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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
Introduction to Law Preliminaries In the preliminaries. the sight of a human being in his everyday undertaking has to follow some. The instructions that a person will learn. with its characteristics. As he learns the law. result to that consciousness of following the law. . he can define it.
2. In Philosophy. the Will – the object of which is the GOOD. the human mind consists principally of two faculties: 1. . The laws that contained the instructions of God given to us are the COMMANDMENTS. the Intellect – the object of which is the TRUTH. The person was created by God and destined for God. The infinite truth and infinite good is infinite beauty of God. the people can attain the final destiny by following the law.
a Spanish Civilist and he defined Law as: “A RULE OF CONDUCT . JUST AND OBLIGATORY PROMULGATED BY LEGITIMATE AUTHORITY FOR THE COMMON OBSERVANCE AND BENEFIT. simple and concise definition of law was defined by Sanchez Roman.Law The most basic.” Edgardo Paras defined Law as “an ordinance of reason promulgated for the common good by Him who is in charge.” .
A RULE OF CONDUCT Meaning any action.Characteristics of Law 1. regulations that can create an orderly. harmonious relations among the people concerned so that in the end justice will prevail. . dictate of reason if regulated or gathered together could become a conglomeration of rules. things. peaceful.
we have three branches of government – legislative body (like Congress. . In a Republican State like the Philippines. made known to those who are expected to follow it.Characteristics of Law 2. PROMULGATED BY LEGITIMATE AUTHORITY That is. Sanggunian) is the law-making body. the executive body is the implementing body and the judiciary as the enforcing body.
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. P.Characteristics of Law 3. creed. regardless of sex. age and status in life and to follow the law there should be equivalent punishment or penalties to enforce them. (Black’s dict. 1074). . Obligatory means any duty binding parties to perform their agreement. JUST and OBLIGATORY Treatment of Law should be equal.
. 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.Characteristics of Law 4.
. Congress comprising the House of Representatives and the Senate. the Sangguniang Pambayan or the local Municipal council. For a Barangay level. For provinces. LEGISLATIVE It consists of legal rights by a competent authority. In the Philippines.Sources of Law 1. the Sangguniang Pambarangay. the Legislative is the law-making body. For national government. being a democratic form of government. the Sangguniang Panlalawigan for every province. For a town.
.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. All laws must conform and comply with the provisions of the Constitution. otherwise it becomes unconstitutional.Sources of Law 3. . ADMINISTRATIVE OR EXECUTIVE ORDERS.
. New Civil Code) Judicial decisions. the Courts exists for stating what the law is. This is why they are part of the legal system in the Philippines. though. are part of the legal system in the Philippines still are not laws for if this were so. part of the law since the Courts interpretation merely establishes the legislative intent. So. though not law. 8. JUDICIAL DECISIONS OR JURISPRUDENCE Judicial decisions or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. Judicial decisions. but not for giving it. it constitute in a way. f an interpretation is placed by the Supreme Court upon a law.Sources of Law 4. (Art. are evidence of what the law means.
should be decided in the same manner. . the law becomes binding and has its full force and effect. then another case involving the same point at issue. has decided that a certain law passed by Congress is constitutional. the doctrine which in reality is “adherance to precedents” stated that once a case has been decided. our country adhere to the Doctrine of Stare Decisis (Let it Stand). Therefore.Sources of Law 4. JUDICIAL DECISIONS OR JURISPRUDENCE Thus. if the Supreme Court being a Court of last resort.
it runs counter to the custom of use of the door. if a person does not pass the gate.Sources of Law 5. . it has been a custom for a person to enter and exit a door. Once a person uses the window for his entrance and exit. Even our Lord said as a good shepherd. he is a thief for a marauder. Thus. 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.
OTHER SOURCES To add. the principle of justice and equity. opinions of text writers and even religion may also be sources of law. . 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.
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. right and equity by internal dictate of reason on our mind. fairness. Like for instance. NATURAL LAW Promulgated impliedly in our conscience and body. .Kinds of Law 2.
THIS CAN BE CLASSIFIED INTO: . 4. HUMAN LAW Those promulgated by man to regulate human relations. PHYSICAL LAW Refers to the act of rules governing the action and movement of things like the law on gravity by Newton.Kinds of Law 3.
. 2. GENERAL or PUBLIC LAW Body of rules which regulates the rights and duties arising from the relationship between the State and its inhabitants.Classification of Human Law A. International Law – consists of those rules and principles which govern the relations and dealing of nations with each other. Constitutional Law It simply governs the relations between the State and its citizens. It includes the following: 1.
. 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. 5. 4. 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. Criminal Law – guaranties the coercive power of the law so that it will be obeyed. Governs the methods of trial and punishment of crimes.Classification of Human Law GENERAL or PUBLIC LAW 3.
Classification of Human Law B. It is defined as the mass of precepts which determines and regulate the relation of assistance. INDIVIDUAL or PRIVATE LAW Those law which govern the private relation person. It includes the following: 1. Civil Law – branch of law which has for its double purpose the organization of the family and the regulation of property. authority and obedience among the members of a society for the protection of private interests. .
Classification of Human Law INDIVIDUAL or PRIVATE LAW 2. trade or mercantile pursuits. intercourse and relation of persons engaged in commerce. Commercial Law – defined as a whole body of substantial jurisprudence applicable to the rights. (Black’s law dict. 338) .
(Ballantine Law Dict. 36) . as distinguished from Substantive law which creates. P.Classification of Human Law INDIVIDUAL or PRIVATE LAW 3. defines and regulate rights. 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.
(Black Law Dict. chapters and subheads and promulgated by legitimate authority. scientifically arranged into books. A civil code is a compilation of existing Civil Laws. 334).Sources of Philippine Civil Code 1. things and civil acts. determining the defective rights and obligations with reference to persons. titles. . The New Civil Code of the Philippines – the collection of laws which regulates the private relations of the members of civil society.
Presidential decrees and other social legislation. 3. . cannot be considered as an independent source of law. jurisprudence in our system of government. 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. Special laws or statutes. Jurisprudence – there is need to mention that.Sources of Philippine Civil Code 2.
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
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. The Insolvency law. 4.Subsequent Repealing Legislation 3. Insurance Law. 5. which repealed the provisions on Commercial Houses in Book Two.
there wee other laws and now form part of the Commercial laws of the Philippines: The Warehouse Receipts law. the General Bonded Warehouse Act. . the Usury law. the General Banking Act. The New Civil Code which repealed the provisions on Partnership. and the Law on Monopolies and Combinations. Loan.Subsequent Repealing Legislation 6. in addition to the foregoing special laws. the Business Names Law. the Trade-mark law. the Chattel Mortgage law. Agency. Casks. the Law on the Use of Duly Marked Bottles. the Copyright law. The Public Service Act. Sales. Kegs. Carriage of Gods by Sea Act. the Patent law. and other Similar Containers. Barrels. 7. the Central Bank Act. the Salvage law. Other legislation. Boxes. Deposit and Guaranty in Book two. The Rural Act.
and letters of credits but not those relating to partnership. Those contained in Book Two governing joint accounts. books and bookkeeping of commerce and general provisions relating to commercial contracts. except such portions thereof as have been repealed or modified by the New Civil Code and other legislation. b. commercial registries. a. transfers of non-negotiable credits. Provisions of the Code of Commerce still in force.Subsequent Repealing Legislation 8. Those contained in Book one governing merchants and commerce in general. deposit . loans. sales. transfers. commercial contracts on transportation overland. agency.
1.Subsequent Repealing Legislation 8. All the provisions in Book four are no longer in force as they have likewise been repealed. Provisions of the Code of Commerce still in force. c. (Agbayani. Those contained in Book Three governing maritime commerce but not those relating to marine insurance which have been repealed. Vol. pp3-4) .
MERCHANTS – Merchants may be natural or juridical person: In the case of natural person.Subsequent Repealing Legislation 9. If he has legal capacity to engage in commerce. He habitually engage thereto . Some provision of the code of Commerce which are pertinent in our study in business in general: a. and b. he is a merchant: a.
. 2. If he has reached the age of twenty – one years. 1. and 3. It is a commercial and industrial company. In the case of juridical person. It is organized in accordance with existing legislation and c. He has free disposition of his property.Subsequent Repealing Legislation A natural person has legal capacity to engage in commerce. it is a merchant: a. b. Its engaging in commerce is habitual. He is not subject to parental authority.
However.Subsequent Repealing Legislation b. Throwing open to the public a business entity establishment. a single act may be deemed habituality in engaging in commerce in the way of the following acts: 1. or . 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 2. A series of acts consisting of investigating and preparations of project studies implying an intention to engage in commerce and comes to reality. newspaper. posters and similar means of the opening of an establishment for commercial acts or dealings with the public. handbills. or 3. 4. Announcement through circulars. . Where a foreign corporation appoints an agent as required by law.
. 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.Subsequent Repealing Legislation c. 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.
Those judicially declared insolent while they have not obtained their discharge.Subsequent Repealing Legislation 2. . Those who in account of special laws or provisions cannot engage in commerce like incapacitated persons or employees covered by the Civil Service law. 3.
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.
In all other cases required by law. In case of ship agent. 5. 6.Registration is compulsory: 4. . In case of vehicles with the Land Transportation Office.
cities or province – for local permits and licenses. Office of Register of deeds – for registration all transaction affecting lands. . as well as shattel mortgage.Commercial Registries in the Philippines 1. 4. 2. Local municipalities. Bureau of Domestic Trade – for registration of business names and merchants to avoid duplication of trade names. Securities and Exchange Commission – for registration of partnership and Corporation. 3.
Land Transportation Office for registration of patents and designs as well as trade names. 6. The MARINA (Marine Industry Authority) – for registration of vessels and other transaction affecting vessels.Commercial Registries in the Philippines 5. trademarks and service marks. trademarks and service marks. 7. . Intellectual property Office for registration of patents and design as well as trade names.
9. . Office of Air Transportation Administration for registration of aircrafts. Bureau of Public Library – for registration of copyrights. Board of investment for registration of pioneer and registered enterprises and with corporations having foreign entity participation. 10.Commercial Registries in the Philippines 8.
2. Public Remedial Law – affords a remedy in favor of the State against the individual. like criminal procedure or in favor of the individual against the State. like the civil procedure. like Habeas Corpus. . Private Remedial Law – affords a remedy in favor of an individual against another individual.Kinds of Procedural Law 1.
. (Alvero V. The Rules of Court have the force and effect of law. orderly. dela Rosa.Philippine Remedial Law Principally contained in the Rules of Court. adequate and effective compliance with the law. which is a combination of rules promulgated by the Supreme Court for the easy. 76 Phil 428).
Art. Sec. 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. COURTS DEFINED – It is the entity. body or tribunal vested with a portion of the judicial power. VIII. 1. par. (Const.2) . (Lontok V. 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.
3. 2. Supreme Court Sandigan-bayan Court of Appeals Regional Trial Court. 4.Different Courts of Justice 1. and Metropolitan / Municipal Trial Courts . 5.
to do or not to do as a patrimonial obligation. . The other sources are also established by law. On the sources of obligation. It means that the debtor has the obligation while the creditor has its rights. the main sources are really Law and Contracts.Lesson 1: General Provisions on Obligation The definition of obligations establishes the unilateral act of the debtor either to give.
to do or not to do. An obligation is a juridical necessity to give. 1156. 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. may obtain satisfaction from the assets of the latter. and. Justice J. Reyes) . in case of breach. L. B. (Approved by Mr.
• • • Characteristics of patrimonial obligations: They represent an exclusively private interest. 1. the economic equivalent obtained at the patrimony of a debtor.The obligations referred to in our manual is a patrimonial obligations that is. . 1. those obligations with pecuniary value or assessable in terms of money. They create ties that are by nature transitory. They exist a power to make effective in case of non-fulfillment. 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.
Rules of court ). . 1. Gaya still did not pay. If after demand. Example – Gaya bought refrigerator from Tito but Gaya did not pay the refrigerator. 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. Tito can sue Gaya in Court either to demand payment or for recovery of the refrigerator.
known as the creditor or oblige.3. c) An object or the prestation which may consist in the act of giving. 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. known as debtor or obligor. It is the legal tie which constitutes the devise of obligation… the coercive force which makes the obligation demandable. a) . It is the legal tie which constitutes the source of obligation—the coercive force which makes the obligation demandable. doing or not doing something. Essential requisites of an obligation – An active subject. b) A passive subject. who has the power to demand the prestation. who is bound to perform the prestation.
Gaya did not deliver the refrigerator. .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 is the passive subject or debtor and Tito is the active subject or creditor. 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.
delivered the refrigerator and Tito did not pay. the obligation of the debtor to fulfill or comply his commitment. On the other hand. that is. Distinctions between Obligations and Contracts: Contract is the only one of the sources of obligation. . All contracts are obligations while not all obligations are contracts. then Tito becomes the debtor who is bound to pay while Gaya is the creditor who has the right to demand the prestation. if Gaya. quasi-contracts. 4. Contract is a bilateral obligation while obligation is a unilateral obligation. This is also known as a unilateral obligation. the delivery of the refrigerator. in this case. while obligations have other sources like law. delicts or quasi-delicts.
Civil obligations as distinguished from Natural obligations – Civil obligations derive their binding force from positive law.5. Natural Obligation derives their binding effect from equity and natural justice. Natural – the fulfillment cannot be compelled by court action but depends on the good conscience of debtor. . Civil can enforced by court action of the coercive power of public authority.
(1089a) ART. 1159. (1090) ART. Contracts. and as to what has not been foreseen. Obligations derived from law are not presumed. 1158. and shall be regulated by the precepts of the law which establishes them. Acts or omissions punished by law. 1157. Obligations arise from: Law. Only those expressly determined in this Code or in special laws are demandable. (1091a) . ART. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. by the provisions of this Book. and Quasi-delicts. Quasi-contracts.
and of Title XVIII of this Book. 1162. regulating damages. 1160. ART. ART. Title XVIII of this Book. Title XVII. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1. Preliminary Title. subject to the provisions of article 2177. and of the pertinent provisions of Chapter 2. 1161. of this Book. (1092a) ART. on Human Relations. Civil obligations arising from criminal offenses shall be governed by the penal laws. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2. (1093a) . and by special law.
(Art. Examples: It is the duty of the Spouses to support each other. which means that obligations arising form law are not presumed and that to be demandable must be clearly provided for. expressly or impliedly in the law. 291. 1158 refers to the legal obligations or obligations imposed by specific provisions of law. 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.Source of Obligations 1.
NCC. provided that are not contrary to law. . it states that the contracting parties may establish such stipulations. 1306. 1305. Although contracts have the force of law.Source of Obligations 2. NCC is the meeting of minds between two person whereby one binds himself with respect to the other. 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. Contracts are with the limitations imposed by law in Art. good custom. morals. it does not mean that contract are over and above the law. For examples: A contract of lease was executed between Gaya as the lessee and Tito as the lessor for the rent of an apartment. CONTRACT as a source of obligations – Contract as defined in Art. public order or public policy. clauses terms and conditions as. 1159). thus. the agreement should be complied with in good faith. (Art. they may deem convenient.
Sources of Obligations 3. contract is a civil obligation while quasi-contract is a natural obligation. (Art. NCC) Contracts and quasi-contracts distinguished: in a contract. Quasi-contract is the juridical relation resulting from a lawful. QUASI-CONTRACTS as a source of obligations The ‘quasi’ literally means ‘as if’. . 2142. 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. consent is essential requirement for its validity while in quasi-contract. there is no consent as the same is implied by law.
00 excess because there was payment by mistake. Arvin paid P2.2 Kinds of Quasi-contracts 1. 000. Ramon.00. a neighbor of Victor managed the farm thereby incurring expenses. 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. ExampleArvin owed Ian the sum of P1. Ian has the obligation to return the P1. 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.00. a wealthy landowner suddenly left for abroad leaving his livestock farm unattended. 2. 2144. (Art. By mistake. NCC) ExampleVictor. 000. 000. When Victor returns. . It is bases on the principle that no one shall enrich himself at the expense of another. he has the obligation to reimburse Ramon for the expenses incurred by him and to pay him for his services.
In addition to whatever penalty that the Court may impose. for Mario to pay the value (reparation) of the gold wrist watch. Mario shall also pay for damages (indemnification) suffered by Rito. Indemnification – the consequential damages which includes the payment of other damages that may have been caused to the injures party. If restitution is no longer possible. the gold wrist watch.Sources of Obligations 4. While an act or omission is felonious because it is punished by law. Illustration: Mario was convicted and sentenced to imprisonment by the Court for the crime of theft. 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. of Rito. Civil liability arising from delicts: Restitution – which is the restoration of or returning the object of the crime to the injured party. Mario may also be ordered to return (restitution) the gold wrist watch to Rito. . In addition to either restitution or reparation. the criminal act gives rise to civil liability as it caused damage to another. when such object cannot be returned to the injured party. Reparation – which is the payment by the offender of the value of the object of the crime.
if there is no pre-existing contractual relation between the parties. is obliged to pay for the damage done. Such fault of negligence.Sources of Obligations 5. 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. . (Art. there being fault of negligence. inflicting upon him physical injuries. Then Pedro becomes liable for damages based on quasi-delict. who is walking on the sidewalk of the street. 2176) ExampleIf Pedro drives his car negligently and because of his negligence hits Jose.
when such object cannot be returned to the injured party. the criminal act gives rise to civil liability as it caused damage to another. . Reparation – which is the payment by the offender of the value of the object of the crime. While an act or omission is felonious because it is punished by law.Sources of Obligations 6. 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. Civil liability arising from delicts: Restitution – which is the restoration of or returning the object of the crime to the injured party.
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.
. that degree of care. (Judge Cooley) Test of Negligence – For the existence of negligence. precaution and vigilance which the circumstances justly demand. the following are necessary: a duty on a party of the defendant to protect the plaintiff from the injury of which the letter complains. whereby such other person suffers injury. a failure to perform that duty. and an injury to the plaintiff through such failure. Negligence Defined – is the failure to observe for the protection of the interests of another person.
. also known as quasi-delict or negligence as a source of obligation.Kinds of Negligence Culpa Aquiliana. Culpa contractual or negligence in the performance of a contract.
while as against the owner of the car there was culpa Aquiliana. although a driver was driving the truck and the owner of the car was also made a defendant. there was Culpa contractual. a passenger truck and private automobile collided. was injured. . The owner of the passenger truck was made a defendant. 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 in the truck. Gutierrez. The court found both drivers negligent. basing basing the liability of the owner of the truck to the plaintiff on the contract of carriage. and the plaintiff. As against the owner of the truck. while the liability of the owner of the car was based on Quasidelict of the Civil Code. An illustration showing this difference is founding Gutierrez vs. 56 Phil 177- While trying to pass each other on a narrow bridge.
LESSON 2: NATURE AND EFFECT OF OBLIGATIONS ART. 1664. When what is to be delivered is a determinate thing. . 1165. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. in addition to the right granted him by article 1170. 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. unless the law or the stipulation of the parties requires another standard of care. However. 1163. (1904a) ART. (1905) ART. he shall acquire no real right over it until the same has been delivered to him. may compel the debtor to make the delivery. the creditor.
If the thing is indeterminate or generic. he shall be responsible for any fortuitous event until he has effected the deliver. The obligation to give a determinate thing includes that of delivering all its accessions and accessories. even though they may not have been mentioned. he may ask that the obligation be complied with at the expense of the debtor. or has promised to deliver the same thing to two or more persons who do not have the same interest. (1906) ART. 1166. (1097a) . If the obligor delays.
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. To preserve or take care of the thing with the proper diligence of a good father of a family. preserve it by taking care of the same as if the horse is his own. pending its delivery. .Obligations of the Debtor To Give a determinate thing1. of the time and of the place. like a person who is obliged to deliver a determinate horse to another should.
including: 1. rents of a building. sugar cane.spontaneous product of the soil. E. vegetables.derived by virtue of juridical relations. Industrial. plants on lands without he intervention of man. Civil . rice. industrial or civil. the young and other products of animal. Fruits of the thing if any.Obligations of the Debtor To Give a determinate thing To deliver the object or thing when the obligation to deliver arises. prices of leases of lands and other similar income.produced by lands of any king through cultivation and labor. E.g.g. Kinds of fruits: Natural. Natural . tress.g. . E.
Accessories – are those things which are joined attached to the principal object as ornament or to render it perfect. . Accession – is the right pertaining to the owner of a thing over its products and whatever is attached thereto either naturally or artificially.Obligations of the Debtor To Give a determinate thing2. Accessions and accessories. Example Accretion which refers to the gradual and addition of sediment to the shore by action of water. or key to a car. Example Radio attached to a car.
Before delivery. To be liable for damages in case of breach of obligation (Art. (Art.Obligations of the Debtor To Give a determinate thing3. if B has not paid the horse. A has right to the colt. he shall acquire no real right over it until the same have been delivered to him. . 000. NCC) Example – a binds himself to sell his horse to B for fro P10. 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. 1164. B does not acquire ownership over it. No date nor condition is stipulated for delivery of the horse. Later. the horse gave birth to a colt. 1170. However.
1460. (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. Indeterminate or generic thing – A thing is generic when it refers to a class or thing or genus and cannot be designated with particularity. NCC) 3. NCC) 2. (Art. NCC) 1. Fortuitous Events – those events which could not be foreseen or which though foreseen were inevitable. 1460. (Art. 1174. .
the same shall be executed at his cost. If a person obliged to do something fails to do it. it may be decreed that what has been poorly done be undone. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore. ( 1098 ) . 1167. Art.
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. or When the obligor poorly performs the obligation. . When the debtor performs the obligation but contrary to the tenor.Obligation of the debtor To Do Being a personal positive obligation.
(1099a) Obligation of the Debtor NOT To Do – This is negative personal obligation which is consisting of an obligation. and the obligor does has been forbidden him. If it is impossible to undo what was done. When the obligation consists in not doing. it shall also be undone at his expense. of not doing something. the obligee can ask the debtor to have it undone. can bring an action to have the fence remove at the expense of A. Should A construct a fence in violation of the agreement. ART. B. If the debtor does what has been forbidden him to do. . ExampleA bought a land from B. the remedy of the injured party is for an action of damages. 1168. It was stipulated that A would not construct a fence in a certain portion of his land adjoining that land sold by B.
judicially demands from theme the fulfillment of their obligation. delay by the other begins. or ( 3 ) When demand would be useless. 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. ART. However. Those oblige to deliver or to do something incur in delay from the time the obligee judicially or extra . ( 1100a ) . as when the obligor has rendered it beyond his power to perform. the demand by the creditor shall not be necessary in order that delay may exist: ( 1 ) When the obligation or the law expressly declares. From the moment one of the parties fulfills his obligation. In reciprocal obligations. 1169. neither party incurs in delay if the other does not comply in a proper manner with what is incumbent upon him.
Gaya failed to delivered on the agreed date. . and A demand has been made by the creditor judicially or extra judicially. only when Tito makes a judicial or extra-judicial demand and from such date of demand when Gaya is on default or delay. Is Gaya already on delay on June 20. The debtor incurred delay if: The debtor fails to perform his obligation when it falls due.Delay ( Mora ) means a legal delay or default and it consists of failure discharge a duty resulting to one’s own disadvantaged. this year. Example – Gaya obliged herself to deliver a determinate horse to Tito on June 20.
. When the obligation expressly so provides The mere fixing of the period is not sufficient to constitute a delay. default or delay by the debtor will automatically arise. However. An agreement to the effect that fulfillment or performance is not made when the obligation becomes due. there are instances when the demand by the Creditor is not necessary to place the debtor on delay: 1.
3. . When the law so provides The express provision of law that a debtor is in default. Example. and demand is not necessary in order that the taxpayer is liable for penalties. Gaya will be in delay because time of the essence. taxes must be paid on the date prescribed by law. Gaya did not deliver the wedding gown on the date agreed upon. Even without demand. For instance.2. Gaya binds herself to sew the wedding gown of Maya to be used by the latter on her wedding date. When time is of the essence Because time is the essential factor in the fulfillment of the obligation.
demand is not necessary. from the moment one of the parties fulfills his obligation. in a contract of sale. Like when the object of the obligation is lost or destroyed through the fault of the debtor. delay to the other begins For instance. then the seller is on delay. . When demand would be useless When the debtor cannot comply his obligation as when it is beyond his power to perform. if the seller delivers the object to the buyer and the buyer does not pay.4. 5. In a reciprocal obligation. if the buyer pays and the seller did not deliver the object. then delay by the buyer begins and vice versa.
like when the creditor unjustifiably refused to accept payment at the time it was due.Kinds of delay – Mora solvendi – delay on the part of the debtor. Compensatio morae – delay both parties in a reciprocal obligation. is in delay. Mora accipiendi – delay on the part of the creditor. .
1170. Any waiver of an action for future fraud is void. 1171. Those who in the performance of their obligations are guilty of fraud. (1130) . 1172.ART. Responsibility arising from negligence in the performance of every king of obligation is also demandable. or delay. but such liability may be regulated by the courts. are liable for damages. negligence. (1101) ART. Responsibility arising from fraud is demandable in all obligations. according to the circumstances. and those whoin any manner contravene the tenor thereof. (1120a) ART.
paragraph 2. When negligence shows bad faith. of the time and of the place. If the law or contract does not state the diligence of which is to be observed in the performance. (1104a) . that which is expected of a good father of a family shall be required. the provisions of articles 1171 and 2201. shall apply. 1173. 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.ART.
1173. (Art. 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. fraud incident to the performance of a pre-existing obligation. 2. of the time and of the place. that is. The fraud referred to is incidental fraud. NCC) .Sources of liability for damages: 1. Fraud (dolo) – is the intentional deception made by one person resulting in the injury of another.
there is contravention of the tenor of the obligation. 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. delay will occur.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. 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. 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)
3. Culpa – presumed from breach of contractual obligation. Dolo – liability cannot mitigated by the courts. Dolo – there is deliberate intent to cause damage or injury. Dolo – fraud must be clearly proved. . Dolo – waiver of liability of future fraud is void. Culpa – ther is no deliberate intent to cause damage. Culpa – may be reduced according to circumstances.Distinguish Fraud (Dolo) from Negligence (culpa) 1. 4. 2. Culpa – waiver may in some cases be allowed.
or which. ART. were inevitable (1105a) . or when the nature of the obligation requires the assumption of risk. Except in cases expressly specified by the law. or when it is otherwise declared by stipulation. no person shall be responsible for those events which could not be foreseen. though foreseen. 1174.
C. robbery. etc. Requisite necessary to constitute fortuitous event The failure of the debtor to comply with the obligation must be independent from the human will. lightning. Fortuitous even – is an event which cannot be foreseen which though foreseen is inevitable. 42926) . The occurrence makes it impossible for the debtor to fulfill the obligation on a normal manner. G. (Vasquez v. is now similar with force majuere or acts of man such as conflagration.R.A. war. Fortuitous event proper are acts of God such as volcanic eruption. etc. 1. earthquake. and the obligor did not take part as to aggravate the injury of the creditor.
Before the arrival of the period. the car was struck by lightning and was totally destroyed. 1998. no person shall be held responsible for fortuitous events Example – Gaya obliged herself to deliver a determine car to Tito on Dec. As a general rule. 30.2. hence her obligation to deliver is extinguished. Gaya cannot be held responsible for the destruction of the car. .
NCC ) The debtor is guilty of concurrent negligence. (Art. When the law expressly so provides. When the nature of obligation requires the assumption of risk. 1169. When declared by stipulation. negligence or in contravention of the tenor of the obligation. 1165. c. Exceptions (when the person is responsible despite the fortuitous even). . An example of this is a contract of insurance. ( Art. 1170. b. The debtor is guilty of default or delay.NCC ) The thing to delivered is generic. such as: The debtor is guilty of fraud. NCC) The debtor has proved to deliver the same thing to two or more persons who do not have the same interest. ( Art. a.
Usurious transaction shall be governed by special laws. *The rate which is in excess of the maximum rate of interest allowed by law. ART. Kinds of interest 1. Note: C. 2. 905 suspends the ceilings in the usury law. parties can agree as to the rate of interest. Circular No. 3. . 1175.B. *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. Hence. 4. Conventional Legal Interest Lawful Interest Usurious Interest *The rate which is agreed upon by the parties.
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.” . The receipt of a later installment of a debt without reservation as to prior installments. (1110a) Presumption means “the inference as to the existence of a certain fact which if not contradicted is considered as true.ART. 1176. shall likewise raise the presumption that such installments have been paid.
Receipt of the principal. . without reservation as to the interest. 2. 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. it is considered as a fact.The presumption in the above article is a disputable presumption. whereby one which can be contradicted by presenting proof to the contrary while a conclusive presumption does not admit any evidence or proof. shall give rise to the presumption that the said interest has been paid. Presumption under this article: 1. hence.
after having pursued the property in possession of the debtor to satisfy their claims. to exercise all the rights and actions of the debtor. creditors have the following successive rights: 1. (1111) Rights of Creditors – In order to satisfy their claims against the debtor. 3. to levy by attachment and execution upon all the property of the debtor. such as are inherently personal to him. may exercise all the rights and bring all the actions of the latter for the same purpose. . save those which are inherent in his person. 1177. ART. except. The creditors. except such as are exempt by law from execution. they may also impugn the acts which the debtor may have done to defraud them. and to ask for the rescission of the contracts made by the debtor in fraud of their rights. 2.
if there has been no stipulation to the contrary. all rights acquired in virtue of an obligation are transmissible. (1112) As a rule. except in the following cases: 1. When the parties stipulate otherwise – by agreement of parties that the rights acquired by them will not be transmitted to any other person. 2. Subject to the laws. . all rights acquired in virtue of an obligation are transmissible. 3. 1178. When the obligation is purely personal in nature. When the law so provides. ART.
10. Conditional. With a period. Joint. Alternative. 2. Pure. Solidary or several or in solidum. 9. . 7. 8. Divisible. 5. Indivisible. 6.LESSON 3: Kinds of Obligations Classification of Obligations: The Civil Code classifies obligations primarily into: (PU CO PE ALFA JOS DIP) 1. 3. 4. With a penal clause. Facultative.
determinate and generic. to wit: a. impliedly admit other classes of obligations. conventional and penal. Other provisions of the Civil Code.) d. real and personal .) c. however. legal.) b.) Unilateral and bilateral.
is demandable at once. – Pure and Conditional Obligations ART. (1113) . Every obligation whose performance does not depend upon a future or uncertain event. 1179. or upon a past event unknown to the parties. without prejudice to the effects of the happening of the event. Section I. Every obligation which contains a resolutory condition shall also be demandable.
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.000 to Tito on demand. Instances when obligations immediately demandable: It is a pure obligation. Example – Gaya obliged herself to pay her loan of P1. Pure Obligation – when the obligation contain no term or condition whatever upon which depends the fulfillment of the obligation contracted by the debtor. 3.1. 2.
1180. 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. subject to the provisions of article 1197. it becomes an obligation with a period.00) and I am to pay my debt to Arvin as soon as possible or as soon as I have the money.” It was held that the conditional obligation is void. the remedy of the creditor is to ask the Court to fix the period of payment. . the obligation shall be deemed to be one with the period. When the debtor binds himself to pay when his means permits him to do so. thus.(n) Example – A promissory note states that “This is to acknowledge receipt of sum of One thousand Six Hundred pesos (P1. ART. because the collection would be impossible. 600.2.
1181. 1183. shall depend upon the happening of the event which constitutes the condition. those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. 1182. The condition not to do an impossible thing shall be considered as not having been agreed upon. If it depends upon chance or upon the will of a third person. (1115) ART. Impossible conditions. When the fulfillment of the condition depends upon the sole will of the debtor. If the obligation is divisible. the conditional obligation shall be void. (1114) ART. In conditional obligations. the obligation shall take effect in conformity with the provisions of this code. ART. that part thereof which is not affected by the impossible or unlawful condition shall be valid. (1116a) . the acquisition of rights as well as the extinguishment or loss of those already acquired.
bearing in mind the nature of the obligation. (1117) ART. 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. 1186. the condition shall be deemed fulfilled at such time as may have probably been contemplated. or if it has become evident that the event cannot occur. (1119) . ART. 1184. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. 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. (1118) ART. If not time has been fixed. 1185.
if Tito marries Gaya.Kinds or classifications of condition: 1. The obligation to lend is immediately demandable. Example: Maya binds herself to deliver a determinate car to Tito if he marries Gaya. Example: Arvin binds himself to lend his only car to Ian until the latter passes the CPA Board. Ian is now obliged to return the car. . The obligation is suspended and not yet demandable. Resolutory – the happening of the condition extinguishes the obligation already existing. Ian’s right over the car is extinguished upon his passing the CPA board. Suspensive and Resolutory Suspensive – the happening of the condition gives rise to an obligation. The obligation is only demandable upon the happening of the condition that is.
Example: Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United States. that is Karpov willingness to play chess with Victor and the latter’s winning over Karpov. Potestative. Example: Mario agrees to give Maria a determinate car if Maria’s only racing horse will win the sweepstake race. This kind of condition is void. . 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. Casual – is one the fulfillment of which depends upon chance. This is mixed condition.Kinds or classifications of condition: 2. Casual and Mixed Potestative – is one the fulfillment of which depends upon the sole will of the debtor.
. 2.Kinds or classifications of condition: 3. 3. Contrary to public policy – Maria agrees to employ Grace in her company if Grace will not join a labor union. Example: 1. Reyes without benefit of marriage. Example: Grace will give Christine a gold necklace if she swims across the Pacific Ocean. Contrary to good custom – Santos binds himself to give Maria a gold wrist watch if she will cohabit with Mr. good custom or public policy. Possible and Impossible Impossible condition is divided into 2: a) Physical Impossibility – the condition imposed is not capable of being performed physically. b) Illegal Impossibility – when the condition imposed is contrary to law. Contrary to law – Pedro agrees to give Ernesto P100.000 if Ernesto will kill Mario.
2001. either a. if Jason has not married Helen until Dec.) the time indicated has elapsed.Kinds or classifications of condition: 4. NCC) Example: Victor will give Jason a car if he will not marry Helen until Dec. Positive and Negative: A Negative condition is one where some event will not happen at a determinate time. 1185. 2001 or if Helen has died within the prescribed time without having married to Jason. 19. 19. the obligation becomes demandable. . or b. the obligation of Victor is extinguished. If Jason married Helen within the prescribed time.) it has become evident that the event cannot occur (Art.
Divisible and Indivisible Divisible – that part of obligation which is not affected by impossible or unlawful condition shall be valid (Art. 000. in the obligation. the first part (to pay P1. 6. 1183. NCC) ExampleX promise to pay Y the sum of P1. 000.00) is void because only the latter is affected by the condition.00 if Y furnishes X with information as to the whereabouts of Z and another sum of P2.00 if Y kills Z.Kinds or classifications of condition: 5. Express and Implied . 000. 000.00) is valid while the second part (P2.
ART. shall retroact to the day of the constitution of the obligation. (1120) . If the obligation is unilateral. the courts shall determine. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. the retroactive effect of the condition that has been complied with. In obligations to do and not to do. once the condition has been fulfilled. Nevertheless. the debtor shall appropriate the fruits and interests received. in each case. 1187. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. when the obligation imposes reciprocal prestations upon the parties. The effects of a conditional obligation to give.
Example – On Jan. he is entitled to the land effective Jan. 1. 1999.Effects of conditional obligation to give: Once the condition is fulfilled. 1999 because B’s right over the land retroacts to the date when the obligation was constituted. 1999 CPA exams. If B passes the CPA exams in May. . 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. 1999 A agreed to give B a parcel of land if he passes the May. 1.
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. Example: A agrees to sell and B agrees to buy A’s parcel of land if B passes the May. . In reciprocal obligation (like a contract of sale) . 1999 CPA Board. as a rule. If B passes the May. the obligation becomes demandable. 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. The following rules shall govern: 1.the fruits and interest during the pendency of the condition shall be deemed to have been mutually compensated. 1999 CPA exams.
In unilateral obligation – the debtor shall appropriate the fruits and interests received during the pendency of the condition unless a contrary intention appears. A will deliver only the parcel of land if the condition is fulfilled. unless a contrary intention appears. Pending the happening of the condition.2. A is entitled to the fruits which the land may produce. Example – X agreed to give Y a parcel of land if Y passes the CPA Board in May. . 1999 exams.
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. ART. 1188. The creditor may. bring the appropriate actions for the preservation of his right. . before the fulfillment of the condition. 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.
To demand security if the debtor becomes insolvent. To prevent concealment of the debtor’s properties which constitute the guaranty in case of nonperformance of the obligation. . 4. 3.Preservation of Creditor’s Right – 2. 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.
To interrupt the period of prescription by actions against adverse possessors of the things which are objects of the obligation. To set aside fraudulent alienation made by the debtor. To register the deeds of sale or mortgages. 1951. (Lawyer’s journal. 7.Preservation of Creditor’s Right – 5. 47) . 6. p.
Raul obliged himself to sell a parcel of land to Dennis if he passes the CPA exams in October. 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. 1999. 1. . 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. to preserve his right over the parcel of land. 1999.
Payment made by debtor was through mistake and error. The action to recover what was paid by mistake should be made before the fulfillment of the condition. during the pendency of the condition. Pedro honestly and believing that the condition was fulfilled paid the P20. 30. 1998. After the obligation was constituted and before Dec. It turned out however that it was a Cebu airline that crushed. Pedro may recover the amount paid to Santos by mistake for the reason that the condition has not yet been fulfilled. 30. 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. 1998. the following requisites may be present: 1. 1. . a plane crushed in Cebu. Thus. Example – Pedro obliged himself to pay Santos P20. 000 to Santos. 2. 000 if a PAL plane crashes at Cebu before Dec.
ART. with indemnity for damages in either case. the creditor may choose between the rescission of the obligation and its fulfillment. the obligation shall be extinguished. 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 following rules shall be observed in case of the improvement. the impairment is to be borne by the creditor. he shall have no other right than that granted to the usufructuary. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. or disappears in such a way that its existence is unknown or it cannot be recovered. the improvement shall inure to the benefit of the creditor. he shall be obliged to pay damages. When the thing deteriorates without the fault of the debtor. If it deteriorates through the fault of the debtor. If the thing is improved by its nature. it is understood that the thing is lost when it perishes. . If the thing is lost through the fault of the debtor. or by time. or goes out of commerce. If it is improved at the expense of the debtor.
the current year. a) specific thing subject to a suspensive condition in case of loss. the specific car was lost through the fault of Reyes. deterioration or improvement of the thing. he shall be obliged to pay damages. In case of loss of the thing If the thing is lost without the fault of the debtor. the obligation shall be extinguished. If in the example above. If the thing is lost through the fault of the debtor. Example – Reyes obliged himself to give Santos a determinate car if he passes the CPA Exams in Oct. These rules apply only to obligation to give a determinate or 1. he shall be liable for damages upon the fulfillment of the condition. the obligation to deliver the car is extinguished even if the condition is fulfilled later. If during the pendency of the condition the car was lost through fortuitous event without the fault of Reyes. b) .
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). .
through the fault of the debtor.2. a) When the thing deteriorates When the thing deteriorates during the pendency of the condition. Ian will bear the impairment. with indemnity for damages in either case. If the condition is fulfilled. during the pendency of the condition. after the fulfillment of the condition. If the thing deteriorates. Example – Arvin obliged himself to give Ian a determinate Toyota car if Ian passes the October CPA Exams. the car was partially damaged by flood. the creditor may choose. without the fault of the debtor. between the rescission of the obligation or its fulfillment. the impairment is to be borne by the creditor. During the pendency of the condition. b) . without the fault on the part of Arvin.
instead of improvement. b) .3. or by time. 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. there would be deterioration without the fault of the debtor. he have no other right than that granted to the usufructuary. the improvement shall inure to the benefit of the creditor. The reason for this is to compensate the creditor who would suffer in case. by its nature. If the thing is improved at the expense of the debtor. a) When the thing improved – If the thing improved during the pendency of the condition.
the parties. 1190. In case of the loss. As for obligations to do or not to do. When the conditions have for their purpose the extinguishment of an obligation to give. shall return to each other what they have received. with respect to the debtor . deterioration or improvement of the thing. ART. the provisions which. are laid down to the preceding article shall be applied to the party who is bound to return. upon the fulfillment of said conditions. the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. (1123) .
it is as if there was never an obligation at all. 1181. 5. deterioration or improvement of the thing. (Art. if any. NCC) Because the obligation is extinguished and considered to have had no effect. The rules given in Art. 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. this year. B did not pass the CPA Exams. The obligation is extinguished and therefore.Effects When Resolutory Condition is fulfilled 1. The courts are given power to determine the retroactivity of the fulfillment of a resolutory conditions. N CC will apply to whoever has the duty to return in case of loss. 2. the parties should restore to each other what they have received. 3. 1189. . The fruits and interests thereon should also be returned after deducting of course the expenses made for the production. Example : A gave B a parcel of land on condition that B will pass the CPA Exams on May. The obligation is extinguished. gathering and preservation. 4.
The power to rescind obligatios is implied in reciprocal ones. in case one of the obligors should not comply with what is incumbent upon him. He may also seek rescission. ART. even after he has chosen fulfillment. The court shall decree the rescission claimed. The injured party may choose between the fulfillment and the rescission of the obligation. if the later should become impossible. This is understood to be without prejudice to the rights of third persons who have acquired the thing. 1191. with the payment of damages in either case. unless there be just cause authorizing the fixing of a period. in accordance with articles 1385 and 1388 and the Mortgage Law. .
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. . Demand fulfillment 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. or Demand rescission 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.
because it is presumed that both parties at about the same time tried to reap some benefits. The first one is fair to both parties because the second infract or. The second rule is likewise just. the liability of the first infractor shall be equitably tempered by the courts. In case both parties have committed a breach of the obligation. 1192. Rules if Both Parties Have Committed a Breach The above rules are deemed just. ART. the same shall be deemed extinguished. and each shall bear his own damages. If it cannot be determined which of the parties first violated the contract. (Report of the Code Commission) . though they would derive some advantage by his own act or neglect.
Obligations with a resolutory period take effect at once. shall be demandable only when that day comes. and it shall be regulated by the rules of the preceding Section. Obligations for whose fulfillment a day certain has been fixed. A day certain is understood to be that which must necessarily come. If the uncertainty consists in whether the day will come or not. . the obligation is conditional. although it may not be known when. but terminate upon arrival of the day certain. 1193. Section 2 .Obligations with a period ` ART.
Period Defined – A period is a future and certain length of time which determines the effectivity or the extinguished of obligation. (8Manresal58) A day certain is understood to be that which must necessarily come. although it may not be known when. Obligation with a period is one whose consequences are subject in one way or another to the expiration of said period or term. .
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. As to time – a period refers only to the future while a condition may refer to a past unknown event.Period and Condition Distinguished: a) As to fulfillment . b) c) .A period is a certain event which must happen sooner or later while a condition is an uncertain event.
ART. Note the cross reference to Art. 1194. 1999. 19. . (n) Effect of loss. NCC. deterioration. the obligation is extinguished. deterioration or improvement of the thing before the arrival of the day certain. or improvement before the arrival of period. 1999 by the car was destroyed by fortuitous event in July 1. the rules in article 1189 shall be observed. 1189. In case of loss. Example: If A is suppose to deliver to B a particular car on Dec.
. By mistake. NCC. the obligor being unaware of the period or believing that the obligation has become de and demandable. allows the recovery of what has been paid by mistake before the fulfillment of a suspensive condition. Example E owes G P20. (1126a) Effect Of Payment Before Arrival of Period This article which is similar to Article 1188. except he interest. Assuming that today is only June 30. in an obligation to give. 000.00. with the fruits and interests. E can recover the amount plus interest therein. But E cannot recover. which was supposed to be paid on December 25 this year. 1195. E paid his obligation on December 25 last year. may be recovered. ART. Anything paid or delivered before the arrival of the period. if the debt had already matured or if E had knowledge of the period.
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. the period is presumed to be for the benefit of both creditor and debtor. 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. 1196. (1127) Presumption As to Benefit Of A Period The general rule is that when a period is fixed by the parties . . ART. Which means that before the expiration of the period. Whenever in an obligation a period is designated.
. 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. 000 on demand. however. For the benefit of both creditor and debtor Example – Gaya obtained a loan of P10. 2001. Gaya can pay her obligation on or before Dec. By way of exceptions. Tito can demand payment from Gaya anytime. Thus. 3. 31.000 or before December 31. Gaya has a period of one year within which to use the money. 2. 000 at 12% interest per annum from Tito for one year. while Tito will benefit from the interest which the money will earn. 2001. 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. 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.
the period cannot be changed by them. the court is not authorized to fix a period. . the courts shall determine such period as may under the circumstance have been probably contemplated by the parties. The courts shall also fix the duration of the period when it depends upon the will of the debtor. 1197. the courts may fix the duration thereof. If the obligation does not fix a period. ART. In every case. Once by the courts. but from its nature and circumstances it can be inferred that a period was intended. The courts have no right to make contracts for the parties. (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.
Here . the court is authorized to fix the period to repurchase. If the obligation does not fix a period but it can be inferred from its nature and circumstances that a period is intended. S sold a parcel of land to B with a right of repurchase. the period is not fixed. Then. Example: 2. If the duration of the period depends upon the sole will of the debtor Example: I will pay you as soon as possible. . so the court may fix the same because if this is not so the obligation may never be complied with by the debtor.Exceptions to the general rule 1. No term is specified in the contract for the exercise of the right.
The debtor shall lose every right to make use of the period: 1) 2) 3) 4) 5) When after the obligation has been contracted. unless he gives a guaranty or security for the debt. 1198. and when through a fortuitous event they disappear. he becomes insolvent. (1129a) . When the debtor attempts to abscond. When by his own acts he has impaired said guaranties or securities after their establishment. in consideration of which the creditor agreed to the period. When the debtor violates any undertaking. When he does not furnish to the creditor the guaranties or securities which he has promised . unless he immediately gives new ones equally satisfactory. ART.
When debtor becomes insolvent: The insolvency need not be judicially declared.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. . 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. It is noted that the insolvency of the debtor must occur after the obligation has been contracted.
When by his own acts he has impaired said guaranties or securities: Example: Gaya borrowed P50. Gaya loses her right to make use of the period.When Debtor Loses The Right to Make Use Of A Period 2. After obtaining the loan. the car was damaged or she causes the impairment of the car. Gaya fails or does not execute a chattel mortgage. 3. 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. Later. the loan becomes demandable or the debtor loses her right to make use of the period. Gaya’s fault. . 000 from Tito which loan was secured by a chattel mortgage on Gaya ‘s car. unless she gives another one equally satisfactory.
After obtaining the loan. the guaranty or security was lost. 000 from Tito which loan was secured by a chattel mortgage on Gaya’s car. 6. When debtor violates an undertaking – Example: Art secured a loan from Arnold on condition that Art will paint the house of Arnold. Example: Gaya borrowed P50. If after the proceeds of the loan was given to Art. . he did not pant the house of Arnold. 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. When by fortuitous event. Abscond means a depart or escape from creditor’s knowledge to avoid payment of his debt. When the debtor attempts to abscond. 5. Gaya loss her right to male use of the period unless she gives another guaranty or security equally satisfactory. the car was lost by fortuitous event. Art loses his right to make use of the period.
1199. 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. Alternative and Facultative obligations ART. If Gaya chooses and delivers the TV set. the obligation is extinguished. Thus. Section 3. part of the other undertaking. . (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.
The debtor shall have no right to choose those prestations which are impossible. unless it has been expressly granted to the creditor. unlawful or which could not have been the object of the obligation. . 1200. ART. The right of choice belongs to the debtor.
Gaya borrowed from Tito P50. unless the right to choose is expressly granted to the creditor. Gaya has two horses.g.Gaya promised to deliver to Tito 100 sacks of rice or a stone from Mars. Could not have been the object of the obligation . Gaya cannot choose Only one prestation is practicable (Art. or her horse or her refrigerator.. 000. 000. It was agreed that Gaya would give Tito her horse or her German Piano.g. Gaya can choose only the delivery of parcel of land.g. Through no fault of Gaya. the horse and the carabao were lost by fortuitous event. Gaya cannot chose to deliver the stone coming from Mars as it is physically impossible. b) Unlawful – E.E. a race horse worth P50. Gaya will deliver to Tito her carabao. 1202) – E. 000 and an ordinary horse which is worth for only P5. the right of choice or to select the prestation belongs to the debtor. Now. Gaya obliged herself to deliver to Tito a kilo of dangerous drug or a parcel of land. c) d) .g. But the right of the debtor is subject to the following: The debtor cannot choose those prestations which are: a) Impossible – E. Gaya can only delivery the refrigerator which is the only one practicable.Rule on Who Makes the Choice – As a general rule.
Where the choice has been expressly given to the creditor. The choice shall produce no effect except from the time it has been communicated. the communicated. the obligation ceases to be alternative and becomes a simple obligation. Once the notice to the effect that a choice is made. ART. 1) . 1205. par. (1133) Right of Choice Must be Communicated – Until the choice is made and communicated. 1201. the obligation remains alternative. such choice shall likewise produce legal effects upon being communicated to the debtor. (Art.
in turn. 000. 1203. it was agreed that instead of P5. If through the fault of Tito. the TV set was destroyed. must pay Gaya the value of the TV set plus damages. When debtor may rescind contract If through the creditor’s fault. ART.00. 000. 1202. only one is practicable. . If Through The creditor’s acts the debtor cannot make a choice according to the terms of the obligation. 000. the debtor cannot made a choice according to the terms of the obligation the debtor is given the right to rescind and recover damages.00 must be returned by Gaya with interest. Tito. In case of rescission. the latter may rescind the contract with damages. ART. the amount of P 5. Gaya could deliver a TV set or a refrigerator or a piano. Example: Gaya borrowed from Tito P5. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound. Gaya can rescind the contract if she wants.
ART. Damages other than the value of the last thing or service may also be awarded. The creditor shall have a right to indemnity for damages when. . through the fault of the debtor. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared. or that of the service which last became impossible. or the compliance of the obligation has become 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. 1204. all the things which are alternatively the object of the obligation have been lost. 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.
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. the creditor may claim any of those subsisting. 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. If the loss of one of the things occurs through the fault of the debtor. or that which remains if only one subsists. through the fault of the former. When the choice has been expressly given to the creditor. or the price of that which. has disappeared. 2) 3) . also with indemnity for damages. he shall perform the obligation by delivering that which the creditor should choose from among the remainder. 1205. ART. the choice by the creditor shall fall upon the price of any one of them.
. or a piano. Tito can choose from among the remainder or that which remains if only one subsists. Some or all of the prestations should become impossible. Example Gaya obliged herself to deliver to Tito a TV set. the rules are as follows: When a thing is los through a fortuitous event 1. If the TV set was lost through fortuitous event. (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. The same rules shall be applied to obligations to do or not to do in case one. or a refrigerator.
4.2. When all the things were lost through debtor’s fault Example: If all the items are lost through the fault of Gaya. 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. 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. then Tito can demand the payment of the price of any one of them with a right to indemnity for damages. 1174 will apply). . 3. When a thing is lost through debtor’s fault Example: If the loss of the TV set occurs through the fault of Gaya.
1206. . When only one prestation has been agreed upon. the obligor is liable for the loss of the substitute on account of his delay. negligence or fraud. through the negligence of the obligor. ART. but the obligor may render another in substitution. the obligation is called facultative. does not render him liable. Example: I will give you my piano but I may give my television set as a substitute. The loss or deterioration of the thing intended as a substitute. 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. But once the substitution has been made.
there is still a need to deliver any of those which remain valid or the only remaining one is valid. As to validity or nullity – In facultative – if the principal thing is unlawful or impossible. there are several things due but the delivery of one is sufficient. 2) 3) .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. there is no need of delivering the substitute in alternative – if one of the thing is unlawful or impossible. As to things due – In facultative – only the principal obligation is due by may substitute another. in alternative.
(1138a) . If from the law. the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors. or that each one of the latter is bound to render. Section 4 – Joint and Solidary Obligations ART. or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear. subject to the Rules of Court governing the multiplicity of suits. 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. entire compliance with the prestation. 1208. There is a solidary liability only when the obligation requires solidarity. 1207. (1137a) ART. the credits or debts being considered distinct from one another.
There are two debtors and two creditors. C and D P9. 000 from A. 500 from each debtor. 2) A borrowed from B. 000 for D. Each creditor can demand only P4. Each creditor can demand only P3. 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. 000. 000. Example of different instances 1) A. B and C are jointly liable. and C borrowed P9. The presumption is that A. 000 from each or a total of P9. 3) A and B are liable to C and D for P9. There is one debtor and three creditors. by virtue of which each of the debtors is liable for a proportionate part of the credit. . 000. D can demand only P3. B.
SOLIDARY OBLIGATION There are solidary liability when 1) The obligation expressly so states. . or 2) The law requires solidarity or 3) The nature of the obligation requires solidarity.
3. where anyone of them can be made liable for the fulfillment of the entire obligation. 000. Example – A is liable to B and C for the amount of P10. 000 2. 000.Kinds of Solidary Obligation 1. Example – A and B are solidary debtors of C in the amount of P 10. Example – A and B are solidarity debtors to C and D. B and C are solidary creditors. . 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. entire compliance with the obligation. where anyone of them can demand the fulfillment of the entire obligation. solidary creditors in the amount of P 10. Active – solidarity on the part of the creditors. Passive – solidarity on the part of the debtors.
is that it is joint. If any of the joint debtors be insolvent. Solidarity not presumed The presumption. 1209. the right of the creditors may be prejudiced only by their collective acts. and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent. If the division is impossible. Example – A and B are jointly liable to give C a particular car. The obligation is joint but since the object is indivisible. the others shall not be liable for his share. . ART. where there are two or more persons in the same obligation. the creditor must proceed against al the joint debtor. Indivisible Joint Obligation – The object is indivisible and the T/E between the parties are merely proportionately liable. The reason is that solidary obligations are very burdensome for they create unusual rights and liabilities. the others shall not be liable for others. Solidarity between debtors increases their responsibility while solidarity between creditors presuming that they are bound jointly and not solidarily.
ART. Joint divisible obligation – A and B are jointly liable to C for P10. The indivisibility of an obligation does not necessarily give rise t solidarity. 000. 000. 4. 2. 1210. . Nor does solidarity of itself imply indivisibility. Solidary indivisible obligation – A and B are solidarily liable to give C their car. Examples: 1. Joint indivisible obligation – A and B are jointly liable to give C their car. 3. (n) Indivisibility as Distinguished from Solidarity Indivisibility refers to the subject matter while solidarity refers to the Tie between the parties. Solidary divisible obligation – A and B are solidarily liable to give C P10.
and D and E to the following conditions. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. 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. ART. C’s share will be due at the end of the year. . 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. 000 to C. 1211. Example: A and B solidarily bound themselves to pay a total of P10. The solidary character of the obligation is not destroyed even if the creditors and debtors are bound by different terms and conditions.
ART. (Art. Each one of the solidary creditors may do whatever may be useful to the others. 1213. 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. However. 1155. otherwise. Not Prejudicial Acts – ART. the act of one solidary creditor in making a judicial demand upon any of the solidary debtors is sufficient. Example of Beneficial Acts – To interrupt the running of prescription. 1212. (1141a) A solidary creditor cannot assign his rights without the consent of the others. . and the obligation is extinguished. the solidary creditor is allowed to so remit. in the case of remission or condonation. NCC) Example of Prejudicial Acts – Should not be performed. there will be liability for damages. Solidary Creditors May Do Useful Act.
1214. 000. judicially or extra-judicially. judicial or extrajudicial. Payment to Any of the Solidary Creditors The rule is that the debtor may pay any one of the creditors. payment should be made to him who made the demand. . payment should be made to him. has been made by one of them. If A paid C. Example A is liable to B and C P5. But when a demand is made by any of the creditors. A may pay either B or C But if B made a demand then payment should only be made to him. B is still entitled to his share from A in case C does not turn over to B his share. The debtor may pay any one of the solidary creditors but if any demand. Art.
made by any of the solidary creditors or with any of the solidary debtors. Compensation. (Art. as well as he who collects the debt. ART. compensation. Confusion or Remission – When a creditor who executed any of these acts. The creditor who may have executed any of these acts. shall be liable to the others for the share in the obligation corresponding to them. 1212. it is logical that he is liable to the other solidary creditors for their corresponding shares considering that such acts are prejudicial to them. Novation. 1215. confusion or remission of the debt. Liability of Solidary Creditor in case of Novation. without prejudice to the provisions of article 1219. shall extinguish the obligation. NCC) .
ART. so long as the debt has not been fully collected. D can collect from A or B or C alone or from any two of them or all of them simultaneously. 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. the creditor may proceed against any. 000. Example A. . (1144a) Creditor May Proceed Against Any Solidary Debtor – In a solidary obligation. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. some or all of the solitary creditors simultaneously so long as it has not been fully collected. If demand is made on A. B and C solidarily owe D the amount of P9.
If the payment is made before the debt is due. because of his insolvency. Payment made by one of the soldiery debtors extinguishes the obligation. 1217. He who made the payment may claim from his codebtors only the share which corresponds to each. no interest for the intervening period may be demanded. (1145a) . When one of the solidary debtors cannot. ART. with the interest for the payment already made. such share shall be borne by all his codebtors. in proportion to the debt to each. reimburse his share to the debtor paying the obligation. If two or more solidary debtors offer to pay the creditor may choose which offer to accept.
Example – A. 31. 000 on Dec. 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 both A and B offer to pay D on Dec. However. 31. If A pays the entire amount of P9. 31. The payment of A gives him the right of reimbursement from B and C P3. 000 each with interest from the date of payment. 000 due on Dec. both A and B shall bear the insolvency in proportion to their shares. the latter may choose which offer to accept. the obligation is extinguished. . if C is insolvent. B and C are solidarily liable to D and E in the amount of P9.
000. If A paid the debt. 2. Becomes Illegal – A and B are solidarily bound to deliver medical drugs to C. (n) Effect of Payment After Obligation Has Prescribed or Become Illegal – 1. Notwithstanding the prohibition. the transaction of such medical drugs were later prohibited by law. he cannot collect form B his share of the debt. Neither can A can recover from C. ART. 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. Example – A and B are solidarily indebted to C in the amount of P 10. 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. 1218. . B performed the obligation by delivering the prohibited drugs. B is not anymore entitled to reimbursement from A. The debt prescribed.
There is no more to remit. in case the debt had been totally paid by anyone of them before the remission was effected. ART. 2) 3) . does not entitle him to reimbursement from his codebtors. If remission is made prior to the payment and payment is made. Remission by Creditor – 1) If payment if made first. (1146a) ART. the remission is of no effect. 1220. he is not entitled to reimbursement from his co-debtors because remission is essentially gratuitous. 1219. The remission of the whole obligation obtained by one of the solidary debtors. then there is payment by mistake. 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. If one of the solidary debtors obtained remission on the whole obligation.
1221. the obligation shall be extinguished. the provisions of the preceding paragraph shall apply. 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. for the price and the payment of damages and interest. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. all shall be responsible to the creditor. without prejudice to their action against the guilty or negligent debtor. If through a fortuitous event. (1147a) . ART.
Without any fault on the part of any one of the debtors. . B and C are solidarily bound to deliver a determinate car to D. If the thing is lost or has become impossible to perform through a fortuitous event without the fault of the debtor.Rules in Case thing has Been Lost or Prestation Has Become Impossible – 1. the car was lost through the fortuitous event. the obligation is extinguished. The obligation is extinguished. Example: A.
the car was lost through the fault of anyone of the solidary debtors. anyone of them may be held liable by D for the price of the car plus damages. The 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. . 3. If in the preceding paragraph.Rules in Case thing has Been Lost or Prestation Has Become Impossible – 2. 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. however who were not in delay have the right to recover from their co-debtors who was responsible due to his delay.
he may avail himself thereof only as regards that part of the debt for which the latter are responsible. in actions filed by the creditor. With respect to those which personally belong to the others. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. 1222. or pertain to his own share. . A solidary debtor may. ART.
remission illegality or absence of consideration. The entire debt was paid by d. the latter can raise the defense of payment by virtue of which the obligation was extinguished. payment or performance. 000. . such as fraud prescription.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. in an action by C against A. Example A and B are solidarily liable to C in the among to P6. The defenses derived from the nature of the obligation.
insanity and vitiated consent. Defenses personal to him or pertaining to his own share. insanity and vitiated consent. .Defenses available to a Solidary Debtor – 2. 3. Defenses which are personal to others. such as minority. such as minority.
(1149) . Section 5 – Divisible and Indivisible Obligations] ART. 1223. 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.
000 in five monthly installment. An indivisible obligation is one the object which in its delivery or performance is not capable of partial fulfillment. The obligation of A is divisible because it is payable in partial payments. 31.Definition of Terms – 1. This is an indivisible obligation because it is not subject to partial performance. 2. Example: A agreed to deliver a determinate car to B on Dec. Example: A agreed to pay B P10. A divisible obligation is one the object of which in its delivery or performance is capable of partial fulfillment. .
obligation to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. 1224. (1150) ART. ART. . A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. 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. For the purposes of the preceding articles. 1225.
However. and obligation is Indivisible if so provided by law or intended by the parties. the accomplishment of work by metrical units. divisibility or indivisibility shall be determined by the character of the prestation in each particular case. (1151a) . even though the object or service may be physically divisible. or analogous things which by their nature are susceptible of partial performance. When the obligation has for its object the execution of a certain number of days of work. it shall be indivisible. In obligations not to do.
Here the obligation is indivisible by reason its purpose which requires the performance of all the parts. 1. Obligation to give definite things Example: To give a particular house. Here the obligation is indivisible because of the nature of the subject matter. Obligations which are not susceptible of partial performance Example: A is obliged to sing a song. 2. .Obligations Deemed Indivisible – The general rule of determining the divisibility or indivisibility of an obligation depend on the purpose of the obligation.
Example: Taxes should be paid within a definite period. Example: The obligation of A to give P10. Obligations intended by the parties to be indivisible even if thing or service is physically divisible. the amount of tax payable must be delivered in Toto. 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. 4. not partially. Although money is physically divisible. . Obligation provided by law to be indivisible even if thing or service physically divisible. 000 to B on a certain date.
Obligations which have for their object the accomplishment of work by metrical units. 3. Example – A obliged himself to paint the house of B to be finished in 10 days. 2.Obligations Deemed Divisible 1. Obligations which by their nature are susceptible of partial performance Example The obligation of A to pay a debt of P10. The obligation is divisible because it will not be finished in one time. . Obligations which have for their object the execution of a certain number of days of work. Example: A obliged himself to deliver 25 cubic meter of sand. 000 to B in ten (10) monthly installments.
. Section 6 – Obligations with a Penal Code ART. Nevertheless. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. if there is no stipulation to the contrary. 1226. (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. In obligations with a penal clause. It is attached to obligations in order to insure their performance.
. 3) To penalize the obligor in case of breach of the principal obligation. 2) To substitute for indemnity for damages and the payment of interest in case of non-compliance of the principal obligation.Purpose of a Penal Clause 1) To insure the performance of the obligation.
The word expressly means that any implied reservation is not allowed. fulfillment of the obligation will be considered an alternative one. ART. the penalty may be enforced. if after the creditor has decided to require the fulfillment of the obligation. 1227. . Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time. save in the case where this right has been expressly reserved for him. The debtor cannot exempt himself from the performance of the obligation by paying the penalty. the performance thereof should become impossible without his fault. However. He can do so if the right has been expressly reserved. (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. unless this right has been clearly granted him. The reason is that if he can just pay.
(1154a) . 1228. Even if there has been no performance. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. 1229. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. ART. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. ART.
When Penalty May be Reduced by the Court – a) When the obligation has been partly 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. even if there has been no performance at all. .
1230. For failure of A to comply with the obligation. the obligation to sell merchandise is valid by the penalty to deliver the prohibited drug is void. ART. The penal clause may be disregarded. If only the penal clause is void. the principal obligation remains valid and demandable. The nullity of the penal clause does not carry with it that of the principal obligation. B may recover damages . Example: A agreed to sell merchandise to B. A will deliver a prohibited drug as penalty. (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. Here. penal clause. it is provided in their agreement that in case of default.
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. th obligation is extinguished and the debtor cannot be held liable. 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. .
when the nature of the obligation requires the assumption of risk. 4. by provision of law. 2. when the thing to be delivered is generic or indeterminate. 3. when the debt or a thing certain and determinate proceeds from a crime. if the debtor is at fault. when the debtor has promised to deliver the same thing to two or more pesons who do not have the same interest. by stipulation or agreement of the parties.The exceptions to this rule are: 1. . 6. 7. 5.
Art. storm. the loss or destruction of anything of the same kind does not extinguish the obligation. 1263. unless there is proof to the contrary. it shall be presumed that the loss was due to his fault. flood. or other natural calamity. The courts shall determine whether. under the circumstances. 1264. and without prejudice to the provisions of article 1165. Art. In an obligation to deliver a generic thing. This presumption does not apply in case of earthquake. Art. the partial loss of the object of the obligation is so important as to extinguish the obligation. Whenever the thing is lost in the possession of the debtor. (1183a) . 1265.
. however.Thing Lost In Possession Of Debtor If the thing is lost while in the possession of the debtor. The presumption of fault. flood or other natural calamities. the law presumes that he ting was lost through his fault. does not apply when the ting is lost due to earthquake.
When the service has become so difficult as to be manifestly beyond the contemplation of the parties. When the debt of a thing certain and determinate proceeds from a criminal offense. the latter refused without justification to accept it. (n) Art. in whole or in part. the obligor may also be released therefrom. whatever may be the cause for the loss. (1184a) Art. 1268. the debtor shall not be exempted from the payment of its price. becomes legally or physically impossible without the fault of the obligor. (1185) . 1267. unless the thing having been offered by him to the person who should receive it.
. 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. 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. 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 .
1269. the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. (1186) . Art. The obligation having been extinguished by the loss of the thing.
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.
SECTION 3. comply with the forms of donation. It may be made expressly or impliedly. Condonation or remission is essentially gratuitous. One and the other kind shall be subject to the rules which govern inofficious donations. . (1187) . 1270. and requires the acceptance by the obligor.Condonation or Remission of the Debt Art. furthermore. Express condonation shall.
as a result his right against the debtor. (4 Sanchez Roman 422) . 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.
must not be inofficious. it must comply with the forms . the parties must have capacity. it must be accepted by the debtor.Requisites of Condonations OR Remissions it must be gratuitous. and if made expressly.
. 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.Effect of inofficious Remission While a person may make donations. otherwise. the excess shall be inofficious and shall be reduced by the Court accordingly. no one can give more than that which he can give by a testamentary will. Like for example.
unless the contrary is proved. The delivery of a private document evidencing a credit. made voluntarily by the creditor to the debtor. it shall be presumed that the creditor delivered it voluntarily. ART. implies the renunciation of the action which the former had against the latter. (1188) ART. 1271. (1189) . If in order to nullify the waiver it should be claimed to be inofficious. 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. Whenever the private document in which the debt appears is found in the possession of the debtor. 1271.
Suppose it is not known how Gaya came into possession of the promissory note. . Gaya owes Tito P10. If the promissory note is voluntarily delivered to Gaya. 000 evidenced by a promissory note. The note as signed by Gaya was given to Tito. the presumption is that it was voluntarily delivered by Tito unless Tito proves to the contrary.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. the presumption is that there was payment by virtue of the payment of the debt. the presumption is that the debt must have been paid by Gaya. it must be presumed that the obligation has been remitted. Example. which gives rise to the remission of the obligation. Or it was voluntarily delivered to the debtor. it is known that Gaya has not yet paid Tito.
The accessory cannot exist without the principal obligation.ART. (1190). . The principal debt here is the P10. Arvin owes Tito P10. Of Effect Renunciation Of the Principal Debt The above provision follows the rule that the accessory follows the principal. 1273. 000 with Gaya as guarantor. 000 while the accessory obligation is the guaranty of Gaya. The remission of the debt of Arvin by Tito extinguishes the guaranty of Gaya. the obligation of Arvin shall remain in force. but the waiver of the latter shall leave the former in forc. The renunciation of the principal debt shall extinguish the accessory obligations. Example. But if only the guaranty of Gaya is condoned.
is found in the possession of the debtor. after its delivery to the creditor. 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. the thing delivered shall be returned with all its fruits and accessions. (1191a) Pledged. . It is presumed that the accessory obligation of pledge has been remitted when the thing pledged.ART. 1274.
Presumption In case Thing in Possession of Debtor If the thing pledged is found in the hands of debtor or the third person. only the accessory obligation of pledge is presumed remitted. Section 4. (1192a) . – Confusion or Merger of Rights ART. The obligation is extinguished from the time the characters or creditor and debtor are merged in the same person. not the obligation itself. 1275.
(4Sanchez Roman 421) .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.
the very obligation must be the same. . Gaya issued a promissory note for P10. Mary indorsed it to Gaya. Arvin indorsed it to Mary. 000 in favor of Tito payable 30 days after sight. 2. clear and definite. it must be complete. the merger of the qualities of creditor and debtor must be in the same person. Tito indorsed it to Arvin. and 4.Requisites of A Valid Confusion 1. Before the maturity of the note. 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. and 3. Example.it must take place in the person of either the principal debtor and principal creditor.
Confusion which takes place in the person of any of the latter does not extinguish the obligation. 1274.ART. that accessory follows the principal. NCC. The principal debt is extinguished and Arvin is released from his obligation as guarantor. If. Later. . the credit was assigned by Tito to Mary and Mary to Arvin. Gaya has now the obligation to pay Arvin. Tito assigned the credit to Mary. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. 000 loan from Tito which loan was guaranteed by Arvin. but the extinguishment of the accessory does not extinguish the principal obligation Example. Gaya obtains P10. who in turn assigned it to Gaya. The contract of guaranty is extinguished but the principal obligations remains. The extinguishment of the principal obligation extinguishes the accessory obligation. 1276. (1193) Effect of Merger This article reiterates the principles established in Articles 1176. in this same example.
Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. The co-debtor will not owe his corresponding share to this former joint co-debtor. 000 each. There is here a merger between Gaya and Tito but Mary and Arvin would now owe Gaya P5. Mary and Arvin are jointly indebted to Tito in the amount of P15. Gaya. the debts are distinct and separate from each other. Tito assigns his credit to Ian who in turn assigned it to Gaya. it affects only the share corresponding to the creditor or debtor in whom the two characters concur. In case there is merger in a joint obligation.ART. (1194) Effect of Merger in Joint Obligation In a joint obligation. Example. . 1277. 000.
(1195) . in their own right are creditors and debtors of each other.Section 5. 1278. Compensation ART. Compensation shall take place when two persons.
in confusion. Compensation Distinguished From Confusion as to number of persons – in compensation there must be two persons. .Compensation. in confusion there is only one obligation. as to number of obligation – in compensation thEre must be two obligations.Defined Compensation shall take place when two persons. in their own rights are creditors and debtors of each other. there is only one person in whom the quality of creditor and debtor is merged.
as to cause a. 2. Judicial – takes place only through court orders.Kinds of Compensation 1. Partial – the debts are not the same amount hence after compensation. Legal – takes effect by operation of law provided all the requisites prescribed by law are present. . as to effect a. c. b. Voluntarily – takes place by virtue of the agreement of the parties. Total – when both debts are completely extinguished because the debt are the same amount b. a balance remains outstanding.
That over neither of them there be any retention of controversy. they be the same kind. That both debts consist in a sum of money. (1196) . is necessary: (1) (2) (3) (4) (5) That each one of the obligors be bound principally. 1279.it ART. That they be liquidated and demandable. In order that compensation may be proper. or if the things due are consumable. and that he be at the same time a principal creditor of the their. and also of the same quality if the latter has been stated. That the two debts be due. commenced by third persons and communicated in due time to the debtor.
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. That the two debts be due. 1279. 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.it ART. and also of the same quality if the latter has been stated. commenced by third persons and communicated in due time to the debtor. In order that compensation may be proper. or if the things due are consumable. That over neither of them there be any retention of controversy. (1196) .
2. Arvin obliged himself to deliver to Tito 100 sacks of rice on October 30. 20. 1999. Example. 1999. the two debts are due and demandable. These two obligation become due on Dec. 3. 000 payable on October 30. . Arvin owes Tito P10. Gaya owes Maya P10. 1999. 1999. 1999. 000 payable also on October 30. Example. on the other hand. 000 payable on Dec. Tito on the other hand owes Arvin P10. There is compensation because they are consisting of consumable things. 1999 compensation takes place because both Arvin and Tito are principal creditor and principal debtor of each other. has an obligation to deliver 100 sacks of rice to Arvin on October 20. 000 also due and payable on Dec. 1999. both debts consists in a sum of money or of consumable things of the same kind and quality. There is compensation when the obligation becomes due on October 30. 1999. Maya owes Gaya P10.Requisites of a Proper Compensation or Legal Compensation 1. Tito. 30. 30. the parties are principal creditor and principal debtor of each other. Example.
4. the two debts liquidated. Arvin woes Ian P10. while the word demandable means when it is due. and then compensation can take place. 5. there be no retention or controversy means a third person who is claiming to be a creditor. 000 has been garnished by Gaya who claims to be an unpaid creditor of Arvin. If Gaya wins her claim. 000 but Arvin credit of P10. 000 and Ian owes Arvin P10. If she loses. Ian has been duly notified of the controversy. Any possible compensation is in the meantime suspended. . and The liquidated means that the amount of debt has already been fixed and determined. there can be no compensation. the controversy is resolved. Example.
Notwithstanding the provision of the preceding article. 1280. 000 because he can set the P4. 000. part. When Tito sues Arvin and Arvin cannot pay. When Tito sues Arvin for P4. . 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. Maya will be liable for only P6. Arvin owes Tito P10. Maya is the guarantor of Arvin. Example. 000.ART. 1 because the article allows setting up compensation as regard what the creditor may owe to the principal debtor. Tito owes Arvin P10. 000. 000 credit of Arvin as the basis of partial compensation.
Gaya is indebted to Maya the amount of P10. 000 due on Dec.ART. 19. 1999. there is a total compensation. hence both obligations are extinguished. . There is here a total compensation. 000 due on Dec. Kinds of Compensation Total compensation is when the amount due are equal or of the same amount. 1281. 19. hence both debts will be extinguished. When the two debts are of the same amount. Compensation may be total or partial. Example. Maya is likewise indebted to Gaya in the amount of P10. 1999.
000 will remain after compensation takes place. ART. On the other hand. (n) .Partial compensation is when the amount are not the same after compensation took place. Maya owes the due date arrives because a balance of P4. 1282. 2009. The parties may agree upon the compensation of debts which are not yet due. 000 due on Dec. Example. 19. Gaya owes Maya P10. there is a balance remains.
1279) Example. Generally compensation the parties there may be compensation cannot take place comes Nov. 2001 because Maya’s debt is not yet due. 30. by voluntary agreement between . On the other hand Maya owes Gaya P10. 2001. 30. However. Gaya owes Maya P10. 000 due on Dec. 2001.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.(Art. 000 due on Nov. 19.
X owes Y P1. Example. X can set off the obligation of Y to pay him damages in the amount of P800 against his debt of P1. X failed to pay. Y damaged the property of X to the extend of P800. 000. (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. . 000. When Y demanded payment. 1283.ART. If one of the parties to a suit over an obligation has acclaim for damages against the other. In anger. the former may set it off by providing his right to said damages and the amount thereof.
A is still liable considering compensation had already taken place because the effect of annulment is retroactive. the debts may be compensated. Example. it is as if there was no compensation. 1284.ART. A. they may be compensated against each other before they are judicially rescinded or avoided. Before the debt of B is nullified. . 000. both debts may be compensated against each other if all the requisites for legal compensation are present. A owes B P 10. 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. through fraud was able to make B sign a promissory note that B is indebted to A for the same amount. If suppose the debt of B is later annulled by the court. Subsequently. When one or both debts are rescissible or voidable. The debt of A is valid.
that he reserve his right to the compensation. he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. cannot set up against the assignee the compensation which would pertain to him against the assignor. 1285. If the assignment is made without the knowledge of the debtor. unless the assignor was notified by the debtor at the time he gave his consent. the latter may set up the compensation of debts previous to the cession . .ART. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. but not of subsequent ones. If the creditor communicated the cession to him but the debtor did not consent thereto.
. If B assigns his right to C. 000 but he can still collect the P2. Example. A still owes B P2. latter can collect only P2. if A gave his consent to the assignment before it was made on will be liable to C for P5. 000. 000 today. B owes A P3. the debtor can raise the defense of compensation with respect to the debt. Both debts are extinguished up to amount of P3.When Compensation Has Taken Place BEFORE Assignment If an extinguished obligation has been assigned by the creditor to third person. 000 due yesterday. A owes B P5. It is as if no compensation took place. 000 due also yesterday. However. 000 from A. The remedy of the assignee is against the assignor. Hence. 000 owed by B.
000 to C. he would be liable only P2. the assignee. . 19. 000 but he can still collect the P2. However. if A while consenting to the assignment. 000 due Dec. They are: Assignment with consent of debtor Example. the compensation which would pertain to him against B.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. reserved his right to the compensation. 000 due Dec. 000 debt from B. B assigned his right to C. A is still liable to C for P5. A owes B P5. the assignor. 19. B owes A P3.
Come Dec. the assignment is valid only up to the amount of P1. The crucial time is when B acquired knowledge of the assignment and not the date of the assignment. he can raise the defense of compensation. 10 which was before the cession on Dec. 10. 000. 000 but B cannot raise the defense of compensation with respect to the debt of A due on Dec. If B learned of the assignment after the debts had already matured. A owes B P1. B owes A P2. There being partial compensation. 000 due Dec. B can set up the compensation of credits before and after the assignment. In this case. 12. on Dec. A notified B but the latter did not give his consent to the assignment. A will liable for his debt of P1. let us suppose that the assignment was made without the knowledge of B who learned of the assignment only on Nov. Assignment without the knowledge of the debtor Example. 000 Dec. 15. . A owes B P1. 12. he cannot. So. 15 which has not yet matured. B is liable to C for P1. A assigned his right to C on Dec. how much can C collect from B? B can set up the compensation of debts on Dec. 000 to B. 1. 15. 12. 16. Assignment with the knowledge but without the consent of debtor Example. otherwise. in the preceding example. 000 due Dec.
ART. Example. (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. If A claim compensation. 1286. bu there shall be an indemnity for expenses of exchange or transportation to the place of payment. Once these expenses are liquidated. The indemnity shall be paid by the person who raises the defense of compensation. Compensation takes place by operation of law. 000(equivalent amount) payable in Manila. he must pay for the expenses of exchange. . Gaya owes Maya $1. the debts also become compensated. 000 payable in New York. Maya owes Gaya P38. even thought eh debts may be payable at different places.
1288.ART. 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. 1287. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. without prejudice to the provision of paragraph 2 of article 301. Neither shall there be compensation if one of the debts consists in civil liability arising from a penal clause. ART. .
with respect to the other. know the elements of contracts. good customs. learn the different classifications of contracts. 3. morals. The classifications of contracts summarizes those types of contracts that may be freely agreed upon as long as they are not contrary to law. that contracts take effect only between parties and its exceptions. A contract is a meeting of minds between two persons whereby one binds himself. public order or public policy. to give something or to render service. you should: 1. 1305.PART III General Provisions on Contracts Learning Objectives: After studying this lesson. know the definition of contract 2. ART. (1254a) . and 4.
In a contract.Contracts. Defined The above article defines the term Contract. to do or not to do. one or more persons bind themselves with respect to another or reciprocally. . to the fulfillment of a presentation to give.
Elements of Contract: 1. Essential elements – those elements without which there can be no valid contract. modes of payment. Accidental elements .those which exist by virtue of an agreement for the purpose of expanding. Such accidental elements are condition. 3. or modifying a contract. or penalties. such as Warranty of hidden defects or eviction in contract of sale. 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. . terms. This element are consent. clauses. 2. limiting.
Preparatory or conception – process of formation such as bargaining. terms and conditions of contract. . negotiation to arrive at a define contract. 2. cause or consideration. 3. 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.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. 2. Mutuality – its validity and performance cannot be left to the wil of only one of the parties. 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. 4.Characteristics of Contracts: 1. .
2. a. As to perfection a. Deposit. Ex. Ex.Classification of A Contract: (FROM) 1. Ex. c. pledge of guaranty. Consensual – one which is perfected by mere consent (Art. Contract of partnership or agency. Ex. A contract of sale. As to dependence to other contract. Preparatory – those which is created in order that a future transaction or contract may be entered into by te parties. . or commodatum. Contract of mortgage. pledge. b. Accessory – those which are dependent upon another contract. Real Contract – perfected by mere consent and by the delivery of the object or subject matter. lease. 1315 b. Principal – one which can stand alone.
Aleatory . etc. Nominate – one which has particular name or designation such as sale. commodation. . Contract of insurance.one which the fulfillment of the obligation depends upon chance. Unilateral – where only one ha an obligation to perform.where there is an exchange of values. Ex. Sale. b. Ex. such as lease. mortgage. agency. b. According to name or designation a. Innominate – those without particular name. According to risk involved a. According to cause a. such as commodatum. b. 4. Commutative . 5. b. Contract of donation. Onerous – one which imposes valuable consideration such as sale. Gratuitous – one which one of the parties does not receive any valuable consideration. Ex. Bilateral – where both parties have reciprocal obligation to perform. According to the nature of obligation a. 6. 3.
clauses. The contracting parties may establish such stipulations. morals. 7. provided they are not contrary to law. 1306. public order. (1255a) . Oral – by word of mouth of the parties b. or public policy. good customs. According to form a. terms and conditions as they may deem convenient. Written – the agreement which is reduced in writing may be public or private or private document which ART.
The contract must bind both contracting parties. (1256a) .Contract Binds by Both Parties ART. 1308. its validity or compliance cannot be left to the will of one of them.
(11 Manresa 380) Example. its validity or compliance cannot be left to the will of one of them. It is elementary rule that no party can renounce or violate the law of the contract without the consent of the other. Hence. This principle is based on the essential equality of the parties. This is also known as “mutuality of contract”. The contract is void because the fulfillment of the condition depends on the will of Gaya. . Contracts entered by and between the parties mush bind both parties in order that it can be enforced against each other. 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.
The determination of the performance may be left to a third person. ART. . The determination shall not be obligatory if it is evidently inequitable. whose decision shall not be binding until it has been made known to both contracting parties. the courts shall decide what is equitable under the circumstances. 1309. In such case. 1310. ART.
fixed the price after considering the factors affecting the value of the land. the court may be called upon to decide what is equitable. Maya. the determination of its performance may be left to a third person after it has been made known to both contracting parties. Gaya sold her parcel of land to Laura. and informing both contracting party that the decision is just and suitable. compliance with a contract cannot be left to the will of one of the contracting parties. Example. then. further. . It was agreed that Maya. However. Provided. the courts shall decide what is equitable under the circumstances. If the decision made by Maya is manifestly inequitable. 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.Determination of Performance by Third Person As a rule. a real estate appraiser would be the one to determine the reasonable price of the land.
If a contact should contain some stipulation in favor of third person. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. their assigns and heirs. ART. 1311. A mere incidental benefit or interest of a person is not sufficient. or by stipulation. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Contracts take effect only between the parties. (1257a) . The heir is not liable beyond the value of the property he perceived from the decedent. except in case where the rights and obligations arising from the contract are not transmissible by their nature. or by provision of law.
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.
There is a meeting of the minds of the parties to the contract. inequitable conduct or accident. The failure to express the true intention is due to mistake. The written instrument does not express the true agreement or intention of the parties. fraud. 2. . 3.Requisites of Reformation 1.
inequitable conduct or accident. The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings. and There is clear and convincing evidence of the mistake. states that the land is being sold excluding the improvements thereon. Example. 4. In this case. 5. the contract was signed by the parties. . Arvin sold his land to Ryan. However. fraud. the remedy is reformation. because there has been a meeting of minds. It was greed that the sale will include all the improvements.
725). 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. 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. while the opposite of inter vivos is donation mortis causa which takes effect after the donor’s death. 2. to take effect after his death.Cases When Reformation Not Allowed 1. Donation is strictly personal andfree act so that if the intend of the donor that the donation will take effect during his lifetime. it is a donation inter vivos. . (Art. who accepts it.
When one party ahs brought an action to enforce the instrument – (Art. The bringing of the action is thus inconsistent with reformation 4. thre is nothing to reform. 3. When the real agreement is void – If the real agreement is void. 1367) When a party brings an action to enforce the contract. . he admits its validity and that it expresses the true intention of the parties.
If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties. the latter shall prevail over the former. 1370.Interpretation Of Contracts Art. (1281) . If the words appear to be contrary to the evident intention of the parties. the literal meaning of its stipulations shall control.
the parties are bound thereby according to the literal sense of their stipulations.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. 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. If the terms of a contract are clear and unequivocal. Example. the contract recites that is a sale of land belongs to A for P500.
the mere liberality of the benefactor.Cause of Contracts Art. in remuneratory ones. In onerous contracts the cause is understood to be. the prestation or promise of a thing or service by the other. for each contracting party. (1274) . 1350. and in contracts of pure beneficence. 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.
Ex. X donated a parcel of land to Y. GRATUTIOUS – the cause which is the mere liberality of the benefactor or giver. 2. ONEROUS – the cause of which for each contracting parties is the pre-station or promise of a thing or service of the other. REMUNERATORY . Ex. the done or benefactor. A rendered service as the lawyer-counsel of B who agreed to pay P10.Classification of Contracts According to Cause 1. .the cause is the service or benefit which is remunerated. lease of things. Sale. 3. 000 for said services. Ex. The cause is the liberality of X.
1352. public order or public policy. 1353. or with unlawful cause. good customs. Contracts without cause. if it should not be proved that they were founded upon another cause which is true and lawful. (1276) . The statement of a false cause in contracts shall render them void. Art. The cause is unlawful if it is contrary to law. (1275a) Art. morals. produce no effect whatever.
. 1352) it must be lawful. (Art 1353) 2. it must exist at the time the contract is entered into. (Ibid) and it must be true or real. 3. (Art.Requisites of Cause 1.
produces no effect whatever.Effect of Absence of Cause A contract without cause or with an unlawful cause. Like. according to this article. an absolutely simulated contract produces no effect because there is no cause at all. . for example.
(Art. 1355). 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. Illegality of cause implies that there is a cause but the same is unlawful or illegal.
Voidable contracts (Chapter 7). and 4. 3. Void or inexistent contracts (Chapter 9) . Unenforceable Contracts (Chapter 8). Rescissible contracts (Chapter 6).PART IV DEFECTIVE CONTRACTS There are four kinds of defective contracts: 1. 2.
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. Art. (1290) . Contracts validly agreed upon may be rescinded in the cases established by law. the contract may be rescinded. such as creditors. 1380.
(8Manresa 748) .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. by means of the restoration of things to their condition in which they were prior to the celebration of said contract.
Requisites of Rescission 1. . There must be no other legal remedy to obtain reparation for the damage. 4. 3. The rescission must be based upon a case especially provided by law. 2. There must be lesion on pecuniary prejudice to one of the parties or to a third person. The contract must be validly agreed upon.
5. The period for filing the action for rescission must not have prescribed . 7. 6. The object of the contract must not legally be in the possession of third person who did not act in bad faith. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract.
(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. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. (1291a) . Art. (5) All other contracts specially declared by law to be subject to rescission. 1381. if the latter suffer the lesion stated in the preceding number. 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.
They are susceptible of ratification. 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.Voidable Contracts Art. The following contracts are voidable or annullable. violence. unless they are annulled by a proper action in court. These contracts are binding. . 1390. intimidation. undue influence or fraud. (2) Those where the consent is vitiated by mistake.
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. undue influence of fraud. violence. intimidation. . or consent is vitiate by mistake.
. 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. for reason of public interest.
The defect in the contract consists in the vitiation consent of one of the contracting parties. of 2.Characteristics of Voidable Contracts 1. The defect or voidable character of the contract cannot be invoked by third persons. 4. . 3. The contract is susceptible of convalidation by ratification or prescription. The contract is binding until annulled by a competent court.
This period shall begin: In cases of intimidation. And when the action refers to contracts entered into by minors or other incapacitated persons. (1301a) . The action for annulment shall be brought within four years. from the time the guardianship ceases.Art. violence or undue influence. In case of mistake or fraud. from the time of the discovery of the same. 1391. from the time the defect of the consent ceases.
The time guardianship ceases. violence or undue influence ceases.Period for Filing Action for Annulment The period within which the action for annulment shall be brought within four(4) years from: 1. 2. and 3. in cases of contracts entered into by incapacipated persons. The time of the discovery of mistake or fraud. The time the intimidation. .
unless the same. thereof.Unenforceable Contracts Art. of the agreement cannot be received without the writing. or by his agent. In the following cases an agreement hereafter made shall be unenforceable by action. or who has acted beyond his powers. The following contracts are unenforceable. 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. (2) Those that do not comply with the Statute of Frauds as set forth in this number. or a secondary evidence of its contents: . therefore. 1403. evidence. be in writing. or some note or memorandum. and subscribed by the party charged.
or miscarriage of another. (a) An agreement that by its terms is not to be performed within a year from the making thereof. . other than a mutual promise to marry. (b) A special promise to answer for the debt. default. (c) An agreement made in consideration of marriage.
(3) Those where both parties are incapable of giving consent to a contract. names of the purchasers and person on whose account the sale is made. of such things in action or pay at the time some part of the purchase money. or the evidences. it is a sufficient memorandum. (d) An agreement for the sale of goods. at a price not less than five hundred pesos. unless the buyer accept and receive part of such goods and chattels. of the amount and kind of property sold. (f ) A representation as to the credit of a third person. but when a sale is made by auction and entry is made by the auctioneer in his sales book. terms of sale. . chattels or things in action. or some of them. or for the sale of real property or of an interest therein. (e) An agreement of the leasing for a longer period than one year. at the time of the sale. price.
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. .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.
2. Those where both parties are incapable of giving consent . Those entered into the same of another person by one without authority or in excess of his authority. Those which do not comply with the Statue of Frauds.Classes of Unenforceable Contracts 1. and 3.
2 of Article 1403. Contracts infringing the Statute of Frauds. or by the acceptance of benefit under them. 1405. referred to in No.Art. are ratified by the failure to object to the presentation of oral evidence to prove the same. 1404. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book. . Art.
object or purpose is contrary to law. morals. 3) Those whose cause or object did not exist at the time of the transaction. 1409. . men. 4) Those whose object is outside the commerce of 5) Those which contemplate an impossible service. The following contracts are inexistent and void from the beginning: 1) Those whose cause. 2) Those which are absolutely simulated or fictitious. public order or public policy. good customs.Void or Inexistent Contracts Art.
These contracts cannot be ratified. . 7) Those expressly prohibited or declared void by law. Art. Neither can the right to set up the defense of illegality be waived. 6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. 1410. The action or defense for the declaration of the inexistence of a contract does not prescribe.
1422) . 1410) 4. the defense of illegality is not available to third persons whose interests are not directly affected. (art. the action or defense for the declaration of its inexistence does not prescribed. and 5.Meaning of Void or Inexistent Contracts 1. it cannot give rise to a valid contract. it cannot be ratified. (Art. 3. (Art 1409) 2. the right to set up the defense of illegality cannot be waived.
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. Mere lapse of time cannot give effect to contracts which are null and void. .
This rule shall be applicable when only one of the parties is guilty. When the nullity proceeds from the illegality of the cause or object of the contract. and both shall be prosecuted. 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. both parties being in pari delicto. but the innocent one may claim what he has given. and shall not be bound to comply with his promise. they shall have no action against each other. Moreover. 1411. (1305) . and the act constitutes a criminal offense.Art.
Meaning of Pari Delicto Pari Delicto means both parties are equally at fault or are equally guilty. The principle of pari delicto. . or the parties have no action against each other. the law refuse them every remedy. 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.
shall be confiscated in favor of the government.Illegal contract with Criminal Offense 1. the parties shall have no action against each other. Where only one party is guilty. When both parties are in pari delicto – Rules a. and c. 2. the things of the price of the contract. b. The innocent one or less guilty may claim what he has given and shall not be bound to comply with his promise . both shall be prosecuted.
The other. the following rules shall be observed: (1) When the fault is on the part of both contracting parties. (1306) . who is not at fault. neither may recover what he has given by virtue of the contract. or demand the performance of the other’s undertaking. or ask for the fulfillment of what has been promised him. (2) When only one of the contracting parties is at fault. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. he cannot recover what he has given by reason of the contract.Art. may demand the return of what he has given without any obligation to comply his promise. 1412.
the latter may be enforced. 1420. In case a contract containing an illegal orlegal terms. In case of a divisible contract. if the illegal terms can be separated from the legal ones.Effect of Illegal Terms in a Contract Art. . the law allows the legal terms to be enforced if it can be enforced if it can be separated from the illegal ones.
their heirs or assigns. contracts bind only the contracting parties. 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.
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