CHAPTER 2 Nature and Effect of Obligations Arts. 1163 1178 1

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

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CHAPTER 2
NATURE AND EFFECT OF OBLIGATIONS
ART. 1163. Every person obliged to give something is also obliged

to take care of it with the proper diligence of a good father of a family,
unless the law or the stipulation of the parties requires another standard
of care. (1094a)
ART. 1164. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall acquire
no real right over it until the same has been delivered to him. (1095)
ART. 1165. When what is to be delivered is a determinate thing, the

creditor, in addition to the right granted him by Article 1170, may
compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to
two or more persons who do not have the same interest, he shall be
responsible for any fortuitous event until he has effected the delivery.
(1096)
Art. 1166. The obligation to give a determinate thing includes that

of delivering all its accessions and accessories, even though they may
not have been mentioned. (1097a)
Art. 1167. If a person obliged to do something fails to do it, the

same shall be executed at his cost.
This same rule shall be observed if he does it in contravention of
the tenor of the obligation. Furthermore, it may be decreed that what
has been poorly done be undone. (1098)
Arts. 1163-1178 (Nature and Effect of Obligations)
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Art. 1168. When the obligation consists in not doing, and the
obligor does what has been forbidden him, it shall also be undone at his
expense. (1099a)
Art. 1169. Those obliged to deliver or to do something incur in

delay from the time the obligee judicially or extra-judicially demands
from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order
that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other

does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins. (1100a)
Art. 1170. Those who in the performance of their obligations are

guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages. (1101)
Art. 1171. Responsibility arising from fraud is demandable in all

obligations. Any waiver of an action for future fraud is void. (1102a)
Art. 1172. Responsibility arising from negligence in the

performance of every kind of obligation is also demandable, but such
liability may be regulated by the courts, according to the circumstances.
(1103)
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Art. 1173. The fault or negligence of the obligor consists in the

omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father of
a family shall be required. (1104a)
Art. 1174. Except in cases expressly specified by the law, or when it

is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable. (1105a)
Art. 1175. Usurious transactions shall be governed by special laws.

(n)
The receipt of the principal by the creditor without

Art. 1176.
reservation with respect to the interest, shall give rise to the
presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation as to
prior installments, shall likewise raise the presumption that such
installments have been paid. (1110a)
The creditors, after having pursued the property in

Art. 1177.
possession of the debtor to satisfy their claims, may exercise all the
rights and bring all the actions of the latter for the same purpose, save
those which are inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them. (1111)
Art. 1178. Subject to the laws, all rights acquired in virtue of an

obligation are transmissible, if there has been no stipulation to the
contrary. (1112)
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 How do you distinguish between a specific real obligation and a

generic real obligation?
 A specific real obligation is an obligation to deliver (to give) a
specific or determinate thing; on the other hand, a generic real obligation is an
obligation to deliver (to give) a generic or indeterminate thing.
 How do you distinguish between a specific or determinate thing,

and a generic or indeterminate thing?
Specific or determinate thing Generic or indeterminate thing
A thing is specific if it is particularly A thing is generic if it refers only to a

designated or physically segregated from class or genus to which it pertains and
others of the same class. cannot be pointed out with particularity.
No other thing of its kind exists; hence, it Other things of the same kind exist;
is not replaceable if lost. hence, it is replaceable if lost.
EXAMPLES :
th
the dress I wore on my 18 birthday a blue floral Kamiseta dress
my 5-year old German Shepherd a 5-year old German Shepherd
the blue car with plate no. ABC-123 a 2010 Toyota Fortuner silver car
the P1,000 bill Alex paid for the shabu the amount of P1,000
My brother’s girlfriend a Filipino girl with blond hair
 What are the duties of the debtor in a specific real obligation?

(A) To preserve the thing
 The debtor in a specific real obligation has the accessory duty to

preserve the thing until its delivery to the creditor. This is called an accessory
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duty because the debtor has to preserve the thing even if the duty has not
been specifically agreed upon by the parties in their contract.
 The standard of care required to preserve the thing. - Under

Article 1163, “(E)very person obliged to give something is also obliged to take
care of it with the proper diligence of a good father of a family, unless the law
or the stipulation of the parties requires another standard of care.”
 What does “proper diligence of a good father of a family” mean?

 This standard of care required of the debtor has been equated
with ordinary care, or that diligence which a reasonably prudent person would
exercise over his own property.
Example 1 : D promised to deliver his goat to C on January 15, 2019.

From the time the promise is made, up to the time that the goat is delivered to C,
D has to feed the goat and provide it with adequate shelter to protect it from
harm. D has to take care of the goat in the same manner as he would have
taken care of it even if he did not promise to deliver it to C.
 If the debtor fails to exercise ordinary diligence over the thing, and
such failure results in the loss and/or non-delivery of the thing promised, then
he will be guilty of fault or negligence under Article 1170, and may be held
liable by the creditor for damages.
 In Example 1 above, if the goat dies before January 15, 2019 due
to severe dehydration, because it was not given a drink by D or his caretaker
for one whole week, C can hold D liable for damages.
Example 2 : In Example 1 above, let us assume that D’s goat is worth

P25,000.00 Also, after D promised to deliver the goat to C, C contacted E who
agreed to buy the goat for P30,000.00.
On January 15, C demanded for the delivery of the goat. D, however, could
not make the delivery because the goat died on January 12 due to severe
dehydration caused by D’s failure to give the goat a drink for one whole week.
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In this case, since the loss of the goat was due to D’s fault or negligence, C can
hold D liable for the value of the goat in the amount of P25,000.00, plus
consequential damages in the amount of P5,000.00, which is what C should
have profited from the sale of the goat to E if D had effected the delivery.
 What is the rationale for this accessory duty?

Without the accessory duty to preserve the thing to be delivered, the
debtor can conveniently and carelessly lose or damage the specific thing
before it is delivered to the creditor. And even if the loss or damage is due to
the debtor’s fault or negligence, he would have no liability for damages to the
creditor. This would render useless the nature of an obligation, the
performance of which is considered a juridical necessity on the part of the
debtor. In other words, the debtor will be given a choice whether to perform
the prestation or not, and to assume no liability in case he chooses not to
perform the prestation.
Note, however, that the duty to preserve the thing is applicable only in
a specific real obligation. This is because once a specific thing is lost, it can no
longer be replaced. The duty does not apply in a generic real obligation
because a generic thing, even if lost, is replaceable, and delivery can still be
made by the debtor.
(B) To deliver the fruits of the thing
 What are the different kinds of fruits? (Art. 442, NCC)

(1) Natural fruits are the spontaneous products of the soil, and
the young and other products of animals.
Examples:
 trees and plants that grow naturally from the soil without the
intervention of human labor
 the kid delivered by a goat
 the milk produced by a cow
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(2) Industrial fruits are those produced by land of any kind through
cultivation or labor.
Examples:
 lanzones and rambutan trees planted on land
 any other products of agriculture or farming
(3) Civil fruits are those which are the result of a juridical relation.
Examples:
 rents of buildings
 the price of leases of lands and other properties
 interest on a loan
 When is the creditor entitled to the fruits of the thing?

Under Article 1164, “the creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises.” In other words, the day when
the debtor is obliged to deliver the thing is the very same day that the creditor
is entitled to its fruits. When then is the debtor obliged to deliver the thing?
 If the obligation does not specify a delivery date, it means that the
obligation is immediately demandable. Hence, the creditor is entitled to the
fruits of the thing from the time of the perfection of the contract.
Example 3 : D has a land planted with 250 mango trees due for harvest on
January 16, 2019. On January 15, 2019, D promised to deliver his land to C
without specifying the date when delivery is to be made.
Q: Who has the right to harvest the mango fruits?
A: In this case, since there is no specific delivery date in the obligation, C
can immediately demand the delivery of the land at the time that the promise is
made. In addition, C will have the right to harvest all the fruits from the mango
plantations existing at the time that D is obliged to deliver the land.
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 If the obligation specifies a delivery date, the creditor is entitled to

the fruits of the thing from the time of the delivery date, because it is only on
the specified delivery date that the debtor will be obliged to deliver the thing.
Example 4 : On January 5, 2019, D promised to deliver his pig to C. It was

also agreed by the parties that delivery was to be made on January 25, 2019.
On January 10, a few days after the parties perfected their contract, the pig gave
birth to 3 piglets.
Q: Who has the right to the piglets?
A: In this case, since there is a specified delivery date, C will be entitled to
the fruits of thing only from the time of the delivery date. In other words, all fruits
from the thing before delivery date will still pertain to D. Hence, although the
piglets were born after perfection of the parties’ contract on January 10, 2019,
they still pertain to D because the birth of the piglets happened before January
25, 2019 – the day D is obliged to deliver the pig to C.
Q2: What if the piglets were born on January 26, 2019, but D made actual
delivery of the pig only on January 28, 2019, who has now the right to the
piglets?
A: If the piglets were born after the specified date of delivery in the
contract, it is now C who has the right to the piglets. Remember that Article 1164
states that the creditor has the right to the fruits from the time the obligation of
the debtor to deliver the thing arises, and NOT from the moment of actual
delivery of the thing. Hence, even if the piglets were born before actual delivery
of the pig, the piglets will now pertain to C because they were born after the
specified delivery date in the contract.
 If the performance of the obligation is subject to a condition, the

creditor has a right to the fruits of the thing only from the time the condition is
fulfilled. This is because it is only at such time that the obligation of the debtor
to deliver the thing arises.
Example 5 : On December 1, 2017, D promised to give his apartment to C

if C will pass the November 2017 Bar Exams. The apartment is earning
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P100,000.00 every month in the form of rentals collected by D from its four (4)
tenants. On April 15, 2018, the results were released and C passed.
Q: From what time will C be entitled to collect the rentals from the
apartment?
A: In this case, the obligation of D to deliver the apartment arose only on
April 15, 2018. It is only on this date that C will also be entitled to the rentals
(civil fruits) of the apartment. Hence, all rentals collected from December 1, 2017
(when the contract was perfected) until April 14, 2018 (before the fulfilment of the
condition for D’s obligation) still belongs to D.
 In any event, the time when the creditor is entitled to the fruits of the
thing may be specifically agreed upon by the parties in their contract.
 What is the nature of the creditor’s right?
 Before the delivery of the thing, under the first sentence of

Article 1164, the only right that the creditor has is to demand the delivery of the
thing and its fruits. This right can be enforced only against D (a definite
passive subject). This right is referred to as a personal right.
 After the delivery of the thing and its fruits to the creditor, the
creditor now acquires a real right over the thing. (2 nd sentence of Article 1164)
A real right is the right or power of a person over a specific thing ( e.g.,
ownership, possession or mortgage) without a definite passive subject against
whom the right may be personally enforced just like in a personal right. A real
right is enforceable against the whole world.
Example 6 : Examine again Example 4 above. If the piglets were born on

January 10, 2019, and D made the delivery on January 25, 2019, C acquires a
real right over the pig and the piglets only from January 25, 2019.
Let us assume, however, that instead of delivering the pig to C, D delivers
the pig and the piglets to E on January 25, 2019. It is E who will acquire
ownership over the pig and the piglets – a real right over the thing and its fruits.
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In such a case, C will have no right of action against E because all that C
possesses before actual delivery is a personal right against D – that is, to
demand delivery of the pig and its piglets. But since delivery is no longer
possible because the pig had already been delivered to E, C can claim damages
from D for non-performance of the obligation under Article 1170.
(C) To deliver the accessions and accessories of the thing
 Under Article 1166, “the obligation to give a determinate thing

includes that of delivering all its accessions and accessories, even though they
may not have been mentioned.” This rule is based on the principle of law that
“the accessory follows the principal.” The parties, however, may stipulate that
the accessions and accessories will not be included when the thing is
delivered.
 What are accessions of a thing?
Accessions include the fruits of a thing, or additions to or

improvements upon a thing.
Examples:
 the air-conditioner in a car
 plantation of grapes on a farmland
 stipulated interest on money borrowed by the debtor
 What are accessories of a thing?
Accessories include anything that is attached to or included with

the principal thing for its embellishment, usefulness, or completion.
Examples:
 the tires of a car
 the doors and windows of a house
 the bracelet of a wrist watch
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(D) To deliver the thing itself
 The debtor cannot deliver any other thing (even if superior in

quality) to replace the thing promised without the consent of the creditor.
 Duties of the debtor in a generic real obligation. – In a generic real

obligation, the debtor is obliged to deliver to the creditor a thing of the quality
intended by the parties in their contract. Under Article 1246, when the
obligation consists in the delivery of a generic thing, the creditor cannot
demand a thing of superior quality. Neither can the debtor deliver to the
creditor a thing of inferior quality.
Example 7 : D promised to deliver a 2018 Toyota Fortuner car to C. On

delivery date, D cannot compel C to accept delivery of a 2017 Toyota Fortuner.
Neither can C compel D to deliver a 2019 Toyota Fortuner.
 What are the remedies of the creditor in a real obligation?

 Specific real obligation  If the debtor’s obligation is to deliver a
specific thing, and the debtor fails to deliver on the agreed delivery date, the
creditor is given the right:
(a) to compel the debtor to personally make the delivery; and/or
(b) to demand the payment of damages from the debtor.
(See Art. 1165, par. 1 in relation to Art. 1170)
Example 8 : D promised to deliver his 2011 white Toyota Camry car with
plate number ABC-123 to C on January 15, 2019. C’s daughter had then
decided to use the car for her wedding on January 18, 2019. D, however, failed
to deliver the car on January 15. Because of D’s failure to deliver the car as
agreed upon, C was forced to contract the services of a car rental company for
which he paid the amount of P20,000.00.
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Q: What is the remedy of C in this case?

A: On due date, C is given the right to compel D to make the delivery
because the car is in D’s possession; hence, its performance cannot be
substituted by another. (Substitute performance is not a proper remedy in a
specific real obligation.)
Thereafter, since a case for specific performance will no longer prove useful
after the wedding date since there is no more use for the car promised to be
delivered for the event, C can file a case in court against D for damages for
breach of contract, so the court will order D to pay for damages amounting to
P20,000.00 as car rental payments which C would not have incurred if only D
made the delivery of the car on time. D can also be ordered by the Court to
indemnify C for other consequential damages arising from the breach of contract.
 Generic real obligation  If the debtor’s obligation is to deliver a

generic thing, and the debtor fails to deliver on the agreed delivery date, the
creditor is given the right:
(a) to ask that the obligation be complied with at the expense of the debtor
(also called substitute performance); and
(b) to demand the payment of damages from the debtor.
(See Art. 1165, par. 2 in relation to Art. 1170)
Example 9 : D promised to deliver 300 kilos of Dinorado rice to C before

7:00 a.m. on January 15, 2019 for use in the restaurant owned by C. On the
other hand, C promised to pay P50.00 per kilo for the rice, or a total
consideration of P15,000.00. On January 15, D did not make good his promise.
Q: What is the remedy of C?
A: C can avail of the remedy of substitute performance. He can ask
another rice dealer to make the delivery of the 300 kilos of Dinorado rice for his
restaurant’s needs. Since the obligation is generic, C can get the 300 kilos of
rice from another person because they can be substituted with another of the
same kind. If C is able to obtain delivery of the rice needed but for the price of
P60.00 per kilo, then D can be made liable for the difference. Thus, C can ask
the court to hold D liable in damages for the amount of P3,000 (300 kilos X
P10.00).
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 What are the remedies of the creditor in a positive personal

obligation? (Article 1167)
 If the debtor fails or refuses to perform his obligation to do, the

creditor cannot compel the debtor to perform the obligation because this would
violate the debtor’s constitutional right against involuntary servitude (Art. III,
Sec. 18[2], Philippine Constitution). The creditor can, however, exercise
the following remedies:
(a) The creditor may perform the obligation himself at the expense of the
debtor (Art. 1167, par. 1); or
(b) The creditor may ask another person to perform the obligation at the
debtor’s expense (Art. 1167, par. 1); and
(c) The creditor can recover damages from the debtor in either case
(Art. 1170).
Example 10 : C brought his television set for repair to the shop of D. D

promised to complete the repair in 1 week. After 1 week, D returned the
television set to C unrepaired.
In this case, C can have the television set repaired by another repair service
center, and he can charge the cost of the repairs to D. In addition, C can
demand the payment of damages from D.
 The same remedies above is available to the creditor if the debtor performs
the obligation but does it in contravention of the tenor of the obligation, i.e., not
in accordance with the stipulations agreed upon with the creditor.
Example 11 : D promised to do the printing job on 200 pieces of shirts for

the sportsfest celebration in the office of C. It was agreed upon by the parties
that the color of the office logo on the shirt would be neon orange. When the job
was done, C found that the color of the office logo printed on the shirt was dark
red orange.
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In this case, C can hire another printing company to do a reprinting with the
specified color, and charge the cost for reprinting to D. C can also demand the
payment of damages from D.
 If the debtor performs the obligation but does it poorly, the creditor
has the following remedies:
(a) The creditor can ask that what has been poorly done be undone at the
debtor’s expense (Art. 1167, par. 2); and
(b) The creditor can demand for the payment of damages from the debtor
(Art. 1170).
Example 12 : D obliged himself to assemble the wooden sliding doors in

the house of C. After the work was finished, C found that the doors could not be
opened with ease and needed two persons to move the doors from side to side.
In this case, C can demand that D fix the jammed mechanisms in the sliding
doors to make them trouble-free. If D refuses to make the repair, C can ask
another contractor to mend the jammed doors, and charge the cost of the repairs
to D. C can also demand the payment of damages from D.
 What are the remedies of the creditor in a negative personal

obligation? (Article 1168)
 In a negative personal obligation, if the debtor does what has been

forbidden him, the creditor can avail of the following remedies:
(a) The creditor can demand that the debtor undo the forbidden act at the
debtor’s expense; or
(b) The creditor can ask another person to undo the forbidden act and
charge the cost to the debtor; and
(c) The creditor can demand the payment of damages from the debtor.
(Art. 1170)
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Example 13 : D and C entered into a lease contract for a term of two (2)
years covering a house and lot owned by C. D also promised not to build any
structure in the backyard of the house and devote it only to vegetable farming.
One year after the perfection of the contract, D constructed a concrete pigpen
with an assessed value of P60,000.00 in the backyard of the property.
In this case, C can demand that D demolish the pigpen immediately at D’s
expense. If D refuses to do so, C can ask another person to demolish the pigpen
and charge the cost therefor to D. In any event, C can demand the payment of
damages from D for violation of the terms of their agreement.
 How do you distinguish between ordinary delay and legal delay?

 Ordinary delay is simply the failure of the debtor to perform the
obligation on time, or on the day designated for the performance of the
obligation.
 Legal delay (default or mora) is the debtor’s failure to perform the

obligation on time, and after the creditor has demanded from the debtor, either
judicially or extrajudicially, the performance of the obligation. (Art. 1169, par.
1) Judicial demand is made by the creditor when he files a complaint in court
against the debtor demanding for the performance of the obligation. On the
other hand, extrajudicial demand is made when the creditor demands, either
orally or in writing, from the debtor the performance of the obligation but
outside of the court.
 Remember that it is only when the debtor incurs legal delay that he
will be liable for damages to the creditor under Article 1170.
 What are the kinds of delay or default?
(a) Mora solvendi – default on the part of the debtor to fulfill his obligation;
(b) Mora accipiendi – default on the part of the creditor to accept the
performance of the obligation;
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(c) Compensatio morae – default of both parties in reciprocal obligations;

here, there is no actionable default on the part of both parties because
the default of the debtor neutralizes the default of the creditor.
 What are the requisites of mora solvendi?

In order that the debtor may be held liable for damages under
Article 1170 on the ground of mora or legal delay, the following requisites must
be present:
(a) The debtor fails to perform his obligation on the date agreed upon;
(b) The creditor makes a judicial or extrajudicial demand upon the debtor
to comply with his obligation; and
(c) The debtor fails to comply with his obligation despite the demand
already made by the creditor.
Example 14 : On October 15, 2017, D borrowed P100,000.00 from C due

for payment on October 15, 2018. In the promissory note signed by D, he also
obliged himself to pay C 5% interest (P5,000.00) per month for late payment. On
October 15, 2018, D did not pay his obligation. On January 15, 2019, C sent D a
demand letter asking D to pay his P100,000.00 debt.
Q: As of what date is D considered in legal delay? When will you start
computing the stipulated penalty interest of 5% per month?
A: Even if D failed to perform his obligation on October 15, 2018, he is only
considered in ordinary delay at that point. It is only after C makes a demand for
the performance of D’s obligation, and D does not comply, that D will be
considered in legal delay. In this case, C made an extrajudicial demand for the
payment of the debt on D only on January 15, 2019. Hence, the penalty interest
of P5,000.00 per month will be computed starting January 15, 2019, and not from
October 15, 2018.
 When is demand by the creditor not required to put the debtor in

delay? In other words, what are the instances when the debtor can already be
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considered in default after non-performance of the obligation, even if the

creditor did not make a judicial or extra-judicial demand for the performance of
the obligation?
(a) When the law specifically provides that the debtor will be guilty of legal
delay even without demand from the creditor. (Art. 1169, par. 2[1])
Example 15: Our internal revenue laws provide that an individual taxpayer who
fails to pay his income tax on or before April 15 of every tax year is already
considered in default and liable for interest and penalties even without demand
from the government.
(b) When the obligation expressly provides that the debtor will be considered
in legal delay if the debtor fails to perform the obligation on maturity date of
the obligation, even if the creditor does not make a demand for its
performance. (Art. 1169, par. 2[1])
Example 16: In Example 14 above, let us assume that D and C also agreed that
if D fails to pay his P100,000.00 loan to C on October 15, 2018, D will already be
considered in default, and will be liable for the 5% per month penalty interest even
without need of any demand from C. In such case, if D tenders payment to C only
on January 15, 2019, D will already be liable to pay two months penalty interest in
the amount of P10,000.00 even if C did not demand for the payment of the
obligation.
(c) When the fixing of the time when the obligation is to be performed was the
primary reason why the parties entered into the contract. (Art. 1169, par.
2[2])
Example 17: D agreed to deliver to C 250 pieces of pink balloons with the
inscription, “Happy 80th Birthday, Mom! 15 December 2018(.)”, to be used for the
birthday celebration in the residence of C’s mother on 15 December 2018 at 7:00
o’clock in the evening. Even if C does not demand for the delivery of the
balloons, if D fails to deliver on the date designated in the contract, D will be guilty
of legal delay under the first paragraph of Article 1169, and will be liable for
damages under Article 1170. Here, time is of the essence in the contract
because delivery of the balloons on a date other than the party date will render
the delivery useless.
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(d) When demand by the creditor for the performance of the obligation would
be useless. (Art. 1169, par. 2[3])
Example 18: D promised to deliver her emerald necklace to C on January 30,

2019. On January 25, 2019, D sold the same necklace to F for P300,000.00. In
this case, D will be considered in default and liable for damages if she fails to
deliver the necklace on January 30, 2019 even without need of a demand from C.
This is because a demand by C will be useless considering that even if C made
the demand, D would no longer be able to perform her obligation because she
had already previously sold the necklace to F even before the maturity date of the
obligation.
(e) When there is performance by one of the parties in a reciprocal obligation.

(Art. 1169, par. 3)
 Reciprocal obligations1 are obligations arising out of the same cause,
and are to be fulfilled at the same time by the parties to the obligation.
 Neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with his obligation. However, the moment one of
the parties in a reciprocal obligation performs his obligation, the other party is
already considered in default.
Example 19: S sold his BMW car to B for P5.5M. No date was set by the
parties for the performance of their respective obligations under their contract of
sale. In this case, it is understood that both parties must perform their obligations
at the same time. Hence, S cannot be compelled to deliver the car if B does not
pay the P5.5M. On the other hand, B cannot be compelled to pay the purchase
price if S does not deliver the car. However, once S delivers the car, B will be
considered in default or mora if he does not pay the purchase price even if S does
not demand for its payment.
For a better understanding of the concept of a reciprocal obligation, refer to the

1
commentaries in your book under Article 1191.

19
 Basis for liability for damages. – What are the grounds for which the
debtor may be held liable for the payment of damages by the injured party
under Article 1170?
 Fraud (deceit or dolo)
 In fraud there is bad faith or malicious intention on the part of the

debtor. It is the deliberate or intentional evasion by the debtor of the normal
fulfilment of his obligation.
 How do you distinguish between the effects of fraud employed at

the time of the perfection of the contract, and fraud employed at the time of the
performance of an obligation arising from a contract?
(a) Fraud employed at the time of the perfection of the contract by the
guilty party will make the consent of the innocent party to the contract
defective. Since the consent of one of the parties to the contract is defective, it
becomes voidable. The remedy, therefore, of the innocent party in this kind of
fraud is to file an action for the annulment of the contract so that the contract
will be declared no longer effective by the court. 2
Example 20: Jojo offered to sell to Cathy a Rolex wrist watch for P250,000.00.
Jojo represented to Cathy that the Rolex was genuine. On the basis of that
representation, Cathy bought the watch and paid the purchase price in cash. A
week after the sale, Cathy found out that the watch was not genuine but was
merely an imitation.
Here, Jojo employed the fraud in order to obtain the consent of Cathy to the
contract of sale. In other words, had Cathy known that the Rolex was a fake, she
would not have bought and paid for the watch. The remedy of Cathy then is to file
for an annulment of the contract of sale on the ground of fraud under Article 1390
(2).
(b) Fraud employed at the time of the performance of the obligation . The
employment of this kind of fraud assumes the existence of a previously valid
2
Art. 1390(2).
20
contract. In other words, the debtor and the creditor first enter into a valid
contract, one which possesses no defect whatsoever. The fraud is employed
by the debtor ONLY at the time of the performance of the obligation under the
contract. This is the kind of fraud referred to under Article 1170. The remedy
of the creditor is not to have his contract with the debtor annulled, but to ask for
damages for fraud.
Example 21: In Example 20 above, let us assume that what Jojo offered for
sale to Cathy was really a genuine Rolex unit. Cathy, who was also an expert on
watches, examined the watch and found it to be genuine. Cathy then buys and
pays for the watch. However, on delivery date, Jojo substitutes the watch with an
imitation which is the unit he delivers to Cathy.
Here, the contract of sale between Jojo and Cathy was perfected because the
consent of Cathy was not defective at the time of its perfection. The fraud was
employed by Jojo at the time of the performance of the obligation (stage of
consummation of the contract) when he delivered the watch to Cathy. The
remedy of Cathy then is to claim for damages from Jojo under Article 1170.
[NOTE: Review the stages in the life of a contract which we have

previously studied in INTRO.]
 Future fraud. – Under Article 1171, any waiver of an action for
future fraud is void. In other words, any stipulation between the parties
exempting the debtor from liability for whatever fraud he may commit in the
future under the contract is void and of no effect for being contrary to law and
public policy.
Example 22: D agreed to deliver to C 150 bottles of DKNY women’s perfume.

It was also agreed by the parties that C will not hold D liable for damages under
the contract should D later on commit fraud in the performance of his obligation.
On delivery date, D delivered the 150 bottles of perfume to C, but half of each of
the bottles were replaced with water.
In this case, D cannot evade the payment of damages by relying on the above
waiver made by C in their contract. The waiver for future fraud made by C is void
and does not bind C. Hence, C can still demand from D the payment of damages
grounded on D’s fraud in the performance of his obligation.
21
 Past fraud. – Any waiver of an action for fraud already committed

is, however, valid and will simply be considered an act of generosity on the part
of the creditor who is the victim of the fraud.
Example 23: D agreed to deliver a 21-K white gold bracelet to C for

P250,000.00 On due date, D delivered only a 14-K white gold bracelet and
received the P250,000.00 from C. When C discovered about the fraud, he
threatened to sue D for damages. D begged C not to pursue with the suit and
promised that he would just replace the bracelet. C, out of compassion, agreed
not to file a case against D.
Here, C made a waiver of his right to hold D liable for damages for fraud
already committed by D. This waiver of an action for past fraud is valid.
 Negligence (culpa)
 What is negligence? – Under Article 1173, the fault or negligence

of the obligor consists in the omission of that diligence which is required by the
nature of the obligation and corresponds with the circumstances of the person,
of the time and of the place. It is the failure to observe, for the protection or
interest of another person, that degree of care, precaution and vigilance which
the circumstances justly demand, whereby such person suffers injury. 3
 Factors to consider in assessing negligence. – As a general

rule, the party alleging negligence has the duty to prove the existence of
negligence by convincing evidence. Under Article 1173, the following factors
are considered in determining whether the debtor is negligent or not:
(a) Nature of the obligation – EXAMPLE: The debtor’s obligation is to deliver

perishable goods (e.g., fresh seafood and dressed chicken). The nature of his
obligation requires that the debtor must store the goods in adequate temperature
to preserve the freshness of the goods. If the debtor fails in this duty resulting in
the spoiling of the goods, he will be considered guilty of negligence.
3
Guillang vs. Bedania, G.R. No. 162987, May 21, 2009.
22
(b) Circumstances of the person – EXAMPLE: A 20 year-old and healthy

woman hired to baby-sit must not sleep while on duty since the circumstances of
her person were considered when she was taken for the job; otherwise, she will
be negligent.
(c) Circumstances of time – EXAMPLE: A driver who fails to turn on his
headlights while driving during the day is not guilty of negligence. But a driver
who fails to turn on his headlights at night is considered guilty of negligence if an
accident occurs because of that.
(d) Circumstances of the place – EXAMPLE: A driver who drives at 80
kilometers per hour in the North Luzon Express Way is not guilty of negligence
because his speed is allowed in the highway. However, if a driver drives at 50
kilometers per hour in a school zone and runs over a child, he will be considered
negligent taking into consideration the circumstances of the place which require
him to drive at a restricted speed.
 What are the kinds of negligence according to the source of

the obligation?
(a) Contractual negligence (culpa contractual) – This is the negligence

committed by the debtor in the performance of an obligation under a contract.
This kind of negligence is not a source of an obligation under Article 1157.
1157. The
negligence here is merely incidental in the performance of an obligation
already existing because of a contract between the parties. In other words, it
merely makes the debtor liable for damages under Articles 1170 and 1172
because of his negligence in the fulfilment of an obligation already existing
because of a contract between the parties.
The defense of a good father of a family in the selection and
supervision of employees is not a defense although it may mitigate the
employer’s liability. What is followed here is the “master-servant rule” or
“respondeat superior” or “command responsibility”. 4
(b) Civil negligence (culpa aquiliana or tort) – This is the negligence

committed by the debtor without criminal intent and independent of a pre-
existing contract between the debtor and the creditor. This kind of negligence
4
Saludaga vs. FEU, G.R. No. 179337, April 30, 2008.
23
is itself the source of an obligation under Article 1157 and 1162, also known as
quasi-delict. Here, the “master-servant” rule does not apply, i.e., the
negligence of the servant is not necessarily the negligence of the master.
Hence, the employer may raise the defense of diligence of a good father of a
family in the selection and supervision of his employees to escape liability.
(c) Criminal negligence (culpa criminal) – This is negligence that results

in the commission of a crime. Defense of a good father of a family in the
selection and supervision of employees is not a defense because the
employee’s guilt is automatically the employer’s civil guilt if the former is
insolvent.
Illustrative Example 24: Mang Canor, a taxi driver was driving beyond the
speed limit along a school zone. It was too late when he caught sight of a sixth
grader, Paula, who was crossing the pedestrian lane. Paula was sideswiped by
the taxi. While trying to avoid Paula, the taxi slammed to a nearby acacia. As a
result, Mang Canor’s passenger, Benjo, sustained injuries.
Breakdown of Facts :
1. Mang Canor is definitely guilty of negligence for driving beyond the
speed limit specified by law in a school zone.
2. As a result of his negligence, Paula (a pedestrian) and Benjo (the
taxicab’s passenger) sustains injuries.
Issues:
1. Who is liable for damages for the injuries sustained by Paula?
2. Who is liable for damages for the injuries sustained by Benjo?
Resolution:
1. There is no pre-existing contractual relation between Paula and the
taxi driver or the owner of the taxicab company. Hence, the negligence of the
driver gives rise to culpa aquiliana. This will be the source of the liability for
damages of the driver and operator to Paula.
2. After Benjo boarded the taxi, a contract of carriage was already

perfected between Benjo (passenger) and the owner of the taxicab company.
Under this contract, the taxicab company obliges itself to bring the passenger
24
safely to its destination. In this case, the taxicab company is guilty of

contravention or breach of its contract of carriage with Benjo because of the
negligence of its authorized driver, Mang Canor. Hence, Benjo can file an action
for damages for contractual negligence against the taxicab company for the
injuries sustained by him arising from the negligence of Mang Canor which is also
considered the negligence of the taxicab company.
3. The same negligent act of Mang Canor may also be the basis for
filing an action for damages based on criminal negligence. This is because Mang
Canor’s act of negligently driving beyond the speed limit in a school zone also
resulted in a crime known as Reckless Imprudence (Art. 365, Revised Penal
Code). Hence, aside from the action for civil negligence, Paula can also file an
action for criminal negligence against Mang Canor for Reckless Imprudence
Resulting in Physical Injuries. In the same manner, Benjo the passenger can also
file an action against Mang Canor claiming for damages arising from criminal
negligence in a similar case for Reckless Imprudence Resulting in Physical
Injuries.
 Can the injured party still recover damages if he himself is guilty of

negligence?
negligence?
(a) If the injured party’s own negligence was the immediate and proximate
or direct cause of his injury, he cannot recover damages. (Art. 2179)
Example 25: At 10:00 o’clock in the evening, Dionisio was run over by a car
that was travelling at a moderate speed along the South Luzon Express Way
(SLEX). Dionisio suffered serious injuries and filed an action against the owner of
the car.
Question: Is the owner of the car liable for damages to Dionisio?
Answer: In this case, Dionisio’s act of crossing the highway in the SLEX is an act
of gross negligence because pedestrians are not allowed anywhere in the area.
No negligence can be attributed to the driver of the car who was travelling at
moderate speed, and could not have foreseen the presence of a pedestrian in the
middle of a high road at that time of the night.
(b) If the injured party’s own negligence merely contributed to his injury,
but the proximate cause of the injury was still the negligence of the party
25
causing the damage, then the injured party can still recover damages.
(Art. 2179)
Example 26: Dina and Cesar agreed to visit a friend in Pampanga. Cesar
then invited Dina to ride in his car and instructed her to fasten her seat belt before
the trip. Dina, however, did not comply. In the NLEX, Cesar drove the car
beyond the speed limit despite the heavy rains. The car slipped and bumped into
a ten-wheeler truck travelling on the same lane. As a result, Dina sustained
serious injuries. In the investigation, it was found that Dina would have sustained
only minor injuries if she had only fastened her seat belt during the trip.
Question: Can Dina still recover damages for her injuries from Cesar?
Answer: In this case, Cesar’s act of overspeeding in the NLEX is an act of
negligence which was the proximate cause of the injuries sustained by Dina.
Hence, even if Dina was herself negligent in not having fastened her seat belt
during the trip, this will not prevent her from recovering damages from Cesar.
 Delay (default or mora)

(See the discussion under No.  above.)
 What is a fortuitous event? (Article 1174)
 A fortuitous event is an event which cannot be foreseen, or, even if

foreseen, is an inevitable event.
 To exempt the debtor from the performance of his obligation

because of a fortuitous event, it is required that :
(a) the happening of the event must be independent of the will of the
debtor;
(b) there must be impossibility of foreseeing the event or of avoiding it
even if it was foreseen; and
(c) the happening of the event makes it impossible for the debtor to
perform his obligation in a normal manner.
26
 Illustrative Examples:
(a) Acts of God

 A singer fails to sing at the concert due to typhoid fever. Illness is a
fortuitous event which will exempt the debtor from liability for damages for
non-performance of her obligation under her contract with the producers of
the concert.
 D promised to deliver his car to C on January 20, 2019. D fails to deliver
the car because it sank in a flash flood during a typhoon on January 18,
2019. D’s obligation to C is now extinguished because the loss of the car
and the reason for its non-delivery was due to a fortuitous event.
(b) Acts of Man

 D promised to deliver his car to C on January 20, 2019. D fails to deliver
the car because it was carnapped while parked outside his home on January
18, 2019. The car was never recovered. D’s obligation to C is now
extinguished because the loss of the car and the reason for its non-delivery
was due to a fortuitous event.
 What are the rules as to liability in case of a fortuitous event?
 GENERAL RULE : The general rule, under Article 1174, is that the
debtor shall not be responsible for loss or damage caused to the creditor
resulting from the non-performance of his obligation due to a fortuitous event.
The effect is that the debtor’s obligation is extinguished, meaning :
(i) The debtor is exempt from the performance of his obligation; AND
(ii) The debtor is not liable for any damages resulting from the non-
performance of his obligation.
 EXCEPTIONS : However, the following are some instances when the

debtor may still be liable even if he is not able to normally comply with his
obligation by reason of a fortuitous event :
(A) When expressly specified by law (Art. 1174)

27
 Under Article 1170, if the debtor is guilty of fraud, negligence, or

delay, or contravention of the tenor of his obligation, he will still be liable for
damages even if a fortuitous event prevented the normal performance of his
obligation.
Example 27: D promised to deliver his goat to C on January 15, 2019. On

January 17, 2019, C demanded for the delivery of the goat. On January 18,
2019, a landslide in the farm of C buried the goat alive.
Question: Is the obligation of D to deliver the goat to C now extinguished?
Answer: NO. In this case, C already made a demand on D for delivery of the
goat on January 17, 2019. When the goat died due to a fortuitous event on On
January 18, 2019, it can be said that D was already in default. Therefore, D will
still be liable to C for the payment of damages for his failure to deliver the goat as
agreed upon even if the non-performance was due to a fortuitous event.
 Under Article 1165, par. 3, if the debtor has promised to deliver the
same specific thing to two or more persons who do not have the same interest
over the thing, he will still be liable for damages even if a fortuitous event would
have prevented the normal performance of the debtor’s obligation to the
creditor.
Example 28: ln Example 27 above, let us assume that the landslide in the farm
happened on January 10, 2019, before the delivery date set in their contract.
Assume also that in addition to C, D had earlier promised to deliver the same
goat to F on January 12, 2019.
Question: Since the goat died due to a fortuitous event on January 18, 2019, is
the obligation of D to deliver the goat to C now extinguished?
Answer: NO. In this case, even if the fortuitous event did not happen on
January 10, 2019, and the goat did not perish, D would still be unable to deliver
the goat to C because it was already promised for delivery to F on an earlier
date. There was bad faith on the part of D for promising to deliver the same
specific thing to two different creditors. The result is that only one of the creditors
will be able to accept delivery of the goat. Hence, the law makes the debtor
28
liable for damages even if it would appear that the debtor’s non-performance was
due to a fortuitous event.
 Under Article 1268, if the debtor’s obligation to deliver a specific thing

arises from his commission of a crime, he will nonetheless be liable for
damages even if the specific thing is lost by virtue of a fortuitous event.
Example 29: D stole the goat of C. Later, D was convicted of the crime of theft
and was ordered by the court to return the goat to C. While on his way to the
farm of C to return the goat, the goat was run over by a reckless driver of a ten-
wheeler truck.
Answer: NO. Under Article 1268, D is still liable for damages to C. This is
because the obligation of D in this case arises from his criminal liability for the
crime of theft.
(B) When it is declared by stipulation of the parties (Art. 1174)
 The parties may stipulate in their contract that the debtor will still be
liable for damages even if his failure to perform the obligation was due to a
fortuitous event.
Example 30: ln Example 27 above, let us assume that C and D agreed in their
contract that D will be liable for damages even if he fails to deliver the goat due
to a fortuitous event. Also assume that the landslide in the farm happened on
January 10, 2019 before the delivery date set in their contract.
Answer: NO. In this case, even if the goat perished in a fortuitous event, D’s
obligation will not be extinguished. D will still be liable to C for damages because
it was specifically agreed upon in their contract.
(C) When the nature of the obligation requires the assumption of risk
(Art. 1174)
29
Example 31: D, a resident of Bocaue, Bulacan, is engaged in the business of

selling firecrackers. He owns a 1,200 square-meter factory-warehouse where he
manufactures and stores his stocks. On January 2, 2019, the factory caught fire
and gutted down the property of C just beside the warehouse, for which C
incurred damages amounting to P450,000.00. In the investigation conducted by
the city of Bocaue, it was found that an explosion immediately preceded the fire
which was caused by fragments of a falling meteorite from space. D seeks to
excuse himself from liability saying that there was no fault or negligence on his
part and the damage was caused by a fortuitous event.
Question: Can D be made liable to C for damages?
Answer: YES. D would still be liable to C for damages because D’s business of
selling firecrackers involved the assumption of risk. Therefore, D cannot exempt
himself from liability for damages by claiming that the fire which caused damage
to C’s property was due to a fortuitous event.
(D) When the thing to be delivered is generic (Art. 1263)
 We said that in a specific real obligation, the debtor’s obligation is

extinguished when the specific thing subject matter of the obligation is lost due
to a fortuitous event. This is because once the specific thing agreed to be
delivered is lost, it can no longer be replaced with another one because the
debtor cannot find another thing of its kind. However, even if the object of the
obligation is a specific thing, if the loss is due to the fault of the debtor, the
debtor’s obligation will not be completely extinguished. While he can no longer
be compelled to deliver the specific thing because it no longer exists, the
debtor’s obligation will be converted into a monetary obligation for the payment
of damages to the creditor arising from the debtor’s fault or negligence.
Example 32: D promised to deliver to C a blue 2009 BMW car with plate
number ABC-123 on January 15, 2019. On January 10, 2019, a falling meteorite
from space crashed onto the property of D and completely burned the car to
ashes.
Question 1: Is the obligation of D to deliver the car to C now extinguished?
30
Answer: YES. Since the obligation is a specific real obligation, the loss of the
specific thing by virtue of a fortuitous event completely extinguishes the debtor’s
obligation. He is then completely released from any kind of liability to the
creditor.
Question 2: What if the cause of the loss of the car was not due to a falling
meteorite? What if the car was completely wrecked on January 10, 2019 after D
drove it while under the influence of alcohol? Will the obligation of D to deliver
the car to C be extinguished due to loss of the car before its delivery date?
Answer: This time the answer is NO. Even if the obligation is to deliver a
specific thing which was completely wrecked beyond repair before its agreed
delivery on January 15, 2019, the debtor D will still be liable to C for damages for
failing to exercise due diligence.
 The rule above discussed does not, however, apply in a generic

real obligation. Under Article 1263, (I)n an obligation to deliver a generic thing,
the loss or destruction of anything of the same kind does not extinguish the
obligation.” This is based on the principle that a generic thing never perishes
(genus nunquam perit). Therefore, despite the loss of a generic thing object of
the obligation (whether due to a fortuitous event, or due to the fault or
negligence of the debtor), the debtor can still be compelled by the creditor to
deliver a thing of the same kind. The creditor, however, cannot demand a thing
of superior quality; neither can the debtor deliver a thing of inferior quality
(Art. 1246).
 What is usury? (Article 1175)
 Usury is the contracting for or receiving something in excess of the

amount allowed by law for the loan or forbearance of money – the taking of
more interest for the use of money than the law allows. 5 Hence, a person
becomes liable if he charges more than the prescribed lawful rates of interest
under the Usury Law.
5
Tolentino vs. Gonzales, 50 Phil. 573.
31
 The Usury law, however, is now legally inexistent after Central

Bank Circular No. 905 (Dec. 10, 2982, effective January 1, 1983) was issued
by the Central Bank Monetary Board repealing the maximum rates of interest
prescribed under the Usury Law. Hence, interest can now be charged
depending on the mutual agreement of the debtor and creditor.
 Note, however, that under Article 1956, in order for the creditor to
be able to recover interest on a loan or forbearance of money, the payment of
interest must be expressly stipulated between the parties and put down in
writing.
Example 33: D borrowed P100,000.00 from C. The parties orally agreed that D
will pay his loan one year after plus 20% interest in the amount of P20,000.00, or
a total of P120,000.00 on maturity date.
Question: How much can C collect from D on maturity date?
Answer: C will have the right to collect only P100,000.00 - the principal amount
of the loan. D cannot be compelled to pay the P20,000.00 due as interest
because the parties’ agreement with respect to payment of interest in this case
was not put down in writing. The agreement was merely verbal.
 Presumptions on the payment of interest and prior instalments
under Article 1176. –
 What is a presumption?
A presumption is an inference as to the existence of a fact not
actually known, arising from its usual connection with another which is known.
 What are the two kinds of presumptions?

(A) Conclusive presumption – This kind of presumption cannot be
contradicted by evidence to the contrary.
32
Example 34: D failed to file his income tax return on April 15, 2018. As a
result, the BIR charged him interest and penalties. D’s defense is that he is not
aware that the due date for filing his return is on April 15 of every tax year.
In this case, D cannot evade the payment of interest and penalties by putting
up the defense that he was not aware of the existence of the provision in the
Philippine Tax Code prescribing the deadline for the filing of income tax returns.
There is a conclusive presumption that everyone knows the law. Hence, D will
not be allowed to introduce evidence to rebut this presumption, and prove that he
did not in fact know the existence of that law.
(B) Disputable (rebuttable) presumption – This kind of presumption can

be contradicted or rebutted by presenting evidence to prove the contrary.
 The presumptions outlined under Article 1176 are examples of

disputable presumptions because evidence can always be introduced to
disprove them.
(1) When the creditor issues a receipt acknowledging the debtor’s

payment of the principal obligation, without reserving his (creditor’s) right to
collect the unpaid interest, there is a presumption that the interest has already
been paid by the debtor (Art. 1176, par. 1). This is based on the rule stated
in Article 1253 that, “(I)f the debt produces interest, payment of the principal
shall not be deemed to have been made until the interests have been
covered.”
Example 35: D borrowed P100,000.00 from C payable on January 5, 2019,

plus 10% interest in the amount of P10,000.00. On January 5, 2019, D paid C
P100,000.00. C then issued a receipt acknowledging the payment of the
principal amount of P100,000.00 without specifying whether the interest on the
loan had been paid.
In this case, it is presumed that the interest of P10,000.00 had already been
paid by D. However, C is allowed to present evidence to prove that the interest
on the loan had not yet been paid. If the court finds the evidence of C in order, C
will be allowed to recover the unpaid interest. However, if C fails to present
convincing evidence that D had not yet paid the interest, the presumption in
favour of D will stand, and C will not be allowed to recover.
33
(2) When the creditor issues a receipt acknowledging the debtor’s

payment of a later instalment, without reserving his (creditor’s) right to collect
previous installments under the obligation, there is a presumption that the
previous installments have already been paid by the debtor (Art. 1176, par.
2).
Example 36: Assume in Example 35 that the debt of D to C is payable in 4

equal monthly instalments as follows :
Installment due Maturity Date
P25,000.00 1 August 2018
P25,000.00 1 September 2018
P25,000.00 1 October 2018
P25,000.00 1 November 2018
D paid the first instalment but failed to pay the second instalment due on
September 1. On October 1, D tendered payment to C in the amount of
P25,000.00. C issued a receipt dated October 1, 2018 acknowledging receipt of
the amount of P25,000.00 for the third instalment. C, however, did not indicate in
the same receipt that the second installment had not yet been paid.
In this case, there is a presumption that the first two instalments have
already been paid. But since the presumption is merely disputable, C can still
present evidence to prove that the second instalment had not yet been paid by
D. If C is able to present convincing evidence of the fact of non-payment, C can
still recover the second instalment from D.
 In case the debtor fails to comply with his obligation, what are
the remedies of the creditor to enforce the payment of his claims?
(Article 1177)
(A) The creditor can file an action for specific performance to compel the
debtor to comply with his obligation;
34
(B) If specific performance is no longer possible, the creditor can pursue

or run after the properties (real or personal) in possession of the debtor;
(C) If the debtor does not have sufficient properties to answer for the
creditor’s claims, the creditor can exercise all the rights, and bring all the
actions of the debtor, except those that are personal to the debtor ( accion
subrogatoria); and
(D) If the claim remains unsatisfied after having availed of the preceding
remedies, the creditor can ask the court to rescind or impugn any act or
contract which the debtor may have entered into to defraud the creditor ( accion
pauliana).
Example 37: D owes C P5M due on June 30, 2018. F owes D P2M due on
July 10, 2018. D has a house worth P4M, a car worth P1.5M, and a Rolex watch
worth P500,000.00. On June 15, 2018, to evade his obligation to C, D sold his
house to B for P4M. On June 30, 2018, D failed to pay his obligation because he
was already bankrupt as of that date.
Question: What are the legal remedies available to C?
Answer:
1. An action for specific performance to compel D to pay his obligation in
this case will be unavailing considering that D is already bankrupt.
2. C can, however, ask the court to attach the remaining properties of D –
the car worth P1.5M, and the Rolex watch worth P500,000.00. After these
properties are sold at public auction to pay for the obligation, there still remains a
balance in the obligation in the sum of P3M.
3. Since C has still a P3M collectible, he can ask the court to order F to pay
his P2M obligation to C instead of paying it to D. After the court orders the
payment, only P1M of the obligation remains.
4. Since C has no other way of recovering the balance of his credit, C can
now ask the court to rescind or cancel the contract of sale between D and B over
the house on the ground that the sale was made by D to defraud C and to evade
the performance of his obligation. Once the sale is rescinded and reverted back
to the ownership of D, it may be sold at public auction under the court’s
35
processes so that part of the proceeds may be used to cover the balance of the
obligation in the amount of P1M.
 What is the rule with respect to transmissibility of rights?

(Art. 1178)
 General rule: All rights acquired in virtue of an obligation are

transmissible.
Example 38: D borrowed P250,000.00 from C payable on February 15, 2019.

As evidence of the debt, D signed a promissory note in favour of C. Before
maturity date, C endorses the note to E.
The right of C to collect the P250,000.00 from D on maturity date is a
transmissible right. Hence, by endorsing the note to E, C in effect transmits or
assigns his right under the promissory note to E. The effect is that on February
15, 2019, E, who is now in possession of the promissory note (and to whom the
right to the credit was transferred by C), will have the right to collect the amount
on the note from D.
 Exceptions: Rights cannot be transmitted :
(A) When the parties stipulate against the transmission of the right.
Example 39: In Example 38 above, D and C can expressly agree that C cannot
assign his right under the promissory note. In such case, C is the only person
given the right to collect, and C cannot transfer this right to a third person.
(B) When the law prohibits the transmission of the right.

36
Example 40: Under our Election laws, the right to hold office of an elective
official is not transmitted to his heirs upon his death. The law provides for the
procedure for succession to office.
Example 41: Under the law on partnership, the rights of a general partner are
not transmitted to his heirs upon his death, because his death causes the
dissolution of the partnership.
(C) When the nature of the obligation does not allow the transmission of
the right, such as when it is purely personal.
Example 42: In the loan of non-consumable things (commodatum), such as the

loan of a motorcycle, the right of the borrower to use the thing is not
transmissible.
SOURCES of NOTES:
The discussions outlined in this lecture have been collectively

lifted from the cases cited and commentaries made by the
authors in the references cited in our course syllabus.
Prepared by:
Atty. Harriet Reyes Linsangan

26 January 2019
37
FOOD FOR THOUGHT
Great things come from hard work and perseverance. No

excuses.
Kobe Bryant

CHAPTER 2 Nature and Effect of Obligations Arts. 1163 1178 1

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CHAPTER 2 Nature and Effect of Obligations Arts. 1163 1178 1

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Arts.

1163-1178 (Nature and Effect of Obligations)

ART. 1163. Every person obliged to give something is also obliged

ART. 1165. When what is to be delivered is a determinate thing, the

Art. 1166. The obligation to give a determinate thing includes that

Art. 1167. If a person obliged to do something fails to do it, the

Art. 1169. Those obliged to deliver or to do something incur in

In reciprocal obligations, neither party incurs in delay if the other

Art. 1170. Those who in the performance of their obligations are

Art. 1171. Responsibility arising from fraud is demandable in all

Art. 1172. Responsibility arising from negligence in the

Art. 1173. The fault or negligence of the obligor consists in the

Art. 1174. Except in cases expressly specified by the law, or when it

Art. 1175. Usurious transactions shall be governed by special laws.

The receipt of the principal by the creditor without

The creditors, after having pursued the property in

Art. 1178. Subject to the laws, all rights acquired in virtue of an

 How do you distinguish between a specific real obligation and a

 How do you distinguish between a specific or determinate thing,

Specific or determinate thing Generic or indeterminate thing

A thing is specific if it is particularly A thing is generic if it refers only to a

 What are the duties of the debtor in a specific real obligation?

 The debtor in a specific real obligation has the accessory duty to

 The standard of care required to preserve the thing. - Under

 What does “proper diligence of a good father of a family” mean?

Example 1 : D promised to deliver his goat to C on January 15, 2019.

Example 2 : In Example 1 above, let us assume that D’s goat is worth

 What is the rationale for this accessory duty?

(B) To deliver the fruits of the thing

 What are the different kinds of fruits? (Art. 442, NCC)

 When is the creditor entitled to the fruits of the thing?

 If the obligation specifies a delivery date, the creditor is entitled to

Example 4 : On January 5, 2019, D promised to deliver his pig to C. It was

 If the performance of the obligation is subject to a condition, the

Example 5 : On December 1, 2017, D promised to give his apartment to C

 What is the nature of the creditor’s right?

 Before the delivery of the thing, under the first sentence of

Example 6 : Examine again Example 4 above. If the piglets were born on

(C) To deliver the accessions and accessories of the thing

 Under Article 1166, “the obligation to give a determinate thing

 What are accessions of a thing?

Accessions include the fruits of a thing, or additions to or

 What are accessories of a thing?

Accessories include anything that is attached to or included with

(D) To deliver the thing itself

 The debtor cannot deliver any other thing (even if superior in

 Duties of the debtor in a generic real obligation. – In a generic real

Example 7 : D promised to deliver a 2018 Toyota Fortuner car to C. On

 What are the remedies of the creditor in a real obligation?

Q: What is the remedy of C in this case?

 Generic real obligation  If the debtor’s obligation is to deliver a

Example 9 : D promised to deliver 300 kilos of Dinorado rice to C before

 What are the remedies of the creditor in a positive personal

 If the debtor fails or refuses to perform his obligation to do, the

Example 10 : C brought his television set for repair to the shop of D. D

Example 11 : D promised to do the printing job on 200 pieces of shirts for

Example 12 : D obliged himself to assemble the wooden sliding doors in

 What are the remedies of the creditor in a negative personal

 In a negative personal obligation, if the debtor does what has been

 How do you distinguish between ordinary delay and legal delay?

 Legal delay (default or mora) is the debtor’s failure to perform the

 What are the kinds of delay or default?

(c) Compensatio morae – default of both parties in reciprocal obligations;