The Law on Obligations and Contracts - where the law on obligations and contracts is found
Introduction to Law
Law- any rule of action or any system of uniformity
Ultimate goal= JUSTICE
Kinds of Law
1. Divine Law- the law of religion and faith (10
Commandments)
2. Natural Law- divine inspiration in man of the sense
of justice, fairness, and righteousness, not by divine
revelation or formal promulgation, but by internal
dictates of reason alone
3. Moral Law- totality of the norms of good and right
conduct growing out of the collective sense of right
and wrong of every community
4. Physical Law- laws of physical science
5. State Law- the law that is promulgated and
enforced by the state
Characteristics of Law
1. Rule of Conduct
2. Obligatory- applies to all; nobody is exempted
3. Promulgated by legitimate authority
4. Common observance and benefit- for the common
good
Law on Obligations and Contracts Defined
- is the body of rules which deals with the nature and
sources of obligations and the rights and duties arising
from agreements and the particular contracts
Civil Code of the Philippines (Republic Act No. 386)
TITLE 1: OBLIGATIONS (Arts. 1156-1304, Civil Code)
Chapter 1: General Provisions
ARTICLE 1156. An obligation is a juridical necessity to
give, to do or not to do
*Obligation- Latin word obligatio means tying or
binding
- a tie or bond recognized by law which one is
bound in favor of another to render something
* Civil Obligation- obligations which give to the
creditor or obligee a right under the law to enforce
their performance in courts of justice
* Natural Obligations- do not grant a right of action to
enforce their performance although in case of
voluntary fulfillment by the debtor
Essential Requisites of an Obligation
1. Passive subject (debtor or obligor)- person who is
bound to the fulfillment of the obligation; he who has
a duty
2. Active subject (creditor or obligee)- person who is
entitled to demand the fulfillment of the obligation; he
who has a right
3. Object or prestation (subject matter of the
obligation)- the conduct required to be observed by
the debtor
4. Juridical or legal tie (efficient cause)- the agreement
or contract which is the source of the obligation
Form of Obligations
-refers to the manner in which an obligation is
manifested or incurred
Kinds of Obligation according to the subject matter
1. Real Obligation (obligation to give)- the subject
matter is a thing in which the obligor must deliver to
the obligee
2. Personal Obligation(obligation to do or not to do)-
the subject matter is an act to be done or not to be
done
a) Positive P.O- obligation to do or to render
service
b) Negative P.O- obligation not to do
ARTICLE 1157. Obligations arise from:
*When can a person have an obligation?
1. Law- when they are imposed by law itself
- Legal Obligation, ‘obligatio ex lege’
2. Contracts- when they arise form stipulation of the
parties
- meeting of the minds between 2 persons
- enter and implement in good faith
3. Quasi- contracts- not a contract but functions as
one. Ex: the obligation to return money paid by
mistake or which is not due
4. Crimes or acts or omissions punished by law- when
they arise from civil liability which is the consequence
of a criminal offense. Ex: the obligation of a thief to
return the car stolen by him
5. Quasi- delicts or torts- when they arise from
damage caused to another through an act or omission,
fault or negligence, but no contractual relation exists
between the parties
ARTICLE 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. (1090)
*Legal Obligations- obligations arising from law
ARTICLE 1159. Obligation arising from contracts have
the force of law between the contracting parties and
should be complied with in good faith
*Contractual Obligations- obligations arising from
contracts or voluntary agreements
*Contract- meeting of minds between 2 persons
whereby one binds himself, with respect to the other,
to give something or to render some service
*Binding force- the force of law between the
contracting parties
*Requirement of a valid contract- it is not contrary to
law, morals, good customs, public order, and public
policy
*Breach of contract- when party fails or refuses to
comply
*Compliance in good faith- compliance or
performance in accordance with the stipulations or
terms of the contract or agreement
ARTICLE 1160. Obligations derived from quasi-
contracts shall be subject to the provisions of Chapter
1, Title XVII of this Book. (n)
*Quasi- contract- juridical relation resulting from
lawful, voluntary and unilateral acts by virtue of which
the parties become bound to each other to the end
that no one will be unjustly enriched or benefited at
the expense of another
Kinds of quasi- contracts
1. Negotiorum gestio- the voluntary management of
the property or affairs of another without the
knowledge or consent of the latter. Note: only
necessary expenses are reimbursed to the obligor.
2. Solutio indebiti- when something is received when
there is no right to demand it and it was unduly
delivered through mistake
ARTICLE 1161. Civil obligations arising from criminal
offenses shall be governed by the penal laws, subject
to the provisions of article 2177, and of the pertinent
provisions of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book, regulating
damages (1092a)
Scope of civil liability
1. Restitution- to return
2. Reparation for the damage caused- paid with value
3. Indemnification for consequential damages
ARTICLE 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- delicts- civil matter
- an act or omission by a person which causes
damage to another in his person
*Delict- commission of crime is more deliberate
- intentional
Note: Civil case is easier to win than criminal case
Chapter 2: Nature and Effect of Obligations
ARTICLE 1163. 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. (1094a)
Specific thing and Determinate thing Distinguished
*Determinate thing- specific thing or identified by its
individuality; cannot be substituted
*Generic thing- identified only by its specie; can be
substituted by the same class as long as it is of the
same kind
Duties of debtor in obligation to give a determinate
thing
They are:
1. Preserve the thing- the obligor has the incidental
duty to take care of the thing due with the diligence of
a good father of a family pending delivery
a) Diligence of a good father of a family-
ordinary care or diligence which an average
person exercises over his own property
b) Another standard of care- slight or
extraordinary diligence; said law or
stipulation must prevail
 c) Factors to be considered- the debtor is not
liable if his failure to reserve the thing is not
due to his fault or negligence but to
fortuitous events or force majeure (Art.
1174)
d) Reason for debtor’s obligation- to insure
that the thing to be delivered would subsist
in the same condition as it was when the
obligation was contracted
2. Deliver the fruits of the thing (Art 1164)
3. Deliver the accessions and accessories (Art 1166)
4. Deliver the thing itself (Art 1163, 1233, 1244; as to
kinds of delivery, see 1497-1501)
5. Answer for damages in case of non- fulfillment or
breach
ARTICLE 1164. The creditor has the right to the fruits
of the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it
until the same has been delivered to him. (1095)
Different Kinds of Fruits
1. Natural fruits- spontaneous products of the soil, and
the young and other products of animals
2. Industrial fruits- produced by lands of any kind
through cultivation or labor; with human intervention
3. Civil fruits- derived by virtue of a juridical relation.
Ex: rents of buildings
Meaning of personal right and real right
1. Personal right (jus in persona)- the right or power of
a person (creditor) to demand from another (debtor)
- definite active subject and a definite passive
subject
- binding or enforceable only against a particular
person
2. Real right (jus in re- Latin: ‘res’- thing in law)- the
right or interest of a person over a specific thing
- definite active subject without definite passive
subject
- directed against the whole world
ARTICLE 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by Article 1170, may compel the
debtor to make the delivery.
If the thing is indeterminate or generic, he may
ask that the obligation be complied with at the
expense of the debtor
If the obligor delays, or has promised to deliver
the same thing to two or more persons who do not
have the same interests, he shall be responsible for
fortuitous event until he has effected the delivery.
(1096)
*genus nunquam perit- genus never perishes
*compel- not by the use of force; made by court
intervention
ARTICLE 1166. The obligation to give a determinate
thing includes that of delivering all its accessions and
accessories, even though they may not have been
mentioned. (1097a)
*Accessions- the fruits of a thing or additions to or
improvements upon a thing (principal). Ex: rent of bldg
*Accessories- the things joined to or included with the
principal thing for the latter’s embellishment, better
use, or completion. Ex: key of a house
ARTICLE 1167. If a person obliged to do something
fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligation.
Furthermore, it ma be decreed that what has been
poorly done be undone. (1098)
Note: di mo pwede piriton it other party kun
against ha iya will an thing na hihimuon
ARTICLE 1168. When the obligation consists in not
doing, and the obligor does what has been forbidden
him, it shall also be undone at his expense. (1099a)
Ex: B bought a land from S. It was stipulated that S
would not construct a fence on a certain portion of his
land adjoining that sold to B.
Should S construct a fence in violation of the
agreement, B can bring an action to have the fence
removed at the expense of S.
ARTICLE 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee
judicially or extrajudicially demands from them the
fulfillment of their obligation.
However, the demand by the creditor shall not
be necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declares; or
(2) When from the nature and the
circumstances of the obligation it appears that the
designation of the time when the thing is to be
delivered or the service is to be rendered was a
controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when
the obligor has rendered it beyond his power ti
perform.
In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent
upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.
(1100a)
Meaning of delay
1. Ordinary delay- the failure to perform an obligation
on time (passage of time lang)
2. Legal delay/ default/ mora- failure to perform an
obligation on time which failure constitues a breach of
the obligation (may demand na but still not perform)
Kinds of delay or default
1. Mora solvendi- delay on the part of the debtor to
fulfill hi obligation
2. Mora accipiendi- delay on the part of the creditor to
accept the performance of the obligation
3. Compensatio morae- delay of the obligors in
reciprocal obligations
Note: Obligor is liable if there is a prior demand.
No demand, no delay, no damages
When demand is not necesarry to put debtor in delay
1. When the obligation so provides
2. When the law so provides
3. When time is of the essence
4. When demand would be useless
5. When there is performance by a party in reciprocal
obligations
ARTICLE 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay
and those who in any manner contravene the tenor
thereof, are liable for damages. (1101)
4 Grounds of Liability
1. Fraud (deceit or dolo)- deliberate or intentional
evasion of the normal fulfillment of an obligation.
a) Dolo causante- causal fraud
b) Dolo incidente- incidental fraud
2. Negligence (fault or culpa)- voluntary act or
omission, there being no bad faith or malice, which
prevents the normal fulfillment of an obligation
3. Delay (mora)
4. Contravention of the terms of the obligation- covers
all form of violation
ARTICLE 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void. (1102a)
Note: only incidental fraud- contract is
demandable
*volition- the power to make your own choices or
decisions
ARTICLE 1172. Responsibility arising from negligence
in the performance of every kind of obligation is also
demandable, but such liability may be regulated by
the courts, according to the circumstances. (1103)
Kinds of negligence according to source of obligation
1. Contractual negligence (culpa contractual)-
negligence in contracts resulting in their breach
2. Civil negligence (culpa aquiliana)- negligence which
by itself is the source of an obligation between the
parties not so related before by any preexisting
contract.
-tort or quasi- delict
3. Criminal negligence (culpa criminal)- negligence
resulting in the commission of a crime
ARTICLE 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 person, of
the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply.
If the law or contract does not state the
diligence which is to be observed in the performance,
that which is expected of a good father of a family
shall be required. (1104a)
*Damages- signify the money compensation awarded
to a party for loss or injury resulting from breach of
still
contract or obligation by the other
ARTICLE 1174. Except in cases expressly specified by
the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be
responsible for those events which could not be
foreseen, or which though foreseen, were inevitable.
(1105a)
*Fortuitous events- any event which cannot be
foreseen, or which, though foreseen, is inevitable.
Fortuitous event distinguished from force majeure
1. Acts of man- an event independent of the will of the
obligor but not other human wills. Ex: fire, robbery
2. Acts of God- majeure or events which are totally
independent will of every human being. Ex: flood, rain
Kinds of fortuitous events
1. Ordinary fortuitous events- events which are
common and which the contracting parties could
reasonably foresee. Ex: rain
2. Extra- ordinary fortuitous events- events which are
uncommon and which the contracting parties could
not have reasonably foreseen. Ex: earthquake, war
Rules as to liability in case of fortuitous event
1. When expressly specified by law
a) The debtor is guilty of fraud, negligence, or
delay, or contravention of the tenor of the
obligation.
b) The debtor has promised to deliver the
same(specific) thing to 2 or more persons
who do not have the same interest
c) The obligation to deliver a specific thing
arises from a crime
d) The thing to be delivered is generic
2. When declared by stipulation
3. When the nature of the obligation requires the
assumption of risk. Ex: contract of insurance
ARTICLE 1175. Usurious transactions shall be
governed by special laws.
*Simple loan or mutuum- a contract whereby one of
the parties delivers to another, money or other
consumable thing, upon the condition that the same
amount of the same kind and quality shall be paid
*Usury- contracting for or receiving interest in excess
of the amount allowed by law for the loan
ARTICLE 1176. 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, shall
likewise raise the presumption that such installments
have been paid. (1110a)
*Presumption- the interference of a fact not actually
known arising from its usual connection with another
which is known or proved
2 Kinds of Presumption
1. Conclusive Presumption- cannot be contradicted
2. Disputable (or rebuttable) Presumption- can be
contradicted by presenting proof to the contrary
Chapter 3: Different Kinds of Obligations
Section 1 - Pure and Conditional Obligations
ARTICLE 1179. Every obligation whose performance
does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is ARTICLE 1181. In conditional obligations, the
demandable at once. acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the
Every obligation which contain a resolutory
happening of the event which constitutes the
condition shall also be demandable, without
condition. (1114)
prejudice to the effects of the happening of the
event. Effects of happening of condition

*Pure obligation- not subject to any condition and no
specific date is mentioned for its fulfillment and is,
therefore, immediately demandable.
*Conditional obligation- whose consequences are
subject in one way or another to the fulfillment of a
condition
1. Acquisition of rights- depends upon the happening
of the event which constitutes the condition
2. Loss of rights already acquired
ARTICLE 1182.
Classification of conditions

*Condition- future and uncertain event, upon the 1. As to effect:

happening of which, the effectivity or extinguishment

a) Suspensive- the happening of which gives
of an obligation subject it depends
rise to the obligation

Characteristics of a condition
b) Resolutory- the happening of which

1. Future and uncertain extinguishes the obligation

2. Past but unknown 2. As to form:

2 principal kinds of condition a) Express- condition is clearly stated

1. Suspensive condition- comply the condition first b) Implied- condition is merely inferred

before the obligation

3. As to possibility:

2. Resolutory condition- the fulfillment of which will

a) Possible- capable of fulfillment
extinguish an obligation already existing
b) Impossible- incapable of fulfillment
ARTICLE 1180. When the debtor binds himself to pay
when his means permit him to do so, the obligation 4. As to cause or origin:

shall be deemed to be one with a period, subject to a) Potestative- depends on the will of one of
the provisions of article 1197. the contracting parties

*Period- future and certain event upon the arrival of b) Causal- depends upon chance and partly the
which the obligation subject to it either arises or is will of a third person
extinguished
 c) Mixed- depends partly upon chance and 5. Improvement of thing by nature or by time
partly upon the will of a third person
6. Improvement of thing at expense of debtor
5. As to mode:
*Usufruct- the right to enjoy the use and fruits of a
a) Positive- performance of an act thing belonging to another

b) Negative- omission of an act Section 2- Obligations with a Period

6. As to numbers: ARTICLE 1193.

a) Conjunctive- all must be fulfilled *Obligation with a period

b) Disjunctive- only 1 or some of them must be Section 3- Alternative Obligations

fulfilled
ARTICLE 1199.
7. As to divisibility:
Kinds of obligation according to object
a) Divisible- susceptible of partial performance
1. Simple obligation- where there is only 1 prestation
b) Indivisible- not susceptible of partial
2. Compound obligation- 2 or more prestations
performance
a) Conjunctive- several prestations and all of
ARTICLE 1189.
them are due
Kinds of Loss
b) Distributive- 2 or more prestations is due.
1. Physical loss- when a thing perishes
i. Alternative- several prestations are
2. Legal loss- when a thing goes out of commerce/ due but 1 performance is sufficient
when a legal thing becomes illegal
ii. Facultative- 1 prestation is due but the
3. Civil loss- when a thing disappears in such a way debtor may substitute another
that its existence is unknown
*Alternative obligation
Rules in case of loss, deterioration, or improvement of
ARTICLE 1200.
thing during pendency of suspensive condition
Right of choice of debtor not absolute
1. Loss of thing without debtor’s fault
1. Impossible
2. Loss of thing through debtor’s fault
2. Unlawful
3. Deterioration of thing without debtor’s fault
3. Could not have been the object of the obligation
4. Deterioration of thing through debtor’s fault
4. Only one prestation is practicable
ARTICLE 1201. The choice shall produce no effect
except from the time it has been communicated.
Communication of notice that choice has been made
1. Effect of notice- until the choice is made and
communicated, the obligation remains alternative
2. Proof and form of notice- the burden of proving that
such communication has been made is upon him who
made the choice
ARTICLE 1204.
Effect of loss of objectss of obligation
1. Some of the objects
2. All of the objects
ARTICLE 1205.
Rules in case of loss before creditor has made choice
1. When a thing is lost through a fortuitous event
2. When a thing is lost through debtor’s fault
3. When all the things are lost through debtor’s fault
4. When all the things are lost through a fortuitous
event
ARTICLE 1206.
*Facultative obligation- where only one prestation has
been agreed upon but the obligor may render another
in substitution
Section 4- Joint and Solidary Obligations
ARTICLE 1207
ARTICLE 1208
Kinds of obligations according to the number of parties
1. Individual obligation- one where there is only 1
obligor or one obligee
2. Collective obligation- there are 2 or more debtors
and/ or 2 or more creditors
a) Joint obligation- the whole obligation is to
be paid or fulfilled proportionately by the
different debtors and/ or is to be demanded
proportionately by the different creditors
- more fair because it is divided among
debtors
b) Solidary obligation- one of the debtors is
bound to render, and/ or each one of the
creditors has a right to demand from any of
the debtors, entire compliance with the
prestation
- more of an exceptions to the rule
- more burdensome
3 instances where there can be a solidary obligation
1. Conventional solidarity- expressly states
2. Legal solidarity- law requires
3. Real solidarity- nature requires
Kinds of solidarity
1. According to the parties bound
a) Passive solidarity- 2 debtors, 1 creditor
b) Active solidarity- 1 debtor, 2 creditors
c) Mixed solidarity- 2 debtors, 2 creditors
2. According to source
a) Conventional solidarity
 b) Legal solidarity *Acts that may prejudice

c) Real solidarity -Novation

ARTICLE 1209. -Compensation

W,X --> Y (200,000) -Confusion

X refuses to deliver -Remission

W willing

W,X are liable of 200,000 + damages

ARTICLE 1210.

*Joint indivisible obligation

*Solidary indivisible obligation

*Solidary divisible obligation

*Joint divisible obligation

ARTICLE 1211.

Kinds of solidary obligation according to the legal tie

1. Uniform- parties are bound by the same stipulation

2. Non- uniform of varied- parties are not subject to

the same stipulation

ARTICLE 1213.

*assign- transfer of rights

*there has to be a consent among other creditor

ARTICLE 1214.

*debtor can pay any of the creditors, but if X demands

payment, you should pay to X

ARTICLE 1215.