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Chapter 2

Nature and Effects of Obligations

Diligence which a reasonably

prudent person exercises over his
own property

Duties of debtor in obligation to give a

determinate thing
1. To preserve or take care of the thing due
(Art. 1163)
2. To deliver the fruits of the thing
(Art. 1164)
3. To deliver its accessions and accessories
(Art. 1166)
4. To deliver the thing itself


Duties of debtor in obligation to deliver a

generic thing
1. To deliver a thing which is of the quality
intended by the parties taking into
consideration the purpose of the
obligation and other circumstances
2. To be liable for damages in case of
fraud, negligence or delay and those
who in any manner contravene the
tenor thereof (Art. 1170)

**parties may agree upon diligence

which is more or less than of a good
father of a family
**it is contrary to public policy to
stipulate for absolute exemption from
Effect of Breach

Article 1163

This Article speaks of an obligation to

take care of a determinate thing
which an obligor is supposed to deliver
to another. (Pineda)
Obligation to give (real obligations), the
obligor has the incidental duty to take
care of the thing due. (De Leon)

Reason for Provision


Unless diligence is exercised, there is

danger that the property would be lost
or destroyed
Thus, rendering illusory the obligations

Diligence Required

Depends upon the nature of the

obligation and corresponds with the
circumstances of the person, of the
time, and of the place (Art. 1173)

General Rule

Ordinary diligence
o Known as diligence of a good
father of a family

Another standard of care

o Slight or extraordinary diligence
o The law or stipulation of the
parties must prevail

Liability for damages is imposed upon

the debtor who fails to exercise the
diligence of a good father of a family
The loss of things while in the custody of
the obligor but without negligence or
fault on his part, but to fortuitous
events, he is exempted from
responsibility. (Tolentino)

Article 1164

i. Those which do not impose

simultaneous and
correlative performance on
both parties.
ii. The performance of one
party is not dependent
upon simultaneous
performance by the other
Article 1191

The general provision on rescission on of

reciprocal obligations
Speaks of the right of the aggrieved
party to choose between two remedies
o An action for specific performance
o An action for rescission

Kinds of Obligation according to the person

1. Unilateral
o When only one party is obliged to
comply with a prestation
2. Bilateral
o When both parties are mutually
bound to each other.
o Both are debtors and creditors to
each other
a. Reciprocal obligations
i. Article 2010
ii. Those which arise from the
same cause
iii. The performance by one
party of his obligation is
designed to be the
equivalent and the
condition for the
performance by the other
of his own obligation
iv. General Rule: They are to
be performed
simultaneously such that
each party may treat the
fulfilment of what is
incumbent upon the other
as a suspensive condition
to his obligation and its
non-fulfilment, as a tacit or
implied resolutory
condition, giving him the
right to demand the
rescission of the contract
b. Non-reciprocal obligations

Breach of Obligation on the part of


Is the failure without legal reason to

comply without legal excuse, to perform
any promise which forms the whole or
part of the obligation
o Committed through fraud,
negligence, delay and those who
contravenes the tenor of the
obligation (Art. 1170)

Right to Rescind

The power to rescind

o Right to cancel the contract or
reciprocal obligations in case of
non-fulfilment on the part of one


is a principal action which means

resolution or cancellation of the
o in Article 1191 is predicated on
the breach of faith by the
defendant which violates the
reciprocity between the parties
1. must arises from
identity of cause
2. presupposes that the
2 obligations are
created at the same

in Article 1380 & 1381 is based on

injury to economic interest on the
part of the plaintif

Effect of Rescission

1. Contract abrogated from its inception

o To annul the contract and to
restore the parties to their
original positions which they
would have occupied as if no such
contract had ever been made
2. Mutual restitution of benefits received
by each party required
o To bring back the parties, as far
as practicable, to their original
situation or position prior to the
inception of the contract
o Can be carried out only when the
one who demands rescission can
return whatever he may be
obliged to restore
Article 1169
Breach of Faith

breach contemplated is the obligors

failure to comply with an obligation
already existent, not failure of a
condition to render binding that

the words in delay should be

translated to mean default (Paras)

Meaning of delay
1. Ordinary delay
o Merely the failure to perform an
obligation on time
2. Legal delay/default/mora
o The failure to perform an
obligation on time which failure,
constitute a breach of obligation
**No delay in an obligation not to do,
nonfulfillment may take place but delay is
impossible for the debtor fulfils by not doing
what has been forbidden him
Requisites of delay by the debtor (Mora
1. The obligation pertains to the debtor
2. The obligation has not been performed
on its maturity date
3. Demand made by the creditor upon the
debtor to fulfil, perform or comply with
his legal obligation which demand may
be either judicial or extra-judicial
4. Failure of the debtor to comply with such
o The creditor has the burden of
proving that a previous demand
has been made
5. The obligation is already due or
demandable and liquidated.
o Debt is liquidated when the
amount is

determinable by inspection
of the terms and conditions
of relevant documents

3. He bears the risk of loss of the thing

4. Where the obligation is to pay
money, the debtor is not liable for
interest from the time of the
creditors delay
5. The debtor may release himself from
the obligation by the consignation of
the thing or sum due

Kinds of Delay
1. Mora solvendi
a. Mora solvendi ex re
Debtors default in real
b. Mora solvendi ex persona
Debtors default in personal
- Delay on the part of the debtor to fulfil
his obligation
- By reason of a cause imputable to him

3. Compensatio morae
- The delay of the obligors in reciprocal
1. There is no actionable default on the
part of both parties, such that as if
neither one is guilty of delay
2. Article 1192

Effects of Mora Solvendi

1. The debtor is guilty of breach of
2. He is liable for interest in case of
obligations to pay money or for
damages in other obligations
o In the absence of extrajudicial
demand, the interest shall
commence from the filing of the
3. He is liable even for fortuitous event
when the obligation is
o to deliver a determinate thing.
(Art. 1165 ie. if the obligor
delays) although damages may
be mitigated if he can prove that
even if he had not been in
default, loss would have occurred
just the same (Art. 2215)
o to deliver a generic thing
can still be compelled to
deliver a thing of the same
kind (Art. 1263)
2. Mora accipiendi
- Delay on the part of the creditor without
justifiable reason to accept the
performance of the obligation
Effects of Mora accipiendi
1. The creditor is guilty of breach of
2. He is liable for damages sufered by
the debtor

When demand not necessary to put

debtor in delay

When the obligation so provides

When the law so provides
When time is of the essence
When demand would be useless
When there is performance by a party in
reciprocal obligations

Article 1170

Intentional evasion of the normal

fulfilment of an obligation
Doing something in bad faith or with
malice in the fulfilment of the obligation
The fraud is committed after the valid
execution of the contract (incidental
The remedy is a claim for damages
o In Article 1338,
Casual fraud
fraud is committed at the
time of the execution of the
contract where the consent
of one party was obtained
due to the employment of
insidious words or

Remedy is annulment of
the contract being voidable

Kinds of damages under the Code

1. Actual or Compensatory damages
o the adequate compensation for
the pecuniary loss sufered by the
aggrieved party
unrealized profits
2. Moral damages
o Include physical sufering, mental
anguish, fright, serious anxiety,
besmirched reputation, wounded
feelings, moral shock, social
humiliation and similar injury
o May be recovered if they are the
proximate result of the
defendants wrongful act or
3. Nominal damages
o Not imposed for the purpose of
indemnifying the plaintif for the
loss he sufered
o But to stress the vindication of his
rights which had been violated by
the defendant
4. Temperate or Moderate damages
o Damages which are more than
nominal but less than
compensatory damages
o Imposed when the plaintif is
found to have sufered pecuniary
loss but its amount cannot by the
nature of the case be proved with
5. Liquidated damages
o Damages agreed upon by the
contracting parties to be paid by
them in case of breach
6. Exemplary damages
o Corrective damages imposed in
addition to compensatory, moral,
temperate or liquidated damages
o For the purpose of setting an
example or correction for the
public good
Negligence. Culpa aquiliana?
What kind of negligence?

Distinction culpa-aquiliana and culpa

Lost of the thing due.
What is a fortuitous event? Vs. force majeure?
Is an act of the state a force majeure?
6%... circular issued by the BSP
Usury is only suspended.
As of July 2013. Loan or forbearance. 6% per
annum. By means of default. Interest.
1176. Memorize.
What are the rebuttable presumption?
How do apply these?
How may the creditor exercise this right?
Dif kinds of obligation?
What is condition?
What are the requisite for there to be an
obligation subject to condition?
What are dif kinds of condition? Efects?
When is the condition void? As to nullification
from obligation which depends upon it?
1177.. babalikan daw as to retroactive efect
ng fulfilment of the condition. 1164in

3. Seek rescission of the contracts

executed by the debtor in fraud of
their rights (accion pauliana)
Liability of the Debtors Property

The debtors property

o Subject to liability for his
o As provided in Article 2236
The debtor is liable with
all his property, present
and future, for the
fulfilment of his obligations,
subject to the exemptions
provided by law
This liability of the property
o Is the legal guaranty in favour of
the creditor
o The debtor cannot maliciously
reduce such guaranty

Accion subrogatoria

Article 1177

Rights of the Creditor


In order to satisfy the creditors claims

against the debtor, creditors have the
following successive rights: [Anchor
Savings Bank vs. Furigay]
1. Exhaust the properties of the debtor
through levying by attachment and
execution upon all the property of
the debtor, except such as are
exempt by law from execution
Presupposes that the
debtor could not pay his
obligations to the creditor
Efected by a writ of
attachment before
judgement or by a writ of
execution if there is already
a final and executory
2. Exercise all the rights and actions of
the debtor, save those personal to
him (accion subrogatoria)

An action where the creditor whose

claims had not been fully satisfied, may
go after the debtors of the defendantdebtor
The creditor merely steps into the
position of the defendant-debtor to
collect the valid and demandable credit
of the latter which a third person owe
him and which have not been paid
Then obtain therefrom the satisfaction
of the creditors own credit
In not pursuing the collection of his
credit, the debtor will prejudice his
creditors. Hence, creditors are
authorized to pursue subrogatory
actions on behalf of their debtors
In order to exercise, a previous approval
of the court is not necessary
The creditor is entitled only to so much
as is needed to satisfy his credit
Diferent and distinct from active
subjective subrogation governed by Art.
1300 to 1304
o There is change of creditors

Exercise of Debtors Rights


The creditor in order to exercise the

rights and actions of the debtor, the
following requisites can be said to be

1. The creditor has an interest in

the right or action not only
because of his credit but
because of the insolvency of
the debtor
2. Malicious or negligent inaction
of the debtor in the exercise of
his right or action of such
seriousness as to endanger
the claim of the creditor
3. The creditor of the debtor
against a third person is
certain, demandable and
4. The debtors right against the
third person must be
patrimonial or susceptible of
being transformed to
patrimonial value for the
benefit of the creditor.
Accion Pauliana

An action where the creditor files an

action in court for the rescission of acts
or contracts entered into by the debtor
designed to defraud the former
Creditors may rescind fraudulent
reductions of the properties of the
debtor which constitute the guaranty for
his debts
Counterpart in the Revised Penal Code
o Fraudulent insolvency (Art. 314,
All acts of the debtor which reduce his
patrimony in fraud of his creditors,
whether by gratuitous or onerous title
can be revoked by this action
New debts contracted by the insolvent
debtor are not included, although they
make the position of existing creditors
o Only acts which impair the assets
of the debtor are covered by the
o Not those which merely increases
his liabilities

Requisites that Must be Alleged in the

Complaint in Accion Pauliana
1. That the plaintif asking for rescission,
has credit prior to the alienation,
although demandable later

2. That the debtor has made a subsequent

contract conveying a patrimonial benefit
to a third person
3. That the creditor has no other legal
remedy to satisfy his claim, but would
benefit by rescission of the conveyance
to the third person
4. That act being impugned is fraudulent
5. That the third person who received the
property conveyed, if by onerous title,
has been an accomplice in the fraud.
Article 1178
Transmissibility of Rights
General Rule- Rights are transmissible
1. If the law provides otherwise
2. If the contract provides otherwise
3. If the obligation is purely personal
Ex. A lease his house to B and gave the option
to him to buy the house after 2 years. B
assigned his right to C who communicated to A
his desire to exercise the option to A. C may
exercise the option to buy the house.

Chapter 3
Different Kinds of Obligations
Classifications of Obligations
1. Primary Classification
a. Pure and conditional obligations
b. Obligations with a period
c. Alternative and facultative
d. Joint and solidary obligations
e. Divisible and indivisible
f. Obligations with a penal clause

2. Secondary Classification
a. Unilateral and bilateral obligations
b. Real and Personal obligations
c. Determinate and generic
d. Civil and natural obligations
e. Legal, conventional and penal
3. Classification according to Sanchez

a. By their juridical quality and

i. Natural according to
natural law
ii. Civil according to civil law
iii. Mixed according to both
natural and civil law
b. By the parties or subject
i. Unilateral or bilateral
ii. Individual or collective
iii. Joint or solidary
c. By the object of the obligation or
i. Specific or generic
ii. Positive or negative
iii. Real or personal
iv. Possible or impossible
v. Divisible or indivisible
vi. Principal or accessory
vii. Simple or compound
1. If compound
a. Conjuctive
at the same
b. Distributive
alternative or
d. By their juridical perfection and
i. Pure or conditional
ii. With a period
Pure and Conditional Obligations
Article 1179
Pure obligation

Is one which is not subject to any

condition and no specific date is
mentioned for its fulfilment and is
immediately demandable
Immediate demandability does not
mean instantaneous compliance


It is a future and uncertain event upon

which an obligation or provision is made
to depend

Term or Period

That which must necessarily come

whether the parties know when it will
happen or not

Conditional obligation

Kind of obligation which is subject to a

Whose efectivity is subordinated to the
fulfilment or non-fulfilment of a future
and uncertain event

Characteristic of a condition
1. Future and uncertain
2. Imposed by the will of a party and must
not be a necessary legal requisite of the
3. Although uncertain, must be possible
(Art. 1183)
4. Past but unknown
o The Past event is to be
designated as a basis of the
contract (Tolentino)
o What can be a condition is the
future knowledge or proof of a
past event unknown to the
parties, but not the event itself
Two principal kinds of condition
1. Suspensive condition
o the demandability of the
obligation is suspended until the
happening of a future and
uncertain event which constitutes
the condition
o the happening of the condition
gives rise to an obligation
o if the suspensive condition does
not happen, the obligation does
not come into existence
o acquisition of right
2. Resolutory condition
o The fulfillment of the resolutory
condition will extinguish an
obligation or right already existing
o Happening of the condition
extinguishes the obligation
o When rights must exist before a
condition can be performed
o Loss of right already acquired

Article 1181

Reiterates the distinction between a

suspensive and Resolutory condition

Article 1186
Requisites to apply this Article
1. The condition is suspensive

2. The obligor actually prevents the

fulfillment of the condition
3. He acts voluntarily or intentionally