to pay is contingent upon the former.

Book IV. Obligations and Contracts

Delivery signifies the execution of sale; transfer of ownership from the owner to the
buyer.
Title I. – Obligations
Heirs of Luis Bacus, et al. v. CA & Sps. Faustino and Victoriana Duray
Chapter 1. General Provisions When the respondents opted to buy the property, they are not yet obliged to make
actual payment. Contingent upon delivery of deed of sale

Art. 1156 An obligation is a juridical necessity to give, to do or not to do. (n)

Art. 1157. Obligations arise from:
Juridical relation whereby one person holds the obligee or creditor who is the holder of the
right, demand from another or debtor to perform an obligation or prestation. In the event of (1) Law;
breach or violation in part of the debtor there will be consequences that will be satisfied out of
(2) Contracts;
his assets or resources.
(3) Quasi-contracts;
Elements
(4) Acts or omissions punished by law; and
❖ Active subject (Obligee/ creditor) - one who has the right
(5) Quasi-delicts. (1089a)
❖ Passive subject (Obligor/ debtor) - one who has the obligation

❖ Object or prestation - the subject matter of the obligation, to do or not to do

Sources of obligations
❖ Efficient cause - the reason why the obligation exists.
❖ Law (obligations ex lege) - like the duty to pay taxes or to support one’s family
A promised to paint the picture of B by virtue of an agreement; A is the passive subject, B is
the active subject ❖ Contracts (obligations ex contractu) - duty to repay a loan by virtue of agreement

Pelayo v Lauron ❖ Quasi-contract (obligations ex quasi-contractu) - no existing contract

❖ Delicts - crimes or omissions punishable by law

Parents-in-law called the doctor. Issue: Who should pay the doctor, the husband or the
parents. Held: Husband, as per the Family Code - the spouse is mandated to provide ❖ Quasi-delict (obligations ex quasi-delicto) - torts, negligence
support

Bacus v Duray
Note: Quasi-contracts, crimes, and quasi delicts are imposed by law
Obligations are reciprocal - like sale; the party is obliged to perform his obligations if
the other party is at the point of executing what is incumbent upon him. The obligation

Art. 1158 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. (1090)
Serrano v. Central Bank
PDIC - mandated by law to pay depositors of an insolvent bank, provided it is a
properly documented
Is Central Bank obliged to pay the depositor of an insolvent bank?
PDIC insured is mandated to pay. But no law that provides the obligation to the banko
sentral
Santos v. CA
Right of pre-emption or right of first refusal
Criteria - tenant, urban land for more than 10 yrs
Art.1159 Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. (1091a)
Contract is a product of contracting parties with the force of law, however, it does not mean
that the latter is subordinate to the contract. For a contract to be valid, it must comply with Art.
1306 of the Civil Code which provides: “The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided, they are
not contrary to law, good morals, good customs, public order, or public policy.”
Delos Reyes v. Alejado
Undertaking to render domestic services for free is contrary to law and morals
Molina v. de la Riva
Jurisdiction is conferred by law, and not by the will of the parties
An Innominate contract are contracts that have no express name; contratos innominados
Vicente Aldaba v. CA
Doctors rendered services to a rich woman for ten years without compensation or expectations
of such. Was there a contract express or implied?
No. No express contract since nothing was agreed upon, and no implied contract for the
doctors themselves did not expect to be paid. For implied contracts, services must be rendered
in an expectation to be paid.
Art. 1160 Obligations derived from quasi-contracts shall be subject to the provisions of
Chapter 1, Title XVII, of this Book. (n)
Quasi-contracts, defined
A juridical relation resulting from lawful, voluntary, and unilateral act, and which has for its
purpose the payment of indemnity to the end that no one shall be unjustly enriched or
benefited at the expense of another.
Types
❖ Negotiorum gestio – when a person voluntarily takes charge of another’s abandoned
property or business without authority of the owner
Unauthorized ; enterprise or business undertaking but the owner left it behind or
abandoned it without leaving anybody to administer or manage it
Fire, reckless fire,flood, or other calamities - if somebody is able to save your property
in the midst of catastrophe; the owner is obliged to pay the saviour entitled to some
kind of just compensation
❖ Solutio indebiti - when something is received when there is no right to demand it, and
it was unduly delivered by mistake
Art. 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. (1092a)
Obligations ex-delicto or ex-maleficio — Obligation arising from criminal law and governed by
penal law; emanated or originated from criminal statute - crimes that involve private offended
parties
Two types of civil liabilities
❖ Arising from the crime - the civil liability will give way to the action if it is filed ahead;
it will be suspended to give way to the criminal action
❖ Arising from the Civil Code; proceedings cannot be hindered when filed separately or
independently
You are only allowed a private prosecutor if the criminal and civil liability are in a court action
Buenaventura Belamala v. Marcelino Polinar
The defendant in a criminal case for physical injuries died before final judgment. Is his civil
liability extinguished? No. In Art. 33 of the Civil Code, the case of physical injuries can still be
an independent civil action. His estate is liable but limited to the value of inheritance.
Art. 1162 Obligations derived from quasi-delicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by special laws. (1093a)
Quasi-delicts, defined
Tort or culpa aquiliana — fault or act of negligence which causes damage to another, there
being no pre-existing contractual relations between the parties.
Elcano v Hill
Culpa aquiliana can refer to acts which are criminal in character, whether the same be
voluntary or negligent.
US v. Barrias
Negligence – 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.
Chapter 2. Nature and Effect of Obligations
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)
Diligence of a good father of a family - standard of care if no law or no contract
Extraordinary diligence
Bishop of Jaro v. De la Pena
A priest deposited charity funds together with his personal account after the American
invasion. He later on became a prisoner of war and his bank deposit was confiscated. Is he
liable for the loss of the trust funds? No. Negligence did not exist in his deposition the money
with the bank since it was taken by force.
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)
There is real right only when there is delivery of a thing.
A personal right (jus in personam or jus ad rem) — a power demandable by one person or
another to give, to do or not to do.
A real right (jus in re) — a power over a specific thing, of ownership or possession, binding
upon the whole world
Kinds of Delivery
Actual – physical handing over of property
Constructive – physical transfer only implied. E.g. tradicio simbolica - as when a key is geven.
Traditio longa manu - by mere pointing out, traditio brevi manu - when a tenant buys a house
already in his possession, traditio constitutum possessorium - owner becomes tenant, and
tradition by execution of legal forms and solemnities - execution of public instrument
The obligation to deliver arises on: the perfection of contract if there is no term or condition,
or from the movement the term arrives or the conditions happen
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 same interest, he shall be responsible for any fortuitous event until
he has effected the delivery. (1096)
Rights of creditor
❖ Demand specific performance of the obligation
❖ Demand rescission or cancellation
❖ May compel the debtor for damages if the latter is guilty of fraud, negligence (see. Art.
1170) in the performance of the obligation
Indeterminate thing - loss does not extinguish the obligation; Genus never perishes
Instances where fortuitous event does not exempt
If the obligor delays (default or mora)
If the obligor is guilty of bad faith
Delay v Default
Ordinary delay is merely non-performance at the stipulated time; default is a delay which
amounts to a virtual nonfulfillment of the obligation
When does the obligation to deliver arise?
Fortuitous event extinguish the obligation if the loss of the generic thing will be caused by
such, provided you are not in delay or bad faith; prior to maturity date
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)
Accessories - joined to or included with the principal for the latter’s better use, perfection, or
enjoyment e.g. Keys to a house, dishes to a restaurant
Accessions - additions or improvements upon a thing. E.g. soil and whatever is built, planted,
or sown off a parcel of land
Refers to prostations to give
Accessories and accessions are included even if not mentioned, Except: if stipulated otherwise
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)
Contravention of contract – specifications form the contract were not followed
Specific performance is not a remed in personal obligations; otherwise, it may amount to
involuntary servitude which is prohibited under the Constitution.
Chavez v Gonzales
A typewriter sent to the repairman when returned was unrepaired and missing parts. Can he
be held liable for damages? Yes, for cost of labor and needed materials, as well as the value of
missing parts.
Thing may be ordered undone if: Debtor may be put in default if there is judicial or extrajudicial demand

❖ Poorly done (Art 1167) When demand is NOT needed to put debtor in default:

❖ Obligation is negative; provided undoing is possible ❖ When the law so provides.

Always take note of damages. ❖ When the obligation expressly so provides.

❖ When the time is of the essence of the contract.

Article 1168. When the obligation consists in not doing, and the obligor does what has ❖ When the demand is useless, as when the obligor has rendered it beyond his power to
been forbidden him, it shall also be undone at his expense. (1099a) (self-explanatory perform.
according to Judge V. Go)
❖ When demand has expressly acknowledged that he really is in default.

Mora Solvendi
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 Default on the part of the debtor
obligation. If in delay, force majeure and acts of God are not excused. If not delivered and beyond
retrieval, it should be indemnified in monetary form. *
However, the demand by the creditor shall not be necessary in order that delay may exist:
There can be no mora solvendi in negative or natural obligations.
(1) When the obligation or the law expressly so declare; or
❖ Mora solvendi ex re - debtor’s default in real obligations
(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 ❖ Mora solvendi ex persona - debtor’s default in personal obligations
was a controlling motive for the establishment of the contract; or
Requisites:
(3) When demand would be useless, as when the obligor has rendered it beyond his power
❖ Obligation must be due, enforceable and already liquidated or determinate in amount
to perform.
❖ Non-performance
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 ❖ Demand, unless not required
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 ❖ Demand must be specific to the obligation
delay, and those who in any manner contravene the tenor thereof, are liable for damages. Effects
(1101)
❖ If in default, debtor is liable for interest or damages

❖ Risk of loss
Default or Mora — “in delay”; speaks about the delay from the debtor
 ❖ Liable even for a fortuitous event; Except: proven that loss would have occurred even if Nominal - to vindicate a right; when no other kind of damages may be recovered
he was not in default (Art 1165, 2215, Civil Code)
Temperate - when the exact amount of damages cannot be determined

Actual - actual losses or unrealized profit

Mora accipiendi
Liquidated - predetermine beforehand; by agreement; can be determine based on contract or
Default on the part of the creditor; such as when he unjustifiably refuses to accept payment or law; known amount of damages; can be the cause of action
performance at the time stipulated

When an obligation arises ex delicto even through a fortuitous event, debtor-criminal is

responsible for loss unless the creditor is in mora accipiendi. He can either: (1) consign it to Article 1171. Responsibility arising from fraud is demandable in all obligations. Any
court, or (2) keep it to himself (would not be liable for loss to a fortuitous event) waiver of an action for future fraud is void. (1102a)

Compensatio morae If damages entered into its being, it can be a source for cause of action.

When in a reciprocal obligation, both parties are in default; here it is as if neither is in default. Cannot waive liability for fraud

Force majeure and acts of God –generally excused; without human intervention. ❖ For future application
❖ Against public policy
— ❖ Against public custom
- Liability can be a source of damages.
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. (1101)
DOLO CULPA
Grounds for liability in performance of obligations
a) There is a deliberate intention to a) Although voluntary, no deliberate
❖ Fraud (deceit or dolo)
cause damage or prejudice intention to cause damage
❖ Negligence (fault or culpa)
b) Liability cannot be mitigated by b) Liability may be reduced in certain
❖ Default (or mora)
courts cases
❖ Violation of the terms of the obligation
c) Waiver of an action to enforce c) Waiver of an action to enforce
Those liable under 1170 should pay damages, only if aside from breach of contract, prejudice liability due to future fraud is void liability due to future culpa may be
or damage was caused. Berg v Teus allowed

Kinds of Damages (MENTAL)

Kinds of Dolo
Moral - mental and physical anguish
Dolo causante (causal fraud) — fraud that is secured; consent given was the result of fraud;
Exemplary - corrective or to set an example
there is some kind of misinterpretation
Dolo incidente (incidental fraud) — Contract is still intact; contract is not a product of fraud; Kinds of Culpa
extract damages from the party who has the source of fraud
(1) Culpa contractual — results from a breach of contract

Article 1172. Responsibility arising from negligence in the performance of every kind of
obligation is also demandable, but such liability may be regulated by the courts,
according to the circumstances. (1103)
Barometer on the extent of damages to be awarded - based on factual circumstances
Illustrative example:
A passenger in a taxi was hurt because of driver’s negligence.
Culpa contractual since there was a contract of carriage between passenger and
owner. Negligence is filed against owner only, driver merely represents owner.

Negligence may be civil or criminal. If owner proves due diligence in selection and supervision of the driver, owner is still
responsible under the “respondeat superior” or master-servant rule. Such diligence
Stipulations regarding future negligence may be considered merely mitigating.

Gross negligence - not excused since it is contrary to public policy For the passenger to prove breach, the fact that he did not arrive to his destination is
sufficient. For the company to escape liability, it must prove the driver was really
Simple negligence - may be excused in certain cases careful and that there was no negligence.
Bill of lading (transporting of goods) San Pedro Bus Line v Navarro
Void: Facts/Issue: A passenger on a truck was hurt, but the driver was acquitted in the
criminal case. The victim now sues the owner of the truck for culpa contractual. May
❖ Exempting the carrier from all liabilities
the suit still prosper?
❖ Limits the liability to an agreed amount regardless of value of parcel
Held: Yes. Since the action is based on a contract, it is sufficient for him to prove the
Valid:
existence of the contract of carriage and the injuries suffered. It is not necessary to
❖ Limits the liability to an agreed value unless declared by the shipper and higher rate of prove negligence from the driver for it is presumed, unless the driver can prove he was
freight is paid not negligent then the company would not be liable.

Contracts of adhesion (2) Culpa aquiliana — civil negligence or tort or quasi-delict

Parties are not on unequal positions; e.g. employment and transportation contracts Illustrative example:

Stipulations on negligence must be strictly construed against the party situated in a higher Pedestrian was hit by a taxi and suffered physical injuries. The driver was negligent.
position
Culpa aquiliana since there is no previous existing contractual relations between the
Dela Cruz v Planters Products, Inc. parties

Is generally not a one-sided document as long as the signatory is not prevented from studying Injured pedestrian can bring action against both the driver and owner or operator.
it before signing
Burden of proof to prove negligence lies on the part of the pedestrian.
 Ibañez, et al., v. North Negros
supervision of employees is defense if the former is insolvent.
Passengers of a private automobile who brought a criminal action against the driver of not a proper complete
a train, and who reserved a civil action against the train owner can still bring on the defense (only mitigating);
basis of culpa aquiliana the civil case against the train owner even if the driver is Follows Respondeat superior
acquitted in the criminal case. or command responsibility
or the master and servant
Rationale: The civil case can prosper even without reservation since the train owner is rule.
not really a defendant in the criminal case. Art. 2177, Civil Code
As long as it proved that Victim has to prove Accused is presumed
(3) Culpa criminal — results from commission of crime or delict there was a contract, not negligence of the defendant innocent until proved;
carried out, presumed that burden of proof lies in the
A pedestrian was injured because of the recklessness of a taxi driver.
the debtor is at fault; Debtor prosecution
Pedestrian may bring an action for culpa criminal if he wants. has burden of proof

Injured party will file a criminal case against the driver, if guilty - owner is subsidiarily
liable if the driver is insolvent. Owner’s liability is automatic and subsidiary. Note: Negligence exists in cases of complacence, lack of attention, while imprudence occurs
in cases of hurry, rashness, insufficient consideration

CULPA CONTRACTUAL
Negligence is merely
incidental, incident to the
performance of an obligation
existing because of a
contract (Rakes v Atlantic
Gullf Pacific Co.)
There is a pre-existing
obligation (express or
implied contract) (Id.)
Proof needed –
preponderance of evidence
(Barredo v Garcia)
CULPA AQUILIANA
Negligence is direct,
substantive and independent
No pre-existing obligation
(except duty to be careful in
all human actuations)
Proof needed –
preponderance of evidence
CULPA CRIMINAL
Negligence here is direct,
substantive, and
independent of a contract.
No pre-existing obligation
(except duty to never harm
others)
Proof needed in a crime —
proof beyond reasonable
doubt
Contributory negligence - conduct on the part of the injured party contributing as a legal
cause to the harm he has suffered, which falls below standard to which he is required to
conform for his own protection.
E.g. Pedestrian not looking where he was going, bumped into a carefully driven car.
Exceptions to the doctrine of “last clear chance”
❖ Negligence of the plaintiff is concurrent with the negligence of the defendant
❖ Party charged is required to act instantaneously
❖ Injury cannot be avoided despite the application at all times of all the means to avoid
the injury
Rakes v. Atlantic Gulf and Pacific Co.
Plaintiff encountered an accident due to a defect in the track which has been previously
repaired negligently. Plaintiff contributed to his own injury by walking in front of the tracks
instead of on the sidelines.

Defense of “good father of Defense of “good father,etc” The respondent’s guilt is Negligence of the plaintiff does not bar him from recovering damages. It contributed only to
family” in the selection and is a proper and complete automatically his civil guilt, the injury or damage upon himself but it did not contribute to the accident. Damages should
be reduced or mitigated because of his own contributory negligence.
Liability for Culpa Aquiliana by others
- Father, or mother for damages caused by minor children (Art 2180)
- Guardians are liable for damages caused by minors or incapacitated persons, unless
“good father” defense is proved (Id.)
- Employers in behalf of their employees, unless “good father” defense is proved (Art
2181)
- Provinces, cities, municipalities on defective buildings and other public works under
their control (Art 2189)
Article 1173. The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows bad
faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required. (1104a)
Fault or negligence of the obligor when there is an omission of diligence which is required by
the nature of obligation.
When the law or contract does not state the diligence, one is expected to exercise diligence of
a good father of a family.
Kinds of diligence under the Civil Code
❖ That agreed by the parties
❖ In the absence of (1), that required by the particular provision of law e.g. Common
carrier — extraordinary diligence from the possession of goods until delivery (Art 1735,
Civil Code)
❖ In the absence of (2), that expected of a good father of a family (bonum pater familia)
E.g. In a contract with a common carrier for passengers — to deliver safely as far as
human care and foresight can provide using the diligence of very cautious persons,
with due regard for all circumstances. (Art. 1755, Civil Code) Even if free or reduced
rate was applied.
(Cont’d) Passenger — observe the same diligence to avoid injury to himself. However,
contributory negligence does not bar recovery of damages for his death and injuries if
the proximate cause is the common carrier. Damages is equitably reduced.
Article 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable. (1105a)
Generally, there is no liability for fortuitous events (caso fortuito) and acts of God.
Except:
1. When expressly declared by law E.g. Done in bad faith (Art. 552, Civil Code)
2. When expressly declared by stipulation or contract
3. When the nature of the obligation requires the assumption of risk; doctrine of
created risk E.g. When a carrier transports dynamite
Fortuitous events — extraordinary events not foreseeable or avoidable (Metro Comcast Steel
Corp v Allied Bank Corp)
Doctrine of assumption of risk — one who voluntarily exposes himself to an obvious, known
and appreciated danger assumes the risk of injury that may result therefrom. (Abrogar v
Cosmos Bottling Co., Inc)
Article 1175. Usurious transactions shall be governed by special laws. (n)
Usury — monetary transaction pertaining to excessive interest; non consumable, exorbitant,
excessive; It is the contracting for and receiving something in excess of the amount allowed by
law for the loan or use of money, goods, chattels, or credits. It is the exaction of excessive
interest.
Advocates for Truth in Lending, Inc. v Bangko Sentral Monetary Board
BSP cannot repeal the law. Usury law was suspended by BSP Circular 905 last January 01,
1983.
Usurious loan with mortgage (collateral) – collateral may be foreclosed; affects only the
interest and not the principal obligation
Article 1176. The receipt of the principal by the creditor without reservation with respect
to the interest, shall give rise to the presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation as to prior installments,
shall likewise raise the presumption that such installments have been paid. (1110a)
Disputable presumptions; in the presence of conclusive or concrete proof.
- If the creditor receives the fourth installment of a debt, it is understood that the first 3
installments have been paid already.
Article 1177. The creditors, after having pursued the property in possession of the debtor
to satisfy their claims, may exercise all the rights and bring all the actions of the latter for
the same purpose, save those which are inherent in his person; they may also impugn the
acts which the debtor may have done to defraud them. (1111)
Ejectment — accrued rental payment and arrears; cannot collect the unpaid dues.
Ground: fraudulent intention on the part of the debtor
Rights of Creditors
❖ Exact payment
❖ Exhaust debtor’s properties, generally by attachment (Art 2236, Civil Code)
❖ Accion subrogatoria (subrogatory action) — Exercise all rights and actions except
those inherent in the person i.e. parental authority, right to revoke donations on
grounds of ingratitude, hold office, carry out agency
❖ Accion pauliana (Impugn or rescind acts or contracts done by the debtor to defraud the
creditors)
Regalado v Luchasingco and Co.
FACTS: A lost a civil case and an attachment was issued against his property. B could not
collect his claim because A sold his warehouse to his son C after attachment has been issued
on such property. B who could not collect in any other means brought an action to rescind
contract allegedly made to defraud him.
HELD: The transaction was fraudulent and since B the creditor, cannot recover in any way, the
contract ought to be rescinded.
Rights inherent in the person of the debtor which cannot be exercised by creditors
❖ Right to existence — e.g. whatever he receives by means of support
❖ Right or relations of a public character — e.g. positions in the government
❖ Rights of honorary character — e.g. doctor’s degree, honoris causa
❖ Rights pertaining to the affairs of the home and the family – personal rights of husband
and wife
❖ Rights granted by law only to the debtor such as the action to revoke a donation
❖ Right to appear in court proceedings, like the settlement of an estate
Judicial family home shall be exempt from attachment, except: for non-payment of taxes,
mortgage
Extra-judicial family home shall be exempt from execution, forced sale or attachment,
exceptions present
Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are
transmissible, if there has been no stipulation to the contrary. (1112)
Rights coming from an obligation or contract
Negotiable promissory notes can be transferred by delivery.
Non-negotiable — can be transferred through donation or assignment to another person
General rule: Rights are transmissible, except:
1) If the law provides otherwise
2) If the contract provides otherwise
 3) If the obligation is purely personal
Transmissibility by contractual stipulation must be clearly proved.
Republic vs. Emilio Guanzon
FACTS: Respondent borrowed money from the Bank of Taiwan during the Japanese
occupation; executed a mortgage. When the Philippines was liberated, mortgage credit was
transferred to the US, and later on to the Phils through Philippine Property Act of 1964 by the
U.S. Congress which is a foreign law. The Philippines filed an action for foreclosure.
HELD: Foreign law cannot be given notice and cannot be given effect in our country.
Chapter 3. Different Kinds of Obligations
Sec 1. Pure and Conditional Obligations
Article 1179. Every obligation whose performance does not depend upon a future or
uncertain event, or upon a past event unknown to the parties, is demandable at once.
Every obligation which contains a resolutory condition shall also be demandable, without
prejudice to the effects of the happening of the event. (1113)
Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period, subject to the provisions of Article
1197. (n)
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition. (1114)
Pure obligation — without a condition or a term; demandable at once
Conditional obligation — when there is a condition
Condition — an uncertain event which wields an influence on a legal relationship.
Classification of Conditions
Suspensive — the happening of the condition gives rise to the obligation
Demandable; due to perform the obligation, without the occurrence of that condition the
obligation is not yet demandable. No consequence, no default, and no damages.
❖ Illustration: A promised to give B one million if the latter will pass the 2021 Bar, A is
the obligor, while B is the obligee, or holder of the right. Is A’s obligation to give the 1
million pesos demandable at once, upon the date the promise was made?
No, the suspensive condition (pass the 2021 Bar) has not been met. The
obligation of A is not yet due and demandable. Once the Supreme Court releases the
results and A has passed, the suspensive condition is deemed to have occured the
obligation to give becomes demandable.
Resolutory — the happening of the condition extinguishes the obligation
Acquisition or extinguishment of a right acquired. A conditional obligation, once the
resolutory condition will occur, the right of the obligor ceases and from the point of the
creditor his right will be lost. The thing received by the creditor will revert back to the debtor.
❖ Illustration: I will give you a BMW car now, but should you pass the 2021 bar the
donation will no longer be effective. Character of liberality.
The right becomes demandable at once, but once the resolutory condition
occurs, the right ceases, and the debtor is obliged to return the thing to the Creditor.
Parks v. Prov. of Tarlac , G.R. No. L-24190 [Donations with a Condition]
FACTS: Complainant donated land to the province of Tarlac on the condition that a school
house and a park will be built upon the land. Donation was accepted but several years later the
province had not performed the conditions, donors sold the land to Mr. Parks. Mr. Parks now
sues the province to recover the land.
HELD: Parks has no right to get the land. It is true that the donation was revocable, but until it
has been revoked, it remains valid and thus the donors did not have the right to sell. One
cannot give what he does not have ( nemo dat quod non habet).
The donation was not a suspensive condition and rather a resolutory one.
Judge V. Go: Deed of Donation, placed in a container, in writing, and accepted by the Donee
for the validity of the Donation.
Failure to fulfill the resolutory condition of the donation, the obligation of the donor will cease,
and the rights of the donee will be extinguished.
Since there was no revocation of the donation, the case will not prosper, as far as the title of
the land is with the Province.
1182. When the fulfillment of the condition depends upon the sole will of the debtor, the
conditional obligation shall be void. If it depends upon chance or upon the will of a third
person, the obligation shall take effect in conformity with the provisions of this Code.
(1115)
Potestative Conditions — depends on the exclusive will of one of the parties (Facultative
Conditions)
On the part of the Debtor:
❖ If also suspensive — both the condition and obligation are void, since the condition is
illusory. E.g. I’ll give you X amount next month if I live
❖ If also resolutory — valid. E.g. I’ll employ you but if X doesn’t happen, the employment
will end.
On the part of the Creditor: Valid.
Casual Conditions — depends on chance or upon the will of a third person
Art 1183. Impossible conditions, those contrary to good customs or public policy and
those prohibited by law shall annul the obligation which depends upon them. If the
obligation is divisible, that part thereof which is not affected by the impossible or
unlawful condition shall be valid.
The condition not to do an impossible thing shall be considered as not having been
agreed upon. (1116a)
Conditions are void if illegal or impossible. If indivisible – completely void.
If divisible – the legal part of the condition is still valid, cutting out the void conditions, as long
as the obligation can be fulfilled even without the void condition.
Art 1184. The condition that some event happen at a determinate time shall extinguish
the obligation as soon as the time expires or if it has become indubitable that the event
will not take place. (1117)
Conditions will happen in a determinate or specific time. When the day comes and the
obligation is not fulfilled there will be delay.
Positive conditions
X will give his land if Y marries Z. If by the end of the year, Z is dead or have not yet married
him, the obligation is extinguisehd.
If the period is not fixed, the court, considering the parties’ intentions will determine the
period intended.
Suspensive Condition with a Period
Suspensive negative condition
Art 1185. The condition that some event will not happen at a determinate time shall
render the obligation effective from the moment the time indicated has elapsed, or if it
has become evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed fulfilled at such time as may have
probably been contemplated, bearing in mind the nature of the obligation. (1118)
Negative conditions
X will give his land to Y if Y will not have married Z by Date. If by Date, Y has not married Z yet
or prior thereto Z has died, the obligation is fulfilled.
Art 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment. (1119)
Unmet condition
When conditions were not met, they become entitled not only to the return of their advances
and payment of their shares of stocks, but also to compensation for the use of their money and
property.
Does not apply if the debtor voluntarily prevents fulfillment — one must not profit by his own
fault.
Art 1187. The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when
the obligation imposed reciprocal prestations upon the parties, the fruits and interests
during the pendency of the condition shall be deemed to have been mutually
compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and
interests received, unless from the nature and circumstances of the obligation it should be
inferred that the intention of the person constituting the same was different.
In obligations to do and not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with. (1120)
In suspensive conditions, the contract cannot take effect until the condition is fulfilled. The
Date of the Contract, although the contract has a suspensive condition of ownership of land,
retroacts to the date the contract was perfected.
If the contract does not specify to turn over the fruits, debtor shall no longer account for the
fruits, natural or any other fruits, during his custodian pendente conditione.
Pending the fulfillment of the condition can the debtor mortgage or sell the property, as long
as he eventually becomes the owner, using 1187 he is an owner.
Art 1188. The creditor may, before the fulfillment of the condition, bring the appropriate
actions for the preservation of his right.
The debtor may recover what during the same time he has paid by mistake in case of a
suspensive condition. (1121a)
If not allowed to take the appropriate actions, there is a danger the creditor will receive
nothing, as when the object is deliberately destroyed, hidden, or alienated.
Phil Long Distance Telephone Co. v Jeturian
FACTS: PLDT operated a pension plan prior to the last pacific war, whereby subject to certain
conditions employees who retire would be given pensions. After the war, the plan was
abolished because of losses sustained during the Japanese occupation. ISSUES: Pending
fulfillment of the conditions, would the employees have any right to the pension? WOuld
financial losses authorize the abolition?
HELD: Yes, they have a right in expectancy. No, Financial losses will not excuse the abolition
since the obligation is to give a generic thing.
The second paragraph refers to a case of solutio indebiti. What was paid by mistake may be
recovered since the condition may not materialize, then there will be unjust enrichment.
Art 1189. When the conditions have been imposed with the intention of suspending the
efficacy of an obligation to give, the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it
is understood that the thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be
borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary. (1122)
Only applies if: the suspensive condition is fulfilled, and the object is specific
If pending the fulfillment of a suspensive condition, the object may be:
a) Lost — without the fault of the debtor, with the fault of the debtor, or partly with or
without the fault of the debor
b) may deteriorate — without the fault of the debtor, with the fault of the debtor, or party
both
c) may be improved — by nature or by time, through the expense of the debtor, partly
both
An object is “lost” if it perishes, goes out of commerce, disappears in such a way its existence
is unknown, or in such a way that it cannot be recovered.
Illustration:
A promised to give B his car if B passes the bar. Pending the results of the bar, the car is
destroyed by fortuitous events. A does not have to give B anything since the fortuitous event
falls under loss without the fault of the debtor. Except: generic things like money
Art 1190. When the conditions have for their purpose the extinguishment of an obligation
to give, the parties, upon the fulfillment of said conditions, shall return to each other what
they have received.
In case of the loss, deterioration or improvement of the thing, the provisions which, with
respect to the debtor, are laid down in the preceding article shall be applied to the party
who is bound to return.
As for the obligations to do and not to do, the provisions of the second paragraph of
Article 1187 shall be observed as regards the effect of the extinguishment of the
obligation. (1123)
When resolutory condition is fulfilled
❖ The obligation is extinguished (Art. 1181, Civil Code)
❖ Parties should restore to each other what they have received.
❖ Fruits or interest shall also be returned after deducting the expenses made for their
production, gathering or preservation (Art. 443, Id.)
❖ Said article will apply to whoever has the duty to return in case of the loss,
deterioration, or improvement of the thing.
❖ The courts shall determine the retroactivity of the fulfillment of resolutory obligations
Obligation is demandable at once, but once the condition is fulfilled, the right of the creditor
will cease. What if there will be loss, deterioration, or improvement? In resolutory, will be
given immediately on the perfection of the contract.
I will give you my land now but if you fail to pass the bar exam 2022, your right to my land will
extinguish and you will return my land to me.
What if the thing will be lost, deteriorated, or improved. Same conditions apply from 1189.
First determine who is liable for the loss. For deterioration, the debtor has the right to claim
the difference. For improvement, the creditor shall receive all the improvements.
Illustration:
A gave B a parcel of land in the condition that B will never go to the casino, but he did
afterwards. A’s obligation is extinguished. B will return both the land and the fruits. IF there
are any natural or time improvements, A is still entitled to the benefits.
Art 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
(1124)
Power to Rescind
Rescission only applies to reciprocal obligations. The power is a given and need not stipulate Art. 1192. In case both parties have committed a breach of the obligation, the liability of
in the contract (sale - buyer and seller, if the parties do not perform their obligations to each the first infractor shall be equitably tempered by the courts. If it cannot be determined
other, then it is as if there is no contract, and they can rescind. But once one party performs which of the parties first violated the contract, the same shall be deemed extinguished,
what is expected of him, then the other party must also perform the agreed prestation.
and each shall bear his own damages. (n)
It can only be demanded if the plaintiff is ready, willing, and able to comply with his
obligation, and the other is not.

The right to rescind is not absolute.

- Trivial causes or slight breaches will not cause recession. The court refused rescission
when there was a short delay in the payment of molasses. However, substantial breach
of an employee’s obligation is sufficient cause to put an end to a contract of
employment. (Song Fo v Hawaiian-Phil Co., Marcaida v Phil. Educ. Co)
- If there be just cause for fixing the period within which the debtor can comply, the
court will not decree rescission
- If the property is now in the hands of an innocent third party who has lawful
possession of the same. (Asiatic Commercial Corp v. Ang)

Aspon Simon v Adamos

In an action to rescind or for specific performance, the latter was granted but the same later
became impossible. May the remedy of rescission still be granted? Yes, under Art 1191, since
specific performance has now become impossible (titles of the lots have been nullified or
canceled) the defendants can no longer deliver their ownership to plaintiffs.

DMRC Enterprise v Este del Sol

In a contract of sale, the buyer can rescind if the seller does not deliver, or the seller can
rescind if the buyer does not pay. (Reciprocal obligation)

Illustration:

A borrowed Php1M from B as loan. A is the owner of a garage where B deposits his car. B owes
A Php1M for deposit fees. Is this a reciprocal obligation? No. They are mutually bound, the
cause does not arise from the same contract. One is a contract of loan, the other is a contract
of deposit.