BOOK IV

 
OBLIGATIONS AND CONTRACTS
 
Title. I. - OBLIGATIONS
 
CHAPTER 1
GENERAL PROVISIONS
 
Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

Obligation Defined – is a juridical relation whereby a person (called creditor) may

demand from another called (debtor) the observance of a determinate conduct, and in
case of breach, may obtain satisfaction from the assets of the latter. (Arias Ramos’
definition)

- The duty of person (called creditor or obligee) to satisfy a specific demandable

claim of another person (called debtor or obligor) which if breached is
enforceable in court.

RIGHTS & OBLIGATIONS, Correlated. –Where there is a RIGHT or power to demand,

there is a corresponding obligation, or, an imposition upon a person of a definite
conduct.

 RIGHT is the active aspect of obligation

-the right to demand the object of the obligation is a credit

 OBLIGATION is the passive aspect.

-the duty to give, to do, or not to do, is the debt

Q. What are the 4 definite Elements of Obligation?

A. 1. Active Subject
2. Passive Subject
3. Prestation
4. Efficient Cause (juridical tie or vinculum juris)

ELEMENTS OF OBLIGATION:
Personal element:
1.) Active Subject – the one who is demanding the performance of the
obligation; known as creditor or obligee;
2.) Passive Subject – the one bound to perform the prestation to give, to do
or not to do; known as debtor or obligor.

Object of Obligation:
3.) Prestation or Object – the subject matter of the obligation which has an
economic value or susceptible of pecuniary (monetary) substitution in case
of non-compliance;
- the object of an obligation is not a thing, but a particular CONDUCT of
the debtor, which may consist in the following:

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 a.) Obligation TO GIVE – delivery of property to the creditor; also known
as Real Obligation (example: obligation to deliver the thing in Sale, Donation,
Deposit, Pledge etc.)

b.) Obligation TO DO – covers all kinds of works or services, whether

physical or mental; also known as Personal Obligation (example:
contract for painting, modelling, singing, dancing, construction, etc.)
c.) Obligation NOT TO DO – consists in refraining from doing some acts;
id. (example: like the obligation of a lessee not to sublease the house, not to store
explosives or highly flammable materials in the building)

Q. What are the requisites of a valid Prestation?

A. 1. It must be possible – physically and juridically
2. It must be determinate, or at least determinable
3. It must have a possible equivalent in money

4.) Efficient Cause – the juridical or legal tie, or the vinculum, by virtue of
which the debtor or obligee has become bound to perform the prestation.
o This makes the obligation enforceable. Parties enter into an obligation
voluntarily. But once the parties entered & perfected it, it becomes
involuntary.

o This juridical relation may arise from:

i. LAW (relation bet. Husband and wife giving rise to the obligation of mutual support);

ii. BILATERAL ACTS (contracts giving rise to obligations stipulated therein by parties)

iii. UNILATERAL ACTS (such as crimes and quasi-delicts giving rise to civil liabilities
or obligations such as restitution, payment of reparation and consequential damages).

KINDS OR CLASSIFICATION OF OBLIGATIONS:

A. As to Judicial Enforceability

1.) Civil Obligation – is an obligation which if not fulfilled when it becomes due
and demandable, may be enforced in court to compel their performance. (ex:
contract of loan)

2.) Natural Obligation – may not be enforced in court but binding on the party
who makes it according to conscience, equity and justice. (ex: payment by debtor
of loan despite prescription). See Arts. 1423 and 1430.

Art. 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their
performance. Natural obligations, not being based on positive law but on equity and natural law, do not
grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they
authorize the retention of what has been delivered or rendered by reason thereof. Some natural
obligations are set forth in the following articles.

Art. 1430. 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.

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Q. What are the Sources of Obligations?

Art. 1157. Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)

SOURCES OF OBLIGATIONS: DISCUSSION

1. LAW

Art. 1158. Obligations derived from law are not presumed. Only those
expressly determined in this Code or in special laws are demandable, and
shall be regulated by the precepts of the law which establishes them; and as
to what has not been foreseen, by the provisions of this Book. (1090)

Nota Bene:
• Obligations derived from law are not presumed.
• Unless the obligations are expressly provided by law (in this Code or special laws),
they are not demandable and enforceable.

Example: An employer has no legal obligation to give free legal assistance or provide a lawyer to
its security guard employee who was forced to pay for his defense after he shot a gate crasher
who attacked him with a bolo after the employee refused entrance as he is without a ticket.
There is no law requiring it. (Dela Cruz vs. Northern Theatrical Enterprises, 95 Phil. 739)

Illustrate: only those determined in the Civil Code and special laws are demandable
Example: Husband must pay the medical fee of doctor even if he is not the one who called him
to attend to the medical emergency of the wife. Husband and wife are legally required to
support each other. Plaintiff doctor must file action against the husband, not the parents -in
-law. (Pelayo v. Lauron, 12 Phil. 453)

Family Code – “Art. 68. The husband and wife are obliged to live together,
observe mutual love, respect and fidelity, and render mutual help and support.”

Other obligations arising from Law – duty to pay taxes; duty to deliver legitime of
compulsory heirs (Art. 51); obligation of lower estates to allow or receive the waters
naturally descending from higher estates (Civil Code; Art. 50, P.D No. 1067, Water
Code).

2. CONTRACTS

Art. 1159. Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith.

Obligation arising from Contract –

 An obligation is a juridical necessity to give, to do or not to do. (Art. 1156)

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 Contract is a meeting of the minds between two persons whereby one binds
himself with respect to the other, to give something or to render some service (Art.
1305).

Autonomy of Will; Freedom to Contract; Validity of Contract –

 Art. 1159 expresses the AUTONOMY OF WILL in contracts; (also known as
obligatory force of contract)

 The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy. (Art. 1306 – Freedom to
Contract principle)

 It presupposes that the contract is valid and enforceable.

 Exception to Arts. 1159 & 1306 Freedom to Contract – if the prestations are
unconscionable or unreasonable. [i.e. if prestation of contract is contrary to law, morals,
good customs, public order or public policy]

Example: unconscionable Attorney’s Fees may be disregarded by the court, it is not necessary to
show as in other contracts, that it is contrary to morality or public policy. It is enough that it is
unreasonable or unconscionable. (Borcena v. IAC, 147 SCRA 111; iniquitous liquidated damages, may
be reduced - Art. 2226)

o The principle of autonomy of will of the parties also called as “obligatory

force of contracts” is one of basic legal principles of contract. But this is now
subject to several restrictions; the exception has now expanded.
o Article 1306 gives the five restrictions: not contrary to law, morals, good
customs, public order, or public policy. Those which are against these five
restrictions are void, as can be seen in Article 1409 (1).

o Others: also restrictions such as social justice, to alleviate the rising tide of
social discontent of the underprivileged; environmental protection and
preservation, to try solve concerns about climate change and the desire to
preserve our natural patrimony for the next generations.

3. QUASI-CONTRACTS

Art. 1160. Obligations derived from quasi-contracts shall be subject to the

provisions of Chapter 1, Title XVII, of this Book. (n)

CONCEPT of QUASI-CONTRACT: Art. 2142 – Certain lawful, voluntary and unilateral

acts give rise to the juridical relation of quasi contract to the end that no one shall be
unjustly enriched or benefitted at the expense of another.

Q. What are the CHARACTERISTICS OF A QUASI-CONTRACT that distinguish it from Crime, or

Quasi-delict, or, Contract?

1. Act must be lawful to distinguish it from crime or delict;

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2. Act must be voluntary to differentiate it from quasi-delict which is based on fault,
negligence or lack of foresight;

3. Act must be unilateral to distinguish it from ordinary contract where there is

meeting of minds of two parties (Art. 1305)

Q. What are the PRINCIPAL KINDS OF QUASI-CONTRACT under the Civil Code?
a.) NEGOTIORUM GESTIO (Arts. 2144, 2150 ) – when a person takes charge of
another’s abandoned business or property without the owner’s authority. Refund
must be made to the gestor for necessary and useful expenses.

b.) SOLUTIO INDEBITI (Art. 2154) – when something is received even if there is no
right to demand it and it was delivered thru mistake. Recipient has the obligation
or duty to return it.

Art. 2154. If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises.

Art. 2159. Whoever in bad faith accepts an undue payment, shall pay legal interest if a sum of
money is involved, or shall be liable for fruits received or which should have been received if
the thing produces fruits.

4. ACTS OR OMISSIONS PUNISHED BY LAW

Art. 1161. Civil obligations arising from criminal offenses shall be governed
by the penal laws, subject to the provisions of Article 2177, and of the
pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and
of Title XVIII of this Book, regulating damages.

Q. What is the general rule re civil obligations or liability arising from crime?
A. Art. 100 of the Revised Penal Code states: “every person criminally liable for
a felony is also civilly liable”.

Exception: If no private party is offended.

Q. What is included in CIVIL LIABILITY or Obligations arising from criminal offenses?

A. Art. 104 of the Revised Penal Code provides the extent of civil liability arising from
crimes such as:
1. Restitution (see Art. 105, RPC)

2. Reparation of the damage caused (Art. 106, RPC)

3. Indemnification for consequential damages (Art. 107, RPC)

RULES GOVERNING CIVIL OBLIGATIONS ARISING FROM CRIMINAL OFFENSES:

1. Penal laws such as Arts. 100 to 113 of the Revised Penal Code.

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 2. Quasi-delict under Art. 2176 of the Civil Code (but plaintiff cannot recover
damages twice for the same act or omission of defendant).

3. Human Relation provisions such as Arts. 26, 29, 30, 32, 33, 34, 35, and 36 of
the Civil Code

4. Title XVII of the Civil Code re Damages in Arts. 2195-2235.

5. QUASI-DELICTS

Art. 1162. Obligations derived from quasi-delicts shall be governed by the

provisions of Chapter 2, Title XVII of this Book, and by special laws.

• QUASI-DELICT = TORT = CULPA AQUILIANA

• Obligations arising from Quasi-delicts – duty of tort feasor to pay damages for
injuries or damages due to his fault, omission or negligence (Art. 2176).

Q. What is the basis of civil liability in QUASI-DELICT ?

A. The obligation or liability in quasi delict is founded on the principle of EQUITY.
o A person is responsible not only for his voluntary willful acts, but also for those
acts performed with lack of foresight, care and diligence, which caused harm to
another or the society. Quasi-delict is broader in scope than obligations that may
arise from crimes, for as long as there is fault or negligence resulting in damage to
another, one may be held civilly liable.

o Source/Basis: “Art. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter.”

Example: Jose was driving his car thru a road near a school. He did not slow down despite
approaching a pedestrian lane a few meters ahead. He hit a child crossing the pedestrian as a result
despite braking immediately. Here, Jose will be liable for damages for having inflicted physical
injury to the child even if there was no contractual relation between Jose and the child. The
Obligation arose due to Jose’s fault/negligence which caused injury to another.

o In Quasi-Delict, the fault or negligence of the defendant is the proximate cause of

the damage or injury. (Elcano v. Hill, 77 SCRA 98)

Q. What is the difference in Obligations arising from Quasi-delict and Contract ?

A. In Quasi-Delict, the obligation arises only when there is a violation or breach of the
diligence required by law, even if no contractual relations exist between the parties.
Breach and quasi-delict are inseparable.

Example: A drives a car recklessly, hits & injured a child B. Here, A’s obligation to B
arises when he hit/injured B. Driver A violated his obligation to always observe
care and diligence while driving.

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 “ Civil Code - Art. 20. Every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the same.”

 In contracts, obligations already exist once the contract is perfected, whether or

not there is breach thereof. Contract and breach may be separated.

Example: Seller Al sold watch to Bo-buyer for P8,000. Al has the obligation to
deliver the watch to Bo, and Bo has the obligation to pay P5,000 to Al
under the contract.

Q. In quasi-delict, can a person be held liable for the act or omission (fault) of another person/s?

A. Yes. The obligation or liability is imposed due to negligence in the supervision of

person/s who are under their responsibility. Here, the person exercising supervision is
solidarily liable for the act or omission of the tort feasor.

Art. 2180 of the Civil Code provides -

Article 2180. The obligation imposed by article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible.

The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons who are
under their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.

The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which
case what is provided in article 2176 shall be applicable.

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages
caused by their pupils and students or apprentices, so long as they remain in their custody.

The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.
(1903a)

Article 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the
former, who was in the vehicle, could have, by the use of the due diligence, prevented the
misfortune. It is disputably presumed that a driver was negligent, if he had been found guilty
of reckless driving or violating traffic regulations at least twice within the next preceding two
months.
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 If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.

Read: Gutierrez v. Gutierrez, 56 Phil. 177 ( Note - respective liabilities or obligations arising
from breach of contract of carriage or culpa contractual vs. quasi-delict or culpa aquiliana arising from
negligence )