Lesson 2

LESSON 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.
1. DUTY TO EXERCISE DILIGENCE
 First effect of an obligation to deliver a determinate thing – the duty to exercise proper
diligence.
Kinds of Diligence:
 ORDINARY DILIGENCE
 EXTRA-ORDINARY DILIGENCE
1. ORDINARY DILIGENCE -DILIGENCE OF A GOOD FATHER OF THE FAMILY
- that which is required by the nature of the obligation and corresponds with the
circumstances of person, place, and time.
2. EXTRA-ORDINARY DILIGENCE –
- “a COMMON CARRIER is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with due regard
for all the circumstances.
2. DUTY TO DELIVER
WHEN CREDITOR IS ENTITLED TO THE FRUITS?
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.
Example: A is obliged to give B on December 3, 2019, a particular parcel of land.
- before Dec 3, 2019, B has no right whatsoever over the fruits.
- After December 3, 2019, B is entitled to the fruits.
But if the fruits and the land was actually delivered on December 15, 2019, B
becomes the owner of the land and said fruits only from the said date.
Personal right – is power demandable by one person of another – to give, to do
or not to do.
Real right – is a power over a specific thing and is binding on the whole world.
(right of ownership or possession)
Kinds of delivery
1. Actual Delivery (tradition) – where physically, the property changes hands.
Example: If A sells B a fountain pen, the giving by A to B of the fountain pen is
actual tradition.
2. CONSTRUCTIVE DELIVERY – that where the physical transfer is implied. This may be done
by:
1. tradition symbolica (symbolical tradition) as when the keys of a bodega are given)
2. tradition longga manu – ( delivery by mere consent or pointing out of the object)
3. tradition brevi manu- (Delivery by the short hand; that kind of delivery whereby a
possessor of a thing not as an owner, becomes the possessor as an owner)
Kinds of delivery
4. tradition constitutum possessorium-
- the opposite of brevi manu; thus the delivery whereby a possessor of a thing as an
owner, retains possession no longer as an owner, but in some other capacity)
5. tradition by the execution of legal forms and soleminities.
- like the execution of a public instrument selling land. (Deed of Sale)
Kinds of delivery
WHEN DOES THE OBLIGATION TO DELIVER ARISE?
Ans: It depends:
1. If there is no term or condition, then from the perfection of the contract.
2. If there is a term or condition, then from the moment the term arrives or the
condition happens.
Art. 1165. When what is to be delivered is a determinate thing, the creditor, in
addition to the right granted him by Art. 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 fortuitous event until he has effected the delivery.
CLASSIFICATION OF OBLIGATION FROM THE VIEWPOINT OF SUBJECT
MATTER.
1. Real Obligation – obligation to give.
a. to give a specific thing (set
apart from a class)
B. to give a generic or
indeterminate thing. (one of a
class)
2. Personal Obligation – obligation to do or not to do.
SPECIFIC OR DETERMINATE THINGS
A thing is said to be specific or determinate when it is capable of particular designation.
Example:
1. This car;
2. The car owned by A on September 12, 2005;
3. The car with plate number 1814 (2005)
4. This particular picture of Maui in my notebook.
GENERIC OR INDETERMINATE THINGS
A thing is generic or indeterminate when it refers only to a class, to a genus and cannot
be pointed out with particularity.
Examples:
a. A car;
b. a 2005 BMW automobile;
c. the sum of Php5 Million;
d. a kilo of sugar.

REMEDIES OF THE CREDITOR WHEN THE DEBTOR FAILS TO COMPLY WITH HIS
OBLIGATION.
A) demand specific performance (or compliance) of the obligation
B) demand rescission or cancellation (in some cases)
C) demand damages either with or without either of the first two, (a) or (b)
EFFECT OF FORTUITIOUS EVENTS
Another important difference between a generic and a specific obligation is that:
a) a SPECIFIC OBLIGATION to deliver a specific thing is, as a rule,
extinguished by a fortuitous event or act of God.
b) Upon the other hand, GENERIC OBLIGATIONS are never extinguished
by fortuitous event.
Example:
a) A is obliged to give B this car. Before delivery, an earthquake destroys completely the
car. The obligation to deliver is extinguished.
B) A is obliged to give B a book. Since this is a generic thing, even if one particular book
is lost, other books may take its place. Hence, the obligation is not extinguished.
(genus nunquam perit)
TWO INSTANCES WHERE A FORTUITOUS EVENT DOES NOT EXEMPT.
A) if the obligor DELAYS;
B) If the obligor is guilty of BAD FAITH (for having promised to deliver the same thing to
two or more persons who do not have the same interest) – as when one is not the agent
merely of the other.
ORDINARY DELAY VS. LEGAL DELAY
Ordinary Delay- it refers only to non-performance at a stipulated time.
Legal Delay (default) – is that delay which amounts to a virtual non fulfilment of the
obligation.
DEFAULT
As a rule to put a debtor in default, there must be a demand for fulfilment, the
demand being either judicial or extra-judicial.
Art. 1166. The obligation to give determinate thing includes that of delivering all
its accessions and accessories, even though they may not have been mentioned.
ACCESSORIES – those joined to or included in with the principal for the latter’s better
use, perfection or enjoyment.
ACCESSIONS – additions to or improvement upon a thing.
Art. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.
The 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.
POSITIVE PERSONAL OBLIGATION
- the first sentence deals with the positive personal obligation (TO DO)
Remedies of a creditor if Debtor fails to do:
1. To have the obligation performed (by himself or by another) at the debtor’s
expense; (SPECIFIC PEFORMANCE)
2. Also – to obtain DAMAGES
3. NATURE AND EFFECT OF OBLIGATIONS
WHEN A THING MAY BE ORDERED UNDONE
1. if made poorly;
2. if the obligation is a negative one (provided the undoing is possible)
Art. 1168. When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall be undone at his expense.
NEGATIVE PERSONAL OBLIGATION
As a rule, the remedy is the undoing of the prohibited thing plus damages.
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 fulfilment 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 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 manner with what is incumbent upon him.
From the moment one of the parties fulfils his obligation, delay by the other
begins.
DEFAULT / MORA – LEGAL DELAY
Although Art. 1169 uses the words “in delay”, these should be translated to mean
default (MORA)
Necessity in General of Demand.
To put a debtor in default, as a rule, DEMAND is needed. The demand maybe judicial,
as when a complaint for specific performance is filed; or extra-judicial, without court
proceedings.
WHEN DEMAND IS NOT NEEDED TO PUT DEBTOR IN DEFAULT
1. When the law so provides.
2. When the obligation so expressly provides.
3. When time is of the essence of the contract.
4. When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
5. When the obligor has expressly acknowledged that he is really in default.
DIFFERENT KINDS OF MORA
1. MORA SOLVENDI – default on the part of the debtor
a. mora solvendi ex re – debtor’s default in real obligations
B. mora solvendi ex persona – debtor’s default in personal obligation.
2. MORA ACCIPIENDI - default on the part of the creditor.
3. COMPENSATIO MORAE – when in a reciprocal obligation both parties are in default; here it
is as if neither is in default.
MORA SOLVENDI
There is no mora solvendi in:
1. negative obligation; and
2. natural obligation.
REQUISITES FOR MORA SOLVENDI
1. The obligation must be due, enforceable, and already liquidated or determinate in
amount;
2. There must be non-performance;
3. There must be a demand, unless the demand is not required.
4. The demand must be for the obligation that is due.
EFFECTS OF MORA SOLVENDI
1. If the debtor is in default, he may be liable for interest or damages.
2. He may also have to bear the risk of loss.
3. He is liable even for a fortuitous event.
MORA ACCIPIENDI
 The creditor is guilty of default when he unjustifiably refuses to accept payment or
performance at the time said payment or performance can be done.
 the improper refusal of the (lessor) creditor to accept the rents tendered by the lessee
places the said lessor in default and he must shoulder the subsequent accidental loss of
the premises leased.
RECIPROCAL OBLIGATIONS
Reciprocal Obligations – depend upon each other for performance.
Contract of Sale: In a sale, the buyer must PAY, and the seller must deliver.
 Here performance may be set on different dates.
Example. Delivery – December 9, 2019
Payment – December 13, 2019
To put the seller on default, demand as a rule, must be made. Delivery, upon the other hand,
does not put the buyer in default, till after demand, unless demand is not required. This is
because, in the example given, different periods for performance were given.
 If the performance is not set on different dates, either by the law, contract or custom, it
is understood that performance must be simultaneous. Hence, one party cannot demand
performance by the other, if the former himself cannot perform.
 And when neither has performed, there is compensation morae (DEFAULT ON THE
PART OF BOTH); so it is as if no one is in default).
 If one party performs, and the other does not, the latter would be in default.
Art. 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.
GROUNDS FOR LIABILITY IN THE PERFORMANCE OF OBLIGATIONS:
1. Fraud
2. Negligence
3. Default
4. Violation of the terms of the obligation.
LIABILITY FOR DAMAGES
Those liable under Art. 1170, should pay damages, but generally only if aside
from the breach of contract, prejudice or damage was caused.
Kinds of damages - mental
A. MORAL Damages – for mental and physical anguish
B. EXEMPLARY damages – corrective or to set an example
C. NOMINAL – to vindicate a right – when no other kid of damages may be recovered.
D. TEMPERATE – when the exact amount of damages cannot be determined
E. ACTUAL – actual losses as well as unrealized profit
F. LIQUIDATED – predetermined before hand – by agreement.
Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver
of an action for future fraud is void.
FRAUD- is the voluntary execution of a wrongful act, or a wilful omission which prevents
the normal realization of the prestation, knowing and intending the effects which
naturally and necessarily arise from such act or omission.
Liability for Fraud or Dolo
A) According to time of commission, fraud may be past or future:
(liability for past fraud may be waived; this is not so for future fraud);
B) According to meaning, fraud may be classified as follows:
1) fraud in obtaining consent (execution/creation/birth of contract):
A. DOLO CAUSANTE
(causal fraud);
B. DOLO INCIDENTE
(Incidental fraud)
2) fraud in the performance of an obligation.
NATURE AND EFFECT OF
OBLIGATIONS
ARTICLE 1344. In order that fraud may make a contract voidable, it should be serious
and should not have been employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay damages.
Dolo causante (Causal Fraud) – Fraud employed at the time of the execution of a
contract in order to secure consent, remedy is annulment because of vitiation of
consent.
It is said that fraud may make a contract voidable when it is serious and it should not be
done by both contracting parties.
Fraud is serious when an ordinary prudent person lead into an error.
Example: PTB sold to DM a parcel of land representing that land was “ absolutely free
from liens and encumbrances” DM gave his consent on the faith of PTB’s
representation. Then when the sale was registered, it was found that a lis pendens
notice was annotated.
In this case there is concealment, and it is made in bad faith or with an intent to deceive,
and induced to enter into the contract.
The parties must not be in pari delicto, otherwise, neither party may ask for annulment.
Dolo incidente (Incidental Fraud) – committed in the performance of pre-existing
obligation, remedy is damages.
Example: Gono enter into a contract to deliver 500 cavans of rice to Rhea with a price
per cavan of 1,300 pesos, Gono delivered 300 cavans but withheld the delivery of the
remaining, stating that the price went up and priced the rice to 1,600 per cavan. The
fraud here is dolo incidental because it is committed to the existing contract.
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.
NEGLIGENCE:
The fault or negligence of the obligor consists in the omission of the diligence
which is required by the nature of the obligation and corresponds with the
circumstances of the persons, place and time.
FRAUD DISTINGUISHED FROM NEGLIGENCE
KINDS OF NEGLIGENCE
A. Civil Negligence
1. Culpa Contractual – fault or negligence of obligor by virtue of which he is
unable to perform his obligation arising from a pre-existing contract.
2. Culpa aquiliana/quasi-delict – fault or negligence of a person, whose failure to observe the
required diligence to the obligation causes damage to another.
B. Culpa Criminal – fault or negligence which results in the commission of a crime.
Nature and effects of obligation
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 assumption of risks,
no person shall be responsible for those events which could not be foreseen, or
which though foreseen, were inevitable.
General Rule for FORTUITOUS EVENTS:
No liability for a fortuitous event.
EXCEPTIONS:
1. When expressly declared by law.
2. When expressly declared by stipulation or contract;
3. When the nature of the obligation requires the assumption of risk.
To exempt the obligor from liability for a breach of obligation due to an “act of
God”, the following must concur:
1. the cause of the breach of the obligation, must be independent of the will of the
debtor/obligor;
2. the event must be either unforeseeable or unavoidable;
3. the event must be such as to render it impossible for the debtor to fulfil his obligation
in a normal manner;
4. and the debtor must be free from any participation in, or aggravation of, the injury to
the creditor.

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LESSON 2

NATURE AND EFFECT OF OBLIGATIONS

NATURE AND EFFECT OF OBLIGATIONS

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