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Lecture: Week 1

Obligations and Contracts

The Law on Obligations and Contracts
The law on obligations and contracts is the body of rules which deals with the nature and
sources of obligations and rights and duties arising from agreements and contracts.
Source of the Law on Obligations and Contracts
The Source of the Law on Obligations and Contracts is the Civil Code of the Philippines
(Republic Act No. 386), which was approved on June 18, 1949 and took effect on August 30, 1950.
Chapter I. General Provisions
Art. 1156. An obligation is a juridical necessity to give, to do or not to do.
The word obligation comes from the Latin words ob and ligare which means to bind
around. (
Elements or requisites of an obligation:
1. Active Subject known as the creditor or obligee; the party who has the right to
demand for the fulfillment of an obligation
2. Passive Subject Known as the debtor of obligor; the party who is bound to the
fulfillment of the obligation
3. Prestation the promise or the particular contract to be observed in the performance of
an obligation, and may consist of giving, doing, or not doing a thing. The object or
prestation must be lawful, possible, determinate or determinable, useful and capable of
pecuniary estimation. If the object of the obligation is contrary to one of these, then the
obligation is defective in some way.
4. Efficient cause - the legal tie which binds the parties to the obligation; otherwise known
as juridical tie or vinculum juris.

Agnes promises to buy Marvins laptop as a result of an agreement. (Here Agnes is the
obligor; Marvin is the oblige; the laptop is the object or prestation; the agreement or
contract is the efficient cause)
Kinds of obligation:
A. Viewpoint of sanction
a. Civil Obligations give a right of action to compel their performance
Dan promise to pay Chris his debt of P 80,000.
b. Natural Obligations not based on positive law but on equity and natural law; do
not grant a right of action to enforce their performance, but after voluntary
fulfillment by the obligor, they authorize the retention of what has been delivered
or rendered by reason thereof.
Dan is indebted to Chris in the amount of P 80,000, but the debt has already
prescribed. Still, Dan paid Chris. Dan cannot later on get back what he has
voluntarily paid.

Moral Obligations those that cannot be enforced by action but which are binding
on the party who makes it in conscience and natural law.
The duty of Catholics to hear mass on Sundays and observe holy days.

Obligations & Contracts / GNValdez [1st Sem-2015]

Based on the book of: Chan, Lauengco, Nolido, Ong, Valdez and Santiago; and Suarez

B. Viewpoint of performance
a. Positive to give or to do
b. Negative not to do
C. Viewpoint of subject matter
a. Real Obligation to give
b. Personal Obligation to do or not to do
D. Viewpoint of persons obliged
a. Unilateral where only one of the parties is bound
b. Bilateral where both parties are bound
E. Viewpoint of creation
a. Legal impose by law (Art. 1158, Civil Code)
b. Conventional established by the agreement of the parties like contracts
F. Viewpoint of susceptibility of partial fulfillment
a. Divisible obligation is susceptible of partial performance
b. Indivisible obligation is not susceptible
G. Viewpoint of existence of burden or condition
a. Pure is not burdened with any condition or term. Demandable at once.
b. Conditional is subject to a condition which may be suspensive (happening of which
shall give rise to the obligation) or resolutory (happening terminates the obligation).
H. Viewpoint of character of responsibility or liability
a. Joint each debtor is liable only for a part of the whole liability and to each creditor
shall belong only a part of the correlative rights
b. Solidary a debtor is answerable for the whole of the obligation without prejudice to
his right to collect from his co-debtors the latters shares in the obligation. (Art. 1207,
Civil Code)

Viewpoint of right to choose and substitution

a. Alternative obligor may choose to completely perform one out of the several
prestations. (Art. 1199, Civil Code)
b. Facultative only one prestation has been agreed upon but the obligor may render
one in substitution of the first one (Art. 1206, Civil Code)

J. Viewpoint of imposition of penalty

a. Simple there is no penalty imposed for violation of the terms thereof
b. Obligation with penalty obligations which imposes a penalty for violation (Art. 1226,

Civil Code)

Art. 1157. Obligations arise from:

1. Law;
2. Contracts;
3. Quasi-contracts;
4. Acts or omissions punished by law; and
5. Quasi-delicts
Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this
Code or in special laws are demandable, and shall be regulated by the precepts of the law which
establishes them; and as to what has not been foreseen, by the provisions of this Book.

Obligations & Contracts / GNValdez [1st Sem-2015]

Based on the book of: Chan, Lauengco, Nolido, Ong, Valdez and Santiago; and Suarez

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.

Compliance in good faith is the performance in accordance with the stipulation, clauses, terms and
conditions of the contract.
Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1,
Title XVII of this Book.
The word quasi-contracts is defined by the Civil Code as certain lawful, voluntary, unilateral
acts which give rise to a juridical relation to the end that no one will be unjustly enriched or
benefited at the expense of another.
Kinds of Quasi-contract
1. Negotiorum Gestio the voluntary management of the property or affairs of another
without the knowledge or consent of the latter. (Art. 2144, Civil Code)
2. Solutio Indebiti the juridical relation which is created when something is received when
there is no right to demand it and it was unduly delivered through mistake.
3. Other Quasi-contracts support given by strangers and other good Samaritans
Under other quasi-contracts several instances are given by the Civil Code, such as the
a. when, without the knowledge of the person obliged to give support, said support is
given by a stranger, the latter, shall have a right to claim the same from the former,
unless it appears that he gave it out of pity and without intention of being repaid.
(Art. 2164, Civil Code)
b. when funeral expenses are borne by a third person, without the knowledge of those
relatives who were obliged to give support to the deceased, said relatives shall
reimburse the third person, should the latter claim reimbursement. (Art. 2165, Civil
c. when during a fire, flood, storm or other calamities, property isa saved from
destruction by another person without the knowledge of the owner, the latter is
bound to pay the former just compensation. (Art. 2168, Civil Code)
Art. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws,
subject to the provisions of Article 2177, and of pertinent provisions of Chapter 2, Preliminary Title,
on Human Relations, and of Title XVIII of this Book, regulating damages.
Under Article 100 of the Revised Penal Code, every person criminally liable is also civilly liable. The
civil liability includes the following:
1. Restitution (Art. 105, Revised Penal Code) The restitution of the thing itself must be
made whenever possible, with allowance for any deterioration or diminution of value as
determined by the court.
2. Reparation of the damaged caused (Art. 106, Revised Penal Code) The court shall
determine the amount of damage, taking into consideration the price of the thing, whenever
possible, and its special sentimental value to the injured party, and reparation shall be made
3. Indemnification for consequential damages (ART. 107, revised Penal Code)
Indemnification of consequential damages shall include not only those caused by the injured
party, but also those suffered by his family or by a third person by reason of the crime.

Den stole the car of Chris. While driving the stolen car looking for a buyer, a 6x6 truck
sideswiped the car causing a damage of P 100,000. In this case, the obligation of Den is to restore
or return the car to the owner Chris and to pay the damage caused amounting to P 100,000. Den
must also pay the consequential damage suffered by Chris, and those suffered by his family or by
third persons by reason of the crime.

Obligations & Contracts / GNValdez [1st Sem-2015]

Based on the book of: Chan, Lauengco, Nolido, Ong, Valdez and Santiago; and Suarez

Art. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2,
Title XVII of this Book, and by special laws.

Quasi-delict is an act or omission arising from fault or negligence which causes damage to
another, there being no pre-existing contractual relations between the parties.
Requisites of quasi-delict:
a. There must be an act or omission;
b. Such act or omission causes damage to another;
c. Such act or omission is caused by fault or negligence; and
d. There is no pre-existing contractual relation between the parties.

Negligence is the omission of that diligence which is required by the circumstances of person,
place and time.
Kinds of negligence:
1. Culpa aquiliana negligence as a source of obligation
2. Culpa contractual negligence in the performance of a contract

Chapter II. Nature and Effect of Obligations

Art. 1163. Every person obliged to give something is also be obliged to take care of it with the
proper diligence of a good father of a family, unless the law or stipulation of the parties requires
another standard of care.

Diligence of a good father of a family is the minimum standard of care required. It means
that the obligor must take care of the thing the way a prudent person would as his own property.

This standard of care applies only when the parties do not agree on another standard of care, or
if the law does not require a higher standard of care.
In banks, the degree of diligence required is more than that of a good father of a family
keeping with their responsibility to exercise the necessary care and prudence in handling their
clients money.
Art. 1164. The creditor has a right to the fruits of the thing from the time of the obligation to deliver
it arises. However, he shall acquire no real right over it until the same has been delivered to him.
Kinds of fruits:
1. Natural fruits are spontaneous products of the soil, and the young and other products of
2. Industrial fruits produced by lands of any king through cultivation or labor
3. Civil fruits fruits arising out of juridical relation, such as rent of lands, apartments and

The right to the fruits commences from the time the object, or principal thing is due. If the
object is not yet demandable, then neither are the fruits.
Delivery is very important. A creditor will have dominion or ownership over the object or thing
only when the object or thing has been delivered to him and not from the moment that the
parties enter into an agreement.

Obligations & Contracts / GNValdez [1st Sem-2015]

Based on the book of: Chan, Lauengco, Nolido, Ong, Valdez and Santiago; and Suarez