OBLIGATIONS

DEFINITION
An obligation is a juridical necessity to give, to do or not to do.
(Art. 1156)
KINDS OF OBLIGATIONS AS TO
ENFORCEABILITY
Obligations are civil or natural. Civil obligations give a right of
action to compel their performance. Natural obligations, not
being 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. Some
natural obligations are set forth in the following articles. (Art.
1423)
KINDS OF OBLIGATIONS AS TO
ENFORCEABILITY
Examples of Natural Obligations:
1. When without the knowledge or against the will of the debtor, a third
person pays a debt which the obligor is not legally bound to pay
because the action thereon has prescribed, but the debtor later
voluntarily reimburses the third person, the obligor cannot recover
what he has paid. (Art. 1425)
2. When, after an action to enforce a civil obligation has failed the
defendant voluntarily performs the obligation, he cannot demand the
return of what he has delivered or the payment of the value of the
service he has rendered. (Art. 1428)
3. When a testate or intestate heir voluntarily pays a debt of the
decedent exceeding the value of the property which he received by
will or by the law of intestacy from the estate of the deceased, the
payment is valid and cannot be rescinded by the payer. (Art. 1429)
ESSENTIAL ELEMENTS OF AN
OBLIGATION
1. Active subject (creditor) - obligee
2. Passive subject (debtor) - obligor
3. Prestation/Object – subject matter of the obligation.
4. Vinculum/Efficient Cause/Juridical Tie – the reason why the
obligation exists, the source of the obligation.
SOURCES OF OBLIGATIONS
Obligations arise from:
1. Law;
2. Contracts;
3. Quasi-contracts;
4. Acts or omissions punished by law; and
5. Quasi-delicts.
SOURCES OF OBLIGATION; LAW
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 Civil Code. (Art. 1158)
SOURCES OF OBLIGATION;
CONTRACTS
Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good
faith. (Art. 1159)
SOURCES OF OBLIGATION; QUASI-
CONTRACTS
Certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of another. (Art.
2142)

Voluntary and Unilateral: "The act is voluntary because the

actor in quasi-contracts is not bound by any pre-existing
obligation to act. It is unilateral, because it arises from the sole
will of the actor who is not previously bound by any reciprocal or
bilateral agreement.
SOURCES OF OBLIGATION; QUASI-
CONTRACTS
Certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of another. (Art.
2142)

Voluntary and Unilateral: "The act is voluntary because the

actor in quasi-contracts is not bound by any pre-existing
obligation to act. It is unilateral, because it arises from the sole
will of the actor who is not previously bound by any reciprocal or
bilateral agreement.
SOURCES OF OBLIGATION; QUASI-
CONTRACTS
Examples of Quasi-Contracts:
1. Negotiorum Gestio - Whoever voluntarily takes charge of
the agency or management of the business or property of
another, without any power from the latter, is obliged to
continue the same until the termination of the affair and its
incidents, or to require the person concerned to substitute
him, if the owner is in a position to do so. This juridical
relation does not arise in either of these instances:
a. When the property or business is not neglected or
abandoned;
b. If in fact the manager has been tacitly authorized by
the owner. (Art. 2144)
SOURCES OF OBLIGATION; QUASI-
CONTRACTS
Examples of Quasi-Contracts:
2. Solutio Indebiti - If something is received when there is no
right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. (Art. 2154)

Requisites:
a. That he who paid was not under obligation to do so; and
b. That payment was made by reason of an essential mistake of
fact. (Andres s. Mantrust)
SOURCES OF OBLIGATION; QUASI-
CONTRACTS
Examples of Quasi-Contracts:
3. 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)
SOURCES OF OBLIGATION; DELICT
Every person criminally liable for a felony is also civilly liable.
(Art. 100, Revised Penal Code)

The civil liability established in Articles 100, 101, 102, and 103 of
this Code includes:
1. Restitution;
2. Reparation of the damage caused;
3. Indemnification for consequential damages. (Art. 104, Revised
Penal Code)
SOURCES OF OBLIGATION; DELICT
Acquittal of accused:
1. Acquittal because the accused did not do the act complained
of – no civil liability
2. Acquittal due to reasonable doubt – there can still be civil
liability.
SOURCES OF OBLIGATION; QUASI-
DELICT
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. (Art. 2176)

Requisites:
1. There must be an act or omission;
2. There must be fault or negligence;
3. There must be damage caused;
4. There must be a direct relation of cause and effect between
the act or omission and the damage.
SOURCES OF OBLIGATION; QUASI-
DELICT
Double recovery not allowed: Responsibility for fault or
negligence under the preceding article is entirely separate and
distinct from the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages twice for
the same act or omission of the defendant. (Art. 2177)
KINDS OF CIVIL OBLIGATIONS: AS TO
PERFECTION AND EXTINGUISHMENT
1. Pure Obligations - an obligation whose performance does
not depend upon a future or uncertain event, or upon a past
event unknown to the parties and is demandable at once.
2. Conditional Obligations - the acquisition of rights, as well
as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes
the condition.
3. Obligations with a term - obligations whose fulfillment a
day certain has been fixed or those which take effect at once,
but terminate upon arrival of the day certain. A day certain is
understood to be that which must necessarily come, although
it may not be known when
KINDS OF CIVIL OBLIGATIONS: AS TO
PERFECTION AND EXTINGUISHMENT
Obligations which are immediately demandable:
1. Pure obligations
2. Obligations with a resolutory condition
3. Obligations with a resolutory term
CONDITIONAL OBLIGATIONS
Kinds of Conditions

as to when the Suspensive happening of which gives rise

obligation should be to the obligation
performed Resolutory happening of which
extinguishes the rights already
existing
as to whom or where Potestative depends on the will of the party
it depends to the juridical relation
Casual depends on chance
Mixed partly depends on will of the
party and partly on chance
CONDITIONAL OBLIGATIONS
Kinds of Conditions

as to capacity to be performed Divisible can be performed in parts

in parts Indivisible cannot be performed in parts
as to number of obligations are Conjunctive all must be performed
to be performed when there are Alternative only one must be performed
several of them
as to nature Positive act
Negative omission
as to how made known to the Express stated
other party Implied merely inferred
as to whether the obligation can Possible can be fulfilled
be fulfilled Impossible cannot be fulfilled either
physically or legally
CONDITIONAL OBLIGATIONS
POTESTATIVE CONDITIONS: are those which depend upon
the sole will of one of the parties. It renders the obligation void if
it is:
1. Suspensive
2. Dependent upon the debtor

Thus, if the condition is resolutory, even if it depends upon the

sole will of the debtor, the obligation remains to be valid.
CONDITIONAL OBLIGATIONS
CONSTRUCTIVE FULFILLMENT:

The condition shall be deemed fulfilled when the obligor

voluntarily prevents its fulfillment. (Art. 1186)
CONDITIONAL OBLIGATIONS
IMPOSSIBLE CONDITIONS: render the obligation as void, if
they are positive. Thus, negative conditions which are impossible,
can either be treated as always fulfilled.

Kinds of Impossibility:
1. Physically impossible – those which are incapable of being
done physically; or
2. Legally impossible – those that are contrary to law, good
customs, public policy.
CONDITIONAL OBLIGATIONS
EFFECT OF HAPPENING OF THE CONDITION: The effects of
a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the
obligation. (Art. 1187)

Retroactivity does not apply:

1. Fruits
2. Period of Prescription
CONDITIONAL OBLIGATIONS
CONDITION TREATED AS A PERIOD: When the debtor binds
himself to pay when his means permit him to do so, the obligation
shall be deemed to be one with a period. (Art. 1180)
CONDITIONAL OBLIGATIONS
CONDITIONS WITH A DEADLINE: The condition that some
event happen at a determinate time shall extinguish the
obligation as soon as:
1. the time expires or
2. if it has become indubitable that the event will not take place.
(Art. 1184)
CONDITIONAL OBLIGATIONS
RULES AS TO LOSS, DETERIORATION OR IMPROVEMENT:
in case of obligations to give a specific or determinate thing is
subject to a suspensive condition, the following rules shall be
observed in case of the improvement, loss or deterioration of the
thing during the pendency of the condition:
Without debtor’s Extinguished
LOSS fault
With debtor’s fault Damages
Without debtor’s Impairment is borne by the
fault creditor
DETERIORATION With debtor’s fault Creditor may choose:
1. Exact Fulfillment plus damages
2. Rescission plus damages
CONDITIONAL OBLIGATIONS
RULES AS TO LOSS, DETERIORATION OR IMPROVEMENT:

By nature or time Improvement is for the benefit

of the creditor
IMPROVEMENT
At the expense of the He has no better right than
debtor that of a usufructuary
OBLIGATIONS WITH A TERM/PERIOD
A period is a certain length of time which determines the
effectivity or the extinguishment of the obligation. Unlike a
condition, a period is certain to arrive or must necessarily come
even though it may not be known when.
OBLIGATIONS WITH A TERM/PERIOD
KINDS OF PERIODS:

Definite With a specific date

Indefinite Based on an event certain to happen though
period may be unknown
Legal Imposed by law
Voluntary Agreed upon by the parties
Judicial Fixed by courts
Ex die Period with suspensive effect
In diem Period with resolutory effect
OBLIGATIONS WITH A TERM/PERIOD
WHEN MAY COURTS FIX THE PERIOD:
1. The court shall decree the rescission claimed, unless there
be just cause authorizing the fixing of a period. (Art.
1911, par. 3)
2. If the obligation does not fix a period, but from its
nature and the circumstances it can be inferred that a
period was intended, the courts may fix the duration
thereof. (Art. 1197, par. 1)
3. The courts shall also fix the duration of the period when it
depends upon the will of the debtor. (Art. 1197, par. 2)
OBLIGATIONS WITH A TERM/PERIOD
BENEFIT OF THE PERIOD:
GENERAL RULE: Whenever in an obligation a period is
designated, it is presumed to have been established for the
benefit of both the creditor and the debtor,

EXCEPTION: from the tenor of the obligation or other

circumstances it should appear that the period has been
established in favor of one or of the other. (Art. 1196)

Consequences of general rule:

1. The debtor cannot be made to pay before the period;
2. The creditor cannot be made to accept payment before the
period.
OBLIGATIONS WITH A TERM/PERIOD
DEBTOR LOSES THE RIGHT TO MAKE USE OF THE PERIOD:
1. When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the debt;
2. When he does not furnish to the creditor the guaranties or
securities which he has promised;
3. When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory;
4. When the debtor violates any undertaking, in consideration of
which the creditor agreed to the period;
5. When the debtor attempts to abscond. (Art. 1198)
KINDS OF CIVIL OBLIGATIONS: AS TO
PLURALITY OF PRESTATION
1. CONJUNCTIVE: when two or more prestations are due and
requires fulfillment of all for the extinguishment of the
obligation.
2. ALTERNATIVE: when two or more prestations are due and
the fulfillment of one extinguishes the obligation.
3. FACULTATIVE: with two or more prestations, but only one is
demandable and the debtor has the right to substitute.
ALTERNATIVE OBLIGATIONS
RULES:
1. Where several objects are due, the fulfillment of one is
sufficient.
2. Right of Choice: generally, it belongs to the debtor, except:
a. When expreslly granted to the creditor
b. When the right of choice is given to a third party.
3. The debtor’s right of choice is limited in such a way that he
cannot choose any prestation which is impossible or unlawful.
4. The choice, to take effect, must be communicated. The
communication of the choice made is technically called
“concentration.”
5. The choice cannot be part of one and part of another.
ALTERNATIVE OBLIGATIONS
RULES:
6. When from all the choices, only one is practicable, the debtor
shall lose the right of choice. Logically, the obligation would
be to deliver that which remains.
7. If through the creditor’s acts, the debtor cannot make a
choice, the debtor may rescind the contract with damages.
8. If the choice is with the debtor and when through his fault, all
prestations are lost or has become impossible, he shall be
liable to the creditor for the value of the last thing which
disappeared.
ALTERNATIVE OBLIGATIONS
RULES:
9. If the choice is with the creditor and until a choice is
communicated:
a. If one of the things is lost through a fortuitous event, the
creditor can choose from the remaining;
b. If the loss of one of the things occurs through the fault of
the debtor, the creditor may:
i. Claim any of those subsisting, or
ii. The price of that which was lost plus damagages;
c. If all the things are lost through the fault of the debtor,
the choice by the creditor shall fall upon the price of any
one of them, also with indemnity for damages.
FACULTATIVE OBLIGATIONS
1. If the loss happened BEFORE substitution, and
a. the prestation lost is the SUBSTITUTE: not extinguished;
b. the prestation lost is the PRINCIPAL: extinguished.
2. If the loss happened AFTER substitution, and
a. The prestation lost is SUBSTITUTE: extinguished.
b. The prestation lost is PRINCIPAL: not extinguished.
KINDS OF CIVIL OBLIGATIONS: AS TO
OBLIGATIONS OF MULTIPLE PARTIES
1. SOLIDARY: is one in which the each of the debtors is liable
for the entire obligation or each of the creditors is entitled to
demand the whole obligation.
2. JOINT: one in which each of the debtors is liable only for a
proportionate part of the debt or each creditor is entitled only
to a proportionate part of the credit.
3. DISJUNTIVE: there are 2 or more creditors and 2 or more
debtors but they are named disjunctively as debtors and
creditors in the alternative and usually uses the words “or”.
SOLIDARY OBLIGATIONS
WHEN CONSIDERED SOLIDARY:
1. When the obligation expressly so states (stipulated);
2. When the law requires solidarity: example:
a. When two or more heirs take possession of the estate,
they are solidarily liable for the loss or destruction of a
thing devised or bequeathed. (Art. 927)
b. Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers.
(Art. 1911)
c. When there are two or more bailees to whom a thing is
loaned in the same contract, they are liable solidarily.
(Art. 1945)
SOLIDARY OBLIGATIONS
WHEN CONSIDERED SOLIDARY:
d. The responsibility of two or more payees, when there has
been payment of what is not due, is solidary. (Art. 2157)
e. The responsibility of two or more persons who are liable
for quasi-delict is solidary. (Art. 2194)
3. When the nature of the obligation requires solidarity.
SOLIDARY OBLIGATIONS
RULES ON THE ENFORCEMENT OF SOLIDARY
OBLIGATIONS:
1. The debtor may pay any one of the solidary creditors; but if
any demand, judicial or extrajudicial, has been made by one
of them, payment should be made to him.
2. Novation, compensation, confusion or remission of the debt,
made by any of the solidary creditors or with any of the
solidary debtors, shall extinguish the obligation:
a. The creditor who may have executed any of these acts, as
well as he who collects the debt, shall be liable to the
others for the share in the obligation corresponding to
them.
SOLIDARY OBLIGATIONS
RULES ON THE ENFORCEMENT OF SOLIDARY
OBLIGATIONS:
b. 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, in
case the debt had been totally paid by anyone of them
before the remission was effected.
c. The remission of the whole obligation, obtained by one of
the solidary debtors, does not entitle him to
reimbursement from his co-debtors.
SOLIDARY OBLIGATIONS
RULES ON THE ENFORCEMENT OF SOLIDARY
OBLIGATIONS:
3. A solidary debtor may, in actions filed by the creditor, avail
himself of all defenses which are derived from the nature of
the obligation and of those which are personal to him, or
pertain to his own share. With respect to those which
personally belong to the others, he may avail himself thereof
only as regards that part of the debt for which the latter are
responsible
4. Payment made by one of the solidary debtors extinguishes
the obligation. If two or more solidary debtors offer to pay,
the creditor may choose which offer to accept.
SOLIDARY OBLIGATIONS
RULES ON THE ENFORCEMENT OF SOLIDARY
OBLIGATIONS:
5. He who made the payment may claim from his co-debtors
only the share which corresponds to each, with the interest
for the payment already made. If the payment is made before
the debt is due, no interest for the intervening period may be
demanded.
6. When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.
SOLIDARY OBLIGATIONS
RULES ON THE ENFORCEMENT OF SOLIDARY
OBLIGATIONS:
7. 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, so
long as the debt has not been fully collected.
8. Payment by a solidary debtor shall not entitle him to
reimbursement from his co-debtors if such payment is made
after the obligation has prescribed or become illegal.
JOINT OBLIGATIONS
RULES ON THE ENFORCEMENT OF JOINT OBLIGATIONS:
1. The debts/credits are independent of each other;
2. The vices of each obligation arising from the personal defect
of a particular debtor or creditor does not affect the obligation
or rights of the others;
3. The demand by one creditor upon one debtor, produces the
effects of default only with respect to the creditor who
demanded & the debtor on whom the demand was made, but
not with respect to the others;
JOINT OBLIGATIONS
RULES ON THE ENFORCEMENT OF JOINT OBLIGATIONS:
3. The interruption of prescription by the judicial demand of one
creditor upon a debtor does not benefit the other creditors
nor interrupt the prescription as to other debtors. On the
same principle, a partial payment or acknowledgement made
by one of several joint debtors does not stop the running of
the statute of limitations as to the others;
4. The insolvency of a debtor does not increase the
responsibility of his co-debtors, nor does it authorize a
creditor to demand anything from his co-creditors
KINDS OF CIVIL OBLIGATIONS: AS TO
PERFORMANCE OF PRESTATION
1. DIVISIBLE: when the prestation is capable of partial
performance.
2. INDIVISIBLE: when the prestation is not capable of partial
performance.
KINDS OF CIVIL OBLIGATIONS: AS TO
PERFORMANCE OF PRESTATION
RULES AS TO ENFORCEMENT:
1. Indivisibility does not connote solidarity
2. In a joint indivisible obligation:
a. the right of the creditors may be prejudiced only by their
collective acts
b. the debt can be enforced only by proceeding against all the
debtors.
c. If one of the debtors should be insolvent, the others shall
not be liable for his share.
KINDS OF CIVIL OBLIGATIONS: AS TO
PERFORMANCE OF PRESTATION
RULES AS TO ENFORCEMENT:
d. If one of the debtors did not comply with his undertaking,
the obligation is converted into a monetary one, and
i. The debtor(s) who did not comply will be liable for his
share and damages;
ii. The debtor(s) who were ready to comply will be liable
only for his share.
3. In solidary indivisible obligations, the creditor(s) can require
performance of the whole prestation from any of the debtors.
KINDS OF CIVIL OBLIGATIONS: AS TO
PERFORMANCE OF PRESTATION
PRESUMPTIONS:
DIVISIBLE INDIVISIBLE
The object of the obliation is the Obligation to give definite things
execution of a certain number of
days of work
When the object is the Those not susceptible of partial
accomplishment of work by metrical performance
units
When the object of the obligation is If capable of partial performance but
the accomplishment of work the law or the intention of the
susceptible of partial performance. parties treats it as indivisible.
When the purpose of the obligation
is to pay a certain amount in
installments
OBLIGATIONS WITH A PENAL CLAUSE
GENERAL RULE: the penalty shall substitute the indemnity for
damages and payment of interests in case of non-compliance.

EXCEPTIONS:
1. If there is stipulation to the contrary;
2. If the debtor refuses to pay the penalty;
3. If the debtor is guilty of fraud in the fulfilment of the
obligation.
OBLIGATIONS WITH A PENAL CLAUSE
RULES AS TO ENFORCEMENT:
1. The debtor cannot exempt himself from the performance of the
obligation by paying the penalty, save in the case where this
right has been expressly reserved for him.
2. Neither can the creditor demand the fulfillment of the
obligation and the satisfaction of the penalty at the same time,
unless this right has been clearly granted him. However, if after
the creditor has decided to require the fulfillment of the
obligation, the performance thereof should become impossible
without his fault, the penalty may be enforced. (Art. 1227)
3. Proof of actual damages suffered by the creditor is not
necessary in order that the penalty may be demanded. (Art.
1228)
OBLIGATIONS WITH A PENAL CLAUSE
RULES AS TO ENFORCEMENT:
4. The penalty can be reduced:
a. When the principal obligation has been partly or irregularly
complied with.
b. When the same is iniquitous or unconscionable. (Art. 1229)
5. The nullity of the penal clause does not carry with it that of the
principal obligation.
6. The nullity of the principal obligation carries with it that of the
penal clause. (Art. 1230)
OTHER CLASSES OF OBLIGATIONS
As to subject matter Real – obligation to give
Personal – obligation to do or not to
do

As to affirmativeness Positive – obligation to give or to do

Negative – obligation not to do or not
to give

As to persons obliged Unilateral – where only one of the

parties is bound
Bilateral – where both parties are
bound
NATURE AND EFFECTS OF
OBLIGATIONS
OBLIGATIONS TO GIVE
1. 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.
2. The creditor has a 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
3. Remedies available to the creditor in case of non-performance:
a. Specific/Determinate Thing – Specific Performance
b. Generic – Substitute Performance
OBLIGATIONS TO GIVE
4. If the obligor delays, or has promised to deliver the same thing to
two or more persons who do not have the same interest, he shall
be responsible for any fortuitous event until he has effected the
delivery.
5. The obligation to give a determinate thing includes that of
delivering all its accessions and accessories, even though they
may not have been mentioned.
6. The debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value as, or
more valuable than that which is due.
7. When the obligation consists in the delivery of an indeterminate or
generic thing, whose quality and circumstances have not been
stated, the creditor cannot demand a thing of superior quality.
Neither can the debtor deliver a thing of inferior quality.
OBLIGATIONS TO DO
Remedy available: if an obligation to do was not complied with (it
was poorly done), the obligation can be performed by the creditor
himself or by some other person at the expense of the debtor or
ask for damages, or both.

Note that, specific performance is not available in obligations to do,

since this would violate the Constitutional prohibition on involuntary
servitude.
OBLIGATIONS NOT TO DO
Remedy available: In obligations not to do and the obligor does it,
the creditor may have it undone at the expense of the debtor
RESCISSION AS A REMEDY
TWO KINDS:
1. Rescission under Art. 1191, which should’ve been properly
termed as “resolution”, in reciprocal obligations where one
party is not ready to perform his part.
2. Rescission under Art. 1301/1303 in case of rescissible
contracts, like when there is lesion suffered by a ward or
absentee.
DAMAGES
Kinds of Damages (MENTAL):
1. Moral – for mental and physical anguish
2. Exemplary – corrective or to set an example
3. Nominal – to vindicate a right when no other kind of damages
may be recovered
4. Temperate – when the exact amount of damages can not be
determined
5. Actual – actual losses incurred. This is the only type of damage
that would require proof.
6. Liquidated – predetermined beforehand.
SPECIFIC CIRCUMSTANCES
AFFECTING OBLIGATIONS
FRAUD
KINDS OF FRAUD
1. Dolo causante – or fraud in obtaining consent, is applicable
only to contracts where consent is necessary and thus affects
the validity of the contract, making it voidable.

Under this kind of fraud, the party would not have entered into
the contract were it not for the fraud; annulment is the remedy
of the party who’s consent was obtained through fraud.

2. Dolo incidente – or fraud in the performance of the obligation

and applicable to obligations arising from any source. This kind,
however, does not affect the validity of the contract and makes
the party guilty of fraud liable for damages.
FRAUD
Responsibility arising from fraud is demandable in all obligations.
Any waiver of an action for future fraud is void. (Art. 1171)

In order that fraud may make a contract voidable, it should be

serious and should not have been employed by both contracting
parties.

Incidental fraud only obliges the person employing it to pay

damages. (Art. 1344)
NEGLIGENCE
1. Negligence 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, of the
time and of the place.
2. 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. (Art. 1173)
3. 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. (Art. 1172)
NEGLIGENCE
Kinds of Negligence as to EXTENT:
1. Simple Negligence – failure to comply with the diligence
required;
2. Gross Negligence – amounts to bad faith and may thus be
the source of moral damages.

Kinds of Negligence as to SOURCE:

1. Culpa Contractual – contractual negligence – or that which
results in a breach of contract.
2. Culpa Aquiliana – civil negligence or quasi-delict
3. Culpa Criminal – criminal negligence – or that which results
in the commission of a crime or a delict.
DELAY
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 declare; 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 to perform. (Art. 1169)
DELAY
KINDS OF DELAY
1. Mora Solvendi – delay on the part of the debtor, which may
either be:
a. Mora solvendi ex re: in real obligations
b. Mora solvendi ex persona: in personal obligations
2. Mora Accipiendi – delay on the part of the creditor;
3. Compensatio Morae – delay on the part of both parties.
ANY MANNER IN CONTRAVENTION OF
THE OBLIGATION
In general, every debtor who fails in performance of his
obligations is bound to indemnify for the losses and damages
caused thereby. The phrase "any manner contravene the tenor"
of the obligation includes any illicit act which impairs the strict
and faithful fulfillment of the obligation or every kind or defective
performance. (Arrieta vs. NARIC)
FORTUITOUS EVENTS
Fortuitous events by definition are extraordinary events not
foreseeable or avoidable. It is therefore, not enough that the
event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or to
avoid.
FORTUITOUS EVENTS
General Rule: is that no personal shall be responsible for those
events which could not be foresee, or which, though foreseen,
were inevitable.
Exceptions:
1. Declared by stipulation;
2. When the nature of the obligation requires the assumption of
risk
3. Expressly specified by law.
4. When negligence, delay or fraud concurred with the fortuitous
event.
MODES OF
EXTINGUISHMENT OF
OBLIGATIONS
MODES OF EXTINGUISHMENT OF
OBLIGATIONS
Obligations are extinguished:
1. By payment or performance:
2. By the loss of the thing due:
3. By the condonation or remission of the debt;
4. By the confusion or merger of the rights of creditor and
debtor;
5. By compensation;
6. By novation.

Other modes of extinguishment of obligations include Annulment,

Rescission, Fulfillment of a resolutory condition, and Prescription.
PAYMENT OR PERFORMANCE
PAYMENT OR PERFORMANCE
A debt is not understood to have been paid unless the thing or
service in which the obligation consists has been completely
delivered or rendered, as the case may be. How made:
1. If debt is a monetary obligation, by delivery of the money.
2. If the debt is delivery of a thing or things, by delivery of the
thing or things.
3. If the debt is doing of a personal undertaking, by the
performance of said personal undertaking.
4. If the debt is not doing something, by refraining from doing
the action.
PAYMENT OR PERFORMANCE
RULES AS TO THE PAYOR:
1. Payment made by a third person who has an interest in the
fulfillment of the obligation or when the debtor consents to
the payment made by the third person. Effects:

a. The creditor can be compelled to receive payment

b. The third party payor may demand reimbursement for the
full amount
c. Results in subrogation. As such, the 3rd party payor may
exercise rights belonging to the creditor, such as going
against the guarantor or foreclosure of mortgage.
PAYMENT OR PERFORMANCE
RULES AS TO THE PAYOR:
2. Payment made by a third person who has NO interest in the
fulfillment of the obligation or pays without the knowledge or
consent of the debtor. Effects:
a. The creditor cannot be compelled to receive payment.
b. If payment was made, 3rd party payor can only demand
reimbursement upto the extent that has been beneficial
to the debtor.
c. No subrogation.
3. Payment made by a third person who does not intend to be
reimbursed by the debtor is deemed to be a donation, which
requires the debtor's consent. But the payment is in any case
valid as to the creditor who has accepted it.
PAYMENT OR PERFORMANCE
RULES AS TO THE PAYOR:
4. In obligations to give, payment made by one who does not
have the free disposal of the thing due and capacity to
alienate it shall not be valid
PAYMENT OR PERFORMANCE
RULES AS TO THE PAYEE:
1. Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest,
or any person authorized to receive it.
2. Payment to a person who is incapacitated to administer his
property shall be valid if he has kept the thing delivered, or
insofar as the payment has been beneficial to him.
PAYMENT OR PERFORMANCE
RULES AS TO THE PAYEE:
3. Payment made to a third person shall also be valid insofar as
it has redounded to the benefit of the creditor. Such benefit
to the creditor need not be proved in the following cases:
a. If after the payment, the third person acquires the
creditor's rights;
b. If the creditor ratifies the payment to the third person;
c. If by the creditor's conduct, the debtor has been led to
believe that the third person had authority to receive the
payment.
PAYMENT OR PERFORMANCE
RULES AS TO THE THING TO BE PAID OR DELIVERED:
1. Payment means not only the delivery of money but also the
performance, in any other manner, of an obligation.
2. The debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value
as, or more valuable than that which is due.
3. In obligations to do or not to do, an act or forbearance
cannot be substituted by another act or forbearance against
the obligee's will.
PAYMENT OR PERFORMANCE
RULES AS TO THE THING TO BE PAID OR DELIVERED:
4. The payment of debts in money shall be made in the
currency stipulated, and if it is not possible to deliver such
currency, then in the currency which is legal tender in the
Philippines.

Legal tender in the Philippines consists of notes and coins

issued by the Bangko Sentral ng Pilipinas subject to the
following limit:
a. Notes (P20, P50, P100, P200, P500, P1,000) – no limit;
b. Coins P1 and above – P1,000
c. Coins below P1 – P100
PAYMENT OR PERFORMANCE
RULES AS TO THE THING TO BE PAID OR DELIVERED:
4. The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or
when through the fault of the creditor they have been
impaired.
5. In case an extraordinary inflation or deflation of the currency
stipulated should supervene, the value of the currency at the
time of the establishment of the obligation shall be the basis
of payment, unless there is an agreement to the contrary.
PAYMENT OR PERFORMANCE
PLACE, DATE AND TIME OF PAYMENT OR PERFORMANCE:
1. Payment shall be made in the place designated in the
obligation.
2. If there was no stipulation and the obligation consists in the
delivery of a determinate thing, the payment shall be made
wherever the thing might be at the moment the obligation
was constituted.
3. In any other case the place of payment shall be the domicile
of the debtor.
4. If the debtor changes his domicile in bad faith or after he has
incurred in delay, the additional expenses shall be borne by
him.
SPECIAL FORMS OF
PAYMENT
DATION IN PAYMENT
1. Dation in payment, whereby property is alienated to the
creditor in satisfaction of a debt in money, shall be governed
by the law of sales.
2. There has to be delivery of the thing and prior acceptance
and a consequent transfer of ownership to consider it a
dation in payment. A mere promise to deliver a thing in lieu
of the originally constituted subject amounts to a novation.
3. Extent of extinguishment: General rule: to the extent of the
value of the thing delivered as agreed upon or as may be
proved. Exception: if the parties consider the thing as
equivalent to the obligation through an express or implied
agreement or by silence.
APPLICATION OF PAYMENTS
1. Application of Payment: is the designation of the debt
which is being paid by a debtor who has several obligations of
the same kind in favor of the creditor to whom payment is
made.
2. Requisites:
a. There is only one debtor;
b. There are several debts;
c. The debts are of the same kind;
d. There is only one and the same creditor.

3. As a general rule, all the debts must be due and demandable.

EXCEPTION: when there is mutual agreement or when the
consent of the party for whose benefit the term was
constituted was obtained.
APPLICATION OF PAYMENTS
Right to apply payment: generally, the debtor has the right to
apply the payment at the time of making the payment, subject to
the following LIMITATIONS:
1. Creditor cannot be compelled to accept partial payment. (Art.
1248);
2. Debtor cannot apply payment to principal if interest has not
been paid. (Art. 1253)
3. The debt must be liquidated, except when the parties agree
otherwise;
4. Cannot be made when the period has not arrived and such
period was constituted in favour of the creditor, except with
the consent of the creditor (Art. 1252);
5. When there is agreement as to which debt must be paid first.
APPLICATION OF PAYMENTS
Creditor can make the application if the debtor fails to choose and
the creditor indicates in the receipt to which debt the payment will
apply.
APPLICATION OF PAYMENTS
If debtor and creditor did not designate:
1. If the debts are of different nature and burden – to that debt
which is most onerous to the debtor;
2. If the debts are of the same nature and burden – applied
proportionately
PAYMENT BY CESSION
1. The debtor may cede or assign his property to his creditors in
payment of his debts.
2. This cession, unless there is stipulation to the contrary, shall
only release the debtor from responsibility for the net
proceeds of the thing assigned.
3. The above covers voluntary cession. In judicial cession, which
is covered by Insolvency Laws, more specifically, liquidation,
all debts/obligations are extinguished.
TENDER OF PAYMENT AND
CONSIGNATION
1. Tender of Payment is the manifestation made by the debtor
to the creditor of his desire to comply with his obligation, with
the offer of immediate performance. It is a PREPARATORY
ACT to consignation and in itself DOES NOT extinguish the
obligation.

2. Consignation is the deposit of the object of the obligation in

a competent court in accordance with rules prescribed by law,
AFTER the tender of payment has been refused or because of
circumstances which render direct payment to the creditor
impossible. It extinguishes the obligation.
TENDER OF PAYMENT AND
CONSIGNATION
3. Instances where consignation can be made even
without tender of payment:
a. When the creditor is absent or unknown, or does not
appear at the place of payment;
b. When he is incapacitated to receive the payment at the
time it is due;
c. When, without just cause, he refuses to give a receipt;
d. When two or more persons claim the same right to
collect;
e. When the title of the obligation has been lost.
TENDER OF PAYMENT AND
CONSIGNATION
4. Withdrawal of the thing deposited:
a. Before the creditor has accepted the consignation, or
before a judicial declaration that the consignation has
been properly made, the debtor may withdraw the thing
or the sum deposited, allowing the obligation to remain in
force.
b. If, the consignation having been made, the creditor should
authorize the debtor to withdraw the same, he shall lose
every preference which he may have over the thing. The
co-debtors, guarantors and sureties shall be released.
LOSS OF THE THING OR
IMPOSSIBILITY OF
PERFORMANCE
LOSS
Loss: means when the thing goes out of commerce, perishes or
disappears in such a way that its existence is unknown or that it
cannot be recovered.

General Rule: loss of the thing subject of the obligation to give

extinguishes the obligation, except:
1. If the debtor is already in delay
2. If there was stipulation that the debtor is liable even for
fortuitous events
3. If the law provides for the debtor’s liability
LOSS
Generic Thing – In an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does not
extinguish the obligation.

Except:
1. When the thing goes out of commerce or by legal
impossibility;
2. Limited Generic: In such cases where the generic thing
belongs to a particular group of thing and the loss pertains to
the whole group and NOT ONLY to the thing itself, then the
obligation is extinguished
LOSS
Partial Loss: The courts shall determine whether, under the
circumstances, the partial loss of the object of the obligation is so
important as to extinguish the obligation.
LOSS
Presumptions of fault: Whenever the thing is lost in the
possession of the debtor, it shall be presumed that the loss was
due to his fault, unless there is proof to the contrary.

This presumption does not apply in case of earthquake, flood,

storm, or other natural calamity.
IMPOSSIBILITY OF PERFORMANCE
To extinguish the obligation, the impossibility should have taken
place DURING the existence of the obligation. If the
impossibility arose BEFORE the existence of the obligation, the
obligation is void.
IMPOSSIBILITY OF PERFORMANCE
KINDS OF IMPOSSIBILITY:
1. As to nature: Physical (by reason of its nature); and Legal
(through some subsequent law);
2. As to whom impossibility refers:
a. Objective – impossibility of the act or service itself
without considering the person of the debtor;
b. Subjective - impossibility refers to the fact that the act or
service can no longer be done by the debtor but may still
be performed by another person
1. As to extent: Partial or Total;
2. As to period of impossibility: Permanent or Temporary.
IMPOSSIBILITY OF PERFORMANCE
DIFFICULTY OF PERFORMANCE: When the service has
become so difficult as to be manifestly beyond the contemplation
of the parties, the obligor may also be released therefrom, in
whole or in part.
IMPOSSIBILITY OF PERFORMANCE
The obligation having been extinguished by the loss of the thing,
the creditor shall have all the rights of action which the debtor
may have against third persons by reason of the loss.
CONDONATION OR
REMISSION OF DEBT
CONDONATION or REMISSION
Condonation/Remission is an act of liberality, by virtue of
which, without receiving any equivalent, the creditor renounces
the enforcement of an obligation, which is extinguished in its
entirety or in that part or aspect of the same to which the
remission refers.

It is essentially gratuitous in character, if the creditor received a

consideration other than mere liberality on his part, it is not
condonation.
CONDONATION or REMISSION
KINDS OF CONDONATION AS TO FORM:
1. Express – when made formally and should comply with the
formal requisites of a donation.
a. Acceptance is necessary to become effective;
b. Movable property donated:
i. An oral donation requires the simultaneous delivery
of the thing or of the document representing the
right donated.
ii. If the value of the personal property donated
exceeds five thousand pesos, the donation and the
acceptance shall be made in writing, otherwise, the
donation shall be void.
c. Immovable property must be in a public document.
2. Implied – when it can be inferred from the acts of the parties.
CONDONATION or REMISSION
KINDS OF CONDONATION AS TO EXTENT:
1. Total - when the whole obligation is extinguished.
2. Partial – which may be as to the amount; as to the accessory
obligation; or as to a certain amount of debt (in case of
solidarity).

KINDS OF CONDONATION AS TO MANNER/EFFECTIVITY:

1. Inter vivos – during the lifetime of the creditor.
2. Mortis causa – will take effect upon death which must be in
done through a will
CONDONATION or REMISSION
PRIVATE DOCUMENTS/PLEDGE:
1. The delivery of a private document evidencing a credit, made
voluntarily by the creditor to the debtor, implies the renunciation
of the action which the former had against the latter.
2. Whenever the private document in which the debt appears is
found in the possession of the debtor, it shall be presumed that
the creditor delivered it voluntarily, unless the contrary is proved.
3. The renunciation of the principal debt shall extinguish the
accessory obligations; but the waiver of the latter shall leave the
former in force.
4. It is presumed that the accessory obligation of pledge has been
remitted when the thing pledged, after its delivery to the creditor,
is found in the possession of the debtor, or of a third person who
owns the thing
CONFUSION/MERGER OF
RIGHTS
MERGER OR CONFUSION
Merger/Confusion: the meeting in one person of the qualities
of the creditor and debtor with respect to the same obligation.

Requisites:
1. Must take place between the credit and the principal debtor;
2. Must involve the very same obligation;
3. Must be total.

Guarantors: Merger which takes place in the person of the

principal debtor or creditor benefits the guarantors. Confusion
which takes place in the person of any of the latter does not
extinguish the obligation
COMPENSATION
COMPENSATION
Compensation: a mode of extinguishment to the concurrent
amount, the obligations of those persons who in their own right,
are reciprocally creditors and debtors of each other.
COMPENSATION
KINDS OF COMPENSATION AS TO EXTENT:
1. Total – when the two obligations are of the same amount.
2. Partial – when the amounts are not equal. This is total as to
the debt with lower amount.

KINDS OF COMPENSATION AS TO ORIGIN/CAUSE:

1. Legal – takes effect by operation of law because all the
requisites are present;
2. Facultative – can be claimed by one of the parties.
3. Conventional – when the parties agree to compensate their
mutual obligations even if some of the requisite are lacking.
4. Judicial – decreed by the court in a case where there is a
counterclaim
COMPENSATION
REQUISITES OF LEGAL COMPENSATION
1. That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the
other;
2. That both debts consist in a sum of money, or if the things
due are consumable, they be of the same kind, and also of
the same quality if the latter has been stated;
3. That the two debts be due;
4. That they be 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
COMPENSATION
OTHER RULES AS TO COMPENSATION:
1. The guarantor may set up compensation as regards what the
creditor may owe the principal debtor.
2. When one or both debts are rescissible or voidable, they may
be compensated against each other before they are judicially
rescinded or avoided.
3. The debtor who has consented to the assignment of rights
made by a creditor in favor of a third person, cannot set up
against the assignee the compensation which would pertain to
him against the assignor, unless the assignor was notified by
the debtor at the time he gave his consent, that he reserved
his right to the compensation.
COMPENSATION
OTHER RULES AS TO COMPENSATION:
4. If the creditor communicated the cession to him but the
debtor did not consent thereto, the latter may set up the
compensation of debts previous to the cession, but not of
subsequent ones.
5. If the assignment is made without the knowledge of the
debtor, he may set up the compensation of all credits prior to
the same and also later ones until he had knowledge of the
assignment.
6. Compensation takes place by operation of law, even though
the debts may be payable at different places, but there shall
be an indemnity for expenses of exchange or transportation to
the place of payment
COMPENSATION
OTHER RULES AS TO COMPENSATION:
7. When compensation is not proper:
a. Depositum – as to the depositary;
b. Bail – as to the bailee;
c. Support – as to the one giving support, EXCEPT: support
in arrears and those contractual in nature;
d. Civil liability arising from a penal offense
8. If a person should have against him several debts which are
susceptible of compensation, the rules on the application
of payments shall apply to the order of the compensation.
9. When all the requisites are present, compensation takes effect
by operation of law, and extinguishes both debts to the
concurrent amount, even though the creditors and
debtors are not aware of the compensation.
NOVATION
NOVATION
KINDS OF NOVATION AS TO NATURE:
1. Objective - Changing their object or principal conditions;
2. Passive Subjective - Substituting the person of the debtor;
3. Active Subjective - Subrogating a third person in the rights of
the creditor
ACTIVE NOVATION; SUBROGATION
TWO WAYS:
1. By agreement or express consent of the parties
2. By law or implied:
a. When a creditor pays another creditor who is preferred,
even without the debtor's knowledge;
b. When a third person, not interested in the obligation, pays
with the express or tacit approval of the debtor;
c. When, even without the knowledge of the debtor, a
person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the
latter's share
ACTIVE NOVATION; SUBROGATION
EFFECT: Subrogation transfers to the persons subrogated the
credit with all the rights thereto appertaining, either against the
debtor or against third person, be they guarantors or possessors
of mortgages, subject to stipulation in a conventional subrogation.
 PASSIVE NOVATION; SUBSTITUTION
Reimbursement Insolvency of new
debtor
without the Only to the extent Old debtor is no longer
knowledge or the debtor was liable
EXPROMISION consent of the benefited
debtor.

with consent or Full amount Old debtor is still liable

with knowledge if:
of the original 1. the insolvency was
debtor but already existing
without any and of public
DELEGACION objections. knowledge, or
2. known to the
debtor.
NOVATION
OTHER RULES:
1. The novation is void if the original obligation was void, except
when annulment may be claimed only by the debtor or when
ratification validates acts which are voidable.
2. If the new obligation is void, the original one shall subsist,
unless the parties intended that the former relation should be
extinguished in any event.
3. When the principal obligation is extinguished in consequence
of a novation, accessory obligations may subsist only insofar
as they may benefit third persons who did not give their
consent.
4. If the original obligation was subject to a suspensive or
resolutory condition, the new obligation shall be under the
same condition, unless it is otherwise stipulated.
END