TOPIC: SOURCES OF OBLIGATIONS (LCQ-DQ)

LAW
CONTRACTS
QUASI-CONTRACT
DELICTS
QUASI-DELICTS

a. LAW (Ex-Lege)
Obligations derived from law are not presumed. Only those expressly in the New Civil Code or in
Special laws are demandable and shall be regulated by the precepts of the law which establishes them.
In obligations arising from law, the law creates obligation and the act upon which it is based is nothing
more than a mere factor for determining the moment when it becomes demandable.

b. CONTRACTS (Ex-Contractu)

Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith. (Art. 1159 Civil Code)

Contract is the meeting of the minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some services.

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 of the consequences which according to
their nature may be in keeping with good faith, usage, and law.

In case of doubt it is the intention of the contracting parties that prevails. If the terms of a contract are
clear and leave no doubt upon the contracting parties intention, such terms should be applied in their
literal meaning.

c. QUASI-CONTRACTS (Quasi ex-Contractual)

Juridical relations arising from lawful, voluntary and unilateral acts by virtue of which the parties
become bound to each other, based on the principle that on one shall be unjustly enriched or benefited
at the expense of another.

Quasi-contacts are based on the principles that:

1. No one must unjustly enrich himself at anothers expense
2. If one benefits, he must reimburse and
3. Justice and equity

KINDS OF QUASI-CONTRACTS

1.) NEGOTIORUM GESTIO (Officious Management)

Whoever voluntarily takes charge of the agency or management of the business or property of another,
without any power from the latter, is obliged to continue the same until the termination of the affair and
its incidents or to require the person concerned to substitute him, if the owner is in a position to do so.

ESSENTIAL REQUISITES OF NEGOTIORUM GESTIO ARE:

1. No meeting of the minds

2. Taking charge of anothers business or property
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3. Property or business must have been abandoned or neglected
4. The officious manager must not have been expressly or implicitly authorized; and
5. The officious manager (gestor) must have voluntarily taken charge (there must be no vitiated
consent, such as error in thinking that he owned the property or the business)

2.) SOLUTIO INDEBITI (Payment not Due)

If something is received when there is no right to demand it and it was unduly delivered through
mistake the obligation to return it arises (Art, 2154 Civil Code)

1. Receipt
2. There is no right to demand it because the giver had no obligation; and
3. The unique delivery was because of mistake

d. DELICT (Ex-Delictu, Culpa Criminal)

Civil obligations arising from criminal offense shall be governed by the penal laws (Art. 1161 Civil Code)

General Rule: Civil liability is a necessary consequence of criminal liability. Every person criminally
liable for a felony is also civilly liable. (Art. 100 Revised Penal Code)

Civil liability may be in the form of:

1. Restitution
2. Reparation of damage caused or
3. Indemnification for Consequential Damages (Art. 104 Revised Penal Code)

e. QUASI-DEICT (QUASI EX-DELICTO)

Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties is called quasi-delict. (Art. 2176 Civil Code)

It is based on the undisputed principle of equity that fault or negligence cannot prejudice anyone else
besides its author and in no case should its consequences be borne by him who suffers the harm
produced by such fault or negligence.

Fault or Negligence:

Negligence is the failure to observe for the protection of the interests of another person, that degree of
acre, precaution, and vigilance which the circumstances justly demand.

Test of Negligence:
Would a prudent man in the position of the person, to whom negligence is attributed, foresee harm to
the person injured as a reasonable consequence of the course about to be pursued? If so, the law
imposes a duty upon him to refrain from that course or take precautions and failure to do so constitute
negligence.

REQUISITES OF QUASI-DELICT:

1. Act or Omission by the defendant

2. Fault or Negligence of the defendant
3. Damage or injury caused to the Plaintiff
4. Direct relation or connection of cause and effect between the act or omission and the damage; and
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5. There is no pre-existing contractual relation between the parties
TOPIC: KINDS OF OBLIGATIONS

1. PURE OBLIGATIONS
2. CONDITIONAL OBLIGATIONS
3. OBLIGATIONS WITH A PERIOD
4. ALTERNATIVE OBLIGATION
5. JOINT AND SOLIDARY OBLIGATIONS
6. DIVISIBLE AND INDIVISIBLE OBLIGATIONS
OBLIGATION WITH A PENAL CLAUSE

1. PURE OBLIGATIONS- Obligations whose performance does not depend upon a future or uncertain
event or upon a past event unknown to the parties are demandable at once.

These are obligations which contain no terms or conditions whatever upon which depends the
fulfillment of the obligation contracted by the obligor.

2. CONDITIONAL OBLIGATIONS- Obligations in which the acquisition of rights as well as the

extinguishment or loss of those already acquired shall depend upon the happening of the event which
constitutes the conditions.

Characteristics of Conditions:
1. It is a future and uncertain event upon which an obligation or provision is made to depend;
2. Even though the event is uncertain, it should be possible;
3. The condition must be imposed by the will of the party and not a necessary legal requisite
4. Pats event but unknown to parties (the knowledge to be acquired in the future of a past event which
at that moment is unknown to parties interested- it is only in that sense that the event is to be deemed
uncertain)

Effects of failure to comply with conditions:

1. If condition is imposed on the perfection of a contract-results in the failure of the contract
2. If condition is imposed on the performance of the obligation-gives the other party an option either to
refuse to proceed with the compliance of the obligation or to waive the condition.

Classification of Conditions:

1. AS TO THE EFFECT OF OBLIGATION:

a. Suspensive- when the fulfillment of the condition results in the acquisition of rights arising out
of the obligation
b. Resolutory- when the fulfillment of the condition results in extinguishment of rights arising out
of the obligation.

2. AS TO THE ORIGIN OF CONDITION:

a. Potestative- one which depends upon the will of one of the contracting parties; it is in the
power of one of the parties to realize or to prevent.
b. Casual- depends exclusively upon chance, will of a third person or partially by chance and
partially by will of a third person or other factors and not upon the will of the contracting parties.
c. Mixed- depends upon the will of one of the contracting parties and other circumstances
including the will of third persons or chance.

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 3. AS TO POSSIBILITY

a. Possible- when the condition is capable of realization according to nature, law, public policy
or good customs
b. Impossible- when the condition is not capable of realization according to nature. Impossibility
must exist at the time of the creation of the obligation.

4. AS TO MODE:

a. Positive- condition that some event happen at a determinate time shall extinguish the
obligation as soon as the time expires or become indubitable that the event will not take place.
b. Negative- the condition that some event will not happen at a determinate time shall render the
obligation effective from the moment the time has elapsed of it has become evident that the
event cannot occur.

5. AS TO DIVISIBILITY:
a. Divisible- when the condition is not of partial realization
b. Indivisible- when the condition is not susceptible of partial realization

6. AS TO PLURALITY OF CONDITIONS
a. Conjunctive- there are several conditions which must all be realized;
b. Alternative- there are several, but only one must be realized.

7. AS TO FORM:
a. Express-condition is stated expressly
b. Implied- condition is tacit

EFFECTS OF SUSPENSIVE, RESOLUTORY, POTESTATIVE, CASUAL, MIXED CONDITION

Suspensive Condition- obligation shall only be effective upon the fulfillment of the condition; upon
constitution of obligation and before fulfillment, oblige acquires a mere hope or expectancy, protected
by law.

Resolutory Condition- obligation becomes demandable immediately after its constitution and rights
are immediately vested in the oblige, but such rights are always subject to the threat or danger of
extinction.

Potestative Condition-
a. When it depends exclusively upon the writ of creditor the condition and obligation is valid.
b. When it depends exclusively upon the will of debtor in case of a Suspensive condition, the
condition and obligation are void. To allow such condition would be to sanction illusory
obligation, in direct contravention of the principle announced in Art. 1308 of the Civil Code.
c. When it depends exclusively upon the will of debtor in case of a Resolutory condition, the
condition and obligation is valid. The position of the debtor is exactly the same as the creditor in
a Suspensive condition and does not render the obligation illusory.

Casual Condition- the obligation and condition shall take effect

Mixed Condition- the obligation and condition shall take effect

3. OBLIGATIONS WITH A PERIOD- Obligations, whose fulfillment a day certain has been fixed, shall
be demandable only when that day comes. Obligations with a Resolutory period take effect at once but
terminate upon the arrival of the day certain.

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A day certain is understood to be that which must necessarily come, although it may not be known
when. If the uncertainty consists in whether the day will come or not, the obligation is a conditional one.

When the debtor binds himself to pay when his means permit him, the obligation shall be deemed to be
one with a period.

4. ALTERNATIVE OBLIGATION- It is one where out of two or more prestations which may be given
only one is due. A person alternatively bound by different prestations shall completely perform one of
them.

Limitation: The creditor cannot be compelled to receive part of one and part of the other undertaking.

RIGHT OF CHOICE IN ALTERNATIVE OBLIGATIONS

General Rule: Right of choice belongs to the debtor.
Exceptions:
1. Expressly granted to the creditor
2. Expressly granted to third person

5. JOINT AND SOLIDARY OBLIGATIONS

JOINT OBLIGATION- The whole obligation is to be paid or fulfilled proportionately by different debtors
or demanded proportionately by different creditors.

SOLIDARY OBLIGATIONS- Each one of the debtor s is bound to render and/or each one of the
creditors has a right to demand entire compliance with the prestation.

Nature of a joint/collective obligation

General Rule: Obligation is presumed joint if there is concurrence of several creditors or of several
debtors or of several creditors and debtors in one and the same obligation.

Exceptions:
1. The obligation expressly states that there is solidarity (i.e jointly and severally, individually and
collectively, I promise to pay followed by the signatures of two or more persons)
2. The law requires solidarity (i.e. tort, quasi-contract, liability of principles)
3. Nature of the obligation requires solidarity
4. When a solidary responsibility is imputed by a final judgment upon several defendants
5. When a charge or condition is imposed upon heirs or legatees and the testament expressly makes
the charge or condition in solidum.

6. DIVISIBLE OBLIGATIONS AND INDIVISIBLE OBLIGATIONS

DIVISIBLE OBLIGATIONS- Those which have as their object a presentation which is susceptible of
partial performance without the essence of obligation changed.

INDIVISIBLE OBLIGATION- Those which have as their object a prestation which is not susceptible of
partial performance otherwise the essence of the obligation will be charged.

Effect of Divisible or Indivisible Obligation

Divisibility/Indivisibility is of little significance as implied under Art. 1223 of the Civil Code.

General Rule: Creditor cannot be compelled partially to receive the prestation in which th obligation
consists; neither may the debtor be require to make partial payments.

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Exceptions:
1. When the obligation expressly stipulates the contrary;
2. When the different prestations constituting the objects of the obligation are subject to different terms
and conditions
3. When the obligation is in part liquidated and in part unliquidated.

TOPIC: EXTINGUISHMENT OF OBLIGATIONS

MODES OF EXTINGUISHING OBLIGATIONS UNDER ART. 1231 OF THE CIVIL CODE

1. NOVATION 6. LOSS of the thing due

2. COMPENSATION 7. PRESCRIPTION
3. CONFUSION OR MERGER 8. REMISSION OR CONDONATION
4. RESCISSION 9. FULFILMENT of a Resolutory condition
5. PAYMENT or PERFORMANCE 10. ANNULMENT

OTHER MODES OF EXTINGUISHMENT

1. FORTUITOUS EVENT 5. IMPOSSIBILITY OF FULFILLMENT OF

2. COMPROMISE CONDITION
3. MUTUAL DESISTANCE OR WITHDRAWAL 6. DEATH (For Personal And Intransmissible
4. ARRIVAL OF RESOLUTORY PERIOD Obligations)

NOVATION
It is the substitution or change of an obligation by another, resulting in its extinguishment or
modification, either by changing its objector principal conditions or by substituting another in place of
the debtor or by subrogating a third person in the rights of the creditor.

REQUISITES OF NOVATION:
1. Previous valid and existing obligation
2. Capacity of the contracting parties to the new contract
3. Animus Novandi or intent to novate
4. Substantial difference between the old obligation and the new obligation consequently
extinguishment of the obligation
5. Validity of the new obligation

CONFUSION OR MERGER- character of debtor & creditor is merged in same person with respect to
same obligation

PAYMENT or PERFORMANCE
Juridical act which is voluntary, licit and made with the intent to extinguish the obligation. Fulfillment of
the prestation due. A fulfillment that extinguishes the obligation by the realization of the purpose for
which it was constituted.
REQUISITES OF PAYMENT
1. Payor or the person who pays
2. Payee or the person to whom payment is made
3. Thing to be paid
4. Manner, time and place of payment

GENERAL RULE:
Whoever pays for another may demand from the debtor what he has paid.

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EXCEPTION:
If payment was made without the knowledge or against the will of the debtor. In such a case, he
can only recover insofar as the payment has been beneficial to the debtor.

LOSS OF THE THING DUE

If the determinate thing due is loss the obligation is extinguished.

REQUISITES:
1. The thing which is lost must be determinate
2. The thing is lost without any fault of the debtor
3. The thing is lost before the debtor has incurred in delay

GENERAL RULE: Loss of a determinate thing through fortuitous event shall extinguish the obligation.
EXCEPTION:
1. When the law so provides
2. When the stipulation so provides
3. When the nature of the obligation requires an assumption of risk
4. Loss of the thing occurs after the debtor incurred in delay
5. Loss of the thing is partly due to the fault of the debtor
6. When the debtor promised to deliver the same thing to two persons who do not have the same
interest.
7. When the obligation to deliver arises from a criminal offense
8. When the obligation is generic

REMISSION OR CONDONATION
An act of liberality by virtue of which the oblige without receiving any price or equivalent, renounces the
enforcement of the obligation, as a result of which it is extinguished in its entirety or in that part or
aspect of the same to which the remission refers.
It is the gratuitous abandonment by the creditor of his right; a form of donation

TOPIC: IMPORTANCE OF CONTRACTS

CONTRACT- A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.

IMPORTANCE OF CONTRACTS
1. A form of security to ensure that the parties shall perform the obligation incumbent upon them.
2. A written contract serves as an evidence of the terms, conditions, agreements and obligations
between the contracting parties.
3. Contracts are a strategic tool that companies use to safeguard their resources and manage risk. In
business, you dont want to trust that you will get paid, you want to make sure you will get paid. Most
people enter business relationships good intentions, but sometimes things go wrong. If a matter ends
up in court, your contract can help ensure a ruling is in your favour.

TOPIC: ESSENTIAL REQUISITES OF A CONTRACT

REQUISITES OF CONTRACT:
I. CONSENT of the contracting parties
II. OBJECT certain which is the subject matter of the contract
III. CAUSE of the obligation which is established

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I. CONSENT- it means agreement of wills. Consent refers to the concurrence of wills of contracting
parties with respect to the object and the cause which shall constitute the contract.
REQUISITES:
1. Manifested by the concurrence of the offer and acceptance
2. Parties must possess the necessary legal capacity
3. Must be intelligent free, spontaneous and real

VICES OF CONSENT:
1. Violence
2. Intimidation
3. Mistake
4. Fraud
5. Undue Influence

II. OBJECT- The thing, right or service which is the subject matter of the obligation arising from the
contract
REQUISITES:
1. Must be within the commerce of man
2. Should be real and possible
3. Should be licit
4. Should be determinate or at least possible of determination as to its kind

GENERAL RULE: All things or services may be the object of contracts. This includes future things or
rights which do not belong to the obligor when the contract was made.
EXCEPTION:
1. Future Inheritance
2. Intransmissible rights
3. Services contrary to law, morals, good customs, public order or public policy
4. Impossible things or services
5. Things outside the commerce of men
6. Objects not possible of determination as to their kind

III. CAUSE- It is the immediate, direct or most proximate reason which explains and justifies the
creation of an obligation through the will of the contracting parties.
REQUISITES:
1. Existing at the time of the celebration of the contract
2. Licit or lawful
3. True

TOPIC: FORMS OF CONTRACTS

GENERAL RULE: Contracts shall be obligatory in whatever form they may have been entered into
provided all the essential requisites for their validity are present. (Art. 1356 Civil Code)

EXCEPTION:
1. When the law requires that the contract be in a certain form to be valid.
2. When law requires that the contract be in a certain form to be enforceable.
3. When required to make the contract effective as against third persons

CONTRACTS WHICH MUST BE IN WRITING:

1. Donation of personal property whose value exceeds Five Hundred Pesos
2. Stipulation limiting Common carriers duty of extraordinary diligence to ordinary diligence
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3. Antichresis
4. Sale of a piece of land or any interest therein through an agent
5. Agreements regarding payment of interest in contracts of loan

CONTRACTS WHICH MUST APPEAR IN A PUBLIC DOCUMENT:

1. Donation of immovable property
2. Partnership where immovable property or real rights are contributed to the common fund
3. Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property
4. Cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of
gains
5. The power to administer property or any other power which has for its object an act appearing or
which should appear in a public document or should prejudice a third person.

CONTRACTS WHICH MUST BE REGISTERED:

1. Chattel mortgages
2. Sale/transfer of large cattle

TOPIC: INTERPRETATION OF CONTRACTS

RULES ON INTERPRETATION OF CONTRACTS:

1. If the terms are clear and no doubt upon the intention of the parties, the literal meaning of its
stipulation shall control.
2. If words are contrary to the intention, the latter shall prevail over the former. When the true intent and
agreement of the parties is established it must be given effect and prevail over the bare words of the
written contract.
3. The contemporaneous and subsequent acts of the parties shall be considered.
4. If the terms in a contract are general, they shall not be understood to comprehend things that are
distinct and different from those which the parties intended.
5. If some stipulations admit of several meanings it shall be understood as bearing that import which is
most adequate to render it effectual.
6. Various stipulations shall be interpreted together.
7. Words with different significations shall be understood in that which is most keeping with the nature
and object of the contract.
8. Usage or Custom of the place shall be taken in the interpretation of the ambiguities of a contract and
shall fill the omissions which are ordinarily established.
9. Interpretation of obscure words or stipulations shall not favor those who caused the obscurity
10. When an instrument contains partly of written words and partly of a printed form and the two are
inconsistent the former controls the latter.

RULES IN SETTLING DOUBTS IN CONTRACTS:

1. GRATUITOUS CONTRACTS- when the doubts refer to its incidental circumstances, the least
transmission of rights and interests shall prevail
2. ONEROUS CONTRACTS- the doubt shall be settled in favor of the greatest reciprocity of interest
3. PRINCIPAL OBJECT- If the doubts are cast upon the principal object of the contract in such a way
that it cannot be known what may have been the intention or will of the parties the contract shall be null
and void.