OBLIGATIONS - 1 File Download

OBLIGATIONS

DEFINITION

An obligation is a juridical necessity to give, to do or not to do.(Art. 1156)

KINDS OF OBLIGATIONS AS TO ENFORCEABILITY

Obligations are civil or natural. Civil obligations give a right ofaction to compel their performance. Natural obligations, notbeing based on positive law but on equity and natural law, do notgrant a right of action to enforce their performance, but aftervoluntary fulfillment by the obligor, they authorize the retentionof what has been delivered or rendered by reason thereof. Somenatural obligations are set forth in the following articles. (Art.1423)

KINDS OF OBLIGATIONS AS TO ENFORCEABILITYExamples of Natural Obligations:

1. When without the knowledge or against the will of the debtor, a thirdperson pays a debt which the obligor is not legally bound to paybecause the action thereon has prescribed, but the debtor latervoluntarily reimburses the third person, the obligor cannot recoverwhat he has paid. (Art. 1425)

2. When, after an action to enforce a civil obligation has failed thedefendant voluntarily performs the obligation, he cannot demand thereturn of what he has delivered or the payment of the value of theservice he has rendered. (Art. 1428)

3. When a testate or intestate heir voluntarily pays a debt of thedecedent exceeding the value of the property which he received bywill or by the law of intestacy from the estate of the deceased, thepayment is valid and cannot be rescinded by the payer. (Art. 1429)

ESSENTIAL ELEMENTS OF AN OBLIGATION

1. Active subject (creditor) - obligee2. Passive subject (debtor) - obligor3. Prestation/Object – subject matter of the obligation.4. Vinculum/Efficient Cause/Juridical Tie – the reason why the

obligation exists, the source of the obligation.

SOURCES OF OBLIGATIONS

Obligations arise from:1. Law;2. Contracts;3. Quasi-contracts;4. Acts or omissions punished by law; and5. Quasi-delicts.

SOURCES OF OBLIGATION; LAW

Obligations derived from law are not presumed. Only thoseexpressly determined in this Code or in special laws aredemandable, and shall be regulated by the precepts of the lawwhich establishes them; and as to what has not been foreseen,by the provisions of Civil Code. (Art. 1158)

SOURCES OF OBLIGATION; CONTRACTS

Obligations arising from contracts have the force of law betweenthe contracting parties and should be complied with in goodfaith. (Art. 1159)

SOURCES OF OBLIGATION; QUASI-CONTRACTS

Certain lawful, voluntary and unilateral acts give rise to thejuridical relation of quasi-contract to the end that no one shall beunjustly enriched or benefited at the expense of another. (Art.2142)

Voluntary and Unilateral: "The act is voluntary because theactor in quasi-contracts is not bound by any pre-existingobligation to act. It is unilateral, because it arises from the solewill of the actor who is not previously bound by any reciprocal orbilateral agreement.


Certain lawful, voluntary and unilateral acts give rise to thejuridical relation of quasi-contract to the end that no one shall beunjustly enriched or benefited at the expense of another. (Art.2142)

Voluntary and Unilateral: "The act is voluntary because theactor in quasi-contracts is not bound by any pre-existingobligation to act. It is unilateral, because it arises from the solewill of the actor who is not previously bound by any reciprocal orbilateral agreement.


Examples of Quasi-Contracts:1. Negotiorum Gestio - Whoever voluntarily takes charge of

the agency or management of the business or property ofanother, without any power from the latter, is obliged tocontinue the same until the termination of the affair and itsincidents, or to require the person concerned to substitutehim, if the owner is in a position to do so. This juridicalrelation does not arise in either of these instances:a. When the property or business is not neglected or

abandoned;b. If in fact the manager has been tacitly authorized by

the owner. (Art. 2144)


Examples of Quasi-Contracts:2. Solutio Indebiti - If something is received when there is no

right to demand it, and it was unduly delivered throughmistake, the obligation to return it arises. (Art. 2154)

Requisites:a. That he who paid was not under obligation to do so; andb. That payment was made by reason of an essential mistake of

fact. (Andres s. Mantrust)


Examples of Quasi-Contracts:3. When funeral expenses are borne by a third person, without

the knowledge of those relatives who were obliged to givesupport to the deceased, said relatives shall reimburse thethird person, should the latter claim reimbursement. (Art.2165)

SOURCES OF OBLIGATION; DELICT

Every person criminally liable for a felony is also civilly liable.(Art. 100, Revised Penal Code)

The civil liability established in Articles 100, 101, 102, and 103 of this Code includes:1. Restitution;2. Reparation of the damage caused;3. Indemnification for consequential damages. (Art. 104, Revised

Penal Code)

SOURCES OF OBLIGATION; DELICT

Acquittal of accused:1. Acquittal because the accused did not do the act complained

of – no civil liability2. Acquittal due to reasonable doubt – there can still be civil

liability.

SOURCES OF OBLIGATION; QUASI-DELICT

Whoever by act or omission causes damage to another, therebeing fault or negligence, is obliged to pay for the damage done.Such fault or negligence, if there is no pre-existing contractualrelation between the parties, is called a quasi-delict and isgoverned by the provisions of this Chapter. (Art. 2176)

Requisites:1. There must be an act or omission; 2. There must be fault or negligence; 3. There must be damage caused; 4. There must be a direct relation of cause and effect between

the act or omission and the damage.

SOURCES OF OBLIGATION; QUASI-DELICT

Double recovery not allowed: Responsibility for fault ornegligence under the preceding article is entirely separate anddistinct from the civil liability arising from negligence under thePenal Code. But the plaintiff cannot recover damages twice forthe same act or omission of the defendant. (Art. 2177)

KINDS OF CIVIL OBLIGATIONS: AS TO PERFECTION AND EXTINGUISHMENT

1. Pure Obligations - an obligation whose performance doesnot depend upon a future or uncertain event, or upon a pastevent unknown to the parties and is demandable at once.

2. Conditional Obligations - the acquisition of rights, as wellas the extinguishment or loss of those already acquired, shalldepend upon the happening of the event which constitutesthe condition.

3. Obligations with a term - obligations whose fulfillment aday certain has been fixed or those which take effect at once,but terminate upon arrival of the day certain. A day certain isunderstood to be that which must necessarily come, althoughit may not be known when

KINDS OF CIVIL OBLIGATIONS: AS TO PERFECTION AND EXTINGUISHMENT

Obligations which are immediately demandable:1. Pure obligations2. Obligations with a resolutory condition3. Obligations with a resolutory term

CONDITIONAL OBLIGATIONS

Kinds of Conditions

as to when the

obligation should be

performed

Suspensive happening of which gives rise

to the obligation

Resolutory happening of which

extinguishes the rights

already existing

as to whom or

where it depends

Potestative depends on the will of the

party to the juridical relation

Casual depends on chance

Mixed partly depends on will of the

party and partly on chance


Kinds of Conditions

as to capacity to be performed

in parts

Divisible can be performed in parts

Indivisible cannot be performed in parts

as to number of obligations

are to be performed when

there are several of them

Conjunctive all must be performed

Alternative only one must be performed

as to nature Positive act

Negative omission

as to how made known to the

other party

Express stated

Implied merely inferred

as to whether the obligation

can be fulfilled

Possible can be fulfilled

Impossible cannot be fulfilled either

physically or legally


POTESTATIVE CONDITIONS: are those which depend uponthe sole will of one of the parties. It renders the obligation void ifit is:1. Suspensive2. Dependent upon the debtor

Thus, if the condition is resolutory, even if it depends upon thesole will of the debtor, the obligation remains to be valid.


CONSTRUCTIVE FULFILLMENT:

The condition shall be deemed fulfilled when the obligorvoluntarily prevents its fulfillment. (Art. 1186)


IMPOSSIBLE CONDITIONS: render the obligation as void, ifthey are positive. Thus, negative conditions which are impossible,can either be treated as always fulfilled.

Kinds of Impossibility:

1. Physically impossible – those which are incapable of beingdone physically; or

2. Legally impossible – those that are contrary to law, goodcustoms, public policy.


EFFECT OF HAPPENING OF THE CONDITION: The effects ofa conditional obligation to give, once the condition has beenfulfilled, shall retroact to the day of the constitution of theobligation. (Art. 1187)

Retroactivity does not apply:1. Fruits2. Period of Prescription


CONDITION TREATED AS A PERIOD: When the debtor bindshimself to pay when his means permit him to do so, the obligationshall be deemed to be one with a period. (Art. 1180)


CONDITIONS WITH A DEADLINE: The condition that someevent happen at a determinate time shall extinguish theobligation as soon as:1. the time expires or2. if it has become indubitable that the event will not take place.

(Art. 1184)


RULES AS TO LOSS, DETERIORATION OR IMPROVEMENT:in case of obligations to give a specific or determinate thing issubject to a suspensive condition, the following rules shall beobserved in case of the improvement, loss or deterioration of thething during the pendency of the condition:

LOSS

Without debtor’s fault

Extinguished

With debtor’s fault Damages

DETERIORATION

Without debtor’s fault

Impairment is borne by the creditor

With debtor’s fault Creditor may choose:1. Exact Fulfillment plus damages2. Rescission plus damages


RULES AS TO LOSS, DETERIORATION OR IMPROVEMENT:

IMPROVEMENT

By nature or time Improvement is for the benefit of the creditor

At the expense of the debtor

He has no better right than that of a usufructuary

OBLIGATIONS WITH A TERM/PERIOD

A period is a certain length of time which determines theeffectivity or the extinguishment of the obligation. Unlike acondition, a period is certain to arrive or must necessarily comeeven though it may not be known when.


KINDS OF PERIODS:

Definite With a specific date

Indefinite Based on an event certain to happen though period may be unknown

Legal Imposed by law

Voluntary Agreed upon by the parties

Judicial Fixed by courts

Ex die Period with suspensive effect

In diem Period with resolutory effect


WHEN MAY COURTS FIX THE PERIOD:1. The court shall decree the rescission claimed, unless there

be just cause authorizing the fixing of a period. (Art.1911, par. 3)

2. If the obligation does not fix a period, but from itsnature and the circumstances it can be inferred that aperiod was intended, the courts may fix the durationthereof. (Art. 1197, par. 1)

3. The courts shall also fix the duration of the period when itdepends upon the will of the debtor. (Art. 1197, par. 2)


BENEFIT OF THE PERIOD:GENERAL RULE: Whenever in an obligation a period isdesignated, it is presumed to have been established for thebenefit of both the creditor and the debtor,

EXCEPTION: from the tenor of the obligation or othercircumstances it should appear that the period has beenestablished in favor of one or of the other. (Art. 1196)

Consequences of general rule:1. The debtor cannot be made to pay before the period;2. The creditor cannot be made to accept payment before the

period.


DEBTOR LOSES THE 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 afortuitous event they disappear, unless he immediately givesnew ones equally satisfactory;

4. When the debtor violates any undertaking, in consideration ofwhich the creditor agreed to the period;

5. When the debtor attempts to abscond. (Art. 1198)

KINDS OF CIVIL OBLIGATIONS: AS TO PLURALITY OF PRESTATION

1. CONJUNCTIVE: when two or more prestations are due andrequires fulfillment of all for the extinguishment of theobligation.

2. ALTERNATIVE: when two or more prestations are due andthe fulfillment of one extinguishes the obligation.

3. FACULTATIVE: with two or more prestations, but only one isdemandable and the debtor has the right to substitute.

ALTERNATIVE OBLIGATIONS

RULES:1. Where several objects are due, the fulfillment of one is

sufficient.2. Right of Choice: generally, it belongs to the debtor, except:

a. When expreslly granted to the creditorb. When the right of choice is given to a third party.

3. The debtor’s right of choice is limited in such a way that hecannot choose any prestation which is impossible or unlawful.

4. The choice, to take effect, must be communicated. Thecommunication of the choice made is technically called“concentration.”

5. The choice cannot be part of one and part of another.


RULES:6. When from all the choices, only one is practicable, the debtor

shall lose the right of choice. Logically, the obligation wouldbe to deliver that which remains.

7. If through the creditor’s acts, the debtor cannot make achoice, the debtor may rescind the contract with damages.

8. If the choice is with the debtor and when through his fault, allprestations are lost or has become impossible, he shall beliable to the creditor for the value of the last thing whichdisappeared.


RULES:9. If the choice is with the creditor and until a choice is

communicated:a. If one of the things is lost through a fortuitous event, the

creditor can choose from the remaining;b. If the loss of one of the things occurs through the fault of

the debtor, the creditor may:i. Claim any of those subsisting, orii. The price of that which was lost plus damagages;

c. If all the things are lost through the fault of the debtor,the choice by the creditor shall fall upon the price of anyone of them, also with indemnity for damages.

FACULTATIVE OBLIGATIONS

1. If the loss happened BEFORE substitution, anda. the prestation lost is the SUBSTITUTE: not extinguished;b. the prestation lost is the PRINCIPAL: extinguished.

2. If the loss happened AFTER substitution, anda. The prestation lost is SUBSTITUTE: extinguished. b. The prestation lost is PRINCIPAL: not extinguished.

KINDS OF CIVIL OBLIGATIONS: AS TO OBLIGATIONS OF MULTIPLE PARTIES

1. SOLIDARY: is one in which the each of the debtors is liablefor the entire obligation or each of the creditors is entitled todemand the whole obligation.

2. JOINT: one in which each of the debtors is liable only for aproportionate part of the debt or each creditor is entitled onlyto a proportionate part of the credit.

3. DISJUNTIVE: there are 2 or more creditors and 2 or moredebtors but they are named disjunctively as debtors andcreditors in the alternative and usually uses the words “or”.

SOLIDARY OBLIGATIONS

WHEN CONSIDERED SOLIDARY:

1. When the obligation expressly so states (stipulated);

2. When the law requires solidarity: example:

a. When two or more heirs take possession of the estate,they are solidarily liable for the loss or destruction of athing devised or bequeathed. (Art. 927)

b. Even when the agent has exceeded his authority, theprincipal is solidarily liable with the agent if the formerallowed the latter to act as though he had full powers.(Art. 1911)

c. When there are two or more bailees to whom a thing isloaned in the same contract, they are liable solidarily.(Art. 1945)


WHEN CONSIDERED SOLIDARY:

d. The responsibility of two or more payees, when there hasbeen payment of what is not due, is solidary. (Art. 2157)

e. The responsibility of two or more persons who are liablefor quasi-delict is solidary. (Art. 2194)

3. When the nature of the obligation requires solidarity.


RULES ON THE ENFORCEMENT OF SOLIDARYOBLIGATIONS:1. The debtor may pay any one of the solidary creditors; but if

any demand, judicial or extrajudicial, has been made by oneof them, payment should be made to him.

2. Novation, compensation, confusion or remission of the debt,made by any of the solidary creditors or with any of thesolidary debtors, shall extinguish the obligation:a. The creditor who may have executed any of these acts, as

well as he who collects the debt, shall be liable to theothers for the share in the obligation corresponding tothem.


RULES ON THE ENFORCEMENT OF SOLIDARYOBLIGATIONS:

b. The remission made by the creditor of the share whichaffects one of the solidary debtors does not release thelatter from his responsibility towards the co-debtors, incase the debt had been totally paid by anyone of thembefore the remission was effected.

c. The remission of the whole obligation, obtained by one ofthe solidary debtors, does not entitle him toreimbursement from his co-debtors.


RULES ON THE ENFORCEMENT OF SOLIDARYOBLIGATIONS:3. A solidary debtor may, in actions filed by the creditor, avail

himself of all defenses which are derived from the nature ofthe obligation and of those which are personal to him, orpertain to his own share. With respect to those whichpersonally belong to the others, he may avail himself thereofonly as regards that part of the debt for which the latter areresponsible

4. Payment made by one of the solidary debtors extinguishesthe obligation. If two or more solidary debtors offer to pay,the creditor may choose which offer to accept.


RULES ON THE ENFORCEMENT OF SOLIDARYOBLIGATIONS:5. He who made the payment may claim from his co-debtors

only the share which corresponds to each, with the interestfor the payment already made. If the payment is made beforethe debt is due, no interest for the intervening period may bedemanded.

6. When one of the solidary debtors cannot, because of hisinsolvency, reimburse his share to the debtor paying theobligation, such share shall be borne by all his co-debtors, inproportion to the debt of each.


RULES ON THE ENFORCEMENT OF SOLIDARYOBLIGATIONS:7. The creditor may proceed against any one of the solidary

debtors or some or all of them simultaneously. The demandmade against one of them shall not be an obstacle to thosewhich may subsequently be directed against the others, solong as the debt has not been fully collected.

8. Payment by a solidary debtor shall not entitle him toreimbursement from his co-debtors if such payment is madeafter the obligation has prescribed or become illegal.

JOINT OBLIGATIONS

RULES ON THE ENFORCEMENT OF JOINT OBLIGATIONS:1. The debts/credits are independent of each other;2. The vices of each obligation arising from the personal defect

of a particular debtor or creditor does not affect the obligationor rights of the others;

3. The demand by one creditor upon one debtor, produces theeffects of default only with respect to the creditor whodemanded & the debtor on whom the demand was made, butnot with respect to the others;

JOINT OBLIGATIONS

RULES ON THE ENFORCEMENT OF JOINT OBLIGATIONS:3. The interruption of prescription by the judicial demand of one

creditor upon a debtor does not benefit the other creditorsnor interrupt the prescription as to other debtors. On thesame principle, a partial payment or acknowledgement madeby one of several joint debtors does not stop the running ofthe statute of limitations as to the others;

4. The insolvency of a debtor does not increase theresponsibility of his co-debtors, nor does it authorize acreditor to demand anything from his co-creditors

KINDS OF CIVIL OBLIGATIONS: AS TO PERFORMANCE OF PRESTATION1. DIVISIBLE: when the prestation is capable of partial

performance.

2. INDIVISIBLE: when the prestation is not capable of partialperformance.

KINDS OF CIVIL OBLIGATIONS: AS TO PERFORMANCE OF PRESTATION

RULES AS TO ENFORCEMENT:

1. Indivisibility does not connote solidarity

2. In a joint indivisible obligation:

a. the right of the creditors may be prejudiced only by theircollective acts

b. the debt can be enforced only by proceeding against all thedebtors.

c. If one of the debtors should be insolvent, the others shallnot be liable for his share.

KINDS OF CIVIL OBLIGATIONS: AS TO PERFORMANCE OF PRESTATIONRULES AS TO ENFORCEMENT:

d. If one of the debtors did not comply with his undertaking,the obligation is converted into a monetary one, and

i. The debtor(s) who did not comply will be liable for hisshare and damages;

ii. The debtor(s) who were ready to comply will be liableonly for his share.

3. In solidary indivisible obligations, the creditor(s) can requireperformance of the whole prestation from any of the debtors.

KINDS OF CIVIL OBLIGATIONS: AS TO PERFORMANCE OF PRESTATION

PRESUMPTIONS:

DIVISIBLE INDIVISIBLE

The object of the obliation is the execution of a certain number of days of work

Obligation to give definite things

When the object is the accomplishment of work by metrical units

Those not susceptible of partial performance

When the object of the obligation is the accomplishment of work susceptible of partial performance.

If capable of partial performance but the law or the intention of the parties treats it as indivisible.

When the purpose of the obligation is to pay a certain amount in installments

OBLIGATIONS WITH A PENAL CLAUSEGENERAL RULE: the penalty shall substitute the indemnity fordamages and payment of interests in case of non-compliance.

EXCEPTIONS:1. If there is stipulation to the contrary;2. If the debtor refuses to pay the penalty;3. If the debtor is guilty of fraud in the fulfilment of the

obligation.

OBLIGATIONS WITH A PENAL CLAUSERULES AS TO ENFORCEMENT:1. The debtor cannot exempt himself from the performance of the

obligation by paying the penalty, save in the case where thisright has been expressly reserved for him.

2. Neither can the creditor demand the fulfillment of theobligation and the satisfaction of the penalty at the same time,unless this right has been clearly granted him. However, if afterthe creditor has decided to require the fulfillment of theobligation, the performance thereof should become impossiblewithout his fault, the penalty may be enforced. (Art. 1227)

3. Proof of actual damages suffered by the creditor is notnecessary in order that the penalty may be demanded. (Art.1228)

OBLIGATIONS WITH A PENAL CLAUSERULES AS TO ENFORCEMENT:4. The penalty can be reduced:

a. When the principal obligation has been partly or irregularlycomplied with.

b. When the same is iniquitous or unconscionable. (Art. 1229)5. The nullity of the penal clause does not carry with it that of the

principal obligation.6. The nullity of the principal obligation carries with it that of the

penal clause. (Art. 1230)

OTHER CLASSES OF OBLIGATIONS

As to subject matter Real – obligation to give

Personal – obligation to do or not to

do

As to affirmativeness Positive – obligation to give or to do

Negative – obligation not to do or not

to give

As to persons obliged Unilateral – where only one of the

parties is bound

Bilateral – where both parties are

bound

NATURE AND EFFECTS OF OBLIGATIONS

OBLIGATIONS TO GIVE1. 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 anotherstandard of care.

2. The creditor has a right to the fruits of the thing from the timethe obligation to deliver it arises. However, he shall acquire noreal right over it until the same has been delivered to him

3. Remedies available to the creditor in case of non-performance:a. Specific/Determinate Thing – Specific Performanceb. Generic – Substitute Performance

OBLIGATIONS TO GIVE4. 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 shallbe responsible for any fortuitous event until he has effected thedelivery.

5. The obligation to give a determinate thing includes that ofdelivering all its accessions and accessories, even though theymay not have been mentioned.

6. The debtor of a thing cannot compel the creditor to receive adifferent one, although the latter may be of the same value as, ormore valuable than that which is due.

7. When the obligation consists in the delivery of an indeterminate orgeneric thing, whose quality and circumstances have not beenstated, the creditor cannot demand a thing of superior quality.Neither can the debtor deliver a thing of inferior quality.

OBLIGATIONS TO DORemedy available: if an obligation to do was not complied with (it

was poorly done), the obligation can be performed by the creditorhimself or by some other person at the expense of the debtor orask for damages, or both.

Note that, specific performance is not available in obligations to do,since this would violate the Constitutional prohibition on involuntaryservitude.

OBLIGATIONS NOT TO DORemedy available: In obligations not to do and the obligor does it,the creditor may have it undone at the expense of the debtor

RESCISSION AS A REMEDYTWO KINDS:1. Rescission under Art. 1191, which should’ve been properly

termed as “resolution”, in reciprocal obligations where oneparty is not ready to perform his part.

2. Rescission under Art. 1301/1303 in case of rescissiblecontracts, like when there is lesion suffered by a ward orabsentee.

DAMAGESKinds of Damages (MENTAL):1. Moral – for mental and physical anguish2. Exemplary – corrective or to set an example3. Nominal – to vindicate a right when no other kind of damages

may be recovered4. Temperate – when the exact amount of damages can not be

determined5. Actual – actual losses incurred. This is the only type of damage

that would require proof.6. Liquidated – predetermined beforehand.

SPECIFIC CIRCUMSTANCES AFFECTING OBLIGATIONS

FRAUD

KINDS OF FRAUD1. Dolo causante – or fraud in obtaining consent, is applicable

only to contracts where consent is necessary and thus affectsthe validity of the contract, making it voidable.

Under this kind of fraud, the party would not have entered intothe contract were it not for the fraud; annulment is the remedyof the party who’s consent was obtained through fraud.

2. Dolo incidente – or fraud in the performance of the obligationand applicable to obligations arising from any source. This kind,however, does not affect the validity of the contract and makesthe party guilty of fraud liable for damages.

FRAUD

Responsibility arising from fraud is demandable in all obligations.Any waiver of an action for future fraud is void. (Art. 1171)

In order that fraud may make a contract voidable, it should beserious and should not have been employed by both contractingparties.

Incidental fraud only obliges the person employing it to paydamages. (Art. 1344)

NEGLIGENCE

1. Negligence obligor consists in the omission of that diligencewhich is required by the nature of the obligation andcorresponds with the circumstances of the persons, of thetime and of the place.

2. If the law or contract does not state the diligence which is tobe observed in the performance, that which is expected of agood father of a family shall be required. (Art. 1173)

3. Responsibility arising from negligence in the performance ofevery kind of obligation is also demandable, but such liabilitymay be regulated by the courts, according to thecircumstances. (Art. 1172)

NEGLIGENCE

Kinds of Negligence as to EXTENT:1. Simple Negligence – failure to comply with the diligence

required;2. Gross Negligence – amounts to bad faith and may thus be

the source of moral damages.

Kinds of Negligence as to SOURCE:1. Culpa Contractual – contractual negligence – or that which

results in a breach of contract.2. Culpa Aquiliana – civil negligence or quasi-delict3. Culpa Criminal – criminal negligence – or that which results

in the commission of a crime or a delict.

DELAY

Those obliged to deliver or to do something incur in delay fromthe time the obligee judicially or extrajudicially demands fromthem the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary inorder that delay may exist:1. When the obligation or the law expressly so declare; or2. When from the nature and the circumstances of the obligation

it appears that the designation of the time when the thing isto be delivered or the service is to be rendered was acontrolling motive for the establishment of the contract; or

3. When demand would be useless, as when the obligor hasrendered it beyond his power to perform. (Art. 1169)

DELAY

KINDS OF DELAY1. Mora Solvendi – delay on the part of the debtor, which may

either be:a. Mora solvendi ex re: in real obligationsb. Mora solvendi ex persona: in personal obligations

2. Mora Accipiendi – delay on the part of the creditor;3. Compensatio Morae – delay on the part of both parties.

ANY MANNER IN CONTRAVENTION OF THE OBLIGATION

In general, every debtor who fails in performance of hisobligations is bound to indemnify for the losses and damagescaused thereby. The phrase "any manner contravene the tenor"of the obligation includes any illicit act which impairs the strictand faithful fulfillment of the obligation or every kind or defectiveperformance. (Arrieta vs. NARIC)

FORTUITOUS EVENTS

Fortuitous events by definition are extraordinary events notforeseeable or avoidable. It is therefore, not enough that theevent should not have been foreseen or anticipated, as iscommonly believed but it must be one impossible to foresee or toavoid.

FORTUITOUS EVENTS

General Rule: is that no personal shall be responsible for thoseevents which could not be foresee, or which, though foreseen,were inevitable.

Exceptions:1. Declared by stipulation;2. When the nature of the obligation requires the assumption of

risk3. Expressly specified by law.4. When negligence, delay or fraud concurred with the fortuitous

event.

MODES OF EXTINGUISHMENT OF OBLIGATIONS

MODES OF EXTINGUISHMENT OF OBLIGATIONS

Obligations are extinguished:1. By payment or performance:2. By the loss of the thing due:3. By the condonation or remission of the debt;4. By the confusion or merger of the rights of creditor and

debtor;5. By compensation;6. By novation.

Other modes of extinguishment of obligations include Annulment, Rescission, Fulfillment of a resolutory condition, and Prescription.

PAYMENT OR PERFORMANCE


A debt is not understood to have been paid unless the thing orservice in which the obligation consists has been completelydelivered or rendered, as the case may be. How made:1. If debt is a monetary obligation, by delivery of the money.2. If the debt is delivery of a thing or things, by delivery of the

thing or things.3. If the debt is doing of a personal undertaking, by the

performance of said personal undertaking.4. If the debt is not doing something, by refraining from doing

the action.


RULES AS TO THE PAYOR:1. Payment made by a third person who has an interest in the

fulfillment of the obligation or when the debtor consents tothe payment made by the third person. Effects:

a. The creditor can be compelled to receive paymentb. The third party payor may demand reimbursement for the

full amountc. Results in subrogation. As such, the 3rd party payor may

exercise rights belonging to the creditor, such as goingagainst the guarantor or foreclosure of mortgage.


RULES AS TO THE PAYOR:2. Payment made by a third person who has NO interest in the

fulfillment of the obligation or pays without the knowledge orconsent of the debtor. Effects:a. The creditor cannot be compelled to receive payment.b. If payment was made, 3rd party payor can only demand

reimbursement upto the extent that has been beneficial to the debtor.

c. No subrogation. 3. Payment made by a third person who does not intend to be

reimbursed by the debtor is deemed to be a donation, whichrequires the debtor's consent. But the payment is in any casevalid as to the creditor who has accepted it.


RULES AS TO THE PAYOR:4. In obligations to give, payment made by one who does not

have the free disposal of the thing due and capacity toalienate it shall not be valid


RULES AS TO THE PAYEE:1. Payment shall be made to the person in whose favor the

obligation has been constituted, or his successor in interest,or any person authorized to receive it.

2. Payment to a person who is incapacitated to administer hisproperty shall be valid if he has kept the thing delivered, orinsofar as the payment has been beneficial to him.


RULES AS TO THE PAYEE:3. Payment made to a third person shall also be valid insofar as

it has redounded to the benefit of the creditor. Such benefitto the creditor need not be proved in the following cases:a. If after the payment, the third person acquires the

creditor's rights;b. If the creditor ratifies the payment to the third person;c. If by the creditor's conduct, the debtor has been led to

believe that the third person had authority to receive thepayment.


RULES AS TO THE THING TO BE PAID OR DELIVERED:1. Payment means not only the delivery of money but also the

performance, in any other manner, of an obligation.2. The debtor of a thing cannot compel the creditor to receive a

different one, although the latter may be of the same valueas, or more valuable than that which is due.

3. In obligations to do or not to do, an act or forbearancecannot be substituted by another act or forbearance againstthe obligee's will.


RULES AS TO THE THING TO BE PAID OR DELIVERED:4. The payment of debts in money shall be made in the

currency stipulated, and if it is not possible to deliver suchcurrency, then in the currency which is legal tender in thePhilippines.

Legal tender in the Philippines consists of notes and coinsissued by the Bangko Sentral ng Pilipinas subject to thefollowing limit:a. Notes (P20, P50, P100, P200, P500, P1,000) – no limit;b. Coins P1 and above – P1,000c. Coins below P1 – P100


RULES AS TO THE THING TO BE PAID OR DELIVERED:4. The delivery of promissory notes payable to order, or bills of

exchange or other mercantile documents shall produce theeffect of payment only when they have been cashed, orwhen through the fault of the creditor they have beenimpaired.

5. In case an extraordinary inflation or deflation of the currencystipulated should supervene, the value of the currency at thetime of the establishment of the obligation shall be the basisof payment, unless there is an agreement to the contrary.


PLACE, DATE AND TIME OF PAYMENT OR PERFORMANCE:1. Payment shall be made in the place designated in the

obligation.2. If there was no stipulation and the obligation consists in the

delivery of a determinate thing, the payment shall be madewherever the thing might be at the moment the obligationwas constituted.

3. In any other case the place of payment shall be the domicileof the debtor.

4. If the debtor changes his domicile in bad faith or after he hasincurred in delay, the additional expenses shall be borne byhim.

SPECIAL FORMS OF PAYMENT

DATION IN PAYMENT

1. Dation in payment, whereby property is alienated to thecreditor in satisfaction of a debt in money, shall be governedby the law of sales.

2. There has to be delivery of the thing and prior acceptanceand a consequent transfer of ownership to consider it adation in payment. A mere promise to deliver a thing in lieuof the originally constituted subject amounts to a novation.

3. Extent of extinguishment: General rule: to the extent of thevalue of the thing delivered as agreed upon or as may beproved. Exception: if the parties consider the thing asequivalent to the obligation through an express or impliedagreement or by silence.

APPLICATION OF PAYMENTS

1. Application of Payment: is the designation of the debtwhich is being paid by a debtor who has several obligations ofthe same kind in favor of the creditor to whom payment ismade.

2. Requisites:a. There is only one debtor;b. There are several debts;c. The debts are of the same kind;d. There is only one and the same creditor.

3. As a general rule, all the debts must be due and demandable.EXCEPTION: when there is mutual agreement or when theconsent of the party for whose benefit the term wasconstituted was obtained.


Right to apply payment: generally, the debtor has the right toapply the payment at the time of making the payment, subject tothe following LIMITATIONS:1. Creditor cannot be compelled to accept partial payment. (Art.

1248);2. Debtor cannot apply payment to principal if interest has not

been paid. (Art. 1253)3. The debt must be liquidated, except when the parties agree

otherwise;4. Cannot be made when the period has not arrived and such

period was constituted in favour of the creditor, except withthe consent of the creditor (Art. 1252);

5. When there is agreement as to which debt must be paid first.


Creditor can make the application if the debtor fails to choose andthe creditor indicates in the receipt to which debt the payment willapply.


If debtor and creditor did not designate:1. If the debts are of different nature and burden – to that debt

which is most onerous to the debtor;2. If the debts are of the same nature and burden – applied

proportionately

PAYMENT BY CESSION

1. The debtor may cede or assign his property to his creditors inpayment of his debts.

2. This cession, unless there is stipulation to the contrary, shallonly release the debtor from responsibility for the netproceeds of the thing assigned.

3. The above covers voluntary cession. In judicial cession, whichis covered by Insolvency Laws, more specifically, liquidation,all debts/obligations are extinguished.

TENDER OF PAYMENT AND CONSIGNATION

1. Tender of Payment is the manifestation made by the debtorto the creditor of his desire to comply with his obligation, withthe offer of immediate performance. It is a PREPARATORYACT to consignation and in itself DOES NOT extinguish theobligation.

2. Consignation is the deposit of the object of the obligation ina competent court in accordance with rules prescribed by law,AFTER the tender of payment has been refused or because ofcircumstances which render direct payment to the creditorimpossible. It extinguishes the obligation.


3. Instances where consignation can be made evenwithout tender of payment:a. When the creditor is absent or unknown, or does not

appear at the place of payment;b. When he is incapacitated to receive the payment at the

time it is due;c. When, without just cause, he refuses to give a receipt;d. When two or more persons claim the same right to

collect;e. When the title of the obligation has been lost.


4. Withdrawal of the thing deposited:a. Before the creditor has accepted the consignation, or

before a judicial declaration that the consignation hasbeen properly made, the debtor may withdraw the thingor the sum deposited, allowing the obligation to remain inforce.

b. If, the consignation having been made, the creditor shouldauthorize the debtor to withdraw the same, he shall loseevery preference which he may have over the thing. Theco-debtors, guarantors and sureties shall be released.

LOSS OF THE THING OR IMPOSSIBILITY OF PERFORMANCE

LOSS

Loss: means when the thing goes out of commerce, perishes ordisappears in such a way that its existence is unknown or that itcannot be recovered.

General Rule: loss of the thing subject of the obligation to giveextinguishes the obligation, except:1. If the debtor is already in delay2. If there was stipulation that the debtor is liable even for

fortuitous events3. If the law provides for the debtor’s liability

LOSS

Generic Thing – In an obligation to deliver a generic thing, theloss or destruction of anything of the same kind does notextinguish the obligation.

Except:1. When the thing goes out of commerce or by legal

impossibility;2. Limited Generic: In such cases where the generic thing

belongs to a particular group of thing and the loss pertains tothe whole group and NOT ONLY to the thing itself, then theobligation is extinguished

LOSS

Partial Loss: The courts shall determine whether, under thecircumstances, the partial loss of the object of the obligation is soimportant as to extinguish the obligation.

LOSS

Presumptions of fault: Whenever the thing is lost in thepossession of the debtor, it shall be presumed that the loss wasdue to his fault, unless there is proof to the contrary.

This presumption does not apply in case of earthquake, flood,storm, or other natural calamity.

IMPOSSIBILITY OF PERFORMANCE

To extinguish the obligation, the impossibility should have takenplace DURING the existence of the obligation. If theimpossibility arose BEFORE the existence of the obligation, theobligation is void.


KINDS OF IMPOSSIBILITY:1. As to nature: Physical (by reason of its nature); and Legal

(through some subsequent law);2. As to whom impossibility refers:

a. Objective – impossibility of the act or service itselfwithout considering the person of the debtor;

b. Subjective - impossibility refers to the fact that the act orservice can no longer be done by the debtor but may stillbe performed by another person

1. As to extent: Partial or Total;2. As to period of impossibility: Permanent or Temporary.


DIFFICULTY OF PERFORMANCE: When the service hasbecome so difficult as to be manifestly beyond the contemplationof the parties, the obligor may also be released therefrom, inwhole or in part.


The obligation having been extinguished by the loss of the thing,the creditor shall have all the rights of action which the debtormay have against third persons by reason of the loss.

CONDONATION OR REMISSION OF DEBT

CONDONATION or REMISSION

Condonation/Remission is an act of liberality, by virtue ofwhich, without receiving any equivalent, the creditor renouncesthe enforcement of an obligation, which is extinguished in itsentirety or in that part or aspect of the same to which theremission refers.

It is essentially gratuitous in character, if the creditor received aconsideration other than mere liberality on his part, it is notcondonation.


KINDS OF CONDONATION AS TO FORM:1. Express – when made formally and should comply with the

formal requisites of a donation.a. Acceptance is necessary to become effective;b. Movable property donated:

i. An oral donation requires the simultaneous deliveryof the thing or of the document representing theright donated.

ii. If the value of the personal property donatedexceeds five thousand pesos, the donation and theacceptance shall be made in writing, otherwise, thedonation shall be void.

c. Immovable property must be in a public document.2. Implied – when it can be inferred from the acts of the parties.


KINDS OF CONDONATION AS TO EXTENT:1. Total - when the whole obligation is extinguished.2. Partial – which may be as to the amount; as to the accessory

obligation; or as to a certain amount of debt (in case ofsolidarity).

KINDS OF CONDONATION AS TO MANNER/EFFECTIVITY:1. Inter vivos – during the lifetime of the creditor.2. Mortis causa – will take effect upon death which must be in

done through a will


PRIVATE DOCUMENTS/PLEDGE:1. The delivery of a private document evidencing a credit, made

voluntarily by the creditor to the debtor, implies the renunciationof the action which the former had against the latter.

2. Whenever the private document in which the debt appears isfound in the possession of the debtor, it shall be presumed thatthe creditor delivered it voluntarily, unless the contrary is proved.

3. The renunciation of the principal debt shall extinguish theaccessory obligations; but the waiver of the latter shall leave theformer in force.

4. It is presumed that the accessory obligation of pledge has beenremitted when the thing pledged, after its delivery to the creditor,is found in the possession of the debtor, or of a third person whoowns the thing

CONFUSION/MERGER OF RIGHTS

MERGER OR CONFUSION

Merger/Confusion: the meeting in one person of the qualitiesof the creditor and debtor with respect to the same obligation.

Requisites:1. Must take place between the credit and the principal debtor;2. Must involve the very same obligation;3. Must be total.

Guarantors: Merger which takes place in the person of theprincipal debtor or creditor benefits the guarantors. Confusionwhich takes place in the person of any of the latter does notextinguish the obligation

COMPENSATION

COMPENSATION

Compensation: a mode of extinguishment to the concurrentamount, the obligations of those persons who in their own right,are reciprocally creditors and debtors of each other.

COMPENSATION

KINDS OF COMPENSATION AS TO EXTENT:1. Total – when the two obligations are of the same amount.2. Partial – when the amounts are not equal. This is total as to

the debt with lower amount.

KINDS OF COMPENSATION AS TO ORIGIN/CAUSE:1. Legal – takes effect by operation of law because all the

requisites are present;2. Facultative – can be claimed by one of the parties.3. Conventional – when the parties agree to compensate their

mutual obligations even if some of the requisite are lacking.4. Judicial – decreed by the court in a case where there is a

counterclaim

COMPENSATION

REQUISITES OF LEGAL COMPENSATION1. That each one of the obligors be bound principally, and

that he be at the same time a principal creditor of theother;

2. That both debts consist in a sum of money, or if the thingsdue are consumable, they be of the same kind, and also ofthe same quality if the latter has been stated;

3. That the two debts be due;4. That they be liquidated and demandable;5. That over neither of them there be any retention or

controversy, commenced by third persons andcommunicated in due time to the debtor

COMPENSATION

OTHER RULES AS TO COMPENSATION:1. The guarantor may set up compensation as regards what the

creditor may owe the principal debtor.2. When one or both debts are rescissible or voidable, they may

be compensated against each other before they are judiciallyrescinded or avoided.

3. The debtor who has consented to the assignment of rightsmade by a creditor in favor of a third person, cannot set upagainst the assignee the compensation which would pertain tohim against the assignor, unless the assignor was notified bythe debtor at the time he gave his consent, that he reservedhis right to the compensation.

COMPENSATION

OTHER RULES AS TO COMPENSATION:4. If the creditor communicated the cession to him but the

debtor did not consent thereto, the latter may set up thecompensation of debts previous to the cession, but not ofsubsequent ones.

5. If the assignment is made without the knowledge of thedebtor, he may set up the compensation of all credits prior tothe same and also later ones until he had knowledge of theassignment.

6. Compensation takes place by operation of law, even thoughthe debts may be payable at different places, but there shallbe an indemnity for expenses of exchange or transportation tothe place of payment

COMPENSATION

OTHER RULES AS TO COMPENSATION:7. When compensation is not proper:

a. Depositum – as to the depositary;b. Bail – as to the bailee;c. Support – as to the one giving support, EXCEPT: support

in arrears and those contractual in nature;d. Civil liability arising from a penal offense

8. If a person should have against him several debts which aresusceptible of compensation, the rules on the applicationof payments shall apply to the order of the compensation.

9. When all the requisites are present, compensation takes effectby operation of law, and extinguishes both debts to theconcurrent amount, even though the creditors anddebtors are not aware of the compensation.

NOVATION

NOVATION

KINDS OF NOVATION AS TO NATURE:1. Objective - Changing their object or principal conditions;2. Passive Subjective - Substituting the person of the debtor;3. Active Subjective - Subrogating a third person in the rights of

the creditor

ACTIVE NOVATION; SUBROGATION

TWO WAYS:1. By agreement or express consent of the parties2. By law or implied:

a. When a creditor pays another creditor who is preferred,even without the debtor's knowledge;

b. When a third person, not interested in the obligation, payswith the express or tacit approval of the debtor;

c. When, even without the knowledge of the debtor, aperson interested in the fulfillment of the obligation pays,without prejudice to the effects of confusion as to thelatter's share

ACTIVE NOVATION; SUBROGATION

EFFECT: Subrogation transfers to the persons subrogated thecredit with all the rights thereto appertaining, either against thedebtor or against third person, be they guarantors or possessorsof mortgages, subject to stipulation in a conventional subrogation.

PASSIVE NOVATION; SUBSTITUTIONReimbursement Insolvency of new

debtor

EXPROMISION

without the knowledge or consent of the debtor.

Only to the extent the debtor was benefited

Old debtor is no longer liable

DELEGACION

with consent or with knowledge of the original debtor but without any objections.

Full amount Old debtor is still liable if:1. the insolvency was

already existing and of public knowledge, or

2. known to the debtor.

NOVATION

OTHER RULES:1. The novation is void if the original obligation was void, except

when annulment may be claimed only by the debtor or whenratification validates acts which are voidable.

2. If the new obligation is void, the original one shall subsist,unless the parties intended that the former relation should beextinguished in any event.

3. When the principal obligation is extinguished in consequenceof a novation, accessory obligations may subsist only insofaras they may benefit third persons who did not give theirconsent.

4. If the original obligation was subject to a suspensive orresolutory condition, the new obligation shall be under thesame condition, unless it is otherwise stipulated.

END

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