Professional Documents
Culture Documents
OBLIGATIONS
Table of Contents
OBLIGATIONS
I. Kinds of Prestations ............................93
II. Breach of Obligation............................94
III. Fortuitous Event (Force Majeure) .......96
IV. Remedies to Creditors ........................96
V. Usurious Transactions and Rules on
Interest .........................................................97
OBLIGATIONS
Writers
Article 1156, Civil Code. An obligation is a juridical
CIVIL LAW necessity to give, to do or not to do.
Kristine Bongcaron
Patricia Tobias I. Obligations
Subject Editors
Jill Hernandez
Lawful Distinguished from crimes
Head
Voluntary Distinguished from quasi-delict,
Loraine Mendoza Faye Celso which are based on fault and
Mary Mendoza Joie Bajo negligence
Members
Unilateral Distinguished from contract which is
based on agreement
CIVIL LAW REVIEWER Chapter I. GENERAL PROVISIONS
OBLIGATIONS
(De Leon, 2003) with fault or negligence causing damage to
another; not a crime nor a contract)
D. Delicts (Acts or omissions punished by law;
crimes) Quasi-Delict Crimes
Private, against Public, against the State
Extent of Civil Liability individual
Governed by the Revised Penal Code and the Criminal intent is not Criminal intent is
Civil Code, includes: necessary necessary for criminal
1. Restitution; liability
2. Reparation of damages caused; and Present in any act or An act can is only
3. Indemnity for consequential damages (Art. omission where fault or punishable when there is
104, Revised Penal Code). negligence intervenes a law penalizing it
(Tolentino, 1987)
Gives rise to liability for There are crimes from
Enforcement of Civil Liability damages to the injured which no civil liability
1. Independent: Criminal and civil action party arises
arising from the same offense may be Reparation, Fine or imprisonment or
instituted separately. compensation or both, to public treasury
2. Suspended: However, after criminal action indemnification of the
has been commenced prosecution for civil injury suffered by the
action is suspended in whatever stage it injured party
may be found, until final judgment in the Preponderance of Proof of guilt beyond
criminal proceeding is rendered; evidence reasonable doubt
3. Impliedly Instituted: Civil action is impliedly Can be compromised Can never be
instituted with the criminal action, when: compromised
○ offended party expressly waives the civil
action or reserves the right to institute a Requisites of Liability (DWD)
separate civil action; or 1. Wrongful act or omission by fault or
○ the law provides for an independent civil negligence
action 2. Damage or injury proven by the person
claiming recovery
Barredo v. Garcia, (1942): The same negligent act 3. Direct causal connection between the fault
may give rise to an action based on delict or quasi- or negligence and the damage or injury
delict and the injured party is free to choose which
remedy to enforce. Liability for Quasi- Liability for Crimes
Delict (Art. 2180, NCC) (Art. 103, RPC)
Mendoza vs. Arrieta, (1979): If the civil action is
based on quasi-delict, there is no need to reserve the Primary, can be directly Subsidiary, employee
right to file a civil action in the criminal case. sued by the injured must first be convicted
party and sentenced to pay
civil indemnity
Effect of Acquittal on Civil Actions
All employers, whether Employer is only liable
Barred No Effect engaged in some when he is engaged in
if based on the very an independent civil enterprise or not, are some kind of business
same facts on which action is allowed by law liable for acts of or industry
the criminal action acquittal is due to lack employees, even
which ended in of proof beyond household helpers
acquittal was based reasonable doubt Avoid civil liability by Subsidiary liability is
if the facts alleged in proving exercise of absolute and cannot be
the civil case has been diligence of a good avoided by any proof of
found to be non- father of a family diligence
existent in the criminal
CIVIL LAW REVIEWER Chapter II. NATURE and EFFECT of OBLIGATIONS
OBLIGATIONS
identified by same class as
I. Kinds of Prestations individuality. long as it is of
the same kind.
KINDS OF PRESTATION Cannot be Can be
1. TO GIVE: real obligation; to deliver either substituted. substituted by
(1) a specific or determinate thing, or (2) a any of the same
generic or indeterminate thing. class and same
2. TO DO: positive personal obligation; kind.
includes all kinds of work or services.
3. NOT TO DO: negative personal Personal Right Real Right
obligation; to abstain from doing an act; Vested before delivery Vested after delivery
A right enforceable only A right enforceable
includes the obligation not to give.
against the debtor against the world
Right of the creditor to Right pertaining to a
Accessories: those joined to or included with demand from the debtor, person over a specific
the principal for the latter’s completion, better the fulfillment of a thing, without a passive
use, perfection or enjoyment prestation to give, to do subject individually
or not to do determined against
Accessions: additions to or improvement upon whom such right may be
a thing, either naturally or artificially personally enforced
Not To Not to do what should not be done To ask to undo what should not be done
Do To shoulder the cost of undoing what To recover damages, where it would be
should not have been done physically or legally impossible to undo
To pay for damages in case of breach what has been undone, because of :
o the very nature of the act itself;
o rights acquired by third persons who
acted in good faith;
o when the effects of the acts prohibited
are definite in character and will not 94
cease even if the thing prohibited be
OBLIGATIONS
undone.
OBLIGATIONS
Effects Effects
Culpa Contractual Culpa Aquiliana Asked 1. The debtor is liable 1. The responsibility of
in ’83, ’84, and ’86) for damages the debtor is
Negligence is merely Negligence is substantive 2. The debtor is liable reduced to fraud
incidental in the and independent even if the loss is due and gross
performance of an to fortuitous events negligence
obligation 3. For determinate 2. The debtor is
objects, the debtor exempted from risk
There is always a pre- There may or may not be
shall bear the risk of of loss of the thing
existing contractual a pre-existing contractual
loss which is borne by
relation obligation
the creditor
The source of obligation The source of obligation
3. The expenses
of defendant to pay is the defendant’s
incurred by the
damages is the breach or negligence itself
debtor for the
non-fulfillment of the
preservation of the
contract
thing after the mora
Proof of the existence of The negligence of the shall be chargeable
the contract and of its defendant must be to the creditor
breach or non-fulfillment proved 4. If the obligation
is sufficient prima facie to bears interest, the
warrant recovery debtor does not
Proof of diligence in the Proof of diligence in the have to pay from
selection and supervision selection and supervision the time of delay
of the employees is NOT of the employee is a 5. The creditor is liable
available as defense defense for damages
6. The debtor may
Culpa Criminal: wrong or negligence in relieve himself of
the commission of a crime obligation by
consigning the thing
OBLIGATIONS
III. Fortuitous Event (Force Majeure)
IV. Remedies to Creditors
Any event which could not be foreseen, or which
though foreseen are inevitable (Art. 1174) Art. 1170, Civil Code. Those who in the performance
of their obligations are guilty of fraud, negligence, or
A happening independent of the will of the delay and those who in any manner contravene the
debtor and which makes the normal fulfillment of tenor thereof, are liable for damages.
the obligation impossible (De Leon, 2003).
Transmissibility of Rights
A. Act of God: an accident, due directly or Art. 1178: Rights acquired by virtue of an
exclusively to natural causes without human obligation are transmissible in character,
intervention, which by no amount of UNLESS prohibited:
foresight, pains or care, reasonably to have 1. by their very nature (i.e. personal
been expected, cold have been prevented. obligations)
B. Act of Man: force majeure is a superior or 2. by stipulation of the parties
irresistible force, which is essentially an act 3. by operation of law
of man; Includes unavoidable accidents, (De Leon, 2003)
even if there has been an intervention of
human element, provided that no fault or Primary Remedies
negligence can be imputed to the debtor Arts. 1165-1168: PRESS
(Asked in ’81, ’87 and ’88) 1. Specific Performance – performance
by the debtor of the prestation itself
Liability in case of Fortuitous Event 2. Substituted Performance – someone
No person shall be responsible for fortuitous else performs or something else is
events, UNLESS: performed at the debtor’s expense
1. expressly specified by law (Arts. 552(2), 3. Equivalent Performance – right to
1942, 2147, 2148, 2159) claim damages (in either performance or
2. liability specified by stipulation rescission)
3. the nature of the obligations requires 4. Rescission – right to rescind or cancel
assumption of risk (Art. 1174) the contract
4. when debtor is guilty of concurrent or 5. Pursue the Leviable – to attach the
contributory negligence properties of the debtor, except those
5. debtor has promised to deliver the same exempt by law from execution
thing to two or more persons who do not
have the same interests (Art. 1165 par. 3) Subsidiary Remedies of Creditor
6. the thing is lost due to the obligor’s fraud,
negligence, delay or contravention of the General Rule: Contracts are binding only
tenor of the obligation (Art. 1170) between the parties thereto, and their heirs,
7. the obligation to deliver a specific thing assignees, and the estate, UNLESS: Accion
arises from a crime (Art. 1268) Subrogatoria and Accion Pauliana
8. the object is a generic thing, i.e. the genus 1. Accion Subrogatoria: right of creditor to
never perishes exercise all of the rights and bring all of the
actions which his debtor may have against
Requisites for Exemption third persons; Novation by change of debtor
1. The event must be independent of the (Art. 1291, par.3).
debtor’s will (fraud or negligence)
CIVIL LAW REVIEWER Chapter II. NATURE and EFFECT of OBLIGATIONS
Requisites
a. Debtor to whom the right of action Siguan v. Lim, (1999): Petitioner cannot invoke the
properly pertains must be indebted to credit of a different creditor to justify the rescission of
the creditor the subject deed of donation, because the only
b. The debt is due and demandable creditor who may benefit from the rescission is the
creditor who brought the action; those who are
c. The creditor must be prejudiced by the
strangers to the action cannot benefit from its effects.
failure of the debtor to collect his own
rd
debt from 3 persons either through
malice or negligence
V. Usurious Transactions and Rules on
97
d. The debtor’s assets are insufficient
OBLIGATIONS
(debtor is insolvent) Interest
e. The right of action is not purely personal
to the debtor USURY: stipulation of interest rates higher than
the ceiling provided by law.
2. Accion Pauliana: Rescission, which
involves the right of the creditor to attack or Note: Usury Law (Act No. 2655, as amended)
impugn by means of a rescissory action any was repealed by Central Bank Circular No. 905,
act of the debtor which is in fraud and to the Dec. 10, 1982.
prejudice of his rights as creditor.
INTEREST
Requisites: CASAL
a. There is a credit in favor of plaintiff Art. 1176, Civil Code. Receipt of the principal without
prior to alienation reservation as to the interest shall give rise to a
b. The debtor has performed a disputable presumption that the interest has been
subsequent contract conveying a paid. Receipt of the latter installment without
patrimonial benefit to third persons reservation as to prior installments shall likewise give
rise to a disputable presumption that such prior
c. The creditor has no other legal remedy
installments have been paid.
to satisfy his claim
d. The debtor’s acts are fraudulent to the
Determination of Interests
prejudice of the creditor
Eastern Shipping Lines v. CA (1961)
e. The third person who received the
property is an accomplice in the fraud
Stage 1
For loan or forbearance NOT for loan or
Accion Subrogatoria Accion Pauliana of money, goods or forbearance of money,
Not necessary that Credit must exist before credit, the interest rate goods or credit, the
creditor’s claim is prior to the fraudulent act is 12% interest rate is 6%
the acquisition of the right
by the debtor a) Interest = interest a) If date of demand is
No need for fraudulent Fraudulent intent is rate stipulated in certain, compute from
intent required if the contract writing + 12% legal the date when demand
rescinded is onerous interest, computed is made (judicial or
No period for prescription Prescribes in 4 years from date of judicial extra-judicial)
from the discovery of the demand (filing of
fraud complaint)
b) If there is no b) If date of demand is
stipulated interest rate, NOT certain, compute
3. Accion Directa (Art. 1729, 1652, 1608, the interest rate is 12% from the date of trial
1893): the right of lessor to go directly to a computed from date of court decision (judicial
sublessee for unpaid rents of the lessee default or demand demand)
(judicial or extra-
4. The right of laborers or persons who furnish judicial)
materials for a piece of work undertaken by Stage 2
a contractor to go directly to the owner for Add 12% interest from finality of SC decision until
any unpaid claim due to the contractor fully paid (equivalent to a forbearance of credit)
OBLIGATIONS
Principle of Retroactivity in
I. Pure and Conditional Obligations Suspensive Conditions
Art.1187, par.1: once the condition is
(Asked in ’79, ’88, ’00, ’03) fulfilled its effects must logically retroact
to the moment when the essential
Pure Obligation (Art.1179): Effectivity or elements, which gave birth to the
extinguishment does not depend upon the obligation have taken place. The
fulfillment or non-fulfillment of a condition or condition which is imposed is only
upon the expiration of a term or period and accidental, not an essential element of
characterized by the quality of its being the obligation.
IMMEDIATELY DEMANDABLE. Applied only to consensual
contracts. No application to real
Conditional Obligation (Art.1181): Effectivity is contracts which can only be
subject to the fulfillment or non-fulfillment of a perfected by delivery.
condition, which is characterized to be a
FUTURE and UNCERTAIN event. To Give To Do/Not To Do
If reciprocal, the fruits In obligations to do or not
Effects of Conditions and interests shall be to do, the court shall
1. Suspensive Condition: Obligation shall deemed to have been determine the retroactive
only be effective upon the fulfillment of the mutually compensated effect of the condition
condition (Art.1181). What is acquired by the as a matter of justice and that has been complied
obligee upon the constitution of the convenience with.
obligation is mere hope or expectancy, but is (Art. 1187, par. 1) (Art. 1187, par. 2)
If unilateral, the debtor The power of the court
protected by law.
shall appropriate the includes the
fruits and interests determination whether or
Before Fulfillment After Fulfillment received, unless from the not there will be any
The demandability and The obligation arises or nature and circumstance retroactive effects. This
acquisition or effectivity becomes effective. it should be inferred that rule shall likewise apply
of the rights arising from The obligor can be the intention of the in obligations with a
the obligation is compelled to comply with persons constituting the resolutory condition (Art.
suspended. Anything what is incumbent upon same was different. 1190 par. 3)
paid by mistake during him.
such time may be
recovered.
Preservation of Creditor’s Rights
Art.1188, par.1: The creditor may,
Doctrine of Constructive Fulfillment before the fulfillment of the condition,
of Suspensive Conditions bring the appropriate action for the
Art. 1186: the condition shall be deemed preservation of his rights. However, this
fulfilled when the obligor actually does not grant any preference of credit
prevented the obligee from complying but only allows the bringing of the proper
with the condition, and that such action for the preservation of the
prevention must have been voluntary or creditor’s rights.
willful in character.
Applicable to suspensive conditions 2. Resolutory Condition: Obligation becomes
and not to resolutory conditions. demandable immediately after its
The article can have no application establishment or constitution. The rights are
to an external contingency which is immediately vested to the creditor, but
lawfully within the control of the always subject to the threat or danger of
obligor. extinction by the happening of the resolutory
condition (Tolentino, 1987).
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
OBLIGATIONS
However, when condition shall annul the obligations which depend
is not fulfilled, rights are
consolidated and they
upon them (Art. 1183).
become absolute in If pre-existing obligation, only the
character impossible condition is void, but not the
obligation.
3. Potestative Condition If divisible obligation, that part which is
not affected by the impossible or
Exclusively Exclusively Exclusively unlawful condition shall be valid.
upon the upon the upon the If the condition is not to do an
Creditor’s Will Debtor’s Will Debtor’s Will impossible thing, it shall be considered
in case of a in case of a as not having been agreed upon (Art
Suspensive Resolutory 1183, par. 2). Consequently, it becomes
Condition Condition pure and immediately demandable.
(Art. 1182) (Art. 1179, par
If attached to a simple or remuneratory
2)
donation (Art. 727), or testamentary
Condition and Condition and Condition and
obligation is obligation are obligation is disposition (Art. 873), condition is
valid void because to valid because in considered as not imposed while the
allow such such situation, obligation is valid.
condition would the position of
be equivalent to the debtor is 7. Positive Condition: Obligation shall be
sanctioning exactly the extinguished as soon as the time expires or
obligations same as the if it becomes indubitable that the event will
which are position of the not take place (Art.1184)
illusory. It also creditor when
constitutes a the condition is
direct suspensive. It 8. Negative Condition: Obligation shall be
contravention of does not render rendered effective from the moment the time
the principle of the obligation indicated has lapsed, or if it has become
mutuality of illusory. evident that the event will not occur
contracts. (Art.1185)
When no period has been fixed, the
4. Casual Condition: The fulfillment of the intention of the parties is controlling,
condition depends upon chance and/or upon and the time shall be that which the
the will of a third person (Art. 1182) parties may have contemplated, taking
into account the nature of the obligation
5. Mixed Condition: The fulfillment of the (Art 1185, par. 2).
condition depends partly upon the will of a
party to the obligation and partly upon
chance and/or will of a third person Effects of Loss, Deterioration, and
Improvement in Real Obligations Pending the
Osmena v. Rama: Defendant executed an Condition (Art. 1189)
endorsement saying that she’ll pay her debt if the
house in which she lives is sold. Such condition Without With Debtor’s
depended upon her exclusive will thus it is void. Debtor’s Fault/Act
Fault/Act
Hermosa v. Longara: The condition that payment Loss Obligation is Obligation is
should be made by Hermosa as soon as he receives extinguished converted into
funds from the sale of his property in Spain is a mixed one of
condition. The condition implies that the obligor indemnity for
already decided to sell the house and all that was damages
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
Deterioration Impairment to be Creditor may shouldered by the first infractor. This shall
borne by the choose be determined by the courts. However, if it
creditor between cannot be determined who was the first
bringing an infractor, the contract shall be deemed
action for
extinguished and each shall bear his own
rescission of
the obligation damages (Art.1192).
OR bringing an
action for UP v. Delos Angeles (1970): The injured party may
specific extra-judicially rescind the contract on account of the 100
performance breach of the other party. However, this is without
OBLIGATIONS
with damages prejudice to the option of the other party to resort to
in either case. the courts in order to determine if the rescission made
is valid, if not, the party who rescinded the contract
Improvement Improvement at Improvement will be sentenced to pay damages.
the debtor’s by the thing’s
expense, the nature or by Where the other party does not oppose the
debtor shall time shall inure extra-judicial declaration of rescission, such
ONLY have to the benefit of declaration shall produce legal effect.
usufructuary the creditor Effect is retroactive therefore invalidating
rights and unmaking the juridical tie between the
contracting parties, leaving things in their
Loss, defined: when the thing perishes; goes status before the celebration of the contract.
out of commerce; disappears in such a way that
its existence is unknown or it cannot be
recovered
III. Obligations with a Period
II. Reciprocal Obligations Period or Term (Asked in ’84, ’86 and ’91):
Interval of time, which either suspends
demandability or produces extinguishment.
Obligations which are established from same The period must be: future, certain, and possible
cause, such that one obligation is correlative to (Tolentino, 1987).
the other. It results in mutual relationship
between the creditor and the debtor. It is Fortuitous event does not interrupt the
performed simultaneously, so that the running of the period. It only relieves the
performance of one is conditioned upon the contracting parties from the fulfillment of
simultaneous fulfillment of the other. their respective obligations during the
period.
Tacit Resolutory Condition: if one of the Kinds of Period (Art. 1193):
parties fail to comply with what is incumbent 1. Ex die - period with a suspensive effect.
upon him, there is a right on the part of the other Obligation becomes demandable after
to rescind the obligation. The power to rescind is the lapse of the period.
given to the injured party (Tolentino, 1987). 2. In diem - period with a resolutory effect.
Obligation is demandable at once but is
Rescission of Reciprocal Obligations (Art. extinguished upon the lapse of the
1191, CC) period.
Right to rescind is implied in reciprocal
obligations thus where one party fails to Art. 1180, Civil Code. When the debtor binds himself
comply with this obligation under a contact, to pay when his means permit him to do so, the
the other party has the right to either obligation shall be deemed to be one with a period,
demand the performance or ask for the subject to the provisions of Article 1197.
resolution of the contract.
Based on the breach of faith committed by Term/Period and Condition Distinguished
the person who is supposed to comply with
the obligation as compared to the rescission Term/Period Condition
referred to in Art. 1308 which involves the Interval of time which is Fact or event which is
damage or lesion, or injury to the economic future and certain future and uncertain
interest of a person.
Must necessarily come, May or may not happen
Where both parties have committed a although it may not be
breach of obligation, the liability will be known when
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
Exerts an influence upon Exerts an influence upon Art. 1197 does not apply to contract of
the time of demandability the very existence of the services and to pure obligations.
or extinguishment of an obligation itself The court, however, to prevent
obligation unreasonable interpretations of the
No retroactive effect Has retroactive effect immediate demandability of pure obligations,
unless there is an
agreement to the contrary
may fix a reasonable time in which the
When it is left exclusively When it is left exclusively debtor may pay.
to the will of the debtor, to the will of the debtor, (Tolentino, 1987)
the existence of the the very existence of the 101
obligation is not affected obligation is affected When Debtor Loses Right to Use Period
OBLIGATIONS
Art.1198: I GIV A LA
Benefit of the Period 1. Debtor becomes Insolvent, unless he gives
Presumption: Period in an obligation is a guaranty or security for his debt, after
presumed to be established for the benefit of obligation is contracted
both the creditor and debtor, UNLESS: If from 2. Debtor fails to furnish the Guaranties or
the tenor of the obligation or other securities promised
circumstances, it shall appear that the period 3. Debtor by his own acts Impaired said
has been established in favor of either the guaranties or securities after their
creditor or debtor (Art. 1196). establishment, and when through a
fortuitous event they disappear, unless he
Period for the Benefit of either Creditor or immediately gives new one equally
Debtor satisfactory
4. Debtor Violates any undertaking, in
Creditor Debtor consideration of which the creditor agreed to
Creditor may demand Debtor may oppose any the period
the fulfillment or premature demand on 5. Debtor attempts to Abscond
performance of the the part of the oblige for 6. By Law or stipulation
obligation at any time the performance of the 7. Parties stipulate an Acceleration Clause
but the obligor cannot obligation, of if he so
compel him to accept desires, he may
payment before the renounce the benefit of In the cases provided, the obligation becomes
expiration of the period the period by performing immediately due and demandable even if the
his obligation in advance period has not yet expired. The obligation is thus
converted into a pure obligation (Tolentino,
1987).
When court may fix period
Art. 1197: as general rule, the court is not
authorized to fix a period for the parties (De IV. Alternative and Facultative
Leon, 2003). Obligations
Araneta v. Phil. Sugar Estates, provides:
Alternative Obligations Facultative Obligations
First, the Court shall determine:
If the obligation does not fix a period, but from Several objects are due Only one object is due
its nature and circumstances, it can be inferred May be complied with by May be complied with by
that a period was intended delivery of one of the the delivery of another
If the period is void, such as when it depends objects or by performance object or by the
upon the will of the debtor of one of the prestations performance of another
If the debtor binds himself when his means which are alternatively prestation in substitution
permit him to do so. due of that which is due
Second, it must decide what period was “probably Choice may pertain to Choice pertains only to
contemplated by the parties”. debtor, creditor, or third the debtor
person
The only action that can be maintained
Loss/impossibility of all Loss/impossibility of the
under Art. 1197 is the action to ask the objects/prestations due to object/prestation due to
courts to fix the term within which the debtor fortuitous event shall fortuitous event is
must comply with his obligation. The extinguish the obligation. sufficient to extinguish
fulfillment of the obligation itself cannot be The loss/impossibility of the obligation
demanded until after the court has fixed the one of the things does not
period for compliance, therewith, and such extinguish the obligation.
period has arrived. Culpable loss of any of Culpable loss of the
the objects alternatively object which the debtor
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
OBLIGATIONS
service which
Right of Choice become impossible
Some Debtor to deliver Debtor to deliver
Art. 1200: to the debtor, UNLESS:
that which he that which the
1. when it is expressly granted to the shall choose creditor shall
creditor from among the choose from among
2. when it is expressly granted to a third remainder the remainder
person without damages
One Debtor to deliver Debtor to deliver
Limitations to the right of choice Remains that which that which remains
1. impossible prestations remains
2. unlawful prestations
3. those which could not have been the Art. 1205: Creditor’s Choice
object of the obligation Fortuitous Debtor’s Fault
4. only one prestation practicable (Art. Event
1202) All Lost Debtor is Creditor may claim
released from the the price/value of
(De Leon, 2003)
obligation any of them with
indemnity for
When choice shall produce effect damages
Art. 1201: Choice shall produce no effect except Some Debtor to deliver creditor may claim
from the time it has been communicated. The that which he any of those
effect of the notice is to limit the obligation of the shall choose subsisting without a
object or prestation selected. Notice of selection from among the right to damages
or choice may be in any form provided it is remainder OR price/value of
sufficient to make the other party know that the the thing lost with
right to damages
selection has been made. It can be:
One Creditor may Creditor may claim
o oral Remains claim any of the remaining thing
o in writing those subsisting without a right to
o tacit without a right to damages OR the
o any other equivocal means damages OR price/value of the
Choice of the debtor when communicated to price/value of the thing lost with right
the creditor does not require the latter’s thing lost with to damages
concurrence. right to damages
When the choice is rendered impossible
through the creditor’s fault, the debtor may
bring an action to rescind the contract with B. Facultative Obligation
damages (Art.1203).
Obligation is converted into a simple Only one prestation has been agreed upon but
obligation when: the debtor may render another in substitution
o When the person who has the right of (De Leon, 2003)
choice has communicated his choice
(Art. 1201) Effect of Loss of Substitute
o When only one prestation is practicable
(Art. 1202) Before Substitution is After Substitution is
Made Made
If due to bad faith or The loss or
fraud of obligor: obligor deterioration of the
is liable substitute on account
of the obligor’s delay,
negligence or fraud
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
OBLIGATIONS
debit
OBLIGATIONS
others, with the right on the part of the
Indivisibility Solidarity debtor-payor to recover from the others their
Refers to the prestation Refers to the legal tie or respective shares.
which constitutes the vinculum, and Creation of a relationship of mutual
object of the obligation consequently to the guaranty among co-debtors
subjects or parties of The total remission of the debt in favor
the obligation
of a debtor releases all the debtors
Plurality of subjects is not Plurality of subjects is
required indispensable All the debtors are liable for the loss of
In case of breach, When there is liability the thing due, even if such loss is
obligation is converted into on the part of the caused by the fault of only one of them
indemnity for damages debtors because of the and for delay, even if it is caused by just
because the indivisibility of breach, the solidarity one of them
the obligation is terminated among the debtors The interruption of prescription as to
remains one debtor affects all the others; but the
renunciation by one debtor of
The indivisibility of an obligation does not prescription already had does not
necessarily give rise to solidarity. Nor does prejudice the others
solidarity itself imply indivisibility. (Art. 1211) 3. Mixed: Solidarity among creditors and
debtors
Kinds of Solidary Obligations Solidarity is not destroyed by the fact
1. Active (solidarity among creditors): Each that the obligation of each debtor is
creditor has the authority to claim and subject to different conditions or periods.
enforce the rights of all, with the resulting The creditor can commence an action
obligation of paying everyone of what against anyone of the debtors for the
belongs to him. compliance with the entire obligation
Creation of a relationship of mutual minus the portion or share which
agency among co-creditors. corresponds to the debtor affected by
the condition or period.
____________________________________________________________________________________
Assignment of Loss or
Compensation &
Rights in Solidary Novation Remission Impossibility
Confusion
Obligations
The solidary If prejudicial, the If it is partial, the If entire If not debtors’
creditor cannot solidary creditor rules regarding obligation, fault, the
assign his right who effected the application of obligation is totally obligation is
because it is novation shall payment shall extinguished. extinguished
predicated upon reimburse the apply (w/o) If for the benefit If thru debtors’
mutual others for prejudice to the of one of the OR fortuitous
confidence, damages incurred right of other debtors covering event after delay,
UNLESS, the (1) by them; creditors who his entire share, the obligation is
the assignment is If beneficial and have not caused he is completely converted into
to a co-creditor; secured by one, the confusion or released from the indemnity for
(2) assignment is he shall be liable compensation to creditor/s. damages but the
with consent of to the others for be reimbursed to If for the benefit solidary character
co-creditor the share the extent that of one of the of the obligation
(obligation & their rights are debtors and it remains.
benefits) which diminished or covers only part
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
OBLIGATIONS
If by subrogating
a third person in
creditor’s rights,
the obligation is
not in reality
extinguished as
the relation
between the other
creditors and the
debtor/s is
maintained.
Effects of Prejudicial and Beneficial Acts The creditor may proceed If two or more solidary
(Art.1212) against any one of the debtors offer to pay, the
solidary debtors or all creditor may choose
1. Each one of the solidary creditors may do simultaneously (Art. which offer to accept.
whatever may be useful or beneficial to the 1216) (Art. 1217)
others, but not anything which may be A creditor’s right to The solidary debtor who
prejudicial to the latter. proceed against the made the payment shall
2. As far as the debtors are concerned, a surety exists have the right to claim
prejudicial act performed by a solidary independently of his right from his co-debtors the
creditor is binding. to proceed against the share which corresponds
3. As between the solidary creditors, the principal to them with interest,
UNLESS barred by
creditor who performed such act shall incur prescription or illegality.
the obligation of indemnifying the others for (Art. 1218)
damages.
When a solidary debtor pays the entire
Defenses Available to a Solidary Debtor (Art. obligation, the resulting obligation of the co-
1222) debtors to reimburse him becomes joint.
1. Those derived from the nature of the If payment was made before the debt
obligation became due, no interest during the
2. Those personal to him intervening period may be demanded. (Art.
3. Those pertaining to his own share 1217 par. 2)
4. Those personally belonging to other co- When one of the solidary debtors cannot
debtors but only as regards that part of the reimburse his share to the debtor paying the
debt for which the latter are responsible. obligation due to insolvency, such share
shall be borne by all his co-debtors, in
Effects proportion to the debt of each. (Art. 1217,
par. 2)
Demand Upon a Payment by a Debtor
Solidary Debtor
Inchausti v. Yulo, (1914): Debtors obligated
The demand made Full payment made by
themselves solidarily, so creditor can bring its action
against one of them shall one of the solidary
against any of them. Remission of any part o fthe
not be an obstacle to debtors extinguishes the
debt, made by the creditor in favor of one of the
those which may obligation. (Art. 1217)
solidary debtors, inures to the benefit of the rest of
subsequently be directed
them.
against the others so
long as the debt has not
been fully collected. (Art.
1216)
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
VI. Divisible and Indivisible Obligations If the principal obligation is void, penal
clause shall also be void. However, the
nullity of the penal clause does not carry
A. Divisible Obligations
with it the nullity of the principal
obligation (Art.1230).
One which is susceptible of partial performance;
that is, the debtor can legally perform the
Purposes of Penalty
obligation by parts and the creditor cannot 1. Funcion coercitiva de garantia - to insure the
demand a single performance of the entire
obligation (Tolentino, 1987). 2.
performance of the obligation.
Funcion liquidatoria - to liquidate the amount of
106
OBLIGATIONS
damages to be awarded to the injured party in
B. Indivisible Obligations case of breach of the principal obligation
(compensatory).
One which cannot be validly performed in parts 3. Function estrictamente penal - to punish the
(Tolentino, 1987). obligor in case of breach of the principal
Divisibility/indivisibility refers to the obligation (punitive).
performance of the prestation and not to the
thing which is the object thereof. The thing Effects of Penalty
may be divisible, yet the obligation may be 1. The penalty shall substitute the indemnity for
indivisible. damages and payment of interest in case of
When the obligation has for its object the non-compliance (Art. 1226), UNLESS:
a. There is a stipulation to the contrary
execution of a certain number of days of b. The obligor refuses to pay the penalty
work, the accomplishment of work by c. The obligor is guilty of fraud
metrical units, or analogous things which by 2. Debtor cannot exempt himself from the
their nature are susceptible of partial performance of the principal obligation by
performance, it shall be divisible (Art.1225, paying the stipulated penalty unless this
par. 2). right has been expressly reserved for him
When there is plurality of debtors and (Art. 1227).
creditors, the effect of divisibility/indivisibility 3. Creditor cannot demand the fulfillment of the
of the obligation depend upon whether the principal obligation and demanding the
obligation is joint or solidary. satisfaction of the penalty at the same time
A joint indivisible obligation give rise to unless the right has been clearly granted to
indemnity for damages from the time anyone him (Art. 1227). Tacit or implied grant is
of the debtors does not comply with is admissible.
undertaking. a. If creditor has chosen fulfillment of the
(Art. 1224) principal obligation and performance thereof
become impossible without his fault, he may
Effect still demand the satisfaction of the penalty.
Creditor cannot be compelled partially to receive b. If there was fault on the part of the debtor,
the prestation in which the obligation consists; creditor may demand not only satisfaction of
neither may the debtor be required to make the penalty but also the payment of damages.
c. If creditor chooses to demand the
partial payment (Art. 1248), UNLESS:
satisfaction of the penalty, he cannot
The obligation expressly stipulates the afterwards demand the fulfillment of the
contrary obligation.
The different prestations constituting the
objects of the obligation are subject to Proof of Actual Damage
different terms and conditions Art. 1228: Proof of actual damages is not
The obligation is in part liquidated and in part necessary is applicable only to the general rule
unliquidated stated in Art. 1226 and not to the exceptions.
The penalty is exactly identical with what is
known as “liquidated damages” in Art. 2226.
VII. Oblligations with a Penal Clause
When Penalty may be Reduced
Penal Clause: An accessory undertaking to Art. 1229:
assume greater liability in case of breach (De 1. If the principal obligation has been partly
Leon, 2003). It is attached to an obligation in complied with.
order to ensure performance. The enforcement 2. If the principal obligation has been irregularly
of the penalty can be demanded by the creditor complied with.
only when the non-performance is due to the 3. If the penalty is iniquitous or unsconscionable
fault or fraud of the debtor. even if there has been no performance.
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
OBLIGATIONS
VI. NOVATION
Delivery and transmission of ownership of a
thing by the debtor to the creditor as an
accepted equivalent of the performance of the
I. Payment or Performance obligation (dacion en pago).
Art. 1232, Civil Code. Payment means not only Dation in payment Payment by cession
delivery of money but also performance, in any
manner, of the obligation. In favor of only one There are various
creditor creditors
See Diagrams of Prof. Labitag at the end Payment extinguishes the Extinguishes credits
obligation to the extent of only up to the extent of
section of Obligations.
the value of the thing proceeds from sale of
delivered, unless the assigned property,
SPECIAL FORMS OF PAYMENT parties agree that the unless otherwise
obligation be totally agreed upon
A. Application of Payment (Art. 1252) extinguished
Transfer of ownership of Only possession and
Designation of the debt to which should be thing alienated to creditor administration with
applied a payment made by a debtor who owes authorization to convert
several debts to the same creditor property to cash with
which the debts shall
be paid
Rules on Application— Not necessarily in state of Assignment
1. Preferential right of debtor - debtor has the financial difficulty presupposes
right to select which of his debts he is insolvency of debtor.
paying. Assignment of only some Assignment involves all
2. The debtor makes the designation at the specific thing the property of the
time he makes the payment debtor.
3. If not, the creditor makes the application, by
so stating in the receipt that he issues, D. Tender of payment and consignation
unless there is cause for invalidating the
contract. 1. Tender of payment: Manifestation made by
4. If neither the creditor nor debtor exercises debtor to creditor of his desire to comply
the right to apply, or if the application is not with his obligation, with offer of immediate
valid, the application is made by operation of performance
law. Preparatory act to consignation
5. If debt produces interest - payment not Extrajudicial in character
deemed applied to the principal unless
interests are covered. 2. Consignation: Deposit of the object of
6. When no application can be inferred from obligation in a competent court in
the circumstances of payment, it is applied accordance to the rules prescribed by law,
to: to the most onerous debt of the debtor; or whenever the creditor unjustly refuses
if debts due are of the same nature and payment or because of some circumstances
burden, to all the debts in proportion which render direct payment to the creditor
7. Rules of application of payment may not be impossible or inadvisable.
invoked by a surety or solidary guarantor. Principal act which constitutes a form of
payment.
Reparations Commission vs. Universal Deep Sea Judicial in character.
Fishing Corp. (1978): Rules on application of payment
cannot be made applicable to a person whose
obligation as a mere surety is both contingent and
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
When Tender and Refusal Not Required (Art. 2. After approval of the court or acceptance by
1259)— the creditor, with the consent of the latter -
1. Creditor is absent or unknown, or does not Obligation remains in force, but guarantors
appear at the place of payment and co-debtors are liberated. Preference of
2. Creditor is incapacitated to receive the thing the creditor over the thing is lost.
due at time of payment 3. After approval of the court or acceptance by
3. Without just cause, creditor refuses to give the creditor, and without creditor’s consent -
receipt Obligation subsists, without change in the
4. Two or more persons claim the same right to liability of guarantors and co-debtors, or the 108
collect creditor’s right of preference.
OBLIGATIONS
5. Title of the obligation has been lost
Art. 1259, Civil Code. Expenses of consignation,
Effects of Withdrawal by Debtor when properly made, shall be charged against the
Arts. 1260- 1261 creditor.
1. Before approval of the court - Obligation
remains in force.
Application of
Cession Dation Tender and Consignation
Payment
Requisites Requisites Requisites Requisites
1. Plurality of 1. Plurality of debts 1. Should not be 1. There is a debt due
debts 2. Plurality of prejudicial to 2. consignation is made because
2. Debts are of creditors other creditors of some legal cause
the same kind 3. Partial insolvency 2. Should not 3. previous notice of consignation
3. Debts are owed of the debtor constitute a was given to those persons
to the same 4. Abandonment of pactum interested in the performance
creditor and by the totality of the commissorium of the obligation
the same debtor’s 4. amount or thing due was
debtor properties for the placed at the disposal of the
4. All debts must benefit of the court
be due creditors 5. after the consignation has been
5. Payment made 5. Acceptance by made, the persons interested
is not sufficient the creditors were notified thereof
to cover all
debts
Effects Effects Effects Effects
Payment of debt Assignment liberates Extinguishment of If accepted by the creditor or
designated as to debtor up to the debt from as an declared properly made by the
corresponding amount of the net equivalent of the Court:
amount proceeds of the sale performance of the 1. Debtor is released in same
of his assets obligation manner as if he had performed
Assignment does not the obligation at the time of
vets title to the consignation
property in the 2. Accrual of interest is
creditors, suspended from the moment of
who are only consignation.
authorized to sell it. 3. Deterioration or loss of the
thing or amount consigned,
occurring without the fault of
debtor, must be borne by
creditor from the moment of
deposit
4. Any increment or increase in
the value of the thing after
consignation inures to the
benefit of the creditor
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
OBLIGATIONS
debtor must indemnify the creditor for damages.
Effects of Loss
B. Impossibility of Performance (Arts. 1266-
Obligation to Deliver a Obligation to Deliver a
1267, CC)
Specific Thing Generic Thing
Extinguishment of the Loss of a generic thing
obligation if the thing was does not extinguish an When prestation becomes legally or physically
destroyed w/o fault of the obligation, UNLESS, impossible (by fortuitous event or force
debtor and before he has Delimited generic majeure), the debtor is released.Impossibility
incurred delay. things: kind or class is must have occurred without fault of debtor, and
limited itself, and the after the obligation has been constituted.
whole class perishes
PARTIAL IMPOSSIBILITY
rd 1. Courts shall determine whether it is so
Action against 3 persons - creditor shall have important as to extinguish the obligation.
all the rights of action the debtor may have 2. If debtor has performed part of the obligation
rd
against 3 persons by reason of the loss. when impossibility occurred, creditor must
pay the part done as long as he benefits
Presumption: The loss was due to the debtor’s from it.
fault, UNLESS: 3. If debtor received full payment from creditor,
1. Law provides that the debtor shall be liable he must return excess amount
even if the loss is due to fortuitous events corresponding to part which was impossible
(Arts. 1942, 1979, 2147, 2159) to perform.
2. Obligor is made liable by express stipulation
3. Nature of the obligation requires an Doctrine of Unforeseen Events
assumption of risk When the service has become so difficult as to
4. Fault or negligence concurs with the be manifestly beyond the contemplation of all
fortuitous event the parties, the obligor may be released in whole
5. Loss occurs after delay or in part (De Leon, 2003).
6. Debtor has promised to deliver the same
thing to two or more different parties Requisites:
7. Obligation arises from a criminal act 1. Event could not have been foreseen at the
8. Borrower in commodatum: saves his own time of the constitution of the contract.
things and not the thing of the creditor 2. Event makes performance extremely difficult
during a fortuitous event but not impossible.
3. Event not due to any act of the parties.
In Reciprocal Obligations 4. Contract is for future prestation.
Extinguishment of the obligation due to loss of
the thing or impossibility of performance affects
both the creditor and debtor; the entire juridical
relation is extinguished.
III. Condonation or Remission of the
Debt
Partial loss
Art. 1264: Partial loss due to a fortuitous event CONDONATION: An act of liberality, by virtue of
does not extinguish the obligation; thing due which, without receiving any equivalent, creditor
shall be delivered in its present condition, renounces the enforcement of the obligation.
without any liability on the part of the debtor, The obligation is extinguished either in whole or
UNLESS, the obligation is extinguished when in such part of the same which to remission
the part lost was of such extent as to make the refers.
thing useless.
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
Requisites Effects
1. Debt must be existing and demandable Arts. 1275- 1277:
2. Renunciation must be gratuitous; without 1. The obligation is extinguished from the time
any consideration the characters of the debtor and creditor are
3. Debtor must accept the remission merged in the same person.
2. In joint obligations, confusion does not
Effect extinguish the obligation except as regards
Art. 1273: Renunciation of the principal debt the corresponding share of the creditor or
shall extinguish the accessory obligations, but debtor in whom the two characters concur. 110
remission of the latter leaves the principal 3. In solidary obligations, confusion in one of
OBLIGATIONS
obligation in force. the solidary debtors extinguishes the entire
obligation.
Presumptions 4. Obligation is not extinguished when
Arts. 1271, 1272, 1274: confusion takes place in the person of
Whenever the private document in which the subsidiary debtor (e.g. guarantor), but
debt is found in the possession of the merger in the person of the principal debtor
debtor, it shall be presumed that the creditor shall benefit the former.
delivered it voluntarily, unless contrary is
proved.
Delivery of a private document evidencing V. Compensation
credit, made voluntarily by the creditor to the
debtor, implies the renunciation of the action
COMPENSATION: Offsetting of two obligations
of creditor against the latter.
which are reciprocally extinguished if they are of
the same value, or extinguished to the
Kinds
concurrent amount if of different values. (Asked
1. As to form (Art. 1270)
in ’80, ’81, ’98, and ’02)
Express: made formally; in accordance
with forms of ordinary donations
Compensation Confusion
Implied: inferred from the act of the
parties There must always be 2 Involves only one
2. As to extent obligations obligation
Total: entire obligation
Partial: may refer only to amount of There are 2 persons who are There is only one
indebtedness, or to an accessory mutually debtors and person whom the
obligation, or to some other aspect of creditors of each other in 2 characters of the
the obligation separate obligations, each creditor and debtor
3. As to constitution arising from the same cause. meet
Inter vivos: effective during the lifetime
of the creditor Kinds
Mortis causa: effective upon death of the 1. As to extent
creditor; must be contained in a will or Total: Debts are of the same amount
testament Partial: Amounts are not equal
2. As to origin
Legal: takes place by operation of law
Conventional: parties agree to
IV. Confusion or Merger of Rights compensate their mutual obligations
even when some requisite in Art. 1279 is
CONFUSION: The meeting in one person of the lacking (Art. 1282).
qualities of creditor and debtor of the same Judicial: decreed by court when there is
obligation. counterclaim; effective upon final
judgment (Art. 1283).
Requisites Facultative: when it can be claimed by
1. It should take place between principal debtor one of the parties who, however, has the
and creditor right to object to it.
2. It must be complete and definite- Parties
must meet all the qualities of creditor and
debtor in the obligation/ in the part affected.
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
OBLIGATIONS
same kind & quality 3. Both debts are
3. Both debts are due extinguished to the the same time, it creates a new one in lieu of the
4. Debts are liquidated concurrent amount, old. (Asked in ’78, ’88, ’94 and ’01)
and demandable eventhough the
5. There must be no creditors and debtors Requisites
retention or are not aware of the 1. A previous valid obligation
controversy over compensation. 2. Agreement of all the parties to the new
either of the debts, 4. Accessory obligation
rd
commenced by 3 obligations are also 3. Extinguishment of the old obligation
persons and extinguished.
communicated in
4. Validity of the new obligation
due time to the
debtor Novation is not presumed.
6. Compensation is not Express novation: Parties must expressly
prohibited by law disclose their intent to extinguish the old
obligation by creating a new one.
Compensation is prohibited in: Implied novation: No specific form is
1. Contracts of depositum required. There must be incompatibility
2. Contracts of commodatum between the old and new obligation or
3. Future support due by gratuitous title contract.
4. Civil liability arising from a penal offense (Asked in ’79, ’82, ’88, and ’94)
5. Obligations due to the government
6. Damage caused to the partnership by a California Bus Line v. State Investment (2003): In the
partner absence of an unequivocal declaration of
extinguishment of the pre-existing obligation, only
ASSIGNMENT OF CREDIT (Art. 1285): proof of incompatibility between the old and new
No effect and does not bind the debtor unless obligation would warrant a novation by implication.
and until the latter is notified of the assignment The restructuring agreement merely provided for a
or learns of it. new schedule of payments and authority giving Delta
to take over management and operations of CBLI in
Without case it fails to pay installments. There was no change
With Debtor’s With Debtor’s
Debtor’s in the object of prior obligations.
Consent Knowledge
Knowlege
Debtor’s Debtor may set Debtor may Test of Incompatibility
consent to up setup Whether or not the old and new obligation can
assignment of compensation compensation
stand together, each one having an independent
credit of debts of all credits
constitutes a (maturing) (maturing) prior existence. No incompatibility exists when they
waiver of before the to the can stand together. Hence, there is no novation.
compensation, assignment of assignment and Incompatibility exists when they cannot stand
unless he credit but not of also latter ones together. Hence, there is novation.
reserved his subsequent until he had
right to ones knowledge of Effects
compensation. the assignment.
In General If Original If New
Facultative compensation: Compensation which Obligation is Obligation is
can only be set up at the option of a creditor, when Void Void
legal compensation cannot take place because some 1. Old Novation is void if New obligation is
legal requisites in favor of the creditor are lacking. obligation is the original void, the old
Creditor may renounce his right to compensation, and extinguished obligation was obligation
he himself may set it up.As opposed to conventional and replaced void, except subsists, unless
compensation, facultative compensation is unilateral by the new when annulment the parties
one may be claimed intended that the
and does not depend upon the agreement of the stipulated. only by the former realations
parties.
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
OBLIGATIONS
before novation debtor and creditor
2. Knowledge or
consent of the old
Accessory obligations are also extinguished, debtor is not
but may subsist only insofar as they may required
rd
benefit 3 persons who did not give their Effects Effects
consent to the novation OR may not be 1. Old debtor is 1. Insolvency of the
affected upon agreement between the released new debtor revives
parties. 2. Insolvency of the the obligation of the
new debtor does not old debtor if it was
Original or new obligation with suspensive or revive the old anterior and public,
resolutory condition obligation in case the and known to the old
old debtor did not debtor.
Art. 1299: If original obligation was subject to a agree to expromision 2. New debtor can
suspensive or resolutory condition, the new 3. If with knowledge demand
obligation shall be under the same condition, and consent of old reimbursement of
unless it is otherwise stipulated. debtor, new debtor the entire amount he
can demand has paid, from the
Compatible Conditions Incompatible reimbursement the original debtor. He
Conditions entire amount paid may compel creditor
Fulfillment of both Original obligation is and w/ subrogation to subrogate him to
conditions: new extinguished, while of creditor’s rights all of his rights.
obligation becomes new obligation exists 4. If without knowledge
demandable Demandability shall of the old debtor,
Fulfillment of be subject to new debtor can
condition concerning fulfillment/ demand
the original nonfulfillment of the reimbursement only
obligation: old condition affecting it up to the extent that
obligation is revived; the latter has been
new obligation loses benefited w/o
force subrogation of
Fulfillment of creditor’s rights
condition concerning
rd
the new obligation: 2. Subrogation of a 3 person in the rights
no novation; of the creditor
requisite of a a. Conventional subrogation: by
previous valid and
agreement of the parties;
effective obligation
lacking rd
Requisites: the consent of the 3
person, and of the original parties (Art.
OBJECTIVE NOVATION 1301).
1. Change of the subject matter
Conventional Assignment of credit
2. Change of causa or consideration
subrogation
3. Change of the principal conditions or terms Debtor’s consent is Debtor’s consent is not
necessary required
SUBJECTIVE NOVATION Extinguishes an Refers to the same right
1. Substitution of the Debtor: Consent of obligation and gives which passes from one
creditor is an indispensable requirement rise to a new one person to another, without
both in expromision and delegacion. modifying or extinguishing
the obligation
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
OBLIGATIONS
debtor’s knowledge
rd
2. When a 3 person not interested in
the obligation pays with the express
or tacit approval of the debtor
3. When, even without the knowledge
of the debtor, a person interested in
the fulfillment of the obligation
without prejudice to the effects of
confusion as to the latter’s share
effects of confusion as to the latter’s
share
Effects
Total Partial
1. Transfers to the 1. A creditor, to whom
person subrogated partial payment has
the credit with all the been made, may
rights thereto exercise his right for
appertaining, either the remainder, and
against the debtor or shall be preferred to
rd
3 persons. the person
2. Obligation is not subrogated in his
extinguished, even if place in virtue of the
the intention is to partial payment.
pay it.
3. Defenses against the
old creditor are
retained, unless
waived by the debtor
CIVIL LAW REVIEWER Charts: PAYMENT & PERFORMANCE
OBLIGATIONS
1. Debtor or his: C = Creditor
2. Authorized Agent D = Debtor
3. Heir
4. Successor-in- interest
3rd PERSON
In GENERAL
• Creditor /person in whose favor obligation was
constituted, or
• His successor in interest, or
• Any person authorized to received payment (1240) 115
OBLIGATIONS
G – NOT valid
Payment to Incapacitated
Creditor (1241)
1) If C has kept the thing delivered
2) Insofar as payment benefited C
In GENERAL
The very prestation (thing or service
OBLIGATIONS
SPECIFIC thing has same value or more
deterioration Apply Art. valuable than that due
1189 (1244)
G:
C cannot demand a thing of superior quality;
can demand inferior
D cannot deliver a thing of inferior quality
Exceptions:
obligation is deemed extinguished
(estoppel) 117
1. Contrary stipulation * There must be intent to waive
OBLIGATIONS
2. When debt is in part liquidated & in part Except if C has no knowledge of
unliquidated the incompleteness
3. When there are several subjects/parties
are bound under different terms/conditions
In GENERAL
In the place designated in the obligation
OBLIGATIONS
wherever the thing was at
the moment obligation was
In GENERAL
constituted
Extrajudicial expenses
If no place is designated Unless there is a required by the payment
contrary express shall be borne by DEBTOR
stipulation
119
In GENERAL
OBLIGATIONS
Payment to be made when the creditor
makes a demand
(judicially/extrajudicially)
- end of Obligations -
CIVIL LAW REVIEWER TABLE of CONTENTS
CONTRACTS
Table of Contents
CONTRACTS
II. Object ................................................127
III. Cause ................................................127
CONTRACTS
Kristine Bongcaron
Patricia Tobias
Subject Editors
A. To formation:
1. Consensual: consent is enough; e.g.
ACADEMICS COMMITTEE sale
Kristine Bongcaron 2. Real: consent and delivery is required;
Michelle Dy e.g. deposit, pledge
Patrich Leccio 3. Solemn or formal: special formalities are
Editors-in-Chief required for perfection e.g. donation of
realty
PRINTING & DISTRIBUTION
Kae Guerrero B. To relation to other contracts:
1. Principal: may exist alone; e.g. lease
DESIGN & LAYOUT
2. Accessory: depends on another contract
Pat Hernandez for its existence; e.g. guaranty
Viktor Fontanilla 3. Preparatory: a preliminary step towards
Rusell Aragones
the celebration of a subsequent
Romualdo Menzon Jr.
Rania Joya contract; e.g. agency
G. To their purpose
CIVIL LAW REVIEWER Chapter I. GENERAL PROVISIONS
CONTRACTS
name
Requisites: D. CONSENSUALITY
a. There must be a stipulation in favor of a Contracts are perfected by mere consent and
third person from that moment, the parties are bound not only
b. The stipulation must be part, not the to the fulfillment of what has been expressly
whole of the contract stipulated but also to all consequences which, 124
c. The contracting parties must have according to their nature, may be in keeping with
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clearly and deliberately conferred a good faith, usage and law, (Art.1315) EXCEPT
favor upon a third person, NOT a mere real contracts, such as deposit, pledge and
incidental benefit or interest. commodatum, are not perfected until the
d. The third person must have delivery of the object of the obligation.
communicated his acceptance to the (Tolentino)
obligor before its revocation
e. No relation of agency exists between E. OBLIGATORY FORCE
any of the parties and the third person
favored Art. 1159, Civil Code. Obligations arising from
contracts have the force of law between the
Florentino v. Encarnacion, 1977: contracting parties and should be complied with in
a. Contracts to perform personal acts good faith.
which cannot be as well performed by
others are discharged by the death of Art. 1308, Civil Code. The contract must bind both
contracting parties; its validity or compliance cannot
the promissor. Conversely, where the
be left to the will of one of them.
service or act is of such a character that
it may as well be performed by another, Art. 1315, Civil Code. Contracts are perfected by
or where the contract, by its terms, mere consent, and from that moment the parties are
shows that performance by others bound not only to the fulfillment of what has been
was contemplated, death does not expressly stipulated but also to all the consequences
terminate the contract or excuse which, according to their nature, may be in keeping
nonperformance. with good faith, usage and law.
b. In this case the stipulation is a
stipulation pour atrui because the true Art. 1356, Civil Code. Contracts shall be obligatory,
intent of the parties is to confer a direct in whatever form they may have been entered into,
and material benefit upon a third party. provided all the essential requisites for their validity
are present. However, when the law requires that a
contract be in some form in order that it may be valid
Accion Directa: Where the statute
or enforceable, or that a contract be proved in a
authorizes the creditor to sue on his certain way, that requirement is absolute and
debtor’s contract, e.g. lessor v. sub- indispensable. In such cases, the right of the parties
lessee (Art. 1651,1652) (J.B.L. Reyes) stated in the following article cannot be exercised.
3. Fraud—
Where the contract is entered into in order to
defraud a person (Art. 1313)
4. Tortuous Interference—
Where the third person induces a
contracting party to violate his contract
(Art.1314).
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES
CONTRACTS
2. Acceptance
Requisites: Requisites:
1. It must be manifested by the concurrence of a. Unqualified and Unconditional, i.e. it
the offer and acceptance (Arts. 1319-1326) must conform with all the terms of the
2. The contracting parties must possess the offer, otherwise it is a counter-offer (Art.
necessary legal capacity (Arts. 1327-1329) 1319)
3. It must be intelligent, free, spontaneous, and b. Communicated to the offeror and
real (not vitiated) (Arts. 1330-1346) learned by him (Arts. 1319, 1322). If
made through an agent, the offer is
A. Concurrence accepted from the time the acceptance
1. Offer: a unilateral proposition which one is communicated to such agent.
party makes to the other for the celebration c. Express/Implied, but is not presumed
of the contract. (Tolentino)
OPTION CONTRACT: A preparatory
Requisites: contract in which one party grants to the
a. Definite other, for a fixed period, the option to decide
b. Intentional whether or not to enter into a principal
c. Complete contract. (Art. 1324)
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property under administration
actions against them would be dropped. A contract is
Public officers-state property under
valid even though one of the parties entered into it
their administration against his wishes and desires, or even against his
Justices, judges, prosecutors, clerks better judgment. Contracts are also valid even though
of court, lawyers-property attached they are entered into by one of the parties without
in litigation. hope of advantage or profit.
e. Members of Ethnic Minorities: their
contracts (excluding sale of personal 3. Violence
property or personal service contracts) Irresistible force used to extort consent
must be approved by the Governor or (J.B.L. Reyes)
his representative. (Public Land Act)
4. Undue Influence
Incapacity to Give Disqualification to When a person takes improper advantage of
Consent (Art. 1327) Contract (Art.1329) his power over the will of another, depriving
Restrains the exercise of Restrains the very right the latter of a reasonable freedom of choice
the right to contract itself (Art. 1337).
Based on subjective Based on public policy
circumstances of certain and morality
persons Circumstances:
a. Relationship of the parties (family,
Voidable Void spiritual, confidential etc.)
b. That the person unduly influenced was
suffering from infirmity (mental
C. Vices of Consent (Art. 1330, CC) (MIVUF) weakness, ignorance etc.) (Art.1337)
1. Mistake
Inadvertent and excusable disregard of a 5. Fraud
circumstance material to the contract. (J.B.L. When through insidious words or
Reyes) machinations of one of the contracting
In order that mistake may invalidate parties, the other is induced to enter into a
consent, it should refer to the contract which, without them, he would not
substance of the thing which is the have agreed to (Art. 1338).
object of the contract, or to those
conditions which have principally moved Art. 1339, Civil Code. Failure to disclose facts, when
one or both parties to enter into the there is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud.
contract (Art.1331)
Art. 1340, Civil Code. The usual exaggerations in
Mistake of Fact Mistake of Law Mutual Mistake
trade, when the other party had an opportunity to
When one or When one or Must be as know the facts, are not in themselves fraudulent.
both contracting both parties to the legal
parties believe arrive at an effect of an
Art. 1341, Civil Code. A mere expression of an
that a fact exists erroneous agreement
opinion does not signify fraud, unless made by an
when in reality it conclusion on Must be
expert and the other party has relied on the former's
does not, or vice the mutual
special knowledge.
versa interpretation of Real purpose
a question of of the parties
law or the legal must have Art. 1342, Civil Code. Misrepresentation by a third
effects been person does not vitiate consent, unless, such
frustrated misrepresentation has created substantial mistake
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES
and the same is mutual. Aleatory contract: where one of the contracting
parties assumes the risk that the thing will never
Art. 1343, Civil Code. Misrepresentation made in come into existence, e.g. insurance
good faith is not fraudulent but may constitute error.
III. Cause
SIMULATION OF CONTRACTS (Art. 1345-
1346): Declaration of a non-existent will made
deliberately for the purpose of producing the It is the impelling reason for which a party
appearance of a transaction that does not exist, assumes an obligation under a contract.
or which is different from the one which actually
arose. (J.B.L. Reyes) Requisites:
a. Existing
Absolute Relative b. Licit or Lawful 127
No real transaction is Real transaction is hidden c. True
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intended
Fictitious contract Disguised contract Cause in:
Void Bound as to hidden
agreement, so long as it Onerous Renumeratory Pure
does not prejudice a third Contracts Contracts Beneficence
person and is not contrary As to each of The service or Mere
to law, morals, good the contracting benefit which is liberality of
customs, public order or parties is remunerated the
public policy understood to benefactor
be the
undertaking or
II. Object the promise of
the thing or
service by the
The thing right or service which is the subject other party
matter of the obligation arising from the contract.
In Villaroel v. Estrada (1940), where a moral
Requisites: obligation is based upon a previous civil obligation,
a. Lawful: Not contrary to law, morals, good which has already been barred by the statute of
customs, public order or public policy. limitations at the time the contract is entered into, it
b. Actual or possible constitutes a sufficient cause or consideration to
support a contract (Natural Obligation).
c. Transmissible: Within the commerce of man BUT,
d. Determinate or determinable In Fisher v. Robb (1939), if the moral obligation arises
wholly from ethical consideration, it cannot constitute
All things or services may be the object of a sufficient cause to support an onerous contract, as
contracts, EXCEPT: when the promise is made on the erroneous belief
Things which are outside the commerce of that one was morally responsible for the failure of an
men enterprise (Moral Obligation).
Intransmissible rights
Future inheritance except in cases Cause Defined Effect
authorized by law Lack of Absence or total The contract
Impossible things or services Cause lack of cause confers no right
and has no legal
Objects which are indeterminable as to their
effect
kind, the genus should be expressed Illegality of Contrary to law, Null and Void
Cause morals, good
In order that a thing, right or service may be the customs, public
object of a contract, it should be in existence at policy and
the moment of the celebration of the contract, or public order
at least, it can exist subsequently or in the Falsity of Cause is stated Void if it should
future. cause but is untrue not be proved that
it was founded
A FUTURE THING may be the object of a upon another
cause which was
contract, such contract may be interpreted as a: true and lawful
Conditional contract: where its efficacy Lesion or Cause is not Shall not invalidate
should depend upon the future existence of inadequacy proportionate to the contract
the thing of cause object except when
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES
a)there is fraud,
mistake, undue
influence
b)when parties
intended a
donation
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CIVIL LAW REVIEWER Chapter III. FORMS OF CONTRACTS
CONTRACTS
Spiritual System of the Spanish Code: The law looks
3. Partnership where immovable property
more on the spirit rather than the form of contracts. or real rights are contributed to the
common fund (Arts.1771 and 1773)
Exceptions:
When the law requires that a contract be in BF Corporation v. CA, 1998: A contract may be
encompassed in several instruments even though
some form for validity (Arts. 1357-1358) every instrument is not signed by the parties since it is
When the law requires that contract be in sufficient if the unsigned instruments are clearly
some form to be enforceable (Statute of identified or referred to and made part of the signed
Frauds) instruments.
CONTRACTS
parties, the the least the doubt shall
instrument; contract shall transmission be settled in
3. Such failure to express their true intention is be null and of rights and favor of the
due to mistake, fraud, inequitable conduct, void. interests shall greatest
or accident; and prevail. reciprocity of
4. There is clear and convincing proof of interests.
mistake, fraud, inequitable conduct, or
accident.
I. RESCISSIBLE
II. VOIDABLE
III. UNENFORCEABLE
IV. VOID OR INEXISTENT
CONTRACTS
Contracts of entered into to
contracts? (Art representation to things in
guardians defraud existing
1381; see also Art of absentees litigation
creditors
1382)
What makes it When the acts of When the acts When the creditors If entered into by
defective? administration of administration cannot in any other the defendant
cause LESION or cause LESION manner collect the without the
damage to the or damage to claims due them knowledge &
WARD they the ABSENTEE approval of the
represent by more they represent litigants or
than 25% of the by more than competent judicial
value of the thing 25% of the value authority
of the thin
Effect on the Valid until rescinded (Art 1380)
Contract
How to rescind? Direct Action (different from action for Accion Pauliana for Contracts in Fraud of
rescission under Art 1191) Creditors
By ward, or by
guardian ad litem
of ward during
incapacity of ward
in an action
against the
original guardian
When to rescind Within four years Within 4 years Within 4 years from Within 4 years
(Art 1389) from [re-] gaining from knowledge knowledge of from knowledge of
capacity of domicile of fraudulent contract fraudulent contract
absentee
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS
What makes it
Incapacity of one party to the Consent vitiated by mistake, violence,
defective? (Art
contract intimidation, undue influence or fraud
1390)
Effect on the Valid until annulled by competent court (Art 1390 last par)
Contract
How to annul? 1. Directly, by an action for annulment
2. Indirectly, by counterclaim asking for positive action of the court to set aside the
contract
CONTRACTS
institute proceedings (art 1401 par 1);
2. the right of action is based upon the incapacity of any one of the contracting
parties and the thing is lost through the fault or fraud of the plaintiff (Art 1401 par
2)
Who can/cannot 1. Parties who are obliged principally or subsidiarily
annul? 2. Persons who are capable cannot allege the incapacity of those with whom they
(Art 1397) contracted
3. Persons who exerted intimidation, violence, or undue intimidation, or employed
fraud, or caused mistake, cannot base their action upon these flaws of the
contract
When? (Art 1391) Within four years after guardianship of Within four years
minors or incapacitated persons 1. After intimidation, violence or undue
ceases influence ceases
2. From the time of discovery of mistake
or fraud
Effect of 1. Mutual restitution of the things delivered, along with fruits and price paid with
Annulment interest (Art 1398)
2. Damages to be paid by party who caused defect of the contract, by virtue of
Article 20 and 21 of the Civil Code
How to Cure 1. Express (written or oral manifestation) or tacit ratification (acts or conduct) by
Defect? (Arts injured party, or guardian of incapacitated person.
1392 - 1396) - Ratification does not require the conformity of the contracting party
who has no right to bring the action for annulment (Art 1395)
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS
Effect on the No effect unless ratified. Cannot be enforced by a proper action in court.
Contract
How to assail? Not by direct action. Not by direct action. Not by direct action. 133
1. As a defense, by 1. As a defense, by motion 1. As a defense, by
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motion to dismiss the to dismiss the complaint motion to dismiss the
complaint on the on the ground that the complaint on the
ground that the contract contract is unenforceable; ground that the
is unenforceable 2. Objection to the contract is
presentation of oral unenforceable
evidence to prove an oral
contract (See Art 1405)
Who can assail? By person whose name By party against whom the By party against whom
*an the contract was entered contract is being enforced; the contract is being
unenforceable into; By owner of property. or his privies. enforced; or his privies;
contract cannot or parents or guardians
be assailed by persons, as it is a
third persons (Art personal defense
1408)
When? When a party asks the court to enforce the contract
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beginning (Art 3.Those whose cause or object did not exist at the time of the transaction
1409) 4.Those whose object is outside the commerce of men
5.Those which contemplate an impossible service
6.Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
7.Those expressly prohibited or declared void by law
How to assail? 1. File for action for declaration of inexistence or nullity of contract
2.As a defense during trial (Art 1409 last par). Such defense not available to third
persons not directly affected by contract (Art 1421)
3.In pari delicto applies when cause or object of contract constitutes a criminal
offense (Art 1411)
Who can assail? 1. Innocent party Art 1. Any of the parties 1. Any person whose
1411 par 2; Art 1412 2. Any person whose interests are
par2) interests are directly directly affected by
2. Less-guilty party, upon affected by the contract the contract Art
court discretion (Art 1421) (1421)
3. Incapacitated person 2. By party for whose
who is a party to an protection the
illegal contract, upon prohibition of the
court discretion (Art law is designed (Art
1415) 1416)
4. Any person whose
interests are directly
affected by the
contract (Art 1421)
When? The action or defense does not prescribe (Art 1410)
- end of Contracts -