Professional Documents
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TABLE of CONTENTS
OBLIGATIONS
Table of Contents
90
OBLIGATIONS
Leo Ledesma
Lead Writer
Krizel Malabanan
Ivy Velasco
Tin Reyes
Frances Domingo
Hazel Abenoja
Writers
CIVIL LAW
Kristine Bongcaron
Patricia Tobias
Subject Editors
ACADEMICS COMMITTEE
Kristine Bongcaron
Michelle Dy
Patrich Leccio
Editors-in-Chief
LECTURES COMMITTEE
Michelle Arias
Camille Maranan
Angela Sandalo
Heads
Katz Manzano Mary Rose Beley
Sam Nuez Krizel Malabanan
Arianne Cerezo Marcrese Banaag
Volunteers
LOGISTICS
Charisse Mendoza
SECRETARIAT COMMITTEE
Jill Hernandez
Head
Loraine Mendoza Faye Celso
Mary Mendoza Joie Bajo
Members
OBLIGATIONS
SOURCES OF OBLIGATIONS
A. LAW
B. CONTRACTS
C. QUASI-CONTRACTS
D. DELICTS
E. QUASI-DELICTS
I.
Obligations
B. Contracts
Art. 1159. Has the Force of Law Between
Parties. Obligations arising from contracts have
the force of law between the contracting parties
and should be complied with in good faith
C. Quasi-Contracts
Art. 2142, Civil Code. Certain lawful, voluntary and
unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
Lawful
Voluntary
Unilateral
91
OBLIGATIONS
Kinds of Quasi-Contracts
Negotiorum Gestio: officious or voluntary
management of the property or affairs of
another without the knowledge or consent of
the latter.
Solutio Indebiti: undue payment. The
juridical relation arises when:
o a thing is received without any right; and
o the thing delivered by mistake.
Others: See Arts. 2164-2175
(De Leon, 2003)
D. Delicts (Acts or omissions punished by law;
crimes)
Extent of Civil Liability
Governed by the Revised Penal Code and the
Civil Code, includes:
1. Restitution;
2. Reparation of damages caused; and
3. Indemnity for consequential damages (Art.
104, Revised Penal Code).
(Tolentino, 1987)
Enforcement of Civil Liability
1. Independent: Criminal and civil action
arising from the same offense may be
instituted separately.
2. Suspended: However, after criminal action
has been commenced prosecution for civil
action is suspended in whatever stage it
may be found, until final judgment in the
criminal proceeding is rendered;
3. Impliedly Instituted: Civil action is impliedly
instituted with the criminal action, when:
offended party expressly waives the civil
action or reserves the right to institute a
separate civil action; or
the law provides for an independent civil
action
Barredo v. Garcia, (1942): The same negligent act
may give rise to an action based on delict or quasidelict and the injured party is free to choose which
remedy to enforce.
Mendoza vs. Arrieta, (1979): If the civil action is
based on quasi-delict, there is no need to reserve the
right to file a civil action in the criminal case.
92
E. Quasi-Delicts (Voluntary acts or omissions
with fault or negligence causing damage to
another; not a crime nor a contract)
Quasi-Delict
Private,
against
individual
Criminal intent is not
necessary
Crimes
Public, against the State
Preponderance
of
evidence
Can be compromised
No Effect
an independent civil
action is allowed by law
acquittal is due to lack
of
proof
beyond
reasonable doubt
intent
is
for criminal
Criminal
necessary
liability
Subsidiary liability is
absolute and cannot be
avoided by any proof of
diligence
OBLIGATIONS
Nature
and
I.
II.
III.
IV.
V.
KINDS OF PRESTATIONS
BREACH OF OBLIGATIONS
FORTUITOUS EVENTS
REMEDIES
USURIOUS TRANSACTIONS
I.
Kinds of Prestations
Effect
of
KINDS OF PRESTATION
1. TO GIVE: real obligation; to deliver either
(1) a specific or determinate thing, or (2) a
generic or indeterminate thing.
2. TO DO: positive personal obligation;
includes all kinds of work or services.
3. NOT
TO
DO:
negative
personal
obligation; to abstain from doing an act;
includes the obligation not to give.
Accessories: those joined to or included with
the principal for the latters completion, better
use, perfection or enjoyment
OBLIGATION TO GIVE
Specific Thing
Generic Thing
Particularly
designated or
physically
segregated
from all other of
the same class;
identified
by
individuality.
Object
is
designated only
by its class/
genus/ species.
Debtor can give
anything of the
same class as
long as it is of
the same kind.
Cannot
be
substituted.
Can
be
substituted by
any of the same
class and same
kind.
Personal Right
Vested before delivery
A right enforceable only
against the debtor
Right of the creditor to
demand from the debtor,
the fulfillment of a
prestation to give, to do
or not to do
To Give
Specific
Thing
(Asked
in 83,
84, 85
and
86)
To Give
Generic
Thing
Real Right
Vested after delivery
A
right
enforceable
against the world
Right pertaining to a
person over a specific
thing, without a passive
subject
individually
determined
against
whom such right may be
personally enforced
To Do
Limited
Generic Thing
When
the
generic objects
are confined to
a
particular
class.
To compel performance
To recover damages where personal
qualifications of the debtor are involved
93
OBLIGATIONS
Chapter II.
Obligations
Not To
Do
2. NEGLIGENCE
or
FAULT
(CULPA):
omission of that diligence which is required
by the nature of the obligation and
corresponds with the circumstances of the
person, of the time and of the place (Art.
1173).
Fraud
There
is
deliberate
intention
to
cause
damage
Liability
cannot
be
mitigated
Waiver for future fraud
is void
Negligence
There is no deliberate
intention to cause damage
Liability may be mitigated
Waiver
for
future
negligence
may
be
allowed in certain cases:
gross can NEVER
be excused in
advance; amounts to
wanton attitude; rules
on fraud shall apply
simple may be
excused in certain
cases
94
OBLIGATIONS
Bad Faith
Debtor is liable for all
damages which can be
reasonably attributed to
the non-performance of
the obligation. Any waiver
or renunciation made in
anticipation
of
such
liability is null and void
Good Faith
Debtor is liable only for
the
natural
and
probable
consequences of the
breach of obligation and
fortuitous events
Culpa Contractual
Negligence is merely
incidental
in
the
performance
of
an
obligation
There is always a preexisting
contractual
relation
The source of obligation
of defendant to pay
damages is the breach or
non-fulfillment of the
contract
Proof of the existence of
the contract and of its
breach or non-fulfillment
is sufficient prima facie to
warrant recovery
Proof of diligence in the
selection and supervision
of the employees is NOT
available as defense
Mora Solvendi
Requisites
1. Obligation must be
liquidated, due and
demandable
2. Non-performance by
the debtor on period
agreed upon
3. Demand, judicial or
extra-judicial, by the
creditor
Effects
1. The debtor is liable
for damages
2. The debtor is liable
even if the loss is due
to fortuitous events
3. For
determinate
objects, the debtor
shall bear the risk of
loss
Mora Accipiendi
Requisites
1. Debtor offers of
performance
2. Offer must be in
compliance with the
prestation
3. Creditor refuses the
performance
without just cause
Effects
1. The responsibility of
the
debtor
is
reduced to fraud
and
gross
negligence
2. The
debtor
is
exempted from risk
of loss of the thing
which is borne by
the creditor
3. The
expenses
incurred by the
debtor
for
the
preservation of the
thing after the mora
shall be chargeable
to the creditor
4. If the obligation
bears interest, the
debtor does not
have to pay from
the time of delay
5. The creditor is liable
for damages
6. The debtor may
relieve himself of
obligation
by
consigning the thing
Exceptions
1. the obligation or law
provides
2. time is of the
essence
3. demand useless
4. debtor
acknowledges that
he is in default
Reciprocal Obligations
General Rule:
Delay occurs from the
moment one party fulfills
his undertaking, while the
other does not comply or
is not ready to comply in
a proper manner with
what is incumbent upon
him.
No delay if neither party
performs his undertaking
(Art. 1169, par. 2).
Exception:
different dates for the
performance
of
respective obligations are
fixed by the parties
95
OBLIGATIONS
Transmissibility of Rights
Art. 1178: Rights acquired by virtue of an
obligation are transmissible in character,
UNLESS prohibited:
1. by their very nature (i.e. personal
obligations)
2. by stipulation of the parties
3. by operation of law
(De Leon, 2003)
Primary Remedies
Arts. 1165-1168: PRESS
1. Specific Performance performance
by the debtor of the prestation itself
2. Substituted Performance someone
else performs or something else is
performed at the debtors expense
3. Equivalent Performance right to
claim damages (in either performance or
rescission)
4. Rescission right to rescind or cancel
the contract
5. Pursue the Leviable to attach the
properties of the debtor, except those
exempt by law from execution
Subsidiary Remedies of Creditor
General Rule: Contracts are binding only
between the parties thereto, and their heirs,
assignees, and the estate, UNLESS: Accion
Subrogatoria and Accion Pauliana
1. Accion Subrogatoria: right of creditor to
exercise all of the rights and bring all of the
actions which his debtor may have against
third persons; Novation by change of debtor
(Art. 1291, par.3).
96
OBLIGATIONS
Requisites
a. Debtor to whom the right of action
properly pertains must be indebted to
the creditor
b. The debt is due and demandable
c. The creditor must be prejudiced by the
failure of the debtor to collect his own
rd
debt from 3 persons either through
malice or negligence
d. The debtors assets are insufficient
(debtor is insolvent)
e. The right of action is not purely personal
to the debtor
2. Accion Pauliana: Rescission, which
involves the right of the creditor to attack or
impugn by means of a rescissory action any
act of the debtor which is in fraud and to the
prejudice of his rights as creditor.
Requisites: CASAL
a. There is a credit in favor of plaintiff
prior to alienation
b. The
debtor
has
performed
a
subsequent contract conveying a
patrimonial benefit to third persons
c. The creditor has no other legal remedy
to satisfy his claim
d. The debtors acts are fraudulent to the
prejudice of the creditor
e. The third person who received the
property is an accomplice in the fraud
Accion Subrogatoria
Not
necessary
that
creditors claim is prior to
the acquisition of the right
by the debtor
No need for fraudulent
intent
No period for prescription
Accion Pauliana
Credit must exist before
the fraudulent act
Fraudulent
intent
is
required if the contract
rescinded is onerous
Prescribes in 4 years
from the discovery of the
fraud
Determination of Interests
Eastern Shipping Lines v. CA (1961)
Stage 1
For loan or forbearance NOT for loan or
of money, goods or forbearance of money,
credit, the interest rate goods or credit, the
interest rate is 6%
is 12%
a) Interest = interest
rate
stipulated
in
writing + 12% legal
interest,
computed
from date of judicial
demand
(filing
of
complaint)
b) If there is no
stipulated interest rate,
the interest rate is 12%
computed from date of
default or demand
(judicial
or
extrajudicial)
a) If date of demand is
certain, compute from
the date when demand
is made (judicial or
extra-judicial)
b) If date of demand is
NOT certain, compute
from the date of trial
court decision (judicial
demand)
Stage 2
Add 12% interest from finality of SC decision until
fully paid (equivalent to a forbearance of credit)
97
OBLIGATIONS
I.
After Fulfillment
The obligation arises or
becomes effective.
The obligor can be
compelled to comply with
what is incumbent upon
him.
Principle
of
Retroactivity
in
Suspensive Conditions
Art.1187, par.1: once the condition is
fulfilled its effects must logically retroact
to the moment when the essential
elements, which gave birth to the
obligation have taken place. The
condition which is imposed is only
accidental, not an essential element of
the obligation.
Applied
only
to
consensual
contracts. No application to real
contracts which can only be
perfected by delivery.
To Give
If reciprocal, the fruits
and interests shall be
deemed to have been
mutually compensated
as a matter of justice and
convenience
(Art. 1187, par. 1)
If unilateral, the debtor
shall appropriate the
fruits
and
interests
received, unless from the
nature and circumstance
it should be inferred that
the intention of the
persons constituting the
same was different.
To Do/Not To Do
In obligations to do or not
to do, the court shall
determine the retroactive
effect of the condition
that has been complied
with.
(Art. 1187, par. 2)
The power of the court
includes
the
determination whether or
not there will be any
retroactive effects. This
rule shall likewise apply
in obligations with a
resolutory condition (Art.
1190 par. 3)
98
OBLIGATIONS
Before Fulfillment
Preservation of creditors
rights (Art. 1188, par. 1)
also
applies
to
obligations
with
a
resolutory condition
After Fulfillment
Whatever
may
have
been paid or delivered by
one or both of the parties
upon the constitution of
the obligation shall have
to be returned upon the
fulfillment
of
the
condition. There is no
return to the status quo.
However, when condition
is not fulfilled, rights are
consolidated and they
become
absolute
in
character
3. Potestative Condition
Exclusively
upon the
Creditors Will
Condition
obligation
valid
and
is
Exclusively
upon the
Debtors Will
in case of a
Suspensive
Condition
(Art. 1182)
Condition and
obligation are
void because to
allow
such
condition would
be equivalent to
sanctioning
obligations
which
are
illusory. It also
constitutes
a
direct
contravention of
the principle of
mutuality
of
contracts.
Exclusively
upon the
Debtors Will
in case of a
Resolutory
Condition
(Art. 1179, par
2)
Condition and
obligation
is
valid because in
such situation,
the position of
the debtor is
exactly
the
same as the
position of the
creditor when
the condition is
suspensive. It
does not render
the
obligation
illusory.
Loss
Without
Debtors
Fault/Act
Obligation
extinguished
With Debtors
Fault/Act
is
Obligation
is
converted into
one
of
indemnity
for
damages
99
OBLIGATIONS
Improvement
Impairment to be
borne by the
creditor
Improvement at
the
debtors
expense,
the
debtor
shall
ONLY
have
usufructuary
rights
Creditor
may
choose
between
bringing
an
action
for
rescission
of
the obligation
OR bringing an
action
for
specific
performance
with damages
in either case.
Improvement
by the things
nature or by
time shall inure
to the benefit of
the creditor
Condition
Fact or event which is
future and uncertain
100
OBLIGATIONS
Deterioration
Debtor
Debtor may oppose any
premature demand on
the part of the oblige for
the performance of the
obligation, of if he so
desires,
he
may
renounce the benefit of
the period by performing
his obligation in advance
IV. Alternative
Obligations
and
Facultative
Alternative Obligations
Several objects are due
May be complied with by
delivery of one of the
objects or by performance
of one of the prestations
which are alternatively
due
Choice may pertain to
debtor, creditor, or third
person
Facultative Obligations
Only one object is due
May be complied with by
the delivery of another
object
or
by
the
performance of another
prestation in substitution
of that which is due
Choice pertains only to
the debtor
Loss/impossibility of all
objects/prestations due to
fortuitous
event
shall
extinguish the obligation.
The loss/impossibility of
one of the things does not
extinguish the obligation.
Culpable loss of any of
the objects alternatively
Loss/impossibility of the
object/prestation due to
fortuitous
event
is
sufficient to extinguish
the obligation
Culpable loss
of the
object which the debtor
101
OBLIGATIONS
A. Alternative Obligations
Fortuitous
Event
Debtor
is
released from the
obligation
Some
Debtor to deliver
that which he
shall
choose
from among the
remainder
One
Remains
Debtor to deliver
that
which
remains
Debtors Fault
Creditor shall have
a right to indemnity
for damages based
on the value of the
last thing which
disappeared
or
service
which
become impossible
Debtor to deliver
that
which
the
creditor
shall
choose from among
the
remainder
without damages
Debtor to deliver
that which remains
Fortuitous
Event
Debtor
is
released from the
obligation
Some
Debtor to deliver
that which he
shall
choose
from among the
remainder
One
Remains
Creditor
may
claim
any
of
those subsisting
without a right to
damages
OR
price/value of the
thing lost with
right to damages
Debtors Fault
Creditor may claim
the price/value of
any of them with
indemnity
for
damages
creditor may claim
any
of
those
subsisting without a
right to damages
OR price/value of
the thing lost with
right to damages
Creditor may claim
the remaining thing
without a right to
damages OR the
price/value of the
thing lost with right
to damages
B. Facultative Obligation
Only one prestation has been agreed upon but
the debtor may render another in substitution
(De Leon, 2003)
Effect of Loss of Substitute
Before Substitution is
Made
If due to bad faith or
fraud of obligor: obligor
is liable
After Substitution is
Made
The
loss
or
deterioration of the
substitute on account
of the obligors delay,
negligence or fraud
102
OBLIGATIONS
Joint Indivisible
Obligations
In case of breach where
one of the joint debtors
fails to comply with his
undertaking,
the
obligation can no longer
be fulfilled or performed.
Thus action must be
converted into indemnity
for damages.
103
OBLIGATIONS
B. Solidary Obligation
An obligation where there is concurrence of
several creditors, or of several debtors, or of
several creditors and several debtors, by virtue
of which, each of the creditors has the right to
demand, and each of the debtors is bound to
render, entire compliance with the prestation
which constitutes the object of the obligation
(Obligacion Solidaria).
Indivisibility
Refers to the prestation
which
constitutes
the
object of the obligation
Solidarity
Refers to the legal tie or
vinculum,
and
consequently to the
subjects or parties of
the obligation
Plurality of subjects is
indispensable
When there is liability
on the part of the
debtors because of the
breach, the solidarity
among the debtors
remains
____________________________________________________________________________________
Effects of Modes of Extinguishment
Assignment of
Rights in Solidary
Obligations
The
solidary
creditor
cannot
assign his right
because it is
predicated upon
mutual
confidence,
UNLESS, the (1)
the assignment is
to a co-creditor;
(2) assignment is
with consent of
co-creditor
Novation
If prejudicial, the
solidary creditor
who effected the
novation
shall
reimburse
the
others
for
damages incurred
by them;
If beneficial and
secured by one,
he shall be liable
to the others for
the
share
(obligation
&
benefits)
which
Compensation &
Confusion
If it is partial, the
rules
regarding
application
of
payment
shall
apply
(w/o)
prejudice to the
right
of
other
creditors
who
have not caused
the confusion or
compensation to
be reimbursed to
the extent that
their rights are
diminished
or
Remission
If
entire
obligation,
obligation is totally
extinguished.
If for the benefit
of one of the
debtors covering
his entire share,
he is completely
released from the
creditor/s.
If for the benefit
of one of the
debtors and it
covers only part
Loss or
Impossibility
If not debtors
fault,
the
obligation
is
extinguished
If thru debtors
OR
fortuitous
event after delay,
the obligation is
converted
into
indemnity
for
damages but the
solidary character
of the obligation
remains.
104
OBLIGATIONS
Payment by a Debtor
Full payment made by
one of the solidary
debtors extinguishes the
obligation. (Art. 1217)
105
OBLIGATIONS
corresponds
to
them
If by substituting
the debtor, the
solidary creditor
who effected the
novation is liable
for the acts of the
new debtor in
deficiency
or
damages
If by subrogating
a third person in
creditors rights,
the obligation is
not
in
reality
extinguished as
the
relation
between the other
creditors and the
debtor/s
is
maintained.
Purposes of Penalty
1.
2.
B. Indivisible Obligations
One which cannot be validly performed in parts
(Tolentino, 1987).
Divisibility/indivisibility
refers
to
the
performance of the prestation and not to the
thing which is the object thereof. The thing
may be divisible, yet the obligation may be
indivisible.
When the obligation has for its object the
execution of a certain number of days of
work, the accomplishment of work by
metrical units, or analogous things which by
their nature are susceptible of partial
performance, it shall be divisible (Art.1225,
par. 2).
When there is plurality of debtors and
creditors, the effect of divisibility/indivisibility
of the obligation depend upon whether the
obligation is joint or solidary.
A joint indivisible obligation give rise to
indemnity for damages from the time anyone
of the debtors does not comply with is
undertaking.
(Art. 1224)
Effect
Creditor cannot be compelled partially to receive
the prestation in which the obligation consists;
neither may the debtor be required to make the
partial payment (Art. 1248), UNLESS:
The obligation expressly stipulates the
contrary
The different prestations constituting the
objects of the obligation are subject to
different terms and conditions
The obligation is in part liquidated and in part
unliquidated
3.
Effects of Penalty
1. The penalty shall substitute the indemnity for
damages and payment of interest in case of
non-compliance (Art. 1226), UNLESS:
a.
b.
c.
b.
c.
106
OBLIGATIONS
Chapter
IV.
Obligations
Extinguishment
of
I.
Payment or Performance
Payment by cession
There
are
various
creditors
Extinguishes
credits
only up to the extent of
proceeds from sale of
assigned
property,
unless
otherwise
agreed upon
107
OBLIGATIONS
I.
II.
Cession
Dation
Requisites
1. Plurality of debts
2. Plurality of
creditors
3. Partial insolvency
of the debtor
4. Abandonment of
the totality of the
debtors
properties for the
benefit of the
creditors
5. Acceptance by
the creditors
Requisites
1. Should not be
prejudicial to
other creditors
2. Should not
constitute a
pactum
commissorium
Requisites
1. There is a debt due
2. consignation is made because
of some legal cause
3. previous notice of consignation
was given to those persons
interested in the performance
of the obligation
4. amount or thing due was
placed at the disposal of the
court
5. after the consignation has been
made, the persons interested
were notified thereof
Effects
Assignment liberates
debtor up to the
amount of the net
proceeds of the sale
of his assets
Assignment does not
vets title to the
property
in
the
creditors,
who
are
only
authorized to sell it.
Effects
Extinguishment
of
debt from as an
equivalent of the
performance of the
obligation
Effects
If accepted by the creditor or
declared properly made by the
Court:
1. Debtor is released in same
manner as if he had performed
the obligation at the time of
consignation
2. Accrual of interest is
suspended from the moment of
consignation.
3. Deterioration or loss of the
thing or amount consigned,
occurring without the fault of
debtor, must be borne by
creditor from the moment of
deposit
4. Any increment or increase in
the value of the thing after
consignation inures to the
benefit of the creditor
108
OBLIGATIONS
Effects of Loss
Obligation to Deliver a
Specific Thing
Extinguishment of the
obligation if the thing was
destroyed w/o fault of the
debtor and before he has
incurred delay.
Obligation to Deliver a
Generic Thing
Loss of a generic thing
does not extinguish an
obligation,
UNLESS,
Delimited
generic
things: kind or class is
limited itself, and the
whole class perishes
rd
109
OBLIGATIONS
Requisites
1. Debt must be existing and demandable
2. Renunciation must be gratuitous; without
any consideration
3. Debtor must accept the remission
Effect
Art. 1273: Renunciation of the principal debt
shall extinguish the accessory obligations, but
remission of the latter leaves the principal
obligation in force.
Presumptions
Arts. 1271, 1272, 1274:
Whenever the private document in which the
debt is found in the possession of the
debtor, it shall be presumed that the creditor
delivered it voluntarily, unless contrary is
proved.
Delivery of a private document evidencing
credit, made voluntarily by the creditor to the
debtor, implies the renunciation of the action
of creditor against the latter.
Kinds
1. As to form (Art. 1270)
Express: made formally; in accordance
with forms of ordinary donations
Implied: inferred from the act of the
parties
2. As to extent
Total: entire obligation
Partial: may refer only to amount of
indebtedness, or to an accessory
obligation, or to some other aspect of
the obligation
3. As to constitution
Inter vivos: effective during the lifetime
of the creditor
Mortis causa: effective upon death of the
creditor; must be contained in a will or
testament
Effects
Arts. 1275- 1277:
1. The obligation is extinguished from the time
the characters of the debtor and creditor are
merged in the same person.
2. In joint obligations, confusion does not
extinguish the obligation except as regards
the corresponding share of the creditor or
debtor in whom the two characters concur.
3. In solidary obligations, confusion in one of
the solidary debtors extinguishes the entire
obligation.
4. Obligation is not extinguished when
confusion takes place in the person of
subsidiary debtor (e.g. guarantor), but
merger in the person of the principal debtor
shall benefit the former.
V. Compensation
COMPENSATION: Offsetting of two obligations
which are reciprocally extinguished if they are of
the same value, or extinguished to the
concurrent amount if of different values. (Asked
in 80, 81, 98, and 02)
Compensation
Confusion
Kinds
1. As to extent
Total: Debts are of the same amount
Partial: Amounts are not equal
2. As to origin
Legal: takes place by operation of law
Conventional:
parties
agree
to
compensate their mutual obligations
even when some requisite in Art. 1279 is
lacking (Art. 1282).
Judicial: decreed by court when there is
counterclaim; effective upon final
judgment (Art. 1283).
Facultative: when it can be claimed by
one of the parties who, however, has the
right to object to it.
110
OBLIGATIONS
2.
3.
4.
5.
6.
Requisites
Each obligor is
bound principally,
and at the same time
a principal creditor of
the other
Both debts must
consist in a sum of
money, or if the
things due are
FUNGIBLE, of the
same kind & quality
Both debts are due
Debts are liquidated
and demandable
There must be no
retention or
controversy over
either of the debts,
rd
commenced by 3
persons and
communicated in
due time to the
debtor
Compensation is not
prohibited by law
1.
2.
3.
4.
Effects
Effects rise from the
moment all the
requisites concur.
Debtor claiming its
benefits must prove
compensation; once
proven, effects
retroact from the
moment when the
requisites concurred.
Both debts are
extinguished to the
concurrent amount,
eventhough the
creditors and debtors
are not aware of the
compensation.
Accessory
obligations are also
extinguished.
With Debtors
Knowledge
Debtors
consent
to
assignment of
credit
constitutes
a
waiver
of
compensation,
unless
he
reserved
his
right
to
compensation.
Without
Debtors
Knowlege
Debtor
may
setup
compensation
of all credits
(maturing) prior
to
the
assignment and
also latter ones
until he had
knowledge of
the assignment.
VI. Novation
NOVATION: Extinguishment of an obligation by
the substitution or change of the obligation by a
subsequent one which extinguishes or modifies
the first either by changing the object or principal
conditions, or by substituting the person of the
debtor, or by subrogating a third person in the
rights of the creditor. A juridical act of dual
functionit extinguishes an obligation, and at
the same time, it creates a new one in lieu of the
old. (Asked in 78, 88, 94 and 01)
Requisites
1. A previous valid obligation
2. Agreement of all the parties to the new
obligation
3. Extinguishment of the old obligation
4. Validity of the new obligation
Novation is not presumed.
Express novation: Parties must expressly
disclose their intent to extinguish the old
obligation by creating a new one.
Implied novation: No specific form is
required. There must be incompatibility
between the old and new obligation or
contract.
(Asked in 79, 82, 88, and 94)
California Bus Line v. State Investment (2003): In the
absence of an unequivocal declaration of
extinguishment of the pre-existing obligation, only
proof of incompatibility between the old and new
obligation would warrant a novation by implication.
The restructuring agreement merely provided for a
new schedule of payments and authority giving Delta
to take over management and operations of CBLI in
case it fails to pay installments. There was no change
in the object of prior obligations.
Test of Incompatibility
Whether or not the old and new obligation can
stand together, each one having an independent
existence. No incompatibility exists when they
can stand together. Hence, there is no novation.
Incompatibility exists when they cannot stand
together. Hence, there is novation.
Effects
In General
1.
Old
obligation is
extinguished
and replaced
by the new
one
stipulated.
If
Original
Obligation
is
Void
Novation is void if
the
original
obligation
was
void,
except
when annulment
may be claimed
only
by
the
If
New
Obligation
is
Void
New obligation is
void,
the
old
obligation
subsists, unless
the
parties
intended that the
former realations
111
OBLIGATIONS
1.
debtor, or when
ratification
validates
acts
that are voidable.
(Art. 1298)
1.
Original
obligation is void:
No novation
2.
Original
obligation
voidable:
Effective
if
contract is ratified
before novation
shall
be
extinguished
in
any event. (Art.
1297)
1. New obligation
void: No novation
2. New obligation
voidable:
Novation
is
effective
Fulfillment of both
conditions:
new
obligation becomes
demandable
Fulfillment
of
condition concerning
the
original
obligation:
old
obligation is revived;
new obligation loses
force
Fulfillment
of
condition concerning
the new obligation:
no
novation;
requisite
of
a
previous valid and
effective obligation
lacking
Incompatible
Conditions
Original obligation is
extinguished, while
new obligation exists
Demandability shall
be
subject
to
fulfillment/
nonfulfillment of the
condition affecting it
OBJECTIVE NOVATION
1. Change of the subject matter
2. Change of causa or consideration
3. Change of the principal conditions or terms
SUBJECTIVE NOVATION
1. Substitution of the Debtor: Consent of
creditor is an indispensable requirement
both in expromision and delegacion.
Expromision
Initiative for change does
not emanate from the
debtor, and may
Even be made without
his knowledge.
Requisites
1. Consent of the
creditor and the new
debtor
2. Knowledge or
consent of the old
debtor is not
required
Effects
1. Old debtor is
released
2. Insolvency of the
new debtor does not
revive the old
obligation in case the
old debtor did not
agree to expromision
3. If with knowledge
and consent of old
debtor, new debtor
can demand
reimbursement the
entire amount paid
and w/ subrogation
of creditors rights
4. If without knowledge
of the old debtor,
new debtor can
demand
reimbursement only
up to the extent that
the latter has been
benefited w/o
subrogation of
creditors rights
Delegacion
Debtor (delegante) offers
or initiates the change,
and
the
creditor
rd
(delegatorio) accepts 3
person (delegado) as
consenting
to
the
substitution
Requisites
1. Consent of old
debtor, new debtor,
and creditor
Effects
1. Insolvency of the
new debtor revives
the obligation of the
old debtor if it was
anterior and public,
and known to the old
debtor.
2. New debtor can
demand
reimbursement of
the entire amount he
has paid, from the
original debtor. He
may compel creditor
to subrogate him to
all of his rights.
rd
Assignment of credit
Debtors consent is not
required
Refers to the same right
which passes from one
person to another, without
modifying or extinguishing
the obligation
112
OBLIGATIONS
Effects
Total
1. Transfers to the
person subrogated
the credit with all the
rights
thereto
appertaining, either
against the debtor or
rd
3 persons.
2. Obligation is not
extinguished, even if
the intention is to
pay it.
3. Defenses against the
old
creditor
are
retained,
unless
waived by the debtor
Partial
1. A creditor, to whom
partial payment has
been made, may
exercise his right for
the remainder, and
shall be preferred to
the
person
subrogated in his
place in virtue of the
partial payment.
113
OBLIGATIONS
1.
2.
3.
4.
Legend:
G = General Rule
= Exception
C = Creditor
D = Debtor
In GENERAL
Debtor or his:
Authorized Agent
Heir
Successor-in- interest
3rd PERSON
Interested in obligation
(creditor cannot refuse
to accept valid payment)
Payment w/ or
w/o debtors
knowledge
Effects:
1.
Valid
payment;
obligation extinguished
2. Debtor to reimburse
fully 3rd person interested
in obligation
3. 3rd person subrogated
to rights of creditor
In Obligation to Give, if
PAYOR has
Payment with
debtors consent
(express/tacit)
Effects:
1. 3rd person is entitled
to full reimbursement
2. Legal subrogation
(novation) 3rd person
is subrogated/step into
the shoes of creditor
Payment without
debtors knowledge
or against the will of D
Effects:
3rd person can only be
reimbursed only insofar as
payment has been beneficial to
debtor(1236, 2nd. par.)
burden of proof on 3rd person
cannot compel C to subrogate
him (1237)
Effects:
1. Payment is deemed
as a donation/offer of
donation
2. Donation must be in
proper form (if above
P5Th must be in
writing
114
114
OBLIGATIONS
In Case of
ACTIVE
SOLIDARITY
G VALID if 3rd
person proves
that
it
redounded
to
Cs benefit
Effect:
No extinguishment
If payment is made
to
a
WRONG
PARTY
OBLIGATIONS
G NOT valid
Payment to Incapacitated
Creditor (1241)
Payment to 3rd
PERSON (1241,
2nd par.)
115
Extinguishment if fault or
negligence can be imputed
to creditor
115
G:
C cannot demand a thing of superior quality;
can demand inferior
D cannot deliver a thing of inferior quality
Obligation to give a
GENERIC thing
Obligation to DO or
NOT to DO
Payment of
MONEY
Payment of
INTEREST
116
OBLIGATIONS
Obligation to give a
SPECIFIC thing
Give:
1. Specific thing itself
2. Accessions & accessories
3. If with loss, improvements,
deterioration Apply Art.
1189
Exceptions:
1. Contrary stipulation
2. When debt is in part liquidated & in part
unliquidated
3. When there are several subjects/parties
are bound under different terms/conditions
In Case of SUBSTANTIAL
PERFORMANCE IN
GOOD FAITH (1234)
PRESUMPTIONS
in payment of
INTERESTS &
INSTALLMENTS
Prior
installments
are
presumed paid (1176, 2nd par.)
117
OBLIGATIONS
In GENERAL
1233 Complete delivery or rendering
1248 C cannot be compelled to
received partial prestations; D cannot
be compelled to give partial payments
In GENERAL
In the place designated in the obligation
Expenses
Payment
of
Making
In GENERAL
Extrajudicial
expenses
required by the payment
shall be borne by DEBTOR
Unless otherwise
stipulated
As to JUDICIAL expenses
Rules of Court shall
govern
118
OBLIGATIONS
If no place is designated
If obligation is to deliver a
SPECIFIC thing
Place of performance is
wherever the thing was at
the moment obligation was
constituted
Unless there is a
contrary
express
stipulation
- end of Obligations -
119
OBLIGATIONS
In GENERAL
Payment to be made when the creditor
makes
a
demand
(judicially/extrajudicially)
TABLE of CONTENTS
CONTRACTS
Table of Contents
Chapter I. General Provisions.....................122
I.
Classification of Contracts.................122
II.
Elements of Contracts.......................123
III. Stages of Contracts...........................123
IV. Charactertics of Contracts (MARCO) 123
121
CONTRACTS
Leo Ledesma
Lead Writer
Krizel Malabanan
Ivy Velasco
Tin Reyes
Frances Domingo
Hazel Abenoja
Writers
CIVIL LAW
Kristine Bongcaron
Patricia Tobias
Subject Editors
ACADEMICS COMMITTEE
Kristine Bongcaron
Michelle Dy
Patrich Leccio
Editors-in-Chief
LECTURES COMMITTEE
Michelle Arias
Camille Maranan
Angela Sandalo
Heads
Katz Manzano Mary Rose Beley
Sam Nuez Krizel Malabanan
Arianne Cerezo Marcrese Banaag
Volunteers
LOGISTICS
Charisse Mendoza
SECRETARIAT COMMITTEE
Jill Hernandez
Head
Loraine Mendoza Faye Celso
Mary Mendoza Joie Bajo
Members
CLASSIFICATION
ELEMENTS
STAGES
CHARACTERISTICS
I.
Classification of Contracts
A. To formation:
1. Consensual: consent is enough; e.g.
sale
2. Real: consent and delivery is required;
e.g. deposit, pledge
3. Solemn or formal: special formalities are
required for perfection e.g. donation of
realty
B. To relation to other contracts:
1. Principal: may exist alone; e.g. lease
2. Accessory: depends on another contract
for its existence; e.g. guaranty
3. Preparatory: a preliminary step towards
the celebration of a subsequent
contract; e.g. agency
C. To nature of vinculum
1. Unilateral: only one party is bound by
the prestation; e.g. commodatum
2. Bilateral (synallagmatic): where both
parties are bound by reciprocal
prestations; e.g. sale
D. To fulfillment of prestations
1. Commutative: fulfillment is determined in
advance
2. Aleatory: fulfillment is determined by
chance
E. By equivalence of prestations
1. Gratuitous: no correlative prestation is
received by a party
2. Onerous: there is an exchange of
correlative prestations
3. Remuneratory: the prestation is based
on services or benefits already received
F. By the time of fulfillment
1. Executed: obligation is fulfilled at the
time contract is entered into
2. Executory: fulfillment does not take
place at the time the contract is made
G. To their purpose
122
CONTRACTS
To their designation
1. Nominate: the law gives the contract a
special designation or particular name
e.g. deposit
2. Innominate: the contract has no special
name
Article
1305,
Civil
Code.
INNOMINATE
CONTRACTS shall be regulated by the stipulations
of the parties, by the general provisions of Titles I
and II of [the Civil Code], by the rules governing the
most analogous nominate contracts, and by the
customs of the place.
Common
Elements
Special
Elements
Example
which
exist
only
Solemn
Real
Consensual
Consent, subject matter, causa
Formality
Delivery
None
Donationo
f personal
property
more than
P5K
Loan,
pledge
Others
Those
C. Accidental:
stipulated
if
B. AUTONOMY
The contracting parties may establish such
stipulations, clauses, terms and conditions as
they may deem convenient, provided they are
not contrary to law, morals, good customs,
public order, or public policy (Art. 1306).
C. RELATIVITY
Contracts take effect only between parties, their
assigns and heirs UNLESS, obligations arising
from the contract are not transmissible by their
(1) nature, (2) by stipulation or (3) by provision of
law. The heir is not liable beyond the value of
the property he received from the decedent. (Art.
1311)
Exception: Strangers may enforce the contract
in their favor in the ff. cases:
1. Stipulations Pour Autrui
If a contract should contain some stipulation
in favor of a third person, he may demand its
fulfilment provided he communicated his
123
CONTRACTS
Requisites:
a. Existence of a valid contract
b. Knowledge of the third person of the
existence of the contract; and
c. Interference by third person without
legal justification or excuse
Requisites:
a. There must be a stipulation in favor of a
third person
b. The stipulation must be part, not the
whole of the contract
c. The contracting parties must have
clearly and deliberately conferred a
favor upon a third person, NOT a mere
incidental benefit or interest.
d. The
third
person
must
have
communicated his acceptance to the
obligor before its revocation
e. No relation of agency exists between
any of the parties and the third person
favored
D. CONSENSUALITY
Contracts are perfected by mere consent and
from that moment, the parties are bound not only
to the fulfillment of what has been expressly
stipulated but also to all consequences which,
according to their nature, may be in keeping with
good faith, usage and law, (Art.1315) EXCEPT
real contracts, such as deposit, pledge and
commodatum, are not perfected until the
delivery of the object of the obligation.
(Tolentino)
E. OBLIGATORY FORCE
Art. 1159, Civil Code. Obligations arising from
contracts have the force of law between the
contracting parties and should be complied with in
good faith.
Art. 1308, Civil Code. The contract must bind both
contracting parties; its validity or compliance cannot
be left to the will of one of them.
Art. 1315, Civil Code. Contracts are perfected by
mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping
with good faith, usage and law.
Art. 1356, Civil Code. Contracts shall be obligatory,
in whatever form they may have been entered into,
provided all the essential requisites for their validity
are present. However, when the law requires that a
contract be in some form in order that it may be valid
or enforceable, or that a contract be proved in a
certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties
stated in the following article cannot be exercised.
124
CONTRACTS
I.
Consent
Without consideration
Offeror may withdraw by
communicating withdrawal
to the offeree before
acceptance
B. Capacity
1. Incapacitated to Give Consent
a. Minors, UNLESS, the minors consent
is operative in contracts:
For necessaries (Art.1427)
Where
the
minor
actively
misrepresents his age (estoppel)
125
CONTRACTS
Disqualification
to
Contract (Art.1329)
Restrains the very right
itself
Based on public policy
and morality
Voidable
Void
Mistake of Law
When one or
both contracting
parties believe
that a fact exists
when in reality it
does not, or vice
versa
When one or
both
parties
arrive at an
erroneous
conclusion on
the
interpretation of
a question of
law or the legal
effects
Mutual Mistake
Must be as
to the legal
effect of an
agreement
Must
be
mutual
Real purpose
of the parties
must
have
been
frustrated
2. Intimidation
When one of the contracting parties is
compelled by a reasonable and wellgrounded fear of an imminent and grave evil
upon his person or property, or upon the
person or property of his spouse,
descendants or ascendants, to give his
consent (Art. 1335).
Martinez v. HSBC, 1910: The conveyance of several
properties by to her husbands creditors, though
reluctant is still consent. She assented to the
requirements of the defendants, the civil and criminal
actions against them would be dropped. A contract is
valid even though one of the parties entered into it
against his wishes and desires, or even against his
better judgment. Contracts are also valid even though
they are entered into by one of the parties without
hope of advantage or profit.
3. Violence
Irresistible force used to extort consent
(J.B.L. Reyes)
4. Undue Influence
When a person takes improper advantage of
his power over the will of another, depriving
the latter of a reasonable freedom of choice
(Art. 1337).
Circumstances:
a. Relationship of the parties (family,
spiritual, confidential etc.)
b. That the person unduly influenced was
suffering
from
infirmity
(mental
weakness, ignorance etc.) (Art.1337)
5. Fraud
When
through
insidious
words
or
machinations of one of the contracting
parties, the other is induced to enter into a
contract which, without them, he would not
have agreed to (Art. 1338).
Art. 1339, Civil Code. Failure to disclose facts, when
there is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud.
Art. 1340, Civil Code. The usual exaggerations in
trade, when the other party had an opportunity to
know the facts, are not in themselves fraudulent.
Art. 1341, Civil Code. A mere expression of an
opinion does not signify fraud, unless made by an
expert and the other party has relied on the former's
special knowledge.
Art. 1342, Civil Code. Misrepresentation by a third
person does not vitiate consent, unless, such
misrepresentation has created substantial mistake
126
CONTRACTS
Relative
Real transaction is hidden
Disguised contract
Bound
as
to
hidden
agreement, so long as it
does not prejudice a third
person and is not contrary
to law, morals, good
customs, public order or
public policy
II. Object
The thing right or service which is the subject
matter of the obligation arising from the contract.
Requisites:
a. Lawful: Not contrary to law, morals, good
customs, public order or public policy.
b. Actual or possible
c. Transmissible: Within the commerce of man
d. Determinate or determinable
All things or services may be the object of
contracts, EXCEPT:
Things which are outside the commerce of
men
Intransmissible rights
Future inheritance except in cases
authorized by law
Impossible things or services
Objects which are indeterminable as to their
kind, the genus should be expressed
In order that a thing, right or service may be the
object of a contract, it should be in existence at
the moment of the celebration of the contract, or
at least, it can exist subsequently or in the
future.
A FUTURE THING may be the object of a
contract, such contract may be interpreted as a:
Conditional contract: where its efficacy
should depend upon the future existence of
the thing
III. Cause
It is the impelling reason for which a party
assumes an obligation under a contract.
Requisites:
a. Existing
b. Licit or Lawful
c. True
127
Cause in:
Onerous
Contracts
As to each of
the contracting
parties
is
understood to
be
the
undertaking or
the promise of
the thing or
service by the
other party
Renumeratory
Contracts
The
service
benefit which
remunerated
or
is
Pure
Beneficence
Mere
liberality of
the
benefactor
of
Illegality
Cause
of
Falsity
cause
of
Lesion
or
inadequacy
of cause
Defined
Absence or total
lack of cause
Contrary to law,
morals,
good
customs, public
policy
and
public order
Cause is stated
but is untrue
Cause is not
proportionate to
object
Effect
The
contract
confers no right
and has no legal
effect
Null and Void
Void if it should
not be proved that
it was founded
upon
another
cause which was
true and lawful
Shall not invalidate
the
contract
except when
CONTRACTS
128
CONTRACTS
I.
Rules
Exceptions:
When the law requires that a contract be in
some form for validity (Arts. 1357-1358)
When the law requires that contract be in
some form to be enforceable (Statute of
Frauds)
129
CONTRACTS
Principal
Objects
Gratuitous
Contracts
Onerous
Contracts
Doubts where
it cannot be
known what
may
have
been
the
intention
or
will of the
parties,
the
contract shall
be null and
void.
Absolutely
impossible
to
settle doubts by
the rules and
only refer to
incidental
circumstances
the
least
transmission
of rights and
interests shall
prevail.
Absolutely
impossible
to
settle doubts by
the rules and
only
refer
to
incidental
circumstances
the doubt shall
be settled in
favor of the
greatest
reciprocity
of
interests.
130
CONTRACTS
I.
Effect
on
the
Contract
How to rescind?
When to rescind
(Art 1389)
Contracts of
guardians
Contracts in
representation
of absentees
Contracts are
entered into to
defraud existing
creditors
131
Contracts refer
to things in
litigation
NO rescission if:
1. Injured party has other legal
means to obtain reparation (Art
1383).
2. Plaintiff cannot return his part of
the obligation (Art 1385 par 1)
3. Object of the contract is in the
hands of third person, onerously
acquired by him in good faith (Art
1385 par 2)
4. If the court approves the
contracts under Art 1381 par 1
and 2 (Art 1386)
In general, by By absentee
injured party
NO rescission if:
1. Injured party has other legal means to
obtain reparation (Art 1383)
2. Plaintiff cannot return his part of the
obligation (Art 1385 par 1)
3. Object of the contract is in the hands of
third person, onerously acquired by
him in good faith (Art 1385 par 2)
By ward, or by
guardian ad litem
of ward during
incapacity of ward
in
an
action
against
the
original guardian
Within four years
from [re-] gaining
capacity
Within 4 years
from knowledge
of domicile of
absentee
If entered into by
the
defendant
without
the
knowledge
&
approval of the
litigants
or
competent judicial
authority
By creditor(s)
By party litigant
Within 4 years
from knowledge of
fraudulent contract
CONTRACTS
I.
II.
III.
IV.
Who can/cannot
annul?
(Art 1397)
Effect
Annulment
of
How to
Cure
Defect?
(Arts
1392 - 1396)
132
CONTRACTS
What makes it
defective?
(Art
1390)
Effect on the
Contract
How to annul?
Contracts
covered
by
Statute of Frauds which
did not comply with the
written
memorandum
requirement
(See Art 1403 par 2)
Effect on the
Contract
How to assail?
How to
Defect?
1403)
1. Ratification by person
whose
name
the
contract was entered
into
Cure
(Art
guardians
The ratification by
one party converts
the contract into a
voidable contract (Art
1407)
133
CONTRACTS
Contracts which
are inconsistent
and void from the
beginning
(Art
1409)
How to assail?
When?
Inexistent contracts, or
contracts whose essential
elements are absent
(Art Art 1409 par 2, 3, 4,5)
Contracts expressly
prohibited or declared
void by law (Art 1409
par
7);
contracts
which
are
direct
results of a previous
illegal contract (art
1422)
1.Those whose Cause, Object of Purpose is contrary to morals, good customs,
public order or public policy
2.Those which are absolutely simulated or fictitious
3.Those whose cause or object did not exist at the time of the transaction
4.Those whose object is outside the commerce of men
5.Those which contemplate an impossible service
6.Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
7.Those expressly prohibited or declared void by law
- end of Contracts -
134
CONTRACTS
What makes
defective?