative, th cbligation is valid even ifthe fullment ofthe condition jis made to depend upon the sole will of the debtor (Taylorvs. Uy Tieng Piao, 43 Phil. 873) 2, The mule that even the obligation itself shal be void is applicable only oan obligation which depends forts Perfection upon the fufiment ofthe potestetve condition. ‘and notto pre-existing abligaton.(Tilane ve. Quezon. Colleges, 03 Phil 383), tion to deliver arise? 41, When there is no term, period, or condition, the: ‘obligation to deliver arises from the perfection of the Contract or its constitution or creation, the obligation being pure. 2. {subject toa suspensive condition, the obligation to deliver arises from the mament the coneiton rappens. 31 Ifsubjectto a suspensive tem or petod, the obligation to deliver arises upon the expiration of the term or period, 4. In obligations arising from law, quasidelicts, quash: contract and crimes, the specific provision ofthe laws ‘applicable shall control ‘ExompleInacontractof sale, al the fruts shall pertain tothe vendee from the day the contractwas perfected (art 1837),93, Effects of impo: _Pat 1 btgaons Conte le and illegal condition. 1, Impossible physically: to make a dead man alive Impossible fogically:tormake a circle thatis atthe same time a square 2, Mega condition: to kilX Effects: 1. Ifthe condition is fo do an impossible or llega thing, ‘both the condition andthe obligation are void, Example give you 10,000 f you wil make a dead man ave, 2. Ifthe condition is negative, thats, not fo do an illegal thing, bath the condition and the obligation are vei ‘Example: will give you P10,000 if you wil nt kil X. 3. If the condition is negative, that is, not to do the impossible, just distegard the condition, but the ‘obligation remains. Example: | willgive you P10,000%F. you cannot make @ circle that is at the same tima a square, Effects of positive condition. Example: | will give you @ specific carif you will marry X this year, 4, youmarry Xon December25, my obigationis to give you the car 2, If on December 25, X died without marriage, my ‘obligation is extinguished because one party is dead, ‘Marriage is impossible to take place. 3. Iftheyear has ended, no marriage teking place, both Parties are alive, just the same my obligation is extinguished because the time indicated has already elapsed. nr sions Law (For CPA Revwoes) 49 96. Effects of negative condition. Example: | wil give you a specific car ifyou will not marry Xthis year . 4. If-on December 25 you marry X, my obligation is extinguished because you violated the condition. 2, \fon December 25, X died and no marriage took place, my obligation becomes effective (not extinguished), becaus the expected event cannot occur anymore. 3, Ifthe yearhas ended and no martiage took place, both partis are stil alive, my obligation becomes effective (not extinguished) because the time indicated has already elapsed. Effect when the debtor voluntarily prevents fulfilment of the condition. ‘When the debtor voluntarily prevents the fulfilment of the condition, the condition is deemed fulfled. The. bigation, therefore, iseffecve. Thisis called constructive oF presumed fulllment. Illustrative Case: O was an hacienda owner, who contracted the services of C, a sugar central, to grind O's sugarcane. Itwas agreed further as a condition that C may construct ¢ railroad to pass on O's hacineda tofacitate the easy movement of sugar wagon from one point to ‘another. When C was asking the written permission of O, the latter refused. Yet, he sued C for falure to grind the ‘sugar cane on time, Wile action of © prosper? ‘No, because 0 voluntarily prevented the fulfilment of the condition, the obligor must be released in whole orin portEt Part 1 Ongaons an Con 97, Etfects of fulfilment of suspensive condition. ‘The obligation becomes effective on the day the obligation is constituted. In other words, the effect is retroactive Example: On June 25, 2017, $ wil sel his parcel of {and to B for P10,000, fB will pass the CPA examination fon May 25, 2019, 4. On June 25, 2017, after the promise was made up to May 25, 2019, S remains tbe the ovmer because the Contiton is notyet flied. 2. {Fon May 25, 2019, B passed the examination after payment and delivery, B becomes the owner and the sffect is retroactive dating back from the time the obligation was constituted, that i, June 25,2017, 3. One year after the promise was made or on May 25, 2018, S soldthe land o xs the sale valid? Yes, becauso Sis stil the owner on the date stated, 4 Supposing on May 25, 2019, B passed the ‘examination, how wil the dispute between B and X be resdlved? If after the promise made by S to B (2017), B reserved his ight by having the conditional sale ioted at the Register of Deeds, the passing will vest in him an absolute ight OVER the property. X cannot question B's right because ofhis %) knowledge of the condional sale inseribed in the Torrens Title. If no inscription is made, the night of 8 wil bo defeated because a buyer in good faiths protected by the law. 99, Rul Lim (Fae CPA Reviews) 5 90, Retroactive effects as to the fruts and interest. 41. tfunilateral, the debtors @ rule, wil gt the fruits and interest 2. Ireciprocal the fruits and interest during the pendency. ofthe condition are deemed mutually compensated although unequal 0 be observed in case ofthe loss, deterioration ‘or improvement of the thing during the pendency of the condition. Ifthe thing is lost without the fault ofthe debtor, the obligation shallbe extinguished 2 the things fost through the fauitof he debtor, he shall be obliged ta pay damages. 3. When the thing deteriorates without the fault of the debior, the impairment sto be borne by the creditor. 4. If t deteriorates through the fault ofthe debtor the ‘editor may choose Between the rescission of the ‘obligation ands fulfilment, wth indemnity fordamages. ‘nether case 5. Ifthe thing is improved by its nature, or by time, the improvement shallinure tothe benefit ofthe creditor. 6. Ifitis improved atthe expense ofthe debtor, he shall have no other rightthan that granted tothe usulructuary. (art 1185), Q — Whatis the meaning of the torm “lost”? ‘A. — Nis understood thatthe thing is lost when perishes, ‘or goss out of commerce, or disappears in such a ‘way that ts existence is Unknown ort cannot be recovered, (Art 1188)