Art.

1156 - An obligation is a juridical necessity to 1157 - Obligations arise from:

give, to do or not to do. (1) Law;
(2) Contracts;
(3) Quasi-contracts;
 Latin: OBLIGATIO – tying/binding
OBLIGATION (4) Acts or omissions punished by law; and
 Tie/bond recognized by law
(5) Quasi-delicts.
Requisites of an Obligation: * 2,3 are licit acts
* 4, 5 are illicit acts
1. Juridical / Legal tie – efficient case
2. Active subject – creditor/obligee LAW
3. Passive subject – debtor/obligor - imposed by law
4. Object / Prestation – to give, to do, not to do - greatest source of obli.

Forms: CONTRACTS
- stipulation of the parties (art. 1306)
- Writing
- meeting of minds—bilateral acts
- Oral
- Partly oral & writing
QUASI-CONTRACTS
- voluntary & unilateral acts—unilateral acts
Civil Code Definition (p.17)
Meaning of Juridical Necessity (p.18)
CRIMES/ACTS/OMISSIONS PUNISHABLE BY LAW
- Revised Penal Code
Nature of Obligations under the Civil Code
- required to do something but did not do it
 CIVIL OBLIGATION - crimes/delicts
- Gives the creditor a right under the law to  CRIMINAL LIABILITY
enforce performance in the courts of justice  CIVIL LIABILITY
- based on a positive law - damages/victims (ex. Carnapping)
- law enacted by congress * actual damages
* moral damages
 NATURAL OBLIGATIONS * exemplary damages
- No legal basis * temperate damages (like an actual but no
- Natural law (have to do what’s right and avoid evidence of damaged cost)
what’s wrong)
QUASI-DELICTS / TORTS - damages caused to another
Form of Obligations (p.19) (culpa-acquilana) CIVIL
negligence/fault
OBLIGATION is the act or performance which the law - causing damage/injury to another person
will enforce.
(culpa-contractual)
RIGHT is the power which a person has under the law, - there is contractual relation
to demand from another any prestation.
* Quasi-offenses
WRONG (cause of action), according to its legal
meaning, is an act or omission of one party in violation (culpa-criminal delictual) CIVIL & CRIMINAL
of the legal right or rights of another, causing injury to - reckless imprudence resulting in crime/homicide
the latter.
* proximate cause (ikaw ang dahilan bakit may mga
Kinds of Obligations Acc. to the Subset Matter damages sa iba)

 REAL OBLIGATION (obligation to give) Sources Classsified

 a thing 1. Those emanating from law
 PERSONAL OBLIGATION (obli to do/not to do) 2. …………………………. Private acts:
 an act  LICIT ACTS – conforming to law
 Positive Personal Obli. – to do (art. 1167) (contracts & quasi-contracts)
 ILLICIT ACTS – unlawful
 Negative Personal Obli. – not to do (art. 1168)
(delicts & quasi-delicts)
 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.
 LEGAL OBLIGATIONS are not presumed because
they are considered a burden upon the obligor.
They are the exception, not the rule. To be
demandable, they must be clearly set forth in the
law, i.e., the Civil Code or special laws.
1159 - Obligations arising from contracts have the
force of law between the contracting parties and
should be complied with in good faith.
CONTRACUTAL OBLIGATIONS - obligations arising from
contracts or voluntary agreements.
 Contract - meeting of minds between two persons
whereby one binds himself, with respect to the
other, to give something or to render some service.
 Binding force - obligations arising from contracts
are governed primarily by the agreement of the
contracting parties.
As a source of enforceable obligation, contract must
be valid and it cannot be valid if it is against the law.
 Requirements of a valid contract — As a source of
obligation, a contract must be valid and
enforceable. A contract is valid (assuming all the
essential elements are present, Art. 1318.) if it is not
contrary to law, morals, good customs, public order,
and public policy. It is invalid or void if it is contrary
to law, morals, good customs, public order, or
public policy.
 Breach of contract – when a party fails or refuses to
comply, without legal reason or justification, with
his obligation under the contract as promised.
Compliance in GOOD FAITH
- compliance or performance n accordance with the
stipulations or terms of the contract/agreement.
- non-compliance by a party w/ his legitimate
obligations often receiving the benefits of a contract
would constitute unjust enrichment on his part.
1160 - Obligations derived from quasi-contracts
shall be subject to the provisions of Chapter 1, Title
XVII, of this Book.
QUASI-CONTRACTUAL OBLIGATIONS
- juridical relation resulting from certain lawful,
voluntary and unilateral acts by virtue of which the
parties become bound to each other to the end that no
one will be unjustly enriched or benefited at the
expense of another
- there is no consent but the same is supplied by
fiction of law (an assertion accepted as true, though
probably fictitious to achieve a particular goal in legal).
KINDS OF QUASI-CONTRACTS
 NEGOTIORUM GESTIO - voluntary management of
the property or affairs of another without the
knowledge or consent of the latter.
 SOLUTIO INDEBITI - juridical relation which is
created when something is received when there is
no right to demand it and it was unduly delivered
through mistake.
1161 - Civil obligations arising from criminal
offenses shall be governed by the penal laws,14
subject to the provisions of Article 2177,15 and of
the pertinent provisions of Chapter 2, Preliminary
Title on Human Relations,16 and of Title XVIII of
this Book, regulating damages.
Civil liability arising from crimes or delicts
 Oftentimes, the commission of a crime causes not
only moral evil but also material damage. Every
person criminally liable for an act or omission is also
civilly liable for damages.
 In crimes, however, which cause no material
damage, there is no civil liability to be enforced. But
a person not criminally responsible may still be
liable civilly.
SCOPE OF CIVIL LIABILITY
The extent of the civil liability arising from crimes is
governed by the Revised Penal Code and the Civil
Code.18 This civil liability includes:
1. RESTITUTION (replacement/restoration)
2. REPARATION for the damage caused
3. INDEMNIFICATION for consequential damages
(compensation)
 1162 - Obligations derived from quasi-delicts shall
be governed by the provisions of Chapter 2, Title
XVII of this Book, and by special laws.

REQUISITES OF QUASI-DELICT (there must be…)

1. an act or omission by the defendant
2. fault or negligence of the defendant
3. damage caused to the plaintiff
4. a direct relation or connection of cause and effect
between the act or omission and the damage
5. no pre-existing contractual relation between the
parties

CRIME QUASI-DELICT
ex delicto ex quasi delicto

Criminal/malicious
intent/criminal Negligence
negligence
Indemnification of the
Purpose: punishment
offended party
Affects: public interest Private interest
2 Liabilities:
Civil liability
criminal & civil

Criminal liab cannot be

Can be compromised as
compromised or settled
any other civil liab
by the party themselves

Need only be provided by

The guilt of the accused
preponderance
must be proved beyond
(superior/greater weight)
reasonable doubt
of evidence

* Quantum of evidence
Civil: lighter evidence
Criminal: evidence beyond reasonable doubt

DILIGENCE – Standard of Care under the Civil Code

1. Simple Diligence
2. Ordinary Diligence (Diligence of a Good
Father of a Family)
3. Extraordinary Diligence
Another standard of care that the law requires:
common carriers.
Required to observe extraordinary care.
ex. Bus companies, jeepney drivers
CHAPTER 2: NATURE & EFFECT OF OBLIGATIONS
 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.
SPECIFIC / GENERIC /
DETERMINATE THING INDETERMINATE THING
Refers only to a class or
Particularly designated genus to which it
or physically segregated pertains and cannot be
others of the same class pointed out with
particularity
Identified with its Identified by its specie.
individuality Basta same kind
Ex. Plate number Ex. Car Toyota VIOS (red)
DUTIES OF DEBTOR IN OBLIGATION TO GIVE A
(SPECIFIC) DETERMINATE THING
1. To preserve or take care of the thing due
a. Diligence of a good father of a family
(ordinary care)
b. Another standard of care
c. Factors to be considered – depends on
the nature of the obli and corresponds
w/ the circumstances of the person,
time, and place
2. To deliver the fruits of the thing (see Art.
1164.)
3. To deliver its accessions and accessories (see
Art. 1166.)
4. To deliver the thing itself
5. Reason for debtor’s obligation
DUTIES OF DEBTOR IN OBLIGATION TO GIVE A
(GENERIC) INDETERMINATE THING
1. To deliver a thing which is of the quality intended
by the parties taking into consideration the purpose
of the obligation and other circumstances
2. To be liable for damages in case of fraud,
negligence, or delay, in the performance of his
obligation, or contravention of the tenor thereof.
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.
DIFFERENT KINDS OF FRUITS
 NATURAL FRUITS - spontaneous products of the
soil, and the young and other products of
animals. Without the intervention of human
labor
 INDUSTRIAL FRUITS - produced by lands of any
kind through cultivation or labor. Brought about
by reason of human labor
 CIVIL FRUITS - those derived by virtue of a
juridical relation (rent, etc.)
PERSONAL RIGHT REAL RIGHT
Right/interest/power of Right/interest/power of a
creditor to demand from person over a specific
another debtor as a thing w/out a definite
definite passive subject passive subject
Definite active & passive
Definite active subject
subject
Binding/enoforceable
Directed against the
only against a particular
whole world
person
Ex. Ms Clanlas and Mr. Napay and a delivery of a car
Ownership acquired by delivery
He shall acquire no real right over it until the same has
been delivered to him. the creditor does not become
the owner until the specific thing has been delivered to
him.
Legal remedy of a generic thing (the kind of suit/action
that you can file at court)
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.
REMEDIES OF CREDITOR IN REAL OBLIGATION
 Specific real obligation
a. Demand specific performance or fulfillment
(if it is still possible) of the obligation with a
right to indemnity for damages
b. Demand rescission or cancellation (in certain
cases) of the obligation also with a right to
recover damages (Art. 1170.)
c. Demand the payment of damages only (see
Art. 1170.) where it is the only feasible
remedy
 Generic real obligation
Where debtor delays or has promised delivery to
separate creditors.
Paragraph 3 gives two instances when a fortuitous
event does not exempt the debtor from responsibility. It
likewise refers to a determinate thing. An indeterminate
thing cannot be the object of destruction by a fortuitous
event because genus nunquam perit (genus never
perishes).
* If civil obligation is breached the creditor has the right
to go to court.
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.
Accessions are the fruits of, or additions to, or
improvements upon, a thing (the principal).
Ex. house or trees on a land; rents of a building; airconditioner
in a car; profits or dividends accruing from shares of stocks;
etc.
The concept includes accession in its three forms of
building, planting, and sowing (see Art. 445.), and
accession natural, such as alluvion (see Art. 457.),
avulsion (see Art. 459.), change of course of rivers (see
Arts. 461-462.), and formation of islands. (see Arts. 464-
465.) “Fruits of the thing” are specifically provided for in
Article 1164.
Accessories are things joined to, or included with, the
principal thing for the latter’s embellishment, better
use, or completion.
Ex. key of a house; frame of a picture; bracelet of a watch;
machinery in a factory; bow of a violin.
Note that while accessions are not necessary to the
principal thing, the accessory and the principal thing
must go together but both accessions and accessories
can exist only in relation to the principal.
Right of Creditor to Accessions and Accessories
General rule: all accessions and accessories are
considered included in the obligation to deliver a
determinate thing although they may not have been
mentioned. This rule is based on the principle of law
that the accessory follows the principal. In order that
they will be excluded, there must be a stipulation to
that effect.
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.
SITUATIONS CONTEMPLATED IN ARTICLE 1167
1. The debtor fails to perform an obligation to do
2. The debtor performs an obligation to do but
contrary to the terms thereof
3. The debtor performs an obligation to do but in a
poor manner.
REMEDIES OF CREDITOR IN POSITIVE PERSONAL
OBLIGATION
1. If the debtor fails to comply with his obligation to
do, the creditor has the right:
a. to have the obligation performed by himself, or
by another unless personal considerations are
involved, at the debtor’s expense
b. to recover damages. (Art. 1170.)
2. In case the obligation is done in contravention of
the terms of the same or is poorly done, it may be
ordered (by the court) that it be undone if it is still
possible to undo what was done.
Performance by a Third Person
Where, however, the personal qualifications of the
debtor are the determining motive for the obligation
contracted (e.g., to sing in a night club), the
performance of the same by another would be
impossible or would result to be so different that the
obligation could not be considered performed.

Hence, the only feasible remedy of the creditor is
indemnification for damages. But where the obligation
can still be performed at the expense of the debtor
notwithstanding his failure or refusal to do so, the court
is not authorized to merely grant damages to the
creditor.
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.
REMEDIES OF CREDITOR IN NEGATIVE PERSONAL
OBLIGATION
In an obligation not to do, the duty of the obligor is to
abstain from an act. Here, there is no specific
performance. The very obligation is fulfilled in not
doing what is forbidden. Hence, in this kind of
obligation the debtor cannot be guilty of delay. (Art.
1169)
As a rule, the remedy of the obligee is the undoing of
the forbidden thing plus damages. (Art. 1170)
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
declares
(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.
ORDINARY DELAY is merely the failure to perform an
obligation on time.
LEGAL DELAY / DEFAULT / MORA
- failure to perform an obligation on time which failure,
constitutes a breach of the obligation.
KINDS OF DELAY/DEFAULT/MORA
1. MORA SOLVENDI or the delay on the part of the
debtor to fulfill his obligation (to give or to do) by
reason of a cause imputable to him
2. MORA ACCIPIENDI or the delay on the part of the
creditor without justifiable reason to accept the
performance of the obligation
3. COMPENSATIO MORAE or the delay of the obligors
in reciprocal obligations (like in sale), i.e., the delay
of the obligor cancels the delay of the obligee, and
vice versa.
There is no delay in negative personal obligation. If the
obligation is not to do, it would only be non-fulfilment
of delay. Delay is impossible for the debtor fulfills by not
doing what has been forbidden him. (see Art. 1168.)
REQUISITES OF DELAY OR DEFAULT BY THE DEBTOR
MORA SOLVENDI
1. failure of the debtor to perform his (positive)
obligation on the date agreed upon
2. demand (not mere reminder or notice) made by the
creditor upon the debtor to fulfi ll, perform, or
comply with his obligation which demand, may be
either judicial (when a complaint is fi led in court) or
extra-judicial (when made outside of court, orally or
in writing)
3. failure of the debtor to comply with such demand
It only becomes legal delay when there has been a
demand.
2 Kinds of Demands:
- Judicial (lawful demand, demanda sa husgado)
- Extrajudicial (normal demand, can be verbal)
WHEN DEMAND NOT NECESSARY TO PUT DEBTOR IN which prevents the normal fulfillment of an
DELAY obligation.
1. When the obligation so provides 3. DELAY (MORA)
2. When the law so provides 4. CONTRAVENTION OF THE TERMS OF THE
3. When time is of the essence OBLIGATION - violation of the terms and
4. When there is performance by a party in conditions stipulated in the obligation. The
reciprocal obligations contravention must not be due to a fortuitous
1170 - Those who in the performance of their event or FORCE MAJEURE. (Art. 1174)
obligations are guilty of fraud, negligence, or delay, * imprudence: lack of skill/precaution
and those who in any manner contravene the tenor
thereof, are liable for damages. FRAUD NEGLIGENCE
dolo culpa
GROUNDS FOR LIABILITY Deliberate intention to
No such intention
cause damage/injury
Article 1170 gives the four grounds for liability which
Such waiver, in a certain
may entitle the injured party to damages (see Art. Waiver of the liab for
sense, be allowed in
2197.) for all kinds of obligations regardless of their future fraud is void
negligence
source, mentioned in Article 1157, whether the Negligence is presumed
obligations are real or personal. (supra.) It contemplates Fraud must be clearly
from the violation of a
proved
that the obligation was eventually performed but the contractual obli
obligor is guilty of breach thereof. Here, the breach of Liab for fraud cannot be Liability for negli may be
the obligation is voluntary; in Article 1174, it is mitigated or reduced by reduced acc to the
involuntary. the courts circumstances

1. FRAUD (DECEIT/DOLO) - deliberate or intentional

evasion of the normal fulfillment of an obligation
a. As a ground for damages, it implies some kind
of malice or dishonesty and it cannot cover
cases of mistake and errors of judgment made
in good faith. It is synonymous to bad faith in
that it involves a design to mislead or deceive
another.
b. Article 1170 refers to incidental fraud
(dolo incidente) committed in the performance
of an obligation already existing because of
contract. It is to be differentiated from
causal fraud (dolo causante) or fraud employed
in the execution of a contract.
c. Under Article 1170, the fraud is employed for
the purpose of evading the normal fulfillment of
an obligation and its existence merely results in
breach thereof giving rise to a right by the
innocent party to recover damages. The Civil
Code refers to civil fraud. Criminal fraud gives
rise to criminal liability.
2. NEGLIGENCE (FAULT / CULPA) — It is any
voluntary act or omission, there being no malice,
Recovery of damages for breach of contract or
obligation
Damages recoverable where obligation to pay money
When negligence equivalent to fraud
(p. 55 – pdf)
1171 - Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void.
(waiver: no longer requiring it, not liable)
Responsibility arising from fraud demandable (p.60)
WAIVER OF ACTION FOR FUTURE FRAUD VOID
A waiver of an action for future fraud is void (no effect,
as if there is no waiver) as being against the law and
public policy. (Art. 1409[1].) A contrary rule would
encourage the perpetration of fraud because the obligor
knows that even if he should commit fraud he would not
be liable for it, thus making the obligation illusory.
Waiver of action for past fraud valid (p.60)

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.
Responsibility arising from negligence demandable
Validity of waiver of action arising from negligence
(p.61)
KINDS OF NEGLIGENCE (CULPA) ACCORDING TO
SOURCE OF OBLIGATION
1. CONTRACTUAL NEGLIGENCE (culpa contractual)
or negligence in contracts resulting in their
breach. This kind of negligence is not a source
of obligation. (Art. 1157.) It merely makes the
debtor liable for damages in view of his
negligence in the fulfillment of a pre-existing
obligation resulting in its breach or non-
fulfillment. (Arts. 1170-1174, 2201.) It is a kind
of civil negligence if it does not amount to a
crime.
2. CIVIL NEGLIGENCE (culpa aquiliana) or
negligence which by itself is the source of an
obligation between the parties not formally
bound before by any pre-existing contract. It is
also called “tort” or “quasidelict.”
3. CRIMINAL NEGLIGENCE (culpa criminal) or
negligence resulting in the commission of a
crime.
Effect of Negligence on the Part of the Injured Party
Suppose the creditor is also guilty of negligence, can he
recover damages?
Article 2179 of the Civil Code provides:
“When the plaintiff’s own negligence was the
immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only
contributory, the immediate and proximate cause of
the injury being the defendant’s lack of due care, the
plaintiff may recover damages, but the courts shall
mitigate the damages to be awarded.” (see Arts. 2214,
2215.13)
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.
FAULT or NEGLIGENCE is defined by the above
provision. According to our Supreme Court, “negligence
is conduct that creates undue risk or harm to another. It
is the failure to observe for the protection of the
interests of another person, that degree of care,
precaution and vigilance which the circumstances justly
demand, whereby such other person suffers injury.”
DILIGENCE is “the attention and care required of a
person in a given situation and is the opposite of
negligence.’’ (Sambijon vs. Suing, 503 SCRA 1 [2006].)
FACTORS TO BE CONSIDERED
1. Nature of the obligation
2. Circumstances of the person
3. Circumstances of time
4. Circumstances of the place
Measure of Liability for Damages
Damages signify the money compensation awarded to a
party for loss or injury resulting from breach or contract
or obligation by the other.
KINDS OF DILIGENCE REQUIRED
1. that agreed upon by the parties, orally or in
writing
 2. in the absence of stipulation, that required by law
in the particular case (like the extraordinary
diligence18 required of common carriers)
3. if both the contract and law are silent, then the
diligence expected of a good father of a family
(par. 2.) or ordinary diligence
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.
FORTUITOUS EVENT is any extraordinary event which
cannot be foreseen, or which, though foreseen, is
inevitable. In other words, it is an event which is either
impossible to foresee or impossible to avoid.
FORTUITOUS EVENT DISTINGUISHED FROM FORCE
MAJEURE
1. Acts of man — Strictly speaking, fortuitous event
is an event independent of the will of the obligor
but not of other human wills
2. Acts of God — They are those events which are
totally independent of the will of every human
being. They are also called force majeure. The
term
In our law, fortuitous events and force majeure are
identical in so far as they exempt an obligor from
liability. Both are independent of the will of the
obligor.
KINDS OF FORTUITOUS EVENTS
1. Ordinary fortuitous events or those events
which are common and which the contracting
parties could reasonably foresee (e.g., rain)
2. Extraordinary fortuitous events or those events
which are uncommon and which the contracting
parties could not have reasonably foreseen (e.g.,
earthquake, fi re, war, pestilence, unusual flood)
REQUISITES OF A FORTUITOUS EVENT
1. The event must be independent of the human will
or at least of the obligor’s will
2. The event could not be foreseen (unforeseeable),
or if it could be foreseen, must have been
impossible to avoid (unavoidable)
3. The event must be of such a character as to
render it impossible for the obligor to comply with
his obligation in a normal manner
4. The obligor must be free from any participation in,
or the aggravation of the injury to the obligee.
EXCEPTIONS
A person is not, as a rule, responsible for loss or damage
caused to another resulting from the non-performance
of his obli due to a fortuitous event.
1. When expressly specified by law
a. The debtor is guilty of fraud, negligence,
or delay, or contravention of the tenor of
the obligation.
b. The debtor has promised to deliver the
same (specific) thing to two or more
persons who do not have the same
interest.
c. The obligation to deliver a specific thing
arises from a crime
d. The thing to be delivered is generic.
(genus nunquam perit)
2. When declared by stipulation
3. When the nature of the obligation requires the
assumption of risk
1175 - Usurious transactions
v
shall be governed by
special laws.
SIMPLE LOAN or MUTUUM is a contract whereby one
of the parties delivers to another money or other
consumable thing, upon the condition that the same
amount of the same kind and quality shall be paid.
USURY is contracting for or receiving interest in excess
of the amount allowed by law for the loan or use of
money, goods, chattels, or credits.
Kinds of Interest (p. 83-pdf)
1. Simple interest
2. Compound interest
3. Legal interest
4. Lawful interest
5. Unlawful interest
Interest Rules (p. 84-pdf)
Liability for legal interest (p. 85-pdf)
REQUISITES FOR RECOVERY OF INTEREST
1. The payment of interest must be expressly
stipulated
2. The agreement must be in writing
3. The interest must be lawful
Usury is now legally non-existent. Parties are now free
to stipulate any amount of interest. It does not,
however, give absolute right to the creditor to charge
the debtor interest that is “iniquitous or
unconscionable.” (p.73)
1176 - The receipt of the principal by the creditor,
without 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.
PRESUMPTION is meant the inference of a fact not
actually known arising from its usual connection with
another which is known or proved.
TWO KINDS OF PRESUMPTION
1. Conclusive presumption
one which cannot be contradicted like the
presumption that everyone is conclusively
presumed to know the law
2. Disputable (or rebuttable) presumption
one which can be contradicted or rebutted by
presenting proof to the contrary like the
presumption established in Article 1176.
WHEN PRESUMPTIONS IN ARTICLE 1176 DO NOT
APPLY
1. With reservation as the interest
The presumptions established in Article 1176 do
not arise where there is a reservation as to
interest or prior installments, as the case may
be. The reservation may be made in writing or
verbally.
2. Receipt without indication of particular
installment paid
3. Non-payment proven
1177 - The creditors, after having pursued the
property in 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.
REMEDIES AVAILABLE TO CREDITORS FOR THE
SATISFACTION OF THEIR CLAIMS
In case the debtor does not comply with his obligation,
the creditor may avail himself of the following remedies
to satisfy his claim:
1. exact fulfillment (specific performance) with the
right to damages
2. pursue the leviable (not exempt from
attachment under the law) property of the
debtor
3. ACCION SUBROGATORIA
“after having pursued the property in
possession of the debtor,’’ exercise all the rights
(like the right to redeem) and bring all the
actions of the debtor22 (like the right to collect
from the debtor of his debtor) except those
inherent in or personal to the person of the
latter (such as the right to vote, to hold office,
to receive legal support, to revoke a donation
on the ground of ingratitude, etc.)
4. ACCION PAULIANA
ask the court to rescind or impugn acts or
contracts which the debtor may have done to
defraud him when he cannot in any other
manner recover his claim.
 Commodatum is essentially gratuitous. (Art.
1933.)
2. Prohibited by stipulation of parties

1178. Subject to the laws, all rights acquired in

virtue of an obligation are transmissible, if there
has been no stipulation to the contrary.

TRANSMISSIBILITY OF RIGHTS
All rights acquired in virtue of an obligation are
generally transmissible. (see Art. 1311.) The exceptions
to this rule are the following:

1. Prohibited by law — When prohibited by law, like

the rights in partnership, agency, and commodatum
which are purely personal in character.
a. By the contract of partnership, two or more
persons bind themselves to contribute
money, property or industry to a common
fund, with the intention of dividing the profi
ts among themselves.
b. By the contract of agency, a person binds
himself to render some service or to do
something in representation or on behalf of
another, with the consent or authority of the
latter. (Art. 1868.)
c. By the contract of commodatum, one of the
parties delivers to another something not
consumable so that the latter may use the
same for a certain time and return it.
CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS WHEN OBLIGATION DEMANDABLE AT ONCE

SECTION 1 – PURE AND CONDITIONAL OBLIGATIONS 1. when it is pure

2. when it is subject to a resolutory condition
1179 - Every obligation whose performance does 3. when it is subject to a resolutory period
not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is WHERE DURATION OF PERIOD DEPENDS UPON THE
demandable at once. WILL OF DEBTOR
Every obligation which contains a resolutory PERIOD is a future and certain event upon the arrival of
condition shall also be demandable, without which the obligation subject to it either arises or is
prejudice to the effects of the happening of the extinguished.
event.
1. The debtor promises to pay when his means
permit him to do so
PURE OBLIGATION is one which is not subject to any
2. Other cases
condition and no specific date is mentioned for its
a. “little by little”
fulfilment and is, therefore, immediately demandable.
b. “as soon as possible”
CONDITIONAL OBLIGATION is one whose consequences c. “from time to time”
are subject in one way or another to the fulfillment of a d. “as soon as I have the money”
condition. e. “at any time I have the money”
CONDITION is a future and uncertain event, upon the f. “in partial payments”
happening of which, the effectivity or extinguishment of g. “when I am in a position to pay”
an obligation (or rights) subject to it depends.
(resolutory condition)
(suspensive condition)
CHARACTERISTICS OF A CONDITION
1. Future and uncertain
1181 - In conditional obligations, the acquisition of
2. Past but unknown
rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of
TWO PRINCIPAL KINDS OF CONDITION
the event which constitutes the condition.
1. Suspensive condition (condition precedent or
condition antecedent) or one the fulfillment of
which will give rise to an obligation (or right). In
other words, the demandability of the obligation is
suspended until the happening of a future and
uncertain event which constitutes the condition. EFFECT OF HAPPENING OF CONDITION
2. Resolutory condition (condition subsequent) or
one the fulfillment of which will extinguish an 1. Acquisition of rights
obligation (or right) already existing In obligations subject to a suspensive condition,
the acquisition of rights by the creditor depends
SUSPENSIVE RESOLUTORY upon the happening of the event which
CONDITION CONDITION constitutes the condition.
Suspensive condition is Resolutory condition that 2. Loss of rights already acquired
fulfilled, the obligation is fulfilled, the obligation In obligations subject to a resolutory condition,
arises is extinguished the happening of the event which constitutes
If the first does not take the condition produces the extinguishment or
place, the tie of the law The tie of the law is loss of rights already acquired.
(juridical/legal tie) does consolidated
not appear
Until the first takes place, Its effects flow, but over
the existence of the obli it hovers the possibility
is mere hope of termination