OBLIGATIONS AND CONTRACTS

CHAPTER 1
STUDY GUIDE

I. Definitions

Define or give the meaning of the following:

1. Obligation – is derived from the Latin word obligatio, which means tying or binding. It is
a tie or a bond recognized by law by virtue of which one is bound in favor of another to
render something. It is a juridical necessity to give, to do, or not to do.
2. Quasi-contract – is a juridical necessity resulting from 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.
3. Compliance in good faith – means compliance or performance in accordance with the
stipulations or terms of the contract or agreement
4. Wrong – is an act or omission of one party in violation of the legal right or rights of
another.
5. Solutio indebiti – is the juridical relations which is created when something is received
when there is no right to demand it and it was unduly delivered through mistake.

II. Discussions
1. What are the essential requisites in an obligation? Give examples to illustrate them.
a) Passive Subject (debtor or obligor) - the person who is bound to the fulfillment of
the obligation; he who has the duty
b) Active Subject (creditor or obligee) – the person who is entitled to demand the
fulfillment of the obligation; he who has a right
c) Object or Prestation (subject matter of the obligation) – the conduct required to be
observed by the debtor (giving, doing, or not doing)
d) Juridical Tie (efficient cause) – that which binds or connects the parties to the
obligation
2. Why are obligations under the Civil Code a juridical necessity? Explain.
 Obligation is a juridical necessity because in case of noncompliance, the courts of justice
may be called upon by the aggrieved party to enforce its fulfillment or, in default
thereof, the economic value that it represents. In other words, the debtor must comply
with his obligation whether he likes it or not; otherwise, his failure will be visited with
some harmful or undesirable consequences. If obligations were not made enforceable,
 then people can disregard them with impunity. There are, however, obligations that
cannot be enforced because they are not recognized by law as binding.
3. What are the elements or requisites in order that a person may acquire a right of action
in court against another to enforce the performance of the latter’s obligation?
a) Right – the power which a person has under the law, to demand from another any
prestation
b) Obligation – on the part of another, to respect or not to violate said right
c) Wrong – an act or omission of one party in violation of the legal right or rights of
another
4. May a person incur obligations even without entering into any contract or voluntary
agreement? Explain.
 Yes, obligation do not only arise from contracts. They can be imposed by law, arise from
quasi-contracts, from crimes or acts or omissions punished by law or delicts, and from
quasi-delicts or torts. The principle behind quasi-contracts is that there should be no
one who will be unjustly enriched or benefited at the expense of another. The
commission of crimes due to deceit (dolo) or negligence (culpa) also give rise to
obligations for having injured the rights of another.

III. Problems

Explain or state briefly the rule or reason for your answers.

1. X saw at about one (1:00 pm) in the afternoon a child alone in a shopping mall. The child
who strayed from Y, his mother, was in tears and appeared very hungry. Out of pity, X
took him to a restaurant to eat for which he spent P150. Y did not give her consent to
the good deed of X. Furthermore, they were on their way home before the child got
lost. Is X entitled to be reimbursed by Y for the amount of P150? (ART. 1160)
 Yes, X is entitled to be reimbursed by Y for the amount of P150 spent for the child’s
meal. This is anchored in the provision of Art. 1160 on obligations arising from quasi-
contracts. A quasi-contract is a juridical necessity resulting from lawful, voluntary, and
unilateral acts by vitue 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. The kind of
quasi-contract exemplified above is called negotiorum gestio, which is the voluntary
management of the property or affairs of another without the knowledge or consent of
the latter. Out of concern for the lost child, X voluntarily took the child and placed it in
their temporary custody even without the consent of the parent. Whatever expenses X
has incurred must be shouldered by Y even if there was no agreement between them,
following the principle that no one will be unjustly enriched or benefited at the expense
 of another. What X did was an act of pity and a selfless deed that should be properly
compensated.
2. While the car of X was parked by the roadside, it was bumped at the rear by a jeep
belonging to Y. Only the car of X suffered damage. Under the circumstances, does it
follow that Y is liable to X for the damage? (ART. 1162)
 Yes, Y is liable to X for the damage suffered by the latter on his car. This is governed by
the provision of Art. 1162 on obligations arising from quasi-delict or torts. A quasi-delict
is an act or omission by a person which causes damage to another in his person,
property, or rights, giving rise to an obligation to pay for the damage done, there being
fault or negligence but there is no pre-existing contractual relation between the parties.
This means that even though X and Y are not parties to an agreement, they are both
bound together by virtue of the accident. Y is only liable for damages because it was an
act of negligence on his part that he bumped X’s car which happened to be parked by
the roadside.
3. In the same problem, has X the right to ask indemnity from R, the employer of X, on the
ground that when the accident occurred X was then on his way to transact business with
a client of R? (ART. 1158)
 No. X does not have the right to ask indemnity from R, his employer, because there is no
law that requires R to reimburse X for such event. According to Article 1158, obligations
derived from law are not presumed. Hence, it must be expressly stipulated in the law
that the employer has to reimburse his employee for an accident that occurred within
the latter’s official working hours. There being none, X does not have the right.
4. D (debtor) borrowed P10,000 from C (creditor). On the due date of the loan, D could not
pay C because he lost to a robber the P10,000 intended for C. In addition, he suffered
financial reverses, and he was short of cash even for his current family’s needs. Is D
legally justified to refuse to pay C? (ART. 1159)
 No. According to Article 1159, obligations have the force of the law between the binding
parties and they must follow its stipulations accordingly. When D loaned from C, he
entered into a voluntary agreement that he will have to pay his creditor accordingly.
Therefore, D must comply with the obligation in good faith and cannot refuse payment
to C.
 OBLIGATIONS AND CONTRACTS

CHAPTER 2
STUDY GUIDE

I. Definitions

Define or give the meaning of the following:

1. Generic or indeterminate thing – it refers only to a class or genus to which it pertains

and cannot be pointed out with particularity.
2. Personal right – is the right or power of a person to demand from another the
fulfillment of the latter’s obligation to give, to do, or not to do.
3. Legal delay or default – is the failure to perform an obligation on time which failure
constitutes a breach of the obligation
4. Fortuitous event – any event which cannot be foreseen, or which, though foreseen, is
inevitable. It is an event which is either impossible to foresee or impossible to avoid.
5. Diligence of a good father of a family – refers to the ordinary care or that diligence
which an average (reasonably prudent) person exercises over his own property.

II. Definitions
1. Give the rules as to the liability of a person for loss or damage resulting from a
fortuitous event. (ART. 1174)
 As a general rule, a person is not responsible for loss or damage caused to another
resulting from the non-performance of his obligation due to fortuitous events. His
obligation is extinguished.
 EXCEPTIONS TO THE RULE:
a) When it is expressly specified by law:
i. The debtor is guilty of fraud, negligence, or delay, or contravention of the
tenor of the obligation
ii. The debtor has promised to deliver the same specific thing to two (2) or
more persons who do not have the same interest
iii. The obligation to deliver a specific thing arises from a crime
iv. The thing to be delivered is generic
b) When declared by stipulation – the basis rests upon the freedom of contract
c) When nature of the obligation requires the assumption of risk – here, risk of loss or
damage is an essential element in the obligation.
2. What rights are given by law to the creditor in case the debtor fails to comply with his
obligation to deliver a specific thing? (ART. 1165)
 The creditor may exercise the following remedies or rights in case the debtor fails to
comply with his obligation:
a) Demand specific performance or fulfillment of the obligation with a right to
indemnity for damages
b) Demand rescission or cancellation of the obligation also with the right to recover
damages
c) Demand payment of damages only, where it is the only feasible remedy
3. What are included to be delivered in an obligation to give a definite thing? Explain them.
(ART. 1166)
 According to Article 1166, the obligation to give a determinate thing includes all of its
accessions and accessories.
a) Accessions – fruits of a thing or additions to or improvements upon a thing; they are
not necessary to the principal thing
b) Accessories – things joined to or included with the principal thing for the latter’s
embellishments, better use, or completion; here, the accessory and the principal
thing must go together
 Accessions and accessories must always be delivered together with the thing regardless
of its mention in the contract. However, a stipulation can be made so that they may be
excluded.
4. Suppose the obligation of the debtor is to do something and he fails to do it or performs
it in contravention of the agreement, what are the remedies available to the creditor?
(ART. 1167)
a) If the debtor fails to comply with his obligation to do, the creditor has the right:
i. To have the obligation performed by himself, or by another, at the debtor’s
expense
ii. To recover damages
b) In case the obligation is done in contravention of the terms of the same or is poorly
done, it may be ordered that it be undone if it is still possible to undo what was done
with right to indemnity for damages.
5. Can a debtor be put in delay and consequently, incur liability even without demand
from creditor? Explain. (ART. 1169)
 As a general rule, Articule 1169 provides that delay by the debtor begins only from the
moment a demand, judicial or extrajudicial, for the fulfillment of the former’s obligation
is made by the creditor.
 EXCEPTIONS TO THE RULE:
a) When the obligation so provides – the obligation must expressly so declare that a
demand is not necessary or must use words to that effect
 b) When the law so provides – payment of taxes, or in the case of the partner being
liable for the fruits of the thing he may have promised to contribute to the
parnership from the time they should have been delivered
c) When time is of the essence – here, the debtor is aware that the peformance of the
obligation after the designated time would no longer benefit the creditor. When the
time of performance is not fixed or is stated in general or indefinite terms, time is
hence not of the essence and the performance must be made within a reasonable
time.
d) When demand would be useless – example would be fortuitous events, negligence,
etc.
e) When there is performance by a party in reciprocal obligations – here, the
performance of one is conditioned upon the simultaneous fulfillment on the part of
the other. Neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent upon him. From the moment
a party fulfills or is ready to fulfill his obligation, delay by the other begins.
6. May an action arising from fraud be waived? Explain. (ART. 1171)
 As a general rule, Article 1171 provides that any waiver of an action for future fraud is
void. This is because a contrary rule would encourage the perpetration of fraud because
the obligor knows that even if he should commit fraud, he would not be liable for it.
 EXCEPTION TO THE RULE: A past fraud can be the subject of a valid waiver, it can be
considered an act of generosity and magnanimity on the part of the party who is the
victim. As a result, the aggrieved party renounces his right to indemnity for damages.
7. May an action arising from negligence be waived? Explain. (ART. 1172)
 Article 1172 provides that an action arising from negligence be waived, except when the
nature of the obligation requires the exercise of extraordinary diligence. Furthermore,
when negligence is gross or shows bad faith, it is considered equivalent to fraud. Hence,
any waiver of an action for future negligence of this kind is considered void.
III. Problems

Explain or state briefly the rule or reason for your answers.

1. S (seller) sold to B (buyer) on July 5, a horse named Silver to be delivered on July 20.
However, on July 15, S sold again and delivered the horse to T. Who has a better right to
Silver? (ART. 1164)
 Article 1164 provides that the creditor has a right to 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. In this case, B becomes the real owner of Silver only at
the time of delivery on July 20. Therefore, when there has been no delivery, the proper
court action is not recovery, but one for specific performance or rescission of the
 obligation. Furthermore, if T acted in good faith and did not have any knowledge about
the contractual agreement between S and B, then he acquires ownership over the horse
against B.
2. S sold to B specific refrigerator which S agreed to deliver not later than July 31, S did not
deliver the refrigerator on said date. Is S guilty of legal delay? (ART. 1169)
 Article 1169 sets forth the requisites of legal delay or default incurred by the debtor:
a) Failure of the debtor to perform his obligation on the date agreed upon
b) Demand made by the creditor upon the debtor to comply with his obligation, either
judicially or extrajudicially
c) Failure of the debtor to comply with such demand
 Hence, S is not guilty of legal delay because there was no demand from B for the
performance of the obligation. This can be construed as an agreement on the part of B
to extend the period within which S is to deliver the refrigerator. There being no
demand, B cannot ask for indemnity.
3. S promised to deliver B a female horse named Suzie on July 10. Suzie gave birth to a colt
on July 5.
a) What are the obligations of S?
b) Who has a right to the colt?
c) Who is the lawful owner of Suzie in case it was sold and delivered by S to July 8?
(ART. 1163, 1164)
4. D (debtor) borrowed P20,000 from C (creditor) payable after one (1 year). Is D liable to
pay interest? (ART. 1175)
5. R (lessor) issued a receipt that E (lessee) has paid the rent for the months of March,
2008. Can R still collect from E the rents for January and February, 2008? (ART. 1176)