OBLIGATIONS and CONTRACTS

OBLIGATIONS AND CONTRACTS By: Atty. Pearl Ashleigh P.
Magbanua
BUSINESS LAW 1
OBLIGATIONS AND CONTRACTS
HUMAN RELATIONS
Art. 19. - Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due and observe honesty and good faith.
Art. 20. – Every person who contrary to law, willfully or negligently causes damage
to another, shall indemnify the latter for the same.
Art. 21.- Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
same.
OBLIGATIONS AND CONTRACTS
Art. 1156. An obligation is a juridical necessity to give, to do or not to do.
ELEMENTS OF AN OBLIGATION
1. Active Subject (obligee/creditor) – the possessor of a right; he in whose favor the
obligation is constituted.
2. Passive Subject (obligor/debtor) – he who has the duty of giving, doing, or not
doing.
3. object/prestation – the subject matter of the obligation
4. efficient cause – the reason why the obligation exists
KINDS OF OBLIGATIONS
A. From the viewpoint of “sanction” –
1. civil obligation –
2. natural obligation –
3. moral obligations

1. Civil Obligation – one that is defined in article 1156.
Example: A promises to pay B debt of Php1,000,000.00.
2. Natural Obligation – the duty not to recover what has voluntarily been paid
although payment was no longer required.
Example: A owes B 1million. But the debt has already prescribed. If A, knowing that
it has prescribed, nevertheless still pays B, he cannot later on get back what he
voluntarily paid.
3. Moral Obligation – the duty of a Catholic to hear mass on Sundays and
holy days of obligation.
 The sanction here is conscience or morality, or the law of the church.

B. From the viewpoint of subject matter –
1. Real obligation – the obligation to give
2. Personal obligation – the obligation to do or not to do.

C. From the affirmativeness and negativeness of an obligation –
1. Positive or affirmative obligation – the obligation to give or to

do.
2. Negative obligation – the obligation not to do (not to give)

D. From the viewpoint of persons obliged –
1. unilateral – where only one of the parties is bound.

 Example: A owes B 1 Million. A must pay B.
2. bilateral – where both parties are bound.

 Example: In a contract of sale, the buyer is obliged to pay, the seller is
obliged to deliver.
SOURCES OF AN OBLIGATION
Art. 1157. Obligations arise from:
1) Law;
2) Contracts;
3) Quasi-contracts;
4) Acts or omissions punished by law;
5) Quasi-delicts
1. LAW – like the duty to pay taxes and to support one’s family.
2. CONTRACTS – like the duty to repay a loan by virtue of an agreement.
3. QUASI- CONTRACTS- like the duty to refund an “over change” of money because
of “undue payment”.
4. CRIMES or ACTS OR OMISSIONS PUNISHED BY LAW – like the duty to return
stolen carabao.
5. QUASI-DELICTS or TORTS – like the duty to repair damage due to negligence.
LAW
Art. 1158. Obligations derived from law are not presumed. Only those expressly
determined in this Code or in special laws are demandable, and shall be regulated
by the precepts of the law which establishes them; and as to what has not been
foreseen, by the provisions of the Book.
CONTRACTS
Article 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
Q: Does this mean, the law is inferior to contracts?

Ans: No. Because before a contract can be enforced, it must first be valid, and it
cannot be valid if it is against the law.
Differences between an OBLIGATION and a CONTRACT?
 - An obligation is the result of the contract (or some other source). Hence,
while a contract, if valid, always results in obligations, not all obligations
come from contracts. A contract always presupposes a meeting of the minds;
this is not necessarily true for all kinds of obligations.
INNOMINATE CONTRACTS
For want of express name, the following are termed “Contratos innominados”:
1. Do ut des – I give that you may give;

2. Do ut facias – I give that you may do;
3. Facio ut des – I do that you may give;
4. Facio ut facias – I do that you may do.
INNOMINATE CONTRACTS
 Example: A worked for B as an interpreter. Even without an express

agreement as to compensation, A is entitled to compensation because of
facio ut des –
A will do the interpreting, and B will give him/her money.

QUASI-CONTRACT
A QUASI-CONTRACT is that juridical relation resulting from a
lawful, voluntary, and unilateral act, and which has for its purpose
the payment of indemnity to the end that NO ONE SHALL BE
UNJUSTLY ENRICHED OR BENEFITED AT THE EXPENSE OF
ANOTHER.
TWO PRINCIPAL KINDS OF A QUASI-CONTRACT:
1. NEGOTIORUM GESTIO – unauthorized management
2. SOLUTIO INDEBITI – undue payment

1. NEGOTIORUM GESTIO
- This takes place when a person voluntarily takes charge of
another’s abandoned business or property without the owner’s
authority.
Reimbursement must be made to the gestor for necessary and useful

expenses.
2. SOLUTIO INDEBITI
This takes place when something is received when there is no right

to demand it and it was unduly delivered thru mistake. The
recipient has the duty to return it.
Example: If I let a store keeper change my Php50.00 bill and

by error he gives me Php50.60. I have the duty to return the extra
Php 0.60.
DELICT
Art. 1161. Civil obligations arising from criminal offenses
shall be governed by the penal laws, subject to the provisions of
Article 2177, and of the pertinent provisions of Chapter,
Preliminary Title, on Human Relations, and of Title XVIII of this
Book, regulating damages.
DELICTS/ CRIMINAL OFFENSE
Art. 100 of the RPC – “Every person criminally liable for a felony is
also civilly liable”.
The reason lies in the fact that oftentimes the commission of a

crime causes not only moral evil but also material damage. If no
material damage is done, civil liability cannot be enforced.
LIABILITY OF AN INSANE CRIMINAL
An insane man who commits a crime is exempted from

criminal liability, but his guardian can be held civilly liable unless
the latter was diligent in his task of taking care of the insane. If
there is no guardian, or if said guardian is insolvent, the property
of the insane man can be made liable.
fault or act of negligence
QUASI-DELICT
Art. 1162. Obligations derived from quasi-delicts shalle be
governed by the provisions of Chapter 2, , Title XVII of this Book
and by special laws.
A quasi-delict is a fault or act of negligence (or omission of care),

which causes damage to another, there being no pre-existing
contractual relations between the parties.
Example:
1. While driving a car recklessly, I injured a pedestrian.
2. While cleaning my window sill, my negligence caused a flower

pot to fall on the street, breaking the arms of my neighbour.
DEFINITION OF NEGLIGENCE
NEGLIGENCE – is the failure to observe, for the protection of the interests

of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.
As defined by the Civil Code, negligence is the omission of that diligence which
is required by the circumstances of persons, place and time. Thus, negligence is
a question of fact.
DEFINITION OF NEGLIGENCE
Requirements before a Person can be held liable for a Quasi-Delict:
A. there must be fault or negligence attributable to the person

charged;
B. there must be damage or injury;
C. there must be a direct relation of cause and effect between the
fault or negligence on the one hand and the damage or injury on
the other hand.
PROXIMATE CAUSE
Is that adequate and efficient cause, which in
natural order of events, necessarily produces the
damages or injury complained of.
CHAPTER 2: NATURE AND EFFECT OF
OBLIGATIONS By: Atty. Pear Ashleigh P.
Magbanua
NATURE AND EFFECT OF OBLIGATIONS
Art. 1163. Every person obliged to give something is also obliged

to take care of it with the proper diligence of a good father of a
family, unless the law or the stipulation of the parties requires
another standard of care.
1. DUTY TO EXERCISE DILIGENCE
 First effect of an obligation to deliver a determinate thing – the
duty to exercise proper diligence.
Kinds of Diligence:
ORDINARY DILIGENCE
 EXTRA-ORDINARY DILIGENCE
1. ORDINARY DILIGENCE -DILIGENCE OF A GOOD FATHER OF
THE FAMILY
- that which is required by the nature of the obligation and corresponds
with the circumstances of person, place, and time.
2. EXTRA-ORDINARY DILIGENCE –
- “a COMMON CARRIER is bound to carry the passengers safely as far

as human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances.
2. DUTY TO DELIVER
WHEN CREDITOR IS ENTITLED TO THE FRUITS?
Art. 1164. The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However,
he shall acquire no real right over it until the same has
been delivered to him.
Example: A is obliged to give B on December 3, 2019, a particular parcel of land.
 - before Dec 3, 2019, B has no right whatsoever over the fruits.
 - After December 3, 2019, B is entitled to the fruits.
 But if the fruits and the land was actually delivered on December 15, 2019, B
becomes the owner of the land and said fruits only from the said date.
 Personal right – is power demandable by one person of another – to give, to do

or not to do.
 Real right – is a power over a specific thing and is binding on the whole world.
 (right of ownership or possession)
KINDS OF DELIVERY
1. Actual Delivery (tradition) – where physically, the property changes
hands.
 Example: If A sells B a fountain pen, the giving by A to B of the fountain pen is actual
tradition.
2. CONSTRUCTIVE DELIVERY – that where the physical transfer is implied. This may be
done by:
1. tradition symbolica (symbolical tradition) as when the keys of a bodega are
given)
2. tradition longga manu – ( delivery by mere consent or pointing out of the
object)
3. tradition brevi manu- (Delivery by the short hand; that kind of delivery
whereby a possessor of a thing not as an owner, becomes the possessor as an owner)
KINDS OF DELIVERY
4. tradition constitutum possessorium-
- the opposite of brevi manu; thus the delivery whereby a possessor of
a thing as an owner, retains possession no longer as an owner, but in some
other capacity)
5. tradition by the execution of legal forms and soleminities.
- like the execution of a public instrument selling land. (Deed of Sale)

KINDS OF DELIVERY
WHEN DOES THE OBLIGATION TO DELIVER ARISE?
Ans: It depends:
1. If there is no term or condition, then from the perfection of the

contract.
2. If there is a term or condition, then from the moment the term
arrives or the condition happens.
Art. 1165. When what is to be delivered is a determinate thing, the creditor,
in addition to the right granted him by Art. 1170, may compel the debtor to
make the delivery.
If the thing is indeterminate or generic, he may ask that the

obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing
to two or more persons who do not have the same interest, he
shall be responsible for fortuitous event until he has effected the
delivery.
CLASSIFICATION OF OBLIGATION FROM THE VIEWPOINT OF SUBJECT MATTER.
1. Real Obligation – obligation to give.

a. to give a specific thing (set apart from a class)
B. to give a generic or indeterminate thing. (one of a
class)
2. Personal Obligation – obligation to do or not to do.
SPECIFIC OR DETERMINATE THINGS
A thing is said to be specific or determinate when it is capable of
particular designation.
Example:
1. This car;
2. The car owned by A on September 12, 2005;
3. The car with plate number 1814 (2005)
4. This particular picture of Maui in my notebook.
GENERIC OR INDETERMINATE THINGS
A thing is generic or indeterminate when it refers only to a
class, to a genus and cannot be pointed out with particularity.
Examples:
a. A car;
b. a 2005 BMW automobile;
c. the sum of Php5 Million;
d. a kilo of sugar.
REMEDIES OF THE CREDITOR WHEN THE DEBTOR FAILS TO COMPLY WITH
HIS OBLIGATION.
A) demand specific performance (or compliance) of the obligation

B) demand rescission or cancellation (in some cases)
C) demand damages either with or without either of the first two,
(a) or (b)
EFFECT OF FORTUITIOUS EVENTS
Another important difference between a generic and a specific
obligation is that:
a) a SPECIFIC OBLIGATION to deliver a specific thing is, as a rule,

extinguished by a fortuitous event or act of God.
a) Upon the other hand, GENERIC OBLIGATIONS are never extinguished

by fortuitous event.
Example:
a) A is obliged to give B this car. Before delivery, an earthquake destroys
completely the car. The obligation to deliver is extinguished.
B) A is obliged to give B a book. Since this is a generic thing, even if one

particular book is lost, other books may take its place. Hence, the obligation is
not extinguished.
(genus nunquam perit)
TWO INSTANCES WHERE A FORTUITOUS EVENT DOES NOT EXEMPT.
A) if the obligor DELAYS;
B) If the obligor is guilty of BAD FAITH (for having promised to deliver the
same thing to two or more persons who do not have the same interest) – as
when one is not the agent merely of the other.
ORDINARY DELAY VS. LEGAL DELAY
Ordinary Delay- it refers only to non-performance at a stipulated

time.
Legal Delay (default) – is that delay which amounts to a virtual

non fulfilment of the obligation.
DEFAULT
As a rule to put a debtor in default, there must be a demand for

fulfilment, the demand being either judicial or extra-judicial.
Art. 1166. The obligation to give determinate thing includes that of delivering all its
accessions and accessories, even though they may not have been mentioned.
ACCESSORIES – those joined to or included in with the principal for the latter’s better
use, perfection or enjoyment.
ACCESSIONS – additions to or improvement upon a thing.

Art. 1167. If a person obliged to do something fails to do it, the same shall
be executed at his cost.
The same rule shall be observed if he does it in contravention of the

tenor of the obligation. Furthermore, it may be decreed that what has been
poorly done be undone.
POSITIVE PERSONAL OBLIGATION
 - the first sentence deals with the positive personal obligation (TO DO)
Remedies of a creditor if Debtor fails to do:

1. To have the obligation performed (by himself or by another) at the debtor’s
expense; (SPECIFIC PEFORMANCE)
2. Also – to obtain DAMAGES

WHEN A THING MAY BE ORDERED UNDONE
1. if made poorly;
2. if the obligation is a negative one (provided the undoing is

possible)
Art. 1168. When the obligation consists in not doing, and the
obligor does what has been forbidden him, it shall be undone at
his expense.
NEGATIVE PERSONAL OBLIGATION

As a rule, the remedy is the undoing of the prohibited thing plus
damages.
Art. 1169. Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extra judicially demands from them the fulfilment of
their obligation.
 HOWEVER, the demand by the creditor shall not be necessary in order that
delay may exist:
 1) When the obligation or the law expressly so declares; or
 2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to
be rendered was a controlling motive for the establishment of the contract; or
3. When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other

does not comply or is not ready to comply in a manner with what
is incumbent upon him. From the moment one of the parties fulfils
his obligation, delay by the other begins.
DEFAULT / MORA – LEGAL DELAY

Although Art. 1169 uses the words “in delay”, these should be
translated to mean default (MORA)
Necessity in General of Demand.

To put a debtor in default, as a rule, DEMAND is needed.
The demand maybe judicial, as when a complaint for specific
performance is filed; or extra-judicial, without court proceedings.
WHEN DEMAND IS NOT NEEDED TO PUT DEBTOR IN DEFAULT
1. When the law so provides.

2. When the obligation so expressly provides.
3. When time is of the essence of the contract.
4. When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
5. When the obligor has expressly acknowledged that he is really in default.
DIFFERENT KINDS OF MORA
1. MORA SOLVENDI – default on the part of the debtor
 a. mora solvendi ex re – debtor’s default in real obligations
 B. mora solvendi ex persona – debtor’s default in personal obligation.
2. MORA ACCIPIENDI - default on the part of the creditor.
3. COMPENSATIO MORAE – when in a reciprocal obligation both parties

are in default; here it is as if neither is in default.
MORA SOLVENDI
There is no mora solvendi in:
 1. negative obligation; and

 2. natural obligation.
REQUISITES FOR MORA SOLVENDI
1. The obligation must be due, enforceable, and already liquidated or determinate
in amount;
2. There must be non-performance;
3. There must be a demand, unless the demand is not required.
4. The demand must be for the obligation that is due.
EFFECTS OF MORA SOLVENDI
1. If the debtor is in default, he may be liable for interest or damages.

2. He may also have to bear the risk of loss.
3. He is liable even for a fortuitous event.
MORA ACCIPIENDI
 The creditor is guilty of default when he unjustifiably refuses to accept
payment or performance at the time said payment or performance can be
done.
 the improper refusal of the (lessor) creditor to accept the rents tendered by
the lessee places the said lessor in default and he must shoulder the
subsequent accidental loss of the premises leased.
RECIPROCAL OBLIGATIONS
Reciprocal Obligations – depend upon each other for performance.
Contract of Sale: In a sale, the buyer must PAY, and the seller must deliver.
 Here performance may be set on different dates.
Example. Delivery – December 9, 2019
Payment – December 13, 2019
To put the seller on default, demand as a rule, must be made. Delivery, upon the other
hand, does not put the buyer in default, till after demand, unless demand is not
required. This is because, in the example given, different periods for performance
were given.
 If the performance is not set on different dates, either by the law, contract
or custom, it is understood that performance must be simultaneous. Hence, one
party cannot demand performance by the other, if the former himself cannot
perform.
And when neither has performed, there is compensation morae (DEFAULT ON
THE PART OF BOTH); so it is as if no one is in default).
 If one party performs, and the other does not, the latter would be in
default.
Art. 1170. Those who in the performance of their obligation are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.
GROUNDS FOR LIABILITY IN THE PERFORMANCE OF OBLIGATIONS:
1. Fraud
2. Negligence
3. Default
4. Violation of the terms of the obligation.
LIABILITY FOR DAMAGES
Those liable under Art. 1170, should pay damages, but

generally only if aside from the breach of contract,
prejudice or damage was caused.
KINDS OF DAMAGES - MENTAL
A. MORAL Damages – for mental and physical anguish
B. EXEMPLARY damages – corrective or to set an example
C. NOMINAL – to vindicate a right – when no other kid of damages
may be recovered.
D. TEMPERATE – when the exact amount of damages cannot be
determined
E. ACTUAL – actual losses as well as unrealized profit
F. LIQUIDATED – predetermined before hand – by agreement.
Art. 1171. Responsibility arising from fraud is demandable in all obligations.

Any waiver of an action for future fraud is void.
FRAUD- is the voluntary execution of a wrongful act, or a wilful omission which

prevents the normal realization of the prestation, knowing and intending the
effects which naturally and necessarily arise from such act or omission.
Liability for Fraud or Dolo
A) According to time of commission, fraud may be past or future:
 (liability for past fraud may be waived; this is not so for future fraud);
B) According to meaning, fraud may be classified as follows:
 1) fraud in obtaining consent (execution/creation/birth of contract):

 A. DOLO CAUSANTE (causal fraud);
 B. DOLO INCIDENTE (Incidental fraud)
 2) fraud in the performance of an obligation.

ARTICLE 1344. In order that fraud may make a contract voidable, it should be serious
and should not have been employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay damages.

Dolo causante (Causal Fraud) – Fraud employed at the time of the execution of a
contract in order to secure consent, remedy is annulment because of vitiation of
consent.
It is said that fraud may make a contract voidable when it is serious and it should not
be done by both contracting parties.
Fraud is serious when an ordinary prudent person lead into an
error.
Example: PTB sold to DM a parcel of land representing that land
was “ absolutely free from liens and encumbrances” DM gave his
consent on the faith of PTB’s representation. Then when the sale
was registered, it was found that a lis pendens notice was
annotated.
In this case there is concealment, and it is made in bad faith or with
an intent to deceive, and induced to enter into the contract.
The parties must not be in pari delicto, otherwise, neither party
may ask for annulment.
Dolo incidente (Incidental Fraud) – committed in the performance
of pre-existing obligation, remedy is damages.
Example: Gono enter into a contract to deliver 500 cavans of rice

to Rhea with a price per cavan of 1,300 pesos, Gono delivered
300 cavans but withheld the delivery of the remaining, stating that
the price went up and priced the rice to 1,600 per cavan. The
fraud here is dolo incidental because it is committed to the existing
contract.
Art. 1172. Responsibility arising from negligence in the
performance of every kind of obligation is also demandable, but
such liability may be regulated by the courts, according to the
circumstances.
NEGLIGENCE:
 The fault or negligence of the obligor consists in the omission of the diligence which is
required by the nature of the obligation and corresponds with the circumstances of the
persons, place and time.
FRAUD DISTINGUISHED FROM NEGLIGENCE
DOLO CULPA
A. There is a DELIBERATE intention to A. Although voluntary (that is not

cause damage or prejudice done thru force) still there is NO
DELIBERATE intention to cause
damage.
B. Liability arising from dolo cannot B. Liability due to negligence may be

be mitigated or reduced by the courts reduced in certain cases.
C. Waiver of an action to enforce C. Waiver of an action to enforce

liability due to future fraud is void. liability due to future culpa may in a
certain sense be allowed.
KINDS OF NEGLIGENCE
A. Civil Negligence
 1. Culpa Contractual – fault or negligence of obligor by virtue of which he is
unable to perform his obligation arising from a pre-existing contract.
2. Culpa aquiliana/quasi-delict – fault or negligence of a person, whose

failure to observe the required diligence to the obligation causes damage to
another.
B. Culpa Criminal – fault or negligence which results in the commission of a

crime.
NATURE AND EFFECTS OF OBLIGATION
Art. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation or when the nature of the obligation
requires assumption of risks, no person shall be responsible for those events
which could not be foreseen, or which though foreseen, were inevitable.
General Rule for FORTUITOUS EVENTS:
 No liability for a fortuitous event.

EXCEPTIONS:
1. When expressly declared by law.

2. When expressly declared by stipulation or contract;
3. When the nature of the obligation requires the assumption of
risk.
To exempt the obligor from liability for a breach of obligation due to an
“act of God”, the following must concur:
1. the cause of the breach of the obligation, must be independent of the will
of the debtor/obligor;
2. the event must be either unforeseeable or unavoidable;
3. the event must be such as to render it impossible for the debtor to fulfil his
obligation in a normal manner;
4. and the debtor must be free from any participation in, or aggravation of,
the injury to the creditor.
CHAPTER 3: BY: Atty. Pearl Ashleigh Pillado
DIFFERENT KINDS OF OBLIGATIONS Magbanua

DIFFERENT KINDS OF OBLIGATIONS
PURE AND CONDITIONAL OBLIGATIONS
Art. 1179. Every obligation whose performance does not depend

upon a future or uncertain event, or upon a past event unknown to
the parties, is demandable at once.
Every obligation which contains a resolutory condition shall

also be demandable, without prejudice to the happening of the
event.
1. Pure Obligation – one without a condition or a term
(hence demandable at once)
Example:
1. I promise to pay you Php1million.
(This is demandable at once unless a period was really intended)
2. CONDITIONAL OBLIGATION – when there is a condition.
Example:
1. I will buy your land for Php10Million if you pass the 2020 CPA
Board Examinations.
2. I will give you my land now, but should you fail in the CPA Board
Examinations, your ownership will cease and it will be mine
again.
Definition of a CONDITION
 - it is an uncertain event which wields an influence on a legal relationship.
Definition of a TERM or PERIOD

- That which necessarily must come whether the parties know when it will
happen or not.
When an OBLIGATION is demandable at once:
1. PURE OBLIGATION ; and
2. When it has a RESOLUTORY CONDITION.

CLASSIFICATION OF CONDITIONS
A.
1. Suspensive Condition- The happening of the condition gives rise to the obligation.
2. Resolutory Condition- the happening of the condition extinguishes the obligation.
B.
1. Potestative – depends upon the will of the debtor. (I will sell you my car If I like.)
2. Casual – depends on chance or hazard or the will of a third person (If I win in the
lotto)
3. mixed – depends partly on the will of one of the parties and partly on chance or
the will of the third person. (if I pass the Bar Exams)
C.
1. Divisible – Capable of partial performance.
2. Indivisible – not capable of partial performance because of the nature of
the thing, or because of the intention of the parties.
D.
1. positive – an act is to be performed
2. negative- something will be omitted.
E.
1. express – the condition is stated.
2. implied – the condition is merely inferred.
F.
1. possible – capable of fulfilment in nature and in law
2. impossible – not capable of fulfilment due to nature or due to
the operation of law or morals or public policy; due to a
contradiction in its terms.
G.
1. conjuctive – if all conditions must be performed
2. alternative – if only a few of the conditions have to be

performed.
Art. 1180. When the debtor binds himself to pay when his means permit him
to do so, the obligation shall be deemed to be one with a period, subject to
the provision of Article 1197.
Similar Phrases:
1. “When my means permit me to do so”;
2. “ When I can afford it”;
3. “When I am able to”;
4. “ When I have money”.
DIFFERENT KINDS OF THE OF OBLIGATIONS
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition.
SUSPENSIVE and RESOLUTORY CONDITIONS

A) Suspensive conditions- the happening of which will give rise to the
acquisition of right.
 - The happening of the condition gives rise to the obligation

Example:
 “I promise to do what you ask provided that you give me the latest OPPO
Cellphone.”
 A, in his last will and testament, gave some property to B, provided that A
would die within a period of one year from the date the last will and
testament is notarized.
RESOLUTORY CONDITION - the happening of the condition extinguishes the
obligation.
- Here, rights already acquired are lost once the condition is fulfilled.
Example:
1) I will give you my car but should you pass this subject, you will return the car
to me.
Art. 1182. When the fulfilment of the condition depends upon the
sole will of the debtor, the conditional obligation shall be void. If it
depends upon chance or upon the will of a third person, the
obligation shall take effect in conformity with the provisions of this
Code.
POTESTATIVE, CASUAL, MIXED CONDITIONS
1. POTESTATIVE – depends upon on the exclusive will of one of the parties.

(This is also called facultative condition)
2. CASUAL – depends on chance or upon the will of a third person.

POTESTATIVE (FACULTATIVE) CONDITION.
1. Potestative on the part of the DEBTOR:
a) if also suspensive – both the condition and the obligation are VOID, for the
obligation is really illusory.
 Example: I’ll give you Php 1, 000, 000 next month if I Live.
2. if also resolutory – valid
Example: I will employ you now as my superintendent in the factory, but it is

understood that if for any reason the machinery which I ordered from the
United States will not arrive, the employment will end.
2. POTESTATIVE ON THE PART OF THE CREDITOR – VALID
Example: I will give you my fountain pen if you desire to have it.
Query
“ I’ll give you P1, 000,000 if I can sell my land.” Suppose I am able to sell my
land, am I bound to give you P1,000,000?”
ANS: It is submitted that the answer is YES. While apparently, this is a

potestative condition (because I may or may not sell) , still it is not purely
potestative but really a mixed one, because the selling would depend not only
on my desire to sell but also on the availability and willingness of the buyer
and other circumstances such as price, friendship, or the necessity of
transferring to a different environment. (Hermoso vs. Longara)
Art. 1183. IMPOSSIBLE CONDITIONS, those contrary to good customs, or

public policy and those prohibited by law shall annul the obligation which
depends upon them. If the obligation is divisible, that part thereof which is not
affected by the impossible or unlawful condition shall be valid.
 The condition not to do an impossible thing shall be considered as not having

been agreed upon.
IMPOSSIBLE and ILLEGAL CONDITIONS
CLASSIFICATION
A. Impossible – incapable of realization
 1. Physical impossibility – To make a dead man alive
 2. logically – to make a circle that is at the same time a square.
B. Illegal - prohibited by good customs, public policy; prohibited

directly, indirectly by law.
EFFECTS
 If the condition is to do an impossible or illegal thing, BOTH the condition
and the obligation are VOID.
Example: I will sell you my land if you can make a dead man alive.
 If the condition is NEGATIVE, that is, not to do the impossible, just disregard
the condition, but the OBLIGATION remains.
Example: I will sell you my land if you cannot make a circle that is at
the same time a square.
 If the condition is NEGATIVE (not to do an impossible or illegal

thing), both the condition and obligation, are VALID.
Example. I will sell you my land if you will not kill X.

Art. 1184. The condition that some event happen at a determinate time shall
extinguish the obligation as soon as the time expires or if it has become
indubitable that the event will not take place.
POSITIVE CONDITION
Example: I’ll give you my land if you marry Maria this year. If by the end of
the year, Maria is already dead, or you have not yet married her, the
obligation is extinguished.
NEGATIVE CONDITION
Article 1185. The condition that some event will not happen at a determinate
time shall render the obligation effective from the moment the time indicated
has elapsed, or if it has become evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed fulfilled at

such time as may have probably been contemplated, bearing in mind the
nature of the obligation.
NEGATIVE CONDITION
Example:
“I will give you P1,000,000 if by Oct. 1, 2005 you have not yet
married Maria. If by said date, you are not yet married, or if prior
thereto, Maria X had died, the obligation is effective- in the first
case- from October 1, 2005; and in the second case, from Maria’s
death.
Art. 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfilment.
CONSTRUCTIVE OR PRESUMED FULFILMENT.
(One must not profit by his own fault)
Requisites:
A) Voluntarily made
B. actually prevents
Example:
A promised to sell to B a car if C could pass the board exam.
On the day of the examination, A caused C to be poisoned and
be hospitalized.
A is still bound to sell the car.
If however, it turns out that C was really disqualified to take
the board examinations, as when he had not finished high school. A
is not bound.
Art. 1187. The effects of a conditional obligation to give, once the condition has
been fulfilled, shall retroact to the day of the constitution of the obligation.
Nevertheless, when the obligation imposes reciprocal prestations upon the parties,
the fruits and interests during the pendency of the condition shall be deemed to
have been mutually compensated.
If the obligation is unilateral, the debtor shall appropriate the fruits and interests
received, unless from the nature and circumstances of the obligation it should be
inferred that the intention of the person constituting the same was different.
In obligation to do or not to do, the court shall determine, in each case, the
retroactive effect of the condition that has been complied with.
EFFECTS OF FULFILMENT OF SUSPENSIVE CONDITION
The obligation becomes effective?
From what day?
(a) RETROACTS – (as a general rule) to the day the obligation was
constituted.
(b) No retroactivity with reference to:
 fruits or interests
 period of prescription
Example:
Jose in 2019 promised to sell to Maria his land provided Maria passes the
CPA Board Examination in 2020 . Maria passed the CPA Board in 2020.
1. It is as if Maria was entitled to the land beginning in 2004.

2. Therefore, any donation or mortgage made by Maria in 2004 will be
considered valid.
3. Any alienation on the land made by Jose should as a rule be considered
invalid.
NO RETROACTIVE EFFECT AS TO FRUITS AND INTERESTS
A. In unilateral obligations, debtor gets the fruits and interests unless there is
a contrary intent.
Example:
In 2019, A promised to give B his (A’s) land if B passes the Board Exam in
2020. If the condition is fulfilled, does A also give the fruits for the period of
one year?
No, by express provision of law unless there is a contrary intent.
B.) In reciprocal obligations, the fruits and interests during the pendency of the
condition shall be deemed to compensate each other.
example:
In 2018, A agreed to sell his land and B agreed to pay if C would pass the
2020 CPA Board Examination. C passed.
A must now give the land and B must pay.
The fruits of the land for the one-year period will remain with A.,i.e., A does not have
to give said fruits.
Upon the other hand, B will keep the 6 % legal interest on money. This is true even if
the interests be greater or lesser than the fruits.
Art. 1189. When the conditions have been imposed with the intention of
suspending the efficacy of an obligation to give, the following rules shall be
observed in case of the improvement, loss or deterioration of the thing during
the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to
pay damages;
it is understood that the thing is lost when it perishes, or goes out of commerce,
or disappears in such a way that its existence is unknown or it cannot be
recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment
is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between
the rescission of the obligation and its fulfillment, with indemnity for damages in
either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than
that granted to the usufructuary. (1122)
LOSS, DETERIORATION, AND
IMPROVEMENT DURING THE
PENDENCY OF THE CONDITION
LOSS, DETERIORATION, AND IMPROVEMENT
DURING THE PENDENCY OF THE CONDITION
 The Article applies only if:
1. The Suspensive condition is fulfilled; and

2. The object is specific
Q: What are the three things that may happen to the object of an obligation pending
the fulfilment of a suspensive condition?
ANS: The object:

1. may be lost;
2. may deteriorate (value is reduced or impaired);
3. may be improved.
The object may be LOST:
A) Without the fault of the debtor;

B) with fault of the debtor;
C) partly with and partly without the fault of the debtor.
The object may deteriorate:
A) Without the fault of the debtor;

B) with fault of the debtor;
C) partly with and partly without the fault of the debtor.
The object may improve:
A) by nature or by time;
B) through the expense of the debtor;
C) partly through nature or time and partly by the debtor.
LOSS
It is understood that a thing is lost:
A. when it perishes;
B. when it goes out of commerce;
C. When it disappears in such a way that its existence is unknown;
D. when it disappears in such a way that it cannot be recovered.
ILLUSTRATIVE PROBLEMS
Q:
A promised to give B his car if B passes the CPA Board Examination on 2020.
Pending the result of the Board Exam, the car is destroyed by a heavy storm, without
the fault at all on the part of the debtor. When passes the CPA Board, does A have
to give anything?
ANS:
No. A does not have to give anything to B. “If the thing is lost without the fault of the
debtor, the obligation shall be extinguished”. The reason is that as a general rule, no
one should be liable for a fortuitous event unless otherwise provided by law or
contract.
ILLUSTRATIVE PROBLEMS
Q: A promised to give B P1million if B passes the CPA Board Examinations. Pending
the results of the Board Exams, A’s money is destroyed by fire without the fault of A.
When B passes the CPA Board Exam, does A still have to give him the P1Million?
ANS.
 Yes. Because the money here is generic. “In an obligation to deliver a generic
thing the loss or destruction of anything of the same kind does not extinguish
the obligation”.
Art. 1190. When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the
fulfilment of said conditions, shall return to each other what they
have received.
In case of the loss, deterioration or improvement of the thing, the
provisions which, with respect to the debtor, are laid down in the
preceding article shall be applied to the party who is bound to
return.
As for the obligations to do and not to do, the provisions of the
second paragraph of Article 1187 shall be observed as regards
the effect of the extinguishment of the obligation. (1123)
(Inobligation to do or not to do, the court shall determine, in each
case, the retroactive effect of the condition that has been complied
with. )
RESOLUTORY CONDITION
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with Articles 1385 and 1388 and the
Mortgage Law. (1124)
Art. 1192. In case both parties have committed a breach of the
obligation, the liability of the first infractor shall be equitably
tempered by the courts. If it cannot be determined which of the
parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (n)
CHAPTER II, SECTION 2: OBLIGATION
WITH A PERIOD
OBLIGATIONS WITH A PERIOD
Art. 1193. Obligations for whose fulfillment a day certain has been fixed,
shall be demandable only when that day comes.
Obligations with a resolutory period take effect at once, but terminate upon
arrival of the day certain.
A day certain is understood to be that which must necessarily come, although it
may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation is
conditional, and it shall be regulated by the rules of the preceding Section.
(1125a)
Art. 1194. In case of loss, deterioration or improvement of the
thing before the arrival of the day certain, the rules in Article
1189 shall be observed. (n)
Art. 1195. Anything paid or delivered before the arrival of the

period, the obligor being unaware of the period or believing that
the obligation has become due and demandable, may be
recovered, with the fruits and interests. (1126a)
Art. 1196. Whenever in an obligation a period is designated, it is presumed
to have been established for the benefit of both the creditor and the debtor,
unless from the tenor of the same or other circumstances it should appear that
the period has been established in favor of one or of the other. (1127)
Art. 1197. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may fix
the duration thereof.
The courts shall also fix the duration of the period when it depends upon the
will of the debtor.
In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed
by the courts, the period cannot be changed by them. (1128a)
Art. 1198. The debtor shall lose every right to make use of the
period:
(1) When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised;
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a fortuitous
event they disappear, unless he immediately gives new ones
equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of
which the creditor agreed to the period;
(5) When the debtor attempts to abscond. (1129a)
CHAPTER II, SECTION 3:
ALTERNATIVE OBLIGATIONS

OBLIGATIONS and CONTRACTS

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OBLIGATIONS and CONTRACTS

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OBLIGATIONS AND CONTRACTS By: Atty. Pearl Ashleigh P.

1. civil obligation –

2. natural obligation –

3. moral obligations

 The sanction here is conscience or morality, or the law of the church.

1. Real obligation – the obligation to give

2. Personal obligation – the obligation to do or not to do.

1. Positive or affirmative obligation – the obligation to give or to

2. Negative obligation – the obligation not to do (not to give)

1. unilateral – where only one of the parties is bound.

2. bilateral – where both parties are bound.

Art. 1157. Obligations arise from:

Q: Does this mean, the law is inferior to contracts?

1. Do ut des – I give that you may give;

 Example: A worked for B as an interpreter. Even without an express

A will do the interpreting, and B will give him/her money.

1. NEGOTIORUM GESTIO – unauthorized management

2. SOLUTIO INDEBITI – undue payment

Reimbursement must be made to the gestor for necessary and useful

This takes place when something is received when there is no right

Example: If I let a store keeper change my Php50.00 bill and

The reason lies in the fact that oftentimes the commission of a

An insane man who commits a crime is exempted from

A quasi-delict is a fault or act of negligence (or omission of care),

1. While driving a car recklessly, I injured a pedestrian.

2. While cleaning my window sill, my negligence caused a flower

NEGLIGENCE – is the failure to observe, for the protection of the interests

A. there must be fault or negligence attributable to the person

Art. 1163. Every person obliged to give something is also obliged

- “a COMMON CARRIER is bound to carry the passengers safely as far

 Personal right – is power demandable by one person of another – to give, to do

5. tradition by the execution of legal forms and soleminities.

- like the execution of a public instrument selling land. (Deed of Sale)

1. If there is no term or condition, then from the perfection of the

If the thing is indeterminate or generic, he may ask that the

1. Real Obligation – obligation to give.

A) demand specific performance (or compliance) of the obligation

a) a SPECIFIC OBLIGATION to deliver a specific thing is, as a rule,

a) Upon the other hand, GENERIC OBLIGATIONS are never extinguished

B) A is obliged to give B a book. Since this is a generic thing, even if one

A) if the obligor DELAYS;

Ordinary Delay- it refers only to non-performance at a stipulated

Legal Delay (default) – is that delay which amounts to a virtual

As a rule to put a debtor in default, there must be a demand for

ACCESSIONS – additions to or improvement upon a thing.

The same rule shall be observed if he does it in contravention of the

Remedies of a creditor if Debtor fails to do:

2. Also – to obtain DAMAGES

2. if the obligation is a negative one (provided the undoing is

NEGATIVE PERSONAL OBLIGATION

 1) When the obligation or the law expressly so declares; or

In reciprocal obligations, neither party incurs in delay if the other

DEFAULT / MORA – LEGAL DELAY

Necessity in General of Demand.

1. When the law so provides.

2. MORA ACCIPIENDI - default on the part of the creditor.

3. COMPENSATIO MORAE – when in a reciprocal obligation both parties

 1. negative obligation; and

1. If the debtor is in default, he may be liable for interest or damages.

LIABILITY FOR DAMAGES

Those liable under Art. 1170, should pay damages, but

Art. 1171. Responsibility arising from fraud is demandable in all obligations.