Law On Obligation First Handout

Republic of the Philippines
CAMARINES NORTE STATE COLLEGE

F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines
COLLEGE OF BUSINESS AND PUBLIC

ADMINISTRATION
Name of faculty: Ryan Daves F. Quiñones, CPA
Subject: BA 100 – Law on Obligations and Contracts
Schedule for Instruction: BSA 1A TTH 11:00 - 12:30 - BSA 1B TTH 2:00 - 3:30
Lesson/Topic: Law on Obligations
Objectives
At the end of the discussion student should be able to:
 Comprehend the meaning of law in general as compared to the concept of state law;
 Identify the general divisions of law;
 Define the meaning of obligation as defined by the Civil Code;
 Enumerate the elements of an obligation;
 Distinguish the various sources of obligations, as well as the kinds of quasi-
contracts;
 Describe the concept of good faith
 Recognize obligations arising from Quasi-delicts
 Recall the concept of obligor and Obligee
 Distinguish vicarious obligations or liability from other sources of obligations.
 Distinguish specific and generic thing
 Enumerate the rights of creditor and duties of debtor.
 Define different kinds of fruits under the Civil Code
 Discuss when the obligations to deliver the fruits arises
 Distinguish personal right from real right
 Distinguish accession from accessories
 Analyse different situations involving obligations to give, to do, and not to do
Discussion
Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n)
An obligation is a juridical necessity to give, to do, or not to do (Art. 1156). It is a

juridical relation or a juridical necessity whereby a person (creditor) may demand from
another (debtor) the observance of a determinative conduct (giving, doing, or not doing),
and in case of breach, may demand satisfaction from the assets of the latter.
It is a juridical necessity because in case of noncompliance, the courts of justice

may be called upon by the aggrieved party to enforce its fulfillment or, in default thereof,
the economic value that it represents.
Art. 1156 refers only to civil obligations which are enforceable in court when
breached. It does not cover natural obligations (Articles. 1423-1430) because the latter
are obligations that cannot be enforced in court being based merely on equity and
natural law and not on positive law.
When there is a right, there is a corresponding obligation. Right is the active
aspect while obligation is the passive aspect. Thus, it is said that the concepts of credit
and debt are two distinct aspects of unitary concept of obligation (Pineda, 2000).
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GR: The law does not require any form in obligations arising from contracts for their
validity or binding force (Art. 1356).
XPNs:
1. When the form is essential to the validity of the contract as required by law (Art.
1346);
2. When the contract is unenforceable unless it is in a certain form, such as those
under the Statute of Frauds as formulated in Art. 1403.
Obligations arising from other sources (Art. 1157) do not have any form at all (De Leon,
2010).
Elements of an Obligation (JAPO)
1. Juridical tie or vinculum juris or efficient cause

2. Active Subject (creditor or obligee)
3. Passive subject (debtor or obligor)
4. Object or prestation
Juridical tie or vinculum juris or efficient cause – the efficient causes by virtue of
which the debtors becomes bound to perform the prestation.
Active subject [creditor (CR) or obligee] – the person demanding the performance of
the obligation. It is he in whose favor the obligation is constituted, established, or
created.
Passive subject [debtor (DR) or obligor] – The person bound to perform the
prestation to give, to do, or not to do.
Object or prestation - The subject matter of the obligation which has a corresponding
economic value or susceptible of pecuniary substitution in case of noncompliance. It is a
conduct that may consist of giving, doing, or not doing something (Pineda, 2000).
NOTE: In order to be valid, the object or prestation must be:

1. Licit or lawful;
2. Possible, physically & judicially;
3. Determinate or determinable; and
4. Pecuniary value or possible equivalent in money.
Absence of any of the first three makes the object void.
NOTE: Some writers add a fifth one: the form in which the obligation is manifested. This
element, however, cannot be considered as essential. There is no particular form
required to make obligations binding, except in certain rare cases.
CLASSIFICATION OF OBLIGATIONS
From the viewpoint of:

1. Creation.
a. Legal – Imposed by law (Art. 1158);
b. Conventional – Established by the agreement of the parties (Contracts).
2. Nature
a. Personal – to do; not to do;
b. Real – to give.
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3. Object
a. Determinate / specific - Particularly designated or physically segregated
from all others of the same class;
b. Generic – Designated merely by its class or genus;
c. Limited generic – Generic objects confined to a particular class or source
(Tolentino, 2002).(e.g. An obligation to deliver one of my horses).
4. Performance
a. Positive - To give; to do;
b. Negative – Not to do (ex. An obligation not to run for an elective post).
5. Person obliged
a. Unilateral – Only one party is bound;
b. Bilateral – Both parties are bound.
NOTE: A bilateral obligation may be reciprocal or non-reciprocal.
Reciprocal obligations are those which arise from the same cause, wherein each
party is a debtor and a creditor of the other, such that the performance of one is
conditioned upon the simultaneous fulfillment of the other.
6. Existence of burden or condition
a. Pure –Not burdened with any condition or term. It is immediately
demandable (Art. 1179);
b. Conditional – Subject to a condition which may be suspensive
(happening of which shall give rise to the obligation) or resolutory
(happening of which terminates the obligation) (NCC. 1181).
7. Character of responsibility or liability.
a. Joint – Each debtor is liable only for a part of the whole liability and to
each creditor shall belong only a part of the correlative rights (8 Manresa
194 ; NCC. 1207);
b. Solidary – Debtor is answerable for the whole of the obligation without
prejudice to his right to collect from his co-debtors the latter’s shares in the
obligation (NCC. 1207).
8. Susceptibility of partial fulfillment.
a. Divisible – Obligation is susceptible of partial performance (NCC. 1223;
and 1224);
b. Indivisible – Obligation is not susceptible of partial performance (NCC.
1225).
9. Right to choose and substitution
a. Alternative – Obligor may choose to completely perform one out of the
several prestations (NCC. 1199);
b. Facultative – Only one prestation has been agreed upon, but the obligor
may render one in substitution of the first one (NCC. 1206).
10. Imposition of penalty
a. Simple – there is no penalty imposed for violation of the terms thereof
(NCC. 1226);
b. Obligation with penalty – obligation which imposes a penalty for violation
of the terms thereof (NCC. 1226; Pineda, 2000).
11. Sanction
a. Civil – Gives a right of action to compel their performance;
b. Natural– Not based on positive law but on equity and natural law; does
not grant a right of action to enforce their performance, but after voluntary
fulfillment by the obligor, they authorize retention of what has been
delivered rendered by reason thereof.
Moral – Cannot be enforced by action but are binding on the party who makes it in
conscience and natural law.
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Examples of Obligation:
A. D is obliged to give C P100, 000.00 with interest of 12% per annum on

December 31, 2020 pursuant to a contract of loan they executed on January 1,
2021. D here is the passive subject or obligor of P100, 000.00 with 12% interest
is the prestation; and the contract of loan is the efficient cause. The obligation
here is unilateral; only one party is required to perform a particular conduct.
B. S and B executed a deed of sale wherein S sold his lot to B for P500, 000.00.
With respect to the giving of the lot, which is the prestation, S is the passive
subject; B is the active subject; and the efficient cause is the deed of sale. With
respect to the giving of P500,000.00 which is the prestation, B is the passive
subject; S is the active subject; and the deed of sale is also the efficient cause.
The obligations here are bilateral each party is required to perform a particular
conduct.
Q: Distinguish Civil Obligation from Natural Obligation

A:
Civil Obligations are based on equity and natural law and a right to compel
their performance, while natural obligations are based on equity and natural law
and do not grant right to compel their performance, but after voluntary fulfillment
by the obligor, they authorize the retention of what has been delivered or
rendered by the reason thereof. (Art. 1423)
EXAMPLES OF A CIVIL AND NATURAL OBLIGATIONS
a. Civil Obligation
Jordan borrowed P50, 000 from James payable on July 31, 2020. As
evidence of the debt, Jordan executed a promissory note. If Jordan makes no
payment on due date, C may enforce payment by filing a court action within a period
of 10 years from due date.
b. Natural Obligation
Curry obtained of P50, 000 from Harden. The debt, which is evidence by a
promissory note, is due on September 30, 2020. No action for payment was filed
in court by Harden within 10 years from such date; hence, the debt prescribed
the right of the creditor to enforce its payment by court action was lost due to
lapse of time. However, Harden knowing that the debt had prescribed, voluntarily
paid Curry. Harden cannot recover what he had voluntary paid because although
payment was no longer required, in equity and moral justice, he still owned Curry
the amount of P50, 000.00.
DIFFERENT KINDS OF PRESTATION
BASIS OBLIGATION TO OBLIGATION TO OBLIGATION NOT

GIVE DO TO DO
As to what the Consists in the Covers the Refraining from
obligation delivery of a thing rendering of works doing certain acts
consists of to the creditor or services whether
physical or mental
Sale, deposit, Contract for Negative
pledge, donation, professional easement,
Examples
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antichresis services like restraining order or
painting, modeling, injunction (Pineda,
singing, etc. 2000)
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)
This enumeration is exclusive. No obligation exists if its source is not one of those
enumerated inArt. 1157 of the NCC
Note: Actually, there are only two sources (i.e., law and contracts) because obligations
arising from quasi-contracts, delicts and quasi-delicts are imposed by law
Time of perfection
General Rule
a. Law – From the time designated by the law creating or regulating them;
b. Contracts –From the time of the perfection of the contract.
XPNs:
1. When the parties made stipulation on the right of the creditor to the fruits
of the thing;
2. When the obligation is subject to a suspensive condition, it arises upon
fulfillment of the condition;
3. When the obligation is with a period, there is already an existing obligation
but demandable only when the period expires or becomes due.
c. Quasi Contracts, delicts, quasi-delict – From the time designated by the law
creating or regulating them.
Art. 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. (1090)
OBLIGATION EX LEGE
1158 refers to the legal obligations or imposed by specific provisions of law,

which means that obligations arising form law are not presumed and that to be
demandable must be clearly provided for, expressly or impliedly in the law.
NOTE: If there is conflict between the NCC and a special law, the latter prevails
unless the contrary has been expressly stipulated in the NCC (NCC, Art. 18; Paras,
2008).
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Article 18 of the New Civil Code provides that, in matters which are
governed by the Code of Commerce and special laws, their deficiency shall be
supplied by the provisions of this Code.
Characteristics of a legal obligation
1. Does not need the consent of the obligor;
2. Must be expressly set forth in the law creating it and not merely presumed; and
3. In order that the law may be a source of obligation, it should be the creator of the
obligation itself (NCC, Art. 1158).
Determining whether an obligation arises from law or from some other source
1. Arises from law if it establishes obligation;
2. Arises from the act itself if the law merely recognizes the existence of an
obligation generated by an act (Manresa).
Examples
1. According to Art. 2014 of the NCC, a loser in a game of chance may recover his
loss from the winner, with legal interest from the time he paid the amount lost
(Leung Ben v. O’Brien, G.R. No. L13602, April 6, 1918);
2. The obligation of the spouses to support each other;
3. The obligation of the employers under the Worker’s Compensation Act;
4. The obligations of the owners of the dominant and servient estates in legal
easements and others scattered in the NCC and in special laws (Jurado, 2009);
5. The obligation to pay taxes (Rabuya, 2017)
DOMINGO DE LA CRUZ vs. NORTHERN THEATRICAL ENTERPRISES INC.,

ET AL.
Facts:
1941, The Northern Theatrical Enterprises Inc., a domestic corporation operated a
movie house in Laoag, Ilocos Norte. Domingo De La Cruz was employed whose duties
were to guard the main entrance, to maintain peace and order and to report the
commission of disorders within premises. He carried a revolver.
Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by
the refusal of De la Cruz to let him in without first providing himself with a ticket, Martin
attacked him with a bolo. De la Cruz defendant himself as best he could until he was
cornered, at which moment to save himself he shot Martin, resulting in Benjamin
Martin’s death.
De la Cruz was charged with homicide. After a re-investigation conducted by the
Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted by
the court. De la Cruz was again accused of the same crime of homicide. After trial, he
was finally acquitted of the charge.
He then demanded from former employer to repay the expenses but was refused thus
filed present action against the Northern Theatrical Enterprises Inc company and to
three members of its Board of Directors to recover amounts he had paid his lawyers
including moral damages said to have been suffered due to his worry, neglect of his
interests and his family as well in the supervision of the cultivation of his land, a total of
P 15,000.
Court of First Instance of Ilocos Norte rejected the theory of De la Cruz because he was
an agent of Northern Theatrical Enterprises Inc. and that as such agent he was entitled
to compensate the expenses incurred by him in connection with the agency.
The court found and decided that De La Cruz had no cause of action and dismissed the
complaint without costs.
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Issue:
Whether or not an agent who’s in the line of duty performs an act that resulted in his
incurring expenses caused by a stranger. May the latter recover the said expenses
against his former employer.
Held:
No, because the relationship between the Northern Theatrical Enterprises Inc. and
plaintiff was not that of principal and agent because the principle of representation as a
characteristic of agency was in no way involved. Plaintiff was not employed to represent
corporation in its dealings with third parties. Plaintiff is a mere employee hired to
perform a certain specific duty or task, that of acting as a special guard and staying at
the main entrance of the movie house to stop gate crashers and to maintain peace and
order within the premises.
Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith. (1091a)
OBLIGATION EX CONTRACTU
1. Contract, concept
A 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.
2. Contract as a source of obligation
An obligation is derived from contract if it arises from the agreement of the

parties. It shall have the force and effect of law between them should be complied with
in good faith. However, in order that the obligation may be enforced, the contract must
be valid and enforceable. Once a contract entered into, neither party can disregard it at
will or withdraw from it without a valid cause.
Requisites of a contractual obligation
1. It must contain all the essential requisites of a contract (NCC, Art. 1318); and
2. It must not be contrary to law, morals, good customs, public order, and public
policy (NCC, Art. 1306).
Rules governing the obligations arising from contracts
GR: These obligations arising from contracts shall be governed primarily by the
stipulations, clauses, terms and conditions of the parties’ agreements.
XPN: Contracts with prestations that are unconscionable or unreasonable (Pineda,

2009).
Binding force of obligation ex contractu
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Obligations arising from contracts have the force of law between the parties and
should be complied with in good faith (NCC, Art. 1159). This is known as the “principle
of obligatory force of contracts” (Rabuya, 2017).
Good faith is performance in accordance with the stipulation, clauses, terms and
conditions of the contract (Pineda, 2000).
GR: Neither party may unilaterally evade his obligation in the contract.
XPNs: Unilateral evasion is allowed when the:
1. Contract authorizes such evasion; or

2. Other party assents thereto.
Art. 1160. Obligations derived from quasi-contracts shall be subject to the

provisions of Chapter 1, Title XVII, of this Book. (n)
OBLIGATION EX QUASI – CONTRACTU
Quasi-contract
A juridical relation arising from lawful, voluntary and unilateral acts based on the
principle that no one shall be unjustly enriched or benefited at the expense of another
(NCC, Art. 2142).
Distinguished from “implied contracts”
An implied contract, in the proper sense, is a contract which arises when the intention of
the parties is not expressed, but an agreement in fact, creating an obligation, is implied
or presumed from their acts, or where there are circumstances which show a mutual
intent to contract.
An implied contract requires consent while quasi-contract, being a unilateral contract,

does not. The basis of an implied contract is the will of the parties while the basis of a
quasi-contract is law, to the end that there is no unjust enrichment (Rabuya, 2017).
Characteristics of a quasi-contract (LUV)
1. It must be Lawful;
2. It must be Unilateral; and
3. It must be Voluntary (Pineda, 2000).
Presumptive consent
Since a quasi-contract is a unilateral contract created by the sole act(s) of the gestor,
there is no express consent given by the other party. The consent needed in a contract
is provided by law through presumption (Pineda, 2000).
Principal forms of quasi-contracts

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1. Negotiorum gestio (inofficious manager) – Arises when a person voluntarily
takes charge of the management of the business or property of another without
any power from the latter (NCC, Art. 2144);
2. Solutio indebiti (unjust enrichment) – Takes place when a person received
something from another without any right to demand for it, and the thing was
unduly delivered to him through mistake (NCC, Art. 2154)
NOTE: The delivery must not be through liberality or some other cause.
Solutio indebiti (SI) v. Accion in rem verso (AIRV)
1. Mistake is an essential element in Solutio indebiti which is not necessary in

Accion in rem verso;
2. An Accion in rem verso is merely an auxilliary action, available only when there
is no other remedy on contract, quasi-contract, crime or quasi-delict (Rabuya,
2017).
Rule in case of excess of payment of interest
If the borrower pays interest when there has been no stipulation therefor, the
provisions of the Code concerning solutio indebiti, or natural obligations, shall be
applied, as the case may be. If the payment of interest is made out of mistake, solutio
indebiti applies; hence, the amount must be returned to the debtor.
If the payment was made after the obligation to pay interest has already
prescribed, natural obligation applies; hence, the creditor is authorized to retain the
amount paid.
Q: Is the Government exempt from application of solution indebiti?
A: No. basis?
UST Cooperative vs. City of Manila L-17133, December 31, 1965
Basis No. 1
Facts:
ABC Cooperative paid municipal taxes and license fees to the government
unaware that under a new law it was exempt “from all taxes and government
fees”. Later, it learned of its exemption and to recover from the city government
the taxes it had paid to the latter. The city government refused to refund taxes.
Held:
ABC Cooperative can recover such taxes from the city government which
has a duty to return what has been paid by mistake under the principle of solution
indebiti.
Basis No. 2
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Commissioner of Internal Revenue vs. Fortune Tabacco Corporation
G.R. No. 167274-75, July 21, 2008
Held:
The Government is not exempt from the application of solution indebiti. Indeed,
the taxpayer expects fair dealing from the Government, and the latter has the duty
to refund without any unreasonable delay what it has erroneously collected. If the
State expects its taxpayers to observed fairness and honesty in paying taxes, it
must hold itself against the same standard in refunding excess (or erroneous)
payments of such taxes. It should not unjustly enrich itself at the expense of the
taxpayers.
Under the tax code itself, apparently in recognition of the pervasive quasi-
contract principle, a claim for tax refund may be based on the following;
a. Erroneously or illegally assessed or collected internal revenue taxes

b. Penalties imposed without authority; and
c. Any sum alleged to have been excessive or in any manner wrongfully
collected.
OTHER EXAMPLES OF QUASI-CONTRACT
1. When, without the knowledge of the person obliged to give support, it is given by
a stranger, the latter shall have the right to claim the same from the former,
unless it appears that he gave it out of piety and without intention of being paid.
2. When funeral expenses are borne by a third person, without knowledge of those
relatives who were obliged to give support to the deceased, said relatives shall
reimburse the third person, should the latter claim reimbursement. (Art. 2165)
3. When the person obliged to support an orphan, or an insane or other indigent
person unjustly refuses to give support to the latter, any third person may furnish
support to the needy individual, with right of reimbursement from the person
obliged to give support. This provision applies when the father or mother of a
child under eighteen years of age unjustly refuses to support him. (Art. 2166)
4. When through an accident or other cause a person is injured or becomes
seriously ill, and he is treated or helped while he is not in a condition to give
consent to a contract, he shall be liable for the services of the physician or other
person aiding him, unless the services has been rendered out of pure generosity.
(Art. 2167)
5. When during a fire, flood, storm or other calamity property is saved from
destruction by another person without the knowledge of the owner; the latter is
bound to pay the former just compensation. (Art. 2168)
6. When the government, upon failure of any calamity property is saved from
destruction by another person without the knowledge of the owner, the latter is
bound to pay the former just compensation.(Art.2169)
7. When by accident or other fortuitous event, movables separately pertaining to
two or more persons are commingled or confused, the rules on co-ownership are
applicable. (Art.2170)
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8. When in a small community, a majority of the inhabitants of age decide upon a
measure of protection against lawlessness, fire, flood, storm or other calamity,
anyone who objects to the plan and refuses to contribute to the expenses but is
benefited by the project as executed shall be liable to pay his share of said
expenses. (Art.2174)
9. Any person who is constrained to pay the taxes of another shall be entitled to
reimburse from the latter. (Art. 2175)
Contract v. Quasi-contract
CONTRACT QUASI-CONTRACT
There is a meeting of the minds or There is no consent but the same is
consent; the parties must have supplied by fiction of law; to prevent
deliberately entered into a formal injustice
agreement
Art. 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. (1092a)
OBLIGATIONS EX DELICTO
Delict
An act or omission punishable under the law.
1. Civil liability for acts and omissions punished by law (felonies)
When a crime is committed and no material damage is caused upon the

offender party, civil liability cannot be enforced. The offender is only criminally
liable and may be imposed a sentence which may consist, among other penalties,
of imprisonment, payment of fine or disqualification to hold public office.
When the crime committed has caused material damage upon the offender
party, Art. 100 of the Revised Penal Code which provides that “every person
criminally liable for a felony is also civilly liable” apply. Thus the offender has two
liabilities, criminal and civil. His civil liability includes restitution, reparation of the
damaged caused, and indemnification of consequential damages. (Art. 104 of the
Revised Penal Code)
Basis
GR: Art. 100 of the RPC provides: “Every person criminally liable for a felony is also
civilly liable.”
XPNs: Crimes of treason, rebellion, espionage, contempt and others wherein no civil
liability arises on the part of the offender either because there are no damages to be
compensated or there is no private person injured by the crime (Reyes, 2008).
Implied institution of the civil action in a criminal case
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GR: When a criminal action is instituted, the civil action for the recovery of the civil
liability arising from the offense charged shall be deemed instituted with the criminal
action (Sec. 1, Rule 111 of the Revised Rules of Court).
XPNs: When the offended party:
1. Waives the civil action;

2. Reserves the right to institute it separately; and
3. Institutes the civil action prior to the criminal action (Rule 111, Sec. 1 of the
Revised Rules of Court).
Scope of civil liability (IRR)
1. Restitution;
2. Reparation for damage caused; and
3. Indemnity for consequential damages (Art. 104, RPC).
RESTITUTION
The restitution of the thing itself must be made whenever possible, with
allowance for any deterioration or diminution in value. The thing itself shall be restored
even though it is found in the possession of a third person who has acquired it by lawful
means, saving to the latter action the proper person who may be liable to him. (Art. 105,
R.P.C)
REPARATION IF THE DAMAGE CAUSED
If restitution is possible, reparation includes the repair of the material damage of

the object of the crime; if it is not possible, reparation includes the price of the object of
the crime, whenever possible, and its sentimental value to the offender party (Art.106
RPC)
INDEMNIFICATION OF CONSEQUENTIAL DAMAGES
This shall include not only those caused the injured party, but also those suffered
by his family or by a third person by reason of the crime. (Art. 107, R.P.C.)
EXAMPLE
Tatum stole the hand tractor of Lowry. If Tatum is found guilty of the crime of theft, he
has a civil liability consisting of restoring the hand tractor to Lowry. If the hand tractor
cannot be returned because it was completely destroyed even without Tatum’s fault,
Tatum has to pay its value to Lowry. Tatum also has to pay the lost profits and moral
and other damages sustained by Lowry
Acquittal in criminal case
GR: The acquittal of the accused in criminal case on the ground of reasonable doubt
does not preclude the filing of a subsequent civil action and only preponderance of
evidence is required to prove the latter.
XPNs: When the acquittal is on the basis that:
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1. The accused did not commit the crime charged; or
2. There is a declaration in the decision of acquittal that no negligence can be
attributed to the accused and that the fact from which the civil action might arise
did not exist (NCC, Art. 29).
EFFECT OF DEATH OF CRIMINAL OFFENDER PENDING TRIAL
The death of the offender before final judgment does not extinguish his civil
liability arising from the crime. The action for the recovery of the civil liability will be
directed against the administrator of the estate, the obligation having become the
obligation of the heirs. However, the heirs will not be liable beyond the value of the
property that they inherit. (Art.774, 1211; Buenaventura Belamala vs. Marcelino Polinar,
L-24098, November 18, 1967)
Art. 1162. Obligations derived from quasi-delicts shall be governed by the

provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)
OBLIGATIONS EX QUASI – DELICTO
Quasi-delict or tort
An act or omission arising from fault or negligence which causes damage to another,
there being no preexisting contractual relations between the parties (NCC, Art. 2176).
NOTE: A single act or omission may give rise to two or more causes of action. Thus, an
act or omission may give rise to an action based on delict, quasi‐delict or contract.
In negligence cases, prior conduct should be examined, that is, conduct prior to the
injury that resulted, or in proper case, the aggravation thereof.
Elements of a quasi-delict
1. Negligent or wrongful act or omission;

2. Damage or injury caused to another;
3. Causal relation between such negligence or fault and damage; and
4. No pre-existing contractual relationship between the parties (NCC, Art. 2176).
Instances when Art. 2176 is inapplicable
1. When there was a pre‐existing contractual relation because the breach of

contract is the source of the obligation (Robles v. Yap Wing, 41 SCRA 267, G.R.
No. L-20442, October 4, 1971);
NOTE: However, if the act that breaches the contract is tortuous, the pre‐existing
contractual relation will not bar the recovery of damages (Singson v. BPI, G.R.
No. L-24837, June 27, 1968);
2. When the fault or negligence is punished by law as a crime, Art. 100 of RPC shall
be applicable;
3. If the action for quasi‐delict is instituted after 4 years, it is deemed prescribed
(Afialda v. Hisole, G.R. No. L-2075, November 29, 1949);
4. When the injury suffered by a person is the result of a fortuitous event without
human intervention;
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5. If there is no damage or injury caused to another (Walter A. Smith & Co. v.
Cadwallader Gibson Lumber Company, G.R. No. L-32640, December 29, 1930).
Example
D was cleaning the window pane of his condominium unit. Due to lack of
care, he caused the glass to break and fall on the street, the splinters hitting the
head of a pedestrian and the cars were parked on the ground. D shall be liable for
the damages to the pedestrian for any injury sustained by him and to the car
owner for the scratches and dents on the car.
Delict v. Quasi-delict
Basis Delict Quasi-delict

As to the kind of intent Presence of criminal or Only negligence
present malicious intent or criminal
negligence.
As to the whether private Concerned with public Concerned with private
or public interest is interest. interest.
concerned
As to the kind of liability Generally, the act or The act or omission gives
arises omission gives rise to two rise only to a civil liability
liabilities: criminal and civil
liability
As to availability of a Criminal liability is not The civil liability can be
compromise subject to a compromise. compromised.
As to the quantum of Guilt must be proved Guilt may be proved by
evidence is required beyond reasonable doubt. preponderance of evidence
NOTE: Inasmuch as civil liability co-exists with criminal responsibility in negligence

cases, the offended party has the options between actions for enforcement of civil
liability based on culpa criminal under Art. 100 of the RPC, and an action for recovery of
damages based on culpa aquiliana under NCC, Art. 2177.
Art. 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. (1094a)
Types of real obligation
1. Determinate/specific – Particularly designated or physically segregated from all

others of the same class;
2. Indeterminate/Generic – Is designated merely by its class or genus;
3. Delimited generic – Generic objects confined to a particular class (Tolentino,
2002); (An obligation to deliver one of my horses.
Obligations of a debtor in an obligation to deliver
The obligations of the debtor (in an obligation to deliver) depend upon the kind thing
involved:
BASIS SPECIFIC GENERIC
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Deliver the thing agreed Deliver the thing which is
upon (NCC, Art. 1165). neither of superior nor
What the obligation inferior quality if quality
consists of and circumstances have
not been stated by the
parties. (NCC, Art. 1246).
Take care of the thing with If the object is generic, but
the proper diligence of a the source is specified or
Required diligence to be good father of a family delimited, the obligation is
observed unless the law requires or to preserve the source.
parties stipulate another
standard of care (NCC,
Art.1163).
Deliver all accessions, Delivery of another thing
accessories and fruits of within the same genus as
What delivery comprises the thing even though they the thing promised if such
of may not have been thing is damaged due to
mentioned (NCC, Art. lack of care or a general
1166). breach is committed.
Pay damages in case of Pay damages in case of
breach of obligation by breach of obligation by
Effect of breach of reason of delay, fraud, reason of delay, fraud,
obligation negligence, contravention negligence, contravention
of the tenor thereof (NCC, of the tenor thereof (NCC,
Art. 1170). Art. 1170).
Fortuitous event Obligation is not
Effect of fortuitous event extinguishes the obligation. extinguished (genus
nunquam peruit – genus
never perishes).
DILIGENCE OF A GODD FATHER OF FAMILY,CONCEPT
Diligence of a good father of a family means the diligence which an

ordinary prudent man would exercise with regard to his own property. (De
Guzman v. Agana, 01885-SP July 1, 1977).
Remedies of the creditor in case of failure to deliver the thing due The following are the
remedies of the creditor in case of failure to deliver the thing due (Pineda, 2000)
SPECIFIC GENERIC
Specific performance. Specific performance (delivery of
anything belonging to the same species).
Rescission (action to rescind under NCC, Ask that the obligation be complied with
Art. 1380). at the debtor’s expense with a right to
recover damages.
Resolution (action for cancellation under
NCC, Art. 1191). Resolution or specific
performance, with damages in either case
(NCC, Art. 1191).
Damages, in both cases (NCC, Art. 1170).
NOTE: May be exclusive or in addition to the above-mentioned remedies
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NOTE: In an obligation to deliver a specific thing, the creditor has the right to demand
preservation of the thing, its accessions, accessories, and the fruits. The creditor is
entitled to the fruits and interests from the time the obligation to deliver the thing arise.
Art. 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. (1095)
SOURCE OF OBLIGATION WHEN OBLIGATION ARISES

Law, quasi-delict, quasi-contract, or Based on specific provisions of applicable
crime. law.
Subject to a suspensive condition. From the happening of the condition.
Subject to a suspensive term/period. From the constitution, creation or
perfection of obligation.
Pure From the constitution, creation or
perfection of the obligation.
Examples
1. On January 1, 2021, Lucifer Morningstar obliged himself to deliver a specific

agricultural lot to Chloe Decker. Since the obligation is a pure obligation, Chloe
Decker shall be entitled to the fruits, such as the plants that have grown on the
lot, accruing from January 1, 2021, when the contract was perfected.
2. On July 1, 2019, Mike Ross Obliged himself to deliver a specific coconut
plantation to Harvey Specter if Harvey Specter passes the November 2020 BAR
exam. Harvey Specter passed the Bar Exam on November 18, 2020, so the
obligation to deliver arose from the said date when the condition was fulfilled.
Any fruits that had accrued from such date shall pertain to Harvey Specter.
3. On August 1, 2020 Professor obliged himself to deliver a specific apartment unit
to Raquel Murillo on August 31, 2020. The obligation to deliver arose on August
31, 2020 when the terms arrive; hence Raquel Murillo shall be entitled to the
fruits, such as the apartment rentals, accruing the said date.
KINDS OF FRUITS (NIC)
1. Natural Fruits
Natural Fruits are the spontaneous products of the soil and the young and other
products of animals. (Art.422) Thus, Trees and plants that grow naturally from the soil
without the intervention of man are natural fruits. So also is a colt delivered by a mare or
the eggs produced by a chicken even with the intervention of human labor.
2. Industrial Fruits
Industrial fruits are those produced by land of any kind through cultivation or labor,
(Art.422) such as rice, corn and other products of land that come into existence through
human labor.
3. Civil Fruits
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Civil Fruits are those which are the result of juridical relation such as the rents of
buildings, the price of leases of lands and other property, and the amount of perpetual
or life annuities or other similar income.
Nature of the right of the creditor with respect to fruits
1. Before delivery – Personal right; (Jus in personarum or jus ad rem)

2. After delivery – Real right. (Jus in re)
Personal right v. Real right
PERSONAL RIGHT REAL RIGHT

The right or power of a person (creditor) The right or interest of a person over a
to demand from another (debtor), as a specific thing (i.e. ownership, possession,
definite passive subject, the fulfillment of mortgage), without a definite subject
the latter’s obligation to give, to do, or not against whom the right may be personally
to do. enforced.
There is a definite active subject and a There is only a definite active subject
definite passive subject. without any passive subject.
Binding and enforceable only against a Directed against the whole World.
particular person.
Example
On July 1, 2020, Derrick Rose obliged himself to deliver a specific horse to

Alaina Anderson on August 31, 2020. Derrick Rose failed to deliver the horse to Alaina
Anderson on August 31, 2020. On September 31, 2020, while the horse was still in the
possession of Derrick Rose, the horse gave a birth to a colt. Alaina Anderson shall be
entitled to the colt and may demand the delivery of the horse together with it (personal
right). If Derrick Rose actually delivered the horse and the colt on October 15, 2020,
then Alaina Anderson acquired real right over them from such date. If Derrick Rose,
however, sold and delivered the horse and the colt to James, a buyer in good faith, on
October 15, 2020, James shall acquire ownership over them. Alaina Anderson shall
have no right of action against James. Instead, he can go after Derrick Rose for
damages.
Principle of “balancing of equities” in actions for specific performance
In decreeing specific performance, equity requires not only that the contract be just and
equitable in its provisions, but that the consequences of specific performance likewise
be just and equitable. The general rule is that this equitable relief will not be granted if,
under the circumstances of the case, the result of the specific performance of the
contract would be harsh, inequitable, and oppressive or result in an unconscionable
advantage to the plaintiff (Agcaoili v. GSIS, G.R. No. 30056, August 30, 1988).
Types of personal obligations
1. Positive - To do;
2. Negative - Not to do.
Remedies in personal obligations
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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).
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).
BREACHES OF OBLIGATIONS
Degree of diligence required
1. That agreed upon;

2. In the absence of such, that which is required by the law;
3. GR: In the absence of the foregoing, diligence of a good father of a family.
XPNs:
a. Common carriers requiring extraordinary diligence (NCC, Arts. 1998-2002);

b. Banks require the highest degree of diligence, being imbued with public interest.
Forms of breach of obligations
1. Voluntary – Debtor is liable for damages if he is guilty of:

a. Default (mora)
b. Fraud (dolo)
c. Negligence (culpa)
d. Breach through contravention of the tenor thereof (NCC, Art. 1170).
2. Involuntary –Debtor is unable to perform the obligation due to fortuitous event thus
not liable for damages.
Art. 1165. When what is to be delivered is a determinate thing, the creditor, in

addition to the right granted him by Article 1170, and 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. (1096)
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Art. 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.
(1097a)
Art. 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. (1098)
Effects of breach of obligation
If a person obliged to do something fails to do it, or if he does it in contravention of the

tenor of the obligation or what has been poorly done be undone, the same shall be
executed at his cost (NCC, Art. 1167).
Art. 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. (1099a)
When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall also be undone at his expense (NCC, Art.1168).
Instances where the remedy under Art. 1168 is not available
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.
NOTE: In either case, the remedy is to seek recovery for damages (NCC, Art. 1168)
Art. 1169. Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extra judicially 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 declare; 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
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(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. (1100a)
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 extra judicially 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.
2. Extraordinary delay or legal delay – This delay already equates to non-
fulfillment of the obligation and arises after the extrajudicial or judicial demand
has been made upon the debtor (Pineda, 2000).
Kinds of legal delay or default
1. Mora solvendi – Default on the part of the debtor/obligor

a. Ex re – Default in real obligations (to give);
b. Ex personae – Default in personal obligations (to do);
2. Mora accipiendi – Default on the part of the creditor/oblige;
3. Compensatio morae – Default on the part of both the debtor and creditor in
reciprocal obligations.
MORA SOLVENDI
Requisites (PDF-MJ)
1. Obligation Pertains to the debtor;

2. Obligation is Determinate, due and demandable, and liquidated;
3. Obligation has not been performed on its Maturity date;
4. There is Judicial or extrajudicial demand by the creditor; and
5. Failure of the debtor to comply with such demand.
Non-applicability of mora solvendi
Mora solvendi does not apply in natural obligations because performance is optional or
voluntary on the debtor’s part. One can never be late in not giving or doing something.
Instances when demand by the creditor is not necessary in order that delay may
exist
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GR: No demand = no default [NCC, Art. 1169 (2)].
XPNs: Demand by the creditor shall not be necessary in order that delay may exist
when:
1. The obligation or the law expressly so declares; or

2. From the nature and the circumstances of the obligation it appears that the
designation of 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. Demand would be useless, as when the obligor has rendered it beyond his
power to perform [Art. 1169 (2)].
Q: “A” borrowed P2, 000 from “B” on December 1, 2018. He executed a promissory
note promising to pay the indebtedness on December 1, 2020. Upon the arrival of the
designated date for payment, is demand necessary in order that “A” shall incur in delay?
A: YES. In order that the first exception provided for in Article 1169 of the NCC can be
applied, it is indispensable that the obligation or the law should expressly add that the
obligor shall incur in delay if he fails to fulfill the obligation upon the arrival of the
designated date or that upon the arrival of such date demand shall not be necessary
(Bayla v. Silang Traffic Co., G.R. Nos. L-48195 and 48196, May 1, 1942).
Effects of mora solvendi
1. Debtor may be liable for damages (NCC, Art. 1155) or interests; and
NOTE: The interest begins to run from the filing of the complaint when there is no
extrajudicial demand.
2. When the obligation has for its object a determinate thing, the debtor may bear
the risk of loss of the thing even if the loss is due to fortuitous event;
3. Rescission or resolution.
Debtor’s liability may be mitigated even if he is guilty of delay
If the debtor can prove that loss would nevertheless transpire even if he had not been
in default, the court may equitably mitigate his liability [NCC, Art. 2215(4); Pineda, 2000]
MORA ACCIPIENDI
Requisites
1. Offer of Performance by a capacitated debtor;

2. Offer must be to Comply with the prestation as it should be performed; and
3. Refusal of the creditor without just cause (Pantaleon v. Amex, supra).
Effects of mora accipiendi
1. Responsibility of debtor is limited to fraud and gross negligence;

2. Debtor is exempted from risk of loss of thing; creditor bears risk of loss;
3. Expenses by debtor for preservation of thing after delay is chargeable to creditor;
4. If the obligation bears interest, debtor does not have to pay it from time of delay;
5. Creditor liable for damages; and 6 Debtor may relieve himself of obligation by
consigning the thing.
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COMPENSATIO MORAE
Reciprocal obligations
Reciprocal obligations are those which arise from the same cause, wherein each party
is a debtor and a creditor of the other, such that performance of one is conditioned upon
the simultaneous fulfillment of the other from the moment one of the parties fulfills his
obligation, delay by the other party begins (ASJ Corporation v. Evangelista, G.R. No.
158086, February 14, 2008).
Delay in reciprocal obligations
One party incurs in delay from the moment the other party fulfills his obligation, while he
himself does not comply or is not ready to comply in a proper manner with what is
incumbent upon him.
Demand is only necessary in order for a party to incur delay when the respective
obligations are to be performed on separate dates.
Effect of non-compliance of both parties in reciprocal obligations
If neither party complies with his prestation, default of one compensates for the default
of the other.
Rules on compensatio morae
Unilateral Obligations Reciprocal Obligations

Default or delay begins from extrajudicial or Delay by the other party
judicial demand – mere expiration of the begins from the moment
Time of period fixed is not enough in order that one of the parties fulfills his
delay debtor may incur delay. obligation.
a. The obligation or the law expressly so When different dates for
dictates; the performance of
b. Time is of the essence; obligation is fixed by the
XPNs c. Demand would be useless, as debtor parties.
has rendered it beyond his power to
perform; or
d. Debtor has acknowledged that he is
in default.
Art. 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. (1101)
FRAUD (Deceit or Dolo)
Kinds of fraud
Basis Fraud in the Fraud in the perfection

performance
It occurs after the valid It occurs before or
execution of the contract. It simultaneous with the
Time of occurrence is employed in the creation or perfection of the
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performance of a obligation.
preexisting obligation.
Consent is free and not Consent is vitiated by
Consent vitiated. serious deception or
misrepresentation.
It is not a ground for It is a ground for annulment
Effect annulment of the contract. of the contract.
Action for damages only. Action for annulment with
Remedy damages.
Dolo causante v. Dolo incidente
Basis Dolo causante (casual Dolo incidente

fraud) (incidental fraud)
This is the essential cause
This is the kind of fraud
of the consent without which is not the efficient
which the party would not
cause for the giving of the
have agreed to enter into
consent to the contract, as
Nature the contract (NCC, Art. it refers merely to an
1338). incident therein and, which
even if not present, the
contracting party would
have still agreed to the
contract.
Effect It renders the contract It does not affect the
voidable. validity of the contract.
Remedy Annulment with damages. Contract remains valid.
Remedy is claim for
damages only
Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any
waiver of an action for future fraud is void. (1102a)
Fraud as mentioned in Art. 1171 It is incidental fraud or fraud in the performance of the
obligation and not the fraud in the execution of the contract or causal fraud. It is the
intentional evasion of the normal fulfillment of the obligation (Pineda, 2000).
Waiver of action arising from future fraud With respect to fraud that has already been
committed (past fraud), the law does not prohibit renunciation of the action for damages
based on the same since such can be deemed an act of generosity. What is renounced
is the effect of fraud, particularly the right to indemnity. However, the law prohibits any
waiver of an action for future fraud since the same is contrary to law and public policy.
Waiver for future fraud is void (NCC, Art. 1171).
Remedies of the defrauded party
1. Specific performance (NCC, Art. 1233); or

2. Resolution of the contract (Art. 1191); and
3. Damages, in either case.
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Art. 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 the circumstances. (1103)
Art. 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. (1104a)
CULPA OR NEGLIGENCE
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 the place. When negligence shows bad faith, the provisions of
Art. 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 expected of a good
father of a family shall be required (NCC, Art. 1173).
Test of negligence
Did the defendant in doing the alleged negligent act use the reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If
not, then he is guilty of negligence. (Picart v. Smith, G.R. No. L-12219, March 15, 1918).
Fraud v. Negligence
BASIS FRAUD NEGLIGENCE

As to the intention to There is deliberate There is no deliberate
cause damage intention to cause damage. intention to cause damage
or injury even if the act was
done voluntarily.
As to the mitigation of Liability cannot be Liability may be mitigated.
liability mitigated.
Waiver for future fraud is GR: Waiver for future
void. negligence may be allowed
As to the waiver of future in certain cases.
fraud
XPN: Nature of the
obligation or public policy
requires extraordinary
diligence. (e.g. common
carrier).
NOTE: When negligence is so gross that it amounts to wanton attitude on the part of
the debtor or such negligence shows bad faith, the laws in case of fraud shall apply.
Effect of good faith or bad faith of the obligor
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If the obligor acted in good faith, he is responsible for the natural and probable
consequences of the breach of contract and which the parties have reasonably
foreseen at the time of the constitution of the obligation.
If the obligor is guilty of fraud, bad faith, malice or wanton attitude, he shall be
responsible for all damages which may be reasonably attributed to the non-performance
of the obligation.
Contributory negligence of the creditor
GR: It reduces or mitigates the damages which he can recover.
XPN: If the negligent act or omission of the creditor is the proximate cause of the event
which led to the damage or injury complained of, he cannot recover
Kinds of negligence or culpa
CULPA
CULPA AQUILIANA/ CULPA CRIMINAL
BASIS CONTRACTUAL CULPA EXTRA- (DELICT)
(CONTRACT) CONTRACTUAL
(QUASI-DELICT)
Negligence is Negligence is Negligence is
Existence of merely an incident substantive and substantive and
negligence in the performance independent. independent.
of an obligation.
Contractual There is always a GR: There is no There is no
relations preexisting preexisting preexisting
contractual relation. contractual relation. contractual relation.
The source of The source of The source of
obligation of obligation is obligation is an act
defendant to pay defendant’s or omission
Source of damages is the negligence itself. punishable by law.
obligation breach or non-
fulfillment of the
contract.
Proof of the The negligence of Accused shall be
existence of the the defendant must presumed innocent
contract and of its be proved. until the contrary is
breach or proved beyond
Proof of nonfulfillment is reasonable doubt.
negligence sufficient prima
facie to warrant
recovery.
Defense of “good Defense of “good Defense of “good
father of a family” in father of a family” in father of a family”
the selection & the selection & in the selection &
supervision of the supervision of the supervision of the
employees is not a employees is a employees is not a
proper complete proper and proper defense.
defense though it complete defense.
may mitigate The employee’s
Defense available damages. guilt is
automatically the
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Respondeat employer’s civil
superior or guilt, if the former is
command insolvent.
responsibility or the
master and servant
rule.
Proof needed Preponderance of Preponderance of Proof of guilt
evidence. evidence. beyond reasonable
doubt.
CONTRAVENTION OF TENOR OF OBLIGATION(VIOLATIO)
The act of contravening the tenor or terms or conditions of the contract is also known as
“violatio,” i.e. failure of common carrier to take its passenger to their destination safely
(Pineda, 2000).
Under NCC,Art. 1170, the phrase “in any manner 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 violation of the terms of contract is excused
in proper cases by fortuitous events.
Art. 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. (1105a)
FORTUITOUS EVENT / CASO FORTUITO
An occurrence or happening which could not be foreseen, or even if foreseen, is

inevitable (NCC, Art. 1174).
Requisites: (CODE)
1. Cause of breach is independent of the will of the debtor;

2. The Event is unforeseeable or unavoidable;
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
4. Debtor is free from any participation in the aggravation of the injury to the
creditor.
NOTE: The fortuitous event must not only be the proximate cause but it must also be
the only and sole cause. Contributory negligence of the debtor renders him liable
despite the fortuitous event (Pineda, 2000).
If the negligence was the proximate cause, the obligation is not extinguished. It is
converted into a monetary obligation for damages.
Difficulty to foresee
The mere difficulty to foresee the happening is not impossibility to foresee the same
(Republic v. Luzon Stevedoring Corp., G.R. No. L-21749, September 29, 1967).
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Liability for loss due to fortuitous event
GR: There is no liability for loss in case of fortuitous event.
XPNs:(LaNS-PC-BaG)
1. Law;
2. Nature of the obligation requires the assumption of risk;
3. Stipulation;
4. The debtor is guilty of dolo, malice or bad faith, has Promised the same thing to
two or more persons who does not have the same interest (NCC, Art. 1165);
5. The debtor Contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472,
March 7, 1912);
6. The possessor is in Bad faith (NCC, Art. 552); or
7. The obligor is Guilty of fraud, negligence or delay or if he contravened the tenor
of the obligation (Juan Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L-
47851, April 15, 1988).
Act of God v. Act of Man
ACT OF GOD ACT OF MAN

Fortuitous event Force majeure
Event which is absolutely independent of Event caused by the legitimate or
human intervention illegitimate acts of persons other than the
obligor
e.g.Earthquakes, storms, floods, e.g.Armed invasion, robbery, war
epidemics (Pineda, 2000).
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).
Q: MIAA entered into a compromise agreement with ALA. MIAA failed to pay
within the period stipulated. Thus, ALA filed a motion for execution to enforce its
claim. MIAA filed a comment and attributed the delays to its being a government
agency and the Christmas rush. Is the delay of payment a fortuitous event?
A: NO. The act-of-God doctrine requires all human agencies to be excluded from
creating the cause of the mischief. Such doctrine cannot be invoked to protect a person
who has failed to take steps to forestall the possible adverse consequences of loss or
injury. Since the delay in payment in the present case was partly a result of human
participation - whether from active intervention or neglect - the whole occurrence was
humanized and was therefore outside the ambit of a caso fortuito.
First, processing claims against the government are certainly not only foreseeable and
expectable, but also dependent upon the human will. Second, the Christmas season is
not a caso fortuito, but a regularly occurring event. Third, the occurrence of the
Christmas season did not at all render impossible the normal fulfillment of the obligation.
Fourth, MIAA cannot argue that it is free from any participation in the delay. It should
have laid out on the compromise table the problems that would be caused by a deadline
falling during the Christmas season. Furthermore, it should have explained to ALA the
process involved for the payment of ALA’s claim (MIAA v. Ala Industries Corp., G.R. No.
147349, February 13, 2004).
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Effects of fortuitous events
1. On determinate obligation – The obligation is extinguished.

2. On generic obligation – The obligation is not extinguished (genus nun quam
peruit – genus never perishes).
Q. Kristina brought her diamond ring for cleaning to a jewelry shop which failed
to fulfill its promise to return such ring in February 1, 2020. Kristina went back to
the shop on February 6, 2020 but she was informed that the ring was stolen by a
thief the night before. Kristina filed an action for damages against the jewelry
shop which put up the defense of force majeure. Will the action prosper or not?
A: YES. The action will prosper. Since the defendant was already in default for not
having delivered the ring when delivery was demanded by plaintiff at due date, the
defendant is liable for the loss of the thing and even when the loss was due to force
majeure.
The defendant who is obliged to deliver incurred delay from the time the plaintiff
extrajudicially demands the fulfillment of the obligation (NCC, Art. 1169). The defendant
shall be held liable for the loss of the thing even it was due to fortuitous event.
Q: X, a dressmaker, accepted clothing materials from Karla to make two dresses

for her. On the day X was supposed to deliver Karla’s dresses, X had an urgent
matter to attend to and told Karla to deliver those the next day. That night,
however, a robber broke into her shop and took everything including Karla’s
dresses. X claims she is not liable to deliver Karla’s dresses or to pay for the
clothing materials considering she herself was a victim of the robbery which was
a fortuitous event and over which she had no control. Do you agree? Why?
A: NO. The law provides that except when it is otherwise declared by stipulation or
when the law provides or the nature of the obligation requires the assumption of risk, no
person shall be liable for those events which could not be foreseen or which though
foreseen were inevitable (NCC, Art. 1174).
In this case, X cannot invoke fortuitous event as a defense because she had already
incurred delay at the time of the occurrence of the loss (NCC, Art. 1165).
Art. 1175. Usurious transactions shall be governed by special laws. (n)
Art. 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.
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. (1110a)
Art. 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.
(1111)
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ADMINISTRATION
REMEDIES
In case of breach of obligation, the following are the remedies available:
1. Specific performance, or substituted performance by a third person in case of an

obligation to deliver a generic thing, and in obligations to do, unless it is a purely
personal act;
2. Rescission (or resolution in reciprocal obligations);
3. Damages, in any case; or 8. Subsidiary remedies of creditors:
a. Accion subrogatoria
b. Accion pauliana
c. Accion directa
SPECIFIC PERFORMANCE
Remedies in connection with specific performance
1. Exhaustion of the properties of the debtor (not exempt from attachment under the
law);
2. Accion subrogatoria (subrogatory action) – An indirect action broughtin the
name ofthe debtor by the creditor to enforce the former’s rights except:
a. Personal rights of the debtor;
b. Rights inherent in the person of the debtor;
c. Properties exempt from execution. e.g.family home
3. Accion pauliana (rescissory action) – An action to impugn or assail the acts
done or contracts entered into by the debtor in fraud of his creditor.
NOTE: Resort to the remedies must be in the order stated above (NCC, Art. 1177).
Q: Sacramento Steel Corporation (SSC) executed 5 separate deeds of chattel

mortgage constituted over various equipment for International Exchange Bank
(IEB) which subsequently, SSC defaulted in the payment of its obligations. IEB’s
demand for payment went unheeded. Meanwhile, Metropolitan Bank and Trust
Company (Metro Bank) filed a motion for intervention as a creditor of SSC. Which
it contends that the mortgage contracts between IEB and SSC were entered into
to defraud the latter’s creditors. Thus, it prayed for the rescission of the chattel
mortgaged executed by SSC in favor of IEB. Will the action to rescind the
mortgage prosper?
A: NO. Jurisprudence is clear that the following successive measures must be taken by
a creditor before he may bring an action for rescission of an allegedly fraudulent
contract: (1) exhaust the properties of the debtor through levying by attachment and
execution upon all the property of the debtor, except such as are exempt by law from
execution; (2) exercise all the rights and actions of the debtor, save those personal to
him (acción subrogatoria); and (3) seek rescission of the contracts executed by the
debtor in fraud of their rights (acción pauliana). It is thus apparent that an action to
rescind, or an acción pauliana, must be of last resort, availed of only after the creditor
has exhausted all the properties of the debtor not exempt from execution or after all
other legal remedies have been exhausted and have been proven futile (Metropolitan
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ADMINISTRATION
Bank and Trust Company v. International Exchange Bank, G.R. No. 176008, August 10,
2011).
Substitute performance
It is a remedy of the creditor in case of nonperformance by the debtor where another

party performs the obligation or the same is performed at the expense of the debtor.
Applicability of substitute performance
1. Positive personal obligation:

a. If not purely personal – Substitute performance; the obligation shall be
executed at debtor’s cost if he fails to do it (NCC, Art. 1167).
b. Purely personal – No substitute performance may be demanded because of
the personal qualifications taken into consideration. The only remedy is
damages.
2. Real obligation:
a. Generic thing – Substitute performance; delivery may be made by a person
other than the debtor since the object is merely designated by its class or
genus. The creditor may ask that the obligation be complied with at the
expense of the debtor (NCC, Art. 1165).
b. Specific thing – Specific performance may be demanded, that is, the
creditor may compel the debtor to make the delivery.
RESCISSION (RESOLUTION) (NCC, ART. 1191)
It refers to the cancellation of the contract or reciprocal obligation in case of breach on

the part of one, which breach is violative of the reciprocity between the parties. This is
properly called resolution.
NOTE: The rescission under Art. 1380 is rescission based on lesion or fraud upon
creditors.
Applicability
Rescission or resolution is applicable in reciprocal obligations, since it is implied therein.
Characteristics of the right to rescind
1. Can be demanded only if plaintiff is ready, willing and able to comply with his
own obligation and defendant is not;
2. Not absolute;
3. Needs judicial approval in the absence of a stipulation allowing for extra-judicial
rescission, in cases of non-reciprocal obligations;
4. Subject to judicial review if availed of extrajudicially;
5. May be waived expressly or impliedly; and
6. Implied to exist in reciprocal obligations therefore need not be expressly
stipulated upon.
Fulfillment or rescission of the obligation
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ADMINISTRATION
GR: The injured party can only choose either fulfillment or rescission of the obligation,
and not both. XPN: If fulfillment has become impossible, Art. 1191 allows the injured
party to seek rescission even after he has chosen fulfillment (Ayson-Simon v. Adamos,
G.R. No. L-39378, August 28, 1984).
DAMAGES
Liability for damages
Those liable under Art. 1170 shall pay damages only if aside from the breach of
contract, prejudice or damage was caused (Berg v. Teus, G.R. No. L-6450, October 30,
1954).
NOTE: If action is brought for specific performance, damages sought must be asked in
the same action; otherwise the damages are deemed waived (Daywalt v. Augustinian
Corp, G.R. No. L-13505, February 4, 1919).
Kinds of damages (MENTAL)
1. Moral;
2. Exemplary;
3. Nominal;
4. Temperate;
5. Actual;
6. Liquidated.
SUBSIDIARY REMEDIES
An action whereby the creditor, whose claim has not been fully satisfied, may go after
thedebtor defendant debtor’s debtor (third person) (NCC, Art. 1177).
Accion subrogatoria is different and distinct from active subjective subrogation governed
by Articles 1300 to 1304. In the latter, there is change of creditors whereas in the former
there is no change of creditors; the creditor merely acts in the name and for the account
of the debtor after exhausting the assets of the latter but not enough to satisfy the
claims of the creditor.
Requisites (IPIN)
1. The debtor’s assets must be Insufficient to satisfy claims against him;

2. The creditor must have Pursued all properties of the debtor subject to execution;
3. The right of action must Not be purely personal; and
4. The debtor whose right of action is exercised must be Indebted to the creditor.
Effects of subrogatory action
1. The creditor may exercise the subrogatory action in behalf of the debtor not only
up to the amount of his credit but in its totality.
NOTE: The excess (if any) must be returned to the debtor.
2. The bringing of action does not entitle the creditor to preference.
3. The defendant (the debtor of the debtor) may avail himself of all defenses
available against the creditor.
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ADMINISTRATION
NOTE: In order to exercise action subrogatoria, a previous approval of the court is not
necessary (Tolentino, 1991).
ACCION PAULIANA
Accion pauliana
An action where the creditor files in court for the rescission of acts or contracts entered
into by the debtor designed to defraud the former (NCC, Art. 1177).
NOTE: When the creditor could not collect in any manner, accion pauliana may be
resorted by him to rescind a fraudulent alienation of property (Regalado, v. Luchsinger
and Co., 5 Phil 625, GR L2250, February 17, 1906).
Requisites (PAPIL)
1. Defendant must be Indebted to plaintiff;

2. The fraudulent act performed by the debtor subsequent to the contract gives
Advantage to another;
3. The creditor is Prejudiced by such act;
4. The creditor must have Pursued all properties of the debtor subject to execution;
and
5. The creditor has no other Legal remedy.
e.g. Alienations of property, payment of debts which are not due, renunciation of rights
such as the right of usufruct or an inheritance, assignment of credit, and remission of
debts.
ACCION DIRECTA
Accion directa
The right of a person to go directly against another who is not a privy to the contract
(NCC, Articles 1652, 1608, 1729 and 1893).
NOTE:
1. Subsidiary liability of sublessee for the rent (NCC, Art. 1652);

2. Right of sellers a retro to redeem property from persons other than the buyer a
retro (NCC, Art. 1608);
3. Subsidiary liability of owners to laborers and material men (NCC, Art. 1729); and
4. The principal may sue the substitute of the agent with respect to the obligations
which the substitute has contracted under the substitution (NCC, Art. 1893).
Art. 1178. Subject to the laws, all rights acquired in virtue of an obligation are
transmissible, if there has been no stipulation to the contrary. (1112)
1. Transmissibility of rights
As a general rule, all rights acquired in virtue of an obligation are transmissible
Example
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ADMINISTRATION
D owes C P100,000.00 The debt is evidence by a promissory note. C may assign or
transfer his credit right, say, to X, a third person. So X will now be the one etitled to
collect from D. or when C dies, his right to the credit is transmitted to his heirs, Thus, the
Heirs will be the ones having the right to collect from D.
2. When rights is not transmitted

a. When the parties stipulated against the transmission of the right.
Thus, in the example given in No. 1, the credit cannot be transmitted to a third
person or such right is not transmitted to the heirs if D and C agreed against such
transmission
b. When the law prohibits the transmission of the right
Thus, the rights of a general partner are not transmitted to his heirs upon his
death because his death causes the dissolution of the partnership.
c. When the nature of the obligation does not allow the transmission of
the right, such as when it is purely personal
Thus, in the loan of non-consumable things, such as the loan of a motorcycle, the
right of the borrower to use the thing is not transmissible.
Activity
Quiz I
Recitation I
Quiz I
References
De Leon, H. and De Leon Jr. H. (2016) the Law on Partnerships and Private
Corporations
Soriano, F. (2016). Notes in Business Law
Domingo, A. (2019). Partnership, Revised Corporation Law, Cooperative Law
Prepared by;
RYAN DAVES F. QUIÑONES, CPA

Instructor I
Noted by;
LUVY S. ASIS, CPA, MBA
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Chairperson, Accountancy Program
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ADMINISTRATION
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ADMINISTRATION
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ADMINISTRATION
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Law On Obligation First Handout

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Republic of the Philippines

CAMARINES NORTE STATE COLLEGE

COLLEGE OF BUSINESS AND PUBLIC

Name of faculty: Ryan Daves F. Quiñones, CPA

Subject: BA 100 – Law on Obligations and Contracts

At the end of the discussion student should be able to:

Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

An obligation is a juridical necessity to give, to do, or not to do (Art. 1156). It is a

It is a juridical necessity because in case of noncompliance, the courts of justice

COLLEGE OF BUSINESS AND PUBLIC

Elements of an Obligation (JAPO)

1. Juridical tie or vinculum juris or efficient cause

NOTE: In order to be valid, the object or prestation must be:

Absence of any of the first three makes the object void.

From the viewpoint of:

COLLEGE OF BUSINESS AND PUBLIC

COLLEGE OF BUSINESS AND PUBLIC

A. D is obliged to give C P100, 000.00 with interest of 12% per annum on

Q: Distinguish Civil Obligation from Natural Obligation

EXAMPLES OF A CIVIL AND NATURAL OBLIGATIONS

DIFFERENT KINDS OF PRESTATION

BASIS OBLIGATION TO OBLIGATION TO OBLIGATION NOT

COLLEGE OF BUSINESS AND PUBLIC

Art. 1157. Obligations arise from:

(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (1089a)

1158 refers to the legal obligations or imposed by specific provisions of law,

COLLEGE OF BUSINESS AND PUBLIC

DOMINGO DE LA CRUZ vs. NORTHERN THEATRICAL ENTERPRISES INC.,

COLLEGE OF BUSINESS AND PUBLIC

A contract is a meeting of minds between two persons whereby one binds

2. Contract as a source of obligation

An obligation is derived from contract if it arises from the agreement of the

Requisites of a contractual obligation

Rules governing the obligations arising from contracts

XPN: Contracts with prestations that are unconscionable or unreasonable (Pineda,

Binding force of obligation ex contractu

COLLEGE OF BUSINESS AND PUBLIC

XPNs: Unilateral evasion is allowed when the:

1. Contract authorizes such evasion; or

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

OBLIGATION EX QUASI – CONTRACTU

Distinguished from “implied contracts”

An implied contract requires consent while quasi-contract, being a unilateral contract,

Characteristics of a quasi-contract (LUV)

Principal forms of quasi-contracts

COLLEGE OF BUSINESS AND PUBLIC

Solutio indebiti (SI) v. Accion in rem verso (AIRV)

1. Mistake is an essential element in Solutio indebiti which is not necessary in

Rule in case of excess of payment of interest

Q: Is the Government exempt from application of solution indebiti?

UST Cooperative vs. City of Manila L-17133, December 31, 1965

COLLEGE OF BUSINESS AND PUBLIC

a. Erroneously or illegally assessed or collected internal revenue taxes

OTHER EXAMPLES OF QUASI-CONTRACT

COLLEGE OF BUSINESS AND PUBLIC

An act or omission punishable under the law.

1. Civil liability for acts and omissions punished by law (felonies)

When a crime is committed and no material damage is caused upon the

Implied institution of the civil action in a criminal case

COLLEGE OF BUSINESS AND PUBLIC

XPNs: When the offended party: