MODULE 2:

NATURE AND EFFECTS OF OBLIGATIONS

 
INTRODUCTION:

The students will be given an overview of the legal concepts used in the subject as well as an in-depth study of the
classifications of things, its importance, kinds of prestations, breach of obligations, the nature of fortuitous events and
its effects.
 
This Module aims to provide students with an overview of the legal principles relating to obligations by discussing the
relevant provisions and applications to these principles to actual cases as decided by the Supreme Court.
 
Module 1 consists of four (4) lessons covering the following topics:
 
Lesson 1. Determinate and Generic thing
Lesson 2. Kinds of prestations
Lesson 3. Breach of obligations
Lesson 4. Fortuitous Event

LEARNING OUTCOMES:

At the end of the Module, student will be able to:

1. Classify and determine the different classification of things as an object of obligation.
2. Identify the kinds of prestations.
3. Determine the importance of knowing the different classification of things and able to identify given examples.
4. Identify and apply the breach of obligations and its effects.
5. Determine the nature of fortuitous events and its effects if the requisites are met.
PRE-ESSENTIAL QUESTION:
Determinate and Generic Thing
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 Determinate and Generic Thing
Lesson 1. DETEMINATE THING AND GENERIC THING

1. Concept

Article 1460. A thing is determinate when it is particularly designated or physical segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the
necessity of a new or further agreement between the parties. (n)

Examples:
2015 Toyota Altis with engine no. 123456, body no. 546611, and plate no. FRS 840;
My only wristwatch;
The house located at 234 Moret Street, Sampaloc, Manila;
My horse named “Black Stallion”

A thing is indeterminate or generic when it is not particularly designated or physically segregated from all others of the same class, i.e. one of a class.

Examples:
A horse, a 1995 Toyota car, the sum of P10,000.00, a police dog

2. Importance of knowing whether a thing is determinate or generic

Article 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without
the fault of the debtor, and before he has incurred in delay. When by law or stipulation, the obligor is liable even for fortuitous events, the loss
of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of
the obligation requires the assumption of risk. (1182a)

As a rule, the loss of a determinate thing through a fortuitous event extinguishes the obligation. (Art. 1262)
 KINDS OF PRESTATION
a. Obligations of one obliged to give a DETERMINATE THING


1. to preserve the thing (Art. 1163)

2. to deliver the accessions and accessories (Art. 1166)

3. to deliver the fruits (Art. 1164, par. 1)

4. to deliver the thing itself (Art. 1244)

5. to answer for damages in case of non-fulfillment or breach (Art. 1270)

 KINDS OF PRESTATION
a. Obligations of one obliged to give a DETERMINATE THING


I.    SPECIFIC THING

1.   to preserve the thing (Art. 1163)

Art. 1163. Every person obliged to give something

(determinate thing) 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.
 Degree of diligence:
Degree of diligence of a good father of a family.

(DOAGFOAF)

▣ EXCEPT:
▣ Unless the law or the stipulations of the parties require a higher degree of
diligence.

▣ Example:
▣ COMMON CARRIERS – Extraordinary diligence (goods & passengers)

GOOD FATHER OF FAMILY – He is NOT and is NOT supposed to be omniscient of the future.
He is one who takes precautions against any harm when there is something before
him to suggest or warn him of the danger or to foresee it. (Picart vs.Smith, 36 Phil. 813).
 KINDS OF PRESTATION
2.   to deliver the accessions and accessories (Art. 1166)

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)

Right of creditor to accessions and accessories

Rule: Accessory follows the principal. In order to be excluded, there must be a stipulation to that
effect.
 
Unless otherwise stipulated, an obligation to deliver the accessions or accessories of a thing
does not include the latter. Thus, a sale of the improvements (e.g., house) upon a land is not
sufficient to convey title or any right to the land. But the lease of a building or house naturally
includes the lease of the lot on which it is constructed for the possession of the lot is implied in
the lease of the improvement.
 KINDS OF PRESTATION

a. Accessions – They include everything that is produced by a thing or is incorporated or attached thereto, either
naturally or artificially, (Art. 440)
* are the fruits of a thing or additions to or improvements upon a thing (the principal)
 
Examples:
(i) alluvium, the soil gradually deposited by the current of a river on a river bank;
(ii) whatever is built, planted or sown on a parcel of land like trees or a house;
(iii) conditioner in a car; or
(iv) profits or dividends accruing from shares of stocks, etc.

b. Accessories – Those joined to or included with the principal thing for the latter’s better use, perfection or enjoyment

Examples:
(i) the keys to a car or a house;
(ii) the bracelet of a wristwatch;
(iii) bow of a violin;
(iv) machinery in a factory; or
(v) frame of a picture, etc.
 KINDS OF PRESTATION
3.   to deliver the fruits (Art. 1164, par. 1)

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)
 
a. Kinds of fruits
1. Natural fruits – They are the spontaneous products of the soil and the young and other products of animals.
(Art. 442). Thus, the trees that grow naturally on the soil without the intervention of man and the colt delivered by
a mare are natural fruits. For the young and other products of animals, they are natural fruits even with the
intervention of human labor.
 
2. Industrial fruits – They refer to those produced by land of any kind through cultivation or labor. (Art. 442).
Examples are rice, corn and other crops produced through the intervention of human labor.
 
3. Civil fruits – They refer to fruits which are the result of a juridical relation such as the rent of a building, price
of lease of land and other property and the amount of perpetual or life annuities. (Art. 442)
KINDS OF PRESTATION
 KINDS OF PRESTATION
4.   to deliver the thing itself (Art. 1244)

Article 1244. The debtor of a thing cannot compel the creditor to receive a different one,
although the latter may be of the same value as, or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance cannot be substituted by another
act or forbearance against the obligee's will. (1166a)

This involves placing the thing in the possession or control of the creditor either actually or constructively.

5.   to answer for damages in case of non-fulfillment or breach (Art. 1270)

Article 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)
 KINDS OF PRESTATION
a. Obligations of one obliged to give a DETERMINATE THING


1. to preserve the thing (Art. 1163)

2. to deliver the accessions and accessories (Art. 1166)

3. to deliver the fruits (Art. 1164, par. 1)

4. to deliver the thing itself (Art. 1244)

5. to answer for damages in case of non-fulfillment or breach (Art. 1270)

 KINDS OF PRESTATION
a. Obligations of one obliged to give a GENERIC THING


1.   to deliver a thing which is of the quality intended by the parties
taking into consideration the purpose of the obligation and other
circumstances (Art. 1246)

2. To be liable for damages in case of fraud, negligence, or delay, in

the performance of his obligation, or contravention of the tenor
thereof (Art. 1170)
Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by
Art. 1170, 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 affected the delivery.

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.

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law. (1124)
Article 1192. In case both parties have committed a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties
first violated the contract, the same shall be deemed extinguished, and each shall bear his own
damages. (n)

Article 1385. Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; consequently, it can be carried out
only when he who demands rescission can return whatever he may be obliged to restore.

Neither shall rescission take place when the things which are the object of the contract are
legally in the possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person causing the loss. (1295)
 RIGHTS OF CREDITOR 

IF THE OBLIGATION IS TO DELIVER A:
DETERMINATE THING GENERIC THING
1. Ask that the obligation be complied
1. Compel specific performance
with at the expense of the debtor

2. Rescission of the contract 2. Rescission of the contract

3. Recover damages for breach of the 3. Recover damages for breach of the
obligation obligation
Note: The rights to demand fulfillment and rescission with damages (see Art. 1170) are alternative, not
cumulative, i.e., the election of one is a waiver of the right to resort to the other. (see Art. 1191). B may
bring an action for damages only even if this is not expressly mentioned by Article 1165 (see Article
1170).

Specific Real Obligation

Example:

S sells his piano to B for P20,000. If S refuses to comply with this obligation to deliver the piano, B can bring
an action for fulfilLment or rescission of the obligation with the payment of damages in either case. (Art.
1191). In case of rescission, the parties must return to each other what they have received. (Art. 1385).

Generic Real Obligation

Example:
S obliges himself to deliver to B 100 sacks of rice on December 4 for P50,000.

If S does not comply with his obligation, B may buy rice from C, a third person. If B paid C P55,000, he may
recover (assuming B has not yet paid S) P5,000 from S. Furthermore, B can also hold S liable for
damages in view of Article 1170 as in the case of the delivery of a determinate thing. (par. 1)
 WHERE DEBTOR DELAYS OR HAS PROMISED DELIVERY TO SEPARATE CREDITORS

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. (1105a)

- 2 instances when a fortuitous event (Art. 1174) does not exempt the debtor from responsibility.
It likewise refers to a determinate thing. An indeterminate thing cannot be the object of destruction by a
fortuitous event because genus nunquam perit (genus never perishes). (see Arts. 1174, 1263) (Art.
1165 par. 3)

If the obligor delays (Art. 1169) or has promised to deliver the same thing to 2 or more persons who
do not have the same interest, he shall be responsible for any fortuitous event until he has affected the
delivery.
 RIGHTS OF CREDITOR 

IF THE OBLIGATION IS TO DO

DEBTOR FAILS TO PERFORM THE DEBTOR PERFORMS THE OBLIGATION BUT

OBLIGATION OR PERFORMS IT BUT DOES IT POORLY
CONTRAVENES THE TENOR (DeD) (DeD)
Creditor may have the obligation executed at Creditor may have the same be undone at
Debtor’s expense (Art. 1167) Debtor’s expense (Art. 1167)

Where, however, the personal qualifications of the

debtor are the determining motive for the obligation
contracted, the performance of the same by
another would be impossible or would result to be
so different that the obligation could not be
considered performed. Hence, the only feasible
remedy is indemnification for damages.
He may also demand Damages from the debtor Creditor may also demand Damages from the
(Art. 1170) debtor (Art. 1170)
 RIGHTS OF CREDITOR
IF THE OBLIGATION IS TO DO
DEBTOR FAILS TO PERFORM THE
OBLIGATION OR PERFORMS IT BUT
CONTRAVENES THE TENOR (DeD)
Example:
D is obliged to construct a hollow block fence for C.
By agreement, the fence will be 2 meters high and
10 meters long, fine-finished and painted. If D does
not perform his obligation upon C’s demand, C can
ask another person to, or he himself may, construct
the fence at the expense of D. C can also ask for
damages from D. C cannot compel D to perform
the obligation because compulsion will violate D’s
right against involuntary servitude.


DEBTOR PERFORMS THE OBLIGATION BUT
DOES IT POORLY
(DeD)
If in the same illustration, D constructs the fence
following the measurements but it was not
properly aligned, the finishing was rough, and
materials used were substandard, C can have
the fence be demolished by another person or
even by himself at D’s expense. C can also
demand damages from D.

If D constructs the fence but did not follow the

measurements agreed upon (i.e., there was
contravention of the tenor of the obligation), C will
have the same rights.
 RIGHTS OF CREDITOR 

IF THE OBLIGATION IS NOT TO DO
DEBTOR DOES WHAT HAS BEEN FORBIDDEN HIM
(DeD)

The creditor may demand that what has been done be undone at Debtor’s expense.

He may also demand Damages from the debtor. (Art. 1170)

However, if it is not possible to undo what was done, either physically or legally, or because of the
rights acquired by third persons who acted in good faith, or for come other reason, his remedy is an
action for damages caused by the debtor’s violation of his obligation.

Example:
B bought a farm lot from S. However, the only access from the road to B’s lot is the lot of D. So B
entered into a contract with D for a right of way over a period of 10 years and paid a sum therefor. It
was agreed that for the duration of the contract D would not construct any fence between B’s lot and
his. Sometime thereafter, however, D constructed a fence in violation of the agreement. B may
demand that D remove the fence at D’s expense and pay damages.
RIGHTS OF CREDITOR
RECIPROCAL OBLIGATIONS
▪ Are those which are created or established at the same time, out of the same cause, and
which result in mutual relationships of creditor and debtor between the parties.

DELAY IN RECIPROCAL OBLIGATIONS

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.

IF BOTH PARTIES IN RECIPROCAL OBLIGATIONS HAVE COMMITTED BREACH

 BREACH OF OBLIGATION
a . Concept

Article 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)

b. Modes of Breach

FRAUD (DECEIT OR DOLO) – the deliberate or intentional evasion of the normal fulfilment of an
obligation. As a ground for damages, it implies some kind of malice or dishonesty and it cannot
cover cases of mistake and errors of judgment made in good faith. It is synonymous to bad faith
in that, it involves a design to mislead to deceive another.

Example:
S obliged himself to deliver to B 20 bottles of wine, of a particular brand. Subsequently, S
delivered 20 bottles knowing that they contain cheaper wine. S is guilty of fraud and is liable for
damages to B.
 BREACH OF OBLIGATION

NEGLIGENCE (FAULT OR CULPA) – It is any voluntary act or omission, there being no bad faith
or malice, which prevents the normal fulfilment of an obligation. (See Arts. 1172, 1173, 1174)

Example:
P is a passenger in a taxi. Here, there is considered a contract of carriage between P and the
owner of the taxi company. In consideration of the fare to be paid by P, the owner of the taxi
company, through the driver, agrees to safely bring P to his destination. (Lasam vs. Smith, 48
Phil. 657)

If, through the recklessness of the driver, like for example, driving at an unjustified rate of speed
or entering a one-way street, an accident occurs, as a result of which P is injured, there is
negligence which would make the owner liable for damages. If the taxi contained defective parts,
the failure to repair the same constitutes also negligence on the part of the owner. (Ibid.)
 BREACH OF OBLIGATION

DELAY
3 Kinds of Delay/Default or mora (Art. 1169)
1. Mora solvendi or the delay of the obligor or debtor to perform his obligation (to give or to do);
▪ Mora solvendi ex re when the obligation is an obligation to give.
▪ Mora solvendi ex persona when the obligation is an obligation to do.

Requisites:
i. Failure of the debtor to perform his (positive) obligation on the date agreed upon;
ii. Demand (not mere reminder or notice) made by the creditor upon the debtor to comply with his obligation
which demand may be either judicial (when a complaint is filed in court) or extrajudicial (when made outside
of court, orally or in writing); and
iii. Failure of the debtor to comply with such demand.

The above presupposes that the obligation is already due and demandable. (see Art. 1279[4]) The creditor has
the burden of proving that demand has been made. Similarly, it is incumbent upon the debtor to prove that the delay
was not caused by his fault to relieve himself from liability. (see Arts. 1173, 1174)
 BREACH OF OBLIGATION
Example:
S obliged himself to deliver to B a specific refrigerator on December 10.

If S does not deliver the refrigerator on December 10, he is only in ordinary delay in the absence of any demand from B
although a period had been fixed for the fulfilment of the obligation. The law presumes that B is giving S an extension of time
within which to deliver the refrigerator. Hence, there is no breach of the obligation and S is not liable for damages.

If a demand is made upon S by B on December 15 and S fails to deliver the refrigerator, S is considered in default only from
that date.

If an action for specific performance is filed by B on December 20, the payment of damages for the default must commence
on December 15 when he made the extrajudicial demand and not on December 20. In the absence of evidence; as to such extra-
judicial demand, the effects of default arise from the date of the judicial demand, that is, from the filing of the complaint.

2. Mora accipiendi (see also 1268) or the delay of the obligee or creditor to accept the delivery of the thing
which is the object of the obligation; and

3. Compensation morae or the delay of the parties or obligors in reciprocal obligations (like in sale) i.e., the
delay of the obligor cancels the delay of the obligee, and vice versa. The net result is that there is no actionable
default on the part of both parties.
Art. 1169.

Gen. Rule: NO DEMAND, NO DELAY

Exceptions: WHEN

1. The obligation or the law expressly so declare;

2. Time is of the essence;
3. Demand is useless as when the obligor has rendered it beyond his
power to perform;
4. There is acknowledgment of default.
ORDINARY DELAY v. LEGAL DELAY/DEFAULT/MORA
(1)Ordinary delay is merely the failure to perform an obligation on time.
(2)Legal delay/default/mora is the failure to perform an obligation on time which failure
constitutes a breach of the obligation.

Ex. S obliged himself to deliver to B a specific refrigerator on Dec. 10.

If S does not deliver the refrigerator on Dec. 10, he is only in ordinary delay in the absence of any
demand from B although a period had been fixed for the fulfilment of the obligation. The law
presumes that B is giving S an extension of time within which to deliver the refrigerator. Hence,
there is no breach of the obligation and S is not liable for damages.

If a demand is made upon S by B on Dec. 15 and S fails to deliver the refrigerator, S is considered
in default only from the date.
 BREACH OF OBLIGATION

CONTRAVENTION OF THE TERMS OF THE OBLIGATION

– This is the violation of the terms and conditions stipulated in the obligation. The contravention must
not be due to a fortuitous event or force majeure. (Art. 1174)

Example:
E leased the apartment of R for P10,000 a month to be paid in advance during the first week of every
month. The obligation of E, as lessee, is to pay the stipulated rent. The obligation of R, as lessor, is to
maintain E in the peaceful possession of the apartment leased.

If E violates his obligation, R is entitled to eject him from the premises and recover damages. If R
does not maintain E in the peaceful possession of the apartment (as when R is not the owner), and E
is ejected, R may be liable for damages for violation of the terms of his obligation.
Art. 1174. FORTUITOUS EVENT
GEN. RULE: No person shall be liable for a fortuitous event.

REQUISITES

1. Cause of breach of obligation must be independent of the will of the

debtor;
2. Event must be either unforeseen or unavoidable;
3. Event must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner;
4. Debtor must be free from any participation in or aggravation of the
injury to the creditor.
NTC et. al. vs. CA, L-47379, 5/16/88
Typhoon Welming Construction works of ECI at the Ipo site

HELD: If upon the happening of a fortuitous event

or an act of God, there occurs a corresponding fraud,
negligence, delay or violation or contravention in
any manner of the tenor of the obligation provided
for in Art. 1170 of the Civil Code, which results
in loss or damage, the obligor cannot escape liability.

The principle embodied in the act of God doctrine strictly requires that the act must
be the one occasioned exclusively by the violence of nature and human agencies
are to be excluded from creating or entering into the cause of the mischief.
NTC et. al. vs. CA, GR 964410, 7/3/92
Typhoon Kading livestock & properties of residents near
the Angat river

HELD: As a general rule, no person shall be responsible

for those events which could not be foreseen or which
though foreseen were inevitable. The principle embodied
in the Act of God doctrine strictly requires that the act must
be occasioned solely by the violence of nature. Human
Intervention is to be excluded from creating or entering
into the cause of the mischief. When the effect is found to
be in part the result of the participation of man, whether
due to his active intervention or neglect or failure to act, the whole occurrence is
then humanized and removed from the rules applicable to the acts of God.
PHILCOMSAT vs. GLOBE TELECOM, INC.
GR Nos. 147324/147334, 5/25/2004

Sec. 8 of the Agreement entered into by PhilComSat and Globe Telecom provides:

“Neither party shall be liable or deemed to be in default for any failure to perform
its obligation under this Agreement if such failure results directly or indirectly from
force majeure or fortuitous event. x x x force majeure shall mean circumstances
beyond the control of the party involved including but not limited to any law, order,
regulation, direction or request of the Gov’t of the Phils., strikes or other labor
difficulties, insurrection, riots, national emergencies, war, acts of public enemies,
fire, floods, typhoons or other catastrophies or acts of God.
PHILCOMSAT vs. GLOBE TELECOM, INC.
GR Nos. 147324/147334, 5/25/2004

HELD:

PhilComSat & Globe had NO CONTROL over the non-renewal of the term of the RP-
US Military Bases Agreement when the same expired in 1991 because the
prerogative to ratify the treaty extending the life thereof belonged to the Senate.
Neither did the parties have control over the subsequent withdrawal of the US
military forces & personnel from Cubi Pt. in Dec. 1992.