LAW ON OBLIGATIONS AND CONTRACTS

BOOK | SECOND SEMESTER

CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS (1163-1178)

ART. 1163: DGFF REASON FOR DEBTOR’S OBLIGATION

Every person obliged to give somethings 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
DETERMINATE (SPECIFIC) VS INDETERMINATE
THING (GENERIC)
1. debtor must exercise diligence to insure that the thing
to be delivered would subsist in the same condition as
it was when the obligation was contracted
2. w/o the accessory duty to take care of the thing, the
debtor would be able to afford being negligent and he
would not be liable even if the property is lost or
destroyed, thus rendering illusory to the obligation to
give.

Determinate thing Indeterminate thing

Individuality, particularly
designated or segregated
from other same class
Can’t be replaced
Genus, class ART. 1164: Right to the fruits
The creditor has aright to the fruits of the thing from the
Can be replaced time the obligation to deliver it arises. However, he shall
Limited generic thing – when acquire no real right over it until the same has been delivered
the generic object is to him.
confined to a particular
class. KINDS OF FRUITS

e.g. – obligation to deliver 1. Natural fruits

one of my horses - natural made
- products of the soil, and the young and other products
RIGHT AND DUTIES OF CREDITOR AND DEBTOR IN of animals
REAL OBLIGATIONS
2. Industrial fruits
Real obligations - man-made
- produced by lands of any kind through cultivation or
Remedies of Creditor Duties of Debtor
labor
Determinate Indeterminate Determinate Indeterminate
Fulfill Ask debtor Preserve or Deliver the 3. Civil fruits – derived by virtue of juridical relation
obligation + take care of thing of same
damages it quality
When obligation to deliver fruits arises
Cancel + Ask 3rd Deliver the Pay damages
damages person to do fruits of the 1. Perfection of contract – birth of the contract
@ expense thing 2. If obligation is subject to suspensive condition/period, it
of debtor arises from fulfillment of condition/arrival of the term
Damages Damages accessions 3. Contract of sale – perfection of the contract regardless if
and oblig. subject to suspensive condition/period where the
accessories price has been paid
Can compel Cannot Deliver the 4. Obligations to give from the 4 sources, time of
compel thing performance is det. spec. prov. of law
FE, debtor FE, debtor is Pay
is not liable liable damages PERSONAL RIGHT VS REAL RIGHT
PRESERVE OR TAKE CARE OF THE THING
Personal right Real Right
Jus in personam Jus in rem
• Levels of Diligence (lowest to highest) To demand from a specific To demand the specific
Meager → DGFF → Extraordinary person thing
Specific person Whole world
DILIGENCE OF A GOOD FATHER OF A FAMILY
• BONUM PATERFAMILIA Ownership acquired by DELIVERY
• ordinary care • Delivery or tradition
• Extraordinary care – based on stipulation or law • Registration
• Gen. rule: public policies need utmost care • No delivery, nothing can be recovered. Therefore, ask for
the fulfillment (1165)
FACTORS TO BE CONSIDERED
1. Gen. rule: not liable to damages if due to fortuitous
events (force majeure)
2. nature of obligations
3. time, place, person
FRANCHESKA F. ATENDIDO
LAW ON OBLIGATIONS AND CONTRACTS
BOOK | SECOND SEMESTER

ART. 1165: Remedies real obligation

RIGHT OF CREDITOR TO ACCESSIONS AND
When what is to be delivered is a determinate thing, the ACCESSORIES
creditor, in addition to the right granted him by Art. 1170, may • Gen. rule: all accessions and accessories are included in
compel the debtor to make the delivery. obligation to deliver specific thing
• Principle of law: ACCESSIO CEDIT PRINCIPALI =
If the thing is indeterminate or generic, he may ask that the
accessory follows principal
obligation be complied with at the expense of the debtor.
• To be excluded = stipulation
If the obligatory delays or has promised to deliver the same
thing to two or more persons who do not have the same interest, ART. 1167: Remedies positive personal obligation
he shall be responsible for fortuitous event until he has effected
the delivery. If a person obliged to do something fails to do it, the same
shall be executed at his cost.

The same rule shall be observed if he does it in

REMEDIES OF CREDITOR TO REAL OBLIGATION
contravention of the tenor of the obligation.

• See remedies of creditor to real obligs. on previous page

Furthermore, it may be decreed that what has been poorly
Specific thing done to be undone.
• Only the debtor can comply
• Creditor can compel him but not thru force/violence REMEDIES OF CREDITOR TO PERSONAL
OBLIGATIONS
Generic thing
• Others can comply
Remedies – CPPO (Art. 1167)
• Creditor cannot compel only ask
A. Fails B. Contrary C. Poorly done
• Art. 1246 – manner of compliance in obligation to
Gen. rule: 1. Ask debtor to 1. Ask debtor to
deliver generic things
do accdg. to undo
1. Ask debtor to specs. 2. Ask 3rd person
WHERE DEBTOR DELAYS OR PROMISED do 2. Ask 3rd person to undo @
DELIVERY TO SEPARATE CREDITORS 2. Ask 3rd person @ expense of expense of debtor
@ expense of debtor
Determinate thing – fortuitous events does not exempt debtor debtor
from responsibility (only when creditor promised same thing to 3. recover
two or more persons) damages
Exception:
Indeterminate thing – cannot be object of destruction by 1. Ask to do
fortuitous event because GENUS NUNQUAM PERIT (genus 2. Can’t ask 3rd
never perishes) person

ART. 1166: Accessions and accessories PERFORMANCE BY A 3rd PERSON

The obligation to give a determinate thing includes that of 1. Compelling performance by debtor prohibited
delivering all its accessions and accessories, even though they a. Positive personal obligation and real
may not have been mentioned. obligation (generic thing) – can ask 3rd
person
Accessions Accessories b. Deliver specific thing – can compel debtor
fruits, additions, Joined to, included for c. Positive personal obligation – cannot compel
improvements on principal embellishment, better use, specific performance due to involuntary
completion servitude
house/trees on a land, rents, Key of a house, picture 2. Indemnification of creditor for damages
aircon, profits/dividends from frame, bracelet of watch, a. Personal qualification is a det. Factor
shares of stocks machinery in factory, bow of b. Court can’t grant damages to creditor when
violin obligation can be performed at debtor’s
Accession Discreta – Less important expense notwithstanding his failure or
(natural, industrial, civil) refusal to do so

Accession Industrial – ART. 1168: Remedies negative personal obligation

(building, planting, sowing)
When the obligation consists in not doing, and the obligor
Accession Natural – does what has been forbidden him, it shall also be undone at his
(alluvion, avulsion) expense.
Accession with respect to
movable
FRANCHESKA F. ATENDIDO
LAW ON OBLIGATIONS AND CONTRACTS
BOOK | SECOND SEMESTER

REMEDIES OF CREDITOR IN NEGATIVE PERSONAL

OBLIGATION Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially demands
from then the fulfillment of the obligation.
1. undo forbidden + damages
2. damages
Exceptions:
• declared by law
obligor’s duty: abstain from forbidden
debtor can’t be guilty of delay • essence of time
• demand is useless
ART. 1169: Delay/default/ mora • reciprocal obligations

DELAY

Ordinary delay – failure to perform obligation on time

Legal delay or default or mora – failure constitutes breach

KINDS OF DEFAULT

MORA SOLVENDI MORA ACCIPIENDI COMPENSATION MORAE

Delay on Debtor creditor both
Ex re = to give
Ex persona = to do
Requisite 1. ordinary delay

2. demand of creditor is
either judicial or extrajudicial

3. failure of debtor to comply

on demand
Effect 1. Debtor is Guilty of 1. Creditor Guilty of 1. first infractor: equitably
breach/violation breach/violation tampered/balanced by court
*for
specific- 2. Liable to Interest/damages 2. Creditor liable to Damages 2. If can’t determine: contract
fortuitous suffered by debtor extinguished and each bear
event, 3. if no Extrajudicial demand, own damages
damages interest commence upon 3. Bears risk of Loss of the
can be filing complaint thing due
reduced if
proven that 4. Liable for Fortuitous event 4. Debtor Not liable to pay
the loss (specific thing) interest from creditor’s delay
will lead to
same 5. Liable for Fortuitous event 5. debtor may Release himself
result + replace or pay damages from obligation by
(generic thing) consignation/deposit of
thing/sum due in court

WHEN DEMAND IS NOT NECESSARY TO PUT 3.Time is essence

DEBTOR IN DELAY a. wedding gown, cake on birthdays
b. but, if time isn’t fix, general or indefinite, = not
of essence
• Gen. rule: No demand, no delay
c. not necessary to state, intent sufficient
• Exceptions: 4.Demand will be useless
a. thing unavailable
1.Obligation so provides b. prior absolute refusal by S
a. Promised to pay on or before due date without c. intention not to comply
need of any demand 5.Reciprocal obligations (COMPENSATIO MORAE)
b. they can stipulate to dispense demand a. conditioned on simultaneous fulfillment
c. must expressly declare obligation so demand b. no delay if neither comply/ready
is not necessary c. no date set – simultaneous
2.Law provides d. right to demand payment only when thing is
a. paying taxes delivered
b. partner liable for fruits of the things he may e. performance is set on different dates
promised in the partnership from the time of - get now, pay later
delivery w/o any demand
FRANCHESKA F. ATENDIDO
LAW ON OBLIGATIONS AND CONTRACTS
BOOK | SECOND SEMESTER

ARTICLE 1170: Fraud, negligence, delay, violation FRAUD vs. NEGLIGENCE

Those who in the performance of their obligation are guilty Fraud Negligence
of fraud, negligence, or delay and who in any manner Intention Deliberate No intention
contravene the tenor thereof, are liable to damages. intention to
cause damage
GROUNDS FOR LIABILITY Waiver of For future For future negligence,
liability fraud, void valid (except when nature
1170: breach of obligation – voluntary because it is of oblig. requires
1174: breach of obligation – involuntary against the law extraordinary diligence)

Grounds for liability For past fraud, For future negligence that
Fraud/ Deliberate or intentional evasion valid = act of is gross, void
Dolo/ Implies some kind of dishonesty or malice generosity and
Deceit magnanimity
Kinds: of the plaintiff
Presumption Clearly proved Presumed from violation
1. Incidental fraud (DOLO INCIDENTE) of contract
• committed in the performance of an Mitigation Cannot be Can be mitigated by
oblig. because of contract mitigated courts accdg. to
• remedy: claim damages circumstances

2. Causal fraud (DOLO CAUSANTE)
• fraud employed in the execution of the
contract to secure consent
• Remedy: contract annulled
Negligence/ • Voluntary act or omission
Fault/ • No bad faith/malice which prevents
Culpa normal fulfillment of the obligation
• Failure to exercise degree of care
Kinds:
1. Contractual negligence (CULPA
CONTRACTUAL)
• merely makes debtor liable for
damages
2. Civil negligence (CULPA
AQUILIANA)
• parties not related by pre-existing
contract
• tort/quasi-delict
3. Criminal negligence (CULPA
CRIMINAL)
• Negligence from commission of crime
• Affected parties may choose bet.
criminal action for damages (Art. 100
RPC) or civil action for damages (Art.
2176)
• Art. 2177 – prohibits recovery for the
same negligent act 2x
Delay/ • Failure to perform an obligation on time
Default/ which failure constitute to breach
Mora
Contravention • Violation of the terms and conditions
of the terms without justifiable excuse or reason
of the • It must not be due to fortuitous event
obligation (force majeure)
*Negligence that is gross – rules of fraud shall apply as it = fraud
ART. 1171: Fraud
Responsibility arising from fraud is demandable in all
obligations. Any waiver of action for future fraud is void.
RESPONSIBILITY ARISING FROM FRAUD
DEMANDABLE
• incidental fraud - employed in the fulfillment of obligation
(Art. 1170)
• Court was not given to reduce damages as fraud is serious
and evil
WAIVER OF ACTION FOR FUTURE FRAUD VOID
see grounds for liability
WAIVER OF ACTION FOR PAST FRAUD VALID
see grounds for liability
ART. 1172: Negligence
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.
RESPONSIBILITY ARISING FROM NEGLIGENCE
DEMANDABLE
In performance of every kind of obligation, debtor is also liable
for damages due to his negligence
1. Discretion of court to fix amount of damage
• court was given a wide discretion in fixing amount of
damages, as negligence must necessarily depend
upon circumstances (Art. 1173)
• When justified by the circumstances, the court may
increase/decrease the damages recoverable

FRANCHESKA F. ATENDIDO
LAW ON OBLIGATIONS AND CONTRACTS
BOOK | SECOND SEMESTER
2. Damages where both parties mutually negligent
• fault of one may cancel or neutralize the negligence of
the other
• equitable principle – no one shall unjustly enrich
himself at the expense of another
VALIDITY OF WAIVER OF ACTION ARISING FROM
NEGLIGENCE
see fraud vs. negligence
EFFECT OF NEGLIGENCE ON THE PART OF THE
INJURED PARTY
Art. 2179 of the new CC:
• plaintiff’s negligence = immediate and prox. cause of injury
= can’t recover damages
• plaintiff’s negligence = contributory = can recover
damages but shall be mitigated by the court
• it is not required that negligence of the defendant should
be the sole cause of the damage
ART. 1173: Fault or negligence as fraud
The fault or negligence of the obligor consists in the
omission of that diligence required by the nature of the obligation
and corresponds with the circumstances of the person, of the
time, and of the place. When negligence shows bad faith, the
provisions of Article 1171 and 2021, 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.
MEANING OF FAULT OR NEGLIGENCE
Negligence – failure to observe for the protection of the interests
of the another person, degree of care, precaution and vigilance
which the circumstance justly demand, whereby such other
person suffers injury
FACTORS TO BE CONSIDERED IN DETERMINING
NEGLIGENCE
1. Nature of the obligation
2. circumstance of the Person
3. circumstance of the Time
4. circumstance of the Place
MEASURE OF LIABILITY FOR DAMAGES
Damages – money compensation awarded
• Purpose: to place the innocent party in the same (not better)
position he would have occupied if the contract or
obligation had been performed
Injury – refers to the wrongful or unlawful act
Article 2201 of the Civil Code:
In case of fraud, bad faith, malice or wanton attitude, the
obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation
FRANCHESKA F. ATENDIDO
DAMAGES RECOVERABLE IN CASE OF BREACH
OF THE OBLIGATION
1. Moral damages – include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and
similar injury.
2. Exemplary or Corrective damages – are imposed, by
way of example or correction for the public good, in
addition to actual or compensatory, moral, temperate
or liquidated damages.
3. Nominal damages – are adjudicated in order that a
right of a person, which has been violated or invaded
by the CC, may be vindicated or recognized, and not
for the purpose of indemnifying such person for any
loss suffered by him.
4. Temperate or Moderate damages – which are more
than nominal but less than compensatory damages,
may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot
from the nature of the case, be (not) proven with
certainty.
5. Actual or Compensatory damages – are adequate
compensation for pecuniary loss suffered by a person
as he has proven with certainty(e.g. – medicine,
hospitalization expenses).
6. Liquidated damages – are those agreed upon by the
parties to a contract, to be paid in case of breach
thereof.
KINDS OF DILIGENCE
Diligence – attention and care required
• Whether or not negligence of the obligor excusable
depends in the degree of diligence required
KINDS OF DILIGENCE REQUIRED
1. by stipulation
2. by law
3. diligence of a good father of a family
Art. 1174: Debtor not liable to fortuitous events
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, were
inevitable.
MEANING OF FORTUITOUS EVENT
Fortuitous event
• cannot be foreseen and inevitable
• impossible to foresee or impossible to avoid
• should be independent of the will of the debtor
LAW ON OBLIGATIONS AND CONTRACTS
BOOK | SECOND SEMESTER
FORTUITOUS EVENT VS FORCE MAJEURE
Fortuitous event – act of man or an act of God
1. Act of man – fortuitous event is an event independent of
the will of the obligor but not of other human wills
Ex: War, fire, robbery, murder
2. Act of God – majeure or totally independent of the will
of every human being
Ex: Earthquake, flood, rain, shipwreck
Fortuitous event and force majeure
• Identical as they exempt obligor from liability
• Independent of the will of the obligor
KINDS OF FORTUITOUS EVENTS
1. Ordinary fortuitous events – common, could reasonably
foresee
2. Extra-ordinary fortuitous events – uncommon, could not
reasonably foreseen
REQUISITES OF A FORTUITOUS EVENT
1. Independent of the human will or at least debtor’s will
2. Could not be foreseen or inevitable
3. Must be impossible to comply in a normal manner
4. Debtor must be free from any participation
➢ Absence of any prevents obligor to exempt from
liability.
➢ Mere pecuniary, poverty, and mere difficulty to
foresee are not excuses to non-fulfillment.
RULES AS TO LIABILITY IN CASE OF FORTUITOUS
EVENT
1. Expressly specified by the law
a. Debtor guilty of Fraud, Negligence, or Delay, or
Contravention of the tenor of the obligation
b. Debtor has promised to deliver the same thing to
2 or more persons who do not have same interests
c. Obligation to deliver specific thing arises from
crime
d. Thing to be delivered is generic
2. Declared by stipulation
3. Nature of obligation requires assumption of risk – risk
of loss or damage as an essential element in oblig.
Art. 1175: Usurious
Usurious transactions shall be governed by special laws
MEANING OF USURY
Usury – contracting for/receiving interest in excess of the
amount allowed by law
REQUISITES FOR RECOVERY OF INTEREST
1. Payment of interest must be expressly stipulated
FRANCHESKA F. ATENDIDO
2. Agreement must be in writing
3. Interest must be lawful
VOID Stipulation for payment of usurious interest is
VALID Lender may still recover the principal of the loan and
demand compliance with other terms of the contract
USURY LAW LEGALLY NON-EXISTENT
Central Bank Circular No. 905
• Start: Dec. 10, 1982
• Effective: Jan. 1, 1983
• Rate of interest and other charges on loan,
forbearance of money, goods, or credit, regardless or
maturity, secured or unsecured, may be charged or
collected shall not be subject to any ceiling
prescribed by the Usury Law
• Usury law is now legally non-existent
• Does not give creditor absolute right to charge interest
that is iniquitous or unconscionable
Art. 1176: Receipt and presumptions
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
MEANING OF PRESUMPTION
Presumption – inference of a fact not actually known arising
from its usual connection with another that is known or proved
2 KINDS OF PRESUMPTION
1. Conclusive presumption – can’t be contradicted
2. Disputable (or rebuttable) presumption – can be
contradicted with proof
Examples:
Rule Issued receipt for the principal and interest was
not stated if paid in the payment.
Presumed Interest paid, as it usually follows principal. Only
disputable if there’s reservation that it was not
yet paid.
Rule Failed to pay rent for February and March but
paid for April. Lessor issued receipt of payment
for April.
Presumed Rent fully paid for February to April. Follows
payment of previous installments first before
later ones. Only disputable if there’s reservation.
EXEMPTION TO PRESUMPTIONS
1. With reservation as the interest – no payment yet for the
prior interests/installments
LAW ON OBLIGATIONS AND CONTRACTS
BOOK | SECOND SEMESTER

2. Receipt without indication of particular installment paid – LATIN TERMS/MAXIMS

receipt doesn’t recite which date is paid
a. Ignorantia legis neminem excusat – ignorance of the
3. Receipt for a part of the principal – did not mention law excuses no one from compliance therewith
interest: 1) Principal, 2) Interest
b. Dura lex sed lex – law maybe harsh but it is the law
c. Damnum absque injuria – damage without injury
4. Payment of taxes – no presumption that previous taxes
were paid by the latest one d. Genus nunquam perit – genus never perishes
e. Nullum crimen, nulla poena sine lege – there is no
5. Non-payment proven crime unless there is a law punishing it
f. Jus in rem – Real right
Art. 1177: Satisfaction of claims g. Jus in personam – personal right
h. Ex re – to give, real obligation
The creditors, after having pursued the property in i. Ex persona – to do, personal obligation
possession of the debtor to satisfy their claims, may exercise all j. Ex lege - legal obligation
the rights and bring all the actions of the latter for the same k. Ex delicto / Ex maleficio – penal obligation
purpose, save those which are inherent in his person; they may *Proof required in labor cases – substantial evidence
also impugn the acts which the debtor may have done to defraud *Proof required in civil case – preponderance of evidence
them. *Proof required in criminal case – proof beyond reasonable
doubt
REMEDIES AVAILABLE TO CREDITORS FOR THE
SATISFACTION OF THEIR CLAIMS

Principal/primary remedy:

1. Exact fulfillment (specific performance) with the right to

damages

Secondary remedy:

1. Pursue the leviable (not exempt from attachment under

the law) property of the debtor
2. ACCION SUBROGATORIA - exercise all the right and
bring all actions of the debtor except those inherent in
or personal to the person of the latter
3. ACCION PAULIANA - rescind or impugn acts or
contracts; last remedy

Art. 1178: Rights transmissible

Subject to the laws, all rights acquired in virtue of an

obligation are transmissible, if there has been no stipulation to
the contrary.

EXCEPTIONS IN TRANSMISSIBILITY OF RIGHTS

1. Prohibited by the law

a. Contract of partnership – 2 or more persons
by themselves to contribute to a common fund
with intention to divide profits
b. Contract of agency – render some service or
to do something with the consent/authority
c. Contract of commodatum – delivers
something unconsumable so the latter can
use and return it; gratuitous

2. Prohibited by stipulation of parties – like stipulation of

upon the death of the creditor, the oblig. shall be
extinguished or creditor cannot transmit his right to
another

FRANCHESKA F. ATENDIDO