Obligations and Contracts Lecture by DLSU Law

I. Obligations
 Definition: Juridical necessity to give, to do, or not to do
o Word Juridical is very important
 Distinguishes civil obligation from natural and from a moral obligation where in
case of non-performance of obligation, the former can be remedied by a judicial
proceeding to demand specific performance.
 Civil obligation specifically is the juridical necessity to give to do or not to do.
o Natural Obligation: on the other hand is defined under Article 1423 of the Civil Code
wherein it is no longer a civil obligation but out of the voluntariness of the debtor, he
performs an obligation.
 Example
 Support of Children
o Moral Obligation: Same with natural obligation where you cannot go tyo court to file an
action demanding specific performance.
 Examples
 It is the moral obligation of Catholics to hear mass every Sunday
 Elements of an Obligation
o Parties
 Active Subject: The creditor
 As he is the one that demands specific performance and file a suit in
court to do so if necessary.
 Passive Subject: The debtor
o Object: Prestation
 Conduct to be performed by the passive subject
 Prestation to give, to do, or not to do
 The “thing” is called the object of the prestation
 In contracts however, the object is not the same definition as an object here.
 Instead, it refers to the “thing”
 For an obligation to be valid, the object as an element of the obligation must be
(DULAP):
 Determinate
 Useful
 Lawful
 Assessable in money
 Possible
o Juridical Tie
 In case of non-performance, active subject has cause to go to court

Classification of Obligation

 Types of Obligations based on the peculiarity of the prestation

o Pure Obligations
o Conditional Obligation
 o Obligation with a Period
 Types of Obligation based on the number of Parties
o Joint Obligation
o Solidary Obligation
 Types of Obligation based on the number of prestations to be rendered
o Individual Obligations
o Multiple Obligations
 Alternative Obligations
 Facultative Obligations
 Types of Obligations based on the quality of an object
o Positive: To perform
o Negative: Not to perform
o Specific: Determinate Thing
o Generic: Indeterminate Thing
o Divisible: Can be performed partially
o Indivisible: Cannot be partially performed
o Principal: Obligation attached to the contract
o Accessory: Obligation arising from principal

Sources of Obligations (Art 1157):

 Law
o Example: Obligation to support under the Family Code, Payment of taxes under the NIRC
 Contract
o SEE Section on Contracts
 Quasi-Contract: based on the concept that no man shall unjustly enriched himself over the
expense of the other
o Negotiorium Gestio: Takes place when a person without the consent of the owner,
assumes the management of an abandoned business;
 Example: A house is on fire and you saved it without the owner asking for help.
 Compensation may be asked for.
o Solutio Indebitii: Payment by mistake
 Based on the concept of unjust enrichment
 Delicts:
o Under Article 100 of the RPC, a person criminally liable is civilly liable
 Damages incurred arising from a criminal act.
 General Rule: Once a criminal case has been filed, the civil case is deemed
instituted
 Exceptions (Under the rules of court -Section 1, Rule 111):
o if the civil case has been filed first
o If there is a waiver in filing a civil action
o If there is a reservation in filing an independent civil action
 When should you reserve to file an independent civil
action?
  Before the prosecution presents evidence in the
criminal case
 What happens if the accused dies during the proceedings?
 Will civil liability be extinguished? – It is also extinguished, Under Art
100 of the Revised Penal Code, civil liability is extinguished, unless it be
based on other sources of obligation. (So, you resort to negligence
under quasi-delict)
 Quasi-Delicts
o Damages arising from negligence

Duties of the Obligor

 Classified according to the prestation involved

o In a Prestation to give:
 In a Specific Thing:
 Deliver the Determinate Thing
 Preservation of the thing exercising different degrees of due diligence
depending on the nature and stipulation of obligations
o In common carrier on the delivery of goods under Art. 1733 is
extraordinary diligence
o In Article 1755, it is utmost diligence for public transportation
(higher than extraordinary)
o Under Article 2000, for innkeepers in case of necessary
deposits, degree of diligence is not only the diligence of a good
father to the family.
o General rule on diligence: Diligence of a good father to his
family.
o Parties may dictate the degree of diligence in the conduct of
obligations unless there is a dictation of law requiring a
standard of diligence.
 Delivery of accessions and accessories
o Distinction between accession and accessory:
 Anything that is attached, produced, and incorporated
are accessions
 For “attached”: If there is an attempt to remove
it, there is injury.
o By injury it means that it destroys the
character of the thing
 Accessory: an ornament
o Once detached, it will not cause injury
 Delivery of fruits
o When the obligation to deliver arises
 To give a generic thing:
 Thing cannot be segregated from the rest of its class.
 o So the duty of the obligor is to deliver the same quality and
quantity specified
 To do:
 Perform the act as promised and not substitute it.
 If you cannot do it, you can ask someone to do the act at your expense
o This will not apply if the quality of the act is considered/A
personal obligation.
 Example: If a specific person is obligated to act.
 Not to do:
 Not to perform the conduct prohibited
 If it has been done, it has to be undone at the expense of the debtor
o If impossible, obligor is liable for damages.

Delay/ Mora:

 Types (SAC)
o Mora Solviendi
 Delay on the part of the debtor
o Mora Accepiendi
 Delay on the part of the creditor
o Compensatio Morae
 Delay on both parties
 General rule on delay: No demand, no delay
o Exceptions:
 If the obligation expressly declares a delay;
 So always add a stipulation “without the need of demand”
 If the law expressly declares it;
 Example: Income Tax Payment
 Where time is a controlling motive for the establishment of the contract.
 Demand would be useless
o In reciprocal obligations, there is delay from the moment that one of the parties deliver
their obligation.
 Because reciprocal obligation is about immediate fulfillment.
 Effect of delay: Obligor will be liable for damages even if there is fortuitous event

Fortuitous Event

 Types
o Act of God (Casa Fortuito)
o Act of Man (Fuerza Mayor)
 General rule: Debtor is released from liability arising from his obligation.
o Requisites for Fortuitous Events for it qualify as a relief (Lasam vs. Smith)
 Independent of Human Will (specifically the defendant obligor)
 Impossible to foresee and even if foreseen, it cannot be avoided
 That it is impossible for the obligor to fulfill his obligation in a normal way
  Debtor has no concurrent fault (not in delay, or not negligent)
o Exceptions to the General Rule:
 There is a law that specifically allow for it
 Article 1942: liability of bailee in the case of commodatum
 Article 2001: Necessary Deposit for innkeepers
o Unless there is a use of arms
 Case of inofficious manager (Negotorium Gestio)
 Express stipulation by the parties
 There is an Assumption of Risk
 Example: Articles 1717 and 1724 on construction
 Debtor in delay
 Debtor guilty of negligence and fault

Remedies of the creditor in the case of breach of obligation

 On the prestation to give a specific thing

o Specific performance + damages
o Rescission + damages
 To deliver a generic thing
o Ask a third person for substituted performance +damages (Art. 1165 par.2)
 To do
o Substituted performance except for personal obligation to do.
o If performed but improperly done, a demand for it to be undone at the obligor’s
expense may be done
 Not to do
o File an action for damages
o Demand the act prohibited be undone + damages

Other remedies in failure to satisfy debt

 Levy and Execution

o Seizing of non-exempted properties to satisfy debt
 Accion Subrogatoria
o Going after the debtors of the debtor to satisfy debt
 Accion Pauliana
o Halting transfers of property to third parties.
 There is an Assumption of fraud if donation is onerous.

Condition vs. Period

 Separate and distinct from obligations in general. Because demandability is not immediate
 Period has certainty in its future while conditions have uncertainty in its future
o Two types of condition/period
 Suspensive Condition/Period
 Demandability of obligation shall arise upon the happening of the
event/condition
  Resolutory Condition/Period
 Obligation shall be extinguished upon the happening of the
event/condition
 During the pendency, something may happen to the thing. (applies mostly to obligation to give
in a suspensive condition)
o Lose, deterioration or improvement during the pendency of condition or period: If loss,
rescission + damages (applies if there is fault on the debtor). Deterioration: 2 options 
Rescission + damages or fulfillment + damages. Improvement: If improved by nature:
benefit of the creditor; if improved by debtor: laws on usufruct shall apply (removal of
the improvement)
 Lose pertains to the situation where the thing becomes lost in the commerce of
man or its existence is unknown. It does not pertain to merely physical loss.
 If generic: even if there is fortuitous event, it can still be substituted. So only
applies to the prestation to give a determinate thing.

Alternative Obligations (includes facultative)

 How to distinguish: In alternative obligation, there are several prestations due. In facultative,
there is only one. In alternative, the fulfillment of on prestation will extinguish the obligation. In
facultative, debtor has the right to perform the obligation that is due but substitute it to another
prestation.
o Civil code is pro debtor. As in default, even an alternative obligation is given to the
choice of the debtor. Creditor cannot compel the debtor unless stipulated
 If a prestation becomes impossible, the obligation shall not be extinguished in an alternative
obligation
 If the substitute becomes impossible in a facultative obligation, the obligation becomes singular.

Plurality of parties

 Joint vs. Solidary Obligations:

o Solidary: full satisfaction of the obligation can be demanded on one of the debtors
o Joint: Satisfaction of obligation is divided proportionally to the debtors. Debtor’s liability
is limited to his share (default)
 Pro Debtor
o In indivisible obligations…
 Not necessarily solidary unless stipulated. Still joint. Because solidarity or joint is
based upon the multiplicity of creditors and debtors. Not the quality of the
prestation.
 If joint, indivisible
 If one of the debtors refuses to perform his obligation, the civil code
provides that the indivisible obligation shall be converted to
indemnification of damages where each erring debtor shall be liable for
his share.
 If erring becomes insolvent, others shall not be liable for his share
o In remission or condonation
 If full it becomes fully forgiven and the obligation is extinguished
  If partial, the share of obligation decreases for joint, and the obligation for
satisfaction becomes smaller for solidary obligations.

General rule in divisible: Presumed that obligation is indivisible.

 Law immediately presumes that the payment is in full instead of installment

In Penal Clauses:

 Can either arise from contract or law

o Law: delay in the payment of taxes is an example
o Contract: by stipulation of the parties
 Penal clauses are there in order to put pressure to the debtor

Extinguishment of an obligation:

 Condonation or Remission: It is gratuitous and therefore must conform with the formalities of
donation (dependent on the thing to be donated)
o Movables: if the value does not exceed 5000, it needs not in writing but simultaneous
delivery and acceptance by the donee
 If more than 5000, it must be in writing with an acknowledgement of the done
o In properties: Not only be in writing but executed by public instrument.
o Invalid remission and condonation are void.
o Requisite:
 It has to be gratuitous
 It has to be accepted by the obligor
 Obligor must be the donee
 Obligation is due and demandable
o Condonation and remission may be total or partial
 Confusion or merger:
o Property: confusion is an accession between two properties
o In obligations: Confusion is the merger of the personalities of the creditor and debtor
into one person.
 General rule is that it extinguishes the obligation
o Requisites:
 Merger of the character of the creditor and debtor in the same person
 Must take place in the principal creditor and debtor
 Complete and definite (no partial confusion)
 Legal Compensation: Quits tayo kasi may utang tayo sa isa’t isa (Obligations are extinguished
because both parties have debt in each other
o Requisites:
 Both parties are principal creditors and debtors of each other
 Obligation is in the sum of money and if consumable/fungible, same kind and
quality
 Debts are due
 Debts are to be liquidated (determined and certain)
  Neither debts are neither subjected to retention or controversy (no third party
who has a claim on either party’s debts)
o By operation of law, the obligations are extinguished
o Judicial compensation can also take place:
 Immaterial that the parties are aware of it or not
o If compensation is agreed upon by parties, the dueness of obligation is not necessary
o There are situations where compensation is prohibited
 In deposit: Delivery of property to a party for safekeeping
 Commodatum: There is no transfer of ownership as what is transferred is
merely the use of the property.
 Support by gratuitous title (because the obligation is provided by law)
 If it involves a civil liability arising from an offense or a delict
 Damage caused to a partnership by a partner
 Obligations in favor of the government.
o Can there be a compensation if one of the parties assigned their right to third parties:
 Art 1285 contemplates 3 cases  The creditor still has the right to assign his
rights regardless of consent but effect is different
 Assignment of credit to third person has the consent of the debtor:
Debtor cannot apply compensation unless he has reserved his right to
do so upon his consent
o Reservation of right is necessary
 Debtor refuses the assignment: Compensation may be made by the
debtor to debts due prior to the assignment
 Debtor is unaware of the assignment: Compensation may apply until the
debtor came to know the assignment.
 Novation:
o Three applicable situations
 If the object or the principal condition has changed
 Change in debtor
 Change in creditor
o Basically, one obligation is terminated and another is created
o Commentators believe that dacion en pago applies here rather in the section of
payment.
o Requisites of Novation
 Previous valid obligation
 An agreement by all parties concerned
 The extinguishment of the old obligation
 The birth of a valid new obligation
o Novation is not presumed. It must be in unequivocal terms
o New and old obligation must be incompatible of each other
o Novation can be real or personal
 Real: change in object
 Personal: Change of parties
o Substitution of debtor has Two types: Expromission and delegacion
 Expromission Change of the debtor without knowledge and consent of the
original debtor
 Delegacion: Change is with the knowledge and consent of the debtor
 Reason: What if the new debtor is insolvent? Can the creditor return to the new
debtor?
 If with consent: The insolvency of the new debtor prior to the changing
of the debtor is known by the original debtor leads to the revival of
the obligation to the old debtor
 If without consent: His obligation will not be revived. Creditor shall
assume the risk.