Substantive law is the portion of the

body of law creating and defining

rights and duties which may be either
public or private in character
Adjective law is the portion of the
body of law prescribing the manner
or procedure by which rights may be
enforced or their violations redressed
Public law is the body of legal rules
which regulates the rights and duties
arising from the relationship of the
state to the people.
Private law is the body of rules which
regulates the relations of individuals
with one another for purely private
ends

Active Subject - creditor / The person

who is entitled to demand the
fulfillment of the obligation
Object/Prestation - The conduct
required to be observed by the
debtor
Juridical or legal tie or efficient cause
- That which binds or connects the
parties to the obligation
Obligation - is the act or performance
which the law will enforce
Right - The power which a person
has under the law to demand ,from
another, any prestation

Law on Obligations and contracts is

the body of rules which deals with
the nature and sources of obligation
and the rights and duties arising from
agreements and the particular
contacts

Wrong is an act or omission of one

party in violation of the legal right or
rights of another

The term of obligation is derived from

Latin word obligatio which means
tying

Personal obligation - obligation to

do(positive) or not to do(negative)
Contract - is a metting of mind
between two persons whereby one
binds himself, with respect to other,
to give something or render some
service

Essential Requisites of an Obligation:

Passive Subject - debtor / person
who is bound to the fulfillment of the
obligation

Kinds of Obligation:
Real Obligation - obligation to give

Compliance in good faith -

compliance in accordance with the

stipulations or terms of contract or
agreement

referring to a class or genus to which

it pertains and cannot be pointed out
with particularity

Quasi contract - juridical relation

resulting from lawful, voluntary and
unilateral acts by virtue of which
parties become bound to each other
to the end that no one will be
enriched or benefited at the expense
of another

Different kinds of fruits:

Natural fruits - products of soil or
animals

Kinds of quasi-contract:
Negotiorum gestio - voluntary
management of property

Civil fruits - are those derived by

virtue of a juridical relation
Personal right - is the right or power
of a person to deman from another

Solutio indebiti - something is

received when there is no right to
demand it and it was unduly
delivered through mistake
Quasi-delict - is an act or ommission
by a person(tortfeasor) which causes
damage to another in his person,
property or rights giving rise to an
obligation to pay for the damage
done, there being fault or negligence
but there is no pre-existing relation
between the parties
--Nature and Effect of Obligation
Specific or Determinate thing - things
particularly designated or physically
segregated others of the same class
Generic or Indeterminate thing -

Industrial fruits - produced by lands

of any kind through cultivation or
labor

Real right - is the right or interest of a

person over a specific thing
Genun nunquam perit - Genus never
perishes
Accessions - are fruits of a things or
improvement upon a thing
Accessories - things joined to or
included with the principal for better
use
Ordinary delay - merely failure to
perform an obligation on time
Legal delay or mora - failure to
perform an obligation

Kinds of delay:
Mora Solvendi - delay on part of the
debtor
Mora accipiendi - delay on part of the
creditor
Compensatio morae - reciprocal
delay
Ground for liability:
Fraud/deceit/dolo - deliberate or
intentional evasion of the normal
fulfillment of an obligation
Negligence/fault/culpa - any
voluntary act or omission, there
being no bad faith or malice, which
prevents the normal fulfillment of an
obligation
Delay(mora)
Contravention - violation of terms
and condition stipulated in the
obligation
Kinds of Negligence:
Contractual negligence/culpa
contractual - negligence in contract
resulting in their breach
Civil negligence/culpa aquiliana
-quasi delict
Criminal negligence/culpa criminal negligence resulting in the

commision of a crime
Fortuitous event - any event which
cannot be foreseen or which, though
foreseen, is inevitable
Simple loan or mutuum - a contract
whereby one of the parties delivers
to anothrr, money or other other
consumble thing upon the condition
that the same amount of the same
kind and quality shall ba paid
Usury - contracting for or receiving
interest in excess of the amount
allowed by law for the loan or use of
money, goods, chattles or credit
Presumption - inference of a fact
actually known arising from its usual
connection with another which is
know or proved
Pure obligation -one which is not
subject to any condition and no
specific date is mentioned for its
fulfillment and is,therefore,
immediately demandable
Conditional obligation - is one whose
consequences are subject in one
way or another to fulfillment of a
condition.
Condition - future and uncertain
event, upon the happening of which,
the effectivity or extinguishment of an
obligation, subject to it, depends.

Two kinds of condition:

Suspensive condition/condition
precedent/condition antecedent - the
fulfillment of which will give rise to an
obligation.
Resolutory condition/condition
subsequent - the fulfillment of which
will extinguish an obligation already
existing
Period - future and certain event
upon the arrival of which the
obligation subject to it either arises or
is extinguished
Potestative condition - the condition
depends upon the will of one of the
contracting parties
Casual condition - condition that
depends upon chance or upon will of
a third person
Conjunctive condition - there are
several condition and all must be
fulfilled
Disjunctive condition - several
conditions and only one or some of
them must be fulfilled
Kinds of loss:
Physical loss - when a thing perishes
as when a house is burned and
reduced to ashes

Legal loss - when a things goes out

of commerce; or when thing
becomes illegal
Civil loss - when a thing disappears
in such a way that is existence is
unknown
Obligation with a period - is one
whose effects or consequences are
subjected in one way or another to
the expiration or arrival of said period
or term
Compound obligation - one where
there are two or more prestations
Conjunctive obligation - one where
there are several prestations and all
of them are due
Distributive - one where one or more
of the prestations is due
Alternative obligation - one where
several prestations are due but the
performance of one is sufficient
Facultative obligation - one where
one prestation is due but the debtor
may substitute another
Individual obligation - one where
there is only one obligor and obligee
Collective obligation - one where
there are two or more debtors and/or

two or more creditors which may be

joint or solidary.

solidarity is agreed upon by the

parties

Joint obligation - one where the

whole obligation is to be paid or
fulfilled proportionately by the
different debtors and/or is to be
demanded proportionately by the
different creditors

Divisible obligation - is one, the

object of which, in its delivery or
performance, is capable of partial
fulfillment

Solidary obligation - one where each

one of the debtor is bound to render
and/or each one of the creditor has a
right to demand from any of the
debtors, entire compliance with the
prestation
Joint obligation - mancomunada,
mancomunadamente, prorata
Solidary obligation - solidaria, in
solidum, juntos o separadamente
Passive solidarity - solidarity on the
part of the debtor where any one of
them can be made liable for the
fulfillment of the entire obligation
Active solidarity - solidarity on part of
the creditor where any one of them
can demand the fulfillment of the
entire obligation
Mixed solidarity - solidarity on both
creditor and debtor
Conventional solidarity - where

Indivisible obligation - is one , the

object of which, in its delivery or
performance, is not capable of partial
fulfillment
Kinds of division:
Qualitative division - one based on
quality and not on number
Quantitative division - based on
quantity rather than quality
Ideal/Intellectual division - one which
exists only in the minds of the parties
Kinds of indivisibility:
Legal indivisibility - where a specific
provision of law declares as
indivisible why by their nature are
divisible
Conventional indivisibility - where the
will of the parties makes as
indivisible, obligations which, by their
nature, are divisible
Natural indivisibility - where the
nature of the object or prestation

does not admit of division

Obligation with penal clause
Obligation with a penal clause is one
which contains an accesory
undertaking to pay a previously
stipulated indemnity in case of
breach of the principal prestation,
intended primarily to induce its
fulfillment
Penal clause - is an accesory
undertaking attached to an obligation
to assume greater liability in case of
breach
Kinds of penal clause:
Legal penal clause - clause provided
by the lAw
Conventional penal clause - clause
provided for by stipulation of the
parties
Compensatory penal clause - when
the penalty takes the place of
damages
Punitive penal clause - when the
penalty is imposed merely as
punishment for breach
Subsidiary penal clause - when only
the penalty can be enforced
Joint penal clause - when both
principal and the penal clause can be
enforced
Debt - obligation to deliver money
Free disposal of the thing due -

means the thing to be delivered must

not be subject to any claim or lien or
encumbrance
Capacity to alienate - means that the
person is not incapacitated to enter
into contracts
Dation in
payment/adjudication/dacion en pago
- is the conveyance of ownership of a
thing as an accepted equivalent of
performance
Judicial cost - statutory amounts
allowed to a party to an action for his
expenses incurred in action
Legal tender - is that currency which
a debtor can legally compel a
creditor to accept in payment of a
debt in money when tendered by the
debtor in the right amount
Inflation - sharp sudden increase of
money
Deflation - reduction in volume and
circulation of the available money or
credit
Application of payment - designation
of the debt to which should be
applied the payment made by a
debtor who has various debts of the
same kind on favor of one and the
same creditor

Tender of payment - act, on the part

of the debtor, of offering to the
creditor the thing or amount due
Consignation - act of depositing the
thing or amount due with the proper
court when the creditor does not
desire or cannot receive it after
complying with the formalities of the
law
Condonation or remission - is the
gratuitous abandonment by the
creditor of his right against the debtor
Inter vivos condonation - when it will
take effect during the lifetime of the
donor
Mortis causa - when it will become
effective upon the death of the donor
Confusion or merger - is the meeting
in one person of the qualities of the
debtor and creditor with respect to
the same obligation
Compensation - is the
extinguishment of the concurrent
anount if the debts of two persons
who, in their own right, are debtors
and creditors of each other
Commodatum - is a gratuitous
contract whereby one of the parties
delivers to another something not

consumable so that the latter may

use the same for a certain time and
return it
Novation - is the total or partial
extinction of an obligation through
creation of a new one which
substitute it
Kinds of novation:
Substitution - when the person of the
debtor is substitued
Subrogation - when the third person
is subrogated in the rights of the
creditor
Kinds of substitution:
Expromision - takes place when a
third person of his own initiative and
without the knowledge of the debtor
and assume the latters obligation
Delegacion - takes place when the
creditor accepts a third person to
take place of the debtor at the
instance of the latter
Contracts
Stipulation pour atri - is a stipulation
in a contract clearly and deliberately
conferring a favor upon a third
person who has a right to demand its
fulfillment provided he communicates

his acceptance to the obligor before

its revocation by the obligee or the
original parties

Option money - is the money paid or

promised to be paid in consideration
for the option

Consensual contract - which is

perfected by mere consent

Mistake/Error - is a false notion of a

thing or a fact material to the contract

Real contract - which is perfected by

the delivery of the thingsubject
matter of the contract

Undue influence - is influence of a

kind that so overpowers the mind of
a party as to destroy his free will and
make him express the will of another
rather than his own

Solemn contract - which requires

compliance with certain formalities
prescribed by law
Consent - is the conformity or
concurrence of wills and with respect
to contracts, it is the agreement of
the will of ine contracting party with
that of another
Offer - proposal made by one party to
another to enter into a contract
Acceptance - is the manifestation by
the offeree of his assent to the terms
of the offer
Option contract - is one giving a
person for consideration a certain
period within which to accept the
offer of the offerer
Option period - period given within
which the offeree must accept the
order

Dealer's/Trader's talk - are

representations which do not appear
on the face of the contract and these
do not bind either party
Simulation of a contract - is the act of
deliberately deceiving others by
feigning or pretending by agreement,
the appearance of a contract which is
either non-existent or concealed
Absolute simulation- when the
contract does not exist at all and the
parties does not intend to be bound
at all
Relative simulation - when the
contract entered into by the parties is
different from their true agreement
Rescissible contracts - are those
validly agreed upon because all the
essential elements exist and legally
effective but in the cases established
by law, the remedy of rescission is

granted in the interest of equity

executed

Rescision - remedy granted by the

law to the contracting parties and
sometimes even to third persons in
order to secure reparation of
damages caused them by a valid
contract, by means of the restoration
of the things to their condition in
which they were prior to the
celebration of said contract

Ratification - means that one

voluntarily adopts some defective or
unathorized act of contract which,
without his subsequent approval or
consent, would not be binding on him

Ward - a person under guardianship

by reason of some incapacity

Unenforceable contracts - are those

that cnnot be enforced in court or
sued upon by reason of certain
defects provided by law until and
unless they are ratified according to
law

Absentee - is a person who

disappears from his domicile his
whereabouts being unknown and
without leaving an agent to
administer his property

Unauthorized contracts - are those

entered into by the name of another
person by one who has been given
no authority or legal representation
or who has acted beyond his powers

Voidable/Annulable contracts - those

which possess all the essential
requisites of a valid contract but one
of the parties is incapable of giving
consent, or consent is vitiated by
mistake, violence, intimidation,
undue influence or fraud

Void contracts - are those which,

because of certain defects, generally
produce no effect at all

Annulment - is a remedy provided by

law, for reason of public interest, for
the declaration of the inefficacy of a
contract based on a defect or vice in
the consent of one of the contracting
parties in order to restore them to
their original position in which they
were before the contract was

Ceiling law - a statute fixing the

maximum price of any article or
commodity
Cause/Causa -is the essential or
more proximate purpose which the
contracting parties have in view at
the time of entering into the contract
Onerous contracts - parties are
reciprocally obligated to each other
Remuneratory contracts - the

purpose of this contract is to reward

the service that had been previously
rendered by the party remunderated
Gratuitous contracts - the cause of
which is the liberality of the
benefactor or giver
Motive - purely personal or private
reason which a party has in entering
into a contract
Absence/Want of Consideration there is total lack of any valid
consideration
Lesion - is any damage caused by
the fact that the price is unjust or
inadequate
Form of contract- refers to the
manner in which a contract is
executed or manifested
Reformation - is the remedy allowed
by law by means of which a written
instrument is amended or rectified so
as to express or conform to the real
agreement or intention of the parties
when by reason of mistake, fraud,
inequitable conduct or accident, the
instrument fails to express such
agreement or intention
Interpretation - determination of the
meanings of the terms or words used
by the parties in their written contract

Contract of sale - is a contract

whereby one of the partied(seller)
obligates himself to deliver
something to the other(buyer) who
on his part, binds himself to pay
therefor a sum of money or its
equivalent(price)
Existing goods - goods owned or
posessed by the seller
Future goods -goods to be
manufactured, raised or acquired
Contract of agency - is a contract
wherein a person binds himself to
render some service or to do
something in reprrsentation or on
behalf of another, with the consent or
authority of the latter
Contract for a piece of work - is a
contract wherein the contractor binds
himself to execute a piece of work for
the employer in consideration of a
certain price
Contract of barter/exchange is a
contract wherein one of the parties
binds himself to give one thing in
consideration of the other's promise
to give another thing
Earnest money - is a money given by
the buyer to the seller to bind the
bargain

Necessaries - are those things which

are needed for the sustenance,
dwelling, clothing and medical
attendance, in keeping with the
financial incapacity of the
incapacitated person
Compromise - is a contract wherby
the parties by reciprocal
concessions, avoid a litigation or put
an end to one already commenced
Renunciation - it is wherein a creditor
gratuitously abandons his right
against his debtor.
Tradition - derivative mode of
acquiring ownership by virtue of
which one, who hase the right and
intention to alienate corporeal thing,
transmits it by virtue of a just title to
one who accepts the same
Public instrument - is one which is
acknowledged before a notary public
or any official authorized to
administer oath, by the person who
executed the same
Symbolic/Constuctive delivery - to
effect the delivery, the parties make
use of a token symbol to represent
the thing delivered
Kinds of Symbolic Tradition:
Traditio longa manu - it takes place

by the mere consent or agreement of

the contracting parties as when the
vendor merely points to the thing
sold which shall thereafter be at the
control and disposal of the vendee
Traditio brevi manu - it happens
when the vendee already has the
possession of the thing sold by virtue
of another title as when the lessor
sells the thing leased to the lessee
Traditio constitutum possessorium takes place when the vendor
continues in possession of the
property sold not as owner but in
some other capacity
Quasi traditio - it is the delivery to a
person of a negotiable document of
title in which it is stated that the
goods referred to therein will be
delivered to the bearer amounts to
delivery of the goods to such person
Contract of sale or return - it is a
contract by which property is sold but
the buyer who becomes the owner of
the property on delivery has the
option to return the same to the seller
instead of paying the price
Contract of sale on trial or approval it is a contract in the nature of an
option to purchase if the goods prove
satisfactory, the approval of the buyer
being a condition precedent

Res perit domino - if the thing is lost

by fortuitous event, the risk is borne
by the owner of the thing at the time
of the loss

COD - collect on delivery

FOB - free on board
CIF - cost insurance and freight

Documents of title:
Bill of lading - it is a contract or
receipt for the transport of goods and
their delivery to the person named
therein to order or to bearer
Dock warrant - is an instrument given
by dock owners to an importer of
goods warehoused on the dock
recognizing the importers title to the
said goods
Warehouse receipt - it is a contract or
receipt for goods deposited with a
warehouseman containing the latter's
undertaking to hold and deliver the
said goods to a specified person, to
order or to bearer.
Quedan - is a warehouse receipt
usually for sugar received by a
warehouseman
Negotiable documents of title - are
those by the terms of which, the
bailee undertakes to deliver the
goods to the bearer and those by the
terms of which the bailee undertakes
to deliver the goods to the order of a
specified person

Unpaid seller - one who has not been

paid or tendered the whole price or
who has received a bill of exchange
or other negotiable instrument as
conditional payment and the
condition on which it was received
has been broken by reason of the
dishonor of the instrument
Warranty-is any representation made
by the seller of the thing with respect
to its character, quality or ownership
by which he induces the buyer to
purchase the same relying on said
representation
Implied warranty - is that which the
law derives by implication or
reference from the nature of the
transaction or the relative situation or
circumstances of the parties
irrespective of any intention of the
seller to create it
Kinds of waiver:
Consciente - waiver that is voluntarily
made by the vendee without the
knowledge and assumption of the
risks of eviction

Agency
Interconcionada - waiver that is
made by the vendee with knowledge
of the risk of eviction and assumption
of its consequences
Servitude/Easement - is an
encumbrance imposed upon an
immovable for the benefit of another
immovable belonging to a different
owner
Warranty of merchantability - is a
warranty that goods are reasonably
fit for the general purpose for which
they are sold
Warranty of fitness - is a warranty
that the goods are suitable for the
special purpose of the buyer which
will not be satisfied by mere fitness
for general purpose
Caveat venditor - the vendor is the
principle that the vendor is liable to
the vendee for any hidden defaults or
defects in the thing sold even though
he was not aware thereof
Caveat emptor the principle
that the buyer alone is responsible
for checking the quality and suitability
of goods before a purchase is made.
Redhibitory vice or defect - is a
defect in the article sold against
which defect the seller is bound to
warrant

Power of attorney - is a written

authorization to an agent to perform
specified acts in behalf of his
principal which acts, when
performed, shall have binding effect
on the principal
Kinds of agent:
Universal agent - one authorized to
do all acts that the principal may
personally do and which he can
lawfully delegate to another the
power of doing
General agent - one authorized to
transact all the business of his
principal, or all business of a
particular kind or in a particular place
Special agent - One authorized to act
in one or more specific transactions
are or to act upon a particular
occasion
Authority of an Agent - is the power
of the agent to affect the legal
relations of the principal by acts done
in accordance with the principal's
manifestation of consent to him
Kinds of Principal:
Disclosed principal - if at the time of

the transaction contracted by the

agent, the other party thereto has
notice that the agent is acting for a
principal and of the principal's identity
Partially disclosed principal - if other
party has notice that the agent is or
may be acting for a principal but has
no notice of the principal's identity
Undisclosed principal - if the other
party has no notice that the agent is
acting for a principal
Authority - is the extent or limitation
of the agent's power to represent the
principal
Instructions - are private directions
which the principal may give the
agent to follow in the discharge of his
duties as such agency
Sub-agent - is a person to whom the
agent delegates as his agent, the
performance of an act for the
principal which the agent has been
empowered to perform through his
representative
Factor/Commission agent - is one
whose business is to receive and sell
goods for a commission and who is
entrusted by the principal with the
possession of goods to be sold
Guarantee commission/Del credere

commission - is one where in

consideration of an increased
commission the factor or commission
agent guarantees to the principal the
payment of debts arising through his
agency
Estoppel - is a bar which precludes a
person from denying or asserting
anything contrary to that which has
been established as the truth by his
own deed or representation either
express or implied
Credit transaction - includes all
transactions involving the purchase
or loan of goods, services or money
in the present with a promise to pay
or deliver in the future
Bailment - comes from the French
word 'bailler' meaning to deliver
Bailor - the giver; the party who
delivers the possession or custody of
the thing bailed
Bailee - the recipient; the party who
receives the possession or custody
of the thing thus delivered
Commodatum - one of the parties
delivers to another either something
not consumable so that the latter
may use the same for a certain time
and return it
Mutuum - one of the parties delivers

to another money or other

consumable thing, upon the condition
that the same amount of the same
kind and quality shall be paid
Precarium - kind of commodatum
whereby the bailor may demand the
thing loaned at will

Bond - undertaking that is sufficiently

secured and not for cash or currency
Bondsman - is a surety offered in
virtue of a provision of law or of a
judicial order

Voluntary deposit - is one wherein

the delivery is made by the will of the
depositor

Pledge - contract by virtue of which

the debtor delivers to the creditor or
to a third person a movable or
instrument evidencing incorporeal
rights for the purpose of securing the
fulfillment of a principal obligation
with the understanding that when the
obligation is fulfilled, the thing
delivered shall be returned with all its
fruit and accession

Judicial deposit/Sequestration - takes

place when an attachment or seizure
of property in litigation is ordered

Mortgage - is a contract whereby the

debtor secures to the creditor the
fulfillment of a principal obligation

Guaranty - a guarantor binds himself

to the creditor to fulfill the obligation
of the principal debtor in case the
latter should fail to do so

Foreclosure - is the remedy available

to the mortgagee by which he
subjects the mortgaged property to
the satisfaction of the obligation to
secure which the mortgage was
given through the sale of the property
at public auction and the application
of the proceeds thereof to the
payment of his claim

Usury - contracting for or receiving

something in excess of the amount
allowed by law for the loan or
forbearance of money, goods or
chattels

Suretyship - a relation which exist

where one person(principal) has
undertaken an obligation and another
person(surety) is also under a direct
and primary obligation or other duty
to the obligee, who is entitled to but
one performance and as between the
two who are bound, the second
rather than the first should perform.

Antichresis - contract wherein the

creditor acquires the right to receive
the fruits of an immovable of his
debtor with the obligation to apply

them to payment of the interest, if

owing, and thereafter to the principal
of his credit
Chattel mortgage - is the contract by
virtue of which personal property is
recorded in the Chattel mortgage
register as a security for the
performance of an obligation

Affidavit of good faith - is an oath in a

contract of chattel mortgage wherein
the parties severally swear that the
mortgage is made for the purpose of
securing the obligations specified in
the conditions thereof and for no
other purposes and that the same is
just and valid obligation and one not
entered into for the purpose of fraud