OBLIGATIONS AND CONTRACTS

CREDITOR(OBLIGEE) can demand from another

called DEBTOR(OBLIGOR) performance of a
OBLIGATION
specific conduct and in case of breach of non- Juridical necessity to give, to do or not to performance may demand sanction
do
- A juridical relation whereby a person ( creditor)
may demand from another (debtor) the
ELEMENTS/REQUISITES OF CIVIL
observance of a determinate conduct and in
OBLIGATION
case of breach, may obtain satisfaction from the
SUBJECTIVE ELEMENTS
assets of the latter.
1)CREDITOR (OBLIGEE) Active Subject
2)DEBTOR
(OBLIGOR) Passive Subject
Classification of Obligations
one who is bound to fulfill
1) Civil Obligations - Obligations which if not
fulfilled when it becomes due or demandable
OBJECTIVE ELEMENTS
may be enforced in court through an action
:1)OBJECT/PRESTATION
2) Natural Obligations - not enforceable in the
2)Efficient Cause/Legal Tie/Vinculum Juris
courts but binding on the party who makes
them, in conscience and according to equity and
CREDITOR - the one who as a matter of right
natural justice
to demand fulfillment of prestation/ specific
3) Moral Obligations - Those without juridical
performance
necessity for performance dependent entirely on
conscience which cannot be sanctioned for
*Juridical capacity - fitness to be the subject
compulsion
of legal relations; only lost through death.
*Capacity to act power to do acts with legal
Obligations enforceable by:
effect, is acquired and may be lost.
Civil
: ACTION
NOTE: Those devoid of capacity to act can be
Natural : OBLIGATION WITHOUT SANCTION
creditors through representatives or guardians.
Moral
: CONSCIENCE
Those incompetent can only be sued for the
amount proven to be redounded for his
Civil and Natural Obligations
benefit. Guardian can be sued.
1)Civil Obligations derive their binding force
from positive law; Natural Obligation derive their
DEBTOR - party whom a demand may be
binding effect from equity and natural justice
made, compulsion of performance can be
2)Civil Obligations can be enforced by court
demanded and liability may be enforced.
action or the coercive power of public authority;
-party who must adjust conduct to meet
Natural Obligation cannot be compelled by
standards/requirement of law/creditor.
court action but depends solely upon the
good conscience of the debtor
Minimum Requirements
1. Debtor and Creditor must be determined or
Moral, Civil, Natural Obligation
definite at time of civil obligation
distinguished
Non fulfillment of Moral Obligation
*Identity of Creditor and Debtor is not needed
-aggrieved may seek redress
when credited but when action needs to be
Non-performance of Civil Obligation
performed.Certainty of identity is only
-aggrieved person may seek recourse
mandatory during payment or performance
Natural Obligation - former civil obligation which
was extinguished and cannot be compelled be
done, except
ex.
An unpaid loan which prescribed after 10 year
and Debtor made voluntary payment
*NOTE: Voluntary payment is no longer
recoverable
Civil Obligation - juridical relation between 2 or
more parties whereby one called

2. Debtor/ Creditor must possess civil or legal

capacity at time of said performance
*Those devoid of legal capacity must be
represented in accordance of law
Object of Civil Obligation
-not material thing but object/prestation refers
to specific conduct
To give/deliver (Positive Real Obligation)
To do
(Positive Personal Obligation)
Not to give
(Negative Real Obligation)

Not to do

(Negative Personal Obligation) 3) Prestation must subject to pecuniary

valuation

To give/deliver (Positive Real

Obligation)
PURPOSE:
1) To transfer ownership of thing or right
as in the case of a donation, sale,
usufruct
*usufruct - beneficial ownership of a thing
2) To convey possession even if
temporary such as lease, commodatum
or depositum
COMMODATUM - use of tangible
personal property
DEPOSITUM - delivery of tangible
personal property for safekeeping
Kinds :1.Voluntary (ex. safekeeping of
pets)
2. Necessary( common carriagebus, hotels -valuables )
3)Obligation may have been created to
require return of a thing
*Restitution - to return
*Depends on juridical relationship of
Creditor and Debtor
To do
(Positive Personal
Obligation)
PURPOSE:
1) Rendition of some service/work
ex. employee contracts, legal aid
2) Extinguish pre-existing obligation
ex. payment of loan
Not to give
Obligation)

(Negative Real

Not to do
(Negative Personal
Obligation)
-involves desistance by debtor from
performance of act thus creditor/debtor
commits breach of contract in
performance of prohibited act
ex. not to obstruct, not to impede, not to
obstruct light/view of building/house
REQUIREMENTS OF VALID
PRESTATION
1) Performance thereof must be possible
both legal and physical
2) Prestation must be certain or
ascertainable

*Prestation/ Conduct must be physically

and legally possible
IF physically impossible it annuls
prestation and obligation itself
IF illegal while physically possible it
becomes subject to criminal liability and
invalidates such
Vinculum Juris/ Efficient
Cause/Juridical Tie
-gives rise to civil obligation
If source cannot be determined no
relationship is established and no
obligation can be demanded.
Sources of Obligation
1) Law
2) Contracts
3)Quasi Contracts
4) Delicts
5)Quasi Delicts
1) LAW
- independent source of civil obligation
-must be established and expressly
provided by law, imposing and creating
obligations
* Not presumed, but must be stated; IF
not stated it is not a demandable
obligation
* Must have specific stipulation
A. Law as a source of Obligation
B. Law recognize obligation from other
source
a. When qualifying condition concurs legal
obligation arises
Examples
Payment of Income Tax/Income Tax
Returns
National Internal Revenue Code source of obligation
NOTE: Only those who qualify must
comply with the law
Income generated by law
-employees with minimum income
prescribed by law
Real property/Real Estate Tax
-land, buildings, condominiums,
townhouses pursuant to Local
Government Code
b. Contract of Sale
-Law recognizes stipulation from contract

-Law supplies deficiencies, if any, in

contract
2) CONTRACT
-voluntary acts by at least 2 parties with
condition precedent to existence of civil
obligation
-meeting of minds between 2 or more
persons; where one is obliged to give
something or do something
NOTE:
Meeting of minds - there is mutual
consent or concurrence of will
NO CONSENT NO CONTRACT
FREE and VOLUNTARY CONSENT
must be given otherwise inexistent
contract
Parties must comply with utmost
good faith and fidelity
When parties do not comply
consequence/conflict exists and
law supplies any gap and resolve
conflict
Failure to observe utmost diligence
and fidelity can be:
considered as BREACH OF
CONTRACT
cause INJURY/DAMAGE
FINE/DAMAGES can be sought
OBLIGATION TO GIVE, TO DO OR NOT
TO DO
TO DO - includes all kinds of work/service
TO GIVE- prestation which consists in
delivery of movable/immovable thing in
order to create a real right/for use of
recipient/obtain simple possession/ return
thing to its owner
NOT TO DO - restrains/prohibits obligor to
perform/do some act
ex.
employee after termination/separation
not to undertake similar business as that
of former employment for protection of
Trade Secrets
NOTE: Contracts have the force of law
between parties
3)QUASI CONTRACT
- a legal fiction of legal relation where
there is no contract which arises from the
principle that no one should be allowed to
unjustly enrich himself at the expense of
another by the latter's voluntary and
unilateral act

-juridical relation which arises from

certain lawful and voluntary and
unilateral acts to the end that no one may
be unjustly enriched at the expense or
benefit at the expense of another.
*Voluntary - actor not bound by any preexisting obligation to act
*Unilateral - arises from sole will of actor
not bound by any bilateral/reciprocal
agreements
REQUISITES OF QUASI CONTRACT
1)Absence of contract
2) Act done in favor of another person is
voluntary and unilateral
3)Law imposes upon person obligation to
reimburse what has been paid (avoid
unjust enrichment)
KINDS OF QUASI CONTRACT
SOLUTIO INDEBITI - one receives
something from another when there is NO
RIGHT TO DEMAND for it and was
DELIVERED through MISTAKE
NEGOTIORUM GESTIO - authority of
officious manager of a property/business
is extinguished when owner demands the
return of the same
NEGOTIORUM GESTOR - one who is entitled to
be indemnified for necessary and useful
expense incurred by him and damage suffered
in his discharge of duties
*Difference between SOLUTIO INDEBITI and
ACCION IN REM VERSO
SOLUTIO INDEBITI proof of money/delivery of
property made by mistake - OWNER is ENTITLED
to RETURN
ACCION IN REM VERSO natural obligation arises
to return property who had no right thereto -NO
RIGHT is ESTABLISHED
NOTE: BURDEN OF PROOF to prove mistake of
delivery belongs to plaintiff (Solutio Indebiti)
IF NOT PROVEN but evidence shows defendant
is NOT ENTITLED (Accion In Rem Verso)
SOLUTION INDEBITI - ILLUSTRATION:
Facts: Parent dies and left 20M cash to children.
Parent had debt of 20M to creditors. During
wake/funeral, creditors attended and had intent
of collecting 20M debt owed by the deceased.
Issue: Whether or not creditors have right to
collect 20M left to children

b. Reparation : reparation of amount of

Held: No. Creditors do not have right to collect
damage, considering its price and sentimental
20M cash from heirs. Heirs are not liable beyond
value
value of inheritance EXCEPT if PROPERTY OF
c. Indemnification : giving compensation for
DECEASED exists. OR if VOLUNTARY PAYMENT
loss or for consequential damages caused to
made NOT RECOVERABLE
the injured party and his family or even third
persons
*NEGOTIORUM GESTIO - Inofficious Management
based on kindness to prevent property from
CRIMINA
CIVIL
falling into disrepair
L
LIABILITY
NEGOTIORUM GESTIO - ILLUSTRATION:
LIABILIT
Facts: N-Neighbor left the country for 1 year
Y
vacation/trip and no caretaker was assigned.
1. RPC Conviction
Yes
Yes thru
Sometime later a storm was about to hit the
Resitution,
area. A found out part of the roof shingles of
Reparation
Neighbor are loose and may be detrimental to
Indemnification
damage of his property. A voluntarily repaired
2. ACQUITTAL
the loose shingles and reinforced the roof. a. Reasonable
No
Yes.
Doubt
Preponderance
Issue: Whether or not A is entitled to
of evidence
reimbursement from N
b. Innocence
No
No
c. Justifying
No
No. Except
Held: Yes. A is entitled to reimbursement forcircumstance
Avoidance of
expenses incurred.
greater evil
Obligation in Inofficious management continues
d. Exempting
No
Yes through
until discharged or replaced by an agency as
per
Circumstance
guardian/paren
instruction of the owner
tal authority
NOTE: NECESSARY EXPENSE incurred to
3. Dismissal due to No
Yes. Either
preserve property, NOT those BEYOND
violation of rights
dependent or
NECESSARY is reimbursible.
Ex. Double
independent
QUANTUM MERUIT - as much as deserved jeopardy
civil action
5) QUASI DELICTS
4)DELICT
-entirely distinct and separate from the delict
-a voluntary act but illicit and punishable by law
or crime under the RPC
-twin liability except for victimless crimes
-fault or negligence caused if there is no preNOTE: In relation to ART. 100 may apply to acts
existing contractual relation between parties
against persons/private persons or victimless Article 2176. whoever by act or omission
crimes (Mala prohibita - possession of firearms,
causes damage to another through fault or
drugs. etc.)
negligence is obliged to pay for the damage
done.
DAMNUM ABSQUE INJURIA(Loss without
injury)
- self inflicted damages such as when the
plaintiff cannot attribute damages to
anyone except himself
NEGLIGENCE
ART. 100 Every person criminally liable is also
-is the failure to observe the protection of
civilly liable
the interests of another person;
ART. 20 Any person who causes injury or
-degree of care , precaution and vigilance
damage to another must indemnify the same
which the circumstances justly demand
whereby a person suffers injury
LAW - ex lege
CONTRACT - ex contractor
QUASI CONTRACT
DELICT - ex malificio
QUASI DELICT

How civil liability is enforced:

a. Restitution : restoration of thing itself

TEST OF NEGLIGENCE
A. Duty on part of defendant to protect the
plaintiff from the injury of which the latter
complains

B. Failure to perform that duty

C. Injury suffered by plaintiff through such
failure
REQUISITES OF LIABILITY FOR Q.DELICTS
A. There exists wrongful act/omission
imputable to defendant by reason of
default or negligence
B. There exists damage/injury which must
be proven by person claiming recovery
C. Negligence/Fault is proximate cause of
damage or injury
LIABILITY OF EMPLOYER FOR Q.DELICT OR
CRIME OF EMPLOYEE
1) Q.DELICT -The liability of the employer
for the fault and negligence of his
employee is PRIMARY; he can be sued
directly by injured party - may claim
reimbursement from his employee after
CRIME -Art.103 of RPC SUBSIDIARY
Liability- employee must have frist been
convicted and sentenced to pay civil
indemnity, and it must be shown that he is
insolvent in order that employer be held
liable.
2)Q.DELICT -Employer can avoid liability
by proving he exercised the diligence of a
good father of a family to prevent
damage.
CRIME - committed by employee subsidiary liability of employer is
ABSOLUTE and Cannot be avoided by
proof of such negligence
3)Q DELICT - Employers liable for acts of
employees whether in
performance/discharge of duties
CRIME - Employer is only liable when in
performance/discharge of duties

QUASI CONTRACT vs OTHER SOURCES

DELICT: Act giving rise to quasi-contract
must be lawful ;distinguished from crime
which act/omission is unlawful
Q.DELICT: Quasi contract must be
voluntary; Quasi delict based on
fault/negligence or mere lack of foresight
CONTRACT: Quasi contract is unilateral;
Contract 2 parties come to an agreement

QUASI DELICT AND DELICT vs OTHER

SOURCES
1.NATURE OF RIGHT VIOLATED
Q.DELICT - private right is violated; wrong
against individual
CRIME - public right violated; wrong
against State
2.CRIMINAL INTENT
Q.DELICT - criminal intent not necessary;
CRIME- criminal intent necessary for
existence of criminal liabilty and essential
to crime
3.LEGAL BASIS OF LIABILITY
Q.DELICT - any act/omission based on fault
or negligence to an agreement
CRIME - act punished when violates penal
law
4.LIABILITY FOR DAMAGES
Q.DELICT - gives rise to liability for
damages to injured party
CRIMES - exception to civil liability arising
from contempt, gambling, violations of
ordinance
5.FORM OF REDRESS
Q.DELICT- reparation of injury suffered,
compensation/indemnification
CRIME - fine or punishment or both
6.AMOUNT OF EVIDENCE
CRIME/DELICT - Proof beyond reasonable
doubt
Q. DELICT - mere Preponderance of
evidence
7.COMPROMISE
Q.DELICT - can be compromised like any
civil liability
CRIME- cannot be compromised
NATURE AND EFFECT OF OBLIGATIONS
Constitutional/Fundamental Rights
-respects and regulates inherent rights
Statutory Rights
Either created by law or recognized by law
a. Created by law: duty and obligation
derived from law itself
b. Recognized by law : provisions of law
merely supplemental to original source of
rights such as those stipulations of
contracts
Either real rights or personal rights
a. Real rights/ JUS IN REM - enforceable
and demandable against the whole world
ex. ownership, name
b. Personal Obligations/ JUS IN
PERSONAM

- demandable against specific person

(defendant)
-derived from Law, Contract, Q.Contract,
Q.Delict, Delict
-power belonging to a person to demand
of another the fulfillment of prestation to
give, to do or not to do
REAL OBLIGATION
- Creditor may demand from the debtor
transfer or conveyance of ownership/
merely possession of a thing where the
performance of prestation creates real
right/right to return
-transfer/convey ownership of thing even if
only temporary/ demand its return
NEED OF DELIVERY
-Ownership of thing is transferred not by
agreement but by delivery
-Creditor does not acquire real right over
thing except from the time it is delivered
NOTE: From the time the obligation to
deliver a determinate thing arises the
creditor only has a personal right to the
thing itself and to the fruits thereof
MODES OF DELIVERY
1.ACTUAL DELIVERY
-physical transfer of thing from creditor to
debtor
-property changes hands
2.CONSTRUCTIVE DELIVERY
-physical transfer is implied
a. Symbolic Delivery
ex. keys of car given as grad gift;
frame and picture
Sale of building on land even if not
included or increase price in proportion
to land and building
b. Formal Delivery
-execution of public instrument
ex. selling land - deed of donation
c. Traditio Longa Manu (Longhand)
-delivery by mere consent or pointing out
of object
ex. Mango fruits from tree agreed upon
d. Traditio Brevi Manu (Shorthand)
-delivery by shorthand
-delivery whereby a possessor of thing not
as owner, becomes the owner
ex. tenant in possession buys house he is
renting
e. Traditio Constituum Possessorium
-opposite of Brevi Manu

-delivery whereby a possessor of a thing

as owner, retains possession no longer as
owner but in some other capacity
ex. House owner sells house, but remains
in possession as tenant of same house
GENERIC REAL
OBLIGATION/INDETERMINATE THING
-cannot be lost thru fortuitous event
-thing delivered must be consistent with
the intent. purpose of parties
-neither superior or inferior in quality
NOTE: creditor cannot demand of thing of
superior quality; debtor cannot give thing
of inferior quality
otherwise there is BREACH OF CONTRACT
MUST BE OF AVERAGE
QUALITY/CONSISTENT WITH OBLIGATION
Generic Thing - one that is indicated by its
kinds without distinguished from others of
the same kind
belongs to the same kind, genus, class
SPECIFIC REAL
OBLIGATION/DETERMINATE THING
Determinate /Specific Thing- one that can
be distinguished from others of its kind
a.TO PRESERVE : Bonus Pater Familias
b.TO DELIVER THING ITSELF
c.TO DELIVER FRUITS
d.TO DELIVER ACCESSORIES AND
ACCESSIONS
a. TO PRESERVE: Bonus Pater Familias
-law requires debtor to exercise the
diligence of a good father of a family
-exercise ordinary diligence unless other
degree of diligence required in contract
-law prohibits stipulations of no diligence
will be provided at all
NOTE: DEPOSITUM, COMMODATUM and
COMMON CARRIER - extra ordinary degree
of diligence is required. Simple Negligence
amounts to BREACH OF CONTRACT
b. TO DELIVER THING ITSELF
-thing to be delivered not suscepttible to
substtitution; even if of greater value
unless both parties agree to same
c. TO DELIVER FRUITS
- creditor/obligee in an obligation to
deliver a determinate thing is entitled to
fruits from the time the obligation to
deliver arises

KINDS OF FRUITS
NATURAL - spontaneous fruits and young
of animals
INDUSTRIAL - man-made/ thru labor or
human intervention
CIVIL- emanate from certain transaction

Moment when obligation arises:

a.Obligations arising from Law,
Q.Contracts, Q.Delicts and Crimes
- specific provisions of law determines
when delivery should be made
b. Obligations with SUSPENSIVE
CONDITION
- obligation to deliver occurs from moment
condition happens/expiration of
term/period
c. NO TERM/CONDITION
-obligation to deliver arises upon
perfection of contract/creation of
obligation
d. TO DELIVER ACCESSORIES AND
ACCESSIONS
ART.1166 Obligation to give
determinate thing includes that of
delivering all accessions and
accessories even if not mentioned
*Accessories
- those joined/incorporated/added to
principal thing for better use or enjoyment
ex. car tint, key, building on land
*Accessions
- additions or improvements upon a thing
-eveything
produced/attached/incorporated naturally
or artificially to principal thing or that
which serves to complete it
ex. doors, windows of house, property
beside water- owns water beside property
PERSONAL OBLIGATIONS
1.Positive Personal Obligations (TO
DO)
2.Negative Personal Obligations(NOT
TO DO)
1.Positive Personal Obligations (TO
DO)
-when debtor does not comply with an
obligation to do, creditor is entitled to
have thing done in proper manner/by
himself/third person at expense of debtor

ART. 1167 If a person obliged to do

something fails to do it the same
shall be executed at his cost. Same
shall be observed if he does it in
contravention of the tenor of the
obligation. May be decreed what has
been poorly done be undone
2.Negative Personal Obligations(NOT
TO DO)
ART. 1168 When obligation consists in
not doing and the obligor does what
has been forbidden him it shall be
undone at his expense
NOTE: If it is impossible to undo thing
physically or legally Indemnification for
damages may be demanded.

BREACH OF OBLIGATIONS
I.
DEFAULT (MORA)
II.
FRAUD (DOLO)
III.
NEGLIGENCE
IV.
CONTRAVENTION OF TERMS
I.

DEFAULT (MORA)

-delay in fulfillment of obligations; non

fulfillment with respect to time
-begins from moment creditor demands
performance of obligation
NOTE: There is NO DELAY in Negative
Obligations only in Positive Obligations
ART.1169 Those obliged to deliver or
to do something incur in delay from
the time obligee judicially or
extrajudicially demands from them
fulfillment of the obligation.
KINDS OF MORA
a. MORA SOLVENDI
b. MORA ACCIPIENDI
c. COMPENSATIO MORAE
a. MORA SOLVENDI/ DEBTOR
-Default on part of Debtor
REQUSITES
1)Obligation DEMANDABLE and already
liquidated
2) Debtor DELAYS performance
3) Creditor requires PERFORMANCE
judicially or extrajudicially
NEED FOR DEMAND

GENERAL RULE: Default begins from

moment creditor demands performance of
obligation, no demand (judicial/extrajudicial) effects of default will not arise
*DEMAND is necessary even if period has
been fixed by obligation including
contracts of loan,sale,mortgage
*Default begins
a.Extra-judicial demand before filing of
complaint
-from DATE of such Extra-judicial demand
b. No evidence of extra-judicial demand
-from filing of complaint
WHEN DEMAND NOT REQUIRED
1.Expressly stipulated
-intent of parties to constitute debtor in
delay upon maturity of obligation, even
without demand is clear in agreement
2.Law provides
ex.Taxes
3.Period is controlling motive/TIME IS OF
THE ESSENCE
ex. Agricultural contracts needed at
particular time
Making of Wedding dress, wedding is due
at scheduled time
4.Demand would be useless
-when impossibility caused by some
act/fault of debtor
ex. sold/disposed thing to be delivered
-when due to Fortuitous event and debtor
bound himself liable in such event
5.Obligor expressly acknowledges default
-there must be express recognition of
default and not mere requests for
extension of time to perform
NOTE: It is not sufficient that the law or
obligation fixes a date for performance it
must also expressly provide after period
lapses, default exists
EFFECTS OF MORA SOLVENDI
1)Delay risks damaging thing
2)Damages for delay
b. MORA ACCIPIENDI/ CREDITOR
-Default on part of Creditor
-delay in performance based on omission
by creditor of necessary cooperation and
acceptance
REQUISITES
1) Offer of PERFORMANCE by Debtor
2) Offer COMPLIES with prestation

3)Creditor refuses performance WITHOUT

JUST CAUSE
EFFECTS OF MORA ACCIPIENDI
1)Debtor exempt from loss and risk of
thing
2)Expenses incurred by Debtor chargeable
to Creditor
3)If with interest, Debtor does not have to
pay from moment of Delay incurred
4)Debtor relieved from consignation
c. COMPENSATIO MORAE/RECIPROCAL
OBLIGATIONS
-both parties are in default; both liability
for damages offset equitably
-fulfillment by parties must be
simultaneous unless otherwise provided
-fulfillment of one party conditioned in
fulfillment of other party
ART 1169. In reciprocal obligations,
neither party incurs in delay if the
other does not comply or is not ready
to comply on what is incumbent upon
him. From moment one of the party
fulfills his obligation, delay by the
other begins

II.

FRAUD (DOLO)

-deliberate and intentional evasion of

normal fulfillment of obligations
-element of intent and not degree of harm
necessary
FRAUD IN 2 WAYS
ACTIVELY - through
misrepresentation/devices/schemes with
purpose of deceiving the other
PASSIVE - concealment of
material/significant fact that requires
disclosure
KINDS OF DOLO
DOLO INCIDENTE
-intentional deliberate intent to evade
normal fulfillment of pre-existing
obligation
-fraud committed in performance of
obligation
ex. sale of car - prior delivery, engine
changed before sale
NOTE: Liability arising from fraud cannot
be condoned
DOLO CAUSANTE

-involves fraud in obtaining consent of

party to contract, NO BREACH done,
VOIDABLE CONTRACT
MALISCIOUS PROSECUTION
a. Malice present in filing case
b. Absence/NO probable cause
c. Case dismissed
d. Filing prompted to humiliate/harras
FRAUD (DOLO)
DELIBERATE INTENT
to cause damage

NEGLIGENCE(CULPA)
VOLUNTARY ACT
done but NO
DELIBERATE INTENT
CANNOT be mitigated Liability may be
reduced in certain
cases

III.

NEGLIGENCE

-failure to take necessary caution or

observe required care, skill or foresight to
avoid injury to another
-disregard of necessary care required
under circumstances
DEGREES OF DILIGENCE
1.EXTRAORDINARY DILIGENCE
2.ORDINARY DILIGENCE
3.SIMPLE DILIGENCE
1.EXTRAORDINARY DILIGENCE
-slight negligence violate obligation
required in the following obligations
common carriers
-transport passengers and cargo safely
banks and similar entities
-handling money, property and assets of
customers
private companies imbued with public
interest
2.ORDINARY DILIGENCE
-bonus pater familias
-ORDINARY NEGLIGENCE will cause
BREACH
3.SIMPLE DILIGENCE
-can only take place when expressly
provided for and stipulated by parties
*charter party - in contract of common
carriage
ex. private tour bus; may be stipulated
that slight diligence be observed
NOTE: NOT ALLOWED stipulation in
contract releasing creditor from
obligation to observe any diligence at all

KINDS OF NEGLIGENCE
1. CULPA CRIMINAL
-act expressly punished by statute
-proof beyond reasonable doubt
conviction by final judgment warrant
imposition of penalty
CIVIL LIABILITY
OWNER/EMPLOYER of establishment may
be held SUBSIDIARY LIABLE
NOTE:
CRIMINAL GUILT of EMPLOYEE
CIVIL GUILT OF EMPLOYER
2. CULPA CONTRACTUAL
-negligence is performed of obligation
arising from contract
-proof of execution of contract is
necessary to hold other party liable
NO CONTRACT NO SUIT
*NEGLIGENCE in connection of contractual
obligation committed by employee,
LIABILITY is DIRECT AND PRIMARY OF
EMPLOYER
RESPONDEAT SUPERIOR/COMMAND
RESPONSIBILITY
-Negligence of employee immediately
holds employer liable
-liability is vicarious as long as there is
proof of employee negligence

3. CULPA AQUILIANA
-negligence arising from ac/ omission
which resulted to loss ,damage or injury
whether or not there is a pre-existing
agreement between parties
NOTE: PLAINTIFF'S BURDEN OF PROOF
When there is proof of Employee
Negligence presumption is Employer is
Negligent. Burden of proof to overcome
presumption belong to EMPLOYER
CULPA CRIMINAL, CULPA
ACQUILIANA, CULPA CONTRACTUAL
DISTINGUISHED
1)In CAqui and CCon negligence is derect
substantial and independent cause
2)CCrim proof beyond reasonable doubt
necessary, CAqui and CCon mere
preponderance of evidence sufficient

3)CAqui, defense of diligence is a

complete defense, CCrim and CCon not
valid defense

IV.
CONTRAVENTION OF TERMS
-prestation is not done or poorly done
ex. payment of installment - omission
of any payment
contracting 3rd party to perform purely
personal obligation
REMEDIES IN CASE OF BREACH OF
OBLIGATION
I.
SPECIFIC
PERFORMANCE
II.
RESCISSION/RESOLUTION
III.
DAMAGES
IV.
V.
VI.

EXHAUSTION OF REMEDIES
ACCION SUBROGATORIA
ACCION PAULIANA

I.
SPECIFIC
PERFORMANCE
CREDITOR: accept performance
DEBTOR: fulfill obligation; failure to do
so subject to additional damages
II.
RESCISSION/RESOLUTION
ART. 1191
NOTE: Unilateral rescission by party
is valid whether or not stipulated in a
contract may be done extra-judicially
or judicially.
When other party contests Judicial
rescission is mandatory and
defendant afforded opportunity to
explain why offense was committed
and breach is not substantial

REQUISITES:
1) Breach in Mutual Obligation
2)Breach is substantial
-violative of terms
3) Plaintiff is not guilty of breach
4) Obligation not yet passed to 3rd party
-rights of 3rd party are superiro to original
party
5)Partial fulfillment/compliance
III. DAMAGES

-can be claimed by filing separate civil

action
KINDS OF DAMAGES
1.ACTUAL DAMAGES
-form of reimbursement for expenses
incurred by aggrieved party directly
related to non performancce of obligation
*There must be appropriate evidence to
recover actual damages (receipts)
*DOCTOLERO - only expenses from direct
cause of injury may be recovered
*compensatory damages
- recovery of loss of income/earning
capacity
-can be recovered in 2 instances DEATH
AND PERMANENT INCAPACITY/DISABILITY
2.MORAL DAMAGES
-automatic upon conviction in certain
crimes
resulting to death
rape (simple/qualified) - no need to prove
entitlement to moral damages
He who demands suffering by way of
sleepless nights, anxiety, mental anguish,
wounded feeling, besmirched
reputation/tainted good will
NOTE: Corporation as artificial person not
entitled to moral damages except on
Besmirched Reputation
3.Exemplary Damages/Punitive Damages
-discretion of the court but based on
principal that act/omission of defendant
should serve as a deterrent to public
-awarded when act/omission due to
blatant disregard for right of other
4. Nominal Damages
-awarded by courts whenever right was
clearly violative by reason of acts of
defendant
5.Temeperate Damages
-substituted for actual damages whenever
proof was inflicted and expense are
incurred as a result.
When exact amount of expenses cannot
be determined the courts assess the value
of expenses in absence of definite proof
6.Liquidated Damages
-parties predetermine extent and value of
injury by breach of contract (penalty
clause)

IV.
EXHAUSTION OF REMEDIES
-applicable only when obligation is
monetary or pecuniary in nature
-creditor has right to look at asset of ebtor
for satisfaction of debt
ART 2236 OF NCC Properties of debtor
is subject to liability for his
obligations
LEGAL/JUDICIAL METHODS
1.Attachment
-plaintiff seeks to reserve specific property
of defendant to cover payment
2.Execution
-through final judgment ; sheriff auctions
property
3.Garnishment
-garnish bank account/ hold amount owed
by defendant to plaintiff
PROPERTIES EXEMPT FROM
EXECUTION/ATTACHMENT/GARNISHME
NT
1)CONJUGAL HOME
-when spouse executes property without
consent of other spouse
2)FAMILY HOME
3) RETIREMENT BENEFITS
V.
ACCION SUBROGATORIA
- The action which the creditor may
exercise in the place of his negligent
debtor in order to preserve or recover
for the patrimony of the debtor the
product of such action, and then
obtain therefrom the satisfaction of his
own credit.
- The creditor shall be substituted to
all the rights the debtor has as against
third person.
- To exercise accion subrogatoria, a
previous APPROVAL OF COURT NOT
NECESSARY
VI.
ACCION PAULIANA
- Action to rescind or revoke acts
which the debtor may have done to
defraud them or acts which are
considered as fraudulent reductions of
the properties of the debtor which
constitute the guaranty for his debts.
Revocable actions:
- Alienations of property
- Payments of debts which are not due

- Renunciations of rights such as the

right of usufruct or an inheritance
- Assignments of credit
- Remission of debts
- Renunciation of a prescription which
has already been acquired.
- Judicial acts such as when the
debtor, in connivance with another,
permits the latter to bring an action
against him and obtain a judgment by
default or confession and such
judgment is enforced against the
debtors property.
Exception:
- Payment of pre-existing obligations
already due, whether natural or civil,
cannot be impugned by this action.
FORTUITOUS EVENT
-obligation is extinguished no liability
ART. 1174 No person shall be
responsible for those events which
could not be foreseen, or which
foreseeable but inevitable.
Fortuitous event
1) act of God
-accident due to natural causes without
human intervention where no reasonable
amount of care or foresight could have
prevented such
2)natural occurrences
ex. flood, earthquake, typhoon
3)act of man
ex. riot, strike, war
ELEMENTS OF FORCE MAJURE (CEED)
1.Cause of breach of obligation
independent of will of debtor
2.Event is unforeseeable or unavoidable
3.Event renders it impossible for debtor to
fulfill his obligation
4.Debtor free from any participation in
aggravation of injury of creditor
NOTE: The obligor is exempt from liability
when loss occurs thru fortuitous event
only holds true when during delivery there
is no stipulation holding him liable even in
case of fortuitous event
INSTANCES WHERE DEBTOR STILL
LIABLE EVEN IF FORTUITOUS EVENT
1. EXPRESSLY STIPULATED

2.IMPOSED BY LAW
Article 1169 par 2, where the
debtor promises to deliver same
subject to two parties then there is
breach of contract. Hence, even if
there is fortuitous event, debtor is
still liable.
* Contract of depositum to innkeepers
or hotel owners, the general rule is that
they are not liable for robbery. However,
they can be liable if the robbery is
committed by their employee. Robbery
in this case is a fortuitous event.
- Contract of deposit of baggage on bus
compartment, liable if the same is lost
due to fortuitous event.
3.ALIATORY CONTRACTS (ASSUMED RISK)
-Those who benefit from the
maintenance or operation of dangerous
machineries or facilities must indemnify
for the injuries or damages that they
may cause.
- Exception: Unless the injury is caused
by the inexcusable fault or negligence of
the victim.
TRANSMISSIBILITY OF RIGHTS AND
OBLIGATIONS
- Rights and obligations are
transferrable to heirs, assignees, and
successors-in-interest.
1. EXPRESSLY STIPULATED
2. EXPRESSLY STATED BY LAW
3. PERSONAL OBLIGATION
1. EXPRESSLY STIPULATED
- If promissory note is negotiable in
nature then it may be transferred upon
endorsement and negotiations, but not
if it states pay to X only.
2. EXPRESSLY STATED BY LAW
a. PARTNERSHIP - death of a partner
extinguishes the partnership since the
same is purely personal and based on
trust and confidence.
b. AGENCY - death of principal or agent
extinguishes the agency.
c. USUFRCUT - death of usufructuary
extinguishes the usufruct.
- Usufruct: real right whereby the right
to possess, use and derive benefits and
fruits of the property is given to one
person while owned by another
d. COMMODATUM - death of the
borrower extinguishes the

commodatum. The same cannot be

passed to the heirs and other
successors. The obligation to pay on
part of the heirs now becomes a natural
obligation.
Exception: Immediate member of the
family
3. PERSONAL OBLIGATION
- In succession, the MONETARY
OBLIGATION OF DECEASED IS
PERSONAL; heirs cannot be compelled
to pay because debt is chargeable only
to the estate of the deceased.
- Heirs are only liable for the said debts
if they divide the estate of their parents
without paying the debts first.
- TRANSFER OF PUBLIC OFFICE or other
position which requires personal
qualification is also NOT ALLOWED
KINDS OF OBLIGATIONS
1. PURE
2. CONDITIONAL
3. WITH A PERIOD/TERM
4. ALTERNATIVE
5.JOINT/MANCOMMUNADA
6. SOLIDARY
7. DIVISIBLE
8. INDIVISIBLE
9. PENAL CLAUSE
1.PURE OBLIGATIONS
- When the obligation contains no term
or condition whatever upon which
depends the fulfillment of the obligation
contracted by the debtor.
- Application: When the period originally
given has been cancelled by mutual
agreement of the parties, or the nonfulfillment of a condition resolves the
period stipulated, the obligation must
be considered as pure.
Limitation on immediate demandability:
- The immediate demandability of a
pure obligation, should not lead to
absurd interpretations or requirements
impossible of instantaneous compliance.
- Immediate demandability shall be
based on purpose of obligation; creditor
shall not abuse the same and shall not
defeat the intent of the obligation.
Court fixes reasonable period:
- The concept of pure obligations is not
violated when the court fixes a

reasonable period within which the

debtor should pay, inasmuch as this
does not alter the character of the
obligation as pure and immediately
demandable.
- The creditor may resort to court action
to fix a time for the performance, in
case the debtor refuses on extra-judicial
fixing of definite period.

b.W/O F/N
-ordinary wear and tear/reasonable use of
property
DEBTOR must DELIVER; CREDITOR must
ACCEPT

CONDITIONAL
-one where obligation to happening
of future and uncertain event OR
past event unknown to parties
1)Future and uncertain event
-event which may or may not take place
ex. purchase price to be paid when buyer
obtains bank loan
NOTE: Lack of knowledge of future event
makes condition future knowledge ;based
on condition not event itself
2)Past event

b.W/ EXPENSE OF DEBTOR

-right to be reimbursed for all
NECESSARY IMPROVEMENTS made.

2 basic kinds of condition

SUSPENSIVE CONDITION
- event happening which gives rise to
obligation
RESOLUTORY CONDITION
-happening of event will terminate preexisting obligation
IMPORTANT
1) SC creates juridical tie; RC juridical tie is
resolved
SC/RC all conditions must be possible
2) SC IF PENDING happening of SC rights
and obligations between parties are
already recognized
IF IMPOSSIBLE nullifies condition and
obligation itself
LOSS - impossibility of performance
a.W/ FAULT/NEGLIGENCE
-debtor fails to deliver payment must
indemnify creditor
b.W/O F/N
-due to fortuitous event - obligation
extinguished
DETERIORATION - impaired condition
a.W/ FAULT/NEGLIGENCE
- rescission OR Specific performance
+damages

IMPROVEMENT - must be NECESSARY to

be reimbursable against USEFUL
a.W/O EXPENSE OF DEBTOR
-creditor benefits; cannot demand higher
price

NOTE: IF USEFUL AND NOT

NECESSARY IMPROVEMENTS made
creditor has right to remove at
expense of debtor
RECIPROCAL OBLIGATION
-same source and origin and
debtor/creditor mutually bound to
happening of condition
-MUTUAL COMPENSATION
NOTE: IF ONE PARTY GAINS earnings
regardless of amount/value extinguished
unless otherwise stipulated
UNILATERAL OBLIGATIONS
-fruits/income earned during period where
CONDITION has NOT take place is to the
benefit of the DEBTOR
SUSPENSIVE CONDITION
MAY BE POSITIVE OR NEGATIVE
SUSPENSIVE
POSITIVE SUSPENSIVE CONDITION
-stipulation some event WILL HAPPEN at
a future determinate time
NOTE: When Suspensive condition does
not take place within time described OR
clear will not take place. OBLIGATION IS
EXTINGUISHED
NEGATIVE SUSPENSIVE CONDITION
-stipulation that some event WILL NOT
HAPPEN within future determinate time
ex.
IF binay does not suceed to Presidency
by 2015
*JAN 2016 OBLIGATION is effective

*TIME BOUND - happening of condition will

retroact to time of creation/establishment
of obligation
NOTE: Fixing of SUSPENSEIVE CONDITION
to fulfillment of obligation does NOT
EXTINGUISH DEMAND
*IF SUSPENSIVE CONDITION DOES
NOT TAKE PLACE. JURIDICAL TIE NOT
ESTABLISHED
NO CREDITOR-DEBTOR RELATION
RESOLUTORY CONDITION
-fulfillment of obligation is subject to
Resolutory
-condition right and obligation terminates
when condition is fulfilled
-IMMEDIATELY DEMANDABLE like pure
obligations
RULES OF RESOLUTORY CONDITIONS
When condition takes place there is a
SHIFT IN RELATION OF PARTIES, original
creditor becomes debtor, original debtor
becomes creditor and both parties
required to make MUTUAL RESTITUTION
unless otherwise stipulated
PURE POTESTATIVE CONDITION
-happening of event dependent on sole
will of parties
RULES
1.Condition depends on sole will of
CREDITOR-VALID
2.Condition depends on sole will of
DEBTOR-INVALID
3.MUTUAL OBLI. dependent on sole will of
1 party-INVALID
MIXED CONDITION
-fulfillment of condition dependent on
debtor and upon chance or will of others
- VALID
-fulfillment of condition dependent on sole
will of CREDITOR/DEBTOR plus 3rd Party
- VALID
CONSTRUCTIVE FULFILLMENT
-fulfillment of condition can be done
1.STRICT PERFORMANCE
- rights and obligations arise/extinguished
2.EQUIVALENT PERFORMANCE
-not give rise/extinguishes obligation
3.CONSTRUCTIVE PERFORMANCE
- condition deemed fulfilled
*IMPORTANT:

IN RESOLUTORY CONDITIONS - IF
CONDITION DOES NOT HAPPEN - right
becomes perpetual and consolidated/
party is entitled until fulfillment
OBLIGATIONS WITH PERIODS
-obligation subject to happening of Future
and Certain event
Period/term
-may be future and certain time OR future
but happening of event uncertain
NOTE: IF OBLIGATION specifies debtor will
fulfill obligation "ASAP/ As soon as i can"
it is an OBLIGATION W/ PERIOD
*WHEN PERIOD IS INDEFINITE
-file action for court FIXING DEFINITE
PERIOD
-court sets more definite period
-prestation not demandable without
definite period
SUSPENSIVE PERIOD
- right itself not suspended but mere
demandability of obligation
RESOLUTORY PERIOD
-arrival of period extinguishes right
CONDITION VS PERIOD
1. CONDIT - future event uncertain
PERIOD - future event certain
2. CONDIT - future and past event
uncertain
PERIOD - embraces future events
3. CONDIT- gives rise/dissolve obligation
PERIOD - existence of right/obligation is
unaffected by period ONLY BY DEMAND
4. CONDIT - proof depends on
enforceability
PERIOD - depends on sole will of debtor
KINDS OF PERIODS
1)SUSPENSIVE/RESOLUTORY
SUS- suspends demand of right/obligation
RES- arrival of period sets juridical tie
between parties
2)DEFINITE/INDEFINITE
DEF - day certain/fixed date
INDEF- exact date of happening uncertain
*SOURCE
a.CONVENTIONAL
-period fixed by stipulation of parties to
contract

b.LEGAL
-fixed by law
ex. Nat'l Internal Revenue Code on Tax,
Rules of Court on Appeal
3)JURIDICAL PERIOD
-period fixed by court in an
order/judgment in relation to pending
litigation
COURTS EMPOWERED TO FIX PERIOD
1)Period PURELY POTESTATIVE on part of
DEBTOR
2)Parties bound by contract fail to
stipulate period but clear intention of
period inteded (NO PERIOD SET)
3)Period stipulated is disputed between
parties
NOTE: IF prior to expiration of period
DEBTOR becomes INSOLVENT, pending
fulfilment of obligation - OBLIGATION
becomes PURE and IMMEDIATELY
DEMANDABLE

INSOLVENCY
a.by Public Knowledge - immediately
demandable
b.Judicially declared - file claim with
court for assets

1. REAL ESTATE MORTGAGE(REM)

-building/land
2. CHATTEL MORTGAGE- movable property
possessed by debtor
3. PLEDGE- personal property delivered as
COLLATERAL; delivered to creditor
4. SURETYSHIP - security transaction
5. GUARANTY- liable only if principal debtor
cannot pay/ becomes
insolvent(SUBSIDIARY LIABILITY)
OTHER OBLIGATIONS
CONJUNCTIVE (and)
-2 or more prestation imposed and debtor
must fulfill ALL of them to extinguish
juridical tie
ALTERNATIVE (or)
-2 or more prestations identified but
fulfillment of one(1) is sufficient to
extinguish obligation
FACULTATIVE
-only 1 prestation demandable from
debtor but same is susceptible of
substitution.
-stipulation to substitute must have been
agreed upon moment of creation of
obligation