LEGAL ASPECTS IN

TOURISM & HOSPITALITY

Chapter 3
 understanding contracts and
obligations affecting the tourism and
hospitality sectors
 Objective
The students should be briefed as early as now, the basic principles of obligations
and contracts.
 OBLIGATION
• Obligation is a juridical necessity to give, to do, or not to do – Article 1156 of the Civil
Code of the Philippines.

• A person has an obligation arising from whatever sources should comply with its
corresponding requirements considering the damage it may produce to one of the
contracting parties or even to a third person, if not complied.

• Non-compliance of what is demanded by the obligation may give the aggrieved party
different courses of action such as demand for payment and damages
 Kinds Of Obligation
3 Kinds of obligation under the law:

Obligationto give – the debtor is obliged to deliver the movable or

immovable thing to creditor

Obligation to do – all kinds of works or services, whether physical or

mental

Obligation not to do – refraining from doing some acts

 Elements of Obligation
 Active Subject
It is one who is demanding the performance of the obligation. It is he who in his favor the obligation is
constituted, established or created. He is called the debtor or oblige.

 Passive Subject
The one bound to perform the presentation to give, to do or not to do. He is called the debtor or obligor

 Presentation or Object
It is the subject matter of the obligation which has economic value or susceptible of pecuniary substitution
in case of noncompliance

 Efficient Cause
It is the juridical tie or vinculum by virtue of which the debtor has become bound to perform the
presentation.
 Kinds of Obligation as to Judicial Enforceability
1. Civil Obligation This is an obligation, which if not fulfilled when it becomes due and
demandable, may be enforced in court through action.

2. Natural Obligation This is a special kind of obligation which cannot be enforced in

court but which authorized the retention of the voluntary payment or performance
made by the debtor.

3. Moral Obligation It arises not from the positive law but from the moral law developed
by the church and not enforceable by the court.
 Kinds of Obligation as to Number of Persons
Bound to Perform
Unilateral Obligation

It is kind of obligation in which only one of the parties is bound to fulfil a prestation.

Bilateral Obligation

This is a kind of obligation in which both parties are bound to perform a part in the
obligation
 Sources of Obligation
• Article 1157 of the Civil Code of the Philippines enumerates the sources of obligation:

Obligations Arising from Law

The obligation of a party to fulfil an obligation arises from the law itself; rules and regulations,
jurisprudence.

Obligations Arising from Contracts

This is the duty of the party to fulfil his undertaking in the contract.
Obligations Arising from Quasi-contracts
It is a juridical relation which arises from a lawful,. Voluntary and unilateral act or acts
executed by somebody for the benefit of another and for which the former must be
indemnified to the end and that no one shall be enriched or benefited at the expense of
another. It is a kind of contract created without the consent of one party but whose missing
consent is given by the law.

Obligations Arising from Delicts or Crimes

The penal provision of the law specifically provides the obligation to be done by the culprit
on his/her victim.

Obligations Arising from Quasi-delict or Tort

Duty of the tortfeasor to pay damages for injuries or damages due to his fault, omission or
negligence
 Diligence Needed

Article 1163 of the Civil Code of the Philippines provides that every
person with obligation 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.

Note:
A good father does not abandon his family; he is always ready to
provide their needs and protect them at all times.
 Other Important Civil Code Provisions Necessary in the
Conduct of Hospitality Business
 Article 1169
• Those who are obliged to deliver or to do something incur in delay from the time they oblige 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 declines

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 controlling motive for the
establishment of the contract
3. When the demand would be useless, as when the obligator has rendered it beyond his power to
perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply
one is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfils his obligation, delay by other begins

Article 1170

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

Article 1171

• The responsibility arising from fraud is demandable in all obligations. Any waiver
of an action for future fraud is void.
 Modes of Extinguishing Obligation
 Payment or performance – the obligation of the customer to the management who served them shall be
extinguished upon payment by the customer of the exact amount; obligation by the entertainer to the
events manager maybe extinguished upon the performance of the obligation for which the entertainer
was commissioned.
 Loss of thing due – obligation arising from a contract may also be extinguished upon the loss of the
thing due. Article 1189 par.2 explained the meaning of the term “loss”. It is understood that the thing is
lost when it perishes, or goes out of commerce or disappears in such a way that its existence is unknown
or it cannot be recovered.
 Condonation or remission of the debt – pertains to the act of liberality on the part of the creditor
wherein she/he forgives or remits a debt.
 Confusion or merger of the rights of the creditor and debtor – Article 1275 of the Civil Code of the
Philippines provides that the obligation is extinguished from the time the characters of the creditor and
debtor are merge in the same person. Be it noted that the merging or convergence of the rights of the
creditor and a debtor in one and in the same person makes the obligation extinguished considering that
the right of one over the other can no longer ne exactly determined.
 Compensation
 Novation
 Compensation – as a means of extinguishing an obligation is the offsetting of the respective obligations of two
persons who stand as principal creditors and debtors of each other, resulting to the extinguishment of their obligation
to their concurrent amount.
 Novation – pertains to the change or modification of an obligation by another resulting to the extinguishment of an
obligation.

Requisites for valid novation:

 There must be a previous valid obligation

 There must be an agreement by the parties to extinguish or modify the old obligation

 The validity of the new obligation

Other causes of extinguishment of obligations

• Annulment
• Rescission
• Fulfillment of the resolutory condition
• Prescription