CHAPTER 2 Arts. 1163 1178

STUDY GUIDE: Arts.
1163-1178 (Nature and Effect of Obligations) Page 1 of 70
CHAPTER 2
Nature and Effect of Obligations
(Arts. 1163-1178)
ART. 1163. Every person obliged to give something is

also obliged to take care of it with the proper diligence of a
good father of a family, unless the law or the stipulation of
the parties requires another standard of care. (1094a)
ART. 1164. The creditor has a right to the fruits of the

thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the
same has been delivered to him. (1095)
ART. 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
STUDY GUIDE: Arts. 1163-1178 (Nature and Effect of Obligations) Page 2 of 70
same interest, he shall be responsible for any fortuitous

event until he has effected the delivery. (1096)
Art. 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. (1097a)
Art. 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. (1098)
Art. 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. (1099a)
Art. 1169. Those obliged to deliver or to do something

incur in delay from the time the obligee judicially or extra-
judicially demands from them the 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. (1100a)
Art. 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. (1101)
Art. 1171. Responsibility arising from fraud is

demandable in all obligations. Any waiver of an action for
future fraud is void. (1102a)
Art. 1172. Responsibility arising from negligence in the

performance of every kind of obligation is also
demandable, but such liability may be regulated by the
courts, according to the circumstances. (1103)
Art. 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.
(1104a)
Art. 1174. Except in cases expressly specified by the

law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events
which could not be foreseen, or which, though foreseen,
were inevitable. (1105a)
Art. 1175. Usurious transactions shall be governed by

special laws. (n)
Art. 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.
(1110a)
Art. 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. (1111)
Art. 1178. Subject to the laws, all rights acquired in

virtue of an obligation are transmissible, if there has been
no stipulation to the contrary. (1112)
 How do you distinguish between a specific real

obligation and a generic real obligation?
 A specific real obligation is an obligation to

deliver (to give) a specific or determinate thing; on the
other hand, a generic real obligation is an obligation to
deliver (to give) a generic or indeterminate thing.
 How do you distinguish between a specific or

determinate thing, and a generic or indeterminate thing?
Specific or determinate thing Generic or indeterminate thing
A thing is generic if it refers

A thing is specific if it is
only to a class or genus to
particularly designated or
which it pertains and
physically segregated from
cannot be pointed out with
others of the same class.
particularity.
No other thing of its kind Other things of the same

exists; hence, it is not kind exist; hence, it is
replaceable if lost. replaceable if lost.
 Examples:
the dress I wore on my a blue floral Kamiseta
18th birthday dress
my 5-year-old German a 5-year-old German

shepherd shepherd
the blue car with plate no. a 2020 silver Toyota

ABC-1234 Fortuner with leather seats
the P1,000 bill Alex paid for

the amount of P1,000
the shabu (marked money)
a Filipino girl with blond

My brother’s girlfriend
hair
 What are the duties of the debtor in a specific real

obligation?
(A) To preserve the thing
 The debtor in a specific real obligation has the

accessory duty to preserve the thing until its delivery to
the creditor. This is called an accessory duty because the
debtor has to preserve the thing even if the duty has not
been specifically agreed upon by the parties in their
contract.
 The standard of care required to preserve the

thing. – Under 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.”
 What does “proper diligence of a good father of

a family” mean?
 This standard of care required of the debtor

has been equated with ordinary care, or that diligence
which a reasonably prudent person would exercise over
his own property.
 Example 1: D promised to deliver his goat to C on 15

January 2021. From the time the promise is made, up to
the time that the goat is delivered to C, D has to feed the
goat and provide it with adequate shelter to protect it
from harm. D has to take care of the goat in the same
manner as he would have taken care of it even if he did
not promise to deliver it to C.
 If the debtor fails to exercise ordinary diligence

over the thing, and such failure results in the loss and/or
non-delivery of the thing promised, then he will be guilty
of fault or negligence under Article 1170, and may be held
liable by the creditor for damages.
 In Example 1 above, if the goat dies before 15

January 2021 due to severe dehydration, because it was
not given a drink by D or his caretaker for one whole week,
C can hold D liable for damages.
 Example 2: In Example 1 above, let us assume that D’s

goat is worth P25,000.00. After D promised to deliver the
goat to C, C contacted E who agreed to buy the goat for
P30,000.00.
On 15 January 2021, C demanded for the delivery of

the goat. D, however, could not make the delivery
because the goat died on 12 January 2021 due to severe
dehydration caused by D’s failure to give the goat a drink
for one whole week. In this case, since the loss of the
goat was due to D’s fault or negligence, C can hold D liable
for the value of the goat in the amount of P25,000.00, plus
consequential damages in the amount of P5,000.00, which
is what C should have profited from the sale of the goat to
E if D had effected the delivery.
 What is the rationale for this accessory duty?
Without the accessory duty to preserve the thing

to be delivered, the debtor can conveniently and carelessly
lose or damage the specific thing before it is delivered to
the creditor. And even if the loss or damage is due to the
debtor’s fault or negligence, he would have no liability for
damages to the creditor. This would render useless the
nature of an obligation, the performance of which is
considered a juridical necessity on the part of the debtor.
In other words, the debtor will be given a choice whether
to perform the prestation or not, and to assume no liability
in case he chooses not to perform the prestation.
Note, however, that the duty to preserve the thing

is applicable only in a specific real obligation. This is
because once a specific thing is lost, it can no longer be
replaced. The duty does not apply in a generic real
obligation because a generic thing, even if lost, is
replaceable, and delivery can still be made by the debtor.
(B) To deliver the fruits of the thing
 What are the different kinds of fruits?

(Art. 442, NCC)
(1) Natural fruits are the spontaneous products of the soil,

and the young and other products of animals.
 Examples:
 trees and plants that grow naturally from the
soil without the intervention of human labor
 the kid delivered by a goat
 the milk produced by a cow
(2) Industrial fruits are those produced by land of any kind

through cultivation or labor.
 Examples:
 lanzones and rambutan trees planted on land
 any other products of agriculture or farming
(3) Civil fruits are those which are the result of a juridical
relation.
 Examples:
 rents of buildings  interest on a loan
 the price of leases of lands and other properties
 When is the creditor entitled to the fruits of the thing?
Under Article 1164, “the creditor has a right to the

fruits of the thing from the time the obligation to deliver it
arises.” In other words, the day when the debtor is
obliged to deliver the thing is the very same day that the
creditor is entitled to its fruits. But when is the debtor
obliged to deliver the thing?
 If the obligation does not specify a delivery

date, it means that the obligation is immediately
demandable. Hence, the creditor is entitled to the fruits of
the thing from the time of the perfection of the contract.
 Example 3: D has a land planted with 250 mango trees

due for harvest on 16 January 2021. On 15 January 2021,
D promised to deliver his land to C without specifying the
date when delivery is to be made.
Q: Who has the right to harvest the mango fruits?
A: In this case, since there is no specific delivery date in

the obligation, C can immediately demand the delivery of
the land at the time that the promise is made. In addition,
C will have the right to harvest all the fruits from the
mango plantations existing at the time that D is obliged to

deliver the land.
 If the obligation specifies a delivery date, the

creditor is entitled to the fruits of the thing from the time
of the delivery date, because it is only on the specified
delivery date that the debtor will be obliged to deliver the
thing.
 Example 4: On 5 January 2021, D promised to deliver

his pig to C. It was also agreed by the parties that delivery
was to be made on 25 January 2021. On 10 January 2021,
a few days after the parties perfected their contract, the
pig gave birth to 3 piglets.
Q: Who has the right to the piglets?
A: In this case, since there is a specified delivery date, C

will be entitled to the fruits of thing only from the time of
the delivery date. In other words, all fruits from the thing
before delivery date will still pertain to D. Hence, although
the piglets were born after perfection of the parties’
contract on 10 January 2021, they still pertain to D
because the birth of the piglets happened before 25
January 2021 – the day D is obliged to deliver the pig to C.
Q2: What if the piglets were born on 26 January 2021, but

D made actual delivery of the pig only on 28 January 2021,
who has now the right to the piglets?
A: If the piglets were born after the specified date of

delivery in the contract, it is now C who has the right to
the piglets. Remember that Article 1164 states that the
creditor has the right to the fruits from the time the
obligation of the debtor to deliver the thing arises, and
NOT from the moment of actual delivery of the thing.
Hence, even if the piglets were born before actual delivery
of the pig, the piglets will now pertain to C because they
were born after the specified delivery date in the contract.
 If the performance of the obligation is subject

to a condition, the creditor has a right to the fruits of the
thing only from the time the condition is fulfilled. This is
because it is only at such time that the obligation of the
debtor to deliver the thing arises.
 Example 5: On 1 December 2020, D promised to give

his apartment to C if C will pass the 2020 Bar Exams. The
apartment is earning P100,000.00 every month in the form
of rentals collected by D from its four (4) tenants. On 15
April 2021, the results were released and C passed.
Q: From what time will C be entitled to collect the rentals

from the apartment?
A: In this case, the obligation of D to deliver the apartment

arose only on 15 April 2021. It is only on this date that C
will also be entitled to the rentals (civil fruits) of the
apartment. Hence, all rentals collected from 1 December
2020 (when the contract was perfected) until 14 April 2021
(before the fulfilment of the condition for D’s obligation)
still belongs to D.
 Question: In a contract of sale, when is the

buyer entitled to the fruits of the thing?
Answer: All the fruits shall pertain to the vendee or buyer

from the day on which the contract was perfected.
(Art. 1537, par. 2, New Civil Code)
 Example: On 15 January 2021, S obliged himself in

writing to sell to B his German shepherd for P45,000.00.
The parties agreed that delivery of the dog and payment of
its purchase price will be made on 15 April 2021. On 14
February 2021, the German shepherd gave birth to 4
puppies.
Q: What will be the obligation of S to B on 15 April 2021?

A: Since the buyer, in a contract of sale, is entitled to the

fruits from the time of the perfection of the contract, S will
be obliged to deliver to B on 15 April 2021 both the
German shepherd and its 4 puppies.
 In any event, the time when the creditor is

entitled to the fruits of the thing may be specifically
agreed upon by the parties in their contract.
 Example: On 15 January 2021, D obliged himself to

deliver to C his Persian cat worth P50,000.00 on 15 April
2021. The parties also agreed that should the cat give
birth at any time after 14 February 2021, C will already be
entitled to the kittens. On 15 March 2021, the Persian cat
gave birth to 6 kittens.
Q: Under the facts, will D be obliged to deliver to C the

kittens together with the cat on 15 April 2021?
A: YES. While as a general rule the creditor is entitled to

the fruits only from the time the obligation to deliver the
thing arises, if the parties agree otherwise in their
contract, the terms of their agreement will control. Article
1164 is meant to be impliedly incorporated in every
contract only if there is no stipulation with regard to the
creditor’s entitlement to the fruits.
 What is the nature of the creditor’s right?
 Before the delivery of the thing, under the first

sentence of Article 1164, the only right that the creditor
has is to demand the delivery of the thing and its fruits.
This right can be enforced only against D (a definite
passive subject). This right is referred to as a personal
right.
 After the delivery of the thing and its fruits to the

creditor, the creditor now acquires a real right over the
thing (2nd sentence of Article 1164). A real right is the
right or power of a person over a specific thing (e.g.,
ownership, possession or mortgage) without a definite
passive subject against whom the right may be personally
enforced just like in a personal right. A real right is
enforceable against the whole world.
 Example 6: Examine again Example 4 above. If the

piglets were born on 10 January 2021, and D made the
delivery on 25 January 2021, C acquires a real right over
the pig and the piglets only from 25 January 2021.
Let us assume, however, that instead of delivering

the pig to C, D delivers the pig and the piglets to E on 25
January 2021. It is E who will acquire ownership over the
pig and the piglets – a real right over the thing and its
fruits. In such a case, C will have no right of action against
E because all that C possesses before actual delivery is a
personal right against D – that is, to demand delivery of
the pig and its piglets. But since delivery is no longer
possible because the pig had already been delivered to E,
C can now only claim damages from D for non-
performance of the obligation under Article 1170.
(C) To deliver the accessions and accessories of the

thing
 Under 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.” This rule is based on the principle
of law that “the accessory follows the principal.” The
parties, however, may stipulate that the accessions and
accessories will not be included when the thing is
delivered.
 What are accessions of a thing?

Accessions include the fruits of a thing, or additions to or
improvements upon a thing.
 Examples:
 the air-conditioner in a car
 plantation of grapes on a farmland
 stipulated interest on debtor’s indebtedness
 What are accessories of a thing?
Accessories include anything that is attached to or

included with the principal thing for its embellishment,
usefulness, or completion.
 Examples:
 the tires of a car
 the doors and windows of a house
 the bracelet of a wrist watch
(D) To deliver the thing itself
 The debtor cannot deliver any other thing (even

if superior in quality) to replace the thing promised
without the consent of the creditor.
 Example: On 15 March 2021, D obliged himself to

deliver to C his Harley Davidson motorcycle worth
P900,000.00 on 30 April 2021. On 30 April 2021, D cannot
compel C to accept instead his BMW car worth P2.8 million

if C insists on D’s delivery of the Harley Davison
motorcycle.
 Duties of the debtor in a generic real obligation. – In

a generic real obligation, the debtor is obliged to deliver to
the creditor a thing of the quality intended by the parties
in their contract. Under Article 1246, when the obligation
consists in the delivery of a generic thing, the creditor
cannot demand a thing of superior quality. Neither can
the debtor deliver to the creditor a thing of inferior
quality.
 Example 7: D promised to deliver a 2020 Toyota

Fortuner car to C. On delivery date, D cannot compel C
to accept delivery of a 2019 Toyota Fortuner. Neither
can C compel D to deliver a 2021 Toyota Fortuner.
 What are the remedies of the creditor in a real

obligation?
 Specific real obligation  If the debtor’s

obligation is to deliver a specific thing, and the debtor fails
to deliver on the agreed delivery date, the creditor is given
the right:
(a) to compel the debtor to personally make the

delivery (specific performance); and/or
(b) to demand the payment of damages from the
debtor. (See Art. 1165, par. 1 in relation to Art. 1170)
 Example 8: D promised to deliver his 2019 white

Toyota Camry car with plate number ABC-123 to C on 15
January 2021. C’s daughter had decided to use the car
for her wedding on 18 January 2021. D, however, failed
to deliver the car on 15 January. Because of D’s failure
to deliver the car as agreed upon, C was forced to
contract the services of a car rental company for which
he paid the amount of P20,000.00.
Q: What is the remedy of C in this case?
A: On due date, C is given the right to compel D to make

the delivery because the car is in D’s possession; hence,
its performance cannot be substituted by another.

(Substitute performance is not a proper remedy in a
specific real obligation.)
Thereafter, since a case for specific performance will no

longer prove useful after the wedding date because
there is no more use for the car promised to be
delivered for the event, C can file a case in court against
D for damages for breach of contract. The court will
then order D to pay C damages amounting to
P20,000.00 as car rental payments which C would not
have incurred had D made the delivery of the car on
time. D can also be ordered by the Court to indemnify C
for other consequential damages arising from his breach
of the contract.
 Generic real obligation  If the debtor’s

obligation is to deliver a generic thing, and the debtor fails
to deliver on the agreed delivery date, the creditor is given
the right:
(a) to ask that the obligation be complied with at the

expense of the debtor (also called substitute
performance); and
(b) to demand the payment of damages from the

debtor. (See Art. 1165, par. 2 in relation to Art. 1170)
 Example 9: D promised to deliver 300 kilos of

Dinorado rice to C before 7:00 a.m. on 15 January 2021
for use in the restaurant owned by C. On the other
hand, C promised to pay P50.00 per kilo for the rice, or a
total consideration of P15,000.00. On 15 January, D did
not make good his promise.
Q: What is the remedy of C?
A: C can avail of the remedy of substitute performance.

He can ask another rice dealer to make the delivery of
the 300 kilos of Dinorado rice for his restaurant’s needs.
Since the obligation is generic, C can get the 300 kilos of
rice from another person because they can be
substituted with another of the same kind. If C is able to
obtain delivery of the rice needed but for the price of
P60.00 per kilo, then D can be made liable for the
difference. Thus, C can ask the court to hold D liable in
damages for the amount of P3,000 (300 kilos X P10.00).
 What are the remedies of the creditor in a positive

personal obligation? (Article 1167)
 If the debtor fails or refuses to perform his

obligation to do, the creditor cannot compel the debtor to
perform the obligation because this would violate the
debtor’s constitutional right against involuntary servitude
(Art. III, Sec. 18[2], Philippine Constitution). The creditor
can, however, exercise the following remedies:
(a) The creditor may perform the obligation himself at

the expense of the debtor (Art. 1167, par. 1); or
(b) The creditor may ask another person to perform

the obligation at the debtor’s expense (Art. 1167, par. 1);
and
(c) The creditor can recover damages from the debtor

in either case (Art. 1170).
 Example 10: C brought his television set for repair to

the shop of D. D promised to complete the repair in 1
week for the price of P1,000.00. After 1 week, D returned
the television set to C unrepaired.
In this case, C can have the television set repaired by

another repair service center, and he can charge the cost
of the repairs to D. Hence, if the other repair service
center charges P1,500.00 for the repair, C can charge the
P500.00 to D. In addition, C can demand the payment of
consequential damages from D, or damages resulting from
the non-repair of the TV set on time as agreed upon.
 The same remedies above is available to the

creditor if the debtor performs the obligation but does it in
contravention of the tenor of the obligation, i.e., not in
accordance with the stipulations agreed upon with the
creditor.
 Example 11: D promised to do the printing job on 200

pieces of shirts for the sportsfest celebration in the office
of C. It was agreed upon by the parties that the color of
the office logo on the shirt would be neon orange. When
the job was done, C found that the color of the office logo
printed on the shirt was dark red orange.
In this case, C can demand that D redo the printing at D’s

expense. If D refuses, C can hire another printing company
to do a reprinting with the specified color, and charge the
cost for reprinting to D. C can also demand the payment

of consequential damages from D.
 If the debtor performs the obligation but does

it poorly, the creditor has the following remedies:
(a) The creditor can ask that what has been poorly
done be undone at the debtor’s expense (Art. 1167, par.
2); and
(b) The creditor can demand for the payment of

damages from the debtor (Art. 1170).
 Example 12: D obliged himself to assemble the wooden

sliding doors in the house of C. After the work was
finished, C found that the doors could not be opened with
ease and needed two persons to move the doors from side
to side.
In this case, C can demand that D fix the jammed

mechanisms in the sliding doors to make them trouble-
free. If D refuses to make the repair, C can ask another
contractor to mend the jammed doors, and charge the
cost of the repairs to D. C can also demand the payment
of damages from D.
 What are the remedies of the creditor in a negative

personal obligation? (Article 1168)
 In a negative personal obligation, if the debtor

does what has been forbidden him, the creditor can avail
of the following remedies:
(a) The creditor can demand that the debtor undo the
forbidden act at the debtor’s expense; or
(b) The creditor can ask another person to undo the

forbidden act and charge the cost to the debtor; and
(c) The creditor can demand the payment of damages

from the debtor. (Art. 1170)
 Example 13: D and C entered into a lease contract for

a term of two (2) years covering a house and lot owned
by C. D also promised not to build any structure in the
backyard of the house and devote it only to vegetable
farming. One year after the perfection of the contract,
D constructed a concrete pigpen with an assessed value
of P60,000.00 in the backyard of the property.
In this case, C can demand that D demolish the pigpen

immediately at D’s expense. If D refuses to do so, C can
ask another person to demolish the pigpen and charge
the cost therefor to D. In any event, C can demand the

payment of damages from D for violation of the terms of
their agreement.
 How do you distinguish between ordinary delay and

legal delay? (Art. 1169)
 Ordinary delay is simply the failure of the debtor

to perform the obligation on time, or on the day
designated for the performance of the obligation.
 Legal delay (default or mora) is the debtor’s

failure to perform the obligation on time, and after the
creditor has demanded from the debtor, either judicially
or extrajudicially, the performance of the obligation (Art.
1169, par. 1). Judicial demand is made by the creditor
when he files a complaint in court against the debtor
demanding for the performance of the obligation. On the
other hand, extrajudicial demand is made when the
creditor demands, either orally or in writing, from the
debtor the performance of the obligation but outside of
the court.
 Remember that it is only when the debtor incurs

legal delay that he will be liable for damages to the
creditor under Article 1170.
 What are the kinds of delay or default?
(a) Mora solvendi – default on the part of the debtor

to fulfill his obligation;
(b) Mora accipiendi – default on the part of the

creditor to accept the performance of the obligation;
(c) Compensatio morae – default of both parties in

reciprocal obligations; here, there is no actionable default
on the part of both parties because the default of the
debtor neutralizes the default of the creditor.
 What are the requisites of mora solvendi?
In order that the debtor may be held liable for

damages under Article 1170 on the ground of mora or
legal delay, the following requisites must be present:
(a) The debtor fails to perform his obligation on the

date agreed upon;
(b) The creditor makes a judicial or extrajudicial

demand upon the debtor to comply with his obligation;
and
(c) The debtor fails to comply with his obligation

despite the demand already made by the creditor.
 Example 14: On 15 October 2019, D borrowed

P100,000.00 from C due for payment on 15 October
2020. In the promissory note signed by D, he also
obliged himself to pay C 2% interest (P2,000.00) per
month for late payment. On 15 October 2020, D did not
pay his obligation. On 15 January 2021, C sent D a
demand letter asking D to pay his P100,000.00 debt.
Q: As of what date is D considered in legal delay? When

will you start computing the stipulated penalty interest
of 2% per month?
A: Even if D failed to perform his obligation on 15

October 2020, he is only considered in ordinary delay at
that point. It is only after C makes a demand for the
performance of D’s obligation, and D does not comply,
that D will be considered in legal delay. In this case, C
made an extrajudicial demand for the payment of the
debt on D only on 15 January 2021. Hence, the penalty
interest of P5,000.00 per month will be computed

starting 15 January 2021, and not from 15 October 2020.
Hence, if D pays his obligation on 15 February 2021, he
will be obliged to pay C penalty interest equivalent only
to 1 month, or in the amount of P2,000.00.
 When is demand by the creditor not required to

put the debtor in delay? In other words, what are the
instances when the debtor can already be considered in
default after non-performance of the obligation, even if
the creditor did not make a judicial or extra-judicial
demand for the performance of the obligation?
(a) When the law specifically provides that the debtor

will be guilty of legal delay even without demand from the
creditor. (Art. 1169, par. 2[1])
 Example 15: Our internal revenue laws provide that an

individual taxpayer who fails to pay his income tax on or
before April 15 of every tax year is already considered in
default and liable for interest and penalties even without
demand from the government.
(b) When the obligation expressly provides that the

debtor will be considered in legal delay if the debtor fails
to perform the obligation on maturity date of the
obligation, even if the creditor does not make a demand
for its performance. (Art. 1169, par. 2[1])
 Example 16: In Example 14 above, let us assume that D

and C also agreed that if D fails to pay his P100,000.00 loan
to C on 15 October 2020, D will already be considered in
default, and will be liable for the 2% per month penalty
interest “even without need of any demand from C.” In
such case, if D tenders payment to C only on 15 January
2021, D will already be liable to pay three months penalty
interest in the amount of P6,000.00 even if C did not
demand for the payment of the obligation on 15 October
2020.
(c) When the fixing of the time when the obligation is

to be performed was the primary reason why the parties
entered into the contract. (Art. 1169, par. 2[2])
 Example 17: D agreed to deliver to C 250 pieces of pink

balloons with the inscription, “Happy 80th Birthday, Mom!
15 December 2020(.)”, to be used for the birthday
celebration in the residence of C’s mother on 15 December
2020 at 7:00 o’clock in the evening. Even if C does not

demand for the delivery of the balloons, if D fails to deliver
on the date designated in the contract, D will be liable for
legal delay under the first paragraph of Article 1169, and
will be liable for damages under Article 1170. Here, time is
of the essence in the contract because delivery of the
balloons on a date other than the party date will render
the delivery useless.
(d) When demand by the creditor for the performance

of the obligation would be useless. (Art. 1169, par. 2[3])
 Example 18: D promised to deliver her emerald

necklace to C on 30 January 2021. On 25 January 2021, D
sold the same necklace to F for P300,000.00. In this case,
D will be considered in default and liable for damages if
she fails to deliver the necklace on 30 January 2021 even
without need of a demand from C. This is because a
demand by C will be useless considering that even if C
made the demand, D would no longer be able to perform
her obligation because she had already previously sold the
necklace to F even before the maturity date of the
obligation.
(e) When there is performance by one of the parties in

a reciprocal obligation. (Art. 1169, par. 3)
 Reciprocal obligations are obligations arising out

of the same cause, and are to be fulfilled at the same time
by the parties to the obligation.
 Neither party incurs in delay if the other does

not comply or is not ready to comply in a proper manner
with his obligation. However, the moment one of the
parties in a reciprocal obligation performs his obligation,
the other party is already considered in default.
(Art. 1169, last par.)
 Example 19: On 15 January 2021, S sold his BMW car to

B for P5.5M. No date was set by the parties for the
performance of their respective obligations under their
contract of sale. In this case, it is understood that both
parties must perform their obligations at the same time.
Hence, S cannot be compelled to deliver the car if B does
not pay the P5.5M. On the other hand, B cannot be
compelled to pay the purchase price if S does not deliver
the car. However, once S delivers the car, B will be
considered in default or mora if he does not pay the
purchase price even if S does not demand for its payment.
Assume that in this case, delivery of the car and payment

of the purchase price is set by the parties on 25 January
2021. On 20 January 2021, if S delivers the car to B and B
is not as yet able to pay the P5.5M on the same date, B will
not be considered in default yet since the agreed date for
payment of the purchase price is still on 25 January 2021.
 Basis for liability for damages. – What are the

grounds for which the debtor may be held liable for the
payment of damages by the injured party under Article
1170?
 Fraud (deceit or dolo)
 In fraud there is bad faith or malicious intention

on the part of the debtor. It is the deliberate or
intentional evasion by the debtor of the normal fulfilment
of his obligation.
 How do you distinguish between the effects of

fraud employed at the time of the perfection of the
contract, and fraud employed at the time of the
performance of an obligation arising from a contract?
(a) Fraud employed at the time of the perfection of

the contract (causal fraud or dolo causante) by the guilty
party will make the consent of the innocent party to the
contract defective. Since the consent of one of the parties
to the contract is defective, it becomes voidable. (Art.
1390, No. 2) The remedy, therefore, of the innocent party
in this kind of fraud is to file an action for the annulment of
the contract so that the contract will be declared no longer
effective by the court.
 Example 20: Jojo offered to sell to Cathy a Rolex wrist

watch for P250,000.00. Jojo represented to Cathy that the
Rolex was genuine. On the basis of that representation,
Cathy bought the watch and paid the purchase price in
cash. A week after the sale, Cathy found out that the
watch was not genuine but was merely an imitation.
Here, Jojo employed the fraud in order to obtain the

consent of Cathy to the contract of sale. In other words,
had Cathy known that the Rolex was a fake, she would not
have bought and paid for the watch. The remedy of Cathy
here is to file an action for the annulment of the contract
of sale on the ground of fraud under Article 1390 (2).
(b) Fraud employed at the time of the performance of

the obligation. – The employment of this kind of fraud
assumes the existence of a previously valid contract. In
other words, the debtor and the creditor first enter into a
valid contract, one which possesses no defect whatsoever.
The fraud is employed by the debtor ONLY at the time of
the performance of the obligation under the contract. This
is the kind of fraud referred to under Article 1170. The
remedy of the creditor is not to have his contract with the
debtor annulled, but to ask for damages for fraud.
 Example 21: In Example 20 above, let us assume that

what Jojo offered for sale to Cathy was really a genuine
Rolex unit. Cathy, who was also an expert on watches,
examined the watch and found it to be genuine. Cathy
then buys and pays for the watch. However, on delivery
date, Jojo substitutes the watch with an imitation which is
what he delivers to Cathy.
Here, the contract of sale between Jojo and Cathy was

perfected because the consent of Cathy was not defective
at the time of its perfection. The fraud was employed by
Jojo at the time of the performance of the obligation
(stage of consummation of the contract) when he
delivered the watch to Cathy. The remedy of Cathy then is

to claim for damages from Jojo under Article 1170.
NOTE: Review the stages in the life of a contract which

we have previously studied in INTRO.
 Future fraud. – Under Article 1171, any waiver of an

action for future fraud is void. In other words, any
stipulation between the parties exempting the debtor
from liability for whatever fraud he may commit in the
future under the contract is void and of no effect for being
contrary to law and public policy.
 Example 22: D agreed to deliver to C 150 bottles of

DKNY women’s perfume. It was also agreed by the parties
that C will not hold D liable for damages under the
contract should D later on commit fraud in the
performance of his obligation. On delivery date, D
delivered the 150 bottles of perfume to C, but half of each
of the bottles were replaced with water.
In this case, D cannot evade the payment of damages by

relying on the above waiver made by C in their contract.
The waiver for future fraud made by C is void and does not
bind C. Hence, C can still demand from D the payment of
damages grounded on D’s fraud in the performance of his

obligation.
 Past fraud. – Any waiver of an action for fraud

already committed is, however, valid and will simply be
considered as an act of generosity on the part of the
creditor who is the victim of the fraud.
 Example 23: D agreed to deliver a 21-K white gold

bracelet to C for P250,000.00. On due date, D delivered
only a 14-K white gold bracelet and received the
P250,000.00 from C. When C discovered about the fraud,
he threatened to sue D for damages. D begged C not to
pursue with the suit and promised that he would just
replace the bracelet. C, out of compassion, agreed not to
file a case against D.
Here, C made a waiver of his right to hold D liable for

damages for fraud already committed by D. This waiver of
an action for past fraud is valid.
 Negligence (culpa)
 What is negligence? – Under 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
person, of the time and of the place. It is the failure to
observe, for the protection or interest of another person,
that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such person suffers
injury.1
 Factors to consider in assessing negligence. – As

a general rule, the party alleging negligence has the duty
to prove the existence of negligence by convincing
evidence. Under Article 1173, the following factors are
considered in determining whether the debtor is negligent
or not:
(a) Nature of the obligation – Example: The debtor’s

obligation is to deliver perishable goods (e.g., fresh
seafood and dressed chicken). The nature of his obligation
requires that the debtor must store the goods in adequate
1
Dela Cruz vs. Octaviano, G.R. No. 219649, 26 July 2017.
temperature to preserve the freshness of the goods. If the

debtor fails in this duty resulting in the spoilage of the
goods, he will be considered guilty of negligence.
(b) Circumstances of the person – Example: A 20-year-

old and healthy woman hired to baby-sit must not sleep
while on duty since the circumstances of her person were
considered when she was taken for the job; otherwise, she
will be negligent.
(c) Circumstances of time – Example: A driver who

fails to turn on his headlights while driving during the day
is not guilty of negligence. But a driver who fails to turn on
his headlights at night is considered guilty of negligence if
an accident occurs because of that.
(d) Circumstances of the place – Example: A driver

who drives at 80 kilometers per hour in the North Luzon
Express Way is not guilty of negligence because his speed
is allowed in the highway. However, if a driver drives at 50
kilometers per hour in a school zone and runs over a child,
he will be considered negligent taking into consideration
the circumstances of the place which require him to drive
at a restricted speed.
 What are the kinds of negligence according to

the source of the obligation?
(a) Contractual negligence (culpa contractual) – This is

the negligence committed by the debtor in the
performance of an obligation under a contract. This kind
of negligence is not a source of an obligation under Article
1157. The negligence here is merely incidental in the
performance of an obligation already existing because of a
contract between the parties. In other words, it merely
makes the debtor liable for damages under Articles 1170
and 1172 because of his negligence in the fulfilment of an
obligation already existing because of a contract between
the parties.
The defense of a good father of a family in the selection

and supervision of employees is not a defense although it
may mitigate the employer’s liability. What is followed
here is the “master-servant rule” or “respondeat superior”
or “command responsibility”.2
(b) Civil negligence (culpa aquiliana or tort) – This is

the negligence committed by the debtor without criminal
2
Saludaga vs. FEU, G.R. No. 179337, 30 April 2008.
intent and independent of a pre-existing contract between

the debtor and the creditor. This kind of negligence is
itself the source of an obligation under Articles 1157 and
1162, also known as quasi-delict. Here, the “master-
servant” rule does not apply, i.e., the negligence of the
servant is not necessarily the negligence of the master.
Hence, the employer may raise the defense of diligence of
a good father of a family in the selection and supervision
of his employees to escape liability.
(c) Criminal negligence (culpa criminal) – This is

negligence that results in the commission of a crime.
Defense of a good father of a family in the selection and
supervision of employees is not a defense because the
employee’s guilt is automatically the employer’s civil guilt
if the former is insolvent.
 Example 24: Mang Canor, a taxi driver was driving

beyond the speed limit along a school zone. It was too late
when he caught sight of a sixth grader, Paula, who was
crossing the pedestrian lane. Paula was sideswiped by the
taxi. While trying to avoid Paula, the taxi slammed to a
nearby acacia. As a result, Mang Canor’s passenger, Benjo,
sustained injuries.
Breakdown of Facts:
1. Mang Canor is definitely guilty of negligence for

driving beyond the speed limit specified by law in a school
zone.
2. As a result of his negligence, Paula (a pedestrian)

and Benjo (the taxicab’s passenger) sustain injuries.
Issues:
1. Who is liable for damages for the injuries sustained

by Paula?
2. Who is liable for damages for the injuries sustained

by Benjo?
Resolution:
1. There is no pre-existing contractual relation

between Paula and the taxi driver or the owner of the
taxicab company. Hence, the negligence of the driver
gives rise to culpa aquiliana. This will be the source of the
liability for damages of the driver and operator to Paula.
2. After Benjo boarded the taxi, a contract of carriage

was already perfected between Benjo (passenger) and the
owner of the taxicab company. Under this contract, the
taxicab company obliges itself to bring the passenger

safely to his destination. In this case, the taxicab company
is guilty of contravention or breach of its contract of
carriage with Benjo because of the negligence of its
authorized driver, Mang Canor. Hence, Benjo can file an
action for damages for contractual negligence against the
taxicab company for the injuries sustained by him arising
from the negligence of Mang Canor which is also
considered the negligence of the taxicab company.
3. The same negligent act of Mang Canor may also be

the basis for filing an action for damages based on criminal
negligence. This is because Mang Canor’s act of
negligently driving beyond the speed limit in a school zone
also resulted in a crime known as Reckless Imprudence
(Art. 365, Revised Penal Code). Hence, aside from the
action for civil negligence, Paula can also file an action for
criminal negligence against Mang Canor for Reckless
Imprudence Resulting in Physical Injuries. In the same
manner, Benjo the passenger can also file an action
against Mang Canor claiming for damages arising from
criminal negligence in a similar case for Reckless
Imprudence Resulting in Physical Injuries.
 Can the injured party still recover damages if

he himself is guilty of negligence?
(a) If the injured party’s own negligence was the

immediate and proximate or direct cause of his injury, he
cannot recover damages. (Art. 2179)
 Example 25: At 10:00 o’clock in the evening, Dionisio

was run over by a car that was travelling at a moderate
speed along the South Luzon Express Way (SLEX). Dionisio
suffered serious injuries and filed an action against the
owner of the car.
Question: Is the owner of the car liable for damages to

Dionisio?
Answer: In this case, Dionisio’s act of crossing the

highway in the SLEX is an act of gross negligence because
pedestrians are not allowed anywhere in the area. No
negligence can be attributed to the driver of the car who
was travelling at moderate speed, and could not have
foreseen the presence of a pedestrian in the middle of a
high road at that time of the night.
(b) If the injured party’s own negligence merely

contributed (contributory negligence) to his injury, but the
proximate cause of the injury was still the negligence of

the party causing the damage, then the injured party can
still recover damages. (Art. 2179)
 Example 26: Dina and Cesar agreed to visit a friend in

Pampanga. Cesar then invited Dina to ride in his car and
instructed her to fasten her seat belt before the trip. Dina,
however, did not comply. In the NLEX, Cesar drove the car
beyond the speed limit despite the heavy rains. The car
slipped and bumped into a ten-wheeler truck travelling on
the same lane. As a result, Dina sustained serious injuries.
In the investigation, it was found that Dina would have
sustained only minor injuries if she had only fastened her
seat belt during the trip.
Question: Can Dina still recover damages for her injuries

from Cesar?
Answer: In this case, Cesar’s act of overspeeding in the

NLEX is an act of negligence which was the proximate
cause of the injuries sustained by Dina. Hence, even if
Dina was herself negligent in not having fastened her seat
belt during the trip, this will not prevent her from
recovering damages from Cesar.
 Delay (default or mora)

(See the discussion under No.  above.)
 What is a fortuitous event? (Article 1174)
 A fortuitous event is an event which cannot be

foreseen, or, even if foreseen, is an inevitable event.
 Requisites. – To exempt the debtor from the

performance of his obligation because of a fortuitous
event, it is required that:
(a) the happening of the event must be independent

of the will of the debtor;
(b) there must be impossibility of foreseeing the event

or of avoiding it even if it was foreseen; and
(c) the happening of the event makes it impossible for

the debtor to perform his obligation in a normal manner.
 Illustrative Examples:
(a) Acts of God
 A singer fails to sing at the concert due to

typhoid fever. Illness is a fortuitous event which will
exempt the debtor from liability for damages for non-
performance of her obligation under her contract with the
producers of the concert.
 D promised to deliver his car to C on 30 April

2021. D fails to deliver the car because it sank in a flash
flood during a typhoon on 20 April 2021. D’s obligation to
C is now extinguished because the loss of the car and the
reason for its non-delivery was due to a fortuitous event.
(b) Acts of Man
 D promised to deliver his car to C on 30 April

2021. D fails to deliver the car because it was carnapped
while parked outside his home on 20 April 2021. The car
was never recovered. D’s obligation to C is now
extinguished because the loss of the car and the reason for
its non-delivery was due to a fortuitous event.
 What are the rules as to liability in case of a

fortuitous event?
 GENERAL RULE: The general rule, under Article 1174, is

that the debtor shall not be responsible for loss or damage
caused to the creditor resulting from the non-performance
of his obligation due to a fortuitous event. The effect is that
the debtor’s obligation is extinguished, meaning :
(i) The debtor is exempt from the performance of his

obligation; AND
(ii) The debtor is not liable for any damages resulting

from the non-performance of his obligation.
 EXCEPTIONS: However, the following are some

instances when the debtor may still be liable even if he is
not able to normally comply with his obligation by reason
of a fortuitous event:
(A) When expressly specified by law (Art. 1174)
 Under Article 1170, if the debtor is guilty of

fraud, negligence, or delay, or contravention of the tenor
of his obligation, he will still be liable for damages even if a
fortuitous event prevented the normal performance of his

obligation.
 Example 27: D promised to deliver his goat to C on 15

April 2021. On 17 April 2021, C demanded for the
delivery of the goat. On 18 April 2021, a landslide in the
farm of C buried the goat alive.
Question: Is the obligation of D to deliver the goat to C

now extinguished?
Answer: NO. In this case, C already made a demand on D

for delivery of the goat on 17 April 2021. When the goat
died due to a fortuitous event on on 18 April 2021, it can
be said that D was already in default. Therefore, D will still
be liable to C for the payment of damages for his failure to
deliver the goat as agreed upon even if the non-
performance was due to a fortuitous event.
 Under Article 1165, par. 3, if the debtor has

promised to deliver the same specific thing to two or more
persons who do not have the same interest over the thing,
he will still be liable for damages even if a fortuitous event
would have prevented the normal performance of the
debtor’s obligation to the creditor.
 Example 28: ln Example 27 above, let us assume that

the landslide in the farm happened on 10 April 2021,
before the delivery date set in their contract. Assume also
that in addition to C, D had earlier promised to deliver the
same goat to F on 12 April 2021.
Question: Since the goat died due to a fortuitous event on

18 April 2021, is the obligation of D to deliver the goat to C
now extinguished?
Answer: NO. In this case, even if the fortuitous event did

not happen on 10 April 2021, and the goat did not perish,
D would still be unable to deliver the goat to C because it
was already promised for delivery to F on an earlier date.
There was bad faith on the part of D for promising to
deliver the same specific thing to two different creditors.
The result is that only one of the creditors will be able to
accept delivery of the goat. Hence, the law makes the
debtor liable for damages even if it would appear that the
debtor’s non-performance was due to a fortuitous event.
 Under Article 1268, if the debtor’s obligation to

deliver a specific thing arises from his commission of a
crime, he will nonetheless be liable for damages even if
the specific thing is lost by virtue of a fortuitous event.
 Example 29: D stole the goat of C. Later, D was

convicted of the crime of theft and was ordered by the
court to return the goat to C. While on his way to the
farm of C to return the goat, the goat was run over by a
reckless driver of a ten-wheeler truck.

now extinguished?
Answer: NO. Under Article 1268, D is still liable for

damages to C. This is because the obligation of D in this
case arises from his criminal liability for the crime of theft.
(B) When it is declared by stipulation of the parties

(Art. 1174)
 The parties may stipulate in their contract that

the debtor will still be liable for damages even if his failure
to perform the obligation was due to a fortuitous event.
 Example 30: ln Example 27 above, let us assume that

C and D agreed in their contract that D will be liable for
damages even if he fails to deliver the goat due to a
fortuitous event. Also assume that the landslide in the
farm happened on 10 April 2021 before the delivery date
set in their contract.

now extinguished?
Answer: NO. In this case, even if the goat perished in a

fortuitous event, D’s obligation will not be extinguished. D
will still be liable to C for damages because it was
specifically agreed upon in their contract.
(C) When the nature of the obligation requires the

assumption of risk (Art. 1174)
 Example 31: D, a resident of Bocaue, Bulacan, is

engaged in the business of selling firecrackers. He owns a
1,200 square-meter factory-warehouse where he
manufactures and stores his stocks. On January 2, 2019,
the factory caught fire and gutted down the property of C
just beside the warehouse. C incurred damages
amounting to P450,000.00. In the investigation conducted
by the City of Bocaue, it was found that an explosion
immediately preceded the fire which was caused by
fragments of a falling meteorite from space. D seeks to
excuse himself from liability saying that there was no fault
or negligence on his part and the damage was caused by a
fortuitous event.
Question: Can D be made liable to C for damages?
Answer: YES. D would still be liable to C for damages

because D’s business of selling firecrackers involved the
assumption of risk. Therefore, D cannot exempt himself
from liability for damages by claiming that the fire which
caused damage to C’s property was due to a fortuitous
event.
(D) When the thing to be delivered is generic

(Art. 1263)
 We said that in a specific real obligation, the

debtor’s obligation is extinguished when the specific thing
subject matter of the obligation is lost due to a fortuitous
event. This is because once the specific thing agreed to be
delivered is lost, it can no longer be replaced with another
one because the debtor cannot find another thing of its
kind. However, even if the object of the obligation is a
specific thing, if the loss is due to the fault of the debtor,
the debtor’s obligation will not be completely
extinguished. While he can no longer be compelled to
deliver the specific thing because it no longer exists, the
debtor’s obligation will be converted into a monetary
obligation for the payment of damages to the creditor

arising from the debtor’s fault or negligence.
 Example 32: D promised to deliver to C a blue 2019

BMW car with plate number ABC-1234 on 15 April 2021.
On 10 April 2021, a falling meteorite from space crashed
onto the property of D and completely burned the car to
ashes.
Question 1: Is the obligation of D to deliver the car to C

now extinguished?
Answer: YES. Since the obligation is a specific real

obligation, the loss of the specific thing by virtue of a
fortuitous event completely extinguishes the debtor’s
obligation. He is then completely released from any kind
of liability to the creditor.
Question 2: What if the cause of the loss of the car was

not due to a falling meteorite? What if the car was
completely wrecked on 10 April 2021 after D drove it while
under the influence of alcohol? Will the obligation of D to
deliver the car to C be extinguished due to loss of the car
before its delivery date?
Answer: This time the answer is NO. Even if the

obligation is to deliver a specific thing which was
completely wrecked beyond repair before its agreed

delivery on 15 April 2021, the debtor D will still be liable to
C for damages for failing to exercise due diligence.
 The rule above discussed does not, however,

apply in a generic real obligation. Under Article 1263, (I)n
an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not
extinguish the obligation.” This is based on the principle
that a generic thing never perishes (genus nunquam perit).
Therefore, despite the loss of a generic thing object of the
obligation (whether due to a fortuitous event, or due to
the fault or negligence of the debtor), the debtor can still
be compelled by the creditor to deliver a thing of the same
kind. The creditor, however, cannot demand a thing of
superior quality; neither can the debtor deliver a thing of
inferior quality (Art. 1246).
 What is usury? (Article 1175)
 Usury is the contracting for or receiving

something in excess of the amount allowed by law for the
loan or forbearance of money – the taking of more interest
for the use of money than the law allows.3 Hence, a
person becomes liable if he charges more than the
prescribed lawful rates of interest under the Usury Law.
 The Usury law, however, is now legally

inexistent after Central Bank Circular No. 905 (Dec. 10,
2982, effective 1 January 1983) was issued by the Central
Bank Monetary Board repealing the maximum rates of
interest prescribed under the Usury Law. Hence, interest
can now be charged depending on the mutual agreement
of the debtor and creditor. However, if the interest rates
agreed upon are unconscionable, they shall be considered
inexistent and void from the beginning.
 Under Circular No. 799, the Monetary Board

declared that effective 1 July 2013, “the rate of interest for
the loan or forbearance of money, goods or credits and
the rate allowed in judgments, in the absence of an
3
Tolentino vs. Gonzales, 50 Phil. 573.
express agreement as to such rate of interest, shall be 6

percent per annum.”
 Note, however, that under Article 1956, in order

for the creditor to be able to recover interest on a loan or
forbearance of money, the payment of interest must be
expressly stipulated between the parties and put down in
writing.
 Example 33: D borrowed P100,000.00 from C. The

parties orally agreed that D will pay his loan one year after
plus 20% interest in the amount of P20,000.00, or a total
of P120,000.00 on maturity date.
Question: How much can C collect from D on maturity

date?
Answer: C will have the right to collect only P100,000.00 -

the principal amount of the loan. D cannot be compelled
to pay the P20,000.00 due as interest because the parties’
agreement with respect to payment of interest in this case
was not put down in writing. The agreement was merely
verbal.
Presumptions on the payment of interest and prior

instalments under Article 1176. –
 What is a presumption?
A presumption is an inference as to the existence of a fact
not actually known, arising from its usual connection with
another which is known.
 What are the two kinds of presumptions?
(A) Conclusive presumption – This kind of presumption

cannot be contradicted by evidence to the contrary.
 Example 34: D failed to file his income tax return on 15

April 2021. As a result, the BIR charged him interest and
penalties. D’s defense is that he is not aware that the due
date for filing his return is on 15 April of every tax year.
In this case, D cannot evade the payment of interest and

penalties by putting up the defense that he was not aware
of the existence of the provision in the Philippine Tax Code
prescribing the deadline for the filing of income tax
returns. There is a conclusive presumption that everyone
knows the law. Hence, D will not be allowed to introduce
evidence to rebut this presumption, and prove that he did

not in fact know the existence of that law.
(B) Disputable (rebuttable) presumption – This kind of

presumption can be contradicted or rebutted by
presenting evidence to prove the contrary.
 The presumptions outlined under Article 1176

are examples of disputable presumptions because
evidence can always be introduced to disprove them.
(1) When the creditor issues a receipt

acknowledging the debtor’s payment of the principal
obligation, without reserving his (creditor’s) right to collect
the unpaid interest, there is a presumption that the
interest has already been paid by the debtor (Art. 1176,
par. 1). This is based on the rule stated in Article 1253
that, “(I)f the debt produces interest, payment of the
principal shall not be deemed to have been made until the
interests have been covered.”
 Example 35: D borrowed P100,000.00 from C payable

on 15 January 2021, plus 10% interest in the amount of
P10,000.00. On 15 January 2021, D paid C P100,000.00. C
then issued a receipt acknowledging the payment of the
principal amount of P100,000.00 without specifying

whether the interest on the loan had been paid.
In this case, it is presumed that the interest of P10,000.00

had already been paid by D. However, C is allowed to
present evidence to prove that the interest on the loan
had not yet been paid. If the court finds the evidence of C
in order, C will be allowed to recover the unpaid interest.
However, if C fails to present convincing evidence that D
had not yet paid the interest, the presumption in favor of
D will stand, and C will not be allowed to recover.
(2) When the creditor issues a receipt

acknowledging the debtor’s payment of a later instalment,
without reserving his (creditor’s) right to collect previous
installments under the obligation, there is a presumption
that the previous installments have already been paid by
the debtor (Art. 1176, par. 2).
 Example 36: Assume in Example 35 that the debt of D

to C is payable in 4 equal monthly instalments as follows:
Installment due Maturity Date
P25,000.00 15 October 2020

P25,000.00 15 November 2020
P25,000.00 15 December 2020
P25,000.00 15 January 2021
D paid the first instalment but failed to pay the second

instalment due on 15 November 2020. On 15 December
2020, D tendered payment to C in the amount of
P25,000.00. C issued a receipt dated 15 December 2021
acknowledging receipt of the amount of P25,000.00 for
the third instalment. C, however, did not indicate in the
same receipt that the second installment had not yet been
paid.
In this case, there is a presumption that the first two

instalments have already been paid. But since the
presumption is merely disputable, C can still present
evidence to prove that the second instalment had not yet
been paid by D. If C is able to present convincing evidence
of the fact of non-payment, C can still recover the second
instalment from D.
In case the debtor fails to comply with his

obligation, what are the remedies of the creditor to
enforce the payment of his claims? (Article 1177)
(A) The creditor can file an action for specific

performance to compel the debtor to comply with his
obligation;
(B) If specific performance is no longer possible, the

creditor can pursue or run after the properties (real or
personal) in possession of the debtor;
(C) If the debtor does not have sufficient properties to

answer for the creditor’s claims, the creditor can exercise
all the rights, and bring all the actions of the debtor,
except those that are personal to the debtor (accion
subrogatoria); and
(D) If the claim remains unsatisfied after having

availed of the preceding remedies, the creditor can ask the
court to rescind or impugn any act or contract which the
debtor may have entered into to defraud the creditor
(accion pauliana).
 Example 37: D owes C P5M due on 15 April 2021. F

owes D P2M due on 15 May 2021. D has a house worth
P4M, a car worth P1.5M, and a Rolex watch worth

P500,000.00. On 15 February 2021, to evade his obligation
to C, D sold his house to B for P4M. On 15 April 2021, D
failed to pay his obligation because he was already
bankrupt as of that date.
Question: What are the legal remedies available to C?
Answer:
1. An action for specific performance to compel D to

pay his obligation in this case will be unavailing considering
that D is already bankrupt.
2. C can, however, ask the court to attach the

remaining properties of D – the car worth P1.5M, and the
Rolex watch worth P500,000.00. After these properties
are sold at public auction to pay for the obligation, there
still remains a balance in the obligation in the sum of P3M.
3. Since C has still a P3M collectible, he can ask the

court to order F to pay his P2M obligation to C instead of
paying it to D. After the court orders the payment, only
P1M of the obligation remains.
4. Since C has no other way of recovering the balance

of his credit, C can now ask the court to rescind or cancel
the contract of sale between D and B over the house on

the ground that the sale was made by D to defraud C and
to evade the performance of his obligation. Once the sale
is rescinded and reverted back to the ownership of D, it
may be sold at public auction under the court’s processes
so that part of the proceeds may be used to cover the
balance of the obligation in the amount of P1M.
What is the rule with respect to transmissibility of

rights? (Art. 1178)
 General rule: All rights acquired in virtue of an

obligation are transmissible.
 Example 38: D borrowed P250,000.00 from C payable

on 15 February 2021. As evidence of the debt, D signed a
promissory note in favor of C. Before maturity date, C
endorses the note to E.
The right of C to collect the P250,000.00 from D on

maturity date is a transmissible right. Hence, by endorsing
the note to E, C in effect transmits or assigns his right
under the promissory note to E. The effect is that on 15
February 2021, E, who is now in possession of the
promissory note (and to whom the right to the credit was
transferred by C), will have the right to collect the amount
on the note from D.
 Exceptions: Rights cannot be transmitted:
(A) When the parties stipulate against the

transmission of the right.
 Example 39: In Example 38 above, D and C can

expressly agree that C cannot assign his right under the
promissory note. In such case, C is the only person given
the right to collect, and C cannot transfer this right to a
third person.
(B) When the law prohibits the transmission of the

right.
 Example 40: Under our Election laws, the right to hold

office of an elective official is not transmitted to his heirs
upon his death. The law provides for the procedure for
succession to office.
 Example 41: Under the law on partnership, the rights of

a general partner are not transmitted to his heirs upon his
death, because his death causes the dissolution of the
partnership.
(C) When the nature of the obligation does not allow

the transmission of the right, such as when it is purely
personal.
 Example 42: In the loan of non-consumable things

(commodatum), such as the loan of a motorcycle, the right
of the borrower to use the thing is not transmissible.
 END OF LECTURE 
HAPPY READING & LEARNING! 

SOURCES of NOTES:
The discussions outlined in this lecture

have been collectively lifted from the cases
cited and commentaries made by the
authors in the references cited in our
course syllabus, to wit:
1. Alconera, Virgilio P. Obligations and Contracts.

Quezon City: Central Book Supply, Inc.; 2009.
2. Aquino, David Robert C., Cruz, Aristeo R. Obligations

and Contracts. Quezon City: Central Book Supply, Inc.;
2016.
3. Aralar, Reynaldo B. Obligations and Contracts Law

and Jurisprudence. Mandaluyong: National Book
Store; 2008.
4. Austria, Salvador E., Aquino, Timoteo B.

Fundamentals of Obligations and Contracts. Quezon
City: Central Book Supply, Inc.; 2009.
5. De Leon, Hector S., De Leon, Hector M. Jr. The Law on

Obligations and Contracts. Manila: Rex Book Store;
2011.
6. Jurado, Desiderio P. Comments and Jurisprudence on

Obligations and Contracts. Manila: Rex Book Store;
2010.
7. Pineda, Ernesto. Obligations and Contracts. Quezon

City: Central Book Supply, Inc.; 2009.
8. Saguinsin, Artemio T. Elements of Obligations and

Contracts. Mandaluyong: National Book Store; 2009.
9. Soriano, Fidelito R. Obligations and Contracts (Law

and Application). Manila: GIC Enterprises & Co., Inc.;
2016.
10. Suarez, Carlos B., Suarez, Alexander Q. The Law on

Obligations and Contracts. Manila: GIC Enterprises &
Co., Inc.; 2011.
11. Torres, Justo P. Jr. Obligations and Contracts. Manila:

Rex Book Store; 2003.
12. Ulep, Mauricio. A Bar Oriented Approach to the Law

on Obligations and Contracts. Quezon City: Central
Book Supply, Inc.; 2016.
Prepared by:
Atty. Harriet Reyes Linsangan

15 May 2021
FOOD FOR THOUGHT

CHAPTER 2 Arts. 1163 1178

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CHAPTER 2 Arts. 1163 1178

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STUDY GUIDE: Arts.

1163-1178 (Nature and Effect of Obligations) Page 1 of 70

ART. 1163. Every person obliged to give something is

ART. 1164. The creditor has a right to the fruits of the

ART. 1165. When what is to be delivered is a

same interest, he shall be responsible for any fortuitous

Art. 1166. The obligation to give a determinate thing

Art. 1167. If a person obliged to do something fails to

Art. 1168. When the obligation consists in not doing,

Art. 1169. Those obliged to deliver or to do something

(1) When the obligation or the law expressly so

was a controlling motive for the establishment of the

In reciprocal obligations, neither party incurs in delay if

Art. 1170. Those who in the performance of their

Art. 1171. Responsibility arising from fraud is

Art. 1172. Responsibility arising from negligence in the

Art. 1173. The fault or negligence of the obligor

If the law or contract does not state the diligence

Art. 1174. Except in cases expressly specified by the

Art. 1175. Usurious transactions shall be governed by

Art. 1176. The receipt of the principal by the creditor

Art. 1177. The creditors, after having pursued the

Art. 1178. Subject to the laws, all rights acquired in

 How do you distinguish between a specific real

 A specific real obligation is an obligation to

 How do you distinguish between a specific or

Specific or determinate thing Generic or indeterminate thing

A thing is generic if it refers

No other thing of its kind Other things of the same

my 5-year-old German a 5-year-old German

the blue car with plate no. a 2020 silver Toyota

the P1,000 bill Alex paid for

a Filipino girl with blond

 What are the duties of the debtor in a specific real

(A) To preserve the thing

 The debtor in a specific real obligation has the

 The standard of care required to preserve the

stipulation of the parties requires another standard of

 What does “proper diligence of a good father of

 This standard of care required of the debtor

 Example 1: D promised to deliver his goat to C on 15

 If the debtor fails to exercise ordinary diligence

 In Example 1 above, if the goat dies before 15

 Example 2: In Example 1 above, let us assume that D’s

On 15 January 2021, C demanded for the delivery of

 What is the rationale for this accessory duty?

Without the accessory duty to preserve the thing

Note, however, that the duty to preserve the thing

(B) To deliver the fruits of the thing

 What are the different kinds of fruits?

(1) Natural fruits are the spontaneous products of the soil,

(2) Industrial fruits are those produced by land of any kind

 When is the creditor entitled to the fruits of the thing?

Under Article 1164, “the creditor has a right to the

 If the obligation does not specify a delivery

 Example 3: D has a land planted with 250 mango trees

Q: Who has the right to harvest the mango fruits?

A: In this case, since there is no specific delivery date in

mango plantations existing at the time that D is obliged to

 If the obligation specifies a delivery date, the

 Example 4: On 5 January 2021, D promised to deliver

Q: Who has the right to the piglets?

A: In this case, since there is a specified delivery date, C