Atty. Daniel D. Besina Jr.

RN,MN
General and Abstract sense
Law is a science of moral laws founded on
rational nature of man that governs his
free activity for the realization of the
individual and social ends of life under an
aspect of mutual conditional dependence
b. Specific and concrete sense
Law is a rule of conduct, just, obligatory,
formulated by legitimate power of common
observance and benefit (Lapitan v. PCSO 60
OG 6841)
 Laws are needed to maintain harmony,
stability and justice.
1. Natural law -principles derived from nature or
based on morality or equity, and which are binding
upon human society in the absence of or in addition to
positive law.
2. Positive Law
a. Divine Positive Law - laws promulgated by a
Supreme Being
b. Divine-Human Positive Law - precepts established by
authorities w/in a religious sect or denomination
c. Human Positive Law - principles promulgated by the
State and which generally imposes a sanction in case of
non-observance
I. According to Function
a. Substantive Law - that which
Creates, Defines, and Establishes rights
and duties

b. Procedural Law - that which

determine the Process of enforcing such
rights and duties
II. According to Scope
a. Private Law - that which regulates the
Relations of the members of a community
with one another
b. Public Law - that which concerned with
regulating the relations of Individuals with
the State and the Organization and conduct
of the government
III. According to Force and Effect
a. Mandatory Laws - that which require
something to be done

b. Permissive Law - those that allow

discretion on the part of the individual on their
application

c. Prohibitory Laws - those that forbid an act to

be done
1. Constitution

2. Acts passed by Legislature and ordinances

enacted by local government

3. Judicial decisions

4. Administrative regulations
Art. 1156. An obligation is a juridical necessity
to give, to do or not to do.

Civil obligation - one that is enforceable in a

court of justice
- Speaks only of the duty of the debtor
- It is a juridical necessity because the debtor
must perform his obligation
1. Active subject - the person who has the RIGHT to
demand performance of the obligation, known as the
creditor or obligee
2. Passive subject - the person from whom the
performance of the obligation is demandable, known as
the debtor or obligor
3. Prestation - the Subject Matter of the obligation
which consists in giving, doing or not doing something
4. Efficient Cause - this is the vinculum or juridical tie that
binds the parties to the obligation; the reason why the
obligation exists. Pertains to the 5 sources of obligations
D is obliged to give C P10,000 with interest of
12% per annum on December 31, 2010
pursuant to a contract of loan they executed
on January 1, 2010. (Unilateral)
Hence:
1. D is the passive subject or obligor
2. C is the active subject or obligee
3. Giving of P10,000 w/ 12% interest is the
prestation
4. Contract of Loan is the efficient cause
 S and B executed a deed of sale wherein S sold
his lot to B for P100K. (bilateral obligation)
Hence:
I. Giving of the Lot (prestation)
a. S is the passive subject
b. B is the active subject
c. Deed of sale is the efficient cause
II. Giving of P100k (prestation)
a. B is the passive subject
b. S is the active subject
 Civil obligation Natural obligation
Based on positive law Based on equity and
natural law
Gives a right to compel Do not grant a right of
their performance action to compel their
performance, they
authorize the retention
of what has been
delivered or rendered
by reason thereof
D borrowed P50K from C payable on
July 31, 2010. As evidence of debt, D
executed a promissory note. If D
makes no payment on due date, C
may enforce payment by filing a
court action within a period of 10
years from due date.
D obtained a loan of P50k from C. the debt,
which is evidenced by a promissory note, is due
on September 30, 2010. No action for payment
was filed in court by C within 10 years from
such date, hence, the debt prescribed.
However, D, knowing that the debt had
prescribed, voluntarily paid C. D cannot
recover what he had paid voluntarily paid
because although payment was no longer
enforceable, in equity and moral justice, he still
owed C the amount of P50k.
 Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omission punished by law; and
(5) Quasi-delicts

Note: the enumeration is EXCLUSIVE (no

obligation arises outside of these sources)
Art. 1158. Obligations derived from LAW are
not presumed. Only those expressly
determined in this Code or in special laws are
demandable, and shall be regulated by the
precepts of the law which establishes them;
and as to what has not been foreseen, by the
provisions of this Book.
 An obligation arises from law if it is imposed by
the law itself.
Ex.
1. Obligation to pay taxes
2. Obligation of parents and children to support
each other
The obligation must be CLEARLY set forth in
the in order that it may be demandable.
G, a movie theater guard, killed a gate crusher.
Accused in court, he was forced to defend
himself by engaging the services of a lawyer. He
was eventually acquitted and sought to recover
attorney’s fees from the theater owner. The
court held that an employer is ordinarily not
required to furnish legal assistance to his
employees because no law imposes his
obligation (dela cruz v. Northern theatrical
enterprises).
Art. 1159. Obligations arising from
contracts have the force of law
between the contracting parties and
should be complied with good faith.
 A contract is a meeting of the minds between
two persons whereby one binds himself, with
respect to the other, to give something or to
render some service (Art. 1305)
 An obligation is derived from contract if it
arises from the agreement of the parties.
 It shall have the force and effect of law
between them and should be complied with in
good faith.
 BUT, the contract must be VALID and
ENFORCEABLE
 A contract of carriage whereby the carrier is
obliged to bring the cargo to a designated
designation, and the shipper to pay the
transport cost.
 A lease contract on an apartment where the
lessee is required to pay the rental w/in the first
5 days of the month in advance, and the lessor
to undertake and shoulder the cost of major
repairs during the term of the lease.
Art. 1160. Obligations derived from quasi-
contracts shall be subject to the provisions of
Chapter I, Title XVII, of this Book.
A quasi-contract is a juridical relation arising
from certain lawful, voluntary and unilateral
acts, and which has for its purpose the
payment of indemnity to the end that no one
shall unjustly enriched or benefited at the
expense of another.
1. Negotiorum gestio
- takes place when a person voluntarily takes
charge of the business or property of another,
without any power from the latter
- the owner must reimburse the officious
manager (gestor) for the necessary and useful
expense incurred by the latter
- presupposes that the property or business is
neglected or abandoned
Example of negotiorum gestio:
D and C are owners of adjacent piggery farms. D
was hospitalized and had no one to tend his
farm. When C noticed that D had not been
around for two days, he took it upon himself to
feed the pigs, clean the pigpens, and
performed other acts to preserve D’s property.
C incurred necessary and useful expenses in
the process. D must reimburse C for the said
expenses.
2. Solutio Indebiti
- takes place when something is received
when there is no right to demand it, and it
was unduly delivered thru mistake,
- the recipient must return what was received
by mistake
Example of solutio indebiti:
D, the payee of a check amounting to P5k
cashed the check with the bank. As soon as
he arrivd at his office, he counted the bills and
discovered that the teller gave him 6 pieces
of P1k bills or a total amount of P6k. D must
return the excess payment of P1k that he
received by mistake.
 Contract Quasi-contract
A result of the A result of the lawful,
conformity of wills of voluntary and
the parties unilateral act of one
party
There is meeting of the Not an implied
minds contract because there
is no meeting of the
minds
Art. 1161. Civil obligations arising from criminal
offenses shall be governed by penal laws,
subject to the provisions of Art. 2177, and of
the pertinent provisions of Chapter 2,
Preliminary Title on Human Relations, and of
Title XVIII of this Book, regulating damages.
 When a crime is committed and no material
damage is caused upon the offended party,
civil liability cannot be enforced.
 The offender is Only criminally liable and may
be imposed a sentence which may consist,
among other penalties, of imprisonment,
payment of fine or disqualification to hold
public office
 When a crime has caused material damage
upon the offended party, Art. 100 of the RPC
applies.

 Civil liability includes restitution, reparation,

and indemnification of consequential
damages.
 The thing itself shall be restored even though
it be found in the possession of a third person
who has acquired it by lawful means, saving
to the latter his action against the person
who may be liable to him
 If restitution is possible, Reparation included
the repair of the material damage of the
object of the crime.
 If restitution is NOT possible, reparation
includes the Price of the object of the crime,
whenever possible, and its Sentimental
value to the offended party.
 This shall include not only those caused the
injured party, but also those suffered by his
family or by a third person by reason of the
crime.
 D stole the hand tractor of C. if D is found
guilty of the crime of theft, he has civil
liability consisting of restoring the hand
tractor to C. If the hand tractor cannot be
returned because it was completely
destroyed even without D’s fault, D has to
pay the lost profits and moral and other
damages sustained by C.
 When a criminal action is instituted, the civil
action for the recovery of civil liability is
impliedly instituted with the criminal action,
unless the offended party waives the civil
action, reserves his right to institute it
separately, or institutes the civil action prior
to the criminal action (Sec. 1, Rule 111, ROC)
 The death of the offender before final
judgment does not extinguish his CIVIL
liability arising from the crime.
 The action for the recovery of civil liability will
be directed against the administrator of the
estate, the obligation having become the
obligation of the heirs.
 However, the heirs will not be liable beyond
the property that they inherit.
 The extinction of the penal action does not
carry with it the extinction of the civil liability,
unless the extinction proceeds from a
declaration of a final judgment that the fact
from which the civil liability might arise did
not exist Sec. 2 (b), Rule 111, ROC)
 Art. 1162. Obligations derived from quasi-
delicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by
special laws.
 Quasi-delict is an act or omission which causes
damage to another there being fault or
negligence but without any PRE-EXISTING
contractual relations between the parties (Art.
2176).
 The liability of a person for QD is founded upon
the principle of equity, that one should be
responsible for the act done by him by reason
of his fault or negligence which causes damage
to another.
 D was cleaning the window pane of his
condominium unit. Due to lack of care, he
caused the glass to break and fall on the
street, the splinters hitting the head of a
pedestrian and the cars that were parked on
the ground. D shall be liable for damages to
the pedestrian for any injury sustained by him
and to the car owner for the scratches and
dents of the car.
Art. 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 stipulation of the
parties requires other standard of care.
An obligation to give consists of the delivery of a
thing which may be determinate or generic.
-a determinate thing is one which is particularly
designated or physically segregated from all
others of the same class such as “my only
diamond ring”, a Toyota car with engine
number 123, and plate number of ILY 143
 A generic or indeterminate thing is one that
refers to a class or genus without being
distinguished from others of the same class.
Examples are ring, a car, a horse.
1. To take care of the thing with the diligence
of a good father of a family, unless the law
or stipulation of the parties requires another
standard of care.
2. To deliver the thing.
3. To deliver the fruits of the thing.
4. To deliver its accessions and accessories.
 Diligence of a good father of a family means
the diligence which an ordinary prudent man
would exercise with regard to his own
property.
 Under a contract executed by D and C on
September 1, D obliged himself to deliver a
specific second-hand car to C on September
30. Before delivery, D must regularly warm up
the engine of the car, check its oil and other
fluids, see to it that it is parked at a safe area,
and do other acts which an ordinary owner
would do to preserve it.
 Common carriers, from the nature of their
business and for reasons of public policy, are
bound to observe extraordinary diligence in
the vigilance over the goods and for the
safety of passengers transported by them,
according to all the circumstances of each
case. (Article 1733. par.1)
 The debtor who fails to observe the
diligence required in the preservation of
the thing shall be liable for the payment
of damages, unless such failure is due to
a fortuitous event. (Art. 1174)
 Delivery means placing the object in the
control and possession of the creditor, either
physically (Art. 1497), or constructively, such
as by execution of a public instrument (for
both movables and immovables ) or by giving
the key of the place or depository where a
movable is kept. (Art. 1498).
Art. 1164. The creditor has a right to the fruits
of the thing from the time the obligation to
deliver it arises. However, he shall acquire no
real right over it until the same has been
delivered to him.
1. Natural fruits
- natural fruits are the spontaneous products
of the soil and the young and other products
of animals.

Thus, trees and plants that grow naturally from

the soil without the intervention of man are
natural fruits.
2. Industrial fruits
- are those produced by land of any kind
through cultivation or labor such as rice, corn
and other products of land that come into
existence through human labor.
3. Civil fruits
- are those which are the result of a
juridical relation such as rents of buildings,
the price of leases of lands and other
property, and the amount of perpetual or life
annuities or other similar income.
 The creditor has a right to the fruits of the
thing from the time the obligation to deliver
the thing arises. Such obligation to deliver
arises as follows:

 A. if the obligation is a pure obligation or one

whose performance is not subject to a
suspensive period or suspensive condition, the
obligation to deliver arises from its perfection.
 a. On September 1, 2010, D obliged himself
to deliver a specific agricultural lot to C. Since
the obligation is a pure obligation, C shall be
entitled to the fruits, such as the plants that
have grown on the lot, accruing from
September 1, 2010, when the contract was
perfected.
B. If the obligation is subject to a suspensive
condition or suspensive period, then, the
obligation to deliver arises upon the
fulfillment of the condition or upon the
arrival of the term.
b. On July 1, 2010, D obliged himself to deliver
a specific coconut plantation to C if C passes
the October 2010 CPA board exam. C passed
the CPA board on October 18, 2010, so the
obligation to deliver arose from the said
date. Any fruits that had accrued from such
date (October 18, 2010, not from July 1,
2010) shall pertain to C.
c. On August 1, 2010, D obliged himself to
deliver a specific unit to C on August 31, 2010;
hence, C shall be entitled to the fruits, such as
the apartment rentals, accruing from the said
date.
1. Before the delivery
- from the time the obligation to deliver the
thing arises, the creditor acquires the right to
demand the delivery of the thing and its fruits
that have accrued from such time from the
debtor. This right which can be enforced only
against a definite passive subject, i.e, the
debtor, is known as personal right which is
also called jus in personam or jus ad rem.
 On July 1, 2010, D obliged himself to deliver
a specific horse to C on August 31, 2010. D
failed to deliver the horse to C on August 31,
2010. On September 30, 2010, while the
horse was still in the possession of D, the
horse gave birth to a colt. C shall be entitled
to the colt and may demand the delivery of
the horse together with it (personal right).
2. After delivery
- after the delivery of the thing and its
fruits to him, the creditor acquires a real right
over them. A real right, also called jus in re,
such as the right of possession or ownership,
is one that is enforceable against the whole
world. This is a right that can be enforced
only over a thing and not the person of the
debtor.
 If D actually delivered the horse and the colt
on October 15, 2010, then C acquired a real
right over them from such date. If D,
however, sold and delivered the horse and
the colt to B, buyer in good faith, on October
15, 2010, B shall acquire ownership over
them. C shall have no right of action against
B. Instead, he can go after D for damages.
Art. 1165. When what is to be delivered
is a determinate thing, the creditor, in
addition to the right granted to him by
Article 1170, may compel the debtor to
make delivery.
If the thing is indeterminate or generic,
he may ask that the obligation be complied
with at the expense of the debtor.
If the obligor delays, or has promised to
deliver the same thing to two or more
persons who do not have the same
interest, he shall be responsible for any
fortuitous event until he has effected
the delivery.
1. Obligation to deliver a determinate thing.
a. To compel the debtor to make delivery.
b. To demand the payment of damages from the
debtor.
In compelling the debtor to make delivery, the
creditor has to institute a court action against
the debtor and if he obtains judgment in his
favor, he can ask the court to order the debtor
to make the delivery and pay damages.
 D is obliged to deliver a specific car to C on
August 31, 2010. if D fails to deliver the car
on due date, C has the right to compel D to
make the delivery and to pay damages. C has
the right to compel D to make the delivery
because the thing is in D’s possession and
cannot be substituted by another.
2. Obligation to deliver a generic thing.

a. To ask the obligation be complied with at the

expense of the debtor.
b. To demand the payment of damages from
the debtor.
 D is obliged to deliver 10 sacks of rice to C on
August 31, 2010. If D fails to deliver 10 sacks
of rice to C on due date, C can get 10 sacks of
rice from another person at D’s expense and
demand damages from D. C can get 10 sacks
of rice from another person because they can
be substituted with another of the same
kind.
 As a rule, the loss of the thing due by reason
of fortuitous event extinguishes the debtor’s
obligation. However, he shall be liable in the
following cases:

a. If he is guilty of delay.
 D is obliged to deliver a specific horse to C on
August 31, 2010. On due date, C demanded
the delivery of the horse but D failed to
comply. On September 2, 2010, the horse was
struck and killed by lightning while still in D’s
possession. Since D was in default, he shall
be liable for damages to C although the cause
of the loss was a fortuitous event.
b.If he promised to deliver the same
thing to two or more persons who
do not have the same interest.
 On August 1, 2010, D obliged himself to
deliver a specific piano to C on August 31,
2010. Two days later, however, D also
promised to deliver the same piano to X on
September 1, 2010, the piano was lost on fire
through no fault of D. In this case, D shall be
liable for damages to both C and X.
 Art. 1166. The obligation to give a
determinate thing includes that of delivering
all its accessions and accessories, even
though they may not have been mentioned.
a. Accessions - include everything which is
produced by a thing or which is incorporated
or attached thereto, either naturally or
artificially. They include alluvium, the soil
gradually deposited by the current of a river
bank, and whatever is built, planted, or sown
on person’s parcel of land. The term accession
includes the fruits of a thing.
b. Accessories
-an accessory is anything that is attached to
or included in another thing of more
importance to add to the utility,
ornamentation, preservation or completion
of the latter. Examples include the keys of the
house, the bracelet of a wristwatch, the
frame of the picture.
 The debtor must deliver the accessions
and accessories even though they may
not have been mentioned. The parties
may, however, stipulate that the
accessions and accessories will not be
included.
Art. 1167. If a person obliged to do something
fails to do it, the same shall be executed at his
cost.
The 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.
a. If the debtor fails to perform the obligation:
1. to have the obligation be executed at the
expense of the debtor. The debtor however
cannot be compelled to perform the
obligation because this would violate his
constitutional right against involuntary
servitude.
2. to demand payment of damages from the
debtor.
 C brought his computer to D’s shop for repair.
D told C that the repair would be completed
in 3 days. After 3 days, D has not yet begun
repairing the computer. Eventually, D
returned it unrepaired. In this case, C can
have the computer repaired by another
computer at D’s expense. C can likewise
demand the payment of damages.
 b. If the debtor performs the obligation but
does it in contravention of the tenor thereof,
i.e., not following the specifications or
stipulations agreed upon:
1. To have the obligation to be executed at the
expense of the debtor.
2. To demand the payment of damages from
the debtor.
D is obliged to construct a 4-bedroom house for
C. D constructs the house but it consists of
only three rooms. In this case, C may ask that
D follow the specifications agreed upon and if
D refuses, C may have the construction done
by another person following such
specifications at D’s expense. C may also
demand the payment of damages from D.
 c. If the debtor performs the obligation but
does it poorly:
1. To ask that what was poorly done be undone
at the debtor’s expense.

2. To demand the payment of damages from

the debtor.
D agreed to paint C’s house. D painted the
house but the painting was unevenly applied.
C may ask D to repaint the house and if D
refuses, C can have the repainting done by
another person at D’s expense. C may also
demand the payment of damages from D.
Art, 1168. When the obligation
consists in not doing, and the
obligor does what has been
forbidden him, it shall also be
undone at his expense.
 If the debtor does what has been forbidden
him:

1. To ask what has been done be undone at the

debtor’s expense.
2. To demand payment of damages from the
debtor.
D and C are owners of adjoining lots in a certain
subdivision whose rules and regulations
provide that residents should not construct
between lots a fence higher than 2 meters to
allow sunlight to pass through. D constructed
a fence 4 meters in height between his lot
and that of C thereby making the place of C
very dark.
 In this case, C may ask that D reduce
the height to 2 meters, and if D
refuses, C may have the excess
fence be demolished at D’s expense.
C may also demand the payment of
damages from D.
Art. 1169. Those obliged to deliver or to do
something incur in delay from the time the
obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.

However, the demand by the creditor shall not

be necessary in order that delay may exist:
1. When the obligation or the law expressly so
declares; or
2. When from the nature and the
circumstances of the obligation it appears
that the designation of the time when the
thing is to be delivered or the service is to be
rendered was a controlling motive for the
establishment of the contract; or
3. When demand would be useless, as when the
obligor has rendered it beyond his power to
perform.

In reciprocal obligations, neither party incurs in

delay if the other does not comply or is not
ready to comply in a proper manner with what
is incumbent upon him. From the moment one
of the parties fulfills his obligation, delay by
the other begins.
 Delay or default or mora is the non-
fulfillment of an obligation with
respect to time.
a. Mora solvendi -default on the part of the
debtor
1. Mora solvendi ex re - debtor’s
default in real obligations (obligation to
give)
2. Mora solendi ex persona -debtor’s
default in personal obligations (obligation to
do)
b. Mora accipiendi - default on the part of the
creditor

c. Compensatio morae - default of both

parties in reciprocal obligations; here it is as
if neither party was in default
 The debtor incurs in delay from the time the
creditor judicially or extrajudicially demands
from him the fulfillment of his obligation.
 Judicial demand takes the form of a
complaint filed in court by the creditor
against the debtor. Extrajudicial demand is
one made outside of the court and which may
be made orally or in writing.
a. The debtor does not perform the obligation
when it is due.

b. The creditor makes a demand upon him to

perform his obligation.

c. The debtor does not perform the obligation

despite the demand.
 D is obliged to deliver 10 bags of cement to C on
August 31, 2010. D does not deliver on such
date. In this case, D is not yet in delay if C does
not make a demand upon him to perform his
obligation. But if C makes a demand upon him to
deliver on August 31, 2010 or immediately
thereafter but D does not comply, then D incurs
in delay. If C makes a demand before August 31,
2010 and D does not comply, D does not incur in
delay because the demand is premature. Before
August 31, 2010, D cannot yet be compelled to
perform the obligation.
a. When the obligation expressly so declares
Thus, if a lease contract provides that D, the
lessee, must pay the rental to C, the lessor, on
the first day of the month in advance “without
need of demand”, D will be in delay if he does
not pay on such date even if C does not make a
demand because the obligation expressly so
declares.
b. When the law expressly so declares.
Thus, if an individual taxpayer engaged in
business does not file his income tax return
and pay the tax on April 15 for his income
earned in the preceding year, he will be in
delay notwithstanding the absence of demand
from the government because his failure will
make him liable for interest and penalties as
provided by law.
c. When the designation of time was a controlling
motive for the establishment of the contract.
Example:
D is obliged to deliver a graduation gown to C on or
before 3:00PM on May 31, 2010 in time for the
commencement exercises in C’s school. If D does
not perform his obligation on the date and tie
agreed upon, then D will be in delay even if there is
no demand from C because time was a controlling
motive in the establishment of the contract.
c. When demand would be useless
Example:
D is obliged to deliver a specific horse to C on
August 31, 2010. Two days before due date, D
sells and delivers the same horse to X. D will
be in delay even if no demand is made by C
because it is now impossible for him to
perform his obligation to the latter.
 Reciprocal obligations are obligations arising
out of the same cause and are to be fulfilled
at the same time, such as the obligations of
the seller and the buyer in a contract of sale.
Neither party incurs in delay if the other does
not comply with his undertaking. From the
moment one of them fulfills his obligation,
delay by the other begins.
 S sold his diamond ring to B for P10,000. The
parties agreed that the delivery of the ring and
the payment of the price would be made on
August 31, 2010. If on August 31, 2010, B pays
P10,000, S will be in delay unless he delivers
the ring to B. Or if on such date S delivers the
ring, B will be in delay unless he pays S
P10,000. However, neither S nor B will be in
delay if the other does not perform his
obligation.
1. He shall be liable for damages.

2. He shall bear the risk of loss.

3. He shall be liable for any fortuitous

event.
 There is NO delay in obligations not to do as
one cannot be in delay in not doing
something.
Art. 1170. Those who in the
performance of their obligations are
guilty of fraud, negligence, or delay,
and those who in any manner
contravene the tenor thereof, are liable
for damages.
a. Fraud

b. Negligence

c. Delay

d. Contravention of the tenor of the obligation

 Damages refer to the harm done and the
sum of money that may be recovered.

 Injury refers to the wrongful, unlawful or

tortuous act. It is the legal wrong to be
redressed.
1. Actual or compensatory damages
-these refer to the pecuniary loss (such as
loss in business or profession) that may be
recovered. It includes the value of the loss
suffered and profits not realized.
2. Moral Damages
- they include physical suffering, mental
anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock,
social humiliation, and similar injury.
3. Nominal damages
-damages to vindicate or recognize a
right, and not for indemnifying any loss
suffered, such as when there is a trespass
upon real property.
4. Temperate or Moderate damages
-they are more than nominal but less
than compensatory damages, but may be
recovered if the court finds that some
pecuniary loss has been suffered but its
amount cannot, from the nature of the case,
be proved with certainty.
5. Liquidated damages
-those agreed upon by the parties to a
contract, to be paid in cash in case of breach
6. Exemplary damages
-imposed by way of example or correction
for public good, in addition to moral,
temperate, liquidated or compensatory
damages.
1. Actual damages
-proof is required unless provided by
stipulation (Art. 2199)

2. Other damages
-proof is not required in order that moral,
nominal, temperate, liquidated or exemplary
damages may be adjudicated. The assessment
of such damages, except liquidated ones, is left
to the discretion of the court according to the
circumstance of the case (Art. 2116).
Art. 1171. Responsibility arising
from fraud is demandable in all
obligations. Any waiver of an action
for future fraud is void.
 Fraud is the deliberate and or
intentional evasion by the debtor of the
formal compliance of his obligation.
I. According to meaning

1. Fraud at the time of giving the consent

a. causal dolo or dolo causante -this

is fraud without which consent would not
have been given. It renders the contract
voidable.
 Example:
S sold a certain ring to B. B bought the ring
because he was induced by what S told him
that it was made of pure gold. In reality, S
knew that the ring was made of bronze only.
In this case, the contract of sale is voidable at
the instance of B. B can also ask for damages.
b. Incidental fraud or dolo cessante -
this is fraud without which consent
would have still been given but the
person giving it would have agreed on
different terms. The contract is valid but
the party employing the fraud shall be
liable for damages.
Example:
S sold a specific farm lot to B for P50,000. B told
S at the time they were negotiating that he was
a poor farmer although in reality, B was a rich
businessman. If S would have sold the farm lot
to B whether B was a poor farmer or a rich
businessman but that he would have demanded
a higher price, say P60,000, had he learned that
B was the latter, then the fraud employed by B
was only incidental and would not affect the
validity of the contract. S, in this case, can
demand the payment of damages from B.
2. Fraud at the time of performance
-this is the deliberate act of evading the
fulfillment of the obligation in a normal
manner. This will not affect the validity of
the contract but it would entitle the injured
party to recover damages.
Example:
S sold 10 sacks of “Maharlika” rice to B. the
parties agreed that S would deliver the rice to B
at the latter’s residence two days later. When S
performed his obligation, he delivered 10 sacks
of “Maharlika” rice which he mixed with rice of a
lower variety. Here, S committed fraud in the
performance of his obligation. However, the
fraud does not affect the validity of the contract
but would entitle B to recover for damages.
1. Future fraud
-the debtor’s liability for future fraud
cannot be waived. Such waiver is void as it
encourages the commission of fraud.
Accordingly, the creditor can still recover
damages from the debtor despite the waiver.
Example:
D obliged himself to deliver 10 bags of soap
powder to C. The parties agreed that C would
not hold D liable for damages should D
commit fraud in the performance of his
obligation. When D made his delivery to C, he
mixed soap powder with chalk. Here, C can
hold D liable for damages despite the waiver.
2. Past fraud
Any waiver of an action for fraud already
committed is valid as this will become simply
an act of generosity on the part of the
creditor.
Example:
D obliged himself to deliver 20 sacks of
“Milagrosa” rice to C. On due date, D delivered
20 sacks of rice of a lower class to C. When C
discovered the fraud, he threatened to sue D for
damages. D pleaded with C not to sue him and
promised that he would replace the rice he
delivered with “Milagrosa” rice. Moved by D’s
plea and promise, C waived his right to hold D
liable for damages for the fraud that D
committed. Here, the waiver made by C is valid.
Art. 1172. Responsibility arising from
Negligence in the performance of every kind
of obligation is also demandable, but such
liability may be regulated by the courts,
according to the circumstances.
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which
is required by the nature of the obligation and
corresponds with the circumstances of the
person, of the time and of the place. When
negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of the family
shall be required.
 The fault or negligence of the debtor consists in
the omission of that diligence which is required
by the nature of the obligation and corresponds
with the circumstances of the person, of the
time and of the place.
 It is the failure to observe for the protection or
interest of another person, that degree of care,
precaution and vigilance which the
circumstances justly demand, whereby such
person suffers injury.
1. Diligence required by the nature of the
obligation
- if the debtor’s obligation is to transport a
specific fragile antique jar, the nature of the
obligation requires that he must place a
cushion or other protective covering around
the jar. Otherwise, he is guilty of negligence.
2. Diligence that corresponds with the
circumstances of the person
-a 20 year-old and healthy woman hired to
baby-sit must not sleep while on duty since
the circumstances of her person were
considered when she was taken for the job.
Otherwise, she will be negligent.
3. Diligence that corresponds with the
circumstances of the time.
- a security guard assigned on night duty
who does not have a flashlight is negligent
considering that the circumstances of
nighttime require him to be equipped with
such device.
4. Diligence that corresponds with the
circumstances of the place.
-if a tricycle driver drives at 70 miles per
hour in a street surrounding the public
market where many people come and go, he
is guilty of negligence taking into
consideration the circumstances of the place
which require him to drive at a moderate
speed.
 The test of negligence is whether the
defendant in doing the alleged negligent act
used that reasonable care and caution which
an ordinary person would have used in the
same situation.
1. Contractual negligence (culpa contractual)
- This is the negligence committed in the
performance of a contract.
- The negligence here is merely incidental in
the performance of an obligation already
existing because of the contract between the
parties.
 The defense of a good father of a family in
the selection and supervision of employees is
not a defense albeit it may mitigate the
employer’s liability.

 What is followed here is the “master-servant

rule” or “respondeat superior” or “command
responsibility”.
 Thus, if a passenger of a taxi is injured because
of the negligence of the driver, the negligence
committed here is contractual negligence
because of the contractual relation between the
passenger and the owner of the taxicab
company. The passenger may institute a civil
case against the owner of the taxicab company
for breach of contract of carriage without
prejudice to the right of the latter to go after the
taxi driver for reimbursement.
 In this case, the negligence of the taxi driver
is the negligence of the owner of the taxicab
company and the latter cannot raise the
defense of a good father of the family in the
selection and supervision of his employees to
escape liability.
2. Civil negligence (culpa aquiliana, tort,
quasi-delict)
- this is the wrong or negligence committed
independent of contract and without
criminal intent.
- the master-servant rule does not apply, the
negligence of the servant is not necessarily
the negligence of the master.
 Hence, the employer may raise the defense
of diligence of a good father of a family in
the selection and supervision of his
employees to escape liability.
 Thus, if a pedestrian was hit by a taxi and suffered
physical injuries because of the negligence of the taxi
driver, the negligence committed here is a civil
negligence because there is no pre-existing
contractual relation between the pedestrian and the
owner of the taxicab company. The pedestrian may
bring an action based on civil negligence against the
taxi driver and the owner of the taxicab company. The
owner, however, can escape liability if he can prove
due diligence in the selection and supervision of his
driver.
3. Criminal negligence (culpa criminal)
- this is a negligence that results in the
commission of a crime.
- defense of a good father of a family in the
selection and supervision of employees is not
a defense because the employee’s guilt is
automatically the employer’s civil guilt if the
former is insolvent.
 The passenger of the taxi may bring a court
action not only for contractual negligence
against the owner of the taxicab company, but
also one for criminal negligence against the taxi
driver for physical injuries through reckless
imprudence. In the same way, the pedestrian
may bring not only a court action for civil
negligence against the taxi driver and the owner
of the taxicab company, but also one for
criminal negligence against the taxi driver for PI
through RI.
 Fraud Negligence
There is deliberate There is no deliberate
intention to cause intention to cause
damage or prejudice damage to another
Liability cannot be Liability may be
reduced or mitigated reduced by the courts
by the courts in accordance with the
circumstances.
Art. 1174. Except in cases expressly specified
by law, or when it is otherwise declared by
stipulation or when the nature of the
obligation requires the assumption of risk,
no person shall be responsible for those
events which could not be foreseen, or which
though foreseen, were inevitable.
 A fortuitous event is an event that could not
be foreseen, or which though foreseen, was
inevitable.
 It is not enough that the event should not be
foreseen or anticipated, but it must be one
impossible to foresee or avoid.
 Examples are acts of God, like lightning,
earthquake and flood; force majeure such as
acts of robbery by an armed band.
a. The cause must be independent of the will
of the debtor.
b. There must be impossibility of foreseeing
the event or of avoiding it even if it can be
foreseen.
c. The occurrence of the event must b of such
character as to render it impossible for the
debtor to perform his obligation in a normal
manner.
 As a general rule, no person shall be
responsible for fortuitous event, i.e., his
obligation will be extinguished. The following
are the exceptions:
1. When expressly specified by law.
Example: if the debtor delays, or has promised to
deliver the same thing to two or more persons
who do not have the same interest, he shall be
responsible for any fortuitous event until he
has effected the delivery (Art.1165,p3).
2. When it is declared by stipulation of the parties.
Example:
D is obliged to deliver a specific horse to C on August
31, 2010. The parties agreed that D would be liable
even if the horse dies by reason of fortuitous event
before due date. Two days before due date, the
horse is killed by lightning. In this case, D will not be
relieved of his liability to C because the parties so
agreed on such liability.
3. When the nature of the obligation requires the
assumption of risk.
Example: If C insures his building against fire
with D Insurance Company and the building is
thereafter razed by fire without the fault of C,
D Insurance Company is liable to C albeit the
building is lost by fortuitous event because of
the nature of the obligation of an insurance
company is to assume the risks.
-the burden of proving that the loss was due
to fortuitous event rests on him who invokes
it.
-in order for a fortuitous event to exempt one
from liability, it is necessary that he must
have committed no negligence or
misconduct that may have occasioned the
loss.
Art. 1175. Usurious transactions shall be
governed by special laws.

Usury - is the contracting for or receiving

something in excess of the amount allowed
by law for the loan or forebearance of money-
the taking of more interest for the use of
money than the law allows.
 With the promulgation of Central Bank
Circular No. 905, effective January 1, 1983,
suspending the Usury Law, usury has become
legally inexistent.
 The lender and the borrower may thus freely
agree on the interest to be charged on the
loan (Verdejo V. CA, 157 SCRA 743).
 Nonetheless, the Supreme Court held that
nothing in the said circular grants lenders
carte blanche to raise the interest rates to
levels which will enslave their borrowers or
lead to a hemorrhaging of their assets.
 Stipulations authorizing such interest are
contra bonus mores ,i.e., contrary to good
customs if not against the law. They are
inexistent and void ab initio.
 Thus, the interest rate of 10% per month
agreed upon by the parties is clearly excessive,
iniquitous and unconscionable and cannot be
sustained (Svendsen v. People, GR No. 175381,
Feb. 26, 2008).
 But the SC in certain cases found the 10%
interest per month clearly excessive and
reduced it to 12% per annum. In effect the
difference may be recovered by the debtor if
he had paid such excessive interest.
Art. 1176. The receipt of the principal by the
creditor, without reservation with respect to
the interest, shall give rise to the presumption
that said interest has been paid.
The receipt of a later installment of a
debt without reservation as to prior
installments, shall likewise raise the
presumption that such installments have
been paid.
 This shall give rise to the presumption
that the interest has been paid.
 This is so because payment of the
principal shall not be deemed to have
been made until the interests have been
covered.
 D obtained from C a loan of P50,000.00 which
bears interest a 10% per annum. C thereafter
issued a receipt acknowledging the payment
of the principal of P50,000.00 without
indicating therein whether the interest has
been paid. In this case, the interest of 10% is
presumed to have been paid. However, C may
prove that such interest has not been paid and
if he is able to do so, he shall be allowed to
recover it.
 This shall give rise to the
presumption that such prior
installments have been paid.
 This presumption is likewise
disputable; hence, the creditor may
present evidence that such prior
installments have not been paid.
 D owes C P10,000.00. The debt is payable in 5
equal monthly installments as follows:
P2,000 due on June 1; P2,000 due on July 1;
P2,000 due on August 1; and P2,000 due on
September 1. C issues a receipt dated
September 1, acknowledging the payment of
P2,000 for the fifth installment which is due
on such date without indicating in the receipt
that the first 4 installments had been paid.
 Thus, C may present evidence that
such prior installments have not
been paid and if he is able to do so,
he shall be allowed to recover such
prior installments.
Art. 1177. The creditors, after having
pursued the property in possession of the
debtor to satisfy their claims, may exercise all
the rights and bring all the actions of the
latter for the same purpose, save those which
are inherent in his person; they may also
impugn the acts which the debtor may have
done to defraud them.
a. Exact payment of the debtor.
b. Pursue the properties in possession of the
debtor.
-in availing himself of this remedy, the
creditor may ask the court in to order that
properties of the debtor not exempt from
execution be attached and sold at public
auction and the proceeds of the sale applied
to the payment of his claim.
c. Exercise all the rights and bring all actions of
the debtor, except those that are inherent in his
person.
-this remedy is known as Subrogatory Action
(accion subrogatoria). Thus, if the debtor has a
right to collect a credit from a third person, the
creditor may exercise such right of action of the
debtor and collect directly from third person.
Or if the debtor has a right to repurchase a
parcel of land form a third person, the creditor
may avail himself of this right.
d. Impugn the acts which the debtor may have
done to defraud his creditors.
-this remedy is known as accion pauliana.
It is available to creditor if he has no legal means
to obtain reparation of the damages caused
him. Thus, if the debtor, in order to defraud his
creditors, sold his only property to a third
person who was aware of the fraudulent
intent of the debtor, the creditor may ask for
the rescission of the sale.
Once the sale is rescinded and the property is
returned to the debtor, the creditor may ask
the court to order the attachment of the
property and the sale thereof at public
auction, and the proceeds of the sale applied
in payment of his claim.
Art. 1178. Subject to laws, all
right acquired in virtue of an
obligation are transmissible, if
there has been no stipulation to the
contrary.
 As a general rule, all rights acquired in virtue
of an obligation are transmissible.
Example:
D owes C P100,000. The debt is evidenced by a
PN. C may assign or transfer his credit right,
say, to X, a third person. So X will now be
entitled to collect from D. Or when C dies, his
right to the credit is transmitted to his heirs.
Thus the heirs will be the ones having the right
to collect from D.
1. When the parties stipulated against the
transmission of the right.

2. When the law prohibits the transmission of

right (ex. Law on Partnership)

3. When the nature of the obligation does not

allow the transmission of the right, such as
when it is purely personal.
1. Primary classification under the Civil Code
a. Pure obligation
b. Conditional obligation
c. Obligation with a period
d. Alternative obligation
e. Facultative obligation
f. Joint obligation
g. Solidary obligation
h. Divisible obligation
i. Indivisible obligation
j. Obligation with penal clause
 2. Other kinds of obligation
a. Unilateral
b. Bilateral
c. Reciprocal
d. Simple
e. Compound
f. Positive
g. Negative
h. Civil
i. Natural
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.
Every obligation which contains
a resolutory condition shall also be
demandable, without prejudice to the effects
of the happening of the event.
 A pure obligation is one without a term or
condition; hence, it is demandable at once.
Example:
1. “I promise to give you P10,000.00”
2. “I promise to give you P10,000.00 on
demand.”
 A conditional obligation is one whose
demandability or extinguishment is subject
to the happening of a condition.

 A condition is an uncertain event which

wields an influence on a legal relationship.
1. Suspensive condition (also called condition
precedent or condition antecedent)
-this is a condition that suspends the
effectivity of the obligation until the
condition is fulfilled.
-if the condition is not fulfilled, the
obligation is not effective or demandable.
 “ I promise to give you a house and lot if you
marry X.” The suspensive condition is “if you
marry X.”
 If you do not marry X, you cannot demand
the delivery of a house and lot from me.
2. Resolutory condition (also called condition
subsequent)
-this is a condition which extinguishes the
obligation upon its happening.
-here, the obligation is demandable at once,
but when the condition is fulfilled, the
obligation is extinguished and the parties
shall return to each other what they have
received.
 “I will let you use my car until you finish your
course in Accountancy.”
 The resolutory condition is your “finishing
your course in Accountancy.”
 You may demand now the delivery of my car
to you, but when you finish your course in
Accountancy, my obligation to let you use
my car is extinguished. You must therefore
return the car to me.
Art. 1180. When the debtor binds himself
to pay “when his means permit him to do
so”, the obligation shall be deemed to be one
with a period, subject to the provisions of
Article 1197.
 The obligation shall be considered as one with
a period and not subject to a condition.
 Since the time of the performance of the
obligation cannot be determined, the creditor,
before he can enforce it, must file a court
action for the fixing of the period.
 Any demand by the creditor before the term
arrives is considered premature.
“I will pay you my debt of P10,000:

when my means permit me to do so.”

 as soon as possible”
 As soon as I have the money”
 When I can afford it”
Art. 1181. In conditional obligations, the
acquisition of rights, as well as the
extinguishment or loss of those already
acquired, shall depend upon the happening of
the event that constitutes the condition.
Note: the provision classifies the principal
conditions into suspensive and resolutory
conditions.
Art. 1182. When the fulfillment of the condition
depends upon the sole will of the debtor, the
conditional obligation shall be void. If it is
dependent upon chance or upon the will of a
third person, the condition shall take effect
in conformity with the provision of this Code.
I. Potestative condition (also known as
facultative condition) --This is a condition
that depends upon the exclusive will of one
of the parties.
1. Potestative on the part of the debtor
a. If a condition is also suspensive, the
obligation and the condition are void.
Ex. (“I will give you P10k if I like.”)
b. If the condition is also resolutory, the
obligation and the condition are valid.

Example:
“ I will let you use my car until I return from
Baguio.”
 2. Potestative on the part of the creditor
-the obligation and the condition are valid,
whether the condition is suspensive or
resolutory.
Example:
a. “I will give you P20k if you go to Baguio.”
b. “I will let you use my car until you return from
Baguio.”
 II. Casual condition
-this is a condition that depends upon chance
or upon the will of a third person. The
obligation and condition are valid.
Example:
1. “I will give you a car if I win the first prize in
the lotto on a bet I placed this morning.”
2. “I will give you P10k if X goes to Hongkong.”
III. Mixed condition -this is a condition that
depends partly upon the will of one of the
parties and partly upon chance or the will of
a third person. The obligation and the
condition are likewise valid.
Examples:
1. “I will give you 10% of my winnings if you
place my bet in the lotto.” (partly upon the
will of the creditor and partly upon chance)

2. “I will give you a house and lot if you marry

X.” (partly upon the will of the creditor and
partly upon the will of a third person)
Art. 1183. 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.
a. Possible condition -a condition
that is capable of fulfillment.

b. Impossible condition -a condition that is

incapable of performance or cannot be
physically done (physical impossibility), or
which is contrary to law, moral, good
customs, public order and public policy (legal
impossibility).
1. D obliged himself to give P50k to C if C can
swim across the Pacific Ocean. (physical
impossibility)

2. D obliged himself to give C P50K if C will not

vote in the coming senatorial election.
(legal impossibility for being contrary to
public policy)
 Impossible conditions shall annul the
obligation that depends upon them.
 The obligation and the condition are void.
Thus, in the example above where “D obliged
himself to give C P5K if C will not vote in the
coming senatorial election”, even if C does
not vote, C cannot demand the payment of
P5k from D.
a. If the obligation is divisible, only that part
that is not affected by the unlawful or
impossible condition shall valid.
 D agrees to give C all books in Accounting in
the review class if C enrolls with him at the
ABC CPA Review Center and P50K if C can
steal the questions in the coming CPA Board
Exam. The obligation to give the Accounting
Books is valid, but the obligation to give P50k
is void because it depends upon a condition
that is unlawful.
b. If the obligation is indivisible, the entire
obligation is void.
Example:
D agrees to give C P100k if C enrolls with him at
the ABC CPA Review Center and if C can steal
the questions in the coming CPA Board Exam.
The obligation is void because that part that is
lawful (if C enrolls with him at the review center)
cannot be separated from that part that is
unlawful (stealing the questions) since there is
only one consideration for both conditions.
 The condition not to do an impossible thing
shall be considered as not having been
agreed upon; hence, the obligation is
demandable at once.
 D obliged himself to give C P5k if C does not
swim the Pacific Ocean. The negative
impossible condition “not to swim across the
Pacific Ocean” is deemed as not having been
agreed upon; hence, the obligation is
considered a pure obligation and is
demandable at once.
Art. 1184. The condition that some event
happen at a determinate time shall
extinguish the obligation as soon as the time
expires or if it has become indubitable that
the event will not take place.
 A positive condition is a condition that some
event will happen at a determinate time.
 When the performance of an obligation
depends upon the happening of some event at
a determinate time, the obligation shall be
extinguished as soon as the time expires
without the event taking place or if there is no
more doubt that the event will not take place
even before the expiration of such determinate
time.
 D obliged himself to give C a house and lot if C
will marry X within one year. If the one-year
period expires without marrying X, then D’s
obligation will be extinguished. If X dies before
the expiration of the one year period and C has
not yet married her, D’s obligation is likewise
extinguished on the date of X’s death.
However, D’s obligation arises if C marries X
within 1 year period.
Art. 1185. The condition that some event will not
happen at a determinate time shall render the
obligation effective from the moment the time
indicated has elapse, or if it has become
evident that the event will not occur.
If no time has been fixed, the condition shall
be deemed fulfilled at such time as may have
probably been contemplated, bearing in mind
the nature of the obligation.
 A negative condition is a condition that
some event will not happen at a
determinate time.
 When the fulfillment of the obligation
depends upon the condition that some event
will not happen at a determinate time, the
obligation becomes effective as soon as the
time expires, or it has become evident that
the event will not take place.
 D obliged himself to give C a house and lot if C
will not marry X within 1 year. If the 1 year
period expires without C marrying X, then D’s
obligation will become effective or demandable.
If X dies before the expiration of the 1 year
period and C has not yet married her, D’s
obligation likewise becomes effective or
demandable on the date of X’s death. However,
D’s obligation is extinguished if C marries X
within the 1 year period.
Art. 1186. The condition shall be deemed
fulfilled when the obligor voluntarily
prevents the fulfillment.
 If the debtor voluntarily prevents the
fulfillment of the condition, such condition is
deemed fulfilled and the obligation becomes
demandable.
 In order that there is constructive fulfillment
of the condition, there must be an intent on
the part of the debtor to prevent compliance
with the condition and he actually prevent
its fulfillment.
 D, the owner of a trading company, obliged
himself to provide a job to C in the firm
provided that C passes the pre-employment
physical examination including the anti-
drug test. D, however, put a dangerous drug
in the drink of C; hence, C failed in his
physical examination and was found unfit for
employment.
 In this case, the condition that C must pass the
pre-employment physical examination is
deemed fulfilled. D is therefore obliged to
provide a job for C. If C, however, is really
disqualified from employment because he had
tuberculosis, then the condition is not fulfilled.
In either case, C may recover damages from D
for the latter’s act of placing a dangerous drug
on the former’s drink.
 The condition is not deemed fulfilled if the
debtor prevents its fulfillment in the exercise
of a lawful right or for justifiable reasons.
 D obliged himself to give a house and lot to C
if C marries X. Later, D tried to convince C not
to marry X because D found out that X was the
daughter of C’s father by another woman.
Here, the condition is not deemed fulfilled
because the prevention of its fulfillment by the
debtor is for a lawful purpose (stopping the
marriage between a brother and a sister from
taking place which is considered void).
Art. 1187. The effects of conditional obligation
to give, once the condition has been fulfilled,
shall retroact to the day of the constitution of
the obligation. Nevertheless, when the
obligation imposes reciprocal prestations
upon the parties, the fruits and interests
during the pendency of the condition shall be
deemed to have been mutually compensated.
If the obligation is unilateral, the debtor shall
appropriate the fruits and interests received,
unless from the nature and circumstances of
the obligation it should be inferred that the
intention of the person constituting the same
was different.
In obligations to do and not to do, the court
shall determine, in each case, the retroactive
effect of the condition that has been complied
with.
 Upon the fulfillment of the suspensive
condition, the obligation becomes effective
and demandable.
 However, the effects of the obligation shall
retroact to the day the obligation was
constituted.
 Hence, the creditor shall be entitled to the
thing from the time the obligation was
perfected.
 On August 1, 2010, D promised to give his
agricultural lot to C if C passes the CPA Board
exam in October 2010. C passed the CPA
board exam on October 20, 2010. In this case,
it was as if C was entitled to the lot on
August 1, 2010.Hence, any alienation, such as
donation, of the lot, made by C before
October 20, 2010 will be considered valid.
 The retroactive effect, however, does not
apply to the fruits and interests during the
pendency of the condition, as follows:
1. In reciprocal obligations, the fruits and
interests received during the pendency of the
condition shall be deemed to have been
mutually compensated, i.e., they are not
required to be delivered for convenience.
 On May 1, 2010, S agreed to sell his coconut
plantation to B and B agreed to pay P500k for
the plantation if B passes the CPA board exam
in October 2010. B passed the CPA board
examination on October 20, 2010. S must now
deliver the plantation but not the fruits thereof
from May 1,2010 until October 19,2010, and B
shall pay the price of P500,000.00 but not the
interest thereon during the same period. The
fruits and interest will offset each other.
2. In Unilateral Obligations, the debtor shall
keep the fruits and interests unless there was
a contrary intent.
 On August 1,2010, D promised to give his
agricultural lot to C if C passes the CPA Board
Examination on October 2010. C passed the
CPA Board examination on October 20,2010.
D must now deliver the lot to C. However, he
shall keep the fruits from August 1,2010 to
October 19,2010, unless the parties agreed
otherwise.
 The courts shall determine in each case the
retroactive effect of the condition that has
been complied with.
Art. 1188 The creditor may, even before the
fulfillment of the condition, bring the
appropriate actions for the preservation of
his right.
The debtor may recover what during the
some time he has paid by mistake in case of a
suspensive condition.
 The creditor may, before the fulfillment of the
condition, take appropriate actions to
preserve his right. Such actions include the
following:
1. Filing a court action to prevent debtor from
deliberately alienating, destroying, or
concealing the property.
2. Recording the expected right with the
Register of Deeds to give notice to third
persons.
 D obliged himself to give C a specific
fishpond provided C completes his course in
Agriculture. To preserve his right, C may
cause the annotation of his expected right
on the Certificate of Title covering the
fishpond with the Register of Deeds. In case
D sells the fishpond, the buyer will take it
subject to the right of C.
3. Asking for security from the debtor if he is
about to become insolvent, such as requiring
the debtor to provide a surety for the debt.
a. If the debtor paid believing that the
condition had been fulfilled, i.e., by mistake,
then he can recover the payment as this is a
case of solutio indebiti. He shall also be
entitled to the fruits or legal interest if the
creditor accepted the payment in bad faith.
b. If he paid with knowledge that the condition
has not yet been fulfilled:

1. if the condition is eventually fulfilled, then

he can no longer recover the payment, as
fulfillment of the condition entitles the
creditor anyway to demand performance of
the obligation.
2. If the condition is not fulfilled, then he shall
be entitled to recover, except if his making
the payment is equivalent to a waiver of the
condition.
Art. 1189. -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
born 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 than that
granted to the usufructuary.
  The provision applies only if:
a. The object of the obligation is determinate;
b. The loss, deterioration or improvement takes
place BEFORE the fulfillment of the
condition; and
c. The obligation is subject to a suspensive
condition which is eventually fulfilled.
 When it perishes, such as when a particular
house is completely razed in a fire;
 When it goes out of commerce, such as when a
drug is banned because of its harmful effects;
or
 When it disappears in such a way that its
existence is unknown, or it cannot be
recovered, such as when a specific ring is
misplaced and it cannot be located, or it is
dropped at the bottom of the ocean.
 If the thing is lost without the fault of the
debtor, the obligation shall be extinguished.
This is based on the rule that “no person
shall be responsible for fortuitous event”
and the object, being determinate, cannot be
replaced.
 D obliged himself to give his house located at
San Jose St., Sampaloc, Manila, to C, his
lawyer, if C wins the civil case of D. The
house of D, however, is struck by lightning
and is burned completely before the
condition is fulfilled. D’s obligation to deliver
the house is extinguished because the house
being determinate cannot be replaced or
substituted.
2. If the thing is lost through the fault of the
debtor, he shall be obliged to pay damages.
Example:
In the foregoing example, if the house is burned
completely because D stored highly flammable
materials inside the house, then he shall be
obliged to pay damages consisting of the
value of the house plus other damages, if any,
to C.
 There is deterioration if the thing becomes
impaired in quality, functioning or condition.

 Rules in case of deterioration

1. If the thing deteriorates without the fault of
the debtor, the impairment shall be borne by
the creditor.
 D obliged himself to give his only car to C if C
passes the CPA Board Exam.. Due to wear
and tear resulting from its use before C
passed the CPA Board Exam, the car
decreased in value. In this case, C bears the
impairment.
2. If the thing deteriorates through the fault
of the debtor, the creditor may choose
between the rescission of the obligation and
its fulfillment, with a right to damages in
either case.
 Supposing that in the immediately preceding
example, the car deteriorated because D used it
frequently in drag racing and drove speedily
even on bad roads thereby causing it to suffer
serious mechanical and other problems, C shall
have the right (a) to cancel the obligation and
require D to pay the value of the car and other
damages, or (b) to demand that D deliver the
car in its deteriorated condition and require him
to pay he amount necessary for its repair as well
as other damages.
 There is improvement in the thing if there is
enhancement in its value or quality, such as
when something is added or attached to it.

Rules in case of improvement:

1. If the thing is improved by its nature, or by
time, the improvement shall inure to the benefit
of the creditor. This is to compensate the
creditor who would otherwise suffer in case the
thing deteriorates without the debtor’s fault.
2. If the thing is improved at the expense of the
debtor, he shall have no other right than that
granted to the usufructuary.
- Usufruct is the right to enjoy the property of
another with the obligation of preserving its
form and substance.
- The debtor may remove the improvements
provided he does not cause damage to the
thing. Otherwise, he must deliver the thing in
its improved condition to the creditor without
any right to reimbursement.
- He may however set off the improvements
against any damage caused on the thing.
Art. 1190. When the conditions have for
their purpose the extinguishment of an
obligation to give, the parties, upon the
fulfillment of said conditions, shall return each
other what they have received.
In case of the loss, deterioration or
improvement of the thing, the provisions
which, with respect tot the debtor, are laid
down in the preceding article, shall be applied
to the party who is bound to return.
 As for obligations to do and not to do,
the provisions of the second paragraph of
Article 1187 shall be observed as regards the
effect of the extinguishment of the
obligation.
1. The obligation will be extinguished.
2. The parties shall return to each other what
they have received.
3. In case of loss, deterioration or
improvement of the thing, the provisions of
Article 1189 shall be applied to the party who
is bound to return.
 D allowed the use of his car by C until C
completes his course in BSBA. D’s obligation to
allow the use of his car by C is immediately
demandable. Upon the completion of C of his
course in BSBA, the obligation of D to allow the
use of his car b C is extinguished. C is obliged to
return the car to D. In case the car deteriorated
through wear and tear during the pendency of
the condition, the deterioration shall be borne
by D. if the car was lost during the same period
through C’s fault, C shall pay damages to D.
 The courts shall determine, in each case,
whether or not to give the extinguishment of
the obligation any retroactive effect.
Art. 1191. The power to rescind 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
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 the 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 188 and the Mortgage Law.
 The foregoing provision is applicable only to
reciprocal obligation.
 A reciprocal obligation is one that arises from
the same cause and in which each party is a
debtor and a creditor of the other, such that
the obligation of one is dependent upon the
obligation of the other.
 Reciprocal obligations are to be performed
simultaneously so that the performance of
one is conditioned upon the simultaneous
fulfillment of the other.
 If one party performs his obligation but the
other does not, the party performing his
obligation suffers injury by reason of the
delay.
1. Rescission with damages
- the remedy of rescission in reciprocal
obligations is implied; hence, it is not
required to be stipulated.

- the availment of the injured party of this

right, however, is subject to the following
limitations:
a. The obligation is not automatically
rescinded by reason of one party’s non-
fulfillment of his obligation.
- neither may the injured party unilaterally
rescind the obligation. The injured party
must still apply for a decree of rescission from
the court.
b. Rescission is not available if there is just
cause for the fixing of the period within
which the debtor can comply with his
obligation.
c. Rescission is not available if the thing
subject matter of the obligation is already in
the possession of a third person who
acquired it in good faith.
d. Rescission will not be granted if there is a
slight or casual breach of the contract. It will
be allowed only for such breaches which are
so fundamental or substantial as to defeat
the purpose of the parties in making the
agreement.
2. Fulfillment of the obligation with damages
Example:
S sold his Toyota car to B for P200k. Upon the
perfection of the contract, B paid the price but
S failed to deliver the car. B has the right to file
a court action against S to require the delivery
of the car and to pay damages or for the
rescission of the contract with damages
which will result in the return of the price.
 The remedies of RESCISSION and
FULFILLMENT may be availed of by the
injured party in the alternative.
 He cannot ask for both.
 If he has chosen rescission of the obligation, he
can no longer ask for fulfillment.
 However, he may also seek rescission, even
after he has chosen fulfillment, if the latter
becomes impossible.
 Thus, in the preceding example, if B has
chosen the fulfillment of the obligation but S
failed to deliver the car because it has been
lost through his fault, B may also ask for the
rescission of the obligation with damages.
Art. 1192. 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.
 The liability of the first infractor shall be
equitably tempered or reduced.

 This rule is fair because the second infractor

also derived or thought he would derive some
advantage by his own act or neglect.
 S sold his computer to B for P10k. The parties
agreed that the delivery of the computer would
be made on August 15 and the payment of the
price on August 17 without need of demand by
either party. S failed to deliver the computer on
August 15 but he delivered it on August 17. B
failed to pay the price on August 17 but he paid it
on August 19. S shall be liable for damages
because he was the first who committed a
breach of his obligation. However, since B
likewise committed a breach of obligation, the
liability of S shall be equitably reduced by the
court.
 The contract shall be extinguished.
 This rule is likewise just, because it is
presumed that both at about the same time
tried to reap some benefit.
Art. 1193. 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 the 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 unconditional,
and it shall be regulated by the rules of the
preceding Section.
 An obligation with a period is one whose
demandability or extinguishment is subjected
to the expiration of the term which must
necessarily come.
 In other words, there is a day certain when
the obligation will arise or cease.
 On August 1, 2010, D obliged himself to give
his ring to C on December 1, 2010. On
December 1, 2010, the obligation becomes
demandable by reason of the expiration of
the term or period. The period here is one
with a suspensive effect or ex die.
 On August 1, 2010, D allowed the use of his
car by C until December 1, 2010. D ‘s
obligation to allow the use of his car by C is
demandable on August 1, 2010, but on
December 1, 2010, his obligation to allow the
use of his car by C is extinguished. The period
is one with a resolutory effect or in diem.
 Period is a space of time which determines
the effectivity or extinguishment of an
obligation. Thus, the space of time between
August 1, 2010 and December 1, 2010 is a
period the lapse of which will cause an
obligation to arise or cease.
 A day certain is that which must necessarily
come although it may not be known when.
 An example is the death of a person which must
necessarily come although it may not be known
when.
 Thus, if D is obliged to give P5K to C upon the
death of C’s father, D’s obligation is one with a
period as a day certain has been fixed for its
demandability. The period in this case is ex die
or one with a suspensive effect.
 Condition Period
As to fulfillment An uncertain event An event which is certain
to happen at a date known
beforehand, or at a time
which cannot be
determined

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

obligation arise or cease efficaciousness of an
obligation

As to time May refer to a past event Always refer to the future

unknown to the parties

As to the will of the debtor A condition that depends A period that depends
upon the will of the debtor upon the will of the debtor
which is suspensive shall authorizes the court to fix
annul the obligation. its duration
1. According to effect
a. Suspensive period (ex die) - it is one the
expiration of which causes the obligation to
arise.
- an obligation with a suspensive period
cannot be demanded until the expiration of
the term.
Examples:
 “I will pay you P500K 6 months from now.”
 “I will give your allowance next week.”
 b. Resolutory Period (in diem)
- it is one the expiration of which causes the
extinguishment of the obligation.
- an obligation with a resolutory period is
demandable at once but is terminated upon
the expiration of the term.
Examples:
a. “I will give you this book until the end of the
semester”
b. “I will give your monthly allowance until
December 31, 2011.”
 2. According to Source

a. Legal period - period fixed by law

b. Voluntary period -period fixed by

stipulation

c. Judicial period -period fixed by court

Art. 1194. In case of loss, deterioration or
improvement of the thing before the arrival
of the day certain, the rules in article 1189
shall be observed.
Art. 1195. Anything paid or delivered before the
arrival of the period, the obligor being
unaware of the period or believing that the
obligation has become due and demandable,
may be recovered, with the fruit and interests.

Application: the provision is applicable only

to a obligation to give a thing. It does not
apply to obligations to do and not to do.
a. If the debtor made the payment believing that
the period has arrived, he may recover what
he has paid with its fruits and interests.
-This is based on the quasi-contract of solutio
indebiti; thus, if an obligation due on
December 31, 2010 is paid by mistake on
December 31, 2008, the debtor can recover
the amount paid together with the interest
from the date of payment.
b. If the debtor made the payment with
knowledge of the period or with knowledge
that the period has not arrived, he cannot
recover what has paid or delivered.
- by making the payment or delivery, he is
deemed to have impliedly waived the benefit
of the period.
Art. 1196. Whenever in an obligation a period is
designated, it is presumed to have been
established for the benefit of both the
creditor and the debtor, unless from the
tenor of the same or other circumstances it
should appear that the period has been
established in favor of one or of the other.
 The period is presumed to have been
established for the benefit of both the debtor
and the creditor, unless form the tenor of the
obligation or other circumstances it should
appear that the period has been established
for only one of them.
 If the period is for the benefit of both parties,
the creditor cannot demand from the
debtor, and the debtor cannot compel the
creditor to accept payment BEFORE the
expiration of the period.
 On January 1, 2010, D obtained a loan of
P100k from C. The debt bears interest at 12%
per annum and due on December 31, 2010.
Here, D cannot compel C to accept payment
before December 31, 2010 and deprive C of
the interest for the remainder of the period.
Neither may C demand payment from D
before December 31, 2010 and deprive D of
the use of the money for the rest of the period.
1. Benefit of the debtor
-the period is for the benefit of the debtor if the
parties so stipulated or it can be inferred
from the tenor of the obligation that the
period was established for the benefit of the
debtor, such as when the debt is “payable
within 1 year” or “payable on or before
December 31, 2010.”
 Here, the debtor may make payment before
the expiration of the term or wait for the
last day of the term to make his payment.
However, he cannot be compelled by the
creditor to make payment before the
expiration of such term.
 On January 1, 2010, D obtained a loan of
P100k from C payable on or before
December 31, 2010. Here, D may pay the
debt before December 31, 2010, but he
cannot be required by C to pay before such
date.
2. Benefit of the creditor
- the period is for the benefit of the
creditor if the parties so stipulated or it can
be inferred from the tenor of the obligation
that the period was established for the
benefit of the creditor, such as when the debt
is “collectible on or before December 31,
2010”.
 Here, the creditor may demand payment
from the debtor before the expiration of the
term or wait up the last day of the term to
demand payment. However, he cannot be
compelled by the debtor to accept payment
before the expiration of the term.
 On January 1, 2010, D obtained a loan of
P100k from C which C may collect on or
before December 31, 2010. Here, C may
demand payment from D before December
31, 2010, but he cannot be required by D to
accept payment before such date.
Art. 1197. If the obligation does not fix a period,
but from its nature and circumstances it can be
inferred that a period was intended, the courts
may fix the duration thereof.
The courts shall also fix the duration of the period
when it depends upon the will of the debtor.
In every case the courts shall determine such
period as may under the circumstance have
been probably contemplated by the parties.
Once fixed the courts, the period cannot be
changed by them.
1. If the obligation does not fix a period, but from
its nature and circumstances it can be inferred
that a period was intended.
Ex:
D is obliged to construct the house of C. However,
no period was indicated in the agreement as to
when D must complete the construction of the
house. It is clear that a period was intended by
the parties since the construction of the house
will take some time. C may thus go to court and
ask it to fix the duration of the construction of
the house.
 2. When the duration of the period depends
upon the will of the debtor.
Examples:
a. “when my means permit me to do so”
b. “little by little”
c. “as soon as I have the money”
d. “as soon as possible”
 When the period is fixed by the court, the
period becomes part of the agreement of the
parties; hence, the court cannot change it
without the consent of the parties.
When the court may not fix the period?
If no term was specified in the obligation and the
parties did not intend a period, the court has
no right to fix it, such as when the obligation is
pure and demandable at once.
 Art. 1198. 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.
Ex. On Jan.1, 2010, D borrowed P100K from C
payable on December 31, 2010. On May 1, 2010,
D became insolvent. Here, C can demand
payment even before December 31,2010, unless
D 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;
Example: On Jan 1, 2010, D obtained a loan of
P100K from C payable on Dec. 31, 2010. D
promised to constitute a chattel mortgage on his
car within 1 month to secure the loan. However,
the one month period expired without D
executing the said chattel mortgage. C can
demand immediate payment from D without
waiting for Dec. 31, 2010.
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;
Example (#3)
On Jan 1, 2010, D obtained a loan of P100K from
C payable on Dec. 31, 2010. To secure the loan,
D constituted a chattel mortgage on his fishing
boat. On May 1, 2010, the boat was partly
burned because of the flammable materials
that D stored therein. Here, C can demand
immediate payment of the loan because the
fishing boat was impaired due to D’s fault.
4. When the debtor violates any undertaking, in
consideration of which the creditor agreed to
the period;
Example: On Jan. 1, 2010, D borrowed P100K
from C. C gave D up to December 31, 2010 to pay
on the condition that D should not enter any
casino until he has paid the debt. On Jan. 1,
2010, however, D was found playing the slot
machine at the casino. In this case, C can
demand immediate payment of the debt
because of D’s violation of his undertaking.
4. When the debtor attempts to abscond.
Example: On Jan. 1, 2010, D borrowed P100K
from C payable on December 31, 2010. On
July 1, 2010, D secretly moved to another
town with the intention of evading payment
of his debt. In this case, C can demand
immediate payment of the debt by reason of
D’s attempt to abscond.