PEA 5 – Regulatory Framework and Business Transactions Review

Special Commercial Laws

1. Law on Bouncing Checks 9. Law on Consumer Protection
2. Secrecy of Bank Deposits 10.Data Privacy Law
3. Unclaimed Bank Balances 11. E-Commerce Law
4. Truth in Lending Act 12. Ease of Doing Business
5. Anti-Money Laundering Act (AMLA) 13. Philippine Competition Act
6. Philippine Deposit Insurance Corporation 14. Law on Intellectual Property (patents,
trademarks, copyrights)
7. New Central Bank Law 15. Law on Insurance
8. Financial Rehabilitation and Insolvency Act (FRIA) 16.Government Procurement
17. Labor and Social Legislation

OBLIGATIONS
Articles 1156 – 1304 Civil Code of the Philippines Republic Act No. 386 (1950)
WHAT IS AN OBLIGATION?
An obligation is a juridical necessity to give, to do or not to do.
Two Parties:
The Obligor – the person with the duty to give, to do or not to do.
The Obligee – the person with the right to demand that the duty be performed; the one to whom the
Obligor is bound.
WHAT IS A JURIDICAL NECESSITY?
It is something enforceable by law. One can go to court when there is noncompliance to have the other
party comply.
Obligation to pray every day – not enforceable in civil courts, not a legal obligation
Obligation to study hard – not enforceable in civil courts, not a legal obligation
Obligation to provide support for one’s children – enforceable in civil courts, legal obligation
KINDS OF OBLIGATIONS
Civil Obligations – enforceable in civil courts
Natural Obligations – not enforceable in civil courts. But when voluntarily undertaken recovery may be
allowed. More on this later
Moral Obligations – duty imposed by culture, religion or tradition
FOUR ESSENTIAL REQUISITES OF AN OBLIGATION
1. Passive Subject – the obligor; the one with the duty.
2. Active Subject - the obligee; the one with the right.
3. Subject Matter – what is to be done or performed.
4. Legal Tie/Juridical/Vinculum Juris – What binds 1 and 2 to the obligation. The basis for the
obligation.

TWO TYPES OF OBLIGATION

1. To Give; Real Obligation – the subject matter is an object or a thing; Here the obligation is to give;
2. To Do or Not to Do; Personal Obligation – the subject matter is an act to be done or not to be done.
2.a Positive Personal Obligation – the obligation to do something.
2.b Negative Personal Obligation – the obligation not to do something.
OBLIGATIONS ARISE FROM 5 SOURCES
1. Law; 4. Acts or Omissions punished by law or Delicts (Crime);
2. Contracts; 5. Quasi-Delicts (Tort)
3. Quasi-Contracts.
“Quasi” means resembling. KAHAWIG, KAMUKHA.
(1) LEGAL OBLIGATIONS
These are legal obligations required and expressly written in a law, ordinance or regulation. Legal
obligations cannot be implied or presumed. They must be clearly required.
(2) CONTRACTUAL OBLIGATIONS
When there is a meeting of the minds between two parties where one party (obligor) binds himself to the
other party (obligee) to give, to do something or not to do something is called a CONTRACT.
Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.

(3) QUASI - CONTRACTUAL OBLIGATIONS

These are contracts implied by law. It is not really a contract because there is no meeting of the minds of
the parties. It resembles or looks like a contract. The consent is presumed.
EXAMPLE – Without Burt’s consent Joey spent P15,000 to have temporary repairs done on Burt’s roof.
When Burt came back, he refused to reimburse Joey the P15,000 saying that the repairs were not
authorized. Wrong, Burt has an obligation to pay Joey.
(4) CRIMES OR DELICTS
These refer to the civil liability arising from a crime or a delicts. When someone commits a crime, he can
be penalized with a fine, imprisonment or both. In addition, he can be made to pay for civil damages that
the victim sustained.
EXAMPLE – Pedring held up Susan by snatching her handbag in a busy street in Makati. Because of the
force applied by Pedring, Susan fell to the ground and fractured her arm. Pedring was caught for robbery
and sentenced to prison. He was also required to pay for the bag and its contents as well as the medical
expenses incurred by Susan.
(5) TORTS OR QUASI – DELICTS
A quasi-delict or tort is an act or omission by a person which causes damage to another, his property or
rights, there being fault or negligence but there is no pre-existing contractual obligation.
EXAMPLE – Juan owns and operates a bakery. One day his baking assistant Tony splashed used cooking
oil on the sidewalk in front of the bakery. Because of the cooking oil, two students from Baliuag
University slipped on the pavement and sustained various injuries.
Juan is liable for the injuries and damage sustained by the two students despite the fact there is no
relationship between the bakery and the students.
NATURE AND EFFECTS OF OBLIGATIONS
Every person obliged (obligor) to give something is also obliged to take care of it with proper diligence of
a good father of a family.
Duty applies to obligations involving a specific or determinate thing – one that is identified or physically
segregated from others of the same class. MALIWANAG KUNG ANO ANG TINUTUKOY.
EXAMPLES OF SPECIFIC OR DETERMINATE THINGS
The farm lot Jose sold to Pedro. The dress Juana made for her customer. The sacks of rice you purchased
from me.
DUTIES OF THE OBLIGOR
1. Preserve the item with the due or proper diligence of a good father of a family. KUNG PAANO
PANGALAGAAN NG ISANG AMA ANG KANYANG PAMILYA.
2. Deliver the fruits of the object to be delivered.
EXAMPLE – Saul sold a pregnant cow to Trinidad. The unborn calf is already owned by Trinidad.
3. Deliver the accessories.
EXAMPLE – When a car is sold, the keys, the spare tire, tools and operating manuals are included in the
sale.
4. Deliver the object itself.
5. Answer for damages in case of breach.
WHAT ARE THE FRUITS TO BE DELIVERED?
• Natural Fruits – spontaneous products of the soil like grass or trees and the young and other products
of animals like milk
• Industrial Fruits – products of the soil produced through cultivation like rice or vegetables
• Civil Fruits – those resulting from a contract like the rent from a building.
A personal right is the power to demand from a definite obligor the fulfillment of an obligation to give,
to do or not to do. DAPAT IGALANG NG OBLIGOR ANG KARAPATAN KO.
A real right is the power to demand compliance or recognition or respect from the whole world. There is
no definite obligor. DAPAT IGALANG NG LAHAT ANG KARAPATAN KO.
RIGHTS OF AN OBLIGEE WHEN THE OBLIGOR FAILS TO COMPLY WITH HIS
OBLIGATIONS
1. Compel specific performance or
2. Ask the courts that the obligation be complied with by a third party at the expense of the obligor or
3. Cancel the contract and recover damages
Breach = failure to comply with an obligation
RIGHTS OF AN OBLIGEE WHEN THE OBLIGOR PERFORMED OBLIGATION IN
CONTRAVENTION OF THE AGREEMENT BETWEEN THE PARTIES
1. Ask the courts that what has been done in contravention of the agreement be undone at the expense of
the debtor and 2. Recover damages.
EXAMPLE – Via went to DMG Motors to have her 2015 Toyota Vios repainted to the color BLUE.
When she came over to pick up the vehicle it had been painted BLACK. DMG Motor Shop refused to
correct the mistake saying it was an honest mistake and that they already spent money on the black paint.
Via can ask the court to have the car painted blue at DMG’s expense. DMG is liable for their mistake.
FORTUITOUS EVENT: ACT OF NATURE (AON)
A fortuitous event is an event that (1) cannot be foreseen, or (2) which though foreseen is inevitable. An
event impossible to foresee or impossible to avoid.
EXAMPLE of an event that cannot be foreseen – an earthquake. We do not have any indication when it
will happen. HINDI NATIN ALAM KUNG MANGYAYARI.
GENERAL RULE: OBLIGOR SHALL NOT BE LIABLE FOR A FORTUITOUS EVENT
EXCEPTIONS WHEN THE OBLIGOR IS LIABLE FOR FORTUITOUS EVENTS
1. It is expressly declared by law
2. It is expressly stipulated in the contract
3. There is delay in the performance of the obligation
4. The nature of the obligation assumes the assumption of risk – insurance companies
5. When the obligor is in bad faith.
WHEN IS THE OBLIGOR LIABLE FOR DAMAGES?
1. When there is default or deceit or mora
2. When there is fraud or dolo
3. When there is negligence or culpa
4. When the debtor contravenes the agreement of the parties.
DEFAULT or MORA – when there is delay or nonfulfillment of the obligation with respect to time
FRAUD, DECEIT or DOLO – when there is conscious and intentional act to evade the normal
fulfillment of the obligation. There should be malice or dishonesty going beyond mere mistake or error.
NEGLIGENCE or CULPA – when there is an omission of that diligence required by the nature of the
obligation and corresponds with the circumstances of person, time and place.
HOW CAN AN OBLIGOR SHOW WE ARE NOT NEGLIGENT AND NOT LIABLE FOR
DAMAGES?
SHOW THAT YOU DID WHAT A GOOD FATHER WOULD DO. If an obligor can show that he has
exercised the diligence expected of a good father of a family, it is a defense to a charge of negligence.
WE CANNOT CONTROL ALL THE ACTIONS OF OTHER PEOPLE. EXCEPTION TO THE
GENERAL RULE.
WHAT DO WE MEAN BY MORA OR DEFAULT?
The obligor who has to deliver or to do something incurs in delay from the time the obligee judicially or
extrajudicially demands from the obligor the fulfillment of the obligation.
TWO KINDS OF DELAY BASED ON TIME:
1. Ordinary Delay – Failure to perform an obligation on time (nahuli) – NO DAMAGES TO BE PAID
2. Legal Delay or Default or Mora – Failure to perform an obligation on time AND which failure
constitutes a breach of the obligation DAMAGES TO BE PAID.
KINDS OF DELAY (MORA) BASED ON WHO IS AT FAULT
1. Mora Solvendi – delay on the part of the obligor to fulfill his obligation.
2. Mora Accipiendi – delay on the part of the obligee to accept the performance of the obligation.
3. Compensatio Morae – when both the obligor and the obligee are in delay in which case no one has a
cause of action since both are at fault.
THREE CONDITIONS BEFORE THERE CAN BE MORA SOLVENDI
1. Failure of the obligor to perform his obligation on the date that was agreed upon;
2. Demand was made by the obligee on the obligor to comply;
3. Continued failure of the obligor to comply despite the demand for him to do so.
WHAT HAPPENS WHEN THERE IS MORA ACCIPIENDI?
1. The obligee is liable for breach of contract;
2. The obligee is liable for damages suffered by the obligor;
3. The obligee bears the loss of the thing due;
4. The obligor is not liable to pay interest from the date of the obligee’s delay.
5. The obligor can deposit payment in court, so he is released from his obligation. Place the payment in
escrow.
EXAMPLE - On the night of October 25, 2020 there was a huge fire in the warehouse and the farm
tractor got burned. Does Boyet still have an obligation to pay for the tractor despite the fact that it got
burned? YES. The obligee (Boyet) bears the loss of the thing because of delay in acceptance (mora
accipiendi).
RECEIPT OF PRINCIPAL AND INSTALLMENT WHEN PAYING A DEBT
1. When the creditor or obligee receives payment from the debtor or obligor without any reservation as to
the interest, the presumption is that the principal and interest has been paid.
2. The receipt of a later installment of a debt without reservation as to any prior installment gives rise to
the presumption that such prior installments have been paid.
Warning to creditors to always confirm when payments are made – (1) principal or interest? (2) which
installment is this payment for?
ALL RIGHTS ARE TRANSMISSIBLE
As a general rule, the rights of a person can be transmitted or passed on to another person, for example an
heir or an assign (nilipat).
DIFFERENT KINDS OF OBLIGATIONS
1. Pure and Conditional 2. Obligations with a Period 3. Alternative Obligations 4. Joint and Solidary
Obligations 5. Divisible and Indivisible Obligations 6. Obligations with a Penal Clause
PURE AND CONDITIONAL OBLIGATIONS ARTICLE 1179 TO 1192
A pure obligation is not subject to any condition and no specific date is mentioned when it is to be
fulfilled. IT IS IMMEDIATELY DEMANDABLE. IT IS UNCONDITIONAL.
A conditional obligation is one whose fulfillment is subject to a condition.
A condition is a future and uncertain event. Only when the condition happens is the obligation
demandable. However, under Art 1179 it can be a past event unknown to the parties.
TWO KINDS OF CONDITIONS
1. SUSPENSIVE CONDITION
condition precedent – once it happens, the obligations start
2. RESOLUTORY CONDITION
condition subsequent – once it happens, the obligation is resolved or end
A SUSPENSIVE CONDITION DEPENDENT SOLELY ON THE WILL OF THE DEBTOR IS
VOID
The suspensive condition cannot be left solely to the will of the debtor. This condition is void.
The effectivity or fulfillment of the obligation cannot be left solely to the decision of the debtor.
WHAT ARE IMPOSSIBLE CONDITIONS?
Conditions are considered impossible if they are physically impossible or if they are illegal or contrary to
good customs or public policy. It cannot be imposed as a condition.
WHAT IS A POSITIVE CONDITION?
It is a condition that some event may happen at a determinate time. THIS IS A VALID OBLIGATION.
WHAT IS A NEGATIVE CONDITION?
If some future event may not happen, the obligation becomes valid and binding. THIS IS A VALID
OBLIGATION.