This action might not be possible to undo. Are you sure you want to continue?
PART II – OBLIGATIONS 2) Nature and Effect of Obligation
According to the Object or Prestation Obligations to give; Obligations to do; Obligations not to do Liability of Damages Fraud – Dolo incidente; Dolo causante Neglignce – Delay – Mora solvendi, accipiendi, compensatio morae Contravention of tenor of obligation
PART I – INTRODUCTION TO LAW AND BUSINESS LAW
1) 2) 3)
Definition of Law and Business Law Sources of Business Law Characteristics of Business Law
PART II – OBLIGATIONS 1) In General
Definition Sources of Obligations
Law; Contracts; Quasi-Contracts; Delicts or Crimes; Quasi-Delicts
Essential requisites of obligation
Parties; object; Juridical tie or vinculum juris
PART III – GENERAL PROVISIONS ON CONTRACT
Contracts Defined Elements of Contract: Stages of A Contract Characteristics of Contracts: Classification of A Contract: (FROM) Contract Binds by Both Parties Cases Where Third person May Be Affected By a Contract Forms of Contracts Reformation of Instruments Interpretation Of Contracts Cause of Contracts
PART IV – DEFECTIVE CONTRACTS
Rescissible Contracts Voidable Contracts Unenforceable Contracts Void or inexistent contracts
INTRODUCTION TO LAW AND BUSINESS LAW
1. 2. 3.
Definition of Law and Business Law Sources of Business Law Characteristics of Business Law
The instructions that a person will learn. with its characteristics. As he learns the law. .Introduction to Law Preliminaries In the preliminaries. the sight of a human being in his everyday undertaking has to follow some. result to that consciousness of following the law. he can define it.
The infinite truth and infinite good is infinite beauty of God. . the Will – the object of which is the GOOD. the people can attain the final destiny by following the law. 2. The laws that contained the instructions of God given to us are the COMMANDMENTS. the human mind consists principally of two faculties: 1. In Philosophy. the Intellect – the object of which is the TRUTH. The person was created by God and destined for God.
simple and concise definition of law was defined by Sanchez Roman.” Edgardo Paras defined Law as “an ordinance of reason promulgated for the common good by Him who is in charge. JUST AND OBLIGATORY PROMULGATED BY LEGITIMATE AUTHORITY FOR THE COMMON OBSERVANCE AND BENEFIT. a Spanish Civilist and he defined Law as: “A RULE OF CONDUCT .Law The most basic.” .
. peaceful. things.Characteristics of Law 1. regulations that can create an orderly. harmonious relations among the people concerned so that in the end justice will prevail. A RULE OF CONDUCT Meaning any action. dictate of reason if regulated or gathered together could become a conglomeration of rules.
PROMULGATED BY LEGITIMATE AUTHORITY That is. . made known to those who are expected to follow it.Characteristics of Law 2. Sanggunian) is the law-making body. In a Republican State like the Philippines. we have three branches of government – legislative body (like Congress. the executive body is the implementing body and the judiciary as the enforcing body.
Characteristics of Law 3. (Black’s dict. regardless of sex. The dictum “Justice delayed is Justice denied” is commonly abused term on the relation of a criminally inclined poor person and a moneyed person on the treatment of the application of law. Obligatory means any duty binding parties to perform their agreement. age and status in life and to follow the law there should be equivalent punishment or penalties to enforce them. . creed. JUST and OBLIGATORY Treatment of Law should be equal. 1074). P.
Characteristics of Law 4. . FOR THE COMMON OBSERVANCE and BENEFIT The application of law should not be titled or favoring an individual but by the observance of all and the benefits that may be derived from it.
Congress comprising the House of Representatives and the Senate. LEGISLATIVE It consists of legal rights by a competent authority. the Legislative is the law-making body. being a democratic form of government. For provinces. the Sangguniang Panlalawigan for every province. the Sangguniang Pambayan or the local Municipal council. the Sangguniang Pambarangay. In the Philippines. For national government. For a town.Sources of Law 1. . For a Barangay level.
All laws must conform and comply with the provisions of the Constitution.Sources of Law 2. CONSTITUTION The fundamental law that governs a nation in its relation to its citizens. . otherwise it becomes unconstitutional.
All laws must conform and comply with the provisions of the Constitution. REGULATIONS AND RULINGS The fundamental law that governs a nation in its relation to its citizens. otherwise it becomes unconstitutional. ADMINISTRATIVE OR EXECUTIVE ORDERS. .Sources of Law 3.
. This is why they are part of the legal system in the Philippines. the Courts exists for stating what the law is. New Civil Code) Judicial decisions. part of the law since the Courts interpretation merely establishes the legislative intent. though not law. (Art. So. Judicial decisions. 8. it constitute in a way. though. JUDICIAL DECISIONS OR JURISPRUDENCE Judicial decisions or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. but not for giving it.Sources of Law 4. are part of the legal system in the Philippines still are not laws for if this were so. are evidence of what the law means. f an interpretation is placed by the Supreme Court upon a law.
JUDICIAL DECISIONS OR JURISPRUDENCE Thus. our country adhere to the Doctrine of Stare Decisis (Let it Stand). . the doctrine which in reality is “adherance to precedents” stated that once a case has been decided. then another case involving the same point at issue. if the Supreme Court being a Court of last resort. has decided that a certain law passed by Congress is constitutional. should be decided in the same manner. the law becomes binding and has its full force and effect. Therefore.Sources of Law 4.
if a person does not pass the gate. it runs counter to the custom of use of the door. Once a person uses the window for his entrance and exit. CUSTOM It consists of those habits and practices which through long and uninterrupted usage have become acknowledged and approved by society as binding rule of conduct. it has been a custom for a person to enter and exit a door. Thus. Even our Lord said as a good shepherd. . he is a thief for a marauder.Sources of Law 5.
the principle of justice and equity. opinions of text writers and even religion may also be sources of law. OTHER SOURCES To add. decisions of foreign tribunals.Sources of Law 6. .
.Kinds of Law 1. revealed or divulged to mankind by means of direct revelation like the Ten Commandments. DIVINE LAW It is formally promulgated by God.
right and equity by internal dictate of reason on our mind. Like for instance.Kinds of Law 2. NATURAL LAW Promulgated impliedly in our conscience and body. It is the divine interpretation in man in the sense of justice. it is better to do good than to do evil for being a God-fearing person. . fairness.
4. THIS CAN BE CLASSIFIED INTO: . HUMAN LAW Those promulgated by man to regulate human relations.Kinds of Law 3. PHYSICAL LAW Refers to the act of rules governing the action and movement of things like the law on gravity by Newton.
Constitutional Law It simply governs the relations between the State and its citizens.Classification of Human Law A. . 2. It includes the following: 1. GENERAL or PUBLIC LAW Body of rules which regulates the rights and duties arising from the relationship between the State and its inhabitants. International Law – consists of those rules and principles which govern the relations and dealing of nations with each other.
4. .Classification of Human Law GENERAL or PUBLIC LAW 3. 5. Criminal Law – guaranties the coercive power of the law so that it will be obeyed. Administrative Law – it fixes the organization and determines the competence of the authorities that execute the law and indicates to the individual remedies for the violation of his rights. Political Law – deals with the organization and operation of the governmental organs of the State and defines the relations of the state with the inhabitants of its territory. Governs the methods of trial and punishment of crimes.
It is defined as the mass of precepts which determines and regulate the relation of assistance.Classification of Human Law B. INDIVIDUAL or PRIVATE LAW Those law which govern the private relation person. It includes the following: 1. authority and obedience among the members of a society for the protection of private interests. . Civil Law – branch of law which has for its double purpose the organization of the family and the regulation of property.
Classification of Human Law INDIVIDUAL or PRIVATE LAW 2. trade or mercantile pursuits. 338) . Commercial Law – defined as a whole body of substantial jurisprudence applicable to the rights. intercourse and relation of persons engaged in commerce. (Black’s law dict.
P. 36) . (Ballantine Law Dict. as distinguished from Substantive law which creates.Classification of Human Law INDIVIDUAL or PRIVATE LAW 3. Procedural Law – defined as the branch of law which prescribes the method of enforcing rights or obtaining redress for their invasion. Procedural law otherwise known as Remedial Law. defines and regulate rights.
(Black Law Dict.Sources of Philippine Civil Code 1. 334). determining the defective rights and obligations with reference to persons. chapters and subheads and promulgated by legitimate authority. A civil code is a compilation of existing Civil Laws. things and civil acts. The New Civil Code of the Philippines – the collection of laws which regulates the private relations of the members of civil society. . scientifically arranged into books. titles.
Jurisprudence – there is need to mention that. jurisprudence in our system of government. Presidential decrees and other social legislation. cannot be considered as an independent source of law. 3. . but the Court’s interpretation of a statute that constitute part of the law as of the date it was originally passed since the Court’s construction merely establishes contemporaneous legislative intent. that the interpreted law could take into effect.Sources of Philippine Civil Code 2. Special laws or statutes.
Sources of Philippine Civil Code
Customs and Traditions – Custom is a judicial rule which results from a constant and continuous uniform practice by the members of a social group. The Code Commission itself – A Code commission of five members was created by Pres. Manuel Roxas through Exec. Order No. 48 dated Mar. 20,1947 in view of the need of revision in keeping with progressive modern legislation. The Civil Code was finished on Dec. 15, 1947 and Congress approved the draft on June, 1949.
Books of the Civil Code
Book I – Person and Family Relations
This was re-codified as Family Code of the Philippines embodied in Exec. Order No. 209 as amended by Exec. Order No. 227. The Family Code effectuates the long-felt reforms and changes to the Civil Code provisions on Family relations consistent with Filipino values, customs and traditions vis-àvis recent developments in the social-cultural scene. (Pineda, Family Code).
Books of the Civil Code
Book II – Property, Ownership and its modifications.
Book III – Different Modes of Acquiring Ownership
Book IV – Obligations and Contracts Book V – Special contracts
The Civil Code begins with preliminary titles and ends up with the repealing clause. This module is taken from the Civil Code of the Philippines from Articles 1156 to 1422 inclusive.
Concept of Commercial Law
The commercial laws, excepting the Code of Commerce are designated by the legislator by any mark or sign, which determines their nature and their commercial function, but they derive their mercantile character from their subject matter or their contents. In order to determine whether a particular law or provision of law is commercial, it is necessary to first inquire if its purpose is to govern a relation pertaining to commercial matters and in this inquiry, the Code of Commerce should be principally considered, because it defines the acts and the person having a mercantile character. Generally, all laws referring to merchants and to commercial transactions are commercial in nature. (Agbayani, Vol. 1 p 2)
Code of Commerce
The Code of Commerce is only one of the remaining laws
in relation to business that has been heavily modified and repealed by subsequent laws which originally divided into four books.
BOOK ONE BOOK TWO BOOK THREE BOOK FOUR
Merchants and Commerce in General Special Commercial Contracts Maritime Commerce Suspension of payments, Bankruptcy and Prescription of Actions.
Subsequent Repealing Legislation
The following are among the important special laws
which repealed either expressly or impliedly certain portions of the Code of Commerce.
The Corporation Code – which repealed principally the provision on sociedad/anonimas on Book Two and the Corporation law; The Negotiable Instrument Law which repealed principally the provisions of Promissory; Notes and Bill of Exchange in Book Two
Subsequent Repealing Legislation 3. 5. . 4. The Securities Act. which repealed the provisions on Suspension of payments and Bankruptcy in Book four. which repealed the provisions on Fire and Marine Insurance on books two and three. which repealed the provisions on Commercial Houses in Book Two. The Insolvency law. Insurance Law.
The Public Service Act. Sales. the Law on the Use of Duly Marked Bottles. the Central Bank Act. Casks. Loan. and other Similar Containers. the Salvage law. The Rural Act. Other legislation. the General Banking Act. the Patent law. Deposit and Guaranty in Book two. Carriage of Gods by Sea Act.Subsequent Repealing Legislation 6. . the Chattel Mortgage law. the Usury law. and the Law on Monopolies and Combinations. in addition to the foregoing special laws. the General Bonded Warehouse Act. there wee other laws and now form part of the Commercial laws of the Philippines: The Warehouse Receipts law. 7. Boxes. the Copyright law. Agency. The New Civil Code which repealed the provisions on Partnership. Barrels. the Business Names Law. the Trade-mark law. Kegs.
transfers. commercial registries. a. Those contained in Book one governing merchants and commerce in general. loans. except such portions thereof as have been repealed or modified by the New Civil Code and other legislation.Subsequent Repealing Legislation 8. deposit . commercial contracts on transportation overland. Provisions of the Code of Commerce still in force. sales. Those contained in Book Two governing joint accounts. agency. transfers of non-negotiable credits. and letters of credits but not those relating to partnership. books and bookkeeping of commerce and general provisions relating to commercial contracts. b.
(Agbayani. Vol. c. Those contained in Book Three governing maritime commerce but not those relating to marine insurance which have been repealed. 1. pp3-4) . All the provisions in Book four are no longer in force as they have likewise been repealed.Subsequent Repealing Legislation 8. Provisions of the Code of Commerce still in force.
If he has legal capacity to engage in commerce. and b. Some provision of the code of Commerce which are pertinent in our study in business in general: a. He habitually engage thereto . MERCHANTS – Merchants may be natural or juridical person: In the case of natural person. he is a merchant: a.Subsequent Repealing Legislation 9.
He is not subject to parental authority.Subsequent Repealing Legislation A natural person has legal capacity to engage in commerce. . b. 1. It is organized in accordance with existing legislation and c. If he has reached the age of twenty – one years. In the case of juridical person. Its engaging in commerce is habitual. He has free disposition of his property. and 3. 2. it is a merchant: a. It is a commercial and industrial company.
There must be continuity of repetition of commercial acts. Habituality in engaging in commerce – Habituality in engaging in commerce is attained when there exists series of acts of commerce or commercial dealings.Subsequent Repealing Legislation b. However. a single act may be deemed habituality in engaging in commerce in the way of the following acts: 1. or . Throwing open to the public a business entity establishment.
posters and similar means of the opening of an establishment for commercial acts or dealings with the public. Where a foreign corporation appoints an agent as required by law. . Announcement through circulars. handbills.Subsequent Repealing Legislation 2. or 3. A series of acts consisting of investigating and preparations of project studies implying an intention to engage in commerce and comes to reality. newspaper. 4.
. Absolute Disqualifications – The following may not engage in commerce nor hold office or have any direct administrative or financial intervention in commercial of industrial companies: 1.Subsequent Repealing Legislation c. Those suffering the penalty of civil interdiction primarily because they are deprived of the right to mange and to dispose of their properties inter-vivos or during their lifetime.
3.Subsequent Repealing Legislation 2. . Those judicially declared insolent while they have not obtained their discharge. Those who in account of special laws or provisions cannot engage in commerce like incapacitated persons or employees covered by the Civil Service law.
Subsequent Repealing Legislation
d. Relative Disqualifications – These are persons who
cannot engage in commerce in places where they exercise their functions.
1. Justices, judges, and officials of the Prosecutor’s office in active service, except Municipal Mayors; municipal judge; municipal prosecuting attorney’s and those who temporarily discharge judicial or prosecuting duties; Administrative, economic or military heads of districts, provinces or post;
Subsequent Repealing Legislation
3. Those employed in the collection and administration of funds of the State appointed by the Government except those who administer and collect under contract and their representative. Stock and commercial brokers of whatever class; Those who under special laws and provisions cannot trade in specified territory.
Subsequent Repealing Legislation
e. Commercial Registry
A commercial registry is a public office that takes charge of the registration of merchants, business associations, vessels and documents of commercial importance. The purpose of a commercial registry is to furnish necessary information and reliable data to any interested party so as to promote and facilitate trade and commercial transaction.
Subsequent Repealing Legislation
f. Books of Merchants
1. Merchants must keep the following books:
a. b. c. d. Book of inventories and balances; A journal; A ledger; Book or books for copies of letters or telegrams; and other books that may be required by special laws.
Subsequent Repealing Legislation
f. Books of Merchants
2. Corporation are bound to keep: a. b. c. Record of all business transactions; Minutes of all meetings of directors; Minutes of all meetings of stockholders; and Stock and transfer books.
Registration is compulsory:
In case of vessel of more than three (3) tons gross in use in Philippine waters;
In case of partnership whose immovable property is contributed by any partner to a common fund. In case of business names under the Business Names Law.
6. In case of vehicles with the Land Transportation Office. In case of ship agent. 5. .Registration is compulsory: 4. In all other cases required by law.
3. 2. Securities and Exchange Commission – for registration of partnership and Corporation. . as well as shattel mortgage. 4. Office of Register of deeds – for registration all transaction affecting lands.Commercial Registries in the Philippines 1. cities or province – for local permits and licenses. Bureau of Domestic Trade – for registration of business names and merchants to avoid duplication of trade names. Local municipalities.
trademarks and service marks.Commercial Registries in the Philippines 5. Land Transportation Office for registration of patents and designs as well as trade names. The MARINA (Marine Industry Authority) – for registration of vessels and other transaction affecting vessels. trademarks and service marks. . 7. 6. Intellectual property Office for registration of patents and design as well as trade names.
Office of Air Transportation Administration for registration of aircrafts. Board of investment for registration of pioneer and registered enterprises and with corporations having foreign entity participation. 9. .Commercial Registries in the Philippines 8. Bureau of Public Library – for registration of copyrights. 10.
Public Remedial Law – affords a remedy in favor of the State against the individual. 2. like Habeas Corpus. like criminal procedure or in favor of the individual against the State. Private Remedial Law – affords a remedy in favor of an individual against another individual.Kinds of Procedural Law 1. like the civil procedure. .
(Alvero V. which is a combination of rules promulgated by the Supreme Court for the easy. dela Rosa. . 76 Phil 428). adequate and effective compliance with the law. orderly.Philippine Remedial Law Principally contained in the Rules of Court. The Rules of Court have the force and effect of law.
Art. (Const. par. 1. Battung 63 Phil 1054) JUDICIAL POWER Includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable. Sec. body or tribunal vested with a portion of the judicial power. COURTS DEFINED – It is the entity. VIII. (Lontok V. and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.2) .
5. 4. Supreme Court Sandigan-bayan Court of Appeals Regional Trial Court. 3. and Metropolitan / Municipal Trial Courts .Different Courts of Justice 1. 2.
On the sources of obligation.Lesson 1: General Provisions on Obligation The definition of obligations establishes the unilateral act of the debtor either to give. the main sources are really Law and Contracts. . to do or not to do as a patrimonial obligation. It means that the debtor has the obligation while the creditor has its rights. The other sources are also established by law.
Justice J. L. may obtain satisfaction from the assets of the latter. Reyes) . An obligation is a juridical necessity to give. and. ART. OBLIGATIONS as defined by ARIAS RAMOS is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct. 1156. B. to do or not to do. (Approved by Mr. in case of breach.
1. • • • Characteristics of patrimonial obligations: They represent an exclusively private interest.The obligations referred to in our manual is a patrimonial obligations that is. Meaning of Juridical Necessity – it means the rights and duties arising from obligation are legally demandable and the courts of justice may be called upon through proper action to order the performance. the economic equivalent obtained at the patrimony of a debtor. . those obligations with pecuniary value or assessable in terms of money. They exist a power to make effective in case of non-fulfillment. 1. They create ties that are by nature transitory.
Action means an ordinary suit in court of justice by which one party prosecutes another for the enforceable or protection for a right or a prevention or redress of a wrong ( Sec. If after demand. . Example – Gaya bought refrigerator from Tito but Gaya did not pay the refrigerator. Tito can sue Gaya in Court either to demand payment or for recovery of the refrigerator. 1. Gaya still did not pay. Rules of court ).
doing or not doing something. known as debtor or obligor. c) An object or the prestation which may consist in the act of giving.3. who has the power to demand the prestation. known as the creditor or oblige. who is bound to perform the prestation. Essential requisites of an obligation – An active subject. a) . It is the legal tie which constitutes the devise of obligation… the coercive force which makes the obligation demandable. d) The vinculum juris or the juridical tie between the two subjects by reason of which the debtor is bound in favor of the creditor to perform the prestation. It is the legal tie which constitutes the source of obligation—the coercive force which makes the obligation demandable. b) A passive subject.
Juridical Tie Debtor Or Obligor Illustration: To give. The object or prestation is the GE refrigerator and the obligation to deliver is the legal tie or the vinculum juris which binds Gaya and Tito. Gaya did not deliver the refrigerator. to do or not to do Creditor or Obligee Gaya enters into a contract of sale with Tito who paid the purchase of a GE refrigerator. Gaya is the passive subject or debtor and Tito is the active subject or creditor. .
On the other hand. This is also known as a unilateral obligation. in this case. delicts or quasi-delicts. quasi-contracts. Distinctions between Obligations and Contracts: Contract is the only one of the sources of obligation. delivered the refrigerator and Tito did not pay. then Tito becomes the debtor who is bound to pay while Gaya is the creditor who has the right to demand the prestation. Contract is a bilateral obligation while obligation is a unilateral obligation. the delivery of the refrigerator. . 4. the obligation of the debtor to fulfill or comply his commitment. that is. if Gaya. All contracts are obligations while not all obligations are contracts. while obligations have other sources like law.
Civil obligations as distinguished from Natural obligations – Civil obligations derive their binding force from positive law. Natural – the fulfillment cannot be compelled by court action but depends on the good conscience of debtor.5. Civil can enforced by court action of the coercive power of public authority. Natural Obligation derives their binding effect from equity and natural justice. .
Obligations derived from law are not presumed. 1157. and as to what has not been foreseen. Only those expressly determined in this Code or in special laws are demandable. and Quasi-delicts. 1158. Acts or omissions punished by law. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Obligations arise from: Law. by the provisions of this Book. Contracts. Quasi-contracts. and shall be regulated by the precepts of the law which establishes them. (1091a) . ART. (1089a) ART. (1090) ART.
and of the pertinent provisions of Chapter 2. Preliminary Title. subject to the provisions of article 2177. ART. (1093a) . on Human Relations. Title XVIII of this Book. (1092a) ART. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1. Title XVII. of this Book. 1162. regulating damages. ART. and of Title XVIII of this Book. and by special law. 1160.
. 1158 refers to the legal obligations or obligations imposed by specific provisions of law. (Art. LAW as a source of obligations – The provisions of Art. it is the duty of every person having an income to pay taxes. New Civil Code) And under the National Internal Revenue Code. Examples: It is the duty of the Spouses to support each other.Source of Obligations 1. expressly or impliedly in the law. 291. which means that obligations arising form law are not presumed and that to be demandable must be clearly provided for.
morals. (Art. clauses terms and conditions as. public order or public policy. they may deem convenient. CONTRACT as a source of obligations – Contract as defined in Art. . For examples: A contract of lease was executed between Gaya as the lessee and Tito as the lessor for the rent of an apartment. 1159). the agreement should be complied with in good faith. thus. Obligations arising from contracts have the force of law between the contracting parties because that which is agreed upon in the contract by the parties is the law between them. 1306. provided that are not contrary to law. NCC is the meeting of minds between two person whereby one binds himself with respect to the other.Source of Obligations 2. it states that the contracting parties may establish such stipulations. 1305. good custom. it does not mean that contract are over and above the law. NCC. Contracts are with the limitations imposed by law in Art. Although contracts have the force of law.
contract is a civil obligation while quasi-contract is a natural obligation. consent is essential requirement for its validity while in quasi-contract. . there is no consent as the same is implied by law. NCC) Contracts and quasi-contracts distinguished: in a contract. (Art. Quasi-contract is the juridical relation resulting from a lawful. voluntary and unilateral act which has for its purpose the payment of indemnity to the end that no one shall unjustly enrich or benefited at the expense of another. QUASI-CONTRACTS as a source of obligations The ‘quasi’ literally means ‘as if’. 2142.Sources of Obligations 3.
(Art. 2144. Solutio Indebiti (Payment by mistake) It is the juridical relation which arises when a person is obliged to return something received by him through error or mistake. 000. he has the obligation to reimburse Ramon for the expenses incurred by him and to pay him for his services. NCC) ExampleVictor.00 excess because there was payment by mistake. Ramon. 000. 000.00. It is bases on the principle that no one shall enrich himself at the expense of another. a neighbor of Victor managed the farm thereby incurring expenses. a wealthy landowner suddenly left for abroad leaving his livestock farm unattended.00. Negotiorum gestio (management of another’s property) It is the voluntary management or administration by a person of the abandoned business or property of another without any authority or power from the latter. . Ian has the obligation to return the P1. 2. When Victor returns. By mistake. ExampleArvin owed Ian the sum of P1.2 Kinds of Quasi-contracts 1. Arvin paid P2.
In addition to whatever penalty that the Court may impose. Indemnification – the consequential damages which includes the payment of other damages that may have been caused to the injures party.Sources of Obligations 4. for Mario to pay the value (reparation) of the gold wrist watch. Illustration: Mario was convicted and sentenced to imprisonment by the Court for the crime of theft. . when such object cannot be returned to the injured party. Mario may also be ordered to return (restitution) the gold wrist watch to Rito. of Rito. the gold wrist watch. Reparation – which is the payment by the offender of the value of the object of the crime. If restitution is no longer possible. Mario shall also pay for damages (indemnification) suffered by Rito. Civil liability arising from delicts: Restitution – which is the restoration of or returning the object of the crime to the injured party. In addition to either restitution or reparation. While an act or omission is felonious because it is punished by law. the criminal act gives rise to civil liability as it caused damage to another. DELICTS or acts or omissions punished by law as a source of obligations Acts or omission punished by law is known as Delict or Felony or Crime.
QUASI-DELICTS as a source of obligations Concepts of Quasi-Delict – Quasi-delict is one where whoever by act or omission causes damage to another. Then Pedro becomes liable for damages based on quasi-delict. is obliged to pay for the damage done. inflicting upon him physical injuries.Sources of Obligations 5. there being fault of negligence. . if there is no pre-existing contractual relation between the parties. who is walking on the sidewalk of the street. 2176) ExampleIf Pedro drives his car negligently and because of his negligence hits Jose. (Art. Such fault of negligence.
While an act or omission is felonious because it is punished by law. the criminal act gives rise to civil liability as it caused damage to another. DELICTS or acts or omissions punished by law as a source of obligations Acts or omission punished by law is known as Delict or Felony or Crime. .Sources of Obligations 6. when such object cannot be returned to the injured party. Civil liability arising from delicts: Restitution – which is the restoration of or returning the object of the crime to the injured party. Reparation – which is the payment by the offender of the value of the object of the crime.
There must be damage or injury caused to another.Requisites of a quasi-delicts There must be fault of negligence attributable to the offended. . There is no pre-existing contract.
whereby such other person suffers injury. that degree of care. the following are necessary: a duty on a party of the defendant to protect the plaintiff from the injury of which the letter complains. . a failure to perform that duty. Negligence Defined – is the failure to observe for the protection of the interests of another person. (Judge Cooley) Test of Negligence – For the existence of negligence. and an injury to the plaintiff through such failure. precaution and vigilance which the circumstances justly demand.
Culpa contractual or negligence in the performance of a contract.Kinds of Negligence Culpa Aquiliana. . also known as quasi-delict or negligence as a source of obligation.
As against the owner of the truck. a passenger in the truck. The court found both drivers negligent. and the plaintiff. although he was not in the car but which was being driven by his 18 year old son and in which members of his family were then riding. a passenger truck and private automobile collided. 56 Phil 177- While trying to pass each other on a narrow bridge. while as against the owner of the car there was culpa Aquiliana. Gutierrez. while the liability of the owner of the car was based on Quasidelict of the Civil Code. was injured. . The owner of the passenger truck was made a defendant. although a driver was driving the truck and the owner of the car was also made a defendant. basing basing the liability of the owner of the truck to the plaintiff on the contract of carriage. An illustration showing this difference is founding Gutierrez vs. there was Culpa contractual.
1664. (1905) ART. the creditor. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family. . (1904a) ART. in addition to the right granted him by article 1170. When what is to be delivered is a determinate thing. 1165. However.LESSON 2: NATURE AND EFFECT OF OBLIGATIONS ART. may compel the debtor to make the delivery. 1163. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. unless the law or the stipulation of the parties requires another standard of care. he shall acquire no real right over it until the same has been delivered to him.
(1097a) . If the thing is indeterminate or generic. If the obligor delays. he may ask that the obligation be complied with at the expense of the debtor. he shall be responsible for any fortuitous event until he has effected the deliver. 1166. The obligation to give a determinate thing includes that of delivering all its accessions and accessories. (1906) ART. or has promised to deliver the same thing to two or more persons who do not have the same interest. even though they may not have been mentioned.
like a person who is obliged to deliver a determinate horse to another should. . To preserve or take care of the thing with the proper diligence of a good father of a family. pending its delivery.Obligations of the Debtor To Give a determinate thing1. preserve it by taking care of the same as if the horse is his own. of the time and of the place. It means the ordinary diligence that a prudent man would exercise in taking care of his own property taking into consideration the nature of the obligation.
rice. industrial or civil. Natural .g. E. prices of leases of lands and other similar income. Civil . Industrial.derived by virtue of juridical relations. Kinds of fruits: Natural.spontaneous product of the soil.Obligations of the Debtor To Give a determinate thing To deliver the object or thing when the obligation to deliver arises.g. vegetables. sugar cane.g. E. . rents of a building.produced by lands of any king through cultivation and labor. E. the young and other products of animal. including: 1. Fruits of the thing if any. plants on lands without he intervention of man. tress.
Accessories – are those things which are joined attached to the principal object as ornament or to render it perfect.Obligations of the Debtor To Give a determinate thing2. . Example Radio attached to a car. Accession – is the right pertaining to the owner of a thing over its products and whatever is attached thereto either naturally or artificially. Example Accretion which refers to the gradual and addition of sediment to the shore by action of water. Accessions and accessories. or key to a car.
However. (Art. B does not acquire ownership over it. NCC) Example – a binds himself to sell his horse to B for fro P10. No date nor condition is stipulated for delivery of the horse. he shall acquire no real right over it until the same have been delivered to him. To be liable for damages in case of breach of obligation (Art. 1164. 000. NCC) When creditor acquire a right to the thing to be delivered and its fruits- The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. if B has not paid the horse. 1170. A has right to the colt. . the horse gave birth to a colt.Obligations of the Debtor To Give a determinate thing3. Before delivery. Later.
(Art. NCC) 3. NCC) 1. (Art. 1174. Fortuitous Events – those events which could not be foreseen or which though foreseen were inevitable. 1460. NCC) 2. 1460. Indeterminate or generic thing – A thing is generic when it refers to a class or thing or genus and cannot be designated with particularity. . (Art.Definition of terms: Determinate thing – a thing is determinate when it is particularly designated or physically segregated from all others from the same class.
( 1098 ) . This same rule shall be observed if he does it in contravention of the tenor of the obligation. the same shall be executed at his cost. Furthermore. If a person obliged to do something fails to do it. Art. it may be decreed that what has been poorly done be undone. 1167.
or When the obligor poorly performs the obligation. The creditor has the right to secure the services of third person to perform the obligation at the expense of the debtor under the following instances: When the debtor fails to do the obligation. . When the debtor performs the obligation but contrary to the tenor.Obligation of the debtor To Do Being a personal positive obligation.
it shall also be undone at his expense. Should A construct a fence in violation of the agreement. When the obligation consists in not doing. of not doing something. the remedy of the injured party is for an action of damages. . If the debtor does what has been forbidden him to do. can bring an action to have the fence remove at the expense of A. ExampleA bought a land from B. ART. and the obligor does has been forbidden him. If it is impossible to undo what was done. B. 1168. the obligee can ask the debtor to have it undone. (1099a) Obligation of the Debtor NOT To Do – This is negative personal obligation which is consisting of an obligation. It was stipulated that A would not construct a fence in a certain portion of his land adjoining that land sold by B.
However. or ( 3 ) When demand would be useless. Those oblige to deliver or to do something incur in delay from the time the obligee judicially or extra . as when the obligor has rendered it beyond his power to perform. ART. the demand by the creditor shall not be necessary in order that delay may exist: ( 1 ) When the obligation or the law expressly declares. neither party incurs in delay if the other does not comply in a proper manner with what is incumbent upon him. 1169. ( 1100a ) . From the moment one of the parties fulfills his obligation. In reciprocal obligations. delay by the other begins.judicially demands from theme the fulfillment of their obligation. or ( 2 ) When from the nature and the circumstances of the obligation it appears that the destination of the time when the thing is to be delivered or the service is to rendered was controlling motive for the establishment of the contract.
only when Tito makes a judicial or extra-judicial demand and from such date of demand when Gaya is on default or delay. Example – Gaya obliged herself to deliver a determinate horse to Tito on June 20. Is Gaya already on delay on June 20.Delay ( Mora ) means a legal delay or default and it consists of failure discharge a duty resulting to one’s own disadvantaged. Gaya failed to delivered on the agreed date. . this year. The debtor incurred delay if: The debtor fails to perform his obligation when it falls due. and A demand has been made by the creditor judicially or extra judicially.
default or delay by the debtor will automatically arise. When the obligation expressly so provides The mere fixing of the period is not sufficient to constitute a delay. An agreement to the effect that fulfillment or performance is not made when the obligation becomes due. However. there are instances when the demand by the Creditor is not necessary to place the debtor on delay: 1. .
Gaya binds herself to sew the wedding gown of Maya to be used by the latter on her wedding date. Gaya will be in delay because time of the essence. 3. and demand is not necessary in order that the taxpayer is liable for penalties. When the law so provides The express provision of law that a debtor is in default. Example. For instance. taxes must be paid on the date prescribed by law. When time is of the essence Because time is the essential factor in the fulfillment of the obligation. . Even without demand. Gaya did not deliver the wedding gown on the date agreed upon.2.
from the moment one of the parties fulfills his obligation. then delay by the buyer begins and vice versa. if the seller delivers the object to the buyer and the buyer does not pay. . In a reciprocal obligation. Like when the object of the obligation is lost or destroyed through the fault of the debtor. 5.4. When demand would be useless When the debtor cannot comply his obligation as when it is beyond his power to perform. if the buyer pays and the seller did not deliver the object. demand is not necessary. in a contract of sale. then the seller is on delay. delay to the other begins For instance.
Kinds of delay – Mora solvendi – delay on the part of the debtor. . like when the creditor unjustifiably refused to accept payment at the time it was due. is in delay. Compensatio morae – delay both parties in a reciprocal obligation. Mora accipiendi – delay on the part of the creditor.
ART. Those who in the performance of their obligations are guilty of fraud. (1101) ART. or delay. (1130) . Any waiver of an action for future fraud is void. negligence. Responsibility arising from fraud is demandable in all obligations. Responsibility arising from negligence in the performance of every king of obligation is also demandable. are liable for damages. 1171. according to the circumstances. (1120a) ART. and those whoin any manner contravene the tenor thereof. 1172. but such liability may be regulated by the courts. 1170.
(1104a) . If the law or contract does not state the diligence of which is to be observed in the performance.ART. shall apply. paragraph 2. of the time and of the place. that which is expected of a good father of a family shall be required. When negligence shows bad faith. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons. 1173. the provisions of articles 1171 and 2201.
Sources of liability for damages: 1. Negligence (culpa) – consists in the omission by the obligor of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person. 2. (Art. NCC) . 1173. Fraud (dolo) – is the intentional deception made by one person resulting in the injury of another. fraud incident to the performance of a pre-existing obligation. The fraud referred to is incidental fraud. of the time and of the place. that is.
delay will occur. . Delay (Mora) – like when there has been judicial or extra- judicial demand and the debtor does not comply his obligation.Sources of liability for damages: 3. like when a landlord fails to maintain a legal and peaceful possession of a tenant being leased by the latter because the landlord was not the owner and the real owner wants to occupy the land. 4. In contravention of the tenor of the obligation – refers to the violation of the terms and conditions or defects in the performance of the obligation. there is contravention of the tenor of the obligation.
Sources of liability for damages:
3. Delay (Mora) – like when there has been judicial or extra-
judicial demand and the debtor does not comply his obligation, delay will occur.
4. In contravention of the tenor of the obligation – refers to
the violation of the terms and conditions or defects in the performance of the obligation, like when a landlord fails to maintain a legal and peaceful possession of a tenant being leased by the latter because the landlord was not the owner and the real owner wants to occupy the land, there is contravention of the tenor of the obligation.
Other sources of liability for damages –
Loss of the thing with the fault of debtor.
Deterioration with the fault of debtor. (Art. 1189)
Kinds of Damages
Moral damages – include physical sufferings, mental anguish, fright, serious anxiety, besmirched reputation, wounded feeling, moral shock, social humiliation and similar injury.
2. Exemplary damages – imposed by way of example or
correction for the public good.
Like in quasi-delicts, if the defendant acted with gross
negligence. (Art. 2231, NCC)
Kinds of Damages
3. Nominal damages – are adjudicated in order that a right
of the plaintiff, which has been violated by the defendant, may be vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him. (Art. 2221, NCC)
4. Temperate or moderate damages – are more than
nominal but less than compensatory damages may be recovered when the courts finds that its amount cannot, from the nature of the case, be proved with certainty. Pecuniary loss means loss of money, or of something by which money or something of money value may be acquired. (Black Law Dict. P. 1131)
Kinds of Damages
5. Actual or compensatory damages – except as provided
by law, or a stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. (Art. 2199, NCC)
Damages may be recovered:
For loss or impairment of earning capacity in cases of temporary or permanent personal injury; For injury, to the plaintiff’s business standing or commercial credit.
Kinds of Damages
6. Liquidated damages – are those agreed upon by
parties to a contract to be paid in case of breach thereof. (Art. 2226, NCC)
. Dolo – liability cannot mitigated by the courts. 2. Dolo – fraud must be clearly proved. Culpa – presumed from breach of contractual obligation. Culpa – may be reduced according to circumstances. Culpa – waiver may in some cases be allowed.Distinguish Fraud (Dolo) from Negligence (culpa) 1. 3. Dolo – waiver of liability of future fraud is void. 4. Dolo – there is deliberate intent to cause damage or injury. Culpa – ther is no deliberate intent to cause damage.
1174. or when the nature of the obligation requires the assumption of risk. no person shall be responsible for those events which could not be foreseen. though foreseen. Except in cases expressly specified by the law. ART. or which. or when it is otherwise declared by stipulation. were inevitable (1105a) .
A. war. is now similar with force majuere or acts of man such as conflagration. etc. The occurrence makes it impossible for the debtor to fulfill the obligation on a normal manner. Fortuitous even – is an event which cannot be foreseen which though foreseen is inevitable. etc.R. 1.C. earthquake. and the obligor did not take part as to aggravate the injury of the creditor. G. lightning. robbery. Requisite necessary to constitute fortuitous event The failure of the debtor to comply with the obligation must be independent from the human will. 42926) . Fortuitous event proper are acts of God such as volcanic eruption. (Vasquez v.
Gaya cannot be held responsible for the destruction of the car. As a general rule. . Before the arrival of the period.2. hence her obligation to deliver is extinguished. no person shall be held responsible for fortuitous events Example – Gaya obliged herself to deliver a determine car to Tito on Dec. 30. 1998. the car was struck by lightning and was totally destroyed.
a. c. b. The debtor is guilty of default or delay. Exceptions (when the person is responsible despite the fortuitous even).NCC ) The thing to delivered is generic.NCC ) The debtor is guilty of concurrent negligence. 1169. such as: The debtor is guilty of fraud. ( Art. 1165. When the law expressly so provides. ( Art. An example of this is a contract of insurance. 1170. (Art. When the nature of obligation requires the assumption of risk. negligence or in contravention of the tenor of the obligation. When declared by stipulation. . NCC) The debtor has proved to deliver the same thing to two or more persons who do not have the same interest.
B. 3. 2. 4. Circular No. 905 suspends the ceilings in the usury law. *The rate which is prescribed by law. . *The rate which is agreed upon by the parties but which rate is within the rate authorized by law. Conventional Legal Interest Lawful Interest Usurious Interest *The rate which is agreed upon by the parties. parties can agree as to the rate of interest. *The rate which is in excess of the maximum rate of interest allowed by law. 1175. Note: C. Kinds of interest 1. ART. Usurious transaction shall be governed by special laws. Hence.
1176.ART. The receipt of the principal by the creditor without reservation with respect to the interest. shall give rise to the presumption that said interest has been paid. (1110a) Presumption means “the inference as to the existence of a certain fact which if not contradicted is considered as true. shall likewise raise the presumption that such installments have been paid. The receipt of a later installment of a debt without reservation as to prior installments.” .
. shall give rise to the presumption that the said interest has been paid. hence. 2. it is considered as a fact. Receipt of the principal.The presumption in the above article is a disputable presumption. without reservation as to the interest. When the creditor issues a receipt of a later installment of a debt without reservation as to prior installment is presumed to have been paid. whereby one which can be contradicted by presenting proof to the contrary while a conclusive presumption does not admit any evidence or proof. Presumption under this article: 1.
except such as are exempt by law from execution. The creditors. may exercise all the rights and bring all the actions of the latter for the same purpose. to levy by attachment and execution upon all the property of the debtor. after having pursued the property in possession of the debtor to satisfy their claims. . except. 1177. save those which are inherent in his person. 3. they may also impugn the acts which the debtor may have done to defraud them. (1111) Rights of Creditors – In order to satisfy their claims against the debtor. such as are inherently personal to him. creditors have the following successive rights: 1. ART. to exercise all the rights and actions of the debtor. 2. and to ask for the rescission of the contracts made by the debtor in fraud of their rights.
Subject to the laws. except in the following cases: 1. if there has been no stipulation to the contrary. 2. (1112) As a rule. When the law so provides. ART. 3. all rights acquired in virtue of an obligation are transmissible. When the parties stipulate otherwise – by agreement of parties that the rights acquired by them will not be transmitted to any other person. When the obligation is purely personal in nature. 1178. . all rights acquired in virtue of an obligation are transmissible.
Alternative. Divisible. Solidary or several or in solidum. 10. . 2. With a period. Pure. With a penal clause. 4. Conditional. Joint. 9. 3. Indivisible.LESSON 3: Kinds of Obligations Classification of Obligations: The Civil Code classifies obligations primarily into: (PU CO PE ALFA JOS DIP) 1. 6. 7. 8. 5. Facultative.
) b.) Unilateral and bilateral.) c. legal. determinate and generic. however. Other provisions of the Civil Code. conventional and penal. real and personal . impliedly admit other classes of obligations. to wit: a.) d.
(1113) . without prejudice to the effects of the happening of the event. or upon a past event unknown to the parties. is demandable at once. Every obligation which contains a resolutory condition shall also be demandable. Every obligation whose performance does not depend upon a future or uncertain event. Section I. 1179. – Pure and Conditional Obligations ART.
Instances when obligations immediately demandable: It is a pure obligation. 3. Pure Obligation – when the obligation contain no term or condition whatever upon which depends the fulfillment of the obligation contracted by the debtor. . 2.1. It is subject to resolutory period. It is immediately demandable and there is nothing to exempt the debtor from compliance therewith. 1. It is subject to a resolutory condition. Example – Gaya obliged herself to pay her loan of P1.000 to Tito on demand.
the remedy of the creditor is to ask the Court to fix the period of payment. .2. ART. 600. When the debtor binds himself to pay when his means permits him to do so. it becomes an obligation with a period. thus.” It was held that the conditional obligation is void. because the collection would be impossible. subject to the provisions of article 1197. Conditional Obligations – one which is subject to a condition of one whose performance depends upon a future or uncertain events or upon past event unknown to the parties. the obligation shall be deemed to be one with the period.00) and I am to pay my debt to Arvin as soon as possible or as soon as I have the money.(n) Example – A promissory note states that “This is to acknowledge receipt of sum of One thousand Six Hundred pesos (P1. 1180.
If the obligation is divisible. Impossible conditions. the acquisition of rights as well as the extinguishment or loss of those already acquired. 1181. 1182. ART. (1114) ART. (1116a) . those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. the conditional obligation shall be void. If it depends upon chance or upon the will of a third person. The condition not to do an impossible thing shall be considered as not having been agreed upon. shall depend upon the happening of the event which constitutes the condition. the obligation shall take effect in conformity with the provisions of this code. In conditional obligations. (1115) ART. that part thereof which is not affected by the impossible or unlawful condition shall be valid. When the fulfillment of the condition depends upon the sole will of the debtor. 1183.
ART. (1118) ART. 1186. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed. 1184. bearing in mind the nature of the obligation. (1117) ART. 1185. or if it has become evident that the event cannot occur. the condition shall be deemed fulfilled at such time as may have probably been contemplated. (1119) . The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. If not time has been fixed.
The obligation is only demandable upon the happening of the condition that is. Suspensive and Resolutory Suspensive – the happening of the condition gives rise to an obligation. .Kinds or classifications of condition: 1. Example: Arvin binds himself to lend his only car to Ian until the latter passes the CPA Board. if Tito marries Gaya. Example: Maya binds herself to deliver a determinate car to Tito if he marries Gaya. The obligation to lend is immediately demandable. Resolutory – the happening of the condition extinguishes the obligation already existing. Ian is now obliged to return the car. The obligation is suspended and not yet demandable. Ian’s right over the car is extinguished upon his passing the CPA board.
Casual – is one the fulfillment of which depends upon chance. Potestative. This is mixed condition. Mixed – is one which depends partly upon the will of third person and partly upon chance Example: Vincent promise to give Victor a new Toyota Car if Victor will be able to play with and beat Karpov in a game of chess. This kind of condition is void. Example: Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United States. Example: Mario agrees to give Maria a determinate car if Maria’s only racing horse will win the sweepstake race. that is Karpov willingness to play chess with Victor and the latter’s winning over Karpov. .Kinds or classifications of condition: 2. Casual and Mixed Potestative – is one the fulfillment of which depends upon the sole will of the debtor.
Example: 1.Kinds or classifications of condition: 3. b) Illegal Impossibility – when the condition imposed is contrary to law. 3.000 if Ernesto will kill Mario. Reyes without benefit of marriage. Contrary to public policy – Maria agrees to employ Grace in her company if Grace will not join a labor union. . good custom or public policy. Contrary to law – Pedro agrees to give Ernesto P100. Example: Grace will give Christine a gold necklace if she swims across the Pacific Ocean. 2. Contrary to good custom – Santos binds himself to give Maria a gold wrist watch if she will cohabit with Mr. Possible and Impossible Impossible condition is divided into 2: a) Physical Impossibility – the condition imposed is not capable of being performed physically.
NCC) Example: Victor will give Jason a car if he will not marry Helen until Dec. 1185. the obligation of Victor is extinguished. or b. If Jason married Helen within the prescribed time.) it has become evident that the event cannot occur (Art. the obligation becomes demandable. 19.) the time indicated has elapsed. Positive and Negative: A Negative condition is one where some event will not happen at a determinate time. . 2001 or if Helen has died within the prescribed time without having married to Jason.Kinds or classifications of condition: 4. 2001. if Jason has not married Helen until Dec. either a. 19.
00 if Y kills Z. Divisible and Indivisible Divisible – that part of obligation which is not affected by impossible or unlawful condition shall be valid (Art. NCC) ExampleX promise to pay Y the sum of P1.00) is void because only the latter is affected by the condition. 000. 000.00) is valid while the second part (P2.Kinds or classifications of condition: 5. 1183. 6. 000. 000. in the obligation. Express and Implied .00 if Y furnishes X with information as to the whereabouts of Z and another sum of P2. the first part (to pay P1.
ART. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. Nevertheless. In obligations to do and not to do. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. 1187. once the condition has been fulfilled. shall retroact to the day of the constitution of the obligation. in each case. If the obligation is unilateral. the retroactive effect of the condition that has been complied with. the courts shall determine. (1120) . the debtor shall appropriate the fruits and interests received. The effects of a conditional obligation to give. when the obligation imposes reciprocal prestations upon the parties.
Effects of conditional obligation to give: Once the condition is fulfilled. the effects of the conditional obligations shall retroact to the day of the constitution of the obligation and not on the date when the condition was fulfilled. Example – On Jan. 1999 A agreed to give B a parcel of land if he passes the May. 1999 because B’s right over the land retroacts to the date when the obligation was constituted. 1. If B passes the CPA exams in May. 1999 CPA exams. 1999. . he is entitled to the land effective Jan. 1.
B is entitled to all the interests that his money (with which to pay A) may earn while A is entitled to the fruits which the parcel of land may have produced during the pendency of the condition. . 1999 CPA exams. as a rule. do not retroact to the date of the constitution of the obligation. As to the fruits and interest – The effect of conditional obligation to give. The following rules shall govern: 1. the obligation becomes demandable.the fruits and interest during the pendency of the condition shall be deemed to have been mutually compensated. In reciprocal obligation (like a contract of sale) . If B passes the May. Example: A agrees to sell and B agrees to buy A’s parcel of land if B passes the May. 1999 CPA Board.
1999 exams. Pending the happening of the condition. Example – X agreed to give Y a parcel of land if Y passes the CPA Board in May.2. In unilateral obligation – the debtor shall appropriate the fruits and interests received during the pendency of the condition unless a contrary intention appears. A is entitled to the fruits which the land may produce. A will deliver only the parcel of land if the condition is fulfilled. . unless a contrary intention appears.
ART. before the fulfillment of the condition. . 1188. To prevent the loss or deterioration of the things which are the objects of the obligation by enjoining or restraining acts of alienation or destruction by the debtor himself or by third person. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition (1121a) Preservation of Creditor’s Right – The action for the preservation of the creditor’s right may have for their objectives: 1. bring the appropriate actions for the preservation of his right. The creditor may.
To prevent concealment of the debtor’s properties which constitute the guaranty in case of nonperformance of the obligation. 3. . To compel the acknowledgement of the debtor’s signature on a private document or the execution of proper public document for registration so as to affect third person.Preservation of Creditor’s Right – 2. To demand security if the debtor becomes insolvent. 4.
7. (Lawyer’s journal. To set aside fraudulent alienation made by the debtor. 1951. 47) . 6. p. To register the deeds of sale or mortgages.Preservation of Creditor’s Right – 5. To interrupt the period of prescription by actions against adverse possessors of the things which are objects of the obligation.
Paragraph I of the above article authorizes the creditor to take any appropriate actions for the preservation of creditor’s right during the pendency of the condition: Example: On Jan. 1999. . Raul obliged himself to sell a parcel of land to Dennis if he passes the CPA exams in October. 1. 1999. to preserve his right over the parcel of land. From the time the obligation was constituted and pending the happening of the condition (passing the CPA Exams) Dennis may cause the annotation of the condition in the certificate of title in the Register of Deeds where the land is located.
000 to Santos. 1998. 1998. After the obligation was constituted and before Dec. The debtor paid the creditor before the fulfillment of the condition. Paragraph II in order that debtor may recover what he has paid by mistake. The action to recover what was paid by mistake should be made before the fulfillment of the condition. Pedro may recover the amount paid to Santos by mistake for the reason that the condition has not yet been fulfilled. Example – Pedro obliged himself to pay Santos P20. 000 if a PAL plane crashes at Cebu before Dec. Thus. the following requisites may be present: 1. a plane crushed in Cebu. 30. 1. Payment made by debtor was through mistake and error. . Pedro honestly and believing that the condition was fulfilled paid the P20. during the pendency of the condition. 30. 2. It turned out however that it was a Cebu airline that crushed.
If it deteriorates through the fault of the debtor. or disappears in such a way that its existence is unknown or it cannot be recovered. . the obligation shall be extinguished. ART. or goes out of commerce. loss or deterioration of the thing during the pendency of the condition: 1) 2) 3) 4) 5) 6) If the thing is lost without the fault of the debtor. the improvement shall inure to the benefit of the creditor. he shall have no other right than that granted to the usufructuary. he shall be obliged to pay damages. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. or by time. 1189. When the thing deteriorates without the fault of the debtor. If the thing is improved by its nature. If the thing is lost through the fault of the debtor. with indemnity for damages in either case. the creditor may choose between the rescission of the obligation and its fulfillment. the impairment is to be borne by the creditor. the following rules shall be observed in case of the improvement. it is understood that the thing is lost when it perishes. If it is improved at the expense of the debtor.
the obligation shall be extinguished. b) . These rules apply only to obligation to give a determinate or 1. Example – Reyes obliged himself to give Santos a determinate car if he passes the CPA Exams in Oct. deterioration or improvement of the thing. If during the pendency of the condition the car was lost through fortuitous event without the fault of Reyes. a) specific thing subject to a suspensive condition in case of loss. he shall be obliged to pay damages. the specific car was lost through the fault of Reyes. In case of loss of the thing If the thing is lost without the fault of the debtor. If in the example above. he shall be liable for damages upon the fulfillment of the condition. the current year. the obligation to deliver the car is extinguished even if the condition is fulfilled later. If the thing is lost through the fault of the debtor.
. It is understood that the thing is lost: a) When it perishes (as when a house is burnt to ashes) a) When it goes out of commerce (as when the object before is unprohibited becomes prohibited) b) When disappears in such a way that its existence is unknown (as when a particular car has been missing for some time) c) When it disappears in such a way that it cannot be recovered (as when a particular diamond ring is dropped in the middle of the Atlantic Ocean).
a) When the thing deteriorates When the thing deteriorates during the pendency of the condition. during the pendency of the condition. Example – Arvin obliged himself to give Ian a determinate Toyota car if Ian passes the October CPA Exams. without the fault of the debtor. During the pendency of the condition. Ian will bear the impairment. b) . without the fault on the part of Arvin. the creditor may choose.2. If the thing deteriorates. If the condition is fulfilled. through the fault of the debtor. the car was partially damaged by flood. after the fulfillment of the condition. the impairment is to be borne by the creditor. with indemnity for damages in either case. between the rescission of the obligation or its fulfillment.
By us usufruct is meant the right to enjoy the property of another which includes the right to enjoy and use the fruits of the property. If the thing is improved at the expense of the debtor.3. instead of improvement. he have no other right than that granted to the usufructuary. b) . or by time. the improvement shall inure to the benefit of the creditor. The reason for this is to compensate the creditor who would suffer in case. a) When the thing improved – If the thing improved during the pendency of the condition. there would be deterioration without the fault of the debtor. by its nature.
deterioration or improvement of the thing. the provisions which. the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. In case of the loss. (1123) . upon the fulfillment of said conditions. shall return to each other what they have received. ART. As for obligations to do or not to do. 1190. When the conditions have for their purpose the extinguishment of an obligation to give. are laid down to the preceding article shall be applied to the party who is bound to return. with respect to the debtor . the parties.
N CC will apply to whoever has the duty to return in case of loss. B will therefore have to return both the land and the fruits he had received there from the moment A has given him the land. 3. The rules given in Art. . 1181. gathering and preservation. The obligation is extinguished and therefore. 5. if any. The courts are given power to determine the retroactivity of the fulfillment of a resolutory conditions. 2. 4.Effects When Resolutory Condition is fulfilled 1. The fruits and interests thereon should also be returned after deducting of course the expenses made for the production. the parties should restore to each other what they have received. The obligation is extinguished. it is as if there was never an obligation at all. this year. deterioration or improvement of the thing. Example : A gave B a parcel of land on condition that B will pass the CPA Exams on May. B did not pass the CPA Exams. 1189. (Art. NCC) Because the obligation is extinguished and considered to have had no effect.
This is understood to be without prejudice to the rights of third persons who have acquired the thing. ART. He may also seek rescission. 1191. with the payment of damages in either case. if the later should become impossible. even after he has chosen fulfillment. unless there be just cause authorizing the fixing of a period. The injured party may choose between the fulfillment and the rescission of the obligation. in accordance with articles 1385 and 1388 and the Mortgage Law. The court shall decree the rescission claimed. in case one of the obligors should not comply with what is incumbent upon him. . The power to rescind obligatios is implied in reciprocal ones.
or Demand rescission of the obligation plus damages. the buyer can rescind if the seller does not deliver or te seller can rescind if the buyer does not pay. Demand fulfillment of the obligation plus damages. The power to rescind is given to the injured party and the injured party has the following alternative remedies: 1. . 2.Right to Rescind The right to rescind means the right to cancel or to resolve in case of reciprocal obligation in case of non-fulfillment on the part of one. Example: In a contract of sale.
though they would derive some advantage by his own act or neglect. In case both parties have committed a breach of the obligation. ART. (Report of the Code Commission) . the liability of the first infractor shall be equitably tempered by the courts. The second rule is likewise just. 1192. If it cannot be determined which of the parties first violated the contract. The first one is fair to both parties because the second infract or. Rules if Both Parties Have Committed a Breach The above rules are deemed just. because it is presumed that both parties at about the same time tried to reap some benefits. and each shall bear his own damages. the same shall be deemed extinguished.
Section 2 . . although it may not be known when. Obligations with a resolutory period take effect at once.Obligations with a period ` ART. 1193. and it shall be regulated by the rules of the preceding Section. If the uncertainty consists in whether the day will come or not. the obligation is conditional. Obligations for whose fulfillment a day certain has been fixed. shall be demandable only when that day comes. but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come.
(8Manresal58) A day certain is understood to be that which must necessarily come. .Period Defined – A period is a future and certain length of time which determines the effectivity or the extinguished of obligation. Obligation with a period is one whose consequences are subject in one way or another to the expiration of said period or term. although it may not be known when.
Period and Condition Distinguished: a) As to fulfillment .A period is a certain event which must happen sooner or later while a condition is an uncertain event. As to influence or effect on the obligation – the period fixes the time of the effectivity of the obligation while a condition may cause the demandability of the obligation to arise or to terminate. b) c) . As to time – a period refers only to the future while a condition may refer to a past unknown event.
deterioration or improvement of the thing before the arrival of the day certain. or improvement before the arrival of period. Example: If A is suppose to deliver to B a particular car on Dec. 1999 by the car was destroyed by fortuitous event in July 1. 1189. the rules in article 1189 shall be observed. In case of loss. deterioration. Note the cross reference to Art. (n) Effect of loss. NCC. . 1999. 1194. the obligation is extinguished. 19. ART.
ART. allows the recovery of what has been paid by mistake before the fulfillment of a suspensive condition. But E cannot recover. E paid his obligation on December 25 last year. Example E owes G P20. except he interest. with the fruits and interests. NCC. the obligor being unaware of the period or believing that the obligation has become de and demandable. By mistake. Assuming that today is only June 30. Anything paid or delivered before the arrival of the period.00. if the debt had already matured or if E had knowledge of the period. . which was supposed to be paid on December 25 this year. 1195. E can recover the amount plus interest therein. (1126a) Effect Of Payment Before Arrival of Period This article which is similar to Article 1188. may be recovered. in an obligation to give. 000.
(1127) Presumption As to Benefit Of A Period The general rule is that when a period is fixed by the parties . Which means that before the expiration of the period. unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. ART. Whenever in an obligation a period is designated. . 1196. the period is presumed to be for the benefit of both creditor and debtor. the debtor may not fulfill the obligation and neither the creditor demand its fulfillment. it is presumed to have been established for the benefit of both the creditor and the debtor.
Thus. For the benefit of both creditor and debtor Example – Gaya obtained a loan of P10. if the tenor of the obligation or other circumstances may indicate that a period is have been established for the benefit of either the creditor or debtor: 1. 2001. Gaya can pay her obligation on or before Dec. 000 at 12% interest per annum from Tito for one year. . 2. 3. Tito can demand payment from Gaya anytime. 000 on demand. 31. Gaya has a period of one year within which to use the money. For the benefit of the creditor Example Gaya executes a promissory note in favor of Tito which reads: “I promise to pay Tito or order the amount of P10. By way of exceptions.000 or before December 31. 2001. however. For the benefit of debtor Example – Gaya executes a promissory note which reads: “I promise to pay Tito r order the amount of P 10. while Tito will benefit from the interest which the money will earn.
The courts have no right to make contracts for the parties. . Once by the courts. If the obligation does not fix a period. 1197. (1128 a) Court Generally is Without Power to Fix a Period If an obligation does not state a judicial period and no period is intended. In every case. the courts may fix the duration thereof. ART. The courts shall also fix the duration of the period when it depends upon the will of the debtor. the court is not authorized to fix a period. the period cannot be changed by them. but from its nature and circumstances it can be inferred that a period was intended. the courts shall determine such period as may under the circumstance have been probably contemplated by the parties.
If the duration of the period depends upon the sole will of the debtor Example: I will pay you as soon as possible. the period is not fixed. Then.Exceptions to the general rule 1. S sold a parcel of land to B with a right of repurchase. Here . so the court may fix the same because if this is not so the obligation may never be complied with by the debtor. the court is authorized to fix the period to repurchase. Example: 2. No term is specified in the contract for the exercise of the right. . If the obligation does not fix a period but it can be inferred from its nature and circumstances that a period is intended.
he becomes insolvent. When the debtor violates any undertaking. ART. 1198. unless he gives a guaranty or security for the debt. When by his own acts he has impaired said guaranties or securities after their establishment. and when through a fortuitous event they disappear. in consideration of which the creditor agreed to the period. The debtor shall lose every right to make use of the period: 1) 2) 3) 4) 5) When after the obligation has been contracted. When the debtor attempts to abscond. unless he immediately gives new ones equally satisfactory. When he does not furnish to the creditor the guaranties or securities which he has promised . (1129a) .
. It is sufficient that the debtor has less assets than his liabilities or if debtor is unable to pay his debts as they mature. The exceptions are based on the fact that the debtor might not be able to comply with his obligation: 1. When debtor becomes insolvent: The insolvency need not be judicially declared. It is noted that the insolvency of the debtor must occur after the obligation has been contracted.When Debtor Loses The Right to Make Use Of A Period The general rule is that the obligation is not demandable before the lapse of the period.
When Debtor Loses The Right to Make Use Of A Period 2. unless she gives another one equally satisfactory. Later. When debtor does not furnish guaranties or securities promised: Example: Gaya borrowed loan from Tito which loan was secured by a chattel mortgage of Gaya’s car as a guaranty. Gaya loses her right to make use of the period. 3. . 000 from Tito which loan was secured by a chattel mortgage on Gaya ‘s car. the loan becomes demandable or the debtor loses her right to make use of the period. the car was damaged or she causes the impairment of the car. When by his own acts he has impaired said guaranties or securities: Example: Gaya borrowed P50. Gaya’s fault. Gaya fails or does not execute a chattel mortgage. After obtaining the loan.
6. Art loses his right to make use of the period. Abscond means a depart or escape from creditor’s knowledge to avoid payment of his debt. When the debtor attempts to abscond. Mere attempt on the part of debtor will entitle the creditor to demand payment of the obligation without waiting for the period to expire.When Debtor Loses The Right to Make Use Of A Period 4. After obtaining the loan. When debtor violates an undertaking – Example: Art secured a loan from Arnold on condition that Art will paint the house of Arnold. Gaya loss her right to male use of the period unless she gives another guaranty or security equally satisfactory. . If after the proceeds of the loan was given to Art. 5. When by fortuitous event. the car was lost by fortuitous event. the guaranty or security was lost. he did not pant the house of Arnold. Example: Gaya borrowed P50. 000 from Tito which loan was secured by a chattel mortgage on Gaya’s car.
If Gaya chooses and delivers the TV set. Section 3. the obligation is extinguished. . Gaya cannot compel Tito to accept part of one and the part of the other prestations. Example: Gaya binds herself to give Tito either a determinate refrigerator or a TV set. part of the other undertaking. Alternative and Facultative obligations ART. Thus. 1199. (1131) The creditor cannot be compelled to receive part of one and Meaning of Alternative Obligation It means an obligation where two or more prestations are due but the delivery of one is sufficient to extinguish the obligation. A person alternatively bound by different prestations shall completely perform one of them.
unless it has been expressly granted to the creditor. unlawful or which could not have been the object of the obligation. The debtor shall have no right to choose those prestations which are impossible. 1200. ART. The right of choice belongs to the debtor. .
Now. the horse and the carabao were lost by fortuitous event. c) d) . Gaya has two horses.Gaya promised to deliver to Tito 100 sacks of rice or a stone from Mars..Rule on Who Makes the Choice – As a general rule. a race horse worth P50.g. Gaya cannot choose Only one prestation is practicable (Art. 1202) – E. Gaya will deliver to Tito her carabao. the right of choice or to select the prestation belongs to the debtor. Gaya borrowed from Tito P50. 000. It was agreed that Gaya would give Tito her horse or her German Piano. or her horse or her refrigerator. Gaya can choose only the delivery of parcel of land. 000 and an ordinary horse which is worth for only P5. 000.g. Gaya obliged herself to deliver to Tito a kilo of dangerous drug or a parcel of land. Gaya cannot chose to deliver the stone coming from Mars as it is physically impossible.g. b) Unlawful – E. Could not have been the object of the obligation . unless the right to choose is expressly granted to the creditor.E. Through no fault of Gaya. But the right of the debtor is subject to the following: The debtor cannot choose those prestations which are: a) Impossible – E.g. Gaya can only delivery the refrigerator which is the only one practicable.
1201. (1133) Right of Choice Must be Communicated – Until the choice is made and communicated. 1205. the communicated. 1) . par. such choice shall likewise produce legal effects upon being communicated to the debtor. Once the notice to the effect that a choice is made. Where the choice has been expressly given to the creditor. The choice shall produce no effect except from the time it has been communicated. (Art. the obligation ceases to be alternative and becomes a simple obligation. the obligation remains alternative. ART.
Gaya can rescind the contract if she wants. the amount of P 5. only one is practicable. must pay Gaya the value of the TV set plus damages. If through the fault of Tito.00 must be returned by Gaya with interest. the latter may rescind the contract with damages. the TV set was destroyed. ART. it was agreed that instead of P5. 1203. In case of rescission. . 1202. Example: Gaya borrowed from Tito P5. 000. in turn. 000. Gaya could deliver a TV set or a refrigerator or a piano. Tito. ART. the debtor cannot made a choice according to the terms of the obligation the debtor is given the right to rescind and recover damages. If Through The creditor’s acts the debtor cannot make a choice according to the terms of the obligation. 000. When debtor may rescind contract If through the creditor’s fault. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound.00.
1204. . ART. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared. The creditor shall have a right to indemnity for damages when. The indemnity for which the creditor is entitled shall be based on the value of the last thing which disappeared or lost or the compliance of the obligation has become impossible. or that of the service which last became impossible. (1135a) When right of choice is with debtor and all prestations were lost – This article entitles the creditor to indemnity for damages when all the alternative objects are lost through the fault of the debtor before he has made his choice. or the compliance of the obligation has become impossible. through the fault of the debtor. Damages other than the value of the last thing or service may also be awarded. all the things which are alternatively the object of the obligation have been lost.
also with indemnity for damages. the choice by the creditor shall fall upon the price of any one of them. If the loss of one of the things occurs through the fault of the debtor. Until then the responsibility of the debtor shall be governed by the following rules 1) If one of the things is lost through a fortuitous event. 1205. or the price of that which. ART. he shall perform the obligation by delivering that which the creditor should choose from among the remainder. 2) 3) . When the choice has been expressly given to the creditor. or that which remains if only one subsists. with a right to damages If all the things are lost through the fault of the debtor. the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. through the fault of the former. has disappeared. the creditor may claim any of those subsisting.
the rules are as follows: When a thing is los through a fortuitous event 1. Some or all of the prestations should become impossible. The same rules shall be applied to obligations to do or not to do in case one. or a piano. Tito can choose from among the remainder or that which remains if only one subsists. or a refrigerator. (1136a) When Right of Choice is With Creditor and All Prestations Were Lost This article provides for the rules to be observed when the right of choice is expressly granted to the creditor. If the TV set was lost through fortuitous event. . Example Gaya obliged herself to deliver to Tito a TV set.
2. When all the things were lost through debtor’s fault Example: If all the items are lost through the fault of Gaya. Tito may claim the refrigerator or the piano with a right of damages or the price of the TV set with a right of damages. When a thing is lost through debtor’s fault Example: If the loss of the TV set occurs through the fault of Gaya. 1174 will apply). 3. 4. When all the thing are lost through a fortuitous event Example: The obligation of Gaya shall be extinguished if all the items which are alternatively the object of the obligation are lost through a fortuitous event (Art. then Tito can demand the payment of the price of any one of them with a right to indemnity for damages. .
1206. . through the negligence of the obligor. The loss or deterioration of the thing intended as a substitute. Example: I will give you my piano but I may give my television set as a substitute. negligence or fraud. But once the substitution has been made. but the obligor may render another in substitution. Meaning of Facultative Obligation – A facultative obligation is one where only one prestation has been agreed upon but the obligor may render another in substitution. does not render him liable. the obligation is called facultative. ART. When only one prestation has been agreed upon. the obligor is liable for the loss of the substitute on account of his delay.
there are several things due but the delivery of one is sufficient. As to validity or nullity – In facultative – if the principal thing is unlawful or impossible. there is still a need to deliver any of those which remain valid or the only remaining one is valid. As to things due – In facultative – only the principal obligation is due by may substitute another. 2) 3) . there is no need of delivering the substitute in alternative – if one of the thing is unlawful or impossible.Alternative and Facultative Distinguished – 1) As to choice – In facultative – the right for substitution is given only to the debtor in Alternative – the choice may be given either to the debtor or to the creditor. in alternative.
1207. If from the law. Section 4 – Joint and Solidary Obligations ART. (1138a) . entire compliance with the prestation. the credits or debts being considered distinct from one another. subject to the Rules of Court governing the multiplicity of suits. (1137a) ART. or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand. the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors. 1208. There is a solidary liability only when the obligation requires solidarity. or that each one of the latter is bound to render.
2) A borrowed from B. C and D P9. 3) A and B are liable to C and D for P9. . and C borrowed P9. Joint Obligation – It is an obligation where there is a concurrence of two or more debtors or two or more creditors or of several debtors and creditors. Each creditor can demand only P4. Each creditor can demand only P3. 000 from A. The presumption is that A. There is one debtor and three creditors. 000. 000. There are two debtors and two creditors. 000 for D. B. Example of different instances 1) A. by virtue of which each of the debtors is liable for a proportionate part of the credit. 000. 000 from each or a total of P9. 500 from each debtor. D can demand only P3. B and C are jointly liable.
or 2) The law requires solidarity or 3) The nature of the obligation requires solidarity. .SOLIDARY OBLIGATION There are solidary liability when 1) The obligation expressly so states.
Mixed Solidarity – solidarity on the part of the debtors and creditors where each one of the debtors is liable to render and each one of the creditors has a right to demand. 000 2. Passive – solidarity on the part of the debtors. where anyone of them can be made liable for the fulfillment of the entire obligation. Example – A and B are solidarity debtors to C and D. B and C are solidary creditors. solidary creditors in the amount of P 10. Example – A and B are solidary debtors of C in the amount of P 10. 3. 000. Active – solidarity on the part of the creditors. entire compliance with the obligation. .Kinds of Solidary Obligation 1. 000. Example – A is liable to B and C for the amount of P10. where anyone of them can demand the fulfillment of the entire obligation.
the right of the creditors may be prejudiced only by their collective acts. the others shall not be liable for his share. and the debt can be enforced only by proceeding against all the debtors. If the division is impossible. the others shall not be liable for others. If any of the joint debtors be insolvent. Solidarity between debtors increases their responsibility while solidarity between creditors presuming that they are bound jointly and not solidarily. The reason is that solidary obligations are very burdensome for they create unusual rights and liabilities. the creditor must proceed against al the joint debtor. 1209. The obligation is joint but since the object is indivisible. If one of the latter should be insolvent. is that it is joint. Example – A and B are jointly liable to give C a particular car. Indivisible Joint Obligation – The object is indivisible and the T/E between the parties are merely proportionately liable. where there are two or more persons in the same obligation. . ART. Solidarity not presumed The presumption.
Nor does solidarity of itself imply indivisibility. 000. Solidary indivisible obligation – A and B are solidarily liable to give C their car. 000. Examples: 1. 2. 1210. Solidary divisible obligation – A and B are solidarily liable to give C P10. The indivisibility of an obligation does not necessarily give rise t solidarity. Joint divisible obligation – A and B are jointly liable to C for P10. 4. Joint indivisible obligation – A and B are jointly liable to give C their car. . (n) Indivisibility as Distinguished from Solidarity Indivisibility refers to the subject matter while solidarity refers to the Tie between the parties. ART. 3.
ART. The solidary character of the obligation is not destroyed even if the creditors and debtors are bound by different terms and conditions. 1211. C’s share will be due at the end of the year. The solidarity is still preserved by recognizing in the creditor the power of claiming from any or all debtors the payment of the entire obligation. and D and E to the following conditions. 000 to C. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. Example: A and B solidarily bound themselves to pay a total of P10. D will get his share only after he passes the CPA exams and E will get his share only after he painted the house of C. .
Each one of the solidary creditors may do whatever may be useful to the others. NCC) Example of Prejudicial Acts – Should not be performed. (Art. Example of Beneficial Acts – To interrupt the running of prescription. (1141a) A solidary creditor cannot assign his rights without the consent of the others. otherwise. Solidary Creditors May Do Useful Act. . there will be liability for damages. 1212. the act of one solidary creditor in making a judicial demand upon any of the solidary debtors is sufficient. ART. in the case of remission or condonation. the solidary creditor is allowed to so remit. but not anything which may be prejudicial to the latter. A solidary creditor may do any act beneficial or useful to the others but he cannot act prejudicial to them. 1213. 1155. Not Prejudicial Acts – ART. and the obligation is extinguished. However.
Example A is liable to B and C P5. judicial or extrajudicial. The debtor may pay any one of the solidary creditors but if any demand. judicially or extra-judicially. B is still entitled to his share from A in case C does not turn over to B his share. Art. If A paid C. But when a demand is made by any of the creditors. Payment to Any of the Solidary Creditors The rule is that the debtor may pay any one of the creditors. A may pay either B or C But if B made a demand then payment should only be made to him. . payment should be made to him. payment should be made to him who made the demand. has been made by one of them. 1214. 000.
shall extinguish the obligation. Compensation. confusion or remission of the debt. Novation. (Art. The creditor who may have executed any of these acts. compensation. Confusion or Remission – When a creditor who executed any of these acts. NCC) . Liability of Solidary Creditor in case of Novation. ART. 1215. shall be liable to the others for the share in the obligation corresponding to them. 1212. as well as he who collects the debt. without prejudice to the provisions of article 1219. made by any of the solidary creditors or with any of the solidary debtors. it is logical that he is liable to the other solidary creditors for their corresponding shares considering that such acts are prejudicial to them.
The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. (1144a) Creditor May Proceed Against Any Solidary Debtor – In a solidary obligation. If demand is made on A. some or all of the solitary creditors simultaneously so long as it has not been fully collected. 000. ART. the creditor may proceed against any. D can collect from A or B or C alone or from any two of them or all of them simultaneously. so long as the debt has not been fully collected. Example A. 1216. the latter cannot require D to make a demand also on B and C or to include them as party defendants as D has the right to proceed against any one of them. B and C solidarily owe D the amount of P9. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. .
ART. If two or more solidary debtors offer to pay the creditor may choose which offer to accept. in proportion to the debt to each. Payment made by one of the soldiery debtors extinguishes the obligation. 1217. because of his insolvency. If the payment is made before the debt is due. He who made the payment may claim from his codebtors only the share which corresponds to each. with the interest for the payment already made. no interest for the intervening period may be demanded. (1145a) . reimburse his share to the debtor paying the obligation. When one of the solidary debtors cannot. such share shall be borne by all his codebtors.
. 31. 000 due on Dec. 000 each with interest from the date of payment. 31. 31. the obligation is extinguished. if C is insolvent. Effects of Payment by a Solidary Debtor – Payment is one of the ways by which an obligation is extinguished and consist in the delivery of the thing or the rendition of the service which is the object of the obligation. If A pays the entire amount of P9. However. 000 on Dec. both A and B shall bear the insolvency in proportion to their shares. Example – A. B and C are solidarily liable to D and E in the amount of P9. The payment of A gives him the right of reimbursement from B and C P3. If both A and B offer to pay D on Dec. the latter may choose which offer to accept.
. Notwithstanding the prohibition. Neither can A can recover from C. B performed the obligation by delivering the prohibited drugs. he cannot collect form B his share of the debt. If A paid the debt. 2. Becomes Illegal – A and B are solidarily bound to deliver medical drugs to C. 000. the transaction of such medical drugs were later prohibited by law. Payment by a solidary debtor shall not entitle in to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. (n) Effect of Payment After Obligation Has Prescribed or Become Illegal – 1. ART. The debt prescribed. B is not anymore entitled to reimbursement from A. Example – A and B are solidarily indebted to C in the amount of P 10. 1218. Prescription – is one where one acquires ownership and other rights through the lapse of time in the manner and under the conditions laid down by law.
1220. does not entitle him to reimbursement from his codebtors. in case the debt had been totally paid by anyone of them before the remission was effected. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors. Remission by Creditor – 1) If payment if made first. (1146a) ART. 2) 3) . The remission of the whole obligation obtained by one of the solidary debtors. There is no more to remit. If one of the solidary debtors obtained remission on the whole obligation. 1219. the remission is of no effect. he is not entitled to reimbursement from his co-debtors because remission is essentially gratuitous. If remission is made prior to the payment and payment is made. ART. then there is payment by mistake.
the obligation shall be extinguished. for the price and the payment of damages and interest. all shall be responsible to the creditor. (1147a) . the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor. If there was fault on the part of any one of them. the provisions of the preceding paragraph shall apply. 1221. without prejudice to their action against the guilty or negligent debtor. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. ART. If through a fortuitous event.
B and C are solidarily bound to deliver a determinate car to D. . the obligation is extinguished. The obligation is extinguished. Without any fault on the part of any one of the debtors. If the thing is lost or has become impossible to perform through a fortuitous event without the fault of the debtor. the car was lost through the fortuitous event.Rules in Case thing has Been Lost or Prestation Has Become Impossible – 1. Example: A.
the car was lost through the fault of anyone of the solidary debtors. The debtors who did not any fault on the lost of the car have the right to recover from the co-debtor who is at fault. The solidary debtors are likewise liable even if the thing is lost through fortuitous event if the loss occurs after anyone of the solidary debtors has been in delay. If in the preceding paragraph. however who were not in delay have the right to recover from their co-debtors who was responsible due to his delay. anyone of them may be held liable by D for the price of the car plus damages. . The debtors. 3.Rules in Case thing has Been Lost or Prestation Has Become Impossible – 2.
. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. or pertain to his own share. A solidary debtor may. ART. in actions filed by the creditor. With respect to those which personally belong to the others. 1222. he may avail himself thereof only as regards that part of the debt for which the latter are responsible.
remission illegality or absence of consideration. The entire debt was paid by d. payment or performance. .Defenses available to a Solidary Debtor – The defenses available to the solidary debtors if the creditor proceeds against him alone for the payment of the entire obligation 1. Example A and B are solidarily liable to C in the among to P6. in an action by C against A. the latter can raise the defense of payment by virtue of which the obligation was extinguished. such as fraud prescription. The defenses derived from the nature of the obligation. 000.
Defenses personal to him or pertaining to his own share. 3. such as minority.Defenses available to a Solidary Debtor – 2. Defenses which are personal to others. insanity and vitiated consent. insanity and vitiated consent. . such as minority.
The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this title. 1223. Section 5 – Divisible and Indivisible Obligations] ART. (1149) .
000 in five monthly installment.Definition of Terms – 1. Example: A agreed to pay B P10. . The obligation of A is divisible because it is payable in partial payments. A divisible obligation is one the object of which in its delivery or performance is capable of partial fulfillment. Example: A agreed to deliver a determinate car to B on Dec. This is an indivisible obligation because it is not subject to partial performance. 2. 31. An indivisible obligation is one the object which in its delivery or performance is not capable of partial fulfillment.
obligation to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. 1225. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. (1150) ART. . ART. The debtors who may been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consist. 1224. For the purposes of the preceding articles.
the accomplishment of work by metrical units. However. divisibility or indivisibility shall be determined by the character of the prestation in each particular case. it shall be indivisible. (1151a) . or analogous things which by their nature are susceptible of partial performance. In obligations not to do. When the obligation has for its object the execution of a certain number of days of work. and obligation is Indivisible if so provided by law or intended by the parties. even though the object or service may be physically divisible.
. 2. Here the obligation is indivisible because of the nature of the subject matter. Obligation to give definite things Example: To give a particular house. Here the obligation is indivisible by reason its purpose which requires the performance of all the parts. 1.Obligations Deemed Indivisible – The general rule of determining the divisibility or indivisibility of an obligation depend on the purpose of the obligation. Obligations which are not susceptible of partial performance Example: A is obliged to sing a song.
Money is physically divisible by the clear intention ere for A to deliver the amount at on time and as a whole.Obligations Deemed Indivisible 3. Obligations intended by the parties to be indivisible even if thing or service is physically divisible. Obligation provided by law to be indivisible even if thing or service physically divisible. 000 to B on a certain date. 4. Example: Taxes should be paid within a definite period. the amount of tax payable must be delivered in Toto. Although money is physically divisible. Example: The obligation of A to give P10. . not partially.
3. Example – A obliged himself to paint the house of B to be finished in 10 days. Obligations which by their nature are susceptible of partial performance Example The obligation of A to pay a debt of P10. 000 to B in ten (10) monthly installments. . The obligation is divisible because it will not be finished in one time. 2.Obligations Deemed Divisible 1. Obligations which have for their object the accomplishment of work by metrical units. Example: A obliged himself to deliver 25 cubic meter of sand. Obligations which have for their object the execution of a certain number of days of work.
if there is no stipulation to the contrary. the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance. (1152a) Meaning of Penal Clause – An obligation with a penal clause is one which contains an accessory undertaking to pay a previously stipulated indemnity incase of breach. It is attached to obligations in order to insure their performance. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. In obligations with a penal clause. 1226. Nevertheless. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. Section 6 – Obligations with a Penal Code ART. .
2) To substitute for indemnity for damages and the payment of interest in case of non-compliance of the principal obligation. 3) To penalize the obligor in case of breach of the principal obligation. .Purpose of a Penal Clause 1) To insure the performance of the obligation.
fulfillment of the obligation will be considered an alternative one. the penalty may be enforced. unless this right has been clearly granted him. the performance thereof should become impossible without his fault. However. The debtor cannot exempt himself from the performance of the obligation by paying the penalty. . The word expressly means that any implied reservation is not allowed. (1153a) Debtor Cannot Substitute Penalty For the Principal Obligation – The general rule is that the debtor is not allowed to just pay the penalty instead of fulfilling the obligation. ART. He can do so if the right has been expressly reserved. The reason is that if he can just pay. 1227. if after the creditor has decided to require the fulfillment of the obligation. save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time.
(1154a) . ART. Even if there has been no performance. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. 1229. ART. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor.
. b) When the obligation has been irregularly complied with by the debtor c) When the penalty is iniquitous or unconscionable.When Penalty May be Reduced by the Court – a) When the obligation has been partly complied with by the debtor. even if there has been no performance at all.
The penal clause may be disregarded. penal clause. 1230. Here. B may recover damages . A will deliver a prohibited drug as penalty. the obligation to sell merchandise is valid by the penalty to deliver the prohibited drug is void. the principal obligation remains valid and demandable. it is provided in their agreement that in case of default. The nullity of the penal clause does not carry with it that of the principal obligation. For failure of A to comply with the obligation. (1155) The nullity of the principal obligation carries with it the Effect of Nullity of Penal Clause – The general principle that the accessory follows the principal. Example: A agreed to sell merchandise to B. ART. If only the penal clause is void.
In such a way that its existence is unknown or it cannot be recovered. . The general rule is that if the thing to be delivered is determinate and it is lost without the fault of the debtor or is lost through fortuitous even pending delivery. th obligation is extinguished and the debtor cannot be held liable.Meaning of Loss Of The Thing Due It means that he ting which constitutes the object of the obligation perishes or goes out of commerce or disappears.
by provision of law.The exceptions to this rule are: 1. when the debtor has promised to deliver the same thing to two or more pesons who do not have the same interest. 5. 6. 3. 4. when the debt or a thing certain and determinate proceeds from a crime. 2. 7. . when the nature of the obligation requires the assumption of risk. if the debtor is at fault. by stipulation or agreement of the parties. when the thing to be delivered is generic or indeterminate.
the partial loss of the object of the obligation is so important as to extinguish the obligation. This presumption does not apply in case of earthquake. the loss or destruction of anything of the same kind does not extinguish the obligation. 1265. 1263. and without prejudice to the provisions of article 1165. flood. Whenever the thing is lost in the possession of the debtor. (1183a) . 1264. Art. Art. storm. under the circumstances. or other natural calamity. The courts shall determine whether. In an obligation to deliver a generic thing. it shall be presumed that the loss was due to his fault. unless there is proof to the contrary. Art.
The presumption of fault.Thing Lost In Possession Of Debtor If the thing is lost while in the possession of the debtor. does not apply when the ting is lost due to earthquake. . however. flood or other natural calamities. the law presumes that he ting was lost through his fault.
(n) Art. 1268. When the debt of a thing certain and determinate proceeds from a criminal offense. the debtor shall not be exempted from the payment of its price. unless the thing having been offered by him to the person who should receive it. (1185) . When the service has become so difficult as to be manifestly beyond the contemplation of the parties. (1184a) Art. the obligor may also be released therefrom. in whole or in part. whatever may be the cause for the loss. 1267. becomes legally or physically impossible without the fault of the obligor. the latter refused without justification to accept it.
The only exception to this rules when the person who should receive the object unjustifiably refused to accept it and the object is subsequently lost due ot fortuitous event. was ordered by the court to return the object to its owner is liable for the payment of its value if such object is lost through whatever case. in which case the obligation is extinguished.Effect Of Obligation Arising From Felony Obligation arising from felony or crime or if a person who was convicted of the crime like of theft . .
the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. The obligation having been extinguished by the loss of the thing. Art. (1186) . 1269.
. the creditor acquire all the rights of actions which a debtor may have against at third person.When Creditor Acquires Debtor’s Right Of Action By reason of the loss of the thing.
Condonation or Remission of the Debt Art. (1187) . Express condonation shall. furthermore. . 1270. Condonation or remission is essentially gratuitous.SECTION 3. It may be made expressly or impliedly. and requires the acceptance by the obligor. One and the other kind shall be subject to the rules which govern inofficious donations. comply with the forms of donation.
(4 Sanchez Roman 422) . as a result his right against the debtor. without receiving any price or equivalent. renounces the enforcement of the obligation.Condonation or Remission Defined Remission is an act of liberality by which the obligee.
and if made expressly. it must be accepted by the debtor.Requisites of Condonations OR Remissions it must be gratuitous. it must comply with the forms . must not be inofficious. the parties must have capacity.
no one can give more than that which he can give by a testamentary will. otherwise. Like for example. .Effect of inofficious Remission While a person may make donations. a part of the testator’s property called legitimate cannot be disposed of because the law has reserved it from certain heirs called the compulsory heirs. the excess shall be inofficious and shall be reduced by the Court accordingly.
If in order to nullify the waiver it should be claimed to be inofficious. Whenever the private document in which the debt appears is found in the possession of the debtor. ART. unless the contrary is proved. The delivery of a private document evidencing a credit. implies the renunciation of the action which the former had against the latter. 1271. 1271. (1188) ART. (1189) . made voluntarily by the creditor to the debtor. the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. it shall be presumed that the creditor delivered it voluntarily.
The note as signed by Gaya was given to Tito. the presumption is that the debt must have been paid by Gaya. If the promissory note is voluntarily delivered to Gaya. it is known that Gaya has not yet paid Tito. 000 evidenced by a promissory note.Presumption In Case Document Found In the Possession Of Debtor If the document is found in the hands of the debtor and it is not known how he came into possession of the same. . Gaya owes Tito P10. Example. Or it was voluntarily delivered to the debtor. the presumption is that there was payment by virtue of the payment of the debt. the presumption is that it was voluntarily delivered by Tito unless Tito proves to the contrary. which gives rise to the remission of the obligation. it must be presumed that the obligation has been remitted. Suppose it is not known how Gaya came into possession of the promissory note.
000 with Gaya as guarantor. Example. Arvin owes Tito P10. (1190). 1273. But if only the guaranty of Gaya is condoned. The renunciation of the principal debt shall extinguish the accessory obligations. 000 while the accessory obligation is the guaranty of Gaya. The principal debt here is the P10. the obligation of Arvin shall remain in force. but the waiver of the latter shall leave the former in forc.ART. The accessory cannot exist without the principal obligation. Of Effect Renunciation Of the Principal Debt The above provision follows the rule that the accessory follows the principal. The remission of the debt of Arvin by Tito extinguishes the guaranty of Gaya. .
is found in the possession of the debtor. 1274.ART. or of a third person who owns the thing. Defined Pledged is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or instrument evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged. (1191a) Pledged. after its delivery to the creditor. the thing delivered shall be returned with all its fruits and accessions. .
1275. – Confusion or Merger of Rights ART. not the obligation itself. only the accessory obligation of pledge is presumed remitted.Presumption In case Thing in Possession of Debtor If the thing pledged is found in the hands of debtor or the third person. Section 4. (1192a) . The obligation is extinguished from the time the characters or creditor and debtor are merged in the same person.
Meaning of Confusion or Merger Confusion is the meeting in one person of the qualities of creditor and debtor with respect to the same obligation. (4Sanchez Roman 421) .
clear and definite. Example. the very obligation must be the same.it must take place in the person of either the principal debtor and principal creditor. Gaya issued a promissory note for P10. . Arvin indorsed it to Mary. 000 in favor of Tito payable 30 days after sight. Before the maturity of the note. Tito indorsed it to Arvin. and 4. and 3. Mary indorsed it to Gaya.Requisites of A Valid Confusion 1. it must be complete. the merger of the qualities of creditor and debtor must be in the same person. The obligation of Gaya to Tito is extinguished because there is here a merger of the qualities of the debtor and creditor in one and the same person with respect to one and the same obligation cannot demand and collect payment from himself. 2.
NCC. who in turn assigned it to Gaya. (1193) Effect of Merger This article reiterates the principles established in Articles 1176. in this same example.ART. the credit was assigned by Tito to Mary and Mary to Arvin. 1276. but the extinguishment of the accessory does not extinguish the principal obligation Example. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. The contract of guaranty is extinguished but the principal obligations remains. 1274. that accessory follows the principal. Confusion which takes place in the person of any of the latter does not extinguish the obligation. Later. . Tito assigned the credit to Mary. The extinguishment of the principal obligation extinguishes the accessory obligation. Gaya has now the obligation to pay Arvin. If. Gaya obtains P10. The principal debt is extinguished and Arvin is released from his obligation as guarantor. 000 loan from Tito which loan was guaranteed by Arvin.
1277. There is here a merger between Gaya and Tito but Mary and Arvin would now owe Gaya P5. it affects only the share corresponding to the creditor or debtor in whom the two characters concur. Tito assigns his credit to Ian who in turn assigned it to Gaya. In case there is merger in a joint obligation. (1194) Effect of Merger in Joint Obligation In a joint obligation. 000. Mary and Arvin are jointly indebted to Tito in the amount of P15. 000 each. The co-debtor will not owe his corresponding share to this former joint co-debtor. . Example. the debts are distinct and separate from each other.ART. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. Gaya.
Compensation shall take place when two persons.Section 5. 1278. in their own right are creditors and debtors of each other. Compensation ART. (1195) .
as to number of obligation – in compensation thEre must be two obligations. there is only one person in whom the quality of creditor and debtor is merged.Compensation. in confusion. in confusion there is only one obligation.Defined Compensation shall take place when two persons. . in their own rights are creditors and debtors of each other. Compensation Distinguished From Confusion as to number of persons – in compensation there must be two persons.
as to effect a. Judicial – takes place only through court orders. . Voluntarily – takes place by virtue of the agreement of the parties. 2. as to cause a. Partial – the debts are not the same amount hence after compensation. c. Total – when both debts are completely extinguished because the debt are the same amount b. Legal – takes effect by operation of law provided all the requisites prescribed by law are present. a balance remains outstanding.Kinds of Compensation 1. b.
and also of the same quality if the latter has been stated. That the two debts be due. That they be liquidated and demandable. That over neither of them there be any retention of controversy. (1196) . commenced by third persons and communicated in due time to the debtor. or if the things due are consumable. That both debts consist in a sum of money. is necessary: (1) (2) (3) (4) (5) That each one of the obligors be bound principally. they be the same kind.it ART. and that he be at the same time a principal creditor of the their. In order that compensation may be proper. 1279.
That the two debts be due.it ART. That they be liquidated and demandable. and that he be at the same time a principal creditor of the their. they be the same kind. and also of the same quality if the latter has been stated. is necessary: (1) (2) (3) (4) (5) That each one of the obligors be bound principally. That both debts consist in a sum of money. commenced by third persons and communicated in due time to the debtor. In order that compensation may be proper. (1196) . 1279. That over neither of them there be any retention of controversy. or if the things due are consumable.
Requisites of a Proper Compensation or Legal Compensation 1. 30. on the other hand. 2. There is compensation because they are consisting of consumable things. 1999. 30. 000 payable on Dec. 1999. Example. 1999. 20. 000 also due and payable on Dec. Example. has an obligation to deliver 100 sacks of rice to Arvin on October 20. 1999. Maya owes Gaya P10. Example. 1999. There is compensation when the obligation becomes due on October 30. Tito. . Gaya owes Maya P10. the two debts are due and demandable. These two obligation become due on Dec. Arvin obliged himself to deliver to Tito 100 sacks of rice on October 30. 000 payable on October 30. the parties are principal creditor and principal debtor of each other. both debts consists in a sum of money or of consumable things of the same kind and quality. 3. Tito on the other hand owes Arvin P10. 1999 compensation takes place because both Arvin and Tito are principal creditor and principal debtor of each other. 1999. 1999. Arvin owes Tito P10. 000 payable also on October 30.
4. Example. Ian has been duly notified of the controversy. 000 but Arvin credit of P10. there be no retention or controversy means a third person who is claiming to be a creditor. 5. If she loses. 000 and Ian owes Arvin P10. and then compensation can take place. Arvin woes Ian P10. 000 has been garnished by Gaya who claims to be an unpaid creditor of Arvin. and The liquidated means that the amount of debt has already been fixed and determined. while the word demandable means when it is due. Any possible compensation is in the meantime suspended. . the controversy is resolved. there can be no compensation. If Gaya wins her claim. the two debts liquidated.
When Tito sues Arvin and Arvin cannot pay. 000. 000. . Maya is the guarantor of Arvin. Example. 000 because he can set the P4. Notwithstanding the provision of the preceding article. 000 credit of Arvin as the basis of partial compensation. Arvin owes Tito P10. When Tito sues Arvin for P4. 000. the guarantor may set up compensation as regards what the creditor may owe the principal debtor Guarantor May Set Up Compensation This is an exception to Article 1279. 1280. Tito owes Arvin P10. 1 because the article allows setting up compensation as regard what the creditor may owe to the principal debtor. part.ART. Maya will be liable for only P6.
Example. 1999. . 19. When the two debts are of the same amount. hence both debts will be extinguished. 19. Maya is likewise indebted to Gaya in the amount of P10. hence both obligations are extinguished. Compensation may be total or partial. There is here a total compensation. 1281. 000 due on Dec. 1999. Kinds of Compensation Total compensation is when the amount due are equal or of the same amount. there is a total compensation.ART. 000 due on Dec. Gaya is indebted to Maya the amount of P10.
(n) . 2009. 19. Gaya owes Maya P10. 000 due on Dec.Partial compensation is when the amount are not the same after compensation took place. The parties may agree upon the compensation of debts which are not yet due. Maya owes the due date arrives because a balance of P4. there is a balance remains. 1282. ART. Example. On the other hand. 000 will remain after compensation takes place.
(Art.Compensation By Agreement Of the Parties This is a voluntary compensation as an execution to the general rule that only debts which are due and demandable can be compensated. 000 due on Dec. Gaya owes Maya P10. 2001. 000 due on Nov. 30. Generally compensation the parties there may be compensation cannot take place comes Nov.1279) Example. On the other hand Maya owes Gaya P10. However. 2001. 19. 30. by voluntary agreement between . 2001 because Maya’s debt is not yet due.
000. Example. 1283. X failed to pay. the former may set it off by providing his right to said damages and the amount thereof. If one of the parties to a suit over an obligation has acclaim for damages against the other. 000. Y damaged the property of X to the extend of P800. In anger. (N) Judicial Compensation A judicial compensation is one whereby a money debt of a person may be allowed by the court to be compensated with a claim of damages by another. . X can set off the obligation of Y to pay him damages in the amount of P800 against his debt of P1. When Y demanded payment.ART. X owes Y P1.
. 000. A. Before the debt of B is nullified. both debts may be compensated against each other if all the requisites for legal compensation are present. When one or both debts are rescissible or voidable. A owes B P 10. they may be compensated against each other before they are judicially rescinded or avoided. 1284. A is still liable considering compensation had already taken place because the effect of annulment is retroactive. it is as if there was no compensation. Example. through fraud was able to make B sign a promissory note that B is indebted to A for the same amount.ART. Compensation Of Rescissible or Voidable Debts Rescissible and voidable obligations are valid until they are judicially rescinded or avoided and prior rescission or annulment. but that of B is voidable. The debt of A is valid. If suppose the debt of B is later annulled by the court. Subsequently. the debts may be compensated.
the latter may set up the compensation of debts previous to the cession . If the creditor communicated the cession to him but the debtor did not consent thereto. If the assignment is made without the knowledge of the debtor. cannot set up against the assignee the compensation which would pertain to him against the assignor. but not of subsequent ones.ART. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. that he reserve his right to the compensation. . unless the assignor was notified by the debtor at the time he gave his consent. he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment.
000 but he can still collect the P2. 000 today. Both debts are extinguished up to amount of P3. A owes B P5.When Compensation Has Taken Place BEFORE Assignment If an extinguished obligation has been assigned by the creditor to third person. Hence. 000. B owes A P3. the debtor can raise the defense of compensation with respect to the debt. The remedy of the assignee is against the assignor. 000 from A. 000 due also yesterday. 000 owed by B. It is as if no compensation took place. However. 000 due yesterday. A still owes B P2. Example. . if A gave his consent to the assignment before it was made on will be liable to C for P5. latter can collect only P2. If B assigns his right to C.
A owes B P5. .Where Compensation Has Taken Place AFTER Assignment There are three cases of compensation which take place after an assignment of rights made by the creditor. 000 due Dec. the assignor. 19. 000 to C. However. 000 debt from B. 000 due Dec. They are: Assignment with consent of debtor Example. reserved his right to the compensation. he would be liable only P2. the assignee. A is still liable to C for P5. if A while consenting to the assignment. 19. the compensation which would pertain to him against B. B owes A P3. 000 but he can still collect the P2. B assigned his right to C.
000 to B. 000 but B cannot raise the defense of compensation with respect to the debt of A due on Dec. A owes B P1. Assignment without the knowledge of the debtor Example. A notified B but the latter did not give his consent to the assignment. he can raise the defense of compensation. There being partial compensation. in the preceding example. 000 due Dec. he cannot. 000. Assignment with the knowledge but without the consent of debtor Example. 10 which was before the cession on Dec. Come Dec. 15. the assignment is valid only up to the amount of P1. So. In this case. 15. 1. 10. 12. on Dec. A will liable for his debt of P1. B can set up the compensation of credits before and after the assignment. 000 due Dec. 16. B owes A P2. If B learned of the assignment after the debts had already matured. . A owes B P1. how much can C collect from B? B can set up the compensation of debts on Dec. 000 Dec. 15 which has not yet matured. The crucial time is when B acquired knowledge of the assignment and not the date of the assignment. B is liable to C for P1. otherwise. 12. let us suppose that the assignment was made without the knowledge of B who learned of the assignment only on Nov. 12. A assigned his right to C on Dec.
(1199a) Compensation Where Debts Payable At Different Places This legal compensation does not refer to the difference in the value of the things in their respective places but to the expenses of monetary exchange and expenses of monetary exchange and expenses in transportation. Compensation takes place by operation of law. he must pay for the expenses of exchange. the debts also become compensated. . If A claim compensation. Gaya owes Maya $1. 000 payable in New York. 1286. bu there shall be an indemnity for expenses of exchange or transportation to the place of payment. Example.ART. Once these expenses are liquidated. 000(equivalent amount) payable in Manila. The indemnity shall be paid by the person who raises the defense of compensation. Maya owes Gaya P38. even thought eh debts may be payable at different places.
1288. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depository or of a bailee in commodatum. Neither shall there be compensation if one of the debts consists in civil liability arising from a penal clause. ART. without prejudice to the provision of paragraph 2 of article 301. 1287. .ART.
A contract is a meeting of minds between two persons whereby one binds himself. know the elements of contracts. and 4. 1305. The classifications of contracts summarizes those types of contracts that may be freely agreed upon as long as they are not contrary to law. morals. with respect to the other. (1254a) . that contracts take effect only between parties and its exceptions.PART III General Provisions on Contracts Learning Objectives: After studying this lesson. good customs. you should: 1. to give something or to render service. know the definition of contract 2. learn the different classifications of contracts. 3. public order or public policy. ART.
Defined The above article defines the term Contract. In a contract. .Contracts. to the fulfillment of a presentation to give. to do or not to do. one or more persons bind themselves with respect to another or reciprocally.
Elements of Contract: 1. 2. object or subject matter and cause or consideration Natural elements – those elements which are found in a contract by its nature and presumed by law to exist. . Accidental elements . or penalties. limiting. clauses. such as Warranty of hidden defects or eviction in contract of sale. terms.those which exist by virtue of an agreement for the purpose of expanding. modes of payment. This element are consent. or modifying a contract. Such accidental elements are condition. 3. Essential elements – those elements without which there can be no valid contract.
negotiation to arrive at a define contract. Consumption or death – which is the fulfillment or performance of the terms and conditions agreed upon in the contract may be said to have been fully accomplished or executed. . terms and conditions of contract. cause or consideration. 3. Preparatory or conception – process of formation such as bargaining. 2.Stages of A Contract: 1. Perfection or birth – there is now a meeting of minds to arrive at a definite agreement as to the subject matter.
3. Obligatory force – it constitutes the law as between the parties. 4. .Characteristics of Contracts: 1. Freedom to contract – they may establish terms and conditions as they may deem convenient. Relativity – it is binding only upon the parties and their successors. 2. Mutuality – its validity and performance cannot be left to the wil of only one of the parties.
or commodatum. 1315 b. lease. . Accessory – those which are dependent upon another contract. Contract of partnership or agency. Consensual – one which is perfected by mere consent (Art. Preparatory – those which is created in order that a future transaction or contract may be entered into by te parties. Real Contract – perfected by mere consent and by the delivery of the object or subject matter. Ex. Contract of mortgage. As to perfection a. As to dependence to other contract. pledge of guaranty. Principal – one which can stand alone. A contract of sale. Ex. Deposit. b. 2. a. c. pledge.Classification of A Contract: (FROM) 1. Ex. Ex.
Ex. 3. agency. such as commodatum. Sale. Aleatory . 4. Bilateral – where both parties have reciprocal obligation to perform. According to the nature of obligation a. Ex. etc. Innominate – those without particular name. b. Contract of donation. Nominate – one which has particular name or designation such as sale. commodation. According to name or designation a. According to cause a. b.one which the fulfillment of the obligation depends upon chance. . 6.where there is an exchange of values. b. Unilateral – where only one ha an obligation to perform. 5. Contract of insurance. such as lease. Gratuitous – one which one of the parties does not receive any valuable consideration. mortgage. b. According to risk involved a. Onerous – one which imposes valuable consideration such as sale. Commutative . Ex.
public order. clauses. The contracting parties may establish such stipulations. terms and conditions as they may deem convenient. provided they are not contrary to law. 7. Written – the agreement which is reduced in writing may be public or private or private document which ART. 1306. (1255a) . morals. good customs. According to form a. Oral – by word of mouth of the parties b. or public policy.
Contract Binds by Both Parties ART. 1308. its validity or compliance cannot be left to the will of one of them. The contract must bind both contracting parties. (1256a) .
its validity or compliance cannot be left to the will of one of them. Contracts entered by and between the parties mush bind both parties in order that it can be enforced against each other. (11 Manresa 380) Example. . The contract is void because the fulfillment of the condition depends on the will of Gaya. Gaya and Laura entered into a contract to sell whereby Gaya binds herself to sell her only parcel of land to Laura if Gaya decides to leave for States. This is also known as “mutuality of contract”. This principle is based on the essential equality of the parties. Hence. It is elementary rule that no party can renounce or violate the law of the contract without the consent of the other.
the courts shall decide what is equitable under the circumstances. ART. whose decision shall not be binding until it has been made known to both contracting parties. 1310. . 1309. ART. The determination shall not be obligatory if it is evidently inequitable. The determination of the performance may be left to a third person. In such case.
. the parties are not bound by the determination if it is evidently inequitable or unjust when the third person acted in bad faith or by mistake. a real estate appraiser would be the one to determine the reasonable price of the land. then. However. If the decision made by Maya is manifestly inequitable. fixed the price after considering the factors affecting the value of the land. the determination of its performance may be left to a third person after it has been made known to both contracting parties. Maya.Determination of Performance by Third Person As a rule. Provided. Gaya sold her parcel of land to Laura. and informing both contracting party that the decision is just and suitable. further. the courts shall decide what is equitable under the circumstances. compliance with a contract cannot be left to the will of one of the contracting parties. Example. the court may be called upon to decide what is equitable. It was agreed that Maya.
The heir is not liable beyond the value of the property he perceived from the decedent. or by provision of law. If a contact should contain some stipulation in favor of third person. A mere incidental benefit or interest of a person is not sufficient. their assigns and heirs. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. (1257a) . 1311. except in case where the rights and obligations arising from the contract are not transmissible by their nature. The contracting parties must have clearly and deliberately conferred a favor upon a third person. ART. or by stipulation. Contracts take effect only between the parties.
Cases Where Third person May Be Affected By a Contract
1. In determining the performance of both parties (Art. 1309).
2. In contracts containing a stipulation in favor of a third person (Art. 1311). 3. In contracts creating real rights (Art. 1312). 4. In contracts entered into to defraud creditor (Art. 1313).
5. In contracts which have been violated at the inducement of the third person (Art. 314). Example, Gaya mortgaged her parcel of land in favor of Laura as collateral for her debt. The mortgage is duly registered. Later on, Gaya sold the same land to Tito. In this case, Tito bought the land subject to the mortgage constituted thereon. Tito, although a stranger in the mortgage, being a real right follows the property on the right of Laura to the mortgage.
Forms of Contracts
Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)
Meaning of Form of Contracts
Forms of a contract refer to the manner in which a contract is executed or manifested
Rules Regarding Form of Contracts
General Rule – Contracts are binding and therefore, enforceable reciprocally by the contracting parties, whatever may be the form in which the contact has been entered into to provided all the three essential requisites (consent, object, cause) for their validity are present.
Reformation of Instruments
Art. 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract.
Meaning of Reformation
Reformation is that remedy by means of which a written instrument is amended or rectified so as to express or conform to the real agreement or intention of the parties when by reason of mistake, fraud, inequitable conduct, or accident the instrument fails to express such an agreement or intention.
3. fraud. The failure to express the true intention is due to mistake. There is a meeting of the minds of the parties to the contract. .Requisites of Reformation 1. 2. inequitable conduct or accident. The written instrument does not express the true agreement or intention of the parties.
and There is clear and convincing evidence of the mistake. 5. inequitable conduct or accident. 4. the remedy is reformation. the contract was signed by the parties. Arvin sold his land to Ryan. states that the land is being sold excluding the improvements thereon. However. The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings. fraud. Example. It was greed that the sale will include all the improvements. . In this case. because there has been a meeting of minds.
. 2.Cases When Reformation Not Allowed 1. who accepts it. it is a donation inter vivos. Simple donation inter vivos where no condition is imposed – Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another. while the opposite of inter vivos is donation mortis causa which takes effect after the donor’s death. (Art. 725). Wills – A will is an act whereby a person is permitted with a formalities prescribed by law to control to a certain degree the disposition of his estate. to take effect after his death. Donation is strictly personal andfree act so that if the intend of the donor that the donation will take effect during his lifetime.
. 1367) When a party brings an action to enforce the contract. thre is nothing to reform. 3. When the real agreement is void – If the real agreement is void. he admits its validity and that it expresses the true intention of the parties. The bringing of the action is thus inconsistent with reformation 4. When one party ahs brought an action to enforce the instrument – (Art.
If the words appear to be contrary to the evident intention of the parties. the literal meaning of its stipulations shall control.Interpretation Of Contracts Art. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties. (1281) . the latter shall prevail over the former. 1370.
If the terms of a contract are clear and unequivocal. Example. the parties are bound thereby according to the literal sense of their stipulations. The terms of the contract are clear and it does not appear that the intention of the parties is contrary to the literal meaning of said terms . a contract was executed by A and B. the contract recites that is a sale of land belongs to A for P500.Meaning of Interpretation of a contract Interpretation of a contract is the determination of the meaning of the terms of word used by the parties in their contact.
in remuneratory ones. 1350. for each contracting party. (1274) . and in contracts of pure beneficence. the prestation or promise of a thing or service by the other. In onerous contracts the cause is understood to be.Cause of Contracts Art. the mere liberality of the benefactor. the service or benefit which is remunerated.
. (8Manresa697) It is the Civil Code term for consideration in Anglo American or Common Law.Meaning of Cause Cause is the essential or more proximate purpose which the contracting parties have in view at the time of entering into a contract.
. A rendered service as the lawyer-counsel of B who agreed to pay P10. Ex. the done or benefactor.the cause is the service or benefit which is remunerated. 000 for said services. X donated a parcel of land to Y. Ex. Sale. ONEROUS – the cause of which for each contracting parties is the pre-station or promise of a thing or service of the other. lease of things. Ex. The cause is the liberality of X. 3. 2.Classification of Contracts According to Cause 1. REMUNERATORY . GRATUTIOUS – the cause which is the mere liberality of the benefactor or giver.
The cause is unlawful if it is contrary to law. Contracts without cause. good customs. 1352. (1276) . produce no effect whatever. 1353. (1275a) Art. Art. if it should not be proved that they were founded upon another cause which is true and lawful. or with unlawful cause. public order or public policy. The statement of a false cause in contracts shall render them void. morals.
(Art 1353) 2.Requisites of Cause 1. (Art. 3. (Ibid) and it must be true or real. it must exist at the time the contract is entered into. . 1352) it must be lawful.
according to this article.Effect of Absence of Cause A contract without cause or with an unlawful cause. an absolutely simulated contract produces no effect because there is no cause at all. for example. . produces no effect whatever. Like.
By falsity of Cause is meant that the contract states a valid consideration but such statement is not true .Effect of Inadequacy of Cause Inadequacy of cause does not invalidate a contact. 1355). (Art. Illegality of cause implies that there is a cause but the same is unlawful or illegal.
3.PART IV DEFECTIVE CONTRACTS There are four kinds of defective contracts: 1. Voidable contracts (Chapter 7). Rescissible contracts (Chapter 6). and 4. Unenforceable Contracts (Chapter 8). 2. Void or inexistent contracts (Chapter 9) .
1380. the contract may be rescinded. Contracts validly agreed upon may be rescinded in the cases established by law.Rescissible contracts Contracts are valid because all the essential requisites of a contract exist but by reason of injury or damage to one of the parties or to third persons. such as creditors. Art. (1290) .
Meaning of Rescission Rescission is a remedy granted by law to the contracting parties and sometimes even to third person in order to secure reparation of damages caused them by a valid contract. (8Manresa 748) . by means of the restoration of things to their condition in which they were prior to the celebration of said contract.
The rescission must be based upon a case especially provided by law. 4. 2. There must be no other legal remedy to obtain reparation for the damage. The contract must be validly agreed upon. . 3.Requisites of Rescission 1. There must be lesion on pecuniary prejudice to one of the parties or to a third person.
6. 5. The period for filing the action for rescission must not have prescribed . The party asking for rescission must be able to return what he is obliged to restore by reason of the contract. The object of the contract must not legally be in the possession of third person who did not act in bad faith. 7.
The following contracts are rescissible: ` (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than onefourth of the value of the things which are the object thereof. 1381. (2) Those agreed upon in representation of absentees. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. (5) All other contracts specially declared by law to be subject to rescission. Art. if the latter suffer the lesion stated in the preceding number. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. (1291a) .
(2) Those where the consent is vitiated by mistake. violence.Voidable Contracts Art. The following contracts are voidable or annullable. They are susceptible of ratification. 1390. even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract. intimidation. undue influence or fraud. These contracts are binding. . unless they are annulled by a proper action in court.
undue influence of fraud.Meaning of Voidable Contracts Voidable or annullable contracts are those which possess all the essential requisites of valid contract but one of the parties is incapable of giving consent. violence. or consent is vitiate by mistake. intimidation. .
. for reason of public interest. for the declaration of the inefficacy of a contract based on defect or vice in the consent of one of the contracting parties in order to restore them to their original position in which there were before contract was executed.Meaning of Annulment Annulment is a remedy granted by law.
of 2. . The contract is susceptible of convalidation by ratification or prescription. The contract is binding until annulled by a competent court.Characteristics of Voidable Contracts 1. The defect or voidable character of the contract cannot be invoked by third persons. 3. The defect in the contract consists in the vitiation consent of one of the contracting parties. 4.
from the time of the discovery of the same. In case of mistake or fraud. This period shall begin: In cases of intimidation. violence or undue influence.Art. The action for annulment shall be brought within four years. from the time the defect of the consent ceases. (1301a) . from the time the guardianship ceases. And when the action refers to contracts entered into by minors or other incapacitated persons. 1391.
. The time of the discovery of mistake or fraud. and 3.Period for Filing Action for Annulment The period within which the action for annulment shall be brought within four(4) years from: 1. in cases of contracts entered into by incapacipated persons. 2. violence or undue influence ceases. The time the intimidation. The time guardianship ceases.
In the following cases an agreement hereafter made shall be unenforceable by action. evidence. or by his agent. be in writing. 1403. of the agreement cannot be received without the writing. The following contracts are unenforceable. (2) Those that do not comply with the Statute of Frauds as set forth in this number. unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation. unless the same. and subscribed by the party charged. or a secondary evidence of its contents: . therefore. thereof. or some note or memorandum.Unenforceable Contracts Art. or who has acted beyond his powers.
or miscarriage of another. . (a) An agreement that by its terms is not to be performed within a year from the making thereof. default. other than a mutual promise to marry. (c) An agreement made in consideration of marriage. (b) A special promise to answer for the debt.
it is a sufficient memorandum. but when a sale is made by auction and entry is made by the auctioneer in his sales book. . price. of the amount and kind of property sold. or some of them. (f ) A representation as to the credit of a third person. unless the buyer accept and receive part of such goods and chattels. at the time of the sale. at a price not less than five hundred pesos. chattels or things in action. terms of sale. of such things in action or pay at the time some part of the purchase money. or the evidences. (d) An agreement for the sale of goods. (e) An agreement of the leasing for a longer period than one year. or for the sale of real property or of an interest therein. names of the purchasers and person on whose account the sale is made. (3) Those where both parties are incapable of giving consent to a contract.
Meaning of Unenforceable Contracts Unenforceable contracts are those that cannot be enforced in court or sued upon by reason of defects provide by law until unless they are ratified according to law. . They are contracts either entered into without or in excess of authority or do not comply with the statue of frauds or both of the contracting parties do not possess the required legal capacity.
2. Those where both parties are incapable of giving consent .Classes of Unenforceable Contracts 1. Those which do not comply with the Statue of Frauds. Those entered into the same of another person by one without authority or in excess of his authority. and 3.
Art. 1404. Contracts infringing the Statute of Frauds. Art. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book. are ratified by the failure to object to the presentation of oral evidence to prove the same. . 2 of Article 1403. or by the acceptance of benefit under them. 1405. referred to in No.
1409. 2) Those which are absolutely simulated or fictitious. 3) Those whose cause or object did not exist at the time of the transaction. good customs. morals. .Void or Inexistent Contracts Art. 4) Those whose object is outside the commerce of 5) Those which contemplate an impossible service. public order or public policy. men. The following contracts are inexistent and void from the beginning: 1) Those whose cause. object or purpose is contrary to law.
Art. 6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. Neither can the right to set up the defense of illegality be waived. 1410. . 7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. The action or defense for the declaration of the inexistence of a contract does not prescribe.
Meaning of Void or Inexistent Contracts 1. it cannot be ratified. the action or defense for the declaration of its inexistence does not prescribed. 1422) . the defense of illegality is not available to third persons whose interests are not directly affected. 1410) 4. (Art 1409) 2. the right to set up the defense of illegality cannot be waived. (art. it cannot give rise to a valid contract. and 5. 3. (Art.
Mere lapse of time cannot give effect to contracts which are null and void.Instances of Void or Inexistence Contract There is no need for a detail discussion of these different kinds of void inexistent contracts considering that they have been discussed in previous chapters of this book. . Void of inexistent contracts does not prescribe.
both parties being in pari delicto. they shall have no action against each other. When the nullity proceeds from the illegality of the cause or object of the contract. (1305) . and both shall be prosecuted.Art. the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract. This rule shall be applicable when only one of the parties is guilty. 1411. Moreover. and the act constitutes a criminal offense. and shall not be bound to comply with his promise. but the innocent one may claim what he has given.
the law refuse them every remedy.Meaning of Pari Delicto Pari Delicto means both parties are equally at fault or are equally guilty. . means that when the defect of avoid contracts consists in the illegality of the cause or object f the contract and both parties are at fault or in a pari delicto. or the parties have no action against each other. The principle of pari delicto.
both shall be prosecuted. 2. the parties shall have no action against each other. Where only one party is guilty. b. shall be confiscated in favor of the government. and c. The innocent one or less guilty may claim what he has given and shall not be bound to comply with his promise .Illegal contract with Criminal Offense 1. the things of the price of the contract. When both parties are in pari delicto – Rules a.
neither may recover what he has given by virtue of the contract. may demand the return of what he has given without any obligation to comply his promise. who is not at fault.Art. or ask for the fulfillment of what has been promised him. The other. (1306) . the following rules shall be observed: (1) When the fault is on the part of both contracting parties. he cannot recover what he has given by reason of the contract. (2) When only one of the contracting parties is at fault. or demand the performance of the other’s undertaking. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense.
if the illegal terms can be separated from the legal ones. . the law allows the legal terms to be enforced if it can be enforced if it can be separated from the illegal ones. In case of a divisible contract.Effect of Illegal Terms in a Contract Art. 1420. In case a contract containing an illegal orlegal terms. the latter may be enforced.
the illegality of a contract maybe set up as a defense only by contracting parties or by parties whose interest are affect by the contracts as a defense .Persons Entitled to Raise Defense of Illegality or Nullity As general rule. Corollary to this rule. contracts bind only the contracting parties. their heirs or assigns.
Thank you!!!!! .
Presenters: Marvin Morente Marianita Rachelle Pica BOA IV-1 .
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.