COURSE PACK

BLAW 601

Law on Obligations
and Contracts

BSAIS
 MODULE 1 Introduction to Law; General Concepts
Module No. and Title
of Obligations; Different Kinds of Obligations

INTRODUCTION:
In this lesson, the meaning, characteristics, sources and importance of
law will be presented and thoroughly discussed for you to be able to gain
understanding on what the law is, in general, and how important it is in the
society.

HKIO00OKM
ABSTRACTION

LAW

- Means any rule of action or any system of uniformity. It determines not only the activities
of men as rational beings but also the movements or motions of all objects of creation,
whether animate or inanimate.
- In general sense: law may be defined as the mass of obligatory rules established for the
purpose of governing the relations of persons in society.
- In specific sense: law is defined as a rules of conduct, just, obligatory, promulgated by
legitimate authority; and of common observance and benefit.
- Law secures justice, resolves social conflict, orders society, protects interests, and
controls social relations. Life without laws would be less orderly, less healthful, less
wholesome, etc.
- General divisions:
o Strict legal sense – promulgated and enforced by the state
▪ State Law
● As a rule of action, only state law is enforced by the state, with
the aid of its physical force, if necessary.

o Non-legal sense – not promulgated and enforced by the state:

a. Divine Law
▪ The law of religion and faith which concerns itself with the concept
of sin and salvation.
▪ Source:
 ● It is formally promulgated by God and revealed or divulged to
mankind by means of direct revelation (Ten Commandments
which are given by God through Moses)
▪ Sanction:
● Lies in the assurance of certain rewards and punishments in
the present life or in the life to come.

b. Natural Law
▪ Defined as the divine inspiration in man of the sense of justice,
fairness, and righteousness not by divine revelation or formal
promulgation, but by internal dictates of reason alone.
▪ Has been regarded as the reasonable basis of state law.
▪ Binding force:
● Binding on all men everywhere and at all times.
● There is in every man a basic understanding of right and wrong
based on an understanding of the fundamental standard or
criterion of good and evil.
● When we speak of this inward instinct of justice, fairness and
righteousness in man as divinely inspired by the dictates of his
higher nature, we are talking about natural law of the law of
nature.

c. Moral Law
▪ The totality of the norms of good and right conduct growing out of
the collective sense of right and wrong of every community.
▪ Influences or shapes state law.
▪ Determination of what is right and wrong:
● “At a comparatively early stage of their existence, human
beings learned that it was good for the welfare of the group
that the privilege to determine what is right and what is wrong
was not left to each member of the group. The mores or ways
of life were then evolved which were always considered right
and correct, and obedience to them was demanded by the
group.”
▪ Sanction:
● “If a member of the community disregards the moral norms a
spontaneous social reaction is produced in the form of public
displeasure, contempt or even indignation. If, on the other
hand, there is conformity to the moral norms, there is created
spontaneous social response which may be in the form of
public pleasure, approval or even joy.”
▪ Binding force:
● Moral law is not absolute. It varies with the changing times,
conditions or convictions of the people.

d. Physical Law
▪ “In the operation or course of nature, there are uniformities of
actions and orders of sequence which are the physical phenomena
 that we sense and feel. They are known as the laws of physical
science or physical law.”
▪ Example: Law of Gravity

- Characteristics of law:
a. Rule of conduct
o Law tells us what shall be done and what shall not be done.

b. Obligatory
o Considered a positive command imposing a duty to obey and involving a
sanction which forces obedience.
c. Promulgated by legitimate authority
o Laws called “statutes” are enacted by Congress which is the name of the
legislative branch of our government; local government units are also
empowered to enact ordinances which have the binding force of laws.
d. Common observance and benefit
o Law is intended by man to serve man. It regulates the relations of men to
maintain harmony in society and to make order and co-existence possible. Law
must be observed by all for the benefit of all.

- Sources of law:
a. Constitution
o Referred to as the fundamental law or supreme law or highest law of the land
because it is promulgated by the people themselves, binding on all individual
citizens and all other agencies of the government. It is the law to which all
other laws enacted by the legislature (as well as administrative or executives,
orders and regulations having the force of law) must conform.
o This means that laws which are declared by the courts to be inconsistent with
the Constitution shall be void and the latter shall govern.
b. Legislation
o Acts passed by the legislature are so – called enacted law or statute law.
Legislation includes ordinances enacted by local government units.
c. Administrative or executive orders, regulations and rulings
o Administrative rules and regulations are intended to clarify or explain the law
and carry into effect its general provisions.
d. Judicial decisions or jurisprudence
o The decisions of a superior court (the Supreme Court) on a point of law are
binding on all subordinate courts. This is called the doctrine of precedent or
stare decisis.
e. Custom
o It consists those habits and practices which through long and uninterrupted
usage have become acknowledged and approved by society as binding rules of
conduct.
f. Other sources.
o May be added with principles of justice and equity, decisions of foreign
tribunals, opinions of textwriters, and religion.
o However, they are only supplementary.
Conclusive presumption of knowledge of law

- Ignorance of the law excuses no one from compliance therewith (Article 3, Civil Code)
o Reasons:
a. If laws will not be binding until they are actually known, then social life
will be impossible, because most laws cannot be enforced due to their
being unknown to many;
b. It is almost impossible to prove the contrary when a person claims
ignorance of the law;
c. It is absurd to absolve those who do not know the law and increase the
obligations of those who know it;
d. In our conscience, we carry norms of right and wrong, and a sense of duty,
so that our reason indicates many times what we have to do and in more
complicated juridical relations, there are lawyers who should be consulted;
and
e. Evasion of the law would be facilitated and the administration of justice
would be defeated if persons could successfully plead ignorance of the law
to escape the legal consequences of their acts, or to excuse non-
performance of their legal duties.

OBLIGATIONS

Article 1156. An obligation is a juridical necessity to give, to do or not to do.

- Obligation
o A tie or bond recognized by law by 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.

- “Juridical Necessity”
o It is a juridical necessity because in case of noncompliance, the courts of justice
may be called upon the aggrieved party to enforce its fulfillment or, in default
thereof, the economic value that it represents.
o Comply with the obligation whether you like it or not; otherwise, your failure
will be visited with some harmful or undesirable consequences.

- Essential Requisites of an Obligation:

a. Passive Subject
o Called the debtor or obligor
o The party or person who is bound to the fulfillment of the obligation
o He is the one who has a duty
b. Active Subject
o Called the creditor or obligee
o The party or person who is entitled to demand the fulfillment of the
obligation
o He is the one who has the right.
c. Object or Prestation
o Subject matter of the obligation
 o The conduct required to be observed by the debtor
o It may consist in giving, doing or not doing
d. Juridical or Legal Tie
o Called the efficient cause which binds or connects the parties to the
obligation.

- Kinds of obligations according to the subject matter:

a. Real Obligation
o Obligation to give
o The subject matter is thing which the obligor must deliver to the obligee
b. Personal Obligation
o Obligation to do or not to do
o The subject matter is an act to be done or not to be done
o Kinds
i. Positive Personal Obligation – obligation to do
ii. Negative Personal Obligation – obligation not to do

Article 1157. Obligations arise from:

1. Law;
2. Contracts;
3. Quasi – contracts;
4. Acts or omissions punished by law; and
5. Quasi – delicts.

- Sources of obligations:
a. Law
o Art. 1158, CC. Obligations derived from law are not presumed. Only those
expressly determined in this Code or in special laws are demandable, and shall
be regulated by the precepts of the law which establishes them; xxx
o Legal obligations
▪ They are not presumed because they are considered a burden upon the
obligor.

b. Contracts
 o Art. 1159, CC. Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith.
o Contractual obligations
▪ Presupposes that the contracts entered into are valid and enforceable
o Binding force
▪ They have the same binding effect of obligations imposed by laws.
However, this does not mean that contract is superior to the law.
o Requirement of a valid contract
▪ A contract is valid (assuming all the essential elements are present), if
it is not contrary to law, morals, good customs, public order and public
policy. It is invalid or void if it is contrary to law, morals, good
customs, public order or public policy.
▪ In the eyes of the law, a void contract does not exist. Consequently, no
obligations will arise.
o Compliance in good faith
▪ Means compliance or performance in accordance with the stipulations
or terms of the contract or agreement.

c. Quasi – contracts
o Quasi – contractual obligations
▪ Juridical relation resulting from lawful, voluntary and unilateral acts
by virtue of which the parties become bound to each other to the end
that no one will be unjustly enriched or benefited at the expense of
another.
▪ There is no consent but the same is supplied by fiction of law, meaning,
the law considers the parties as having entered into a contract, although
they have not actually did so, and irrespective their intention, to prevent
injustice.
▪ Kinds:
i. Negotiorum gestio
● Voluntary management of the property or affairs of another
without the knowledge of consent of the latter.

ii. Solutio indebiti

● Juridical relation which is created when something is received
where there is no right to demand it and it was unduly
delivered through mistake.
 ● Requisites:
1. There is no right to receive the thing delivered; and
2. The thing was delivered through mistake.

d. Crimes
o Art. 1161, CC. Civil obligations arising from criminal offenses shall be
governed by the penal laws, xxx
o Civil liability arising from crimes or delicts
▪ The commission of a crime causes not only moral evil but also material
damage. From this principle, the rule has been established that every
person criminally liable for an act or omission is also civilly liable for
damages.
o Scope of civil liability
▪ Includes:
i. Restitution (obligation to return)
ii. Reparation for the damage caused (restoration/repair if possible)
iii. Indemnification for consequential damages (payment for the
actual damages incurred because of the act)

e. Quasi – delicts
o It is an act or omission by a person which causes damage to another in his
person, property, or rights giving rise to an obligation to pay for the damage
done, there being fault or negligence but there is no pre-existing contractual
relation between the parties.
o Requisites:
i. There must be an act or omission
ii. There must be fault or negligence
iii. There must be damage caused
iv. There must be a direct relation or connection of cause and effect between
the act or omission and the damage; and
v. There is no pre-existing contractual relation between the parties.
o Crime vs. Quasi – delict

Crime Quasi – delict

There is criminal or malicious intent or There is only negligence.

criminal negligence.

The purpose is punishment The purpose is for indemnification of the

offended party
There are criminal and civil liabilities There is civil liability only

Affects public interest Affects private interest only

Cannot be compromised or settled by the Can be settled or compromised

parties themselves.

The guilt of the accused must be proven The fault or negligence of the defendant need
beyond reasonable doubt only be proved by preponderance of
evidence.

Discussion:
1. What are the essential requisites of an obligation? Give an example to illustrate
them.
2. Why are obligations under the Civil Code a juridical necessity? Explain.
3. What are the elements or requisites in order that a person may acquire a right of
action in court against another to enforce the performance of the latter’s
obligation?
4. May a person incur obligations even without entering into any contract or
voluntary agreement? Explain.

WeØ Zɕme fa fimislimp pɕys fissS lessɕm fa &is sy$żecS?

If you are ready, please proceed to Lesson 2 for Module 1.
 MODULE 1 Introduction to Law; General Concepts
Module No. and Title
of Obligations; Different Kinds of Obligations

INTRODUCTION:
In this lesson, we will be discussing the nature and effects of legal obligations on all
the parties entering into it. Specifically, their roles and responsibilities, as well as their rights as
becoming a party to a legal obligation. It is important for us to know these things because it is
unavoidable that in the near future, you might encounter these transactions, thus, giving you the
knowledge already on how to deal with it, and what you must do in case your rights as a party
of a legal obligation is violated by the other party.

ACTIVITY
 ANALYSIS

ABSTRACTION:

Article 1163. Every person obliged to give something is also obliged to take care of it with
the proper diligence of a good father of a family, unless the law or the stipulation of the
parties requires another standard of care.
- Specific (Determinate) Thing vs. Generic (Indeterminate) Thing

Specific (Determinate) Generic (Indeterminate)

The thing can be identfied by its Identified only by its specie.

individuality.

Cannot be substituted it with another The debtor can give anything of the same
although the latter is of the same kind and class as long as it is of the same king.
quality without the consent of the creditor.

- Duties of debtor in obligation to give a determinate thing

1. Preserve the thing
o In real obligations, the obligor has the incidental duty to take care of the thing
due with the diligence of a good father of a family pending delivery.
o Ways of taking care of the specific thing:
a. Diligence of a good father of a family
▪ This phrase has been equated with ordinary care of that diligence
which an average (a reasonably prudent) person exercises over his own
property.

b. Another standard of care

▪ If the law of the stipulation of the parties provides for another standard
of care (slight or extraordinary diligence), said law or stipulation must
prevail.
▪ Example:
 ● Common carriers (public utility vehicles) are bound by law to
carry their passengers safely as far as human care and foresight
can provide, using utmost diligence of very cautious persons,
with a due regard for all the circumstance.
▪ It is contrary to public policy to stipulate for absolute exemption from
liability of the obligor for any fault or negligence on his part.

c. Factors to be considered
▪ The diligence required necessarily depends upon the nature of the
obligation and corresponds with the circumstances of the person, of
the time and of the place.
▪ General Rule:
● Debtor is not liable if his failure to preserve the thing is not
due to his fault or negligence but to fortuitous events or force
majeure.

d. Reason for debtor’s obligation

▪ Without the accessory duty to take care of the thing, the debtor would
be able to afford being negligent and he would not be liable even if the
property is lost or destroyed, thus, renderin gillusory the obligation to
give.

2. Deliver the fruits of the thing

o Art. 1164, CC. The creditor has a right to the fruits of the thing from the time
the obligation to deliver it arises. However, he shall acquire no real right over
it until the same has been delivered to him.
o Kinds of fruits:
a. Natural Fruits – spontaneous products of the soil, and the young and
other products of animals.
b. Industrial fruits – those produced by lands of any kind trhough cultivation
or labor.
c. Civil fruits – those derived by virtue of a juridical relation.
o Right of creditor to the fruits
▪ The creditor is entitled to the fruits of the thing from the time the
obligation to make delivery arises.
▪ The intention of the law is to protect the interest of the obligee should
the obligor commit delay, purposely or otherwise, in the fulfillment of
his obligation.
o When obligation to deliver fruits arises?
▪ The obligation to deliver the thing due arises from the time of the
perfection of the contract. Perfection refers to the birth of the contract
or to the meeting of the minds between the parties.
o Personal Right vs. Real Right

Personal Right Real Right

The right or power of a person (creditor) to
deman dfrom another (debtor) the fulfillment
of the latter’s obligation to give, to do or not
to do.
The right or interest of a perosn over a
specific thing (ownership, mossession,
mortgage), without a definite passive subject
against whom the right may be personally
enforced.

There is a definite active subject and a There is only a definite active subject
defnite passive subject. without any definite passive subject.

Binding or enforeceable only against a Directed against the whole world.

particular person – debtor.

o Ownership acquired by delivery

▪ The meaning of the phrase “he shall acquire no real right over it until
the same has been delivered to him”, is that the creditor does not
become the owner until the specific thing has been delivered to him.
Hence, when there has been no delivery yet, the proper court action of
the creditor is not one for recovery of possession and ownerhsip but
one for specific performance or rescission of the obligation.

3. Deliver the accessions and accessories

o Art. 1166, CC. The obligation to give a determinate thing includes that of
delivering of all its accessions and accessories, even though they may not have
been mentioned.
o Accessions vs. Accessories

Accessions Accessories

The fruits of a thing or additions to or Things joined to or included with the

improvements upon a thing principal thing for the latter’s
embellishment, better use, or completion.

Those which are not necessary to the Always go to the principal together.
principal.

Ex: House or trees on a land; Ex: Key of a house; frame of a picture;

air-conditioner in a car bracelet of a watch

o Right of creditor to accessions and accessories

▪ General Rule: all accessions and accessories are considered included
in the obligation to deliver a determinate thing although they may not
have been mentioned.
▪ In order that thye will be excluded, there must be a stipulation to that
effect.
4. Deliver the thing itself
5. Answer for damages in case of non-fulfillment or breach
o Art. 1170, CC. Those who in the performanc eof their obligaitons are guilty of
fraud, negligence or delay, amd those who in any manner contravene the tenor
thereof, are liable for damages.
▪ Grounds for liability
1. Fraud (deceit or dolo)
● Art. 1171, CC. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an action for
future fraud is void.
o The court is not given the power to mitigate or reduce
the damages to be awarded.
o This is so because fraud is deemed serious and evil
that its employment to avoid the fulfillment of one’s
obligation should be discouraged.
o Waiver of action for future fraud is void
▪ No effect as if there is no waiver. Waiver for
this would encourage the perpetration of
fraud because the obligor knows that even if
he should commit fraud, he would not be
liable for it, thus, making the obligation
illusory.

o Waiver of action for past fraud is valid.

▪ Can be considered as an act of generosity and
forgiveness on the part of the party who is the
victiom of the fraud.

2. Negligence (fault or culpa)

● It is the failure to observe for the protection of the interests of
another person, that degree of care, precaution and vigilance
which the circumstances justly demand, whereby such other
person suffers injury.
● Art. 1172, CC. Responsibility arising from negligence in the
performance of every kind of obligaiton is also demandable,
but such liability may be regulated by the courts, according to
the circumstances.
● Damages arising out from negligence are demandable.
However, the courts are given wide discretion in fixing the
measure of damages. The reason is because negligence is a
question which must necessarily depend upon the
circumstances of each particular case.
● An action for future negligence may be renounce except where
the nature of the obligation requires the exercise of
extraordinary diligence as in the case of common carriers.
● Effect of negligence on the part of the injured party:
o Art. 2179, CC. When the plaintiff ’s own negligence
was the immediate and proximate cuase of his injury,
 he cannot recover damages. But if his negligence was
only contributory, the immediate and proximate cause
of the injury being the defendat’s lack of due care, the
plaintiff amy recover damages, but the courts shall
mitigate the damages to be awarded.

3. Delay (mora)
● Art. 1169, CC. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or extra-
judicially demands from them the fulfillment of their
obligaiton.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
1. When the obligaiton or the law expressly so declares; or
2. When from from the nature and the circumstances of the
obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered
was a controlling motive for the establishment of the
contract; or
3. When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other
begins.
● Meaning of delay:
a. Ordinary Delay – merely the failure to perform an
obligation on time.
b. Legal Delay or default or mora – the failure to perform an
obligation on time which failure constitutes a breach of
the obligation.
● Kinds of delay:
a. Mora solvendi – the delay is on the part of the debtor to
fulfill his obligation (to give or to do; no delay in negative
personal obligation)
b. Mora accipiendi – the delay is on the part of the creditor
to accept the performance of the obligation
c. Compensatio morae – the delay of the obligors in
reciprocal obligations.
● Requisites of default
a. Failure of the debtor to perform his obligation on the date
agreed upon
b. Demand (not mere reminder or notice) made by the
creditor upon the debtor to comply with his obligation
which demand may be either judicial or extra-judicial and
c. Failure of the debtor to comply with such demand.
 ● Situations when demand is not necessary to put debtor in
delay:
a. When the obligation so provides
b. When the law so provides
c. When time is of the essence
d. When demand would be useless
e. When there is performance by a party in reciprocal
obligations

4. Contravention of the terms of the obligation

● Art. 1167, CC. If a person obliged to do something fails to do
it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention
of the tenor of the obligation. Furthermore, it may be decreed
that what has been poorly done be undone.
● Situations under Art. 1167
a. The debtor fails to perform an obligation to do
b. The debtor performs an obligation to do but contrary to
the terms thereof; or
c. The debtor performs an obligation to do but in poor
manner.
● Remedies for each situation:
a. If debtor fails to comply, the creditor has the right to:
i. To have the obligaiton performed by himself, or by
another, unless personal considerations are involved, at
the debtor’s expense; and
ii. To recover damanges.

b and c. In case the obligaiton is done in contravention of the

terms of the same or is poorly done, it may be ordered (by the
court upon complaint) that it be undone if it is still possible to
undo what was done.
● Performance by a third person
o A personal obligation to do, like a real obligation to
deliver a generic thing, can be performed by a third
person.
o However, a specific performance cannot be ordered in
a personal obligaiton to do because this may amount
to involuntary servitude which, as a rule, is prohibited
under our Constitution.
● Moreover, if the personal qualifications of the debtor are the
determining motive for the obligaiton contracted, the
performance of the same by another would be impossible or
would result to be so different that obligation could not be
considered performed. Hence, the only feasible remedy of the
creditor is indemification for damages.
Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be foressen, or which tough foreseen,
were inevitable.
- Fortuitous event
o Any event which cannot be foreseen or which, though foreseen, is inevitable.
o An event either impossible to foresee or impossible to avoid.

Fortuitous Events Force Majeure

Acts of man Acts of God

An event independednt of the will of Events which are totally independent will of
the obligor but not of other human every human being
wills

War, fire, robbery, murder, etc. Earthquake, flood, rain, shipwreck,

lightning, eruption of volcano.

o Requisites:
1. The event must be independent of the human will or at least of the debtor’s
will;
2. The event could not be foressen, or if foreseen, is inevitable;
3. The event must be of such a character as to render it impossible for the
debtor to comply with his obligation in a normal manner; and
4. The debtor must be free from any participation in, or the aggravation of,
the injury to the creditor, that is, there is no concurrent engligence on his
part.
o Rules as to liability in case of fortuitous event:
▪ General Rule: a person is not liable for loss or damage caused to
another resulting from the non-performance of his obligation due to a
fortuitous events. Obligation is extinguished.

▪ Exceptions:
1. When expressly specified by law:
a. The debtor is guilty of fraud, negligence, or delay or
contravention of the tenor of the obligation.
b. The debtor has promised to deliver the same specific thing to
two or more persons who do not have the same interest.
c. The obligaiton to deliver a specifc thing arises from a crime
d. The thing to be delivered is generic
2. When declared by stipulation of the parties
3. When the nature of the oblgiation requires the assumption of risk
Discussion:
1. Give the rules as to the liability of a person for loss or damage resulting from a
fortuitous event.
2. What rights are given by law to the creditor in case the debtor fails to comply
with his obligation to deliver a specific thing?
3. What are included to be delivered in an obligation to give a definite thing?
Explain them.
4. Suppose the obligation of the debtor is to do something and he fails to do it or
performs it in contravention of the agreement, what are the remedies available to
the creditor?
5. Can a debtor be put in delay and consequently, incur liability even without
demand from creditor? Explain.
6. May an action arising from fraud be waived? Explain.
7. May an action arising from negligence be waived? Explain.

Tap yourself in the back and be proud for finishing Lesson 2. Ready for our next lesson?

Let’s go!
 MODULE 1 Introduction to Law; General Concepts
Module No. and Title
of Obligations; Different Kinds of Obligations

INTRODUCTION:
In this lesson, we will be discussing about the different kinds of obligations and
how each kind differs from each other. It is vital for us to be knowledgeable on this one
because we are in the field of business, thus, giving us a higher chance of encountering
this in the future when we are conducting business transactions. Further, by knowing,
we can be able to better protect ourselves from all the illegalities might arise from these
transactions.

ACTIVITY
 ANALYSIS

ABSTRACTION
Kinds:

1. Pure and Conditional Obligations

a. Pure Obligation
- Art. 1179. Every obligation whose performance does not depend upon a future or
uncertain event, or upon a past event unknown to the parties, is demandable at once.
- One which is not subject to any condition and no specific date is mentioned for its
fulfillment ant is, therefore, immediately demandable.

b. Conditional Obligation
- Those obligations whose consequences are subject in one way or another to the
fulfillment of a condition.
- Condition
o It is a future and uncertain event, upon the happening of which, the
effectivity or extinguishment of an obligation (or right) subject to it
depends.
o Characteristics:
i. Future and uncertain
ii. Past but unknown
iii. Must not be impossible
o Kinds:

Suspensive Condition Resolutory Condition

The fulfillment of which will give The fulfillment of which will
rise to an obligation or right. extinguish an obligation or right
already existing.
 The demandability of the
obligation is
which constitutes the condition.

If the SC is fulfilled, the If the RC is fulfilled, the

suspended until the happening of
the uncertain event
obligation arises.
If the SC does not take place, the
tie of the law does not appear.
Until the SC takes place, the
existence of the obligation is a
mere hope.
There is acquisition of rights.
Ex.: T in his last will and
testament gave some property to H
(heir) provided T would die within
two years.
obligation is extinguished.
If the RC does not take place, the
tie of the law is consolidated.
When its effects flow, it hovers the
possibility of termination.
There is loss of rights already
acquired.
Ex.: X binds himself to support Y
until Y graduates from college.
Here, the right already acquired by
Y – the right to receive support –
however, it shall be extinguished or
lost once the condition is
fulfilled.

o When the fulfillment of the condition depends upon the sole will of the
debtor, the conditional obligation shall be void. If it depends upon chance
or upon the will of a third person, the obligation shall take effect in
conformity with the provisions of the Code.
▪ Ex.: I will pay you if I want = Void.

- Art. 1183, CC. Impossible conditions, those contrary to good customs or public
policy and those prohibited by law shall annul the obligation which depends upon
them. If the obligation is divisible, that part thereof which is not affected by the
impossible or unlawful condition shall be valid. The condition not to do an
impossible thing shall be considered as not having been agreed upon.
o Applies to cases where the impossibility already existed at the time the
obligation was constituted.
o Impossible conditions annul the obligation which depends upon them. Both
the obligation and the condition are void. If the obligation is divisible, the
part thereof not affected by the impossible condition shall be valid.
o Kinds of impossible conditions:
i. Physically impossible conditions – when they, in nature of things,
cannot exist or cannot be done.
Ex. “I will pay you Php 10,000 if it will not rain for one year in the
Philippines.”
ii. Legally impossible conditions – when they are contrary to law, morals,
good customs, public order, or public policy.
Ex. X will give Y Php 1,000, if Y ---
…will kill Z (contrary to law)
… will be the common – law wife of X (against morals)
…will slap his father (against good customs); or
 …will publicly advocate the overthrow of the government
(against public order); or
…will not appear as a witness against X in a criminal case
(against public policy).

- Art. 1189, CC. When the conditions have been imposed with the intention of
suspending the efficacy of an obligation to give, the following rules shall be
observed in case of the improvement, loss or deterioration of the thing during the
pendency of the condition:

(1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages; it is understood that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknown or it
cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to
be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for
damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to
the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right that
that granted to the usufructuary.

o Requisites for the application of Article 1189

i. The obligation is a real obligation
ii. The object is a specific or determinate thing
iii. The obligation is subject to a suspensive conditions
iv. The condition is fulfilled and
v. There is loss, deterioration or improvement of the thing during the
pendency of the condition

o Kinds of Loss:
i. Physical Loss – when a thing perishes as when a house is burned and
reduced to ashes;
ii. Legal Loss – when a thing goes out of commerce or when a thing
heretofore legal becomes illegal
iii. Civil Loss – when a thing disappears in such a way that its existence is
unknown; or even if known, it cannot be recovered, whether as a matter
of fact or at law.

o Rules in case of loss, deterioration, or improvement of thing during

pendency of suspensive condition
 Rules

Without debtor’s fault:

The obligation is extinguished and

the debtor is not liable for damages,

1. Loss of the thing

With debtor’s fault:

The creditor will be entitled to

demand damages from the debtor.

Without debtor’s fault:

The creditor will have to suffer the

deterioration or the impairment.

2. Deteriorates – a thing With debtor’s fault:

deteriorates when its
value is reduced or Choices:
impaired a. Rescission or cancellation
of the obligation with
damages.
b. Fulfillment of the
obligation also with
damages.

By time/natural:

The improvement shall inure to the

benefit of the creditor.

At the expense of the debtor:

Debtor will have the right granted

to a usufructuary with respect to
3. Improvement – a thing is
improved when its value improvements made on the thing
held in usufruct.
is increased or enhanced.

Usufruct – the right to enjoy the use

and fruits of a thing belonging to
another.
- The usufructuary may
make on the property
held in usufruct such
useful improvements or
expenses for mere
 pleasure as he may
deem proper provided
he does not alter its
form or substance; but
he shall have no right to
be indemnified
therefor. He may,
however, remove such
improvements should it
be possible to do so
without damage to the
property.

- Art. 1191, CC. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage
Law.

o Reciprocal Obligations:
▪ Those which arise from the same cause and in which each party is
a debtor and creditor of the other, such that the performance of one
is designed to be the equivalent and the condition for the
performance of the other.
o Remedies in reciprocal obligations:
▪ In case one of the obligors does not comply with what is incumbent
upon him, the aggrieved party may choose between:
1. Action for specific performance of the obligation with
damages; or
2. Action for rescission of the obligation also with damages.
▪ The remedies of the injured or aggrieved party are alternative and
not cumulative, that is, he is privileged to choose only one of the
remedies, and not both.

- Art. 1192, CC. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it cannot
be determined which of the parties first violated the contract, the same shall be
deemed extinguished, and each shall bear his own damages.
2. Obligations with a Period

- Art. 1193, CC. Obligations for whose fulfillment a day certain has been fixed, shall
be demandable only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of
the day certain.

A day certain is understood to be that which must necessarily come, although it may
not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is
conditional, and it shall be regulated by the rules of the preceding section.

o 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.

o Period or Term
▪ It is a future and certain event upon the arrival of which the obligation
(or right) subject to it either arises or is terminated. It is a day certain
which must necessarily come, although it may not be known when,

▪ Period vs. Condition

Period Condition

As to fulfillment A certain event which An uncertain event.

must happen sooner or
later at a date known
beforehand

As to time Refers only to the future May refer to a past event

unknown to the parties

As to influence on the Merely fixes the time Causes an obligation

obligation for the efficaciousness either to arise or to cease.
of the obligation.

As to effect, when left to If it depends upon the If it depends upon the

debtor’s will will of the debtor sole will of debtor, it
empowers the court to invalidates the
fix the duration thereof. obligation.
 As to retroactivity of Unless there is The happening of a
effects agreement to the condition has retroactive
contrary, the arrival of a effect.
period does not have
any retroactive effect.

▪ Kinds of Period:
a. Suspensive Period – the obligation begins only from a day
certain upon the arrival of period

Ex. I will pay you 30 days from today.

I will support you from the time your father dies. (Here, the
uncertainty consists not in whether the day (death) will come or
not, but only in the exact date or time of its taking place.

b. Resolutory Period – the obligation is valid up to a day certain and

terminates upon arrival of the period.

Ex. I will give you Php500.00 a month until the end of the year.

- Art. 1198, CC. The debtor shall lose every right to make use of the period:

1. When after the obligation has been contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt;
2. When he does not furnish to the creditor the guaranties or securities which he has
promised;
3. When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory;
4. When the debtor violates any undertaking, in consideration of which the creditor
agreed to the period; and
5. When the debtor attempts to abscond.

3. Alternative Obligations

- Art. 1199, CC. A person alternatively bound by different prestations shall completely
perform one of them.

The creditor cannot be compelled to receive part of one and part of the other
undertaking.

o Alternative Obligation
▪ One wherein various prestations 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.
- Art. 1200, CC. The right of choice belongs to the debtor, unless it has been expressly
granted to the creditor.

The debtor shall have no right to choose those prestations which are impossible,
unlawful, or which could not have been the object of the obligation.

o Right of choice
▪ The right to choose the prestation belongs to the debtor, except when
the right is expressly given to the creditor.
▪ This right is not absolute. Limitations:
a. The debtor cannot choose those prestations which are impossible,
unlawful or which could not have been the object of the obligation.
b. The debtor has no more right of choice when, among the
prestations whereby he is alternatively bound, only one is
practicable.

- Art. 1206, CC. When only one prestation has been agreed upon, but the obligor may
render another in substitution, the obligation is called facultative.

The loss or deterioration of the thing intended as a substitute, through the negligence
of the obligor, does not render him liable. But once the substitution has been made, the
obligor is liable for the loss of the substitute on account of his delay, negligence or
fraud.

o Facultative obligation
▪ One where only one prestation has been agreed upon but the obligor
may render another in substitution.

o Facultative vs. Alternative

Alternative Facultative

1. Number of Several prestations are Only one prestation is

Prestations due but compliance due although the
with one is sufficient. debtor is allowed to
substitute it.

2. Right of choice The right choice may The right to make the
be given to the creditor substitution is given
or thid person only to the debtor

3. Loss through The loss of one or more The loss of the thing
fortuitous event of the alternatives due extinguishes the
through a obligation
fortuitous event does
 not extinguish the
obligation

4. Loss through the The loss of one of the The loss of the thing
fault of debtor alternatives through due through his fault
the fault of the debtor makes him liable.
does not render him
liable

Where the choice The loss of the

belongs to the creditor, substitute before the
the loss of one substitution through
alternative through the the fault of the debtor
fault of the debtor does not render him
gives rise to liability liable.

4. Joint and Solidary Obligations

- Art. 1207, CC. The concurrence of two or more creditors or of two or more debtors in
one and the same obligation does not imply that each one of the former has a right to
demand, or that each one of the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.

- Art. 1208, CC. If from the law, or the nature or the wording of the obligations to which
the preceding articles refers, the contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there are creditors or debtors,
the credits or debts being considered distinct from one another, xxx

o Joint Obligation
▪ One where the whole obligation is to be paid or fulfilled
proportionately by the different debtors and/or is to be demanded
proportionately by the different creditors. However, if there is an
agreement on how to divide the obligation, the agreement or
stipulation should be followed.
▪ Example:
A, B and C borrowed Php 9,000 from D. The presumption is that A, B
and C are jointly liable.
Here, there are three (3) debts, D can demand only Php 3,000
from A, B and C or a total of Php 9,000.

o Solidary Obligation
▪ One where each one of the debtors is bound to render, and/or each one
of the creditors has a right to demand from any of the debtors, entire
compliance with the prestation.
▪ When obligation solidary:
a. The obligation expressly so states; or
b. The law requires solidarity; or
 c. The nature of the obligation requires solidarity.

▪ Example:
A and B are solidary debtors of C in the amount of Php 10,000.
Here, C may demand payment from either A or B, or both of
them simultaneously, of the whole obligation.

5. Divisible and Indivisible Obligations

- Art. 1223, CC. The divisibility or indivisibility of the things that are the object of
obligations in which there is only one debtor and only one creditor does not alter or
modify the provisions of Chapter 2 of this Title.

o Divisible obligations
▪ One the object of which, in its delivery or performance, is capable of
partial fulfillment.
o Indivisible obligations
▪ One of the object of which, in its delivery or performance, is not capable
of partial fulfillment.
o Test for the distinction
▪ In determining whether an obligation is divisible or not, the
controlling circumstance is not the possibility or impossibility of
partial prestation but the purpose the obligation or the intention of the
parties. Hence, even though the object or service may be physically
divisible, an obligation is indivisible if so provided by law or intended
by the parties.

- Art. 1225, CC. For the purposes of the preceding articles, obligations to give definite
things and those which are not susceptible of partial performance shall be deemed to
be indivisible.

When the obligation has for its object execution of a certain number of days of work,
the accomplishment of work by metrical units, or analogous things which by their
nature are susceptible of partial performance, it shall be divisible.

However, even though the object or service may be physically divisible, an obligation
is indivisible if so provided by law or intended by the parties.

In obligations not to do, divisibility or indivisibility shall be determined by the

character of the prestation in each particular case.

o Obligations deemed indivisible:

a. Obligation to give definite things
b. Obligations which are not susceptible of partial performance
c. Obligations provided by law to be indivisible even if thing or service
physically divisible.
d. Obligations intended by the parties to be indivisible even if the thing or
service is physically divisible.
 o Obligations deemed divisible:
a. Obligations which have for their object the execution of a certain number
of days of work
b. Obligations which have for their object the accomplishment of work by
metrical units.
c. Obligations which by their nature are susceptible of partial performance.

6. Obligations with a Penal Clause

- Art. 1226, CC. In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of non-compliance, if there
is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code.

o Principal Obligation
▪ One which can stand by itself and does not depend for its validity and
existence upon another obligation.
o Accessory Obligation
▪ One which is attached to a principal obligation and therefore, cannot
stand alone.
o Obligation with 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.
o Penal clause
▪ An accessory undertaking attached to an obligation to assume greater
liability in case of breach
▪ Purposes:
1. To insure their performance by creating an effective deterrent
against breach, making the consequences of such breach as
onerous as it may be possible.
2. To substitute a penalty for the indemnity for damages and the
payment of interest in case of noncompliance.
3. To punish the debtor for the nonfulfillment or violation of his
obligation.
o When creditor may recover damages:
a. When so stipulated by the parties
b. When the obligor refuses to pay the penalty, in which case the creditor may
recover legal interest thereon; or
c. When the obligor is guilty of fraud in the fulfillment of the obligation, in
which case the creditor may recover damages caused by such fraud.
 - Art. 1227, CC. The debtor cannot exempt himself from the performance of the obligation
by paying the penalty, save in the case where this right has been expressly reserved for
him. Neither can the creditor demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this right has been clearly granted
him. However, if after the creditor has decided to require the fulfillment of the
obligation, the performance thereof should become impossible without his fault, the
penalty may be enforced.

- Art. 1230, CC. The nullity of the penal clause does not carry with it that of the principal
obligation.

The nullity of the principal obligation carries with it that of the penal clause.

Definitions: Define or give the meaning of the following:

1. Condition
2. Civil Loss
3. Reciprocal Obligations
4. Pure Obligation
5. Legal Loss
6. Period
7. Facultative Obligation
8. Solidary Obligation
9. Indivisible Obligation
10. Penal Clause