COLLEGE DEPARTMENT

BACHELOR OF SCIENCE IN BUSINESS

ADMINISTRATION PROGRAM

LEARNING PACKET IN
LAW ON OBLIGATIONS AND CONTRACTS
(BUSLAW)

Prepared by:

VIENNALYN G. VALLENTIS, MBA

Email: viennavallentis@acdeducation.com

Checked by:

JUDITH N. AMBALONG, DBA

BSBA Program Dean
INTELLECTUAL PROPERTY DISCLAIMER

This learning resource is a property of Assumption College of Davao. The school

assigned particular of its agents to mass-produce such a resource. No teacher, instructor, or
student is permitted to reproduce this learning resource without written consent from the school.
Moreover, any manner of destruction of this learning resource is strictly prohibited and is
subject to sanctions under the school policy.

In order to avoid plagiarism, educators and students must:

• properly quote and paraphrase any works of other authors;
• properly cite sources using in-text citation and a separate reference list;
• check academic work for possible plagiarism using checker tools.

Prepared by:

RYAN ARCEL GALENDEZ

Data Privacy Officer
 CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS

Source: https://www.google.com/

As discussed in the previous lesson, you already acquire knowledge about law and
obligation. But what is really an obligation? What is the nature of it? What are the effects
of obligations? As you explore this lesson and do the task, you are going to learn all
about the nature and effect of obligations. So, brace yourself for a fun learning
experience.

Learning Outcomes

At the end of the learning session, the students will be able to:

 Explain the types of obligations according to its prestation

 Discuss the obligations of the debtor and rights of creditors
 Analyze the concepts of delay, fraud and fortuitous event

Time Frame: 1 Week (August 16-21, 2021)

 TYPES OF OBLIGATIONS ACCORDING TO PRESTATION

Visit the following websites, read, and take note of important details and complete
the activity below.
 https://prezi.com/p/wngp5xyhgdvy/chapter-2/
 https://www.academia.edu/31782912/CHAPTER_2_Nature_and_Effects_of_Obliga
tions

If your unable to do so, please refer to Appendix A attached at the end of the lesson.

Activity 1

Activity 1.1 Nature and Effect of Obligations

Examine below situation:

Retrieved from: https://jurisdoctor1a.wordpress.com/2019/02/20/chapter-2-nature-and-effect-of-
obligations/

Anne sold her dog to Janine for P15,000 pesos and while in the possession of Anne, the
dog gave birth to a puppy. In which Janine is the one entitled to the puppy if Janine has
already paid the amount of P15,000 pesos to Anne.
 Process Questions
1. Based on the given situation above, what do you think were the obligation of
Anne to Janine?

2. What will be the personal right and real right of Janine towards the dog?

3. As a BSBA student, do you think you can use your learnings in the nature
and effect of obligations in real life situations? Discuss your answer
thoroughly.

Activity 1.2
Explain the types of obligations according to its prestation through concept map. Write
your answer on the space given below.
 Process Questions
 Based on your readings, what are the duties of the debtor in obligation to give a
determinate thing and an indeterminate thing?

 What do you think is the difference between real obligation and personal obligation?

 As a student and future entrepreneur, do you find any importance in understanding

the types of obligations? Why or Why not?
 OBLIGATIONS OF THE DEBTOR AND RIGHTS AND REMEDIES OF CREDITORS

Your goal in this section is to discuss the obligations of the debtor and rights and
remedies of the creditors.

For you to accomplish this task, read the book entitled Law on Obligations and Contracts
Chapter 2: Nature and Effect of Obligations

For additional learnings, you may visit the link below;

Media Lesson:

 https://www.youtube.com/watch?v=ZtdD1Nf4mQI&t=94s

If your unable to watch it, see Appendix B attached at the end of the lesson.

ACTIVITY 2

Discuss the obligations of the debtor and rights of creditors through discussion grid. Write
your answer on the space given below.

Obligations of the Debtor Rights of the Debtor

Rights of the Creditor…
To Fruits Against Debtor If Debtor Failed to Remedies of the
Deliver a Thing Creditor

Process Questions
 What rights are given by law to the creditor in case the debtor fails to comply with
his obligation to deliver a specific thing?
 What do you think are included to be delivered in an obligation to give a definite
thing? Explain each of them

 Suppose your obligation as debtor is to do something and you fail to do it or

performs it in contravention of the agreement, what will be the remedies available
to the creditor?

CONCEPTS OF DELAY, FRAUD AND FORTUITOUS EVENT

Visit the website, read, and take note of important details and complete the activity
below.
 https://steemit.com/steemiteducation/@paulthebeloved/philippine-laws-obligations-
and-contracts-chapter-2-part-2

If your unable to do so, please refer to Appendix B attached at the end of the lesson.
Analyze the following situations and write your answer on the space given below.

Situation 1:
Lei obliged to give Asi a specific car on January 1, 2020. On Jan. 1, 2020
Lei failed to give and deliver a specific car to Asi. Since Asi wanted a car, he
extra-judicially demand Lei performance by summoning him to Baranggay
Saray Hall to execute what they had agreed upon. Though Kapitan Siaga,
Baranggay Saray Chairman, mediated for the two to settle their disagreements
by making the two agreed to a common understanding that the car will be
delivered on Jan. 10 instead. But when Jan. 10 came still Lei failed to deliver
the car to Asi.

Questions:
1. Based from the situation, what is the problem all about?

2. When can a debtor be considered in delay?

3. What must be present for the delay to exist?

Situation 2:
Cheche sell her ring that is aluminum plated with gold to Chin telling her
that the ring is made of 18 karat gold. Cheche knew all along that it was not
made of 18 karat gold but made it looks like. Chin bought the ring relying upon
what Cheche told her.

Questions:
1. Based from the situation, what is the problem all about?

2. What do you think are the liability of Cheche to Chin?

Situation 3:

Jerry is obliged to deliver a specific car to March. Before the said date of
delivery, there was severe tropical depression which caused flooding and took
the car out of Jerry's garage and brought it to nowhere.

Questions:
1. Based from the situation, what is the problem all about?

2. Is Jerry liable to deliver the car to March? Explain your answer

 Process Questions
 Give at least 2 rules as to the liability of a person for loss or damage resulting from
a fortuitous event and justify each rule.

 As an individual, may an action arising from fraud be waived? Explain your answer
  As a student and future entrepreneur, is conducting fraud and delay legal or illegal?
Why or why not?

Now that you have completed the task, answer the following questions:

a. How did you find the tasks given above?

____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________

b. How did the task help you see the real world of the topic?
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________

c. What new realizations do you have about the topic?

____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
 Assessment Tools

RUBRICS FOR ESSAY/ PROCESS QUESTIONS

4 3 2 1 0
The explanation is The explanation The The explanation There is no
clear and correct; is correct and the explanation is is incorrect and attempt to
and the ideas are ideas are correct but the ideas are not answer the
organized organized. the ideas are organized. question.
not organized.
Note: Score per item plus one (1) point

Criteria for Graphic Organizer

4 3 2 1
Explanation A complete Good solid Explanation is Misses key
response with a response with unclear points
detailed clear
explanation explanation
Demonstrated Shows complete Shows Response Response
Knowledge understanding of substantial shows some shows a
the ideas and understanding of understanding of complete lack of
processes. the ideas and the ideas and understanding of
processes processes the ideas and
processes
Requirements Goes beyond Meets the Hardly meets Does not meet
the requirement requirements of the requirement the requirements
of the graphic the graphic of the graphic asked.
organizer organizer organizer.
Note: Overall points (15 points) (Total Score +3 = 15)

References
Book

De Leon, H. S., & De Leon Jr., H. M. (2014). The Law on Obligations and Contracts 2014
Edition. Rex Bookstore

Ballada, S.,Mendoza, D.J. & Perez, L.P. (2012). Law on Obligations and Contracts. 2012
Issue – 2nd Edition per CHED Model Syllabus with Introduction to Law and Exercises.
Dynasty Book Source Asia

De Leon, H. S., & De Leon Jr., H. M. (2011). The Law on Obligations and Contracts 2011
Edition. Rex Bookstore

Carpio-Aldiguer, C. P. (2014). Law on Obligations and Contracts in the Philippines An

Overview. Far Eastern University Institute of Accounts, Business & Finance

Samson, A. R. V. (n.d). Law on Obligations and Contracts Notes and Cases. C & E
Publishing, Inc.

Website:

Laguna State Polytechnic University. (2019, February 20). Chapter 2 Nature & Effect
of Obligation. Retrieved August 12, 2020, from
https://jurisdoctor1a.wordpress.com/2019/02/20/chapter-2-nature-and-effect-of-
obligations/

Lachica, J.M. (2017, October 21). Chapter 2 Nature & Effect of Obligations. Retrieved
August 12, 2020, from https://prezi.com/p/wngp5xyhgdvy/chapter-2/

Bertillo, A. (n.d.). Chapter 2 Nature and Effects of Obligations. Retrieved August 12,
2020, from
https://www.academia.edu/31782912/CHAPTER_2_Nature_and_Effects_of_Obligatio
ns

Atty. Javier Law Vlog. (2020, May 5). Obligations Part 2: (Nature & Effect of
Obligations) Debtor’s Obligation & Creditor’s Rights. Retrieved August 13, 2020, from
https://www.youtube.com/watch?v=ZtdD1Nf4mQI&t=94s

Paulthebeloved. (2017). Philippines Laws: Obligations and Contracts (Chapter 2 Part

2). Retrieved August 13, 2020, from
 https://steemit.com/steemiteducation/@paulthebeloved/philippine-laws-obligations-
and-contracts-chapter-2-part-2

Photo:

https://www.google.com/search?
q=nature+and+effect+of+obligations&source=lnms&tbm=isch&sa=X&ved=2ahUKEwiK4q
bI8ZTyAhU_xosBHYY7A5gQ_AUoAXoECAEQAw&biw=1366&bih=625#imgrc=P-
p5ubC5NfjCEM

APPENDIX A
CHAPTER 2. NATURE AND EFFECT OF OBLIGATIONS

ARTICLE 1163. EVERY PERSON OBLIGED TO GIVE SOMETHING IS ALSO

OBLIGED TO TAKE CARE OF IT WITH THE PROPER DILIGENCE OF A GOOD
FATHER OF A FAMILY, UNLESS THE LAW OR THE STIPULATION OF THE
PARTIES REQUIRES ANOTHER STANDARD OF CARE. 
BY: JOHANNES AQUINO

The article refers to obligation to give a determinate thing

Determinate/specific – identified by individuality

Generic/indeterminate – refers to class or genus

Requirements

Diligence of a good father of the family. Bonus pater familias: The concept involves giving
the care which the nature of the thing cared for demands.

Another standard of care – The degree of diligence must not be inferior to the diligence of
a good father of the family. Anything lower than this would be against public policy and
good customs.
Duties of debtor in obligation to give a determinate thing

 (1) To preserve or take care of the thing due;

(2) To deliver the fruits of the thing;

(3) To deliver its accessions and accessories;

(4) To deliver the thing itself

(5) To answer for damages in case of non-fulfillment or breach.

Duties of debtor in obligation to deliver a generic thing

(1) To deliver a thing which is of the quality intended by the parties taking into consideration the
purpose of the obligation and other circumstances; and

(2) To be liable for damages in case of fraud, negligence, or delay, in the performance of his
obligation, or contravention of the tenor thereof.

Illustration:

 If Autobot Car Dealer’s obligation is to deliver a brand new Toyota Alphard to Rody Dutz,
Autobot can deliver any unit of Toyota Alphard as long as it is brand new regardless of
whatever conduction sticker, chassis number or engine number the vehicle has. But if
Autobot’s obligation is to deliver to Rody Dutz a particular Toyota Alphard, like the one
used by the Sultan of Brunei in the latest APEC summit, Autobot cannot substitute it with
another unit of Toyota Alphard nor can Rody Dutz require Autobot to deliver a different
Toyota Alphard without Autobot’s consent although it may be of the same kind and value.
determinate upon its delivery.

ARTICLE 1164. THE CREDITOR HAS A RIGHT TO THE FRUITS OF THE THING
FROM THE TIME THE OBLIGATION TO DELIVER IT ARISES. HOWEVER, HE SHALL
ACQUIRE NO REAL RIGHT OVER IT UNTIL THE SAME HAS BEEN DELIVERED TO
HIM. 
BY: KRISTIA CAPIO

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

WHEN OBLIGATION TO DELIVER THE FRUITS ARISES

Example:
 

Anne sold her dog to Janine for 15,000 pesos and while in the possession of Anne, the dog gave
birth to a puppy in which Janine is the one entitled to the puppy if Janine has already paid the
amount of 15, 000 pesos to Anne.
PERSONAL RIGHT is the right or power of a person to demand from another — to give, to do, or
not to do.
REAL RIGHT is a power over a specific thing (like the right of ownership or possession) and is
binding on the whole world.
Example:
 
If Anne was a creditor to a house and Janine was the debtor and both agreed that the payment
for the rent of the house would be monthly. Janine upon paying is what we call REAL RIGHT. But
upon Anne expecting Janine to pay every month is what we call PERSONAL RIGHT.

ARTICLE 1165. WHEN WHAT IS TO BE DELIVERED IS A DETERMINATE THING,

THE CREDITOR, IN ADDITION TO THE RIGHT GRANTED HIM BY ARTICLE 1170,
MAY COMPEL THE DEBTOR TO MAKE THE DELIVERY.
IF THE THING IS INDETERMINATE OR GENERIC, HE MAY ASK THAT THE
OBLIGATION BE COMPLIED WITH AT THE EXPENSE OF THE DEBTOR.
IF THE OBLIGOR DELAYS, OR HAS PROMISED TO DELIVER THE SAME THING TO
TWO OR MORE PERSONS WHO DO NOT HAVE THE SAME INTEREST, HE SHALL
BE RESPONSIBLE FOR ANY FORTUITOUS EVENT UNTIL HE HAS EFFECTED THE
DELIVERY. 
BY: BRYAN GLENN FABIAÑA

A determinate or specific thing is something which is susceptible of particular designation

or specification. (ex.) Mercedez Benz Car Model 2000, Chasis No. 12345678910 with
Plate No. BBB 2222.
An indeterminate or generic thing is something which is not particularized or specified but
has reference only to class or genus. (ex) a money, a car etc.

Paragraph 1 does not mean that the creditor can use force or violence upon the debtor.
The creditor must bring the matter to the court and the court and will be the one to order
the delivery. When a debtor does not fulfill his obligation to deliver a determinate thing
the creditor may avail himself of the following actions:

(1.) Complaint for specific performance;

(2.) Complaint fore recission of the obligation;

(3.) Compalint for damages.

An obligation to deliver a determinate thing as a general rule is extinguished if the thing is

lost due to fortuitous events. Whereas an obligation to deliver an indeterminate or generic
thing is not extinguished by fortuitous events.

Genus Nunguam Perit (Genus Never Perishes)

A fortuitous event is an extra ordinary event which cannot be foreseen or which though
foreseen is inevitable. As a general rule no person shall be responsible for those events
which could not be foreseen or which though foreseen were inevitable except:

1.) In cases expressly specified by law;

2.) When it is stipulated by the parties;

3.) When the nature of the obligation requires assumption of risk.

Article 1165 paragraph 3 is an example of an exception expressly provided by law. Thus

id the debtor is guilty of delay in the performance of his obligation or has promised to
deliver the same thing to two or more persons who do not have common interest he shall
be liable for the loss of the thing by reason of fortuitous event until he has effected the
delivery thereof. Delay in paragraph 3 speaks of extra ordinary or legal delay and not
ordinary delay. Extra ordinary delay is a delay tantamount to non-fulfillment of obligation
and arises after an extrajudicial or judicial demand had been made upon the debtor.

Illustration:

ABC company contracted to deliver a vessel to ZZZ company on January 10, 2019. The
former failed to deliver on the stipulated period. On January 30, 2019 the vessel sunk
because of a raging storm. ABC company is not liable because the obligation was
extinguished. It does not commit legal delay.

However, if there was demand for delivery of the vessel before January 10, 2019 and
ABC company failed to deliver and the vessel sunk on Jawnuary 30, 2019 by reason of
the storm, the company is liable. The obligation to deliver the vessel is converted into a
money claim for damages.

ARTICLE 1166. THE OBLIGATION TO GIVE A DETERMINATE THING INCLUDES

THAT OF DELIVERING ALL ITS ACCESSIONS AND ACCESSORIES, EVEN
THOUGH THEY MAY NOT HAVE BEEN MENTIONED. 
BY: JANINE GUMANGOL

Determinate/Specific Things

–things that are distinct and can be physically classified or determined from all others.
Ex: vehicle, Iphone

Accessories—those joined or included with the principal for the latter’s better use,
perfection, or enjoyment. Ex: Keys to a house, Key to a car

Accessions-additions to or improvements upon a thing. Ex: Alluvium (soil of a riverbank,

plants.

Effect of Stipulation

Of course, if there is a stipulation to said effect, accessions and accessories do not have
to be included.

The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the
person, of the time and of the place. When negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
 ARTICLE 1167. IF A PERSON OBLIGED TO DO SOMETHING FAILS TO DO IT, THE
SAME SHALL BE EXECUTED AT HIS COST.
THIS SAME RULE SHALL BE OBSERVED IF HE DOES IT IN CONTRAVENTION OF
THE TENOR OF THE OBLIGATION. FURTHERMORE, IT MAY BE DECREED THAT
WHAT HAS BEEN POORLY DONE BE UNDONE. 
BY: ALGY RIGUER

A PERSON WHO HAS AN OBLIGATION NEGLECT TO DO IT, HE WILL PAY FOR HIS
FAILURE.

SAME RULE IS OBSERVED IF HE FULFILL THE OBLIGATION BUT CONTRAVENTION OF

THE AGREEMENT, BUT THE SAME IS POOR OR INADEQUATE.

It contemplates three situations:

1. The debtor fails to perform an obligation to do; or 
2. The debtor performs an obligation to do but contrary to the terms thereof; or 
3. The debtor performs an obligation to do but in a poor manner.

ARTICLE 1168. WHEN THE OBLIGATION CONSISTS IN NOT DOING, AND THE
OBLIGOR DOES WHAT HAS BEEN FORBIDDEN HIM, IT SHALL ALSO BE UNDONE
AT HIS EXPENSE. 
BY: ROSE ANN VILLANUEVA

The duty of the obligor is to abstain from doing. The very obligation is fulfilled in not doing
what is forbidden.

Example:

Kristia bought a land from Bryan, it is stipulated in the contract that Bryan will not build a
fence on a certain portion of his land adjoining that sold to Kristia. If Bryan constructs a
fence in violation of the agreement, Kristia can bring an action to have the fence removed
at the expense of Bryan.

Article 1169. Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment of
their obligation.

However, the demand by the creditor shall not be necessary in order that delay
may exist:

(1) When the obligation or the law expressly so declare; or

 (2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond
his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other
begins. 

ARTICLE 1170. THOSE WHO IN THE PERFORMANCE OF THEIR OBLIGATIONS

ARE GUILTY OF FRAUD, NEGLIGENCE, OR DELAY, AND THOSE WHO IN ANY
MANNER CONTRAVENE THE TENOR THEREOF, ARE LIABLE FOR DAMAGES.
BY: JOHANNES AQUINO

Grounds for liability

1. Fraud (dolo) – There is fraud or willful violation of the obligation

2. Negligence (culpa) – Refers to negligence arising from contractual obligations, which are
not fully and faithfully complied by the obligor. This is distinguished from culpa aquiliana,
which refers to negligence independent of any contractual obligation
3. Delay (mora) – The delay must be either malicious or negligent.
4. Contravention of the tenor of the obligation – Violation of the terms and condition
stipulated in the obligation

Damages may include moral, nominal, temperate, liquidated and exemplary

Illustration:

Gloria Arrovo obliged himself to deliver to socialite Imee Narcos 20 bottles of expensive
wine. Gloria Arrovo delivered 20 bottles knowing that they contain cheaper wine. Gloria
Arrovo is guilty of fraud and is liable for damages to Imee Narcos.

If Imee Narcos bought the 20 bottles of Dom Perignon wine on the false representation of
Gloria Arrovo that the wine is that as represented by the labels, the fraud committed by
Gloria Arrovo is causal fraud. Without the fraud, Imee Narcos would not have given his
consent to the contract. He has the right to have the contract annulled or set aside on the
ground of the fraud. In the first situation, the remedy of Imee Narcos is not annulment of
the contract of sale which is not affected by the incidental fraud but to claim damages. If
the fraud employed by Gloria Arrovo to get Imee Narcos’ consent was not the principal
inducement that led Imee Narcos to enter into the contract, the fraud is also incidental
under Article 1344 and it will likewise give rise only to an action for damages.
ARTICLE 1171. RESPONSIBILITY ARISING FROM FRAUD IS DEMANDABLE IN ALL
OBLIGATIONS. ANY WAIVER OF AN ACTION FOR FUTURE FRAUD IS VOID.
BY: KRISTIA CAPIO

According to time of commission, fraud may be past or future. The fraud referred to in this article

is the fraud that refers to the fulfillment of an obligation rather than the fraud which is the origin of
the obligation.

Two different articles refer to two different frauds or dolos:

 Dolo causante or causal fraud (Article 1338) is a deception of a serious character

employed by one party and without which the other party would not have entered into a
contract.  

This is when fraud used to induce a person to agree to a contract. This kind of fraud is a ground
for annulment of the contract plus damages

Example:

There was an ad offering work to female college graduates to work as English tutors to rich Hong
Kong families but in truth that was recruitment to work in a red light district or pleasure district.

 Dolo incedente or incidental fraud (Article 1144) those which are not serious in
character and without which the other party would still have entered into the contract.

Example:

Anne enter into a contract to deliver 500 cavans of rice to Noel with a price per cavan of 1,300
pesos, Anne delivered 400 cavans but withheld the delivery of the remaining, stating that the
price went up and priced the rice to 1,600 per cavan. The fraud here is dolo incidental because it
is committed to the existing contract.

ARTICLE 1172. RESPONSIBILITY ARISING FROM NEGLIGENCE IN THE

PERFORMANCE OF EVERY KIND OF OBLIGATION IS ALSO DEMANDABLE, BUT
SUCH LIABILITY MAY BE REGULATED BY THE COURTS, ACCORDING TO THE
CIRCUMSTANCES.
BY: BRYAN GLENN FABIAÑA

Comment:

In determining the liability of a party for damages resulting from his negligence in the
fulfillment of contractual obligation, the courts have discretionary power to moderate the
liability according to the circumstances of the case.
However, this mitigation of damages is applied only to liability arising from culpa as there
is no deliberate intention to cause damage or injury as against fraud where there is a
deliberate intention to cause damage.

Illustration:

(Ex.) If a passenger was himself is negligent then the liability of the common carrier due
to negligence will be reduced.

ARTICLE 1173. THE FAULT OR NEGLIGENCE OF THE OBLIGOR CONSISTS IN THE

OMISSION OF THAT DILIGENCE WHICH IS REQUIRED BY THE NATURE OF THE
OBLIGATION AND CORRESPONDS WITH THE CIRCUMSTANCES OF THE
PERSONS, OF THE TIME AND OF THE PLACE. WHEN NEGLIGENCE SHOWS BAD
FAITH, THE PROVISIONS OF ARTICLES 1171 AND 2201, PARAGRAPH 2, SHALL
APPLY.
IF THE LAW OR CONTRACT DOES NOT STATE THE DILIGENCE WHICH IS TO BE
OBSERVED IN THE PERFORMANCE, THAT WHICH IS EXPECTED OF A GOOD
FATHER OF A FAMILY SHALL BE REQUIRED.
BY: JANINE GUMANGOL

ARTICLE 1174. EXCEPT IN CASES EXPRESSLY SPECIFIED BY THE LAW, OR

WHEN IT IS OTHERWISE DECLARED BY STIPULATION, OR WHEN THE NATURE
OF THE OBLIGATION REQUIRES THE ASSUMPTION OF RISK, NO PERSON SHALL
BE RESPONSIBLE FOR THOSE EVENTS WHICH COULD NOT BE FORESEEN, OR
WHICH, THOUGH FORESEEN, WERE INEVITABLE.
BY: ALGY RIGUER

THIS ARTICLE AS A GENERAL RULE EXCUSING THE OBLIGOR IN THE NON-

PERFORMANCE OF THE OBLIGATION IF SUCH NON-PERFORMANCE IS CAUSE BY ANY
FORTUITOUS EVENT.

Fortuitous event – is any extraordinary event which cannot be foreseen, or which,   though
foreseen is inevitable.

Classes of Fortuitous Events

As to origin of cause

1. Fortuitous event – This refers to an event which is absolutely independent of human  

intervention. It is also called an act of God.
2. Force majeure (fuerza mayor) – This refers to an event caused by the legitimate and  
illegitimate acts of persons other than the obligor. In brief, in force majeure, there is  
human intervention.

As to foresee ability
 1. Ordinary fortuitous events – These are events which ordinarily happen or which could   be
reasonably foreseen but are inevitable.
2. Extraordinary fortuitous events – Those which do not usually happen and could not   be
reasonably foreseen.

CASE DIGEST

Roman Catholic Bishop of Jaro, Plaintiff-appellee,

vs

Gregorio Dela Peña, Defendant-appellant.

G.R. No. L-6913

November 21, 1913

Moreland, J;

Facts: In 1898 Fr. De la Peña assigned as trustee of the sum of P6,641, collected by him for the
charitable purposes he deposited in his personal account P19,000 in the Hong Kong and
Shanghai Bank at Iloilo. During the war of the revolution, Father De la Peña was arrested by the
military authorities as a political prisoner. The arrest of Father De la Peña and the confiscation of
the funds in the bank were the result of the claim of the military authorities that he was an
insurgent and that the funds deposited had been collected by him is for revolutionary purposes.
The money was taken from the bank by the military authorities by virtue of such order, was
confiscated and turned over to the Government.

Issue: Whether or not Father De la Peña is liable for the loss of the funds.

Held: No, he is not liable because there is no negligent act on the part of Fr. De la Peña. It was
so happened that during that time the money was taken from him by the U.S. military forces
which is unforeseen event. Although the Civil Code states that “a person obliged to give
something is also bound to preserve it with the diligence pertaining to a good father of a family”, it
also provides, following the principle of the Roman law that “no one shall be liable for events
which could not be foreseen, or which having been foreseen were inevitable, with the exception
of the cases expressly mentioned in the law or those in which the obligation so declares.”

ARTICLE 1175. USURIOUS TRANSACTIONS SHALL BE GOVERNED BY SPECIAL

LAWS. 
BY: ROSE ANN VILLANUEVA

 Usury- is the contracting for or receiving something in excess of the amount allowed by
law for the loan or use of money, goods, chattels ( something that a person owns other
than land or buildings. e.g furniture, tools) or credits.
Usury law is now legally non-existent.

Special Laws that use to govern usury:

1. Commonwealth Act No. 399

2. Act No. 2655 as amended by Act No. 3998
3. Republic Act No. 337
4. Presidential Decree No. 116, 858 and 1684

 Loan- giving a sum of money, goods, or credit to another, with a promise to repay but not
a promised to return the same thing
 Interest- income produced by money in relation to its amount and to the time that it cannot
be utilized by its owner. Interest s may either be moratory (paid in contractual obligations
to pay a sum of money, or as the stipulated advanced determination of the damages due
to the delay in fulfillment of the obligation) or compensatory (interest on obligations which
have an extra contractual or delictual origin)

Article 1176. The receipt of the principal by the creditor without reservation with
respect to the interest, shall give rise to the presumption that said interest has
been paid.

The receipt of a later installment of a debt without reservation as to prior

installments, shall likewise raise the presumption that such installments have been
paid. 

ARTICLE 1177. THE CREDITORS, AFTER HAVING PURSUED THE PROPERTY IN

POSSESSION OF THE DEBTOR TO SATISFY THEIR CLAIMS, MAY EXERCISE ALL
THE RIGHTS AND BRING ALL THE ACTIONS OF THE LATTER FOR THE SAME
PURPOSE, SAVE THOSE WHICH ARE INHERENT IN HIS PERSON; THEY MAY
ALSO IMPUGN THE ACTS WHICH THE DEBTOR MAY HAVE DONE TO DEFRAUD
THEM. 
BY: JOHANNES AQUINO

Remedies of the creditors to satisfy their claims:

1. Pursue the property of the debtor still in his possession

2. Exercise all rights of the debtor except those that are personal to such debtor
3. File judicial actions to collect the credit including writ of attachment and execution upon all
leviable property of the debtor
4. Contest or seek the annulment of acts executed by the debtor to defraud collectors

Contracts that may be rescinded by the creditors:

1. Alienations by gratuitous title by the debtor who does not reserve enough property to
satisfy previous debts
 2. Alienations by onerous title if the debtor has been issued a writ of attachment or there is a
judgement against him

 Creditors may also petition the court to accept the inheritance of a repudiating heir

Illustration:

On the due date, Chiz Caldero could not pay Tony Thrillyanez his obligation in the
amount of P300,000.00. However, Chiz Caldero owns a car worth about P160,000.00
and Alan Peter Cayetanose is indebted to him for P40,000.00. Before the due date of the
obligation, Chiz Caldero sold his farm land worth P200,000.00 to real estate magnate
Cynthia Billiards.

Under the circumstances, the rights granted to Tony Thrillyanez under the law are as
follows:

(a) He may bring an action for the collection of the amount of P300,000.00 with the right
to damages.

(b) If, inspite of the judgment rendered, Chiz Caldero fails to pay the amount due, Tony
Thrillyanez can ask for the attachment of Chiz Caldero’s car so that the car may be sold
and payment made from the proceeds of the sale.

(c) He may ask the court to order Alan Peter Cayetanose not to pay Chiz Caldero so that
payment may be made to him (Tony Thrillyanez).

(d) He may ask the court to rescind or cancel the sale made by Chiz Caldero to Cynthia
Billiards on the ground that the transaction is fraudulent in case he cannot recover in any
other manner his credit. Note that this last remedy can be resorted to only if Tony
Thrillyanez could not collect in full his credit. He must first exhaust the properties of the
debtor or subrogate himself in the latter’s transmissible rights and actions.

ARTICLE 1178. SUBJECT TO THE LAWS, ALL RIGHTS ACQUIRED IN VIRTUE OF

AN OBLIGATION ARE TRANSMISSIBLE, IF THERE HAS BEEN NO STIPULATION
TO THE CONTRARY. 
BY: KRISTIA CAPIO

General Rule:

All rights that are acquired by virtue of an obligation are transmissible. 

Subject to such laws, all rights acquired by virtue of an obligation are transmissible. Heirs shall be
liable only to the extent of what they stand to inherit.
Transmissibility is that character whereby an act, a deed or a title whereby it passes on to one’s
heirs or assigns.

Intransmissible rights are rights that do not pass on to one’s heirs or assigns. 

Exceptions:

(1) Prohibited by law. — When prohibited by law, like the rights in partnership, agency, and
commodatum which are purely personal in character.
(a) By the contract of partnership, two or more persons bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among
themselves. (Art. 1767.)
(b) By the contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter. (Art. 1868.)
(c) By the contract of commodatum, one of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and return it.

(2) Prohibited by stipulation of parties. — When prohibited by stipulation of the parties, like the
stipulation that upon the death of the creditor, the obligation shall be extinguished or that the
creditor cannot assign his credit to another. The stipulation against transmission must not be
contrary to public policy. Such stipulation, being contrary to the general rule, should not be easily
implied, but must be clearly proved, or at the very least, clearly implied from the provisions of the
contract itself.

Appendix B
Obligations Part 2: (Nature & Effect of Obligations 1) Debtor's Obligations &
Creditor's Rights
YouTube Transcript

Hi guys and welcome to another episode of attorneys of blogger law for the everyday laymen.
Today we continue with part 2 on the law of obligations and we talked about the nature and effect
of obligations so if you like my videos and you want to see more. Please hit the subscribe button
to be notified if I when you upload ok please remember that this is only for educational purposes
and it's not a substitute for proper legal advice or for studying and understanding the law. ok
shout out to Frances Plancha and JC Elia of La Salle green hills batch 2002. Thank You JC Elia
for making the thumbnails of my videos.

ok so now we can begin. First let's just review a few basic concepts ok we have on the
one hand a personal obligation and on the other a real obligation this was discussed in my
previous video on the general principles but a personal obligation is one which either requires the
performance of an act in which case it refers to the presentation to do or let me involve the
forbidding of an app to be done in which case it is an obligation not to do. ok whereas a real
obligation involves the delivery of the thing which in which case is a procession to give. ok now
this should not be confused with personal right and a real right ok a personal right is one which
will be enforced against a definite passive subject namely the data ok real right may be enforced
even without indefinite passive subject but against the whole world.

ok so even third persons finally we have a difference between a determinate or specific

thing versus an indeterminate or generic thing a thing is said to be determinant when it is
particularly designated or physically segregated from all others of the same class. ok you can
point out to a particular well as an indeterminate or generic thing merely refers to the class or
genus to which nothing belongs you cannot point out a certain thing with particularity or
definiteness okay for instance there a lot of models of white Westinghouse refrigerators and that
refers to the class of white Westinghouse refrigerators in order to render it determinate you may
refer to it as a white Westinghouse refrigerator with model number XYZ and motor number where
T one two three four five okay so in that case you will know that you are referring specifically to
that unit and in which case it is a determinate thing okay so now we can go to the obligations of
the debtor in case the obligation of the debtor requires the livery of a determinate thing okay now
we're talking about determinate things the first obligation of the data of course is to deliver the
thing itself.

okay this is a specific performance second the debtor must preserve or take care of the
thing with that required degree of diligence okay if the part is stipulated upon a certain degree of
diligence then that must be observed otherwise if the law requires a certain degree of diligence
that will be followed in the absence of the stipulation or no flaw then the default will govern which
is ordinary diligence or the diligence of a good father of a family okay third obligation of the data
is to deliver all exceptions and accessories what's the difference between obsessions and
accessories accessions are everything are produced either naturally or artificially and they are
attached to the thing okay these can refer to natural fruits such as the apple of the tree okay
accessories on the other hand are those which are merely for the embed man use or
preservation of the thing to make it easy an earring is an accessory it's not part of your body but
you can accessorize by wearing an earring okay so now final obligation of the data in case of a
determinate thing is his liability for damages in case he breaches the obligation due to delay
fraud negligence or contravention of the tenor of the obligation I'll be discussing those later on
okay next what if the obligation of the data is to deliver a generic thing okay the obligation of the
data in this case is to deliver a thing of the quality intended by the parties in other words the
creditor cannot demand a superior thing and the debtor cannot deliver an inferior thing okay the
thing that must be delivered again must be of the quality intended taking into account the purpose
of the obligation the intent of the parties and other surrounding circumstances and the second
obligation of the debtor is to be liable for damages in case of breeds do to delay fraud negligence
or contravention of tenor of the obligation.

okay now we can move on to the rights or remedies of the creditor in case of a real
obligation meaning an obligation to give in case the thing is determinate okay the creditor has the
right to compel the debtor to make delivery or specific performance. okay plus damages in case
of breach no second that the creditor has the right to hold the data liable in case nothing is lost or
damaged due to fortuitous event in case there is delay or if the debtor has promised to deliver the
thing to two or more persons who do not have the same interests. okay why because the law
punishes the debtor for his evident bad faith why will he promise to delivery to two persons only
one can own it. Now provided the two persons do not have the same interest over the thing okay
now whether it be a determinate thing or a generic thing please remember that the creditor
acquires a personal right to the fruits of the thing from the time the delivery of the thing arises.
 okay he will have the creditor will only acquire a real right okay real right only after the
thing has been delivered to him so what does this mean delivery is the mode by which ownership
is transferred from the debtor to the creditor and ownership creates a real right which will be
enforced against the whole world in other words by virtue of delivery the creditor can now tell
anyone no any third person hey I am the owner and I can enforce my rights however what about
the fruits no if the thing itself has not yet been delivered that creditor only has a personal right
meaning it can only be enforced against a definite
passive subject who is the death or okay in other words the personal right of the creditor is to
compel the debtor to deliver the fruits and the thing to him okay in other words since ownership it
has not yet been transferred to the creditor he cannot enforce his right to
the fruits against the whole world again because he doesn't have ownership over the thing or the
fruits yet as endeavor therefore he cannot enforce it against the whole world okay so how do we
know what is the time of delivery because time of delivery is the reckoning point why we we know
that the personal right to the fruits arises right the time of delivery is said either by law if the law
gives a certain date for delivery by perfection if the parties had not agreed otherwise if the
obligation is subject to a condition then upon the happening of the condition or if the obligation is
set to a period then upon expiration or arrival of the period okay so again the creditor has a
personal right to the fruits only of us of the time the delivery of the thing arises and he acquires a
real right only after the thing has been delivered to him okay now we can go to the rights of a
credit or in case of a personal obligation meaning either an obligation to do or an obligation not to
do.

okay first let's talk about the positive personal obligation meaning an obligation to do if the
debtor fails to perform obligate obligation or the death toll does the obligation in contravention of
the tenor of the obligation then the creditor may demand that the obligation be performed at the
expense of the death or okay can he can the creditor compel the debtor to actually perform the
obligation to do no why because this will go against the constitutional prohibition against
involuntary servitude in other words you cannot compel a person to perform an act so what is
your remedy your remedy is to ask that the obligation be performed by some other third person
who is willing to do it but it will be paid for at the expense of the death or okay now this case is
accepted that the scenario where the principal motive for entering the public and entering into the
obligation is the personal qualifications of the debtor so let's say the creditor asked the debtor to
make a painting because this data is a skilled painter who can only make that kind of paintings
like let's say Picasso okay now in that case since we cannot compel a third person to make an
artwork that is a Picasso level then the only remedy of the creditor in that case is an action for
damages because again first you cannot compel the data to perform an act against his will
because of the prohibition against involuntary servitude

and you cannot compel in third person because the personal qualifications only pertain to
the debt or no one else can do what the debtor is doing okay so your remedy in case of the
creditor is damages on video okay second scenario under positive obligations or obligations to do
if the obligation has been poorly done then it may be ordered to be undone at the expense of the
debtor okay and in you know in other cases when these are not available then simply the creditor
has the right to damages okay now what about the scenario of negative personal obligations or
obligations not to do okay in other words the debt or performs an act which has been forbidden
do not do this no then simply the Act will be undone plus the creditor has a right to claim
damages okay this these rules will not apply of course if the effects of the forbidden are definite
and cannot be undone so the remedy of the creditor in this case is to simply ask for hwijae's
another scenario when this system the rule is not available is when it is physically or legally
impossible to undo the apps which have been performed again the remedy of the credit or in this
case is one for damages