Obligations and Contracts: San Beda College of Law

San Beda College of Law 85
MEMORY AID IN CIVIL LAW
OBLIGATIONS AND CONTRACTS

principle that no one shall
be unjustly enriched or
I. OBLIGATIONS benefited at the expense of
another.
OBLIGATION
Principal Kinds of Quasi-contracts:
 A juridical necessity to give, to
do, or not to do (Article 1156), 1. Negotiorum gestio - arises
one impressed with the whenever a person voluntarily
character of enforceability. takes charge of the agency or
management of the business
or property of another without
 Requisites:
any power or authority from
a. juridical or legal tie or
the latter.
efficient
2. Solutio indebiti - arises
cause whenever a person unduly
b. active subject (obligee or delivers a thing
creditor)
c. passive subject (obligor or through mistake to another who has
debtor) no right to demand it.
d. fact, prestation or service
constituting the object of QUASI-DELICTS
the  An act or omission by a person
obligat (tortfeasor) which causes damage
ion  to another giving rise to an
Requis obligation to pay for the damage
ites: done, there being fault or
i) it must be licit negligence but there is no pre-
ii) it must be possible, existing contractual relation
physically & juridically between the parties (Article
iii) it must be determinate 2176).
or
determinable  Requisites:
iv) it must have a possible 1. There must be an act or
equivalent in money omission;
2. There must be fault
or negligence;
1. Law 3. There must be damage
2. Contracts caused to the plaintiff;
3. Quasi-contracts 4. There must be a direct
4. Delicts relation of cause and effect
5. Quasi-delicts between the act or omission
and the damage; and
QUASI-CONTRACTS 5. There is no pre-existing
 Those juridical relations contractual relation between
arising from lawful, the parties.
voluntary and unilateral
acts, by virtue of which the NOTES:
parties become bound to  The same negligent act or
each other, based on the omission causing damage may
86 2005 CENTRALIZED BAR OPERATIONS
produce civil liability arising from fulfillment of a whom such right

crime under Art. 100 of the RPC prestation to give, may be personally
or create an action for quasi- to do or not to do. enforced
delict under Article 2176.
RIGHTS OF A CREDITOR
 While it is true that in order that
a person may be liable for Determinate Generic
1. compel specific 1. ask for
quasidelicts, there must be no
performance performance of the
preexisting contractual
obligation
relationship between the parties,
2. recover 2. ask that the
yet, “the act that breaks the
damages in case of obligation be
contract may also be a tort.” breach of the complied with at
(Air France vs. obligation, the expense of the
Carrascoso, 18 SCRA 155). exclusive or in debtor
addition to
Nature of Obligations specific
1. Personal Obligations - obligations performance
to do 3. entitlement to 3. recover damages
a. Positive – obligation to do fruits, interests in case of breach
from the time the of the
b. Negative – obligation not to
obligation to obligation
do
deliver arises.
2. Real Obligations - obligations to
give
a. Determinate or specific – object Principle of Balancing of Equities as
is particularly designated or Applied in Actions for Specific
physically segregated from all other Performance
of the same class  In decreeing specific performance,
equity requires not only that the
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad EDP: Alnaiza Hassiman, Dorothy Gayon
 SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora
Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen
Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD),
Ma. Ricasion Tugadi (Conflict of Laws)
b. Generic – object is contract be just and equitable in
designated merely by its its provisions, but that the
class or genus consequences of specific
c. Limited generic thing – when performance likewise be
the generic objects are equitable and just. The general
confined to a particular rule is that this equitable relief
class, e.g. an obligation to will not be granted
deliver one of my horses if, under the circumstances of
(Tolentino, Volume IV, p. the case, the result of the
91). specific performance of the
contract would be harsh,
PERSONAL vs. REAL RIGHT inequitable, oppressive or result
in an unconscionable advantage
Personal Real
to the plaintiff. The courts may
1. jus ad rem, a 1. jus in re, a right
right enforceable enforceable adjust the rights of the parties in
only against a against the whole accordance with the
definite person or world circumstances obtaining at the
group of persons time of rendition of judgment,
2. right pertaining 2. right pertaining when these are significantly
to the person to to a person over a different from those existing at
demand from specific thing, the time of generation of those
another, as a without a passive rights. (Agcaoili vs. GSIS, G.R.
definite passive subject individually No. 30056, August 30,
subject, the determined against 1988)
2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT CHAIRPERSONS

Maricel Abarentos (Over-all Chairperson), Ronald Jalmanzar (Over-all Vice Chair), Yolanda Tolentino(VC-Acads), Jennifer
Ang(VC- Secretariat), Joy Inductivo (VC-Finance), Elaine Masukat (VC-EDP), Anna Margarita Eres (VC-Logistics). Jonathan
Mangundayao (Political Law), Francis Benedict Reotutar (Labor Law), Romuald Padilla (Civil Law), Charmaine Torres (Taxation Law),
Mark David Martinez (Criminal Law), Garny Luisa Alegre (Commercial Law), Jinky Ann Uy (Remedial Law), Jackie Lou Bautista (Legal
Ethics)

ask that the act be undone at the
OBLIGATIONS OF THE DEBTOR expense of the obligor,
Determinate Generic consequences contrary to the
1. deliver the 1. deliver the object of the obligation will have
thing which he has thing which is been produced which are
obligated himself to neither of permanent in character
give superior nor 2. Where it would be physically or
2. take care inferior quality
legally impossible to undo what
of the thing with the 2. pay
proper diligence of damages in case has been undone because of the
a good father of a of breach of the very nature of the act itself or
family obligation by because of a provision of law, or
3. deliver all reason of delay, because of conflicting rights of
accessions and fraud, 3rd persons NOTE: In either case,
accessories of the negligence or the remedy is to ask for
thing even though contravention of
the tenor
damages.
they may not have
thereof
been mentioned 4.
BREACH OF OBLIGATIONS
pay damages in case
of breach of the
1. Voluntary - debtor, in the
obligation by reason performance of the obligation, is
of delay, fraud, guilty of:
negligence or a. default (mora)
contravention of the b. fraud (dolo)
tenor thereof c. negligence (culpa)
d. contravention of the tenor
EFFECTS OF BREACH of the obligation
Positive Personal Negative Personal NOTE: debtor is liable for damages
Obligations Obligations
The creditor can: If the obligor does 2. Involuntary - debtor is unable to
1. have the what has been comply with his obligation
obligation forbidden him, the because of fortuitous event
performed or creditor can: NOTE: debtor is not liable for
executed at the 1. have it undone damages
expense of the at the expense of
obligor (except the obligor; and 2.
in cases where ask for damages DEFAULT or DELAY
the  Non-fulfillment of the obligation
personal with respect to time  Requisites:
qualifications of the 1. Obligation is demandable and
debtor are taken already liquidated
into account in
which case the only 2. The debtor delays performance
remedy is an action 3. The creditor requires
for damages) performance judicially or extra-
2. ask that judicially
what has
been poorly done be
undone
3. recover damages
because of breach of
the obligation  3 Kinds:
1. Mora solvendi - delay of the
Cases where the remedy granted debtor to perform his obligation.
under Article 1168 is not available: It may be:
1. Where the effects of the act a. Ex re – obligation is to give
which is forbidden, are definite b. Ex persona – obligation is to do
in character, in which case, even 2. Mora accipiendi - delay of the
if it is possible for the obligee to creditor to accept the delivery of
CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conflicts of Law)
the thing w/c is the object of the NOTE: Future fraud cannot be
obligation waived because it would result to
3. Compensatio morae - delay of illusory obligation.
the parties or obligors in
reciprocal Incidental Causal Fraud/dolo
obligation Fraud/dolo causante
incidente (Article 1338)
(Article 1170)
There must be a
demand (judicial or extra-judicial) 1. Present during 1. Present during the
before delay may be incurred. the performance time of birth or
of a pre-existing perfection of the
obligation obligation
1. obligation or law expressly so
declares
2. Purpose is to 2. Purpose is to
2. time is of the essence of the
evade the normal secure the consent of
contract fulfillment of the the other to enter
3. demand is useless as when obligation into a contract
obligor has rendered beyond
his power to perform 3. Results in the 3. Results in the
4. there is acknowledgment of non-fulfillment or vitiation of consent
default breach of the
obligation
NOTES:
4. Gives rise to a 4. Gives rise to a
 There can be delay only in right of an innocent
right of the creditor
positive obligations (to give/to party to annul the
to recover damages
do). There can be no delay in contract
from the debtor
negative obligations (not to
give/not to do).
 In reciprocal obligations one NEGLIGENCE
party incurs in delay from the  Omission of that diligence which
moment the other party fulfills is required by the nature of the
his obligation, while he himself obligation and corresponds with
does not comply or is not ready the circumstances of the
to comply in a proper manner persons, of the time and of the
with what is incumbent upon place
him. The general rule is that NOTE: Negligence can be waived
fulfillment by both parties should unless the nature of the obligation or
be simultaneous except when public policy requires extraordinary
different dates for the diligence as in common carrier.
performance of obligation is
fixed by the parties. Diligence Required
 Demand is still necessary if their 1. That agreed upon by the parties
respective obligations are to be 2. In the absence of stipulation,
performed on separate dates that required by law in the
particular case
FRAUD 3. If both the contract and law are
silent, diligence of a good father
 Deliberate and intentional of a family
evasion of the fulfillment of an
obligation Concept of Diligence of Good Father
of a Family
 That reasonable diligence which

an ordinary prudent person

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would have done under the same NOTE: It must not only be the
circumstances proximate cause but it must be
Test of Negligence  The test of the ONLY and SOLE CAUSE.
negligence can be determined by
this standard: If the defendant, in
committing or causing the
negligent act, had GENERAL RULE: No liability in case
used reasonable care and of fortuitous event.
vigilance which a man of ordinary EXCEPTIONS:
prudence would have employed 1 When expressly declared by
under the same situation, he is not law NOTE: e.g.
guilty of negligence. Otherwise, he Article 552(2),
is guilty. 1165(3), 1268, 1942, 2147,
2148 and 2159 of the Civil
Doctrine of Res Ipsa Loquitur as Code.
Applied in Negligence Cases  The 2 When expressly declared by
thing or transaction speaks for itself stipulation or contract
3 When the nature of the
 When the thing which caused
obligation requires the
injury, without fault of the
assumption of risk
injured person, is under the
4 When the obligor is in default
exclusive control of the
or has promised to deliver
defendant and the injury is such
the same thing to 2 or more
as in the ordinary course of
persons who do not have the
things does not occur if he having
same interest [Article
such control use proper care, it
1165(3)].
affords reasonable evidence, in
the absence of explanation from
the defendant, that the injury EFFECT OF FORTUITOUS EVENT
arose from defendant’s want of Determinate Generic
care (Africa vs. Caltex, 16 SCRA Obligation Obligation
448 and Republic vs. obligation is obligation is not
Luzon Stevedoring, 21 SCRA 279). extinguished extinguished based
on the rule that a
genus never perishes
FORTUITOUS EVENT  An event (genus nunquam
which could not be foreseen or which peruit)
though foreseen was inevitable.
 Requisites:
1. cause is independent of the will PRINCIPLE UNDER ARTICLE 1176 
of the debtor Before the presumption that a prior
2. the event must be unforeseeable installment had been paid may arise,
or unavoidable the receipt must specify the
installment for which payment is
3. occurrence must be such as to
made.
render it impossible for the
debtor to fulfill his obligation in
a normal manner  REMEDIES OF CREDITOR
4. debtor must be free from any TO
participation in PROTECT CREDIT:
5. the aggravation of the injury 1. Exhaustion of debtor’s property
resulting to the creditor (Lasam 2. Accion subrogatoria - to be
vs. Smith, 45 Phil. 657) subrogated to all the rights and
actions of the debtor save those
which are inherent in his person.
CIVIL LAW COMMITTEE

3. Accion pauliana - impugn all the chance and/or the will of a third
acts w/c the debtor may have person
done to defraud them. 6. Possible - condition is capable of
NOTE: 2nd & 3rd remedies are realization according to nature,
subsidiary to the first law, public policy and good
customs
Rights acquired 7. Impossible - condition is not
by virtue of an obligation are capable of realization according
transmissible in character to nature, law, public policy and
good customs
8. Positive - condition involves the
performance of an act
9. Negative - condition involves the
omission of an act
1. When they are not
10. Divisible - condition is
transmissible by their very
susceptible of partial realization
nature e.g. purely personal
11. Indivisible - condition is not
right
susceptible of partial realization
2. When there is a stipulation of 12. Conjunctive - where there are
the parties that they are not several conditions, all of which
transmissible must be realized
3. Not transmissible by 13. Alternative - where there are
operation of law several conditions but only one
must be realized
PURE OBLIGATION
 One whose effectivity or Rule in Potestative Conditions
extinguishment does not depend a. If the fulfillment of the
upon the fulfillment or potestative condition depends
nonfulfillment of a condition or upon the sole will of the
upon the expiration of a term or debtor, the condition as well
period and is demandable at as the obligation itself is void.
once. It renders the obligation
illusory.
CONDITIONAL OBLIGATION (Applicable only to a
 One whose effectivity is suspensive condition and to an
subordinated to the fulfillment or obligation which depends for
non-fulfillment of a future AND its perfection upon the
uncertain fact or event fulfillment of the potestative
condition and not to a pre-
Kinds of conditions: existing obligation.)
1. Suspensive - fulfillment of the b. If the fulfillment depends
condition results in the exclusively upon the will of
acquisition of rights arising out of the creditor, both the
the obligation condition and obligation is
2. Resolutory - fulfillment of the valid.
condition results in the NOTE: In case of simple
extinguishments of rights arising potestative condition, e.g. right
out of the obligation of first refusal, such condition is
3. Potestative - fulfillment of the valid.
condition depends upon the will
of a party to the obligation Rule in Impossible Conditions
4. Casual - fulfillment of the
They shall annul
condition depends upon chance
the obligation which depends upon
and/or upon the will of a third
them.
person
5. Mixed - fulfillment of the
condition depends partly upon 1. pre-existing obligation

Ethics)

2. if obligation is divisible virtue of the obligation is subject
3. in simple or renumeratory to a threat of extinction.
donations 2. If condition is not fulfilled, rights
4. in testamentary dispositions are consolidated; they become
5. in case of conditions not to do an absolute.
impossible thing 3. Upon fulfillment of the
condition, the parties shall
Effects of Suspensive Condition return to each other what they
1. Before fulfillment of the received including the
condition, the demandability as fruits
well as the acquisition or
effectivity of the rights arising SUMMARY:
from the obligation is suspended SUSPENSIVE RESOLUTORY
2. After the fulfillment of the CONDITION CONDITION
condition, the obligation arises 1.if fulfilled, 1. if fulfilled,
or becomes effective obligation arises obligation is
3. The effects of a conditional or becomes extinguished
obligation to give, once the effective
condition has been fulfilled, shall 2.if not fulfilled, no 2. if not fulfilled,
retroact to the day of the juridical relation juridical
is created relation is
constitution of the obligation 3.rights are not yet consolidated
4. When the obligation imposes acquired, but 3. rights are
reciprocal prestations upon the there is hope or already
parties, the fruits & interests expectancy that acquired, but
shall they will soon be subject to the
be deemed to have been acquired threat or danger
mutually compensated of extinction
5. If the obligation is unilateral, the
debtor shall appropriate the
fruits & interests received, Effects of Loss, Deterioration and
unless from the nature & Improvement in real obligations
circumstances it should be (during
inferred that the intention of the the pendency of the condition)
persons constituting the same
was different 1. Loss
6. In obligations to do or not to do, a. without debtor’s fault -
the court shall determine the obligation is extinguished
retroactive effect or the b. with debtor’s fault - debtor
conditions that has pays
been complied with damages
Constructive fulfillment of 2. Deterioration

Suspensive Condition
a. without debtor’s fault -
 The condition shall be deemed impairment to be borne by
fulfilled when the obligor actually the creditor
prevented the obligee from b. with debtor’s fault - creditor
complying with the condition and may choose between the
such prevention must have been rescission of the obligation
voluntary and willful in character. and its fulfillment with
indemnity for
Effects of Resolutory Condition damages in either case
1. Before the fulfillment of the
condition, the right which the 3. Improvement
creditor has already acquired by
CIVIL LAW COMMITTEE

a. by the thing’s nature or by nothing in the law which

time - improvement shall prohibits the parties from
inure to the benefit of the entering into an agreement that
creditor violation of the terms of the
b. at the debtor’s expense - contract would cause its
debtor shall have no other cancellation without court
right than intervention. Said stipulation is
that granted to a in the nature of facultative
usufructuary resolutory condition (Angeles vs.
Calasanz, 135 SCRA 323).
NOTE: Applies only to determinate  Rescission will be ordered only
things where the breach is substantial
as to defeat the object of the
A Thing is Lost when it: parties in entering into the
1. perishes agreement.
2. goes out of commerce
3. disappears in such a way that its  The injured party may choose
existence is unknown or it cannot between fulfillment and
be recovered rescission of the obligations, with
the payment of damages in
RECIPROCAL OBLIGATIONS either case. These remedies are
alternative, not cumulative.
Those which are created or
However, should fulfillment
established at the same time, out of
become impossible, the injured
the same cause, and which result in
party may also seek rescission.
mutual relationships of creditor &
debtor  The right to rescind belongs
between the parties exclusively to the injured party.
TACIT RESOLUTORY CONDITION OBLIGATION WITH A PERIOD

 Those whose demandability or
with what is incumbent upon him, extinguishment is subject to the
there is a right on the part of the expiration of a term or period 
other to rescind the obligation. Requisites:
1. future
2. certain
3. possible, legally and physically
CLASSIFICATION OF TERM OR
PERIOD
RIGHT TO RESCIND (ART 1191) 1. a. suspensive (ex die) – obligation
becomes demandable only upon
The right to
arrival of a day certain
rescind needs judicial approval.
b.resolutory (in diem) – arrival
1. If there is an express of day certain terminates
stipulation of automatic the obligation
rescission 2. a. legal – granted by law
2. When the debtor voluntarily
b. conventional – stipulated by
returned the thing
parties
c. judicial – fixed by courts
NOTES: 3. a. definite – date/time is know
 Article 1191 refers to judicial beforehand
rescission. It does not apply if b. indefinite – the date/time of
there is an express stipulation to day
rescind, in which case such certain is unknown
stipulation must prevail. There is

Ethics)

TERM CONDITION court to fix the duration of the term
1. interval of time 1. fact or event w/c or period. The fulfillment of the
w/c is future & is future and obligation itself cannot be demanded
certain uncertain until after the court has fixed the
2. interval of time 2. future and period for compliance therewith, and
w/c must uncertain fact or such period has arrived. However,
necessarily come, event w/c may or such technicality need not be
although it may may not happen adhered to when a prior and separate
not be known when action would be a mere formality and
3.exerts an 3. exerts an influence would serve no other purpose than to
influence upon the upon the very delay (Borromeo vs. CA, 47 SCRA 65).
time of existence of the
demandability or obligation itself Reason for Fixing the Period (ART
extinguishment of 1197)
an obligation
 There can be no possibility of any
4. does not have 4. has retroactive
breach of contract or failure to
any retroactive effect
perform the obligation unless the
effect unless there
period is fixed by courts.
is an agreement to
the contrary
5. when it is left 5. when it is left When debtor loses right to make
exclusively to the exclusively to the will use of period: (IGIVA)
will of the debtor, of the debtor, the 1. when after the obligation has
the existence of very existence of the been contracted, he becomes
the obligation is obligation is affected insolvent, unless he gives
not affected guaranties or securities for the
debt (the insolvency need not
be judicially declared)
When a period is 2. when he does not furnish to the
designated for the performance or creditor the guaranties or
fulfillment of an obligation, it is securities he promised
presumed to have been established
3. when by his own act he has
for the benefit of both creditor and
impaired said guaranties or
debtor.
securities after their
When it appears from establishment, and when
the tenor of the obligation or other through fortuitous event they
circumstances that the period has disappear, unless he gives new
been established in favor of one or of ones equally satisfactory when
the other. debtor violates any
undertaking, in consideration of
When court may fix period: which the creditor agreed to
1. if the obligation does not fix a the period or
period, but from its nature and 4. when debtor attempts to
circumstances it can be inferred abscond
that a period was intended by
the parties FACULTATIVE ALTERNATIVE
2. if the duration of the period Obligations Obligations
depends upon the will of the
debtor; and 1. comprehends 1. comprehends
3. If the debtor binds himself when only one object or several objects or
his means permit him to do so prestation which is prestations which are
(Article due, but it may be due but may be
1180) complied with by complied with by the
the delivery of delivery or
NOTE: The only action that can be another object or performance of only
maintained is an action to ask the performance of one of them
CIVIL LAW COMMITTEE

another prestation choose from among the
in substitution remainder, or that which
remains if only 1 subsists
2. fortuitous loss 2. fortuitous loss of b. If the loss of 1 of the things
extinguishes the all prestations will occurs through the fault of
obligation extinguish the the debtor, the creditor may
obligation claim any of those
subsisting, or the price of
3. culpable loss 3. culpable loss of that which, through the
obliges the debtor any object due will fault of the former, has
to deliver give
disappeared with a right to
substitute rise to liability to
prestation without damages
debtor
liability to debtor c. If all the things are lost
through the fault of the
debtor, the choice by the
4. choice pertains 4. choice may pertain creditor shall fall upon the
only to debtor to creditor or even price of any 1 of them,
third person also with indemnity for damages
NOTES: JOINT AND SOLIDARY

OBLIGATIONS
 In alternative obligations, choice Obligation is
takes effect only upon presumed joint if there is
communication of the choice to the concurrence of two or more debtors
other party and from such time the and/or creditors.
obligation ceases to be alternative.
 The debtor cannot choose those 1. when expressly stated that
prestations or undertakings which are there is solidarity
impossible, unlawful or w/c could 2. when the law requires
not have been the object of the solidarity
obligation. 3. when the nature of
the obligation requires
EFFECT OF LOSS OF OBJECT OF solidarity
OBLIGATION:
1. If right of choice belongs to JOINT DIVISIBLE OBLIGATIONS
debtor  Each creditor can demand for the
a. If through a fortuitous event payment of his proportionate
- debtor cannot be held share of the credit, while each
liable for damages debtor can be held liable only for
b. If 1 or more but not all of the payment of his proportionate
the things are lost or one or share of the debt.
some but not all of the  A joint creditor cannot act in
prestations cannot be representation of the other
performed due to the fault creditors while a joint debtor
of the debtor, creditor cannot be compelled to answer
cannot hold the debtor for the acts or liability of the
liable for damages because other debtors.
the debtor can still comply
with his obligation. JOINT INDIVISIBLE OBLIGATIONS
2. If right of choice belongs to the 1. If there are 2 or more debtors,
creditor the fulfillment of or compliance
a. If 1 of the things is lost with the obligation requires the
through a fortuitous event, concurrence of all the debtors,
the debtor shall perform the although each for his own share.
obligation by delivering that Consequently, the obligation can
which the creditor should

Ethics)

be enforced only by proceeding accounting of his acts to such
against all of the debtors. creditors
2. If there are 2 or more creditors,  creates a relationship of mutual
the concurrence or collective act agency among solidary creditors
of all the creditors, although 2. Passive solidarity
each for his own share, is also  solidarity of debtors
necessary for the enforcement of  liability of each debtor for the
the obligation. payment of the entire obligation,
with the consequent right to
Effect of breach – If one of the joint demand reimbursement from the
debtors fails to comply with his others for their corresponding
undertaking, the obligation can no shares once payment has been
longer be fulfilled or performed. made
Consequently, it is converted into 3. Mixed solidarity
one of indemnity for damages.  solidarity among creditors
Innocent joint debtors shall not and debtors
contribute to the indemnity beyond Effect of Assignment by Solidary
their corresponding share of the Creditor Without Consent of Others
obligation.
1. assignee is co-creditor – no
violation of Article 1213 because
Effect of insolvency of a debtor – If there can be no invasion of the
one of the joint debtors should be personal or
insolvent, the others shall not be
confidential relationship
liable for his share.
2. assignee is third person –
cocreditors and debtors are not
INDIVISIBILITY SOLIDARITY bound
1. refers to the 1. refers to the legal by the assignment
prestation which tie or vinculum juris
constitutes the & consequently to Effect of Novation upon Solidary
object of the the subjects or
Obligation
obligation parties of the
obligation 1. If the novation is prejudicial, the
2. plurality of 2. plurality of solidary creditor who effected
subjects is not subjects is the novation shall reimburse the
required indispensable others for damages incurred by
3. in case of breach, 3. when there is them
obligation is liability on the part 2. If it is beneficial and the creditor
converted into 1 of of the debtors who effected the novation is able
indemnity for because of the to secure performance of the
breach, the
damages because of obligation, such creditor shall be
solidarity among the
breach, indivisibility liable to the others for the share
debtors remains
of the obligation is which corresponds to them, not
terminated only in the obligation, but also in
the benefits
3. If the novation is effected by
KINDS OF SOLIDARITY substituting another person in
1. Active solidarity place of the debtor, the solidary
 solidarity of creditors creditor who effected the
 each creditor is empowered to novation is liable for the acts of
exercise against the debtor not the new debtor in case the is
only the rights which correspond deficiency in performance or in
to him, but also all the rights case damages are incurred by the
which correspond to the other other solidary creditors as a
creditors, with the consequent result of the substitution.
obligation to render an
CIVIL LAW COMMITTEE

4. If the novation is effected by the obligation, his character as a

subrogating a third person in the solidary debtor is not affected.
rights of the solidary creditor
responsible for the novation, the Effect of Payment by Solidary
relation between the other Debtor
creditors not substituted and the 1. Whole or partial extinguishment
debtor or debtors is maintained. of debt
2. Right to recover against co-
Effect of Compensation and debtor
Confusion upon Solidary Obligation 3. Right to recover interest from
1. If the confusion or compensation time the obligation becomes due
is partial, the rules regarding
application of payment shall Effect of Loss or Impossibility of
apply. This is without prejudice Performance
to the right of other creditors 1. If it is not due to the fault of the
who have not caused the solidary debtors, the obligation is
confusion or compensation to be extinguished.
reimbursed to the extent that
2. If the loss or impossibility is due
their rights are diminished or
to the fault of one of the solidary
affected.
debtors or due to a fortuitous
2. If the confusion or compensation
event after one of the solidary
is total, the obligation is
debtors had already incurred in
extinguished, what is left is the
delay, the obligation is converted
ensuing liability
into an obligation of indemnity
for reimbursement within each
for damages but the solidary
group:
character of the obligation
a. The creditor causing the remains.
confusion or compensation is
obliged to reimburse the
other creditors
b. The debtors benefited by
Defenses available to a Solidary
the extinguishments of the
Debtor
obligation are obliged to
1. Defenses derived from the very
reimburse the debtor who
nature of the obligation
made the confusion or
compensation possible. 2. Defenses personal to him or
pertaining to his own share
Effect of Remission upon Solidary 3. Defenses personal to the others,
Obligation but only as regards that part of
the debt
1. If the remission covers the entire
for w/c the latter are responsible
obligation, the obligation is
totally extinguished and the
entire juridical relation among DIVISIBLE OBLIGATIONS
the debtors is extinguished all  Those which have as their object a
together. prestation which is susceptible of
2. If the remission is for the benefit partial performance without the
of one of the debtors and it essence of obligation changed.
covers his entire share in the
obligation, he is completely INDIVISIBLE OBLIGATIONS
released from the  Prestation is not susceptible of
creditors but is still bound to his partial performance, otherwise,
codebtors. the essence of the obligation will
3. If the remission is for the benefit be changed
of one of the debtors and it
covers only a part of his share in NOTES:
 Divisibility or indivisibility of the
obligation refers to the

Ethics)

performance of the prestation substitute for damages in case of
and not to the thing which is the breach.
object thereof.
 Intention of parties should be 1. when there is a stipulation to
taken into account to determine the contrary;
whether obligation is divisible or 2. when the debtor is sued for
not. refusal to pay the agreed
penalty; and
The creditor 3. when debtor is guilty of
cannot be compelled partially to fraud
receive the prestation in which the
obligation consists; neither may the NOTE: Article 1228 does not
debtor be required to make partial apply to these exceptions; there
payments. must be proof of actual damages.
1. When the obligation NOTES:

expressly stipulates the  The debtor cannot exempt
contrary;
himself from the performance of
2. When the different the principal obligation by paying
prestations constituting the the stipulated penalty unless
objects of the obligation are when the right has been
subject to different terms expressly reserved for him.
and conditions; and
3. When the obligation is in part  The creditor cannot demand the
liquidated and in part fulfillment of the principal
unliquidated. obligation and the satisfaction of
the stipulated penalty at the
OBLIGATIONS WITH A PENAL same time unless the right has
CLAUSE been clearly granted him.
 One to which an accessory
undertaking is attached for the When penalty may be reduced
purpose of insuring its 1. If the principal obligation has
performance by virtue of which been partly complied with;
the obligor is bound to pay a 2. If the principal obligation has
stipulated indemnity or perform been irregularly complied with;
a stipulated prestation in case of and 3. If the penalty is iniquitous
breach. or unconscionable even if there
has been no performance.
 Purpose of Penalty:
1. To insure the performance of MODES OF EXTINGUISHMENT OF
the obligation; OBLIGATION (LFC3NARP2)
2. to liquidate the amount of S
damages to be awarded to 1. loss of the thing due
the injured party in case of 2. fulfillment of resolutory
breach of the principal condition
obligation (compensatory);
3. compensation
and
4. condonation or remission of the
3. in certain exceptional cases, debt
to punish the obligor in case 5. confusion or merger of rights of
of breach of the principal the creditor and debtor
obligation (punitive). 6. novation
7. annulment
ULE: The penalty fixed 8. rescission
by the parties is a compensation or 9. prescription
CIVIL LAW COMMITTEE

10. payment or performance 1. If payment was made with

knowledge and consent of
Payment or Performance the debtor:
 Means not only the delivery of a. can recover entire
money but also the performance, amount paid
in any other manner, of an b. can be subrogated to
obligation. all the rights of the
creditor.
Integrity of Payment 2. If payment was made without
A debt shall not be knowledge or against the will
understood to have been paid unless of the debtor, he can recover
the thing or service in which the only insofar as the payment
obligation consists has been has been beneficial to the
completely delivered or rendered, as debtor.
the case may be.
To whom payment must be made:
1. The person in whose favor the
1. When the obligation has been
obligation has been constituted;
substantially performed in good
2. His successor in interest; or 3.
faith;
Any person authorized to
2. When the obligee accepts
receive it.
performance, knowing its
incompleteness or irregularity &
w/out expressing any protest or If payment is made
objection; to a person other than those
3. When there is an express enumerated, it shall not be valid.
stipulation; and
4. When the debt is in part 1. Payment made to a 3rd
liquidated and in part person, provided that it has
unliquidated. redounded to the benefit of
the creditor. Such benefit to
Identity of Payment the creditor is presumed in
 requires that the very thing, the following cases:
service or forbearance, as the • If after the payment,
object of the prestation, must be the third person
performed or acquires the creditor’s
observed rights;
• If the creditor ratifies
Persons who may pay the the payment to the
obligation: third person;
1. the debtor himself or his legal • If by the creditor’s
representative conduct, the debtor has
2. any third person been led to believe that
the third person had
Creditor is not authority to receive the
bound to accept payment or payment.
performance by a third person. 2. Payment made to the
possessor of the credit,
provided that it was made in
1. when made by a third person
good faith.
who has an interest in the
fulfillment of the obligation;
2. when there is a stipulation to Obligation to Deliver a Generic
the contrary. Thing
 If the quality and circumstances
Rights of 3rd person who paid the have not been stated, the
obligation: creditor cannot demand a thing
of superior quality; neither can

Ethics)

the debtor deliver a thing of a. The decrease in the value of
inferior quality. the currency could not have
been reasonably foreseen
by the parties or
beyond their contemplation
Rules in Monetary Obligations: at the time the obligation was
1. Payment in cash - must be made established ;
in the currency stipulated; if it is b. There must be a declaration of
not possible to deliver such such extraordinary inflation
currency, then in the currency or
which is legal tender in the
Philippines.
2. Payment in check or other
negotiable instrument - not deflation by the Bangko
considered payment; not Sentral. Without such
considered legal tender and may declaration, the creditors
be refused by the creditor. It cannot demand an increase,
shall only produce the effect of and debtors a decrease, of
payment: what is due to or from them.
a. when it has been cashed or (Ramos vs. CA, 275 SCRA 167
b. when it has been impaired and Mobil Oil Phils. vs.
through the fault of the CA, 180 SCRA 651)
creditor.
Place of payment
LEGAL TENDER 1. Place stipulated by the parties.
 Such currency which may be used 2. No stipulation and the obligation
for the payment of all debts, is to deliver a determinate thing,
whether private or public. The payment shall be made at the
kind of currency which a debtor place where the thing might be
can legally compel a creditor to at the time the obligation was
accept in payment of a debt in constituted.
money when tendered by the 3. In any other case, the payment
debtor in the right amount. shall be made at the domicile of
 Legal tender of the Philippines the debtor.
would be all notes and coins
issued by the Central Bank. Special Forms of Payment:
 Section 52, R.A. No. 7653 a. Application of payment
1. 25c and above, legal tender b. Dation in Payment
up to P50 c. Payment by Cession
2. 10c and below, legal tender d. Tender of payment
up to P20 and
Consignation
Extraordinary inflation or deflation
 unusual or beyond the common a. Application of Payment
fluctuation in the value of  Designation of the debt to which
currency, which the parties could the payment must be applied
not have reasonably foreseen or when the debtor has several
which was manifestly beyond obligations of the same kind in
their contemplation at the time favor of the same creditor.
the obligation was established.  Requisites:
 Applies only to a. there must be only 1 debtor
contractual obligations & only 1 creditor;
 Requisites: b. there must be 2 or more
debts of the same kind;
CIVIL LAW COMMITTEE

c. all of the debts must be due;  Debtor abandons all of his

except: if there’s stipulation property for the benefit of his
to the contrary; or creditors in order that from the
application of payment is proceeds thereof, the latter may
made by the party for whose obtain payment of their credits.
benefit the term has been  Requisites:
constituted; and a. plurality of debts
d. amount paid by the debtor b. partial or relative insolvency
must not be sufficient to of the debtor
cover the total amount of all c. acceptance of the cession by
the debts. the
creditors
The right to
designate the debt to which the
payment shall be applied primarily
belongs to the debtor.
If the debtor does not
avail of such right and he accepts
from the creditor a
receipt in which the
application is made.
Legal Application of Payment

(ART1254)
1. If neither the debtor nor the
creditor makes any application of
payment, or if it cannot be
inferred from other
circumstances, the debt which is
most onerous to the debtor,
among those which are due, shall
be deemed to have been
satisfied.
2. If the debts due are of the same
nature and burden, payment
shall be applied to all of them
proportionately.
b. Dation in Payment (DACION EN

PAGO)
 Delivery and transmission of
ownership of a thing by the
debtor to the creditor as an
accepted equivalent of the
performance of the obligation.
 Requisites:
a. existence of a money
obligation
b. alienation to the creditor of
a property by the debtor
with the consent of the
former
c. satisfaction of the money
obligation of the debtor
c. Payment by Cession

Ethics)

DATION IN PAYMENT BY
PAYMENT CESSION
1. one creditor 1. plurality of

creditors
2. not necessarily 2. debtor must be

in state of financial partially or
difficulty relatively insolvent
3. thing delivered 3. universality of

is considered as property of debtor is
equivalent of what is ceded
performance
CIVIL LAW COMMITTEE

4. payment 4. merely releases  Effects of consignation:

extinguishes debtor for net 1. If the creditor accepts the thing
obligation to the proceeds of things or amount deposited without
extent of the value ceded or assigned,
unless there is
contesting the validity or
of the
contrary intention efficacy of the consignation, the
thing
delivered as agreed obligation is extinguished.
upon, proved or 2. If the creditor contests the
implied from the validity or efficacy of the
conduct of consignation or if the creditor is
the not interested or unknown or is
creditor absent, the result is a litigation.
If the debtor complied with all
d. Tender of Payment and the requisites, the obligation is
Consignation Tender of extinguished.
Payment
 Manifestation of he debtor to the Consignation shall
creditor of his decision to comply produce effects of payment only if there
immediately with his obligation. is a valid tender of payment.
 It is the preparatory act and
extrajudicial in character. 1. creditor is absent or unknown, or
does not appear at the place of
Consignation payment
 Deposit of the object of the 2. creditor incapacitated to receive
obligation in a competent court in payment at the time it is due
accordance with the rules prescribed
3. when two or more persons claim the
by law, after the tender of payment
right to collect
has been refused or because of
4. when the title of the obligation has
circumstances which render direct
been lost
payment to the creditor impossible
or inadvisable. 5. when without just cause creditor
refuses to give a receipt
 It is the principal act and judicial in
character.
NOTES:
 Special Requisites:  It is the consignation which
a. The debt sought to be paid must constitutes a form of payment and
be due; must follow, supplement or complete
b. There must be a valid and the tender of payment in order to
unconditional tender of payment discharge the obligation.  A valid
or any of the causes stated by tender of payment has the effect of
law for effective consignation exempting the debtor from payment
without previous tender of of interest and/or damages.
payment exists;
c. The consignation of the thing due  If tender is made by means of a
must first be announced to the check, such tender is valid because it
persons interested in the is an exercise of a right. Article 1249
fulfillment of the obligation; is not applicable.
d. Consignation shall be made by
depositing the things due at the LOSS OF THE THING DUE
disposal of judicial authority; and In Determinate Obligations to Give
e. The consignation having been
made, the interested parties Obligation is
shall also be notified thereof. extinguished.
CIVIL LAW COMMITTEE 2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT CHAIRPERSONS
Maricel Abarentos (Over-all Chairperson), Ronald Jalmanzar (Over-all Vice Chair), Yolanda Tolentino(VC-Acads), Jennifer Ang(VC-
Secretariat), Joy Inductivo (VC-Finance), Elaine Masukat (VC-EDP), Anna Margarita Eres (VC-Logistics). Jonathan
Ethics)
 Requisites: obligor may also be released

1. The thing which is lost is therefrom, in whole or in part.
determinate;  Requisites:
2. The thing is lost without the fault 1. The event or change
of the debtor; and in circumstances could
3. The thing is lost before the not have been foreseen at the
debtor has incurred in delay. time of the execution of the
contract;
2. It makes the performance of the
1. when by law, obligor is liable contract extremely difficult but
even for fortuitous event; not impossible;
2. when by stipulation, obligor is 3. The event must not be due to the
liable even for fortuitous event; act of any of the parties; and
4. The contract is for a future
3. when the nature of the
prestation.
obligation requires the
assumption of risk;
4. when the loss of the thing is due Principle of Subjective Impossibility
partly to the fault of the debtor;  When there is no physical or legal
5. when the loss of the thing occurs loss but the thing object of the
after the debtor incurred in obligation belongs to another, the
delay; performance by the debtor of the
obligation undoubtedly becomes
6. when the debtor promised to
impossible. Failure of performance is
deliver the same thing to two or
imputable to the debtor. Thus, the
more persons who do not have
debtor must indemnify the creditor
the same interest; and
for the damages suffered by the
7. when the debt of a certain and latter. (Tolentino, Volume IV, p.
determinate thing proceeds from 336)
a criminal offense
Effect of Loss on Reciprocal Obligations
In Generic Obligations to Give  First view (Tolentino, Volume IV, pp.
337-338) – If an obligation is extinguished
Obligation is not by the loss of the thing or impossibility of
extinguished because the genus of a thing performance through fortuitous events,
cannot perish. the counter-prestation is also
In case of extinguished. The debtor is released from
generic obligations whose object is a liability but he cannot demand the
particular class or group with prestation which has been stipulated for
specific or determinate qualities his benefit. He who gives nothing has no
(Limited Generic reason to demand anything.
Obligations)
 Second View (JBL Reyes) – The loss or
In Obligations to Do impossibility of performance must be
due to the fault of the debtor. In this
Obligation is extinguished when case, the injured party may ask for
prestation becomes legally or physically rescission under Article 1191 plus
impossible. damages. If the loss or impossibility
was due to a fortuitous event, the
Effect of Relative Impossibility or other party is still obliged to give the
Doctrine of Unforeseen Events (ART prestation due to the other.
1267)
 When the service has become CONDONATION OR REMISSION OF THE
difficult as to be manifestly beyond DEBT
the contemplation of the parties, the
 An act of pure liberality by virtue of d. both debts must be liquidated &

which the obligee, without receiving demandable;
any price or equivalent, renounces e. there must be no retention or
the enforcement of the obligation, as controversy commenced by 3rd
a result of which it is extinguished in persons over either of the debts
its entirety or in that part or aspect & communicated in due time to
of the same to which the remission the debtor; and
refers. f. compensation must not be
 It is the gratuitous abandonment by prohibited by law.
the creditor of his right. 
Requisites: Compensation Confusion
a. It must be gratuitous 1. two persons 1. one person
b. It must be accepted by the who are mutual where qualities of
debtor debtors and debtor and creditor
c. The obligation must creditors of each are merged
be demandable other
2. there must be 2. only one
NOTE: Express condonation or at least two obligation
remission must comply with the obligations
formalities of donation.
Compensation Payment
CONFUSION OR MERGER OF RIGHTS 1. The requisites prescribe by law for
 Merger of the characters of the compensation are different from those
creditor and the debtor in one and prescribed by law for payment.
the same person by virtue of which 2. Takes effect by 2. Takes effect by
the obligation is extinguished. operation of law act of the parties
 Requisites: 3. Capacity to 3. Capacity to give
a. that the characters of creditor & give and to and to acquire is
debtor must be in the same acquire is not essential
person; necessary
b. that it must take place in the 4. As a rule, it is 4. As a rule,
partial complete and
person of either the principal indivisible
creditor or the principal debtor;
and
c. it must be complete & definite
Compensation Counterclaim
COMPENSATION
1. Requires 2 1. Not necessary
 Extinguishment in the concurrent debts must consist
amount of the obligation of those in money or if
persons who are reciprocally debtors fungibles, same
and creditors of each other. kind and quality
 Requisites:
a. there must be 2 parties, who, in 2. Both debts 2. Does not require
their own right, are principal must be that debts be
creditors & principal debtors of liquidated liquidated
each other (except in case of
guarantor, Article 1280); 3. Need not be 3. Must be pleaded
b. both debts must consist in pleaded to be effectual
money, or if the things due are
fungibles, they must be of the
same kind & quality; Kinds of Compensation
c. both debts must be due; 1. Legal – takes effect by operation
of law
Ethics)
2. Voluntary – agreed upon by the b. agreement of the parties to the

parties new obligation;
3. Judicial – takes effect by judicial c. extinguishment of the old
decree obligation; and
4. Facultative – when it can be d. validity of the new obligation.
claimed by one of the parties
who, however, has the right to Kinds:
object to it 1. As to its essence
a. Objective/Real - refers to the
Debts not subject to Compensation: change either in the cause,
1. debts arising from contracts of object or principal conditions of
deposit the obligations
2. debts arising from contracts of b. Subjective/Personal - refers to
commodatum the substitution of the person of
3. claims for support due by the debtor or to the subrogation
gratuitous title of a 3rd person in the rights of
4. obligations arising from criminal the creditor
offenses c. Mixed
5. certain obligations in favor of 2. As to its form/constitution
government a. Express - when it is declared in
NOTE: Taxes are not subject to set-off or unequivocal terms that the old
legal compensation because the obligation is extinguished by a
government & taxpayers are not mutually new one w/c substitutes the
creditors & debtors of each other same.
(Francia vs. IAC, 162 SCRA 753). b. Implied - when the old & new
obligation are incompatible w/
Facultative Compensation each other on every point.
 This is compensation which can be
set up only at the option of a Test of Incompatibility
creditor, when legal compensation  Whether or not the old and new
cannot take place because of want of obligations can stand together, each
some legal requisites for the benefit having its own independent
of the creditor. The latter can existence. If they can stand together,
renounce his right to oppose the there is no incompatibility;
compensation and he himself can set consequently, there is no novation. If
it up. It differs from conventional they cannot stand together, there is
compensation because it is unilateral incompatibility; consequently, there
while the latter depends upon the is novation.
agreement of both parties.
(Tolentino, Volume IV, p. 367) Forms of Substitution of Debtors:
1. Expromision - effected with the
NOVATION consent of the creditor at the
 Substitution or change of an instance of the new debtor even
obligation by another, resulting in its without the consent or even against
extinguishment or modification, the will of the old debtor.
either by changing its object or Requisites:
principal conditions, or by a. Initiative for substitution must
substituting another in place of the emanate from the new debtor
debtor, or by subrogating a third b. Consent of the creditor to the
person in the rights of the creditor. substitution
 Requisites: 2. Delegacion - effected with the
a. a previous valid obligation; consent of the creditor at the
instance of the old debtor, with the
concurrence of the new debtor.  Kinds of Subrogation

Requisites: 1. Conventional – takes place by
a. Initiative for substitution must agreement of the parties; this kind of
emanate from the old debtor subrogation requires the intervention
b. Consent of the new debtor and consent of 3 persons: the original
c. Acceptance by the creditor creditor, the new creditor and the
debtor.
Effect of insolvency of new debtor 2. Legal – takes place without
1. Expromision – the new debtor’s agreement but by operation of law
insolvency or nonfulfillment of the because of certain acts (Article
obligation shall not revive the 1302).
original debtor’s liability to the
creditor whether the substitution is Legal subrogation
effected with or without the cannot be presumed.
knowledge or against the will of the
original debtor. 1. Creditor pays another creditor who is
2. Delegacion – the creditor can sue the preferred, without debtor’s
old debtor only when the knowledge;
insolvency was prior to the 2. A third person not interested in the
delegation and publicly known or obligation pays with the express or
when the old debtor knew of such tacit approval of the debtor; or
insolvency at the time he delegated
3. Even without debtor’s knowledge, a
the obligation.
person interested in the fulfillment
of the obligation pays without
NOTE: A change in the incidental
prejudice to the effects of confusion
elements of, or an addition of such
as to the latter’s share.
elements to an obligation, unless
otherwise expressed by the parties, will
not result in its extinguishment. II. CONTRACTS
CONVENTIONAL ASSIGNMENT OF CONTRACT

SUBROGATION RIGHTS  A contract is a meeting of minds
between two persons whereby one
1. governed by Arts. 1. governed by Arts. binds himself, with respect to the
1300 to 1304 1624 to 1627 other, to give something or to render
some service (Article 1305).
2. debtor’s consent 2. debtor’s consent
is required is not required  Elements
1. Essential – those without which there
3. extinguishes 3. transmission of can be no contract. a. Consent
the obligation and right of the creditor b. Object or Subject Matter
gives rise to a new to third person c. Cause or Consideration
one without modifying 2. Natural – those derived from the
or extinguishing the nature of the contract and ordinarily
obligation accompany the same.
3. Accidental – those which exist only
4. defects and 4. defects and vices when the parties expressly provide
vices in the old in the old obligation for them for the purpose of limiting
obligation are cured are not cured or modifying the normal effects of
5. takes effect 5. as far as the the contract.
upon moment of debtor is concerned,
novation or takes effect upon
Nominate contracts
subrogation notification
 Those which have their own
distinctive individuality and are
Ethics)
regulated by special provisions of revocation;

law. d. the favorable stipulation
Innominate contracts should not be
 Those which lack individuality and conditioned or
are not regulated by special compensated by any kind
provisions of law. of obligation whatever;
 Regulated by the stipulations of the and
parties, by the general provisions of e. neither of the
the Civil Code on obligations and contracting parties bears
contracts, by rule governing the most the legal representative
analogous nominate contracts and by or authorization of the
the customs of the place. third person.
 Kinds:
a. Do ut des - I give that you give Test of Beneficial Stipulation – the
b. Do ut facias - I give that you do fairest test to determine whether the
c. Facio ut des - I do that you give interest of a 3rd person in a contract is a
d. Facio ut facias - I do that you do stipulation pour atrui or merely an
NOTE: According to some incidental interest is to rely upon the
authorities. do ut des in no longer an intention of the parties as disclosed by
innominate contract. It has already their contract. Determine whether the
been given a name of its own, i.e. contracting parties desired to tender him
barter or exchange (Article 1638). such an interest (Uy Tam vs. Leonard, 30
Phil. 471).
Characteristics of Contracts: (ROMA)
1. Relativity (ART 1311)
2. When a third person induces a
2. Obligatory Force and Consensuality
party to violate contract
(ART 1315)
(ART1314)
3. Mutuality (ART 1308)
 Requisites:
4. Autonomy (ART 1306)
a. Existence of a valid contract;
Relativity
b. knowledge of contract by
Contracts take effect third person; and
only between parties, their assigns and c. interference by third person
heirs. without legal justification or
excuse.
1. Stipulation pour atrui - 3. Third persons who come into
stipulation in favor of a third possession of the object of the
person. contract creating real rights
 Requisites: 4. Contracts entered into in fraud
a. the stipulation must be a of creditors
part, not the whole of
the contract; Mutuality
b. the contracting parties  The contract must bind both parties;
must have clearly and its validity or compliance must not
deliberately conferred a be left to the will of one of them.
favor upon a third (ART 1308)
person, not a mere  The contract cannot have any
incidental benefit or stipulation authorizing one of the
interest; contracting parties (a) to determine
c. the third person must whether or not the contract shall be
have communicated his valid, or (b) to determine whether or
acceptance to not the contract shall be fulfilled.
the obligor
before its Autonomy
 The parties are free to stipulate

anything they deem convenient
provided that they are not contrary
to law, morals, good customs, public
order and public policy. (ART 1306)
Consensuality
 Contracts are perfected by mere
consent and from that moment, the
parties are bound not only to the
fulfillment of what has been
expressly stipulated but also to all
consequences which, according to
their nature may be in keeping with
good faith, usage and law.
CONSENT
 Manifested by the concurrence of the
offer and acceptance upon the thing
and the cause which are to
constitute the contract.
 Requisites:
a. Legal capacity of the contracting
parties
b. Manifestation of the conformity
of the contracting parties
c. The parties’ conformity to the
object, cause, the terms and
conditions of the contract must
be intelligent, spontaneous and
free from all vices of consent
d. The said conformity must be real
and not simulated or fictitious

Ethics)
Offer element (i.e., donation of real

 A proposal made by one party to property).
another to enter into a contract.  An offer made inter praesentes must
 It must be certain or definite, be accepted IMMEDIATELY. If the
complete and intentional. parties intended that there should be
an express acceptance, the contract
NOTE: Offer/proposal may be withdrawn will be perfected only upon
so long as the offeror has no knowledge knowledge by the offeror of the
of acceptance by offeree. express acceptance by the offeree of
Acceptance the offer. An acceptance which is
 Manifestation by the offeree of his not made in the manner prescribed
assent to the terms of the offer. by the offeror is NOT EFFECTIVE BUT
 It must me absolute. A COUNTER-OFFER which the offeror
 A qualified acceptance constitutes may accept or reject. (Malbarosa vs.
counter-offer. CA, et al., G.R. # 125761, April 30,
2003)
NOTE: Acceptance may be revoked  Contracts under the Civil Code
before it comes to the knowledge of the generally adhere to the Cognition
offeror. Theory (contract is perfected from
the moment the acceptance comes
Amplified Acceptance to the knowledge of the offeror),
 Under certain circumstances, a mere while transactions under the Code of
amplification on the offer must be Commerce use the Manifestation
understood as an acceptance of the Theory (it is perfected from the
original offer, plus a new offer which moment the acceptance is declared
is contained in the amplification. or made).
(Tolentino, Volume IV, p. 452)
Rule on Complex offers PERSONS INCAPACITATED
1. Offers are interrelated – contract is TO GIVE CONSENT:
perfected if all the offers are 1. Minors EXCEPTIONS:
accepted. • Contracts where the minor is
2. Offers are not interrelated – single estopped to raise minority as a
acceptance of each offer results in a defense through his own
perfected contract unless the offeror misrepresentation
has made it clear that one is • Contracts for necessaries
dependent upon the other and • Contracts by guardians or legal
acceptance of both is necessary. representatives
• Voluntary fulfillment of a natural
NOTES: obligation provided that the
 Consensual contracts are perfected minor is between 18-21 years of
from the moment there is a age
manifestation of concurrence • Contracts of life, health or
between the offer and the accident insurance taken on the
acceptance regarding the object and life of the minor
the cause. 2. Insane or demented persons, unless
 Real contracts like deposit, pledge the contract was entered into during
and commodatum requires delivery a lucid interval
of object for perfection. 3. Deaf-mutes who do not know how to
 Solemn contracts are those which read and write
requires compliance with certain
formalities prescribed by law, such Effect of Misrepresentation of Age by
prescribed form being an essential the Minor
CIVIL LAW COMMITTEE

 Misrepresentation by minors with into it against his wishes and desires or

regard to their age when entering even against his better judgment.
into a contract shall bind them in the Contracts are also valid even though
sense that they are estopped they are entered into by one of the
subsequently from impugning the parties without hope of advantage or
validity of the contract on the ground profit. (Martinez vs. Hongkong and
of minority. It is necessary that the Shanghai Bank, 15 Phil. 252)
misrepresentation must be active Simulation of Contracts
(e.g. when minors specifically stated 1. Absolute – when the contracting
in a contract that they were of age), parties do not intend to be bound by
not merely constructive. the contract at all. Thus, an
absolutely simulated contract is
VICES OF CONSENT (VIMFU) VOID.
1. Violence - when in order to wrest 2. Relative – when the contracting
consent, serious or irresistible force parties conceal their true
is employed. agreement. A relatively simulate
2. Intimidation - when 1 of the contract binds the parties to their
contracting parties is compelled by a real agreement, when it does not
reasonable & well-grounded fear of prejudice a 3rd person and is not
an imminent & grave evil upon his intended for any purpose contrary to
person or property, or upon the law, morals, good customs, public
person or property of his spouse, order or public policy.
descendants or ascendants, to give
his consent. OBJECT
3. Mistake - should refer to the  The thing, right or service which is
substance of the thing which is the the subject matter of the obligation
object of the contract, or to those arising from the contract.
conditions which have principally  Requisites:
moved one or both parties to enter a. It must be w/in the commerce of
into the contact.  Must be mistake man
of fact and not of law, except under b. It must be licit or not contrary
Article 1334. law, morals, good customs,
 Requisites under Article 1334: public order or public policy
a. Mistake must be with respect c. It must be possible
to the legal effect of an d. It must be determinate as to its
agreement kind
b. Mistake must be mutual
c. Real purpose of the parties Things which Cannot be the Object of
must have been frustrated. Contract
4. Fraud - when, through insidious 1. Things which are outside the
words or machinations of 1 of the commerce of men
contracting parties, the other is 2. Intransmissible rights
induced to enter into a contract 3. Future inheritance, except in
which, without them, he would not cases expressly authorized by law
have agreed to. 4. Services which are contrary to
5. Undue influence - when a person law, morals, good customs,
takes improper advantage of his public order or public policy
power over the will of another, 5. Impossible things or services
depriving the latter of a reasonable 6. Objects which are not possible of
freedom of choice. determination as to their kind
Reluctant Consent  A contract is valid CAUSE

even though one of the parties entered

Ethics)
 The immediate, direct and most FORM OF CONTRACTS

proximate reason which explains and Contracts shall be
justifies the creation of obligation. obligatory, in whatever form they may
 Requisites have been entered into, provided all the
a. Cause should be in existence at essential requisites for their validity are
the time of the celebration of present.
the contract
b. Cause should be licit or lawful 1. When the law requires that a
c. Cause should be true contract be in some form in order
that it may be valid
 Rules:
1. In onerous contracts, the cause is
understood to be, for each
contracting party, the prestation of
promise of a thing or service by the
other.
2. In remuneratory contracts, the
2. When the law requires that a
service or benefit w/c is
contract be in some form in order
remunerated.
that it may be enforceable
3. In contracts of pure beneficence,
the mere liberality of the donor or
benefactor. NOTES:
4. In accessory contracts (mortgage or
pledge), the cause is identical with  Parties may compel each other to
the cause of the principal contract, comply with the form required once the
that is, the loan from which it contract has been perfected. (Article
derives its life and existence. 1357)  Contracts under Art 1358 which
are required to be in some specific form
is only for the convenience of parties and
CAUSE EFFECT
does not affect its validity and
the contract confers
enforceability as between them.
1. Absence of cause no right and produces
no legal effect
does not render the
RA 8792 (E- COMMERCE ACT) provides
contract void that the formal requirements to make
2. Failure of cause
contracts effective as against third
the contract is null
persons and to establish the existence of
3. Illegality of cause and void
a contract are deemed complied with
the contract is void,
provided that the electronic document is
4. Falsity of cause unless the parties
unaltered and can be authenticated as to
show that there is
be usable for future reference.
another cause which
is true and lawful
does not invalidate REFORMATION OF INSTRUMENTS 
5. Lesion the contract, unless Requisites:
(a) there is fraud, a. meeting of the minds to the
mistake or undue contract
influence; or (b) when
the parties intended a
b. true intention is not expressed in
donation or some the instrument by reason of
other mistake, accident, relative
contract simulation, fraud, or inequitable
conduct
c. clear and convincing proof of
mistake, accident, relative
simulation, fraud, or inequitable
conduct
CIVIL LAW COMMITTEE

prejudice may be rescinded in cases

Instances when there can be no established by law.
reformation:
1. Simple unconditional donations What contracts are rescissible
inter vivos; 1. those entered into by guardians
2. Wills; where the ward suffers lesion of
3. When the agreement is void; more than ¼ of the value of the
things which are objects thereof;
When one of the parties has brought an 2. those agreed upon in representation
action to enforce the instrument, no of absentees, if the latter suffer
subsequent reformation can be asked.
COMPARATIVE TABLE OF DEFECTIVE CONTRACTS
VOID VOIDABLE RESCISSIBLE UNENFORCEABLE
1. Defect is caused Defect is caused by vice Defect is caused by Defect is caused by

by lack of essential of consent injury/ damage either lack of form,
elements or illegality to one of the parties of authority, or capacity
to a 3rd person of both parties not
cured by prescription
2. Do not, as a Valid and enforceable Valid and enforceable Cannot be enforced

general rule produce until they are annulled until they are rescinded by a proper action in
any legal effect by a competent court by a competent court court
3. Action for the Action for annulment or Action for rescission may Corresponding action
declaration or nullity defense of annulability prescribe for recovery, if there
or inexistence or may prescribe was total or partial
defense of nullity or performance of the
inexistence does not unenforceable
prescribe contract under No. 1
or 3 of Article 1403
may prescribe
4. Not cured by Cured by prescription Cured by prescription Not cured by

prescription prescription
5. Cannot be ratified Can be ratified Need not be ratified Can be ratified
6. Assailed not only Assailed only by a Assailed not only by a Assailed only by a
by a contracting contracting party contracting party but contracting party
party but even by a even by a third person
third person whose who is prejudiced or
interest is directly damaged by the
contract
affected
7. Assailed directly or Assailed directly or Assailed directly only Assailed directly or

collaterally collaterally collaterally
lesion by more than ¼ of the value of

RESCISSIBLE CONTRACTS the things which are subject thereof;
 Contracts validly agreed upon but, by 3. those undertaken in fraud of
reason of lesion or economic creditors when the latter cannot in

Ethics)
any manner claim what are due 7. Failure of the vendee to take
them; exclusive possession of all the
property
4. those which refer to things under
litigation if they have been entered
into by the defendant without the Rescission in Rescission Proper
knowledge and approval of the Article 1191 in Article 1381
litigants and the court; 1. It is a principal 1. It is a subsidiary
5. all other contracts especially action retaliatory in remedy.
declared by law to be subject to character.
rescission; and 2. The only ground is 2. There are 5
6. payments made in a state of non-performance of grounds to rescind.
insolvency on account of obligations one’s obligation/s or Non-performance by
not yet enforceable what is incumbent the other party is not
upon him. important.
 Requisites: 3. It applies only to 3. It applies to both
reciprocal obligation unilateral and
a. the contract must be rescissible
reciprocal
b. the party asking for rescission obligations.
must have no other legal means
4. Only a party to the 4. Even a 3rd person
c. to obtain reparation for the contract may demand who is prejudiced by
damages suffered by him fulfillment or seek the contract may
d. the person demanding rescission the rescission of the demand the
must be able to return whatever contract. rescission of the
he may be obliged to restore if contract.
rescission is granted 5. Court may fix a 5. Court cannot grant
period or grant extension of time for
e. the things w/c are the object of fulfillment of the
extension of time for
the contract must not have the fulfillment of the obligation.
passed legally to the possession obligation.
of a 3rd person acting in good 6. Its purpose is to 6. Its purpose is to
faith cancel the contract. seek reparation for
f. the action for rescission must be the damage or injury
brought w/in the prescriptive caused, thus allowing
period of 4 years partial rescission of
the contract.
BADGES OF FRAUD: VOIDABLE CONTRACTS

1. Consideration of the conveyance  Those in which all of the essential
is inadequate or fictitious; elements for validity are present,
2. Transfer was made by a debtor although the element of consent is
after a suit has been begun and vitiated either by lack of capacity of
while it is pending against him; one of the contracting parties or by
3. Sale upon credit by an insolvent VIMFU.
debtor;
4. Evidence of indebtedness or What contracts are voidable
complete insolvency 1. Those where one of the parties is
5. Transfer of all his property by a incapable of giving consent to a
debtor when he is financially contract
embarrassed or insolvent; 2. Those where the consent is vitiated
6. Transfer made between father & by mistake, violence, intimidation,
son, where there is present any undue influence or fraud
of the above circumstances
Causes of extinction of action to annul:
1. PRESCRIPTION
CIVIL LAW COMMITTEE

 the action must be commenced within 2. those where both parties are
4 years from: incapable of giving consent; and
a. the time the incapacity ends; 3. those which do not comply with the
b. the time the violence, Statute of Frauds
intimidation or undue
influence ends; or Agreements within the scope of the
c. the time the mistake or fraud Statute of Frauds (EXCLUSIVE LIST):
is discovered. 1. Agreements not to be performed
NOTE: Discovery of fraud must be within one year from the making
reckoned to have taken place from thereof;
the time the document was 2. Special promise to answer for the
registered in the office of the debt, default or miscarriage of
register of deeds. Registration another;
constitutes constructive notice to the NOTE: This does not refer to the original
whole world. (Carantes vs. CA, or independent promise of the debtor
76 SCRA 514) to his own creditor. It refers rather
to a collateral promise.
2. RATIFICATION  3. Agreement in consideration of
Requisites: marriage other than a mutual
a. there must be knowledge of promise to marry;
the reason which renders 4. Agreement for the sale of goods, etc.
the contract voidable at a price not less than P500.00;
b. such reason must have 5. Contracts of lease for a period longer
ceased and than one year;
6. Agreements for the sale of real
c. the injured party must have
property or interest therein; and
executed an act
7. Representation as to the credit of a
which expressly
third person.
or impliedly conveys
an intention to
waive his right NOTES:
3. By loss of the thing which
is the object of the
 The contracts/agreements under the
Statute of Frauds require that the
contract through fraud or
same be evidenced by some note,
fault of the person who is
memorandum or writing, subscribed
entitled to annul the
by the party charged or by his agent,
contract.
otherwise, the said contracts shall be
NOTE: If the object is lost through unenforceable.  The statute of frauds
fortuitous event, the contract can still applies only to executory contracts, not
be annulled, but the person obliged to to those that are partially or completely
return the same can be held liable only fulfilled.
for the value of the thing at the time of
the loss, but without interest thereon. Ratification of contracts in violation of
the Statute of Frauds
UNENFORCEABLE CONTRACTS 1. Failure to object to the presentation
of oral evidence to prove such
 Those which cannot be enforced by
contracts
proper action in court unless they are
2. Acceptance of benefits under these
ratified
contracts
What contracts are unenforceable
VOID CONTRACTS
1. those entered into in the name of  Those where all of the requisites of a
another by one without or acting in contract are present but the cause,
excess of authority; object or purpose is contrary to law,

Ethics)
morals, good customs, public order 3. Payment of money or delivery of

or public policy, or contract itself is property made by an
prohibited or declared void by law. incapacitated person
4. Agreement or contract which is
What contracts are void not illegal per se & the
1. Those whose cause, object or prohibition is designed for the
purpose is contrary to law, morals protection of the plaintiff
good customs, public order or public 5. Payment of any amount in excess
policy; of the maximum price of any
2. Those whose object is outside the article or commodity fixed by
commerce of men; law or regulation by competent
3. Those which contemplate an authority.
impossible service; 6. Contract whereby a laborer
undertakes to work longer than
4. Those where the intention of the
the maximum # of hours fixed by
parties relative to the principal
law.
object of the contract cannot be
7. Contract whereby a laborer
ascertained; and
accepts a wage lower than the
5. Those expressly prohibited or minimum wage fixed by law.
declared void by law.
8. One who lost in gambling
because of fraudulent schemes
INEXISTENT CONTRACTS practiced on him is allowed to
 Those where one or some or all of the recover his losses [(Art. 315, 3
requisites essential for the validity of (b), RPC] even if gambling is a
a contract are absolutely lacking. prohibited one.
What contracts are inexistent Rules when only one of the parties is at
1. Those which are fault:
absolutely simulated or 1. Executed Contracts:
fictitious; and a. Guilty party is barred from
2. Those whose cause or object did not recovering what he has given to
exist at the time of the transaction. the other party is barred from
recovering what he has given to
NOTE: The principle of In Pari Delicto is the other party by reason of the
applicable only to void contracts and not contract.
as to inexistent contracts. b. Innocent party may demand for
Principle of In Pari Delicto the return for the return of what
RAL RULE: When the defect of a he has given.
void contract consists in the illegality of 2. Executory Contracts - Neither of the
the cause or object of the contract and contracting parties can demand for
both of the parties are at fault or in pari the fulfillment of any obligation
delicto, the law refuses them every from the contract nor may be
remedy and leaves them where they are. compelled to comply with such
obligation
1. Payment of usurious interest
2. Payment of money or delivery of NATURAL OBLIGATIONS
property for an illegal purpose,  They are real obligations to which
where the party who paid or the law denies an action, but which
delivered repudiates the contract the debtor may perform voluntarily.
before the purpose has been  It is patrimonial, and presupposes a
accomplished, or before any prestation.
damage has been caused to a 3rd  The binding tie of these obligations is
person. in the conscience of man, for under
the law, they do not have the
CIVIL LAW COMMITTEE

necessary efficacy to give rise to an entitled to assert it either has

action. abandoned it or declined to
assert it.
Examples of natural
obligations enumerated under the Civil  Elements:
Code: a. C
1. Performance after the civil obligation o
has prescribed; n
2. Reimbursement of a third person for d
a debt that has prescribed; u
3. Restitution by minor after annulment c
of contract; t
4. Delivery by minor of money or
fungible thing in fulfillment of on
obligation; part
5. Performance after action to enforce of
civil obligation has failed; the defendant, or of one under whom
6. Payment by heir of debt exceeding h
value of property inherited; and e
7. Payment of legacy after will have
been declared void. c
l
ESTOPPEL a
i
 A condition or state by virtue of
m
which an admission or representation
s
is rendered conclusive upon the
,
person making it and cannot be
denied or disproved as against the g
person relying thereon. i
 Kinds: v
1. Estoppel in Pais (by conduct) i
a. Estoppel by silence n
b. Estoppel by g
acceptance of
benefits r
2. Technical Estoppel i
a. Estoppel by deed s
b. Estoppel by record e
c. Estoppel by judgment
d. Estoppel by laches t
o
LACHES or “STALE DEMANDS” LACHES PRESCRIPTION

 Failure or neglect,
for an unreasonable and 1. concerned with 1. concerned with
unexplained length of time, to do effect of delay fact of delay
that which, by exercising due
diligence, could or should have 2. question of 2. question or
been done earlier; it is inequity of matter of time
negligence or omission to assert permitting the claim
a right within reasonable to be enforced
time, warranting a
presumption that the party 3. not statutory 3. statutory

4. applies in equity 4. applies at law
5. not Padilla
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on aLaw), Charmaine
5. based on(Taxation
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Ethics) fixed time time
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CIVIL LAW COMMITTEE

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Obligations and Contracts: San Beda College of Law

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San Beda College of Law 85

MEMORY AID IN CIVIL LAW