GLOBAL RECIPROCAL COLLEGES

COLLEGE OF ACCOUNTANCY
Law on Obligations and Contracts

SPECIFIC CIRCUMSTANCES AFFECTING THE OBLIGATIONS

(ARTS. 1173 - 1178)
Article 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and corresponds
with the circumstances of the person, 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.

 Factors to be considered - OPPT

1. Nature of obligation
2. Circumstances of the person
3. Circumstances of place
4. Circumstances of time

 Kinds of diligence required

a. Stipulation of the parties;
b. Required by the law (case to case basis);
c. Diligence expected of a good father of a family.

Article 1174. Except in cases expressly specified by the law, or when it is

otherwise declared by stipulation, or when the nature of the obligation requires
the assumption of risk, no person shall be responsible for those events which
could not be foreseen, or which though foreseen, were inevitable.

 Requisites of fortuitous events

1. Independent of human will;
2. Event could not be foreseen, or if foreseen, is inevitable;
3. Event must be of such a character as to render it impossible for the
debtor to comply with his obligation in a normal manner; and
4. Do not have any participation from the debtor.

 Kinds of fortuitous events

1. Ordinary fortuitous events - those events which contracting parties
could reasonably foresee.
2. Extra-ordinary fortuitous events - those events which contracting
parties could not have reasonably foresee.

 Exceptions
A. Expressly specified by law - debtor is guilty of fraud, negligence, or
delay.

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
B. The debtor has promised to deliver the same to two or more persons.
C. The obligation to deliver a specific thing arises from a crime.
D. The thing to be delivered is generic.
E. Declared by stipulation.
F. Nature of the obligation requires the assumption of risk.

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

 Simple loan or mutuum - a contract whereby one of the parties delivers to

another, money or other consumable thing, upon the condition that the same
amount of the same kind and quality shall be paid.

 Requisites for recovery of interest

1. Expressly stipulated;
2. Must be in writing; and
3. Must be lawful.

Article 1176. The receipt of the principal by the creditor, without reservation
with respect to the interest, shall give rise to the presumption that said
interest has been paid.
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.

 Kinds of presumption
1. Conclusive - cannot be contradicted.
2. Disputable - one which can be contradicted by presenting proof to the
contrary.
a) Receipt of principal without reservation to interest.
 Paolo owes LJ the amount of P10,000.00 with interest at 6% annually.
LJ issued a receipt for the principal upon payment of Paolo.
b) Receipt of later installment without reservation to prior installments.
 Gerald is renting the bungalow house of Bea for Php.30,000.00
monthly. After defaulting for the payment of January and February, Bea
issued a receipt to Gerald for March rents.

 Exceptions
1. With reservation as to interest.
2. Receipt is without indication of particular installment.
3. Receipt for a part of the principal.
4. Payment of taxes.
5. Non-payment proven.

Article 1177. The creditors, after having pursued the property in possession of
the debtor to satisfy their claims, may exercise all the rights and bring all the
actions of the latter for the same purpose, save those which are inherent in his
person; they may also impugn the acts which the debtor to defraud them.
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
 Remedies for the satisfaction of creditors’ claims
1. Exact fulfillment;
2. Pursue leviable property of the debtor;
3. Exercise all rights;
4. Bring all the actions of the debtor; and
i. Exception: personal to the person of the debtor
5. Ask the court to rescind acts or contracts by debtor to defraud creditor.

NOTE: THE DEBTOR IS LIABLE WITH ALL HIS PROPERTY, PRESENT, AND FUTURE, FOR THE
FULFILLMENT OF HIS OBLIGATIONS.

 Kiko borrowed to Devon P1M, payable on or before December 31, 2022. On the due
date, there is no indication that Kiko can fulfill his obligations to Heaven due
to financial bankruptcy filed by the former. However, Kiko owns a Toyota car
whose market value is P500,000; a collectibles to Jemuel of P100,000.00; and a
P600,000.00 Subaru car that he donated to Heaven on January 1, 2023 as a gift.
What are the rights granted to Devon?

Article 1178. Subject to the laws, all rights acquired in virtue of an obligation
are transmissible, if there has been no stipulation to the contrary.

 Exceptions
1. Stipulated by the parties.
2. Prohibited by law - purely personal in character
i. Contract of partnership
ii. Contract of agency
iii. Contract of commodatum

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