COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

LAW ON OBLIGATIONS

II. NATURE AND EFFECTS OF OBLIGATIONS the tenor thereof the tenor thereof
(NCC, Art. 1170). (NCC, Art. 1170)
Effect of Fortuitous event Obligation is not
A. Types of Real Obligations fortuitous event extinguishes the extinguished
1. Determinate/specific – Particularly designated or obligation. (genus nunquam
physically segregated from all others of the same class; peruit – genus
2. Indeterminate/Generic – Is designated merely by its never perishes).
class or genus;
3. Delimited generic – Generic objects confined to a Remedies of the creditor in case of failure to deliver the
particular class (Tolentino, 2002); e.g. An obligation to thing due:
deliver one of my horses.
The following are the remedies of the creditor in case of
Obligations of a debtor in an obligation to deliver: failure to deliver the thing due (Pineda, 2000)

The obligations of the debtor (in an obligation to deliver) Specific Generic

depends upon the kind thing involved: Specific performance. Specific performance
(delivery of anything
Basis Specific Generic belonging to the same
What the Deliver the thing Deliver the thing species).
obligation agreed upon which is neither Rescission (action to Ask that the obligation be
consists of (NCC, Art. 1165). of superior nor rescind under NCC, Art. complied with at the
inferior quality if 1380). debtor’s expense with a
quality and right to recover damages.
circumstances Resolution (action for Resolution or specific
have not been cancellation under NCC, performance, with
stated by the Art. 1191). damages in either case
parties. (NCC, (NCC, Art. 1191).
Art. 1246). Damages, in both cases (NCC, Art. 1170). NOTE: May
Required Take care of the If the object is be exclusive or in addition to the above-mentioned
diligence to be thing with the generic, but the remedies
observed proper diligence source is
of a good father specified or NOTE: In an obligation to deliver a specific thing, the
of a family unless delimited, the creditor has the right to demand preservation of the thing,
the law requires obligation is to its accessions, accessories, and the fruits. The creditor is
or parties preserve the entitled to the fruits and interests from the time the obligation
stipulate another source. to deliver the thing arise.
standard of care
(NCC, Art.1163). Right of the creditor to the fruits:
What delivery Deliver all Delivery of
comprises of accessions, another thing The creditor has a right to the fruits of the thing from the time
accessories, and within the same the obligation to deliver it arises. However, he shall acquire
fruits of the thing genus as the no real right over it until the same has been delivered to him
even though they thing promised if (NCC, Art. 1164).
may not have such thing is
been mentioned damaged due to Source of Obligation When Obligation arises
(NCC, Art. 1166). lack of care or a Law, quasi-delict, quasi- Based on specific
general breach is contract, or crime. provisions of applicable
committed. law.
Effect of breach Pay damages in Pay damages in Subject to a suspensive From the happening of the
of obligation case of breach of case of breach of condition. condition.
obligation by obligation by Subject to a suspensive From the constitution,
reason of delay, reason of delay, term/period. creation or perfection of
fraud, fraud, obligation
negligence, negligence,
contravention of contravention of
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 Pure From the constitution, XPNs: a. Common carriers requiring extraordinary
creation or perfection of the diligence (NCC, Arts. 1998-2002); b. Banks require the
obligation. highest degree of deligence, being imbued with public
interest.
Diligence of a good father of a family:
Nature of the right of the creditor with respect to fruits:
That reasonable diligence which an ordinary prudent
1. Before delivery – Personal right; person would have done under the same circumstances.
2. After delivery – Real right.
Forms of breach of obligations:
Personal right v. Real right
1. Voluntary – Debtor is liable for damages if he is guilty
Personal Right Real Right of:
The right or power of a The right or interest of a a. Default (mora)
person (creditor) to person over a specific thing b. Fraud (dolo)
demand from another (i.e. ownership, c. Negligence (culpa)
(debtor), as a definite possession, mortgage), d. Breach through contravention of the tenor thereof
passive subject, the without a definite subject (NCC, Art. 1170).
fulfillment of the latter’s against whom the right
obligation to give, to do, or may be personally 2. Involuntary – Debtor is unable to perform the obligation
not to do. enforced. due to fortuitous event thus not liable for damages.
There is a definite active There is only a definite
subject and a definite active subject without any Effects of breach of obligation
passive subject. passive subject.
Binding and enforceable Directed against the whole If a person obliged to do something fails to do it, or if he
only against a particular World. does it in contravention of the tenor of the obligation or what
person. has been poorly done be undone, the same shall be
executed at his cost (NCC, Art. 1167).

B. Types of Personal Obligations When the obligation consists in not doing, and the obligor
does what has been forbidden him, it shall also be undone
1. Positive - To do; at his expense (NCC, Art.1168).
2. Negative - Not to do
Instances where the remedy under Art. 1168 is not
Remedies in personal obligations: available:

1. Positive personal obligations
a. Not purely personal act – To have obligation executed
at debtor's expense plus damages;
b. Purely personal act - Damages only.
When positive personal obligations considered breached:
a. If the debtor fails to perform the obligation; or b. Even
in case of performance but the same is done either in a
poor manner or in contravention of the tenor of the
obligation (NCC, Art. 1167).
1. Where the effects of the act which is forbidden are
definite in character – Even if it is possible for the creditor
to ask that the act be undone at the expense of the debtor,
consequences contrary to the object of the obligation will
have been produced which are permanent in character.
2. Where it would be physically or legally impossible to
undo what has been undone – Because of: a. The very
nature of the act itself; b. A provision of law; or c.
Conflicting rights of third persons.

2. Negative personal obligation – To have the prohibited
thing undone at the expense of the debtor plus damages.
However, if thing cannot be physically or legally undone,
only damages may be demanded (8 Manresa 58).
Specific performance is not a remedy in positive
personal obligations
If specific performance will be allowed, it will amount to
involuntary servitude which is prohibited by the Constitution
(Pineda, 2000).
C. Breach of Obligations
Degree of diligence required
1. That agreed upon;
2. In the absence of such, that which is required by the
law;
NOTE: In either case, the remedy is to seek recovery for
damages (NCC, Art. 1168)
C1. Delay (Mora) or Debtor’s Default
Those obliged to deliver or to do something incur in delay
from the time the obligee (creditor) judicially or
extrajudicially demands from them the fulfillment of their
obligation.
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 obligations, delay by the other
begins (NCC, Art. 1169).
Kinds of delay:
1. Ordinary delay – This is the mere failure to perform an
obligation at the stipulated time.

GR: In the absence of the foregoing, diligence of a good 2. Extraordinary delay or legal delay – This delay already
father of a family equates to non-fulfillment of the obligation and arises after
the extrajudicial or judicial demand has been made upon
the debtor (Pineda, 2000)

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Kinds of legal delay or default employed in the perfection of the
performance of a obligation.
1. Mora solvendi – Default on the part of the debtor/obligor pre-existing
a. Ex re – Default in real obligations (to give); obligation.
b. Ex personae – Default in personal obligations (to do); Consent Consent is free Consent is
2. Mora accipiendi – Default on the part of the and not vitiated. vitiated by serious
creditor/oblige; 3. Compensatio morae – Default on the deception or
part of both the debtor and creditor in reciprocal misrepresentation
obligations. Effect It is not a ground It is a ground for
for annulment of annulment of the
Instances when demand by the creditor is not the contract. contract.
necessary in order that delay may exist: Remedy Action for Action for
damages only annulment with
GR: No demand = no default [NCC, Art. 1169 (2)]. damages.

XPNs: Demand by the creditor shall not be necessary in Fraud as mentioned in Art. 1171
order that delay may exist when: 1. The obligation or the law
expressly so declares; or 2. From the nature and the Article 1171 of the NCC states that responsibility arising
circumstances of the obligation it appears that the from fraud is demandable in all obligations. Any waiver
designation of time when the thing is to be delivered or the of an action for future fraud is void.
service is to be rendered was a controlling motive for the
establishment of the contract; or 3. Demand would be It is incidental fraud or fraud in the performance of the
useless, as when the obligor has rendered it beyond his obligation and not the fraud in the execution of the contract
power to perform [Art. 1169 (2)]. or causal fraud. It is the intentional evasion of the normal
fulfillment of the obligation (Pineda, 2000).
Rules on compensatio morae:
Waiver of action arising from future fraud:
Unilateral Reciprocal
Obligations Obligations With respect to fraud that has already been committed (past
Time of delay Default or delay Delay by the fraud), the law does not prohibit renunciation of the action
begins from other party for damages based on the same since such can be deemed
extrajudicial or begins from the an act of generosity. What is renounced is the effect of
judicial demand moment one of fraud, particularly the right to indemnity. However, the law
– mere expiration the parties fulfills prohibits any waiver of an action for future fraud since the
of the period his obligation. same is contrary to law and public policy. Waiver for future
fixed is not fraud is void (NCC, Art. 1171).
enough in order
that debtor may
incur delay. C3. Negligence (Culpa)
Exceptions a. The obligation When different
or the law dates for the The fault or negligence of the obligor consists in the
expressly so performance of omission of that diligence which is required by the nature of
dictates; obligation is fixed the obligation and corresponds with the circumstances of
b. Time is of the by the parties. the persons, of the time and the place. When negligence
essence; shows bad faith, the provisions of Art. 1171 and 2201,
c. Demand would paragraph 2, shall apply. If the law or contract does not state
be useless, as the diligence which is to be observed in the performance,
debtor has that which expected of a good father of a family shall be
rendered it required (NCC, Art. 1173).
beyond his
power to Test of negligence
perform; or
d. Debtor has Did the defendant in doing the alleged negligent act use the
acknowledged reasonable care and caution which an ordinarily prudent
that he is in person would have used in the same situation? If not, then
default. he is guilty of negligence. (Picart v. Smith, G.R. No. L-
12219, March 15, 1918).

C2. Fraud (Deceit or Dolo) Kinds of negligence or culpa

1. Culpa contractual (contractual negligence) -
It is an intentional evasion of the faithful performance of the Negligence which results from the breach of contract;
obligation (8 Manresa 72).
2. Culpa aquiliana (civil negligence or tort or quasi-delict)
Kinds of fraud: Acts or omissions that cause damage to another, there
being no contractual relation between the parties (NCC,
Basis Fraud in the Fraud in the Art. 2176); and
performance perfection (Dolo
(Dolo incidente) causante) 3. Culpa criminal (criminal negligence) – Those which
Time of It occurs after It occurs before or results in the commission of a crime or a delict.
occurrence the valid simultaneous with
execution of the the creation or
contract. It is

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 Culpa Culpa Aquiliana/ Culpa 4. Debtor is free from any participation in the aggravation
Contractual Culpa Extra- Criminal of the injury to the creditor.
(Contract) Contractual (Delict)
(Quasi-Delict) NOTE: The fortuitous event must not only be the proximate
Existe Negligence is Negligence is Negligence is
cause but it must also be the only and sole cause.
nce of merely an substantive and substantive
neglige incident in the independent. and
Contributory negligence of the debtor renders him liable
nce performance of independent despite the fortuitous event (Pineda, 2000).
an obligation.
Contra There is always GR: There is NO There is No If the negligence was the proximate cause, the obligation is
ctual a pre-existing pre-existing pre-existing not extinguished. It is converted into a monetary obligation
relatio contractual contractual contractual for damages.
ns relation. relation. relation.
Source The source of The source of The source of Liability for loss due to fortuitous event
of obligation of obligation is obligation is
obligati defendant to defendant’s an act or
GR: There is no liability for loss in case of fortuitous event.
on pay damages is negligence omission
the breach or itself. punishable by
non-fulfillment of law. XPNs: (LaNS-PC-BaG)
the contract. 1. Law;
Proof Proof of the The negligence Accused shall 2. Nature of the obligation requires the assumption of risk;
of existence of the of the defendant be presumed 3. Stipulation;
neglige contract and of must be proved. innocent until 4. The debtor is guilty of dolo, malice or bad faith, has
nce its breach or the contrary is Promised the same thing to two or more persons who
non-fulfillment is proved does not have the same interest (NCC, Art. 1165);
sufficient prima beyond 5. The debtor Contributed to the loss (Tan v. Inchausti &
facie to warrant reasonable
recovery. doubt.
Co., G.R. No. 6092, March 8, 1912);
Defens Defense of Defense of Defense of 6. The possessor is in Bad faith (NCC, Art. 552); or
e “good father of a “good father of a “good father 7. The obligor is Guilty of fraud, negligence or delay or if
availab family” in the family” in the of a family” in he contravened the tenor of the obligation (Juan Nakpil v.
le selection & selection & the selection United Construction Co., Inc. v. CA, G.R. No. L-47851,
supervision of supervision of & supervision April 15, 1988).
the employees the employees of the
is not a proper is a proper and employees is Act of God v. Act of Man
complete complete not a proper
defense though defense. defense. The
it may mitigate employee’s
Act of God Act of Man
damages. guilt is Fortuitous event Force majeure
Respondeat automatically Event which is absolutely Event caused by the
superior or the independent of human legitimate or illegitimate
command employer’s intervention acts of persons other than
responsibility or civil guilt, if the obligor
the master and the former is e.g. Earthquakes, storms, e.g. Armed invasion,
servant rule. insolvent.
floods, epidemics robbery, war (Pineda,
Proof Preponderance Preponderance Proof of guilt
2000).
neede of evidence. of evidence. beyond
d reasonable
doubt. NOTE: There is no essential difference between fortuitous
event and force majuere; they both refer to causes
independent of the will of the obligor (Tolentino, 2002).
C4. Contravention of Tenor of Obligation (Violation)
Effects of fortuitous events
The act of contravening the tenor or terms or conditions of 1. On determinate obligation – The obligation is
the contract is also known as “violation,” i.e. failure of extinguished.
common carrier to take its passenger to their destination
safely (Pineda, 2000). 2. On generic obligation – The obligation is not
extinguished (genus nun quam peruit – genus never
Under NCC, Art. 1170, the phrase “in any manner perishes).
contravene the tenor” of the obligation includes any illicit act
which impairs the strict and faithful fulfillment of the
obligation, or every kind of defective performance. Such D. Remedies
violation of the terms of contract is excused in proper cases
by fortuitous events. In case of breach of obligation, the following are the
remedies available:
Fortuitous Event (Caso Fortuito) 1. Specific performance, or substituted performance by a
third person in case of an obligation to deliver a generic
An occurrence or happening which could not be foreseen, thing, and in obligations to do, unless it is a purely
or even if foreseen, is inevitable (NCC, Art. 1174). personal act;
2. Rescission (or resolution in reciprocal obligations);
Requisites: (CODE) 3. Damages, in any case; or
1. Cause of breach is independent of the will of the debtor; 4. Subsidiary remedies of creditors: a. Accion
2. The Event is unforeseeable or unavoidable; subrogatoria b. Accion pauliana c. Accion directa
3. Occurrence renders it absolutely impossible for the
debtor to fulfill his obligation in a normal manner -
impossibility must be absolute not partial, otherwise not
force majeure; and
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