Law on Obligations

and Contracts
Atty. Samuel Dave O. Solas, MPA
 TITLE I
Obligations

CHAPTER 1
General Provisions
O Article 1156. An obligation is a juridical
necessity to give, to do or not to do.
 What is a right?
O A right is a claim or title to an interest in
anything whatsoever that is enforceable by
law.
O For every right enjoyed by any person, there is
a corresponding obligation on the part of
another person to respect such right.
 More complete definition of
Obligation:
O An obligation is a juridical relation whereby a
person (called the creditor) may demand from
another (called the debtor) the observance of a
particular conduct (the giving, doing, or not
doing), and in case of breach, may demand
satisfaction from the assets of the latter.
O Civil Action – is one by which a party sues
another for the enforcement or protection of a
right, or the prevention or redress of a wrong.
O Cause of Action – is the act or omission by
which a party violates the right of another.
O Complaint – written statements alleging the
plaintiff’s claim or cause or causes of action.
Complaint in relation to cause of
action:
A complaint states a cause of action where it
contains three essential elements of a cause of
action, namely:
O The legal right of the plaintiff;
O The correlative obligation of the defendant;
and
O The act or omission of the defendant in
violation of said legal right .
What is a REAL OBLIGATION
(obligation to give)?
O Obligation of the debtor or obligor to deliver a
thing, movable or immovable, to the creditor
or obligee for the purpose of transferring
ownership or for the use or possession of the
recipient.
Kinds of REAL Obligation
O Determinate or Specific Real Obligation –
the obligation of the debtor or obligor to deliver
a determinate or specific thing to the creditor or
obligee.
O Meaning of Specific or Determinate thing – a
thing is determinate when it is particularly
segregated or physically segregated from all
others of the same class.
O Example: The obligation to deliver a car with
plate number ABC123
O Indeterminate or Generic Real Obligation –
the obligation of the debtor or obligor to
deliver an indeterminate or generic thing to
the creditor or obligee.
O Meaning of Indeterminate or Generic thing
– a thing is indeterminate when it is
designated merely by its class or genus
without any particular designation or physical
segregation from all others of the same class.
O Example: The obligation to deliver five tables.
What is PERSONAL OBLIGATION
(obligation to do or not to do)?
O Obligation to do is also known as positive
personal obligation while obligation not to do
is also known as negative personal obligation.
Kinds of PERSONAL Obligation
O Positive personal obligation (obligation to
do) – this is the obligation of the debtor or
obligor to perform some work or service for
the creditor or obligee.
O Example: The obligation of X to repair the
bicycle.
O Negative personal obligation (obligation not
to do) – this is the obligation of the debtor or
obligor not to perform some act in favor of the
creditor of obligee.
O Example: The obligation not to construct an
extension on a house as per agreement in a
contract.
 ESSENTIAL Elements of an
Obligation:
O Passive subject or the debtor/obligor;
O Active subject or the creditor/obligee;
O Object (the fact, the prestation or service) and
O Juridical or legal tie or efficient cause or
vinculum juris
O Article 1157. Obligations arise from:
1. Law;
2. Contracts;
3. Quasi-contracts;
4. Acts or omissions punished by law; and
5. Quasi-delicts.
O Article 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 this Book.
O Law – a rule of conduct, just, obligatory,
promulgated by legitimate authority, and of
common observance and benefit.
O Article 1159. Obligations arising from
contracts have the force of law between the
contracting parties and should be complied
with in good faith.
O Article 1160. Obligations derived from quasi-
contracts shall be subject to the provisions of
Chapter 1, Title XVII, of this Book.
O Three kinds of Quasi-Contracts:
O Negotiorum Gestio;
O Solutio Indebiti; and
O Other quasi-contracts.
 Negotiorum Gestio
O Whoever voluntarily takes charge of the agency or
management of the business or property of another,
without any power from the latter, is obliged to continue
the same until the termination of the affair and its
incidents, or to require the person concerned to substitute
him, if the owner is in a position to do so. This juridical
relation does not arise in either of these instances:
O (1) When the property or business is not neglected or
abandoned;
O (2) If in fact the manager has been tacitly authorized by
the owner.
O In the first case, the provisions of articles 1317, 1403, No.
1, and 1404 regarding unauthorized contracts shall govern.
 Solutio Indebiti
O If something is received when there is no right
to demand it, and it was unduly delivered
through mistake, the obligation to return it
arises.
O Article 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 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book,
regulating damages.
 What is included in the civil
laibility?
O Restitution;
O Reparation of the damage caused;
O Imdemnification for consequential damages.
O Article 1162. Obligations derived from quasi-
delicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by
special laws.
 Quasi-delict:
O Whoever by act or omission causes damage to
another, there being fault or negligence, is
obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing
contractual relation between the parties, is
called a quasi-delict and is governed by the
provisions of this Chapter.
Requisites for Quasi-delict:
O Damage suffered by the plaintiff;
O Fault or negligence of the defendant; and
O Connection of cause and effect between the
fault or negligence of defendant and the
damage incurred by the plaintiff.
O Negligence – it is the failure to observe for the
protection of the interests of another person
that degree of care, precaution and vigilance
which the circumstances demand, whereby
such other person suffers injury.
 CHAPTER 2
Nature and Effect of Obligations
 Review!
O What is specific of determinate thing?
O A thing is determinate when it is particularly
designated or physically segregated from all of
the others of the same class.
O What is generic or indeterminate thing?
O The object thereof is designated merely by its
class or genus without any particular
designation or physical segregation from all
others of the same class.
O Article 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.
O Diligence – is the care; caution; the attention
and care required from a person in a given
situation.
O Extraordinary Diligence – Extreme care that
a person of unusual prudence exercises to
secure rights or property.
 Rules as to the diligence
required!
O General Rule: To take care of thing with the
proper diligence of a good father of a family.
O Exceptions:
1. Law requires another standard of care;
2. The stipulation of the parties requires another
standard of care.
O Article 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.
O Delivery – the formal act of transferring
something, such as a deed; the giving or
yielding possession or control of something to
another.
 KINDS of Delivery
O Actual Delivery – the act of giving real and
immediate possession to the buyer or the
buyer’s agent.
O Constructive Delivery – An act that amounts
to a transfer of the title by operation of law
when actual transfer is impractical or
impossible.
Personal Right vs. Real Right
Personal Right
A personal right is the
power of one person to
demand of another, as a
definite passive subject, the
fulfillment of a prestation to
give, to do or not to do.
Real Right
A real right is the power
belonging to a person over a
specific thing, without a
passive subject individually
determined, against whom
such right may be
personally exercised.
 Kinds of FRUITS
Natural Fruits Industrial Fruits Civil Fruits
They are the Industrial fruits These are the
spontaneous are those rents of buildings,
products of the produced by lands the price of leases
soil, the young of any kind of lands and other
and other through property and the
products of cultivation or amount of
animals. labor. perpetual of life
anuity.
O Article 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by article 1170, may compel the
debtor to make the delivery.
O If the thing is indeterminate or generic, he may ask
that the obligation be complied with at the expense
of the debtor.
O 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 any
fortuitous event until he has effected the delivery.
O Reciprocal obligations – like in a contract of
sale, are those which arise from the same
cause, and which each party is a debtor and a
creditor of the other, such that the obligation
of one is dependent upon the obligation of the
other. They are to be performed
simultaneously, so that the performance of one
is conditioned upon the simultaneous
fulfillment of the other.
O Article 1166. The obligation to give a
determinate thing includes that of delivering
all its accessions and accessories, even though
they may not have been mentioned.
Accessions vs. Accessories
Accessions Accessories
It signifies all of those things It signifies all those which have
which are produced by the for their object the
thing which is the object of the embellishment, use or
obligation as well as all of preservation of another thing
those which are naturally or which is important and to
artificially attached thereto. which they are not
incorporated or attached.
Example: Example:
1. A partner’s share in the 1. Equipment of a factory;
profit in a contract of 2. The spare parts and tools of
partnership; a machine;
2. Earphone of a cell phone; 3. The key of a house.
3. Mouse pad of a computer.
 NOTE this!
O The principle is “accessory follows the
principal”.
O Article 1167. If a person obliged to do
something fails to do it, the same shall be
executed at his cost.
O This 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.
O Article 1168. When the obligation consists in
not doing, and the obligor does what has been
forbidden him, it shall also be undone at his
expense.
O Article 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.
O 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 declare; 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.
O In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other
begins.
What is meant by mora or delay?
O Mora or delay is the failure to perform the
obligation in due time because of dolo
(malice) or culpa (negligence).
Requisites necessary for a finding
of default:
O The obligation is demandable and liquidated;
O The debtor delays in performance;
O The creditor judicially or extrajudicially
requires the debtor’s performance.
 When debt is considered
liquidated?
O A debt is liquidated when the amount is
known or is determinable by inspection of the
terms and conditions of the relevant
promissory notes and related documentation.
Kinds of MORA or DELAY
O Mora solvendi – or debtor’s default is defined as
delay in the fulfillment of an obligation, by
reason of a cause imputable to the debtor.
O Mora accipiendi – or delay of the obligee or
creditor to accept delivery of a thing which is the
object of the obligation.
O Compensatio morae – default on the part of both
parties because neither has completed their part in
their reciprocal obligation. This mutual delay of
the parties cancels out the effects of default such
that, it is as if no one is guilty of delay.
 When is demand by the creditor NOT
necessary in order that delay may exist on
the part of the debtor?
1. When the obligation (e.g. stipulation) or the
law expressly so declares;
2. When from the nature and the
circumstances of the obligation, it appears
that the designation of the time when the thins
is to be delivered or the service is to be
rendered was the controlling motive for the
establishment of the contract;
3. When demand would be useless as when the
obligor has rendered it beyond his power to
perform.
O Article 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.
 Kinds of ‘Breaches of
Obligations’
O Fraud or dolo;
O Negligence or culpa;
O Delay or default or mora; and
O Contravention of the tenor of the obligation.
 Fraud
O Fraud – refers to all kinds of deception,
whether though insidious machination,
manipulation, concealment or
misrepresentation, that would lead an ordinary
prudent person into error after taking the
circumstances into account.
 Kinds of Fraud
O Dolo causante or causal fraud – is basically
a deception used by one party prior to or
simultaneous with the contract, in order to
secure the consent of the other. Needless to
say, the deceit employed must be serious.
O Dolo incidente or incidental fraud – that
which is not serious in character and without
which the other party would have entered into
contract anyway.
Fraud (dolo) vs. Negligence (culpa)

Fraud (dolo) Negligence (culpa)

Wilfulness or deliberate intent Mere want of care or diligence
to cause damage or injury to and not the voluntariness of the
another. act or omission.

Liability cannot be mitigated Liability may be mitigated by

by courts. courts

Waiver of future fraud is void. Waiver of future negligence

may be valid.
 Negligence
O Negligence or culpa – is the omission to do
something which a reasonable man, guided by
those considerations which ordinarily regulate
the conduct of human affairs, would do; or the
doing of something which a prudent and
reasonable man would not do. It is want of
care required by the circumstances.
Delay or Default or Mora
O Mora or delay – is the failure to perform the
obligation in due time because of dolo
(malice) or culpa (negligence). A debtor is
deemed to have violated his obligation to the
creditor from the time the latter makes a
demand. Once the creditor makes a demand,
the debtor incurs mora or delay.
Contravention of the tenor of the
obligation
O This means violation of a contract or breach of
contract.
O The phrase “in any manner contravene the
tenor” of the obligation includes not only any
illicit act which impairs the strict and faithful
fulfilment of the obligation.
 Kinds of Damages under the
New Civil Code
O Actual of compensatory;
O Moral;
O Nominal;
O Temperate or moderate;
O Liquidated; or
O Exemplary or corrective.
O Article 1171. Responsibility arising from
fraud is demandable in all obligations. Any
waiver of an action for future fraud is void.
O Article 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.
O Article 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. When
negligence shows bad faith, the provisions of
articles 1171 and 2201, paragraph 2, shall apply.
O If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family
shall be required.
 What is Bad Faith?
O Bad faith imports a dishonest purpose or some
moral obliquity or conscious doing of a wrong
that partakes of the nature of fraud.
O Article 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 the assumption of risk,
no person shall be responsible for those events
which could not be foreseen, or which, though
foreseen, were inevitable.
What is fortuitous event (caso
fortuito)?
O It is any event which cannot be foreseen, or
which, though foreseen, is inevitable.
O Fortuitous event by definition are
extraordinary events not foreseeable or
avoidable. It is therefore, not enough that the
event should not have been foreseen or
anticipated, as is commonly believed but it
must be one impossible to foresee or to avoid.
The mere difficulty to foresee the happening is
not impossibility to foresee the same.
O A fortuitous event may either be an ‘act of
God’, or natural occurences such as floods or
typhoons, or an ‘act of man’ such as riots,
strikes or wars. However, when the loss is
found to be 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 a fortuitous event.
Elements of Fortuitous Event
1. The cause of the unforeseen and unexpected occurrence,
must have been independent of human will;
2. The event that constituted the caso fortuito must have
been impossible to foresee or if foreseeable,
impossible to avoid;
3. The occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in
a normal manner; and
4. The obligor must have been free from any
participation in the aggravation of the resulting
injury to the creditor.
Exceptions to the rule that no person shall
be responsible for fortuitous events:
1. Cases expressly specified by law;
2. Cases declared by stipulation; and
3. When the nature of the obligation requires
the assumption of risk.
O Article 1175. Usurious transactions shall be
governed by special laws.
O Article 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.
O 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.
O Article 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.
Remedies of the creditor:
Thus, the following successive measures must be
taken by a creditor before he may bring an action for
rescission of an allegedly fraudulent sale:
1. Exhaust the properties upon all the property of the
debtor through levying by attachment and
execution upon all the property of the debtor,
except such as are exempt by law from execution.;
2. Exercise all the rights and actions of the debtor,
save those personal to him (accion subogatoria);
and
3. Seek rescission of the contracts executed by the
debtor in fraud of their rights (accion pauliana).
O Article 1178. Subject to the laws, all rights
acquired in virtue of an obligation are
transmissible, if there has been no stipulation
to the contrary.
 CHAPTER 3
Different Kinds of Obligations

SECTION 1
Pure and Conditional Obligations