CHAPTER 2

NATURE AND EFFECT

OF OBLIGATION
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 stipulation of the parties
requires another standard of care.
DETERMINATE
- A determinate thing is one which is particularly
designated or physically segregated from all others of the
same class, (Art.1460).

Example:
1. Toyota car with engine no. A12345, Body no.
B891011, and plate no. ABC123.
2. My only diamond ring.
3. Race horse named “Black Stallion”.
GENERIC

- A generic or indeterminate thing is one that refers to a

class or genus without being distinguished from others
of the same class.

Example:
A ring, A car, A horse, and 5,000.
OBLIGATIONS OF ONE OBLIGED TO GIVE A
DETERMINATE THING

1. To take care of the thing with the diligence of a

good father of a family, unless the law or
stipulation of the parties requires another standard
care. (Art.1163)
2. To deliver the thing (Art. 1163)
3. To deliver the fruits of the thing. (Art.1164)
4. To deliver its accessions and accessories.
(Art.1166)
1.To take care of the thing with the diligence of
a good father of a family, unless the law or
stipulation of the parties requires another
standard of care. (Art.1163)

Diligence of a good father of a family

-The diligence which an ordinary prudent man
would exercise with regard to his own property.
(De Guzman v. Agana, 01885-SP, July 1, 1977)
2. To deliver the thing (Art.1163)

Delivery means placing the object in the control and possession of the creditor, either physically (Art. 1497), or constructively, such as by
execution of a public instrument (for both movables and immovables) or by giving the key of the place or depository where a movable is
kept. (Art 1498).
There are 2 kinds of Delivery:

1. Actual Delivery
-This is the act of giving real and immediate possession to the creditor.

Example:
- S the seller, entered into a contract of sale with B, the Buyer, involving a particular cellphone. The giving by S to B of that particular cellphone is actual delivery.
2. Constructive Delivery
- an act that amounts to a transfer of title by
operation of law when actual transfer is impractical
or impossible.

Example:
- S sold to B a particular parcel of land. They went
to a notary public to assist them in the execution of
a contract of sale. Such execution of a public
instrument was done through constructive delivery.
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.
3. To deliver the fruits of the thing. (Art. 1164)

1. Kinds of fruits
a. Natural Fruits
- Natural fruits are the spontaneous products of the soil
and the young and other products of animals.(Art.442)

Example:
-The trees that grow naturally on the soil without the
intervention of human labor.
b. Industrial Fruits
-Industrial fruits are those produced by land of any
kind through cultivation or labor.(Art.442)

Example:
-Rice, corn and others products of land that come
into existence through human labor.
c. Civil Fruits
-Civil fruits are those which are the result of a
juridical relation.

Example:
-The price of leases of lands and other property,
and the amount of perpetual or life annuities or
other similar income.(Art.442)
2. Right of the creditor to the fruits
-The creditor has a right to the fruits of the thing from the
time the obligation to deliver the thing arises. (Art. 1164)
Such obligation to deliver arises as follows:

a. If the obligation is a pure obligation or one whose

performance is not subject to a suspensive period or
suspensive condition, the obligation to deliver arises from its
perfection.
b. If the obligation is subject to a suspensive condition or
suspensive period, then, the obligation to deliver arises upon the
fulfillment of the condition or upon the arrival of the term.

3. Nature of the creditor’s right

a. Personal Right (also called jus in personam or jus ad rem)
-This is a right that may be enforced by one person on another
such as the right of the creditors to demand the delivery of the
thing and its fruits from the debtor.
b. Real Right (also called jus in re)
-This refers to the right or power over a specific thing, such as
possession or ownership, which is a right enforceable against the
whole world.
 Art.1165. when what is to be delivered is a determinate things, the
creditor in addition to the right granted to him by articles 1170, may
compel the debtor to make the delivery .

 Ifthe things is indeterminate or generic,he may ask that the

obligation be complied with at the expense of the debtor.

 Ifthe obligor delays, or has promised to deliver the same things to

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.
1. Remedies of the creditor when the debtor fails to perform an obligation to give (real
obligation)
a. Obligation to deliver a determinate things
1. to compel the debtor to make the delivery.
2. To demand the payment of damages from the debtor.
b. Obligation to deliver a genetic thing
1. To ask that the obligation be complied with at the expense of the debtor.
2. To demand the payment of damages from the debtor.

2. Loss due to fortuitous event of the determinate thing

a. If the guilty of delay
b. If the promised to deliver the same things to two or more persons who do not have the
same interest
Art, 1166. the obligation to give a determinate thing includes
that of delivering all its accessories, even though they may not
have been mentioned.

1. Accessories and accessions, concept

a. Accession
b. Accessories

2. Duty to deliver accessions and accessories

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.
1. Remedies of the creditor in an obligation to do ( positive personal
obligation )
a. If the debtor fails to perform the obligation
b. If the debtor perform the obligation but does it in contravention of the
tenor thereof, not following the specification or stipulations agreed upon.
c. If the debtor perform the obligation but does it poorly
Art, 1168. When the obligation consists in not doing, and the
obligor does what has been forbidden him, it shall also be
undone at his experse.

1. remedies of the creditor in obligation not to do ( negative personal

obligation ), if the debtor does what has been forbidden him.
Nature and effect of obligations

Art. 1169. Those obliged to deliver or to do something incur in delay from

the time the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.

1.DELAY or default or mora

-Is the non-fulfillment of an obligation with respect to time.
Kinds of Delay

A. Mora solvendi – default on the party of the debtor

1.)Mora solvendi ex re – debtor’s default in real obligations

(obligations to give).
2.)Mora solvendi ex persona- debtor’s default in personal
obligations (obligations to do).
B. Mora accipiendi – default on the part of the
creditor.
C. Compensatio morea – default of both parties in
reciprocal obligations.

Art. 1170. Those who in the performance of

their obligations are guilty of fraud,
negligence or delay, and those who in any
manner contravene the tenor thereof, are
liable for damages.
Art. 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void.

2. FRAUD
-Is the deliberate and or intentional evasion by the debtor of
the normal compliance of his obligation.
Kinds of fraud
1.According to meaning

A. Casual fraud or Dolo causante – this is fraud without which

consent would not have been given. It renders the contract voidable.

B. Incidental fraud or Dolo incidente – this is fraud without which

consent would have still been given but the person giving it would
have agreed on different terms. the contract is valid but the party
employing the fraud shall be liable for damages.
2.Fraud at the time of performance
-This is the deliberate act of evading the fulfillment of the obligation in a
normal manner. This will not affect the validity of the contract but it would
entitle the injured party to recover damages.

3.According to time of commission

A. Future Fraud
-The debtor’s liability for future fraud cannot be waived .such
waiver is void as it accordingly, the creditor can still recover
damages from debtor despite the waiver.
B.Past Fraud
-Any waiver of an action for fraud already committed is valid
as this will become simply an act of generosity on the part of
the creditor.

Art. 1172. Responsibility arising from negligence in

the performance of every kind of obligations is also
demandable, but such liability may be regulated by
the courts, according to the circumstances.
Art. 1173 The fault or negligence of the obligor consists in
the omission of that diligence which is required by the
nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.

3.NEGLIGENCE
-the defendant in doing the alleged negligent act used that
reasonable care and caution which an ordinary person would
have used in the same situation.
Kinds of negligence

A. Contractual negligence (or culpa contractual ) – this is the

negligence committed in the performance of a contract .
B. Civil negligence ( or culpa aquiliana , tort, quasi-delict,or
culpa extra-contractual ) – this is the wrong or negligence
committed independent of contract and without criminal intent.
C. Criminal negligence (or culpa criminal ) – this is
negligence that results in the commission of a crime.
FORTUITOUS EVENT

 A fortuitous event is an event that could not be foreseen, or which though

foreseen, was inevitable. (Art. 1174) it is not enough that the event
should not be foreseen or anticipated, but it must be one impossible to
foresee or avoid. (Sicam vs Jorge, infra) example are acts of god, like
lightning, earthquake and flood, force majeure such as acts of robbery by
an armed band, or the act of a robber done with the use of arms (Art.
2001); and unavoidable accidents such as tire blowout provided no
negligence exists on the part of the vehicle owner
2. CHARACTERISTICS OF FORTUITOUS EVENT

a. the cause must be independent of the will of the debtor

b. the must be impossibility of foreseeing the event or of avoiding it even
if it can be foreseen.
c. the occurrence of the event must be of such character as to render it
impossible for the debtor to perform his obligation in a normal manner.
(See Sicam vs Jorge, infra, for similar characteristics.)
3. GENERAL RULE AND EXCEPTION FOR ABILITY FOR
FORTUITOUS EVENT
-As a general rule, no person shall be responsible for fortuitous event, his
obligation will be extinguished. The following are the exception:

a. When expressly specified by law

b. When it is declared by stipulation of the parties.
c. When the nature of the obligation requires the assumption of risk.
4. BURDEN OF PROVIDING LOSS DUE TO
FORTUITOUS EVENT

- the burden of providing that the loss was due to fortuitous event rests on
him who invokes it. And, in order for a fortuitous event to exempt one from
liability, it is necessary that he must have committed no negligence or
misconduct that may have occasioned the loss
CASE
Roberto C. Sicam, et al., vs. Spouses Jorge
G.R. No 159617, August 8, 2007

Fact: LJ pawned several pieces of jewelry with Agencia de R.C. Sicam to

secure a loan. Armed robbers entered the pawnshop and took away the
jewelry of LJ and other clients of the pawnshop from the vault which was
left open since it was a Saturday. There was no showing that a security
guard was stationed at the pawnshop. The vault where the jewelry was
stored was also kept open. When LJ demanded the return of the jewelry
she had pawned, the pawnshop raised, among other defenses, non liability
due to fortuitous event. It the defense tenable?
Held: No. in order for a fortuitous event to exempt one from liability, it is
necessary that he has committed no negligence or misconduct that may have
occasioned the loss. When the event is found to the partly the result of a
person’s participation – whether by active intervention, neglect or failure to
act – the whole occurrence is humanized and removed from the rules
applicable to acts of god . The pawnshop failed to show that it was free from
any negligence by which the loss of the pawned jewelry may have been
occasioned. Its failure to provide a station a security guard at the pawnshop
and its leaving the vault open constitute acts of negligence which made the
loss no longer independent of its will.
Art. 1175. usurious transaction shall be governed by special laws.

1. USURY, CONCEPT
– usury is the contracting for or receiving something in excess of the
amount allowed by law for the loan forbearance of money- the taking of
more interest for the use of money than the law allows.
2. LAW APPLICABLE
-The law governing usurious is the usury law. The following are the
maximum lawful rate of interest under the usury law which may be charged
for loan or forbearance of money:
a. twelve percent (12%) per annum – if the security given is a real estate the
title to which is duly recorded or government securities.
b. fourteen percent (14%) per annum – if the security given is unregistered
real state or personal property, or where there is no security.
c. For pawnbrokers
3. USURY LAW, LEGALLY INEXISTENT

The usury law had been rendered legally ineffective by resolution No. 224
dated December 3, 1982O of the monetary board of the central bank, and
later by central bank circular No. 905 which took effect on January 1, 1983.
these circulars remove the ceiling on interest rates for secured the
unsecured loans regardless of maturity. The effect of these circulars is to
allow the parties to agree on any interest that may be charged on a loan. The
interest impose should be in writing. (SolidBank Corp. Vs. Permanent
Homes, Inc., G.R. NO. 171925, July 23, 2010; see also Verdejo vs. CA, 157
SCRA 743).
Nonetheless, the supreme court held that nothing in the said circular
grants lenders carte blanche to raise interest rates to level which will either
enslave their borrowers or lead to a hemorrhaging of their assets.
Stipulations authorizing such interest are contra bonos more, contrary to
good customs, if not against the law. They are inexistent and avoid from
the beginning thus the interest rate of 10% per month agree upon by the
parties is clearly excessive, iniquitous and unconscionable and cannot be
sustained. (Svendsen vs. People, G.R. No. 175 381, February 26, 2008
 But the supreme court in certain cases [ Macalalag vs. People, 511 SCRA
400 (2006)]; [ Dino vs. Jardines 481 SCRA 226 (2006)]; and [ Cuaton vs.
Salud, 41 SCRA 278 (2004)], found the 10% interest per month clearly
excessive and reduced it to 12% per annum. In effect, the difference may
be recovered by the debtor if he had paid such excessive interest.

NEW LEGAL OF INTEREST

Under circular No. 799, the monetary board declared that effective July 1,
2013 “ the rate of interest for the loan or forbearance of money, goods or
credit and the rate allowed in judgement, in the absence of an express
agreement as to much rate of interest, shall be 6 percent per annum.”
Art. 1176 The receipt of the principal by the creditor, without
reservation with respect to the interest, shall give rise to the
presumption that said interest has been paid.

The receipt of a later installment of a debt without reservation as

to prior installments, shall likewise raise the presumption that
such installments have been paid.
 1. Presumption, concept
Presumption is an inference as to the existence of a fact not actually
known, arising from its usual connection with another which is known.

Kinds of presumption
a. Conclusive presumption Presumption that is not allowed to be
contradicted by other evidence.

b. Disputable presumption - Presumption that is permitted to be

contradicted and overcome by other evidence. (Section 3, Rule 131, Rules
of Court)
Art. 1177. The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all
the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person; they may
also impugn the acts which the debtor may have done to defraud
them.
1.Remedies of the creditor to enforce payment of his claim
a. Exact payment of the debtor's obligation.
b. Pursue the properties in possession of the debtor
Art. 1178. subject to the laws right acquired in virtue of an
obligation are transmissible, if there has been no stipulation to
the country.

1. TRANSMISSIBILITY- as a general, all rights acquired in virtue

of an example
2. when right is not transmitted

a. When the parties stipulated against the transmission of the right

b. When the law prohibits the transmission of the right
c. When the nature of the obligation not allow the transmission of the right,
such as when it is purely personal