Saturday, September 14, 2013

Self-Made Reviewer on Obligation and Contracts

If you are a law student or just an ordinary student who needs a reviewer, read this. This is my personal
reviewer for my subject in Law on Obligations and Contracts. Hope you learn from it and enjoy reading!
:)
DISCLAIMER: Not all grammars and punctuations are technically correct because I use "keywords",
"shortcuts" for easy understanding and memorization, as for myself.

OBLIGATION juridical necessity to give, to do or not to do

4 ELEMENTS OF OBLIGATION
1. ACTIVE SUBJECT (creditor/obligee) whose obligation is constituted
2. PASSIVE SUBJECT (debtor/obligor) has duty to give, to do or not to do
3. OBJECT/PRESTATION subject matter
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) reason
CIVIL OBLIGATION
derived from positive law
enforceable by court action

NATURAL OBLIGATION
derived from equity &
justice
not enforceable by court
action

5 SOURCES OF OBLIGATION
1. LAW
2. CONTRACTS
3. QUASI-CONTRACTS arise from lawful, voluntary acts; no one shall be unjustly enriched...
2Kinds
a. Solutio indebiti something received (delivered on a mistake), no right to demand it
b. Negotiorum gestio voluntary mgt of property/affairs of another w/o his knowledge/consent
4. QUASI-DELICT/TORTS/CULPA AQUILIANA arise from damage; fault/negligence
5. CRIMES/ACTS/OMISSIONS punished by law arise from civil liability that is a consequence of a
criminal offense
DILIGENCE OF A GOOD FATHER OF A FAMILY
- care need to be exercised by a debtor to deliver/give determinate thing
Exception: When law/stipulation of parties requires a differnt standard of care (slight/extraordinary
diligence).
When creditor is entitled to the fruits
Rule: The creditor has personal right (right to ask for delivery) from the time the obligation to deliver
arises.
But NO real right (right enforceable against the whole world) until it is delivered.
3 KINDS OF FRUITS

1. NATURAL w/o human intervention

2. INDUSTRIAL w/ human intervention
3. CIVIL derived by virtue of juridical relation
Creditors rights if debtor fails to comply w/ the obligation
1. Determinate
a. Performance
b. Damages
2. Generic
a. Performance
b. Damages
c. Obligation be complied at debtors expense
Creditors rights if debtor does in contravention
1. Damages
2. Ask it be UNDONE at debtors expense
FORTUITOUS EVENT cannot be foreseen, if foreseen, inevitable
General Rule: No person liable to fortuitous event.
Exceptions:
1. Law states
2. Stipulation/contract states
3. Assumption of risk
4. Delay
5. Debtor promises deliver to 2/more persons who do not have same interest (bad faith)
EFFECTS OF FORTUITOUS EVENT to thing to be delivered
- extinguish the obligation if determinate; generic does not extinguish the obligation
3 MISCELLANEOUS RULES ON PERFORMANCE OF OBLIGA-TION
1.
When
to
deliver determinate, accessions (additions/
improvements)
and accessories (joined/included with the principal) are INCLUDED even not mentioned.
2. If debtor fails to do, it shall be DONE AT HIS EXPENSE, same with doing the contravention; poorly
done be undone.
3. In obligation not to do, and obligor does what is forbidden, shall be UNDONE AT HIS EXPENSE.
4 GROUNDS; debtor liable for damages
1. Default/mora
2. Fraud/dolo
3. Negligence/culpa
4. Contrary to terms of obligation
1. DEFAULT/MORA delay
3kinds
a. Mora solvendi debtors delay to give (real ob.), to do (personal ob.)
b. Mora accipiende creditors delay to accept
c. Compensatio Morae delay of both in reciprocal obligation

CONCEPT OF DELAY
General Rule: No demand, No delay
Exceptions:
1. Law states
2. Obligation states
3. Time is the essence
4. Demand be useless if delay
5. Debtor guilty of delay
EFFECTS OF DELAY
1. Damages
2. When to deliver determinate thing, STILL LIABLE in fortuitous event.
2. FRAUD/DOLO conscious, deliberate, intentional evasion of fulfillment
2Kinds
a. Dolo causante/Causal fraud fraud in obtaining consent; consent is defective, contract is
voidable. Remedy: annulment
b. Dolo incidente/Incidental fraud fraud w/c vitiates consent. Remedy: damages
3. NEGLIGENCE/CULPA voluntary act/omission; no bad faith intended
3Kinds
a. Culpa aquiliana/Civil negligence quasi-delict/torts
b. Culpa contractual/Contractual negligence breach
c. Culpa criminal/Criminal negligence crime/delict
4. Contrary to the terms of obligation
2 RULES OF PRINCIPAL & INSTALLMENT
1. Receipt of principal w/o mention of interest, presumed interest is paid also.
2. Receipt of latter installment w/o mention of prior installment, presumed prior installment is paid
also.
4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against DEBTOR
1. Exact payment
2. Attach debtors properties
3. Accion subrogatoria exercise rights & actions except inherent in person
4. Accion pauliana cancel acts/contracts by debtor to defraud creditor
TRANSMISSIBILITY OF RIGHTS
General Rule: ALL RIGHTS are transmissible.
Exceptions:
1. Law states
2. Contract states
3. Obligation is purely personal
10 Kinds of Obligation
1. Pure

2. Conditional
3. Alternative
4. Facultative
5. Joint
6. Solidary
7. Divisible
8. Indivisible
9. Obligation w/ a period
10. Obligation w/ a penal clause
1. PURE OBLIGATION
- w/o condition, demandable at once (pure has resolutory condition/period)
2. CONDITIONAL OBLIGATION
- there is condition in performance; future & uncertain
2Kinds
a. Suspensive condition happening of condition gives RISE to obligation
b. Resolutory condition happening of condition EXTINGUISHES obligation
6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION
1. Impossible conditions, contrary to law, shall ANNUL obligation.
2. The condition not to do an impossible thing is considered not agreed upon.
3. The condition that happens in determinate time, EXTINGUISHES obligation.
4. The condition that happens in INDETERMINATE time, obligation only effective at arrival.
5. The condition is fulfilled if DEBTOR prevents fulfillment.
6. The effect of conditional obligation, once fulfilled:
- to give: retroact to the day of constitution of obligation
- has reciprocal prestations: fruits & interests be mutually compensated
- has unilateral obligation: debtor shall give fruits & interests
RULES in case of Loss, Improvement, or Deterioration of thing during the pendency of condition
1. LOST
a. w/ debtors fault damages
b. w/o debtors fault extinguishes obligation
2. DETERIORATION
a. w/ debtors fault - (1) cancel obligation & damages; or (2) fulfill obligation w/ damages
b. w/o debtors fault creditor suffer impairment
3. IMPROVEMENT
a. By nature/time benefit to creditor
b. at expense of debtor debtor no right than that granted to usufructuary (debtor no right to
compensate amount for improvement)
EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION
General Rule: The obligation becomes effective retroactively to the day obligation was constituted.
Exceptions:

1. In reciprocal obligation, fruits & interests during pendency of condition shall compensate each
other.
2. In unilateral obligation, debtor gets fruits & interests unless there is a contrary intent.
3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION
1. Extinguish obligation.
2. Both parties restore what they received plus fruits & interests.
3. The rule on L, D, or I will apply to person who has to return the thing.
When one of debtors in reciprocal obligation does not comply w/ his obligation
1. The right of injured party is (1) cancel contract & damages; or (2) fulfill obligation & damages
3 Kinds of Obligation (Accdng to PERSON OBLIGED)
1. UNILATERAL only 1 party obliged to comply
2. BILATERAL both parties; performance not same time
3. RECIPROCAL both parties; performance same time
3. OBLIGATION W/ A PERIOD
- demandability/extinguishment subject to the expiration of period
PERIOD interval of time; either suspends demandability or produces extinguishment
DAY CERTAIN must come, not known when
7 CASES CONSIDERED TO BE OBLIGATION W/ A PERIOD
1. Little by little
2. In partial payment
3. Payable ASAP
4. When I can afford it
5. When I have the money
6. When I am able to
7. When my means permit me to do so
PERIOD
certain
future only
(*influence upon obligation)
only upon its demandability

CONDITION
uncertain
future/past but unknown
(*) on the very existence of
obligation itself

FOR WHOSE BENEFIT IS THE PERIOD?

General Rule: Both the debtor & creditor.
Therefore, NEITHER of them can demand performance of obligation.
Exception: If the term of obligation has to favor one of them.
5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE PERIOD
1. Debtor is insolvent.
2. Debtor attempts to abscond.
3. Impairment of guarantees/securities.

4. Failure to furnish guarantees/securities promised.

5. Violation of undertaking.
4. ALTERNATIVE OBLIGATION
- w/ 2 or more prestations, only 1 is due.
5. FACULTATIVE OBLIGATION
- w/ ONLY 1 prestation but can be substituted.
ALTERNATIVE prestations LOST w/ debtors fault
Creditor entitled to damages but needs ff requisites:
1. Debtor can choose.
2. All prestations lost/become impossible due to debtors fault.
ALTERNATIVE OBLIGATION
several prestations due,
giving one is sufficient
right to choose (debtor)
unless granted to creditor
If 1 of the prestation is
illegal, others may be valid,
obligation remains
loss/impossibility of ALL
prestations due, w/o
debtors fault, extinguishes
obligation

FACULTATIVE OBLIGATION
one prestation due, but can
be subtituted
right to choose DEBTOR ONLY
nullity of principal carries
w/ it nullity of accessory/
substitute
loss/impossibility of prestation due, w/o debtors fault,
extinguishes obligation

(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF DEBTOR IN ALTERNATIVE OBLIGATION

1. If 1 of prestations lost through fortuitous event, shall still be perform by choosing (creditor) from
the remainder.
2. If 1 of prestations lost through debtors fault, creditor may claim any of remainders w/ damages.
3. If ALL prestations lost through debtors fault, creditor choose price w/ damages.
RULES on LOSS/DETERIORATION of the thing intended as SUBSTITUTE in FACULTATIVE OBLIGATION
1. If there is a loss/deterioration of thing intended as substitute, debtor is NOT liable if NOT HIS FAULT.
But if substitution is already made, debtor is liable for loss of substitute when in DELAY, NEGLIGENCE,
or FRAUD.
6. JOINT OBLIGATION
- obligation is to be paid proportionately by debtors or to be demanded proportionately by creditors
7. SOLIDARY OBLIGATION
- each one of debtors has right to render or each one of creditors has right to demand the entire
compliance w/ prestation
MAXIMS & SYNONYMS

JOINT Obligation
SOLIDARY
Obligation

MAXIMS
To each his own
One for all, all
for one

SYNONYMS
proportionate
individually &
collectively

(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES

1. Law states
2. Stipulation states
3. Nature of obligation requires
2 PRESUMPTIONS THAT OBLIGATION IS JOINT
1. The debts be divided as many shares as there are debtors/creditors.
2. The debtors/creditors are distinct from one another.
8. DIVISIBLE OBLIGATION
- prestation is capable of partial performance
9. INDIVISIBLE OBLIGATION
- prestation incapable of partial performance
10. OBLIGATION W/ A PENAL CLAUSE
- one w/ accessory undertaking attached to obligation to assume greater liablity in case of breach/nonfulfillment of obligation
3 PURPOSES OF PENAL CLAUSE
1. Ensure performance of obligation
2. Substitute for damages & interest in case of noncompli-ance
3. Penalize debtor in case of breach
In case obligation has a PENAL CLAUSE
General Rule: Penalty takes the place of damages & interest in case of non-compliance.
Exceptions:
1. Stipulation states.
2. Debtor refuse to pay penalty.
3. Debtor guilty of fraud in performance of obligation.
NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE
Nullity of principal obligation = nullity of penal clause
Nullity of penal clause = NOT nullity of principal obligation
10 MODES OF EXTINGUISHMENT OF OBLIGATIONS
1. Payment or performance
2. Prescription
3. Compensation
4. Confusion/merger
5. Condonation/remission
6. Fulfillment of resolutory condition

7. Annulment
8. Rescission
9. Novation
10. Loss of thing due
1. PAYMENT/PERFORMANCE
- Payment means delivery of money & performance of obligation
2 PLACE OF PAYMENT
1. At place agreed upon
2. If w/o agreement
a. Object is indeterminate paid at domicile of DEBTOR
b. Object is determinate place of thing at the time of constitution of obligation
4 SPECIAL MODES OF PAYMENT
a. Application of payment
b. Cession
c. Tender of payment & consignation
d. Dacion in payment
a. APPLICATION OF PAYMENT
- designation of debt to w/c payment must be applied when debtor has several obligations of same
kind in favor of same creditor.
3 REQUISITES OF APPLICATION OF PAYMENT
1. Only 1 debtor & 1 creditor
2. 2 or more debts, same kind
3. All debts are due
4. Insufficient payment to exinguish ALL debts
3 RIGHTS TO MAKE APPLICATION OF PAYMENT
1. Right belongs to CREDITOR.
2. If debtor does not avail, creditor can give him receipt designating the debt from which payment will
be applied.
3. If debtor accepts the receipt, he cannot complain unless THERE IS just cause to invalidate the
contract.
b. CESSION
- debtor abandons ALL his property for creditors benefit to obtain payment from proceeds of his
property
5 REQUISITES OF VALID CESSION
1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to creditors
4. Debt is due & demandable.
5. Creditors must sell the properties & apply the proceeds to their respective credits proportionately.

c. DACION IN PAYMENT (dacion en pago)

- alienation of property to the creditor in satisfaction of debt
3 REQUISITES OF DACION IN PAYMENT
1. Consent of creditor
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree
CESSION
all properties
require more than 1 creditor
NOT act of novation
NOT transfer ownership
requires partial/total insolvency

DACION IN PAYMENT
NOT all properties
NOT require all creditors
act of novation
transfer ownership
may happen
during solvency of debtor

d. TENDER OF PAYMENT & CONSIGNATION

TENDER OF PAYMENT act of offering the creditor what is due to him w/ a demand that the creditor
accept it
CONSIGNATION act of depositing thing due w/ the court when creditor cannot/refuses acceptance of
payment
5 REQUISITES OF CONSIGNATION
1. Debt due.
2. Creditor refused the tender of payment w/o just cause
3. Notice of consignation already given to persons interested in fulfillment of obligation
4. Consignation of thing/amount due
5. Subsequent notice of consignation to interested persons
5 VALID CONSIGNATION W/O PREVIOUS TENDER OF PAYMENT
1. Creditor is absent/unknown.
2. Creditor is incapacitate to receive at time it is due.
3. Creditor refused give a receipt, w/o just cause.
4. 2 or more persons claim the right to collect.
5. Title of obligation lost.
2. LOSS OF THING DUE
- perishes, disappears, or goes out of commerce; existence is unknown; cannot be recovered
3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS
1. Determinate thing.
2. W/o debtors fault.
3. No delay.
3. CONDONATION/REMISSION

- gratuitous abandonment of right by the creditor

3 REQUISITES OF A VALID CONDONATION/REMISSION
1. It must be gratuitous.
2. Accepted by obligor.
3. Obligation is demandable.
4. CONFUSION/MERGER
- meeting in 1 person of qualities of debtor & creditor w/ same obligation
3 REQUISITES OF VALID CONFUSION/MERGER
1. The merger of characters of debtor & creditor must be in same person.
2. Take place between principal debtor & creditor.
3. Clear & definite.
5. COMPENSATION
- 2 persons are debtors & creditors of each other
6 ESSENTIAL REQUISITES OF COMPENSATION
1. Parties both principal debtors & creditors of each other.
2. Compensation is not prohibited by law.
3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable.
5. 2 debts are liquidated.
6. 2 debts both in money/consumable things.
(2) CLASSES OF COMPENSATION
1. As to effect
a. TOTAL obligations completely extinguished.
b. PARTIAL a balance remains
2. As to origin or cause
a. LEGAL by law
b. VOLUNTARY/CONVENTIONAL agreement of parties
c. JUDICIAL order from the court
d. FACULTATIVE 1 of parties can choose/oppose claiming compensation