Law on Obligations and Contracts

R.A 386 Civil Code of the Philippines

- Every person who, contrary to law, wilfully or negligently causes damage to another, shall
indemnify the latter for the same. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall compensate the latter for
the damage.

Book IV Obligations and Contracts

What is Obligation?
- Philippine Civil Code Article 1156 defines obligation as a juridical necessity to give, to do, or
not to do.

Why Civil Obligation is a Juridical Necessity?

- In case of non-compliance, the court of justice may be called upon to enforce its fulfillment or, in
default thereof, the economic value that it represents.

 Unilateral Obligation – only the offeror has an obligation. The offeree is not required to
complete the task or action.
 Bilateral Obligation – both parties agree to an obligation and involve equal obligation from each
other.

Types of Obligation according to prestation

1. Real Obligation – to give
2. Personal Obligation
 Positive Personal – to do
 Negative Personal – not to do

Requisites of Obligation
1. Active Subject (Creditor/Obligee)– the party who has the right to demand performance of the
obligation.
2. Passive Subject (Debtor/Obligor) – the party who is obliged to perform the obligation.
3. Prestation (Object/Subject Matter) – It may consist of giving, doing or not doing something.
4. Efficient Cause – the vinculum or the legal or juridical tie which binds the parties to an
obligation.

Obligation, Right, Cause of Action

 Obligation
 Right – power which a person has under the law, to demand from another any prestation.
 Cause of Action – act or omission which violates rights.

Injury, Damage, Damages

 Injury – act or omission which causes harm.
 Damage – the harm done to a party.
 Damages – sum of money recoverable by reason of damage done.

Example:
Tanjiro sold a bottle of wine to Inosuke for P1,000
Obligations Rights
Tanjiro / Deliver the bottle of wine Demand collection of P1,000
Inosuke X Pay P1,000 Demand delivery of bottle of wine
 If Tanjiro delivered the bottle of wine and Inosuke does not pay Tanjiro P1,000, Tanjiro will have a
right of action.
Tanjiro – Plaintiff (nag-kaso)

Inosuke – Defendant (kinasuhan)

Cause of Action omission on part of Inosuke (not paying)
Damage Tanjiro incurred loss on sale
Damages sum of money recoverable (P1,000+)

Sources of Obligation
- Article 1157. Obligations arises from
1. Law – a rule of conduct, just and obligatory, laid down by legitimate authority for common
observance and benefit.
Only those expressly determined in the CC or in Special laws are demandable, and shall
be regulated by the precepts of the law which establishes them (Article 1158)
2. Contracts – it is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.
Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith. (Article 1159)
3. Quasi-contracts – they refer to certain lawful, voluntary and unilateral acts giving rise to a
juridical relation to the end that no one shall be unjustly enriched at the expense of another.
(Article 2142 CC)
 Negotiorum gestio – refers to the voluntary administration of the property, business or
affairs of another without his consent or authority. It creates the obligation to reimburse
the gestor (doer) for necessary and useful expenses. (Article 2150 CC). Voluntarily manages
property or affairs.
 Solutio indebiti – refers to payment by mistake of an obligation which was not due when
paid. It creates the obligation to return the payment. (Article 2154 CC). Receive something
by mistake.
4. Acts or Omissions punishable by law (Delicts) – these are crimes / felonies. The commission of
a crime makes the offender civilly liable. Such civil liability includes restitution, reparation of the
damage caused, and indemnification of consequential damages.
5. Quasi-delicts (torts / culpa aquiliana) – These are acts or omissions that cause damage to
another, there being fault or negligence but without any pre-existing contractual relation
between the parties.

Scope of Civil Liabilities

1. Restitution – the restitution of the thing itself must be made whenever possible, with
allowance for any deterioration, or diminution of value as determined by the court.
2. Reparation for damage caused – court shale determine the amount of damage, taking into
consideration the price of the thing, whenever possible, and its special sentimental value to the
injured party, and reparation shall be made accordingly.
3. Indemnification for consequential damages – shall include not only those caused the injured
party, but also those suffered by his family or by third person by reason of the crime.

Example:
Gen stole the vehicle of Senku. Gen was sighted by the authority and was engaged in a car chase.
After a while, Gen was apprehended by the authority but the vehicle he stole from Senku got
damaged. Furthermore, Senku should have presented the vehicle in a car show the same day Gen
stole the said vehicle. As a result, Senku loss potential income from the car show.
Restitution return the vehicle
Reparation answer for the damage caused to the vehicle
Indemnification since Gen's act resulted to Senku's loss, Gen will also answer for the said loss