OBLIGATIONS & CONTRACTS | Sherley Ann T.

Feliciano

I. Refresher in Law in General

1. Give the definition of law.

The most accepted definition of law under the Philippine legal system is the one
proffered by Spanish jurist Sanchez Roman. He made a distinction between the two
senses the term law connotes: the general sense and the specific sense.

In the general sense (derecho), law is defined as the science of moral laws based on
the rational nature of man. These moral laws govern his free activity for the realization
of his individual and social ends. They are, by their very nature, demandable and
reciprocal.

When we speak of law in the general sense, we are referring to the abstract and moral
conception of law. Morality recognizes that humans, as rational creatures, have free
will, and that they have every right to exercise this free will to achieve their unique and
individual aspirations. This right cannot be infringed and must be respected by other
humans.

In the specific sense (ley), law is defined as a rule of conduct. These rules of conduct
are just and obligatory. They are promulgated by legitimate authority (typically by the
Legislature). They are of common observance and benefit.

Law in the specific sense is the common and popular definition of law. It refers to the
rules established by an instrumentality of the State—usually the Congress—that either
direct conduct, prohibit conduct, impose rights or duties, or repeal or modify another
law. There is a presumption that these rules are just and may only be struck down by
an instrumentality of the State that has the power to do so. These rules must be
observed by everyone under Philippine jurisdiction, subject to limitations imposed by
the rules themselves.

2. What are the different kinds of law?

a. Private law
Private law applies to any circumstances relating to relationships between
individuals in a legal system. It regulates disputes between private individuals
or entities. It is also called civil law that governs:

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-Laws on persons and family relations

-Laws on property and ownership
-Laws on obligations and contracts

b. Public law
Public law deals with issues that affect the general public or state. Its wide
scope covers the following:

-Administrative law
-Constitutional law
-Criminal laws
-International law
-Tax Law

3. Give the elements of a valid law

As provided by the New Civil Code of the Philippines,

a. Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided. (Article 2)

b. Laws are repealed only by subsequent ones, and their violation or non-
observance shall not be excused by disuse, or custom or practice to the
contrary.

When the courts declared a law to be inconsistent with the Constitution, the
former shall be void and the latter shall govern.

Administrative or executive acts, orders and regulations shall be valid only

when they are not contrary to the laws or the Constitution. (Article 7)

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4. Give the purposes of law

a. Laws protect individual rights and liberties. The Bill of Rights in the Philippine
Constitution guarantees several important protections from other individuals,
from organizations, and even from the government.

b. Laws provide a framework and rules to help resolve disputes between

individuals. Laws create a system where individuals can bring their disputes
before an impartial fact-finder, such as a judge or jury. There are also legal
alternatives where individuals work together to find a solution, such as by using
alternative dispute resolution (ADR).

c. Laws provide a way to set standards. Laws provide enforceable rules and
protections regarding taxes, commercial transactions, employment laws,
insurance, and other important issues that affect the state.

d. Laws help societies to maintain peace order. Laws guarantee punishment for
the offender and that the rights of the victim are upheld, thus creating a
deterrence from committing felonies and offenses.

5. Give the effects of law upon humanity and social relationships

a. Social Control

Social control is the process of ensuring individuals engage in “right conduct”.

The law is the primary institution that is relied on to ensure social control in
large and diverse societies. First, the law defines the deviant behavior that is
subject to legal punishment. Second, the law defines the institutions and
procedures that will punish individuals who engage in deviant behavior. Third,
the law defines the procedures that are used to detect and investigate felonies
and offenses.

For instance, an ordinance that mandates curfew hours within a city imposes
social control.

b. Dispute Resolution

Dispute is the assertion of inconsistent claims over something of value. Existing

laws are what the plaintiff and the defendant assert in their arguments. The

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Legislature may also intervene to resolve a dispute by passing a law the

resolves a certain conflict. Then a competent court decides on the case.

c. Social Change

Rule of law tells that no man can be held to be above the law of the land and
thereby ensures that law is the supreme element that regulates any society.
Law is not only present to provide the society with a set of rules according to
which a society should function but also regulations which the society is
supposed to adopt in its own way in order to ensure welfare to the people living
therein. Law is a helpful agency of the State that brings in a social order that
the people have to abide by in order to avoid unnecessary conflicts that can act
as an obstacle for the overall development of the society.

II. Obligation, Definition, Sources

1. Article 1156

An obligation is a juridical necessity to give, to do or not to do.

2. Define juridical necessity

Juridical necessity is a duty arising from obligation which is legally demandable

and the courts of justice may be called upon through proper action to order the
performance.

3. Essential Requisites of Obligation

An obligation as defined in Article 1156 is constituted upon the

concurrence of the four (4) essential elements thereof, namely:

1. A passive subject (called debtor or obligor)

– the person who is bound to the fulfillment of the obligation; he who has a
duty;

2. An active subject (called creditor or obligee)

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– the person who is entitled to demand the fulfillment of the obligation; he

who has a right;

3. Object or prestation (subject matter of the obligation)

– the conduct required to be observed by the debtor. It may consist in giving,

doing, or not doing. Without the prestation, there is nothing to perform. In
bilateral obligations, the parties are reciprocally debtors and creditors; and

4. A juridical or legal tie (also called efficient cause)

– that which binds or connects the parties to the obligation. The tie in an
obligation can easily be determined by knowing the source of the obligation.
– also called the vinculum juris

4. Give 3 examples each of obligations to give, to do and not to do

To give:

1. Employers are bound by law to give 13th month pay to their regular
employees.
2. Employers are bound by law to remit their employees’ SSS contributions on
time.
3. An employee who earns more than P250,000 per year is required to pay
his/her income tax at 20% of the excess of P250,000.

To do:

1. A person engaged in trade or profession shall file his/her income tax return,
regardless of amount of gross income on or before April 15 of each year
covering income for the preceding taxable year.

2. Each employer shall immediately report to the SSS the names, ages, civil
status, occupations, salaries, and dependents of all his employees who are
subject to compulsory coverage.

3. Every official and employee, except those who serve in an official honorary
capacity, without service credit or pay, temporary laborers and casual or

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temporary or contractual workers, shall file under oath their statement of

assets, liabilities and net worth and a disclosure of business interests and
financial connections including those of their spouses and unmarried
children under eighteen (18) years of age living in their households.

Not to do:

1. Public officials and employees shall not, directly or indirectly, have any
financial or material interest in any transaction requiring the approval of their
office.

2. Public officials and employees shall not engage in the private practice of
their profession unless authorized by the Constitution or law, provided, that
such practice will not conflict or tend to conflict with their official functions.

3. The President, Vice-President, the Members of the Cabinet, and their

deputies or assistants shall not, unless otherwise provided in the 1987
Philippine Constitution, hold any other office or employment during their
tenure.

5. Article 1157

Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts.

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6. Define each source of law and give an example each

1. A law is a body of rules of action or conduct prescribed by a controlling

authority, and having binding legal force. That which must be obeyed and
followed by citizens subject to sanctions or legal consequence is a law.

Obligations derived from law are not presumed. Only those expressly
determined in this Code or in special laws are demandable, and shall be
regulated by the precepts of the law which establishes them; and as to what
has not been foreseen, by the provisions of this Book. (Article 1158)

Examples:

Republic Act No. 11199 - The Social Security Act of 2018

Republic Act No. 10963 - Tax Reform for Acceleration and Inclusion (TRAIN)
Law

Republic Act No. 11223 – Universal Health Care Act

2. A contract is a meeting of minds between two persons whereby one bind

himself, with respect to the other, to give something or to render some service.
(Article 1305 of the New Civil Code)

Article 1159. Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith.

Examples:

a. On January 1, 2022, D borrowed from C P2,000,000.00 to be paid on or

before December 31, 2023, under the agreement that, if D fails to pay
at the expiration of said period, the house and lot described in the
contract would be considered sold for the amount of the loan.

b. Wil employed the services of Architect Oliver to design for him a two-
storey house under the agreement that Wil shall pay him P100,000.00
upon the delivery of the blueprints to him.

c. A entered into a 24-month lease agreement with B to use B’s condo unit
for P20,000 monthly that must be paid every 25 th of the month. In case

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of two consecutive defaults in payment, the contract shall be terminated

and the full amount of unpaid rentals shall be due and demandable.

3. A quasi-contract is that juridical relation resulting from certain lawful, voluntary

and unilateral acts by virtue of which the parties become bound to each other
to the end that no one will be unjustly enriched or benefited at the expense of
another. (Art. 2142)

a. Juliet left her farm unattended for because she is having a vacation.
Romeo, a concerned lover in secrecy, noticed that Juliet has not been
around and the plants are slowly dying. Out of affection, Romeo
cultivated the land and took care of the property. Romeo spent
necessary expenses. Juliet is bound to reimburse Romeo’s expenses
in order for her not to unjustly enrich herself at the expense of Romeo.

b. A Lazada delivery rider mistakenly delivered a parcel that contains

luxury goods to Maria Mercedes. Thinking that it was her husband’s
surprise gift, she accepted the parcel. However, it was actually her
neighbor, Maria Mercy, who ordered and paid for the items for herself.
Maria Mercedes is duty bound to return the items to Maria Mercy or
reimburse Maria Mercy of the value of the items mistakenly received.

c. Pedro got into an accident while driving his motorcycle. While

unconscious, he was rushed to the nearest hospital for an immediate
medical treatment. Pedro is duty bound to pay the hospital to cover the
cost of medical expenses he incurred.

4. Delicts are acts or omissions punished by law. These are felonies punished by
the Revised Penal Code or offenses punishable by special laws. Delicts are
crimes.

Article 1161. 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 of the Revised Penal Code provides that every person criminally
liable is also civilly liable.

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Article 104 of the Revised Penal Code provides that the civil liability arising out
of the commission of crime includes:
1. restitution
2. reparation of damage caused
3. indemnification of consequential damages

Examples:

a. Drew Terte stole the Ducati Panigale V4 owned by Michael Young. If

Drew Terte is convicted, the court shall order him to: (1) to return the
vehicle (or to pay its value if it was lost or destroyed); (2) to pay for any
damage caused to the vehicle; and (3) to pay such other damages
suffered by Michael Young, as a consequence of the crime.

b. Rey Pis was found by the RTC guilty beyond reasonable doubt of the
crime of statutory rape. Aside from the penalty of reclusion perpetua,
Rey was ordered by the court to pay the victim the following amounts:
civil indemnity of ₱75,000.00, moral damages of ₱75,000.00, and
exemplary damages of ₱75,000.00. All monetary awards for damages
shall earn interest at the legal rate of six percent (6%) per annum from
date of finality of the decision until fully paid.

c. The Court of Appeals found Bongbong Marcos “guilty beyond

reasonable doubt” for violation of the Internal Revenue Code over his
failure to file his ITRs. The CA ordered him to pay his deficiency taxes
to the Bureau of Internal Revenue and imposed on him a fine of P36,000
plus surcharges as penalty.

5. A quasi-delict is an act or omission whereby a person

without malice, but by fault, negligence or imprudence not legally excusable,
causes injury to another.

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.

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Examples:

a. Dina Caiwas was a victim of a vehicular accident. On her way home, she
was hit by a delivery truck owned by Rush Inc. Dina filed a criminal case in
court for reckless imprudence resulting in serious physical injuries and
damage to property against Mavi Lis, the driver who was an employee of
the said company. The driver was later convicted of the crime and the court
awarded damages in Dina’s favor. However, the driver had no means to
pay or satisfy the award of damages. Dina can therefore recover damages
from Mavi’s employer. Article 103 of the RPC states that employers have
subsidiary civil liability for the felonies committed by their employees in the
discharge of their duties.

b. Mercury Drug is the registered owner of a six-wheeler 1990 Mitsubishi

Truck. It has in its employ Rolando Del Rosario as driver. Spouses Richard
and Carmen Huang are the parents of Stephen Huang and own the red
1991 Toyota Corolla. These two vehicles figured in a road accident. At the
time of the accident, Del Rosario only had a Traffic Violation Receipt. A
driver’s license had been confiscated because he had been previously
apprehended for reckless driving. Stephen Huang sustained massive
injuries to his spinal cord, head, face and lung. He is paralyzed for life from
his chest down and requires continuous medical and rehabilitation
treatment. Mr.& Mrs. Huang fault petitioner Del Rosario for committing gross
negligence and reckless imprudence while driving, and Mercury Drug for
failing to exercise the diligence of a good father of a family in the selection
and supervision of its driver. The trial court found Mercury Drug and Del
Rosario jointly and severally liable to pay respondents. The Court of
Appeals affirmed the said decision. (Mercury Drug Corporation v. Huang,
G.R. No. 172122, June 22, 2007)

c. Eight-year-old boy Otso suffered injuries due to the prank played on him by
the minor children of their neighbors, Mr. & Mrs. Frank. Otso was
hospitalized and received several stitches because of the incident. Marites,
Otso’s mother went to Mr. & Mrs Frank and informed them of the injuries
sustained by her son and asked them for reimbursement of the medical
expenses incurred. Mr. & Mrs. Frank are civilly liable for the injuries and
damages caused by the acts or omissions of their unemancipated children
living in their company and under their parental authority.

7. Read and analyze all the articles related to Article 1157 (sources of obligations)

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8. Define culpa, dolo, culpa aquiliana, delicto, negotiorum gestio, solutio indebiti,
culpa contractual, prestation, movable and immovable properties, good father of
the family

Culpa (negligence or fault) is 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 (Art. 1173).

Dolo (fraud) is a deliberate or intentional evasion of the normal fulfillment of an

obligation

Culpa aquiliana (civil negligence) is a negligence which by itself is the source of an

obligation between the parties not formally bound before by any pre-existing contract.
It is also called “tort” or “quasidelict.”

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.

Delicto (crime) is an act or omission punished by law.

Article 100 (Revised Penal Code). Civil liability of a person guilty of felony. -
Every person criminally liable for a felony is also civilly liable.

Negotiorum gestio (unauthorized management) is the voluntary management of

the property or affairs of another without the knowledge or consent of the latter.

Article 2144. Whoever voluntarily takes charge of the agency or management of

the business or property of another, without any power from the latter, is obliged
to continue the same until the termination of the affair and its incidents, or to require
the person concerned to substitute him, if the owner is in a position to do so.

Solutio indebiti (undue payment) is the juridical relation which is created when
something is received when there is no right to demand it and it was unduly delivered
through mistake.

Article 2154. If something is received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.

Culpa contractual (contractual negligence) is negligence in contracts resulting in

their breach. This kind of negligence is not a source of obligation. (Art. 1157.) It merely
makes the debtor liable for damages in view of his negligence in the fulfillment of a

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pre-existing obligation resulting in its breach or non-fulfillment. (Arts. 1170-1174,

2201.) It is a kind of civil negligence if it does not amount to a crime.

A prestation is the subject matter of the obligation or the conduct required to be

observed by the debtor. It may consist in giving, doing, or not doing. (see Art. 1232.)
Without the prestation, there is nothing to perform. In bilateral obligations (see Art.
1191.), the parties are reciprocally debtors and creditors.

Article 414. All things which are or may be the object of appropriation are
considered either:

(1) Immovable or real property; or

(2) Movable or personal property.

Article 418. Movable property is either consumable or nonconsumable. To the first

class belong those movables which cannot be used in a manner appropriate to their
nature without their being consumed; to the second class belong all the others.

Article 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil;

(2) Trees, plants, and growing fruits, while they are attached to the land or form an
integral part of an immovable;

(3) Everything attached to an immovable in a fixed manner, in such a way that it

cannot be separated therefrom without breaking the material or deterioration of
the object;

(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in
buildings or on lands by the owner of the immovable in such a manner that it
reveals the intention to attach them permanently to the tenements;

(5) Machinery, receptacles, instruments or implements intended by the owner of

the tenement for an industry or works which may be carried on in a building or on
a piece of land, and which tend directly to meet the needs of the said industry or
works;

(6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of

similar nature, in case their owner has placed them or preserves them with the

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intention to have them permanently attached to the land, and forming a permanent
part of it; the animals in these places are included;

(7) Fertilizer actually used on a piece of land;

(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed,
and waters either running or stagnant;

(9) Docks and structures which, though floating, are intended by their nature and
object to remain at a fixed place on a river, lake, or coast;

(10) Contracts for public works, and servitudes and other real rights over
immovable property.

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.

Diligence of a good father of a family. — In obligations to give (real obligations), the

obligor has the incidental duty to take care of the thing due with the diligence of a good
father of a family pending delivery. The phrase has been equated with ordinary care or
that diligence which an average (a reasonably prudent) person exercises over his own
property.

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