Types of obligations 1. Pure and Conditional 2. Obligations with a period 3. Alternative Obligations 4. Joint and Solidary Obligations 5.

Divisible and Indivisible Obligations 6. Obligations with a Penal Clause Sources of Obligations 1. Laws 2. Contracts 3. Quasi-contracts 4. Acts or omissions punishable by law 5. Quasi-delicts Modes of Extinguishment of Obligations 1. Payment a. Application of payment b. Payment by cession c. Consignation 2. Loss of the thing due 3. Condonation/Remission 4. Confusion/Merger 5. Compensation 6. Novation Cases when courts can intervene 1. Court shall set a period if the condition is “if my means permit me so” because this is considered as a period by the court. Something that would happen. 2. When the condition is a suspensive potestative condition and the obligation is still valid, the courts shall fix a period 3. When the parties intended to have a period but no period was written, the court shall fix a period 4. If there is a rescission and there is a just cause.

Situations where though there is no debtor and creditor, compensation shall apply. 1. Guarantor may set up compensation as regards what the creditor may owe the principal debtor. 2. Conventional compensation 3. Assignment of creditor with consent however debtor reserved the right to consignation 4. Assignment of creditor with knowledge but without consent 5. Assignment of creditor without knowledge Situations when the debtor shall lose the right to make use of the period: 1. When he becomes insolvent 2. When he fails to secure the debt 3. When he secures the debt and if the securities get impaired through any event. 4. When the debtor violates any undertaking in the contract 5. When the debtor attempts to abscond. Payment to a third person shall be valid when: 1. Redounded to the benefit of the creditor. Cases when benefit need not be proven 2. After the payment, the third person acquires the creditor’s rights 3. If the creditor ratifies the payment to the third person 4. If through the conduct of the creditor, the debtor has been led to believe that the third person had authority to receive payment. Actions that creditors can do in case of breach of contract 1. Exhaust the properties of the debtor 2. Exercise all the rights and actions of the debtor, save those personal to him 3. Seek rescission of the contracts executed by the debtor in fraud of their rights A day certain - is though unknown, it must necessarily come. Legal Delay – is incurred when demand has been made but debtor fails to render obligation because of negligence or malice Legal subrogation – transfers to the person subrogated the credit with all the rights thereto appertaining, either against third persons, be they guarantors, or possessors of mortgages. Dation in payment or Dacion en Pago – delivery and transmission of ownership of a thing by the debtor to creditor as an accepted equivalent of the performance of an obligation. alternative obligation – when a person is bound to an obligation but can choose from different ways. In alternative obligations, the obligor should completely perform the obligation. Facultative-alternative obligation – when only one prestation has been agreed upon but the obligor may render another in substitution Requisites for a valid dation in payment/dacion en pago: 1. There must be the performance of the prestation in lieu of payment 2. There must be some difference in the prestation due and that which is given in substitution 3. There must be an agreement between the debtor and the creditor that the obligation is extinguished immediately by this act. Dacion en pago/Dation in Payment – payment in kind Requisites: 1. There must be a performance of an obligation in lieu of the original prestation. 2. There must be some difference with the 2 obligations 3. The parties must agree that the payment in kind extinguishes immediately the obligation Pactum Commissorium – is an agreement where in case the debtor fails to pay, the mortgage or the pledge shall be automatically appropriated to the creditor. This is VOID because the law requires that if the debtor shall not be able to pay, the prestation must be sold through an auction/bidding wherein the proceeds less the amount the debtor owes should go to the debtor. Extraordinary inflation – an official declaration by competent authorities is needed. It may be the BSP or the Department of Finance. Most onerous debt – the indebtedness which exacts the heavier burden from among many

5. 6. 7. 8. 9.

When the period depends on the sole will of the debtor, the court shall fix a period When the principal obligation has been partly or irregularly complied with by the debtor When the penalty appears to be iniquitous or unconscionable When under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation. When there is impossibility to do the obligation or manifestly beyond the contemplation of the parties.

When demand is not needed: 1. By stipulation 2. When time is of the essence 3. When it is useless Obligor is still liable even if fortuitous event as provided by law 1. When obligor delays 2. When he has promised to deliver the same thing to two persons who do not have the same interest 3. When the debt of a thing certain and determinate proceeds from a criminal offense 4. Possessor in bad faith shall be liable for deterioration or loss 5. Loss or deterioration of movables used for the benefit of the family, belonging to either spouse shall be paid to said spouse from the conjugal funds 6. Bailee in a Commodatum a. If he devotes the thing to any purpose other than that for which it was loaned b. If he keeps it longer than the period stipulated c. If the thing loaned has been delivered with appraisal of its value d. If he lends or leases the thing to a third person e. If being able to save either the thing borrowed or his own thing, he chose to save the latter 7. Deposits 8. When the nature of the obligation bears an assumption of risk.

Payment by cession – (assignment) when the debtor assigns his property to the creditors so that the creditors shall dispose the property to cover the amount to which he is indebted. This cession, unless otherwise stipulated, shall only release the debtor from the responsibility for the net proceeds of the thing assigned. Requisites: 1. That the debtor is having financial difficulties 2. There are two or more debts and two or more creditors. Consignation – depositing to the court the payment when without just cause, the creditor refuses to accept it and the debtor is released from the responsibility by the consignation of the thing or sum due. Tender of payment – is the extrajudicial act of paying the creditor Consignation alone shall produce the same effect in the following cases: 1. When the creditor is absent or unknown, or does not appear at the place of payment 2. When he is incapacitated to receive the payment at the time it is due 3. When without just cause he refuses to issue a receipt 4. When two or more persons claim the same right to collect 5. When the title of the obligation has been lost Subjective impossibility – a promissor’s duty is never discharged by the mere fact that the supervening events deprive him of the ability to perform, if they are not such as to deprive other persons, likewise, of ability to render such performance. Impossibility of performance – when service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may be released therefrom, in whole or in part. Requisites: 1. Prestation has become so difficult to render 2. Service has become manifestly beyond the contemplation of the parties. Rebus sic stantibus - is the legal doctrine allowing for treaties to become inapplicable because of a fundamental change of circumstances. Condonation/Remission- an act of liberality. It connotes that there is a previous demandable obligation but the creditor does not want to collect anymore. It requires however the express or implied consent of the debtor. Inofficious Donation- is when the donation turns out that the thing or the amount condoned encroaches upon the legitime or successional rights of the condoning creditor. Express Condonation = donation which must comply with the rules of donation. • Delivery of a private document evidencing the credit by the creditor to the debtor implies condonation/remission


Civil liability arising from a penal clause

Commodatum – lending something without the benefit of the fruits Novation – extinguishes an obligation and gives rise to another Novation takes place when: 1. Change in the object or principal conditions 2. Substituting the person of the debtor 3. Subrogating a third person in the rights of a creditor Two ways to extinguish a contract by novation: 1. Expressly 2. When the first and second contracts are incompatible with each other. Objective novation – change in the object Subjective novation – change in the persons Mixed novation – change in both Subrogation – transfer of rights (?) Legal Subrogation – by operation of law Conventional Subrogation – by contract

Merger of Rights – when the debtor and creditor only becomes one person. Confusion – does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur Compensation – happens when two persons are creditors and debtors of each other and takes place by operation of law • May be total or partial Contractual compensation - Parties may agree upon the compensation of debts which are not yet due Requisites of compensation: 1. Both are principally bound to each other 2. Both are money, or both are the same kind and quality 3. Both obligations are due 4. Both are liquidated and demandable 5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor Cases when compensation is not proper 1. Depositum or obligations of a depository


Bailee in a commodatum Debts arising from support due by gratuitous title

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