OBLIGATIONS said examinations, Pedro refused to give the car on the
ground that the condition was a purely potestative one. Is
I. Definition
II. Elements of an Obligation
The following are the elements of an obligation, except:
(2012 BAR)
a) Juridical/Legal Tie
b) Active subject
c) Passive subject
d) Consideration
It is a conduct that may consist of giving, doing, or not
doing something. (2012 BAR)
a) Obligation
b) Juridical necessity
c) Prestation
d) Contract
III. Different Kinds of Prestations
IV. Classification of Obligations
A. Sara borrowed PS0,000.00 from Julia and orally
promised to pay it within six months. When Sara
tried to pay her debt on the gth month, Julia
demanded the payment of interest of 12o/o per
annum because of Sara's delay in payment. Sara
paid her debt and the interest claimed by Julia. After
rethinking, Sara demanded back from Julia the
amount she had paid as interest. Julia claims she
has no obligation to return the interest paid by Sara
because it was a natural obligation which Sara
voluntarily performed and can no longer recover. Do
you agree? Explain. (4%)
B. Distinguish civil and natural obligations. (2%) (2015
BAR)
SUGGESTED ANSWER:
a) No, the case is not one of a natural obligation because
even if the contract of loan is verbal, the delay of Julia made her
liable for interest upon demand by Sara. This is not a case of a
natural obligation but a civil obligation to pay interest by way of
damages by reason of delay. (Article 1956; Article 1169; Article
2209 Civil Code)
b) A civil obligation is based on positive law which gives
a right of action to compel their performance in case of breach.
A natural obligation is based on equity and natural law and
cannot be enforced by court action but after voluntary fulfilment
by the obligor, they authorize the retention of what may have
been delivered or rendered by reason thereof. (Article 1423,
Civil Code)
Distinguish briefly but clearly between:
Civil obligation and natural obligation. (2004 Bar Question)
SUGGESTED ANSWER:
Civil obligation is a juridical necessity to give, to do and not to
do. It gives the creditor the legal right to compel by an action in
court the performance of such obligation.
A natural obligation is based on equity and natural law. There is
no legal right to compel performance thereof but if the debtor
voluntarily pays it, he cannot recover what was paid.
Pedro promised to give his grandson a car if the latter will
pass the bar examinations. When his grandson passed the
he correct or not? (2%) (2000 Bar Question)
SUGGESTED ANSWER:
No, he is not correct. First of all, the condition is not purely
potestative, because it does not depend on the sole will of one
of the parties. Secondly, even if it were, it would be valid
because it depends on the sole will of the creditor (the donee)
and not of the debtor (the donor).
In 1997, Manuel bound himself to sell Eva a house and lot
which is being rented by another person, if Eva passes the
1998 bar examinations. Luckily for Eva, she passed said
examinations.
a. Suppose Manuel had sold the same house
and lot to another before Eva passed the 1998
bar examinations, is such sale valid? Why?
(2%)
b. Assuming that it is Eva who is entitled to buy
said house and lot, is she entitled to the
rentals collected by Manuel before she
passed the 1998 bar examinations? Why?
(3%) (1999 Bar Question)
SUGGESTED ANSWER:
(a) Yes, the sale to the other person is valid as a sale with a
resolutory condition because what operates as a suspensive
condition for Eva operates a resolutory condition for the buyer.
FIRST ALTERNATIVE ANSWER:
Yes, the sale to the other person is valid. However, the buyer
acquired the property subject to a resolutory condition of Eva
passing the 1998 Bar Examinations. Hence, upon Eva’s passing
the
Bar, the rights of the other buyer terminated and Eva acquired
ownership of the property.
SECOND ALTERNATIVE ANSWER:
The sale to another person before Eva could buy it from Manuel
is valid, as the contract between Manuel and Eva is a mere
promise to sell and Eva has not acquired a real right over the
land assuming that there is a price stipulated in the contract for
the contract to be considered a sale and there was delivery or
tradition of the thing sold.
(b) No, she is not entitled to the rentals collected by Manuel
because at the time they accrued and were collected, Eva was
not yet the owner of the property.
FIRST ALTERNATIVE ANSWER:
Assuming that Eva is the one entitled to buy the house and lot,
she is not entitled to the rentals collected by Manuel before she
passed the bar examinations. Whether it is a contract of sale or
a contract to sell, reciprocal prestations are deemed imposed A
for the seller to deliver the object sold and for the buyer to pay
the price. Before the happening of the condition, the fruits of the
thing and the interests on the money are deemed to have been
mutually compensated under Article 1187.
SECOND ALTERNATIVE ANSWER:
Under Art. 1164, there is no obligation on the part of Manuel to
deliver the fruits (rentals) of the thing until the obligation to
deliver the thing arises. As the suspensive condition has not
been fulfilled, the obligation to sell does not arise.
In two separate documents signed by him, Juan Valentino
"obligated" himself each to Marla and to Perla, thus –
'To Marla, my true love, I obligate myself to give you my one
and only horse when I feel like it."
- and –
To Perla, my true sweetheart, I obligate myself to pay you
the P500.00 I owe you when I feel like it."
Months passed but Juan never bothered to make good his
promises. Maria and Perla came to consult you on whether
or not they could recover on the basis of the foregoing
settings.
What would your legal advice be? (1997 Bar Question)
SUGGESTED ANSWER:
I would advise Maria not to bother running after Juan for the
latter to make good his promise. [This is because a promise is
not an actionable wrong that allows a party to recover especially
when she has not suffered damages resulting from such
promise. A promise does not create an obligation on the part of
Juan because it is not something which arises from a contract,
law, quasi-contracts or quasi-delicts (Art. 1157)]. Under Art.
1182, Juan's promise to Maria is void because a conditional
obligation depends upon the sole will of the obligor.
As regards Perla, the document is an express acknowledgment
of a debt, and the promise to pay what he owes her when he
feels like it is equivalent to a promise to pay when his means
permits him to do so, and is deemed to be one with an indefinite
period under Art. 1180. Hence the amount is recoverable after
Perla asks the court to set the period as provided by Art. 1197,
par. 2.
In a deed of sale of a realty, it was stipulated that the buyer
would construct a commercial building on the lot while the
seller would construct a private passageway bordering the
lot. The building was eventually finished but the seller
failed to complete the passageway as some of the
squatters, who were already known to be there at the time
they entered into the contract, refused to vacate the
premises. In fact, prior to its execution, the seller filed
ejectment cases against the squatters.
The buyer now sues the seller for specific performance with
damages. The defense is that the obligation to construct
the passageway should be with a period which,
incidentally, had not been fixed by them, hence, the need
for fixing a judicial period.
Will the action for specific performance of the buyer against
the seller prosper? (1991 Bar Question)
SUGGESTED ANSWER:
No, the action for specific performance filed by the buyer is
premature under Art. 1197 of the Civil Code. If a period has not
been fixed although contemplated by the parties, the parties
themselves should fix that period, failing in which, the Court may
be asked to fix it taking into consideration the probable
contemplation of the parties. Before the period is fixed, an action
for specific performance is premature.
ALTERNATIVE ANSWER:
It has been held in Borromeo vs. CA (47 SCRA 69) that the
Supreme Court allowed the simultaneous filing of action to fix
the probable contemplated period of the parties where none is
fixed in the agreement, if this would avoid multiplicity of suits. In
addition, technicalities must be subordinated to substantial
justice.
ALTERNATIVE ANSWER:
The action for specific performance will not prosper. The filing
of the ejectment suit by the seller was precisely in compliance
with his obligations and should not, therefore, be faulted if no
decision has yet been reached by the Court on the matter.
How is a civil obligation distinguished from a natural
obligation? Give an example of a natural obligation. (1989
Bar Question)
SUGGESTED ANSWER:
Civil obligations give a right of action to compel their
performance. Natural obligations, not being based on positive
law but on equity and natural law, do not grant a right of action
to enforce their performance, but after voluntary fulfillment by
the obligor, they authorize the retention of what has been
delivered on rendered by reason thereof.
Example of a natural obligation (one example out of any of the
following):
1. When a right to sue upon a civil obligation has lapsed by
extinctive prescription, the obligor who voluntarily performs the
contract cannot recover what he has delivered or the value of
the service he has rendered.
2. When without the knowledge or against the will of the
debtor a third person pays a debt which the obligor is not legally
bound to pay because the action thereon has prescribed, but
the debtor later voluntarily reimburses the third person, the
obligor cannot recover what he has paid.
3. When a minor between eighteen and twenty-one years of
age who has entered into a contract without the consent of the
parent or guardian, after the annulment of the contract
voluntarily returns the whole thing or price received,
notwithstanding the fact that he has not been benefited thereby,
there is no right to demand the thing or price thus returned.
4. When a minor between eighteen and twenty-one* years of
age, who has entered into a contract without the consent of the
parent or guardian, voluntarily pays a sum of money or delivers
a fungible thing in fulfillment of the obligation, there shall be no
right to recover the same from the obligee who has spent or
consumed it in good faith.
5. When, after an action to enforce a civil obligation has failed,
the defendant voluntarily performs the obligation, he cannot
demand the return of what he has delivered or the payment of
the value of the service he has rendered.
6. When a testate or intestate heir voluntarily pays a debt of
the decedent exceeding the value of the property which he
received by will or by the law of intestacy from the estate of the
deceased, the payment is valid and cannot be rescinded by the
payer.
7. When a will is declared void because it has not been
executed in accordance with the formalities required by law, but
one of the intestate heirs, after the settlement of the debts of the
deceased, pays a legacy in compliance with, a clause in the
defective will, the payment is effective and irrevocable.
A. Define alternative and facultative obligations.

B. Define joint and solidary obligations. (1988 Bar Question)
SUGGESTED ANSWER:
A. Alternative obligations refer to those juridical relations which
comprehend several objects or prestations which are due, but
the payment or performance of one of them would be sufficient.
On the other hand, facultative obligations refer to those juridical
relations where only one object or prestation has been agreed
upon by the parties to the obligation, but the obligor may deliver
or render another in substitution.
B. When there is a concurrence of two or more creditors or of
two or more debtors in one and the same Obligation, such
obligation may be either joint (obligacion mancomunada) or
solidary (obligacion solidaria). A joint obligation may be defined
as an obligation where there is a concurrence of several
creditors or several debtors, or of several creditors and debtors
by virtue which each of the creditors has a right to demand, while
each of debtors is bound to render compliance with his
proportionate part of the prestation which constitutes the object
of the obligation. In other words, each of the creditors is entitled
to demand the payment of only a proportionate part of the credit,
while each of the debtors is liable for the payment of only a
proportionate part of the debt. A solidary obligation, on the other
hand, may be defined as an obligation where there is a
concurrence of several creditors, or several debtors, or of
several creditors and debtors, by virtue which each of the
creditors has a right to demand, while each of the debtors is
bound to render entire compliance with the prestation which
constitutes the object of the obligation. In other words, each of
the creditors is entitled to demand the payment of the entire
credit, while each of the debtors is liable for the payment of the
entire debt. (See Art. 1207, CC; 3 Castan, 7th Ed., pp. 65-66.)
V. Sources of Obligations
It is a juridical relation arising from lawful, voluntary and
unilateral acts based on the principle that no one should
unjustly enrich himself at the expense of another. (2012
BAR)
a) Quasi-contract
b) Quasi-delict
c) Cotract
d) Delict
The following are the elements of quasi-delict, except:
(2012 BAR)
a) Act or omission
b) Fault/negligence
c) Damage/injury
d) Pre-existing contract
What are obligations without an agreement”? Give five
examples of situations giving rise to this type of obligation.
(2007 Bar Question)
SUGGESTED ANSWER:
“Obligations without an agreement” are obligations that do not
arise from contract such as those arising from:
1. delicts;
2. quasi-delicts;
3. solution indebiti;
4. negotiorumgestio; and
5. all other obligations arising from law.
ALTERNATIVE ANSWER:
“Obligations without an agreement” refer to the juridical relation
of quasi-contract which arise from certain lawful, voluntary and
unilateral acts to the end that no one shall be unjustly enriched
or benefited at the expense of another. (Art. 2142, NCC)
First example of an obligation without an agreement is a case of
negotiorum gestio, whereby one who voluntarily takes charge of
the agency or management of the business or property of
another, without any power from the latter, is obliged to continue
the same until the termination of the affair and its incidents, or
to require the person concerned to substitute him, if the owner
is in a position to do so (Art. 2144, NCC).
Second example, a case of solutio indebiti may also give rise to
an obligation without an agreement. This refers to the obligation
to return which arises when something is received when there
is no right to demand it, and it was unduly delivered through
mistake (Art. 2154, NCC).
Third example, is when without the knowledge of the person
obliged to give support, it is given by a stranger, the latter shall
have a right to claim the same from the former, unless it appears
that he gave it out of piety and without intention of being repaid
(Art. 2164, NCC).
Fourth example, is when through an accident or other cause a
person is injured or becomes seriously ill, and he is treated or
helped while he is not in a condition to give consent to a
contract, he shall be liable to pay for the services of the
physician or other person aiding him, unless the service has
been rendered out or pure generosity (Art. 2167, NCC).
Fifth instance of an obligation without an agreement is when the
person obliged to support an orphan or an insane or other
indigent person unjustly refuses to give support to the latter, any
third person may furnish support to the needy individual, with
right of reimbursement from the person obliged to give support.
The provisions of this article apply when the father or mother of
a child under eighteen years of age unjustly refuses to support
him (Art. 2166, NCC).
DPO went to a store to buy a pack of cigarettes worth
P225.00 only. He gave the vendor, RRA, a P500-peso bill.
The vendor gave him the pack plus P375.00 change. Was
there a discount, an oversight, or an error in the amount
given? What would be DPO’s duty, if any, in case of an
excess in the amount of change given by the vendor? How
is this situational relationship between DPO and RRA
denominated? Explain. (5%) (2004 Bar Question)
SUGGESTED ANSWER:
There was error in the amount of change given by RRA. This is
a case of solutio indebiti in that DPO received something that is
not due him. He has the obligation to return the P100.00;
otherwise, he will unjustly enrich himself at the expense of RRA.
(Art. 2154, Civil Code)
ALTERNATIVE ANSWER:
DPO has the duty to return to RRA the excess P100 as trustee
under Article 1456 of the Civil Code which provides: If property
is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes. There is,
in this case, an implied or constructive trust in favor of RRA.
Armando owns, a row of residential apartments in San
Juan, Metro Manila, which he rents out to tenants. On 1
April 1991 he left for the United States without appointing
any administrator to manage his apartments such that
uncollected rentals accumulated for three (3) years.
Amparo, a niece of Armando, concerned with the Interest
of her uncle, took it upon herself to administer the property.
As a consequence, she incurred expenses in collecting the
rents and in some instances even spent for necessary
repairs to preserve the property.
a. What juridical relation between Amparo and
Armando, if any, has resulted from Amparo’s
unilateral act of assuming the administration
of Armando’s apartments? Explain.
b. What rights and obligations, if any, does
Amparo have under the circumstances?
Explain. (1995 Bar Question)
SUGGESTED ANSWER:
a. Negotiorum gestio existed between Amparo and
Armando. She voluntarily took charge of the agency
or management of the business or property of her
uncle without any power from her uncle whose
property was neglected. She is called the gestor
negotiorum or officious manager. (Art. 2144, NCC)
b. It is recommended by the Committee that an
enumeration of any two (2) obligations and two (2)
rights as enumerated in Arts. 2145 to 2152, NCC,
would entitle the examinee to full credit.
Art. 2145. The officious manager shall perform his duties with
all the diligence of a good father of a family, and pay the
damages which through his fault or negligence may be suffered
by the owner of the property or business under management.
The courts may, however, increase or moderate the indemnity
according to the circumstances of each case.
Art. 2146. If the officious manager delegates to another person
all or some of his duties, he shall be liable for the acts of the
delegate, without prejudice to the direct obligation of the latter
toward the owner of the business.
The responsibility of two or more officious managers shall be
solidary, unless management was assumed to save the thing or
business from imminent danger.
Art. 2147. The officious manager shall be liable for any fortuitous
event:
1. If he undertakes risky operations which the owner was
not accustomed to embark upon:
2. If he has preferred his own interest to that of the
owner;
3. If he fails to return the property or business after
demand by the owner;
4. If he assumed the management in bad faith.
Art. 2148. Except when the management was assumed to save
the property or business from imminent danger, the officious
manager shall be liable for fortuitous events
1. If he is manifestly unfit to carry on the management;
2. If by his intervention he prevented a more competent
person from taking up the management.
Art. 2149. The ratification of the management by the owner of
the business produces the effects of an express agency, even if
the business may not have been successful.
Art. 2150. Although the officious management may not have
been expressly ratified, the owner of the property business who
enjoys the advantages of the same shall be liable for obligations
Incurred In his interest, and shall reimburse the officious
manager for the necessary and useful expenses and for the
damages which the latter may have suffered in the performance
of his duties.
The same obligation shall be incumbent upon him when, the
management had for its purpose the prevention of an imminent
and manifest loss, although no benefit may have been derived.
Art. 2151. Even though the owner did not derive any benefit and
there has been no imminent and manifest danger to the property
or business, the owner is liable as under the first paragraph of
the preceding article, provided:
1. The officious manager has acted in good faith, and
2. The property or business is intact, ready to be returned
to the owner.
Art. 2152. The officious manager is personally liable for
contracts which he has entered into with third persons, even
though he acted in the name of the owner, and there shall be no
right of action between the owner and third persons.. These
provisions shall not apply:
1. If the owner has expressly or tacitly ratified the
management, or
2. When the contract refers to things pertaining to the
owner of the business.
(NOTE: It is recommended by the Committee that an
enumeration of any two (2) obligations and any two (2) rights as
enumerated in Arts. 2145 to 2152. NCC would entitle thfe
examinee to full credit.)
In September, 1972, upon declaration of martial rule in the
Philippines, A, together with his wife and children,
disappeared from his residence along A. Mabini Street.
Ermita, Manila. B. his immediate neighbor, noticing that
mysterious disappearance of A and his family, closed the
doors and windows of his house to prevent it from being
burglarized. Years passed without B hearing from A and his
family. B continued taking care of A's house, even causing
minor repairs to be done at his house to preserve it. In 1976,
when business began to perk up in the area, an enterprising
man, C, approached B and proposed that they build stores
at the ground floor of the house and convert its second
floor into a pension house. B agreed to C’s proposal and
together they spent for the construction of stores at the
ground floor and the conversion of the second floor into a
pension house. While construction was going on, fire
occurred at a nearby house. The houses at the entire block,
including A's, were burned. After the EDSA revolution in
February 1986. A and his family returned from the United
States where they took refuge in 1972. Upon learning of
what happened to his house. A sued B for damages. B
pleaded as a defense that he merely look charge of his
house under the principle of negotiorum gestio. He was not
liable as the burning of the house is a fortuitous event.
Is B liable to A for damages under the foregoing
circumstances? (1993 Bar Question)
SUGGESTED ANSWER:
No, B is not liable for damages, because he is a gestor in
negotiorum gestio (Art. 2144, Civil Code).
Furthermore, B is not liable to A because Article 2147 of the Civil
Code is not applicable.
B did not undertake risky operations which the owner was not
accustomed to embark upon:
1) he has not preferred his own interest to that of the owner:
2) he has not failed to return the property or business after
demand by the owner; and
3) he has not assumed the management in bad faith.
ALTERNATIVE ANSWER:
He would be liable under Art.2147 (1) of the Civil Code, because
he used the property for an operation which the operator is not
accustomed to, and in so doing, he exposed the house to
increased risk, namely the operation of a pension house on the
second floor and stores on the first floor.
In fear of reprisals from lawless elements besieging his
barangay, X abandoned his fishpond, fled to Manila and left
for Europe. Seeking that the fish in the fishpond were ready
for harvest, Y, who is in the business of managing
fishponds on a commission basis, took possession of the
property, harvested the fish and sold the entire harvest to
Z.
Thereafter, Y borrowed money from W and used the money
to buy new supplies of fish fry and to prepare the fishpond
for the next crop.
A. What is the Juridical relation between X and Y during
X’s absence?
B. Upon the return of X to the barangay, what are the
obligations of Y to X as regards the contract with Z?
C. Upon X’s return, what are the obligations of X as
regards Y’s contract with W?
D. What legal effects will result If X expressly ratifies Y’s
management and what would be the obligations of X in
favor of Y?(1992 Bar Question)
SUGGESTED ANSWER:
A. The juridical relation is that of the quasi-contract of
“negotiorum gestio". Y Is the “gestor" or “officious manager" and
X is the “owner" (Art. 2144, Civil Code).
B. Y must render an account of his operations and deliver to
X the price he received for the sale of the harvested fish (Art.
2145, Civil Code).
C. X must pay the loan obtained by Y from W because X must
answer for obligations contracted with third persons in the
interest of the owner (Art. 2150, Civil Code).
D. Express ratification by X provides the effects of an express
agency and X is liable to pay the commissions habitually
received by the gestor as manager (Art. 2149, Civil Code).
VI. Nature and Effect of Obligations
The creditor has the right to the fruits of the thing from the
time: (2012 BAR)
a) the thing is delivered.
b) the obligation to deliver the things arises.
c) the contract is perfected.
d) the fruits are delivered.
A debtor is liable for damages in case of delay if he is guilty
of any of the following, except: (2012 BAR)
a) default (mora)
b) mistake
c) negligence (culpa)
d) breach through contravention of the tenor thereof
This term refers to a delay on the part of both the debtor
and creditor in reciprocal obligations. (2012 BAR)
a) Mora accipiendi
b) Mora solvendi
c) Compensation morae
d) Solution indibiti
The following are the requisites of mora solvendi, except:
(2012 BAR)
a) Obligation pertains to the debtor and is determinate,
due, demandable, and liquidated.
b) Obligation was performed on its maturity date.
c) There is judicial or extrajudicial demand by the
creditor.
d) Failure of the debtor to comply with such demand.
It is an international evasion of the faithful performance of
the obligation. (2012 BAR)
a) Negligence
b) Fraud
c) Delay
d) Mistake
The following are the requisites of fortuitous event, except:
(2012 BAR)
a) Cause is independent of the will of the debtor.
b) The event is unforeseeable/unavoidable.
c) Occurrence renders it absolutely impossible for the
debtor to fulfill his obligation in a normal manner;
impossibility must be absolute not partial, otherwise
not force majeure.
d) Debtor contributed to the aggravation of the injury
to the creditor.
A debtor may still be held liable for loss or damages even
if it was caused by a fortuitous event in any of the following
instances, except: (2012 BAR)
a) The debtor is guilty of dolo, malice or bad faith, has
promised the same thing to two or more persons who
do not have the same interest.
b) The debtor contributed to the loss.
c) The thing to be delivered is generic.
d) The creditor is guilty of fraud, negligence or delay
or if he contravened the tenor of the obligation.
Gary is a tobacco trader and also a lending investor. He
sold tobacco leaves to Homer for delivery within a month,
although the period for delivery was not guaranteed.
Despite Gary's efforts to deliver on time, transportation
problems and government red tape hindered his efforts and
he could only deliver after 30 days. Homer refused to
accept the late delivery and to pay on the ground that the
agreed term had not been complied with.
As lending investor, Gary granted a Pl,000,000 loan to Isaac
to be paid within two years from execution of the contract.
As security for the loan, Isaac promised to deliver to Gary
his Toyota Innova within seven (7) days, but Isaac failed to
do so. Gary was thus compelled to demand payment for the
loan before the end of the agreed two-year term. (2013 BAR)
1) Was Homer justified in refusing to accept the tobacco
leaves? (1%) (2012 BAR)
(A) Yes. Homer was justified in refusing to accept the
tobacco leaves. The delivery was to be made within a
month. Gary's promise of delivery on a "best effort" basis
made the delivery uncertain. The term, therefore, was
ambiguous.
(B) No. Homer was not justified in refusing to accept the
tobacco leaves. He consented to the terms and conditions
of the sale and must abide by it. Obligations arising from
contract have the force of law between the contracting
parties.
(C) Yes. Homer was justified in his refusal to accept the
delivery. The contract contemplates an obligation with a
term. Since the delivery was made after 30 days, contrary
to the terms agreed upon, Gary could not insist that Homer
accept the tobacco leaves.
(D) No. Homer was not justified in refusing to accept the
tobacco leaves. There was no term in the contract but a
mixed condition. The fulfillment of the condition did not
depend purely on Gary's will but on other factors, e.g., the
shipping company and the government. Homer should
comply with his obligation.
ANSWER:
B (obligations arising from contracts have the force of law) or D
(the obligation is not with the term but with a mixed condition –
although the facts are not clear enough if it was stated in the
contract that the other factors like transportation or government
regulations would be a factor)
2) Can Gary compel Isaac to pay his loan even before the
end of the two-year period? (1%) (2012 BAR)
(A) Yes, Gary can compel Isaac to immediately pay the loan.
Non-compliance with the promised guaranty or security
renders the obligation immediately demandable. Isaac lost
his right to make use of the period.
(B) Yes, Gary can compel Isaac to immediately pay the loan.
The delivery of the Toyota Innova is a condition for the loan.
Isaac's failure to deliver the car violated the condition upon
which the loan was granted. It is but fair for Gary to demand
immediate payment.
(C) No, Gary cannot compel Isaac to immediately pay the
loan. The delivery of the car as security for the loan is an
accessory contract; the principal contract is still the P
1,000,000 loan. Thus, Isaac can still make use of the period.
(D) No, Gary cannot compel Isaac to immediately pay the
loan. Equity dictates that Gary should have granted a
reasonable extension of time for Isaac to deliver his Toyota
Innova. It would be unfair and burdensome for Isaac to pay
the P1,000,000 simply because the promised security was
not delivered.
ANSWER:
A – Article 1198 Isaac lost his right to make use of the period
because he failed to furnish the guaranty or security in
consideration of which Gary agreed to the period
Juliet offered to sell her house and lot, together with all the
furniture and appliances therein, to Dehlma. Before
agreeing to purchase the property, Dehlma went to the
Register of Deeds to verify Juliet’s title. She discovered that
while the property was registered in Juliet’s name under the
Land Registration Act, as amended by the Property
Registration Decree, it was mortgaged to Elaine to secure
a debt of P80,000. Wanting to buy the property, Dehlma told
Juliet to redeem the property from Elaine, and gave her an
advance payment to be used for purposes of releasing the
mortgage on the property. When the mortgage was
released, Juliet executed a Deed of Absolute Sale over the
property which was duly registered with the Registry of
Deeds, and a new TCT was issued in Dehlma’s name.
Dehlma immediately took possession over the house and
lot and the movables therein Thereafter, Dehlma went to the
Assessor’s Office to get a new tax declaration under her
name. She was surprised to find out that the property was
already declared for tax purposes in the name of XYZ Bank
which had foreclosed the mortgage on the property before
it was sold to her. XYZ Bank was also the purchaser in the
foreclosure sale of the property. At that time the property
was still unregistered but XYZ Bank registered the Sheriffs
Deed of Conveyance in the day book of the Register of
Deeds under Act. 3344 and obtained a tax declaration in its
name.
xxx
c) Who owns the movables inside the house? (2%) (2008
Bar Question)
SUGGESTED ANSWER:
Unless there is a contrary stipulation in the absolute deed of
sale, Dehlma owns the movables covered by the Deed of Sale
and her ownership is perfected by the execution and delivery of
public document of sale. The delivery of the absolute deed of
sale is a symbolical delivery of the house and lot, including the
contents of the house. This is an obligation to deliver a specific
thing, which includes the delivery of the specific thing itself and
all of its accessions and accessories even though they may not
have been mentioned (Art. 1166, CC).
AB Corp. entered into a contract with XY Corp. whereby the
former agreed to construct the research and laboratory
facilities of the latter. Under the terms of the contract, AB
Corp. agreed to complete the facility in 18 months, at the
total contract price of P10 million. XY Corp. paid 50% of the
total contract price, the balance to be paid upon completion
of the work. The work started immediately, but AB Corp.
later experienced work slippage because of labor unrest in
his company. AB Corp.’s employees claimed that they are
not being paid on time; hence, the work slowdown. As of
the 17th month, work was only 45% completed. AB Corp.
asked for extension of time, claiming that its labor
problems is a case of fortuitous event, but this was denied
by XY Corp. When it became certain that the construction
could not be finished on time, XY Corp. sent written notice
canceling the contract, and requiring AB Corp. to
immediately vacate the premises.
Can the labor unrest be considered a fortuitous event? (1%)
(2008 Bar Question)
MAIN SUGGESTED ANSWER:
Labor unrest is not a fortuitous event that will excuse AB Corp.
from complying with its obligation of constructing the research
and laboratory facilities of XY Corp. The labor unrest, which may
even be attributed in large part to AB Corp. itself, is not the direct
cause of non- compliance by AB Corp. It is independent of its
obligation. It is similar to the failure of a DBP borrower to pay
her loan just because her plantation suffered losses due to the
cadang-cadang disease. It does not excuse compliance with the
obligation (DBP vs. Vda. de Moll, 43 SCRA 82 [1972])
ADDITIONAL ANSWER:
The labor unrest in this case is not a fortuitous event. The
requisites of fortuitous event are:
(1) the event must be independent of human will or at least of
the debtor’s will; (2) the event could not be foreseen, or if
foreseen, is inevitable; (3) the event must have rendered
impossible debtor’s compliance of the obligation in a proper
manner; and (4) the debtor must not be guilty of concurrent
negligence (Lasam v Smith, 45 Phils. 657 [1924]). All the
requisites are absent in this case. AB Corp. could have
anticipated the labor unrest which was caused by delays in
paying the laborer’s wages. The company could have hired
additional laborers to make up for the work slowdown.
x x x himself to pay when his means permit him to do
c) Must AB Corp. return the 50% downpayment? (2%) (2008
Bar Question)
SUGGESTED ANSWER:
No, under the principle of quantum meruit, AC Corp. has the
right to retain payment corresponding to his percentage of
accomplishment less the amount of damages suffered by XY
Corp. because of the delay or default.
Mr. ZY lost P100,000 in a card game called Russian poker,
but he had no more cash to pay in full the winner at the time
session ended. He promised to pay PX, the winner, two
weeks thereafter. But he failed to do so despite the lapse of
two months, so PX filed in court a suit to collect the amount
of P50.000 that he won but remained unpaid. Will the
collection suit against ZY prosper? Could Mrs. ZY file in
turn a suit against PX to recover the P 100,000 that her
husband lost? Reason. (5%) (2004 Bar Question)
SUGGESTED ANSWER:
a. The suit by PX to collect the balance of what he won
from ZY will not prosper. Under Article 2014 of the Civil Code,
no action can be maintained by the winner for the collection of
what he has won in a game of chance. Although poker may
depend in part on ability, it is fundamentally a game of chance.
b. If the money paid by ZY to PX was conjugal or
community property, the wife of ZY could sue to recover it
because Article 117(7) of the Family Code provides that losses
in gambling or betting are borne exclusively by the loser-spc-
use. Hence, conjugal or community funds may not be used to
pay for such losses. If the money were exclusive property of ZY,
his wife may also sue to recover it under Article 2016 of the Civil
Code if she and the family needed the money for support.
ALTERNATIVE ANSWER TO (2):
c. Mrs. ZY cannot file a suit to recover what her husband
lost. Art 2014 of the Civil Code provides that any loser in a game
of chance may recover his loss from the winner, with legal
interest from the time he paid the amount lost. This means that
only he can file the suit. Mrs. ZY cannot recover as a spouse
who has interest in the absolute community property or conjugal
partnership of gains, because under Art. 117(7) of the Family
Code, losses are borne exclusively by the loser-spouse.
Therefore, these cannot be charged against absolute
community property or conjugal partnership of gains. This being
so, Mrs. ZY has no interest in law to prosecute and recover as
she has no legal standing in court to do so.
Are the following obligations valid, why, and if they are
valid, when is the obligation demandable in each case?
A. If the debtor promises to pay as soon as he has the
means to pay;
B. If the debtor promises to pay when he likes;
C. If the debtor promises to pay when he becomes a
lawyer;
D. If the debtor promises to pay if his son, who is sick with
cancer, does not die within one year. (2003 Bar Question)
SUGGESTED ANSWER:
a. The obligation is valid. It is an obligation subject
to an indefinite period because the debtor binds
so (Article 1180, NCC). When the creditor knows
that the debtor already has the means to pay, he
must file an action in court to fix the period, and
when the definite period as set by the court
arrives, the obligation to pay becomes
demandable (Article 1197, NCC).
b. The obligation “to pay when he likes” is a
suspensive condition the fulfillment of which is
subject to the sole will of the debtor and,
therefore, the conditional obligation is void.
(Article 1182, NCC).
c. The obligation is valid. It is subject to a
suspensive condition, *.e. the future and
uncertain event of his becoming a lawyer. The
performance of this obligation does not depend
solely on the will of the debtor but also on other
factors outside the debtor's control.
d. The obligation is valid. The death of the son of
cancer within one year is made a negative
suspensive condition to his making the payment.
The obligation is demandable if the son does not
die within one year (Article 1185, NCC).
Kristina brought her diamond ring to a jewelry shop for
cleaning. The jewelry shop undertook to return the ring by
February 1, 1999. When the said date arrived, the Jewelry
shop informed Kristina that the job was not yet finished.
They asked her to return five days later. On February 6.
1999, Kristina went to the shop to claim the ring, but she
was Informed that the same was stolen by a thief who
entered the shop the night before. Kristina filed an action
for damages against the jewelry shop which put up the
defense of force majeure. Will the action prosper or not?
(5%) (2000 Bar Question)
SUGGESTED ANSWER:
The action will prosper. Since the defendant was already in
default not having delivered the ring when delivery was
demanded by plaintiff at due date, the defendant is liable for the
loss of the thing and even when the loss was due to force
majeure.
Distinguish between the effects of suspensive and
resolutory conditions upon an obligation. (1988 Bar
Question)
SUGGESTED ANSWER:
It is evident that a resolutory condition affects the obligation to
which it is attached in a manner which is diametrically opposed
to that of a suspensive condition. If the suspensive condition is
fulfilled, the obligation arises or becomes effective if the
resolutory condition is fulfilled, the obligation is extinguished. If
the first is not fulfilled, the juridical relation is created; if the
second is not fulfilled, the juridical relation is consolidated. In
other words, in the first, rights are not yet acquired, but there is
a hope or expectancy that they will soon be acquired; in the
second, rights are already acquired, but subject to the threat of
extinction (8 Manresa, 5th Ed., Bk. 1, p. 311.)
VII. Kinds of Civil Obligations
A natural obligation under the New Civil Code of the
Philippines is one which (2011 BAR)
(A) the obligor has a moral obligation to do, otherwise
entitling the obligee to damages.
(B) refers to an obligation in writing to do or not to do.
(C) the obligee may enforce through the court if violated
by the obligor.
(D) cannot be judicially enforced but authorizes the
obligee to retain the obligor’s payment or performance.
How is a civil obligation distinguished from a natural
obligation? Give an example of a natural obligation. (1989
Bar Question)
SUGGESTED ANSWER:
Civil obligations give a right of action to compel their
performance. Natural obligations, not being based on positive
law but on equity and natural law, do not grant a right of action
to enforce their performance, but after voluntary fulfillment by
the obligor, they authorize the retention of what has been
delivered on rendered by reason thereof.
Example of a natural obligation (one example out of any of the
following):
1. When a right to sue upon a civil obligation has lapsed by
extinctive prescription, the obligor who voluntarily performs the
contract cannot recover what he has delivered or the value of
the service he has rendered.
2. When without the knowledge or against the will of the
debtor a third person pays a debt which the obligor is not legally
bound to pay because the action thereon has prescribed, but
the debtor later voluntarily reimburses the third person, the
obligor cannot recover what he has paid.
3. When a minor between eighteen and twenty-one years of
age who has entered into a contract without the consent of the
parent or guardian, after the annulment of the contract
voluntarily returns the whole thing or price received,
notwithstanding the fact that he has not been benefited thereby,
there is no right to demand the thing or price thus returned.
4. When a minor between eighteen and twenty-one* years of
age, who has entered into a contract without the consent of the
parent or guardian, voluntarily pays a sum of money or delivers
a fungible thing in fulfillment of the obligation, there shall be no
right to recover the same from the obligee who has spent or
consumed it in good faith.
5. When, after an action to enforce a civil obligation has failed,
the defendant voluntarily performs the obligation, he cannot
demand the return of what he has delivered or the payment of
the value of the service he has rendered.
6. When a testate or intestate heir voluntarily pays a debt of
the decedent exceeding the value of the property which he
received by will or by the law of intestacy from the estate of the
deceased, the payment is valid and cannot be rescinded by the
payer.
7. When a will is declared void because it has not been
executed in accordance with the formalities required by law, but
one of the intestate heirs, after the settlement of the debts of the
deceased, pays a legacy in compliance with, a clause in the
defective will, the payment is effective and irrevocable.
What do you understand by ESTOPPEL? What are the
different kinds of estoppel? Explain. (1989 Bar Question)
SUGGESTED ANSWER:
The Civil Code enumerates only two (2) kinds of estoppel:
estoppel in pais or, by conduct and estoppel by deed. Estoppel
in pais or by conduct arises when one by his act, representation,
oral admission or by his silence induces another to believe
certain facts to exist and the other realize an act on such belief.
Estoppel by deed is that by virtue of which a party to a deed and
his privies are precluded from asserting as against the other
party any right or title in derogation of the deed or any fact
asserted therein.
ALTERNATIVE EXTENDED ANSWER:
The Civil Code gives two (2) kinds of estoppel, namely: estoppel
in pais and estoppel by deed; and jurisprudence gives a third,
namely: estoppel by laches.
Estoppel in pais or by conduct arises when one by his act,
representation, oral admission or by his silence induces another
to believe certain facts to exist and the other realize an act on
such belief.
Estoppel by deed is that by virtue of which a party to a deed and
his privies are precluded from asserting as against the other
party by which any right or title in derogation of the deed or any
fact asserted therein.
Laches is negligence or omission to assert a right within a
reasonable time giving rise to the presumption that the party
entitled to assert it either has abandoned it or declined to assert
it.
VIII. Joint and Solidary Obligation
Buko, Fermin and Toti bound themselves solidarily to pay
Ayee the amount of P 5,000.00. Suppose Buko paid the
obligation, what is his right as against his co-debtors?
(2012 BAR)
a) Buko cas ask for reimbursement from Fermin
and Toti.
b) Buko can sue Fermin and Toti for damages.
c) Buko can sue for rescission.
d) Buko can claim a refund from Ayee.
Buko, Fermin and Toti bound themselves solidarily to pay
Ayee the sum of P 10,000.00. When the obligation became
due and demandable, Ayee sued Buko for the payment of
the P 10,000.00. Buko moved to dismiss on the ground that
there was failure to implead Fermin and Toti who are
indispensable parties. Will the motion to dismiss prosper?
Why? (2012 BAR)
a) Yes, because Fermin and Toti should have been
impleaded as their obligation is solidary.
b) No, because the creditor may proceed against
any one of the solidary debtors or some or all of
them simultaneously.
c) No, because a motion to dismiss is a prohibited
pleading.
d) Yes, because Fermin and Toti should also pay
their share of the obligation.
Buko, Fermin and Toti are solidarily debtors of Ayee.
Twelve (12) years after the obligation became due and
demandable, Buko paid Ayee and later on asked for
reimbursement of Fermin’s and Toti’s shares. Is Buko
correct? Why? (2012 BAR)
a) No, because the obligation has already
prescribed.
b) Yes, because the obligation is solidary.
c) No, because in solidary obligation any one of
the solidary debtors can pay the entire debt.
d) Yes, because Fermin and Toti will be unduly
enriched at the expense of Buko.
Buko, Fermin and Toti are solidary debtors under a loan
obligation of P 300,000.00 which has fallen due. The
creditor has, however, condoned Fermin’s entire share in
the debt. Since Toti has become insolvent, the creditor
makes a demand on Buko to pay the debt. How much, if
any, may Buko be compelled to pay? (2012 BAR)
a) P 200.000.00
b) P 300,000.00
c) P 100,000.00
d) P 150,000.00
a. Iya and Betty owed Jun P500,000.00 for
advancing their equity in a corporation they joined as
incorporators. Iya and Betty bound themselves solidarily
liable for the debt. Later, Iya and Jun became sweethearts
so Jun condoned the debt of P500,000.00. May lya demand
from Betty P250,000.00 as her share in the debt? Explain
with legal basis.
Answer:
NO, Iya may not demand the 250,000 from Betty because the
entire obligation has been condoned by the creditor Jun. In a
solidary obligation the remission of the whole obligation
obtained by one of the solidary debtors does not entitle him to
reimbursement from his co-debtors (Art. 1220).
b. Juancho, Don and Pedro borrowed P150,000.00
from their friend Cita to put up an internet cafe orally
promising to pay her the full amount after one year.
Because of their lack of business know-how, their
business collapsed. Juancho and Don ended up penniless
but Pedro was able to borrow money and put up a
restaurant which did well. Can Cita demand that Pedro pay
the entire obligation since he, together with the two
others, promised to pay the amount in full after one year?
Defend your answer. (2015 BAR)
Answer:
NO, Cita cannot demand that Pedro pay the entire obligation
because the obligation in this case is presumed to be joint. The
concurrence of two or more creditors or of two or more debtors
in one and the same obligation does not imply that each one
of the former has a right to demand, or that each one of the
latter is bound to render, entire compliance with the prestation
(Art. 1207). In a joint obligation, there is no mutual agency
among the joint debtors such that if one of them is insolvent
the others shall not be liable for his share.
A, B, C and D are the solidary debtors of X for P40,000. X
released D from the payment of his share of PI 0,000. When
the obligation became due and demandable, C turned out
to be insolvent.
Should the share of insolvent debtor C be divided only
between the two other remaining debtors, A and B? (1%)
(2013 BAR)
(A) Yes. Remission of D's share carries with it total
extinguishment of his obligation to the benefit of the
solidary debtors.
(B) Yes. The Civil Code recognizes remission as a mode of
extinguishing an obligation. This clearly applies to D.
(C) No. The rule is that gratuitous acts should be
restrictively construed, allowing only the least
transmission of rights.
(D) No, as the release of the share of one debtor would then
increase the burden of the other debtors without their
consent.
ANSWER:
C – Under Art. 1217 when one of the solidary debtors cannot
because of his insolvency reimburse his share to the debtor
paying, such share shall be borne by all his co-debtors in
proportion to the debt of each
Rudolf borrowed P1 million from Rodrigo and Fernando
who acted as solidary creditors. When the loan matured,
Rodrigo wrote a letter to Rudolf, demanding payment of the
loan directly to him. Before Rudolf could comply, Fernando
went to see him personally to collect and he paid him. Did
Rudolf make a valid payment? (2011 BAR)
(A) No, since Rudolf should have split the payment
between Rodrigo and Fernando.
(B) No, since Rodrigo, the other solidary creditor, already
made a prior demand for payment from Rudolf.
(C) Yes, since the payment covers the whole obligation.
(D) Yes, since Fernando was a solidary creditor, payment
to him extinguished the obligation.
Roy and Carlos both undertook a contract to deliver to Sam
in Manila a boat docked in Subic. Before they could deliver
it, however, the boat sank in a storm. The contract provides
that fortuitous event shall not exempt Roy and Carlos from
their obligation. Owing to the loss of the motor boat, such
obligation is deemed converted into one of indemnity for
damages. Is the liability of Roy and Carlos joint or solidary?
(2011 BAR)
(A) Neither solidary nor joint since they cannot waive the
defense of fortuitous event to which they are entitled.
(B) Solidary or joint upon the discretion of Sam.
(C) Solidary since Roy and Carlos failed to perform their
obligation to deliver the motor boat.
(D) Joint since the conversion of their liability to one of
indemnity for damages made it joint.
A, B, C, D, and E made themselves solidarily indebted to X
for the amount of P50,000.00. When X demanded payment
from A, the latter refused to pay on the following grounds:
a. B is only 16 years old
b. C has already been condoned by X.
c. D is insolvent.
d. E was given by X an extension of 6 months
without the consent of the other four co-
debtors.
State the effect of each of the above defenses put up by A
on his obligation to pay X, if such defenses are found to be
true. (2003 Bar Question)
SUGGESTED ANSWER:
a. A may avail the minority of B as a defense, but only for
B’s share of P10,000.00. A solidary debtor may avail
himself of any defense which personally belongs to a
solidary codebtor, but only as to the share of that co-
debtor.
b. A may avail of the condonation by X of C's share of
P10.000.00. A solidary debtor may, in actions filed by
the creditor, avail himself of all defenses which are
derived from the nature of the obligation and of those
which are personal to him or pertain to his own share.
With respect to those which personally belong to
others, he may avail himself thereof only as regards
 that part of the debt for which the latter are
responsible. (Article 1222, NCC).
c. A may not interpose the defense of insolvency of D as
a defense. Applying the principle of mutual guaranty
among solidary debtors, A guaranteed the payment of
D’s share and of all the other co-debtors. Hence, A
cannot avail of the defense of D’s insolvency.
d. The extension of six (6) months given by X to E may
be availed of by A as a partial defense but only for the
share of E. There is no novation of the obligation but
only an act of liberality granted to E alone.
Four foreign medical students rented the apartment of
Thelma for a period of one year. After one semester, three
of them returned to their home country and the fourth
transferred to a boarding house. Thelma discovered that
they left unpaid telephone bills in the total amount of
P80.000.00. The lease contract provided that the lessees
shall pay for the telephone services in the leased premises.
Thelma demanded that the fourth student pay the entire
amount of the unpaid telephone bills, but the latter is willing
to pay only one fourth of it. Who is correct? Why? (5%)
(2001 Bar Question)
SUGGESTED ANSWER:
The fourth student is correct. His liability is only joint, hence, pro
rata. There is solidary liability only when the obligation expressly
so states or when the law or nature of the obligation requires
solidarity (Art. 1207, CC). The contract of lease in the problem
does not, in any way, stipulate solidarity.
Joey, Jovy and Jojo are solidary debtors under a loan
obligation of P300.000.00 which has fallen due. The creditor
has, however, condoned Jojo’s entire share in the debt.
Since Jovy has become insolvent, the creditor makes a
demand on Joey to pay the debt.
a. How much, if any, may Joey be compelled to
pay? [2%]
b. To what extent, if at all, can Jojo be compelled
by Joey to contribute to such payment? (3%)
(1998 Bar Question)
SUGGESTED ANSWER:
a. Joey can be compelled to pay only the remaining
balance of P200.000, in view of the remission of Jojo's
share by the creditor. (Art. 1219, Civil Code)
b. Jojo can be compelled by Joey to contribute P50,000.
Art. 1217, par. 3, Civil Code provides, "When one of
the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying
the obligation, such share shall be borne by all his co-
debtors, in proportion to the debt of each."
Since the Insolvent debtor's share which Joey paid was
P100,000, and there are only two remaining debtors - namely
Joey and Jojo - these two shall share equally the burden of
reimbursement. Jojo may thus be compelled by Joey to
contribute P50,000.00.
In June 1988, X obtained a loan from A and executed with Y
as solidary co-maker a promissory note in favor of A for the
sum of P200.000.00. The loan was payable at P20,000.00
with interest monthly within the first week of each month
beginning July 1988 until maturity in April 1989 To secure
the payment of the loan, X put up as security a chattel
mortgage on his car, a Toyota Corolla sedan. Because of
failure of X and Y to pay the principal amount of the loan,
the car was extrajudicially foreclosed. A acquired the car at
A’s highest bid of PI20.000.00 during the auction sale.
After several fruitless letters of demand against X and Y, A
sued Y alone for the discovery of P80.000.00 constituting
the deficiency.
Y resisted the suit raising the following defenses:
1) That Y should not be liable at all because X was not
sued together with Y.
2) That the obligation has been paid completely by A’s
acquisition of the car through “dacion en pago" or payment
by cession.
3) That Y should not be held liable for the deficiency of
P80.000.00 because he was not a co-mortgagor in the
chattel mortgage of the car, which contract was executed
by X alone as owner and mortgagor.
4) That assuming that Y is liable, he should only pay the
proportionate sum of P40.000.00.
Decide each defense with reasons. (1992 Bar Question)
SUGGESTED ANSWER:
1. This first defense of Y is untenable. Y is still liable as
solidary debtor. The creditor may proceed against any one of
the solidary debtors. The demand against one does not
preclude further demand against the others so long as the debt
is not fully paid.
2. The second defense of Y is untenable. Y is still liable. The
chattel mortgage is only given as a security and not as payment
for the debt in case of failure to pay. Y as a solidary co-maker is
not relieved of further liability on the promissory note as a result
of the foreclosure of the chattel mortgage.
3. The third defense of Y is untenable. Y is a surety of X and
the extrajudicial demand against the principal debtor is not
inconsistent with a judicial demand against the surety. A
suretyship may co-exist with a mortgage.
4. The fourth defense of Y is untenable. Y is liable for the
entire prestation since Y incurred a solidary obligation with X.
(Arts. 1207. 1216, 1252 and 2047 Civil Code; Bicol Savings and
Loan Associates vs. Guinhawa 188 SCRA 642)
x x x
(b) Define joint and solidary obligations.
(c) A, B, and C borrowed P12,000 from X. This debt is
evidenced by a promissory note wherein the three bound
themselves to pay the debt jointly and severally. However,
according to the note, A can be compelled to pay only on
June 15, 1962, B can be compelled to pay only on June 15,
1964, while C can be compelled to pay only on June 15,
1966. On June 15, 1962, X made a demand upon A to pay
the entire indebtedness but the latter aid only P4,000.00.
Subsequently, because of A’s refusal to pay the balance, X
brought an action against him for collection of the amount.
Will such an action prosper? Reasons. (1988 Bar Question)
SUGGESTED ANSWER:
(b) When there is a concurrence of two or more creditors or of
two or more debtors in one and the same Obligation, such
obligation may be either joint (obligacion mancomunada) or
solidary (obligacion solidaria). A joint obligation may be defined
as an obligation where there is a concurrence of several
creditors or several debtors, or of several creditors and debtors
by virtue which each of the creditors has a right t6 demand, while
each of debtors is bound to render compliance with his
proportionate part of the prestation which constitutes the object
of the obligation. In other words, each of the creditors is entitled
to demand the payment of only a proportionate part of the credit,
while each of the debtors is liable for the payment of only a
proportionate part of the debt. A solidary obligation, on the other
hand, may be defined as an obligation where there is a
concurrence of several creditors, or several debtors, or of
several creditors and debtors, by virtue which each of the
creditors has a right to demand, while each of the debtors is
bound to render entire compliance with the prestation which
constitutes the object of the obligation. In other words, each of
the creditors is entitled to demand the payment of the entire
credit, while each of the debtors is liable for the payment of the
entire debt. (See Art. 1207, CC; 3 Castan, 7th Ed., pp. 65-66.)
(c) For the present, the action will not prosper. It is of course
true that the obligation here is solidary and that its solidary
character is not destroyed by the fact that the debtors are bound
by different periods for payment is expressly provided for in Art.
1211 of the Civil Code. However, in solidary obligations of this
type, the right of the creditor is limited to the recovery of the
amount owed by the debtor whose obligation has already
matured, leaving in suspense his right to recover the shares
corresponding to the other debtors whose obligations have not
yet matured. This restriction upon the creditor’s right does not
destroy the solidary character of the obligation, because
ultimately, he can still compel one and the same debtor, if that
is his wish, to pay the entire obligation; Therefore, in the instant
case, X shall have to wait for June 15, 1964, when B’s obligation
shall have matured, and for June 15, 1966, when C’s obligation
shall have also matured. On June 15, 1966, he can collect
P4,000 from either A or B. On June 15, 1966, he can again
collect another P4,000 from either A or B or C. (See
Ynchaustivs. Yulo, 34 Phil. 978.)
ALTERNATIVE ANSWER:
It now being 1988, the action can no longer prosper because it
has already prescribed. Actions upon written contracts
prescribe in 10 years.
M/S Philippines, operated by United Shipping Lines, loaded
in Japan for shipment to Manila 50 crates of pipes
consigned to Standard Blooming Mills. The shipment was
insured against marine risks with Marine Insurance
Company. Enroute, the ship caught fire resulting in the total
loss of ship and cargo. The insurance company paid the
consignee and thereafter sought recovery and
reimbursement from the United Shipping Lines as
subrogee unto the rights of the insured. Evidence was
presented establishing the fact that from the time the goods
were stored in the ship’s hatch, no regular inspection was
made during the voyage such that the fire must have
started 24 hours before it was noticed.
Could the insurance company claim reimbursement of the
amount it had paid its insured from the United Shipping
Lines? Explain. (1987 Bar Question)
SUGGESTED ANSWER:
Yes. Under Article 2207, the insurer is subrogated to the rights
of the insured against the wrongdoer or the person who violated
the contract when the insurer pays or indemnifies the insured
for the injury or loss arising out of the wrong or breach of
contract complained of. There being a breach of contract of
carriage in view of total loss of the cargo insured, Marine
Insurance Company may claim reimbursement of the amount
paid the insured from the United Shipping Lines.
IX. Extinguishment of Obligations
Dina bought a car from Jai and delivered a check in
payment of the same. Has Dina paid the obligation? Why?
(2012 BAR)
a) No, not yet. The delivery of promissory notes
payable to order, or bills of exchange or other
mercantile documents shall produce the effect of
payment only when they have been cashed, or
when through the fault of the creditor they have
been impaired.
b) Yes, because a check is a valid legal tender of
payment.
c) It depends. If the check is a manager’s check or
cashier’s check it will produce the effect of
payment. If it’s an ordinary check, no payment.
d) Yes, because a check is as good as cash.
The following are the requisites of legal
compensation, except: (2012 BAR)
a) That each of the obligors is bound principally
and that he be the same time a principal creditor
of the other.
b) That both debts consist in a sum of money, or
if the things due are consumable, they be the same
kind, and also of the same quality if the latter has
been stated.
c) That the two (2) debts are not yet due.
d) That they be liquidated and demandable.
X, a dressmaker, accepted clothing materials from Karla to
make two dresses for her day. On the X was supposed to
deliver Karla's dresses, X called up Karla to say that she
had an urgent matter to attend to and will deliver them the
next day. That night, however, a robber broke into her shop
and took everything including Karla's two dresses. X
claims she is not liable to deliver Karla's dresses or to pay
for the clothing materials considering she herself was a
victim of the robbery which was a fortuitous event and over
which she had no control. Do you agree? Why? (2015 BAR)
Answer:
NO, I do not agree with the contention of X. The law provides
that except when it is otherwise declared by stipulation or when
the law provides or the nature of the obligation requires the
assumption of risk, no person shall be liable for those events
which could not be foreseen or which though foreseen were
inevitable (Art. 1174). In the case presented, X cannot invoke
fortuitous event as a defense because she had already incurred
in delay at the time of the occurrence of the loss (Art. 1165).
a. X and Y are partners in a shop offering portrait
painting. Y provided the capital and the marketing while X
was the portrait artist. They accepted the PS0,000.00
payment of Kyla to do her portrait but X passed away
without being able to do it. Can Kyla demand that Y deliver
the portrait she had paid for because she was dealing the
with business establishment and not with the artist
personally? Why or why not?
Answer:
NO, Kyla cannot demand that Y deliver the portrait. The death
of X has the effect of dissolving the partnership (Art. 1830). Also,
while the obligation was contracted by the partnership, it was X
who was supposed to create the portrait for Kyla. Since X died
before creating the portrait, the obligation can no longer be
complied because of impossibility of performance (Art. 1266). In
obligations to do, the debtor shall be released when the
prestation becomes legally or physically impossible without the
debtor’s fault.
b. In this jurisdiction, is a joint venture (i.e., a group
of corporations contributing resources for a specific
project and sharing the profits therefrom) considered a
partnership? (2015 BAR)
Answer:
YES, under Philippine law, a joint venture is understood to mean
an organization formed for some temporary purpose and is
hardly distinguishable form a partnership since its elements are
similar which are: community of interest in business, sharing of
profits, and losses, and a mutual right of control (Primelink
Properties v. Lazatin, G.R. No. 167379, June 27, 2006 citing
Blackner v. Mcdermott, 176 F. 2d 498[1949]).
J.C. Construction (J.C.) bought steel bars from Matibay
Steel Industries (MSI) which is owned by Buddy
Batungbacal. J.C. failed to pay the purchased materials
worth P500,000.00 on due date. J.C. persuaded its client
Amoroso with whom it had receivables to pay its obligation
to MSI. Amoroso agreed and paid MSI the amount of
P50,000.00. After two (2) other payments, Amoroso stopped
making further payments.
Buddy filed a complaint for collection of the balance of the
obligation and damages against J.C. J.C. denied any
liability claiming that its obligation was extinguished by
reason of novation which took place when MSI accepted
partial payments from Amoroso on its behalf.
Was the obligation of J.C. Construction to MSI extinguished
by novation? Why? (2014 BAR)
Answer:
NO, the obligation of JC was not extinguished by novation.
Novation may either be objective or subjective. Subjective
novation takes place by the substitution of debtor or subrogation
of a third person to the rights of the creditor. Novation by
substituting a new debtor may take place even without the
knowledge or against the will of the original debtor but not
without the consent of the creditor. Moreover, novation must be
expressed and it cannot be implied and there must be an
agreement that the old obligation is extinguished. In the case of
JC, it does not appear that MSI had agreed to release JC from
the obligation. Hence, the obligation of JC was not extinguished.
Upon the proposal of a third person, a new debtor
substituted the original debtor without the latter’s consent.
The creditor accepted the substitution. Later, however, the
new debtor became insolvent and defaulted in his
obligation. What is the effect of the new debtor’s default
upon the original debtor? (2011 BAR)
(A) The original debtor is freed of liability since novation
took place and this relieved him of his obligation.
(B) The original debtor shall pay or perform the obligation
with recourse to the new debtor.
(C) The original debtor remains liable since he gave no
consent to the substitution.
(D) The original debtor shall pay or perform 50% of the
obligation to avoid unjust enrichment on his part.
Allan bought Billy’s property through Carlos, an agent
empowered with a special power of attorney (SPA) to sell
the same. When Allan was ready to pay as scheduled, Billy
called, directing Allan to pay directly to him. On learning of
this, Carlos, Billy's agent, told Allan to pay through him as
his SPA provided and to protect his commission. Faced
with two claimants, Allan consigned the payment in court.
Billy protested, contending that the consignation is
ineffective since no tender of payment was made to him. Is
he correct? (2011 BAR)
(A) No, since consignation without tender of payment is
allowed in the face of the conflicting claims on the plaintiff.
(B) Yes, as owner of the property sold, Billy can demand
payment directly to himself.
(C) Yes, since Allan made no announcement of the
tender.
(D) Yes, a tender of payment is required for a valid
consignation.
Anne owed Bessy P1 million due on October 1, 2011 but
failed to pay her on due date. Bessy sent a demand letter to
Anne giving her 5 days from receipt within which to pay.
Two days after receipt of the letter, Anne personally offered
to pay Bessy in manager's check but the latter refused to
accept the same. The 5 days lapsed. May Anne’s obligation
be considered extinguished? (2011 BAR)
(A) Yes, since Bessy’s refusal of the manager’s check,
which is presumed funded, amounts to a satisfaction of the
obligation.
(B) No, since tender of payment even in cash, if refused,
will not discharge the obligation without proper consignation in
court.
(C) Yes, since Anne tendered payment of the full amount
due.
(D) No, since a manager’s check is not considered legal
tender in the Philippines.
X borrowed money from a bank, secured by a mortgage on
the land of Y, his close friend. When the loan matured, Y
offered to pay the bank but it refused since Y was not the
borrower. Is the bank’s action correct? (2011 BAR)
(A) Yes, since X, the true borrower, did not give his
consent to Y’s offer to pay.
(B) No, since anybody can discharge X’s obligation to his
benefit.
(C) No, since Y, the owner of the collateral, has an interest
in the payment of the obligation.
(D) Yes, since it was X who has an obligation to the bank.
Sarah had a deposit in a savings account with Filipino
Universal Bank in the amount of five Million pesos
(P5,000,000.00). To buy a new car, she obtained a loan from
the same bank in the amount of P1,200,000.00, payable in
twelve monthly installments. Sarah issued in favor of the
bank in post-dated checks, each in the amount of
P100,000.00 to cover the twelve monthly installment
payments. On the third, fourth and fifth months, the
corresponding checks bounced.
The bank then declared the whole obligation due, and
proceed to deduct the amount of one million pesos
(P1,000,000.00) from Sarah's deposit after notice to her that
this is a form of compensation allowed by law. Is the bank
correct? Explain. (4%) (2009 Bar Question)
SUGGESTED ANSWER:
No the bank is not correct, while the Bank is correct about the
applicability of compensation, it was not correct as to the
amount compensated.
A bank deposit is a contract of loan, where the depositor is the
creditor and the bank the debtor. Since Sarah is also the debtor
of the bank with respect to the loan, both are mutually principal
debtors and creditors of each other. Both obligations are due,
demandable and liquidated but only up to the extent of
P300,000 (covering the unpaid third, fourth and fifth monthly
installments). The entire one million was not yet due because
the loan has no acceleration clause in case of default. And since
there is no retention or controversy commenced by third
persons and communicated in due time to the debtor, then all
the requisites of legal compensation are present but only up to
the amount of P300,000. The bank, therefore, may deduct
P300,000 pesos from Sarah's bank deposit by way of
compensation.
Eduardo was granted a loan by XYZ Bank for the purpose
of improving a building which XYZ leased from him.
Eduardo, executed the promissory note (“PN”) in favor of
the bank, with his friend Recardo as cosignatory. In the PN,
they both acknowledged that they are “individually and
collectively” liable and waived the need for prior demand.
To secure the PN, Recardo executed a real estate mortgage
on his own property. When Eduardo defaulted on the PN,
XYZ stopped payment of rentals on the building on the
ground that legal compensation had set in. Since there was
still a balance due on the PN after applying the rentals, XYZ
foreclosed the real estate mortgage over Recardo’s
property.
Recardo opposed the foreclosure on the ground that he is
only a co-signatory; that no demand was made upon him
for payment, and assuming he is liable, his liability should
not go beyond half the balance of the loan. Further,
Recardo said that when the bank invoked compensation
between the rentals and the amount of the loan, it
amounted to a new contract or novation, and had the effect
of extinguishing the security since he did not give his
consent (as owner of the property under the real estate
mortgage) thereto.
a) Can XYZ Bank validly assert legal compensation?
(2%) (2008 Bar Question)
MAIN SUGGESTED ANSWER:
XYZ Bank may validly assert the partial compensation of both
debts, but it should be facultative compensation because not all
of the five requisites of legal compensation are present (Article
1279, N.C.C.). The payment of the rentals by XYZ bank is not
yet due, but the principal obligation of loan where both Eduardo
and Recardo are bound to pay the entire loan, is due and
demandable without need of demand. XYZ Bank may declare
its obligation to pay rentals as already due and demand
payment from any of the two debtors.
ALTERNATIVE ANSWER:
Legal compensation can be validly asserted between the bank,
Eduardo and Recardo. This is a case of facultative obligation,
thus, the bank can assert partial compensation. Banks have an
inherent right to set off where both obligations are due and
demandable (Art. 1279, CC)
x x x ejectment case does not constitute a waiver or abandonment of
c) Does Recardo have basis under the Civil Code for
claiming that the original contract was novated? (2%) (2008
Bar Question)
SUGGESTED ANSWER:
One of the three kinds of novation is applicable. There is no
objective novation, whether express or implied, because there
is no change in the object or principal conditions of the
obligation. There is no substitution of debtors, either.
Compensation is considered as abbreviated or simplified
payment and since Recardo bound himself solidarily with
Eduardo, any facultative compensation which occurs does not
result in partial legal subrogation. Neither Eduardo nor Recardo
is a third person interested in the obligation under Art 1302, CC.
AB Corp. entered into a contract with XY Corp. whereby the
former agreed to construct the research and laboratory
facilities of the latter. Under the terms of the contract, AB
Corp. agreed to complete the facility in 18 months, at the
total contract price of P10 million. XY Corp. paid 50% of the
total contract price, the balance to be paid upon completion
of the work. The work started immediately, but AB Corp.
later experienced work slippage because of labor unrest in
his company. AB Corp.’s employees claimed that they are
not being paid on time; hence, the work slowdown. As of
the 17th month, work was only 45% completed. AB Corp.
asked for extension of time, claiming that its labor
problems is a case of fortuitous event, but this was denied
by XY Corp. When it became certain that the construction
could not be finished on time, XY Corp. sent written notice
canceling the contract, and requiring AB Corp. to
immediately vacate the premises.
x x x
b) Can XY Corp. unilaterally and immediately cancel the
contract? (2%) (2008 Bar Question)
MAIN SUGGESTED ANSWER:
No. XY Corp cannot unilaterally and immediately cancel the
contract because there is need for a judicial action of rescission.
The provisions of Art. 1191 of the Civil Code providing for
rescission in reciprocal obligations can only be invoked judicially
(Escueta v. Pando, 76 Phil. 256 [1946]; Republic v. Hospital de
San Juan de Dios, 84 Phil. 820 [1949]).
ALTERNATIVE ANSWER:
Yes, XY Corp. may unilaterally cancel the obligation but this is
subject to the risk that the cancellation of the reciprocal
obligation being challenged in court and if AB Corp. succeeds,
then XY Corp. will be declared in default and be liable for
damages (U.P. v. de los Angeles, 35 SCRA 102 [1970]).
TX filed a suit for ejectment against BD for nonpayment of
condominium rentals amount to P150,000. During the
pendency of the case, BD offered and TX accepted the full
amount due as rentals from BD, who then filed a motion to
dismiss the ejectment suit on the ground that the action is
already extinguished.
Is BD’s contention correct? Why or why not? Reason. (5%)
(2004 Bar Question)
SUGGESTED ANSWER:
BD’s contention is not correct. TX can still maintain the suit for
ejectment. The acceptance by the lessor of the payment by the
lessee of the rentals in arrears even during the pendency of the
the ejectment case. (Spouses Clutario v. CA, 216 SCRA 341
[1992]).
On July 1, 1998. Brian leased an office space in a building
for a period of five years at a rental rate of PI.000.00 a
month. The contract of lease contained the proviso that “in
case of inflation or devaluation of the Philippine peso, the
monthly rental will automatically be increased or decreased
depending on the devaluation or inflation of the peso to the
dollar." Starting March 1, 2001, the lessor increased the
rental to P2.000.00 a month, on the ground of inflation
proven by the fact that the exchange rate of the Philippine
peso to the dollar had increased from P25.00=$1.00 to
P50.00=$1.00. Brian refused to pay the increased rate and
an action for unlawful detainer was filed against him. Will
the action prosper? Why? (5%) (2001 Bar Question)

SUGGESTED ANSWER:
The unlawful detainer action will not prosper. Extraordinary
inflation or deflation is defined as the sharp decrease in the
purchasing power of the peso. It does not necessarily refer to
the exchange rate of the peso to the dollar. Whether or not there
exists an extraordinary Inflation or deflation is for the courts to
decide. There being no showing that the purchasing power of
the peso had been reduced tremendously, there could be no
inflation that would justify the increase in the amount of rental to
be paid. Hence, Brian could refuse to pay the increased rate.
ALTERNATIVE ANSWER:
The action will not prosper. The existence of inflation or deflation
requires an official declaration by the Bangko Sentral ng
Pilipinas.
ALTERNATIVE ANSWER:
The unlawful detainer action will prosper. It is a given fact in the
problem, that there was inflation, which caused the exchange
rate to double. Since the contract itself authorizes the increase
in rental in the event of an inflation or devaluation of the
Philippine peso, the doubling of the monthly rent is reasonable
and is therefore a valid act under the very terms of the contract.
Brian's refusal to pay is thus a ground for ejectment.
The sugar cane planters of Batangas entered into a long
term milling contract with the Central Azucarera de Don
Pedro Inc. Ten years later, the Central assigned its rights to
the said milling contract to a Taiwanese group which would
take over the operations of the sugar mill. The planters filed
an action to annul the said assignment on the ground that
the Taiwanese group was not registered with the Board of
Investments. Will the action prosper or not? Explain briefly.
(5%) (2001 Bar Question)
(Note: The question presupposes knowledge and requires the
application of the provisions of the Omnibus investment Code,
which properly belongs to Commercial law)
SUGGESTED ANSWER:
The action will prosper not on the ground invoked but on the
ground that the farmers have not given their consent to the
assignment. The milling contract imposes reciprocal obligations
on the parties. The sugar central has the obligation to mill the
sugar cane of the farmers while the latter have the obligation to
deliver their sugar cane to the sugar central. As to the obligation
to mill the sugar cane, the sugar central is a debtor of the
farmers. In assigning its rights under the contract, the sugar
central will also transfer to the Taiwanese its obligation to the
sugar cane of the farmers. This will amount to a novation of the
contract by substituting the debtor with a third party. Under
Article 1293 of the Civil Code, such substitution cannot take
effect without the consent of the creditor. The farmers, who are
creditors as far as the obligation to mill their sugar cane is
concerned, may annul such assignment for not having given
their consent thereto.
ALTERNATIVE ANSWER:
The assignment is valid because there is absolute freedom to
transfer the credit and the creditor need not get the consent of
the debtor. He only needs to notify him.
VII. Arturo borrowed P500.000.00 from his father. After he
had paid P300.000.00, his father died. When the
administrator of his father’s estate requested payment of
the balance of P200.000.00, Arturo replied that the same
had been condoned by his father as evidenced by a
notation at the back of his check payment for the
P300.000.00 reading: “In full payment of the loan". Will this
be a valid defense in an action for collection? (3%) (2000
Bar Question)
SUGGESTED ANSWER:
It depends. If the notation “in full payment of the loan" was
written by Arturo's father, there was an implied condonation of
the balance that discharges the obligation. In such case, the
notation is an act of the father from which condonation may be
inferred. The condonation being implied, it need not comply with
the formalities of a donation to be effective. The defense of full
payment will, therefore, be valid.
When, however, the notation was written by Arturo himself, it
merely proves his intention in making that payment but in no
way does it bind his father (Yam u. CA, G.R. No. 104726, 11
February 1999). In such case, the notation was not the act of his
father from which condonation may be inferred. There being no
condonation at all, the defense of full payment will not be valid.
ALTERNATIVE ANSWER:
If the notation was written by Arturo's father, it amounted to an
express condonation of the balance which must comply with the
formalities of a donation to be valid under the 2nd paragraph of
Article 1270 of the New Civil Code. Since the amount of the
balance is more than 5,000 pesos, the acceptance by Arturo of
the condonation must also be in writing under Article 748. There
being no acceptance in writing by Arturo, the condonation is void
and the obligation to pay the balance subsists. The defense of
full payment is, therefore, not valid. In case the notation was not
written by Arturo's father, the answer is the same as the answers
above.
A. Define compensation as a mode of extinguishing an
obligation, and distinguish it from payment. [2%]
B. X, who has a savings deposit with Y Bank in the sum of
P1,000,000.00 incurs a loan obligation with the said
Bank in the sum of P800,000.00 which has become due.
When X tries to withdraw his deposit. Y Bank allows
only P200,000.00 to be withdrawn, less service
charges, claiming that compensation has extinguished
its obligation under the savings account to the
concurrent amount of X’s debt. X contends that
compensation is improper when one of the debts, as
here, arises from a contract of deposit. Assuming that
the promissory note signed by X to evidence the loan
does not provide for compensation between said loan
and his savings deposit, who is correct? [3%] (1998 Bar
Question)
SUGGESTED ANSWER:
A. Compensation is a mode of extinguishing to the concurrent
amount, the obligations of those persons who in their own right
are reciprocally debtors and creditors of each other (Tolentino,
1991 ed., p. 365, citing 2 Castan 560 and Francia vs. LAC, 162
SCRA 753). It involves the simultaneous balancing of two
obligations in order to extinguish them to the extent in which the
amount of one is covered by that of the other. (De Leon, 1992
ed., p. 221, citing 6 Manresa 401).
Payment means not only delivery of money but also
performance of an obligation (Article 1232, Civil Code). In
payment, capacity to dispose of the thing paid and capacity to
receive payment are required for debtor and creditor,
respectively: in compensation, such capacity is not necessary,
because the compensation operates bylaw and not by the act of
the parties. In payment, the performance must be complete;
while in compensation there may be partial extinguishment of
an obligation (Tolentino, supra)
B. Y bank is correct. Art. 1287, Civil Code, does not apply. All
the requisites of Art. 1279, Civil Code are present. In the case
of Gullas vs. PNB (62 Phil. 519), the Supreme Court held: “The
Civil Code contains provisions regarding compensation (set off)
and deposit. These portions of Philippine law provide that
compensation shall take place when two persons are
reciprocally creditor and debtor of each other. In this connection,
it has been held that the relation existing between a depositor
and a bank is that of creditor and debtor, x xx As a general rule,
a bank has a right of set off of the deposits in its hands for the
payment of any indebtedness to it on the part of a depositor."
Hence, compensation took place between the mutual
obligations of X and Y bank.
In 1983 PHILCREDIT extended loans to Rivett-Strom
Machineries. Inc. (RIVETT-STROM), consisting of US$10
Million for the cost of machineries imported and directly
paid by PHILCREDIT, and 5 Million in cash payable in
installments over a period of ten (10) years on the basis of
computed at the rate of exchange of the U.S. dollar vis-a-
vis the Philippine peso at the time of payment.
RIVETT-STROM made payments on both loans which if
based on the rate of exchange in 1983 would have fully
settled the loans.
PHILCREDIT contends that the payments on both loans
should be based on the rate of exchange existing at the
time of payment, which rate of exchange has been
consistently increasing, and for which reason there would
still be a considerable balance on each loan.
Is the contention of PHILCREDIT correct? Discuss fully.
(1995 Bar Question)
SUGGESTED ANSWER:
As regards the loan consisting of dollars, the contention of
PHILCREDIT is correct. It has to be paid in Philippine currency
computed on the basis of the exchange rate at the time of
payment of each installment, as held in Kalalo v. Luz, 34 SCRA
337. As regards the P5 Million loan in Philippine pesos,
PHILCREDIT is wrong. The payment thereof cannot be
measured by the peso-dollar exchange rate. That will be
violative of the Uniform Currency Act (R.A. 529) which prohibits
the payment of an obligation which, although to be paid in
Philippine currency, is measured by a foreign currency.
(Palanca v. CA, 238 SCRA 593).
In 1978, Bobby borrowed P 1,000,000.00 from Chito payable
in two years. The loan, which was evidenced by a
promissory note, was secured by a mortgage on real
property. No action was filed by Chito to collect the loan or
to foreclose the mortgage. But in 1991, Bobby, without
receiving any amount from Chito, executed another
promissory note which was worded exactly as the 1978
promissory note, except for the date thereof, which was the
date of its execution.
1) Can Chito demand payment on the 1991 promissory note
in 1994?
2) Can Chito foreclose the real estate mortgage if Bobby
fails to make good his obligation under the 1991
promissory note? (1994 Bar Question)
SUGGESTED ANSWER:
1) Yes, Chito can demand payment on the 1991 promissory
note in 1994. Although the 1978 promissory note for PI million
payable two years later or in 1980 became a natural obligation
after the lapse of ten (10) years, such natural obligation can be
a valid consideration of a novated promissory note dated in
1991 and payable two years later, or in 1993.
All the elements of an implied real novation are present:
a. an old valid obligation;
b. a new valid obligation;
c. capacity of the parties;
d. animus novandi or intention to novate; and
e. The old and the new obligation should be
incompatible with each other on all material
points (Article 1292). The two promissory notes
cannot stand together, hence, the period of
prescription of ten (10) years has not yet lapsed.
2) No. The mortgage being an accessory contract prescribed
with the loan. The novation of the loan, however, did not
expressly include the mortgage, hence, the mortgage is
extinguished under Article 1296 of the NCC. The contract has
been extinguished by the novation or extinction of the principal
obligation insofar as third parties are concerned.
Dino sued Ben for damages because the latter had failed to
deliver the antique Mercedes Benz car Dino had purchased
from Ben, which was —by agreement—due for delivery on
December 31. 1993. Ben, in his answer to Dino's complaint,
said Dino's claim has no basis for the suit, because as the
car was being driven to be delivered to Dino on January 1.
1994, a reckless truck driver had rammed into the Mercedes
Benz. The trial court dismissed Dino's complaint, saying
Ben's obligation had, indeed, been extinguished by force
majeure.
Is the trial court correct? (1994 Bar Question)
SUGGESTED ANSWER:
No. Article 1262, New Civil Code provides, “An obligation which
consists in the delivery of a determinate thing shall be
extinguished if it should be lost or destroyed without the fault of
the debtor, and before he has incurred in delay.
The judgment of the trial court is incorrect. Loss of the thing due
by fortuitous events or force majeure is a valid defense for a
debtor only when the debtor has not incurred delay.
Extinguishment of liability for fortuitous event requires that the
debtor has not yet incurred any delay. In the present case, the
debtor was in delay when the car was destroyed on January 1,
1993 since it was due for delivery on December 31, 1993. (Art.
1262 Civil Code)
It depends whether or not Ben, the seller, was already in default
at the time of the accident because a demand for him to deliver
on due date was not complied with by him. That fact not having
been given in the problem, the trial court erred in dismissing
Dino's complaint. Reason: There is default making him
responsible for fortuitous events including the assumption of risk
or loss.
If on the other hand Ben was not in default as no demand has
been sent to him prior to the accident, then we must distinguish
whether the price has been paid or not. If it has been paid, the
suit for damages should prosper but only to enable the buyer to
recover the price paid. It should be noted that Ben, the seller,
must bear the loss on the principle of res peril domino. He
cannot be held answerable for damages as the loss of the car
was not imputable to his fault or fraud. In any case, he can
recover the value of the car from the party whose negligence
caused the accident. If no price has been paid at all, the trial
court acted correctly in dismissing the complaint.
In 1971, Able Construction, Inc. entered into a contract with
Tropical Home Developers, Inc. whereby the former would
build for the latter the houses within its subdivision. The
cost of each house, labor and materials included, was P
100,000.00. Four hundred units were to be constructed
within five years. In 1973, Able found that it could no longer
continue with the job due to the Increase in the price of oil
and its derivatives and the concomitant worldwide
spiralling of prices of all commodities, including basic raw
materials required for the construction of the houses. The
cost of development had risen to unanticipated levels and
to such a degree that the conditions and factors which
formed the original basis of the contract had been totally
changed. Able brought suit against Tropical Homes praying
that the Court relieve it of its obligation.
Is Able Construction entitled to the relief sought? (1993 Bar
Question)
SUGGESTED ANSWER:
Yes, the Able Construction, Inc. is entitled to the relief sought
under Article 1267, Civil Code. The law provides: “When the
service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released
therefrom, in whole or in part."
What is dation in payment and how is it distinguished from
assignment of property? (1989 Bar Question)
SUGGESTED ANSWER:
Dation in payment is a special form of payment whereby
property is alienated to the creditor in satisfaction of a debt in
money.
Assignment of property, or payment by cession, is a special
form of payment whereby the debtor cedes or assigns his
property to his creditors so that the proceeds thereof will be
applied in payment of his debts.
ALTERNATIVE ANSWER:
In dation in payment whereby property is given by the debtor to
the creditor in payment of a debt in money, there is only one
creditor. In assignment of property, there are several creditors.
In the former, the debtor may be solvent. In the latter, there may
be partial insolvency.
In the former, particular property is ceded. In the latter, all the
property of the debtor is ceded.
In the former, the particular obligation is extinguished in whole
or in part as agreed upon. In the latter, it releases the debtor
from the net proceeds only, unless otherwise agreed or
intended.
A. Under the Civil Code, what are the different special
forms of payments?
B. What are the special requisites of consignation in
order that it shall produce the effect of payment?
C. A treasury warrant payable to Rosenne and indorsed
by Boni was cashed at the Philippine National Bank. The
warrant was subsequently dishonored by the Philippine
Treasury. The Bank then applied the deposit of Boni to the
payment of the amount paid for the warrant. Is the action of
the Bank in accordance with law? Reasons. (1988 Bar
Question)
SUGGESTED ANSWER:
A. Under the Civil Code, there are actually four special forms of
payment. They are (1) application of payment (Arts. 1252-1254);
(2) dation in payment (Art. 1245); (3) payment by cession (Art.
1255); and (4) tender of payment and consignation (Arts. 1256-
1261). Strictly speaking, however, application of payment, by its
very nature, is not a special form of payment.
B. In order that consignation shall produce the effect of
payment, it is not only essential that it must conform with
all of the requisites of payment, but it is also essential that
certain special requirements prescribed by law must be
complied with. The debtor must show:
a. That there is a debt due;
b. That the consignation has been made either
because the creditor to whom tender of payment
was made refused to accept the payment without
just cause, or because any of the cause stated by
law for effective consignation without previous
tender of payment exists (Art. 1256, CC);
c. The previous notice of the consignation had been
given to the persons interested in the fulfillment
of the obligation (Art. 1256, CC);
d. That the thing or amount due had been placed at
the disposal of judicial authority (Art. 1258, par. 1,
CC); and
e. That after the consignation had been made, the
persons interested in the fulfillment of the
obligation had been notified thereof (Art. 1258,
par. 2, CC).
C. Yes, the action of the Bank is in accordance with law. The
facts stated in the above problem are exactly the same as
those in the case of Gullas vs. National Bank, 62 Phil. 519,
where the Supreme Court held that a bank has a right of
set-off of the deposit in its hands for the payment of any
indebtedness to it on the part of the depositor. When-a
person deposits his money at a bank, whether such deposit
is fixed, savings or current, a relationship of creditor and
debtor is established between the depositor and bank. It is,
therefore, evident that all of the requisites for compensation
are present in this case.
Committee’s Recommendation Re: (a):
The committee recommends that if application for payment is
not mentioned by the examinee, full credit must likewise be
given.
Suppose that under an obligation imposed by a final
judgment, the liability of the judgment debtor is to pay the
amount of P6,000.00 but both the judgment debtor and the
judgment creditor subsequently entered into a contract
reducing the liability of the former to only P4,000.00, is
there an implied novation which will have the effect of
extinguishing the judgment obligation and creating a
modified obligatory relation? Reasons. (1988 Bar Question)
SUGGESTED ANSWER:
There is no implied novation in this case. We see no valid
objection to the judgment debtor and the judgment creditor in
entering into an agreement regarding the monetary obligation of
the former under the judgment referred to. The payment by the
judgment debtor of the lesser amount of P4,000, accepted by
the creditor without any protest or objection and acknowledged
by the latter as in full satisfaction of the money judgment,
completely extinguished the judgment debt and released the
debtor from his pecuniary liability. Novation results in two
stipulations—one to extinguish an existing obligation, the other
to substitute a new one in its place. Fundamental it is that
novation effects a substitution or modification of an obligation by
another or an extinguish-ment of one obligation by the creation
of another. In the case at hand, we fail to see what new or
modified obligation arose out of the payment by judgment debtor
of the reduced amount of P4,000 to the creditor. Additionally, to
sustain novation necessitates thjit the same be so declared in
unequivocal terms clearly and unmistakably shown by the ex-,
press agreement of the parties or by acts of equivalent import—
or that there is complete and substantial incompatibility between
the two obligations. (Sandico vs. Piguing, 42SCRA 322.)
ALTERNATIVE ANSWERS:
1. There remains an obligation on the basis of the facts given.
There is no showing in the facts that the P4,000 has been paid
so it created a modified obligatory obligation no longer based on
the judgment but based on the novatory agreement.
2. There is no implied novation. Instead there has been a partial
remission in the amount of P2,000 leaving P4,000 still
enforceable under the judgment.
3. It can amount to a compromise. A final judgment which has
not yet been fully satisfied may be the subject of a compromise.
The compromise partakes the nature of a novation. Article 204;
provides that:
“If one of the parties fails or refuses to abide by the compromise,
the other party may either enforce the compromise or regard it
as rescinded and insist upon his original demand.” (Gatchalian
vs. Arlegui 75 SCRA 234; Dormitorio vs. Fernandez 72 SCRA
388)
CONTRACTS
It is a principle which holds that contracts must be binding
to both parties and its validity and effectivity can never be
left to the will of one of the parties. (2012 BAR)
a) Obligatory force of contracts
b) Mutuality of contracts
c) Autonomy of contracts
d) Relativity of contracts
It refers to the rule that a contract is binding not
only between parties but extends to the heirs, successors
in interest, and assignees of the parties, provided that the
contract involved transmissible rights by their nature, or by
stipulation or by law. (2012 BAR)
a) Obligatory force of contracts
b) Mutuality of contracts
c) Autonomy of contracts
d) Relativity of contracts
It is rule which holds that the freedom of the parties to
contract includes the freedom to stipulate, provided the
stipulations are not contrary to law, morals, good customs,
public order or public policy. (2012 BAR)
a) Obligatory force of contracts
b) Mutuality of contracts
c) Autonomy of contracts
d) Relativity of contracts
Contracts take effect only between the parties or their
assigns and heirs, except where the rights and obligations
arising from the contract are not transmissible by their
nature, by stipulation, or by provision of law. In the latter
case, the assigns or the heirs are not bound by the
contracts. This is known as the principle of (2011 BAR)
(A) Relativity of contracts.
(B) Freedom to stipulate.
(C) Mutuality of contracts.
(D) Obligatory force of contracts.
I. Essential Requisites
An offer becomes ineffective on any of the following
grounds, except: (2012 BAR)
a) Death, civil interdiction, insanity/insolvency of
either party before acceptance is conveyed.
b) Acceptance of the offer by the offeree.
c) Qualified/conditional acceptance of the offer,
which becomes counter-offer.
d) Subject matter becomes illegal/impossible
before acceptance is communicated.
Which of the following statements is correct? (2012 BAR)
a) Offers in interrelated contracts are perfected
upon consent.
b) Offers in interrelated contracts require a single
acceptance.
c) Business advertisements are definite offers
that require specific acceptance.
d) Advertisements for Bidders are only invitations
to make proposals and the advertiser is not bound
to accept the highest/lowest bidder, unless it
appears otherwise.
Lolita was employed in a finance company. Because she
could not account for the funds entrusted to her, she was
charged with estafa and ordered arrested. In order to
secure her release from jail, her parents executed a
promissory note to pay the finance company the amount
allegedly misappropriated by their daughter. The finance
company then executed an affidavit of desistance which led
to the withdrawal of the information against Lolita and her
release from jail. The parents failed to comply with their
promissory note and the finance company sued them for
specific performance. Will the action prosper or not? (3%)
(2000 Bar Question)
SUGGESTED ANSWER:
The action will prosper. The promissory note executed by
Lolita’s parents is valid and binding, the consideration being the
extinguishment of Lolita’s civil liability and not the stifling of the
criminal prosecution.
ALTERNATIVE ANSWER:
The action will not prosper because the consideration for the
promissory note was the non-prosecution of the criminal case
for estafa. This cannot be done anymore because the
information has already been filed in court and to do it is illegal.
That the consideration for the promissory' note is the stifling of
the criminal prosecution is evident from the execution by the
finance company of the affidavit of desistance immediately after
the execution by Lolita’s parents of the promissory note. The
consideration being illegal, the promissory' note is invalid and
may not be enforced by court action.
Merle offered to sell her automobile to Violy for P60,000.00.
After inspecting the automobile, Violy offered to buy it for
P50,000.00. This offer was accepted by Merle. The next day,
Merle offered to deliver the automobile, but Violy being
short of funds, secured postponement of the delivery,
promising to pay the price “upon arrival of the steamer,
Helena”. The steamer however never arrived because it was
wrecked by a typhoon and sank somewhere off the Coast
of Samar.
1. Is there a perfected contract in this case?
Why?
 2. Is the promise to pay made by Violy
conditional or with a term? Why?
3. Can Merle compel Violy to pay the purchase
price and to accept the automobile? Why?
(1988 Bar Question)
SUGGESTED ANSWER:
1. Yes, there is a perfected contract because there is
already a concurrence between the offer and the
acceptance with respect to the object and the cause
which shall constitute the contract. Such concurrence
is manifested by the acceptance made by Merle of the
offer made by Violy.
2. I submit that the promise to pay made by Violy is not
conditional, but with a term. The promise is to pay the
P50,000 upon arrival in this port of the steamer,
Helena* not if the steamer Helena shall arrive in this
port. Hence, the promise is with regard to the date of
arrival and not with regard to the fact of arrival.
3. Yes, Merle can compel Violy to pay the purchase price
and to accept the automobile. She will, however, have
to wait for the date when the steamer, Helena, would
have arrived were it not for the shipwreck. After all,
there is already a perfected contract lesser amount of
P4,000, accepted by the creditor without any protest
or objection and acknowledged by the latter as in full
satisfaction of the money judgment, completely
extinguished the judgment debt and released the
debtor from his pecuniary liability.
ALTERNATIVE ANSWERS:
2. The promise to pay is subject to a term. When there is a pre-
existing obligation and the “condition” affects only the time of
payment such “condition” can be considered as a period. In
other words, the parties must be deemed to have contemplated
a period.
3. Yes Merle can compel Violy to pay the purchase price and to
accept the automobile but only after the parties would have fixed
the period. Failing in that, the courts may be asked to fix the
period. Article 1180 provides that:
“When the debtor binds himself to pay when his means permit
him to do so, the obligation shall be deemed to be one with a
period, subject to the provisions of article 1197.”
II. Kinds of Contracts
The following are the ways by which innominate contracts
are regulated, except: (2012 BAR)
a) By the stipulation of the parties.
b) By the general principles of quasi-contracts
and delicts
c) By the rules governing the most analogous
nominate contracts.
d) By the customs of the place.
An obligation which is based on equity and natural law is
known as: (2012 BAR)
a) pure
b) quasi-contract
c) civil
d) natural
Mr. A, a businessman, put several real estate properties
under the name of his eldest son X because at that time, X
was the only one of legal age among his four children. He
told his son he was to hold those assets for his siblings
until they become adults themselves. X then got married.
After 5 years, Mr. A asked X to transfer the titles over three
properties to his three siblings, leaving two properties for
himself. To A’s surprise, X said that he can no longer be
made to transfer the properties to his siblings because
more than 5 years have passed since the titles were
registered in his name. Do you agree? Explain. (2015 BAR)
Answer:
NO, the transfer of the properties in the name of X was without
cause or consideration and it was made for the purpose of
holding these properties in trust for the siblings of X. If the
transfer was by virtue of a sale, the same is void for lack of
cause or consideration. Hence, the action to declare the sale
void is imprescriptible (Heirs of Ureta vs. Ureta, G.R. No.
165748 September 14, 2011).
Marvin offered to construct the house of Carlos for a very
reasonable price of P900,000.00, giving the latter 10 days
within which to accept or reject the offer. On the fifth day,
before Carlos could make up his mind, Marvin withdrew his
offer.
What is the effect of the withdrawal of Marvin's offer? (2%)
(2005 Bar Question)
SUGGESTED ANSWER:
The withdrawal of Marvin’s offer is valid because there was no
consideration paid for the option. An option is a separate
contract from the contract which is the subject of the offer, and
if not supported by ajpty consideration, the option contract is not
deemed perfected. Thus, Marvin may withdraw the offer at any
time before acceptance of the offer.
d. Will your answer be the same if Carlos paid Marvin
P10,000.00 as consideration for that option? Explain. (2%)
(2005 Bar Question)
SUGGESTED ANSWER:
If Carlos paid P10,000.00 as consideration for that option,
Marvin cannot withdraw the offer prior to expiration of the option
period. The option is a separate contract and if founded on
consideration is a perfected option contract and must be
respected by Marvin.
Supposing that Carlos accepted the offer before
Marvin could communicate his withdrawal thereof?
Discuss the legal consequences. (2%) (2005 Bar Question)
SUGGESTED ANSWER:
If Carlos has already accepted the offer and such acceptance
has been communicated to Marvin before Marvin
communicates the withdrawal, the acceptance creates a
perfected construction contract, even if no consideration was as
yet paid for the option. If Marvin does not perform his obligations
under the perfected contract of construction, he shall be liable
for all consequences arising from the breach thereof based on
any of the available remedies which may be instituted by Carlos,
such as specific performance, or rescission with damages in
both cases.
Distinguish briefly but clearly between:
Inexistent contracts and annullable contracts. (2004 Bar
Question)
SUGGESTED ANSWER:
In inexistent contracts, one or more requisites of a valid contract
are absent. In anullable contracts, all the elements of a contract
are present except that the consent of one of the contracting
parties was vitiated or one of them has no capacity to give
consent.
Inexistent contracts are considered as not having been entered
into and, therefore, void ab initio. They do not create any
obligation and cannot be ratified or validated, as there is no
agreement to ratify or validate. On the other hand, annullable or
voidable contracts are valid until invalidated by the court but
may be ratified.
Jo-Ann asked her close friend, Aissa, to buy some
groceries for her in the supermarket. Was there a nominate
contract entered into between Jo-Ann and Aissa? In the
affirmative, what was it? Explain. (2003 Bar Question)
SUGGESTED ANSWER:
Yes, there was a nominate contract. On the assumption that
Aissa accepted the request of her close friend Jo-Ann to buy
some groceries for her in the supermarket, what they entered
into was the nominate contract of Agency. Article 1868 of the
New Civil code provides that by the contract of agency a person
binds himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
ALTERNATIVE ANSWER:
Yes, they entered into a nominate contract of lease of service in
the absence of a relation of principal and agent between them
(Article 1644, New Civil Code).
Distinguish consensual from real contracts and name at
least four (4) kinds of real contracts under the present law.
(3%) (1998 Bar Question)
SUGGESTED ANSWER:
Consensual contracts are those which are perfected by mere
consent (Art. 1315, Civil Code). Real contracts are those which
are perfected by the delivery of the object of the obligation. (Art.
1316, Civil Code)
Examples of real contracts are deposit, pledge, commodatum
and simple loan (mutuum).
III. Formality
Which of the following contracts of sale is void? (2012 BAR)
a) Sale of EGM’s car by KRP, EGM’s agent, whose
authority is not reduced into writing.
b) Sale of EGM’s piece of land by KRP, EGM’s
agent, whose authority is not reduced into writing.
c) Sale of EGM’s car by KRP, a person stranger to
EGM, without EGM’s consent or authority.
d) Sale of EGM’s piece of land by KRP, a person
stranger to EGM, without EGM’s consent or
authority.
The following are solemn contracts (Contracts which must
appear in writing), except: (2012 BAR)
a) Donations of real estate or of movables if the
value exceeds P 5,000.00.
b) Stipulation to pay interest in loans.
c) Sale of land through an agent (authority must
be in writing).
d) Construction contract of a building.
Suppose that in an oral contract, which by its terms is not
to be performed within one year from the execution thereof,
one of the contracting parties has already complied within
the year with the obligations imposed upon him by said
contract, can the other party avoid fulfillment of those
incumbent upon him by invoking the Statute of Frauds?
(1988 Bar Question)
SUGGESTED ANSWER:
No, he cannot. This is so, because the Statute of Frauds aims
to prevent and not to protect fraud. It is well- settled that when
the law declares that an agreement which by its terms is not to
be performed within a year from the making thereof is
unenforceable by action, unless the same* or some note or
memorandum thereof, be in writing, and subscribed by the party
charged, or by his agent, it refers only to an agreement which
by its terms is not to be performed on either side within a year
from the execution thereof. Hence, one which has already been
fully performed on one side within a year is taken out of the
operation of the statute. (Phil. Nat. Bank vs. Phil. Vegetable Oil
Co., 49 Phil. 857; Shoemaker vs. La Tondena, 68 Phil. 24.)
Which of the following actions or defenses are meritorious:
(1%) (2013 BAR)
(A) An action for recovery of downpayment paid under a
rescinded oral sale of real property.
(B) A defense in an action for ejectment that the lessor
verbally promised to extend or renew the lease.
(C) An action for payment of sum of money filed against
one who orally promised to answer another's debt in case
the latter defaults.
(D) A defense in an action for damages that the debtor has
sufficient, but unliquidated assets to satisfy the credit
acquired when it becomes due.
(E) None of the above.
ANSWER:
A - In Asia Productions v. Pano (205 SCRA 458) the SC
allowed recovery of the partial payment made by the buyer of a
building under a verbal contract of sale because the buyer is not
seeking the enforcement of the contract and at any rate it is not
covered by the statute of frauds.
Arlene owns a row of apartment houses in Kamuning,
Quezon City. She agreed to lease Apartment No. 1 to Janet
for a period of 18 months at the rate of P10,000 per month.
The lease was not covered by any contract. Janet promptly
gave Arlene two (2) months deposit and 18 checks covering
the rental payment for 18 months. This show of good faith
prompted Arlene to promise Janet that should Arlene
decide to sell the property, she would give Janet the right
of first refusal. (2013 BAR)
(1) Not long after Janet moved in, she received news that
her application for a Master of Laws scholarship at King's
College in London had been approved. Since her
acceptance of the scholarship entailed a transfer of
residence, Janet asked Arlene to return the advance rental
payments she made. Arlene refused, prompting Janet to file
an action to recover the payments. Arlene filed a motion to
dismiss, claiming that the lease on which the action is
based, is unenforceable.
If you were the judge, would you grant Arlene's motion?
(1%)
(A) Yes, I will grant the motion because the lease contract
between Arlene and Janet was not in writing, hence, Janet
may not enforce any right arising from the same contract.
(B) No, I will not grant the motion because to allow Arlene
to retain the advance payments would amount to unjust
enrichment.
(C) Yes, I will grant the motion because the action for
recovery is premature; Janet should first secure a judicial
rescission of the contract of lease.
(D) No. I will not grant the motion because the cause of
action does not seek to enforce any right under the contract
of lease.
ANSWER:
D – recovery of advance rental payments made is not covered
by the statute of frauds because its purpose it not to perpetrate
fraud but to prevent fraud
(2) Assume that Janet decided not to accept the
scholarship and continued leasing Apartment No. 1.
Midway through the lease period, Arlene decided to sell
Apartment No. 1 to Jun in breach of her promise to Janet to
grant her the right of first refusal. Thus, Janet filed an action
seeking the recognition of her right of first refusal, the
payment of damages for the violation of this right, and the
rescission of the sale between Arlene and Jun.
b) rescissible
c) void
d) unenforceable
The following are rescissible contracts, except: (2012 BAR)
a) Entered into by guardian whenever ward suffers
damage more than ¼ of value of property.
b) Agreed upon in representation of absentees, if
absentee suffers lesion by more than ¼ of value of
property.
c) Contracts where fraud is committed on creditor
(accion pauliana).
d) Contracts entered into by minors.
The following are the requisites before a contract entered
into in fraud of creditors may be rescinded, except: (2012
BAR)
a) There must be credited existing prior to the
celebration of the contract.
b) There must be fraud, or at least, the intent to
commit fraud to the prejudice of the creditor
seeking rescission.
c) The creditor cannot in any legal manner collect
his credit (subsidiary character of rescission)
d) The object of the contract must be legally in the
possession of a 3rd person in good faith.

Is Janet's action meritorious? (1%) The following are the characteristics of a voidable
contract, except: (2012 BAR)
(A) Yes, under the Civil Code, a promise to buy and sell a a) Effective until set aside.
determinate thing is reciprocally demandable. b) May be assailed/attacked only in an action for
(B) No, the promise to buy and sell a determinate thing was that purpose.
not supported by a consideration. c) Can be confirmed or ratified.
(C) Yes, Janet's right of first refusal was clearly violated d) Can be assailed only by either party.
when the property was not offered for sale to her before it
was sold to Jun. The following are void contracts, except: (2012 BAR)
(D) No, a right of first refusal involves an interest over real a) Pactum commissorium
property that must be embodied in a written contract to be b) Pactum de non alienando
enforceable. c) Pactum leonina
(E) None of the above. d) Pacto de retro

ANSWER: When bilateral contracts are vitiated with vices of consent,

D – although the lease itself is valid even if verbal, the right of they are rendered (2011 BAR)
first refusal is a different matter because a verbal promise to
grant a right of first refusal which in essence is a promise to sell (A) rescissible.
is unenforceable under the Statute of Frauds (B) void.
(C) unenforceable.
IV. Defective Contracts (D) voidable.

The presence of a vice of consent vitiates the consent of a

If one of the parties to the contract is without juridical
party in a contract and this renders the contract (2011 BAR)
capacity, the contract is: (2012 BAR)
a) voidable
(A) Rescissible.
b) rescissible
(B) Unenforceable.
c) void
(C) Voidable.
d) unenforceable
(D) Void.
When both parties to the contract are minors, the contract
Which of the following expresses a correct principle of law?
is: (2012 BAR)
a) voidable Choose the best answer. (2012 BAR)
b) rescissible a) Failure to disclose facts when there is a duty to
reveal them, does not constitute fraud.
c) void
b) Violence or intimidation does not render a
d) unenforceable
contract annullable if employed not by a
contracting party but by a third person.
When the consent of one of the parties was vitiated, the
c) A threat to enforce one’s claim through
contract is: (2012 BAR)
competent authority, if the claim is legal or just,
a) voidable
b) rescissible does not vitiate consent.
d) Absolute simulation of a contract always
c) void
results in a void contract.
d) unenforceable

Consent was given by one in representation of another but V. Effect of Contracts

without authority. The contract is: (2012 BAR)
a) voidable
Which of the following statements is wrong? (2012 BAR)
a) Creditors are protected in cases of contracts
intended to defraud them.
b) Contracts take effect only between the parties,
their assign and heirs, except in case where the
rights and obligations arising from the contract
are not transmissible by their nature, or by
stipulation or by provision of law.
c) If a contract should contain some stipulation in
favor of a third person, he may demand its
fulfillment provided he communicated his
acceptance to the obligor before its revocation.
d) In contracts creating real rights, third persons
who come into possession of the object of the
contract are not bound thereby.
Which phrase most accurately completes the statement –
Any third person who induces another to violate his
contract: (2012 BAR)
a) shall be liable for damages only if he is a party
to the same contract.
b) shall be liable for damages to the other
contracting party.
c) shall not be liable for damages to the other
contracting party.
d) shall not be liable for damages if the parties are
in pari delicto.
DON, an American businessman, secured parental consent
for the employment of five minors to play certain roles in
two movies he was producing at home in Makati. They
worked at odd hours of the day and night, but always
accompanied by parents or other adults. The producer paid
the children talent fees at rates better than adult wages.
But the social worker, DEB, reported to OSWD that these
children often missed going to school. They sometimes
drank wine, aside from being exposed to drugs. In some
scenes, they were filmed naked or in revealing costumes.
In his defense. DON contended all these were part of artistic
freedom and cultural creativity. None of the parents
complained, said DON. He also said they signed a contract
containing a waiver of their right to file any complaint in any
office or tribunal concerning the working conditions of their
children acting in the movies.
Is the waiver valid and binding? Why or why not? Explain.
(5%) (2004 Bar Question)
SUGGESTED ANSWER:
The waiver is not valid. Although the contracting parties may
establish such stipulations, clauses, terms and conditions as
they may deem convenient, they may not do so if such are
contrary to law, morals, good customs, public order, or public
policy (Article 1306, Civil Code). The parents’ waiver to file a
complaint concerning the working conditions detrimental to the
moral well-being of their children acting in the movies is in
violation of the Family Code and Labor laws. Thus, the waiver
is invalid and not binding.
The Child Labor Law is a mandatory and prohibitory law and the
rights of the child cannot be waived as it is contrary to law and
public policy.
Printado is engaged in the printing business. Suplico
supplies printing paper to Printado pursuant to an order
agreement under which Suplico binds himself to deliver the
same volume of paper every month for a period of 18
months, with Printado in turn agreeing to pay within 60
days after each delivery. Suplico has been faithfully
delivering under the order agreement for 10 months but
thereafter stopped doing so, because Printado has not
made any payment at all. Printado has also a standing
contract with publisher Publico for the printing of 10,000
volumes of school textbooks. Suplico was aware of said
printing contract. After printing 1,000 volumes, Printado
also fails to perform under its printing contract with
Publico. Suplico sues Printado for the value of the unpaid
deliveries under their order agreement. At the same time
Publico sues Printado for damages for breach of contract
with respect to their own printing agreement. In the suit
filed by Suplico, Printado counters that: (a) Suplico cannot
demand payment for deliveries made under their order
agreement until Suplico has completed performance under
said contract; (b) Suplico should pay damages for breach
of contract; and (c) Suplico should be liable for Printado’s
breach of his contract with Publico because the order
agreement between Suplico and Printado was for the
benefit of Publico. Are the contentions of Printado tenable?
Explain your answer as to each contention. (5%) (2002 Bar
Question)
SUGGESTED ANSWER:
No, the contentions of Printado are untenable.
Printado having failed to pay for the printing paper covered by
the delivery invoices on time, Suplico has the right to cease
making further delivery. And the latter did not violate the order
agreement (Integrated Packaging Corporation v. Court of
Appeals, (333 SCRA 170, G.R. No. 115117, June 8, 2000).
Suplico cannot be held liable for damages, for breach of
contract, as it was not he who violated the order agreement, but
Printado.
Suplico cannot be held liable for Printado's breach of contract
with Publico. He is not a party to the agreement entered into by
and between Printado and Publico. Theirs is not a stipulation
pour autrui. [Aforesaid] Such contracts do could not affect third
persons like Suplico because of the basic civil law principle of
relativity of contracts which provides that contracts can only bind
the parties who entered into it, and it cannot favor or prejudice
a third person, even if he is aware of such contract and has
acted with knowledge thereof. (Integrated Packaging
Corporation v. CA, supra.)
Roland, a basketball star, was under contract for one year
to play-for-play exclusively for Lady Love. Inc. However,
even before the basketball season could open, he was
offered a more attractive pay plus fringes benefits by Sweet
Taste, Inc. Roland accepted the offer and transferred to
Sweet Taste. Lady Love sues Roland and Sweet Taste for
breach of contract. Defendants claim that the restriction to
play for Lady Love alone is void, hence, unenforceable, as
it constitutes an undue interference with the right of Roland
to enter into contracts and the impairment of his freedom
to play and enjoy basketball.
Can Roland be bound by the contract he entered into with
Lady Love or can he disregard the same? Is he liable at all?
How about Sweet Taste? Is it liable to Lady Love? (1991 Bar
Question)
SUGGESTED ANSWER:
Roland is bound by the contract he entered into with Lady Love
and he cannot disregard the same, under the principles of
obligatoriness of contracts. Obligations arising from contracts
have the force of law between the parties.
Yes, Roland is liable under the contract as far as Lady Love is
concerned.
He is liable for damages under Article 1170 of the Civil Code
since he contravened the tenor of his obligation. Not being a
contracting party. Sweet Taste is not bound by the contract but
it can be held liable under Art. 1314. The basis of its liability is
not prescribed by contract but is founded on quasi-delict,
assuming that Sweet Taste knew of the contract. Article 1314 of
the Civil Code provides that any third person who induces
another to violate his contract shall be liable for damages to the
other contracting party.

ALTERNATIVE ANSWER:

It is assumed that Lady Love knew of the contract.

Neither Roland nor Sweet Taste would be liable, because the

restriction in the contract is violative of Article 1306 as being
contrary to law, morals, good customs, public order or public
policy.

X sold Y 100 sacks of rice that Y was to pick up from X’s

rice mill on a particular date. Y did not, however, appear on
the agreed date to take delivery of the rice. After one week,
X automatically rescinded the sale without notarial notice
to Y. Is the rescission valid? (2011 BAR)

(A) Yes, automatic rescission is allowed since, having the

character of movables and consumables, rice can easily
deteriorate.
(B) No, the buyer is entitled to a customary 30-day
extension of his obligation to take delivery of the goods.
(C) No, since there was no express agreement regarding
automatic rescission.
(D) No, the seller should first determine that Y was not
justified in failing to appear.

A is the lessee of an apartment owned by Y. A allowed his

married but employed daughter B, whose husband works
in Kuwait, to occupy it. The relationship between Y and A
soured. Since he has no reason at all to eject A, Y, in
connivance with the City Engineer, secured from the latter
an order for the demolition of the building. A immediately
filed an action in the Regional Trial Court to annul the order
and to enjoin its enforcement. Y and A were able to forge a
compromise agreement under which A agreed to a twenty
percent (20%) increase in the monthly rentals. They further
agreed that the lease will expire two (2) years later and that
in the event that Y would sell the property, either A or his
daughter B shall have the right of first refusal. * The
Compromise Agreement was approved by the court. Six (6)
months before the expiration of the lease, A died. Y sold the
property to the Visorro Realty Corp. without notifying B. B
then filed an action to rescind the sale in favor of the
corporation and to compel Y to sell the property to her
since under the Compromise Agreement, she was given the
right of first refusal which, she maintains, is a stipulation
pour atrui under Article 1311 of the Civil Code.

Is she correct? (1991 Bar Question)

SUGGESTED ANSWER:

B is not correct. Her action cannot prosper. Article 1311 requires

that the third person intended to be benefited must
communicate his acceptance to the obligor before the
revocation. There is no showing that B manifested her
acceptance to Y at any time before the death of A and before
the sale. Hence, B cannot enforce any right under the alleged
stipulation pour atrui.