Course Syllabus

OBLIGATIONS AND CONTRACTS

Jorge Patrick A. Yasay
1st Semester, SY 2019-2020

No particular book or commentary is required in this class. The choice is left to the
student as part of their academic freedom.

Unless otherwise specified, numbers below refer to the articles of the New Civil Code.
Students should read their preferred commentaries and come to class prepared to discuss
with the lecturer following the Socratic Method in teaching.

Students are strongly advised to read all cases in the original and personally prepare
their summaries or digests.

Students should not expect to be spoon-fed.

The use of electronic devices of any kind is discouraged. These, together with
textbooks and printed materials, shall be kept hidden as soon as the class starts. Personal
notes and codals may be taken out; however, during recitations, students are expected to
recite and not read from their notes and codals.

Students shall prepare at least 2 sheets of yellow intermediate pad paper for quizzes.
Quizzes may be given in lieu of recitations.

If a student is called for recitation and s/he is absent, s/he shall be given a failing
mark for said recitation.

The final grade shall have three components, as follows:

30% - Midterm Examination, Quizzes, Digests, etc.;

30% - Recitations; and
40% - Final Exam.
 PART 1: OBLIGATIONS

A. Definition, Elements and Sources of Obligation (1156-1162)

1. Definition
2. Elements of an obligation
3. Sources of an obligation
4. The concept of prestation

Cases:
 Makati Stock Exchange v. Campos, G.R. No. 138814, April 16, 2009
 Wellex Group v. U-Land Airlines, G.R. No. 167519, January 14, 2015
 Barredo v. Garcia, 73 Phil. 607 (1942)
 Mendoza v. Arrieta, 91 SCRA 113 (1979)
 PSBA v. CA, 205 SCRA 729 (1992)
 Amadora v. CA, 160 SCRA 315 (1998)

B. Nature and Effect of Obligations (1163-1178)

1. The concepts of ‘diligence’ and ‘negligence’

2. Obligation to give a thing and its accessories
3. Default or delay
4. Fraud (incidental and causal)
5. Fortuitous event

Cases:
 De Guia v. Manila Electric Co., 40 Phil. 706 (1920)
 E. Razon, Inc. v. CA, G.R. No. L-50242, May 21, 1988
 Optimum Motor v. Tan, G.R. No. 170202, July 14, 2008
 Civil Aeronautics Administration v. CA, G.R. No. L-51806, November 8, 1988

C. Possible Classifications of Obligations

1. By enforceability (1423-1429)
a. Civil
b. Natural

Cases:
 Villaroel v. Estrada, 71 Phil 140 (1940)
 Fisher v. Robb, 69 Phil 101 (1939)

2. By number of parties: sole/unilateral, joint/bilateral, collective

3. By presence of conditions: unconditional/pure, conditional (period, prestation, event,
penal clause)
4. By variability of obligation: definitive, alternative
 5. By divisibility of obligation: divisible, indivisible
6. By relationship: principal, accessory
7. By nature of action to enforce: real, personal
8. By nature of object: generic/specific

(You may refer to the discussions in ‘Tolentino, Arturo. Commentaries and Jurisprudence on
the Civil Code of the Philippines. Any edition.)

D. Different Kinds of Obligations (1179-1230)

1. Pure and conditional obligations

a. Pure obligations, 1179
b. Conditional obligations, 1181-92
i. Definition, 1181, 1193
ii. When demandable, 1181-82, 1185-86
iii. Effects when condition is fulfilled, 1187
iv. Types of conditions
1. As to effect
a. Suspensive (condition precedent)
b. Resolutory (condition subsequent)
 Cases:
o CS Garment v. CIR, G.R. No. 182399, March
12, 2014 (suspensive)
o Escanlar v. CA, G.R. No. 119777, October 23,
1997, (resolutory)

2. As to cause/origin
a. Potestative, 1180, 1182, 1197
 Case: Lim v. CA. 191 SCRA 156 (1990)

b. Casual
 Case: Naga Telephone v. CA, 230 SCRA 351 (1990)
c. Mixed
 Cases:
o Osmena v. Rama, 14 Phil 99 (1909)
o Hermosa v. Longora, 93 Phil 971 (1953)

3. As to possibility
a. Impossible conditions, 1183
 Case: Roman Catholic Archbishop of Manila v. CA,
198 SCRA 300 (1991)

4. As to mode
a. Positive, 1184
b. Negative, 1185
 v. When obligation ineffective
1. When condition is not fulfilled, 1184
2. When condition is void ab initio, 1182-83
3. Rescission of reciprocal obligations, 1191-92, 1189

vi. Events pending happening of condition

1. Protective action, 1188
2. Loss, deterioration, improvement of the thing, 1190, 1189
3. Prevention of fulfillment of the condition by obligor, 1189

2. Obligations with a period, 1193-98

a. Definition
b. For whose benefit
c. Kinds
i. Effect: suspensive, resolutory
ii. Expression: express, implied
iii. Definiteness: definite, indefinite
iv. Source: voluntary, legal, judicial

 Cases:
o Qui v. CA, L-38059, September 4, 1975
o Araneta v. Philippine Sugar Estates, L-22558, May 31, 1967
o Gaite v. Fonacier, L-11827, July 31, 1961

3. Alternative Obligations, 1199-1206

a. Kinds
i. Simple alternative
ii. Facultative
b. Right to Choose
c. Loss/Impossibility
i. Liability for loss of thing/impossibility of performance, 1205
ii. Creditor’s right to indemnity for damages, 1204

 Cases:
o Alco Pulp and Paper v. Lim, G.R. No. 206806, June 15, 2014
o Borbon v. Servicewide Specialists, G.R. No. 106418, July 11, 1996

4. Joint and Solidary Obligations, 1207-22

a. Joint obligations
i. General Rule, 1207
ii. Presumption, 1208
iii. In case indivisible, 1209
b. Solidary obligations
i. When solidary, 1207
ii. Kinds
 1. Source
a. Legal, 1915, 1945, 2194, RPC 119
b. Conventional
c. Real

2. Parties: active, passive, mixed

3. Uniformity
a. Uniform
b. Varied, 1211

4. Solidary creditors’ options

a. Can be done, 1212, 1216
b. Cannot be done, 1212-13

5. Solidary debtors’ options

a. Pay any one of the solidary creditors, 1214
b. Avail of defenses, 1222

6. Extinguishment of solidary obligations, 1215

7. Change in obligation, 1215, 1219
8. Payment, 1217-20
9. Loss/impossibility, 1221

 Cases:
o Lafarge Cement v. Continental Cement, G.R. No. 155173,
November 23, 2004
o De Castro v. CA, G.R. Ni. 115838, July 18, 2002
o Malayan Insurance v. CA, L-36413, September 26, 1988

5. Divisible/Indivisible Obligations (1223-1225)

a. Object not material, 1223
b. How determined, 1225
c. Right to damages, 1224
d. Partial invalidation, 1183

6. Obligations with a Penal Clause (1226-30)

E. Extinguishment of Obligations (1231-1304)

1. Payment or Performance
 ACCRA Investments v. CA, G.R. No. 96322, December 30, 1991

2. Application of Payments
 Premiere Development Bank v. Central Surety, G.R. No. 176246, February 13,
2009

3. Payment by Cession
4. Tender of Payment and Consignation
 Del Carmen v. Spouses Sabordo, G.R. No. 181723, August 11, 2014
 Banco Filipino v. Diaz, G.R. No. 153134, June 27, 2006

5. Loss of the Thing Due

 Gaisano Cagayan v. Insurance Company of North America, G.R. No. 147839,
June 8, 2006
 Norkis Distributors v. CA, G.R. No. 91029, February 7, 1991
 PNCC v. CA, G.R. No. 116896, May 5, 1997

6. Condonation or Remission of the Debt

 Dizon v. CTA, G.R. No. 140944, April 30, 2008
 Bognot v. RRI Lending Corporation, G.R. No. 180144, September 24, 2014

7. Confusion or Merger of the Rights

 Agro Conglomerates v. CA, G.R. No. 117660, December 18, 2000

8. Compensation
 CKH Industrial v. CA, G.R. No. 111890, May 7, 1997
 First United v. Bayanihan Automotive, G.R. No. 164985, January 15, 2014

9. Novation and Subrogation

 Transpacific v. Security Bank, G.R. No. 173565, May 8, 2009
 Ligutan v. CA, G.R. No. 138677, February 12, 2002
 PART 2: CONTRACTS

A. GENERAL PROVISIONS
1. Nature, Definition (1305)
 GSIS v. CA, 228 SCRA 183 (1993)
 SM Land Inc. v. BCDA, G.R. No. 203655 (Resolution dated March 18, 2015)
2. Content, Subject Matter
a. Freedom to Stipulate (Freedom of Contract, Principle of Autonomy)
b. Limitation on Stipulation
i. Law
ii. Morals and Good Customs
iii. Public Order or Public Policy

 Cases:
o Rivera v. Solidbank Corp., G.R. No. 163269, April 19, 2006
o Traveno v. BBGMC, G.R. No. 164205, September 3, 2009

3. Principle of Mutuality
4. Principle of Relativity
a. General Rule
b. Exceptions
i. Stipulation in favor of third party
ii. In case of contracts creating real rights
iii. In case of creditors
5. Determination of Validity/Compliance/Performance
6. Perfection
7. Authority to Contract
8. Inducement to Violate

B. ESSENTIAL REQUISITES (1318)

1. Consent, Definition (1319)
a. Requisites
i. Offer (1321, 1323-26)
1. Requisites for a valid offer
2. Acceptance of an offer made through an agent
3. Effectiveness of an offer in case of death, civil interdiction,
insanity or insolvency
4. When validity withdrawn
Option and option contract
Option and the right of first refusal
Option contract and contract of sale
Option and unilateral promise to sell
The consideration for the option
Effect of acceptance
Exercise of the option
ii. Advertisements
 iii. Acceptance (1320, 1322)
1. Requisites for a valid acceptance
2. Manner of acceptance
Express or implied
By letter or telegram
Right of offeror to fix manner of acceptance

b. Vices of Consent (1328, 1330)

i. Mistake (1330-34)
ii. Violence/Intimidation (1330, 1335-36)
iii. Undue influence (1330, 1337)
iv. Fraud/Misrepresentation (1330, 1344)

 CASES:
o Roman Catholic v. Pante, G.R. No. 174118, April 11, 2012 (requisites,
nature of mistake required)
o Spouses Theis v. CA, G.R. No. 126013, February 12, 1997
o Cebu Winland Development Corporation v. Ong Siao Hua, G.R. No.
173215, May 21, 2009
o Domingo Realty v. CA, G.R. No. 126236, January 6, 2007 (no mistake
where there is knowledge)

o Alejandro v. Bernas, G.R. No. 179243, September 7, 2011

o Callanta v. NLRC, G.R. No. 105083, August 20, 1993

o Alcasid v. CA, G.R. No. 104751, October 7, 1994

o Loyola v. CA, G.R. No. 115734, Februart 23, 2000

o Spouses Lequin v. Spouses Vizconde, G.R. No. 177710

o Tankeh v. DBP, G.R. No. 171428, November 11, 2013
o Geraldez v. CA, G.R. No. 108253, February 23, 1994

c. Simulation
i. Types
ii. Effect
 CASES:
o Villaflor v. CA, G.R. No. 95694, October 9, 1997
o The Manila Banking Corporation v. Silverio, G.R. No. 132887, August
11, 2005
o Heirs of Ureta v. Heirs of Ureta, G.R. No. 165748, 165930, September
14, 2011
o Cruz v. Bancom Finance Corp., G.R. No. 147788, March 19, 2002

o Valerio v. Refresca, G.R. No. 163687, March 28, 2006

o Heirs of Spouses Intac v. CA, G.R. No. 173211, October 11, 2012
 2. Object (1347-49)
a. What may be the object of a contract
i. Not outside the commerce of man
 MIAA v. CA, G.R. No. 155650, July 20, 2006
 Quijada v. CA, G.R. No. 126444, December 4, 1998
ii. Future things
 Domingo Realty v. CA, G.R. No. 126236, January 6, 2007
b. What may not be an object of a contract
i. Future inheritance
 Definition: JLT Agro v. Balansag, G.R. No. 141882, March 11,
2005
ii. Impossible things
The impossibility must be actual and contemporaneous with the
making of the contract, and not subsequent thereto. (Tolentino)

3. Cause (1350-55)
a. Kinds
i. Onerous
ii. Remuneratory
iii. Gratuitous
b. Distinguished from motive
i. Invalidity of the motive does not invalidate the cause
ii. When invalidity of the motive invalidates the cause
 Uy v. CA, G.R. No. 120465, September 9, 1999
 PNCC v. CA, G.R. No. 116896
 Heirs of Balite v. Lim, G.R. No. 152168, December 10, 2004
 Olegario v. CA, G.R. No. 104892, November 14, 1994
c. Want of cause (1352)
d. Statement of false cause (1353)
e. Presumed lawful cause (1354)
f. Inadequacy of cause (1355)

C. FORMING THE CONTRACT (1356-1369)

1. Stages of Formation
a. Negotiation
b. Perfection
c. Consummation
2. Forms of Contract
a. General Rule
b. Exceptions
i. Contracts required to be in writing
ii. Contracts required to be in public instrument
3. Reformation of Instruments
a. Nature and basis
b. Effect and purpose
c. When proper
i. In general
 ii. Specific grounds
Mutual Mistake
Mistake by one
Error in drafting
“Severe” pacto de retro
iii. When improper
iv. Who may order
v. Governing law
vi. Prescription of action

D. INTERPRETATION OF CONTRACTS (1370-1379)

E. DEFECTIVE CONTRACTS

1. Rescissible Contracts (1380-1389)

a. Rescission
i. Nature and rationale
ii. Distinguished from Article 1191
iii. Distinguished from termination

b. Kinds
i. Contracts with lesion
ii. Contracts in fraud of creditors
Presumption of fraud
Liability of acquirer
iii. Contracts referring to things under litigation
iv. Contracts subject to rescission by operation of law
v. Payment made when insolvent

c. Limitations on rescission
i. Subsidiary
ii. To extent of damage
d. Effect of Rescission
e. When rescission is improper
f. Prescription of action (1389)

2. Voidable Contracts (1390-1402)

a. Types
i. Incapable of giving consent
ii. Vitiated consent

b. Ratification
i. Effect
ii. Types
iii. By guardians
iv. Conformity not required
 c. Who may institute action for annulment
i. Innocent parties
ii. Prejudiced strangers

d. Effect of annulment
i. Restoration
ii. When restoration not required or possible

e. Prescription or extinguishment of action

3. Unenforceable Contracts
a. Types
i. Unauthorized contracts
ii. Contracts infringing statute of frauds
(a) Application
Executory contracts
Perfected contracts
Actions for specific performance or breach of contract
(b) Requirement
(c) Effect or purpose of requirement
(d) Consequence of non-compliance
(e) Types of transaction
Performance not within a year
Special promise to answer for the debt, default or
miscarriage of another
Contracts made in consideration of marriage, other than
a mutual promise to marry
Contracts for the sale of goods, chattels or things in
action
Contracts of lease for more than one year, or for the sale
of real property or of an interest therein
Representation as to the credit of a third person
(f) Ratification
iii. Contracts where both parties are incapable of giving consent

b. Who may assail

4. Void or Inexistent Contracts

a. Categories
i. Essential requisite contrary to law, morals, good customs, public
order or public policy
ii. Absolutely simulated or fictitious
iii. Cause or object did not exist at the time of the transaction
iv. Object is outside the commerce of men
v. Contemplate an impossible service
vi. Intention of the parties relative to the principal object of the
contract cannot be ascertained
 vii. Expressly prohibited or declared void by law
viii. Contracts directly resulting from illegal contract

b. No Ratification or Waiver
c. When divisible
d. The in pari delicto doctrine
e. Recovery
i. When illegal and a crime
ii. When unlawful/forbidden but not a crime
iii. When validity repudiated
iv. When one party is incapacitated
v. When contract is not illegal per se but merely prohibited
vi. Of usurious interest
vii. Of overprice
viii. When contract violates labor laws
ix. Defense of illegality not available to third persons
x. No prescription

F. QUASI-CONTRACTS (2142-2175)
1. Concept
a. Basis
b. Distinguished from contracts
c. Distinguished from acts pursuant to contract
d. Distinguished from constructive trust

2. Kinds
a. Negotiorum gestio (2144-53)
b. Solutio indebiti (2154-63)

3. Other quasi-contracts
a. Support given by stranger or third person
b. Funeral expenses borne by third person
c. Medical services
d. Saved property
e. Government performs necessary work

4. Other provisions