Law on Obligations and Contracts (COMLAW1)
1st Semester Summary
CHAPTER I: General Provisions
ARTICLE 1156. “An obligation is a juridical
necessity to give, to do or not to do. (n)”
Obligation derived from the latin word
“obligatio” meaning tying or binding.
Juridical necessity connote that in case of
noncompliance, there will be legal sanction.
Elements:
● Active Subject – the one demanding the
performance (Creditor)
● Passive Subject – the one bound to perform
the prestation to give, to give, to do, or not
to do (Debtor)
● Prestation or Object – the subject matter of
the obligation
➢ Real obligation - obligation to give
➢ Positive personal obligation
➢ Negative personal obligation
● Efficient Cause – the juridical tie or vinculum
by virtue of which the debtor has become
bound to perform the prestation
ARTICLE 1157. Obligation arise from:
1.) Law;
2.) Contracts;
3.) Quasi-Contracts;
4.) Act or omissions punished by law; and
5.) Quasi-delicts
Sources of Obligations
● Law (obligation ex lege) – like the duty to
pay taxes and to support one’s family.
● Contracts (obligation ex contractu) – like the
duty to repay a loan by virtue of an
agreement.
● Quasi-contracts (obligations ex quasi-
contractu) – like the duty to refund an “over
change” of money because of the quasi-
contract of solutio indebiti or “undue
payment.”
➢ negotiorum gestio
➢ Solutio indebti
● Crimes or Acts of Omissions Punished by
Law (obligations ex maleficio or ex delicto) –
like the duty to return a stolen carabao.
● Quasi-delicts or Torts (obligation ex quasi-
delicto or ex quasi-maleficio) – like the duty
to repair damage due to negligence.
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. (1090)”
When obligations are not expressly
provided by law, they cannot be presumed to exist,
thus making them not demandable nor
enforceable.
When the act itself is the source of the
obligation and not the law:
The law merely acknowledges the
existence of an obligation generated by an act;
It constitutes a contract, quasi-contract,
delict or quasi-delict;
Its only purpose is to regulate the obligation
which did not arise from the law.
When the source of the obligation is the law itself:
1.) The law creates the obligation;
2.) The act upon which it is based is nothing
more than a mere factor for determining the
moment when it becomes demandable.
ARTICLE 1159. “Obligations arising from
contracts have the force of law between the
contracting parties and should be complied
with in good faith.”
Distinction between Obligation and Contract
● Obligation – is a judicial necessity to give, to
do or not to do (1156), while
● 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 services.
(Art.1305)
● Obligation Arising from contracts – it is an
established doctrine of law and sustained by
the settled practice of the courts, that a man
obligates himself to do that to which he
promises to be bound, because that which
is agreed to in a contract is the law between
such contracting parties. This rule, however,
is subject to a condition that a court is not
contrary to law, morals, good customs,
public order, or public policy.
*involuntary vs mandatory
ARTICLE 1160. “Obligations derived from
quasi-contracts shall be subject to the
provisions of Chapter I, Title XVII of this Book.”
***A quasi-contract is a juridical relation
which arises from a lawful, voluntary and unilateral
act/s executed by somebody for the benefit of
another and for which the former must be
indemnified to the end that no one shall be
enriched or benefited at the expense of another
(Article 2142).
Presumptive Consent - the consent in
quasicontracts is referred to as presumptive
consent. Since a quasi-contract is a unilateral
contract created by the act/s of the gestor, the
consent is provided by law through presumption.
This consent gives rise to multiple judicial relations
which result in obligations for the delivery of the
thing or rendition of service.
ARTICLE 1161. “Civil obligations arising from
criminal offenses shall be governed by the
penal laws, subject to the provisions of Article
2177, and the pertinent provisions of chapter 2,
Preliminary title on Human Relations, and to
Title XVIII of this Book, regulating damages.”
Rules Governing Civil Obligations Arising from
Criminal Offenses.
1.) Penal laws like the Revised Penal Code.
The Penal Code contains a Chapter on civil
liability (Articles 100 to 113)
2.) Article 2176 (Quasi – delict)
3.) Pertinent provisions of chapter 2 the proper diligence of a good father of a family,
(Preliminary Title) on Human Relations –
particularly Articles 26, 29, 30, 32, 33, 35
and 36, NCC;
4.) Title XVII of this code involving damages
(Articles 2195 to 2235)
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. (1093a)”
A quasi delict is an act or omission by a
person which causes damage to another giving rise
to an obligation to pay for the damage done, there
being fault or negligence but there is no preexisting
contractual relation between the parties. Requisites
of Quasi delict.
Before a person can be held liable for quasi delict,
the following requisites must be present:
1.) There must be an act or omission;
2.) There must be fault or negligence
3.) There must be damage caused;
4.) There must be a direct relation of cause and
effect between the act or omission and the
damage; and
5.) There is no preexisting contractual relation
between the parties.
Crime Distinguished from Quasi delict.
1.) In crime, there is criminal or malicious intent
or criminal negligence, while in quasi delict,
there is only negligence;
2.) In crime, the purpose is punishment, while
in quasi delict, indemnification of the
offended party;
3.) Crime affects public interest, while quasi
delict concerns private interest in crime,
there are generally two liabilities: criminal
and civil, while in quasi delict, there is only
civil liability;
4.) Criminal liability cannot be compromised or
settled by the parties themselves, while the
liability for quasi delict can be compromised
as any other civil liability;
5.) In crime, the guilt of the accused must be
proved beyond reasonable doubt, while in
quasi delict the fault or negligence of the
defendant need only be proved by
preponderance (i.e., superior or greater
weight) of evidence.
CHAPTER II: Nature and Effect of Obligation
ARTICLE 1163. “Every person obliged to give
something is also obliged to take care of it with
unless the law or the stipulation of the parties
requires another standard of care. (1094a)”
“The diligence of a good father of a family” is the
diligence required in this article and if extraordinary
diligence is required, then the obligor shall exercise
extraordinary diligence.
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. (1095)”
The Debtor’s Obligation to deliver arise when:
1.) When the obligation is based on law,
quasidelict, quasi-contract or crime, specific
provisions of the applicable law shall
determine when the delivery shall be done
or affected.
2.) When the obligation is subject to a
suspensive condition, the obligation to
deliver arises from the happening of the
condition.
3.) When the obligation is subject to a
suspensive term or period, the obligation to
deliver arises from the lapse of the term or
period.
 4.) When there is no condition or term, the
obligation to deliver arises from the
constitution, creation or perfection of the
obligation.
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 fortuitous event until he has
effected the delivery.”
Yu Tek v. Gonzales
● Facts: A obligated himself to sell for a
definite price a certain specified quantity of
sugar of a given quality, without designating
a particular lot.
● Issue: In case the sugar is lost by a
fortuitous event, who bears loss prior to
delivery, the seller or the buyer?
● Held: In this case, the seller bears the loss
because what was delivered was not a
specific thing, but a generic thing. And
genus never perishes. Incidentally, the sale
here cannot be said to have been already
perfected because of the lack of physical
segregation from the rest of the sugar.
ARTICLE 1166. “The obligation to give a
determinate thing includes that of delivery of all
its accessions and accessories, even though
they may not have been mentioned. (1097a)”
● Accession – includes everything produced
by a thing, as well as all incorporated or
attached with it, may it be natural or artificial
● Accession discreta – right to the fruits
● Accession continua – includes both
accession natural (i.e. alluvial deposits) and
accession industrial (i.e. those built, planted
or sowed on the land of the landowner)
● Accessories – includes things that are
united or attached as ornaments to the
principal thing, for the latter’s use or
perfection (i.e. spare tire of a car, television
antennas, cellphone chargers, moviehouse
chairs, etc.)
Note: Although the delivery of determinate thing
includes all its accessions and accessories, the
parties in the contract may stipulate that certain
accessions or accessories may not be included in
the delivery. Both parties have the freedom to
stipulate such things.
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. (1098)”
Coverage of Article
1.) the obligor failed to fulfill a positive personal
obligation, that is, “to do” something;
2.) he fulfilled the obligation but in
contravention of the agreement; and
3.) there was fulfillment but the same is poor or
inadequate.
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.”
This article pertains to negative personal obligation,
or the obligation not to do. In addition to the
obligation of the obligor to undo the forbidden act of
thing, he may also be made liable for damages
caused by doing that which was forbidden.
ARTICLE 1169. Those obliged to deliver or to do
something incur in delay from the time the
obligee judicially or extrajudicially 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 declare; 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. (1100a)

The delay contemplated in the article is legal delay
or default and not ordinary delay. To put an obligor
in default (or mora), there must be a demand made
upon him for the performance of the obligation
either judicially or extrajudicially.
Demand is not necessary to place the obligor in
default under the following circumstances:
1.) When the law or obligation expressly
declares;
2.) When from the nature of the contract, it
appears that the time is of the essence and
this is the motivating factor in the
establishment of the contract;
3.) When demand would be useless;
4.) When the debtor admits, he is in default.
Classes of Default
1.) Mora solvendi – the default on the part of
the debtor/obligor;
2.) Mora accipiendi – the default on the part of
the creditor/obligee;
3.) Compensatio morae – the default on the
part of both the debtor/obligor and
creditor/obligee which arises in reciprocal
obligations the effect is the default of one
party neutralizes the default of the other.
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)”
● Fraud – A false representation of a matter of
fact—whether by words or by conduct, by
false or misleading allegations, or by
concealment of what should have been
disclosed—that deceives and isintended to
deceive another so that the individual will
act upon it to her or his legal injury.
● Negligence – Conduct that falls below the
standards of behavior established by law for
the protection of others against
unreasonable risk of harm. A person has
acted negligently if he or she has departed
from the conduct expected of a reasonably
prudent person acting under similar
circumstances.
ARTICLE 1171. “Responsibility arising from
fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void.”
ARTICLE 1172. “Responsibility arising from
negligence in the performance of every kind of
obligation is also demandable, but such liability
may be regulated by the courts, according to
the circumstances. (1103)”
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.
Far East Bank and Trust Co. v. Estrella O. Querimit
● Facts: Respondents filed a complaint
against petitioner bank and certain officials
of the latter, alleging that the they refused to
allow her to withdraw her time deposit
evidenced by four certificates of deposit in
the total amount of $60,000. The trial court
ordered petitioner-bank and its officials to
allow respondent to withdraw her time
deposit plus accrued interests. The Court of
Appeals (CA) affirmed the decision of the
trial court with the modification that
petitioner-bank was solely liable because
the latter has a personality separate from its
officers and stockholders. On appeal, the
Supreme Court affirmed the CA.
● Held: Petitioner-bank failed to prove that it
had already made payment considering that
the subject certificates of deposit were still
in the possession of the depositors. The
principle that payment, in order to discharge
a debt, must be made to someone
authorized to receive it is applicable to the
payment of certificates of deposit. Petitioner
should, thus, not have paid respondent’s
husband or any third party the amount of
the time deposit without requiring the
surrender of the certificates of deposit.
Laches would also not defeat respondent’s
claim as she did not withdraw her deposit
because she relied on petitioner bank’s
assurance that the interest would
accumulate annually even after maturity of
the time deposit and she set aside the
money therein for the retirement.
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)
This article is a continuance to ART. 1173. ART.
1174 explains a fortuitous event that may have
arisen during the event of doing the obligation. It is
an event which cannot be foreseen such as sudden
coming of a storm which considered an Acts of
God or known as majeure or any other unexpected
event such as robbery, insurrection which is
considered Acts of man.
The Philippine Civil Code distinguishes between
two kinds of fortuitous events namely:
1.) Ordinary fortuitous events or those which
are common and which the contracting
parties could reasonably foresee e.g. rain.
2.) Extra-ordinary fortuitous events which are
uncommon and which the contracting
parties could not have reasonably foreseen
e.g. earthquake, fire, unusual flood.
To be declared that such circumstances are
fortuitous events the following must be considered:
1.) The event must be independent of the
human will or the debtor
2.) The event could not be foreseen, or if
foreseen, is inevitable
3.) The event must be of such a character as to
render it impossible for the debtor to comply
with his obligation in a normal manner
4.) The debtor must be free from any
participation in, or the aggravation of, the
injury to the creditor, that is, there is no
concurrent negligence on his part.
In case of fortuitous event there are still rules to be
observed: When expressly specified by law.: a) the
debtor is guilty of fraud, negligence, or delay, or
contravention of the tenor of the obligation. (Arts.
1170. 1165, par.3)
Example: S is obliged to deliver a specific horse to
B on August 10. S did not deliver the horse on said
date. If, on August 11, the horse died because it
was hit by lightning, S is not liable if no demand
was made by B. His obligation was extinguished. If
the horse died after a demand was made by B, S is
liable for damages because he is guilty of (legal)
delay. In this case the obligation of S to deliver the
horse is also extinguished but it is converted into
monetary obligation to pay damages. (Art. 1165). b)
the debtor has promised to deliver the same
(specific) thing to two or more persons who do not
have the same interest. Example: If S sold and
promised to deliver.
ARTICLE 1175. Usurious transactions shall be
governed by special laws.
Usury, as defined in Black’s Law Dictionary, is the
charging of exorbitant and unconscionable rate of
interest, higher than the interest allowed by law. In
layman’s term, it means loan sharking.
Special Laws Regulating Usury:
Central Bank Circular No. 905 which took effect on
January 1, 1983 made the Usury Law legally non-
existent, as declared in the case of Liam Law vs
Olympic Sawmill Co. 129 SCRA 439 (1984). An
excerpt from the case goes:
The special laws that used to govern usury are:
1.) Act No. 2655 as amended by Act No. 3998
2.) Commonwealth Act No. 399
3.) Republic Act No. 337 and
4.) Presidential Decree No. 116, 858 and 1684
Rules governing interest rates in relation to
usurious transactions:
1.) CBC No. 905 does not repeal the Usury
Law. Only a law can repeal a law. The
circular merely suspended the law’s
effectivity.
2.) While the Usury Law ceiling on interest
rates was lifted by the CB Circular 905,
nothing in the said circular could possibly be
read as granting carte blanche authority to
lenders to raise interest rates to levels
which would either enslave their borrowers
or lead to a hemorrhaging of their assets
(Almeda vs. CA, 256 SCRA 292 [1996]).
3.) Increase of interest rate unilaterally without
the consent of the debtor is illegal for it
violates the principle of mutuality of
contracts.
4.) The determination of the illegality of a
stipulated interest rate depends on the
circumstances of the case.
5.) Jurisprudence shows that an interest rate of
12% to 25% per annum is considered legal.
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. (1110a)

A receipt issued by the lessor dated June 1, 1904

to the lessee covering the rent for the month,
shows that the rent for the prior month (May) had
already been paid. The presumption is rebuttal and
not conclusive.

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. (1111)

● Accion subrogatoria is an action where the

creditor hose claims had not been fully
satisfied, may go after the debtors (third
persons) of the defendant-debtor.
● Accion pauliana is an action where the
creditor files an action in court for the
rescission of acts or contracts entered into
by the debtor designed to defraud the
former.

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. (1112)

Rights that do not fall under the exceptions are

considered assignable or alienable, but as a
general rule, rights are transmissible except for the
following:
a. those not transmissible by their nature like
purely personal rights;
b. those not transmissible by provision of law.