UNIVERSITY

OF MINDANAO
College of Accounting Education
Program: BSA, BSIA, BSMA, BSAIS

Physically Distanced but Academically Engaged

Self-Instructional Manual (SIM) for

Self-Directed Learning (SDL)
(Week -1-3)

Course/Subject: ACC 216 – OBLIGATIONS AND CONTRACTS

Name of Teacher: ATTY. ALNESSA THEA V. REPOLLO – UY, REB
THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT FOR
REPRODUCTION AND DISTRIBUTION OUTSIDE OF ITS INTENDED USE.
THIS IS INTENDED ONLY FOR THE USE OF THE STUDENTS WHO ARE
OFFICIALLY ENROLLED IN THE COURSE/SUBJECT.
EXPECT REVISIONS OF THE MANUAL.
THIS IS NOT FOR COMMERCIAL USE.

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TABLE OF CONTENTS
Particulars Pages
Cover Page 1
Table of Contents 2
Course Outline Policy 3-6
Course Information 6
Big Picture Unit Learning Outcome (BP ULO)a: 7
Metalanguage 7-8
Essential Knowledge: Introduction to Law - The General
Nature of Law 8-10
Self-helf 10
Let's Check 11-12
Let's Analyze 12
In a Nutshell 12-13
Q & A List 13
Keywords Index 13
BP ULOb and ULOc : 13
Metalanguage 13-16
Essential Knowledge : Civil Code IV, Title I - Obligations
Chapter I – General Provisions 16-22
Self-helf 22
Let's Check 22-24
Let's Analyze 24
In a Nutshell 24-25
Q & A List 25
Keywords Index 25
BP ULOd : 26
Metalanguage 26-28
Essential Knowledge: Nature and Effects of Obligations 28-41
Self-helf 41-42
Let's Check 42-43
Let's Analyze 43-44
In a Nutshell 44
Q & A List 44
Keywords Index 45
Course Schedules 45-46
Online Code of Conduct 46-47

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Course Outline: ACC 216 – Obligations and Contracts

Course Coordinator: Atty. Alnessa Thea V. Repollo – Uy, REB
Email: alnessauy@umindanao.edu.ph
Student Consultation: By Blackboard LMS Message
Effectivity Date: May 25, 2020 (Summer/Term)
Mode of Delivery: Blended (On-Line with face to face or virtual sessions)
Time Frame: 54 Hours
Student Workload: Expected Self-Directed Learning
Requisites: None
Credit: 3
Attendance Requirements: A minimum of 95% attendance is required at all
scheduled Virtual or face to face sessions.

Course Outline Policy

Areas of Concern Details
Contact and Non-contact Hours This 3-unit course self-instructional manual is designed
for blended learning mode of instructional delivery with
scheduled face to face or virtual sessions. The expected
number of hours will be 54 including the face to face or
virtual sessions. The face to face sessions shall include
the summative assessment tasks (exams) since this
course is crucial in the licensure examination for
certified public accountant.s (CPAs)
Assessment Task Submission Submission of assessment tasks shall be on 3rd, 5th, 7th
and 9th week of the term. The assessment paper shall
be attached with a cover page indicating the title of the
assessment task (if the task is performance), the
name of the course coordinator, date of submission and
name of the student. The document should be emailed
to the course coordinator. It is also expected that you
already paid your tuition and other fees before the
submission of the assessment task.

If the assessment task is done in real time through the
features in the Blackboard Learning Management
System, the schedule shall be arranged ahead of time
by the course coordinator.

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Since this course is included in the licensure examination for
certified public accountants, you will be required to take the
Multiple Choice Question exam inside the University. This
should be scheduled ahead of time by your course coordinator.
This is non-negotiable for all licensure-based programs.
Turnitin To ensure honesty and authenticity, all assessment tasks are
Submission (if required to be submitted through Turnitin with a maximum
necessary) similarity index of 30% allowed. This means that if your paper
goes beyond 30%, the students will either opt to redo her/his
paper or explain in writing addressed to the course coordinator
the reasons for the similarity. In addition, if the paper has
reached more than 30% similarity index, the student may be
called for a disciplinary action in accordance with the
University’s OPM on Intellectual and Academic Honesty.

Please note that academic dishonesty such as cheating and
commissioning other students or people to complete the task for
you have severe punishments (reprimand, warning, expulsion).

Penalties for Late The score for an assessment item submitted after the
Assignments/Assessments designated time on the due date, without an approved extension
of time, will be reduced by 5% of the possible maximum score
for that assessment item for each day or part day that the
assessment item is late.

However, if the late submission of assessment paper has a valid
reason, a letter of explanation should be submitted and
approved by the course coordinator. If necessary, you will also
be required to present/attach evidences.

Return of Assignments/ Assessment tasks will be returned to you two (2) weeks after the
Assessments submission. This will be returned by email or via Blackboard
portal.

For group assessment tasks, the course coordinator will require
some or few of the students for online or virtual sessions to ask
clarificatory questions to validate the originality of the
assessment task submitted and to ensure that all the group
members are involved.
Assignment Resubmission You should request in writing addressed to the course
coordinator his/her intention to resubmit an assessment task.
The resubmission is premised on the student’s failure to comply
with the similarity index and other reasonable grounds such as
academic literacy

standards or other reasonable circumstances e.g.
illness, accidents financial constraints.

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Re-marking of You should request in writing addressed to the program
Assessment Papers and coordinator your intention to appeal or contest the score given to
Appeal an assessment task. The letter should explicitly explain the
reasons/points to contest the grade. The program coordinator
shall communicate with the students on the approval and
disapproval of the request.

If disapproved by the course coordinator, you can elevate your
case to the program head or the dean with the original letter of
request. The final decision will come from the dean of the
college.

Grading System All culled from BlackBoard sessions and traditional contact
Course discussions/exercises – 30%
st
1 formative assessment – 10%
2nd formative assessment – 10%
3rd formative assessment – 10%

All culled from on-campus/onsite sessions (TBA):
Final exam – 40%

Submission of the final grades shall follow the usual University

system and procedures.

Preferred Referencing Harvard Referencing Style.

Style


Student Communication You are required to create a umindanao email account which is
a requirement to access the BlackBoard portal. Then, the
course coordinator shall enroll the students to have access to the
materials and resources of the course. All communication
formats: chat, submission of assessment tasks, requests etc.
shall be through the portal and other university recognized
platforms.

You can also meet the course coordinator in person through the
scheduled face to face sessions to raise your issues and
concerns.

For students who have not created their student email, please
contact the course coordinator or program head.

Contact Details of the Lord Eddie I. Aguilar

Dean Email: aguilar_lordeddie@umindanao.edu.ph Phone:
082-3050654 local 137

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Contact Details of the Mary Grace S. Sombilon, MSA, CPA
Program Program Head – BSA, BSMA
Heads Email: sombilon_marygrace@umindanao.edu.ph
Phone: 082-3050647 local 102

Devzon U. Porras, MSA, CPA
Program Head – BSAT, BSAIS, BSIA
Email: dporras@umindanao.edu.ph
Phone: 082-3050647 local 102
Students with Special Students with special needs shall communicate with the course
Needs coordinator about the nature of his or her special needs.
Depending on the nature of the need, the course coordinator
with the approval of the program coordinator may provide
alternative assessment tasks or extension of the deadline of
submission of assessment tasks. However, the alternative
assessment tasks should still be in the service of achieving the
desired course learning outcomes.

Online Tutorial Through LMS or PM Chats

Well-Being Welfare GSTC Head:

Support Help Desk Ronadora E.Deala
Email: ronadora_deala@umindanao.edu.ph
Phone: 0921-2122846

GSTC Facilitator:
Zerdszen P Ranises
Email: gstcmain@umindanao.edu.ph
Phone: 0950-4665431/0905-8924090
Library and Information Brigida E. Bacani
Center (LIC) Resource Email: library@umindanao.edu.ph
09513766681

for inquiries, you can email
at umlic.eresources@gmail.com, raphael_digal@umindanao.edu.ph or
chat with us here http://library.umindanao.edu.ph/
Facebook page: https://www.facebook.com/UM-Learning-and-
Information-Center-Davao-City-962331877193048/



Course Information – see/download course syllabus in the Black Board LMS


CC’s Voice: Hi, dear student! Welcome to this course ACC 216: Obligations and
Contracts. I hope you will have fun learning the many interesting and
important topics in this subject. Enjoy and study well!!!

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CO As a future accounting practitioner, you need to have adequate knowledge of
laws pertinent in the business world. Thus, in this course you are expected to read in
advance, recall your knowledge and apply your understanding of the different legal
terminologies used in the law of obligations and contracts; apply skills in critical thinking
by identifying which particular law is appropriate in a hypothetical/legal situation; apply
skills in logical thinking through judgment and evaluation on given situations.
Let us begin!

Big Picture
Week 1-3: Unit Learning Outcomes (ULO): At the end of the unit, you are expected to
a. comprehend the different kinds of laws;
b. define and contrast the different kinds of obligations;
c. define and identify the different sources of obligation;
d. explain the nature and effects of obligation.

Big Picture in Focus:
ULOa. Comprehend the different kinds of laws.

Metalanguage

In this section, the most essential terms relevant to the study of different laws and to
demonstrate ULOa will be operationally defined to establish a common frame of refence
as to how the texts work in your chosen field or career. You will encounter these terms
as we go through with our lessons. Please refer to these definitions in case you will
encounter difficulty in understanding basic legal and obligations concepts.

constitution - fundamental law or supreme law or highest law of the land.

divine law - is the law of religion and faith which involves itself with the concept of sin
and salvation.

law – (meaning in general) it means any rule of action or any system of uniformity.

legislations - are the statements of legal rules enacted by a competent authority; it also
includes ordinances enacted by local governments units.

natural law - is the divine inspiration in man of the sense of justice, fairness and
righteousness, not by divine revelation or formal promulgation, but by internal dictates of
reason alone.

moral law - it means the entirely of the norms of good and right conduct growing out of
the common belief of every community of what they consider as right or wrong.

physical law – it refers to the many uniformities of actions and orders of sequence in the
operation or course of nature. Also known as the laws of physical science or physical
law, they are the physical phenomena that we sense and feel. They are actually called
law only by analogy.

stare decisis (or Doctrine of precedent) - the judgment or ruling of a higher court on a
issue of law are binding on all lower courts.

state law - the law that is enacted and imposed by the state.

Essential Knowledge

To perform the aforesaid big picture unit learning outcome a (ULOa) during the first
three (3) weeks of the course, you need to fully understand the following essential
knowledge that will be laid down in the succeeding pages. Please note that you are not
limited to exclusively refer to the these resources. Thus, you are expected to utilize
other books, research articles and other resources that are available in the university’s
library e.g. ebrary, search.proquest.com etc.

INTRODUCTION TO LAW
The General Nature of Law

GENERAL DIVISIONS OF LAW

1. Law which is enacted and imposed by the state; also known as the state law.
2. Law which is not enacted and imposed by the state; it includes divine law, natural
law, moral law and physical law.

SUBJECTS OF LAW
• State law, divine law, natural law, moral law - are considered rules of action. They
apply to men as rational beings only.
• Physical law - operates on everything, including humans, without consideration to
the latter’s use of their will power and intelligence.

DIVINE LAW - is the law of religion and faith which involves itself with the concept of sin
and salvation.

• Source - it is formally declared by God and made known to mankind by means of

direct revelation.

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• Sanction – found in the promise of certain and retributions in the current life or in
the afterlife.

NATURAL LAW - is the divine inspiration in man of the sense of justice, fairness and
righteousness, not by divine revelation or formal promulgation, but by internal dictates of
reason alone.

• Binding force – every person has a basic notion of what is right or wrong
determined from common standards of good and evil; thus natural law is
constantly present and applies to all men at all times, wherever they may be.

MORAL LAW - it means the entirely of the norms of good and right conduct growing
out of the common belief of every community of what they consider as right or wrong.
• Binding force - moral law is not fixed as it evolves with the changing times,
conditions or convictions of the people.
Example: Polygamy

PHYSICAL LAW – it refers to the many uniformities of actions and orders of sequence
in the operation or course of nature. Also known as the laws of physical science or
physical law, they are the physical phenomena that we sense and feel. They are
actually called law only by analogy.
Example: Gravity

STATE LAW – also referred to as positive law, municipal law, civil law, or imperative
law.
• Binding force – among the many laws considered as rules of action, state law is
the only law enforced by the state; sometimes, if necessary, even imposed with
the use of its physical force.

Example: The Family Code of the Philippines

• Concepts - the term (state) law, in its general sense, means all the laws taken
together.
Example: Law of the land

- law, in its specific sense, has been referred to as a rule of conduct, just, obligatory,
promulgated by legitimate authority and for common observance and benefit.
Example. The law on sales

CHARACTERISTICS OF LAW
1. A rule of conduct - tells us what acts are allowed and what acts should not be done.

2. Obligatory – non-compliance with one’s duty as demanded by law may result to

repercussions which can compel obedience.

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3. Promulgated by legitimate authority -, the legislative branch of the government of
the Philippines, also known as Congress, is the legitimate or competent authority which
enact laws in our country, although local government units may also enact ordinances.

4. Of common observance and benefit – as law is made to benefit the people, it must
therefore be followed by everyone for the good of all.

SOURCES OF LAW
1. Constitution - fundamental law or supreme law or highest law of the land.

2. Legislations - are the statements of legal rules enacted by a competent authority; it

also includes ordinances enacted by local governments units.

3. Administrative or executive orders, regulations and rulings – are those made by

administrative officials under legislative authority.

4. Judicial decisions or jurisprudence – the rulings issued by the judicial courts,

especially the Supreme Court, to apply or interpret Philippine laws or the Constitution
are a component of the legal system of the Philippines.

DOCTRINE OF PRECEDENT OR STARE DECISIS - the judgment or ruling of a higher

court on a issue of law are binding on all lower courts.

Self-Help: You can also refer to the sources below to help you further
understand the lesson:

Agpalo. R 2008, Obligations and contracts, Rex Bookstore, Inc., Manila, Philippines.

De Leon, H 2010,The law on obligations and contracts, Rex Bookstore, Inc., Manila,
Philippines.

Jurado, D 2009 Civil law reviewer, Rex Bookstore, Inc., Manila, Philippines.

Paras, E 2008, Civil code of the Philippines annotated, Volume IV, Arts. 1106-1457
(Prescription, Obligations and Contract), Rex Bookstore, Inc., Manila,
Philippines.

Vitug, J 2006, Civil Law, Volume III (Articles 1156-1641), Rex Bookstore, Inc., Manila,
Philippines.

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Let’s Check

Activity 1. Now that you know the most essential terms in the study of different kinds of
laws and basic nature, effects, kinds and sources of obligations in the Philippines, let us
try to check your understanding of these terms. In the space provided, write the letter
corresponding to the correct term/s being asked in the following statements:

______1. In the operation or course of nature, there are uniformities of actions and
orders of sequence which are the physical phenomena that we sense or feel.
a. Moral Law b. Divine Law c. Physical law d. Natural Law

______2. It is the law of religion and faith which involves itself with the concept of sin
and salvation.
a. Moral Law b. Divine Law c. Physical law d. Natural Law

______3. It is the only law enforced by the government.

a. Moral Law b. State Law c. Physical law d. Natural Law

______4. it means the entirely of the norms of good and right conduct growing out of
the common belief of every community of what they consider as right or wrong.
a. Moral Law b. State Law c. Physical law d. Natural Law

______5. The written instrument by which the fundamental powers of the government
are established, limited, and defined, and by which these powers are distributed
among the several departments for their safe and useful exercise for the benefit
of the people.
a. Constitution of the Philippines
b. Civil Code of the Philippines
c. Revised Penal Code of the Philippines
d. Legislation
______6. A rule of conduct, just, obligatory, promulgated by legitimate authority, and of
common observance and benefit.
a. Law b. Obligation c. Contracts d. Wrong

______7. It is the preponderant source of law in the Philippines. It includes ordinances

enacted by local government units.
a. Constitution of the Philippines c. Legislation
b. jurisprudence d. Treaties

______8. The decisions of a superior court on a point of law are binding on all
subordinate courts.
a. stare decisis b. tradition c. jurisprudence d. Custom

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______9. A characteristic of law which dictates what people can and cannot do.
a. obligatory c. of common observance and benefit
b. a rule of conduct d. promulgated by legitimate authority

______10. Non-compliance with one’s duty as demanded by law may result to

repercussions which can compel obedience.
a. obligatory c. of common observance and benefit
b. a rule of conduct d. promulgated by legitimate authority

Let’s Analyze

1. Anna agreed to live co-habit as a common-law wife of Pedro for the sum of
P1,000,000. Is the agreement valid? Why?

2. Jose agreed not to prosecute the Juan, for theft, for stealing his (Jose’s) car in
exchange for P200,000. Is the agreement valid? Why?

3. Mario obliged himself to give Maria P100,000 if she will slap hermother in the face. Is
the agreement valid? Why?

4. Recently, Anita remembered that she borrowed money from Berta more than 10
years ago so she paid her liability. Afterwards, she learned that she is not really obliged
anymore to pay her debt as it has already prescribed? Can Anita get back from Berta
the amount she paid? Why?

In a Nutshell
Explain your answers in your own words thoroughly.
1. Contrast divine law from natural law.
2. Differentiate state law from physical law.
3. Give concrete examples of the characteristics of law and explain.
a. as a rule of conduct
b. as obligatory
c. as promulgated by legitimate authority
d. as being of common observance and benefit
4. Give examples of obligations or contracts which are contrary to:
a. law
b. morals
c. good custom

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d. public order
e. public policy

Q & A List
Do you have any questions for clarification? You may write them down below.
Questions/Issues Answers

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

Keywords Index
constitution legislations physical law
divine law natural law stare decisis
Law moral law state law

Big Picture in Focus:

ULOb. Define and contrast the different kinds of obligations
ULOc. Define and identify the different sources of obligation.

Metalanguage

In this section, the most essential terms relevant to the study of different kinds and
sources of obligations and to demonstrate ULOb and ULOc will be operationally
defined to establish a common frame of refence as to how the texts work in your chosen
field or career. You will encounter these terms as we go through with our lessons.
Please refer to these definitions in case you will encounter difficulty in understanding
basic legal and obligations concepts.

bilateral obligation – both parties are bound to comply.

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contract – a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service. (Art. 1305)

civil obligation - obligations that provide the creditor or obligee a right of action in courts
of justice to compel their compliance.

creditor – or obligee; the active subject; he entity entitled to demand the performance of
the obligation.

damage – is the loss, hurt, or harm which results from the injury.

damages - represent the sum of money given as a compensation for the injury or harm
suffered by the creditor or obligee.

debtor – or obligor; the passive subject; he who has a duty to fulfill the obligation.

delicts – civil obligation resulting from a criminal offense.

do ut des - I give that you may give.

do ut facias - I give that you may do.

efficient cause - (the vinculum or juridical tie) the cause or source of the obligation.

facio ut des - I do that you may give.

facio ut facias - I do that you may do.

injury - the wrongful act or omission which causes loss or harm to another.

juridical necessity - juridical tie; because noncompliance with the obligation can result to
negative legal consequences.

law – (meaning in general) it means any rule of action or any system of uniformity.

natural fruits - spontaneous products of the soil, the young and other products of
animals.

natural obligation - it does not give a right of action to exact its performance; it is not
derived from positive law but based on equity and natural law.

negative obligation - the obligation not to do

negligence - is 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.

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negotiorum gestio – exists when a person, on his own free will, takes control of the
agency and management of the business or property of another, without the owner’s
knowledge or consent.

non-reciprocal obligation - where fulfillment by one party of his duty under the same
obligation does not depend on the fulfillment by the other party of his commitment.

obligatio – A Latin word which means a “tying” or “binding.”

obligation - the act or performance which the law will enforce.

ordinary delay - is merely non-performance at the agreed time.

personal obligation - the obligation to do or not to do.

positive obligation – also known as affirmative obligation; the obligation to give or to do

prestation - it is the object or subject matter of the obligation or the action required to be
performed by the debtor ( to give, to do or not to do).

quasi - contracts- juridical relation resulting from lawful, voluntary and unilateral acts and
which are enforceable to the end that no one shall be unjustly enriched or benefited at
the expense of another.

quasi-delicts – (“torts” or “culpa aquiliana”) results from damage made to another

because of an action or omission, although there was fault or negligence, but there was
no contractual relation between the parties.

real obligation - the obligation to give.

restitution – the restoration of something lost or stolen to its proper owner.

right - the privilege granted by law to a person to demand from another any prestation.

solution indebiti - undue payment; takes place when something is received when there
is no right to demand it, and it was unduly delivered through mistake; obligation to return
the thing arises on the part of the recipient. (Art. 2154.)

unilateral obligation – only one of the parties is bound.

valid contract - all its elements are present and it is not contrary to law, morals, good
customs, public order, and public policy.

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wrong - (cause of action) is the action or failure to act of one party which is an infraction
of the legal right or rights of another, resulting to injury to the latter.

Essential Knowledge

To perform the aforesaid big picture unit learning outcomes b and c (ULOb and ULOc)
during the first three (3) weeks of the course, you need to fully understand the following
essential knowledge that will be laid down in the succeeding pages. Please note that
you are not limited to exclusively refer to the these resources. Thus, you are expected
to utilize other books, research articles and other resources that are available in the
university’s library e.g. ebrary, search.proquest.com etc.

CIVIL CODE
Book IV
Title I - Obligations
Chapter I – General Provisions

Article 1156. An obligation is a juridical necessity to give, to do, or not to

do.

JURIDICAL NECESSITY - juridical tie; because the nonperformance of the debtor of his
obligation may ensue to negative legal ramifications, such as an action being filed in the
courts to enforce its compliance, or in case of its non-fulfillment, its monetary equivalent.

KINDS OF OBLIGATIONS1
A. From the viewpoint of “sanction”:

1. CIVIL OBLIGATION - obligations that provide the creditor or obligee a right of action
in courts of justice to compel their compliance.

2. NATURAL OBLIGATION - it does not give a right of action to exact its performance;
it is not derived from positive law but based on equity and natural law; but, if the debtor
voluntarily performs the obligation, he may not retrieve back what he has already given
or done to comply with his duty.
Example: Andy borrowed P2 million from Brian. Andy still paid the loan although
he knows that the debt has already prescribed. Because of this. Andy cannot anymore
get take back later on what he willingly paid Brian.

3. MORAL OBLIGATION - Conscience, morality or the law of Church is the sanction.

B. FROM THE VIEWPOINT OF SUBJECT MATTER:

1. REAL OBLIGATION - the obligation to give.
2. PERSONAL OBLIGATION - the obligation to do or not to do.

Example: the duty to assemble a car or the duty to not reveal an information.

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C. FROM THE AFFIRMATIVENESS AND NEGATIVENESS OF THE OBLIGATION:

1. POSITIVE OR AFFIRMATIVE OBLIGATION — the obligation to give or to do
2. NEGATIVE OBLIGATION — the obligation not to do (which naturally includes “not to
give”)

D. FROM THE VIEWPOINT OF PERSONS OBLIGED:

1. UNILATERAL –only one of the parties is bound or obliged.
Example: Andres is indebted to Bert for P3,000. Andres has to pay Bert the
amount he borrowed.

2. BILATERAL – both parties are bound to comply with their respective duties in the
same obligation.
Example: In a contract of sale, the buyer is obliged to pay, while the seller is
obliged to deliver.

• RECIPROCAL
• NON-RECIPROCAL
1
see Paras, E. (2008). Civil Code of the Philippines Annotated, Volume IV (Obligations
and Contracts).

ELEMENTS OF OBLIGATION
1. ACTIVE SUBJECT - the creditor or obligee; the entity who is entitled to exact the
compliance of the obligation.

2. PASSIVE SUBJECT - the debtor or obligor; the entity duty-bound to give or render
the prestation.

3. PRESTATION - It is the object or subject matter of the obligation or the action

required to be performed by the debtor ( to give, to do or not to do).

4. EFFICIENT CAUSE – (the vinculum or juridical tie) the cause or source of the
obligation.

Example: Anton entered into a contract whereby he promised to paint a portrait

of Brent for the consideration of P500,000.00.

Anton - the passive subject; Brent - the active subject; Painting the portrait -
the object/prestation; Agreement or contract - the juridical tie and the source of the
obligation.

If Anton had already painted the portrait and it was agreed by the parties that
Brent would pay Anton after the portrait is finished, Anton is now the active subject while
Brent is now the passive subject.

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FORM OF OBLIGATION
As a general rule, no specific form is required to make a contract valid and binding.
There are instances, however, which demand that obligations be presented in some
particular.

Article 1157. Obligation arises from:

(1) law;
(2) contracts;
(3) quasi-contracts;
(4) acts or omissions punished by law;
(5) quasi-delicts.

1. LAW - compliance of the obligation is required by law itself; must be expressly or

impliedly set forth and shall not be presumed.
Examples: obligation to pay taxes; obligation to support one’s family.

2. CONTRACTS - obligations resulting from the stipulation of the parties (Art. 1306.)

• Parties are free to make any contract, as long as its stipulations are not contrary
to law, morals, good customs, public order or public policy .

Example: the duty to return what was borrowed (e.g. money) by reason of an
agreement.

3. QUASI-CONTRACTS - juridical relation resulting from lawful, voluntary and unilateral

acts and which are enforceable to the end that no one shall be unjustly enriched or
benefited at the expense of another (Art. 2142.)

4. DELICTS – civil obligation resulting from a criminal offense (Art. 1161.)

Example: the obligation to return a stolen jewelry

5. QUASI-DELICTS – (“torts” or “culpa aquiliana”) results from damage made to another

because of an action or omission, although there was fault or negligence, but there was
no contractual relation between the parties. (Art. 2176.)

Article 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.

• Being deemed a burden upon the obligor, an obligation derived from law shall not
be presumed to exist unless it is clearly (expressly or impliedly) set forth in the
Civil Code or in special laws.

• The Civil Code can be suppletorily used to decide cases relating to obligations
arising from other laws than the Civil Code itself.

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• If there is a conflict between the New Civil Code and a special law regarding an
obligation arising from law, the latter shall be followed except if the contrary is
stated in the New Civil Code. (See Art. 18).

Example: Since there is no law requiring this, an employer is not obligated to

provide his employees with free legal assistance. (see De la Cruz vs. Northern
Theatrical Enterprises, 95 Phil. 739 [1954].)

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

CONTRACT - is a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service. (Art. 1305.)

• A contract is governed primarily by the agreement of the contracting parties.

Legally, a void contract is existent (Art. 1409), thus it will not result to any
obligation.

• A contract to be considered valid must be in congruence with the law. As such,

although obligations resulting from a contract have the force of law between the
contracting parties, this does not mean that the law is subordinate to contracts,
for a contract must first be valid before it can be enforced.

• The contracting parties are free to include in their contract whatever stipulations,
clauses, terms and conditions they may consider convenient, as long as they are
not contrary to law, morals, good customs, public order, or public policy (Art.
1306).

Article 1160. Obligations derived from quasi-contracts shall be subject to

the provisions of Chapter 1, Title XVII, of this Book.

QUASI-CONTRACT – juridical relation arising from lawful, voluntary and unilateral acts
by reason of which, both parties become bound to each other, to the end that no one
shall be unjustly enriched or benefited at the expense of the other. (See Article 2142)

2 KINDS OF QUASI- CONTRACTS

1. NEGOTIORUM GESTIO – exists when a person, on his own free will, takes control of
the agency and management of the business or property of another, without the owner’s
knowledge or consent. (Art. 2144.)

Example: If Andrew, a customer, saved the restaurant of Bianca from burning,

Bianca, based on the principle of quasi-contract, has the duty to reimburse Andrew for

19


the expenses he incurred, although Bianca did not actually gave her consent to the act
of Andrew in saving her restaurant.
- Adapted (De Leon, 2010)

2. SOLUTIO INDEBITI - undue payment; takes place when something is received when
there is no right to demand it, and it was unduly delivered through mistake; obligation to
return the thing arises on the part of the recipient. (Art. 2154.)
Example: If Aris owes Ben P100 but paid him P150, because he mistakenly
thought the amount of his debt is really P150. Aris has the duty to return the P50 excess
payment to Ben.

INNOMINATE CONTRACTS
1. Do ut des - I give that you may give.
2. Do ut facias - I give that you may do.
3. Facio ut des - I do that you may give.
4. Facio ut facias - I do that you may do.

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.

RULES GOVERNING CIVIL OBLIGATIONS ARISING FROM CRIMINAL OFFENSES

1. Penal laws (Articles 100 to 113 of the Revised Penal Code), subject to the
provisions of Article 2177 of the Civil Code of the Philippines;

2. Chapter 2, Preliminary Title on Human Relations of the Civil Code of the

Philippines;

3. Title 18 of the Civil Code, regulating damages.

SCOPE OF CIVIL LIABILITY ARISING FROM CRIME

1. RESTITUTION
2. REPARATION FOR THE DAMAGE CAUSED
3. INDEMNIFICATION FOR CONSEQUENTIAL DAMAGES

Example: Alfred stole the computer of Brendon. If Alfred is convicted, the court
will order Alfred to:
1. return the computer (or to pay its value if it was lost or destroyed);
2. pay for any damage caused to the computer; and
3. pay such other damages suffered by Brendon as a consequence of the
crime.
- Adapted (De Leon, 2010)

Article 1162. Obligations derived from quasi-delicts shall be governed by

the provisions of Chapter 2, Title XVII of this Book, and by special laws.

20


RULES GOVERNING OBLIGATIONS ARISING FROM QUASI-DELICTS
1. Chapter 2, Title XVII of this Book, and
2. Special laws.

QUASI-DELICT – (culpa aquiliana) is an act or omission by a person resulting to

damage to another in his person, property, or rights causing to arise an obligation to pay
for the damage done, with fault or negligence, but without a pre-existing contractual
relation between the parties. (Art. 2176.)

REQUISITES OF QUASI-DELICTS:
1. Omission by the defendant;
2. Negligence by the defendant;
3. Damage caused to the plaintiff;
4. Direct relation of omission, being the cause, and the damage, being the effect
(proximate cause); and
5. No pre-existing contractual relations between parties.

NEGLIGENCE - is 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. (U.S. v. Barrias, 23 Phil. 434).

Example: a. While driving a car recklessly, Alex injured a pedestrian.

b. While cleaning his window sill, Arthur’s negligence caused a flower pot
to fall on the street, breaking the arms of his neighbor.

In the above examples, Alex and Arthur can both also be charged with the
crime of physical injuries through simple or reckless imprudence.

- Adapted (Paras, 2008)

• A negligent act or omission resulting to damage may result to:

o civil liability arising from a crime under Article 100 of the Revised Penal
Code, or
o create an action for quasi-delict under Article 2176.

• An action for recovery of damages may be filed for either cause of action (delict
or quasi-delict) but the offended party is not allowed to recover damages more
than once for the same act or omission. Since these two (2) civil liabilities are
distinct and independent from each other, one can still recover damages for the
other cause of action after failure to collect from the first one.

21


DELICTS VS QUASI-DELICTS

BASIS DELICTS QUASI-DELICTS

1. INTENT Criminal / malicious Negligence
2. INTEREST Affects public interest Affects private interest
3. LIABILTY Criminal and civil; subsidiary Civil only;direct and primary
4. PURPOSE Purpose – punishment Indemnification
5.COMPROMISE Cannot be compromised Can be compromised
6. GUILT Proved beyond reasonable doubt Preponderance of evidence

Self-Help: You can also refer to the sources below to help you further
understand the lesson:

Agpalo. R 2008, Obligations and contracts, Rex Bookstore, Inc., Manila, Philippines.

De Leon, H 2010,The law on obligations and contracts, Rex Bookstore, Inc., Manila,
Philippines.

Jurado, D 2009 Civil law reviewer, Rex Bookstore, Inc., Manila, Philippines.

Paras, E 2008, Civil code of the Philippines annotated, Volume IV, Arts. 1106-1457
(Prescription, Obligations and Contract), Rex Bookstore, Inc., Manila,
Philippines.

Vitug, J 2006, Civil Law, Volume III (Articles 1156-1641), Rex Bookstore, Inc., Manila,
Philippines.

Let’s Check

Activity 1. Now that you know the most essential terms in the study of different kinds
and sources of obligations, let us try to check your understanding of these terms. In the
space provided, write the letter of the correct term/s corresponding to the different
statements given below:

Activity 1

______1. The conduct required to be observed by the debtor. It consists in giving,

doing, or not doing.
a. Juridical tie b. Active subject c. Passive subject d. Prestation

______2. It is the power which a person has under the law, to demand from another any
prestation.
a. Right b. Wrong c. Contract d. Obligation

22


______3. It means performance in accordance with the stipulations or terms of the

contract.
a. Perfection of the contract c. Tradition
b. Compliance in good faith d. Stare decisis

______4. 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.
a. Solutio indebiti c. Negotiorum gestio
b. Contract d. Obligation

______5. It is the voluntary management of the property or affairs of another without the
knowledge or consent of the latter.
a. negotiorum gestio c. Solutio indebiti
b. Tradition d. Prestation

______6. The person who is entitled to demand the fulfillment of the obligation.
a. Obligee b. Obligor c. Debtor d. Passive Subject

______7. That which binds or connects the parties to the obligation.

a. Prestation c. Passive subject
b. Active subject d. Efficient cause

______8. The subject matter is a thing which the debtor must deliver to the creditor.
a. Real Obligation c. Natural Obligation
b. Passive Obligation d. Juridical Obligation

______9. When they arise from lawful and voluntary acts which are enforceable to the
end that no one shall be unjustly enriched or benefited at the expense of another.
a. Quasi-delict c. Quasi-contracts
b. quasi-judicial d. quasi-administrative

______10. I give that you may do.

a. Do ut des c. Facio ut des
b. Do ut facias d. Facio ut facias

______11. The obligation may arise from any of the following, except:
a. contracts b. quasi-contracts c. prestation d. law

______12. It is a wrong committed without any pre-existing relations between the

parties.
a. natural obligation b. crime c. quasi-contract d. quasi-delict

______13. The following are the requisites of an obligation, except:

a. passive subject, debtor or obligor
b. active subject, creditor or oblige

23


c. demand
d. efficient cause

______14. Juridical necessity to give, to do or not to do.

a. right b. wrong c. demand d. obligation

______15. The reason why the obligation exists.

a. Prestation c. Passive subject
b. Active subject d. Efficient cause

Let’s Analyze
Instruction: Explain your answers thoroughly, with proper legal basis.

Case 1: Dino promises to pay Clarin his (Dino’s) debt of P5 million to the latter.
Classify this obligation and explain your chosen classification/s.

Case 2: Alice borrowed money from Bonita. She promised to pay the loan or to render
free service as a servant in case she cannot cannot pay her obligation.
a. Is the obligation valid? Why?

Case 3: An insane man committed a crime.

a. Is he liable? If yes, why?
b. If no, why?
c. Who can be held liable? What is the exception?

4. A defendant was judged not guilty criminally. Is he also already free of any civil
liability?

Case 5: A person is sued for causing damage by violation of traffic rules. Discuss his
liability.

In a Nutshell
Explain or answer the following questions using your own understanding.

1. Contrast the following obligations and give concrete examples:

a. civil vs. natural obligation.
b. personal vs. real obligation.
c. positive vs. negative obligation.
d. unilateral vs. bilateral obligation.

2. Give other examples of obligations arising from:

a. law
b. contracts
c. quasi-contracts

24


d. quasi-delicts
e. delicts

3. GIve concrete examples of the following kinds of innominate contracts

a. Do ut des - I give that you may give.
b. Do ut facias - I give that you may do.
c. Facio ut des - I do that you may give.
d. Facio ut facias - I do that you may do.

Q & A List
Do you have any questions for clarification? You may write them down below.
Questions/Issues Answers

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

Keywords Index
bilateral obligation injury positive obligation
Contract juridical necessity prestation
civil obligation Law quasi - contracts
Creditor natural fruits quasi-delicts
Damages natural obligation real obligation
debtor negative obligation Restitution
delicts Negligence Right
do ut des negotiorum gestio solution indebiti
do ut facias non-reciprocal obligation unilateral obligation
efficient cause Obligation valid contract
facio ut des ordinary delay Wrong
facio ut facias personal obligation

25


Big Picture in Focus:
ULOd: Explain the nature and effects of obligation.

Metalanguage

In this section, the most essential terms relevant to the study of the nature and effects of
obligations and to demonstrate ULOd will be operationally defined to establish a
common frame of refence as to how the texts work in your chosen field or career. You
will encounter these terms as we go through with our lessons. Please refer to these
definitions in case you will encounter difficulty in understanding basic legal and
obligations concepts.

accessions - are the fruits of, or additions to, or improvements upon, the principal; those
which are naturally or artificially attached to the thing.

accessories - are things joined to, or included with, the principal thing for the latter’s
embellishment, better use, or completion.

accion pauliana (rescissory action) - an action to rescind contracts entered into by the
debtor to defraud creditors.

accion subrogatoria (subrogatory action) - an action against the debtor of the debtor.

breach of contract - occurs when a party fails, for no valid reason, either intentionally or
unintentionally, to comply with his obligation as stated in the contract.

causal fraud – fraud used to get the consent; remedy is annulment because of vitiation
of consent.

commodatum – a gratuitous loan of a movable property which has to be returned free

from damage to the lender.

compensation morae- the delay of the obligors in reciprocal obligations (like in sale)

compliance in good faith - means compliance or performance done according to the

agreement of the parties.

civil fruits – those derived by virtue of juridical relation.

conclusive presumption – one which cannot be contradicted like the presumption that
everyone is conclusively presumed to know the law.

26


criminal negligence (culpa criminal) - negligence which results to a commission of a

crime.

culpa aquiliana – civil negligence; “tort”, quasi- delict.”; the negligence of one of the
parties is the source of the obligation, as there was no pre-existing contract between the
parties before the negligence.

culpa contractual –negligence in the performance of a pre-existing obligation which

results in its breach, making the debtor liable for damages.

delay (mora) – default or tardiness in the performance of an obligation after it has been
due and demandable.

determinate thing – . a thing identified by its individuality.

extra-judicial demand - when demand is made without court proceedings; may be made
orally or in writing.

fraud (deceit or dolo) –conscious dodging of the honest performance of an obligation; it

is equivalent to bad faith in that it includes a plan to mislead or deceive another

force majeure - acts of God; circumstances which are entirely free of the will of any
person, the word often used to refer to a natural accident.

fortuitous events – those events which could not be foreseen (accident) or which,
though foreseen, are inevitable (force majeure).

generic thing – a thing which cannot be determined with particularity.

genus nunquam perit - genus never perishes.

incidental fraud – committed in the performance of an obligation which is already

existing; obliges the person employing it to pay damages.

indeterminate thing — genus or class; cannot be identified with particularity.

industrial fruits – produced by lands of any kind through cultivation or labor.

injury - the wrongful act or omission which causes loss or harm to another.

judicial demand - when a complaint is filed in court.

legal delay - (default) the delay which is equivalent to a virtual noncompliance of the
obligation.

27


leviable - not exempt from attachment under the law.

mora accipiende - the delay on the part of the creditor to accept the performance of the
obligation.

mora solvendi- the delay on the part of the debtor to fulfill his obligation (to give or to
do).

negative personal obligation - an obligation not to do; no delay.

negligence (culpa or fault) – voluntary act or omission of diligence, there being no

malice, which prevents the normal fulfillment of an obligation.

personal right - is the right demandable by one person from another - to give, to do, or
not to do.

presumption - is meant the deduction of a fact not actually known resulting from its
usual connection with another which is known or proved.

proximate cause- is that adequate and efficient cause, which in the natural order of
events, necessarily produces the damages or injury complained.

real right - is a right over a specific thing and is binding on the whole world, example,
the right of ownership or possession

rebuttable presumption – one which can be contradicted or disputed by presenting proof

to the contrary.

special laws – refer to all other laws not part of the Civil Code.

specific thing – a thing that can be determined with particularity.

simple loan (mutuum) - is a contract whereby one of the parties delivers to another
money or other consumable thing, on the condition that the same amount of the same
kind and quality shall be paid. It may be gratuitous or with a stipulation to pay interest.

usury – contracting for or receiving interest in excess of the amount allowed by law for
the loan or use of money, goods, etc.

Essential Knowledge
To perform the aforesaid ULOd of the course, you need to fully understand the following
essential knowledge that will be laid down in the succeeding pages. Please note that
you are not limited to exclusively refer to the these resources. Thus, you are expected
to utilize other books, research articles and other resources that are available in the
university’s library e.g. ebrary, search.proquest.com etc.

28


Chapter 2 - Nature and Effect of Obligations

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.

• This article refers to the consequent responsibility of the obligor in an obligation

to deliver a determinate thing – that is, to exercise the proper diligence of a good
father of a family, unless another standard of care was required by law or by the
agreement of the parties.

SPECIFIC THING – a determinate thing.

Examples: My dog named “Spike”; the Montero car with Plate No. JLI 912.

GENERIC THING – indeterminate thing.

Examples: A cavan of rice; the sum of P1,000.

KINDS OF DILIGENCE TO BE PRACTICED

1. diligence of a good father of a family (ordinary diligence) - that which is required by
the nature of the obligation and corresponds with the circumstances of person,
time, and place.

2. However, if the law or contract of the parties provides for a different standard of care,
said law or stipulation must prevail.

• Without negligence or fault in his part, debtor is not liable if his failure to deliver
the thing is due to fortuitous events or force majeure.

DUTIES OF DEBTOR IN OBLIGATION TO GIVE A DETERMINATE THING

1. To preserve or take care of the thing due;
2. To deliver the fruits of the thing;
3. To deliver its accessions and accessories;
4. To deliver the thing itself; and
5. To answer for damages in case of non-fulfillment or breach.

Article 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.

Example: Armand promised to deliver to Bill a specific lot on April 10, 2020. Bill is
only entitled to the fruits after April 10, as before that day he has no rights over them.
Ownership of the fruits and the lot, however, will only be transferred to Bill on delivery.
Thus If delivery of the fruits and the lot was made only on April 20, 2020, Bill becomes
owner of said fruits and land only from said date. From April 10 to April 20, Bill had only
a personal right enforceable against Alain; after April 20, he has a real right (over the

29


properties).

- Adapted. (Paras, 2008)

REAL RIGHT – right of a person over a specific thing, without a specific passive subject
from whom the right may be personally enforced; a right enforceable against the whole
world.

PERSONAL RIGHT – pertaining to a right of a person to demand from another, as a

definite passive subject, the fulfillment of a prestation to give, to do or not to do; a right
enforceable only against a definite person or group of persons.

OWNERSHIP - is transferred, in some cases, by delivery.

TIME WHEN THE OBLIGATION TO DELIVER ARISES

1. Without term or condition - upon perfection of the contract.
• Perfection – means the birth of the contract or the meeting of the minds between
the parties.

2. With a term or a condition - from the arrival of the term.

DIFFERENT KINDS OF FRUITS

1. NATURAL - spontaneous products of the soil, the young and other products of
animals;

2. INDUSTRIAL – produced by lands of any kind through cultivation or labor;

3. CIVIL – those derived by virtue of juridical relation.

Article 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.

SPECIFIC OBLIGATION - is, as a rule, extinguished by a fortuitous event or act of God.

Example: Arnold is obliged to give Bobby a particular car. Before delivery, an
earthquake destroys completely the car. The obligation to deliver is extinguished.

REMEDIES OF CREDITOR IN A SPECIFIC REAL OBLIGATION

30


1. File an action for specific performance or fulfillment, with a right to indemnity for
damages; or
2. Demand for rescission or cancellation of the obligation, also with a right to
recover damages (Art. 1170); or
3. Demand for the payment of damages only where it is the only feasible remedy
(Art. 1170).

GENERIC OBLIGATIONS - are never extinguished by fortuitous events.

Example: Arnold promised to give Bobby a camera. Since a camera is a generic
thing, the loss of one specific camera will not extinguish Bobby’s obligation as he can
give another camera.

REMEDIES OF CREDITOR IN A GENERIC OBLIGATION

1. Have the obligation be performed by a third person since the object is expressed only
according to its family or genus, and demand the payment of damages; or
2. Demand the payment of damages only.

genus nunquam perit - genus never perishes.

FORTUITOUS EVENTS - those events which could not be foreseen (accident) or which,
though foreseen, are inevitable (force majeure).

TWO INSTANCES WHEN FORTUITOUS EVENT DOES NOT EXEMPT

1. If the obligor “delays” – means default or legal delay or mora.
2. If the obligor promised to deliver the same thing to two or more persons who do not
have the same interest, as when one is not the agent merely of the other.

ORDINARY DELAY - is merely non-performance at the agreed time.

Example: Alain is obliged to give Brent his Montero car on September 12, 2019.
If on said day, Alain does not deliver, he is in only in ordinary delay, not in default. the
obligation is extinguished and Alain is not liable if on September 15, 2019 an
earthquake destroys the Montero car.

LEGAL DELAY - (default) the delay which is equivalent to a virtual noncompliance of

the obligation. Generally, a demand for fulfillment of the obligation is a prerequisite to
place the obligor in default.

Example: Alain is obliged to give Brent his Montero car on September 12, 2019.
In case Alain was not able to deliver the car on the agreed date, despite prior demand
by Brent for delivery, Alain would be in default.

If afterwards the car is destroyed by a fortuitous event, Alain would still be liable.
The obligation to deliver the lost specific thing is converted into a monetary claim for
damages. (see Art.1165, Civil Code).

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However, if the car would have been destroyed at any rate even if no demand
was made, the amount of damage would be reduced.

-Adapted. (Paras, 2008)

Article 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.

• Generally, all accessions and accessories should be delivered together with the
promised determinate thing, even if they may not have been mentioned, unless
the contrary is agreed upon by the parties.

• This rule is taken from the principle of law that the accessory follows the
principal, unless otherwise stated. However, an obligation to deliver the
accessions or accessories of a thing does not include the principal.

ACCESSIONS - are the fruits of, or additions to, or improvements upon, the principal;
those which are naturally or artificially attached to the thing.
Example: building built on a parcel of land

ACCESSORIES - are things joined to, or included with, the principal thing for the latter’s
embellishment, better use, or completion.
Example: key of a car

Article. 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.

• This provision applies to an obligation to do.

THREE SITUATIONS THIS ARTICLE CONTEMPLATES

1. Debtor’s failure to perform an obligation
a. the creditor may do the obligation, or another person, at the expense of the
debtor; and
b. to recover damages (Art. 1170)

2. Performance was contrary to the terms agreed upon - order of the court to undo the
same at the expense of the debtor

3. Performance in a poor manner - order of the court to undo the same at the expense
of the debtor

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• An action for specific performance to enforce compliance with a positive personal

obligation may not prosper because it may be equated to involuntary servitude
which is prohibited under our Constitution.

Article 1168. When the obligation consists in not doing, and the obligor
does what has been forbidden him, it shall also be undone at his expense.

• This Article refers to a negative personal obligation.

REMEDY FOR VIOLATION OF A NEGATIVE PERSONAL OBLIGATION – to undo

the prohibited act done and to demand for damages (Art. 1170).

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 obligation.

However, the demand by the creditor shall not be necessary in order that delay
may exist:
(1) When the obligation or the law expressly so declares; or
(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 was a controlling motive for the establishment of
the contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.

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 moment one of the parties fulfills his obligation, delay by the other
begins.

KINDS OF DELAY (MORA)

1. MORA SOLVENDI - the delay on the part of the debtor to fulfill his obligation (to give
or to do);

2. MORA ACCIPIENDE- the delay on the part of the creditor to accept the performance
of the obligation; and

3. COMPENSATIO MORAE - the delay of the obligors in reciprocal obligations (like in

sale)
Example: the delay of the obligor cancels the delay of the obligee, and vice versa

NEGATIVE PERSONAL OBLIGATION - an obligation not to do; no delay.

REQUISITES OF DELAY/DEFAULT BY THE DEBTOR

33


1. The debtor was not able to perform his (positive) obligation on the agreed date;
2. Demand, either judicial or extra-judicial, and not merely reminder or notice, by the
creditor to the debtor to fulfill his obligation; and
3. The debtor was not able to comply with such demand.
• The presumption is that the obligation is already due and demandable for there
can be no delay if otherwise.

WHEN DEMAND NOT NECESSARY TO PUT DEBTOR IN DELAY

1. When the obligation so provides.
Example: Diana owes Catherine the sum of P10,000.00 payable on or before
June 30 without the need of any demand. Therefore, if Dianna fails to pay on June 30,
she is automatically in default as the parties had agreed to remove the requirement of
demand.

2. When the law so provides.

Example: Under the law, taxes should be paid on or before a specific date;
otherwise, penalties and surcharges are imposed without the need of demand for
payment by the government.

3. When time is of the essence.

Example:
a. The delivery of a wedding cake on the wedding day

4. When demand would be useless.

Example: Sarrie promised to deliver,Katlia, her only cat, to Beatriz on January 15.
However, the cat died before January 15. It would be useless for Beatriz to demand the
delivery of Katlia as the cat is already dead.

5. When there is performance by a party in reciprocal obligations.

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.

GROUNDS FOR LIABILITY FOR DAMAGES

1. FRAUD (deceit or dolo) –conscious dodging of the honest performance of an
obligation; It is equivalent to bad faith in that it includes a plan to mislead or deceive
another; does not include honest mistake and judgment errors committed in good faith
(see O’leary Macondray & Co., 45 Phil. 812 [1924]; Solid Bank Corp. vs. Mindanao
Ferroalloy Corp., 464 SCRA 409 [2005].)

Example: Sara obliged herself to deliver to Brenda 10 bottles of perfume, of a

specific brand. Sara delivered 10 bottles knowing that they contain cheaper perfume.
Sara is guilty of fraud and is liable for damages to Brenda.

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• CAUSAL FRAUD – fraud used to get the consent; remedy is annulment because
of vitiation of consent.

Example: In the given example above, if Brenda bought the 10 bottles of perfume
based on the dishonest claim of Sara that the perfume is that as stated on their labels,
Sara committed a causal fraud for without the fraud, Brenda would not have given her
consent to the contract. Brenda has the right to have the contract annulled or set aside
on the ground of fraud.

• INCIDENTAL FRAUD – committed in the performance of an obligation which is

already existing; obliges the person employing it to pay damages.

Example: In the first situation, the remedy of Brenda is not annulment of the contract
of sale which is not affected by the incidental fraud but to claim damages.

2. NEGLIGENCE (culpa or fault) – voluntary act or omission of diligence, there being

no malice, which prevents the normal fulfillment of an obligation(see Arts. 1173, 1174.) .

3. DELAY (mora) – default or tardiness in the performance of an obligation after it has

been due and demandable.

4. CONTRAVENTION OF TERMS OF OBLIGATION (violation) – violation of terms

and conditions stipulated in the obligation; this must not be due to a fortuitous event
(Art.1174)

BREACH OF CONTRACT - occurs when a party fails, for no valid reason, either
intentionally or unintentionally, to comply with his obligation as stated in the contract
(Nakpil vs. Manila Towers Dev. Corp., 502 SCRA 470 [2006].)

Article 1171. Responsibility arising from fraud is demandable in all

obligations. Any waiver of an action for future fraud is void.

• An action for fraud already committed may be waived as it can be considered an

act of generosity of the offended party. On other hand, the advance waiver for
fraud still to be committed is prohibited as it would encourage perpetration of
fraud.

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 circumstances.

REASONS FOR COURT’S DISCRETION

1. negligence depends upon the circumstances of a case – good or bad faith of the
obligor may be considered as well as the conduct or misconduct of the obligee;
2. it is not as serious as fraud as there is no bad faith and conscious intent to harm in
negligence.

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NEGLIGENCE – lack of foresight or knowledge.

IMPRUDENCE – lack of skill or precaution.

FRAUD VS. NEGLIGENCE

BASIS FRAUD NEGLIGENCE

DELIBERATE
INTENTION TO
Present Absent
CAUSE
DAMAGE

WAIVER OF
LIABILITY FOR Void. Allowed in certain cases.
FUTURE FRAUD

EVIDENCE Mere preponderance of

Must be clearly proved.
REQUIRED evidence.

• Generally, an action for future negligence may be waived unless the nature of the
obligation demands the use of extraordinary diligence (e.g., common carriers.)
(see Art. 1733.)

KINDS OF NEGLIGENCE ACCORDING TO SOURCE OF OBLIGATION

1. CONTRACTUAL NEGLIGENCE (culpa contractual) –negligence in the
performance of a pre-existing obligation which results in its breach, making the debtor
liable for damages (Arts. 1170-1174, 2201.)

2. CIVIL NEGLIGENCE (culpa aquiliana,“tort”, quasi- delict.”) – the negligence of one

of the parties is the source of the obligation, as there was no pre-existing contract
between the parties before the negligence.

3. CRIMINAL NEGLIGENCE (culpa criminal) - negligence which results to a

commission of a crime (Arts. 3, 365, Revised Penal Code.)

• A negligent act causing damages may make one civilly liable, as a result of a
crime under Article 100 of the Revised Penal Code or under an action for quasi-
delict under Article 2176 of the Civil Code.

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• The offended party in negligence cases has the option to decide between a
criminal action under Article 100 of the Revised Penal Code or a civil action for
damages under Article 2176 of the Civil Code, subject to the limitation that he is
not allowed to to recover more than once for the same negligent act.
Examples:
1. CULPA CONTRACTUAL: Shirley sold to Bella a specific cat which she promised to
deliver on a particular day. The cat died, before delivery, because of the negligence of
Shirley. Shirley should pay Bella for damages for her failure to fulfill a pre-existing
obligation due to her negligence.
2. CULPA AQUILIANA – It is Bella’s cat but it died because of the negligence of
Shirley. There is no pre-existing contractual relation between Shirley and Bella. The
negligence itself is the source of obligation.
3. CULPA CRIMINAL – Bella may file an action to demand payment for damage to
property through simple or reckless imprudence.
But Bella cannot recover damages more than once for the same act or omission
of Shirley.
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.

TEST OF NEGLIGENCE
“Did the defendant, in doing the alleged negligent act, use the reasonable care and
caution which an ordinary prudent man would have used in the same situation? If not,
then he is guilty of negligence.’’ (Mandarin Villa, Inc. vs. Court of Appeals, 257 SCRA
538 [1996].

FACTORS TO BE CONSIDERED IN DETERMINING EXISTENCE OF NEGLIGENCE

1. NATURE OF THE OBLIGATION
Example: Smoking while carrying materials known to be inflammable constitutes
negligence.

2. CIRCUMSTANCES OF THE PERSON

Example: A guard, a man in the prime of life, robust and healthy, sleeping while
on duty is guilty of negligence.

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3. CIRCUMSTANCES OF THE TIME
Example: Driving a car without headlights at night is gross negligence but it does
not by itself constitute negligence when driving during the day.

4. CIRCUMSTANCES OF THE PLACE

Example: Driving fast on the highway is permissible but driving at the same rate
of speed in a road which is always has a heavy traffic is gross recklessness.

-Adapted. (De Leon, 2010)

• Negligence is a question of fact, its existence being dependent upon the

particular circumstances of each case. It is never presumed but must be proven
by the party who alleges it.

• The rules on fraud shall apply on gross negligence.

GROSS NEGLIGENCE – the negligence when there is a total lack of care or diligence.

DILIGENCE - is “the attention and care required of a person in a given situation and is
the opposite of negligence.’’

KINDS OF DILIGENCE REQUIRED

1. Diligence agreed upon by the parties, orally or in writing;

2. In the absence of stipulation, that diligence required by law in the particular case;
Example: the extraordinary diligence required of common carriers

3. If both the contract and law are silent, then the diligence expected of a good father of
a family or ordinary diligence.

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.

FORTUITOUS EVENT – acts of man; an occurrence free of the will of the obligor but
not of other human wills.
Example: war, fire, robbery, murder, insurrection.

FORCE MAJEURE - acts of God; circumstances which are entirely free of the will of
any person, the word often used to refer to a natural accident.
Example: earthquake, flood, rain, shipwreck, lightning, eruption of volcano.

KINDS OF FORTUITOUS EVENTS

1. ORDINARY FORTUITOUS EVENTS - those events which are common and which
the contracting parties could reasonably foresee.

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Example: rain

2. EXTRA-ORDINARY FORTUITOUS EVENTS - those events which are uncommon

and which the contracting parties could not have reasonably foreseen.
Example: earthquake, fire, war, pestilence, unusual flood

REQUISITES OF FORTUITOUS EVENT

1.Independent of the human will (or at least of the obligor’s)
2. Unforeseen or unavoidable
3. Of such character as to render it impossible for the obligor to comply with his
obligation in a normal manner
4. Obligor – free from any participation/aggravation of the injury to the obligee (no
negligence or imprudence)

GENERAL RULE
A person is not liable for loss or damage resulting from fortuitous events. In other words,
his obligation is extinguished.

EXCEPTIONS TO THE GENERAL RULE

1. When expressly specified by law.
2. When expressly agreed upon by the parties.
3. When the nature of the obligation requires the assumption of risk.
Example: Andy insured his house against fire for P100,000.00 with Benjoe, an
insurance company. Later, the house was destroyed by accidental fire.

Article 1175. Usurious transactions shall be governed by special laws. *

SIMPLE LOAN (mutuum) - is a contract whereby one of the parties delivers to another
money or other consumable thing, on the condition that the same amount of the same
kind and quality shall be paid. It may be gratuitous or with a stipulation to pay interest.

USURY – contracting for or receiving interest in excess of the amount allowed by law for
the loan or use of money, goods, etc.

USURY LAW – makes the usurers criminally liable if the interest charged on loans are
more that the limit prescribed by law.

• This law is repealed – Circular No. 905 of the Central Bank has expressly removed the
interest ceilings prescribed by the USURY LAW.

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.

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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.

• These are mere rebuttable presumptions.

Example: Darren owes P5,000.00 from Cathy. Later, Darren shows a receipt
signed by Cathy. It is not known if there was payment by Darren. What is known is that
Darren has a receipt signed by Cathy.

This will lead to the presumption that the obligation has been paid, except if
otherwise proved by Cathy, like by showing that Darren forced Cathy to sign the receipt.

TWO KINDS OF PRESUMPTION

1. CONCLUSIVE PRESUMPTION – one which cannot be contradicted like the
presumption that everyone is conclusively presumed to know the law.

2. DISPUTABLE (REBUTTABLE) PRESUMPTION – one which can be contradicted or

rebutted by presenting proof to the contrary.

Example: Dory owes Cindy the amount of P1,000.00 with interest at 12% a year.
Cindy issued a receipt for the principal. The interest was not referred to in the payment
whether or not it has been paid.

The assumption is that the interest has already been paid by Dory because
usually, interest is paid first before the principal. This is only a disputable presumption
though and may be disproved by presenting appropriate evidence to show that the
interest had not yet peen paid.

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.

REMEDIES AVAILABLE TO CREDITORS FOR THE

SATISFACTION OF THEIR CLAIMS
1. Exact fulfillment (specific performance) with the right to damages;
2. Pursue the leviable property of the debtor;
3. Exercise all the rights and bring all the actions of the debtor, except those inherent in
or personal to the person of the latter;
Note: This remedy is only available after the creditor has pursued the property in
possession of the debtor.
4. Ask the court to rescind or impugn acts or contracts which the debtor may have done
to defraud him when he cannot in any other manner recover his claim.

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Example: Danny could not pay Carlo his obligation in the amount of P250,000.00
on the due date they agreed upon. However, Danny owns a jeepney worth about
P200,000.00 and he has a collectible from amount from Andrew in the amount of
P50,000.00. Before the due date of the obligation, Danny sold his motorcycle worth
P80,000.00 to Bruce.

Under the circumstances, the rights granted to Carlo under the law are as
follows:
a. He may file an action for specific performance to collect the P250,000.00
with the right to damages.
b. If, despite the judgment rendered, Danny fails to pay the amount due,
Carlo can ask for the attachment of Danny’s jeepney so that it may be sold
and payment made from the proceeds of the sale.
c. He may ask the court to order Andrew not to pay Danny so that payment
may be made to him, Carlo. (accion subrogatoria)
d. If Carlo will not be able to collect in any other manner Danny’s debt, he
may ask the court to rescind or cancel the sale made by Danny to Bruce
on the ground that the transaction is fraudulent. (accion pauliana)

-Adapted (De Leon, 2010)

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.

EXEMPTED RIGHTS
Rights not transmissible by:
1. their nature -example: purely personal rights

2. provision of law - examples: the rights in partnership, agency, and commodatum

3. stipulation of the parties - example: The stipulation that upon the death of the creditor,
the obligation shall be extinguished or that the creditor cannot assign his credit to
another.

Self-Help: You can also refer to the sources below to help you further to
understand the lesson:

Agpalo. R 2008, Obligations and contracts, Rex Bookstore, Inc., Manila, Philippines.

De Leon, H 2010,The law on obligations and contracts, Rex Bookstore, Inc., Manila,
Philippines.

Jurado, D 2009 Civil law reviewer, Rex Bookstore, Inc., Manila, Philippines.

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Paras, E 2008, Civil code of the Philippines annotated, Volume IV, Arts. 1106-1457
(Prescription, Obligations and Contract), Rex Bookstore, Inc., Manila,
Philippines.

Vitug, J 2006, Civil Law, Volume III (Articles 1156-1641), Rex Bookstore, Inc., Manila,
Philippines.

Let’s Check
Activity 1. Now that you know the most essential terms in the study of the nature and effects of
obigations, let us try to check your understanding of these terms. In the space provided, write
the letter of the correct term/s corresponding to the following different statements:

_____1. It refers to the ordinary care which an average person exercises over his own
property.
a. Diligence of a good father of a family
b. Diligence of a father of a good family
c. Good diligence of a father of a family
d. Due diligence of a father of a family

______2. Those produced by lands of any kind through cultivation or labor.

a. Natural fruits b. Industrial fruits c. Civil fruits d. Ordinary fruits

______3. This kind of negligence is not a source of obligation. It merely makes the
debtor liable for damages in view of his negligence in the fulfillment of a pre-
existing obligation.
a. Dolo Causante c. Culpa Aquiliana
b. Dolo Incidente d. Culpa contractual

______4. A thing particularly designated or physically segregated from others of the

same class.
a. Determinate thing c. generic thing
b. Accessories d. accessions

______5. It is the interest of a person over a specific thing without a definite passive
subject against whom the right may be personally enforced.
a. Real right c. Obligation
b. Personal right d. Efficient Cause

______6. The things joined to or included with the principal thing for the latter’s
embellishment, better use or completion.
a. Accessions c. Accessories
b. Natural fruits d. Civil fruits

______7. The failure to perform an obligation on time which failure constitutes a breach
of the obligation.
a. Ordinary delay b. Legal delay c. damages d. injury

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______8. It is the fraud committed in the performance of an obligation already existing

because of contract.
a. Dolo causante c. Dolo incidente
b. Culpa Contractual d. Culpa Aquiliana

______9. These are the fruits of, or additions to, or improvements upon, the principal;
those which are naturally or artificially attached to the thing.
a. Accessions c. Accessories
b. Natural fruits d. Civil fruits

______10. It is the delay on the part of the creditor to accept the performance of the
obligation.
a. mora solvendi c. compensatio morae
b. mora accipiende d. none of the above

Let’s Analyze
Instruction: Explain your answers in your own words thoroughly, with proper legal basis.

Case 1: Facts: Andres is obliged to deliver to Brian a 2019 model CRV car, and the 40-
inch Samsung TV set with unit Serial No. AFTR -2354 which Brian saw in Andres’
house, and to repair Brian’s organ. Andres did none of these things.

Issue: May the court compel Andres to deliver the car and the TV and repair the organ?
Why? If not, what relief may the court grant Brian? Why?

Case 2: The object of the real obligation is lost due to a fortuitous event.
a: Can the debtor still be held liable for damages?
(Support you answer with proper legal basis and concrete example)

Case 3. The carelessness of the driver of a jeepney as well as the negligence of the
driver of a van resulted in the collision of both vehicles which caused hurt to the
passenger of the jeepney.
a. Who should be liable?
b. What are the probable cause/s of action against the liable person/s? Justify your
answers with legal basis.

Case 4: Ally owes Bea P5,000 supported by a promissory note she (Ally) executed,
promising to pay the indebtedness on April 30, 2020. Ally was not able to make good
her promise. Is she already in delay?

In a Nutshell
Explain your own understanding the answers to the following questions.

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1. Explain personal right and real right in relation to a contract of sale.

2. Differentiate accessions from accessories

3. Explain in your own words the reasons for the difference in obligation arising from
fraud compared to liability for damages from negligence.

4. Explain differences between a causal fraud and an incidental fraud.

5. Give concrete examples of situations when demand is not necessary to put the
debtor in delay.

6. Differentiate culpa aquiliana from culpa criminal, and culpa contractual.

7. Differentiate ordinary delay from legal delay?

8. Give 3 examples of fraudulent acts.

________________________________________________________________
________________________________________________________________
________________________________________________________________

Q & A List
Do you have any questions for clarification? You may write them down below.
Questions/Issues Answers

1.

2.

3.

4.

5.

Keywords Index
Accessions culpa contractual mora solvendi
Accessories delay (mora) negative personal obligation
accion pauliana extra-judicial demand negligence (culpa or fault)
accion subrogatoria fraud (deceit or dolo) personal right
breach of contract force majeure presumption

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causal fraud fortuitous events proximate cause
Commodatum generic thing real right
compensation morae genus nunquam perit rebuttable presumption
compliance in good faith incidental fraud special laws
civil fruits industrial fruits specific thing
conclusive presumption judicial demand simple loan (mutuum)
criminal negligence legal delay usury
culpa aquiliana mora accipiende

COURSE SCHEDULES

Activity Date Where to submit

Big Picture ULOa: Let’s August 20, 2020 BlackBoard LMS

Check Activities

Big Picture ULOa: Let’s August 22, 2020 BlackBoard LMS

Analyze Activities

Big Picture ULOa: In a August 24, 2020 BlackBoard LMS

Nutshell Activities

Big Picture ULOa: Q & A August 25, 2020 BlackBoard LMS - Forum
List

Big Picture ULOb and August 27, 2020 BlackBoard LMS

ULOc: Let’s Check
Activities

Big Picture ULOb and August 29, 2020 BlackBoard LMS

ULOc: Let’s Analyze
Activities

Big Picture ULOb and September 31, 2020 BlackBoard LMS

ULOc: In a Nutshell
Activities

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Big Picture ULOb and September 2, 2020 BlackBoard LMS
ULOc: Q & A List

Big Picture ULOd: Let’s September 3, 2020 BlackBoard LMS

Check Activities

Big Picture ULOd: Let’s September 4, 2020 BlackBoard LMS

Analyze Activities

Big Picture ULOd: In a September 5, 2020 BlackBoard LMS

Nutshell Activities

Big Picture ULOd: Q & A September 5, 2020 BlackBoard LMS

List

Online Code of Conduct

1. Students are expected to abide by and honor code of conduct, and thus everyone
and all are exhorted to exercise self-management and self-regulation.

2. All students are guided by professional conduct as learners in attending On-Line

Blended Delivery (OBD) course. Any breach and violation shall be dealt with properly
under existing guidelines, specifically in Section 7 (Student Discipline) in the Student
Handbook.

3. Professional conduct refers to the embodiment and exercise of the University’s Core
Values, specifically in the adherence to intellectual honesty and integrity; academic
excellence by giving due diligence in virtual class participation in all lectures and
activities, as well as fidelity in doing and submitting performance tasks and
assignments; personal discipline in complying with all deadlines; and observance of
data privacy.

4. Plagiarism is a serious intellectual crime and shall be dealt with accordingly. The
University shall institute monitoring mechanisms online to detect and penalize
plagiarism.

5. Students shall independently and honestly take examinations and do assignments,

unless collaboration is clearly required or permitted. Students shall not resort to
dishonesty to improve the result of their assessments (e.g. examinations, assignments).

46


6. Students shall not allow anyone else to access their personal LMS account. Students
shall not post or share their answers, assignment or examinations to others to further
academic fraudulence online.

7. By enrolling in OBD course, students agree and abide by all the provisions of the
Online Code of Conduct, as well as all the requirements and protocols in handling
online courses.

Course prepared by:

ATTY. ALNESSA THEA V. REPOLLO – UY, REB

Course Facilitator

Course reviewed by:

MARY GRACE S. SOMBILON, MSA, CPA

Program Head – BSA, BSMA

DEVZON U. PORRAS, MSA, CPA

Program Head – BSAT, BSAIS, BSIA

Approved by:

LORD EDDIE I. AGUILAR

Dean – College of Accounting Education

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