LAW ON OBLIGATIONS AND CONTRACTS

            It is a body of rules which deals with the nature and sources of obligations and the rights and duties
arising from agreements and the particular contracts.

Civil Code of the Philippines

            The Law on obligations and contracts is found in Republic Act 386, otherwise known as the Civil
Code of the Philippines. When we speak of civil law, we refer to the law found primarily in our Civil Code. It
was approved as RA 386 on June 18, 1949 and took effect on August 30, 1950. It is divided into four (4)
books.

            Book 4 of the Civil Code deals with the obligations and contracts. The general provisions on
OBLIGATIONS are contained in Title I, Article 1156-1304 while those on CONTRACTS in Title II, Articles
1305-1422.

OBLIGATIONS
(Articles 1156-1304, Civil Code)

ARTICLE 1156 – An obligation is a juridical necessity to give, to do or not to do. The term obligation is
derived from the Latin word “obligare” which means tying or binding.

It is a tie or bond recognized by law by virtue of which one is bound in favor of another to render something
– and this may consist in giving a thing, doing a certain act, or not doing a certain act.

The Civil Code defines as merely the duty under the law of the DEBTOR OR OBLIGOR ( he who has the
duty of giving doing, or not doing) when it speaks of obligation as a juridical necessity.

Obligation is a juridical necessity because in case of noncompliance, the courts of justice may be called
upon by the aggrieved party to enforce its fulfillment or, in default thereof, the economic value that it
represents. In a proper case, the debtor or obligor may also be made liable for DAMAGES, which
represents the sum of money given as a compensation for the injury or harm suffered by the CREDITOR
OR THE OBLIGEE (he who has the right to the performance of the obligation for the violation of his rights ).

ESSENTIAL REQUISITES OF AN OBLIGATION

1. A PASSIVE SUBJECT (debtor or obligor) the person who is bound to the fulfillment of the
obligation; he who has a duty.
2. AN ACTIVE SUBJECT (creditor or obligee) the person who is entitled to demand the fulfillment of
the obligation; he who has a right.
3. OBJECT or PRESTATION (subject matter of the obligation) the conduct required to be observed
by the debtor. It may consist in giving, doing or not doing. Without prestation, there is nothing to
perform.
 4. A JURIDICAL or LEGAL TIE (efficient cause) that which binds or connects the parties to the
obligation.

ARTICLE 1157 – Obligations arise from;

1. Law
2. Contracts
3. Quasi-contracts
4. Acts or omissions punished by law
5. Quasi-delicts

SOURCES OF OBLIGATIONS

1. LAWS –when they are enforced by law itself. E.g. obligations to pay taxes, obligation to support
one’s family.
2. CONTRACTS – when they arise from the stipulation of the parties. (art. 1306)
3. QUASI-CONTRACTS – when they arise from lawful, voluntary and unilateral acts which are
enforceable to the end that no one shall be unjustly enriched or benefited at the expense of
another.
4. CRIMES OR ACTS OR OMISSIONS PUNISHED BY LAW – when they arise from civil liability
which is the consequences of the criminal offense.
5. QUASI-DELICTS – when they arise from damaged cause to another through an act of omission,
there being fault or negligence, but no contractual relations exists between the parties.

An obligation is a juridical necessity to give, to do or not to do. An obligation needs to be juridical in

nature in order for it to have the force of law. Through this, a court may be asked to order the performance
of an obligation.
An obligation are civil or natural. Civil Obligation is based on a positive law and gives right of action
to compel their performance, while Natural Obligation is based on natural law, but on equity and moral
justice. Hence, it is not enforceable by court action, but after voluntary performance of the debtor, he can
no longer recover what he has given.
Example: Romeo executed a promissory note in favor of Juliet for $50, 000. Romeo is the debtor (payor)
while Juliet is the creditor (payee). If Romeo does not pay on due date, Juliet can enforce the fulfillment of
the obligation by court action. If Juliet does not file a court action against Juliet within 10 years from due
date which is the prescriptive period for an action against a written contract. Juliet loses the right to exact
performance by court action. However, if Romeo, out of his love for Juliet, voluntarily makes the payment to
Juliet thought such obligation has prescribed, Romeo will no longer be allowed to recover what he has
given as payment because although the obligation has prescribed, in equity and moral justice, Romeo still
owed Juliet the amount of $50, 000.
(Article 1144 (3), Civil Code of the Philippines. Upon a written contract; actions must be brought within 10
years from the time the right of action accrues.)

There are 4 essential requisites of an obligation in order to exist. All of these must be present:
1. Active subject - It is the party (creditor or obligee) who has the right to demand the performance of an
obligation.
2. Passive subject - It is the one (debtor or obligor) who is obliged to perform the obligation.
3. Prestation - It is the object of the obligation. It is what the obligation is all about either to give, to do, not
to do, or a combination.
4. Efficient Cause - The juridical tie that binds the parties to an obligation. It is what binds the parties (e.g.
contracts, quasi contracts).

Example: Romeo executed a contract of loan to borrow money from Juliet whom he wishes to spend in
courting Juliet. Juliet in turn agreed and lend money to Romeo.
In the preceding example, Romeo is the passive subject while Juliet is the active subject. Their prestation is
the money being borrowed while their efficient cause is the contract of loan. All of the essential requisites of
an obligation is present, hence such contract creates an obligation.

Law
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.
A law is a binding custom or practice of a community: a rule of
conduct or action prescribed or formally recognized as binding
or enforced by a controlling authority. Obligation derived from
law must not be presumed. If the law does not include,
therefore it excludes. Only those which the law clearly stipulate
or express are demandable.
Example of this is the obligation to pay Taxes. Those which
are clearly stipulated in the National Internal Revenue Code
(R.A. 8424) are demandable and those which are not clearly
expressed are not presumed.
Contracts
Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.
A contract is a meeting of minds between two
persons whereby one binds himself, with respect to
the other, to give something or to render some
service. A contract, according to article 1159 and
1305, bind two persons to perform an obligation that
are incumbent upon them based on their agreement
having in them the force of law and should be
complied in good faith. The two persons are the
active and passive subject while their agreement
and what they have agreed upon are the prestation
and efficient cause.
An example of this is a contract of loan, wherein the active subject is the creditor; the passive subject is the
debtor. The prestation is money to be borrowed and the efficient cause is the contract.
Example: Romeo executed a contract of loan to borrow money from Juliet whom he wishes to spend in
courting Juliet. Juliet in turn agreed and lend money to Romeo. The meeting of the minds of Romeo and
Juliet created the contract of loan and to enforce what they have agreed upon they put it in writing (contract
of loan) which is what the statute of fraud demand.
Quasi-contracts
Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this
Book.
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that
no one shall be unjustly enriched or benefited at the expense of another. Quasi-contract arises because of
these acts which might result to an unjust enrichment. There is unjust enrichment when a person unjustly
retains a benefit at the loss of another that is against the fundamental principles of justice, equity and good
conscience.
Examples of these acts that give rise to quasi-contract are Negotiorum gestio and Solutio indebiti.
a. Negotiorum gestio
Negotiorum gestio is the voluntary administration of the property, business or affairs of another, without his
consent or authority that creates an obligation for reimbursement for the necessary expenses the gestor
had spent.
Example: Juliet left her farm unattended for 1
week because she is having a vacation.
Romeo, a concerned lover in secrecy, noticed
that Juliet has not been around and the plants
are slowly dying. Out of affection, Romeo
cultivated the land, watered the plants, buy
fertilizers and placed fertilizers to the plants,
removed the weeds and do all what a farmer
should do. Romeo spent necessary expenses
which needs to be reimbursed in order for
Juliet not to unjustly enrich herself at the
expense of Romeo.
b. Solutio indebiti
If something is received when there is no right to demand it, and it was unduly delivered through mistake,
the obligation to return it arises.
Solutio indebiti refers to payment by mistake. It is receiving payment by mistake that is not due or does not
have such right to demand such payment. It creates an obligation to return such payment.
Example: Romeo bought goods from Juliet Store. The goods cost $1500. Romeo gave $2000 to the store
cashier and receive a change of $700. Romeo is duty bound to return the excess of $200 to the store.
Otherwise, he will be unjustly enriching himself at the expense of Juliet Store.

Another example, Romeo commutes via jeepney on

his way to school. Juliet, a jeepney driver, receives
Php 10 from Romeo. Because of the handsomeness
and cuteness of Romeo, Juliet thought that Romeo is a
student. So, she gave Romeo a change of Php 4
rather than Php 2 if no discount given. By solutio
indebiti, Romeo has no right to receive the excess Php
2. Therefore, Romeo is bound to return the excess
Php 2 or else he will be unjustly enriching himself at
the expense of Juliet.

Acts or omissions punishable by law

Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the
provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book, regulating damages.
Every person criminally liable for a felony is also civilly liable. Commission of a crime makes the offender
civilly liable. Such civil liability includes.
1. Restitution;
2. Reparation of the damage caused;
3. Indemnification for consequential damages.
Example: Romeo, a horse racing enthusiast, steals the
horse of Juliet. Romeo commits the crime of stealing
Juliet's beloved horse. Romeo is criminally liable. In
addition, Romeo is also civilly liable. He is liable to return
the horse, paying for its value if he cannot return the
horse and indemnifying Juliet of the consequential
damages she had suffered.

QUASI-DELICT
Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this
Book, and by special laws.
Quasi-delict (also known as tort or culpa aquiliana ) are acts or omissions that cause damage to another,
there being fault or negligence, is obliged to pay for the damage done but without any pre-existing
contractual relations between the party. There is quasi-delict if there is damages sustained, negligence by
act or omission, and the connection of the cause and
effect between such negligence and damages.
Example: Romeo, a handsome try hard baseball player,
was playing baseball outside Juliet's house. Upon
seeing Juliet, Romeo suddenly got excited and hit the
ball so hard that it fly straight to Juliet's window
shattering it into pieces and bounce right into Juliet's
face injuring her beloved nose. Though Romeo and
Juliet has no contractual relation at all. They are now
bound to each other because of quasi-delict. Because
of Romeo's negligence, he will be liable for the
damages to Juliet.

ARTICLE 1161
Civil obligations arising from criminal offenses shall be governed by penal laws, subject to the provisions of
Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of
Title XVIII of the Book, regulating damages.
Explanations:
Civil Obligations Arising from Crimes
This provision refers to civil obligations arising from crimes. Under the law “every person criminally liable for
a felony is also civilly liable”. The civil liability arising out of the commission of crime includes: (1) restitution
(2) reparation of damage caused and (3) indemnification of consequential damages.
Example
Mang Kanor is found guilty by the court of theft of colored television belonging to Mang Wally.  Aside from
sentencing him imprisonment, the court also orders Mang Kanor to return the colored television
(restitution), or if he has disposed of the same, to pay its value (reparation) and other damages
(indemnification) suffering by Mang Wally.

ARTICLE 1162
Obligations derived from quasi-delicts shall be governed by the provisions of chapter 2, title xvii of this
book, and by special laws.
Quasi-Delicts define in Article 2176 of the Civil Code state:
Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this Chapter.
According to Article 29 of the civil code
 When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved
beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such
action requires only a preponderance of evidence.
Upon motion of the defendant, the court may require the plaintiff to file a bond to answer for damages in
case the complaint should be found to be malicious.
Elements of Quasi Delict:
1. Damages suffered by the plaintiff
2. Fault or negligence of the defendant
3. An injury to the plaintiff through such failure
Kinds of negligence
1.Culpa aquiliana
2.Culpa contractual - “the fault or negligence incident in the performance of an obligation
which already existed, and which increases the liability from such already existing obligation”;
Quasi-delict (culpa Aquiliana) distinguished from Culpa Contractual
CULPA AQUILIANA CULPA CONTRACTUAL

Only private concern Pre-existing obligation between the parties

 Repairs the damage by
indemnification.
Fault or negligence is incidental to the
Covers all acts that are faulty
performance of the obligation
or negligent.
Preponderance of evidence.

Quasi-delicts distinguished from Crime

QUASI-DELICTS CRIME

Against the individual Against the State

Criminal Intent is not Criminal intent is necessary for the existence of
necessary criminal liability
Ground for Civil action for Only when there is a penal law clearly
damages penalizing it.

Proximate Cause
It is generally stated, is such adequate and efficient cause as, in the natural order of events, and under the
particular circumstances surrounding the case, would necessarily produce the event.

CASE DIGEST
 
FILOMENO URBANO, petitioner, vs HON. INTERMEDIATE APPELLATE COURT AND PEOPLE OF THE
PHILIPPINES, respondents. G.R. No. 72964  January 7, 1988

Facts:
On October 23, 1980, petitioner Filomeno Urbano was on his way to his ricefield. He found the place where
he stored palay flooded with water coming from the irrigation canal. Urbano went to the elevated portion to
see what happened, and there he saw Marcelino Javier and Emilio Efren cutting grass. Javier admitted that
he was the one who opened the canal.
A quarrel ensued, and Urbano hit Javier on the right palm with his bolo, and again on the leg with the back
of the bolo. On October 27, 1980, Urbano and Javier had an amicable settlement. Urbano paid P700 for the
medical expenses of Javier. On November 14, 1980, Javier was rushed to the hospital where he had
lockjaw and convulsions.
The doctor found the condition to be caused by tetanus toxin which infected the healing wound in his palm.
He died the following day. Urbano was charged with homicide and was found guilty both by the trial court
and on appeal by the Court of Appeals.
Urbano filed a motion for new trial based on the affidavit of the Barangay Captain who stated that he saw
the deceased catching fish in the shallow irrigation canals on November 5. The motion was denied; hence,
this petition.
Issue:
Whether the wound inflicted by Urbano to Javier was the proximate cause of the latter’s death
Held:
A definition of proximate cause is that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would not have occurred.
The symptoms of tetanus appeared on the 22nd day after the hacking incident or more than 14 days after
the infliction of the wound.
The more credible conclusion is that at the time Javier’s wound was inflicted by the appellant, the severe
form of tetanus that killed him was not yet present. Consequently, Javier’s wound could have been infected
with tetanus after the hacking incident. Considering the circumstance surrounding Javier’s death, his wound
could have been infected by tetanus 2 or 3 or a few but not 20 to 22 days before he died.
The rule is that the death of the victim must be the direct, natural, and logical consequence  of the wounds
inflicted upon him by the accused.
the proof that the accused caused the victim’s death must convince a rational mind beyond reasonable
doubt. The medical findings, however, lead us to a distinct possibility that the infection of the wound by
tetanus was an efficient intervening cause later or between the time Javier was wounded to the time of his
death. The infection was, therefore, distinct and foreign to the crime.
The decision of the then Intermediate Appellate Court, now Court of Appeals, is REVERSED and SET
ASIDE. The petitioner is ACQUITTED of the crime of homicide.

LESSON 2

NATURE AND EFFECTS OF OBLIGATION

ARTICLE 1163
Art. 1163 Every Person obliged to give something is also obliged to take care of it with proper diligence of a
good father of a family unless the law or the stipulation of the parties requires another standard of care.

Reason for provision – the obligation to deliver the thing would be illusionary if the debtor and will pertain to
another it is a condition suitable for its enjoyment by the obligee for the purpose of contemplated.
Diligence Required – preserving the thing, law requires the diligence of a good father of a family
Effect of Breach – the obligation to preserve the thing to be delivered has its sanction in the liability for
damages imposed upon the debtor who fails the exercise of diligence of a good father of a family
preserving the thing. But if the failure of the debtor to preserve the thing is due to no fault or negligence of
his but fortuitous event or force. He is exempted from the responsibility

What are the obligations of someone obliged to give a determinate thing?

I. To take good care of the thing with the diligence of a good father of a family.
Diligence of a good father of a family means an ordinary care. Just like a father of a family, it is a care that
an average person would do in taking care of his property.

II. To deliver the thing.

Delivery is placing the thing in the possession or control of the active subject (obligee) by the passive
subject (obligor) either actually or constructively.

III. To deliver the fruits of the thing.

The creditor has a right to the fruits of the thing from the time the obligation to deliver the thing arises.
However, such creditor has no real right over the thing unless such it has been delivered to him.
Rights of the creditor (obligee)
a. Personal right - a right that may be enforce by one person on another, such as the right of a creditor to
demand delivery of the thing and its fruits from the debtor.

ENGRACIO OBEJERA and MERCEDES INTAK, plaintiffs-appellees, vs. IGA SY, defendant-appellant.

Pedro Panganiban for appellant. Jose Mayo Librea for appellees. JARANILLA, J.:
By virtue of the appeal filed against the decision of the Court of First Instance of Batangas
annulling, on the ground of force and intimidation, the deed of transfer executed on April 9, 1942 (Exhibit
Y), whereby the plaintiffs and appellees agreed to transfer to the defendant and appellant their property
assessed at P2,230 in case they failed to return to the defendant on December 31, 1942 the balance of
P3,697 and pieces of jewelry worth P400 allegedly deposited with the plaintiffs on January 2, 1942, the
above-entitled case was submitted to this court for review.
On December 13, 1941, plaintiffs and defendant sought refuge in the house of Leon Villena, barrio
lieutenant of Dalig, Batangas, Batangas, on account of the Japanese invasion of the Philippines. plaintiffs
and defendant, after consultation with their host Leon Villena, decided to hide their things and valuables in
a dug-out belonging to Leon Villena about thirty meters away from his house. The defendant placed in said
dug-out her money allegedly amounting to P5,021 and jewelry worth P400 in her own container; Leon
Villena and his wife also placed therein their own things; the plaintiffs also placed their things and money
allegedly amounting to P3,000. They did this at night and covered the dug-out with palay belonging to Leon
Villena and the defendant Iga Sy.
On February 18, 1942, at the instance of the defendant who desired to move to another house, the
plaintiffs and the defendant, together with Leon Villena, among others, went to the dug-out to take out the
defendant’s container and discovered, to their consternation, that their money and things, except for a few
papers, had been lost.
One day during the first week of April, 1942, the defendant reported the loss of her money and
jewels, causing the arrest and investigation of Leon Villena, two others and the plaintiff Engracio Obejera,
who where released shortly after, except Engracio Obejera who was released only on April 19, 1942 after
he, with his wife, had consented to execute Exhibit Y which document was sought to be annulled by the
plaintiffs and appellees herein. The defendant and appellant contends that she deposited her money and
jewelry with the plaintiffs and that the plaintiffs, acknowledging liability for the loss of her money and
jewelry, offered to transfer their property under Transfer Certificate of Title No. 666 and accordingly
executed the document in question. On the other hand, the plaintiffs deny the alleged deposit, deny
knowledge of the loss of the defendant’s money and jewelry, and claim that their consent to the deed of
transfer was obtained through violence and intimidation.
After a careful consideration of the nine assignments of error and examination of the evidence of
this case, the contention of the defendant and appellant cannot be sustained. The alleged deposit cannot
be believed and is contrary to the ordinary course of nature and the ordinary habits of life
that the plaintiffs and the defendant only sought refuge in his house; that neither the plaintiffs nor the
defendant had, therefore, control over, or absolute and exclusive access, to the dug-out, as proved by the
fact that when the defendant decided to take her things with her because she was going to move to another
house, two days before the discovery of the loss,
Under these circumstances, it is hard to believe that plaintiff Engracio Obejera would assume
responsibility over the defendant’s things hidden in a place not belonging to him but to Leon Villena, in
whose house they only sought refuge and were like guests, and especially at a time when the confusion
and fear resulting from the Japanese invasion and fast advance so gripped everyone that nobody could be
sure of his own things and even of his life.
The Supreme Court held:
In this bailment ordinary care and diligence are required of the bailee and he is not liable for the
inevitable loss or destruction of the chattel, not attributable to his fault. If while the bailment continues, the
chattel is destroyed, or stolen, or perishes, without negligence on the bailee’s part, the loss as in other
hirings, falls upon the owner, in accordance with the maxim  res perit domino

Article 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.

The general rule is that the creditor has the right to the fruits of the thing from the time the
obligation to deliver it arises.
Ownership over the thing though, is only required when such an object is delivered to him. The
essential element therefore of ownership is delivery. Therefore, although the creditor has the right has the
right to the fruits of a thing from the time the obligation to deliver the thing itself arises, his ownership will
start when the thing is delivered to him.

WHEN OBLIGATION TO DELIVER THE FRUITS ARISES

Example:
  Anne sold her dog to Janine for 15,000 pesos and while in the possession of Anne, the dog gave
birth to a puppy in which Janine is the one entitled to the puppy if Janine has already paid the amount of
15, 000 pesos to Anne.
PERSONAL RIGHT  is the right or power of a person to demand from another — to give, to do, or not to
do.
REAL RIGHT is a power over a specific thing (like the right of ownership or possession) and is binding on
the whole world.

Example:
  If Anne was a creditor to a house and Janine was the debtor and both agreed that the payment for
the rent of the house would be monthly. Janine upon paying is what we call REAL RIGHT. But upon Anne
expecting Janine to pay every month is what we call PERSONAL RIGHT.

CASE

A. A. ADDISON vs. MARCIANA FELIX and BALBINO TIOCO G.R. No. L-12342. August 3, 1918.
FISHER, J.

Facts:
Petitioner Addison sold four parcels of land to Defendant spouses Felix and Tioco located in Lucena City.
Respondents paid P3, 000.00 for the purchase price and promised to pay the remaining by installment. The
contract provides that the purchasers may cancel the contract within one year after the issuance of title on
their name.
The petitioner went to Lucena for the survey designaton and delivery of the land but only 2 parcels were
designated and 2/3 of it was in possession of a Juan Villafuerte.
The other parcels were not surveyed and designated by Addison.
Addison demanded from petitioner the payment of the first installment but the latter resists that there was
no delivery and as such, they are entitled to get back the 3,000 purchase price they gave upon the
execution of the contract.
 
Issue:
Whether or not there was a valid delivery.

Ruling:
The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land,
he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of
their area was in the hostile and adverse possession of a third person.
 
It is true that the same article declares that the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce
the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at
the moment of the sale, its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the
sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if
there is an impediment, delivery cannot be deemed effected.

Article 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 a delivery.
If the thing is indeterminate or generic, he may ask the obligation to be complied with the expense of the
debtor.
If the obligor delays, or has promised to deliver the thing to two or more persons who do not have the same
interest, he shall be responsible for fortuitous events until he has effected the delivery.

Classification of Obligation from the view point of subject matter

1. Real Obligations (to give)
a specific thing
a generic or indeterminate thing
2. Personal obligations (to do or not to do)

Remedies of the creditor when the debtor fails to deliver a determinate thing
1. Action for specific performance
2. Action to rescind or resolve the obligation
3. Complaint for damages
4. Liability of the debtor for loss of the thing due to a fortuitous event

General Rule
“No person shall be responsible for those events which could not be foreseen, or which, though foreseen,
were inevitable”

Question:
If the obligee delays the performance of the obligation and a fortuitous event occurs,; the specific prestation
is lost, is the obligation extinguished?
Answer
No. the obligee has incurred delay before the specific prestation is lost so therefore he must bear the
damages.

Exceptions
1. If the obligor delays
2. If the obligor is guilty in bad faith

Kinds of delay
Ordinary Delay – Failure to perform an obligation in a specific time
Extraordinary Delay/Legal delay/default – Non-fulfillment of obligation that arises after extrajudicial or
judicial demand.

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.

General. Rule:
Obligation to deliver the object includes with it the accessories and accessions.

Exception to the Rule

a. Required by law
b. Exclusion is expressly stipulated by the parties.

ACCESSORIES
Those things which are used for the preservation of another thing or more important, have for their object
the completion of the latter for which they are indispensable or convenient.
ACCESSIONS
Includes everything which is produced by a thing, or which is incorporated or attached thereto, either
naturally or artificially.

ARTICLE 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.

Article 1167 refers to an obligation to do, that is, to perform an act or render a service. It contemplates three
situations:
The debtor fails to perform an obligation to do.
The debtor performs an obligation to do but contrary to the terms thereof.
The debtor performs an obligation to do in poor manner.
Performance at debtor’s cost. 
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, at the debtor’s
expense.
b. to recover damages.
In case the obligation is done in contravention of the terms or is poorly done, it may be ordered (by the
court) that it shall be reversed if still possible.
Personal Compulsion.
If no law was implemented that regards to the cause of action. Then the only sanction of civil
obligations is compensation for the damages.
Indemnification for Damages.
If the obligation to do cannot be done by another, in case of non-performance the only feasible
remedy of the creditor is indemnification for damages.

Case Illustration
Chavez vs. Gonzales, 32 SCRA 547
Facts:
July 1963, Rosendo Chavez, plaintiff, brought his typewriter to Fructuoso Gonzales, defendant, a
typewriter repairman for the cleaning and servicing of the said typewriter. Three months later, the plaintiff
paid P6.00 to the defendant for the purchase of spare parts. Because of the delay of the repair the plaintiff
decided to recover the typewriter from the defendant which was wrapped like a package. When he opened
and examined it, the interior cover and some parts and screws were missing. October 29, 1963 the plaintiff
sent a letter to the defendant for the return of the missing parts, the interior cover and the sum of P6.00.
The following day, the defendant returned to the plaintiff only some of the missing parts, the interior cover
and the P6.00.
August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines, that cost
him a total of P89.85. A year later, the plaintiff filed an action before the City Court of Manila, demanding
from the defendant the payment for total of P1,190.00 for damages including attorney’s fees. The
defendant made no denials. The repair invoice shows that the missing parts had a total value of P31.10
only. Wherefore, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P31.10,
and the costs of suit.
Chaves appealed, because it only awarded  the value of the missing parts of the typewriter, instead
of the whole cost of labor and materials that went into the repair of the machine. It is clear that the
defendant-appellee contravened the tenor of his obligation because not only did he not repair the typewriter
but returned it “in shambles”.
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified, by
ordering the defendant-appellee to pay, as he is hereby ordered to pay, the plaintiff-appellant the sum of
P89.85, with interest at the legal rate from the filing of the complaint. Costs in all instances against appellee
Fructuoso Gonzales.

Issue:
Whether or not the defendant is liable for the total cost of repair.

Held:
Yes. For such contravention, he is liable under Article 1167 of the Civil Code. For the cost of executing the
obligation in a proper manner. The cost of the execution of the obligation in this case should be the cost of
the labor or service expended in the repair of the typewriter.

ARTICLE 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.
 
Doing Prohibited Thing
This article also known as negative obligation of prestation , that is not to do a certain thing or act.
The thing  done or act performed  shall be undone at the expense of the obligor. Damages may be claimed
against him.
 
Example:
In a contract of lease of house, the lessee obligated himself not to make any improvements without the
consent of the lessor. In making improvements unilaterally, the improvements may be undone at his
expense in addition to damages.
ARTICLE 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; or
(2) When from the nature and the circumstances of the obligations it appears that the designation of the
time when the things 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 obligation, 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 other begins.

Concept and Nature of Delay

Synonymous to default or mora,  means delay in the fulfillment of obligation (default).

Kinds of MORA
Mora Solvendi – default on debtor
a. Ex re – obligation to give
b. Ex persona – obligation to do
Mora Accipiendi – default on creditor
Compensatio Morae – default on both parties in reciprocal obligations.
Mora Solvendi
-Delay is on part of debtor contrary to law
-No Mora on natural obligation
-Effects only arise due to causes imputable to the debtor

Requisites for debtor be in default 

-That the obligation be demandable and already liquidated.
-That debtor delays performance.
-That the creditors requires the performance judicially or extra-judicially.
DEMAND;
Begins from demand of the creditor for the performance of obligation.
Demand necessary even a period has been fixed in the obligation.
There is no delay/default if there is no demand.
Default start on the day of extra-judicially demand.
Refer to prestation that is due and not to another.
No delay when demand is bigger that what is due.

Four cases where demand not necessary constitute debtor in default:

(1)Where there is express stipulation to that effect.
(2)Where the law so provides.
(3)When the period is the controlling motive or the principal inducement for creation of the obligation.
(4)Where demand would be useless.
 
“1st two cases, not sufficient that law or obligation fixes date for performance, it must further state
expressly that after the period lapses, default will commence.”

Period Fixed
There is delay/default if the time stated on the agreement of both parties.
No need to demand.
Nature and Circumstances consider of delay/default of the debtor.

Demand is Useless
When impossibility is caused by some act or fault of the debtor, such as when he is absent or is in
hiding, or has already disposed of the thing which is to be delivered.
When impossibility is caused by fortuitous event, but the debtor has bound himself to be liable in
cases of such events.

Acknowledgement of Delay
When debtor expressly recognized or acknowledges that he has incurred in delay.

Effect of Mora Solvendi

(1)When it has for its object a determinate thing, the delay places the risks of the thing on the
debtor
(2)He becomes liable for damages for delay

Mora Accipiendi
Mora of the creditor, delay in performance based on omission by creditor of necessary cooperation.
Requisites:
(1)An offer of performance by the debtor who has the required capacity.
(2)The offer must be to comply with the prestation as it should be performed.
(3)The creditor refuses the performance w/o just cause.

Effects of Mora Accipiendi
The responsibility of the debtor for the thing is reduced and limited to fraud and gross negligence
Debtor is exempted from the risk of loss of the thing w/c automatically pass to creditor
All expenses incurred by the debtor for the preservation of the thing after the mora shall be
chargeable to creditor
If the obligations bears interest the debtor does not have to pay the same from the moment of the
mora
The creditors becomes liable for damages
Debtor may relieve himself of the obligation by the consignation of thing

Compensatio Marae
Reciprocal Obligation must be regulate by both party simultaneous.

Cessation of the Effects of MORA

(1) Renunciation by the creditor and
(2) prescription

ARTICLE 1170
 Those who in the performance of their obligation are guilty of fraud, negligence, or delay and those
who in any manner contravene the tenor thereof, are liable for damages.

Fraud may be defined as the voluntary execution of wrongful act or willful omission, knowing and intending
the effects which naturally arise from such omission. In this article fraud is referred to as the deliberate
evasion from an obligation. Fraud in this article also involves malice in the act of evasion from an obligation.

Non-performance by fault or negligence is known as Culpa Contractual or the fault of the debtor as an

incident if fulfilling an existing obligation.
Excuse for non-performance of an obligation is only valid if it is due to fortuitous event.
Damages are referred to as any damage caused in any human being. It can be in the form of money,
Physical damage, moral damage, mental damage etc.
If the damage is in the form of money and the damage to be incurred from is not indicated in the contract, a
legal interest of 6 percent per year will be observed in computing for damage.

ARTICLE 1171
Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future
fraud is void.
Responsibility arising from fraud can be demandable with respect to all obligations, and any waiver
for an action for future fraud is void, there is no effect as if there is no waiver being against the law and
public policy.

December 14, 1979

MARIANO C. PAMINTUAN, petitioner-appellant, vs. CA and YU PING KUN CO., INC., respondent
appellees.

Facts: This case is about the recovery compensatory, damages for breach of contract of sale in addition to
liquidated damages.
The petitioner appellant was the holder of a barter license wherein he was authorized to export to
Japan 1,000 metric tons of white flint corn in exchange of collateral importation of plastic sheetings.
The petitioner contracted to sell the plastic sheetings to Yu Ping Kun, which amounting to P265, 550 for the
339,550 yards of plastic sheetings. That any violation of this contract of sale would entitle the aggrieved
party to collect from the offending party liquidated damages in the sum of P10, 000 pesos.
Pamintuan delivered 224,150 yards but withheld to deliver the remaining, justifying that the company failed
to comply with the conditions of the contract.
But on the liquidation value the respondent made an overpayment amounting to P12, 282. 26 pesos.

Issue:
Whether or not Pamintuan is guilty of fraud?

Held:
Yes, the petitioner is guilty of fraud and should pay the damages to the defendant.
Petitioners contention is based on the stipulation that, any violation of this contract of sale shall entitle the
aggrieved party to collect from the offending party liquidated damages of P10, 000 pesos .
Pamintuan relies on the rule that a penalty and liquidated damages are the same.
1st sentence of Art. 1226, Civil Code states that “in obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case of non-compliance, if there is no
stipulation to the contrary ”
But the supreme court contends that the second sentence of article 1226 itself provides that nevertheless,
damages shall be paid if the obligor refuses to pay the penalty or is  guilty of fraud in the fulfillment of the
obligation” Article 1171. Responsibility arising from fraud is demandable in all obligations.
Article 2201. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible
for damages which may be reasonably attributed to the non-performance of the obligation.
Since he did not make the complete delivery and overpriced the plastic sheetings which he delivered to the
company. Therefore, Pamintuan, is guilty of fraud and should pay the damages.