I.
OBLIGATION – juridical necessity to give, to do or
not to do.
Elements:
1. Active Subject (creditor/oblige)
2. Passive Subject (debtor/obligor)
Sources of Obligation:
1. Law
2. Contract
3. Quasi-contract
4. Crime
5. Quasi-delict/tort
Different Kinds of Obligation:
1. Pure Obligations – demandable immediately.
- does not have a period(term) or condition
- upon perfection, fulfillment can be
demandable
2. Conditional Obligations
Kinds of Condition:
a. Suspensive Condition – happening of
suspensive condition gives rise to an
obligation
Effect of Loss/Deterioration/Improvement
during pendency of suspensive
condition (specific thing is to be given):
i. Loss without debtor’s fault
- obligation is extinguished
ii. Loss with debtor’s fault
- liability for payment of damages
iii. Deterioration without debtor’s fault
- impairment is borne by the creditor
(creditor shall accept whatever the
condition of the object is at the time
the obligation is due)
iv. Deterioration with debtor’s fault
- creditor may demand rescission plus
damages or fulfillment plus
damages
Power to Rescind:
- Right belongs to the INJURED
PARTY
- The party entitled to rescind must
invoke judicial aid
- The judgment of the court (and not
the will of the vendor) produces
rescission.
v. Improvement by nature/time
- improvement inures to the benefit of
creditor
vi. Improvement at the expense of the
debtor
- creditor becomes is usufructuary (if
there is improvement, debtor can
remove the improvement if it will
cause no damage to the principal
object.
b. Resolutory Condition – happening of the
resolutory condition extinguishes the
obligation
3. Obligations with a Period – effects or
consequences are subjected in one way or
another to the expiration or arrival of said period
or term.
Benefit of the term or Period:
Presumption: Period was established for the
benefit of BOTH the debtor and the creditor.
(unless it should appear in favor of one)
Creditor – (if it stipulates an interest) he
can be entitled to the interest
Debtor – it will give him sufficient time to
look for money to pay the creditor
General Rule: the creditor cannot demand for
performance before obligation arises.
If: obligation to pay a sum of money, without
period. For whose benefit is the period
constituted?
Only in favor of the debtor. Creditor does
not gain anything for the period.
If: “I will pay when my means allow…”
Then: ask the court to fix a period (when the
obligation does not fix the period)
4. Joint Obligations – “to each his own”
- Joint creditor can only demand his share.
5. Solidary Obligations – “One for all, all for one”
- Solidary creditor can demand for the
entire obligation, for the entire credit,
but he has obligation to give his co-
creditors their respective share.
- Solidary debtor, and creditor demands
payment for the full amount of the
obligation, defenses that can be placed
by solidary debtor to avoid/minimize
liability for payment:
o Complete
 Derived from nature
 Defenses personal from you
o Partial/Incomplete
 Personal defenses of co-creditor
6. Alternative Obligations – there are several
objects or prestations but only one is due.
Right to choose: it is with the debtor
Exc: Right of choice is granted to the creditor by
both parties
Right of choice is expressly granted to a 3rd
person.
MLREGALA edit | 1
 When it is silent as to who is given the right to
choose, if all of the objects were lost due to
fault of debtor:
The right to choose belongs to the debtor.
Damages will be the value of the last thing lost
(in a case where all of the objects were lost
or destroyed)
If right to choose belongs to the creditor and
all of the objects are destroyed by debtor:
Creditor can choose to demand payment for the
value of any of the objects.
RIGHT OF CHOICE BELONGS TO
DEBTOR (in cases of loss)
Fortuitous
If all objects lost – obligation is
extinguished
One or some – debtor may choose among
the remainder
Fault/Negligence of Debtor
If all objects lost
- Obligation not extinguished
- Obligation is converted to a monetary
value (of the last thing lost) including
damages
One or some – choose among remainder
RIGHT OF CHOICE BELONGS TO
DEBTOR (in cases of loss)
Fortuitous
If all objects lost – obligation is
extinguished
One or some – creditor may choose from
the remainder
Fault/Negligence of Debtor
If all objects lost – demand of value of any
object chosen plus damages
One or some – Choose from remainder or
demand value of lost plus damages
7. Facultative Obligations – comprehends only
one object but may be complied with by
delivering of another (substitute)
- The debtor has the right to choose
8. Divisible Obligations – capable of partial
fulfillment
9. Indivisible Obligations – not capable of partial
fulfillment/performance
10. Obligations with a Penal Clause
Purpose: Insure the performance of an
obligation and to substitute for damages and the
payment of interest in case of non-compliance.
[Reparation and punishment]
Demand of Creditor when debtor fails to comply
with his obligation:
Creditor can demand specific performance of
obligation
Demand rescission or cancellation
Demand damages
Significance as to when demand is made:
- Interest will run starting on the day of demand
(not when the amount was due)
- If a case was filed with demand, demand will
start for computation of interest
- If a case was filed without demand, interest
computation will start during the filing of case in
court.
- No demand, no delay.
- Demand should be judicial or extra-judicial.
G.R.: Loss of a specific thing due extinguishes the
obligation if the loss is without the fault of the
debtor.
Exc (Loss of specific thing is without the fault of
the debtor but he can still be held for
damages):
No one can be held liable for fortuitous events.
Exc: when loss happened when he was already in
default; or when he has promised to deliver the
same thing to different persons not having the
same interest.

Alternative
Several things are due
If one of the prestations is
illegal, others may be valid
and obligation remains
If it is impossible all
except one, that last one
must be given
The right to choose may
be given either to debtor or
creditor
Facultative
Only one thing is
principally due
If principal obligation is
void, there is no necessity
of giving the substitute.
If it is impossible to give
the principal, substitute
need not be given. If it is
impossible to give the
substitute, the principal
must still be given.
Right of choice is given
only to the debtor.
MLREGALA edit | 2
Chapter 4: MODES OF EXTINGUISHING Application of Payment (a debtor has several
OBLIGATIONS obligations in favor of the same creditor and
payment is not sufficient to cover all debt due):
PA – Payment/Performance 1. Debtor
LO – Loss of the thing due 2. Without application, creditor, by issuing a receipt
RE – Remission/Condonation specifying which obligation has been paid.
ME – Merger/Confusion 3. Payment shall be applied to the most onerous
CO - Compensation 4. If the same burden, applied proportionately to the
NO - Novation obligations.
ARFP – Annulment, Rescission, Fulfillment of
condition, Prescription Dation in payment – transfer or conveyance of
ownership of a thing as an accepted equivalent
1. PA – Payment/Performance of performance
Payment by cession – debtor transfers all the
Delivery of sum of money properties not subject to execution in favor of
Performance (in a case of personal obligation) his creditors so that the latter may sell them, and
thus apply proceeds to the credits.
To whom shall payment be made?
- Creditor Donation, with debtor’s consent.
- Successor-in-interest - No one shall be compelled to accept the
- Any person authorized to receive it generosity of another
- This is for cases where the paying third person
Can the creditor refuse payment from a person does not intend to be reimbursed, which
who is not the debtor? makes the payment donation. To be valid, it
Yes. A person cannot be compelled to accept requires the debtor’s consent
payment from a third person who does not have Cession Dation
an interest in the obligation. As to Affects all Does not affect all
properties properties of the the properties
If such person is not a party-in-interest to the debtor
obligation. (A guarantor may compel creditor to No. of Requires more than Does not require
accept) Creditors 1 creditor plurality of
creditors
Consent of Require consent Only specific or
What would be the effect if a third person pays Creditors from all concerned
creditors’ consent
the obligation and the creditor accepts the is required
payment? Transfer of Does not transfer Transfers
With the knowledge and Consent of the debtor – ownership ownership ownership
As to Requires full or May take place
BENEFICIAL REIMBURSMENT and solvency partial insolvency during debtor’s
SUBROGATION to such rights. solvency
Novation Not an act of An act of novation
Without the debtor’s knowledge or against his will – novation
payor is not entitled to subrogation, only
BENEFICIAL REIMBURSMENT.
[The law makes no distinction as to the right of 2. LO – Loss of the thing due
recovery in case payment by a stranger was
made either without the knowledge or against 3. RE – Remission/Condonation
the consent of the debtor. In both cases, the Remission – point-of-view of the creditor
paying stranger “can recover only insofar as Condonation – point-of-view of the debtor
the payment has been beneficial to the
debtor.”] - It is gratuitous in nature, requiring consent of
the debtor.
Payment to an incapacitated person: - Creditor abandons his claim
Valid only when: - There should be acceptance by the creditor. It is
- The incapacitated has kept the thing required by law that there by acceptance for it to
delivered be valid.
- Insofar as the payment has been beneficial
to him 4. ME – Merger/Confusion
The characters of a debtor and a creditor are merged
in one and the same person resulting to
extinguishment of obligation.

MLREGALA edit | 3
5. CO - Compensation
There is compensation when two persons are debtors
and creditors of each other.
Compensation by operation of law:
1. Principal debtors and creditors
2. The objects must be the same
3. Debts must be due
4. Must be liquidated (amount has been determined)
and demandable.
5. If there is retention or controversy, no
compensation shall take place.
6. NO – Novation
- this is the substitution or change of an
obligation by other which extinguishes or
modifies the first, either by:
o changing the object or principal condition
o substituting the person of the debtor
o subrogating a third person in the right of
the creditor
Forms (change of the person):
i. Expromision
Initiative of the substitution comes from a new
debtor.
Creditor consents.
- Will not revive action against old debtor whose
obligation is assumed by the new debtor
- Obligation is assumed by a third person
- Still applies even without the knowledge or
consent of original debtor.
ii. Delegacion
Initiative comes from the original debtor.
The new debtor consents.
The creditor accepts.
- To make old debtor liable for new debtor’s
insolvency, insolvency must already been
existing and of public knowledge at the time of
delegacion
7. ARFP – Annulment, Rescission, Fulfillment of
condition, Prescription
II. CONTRACT – an agreement or meeting of the
minds between two persons, whereby one binds
himself to give something or to render some service.
Life of a Contract:
1. Generation/Negotiation
2. Perfection/There is meeting of the minds
3. Consummation
Cardinal Principles:
1. Autonomy of Contracts
2. Mutuality of Contracts
3. Relativity of Contracts
4. Consensuality of Contracts
5. Obligatory Force and Compliance in Good Faith
1. Autonomy of Contracts – whatever the parties will
agree on shall be binding, subject to restrictions
(shall not be contrary to law, morals good customs,
public order, and public policy)
2. Mutuality of Contracts
GR: Terms and conditions must be agreed by both
parties.
It is still valid if T&C are made by third persons.
Determination should be communicated to both
parties and shall not be binding until such
determination was made known to them.
But, if determination is unconscionable, parties may
disagree to such determination, as per decision
of the courts.
3. Relativity of Contracts
GR: Contracts are generally effective only between
the parties, their assigns and their heirs.
Exc: Contracts are effective only between parties
when such rights and obligations arising from
contracts are not transmissible.
by their nature (contracts involving personal
qualifications)
by stipulation (according to the principle of
freedom to stipulate contracts)
by provision of law (agency, partnership, when
death extinguishes legal relationship)
Stipulation pour autrui – a stipulation in favor of a
third party. (eg. Interest in the obligation shall be
paid to X, a third person)
4. Consensuality of Contracts
GR: Contracts are perfected by mere consent.
Contracts requiring more than consent:
Real Contract – delivery is required
Solemn Contract – requires form to be valid
Kinds of contracts according to perfection:
The moment of the perfection of the contract, it
becomes binding.
5. Obligatory Force and Compliance in Good Faith
MLREGALA edit | 4
Essential Elements of a Contract:
1. Consent of the contracting parties
Contract is voidable – if only one of the contracting
parties is incapacitated to give his consent.
Contract is unenforceable – if both parties are
incapacitated to give consent.
Vices of Consent (makes the contracts
VOIDABLE):
i. Mistake (or error)
- False belief about something
- No mistake if the party alleging it knew the
doubt, contingency or risk affecting the
contract
- There must be mutual error to vitiate consent.
(mutual error = no perfected contract)
- Here, substance of the thing (object of the
contract) is referred.
- Mistake of fact will vitiate consent
ii. Fraud (or deceit)
- Through insidious words or machinations of
one of the contracting parties, the other is
induced to enter into a contract, which,
without them, he would not have agreed to.
- Deals with causal fraud (dolo causante)
- Req (dolo causante)
o Must be material and serious that induced
consent
o Employed only by 1 party (if both
committed fraud, contracts is still valid)
o There is deliberate intent to deceive or
induce
o Other party – not guilty of negligence, have
relied to the untrue statement
o Concealment = fraud
o Exaggeration in trade – not fraudulent if
other party had the chance to know the
facts
o Opinion – not fraud, unless you’re an
expert and the other party relied on your
expert opinion. (if it was you own expert’s
opinion, contract may not be annulled)
o Misrepresentation in good faith, not fraud;
but may constitute error
iii. Violence
- Physical compulsion
- Req:
o Serious or irresistible force
o V is the reason why contract was entered
into.
iv. Intimidation
- Mental/moral compulsion
- Req:
o Reasonable and well-grounded fear
o Imminent and grave evil
o I is against person/property,
himself/relatives
o Reason why the contract was entered
o Must be an unjust act or an actionable
wrong
v. Undue Influence
- Improper advantage of his power over the will
of another, depriving the latter of a reasonable
freedom of choice.
2. Object
(Could be an object, thing, right or service)
Questions to ask:
- Is it within the commerce of man?
- Is it not against the law?
 Future things may be the object of a contract
[eg.you can sell future harvest of farm]
 Future inheritance is prohibited because right to
inherit is vested upon death of precedent.
 “Will” – disposition takes effect only upon death
of testator; revocable during lifetime of testator
 Right of partner – not transmissible
3. Cause or consideration
o Onerous: there is something in exchange
o Renumeratory
o Gratuitous
- There is no cause of a contract, but there is cause
for an obligation ???
- Lesion: inadequacy of price does not invalidate
a contracts
o EXC: When there is fraud, mistake, undue
influence or in cases provided for by law.
Form of Contracts:
GR: Contract is obligatory no matter what for, as long
as all requisites for validity are present.
EXC:
- When the law requires that the contract must be in a
certain form to be valid
- When the law requires that the contract must be in a
certain form in order to be enforceable
- Examples:
o Formal Contracts (Solemn Contracts) require a
certain specified form
o Real Contracts require delivery to be valid as a
real contract
- When for is important:
o For validity – for formal and solemn contracts
o For enforceability – true for agreements under
the Statute of Frauds which must be in writing to
be enforceable
 May be waived by acceptance of benefits
 By failure to object to the presentation of
parol (oral) evidence.
o For convenience
MLREGALA edit | 5
If contract does not reflect true intention of the parties: DEFECTIVE CONTRACTS
REFORMATION (conforming to the real intention 1. Rescissible Contracts
when there is mistake or error) 2. Voidable Contracts
3. Unenforceable Contracts
Who can file action for reformation? 4. Void Contracts
- If reason is by mutual mistake, any of the
parties/heirs may file 1. RESCISSIBLE CONTRACTS
- If reason is because one committed fraud, There can be no ratification, but may be
innocent party may file. prescribed.
These contracts are valid, but legally defective.
Reformation Annulment (valid at the beginning)
There has been a meeting There is no meeting of There is injury or damage to either parties or to a
of the minds; the minds third person (not a party to a contract).
There is mistake, fraud, There is vitiated Consent Injury or damage – refers to the cause or
inequitable conduct or
consideration.
accident in the contract
as written Mere inadequacy of consideration does not affect the
Does not invalidate the Invalidates a contract validity of the contract. Bad bargain does not
contract affect a contract’s validity (except in cases
provided by law)
INTERPRETATION of CONTRACTS: It should be directly attacked, not collaterally.
GR: If literal is clear, literal provision shall apply. Nature – subsidiary. This should be the remedy of
In the presence of ambiguity, apply rules on last resort.
interpretation.
In case of conflict of terms as to intention of parties, Badges of Fraud: circumstances indicative of the
intention shall prevail. (The will of the parties fraudulent intent of a debtor. This is basis for
has the force of law between them.) action of rescission because this will be proof of
In interpreting contracts, interpret it in its entirety rescissible contract is entered into in fraud of a
(interpret it as a whole). debtor.
In contracts of adhesion, in cases of ambiguity,
interpret against the one who drafted the contract. Rescissible Contracts:
a. Those entered into by the guardians whenever
the wards they represent suffer lesion by more
than ¼ of the value of things which are objects
thereof. (inadequacy of consideration entered by
wards of less than ¼)

- if an act of ownership, court approval is

required, otherwise unenforceable
- if merely an act of administration:
o If with court consent/approval – valid,
regardless of lesion.
o If without court approval – rescissible, if
lesion is more than ¼

b. Those agreed upon in representation of

absentees suffering lesion by more than ¼ of
the value of things.

c. Those undertaken in fraud of creditors when

creditor cannot in any many collect the claims
due them. (There is no other available means
for the creditor to collect)

d. Things under litigation entered by defendant

without knowledge and approval of the
litigants or of competent judicial authority.

e. Other contracts declared by law.

MLREGALA edit | 6
2. VOIDABLE CONTRACTS Rescission Annulment
- This is in relation to consent (an essential The basis is lesion (damage) The basis is vitiated consent
requisite for contracts) or incapacity to consent.
The defect is external or The defect is intrinsic (the
- Defect is as to consent where: intrinsic. meeting of the minds)
o Consent was given by an incapacitated The action is subsidiary The action is principal
person (entered into by a minor or an insane This is a remedy This is a sanction
person) Private interest governs Public Interest governs
Equity predominates Law predominates
o Consent has been vitiated (there is violence,
Plaintiff may be a party or a Plaintiff must be a party to
intimidation, undue influence, fraud or third person the contract. (whether
mistake) subsidiarily or principally
- Voidable contracts are valid and binding until bound)
There must be damage to the Damage to the plaintiff is
annulled by the court.
plaintiff immaterial.
- Prescriptive period: four (4) years If plaintiff is indemnified, Indemnity is no bar to the
o If voidable because of vitiated consent, it rescission cannot prosper. prosecution of the action
depends on which vice: Compatible with the perfect A defect is presupposed
validity of the contract
 Violence, intimidation or undue
To prevent rescission, To prevent annulment,
influence: from time it has ceased. If ratification is not required ratification is required.
not stipulated as to when viu has
ceased, it may be construed that it has
ceased upon execution 3. UNENFORCEABLE CONTRACTS
 Mistake or fraud: from the time of the
discovery of the mistake or fraud Kinds of unenforceable contracts:
o If incapacitated: prescription starts to run 1. Unauthorized Contracts
when guardianship ceases: 2. Those that fail to comply with the Statute of
 Minor reaching age of majority (while Frauds
still a minor, guardian may ratify) 3. Those where both parties are incapable of
 Insane – from the time he regains giving consent
sanity
- May be expressly or impliedly ratified. UNAUTHORIZED CONTRACTS: those entered
- Person responsible for vitiated consent can’t file into the name of another person by one who has
action for annulment (He who comes to court been given no authority or legal representation,
must come with clean hands.) or who has acted beyond his powers.
- Person of legal age can’t file an action for Those that fail to comply with the STATUE OF
annulment. FRAUDS: This is to prevent fraud, not
- Rule as to what extent is the liability of the encourage the same.
incapacitated as to obligation to return:
o GR: Parties to an annulled contract has to Fundamental Principles:
return what they have received. i. SOF applies only to executory contracts
o EXC: Incapacitated person is not obliged to ii. Cannot apply if the action is neither for
restitution more than the extent of enrichment damages because of violation of an agreement
(the extent that he has benefited) nor the specific performance of said
- If party can’t return: (his fault) return fruits agreement.
received and the value of the thing at time of iii. SOF is exclusive
loss plus interest from time of loss to the time he iv. Defense of SOF may be waived.
can pay. - Failure to timely object presentation of
oral evidence
- Acceptance of benefits
v. SOF is a personal defense
- Only parties to the contract of sale may
raise issue of enforceability
vi. Contracts infringing SOF are merely
unenforceable
vii. SOF is a Rule of Exclusion
viii. SOF concerns itself with the admissibility of
evidence, not to its credibility or weight.
ix. SOF does not apply if it is claimed that
contract does not express true agreement of
the parties.

MLREGALA edit | 7
 The following contracts shall be in writing.
a. That by its terms is not to be performed
within a year from the making thereof
b. A special promise to answer for the debt,
default or miscarriage of another.
Special promise – subsidiary or collateral
promise to pay, like a contract of guaranty
c. Agreement made in consideration of
marriage (other than mutual promise to
marry)
d. An agreement for the sale of goods, chattels
or things in action, at a price not less than
five hundred pesos
“Things in action”: intangible or incorporated
personal property.
“Sale”, not other contracts.
If price is exactly P500, the contract must be in
writing to be enforceable.
Partial payment takes the contract away from the
Statute, exc if said part payment corresponds
to the party delivered.
e. An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest
If exactly one year, may be oral, and still
enforceable.
f. A representation as to the credit of a third
person
Defenses of the Attorney of the Defendant:
i. File a motion to dismiss.
ii. Plead Statute of Frauds as an affirmative defnse.
iii. Make a timely objection in the course of the trial.
Duty of the Attorney for the Plaintiff:
i. Present the written agreement or contract.
ii. If cannot be done because of the loss of contract,
present a memorandum or note in writing where
the important details of the contract are set forth
like the description of the property.
iii. Present secondary evidence of the written
agreement. It may be proved by oral testimony.
It is not an oral contract that is being proven. A
written contract now lost or destroyed, is being
proved orally.
4. VOID CONTRACTS
i. Cause, object purpose: contrary to law,
morals, good customs, public order, or
public policy
ii. Consent is Simulated or Fictitious
If absolutely simulated, the contract is void
for utter lack of consent
If relatively simulated, the hidden or
intended contract is generally binding.
iii. Cause or object is inexistent
iv. Object is outside the commerce of man
v. Impossibility of service
vi. Intention of parties can’t be ascertained
vii. Expressly prohibited/declared void by law
Characteristics of void contracts:
a. The right to set up the defense of illegality
cannot be waived.
b. The action or defense for their declaration as
inexistent does not prescribe.
c. The defense of illegality of contracts is not
available to 3rd persons whose interests are
not directly affected.
d. Cannot give rise to a contract. A contract
which is the direct result of a previous illegal
contract is also void and inexistent.
e. Generally produces no effect.
f. No action to declare void is needed. They are
inexistent ab initio.
(For pusposes of convenience, or to avoid taking
the law into our own hands, there is nothing
wrong in having a void contract declared really
void.
g. They cannot be ratified.
Two kinds of illegal Contracts:
a. Those where there is a criminal offense.
i. When BOTH are equally guilty (in pari
delicto)
 Effects:
 No action against each other
 Both shall be prosecuted
 Effects or instruments shall be
confiscated.
ii. Only one is guilty and the other is innocent
 Effects:
 Guilty party will be prosecuted.
 Instrument of the crime will be
confiscated
 Innocent one may claim what he has
given or she shall not be bound to
comply with his promise
b. Those where there is no criminal offense.
i. When BOTH are equally guilty (in pari
delicto)
 Effect: Neither may recover what he has
given by virtue of the contract or demand
the performance of the other’s undertaking.
ii. Only one is guilty and the other is innocent
 Effects:
 The guilty party cannot recover what
he has given by reason of the contract,
or ask for the fulfillment of what had
been promised him
 The party not at fault may demand the
return of what he has given, without
any obligation to comply with his
promise.
MLREGALA edit | 8
 Voidable Void TITLE IV – ESTOPPEL
May be ratified Cannot be ratified
Produces effects until Generally, effects are not Estoppel – an admission or representation is rendered
annulled produced at all
Defect is due to incapacity or The defect is that ordinarily, conclusive upon the person making it, and cannot be
vitiated consent public policy is militated denied or disproved as against the person relying
against thereon.
Valid until annulled Void from the beginning, so - It is effective only as between the parties or their
generally no action is
required to set it aside, unless successors-in-interest
the contract has already been
performed Kinds of Estoppel:
May be cured by prescription Cannot be cured by 1. Estoppel IN PAIS
prescription
Defense may be invoked only Defense may be availed of by
by the parties (those anybody, whether he is a i. By conduct or by acceptance of benefits
principally or subsidiarily party to the contract or not, as ii. By representation or concealment
liable), or their successors in long as his interest is directly iii. By silence
interest and privies affected
Referred to as relative or Referred to as absolute nullity iv. By omission
conditional nullity v. By laches (failure or neglect for unreasonable
or unexplained time)
- Omission to assert a right in a reasonable
Unenforceable Void time, or party has declined to assert it (had
May be ratified Cannot be ratified
There is a contract but it No contract at all
the right and opportunity to assert right)
cannot be enforced by a court - How to construe inaction? It is presumed,
action by failure to assert right, he knows his
Cannot be assailed by third Can be assailed by anybody right but decided to abandon right or
parties directly affected.
decline to assert.
- Mere fact of delay = laches
TITLE III – NATURAL OBLIGATION - Stale demand: estoppel by standing
- Elements:
Natural Obligations – based on equity o Conduct on the part of defendant
- Can no longer be enforced to court action but giving rise to a situation where a
because of the voluntary fulfiment, person can complainant claiming remedy
no longer pay what he has paid. o Unreasonable delay in asserting
- When an action has prescribed, defendant can no complainant’s right, who was aware
longer be compelled to performance. But, of right and had the opportunity to
despite prescription, he performs, he can no assert such right
longer get back what he has already paid. o Lack of knowledge or notice of
- Payment of debt of the debt of the deceased defendant will assert such right
decedent exceeding the estate that heir has (defendant did not know)
received, heir can no longer get back the o There will be injury or injustice to
payment defendant if relief is given to
complainant
Civil Obligation – can be compelled or enforced
through court action. 2. Estoppel BY DEED
Sources of Civil Obligation: Must be in a written instrument
Law
Contracts 3. Estoppel Concerning immovable property
Quasi-Contracts Requisites:
Crime a. There is fraudulent representation
Quasi-delict b. The party precluded intend that the other should
Natural Civil act upon the facts as misrepresented
Based on equity and Based on positive law c. The party misled must have been unaware of the
natural law (fairness) true facts
Not enforceable by court Enforceable by court d. Party defrauded must have acted in accordance
action action with the misrepresentation
There is a juridical tie (you No juridical tie
can no longer claim what
you paid)
Produces legal effect Does not have legal effect

MLREGALA edit | 9
TITLE V – TRUSTS  express trusts do NOT prescribe (implied trust-
confusing)
Trust – right to the beneficial enjoyment of property  Trust may be proved by ORAL EVIDENCE
- a fiduciary relationship concerning property  implied trust: a distinction must be made
which obliges the person holding it to deal
with the property for the benefit of another. Resulting Trusts Constructive Trusts
Those presumed to have Justified merely by equity
Parties to a “trust” been contemplated by the to satisfy the demands of
a. Trustor or settler – establishes the trust parties, but not so justice, and therefore not
expressed in the trusts in the technical sense
b. Trustee – holds the property in trust for the benefit of
instrument of conveyance
another Do not prescribe Do prescribe
c. Beneficiary or cestui que trust – the person for Exc: recovery from the
whose benefit the trust has been cereated. trustee may prescribe if the
trustee has expressly
Characteristics of Trust: repudiated the trust.
a. It is a fiduciary relationship
b. Created by law or by agreement
c. Where the legal title is held by one, and the equitable
title or the beneficial title is held

Classifications of Trust:
a. Express trust – created by the parties, or by the
intention of the trustor
- immovable or any interest trust (express) can’t be
proved by parol evidence
- no particular words needed. It just needs that the
nature of agreement that trust is created.
- if trustee declines it, trust will not fail. Only assign
another trustee.
- acceptance of beneficiary is required. Without
onerous condition on beneficiary, acceptance is
presumed. (One accorded with benefit will not
refuse it.)

b. Implied trust – created by operation of law

- where the title is not given to the payer but another,
there is trust (a resulting trust). One who pays
for something does so for his own benefit.
- when there is donation, ownership transfers to done.
If donor still receives benefits, there is implied
trust.
- a loan is extended to a person who intends to buy a
property (Lender in whose name property is
issued is just the trustee. Borrower is the trustor.
- transfer by succession (if trustee refuses to convey
property to heir)

Kinds:
i. Resulting Trust – there is an intent to create a
trust but it is not effective as an express trust.
ii. Constructive Trust – no intention to create a
trust is present, but a trust is nevertheless created
by law to prevent unjust enrichment or
oppression.

MLREGALA edit | 10