GLOBAL RECIPROCAL COLLEGES

COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

GENERAL PROVISIONS OF OBLIGATIONS

(ARTS. 1157 - 1162)
Article 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts

 Sources of Obligations
1. Law - when they are imposed by law itself.
i. Obligations derived from law are not presumed
 The NIRC which provides for the obligation to pay taxes.
 The Anti-Mendicancy Law which prohibits the giving of alms
to beggars.
2. Contracts - arises from the stipulation of the parties.
i. Meeting of the minds between two persons
 Contract of Sale
 Contract of Lease
3. Quasi-contracts - arises from lawful, voluntary, and
unilateral acts which are enforceable to the end that no one
shall be unjustly enriched or benefited at the expense of
another.
i. Unjustly enrichment - a person unjustly retains a benefit
to the loss of another.
 Obligation to return a money mistakenly paid.
4. Acts or omissions punishable by law - delicts, crimes, or
felonies
i. Commission of crimes makes the offender civilly liable.
 Obligation of a thief to return what is stolen and answer
for damages thereof.
5. Quasi-delicts - tort or culpa aquiliana
i. Arises from damage caused to another through an act or
omission, there being fault or negligence, but no contractual
relation exists.
 Obligation of an owner of an animal to pay for the damages
it may caused.
 Obligation of the parents of a minor to pay for damages it
may caused.

1 | P a g e ObliCon01
Sheila Marie C. Caculitan, CPA, CTT
Faculty, College of Accountancy
 GLOBAL RECIPROCAL COLLEGES
COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

Article 1158. Obligations derived from law are not presumed. Only
those expressly determined in this Code or in special laws are
demandable, and shall be regulated by the precepts of the law which
establishes them; and as to what has not been foreseen by the
provisions of this Book.

 Key Notes:
1. Not presumed because they are considered a burden upon the
obligor.
2. Obligations arising from the law are the exception, not the
rule.
3. To be demandable, the obligations must be clearly set forth
in the Civil Code or special laws.
i. Special Laws - refer to all other laws not found in the
Civil Code.
 The employer is liable to pay an additional compensation
equivalent to the average 8-hour pay, including 30% more if
he has asked his employee to work beyond 8-hours on a holiday
or rest day.
 The employer is not obliged to to provide clothing
allowance to its employees.

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

 Definition - contract is the meeting of the minds between two

persons whereby one binds himself, with respect to the other, to
give something or to render some service.
 Binding force - must be valid to be enforceable
 Requirement of a valid contract - not contrary to law, morals,
good customs, public order, and public policy.
 Compliance in good faith - compliance or performance in
accordance with the stipulations or terms of the contract or
agreement.
 Daniel sells his house to Kathryn for 1M.
 Liza directed Enrique to kill Mama O for 5M.

Article 1160. Obligations derived from quasi-contracts shall be

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

 As compared to Contracts - in quasi-contracts, there is no

consent but the same is supplied by fiction of law.

2 | P a g e ObliCon01
Sheila Marie C. Caculitan, CPA, CTT
Faculty, College of Accountancy
 GLOBAL RECIPROCAL COLLEGES
COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

 Kinds of Quasi-Contracts
1. Negotorium Gestio - voluntary administration of the property,
business or affairs of another without his consent or authority.
 Ganda went to Elyu with his family. While in Elyu, a fire
broke out that could have been destructed the house of
Ganda should Ion did not exert efforts to save the house.
However, Ion incurred total of Php. 10,000.00 while saving
the house of Ganda.
2. Solution Indebiti - payment by mistake of an obligation which
was not due when paid.
 Aljur wrote a check amounting to 1M: “Payable to the
order of AJ Raval”, as payment to his big bike. However,
Aljur mistakenly paid the amount due to AJ not knowing that
the true owner of big bike is Kylie.

Article 1161. Civil obligations arising from criminal offenses shall

be governed by the penal laws, subject to the provisions of articla
2177, and of the pertinent provisions of Chapter 2, Preliminary Title,
on Human Relations, and of Title XVIII of this Book, regulating
damages.

 Civil Liability arising from delicts

1. Criminally liable person is also civilly liable for damages.
i. Restitution
ii. Reparation for the damaged caused; and
iii. Indemnification for consequential damages
 Ronnie stole the car of Loisa. The former is convicted
hours after his act. The court ordered Ronnie for the
following:
1. Return the car or to pay its value if return is
impossible;
2. Pay for damages;
3. Pay for other damages suffered by Loisa as the
consequence of the crime.

Article 1162. Obligations derived from quasi-delicts shall be

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

 Requisites of quasi-delict
1. Act or omission;
2. Fault or negligence;
3. There must be damage;
4. Direct relation between the act or omission and the damage;
and
5. No pre-existing contractual relation.
3 | P a g e ObliCon01
Sheila Marie C. Caculitan, CPA, CTT
Faculty, College of Accountancy
 GLOBAL RECIPROCAL COLLEGES
COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

 Marian, while playing with her friends, accidentally caused

damage to the car of Dingdong, of which were parked illegally in
the side of the streets. Marian claimed that she is not liable to
pay for the damages because Dingdong is violating traffic rules
at the time of the accident.

 Crimes vs. Torts

CRIMES TORTS
Malicious intent is present Only negligence
Criminal and civil liability Civil liability only
Affects public interest Affects private interest
Cannot be compromised Can be compromised
Guilt of accused must be proved Proved by evidence
beyond reasonable doubt

NATURE AND EFFECT OF OBALITAIONS

(ARTS. 1163 - 1168)
Article 1163. Every person obliged to give something is also obliged
to take care of it with the proper diligence of a good father of a
family, unless the law or the stipulation of the parties requires
another standard of care.

 Determinate thing vs. Generic thing

SPECIFIC OR DETERMINATE THING
Particularly designated or
physically designated from all
others.
Debtor cannot substitute it with
another without the consent of the
creditor.
GENERIC OR INDETERMINATE THING
Not particularly designated or
physically designated from all
others.
Debtor can give anything of the
same class as long as it is of the
same kind.

 If the object of the contract is to deliver a Rolex watch,

seller can deliver any Rolex watch.
 If the object of the contract is to deliver a Rolex Explorer
which the seller owns, seller can only deliver that Rolex watch.

4 | P a g e ObliCon01
Sheila Marie C. Caculitan, CPA, CTT
Faculty, College of Accountancy
 GLOBAL RECIPROCAL COLLEGES
COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

Importance: The loss of a determinate thing through a fortuitous event

extinguishes the obligation.

 Duties of debtor
1. Obligation to give a determinate thing -
i. Preserve the thing with a diligence of a good father of a
family, unless there is stipulation of the parties
requiring another standard of care.
 It is against public policy to stipulate for absolute
exemption from the liability.
 Rationale - to ensure that the thing to be delivered
would subsist in the same condition as it was when the
obligation was contracted.
ii. Deliver the thing and its fruits - Article 1164, 1166
iii. Answer for damages in case of non-fulfillment or
breach - Article 1170
2. Obligation to give a generic thing
i. To deliver the thing which is of the quality intended
by the parties
ii. To be liable for damages in case of fraud, negligence,
or delay.

Article 1164. The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However, he shall
acquire no real right over it until the same has been delivered to him.

 Kinds of fruits
1. Natural fruits - spontaneous products of the soil, and the
young and other products of animals
 Without human intervention
2. Industrial fruits - produced by lands of any kind
 With human intervention
3. Civil fruits - derived by virtue of a juridical relation.
 Legal tie

 When obligation to deliver fruits arises

1. Obligation is a pure obligation - perfection of the contract
2. If subject to suspensive condition or period - delivery
arises upon arrival of the period or fulfillment of the
condition.
 Daniel obliges himself to give his 1967 Mustang to Kath
if she will win the Best Actress Award next year.
Exception: Contract of Sale

5 | P a g e ObliCon01
Sheila Marie C. Caculitan, CPA, CTT
Faculty, College of Accountancy
 GLOBAL RECIPROCAL COLLEGES
COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

 Personal right vs. Real right

A. Personal right - jus ad rem, directed only to a definite
passive subject
B. Real right - jus in re, directed to against the whole world.

6 | P a g e ObliCon01
Sheila Marie C. Caculitan, CPA, CTT
Faculty, College of Accountancy