OBLIGATIONS AND CONTRACTS SAMPLEX

1. Dyosa and Adonis entered into a contract of loan in March 15, 2002 where Dyosa borrowed from
Adonis the amount of US$25,000.00 when the exchange rate is P55.00 to US$1.00 payable in Philippine
Peso on or before December 31, 2007, when the exchange rate is P31.00 to US$1.00. Kulas executed a
surety to secure the loan on December 20, 2007. The Bangko Sentral ng Pilipinas declared that there is
an unusual deflation in the value of the peso. On January 25, 2008, Kulas tendered to Adonis the
amount of P820,000.00 plus interest in the form of cashier’s check. Adonis refused to accept such
payment because of the following reasons
o The amount to be paid should be P1,375,000.00, excluding interest
o The payment should be in cash
o He is not compelled to accept payment from Kulas because he is not the debtor

Decide with reasons(20 pts)

 Adonis is correct in demanding the amount of P1,375,000.00, excluding interest. As provided by

Article 1250 of the Civil Code, in case of 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. In this
case, since an unusual deflation has been declared by the Bangko Sentral ng Pilipinas, it is
proper for Adonis to have demanded his receivable valued at the time of the establishment of
the obligation. Hence, Dyosa should pay the amount of P1,375,000.00, excluding interest.
 The refusal of Adonis to accept the payment because it was not in cash was untenable. As a
general rule, 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 (Article 1249). The exception in
this case is the Central Bank Act, Section 63, where it is provided that a Cashier’s Check is
deemed as cash. This is because a Cashier’s Check is a certification that a check which has been
cleared and credited to the account of the creditor shall be equivalent to a delivery to the
creditor in cash in an amount equal to the amount credited to his account. In this case, however,
while Adonis was incorrect in not accepting the payment of Kulas because it was not in cash, his
refusal to accept the same is justified because it is only a partial payment. Under Article 1248,
unless there is an express stipulation to that effect, the creditor cannot be compelled partially to
receive the prestations in which the obligation consists.
 The third contention of Adonis is also without merit. As provided in Article 1236 of the Civil
Code, the creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. Kulas, as
a surety, is not considered as a third person within the meaning of the law. He is considered as a
person who has an interest in the fulfillment of the obligation because as a surety, he is bound
to perform the prestation in case of default by Dyosa.

2. Magulang bought 2 diamond earrings from Masiba valued at P200,000.00 which he can sell at 20%
margin. Since they are good friends it was agreed that Magulang will pay “whenever” his means permit
him otherwise he has to return the same. Magulang was able to sell said pieces of jewelry in two (2)
equal installments on July 25, 2008. In the evening of August 2, 2008, Magulang offered Masiba
P100,000.00, the only money he had collected, but Masiba refused to accept the payment. While
walking home from the residence of Magulang, two men, armed with bread knives, snatched the purse
and ran away. On the following week, magulang offered Masiba P80,000.00, the 2nd installment less his

1
commission. However Masiba refused the payment also because it’s not the full payment. Thereafter
Magulang met Maluho, Masiba’s wife, to whom he gave the P80,000.00 with the request that she turn
the money over to Masiba, Maluho did not turn over said money but instead used it to buy plane tickets
to Nigeria for her and Masiba so they can visit Maluho’s parents. Following a quarrel, Masiba made a
demand upon Magulang to pay the amount of P180,000.00 or return the pieces of jewelry. Magulang
interposed the following defenses:
o That the first P100,000.00 was lost due to fortuitous event
o The P80,000.00 was paid already
o He cannot be faulted because it is Masiba who refused to accept his payment, and that
o His obligation to pay is not yet due because no period has been agreed upon

Decide whether the above defenses are tenable (25 points)

 The 1st contention of Magulang is untenable. Under Article 1263, in an obligation to deliver a
generic thing, the loss or destruction of anything of the same kind does not extinguish the
obligation. It is well-settled that where an obligation consists in the payment of money, the
failure of the debtor to effect the delivery even by a reason of a fortuitous event shall not
relieve him of his liability.
 The 2nd claim of Magulang is correct. According to the second paragraph of Article 1241,
payment made to a third person shall also be valid insofar as it has redounded to the benefit of
the creditor. In this case, since the money spent by Masiba’s wife to buy plane tickets to Nigeria
so they can visit his parents clearly redounded to the benefit of Masiba, the payment of
Magulang amounting to Ph80,000.00 was valid.
 The 3rd contention of Magulang is untenable. Under Article 1256, the debtor shall be released
from responsibility by the consignation of the thing or sum due if the creditor to whom tender
of payment has been made refuses without just cause to accept it. In this case, while it is true
that Masiba did not have any just cause in refusing to accept Magulang’s payment, Magulang
has failed to consign the sum due to a proper judicial authority. Under Article 1257, the
consignation shall be ineffectual if it is not made strictly in consonance with the provisions
which regulate payment. Hence, there is no valid consignation and Magulang is not relieved
from his liability.
 The 4th contention of Magulang is correct. As provided in Article 1280 in relation to Article 1297,
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. Hence, the remedy of the Masiba is to ask the court to fix
the period thereof. After the court has fixed the period, Masiba may then demand payment
from Magulang upon the expiration of the fixed period.

3. Tango, Tinga, Tenga are solidary debtors under a loan obligation of P300,000.00 which has fallen due.
Taptap, the creditor has condoned Tenga’s entire share in the debt. Since Tinga has become insolvent,
Taptap makes a demand on Tango to pay the debt. How much, if any, Tango may be compelled to pay
and to what extent, if at all, can Tenga be compelled by Tango to contribute to such payment? (10pts)

 Tango may be compelled to pay the amount of Ph200,000.00, representing his and Tinga’s share
in the obligation. Under Article 1216, the creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. Since the share of Tenga was entirely condoned
by Taptap, the obligation to pay Ph300,000.00 was converted into an obligation to pay the sum
of Ph200,000.00.

2
  Tenga may be compelled to contribute Ph50,000.00, which is half of Tinga’s share in the
obligation. Under Article 1219, 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. Hence, Tenga is still liable for half of Tinga’s share in the obligation.

4. Guapo delivered his car valued at P300,000.00 to Pogi to be sold on 5% commission upon agreement
that if the car is unsold, Pogi shall return the car to Guapo. During the onslaught of typhoon Milenyo,
Pogi uses the car to go to a hotel. While the car is parked by the side street near Manila Motel, the car
was carnapped. Because of poor visibility and raging floods, the carnappers hit a tree and leaves the car
a total wreck. Pogi claims fortuitous event to absolve him from any obligation. Discuss (15pts)

 The claim of Pogi to be absolved from any obligation is tenable. Under 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. This case falls
within the purview of force majeure, and it could have been possible for Pogi to foresee that the
car will be carnapped when he parked it outside the hotel. (Memorize requisites of fortuitous
events!)

(a) May the debtor withdraw the thing consigned? Discuss (7.5pts)

 This question calls for a qualified answer. Under Article 1260, the debtor may only withdraw the
thing or the sum deposited before the creditor has accepted the consignation, or before a
judicial declaration that the consignation has been properly made. After the creditor has
accepted the consignation, or after a judicial declaration that the consignation has been
properly made, the debtor may not withdraw the thing consigned anymore.

(b) When does loss or destruction of the thing result to extinguishment of the obligation? (7.5 pts)

 Under Article 1262, an obligation which consists in the delivery of a determinate thing shall be
extinguished if it should be lost or destroyed without the fault of the debtor, and before he has
incurred in delay.

5. Bob, the builder entered into a contract with Mr. Bean to build the latter’s house for P1,000.00. The
contract provides that if Mr. Bean fails to pay the amount on December 25, 2006, he shall pay a
surcharge of 10% for every day of default until full settlement of his obligation. Mr. Bean did not pay on
time. Bob the builder went to Court to recover the amount plus the penalties and damages. The
Kangaroo Court decided in favor of Bob, awarded surcharges and additional 6% per annum as penalty.
Mr. Bean asks you

(a) if the Kangaroo Court is correct and

(b) what are the three (3) purpose of a penalty clause (15 points)

 As to the daily surcharge of 10%, it is clear that Kangaroo Court is not correct in holding Mr.
Bean liable for such, the penalty being unconscionable and iniquitous.
 On the other hand, Kangaroo Court is correct in holding Mr. Bean liable for the additional
penalty of 6% per annum. Under Article 1226, the penalty takes the place of interest only if

3
 there is no stipulation to the contrary, and even then damages may still be collected if the
obligor refuses to pay the penalty or is guilty of fraud. In the case at bar, not only is there an
express stipulation to pay damages in addition to the penalty, but defendant has failed to pay
his obligation as well as the penalty. The imposition of the interest is, therefore, justified.

 Purposes of penalty:
1. Función coercitiva o de garantia – to insure the performance of the obligation
2. Función liquidatoria – to liquidate the amount of damages to be awarded to the injured party in
case of breach of the principal obligation
3. Función estrictamente penal – in certain exceptional cases, to punish the obligor in case of
breach of the principal obligation

6. Dino sued Ben for damages because the latter had failed to deliver the antique Mercedes benz car
Dino purchased from Ben - which was - by agreement - due for delivery on Dec. 31, 1993. Ben, in his
answer to Dino’s complaint, said Dino’s claim has no basis for the suit, because as the car was being
driven to be delivered to Dino on January 1, 1994, a reckless truck driver had rammed into the Mercedes
Benz. The trial court dismissed Dino’s complaint, saying Ben’s obligation had indeed been extinguished
by force majeure. Is the trial court correct?

 The trial court is not correct in dismissing Dino’s complaint. Under Article 1165, if the obligor
delays, he shall be responsible for any fortuitous event until he has effected the delivery. In this
case, since Ben was already in delay when the accident happened, he is not relieved from
responsibility.

7. In 1960, the Bureau of Lands issued a Homestead patent to Elias Palos. Under the Public Land Law,
any sale or conveyance made involving said Homestead is void. 3 years later, Elias Palos sold the
homestead to Enrico Fernando. Elias Palos died on March 15, 1990, and his heirs filed inaction to
recover the homestead from Enrico Fernando on the ground that its sale by their father to the latter is
void under Section 188 of the Public Land Law, Enrico Fernando, contended, however, that the heirs of
Elias Palos cannot recover the homestead from him anymore because:

a) their action has already prescribed,

b) Elias Palos was in pari deluxe, and,
c) the heirs are guilty of laches. Decide with Reasons.

8. Totoy Bato a Citizen and a resident of New Jersey, USA, under whose law he was still a minor, being
only 20 years of age. He was hired by the ZTE corporation of Manila to serve for two years as its Chief
computer programmer. However, after serving only 1 year, he resigned from ZTE company, because he
was enticed by GMA/FG Corp. by offering more advantageous terms. ZTE Corporation sued him and
GMA/FG Corp in Manila for damages arising from the breach of his contract of employment. He
interposed his minority as a defence and asked for annulment of the contract on the ground ZTE
corporation disputed this by alleging that since the contract was executed in the Philippines under
whose law the age of majority is 18 years, under he was no longer a minor at the time of the perfection
of the contract.
a. will the suit against Totoy Bato prosper?
 Yes. Article 15.
b. will the suit against GMA/FG Corp prosper and what would be the basis of its liability?
 Di ko alam anghirap gagu.

4
9. Laida and Miggy entered into a lease contract over Monte Building on Feb 1, 2005 where Miggy is
expressly granted a right of first refusal should the lessor, Laida, decide to sell both the land and
building. However, on March 30, 2007, Laida sold the property to Mackoy who knew about the lease
and in fact agreed to it. Thereafter, after being informed of the new lessor, Miggy made a demand and
subsequently filed an action against both lessor-seller, Laida and the buyer Mackoy, (a) to rescind the
sale and (b) to compel the specific performance of his right of first refusal in the sense that the lessor
should be ordered to execute a deed of absolute sale in favor of the lessee at the same price. The
defendants contended that the plaintiff can neither ask rescission of the sale nor compel specific
performance of a right of first refusal. Decide the case.

 Question: rescission of sale nga ba demand ni Miggy? Or rescission of lease contract? O sige
kung sale man:
 Miggy is correct in filing an action for the rescission of sale and compelling the specific
performance from Laida. Under Article 1191, the injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case.
Since the rescission of Laida’s sale to Mackoy is an incident to the action for specific
performance, the court should order specific performance by Laida.

10. In two separate documents signed by him, Miguel Tonto "obligated himself" each to Glow Labandera
and to Perlie Estrada, thus - "To Glow, my true love, I obligate myself to give you my one and only horse
when I feel like it."

"To perlie, my true sweetheart, I obligate myself to pay you the P500,000.00 owe you when I feel like it."
Months passed but Miguel never bothered to make good his promises. Glow and Perlie came to consult
on you whether or not they could recover on the basis of the foregoing settings. What your legal advice
be to Glow? To Perlie?

 As to Glow Labandera: the obligation to deliver the horse is void, since the condition is
potestative, whose fulfillment depends solely upon the will of the debtor. Under Article 1182,
when the fulfillment of the condition depends upon the sole will of the debtor, the conditional
obligation shall be void.
 As to Perlie Estrada: The obligation of Miguel to pay Ph500,000.00 still subsists, even though the
condition is void. While it is provided in the case of Glow that conditions whose performance
depend solely on the will of the debtor are void, this rule is not absolute. In the case of Perlie,
although the condition is void because of its potestative character, the obligation itself is not
affected since it refers to a pre-existing indebtedness. The remedy of Perlie, therefore, is to go
to the court and ask for the fixing of the period. Under Article 1197, the courts shall fix the
duration of the period when it depends upon the will of the debtor.

11. Suppose that under an obligation imposed by a final judgement, the liability of the judgment debtor
is to pay the amount of P6,000.00 but both the judgement debtor and the judgement creditor
subsequently entered into a contract reducing the liability of the former to only P4,000, is there an
implied novation which will have the effect of extinguishing the judgement obligation and creating a
modified obligatory relation? Reasons.
 No implied novation. Nasa Jurado Reviewer to. Pages 801-802. Heehee tamad sorry.

How is a civil obligation distinguished from a natural obligation? Give an example of natural obligation.
 Bahala na you.

5
12. Beauty La Fea offered to sell her BMW to Regina Bilog for P600,000.00. After inspecting the car,
Regina Bilog offered to buy it for P500,000. This offer was accepted by Beauty La Fea. The next day,
Beauty offered to deliver the car, but Regina being short of funds, secured postponement of the
delivery, promising to pay the price upon arrival of the steamer, Ogie da Pogi. The steamer however
never arrived because it was wrecked by a typhoon and sank somewhere off the coast of Samar.
o Can Beauty compel Regina to pay the purchase price? Why?
o Is the promise to pay made by Regina conditional or with a term? Why?

 No. Regina cannot be compelled to pay the purchase price. Under Article 1169, in reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to compy 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. In the case at bar, while Beauty was ready to comply
with her obligation, she has not yet delivered the car, hence, since this is a reciprocal obligation,
she may not compel Regina yet to pay the purchase price. (Di ko sure to, sorry.)
 The promise of Regina to pay is conditional. Under Article 1181, in 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.

13. Ian and Asha met on the plane to Cebu. Ian offered Asha to stay in his resort in Bohol. Asha was so
impressed with the place she hinted a desire to lease the same. On March 5, 2007, Ian emailed Asha
offering to lease the resort. Asha opened her email on March 6, 2007 but only sent the telegram of
acceptance on March 8, 2007. On March 7, Ian had a change of the heart and withdrew his offer. Asha
read the email right after sending the telegram to Ian. Was the contract perfected?

 Oy contracts na to!

14. Ismael is married to Marta. in 1999, Ismael met Tisay a 17yr old GRO and went crazy rabid with
desire. Ismael donated to Tisay a house and lot which he and Marta previously occupied with their 3
children. The donation was, of course, subject to the condition that Tisay becomes Ismael's mistress.
Tisay accepted the donation but demanded to have a condominium unit as their love nest. In 2006,
Ismael died of a heart attack. Marta and her 3 children went back to the house donated to Tisay and
decided to live there. Tisay goes to you for advice.

 Eh?