Makeup class

(ObliCon)
CONTRACTS

Article 1159. Obligations arising from contracts

have the force of law between the contracting
parties and should be complied with in good faith.
Article 1305. A contract is a meeting of minds
between two persons whereby one binds himself,
with respect to the other, to give something or to
render some service.
Consent
Object
Consideration
Differences between an obligation and a
contract
• A contract is one of the sources/ efficient
causes of an obligation.
• An obligation is the result of a contract.
• May an obligation be the source of a
contract?
• Contract of agency obligation to do
• Contract of sale obligation to deliver
• Contract of carriage
Goduco v. CA
• May an agent in a sale claim her commission fee
against a person who was neither the buyer nor the
seller?
• Goduco filed a case for collection of money against
Castro.
• Based on the deed of sale between Goduco’s
principal (seller) and Campillo (buyer), Castro was
only a witness.
• Held: There is no privity of contract between
Goduco and Castro.
• At most, the owner of the property and the one who
promised to give her a commission should be the one
liable to pay the same and to whom the claim should
have been directed.
Innominate contracts
• Contracts without any express name under
the law
• Lack individuality
• Generic
Innominate contracts
• I give that you may give.
• I give that you may do.
• I do that you may give.
• I do that you may do.
Aldaba v. CA
• Two doctors rendered services to a rich old woman
for ten years without expecting to be paid. Can
they claim compensation in the form of properties
which the deceased woman left behind?
• Dr. Vicente Aldaba and Dr. Jane Aldaba filed a case
to annul the title of Cesar Aldaba and Emmanuel
Bautista over two lots and a house which were left
behind by Belen Aldaba, whom plaintiffs treated for
ten years without expecting to be paid.
• Dr. Aldaba claimed that Belen Aldaba intended to
leave those properties to them as evidenced by a
note saying “TALAGANG IYAN AY PARA SAINYO”
and another note from defendant Emmanuel Aldaba’s
wife who forwarded the real estate tax to Dr. Aldaba.
Aldaba v. CA
• Was there a contract which obliged Belen Aldaba to
compensate the two doctors?
• Held: NO.
• When a person does not expect to be paid for his
services, there cannot be a contract implied in fact to
make compensation for said services.
• The other party must know of such expectation to be
paid.
• As to Belen’s alleged intent to transfer the properties
to Dr. Aldaba, the mere expression of an intention is
not a promise, because a promise is an undertaking
to carry the intention into effect.
QUASI-CONTRACTS
Article 1160. Obligations derived from quasi-
contracts shall be subject to the provisions of
Chapter 1, Title XVII, of this Book.
Article 2142. Certain lawful, voluntary and
unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of
another.
Quasi-contract
• Juridical relation resulting from a lawful,
voluntary and unilateral act
• Purpose: indemnity
• Principle: no one shall be unjustly enriched or
benefited at the expense of another
Quasi-contract
• NOT an implied contract
• There being no express consent, in the sense of
a meeting of minds between the parties, there is
no contract to speak of. However, in view of the
peculiar circumstances or factual environment,
consent is presumed to the end that a recipient
of benefits or favors resulting from lawful,
voluntary and unilateral acts of another may not
be unjustly enriched at the expense of another
(PNB v. CA, G.R. No. 97995 January 21, 1993).
Quasi-contract; main kinds
• Negotiorum gestio
• Solutio indebiti
Quasi-contract; main kinds
• Negotiorum gestio
• A person (gestor or officious manager)
voluntarily takes charge of another’s
abandoned business or property without the
owner’s authority
• Reimbursement for useful and necessary
expenses and for those needed to prevent
imminent and manifest loss
Quasi-contract; main kinds
• Solutio indebiti
• Something is received when there is no right
to demand it, and it was unduly delivered
through mistake
• (a) He who paid was not under obligation to do
so; and
• (b) The payment was made by reason of an
essential mistake of fact.
City of Cebu v. Piccio
• Caballero sued the City Mayor, Municipal Board,
City Treasurer and City Auditor (all of the City of
Cebu) for illegal dismissal and backwages.
• The trial court adjudged Caballero to be illegally
dismissed and ordered the defendants to pay
him backwages, which the Municipal Board did
through a resolution.
• Later, the City of Cebu sued Caballero for the
return of those backwages, claiming that it was
not made a party to the first case and that there
was solutio indebiti.
City of Cebu v. Piccio
• Held: The City of Cebu has no cause of action
because the requisites of solution indebiti are not
present.
• Caballero has a right to be paid and there was no
mistake of payment.
UST Cooperative Store v. City of Manila
• In 1957, RA 2023 was passed. Under this law,
cooperatives with net assets of not more that
Php 500,000 are exempted from taxes.
• For 1957 to 1959, the net assets of UST
Cooperative Store never exceeded Php 500,000.
• Unaware of the exemption, UST Cooperative
Store paid taxes for those three years. It later
demanded a refund from the City Treasurer of
Manila.
• City Treasurer: Voluntary payment. UST is
presumed to know the law. By paying, it waived
its exemption.
UST Cooperative Store v. City of Manila
• Held: Refund is proper. Solutio indebiti is present.
• There was erroneous payment because UST
Cooperative Store did not know it was exempt. A
payment of taxes under a mistake of fact has
been held not to be voluntary, and is therefore
recoverable.
• If UST Cooperative Store continued to pay for a
time after the exemption became effective it did
so in a desire to abide by what it believed to be
the law. No undue disadvantage should be
visited upon it as a consequence thereof.
CRIMES

Article 1161, NCC. Civil obligations arising from

criminal offenses shall be governed by the penal
laws, subject to the provisions of article 2177, and
of the pertinent provisions of Chapter 2, Preliminary
Title, on Human Relations, and of Title XVIII of this
Book, regulating damages.
Article 100, RPC. Civil liability of a person guilty of
felony. - Every person criminally liable for a felony
is also civilly liable.
Criminal liability and civil liability
• Moral evil against the State; social injury –
criminal liability
• Material damage against a private individual –
civil liability
 Wrongful act

Criminal liability Civil liability

- Moral evil against the - Material damage
State against an individual
-Social injury
Budlong v. Judge Apalisok
• Accused Puyon was charged with reckless
imprudence resulting to physical injuries. He was
convicted and sentenced to imprisonment of
thirty days. No civil liability was imposed.
• Puyon was later granted probation.
• Fiscal Budlong moved to set hearing for
reception of evidence to prove civil liability.
• Judge Apalisok denied the motion, ruling that
Accused Puyon had already availed of probation.
• Held: The prosecution must still be allowed to
prove civil damages otherwise the private
complainant would be denied due process.
• Probation affects only the criminal aspect.
• Under Art. 113, RPC, accused must still satisfy
his criminal liability.
• Thus, probation extinguishes only the criminal
aspect but not the civil aspect.
Liability of insane person
• Art. 101, RPC:
• An insane person is criminally exempt but
guardian may be civilly liable.
• If there is no guardian, or guardian is insolvent,
the property of the accused will be made liable.
Civil liability arising from a crime
• Art. 104, RPC:
• Restitution
• Reparation
• Indemnification for consequential damages
Civil liability arising from a crime (Arts. 104 to 111, RPC)
• Restitution - The restitution of the thing itself must be
made whenever possible, with allowance for any
deterioration, or diminution of value as determined by
the court.
• Reparation - The court shall determine the amount of
damage, taking into consideration the price of the
thing, whenever possible, and its special sentimental
value to the injured party, and reparation shall be
made accordingly.
• Indemnification for consequential damages -
Indemnification for consequential damages shall
include not only those caused the injured party, but
also those suffered by his family or by a third person
by reason of the crime.
People v. Mostasesa
• Mostasesa and Dumagat were convicted of
coercion. They were sentenced to imprisonment
and to return the bales of tobacco which they
took from the private complainant or to indemnify
him of Php 600.
• They gave two bales of tobacco but the sheriff
still levied on the properties of Dumagat.
• Accused: Tobacco is a fungible thing so they
complied with Art. 1953, NCC (to return to the
creditor the same kind and quality as the thing
owed).
• Held: The civil liability does not come from Art.
1953, NCC but from Arts. 100 and 111, RPC
(obligation to make restitution).
• The trial court’s sentence is for the return of the
very thing taken (restitution), and if this cannot
be done, for the payment of P600 (reparation).
This amount represents the value of the two
bales of tobacco taken, at the time of the taking.
• In this case, reparation may not be made by
giving a similar thing because the value of the
original thing taken may have decreased since it
was taken from the complainant.
• Here, reparation should be in the form of the
price of the thing taken because money does not
fluctuate unlike the value of goods.
Damages for the death of the victim
• Art. 2206. The amount of damages for death
caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may
have been mitigating circumstances. x x x
• Prevailing jurisprudence now raised the amount
to Php 50,000.
People v. Wahiman
•Wahiman was convicted of murdering the manager
of Stanfilco-Dole Phils.
•TC: Civil indemnity of Php 75,000, lost earnings of
Php 59,280,000.00
•Generally, there must be documentary proof to
support indemnity for loss of earning capacity.
•During trial, only the widow testified that the
deceased was receiving a monthly salary of Php
95,000 and that he was 54 when he died.
•The counsel for the accused did not object to this
testimony or cross-examined the widow.
• Held: The factual basis for the award for lost
earnings is sufficiently established. However, the
said award was reduced to Php 9,878,100.
Institution of civil action in criminal cases
• GR: Civil action for civil liability is also impliedly
instituted with the criminal action (Sec. 1, Rule
111, Revised Rules of Criminal Procedure).
• XPN: The offended party:
• waives the civil action;
• reserves the right to institute it separately; or
• institutes the civil action prior to the criminal
action.
Death of accused pending trial
Torrijos v. CA
• Double sale
• Diamnuan sold his ¼ share over a parcel of land
to Torrijos. However, the land cannot be
registered under Torrijos’ name because he did
not have the owner’s title for the other co-
owners.
• Later, Diamnuan sold the entire property to de
Guia, leading Torrjios to file an estafa case
against Diamnuan.
• TC sentenced Diamnuan to suffer imprisonment
and to indemnify Torrijos in the amount of Php
7,493 (later increased to Php 25,000).
• Dispositive portion: "Whatever damages may have been
suffered by Torrijos before the Deed of Sale in favor of
Victor de Guia was made by the accused and his co-
owners may be the subject of some other action, perhaps
civil, but not in this case.“
• Accused appealed. While the appeal was pending, he
died.
• Counsel for the accused moved to dismiss the appeal
under Par. 1, Art. 89, RPC, which provides that the death
of a convict extinguishes not only the personal penalties,
but also the "pecuniary penalties" as long as the death
occurs before final judgment.
• Torrijos opposed. The term "pecuniary penalty" should not
include civil liability in favor of the offended party.
• Extinction of civil liability follows the extinction of
the criminal liability under Article 89, only when
the civil liability arises from the criminal act as
its only basis.
• Where the civil liability does not exist
independently of the criminal responsibility, the
extinction of the latter by death, ipso
facto extinguishes the former, provided, of
course, that death supervenes before final
judgment.
• INAPPLICABLE HERE: The civil liability springs
neither solely nor originally from the crime itself
but from a civil contract of purchase and sale.
• Independently of the criminal case, Diamnuan is
also civilly liable to Torrijos under their contract of
sale.
• Death is not a valid cause for the extinguishment
of a civil obligation.
• Arts. 19, 20, 21, NCC
• Civil action based on tort or contract need not be
reserved.
Effect of acquittal in the civil case
• Accused could not have committed the crime –
no civil action can be brought
• Exempting circumstance (ex. insanity) – may still
be civilly liable
• Reasonable doubt – may still be civilly liable
• Quantum of evidence
• If there is independent civil action allowed (Art.
33, NCC): defamation, fraud, physical injuries
Affidavit of desistance
• An affidavit of desistance is not a ground for the
dismissal of the criminal cases, since the actions
have already been instituted. To justify the
dismissal of the Complaints, the pardon should
have been made prior to the institution of the
criminal actions (People v. Montes).
Quasi-delict/ tort/ culpa aquiliana
• Article 1162. Obligations derived from quasi-
delicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by special
laws.
• Article 2176. Whoever by act or omission
causes damage to another, there being fault or
negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties,
is called a quasi-delict and is governed by the
provisions of this Chapter.
Elements of a quasi-delict
• (1) an act or omission;
• (2) fault or negligence in the performance or
non-performance of the act;
• (3) injury;
• (4) a causal connection between the
negligent act and the injury (proximate
cause); and
• (5) no pre-existing contractual relation
Negligence
• Omission of that diligence which is required by
the circumstances of person, place and time (Art.
1173, NCC)
• Failure to observe, for the protection of the
interests of the person of the interests of another
person, that degree of care, precaution and
vigilance which the circumstances justly demand,
whereby such other person suffers injury (US v.
Barrias)
Test for negligence
• Would a prudent man foresee harm to the person
injured as a reasonable consequence of the
course about to be pursued?
Elcano v. Hill
• Reginald Hill, a minor, killed the son of Spouses
Elcano.
• A criminal case was filed against him but he was
acquitted because the court found the act was
not criminal (no intent to kill + mistake).
• Spouses Elcano filed a civil case for damages,
still based on the killing committed by Reginald
Hill.
• The civil case was dismissed due to res judicata.
• Will Reginald’s acquittal in the criminal case bar
recovery for damages in a civil case?
• Held: NO. The civil case may still proceed.
• The civil case for damages is predicated on civil
liability arising from quasi-delict, not the civil
liability as contemplated by Rule 111, Rules of
Criminal Procedure.
 Killing committed by R. Hill

Criminal liability
Civil liability
with corresponding
civil liability (Art. 100, Independent civil
RPC) action (Arts. 2176 and
2177, NCC)
Culpa criminal
Culpa aquiliana/
quasi-delict

• Quantum of evidence
• However, the private complainant cannot recover
damages in BOTH cases.
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.
• Obligation to GIVE
• Determinate thing
 Generic Determinate
Designated only by Particularly
class or genus designated or
physically
segregated from
others of the same
class or genus
• Unless proper diligence is exercised, there is
a danger that the property would be lost or
destroyed, thus rendering illusory the
obligation.
Diligence needed
• GR: Good father of a family
• Required by the nature of the obligation and
corresponds to the circumstances of person,
time and place (Art. 1173, NCC)
• XPN:
• Law
• Common carriers – “utmost diligence of
very cautious persons;” extraordinary care
(Art. 1755)
• Contract
Obejera and Intak v. Iga Sy
• Plaintiffs Obejera and Intak along with
defendant Iga Sy sought refuge from the
Japanese invasion in the house of barrio
lieutenant Villena.
• Due to the advancing Japanese army, both
plaintiffs and defendant hid their valuables in
Villena’s dugout.
• The parties later discovered that their valuables
were missing.
• Defendant Iga Sy reported the loss of her money
and jewels, causing the arrest and investigation
of Villena, two others and the plaintiff Engracio
Obejera.
• Obejera was released only more than a week
later after he, with his wife, executed a document
where they agreed to transfer their own property
to the defendant in case they failed to return the
money and jewelry.
• Plaintiffs filed for the annulment of that
document.
• Defendant: She deposited her valuables with the
plaintiffs, who acknowledged their liability by
executing the document complained of.
• Held: Plaintiffs are not liable.
• The alleged deposit is unbelievable and contrary
to human nature.
• It is hard to believe that Obereja would assume
responsibility over the defendant's things hidden
in a place not belonging to him especially at a
time when the confusion and fear resulting from
the Japanese invasion and fast advance so
gripped everyone that nobody could be sure of
even of his life.
Negligence
• Omission of that diligence which is required by
the circumstances of person, place and time (Art.
1173, NCC)
• Failure to observe, for the protection of the
interests of the person of the interests of another
person, that degree of care, precaution and
vigilance which the circumstances justly demand,
whereby such other person suffers injury (US v.
Barrias)
Cangco v. Manila Railroad Co.
• Cangco was preparing to step off a train which was
slowing down to a stop. When he alighted, he
stepped on a sack of watermelons.
• The accident occurred between 7 and 8 o'clock on a
dark night. The railroad station was lighted dimly by a
single light located some distance away.
• The train platform where passengers alight begins to
rise some distance from the railroad company’s
office.
• He rolled from the platform and was drawn under the
moving car, where his right arm was badly crushed
and lacerated.
• After he alighted from the train, the car moved
forward possibly six meters before it came to a full
stop.
• Railroad co.: The direct and proximate cause of
the injury suffered by Cangco was his own
contributory negligence in failing to wait until the
train had come to a complete stop before
alighting.
• Held: The railroad co. is liable because it
negligently failed to provide a safe alighting
place.
• The test by which to determine whether the
passenger has been guilty of negligence in
attempting to alight from a moving railway
train, is that of ordinary or reasonable care, or
whether an ordinarily prudent person, of the
age, sex and condition of the passenger,
would have acted as the passenger acted
under the circumstances.
• Care which a man of ordinary prudence
would use under similar circumstances to
avoid injury.
• Was there anything in the circumstances
surrounding the plaintiff at the time he alighted
from the train which would have admonished a
person of average prudence that to get off the
train under the conditions then existing was
dangerous?
• Person
• Young man
• Familiar with the area
• Place
• No warning that the platform was not clear for
alighting
• Dimly-lit
• The distance from the steps of the car to the
spot where the alighting passenger would
place his feet on the platform was reduced,
thereby decreasing the risk incident to
stepping off.
• Cement
De la Cruz v. Spouses Octaviano
• The sedan driven by de la Cruz hit the back portion
of the tricycle where Renato Octaviano was riding.
• De la Cruz: He saw a tricycle 100-120 meters away
from him going in the opposite direction. An Elf van
was parked along the road on the opposite side. He
flashed his low beam and high beam light to signal
the tricycle. The tricycle then slowed down and
stopped a bit, hence, he also slowed down.
Suddenly, the tricycle picked up speed from its stop
position and the two vehicles collided after the Elf
van.
• De la Cruz appeared to be drunk.
• At the time of the incident, the tricycle driver had no
license. Renato Octaviano also violated a municipal
ordinance by riding behind the tricycle driver.
• Negligence is the failure to observe for the
protection of the interests of another person that
degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such
other person suffers injury.
• Could a prudent man, in the case under
consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of
the actor to take precautions to guard against
that harm.
• Held: De la Cruz, the driver of the sedan, was
negligent.
• Drunk
• If the collision point was right ahead of the front
of the parked Elf van, it means that the tricycle
was already past the parked Elf and it was Dela
Cruz who forced his way into the two-way
road.
• De la Cruz swerved to the left.
• The tricycle was hit at the back portion meaning
it was already turning after passing the parked
Elf.
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.
When must delivery be made?
• If there is a term or condition, from the moment
the term arrives or the condition is fulfilled.
• If there is no term or condition, from the time of
the perfection of the contract.
 Personal right Real right
Jus in personam; jus Jus in re
ad rem
Demandable against Power over a specific
another person thing; demandable
over the whole world
Kinds of delivery
• Actual delivery
• Tradition
• The property changes hands physically
• Constructive delivery
• Physical transfer is implied
• Traditio simbolica/Symbolical tradition
• Traditio longa manu/ Delivery by mere consent
• Traditio brevi manu/ Delivery by short hand
• Traditio constitutum possessorium (opposite of
brevi manu)
• Traditio by execution of legal forms and
solemnities (ex. execution of deed of absolute
sale)
Fidelity & Deposit Co. v. Wilson
• Wilson is a disbursing officer for a government agency.
The Fidelity and Deposit Company of Maryland
(“Maryland”), and the American Surety Company of New
York (“NY”) were the sureties of his official bond of $1,500.
• Wilson defaulted on his obligations and the two sureties
were made to pay $ 4,465 each.
• When Wilson was finally captured, he had with him c
which was confiscated.
• Marlyand filed a case against Wilson and NY, demanding
the payment of $ 4,465 and that the amount be applied to
the $ 785 in gold which was recovered from Wilson upon
his arrest.
• Terrell intervened in the case.
• Terrell: Wilson had ceded and transferred to him all of
Wilson’s rights to the said $785 in payment on account of
a larger sum then owed by Wilson to him.
• NY and Maryland: They have a better right to the
$785 in gold. The funds are part of government
money taken by Wilson. They became subrogated to
the rights of the government to that money.
• Who has a better right to the $785?
• What is the right of Terrell that $785?
• Held:
• A creditor has the rights to the fruits of a thing from
the time the obligation to deliver it arises. However,
he shall not acquire a real right (and the ownership is
surely such) until the property has been delivered
to him (Art. 1905, Old Civil Code).
• The transfer of the ownership in the contract of
transfer in favor of Terrell does not produce the
effect by the fact of the mere consent, but is
acquired by tradition xxx.
• Therefore, by reason of the non-delivery Terrell
did not acquire the ownership of the property
transferred to him by Wilson. It is only the jus ad
rem (personal right or jus in personam), and not
the jus in re (or real right), that was acquired by
Terrell by virtue of the transfer.
• Terrell was adjudged to have the same right as
that of a creditor, and no other.
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.

Identify 1) when the obligation to deliver the thing

would arise and 2) when actual delivery was made.

Ex.
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.
Classification of obligations based on subject
matter
• Real obligations (to give)
• To give a specific thing (set apart from a class)
• To give a generic or indeterminate thing (one
of a class)
• Personal obligation (to do or not to do)
 Generic Determinate
Designated only by Particularly
class or genus designated or
physically
segregated from
others of the same
class or genus
Article 1165. xxx
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.
Fortuitous events
• Events which could not be foreseen, or which,
though foreseen, were inevitable (Art. 1174)
• GR: Obligation is extinguished
• XPN:
• Obligation is to give a generic/indeterminate
thing
• Obligor delays
• Ordinary delay v. legal delay (virtual
nonfulfillment; needs DEMAND)
• Obligor promised to deliver the same thing to
two or more people who do not have the same
interest
Yu Tek v. Gonzales
• Gonzales obligated himself to deliver to Yu Tek
and Co., “600 piculs of sugar of the first and
second grade.”
• Gonzales: The sugar was to be secured from the
crop which he raised on his plantation. He was
unable to fulfill the contract because of the
almost total failure of his crop.
• Did the crop failure extinguish Gonzales’
obligation to deliver the sugar?
• Held: NO. The obligation was generic. He agreed
to deliver the sugar and nothing is said in the
contract about where he was to get it.
• Defendant Gonzales undertook to deliver a specified
quantity of sugar within a specified time. The contract
placed no restriction upon him in the matter of
obtaining the sugar. He was equally at liberty to
purchase it on the market or raise it himself. It may
be true that defendant owned a plantation and
expected to raise the sugar himself, but he did not
limit his obligation to his own crop of sugar.
• If called upon to designate the article sold, defendant
could only say that it was "sugar." He could only use
this generic name for the thing sold. There was no
"appropriation" of any particular lot of sugar. Neither
party could point to any specific quantity of sugar and
say: "This is the article which was the subject of our
contract."
Remedies for the creditor when the debtor fails to
comply with his obligation
• Specific performance (generic or specific)
• Recission or cancellation
• Damages (with or without either of the first two)
Roman v. Grimalt
• Grimalt agreed to buy Roman’s ship.
• Upon being informed that Roman had no papers
proving ownership, Grimalt insisted that he would
buy the vessel only when the title papers were
perfected and the vessel duly inspected.
• Before the parties could execute any contract of
sale, the ship sunk due to a severe storm.
• Held: Grimalt, the buyer, is not obligated to pay.
• No perfected sale
• The rule on fortuitous events does not apply.
• Loss of the ship must be borne by the seller
What if there WAS a perfected sale + fortuitous
event?
• Paras: Because there is already a perfected
sale, the buyer would then be obliged to pay the
purchase price even though the ship had not yet
been delivered to him.
• Tolentino: The debtor (seller) is released from
liability; but he cannot demand the prestation
which has been stipulated for his benefit.
Gutierrez Repide v. Afzelius
• Sps. Afzelius bought land from Repide on installment.
• They were unable to pay the first installment.
• Repide bought an action for specific performance.
• Sps. Afzelius: They already had Php 2,000 for the
first installment but the amount belonged to
Patrocinio Afzelius’ sister so they had to return it to
her. (impossibility of performance)
• Held: Mere pecuniary inability to fulfill an engagement
does not discharge the obligation of the contract, nor
does it constitute any defense to a decree for specific
performance.
• The stability of commercial transactions requires that
the rights of the seller be protected just as effectively
as the rights of the buyer.
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.
• XPN: Stipulation
Accessories
• Joined to or included with the principal for the
latter’s better use, perfection or enjoyment

Accessions
• Additions to or improvements upon a thing
• Alluvium and whatever is built, planted or sown
on a person’s land
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.

• Obligations to do and not to do

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.

• Obligation not to do
Creditor’s remedies if debtor fails to do
• To have the obligation performed (by the debtor
or by another) at debtor’s expense (only if
another can do the performance)
• Damages
• If the creditor can have it done by someone
else - damages alone cannot substitute for
performance
• If the obligation is purely personal or special -
only damages may be asked
What about specific performance?
• NOT a remedy in personal obligations (to do or
not to do)
• Involuntary servitude
• Agreement to marry
When a thing may be ordered undone
• If made poorly
• Performance by a third person + damages
• If the obligation is a negative one
• Undoing (if possible) + damages
Chavez v. Gonzales
• Chavez delivered his typewriter to Gonzales for routine
servicing and repair, although there was no specific
period for fulfilling the obligation. The latter was not
able to finish the job after some time despite repeated
reminders.
• Gonzales then required money for spare parts.
• When Chavez finally asked for the return of the
typewriter, Gonzales delivered it to him in shambles
with parts missing.
• Chavez had to take his typewriter to another repairer.
• He filed a case for damages.
• Gonzales: Because his contract with plaintiff Chavez
did not contain a period, plaintiff-appellant should have
first filed a petition for the court to fix the period.
• Held: Gonzales contravened the tenor of his
obligation because he not only did not repair the
typewriter but also returned it in shambles.
• Liable under:
• Art. 1167 for compelling Chavez, the creditor,
find a second repairer to fulfill the obligation in
a proper manner (cost of the labor for the
repair of the typewriter)
• Art. 1170 for he failed or neglected to return the
typewriter in the same manner as he received it
(cost of the missing parts)
• There was no time specified within which to finish
repairing the typewriter.
• However, such time had passed without the work
having been accomplished, for Gonzales returned
the typewriter cannibalized and unrepaired, which
in itself is a breach of his obligation.
• By returning the typewriter in that state, he
virtually admitted non-performance of his
obligation.
• The fixing of a period would thus be a mere
formality and would serve no purpose than to
delay.
Vil-Rey Planners and Builders v. Lexber
• Vil-Rey and Lexber entered into a contract for
the completion of the remaining works under
two prior contracts involving a compacted
back-fill on Lexber’s property.
• Under the present contract, Vil-Rey must
complete the work by 15 January 1997. The
contract price of Php 1,168,728.37 shall be
paid on the following basis:
• 50% downpayment to be secured by a
surety bond; and
• 50% balance upon completion of the works.
• Vil-Rey requested for an extension of the
contract period until 31 January 1997 which
was granted by Lexber.
• Still, Vil-Rey did not comply with its obligation,
even with an additional five days granted to
it by Lexber.
• Lexber filed a complaint for sum of money.
• Vil-Rey: Denied breach of contract. It was
actually Lexber which breached the contract
for paying only 50% of the contract price. Vil-
Rey had fulfilled almost 100% of the contract
but was unable to finish it because Lexber did
not pay anymore. Thus, Lexber owed it the
balance of Php 668,728.37.
• Held: Vil-Rey is liable for breach of contract.
• Breach of contract is the failure of a party,
without legal reason, to comply with the terms
of a contract or perform any promise that forms
either a part or the whole of it.
• Vill-Rey failed to prove it fulfilled 95% of its
obligation. Even if it were true, it did not fulfill
100% of the work.
• Reciprocal obligations
• arise from the same cause, such that the
obligation of one is dependent upon that of the
other.
• Under the contract, Lexber is obliged to pay the
remaining 50% upon the completion of Vil-Rey of
its work by 15 January 1997.
• The next payment for Vil-Rey would have fallen
due upon completion of the works. Thus, it cannot
put up the defense that its failure to comply with its
obligation was because it was not paid.
• However, since it was not shown that Vil-Rey
acted in bad faith, it shall be liable for
damages only with regard to those that are the
natural and probable consequences of its
breach (Art. 2201).
• Failure of Vil-Rey to finish the works
compelled Lexber to secure the services of
another contractor, to which the latter paid a
total of P284,084.46.
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.
When is a debtor in default?
• GR: Demand must be made
• Judicial
• Extrajudicial
• XPN: No demand need when:
• The law provides
• Ex. Taxes
• The obligation expressly declares
• Time is of the essence of the contract
• Ex. Wedding dress for the wedding; agricultural
contracts
• Demand would be useless (obligor has rendered it
beyond his power to perform)
• The debtor has expressly acknowledged that he is in
default
• Mere asking for an extension is not an express
acknowledgment of default.
Different kinds of delay/ mora
• Mora solvendi (default on the part of the
debtor)
• Mora solvendi ex re
• Mora solvendi ex persona
• Mora accipiendi (default on the part of the
creditor)
• Compensatio morae
• Reciprocal obligations
• Both parties are in default – it is as if neither
is in default
Mora solvendi
• Absent in negative obligations and natural
obligations
Mora solvendi; requisites
• Obligation must be demandable and already
liquidated or determinate in amount
• Non-performance of the debtor
• Demand
Demand
• Categorical assertion for the fulfillment of a
due and demandable obligation
• Must clearly require the performance of a
prestation
• Tolerance and benevolence of the creditor has
ended (Tolentino)
• Ex. Demand to vacate (Macaslang v. Zamora)
• “I will be taking over the occupancy of the said
property two months from date of this letter.”
• No other interpretation of the import of the
notice
• Alternatives were clear cut
Demand
• Ex. Inaccurate amount in demand letter
(United Planters Bank v. Beluso)
• Demand for a considerably bigger amount
• Held: The excess amount in such a demand
does not nullify the demand itself, which is
valid with respect to the proper amount.
• Valid, albeit excessive demand
Demand
• Demand is generally needed even if a period
has been fixed in the obligation. Without
demand, the effects of delay will not arise.
• “Due and demandable”
• Interest and damages
• Ex. Dates
De la Rosa v. BPI
• BPI started a contest of designs and plans for the
construction of a building, announcing that the prizes would
be awarded not later that on November 30, 1921.
• De la Rosa participated in the contest, having performed
work and incurred expenses for that purpose.
• BPI refrained from naming judges and awarding the prizes in
accordance with the conditions stipulated.
• Was BPI’s failure to award the prizes by November 30, 1921
as previously announced, a breach of contract?
• Held: No.
• BPI cannot be held to have been in default through the mere
lapse of time. For this judicial or extrajudicial demand was
necessary for the performance of the obligation, and it was
not alleged here, nor does it appear that before bringing this
action the plaintiff had ever demanded it from the defendant
bank in any manner whatsoever. The defendant bank,
therefore, was not in default.
Effects of delay/mora
• If the debtor is in default, he may be liable for
interest or damages
• Debtor may also bear the risk of loss.
• Debtor is liable for a fortuitous event
Acceleration clause
• Clause which would make all installments due
upon the default of one installment
• Default in one payment does not mean default
of the whole amount.
• The whole amount only becomes due.
However, in the absence of stipulation,
demand is still needed to put the debtor in
default.
La Compañia General De Tabacos De Filipina v. Araza
• Araza mortgaged his land to La Compañia General De
Tabacos De Filipina for Php 8,000.
• He promised to pay 500 pesos on the June 30, 1901,
and the remainder at the rate of 100 pesos a month,
payable on the 30th day of each month, until the entire
8,000 pesos was paid.
• There was no:
• Acceleration clause
• Provision for interest
• Express declaration that the failure to pay when due
should put the debtor in default.
• Araza paid only 400 pesos.
• La Compañía filed a case for foreclosure on June 12,
1903.
• What portion of the obligation may La Compania’s
action cover?
• Only the amount due and demandable on June
12, 1903, the date of filing of La Compania’s
action.
• There was no evidence any demand prior to the
presentation of the complaint. The plaintiff is
therefore entitled to interest only from the
commencement of the action.
Mora accipiendi
• The creditor unjustifiably refuses to accept
payment/performance at the time it can be
done.
• Obligations ex-delicto
• Debtor-criminal is responsible for loss even
through a fortuitous event, unless the creditor
is in mora accipiendi
• Consign the thing
• Keep it himself (still exercising due diligence)
Mora accipiendi
• Improper refusal of the lessor/creditor to
accept the rentals tendered by lessee
• Lessor/creditor must shoulder the accidental
loss of the leased premises
• Mora accipiendi is not cured by the
lessee/debtor’s failure to consign the rentals
but the lessee remains obligated to pay the
rentals he had tendered but did not deposit in
court (Vda. De Villaruel v. Manila Motor Co.)
When is demand not needed
• Law
• Stipulation
• Time is of the essence
• Demand would be useless (obligor has
rendered it beyond his power to perform)
• The debtor has expressly acknowledged
that he is in default
When is demand not needed; time is of the essence
Barzaga v. CA
• The deceased wife of Barzaga specified that she
wished to be buried before December 25.
• Barzaga contracted with Alviar for the delivery of
materials for the niche on December 22.
• It would take 2 days to finish the construction of
the niche.
• Alviar’s delay in delivering the materials wasted so
much time that the construction could only start on
December 23.
• Work on the niche had to be put off on December
25
• Prolonged the wake
When is demand not needed; time is of the essence
Abella v. Francisco
• Francisco bought from the government on
installment certain parcels of land. He had already
in debt for some of the installments.
• He sold the parcels of land at Php 100/lot to
Guillermo, who paid a downpayment of Php 500.
The balance is to be paid on or before December
14.
• Francisco intended to apply the proceeds of the
sale to certain obligations which will be due on
December.
• Abella did not pay on time. It was only on January
the following year that he attempted to pay.
• May Abella compel Francisco to execute a
sale of the subject parcels in his favor?
• Held: NO.
• Time was an essential element in the
transaction. Francisco wanted to sell those
lots to the plaintiff in order to pay off certain
obligations which fell due in the month of
December, 1928. The time fixed for the
payment of the price was therefore essential
for him.
• The contract is rescinded.
When is demand not needed; demand is
useless
• Debtor delivered the specific thing to
another person
• Debtor destroyed the specific thing to be
delivered
Reciprocal obligations
• Created and established at the same time, out
of the same cause and results in a mutual
relationship of creditor and debtor between the
parties
• Performance of one is conditioned upon the
simultaneous fulfillment of the other.
• Ex. Contract of sale (buyer must pay and the
seller must deliver)
Reciprocal obligations
• If the performance is not set on different dates,
it must be simultaneous.
• One party cannot demand performance by the
other if the former himself cannot perform.
• If both did not perform, there is compensatio
morae (mutual delay).
• Both of them are in default so it is as if no
one is in default.
• If one party performs and the other does
not, the latter would be in default.
Phil. Export and Foreign Loan Guarantee Corp. v. V.P.
Eusebio Construction, Inc.
• State Organization of Buildings (SOB), an Iraqi
government agency, awarded the construction of the a
medical rehabilitation building (Project) to Ajyal Trading
and Contracting Company.
• 3-Plex International, Inc., a Filipino contractor
engaged in the construction business, entered into a
joint venture agreement with Ajyal. 3-Plex undertook
the execution of the entire Project, while Ajyal would be
entitled to a 4% commission of the contract price.
• 3-Plex, not being accredited by or registered with the
Philippine Overseas Construction Board (POCB),
assigned all its rights and interests under the joint
venture agreement to VPECI.
• After the required performance bonds were
executed, SOB and the joint venture VPECI and
Ajyal executed the service contract for the
construction of the Project to be finished within 18
months.
• Under the Contract, the Joint Venture would
supply manpower and materials, and SOB would
refund to the former 25% of the project cost in
Iraqi Dinar and the 75% in US dollars.
• The agreement between the parties was a periodic
payment by SOB to the contractors depending on the
percentage of accomplishment within the period. The
payments were, in turn, to be used by the contractor to
finance the subsequent phase of the work.
• The status the Project was 51% accomplished,
meaning the structures were already finished. The
remaining 47% consisted in electro-mechanical works
and the 2%, sanitary works, which both required
importation of equipment and materials.
• SOB paid for the remaining 75% of the Project using
Iraqi dinars, which are not freely convertible to other
currency. The Iraqi government prohibited the bringing
of Iraqi dinars outside of the country.
• Was the JV of VPECI and Ajyal in default for not
accomplishing the remaining 49% of the Project?
• Held: NO.
• In reciprocal obligations, neither party incurs in
delay if the other party does not comply or is not
ready to comply in a proper manner with what is
incumbent upon him (3rd par., Art. 1169).
• The non-completion of the Project was caused by
factors not imputable to the VPECI. It was rather
due mainly to the persistent violations by SOB of
the terms and conditions of the contract,
particularly its failure to pay 75% of the
accomplished work in US Dollars.
• SOB cannot yet demand complete performance
from VPECI because it has not yet itself
performed its obligation in a proper manner,
particularly the payment of the 75% of the cost of
the Project in US Dollars. VPECI cannot yet be
said to have incurred in delay.
• Even assuming that there was delay and that the
delay was attributable to VPECI, still the effects of
that delay ceased upon the renunciation by the
creditor, SOB, which could be implied when the
latter granted several extensions of time to the
former.
• Besides, no demand has yet been made by SOB
against the respondent contractor. Demand is
generally necessary even if a period has been
fixed in the obligation. And default generally
begins from the moment the creditor demands
judicially or extra-judicially the performance of the
obligation. Without such demand, the effects of
default will not arise.
Price v. Rilloraza
• Camus leased to Price, Inc. a certain property. Under the
contract:
• Price will pay monthly rentals without need of demand;
• Price will construct a factory and warehouse on the lot,
and insure the structure with Camus as the beneficiary.
Camus will then become the owner upon termination of
the contract;
• In case of a breach of the contract by Price, Camus
may, while the default shall continue, and without
notice or demand, enter upon the premises and
terminate the lease and may thereupon expel and
remove Price; and
• Camus will, within one year from the signing of the
contract, fill and elevate a portion of the leased
property and enclose it with a concrete fence with
barbed wires.
Breach of reciprocal obligation
• 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 (3rd par., Art. 1169).
• Camus breached his obligation to elevate the area and
enclose it with a concrete fence and barbed wire.
Title of the warehouse/factory
• Title to the building would pass from Price to Camus upon
the termination of the lease. However, said right of Camus
to terminate the lease could be exercised only "while the
default (of Price) shall continue," and Price is not in default
as long as - in the words of Article 1169 - Camus "does
not comply or is not ready to comply in a proper manner
with what is incumbent upon him" and there is prima facie
proof of breach of contract by Camus.
When damages or interest may be lost
• A creditor entitled to damages or interest
because of default may lose the same if:
• The principal obligation is allowed to
prescribe
• Damages or interest are allowed to prescribe
• Damages or interest are condoned
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.
Grounds for liability for damages
• Fraud
• Deceit/ dolo/ intentional evasion of
fulfillment
• Negligence
• Fault/ culpa
• Default
• Mora
• Violation of the terms of the obligation
• Breach; contravention of the tenor

Fortuitous event?
Examples of violation of the contract giving rise to
liability:
• When a landlord fails to maintain a tenant in legal
possession of the land because the landlord was
not the owner and the true owner now wants to
occupy the land
Examples of violation of the contract giving rise to
liability:
De la Cruz v. El Seminario de la Archdiocesis de
Manila, et al.
• Methodist Episcopal Association, with de la Cruz
as its president, leased a parcel of land from the
Archbishop of Manila.
• MEA built a chapel on the leased premises.
• Just when the chapel was completed, a certain
Sinsuangco filed an ejectment case against the
MEA and the agent of the Archbishop who
executed the lease.
• The ejectment case prospered and no appeal was
taken.
• De la Cruz filed a case for damages.
• Held: The defendants are liable.
• When this rental contract was executed, the
lot in question was vacant. The agent, Miller,
led the plaintiff de la Cruz to believe that he
could place him in legal possession of the lot.
It was upon this theory that the plaintiff
entered into this contract and paid the rent for
the first year.
• Under their contract of lease, it was the duty of
the defendants to give the plaintiff the legal
possession of the premises. This they did not
do.
• The person who fails in the performance of his
obligations shall be subject to indemnify for
the losses and damages caused thereby.
• The true measure of damages for the breach
of such a contract is what the plaintiff has lost
by the breach (Locke v. Fruze).
Examples of violation of the contract giving rise to liability:
Arrieta v. NIRC
• Arrieta and NIRC entered into a Contract of Sale of
Rice.
• Arrieta will deliver to NIRC 20,000 metric tons of
Burmess Rice at $203.00 per metric ton.
• NIRC promised to pay for the imported rice "by means
of an irrevocable, confirmed and assignable letter of
credit in U.S. currency in favor of Arrieta and/or
supplier in Burma, immediately."
• Despite the commitment to pay immediately through a
LOC, however, it was only on July 30, 1952, or a full
month from the execution of the contract, that the
NIRC started its application for an LOC with PNB.
• NIRC does not have sufficient deposit so it asked for
special consideration from PNB.
• Arrieta reminded NIRC of the extreme necessity for the
immediate opening of the LOC by August 4.
• She had by then made a tender to her supplier in
Rangoon, Burma, "equivalent to 5% of the F.O.B. price
of 20,000 tons.
• This 5% will be confiscated if the required letter of
credit is not received by her supplier before August 4.
• However, NIRC was unable to open the LOC because
it failed to come up the marginal cash deposit required
by PNB.
• NIRC was only able to open its LOC on September 8.
• As a result of NIRC’s failure to open the LOC
by August 4, Arrieta’s 5% tender to her
supplier was forfeited.
• Held: NIRC is liable for damages.
• Its culpability arises from its willful and
deliberate assumption of contractual
obligations even as it was well aware of its
financial incapacity to undertake the
prestation.
• “Those who in the performance of their
obligation are guilty of fraud, negligence, or
delay, and those who in any manner
contravene the tenor thereof, are liable in
damages.”
• Under this provision, not only debtors guilty of
fraud, negligence or default in the
performance of obligations are decreed liable;
in general, every debtor who fails in
performance of his obligations is bound to
indemnify for the losses and damages caused
thereby.
• The phrase "any manner contravene the
tenor" of the obligation includes any illicit act
which impairs the strict and faithful fulfillment
of the obligation or every kind or defective
performance.
Examples of violation of the contract giving rise to
liability:
• When a person agreed to supply cinematographic
films but cannot do so because of his fault
• When a common carrier fails to take its
passengers to their destination
• If a taxi passenger is intentionally killed by the
driver
Kinds of damages:
• MENTAL
• Moral
• Exemplary
• Nominal
• Temperate
• Actual
• Liquidated
Kinds of damages; moral damages
• Physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings,
moral shocks, social humiliation, and similar injury.
• Though incapable of pecuniary computation,
moral damages may be recovered if they are the
proximate result of the defendant's wrongful act
or omission.
Kinds of damages; exemplary damages
• To serve as a deterrent to future and subsequent
parties from the commission of a similar offense
• Corrective
• “Punitive” or “vindictive” damages
Kinds of damages; nominal damages
• Recoverable where a legal right is technically
violated and must be vindicated against an
invasion that has produced no actual present
loss of any kind
• Where there has been a breach of contract and
no substantial injury or actual damages
whatsoever have been or can be shown
• When no other right can be recovered
• Discretion of the court
Kinds of damages; temperate damages
• Moderate damages
• The amount of plaintiff’s loss cannot be proved
with certainty, but the fact that there has been
loss on his/her part was established.
• More than nominal but less than
compensatory
Kinds of damages; actual damages
• Actual losses, unrealized profit
• Compensatory damages
• Cannot be presumed so the party alleging
must use the best evidence possible
• To be recoverable, actual damages must not
only be capable of proof, but must actually be
proved with reasonable degree of certainty.
We cannot simply rely on speculation,
conjecture or guesswork in determining the
amount of damages.
Kinds of damages; liquidated damages
• Agreed upon by the parties in case of breach
• When intended as a penalty, the courts may
reduce liquidated damages if unconscionable.
GF Equity v. Valenzona
• GF Equity hired Valenzona as Head Coach of
the Alaska basketball team in the Philippine
Basketball Association under a Contract of
Employment.
• “3. x x x If at any time during the contract, the
COACH, in the sole opinion of the
CORPORATION, fails to exhibit sufficient skill
or competitive ability to coach the team, the
CORPORATION may terminate this contract.”
• During his stint as Alaska’s head coach, the
team placed third both in the Open and All-
Filipino PBA Conferences in 1988.
GF Equity v. Valenzona
• GF Equity terminated Valenzona’s services by
citing Par. 3 of their contract.
• Valenzona filed a case for breach of contract with
damages, praying for:
• actual damages
• moral
• exemplary damages
• attorney’s fees
• costs of suit.

• Held: Par. 3 is void for it violates the principle of

mutuality of contracts.
• However, Valezona can recover only actual
damages but not moral damages.
• The pre-termination of the contract was not
willful as GF Equity based it on a provision
therein which is void. Malice or bad faith
cannot thus be ascribed to GF Equity.