What is an obligation?

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The namesake of the subject clearly lays out the two main topics of the class.
These are obligations and contracts. First, we will tackle what an obligation is.
An obligation is a juridical necessity to give, to do, or not to do. This is
according to Article 1156 of the Civil Code of the Philippines. Sounds
intimidating right? Let us simplify it with an example.

An example would when a buyer is legally bound to pay the seller for an item
bought. Conversely, the seller is also bound to transfer the ownership of the
item to the buyer. That is an example of an obligation “to give”. Two neighbors
contracting not to build a fence between their houses is an example of an
obligation “not to do”. An obligation “to do” would be the opposite of the
previous example. In that case, the neighbors would need to build the fence
between their properties based on their agreement.

Where do obligations come from?

An obligation can come from five sources. The Civil Code enumerates these
in Article 1157 as the law, contracts, quasi-contracts, crimes or delicts, and
quasi-delicts. Obligations that arise from contracts have the full force of the
law between the contracting parties. These are also to be enforced in good
faith. This is according to Article 1159 of the Civil Code.

Obligations from quasi-contracts rise with the notion that no one should be
unjustly enriched at the expense of another. An example of this is when a
delivery person gives a person a package not meant for him. The person then
has to give the mistaken delivery back to the rightful owner.

Lastly, obligations that arise from quasi-delicts are because of an act that
causes damage to another. However, there is no existing contractual
relationship between the parties concerned. An example would be when a
person destroys another person’s window while playing with a ball. He should
offer to have it fixed.

What are the kinds of obligations?

There are many different kinds of obligations. These include pure and
conditional obligations, obligations with a period, and alternative obligations.
Additionally, joint and solidary, divisible and indivisible obligations, and
obligations with a penal clause are also defined in the law. All of these can be
differentiated by their nature. The definitions of each kind of obligation can be
found in Chapter Three of the Civil Code.
What is a contract?

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A contract is a meeting of minds between persons whereby they agree to give
something or to render some service. This is according to Article 1156 of the
Civil Code of the Philippines. This definition of a contract brings back the
earlier definition of obligations arising from contracts. Contracts contain any
stipulations that may be deemed convenient, provided these are not contrary
to law or public policy. But what makes a contract valid? Well, there are three
essential requisites that determine validity of a contract. These are consent,
object, and cause. 

When is a contract valid?

The first requisite of a valid contract is the consent of the contracting parties.
Consent manifests itself when an agreement between two things meet. These
are the object and cause of the contract. According to Article 1319, the offer
must be certain and the acceptance must be absolute. Basically, consent
happens when there is a meeting of the minds between the parties.

The second requisite of a valid contract is the object which is the subject
matter of the contract. An example of an object would be a cellphone or a
parcel of land in a contract of lease. An object of the contract is within the
commerce of men. Objects may also be future products that have not been
produced yet. Additionally, services that are legal may also be objects in a
contract. Rights that are transmissible may be the objects of contracts as well.

The final requisite of a valid contract is the cause or consideration. The cause
of a contract depends on the party. In a contract of sale for example, the
cause for the buyer would be the ownership of the thing bought. On the other
hand, the cause of the seller would be the price of the item. The cause is
differentiated from the motives of the contracting parties for entering into the
contract. So a seller may sell a car to buy a new one. That would be the
motive. The cause, however, would be the price of the car.

This blog is merely an overview of the subject. Hopefully though, it is enough

to pique your interest in the subject. If you want to read about accounting
stereotypes, click on this link.

Reference:
Obligations and Contract, Republic Act No. 386.(1949).