UNIVERSITY OF SAN CARLOS

SCHOOL OF LAW AND GOVERNANCE

College of Law
Cebu City

Course No. : LLB 117

Course Title : Obliga ons and Contracts
Credit : 5 units
Total Hours : 90 hours (5 hours a week)
Prerequisite Course : None
Course Professor : A y. Maricris E. Bathan-Lasco, CPA
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COURSE DESCRIPTION:

As a basic course in Civil Law, the subject aims to introduce the students to the
general principles of obliga ons and contracts. The course covers an in-depth study of
the nature, kinds and e ect of obliga ons, and their ex nguishment; contracts in
general, their requisites, form and interpreta on; and defec ve contracts, including
quasi-contracts, natural obliga ons, and estoppel.

The course emphasizes the use of skills in iden fying and ar cula ng legal issues,
applying legal reasoning, engaging in cri cal analysis and providing basic reasoned
choices and op ons. Research skills of the students are likewise developed, as well as
the ability to properly and e ec vely communicate. Students are also made to apply the
ethical standards of the profession in given situa ons.

PROGRAM LEVEL LEARNING OUTCOMES1 (PLLO):

Upon comple ng the law program, Carolinian law graduates will demonstrate the
following:

PLLO 1: KNOWLEDGE

PLLO 2: ETHICS, PROFESSIONAL RESPONSIBILITY, WITNESS TO THE WORD

PLLO 3: THINKING SKILLS which include the skills to iden fy and ar culate legal issues;
apply legal reasoning and research to generate appropriate responses to legal issues;
engage in cri cal analysis and make a reasoned choice amongst alterna ves; and think
crea vely in approaching legal issues and genera ng appropriate responses.

PLLO 4: RESEARCH SKILLS

PLLO 5: COMMUNICATION AND COLLABORATION

PLLO 6: SELF-MANAGEMENT
At the end of the law program, the Carolinian law graduate is expected to be Witness to
the Word and to embody the following Graduate A ributes:

1Based in part on ALTC’s Learning and Teaching Academic Standards Program,

December 2010.
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 Scien a: A COMPETENT PROFESSIONAL
Cri cal thinker
Lifelong learner
Skilled researcher
Sound decision- maker
Innova ve problem-solver
E ec ve and ar culate communicator

Virtus: A VIRTUOUS EXEMPLAR

Incorrup ble servant leader
Ethical and values-driven prac oner

Devo o: A DEDICATED ADVOCATE

Commi ed peacemaker
Culture- sensi ve patriot
Socially- engaged ci zen
Passionate worker for the marginalized

COURSE LEVEL LEARNING OUTCOMES (CLLO)

Upon comple on of the course Obliga ons and Contracts, the students should be able
to:

CLLO 1: Explain and apply the general principles on obliga ons & contracts as well as
di eren ate a valid contract from the defec ve contracts.

CLLO 2: Recognize and re ect upon the professional du es of lawyers in the

prepara on of contracts; and use their knowledge of the course to be Witness to the
Word.

CLLO 3: Examine the facts of a given case, evaluate the relevant facts and the key issues,
iden fy and apply the legal rules and principles involved, and generate appropriate
responses.

CLLO 4: Search and use up-to-date primary and secondary legal sources in support of
their evalua on and synthesis of relevant factual issues involving the fundamental
principles on obliga ons and contracts.

CLLO 5: Communicate e ec vely and persuasively the key principles and concepts on
obliga ons and contracts; demonstrate the ability to use appropriate means and form of
communica on depending on the educa onal background and needs of legal or non-
legal audiences; render appropriate opinion on a given situa on a er demonstra ng the
use of ac ve listening skills such as ques oning, summarizing and paraphrasing.

CLLO 6: Exhibit the ability to learn and work independently, as well as the ability to work
in groups or coopera vely with others.

METHODOLOGY

Methods used in teaching the course shall include lecture discussion, cases and
class recita on.
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 Textbook: Civil Code, Volume IV, Obliga ons & Contracts by Edgardo L. Paras,
2018 Edi on (or latest edi on)

References: Comments & Jurisprudence on Obliga ons and Contracts by Jurado,

2023 Edi on (or latest edi on)
Comments & Cases on Obliga ons and Contracts by de Leon, 2023 Edi on
(or latest edi on)
Obliga ons and Contracts: Text and Cases by Sta. Maria, 2023 Edi on
(or latest edi on)

Course Requirements:

1. Regular A endance
2. Passing grades in Summa ve tests/Quizzes and other Academic Papers as may be
required
3. Class Par cipa on in Oral Examina ons
4. Outcomes Based Exercise

Policy On Class Recordings And Course Materials:

The course syllabus, discussions, lecture presenta ons and other course material
are property of the course professor. No student shall be allowed to record any part of
the class discussion/presenta on/conduc on of oral examina on by any means. No
student shall be allowed to reproduce or upload such recording to a computer or any
device for distribu on or sale. Non-observance of said policy may subject the student to
disciplinary ac on and may be punished under copyright laws.

Course Outline:

I. OBLIGATIONS

A. General Provisions
1. Concept, Art. 1156
2. Civil Obliga on vs. Natural Obliga on
3. Requisites or Elements of an Obliga on
i. Requisites
ii. Case
1. Ang Yu Asuncion vs. CA, G.R. No. 109125, Dec. 2, 1994, 57
SCAD 163, 238 SCRA 602 (revisit this in Contracts)
- pe toners led a complaint for speci c performance; pe oners leased the residen al
property of the respondents; the la er informed the pe oners that they are o ering
to sell the premises and giving them priority to acquire it
- Un l the contract is perfected, it cannot, as an independent source of obliga on, serve
as a binding juridical rela on - one of the requisites of an obliga on
4. General Classi ca ons
i. As to sanc on
ii. As to subject ma er
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 iii. As to a rma veness or nega veness of the obliga on
iv. As to persons obliged
5. Obliga on dis nguished from cause of ac on; Subject Ma er
dis nguished from Cause of Ac on
i. De la Rama vs. Mendiola, 401 SCRA 704 (2003)
- whether speci c perf case is barred by the pe on for declaratory relief; both led by
the respondent
- Yes there us res judicata: 1 nal judgment 2) jurisdic on over the subject ma er 3)
judgment on the merits 4) iden ty of par es, subject ma er, and cause of ac on
- Subject ma er -item with respect to which controversy has arisen
- Cause of ac on - iden ty in the facts essen al to the maintenance of the two ac ons

ii. Bachrach Corpora on vs. CA, 296 SCRA 487 (1998)

- won speci c perf is barred by the unlawful detainer case; pe oner and republic
entered into a lease agreement; rent was increased thus pe oner refused to pay;
unlawful detainer case was led against pe oner; pe oner led for speci c
performance pursuant to a compromise agreement
- No, 4th req, there must be iden ty of the par es, subject ma er, and cause of ac on
- In the unlawful detainer case the subject ma er is the contract of lease while the cop
is the breach; in the speci c perf, the subject ma er is the compromise agreement
allegedly perfected while the coal is the refusal of PPA to comply

B. Sources of Obliga ons, Art. 1157-1162

1. Law
i. Ar cle 1157; Ar cle 1158
ii. Cases
1. Pelayo vs. Lauron, 12 Phil. 453
- pe oner rendered medical assistance during child delivery of the daughter in law of
the defendants; won defendants are obliged to pay for the medical assistance
- NO. According to Ar cle 1089 of the Old Civil Code (now 1157), obliga ons are created
by law, by contracts, by quasi-contracts, by illicit acts and omissions or by those in
which any kind of fault or negligence occurs. Obliga ons arising from law are not
presumed. Those expressly determined in the Code or in special law, etc., are the only
demandable ones.
- The obligation to pay must be couched on the husband
2. De la Cruz vs. Northern Theatrical Enterprises, 95Phil. 739
(1954)
- dela cruz shot benjamin who wanted to crash the entrance of the movie house a er
the la er a acked him with a bolo; two criminal cases for homicide where led against
deal cruz and was acqui ed; he then demanded reimbursement from Northern
Theatrical Enterprises who was the former employer
- WON he may recover from his employer; NO- If the employer is not legally obliged to
give legal assistance to its employee and provide him with a lawyer, naturally said
employee may not recover the amount he may have paid a lawyer hired by him.
-
2. Contracts
i. Art. 1157; Art. 1159
ii. Cases
1. Eduardo B. Manzano vs. Antonio B. Lazaro, G.R. No.
173320, April11, 2012
- Manzano entered into a professional services contract with Lazaro as his campaign
manager; however his last compensa on remained unpaid despite demand;
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 manzanilla argued that Lazaro misrepresented in his exper se thus not en tled to the
bonus agreed upon
- Won lazari misrepresented himself thus consent into entering the contract was vi ated
by fraud and mistake
- No, the alleged fraud commi ed by Lazaro made the contract a voidable one; thus
suscep ble of ra ca on. an Annullable contract may be rendered perfectly valid by
ra ca on, which can be express or implied. Implied ra ca on may take the form of
accep ng and retaining the bene ts of a contract.
- Manzano remained silent and did not confront Lazaro
2. William Golangco Construc on Corpora on vs. PCIB, 485
SCRA 293 (G.R. No. 142830. March 24, 2006)
- WGCC aba PCIB enterd into a contact for construc on of a tower; one of the
s pula ons was that the contractor guarantees the work and shall make good any
defect in the materials and workmanship which becomes evident within one year
a er the nal acceptance of the work. ; a er a year the por ons of the granite wash-
out nish started peeling o and falling from the walls
- Won WGCC is liable for the construction of the defects after the lapse of one-year
defects liability period, as stipulated in the contract
- Contracts have the force and e ect of law. Any s pula on in the contract, as long as it
is not contrary to law, morals, good customs, public order or public policy, is valid and
binding. A provision in a construc on contract limi ng liability for defects for one-year
is valid.
3. Dio vs. St. Ferdinand Memorial Park, Inc., 509 SCRA 453
(G.R. No. 169578. November 30, 2006)
- Dio entered into an agreement with SFMPI to purchase a memorial site, evidence by a
pre-need transac on agreement. Did agreed to comply with the rules and regula ons
including a provision that the mausoleum construc on be performed by park sta not
outside contractor; several years a er did decided to construct one but disagreed with
the cost presented by SFMPI
- WON dio was aware of the said ruled; won it is binding and valid on bio - YES both
- That once a contract is perfected, both par es are bound by its terms and are
presumed to know and consent to those terms, and they cannot later challenge the
contract's validity based on claims of ignorance or lack of consent.

4. NHA vs. CA, G.R. No. 156437, March 1, 2004

- Respondent church applied t purchase lots from pe oner which was approved by the
la er. Respondent proceeded to possess the land and received a le er from pe oner
duly approving the sale of the subject lots but at a price not declared to them by the
NHA Field O ce. Pe oner returned the check sta ng that the amount was
insu cient considering that the price of the proper es had changed. The Church
made demands to the pe oner but the la er refused to accept the payment. Church
led for speci c performance contending that there was a valid contract of sale
- Won there was a valid contract of sale - NO
- There being no concurrence of the o er and acceptance, it did not pass the stage of
genera on to the point of perfec on. As such, it is without force and e ect from the
very beginning. Thus, there is no contract to speak o .
- The o er of the NHA to sell the subject property was not accepted by the respondent.
Thus, the alleged contract involved in this case should be more accurately
denominated as inexistent.

5. Tiu Peck vs. CA vs. CA 221 SCRA 618 (1993)

-

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 - King, peck, and rubato decided to end their partnership thus they entered unto an
agreement on the appor onment of Partnership business; however, kind and rubato
departed from the agreement and led for an ac on of par on
- WON a par on can be ordered anew, considering that there was already a prior
agreement between the par es on the appor onment of proper es? - NO
- An agreement (contract) drawn up by par es is the law between them. It shall be
obligatory in whatever form it may have been entered into, provided all the essen al
requisites for its validity are present. In other words, a contract, once perfected, has
the force of law between the par es who are bound to comply therewith in good faith,
and neither one may, without the consent of the other, renege therefrom.

3. Quasi-Contracts
i. Art. 1157; Art. 1160
ii. De ni on
iii. Types
iv. Cases
1. BPI vs. Sarmiento, 484 SCRA 261 (G.R. No. 146021. March
10, 2006)
- There was an inves ga on due to several anomalous transac ons; Sarmiento did not
regularly report for work. She however received her full salary. Sarmiento received a
demand from BPI to return said amount but she refused to do so. BPI asserted that
since Sarmiento did not actually work during the period adverted to, she was not
en tled to receive any salary and that its payment of respondent's salary was by
mistake.
- Whether or not there is Solu o Indebi ? - NONE
- Sarmiento not obliged to return the salary that he received because there is an
exis ng pre contractual obliga on and that is the employer-employee rela onship
between BPI and Sarmiento
- IN this case, the bank was saying that Sarmiento must return the salary that he
received during his preven ve suspension the SC said that since Sarmiento told by his
supervisor not to o to work while the inves ga on was ongoing the SC said that it was
because of that reason that Sarmiento sparingly went to work and during that me
and he was given the salary the salary was not paid by mistake but it was due to a
contractual rela on – it is the employer-employee rela onship.
- If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obliga on to return it arises.

2. Perez vs. Pomar, 2 Phil. 682 (G.R. No. 1299, November 16,
1903)
- Plain Perez, on various occasions, rendered defendant Pomar services as interpreter
of English and had obtained passes to accompany Pomar upon his journeys to transact
businesses with clients, a end conferences, as well as the shipment of goods to other
places in the country. There was, however, no wri en contract entered into between
par es for the employment of Perez as interpreter, or any innominate contract
showing their agreement. Upon refusal to pay for his services, Perez led a complaint
for sums of money and damages against Pomar.
- WON a contract exists bet Perez and Pomar
- Contracts resul ng from an implied consent of the par es are valid and enforceable.
Where one has rendered services to another, and these services are accepted by the
la er, in the absence of proof that the service was rendered gratuitously, an obliga on
results to pay the reasonable worth of the services rendered upon the implied
contract of hiring.
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 3. Reyes vs. Lim, 408 SCRA 560 (2003)
- Reyes led a complaint for annulment of contract and damages against Lim alleging
that pe oner Reyes as seller and respondent Lim as buyer entered into a contract to
sell a parcel of land. Lim paid ten million pesos as down payment upon the signing of
the contract. However, before the payment of the balance, Lim learned that Reyes had
already sold the property to another buyer. Lim sought the cancella on of the contract
to sell and requested in open court that Reyes be ordered to deposit the ten million
down payment with the trial court which was granted by the la er.
- There is unjust enrichment when a person unjustly retains a bene t to the loss of
another, or when a person retains money or property of another against the
fundamental principles of jus ce, equity and good conscience. The principle that no
person may unjustly enrich himself at the expense of another applies not only to
substan ve rights but also to procedural remedies. One condi on for invoking this
principle is that the aggrieved party has no other ac on based on contract, quasi-
contract, crime, quasi-delict or any other provision of law.
4. Rodzssen Supply, Inc. vs. Far East Bank & Trust Co., 148
SCAD 392, 357 SCRA 618 (G.R. No. 109087, May 9, 2001))
- Pe oner opened a Le er of credit with Far East bank, originally set to expire within
30 days, but it was extended for another 30 days. There were to remaining units
delivered a er the expira on of the LC and was paid by Far East bank. The la er then
demanded payment from the pe oner but the la er refused contending that it had
no obliga on to do so Bec of the expira on of the LC.
- WON respondent can demand payment - YES
- The respondent bank could s ll demand payment from the pe oner but not based
on the Le er of Credit but rather on a quasi-contract between them. While it is true
that upon the expira on of the LC, the same had since became invalid and as such the
bank was not obligated to pay Ekman, the act of the pe oner Rodzssen in voluntarily
receiving and keeping the hydraulic loaders, the right of the bank to demand payment
from pe oner is anchored from Ar cle 2142 which provides that: "Certain lawful,
voluntary and unilateral acts give rise to the juridical rela on of quasi-contract to the
end that no one shall be unjustly enriched or bene ted at the expense of another."
- When both par es to a transac on are mutually negligent in the performance of their
obliga ons, the fault of one cancels the negligence of the other. Thus, their rights and
obliga ons may be determined equitably. No one shall enrich oneself at the expense
of the other.

4. Delict
i. Art. 1161, Revised Penal Code Art. 100
ii. Case
1. People vs. Catubig, 153 SCRA SCAD 624, 363 SCRA 621
(2001)
- The commission of an o ense has a two-pronged e ect, one on the public as it
breaches the social order and the other upon the private vic m as it causes personal
su erings, each of which is addressed by, respec vely, the prescrip on of heavier
punishment for the accused and by an award of addi onal damages to the vic m.

5. Quasi-delict
i. Ar cle 1157; Ar cle 1162
ii. De ni on of Quasi-Delict
iii. De ni on of Negligence
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 iv. Determina on of Negligence
v. Requisites
vi. Case
1. Air France vs. Carrascoso, 18 SCRA 155
- Carrascoso paid and was issued a rst class cket but was asked by plain to vacate
his seat because a wife man had a be er right than him
- A contract of carriage is one vested with the public interest. A violator may be liable
not only for culpa contractual but also for culpa acquillana when the same is a tor ous
act. Passengers are en tled to be treated with kindness, respect, courtesy, and due
considera on.

6. Enumera on by law is exclusive

i. Case
1. Maka Stock Exchange vs. Campos, 585 SCRA 120 (G.R. No.
138814, April 16, 2009)
- Enumera on given by law is Exclusive. A prac ce or custom is, as a general rule, not a
source of a legally demandable or enforceable right.

C. Nature and E ect of Obliga ons

1. Art. 1163
2. Speci c/Determinate thing vs. Generic thing
3. Applicability of Art. 1163
4. Standard of Care
i. General Rule
ii. Excep on
5. Factors to consider

6. Obliga ons to give

i. Determinate things, Art 1164-1166,
a. Real right vs. Personal right
b. Kinds of Delivery
c. When does the obliga on to deliver arise?
d. Case
i. San Lorenzo Development Corp. vs. CA, 449
SCRA 99 (G.R. No. 124242. January 21,
2005)
- Spouses Lu sold two parcels of land to the respondent where the latter made a
downpayment. Respondent then made a demand letter to demand execution of a nal
deed of sale in his favor so that he could e ect full payment of the purchase price.
Unheeded, Babasanta led a Complaint for Speci c Performance and Damages against
the Spouses Lu. San Lorenzo Development Corpora on (SLDC) led a Mo on for
Interven on alleging that it had legal interest in the subject ma er under li ga on
because the two parcels of land involved had been sold to it in a Deed of Absolute Sale
with Mortgage.
- In a contract of sale, tle passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the vendor
and is not to pass un l the full payment of the price. — SMDC has a be er right than
Babasanta (respondent)
- Obliga ons arose from the crea on of a valid contract. A valid contract creates an
obligatory force between the par es. In contract to sell, the obliga on of the buyer is

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 to pay the balance while that of the seller is to convey the tle upon payment of the
full price.

e. Art. 1165
i. Classi ca on of Obliga ons according to
subject ma er
ii. Generic Thing vs. Speci c Thing
iii. Remedies of Creditor in a Speci c Real
Obliga on
iv. Remedies of Creditor in a Generic Real
Obliga on
v. E ect of Fortuitous Events
- General Rule
- Excep ons
vi. Ordinary Delay vs. Legal Delay
f. Art. 1166
i. Case
- Caleon vs. Agus Development Corp.,
207 SCRA 748 (G.R. No. 77365. April
7, 1992)
- Respondent Agus Development Corp. (Agus) leased a parcel of land to Pe oner
Caleon. Caleon then constructed on the leased lot a four door apartment building and
subsequently, without consent of Agus, sub-leased two out of the four doors of the
apartment. Upon learning of the unauthorized sublease, Agus led a Complaint for
ejectment against Pe oner on the basis of failing to get the consent of the lessor to
sublease the premises — WON lease of an apartment includes a sublease of the lot on
which it is constructed — YES (they can validly be ejected; BP25)
- The lease of a building naturally includes the lease of the lot it is built upon and that
the rentals of the building include the rentals of the lot. Occupancy of a building or
house implies the tenancy or possession in fact of the land on which they are
constructed.

ii. Generic Things

1. Rights of Creditor in Generic Obliga ons

7. Obliga
ons to do/not to do, Art. 1167-1168
Applicability i.
ii.
Remedies of Creditor if Debtor Fails to Do
iii.
When may a thing be ordered undone
Case iv.
1. Chavez vs. Gonzales, GR No. L-27454, April 30, 1970, 32
SCRA 547
- Rosendo Chavez (Chavez) brought his typewriter to Fructuoso Gonzales (Gonzales), a
typewriter repairman, for the cleaning and servicing of the said typewriter but the
la er was not able to nish the job. Because of the delay of the repair Chavez decided
to recover the typewriter from Gonzales which he wrapped it like a package. When
Chavez reached their home, he opened it and examined that some parts and screws
was lost. — WON Gonzales is liable for the cost of the repair and missing parts - YES
- he is liable under Ar cle 1167 of the Civil Code for the cost of execu ng the obliga on
in a proper manner. likewise liable, under Ar cle 1170 of the Code, for the cost of the
missing parts, in the amount of P31.10, for in his obliga on to repair the typewriter he
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 was bound, but failed or neglected, to return it in the same condi on it was when he
received it.

2. Tanguilig vs. CA, 77 SCAD 647, 266 SCRA 78 (G.R. No.

117190. January 2, 1997)
- Vicente Herce contracted Jacinto Tanguilig to construct a windmill system Vicente
refused to pay the balance, Also, assuming that Vicente owed the P15,000, according
to him, this should be o set by the defects in the windmill system which caused the
structure to collapse a er strong winds hit their place. - WON pe oner Tanguilig is
under obliga on to reconstruct the windmill a er it collapsed.
- Tanguilig is under obliga on to reconstruct the windmill a er it collapsed. When the
windmill failed to func on properly it became incumbent upon pe oner to ins tute
the proper repairs in accordance with the guaranty stated in the contract. Thus, it is
Tanguilig who should bear the expenses for the reconstruc on of the windmill.
- Ar cle 1167 of the Civil Code is explicit on the point that if a person obliged to do
something fails to do it, the same shall be executed at his cost.

8. Delay or Mora, Art. 1169-1170

i. Meaning of Delay
ii. Requisite of Delay
iii. Kinds of Delay or Default
iv. When demand not needed to put debtor in default
v. Grounds for liability
vi. Kinds of Damages
vii.Cases
1. Piczon vs. Piczon, 61 SCRA 67 (G.R. No. L-29139. November
15, 1974)
- Sosing Lobos Corp obtained a loan of P12,500 from Piczon Co. Inc. The President of the
Sosing Lobos, Esteban Piczon, signed an agreement expressing that he will pay the sum
of P12,500 with interest of 12% per annum commencing from the date of the
execu on. Consuelo Piczon (creditor) brought an ac on to recover the loaned amount
to which the Court ruled in favor of Consuelo and ordered Esteban and Sosing Lobos
Corp to pay him with interest. — WON trial court was correct in its decision that the
defendant will only have to pay the interest from August 6, 1964 when the rst
demand was made?
- Ar cle 2209 of the Civil Code provides that in case the debtor delays in paying his
obliga ons, the indemnity for damages shall be the payment of interest agreed upon.
In the absence thereof, the legal interest which is 6% per annum.

2. Philippine Charter Insurance Corpora on vs. Central

Colleges of the Philippines (G.R. Nos. 180631-33. February
22, 2012.)
- For the construc on of a ve (5)-storey building, CCP contracted the services of DPCC.
In a le er dated October 29, 2003, the school informed the contractor and pe oner
that only 47% of the project was completed, which was way behind the construc on
schedule.
- The civil law concept of delay or default commences from the me the obligor
demands, judicially or extrajudicially, the ful llment of the obliga on from the obligee.
In legal parlance, demand is the asser on of a legal or procedural right.
- When did the contractor incur delay? WON contractor is entitled to the actual damages
that it prayed for in its counterclaim?
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 - Oct 29, 2003. The contractor DPCC incurred delay from the me the school called its
a en on that it had breached the contract and extrajudicially demanded the
ful llment of its commitment against the bonds. - Art. 1169. Those obliged to deliver
or to do something incur in delay from the me the obligee judicially or extrajudicially
demands from them the ful llment of their obliga on.
- NO. A claim for actual damages cannot be predicated on imsy, remote, specula ve,
and insubstan al proof. Thus, courts are required to state the factual bases of the
award. The contractor DPCC was not able to establish that it is en tled to the actual
damages that it prayed for in its counterclaim.

3. Palmares vs. CA, GR No. 126490, March 31, 1998, 288

SCRA 422
- Palmares) signed as co-maker to Spouses Azarraga in a loan extended by M.B. Lending
Corpora on (MBLC). In a promissory note, she acknowledged her joint and several
liability with the principal. When informed that the debtors defaulted, she o ered to
se le the obliga on in case the creditor fails to collect. Therea er, a complaint was
led against her to the exclusion of the principal debtors. Palmares o ered to pay but
it was insu cient - WON the complaint was prematurely led due to lack of judicial or
extrajudicial demand made by MBLC.
- Under Art. 1169, delay exists when there is a judicial or extra-judicial demand.
However, demand is not necessary for delay to exist when the obliga on or the law
expressly so declares.
- Even if it were otherwise, demand on the sure es is not necessary before bringing suit
against them, since the commencement of the suit is a su cient demand.
4. Binalbaga Tech, Inc. vs. CA, GR No. 100594, March
10,1993, 219 SCRA 777
- Angelina, Administrator of the estate of Luis Puentevella executed a contract to sell
and a deed of sale to Pe oner. The pe oner then took possession of the property
and started opera ng a school. Apparently, there was already a pending civil case
regarding the subject lots
- A party to a contract cannot demand performance of the other party's obliga ons
unless he is in a posi on to comply with his own obliga ons.

5. Barzaga vs. Court of Appeals, GR No. 115129, Feb. 12, 1997

- A er his wife passed away, Pe oner bought and paid in full materials from herein
Private Respondent for the construc on of her niche. Pe oner was promised that the
materials would be delivered within the day. Respondent however failed to deliver on
the agreed me, date, and place despite repeated follow-ups. Pe oner was
constrained to buy materials from another store. — YES, there was delay
- Private Respondent was negligent and incurred in delay in the performance of his
contractual obliga on. This en tles Pe oner to be indemni ed for the damage he
su ered as a consequence of delay or contractual breach. There was a speci c me
agreed upon for the performance of the obliga on. Pe oner was assured by the
Respondent of the immediate delivery of the materials. This is clearly a case of non-
performance of a reciprocal obliga on, as in the contract of purchase and sale, the
pe oner had already done his part, which is the payment of the price. It was
incumbent upon the respondent to immediately ful ll his obliga on to deliver the
goods otherwise delay would a ach. An award of moral damages is incumbent in this
case as the pe oner has su ered so much.
-

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 6. Financial Building Corpora on vs. Rudlin Interna onal
Corpora on G.R. No. 164186. October 4, 2010 and G.R.
No. 164347. October 4, 2010 (consolidated)
- In 1985, Rudlin Interna onal Corpora on awarded Financial Building Corpora on (FBC)
a contract to build a school in Metro Manila for PHP 6,933,268.00. The two par es
inked a Construc on Agreement on November 22, 1985, that outlined terms, including
penal es for construc on delays. Ini ally, the comple on was set for April 30, 1986.
However, a subsequent amendment on June 5, 1986, extended this deadline to June
10, 1986 and emphasized the payment terms, par cularly a reconcilia on of accounts
by June 30, 1986. Yet, by the revised comple on date, the construc on remained
incomplete. —YES. FBC was responsible for the delay as they failed to complete the
correc ve/repair works in compliance with the Contract Documents
- Based on the principle of Reciprocal Obliga ons: Neither party incurs in delay IF the
other party 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 par es ful lls his obliga on, delay
by the other begins. (Art. 1167)
7. Tanguilig vs. Court of Appeals, GR NO. 117190, Jan. 2, 1997
8. Aerospace Chemical Industries, Inc. vs. Court of Appeals,
315 SCRA 94, G.R. No. 108129. September 23, 1999
- Pe oner, Aerospace, purchased 500 metric tons of sulfuric acid from private
respondent, Philphos. Aerospace agreed to secure the means of transport to pick-up
the sulfuric acid from Philphos' loadports in Basay, Negros Oriental and Sangi, Cebu.
Aerospace paid the purchased price of 500 MT of sulfuric acid. Then, it chartered M/T
Sultan Kayumanggi to carry the agreed volumes of freight from designated loading
areas. But the vessel was able to withdraw a par al amount of sulfuric acid from Basay
and Sangi because it lted. And later, it sank with a total amount of 227.51 MT of
sulfuric acid on board.
- Where there has been breach of contract by the buyer, the seller has a right of ac on
for damages. Following this rule, a cause of ac on of the seller for damages may arise
where the buyer refuses to remove the goods, such that the buyer has to remove
them. In the present case, Philphos required Aerospace to ship out or li the sulfuric
acid as agreed, otherwise pe oner, Aerospace, would be charged for the
consequen al damages owing to any delay.
- Delay begins from the me the obligee judicially or extrajudicially demands from the
obligor the performance of the obliga on.
9. Responsibility from fraud, Art. 1171
i. Case
1. Far East Bank & Trust Co. vs. Court of Appeals, 59 SCAD
253, 241 SCRA 671 (1995)
- (FEBTC) issued a credit card to Luis Luna at its Pasig branch. Luis tendered a despedida
lunch for his friends at the Hotel Intercon nental Manila. To pay for the lunch, Luis
presented his credit card. Unfortunately, it was dishonored and he was forced to pay
the bill in cash and felt embarrassed by this incident. Luis demanded the payment of
damages from FEBTC. — QON FEBTC is liable for other damages
- NO. Spouses Luna are en tled only to nominal. In culpa contractual, moral damages
may be recovered where the defendant is shown to have acted in bad faith or with
malice in the breach of the contract and that bad faith, in this context, includes gross,
but not simple, negligence. there was nothing to su ciently indicate any deliberate
intent on the part of FEBTC to cause harm to private respondents
10. Responsibility from negligence, Art. 1172
i. Cases
1. PNB vs. CA, GR No. 126152, Sept. 28, 1999, 315 SCRA 309
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 - Respondent Lily Pujol, opened with Pe oner PNB, an account denominated as
Combo Account. Pujol issued a check in the amount of 30,000 in favor of her daughter
in law and daughter which were dishonoured by PNB on the ground of insu ciency of
funds respec vely and debited her account with P250.00 as penalty charge for both. -
Is PNB liable for moral damages — YES
- a bank is under obliga on to treat the accounts of its depositors with me culous care
whether such an account consists only of a few hundred pesos or of millions of pesos.
Responsibility arising from negligence in the performance of every kind of obliga on is
demandable. While pe oner’s negligence in this case may not have been a ended
with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and
humilia on to private respondent Lily S. Pujol for which she is en tled to recover
reasonable moral damage

2. Southeastern College, Inc. vs. Court of Appeals, Juanita de

Jesus Vda. De Dimaano, et. al., July 10, 1998, 292 SCRA 422
- A er Typhoon "Saling" hit Metro Manila, the strong winds blew o the roo ng of
pe oner Southeastern Colleges building (Southeastern), causing damage to the
roo ng of private respondent Juanita Dimaano and her family. — Is the pe oner
exempted from liability for the damages su ered by the DImaano family due to a
fortuitous event?
- YES. A typhoon or storm is a fortuitous event, a natural occurrence which may be
foreseen but is unavoidable despite any amount of foresight, diligence or care. In
fortuitous events, any person cannot be held liable for the damages su ered by
another. This conclusion nds support in Ar cle 1174 of the Civil Code
- "Art 1174. Except in cases expressly speci ed by the law, or when it is otherwise
declared by s pula on, or when the nature of the obliga on requires the assump on
of risk, no person shall be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable."
ii. Fraud vs. Negligence
iii. Kinds of negligence

11. Degree of Diligence, Art. 1173

i. Cases
1. Samson vs. CA, GR No. 108245, Nov. 25, 1994, 238 SCRA
397
- Santos (vendor/lessee), who s ll occupied the leased premises for his store beyond
the extended term, received a le er from the lessor informing him of the increased
rentals, pending renewal of the contract un l the arrival of Ms. Madrigal (one of the
owners of Susana Realty). Samson (buyer) o ered to buy the store and right to lease,
but he was advised by Santos to return a er a week. …However, the lease was not
renewed and Samson, already occupying the store, was forced to vacate. - Is the
vendor liable for the evic on? — NO. Seller Santos was neither guilty of fraud nor bad
faith since the lessor’s le er led him to believe and conclude that his lease contract
was impliedly renewed. Besides, Samson failed to exercise su cient diligence in
verifying rst the status of the lease.
- The rule caveat emptor requires the purchaser to be aware of the supposed tle of
the vendor and he who buys without checking the vendor's tle takes all the risks and
losses consequent to such failure.
2. Dioquino vs. Laureano, GR No. L-25906, May 28, 1970, 33
SCRA 65
- A y Dioquino wanted to register his car thus he requested defendant Laureano to
introduce him to one of the clerks in the MVO O ce. Defendant rode with A y
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 Dioquino and while about to reach the des na on, the car was stoned by mischievous
boys and the windshield was broken. The defendant Federico Laureano refused to le
any charges against the boy and his parents because he thought that the stone-
throwing was merely accidental and that it was due to force majeure. Laureano
refused to pay for the damaged done to the windshield and challenged the case for
judicial adjudica on. — There was a fortuitous event making Laureano not liable to
pay damages; throwing of the stone by the child was clearly unforeseen or if foreseen,
was inevitable.
- The express language of Art. 1174 of the present Civil Code states that "Except in cases
expressly speci ed by the law, or when it is otherwise declared by s pula on, or when
the nature of the obliga on requires the assump on of risk, no person shall be
responsible for those events which could not be, foreseen, or which, though foreseen
were inevitable.”

3. Jarco Marke ng Corpora on vs. CA, 117 SCAD 818, 321

SCRA 375 (1999)
- Criselda and her daughter, Xhieneth were at Syvel’s Department Store owned by Jarco
Marke ng Corp (Jarco). While Criselda was signing her credit card slip, she heard a
loud thud and saw her daughter on the oor, pinned by the bulk of the store’s gi -
wraping counter. She was immediately rushed to the hospital, however she died a er
2 weeks. — Whether the negligence was a ributable to private respondents for
maintaining a defec ve counter. — YES, The pe oners and another store supervisor
were personally informed of the danger posed by the unstable counter. Yet, neither
ini ated any concrete ac on to remedy the situa on nor ensure the safety of the
store’s employees and patrons as a reasonable and ordinary prudent man would have
done
- Negligence is the omission to do something which a reasonable man, guided by those
considera on which ordinarily regulate the conduct of human a airs, would do, or the
doing of something which a prudent and reasonable man would not do. Negligence is
the failure to observe, for the protec on of the interest of another person, that degree
of care, precau on and vigilance which the circumstances justly demand, whereby
such other person su ers injury.
4. People vs. Fallouna, 424 SCRA 655 (2004)
- This is a criminal case involving a police o cer prosecuted for the murder of an 11-
year-old. - can the shoo ng of the child be considered an accident? — NO, Here, the
gun was loaded with bullets and cocked when the police o cer placed it on his
waistline. The gun's safety lock was also on that even if one would pull hard on the
trigger, the gun would not re.
- (1) An accident is an event that happens without human agency, or there may be
wholly or partly human agency, but the consequences should not be foreseeable.
Otherwise, there is (2) negligence or the failure to observe that degree of care,
precau on, and vigilance that the circumstances justly demand without which the
other person su ers injury.
5. Philippine Airlines vs. Court of Appeals, 106 SCRA 391
- Mejia shipped through PAL one (1) microwave oven from the US to the PH, using PAL
Air Waybill No. 0-79- 1013008-3. The shipment was made through Philippine Airlines.
However, upon delivery in the PH, the front glass door of the microwave was smashed,
and the resul ng damage made the item inoperable. Demands for refund were made
but were denied and ignored by PAL — The air waybill should be severely construed
against PAL. Due to the fact that the carrier is the sole party who prepares and writes
the terms of the air waybill, this document is considered to be a contract of adhesion.

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 As a rule, contract of adhesion must be construed in a way that is adverse to the
interests of the party that formed the agreement.
- There is no absolute obliga on on the part of a carrier to accept a cargo. Where a
common carrier accepts a cargo for shipment for valuable considera on, it takes the
risk of delivering it in good condi on as when it was loaded. If the fact of improper
packing is known to the carrier or its personnel, or apparent upon observa on but it
accepts the goods notwithstanding such condi on, it is not relieved of liability for loss
or injury resul ng therefrom.
6. La Mallorca vs. Court of Appeals, 17 SCRA 739
- Private respondent Mariano Beltran and his wife, together with their three (3) minor
daughters, boarded a bus owned and operated by pe oner La Mallorca. Upon
reaching their des na on, Beltran and his family alighted the bus and he led them to a
shaded spot about 4 or 5 meters away from the bus. A erwards, he returned to the
bus to get his other baggage. He failed to no ce that his 4-1/2-year-old daughter
Raquel followed him… bus suddenly started moving…Raquel was run over by the bus
- Ar cle 1755 of the NCC requires a common carrier to exercise utmost diligence of a
very cau ous person in the discharge of its obliga on to transport safely its passengers
(extraordinary diligence). The rela on of carrier and passenger does not cease at the
moment the passenger alights from the carrier's vehicle at a place selected by the
carrier at the point of des na on, but con nues un l the passenger has had a
reasonable me or a reasonable opportunity to leave the carrier's premises

12. Fortuitous events, Art. 1174

i. De ni on
ii. General Rule
iii. Excep ons
iv. Cases
1. Asian Construc on & Dev. Corp. vs. PCIB, 488 SCRA 192
(2006)
- Asian Construc on and Development Corpora on (AsiaKonstrukt) obtained a U.S
dollar credit accommoda ons from PCI Bank in the amount of approximately 4 Million
dollars secured with several deeds of assignment. However, Asian reneged on their
obliga on when it became due and demandable interposing in their defense the
alleged “severe nancial and currency crisis” which hit the Philippines in 1997, which
adversely a ected and ul mately put it out of business. — WON the alleged “1997
economic crisis” is a fortuitous event that would cons tute a valid jus ca on for it to
renege on its obliga ons to the bank. — NO, AsiaKonstrukt may have experienced
nancial di cul es because of the "1997 economic crisis" that ensued in Asia.
However, the same does not cons tute a valid jus ca on for it to renege on its
obliga ons to the bank.
- ‘The debtor in obliga ons to do shall also be released when the presta on becomes
legally or physically impossible without the fault of the obligor”; it is applicable only to
obliga ons "to do," and not obliga ons "to give." The 1997 economic crisis is not a
fortuitous event nor an exemp ng circumstance that would cons tute a valid
jus ca on for it to renege on its obliga ons to the bank.
2. Fil-Estate Proper es, Inc. vs. Go, 530 SCRA 624 (2007)
- Spouses Go and Gil-estate entered into a contrat to sell a condo unit. Based on their
contract, it was said that the condominium project would start in 1995 and be nished
in 1997. However, in 1999, Fil-Estate s ll failed to develop the condominium project
and it alleged that the same was due to the nancial crisis that hit the Asian region in
1997 – a fortuitous event over which it had no control.

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 - ART. 1174 explains a fortuitous event that may have arise during the event of doing
the obliga on. 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, insurrec on which is considered Acts of man — the Asian
nancial crisis in 1997 is not one of the fortuitous event contemplated in Ar cle 1174
of the Civil Code.
3. Victorias Planters Asso., Inc. vs. Victorias Milling Co. (GR
No. L-6648, July 25, 1955, 97 SCRA 318
- (respondent) entered into a milling contract whereby they s pulated a 30-year period
within which the sugar cane produced by the pe oner would be milled by
respondent central. The par es also s pulated that in the event of force majeure, the
contract shall be deemed suspended during this period. The pe oner failed to deliver
the sugar cane during the 4 years of the Japanese occupa on and 2 years a er the
libera on when the mill was being rebuilt for a total of 6 years. —Can the pe oners
be compelled to deliver sugar cane for 6 more years a er the expira on of the 30 year
period to make up for what they failed to deliver to the respondent? — NO
- Ar cle 1174 provides that fortuitous events relieves the obligor from ful lling the
contractual obliga on. The reason the planters failed to deliver the sugar cane was the
war or a fortuitous event. The appellant ceased to run its mill due to the same cause.
To require the planters to deliver the sugar cane which they failed to deliver during the
four years of the Japanese occupa on and the two years a er libera on when the mill
was being rebuilt is to demand from the obligors the ful llment of an obliga on which
was impossible of performance at the me it became due. Nemo tenetur ad
impossibilia.
4. Ace-Agro Dev. Corp. vs. CA, GR No. 119729, Jan. 21, 1997
- Ace-Agro Development Corpora on had been cleaning so drink bo les and repairing
wooden shells for Cosmos Bo ling Corpora on. On April 25, 1990, a re broke out in
the Cosmos plant. As a result, Ace-Agro’s work stopped. Cosmos, subsequently
terminated the contract on account of the re destroying nearly all the bo les and
shells — The force majeure or re is not a valid cause for the termina on of the
contract; The suspension of work due to re (force majuere) does not merit an
automa c extension of the agreement between them.
- The period during which work was suspended does not justify an extension of the term
of the contract. Suspension of contract brought by force majeure, does not justify an
extension of the term thereof.

13. Usurious transac ons, Art. 1175

i. Cases
1. Cauton vs. Court of Appeals, GR No. 158382, Jan. 27, 2004
- Respondents led a suit for foreclosure of real estate mortgage against pe oner. The
trial court declared the mortgage as void because pe oner failed to expressly state
that he entered into the mortgage as the ac ng representa ve of the tled owner of
the mortgaged property. Instead, the RTC ordered the pe oner to pay the original
loan of Php 1 Million secured by the mortgage plus interest of 10% and 8% per month.
— WON the 8% and 10% monthly interest rates imposed are valid — NO, it is
unconscionable— The s pulated interest rates are illegal if they are unconscionable.
This is because s pula ons authorizing iniquitous or unconscionable interests are
contrary to morals (‘contra bonos mores’), if not against the law.
- Although the Usury Law was suspended by Central Bank Circular No. 905, s. 1982
which gives par es to a loan agreement a wide la tude to agree on any interest rate,
lenders s ll cannot raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets.
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 2. Liam Law vs. Olympic Sawmill Co., 129 SCRA 439 (1984)
- Liam Law loaned P10,000.00 without interest to the Olympic Sawmill Co. and Elino Lee
Chi, as the managing partner. When the loan became due, the debtors asked for
extension and another loan was executed, extending the payment of the loan and
adding P6,000.00 as answer for a orney’s fees, legal interest and other cost incident
thereto to be paid upon the termina on of the agreement. Liam Law led a collec on
case when the defendants were unable to pay the second me. Defendants admi ed
the P10,000.00 principal obliga on, but claimed that the addi onal P6,000.00
cons tuted usurious interest. — WON the agreement to pay P6,000.00 in addi on to
the principal obliga on is lawful. — YES
- Ar cle 1354. Although the cause is not stated in the contract, it is presumed that it
exists and is lawful, unless the debtor proves the contrary.

14. Presump ons, Art. 1176.

1. Manila Trading & Supply Co. vs. Medina, 2 SCRA 549 (1961)
- Mariano Medina had certain accounts with Manila Trading & Supply CO. These
accounts were consolidated into a total balance due of P60,000.00, for which Medina
executed a promissory note. The note provided that upon failure to pay any of the
installments "the whole sum remaining then unpaid will immediately become due and
payable, at the op on of the holder of this note". Manila Trading & Supply Co. led a
complaint against appellant Medina, claiming that the said debtor had failed to meet
the installments due on the note for the months of September, 1956 up to and
including January 7, 1957. — WON Medina was correct in saying that genuine receipts
dated January 1957 raise the presump on that prior installments were paid. —NO
- Recital of the fact that receipts were issued for a corresponding month only raises a
prima facie presump on and can be proven otherwise.

2. Ledesma vs. Realubin, 8 SCRA 608 (1963)

- Salud Ledesma purchased on credit, on di erent dates, through her drivers, gasoline
and motor oil, from June to September 1956, from the Baguio Caltex service sta on
owned by Alberto Realubin. Alberto follows this business prac ce: Each invoice is done
in triplicate. During the trial, Alberto was in possession of the original or white copies
of the invoice for purchases made in the months of June to September, all of which
were signed by Salud's truck drivers. — WON he presump on of payment under
Ar cle 1176 of the NCC should apply? — NO, Alberto proved as a fact that the prior
purchases were not paid, and that the October purchases were for cash. Therefore,
the presump on of payment of prior obliga ons (assuming its applicability for
argument's sake) cannot prevail.
- The presump on of payment of prior obliga ons under Ar cle 1176 of the New Civil
Code cannot prevail when the creditor can prove that the prior purchases were not
paid. Between a proven fact and a presump on pro tanto, the former stands and the
la er falls.

15. Remedies of the Creditor, Art. 1177

i. Case
1. Adorable vs. Court of Appeals, GR No. 119466, Nov. 25,
1999, 319 SCRA 511
- pe oner was asking the court to cancel a contract of sale that was entered into by
his debtor with a third person. However the SC said that NO you cannot ask for
rescission of the contract of sale because you have not even exhausted all the
remedies yet, there was no showing that he tried to sue for collec on of sum of
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 money so he did not exact ful llment yet. There was also no showing that he a ached
proper es of the debtor and in this case it was shown that the debtor has proper es
and third there was no showing that he tried to subrogate the debtor in his rights and
so the SC said he cannot just jump and avail of the fourth remedy. You have to go
through all the remedies rst before you can ask the court to rescind to cancel
contracts entered into by the debtor with third persons
- The following successive measures must be taken by a creditor before he may bring an
ac on for rescission of an allegedly fraudulent sale: (1) exhaust the proper es of the
debtor through levying by a achment and execu on upon all the property of the
debtor, except such as are exempt by law from execu on; (2) exercise all the rights and
ac ons of the debtor, save those personal to him (accion subrogatoria); and (3) seek
rescission of the contracts executed by the debtor in fraud of their rights (accion
pauliana).

16. Transmissibility of rights, Art. 1178

D. Di erent Kinds of Obliga ons

1. Pure and Condi onal Obliga ons
i. Ar cles 1179-1192
ii. Kinds of Condi onal Obliga ons: suspensive and resolutory, Art.
1181
1. Cases
a. Insular Life Assurance Co., Ltd. vs. Toyota Bel-Air,
Inc., 550 SCRA 70 (2008)
b. Coronel vs. CA, GR No. 103577, Oct 7, 1996
c. Central Philippine University vs. CA, GR No. 112127,
July 17, 1995, 246 SCRA 511, 63 SCAD 72
d. Jacinto vs. Kaparaz, 209 SCRA 246 (1992)
e. Ducusin vs. CA, 122 SCRA 280 (1983)
iii. Potesta ve, casual and mixed condi ons, Art. 1182
1. Case
a. Rustan Pulp vs. IAC, GR No. 70789, Oct. 19, 1992,
214 SCRA 665
b. Osmena vs. Rama. 14 Phil 99 (1909), Sept. 9, 1909
c. Naga Telephone Co., Inc. vs. Court of Appeals, 230
SCRA 351 (1994)
iv. Impossible Condi ons, Art. 1183
v. Posi ve and Nega ve Condi ons, Art. 1184-1185
vi. Construc ve Ful llment, Art. 1186
1. Cases
a. Tayag vs. CA, (G.R. No. 96053. March 3, 1993)
b. Ong vs. Bognalbal, 501 SCRA 490 (2006)
vii.Ful llment of condi ons
1. Case
a. Enriquez vs. Ramos, 73 SCRA 116 (1976)
viii.Preserva ons of Rights
ix. Rules in case of loss, deteriora on or improvement, Art. 1189
x. Resolutory Condi ons, Art. 1190
xi. Rescission in Reciprocal Obliga ons, Art. 1191
1. Cases
a. Tan vs. Court of Appeals, G.R. No. 80479, July 28,
1989, 175 SCRA656
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 b. Velarde vs. Court of Appeals, G.R. No. 108346, July
11, 2001
c. Siy vs. Court of Appeals, G.R. No. L-39778, Sept. 13,
1985, 138 SCRA 536
d. University of the Philippines vs. De Los Angeles,
G.R. No. L-28602, Sept. 29, 1970, 35 SCRA 102
e. Palay, Inc. vs. Clave, G.R. No. L-56076, Sept. 21,
1983, 124 SCRA 638
xii. Both par es in breach in reciprocal obliga ons, Art. 1192
1. Case
a. Camus vs. Price, Inc., G.R. Nos. L-17859-9, July 18,
1962

2. Obliga ons with a Period

i. Ar cles 1193-1198
ii. Cases
1. Gaite vs. Fonacier, G.R. No. L-11827, July 31, 1961, 2 SCRA
831
2. Fernandez vs. CA, G.R. No.80231, October 18, 1988, 166
SCRA 577
3. Abesamis vs. Woodcra Works, Inc., G.R. No. L-18916, Nov.
28, 1969, 30 SCRA 372
4. Gregorio Araneta, Inc. vs. Phil. Sugar Estates Development
Co., Ltd, G.R. No. L-22558, May 31, 1967, 20 SCRA 330
5. Radiowealth Finance Company vs. Del Rosario, G.R. No.
138739, July 6, 2000, 335 SCRA 288
6. Allen vs. Province of Albay, G.R. No. 11433, December 20,
1916, 35 Phil. 826

3. Alterna ve & Faculta ve Obliga ons

i. Art. 1199-1206
ii. Cases
1. Ong Guan Can vs. Century Insurance Company, 46 Phil. 492

4. Joint and Solidary Obliga ons

i. Art. 1207-1222
ii. Cases
1. Palmares vs. CA, G.R. No. 126490, Mar. 31, 1998, 288 SCRA
422
2. Sesbreno vs. CA, G.R. No. 89252, May 24, 1993, 222 SCRA
466
3. PNB VS. STA. Maria, G.R. No. L-24765, Aug. 29, 1969, 29
SCRA 303
4. Paci c Banking Corp. vs. Intermediate Appellate Court,
G.R. No. 72275, Nov. 13, 1991, 203 SCRA 496
5. Ronquillo vs. CA, G.R. No. L-55138, Sept. 28, 1984, 132
SCRA 274
6. Quiombing vs. CA, G.R. No. 93010, Aug. 30, 1990, 189
SCRA 325
7. Inciong, Jr. vs. CA, G.R. No. 96405, June 26, 1996, 257 SCRA
578

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 5. Divisible and Indivisible Obliga ons
i. Art. 1223-1225
ii. Case
1. Government vs. CFI, G.R. No. L-32162, Sept. 28, 1984, 132
SCRA 156

6. Obliga ons with a Penal Clause

i. Art. 1226-1230
ii. Cases
1. (Suatengco) Guatengco vs. Reyes, 574 SCRA 187 (2008)
2. Titan Construc on Corp. vs. Uni-Field Enterprises, Inc., 517
SCRA 180 (2007)
3. Ruiz vs. CA, 401 SCRA 410 (2003)
4. SSS vs. Moonwalk, G.R. No. 73345, Apr. 7, 1993, 221 SCRA
119
5. Allen vs. Province of Albay, G.R. No. 11433, Dec. 20, 1916,
35 Phil.826
6. State Investment House vs. Court of Appeals, G.R. No.
112590, July 12, 2001
7. Spouses Solangon vs. Salazar, G.R. No. 125944, June 29,
2001
8. Barons Marke ng Corp. vs. CA, 286 SCRA 96
9. Manila Racing Club vs. Manila Jockey Club, 69 Phil.55
10. Ligutan vs. CA, et. al., GR No. 138677, Feb. 12, 2002

E. Ex nguishment of Obliga ons

1. Payment or Performance
i. Art. 1221-1251
ii. Cases
1. Montecillo vs. Reynes, 385 SCRA 244 (2002)
2. PNB vs. CA, G.R. No. 108630, Apr. 2, 1996, 256 SCRA 44
3. Pagsibigan vs. CA, G.R. No. 90169, Apr. 7, 1993, 221 SCRA
202
4. Tayag vs. CA, G.R. No. 96053, Mar. 3, 1993, 219 SCRA 480
5. Panganiban vs. Cuevas, 7 Phil 477
6. BPI vs. CA, G.R. No. 104612, May 10, 1994, 232 SCRA 302
7. Caltex vs.Intermediate Appellate Court, GR No. 72703,
Nov. 13, 1992, 215 SCRA 580
8. FEBTC vs. Diaz Realty Inc., GR No. 138588, Aug. 23, 2001

a. Applica on of Payments, Art. 1252-1254

a. Cases
i. Espina vs. CA, G.R. No. 116805, June 22, 2000, 334
SCRA 186
b. Payment by Cession, Art. 1255
a. Case
i. Lopez vs. CA, G.R. No. L-33157, June 29, 1982, 114
SCRA 671
c. Tender of Payment and Consigna on, Art. 1256-1261
a. Cases

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 i. Eternal Gardens Memorial Park vs. CA, 282 SCRA 553
(1997)
ii. Rayos vs. Reyes, 398 SCRA 24 (2003)
iii. Badayos vs. CA, G.R. No. 57630, Mar. 13, 1992
iv. Adelfa Proper es, Inc. vs. CA, G.R. No. 111238, Jan. 25,
1995, 240 SCRA 565
v. De Mesa vs. CA, G.R. Nos. 196467-68, Oct. 19, 1999,
317 SCRA 24

2. Loss of the Thing Due

i. Art. 1262- 1269
ii. Cases
1. Yu Tek Co. vs. Gonzales, 29 Phil. 384
2. Labayen vs. Talisay-Silay Milling Co., 52 Phil. 440

3. Condona on or Remission of the Debt

i. Art. 1270-1274
ii. Cases
1. Veloso vs. Masa, 10 Phil. 279
2. Lopez vs. Tambun ng, 33 Phil. 236

4. Confusion or Merger of Rights

i. Art. 1275-1277
ii. Cases
1. Sochayseng vs. Trujillo, 31 Phil. 153
2. Yek Ton Lin Fire & Marine Insurance Co. vs. Yusingco, 46
Phil. 473

5. Compensa on
i. Art. 1278-1290
ii. Cases
1. Silahis Mktg. Corp. vs. IAC, 180 SCRA 217
2. BPI vs. CA, et.al., 255 SCRA 571
3. Tan vs. Mendez Jr., 383 SCRA 202 (2002)

6. Nova on
i. Art. 1291-1304
ii. Case
1. Diongzon vs. Court of Appeals, 321 SCRA 477 (1999)
2. Sandico vs. Piguing, 42 SCRA 322
3. People’s bank and Trust Co. vs. Syvel’s, Inc., 164 SCRA 247
4. Cruz vs. Court of Appeals, July 27, 1998, 293 SCRA 239
5. Quinto vs. People, April 14, 1999, 305 SCRA 708

II. Contracts

Chapter I. General Provisions

A. De ni on—Ar cle 1305

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 B. Elements
1. Essen al elements (see Chapter II, infra)
2. Natural elements

3. Accidental elements (see D., 3, infra )

C. Characteris cs
1. Obligatory force—Art. 1308
2. Mutuality—Art. 1308-1310 (see also Art. 1473)
Case
GSIS v. CA, 228 SCRA 183 (1993)
3. Rela vity
a. Art. 1311
Case
Manila Railroad Co. v. La Compana Transatlan ca, 38 Phil.
875 (1918)
DKC Holdings Corp. v. CA, 329 SCRA 666 (2000)
b. Art. 1317
Case
Gu errez Hmnos. v. Orense, 28 Phil. 571 (1914)

D. Par es
1. Auto-contracts
2. Freedom to contract –Art. 1306
Case
Gabriel v. Monte de Piedad, 71 Phil. 497 (1941)
Pakistan Interna onal Airlines v. Ople 190 SCRA 90 (1990)

a. Special disquali ca on
1. Art. 87, Family Code
2. Arts. 1490 and 1491, CC
3. Art. 1782, CC

3. What they may not s pulate—Art. 1306

Cases
Cui v. Arellano, 2 SCRA 205 (1961)
Arroyo v. Berwin, 36 Phil. 386 (1917)
Bustamante v. Rosel 319 SCRA 413 (1999)

E. Classi ca on

1. According to subject-ma er
2. According to name
a. Art. 1307
Case
Dizon vs. Gaborro, 83 SCRA 688 (1978)
3. According to perfec on
a. Art. 1315
b. Art. 1316
4. According to its rela on to other contracts

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 5. According to form
6. According to purpose
7. According to the nature of the vinculum produced
8. According to cause
9. According to risk

F. Stages

G. As dis nguished from a perfected promise and an imperfect promise

(policitacion)

H. With respect to third persons

1. S pula ons in favour of third persons (s pula ons pour autrui) –Art.
1311, 2nd par.
Cases
Floren no v. Encarnacion, 79 SCRA 192 (1977)
Coquia v. Fieldmen’s Insurance Co., 26 SCRA 178 (1968)
Constan no v. Espiritu, 39 SCRA 206 (1971)
2. Possession of the object of contract by third persons—Art 1312
3. Creditors of the contrac ng par es—Art. 1313
4. Interference by third persons—Art. 1314
Case
Daywalt v. Corp., 39 Phil 587 (1919)
So Ping Bun v. CA, 314 SCRA 751 (1999)

Chapter II. Essen al Requisites of Contracts

A. Consent
1. Requisites—Art. 1319
a. Must be manifested by the concurrence of the o er and
acceptance
Case
Resenstock v. Burke, 46 Phil. 217 (1924)
Malbarosa v. CA, 402 SCRA 168 (2003)

1. O er
a) Art. 1319
b) Art. 1321
c) Art. 1322
d) Art. 1323
e) Art. 1325
f) Art. 1326

2. Acceptance
a. Art. 1319
b. Kinds (1319-1320)
c. If made by le er or telegram –Art. 1319, 2nd par.
d. Period of acceptance—Art. 1324
Case
Sanchez v. Rigos, 45 SCRA 368 (1972)
e. Contract of op on

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 b. Necessary legal capacity of the par es
1) Who cannot give consent—Art. 1327
2) When o er and/or acceptance is made
c. The consent must be intelligent, free, spontaneous, and real –Arts.
1330-1346
1) E ect –Art. 1330
2) Vices of consent
a) Mistake or error (1330-1334)
Case
Asiain v. Jalandoni, 45 Phil. 296
(1923)
Heirs of William Sevilla, et Al. v.
Leopold Sevilla, 402 SCRA 501
(2003)

Dumasug v. Modelo, 34 Phil. 252

(1916)
Maxima Hemedes v. CA, 316 SCRA
347 (1990)
b) Violence and in mida on—Art. 1333
c) Undue in uence—Art. 1337
d) Fraud or dolo—Art. 1338

Cases
Hill v. Veloso, 31 Phil. 161 (1915)
Woodhouse v. Halili, supra
Geraldez v. CA, 230 SCRA 320 (1994)
i. Kinds
ii. Failure to disclose facts; duty to reveal
them—Art. 1339
Case
Tuason v. Marquez, 45 Phil. 381 (1923)
Rural Bank of Sta. Maria v. CA,314 SCRA
255 (1999)
iii. Usual exaggera ons in trade;
opportunity to know the facts
Case
Azarraga v. Gay, 52 Phil. 599 (1928)
Laureta Trinidad v. IAC, 204 SCRA 524
(1991)
iv. Mere expression of an opinion –Art.
1341

1. E ects—Art. 1344
Case
Songco v. Sellner, 37 Phil.
254 (1917)

e) Misrepresenta on
i. By a third person—Art. 1342
ii. Made in good faith—Art. 1343
iii. Ac ve/Passive
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 Cases
Mercado and Mercado v. Espiritu,
37 Phil. 215 (1917)
Braganza v. Villa Abrille, 105 Phil.
456 (1959)

f) Simula on of Contracts
Cases
Rodriguez v. Rodriguez, 28 SCRA
229 (1914)
Suntay v. CA, 251 SCRa 430 (1995)
i. Kinds—Art. 1345
1. Absolute
2. Rela ve
ii. E ects—Art. 1346

B. Object of Contracts
1. What may be the objects of contracts—Art. 1347
2. Requisite—Art. 1349
3. What may not be the objects of contracts
Case
Blas v. Santos, 1 SCRA 899 (1961)
a. Impossible things or services—Art. 1348

C. Cause of Contracts
1. Meaning of cause—Art. 1350
a. In onerous contracts
b. In remuneratory contracts
c. In contract of pure bene cience
2. As dis nguished from mo ve—Art. 1351
3. Defec ve causes and their e ects:
a. Absence of cause and unlawful cause—Art. 1352
Case
Liguez v. CA, 102 Phil. 577 (1957)

b. Statement of a false cause in the contract—Art. 1353

c. Lesion or inadequacy of cause—Art. 1355
Case
Carantes v. CA, 76 SCRA 514 (1977)
Sps. Buenaventura et al. v. CA, 416 SCRA 263
(2003)

4. Presump on of the existence and lawfulness of a cause, though it is

not stated in the contract—Art. 1354

Chapter III. Form of Contracts

A. General rule: Contracts shall be obligatory, in whatever form they may have been
entered into, provided all the essen al requisites for their validity are present.
(“Spiritual system” of the Spanish Code)—Art. 1356
B. Excep on: When the law require that a contract be in some form in order that it
may be valid or enforceable (Anglo-American principle)—Art. 1356
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 Case
Hernaez vs. de los Angeles, 27 SCRA 1276 (1969)

C. Kinds of formali es required by the law

1. Those required for the validity of contracts, such as those referred to in Arts.
748, 749, 1874, 2134, 1771, 1773;
2. Those required, not for validity, but to make the contract e ec ve as against
third persons, such as those covered by Arts. 1357 and 1358; and
3. Those required for the purpose of proving the existence of the contract, such
as those under the Statute of Frauds in Art. 1403.

Chapter IV. Reforma on of Instruments

A. Requisites (Art. 1359):

Cases
Garcia v. Bisaya, 97 Phil. 609 (1955)
Ben r v. Leande, 330 SCRA 591 (2000)

B. Cases where reforma on is allowed – Art. 1362-1365

C. Cases where no reforma on is allowed—Art. 1366
D. Implied Ra ca on—Art. 1367
E. Who may ask for reforma on—Art. 1368
F. Procedure of reforma on—Art. 1369
Cases
A lano v. A lano, 28 SCRA 2232 (1969)
Carantes v. CA, supra
Sarming et al. v. Cresencio Dy et al., 383 SCRA 131 (2002)

Chapter V. Interpreta on of Contracts (Compare with Rules on Statutory Construc on)

A. Primacy of inten on—Arts. 1370, 1372

Cases
Borromeo v. CA, 47 SCRA 65 (1972)
Kasilag v. Rodriguez, 69 Phil. 217 (1939)

B. How to determine inten on—Art. 1371

C. How to interpret a contract

1. When it contains s pula ons that admit several meanings—Art. 1373
2. When it contains various s pula ons, some of which are doub ul—
Art. 1364
3. When it contains words that have di erent signi ca ons—Art. 1375
4. When it contains ambigui es and omission of s pula ons—Art. 1376
5. With respect to the party who caused the obscurity—Art. 1377
6. When it is absolutely impossible to se le doubts by the rules above—
Art. 1378
a. In gratuitous contracts
b. In onerous contracts

7. When the doubts are cast upon the principal object so that the
inten on cannot be known—Art. 1378
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 D. Applicability of Rule 123, Rules of Court (now Secs. 10-19, Rule 130)

DEFECTIVE CONTRACTS

Chapter VI. Rescissible Contracts

A. Kinds—Art. 1381

B. Characteris cs

C. Rescission—Art. 1380
1. De ni on
2. As dis nguished from rescission under Art. 1191
Case
Universal Food Corp. v. CA, 33 SCRA 1 (1970)
3. Requisites: (1383, 1385, 1389)
4. E ect of rescission—Art. 1389
a. With respect to third persons who acquired the thing in good faith—
Art. 1385, 2nd and 3rd par.
5. Extent of rescission—Art. 1384
6. Presump on of fraud—Art. 1384
a. Badges of fraud
Case
Oria vs. Memicking, 21 Phil. 243 (1912)
Siguan v. Lim et al., 318 SCRA 725 (1999)
Suntay v. CA., supra

7. Liability for acquiring in bad faith the things alienated in fraud of creditors—
Art. 1388

Chapter VII. Voidable or Annullable Contracts

A. Kinds—Art. 1390
B. Characteris cs
C. Annulment
1. As dis nguished from rescission
2. Grounds—Art. 1390
3. Who may and may not ins tute ac on for annulment—Art. 1397
Case
Singsong v. Isabela Sawmill, 88 SCRA 623 (1979)
4. Prescrip on—Art. 1391
5. E ect
a. Mutual res tu on—Arts. 1398 and 1402
Case
Cadwallader & Co v. Smith, Bell, & Co., 7 Phil. 461
(1907)
Velarde v. CA, supra

1. When one of the par es is incapacitated—Art. 1399

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 2. When the thing is lost through the fault of the party
obliged to return the same—Art. 1400
6. Ex nguishment of the ac on

D. Ra ca on
1. Requisites:
2. Forms
a. Express or tacit—Art. 1393
b. By the par es themselves or by the guardian in behalf of an
incapacitated party—Art. 1394

3. E ects:
a. Ac on to annul is ex nguished—Art. 1392
Case
Uy Soo Lim v. Tan Unchuan, 38 Phil. 552 (1918)

b. The contract is cleansed retroac vely from all its defects—Art.

1396

Chapter VIII. Unenforceable Contracts

A. Characteris cs

B. Kinds—Art. 1403
1. Unauthorized contracts
a. Governing rules—Art. 1404
2. Contracts covered by the Statute of Frauds
a. Purpose of Statute
Case
Philippine Na onal Bank v. Phil. Vegetable Oil Co., 49 Phil. 857
(1927)
Rosencor Dev’t. Corp., et al. v. Inquing, 354 SCRA 119 (2001)

b. How ra ed
Case
Carbonnel v. Poncio, et al., 103 Phil. 655 (1958)

c. Right of the par es when a contract is enforceable but a public

document is necessary for its registra on—Art. 1406

3. Contracts executed by par es who are both incapable of giving consent to

a contract
a. E ect of ra ca on by the parents or guardian of one of the par es—
Art. 1407
b. E ect of ra ca on by the parents or guardian of both par es—Art.
1407

Chapter IX. Void or Inexistent Contracts

A. Characteris cs (1409)

B. Kinds—Art. 1406
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 1. Contracts that are void
a. Those whose cause, object, or purpose is contrary to law, morals, good
customs, public order or public policy
1) When the act cons tutes a criminal o ense—Art. 1411
a) In pari delicto rule
2) When the act is unlawful but does not cons tute a criminal
o ense—Art. 1412
a) In pari delicto rule
3) When the purpose is illegal, and money is paid or property
delivered therefore—Art. 1414
4) When the contract is illegal and one of the par es is
incapable of giving consent—Art. 1415
Case
Liguez v. CA, supra
Relloza vs. Gaw Cheen Hum, 93 Phil. 827 (1953)
5) When the agreement is not illegal per se but is prohibited
–Art. 1416
Case
Phil. Banking Corp., v. Lui She, 21 SCRA 52 (1967)
Frenzel v. Ca to, 406 SCRA 55 (2003)
6) When the amount paid exceeds the maximum xed by the
law—Art. 1417
7) When by virtue of a contract a labourer undertakes to
work longer than the maximum number of hours of work
xed by the law—Art. 1419
8) When a labourer agrees to accept a lower wage than that
set by law—Art. 1419
9) When the contract is divisible—Art. 1420
10) When the contract is the direct result of a previous illegal
contract—Art. 1422

b. Those whose object is outside the commerce of man

c. Those which contemplate an impossible service
d. Those where the inten on of the par es rela ve to the principal object of
the contract cannot be ascertained
e. Those expressly prohibited or declared void by law

2. Contracts that are inexistent

a. Those which are absolutely simulated or c ous (see Arts. 1345 and
1346)
b. Those whose cause or object did not exist at the me of the transac on

C. Right to set up defense of illegality cannot be waived—Art. 1409

D. The ac on or defense for the declara on of the inexistence of a contract

1. Does not prescribe—Art. 1410

2. Is not available to third persons whose interest is not directly a ected—Art.

1421

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