Obligations and Contracts Dean Del Castillo Notes

CIVIL LAW REVIEW 11- Dean Del Castillo
OBLIGATIONS
Obligation- juricilcal necessity to give, to do, or not to do
Obligation is broader than contracts
Contracts is only o ne source of obligation
Five sources of Obligations:
a. Law
b. Contract
c. Quasi-Contr.tct
d. Delict
e. Quasi-Dehcts
LAW
What do we refer as law?
Laws that cr\!ates
obligations and
contract. Civil Code
does not creare
obligations and
contract.
We are nor talking
about general law but
rather specific laws (e.g
dury to pay rax; duty to
support) where the law
provides for your
obligation. General law
only provides
concepts(e.g.
requirements) but does
not create obligaoons.
CONTRACTS
\XIhat makes Contract

unique?
There are meeting of
minds between the
parues. (only in this
source that this is
needed)
DELICTS
When your obligation

comes from delict, what is
it?
The ctv!.lliability
arismg from the
cnme
l Y t:l)' person
criminally hable is
civilly liable
What is it compnsed of?
Due to the offended
party. resritution, etc.
Nugwd
\'. N1cdao:
BP22 - the accu-;ed

e/ltf4 was eventually
acquitted, but the
d
I
. . offended party kept on
msiscing that the
accused is still civilly
liable. Is she still liable?
'
(JI.
""""'
a. The court held that

you are only ctvil.ly
liable
b. The acquinal is
based on
The Civil liability
docs not anse
li Page
"Every good and perfect gift is from above, coming down from the Father of the heavenly lights, who
does nor change like shifting shadows."
Caroline Ton, Jessamyn Uy & James L:gan
CIVIL LAW REVlEW IJ - Dean Del Castillo

from the crJnunal
act
Q UASI-CONTRACTS
-
QUASI -DELI CTS
Not a Lrue contract

Meaning one of the
elements of a valid contract ts rrusstng, i.e., megting of
'
the minds.
We caU it q11oJi because the
obligauon is sourced from a natural obligaoon, like
negotorium gestio
This is unilarer:J, cre:ned
only by an act of one
person
Act or omission is not

punishable by law.
Is reckless imprudence
mcluded? No! They arc
delicts as being punished by
RPC.
Obligauon is you have to
pay
T wo kin ds ofquasi-contrac t:
a. Negotoriwn gestio- one
party undertakes to
admini!.ter or rake care of
proper)' of another. Your
unilateral act in here is the
cakmg care of the property
It came from your own
volition. This pertains to
emergency Situations. An
act of kindness.
There is no obligation for
you to do this but you did
it anyway. So where is the
oblJgation? Once he
decided to t:&e care of the
he is OBLIGED
to
care of it until the
emergency ceases.
of the owner1 there is
an obligaoon created. The
OBUGATION IS TO
COMPENSATE
b. Solution indebiti payment by mistake. You
thought you were obliged
to pay it but in fact you are
not obliged:Or you have
21Page
"Every good ond perfect gift i5 from above, coming down from the Father of the heavenly lights, who
does not change like shifting shadows."
Caroline Ton, Jessamyn Uy & James Ligan
CIVIL LAW REVJ EW II - Dean De l Castillo
paid even 1f you are not yet

required to pay. This is to
be differentiated with
wherein
natural
you do not have any
obligation to Eaz at all. You
just wanted to pay. lf it is a
natural obligation,
whatever you paid
voluntary, the same cannot
be recovered, unlike in S.I.,
the recipient is obliged to
return.
A source of obligation is an exclusive list. lf not coming from this one, then you do not have any
obligation.
..
Juridical Necessity
Meaning, it is mandatory. Once an obligation is created from these 5 sources, someone has to
comply! Ths is complete m itself
Three phrases to do, not to do, and co give are what we c:ill PRESTATIONS.
a Obhgaoon to give
\Vhat arc rou requLred to do m here?
To deliver, real or personal
b. Obligation to do or not do
\\7hat are you reqwred to do?
Service, to do or to refrrun
i.
Obligation to give (real obllgations)

a. Genetic - or indeterminate thing- one of a class
b. Specific -set apart from a class
l s this dassificacion applicable to real properties? Of course! Personal and Real Propernes can t:Hher
be specific or real .
'
'.
,-
For example a car:

It will be speci fic if you provided the plate number, or serial number or chassis number.
For real property:
If you say deliver a piece of land, then it is generic. Even if you say a land from Barrio Bangkal in
Makati, it is still generic.
'Obligation to do/not to do (personal obligations):

<-
l .
a. Legal.
b. Moral
3IPage
NEvery good and perfect gift is from above, coming down from the Father of the heavenly lights, who
Caroline Ton, Jessamyn Uy & James Ligon
CIVIL LAW REVlEWil - Dean Del Castillo

c. Possible
Obligation to deliver a specific prop erty
Has more obligation as compued if only to delnrer: a generic property
Added obligations:
a. Take caft ofit with due diligen ce ofa good father ofa family
Illustration:
Perfection
Condition
Delivery
Today the obligation is created. Then there is gap where the property is exposed from periL
Then the day you have to deliver. So this obligation is accual.ly to take .into account this
interregnum. This is the guarantee that you will be able to deliver.
What happens when your obligation is subject to a condition?
Your obligacion starts only from the tir:::le the condition is fulfilled
Diligence required
o Diligence. of a good father of a fatnily- that which is reqnired by the nature of the
obligation and corresponds with the circumstances of person, time, and place,
Exception: when the law o r contractprovides for a different standard of care
(e.g. common carrier- requires extraordinary care)
b. D eli ver fruits
The fruits earned from the property fro m the perfection of the obligation?
If the obligation is PURE -then you are obliged to deliver the fruits from the time you are
obliged to make delivery- all the fruits earned from the time you are supposed to deliver must
b e delivered, he was already the owner &om the time the contract was perfected.
If the obligation is CONDITIQNAL (suspensive), refer to Article 1187.
,,1oc'(\s
If the obligation is reciprocal - the fruits are murually compensated
If the obligation is unilateral - the debtor shall appropriate the fruits:
debtor does not need to ._;. de.liverr .: .
lf the obligation is with a PERIOD, no equivalent of article 1187.
CRC: 2 views
1
a. One group: obligation to deliver arises orily from the arrivel of ath term, then the
obligation starts only from the arrival o f l period - therefore, to delivery all the fruits
b. Second group: obligatio n to deliver starts from day 1 (where the contract was
perfected)
CRC: in both cases, you cannot apply article 1187. You still have to deliver fruits
lf the obligation is RESOLUT<j)RY, deliver immediately.
When Creditor is entitled to the Fruits
o l;xample: A is obliged to give B on March 3, 201 1, a particular parcel ofland. (Before
D ec.)?_he has_!lo rigi}ty.rhatsoever ?ver the fruits) . After March 3, 2011 , the ctdlror
is entttled (as of right) to the fruits . But if the fruits and the land are actually or
4 t Pag e
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"Ever; good and perfect gift is from above, coming down from the Father of the heavenly lights, who
doP.s not change like shifting shadows."
Caroline Tan, Jessamyn Uy & James Ligan
CIVIL LAW REVIEW II- Dean Del Castillo
o
o
o
constructively dehvered only ou March 15,2011, B becomes owner of said fru its and
land only from said date. Between March 3 and 15, B had only personal right
(enforceable against A); after March 15, he Pas a real right over the properoes.
Personal Right- power demandable by one person of another - to give, to do. or nor
to do.
Real Rightpower over a specific thing (e.g. right of ownerslup or posscss10n)
and is binding on the whole world.
In the case above mentioned, before the land is del.tvered, the proper remedy ot the
buyer (since he ts not yet the owner) is to compel specific performance and debvery.
and not an accion reinvmdicatoria.
c. Deliver Accessions
Accessories- those joined to or included w1tb the p1incipal for the latter's better use, perfection,
enjoyment (e.g., the keys to a house, the dishes in a restaurant).
o They are attached to the property but this can be separated without any damage
O nly for embellishment or ornamentation.
1\ccessions - additions to or improvements upon a thing. These Accessions are attached, cannot
be removed without causing damage to the principal. These become part of the principal, so rhe
owner of the principal property gets the accessions.
o Example: obligation to deliver a car, it ha4momo steering wheel,
1pod dock etc.
Do you have to deliver these wtth the accessories?
GR: once you sajd you will deliver this ca.c, you have to deliver
everything. "But of course, you can s cipulate othetw1se.
If the object ts generic, then genus does not pensh. So you don't actually have these Lh.ree added
obligations.
Breach - failed to deliver or perform the prestacion
Remedies of the CREDITOR in case there is a Breach of Obligation:
To Do
To Give
Specific
Specific performance
- Right to compel the
obligor to deliver or
to perform his
obligation
"
Substitute Performance
blu,..W-k
Damages
"
Generic
"
"
...J
"
(no prohibition
provided in the
law; but It is not
:LI effccove
remedy)
"
(except: purdy
personal/
prohibited by
the agyeement)
"
Not to Do
X
..
,.....II'\
"
S IPage
Caroline Tan, Jessamyn Uy & James Ligon
CIVIL LAW REVIEW II - Dean Del Castillo
I Rcsolucion/Cancellaoon I
Can you choose all of the above?
No. But you are not limited tO one. You cannot have not more than 2. The only remedy that
be combined is DAMAGES+ other remedy
!...
Other combinations cannot stand together

Can you ask for these remedies succcsstvely?
Yes
('
Once you have asked for S.P, the coum have srud you can go to the resolution of the 1,omract.
H owever, if your first option is resolution, then you can no longer take it back and ask for spec1fic
performance (or shift to other remedies).
..
.___
When is It available:
o There must be a substanual breach (Php 99.00 was paid out of the Php 100.00 debt)when the breach is sughr, can you sull ask for resolution? General rule
Exct!pt
when time is of the rucnce
This remedy even without a sripulaoon in reciprucal obhgaoom
It ts a remedy when all other fail.
These remedies need no t be stipulated by the parocs. even 1f there is nothing agreed upon, these
are LEG,-\L RElviEDIES provided by law. However, this is qualified by tht.> fact that the parces
are free to stipulate anything in the conuact because for example they have s opulateJ for
arburatlon then of course they have to undergo arbttration ftrsr.
i6
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Cases:
First two cases: you can have oncelL1oon only when the breach IS
of the essence, no matter how slight the breach ts you can bring this action.
when the orne
IS
...
Io the absence of stipulation, Article 11 91 provides that 1D reciprocal obligations! cancellation as

remedy is
As long as reciprocal, then no need to stipulate
.
As to those obligations that are net reciprocal, the law is silent so y o S t o stipulate this
for you to avail of this later.
tJt
I ..
\'('hether you need a court action to cesolvc or cancel an

GR:NO
Exception: UP v Delos Angeles while ll is not necessary to bnng a court :tcoon 1f there 1s a
basis that the breach is not matenal, vou are runn.in the cisk of cancellin an
liganon that you
are not entitled to caned. If the debtor contests that the breach is only slight an
e court
agrees, then you are dead! The court will nullity the resolution that has been made.
6I Page
I
HEvery good and perfect gift is from above, coming down from the Father of the heavenly lights, who
does not change like shifting shadows.''
CIVIL lAW REVIEW JJ - Dean Del Castillo

These cases of Villanueva ancl Bernabe, these are K of
and K to Sell. The doctnne now IS thar it
11 is a K to sell, the remdy of rcsoluoon of cancellatiOn is NOT a remedy because there is nothtng to
cancel or resolve. This remedy presumes that there is an existing obliM.Uon. If it 1s a K to sell, th1s IS
an obligation subject to a suspensive condition, that is, the payment of the buyer, so if there has
been no payment, no obligation has
perfected.
Ji is it a resolutory condition, such as the K of sale, then an obligation has already been perfected so
you can resolve or cancel the obligation
Racquel and Unlad: ;!_not interchange resciSSIOn Aroclc 1380 and Article 1191 The latter should bt"
Ltrmed as resolution/ cancellation
RESCISSION
{tNtlts.tJ.
Article 1380- 1385

Basis: Lesion or economic prejudice; this is
something intrinsic in the obligation; we are not
talking about breach here; these are actually
limited to those K entered between specific
people like guardians and wards. If you look at
the K lt is valtd, but then there is somcthtng
wrong because someone is preJudiced.
Subsidiary Remedy: resorted to only when all
o ther remedies fail
Since tlus IS b:tsed on economic prejudice. the
creditor mav be compelled to accept settlement
(or payment). Right of rescissiOn may not e,Ost.
11us remedy IS not totally vm:hin the prerogative
of the creditor.
Mutual resotution applicable o nly in specific
instances:
a. Those entered into m :a fiduciary
re.lanonship
RESOLUTION
Obh,....
Article 1191
Breach -you have valid obligatio n as well
Pnne1pal remedy: 1t does no t depend on

anythmg
you
to avail of rhis remedy ,
mal: no lo nger revoke it. The OEooq t$
TR.REVOCABLE
Once there has been breached, then you can ntJ
lo nger VNBREACHED it!
is always a requirement of mutual
resurucion
BREACH
What is breach?
There is breach if you do not comply with tht: oblJ.gation exactly in the manner and Stipulations
agreed upon
4 Sources o f Breach
1
a Dolo b. Culpa ..; f\/C' H7"'t.c.
c. Default
d. Contravention of the Terms
71 Page
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CIVIL LAW REVIEW II - Dean Del CastillQ
DOLO (CRC: this is reaJly not FRAUD)

There is deliberate intention to cause
damage or prejudice
b. Liabihty arising from dolo cannot be
miciga red or reduced by the couns.
c. Waiver of an action to
Liability
due co furore fr:1ud is void.
;1
,;
DEFAULT
a A brench or non-performance in point in
orne
b. But look ar the reason why the debtor
failed to perform
If Dolo/Culpa -liable
If not (e.g. fortuitous event) - not hable
CULPA (negligence)
a. ll1ere is no deliberate intention to cause
damage
b. uability due co negligence may be
reduced in certain cases
c. Waiver of an action to enforce liability
due to furore culpa may in a certain sense
be allowed.
CONTRAVENTI ON OF TER.l\ttS
a. You do nor comply with the terms and
conditions
,.I
mere are really just two cases of breach:

a. DOLO
b. CULPA
The contravention and default is the EFFECT of breach
DOLO
Person most liable
Basis
j
He is liable because.> he
is AWARE that he has
an obligation and yet
deliberatelY fails to
cX;mply with it
r -
"'
Extent of
Liabifjty
Liable for all the

consequences of his
actions, whether
foreseen or unforeseen
CULPA
People who are in the
lruddle of the road; they
are liable but nor so much
as compared to Dolo
Person is not aware but
he is punished because he
FAILED TO
lt,J.
EXERCISE THE ,1.,4/ w

Dll.JGENCE
I
REQUIRED OF HIM;
HE COUlD/OUGHT
ro have foreseen
Liable only for those that
could have been foreseen
Fortuitous Event
No liabU.Hy
Two kinds:
a. Could not have
foreseen
b Foreseen but
unavaoicl.ablc
Not liable
L.
..
.
-
3 Kinds of CULPA
CULPA CO!'rrRAcruAL
CULPA AQUlLIANA
CuLPA CRIMINAL
8IPage
Cl VI L LAW REVIEW 11 - Dean Del Castillo

Basis: Contract
N egligcm Act
As l0ng as it IS proved that

there was a comract, and that
ll was not carm:d_s>ut, it is
that the debtor is at
fawt, and it 1s h1s duty to prove
that there was no negligence in
carrpng out the ttems of the
contr:tct
Defense of "good father of a
famtl)" 111 thr.: selection and
supervisJon of employees
a proper defense.
The victim has lO eroYe the
negligence of the defendant.

Tills is because his action is
based on alleged negligence on
the part of the defendant
i@
Defense of "good father, etc."

JS proper and complete defense
(insofar as employers or
guardians ar"
Civil uability aasing

cnme
Accused td P,tesumed innocent
until contrary is proved, so
prosecution has the burden of
provmg negligence of the
accused.
This IS not a proper defense.

Here, the employee's guilt is
automatically the employer's
civll guilt, if the fom1er JS
insolvent (SUBSIDIARY
LIABILITY).
USURY LAW
Usury - exaction of excessive interest.
Not abolished but merely suspended.
1he WHOLE INTEREST that is USURIOUS is voided, not only the excess interest
1NST ALLMENTS
Please see Art. 1176
:\n. 1176 is merely a rebuttable presumption not a conclusive presumption.
r:or par 2, Art 11 76 to apply, 1t 1s not enough that the receipt for the msralmenr paid be dated,
n must also specify that the receipt is for payment of a particular installement due.
RIGHTS O F CREDITORS (An. 1177)

1. Exact Payment
2. Exhaust debtor's property, generally by attachment (except properties exempted by law).
3. Accion subrogatoria (subrogatory action) -I.e., exercise all rights and actions except those
inherit in the person (e.g. parental authority, right to revoke donations on ground of
ingratirude, hold office, carry out an agency). This is not a remedy of subrogaoon referred to
In the Chapter on Novation.
+. ;\ccton pautiana- impugn or rescind acts or contracts done by the debtor to defraud the
creditors.
General rule RJghts arc transmissible.

Exceptions:
1. If the law.provides otherwise
2. If the contract provides
9IPage
NEvery good ond perfect gift is from above, coming down from the Father of the heavenly lights, who
CIVIL LAW REVIEW lJ - Dean Del Castillo

3.
If the obligation Is purely personal
DIFFERENT KINDS OF OBLIGATIONS

PURE OBLIGATIONS- one without a condition or a term (hence, demandable at once)
How \\111 you be placeJ tn default?
Demand IS needed
CONDITIONAL OBLIGATIONS:\ND uncen:iln- cannot be past and uncertain (du!:i

period uf uncertainty- is a PERIOD)
a. Suspenstve- the happerung of the condition gives rise to the obligation
Entry
J.
IW' 1
h
fl
/r---'
FRUJTJ
Fulfllmen\ of the Condmon
Dehvery
You need a demand

When does your obligaoon anse? Upon the rime the condjtion is fulfilled. But once it
is fulfilled, it retroacts from the ti.-ne you entered into the K.
\"'hat is the consequence of th1s? You can sue only upon happerung of the condition
but what is the sigru6cance of this retroactivity? The cred.ttor can sue you wtthin the
period entering until the happening of the ccndiuon.
Resolutory- the happcrung of !.he condition extinguishes the obl.igaoon
Remember you can always 1mpose any condiuon, except It should not be ILLEGAL. Il\Uv0R.\L,
and tlvfPOSSlBLE
You can mixed these two (suspensive/resolutory) with the followUlg:
a. Potescstive - depends upon the will of one of the parties
a.. Potestative on the part of the DEBTOR
i. If also suspensive- BOTH the condirion and the obligauon are VOID
ii. If resolutory - Valid
b. Potestative on the part of the CREDITOR -VALID
b. Casu3/- depends on chance o r the will of a third person
c. Mixed - depends partly on the Vv-ill of one of the parties and partly on chance or v..-ill of a
thud person
FORTUITOUS EVENT
Somethmg beyond the debtor's 'vtll
It is an act of God that no one has control of
If u ss a FE, then your liability is 0. Because this is something which you have nor foreseen o r
foreseen but unavoidable
Exceptions:
1. By sopuhtion or contract
10
Ira g e
NEvery good and perfecc gift is from above, coming down from the Father of the heavenly lights, who
does noc change like shifting shadows."
CIVlL LAW REVIEW II - Dean Del Castillo
2.
3.
4.
5.
6.
7.
Debtor assumes the risk (e.g. msurance contract)

If the obligor is in default
If the obligor is guilcy of Bad Fruth (for havmg promised to deliver the same thmg to
2/more persons who do not have the same Interest)- liable to BOTI I
Provisions of law
Rule on concurrent negligence
Example: civil liability arising from criminal offenses
Exception: When the creditor (offended party tn the crime ts in Mora
Accipiendi)
Illustration:
A commits a crime of theft and JS asked to return the srolen ro ns
owner B. If A had previously asked the owner to accept the cor, but
the owner without JUstifiable cause
to accept the car, and later
on, the car was lost thru a FE. Is A still liable;;.:>_ _ __
No longer liable because the creditor is
Rule on commodatum - bailor scill liable
del") tJ
R equisites: (IFIN)
/1
a. Independent of the will of the debtor- something he has not control of, an act of god or
nature, it can involve acciden ts like ftre, catastrophy, war, rebellion, sedition
b. Could not have been Foreseen or foreseen bur ur.avoided
c. An event which render you I lvfPOSSIBLE to perform- difficult-j ts not an excuse, it is the
imposs1bilicy of perf01mance that excuses you from performing your obugaoon- 1f it can
still be perform even tn the uunost difficulty, you a.re not
d. No contributory NEGLIGENCE
Cases:
\Vhere parries have inststed that they were supposed co be excused from perfoarung theJr obugauon
because of martial law, the courts said that this should not be considered as a fortuitouse event
unless of course this is very direct say for example you have to deliver a thing to a company which
was already escheated by Marcos.
.
t i
..
..
The fact that you are not
is also nor a forruirous event
Example: Contracts cove.red by a period
I 2 YRS FE I
,;
Delwer i@ars, therl..lJ'ears in between a 6rc has prevented you from detivenng your product,
the court said that one you have to
the cause
the
So if the two-year perioj IS
because of fortuitou5 event, you do not extend your obligation for another two yeru; because in this
1"\No years you were excused from"ji';'Qliry because again it is a fortuitous event
EFFECTS OF ILLEGAL, IMMORAL, OR IMPOSSIBLE CONDITION
"'
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lliPag e
"Every good and perfect gift isfrom above; coming down from the Father of the heavenly lights, who
.,

J\. Positive condition- ryou must do)
G.R. both the condition and the obl..tgation is v01d
E>:cept graruirous(donation etc)- conditions are not deemed written- the reason for this is that
you cannot be an Indian giver, you say you will give but because of the condition you are nor
bound to deliver.
( flr"&!Jl
l,.vr.. /-..
(1(?/i
VJ\.
4A
B. Negative condition- (if you do om commit an illegal act, that nothing must happen)- the
condition will be deemed as not having been agreed upon by the paroes. The condition lS
treated as not written. Why? Because the condition is superfluous. Everybody is expected
not to do immo:aJ things. llus wJil be as if you h3vc entered Into a PURE obligaoon.
On the assumption that your condition does not fall within the three aforementioned limitations,
then tbe condinon must be fulfilled.
Example: to pass the bar. But what if the person keeps on failing the bar, how long should you wait?
GR: if the parries have nor agreed to fix the date as to when it should be fulfilled, then you have
to wait, subJeCt to the rules on prescription (well one may argue there is no runrung of
prescription yet because there is n o obligation yet)
Exception: if It ts obvious that you will not be able to pass. Now we JUSt have 5 years to do HI
Article 1185
CRC: 1 would reaUy understMd this provision to mean that it IS not that the condition is fulfilled
but the debtor is already released according to 1nrent:ion of the paroes and the narure of the
obugation. It is wrong to say ''deemed to be fulfilled" because by thi!> we wtll mean the.re wac;
obligation. In other words, if the tnteotion of the paroes is not to walt fotever, then the court
should take this into considcnwon.
Period for
Fullilmenr of t.he Obligation
A. Positive form
I will give you Php 1M if the ticle will be issued before Dccembe:- 31,2011.
What happens if before the said date, condition is fulfilled? Obligation anses at the wne of
fulfilment, not on the agreed penod.
lf the period arrives and the condition has not been fulfilled - debtor is released from the
obligation. Except: when the creditor prevents the fulfilment of the condition or it becomes
indubitable that the condition will not happen
{t ;hir.
B. Negative
.. -
- which means that nothing should happen before the period

Effect if something happens, then the debtor is released
Effect if nothing happens, then the obligaoon is created
OBLIGATIONS WITH A PERIOD
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'Every good and perfect gift is from ubove, coming down from the Father of the heavenly lights, who
Caroline Ton, Jessamyn Uy P.t James Ligon
L ..,

;\n obhgation with a day ccwun
What is the meaning of 'a
certain'?
a. Can be a fiXe date
b. Future andcertain event- must necessarily come, although it may not be known
when.
c. Past event which is unknown to the parties- what is the period here? Date of
discovery or knowledge: of the party because it is SURE that it happened but there is
an uncertainty as to when will the knowledge be acquired
d. Pa able
able time- this is a sure obligaoon. What IS the penod for payment here?
e period is fixed by the court. The court's obligation is to try the tntention of the
parties based on rhe
of the obiJgation and the cucumstances of the parries and
fix the penod. Is there :1ny other mstance
the court fixes the period? Yes. article
1197
.
Requisites for a Valid Pcn"od or Term

1. It must refe to the future
2. It must be certain (sure to come) but can be extended
3. It must be physical and legally possible
Fixtng the period
a. First step: is there an intention to fix a peood?
b. Second step: when the pertod has armed and the debtor has nor paid so you avail the
remedies provided in the Cl\'tl Code
The coun sometimes consolidate
like if tht debtor has not fulfllled after tlus penod. rhe c;.rediror
Js entitled to this 01: that remedy
When the Court May fix a penod?
I When the duration depends upon the \Vill of tlte debtor
2. \\'hen although the obligation does not fix a penod, It can be Inferred that a penod was
intended
--
When Court May Not Fix the Term (Paras)

1 \Vhen no tetm was speofied by the parties because no term was even intended, in wiuch
case the obligaoon is cP.ally a pure ooe, and dem:mdable at once
2. Payable on demand
3. Specific periods are prov1ded for in the law
Suspensive Period (ex die)- the obligauon begins from a day cert:Url, In other words. upon the
arrival of the period.
Resolutory Period (in diem) - up to a tune certain, the obligation remams vahd, but upon the arrival
of said period, the obligation terminates.
Period
from a Condition
Podod
Condition
1.31Page
"Every good and perfect gift is from above, coming down from the Father of the heavenly lighcs, who
Coraline Tan, Jessamyn Uy & James Ligon
CIVIL LAW REVIEW IJ - Dean Del Castillo

Event which must happen soosH.:r or iaicr, .11 .l
date known beforehand, or a wnc which C<Hli\CH
be determined
Refers to the furure
Fixes the time or the efficaciousness of an
obligation
Unc<::mun Event
May refer even to the past

Causes an obligation to arise or to cease
For Whose Benefit the Tenn has been established:

GR: Term is for the benefit of both the debLOr and the creditor
Is Jt possible co give the benefit of a penod only
one party?
Y cs, and Iusually
It is granted for the benefit of rhe debtor. This means he can compel the
I
I
creditor to accept his payment before the arrival of the pen?d but tl. cannot be
ro
Ray before the arrival of the E;?,eriocl
If it is given to
then the cred.Jtor is enotled to demand collection befgrc:, the arrival
of the perio.d but he cannot be compelled to acceet payment before the arrival of !Jle period
By stipulation, it is possible granting the penod to the creditor, but this is not normal.
to
Can the debtor lose the benefit of the period?

Yes.
Can the creditor lose the benefit of the period::.
Yes
Grounds where the benefit of the penod for the debtor can be lost:
a. Legal ground!"
b. By sopulaoon
Mea rung of "the debtor lose every oght to make use of the period"- the term is extinguished, anJ
the obligation is demandable at once.
Legal Grounds:
a.
When the debtor becomes insolvent

Why? Of course tn here we do not mean insolvency proceedings. No need for court
cleci:J.ration. It is nor because we are squeezing blood out of a stone but rather to protect
the creditors whose obligations are subject to a period. l\feaning, t.he remauung assets of
rhe debtor can be shared by aU the creditors
b. Debtor has promised to g1ve sccunry /collateral, bur he does nor
what he
pronused
Why? This is just to be f:ur that when you do not furnish the secunty, then you'U lose
your period as well. In here, you cannot accept t.he creditor to accept other -;ecunry than
what you have promised

Impatred security/guaranty
14
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CJVIL LAW REVIEW II- Dean Del Castillo
(;
fr JJ/? {DII
&, ft I
}7/c./ fvt)
ttcr
gt...fL
The unpa.Lrment must be bec:J.me of debtors fault.

Make sure you can distioglllsh (b) and (c\ Jn (c), you can replace the security
d . Violation of any condJoon
Remember it must be dear that the undercaiUng/ concliuoo JS the one that induced rhe
creditor in granting the debtor a period
e. Debtor attemets to abscond
Abscond: runmng away from your obhgation, in most cases, due to flight
Take note, mere attempt wiU entitle the: creditor to accelerate the period because 1f you
still have to w:m, then you mjght be left \Vllh nothing
f. Those instances where the snpulation of the parties for the acceleration of the parues
Retroactivity
..
Retroactive Effecr
,(C) delivery
,.
'
ab.. Condioon is fulfuled, effccti\,ty: nme condi tion is fulfilled but retroacts to the date when rht:
obligation is entered
you have rights but accruing only upon the cond.ioon)
So UJ between A and B, vou mr.y have these protecnve actJons:
Bond, escrow, etc
Sometlung the paraes may agree to. not forced by law
c. If the debtor ddivers in (A), what is the effect? Recover acrual payment and mtercsr
thJs
is payment by mistake (soluoon indebiti gives the payor the right to recover with interest)
dus is of cou.rse jf he discovers the mistake before the happening of the condition.
But what 1f he knew of the mistake after the condition has already been fulfilled?
YOU DO NOT H.AVE THE RIGHT TO ASK FOR TI-lE RETURN OF THE
PRINCrP r\L, you can recover for the tncerest for the period before tht> happenmg of
the period.
I f the debtor knew mat payment was not yet due- he cannot recover what has been
paid. This is true whether the creditor is in good faith o r bad faith, since the
important thing is the knowledge of the debtor (Implied Waiver).
J>
Example (From Tolentino's Book)

X sells a piece of land, subject to a suspensive condioon, to A. Then, before the happemng
o f the condition, he
.it unconditionally to B. There is neither registrat.ion of the sale nor
delivery of possession etther to 1\ or B. Upon the happening of the condJuon, the sale to A v.,ll
retroact to the date when it was made,
he will haye a better right than B.
\Vhen there is no Retroactivity?
a. Fruits or interests- Art. 1187
l .
15
I P age
does not change like shifting shadows. "
Coraline Ton, Jessamyn Uy & James Ligon
CIVIL LAW REVlEW II - Dean Del Castillo
[n un.i.iateral obi.Jgauons - debtor gets the fruits .tnd mterests, unless there ts contr tn
lntenr
In reciprocal obLg:mons - the fruits and Interests dunng the pendency of tht:
condition shall be deemed to compensate each other.
b. Prescription -you start c-ounting from the time the condition wok effect
Is tlus the same rule .if we talk about those 'Wth a Period?
You already have an obligation from DAY 1, that is why tough you may ask for protective acts
but tht: debtor is already obligation Period is merely a SUSPENSION of the obligation to fulG.I.
Hence, retroactivity is acmally N I A
For prescription though, same rule applies. You count only upon the happerung of the penod
(suspenstve)
For the fruHS, well since your oblJgatJon arises from DAY I if it is a period.
CRC: Caguioa group: since we do not have equiva.lent of Article 1187 for .geriods, fruits
fwm day 1 up to the date the period anses belong to the creditor.
..
Paras gro_!P: since you cannot rea.lly bring an action before the amval of the
period:""then techrucally you do not have rights OYet the fruits before the arrival of the
penod as well.
LOSS, DETERIORATlON & IMPROVEMENT
(.
This onlv appLes to those OBLIGATIONS TO GIVF SPECIFIC PROPERTIES Bt:cause it you
talk about gcnenc propertJes, res perit domino
In those to Jo or not ro do, nothing can be lust. Duh. Also for retroacovity, it is up to the court if
they will allow this
LOSS
a. Total loss
Depends:
Fault of debtor
Debtor pay damages
No specipc perfonnance
because it is one of a
kind. No subsrirute
performance as well.
Resolution I cancellation?
There is nothmg more
ro cancel. (! I >tf
Fault of Creditor
Debtor is released.
No obligaaon
created in the first
-+
DETERIORATE
Fault of debtor:
Creditor's option:
a. Specific
perfoonance +
damages
b. Resolution/ cancell
at.ion + damages
Fault of creditor
Debtor delivers the prope1('
111 its status. Tapos!
{,Fortuitous event
oebto' de:s pwpeny

its status Tapos Credttor
suffers imp
t.
U1
IMPROVED
-+
Caused by
debtor:
Usfrucuary
rights- can he
get payment for
the
tmprovemen ts?
No. He can
remove if it can
be removed .
Caused by rhc
creditor:
Not entitled to
any expenses for
1mprovement.
16
I P a g l"
"Every good and perfect gift Is from above, coming down from the Father of the heavenly lights, who
;Joes not chonge like shifting shadows."
/
- Caroline Ton, Jessamyn Uy & James Ligan
-+
place
Fortuitous event
Obliganon is
extinguished
-+
Bv narurc
Inures
to the
cr#fl/,.
of the
credltor
You apply the same rule in resolurorx condiuon (m case the debtor fails ro rerum the property
the happening of the resolutory condition)
t1
I -
Does this have any applicaoon in obligations with a term/period?

Yes. with more reasons! There was already an obligation at the time they entered into such
1 -
f-
DEFAULT/ MORA
General Rule: Demand is needed
Pure obligation- make a demand to place the debtor in default
Conditional/obligation \"1th a period- you still need to make a demand make the debtor in
default
There are people who are suggesting that if it 1s a monetary obligation, no need for demand CRC
does not agree. The rule JS that the sigrufic:lllce of the happeiUng of period is that this thl emir
lime that the credaor can make :1 dem:cnc.l Othc.:I"'VlSe. it 15 prcmarurc
The concept of delay/default could not actually apply to pure obligations

needed.
' ',-
/f1'(/nt t.
1 -
MULTIPLE OBLIGATIONS
II\
. &Wt,
t;l-
ahvays
Excptio71S: where demand not necessary:

a. When the law so provides (e.g. payment of taxes)
b. By stipulation
c. Ttme is of the essence- this is different from number 2- it js not in the agreement but
the NATURE of the obligatjon ll is presumed that the party could not have entered
into the agreement. If it is stipulated, then it is number 2.
d. Demand would be useless- beyond ability to perform. When is he constdered in default?
The moment you commit an act wluch renders you impossible to perform. If you sell the
property to somebody dse, at that precise moment, you are already in default
e. Prevents fulfilment
Ju,.) hlh
Kinds of Mora
1. Mora Solvendi- default on the paxt of the debtor
2. Mora Accipiendi- default on the pan of the creditOr
dcmanJ
bli\
Simple Obligations- only one prestatior./object of obligations

171 Page
Coroline Ton, Jessamyn Uy & James Ligon
CIVIL LAW REVI EW J1 - Dean Del Castillo
Muluplc Obligaoons
a. Multiple parries -Joint and soildary obligations
b. Multiple prestations
Alternative -is
where out of rl-)e two or more prestations which may be given,
only one is due
ConJunctiveif all the conditions must be performed
.
Facultative- only one prestation has been agreed upon (prtnopal prest.-uion) but the
obligor may renderanother m substituoon
ALTERNATIVE OBLIGATIONS
,-
'\
I -
.-
How to determine which one is due?

I. Exercise Right of Choice
\'V'ho has the Right of Choice?
o GR: the right belongs to the debtor
o Exception: when it is expressly gramed to the
or there's a
granting the right of choice to 3'd party
Luni.tations: No right to choose those prcstatioos which are:
a. Imposs1ble
b. Unlawful
c. Which could not have been the object of the obligation
If H is impossible to give all except one, that
one must still be given
Jf one of the prestarions is illegal, Lhe others may be v:ilid and the obligatl.on remams
2. Choice must be communicated
lt 1s a noofication process not a conscnr process
o Debtor's choice - notify the creclitor
o Creditor's choice -notify the debtor
o 3rd Person's chmcc- noufy BOTH tht: Jebwr and Lhe crednor
Choice can be commurucated orally or m wnung, e..xpressly or impliedly
person having the right of choice performs act that limits Ius
o Tacit Choicechoice (e.g. destroys one of the prestations)
o Implied ChOice- when the debtor delivers to the creditor and the latter accepts H
Once notice has been made, the obligation becomes a simple obliga cion.
he will not be permitted
An elec:Oon once made is binding on the person who
to renounce his choice an take an alternative which was first open to him (irrevocable)
Effect ofLoss
. d orruno
Db
' Ch.
e tors
o1ce - spec1(iJC property smce res pem
One/Some
Debtors Fault
a. \Vhen hr destroys one
of the several
prestations, then the
debtor i..c; just makmg
his choice - choose
a.
All
Crednor to receive
damages - what is the
value? Based on the last
one
18
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"Every good and perfect gift is from above, comfng dawn from the Father of the heavenly lights, who
does nat change like shifting shadows."
l -
Crcdiror1s Fault
FortuitOus Event
from the remaming

Deliver any of the
remammg
b. Resoluoon + damages
a. Choose from remaining
2
:i.
a.
Resoluoon + Damages
based on the cho1cc of
the debtor
Obligation 1s
extinguished
2. Poss1ble combinations
If you destroy everything then the last one ts lost due to FE, then rou do not have any
ob!Jgation already. The debtcr has aheady chosen bv desrro',1ng other presratJons and cotwt:rrcd
H mro a simple obugation
A - bst due ro FE
B - lose due ro credltor's fault (at thts poim. debtor can choose between the two opoons 'ls
menooned above)
C Qast item) - destroyed by the debtor Qost due to debtor's fault) - t t means that the debtor has
chosen resoluoon/cancellation (not liable for the loss)
3
Creditor's Choice
Debtor's F:wft
a.
b
Credu ors iault
Fortuitous Event
a.
FACULTAT!VEOBUGAT/ON
One/Some
Choose from the
remaining
Damages- Value of
the thing destroyed by
the debtor
Can choose from the
remaining
Choose from
remrumng
a.
All
Damages based on
whatever his cho1ce
a.
Obligation 1"
extinguished
a. Obligaoon i:,
ex ting01sh<>d
i
A
1l1c nulliry of the principal caroes with lt the nullity of the accessones or substitute
If it 1s impossible to give the

the substitute does not have to be given; if it is
m1possible to give the substitute, lhe principal must still be given
1l1e right of choice is
0!12; to the debtor
;
IS
Effect ofLoss
i ..
a. Loss of Substitute GR: Does not affect the principal prestation. Debtor cao still deliver prinopal prestation
Except: if debtor chooses substitute and communicates to creditor and the credttor does
something w/c results in loss of subst.
19
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Cora/me Ton, Jessamyn Uy & James Ligon
--
CIVJL LAW REVIEW II - Dean De i Castillo
-? credltor liable to debtor

b. Loss of Pnncipal Loss due to FE- obligation is exongwshed
Loss thru fault of Debtor
o convert subsorute into tJne of pnnctpal obligations; By destropng pnnapaL it is :IS if
debwr has chosen
Loss thru fault of Creditor- obugaoon 1s exunguished
If it can't be determmed if the obligation ts
/
Consider it as an alternative obligation because it creates more :coproetry of rights
To be facultaove
intention must be cle u- by prO\ision of l:lw
.fOINT & SOLIDARY OBLIGATIONS

GR: Joint Obligatton- each obligor answers only for a part of the whole liability and to each obligee
belongs only a pan of the correlative rights
Dtfferent shares of the debt or the credit are constdered from one another
""
Excepoon: Solidary Obl.igauons -the active and passtve
must comply '">ith the whole
may dem and the fulfilment of or
When do you have solidary obligations?
' .
E.xpresslv sopulated
Bv law (e.g obligaoons arismg from
bailees in commodarum)
UstOf words such as JOint and severally
( the use of the word sever".J.ly in the Philipp1nes, tt mean:- ::.olidary)
lnwvtdually, collccrivc:fY. separately, disuncnvely, "I" \Vlth a lot of st&T:!atures = aU
\\7hen the nature of the obligation reqwres liability to be solidary
Different Kinds of Solidarity:

J_
Solidarity - on the part of the creditors or obligees
2
Solidanty -on the part of the debtors or obligors
3. Mixed solidarity- on the part of the obhgors and obligees, or on the part of the debtors and
the crerutors
Solidanry despite Dtfferent Terms or Condmons
Credito r may recover that e..,art wruch is pure and unconditional, and should lea\e in suspense or
pentrg, the righr to demand the
the remainder unnl the expiration
rhe term or
the
ftlment of the condition.
The whole solidary obiJgations can be recovered from any of the solidary debtors@. the
share o f those with unmatu;-ed conditions
-
of
---------------------------
20
I Page
"Every good and perfect gift is from above, coming dawn from the Father of tile heavenly lights. who
--
CIVlL LAW REVIEW II -Dean Del Castillo
To Whom debtor musr pay:.

GR: to .!.!1 of the sobdary credttors
Exception- payment must be made to solidary cred.itor4ho made a demand GucLctal or
extrajudicial)
,.
o If there are more than one creditors, once one of them has already made a demand, then you
h:we to pay to that person_otherwise you'll be asked to pav again_ Once demand by a creditor
has been given, then it is considered as irrevocable_
:t
If
of Lhe debtors has passed away, can rhe creditor still go against A (the one who clied)?
Ye!.> 'fhe creditor's nght should not be frustrared by the mere fact that A died You can still
collect from the cst:lte.
I" the two yeat per1od limitauon apply so ::ts w when c'.ln you tile a cl:um on the estate as proviJcd tn
Rules of Court?
Yes
If you fail to present a claim, chen you can always claJm agamst other debtors. Take note that the
argument that since you failed to 5.1e your claim then you are already barred from collecting does not
hold water. You can always go after the livin2 debtqrs. That rule wherein you are already barred
from collecong ts applicable of course if you only ha\'C one debtor- So if there are other debtors,
then you have 10 years to collect 1f It is written_
I
G e : A & Bare solidary debtors of C. D & E, solidary crec.titors. C demands from A,

(upon whom no demand has been made), pays the whole debt to E. Is .B allowed tO do that, and
the
obligation extinguished=-after aU no demand had been made by C upon B. It ts only A that is bound, not B.
If
creditor sues only one, or
those not yet sued.
IS
several of the debtors (bur not all) there is no waiver agrunst
If you go after B (another debror), are there defences whtch can be mvoked bv B?
We have ,___
personal and real defences
..
If one of the solidary creditors w / the debtor

o
o
obligation is extinguJshed as betv.rcen Lhe solidary creditors &,debtor

Howrur, an obligation arises on part of the satisfied creditor:
- ; to reimburse share of other solidary creditors
., among the creditors J\emselvcs, a ret\oonsh1p ex.ists (always joim)
G R: Regardless of what the cause of extinguishment is, there is an obligation among all solidary
md.itors to reimbmsc a ge ao"thcr
o Exceet: if loss is due to FE, no reimbursement is required
211 Page
J.c.
Tlf'
fVl" -
f,ff,J. t/J
t '-
lv fAJ
GR: liabiliry depends on agreement

o Exception: if there is no agreement, e.9.ual apportionn1ent of liability
QB: solidary
do anything prejudicial to other solidary creditors. Bur he can do
anything thar
o Excepti9ns
J_ . L
1
1.
V
,..,}1 t'Ol

he has the obligation to reimburse the other creditors
Except If condorung creditor has consent of all other creditors,
Condoning creditor has NO more duty to reimburse the other
2. Assignment of
- GR: consent of all is
(can be given later)
- o Exception: assignment of shares to another solidacy p-editor
w/"o consent of others G%1iJ.e assjgnment (can be

ratifif'd)
*J.Wv f":A
E ffect of Forms o f Extinoo-uishnu:n t (Passive So/idad ty)

payment; novation; compensation; confusion; remission
Obligation extinguished as between creditor and solida;y debwrs

However, a new obligation is creared as among the solidary debtors
o
= to
the paJing
Obligation among themselves i!,_iol!lt
Rule on exnngu.ished thru PAYMf:NT

GR: Obligation ro
Exception: if payment is made after obliwon- Vrescribed or has become legally impossjble
o - Paying debtor shoulders whole gQl.!gation lU.mself- he can't claim reimbursement from
other solidary debtor
o Remedy: Recover from the creditor: follow rules on natural obligation & soJutio indebiti
-if he KNOWS that debt already presccibed 7 narural obligation- NO recovery
-if he did not know debt prescribed
-7 can recover from creditor

Rule on extinguished thru NOVATION
Modificatory Novatioo- other solidary debtors must REIMBURSE paying debtor (with
respect to the lower amount)
o e.g. one solidary debtor able to renegotiaLe lower amt of
Extinctive Novation- NO obligatton to reimburse
o condonation ofTOTAL obligation
Rule on Extinguishmen t thro COMPENSATION, CONFUSION, REMISSION
GR: There right of l'dffil5Ursernent
Exception: NO reimbursement:
:J' hi..(
i1;
Jt
/(JJJ
''Every good and perfect gift is from above, coming down from the Father of the heavenly
.. '
2,
If
age
who

o
o
Condonaoon of TOT:\L obllgation

when debtor sued is guilty of loss of d1mg due
Effect ofLoss or Impossibility

1. Due w FE
BEFORE demand was made- obligation is exungwshed

AFTER demand was made -debtor still liable
Convened to liability for damage
2. due w fault of one of the solidary debtors - debtor liable
Kinds of Defences
1. Complete Defense- denved from the narure of the obligation: you don't need to pay anything
Examples: lack of consideration; absolute simulation; illegal consideration;
extinguishment of the obligation; non-fulfilment of the suspensive condition; statute of
frauds
2. Personal Defense to the Debtor Sued- Complete deft>nse (generally)
Vitiated Consent -Complete Defense
Incapacity to give consent- Complete Defense
Non-fulfilment of condition imposed regarding Ius share- Partial Defense
Non-arrival of the rc.rm regarding his share- Partial Defense
3. Personal to Others -Partial Defense regarding share others involved
If one of debtors IS uwoki.ng a personal defense (personal to hunself) you CANNOT be made to
pay. Example you are saymg your signarure 1s forged. Unbke when It is invoked bv another debtor,
be may be liable to pay less the debtor's share that has a personal dt:fense.
Subrogaoon - the debtor who paid DOES NOT STEP INTO THE SHOES OF THE
CREDITOR
'.
i,
Rule on Insolvency of a Solidary Debtor

Insolvency 1s NEVER a defense
Insolvency of one is shared proportionately by the others
A solidary debtor who pays can later on recover from the insolvent debtor
Upon payment by tht: other solidary debtors, the obligation of insolvent debtor nor yet
extinguished UNLESS the insolvent debtor has been declared insolvem
on
I erences b etween a so lid1ary d e b tor an d a suret
Solid:uy Debtor
principal party in me contract
cnn be made to pay the whole amount of the
obligatJon (can you bind _yourself less? No)
collects from othec debtors and cmoot collect
the full amount (of course minus his share)
Extension of time will not release the solidary
Surety
not a pnncipal party
can bind himself for less
collects the entire amount agreed upon
An extension of time to the pnnCipal debtor

23 I P
NEvery good ond perfect gift is from above, coming down from the Father of che heavenly lights, wf"
does noc change fike shifting shadows."
>,a;.;,
l -
'
(ltl ;.
.;.
JJJ., t,..fl'.,.1,
k&t- I
CIVIL LAW REVIF.W II - Dean Del Castill o

deb1or
wjrhout the surety's consent will release the

surety from the contract
TO/NT INDIVISIBL E OBLI GATIONS

.
Solidarity
Indivisibility
Refers to natUJ::e of obligaoon
May exist even if there IS only one debtor and
only one creditor
The fault of one is not the fault of the others
';jl
Refers to rhe oe between the parties

Need at least 2 debtors or creditors
The fault of one is the fault of the others
The liability of the parties is reaUy
Obligations deemed INDIVISIBLE:

'
1/C.INJ
o Obligations to give definit
s (e.g. to
a car)
'"
H
I
'.I .
o Those which are<Oo usee tible of artial erformance
o If so provided by .;$.
o If such was the intenrion of tbe parties concerned
Obligations that ate deemed DIVISiBLE:
o When the object of the obligation is the execution of a certain number of days of work
o Accomplishment of work by metrical units
o To pay a ce.rtain amount in instalments
o Susceptible of2arrial perforwance
So how do you enforce this obligation? You enforce against all debtors
Effect of Non-Compliance- the obugacion is converted into a monetary one for mdcmnity
lmportance of the Co:1cept: m di";stble obl..tgaoon, you can campti rhe credltor tO accept partial
but we
objec1 that is indivJSJble
performance
..:
J. /t'-Mt;
OBLIGATIONS WITH A PENAL CLAUSE
,.
'.
Penalty Clause
Coercive means to obtain from the debtor compliance from the debtor
An accessory undertaking to assume greater Liability in case of breach
No need to prove the amount of damages -have to pay the supulated penalty
'.
..
L
" fyr t1
the penalty
the place of mdemnity for damages and the payment of Interest
Exceptions:
o
sopulacion - to the effect that damages or interest may still be recovered,
despite the presence of the penalty clause
o Debtor refuses to p ay the penalty imposed in the obligation
The penalty will earn interest from the date of demand
o Debtor is guilty o f fraud or dolo in the fulfilment of the obligation
I.
V""vt\
, ..
j,
J4rb"-
24 1 P a g e
"Every good ond perfect gift is from above, coming down from the Father of the heavenly l1ghts, who
does not change /1ke shifting shadows."
'
CIVlL LAW REVIEW II- Dea n Del Castillo
I,.
Whc::r: penalty may be reduced by court.

The obbgacion has been pardy complied with. by the debtor
Penalty is
Penal Clause CANNOT be enforced tf:

1. The breach is due to the fault of the creditor
2. Fortuitous s:yeot,
unless the debtor expressly agreed
3. Debtor is I'JOTyet in DEFAULT
Two provisions thar are confusing: ''cannot collect penalty & principal" and ''collect only penalty in
lieu of principal"
onetary Obligation (payment of a sum o f money)- can collect BOTH the printipal and
penalty
If NOT a monetary obl.tg-ation (e.g. fat.lure to deliver the thing) -must pay the penalry
Problem:
Facts: Credit: Pl ,000; Penalty- P200, interest- 12%; payable in 3 years
1" yeru- Interest- 120
2"<1 year - default
Amount need to be paid:
Credit
1,000
120
I ncerc::sl (1" yeat)
Penalty
200 (NO MORE INIERE$1)
TOTAL - 1,320
Whenever people talk abom tnterest- !t's eaher the compensanon for using the money or the
penalty
If we talk about interest which is not because of any default, it is because you are using the
money of a person -this is not in a form of penalty but rather .a compensation
With stipulation but no rate- 12% for loans/forbearance of money [6% for the rest]
No agreement - it doesn't mean you arc. not entitled to collect- by mere default, you will be
liable at 12%/6% depending whether it IS loo.n or forbearance
Compoundtng of interest- charge interest over interest- only when there is a sopularion or
judicially decreed
If it ts :1 judgment obhgauon, before the judgment comes in, there 1s no obligation You don' t
reckon rhe rlamage at the time of fihng. lf
coun at first instance says ynu are bable for
damages, this IS not final but you aL:eady have an obligation from then on. You have an
obligaoon but the amount remains unliquidated. Once the judgment has become final, it
becomes liquidated. From the final.tty until your payment this becomes loan/forbearance already
(12%).
"Every good and perfect gift is from above, coming down from the For her of the heavenly lights, who
,.J. 1
Caroline Ton, Jessamyn Uy & James Ugon
J "f:l.
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CIVIL LAW REVIEW II - Dea n Del Castillo
:\n. 12.3i is NOT an ext.iusive

there are other modes of exonguishmcnr (e.g. tlt:arhtn case of personal obl.igauon; compromlsc; fonwtous even; fulfilment of resolutmy term:
prescription)
PA YMENT
Payment- is the mode of extinguishlng obligations whlch consists of.
a. The delivery of money: or
b. The performance in an} other manner of an obligation
Three Principles in Paym ent
Integrity
'
You can subsume mdivjsibiliry here

If your obligation is to pay Php1M, then you want ro pay PhpSOOK only, then tius vwlares the
rule on integriry
Performance or payment must be made m :1ccordance with the terms and condioons agreed
upon
Exceptions:
a
"'(ff
Substantial performance (Article 1234 and 1235J performance accorJmg to the f.ur
tntent of the contrnct .....vah an attempt LO perform
if you read Article 1234, it IS a bit confus1ng. It
the ob!Jgor rna\ rel: OVt"r le s.s
the darnzges - what is the mea:Ung of recover? Does this mean rhar the o bligor
can take back his money:>
No. otherwise the obligation v.ril.l still eXJst. Thjs only means th:\t the
debtor can be considered as hanng ful.filled hls obhgaoon and can
enforce fulfilment of his obligation, but he is still liable to make good as
to what has not bee>n performed (balance)
Example: the obligation is at Php 100.00 but the debtor only patd
1'hp90.00, the debtor will be deemed to have been fulfilled his obhgacion
but he stiJJ has to pay the remaining).
If this is the case, is 1234 and 1235 the same?
-+
Nol In Article 1234, there is the phrase "less the.: damages obt:uncd
by the ctetlitor- tllis means that the debtor is not vet off the hook, the
effect of rhis is
the crcdttor cannot cancel the obljgauon. Th1s ts an
cxcepoon because the
at this n.me cannot snll av:ul o f remedies
such as resolution but at the ;ame time the debtor cannot be considered
as fuUy patd because he still
to pay.
b. Waiver
26
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"Every good and perfect gift Is from above, coming down from the Father of the heavenly lights, who
CIVI L LAW REVIEW II - Dean De l Castillo
as pe.r conw1ct"- crednur hns considered this as full compi.Jancc of the

ob!Jgaoon
1235: If the creditor accepts payment/performance knowing chat JUS incomplete
or uregular Watver- debtor no longer required to pay balance
1234: creditor has not consented
c.
Impossibility (or impracticability)
111
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k f't1tlf
performing of the obligation- rebus sic stantibus
JmpOJJ:ibilz!J of performance (beyond the contemplatton of BOTH parnes) NOT

cl.Jfficuhy, or mere mconvemence, unexpected unped.iments
difficulty to perform- debtor JS released either in whole or part -discretion of
the courts- not automatically a:1d wholly discharged
Art. 1267: refers to rebus SlC stantibus- an agreement remains valid only if the
Jame conditions prevailing at the time of contracting continue to exist a[ the of
performance
2.
- The terms of the contract form the law between the paroes, and the subJect matter CANNOT
be changed v.nthout the consent of the parties.
/,
- Exceptions:
I J. ;.,1 '
a. Facultative obligauom ( JttL
b. Dation in
.. 111 [f-f) //)
Atk
c. Novaoon
VVA..;
d. Waiver c.. lo..J
,(N7'(,.,
. .
- ) h- !H1.
I"()
- lf the contract does not speofy the gu:Wry.
:
Creditor- cannot demand a thing of superior quality (but if he desires, he may demand nnd
accept one of tnferior gualay).
Debtor- cannot delrver a thing of infcnor quality, but 1f he so
he may de!Jvcr one of
supenor quality.
1/lf.t-., 1
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If intent cannot be detenmned, the paroes may resort to- jurucial interpretation.
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3. Indivisibility
A debt shall no t be understood to have been paid unless the thing or service in which the
obligation consists has been ror!!P<J delivered or rendered.
f.t
Partial performance is NOT allowed
Mtl
Exceptions:
a. Contrary sopulaoon
b. \X' hen the obligation is co' ered by chfferent conclitions or differenr terms
c. Parualliqu1daoon
d. Jomt debtOr pays fus share or rhe crednors demands the same
e. Solidary debtor pays only the pan demandable
f. Compensation - when one debt is larger than the other, it follows rhat a balance is left
g. Work is done by parts
27
I P <1 g e
"Every good and perfect gift is from above, coming down from the Father of the heavenly lighcs, who
does not change like shifting shadows.
H

P:c1_wnetJt by :Jd Person
The creditor can refuse payment by srranger (.3rd person), except:

a. There ts a
allowing this
b. 3rd person has an inte:-e5t in the fulfilmem of the ob!Jgation (e.g. co-debtor,
guarantor)
3'J person is NOT interested
If creditor does not accept payment- c:an't bt. considered in default
'If he accepts payment, obligation is created between the debtor and payor
..,.
Can
Creditor to accept?
I
""
Debtor
3"' Person with interest
3rt1 person without interest
If creditor refuses to accept,

can he be considered tn default;l
""
"
The 3'd person may pay:

With knowledge AND consent gf the debtor- pavor is en titled to Re.unbursemenr AND
Subrogation
o Subrogation -putting somebody imo the :;hoes of the creditor, bencc, enabling the
'I\ 1
fom1er to exercise all the nghts and actions that could have been e:"<erctsed by thl.'
\__
latter.
\
o Rights whlch may be exewsetl by thy the Person Subrogated
Mortgage
Guaranry
Penalty or penal clause
Without the debtor's knowledge or agatnst his wtll- payor ts aUoweJ only BENEFICIAL
Reunbursement
I,.lk 1"4t
If payment is made WITHOUT Intention of bemg reimbursed
1"(,,.,./nAvJ..
o FoUow the rules 0:1 donation
o Acceptance of Debtor (or donee) IS REQUIRED
o If there is no acceptance (=no consent) - payor can collect Benefiaal
Reimbursement
Instances when recovery c:m be had from the CREDITOR and not from the innocent debtor.
Debt had P-rescribed
Debt had been completely renuned
Debt has already been
Legal compensati.on had already t2ken place
Paymenfb0.fncapacitated Person
- GR:
paying has no capacity to:
Payment is VOIDABLE- if accepted

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Caroline Tan Jessamyn Uy & James Ligan
CIVIL LAW REVlEW II - Dean Del Castillo
Can be ranfied
Creditor cannot be compelled to accept It

Remedy of consignation would not be proper (Paras)
Exception: Art 1427 CC - "\'\!hen a nunor between 18 a.f'Jd 21 years of age, who has enrered
Into a contract without the consent of the parents or guardian voluntarily pays a sum of money
or delivers a fungible thing in fulfilment of the obligation, there shall be no nghr to r ecO\"Cr the
me from the obligee who has spent 0 1 conswned it m goodfmth."
:;,ubJeCt to the mJe on natural obligauons
To whom payment must be made

Creditor
Heirs
assigns
Assignment of credit does NOT reqwre consent of debtor; mere nouce is enough
d. Person authorized to receive It
-11 '}ti
a.
b
c.
p"'Jt-l
Excepgons: (payment made to the above mentioned not vahd [void])

There is judicial order for retention of debts (e.g. garnishment)
Wm of injunction that prohibits payment to creditor
lnsolvcnt creditors
(f., ;v
'J(
tt1? 1
ft Atrl
,1-
Pa_vmenr to Unauchonzed Person

'D1c payment is Vaud nm only w the extent of benetit to the creditor
Burden of Proof that the benefit redounded to the credJtor DEBTOR
t ..A.. klh
Excepuons:
"''"'1
obl-t!ll
.1
1f after payment the tlurd persor; acquJreu the creditor's rtghts
W
b. If the creditor ratifies the payment to the third person
c If by the creditor's conduct, the debtor has been lt:cl to make the payment (estoppel)
vJ;l
ft)
Payment to Person in Possession ofthe Credit

Requisites (to consider as valid payment and release the debtor):
a. Payment must be made in good faith
b. The payee must be in possession of the mdil itself (nor merely the document)
When one possesses the credit- there IS color of title to it
Payment to Incapacitated Person

Valid only:
If the incapacitated person has kept the thmg dcl!veud; or

Insofar as the payment has been beneficial to hin1
Rules on Monetary Obligations

a.
-"
QJ
"&
kr-A
It must be io legal tender- it is tl1at whsch a debtor
vp tv k ri
rrlft:.hr,.:
compel a creditor to accept in pa)mCn(
of the debt.
29
I P il g e
does not
like shifting shadows."
V
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Coroltne Tan, Jessamyn Uy & James Ligan
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72
Can vou pay in dollars?

o No! The only currency that is a legal tender 1n the Philipptnes ts the Philippine
Peso.
o But you can agree to pay in other currenoes other than Philippine Peso.
b. 1t is subJect to rule on inflation
These are only applicable if payable m money.
lt refers to the value of our money; as to its purchasing power of the Php
How do we detennine the lncreast: or decrease In the value of the money?
o Based on the purchasing power of your money
o If there has been a decrease tn the v:\lue of money- then it is inflation
o There is a consumer pnce index as ;:elcased in the Central Bank of the
Pru.hppines
Does tlus affecl your obligation?
o Generally no but it begms to take effect when there is ll'TRAORDINARl.
INFLATION or DEFLATION
--;--p;xtraordinary - when there 1s a sharp increase/ decrease on the
purchasing power but generally the determination is a judicial matter.
But we have the Ramos Case that has been decided in the 1980's where
the court has said thar it is the BSP that has the right.
CRC: BSP merely says the RATE oflNFLATION .
In 2007, Cicibank v. Sabin.iano talked about compensation of your debt
from one branch to another. The Court said thllt it is the person who
alleges thaT there 1:> an extraordinary inflation who has the burden of
v
provmg.
this. the courr wiU no[ declare if there 15 an extraordinary
in flacon.
only reconahaoon we can make ts that ll JS soli a JUdicial

deterrruoation bul in pro\,ng such, vou can use BSP figures. These
fJ.gUres from the BSP are mcrdy eVJdence. These are not conclusive
evidence.
This has nothmg to do with the exchange rale

o In the past, the value of the Php v. $ kepl on increasing, of course ow lftlporred
components have been increasing as well. But there is no relation as to yow:
purchasing power as ro the exchange of rate. These cases therefore are correct m
saying that exchange rnte has nothing to do with your purchasing power
On the assumption that we have a finding that we have an extraordinary mfiaoon, what
is the effect?
'}
o Again, if no extraordinary inflation, then Jf your debt is PhplOO.OO, you still pay
Php 100.00 today
o If there IS a finding, then:
o Example:
2010
2011
Php 100
Php?
Determine the inflation rate (max a[ 100%)- how much will you pay? Php200.00 tf
Lhe in flacion is at 100%
.I
..
30
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IPag
"Every good and perfect gift Is from above, coming down from the Father of the heavenly fights, who
does not change like shifting shadows. n
Caroline Ton, Jessamyn Uy & james Ligon
CIVIL LAW REViEW ll - Dean De l Castillo
c.
Payment using coins

a. These are legal tender but 1f you use 1n coins:
I pt11
pJf
o Cent:tvos ()-only up to PhplOO.OO.
o Pesos -only up to Php 1,000.00
d. Mercantile documen rs
Take note: new rule: all kinds of checks are NOT LEGAL TENDER
!Pll.oO
'1/v
t,tJIJ(;. Gb
You have to
in cash if the creditor refuses to receive rhe checks
Creditor can refuse to accept personal check unless It has been scipuJated
However, the moment the Creditor accepts the check -cAnnot put up the uefense that
the check is not a legal tender
J
Problem
February 11 : check 1s tendered
February 15: encashment/clearance
February 14: Due date
o Are you already m default because your obligation was due on February 1-P
-+ No. As long as the check has been cleared, you'll be credited on the 11 .to
(retroactive effect)
Place ofPayment
w,hJ
-l'dJfh.
Sopulation of the contract

;,
If rhere is no stipulation
Obligation ro deliver Detertnlnate or Spec1fic properuel' -where It is located
Indeterrrunate properoes- dorrucile of debtor (CRC: H shouJd be RESIDENCE because= 1f It
as dom1c1ie, you have to guess your debtor's tntcnoon)
o What i[ your debtor has changed b1s residence?
Ir depends whether good f:urh or bad faarh. If it is 1n bad fauh however, rhen
you can charge extra expenses (transporracion expense) you have incurr.ed m
/v
collecong what is due to you.
If
SPECIAL FORMS OF PAYMENT
bf=
A. Application ofPayments
Definition: it is the destgnation of the debr to which should be apphed a payment made by a
debtor who owes several debts in favor of the same creditor.
Remember the requisites of valid payment (identity, integnry, indiVlsibility)- must sull be
complied
REQUISITES:
a. There must be two or more debts (severality of debts)
b. The debts must be of the same kind
c Owed by the same debtor in favor of the same
(thus, there must be only one
debtor and onJy one creditor)
'f'tt t ttl I -{JA /
d. All the debts must be due
Exceptions:
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"Every good and perfect gift is from above, coming down from the Father of the heavenly ltgh ts, who
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CIVIL LAW REVIEW ll - Dea n Del Cast illo

Jf mere IS a
When it is made by the party for whose benefit the terrn is
constituted
i
e. Paymem 1s nor enough ro exnngwsh all the debts
'How Appltcauon is Made?
a. PREfERENTIAL RIGHT OF DEBTOR
!.
Debtor is given by the law the right
of the debts he is paying.
Exception: Contrary agreement
Lunitadons:
o Debtor cannot choose to pay part of the principal ahead of the interest, unless
creditor consents
o Rule on incliv1sibiliry (partial payment)
0
:\pplicatioo must be made at the time when payment by debtor is made

o If debtor fails to make applicaoon - creclitor has the right to make proposal or
recornmcndacion
o If debtor agrees- apply creditor's rccorn.mcndauon
o If debtor disagrees- be makes the application
b. Creditor makes the Jes1gnaoon, :JS agreed upon by the parties
UNLESS there is cuuse for invalidating the contract- refers to invalidity of payme111
o If obligation itself is VOID- application of payment lS also void
o Payment V01d (e.g. payment to incapacituted person)- application of payment is
invalidated BUT obltgauon still remains
If the crechcor makes the application \vithout the knowledge and consent of the debtor,
the application is not valld (Paras).
c. lf neither the debtor nor rhe debt<.>r has made the appllcatio""' or if the appllcation is not
valid, then application IS rrutCe by optrafiOII oj /tiR1
Apply I t to the most onerous
[f the debts are of the same nature and burden, application shall be made to aU
proportionately
Once applicaoon o f payment is made, Jt cannot be revoked
c. Excep tion: BOTH parties agree
d. Exception to the exception: not allowed tf 3rd persons would be prejudiced
B . D acion en Pago
- Definicion: Mode of extinguishing an <.>bligauon where the debtor alienates in favor of the
creditor, property for the saosfacuon of monetary debt.
- Governed by the Law of Sales
e. Partakes the nature of sale -i.e. the creditor is
buying some property of the debtor,
payment for which JS co be charged against the debtor's debt.
f. So, warranties in Sales applies in this case
Effect of Breach of warranty: No payment
Does it ex tinguish the obligation in full?
32
I P "g e
"Every good and perfect gift is from above, coming down from the Father of the heavenly llgh rs, who
does not change like shifting shadows.''
CIVJL LAW REVIEW ll- Dean Del Castillo

Not ncce5:;aq,
!here can be nc::gou:u:ion m the pncc of the property and
lower than the debt = balance
Requires consent of the creditor
g.
wh1
tt s
C. Cession (Assignment in Favor ofCcewtors)
/..;
!v
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.,. ., ml 11 lhc
- Definioon: it is a process by whtch a debtor cransfers all the propernes not subject to execution
in favor of his creditors so Ll)ar the latter may sell them, and thus apply the proceeds to their
credits.
- Kmds ol Assignment
h. Legal- governed br the Insolvency Law; maJOrtcy of creditors muse agree
1. \' oluntary - this what ts referred to in An. 1255 CC; ALL the creditors mnst agree
- Requisites.
j. More than ooe debt
k. More than one creditor
1. Complete or partial insolvencv of debtor (does nor have co be declared .insolvent)
m. Abandonment of all debtor's co
not exempt from execution in favor of creditors
n. cceptance or consent on the parr of the C!j.e.ditors
- Effects:
o. "The ctedllors do not become the owner:>; they are merdy ass1gnees with
sell
p. ne balance remams collectible
q. Creditors will collect ere ts in the order of preference agreed upon, or in default o f
agreement. in the order established by law
- Cession Distin 'shed from Daoon en Pa o
Jt/tr
\AV.
uires the consent of all the creditors

Requires full or partial insolvenqr
Transfers ownershi
Docs not transfer own<.rsbi
D. Tender o f Payment and Consignation
c?" 7f'Y'.
Tender of Payment - act of offenng the creditor what is due him together with a demand that
the creditor accept the same (extrajudicial process)
r. Tender ofPaymenl-+ acceptance= extinguishment of obligation
s. Tender of the pnncipal must be accompanied \Vlth the render of the
which has
accrued
Consignation - the act of depositing the thing due Wlth the court or judicial authonties
whenever the creditor cannot accept or refuses to accept payment; produces the dfec( of
paymen t
t. It is a Judicial Process
Exception: Rental Law- debtor allowed ro consign payment with the bank upon
notice to the 1'-!::;sor
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33I Page
"Every good and perfect gift is from above, coming down frqm the Father of the heavenly lights, who
does not change like shifting shadows "
:i:.
CML LAW REVIEW II - Dean Del Castillo

u.
Requ1Sl.!.!d:.
a. Exmence of a vaLd debt

In case of an option, this 1s a privilege, not an obugaaon or debt.
Debt must also be due
b. Valid prior tender
Exceptions:
o Creditor is ab!>ent or unknown or does not appear at the place of
payment
o Crediwr is incapacitated at the rime it 1s due AND does nor have a legal
representative
o Without just cause, the creditor refuses to gtve a recepr
o Two or more persons claim the same nght to collect (an action m
interpleader would be proper here)
o Title (written document) of the obligation has been lost
o Debtor previously been notified by the creditor that the latter would not
accept any payment
c. Prior nooce of consignation (before deposit) to all persons Interested
Exception: uotice would be useless
Persons mtercsred - e.g. solidary creditors; as1de from the creditor- why?
o Tender nooce to crednor- (so, there 1s alreadv in compliance with
this requjsite)
d. Actual
(deposit)
Effect: Property is in 'custodia legis'
e. Subsequent notice of cgnsignarioa tg all persons
Again, creditor is not included in the term "persons 1.meresred" - why?
o Notice accomplished by = service of surrunons
Tender of payment WITHOUT consignation docs NOT extmgwsh the debt; consignaoon must
follow
When Consignation produces the effect of payment- when the court approves the consignauon
.1\ND orders the cancellation of o bligaoon
v. Prior w
the obligation RE:MAINS
Creditor generally bears the expenses of consignation; it includes expenses for the preservation
of the goods
j
Effects of Valid Tender WITHOUT Consignation: ,1,.
w. Stops the running of prescriptive pt:riod
'
x. Stops the running of llllercst
Effects of Improper Consignation:
y. TI1e obl.Jgaoon REi\1AINS
z. Debto r 1s considered in defauh
aa Interest conunues to run from the time it is due
bb. Prescriptive period continues to run
Withdrawal of the Thing Consigned (by the Debt.Q.!,).
cc. As a manet of right:
BEFORE the creditor accepted the consignation; or
'.
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CIVI L LAW REVI EW lJ - Dean Del Castillo
BErORE there is a jud.IClal declu:mon rhat rhc consignauon has been properly
made
dd. As a marter of erivtl.sge
AFTER consignauon had been properly made, the Crednor authonzu the Debror
to withdraw the thing
o Effects:
1. The obligation rernall1s
2. The creditor loses an} preference over the thing
3. The guaramors and succoes (accessory obl.tgacions) are
RELEASED (unless they consented)
Ri:;k of Loss !during constgnat:ion)
ee. GR: borne bv the CredJtor
ff. 1f tt ts due to:
Fortuitous event- ob!Jgatioo extingUished
Crednor's Fault- obligation extinguis,hed
Debtor's Fault- obligation remains (llable for damages)
Fault of court/ sheriff- Creditor assumes the acoon of the former; borne by the
Creditor
J
LOSS OF THE THING D UE
obttJ
Loss- refers ro obligaoons to give

'
lmposstbllny -refers to ob!Jgation to do or not to do
- Must be AFTER the constituoon of rhe obligauon
If the performance was t.mposstble at the START- VOID
Kinds of Imp ossibility:

L Legal Impossibility
Example: when prohibited by law
2. Phyucal Impossibility
3. Moral Impossibility (Impracticability) - see notes in rebus sic stantibus
The obligation become so difficult that it was manifestly beyond the contemplanon of
Both Parries
Effccr of Loss
,. .
Spectfic Thmg- Obi.Jgaoon 1s cxtingmsh!:d

o Exceptions
Debtor is at faulr
Debtor is made !Jable for a forrwtous event
o Satd obligation is ronVtrttJ into a Monetary Obligation for Damages
Generic 1biog- obligation continues to eXIst because it does not perish
o
35
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does not change like shifting shadows."'
Caroline 7an, Jessamyn U} & James Ligan
CIVlL l.A W REVIEW II - Dean Del Castillo

i
1f IS deluruted (e.g. SO kilos of sugar from..my 201U harvest)

Has alre:1dy been segregated or set aside ,(becomes spec1fic)
If cause of loss is NOT known, PRESUMP110N- debtor's fault IF rhc dung lost is tn lus
possesSJon
Exception; 1f it is lo;;s is caused hy narural calamity
I floss is due co 3m Person

Obligaoon IS extinguished WITHOUT prejudice to the Credltor's Right of legal
subroganon- crcclitor shall h:we all the rights of action wluch the debtor may ha,e
against 3rd person
Exception: If there is collusiOn between the Debtor and the 31 person
CONDONATION OR REMISSION OF THE DEBT

Remission or Condonation- grofllitou.r abandonment by the crechtor o f-his right
Must comply with the form of donaoon
vrJ,I/,., ,.,
Requisite's:
1. Acceptance by the Debtor
gg. Donaaon Mortis Cause- there IS no need to formally or expressly at.ccpt It fhe rule an
(}.Wiitr
succession provides that if you Jo not repucliate it, then 1t ts deemed ncct:pttJ
'
bh Donation Inter V1vos - there should be an expressed acceptance. but doec; n()t
nccessanly mean written
J,bfvv
Real Property: Donaoon AND acceptance mllst appear U1 a Public Jnstrumenr
Personal Property <PS,OOO- there can be Oral Donation, Provided: there ts
simultaneous Deuvery of the property
Personal Property >P5,000- Donation AND Acceptance must be in Wriong
(need nor be in Public Instrument)
i.i. Effect if Remission is NOT ACCEPTED by the Debtor: No rcnussion, however, if the
Credttor does not really collect within the Starute of Llrrutat:Jons -debt is extinguished
by PRESCRIPTION
2. Capacity of both parties
3. Graruitous act on the part of the Creditor (person condoning the obhgallon)
4. F ormalities
o Express Condonation -requires formalities, if:
a. Donaoon kter Vlvos - formalities of a donauon
b. Donation Mortis Cause- formalities of a Will
o Implied Condonation- requues NO formality
a. J\n 1271 -delivery of a privalt document evidencmg a crcclit, made
h
thumlitorro tht: debtor
(VtiW14
J
fti'Jt,..
NOT applicable to th"qlocuments because you have an extra copy which
1
tf
is kept by ootru:y pu lie, an instrument showtng that a debt still subsiSts
It is the CREDITOR who delivers the document
l. .I
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ft1- 0tt t}fUtf... .J...rl
36 I P a g e
r
llv11.
"Every good and perfect gift is from above, coming down from ltle Father of the heavenly lights, who
Caroline Tan, Jessamyn l.{y & James Ligon
f.t
o4vr
CIVIL LAW REVIEW II - Dean De l Castillo /
:...:---
There must be proof that there was VOLUNTARY dellven

CONCLUSfVE PRESUlvfPTlON not merely Dtsputable Presumption
because of the vof,,ntory act of the CreditOr
{kti'#IV..' b.
ll document is found in the possession of the debtor f'W) 11/l},.,z,.,f
r D.fSPUTABI: PRESUMPTION of voluntary delivery
nttl> found in possession of a JOINT Debtor - presumptiun ;s
11
that only his debt
been remitted
11i
If the document is found in possession of a SOLIDARY Dc:brort'lV
presumption is \X/HOLE debt is remitted
1/ L J
'>
,.vi
fh-f>)t/ t'J- /IIIJ

....tis n possible that you condone
the DEBT b1.a of the SECURJlY? ' ,II
f"'M'I
el-f.
f f<tl?f
- Yes. How? The only provisiOn we have under tlus chapter (condonaoon) refers only ro pledge.
Why is this so? Because in piedge, as long as it is still m the p ossession of the cred.Jtor, then you
can never say that the debt has been exunguished. This is the only instance that uwohes
something to be RETURNED.
- Art. 1274: Implied Remission of Pledge- when the thing is found in possession of the debtor,
or of a 3rd person who (}1Vf1J the thing
o Only the "accessory obhganon" ts presumed remitted
o Principal Obligation- remains in force
- An. 1274 NOT applicable ro Other securities
o CRC: apply Art. 1272
- Effect 1f ONLY the aet:essorv oblgaoon IS conJoned
o Debt becornes un.ur mttl
o Pnncipal obhgauon - rem:1tns tn Ioree
I CONFUSI ON OR ME R GER
Merger or Confusion- meeong in one person of the qualities of crerutor and debtor
the same obhgation
\V1th
respect to
Requisites: (Paras)
1. Takes lace betWeen the rinc1 aJ debtor and creditor
JJ
on sion of the creditor with the person of the guarantor does NOT exnnguish the
principal obligation
2 Must be clear and definite
3. The obligation must be the same or tdcnr:ical
If the debtor acquires certain nghts from ::he creditor with respect mother thjngs NO
merger
Effect of Merger on Guarantors If there is merger with respect to the prinopal Jebr, the
guaran ty is EXTIGUISHED
Problems.
37]Page
"Every good and perfect gift is from obove, coming down from the Father of the heavenly lights, who
N
CIVlL LAW REVlEW 11- Dean Del Castillo

kk. Suppose the Creditor becomes the O\'-"'er of rhe property grven as a security by the 3'd
person (NOT the Debtor)
Effect: it extingwshes the accessory obLgation. The principal obbgauon remams
outstandmg (becomes
unsecured debt)
rd
ll. Suppose the Guarantor (3 person- NOT the debtor) becomes the Crec:htor (e.g.
assignment of credit)
Effect: Contract of Guaranry is extinguished. The prinopal obllgauon remains
-outstanding
I COMPENSATION,. Confusion
There is onl\2)erson
'\.
Compensation
There must be rwo persons who are murually
creditor and debtor to each other
There must be 2 obligations
./'
There can only be{onepbligation
...._....
C"""'
Requisites:
1. Both obligations must be due and demandable

cf
J,.,IIJ
2. Both obligations must be ligui4 ated
;;:
3. Both parries must be p,9.ocjpally b,.ound (
jt. Jill' lv\A)
4. Obligation consists of sum of moner (or " the things due :ue fungible)
JIf'\ II
S. Lack of retention or controversy by 3'd person (e.g. gamisbrru;.nt/attachment)
Merely suspends compensauon
"' Yll'f )o "'
. .I
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xample:
A owes B, wnh Gas the guarantor of.:\ Can there be compt!nsaoon, in case B (tht: Cn:cl.itor) owes
G (the Guarantor)?
A-B
The debtor cannot cla.un compensauon. However, if A defaulted. there can be compensation
between B and G
the guarantor now becomes liable to the Creclitor.
Note: The guarantor may set up compensation as regard the creditor may owe the principal
debtor. Reason: if the principal obligation is extinguished, the accessory obligaooo of guaranty id
ruso extinguished.
'
fl
Kinds of Compensation
f..,l
CAo-
According to 1ts Extent

Total- Both obiJgaoon arc COMPLETELY extingutshed because they arc of the snme
or equal amounts
Partial - when a balance remains
2. According to Cause
A4
1.
lv
,..,..,.:lf3 I P age
e; J..
,..J.,
Legal - takes place by operauon of law /

Voluntary or conventional- due ro the agreement of the parties
Judicial - effective only by an orde!r from the court
one of the parties has the choice of claiming the compensation or of
'jt
opposmg 1t
Compensation Prohibited by L aw.-
f!l_t,r!
P.,. t.
Debts ansmg from a depositum/.

/
a. E:xcept: Bank Dcpos1ts- whtt:.h uc cons1dcred s
to the bank
b. Excepoon to the Exception. Supp(,se BOO has a ranch tn <mothu country (NY) A
is a depositor of both BOO (Piul.) and NY. Assuming that the bank deposu of A 111
BDO (Phil.) is not
to cover the!loan or the debt it owed to BDO (Phd) .
.
Can BDO collect from rhe deposit of A NY and claim compensation?
1l
Nol BD O Phil and NY considered 2 distinct and separate entities. Hence,
J,,f(f_
A is considered only the debtor of BDO (Phil) but not NY. There can be
NO compensation here because A is not a debtGr of NY.
L J 1 Ml1
2. Obhgations of a depositary
{ JTl
;!.!
3. Obligations of a bailee in commodatum
U
l;J
4. Claim for future support
5 Civil liability arising from a penal offense
6. Damages suffered by a partnership thru the faulr of a partner cannot be compensated with
profits earned and benefits he may have earned for the partnership
7. Taxes
However, in some ins tances, compensation may be claimed by the parry for whose benefit the
prohibition ts imposed (Example of Facultative Compensation)
Example. Bailor or Deposiror may claim compensanon
1
in
Effect ofAssi
vltf
.,/' f,Jt-
menton Compensation of Debt.'>
with the Consent o

e e cor
oEffect: Compensation CANNOT be set-up; WAIVER
o Exception: Rjght to Compens90on iS' reserved
Assignmen t with Knowledge (Notice) but WJTH OUT the Consent (or against the will) of the
debto r
o E ffect: Compensation can be set up regarding deb ts P REVIOUS to the assignment
- maturing BEFORE the assignment
o Reckorung
Assignment made
Knowledge (Notice) of the Debtor
o Effect: D
(:an
as a defense for aU debts maruring PRlOR
to hi Knowle e
the assignment (whether marured before or after
e ass1
1ent)
o Reckoning
Important dates:
D ate of Assignment: if theJ:e has been compensation already
3
"f"'Y good and perfect gift is f'om ubave, coming down fmm the Father of the heavenly flgh
lA _
tV"
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t:,
C'
... .,
R. ... r

Date o f notice- when can the debtor
bound
Example:
A owes B PlOO due on Feb. 14, 201 1
B owes A P1 00 due on Fcl).i"S, 2011
A assigned credit to X on Feb. 20, 2011
t:IA ol
On Feb. 20, 201 1, Can X collect from B?
No more, because legal compensation has already taken place on Feb. 15, 2011 (Jt
is utoma . Hence, there 1s no more debt to be assigned on Feb. 20 because on
Fen.
the debt
.tlrcady exungutshed .
t:em,,.,..r.
Compensanon m the Case of Resassiblc or Votdable Debts

Rescissible or voidable debts arc valjd nntil rhey are annuUed: hence: compensnuon
bifore they are judicially resanded or avotded.(.!\rt. 1284)
NOVATION
IS
allowed
Clrlfik;..
Kinds ofNovation:
1/41\.
Real
(or
Objective)changing
the
subject
matter
or
the
principaJ
conditions
of
the
obligaoon
o There must be !llhstantiol (not minor) change in the principal condition

Personal (or Subjective) -change of persons
- o Substituting the person of the debtor
Expromision - o ld debtor docs nor participate; intiacive comes from a 3 111
person
4
The turvdebror and the creditor must consent
.;DC
The old debtor will not be rcspo11sible for the ne debtor's Insolvency
or Non-fulfillment
Delegaciun - uutiative comes from the debtor; he JS the one who delegates
another to pay the debt
ALL rhe paroes concerned must consent
Effect of Non-payment by the New Debtor:
o No cevjval of old obligation; cannot hold the old debtor liable
becau se as far as the latter is concerned his obligation is
already extinguished at the time of novation
f'4"
Effect of Insolvency of New Debtor
o GR: Not Liable
tr10 . I
o Exceptions:
U ()
Insolvency was already eXJsWlg AND of
1r-..
knowleQgc at the time of rbe
1
Insolvency was already existing AND known to the

at the time of the delegation
\..
o CRC In case of Pubuc knowledge, Creditor must bear the
equence as well because he rr;ust aJso exercise due
--
1l'lrdJi"i
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J .
@.
t \{""
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diligence
hJJ
II\M..
40 1 P a g e
"Every good ond perfect gift

above, coming down from the Father of the heavenly lights, who
Corolme Ton, Jessamyn Uy & James L1gon

o
Reqwsttes tn Botb:
Creditor must comcnt
Totally different from 3.-d person paying the debt
not a new debtor
3<11 p erson paytng rh e d e b t - onlyl act o f
Change ofDebto r
Payment by :r' Person
DebtOr is not necessarily released from Debtor is released
debt
Two obligations- one is extinguished
One obligation
and a new one is created
3'dperson has no obligation to pay 1f
New debtOr has to pay
insolvent
Jj /111-
/ f ... - \ -
to' thUd person of .JI <he <ighr. ppewUning <a lhe c<e<lito< -
change of creditor.
Legal Subrogation- takes place by operauon of law
Conven tional or volun tary Obligation- requires agreement and the consent
of tht: ori :U arties and of the creditor
A ssi ment ofCredit
(.o nventiona/ Subro tion
Transfer of the SAME right or credit
Extinguishes the obligation, and
(the transfer did not
the
creates a new one
cred1 t
{,&tMi,l M
Does NOT require the debtor's
Reguires the debtor's consent
com.ent (mere notificaoon to him 1s
sufficient
1ne debtor generally still has the nght
NO right to present against the new
to present against the new debtor any
creditor any defense wluch he could
defense available as a st old creditor have set u a st the old creduor
.Mixed-
of ObJect and Parnes
Manner (or Focm) of Novation:

Express - declared in unequivocal terms
Implied -when the two obligations are essentially incompatible with each other (there must be
inconsistency)
Extent or E ffect o f N ovaa'on
Extinctive (Total) Novation- when the old obligation is completely extir.guished
Modificatory (Partial) NovatJ.on- old ob!.igaoon IS merely modified (changes only the minor
terms)
l. _
1'\
Requisites:
.fV
]
1. The existence of a VAL ID O ld Obligation
f
VOID- NO novation;. there is nothing to ndvate
*.
41
I Page
''Every good and perfect gift is from above, coming down from the Father of the heavenly lights, who
CIVIL LAW REVIEW ll - Dean Del Castill o
VOIDABLE- there can be novaliUil, prov1ded
Of' ) 11"
\
IJ/- hn
"71
Jv
WMll/
Waiver. l_t is subject ro
set up che defense, undr..r r'Fi"e old obligation)
Debtor must consent= \\f:tivcr
/)JI J 1rr there is no parric1patioJi from the Debror-
I .J\
(debror
Resossible- valid obligation, there is just an extrinsic defect
Can be Novated, provided the obligation has not yet been annulled _/
After Prescription- the obligation is convened into a "natural obligation", and this may
be the cause of a new obligation
vul\11\t:;:;" _ v1l"
J,/f
Effect: Waives ilie right to claim that the obligai:f m JS eitingUJshed thru
Wrl
Prescription
2. Jment of the parties (to extinguish the old obLgarion)
3. Validi
e NEW Obli tion
e condition if there j!\ 1n the OLD and NE\V Obli oon muse be fulfilled
If new oblia<!rion is "Y_OID- NO nov3tion, and che old obllgation generally will subsist.
IfVOIDAB.!- if r..l-)e new obligaaon ts annulled, the olc.l obligation subsisrs
EXCEPTION (Rule on Void and Votdablc NEW Obligation): when the parries
intended !hat lhe former relation should be extinguished in any event.
-z;.J.
.,_J..'L
Effect on AcccsSOLJ' Obligadon

GR: Extinguishment of the principal obhgallon cames with it the extinguishment of the accessory
o bligations
Exception: Stipulations pour autri- accessory
or stipulations made in favor of 3'd
persons remain unless said 3'd person have their consendo the novation.
i.
l
Essential requirements of a valid contract

a
Consent- for purposes of consent, th1s presupposes that there are two parties. You can have one
person representing two different capacities. You do not need that there are two persons. This
excludes where the law prohibtts it. Example an agent contracting himself on behalf of his pnncipai. So
autocontract is actually okay.
Legal lncapacity to give consent:
42
I Page
"Every good and perfect gift is from above, commg down from the Father of the heavenly lights, who
not change like shifting shadows."
1urJ
] t
fll Qt)(1
CIVIL LAW REVlEW 11- Dean Del Castillo

1.
2
3.
cannot yive consent by themselves unless properly represented by guard1ans. No

representation, 1t is VOIDABLE (only one of the party IS a minor); UNENFORCEABLE (two
minors entering into a contract)
Insane or demented
VOIDABLE .r IJIJ/
Deaf-mutes- why are they considered as incapac1ted? Are all of them incapacitated?
-+ Onlx
Deaf mutes - cannot speak nor cannot hear, but there 1S
nothing wrong w1th his mind. He can also read. Supposmg he cannot read? CRC: if you
cannot read It is obvious that you cannot write. But the restriction is only as to those
)I v1 / t}
{!:
-+
(,1
vr.
Jr ,. \/VI
-jt
'1.
1.
-+
mtr Mtbt
e (/e,.:, '
/LLJ
.'
WHO CANNOT WRITE.

Why is this hmited to this? Because a deaf mute can only communicate through wnting.
Cannot write means cannot
What if through sign language? Then this can be considered as he can write, he can
communicate.
1-.-/ 1fr;u//t4
Take note that when these part1es are mvolved,, your
It can be
'"
J lA UNENFORCEABLE if the contract is between two Incapacitated to 91ve consent.
\}Tflf/1/liV Can it be void by reason that the K was entered by these people? Yes, in those K that they are
prohibited to enter. Uke H&W.
b. Communication -?
and acceptance must both be communi,cated
J0 c} Jfl
lflKI
I.
-+
...
J...l1v.. /
,. 1
rl:
2.
to the OFFEREE
Requirements:
(
i.
Definite, absolute, unconditional: terms must t>@r, it
be able to state
(a) what kind of K you want to enter into [nature]; (b) subject matter or the
object of the contract and (c) the consideration plus substantial terms and
conditions like payment etc
ii.
Intentional - must not be made in JEST (joke). CRC. I guess some
commentators include this because of the Filipino culture that you keep on
making offers that are not intended to be offered. Courtesy.
iii.
Oeqrly commynicated: does it have to be in writing' No. This can be through e
mail or oral as long as you have all the requirements.
advertisements: merely considered as an invitation to make an offer.
@!?: you are being asked to make an offer
Jl.tt
Except: they are considered as an offer when the contrary appears. Meaning, rt depends on the
language. If it is very definite, like the government will sell lot A to anyone who has bided the
highest
(li, f}
kp
3. Acceptance: there is a valid acceptance when:
-+
..
How do you accept? Absolu te and unconditional acceptance which means that there are
no conditions whatsoew:YES I ACCEPT, PERIOD.
Jlll.j
0""-
Counter-offer: what does It do to the original offer? The anginal offer will be gone. So
you cannot revert back to this original offer when your counter offer has been rejected as
well.
-+
Example: buy mangoes for PhplOO.OO per kilo, then you say, oh it is expensive, Php80.00
(counter-offer) the mama says oh sige, then you say ay wag nalang. A K here is already
perfected in the legal sense.
,. Communication: it is important that the offeror teams of the acceptance
43 1 r
does not change like shtfting shadows."
ge
'W)

i.
4.
You accepted through the mail, but betore the offeror got the acceptance, I
already offered tt to somebody else. can you sue the offeror@. No K perfected
If acceptance given through middleman, or through an agent, take note that you l
have to look into their authority. If they have, then acceptance deemed
{t. t&r , L.
communicated otherwtse acceptance of the agent is not an aa:eptance of the
I'W'Jif\...-}
principal. (authority to accept is import.ont, different from authonty to offer)

Other ways to terminate an offer even before a receipt of an acceptance of the offeree:
fh-.J h t1
A,/f
Interdiction
(J'Ld
there is a period where the offeree can accept
Immediate effect Either of the party
from this one, an offer Is terminated .
can there be an implied acceptance:
you got a t1cket through matI of Taylor Sw1ft and
then it says if you don't return this on or before February 18, it is sold. Is this valid? No. But if the
ticket was given
you personally and you took the ticket, then th1s may be constde-;:;i as V<!lid.
You may have actually accepted the offer.
-
to
What are options?

A.K.A an option contract. A nght that ts gtven for a limited penod of ttme to agree to the offer.
Is this exclusive in character?
there is no consideration given. If there has been a consrderabon, then it is exdusive.
The latter will then be
a se.?arate contract because it has the three reqursrtes of a
valid contract.
1=/' Nll
,',/(
... .'
What is the effect of the consideration to be _given? What kind of consideration.,

can be given as a consideration. There is nothing in the law that requires you a certain
amount. It does not even have
money. It can be paid or even Just promised.
Is the promise of love sufficient. No. ut any prestation as we have discussed and can be enforced
and court to deliver as promised, en that can be considered as a consideration.
lf you have a valid option O?ntract. what right dg yoo ttave?
Take note that you are bl!)'ing time here. You cannot refund this even if at ttle end of the period you
decided not to accept
If you accepted the offet, can you make the consideration you paid for ttle option contract as part of
the subsequent contract? CRC: you already bought time so you cannot ask to make rt: as part of the
purchase pnce of t:!'le contracted offer. SINUSWERTE KA NAMANt But of course tf your offerer IS
generous, he can do it but no compulsion
How
IS
this dtfferent with earnest money?
c).Mtt /"'Jt-J, J
A.K.A down payment, part of the purchase

K already perfec!fd. Take note once you paid this,
you already perfected a K, you can now be sued to pay for the entire balance
03 March 2011
441Page
"Every good and perfect gift is from above, coming down from rhe Father of the heavenly lights, who
Coraline Tan, Jessamyn Uy & James Ligan
ClVlL LAW REVIEW 11 - Dean Del Castillo

Recap: as we have sa1d opt1on contract is a separate contract. Thus, 1t requires a consideration separate from
the other contract.
As long there is a consideration paid, you own this exclusively. You can sue. Tnrs is aSSignable unless there Is a
prohibition agreed upon by the parties
In case of earnest money/ this is a sale being offered, what contract have you entered into?
Whether 1t is a K of sale, or K to sell - th1s really depends on the intention but defimtely this rs not an
offer
<aud10>
Differentiate:
tl.
In qenergl:
K of sale: ownership
from the moment it is entered even if there is still a balance
r/JtJ
K to sell: ownership does n_g,t transfer at the time of execution,
payment is a suspensive condition llllhl
to that contract, if condition does not happen, then no K. This does not involve a breach
!l-4L
Oetjon contract: you do not have a K yet at this point. Only the option contract which merely gives
fiJ.
not an obligation.
; . . 1i CA JIAA/,.. . f
In terms of breach:
K of sale: 12.!_1ure'to pay the balance of the purchase price
K to sell: non payriient i5 not considered a breach, simply a fa1lure of the condition. But you sta'1d to
lose whatever you have paid but of course if this is unconscionable, ask the court to return to you
11- /./
Option K: when the offerer enters into another K with another person.
What IS your action?
{&A"fA//1..
Sue for specific performance, or resolution of the K, with damages 1f warranted
K to sell: no breach here. You don't
you simply
Resolution is not a remedy,
noth1ng to resolve.
Option K: recent J: remedy is action
Because it is considered asK m fraud of
creditors. You are already a creditor 10 the option contract so when the offerer has sold it, you (as an
o fferee) is considered as a creditor
'k",.$Alit
Right of Rrst Refusal (ROFR)

<audio>
The right does not arise until the person decides to sell the ro
over w hich you have the ROFR
It is tne-;; but there is a need lD bigger it only when the other party decides to enter into some uridical _ ?
Right of Rrst Refusal v. Option Contract
..
a. rn an Option k, you have @This is a sure thing. In ROFR, it is not a sure
b. In an Option K, you need a separate consideration. In'*ROFR, lt is part of the principal K so no. If it is a
stand-alone ROFR,, then this would need a separate consideration
When is tfiere a breach?
<audio>
In the Philippine context, there is a techincal difference in a ROFR and ROFoffer

ROFR: when a third person offer to you
you have the right tg m atch it.
But here: you need to be offered first before ttltlt is being offered to anybody else
J-
t.
,I
IIJ.
Gl(,
45
I Pa g e
"Every good and perfect gift Is from above, coming down from the Father of the heavenly Ughts, who
N
f'1.
J-
what is your right? It is an action for specific performance to sell to the grantee because that point
has been no sale yet, only lhat it was offered to
person. If you d1d not know that there
was already an offer to another person,
f Aogyu
court said there IS no K. Breach is not enforceable. What you have is Art,jc!e 19 of CC, remedy
for damages
1s rescissible for being in fraud of creditor, prov1deo if there is BF, and terms are not identical
We are talkmg about real resdssion here'
a. Fraud
b.
c.
d.
--
Violence
Intimidj!tion
Lack of consent because of
oc
Preliminaries:
1
Atices of CQ!lsent:
a Affects 1ntellect: fraud and incapacity
lts voluntary but you are m1staken because the person
dealing with you gave wrong set of facts or wrong assumption
b. Affects free will: mvoluntary consent -7 y.)u know what IS happening but you have no choice
Simulated Contracts
Somethmg that is not real, you j ust pretend.
This is treated as those lack of consent of the parties
a.
v""
j
tifY"'
L
parties do not intend to be bound at all; we do not have a K here because no consent here.
to be bound = no consent)
conceal their true intention; we do have a K but it is voidable
Why would people enter Into something like this?

In absolutely simulated contracts, are you doing something illegal' Why would you fake a contract?
There is no K created so you do not need to file an action t o declare in a nulhty.
t"' 1
It is not Illegal
tr
vr r
J'J. _
'l_.
1h- ,; t
What about in relattve simulation?

No Intention to be bound as well but there is in fact a K. And thts K is hidden or concealed.
Can you enforce the K? Yes. you enforced
concealed contract but this is dangerous tf it is made to
evade taxes then you rncty be held liable
46
Ira g e
"Every good and perfect gift is from above, coming down from the Father of the heavenly fights, who
does not change like shifting shadows "
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CIVIL LAW REVIEW II - Dean DeJ Castillo
...
jf'\
e contract
Debate: what is the cause/consideration, whether it shifts from the buyer to creditor
CRC: object is constant but the consideration shifts
.;;
't:
Possible objects:
Real personal things
.
'
Rights
Services
Oblig.ation to give
Those that you can give and not intransmissible
Obligation to do
Your object is service
Obli9ation to give
Requirements:
a. Within the commerce
- legal, licit, not be a contraband, or not prohibited by law
b. It must be a deternlinate thing -you know tlle object, tllis is not determine vis-a-vis generic. This
means only t:rat it must determinate in kind. Example: it is a cow. What about quantity? Must It be
stlpulatedfNo') So how do you detennine your obligation? As long as you can determine without
having to
into another contract
c. Must be existing or capable of coming into existence in the future - as long as there is a possibility
that you can acquire tfie ownership of the property
Two things:
1. Capable of transferring ownership
EXample I will sell to you that red Ferrari car pari<ed In power plant mall. This is generally not
valid because you do not own it. Except if he later on acquires it, ownership transfers
automatically by operation of law from the moment you owned it already. So this is not a VOID
contr.lct It actually becomes a CONDillON. This is a rule that is applicable only if specific
2.
property is concerned.
Yet to be produced
As long as it capable of coming into existence in the future, you have a valid object of a
contract So it is not existing at the time of entering into contract This Is a FORWARD CONTRACT.
is
things forward.
-+
-+
lALtt/
Future inheritance - your right here is merely inchoate

Future
you must have the property at hand E: marriage? Well it is actually a
mortis cause donation so it is valid
Future support E: it IS no longer future and the period has already arrived
With regard to rights, as long as it is not personal, then it Is valid. It must involve transmissible rights
With regard to services, as long as it is possible to perform tllen it is valid. This Includes physical impossibility
and legal impossibility.
47
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"Every good and perfect gift is from above, coming down from the Father of tHe heavenly lights, who
CIV IL LAW REVIEW 11 - Dean Del CastiJio
What is it?
Proximate reason of the
This must be a LEGAL reason
parties to enter
Answers the
If it is K of sale of a car for PhplM, the cause:

For the buyer: delivery of car
For the seller; payment of the PhplM
Different kinds of cause/consideration:
a. Qgemt{,S- cause is what you have promised
What is the
Past service. Where do you group this? It Is either eh so
b.
put this in the middle
c.
-liberality the cause. This is still a valid contract.
Cause/consideration v .. Motive
Motive is youpersonal reason, cause is your
reQiC>n
Example:
If you want to buy a gun, the reason is you want to kill you seatmate (this is your motive) but when
you entered into the sale of the gun, your consideration is what you have promised
this affect your K?

s long as there is a licit
when the motive is equivalent to the cause. When tt is so
wined so much so that it becomes the same, then the K is considered void by reason of illegality.
Example:
Donated a lot of money to get the girl of tender years
Other cases: those in violation of anti-graft so while you are saying it is gratuitous but to get certain
benefits is so intertwined with the motive
False cause (not illegal)

GR: reii'ders the K void
E: the re is another lawful cause
11,)
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;t-cf OW:
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Do you need to state a cause in your K?

No. It is presumed that there is a lawful cause.
Take note that another element of K must be expressed which is the'consent Cause/consideration, this can be
presumed.
Besides if you put the cause there and it turned out that it was false, then the K is voided.
ln most cases when people are charged with false cause, the defense is that the czuse is the liberality. So
follow the formalities in donation.
When" you put your dlild's name in your property, is this a valid K?
Yes. this Is presumed to be an advance to a legitime
48
Ir a g e
"Every good and perfect gift is from above, coming down from the Father of rhe heavenly lights, who
3:
-------------------------------------- - -
In other forms of K, there are other requisites, this can be considered as essential because it is voided if you
do not follow this
We also have tile real K where delfvery is essential for the validity of the K
_...,--
Forms oft<
First rule: not an essential element except certain contracts that require this for validity or enforceability
(Article 1356)
Second rule: (Article 1357)
1358 v. 1357
1358 contracts are only contracts that are only for convenience. What is tile conveniP.nce here? so that you can
register it in the register of deeds (this won't annotate unless it is in a public instrument)
If it is a requirement for validity or enforceability, you cannot compel the other party to execute in the required
form because it is void in tile first place
08 March 2011
As to form:
@J (I/)(;..
Article 1358 contracts are mere examples.

As far as those real properties are concemed, when we talk about sale or lease of these for over one year,
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found under SOF, form is necessary for purposes of enforceability
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If you sell a car, that is also under SOF, unless of course this is only worth PhpSOO.OO
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If it is under Article 1358, this is only for purposes of conven1ence.
J 1141
vt
Once it is taken out of SOF, ttlen you can use Artide !358 tD a>mpe.l the other party. The form there is no
longer necessary for purposes of enforceability
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REFORMATION
This Is nothing more than just merely correcting the instrument. You do not ask for this when there is no K in
writing.
For purposes of reformation, the parties have agreed, they reduced it in writing but whc,t was written did not
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reflect what they wanted

This is just a CORRECTION to reflect the true intentions of the parties
This is to
the
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difteceotiated with_simulated K,
parties in the latter intentionally agreed to oonceal the
Yo4r true
is the concealed contract.
npt require any correction, you just invike
But can
reform the K?
'
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49
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"Every good and perfect gift is from above, coming down from the Fother of the heavenly fights, who
does not chonge like shifting shadows."
I

Yes. Go ahead but this is not necessary
People also relate this with annulment of K, in the reformation, there is a valid K. In annulment, there is no
valid K because there is a flaw in one of the requirements
Prescriptive period
to reform: lOyears counting from the date of exeartion (agreement)
) EFECTIVE CONTRACTS
Four kinds: (lightest
heaviest)
a. Rescissible K
b. Voidable K
c. Unenforceable K
d.
Void K
1111
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K{VAYP
JLA
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Resc
.JAA.ble
but there is an economic prejudice of
You will notice that lesion and inadequacy of price
.>
elements of the K
'UIIid until rescinded

This is the reason why this is the least severe
t;o.J.,r,r:M
ink P;Jhkl
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{lesion or inadequacy of price)
intrinsic defect, it is not one of the essential
'I
Voidable K
This is next because these ar . VAU un
NNU
- If nobody institute an
thiSWIValld
Also, the defect here has something to do with the essential requirements of a K
LEi})
Unenforceable K
More severe than the Voidable K
Defect in form, or authority (in some instances)
You cannot sue on it until it is ratified that is why this is more severe
Void K
Not a Kat all
Nothing you can do about It
RESCISSIBLE CONTRACTS
Kinds:
..
..
b.
c.
Those entered into by people exercising fiduciary

or
of absentees
K in fraud of creQjtors - would basically involve when debtors enter into a K'so that creditors cannot
get anything from him, also when an object of litigation is sold
Declared as sudl by the law
so I Page
''Every good and perfect gift is from above, coming down from the Father of the heavenly lights, who
L-
- - - - -- - - - -- - - -- ---- - -

..
For you to be covered by this provision, you must
by the court
MJ,k1,
Does
No. Like
has powers as granted by the contracts?

if you do not have an authority, this is UNENFORCEABLE
These are the people who have been property authorized by the court, if no authority from_the court, tlle K
that they have entered into is UNENFORCEABLE.
When you are
as guardian or legal representative, what functions do you have?
Only exercises acts of administratioh' (if you enter a K with regard to ttl is act, tllis is VAUD)
Does not include acts of ownerthip (ask for court approval as well _otherwise UNENFORCEABLE)
rf
r)vfCJitr- 1 t:u -<

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Now, If acts of adminjifdtlon, this will be valid only if there is no lesion.
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Court approval of a K of administration validates the Keven If there is a lesion in the K. In other words, you
are safer because If it is rescissible, a court approval deanses this and VAUDATES JHE K.
As far as minors and incapacitated persons are concerned, they are protected by reason of the fact that there
is a lesion.
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- \ Ynsane, must be in
If absentee@ears from the time of knowledge of his domidle
When you rescind a K
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When can the wards/absentees/incapacitated person bring this action?

from the time of acquiring capacity /
-
fact that there is lesion, what do you rescind?

far as first kind of rescissible K is concerned)
You resdnd
As far as minor incapadtated person are concerned, do they have to restitute what they have gotten?
There is no provision In the civil code where you are excused t o make re.s titution
Because ttlese are K that are entered into by guardians or legal representative, ttlerefore whatever
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you receive, you ought to return it.
lu
re/vi'Y"
If you did not receive the., then what will you rest:ib.Jte?
Can you resdnd this?
3(4 was paid to you guardian but your guardian spent it, now you want to rescind ttle K because you
were prejudice, what will you do as minor?
CRC: remember the third party deals wittl your guardian are in GF, as far as he is concerned, he has
rtr
paid 3/4 so you have to return it t o him. So what happens then? What is your right of action?
CRC: against your guardian because of breach of fidudary duty
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K in fraud of creditors
Prior creditor
hi- kd-
+ fraud -debtor
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51
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'rEvery good and perfect gift is from above, coming down from the Father of the heavenly lights, who
doesnotchonge/ikeshiftingshadows."
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CIVI L LAW REVIEW II - Dean Del Castillo
1rl
Wha t IS the fraudulent act here?
To prevent the creditor from getting your property as payment
Empty judgment
{p /tl) :rtz,.
You are allowed to rescind the subsequent contra_c t that your debtor has entered into because you have no
other means to enforce your contract. YOU HAVE TO SHOW YOU HAVE NO OTHER MfANS TO SATISFY '(OUR
Like your debtor has no property anymore. YOU MUST ALSO SHOW DEBTOR ACTED I N FRAUD
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lf you have no actual evidence of fraud, what do you do?

-
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Rely on
enter Into
K, it is presumed to be fraudulent if he did not reserve enough assets for

his PRIOR creditors (remember this is only a disputable presumption)
If h SOLD e property, the
can only arise if the
K only
after
re has been a writ ot attac:nment or judgment against his tavor in a prior proceedin?._ .
(someone flied a case against him alre
addition to this, we also have
, it may
e BADGES OF FRAU
Please enumerate!
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(rodstodytase)
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Remember these are not in the same categories as disputable presumptions. These are merely indications not
t.Yfly
even presumptions.
About the case mentioned, this was the compromise entered into by PNCC and Marubeni. You can
acknowledge a prescribed debt but In this case this was after its creditors-were already
after him. The
Court said that this was made in fraud of the creditors
What else are covered under contracts that are rescissible in fraud of creditors?
Payments by debtors in state of insolvency 7 more beca
nsolve
------Objects of litigation was sold through K of sale wi out approval of the court or consent of the
How is this different from those presumptions w
This one is not a presumption. These are resdssible K.
What are objed:s of litigations?
As far
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11
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piive :.
Partial on . The right to rescind by the treditor to a K whom he is not a party, then only to the extent
t hat e was prejudice'CI
X
Php200,000
Wm"
hOW
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a thii'a1Jc!ltV'?
When summons has been served and the object is in custodia legis already
Take note that only the plaintiff can invoke this

as rescission is conref'!led, do you have to make a rest:itlrtion?
No. In this case, it is the creditor who was prejudiced (not the minors). There is nothing for the
creditor to restitute
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above, coming down from the Fatl!er of the heavenly lights, who
Caroline Tan Jessamyn Uy & James Ligon
.
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0 to X sold PhplM
c cin only go after upto

bring ba
unless of course it is indivisible -7 you can compel X to
. e indivisible object to 0, then you can go after D) -7 not sure
What is the effect of subsequent transactions?

X -7 Y 7 W (y and ware on bad faith; x is in good faith)
_YoJJ see once it gets transferred to a third person who is in good faith, the K Is validated here.
upon obtaining the property
If X and Yare in BF, but W is
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This is an Accion Pauliana

Bring back the property until it gets bad< to the debtor
/
The moment it hits a GF person, then your right to rescind stops here
/
Your remedy is to daim DAMAGES against the debtor
If you cannot recover from your debtor then you go after those who are also in Bf
If this is based on fraud, why is it not voidable?
Because you are not a contracting party. This is a K entered int o by your debtor, it has only a
collateral effect on you as creditor
t
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can .no longer go after the rest of the subsequent transacti

you recover the property? You cannot rescind anymore.
K }
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Defect in the consent, therefore the following are covered by this:

a. One of the parties Is incapacitated (lf both of them, then this is UNENFORCEABLE)
b.
Vitiated consent
....
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Prescriptive period t o bring an action:
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If incapacity, this if from the time he achieves capacity

If insane, from the time he comes back by reason
If violence, intimidation, undue influence, then from the time it has stopped
If fraua, from the time it is discovered
"
Vices of consent
Mistake
When will mistalt:e vitiate the rontract of a person?
Mistake of facts. Not mistake in law
Why is this? Ignorance of the law excuses no one
What is mistake of fact?

It is the mistake in the substance of a thing which is the subject of the contract or in the essential
conditions
Mistake in substance:
a.
b.
gold plated Instead of 24K gold

- i ordered 100 pieces, you delivered 80. No MISTAKE there was a perfected K!! There is no
in the K here, there Is the defect in the PERFORMANCE. We should talk about the rnjst;!ke at
the time of entering the K.
uan
53
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Coraline Ton, Jessamyn Uy & James Ligan
CIVIl LAW REVIEW II -Dean Del Castillo

Example: you bought a pc of property as described with 100 sq.m. but then it turned out that
it was only 80.
Take note that mistake in here need not be made by one of the contracting parties
(:,,! Jd- ____ 1
When is this a ground for merely a computation? As con'lpilred to a ground for annulment?
Contract= 100 kg x 100; consideration: Php 90,000 (instead of PhplOO,OOO)
Exception: lf that was predsely the consideration
t;;tleJl
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29,ent_!!y
GR: n,2! a mista.ke
E: K of
Two types:
a.
- annulable
b. Inddente - cancellation/SP
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This is one of the vices that are different from the rest
Who must commit the fraud?
Must be committed by the party in the K
Legal opinipns made by the lawyer, and then you rely on this to enter into a K, can you be considered in fraud?
He is your expert, the other contracting party doe not have to do anything so you cannot annul the
K. You can go after your own lawyer. Your K is ot ffected
Legal opinions are basis of good faith that is why you cannot be charged with fraud when you rely on it
There is a need for mutual restitution. Except when minors and incapacitated, they can restitute only upto the
extent that they have been benefitted.
(check sophie on this last topic)
10 March 2011
We have violence vs. Intimidation
Violence - physical
Intimidation -threat
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----,
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As far a viole e is concerned, this must be committed on the party to the contract
timidat:i , this can be committed to the contracting j;'rty,
asndarJt,or descendant
May
committed by third person, unlike fraud \vhidl
be romtnitted only by the
party
--
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may
54
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CIVIL LAW REVIEW L1- Dean Del Castill o
Violence - SERIOUS and IRRESISTABLE

Intimidation- IMIMINENT and GRAVE
Undue influence - person exercising influence must somebody In authority, has some authority over the other
person who is being asked to give consent. Take note this should not be a threat.
If you are influenced to give consent otherwise you will not inherit
It depends. If you are
a lawyer, then no
If you have a teacher, then says 1f you do not give consent, your teacher will fail you
Distinguish
influence and reverential fear
M...
Buying tickets without any condition: reverential fear
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Buying tickets otherwise you will fail: undue influence
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Asking YC!u to marry somebody but you do not want

Not a cause for annulment. Even if your parents want him, this will be considered as voluntary
consent
Estoppel
kill your right to file an action for annulment

You are a minor pretending to be one with legal age,
Misrepresentation on the part of the mmor
so you cannot file this anymore
1.UNENFORCEABLE CONTRACTS]
'
cannot be
This is a defense, so you have to raise this
So it is possible for a person to initiate a contract that is unenforceable, then if it Is unenforceable, you raise
your defense, ot herwise it will be waived.
Three kinds of unenforceable contract:
1. Entering into a K without authority from the person he represents or exceeded her/his authority
You cannot enforce this against who? Against the prindpal of the person who is claiming to be a legal
representative
2.
you enforce this against the agent? Of course!

the contracti
rtles are incapadtat!Aand they entered into a K without proper legal
resentation
If one of the parties has capacity or represented, it is-1escissible
Bo
What is the
1. Statute of frauds
(,. jJ ,CAl"')
--
t{:ation?- voidable to the person who did not ratify
SoF
A fct}
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The writing does no

ed to be in public or formal private document, memorandum is enough
As long as you can preserve and understand what was written, then is it is okay
What should be the content of the note/memorandum?
Essential elements of the K should be indicated: what kind of K, object, price/consideration, and
t OT must subscribe [sign] to the note or
E: as long as the party
,
E to theE: sales by an auctioneer (the only thing that shouia be
nt is the signature of the parties, this is instead signed by the auctioneer)
55
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"Every good ond perfect gift is from above, coming down from the Father of the heavenly lights, who
CIVIL LAW REVIEW 11 -Dean Del Castillo

As long as one party is able to perform, even if unsubstantial, will take out the case from this
Waiver
#/f\141/,."-
:--formal waiver
Implied - failure to raise the defense of unenforceability at the first opportunity
Concept
People can easily

so thalY.Q.u need tQ r-"rite it
The reason Why we have an exception, is that to stop perpetrating fraud

Wha t are the IS that are covered bere?
Knot to be performed within a year i
-+ Do you need to have a .specific provision that it should not be done within a year? Yes.
this is a SPECIFIC PROHIBmON.
-+ What are obligations not to do, are they covered? The not doing starts now so it IS not
covered. Your prohibition ends after a year
Made in consideration of marriage

,-. Sf}r
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-+ We are talking about ante-nuptial or donation propter nuptias -+ Donation propter nuptias not reduced
isn't this void? Because the law on
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donations requires this?
CRC: the family code now provides that it should be c

under the law on donations, so
even if it is donation propter nuptias, it should be writing,',9therwise it is VOID!
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Actual beneficial ownership another person

Trustor
creator of
trust
Trustee
in whom he reposes the trust
Beneficiary
You put the title to the name of the
but it is not owned bx him. There1's nothing wrong if both
and benefidary are the same. But of course it cannot be that beneficiary and trustee is the
same person only
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This is fiduc:iary capacity
Kinds:
a.
be
immovable property, become; unenforceable_
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actually express their true intention to create the trust; does not need to
Express
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Must the benefidary accept?

We have a presumed acceptance. There are not conditions anyway
For as long as there are no onerou!> conditions,
acceptance but even if you need to accept,
there is no specific form
Eve
. e, there is no specific form except jjit is immovable
Implied trust
st- whether there is an intention to create trust but it fails because the parties were
unable to express it but the intention dear1y shows this
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56
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CIVIL LAW REVIEW n - Dean Del Castillo
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trusJ;- created by
o law for the purpose of satisfying the ends of justice.
What we have in the civilcode are mere examples. These are not exhaustive list.
Example:
.
if somebody buys the property, title in another person.
is proven to be a loan
You buy a car for your daughter or son, in your title but the money came from your parents, th is is
-
..
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p ot
This is in the form of EONAJ19N. COLLATIONABLE!!
f:.onst:ruc;tjve trust: Mellon Bank: received the money by mistake
;.
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Magallon Case: QUERIDA acting as trustee of the legitimate children of the donor with his legal wife
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PRESCRIPTION
We are referring to the beneficiary being able to recover the property from trustee. If
_rust, then it is
imprescriptible as long as the trustee still recognize the trust. If the trustee now starts to repudiate it, then of
course he
acquire It to !_cquisitive..,Prescription (except those under torrP.ns title).
-
,.
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Prescriptive Peri
Prescriptive period
vable an 30 ars {immovable)

I
10
from the creation of the trust
b.vf
A{Xluisitive prescription
Acquisition of certain properties
We talk about lapse of time plus:
a. Good faith
b. Just title
c. Possession in the concept of an owner, uninterrupted, public etc etc
J
Period : 4/8 for movables; 10/30 for immovable

Extinc;tjve prescription
Same period as above as regards to the owner of the property to be acquired by somebody else
AcquisitiOn of one is the extinction of another
Prescription of action
Passive prescription
You do not file an action within a certain period of time t hen you can no longer file
x different periods
1.. ..
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"Every good ond perfect gift is from above, coming down from the Father of the heavenly lights, who
does not change /Ike shifting shadows."
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Obligations and Contracts Dean Del Castillo Notes

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Obligations and Contracts Dean Del Castillo Notes

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CIVIL LAW REVIEW 11- Dean Del Castillo

\XIhat makes Contract

When your obligation

BP22 - the accu-;ed

a. The court held that

CIVIL LAW REVlEW IJ - Dean Del Castillo

QUASI -DELI CTS

Not a Lrue contract

Act or omission is not

CIVIL LAW REVJ EW II - Dean De l Castillo

paid even 1f you are not yet

Obligation to give (real obllgations)

For example a car:

'Obligation to do/not to do (personal obligations):

CIVIL LAW REVlEWil - Dean Del Castillo

CIVIL LAW REVIEW II- Dean Del Castillo

CIVIL LAW REVIEW II - Dean Del Castillo

be combined is DAMAGES+ other remedy

Other combinations cannot stand together

when the orne

Io the absence of stipulation, Article 11 91 provides that 1D reciprocal obligations! cancellation as

\'('hether you need a court action to cesolvc or cancel an

CIVIL lAW REVIEW JJ - Dean Del Castillo

Article 1380- 1385

Pnne1pal remedy: 1t does no t depend on

CIVIL LAW REVIEW II - Dean Del CastillQ

DOLO (CRC: this is reaJly not FRAUD)

mere are really just two cases of breach:

Liable for all the

EXERCISE THE ,1.,4/ w

Cl VI L LAW REVIEW 11 - Dean Del Castillo

As l0ng as it IS proved that

The victim has lO eroYe the

negligence of the defendant.

Defense of "good father, etc."

Civil uability aasing

This IS not a proper defense.

RIGHTS O F CREDITORS (An. 1177)

General rule RJghts arc transmissible.

CIVIL LAW REVIEW lJ - Dean Del Castillo

If the obligation Is purely personal

DIFFERENT KINDS OF OBLIGATIONS

CONDITIONAL OBLIGATIONS:\ND uncen:iln- cannot be past and uncertain (du!:i

You need a demand

Resolutory- the happcrung of !.he condition extinguishes the obl.igaoon

CIVlL LAW REVIEW II - Dean Del Castillo

Debtor assumes the risk (e.g. msurance contract)

The fact that you are not

is also nor a forruirous event

Example: Contracts cove.red by a period

EFFECTS OF ILLEGAL, IMMORAL, OR IMPOSSIBLE CONDITION

CIVIL LAW REVIEW II- Dean Del Castillo

Fullilmenr of t.he Obligation

- which means that nothing should happen before the period

OBLIGATIONS WITH A PERIOD

CIVIL LAW REVIEW II - Dean Del Castillo

Requisites for a Valid Pcn"od or Term

When Court May Not Fix the Term (Paras)

CIVIL LAW REVIEW IJ - Dean Del Castillo

May refer even to the past

For Whose Benefit the Tenn has been established:

Is Jt possible co give the benefit of a penod only

Can the debtor lose the benefit of the period?