ART.
1156-1178 OBLIGATIONS AND CONTRACTS
Business Law (Lecture #1)
(BSBA-IM) (3B) | PROF. EDWARD MANANSALA | SEM 1 2022
ARTICLE 1156
An obligation is a juridical necessity to
give, to do, or not to do.
Meaning of Obligation
● Latin word “obligatio” means “tying”
or “binding”.
(1). It is a tie of law or a juridical bond by
virtue of which one is bound in favor of
another to render something.
(2). “a legal relation established between
one party and another, whereby the latter
is bound to the fulfillment of a prestation
which the former may demand of him.”
(3). Our law merely stresses the duty of
the debtor or obligor (he who has the duty
of giving, doing, or not doing) when it
speaks of obligation as a juridical
necessity.
Essential Requisites of an Obligation
1. passive subject (debtor or obligor)
2. active subject (creditor or obligee)
3. object or prestation (subject matter
of the obligation)
4. juridical or legal tie (efficient cause)
Kinds of Obligation
a. real obligation (obligation to give)
b. personal obligation (obligation to
do or not to do)
1. Positive personal obligation
or obligation to do or to
render service
2. Negative personal
obligation or obligation not
to do
ARTICLE 1157
Sources of Obligation
1. Law - when they are imposed by the
law itself,
2. Contracts - when they arise from the
stipulation of the parties (Art. 1306.)
3. Quasi-contracts - when they arise from
lawful, voluntary and unilateral acts and
which are enforceable to the end that no
one shall be unjustly enriched or benefited
at the expense of another (Art. 2142.)
4. Crimes or omissions punished by law -
when they arise from civil liability which is
the consequence of a criminal offense
(Art. 1161.)
5. Quasi-delicts or torts - when they arise
from damage caused to another through
an act or omission, there being fault or
negligence, but no contractual relation
exists between the parties (Art. 2176.); the
obligation of the possessor of an animal to
pay for the damage which it may have
caused. (Art. 2183.)
ARTICLE 1160
Obligations derived from quasi-contracts
shall be subject to the provisions of
Chapter 1, Title XVII, of this Book.
A quasi-contract is that juridical relation
resulting from certain lawful, voluntary and
unilateral acts by virtue of which the
parties become bound to each other to the
end that no one will be unjustly enriched
or benefited at the expense of another.
Kinds of Quasi-contracts
a. Negotiorum gestio is the voluntary
management of the property or
affairs of another without the
knowledge or consent of the latter.
b. Solutio indebitti is the juridical
relation which is created when
something is received when there
is no right to demand it and it was
unduly delivered through mistake.
c. Other cases
ARTICLE 1161
Civil obligations arising from criminal
offenses shall be governed by the penal
laws,14 subject to the provisions of Article
2177,15 and of the pertinent provisions of
Chapter 2, Preliminary Title on Human
Relations,16 and of Title XVIII of this
Book, regulating damages.
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ART. 1156-1178 OBLIGATIONS AND CONTRACTS
Business Law (Lecture #1)
(BSBA-IM) (3B) | PROF. EDWARD MANANSALA | SEM 1 2022
Scope of Civil Liability
1. Restitution
2. Reparation for the damage
caused; and
3. Indemnification for consequential
damages
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.
Obligations arising from quasi-delicts
A quasi-delict is an act or omission by a
person (tort feasor) which causes damage
to another in his person, property, or rights
giving rise to an obligation to pay for the
damage done, there being fault or
negligence but there is no pre-existing
contractual relation between the parties.
CHAPTER 2
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.
Meaning of specific or determinate thing
● An obligation to give a specific or
determinate thing.
● A thing is said to be specific or
determinate when it is particularly
designated or physically
segregated from all others of the
same class.
Meaning of generic or indeterminate thing
● A thing is generic or indeterminate
when it refers only to a class or
genus to which it pertains and
cannot be pointed out with
particularity.
Duties of debtor in obligation to give a
determinate thing
1. To preserve or take care of the
thing due;
2. To deliver the fruits of the thing
(see Art. 1164.);
3. To deliver its accessions and
accessories (see Art. 1166.);
4. To deliver the thing itself
5. To answer for damages in case of
non-fulfillment or breach.
Obligation to take care of the thing due
a. Diligence of a good father of a
family.
b. Another standard of care.
c. Factors to be considered.
d. Reason for debtor’s obligation.
Duties of debtor in obligation to deliver a
generic thing
a. To deliver a thing which is of the
quality intended by the parties
taking into consideration the
purpose of the obligation and other
circumstances.
b. To be liable for damages in case of
fraud, negligence, or delay, in the
performance of his obligation, or
contravention of the tenor thereof.
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.
Meaning of personal right and real right
Personal right is the right or power of a
person (creditor) to demand from another
(debtor), as a definite passive subject, the
fulfillment of the latter’s obligation to give,
to do, or not to do.
Real right is the right or interest of a
person over a specific thing (like
ownership, possession, mortgage, lease
record) without a definite passive subject
against whom the right may be personally
enforced.
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ART. 1156-1178 OBLIGATIONS AND CONTRACTS
Business Law (Lecture #1)
(BSBA-IM) (3B) | PROF. EDWARD MANANSALA | SEM 1 2022
Personal right and real right distinguished.
While in personal right there is a definite
active subject and a definite passive
subject, in real right, there is only a
definite active subject without any definite
passive subject. A personal right is,
therefore, binding or enforceable only
against a particular person while a real
right is directed against the whole world.
ARTICLE 1165
When what is to be delivered is a
determinate thing, the creditor, in addition
to the right granted him by Article 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 effected the
delivery.
Remedies of Creditor in Real Obligation.
a. Specific Real Obligation
b. Generic Real Obligation
ARTICLE 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.
Meaning of accessions and accessories.
Accessions are the fruits of, or additions
to, or improvements upon, a thing (the
principal),
The concept includes accession in its
three forms of building, planting, and
sowing (see Art. 445.), and accession
natural, such as alluvion (see Art. 457.),
avulsion (see Art. 459.), change of course
of rivers (see Arts. 461-462.), and
formation of islands. (see Arts. 464-465.)
“Fruits of the thing” are specifically
provided for in Article 1164. ‘
Accessories are things joined to, or
included with, the principal thing for the
latter’s embellishment, better use, or
completion.
Right of creditor to accessions and
accessories.
The general rule is that all accessions and
accessories are considered included in
the obligation to deliver a determinate
thing although they may not have been
mentioned.
- This rule is based on the principle
of law that the accessory follows
the principal. In order that they will
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.
Accession as a right.
Accession is also used in the sense of a
right.
- In that sense, it may be defined as
the right pertaining to the owner of
a thing over its products and
whatever is incorporated or
attached thereto, either naturally or
artificially.
ARTICLE 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.
Situations contemplated in Article 1167
Article 1167 refers to an obligation to do,
i.e., to perform an act or render a service.
It contemplates three situations:
(1) The debtor fails to perform an
obligation to do; or
(2) The debtor performs an obligation to
do but contrary to the terms thereof; or
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ART. 1156-1178 OBLIGATIONS AND CONTRACTS
Business Law (Lecture #1)
(BSBA-IM) (3B) | PROF. EDWARD MANANSALA | SEM 1 2022
(3) The debtor performs an obligation to
do but in a poor manner.
ARTICLE 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.
ARTICLE 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 declares; 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
(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.
Meaning of delay
● The word delay, as used in the law,
is not to be understood according
to its meaning in common
parlance.
(1) Ordinary delay is merely the
failure to perform an obligation on
time.
(2) Legal delay or default or mora is
the failure to perform an obligation
on time which failure, constitutes a
breach of the obligation.
Kinds of delay (mora)
a. Mora solvendi or the delay on the
part of the debtor to fulfill his
obligation (to give or to do) by
reason of a cause imputable to
him;
b. Mora accipiendi or the delay on the
part of the creditor without
justifiable reason to accept the
performance of the obligation; and
c. Compensatio morae or the delay of
the obligors in reciprocal
obligations (like in sale).
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.
Grounds for liability
It contemplates that the obligation was
eventually performed but the obligor is
guilty of breach thereof. Here, the breach
of the obligation is voluntary;
(1). Fraud (deceit or dolo)
- B. Article 1170 refers to incidental
fraud (dolo incidente) committed in
the performance of an obligation
already existing because of
contract. It is to be differentiated
from causal fraud (dolo causante)
or fraud employed in the execution
of a contract under Article 1338,
which vitiates consent and makes
the contract voidable and to
incidental fraud under Article 1344
also employed for the purpose of
securing the consent of the other
party to enter into the contract but
such fraud was not the principal
inducement to the making of the
contract.
(2). Negligence (fault or culpa)
(3). Delay (mora)
(4). 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.
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ART. 1156-1178 OBLIGATIONS AND CONTRACTS
Business Law (Lecture #1)
(BSBA-IM) (3B) | PROF. EDWARD MANANSALA | SEM 1 2022

Recovery of damages for breach of contract Meaning of simple loan or mutuum

or obligation Simple loan or mutuum is a contract
Breach of contract is the failure without whereby one of the parties delivers to
justifiable excuse to comply with the terms another money or other consumable thing,
of a contract. upon the condition that the same amount
- The breach may be willful or done of the same kind and quality shall be paid.
unintentionally. It has been defined
as the failure, without legal excuse, Meaning of usury
to perform any promise which Usury is contracting for or receiving
forms the whole or part of the interest in excess of the amount allowed
contract. by law for the loan or use of money,
(1). Measure of recoverable damages. goods, chattels, or credits.
(2). Contractual interests of obligee or
promisee, remedy serves to preserve. Kinds of Interest
(3). Excuse from ensuing liability. a. Simple Interest
(4). Duty of obligee to minimize his b. Compound Interest
damages. c. Legal Interest
d. Lawful Interest
ARTICLE 1174 e. Unlawful Interest
Except in cases expressly specified by the Interest Rules
law, or when it is otherwise declared by 1. Legal rate - The legal rate is 12%
stipulation, or when the nature of the (from default until fully paid) if the
obligation requires the assumption of risk, transaction is a loan or
no person shall be responsible for those forbearance of money, goods, or
events which could not be foreseen, or credits or the judgment involves a
which, though foreseen, were inevitable. loan or forbearance of money,
goods or credits,
Meaning of fortuitous event 2. Maximum rate
A fortuitous event is any extraordinary
event which cannot be foreseen, or which,
though foreseen, is inevitable. In other ARTICLE 1176
words, it is an event which is either The receipt of the principal by the creditor,
impossible to foresee or impossible to without reservation with respect to the
avoid. interest, shall give rise to the presumption
that said interest has been paid.
Fortuitous event distinguished from force The receipt of a later installment of a debt
majeure without reservation as to prior
1. Acts of Man installments, shall likewise raise the
2. Acts of God presumption that such installments have
In our law, fortuitous events and force been paid.
majeure are identical in so far as they
exempt an obligor from liability. Meaning of presumption
By presumption is meant the inference of
Kinds of fortuitous events a fact not actually known arising from its
a. Ordinary fortuitous events usual connection with another which is
b. Extraordinary fortuitous events known or proved.

ARTICLE 1175 Two Kinds of Presumption

a. Conclusive presumption - with
Usurious transactions shall be governed evidence
by special laws.

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ART. 1156-1178 OBLIGATIONS AND CONTRACTS
Business Law (Lecture #1)
(BSBA-IM) (3B) | PROF. EDWARD MANANSALA | SEM 1 2022

b. Disputable (or rebuttable)

presumption

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 may
have done to defraud them.

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.

Transmissibility of Rights
All rights acquired in virtue of an obligation
are generally transmissible.
1. Prohibited by law.
(a.) By the contract of partnership
(b.) By the contract of agency
(c.)By the contract of commodatum
2. Prohibited by stipulation of parties.