Oblicon Reviewer

OBLIGATIONS AND CONTRACTS REVIEWER
TITLE I OBLIGATIONS CHAPTER 1 GENERAL PROVISIONS 1156. An obligation is a j !i"i#al n$#$ssit% to gi&$' to "o' o! not to "o. JURIDICAL NECESSITY juridical tie; connotes that in case of nonco !liance" there #ill $e le%al sanctions& An obligation is nothin% ore than the dut' of a !erson (o$li%or) to satisf' a s!ecific de anda$le clai (o$li%ee) #hich" if $reached" is enforcea$le in court& of another !erson
A contract necessaril' %i*es rise to an o$li%ation $ut an o$li%ation does not al#a's need to ha*e a contract&
+INDS ,- ,.LI/ATI,N A& -ro the *ie#!oint of 0sanction1 2 (a) CI3IL ,.LI/ATI,N that defined in Article 4456; an o$li%ation" if not fulfilled #hen it $eco es due and de anda$le" a' $e enforced in court throu%h action; $ased on la#; the sanction is judicial due process ($) NATURAL ,.LI/ATI,N defined in Article 4789; a s!ecial :ind of o$li%ation #hich cannot $e enforced in court $ut #hich authori;es the retention of the *oluntar' !a' ent or !erfor ance ade $' the de$tor; $ased on e<uit' and natural la#& (i&e& #hen there is !rescri!tion of dut' to !a'" still" the o$li%or !aid his dues to the o$li%ee the o$li%or cannot reco*er his !a' ent e*en there is !rescri!tion) the sanction is the law" $ut onl' conscience had ori%inall' oti*ated the !a' ent& (c) =,RAL ,.LI/ATI,N the sanction is conscience or oralit'" or the la# of the church& (Note> If a Catholic !ro ises to hear ass for 4? consecuti*e Sunda's in order to recei*e @4"???" this o$li%ation $eco es a ci*il one&) .& -ro the *ie#!oint of su$ject atter 2 (a) REAL ,.LI/ATI,N the o$li%ation to %i*e ($) @ERS,NAL ,.LI/ATI,N the o$li%ation to do or not to do (e&%& the dut' to !aint a house" or to refrain fro co ittin% a nuisance) C& -ro the affir ati*eness and ne%ati*eness of the o$li%ation 2 (a) @,SITI3E ,R A--IR=ATI3E ,.LI/ATI,N the o$li%ation to %i*e or to do ($) NE/ATI3E ,.LI/ATI,N the o$li%ation not to do (#hich naturall' inludes not to %i*e) D& -ro the *ie#!oint of !ersons o$li%ed 2 0sanction1 2 (a) UNILATERAL #here onl' one of the !arties is $ound (e&%& @lato o#es Socrates @4"???& @lato ust !a' Socrates&) ($) .ILATERAL #here $oth !arties are $ound (e&%& In a contract of sale" the $u'er is o$li%ed to deli*er) 2 a' $e> ($&4) reci!rocal ($&8) non2reci!rocal #here !erfor ance $' one is non2de!endent u!on !erfor ance $' the other ELE=ENTS ,- ,.LI/ATI,N a) ACTI3E SU.JECT (Creditor A ,$li%ee) the !erson #ho is de andin% the !erfor ance of the o$li%ation; $) @ASSI3E SU.JECT (De$tor A ,$li%or) the one $ound to !erfor the !restation or to fulfill the o$li%ation or dut'; c) @RESTATI,N (to %i*e" to do" or not to do) o$ject; su$ject atter of the o$li%ation; conduct re<uired to $e o$ser*ed $' the de$tor; d) E--ICIENT CAUSE the JURIDICAL TIE #hich $inds the !arties to the o$li%ation; source of the o$li%ation& @RESTATI,N (,$ject) 4& T, /I3E deli*er' of a thin% to the creditor (in sale" de!osit" !led%e" donation); 8& T, D, co*ers all :inds of #or:s or ser*ices (contract for !rofessional ser*ices); 9& N,T T, D, consists of refrainin% fro doin% so e acts (in follo#in% rules and re%ulations)& Re<uisites of @restation A ,$ject( 4) licit (if illicit" it is *oid) 8) !ossi$le (if i !ossi$le" it is *oid) 9) deter inate or deter ina$le (or else" *oid)
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!ecuniar' *alue INJURY #ron%ful act or o ission #hich causes loss or har DA=A/E result of injur' (loss" hurt" har ) to another
115). Obligation a!is$s *!o+ ,1- la./ ,0- #ont!a#ts/ ,1- 2 asi3#ont!a#ts/ ,4- a#ts o! o+issions 5 nis6$" b% la./ ,52 asi3"$li#ts. ,1- LA7 (,$li%ation eB le%e) i !osed $' la# itself; 2 CSee Article 1158D ust $e eB!ressl' or i !liedl' set forth and cannot $e !resu ed
,0- CONTRACTS (,$li%ation eB contractu) arise fro sti!ulations of the !arties> eetin% of the inds A for al a%ree ent 2 ust $e co !lied #ith in %ood faith $ecause it is the 0la#1 $et#een !arties; neither !art' a' unilaterall' e*ade his o$li%ation in the contract" unless> a) contract authori;es it $) other !art' assents Note: Parties may freely enter into any stipulations, provided t ey are not contrary to law, morals, good customs, public order or public policy ! "See Article 115#D ,1- 89ASI3CONTRACTS (,$li%ation eB <uasi2contractu) arise fro la#ful" *oluntar' and unilateral acts and #hich are enforcea$le to the end that no one shall $e unjustl' enriched or $enefited at the eB!ense of another 2 8 :inds> a& Ne%otioru %estio 2 unauthori;ed ana%e ent; This ta:es !lace #hen a !erson *oluntaril' ta:es char%e of anotherEs a$andoned $usiness or !ro!ert' #ithout the o#nerEs authorit' $& Solutio inde$iti 2 undue !a' ent; This ta:es !lace #hen so ethin% is recei*ed #hen there is no ri%ht to de and it" and it #as undul' deli*ered thru ista:e 2 CSee Article 11$%D ,4- :ELICTS (,$li%ation eB aleficio or eB delicto) arise fro ci*il lia$ilit' #hich is the conse<uence of a cri inal offense 2 /o*ernin% rules> 4& @ertinent !ro*isions of the R@C and other !enal la#s su$ject to Art 84FF Ci*il Code CArt 4??" R@C E*er' !erson cri inall' lia$le for a felon' is also ci*ill' lia$leD 8& Cha!ter 8" @reli inar' title" on Gu an Relations ( Ci*il Code ) 9& Title 4H of .oo: I3 of the Ci*il Code on da a%es 2 CSee Article 11$1D ,5- 89ASI3:ELICTS ; TORTS (,$li%ation eB <uasi2delicto or eB <uasi2 aleficio) arise fro da a%e caused to another throu%h an act or o ission" there $ein% no fault or ne%li%ence" $ut no contractual relation eBists $et#een the !arties ! "See Article 11$&D 115<. Obligations *!o+ la. a!$ not 5!$s +$". Onl% t6os$ ,1- $=5!$ssl% "$t$!+in$" in t6is #o"$ o! ,0- in s5$#ial la.s a!$ "$+an"abl$' an" s6all b$ !$g lat$" b% t6$ 5!$#$5ts o* t6$ la. .6i#6 $stablis6$s t6$+/ an" as to .6at 6as not b$$n *o!$s$$n' b% t6$ 5!o&isions o* t6is #o"$. Unless such o$li%ations are EI@RESSLY !ro*ided $' la#" the' are not de anda$le and enforcea$le" and cannot $e !resu ed to eBist& The Ci*il Code can $e a!!lica$le su!!letoril' to o$li%ations arisin% fro la#s other than the Ci*il Code itself& S!ecial la#s refer to all other la#s not contained in the Ci*il Code&
115>. Obligations a!ising *!o+ #ont!a#ts 6a&$ t6$ *o!#$ o* la. b$t.$$n t6$ #ont!a#ting 5a!ti$s an" s6o l" b$ #o+5li$" .it6 in goo" *ait6. C,NTRACT eetin% of inds $et#een t#o !ersons #here$' one $inds hi self" #ith res!ect to the other" to %i*e" to do so ethin% or to render so e ser*ice; %o*erned !ri aril' $' the a%ree ent of the contractin% !arties&
3ALID C,NTRACT it should not $e a%ainst the la#" contrar' to
orals" %ood custo s" !u$lic order" and !u$lic !olic'& it&
In the e'es of la#" a *oid contract does not eBist and no o$li%ation #ill arise fro
,.LI/ATI,NS ARISIN/ -R,= C,NTRACTS !ri aril' %o*erned $' the sti!ulations" clauses" ter s and conditions of their a%ree ents& If a contractEs !restation is unconsciona$le (unfair) or unreasona$le" e*en if it does not *iolate not $e enforced totall'& Inter!retation of contract in*ol*es a <uestion of la#& orals" la#" etc&" it a'
C,=@LIANCE IN /,,D -AITG co !liance or !erfor ance in accordance #ith the sti!ulations or ter s of the contract or a%ree ent& -ALSI-ICATI,N ,- A 3ALID C,NTRACT onl' the unauthori;ed insertions #ill $e disre%arded; the ori%inal ter s and sti!ulations should $e considered *alid and su$sistin% for the !artied to fulfill& 116?. Obligations "$!i&$" *!o+ 2 asi3#ont!a#ts s6all b$ s bj$#t to t6$ 5!o&isions o* #6a5t$! 1' titl$ 1) o* t6is boo@. JUASI2C,NTRACT juridical relation resultin% fro la#ful" *oluntar' and unilateral acts $' *irtue of #hich" $oth !arties $eco e $ound to each other" to the end that no one #ill $e unjustl' enriched or $enefited at the eB!ense of the other& (See Article 8478) (4) NE/,TI,RU= /ESTI, juridical relation #hich ta:es !lace #hen so e$od' *oluntaril' ana%es the !ro!ert' affairs of another #ithout the :no#led%e or consent of the latter; o#ner shall rei $urse the %estor for necessar' and useful eB!enses incurred $' the latter for the !erfor ance of his function as %estor& (8) S,LUTI, INDE.ITI so ethin% is recei*ed #hen there is no ri%ht to de and it and it #as undul' deli*ered throu%h ista:e; o$li%ation to return the thin% arises on the !art of the reci!ient& (e&%& If I let a store:ee!er chan%e ' @5?? $ill and $' error he %i*es e @56?" I ha*e the dut' to return the eBtra @6?) 1161. Ci&il obligations a!ising *!o+ #!i+inal o**$ns$s s6all b$ go&$!n$" b% t6$ 5$nal la.s' s bj$#t to t6$ 5!o&isions o* A!ti#l$ 01))' an" o* t6$ 5$!tin$nt 5!o&isions o* C6a5t$! 0' P!$li+ina!% in H +an R$lations' an" o* Titl$ 1< o* t6is boo@' !$g lating "a+ag$s. /o*ernin% rules> 4& @ertinent !ro*isions of the R@C and other !enal la#s su$ject to Art 84FF Ci*il Code CArt 4??" R@C E*er' !erson cri inall' lia$le for a felon' is also ci*ill' lia$leD 8& Cha!ter 8" @reli inar' title" on Gu an Relations ( Ci*il Code ) 9& Title 4H of .oo: I3 of the Ci*il Code on da a%es E*er' !erson cri inall' lia$le for a felon' is also cri inall' lia$le (art& 4??" R@C)
CRI=INAL LIA.ILITY INCLUDES> (a) RESTITUTI,N restoration of !ro!ert' !re*iousl' ta:en a#a'; the thin% itself shall $e restored" e*en thou%h it $e found in the !ossession of a third !erson #ho has ac<uired it $' la#ful eans" sa*in% to the latter his action a%ainst the !ro!er !erson #ho a' $e lia$le to hi & ($) RE@ARATI,N ,- TGE DA=A/E CAUSED court deter ines the a ount of da a%e> !rice of a thin%" senti ental *alue" etc& (c) INDE=NI-ICATI,N -,R C,NSEJUENTIAL DA=A/ES includes da a%es suffered $' the fa il' of the injured !art' or $' a third !erson $' reason of the cri e& 'ffect of ac(uittal in criminal case: a& #hen ac<uittal is due to reasona$le dou$t no ci*il lia$ilit' $& #hen ac<uittal is due to eBe !tin% circu stances there is ci*il lia$ilit' c& #hen there is !re!onderance of e*idence there is ci*il lia$ilit'
1160. Obligations "$!i&$" *!o+ 2 asi3"$li#ts s6all b$ go&$!n$" b% t6$ 5!o&isions o* #6a5t$! 0' titl$ 1) o* t6is boo@'
an" b% s5$#ial la.s. JUASI2DELICT (cul!a a<uiliana) an act or o ission $' a !erson #hich causes da a%e to another %i*in% rise to an o$li%ation to !a' for the da a%e done" there $ein% fault or ne%li%ence $ut there is no !re2eBistin% contractual relation $et#een !arties& (See Article 84F6) REJUISITES> a& o ission $& ne%li%ence c& da a%e caused to the !laintiff d& direct relation of o ission" $ein% the cause" and the da a%e" $ein% the effect e& no !re2eBistin% contractual relations $et#een !arties -ault or Ne%li%ence consists in the o ission of that dili%ence #hich is re<uired $' the nature of the o$li%ation and corres!onds #ith the circu stances of the !erson" ti e" and of the !lace& BASIS 4& INTENT 8& INTEREST 9& LIA.ILITY 7& @UR@,SE 5&C,=@R,=ISE 6& /UILT :ELICTS Cri inal A alicious Affects @U.LIC interest Cri inal and ci*il lia$ilities @ur!ose !unish ent Cannot $e co !ro ised @ro*ed $e'ond reasona$le dou$t 89ASI3:ELICTS Ne%li%ence Affects @RI3ATE interest Ci*il lia$ilit' Inde nification Can $e co !ro ised @re!onderance of e*idence
CHAPTER 0 NAT9RE AN: EAAECT OA OBLIGATIONS 1161. E&$!% 5$!son oblig$" to gi&$ so+$t6ing is also oblig$" to ta@$ #a!$ o* it .it6 t6$ 5!o5$! "ilig$n#$ o* a goo" *at6$! o* a *a+il%' nl$ss t6$ la. o! t6$ sti5 lation o* t6$ 5a!ti$s !$2 i!$s anot6$! stan"a!" o* #a!$. S!ea:s of an o$li%ation to care of a DETER=INATE thin% (that is one #hich is s!ecific; a thin% identified $' its indi*idualit') #hich an o$li%or is su!!osed to deli*er to another& Reason> the o$li%or cannot ta:e care of the #hole classA%enus
DUTIES ,- DE.T,R> @reser*e or ta:e care of the thin%s due& DILI/ENCE ,- A /,,D -ATGER a %ood father does not a$andon his fa il'" he is al#a's read' to !ro*ide and !rotect his fa il'; ordinar' care #hich an a*era%e and reasona$l' !rudent an #ould do& 2 Defined in the ne%ati*e in Article 44F9 AN,TGER STANDARD ,- CARE eBtraordinar' dili%ence !ro*ided in the sti!ulation of !arties& -ACT,RS T, .E C,NSIDERED dili%ence de!ends on the nature of o$li%ation and corres!onds #ith the circu stances of the !erson" ti e" and !lace& ajeureL #ithout ne%li%ence or fault in
KK De$tor is not lia$le if his failure to deli*er the thin% is due to fortuitous e*ents or force his !art& Deli*er the fruits of a thin% Deli*er the accessionsAaccessories Deli*er the thin% itself Ans#er for da a%es in case of non2fulfill ent or $reach
1164. T6$ #!$"ito! 6as a !ig6t to t6$ *! its o* t6$ t6ing *!o+ t6$ ti+$ t6$ obligation to "$li&$! it a!is$s. Ho.$&$!' 6$ s6all a#2 i!$ no !$al !ig6t o&$! it ntil t6$ sa+$ 6as b$$n "$li&$!$" to 6i+. REAL RI/GT (jus in re) ri%ht !ertainin% to !erson o*er a s!ecific thin%" #ithout a !assi*e su$ject indi*iduall' deter ined
a%ainst #ho such ri%ht a' $e !ersonall' enforced& a ri%ht enforcea$le a%ainst the #hole #orld @ERS,NAL RI/GT (jus ad re ) a ri%ht !ertainin% to a !erson to de and fro fulfill ent of a !restation to %i*e" to do or not to do& a ri%ht enforcea$le onl' a%ainst a definite !erson or %rou! of !ersons& another" as a definite !assi*e su$ject" the
.efore the deli*er'" the creditor" in o$li%ations to %i*e" has erel' a !ersonal ri%ht a%ainst the de$tor a ri%ht to as: for deli*er' of the thin% and the fruits thereof& ,nce the thin% and the fruits are deli*ered" then he ac<uires a real ri%ht o*er the & ,#nershi! is transferred $' deli*er' #hich could $e either actual or constructive& (Art& 47FF) The re ed' of the $u'er #hen there is no deli*er' des!ite de and is to file a co !laint for 0S@ECI-IC @ER-,R=ANCE AND DELI3ERY1 $ecause he is not 'et the o#ner of the !ro!ert' $efore the deli*er'&
ACTUAL DELI3ERY actual deli*er' of a thin% fro the hand of the %rantor to the hand of the %rantee (!resonall')" or anifested $' certain !ossessor' acts eBecuted $' the %rantee #ith the consent of the %rantor (realt')& -RUITS> 4& NATURAL s!ontaneous !roducts of the soil" the 'oun% and other !roducts of ani als; 8& INDUSTRIAL !roduced $' lands of an' culti*ation or la$or; 9& CI3IL those deri*ed $' *irtue of juridical relation& KK SEE Article 4467 (retroacti*it' of the effects of conditional o$li%ation to %i*e once the condition has $een fulfilled)
1165. 76$n .6at is to b$ "$li&$!$" is a "$t$!+inat$ t6ing' t6$ #!$"ito! B +a% #o+5$l t6$ "$bto! to +a@$ "$li&$!%. I* t6$ t6ing is in"$t$!+inat$ o! g$n$!i#' 6$ +a% as@ t6at t6$ obligation b$ #o+5li$" .it6 at t6$ $=5$ns$ o* t6$ "$bto!. I* t6$ obligo! "$la%s o! 6as 5!o+is$" to "$li&$! t6$ sa+$ ting to t.o o! +o!$ 5$!sons .6o "o not 6a&$ t6$ sa+$ int$!$st' 6$ s6all b$ !$s5onsibl$ *o! an% *o!t ito s $&$nt ntil 6$ 6as $**$#t$" t6$ "$li&$!%. KThis !ro*ision a!!lies to an o$li%ation to %i*e& DETER=INATE TGIN/ so ethin% #hich is susce!ti$le of !articular desi%nation or s!ecification; o$li%ation is eBtin%uished if the thin% is lost due to fortuitous e*ents& Article 476?> a thin% is deter inate #hen it is !articularl' desi%nated and !h'sicall' se%re%ated fro sa e class& INDETER=INATE TGIN/ so ethin% that has reference onl' to a class or %enus; o$li%ation to deli*er is not so eBtin%uished $' fortuitous e*ents& RE=EDIES -,R -AILURE ,- DELI3ERY (deter inate thin%) 4& Co !laint for s!ecific !erfor ance an action to co !el the fulfill ent of the o$li%ation& 8& Co !laint for rescission of the o$li%ation action to rescind 9& Co !laint for da a%es action to clai for co !ensation of da a%es suffered As a %eneral rule" 0no !erson shall $e res!onsi$le for those e*ents #hich could not $e foreseen" or #hich" thou%h foreseen" are ine*ita$le" eBce!t> 4& in cases eB!ressl' s!ecified $' the la# 8& #hen it is sti!ulated $' the !arties 9& #hen the nature of the o$li%ation re<uires assu !tion of ris: An indeter inate thin% cannot $e o$ject of destruction $' a fortuitous e*ent $ecause %enus ne*er !erishes&
all others of the
1166. T6$ obligation to gi&$ a "$t$!+inat$ t6ing in#l "$s t6at o* "$li&$!ing all its a##$ssions an" a##$sso!i$s' $&$n t6o g6 t6$% +a% not 6a&$ b$$n +$ntion$". ACCESSI,NS fruits of the thin% or additions to or i !ro*e ents u!on the !rinci!al
those #hich are naturall' or artificiall' attached to the thin%
ACCESS,RIES thin%s included #ith the !rinci!al for the latterEs e $ellish ent" $etter use" or co !letion ) en does rig t to fruits ariseM fro the ti e the o$li%ation to deli*er arises Conditional fro the o ent the condition ha!!ens Nith a ter A!eriod u!on the eB!iration of the ter A!eriod Si !le fro the !erfection of the contract 116). I* a 5$!son oblig$" to "o so+$t6ing *ails to "o it' t6$ sa+$ s6all b$ $=$# t$" at 6is #ost. T6is sa+$ ! l$ s6all b$ obs$!&$" i* 6$ "o$s it in #ont!a&$ntion o* t6$ t$no! o* t6$ obligation B it +a% b$ "$#!$$" t6at .6at 6as b$$n 5oo!l% "on$ b$ n"on$. K This !ro*ision a!!lies to an o$li%ation to do& TGREE SITUATI,NS> a) De$torEs failure to !erfor an o$li%ation creditor a' do the o$li%ation" or $' another" at the eB!ense of the de$tor; $) c) reco*er da a%es @erfor ance #as contrar' to the ter s a%reed u!on order of the court to undo the sa e at the eB!ense of the de$tor @erfor ance in a !oor anner order of the court to undo the sa e at the eB!ense of the de$tor
116<. 76$n t6$ obligation #onsists in NOT :OING an" t6$ obligo! "o$s .6at 6as b$$n *o!bi""$n 6i+' it s6all also b$ n"on$ at 6is $=5$ns$. K This !ro*ision a!!lies to an o$li%ation not to do& 116>. T6os$ oblig$" to "$li&$! o! to "o so+$t6ing in# ! in "$la% *!o+ t6$ ti+$ t6$ oblig$$ j "i#iall% o! $=t!aj "i#iall% "$+an"s *!o+ t6$+ t6$ * l*ill+$nt o* t6$i! obligation. Ho.$&$!' t6$ "$+an" b% t6$ #!$"ito! s6all not b$ n$#$ssa!% in o!"$! t6at "$la% +a% $=ists( 76$n t6$ la. o! obligation so $=5!$ssl% "$#la!$s/ 76$n *!o+ t6$ nat !$ o* t6$ #ont!a#t' ti+$ s t6$ $ss$n#$ an" +oti&ating *a#to! *o! its $stablis6+$nt/ 76$n "$+an" .o l" b$ s$l$ss ,5!$station is i+5ossibl$-/ In !$#i5!o#al obligations' *!o+ t6$ +o+$nt on$ o* t6$ 5a!ti$s * l*ills 6is obligation/ 76$n t6$ "$bto! a"+its 6$ is in "$*a lt
,RDINARY DELAY ere failure to !erfor an o$li%ation at the a!!ointed ti e& LE/AL DELAY (DE-AULT) tanta ount to non2fulfill ent of the o$li%ation and arises after an eBtrajudicial or judicial de and #as ade u!on the de$tor& CIN:S OA :EAA9LT> a) DORA SOLVEN:I dela' on the !art of the de$tor to fulfill his o$li%ation; REJUISITES> 4& failure of the o$li%or to !erfor o$li%ation on the DATE a%reed u!on; 8& de and (judicialAeBtrajudicial) $' the creditor; 9& failure to co !l' #ith such de and E--ECTS> 4) 8) +INDS> 4) ora sol*endi eB re default in real o$li%ations (to %i*e)
de$tor lia$le for da a%es and interests de$tor lia$le for the loss of a thin% due to a fortuitous e*ent
8)
ora sol*endi eB !ersona default in !ersonal o$li%ations (to do)
$) DORA ACCIPIEN:I dela' on the !art of the creditor to acce!t the !erfor ance of the o$li%ation; Effects> 4& creditor lia$le for da a%es 8& creditor $ears the ris: of loss of the thin% 9& de$tor not lia$le for interest fro the ti e of creditorEs dela' 7& de$tor release hi self fro the o$li%ation c) CODPENSATIO DORAE dela' of the o$li%ors in reci!rocal o$li%ation& Effect> the default of one co !ensates the default of the other; their res!ecti*e lia$ilities shall $e offset e<uita$le&
Default A Dela' in ne%ati*e o$li%ation is not !ossi$le& (In ne%ati*e o$li%ation" onl' fulfill ent and *iolation are !ossi$le)
11)?. T6os$ .6o in t6$ 5$!*o!+an#$ o* t6$i! obligations a!$ g ilt% o* *!a "' n$glig$n#$' o! "$la%' an" t6os$ .6o in an% +ann$! #ont!a&$n$ t6$ t$no! t6$!$o*' a!$ liabl$ *o! "a+ag$s. -RAUD (dolo) deli$erate intentional e*asion of the faithful fulfill ent of an o$li%ation; NE/LI/ENCE (cul!a or fault) *oluntar' act or o ission of dili%ence" there $ein% no alice" #hich !re*ents the nor al fulfill ent of an o$li%ation; DELAY ( ora) default or tardiness in the !erfor ance of an o$li%ation after it has $een due and de anda$le; C,NTRA3ENTI,N ,- TER=S ,- ,.LI/ATI,N (*iolation) *iolation of ter s and conditions sti!ulated in the o$li%ation; this ust not $e due to a fortuitous e*ent&
11)1. R$s5onsibilit% a!ising *!o+ *!a " is "$+an"abl$ in all obligations. An% .ai&$! o* an a#tion *o! * t !$ *!a " is &oi". To allo# such #ai*er #ill necessaril' render the o$li%ator' force of contracts illusor'& The la# does not !rohi$it #ai*er of an action for da a%es $ased on fraud alread' co itted& An' deli$erate de*iation fro the nor al #a' of fulfillin% the o$li%ation a' $e a !ro!er $asis for clai a%ainst the %uilt' !art'&
for da a%es
INCIDENTAL -RAUD (a!!lica$le !ro*isions are Arts& 44F? O 4977) co itted in the !erfor ance of an o$li%ation alread' eBistin% $ecause of a contract; incidental fraud o$li%es the !erson e !lo'in% it to !a' da a%es& CAUSAL -RAUD (Art& 499H) e !lo'ed in the eBecution of contract in order to secure consent; re ed' is annul ent $ecause of *itiation of consent& 11)0. R$s5onsibilit% a!ising *!o+ n$glig$n#$ in t6$ 5$!*o!+an#$ o* $&$!% @in" o* obligation is also "$+an"abl$' b t s #6 liabilit% +a% b$ !$g lat$" b% t6$ #o !ts' a##o!"ing to #i!# +stan#$s. CourtEs discretion $ecause> (a) ne%li%ence de!ends u!on the circu stances of a case %ood or $ad faith of the o$li%or as #ell as the conduct or isconduct of the o$li%ee; ($) it is not as serious as fraud& Ne%li%ence lac: of foresi%ht or :no#led%e I !rudence lac: of s:ill or !recaution TEST ,- NE/LI/ENCE Did the defendant" in doin% the alle%ed ne%li%ent act" use the reasona$le care and caution #hich an ordinar' !rudent ha*e used in the sa e situationM TN, TY@ES ,- NE/LI/ENCE> Basis DE-INITI,N 1. C l5a A2 iliana ,8 asi3"$li#tNe%li%ence $et#een !arties not so 0. C l5a Cont!a#t al ,B!$a#6 o* #ont!a#tNe%li%ence in the !erfor ance of contractual
a' $e considered
an #ould
NATURE ,- NE/LI/ENCE /,,D -ATGER ,- TGE -A=ILY DE-ENSE @RESU=@TI,N ,NE/LI/ENCE
related $' !re2eBistin% contract Direct" su$stanti*e and inde!endent Co !lete and !ro!er defense (!arents" %uardian" e !lo'ers) No !resu !tion injured !art' ust !ro*e ne%li%ence of the defendant&
o$li%ation Incidental to the !erfor ance of the o$li%ation& Not co !lete and !ro!er defense in the selection of e !lo'ees& There is !resu !tion defendant ust !ro*e that there #as no ne%li%ence in the carr'in% out of the ter s of the contract&
11)1. T6$ *a lt o! n$glig$n#$ o* t6$ obligo! #onsists in t6$ o+ission o* t6at "ilig$n#$ .6i#6 is !$2 i!$" b% t6$ nat !$ o* t6$ obligation an" #o!!$s5on"s .it6 t6$ #i!# +stan#$s o* t6$ 5$!sons' o* 6$ ti+$ an" o* t6$ 5la#$B I* t6$ la. o! #ont!a#t "o$s not stat$ t6$ "ilig$n#$ .6i#6 is to b$ obs$!&$" in t6$ 5$!*o!+an#$' t6at .6i#6 is $=5$#t$" i* a goo" *at6$! o* a *a+il% s6all b$ !$2 i!$". 2 This !ro*ision !ro*ides for a ne%ati*e definition of 0!ro!er dili%ence of a %ood father of a fa il'1 -RAUD distin%uished fro NE/LI/ENCE ARA9: There is deli$erate intention to cause da a%e& Lia$ilit' cannot $e iti%ated& Nai*er for future fraud is *oid&
NEGLIGENCE There is no deli$erate intention to cause da a%e& Lia$ilit' a' $e iti%ated& Nai*er for future ne%li%ence a' $e allo#ed in certain cases>
DILI/ENCE the attention and care re<uired of a !erson in a %i*en situation and is o!!osite of ne%li%ence& NE/LI/ENCE consists in the o ission of that dili%ence #hich is re<uired $' the nature of the !articular o$li%ation and corres!onds #ith the circu stances of the !ersons" of the ti e" and of the !lace& +INDS of DILI/ENCE> 4& DILI/ENCE ,- A /,,D -ATGER a %ood father does not a$andon his fa il'" he is al#a's read' to !ro*ide and !rotect his fa il'; ordinar' care #hich an a*era%e and reasona$l' !rudent an #ould do& 8& Dili%ence re<uired $' the la# %o*ernin% the !articular o$li%ation 9& Dili%ence sti!ulated $' the !arties 11)4. E=#$5t in #as$s $=5!$ssl% s5$#i*i$" b% t6$ la.' o! .6$n it is ot6$!.is$ "$#la!$" b% sti5 lation' o! .6$n t6$ nat !$ o* t6$ obligation !$2 i!$s t6$ ass +5tion o* !is@' no 5$!son s6all b$ !$s5onsibl$ *o! t6os$ $&$nts .6i#6 #o l" not b$ *o!$s$$n' o! .6i#6' t6o g6 *o!$s$$n' .$!$ in$&itabl$. -,RTUIT,US E3ENT an occurrence or ha!!enin% #hich could not $e foreseen or e*en if foreseen" is ine*ita$le; a$solutel' inde!endent of hu an inter*ention; act of /od& -,RCE =AJEURE 2 an e*ent caused $' the le%iti ate or ille%iti ate acts of !ersons other than the o$li%or; there is hu an inter*ention&
REJUISITES 4& 8& 9& 7&
,- -,RTUIT,US E3ENT> CI93IAD Inde!endent of the hu an #ill (or at least of the o$li%orEs) 9nforeseen or una*oida$le ,f such character as to render it i !ossi$le for the o$li%or to co !l' #ith his o$li%ation in a nor al anner ,$li%or *ree fro an' !artici!ationAa%%ra*ation of the injur' to the o$li%ee (no ne%li%ence or i !rudence)
EIE@TI,NS> 4& Nhen it is eB!ressl' sti!ulated that he shall $e lia$le e*en if non2!erfor ance of the o$li%ation is due to fortuitous e*ents; 8& Nhen the nature of the o$li%ation re<uires the assu !tion of ris:; 9& Nhen the o$li%or is in dela'; 7& Nhen the o$li%or has !ro ised the sa e thin% to t#o or ore !ersons #ho do not ha*e the sa e interest; 5& Nhen the !ossessor is in $ad faith and the thin% lost or deteriorated due to fortuitous e*ent; 6& Nhen the o$li%or contri$uted to the loss of the thin%&
11)5. 9s !io s t!ansa#tions s6all b$ go&$!n$" b% s5$#ial la.s. K see Article 4749 USURY contractin% for or recei*in% interest in eBcess of the a ount allo#ed $' la# for the loan or use of one'" %oods" etc&
USURY LAN a:es the usurers cri inall' lia$le if the interest char%ed on loans are ore that the li it !rescri$ed $' la#& This la# is re!ealed Circular No& P?5 of the Central .an: has eB!ressl' re o*ed the interest ceilin%s !rescri$ed $' the USURY LAN& 11)6. T6$ !$#$i5t o* t6$ 5!in#i5al b% t6$ #!$"ito! .it6o t !$s$!&ation .it6 !$s5$#t to t6$ int$!$st' s6all gi&$ !is$ to t6$ 5!$s +5tion t6at sai" int$!$st 6as b$$n 5ai". T6$ !$#$i5t o* a lat$! install+$nt o* a "$bt .it6o t !$s$!&ation as to 5!io! install+$nts' s6all li@$.is$ !ais$ t6$ 5!$s +5tion t6at s #6 install+$nts 6a&$ b$$n 5ai". These are ere !resu !tions& To $e sure #rite the interest and the dates co*ered $' such !a' ent in the recei!t&
11)). T6$ #!$"ito!s' a*t$! 6a&ing 5 !s $" t6$ 5!o5$!t% in 5oss$ssion o* t6$ "$bto! to satis*% t6$i! #lai+s' +a% $=$!#is$ all t6$ !ig6ts an" b!ing all t6$ a#tions o* t6$ latt$! *o! t6$ sa+$ 5 !5os$' sa&$ t6os$ .6i#6 a!$ in6$!$nt in 6is 5$!son/ t6$% +a% also i+5 gn t6$ a#ts .6i#6 t6$ "$bto! +a% 6a&$ "on$ to "$*!a " t6$+. RE=EDIES A3AILA.LE T, CREDIT,RS -,R TGE SATIS-ACTI,N ,- TGEIR CLAI=S> 4& EBact fulfill ent #ith ri%ht to da a%es 8& EBhaustion of the de$torEs !ro!erties still in his !ossession #rit of attach ent ($efore jud% ent) or #rit of eBecution (for final jud% ent not 'et eBecuted) 9& ACCI,N SU.R,/AT,RIA an action #here the creditor #hose clai s had not $een full' satisfied" a' %o after the de$tors (9rd !erson) of the defendant de$tor& 7& ACCI,N @AULIANA an action #here the creditor files an action in court for the RESCISSI,N of acts or contracts entered into $' the de$tor desi%ned to defraud the for er& 11)<. S bj$#t to t6$ la.s' all !ig6ts a#2 i!$" in &i!t $ o* an obligation a!$ t!ans+issibl$' i* t6$!$ 6as b$$n no sti5 lation to t6$ #ont!a!%. EICE@TI,NS> a) Those not trans issi$le $' their nature li:e !urel' !ersonal ri%hts; $) Those not trans issi$le $' !ro*ision of la#; c) Those not trans issi$le $' sti!ulation of !arties&
CHAPTER 1 :IAAERENT CIN:S OA OBLIGATIONS Section 1 Pure and Conditional Obligations 11)>. E&$!% obligation .6os$ 5$!*o!+an#$ "o$s not "$5$n" 5on a * t !$ o! n#$!tain $&$nt' o! 5on a 5ast $&$nt n@no.n to t6$ 5a!ti$s' is "$+an"abl$ at on#$. E&$!% obligation .6i#6 #ontains a !$sol to!% #on"ition s6all also b$ "$+an"abl$' .it6o t 5!$j "i#$ to t6$ $**$#ts o* t6$ 6a55$ning o* t6$ $&$nt. @URE ,.LI/ATI,N an o$li%ation #hich does not contain an' condition or ter u!on #hich the fulfill ent is ade to de!end; i ediatel' de anda$le $' the creditors and the de$tor cannot $e eBcused fro not co !l'in% #ith his !restation& C,NDITI,NAL ,.LI/ATI,N an o$li%ation #hich de!ends u!on a future or uncertain e*ent" or u!on a !ast e*ent un:no#n to the contractin% !arties& an o$li%ation su$ject to a condition& a) Sus!ensi*e ,$li%ation its fulfill ent %i*es rise to an o$li%ation; the de anda$ilit' of the o$li%ation or the effecti*it' of the contract can ta:e !lace onl' after the condition has $een fulfilled& $) Resolutor' ,$li%ation its ha!!enin% eBtin%uishes the o$li%ation #hich is alread' eBistin%;
11<?. 76$n t6$ "$bto! bin"s 6i+s$l* to 5a% .6$n 6is +$ans 5$!+it 6i+ to "o so' t6$ obligation s6all b$ "$$+$" to b$ on$ .it6 a 5$!io"' s bj$#t to t6$ 5!o&isions o* A!ti#l$ 11>). @ERI,D a future and certain e*ent u!on the arri*al of #hich" the o$li%ation su$ject to it either arises or is eBtin%uished& INDICATI,NS ,- A TER= ,R @ERI,D> Nhen the de$tor $inds hi self to !a' #hen his eans !er it hi to do so little $' little as soon as !ossi$le fro ti e to ti e as soon as I ha*e the one' in !artial !a' ent #hen in the !osition to !a' 11<1. In #on"itional obligations' t6$ a#2 isition o* !ig6ts' as .$ll as t6$ $=ting is6+$nt o! loss o* t6os$ al!$a"% a#2 i!$"' s6all "$5$n" 5on t6$ 6a55$ning o* t6$ $&$nt .6i#6 #onstit t$s t6$ #on"ition. Sus!ensi*e Condition the ac<uisition of ri%hts $' the creditor de!ends u!on the ha!!enin% of the e*ent #hich constitutes the condition; if such condition does not ta:e !lace" it #ould $e as of the conditional o$li%ation had ne*er eBisted& (e&%& !ro ise to %i*e a car after %raduatin% fro la# school as cu laude) Resolutor' Condition the ri%hts and o$li%ations alread' eBistin% are under threat of eBtinction u!on the ha!!enin% or fulfill ent of such condition& (e&%& donation $' reason of arria%e the cele$ration of arria%e is a resolutor' condition; if the arria%e did not !ush throu%h" the donation a' $e re*o:ed) 11<0. 76$n t6$ * l*ill+$nt o* t6$ #on"ition "$5$n"s 5on t6$ sol$ .ill o* t6$ "$bto!' t6$ #on"itional obligation s6all b$ &oi". I* it "$5$n"s 5on #6an#$ o! 5on t6$ .ill o* a t6i!" 5$!son' t6$ obligation s6all ta@$ $**$#t in #on*o!+it% .it6 t6$ 5!o&isions o* t6is Co"$. A!!lies onl' to sus!ensi*e conditions&
9 +INDS ,- C,NDITI,NS UNDER TGIS ARTICLE> 4& @,TESTATI3E a sus!ensi*e condition #hich de!ends u!on the #ill of one of the contractin% !arties Q if at the sole #ill of the de$tor" it is *oid; if at the creditorEs" still *alid& this is to !re*ent the esta$lish ent of illusor' o$li%ations& 8& CASUAL the condition de!ends u!on chance or the #ill of a third !erson;(e&%& cell!hone #arrant') 9& =IIED the condition de!ends !artl' u!on the #ill of the !arties and !artl' u!on chance or the #ill of a third !erson; (eBa !le ni Att'& De Cha*e;> !assin% the $ar) 11<1. I+5ossibl$ #on"itions' t6os$ #ont!a!% to goo" # sto+s o! 5 bli# 5oli#% an" t6os$ 5!o6ibit$" b% la. s6all ann l t6$ obligation .6i#6 "$5$n"s 5on t6$+. I* t6$ obligation is "i&isibl$' t6at 5a!t t6$!$o* .6i#6 is not a**$#t$" b% t6$ i+5ossibl$ o! nla.* l #on"ition s6all b$ &ali". T6$ #on"ition not to "o an i+5ossibl$ t6ing s6all b$ #onsi"$!$" as not 6a&ing b$$n ag!$$" 5on. @,SSI.LE C,NDITI,N if it is ca!a$le of reali;ation or actuali;ation accordin% to nature" la#" !u$lic !olic' or %ood custo s& 8 +INDS ,- I=@,SSI.LE C,NDITI,NS> 4& @h'sicall' I !ossi$le cannot eBist or cannot $e done in its nature; 8& Le%all' I !ossi$le contrar' to la#" %ood custo s" or !u$lic !olic'& ,nl' the affected o$li%ation is *oid" if the o$li%ation is di*isi$le" and the !art thereof not affected $' the i !ossi$le condition is *alid& ,nl' the condition is *oid if there is alread' a !re2eBistin% o$li%ation and it does not de!end u!on the fulfill ent of the condition #hich is i !ossi$le&
11<4. T6$ #on"ition t6at so+$ $&$nt 6a55$n at a "$t$!+inat$ ti+$ s6all $=ting is6 t6$ obligation as soon as t6$ ti+$ $=5i!$s o! i* it 6as b$#o+$ in" bitabl$ t6at t6$ $&$nt .ill not ta@$ 5la#$. @ositi*e condition refers to the fulfill ent of an e*ent or !erfor ance of an act Ne%ati*e condition refers to the non2fulfill ent or non2!erfor ance of an act& @,SITI3E SUS@ENSI3E C,NDITI,N The o$li%ation is eBtin%uished> 4& As soon as the TI=E EI@IRES #ithout the e*ent ta:in% !lace; 8& As soon as it has $eco e certain that the E3ENT NILL N,T TA+E @LACE althou%h the ti e s!ecified has not 'et eB!ired& 11<5. T6$ #on"ition t6at so+$ $&$nt .ill not 6a55$n at a "$t$!+inat$ ti+$ s6all !$n"$! t6$ obligation $**$#ti&$ *!o+ t6$ +o+$nt t6$ ti+$ in"i#at$" 6as $la5s$"' o! i* it 6as b$#o+$ $&i"$nt t6at t6$ $&$nt #annot o## !. I* no ti+$ 6as b$$n *i=$"' t6$ #on"ition s6all b$ "$$+$" * l*ill$" at s #6 ti+$ as +a% 6a&$ 5!obabl% b$$n #ont$+5lat$"' b$a!ing in +in" t6$ nat !$ o* t6$ obligation. KK This is a condition of non2ha!!enin% of a future e*ent& The o$li%ation shall $eco e effecti*e and $indin%> a) -ro the o ent the ti e indicated has ela!sed #ithout the e*ent ta:in% !lace; $) -ro the o ent it has $eco e e*ident that the e*ent cannot occur" althou%h the ti e indicated has not 'et ela!sed& 44H7 2*s2 44H5 11<4 ,POSITIVE S9SPENSIVE*ose obliges imself to give t e pregnant woman +aria P5%%% if s e would give birt on or before ,ecember -%. a& Jose is LIA.LE if =aria %i*es $irth on or $efore Dece $er 9?& $& Jose is N,T LIA.LE if =aria %i*es $irth after Dece $er 9?& c& If =aria #ould ha*e a iscarria%e $efore Dece $er 9?" the o$li%ation is EITIN/UISGED& 11<5 ,NEGATIVE S9SPENSIVE*ose obliges imself to give t e pregnant woman +aria P5%%% if s e would N/0 give birt on ,ecember -%. a& Jose is N,T LIA.LE if =aria %i*es $irth on Dece $er 9?& $& Jose is LIA.LE if =aria DID N,T %i*e $irth on Dece $er 9? if =aria %i*es $irth .E-,RE or A-TER Dece $er 9?& c& If =aria #ould ha*e a iscarria%e $efore Dece $er 9?" the o$li%ation is dee ed -UL-ILLED&
11<6. T6$ #on"ition s6all b$ "$$+$" * l*ill$" .6$n t6$ obligo! &ol nta!il% 5!$&$nts its * l*ill+$nt. This !ro*ision s!ea:s of the D,CTRINE ,- C,NSTRUCTI3E -UL-ILL=ENT Co !are #ith Art& 48?9 2 REJUISITES> 4& The condition is SUS@ENSI3E; 8& The o$li%or ACTUALLY @RE3ENTS the fulfill ent of the condition; 9& Ge acts 3,LUNTARILY& =alice or fraud is not re<uired" as lon% as his !ur!ose is to !re*ent the fulfill ent of the condition& No !erson shall !rofit $' his o#n #ron%&
11<). T6$ $**$#ts o* a #on"itional obligation to gi&$' on#$ t6$ #on"ition 6as b$$n * l*ill$"' s6all !$t!oa#t to t6$ "a% o* t6$ #onstit tion o* t6$ obligation. N$&$!t6$l$ss' .6$n t6$ obligation i+5os$s !$#i5!o#al 5!$stations 5on t6$ 5a!ti$s' t6$ *! its an" int$!$sts " !ing t6$ 5$n"$n#% o* t6$ #on"ition s6all b$ "$$+$" to 6a&$ b$$n + t all% #o+5$nsat$". I* t6$ obligation is nilat$!al' t6$ "$bto! s6all a55!o5!iat$ t6$ *! its an" int$!$sts !$#$i&$"' nl$ss *!o+ t6$ nat !$ an" #i!# +stan#$s o* t6$ obligation it s6o l" b$ in*$!!$" t6at t6$ int$ntion o* t6$ 5$!son #onstit ting t6$ sa+$ .as "i**$!$nt. In obligations to "o an" not to "o' t6$ #o !ts s6all "$t$!+in$' in $a#6 #as$' t6$ !$t!oa#ti&$ $**$#t o* t6$ #on"ition
t6at 6as b$$n #o+5li$" .it6. A!!lies onl' to fulfilled sus!ensi*e conditions& Retroacti*e statute The effects of the o$li%ation is dee ed to co ence not fro the fulfill ent of the o$li%ation $ut fro the da' of its constitution (si ilar to the le%iti ation of a natural child) Nhen the o$li%ation is unilateral" the de$tor shall a!!ro!riate the fruits and interests recei*ed $ecause he does not recei*e an' e<ui*alent or *alua$le consideration fro the o$li%ee& The article does not re<uire the deli*er' of fruits or !a' ent of interests accruin% (accu ulatin%) $efore the fulfill ent of the sus!ensi*e condition& ,$li%ations to do or not to do the retroacti*e effect shall $e deter ined $' the court usin% its sound discretion #ithout disre%ardin% the intentions of the !arties&
11<<. T6$ #!$"ito! +a%' b$*o!$ t6$ * l*ill+$nt o* t6$ #on"ition' b!ing t6$ a55!o5!iat$ a#tions *o! t6$ 5!$s$!&ation o* 6is !ig6t. T6$ "$bto! +a% !$#o&$! .6at " !ing t6$ sa+$ ti+$ 6$ 6as 5ai" b% +ista@$ in #as$ o* a s s5$nsi&$ #on"ition. Actions a*aila$le to the creditor> Action for !rohi$ition restrainin% the alienation of the thin% !endin% the ha!!enin% of the sus!ensi*e condition; Action to de and securit' if the de$tor has $eco e insol*ent; Action to set aside alienations ade $' the de$tor in fraud of creditors; Actions a%ainst ad*erse !ossessors to interru!t the runnin% !rescri!ti*e !eriod& To ha*e his ri%hts annotated in the re%istr'& Ri%hts of the DE.T,R entitled to reco*er #hat has $een !aid $' ista:e !rior to the ha!!enin% of the sus!ensi*e condition&
11<>. 76$n t6$ #on"itions 6a&$ b$$n i+5os$" .it6 t6$ int$ntion o* s s5$n"ing t6$ $**i#a#% o* an obligation to gi&$' t6$ *ollo.ing ! l$s s6all b$ obs$!&$" in #as$ o* t6$ i+5!o&$+$nt' loss o! "$t$!io!ation o* t6$ t6ing " !ing t6$ 5$n"$n#% o* t6$ #on"ition( L,SS (4) de$tor #ithout fault o$li%ation is eBtin%uished (8) de$tor #ith fault o$li%ation to !a' da a%es DETERI,RATI,N (4) de$tor #ithout fault i !air ent is to $e $orne $' the creditor (8) de$tor #ith fault creditor chooses> rescission of o$li%ation" fulfill ent" inde nit' I=@R,3E=ENT (4) $' nature or ti e i !ro*e ent> inure to the $enefit of the creditor (8) at the eB!ense of the de$tor %ranted to the usufructuar' 11>?. 76$n t6$ #on"itions 6a&$ *o! t6$i! 5 !5os$ t6$ $=ting is6+$nt o* an obligation to gi&$' t6$ 5a!ti$s' 5on t6$ * l*ill+$nt o* sai" #on"itions' s6all !$t !n to $a#6 ot6$! .6at t6$% 6a&$ !$#$i&$". In #as$ o* t6$ loss' "$t$!io!ation o! i+5!o&$+$nt o* t6$ t6ing' t6$ 5!o&isions .6i#6' .it6 !$s5$#t to t6$ "$bto!' a!$ lai" "o.n in t6$ 5!$#$"ing a!ti#l$ s6all b$ a55li$" to t6$ 5a!t% .6o is bo n" to !$t !n. As *o! t6$ obligations to "o an" not to "o' t6$ 5!o&isions o* t6$ s$#on" 5a!ag!a56 o* A!ti#l$ 11<) s6all b$ obs$!&$" as !$ga!"s t6$ $**$#t o* t6$ $=ting is6+$nt o* t6$ obligation. Refers to the fulfill ent of a resolutor' condition& Nhen the resolutor' condition ha!!ened" the o$li%ation is considered as if it did not eBist& The !arties are $ound to return or restore #hate*er the' ha*e recei*ed fro each other 0reci!rocal restitution1 Donation $' reason of arria%e if the arria%e does not ha!!en" such donation should $e returned to the donor& Loss" deterioration and i !ro*e ent %o*erned $' 44HP& In o$li%ations to do and not to do" the courts shall deter ine" in each case" the retroacti*e effect of the condition that
has $een co !lied #ith& 11>1. T6$ 5o.$! to !$s#in" obligations is i+5li$" in !$#i5!o#al on$s' in #as$ on$ o* t6$ obligo!s s6o l" not #o+5l% .it6 .6at is in# +b$nt 5on 6i+. T6$ inj !$" 5a!t% +a% #6oos$ b$t.$$n t6$ * l*ill+$nt an" t6$ !$s#ission o* t6$ obligation' .it6 t6$ 5a%+$nt o* "a+ag$s in $it6$! #as$. H$ +a% also s$$@ !$s#ission' $&$n a*t$! 6$ 6as #6os$n * l*ill+$nt' i* t6$ latt$! s6o l" b$#o+$ i+5ossibl$. T6$ #o !t s6all "$#!$$ t6$ !$s#ission #lai+$"' nl$ss t6$!$ b$ j st #a s$ a t6o!iEing t6$ *i=ing o* a 5$!io". T6is is n"$!stoo" to b$ .it6o t 5!$j "i#$ to t6$ !ig6ts o* t6i!" 5$!sons .6o 6a&$ a#2 i!$" t6$ t6ing' in a##o!"an#$ .it6 A!ti#l$s 11<5 an" 11<< an" t6$ Do!tgag$ La.. K This re ed' should $e ter ed as 0resolution"1 not rescission (@aras)& K This !ro*ision is not a!!lica$le to contracts of !artnershi! (%o*erned $' Arts& 4FH6 O 4FHH)" and sales of real and !ersonal !ro!erties $' install ents (%o*erned $' =aceda and Recto la#s) RECI@R,CAL each is a de$tor and creditor of the other RESCISSI,N resolution or cancellation of the contract A!!lies onl' to reci!rocal o$li%ations #here t#o !arties are utuall' de$tor and creditor of each other in the sa e transaction& The cause ust $e identical ad the o$li%ations ust arise si ultaneousl'& The !art' #ho can de and rescission should $e the !art' #ho is read'" #illin%" and a$le to co !l' #ith his o#n o$li%ations #hile the other is not ca!a$le to !erfor his o#n& RE=EDIES> 4& 8& S!ecific !erfor ance or fulfill ent of o$li%ation #ith da a%es; Rescission of contract #ith da a%es& ust surrender #hate*er the' ha*e recei*ed fro the other" and the o$li%ation to !a' is
Effect of rescission> the !arties eBtin%uished&
If there is an eB!ress sti!ulation of automatic rescission $et#een !arties such resolution shall ta:e !lace onl' after the creditor has notified the de$tor of his choice of rescission su$ject to judicial scrutin'& 11>0. In #as$ bot6 5a!ti$s 6a&$ #o++itt$" a b!$a#6 o* t6$ obligation' t6$ liabilit% o* t6$ *i!st in*!a#to! s6all b$ $2 itabl% t$+5$!$" b% t6$ #o !ts. I* it #annot b$ "$t$!+in$" .6i#6 o* t6$ 5a!ti$s *i!st &iolat$" t6$ #ont!a#t' t6$ sa+$ s6all b$ "$$+$" $=ting is6$"' an" $a#6 s6all b$a! 6is o.n "a+ag$s. -IRST IN-RACT,R +N,NN The lia$ilit' of the first infractor should $e e<uita$l' reduced& e<uita$l' offset each otherEs da a%es& -IRST IN-RACT,R CANN,T .E DETER=INED The court shall declare the eBtin%uish ent of the o$li%ation and each shall $ear his o#n da a%es& Section 2 Obligations with a Period 11>1. Obligations *o! .6os$ * l*ill+$nt a "a% #$!tain 6as b$$n *i=$"' s6all b$ "$+an"abl$ onl% .6$n t6at "a% #o+$s. Obligations .it6 a !$sol to!% 5$!io" ta@$ $**$#t at on#$' b t t$!+inat$ 5on a!!i&al o* t6$ "a% #$!tain. A "a% #$!tain is n"$!stoo" to b$ t6at .6i#6 + st n$#$ssa!il% #o+$' alt6o g6 it +a% not b$ @no.n .6$n. I* t6$ n#$!taint% #onsists in .6$t6$! t6$ "a% .ill #o+$ o! not' t6$ obligation is #on"itional' an" it s6all b$ !$g lat$" b% t6$ ! l$s o* t6$ 5!$#$"ing S$#tion. @ERI,D A TER= consists in a s!ace or len%th of ti e u!on the arri*al of #hich" the demandability or the e1tinguis ment of an o$li%ation is determined; it a' $e definite (eBact date or ti e is :no#n) or indefinite (arri*al of date is un:no#n $ut sure to co e)& 2 -uture R Certain e*ent /ENERAL CLASSI-ICATI,NS> a) EI DIE A SUS@ENSI3E @ERI,D fro
a da' certain %i*e rise to the o$li%ation; sus!ensi*e effect&
$)
IN DIE= A RES,LUT,RY @ERI,D arri*al of a ter
certain ter inated the o$li%ation; resolutor' effect&
Ter len%th of ti e sure to co e Condition fact or e*ent uncertain to co e Basis 4& TI=E 8& -UL-ILL=ENT 9& IN-LUENCE P$!io";T$!+ Al#a's refers to -UTURE Sure to ha!!en at an eBact date or indefinite ti e $ut sure to co e& =erel' fiBes the ti e for the de anda$ilit' or !erfor ance of o$li%ation& Con"ition Can refer to !ast e*ents un:no#n to the !arties =a' or a' not ha!!en& =a' cause the arisin% or cessation of the o$li%ation&
11>4. In #as$ o* loss' "$t$!io!ation o! i+5!o&$+$nt o* t6$ t6ing b$*o!$ t6$ a!!i&al o* t6$ "a% #$!tain' t6$ ! l$s in A!ti#l$ 11<> s6all b$ obs$!&$". 11>5. An%t6ing 5ai" o! "$li&$!$" b$*o!$ t6$ a!!i&al o* t6$ 5$!io"' t6$ obligo! b$ing na.a!$ o* t6$ 5$!io" o! b$li$&ing t6at t6$ obligation 6as b$#o+$ " $ an" "$+an"abl$' +a% b$ !$#o&$!$"' .it6 t6$ *! its an" int$!$sts. If he #as not a#are of the !eriod or he $elie*es that the o$li%ation has $eco e due and de anda$le he can reco*er #hat he !aid or deli*ered includin% fruits and interests; If he #as a#are and he !aid *oluntaril' he cannot reco*er the deli*er' ade; it is dee ed a #ai*er of the $enefit of the ter and the o$li%ation is considered alread' atured&
The !resu !tion is that the de$tor :ne# that the de$t #as not 'et due& Ge has the $urden of !ro*in% that he #as una#are of the !eriod&
11>6. 76$n$&$! in an obligation a 5$!io" is "$signat$"' it is 5!$s +$" to 6a&$ b$$n $stablis6$" *o! t6$ b$n$*it o* bot6 t6$ #!$"ito! an" t6$ "$bto!' nl$ss *!o+ t6$ t$no! o* t6$ sa+$ o! ot6$! #i!# +stan#$s it s6o l" a55$a! t6at t6$ 5$!io" 6as b$$n $stablis6$" in *a&o! o* on$ o! o* t6$ ot6$!. @RESU=@TI,N> ,$li%ation #ith a !eriod is for the $enefit of $oth the creditor and de$tor& EICE@TI,N> #hen it a!!ears that the !eriod is for the $enefit of one or the other
The $enefit of the ter a' $e the su$ject of sti!ulation of the !arties& 4& Ter is for the $enefit of the de$tor alone he cannot $e co !elled to !a' !re aturel'" $ut he can if he desires to do so& 2 EBa !le> A o$li%es hi self to !a' . #ithin 5 'ears& A cannot $e co !elled to !a' !re aturel'" $ut he can !a' an'ti e #ithin 5 'ears (A #ill $enefit $ecause he can !a' an'ti e he #ants as lon% as it is #ithin 5 'ears; . #ill not $enefit fro the interests if A decides to !a' earl')& 8& Ter is for the $enefit of the creditor Ge a' de and fulfill ent e*en $efore the arri*al of the ter $ut the de$tor cannot re<uire hi to acce!t !a' ent $efore the eB!iration of the sti!ulated !eriod& 2 EBa !le> A $orro#s one' fro . and is o$li%ed to a:e the !a' ent on Dece $er 5& . a' co !el A to a:e the !a' ent $efore Dece $er 5" $ut A a' not co !el . to recei*e the !a' ent $efore Dece $er 5 (. #ill $enefit fro the interests that #ill accrue $efore Dece $er 5)& The creditor a' ha*e reasons other than the aturit' of interest" thatEs #h'" unless the creditor consents" the de$tor has no ri%ht to accelerate the ti e of !a' ent e*en if the !re ature tender includes an offer to !a' the !rinci!al and interest in full&
11>). I* t6$ obligation "o$s not *i= a 5$!io"' b t *!o+ its nat !$ an" t6$ #i!# +stan#$s it #an b$ in*$!!$" t6at a 5$!io" .as int$n"$"' t6$ #o !ts +a% *i= t6$ " !ation t6$!$o*. T6$ #o !ts s6all also *i= t6$ " !ation o* t6$ 5$!io" .6$n it "$5$n"s 5on t6$ .ill o* t6$ "$bto!.
In $&$!% #as$' t6$ #o !ts s6all "$t$!+in$ s #6 5$!io" as +a% n"$! t6$ #i!# +stan#$s 6a&$ b$$n 5!obabl% #ont$+5lat$" b% t6$ 5a!ti$s. On#$ *i=$" b% t6$ #o !ts' t6$ 5$!io" #annot b$ #6ang$" b% t6$+. JUDICIAL @ERI,D !eriod desi%nated $' the court& C,NTRACTUAL @ERI,D !eriod fiBed $' the !arties in their contract& Court #ill fiB a !eriod> 4& Nhen no !eriod is entioned" $ut it is infera$le fro the nature and circu stances of the o$li%ation that a !eriod #as intended $' the !arties& 8& Nhen the !eriod is de!endent u!on the #ill of the de$tor& If the o$li%ation does not state and intend a !eriod" the court is not authori;ed to fiB a !eriod& The court ust fiB the duration of the !eriod to !re*ent the !ossi$ilit' that the o$li%ation a' ne*er $e fulfilled or to cure a defect in a contract #here$' it is ade to de!end solel' u!on the #ill of one of the !arties&
Court cannot fiB the !eriod> 4& If there is a !eriod a%reed u!on $' the !arties and it has alread' la!sed or eB!ired& 8& -ro the *er' o ent the !arties %i*e their acce!tance and consent to the !eriod fiBed $' the court" it $eco es a la# %o*ernin% their contract& 11><. T6$ "$bto! s6all los$ $&$!% !ig6t to +a@$ s$ o* t6$ 5$!io"( ,1- 76$n a*t$! t6$ obligation 6as b$$n #ont!a#t$"' 6$ b$#o+$s insol&$nt' nl$ss 6$ gi&$s a g a!ant% o! s$# !it% *o! t6$ "$bt/ ,0- 76$n 6$ "o$s not * !nis6 to t6$ #!$"ito! t6$ g a!anti$s o! s$# !iti$s .6i#6 6$ 6as 5!o+is$"/ ,1- 76$n b% 6is o.n a#ts 6$ 6as i+5ai!$" sai" g a!anti$s o! s$# !iti$s a*t$! t6$i! $stablis6+$nt' an" .6$n t6!o g6 a *o!t ito s $&$nt t6$% "isa55$a!' nl$ss 6$ i++$"iat$l% gi&$s n$. on$s $2 all% satis*a#to!%/ ,4- 76$n t6$ "$bto! &iolat$s an% n"$!ta@ing' in #onsi"$!ation o* .6i#6 t6$ #!$"ito! ag!$$" to t6$ 5$!io"/ ,5- 76$n t6$ "$bto! att$+5ts to abs#on". The !eriod is disre%arded and the o$li%ation $eco es !ure and i ediatel' de anda$le> CIGIVAD
FIG Nhen de$tor $eco es insol*ent; The insol*enc' need not $e judiciall' declared& It is sufficient that de$tor could not !a' his de$ts due to lac: of one' or funds& FGG Nhen the de$tor does not furnish guaranties or securities; FIG Nhen %uaranties or securities %i*en ha*e $een i !aired or ha*e disa!!eared; If securit' #as lost throu%h de$torEs fault 2 impairment If securit' #as lost throu%h fortuitous e*ent 2 disappearance FVG Nhen de$tor &iolates an underta:in%; If such underta:in% is the reason for the creditor to a%ree #ith such !eriod& FAG Nhen de$tor atte !ts to a$scond (esca!e)& =ere atte !t to a$scond is sufficient& It is an indication of $ad faith& Section 3 Alternative Obligations 11>>. A 5$!son alt$!nati&$l% bo n" b% "i**$!$nt 5!$stations s6all #o+5l$t$l% 5$!*o!+ on$ o* t6$+. T6$ #!$"ito! #annot b$ #o+5$ll$" to !$#$i&$ 5a!t o* on$ an" 5a!t o* t6$ ot6$! n"$!ta@ing. ,.LI/ATI,NS NITG @LURAL @RESTATI,NS> 4& C,NJUNCTI3EAC,=@,UND ,.LI/ATI,N 2 an o$li%ation #here the de$tor has to !erfor ALL the se*eral !restations in the contract to eBtin%uish the o$li%ation& 8& ALTERNATI3E ,.LI/ATI,N an o$li%ation #here the de$tor is re<uired to fulfill ,NLY ,NE of the se*eral !restations to eBtin%uish the o$li%ation& 9& -ACULTATI3E ,.LI/ATI,N an o$li%ation #here the de$tor is $ound to !erfor ,NLY ,NE !restation" #ith a reser*ed ri%ht to choose another !restation as SU.STITUTE for the !rinci!al& 10??. T6$ !ig6t o* #6oi#$ b$longs to t6$ "$bto!' nl$ss it 6as b$$n $=5!$ssl% g!ant$" to t6$ #!$"ito!.
T6$ "$bto! s6all 6a&$ no !ig6t to #6oos$ t6os$ 5!$stations .6i#6 a!$ i+5ossibl$' b$$n t6$ obj$#t o* t6$ obligation.
nla.* l o! .6i#6 #o l" not 6a&$
I !lied %rant to the creditor is not allo#ed& If it does not a!!ear on the a%ree ent as to #ho choose" it is the de$tor #ho can choose&
a on% the
has the ri%ht to
10?1. T6$ #6oi#$ s6all 5!o" #$ no $**$#t $=#$5t *!o+ t6$ ti+$ it 6as b$$n #o++ ni#at$". The choice shall not !roduce an' le%al effect until it has $een dul' co unicated to the other !art'& It can $e done in #ritin%" *er$all'" i !liedl'" or an' une<ui*ocal eans& ,nce the choice has $een co unicated to the other !art'> The o$li%ation is no# LI=ITED onl' to the @RESTATI,N CG,SEN" #ith all the natural conse<uences flo#in% therefro ; The choice is IRRE3,CA.LE& The !erfor ance of !restation #ithout announcin% the choice to the creditor is N,T .INDIN/& The consent of the other !art' is N,T REJUIRED in a:in% the choice that #ill in effect frustrate the clear intention of the la# and the nature of the alternati*e o$li%ation& If there is dela' in the a:in% of choice !unish the one #ho is su!!osed to eBercise the ri%ht of choice for the dela' he caused court a' order the de$tor to a:e a choice" or creditor to a:e the choice #ithin certain !eriod" or court a:es the choice&
4& 8&
10?0. T6$ "$bto! s6all los$ t6$ !ig6t o* #6oi#$ .6$n a+ong t6$ 5!$stations .6$!$b% 6$ is alt$!nati&$l% bo n"' onl% on$ is 5!a#ti#abl$.
There $ein% $ut one !restation a*aila$le" this !restation $eco es a si !le o$li%ation&
10?1. I* t6!o g6 t6$ #!$"ito!Hs a#ts t6$ "$bto! #annot +a@$ a #6oi#$ a##o!"ing to t6$ t$!+s o* t6$ obligation' t6$ latt$! +a% !$s#in" t6$ #ont!a#t .it6 "a+ag$s. (4) If the de$tor could not a:e a choice due to the creditorEs act of a:in% the !restations i !ossi$le" de$tor a' RESCIND the contract #ith da a%es 2 rescission ta:es !lace at the initiati*e of the de$tor& (8) If the de$tor is $ein% !re*ented to choose onl' a !articular !restation" and there are others a*aila$le" he is free to choose fro the " after notif'in% the creditor of his decision& 10?4. T6$ #!$"ito! s6all 6a&$ a !ig6t to in"$+nit% *o! "a+ag$s .6$n' t6!o g6 t6$ *a lt o* t6$ "$bto!' all t6$ t6ings .6i#6 a!$ alt$!nati&$l% t6$ obj$#t o* t6$ obligation 6a&$ b$$n lost' o! t6$ #o+5lian#$ o* t6$ obligation 6as b$#o+$ i+5ossibl$. T6$ in"$+nit% s6all b$ *i=$" ta@ing as a basis t6$ &al $ o* t6$ last t6ing .6i#6 "isa55$a!$"' o! t6at o* t6$ s$!&i#$ .6i#6 last b$#a+$ i+5ossibl$. :a+ag$s ot6$! t6an t6$ &al $ o* t6$ last t6ing o! s$!&i#$ +a% also b$ a.a!"$".
If the i !ossi$ilit' of all the o$jects of the alternati*e o$li%ation is caused $' the de$tor" the creditor is entitled to da a%es& If such i !ossi$ilit' is caused $' a fortuitous e*ent" the o$li%ation is eBtin%uished and the de$tor is released fro res!onsi$ilit'" unless the contrar' is sti!ulated $' the !arties& The creditor cannot clai for da a%es if the de$tor can still !erfor the re ainin% !restations& The da a%es that a' $e reco*ered is $ased on the last thin% #hich disa!!eared or the ser*ice #hich $eca e i !ossi$le& This last one is con*erted into a si !le o$li%ation&
10?5. 76$n t6$ #6oi#$ 6as b$$n $=5!$ssl% gi&$n to t6$ #!$"ito!' t6$ obligation s6all #$as$ to b$ alt$!nati&$ *!o+ t6$ "a% .6$n t6$ s$l$#tion 6as b$$n #o++ ni#at$" to t6$ "$bto!. 9ntil t6$n t6$ !$s5onsibilit% o* t6$ "$bto! s6all b$ go&$!n$" b% t6$ *ollo.ing ! l$s( A& .& C& onl' one thin% lost fortuitous e*ent creditor chooses fro the re ainder de$tor deli*ers the choice to creditor; onl' one re ains de$tor deli*ers the sa e to the creditor; onl' one thin% lost fault of the de$tor 4& creditor a' choose an' one of the re ainders;
D&
8& creditor a' choose the !rice or *alue of the one #hich #as lost; 9& a' choose 4 or 8 !lus da a%es all thin%s lost fault of the de$tor creditor a' choose the !rice of ANY,NE of the thin%s" #ith da a%es if #arranted&
T6$ sa+$ ! l$s s6all b$ a55li$" to obligations to "o o! not to "o in #as$ on$' so+$ o! all o* t6$ 5!$stations s6o l" b$#o+$ i+5ossibl$.
This article a!!lies onl' #hen the ri%ht of choice has $een eB!ressl' %ranted to the creditor&
10?6. 76$n onl% on$ 5!$station 6as b$$n ag!$$" 5on' b t t6$ obligo! +a% !$n"$! anot6$! in s bstit tion' t6$ obligation is #all$" *a# ltati&$. T6$ loss o! "$t$!io!ation o* t6$ t6ing int$n"$" as a s bstit t$' t6!o g6 t6$ n$glig$n#$ o* t6$ obligo!' "o$s not !$n"$! 6i+ liabl$. B t on#$ t6$ s bstit tion 6as b$$n +a"$' t6$ obligo! is liabl$ *o! t6$ loss o* t6$ s bstit t$ on a##o nt o* 6is "$la%' n$glig$n#$ o! *!a ".
If loss or deterioration ha!!ened $efore su$stitution is is lia$le for loss (throu%h dela'" ne%li%ence or fraud)
ade" o$li%or is not lia$le; after su$stitution is co
unicated" he
Section 4 Joint and Solidary Obligations 10?). T6$ #on# !!$n#$ o* t.o o! +o!$ #!$"ito!s o! o* t.o o! +o!$ "$bto!s in on$ an" t6$ sa+$ obligation "o$s not i+5l% t6at $a#6 on$ o* t6$ *o!+$! 6as a !ig6t to "$+an"' o! t6at $a#6 on$ o* t6$ latt$! is bo n" to !$n"$!' $nti!$ #o+5lian#$ .it6 t6$ 5!$station. T6$!$ is a soli"a!% liabilit% onl% .6$n t6$ obligation $=5!$ssl% so stat$s' o! .6$n t6$ la. o! t6$ nat !$ o* t6$ obligation !$2 i!$s soli"a!it%. K In case of concurrence of t#o or is joint" and not solidar'& ore creditors or t#o or ore de$tors in one o$li%ation" the !resu !tion is that the o$li%ation
INDI3IDUAL ,.LI/ATI,N one de$tor and one creditor C,LLECTI3E ,.LI/ATI,N t#o or 4& 8& ore de$tors and t#o or ore creditors
J,INT entire o$li%ation is to $e !aid or !erfor ed proportionately $' the de$tors; S,LIDARY eac one of the de$tors are o$li%ed to !a' the entire obligation" each one of the creditors has the ri%ht to de and fro an' of the de$tors" the fulfill ent of the entire o$li%ation; A& @assi*e Solidarit' solidarit' on the !art of the DE.T,RS .& Acti*e Solidarit' solidarit' on the !art of the CREDIT,RS& S,LIDARITY SG,ULD .E EI@RESSED la#" sti!ulation" nature of o$li%ation& Nhen the o$li%ation is a $i%uous" it ust $e considered as joint o$li%ation&
C,NSEJUENCES ,- S,LIDARITY> 4& @assi*e Solidarit' full !a' ent ade $' an'one of the solidar' de$tors eBtin%uishes the o$li%ation& The one #ho !aid can clai rei $urse ent fro his co2de$tors as re%ards their corres!ondin% shares in the o$li%ation& A" ." O C are solidar' de$tors of D in the su of @P??& D can de and !a' ent of the entire o$li%ation #hen it $eco es due" fro an' one of the de$tors or fro all of the at the sa e ti e& If C !aid the #hole @P?? to D" he a' clai rei $urse ent fro A and .& Acti*e Solidarit' full !a' ent to an' of the creditors eBtin%uishes the o$li%ation& The creditor #ho recei*ed the entire a ount #ill $e lia$le to !a' the corres!ondin% shares of his co2creditors in accordance #ith their internal a%ree ent& /arfield o#es the su of @7?"??? to =ic:e'" =innie" Donald" and @luto" #ho are solidar' creditors& /arfield can !a' an'one of the & If =ic:e' recei*ed the @7?"???" he is lia$le to !a' the corres!ondin% shares of his co2creditors& =IIED S,LIDARITY a& Solidar' De$tors" Joint Creditors @P"???&?? total de$t 8&
:$bto!s ,Soli"a!%Aida !a's @7"5??&?? Lorna !a's @7"5??&?? -e
C!$"ito!s ,IointJohn Q @ 7"5??&?? =arsha @ 7"5??&??
$& Joint De$tors" Solidar' Creditors @ P"???&?? total de$t :$bto!s ,IointC!$"ito!s ,Soli"a!%Aida (@ 9"???&??) John (can clai fro de$tors) Lorna (@ 9"???&??) =arsha (2sa e2) -e (@ 9"???&??)
10?<. I* *!o+ t6$ la.' o! t6$ nat !$ o! t6$ .o!"ing o* t6$ obligations to .6i#6 t6$ 5!$#$"ing a!ti#l$ !$*$!s t6$ #ont!a!% "o$s not a55$a!' t6$ #!$"it o! "$bt s6all b$ 5!$s +$" to b$ "i&i"$" into as +an% s6a!$s as t6$!$ a!$ #!$"ito!s o! "$bto!s' t6$ #!$"its o! "$bts b$ing #onsi"$!$" "istin#t *!o+ on$ anot6$!' s bj$#t to t6$ R l$s o* Co !t go&$!ning t6$ + lti5li#it% o* s its.
This !ro*ision s!ea:s of J,INT DI3ISI.LE ,.LI/ATI,N& Nhen there is a concurrence of se*eral creditors or of se*eral de$tors in one and in the sa e o$li%ation" there is a !resu !tion that the o$li%ation is joint& Each of the creditors shall $e entitled to de and onl' the !a' ent of his !ro!ortionate share of the credit& Each of the de$tors a' $e co !elled to !a' onl' his !ro!ortionate share of the de$t& The credits or de$ts shall $e considered distinct fro one another&
C,NSEJUENCES ,- J,INT ,.LI/ATI,N> 4& Each de$tor lia$le for a !ro!ortionate !art of the entire de$t; Thales" Socrates" @lato" O Aristotle o#e @4?? to .ruce Lee Q 7 de$tors and 4 creditor Each of the o#es .ruce Lee @85 .ruce Lee cannot collect the entire @4?? fro an' one of the & 8& Each creditor entitled to a !ro!ortionate !art of the credit; @i%%' o#es @4?? to -ro%%' and -ish' Q 4 de$tor and 8 creditors -ro%%' can onl' collect 5? fro @i%%'" Sa e #ith -ish' 9& De and ade $' one creditor u!on one de$tor !roduces the effects of default onl' as $et#een the " $ut not #ith res!ect to the others; .u$$les de anded !a' ent fro .uttercu!; .uttercu! #as in default& This does not ean that the others are in default too $ecause .u$$les did not de and fro the & 7& The interru!tion of !rescri!tion caused $' the de and ade $' one creditor u!on one de$tor #ill not $enefit the co2 creditors; Nitt%enstein eBtended the !eriod in #hich Tars:i should ha*e !aid his de$t to hi & This does not ean that the sa e eBtension a!!lies to Tars:iSs de$t to Da*idson& 5& The insol*enc' of one de$tor #ill not increase the lia$ilit' of his co2de$tors" nor #ill it allo# a creditor to de and an'thin% fro the co2creditors& If Gusserl and =erleau2@ont' are de$tors of Sartre for @4"???"???&?? and Gusserl $eco es insol*ent" the lia$ilit' of =erleau2 @ont' #ill onl' $e @5??"???&?? re!resentin% his !ro!ortional share of T in the #hole o$li%ation& 10?>. I* t6$ "i&ision is i+5ossibl$' t6$ !ig6t o* t6$ #!$"ito!s +a% b$ 5!$j "i#$" onl% b% t6$i! #oll$#ti&$ a#ts' an" t6$ "$bt #an b$ $n*o!#$" onl% b% 5!o#$$"ing against all t6$ "$bto!s. I* on$ o* t6$ latt$! s6o l" b$ insol&$nt' t6$ ot6$!s s6all not b$ liabl$ *o! 6is s6a!$. J,INT INDI3ISI.LE ,.LI/ATI,N an o$li%ation #here solidarit' is not !ro*ided and the !restation or o$ject is not susce!ti$le of di*ision; its fulfill ent re<uires the concurrence of all de$tors" #hile doin% each oneEs !arts&
.at an and Ro$in jointl' o$li%ed the sel*es to deli*er a $rand ne# To'ota -ortuner #orth @4"5??"???&?? to Su!er an& The o$ject" a *ehicle" is indi*isi$le& The' ust deli*er the thin% jointl'& In case of $reach" the o$li%ation is con*erted into onetar' o$li%ation for inde nit' for da a%es& .at an and Ro$in #ill $e lia$le onl' for @ F5?"???&?? each&
The act of one is not $indin% (others
ust concur)
101?. T6$ in"i&isibilit% o* an obligation "o$s not n$#$ssa!il% gi&$ !is$ to soli"a!it%. No! "o$s soli"a!it% o* its$l* i+5l% in"i&isibilit%.
Solidarit' is eB!ressed in the sti!ulations of the !art'" la# %o*ernin% the o$li%ation" or the nature of the o$li%ation&
INDI3ISI.LE ,.LI/ATI,N an o$li%ation #here the !restation or o$ject to $e deli*ered cannot $e !erfor ed $' !arts #ithout alterin% its essence or su$stance& .asis 4& Nature 8& Nu $er of su$jects A !arties 9& Effect of $reach of o$li%ation Indi*isi$ilit' Refers to the prestation of the contract Does not re<uire !luralit' of !arties ,$li%ation is con*erted into onetar' o$li%ation for inde nit' for da a%es each de$tor is lia$le onl' for his !art in the inde nit'& Solidarit' Refers to the tie eBistin% $et#een !arties of the o$li%ation (#ho is lia$le) Re<uires !luralit' of !arties The lia$ilit'" e*en if con*erted into inde nit' for da a%es" re ains solidar'&
1011. Soli"a!it% +a% $=ist alt6o g6 t6$ #!$"ito!s an" t6$ "$bto!s +a% not b$ bo n" in t6$ sa+$ +ann$! an" b% t6$ sa+$ 5$!io"s an" #on"itions.
The solidarit' of the de$tors is not affected e*en if different ter s and conditions are ade a!!lica$le to the & Enforce ent of the ter s and conditions a' $e ade at different ti es& The o$li%ations #hich ha*e atured can $e enforced #hile those still undue #ill ha*e to $e a#aited& Enforce ent can $e ade a%ainst an' one of the solidar' de$tors althou%h it can ha!!en that a !articular o$li%ation char%ea$le to a !articular de$tor is not 'et due& Ge #ill $e ans#era$le for all the !restations #hich fall due althou%h char%ea$le to the other co2de$tors&
Sad -ace" Ga!!'" and -ann' %ot a loan of @45? fro S ile'& The' si%ned a !ro issor' note solidaril' $indin% the sel*es to !a' S ile' under the follo#in% ter s> Sad -ace #ill !a' @5? #ith 9U on Dece $er 9?" 8??6 Ga!!' #ill !a' @5? #ith 7U on Dece $er 9?" 8??F -ann' #ill !a' @5? #ith 5U on Dece $er 9?" 8??H ,n Dece $er 94" 8??6" S ile' can collect his @5? #ith 9U fro an' one of the de$tors" $ut not the #hole @45? $ecause it is not 'et entirel' due& The aturit' of the other a ounts should still $e a#aited& If aturit' co es" S ile' can collect fro an' of the de$tors" $ecause the' are eB!ressl' solidar' in lia$ilities" and not affected $' the secondar' sti!ulations& 1010. Ea#6 on$ o* t6$ soli"a!% #!$"ito!s +a% "o .6at$&$! +a% b$ b$ 5!$j "i#ial to t6$ latt$!. s$* l to t6$ ot6$!s' b t not an%t6ing .6i#6 +a%
E*er' solidar' creditor is $enefited $' the useful acts of an' one of the & If a solidar' creditor !erfor s an act #hich is not fair to his co2creditors" the act a' ha*e *alid le%al effects or the o$li%ation of the de$tor due to the a' $e eBtin%uished" $ut the !erfor in% creditor shall $e lia$le to his co2creditors& 8 $stion> =a' solidar' creditors !erfor an act that is $eneficial to othersM
1011. A soli"a!% #!$"ito! #annot assign 6is !ig6ts .it6o t t6$ #ons$nt o* t6$ ot6$!s. Assi%n transfer of ri%ht
The assi%nee does not $eco e a solidar' creditor" and an' !a' ent ade u!on hi $' the de$tor does not eBtin%uish the o$li%ation& Ge is considered a STRAN/ER" and his acts are not $indin% to the solidarit'& D,CTRINE ,- =UTUAL A/ENCY 2 In solidar' o$li%ations" the act of one is act of the others& EBce!tions to the doctrine> 4& Art& 4848 a creditor a' not !erfor an act !rejudicial to other creditors 8& Art& 4849 a creditor cannot transfer his ri%ht #ithout consent
1014. T6$ "$bto! +a% 5a% an% on$ o* t6$ soli"a!% #!$"ito!s/ b t i* an% "$+an"' j "i#ial o! $=t!aj "i#ial' 6as b$$n +a"$ b% on$ o* t6$+' 5a%+$nt s6o l" b$ +a"$ to 6i+.
The de$tor can !a' an' one of the solidar' creditors& Such !a' ent #hen acce!ted $' an' of the solidar' creditors #ill eBtin%uish the o$li%ation& To a*oid confusion on the !a' ent of the o$li%ation" the de$tor is re<uired to a' onl' to the de andin% creditor and that !a' ent is sufficient to effect the eBtin%uish ent of the o$li%ation& In case t#o or ore de ands ade $' the other creditors" the first de and ust $e %i*en !riorit'&
1015. No&ation' #o+5$nsation' #on* sion o! !$+ission o* t6$ "$bt' +a"$ b% an% o* t6$ soli"a!% #!$"ito!s o! .it6 an% o* t6$ soli"a!% "$bto!s' s6all $=ting is6 t6$ obligation' .it6o t 5!$j "i#$ to t6$ 5!o&isions o* A!ti#l$ 101>. T6$ #!$"ito! .6o +a% 6a&$ $=$# t$" an% o* t6$s$ a#ts' as .$ll as 6$ .6o #oll$#ts t6$ "$bt' s6all b$ liabl$ to t6$ ot6$!s *o! t6$ s6a!$ in t6$ obligation #o!!$s5on"ing to t6$+. N,3ATI,N o$li%ations are odified $'> 4& Chan%in% their o$ject or !rinci!al conditions; 8& Su$stitutin% the !erson of the de$tor; and 9& Su$ro%atin% (!lacin%) a third !erson in the ri%hts of the creditor& CArt& 48P4D C,=@ENSATI,N ta:es !lace #hen t#o !ersons" in their o#n ri%ht" $eco e creditors and de$tors of each other the a ount of one is co*ered $' the a ount of the other Era! $orro#ed @4?? fro -ernando& -ernando $orro#ed @F5 fro Era!& Era!Es o$li%ation to -ernando is no# @85 onl'" $ecause the ori%inal o$li%ation #as offset $' -ernandoEs su!!osed2to2$e o$li%ation to Era!& C,N-USI,N ta:es !lace #hen the characters of creditor and de$tor are er%ed in the sa e !erson& Tito !a's his de$t to 3ic #ith a chec: !a'a$le to 0cash1& 3ic !aid his de$t to Joe' #ith the sa e chec:& Joe' !aid his de$t to Tito" #ith the sa e chec: Tito issued to 3ic& Tito $eco es !aid $' his o#n chec:& Ge $eco es the de$tor and the creditor of hi self at the sa e ti e& RE=ISSI,N the %ratuitous a$andon ent $' the creditor of his ri%ht; acce!tance of the o$li%or is necessar'&
These 7 odes of eBtin%uishin% o$li%ations are acts !rejudicial to the other solidar' co2creditors $ecause these ha*e the effect of eBtin%uishin% the de$t or o$li%ation #hich is due to all of the & The onl' recourse of the co2creditors is to let the one #ho eBecuted an' of those acts $e lia$le for the shares corres!ondin% to all his co2creditors (in their internal a%ree ent)&
1016. T6$ #!$"ito! +a% 5!o#$$" against an% on$ o* t6$ soli"a!% "$bto!s o! so+$ o! all o* t6$+ si+ ltan$o sl%. T6$ "$+an" +a"$ against on$ o* t6$+ s6all not b$ an obsta#l$ to t6os$ .6i#6 +a% s bs$2 $ntl% b$ "i!$#t$" against t6$ ot6$!s' so long as t6$ "$bt 6as not b$$n * ll% #oll$#t$".
Nhen there is !assi*e solidarit'" the creditor can !roceed a%ainst> An' of the solidar' de$tors; So e of the solidar' de$tors; All of the solidar' de$tors" si ultaneousl'&
EBtrajudicial de ands 2 first de and shall not !re*ent su$se<uent de ands on the other co2de$tors" if co2de$tor first to ha*e $een re<uired to fulfill o$li%ation did not act on it& 101). Pa%+$nt +a"$ b% on$ o* t6$ soli"a!% "$bto!s $=ting is6$s t6$ obligation. I* t.o o! +o!$ soli"a!% "$bto!s o**$! to 5a%' t6$ #!$"ito! +a% #6oos$ .6i#6 o**$! to a##$5t. H$ .6o +a"$ t6$ 5a%+$nt +a% #lai+ *!o+ 6is #o3"$bto!s onl% t6$ s6a!$ .6i#6 #o!!$s5on"s to $a#6' .it6 t6$ int$!$st *o! t6$ 5a%+$nt al!$a"% +a"$. I* t6$ 5a%+$nt is +a"$ b$*o!$ t6$ "$bt is " $' no int$!$st *o! t6$ int$!&$ning 5$!io" +a% b$ "$+an"$". 76$n on$ o* t6$ soli"a!% "$bto!s #annot' b$#a s$ o* 6is insol&$n#%' !$i+b !s$ 6is s6a!$ to t6$ "$bto! 5a%ing t6$ obligation' s #6 s6a!$ s6all b$ bo!n$ b% all 6is #o3"$bto!s' in 5!o5o!tion to t6$ "$bt o* $a#6. @a' ent consists in the deli*er' of the thin% or the rendition (renderin%) of the ser*ice #hish is the o$ject of the o$li%ation& Interest co !ensation for the use of $orro#ed one' one'
@artial !a' ent the solidar' de$tor #ho ade the !artial !a' ent is entitles to $e rei $ursed onl' for such a ount of #hich he had !aid and #hich eBceeds his o#n share in the o$li%ation&
If one of the de$tors is insol*ent and could not !a' his share in the o$li%ation" all solidar' de$tors includin% the !a'in% de$tor shall share !ro!ortionatel' in the settle ent of the corres!ondin% share of the insol*ent de$tor& CIn short" his co2de$tors #ill sa*e his ass&D 101<. Pa%+$nt b% a soli"a!% "$bto! s6all not $ntitl$ 6i+ to !$i+b !s$+$nt *!o+ 6is #o3"$bto!s i* s #6 5a%+$nt is +a"$ a*t$! t6$ obligation 6as 5!$s#!ib$" o! b$#o+$ ill$gal. No rei $urse ent if> 4& ,$li%ation @RESCRI.ES The creditor did not a:e an' de and for ore than 4? 'ears& 8& ,$li%ation $eco es ILLE/AL La# has $een !assed" a:in% such !restation ille%al&
101>. T6$ !$+ission +a"$ b% t6$ #!$"ito! o* t6$ s6a!$ .6i#6 a**$#ts on$ o* t6$ soli"a!% "$bto!s "o$s not !$l$as$ t6$ latt$! *!o+ 6is !$s5onsibilit% to.a!"s t6$ #o3"$bto!s' in #as$ t6$ "$bt 6a" b$$n totall% 5ai" b% an%on$ o* t6$+ b$*o!$ t6$ !$+ission .as $**$#t$".
Att' De Cha*e;> Ito a' !ro*ision sa tan%a&&& (si'e !re" S!a% na%$a'ad na" #ala nan% o$li%ation" #ala na din% ire2 re it&&&) An' $elated (dela'ed) re ission $' the creditor of the share of an' of the de$tor has no effect on the internal relationshi! of the co2de$tors&
Payment before remission> A" ." and C solidaril' o#e D @4"5??&??& . !aid the entire o$li%ation& After #hich" D re itted the share of C& . can collect @5??&?? each fro A and C e*en if the share of C in the o$li%ation had $een re itted& 2emission before payment> A" ." and C solidaril' o#e D @4"5??&??& D re itted the share of C& Thereafter" . !aid the entire o$li%ation& . can collect @5??&?? fro A $ut not fro C& Go#e*er" . a' as: D to %i*e $ac: @5??" #hich is the su!!osed2to2$e share of C&
After the !rior !a' ent of the entire o$li%ation" there is nothin% to re it $ecause the o$li%ation had $een eBtin%uished&
100?. T6$ !$+ission o* t6$ .6ol$ obligation' obtain$" b% on$ o* t6$ soli"a!% "$bto!s' "o$s not $ntitl$ 6i+ to !$i+b !s$+$nt *!o+ 6is #o3"$bto!s.
There is nothin% to $e rei $ursed $ecause he did not s!end an'
one'" the re ission $ein% a %ratuitous act&
1001. I* t6$ t6ing 6as b$$n lost o! i* t6$ 5!$station 6as b$#o+$ i+5ossibl$ .it6o t t6$ *a lt o* t6$ soli"a!% "$bto!s'
t6$ obligation s6all b$ $=ting is6$". I* t6$!$ .as *a lt on t6$ 5a!t o* an% on$ o* t6$+' all s6all b$ !$s5onsibl$ to t6$ #!$"ito!' *o! t6$ 5!i#$ an" t6$ 5a%+$nt o* "a+ag$s an" int$!$st' .it6o t 5!$j "i#$ to t6$i! a#tion against t6$ g ilt% o! n$glig$nt "$bto!. I* t6!o g6 a *o!t ito s $&$nt' t6$ t6ing is lost o! t6$ 5$!*o!+an#$ 6as b$#o+$ i+5ossibl$ a*t$! on$ o* t6$ soli"a!% "$bto!s 6as in# !!$" in "$la% t6!o g6 t6$ j "i#ial o! $=t!aj "i#ial "$+an" 5on 6i+ b% t6$ #!$"ito!' t6$ 5!o&isions o* t6$ 5!$#$"ing 5a!ag!a56 s6all a55l%. Loss of the thin% or i 4& 8& 9& !ossi$ilit' of !restation N, -AULT solidar' de$tors o$li%ation is eBtin%uished -AULT of an' one of the all are lia$le $ecause of their utual a%enc' -,RTUIT,US E3ENT dela' on the !art of the de$tors all #ill $e lia$le
If the thin% due #as not lost" $ut there is erel' a dela'" fraud or ne%li%ence on the !art of one of the solidar' de$tors" all (includin% the innocent) de$tors #ill share in the !a' ent of the @RINCI@AL !restation& The da a%es and interest i !osed #ill $e $orne $' the %uilt' de$tor& ,$li%ation to deli*er is con*erted into an o$li%ation to !a' inde nit' #hen there us loss or i !ossi$ilit' of !erfor ance&
1000. A soli"a!% "$bto! +a%' in a#tions *il$" b% t6$ #!$"ito!' a&ail 6i+s$l* o* all "$*$ns$s .6i#6 a!$ "$!i&$" *!o+ t6$ nat !$ o* t6$ obligation an" o* t6os$ .6i#6 a!$ 5$!sonal to 6i+' o! 5$!tain to 6is o.n s6a!$. 7it6 !$s5$#t to t6os$ .6i#6 5$!sonall% b$long to t6$ ot6$!s' 6$ +a% a&ail 6i+s$l* t6$!$o* onl% as !$ga!"s t6at 5a!t o* t6$ "$bt *o! .6i#6 t6$ latt$! a!$ !$s5onsibl$. DE-ENSES ,- A S,LIDARY DE.T,R> 4& 8& 9& Defense arisin% fro the nature of the o$li%ation such as !a' ent" !rescri!tion" re ission" statute of frauds" !resence of *ices of consent" etc& Defenses #hich are !ersonal to hi or #hich !ertains to his o#n share alone such as inorit'" insanit' and others !urel' !ersonal to hi & Defenses !ersonal to the other solidar' creditors $ut onl' as re%ards that !art of the de$t for #hich the other creditors are lia$le& !ivisible and "ndivisible Obligations
Section
1001. T6$ "i&isibilit% o! in"i&isibilit% o* t6$ t6ings t6at a!$ t6$ obj$#t o* obligations in .6i#6 t6$!$ is onl% on$ "$bto! an" onl% on$ #!$"ito! "o$s not alt$! o! +o"i*% t6$ 5!o&isions o* C6a5t$! 0 o* t6is Titl$. DI3ISI.ILITY refers to the susce!ti$ilit' of an o$li%ation to $e !erfor ed !artiall'& ,$li%ation to deli*er 4?? sac:s of rice or a !articular t'!e INDI3ISI.ILITY refers to the non2susce!ti$ilit' of an o$li%ation to !artial !erfor ance& ,$li%ation to deli*er a !articular co !uter set If a thin% could $e di*ided into !arts and as di*ided" its *alue is i !aired dis!ro!ortionatel'" that thin% is INDI3ISI.LE& 1004. A joint in"i&isibl$ obligation gi&$s !is$ to in"$+nit% *o! "a+ag$s *!o+ t6$ ti+$ an%on$ o* t6$ "$bto!s "o$s not #o+5l% .it6 6is n"$!ta@ing. T6$ "$bto!s .6o +a% 6a&$ b$$n !$a"% to * l*ill t6$i! 5!o+is$s s6all not #ont!ib t$ to t6$ in"$+nit% b$%on" t6$ #o!!$s5on"ing 5o!tion o* t6$ 5!i#$ o* t6$ t6ing o! o* t6$ &al $ o* t6$ s$!&i#$ in .6i#6 t6$ obligation #onsists. K Relate this !ro*ision to Articles 4465" 48?H and 48?P& J,INT INDI3ISI.LE ,.LI/ATI,N the o$ject is indi*isi$le $ut the lia$ilit' of the !arties is joint&
The unfulfilled underta:in% (dut') is con*erted into a The %uilt' de$tor is lia$le for da a%es&
onetar' o$li%ation #hich is not di*isi$le&
1005. Ao! t6$ 5 !5os$s o* t6$ 5!$#$"ing a!ti#l$s' obligations to gi&$ "$*init$ t6ings an" t6os$ .6i#6 a!$ not s s#$5tibl$ o* 5a!tial 5$!*o!+an#$ s6all b$ "$$+$" to b$ in"i&isibl$.
76$n t6$ obligation 6as *o! its obj$#t t6$ $=$# tion o* a #$!tain n +b$! o* "a%s o* .o!@' t6$ a##o+5lis6+$nt o* .o!@ b% +$t!i#al nits' o! analogo s t6ings .6i#6 b% t6$i! nat !$ a!$ s s#$5tibl$ o* 5a!tial 5$!*o!+an#$' it s6all b$ "i&isibl$. Ho.$&$!' $&$n t6o g6 t6$ obj$#t o! s$!&i#$ +a% b$ 56%si#all% "i&isibl$' an obligation is in"i&isibl$ i* so 5!o&i"$" b% la. o! int$n"$" b% t6$ 5a!ti$s. In obligations not to "o' "i&isibilit% o! in"i&isibilit% s6all b$ "$t$!+in$" b% t6$ #6a!a#t$! o* t6$ 5!$station in $a#6 5a!ti# la! #as$. The follo#in% are considered INDI3ISI.LE o$li%ations> 4& ,$li%ation to %i*e definite thin%s 8& ,$li%ations #hich are not susce!ti$le of !artial !erfor ance 9& E*en thou%h the o$ject or ser*ice a' $e !h'sicall' di*isi$le" it is indi*isi$le if> a& the la# so !ro*ides $& #hen the !arties intended it to $e indi*isi$le The follo#in% o$li%ations are dee ed DI3ISI.LE> 4& Nhen the o$ject of the o$li%ation is the eBecution of a certain nu $er of da's of #or: 8& Nhen the o$ject of the o$li%ation is the acco !lish ent of #or: easured in units 9& Nhen the o$ject of the o$li%ation is susce!ti$le of !artial co !liance 7& Nhen the o$ject of the o$li%ation is such that the de$tor is re<uired to !a' in install ents
If the contract is di*isi$le" and a !art of it is ille%al" the ille%al !art is *oid" and the rest shall $e *alid and enforcea$le& If the contract is indi*isi$le" and a !art of it is ille%al" the entire contract is *oid& @artial !erfor ance of an indi*isi$le o$li%ation is tanta ount to non2!erfor ance&
Section # Obligations with a Penal Clause 1006. In obligations .it6 a 5$nal #la s$' t6$ 5$nalt% s6all s bstit t$ t6$ in"$+nit% *o! "a+ag$s an" t6$ 5a%+$nt o* int$!$sts in #as$ o* non#o+5lian#$' i* t6$!$ is no sti5 lation to t6$ #ont!a!%. N$&$!t6$l$ss' "a+ag$s s6all b$ 5ai" i* t6$ obligo! !$* s$s to 5a% t6$ 5$nalt% o! is g ilt% o* *!a " in t6$ * l*ill+$nt o* t6$ obligation. T6$ 5$nalt% +a% b$ $n*o!#$" onl% .6$n it is "$+an"abl$ in a##o!"an#$ .it6 t6$ 5!o&isions o* t6is Co"$. K An o$li%ation #ith a !enal clause a' $e defined as one to #hich an accessor' underta:in% is attached for the !ur!ose of insurin% its !erfor ance $' *irtue of #hich the o$li%or is $ound to !a' a sti!ulated inde nit' or !erfor a sti!ulated !restation in case of $reach&
@ur!oses> 4& 3uncion coercitiva o de garantia to insure the !erfor ance of the o$li%ation 8& 3uncion li(uidatoria to li<uidate the a ount of da a%es to $e a#arded to the injured !art' in case of $reach of the !rinci!al o$li%ation; and 9& 3uncion estrictamente penal in certain eBce!tional cases" to !unish the o$li%or in case of $reach of the !rinci!al o$li%ation& This is an accessory obligation attached to the !rinci!al o$li%ation" #hich i !oses an additional lia$ilit' in case of $reach of the !rinci!al o$li%ation& It !ushes the de$tor to !erfor his o$li%ation faithfull' and #ithout dela' #ithin the !eriod a%reed u!on" or else" he suffers a fiBed ci*il !enalt' #ithout need of !ro*in% the da a%es of the other !art'&
The !enalt' i !osa$le is a su$stitute for the inde nit' for> a& da a%es $& !a' ent of interest in case of $reach of o$li%ation 2unless the contrar' is sti!ulatedV EICE@TI,NS additional da a%es a' $e reco*ered fro the follo#in% acts> If the de$tor refuses to !a' the !enalt' If the de$tor is %uilt' of fraud in the fulfill ent of the o$li%ation If there is eB!ress sti!ulation that the other da a%es or interests are de anda$le to the !enalt' in the !enal
clause 100). T6$ "$bto! #annot $=$+5t 6i+s$l* *!o+ t6$ 5$!*o!+an#$ o* t6$ obligation b% 5a%ing t6$ 5$nalt%' sa&$ in t6$ #as$ .6$!$ t6is !ig6t 6as b$$n $=5!$ssl% !$s$!&$" *o! 6i+. N$it6$! #an t6$ #!$"ito! "$+an" t6$ * l*ill+$nt o* t6$ obligation an" t6$ satis*a#tion o* t6$ 5$nalt% at t6$ sa+$ ti+$' nl$ss t6is !ig6t 6as b$$n #l$a!l% g!ant$" 6i+. Ho.$&$!' i* a*t$! t6$ #!$"ito! 6as "$#i"$" to !$2 i!$ t6$ * l*ill+$nt o* t6$ obligation' t6$ 5$!*o!+an#$ t6$!$o* s6o l" b$#o+$ i+5ossibl$ .it6o t 6is *a lt' t6$ 5$nalt% +a% b$ $n*o!#$".
A de$tor cannot e*ade fro !a' ent of his !rinci!al o$li%ation $' choosin% to !a' the !enalt' sti!ulated" eBce!t #hen the de$tor is EI@RESSLY %ranted #ith the ri%ht to su$stitute the !enalt' for the !rinci!al o$li%ation& an o$li%ation #ith !enalt' clause cannot $e turned to facultati*e o$li%ation unless eB!ressl' sti!ulated in the contract& The creditor cannot de and the sti!ulated fulfill ent of the !rinci!al o$li%ation and the !enalt' at the sa e ti e" eBce!t a& #hen the creditor #as clearl' %i*en the ri%ht to enforce $oth the !rinci!al o$li%ation and !enalt'; $& #hen the creditor has de anded fulfill ent of the o$li%ation $ut cannot $e fulfilled due to the 4& de$torEs fault creditor a' de and for !enalt' 8& creditorEs fault he cannot clai the !enalt' 9& fortuitous e*ent !rinci!al o$li%ation and !enalt' are eBtin%uished
100<. P!oo* o* a#t al "a+ag$s s **$!$" b% t6$ #!$"ito! is not n$#$ssa!% in o!"$! t6at t6$ 5$nalt% +a% b$ "$+an"$". As lon% as the a%ree ent or contract is $reached& The ere non2fulfill ent of the !rinci!al o$li%ation entitles the creditor to the !enalt' sti!ulated& The !ur!ose of the !enalt' clause is !recisel' to a*oid !ro*in% da a%es&
100>. T6$ j "g$ s6all $2 itabl% !$" #$ t6$ 5$nalt% .6$n t6$ 5!in#i5al obligation 6as b$$n 5a!tl% o! i!!$g la!l% #o+5li$" .it6 b% t6$ "$bto!. E&$n i* t6$!$ 6as b$$n no 5$!*o!+an#$' t6$ 5$nalt% +a% also b$ !$" #$" b% t6$ #o !ts i* it is ini2 ito s o! n#ons#ionabl$. JUDICIAL REDUCTI,N ,- @ENALTY @rinci!al o$li%ation !artl' co !lied #ith $' the de$tor ($ut not in indi*isi$le o$li%ation" $ecause it is tanta ount to non2co !liance) @rinci!al o$li%ation co !lied not in accordance #ith the tenor of the a%ree ent (refers to irre%ular !erfor ance) @enalt' ini<uitous or unconsciona$le
Jud%eEs !o#er to reduce !enalties are li ited to !ri*ate contracts& on sense; %rossl' dis!ro!ortionate to the
INIJUIT,US ,R UNC,NSCI,NA.LE #hen it is re*oltin% to the conscience or co da a%es suffered&
@ENALTY N,T EN-,RCEA.LE> 4& I !ossi$le !erfor ance of !rinci!al o$li%ation due to fortuitous e*ents 8& Creditor !re*ented the de$tor fro fulfillin% the o$li%ation 9& @enalt' is contrar' to %ood orals or %ood custo s 7& .oth !arties are %uilt' of $reach of contract 5& .reach of contract $' the creditor 6& None of the !arties co itted an' #illful or cul!a$le *iolation of the a%ree ent 101?. T6$ n llit% o* t6$ 5$nal #la s$ "o$s not #a!!% .it6 it t6at o* t6$ 5!in#i5al obligation. T6$ n llit% o* t6$ 5!in#i5al obligation #a!!i$s .it6 it t6at o* t6$ 5$nal #la s$. .ecause the !enal clause is onl' an accessor' to the !rinci!al o$li%ation" it cannot eBist alone& If the !enal clause is *oid" the !rinci!al o$li%ation re ains enforcea$le& 0 e nullity of penal clause does not mean t e nullity of t e principal. -or eBa !le> In case of non2!a' ent of @4?"???" @4"??? !er da' as !enalt' shall $e i !osed& It is a *oid contract $ut it is not an eBcuse that 'ou donSt ha*e to !a' the !rinci!al #hich is @4?"???&
CHAPTER 4 EJTINHG9ISHDENT OA OBLIGATIONS GENERAL PROVISIONS 1011. Obligations a!$ $=ting is6$"( 5. b% 5a%+$nt o! 5$!*o!+an#$ 6. b% loss o* t6$ t6ing " $ ). b% #on"onation o! !$+ission <. b% #on* sion o! +$!g$! o* t6$ !ig6ts o* #!$"ito! an" "$bto! >. b% #o+5$nsation 1?. b% no&ation Ot6$! #a s$s o* $=ting is6+$nt o* obligations' s #6 as ann l+$nt' !$s#ission' * l*ill+$nt o* a !$sol to!% #on"ition' an" 5!$s#!i5tion' a!$ go&$!n$" $ls$.6$!$ in t6is Co"$. 1010. Pa%+$nt +$ans not onl% t6$ "$li&$!% o* +on$% b t also t6$ 5$!*o!+an#$' in an% ot6$! +ann$! o* an obligation. Payment means not only delivery of money but also t e performance.
It is the fulfill ent of the !restation due that eBtin%uishes the o$li%ation $' the reali;ation of the !ur!oses for #hich it #as constituted It is a juridical act #hich is *oluntar'" licit and ade #ith the intent to eBtin%uish an o$li%ation Re<uisites> 4& !erson #ho !a's 8& the !erson to #ho !a' ent is ade 9& the thin% to $e !aid 7& the anner" ti e and !lace of !a' ent etc The !a'in% as #ell as the one recei*in% should ha*e the re<uisite ca!acit' +inds> nor al #hen the de$tor *oluntaril' !erfor s the !restation sti!ulated a$nor al #hen he is forced $' eans of a judicial !roceedin% either to co !l' #ith !restation or to !a' indemnity

4& 8&
1011. A "$bt s6all not b$ n"$!stoo" to 6a&$ b$$n 5ai" nl$ss t6$ t6ing o! s$!&i#$ in .6i#6 t6$ oligatoin #onsists 6as b$$n #o+5l$t$l% "$li&$!$" o! !$n"$!$"' as t6$ #as$ +a% b$. States 8 re<uisites of !a' ent> a&) identit' of !restation 2 the *er' thin% or ser*ice due ust $e deli*ered or released $&) inte%rit' !restation ust $e fulfilled co !letel' Ti e of !a' ent the !a' ent or !erfor ance ust $e on the date sti!ulated ( a' $e ade e*en on Sunda's or on an' holida'" althou%h so e" li:e the Ne%otia$le Instru ents La#" states that !a' ent in such case a' $e ade on the neBt succeedin% $usiness da') The $urden of !ro*in% that the o$li%ation has $een eBtin%uished $' !a' ent de*ol*es u!on the de$tor #ho offers such a defense to the clai of the !laintiff creditor The issuance of a recei!t is a conse<uence of usa%e and %ood faith #hich ust $e o$ser*ed (althou%h our Code has no !ro*ision on this) and the refusal of the creditor to issue a recei!t #ithout just cause is a %round for consi%nation under Art 4856 ( if a recei!t has $een issued $' !a'ee" the testi on' alone of !a'er #ould $e insufficient to !ro*e alle%ed !a' ents) 1014. I* t6$ obligation 6as b$$n s bstantiall% 5$!*o!+$" in goo" *ait6' t6$ obligo! +a% !$#o&$! as t6o g6 t6$!$ 6a" b$$n a st!i#t an" #o+5l$t$ * l*ill+$nt' l$ss "a+ag$s s **$!$" b% t6$ oblig$$. In order that there a' $e su$stantial !erfor ance of an o$li%ation" there ust ha*e $een an atte !t in %ood faith to !erfor " #ithout an' #illful or intentional de!arture therefro The non2!erfor ance of a aterial !art of a contract #ill !re*ent the !erfor ance fro a ountin% to a su$stantial co !liance
A !art' #ho :no#in%l' and #illfull' fails to !erfor his contract in an' res!ect" or o its to !erfor a aterial !art of it cannot $e !er itted under the !rotection of this rule to co !el the other !art' to !erfor ; and the trend of the ore recent decisions is to hold that the !ercenta%e of o itted or irre%ular !erfor ance a' in and of itself $e sufficient to sho# that there has not $een a su$stantial !erfor ance The !art' #ho has su$stantiall' !erfor ed a' enforce s!ecific !erfor ance of the o$li%ation of the other !art' or a' reco*er da a%es for their $reach u!on an alle%ation of !erfor ance" #ithout !roof of co !lete fulfill ent& The other !art'" on the other hand" a' $' an inde!endent action $efore he is sued" or $' a counterclai after co ence ent of a suit a%ainst hi " reco*er fro the first !art' the da a%es #hich he has sustained $' the latterEs failure to co !letel' fulfill his o$li%ation
1015 76$n t6$ oblig$ a##$5ts t6$ 5$!*o!+an#$' @no.ing its in#o+5l$t$n$ss o! i!!$g la!it%' an" .it6o t $=5!$ssing an% 5!ot$st o! obj$#tion' t6$ obligation is "$$+$" * ll% #o+5li$" .it6 A !erson enterin% into a contract has a ri%ht to insist on its !erfor ance in all !articulars" accordin% to its eanin% and s!irit& .ut if he chooses to #ai*e an' of the ter s introduced for his o#n $enefit" he a' do so& .ut he is not o$li%ed to acce!t an'thin% else in !lace of that #hich he has contracted for and if he does not #ai*e this ri%ht" the other !art' cannot reco*er a%ainst hi #ithout !erfor in% all the sti!ulations on is !art To constitute a #ai*er" there ust $e an intentional relin<uish ent of a :no#n ri%ht& A #ai*er #ill not result fro a ere failure to assert a clai for defecti*e !erfor anceA!a' ent& There ust ha*e $een acce!tance of the defecti*e !erfor ance #ith actual :no#led%e if the inco !leteness or defect" under circu stances that #ould indicate an intention to consider the !erfor ance as co !lete and renounce an' clai arisin% fro the defect A creditor cannot o$ject $ecause of defects in !erfor ance resultin% fro his o#n acts or directions 1016. T6$ #!$"ito! is not bo n" to a##$5t 5a%+$nt o! 5$!*o!+an#$ b% a t6i!" 5$!son .6o 6as no int$!$st in t6$ * l*ill+$nt o* t6$ obligation' nl$ss t6$!$ is a sti5 lation to t6$ #ont!a!%. 76o$&$! 5a%s *o! anot6$! +a% "$+an" *!o+ t6$ "$bto! .6at 6$ 6as 5ai"' $=#$5t t6at i* 6$ 5ai" .it6o t t6$ @no.l$"g$ o! against t6$ .ill o* t6$ "$bto!' 6$ #an !$#o&$! onl% inso*a! as t6$ 5a%+$nt 6as b$$n b$n$*i#ial to t6$ "$bto! Reason for this article> #hene*er a third !erson !a's there is a odification of the !restation that is due& /enerall'" the 9rd !erson #ho !aid anotherEs de$t is entitled to reco*er the full a ount he !aid& The la#" ho#e*er li its his reco*er' to the a ount $' #hich the de$tor has $een $enefited" if the de$tor has no :no#led%e of" or has eB!ressed his o!!osition to such !a' ent If the de$t has $een re itted" !aid co !ensated or !rescri$ed" a !a' ent $' a third !erson #ould constitute a !a' ent of #hat is not due; his re ed' #ould $e a%ainst the !erson #ho recei*ed the !a' ent under such conditions and not a%ainst the de$tor #ho did not $enefit fro the !a' ent !a' ent a%ainst de$torEs #ill e*en if !a' ent of the third !art' is a%ainst the #ill of the de$tor" u!on !a' ent $' the third !art'" the o$li%ation $et#een the de$tor and creditor is alread' eBtin%uished 101). 76o$&$! 5a%s on b$6al* o* t6$ "$bto! .it6o t t6$ @no.l$"g$ o! against t6$ .ill o* t6$ latt$!' #annot #o+5$l t6$ #!$"ito! to s b!ogat$ 6i+ in 6is !ig6ts' s #6 as t6os$ a!ising *!o+ a +o!tgag$' g a!ant% o! 5$nalt% This article %i*es to the third !erson #ho !aid onl' a si !le !ersonal action for rei $urse ent" #ithout the securities" %uaranties and other ri%hts reco%ni;ed in the creditor" #hich are eBtin%uished $' the !a' ent 101<. Pa%+$nt +a"$ b% a t6i!" 5$!son .6o "o$s not int$n" to b$ !$i+b !s$" b% t6$ "$bto! is "$$+$" to b$ a "onation' .6i#6 !$2 i!$s t6$ "$bto!Ks #ons$nt; b t t6$ 5a%+$nt is in an% #as$ &ali" as to t6$ #!$"ito! .6o 6as a##$5t$" it ART 101>. In obligations to gi&$' 5a%+$nt +a"$ b% on$ .6o "o$s not 6a&$ t6$ *!$$ "is5osal o* t6$ t6ing " $ an" #a5a#it% to ali$nat$ it s6all not b$ &ali$"' .it6o t 5!$j "i#$ to t6$ 5!o&isions o* a!ti#l$ 140) n"$! t6$ Titl$ on LNat !al ObligationsM consi%nation #ill not $e !ro!er here& In case the creditor acce!ts the !a' ent" the !a' ent #ill not $e *alid eBce!t in the case !ro*ided in article 478F 104?. Pa%+$nt s6all b$ +a"$ to t6$ 5$!son in .6os$ *a&o! t6$ obligation 6as b$$n #onstit t$"' o! 6is s ##$sso! in int$!$st' o! an% 5$!son a t6o!iE$" to !$#$i&$ it the authorit' of a !erson to recei*e !a' ent for the creditor a' $e a&) le%al conferred $' la# (e&%&"%uardian of the inca!acitated" ad inistrator of the estate of the deceased) $&) con*entional #hen the authorit' has $een %i*en $' the creditor hi self (e&%&" a%ent #ho is a!!ointed to collect fro the de$tor
!a' ent ade $' the de$tor to a #ron% !art' does not eBtin%uish the o$li%ation as to the creditor (*oid)" if there is no fault or ne%li%ence #hich can $e i !uted to the latter (e*en #hen the de$tor acted in ut ost %ood faith" or throu%h error induced $' the fraud of the 9rd !erson)& It does not !rejudice the creditor and the accrual of interest is not sus!ended $' it
1041. Pa%+$nt to a 5$!son .6o is in#a5a#itat$" to a"+inist$! 6is 5!o5$!t% s6all b$ &ali" i* 6$ 6as @$5t t6$ t6ing "$li&$!$"' o! inso*a! as t6$ 5a%+$nt 6as b$$n b$n$*i#ial to 6i+. Pa%+$nt +a"$ to a t6i!" 5$!son s6all also b$ &ali" inso*a! as it 6as !$"o n"$" to t6$ b$n$*it o* t6$ #!$"ito!. S #6 b$n$*it to t6$ #!$"ito! n$$" not b$ 5!o&$" in t6$ *ollo.ing #as$s( ,1- I* a*t$! t6$ 5a%+$nt' t6$ t6i!" 5$!son a#2 i!$s t6$ #!$"ito!Hs !ig6ts/ ,0- I* t6$ #!$"ito! !ati*i$s t6$ 5a%+$nt to t6$ t6i!" 5$!son/ ,1- I* b% t6$ #!$"ito!Hs #on" #t' t6$ "$bto! 6as b$$n l$" to b$li$&$ t6at t6$ t6i!" 5$!son 6a" a t6o!it% to !$#$i&$ t6$ 5a%+$nt. ,1161a !a' ent shall $e considered as ha*in% $enefited the inca!acitated !erson if he ade an intelli%ent and reasona$le use thereof" for !ur!oses necessar' or useful to hi " such as that #hich his le%al re!resentati*e #ould ha*e or could ha*e done under si ilar circu stances" e*en if at the ti e of the co !laint the effect of such use no lon%er eBists (e&%&" taBes on creditorEs !ro!ert'" one' to eBtin%uish a ort%a%e on creditorEs !ro!ert') the de$tor is not released fro lia$ilit' $' a !a' ent to one #ho is not the creditor nor one authori;ed to recei*e the !a' ent" e*en if the de$tor $elie*ed in %ood faith that he is the creditor" eBce!t to the eBtent that the !a' ent inured to the $enefit of the creditor in addition to those entioned a$o*e" !a' ent to a third !erson releases the de$tor> a&) #hen" #ithout notice of the assi%n ent of credit" he !a's to the ori%inal creditor $&) #hen in %ood faith he !a's to one in !ossession of the credit e*en #hen the creditor recei*es no $enefit fro the !a' ent to a third !erson" he cannot de and !a' ent ane#" if the ista:e of the de$tor #as due to the fault of the creditor 1040. Pa%+$nt +a"$ in goo" *ait6 to an% 5$!son in 5oss$ssion o* t6$ #!$"it s6all !$l$as$ t6$ "$bto!. ,1164 the !erson in !ossession of the credit is neither the creditor nor one authori;ed $' hi to recei*e !a' ent" $ut a!!ears under the circu stances of the case" to $e the creditor& Ge a!!ears to $e the o#ner of the credit" althou%h in realit'" he a' not $e the o#ner (e&%&" an heir #ho enters u!on the hereditar' estate and collects the credits thereof" $ut #ho is later de!ri*ed of the inheritance $ecause of inca!acit' to succeed) it is necessar' not onl' that the !ossession of the credit $e le%al" $ut also that the !a' ent $e in %ood faith 1041. Pa%+$nt +a"$ to t6$ #!$"ito! b% t6$ "$bto! a*t$! t6$ latt$! 6as b$$n j "i#iall% o!"$!$" to !$tain t6$ "$bt s6all not b$ &ali". ,1165 the !a' ent to the creditor after the credit has $een attached or %arnished is *oid as to the !art' #ho o$tained the attach ent or %arnish ent" to the eBtent of the a ount of the jud% ent in his fa*or& The de$tor u!on #ho %arnish ent order is ser*ed can al#a's de!osit the one' in court $' #a' of consi%nation and thus relie*e hi self fro further lia$ilit' 1044. T6$ "$bto! o* a t6ing #annot #o+5$l t6$ #!$"ito! to !$#$i&$ a "i**$!$nt on$' alt6o g6 t6$ latt$! +a% b$ o* t6$ sa+$ &al $ as' o! +o!$ &al abl$ t6an t6at .6i#6 is " $. In obligations to "o o! not to "o' an a#t o! *o!b$a!an#$ #annot b$ s bstit t$" b% anot6$! a#t o! *o!b$a!an#$ against t6$ oblig$$Hs .ill. ,1166a U!on a%ree ent of consent of the creditor" the de$tor a' deli*er a different thin% or !erfor a different !restation in lieu of that sti!ulated& In this case there a' $e dation in !a' ent or no*ation The defects of the thin% deli*ered a' $e #ai*ed $' the creditor" if he eB!ressl' so declares or if" #ith :no#led%e thereof" he acce!ts the thin% #ithout !rotest or dis!oses of it or consu es it 1045. :ation in 5a%+$nt' .6$!$b% 5!o5$!t% is ali$nat$" to t6$ #!$"ito! in satis*a#tion o* a "$bt in +on$%' s6all b$ go&$!n$" b% t6$ la. o* sal$s. ,n This is the deli*er' and trans ission of o#nershi! of a thin% $' the de$tor to the creditor as an acce!ted e<ui*alent of the !erfor ance of the o$li%ation& The !ro!ert' %i*en a' consist not onl' of a thin% $ut also of a real ri%ht (such as a usufruct)
Considered as a no*ation $' chan%e of the o$ject Nhere the de$t is one'" the la# on sale shall %o*ern; in this case" the act is dee ed to $e a sale #ith the a ount of
the o$li%ation to the eBtent that it is eBtin%uished $ein% considered as !rice Difference $et#een Dation and Cession (see Art& 4855)
1046. 76$n t6$ obligation #onsists in t6$ "$li&$!% o* an in"$t$!+inat$ o! g$n$!i# t6ing' .6os$ 2 alit% an" #i!# +stan#$s 6a&$ not b$$n stat$"' t6$ #!$"ito! #annot "$+an" a t6ing o* s 5$!io! 2 alit%. N$it6$! #an t6$ "$bto! "$li&$! a t6ing o* in*$!io! 2 alit%. T6$ 5 !5os$ o* t6$ obligation an" ot6$! #i!# +stan#$s s6all b$ ta@$n into #onsi"$!ation. ,116)a If there is disa%ree ent $et#een the de$tor and the creditor as to the <ualit' of the thin% deli*ered" the court should decide #hether it co !lies #ith the o$li%ation" ta:in% into consideration the !ur!ose and other circu stances of the o$li%ation .oth the creditor and the de$tor a' #ai*e the $enefit of this article see Art& 4877 104). 9nl$ss it is ot6$!.is$ sti5 lat$"' t6$ $=t!aj "i#ial $=5$ns$s !$2 i!$" b% t6$ 5a%+$nt s6all b$ *o! t6$ a##o nt o* t6$ "$bto!. 7it6 !$ga!" to j "i#ial #osts' t6$ R l$s o* Co !t s6all go&$!n. ,116<a This is $ecause the !a' ent is the de$torEs dut' and it inures to his $enefit in that he is dischar%ed fro the $urden of the o$li%ation 104<. 9nl$ss t6$!$ is an $=5!$ss sti5 lation to t6at $**$#t' t6$ #!$"ito! #annot b$ #o+5$ll$" 5a!tiall% to !$#$i&$ t6$ 5!$stations in .6i#6 t6$ obligation #onsists. N$it6$! +a% t6$ "$bto! b$ !$2 i!$" to +a@$ 5a!tial 5a%+$nts. Ho.$&$!' .6$n t6$ "$bt is in 5a!t li2 i"at$" an" in 5a!t nli2 i"at$"' t6$ #!$"ito! +a% "$+an" an" t6$ "$bto! +a% $**$#t t6$ 5a%+$nt o* t6$ *o!+$! .it6o t .aiting *o! t6$ li2 i"ation o* t6$ latt$!. ,116>a The creditor #ho refuses to acce!t !artial !restations does not incur dela' eBce!t #hen there is a$use of ri%ht or if %ood faith re<uires acce!tance This article does not a!!l' to o$li%ations #here there are se*eral su$jects or #here the *arious !arties are $ound under different ter s and conditions 104>. T6$ 5a%+$nt o* "$bts in +on$% s6all b$ +a"$ in t6$ # !!$n#% sti5 lat$"' an" i* it is not 5ossibl$ to "$li&$! s #6 # !!$n#%' t6$n in t6$ # !!$n#% .6i#6 is l$gal t$n"$! in t6$ P6ili55in$s. T6$ "$li&$!% o* 5!o+isso!% not$s 5a%abl$ to o!"$!' o! bills o* $=#6ang$ o! ot6$! +$!#antil$ "o# +$nts s6all 5!o" #$ t6$ $**$#t o* 5a%+$nt onl% .6$n t6$% 6a&$ b$$n #as6$"' o! .6$n t6!o g6 t6$ *a lt o* t6$ #!$"ito! t6$% 6a&$ b$$n i+5ai!$". In t6$ +$anti+$' t6$ a#tion "$!i&$" *!o+ t6$ o!iginal obligation s6all b$ 6$l" in t6$ ab$%an#$. ,11)? LE/AL TENDER 2 eans such currenc' #hich in a %i*en jurisdiction can $e used for the !a' ent of de$ts" !u$lic and !ri*ate" and #hich cannot $e refused $' the creditor 2 That #hich a de$tor a' co !el a creditor to acce!t in !a' ent of de$t& so lon% as the notes #ere le%al tender at the ti e the' #ere !aid or deli*ered" the !erson acce!tin% the ust suffer the loss if thereafter the' $eca e *alueless the !ro*isions of the !resent article ha*e $een odified $' RA No& 58P #hich states that !a' ents of all onetar' o$li%ations should no# $e ade in currenc' #hich is le%al tender in the @hils& A stipulation providing payment in a foreign currency is null and void but it does not invalidate t e entire contract " and R&A& 74??& A chec:" #hether a ana%erEs chec: or an ordinar' chec: is not le%al tender and an offer of the chec: in !a' ent of de$t is not a *alid tender of !a' ent 105?. In #as$ an $=t!ao!"ina!% in*lation o! "$*lation o* t6$ # !!$n#% sti5 lat$" s6o l" s 5$!&$n$' t6$ &al $ o* t6$ # !!$n#% at t6$ ti+$ o* t6$ $stablis6+$nt o* t6$ obligation s6all b$ t6$ basis o* 5a%+$nt' nl$ss t6$!$ is an ag!$$+$nt to t6$ #ont!a!%. ,n A!!lies onl' #here a contract or a%ree ent is in*ol*ed& It does not a!!l' #here the o$li%ation to !a' arises fro la#" inde!endent of contracts EBtraordinar' inflation of deflation a' $e said to $e that #hich is unusual or beyond t e common fluctuations in t e value of t e currency" #hich !arties could not ha*e reasona$l' foreseen or #hich #as anifestl' $e'ond their conte !lation at the ti e #hen the o$li%ation #as constituted 1051. Pa%+$nt s6all b$ +a"$ in t6$ 5la#$ "$signat$" in t6$ obligation. T6$!$ b$ing no $=5!$ss sti5 lation an" i* t6$ n"$!ta@ing is to "$li&$! a "$t$!+inat$ t6ing' t6$ 5a%+$nt s6all b$ +a"$ .6$!$&$! t6$ t6ing +ig6t b$ at t6$ +o+$nt t6$ obligation .as #onstit t$". In an% ot6$! #as$ t6$ 5la#$ o* 5a%+$nt s6all b$ t6$ "o+i#il$ o* t6$ "$bto!.
If the de$tor chan%es his do icile in $ad faith or after he has incurred in dela'" the additional eB!enses shall $e $orne $' hi & These !ro*isions are #ithout !rejudice to *enue under the Rules of Court&(44F4a) Since the la# fiBes the !lace of !a' ent at the do icile of the de$tor" it is the dut' of the creditor to %o there and recei*e !a' ent; he should $ear the eB!enses in this case $ecause the de$tor cannot $e ade to shoulder the eB!enses #hich the creditor incurs in !erfor in% a dut' i !osed $' la# and #hich is for his $enefit& .ut if the de$tor chan%es his do icile in $ad faith or after he has incurred in dela'" then the additional eB!enses shall $e $orne $' hi Nhen the de$tor has $een re<uired to re it one' to the creditor" the latter $ears the ris:s and the eB!enses of the trans ission& In cases ho#e*er #here the de$tor chooses this eans of !a' ent" he $ears the ris: of loss&
S9BSECTION 1 APPLICATION OA PANDENTS 1050. H$ .6o 6as &a!io s "$bts o* t6$ sa+$ @in" in *a&o! o* on$ an" t6$ sa+$ #!$"ito!' +a% "$#la!$ at t6$ ti+$ o* +a@ing t6$ 5a%+$nt' to .6i#6 o* t6$+ t6$ sa+$ + st b$ a55li$". 9nl$ss t6$ 5a!ti$s so sti5 lat$' o! .6$n t6$ a55li#ation o* 5a%+$nt is +a"$ b% t6$ 5a!t% *o! .6os$ b$n$*it t6$ t$!+ 6as b$$n #onstit t$"' a55li#ation s6all not b$ +a"$ as to "$bts .6i#6 a!$ not %$t " $. I* t6$ "$bto! a##$5ts *!o+ t6$ #!$"ito! a !$#$i5t in .6i#6 an a55li#ation o* t6$ 5a%+$nt is +a"$' t6$ *o!+$! #annot #o+5lain o* t6$ sa+$' nl$ss t6$!$ is a #a s$ *o! in&ali"ating t6$ #ont!a#t. ,11)0a Re<uisites> 4& 4 de$tor and 4 creditor onl' 8& 8 or ore de$ts of the sa e :ind 9& all de$ts ust $e due 7& a ount !aid $' the de$tor ust not $e sufficient to co*er the total a ount of all the de$ts It is necessar' that the o$li%ations ust all $e due& EBce!tions> (4) #he there is a sti!ulation to the contrar'; and (8) the a!!lication of !a' ent is ade $' the !art' for #hose $enefit the ter or !eriod has $een constituted (relate to Art& 44P6)& It is also necessar' that all the de$ts $e for the sa e :ind" %enerall' of a onetar' character& This includes o$li%ations #hich #ere not ori%inall' of a onetar' character" $ut at the ti e of a!!lication of !a' ent" had $een con*erted into an o$li%ation to !a' da a%es $' reason of $reach or non!erfor ance& If the de$tor a:es a !ro!er a!!lication of !a' ent $ut the creditor refuses to acce!t it $ecause he #ants to a!!l' it to another de$t" such creditor #ill incur in dela' RI/GT ,- DE.T,R T, =A+E A@@LICATI,N& If at the ti e of !a' ent" the de$tor does not eBercise his ri%ht to a!!l' it to an' of his de$ts" the a!!lication shall $e understood as !ro*ided $' la#" unless the creditor a:es the a!!lication and his decision is acce!ted $' the de$tor& This a!!lication of !a' ent can $e ade $' the creditor onl' in the recei!t issued at the ti e of !a' ent (althou%h the a!!lication ade $' creditor a' $e contested $' the de$tor if the latterEs assent to such a!!lication #as *itiated $' such causes as ista:e" *iolence" inti idation" fraud" etc) The de$tor and the creditor $' a%ree ent" can *alidl' chan%e the a!!lication of !a' ent alread' ade #ithout !rejudice to the ri%hts of third !ersons ac<uired $efore such a%ree ent 1051. I* t6$ "$bt 5!o" #$s int$!$st' 5a%+$nt o* t6$ 5!in#i5al s6all not b$ "$$+$" to 6a&$ b$$n +a"$ int$!$sts 6a&$ b$$n #o&$!$". ,11)1 Interest !aid first $efore !rinci!al ntil t6$
A!!lies $oth to co !ensator' interest (that sti!ulated as earnin%s of the a ount due under the o$li%ation) and to interest due $ecause of dela' or ora on the !art of the de$tor SC held that this !ro*ision a!!lies onl' in the a$sence of a *er$al or #ritten a%ree ent to the contrar' ( erel' director'" not andator')
1054. 76$n t6$ 5a%+$nt #annot b$ a55li$" in a##o!"an#$ .it6 t6$ 5!$#$"ing ! l$s' o! i* a55li#ation #an not b$ in*$!!$" *!o+ ot6$! #i!# +stan#$s' t6$ "$bt .6i#6 is +ost on$!o s to t6$ "$bto!' a+ong t6os$ " $' s6all b$ "$$+$" to 6a&$ b$$n satis*i$". I* t6$ "$bts " $ a!$ o* t6$ sa+$ nat !$ an" b !"$n' t6$ 5a%+$nt s6all b$ a55li$" to all o* t6$+ 5!o5o!tionat$l%. ,11)4a As to #hich of 8 de$ts is ore onerous is funda entall' a <uestion of fact" #hich courts ust deter ine on the $asis of the circu stances of each case
De$ts are not of the sa e $urden (4st !ar&) Rules> 4& ,ldest are ore onerous than ne# ones 8& ,ne $earin% interest ore onerous than one that does not 9& secured de$t ore onerous than unsecured one 7& !rinci!al de$t ore onerous than %uarant' 5& solidar' de$tor ore onerous than sole de$tor 6& share in a solidar' o$li%ation ore onerous to a solidar' de$tor F& li<uidated de$t ore onerous than unli<uidated De$ts are of the sa e $urden (8nd !ar&) the !a' ent shall $e a!!lied to all of the pro rata or !ro!ortionatel'. EBa !le> de$tor o#es his creditor se*eral de$ts" all of the due" to #it> (4) unsecured de$t" (8) a de$t secured #ith ort%a%e of the de$torSs !ro!ert'" (9) a de$t #ith interest" (7) a de$t in #hich the de$tor is solidaril' lia$le #ith another& @artial !a' ent #as ade $' the de$tor" #ithout s!ecification as to #hich the !a' ent should $e a!!lied& The ost onerous is (7)" follo#ed $' (8)" then (9)" then (4)& Conse<uentl'" !a' ent shall $e ade in that order&
S9BSECTION 0 PANDENT BN CESSION 1055. T6$ "$bto! +a% #$"$ o! assign 6is 5!o5$!t% to 6is #!$"ito!s in 5a%+$nt o* 6is "$bts. T6is #$ssion' nl$ss t6$!$ is sti5 lation to t6$ #ont!a!%' s6all onl% !$l$as$ t6$ "$bto! *!o+ !$s5onsibilit% *o! t6$ n$t 5!o#$$"s o* t6$ t6ing assign$". T6$ ag!$$+$nts .6i#6' on t6$ $**$#t o* t6$ #$ssion' a!$ +a"$ b$t.$$n t6$ "$bto! an" 6is #!$"ito!s s6all b$ go&$!n$" b% s5$#ial la.s. ,11)5a Cession is a s!ecial for of !a' ent #here$' the de$tor a$andons or assi%ns all of his !ro!ert' for the $enefit of his creditors so that the latter a' o$tain !a' ent of their credits fro the !roceeds of the !ro!ert'& Re<uisites> 4& !luralit' of de$ts 8& !artial or relati*e insol*enc' of the de$tor 9& acce!tance of cession $' the creditors +inds of Cession> 4& Contractual (Art& 4855) 8& Judicial (Insol*enc' La#) =ust $e initiated $' de$tors
Re<uires t#o or
ore creditors" de$tors insol*ent" cession acce!ted $' creditors a:in% the creditors the o#ners of the !ro!ert' of the de$tor unless there
Such assi%n ent does not ha*e the effect of is an a%ree ent to that effect Difference $et#een Dation and Cession DATI,N a' $e 4 creditor does not re<uire insol*enc' deli*er' of a thin% transfer of o#nershi! of the !ro!ert' a no*ation !a' ent eBtin%uishes o$li%ation (to the eBtent of the *alue of the thin% deli*ered)
CESSI,N an' creditors re<uires !artial or relati*e insol*enc' deli*er' of all the !ro!ert' no transfer of o#nershi! (onl' of !ossession and ad inistration)
the effect is erel' to release de$tor fro the net !roceeds of the !ro!ert'; hence" !artial eBtin%uish ent of o$li%ation&
S9BSECTION 1 TEN:ER OA PANDENT AN: CONSIGNATION 1056. I* t6$ #!$"ito! to .6o+ t$n"$! o* 5a%+$nt 6as b$$n +a"$ !$* s$s .it6o t j st #a s$ to a##$5t it' t6$ "$bto!
s6all b$ !$l$as$" *!o+ !$s5onsibilit% b% t6$ #onsignation o* t6$ t6ing o! s + " $. Consignation alon$ s6all 5!o" #$ t6$ sa+$ $**$#t in t6$ *ollo.ing #as$s( ,1- 76$n t6$ #!$"ito! is abs$nt o! n@no.n' o! "o$s not a55$a! at t6$ 5la#$ o* 5a%+$nt/ ,0- 76$n 6$ is in#a5a#itat$" to !$#$i&$ t6$ 5a%+$nt at t6$ ti+$ it is " $/ ,1- 76$n' .it6o t j st #a s$' 6$ !$* s$s to gi&$ a !$#$i5t/ ,4- 76$n t.o o! +o!$ 5$!sons #lai+ t6$ sa+$ !ig6t to #oll$#t/ ,5- 76$n t6$ titl$ o* t6$ obligation 6as b$$n lost. ,11)6a T$n"$! o* 5a%+$nt > anifestation ade $' the de$tor to the creditor of his desire to co !l' #ith his o$li%ation; The act of the de$tor of offerin% to the creditor the thin% or a ount due Consignation > De!osit of the o$ject or the a ount due #ith the !ro!er court after refusal or ina$ilit' of the creditor to acce!t the tender of !a' ent Tender of !a' ent $' certified chec: is *alid; a ere chec: #ould also $e *alid for tender of !a' ent if the creditor a:es no !ro !t o$jection" $ut this does not esto! the latter fro later de andin% !a' ent in cash Nhen a tender of !a' ent is ade in such a for that the creditor could ha*e i ediatel' reali;ed !a' ent if he had acce!ted the tender" follo#ed $' a !ro !t atte !t of the de$tor to de!osit the eans of !a' ent in court $' #a' of consi%nation" the accrual of interest on the o$li%ation #ill $e sus!ended fro the date of such tender& .ut #hen the tender of !a' ent is not acco !anied $' the eans of !a' ent" and the de$tor did not ta:e an' i ediate ste! to a:e a consi%nation" then the interest is not sus!ended fro the ti e of such tender&
/ENERAL REJUISITES ,- 3ALID C,NSI/NATI,N *s S@ECIAL REJUISITES /eneral Re< > relati*e to !a' ent (Arts& 4898 2 4854) S!ecial Re< > *er' nature of consi%nation (Arts& 4856 485H) S!ecial Re<uisites of consi%nation> F:LN3:NG F:G There #as a "e$t due FLG The consi%nation of the o$li%ation #as ade $ecause of so e le%al cause !ro*ided in the !resent article FNG That !re*ious notice of the consi%nation has $een %i*en to !ersons interested in the !erfor ance of the o$li%ation F:G The a ount or thin% due #as !laced at the "is!osal of the court FNG After the consi%nation had $een ade the !ersons interested had $een notified thereof If the reason for consi%nation is the unjust refusal of the creditor to acce!t !a' ent" it ust $e sho#n> That there #as !re*ious tender of !a' ent" #ithout #hich the consi%nation is ineffecti*e That the tender of !a' ent #as of the *er' thin% due" or in case of one' o$li%ations that le%al tender currenc' #as offered That the tender of !a' ent #as unconditional and That the creditor refused to acce!t !a' ent #ithout just cause EBce!tion to re<uire ent for tender of !a' ent> FAIR3TTG FAG Nhen creditor is a$sent or un:no#n or does not a!!ear at !lace of !a' ent FIG Nhen he is inca!acitated to recei*e !a' ent FRG Nhen he refuses to %i*e !ecei!t" #ithout just cause FTG Nhen t#o or ore !ersons clai sa e ri%ht to collect FTG Nhen title of the o$li%ation has $een lost
4& 8& 9& 7& 5&
4& 8& 9& 7&
4& 8& 9& 7& 5&
The 4st and 8nd S!ecial Re<uisites of Consi%nation are e $odied in Article 4856& As to the 8nd re<uisite (CLD le%al cause) the follo#in% usst $e !resent> (a) the tender of !a' ent ust ha*e $een ade prior to t e consignation ($) that it ust ha*e $een unconditional Ce&%& #here the de$tor tendered a chec: for @9"85? to the creditor as !a' ent of a de$t conditioned u!on the si%nin% $' the latter of a otion to dis iss a co !laint for le%al se!aration" such tender of !a' ent is in*alid&D (c) that the creditor ust ha*e refused to acce!t the !a' ent wit out just cause Cit is not necessar' for the court #here the thin% or the a ount is de!osited to deter ine #hether the refusal of the creditor to acce!t the sa e #as #ith or #ithout just cause& The <uestion #ill $e resol*ed an'#a' in a su$se<uent !roceedin%& Gence" the ere refusal of the creditor to acce!t the tender of !a' ent #ill $e sufficient (=anresa)D
105). In o!"$! t6at t6$ #onsignation o* t6$ t6ing " $ +a% !$l$as$ t6$ obligo!' it + st *i!st b$ anno n#$" to t6$
5$!sons int$!$st$" in t6$ * l*ill+$nt o* t6$ obligation. T6$ #onsignation s6all b$ in$**$#t al i* it is not +a"$ st!i#tl% in #onsonan#$ .it6 t6$ 5!o&isions .6i#6 !$g lat$ 5a%+$nt. ,11)) The lac: of notice does not in*alidate the consi%nation $ut si !l' a:es the de$tor lia$le for the eB!enses
The tender of !a' ent and the notice of consi%nation sent to the creditor a$sent or un:no#n creditors" the notice a' $e ade $' !u$lication
a' $e
ade in the sa e act& In case of
4st !ara%ra!h of this article !ertains to the 9rd S!ecial Re<uisite of Consi%nation (CND @re*ious Notice) 2 Tender of @a' ent *s @re*ious Notice > the for er is a friendl' and !ri*ate act anifested onl' to the creditor; the latter is anifested also to other !ersons interested in the fulfill ent of the o$li%ation& 8nd !ara%ra!h of this article !ertains to the /eneral Re<uisites of Consi%nation (Arts& 489824854)" #hich ust $e co !lied #ith
105<. Consignation s6all b$ +a"$ b% "$5ositing t6$ t6ings " $ at t6$ "is5osal o* j "i#ial a t6o!it%' b$*o!$ .6o+ t6$ t$n"$! o* 5a%+$nt s6all b$ 5!o&$"' in a 5!o5$! #as$' an" t6$ anno n#$+$nt o* t6$ #onsignation in ot6$! #as$s. T6$ #onsignation 6a&ing b$$n +a"$' t6$ int$!$st$" 5a!ti$s s6all also b$ noti*i$" t6$!$o*. ,11)< 4st !ara%ra!h hereof 2 7th S!ecial Re<uisite of Consi%nation (CDD Dis!osal of the Court) 2 this is co !lied #ith if the de$tor de!ostis the thin% or a ount #ith the Cler: of Court 8nd !ara%ra!h hereof 2 5th S!ecial Re<uisite of Consi%nation (CND Su$se<uent Notice) 2 this is to ena$le the creditor to #ithdra# the %oods or one' de!osited& 105>. T6$ $=5$ns$s o* #onsignation' .6$n 5!o5$!l% +a"$' s6all b$ #6a!g$" against t6$ #!$"ito!. ,11)> The consi%nation is !ro!erl' ade #hen> 4&) after the thin% has $een de!osited in court" the creditor acce!ts the consi%nation #ithout o$jection and #ithout an' reser*ation of his ri%ht to contest it $ecause of failure to co !l' #ith an' of the re<uisites for consi%nation; and 8&) #hen the creditor o$jects to the consi%nation $ut the court" after !ro!er hearin%" declares that the consi%nation has $een *alidl' ade Kin these cases" the creditor $ears the eB!enses of the consi%nation 106?. On#$ t6$ #onsignation 6as b$$n " l% +a"$' t6$ "$bto! +a% as@ t6$ j "g$ to o!"$! t6$ #an#$llation o* t6$ obligation. B$*o!$ t6$ #!$"ito! 6as a##$5t$" t6$ #onsignation' o! b$*o!$ a j "i#ial "$#la!ation t6at t6$ #onsignation 6as b$$n 5!o5$!l% +a"$' t6$ "$bto! +a% .it6"!a. t6$ t6ing o! t6$ s + "$5osit$"' allo.ing t6$ obligation to !$+ain in *o!#$. ,11<? Consi%nation has a retroacti*e effect and the !a' ent is dee ed to ha*e $een ade at the ti e of the de!osit of the thin% in court or #hen it #as !laced at the dis!osal of the judicial authorit' The effects of consi%nation are> 4&) the de$tor is released in the sa e anner as if he had !erfor ed the o$li%ation at the ti e of the consi%nation $ecause this !roduces the sa e effect as a *alid !a' ent" 8&) the accrual of interest on the o$li%ation is sus!ended fro the o ent of consi%nation" 9&) the deteriorations or loss of the thin% or a ount consi%ned occurrin% #ithout fault of the de$tor ust $e $orne $' the creditor" $ecause the ris:s of the thin% are transferred to the creditor fro the o ent of de!osit 7&) an' incre ent or increase in *alue of the thin% after the consi%nation inures to the $enefit of the creditor& Nhen the a ount consi%ned does not co*er the entire o$li%ation" the creditor a' acce!t it" reser*in% his ri%ht to the $alance& If no reser*ations are ade" the acce!tance $' the creditor of the a ount consi%ned a' $e re%arded as a #ai*er of further clai s under the contract 1061. I*' t6$ #onsignation 6a&ing b$$n +a"$' t6$ #!$"ito! s6o l" a t6o!iE$ t6$ "$bto! to .it6"!a. t6$ sa+$' 6$ s6all los$ $&$!% 5!$*$!$n#$ .6i#6 6$ +a% 6a&$ o&$! t6$ t6ing. T6$ #o3"$bto!s' g a!anto!s an" s !$ti$s s6all b$ !$l$as$". ,11<1a Nhen the consi%nation has alread' $een ade and the creditor has acce!ted it or it has $een judiciall' declared as !ro!er" the de$tor cannot #ithdra# the thin% or a ount de!osited unless the creditor consents thereto& If the creditor authori;es the de$tor to #ithdra# the sa e" there is a re*i*al of the o$li%ation" #hich has alread' $een eBtin%uished $' the consi%nation" and the relationshi! of de$tor and creditor is restored to the condition in #hich it #as $efore the consi%nation& .ut third !ersons" solidar' co2de$tors" %uarantors and sureties #ho are $enefited $' the consi%nation are not !rejudiced $' the re*i*al of the o$li%ation $et#een the de$tor and the creditor
SECTION 0 LOSS OA THE THING :9E 1060. An obligation .6i#6 #onsists in t6$ "$li&$!% o* a "$t$!+inat$ t6ing s6all b$ $=ting is6$" i* it s6o l" b$ lost o! "$st!o%$" .it6o t t6$ *a lt o* t6$ "$bto!' an" b$*o!$ 6$ 6as in# !!$" in "$la%. 76$n b% la. o! sti5 lation' t6$ obligo! is liabl$ $&$n *o! *o!t ito s $&$nts' t6$ loss o* t6$ t6ing "o$s not $=ting is6 t6$ obligation an" 6$ s6all b$ !$s5onsibl$ *o! "a+ag$s. T6$ sa+$ ! l$ a55li$s .6$n t6$ nat !$ o* t6$ obligation !$2 i!$s t6$ ass +5tion o* !is@. 1061( In an obligation to "$li&$! a g$n$!i# t6ing' t6$ loss o! "$st! #tion o* an%t6ing o* t6$ sa+$ @in" "o$s not $=ting is6 t6$ obligation. ,n1064. T6$ #o !ts s6all "$t$!+in$ .6$t6$!' n"$! t6$ #i!# +stan#$s' t6$ 5a!tial loss o* t6$ obj$#t o* t6$ obligation is so i+5o!tant as to $=ting is6 t6$ obligation. ,n1065. 76$n$&$! t6$ t6ing is lost in t6$ 5oss$ssion o* t6$ "$bto!' it s6all b$ 5!$s +$" t6at t6$ loss .as " $ to 6is *a lt' nl$ss t6$!$ is 5!oo* to t6$ #ont!a!%' an" .it6o t 5!$j "i#$ to t6$ 5!o&isions o* a!ti#l$ 1165. T6is 5!$s +5tion "o$s not a55l% in #as$ o* $a!t62 a@$' *loo"' sto!+' o! ot6$! nat !al #ala+it%. ,11<1a-
9rd !ara%ra!h of Art& 4465> #he the o$li%or dela's" or has !ro ised to deli*er the sa e thin% to t#o or ore !ersons #ho do not ha*e the sa e interest" he shall $e lia$le for an' fortuitious e*ent until he has effected the deli*er' Gence" in cases #here Art& 4465" !ar& 9 is a!!lica$le" e*en if the de$tor can !ro*e that the loss of the thin% in his !ossession #as not throu%h his fault or that it #as throu%h a fortuitous e*ent" he shall still $e lia$le to the creditor for da a%es&
1066. T6$ "$bto! in obligations to "o s6all also b$ !$l$as$" .6$n t6$ 5!$station b$#o+$s l$gall% o! 56%si#all% i+5ossibl$ .it6o t t6$ *a lt o* t6$ obligo!. ,11<4aLE/AL I=@,SSI.ILITY > a' either $e 2 4& direct (#hen the la# !rohi$its the !erfor ance or eBecution of the #or: a%reed u!on" i&e& #hen it is i oral or dan%erous) 8& indirect (the la# i !oses duties of a su!erior character u!on the o$li%or #hich are inco !ati$le #ith the #or: a%reed u!on" althou%h the latter a' $e !erfectl' licit" as #here the o$li%or is drafted for ilitar' ser*ice or for a ci*il function) @GYSICAL I=@,SSI.ILTY > eBa !les death of the de$tor; #hen there is an accident&&& 106). 76$n t6$ s$!&i#$ 6as b$#o+$ so "i**i# lt as to b$ +ani*$stl% b$%on" t6$ #ont$+5lation o* t6$ 5a!ti$s' t6$ obligo! +a% also b$ !$l$as$" t6$!$*!o+' in .6ol$ o! in 5a!t. ,nD,CTRINE ,- UN-,RESEEN E3ENT A D,CTRINE ,- RELATI3E I=@,SSI.ILITY (re$us sic stanti$us) It refers to o$li%ation Wto doW (!ersonal o$li%ation) @arties are !resu ed to ha*e the ris: It does not a!!l' to aleator' contracts (insurance contract) EBcludes hi%hl' s!eculati*e $usiness (stoc: eBchan%e) =onator' o$li%ations are also eBcluded (%o*erned $' 495F) Re<uisites> 4& e*ent or chan%e in the circu stances could ha*e $een foreseen of the ti e of the eBecution contract 8& it a:es the !erfor ance of the contract eBtre el' difficult $ut not i !ossi$le 9& the e*ent ust not $e due to the act of an' of the !arties 7& the contract is for a future !restation& If the contract is of i ediate fulfill ent" the %ross ine<ualit' of the reci!rocal !restations a' $e in*ol*e desion or #ant of cause& 106<. 76$n t6$ "$bt o* a t6ing #$!tain an" "$t$!+inat$ 5!o#$$"s *!o+ a #!i+inal o**$ns$' t6$ "$bto! s6all not b$ $=$+5t$" *!o+ t6$ 5a%+$nt o* its 5!i#$' .6at$&$! +a% b$ t6$ #a s$ *o! t6$ loss' nl$ss t6$ t6ing 6a&ing b$$n o**$!$" b% 6i+ to t6$ 5$!son .6o s6o l" !$#$i&$ it' t6$ latt$! !$* s$" .it6o t j sti*i#ation to a##$5t it. ,11<5-
106>. T6$ obligation 6a&ing b$$n $=ting is6$" b% t6$ loss o* t6$ t6ing' t6$ #!$"ito! s6all 6a&$ all t6$ !ig6ts o* a#tion .6i#6 t6$ "$bto! +a% 6a&$ against t6i!" 5$!sons b% !$ason o* t6$ loss. ,11<610)?. Con"onation o! !$+ission is $ss$ntiall% g!at ito s' an" !$2 i!$s t6$ a##$5tan#$ b% t6$ obligo!. It +a% b$ +a"$ $=5!$ssl% o! i+5li$"l%. On$ an" t6$ ot6$! @in" s6all b$ s bj$#t to t6$ ! l$s .6i#6 go&$!n ino**i#io s "onations. E=5!$ss #on"onation s6all' * !t6$!+o!$' #o+5l% .it6 t6$ *o!+s o* "onation. ,11<)10)1. T6$ "$li&$!% o* a 5!i&at$ "o# +$nt $&i"$n#ing a #!$"it' +a"$ &ol nta!il% b% t6$ #!$"ito! to t6$ "$bto!' i+5li$s t6$ !$n n#iation o* t6$ a#tion .6i#6 t6$ *o!+$! 6a" against t6$ latt$!. I* in o!"$! to n lli*% t6is .ai&$! it s6o l" b$ #lai+$" to b$ ino**i#io s' t6$ "$bto! an" 6is 6$i!s +a% 56ol" it b% 5!o&ing t6at t6$ "$li&$!% o* t6$ "o# +$nt .as +a"$ in &i!t $ o* 5a%+$nt o* t6$ "$bt. ,11<<10)0. 76$n$&$! t6$ 5!i&at$ "o# +$nt in .6i#6 t6$ "$bt a55$a!s is *o n" in t6$ 5oss$ssion o* t6$ "$bto!' it s6all b$ 5!$s +$" t6at t6$ #!$"ito! "$li&$!$" it &ol nta!il%' nl$ss t6$ #ont!a!% is 5!o&$". ,11<>10)1. T6$ !$n n#iation o* t6$ 5!in#i5al "$bt s6all $=ting is6 t6$ a##$sso!% obligations/ b t t6$ .ai&$! o* t6$ latt$! s6all l$a&$ t6$ *o!+$! in *o!#$. ,11>?10)4. It is 5!$s +$" t6at t6$ a##$sso!% obligation o* 5l$"g$ 6as b$$n !$+itt$" .6$n t6$ t6ing 5l$"g$"' a*t$! its "$li&$!% to t6$ #!$"ito!' is *o n" in t6$ 5oss$ssion o* t6$ "$bto!' o! o* a t6i!" 5$!son .6o o.ns t6$ t6ing. ,11>1aK Aticles 48F4 48F7> eBa !les of i !lied re ission SECTION 4 CONA9SION OR DERGER OA RIGHTS 10)5. T6$ obligation is $=ting is6$" *!o+ t6$ ti+$ t6$ #6a!a#t$!s o* #!$"ito! an" "$bto! a!$ +$!g$" in t6$ sa+$ 5$!son. ,11>0a =er%er or confusion is the eetin% in one !erson of the <ualities of creator and de$tor #ith res!ect to the sa e o$li%ation& It erases the !luralit' of su$jects of the o$li%ation& -urther" the !ur!oses for #hich the o$li%ation a' ha*e $een created are considered as full' reali;ed $' the er%er of the <ualities of de$tor and creditor in the sa e !erson& Re<uisites of er%er or confusion are> (4) It ust ta:e !lace $et#een the creditor and the !rinci!al de$tor" (8) the *er' sa e o$li%ation ust $e in*ol*ed" for if the de$tor ac<uires ri%hts fro the creditor" $ut not the !articular o$li%ation in <uestion in <uestion there #ill $e no er%er" (9) the confusion ust $e total or as re%ards the entire o$li%ation& The effect of er%er is to eBtin%uish the o$li%ation& 10)6. D$!g$! .6i#6 ta@$s 5la#$ in t6$ 5$!son o* t6$ 5!in#i5al "$bto! o! #!$"ito! b$n$*its t6$ g a!anto!s. Con* sion .6i#6 ta@$s 5la#$ in t6$ 5$!son o* an% o* t6$ latt$! "o$s not $=ting is6 t6$ obligation. ,11>1 The eBtin%uish ent of the !rinci!al o$li%ation throu%h confusion releases the %uarantorEs $ecause the o$li%ation of the latter is erel' accessor'& Nhen the er%er ta:es !lace in the !erson of a %uarantor" the o$li%ation is not eBtin%uished& 10)). Con* sion "o$s not $=ting is6 a joint obligation $=#$5t as !$ga!"s t6$ s6a!$ #o!!$s5on"ing to t6$ #!$"ito! o! "$bto! in .6o+ t6$ t.o #6a!a#t$!s #on# !. ,11>4SECTION 5 CODPENSATION 10)<. Co+5$nsation s6all ta@$ 5la#$ .6$n t.o 5$!sons' in t6$i! o.n !ig6t' a!$ #!$"ito!s an" "$bto!s o* $a#6 ot6$!. ,11>5 Co !ensation is a ode of eBtin%uishin% to the concurrent a ount" the o$li%ations of those !ersons #ho in their o#n ri%ht are reci!rocall' de$tors and creditors of each other& It is the offsettin% of t#o o$li%ations #hich are reci!rocall' eBtin%uished if the' are of e<ual *alue& ,r eBtin%uished to the concurrent a ount if of different *alues& +inds of Co !ensation>
As to their effects
co !ensation
a' $e total (#hen the t#o o$li%ations are of the sa e a ount); or
!artial (#hen the a ounts are not e<ual)&
As to ori%in 4& it a' $e le%al; 8& facultati*e; 9& con*entional; 7& or judicial& It is le%al #hen it ta:es !lace $' o!eration of la# $ecause all re<uisites are !resent& It is facultati*e #hen it can $e clai ed $' one of the !arties" #ho" ho#e*er" has the ri%ht to o$ject to it" such as #hen one of the o$li%ations has a !eriod for the $enefit of one !art' alone and #ho renounces that !eriod so as to a:e the o$li%ation due& It is con*entional #hen the !arties a%ree to co !ensate their utual o$li%ations e*en if so e re<uisite is lac:in%& It is judicial #hen decreed $' the court in a case #here there is a counterclai &
Co+5$nsation &s. Pa%+$nt( In co !ensation" there can $e !artial eBtin%uish ent of the o$li%ation; in !a' ent" the !erfor ance ust $e co !leter" unless #ai*ed $' the creditor& @a' ent in*ol*es deli*er' of action" #hile co !ensation (le%al co !ensation) ta:es !lace $' o!eration of la# #ithout si ultaneous deli*er'& Co+5$nsation &s. D$!g$!( In co !ensation" there are at least t#o !ersons #ho stand as !rinci!al creditors and de$tor of each other" in er%er" there is onl' one !erson in*ol*ed in #ho the characters of creditor and de$tor are er%ed& In er%er" there is onl' one o$li%ation" #hile in co !ensation" there are t#o o$li%ations in*ol*ed& 10)>. In o!"$! t6at #o+5$nsation +a% b$ 5!o5$!' it is n$#$ssa!%( ,1- T6at $a#6 on$ o* t6$ obligo!s b$ bo n" 5!in#i5all%' an" t6at 6$ b$ at t6$ sa+$ ti+$ a 5!in#i5al #!$"ito! o* t6$ ot6$!/ ,0- T6at bot6 "$bts #onsist in a s + o* +on$%' o! i* t6$ t6ings " $ a!$ #ons +abl$' t6$% b$ o* t6$ sa+$ @in"' an" also o* t6$ sa+$ 2 alit% i* t6$ latt$! 6as b$$n stat$"/ ,1- T6at t6$ t.o "$bts b$ " $/ ,4- T6at t6$% b$ li2 i"at$" an" "$+an"abl$/ ,5- T6at o&$! n$it6$! o* t6$+ t6$!$ b$ an% !$t$ntion o! #ont!o&$!s%' #o++$n#$" b% t6i!" 5$!sons an" #o++ ni#at$" in " $ ti+$ to t6$ "$bto!. ,11>6 -or co !ensation to ta:e !lace" the !arties ust $e utuall' de$tors and creditors (4) in their o#n ri%ht" and (8) as !rinci!als& Nhere there is no relationshi! of utual creditors and de$tors" there can $e no co !ensation& .ecause the 4st re<uire ent that the !arties $e utuall' de$tors and creditors in their o#n ri%ht" there can $e no co !ensation #hen one !art' is occu!'in% a re!resentati*e ca!acit'" such as a %uardian or an ad inistrator& The 8nd re<uire ent is that the !arties should $e utuall' de$tors and creditors as !rinci!als& This eans that there can $e no co !ensation #hen one !art' is a !rinci!al creditor in one o$li%ation $ut is onl' a suret' or %uarantor in the other& The thin%s due in $oth o$li%ations ust $e fun%i$le" or thin%s #hich can $e su$stituted for each other&
.oth de$ts
ust $e due to !er it co !ensation&
De anda$le eans that the de$ts are enforcea$le in court" there $ein% no a!!arent defenses inherent in the & The o$li%ations ust $e ci*il o$li%ations" includin% those that are !urel' natural& An o$li%ation is not de anda$le" therefore" and not su$ject to co !ensation" in the follo#in% cases> (4) #hen there is a !eriod #hich has not 'et arri*ed" includin% the cases #hen one !art' is in a state of sus!ension of !a' ents; (8) #hen there is a sus!ensi*e condition that has not 'et ha!!ened; (9) #hen the o$li%ation cannot $e sued u!on" as in natural o$li%ation& A de$t is li<uidated #hen its eBistence and a ount is deter ined& Co !ensation can onl' ta:e !lace $et#een certain and li<uidated de$ts&
K The *i&$ !$2 isit$s o* a l$gal #o+5$nsation are enu erated in the Article& All re<uisites ust $e !resent $efore co !ensation can $e effectual& 4& That each of the o$li%ators $e $ound !rinci!all' and that he $e at the sa e ti e a !rinci!al creditor of the other& The !arties ust $e utual creditor and de$tor of each other and their relationshi! is a !rinci!al one" that is" the' are !rinci!al de$tor and creditor of each other& 8& That $oth de$ts consist in such a su of one'" or if the thin%s due are consu a$le" the' $e of the sa e :ind" and also of the sa e <ualit' if the latter has $een stated& XXNhen the de$ts consist of one'" there is not uch of a
9&
7&
5&
!ro$le #hen it co es to co !ensation to the concurrent a ount& It is a atter of athe atical co !utation& Nhen the de$t consist of thin%s" it is necessar' that the thin%s are consu a$le #hich ust $e understood as Yfun%i$leE and therefore susce!ti$le of su$stitution& =ore than that the' ust $e of the sa e :ind& If the <ualit' has $een states" the thin%s ust $e of the sa e <ualit'& That the t#o de$ts are due& XX A de$t is YdueE #hen its !eriod of !erfor ance has arri*ed& If it is a su$ject to a condition" the condition ust ha*e alread' $een fulfilled& Go#e*er" in *oluntar' co !ensation" the !arties a' a%ree u!on the co !ensation of de$ts #hich are not 'et due& That the' $e li<uidated and de anda$le& XX A de$t is considered Yli<uidatedE #hen its a ount is clearl' fiBed& ,f if it is not 'et s!eciall' fiBed" a si !le athe atical co !utation #ill deter ine its a ount or *alue& It is Yunli<uidatedE #hen the a ount is not fiBed $ecause it is still su$ject to a dis!ute or to certain condition& It is not enou%h that the de$ts $e li<uidated& It is also essential that the sa e $e de anda$le& A de$t is de anda$le if it is not 'et $arred $' !rescri!tion and it is not ille%al or in*alid& That o*er neither of the there $e an' retention or contro*ers'" co enced $' third !ersons and co unicated in due ti e to the de$tor& XX A de$t of a thin% cannot $e a su$ject of co !ensation if the sa e had $een su$ject of a %arnish ent of #hich the de$tor #as ti el' notified& Nhen a credit or !ro!ert' had $een !ro!erl' %arnished of attached" it cannot $e dis!osed of #ithout the a!!ro*al of the court&
10<?. Not.it6stan"ing t6$ 5!o&isions o* t6$ 5!$#$"ing a!ti#l$' t6$ g a!anto! +a% s$t 5 #o+5$nsation as !$ga!"s .6at t6$ #!$"ito! +a% o.$ t6$ 5!in#i5al "$bto!. ,11>) The lia$ilit' of the %uarantor is onl' su$sidiar'; it is accessor' to the !rinci!al o$li%ation of the de$tor& If the !rinci!al de$tor has a credit a%ainst the creditor" #hich can $e co !ensated" it #ould ean the eBtin%uish ent of the %uaranteed de$t" either totall' or !artiall'& This eBtin%uish ent $enefits the %uarantor" for he can $e held lia$le onl' to the sa e eBtent as the de$tor& E=#$5tion to t6$ R l$ On Co+5$nsation( Ri%ht of /uarantor to In*o:e Co !ensation A%ainst Creditor& The %eneral rule is that for co !ensation to o!erate" the !arties ust $e related reci!rocall' as !rinci!al creditors and de$tors of each other& Under the !resent Article" the %uarantor is allo#ed to set u! co !ensation a%ainst the creditor& 10<1. Co+5$nsation +a% b$ total o! 5a!tial. 76$n t6$ t.o "$bts a!$ o* t6$ sa+$ a+o nt' t6$!$ is a total #o+5$nsation. ,n Total Co !ensationZde$ts are of the sa e a ount&
@artial Co !ensationZDe$ts are not of the sa e a ount; o!erati*e onl' u! to the concurrent a ount&
10<0. T6$ 5a!ti$s +a% ag!$$ 5on t6$ #o+5$nsation o* "$bts .6i#6 a!$ not %$t " $. ,n 3oluntar' co !ensation is not li ited to o$li%ations #hich are not 'et due& The !arties a' co !ensate $' a%ree ent an' o$li%ations" in #hich the o$jecti*e re<uisites !ro*ided for le%al co !ensation are not !resent& It is necessar'" ho#e*er" that the !arties should ha*e the ca!acit' to dis!ose of the credits #hich the' co !ensate" $ecause the eBtin%uish ent of the o$li%ations in this case arises fro their #ills and not fro la#& 10<1. I* on$ o* t6$ 5a!ti$s to a s it o&$! an obligation 6as a #lai+ *o! "a+ag$s against t6$ ot6$!' t6$ *o!+$! +a% s$t it o** b% 5!o&ing 6is !ig6t to sai" "a+ag$s an" t6$ a+o nt t6$!$o*. ,nA!t. 10<4. 76$n on$ o! bot6 "$bts a!$ !$s#issibl$ o! &oi"abl$' t6$% +a% b$ #o+5$nsat$" against $a#6 ot6$! b$*o!$ t6$% a!$ j "i#iall% !$s#in"$" o! a&oi"$". ,n Althou%h a rescissi$le or *oida$le de$t can $e co !ensated $efore it is rescinded or annulled" the o ent it is rescinded or annulled" the decree of rescission or annul ent is retroacti*e" and the co !ensation ust $e considered as cancelled& Recission of annul ent re<uires utual restitution; the !art' #hose o$li%ation is annulled or rescinded can thus reco*er to the eBtent that his credit #as eBtin%uished $' the co !ensation" $ecause to that eBtent he is dee ed to ha*e ade a !a' ent& 10<5. T6$ "$bto! .6o 6as #ons$nt$" to t6$ assign+$nt o* !ig6ts +a"$ b% a #!$"ito! in *a&o! o* a t6i!" 5$!son' #annot s$t 5 against t6$ assign$$ t6$ #o+5$nsation .6i#6 .o l" 5$!tain to 6i+ against t6$ assigno!' nl$ss t6$ assigno! .as noti*i$" b% t6$ "$bto! at t6$ ti+$ 6$ ga&$ 6is #ons$nt' t6at 6$ !$s$!&$" 6is !ig6t to t6$ #o+5$nsation. I* t6$ #!$"ito! #o++ ni#at$" t6$ #$ssion to 6i+ b t t6$ "$bto! "i" not #ons$nt t6$!$to' t6$ latt$! +a% s$t 5 t6$ #o+5$nsation o* "$bts 5!$&io s to t6$ #$ssion' b t not o* s bs$2 $nt on$s. I* t6$ assign+$nt is +a"$ .it6o t t6$ @no.l$"g$ o* t6$ "$bto!' 6$ +a% s$t 5 t6$ #o+5$nsation o* all #!$"its 5!io! to t6$ sa+$ an" also lat$! on$s ntil 6$ 6a" @no.l$"g$ o* t6$ assign+$nt. ,11><a-
Assignment after 4ompensation> Nhen co !ensation has alread' ta:en !lace $efore the assi%n ent" inas uch as it ta:es !lace i!so jure" there has alread' $een an eBtin%uish ent of one of the other of the o$li%ations& A su$se<uent assi%n ent of an eBtin%uished o$li%ation cannot !roduce an' effect a%ainst the de$tor& The onl' eBce!tion to this rule is #hen the de$tor consents to the assi%n ent of the credit; his consent constitutes a #ai*er of the co !ensation" unless at the ti e he %i*es consent" he infor s the assi%nor that he reser*ed his ri%ht to the co !ensation& Assignment before compensation& The assi%n ent a' $e ade $efore co !ensation has ta:en !lace" either $ecause at the ti e of assi%n ent one of the de$ts is not 'et due or li<uidated" or $ecause of so e other cause #hich i !edes the co !ensation& As far as the de$tor is concerned" the assi%n ent does not ta:e effect eBce!t fro the ti e he is notified thereof& If the notice of assi%n ent is si ultaneous to the transfer" he can set u! co !ensation of de$ts !rior to the assi%n ent& If notice #as %i*en to hi $efore the assi%n ent" this ta:es effect at the ti e of the assi%n ent; therefore the sa e rule a!!lies& If he consents to the assi%n ent" he #ai*es co !ensation e*en of de$ts alread' due" unless he a:es a reser*ation& .ut if the de$tor #as notified of the assi%n ent" $ut he did not consent" and the credit assi%ned to a third !erson atures after that #hich !ertains to the de$tor" the latter a' set u! co !ensation #hen the assi%nee atte !ts to enforce the assi%ned credit" !ro*ided that the credit of the de$tor $eca e due $efore the assi%n ent& .ut it f the assi%ned credit atures earlier than that of the de$tor" the assi%nee a' i ediatel' enforce it" and the de$tor cannot set u! co !ensation" $ecause the credit is not 'et due& If the de$tor did not ha*e :no#led%e of the assi%n ent" he a' set u! $' #a' of co !ensation all credits aturin% $efore he is notified thereof& Gence" if the assi%n ent is concealed" and the assi%nor still contracts ne# o$li%ation in fa*or of the de$tor" such o$li%ation aturin% $efore the latter learns of the assi%n ent #ill still $e allo#a$le $' #a' of co !ensation& The assi%nee in such case #ould ha*e a !ersonal action a%ainst the assi%nor&
10<6. Co+5$nsation ta@$s 5la#$ b% o5$!ation o* la.' $&$n t6o g6 t6$ "$bts +a% b$ 5a%abl$ at "i**$!$nt 5la#$s' b t t6$!$ s6all b$ an in"$+nit% *o! $=5$ns$s o* $=#6ang$ o! t!ans5o!tation to t6$ 5la#$ o* 5a%+$nt. ,11>>a This article a!!lies to le%al co !ensation and not to *oluntar' co !ensation& 10<). Co+5$nsation s6all not b$ 5!o5$! .6$n on$ o* t6$ "$bts a!is$s *!o+ a "$5osit + o! *!o+ t6$ obligations o* a "$5osita!% o! o* a bail$$ in #o++o"at +. N$it6$! #an #o+5$nsation b$ s$t 5 against a #!$"ito! .6o 6as a #lai+ *o! s 55o!t " $ b% g!at ito s titl$' .it6o t 5!$j "i#$ to t6$ 5!o&isions o* 5a!ag!a56 0 o* A!ti#l$ 1?1. ,10??aE& The !rohi$ition of co !ensation #hen one of the de$ts arises fro a de!ositu (a contract $' *irtue of #hich a !erson Cde!ositar'D recei*es !ersonal !ro!ert' $elon%in% to another Cde!ositorD" #ith the o$li%ation of safel' :ee!in% it and returnin% the sa e) or co odatu (a %ratuitous contract $' *irtue of #hich one of the !arties deli*ers to the other a non2consu a$le !ersonal !ro!ert' so that the latter a' use it for a certain ti e and return it) is $ased on justice& A de!osit of co odatu is %i*en on the $asis of confidence in the de!ositar' of the $orro#er& It is therefore" a atter of oralit'" the de!ositar' or $orro#er !erfor s his o$li%ation& Nith res!ect to future su!!ort" to allo# its eBtin%uish ent $' co !ensation #ould defeat its eBe !tion fro attach ent and eBecution& " and a' eB!ose the reci!ient to iser' and star*ation& Co on hu anit' and !u$lic !olic' for$id this conse<uence& Su!!ort under this !ro*ision should $e understood" not onl' referrin% to le%al su!!ort" to include all ri%hts #hich ha*e for their !ur!ose the su$sistence of the de$tor" such as !ensions and %ratuities& 10<<. N$it6$! s6all t6$!$ b$ #o+5$nsation i* on$ o* t6$ "$bts #onsists in #i&il liabilit% a!ising *!o+ a 5$nal o**$ns$. ,n If one of the de$ts consists in ci*il lia$ilit' arisin% fro a !enal offense" co !ensation #ould $e i !ro!er and inad*isa$le $ecause the satisfaction of such o$li%ation is i !erati*e& The !erson #ho has the ci*il lia$ilit' arisin% fro cri e is the onl' !art' #ho cannot set u! the co !ensation; $ut the offended !art' entitled to the inde nit' can set u! his clai in co !ensation of his de$t& A!t. 10<>. I* a 5$!son s6o l" 6a&$ against 6i+ s$&$!al "$bts .6i#6 a!$ s s#$5tibl$ o* #o+5$nsation' t6$ ! l$s on t6$ a55li#ation o* 5a%+$nts s6all a55l% to t6$ o!"$! o* t6$ #o+5$nsation. ,10?1 It can ha!!en that a de$tor a' ha*e se*eral de$ts to a creditor& And *ice *ersa& Under these circu stances" Articles 4858 to 4857 shall a!!l'& 10>?. 76$n all t6$ !$2 isit$s +$ntion$" in A!ti#l$ 10)> a!$ 5!$s$nt' #o+5$nsation ta@$s $**$#t b% o5$!ation o* la.' an" $=ting is6$s bot6 "$bts to t6$ #on# !!$nt a+o nt' $&$n t6o g6 t6$ #!$"ito!s an" "$bto!s a!$ not a.a!$ o* t6$
#o+5$nsation. Le%al co !ensation ta:es !lace fro the o ent that the re<uisites of the articles 48FH and 48F? co2eBist; its effects arise on the *er' da' #hich all its re<uisites concur& 3oluntar' of con*entional co !ensation ta:es effect u!on the a%ree ent of the !arties&
Effects of Co !ensation> .oth de$ts are eBtin%uished to the concurrent a ount; interests sto! accruin% on the eBtin%uished o$li%ation of the !art eBtin%uished; the !eriod of !rescri!tion sto!s #ith res!ect to the o$li%ation or !art eBtin%uished; all accessor' o$li%ations of the !rinci!al o$li%ation #hich has $een eBtin%uished are also eBtin%uished& Renunciation of Co !ensation& Co !ensation can $e renounces" either at the ti e an o$li%ation is contracted or after#ards& Co !ensation rests u!on a !otestati*e ri%ht" and a unilateral decision of the de$tor #ould $e sufficient renunciation& Co !ensation can $e renounced eB!ressl' of i !liedl'& No Co !ensation& E*en #hen all the re<uisites for co !ensation occur" the co !ensation a' not ta:e !lace in the follo#in% cases> (4) Nhen there is renunciation of the effects of co !ensation $' a !art'; and (8) #hen the la# !rohi$its co !ensation& (Unless other#ise indicated" co entaries are sourced fro the Ci*il Code $oo: I3 $' Tolentino)& (4) (8) (9) (7) SECTION 6 NOVATION HO7 OBLIGATIONS ARE DO:IAIE: 10>1. Obligations +a% b$ +o"i*i$" b%( ,1- C6anging t6$i! obj$#t o! 5!in#i5al #on"ition ,0- S bstit ting t6$ 5$!son o* t6$ "$bto! ,1- S b!ogating a t6i!" 5$!son in t6$ !ig6ts o* a #!$"ito! No*ation is the eBtin%uish ent of an o$li%ation $' a su$stitution or chan%e of the o$li%ation $' a su$se<uent one #hich eBtin%uishes or odifies the first either $'> 4& chan%in% the o$ject or !rinci!al conditions 8& $' su$stitutin% the !erson of the de$tor 9& su$ro%atin% a third !erson in the ri%hts of the creditor No*ation is a juridical act of dual function& At the ti e it eBtin%uishes an o$li%ation it creates a ne# one in lieu of the old Classification of No*ation
-acultati*e co !ensation ta:es !lace #hen the creditor declares his o!tion to set it u!& Judicial co !ensation ta:es !lace u!on final jud% ent&
as to nature 4& Su$jecti*e or !ersonal either !assi*e or acti*e& @assi*e if there is su$stitution of the de$tor& Acti*e if a third !erson is su$ro%ated in the ri%hts of the creditor& 8& ,$jecti*e or real su$stitution of the o$ject #ith another or chan%in% the !rinci!al conditions 9& =iBed Co $ination of su$jecti*e and o$jecti*e as to for
EB!ress !arties declare that the old o$li%ation is su$stituted $' the ne# I !lied an inco !ati$ilit' eBists $et#een the old and the ne# o$li%ation that cannot stand to%ether as to effect 4& @artial #hen there is onl' a odification or chan%e in so e !rinci!al conditions of the o$li%ation 8& Total #hen the old o$li%ation is co !letel' eBtin%uished Re<uisites of No*ation> 4& A !re*ious &ali" o$li%ation 8& A%ree ent of all 5a!ti$s 9& EBtin%uish ent of the old contract a' $e eB!ress of i !lied 7& Vali"it% of the ne# one
TITLE II.
CONTRACTS CHAPTER 1 GENERAL PROVISIONS GENERAL PROVISIONS A!t. 11?5. A #ont!a#t is a +$$ting o* t6$ +in"s b$t.$$n t.o 5$!sons .6$!$b% on$ bin"s 6i+s$l*' .it6 !$s5$#t to t6$ ot6$! to gi&$ so+$t6ing o! to !$n"$! so+$ s$!&i#$. K relate to Art& 445P of CC C,NTRACT 2 a juridical con*ention anifested in le%al for " $' *irtue of #hich one or ore !ersons $ind the sel*es in fa*or of another or others" or reci!rocall'" to the fulfill ent of a !restation to %i*e" to do or not to do& K ,ther Ter s> @erfect !ro ise distin%uished fro a contract" in that the latter esta$lishes and deter ines the o$li%ations arisin% therefro ; #hile the for er tends onl' to assure and !a*e the #a' for the cele$ration of a contract in the future& I !erfect @ro ise ere unacce!ted offer
@act a s!ecial !art of the contract" so eti es incidental and se!ara$le for the !rinci!al a%ree ent Sti!ulation si ilar to a !act; #hen the contract is an instru ent" it refers to the essential and dis!ositi*e !art" as distin%uished fro the eB!osition of the facts and antecedents u!on #hich it is $ased& K Nu $er of @arties> The Code states 0t#o !ersons1; #hat is can $e one or ore !ersons& eant actuall' is 0t#o !arties1& -or a contract to eBist" there ust $e t#o !arties& A !art'
K Gus$and O Nife> Gus$ands and #i*es cannot sell to each other as a !rotection of the conju%al !artnershi!& The' can ho#e*er enter into a contract of a%enc'& K Auto2contracts> It eans one !erson contracts hi self& As a %eneral rule" it is acce!ted in our la#& The eBistence of a contract does not de!end on the nu $er of !ersons $ut on the nu $er of !arties& There is no %eneral !rohi$ition a%ainst auto2contracts; hence" it should $e held *alid& K Contracts of Adhesion> Contracts !re!ared $' another" containin% !ro*isions that he desires" and as:s the other !art' to a%ree to the if he #ants to enter into a contract& 2 EBa !le> trans!ortation tic:ets& It is *alid contract accordin% to Tolentino $ecause the other !art' can reject it entirel'& K Characteristics of Contracts> 9 ele ents> 4& Essential ele ents #ithout #hich there is no contract; the' are> a) consent $) su$ject atter; and c) cause 8& Natural ele ents eBist as !art of the contract e*en if the !arties do not !ro*ide for the " $ecause the la#" as su!!letor' to the contract" creates the 9& Accidental ele ents those #hich are a%reed $' the !arties and #hich cannot eBist #ithout sti!ulated $ Stages o% a Contract: 9 sta%es> 4& @re!aration" /eneration or @olicitacion !eriod of ne%otiation and $ar%ainin%" endin% at the o ent of a%ree ent of the !arties 8& @erfection or .irth of the contract the o ent #hen the !arties co e to a%ree on the ter s of the contract 9& Consu ation or Death the fulfill ent or !erfor ance of the ter s a%reed u!on in an' contract
11?6. T6$ #ont!a#ting 5a!ti$s +a% $stablis6 s #6 sti5 lations' #la s$s' t$!+s O #on"itions as t6$% +a% "$$+ #on&$ni$nt' 5!o&i"$" t6$% a!$ not #ont!a!% to la.' +o!als' goo" # sto+s' 5 bli# o!"$!' o! 5 bli# 5oli#%. K This article e $odies the Principle of Autonomy of 4ontracts K -reedo to contract> An' !erson has the li$ert' to enter into a contract so lon% as the' are not contrar' to la#" orals" %ood custo s" !u$lic order or !u$lic !olic'& The le%islature" under the constitution" is !rohi$ited fro enactin% la#s to !rescri$e the ter s of a le%al contract& K 3alidit' of Sti!ulations> An' and all sti!ulations not contrar' to la#" orals" %ood custo s" !u$lic order or !u$lic !olic' is *alid K Contrar' to la#> -reedo of contract is restricted $' la# for the %ood of the !u$lic& It is funda ental !ostulate that ho#e*er $road the freedo of the contractin% !arties a' $e" it does not %o so far as to countenance disres!ect for or failure to o$ser*e a le%al !rescri!tion& The Statute ta:es !recedence& 2 EBa !les> A !ro issor' note #hich re!resents a %a $lin% de$t is unenforcea$le in the hands of the assi%nee& Sti!ulations to !a' usurious interests are *oid& A contract $et#een to !u$lic ser*ice co !anies to di*ide the territor' is *oid $ecause it i !airs the control of the @u$lic Ser*ice Co ission& A%ree ent to declare *alid a la# or ordinance is *oid& K Contrar' to =orals> =orals ean those %enerall' acce!ted !rinci!les of oralit' #hich ha*e recei*ed so e :ind of social and !ractical confir ation& 2 EBa !les> a !ro ise to arr' or nor to arr'" to secure le%al se!aration" or to ado!t a child a !ro ise to chan%e citi;enshi!" !rofession" reli%ion or do icile a !ro ise not to hold !u$lic office or #hich li its the !erfor ance of official duties a !ro ise to enter a !articular !olitical !art' or se!arate fro it contracts #hich li it in an eBcessi*e anner the !ersonal or econo ic freedo of a !erson to a:e an act de!endent on one' or so e !ecuniar' *alue" #hen it is of such a nature that it should not de!end thereon; !a' ent to :ill another& K Contrar' to @u$lic ,rder> @u$lic order eans the !u$lic #eal or !u$lic !olic'& It re!resents the !u$lic" social" and le%al interest in !ri*ate la# that #hich is !er anent and essential in institutions" #hich" e*en if fa*orin% so e indi*idual to #ho the ri%ht !ertains" cannot $e left to his o#n #ill& A contract is said to $e a%ainst !u$lic order if the court finds that the contract as to the consideration or the thin% to $e done" contra*enes so e esta$lished interest of societ'" or is inconsistent #ith sound !olic' and %ood orals" or tends clearl' to under ine the securit' of indi*idual ri%hts& 2 EBa !les> Co on carrier cannot sti!ulate for eBe !tion for lia$ilit' unless such eBe !tion is justifia$le and reasona$le and the contract is freel' and fairl' ade& @a' ent to inter ediaries in securin% i !ort licenses or <uota allocations& Contract of scholarshi! sti!ulatin% that the student ust re ain in the sa e school and that he #ai*es his ri%ht to transfer to another school #ithout refundin% the school A!t. 11?). Inno+inat$ #ont!a#ts s6all b$ !$g lat$" b% t6$ sti5 lations o* t6$ 5a!ti$s' b% t6$ 5!o&isions o* Titl$s I O II o* t6is Boo@' b% t6$ ! l$s go&$!ning t6$ +ost analogo s no+inat$ #ont!a#ts' an" b% t6$ # sto+s o* t6$ 5la#$. INN,=INATE C,NTRACTS those #hich lac: indi*idualit' and are not re%ulated $' s!ecial !ro*isions of la#& K Inno inate Contracts> do ut des (I %i*e that 'ou a' %i*e) An a%ree do ut facias (I %i*e that 'ou a' do) An a%ree facio ut facias (I do that 'ou a' do) An a%ree ser*ice for A& facio ut des (I do that 'ou a' %i*e) An a%ree ent in #hich A #ill %i*e one thin% to ." so that . #ill %i*e another thin% to A& ent under #hich A #ill %i*e so ethin% to ." so that . a' do so ethin% for A& ent under #hich A does so ethin% for ." so that . a' render so e other ent under #hich A does so ethin% for ." so that . a' %i*e so ethin% to A&
K Analo%ous contracts> Inno inate contracts" in the a$sence of sti!ulations and s!ecific !ro*isions of la# on the a!!lica$le to the ost analo%ous contracts&
atter" are to $e %o*erned $' rules
A!t. 11?<. T6$ #ont!a#t + st bin" bot6 #ont!a#ting 5a!ti$s/ its &ali"it% o! #o+5lian#$ #annot b$ l$*t to t6$ .ill o* on$ o* t6$+. K Principle of +utuality of 4ontract> The $indin% effect of contract on $oth !arties is $ased on the !rinci!les> 2 that o$li%ations arisin% fro contracts ha*e the force of la# $et#een the contractin% !arties 2 that there ust $e utualit' $et#een the !arties $ased on their essential e<ualit'" to #hich is re!u%nant to ha*e one !art' $ound $' the contract lea*in% the other free therefro & A contract containin% a condition #hich a:es its fulfill ent de!endent eBclusi*el' u!on the uncontrolled #ill of one of the contractin% !arties is *oid& K Unilateral Cancellation> Just as no$od' can $e forced to enter into a contract" in the sa e anner once a contract is entered into" no !art' can renounce it unilaterall' or #ithout the consent of the other& No$od' is allo#ed to enter into a contract" and #hile the contract is in effect" lea*es" denounces or disa*o#s the contract to the !rejudice of the other& K Nhen Sti!ulated> Go#e*er" #hen the contract so sti!ulates that one a' ter inate the contract u!on a reasona$le !eriod is *alid& Judicial action for the rescission of the contract is no lon%er necessar' #hen the contract so sti!ulates that it a' $e re*o:ed and cancelled for the *iolation of an' of its ter s and conditions& This ri%ht of rescission a' $e #ai*ed& A!t. 11?>. T6$ "$t$!+ination o* t6$ 5$!*o!+an#$ +a% b$ l$*t to a t6i!" 5$!son' .6os$ "$#ision s6all not b$ bin"ing ntil it 6as b$$n +a"$ @no.n to bot6 #ont!a#ting 5a!ti$s. K EBce!tion to Art& 49?H (=utualit' of Contract) A third !erson a' $e called u!on to decide #hether or not !erfor ance has $een done for the fulfill ent of the contract& Such decision $eco es $indin% #hen the contractin% !arties ha*e $een infor ed of it& A!t. 111?. T6$ "$t$!+ination s6all b$ obligato!% i* it is $&i"$ntl% in$2 itabl$. In s #6 #as$' t6$ #o !ts s6all "$#i"$ .6at is $2 itabl$ n"$! t6$ #i!# +stan#$s. K EBce!tion to Art& 49?H (=utualit' of Contract) Go#e*er" #hen the decision cannot $e arri*ed due to ine<uit'" the courts shall decide #hat is e<uita$le for the !arties in*ol*ed& A!t 1111. Cont!a#ts ta@$ $**$#t onl% b$t.$$n t6$ 5a!ti$s' t6$i! assigns an" 6$i!s' $=#$5t in #as$ .6$!$ t6$ !ig6ts an" obligations a!ising *!o+ t6$ #ont!a#ts a!$ not t!ans+issibl$ b% t6$i! nat !$' o! b% sti5 lation o! b% 5!o&ision o* la.. T6$ 6$i! is not liabl$ b$%on" t6$ &al $ o* t6$ 5!o5$!t% 6$ !$#$i&$" *!o+ t6$ "$#$"$nt. I* a #ont!a#t s6o l" #ontain so+$ sti5 lation in *a&o! o* a t6i!" 5$!son' 6$ +a% "$+an" its * l*ill+$nt 5!o&i"$" 6$ #o++ ni#at$" 6is a##$5tan#$ to t6$ obligo! b$*o!$ its !$&o#ation. A +$!$ in#i"$ntal b$n$*it o! int$!$st o* a 5$!son is not s **i#i$nt. T6$ #ont!a#ting 5a!ti$s + st 6a&$ #l$a!l% an" "$lib$!at$l% #on*$!!$" a *a&o! 5on a t6i!" 5$!son. 4st !ara%ra!h of this article e $odies the Principle of 2elativity of 4ontract -our eBce!tional instances #here a contract !ar&8 4947 a' !roduce effect on third !ersons (sti!ulation !our autrui)> Art& 4944"
K @arties $ound $' contract> /enerall'" onl' the !arties that a%reed on the contracts are $ound $' the contract& Trans ission is !ossi$le to the heirs or assi%nees if so sti!ulated and in certain contracts& K Third !ersons not $ound> It is a %eneral rule that third !arties are not $ound $' the acts of another& A contract cannot $e $indin% u!on and cannot $e enforced a%ainst one #ho is not a !art' to it" e*en if he has :no#led%e of such
contract and has acted #ith :no#led%e thereof& K Enforce ent of contract> ,nl' a !art' to the contract can aintain an action to enforce the o$li%ations arisin% under said contract&
K Contracts $ind heirs> Ri%hts and o$li%ations under a contract are trans issi$le to heirs& Geirs are not third !ersons $ecause there is !ri*it' of interest $et#een the and their !redecessor& A!t 1110. In #ont!a#ts #!$ating !$al !ig6ts' t6i!" 5$!sons .6o #o+$ into 5oss$ssion o* t6$ obj$#t o* t6$ #ont!a#t a!$ bo n" t6$!$b%' s bj$#t to t6$ 5!o&isions o* t6$ Do!tgag$ La. an" t6$ Lan" R$gist!ation la.s. K Real Ri%hts in @ro!ert' A real ri%ht directl' affects !ro!ert' su$ject to it; hence" #hoe*er is in !ossession of such !ro!ert' A!t 1111. C!$"ito!s a!$ 5!ot$#t$" in #as$s o* #ont!a#ts int$n"$" to "$*!a " t6$+. K Contracts in -raud of Creditors Nhen a de$tor enters into a contract in fraud of his creditors" such as #hen he alienated !ro!ert' %ratuitousl' #ithout lea*in% enou%h for his creditors (article 49HF)" the creditor a' as: for its rescission& K see Arts& 44FF and 49H? A!t 1114. An% t6i!" 5$!son .6o in" #$s anot6$! to &iolat$ 6is #ont!a#t s6all b$ liabl$ *o! "a+ag$s to t6$ ot6$! #ont!a#ting 5a!t%. K Interference of Third @ersons> If a third !erson induced a !art' to *iolate his side of the contract" the other !art' a' sue the third !erson for da a%es& Re<uisites> 4& the eBistence of a *alid contract 8& :no#led%e $' the third !erson of the eBistence of a contract 9& interference $' the third !erson in the contractual relation #ithout le%al justification Juris!rudential doctrine> K=anila Railroad Co& *s& Co !a[ia Transatlantica The !rocess ust $e acco !lished $' distin%uishin% clearl' $et#een the ri%ht of action arisin% fro the i !ro!er interference #ith the contract $' a stran%er thereto" considered as an inde!endent act %enerati*e of ci*il lia$ilit'" and the ri%ht of action eB contractu a%ainst a !art' to the contract resultin% for the $reach thereof& A!t 1115. Cont!a#ts a!$ 5$!*$#t$" b% +$!$ #ons$nt' an" *!o+ t6at +o+$nt t6$ 5a!ti$s a!$ bo n" not onl% to t6$ * l*ill+$nt o* .6at 6as b$$n $=5!$ssl% sti5 lat$" b t also to all t6$ #ons$2 $n#$s .6i#6' a##o!"ing to t6$i! nat !$' +a% b$ in @$$5ing .it6 goo" *ait6' sag$ an" la.. K e $odies the Principle of 4onsensuality> A!t 1116. R$al #ont!a#ts' s #6 as "$5osit' 5l$"g$ o! #o++o"at +' a!$ not 5$!*$#t$" o* t6$ obligation. K EBce!tion to Art& 4945 or @rinci!le of Consensualit' K @erfection of real contracts> Real contract is not !erfect $' ere consent& The deli*er' of the thin% is re<uired& Deli*er' is de anded" neither ar$itrar' nor for alistic& A!t 111). No on$ +a% #ont!a#t in t6$ na+$ o* anot6$! .it6o t b$ing a t6o!iE$" b% t6$ latt$!' o! nl$ss 6$ 6as b% la. a !ig6t to !$5!$s$nt 6i+. A #ont!a#t $nt$!$" into in t6$ na+$ o* anot6$! b% on$ .6o 6as no a t6o!it% o! l$gal !$5!$s$ntation' o! .6o 6as ntil t6$ "$li&$!% o* t6$ obj$#t ust res!ect that real ri%ht&
a#t$" b$%on" 6is 5o.$!s' s6all b$ n$n*o!#$abl$' nl$ss it is !ati*i$"' $=5!$ssl% o! i+5li$"l%' b% t6$ 5$!son on .6os$ b$6al* it 6as b$$n $=$# t$"' b$*o!$ it is !$&o@$" b% t6$ ot6$! #ont!a#ting 5a!t%. K Ratification necessar'> A contract entered into in $ehalf of another #ho has not authori;ed it is not *alid or $indin% on hi transaction& Nhen ratified" he is esto!!ed to <uestion the le%alit' of the transaction& +inds of ratification> 4& eB!ress 8& i !lied CHAPTER 0 ESSENTIAL RE89ISITES OA CONTRACTS GENERAL PROVISIONS A!t. 111<. T6$!$ is no #ont!a#t nl$ss t6$ *ollo.ing !$2 isit$s #on# !( ,1- Cons$nt o* t6$ #ont!a#ting 5a!ti$s/ ,0- Obj$#t #$!tain .6i#6 is t6$ s bj$#t +att$! o* t6$ #ont!a#t/ ,1- Ca s$ o* t6$ obligation .6i#6 is $stablis6$". ,1061CCOCD SECTION 1 CONSENT A!t. 111>. Cons$nt is +ani*$st$" b% t6$ +$$ting o* t6$ o**$! an" t6$ a##$5tan#$ 5on t6$ t6ing an" t6$ #a s$ .6i#6 a!$ to #onstit t$ t6$ #ont!a#t. T6$ o**$! + st b$ #$!tain an" t6$ a##$5tan#$ absol t$. A 2 ali*i$" a##$5tan#$ #onstit t$s a #o nt$!3o**$!. A##$5tan#$ +a"$ b% l$tt$! o! t$l$g!a+ "o$s not bin" t6$ o**$!$! $=#$5t *!o+ t6$ ti+$ it #a+$ to 6is @no.l$"g$. T6$ #ont!a#t' in s #6 a #as$' is 5!$s +$" to 6a&$ b$$n $nt$!$" into in t6$ 5la#$ .6$!$ t6$ o**$! .as +a"$. ,1060a C,NSENT (as a!!lied to contracts) > concurrence of the #ills of the contractin% !arties #ith res!ect to the o$ject and the cause #hich shall constitute the contract Re<uisites> 4& consent ust $e anifested $' the concurrence of the offer and the acce!tance (Arts& 494P24986); 8& contractin% !arties ust !ossess the necessar' le%al ca!acit' (Arts& 498F2498P); and 9& consent ust $e intelli%ent" free" s!ontaneous and real (Arts& 499?24976) a' either $e eB!ress or i !lied& There is also a !resu !ti*e consent" #hich is the $asis of <uasi2contracts& unless he ratifies the
K-or s> Consent
K=anifestation> Consent is anifested $' the concurrence of offer and acce!tance #ith res!ect to the o$ject and the cause of the contract& ,nce there is such a anifestation" the !eriod or sta%e of ne%otiation is ter inated& If consensual" the contract is !erfected& KA unilateral !ro!osition ust $e definite (distin%uished fro ere co unications)" co !lete (statin% the essential and non2 essential conditions desired $' the offeror)" and intentional (serious) #hen acce!ted $' another !art' for such !ro!osition to for a *alid contract& Go#e*er" a unilateral !ro ise is not reco%ni;ed $' our Code as ha*in% o$li%ator' force& To $e so" there ust $e an acce!tance that shall con*ert it into a contract& K=ental reser*ationZ#hen a !art' a:es a declaration $ut secretl' does not desire the effects of such declaration& The reser*ation of the offeror" un:no#n to the other" cannot affect the *alidit' of the offer& ental
A!t. 110?. An a##$5tan#$ +a% b$ $=5!$ss o! i+5li$". ,nI !lied acce!tance a' arise fro acts or facts #hich re*eal the intent to acce!t" such as the consu !tion of the thin%s sent to the offeree" or the fact of i ediatel' carr'in% out of the contract offered&
A!t. 1101. T6$ 5$!son +a@ing t6$ o**$! +a% *i= t6$ ti+$' 5la#$' an" +ann$! o* a##$5tan#$' all o* .6i#6 + st b$ #o+5li$" .it6. ,nThe offer #ith a !eriod la!ses u!on the ter ination of the !eriod& Thus the acce!tance" to $eco e effecti*e" ust $e :no#n to the offeror $efore the !eriod la!ses& A!t. 1100. An o**$! +a"$ t6!o g6 an ag$nt is a##$5t$" *!o+ t6$ ti+$ a##$5tan#$ is #o++ ni#at$" to 6i+. ,nAn inter ediar' #ho has no !o#er to $ind either the offeror or the offeree is not an a%ent; his situation is si ilar to that of a letter carrier& A!t. 1101. An o**$! b$#o+$s in$**$#ti&$ b$*o!$ a##$5tan#$ is #on&$%$". ,n5on t6$ "$at6' #i&il int$!"i#tion' insanit%' o! insol&$n#% o* $it6$! 5a!t%
A!t. 1104. 76$n t6$ o**$!$! 6as allo.$" t6$ o**$!$$ a #$!tain 5$!io" to a##$5t' t6$ o**$! +a% b$ .it6"!a.n at an% ti+$ b$*o!$ a##$5tan#$ b% #o++ ni#ating s #6 .it6"!a.al' $=#$5t .6$n t6$ o5tion is *o n"$" 5on a #onsi"$!ation' as so+$t6ing 5ai" o! 5!o+is$". ,nIt is not the o ent of sendin% $ut the ti e of recei!t of the re*ocation or acce!tance #hich is controllin%& The dela' in trans ission is at the ris: of the sender" $ecause he is the one #ho selects the ti e and the anner of a:in% the trans ission& Contract of ,!tion> This is a !re!arator' contract in #hich one !art' %rants to the other" for a fiBed !eriod and under s!ecified conditions" the !o#er to decide #hether or not to enter into a !rinci!al contract& It ust $e su!!orted $' an inde!endent consideration" and the %rant ust $e eBclusi*e& A!t. 1105. 9nl$ss it a55$a!s ot6$!.is$' b sin$ss a"&$!tis$+$nts o* t6ings *o! sal$ a!$ not "$*init$ o**$!s' b t +$!$ in&itations to +a@$ an o**$!. ,nA!t. 1106. A"&$!tis$+$nts *o! bi""$!s a!$ si+5l% in&itations to +a@$ 5!o5osals' an" t6$ a"&$!tis$! is not bo n" to a##$5t t6$ 6ig6$st o! lo.$st bi""$!' nl$ss t6$ #ont!a!% a55$a!s. ,nA!t. 110). T6$ *ollo.ing #annot gi&$ #ons$nt to a #ont!a#t( ,1- 9n$+an#i5at$" +ino!s/ ,0- Insan$ o! "$+$nt$" 5$!sons' an" "$a*3+ t$s .6o "o not @no. 6o. to .!it$. ,1061aK see Art& 9H K Une anci!ated inors cannot enter into *alid contracts" and contracts entered into $' the are not $indin% u!on the " unless u!on reachin% ajorit' the' ratif' the sa e& K Insane !ersons> It is not necessar' that there $e a !re*ious of declaration of ental inca!acit' in order that a contract entered into $' a entall' defecti*e !erson a' $e annulled; it is enou%h that the insanit' eBisted at the ti e the contract #as ade& K .ein% deaf2 ute is not $' itself alone a dis<ualification for %i*in% consent& The la# refers to the deaf2 ute #ho does not :no# ho# to #rite& A!t. 110<. Cont!a#ts $nt$!$" into " !ing a l #i" int$!&al a!$ &ali". Cont!a#ts ag!$$" to in a stat$ o* "! n@$nn$ss o! " !ing a 6%5noti# s5$ll a!$ &oi"abl$. ,nKThe use of intoBicants does not necessaril' ean a co !lete loss of understandin%& The sa e a' $e said of dru%s& .ut a !erson" under the influence of su!era$undance of alcoholic drin:s or eBcessi*e use of dru%s" a' ha*e no ca!acit' to contract& KIn h'!notis and so na $ulis " the utter #ant of understandin% is a co on ele ent& A!t. 110>. T6$ in#a5a#it% "$#la!$" in A!ti#l$ 110) is s bj$#t to t6$ +o"i*i#ations "$t$!+in$" b% la.' an" is n"$!stoo" to b$ .it6o t 5!$j "i#$ to s5$#ial "is2 ali*i#ations $stablis6$" in t6$ la.s. ,1064K The Rules of Court !ro*ide a list of inco !etents #ho need %uardianshi!> !ersons sufferin% fro the !enalt' of ci*il interdiction" hos!itali;ed le!ers" !rodi%als" deaf and du $ #ho are una$le to #rite and read" those of unsound ind (e*en thou%h the' ha*e lucid inter*als)" and !ersons not $ein% of unsound ind $ut $' reason of a%e" disease" #ea: ind" and other si ilar causes cannot" #ithout outside aid" ta:e care of the sel*es and ana%e their !ro!ert'Z$eco in% an eas' !re' for deceit and eB!loitation& K The inca!acit' to %i*e consent (Arts& 498F O 498H) to contracts renders the contract erel' *oida$le" #hile s!ecial
dis<ualification (Art& 498P)
a:es it *oid& n" $ in*l $n#$' o! *!a " is
A!t. 111?. A #ont!a#t .6$!$ #ons$nt is gi&$n t6!o g6 +ista@$' &iol$n#$' inti+i"ation' &oi"abl$. ,1065a-
A!t. 1111. In o!"$! t6at +ista@$ +a% in&ali"at$ #ons$nt' it s6o l" !$*$! to t6$ s bstan#$ o* t6$ t6ing .6i#6 is t6$ obj$#t o* t6$ #ont!a#t' o! to t6os$ #on"itions .6i#6 6a&$ 5!in#i5all% +o&$" on$ o! bot6 5a!ti$s to $nt$! into t6$ #ont!a#t. Dista@$ as to t6$ i"$ntit% o! 2 ali*i#ations o* on$ o* t6$ 5a!ti$s .ill &itiat$ #ons$nt onl% .6$n s #6 i"$ntit% o! 2 ali*i#ations 6a&$ b$$n t6$ 5!in#i5al #a s$ o* t6$ #ont!a#t. A si+5l$ +ista@$ o* a##o nt s6all gi&$ !is$ to its #o!!$#tion. ,1066aK I%norance and error are 8 different states of ind& I%norance eans the co !lete a$sence of an' notion a$out a !articular atter" #hile error or ista:e eans a #ron% or false notion a$out such atter& K Annul ent of contract on the %round of error is li ited to cases in #hich it a' reasona$l' $e said that #ithout such error the consent #ould not ha*e $een %i*en& K An error as to the !erson #ill in*alidate consent #hen the consideration of the !erson has $een the !rinci!al cause of the sa e& K =ista:e as to <ualifications" e*en #hen there is no error as to !erson" is a cause *itiatin% consent" if such <ualifications ha*e $een the !rinci!al cause of the contract& K A ista:e as to the oti*e of a !art' does not affect the contract; to %i*e it such effect #ould destro' the sta$ilit' of contractual relations& Nhen the oti*e has" ho#e*er" $een eB!ressed and #as a condition of the consent %i*en" annul ent is !ro!erZ$ecause an accidental ele ent is" $' the #ill of the !arties" con*erted into a su$stantial ele ent& A!t. 1110. 76$n on$ o* t6$ 5a!ti$s is nabl$ to !$a"' o! i* t6$ #ont!a#t is in a lang ag$ not n"$!stoo" b% 6i+' an" +ista@$ o! *!a " is all$g$"' t6$ 5$!son $n*o!#ing t6$ #ont!a#t + st s6o. t6at t6$ t$!+s t6$!$o* 6a&$ b$$n * ll% $=5lain$" to t6$ *o!+$!. ,nA!t. 1111. T6$!$ is no +ista@$ i* t6$ 5a!t% all$ging it @n$. t6$ "o bt' #onting$n#% o! !is@ a**$#ting t6$ obj$#t o* t6$ #ont!a#t. ,nTo in*alidate consent" the error ust $e eBcusa$le& It ust $e a real error and not one that could ha*e $een a*oided $' the !art' alle%in% it& The error ust arise fro facts un:no#n to hi & A ista:e that is caused $' anifest ne%li%ence cannot in*alidate a juridical act& A!t. 1114. D t al $!!o! as to t6$ l$gal $**$#t o* an ag!$$+$nt .6$n t6$ !$al 5 !5os$ o* t6$ 5a!ti$s is *! st!at$"' +a% &itiat$ #ons$nt. ,nKThree re<uisites under this article> 4) the error ust $e as to the le%al effect of an a%ree ent; 8) it ust $e utual; and 9) the real !ur!ose of the !arties is frustrated& K The le%al effects include the ri%hts and o$li%ations of the !arties" not as sti!ulated in the contract" $ut as !ro*ided $' the la#& The ista:e as to these effects" therefore" eans an error as to #hat the la# !ro*ides should s!rin% as conse<uences fro the contract in <uestion& K An error as to the nature or character is al#a's essential" and a:es the act juridicall' ineBistent& A!t. 1115. T6$!$ is &iol$n#$ .6$n in o!"$! to .!$st #ons$nt' s$!io s o! i!!$sistibl$ *o!#$ is $+5lo%$". T6$!$ is inti+i"ation .6$n on$ o* t6$ #ont!a#ting 5a!ti$s is #o+5$ll$" b% a !$asonabl$ an" .$ll3g!o n"$" *$a! o* an i++in$nt an" g!a&$ $&il 5on 6is 5$!son o! 5!o5$!t%' o! 5on t6$ 5$!son o! 5!o5$!t% o* 6is s5o s$' "$s#$n"ants o! as#$n"ants' to gi&$ 6is #ons$nt. To "$t$!+in$ t6$ "$g!$$ o* inti+i"ation' t6$ ag$' s$= an" #on"ition o* t6$ 5$!son s6all b$ bo!n$ in +in". A t6!$at to $n*o!#$ on$Hs #lai+ t6!o g6 #o+5$t$nt a t6o!it%' i* t6$ #lai+ is j st o! l$gal' "o$s not &itiat$ #ons$nt. ,106)aKDuress is that de%ree of constraint or dan%er either actuall' inflicted (*iolent) or threatened and i !endin% (inti idation)" sufficient to o*erco e the ind and #ill of a !erson of ordinar' fir ness& K 3iolence refers to !h'sical force or co !ulsion" #hile inti idation refers to oral force or co !ulsion& KRe<uisites of *iolence> 4) That the !h'sical force e !lo'ed ust $e irresisti$le or of such de%ree that the *icti circu stances" $ut to su$ it; and 8) that such force is the deter inin% cause in %i*in% the consent to the contract& K Re<uisites of inti idation> has no other course" under the
4) that the inti idation ust $e the deter inin% cause of the contract" or ust ha*e caused the consent to $e %i*en; 8) that the threatened act $e unjust or unla#ful; 9) that the threat $e real and serious" there $ein% an e*ident dis!ro!ortion $et#een the e*il and the resistance #hich all en can offer; and 7) that it !roduces a reasona$le and #ell2%rounded fear fro the fact that the !erson fro #ho it co es has the necessar' eans or a$ilit' to inflict the threatened injur'& A!t. 1116. Viol$n#$ o! inti+i"ation s6all ann l t6$ obligation' alt6o g6 it +a% 6a&$ b$$n $+5lo%$" b% a t6i!" 5$!son .6o "i" not ta@$ 5a!t in t6$ #ont!a#t. ,106<A!t. 111). T6$!$ is n" $ in*l $n#$ .6$n a 5$!son ta@$s i+5!o5$! a"&antag$ o* 6is 5o.$! o&$! t6$ .ill o* anot6$!' "$5!i&ing t6$ latt$! o* a !$asonabl$ *!$$"o+ o* #6oi#$. T6$ *ollo.ing #i!# +stan#$s s6all b$ #onsi"$!$"( t6$ #on*i"$ntial' *a+il%' s5i!it al an" ot6$! !$lations b$t.$$n t6$ 5a!ti$s' o! t6$ *a#t t6at t6$ 5$!son all$g$" to 6a&$ b$$n n" l% in*l $n#$" .as s **$!ing *!o+ +$ntal .$a@n$ss' o! .as igno!ant o! in *inan#ial "ist!$ss. ,nK In inti idation" there ust $e an unla#ful or unjust act #hich is threatened and #hich causes consent to $e %i*en" #hile in undue influence there need not $e an unjust or unla#ful act& In $oth cases" there is oral coercion& K=oral coercion a' $e effected throu%h threats" eB!ressed or i !lied" or throu%h harassin% tactics&
KUndue influence is an' eans e !lo'ed u!on a !art' #hich" under the circu stances" he could not #ell resist" and #hich controlled his *olition and induced hi to %i*e his consent to the contractZ#hich other#ise he #ould not ha*e entered into& A!t. 111<. T6$!$ is *!a " .6$n' t6!o g6 insi"io s .o!"s o! +a#6inations o* on$ o* t6$ #ont!a#ting 5a!ti$s' t6$ ot6$! is in" #$" to $nt$! into a #ont!a#t .6i#6' .it6o t t6$+' 6$ .o l" not 6a&$ ag!$$" to. ,106>K-raud is e*er' :ind of dece!tion" #hether in the for of insidious achinations" ani!ulations" conceal ents" or isre!resentations" for the !ur!ose of leadin% another !art' into error and thus eBecutin% a !articular act& K -raud !roduces <ualified error; it induces in the other !art' an ineBact notion of facts& The #ill of another is $' eans of false a!!earance of realit'& aliciousl' isled
K0Insidious #ords or achinations1 include false !ro ises; eBa%%eration of ho!es or $enefits; a$use of confidence; and fictitious na es" <ualifications" or authorit'& K +inds of fraud> 4) dolo causante (Art& 499H) Z #hich deter ines or is the essential cause of the consent; fraud in the !erfection of contract 8) dolo incidenteZ (Arts& 4977 O 44F?) #hich does not ha*e such a decisi*e influence and $' itself cannot cause the %i*in% of consent" $ut refers onl' to so e !articular or accident of the o$li%ation& KDolo causante can $e a %round for annul ent; dolo incident cannot $e a %round for annul ent& KThe result of fraud is error on the !art of the *icti & KRe<uisites of fraud> 4) it ust ha*e $een e !lo'ed $' one contractin% !art' u!on the other; 8) it ust ha*e induced the other !art' to enter into the contract; 9) it ust ha*e $een serious; 7) and it ust ha*e resulted in da a%e or injur' to the !art' see:in% annul ent& A!t. 111>. Aail !$ to "is#los$ *a#ts' .6$n t6$!$ is a " t% to !$&$al t6$+' as .6$n t6$ 5a!ti$s a!$ bo n" b% #on*i"$ntial !$lations' #onstit t$s *!a ". ,nKSilence or conceal ent" $' itself" does not constitute fraud" unless there is a s!ecial dut' to disclose certain facts" or unless accordin% to %ood faith and the usa%es of co erce" the co unication should $e ade& KThus" the innocent non2disclosure of a fact does not affect the for ation of the contract or o!erate to dischar%e the !arties fro their a%ree ent& A!t. 114?. T6$ s al $=agg$!ations in t!a"$' .6$n t6$ ot6$! 5a!t% 6a" an o55o!t nit% to @no. t6$ *a#ts' a!$ not in t6$+s$l&$s *!a " l$nt. ,n-
KTolerated fraud includes ini i;in% the defects of the thin%" eBa%%eration of its %ood <ualities" and %i*in% it <ualities that it does not ha*e& This is la#ful isre!resentation :no#n as dolus $onus& This is also called la#ful astuteness& KThese isre!resentations are usuall' encountered in fairs" ar:ets" and al ost all co ercial transactions& The' do not %i*e rise to an action for da a%es" either $ecause of their insi%nificance or $ecause the stu!idit' of the *icti is the real cause of his loss& KThe thin:in% is that #here the eans of :no#led%e are at hand and e<uall' a*aila$le to $oth !arties" one #ill not $e heard to sa' that he has $een decei*ed& A!t. 1141. A +$!$ $=5!$ssion o* an o5inion "o$s not signi*% *!a "' nl$ss +a"$ b% an $=5$!t an" t6$ ot6$! 5a!t% 6as !$li$" on t6$ *o!+$!Hs s5$#ial @no.l$"g$. ,nAn o!inion of an eB!ert is li:e a state ent of fact" and if false" a' $e considered a fraud %i*in% rise to annul ent& A!t. 1140. Dis!$5!$s$ntation b% a t6i!" 5$!son "o$s not &itiat$ #ons$nt' nl$ss s #6 +is!$5!$s$ntation 6as #!$at$" s bstantial +ista@$ an" t6$ sa+$ is + t al. ,nKThe %eneral rule is that the fraud e !lo'ed $' a third !erson u!on one of the !arties does not *itiate consent and cause the nullit' of a contract& KEBce!tion> If one of the !arties is in collusion #ith the third !erson" or :no#s of the fraud $' the third !erson" and he is $enefited there$'" he a' $e considered as an acco !lice to the fraud" and the contract $eco es *oida$le& A!t. 1141. Dis!$5!$s$ntation +a"$ in goo" *ait6 is not *!a " l$nt b t +a% #onstit t$ $!!o!. ,nA!t. 1144. In o!"$! t6at *!a " +a% +a@$ a #ont!a#t &oi"abl$' it s6o l" b$ s$!io s an" s6o l" not 6a&$ b$$n $+5lo%$" b% bot6 #ont!a#ting 5a!ti$s. In#i"$ntal *!a " onl% oblig$s t6$ 5$!son $+5lo%ing it to 5a% "a+ag$s. ,10)?K-raud is serious #hen it is sufficient to i !ress" or to lead an ordinaril' !rudent !erson into error; that #hich cannot decei*e a !rudent !erson cannot $e a %round for nullit'& K.esides $ein% serious" the fraud ust $e the deter inin% cause of the contract& It ust $e dolo causante& KNhen $oth !arties use fraud reci!rocall'" neither one has an action a%ainst the other; the fraud of one co !ensates that of the other& Neither !art' can as: for the annul ent of the contract& A!t. 1145. Si+ lation o* a #ont!a#t +a% b$ absol t$ o! !$lati&$. T6$ *o!+$! ta@$s 5la#$ .6$n t6$ 5a!ti$s "o not int$n" to b$ bo n" at all/ t6$ latt$!' .6$n t6$ 5a!ti$s #on#$al t6$i! t! $ ag!$$+$nt. ,nK Si ulation is the declaration of a fictitious #ill" deli$eratel' ade $' a%ree ent of the !arties" in order to !roduce" for the !ur!oses of dece!tion" the a!!earance of a juridical act #hich does not eBist or is different fro that #hich #as reall' eBecuted& A!t. 1146. An absol t$l% si+ lat$" o! *i#titio s #ont!a#t is &oi". A !$lati&$ si+ lation' .6$n it "o$s not 5!$j "i#$ a t6i!" 5$!son an" is not int$n"$" *o! an% 5 !5os$ #ont!a!% to la.' +o!als' goo" # sto+s' 5 bli# o!"$! o! 5 bli# 5oli#% bin"s t6$ 5a!ti$s to t6$i! !$al ag!$$+$nt. ,nKIn a$solute si ulation" there is color of a contract" #ithout an' su$stance thereof" the !arties not ha*in% an' intention to $e $ound& KIn relati*e si ulation" the !arties ha*e an a%ree ent #hich the' conceal under the %uise of another contract& EBa !le> a deed of sale eBecuted to conceal donation& SECTION 0. 3 Obj$#t o* Cont!a#ts The o$ject of a contract is its su$ject arisin% fro the contract& atter& It is the thin%" ri%ht" or ser*ice #hich is the su$ject2 atter of the o$li%ation
Re<uisites> FCILI:G 4) CCD #ithin the #o erce of an; 8) CID not intrans issi$le 9) CLD ust $e licit" or not contrar' to la#" orals" %ood custo s" !u$lic !olic'" or !u$lic order; 9) CIDnot an i !ossi$le thin% or ser*ice; and 7) CDD it ust $e "eter inate as to its :ind&
A!t. 114). All t6ings .6i#6 a!$ not o tsi"$ t6$ #o++$!#$ o* +$n' in#l "ing * t !$ t6ings' +a% b$ t6$ obj$#t o* a #ont!a#t. All !ig6ts .6i#6 a!$ not int!ans+issibl$ +a% also b$ t6$ obj$#t o* #ont!a#ts. No #ont!a#t +a% b$ $nt$!$" into 5on * t !$ in6$!itan#$ $=#$5t in #as$s $=5!$ssl% a t6o!iE$" b% la..
All s$!&i#$s .6i#6 a!$ not #ont!a!% to la.' +o!als' goo" # sto+s' 5 bli# o!"$! o! 5 bli# 5oli#% +a% li@$.is$ b$ t6$ obj$#t o* a #ont!a#t. ,10)1aK Thin%s #hich are outside the co erce of an> Ser*ices #hich i !l' an a$solute su$ ission $' those #ho render the " sacrificin% their li$ert'" their inde!endence or $eliefs" or disre%ardin% in an' anner the e<ualit' and di%nit' of !ersons" such as !er!etual ser*itude or sla*er'; @ersonal ri%hts" such as arital authorit'" the status and ca!acit' of a !erson" and honorar' titles and distinctions; @u$lic offices" inherent attri$utes of the !u$lic authorit'" and !olitical ri%hts of indi*iduals" such as the ri%ht of suffra%e; @ro!ert'" #hile the' !ertain to the !u$lic do inion" such as the roads" !la;as" s<uares" and ri*ers; Sacred thin%s" co on thin%s" li:e the air and the sea" and res nullius" as lon% as the' ha*e not $een a!!ro!riated& E*en future thin%s can $e the o$ject of contracts" as lon% as the' ha*e the !ossi$ilit' or !otentialit' of co in% into eBistence& The la#" ho#e*er" %enerall' does not allo# contracts on future inheritance& A contract entered into $' a fideico issar' heir #ith res!ect to his e*entual ri%hts #ould $e *alid !ro*ided that the testator has alread' died& The ri%ht of a fideico issar' heir co es fro the testator and not fro the fiduciar'& A!t. 114<. I+5ossibl$ t6ings o! s$!&i#$s #annot b$ t6$ obj$#t o* #ont!a#ts. ,10)0KThin%s are i !ossi$le #hen the' are not susce!ti$le of eBistin%" or the' are outside the co erce of an& @ersonal acts or ser*ices i !ossi$le #hen the' $e'ond the ordinar' stren%th or !o#er of an& KThe i !ossi$ilit' ust $e actual and conte !oraneous #ith the a:in% of the contract" and not su$se<uent thereto& KThe i !ossi$ilit' is a$solute or o$jecti*e #hen no$od' can !erfor it; it is relati*e or su$jecti*e #hen due to the s!ecial conditions or <ualifications of the de$tor it cannot $e !erfor ed& KThe a$solute or o$jecti*e i !ossi$ilit' nullifies the contract; the relati*e or su$jecti*e does not& A!t. 114>. T6$ obj$#t o* $&$!% #ont!a#t + st b$ "$t$!+inat$ as to its @in". T6$ *a#t t6at t6$ 2 antit% is not "$t$!+inat$ s6all not b$ an obsta#l$ to t6$ $=ist$n#$ o* t6$ #ont!a#t' 5!o&i"$" it is 5ossibl$ to "$t$!+in$ t6$ sa+$' .it6o t t6$ n$$" o* a n$. #ont!a#t b$t.$$n t6$ 5a!ti$s. ,10)1KThe thin% ust ha*e definite li its" not uncertain or ar$itrar'& KThe <uantit' of the of the o$ject a' $e indeter inate" so lon% as the ri%ht of the creditor is not rendered illusor'& SECTION 1. 3 Ca s$ o* Cont!a#ts KThe cause of the contract is the 0#h' of the contract"1 the i ediate and ost !roBi ate !ur!ose of the contract" the essential reason #hich i !els the contractin% !arties to enter into it and #hich eB!lains and justifies the creation of the o$li%ation throu%h such contract& KThe cause as to each !art' is the underta:in% or !restation to $e !erfor ed $' the other& The o$ject of the contract is the su$ject atter thereof (e&%&" the land #hich is sold in a sales contract)& Consideration" ean#hile" is the reason" oti*e" or induce ent $' #hich a an is o*ed to $ind hi self $' an a%ree ent& KRe<uisites> 4) it ust eBist; 8) it ust $e true; and 9) it ust $e licit& A!t. 115?. In on$!o s #ont!a#ts t6$ #a s$ is n"$!stoo" to b$' *o! $a#6 #ont!a#ting 5a!t%' t6$ 5!$station o! 5!o+is$ o* a t6ing o! s$!&i#$ b% t6$ ot6$!/ in !$+ n$!ato!% on$s' t6$ s$!&i#$ o! b$n$*it .6i#6 is !$+ n$!at$"/ an" in #ont!a#ts o* 5 !$ b$n$*i#$n#$' t6$ +$!$ lib$!alit% o* t6$ b$n$*a#to!. ,10)4K In onerous contracts" the cause need not $e ade<uate or an eBact e<ui*alent in !oint of actual *alue" es!eciall' in dealin% #ith o$jects #hich ha*e a ra!idl' fluctuatin% !rice& There are e<ual considerations& K A re unerator' contract is one #here a !art' %i*es so ethin% to another $ecause of so e ser*ice or $enefit %i*en or rendered $' the latter to the for er" #here such ser*ice or $enefit #as not due as a le%al o$li%ation& The consideration of one is %reater than the otherEs& KA %ratuitous contract is essentiall' an a%ree ent to %i*e donations& The %enerosit' or li$eralit' of the $enefactor is the cause of the contract& There is nothin% to e<uate& A!t. 1151. T6$ 5a!ti# la! +oti&$s o* t6$ 5a!ti$s in $nt$!ing into a #ont!a#t a!$ "i**$!$nt *!o+ t6$ #a s$ t6$!$o*. ,nK Cause is the o$jecti*e" intrinsic" and juridical reason for the eBistence of the contract itself" #hile oti*e is the !s'cholo%ical" indi*idual" or !ersonal !ur!ose of a !art' to the contract&
K As a %eneral !rinci!le" the oti*es of a !art' do not affect the *alidit' or eBistence of a contract& EBce!tions> Nhen oti*e !redeter ines the !ur!ose of the contract" such as> KNhen the oti*e of a de$tor in alienatin% !ro!ert' is to defraud his creditors" the alienation is rescissi$le; K Nhen the oti*e of a !erson in %i*in% his consent is to a*oid a threatened injur'" as in the case of inti idation" the contract is *oida$le; and KNhen the oti*e of a !erson induced hi to act on the $asis of fraud or isre!resentation $' the other !art'" the contract is *oida$le& A!t. 1150. Cont!a#ts .it6o t #a s$' o! .it6 nla.* l #a s$' 5!o" #$ no $**$#t .6at$&$!. T6$ #a s$ is nla.* l i* it is #ont!a!% to la.' +o!als' goo" # sto+s' 5 bli# o!"$! o! 5 bli# 5oli#%. ,10)5aA!t. 1151. T6$ stat$+$nt o* a *als$ #a s$ in #ont!a#ts s6all !$n"$! t6$+ &oi"' i* it s6o l" not b$ 5!o&$" t6at t6$% .$!$ *o n"$" 5on anot6$! #a s$ .6i#6 is t! $ an" la.* l. ,10)6Nhere the cause stated in the contract is false" the latter a' ne*ertheless $e sustained $' !roof of another licit cause& A!t. 1154. Alt6o g6 t6$ #a s$ is not stat$" in t6$ #ont!a#t' it is 5!$s +$" t6at it $=ists an" is la.* l' nl$ss t6$ "$bto! 5!o&$s t6$ #ont!a!%. ,10))Unless the contrar' is !ro*ed" a contract is !resu ed to ha*e a %ood and sufficient consideration& This !resu !tion a!!lies #hen no cause is stated in the contract& A!t. 1155. E=#$5t in #as$s s5$#i*i$" b% la.' l$sion o! ina"$2 a#% o* #a s$ s6all not in&ali"at$ a #ont!a#t' nl$ss t6$!$ 6as b$$n *!a "' +ista@$ o! n" $ in*l $n#$. ,nK In case of lesion or inade<uac' of cause" the %eneral rule is that the contract is not su$ject to annul ent& K In cases !ro*ided $' la#" ho#e*er" such as those entioned in Art 49H4" the lesion is a %round for rescission of the contract& K /ross inade<uac' naturall' su%%ests fraud and is e*idence thereof" so that it connection #ith other circu stances& :EAECTIVE CONTRACTS( RESCISSIBLE 3alid and enforcea$le until rescinded; there is a sort of eBtrinsic defect consistin% of econo ic da a%e or lesion Causes> injur' or da a%e to one of the !arties or to third !ersons C/A-LAI Arts& 49H4 49H8D Cured $' !rescri!tion Need not $e ratified Can $e assailed $' the injured or da a%ed !art' or injured or da a%ed third !erson Assailed directl' onl' ,utline of !ro*isions> 49H?> Nature of rescissi$le contract 49H4249H8> t'!es of rescissi$le contract 49H9> su$sidiar' character 49H7> eBtent of rescission 49H5> utual restitution; no rescission #hen the thin% is le%all' !ossessed $' a third !erson VOI:ABLE 3alid and enforcea$le until annulled; The defect is ore or less intrinsic Causes> (Art& 49P?) 2 le%al inca!acit' of one !art'; or 2 *itiation of consent Cured $' !rescri!tion Can $e ratified Can $e assailed $' a contractin% !art' (Art& 49PF) Assailed directl' or collaterall' ,utline of !ro*isions> 49P?> *oida$le contracts a' $e annulla$le e*en if there is no da a%e to !arties; t'!es of *oida$le contracts; $indin% character unless annulled; susce!ti$ilit' to ratification 49P4> !rescri!ti*e !eriod 49P8249PF> ratification 49PH247?8> =utual restitution 9NENAORCEABLE 3alida$le transaction; Cannot $e enforce unless ratified Causes> (Art& 47?9) 2 contract is entered into in eBcess or #ithout authorit' 2 non2co !liance #ith Stature of -rauds Le%al inca!acit' of $oth Not cured $' !rescri!tion Can $e ratified Can $e assailed $' a contractin% !art' (Art& 47?H) Assailed directl' or collaterall' ,utline of !ro*isions> 47?9> t'!es of unenforcea$le contracts 47?5> ratification of contracts infrin%in% statute of frauds 47?F> eB!ress or i !lied ratification $' the !arent or %uardian of one (#hen $oth are inca!acitated) sa e effect as if onl' one is inca!acitated; VOI: O INEJISTENT Does not and cannot !roduce le%al effect a' $e sufficient to sho# it #hen ta:en in
Causes> (*oid) illicit" !rohi$ited or declared $' la# as *oid (ineBistent) lac:s one or all of the re<uisites of a contract CCS2D,ICE Art& 47?PD Not cured $' !rescri!tion Cannot $e ratified Can $e assailed $' a contractin% !art' or a third !erson #hose interest is affected (Art& 4784) Assailed directl' or collaterall' 47?P> t'!es of *oid or ineBistent contracts 474?> i !rescri!ti$ilit' 4744> contracts that are $oth ille%al and cri inal $oth !arties ha*e no action a%ainst each other and shall $e !rosecuted 4748> contracts that are ille%al $ut do not constitute cri inal offense
49H6> no rescission in case of 49H4 (4) and (8) #hen the contract is a!!ro*ed $' court 49HF> !reseu !tion (eBistence of fraud); alienation $' %ratuitous title; alienation $' onerous title 49HH> ac<uisition in $ad faith (of thin%s alienated in fraud of creditors) 49HP> !rescri!ti*e !eriod
49PH> utual restitution 49PP> eBce!tion to utual restitution defect is the inca!acit' of one 47??> loss of the thin% throu%h faultAfraud of !art' o$li%ed to return the thin% $ut has no ri%ht to institute !roceedin%" he shall return the fruits and the *alue of the thin% 47?4> loss of the thin% throu%h faultAfraud of the !erson #ho a' institute the !roceedin% (action for annul ent is eBtin%uished) 47?8> one does not restore the other cannot $e co !elled to co !l'
Ratification $' !arent or %uardian of $oth contract is *alidated fro ince!tion 47?H> cannot $e assailed $' third !ersons&
47492474P> eBce!tions to in !ari delicto rule
RESCISSIBLE CONTRACTS A!t. 11<?. Cont!a#ts &ali"l% ag!$$" 5on +a% b$ !$s#in"$" in t6$ #as$s $stablis6$" b% la.. ,10>?-
A!t. 11<1. T6$ *ollo.ing #ont!a#ts a!$ !$s#issibl$( ,1- T6os$ .6i#6 a!$ $nt$!$" into b% g a!"ians .6$n$&$! t6$ .a!"s .6o+ t6$% !$5!$s$nt s **$! l$sion b% +o!$ t6an on$3*o !t6 o* t6$ &al $ o* t6$ t6ings .6i#6 a!$ t6$ obj$#t t6$!$o*/ ,0- T6os$ ag!$$" 5on in !$5!$s$ntation o* abs$nt$$s' i* t6$ latt$! s **$! t6$ l$sion stat$" in t6$ 5!$#$"ing n +b$!/ ,1- T6os$ n"$!ta@$n in *!a " o* #!$"ito!s .6$n t6$ latt$! #annot in an% ot6$! +ann$! #oll$#t t6$ #lai+s " $ t6$+/ ,4- T6os$ .6i#6 !$*$! to t6ings n"$! litigation i* t6$% 6a&$ b$$n $nt$!$" into b% t6$ "$*$n"ant .it6o t t6$ @no.l$"g$ an" a55!o&al o* t6$ litigants o! o* #o+5$t$nt j "i#ial a t6o!it%/ ,5- All ot6$! #ont!a#ts s5$#iall% "$#la!$" b% la. to b$ s bj$#t to !$s#ission. ,10>1aA!t. 11<0. Pa%+$nts +a"$ in a stat$ o* insol&$n#% *o! obligations to .6os$ * l*ill+$nt t6$ "$bto! #o l" not b$ #o+5$ll$" at t6$ ti+$ t6$% .$!$ $**$#t$"' a!$ also !$s#issibl$. ,10>0A!t. 11<1. T6$ a#tion *o! !$s#ission is s bsi"ia!%/ it #annot b$ instit t$" $=#$5t .6$n t6$ 5a!t% s **$!ing "a+ag$ 6as no ot6$! l$gal +$ans to obtain !$5a!ation *o! t6$ sa+$. ,10>4A!t. 11<4. R$s#ission s6all b$ onl% to t6$ $=t$nt n$#$ssa!% to #o&$! t6$ "a+ag$s #a s$". ,nA!t. 11<5. R$s#ission #!$at$s t6$ obligation to !$t !n t6$ t6ings .6i#6 .$!$ t6$ obj$#t o* t6$ #ont!a#t' tog$t6$! .it6 t6$i! *! its' an" t6$ 5!i#$ .it6 its int$!$st/ #ons$2 $ntl%' it #an b$ #a!!i$" o t onl% .6$n 6$ .6o "$+an"s !$s#ission #an !$t !n .6at$&$! 6$ +a% b$ oblig$" to !$sto!$. N$it6$! s6all !$s#ission ta@$ 5la#$ .6$n t6$ t6ings .6i#6 a!$ t6$ obj$#t o* t6$ #ont!a#t a!$ l$gall% in t6$ 5oss$ssion o* t6i!" 5$!sons .6o "i" not a#t in ba" *ait6. In t6is #as$' in"$+nit% *o! "a+ag$s +a% b$ "$+an"$" *!o+ t6$ 5$!son #a sing t6$ loss. ,10>5A!t. 11<6. R$s#ission !$*$!!$" to in Nos. 1 an" 0 o* A!ti#l$ 11<1 s6all not ta@$ 5la#$ .it6 !$s5$#t to #ont!a#ts a55!o&$" b% t6$ #o !ts. ,10>6aA!t. 11<). All #ont!a#ts b% &i!t $ o* .6i#6 t6$ "$bto! ali$nat$s 5!o5$!t% b% g!at ito s titl$ a!$ 5!$s +$" to 6a&$ b$$n $nt$!$" into in *!a " o* #!$"ito!s' .6$n t6$ "ono! "i" not !$s$!&$ s **i#i$nt 5!o5$!t% to 5a% all "$bts #ont!a#t$" b$*o!$ t6$ "onation. Ali$nations b% on$!o s titl$ a!$ also 5!$s +$" *!a " l$nt .6$n +a"$ b% 5$!sons against .6o+ so+$ j "g+$nt 6as b$$n iss $". T6$ "$#ision o! atta#6+$nt n$$" not !$*$! to t6$ 5!o5$!t% ali$nat$"' an" n$$" not 6a&$ b$$n obtain$" b% t6$ 5a!t% s$$@ing t6$ !$s#ission.
In a""ition to t6$s$ 5!$s +5tions' t6$ "$sign to "$*!a " #!$"ito!s +a% b$ 5!o&$" in an% ot6$! +ann$! !$#ogniE$" b% t6$ la. o* $&i"$n#$. ,10>)aA!t. 11<<. 76o$&$! a#2 i!$s in ba" *ait6 t6$ t6ings ali$nat$" in *!a " o* #!$"ito!s' s6all in"$+ni*% t6$ latt$! *o! "a+ag$s s **$!$" b% t6$+ on a##o nt o* t6$ ali$nation' .6$n$&$!' " $ to an% #a s$' it s6o l" b$ i+5ossibl$ *o! 6i+ to !$t !n t6$+. I* t6$!$ a!$ t.o o! +o!$ ali$nations' t6$ *i!st a#2 i!$! s6all b$ liabl$ *i!st' an" so on s ##$ssi&$l%. ,10><aA!t. 11<>. T6$ a#tion to #lai+ !$s#ission + st b$ #o++$n#$" .it6in *o ! %$a!s. Ao! 5$!sons n"$! g a!"ians6i5 an" *o! abs$nt$$s' t6$ 5$!io" o* *o ! %$a!s s6all not b$gin t6$ *o!+$!Hs in#a5a#it%' o! ntil t6$ "o+i#il$ o* t6$ latt$! is @no.n. ,10>>Voi"abl$ Cont!a#ts Voi"abl$ Cont!a#ts K Contracts that are *oida$le or annulla$le> 4& Nhen either !art' is inca!a$le of %i*in% consent to a contract 8& Nhen consent is *itiated $' ista:e" *iolence" inti idation" undue influence" fraud K.indin%" unless annulled $' a !ro!er court action KRatifia$le (Art& 49P?) K@rescri!tion for action of annul ent> 7 'ears to $e%in> #hen *ice is due to inti idation" *iolence or undue influence fro ista:e or fraud fro the ti e of disco*er' entered into $' inors or those inca!a$le of %i*in% consent the KRatification eBtin%uishes action for annul ent (Art& 49P8) a' $e eB!ress or tacit (Art& 49P9) tacit ratification the eBecution of an act #hich necessaril' i !lies an intention to #ai*e his ri%ht $' the !art'" #ho" :no#in% of the reason #hich renders the contract *oida$le" has a ri%ht to in*o:e annul ent& 2 a' $e effected $' the %uardian of the inca!acitated !erson (Art& 49P7) 2 does not re<uire the confor it' of the !erson #ho does not ha*e a ri%ht to $rin% an action for annul ent (Art& 49P5) 2cleanses the contract fro all its defects fro the o ent it #as constituted (Art& 49P6) KAnnul ent 2 Nho a' institute (Art& 49PF) 2 .' all #ho are o$li%ed !rinci!all' or su$sidiaril' EBce!tions> K@ersons ca!a$le #annot all$g$ t6$ in#a5a#it% of those #ith #ho the' contracted K@ersons #ho eBerted *iolence" undue influence" #ho e !lo'ed fraud or caused ista:e action for annul ent cannot $e $ased on these fla#s K/i*es rise to the res!onsi$ilit' of restorin% to each other thin%s su$ject eBce!t in cases !ro*ided $' la# (Art& 49PH) Ser*ice *alue thereof #ill ser*e as the $asis for da a%es atter of the contract" #ith fruits" !rice #ith its interest" the ti e defect of consent ceases o ent %uardianshi! ceases (Art& 49P4) ntil t6$ t$!+ination o*
KInca!acitated !ersons not o$li%ed to a:e restitutions eBce!t insofar as he has $een $enefited $' the thin% or !rice recei*ed $' hi (Art& 49PP) KIf o$jects cannot $e returned $ecause these #ere lost throu%h his fault" he shall return the fruits recei*ed and the *alue of the thin% at the ti e of the loss" #ith interests fro the sa e date (Art& 47??) KAs lon% as one of the contractin% !arties does not restore #hat in *irtue of the annul ent decree he is $ound to return" the other cannot $e co !elled to co !l' #ith #hat is incu $ent u!on hi & (Art& 47?8) KEBtin%uish ent of action (Art& 47?4) if o$ject is lost throu%h the fault or fraud of !erson #ho has the ri%ht to institute the !roceedin%s
if action $ased on inca!acit' of an' one of contractin% !arties" loss of thin% shall not $e an o$stacle to the success of action" unless loss or fraud too: !lace throu%h the !laintiffEs fault
9NENAORCEABLE CONTRACTS A!t. 14?1. T6$ *ollo.ing #ont!a#ts a!$ n$n*o!#$abl$' nl$ss t6$% a!$ !ati*i$"( ,1- T6os$ $nt$!$" into in t6$ na+$ o* anot6$! 5$!son b% on$ .6o 6as b$$n gi&$n no a t6o!it% o! l$gal !$5!$s$ntation' o! .6o 6as a#t$" b$%on" 6is 5o.$!s/ ,0- T6os$ t6at "o not #o+5l% .it6 t6$ Stat t$ o* A!a "s as s$t *o!t6 in t6is n +b$!. In t6$ *ollo.ing #as$s an ag!$$+$nt 6$!$a*t$! +a"$ s6all b$ n$n*o!#$abl$ b% a#tion' nl$ss t6$ sa+$' o! so+$ not$ o! +$+o!an" +' t6$!$o*' b$ in .!iting' an" s bs#!ib$" b% t6$ 5a!t% #6a!g$"' o! b% 6is ag$nt/ $&i"$n#$' t6$!$*o!$' o* t6$ ag!$$+$nt #annot b$ !$#$i&$" .it6o t t6$ .!iting' o! a s$#on"a!% $&i"$n#$ o* its #ont$nts( ,a- An ag!$$+$nt t6at b% its t$!+s is not to b$ 5$!*o!+$" .it6in a %$a! *!o+ t6$ +a@ing t6$!$o*/ ,b- A s5$#ial 5!o+is$ to ans.$! *o! t6$ "$bt' "$*a lt' o! +is#a!!iag$ o* anot6$!/ ,#- An ag!$$+$nt +a"$ in #onsi"$!ation o* +a!!iag$' ot6$! t6an a + t al 5!o+is$ to +a!!%/ ,"- An ag!$$+$nt *o! t6$ sal$ o* goo"s' #6att$ls o! t6ings in a#tion' at a 5!i#$ not l$ss t6an *i&$ 6 n"!$" 5$sos' nl$ss t6$ b %$! a##$5t an" !$#$i&$ 5a!t o* s #6 goo"s an" #6att$ls' o! t6$ $&i"$n#$s' o! so+$ o* t6$+' o* s #6 t6ings in a#tion o! 5a% at t6$ ti+$ so+$ 5a!t o* t6$ 5 !#6as$ +on$%/ b t .6$n a sal$ is +a"$ b% a #tion an" $nt!% is +a"$ b% t6$ a #tion$$! in 6is sal$s boo@' at t6$ ti+$ o* t6$ sal$' o* t6$ a+o nt an" @in" o* 5!o5$!t% sol"' t$!+s o* sal$' 5!i#$' na+$s o* t6$ 5 !#6as$!s an" 5$!son on .6os$ a##o nt t6$ sal$ is +a"$' it is a s **i#i$nt +$+o!an" +/ ,$- An ag!$$+$nt o* t6$ l$asing *o! a long$! 5$!io" t6an on$ %$a!' o! *o! t6$ sal$ o* !$al 5!o5$!t% o! o* an int$!$st t6$!$in/ ,*- A !$5!$s$ntation as to t6$ #!$"it o* a t6i!" 5$!son. ,1- T6os$ .6$!$ bot6 5a!ti$s a!$ in#a5abl$ o* gi&ing #ons$nt to a #ont!a#t. KUnenforcea$le contracts cannot $e enforced unless it is first ratified in the anner !ro*ided $' la#& An unenforcea$le contract does not !roduce an' effect unless it is ratified& Unenforcea$le contracts cannot $e sued u!on unless ratified (@aras" 8??9)& KThere are 9 :inds of unenforcea$le contracts> a) unauthori;ed contracts; $) those that fail to co !l' #ith the Statute of -rauds; c) those #here $oth !arties are inca!a$le of %i*in% consent to a contract& UNAUTG,RI\ED C,NTRACTS Nhen a !erson enters into a contract for and in the na e of the another" #ithout authorit' to do so" the contract does not $ind the latter" unless he ratifies the sa e& The a%ent" #ho has entered into the contract in the na e of the !ur!orted !rinci!al" $ut #ithout authorit' fro hi " is lia$le to third !ersons u!on the contract; it ust ha*e $een the intention of the !arties to $ind so eone" and" as the !rinci!al #as not $ound" the a%ent should $e& EB> Nithout ' authorit'" ' $rother sold ' car" in ' na e to I& The contract is unauthori;ed and cannot affect e unless I ratif' the sa e eB!ressl' or i !licitl'" as $' acce!tin% the !roceeds of the sale& (@aras) =ere la!se of ti e" no atter ho# lon%" is not the ratification re<uired $' la# of an unenforcea$le contract (Ti!ton *& 3elasco" 6 @hil 6F" as cited in @aras)& STATUTE ,- -RAUDS =eanin%> descri!ti*e of statutes #hich re<uire certain classes of contracts to $e in #ritin%& @ur!ose> to !re*ent fraud and !erjur' in the enforce ent of o$li%ations de!endin% for their e*idence u!on the unassisted e or' of #itnesses $' re<uirin% certain enu erated contracts and transactions to $e e*idenced $' a #ritin% si%ned $' the !art' to $e char%ed& A!!lication> This statute does not de!ri*e the !arties the ri%ht to contract #ith res!ect to atters therein in*ol*ed" $ut erel' re%ulates the for alities of the contract necessar' to render it unenforcea$le& The statute of frauds" ho#e*er" si !l' !ro*ides for the anner in #hich contracts under it shall $e !ro*ed& It does not atte !t to a:e such contracts in*alid if not eBecuted in #ritin% $ut onl' a:es ineffecti*e the action for s!ecific !erfor ance& The statute of frauds is not a!!lica$le to contracts #hich are either totall' or !artiall' !erfor ed" on the theor' that there is a #ide field for the co ission of frauds in eBecutor' contracts #hich can onl' $e !re*ented $' re<uirin% the to $e in #ritin%" a fact #hich is reduced to a ini u in eBecuted contracts $ecause the intention of the !arties $eco es a!!arent $' their eBecution" and eBecution concludes" in ost cases" the ri%hts of the !arties& A note or e orandu is e*idence of the a%ree ent" and is used to sho# the intention of the !arties& No !articular for of lan%ua%e or instru ent is necessar' to constitute a e orandu or note as a #ritin% under the Statute of -rauds& K/eneral Rules of A!!lication ( ainl' @aras)>
Applies only to e1ecutory contracts& .ut it is not enou%h for a !art' to alle%e !artial !erfor ance in order to render the Statute ina!!lica$le; such !artial !erfor ance ust $e dul' !ro*ed" $' either docu entar' or oral e*idence; Cannot a!!l' if the action is neither for da a%es $ecause of the *iolation of an a%ree ent nor for the s!ecific !erfor ance of said a%reee ent; KEBclusi*e" i&e& it a!!lies onl' to the a%ree ents or contracts enu erated herein; KDefense of the Statute a' $e #ai*ed; K@ersonal defense" i&e& a contract infrin%in% it cannot $e assailed $' third !ersons; Kcontracts infrin%in% the Statute are not *oid; the' are erel' unenforcea$le; KThe Statute of -rauds is a rule of eBclusion" i&e& oral e*idence i%ht $e rele*ant to the a%ree ents enu erated therein and i%ht therefore $e ad issi$le #ere it not for the fact that the la# or the statute eBcludes oral e*idence; KThe Statute does not deter ine the credi$ilit' or #ei%ht of e*idence& It erel' concerns itself #ith the ad issi$ilit' thereof; KThe Statute does not a!!l' if it is clai ed that the contract does not eB!ress the true a%ree ent of the !arties& As lon% as true or real a%ree ent is not co*ered $' the Statute" it is !ro*a$le $' oral e*idence& INCA@ACITATED @ARTIES Ratification $' one !art' con*erts the contract into a *oida$le contract2 *oida$le at the o!tion of the !art' #ho has not ratified& A!t. 14?4. 9na t6o!iE$" #ont!a#ts a!$ go&$!n$" b% A!ti#l$ 111) an" t6$ 5!in#i5l$s o* ag$n#% in Titl$ J o* t6is Boo@. KArt& 494F& No one a' contract in the na e of another #ithout $ein% authori;ed $' the latter" or unless he has $' la# a ri%ht to re!resent hi & KA contract entered into in the na e of another $' one #ho has no authorit' or le%al re!resentation" or #ho has acted $e'ond his !o#ers" shall $e unenforcea$le" unless it is ratified" eB!ressl' or i !liedl'" $' the !erson on #hose $ehalf it has $een eBecuted" $efore it is re*o:ed $' the other contractin% !art'& (485Pa) KRe<uisites for a @erson to contract in the na e of another> a) he ust $e dul' authori;ed (eB!ressl' or i !liedl') or $) he ust ha*e $' la# a ri%ht to re!resent hi (li:e the %uardian" or the ad inistrator) or c) the contract ust $e su$se<uentl' ratified (eB!ressl' or i !liedl'" $' #ord or $' deed)& (@aras)& A!t. 14?5. Cont!a#ts in*!inging t6$ Stat t$ o* A!a "s' !$*$!!$" to in No. 0 o* A!ti#l$ 14?1' a!$ !ati*i$" b% t6$ *ail !$ to obj$#t to t6$ 5!$s$ntation o* o!al $&i"$n#$ to 5!o&$ t6$ sa+$' o! b% t6$ a##$5tan#$ o* b$n$*it n"$! t6$+. KT#o #a's of ratification of contracts infrin%in% the Statute are> a) failure to o$ject to the !resentation of oral e*idence; $) acce!tance of $enefits under the " since the Statute does not a!!l' to contracts #hich are !artiall' eBecuted& Cross eBa ination of the #itnesses testif'in% orall' on the contract a ounts to a #ai*er or to a failure to o$ject& A!t. 14?6. 76$n a #ont!a#t is $n*o!#$abl$ n"$! t6$ Stat t$ o* A!a "s' an" a 5 bli# "o# +$nt is n$#$ssa!% *o! its !$gist!ation in t6$ R$gist!% o* :$$"s' t6$ 5a!ti$s +a% a&ail t6$+s$l&$s o* t6$ !ig6t n"$! A!ti#l$ 115). KArt& 495F& If the la# re<uires a docu ent or other s!ecial for " as in the acts and contracts enu erated in the follo#in% article" the contractin% !arties a' co !el each other to o$ser*e that for " once the contract has $een !erfected& This ri%ht a' $e eBercised si ultaneousl' #ith the action u!on the contract& (48FPa) KThe ri%ht of one !art' to ha*e the other eBecute the !u$lic docu ent needed for con*enience in re%istration" is %i*en onl' #hen the contract is $oth *alid and enforcea$le& (@aras) A!t. 14?). In a #ont!a#t .6$!$ bot6 5a!ti$s a!$ in#a5abl$ o* gi&ing #ons$nt' $=5!$ss o! i+5li$" !ati*i#ation b% t6$ 5a!$nt' o! g a!"ian' as t6$ #as$ +a% b$' o* on$ o* t6$ #ont!a#ting 5a!ti$s s6all gi&$ t6$ #ont!a#t t6$ sa+$ $**$#t as i* onl% on$ o* t6$+ .$!$ in#a5a#itat$". I* !ati*i#ation is +a"$ b% t6$ 5a!$nts o! g a!"ians' as t6$ #as$ +a% b$' o* bot6 #ont!a#ting 5a!ti$s' t6$ #ont!a#t s6all b$ &ali"at$" *!o+ t6$ in#$5tion. A!t. 14?<. 9n$n*o!#$abl$ #ont!a#ts #annot b$ assail$" b% t6i!" 5$!sons. KThe defense of the Statute is !ersonal to the !art' to the a%ree ent& Thus" it cannot $e set u! $' stran%ers to the a%ree ent& KJust as stran%ers cannot attac: the *alidit' of *oida$le contracts" so also can the' not attac: a contract $ecause of its unenforcea$ilit'& Indeed the Statute of -rauds cannot $e set u! as a defense $' stran%ers to the transaction& (A'son *& CA" PF @hil& P65)& VOI: OR INEJISTENT CONTRACTS 76at #ont!a#ts a!$ &oi" o! in$=ist$ntP The follo#in% contracts are *oid or ineBistent fro the $e%innin%> 1. Those #hose cause" o$ject or !ur!ose is contrar' to la#"
orals" %ood custo s" !u$lic order or !u$lic !olic';
2.
Those #hich are a$solutel' si ulated or fictitious;
3. 4. 5. 6. 7. 8.
Those #hose cause or o$ject did not eBist at the ti e of the transaction; Those #hose o$ject is outside the co erce of en; Those #hich conte !late an i !ossi$le ser*ice; Those #here the intention of the !arties relati*e to the !rinci!al o$ject cannot $e ascertained; Those eB!ressl' !rohi$ited or declared *oid $' la#& (a2%" Art 47?P" NCC)& Those #hich are the direct results of !re*ious ille%al contracts (Art 4788" NCC)&
III. NAT9RAL OBLIGATIONS :$*inition Natural o$li%ations are those $ased on e<uit' and natural la#" #hich are not enforcea$le $' eans of court action" $ut #hich" after *oluntar' fulfill ent $' the o$li%or" authori;e the retention $' the o$li%e of #hat has $een deli*ered or rendered $' reason thereof& In other #ords" the' refer to those o$li%ations #ithout sanction" susce!ti$le of *oluntar' !erfor ance" $ut not throu%h co !ulsion $' le%al eans& Nat !al Obligation &s Ci&il Obligation Nat !al Obligations 5asis 'nforceability 1. &s Do!al Obligations '1istence of juridical tie 'ffect of fulfillment E<uit' and natural la# Not enforcea$le $' court action Nat !al Obligations
Ci&il Obligations @ositi*e la# Enforcea$le $' court action Do!al Obligations
There eBists a juridical tie $et#een the No juridical tie #hatsoe*er& !arties not enforcea$le $' court action& 3oluntar' fulfill ent !roduces le%al effects 3oluntar' fulfill ent does not !roduce #hich the courts reco%ni;e and !rotect& le%al effects #hich the courts reco%ni;e and !rotect&
A!ti#l$s 1404 141?( EBa !les of Natural ,$li%ations

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OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

3ALID C,NTRACT it should not $e a%ainst the la#" contrar' to

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

all others of the

OBLIGATIONS AND CONTRACTS REVIEWER

those #hich are naturall' or artificiall' attached to the thin%

OBLIGATIONS AND CONTRACTS REVIEWER

ora sol*endi eB !ersona default in !ersonal o$li%ations (to do)

OBLIGATIONS AND CONTRACTS REVIEWER

NATURE ,- NE/LI/ENCE /,,D -ATGER ,- TGE -A=ILY DE-ENSE @RESU=@TI,N ,NE/LI/ENCE

REJUISITES 4& 8& 9& 7&

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

Effect of rescission> the !arties eBtin%uished&

a da' certain %i*e rise to the o$li%ation; sus!ensi*e effect&

OBLIGATIONS AND CONTRACTS REVIEWER

IN DIE= A RES,LUT,RY @ERI,D arri*al of a ter

certain ter inated the o$li%ation; resolutor' effect&

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

nla.* l o! .6i#6 #o l" not 6a&$

has the ri%ht to

OBLIGATIONS AND CONTRACTS REVIEWER

ade" o$li%or is not lia$le; after su$stitution is co

OBLIGATIONS AND CONTRACTS REVIEWER

:$bto!s ,Soli"a!%Aida !a's @7"5??&?? Lorna !a's @7"5??&?? -e

C!$"ito!s ,IointJohn Q @ 7"5??&?? =arsha @ 7"5??&??

OBLIGATIONS AND CONTRACTS REVIEWER

The act of one is not $indin% (others

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

There is nothin% to $e rei $ursed $ecause he did not s!end an'

one'" the re ission $ein% a %ratuitous act&

OBLIGATIONS AND CONTRACTS REVIEWER

onetar' o$li%ation #hich is not di*isi$le&

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

INIJUIT,US ,R UNC,NSCI,NA.LE #hen it is re*oltin% to the conscience or co da a%es suffered&

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

4& 8& 9& 7& 5&

4& 8& 9& 7&

4& 8& 9& 7& 5&

OBLIGATIONS AND CONTRACTS REVIEWER

ade in the sa e act& In case of

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

OBLIGATIONS AND CONTRACTS REVIEWER

a' $e total (#hen the t#o o$li%ations are of the sa e a ount); or

!artial (#hen the a ounts are not e<ual)&

ust $e due to !er it co !ensation&

OBLIGATIONS AND CONTRACTS REVIEWER

a da' certain %ie rise to the o$li%ation; sus!ensie effect&

a:es it oid& n" $ inl $n#$' o! *!a " is