LAW ON OBLIGATIONS AND CONTRACTS REVIEWER
A. Obligations
a. Definition
i. It is a juridical necessity to give, to do, or not to do.
b. Elements
i. Juridical tie – the legal or judicial relationship
ii. Active Subject – the obligee or the creditor; the party who has the
right to demand the performance of the obligation
iii. Passive Subject – the obligor or debtor; the party who has the duty
to perform the obligation
iv. Prestation – the obligation to be performed
c. Sources of Obligations
i. Law - refers to the principles and regulations established in a
community by some authority and applicable to its people, whether
in the form of legislation or of custom and policies recognized and
enforced by judicial decision.
- Obligations derived from law are not presumed. Only those
expressly determined in the Code or in special laws are
demandable.
ii. Contracts - meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to
render some service. Obligations arising from contracts have the
force of law between the contracting parties and should be
complied with in good faith.
iii. Quasi-contracts - Juridical relation resulting from lawful, voluntary
and unilateral acts by virtue of which the parties become bound to
each other to the end that no one will be unjustly enriched or
benefited at the expense of another
- Negotiorium Gestio- refers to the voluntary management
of property or affairs of another without the knowledge or consent of
the latter.
- Solutio Indebiti- juridical relation created when something
is received when there is no right to demand it and it was unduly
delivered through mistake.
iv. Quasi-delicts - Whoever by act or omission causes damages 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 parties is called quasi-delict.
v. Delicts - Acts and omissions punishable by law which may be
governed by the Revised Penal Code, other penal laws, or the Title
on Human Relations under the Civil Code. Every person criminally
liable for a felony is also civilly liable
d. Kinds of Obligations
i. Civil Obligation - derive their binding force from positive law and
can be enforced by court action or the coercive power of public
authority
ii. Natural Obligation - -not being based on positive law but on equity
and natural law, do not grant a right of action to enforce their
performance, but after voluntary fulfilment by the obligor, they
authorize the retention of what has been delivered or rendered by
reason thereof.
iii. Moral Obligation
e. Nature and Effects of Obligations
i. Obligations to do
1. If a person obliged to do something fails to do it, the same
shall be executed at his cost. 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.
2. Only substitute performance is available since forcing obligor
to comply will violate the constitutional prohibition against
involuntary servitude
ii. Obligations not to do
1. If a person is not obliged to do it, and obligor does it, the
creditor may have it undone at the expense of the debtor.
iii. Obligations to give
1. Determinate or Specific
a. Object is particularly designated or physically
segregated from all others of the same class.
b. Remedies of Active Subject
i. To compel specific performance
ii. to recover damages in case of breach of the
obligation
c. Obligation of Passive Subject
i. To deliver the thing which he has obligated
himself to give
ii. to take care of the thing with the proper
diligence of a good father of a family
iii. to deliver all accessions and accessories
iv. to pay damages in case of breach of obligation
2. Indeterminate or Generic
a. Object refers to a class or genus and cannot be
determined with particularity. It cannot be specifically
determined from things of the identical class.
b. Remedies of Active Subject
i. to ask for performance of the obligation
ii. to ask that the obligation be complied with at
the expense of the debtor
iii. to recover damages in case of breach of
obligation
c. Obligation of Passive Subject
i. To deliver a thing which must be neither of
superior nor inferior quality
ii. To pay damages in case of breach of the
obligation
f. Circumstances affecting obligations
i. Fraud - Responsibility arising from fraud is demandable in all
obligations. Any waiver of an action for future fraud is void.
1. Causal fraud (dolo causante) - fraud in obtaining consent, is
applicable only to obligations where consent is necessary,
such as contract, and thus affects the validity thereof,
making it voidable. There is fraud when, through insidious
words or machinations of one of the contracting parties, the
other is induced to enter a contract which, without them, he
would not have agreed to.
The party would not have entered the contract were it
not for the fraud. Annulment is the remedy of the party
whose consent was obtained through fraud.
2. Incidental Fraud (Dolo Incidente)-the deliberate and
intentional evasion of the normal fulfilment of the obligation.
This is fraud in the performance of the obligation and
applicable to obligations arising from any source. This kind,
however, does not affect the validity of the contract and
makes the party guilty of fraud liable for damages.
The party would have entered the obligation with or
without the fraud. The proper remedy is not annulment of the
obligation but for damages.
ii. Negligence - Consist 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.
1. Contractual Negligence (Culpa Contractual) -negligence
in the performance of a contractual obligation.
2. Civil Negligence (Culpa Aquiliana) - Quasi delict
3. Criminal Negligence (Culpa Criminal) -That which results
from commission of a crime or a delict
Note: If his negligence was only contributory- he may still
recover damages, But the court can mitigate or reduce the
same.
Degree of care or diligence required as a rule:
a. Required by law
b. Agreed upon by the parties
c. In the absence of the above, diligence of a good father of
a family
iii. Default - signifies the idea of delay in the fulfilment of an obligation.
In other words, it is the non-fulfillment of an obligation with respect
to time.
1. Mora solvendi- delay of the debtor/passive subject to
perform his obligation.
2. Mora accipiendi- delay of the creditor/ active subject to
accept the delivery of the thing which is the object of the
obligation.
3. Compensatio morae- delay of the parties or obligors in
reciprocal obligations.
General Rule (GR): The debtor incurs in delay from the time
the creditor judicially or extrajudicially demands from him
the fulfillment of his obligation and in spite of such demand, he
is unable to comply with the obligation.
Exception (XPN) to the GR: Demand shall not be necessary
in order the delay may exist when:
1. When the obligation or the law expressly so declares.
2. When 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.
iv. Fortuitous Event - are extraordinary events not foreseeable or
avoidable. It is therefore not enough that the event should have
been foreseen or anticipated, it must be one impossible to foresee
or avoid.
1. Fortuitous Event Proper (Acts of God)- independent of
human intervention. May be reasonably foreseen. Like
lightning, flood, storm, earthquake, and volcano eruption
2. Force Majuere - an event which is dependent upon human
intervention, other than that of the obligor. Does not usually
happen or that which could not have reasonably foreseen
GR: No person shall be responsible for those events which
could not be foresee, or which, though foreseen, were
inevitable.
XPN to the GR:
1. Declared by stipulation.
2. When the nature of obligation requires the assumption of
risk. example: Insurance contract
3. Expressly specified by law. example: possessor in bad
faith, obligor already in delay.
4. negligence, delay or fraud concurred with the fortuitous
event
5. When the object was lost or deteriorated due or partly
due to the obligor himself
6. When obligation arises from a criminal offense
7. When the obligation to give is generic
g. Kinds of Civil Obligations
i. As to Perfection and Extinguishment
1. Pure Obligations - An obligation whose performance does
not depend upon a future or uncertain event, or upon a past
event unknown to the parties, and is demandable at once
2. 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
a. Suspensive Condition - (condition precedent)
happening of which gives rise to the obligation
b. Resolutory Condition - (condition subsequent)
Happening of which extinguishes the rights already
existing
c. Potestative Condition - condition dependent solely on
the will of one of the parties
Note: If the condition is dependent solely on the will
of the debtor/passive subject, the condition is void.
d. Constructive Fulfillment - condition shall be deemed
fulfilled when the obligor voluntarily prevents its
fulfilment
e. Impossible Condition - annuls the obligation which
depends upon them.
i. Physically impossible- ex. I will give you this
pen if you go to the sun.
ii. Legally Impossible- contrary to law, good
customs and public policy. ex. I will give you
this pen if you kill Pedro
• Rules as to improvement, loss, or deterioration of a
specific thing in a suspensive condition
o Lost without the fault of the passive subject –
obligation is extinguished
o Lost with the fault of the passive subject – debtor
is liable for damages
o Deterioration without fault of the passive subject –
impairment borne by the creditor
o Deterioration with the fault of the passive subject –
active subject may either exact fulfillment and ask
for damages or ask for rescission and damages
o Improvement by nature/time – improvement will
inure to the benefit of the creditor
o Improvement at the expense of the passive
subject – debtor shall have no right other than that
of a usufructuary. He may remove the
improvement if it will not cause damage to the
thing
3. Obligations with a period/term - A period is a certain length of
time which determines the effectivity or the extinguishment of
the obligation. Unlike a condition, a period is certain to arrive
or must necessarily come even though it may not be known
when
a. General Rule: 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
Hence, passive subject cannot be made to pay before
the period; while active subject cannot be made to
accept payment before the period.
b. Exception : from the tenor of the obligation or other
circumstances it should appear that the period has
been established in favor of one or of the other
c. Loss of Benefit of a Period
i. Insolvency of the debtor/ passive subject
ii. unable to furnish the promised security
iii. Impairment of the promised security
iv. violation of undertaking by the debtor
v. debtor attempts to abscond
ii. Plurality of Prestation
1. Conjunctive - Usually use the word "and". All prestations
must be complied with in order to fulfil the condition.
2. Alternative - Usually use the word "or". The performance of
the one of the prestation fulfill the obligation
Note: Right of Choice may belong to debtor creditor or third
party
If the right of choice belongs to the debtor and all
things are lost without the fault of the passive subject,
obligation is extinguished
If the right of choice belongs to the debtor with the
fault of the passive subject, value of the last plus damages
If the right of choice belongs to the debtor and some
things are lost without the fault of the passive subject, deliver
the remaining
If the right of choice belongs to the debtor and some
things are lost with the fault of the passive subject, exact
fulfillment and ask for damages, or ask for rescission and
damages
If the right of choice belongs to the creditor and all
things are lost without the fault of the passive subject,
obligation is extinguished
If the right of choice belongs to the creditor with the
fault of the passive subject, value of any plus damages
If the right of choice belongs to the creditor and some
things are lost without the fault of the passive subject,
demand from the remaining
If the right of choice belongs to the creditor and some
things are lost with the fault of the passive subject, price of
the lost and ask for damages, or demand from the remaining
and damages
3. Facultative - when only one prestation has been agreed
upon, but the obligor may render another in substitution
Note: Right of choice is always with the debtor. he cannot be
compelled to make the substitution
In case the principal object is lost before the
substitution, the obligation is extinguished, but if it is the
substitute, the obligation is not extinguished.
In case the principal object is lost after the
substitution, the obligation is not extinguished, but if it the
substitute, the obligation is extinguished
iii. Rights of Multiple Parties
1. Solidary Obligation - One in which each debtor is liable for
the entire obligation or each creditor is entitled to demand
the whole obligation
a. Solidarity arises when the obligation expressly so
states, or when the law requires solidarity, or when
the nature of the obligation requires solidarity
b. Enforcement of Solidary Obligation
i. The debtor may pay any one of the solidary
creditors
ii. Novation, compensation, confusion or
remission of the debt, made by any of the
solidary creditors with any solidary debtors
shall extinguish the obligation
1. the creditor who executed the acts shall
be liable to the others for the share in
obligation
2. Remission by the creditor of the share
which affects one responsibility towards
the co-debtor, in case the debt had been
totally paid by anyone of them
3. Remission of the whole obligation,
obtained by one of the solidary debtors,
does not entitle him reimbursement from
his co-debtors
iii. Solidary debtors may avail himself of all
defenses which are derived from the
obligations which are personal to him.
• Payment of another co-debtor
• if the contract is void
• obligation has prescribed
iv. He who made the payment may claim from his
co-debtors only the share which corresponds
to each with the interest for the payment
made.
v. In case of insolvency of one debtor, such
share shall be borne by all his co-debtors, in
proportion to the debt of each.
1. Joint Obligation - One in which each of the debtors is liable
only for a proportionate part of the debt or each creditor is
entitled only to a proportionate part of the credit.
There are as many obligation as there are debtors
multiplied by the number of creditors.
When the problem is silent about the right
a. Enforcement of joint obligation
i. Demand by one one creditor upon one
debtor, produces the effects of default only
with respect to the creditor who demanded
and the debtor whom the demand was
made
ii. The vices of each obligation arising from
the personal defect of a particular debtor or
creditor does not affect the obligation or
rights of the others.
iii. Insolvency of a debtor does not increase
the responsibility of his co-debtors, nor
does it authorize a creditor to demand
anything from his co-creditors
h. Extinguishment of Obligations
i. Payment or Performance
1. Substantial Performance
2. Incomplete Performance
ii. Loss of the Thing Due
1. loss due to fortuitous event
2. Impossibility of performance
3. Difficulty of prestation
iii. Condonation or Remission
1. express
2. implied
3. total
4. partial
5. inter vivos
6. mortis causa
iv. Confusion or Merger
1. the obligation is extinguished from the time the characters of
creditor and debtor are merged in the same person
v. Compensation
1. the obligation of those persons who in their on right, are
reciprocally creditors and debtors of each other
2. total
3. partial
4. legal
5. facultative
6. conventional
7. judicial
vi. Novation
1. previous valid obligation
2. agreement of all parties to a new contract
3. extinguishment of all obligation
4. validity of the new obligation
