OBLIGATIONS: SUMMARY

(Atty. Goquingco classroom notes)

Obligation – An obligation is a relationship or legal bond where a person is constrained to act or do something for
another person or group of persons. (Art. 1156)

Elements of Obligation: (Art. 1156)

1. Passive Subject (Debtor)- the one bound to perform the prestation or to fulfill the obligation.
2. Active Subject (Creditor)- the one demanding the performance of the obligation.
3. Object or Prestation- subject matter of the obligation; conduct required to be observed by the debtor.
4. Efficient cause or juridical tie- reason which binds the parties to the obligation.

Sources of obligation: (Art. 1157)

1. Law
2. Contracts
3. Quasi-contracts
4. Delicts
5. Quasi-delicts

Classification of obligation:
1. Conditional (Art. 1179)- A condition is a future uncertain event or a past event unknown to the parties.

a. Suspensive (Art. 1181)

 Obligation has yet to come into existence
 No obligation to speak of until the condition is fulfilled.
b. Resolutory (Art. 1181)
 Extinguishes the obligation.
 Obligation is immediately demandable.

2. Period/Term (Art. 1193)- It is a future and certain event upon the arrival of which the obligation subject to
it either ARISES or TERMINATED.

a. Suspensive- until the obligation happen.

b. Resolutory- immediately demandable.

3. Alternative (Art. 1199)- an obligation where the debtor is required to fulfill ONLY ONE of the several
prestations to extinguish the obligation.

4. Joint or solidary (Art. 1207)

*Note: In case of concurrence of two or more creditors or two or more debtors in one obligation, the
presumption is that the obligation is JOINT and NOT solidary.

 Joint- entire obligation is to be paid or performed PROPORTIONATELY by the debtors.

 Solidary- EACH ONE of the debtors are obliged to pay the ENTIRE OBLIGATION, each one of
the creditors has the right to demand from ANY OF THE DEBTORS, the fulfillment of the entire
obligation.

*Note: Solidarity should be EXPRESS, when the obligation is ambiguous, it must be considered as JOINT
obligation.

5. Divisible or Indivisible (Art. 1223)

 Divisibility- refers to the susceptibility of an obligation to be performed partially.
 Indivisibility- refers to the non-susceptibility of an obligation to partial performance.

*Note: If a thing could be divided into parts and as divided, its value is impaired disproportionately, that
thing is INDIVISIBLE.

*Note:

 If the contract is divisible, and a part of it is illegal, the illegal part is void, and the rest shall be
valid and enforceable.
 If the contract is indivisible, and a part of it is illegal, the entire contract is void.
 Partial performance of an indivisible obligation is tantamount to non-performance.

6. With a penal clause (Art. 1226)- it is an ACCESSORY OBLIGATION attached to the principal
obligation, which imposes an additional liability in case of breach of the principal obligation.
  PURPOSE:
 To insure the performance of the obligation
 To liquidate the amount of damages to be awarded to the injured party in case of breach of the
principal obligation; and
 In certain exceptional cases, to punish the obligor in case of the breach of the principal obligation.

BREACH OF OBLIGATION:
BREACH OF CONTRACT-defined as the failure without legal reason to comply with the terms of the contract.

 KINDS OF BREACH:
1. Casual or slight (Art. 1182)- depends upon the will of the third person.
2. Substantial (Art. 1234)- depends upon the attendant circumstances and not merely on the percentage of
the amount not paid.

*Note: The general rule is that rescission will not be granted for SLIGHT or CASUAL breaches of contract. The
violation should be SUBSTANTIAL and fundamental as to defeat the object of the parties in making the agreement.
(Ang vs. CA)

 HOW BREACH COMMITTED: (Art. 1170)

1. FRAUD (Art. 1338) - every kind of deception, whether in the form of insidious machinations,
manipulations, concealments, or misrepresentations, for the purpose of leading another party into error
and thus executing a particular act.

Requisites of fraud:

1) it must have been employed by one contracting party upon the other;
2) it must have induced the other party to enter into the contract;
3) it must have been serious;
4) and it must have resulted in damage or injury to the party seeking annulment.

Kinds of fraud:

1) Dolo causante (Art. 1338) — which determines or is the essential cause of the consent, fraud in the
perfection of contract
2) Dolo incidente (Arts. 1344 & 1170)- which does not have such a decisive influence and by itself cannot
cause the giving of consent but refers only to some particular or accident of the obligation.

*Dolo causante CAN be a ground for annulment; dolo incident CANNOT be a ground for annulment.

*The result of fraud is error on the part of the victim.

*Note: Fraud produces qualified error; it induces in the other party an inexact notion of facts. The will of another is
maliciously misled by means of false appearance of reality.

2. NEGLIGENCE (Art.1162)- consists in the omission of that digence which is required by the nature of
the obligation and corresponds with the circumstances of the person, time, and the of the place.

Voluntary act or omission of diligence, there being no malice, which prevents the normal fulfillment of
an obligation (Art. 1170)

3. DELAY (Art. 1169, 1170)- Default or tardiness in the performance of an obligation after it has been
DUE and DEMANDABLE.

 Mora solvendi- delay on the part of the debtor to fulfill his obligation.
 Mora accipiendi- – delay on the part of the creditor to accept the performance of the obligation.
 Compensatio morae- delay of the obligors in reciprocal obligation.

4. CONTRAVENTION OF TENOR (Art.1170)- violation of terms and conditions stipulated in the

obligation; this must NOT be DUE to a FORTUITOUS EVENT.

 REMEDIES: (Art. 1165)

1. Specific performance- action to compel the fulfillment of the obligation.

2. Rescission- action to rescind.
3. Damages- action to claim for compensation for damages suffered.

 SUBSIDIARY REMEDIES (Art. 1177)

REMEDIES AVAILABLE TO CREDITORS FOR THE SATISFACTION OF THEIR CLAIMS:

 1. Accion subragatoria- An action where the creditor whose claims had not been fully satisfied, may go
after the debtors (3rd person) of the defendant debtor.
2. Accion pauliana- An action where the creditor files an action in court for the RESCISSION of acts or
contracts enters into by the debtor designed to DEFRAUD the former.

EXTINGUISHMENT OF OBLIGATION: (Art. 1231)

1) PAYMENT OR PERFORMANCE (Art. 1232)- payment means not only delivery of money but also the
performance.
Requisites:
a. PERSON WHO MAY PAY
 Debtor
 Third person
o Interested party
o Not interested party but with consent of debtor
o Not an interested party and without knowledge or against the will of the debtor (Art. 1236,
1237)
o Party not interested to be reimbursed- it is deemed to be DONATION (Art. 1238)
 Payment by person who does not have free disposal of property in an obligation to give. – In case
the creditor accepts the payment, the payment will NOT be VALID except in the case provided in Art.
1427. (Art. 1239)

 Payment by solidary debtor in case of active solidarity

*Art. 1235- To constitute a waiver, there must be an intentional relinquishment of a known right. A waiver will not
result from a mere failure to assert a claim for defective performance/payment. There must have been acceptance of
the defective performance with actual knowledge if the incompleteness or defect, under circumstances that would
indicate an intention to consider the performance as complete and renounce any claim arising from the defect.

b. PERSON WHOM PAYMENT MAY BE MADE

c. WHAT MUST BE PAID
d. TAKE NOTE OF THE FOLLOWING

 Application of Payments (Art. 1252)

Requisites:
1.One (1) debtor and one (1) creditor ONLY
2.Two (2) or more debts of the SAME KIND
3.All debts must be DUE
4.Amount paid by the debtor MUST NOT BE SUFFICIENT to cover the total amount of all the
debts.

 Payment by Cession (Art. 1255)- It is a special form of payment whereby the debtor abandons or
assign all of his property for the benefit of his creditors so that the latter may obtain payment of
their credits from the proceeds of the property.

Requisites:
1.Plurailty of debts
2.Partial or relative insolvency of the debtor
3.Acceptance of cession by the creditors

Kinds of Cession:
1.Contractual (Art. 1255)
2. Judicial (Insolvency Law)

*Note: It must be initiated by DEBTORS. Such assignment does not have the effect of making the CREIDOTORS
the OWNERS of the property of the debtor UNLESS there is an agreement to that effect.

 Dation in Payment (Dacion en Pago) (Art. 1245)- This is the delivery and transmission of
OWNERSHIP of a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation.

Where the debt is MONEY, the law of sale govern. In this case, the act is deemed to be a sale with
the amount of the obligation to the extent that it is extinguished being considered as price.

DISTINCTION BETWEEN DATION and CESSION: (Art. 1255)

DATION CESSION
May be one (1) creditor Many creditors
Does not require INSOLVENCY Requires PARTIAL or RELATIVE INSOLVENCY
Delivery of a THING Delivery of ALL the PROPERTY
TRANSFER of ownership of the property NO TRANSFER of ownership (only possession and
administration)
A Novation
Payment extinguishes obligation (to the extent of the The effect is MERELY TO RELEASE debtor from the
value of the thing delivered) net proceeds of the property; hence, PARTIAL
EXTINGUISHMENT of obligation.

 Tender of payment and consignation (Art. 1256)

TENDER OF PAYMENT- manifestation made by the debtor to the creditor of his desire to
comply with the obligation.

The act of the debtor of offering to the creditor the thing or amount due.

CONSIGNATION- Deposit of the object or the amount due with the PROPER COURT after
refusal or inability of the creditor to ACCEPT the tender of payment.

2) LOSS OF THE THING DUE OR IMPOSSIBILITY (Art. 1221)- If the thing has been lost or if the
prestation has become impossible without the fault of the solidary debtors, the obligation shall be
extinguished.

 NOFAULT- solidary debtors – obligation is extinguished.

 FAULT of any one of them – all are liable because of their mutual agency.
 FORTUITUOUS EVENT- delay on the part of the debtors – all will be liable.

*Note: If the thing due was not lost, but there is merely a delay, fraud, or negligence on the part of one of the
solidary debtors, all (including the innocent) debtors will share in the payment of the PRINCIPAL
prestation. The damages and interest imposed will be borne by the guilty debtor.

3) CONDONATION OR REMISSION (Art. 1270)

Requisites:

1) It must be gratuitous;

 It is an essential characteristic of remission that it be gratuitous, i.e., there is no equivalent

received for the benefit given because from the moment it exists, the nature of the act is changed,
and becomes:

(1) Dation in payment, if a thing is received by the creditor instead of the amount due (Art.
1245.);
(2) Cession, if the assignment of property is for the benefit of creditors (see Art. 1255.);
(3) Novation, if the object or circumstances of the obligation are changed (Art. 1291.); and
(4) Compromise,1 if what is renounced is a doubtful or litigious right in exchange of other
concessions obtained by the creditor.

2) It must be accepted by the obligor;

3) The parties must have capacity;
4) It must not be inofficious; and
5) If made expressly, it must comply with the forms of donation.

It is also clear that remission, properly speaking, presupposes that the obligation is and continues to be,
demandable at the time of the remission.

4) CONFUSION OR MERGER (Art. 1275)- Is the meeting in one person of the qualities of creditor and
debtor with respect to the same obligation.

It erases the plurality of subjects of the obligation.

Requisites:

1) It must take place between the creditor and the principal debtor
2) The very same obligation must be involved, for if the debtor acquires rights from the creditor, but
not the particular obligation in question there will be no merger
3) The confusion must be total or as regards the entire obligation.

5) COMPENSATION (Art. 1278)- is a mode of extinguishing to the concurrent amount, the obligations of
those persons who in their own right are reciprocally debtors and creditors of each other.
 It is the offsetting of two obligations which are reciprocally extinguished if they are of equal value.
Or extinguished to be concurrent amount if of different values.

Kinds of Compensation:
As to their effects
 Total (when two obligations are of the same amount)
 Partial (when the amount is not equal)

As to origin

 Legal (takes place by operation by law)

 Facultative (Unilateral; when it be claimed by one of the parties)
 Conventional (Both parties agree to compensate their mutual obligations)
 Juridical (decreed by the court, where there is a counterclaim)

6) NOVATION (Art. 1291)- is the extinguishment of an obligation by a substitution or CHANGE OF THE

OBLIGATION by a subsequent one which extinguishes or modifies the first either by:
a. Changing the object or principal conditions
b. By substituting the person of the debtor
c. Subrogating a third person in the rights of the creditor

CLASSIFICATION OF NOVATION:

 as to nature
1) Subjective or personal – either passive or active. Passive if there is substitution of the debtor.
Active if a third person is subrogated in the rights of the creditor.
2) Objective or real – substitution of the object with another or changing the principal conditions
3) Mixed – Combination of subjective and objective

 as to form
1) Express – parties declare that the old obligation is substituted by the new
2) Implied – an incompatibility exists between the old and the new obligation that cannot stand
together
 as to effect
1) Partial – when there is only a modification or change in some principal conditions of the
obligation
2) Total – when the old obligation is completely extinguished

REQUISITES OF NOVATION:
1. A previous valid obligation
2. Agreement of all parties
3. Extinguishment of the old contract – may be express of implied.
4. Validity of the new one