LAW ON OBLIGATIONS AND
CONTRACT
I. Obligations
o Definition of Obligation
 Obligation is a juridical necessity to
give, to do, or not to do. (Art. 1156)
 Derived from the Latin word
“obligatio” which means tying or
binding.
 A tie or bond recognized by law of
virtue of which one is bound in
favor of another to render
something--- and this may consist
in giving a thing, doing a certain
act, or not doing a certain act.
o Kinds of Obligations in General under
the Civil Code
 Primary classification of obligations
(PADJOO)
1. Pure and Conditional Obligation
Pure obligation- one which is not
subject to any condition and no
specific date is mentioned for its
fulfillment and is, therefore,
immediately demandable.
Conditional obligation- one
whose consequences are subject
in one way or another to the
fulfillment of a condition.
2. Alternative and Facultative
Obligation
Alternative obligation- one
wherein various prestation are
due but the performance of one
of them is sufficient as
determined by the choice which,
as a general rule, belongs to the
debtor.
Facultative obligation- one where
only one prestation is due or has
been agreed upon but the obligor
may render another substitution.
Effect of Loss (before
substitution)
If principal thing is lost due to
fortuitous event (debtor is not
liable)
If principal thing is lost due to
debtor’s fault (debtor is not
liable)
If substitute is lost due to
debtor’s fault or fortuitous event
(debtor is not liable)
Effect of Loss (after substitution)
If principal things is lost due to
fortuitous event or debtor’s fault
(debtor is not liable)
If substitute is lost due to
fortuitous event (debtor is not
liable)
If substitute is lost due to
debtor’s fault (debtor is not
liable)
3. Divisible and Indivisible
Obligation
Divisible obligation- one the
object of which, in its delivery or
performance, is capable of partial
fulfillment.
Indivisible obligation- one the
object of which, in its delivery or
performance, is not capable of
partial fulfilment.
4. Joint and Solidary Obligation
Joint obligation- one where
whole obligation is to be paid or
fulfilled proportionally by the
different debtors and is
demanded proportionally by the
different creditors. (We divide/ to
each his own)
Synonyms: Pro-rata,
Proportionate, Mancomunada,
Mancomunada simple,
Mancomunadamente, “We
promise to pay” signed by two or
more persons.
Solidary Obligation- each one of
the debtor is bound to render, and
each one of the creditor has a
right to demand from any of the
debtors, entire compliance with
the prestation. (they don’t divide/
one for all, all for one)
Synonyms: In solidum/ solidaria,
jointly and severally, individually
and collectively, mancomunada
solidaria, juntos o
separadomente, “I promise to
pay” signed by 2 or more
persons.
5. Obligations with a Period
Obligation with a period- one
whose effects or consequences
are subjected in one way or
another to the expiration or
arrival of said period or term.
(subject to a period)
6. Obligations with a penal clause
Obligation with a penal clause-
one which contains an accessory
undertaking to pay a previously
stipulated indemnity in case of
breach of the principal prestation
intended primarily to induce its
fulfillment.
 Secondary classification of obligations
(RUDCL)
1. Real and Personal Obligations
Real obligation- prestation is to
give or deliver a thing.
u Determinate/specific thing
- Particularly designated or physically
segregated
- Identified by its individuality
- Debtor cannot substitute it with
another although the latter is of the
same kind and quality without the
consent of creditor.
 Duties of debtor in obligation to give a
determinate thing:
a. Preserve the thing
Degree of care:
 By stipulation
 What the law provides
 Diligence of a good father of a
family (ordinary care)
 Factors to be considered:
- nature of obligation
- GR. If thing loss is due force majeure,
debtor is not liable
 Reason for debtor’s obligation
 Thing to be delivered should be in the
same condition as it was when obli. was
made so that debtor may not be negligent
of his accessory duty to take care of the
ting
b. Deliver the fruits of the thing
c. Deliver accession and accessories
d. Deliver the thing itself
e. Answer for damage in case of non-
fulfillment or breach
u Generic/indeterminate thing
- Refers only to a class or genus and
cannot be pointed out with
particularity
- Identified only by a its specie
- Debtor can give anything of the same
class as long as it is of the same kind.
Duties of debtor in obligation to give a
generic thing:
a. Deliver the thing which is of the
quality intended by the parties taking
into consideration the purpose oof
obligation and other circumstances
b. To be liable for damages in case of
fraud, negligence, or delay.
Personal obligation- prestation is to do or
not to do an act.
u Positive obligation- to do an act
u Negative obligation- to not do an act.
2. Unilateral and Bilateral Obligations
Unilateral obligation- only one party is
bound to perform an obligation
Bilateral obligation- both parties are
bound to each other in performing their
respective prestation.
3. Determinate and Generic Obligations
Determinate obligation- to deliver a
determinate thing
Remedies or rights of creditor incase
debtor fails to comply:
a. Demand specific performance + right
to indemnity for damages
b. Demand rescission or cancellation +
right to recover damages
c. Demand payment of damages only
Generic obligation- to deliver a generic
thing.
Remedies or rights of creditor incase
debtor fails to comply:
a. Compel debtor to deliver the thing
b. Ask for damages

4. Civil and Natural Obligations
Civil obligation- arise from law,
contracts, quasi-contracts, delicts and
quasi-delicts (has a legal basis); give a
right of action to compel their
performance or fulfillment.
Natural obligation- are based not on
positive law but on equity and natural
law; do not grant such right of action to
enforce their performance.
5. Legal, Conventional, and Penal
Obligations
Legal obligation- arise from law. They are
not presumed because they are considered a
burden to the obligor.
Conventional obligation- arise from
contracts or voluntary agreement with the
force of law. Therefore, it is presupposes
that contracts are entered into are valid and
enforceable.
Penal obligation- arise from delicts and
criminal offences.
Scope of civil liability:
a. Restitution
b. Reparation for the damages caused
c. Indemnification for consequential
damages.
o Sources of Obligations
 Law
-when they are imposed by law itself.
(Ex. Obligation to pay taxes)
 Contracts
-when they arise from the stipulation of
the parties.
(Ex. Obligation to repay a loan or
indebtedness by virtue of agreement)
 Quasi-contracts
-when they arise from lawful,
voluntary and unilateral acts which are
enforceable to the end that no one shall
be unjustly enriched or benefitted at the
expense of another.
(Ex. The obligation to return money
paid by mistake or which are due)
 Crimes or acts or omissions punished by
law (Delict)
-when they arise from civil liability
which is a consequence of a criminal
offense.
(Ex. Obligation of a thief to return the
car stolen by him; duty of a killer to
indemnify the heirs of his victim)
 Quasi-delicts or tors
-when they arise from damage caused
to another through an act or omission,
there being fault or negligence, but no
contractual relation exists between the
parties.
(obligation to pay for damages caused
by negligence even without a
contractual relation of the parties)
o Nature and Effect of Obligations
Article 1163 - Proper Diligence of a Good
father of a Family

Article 1164- Creditor has a right to the fruit
of thing from the time the obli. To deliver it
arises. However, he shall have no real right
over it until the same has been delivered to
him.
Different kind of fruits
 Natural Fruits
 Industrial Fruits- through cultivation
and labor
 Civil fruits- by virtue of juridical
relation (rents, leases, any form of
income etc.)
Right of creditor to the fruits
 Protects creditor in case debtor
commits delay/fraud
When obligation to deliver it arises
 Upon perfection/birth of contract (ex.
Contract of sale)
 If suspensive conditional obli., upon
fulfillment of condition
 If obli. w/ a period, upon arrival of the
term
 If contract of sale, “all fruits shall
pertain to the vendor from the day on
which the contract was perfected”
o If fruit has arisen before contract
was made, seller does not have to
render fruits and interest of the thing
since they are deemed to have been
mutually compensated.
Personal right – right of creditor to demand
from debtor the fulfillment of obli.
Subject: definite passive subject & definite
active subject
Binding: against a particular person
Real right- right of a person over a specific
thing (ownership, possession, mortgage)
against who, the right may be personally
enforced.
Subject: definite active subject
Binding: directed against the whole world
Article 1165- If delivered is a determinate
thing, creditor may compel debtor to make
the delivery. If it is indeterminate, he may
ask that obli. be complied with at the
expense of debtor.
Remedies of creditor in real obligation in
case debtor fails to fulfill his obligation
 Specific real obligation
o Specific performance/fulfillment of
obligation (if still possible) +
damages
- Rescission- returning what each
parties has receive
o Rescission/ cancellation of obli. +
damages
o Payment of damages only (if it’s the
only feasible remedy)
 General Real Obligation
o Can be performed by third person
- No person shall be imprisoned for
non-payment of debt only for non-
payment of civil liability adjudged in
a criminal case.
Exceptions to gen. rule regarding
involving delivery of determinate thing
o Delay
 o When debtor promised delivery to
separate creditors
Article 1166- Obligation to give determinate
thing must include all accessions and
accessories bec. they must go together w/
principal thing
Accessions- fruits of a thing/additions to/
improvements upon the principal thing
Accessories- things joined to/included to w/
the principal thing for the latter’s
embellishment, better use, or completion
Article 1167- if person obliged TO DO
something fails to do it, the same shall be
executed at his cost
Different scenarios
 Failure of debtor to perform his obli.
 Debtor’s performance of obli. contrary
to the terms
 Debtor’s performance of obli. but in
poor manner
Remedies of creditor in positive personal
obligation
 Failure to comply
o Perform obli. himself or by another
unless personal considerations are
involved at debtor’s expense
o Recover damages
 Contravention/violation of terms or obli.
poorly done
o Order by court undo what has been
done (if possible)
o Specific performance cannot be
ordered a personal obli. to do
(involuntary servitude)
Article 1168 – In obligation NOT TO DO
and obligor does what has been forbidden
him, it shall be undone at his expense.
Remedies of creditor in negative personal
obligation
 Undoing the forbidden thing + damages
 If first remedy is impossible, damages
Article 1169- Delay
Ordinary Delay- failure to perform an obli.
on time; before demand is made
Legal delay/default/mora- failure to perform
obli. on time which failure constitutes a
breach of obli; after demand has been made.
Requisites of delay by debtor (mora
dolvendi assuming obl. has been
due/demandable)
 Failure of debtor to perform obl. on date
of agreement
 Demand made by creditor
(judicial/extra-judicial)
 Failure of debtor to comply with such
demand
Effects of delay
 Mora solvendi (debtor)
o Guilty of breach of obli
o Liable to creditor for interest (in obli.
to pay money)/damages
- Interest start from the time of filing of
the complaint
 o Liable even for f.e when obli. is to
deliver determinate thing Article 1172- Responsibility arising from
o In obli. to deliver a generic thing, negligence may be regulated by the court
delivery of the thing of the same
kind+damages - Debtor may be liable for damages
bec. of negligence
 Mora accipiendi (creditor)
o Guilty of breach of obli. Validity of waiver arising from negligence
o Liable for damages suffered by
debtor, if any  Action for future negligence: VOID
o Bears the risk of loss of thing due - Except in oli. whose nature requires
o Debtor not liable for interest from the extraordinary diligence
 Negligence w/ bad faith: VOID
time of the creditor’s delay (in oli. To
- Aggrieved party may choose bet.
pay money)
Criminal/civil for damages but not
o Debtor may release himself from obli.
recover twice from the same
by consignation/deposit of the
negligent act
thing/sum due
- If creditor is also guilty of negligence,
he cannot recover damages unless his
 Compensatio morae (BOTH)
negligence is only CONTRIBUTORY
o Delay of debtor cancels delay of
creditor & vice versa
Article 1173- Requisites of fortuitous event
o No delay on both parties
- If first infractor CND, contract-
 must be independent of the human will,
extinguished + parties will bear their
at least of debtor’s will
respective damages
 Could not be foreseen, if foreseen,
inevitable
Article 1170- Those guilty of fraud,
 Normal manner of fulfillment of debtor’s
negligence, delay etc. are liable for damages.
obli. should be impossible
 Debtor must be free from any
Article 1171- Responsibility arising from
participation in injury of creditor--- no
fraud is demandable in all obli.
current negligence on debtor’s part

- Court is not given the power to

mitigate/reduce
Absence of any would prevent debtor from
- Fraud may be past/future
being except from liability

Waiver of an action for future fraud: VOID

Exceptions:
Waiver of an action for past fraud: VALID
 When expressly specified by law
(act of generosity/magnanimity/act of
forgiveness)
 o Debtor guilty of fraud, negligence,
delay or contravention of the tenor of
obli.
o Debtor promised to deliver the same
specific thing to 2 or more persons
who do not have the same interest
o Obli. to deliver a specific thing arises
from a crime
o Thing to be delivered is generic
 Stipulation
 Nature of obligation requires assumption
of risk
Article 1175- Usurious transactions shall be
governed by special laws
Usury- receiving interest in excess of the
amount allowed by law for the loan/use of
money
Usury law- legally nonexistent but creditor
stil has no absolute right to change interest
that is iniquitous/unconscionable
Requisites for recovery of interest
 Payment of interest must be expressly
stipulated
 Agreement should be in writing
 Interest must be lawful
Article 1176-
1st statement: 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.
2nd statement: the receipt of a latter
installment of a debt without reservation as
to prior installments, shall likewise raise
presumption that such installments has been
paid.
Presumption- interference of a fact not
actually known arising from its usual
connection w/ another which is
known/proved.
 Conclusive presumption
 Disputable/rebuttable presumption
When presumption in art. 1176 does not
apply
 With reservation as the interest
 Receipt w/o indication of a particular
installment
 Receipt for a part of principal
 Payment of taxes
 Non-payment proven
Article 1177- Creditors, after having pursued
property in possession may exercise all
rights and bring all actions of the later of the
same purpose; they may also impugn acts
which debtor may have done to defraud
them.
Remedies available to creditors for the
satisfaction of their claims in case debtor
does not comply w/ his obligation
 Exact fulfillment + damages
 Pursue the leviable property of debtor
(not except from attachments under the
law)
 After remedy 2, exercise all rights (right
to redeem) and bring all actions of
debtor (right to collect from debtor of the
debtor) except those inherent in or
personal to the person of the latter
 Ask court to rescind acts/contracts which
debtor may have done to defraud him
when he cannot recover his claim
 - Debtor is liable w/ all his property,
present and future, for the fulfillment
of his obli.
Article 1178- all rights required in virtue of
an obli. are transmissible, if there has been
no stipulation to the contrary.
Transmissibility of rights (exceptions)
 Prohibited by law
o Contract of partnership- contribute
money, property, industry to a common
fun w/ the intention to divide profits w/
themselves
o Contract of agency- render service/do
something in representation of the
other, with the consent of others
o Contract of commodatum (gratuitous-
delivering something not consumable
so it may be used but returned after a
certain time.
 Stipulation
o Specific Circumstances Affecting
obligations in General
1. Fraud (Deceit or Dolo)
- Deliberate or intentional evasion of
the normal fulfillment of an
obligation.
- With malice/dishonesty/bad faith to
mislead/deceive anotehr
Kinds of Fraud
a. Dolo incidente (incidental fraud)
- Willful/fraud in performing the
obligation or contract
- Committed in the performance of
obli. already existing bec. of contract
Effect or remedy: breach of contract +
damages
b. Dolo causante (causal fraud)
- Fraud in obtaining consent- false
representation or misrepresentation;
deliberate intent to deceive.
- Employed in execution of a contract
which impairs consent; fraud made to
make creditor enter the contract
Effect: contract is voidable; Art.
1390/1344 1st part
Remedy: Annulment
2. Legal Delay (Mora or Default)
Kinds of Delay
a. Mora Solvendi – delay on debtor’s
part
- Mora solvendi ex re- obilgaiton to
give
- Mora solvendi ex persona- obligation
to do
b. Mora Acipiendi- delay on creditor’s
part
c. Compensatio Morae- delay on both
part
General Rule: No demand, no delay
Exceptions: Law, Useless, Stipulation,
Time is of the essence, Reciprocal
obligation
Effect/Remedy:

- Debtor is liable/bears the loss even if
loss is due fortuitous event
- Creditor to apply Art. 1170; file civil
action; breach of contract+damages
3. Negligence (Fault or Culpa)
- any voluntary act or omission, there
being no bad faith or malice which
prevents the normal fulfillment of an
obligation.
- failure to observe for the protection of
the interests to another person, that
decree of care, precaution, and vigilance.
4. Contravention of the terms of obligation
- Violation of terms and conditions of
obli.
- Must not be due to force majure (f.e)
Kinds of negligence (CCC)
a. Contractual- negligence in contract
resulting in breach; it merely makes
the debtor liable for damages in view
of his negligence in the fulfillment of
a pre-existing obligation.
b. Civil (tort or quasi-delict) -
negligence which by itself is the
source of obligation between the
parties not so related before by any
pre-existing contract.
c. Criminal- negligence resulting in the
omission of crime.
o Kinds of Damages (MENTAL)
1. Moral Damages
- Include physical sufferings, mental
anguish, fright, serious anxiety,
besmirched reputation, wounded
feeling, moral shock, social
humiliation and similar injury.
2. Exemplary Damages
- Imposed by way or correction for the
public good.
3. Nominal Damages
- Are adjusted in order that a right of a
plaintiff which have been violated by
the defendant may be vindicated or
recognized and not for the purpose of
indemnifying the plaintiff for any loss
suffered by him.
4. Temperate/Moderate Damages
- More than nominal but less than
compensatory damages may be
recovered when the courts finds that
its amounts cannot be proved with
certainty. (Pecuniary loss)
5. Actual/Compensatory Damages
- Except as provided by law or
stipulation, one is entitled to an
adequate compensation ONLY for
such pecuniary loss suffered by him
as he duly proved.
Damages may be recovered:
a. For loss or impairment of earning
capacity in cases of temporary or
permanent personal injury
b. For injury, to the plaintiff’s
business standing or commercial
credit.
6. Liquidated Damages
 - Those agreed upon by parties to a
contract to be paid in case of breach
thereof.

o Remedies of Creditor against the debtor

o Kinds of obligations

o Extinguishment of Obligation