PART I - OBLIGATIONS
Necessarily, the school must
I. In General
A. Definition, NCC 1156
B. Sources, NCC 1157
MetroBank v. Rosales, G.R. No. 183204, January 13, 2014
The “Hold Out” clause applies only if there is a valid and existing obligation arising from
any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit:
law, contracts, quasi-contracts, delict, and quasi-delict.— In this case, petitioner failed
to show that respondents have an obligation to it under any law, contract, quasi-
contract, delict, or quasi-delict. And although a criminal case was filed by petitioner
against respondent Rosales, this is not enough reason for petitioner to issue a “Hold
Out” order as the case is still pending and no final judgment of conviction has been
rendered against respondent Rosales. In fact, it is significant to note that at the time
petitioner issued the “Hold Out” order, the criminal complaint had not yet been filed.
Thus, considering that respondent Rosales is not liable under any of the five sources
of obligation, there was no legal basis for petitioner to issue the “Hold Out” order.
Accordingly, we agree with the findings of the RTC and the CA that the “Hold Out”
clause does not apply in the instant case. In view of the foregoing, we find that
petitioner is guilty of breach of contract when it unjustifiably refused to release
respondents’ deposit despite demand. Having breached its contract with respondents,
petitioner is liable for damages.
Bank deposits, which are in the nature of a simple loan or mutuum, must be paid upon
demand by the depositor.
(a) Law, NCC 1158
(b) Contract, NCC 1159
PSBA v CA, GR 84698, Feb. 4, 1992
An academic institution enters into a contract when it accepts students for enrollment;
The contract between school and student is one "imbued with public interest".—
Institutions of learning must also meet the implicit or "built-in" obligation of providing
their students with an atmosphere that promotes or assists in attaining its primary
undertaking of imparting knowledge. Certainly, no student can absorb the intricacies
of physics or higher mathematics or explore the realm of the arts and other sciences
when bullets are flying or grenades exploding in the air or where there looms around
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the school premises a constant threat to life and limb.
ensure that adequate steps are taken to maintain peace and order within the campus
premises and to prevent the breakdown thereof.
A contractual relation is a condition sine qua non to the school's liability. The
negligence of the school cannot exist independently on the contract, unless the
negligence occurs under the circumstances set out in Article 21 of the Civil Code.
Cruz v Gruspe, GR 191431, March 13, 2013
Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an
affidavit or a contract, the Court looks beyond the title of the document, since the
denomination or title given by the parties in their document is not conclusive of the
nature of its contents. In the construction or interpretation of an instrument, the
intention of the parties is primordial and is to be pursued. If the terms of the document
are clear and leave no doubt on the intention of the contracting parties, the literal
meaning of its stipulations shall control. If the words appear to be contrary to the
parties’ evident intention, the latter shall prevail over the former.
In order that the debtor may be in default, it is necessary that the following requisites
be present: (1) that the obligation be demandable and already liquidated; (2) that the
debtor delays performance; and (3) that the creditor requires the performance judicially
and extrajudicially.—The 15% interest (later modified by the CA to be 12%) was
computed from November 15, 1999—the date stipulated in the Joint Affidavit of
Undertaking for the payment of the value of Gruspe’s car. In the absence of a finding
by the lower courts that Gruspe made a demand prior to the filing of the complaint, the
interest cannot be computed from November 15, 1999 because until a demand has
been made, Cruz and Leonardo could not be said to be in default. Default generally
begins from the moment the creditor demands the performance of the obligation. In
this case, demand could be considered to have been made upon the filing of the
complaint on November 19, 1999, and it is only from this date that the interest should
be computed.
ACE Foods, Inc. v. Micro Pacific, G.R. No. 200602, December 11, 2013.
The essential issue in this case is whether ACE Foods should pay MTCL the purchase
price for the subject products.
 The petition lacks merit.
 A contract is what the law
defines it to be, taking into consideration its essential elements, and not what the
contracting parties call it. The real nature of a contract may be determined from the
express terms of the written agreement and from the contemporaneous and
subsequent acts of the contracting parties. However, in the construction or
interpretation of an instrument, the intention of the parties is primordial and is to
be pursued. The denomination or title given by the parties in their contract is not
conclusive of the nature of its contents. The very essence of a contract of sale is the
transfer of ownership in exchange for a price paid or promised. This may be
gleaned from Article 1458 of the Civil Code which defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership and to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent.
A contract of sale may be absolute or conditional. (Emphasis supplied)
 Corollary
thereto, a contract of sale is classified as a consensual contract, which means that
the sale is perfected by mere consent. No particular form is required for its validity.
Upon perfection of the contract, the parties may reciprocally demand performance, i.e.,
the vendee may compel transfer of ownership of the object of the sale, and the vendor
may require the vendee to pay the thing sold. In contrast, a contract to sell is defined
as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, i.e., the full payment of the purchase price. A contract to sell
may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur.
(c) Quasi-Contract, NCC 1160
Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9, 2013.
In the absence of specific terms and conditions governing the car plan arrangement
between the petitioner and Mekeni, a quasi- contractual relation was created between
them. Consequently, Mekeni may not enrich itself by charging petitioner for the use of
its vehicle which is otherwise absolutely necessary to the full and effective promotion
of its business.—Under Article 22 of the Civil Code, “[e]very person who through an
act of performance by another, or any other means, acquires or comes into possession
of something at the expense of the latter without just or legal ground, shall return the
same to him.” Article 2142 of the same Code likewise clarifies that there are certain
lawful, voluntary and unilateral acts which give rise to the juridical relation of quasi-
contract, to the end that no one shall be unjustly enriched or benefited at the expense
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of another. In the absence of specific terms and conditions governing the car plan
arrangement between the petitioner and Mekeni, a quasi-contractual relation was
created between them. Consequently, Mekeni may not enrich itself by charging
petitioner for the use of its vehicle which is otherwise absolutely necessary to the full
and effective promotion of its business. It may not, under the claim that petitioner’s
payments constitute rents for the use of the company vehicle, refuse to refund what
petitioner had paid, for the reasons that the car plan did not carry such a condition; the
subject vehicle is an old car that is substantially, if not fully, depreciated; the car plan
arrangement benefited Mekeni for the most part; and any personal benefit obtained by
petitioner from using the vehicle was merely incidental.
(d) Delict, NCC 1161
(d) Quasi-Delict, NCC 1162
Garcia v. Ferro Chemicals, Inc. (2014)
The civil liability asserted by Ferro Chemicals, Inc. before the CA arose from the
criminal act. It is in the nature of civil liability ex delicto. Ferro Chemicals did not reserve
the right to institute the civil action for the recovery of civil liability ex delicto or institute
a separate civil action prior to the filing of the criminal case. Thus, it is an adjunct of
the criminal aspect of the case.
People of the Philippines v. Dionaldo (2015)
The death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as his civil liability ex delicto.
Barredo v Garcia, 73 Phil. 607 (1942)
There are two actions available for parents of Garcia. One is under the A100RPC
wherein the employer is only subsidiarily liable for the damages arising from the crime
thereby first exhausting the properties of Fontanilla. The other action is under
A1903CC (quasi-delict or culpa aquiliana) wherein as the negligent employer of
Fontanilla, Barredo is held primarily liable subject to proving that he exercising
diligence of a good father of the family. The parents simply took the action under the
Civil Code as it is more practical to get damages from the employer bec he has more
money to give than Fontanilla who is yet to serve his sentence.
Obiter: Difference between Crime and Quasi-delict 1) Crimes – public interest; Quasi-
delict – only private interest 2) Penal code punishes or corrects criminal acts; Civil
Code by means of indemnification merely repairs the damage 3) Delicts are not as
broad as quasi-delicts; Crimes are only punished if there is a penal law; Quasi-delicts
include any kind of fault or negligence. (NOTE: Not all violations of penal law produce
civil responsibility, e.g. contravention of ordinances, violation of game laws, infraction
of rules of traffic when nobody is hurt); 4) Crime – guilt beyond reasonable doubt; Civil
– mere preponderance of evidence.
established, this Court can then proceed with the application and the interpretation of
the fifth paragraph of Article 2180 of the Civil Code. The rationale for these graduated
levels of analyses is that it is essentially the wrongful or negligent act or omission itself
which creates the vinculum juris in extra-contractual obligations.

Gutierrez v Gutierrez, No. 34840, September 23, 1931

BG was an incompetent chauffer as he was driving in an excessive speed. The
guarantee the father gave at the time the son was granted a license to operate motor
vehicles gave the father responsible for the acts of his son. - SCor and AV’s liability is
based on the contract. The position of the truck on the bridge and the speed in
operating the machine and the lack of care employed reached such conclusion. The
fact that 2 drivers were approaching a narrow bridge, neither willing to slow up and
give right of way inevitably resulted to the collision and the accident.

- The contention that there was contributory negligence as the plaintiff kept his foot
outside the truck was not pleaded and was dismissed as speculative. Ratio In the US
it is uniformly held that the head of the house, the owner of the vehicle, who maintains
it for the general use of his family is liable for its negligent operation by one of his
children, whom he designates or permits to run it, where the car is occupied and being
used for the pleasure of the other members of the family, other than the child driving
it.

Llana v. Biong, G.R. No. 182356, December 4, 2013.

Elements of Quasi-Delicts—Article 2176 of the Civil Code provides that “[w]hoever 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 a quasi-delict.” Under this provision, the
elements necessary to establish a quasi-delict case are: (1) damages to the plaintiff;
(2) negligence, by act or omission, of the defendant or by some person for whose acts
the defendant must respond, was guilty; and (3) the connection of cause and effect
between such negligence and the damages. These elements show that the source of
obligation in a quasi-delict case is the breach or omission of mutual duties that civilized
society imposes upon its members, or which arise from non-contractual relations of
certain members of society to others.

Under Article 2176 of the Civil Code, in relation with the fifth paragraph of Article 2180,
“an action predicated on an employee’s act or omission may be instituted against the
employer who is held liable for the negligent act or omission committed by his
employee.”—Once negligence, the damages and the proximate causation are

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II. Nature and Effect of Obligations
A. Kinds of Prestations
1. To give, NCC 1163-1166
a. Rules regarding improvement, loss, or deterioration,
NCC 1189, 1190, 1194, 566-571
2. To do, NCC 1167
Chavez v Gonzales, 32 SCRA 547
Under Article 1167 of the Civil Code, a person who is obliged to do something and fails
to do it shall be liable for the cost of executing the obligation in a proper manner. The
cost of execution of the obligation to repair a typewriter is the cost of the labor or service
expended in the repair of the typewriter. In addition, the obligor, under Article 1170 of
the Code, is liable for the cost of the missing parts because in his obligation to repair
the typewriter he is bound to return the typewriter in the same condition it was when
he received it.
Tanguilig v CA, 266 SCRA 78 (1997)
Petitioner’s argument that private respondent was already in default in the payment of
his outstanding balance of P15,000.00 and hence should bear his own loss, is
untenable. In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him.
When the windmill failed to function properly it became incumbent upon petitioner to
institute the proper repairs in accordance with the guaranty stated in the contract. Thus,
respondent cannot be said to have incurred in delay; instead, it is petitioner who should
bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code
is explicit on this point that if a person obliged to do something fails to do it, the same
shall be executed at his cost.
Mackay v. Caswell (2014)
For Owen’s failure to provide quality work, he is to reimburse the rectification costs the
Caswells had shouldered as the latter’s actual damages; the unpaid compensation
Owen is claiming shall be set-off from the Caswell’s monetary claims supported by
receipts.
3. Not to do, NCC 1168
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B. Irregularity in Performance
1. Attributable to Debtor, NCC 1170
(a) Fraud (dolo), NCC 1170, 1171, cf. NCC 1338
Woodhouse v Halili, 93 Phil 526 (1953)
False Representatiom ; Damages, for dolo incident.—Plain-tiff is entitled under the
terms of the agreement to 30 per cent of the net profits of the business. Against this
amount of damages, the damage the defendant suffered by plaintiff's
misrepresentation that he had the exclusive franchise, must be set off. (Art. 1101,
Span. Civ. Code.) When the defend-ant learned, in Los Angeles, California, that
plaintiff did not have the exclusive franchise which he pretended be had and which he
had agreed to transfer to the partnership, his spontaneous reaction was to reduce the
plaintiff's share from 30 per cent to 15 per cent only, to which reduction plaintiff appears
to have readily given his assent. Held: By the mis-representation of the plaintiff, he
obtained a very high per-centage (30%) of share in the profits. Upon learning of the
misrepresentation, defendant reduced plaintiff's share to 15 per cent, to which
defendant assented. The court can do no better than follow such appraisal of the
damages as the parties themselves had adopted.
The causal fraud which may be a ground for the annulment of a contract, and the
incidental deceit which only renders the party who employs it liable for damages. In
order that fraud may vitiate consent, it must be the causal (dolo causante), not merely
the incidental (dole in- cidente), inducement to the making of the contract (art. 1270,
Span. Civ. Code; Hill vs, Yeloso, 31 Phil., 160). In the case at bar, inasmuch as the
principal consideration, the main cause that induced. defendant to enter into the
partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive
franchise to bottle and distribute for the defendant or for the partnership, the false
representation made by the plaintiff was not the casual consideration, or the principal
inducement, that led the defendant to enter into the partnership agreement,.
Geraldez v CA, 230 SCRA 329 (1994)
Under dolo causante or causal fraud (in NCC Art. 1338) are deceptions or
misrepresentations of a party to a contract without which the other party/parties would
not have entered into the contract. The fraud was employed in order to secure the
consent of the defrauded party, thus existing before and during creation of the contract.
The fraud itself is the essential source of the consent. Its effects are nullity of the
contract and indemnification of damages.
On the other hand, dolo incidente or incidental fraud (in NCC Arts. 1170 and 1344) is
of minor character, without which the other party will still enter the contract. The fraud
refers only to some particular or accident of the obligation. Since the fraud did not
vitiate consent of the party while entering in the contract, said contract is valid. The
party who committed dolo incidente is liable for damages as well.
Private respondent committed fraud in the inducement (or dolo causante), with
promising the attendance of a European tour manager that would take care of her and
her sister during the entirety of the tour. The other breaches of contract committed by
private respondent, whether considered as dolo causante or dolo incidente, likewise
will bring about to said respondent the obligation to pay moral and exemplary damages.
Metropolitan v. Prosperity, G.R. No. 154390, March 17, 2014
According to Article 1338 of the Civil Code, there is fraud when one of the contracting
parties, through insidious words or machinations, induces the other to enter into the
contract that, without the inducement, he would not have agreed to. Yet, fraud, to vitiate
consent, must be the causal (dolo causante), not merely the incidental (dolo incidente),
inducement to the making of the contract. In Samson v. Court of Appeals, 238 SCRA
397 (1994), causal fraud is defined as “a deception employed by one party prior to or
simultaneous to the contract in order to secure the consent of the other.” Fraud cannot
be presumed but must be proved by clear and convincing evidence. Where the consent
was given through fraud, the contract was voidable, not void ab initio. This is because
a voidable or annullable contract is existent, valid and binding, although it can be
annulled due to want of capacity or because of the vitiated consent of one of the
parties.—Contrary to their modified defense of absence of consent, Vicky Ang’s
testimony tended at best to prove the vitiation of their consent through insidious words,
machinations or misrepresentations amounting to fraud, which showed that the
contract was voidable. Where the consent was given through fraud, the contract was
voidable, not void ab initio. This is because a voidable or annullable contract is existent,
valid and binding, although it can be annulled due to want of capacity or because of
the vitiated consent of one of the parties. Article 1390, in relation to Article 1391 of the
Civil Code, provides that if the consent of the contracting parties was obtained through
fraud, the contract is considered voidable and may be annulled within four years from
the time of the discovery of the fraud. The discovery of fraud is reckoned from the time
the document was registered in the Register of Deeds in view of the rule that
registration was notice to the whole world. Thus, because the mortgage involving the
seven lots was registered on September 5, 1984, they had until September 5, 1988
within which to assail the validity of the mortgage. But their complaint was instituted in
the RTC only on October 10, 1991. Hence, the action, being by then already
prescribed, should be dismissed.