Module 1: General Provisions (Atty.

Bonna Soriano)

Overview: Obligations and contracts, the provisions and law you can find it under the new civil code of
the Philippines. It can be divided into two parts: obligations, contracts…

Obligation has been defined under the law.

CONTRACTS:

Obligations: duty or responsibility of each party under the sources: law, contract, quasi-contract, crime
or offense, and quasi-delict

-Law (A payment of taxes under the National Internal Revenue Code you are obliged to pay your taxes if
you earned income within and outside the Philippines if you are a Filipino citizen.)

-Contract (If you also engage yourself and execute a contract with another party and in that contract it
was laid down there each of your responsibilities then you are obliged to perform your responsibilities
or obligations under that contract. )

-Quasi-contract (Based on equity, there is no contract. But the virtue of the principle of nobody should
unjustly enrich himself at the expense of another. The law there creates contract that the party is
obliged to reimburse)

-Crime (under revised penal code) or Offense (under special law) There is a criminal liability. If you
commit a crime, it necessarily entails you go to jail. You need to serve your sentence. If you commit a
crime, it does not entail only the consequence of being liable criminally but also civilly. For example, if
you steal something you can go to jail for stealing and at the same time you will obliged to return back
the thing that you have stolen. If the return is no longer possible, then you pay for the cost of the thing
stolen. That’s the civil aspect of criminal action.

-Quasi-delict (In a broader sense, falls under towards. For example, if you hit somebody or cause
damage of property due to your negligence act, you are liable to pay for damages. If you cause
somebody an injury due to that negligence act of driving a car, if you are a reckless driver, then you are
paying hospitalization expenses, loss of salary or other consequential damage.

It is important because you are all BA students. You need to know the importance of contract, why
contracts are very important in your day to day transactions of your business.

-Contract is a binding effect. It binds the parties. You can compel other party to perform his/her
obligation under any source of obligation.

-Contract can be likened to a law, but it’s inferior over law. Law is superior over contract but contracts
can be likened to a law between the parties. Just like a law, non-compliance of the requirements of the
law, you will be liable of a consequence such as sanction in a form of penalty of fine.

-It has obligatory force because in contract there is penal clause; you will be forced to perform your
obligations so that you will prevent case filed against you.

-Contracts specify the rights, obligations, and remedies of each party. Because there is a right and
obligation, the agreed party (performing party has the remedy to compel the non-performing party in
the form of enforcing penal clause- there is a fine or penalty that will be imposed).

-Contract is enforceable. You can always go to court if the other party failed to perform his obligation
under the contract then you can file a breach of contract and you can also file for damages.

-Contract serves as a record of undertakings or commitment by each parties. It can be sorted as a

reference for any conflict, question, and dispute.

-It also prevents conflict and mitigates risks. It prevents party suing other party because the contract is
very precise and clear as to rights and obligations. There is no room for interpretation if the contract is
clear.
-It increases operational efficiency (for businesses). Because if you do away with litigation expenses or
unnecessary expenses, making sure that when you transact with somebody there is always contract that
both of you have executed then it would way that might arise in the future because the contract is not
clear.

-It extends company’s brands and values. When you engage with a certain company and that company
executes a contract to protect its rights and business rights. And the company wanted you to comply
with the agreement it gives the impression to the public that the company is serious in their business
dealings.

Nobody likes to execute a defective contract.

There are three essential requisites of a valid contract:

Consent, object and cause or consideration)

OBLIGATIONS:

Article 115O6: it defines what an obligation is, from the Latin word “obligation” which means tie or bond
Juridical tie- purpose or reason why the obligation needs to be performed

A- Debtor (Passive subject)- required to perform an obligation

B- Creditor (Active subject)- the one who requires a performance of an obligation

Object: Car

Juridical tie: the efficient cause (agreement or contract to deliver)

Kinds of Obligations:

Obligations should arise from a source: