Law on Obligations

& Contracts

PROF: ATTY. GABRIEL P. SINCO

GAB PADILLA SINCO
 Books
I. Law on Obligations & Contracts
Author: Anne Rhea Valle Samson, Esq.
C & E Publishing, Inc.

II. Law on Obligations & Contracts

Author: Hector De Leon (2019 Edition)
Rex Bookstore
 Coverage

Prelim & Midterm – Law on Obligations

(Articles 1156- 1304, New Civil Code)

Final – Law on Contracts (Articles 1305-

1422)
 TITLE 1

OBLIGATIONS
 Chapter 1
General Provisions

Article 1156
An obligation is a juridical necessity to give, to do or not to
do.
 An obligation is a juridical relation whereby a person
(called the creditor) may demand from another (called the
debtor) the observance of a determinative conduct (the
giving, doing, or not doing); in case of breach, may
demand satisfaction from the assets of the latter (Lawyer’s
Journal, 31 January 1951, 47).
 Essential Elements of an Obligation
(Asuncion v. The Honorable Court of Appeals, G.R. No. 109125, 2 December 1994)

i. Juridical tie
ii. Object
iii. Subject-Persons
 Civil Obligations distinguished from
Natural Obligations
 Civil Obligations grant a right of action by which their
performance can be compelled.

 Natural Obligations, not being based on positive law but

on equity and natural law, do not grant such a right.
 Civil Actions

Civil Actions - are suits filed in court involving either the

enforcement or protection of a right, or the prevention or
redress of a wrong.

- they are commenced by the filing of an original

complaint before an appropriate court.
 Prescriptions of Actions
(Statute of Limitations)
Although the creditor may file a civil action against the
debtor, such an action is subject to the prescriptive periods
provided under the law for the filing of actions.
 The rationale behind prescription is to prevent
fraudulent and stale claims from springing up at great
distances of time, thus surprising the parties or their
representatives when the facts become obscure from the
lapse of time or the defective memory, death, or removal
of the witnesses. The statute of limitations is devised to
operate primarily against those who sleep on their rights.
 Prescriptive Periods

 The following actions must be brought within 10 years

from the date the cause of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law; and
3. Upon a judgment (Art. 1144)
 The following actions must be commenced with six
years:

1. Upon an oral contract; and

2. Upon a quasi-contract (Art. 1145).
 The following actions must be instituted within four
years:

1. Upon an injury to the rights of the plaintiff; and

2. Upon a quasi-delict (Art. 1146)
Effect of Failure to File an Action within
the Prescriptive Period
 The failure to file action within the prescriptive period
CONVERTS the civil obligation into a natural
obligation.
 Illustrations

 If the debtor owes the creditor a sum of money based

on oral contract, the creditor has six years to file a civil
action demanding the payment counted from the time
the cause of action accrues, i.e., the date when the debt
becomes due. If the creditor to file his claim after that
time, his action is barred by prescription.
 ARTICLE 1157

Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
 Law includes the enactments made by a legislative
body in the exercise of its original or delegated
authority.

 A contract is a meeting of the minds between two

persons in which one binds himself, with respect to
another, to give something or to render some service.
(Art. 1305)
 A quasi-contract involves a juridical relation that the
law creates on the basis of certain voluntary, unilateral,
and lawful acts of person to avoid unjust enrichment
(Metropolitan Bank and Trust Company v. Absolute
Management Corporation, G.R. No. 170498, 9
January 2013)
 Acts or omissions punishable by law are felonies.

Felonies or delicts are committed not only by means of deceit (dolo)

but also by means of fault (culpa)

Art. 3, Revised Penal Code

There is deceit when the act is performed with a deliberate intent and
there is fault when the wrongful act results from imprudence, negligence,
lack of foresight, or lack of skill.
 Quasi-delict – whoever by act or omission causes
damage to another, there being no fault or negligence,
is obliged to pay for the damage done, and such fault
or negligence, if there is no pre-existing contractual
relation between the parties.
Practice or Custom

A practice or custom is, a general rule, not a source of

a legally demandable or enforceable right (Makati Stock
Exchange, Inc. v. Campos, G.R. No. 138814, 16 April
2009)
 ARTICLE 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.
 Obligations arising from law must be clearly and
expressly stated in the law in order for them to be
demandable. A debtor need not agree with the law to
be bound, as the law itself establishes the obligation.
”obligations arising from law are not presumed”

- it means that the obligation must be clearly (expressly or impliedly) set forth in the
law (the Civil Code or Special Laws)
Example:

Under the 13th Month Pay Law, an employer is

required to give 13th month pay to all rank-and-file
employees who have rendered at least one month of
service in a calendar year.
 ARTICLE 1159

Obligations arising from contracts have the force of

law between the contracting parties and should be
complied with in good faith.
Interpretation of the Article:

The Article means that neither party may unilaterally and upon his own exclusive
volition, escape his obligations under the contract, unless the other party assented thereto,
or unless for causes sufficient in law and pronounced adequate by a competent tribunal
(L-10337, May 7, 1957)
Meaning of “Compliance in Good Faith”

“Compliance in good faith” means that we must interpret “not by the letter that
killeth but by the spirit that giveth life.” (William Golangco Construction Corp. v.
PCIB, 485 SCRA 203, [2006]).
Requisites for Perfection of a Contract:

1. Consent of the contracting parties;

2. Object certain which is the subject matter of the
contract; and
3. Cause of the obligation which is established (Heirs
of Liong v. Castillo, G.R. No. 176425, 5 June 2013)
Stages of a Contract:

1. Negotiation
2. Perfection or birth
3. Consummation or termination
Obligatory force of Contracts

A perfected contract is the LAW between the parties

and should be complied with by them in good faith.
Philippine Transmarine Carriers, Inc. v. Legaspi (G.R.
No. 202791, 10 June 2013)

The Court held that an agreement that was voluntarily

entered into by the parties and represented a reasonable
settlement was binding on the parties and could not be
disowned later simply because one of the parties changed
his mind.
Saludaga v. Far Eastern University (G.R. No. 179337, 30
April 2008)

The Supreme Court held that when a student enrolled

in an educational institution, a contractual obligation
between him and the institution was created.
Philippine Airlines, Inc. v. Court of Appeals, G.R. No.
123238, 22 September 2008.

The Supreme Court held that when an airline issued a

ticket passenger to a passenger, confirmed for a
particular flight on a certain date, a contract of carriage
arose.
Limitations on the Obligatory Force of
Contracts
A contract is the law between the parties and its
stipulations are binding upon them, unless they are
contrary to law, morals, good customs, public order,
or public policy (Mendiola v. Commerz Trading
International, Inc., G.R. No. 200895, 31 July 2013).
Cuyco v. Cuyco, G.R. No. 168736, 19 April 2006; Sulo
sa Nayon, Inc. v. Nayong Pilipino Foundation, G.R. No.
170923, 20 January 2009

The reason is that existing laws are deemed

incorporated to, and form part of, any contract without
the need for the parties to expressly make reference to
these existing laws.
 Morals – pertain to or relate to the conscience or moral
sense or to the general principles of right conduct (Black’s
Law Dictionary)

 Good Customs – are habitual or customary practices, more

or less widespread, which prevail within a geographical or
sociological area, and by long and unvarying habit, has
become compulsory and has acquired the force of law with
respect to the place or the subject-matter to which it relates
(Black’s Law Dictionary)
 Public Order - is not as broad public policy, as the latter may
refer not only to public safety but also to considerations which
are moved by the common good. In the absence of express
legislation or constitutional prohibition, a court in order to
declare a contract void for being against public policy must
find that the contract has a tendency to injure the public, is
against the public good, or contravenes some established
interests of society, or is inconsistent with sound policy and
good morals, or tends clearly to undermine the security of
individual rights (Philippine Bank of Communications v. Hon.
Echiverri, G.R. No. L-41795, 29 August 1980)
 Innominate Contracts

For want of an express name, the following are termed “contratos innominados”:

(a) Do ut des – I give that you may give.

(b) Do ut facias – I give that you may do.
(c) Facio ut des – I do that you may give.
(d) Facio ut facias – I do that you may do.
 Example

A worked for B as interpreter. Even without an express agreement as to

compensation, A is entitled to compensation because of facio ut des – I do the interpreting
that you may give the money. (Perez v. Pomar, 2 Phil. 682).
 Obligations Arising From Law vs. Obligations Arising
from Contracts
LAW CONTRACTS

Obligations arising from law must be clearly and Obligations arising from contracts are based on the
expressly stated in the law in order for them to be stipulations between the parties which are the law
demandable. between them as long as they are not contrary to law,
morals, good customs, public policy, or public order.

Consent is not necessary to be bound. Consent, object, and cause or consideration are
essential requisites.

Prescriptive period is 10 years. Prescriptive period is 10 years for written contracts; 6

years for oral contracts.
 Article 1160

Obligations derived from quasi-contracts shall be subject to the

provisions of Chapter 1, Title XVII, of this Book.
 Obligations Arising From Quasi-Contracts

A quasi-contract is premised on the Roman maxim nemo cum

alterius detriment locupletari protest (”No one shall unjustly enrich
himself at the expense of another.”)
 Principles of Absolute Justice

Some of these principles are as follows:

1. It is presumed that person agrees to that which will benefit him.

2. Nobody wants to enrich himself unjustly at the expense of

another.
3. We must do unto other what we want them to do unto us under
the same circumstances.
 Unjust Enrichment

Zosa v. Estrella, G.R. No. 149984, 28 November 2008

There is unjust enrichment when a person unjustly retains a benefit

to the loss of another, or when a person retains the money or property
of another against the fundamental principles of justice, equality, and
good conscience.
 Kinds of Quasi-Contract

1. Negotiorum Gestio (Undue Management)

2. Solutio Indebiti (Undue Payment or Payment by Mistake)
Negotiorum Gestio – is the voluntary management of the business or
property of another without authority or power given to the officious
manager. (Art. 2144, NCC)

 The owner of the property or the business who enjoys the advantages
of the officious management shall be liable for the obligations
incurred in his interest, and shall reimburse the officious manager for
the necessary and useful expenses, and for the damages which the
officious manager may have suffered in the performance of his duties.
 Example

Where the owner of the house leaves for vacation abroad, and while
on vacation, fire breaks out and his neighbor saves his house from fire,
an obligation arising from quasi-contract – negotiorum gestio – arises.
Solutio Indebiti – arises when something is delivered through mistake
to a person who has no right to demand it, causing the unjust
enrichment of the recipient.
 Elements of Solutio Indebiti

The requisites of solution indebiti are the following:

1. Something was unduly delivered through mistake;

2. Something was received even when there was no right to demand
it; and
3. The receipt caused unjust enrichment.
 Jurisprudence (Decided Cases)

Titan-Ikeda Construction and Development Corporation v. Primetown

Property Group, Inc., G.R. Mo. 158768, Feb. 12, 2008.

It is presumed that there was a mistake if something which was

never due was delivered.
 Jurisprudence (Decided Cases)

Venzon v. Rural Bank of Buenavista [Agusan del Norte], Inc., G.R.

No. 178031, 28 August 2013.

If something is received when there is no right to demand it, and it

unduly delivered through mistake, the obligation to return it arises.
 Article 1161

Civil obligations arising from criminal offenses shall be governed

by the penal laws, subject to the provisions of article 2177, and of the
pertinent provisions of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book, regulating damages.
 Obligations Arising From A Crime

An obligation arises from crime if the offense is punishable under

the provisions of the Revised Penal Code and other penal laws.
 Dual Character of a Crime

From the standpoint of its effects, a crime has dual character:

1. It is an offense against the State because it disturbs the social

order.
2. It is an offense against a private person because it actually or
directly injures or damage his right, honor, chastity, or property
(Nuguid v. Nicdao, G.R. No. 150785, 15 September 2006.
 Civil Liability Arising From A Crime

Liong v. Lee, G.R. No. 181658, 7 August 2013, Art. 104, RPC)

Civil liability arising from crime includes restitution, reparation of

the damage caused, and indemnification for consequential damages.
 Example

A defendant who steals jewelry will be held criminally liable for

theft under the RPC. Aside from his criminal liability, the defendant
has the obligation to return the return the jewelry stolen to the owner
(restitution) with an allowance for the repair of the damage
(reparation), if any, caused to the jewelry by the defendant, and pay
damages for injuries suffered by the owner by reason of the theft
(indemnification)
 Effect of An Acquittal

A person acquitted of a criminal charge is not necessarily free from

civil liability because the quantum of proof required in criminal
prosecution (proof beyond reasonable doubt) is greater than that
required for civil liability (preponderance of evidence).
Nuguid v. Nicdao; Dayap v. Sendiong; Ambito v. People of the
Philippines

In order to be completely free from civil liability, a person’s acquittal

must be based on the fact that he did not commit the offense. If the
acquittal is based merely on reasonable doubt, the accused may still be
held civilly liable, since such an acquittal did not mean that he did not
commit the act complained of. It may only be that the facts proved did
not constitute the offenses charged.
 Article 1162

Obligations derived from quasi-delicts shall be governed by the

provisions of Chapter 2, Title XVII of this Book, and by special laws.
 Obligations Arising From Quasi-Delicts

An obligation arises from quasi-delict if a person causes damage to

another through the commission of an act or omission, there being
fault or negligence, and no pre-existing contractual relations exist
between them.
 Negligence

Negligence is defined as the failure to observe for the protection of

the interest of another person that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other
person suffers injury.
 Doctrine of Res Ipsa Loquitor
(the evidence speaks for itself)
The Doctrine of res ipsa loquitor holds a defendant liable where the
thing which caused the injury complained of is shown to be under the
defendant’s management and the accident is such that, in the ordinary
course of things, cannot be expected to happen it those who have its
management or control exercised proper care.
The Doctrine of Res Ipsa Loquitor may be allowed only
when:
(a) the event is of a kind which does not ordinarily occur in the
absence of negligence;
(b) other responsible causes, including the conduct of the plaintiff and
third persons, are sufficiently eliminated by the evidence; and
(c) the indicated negligence is within the scope of the defendant’s duty
to the plaintiff.
 Basis of Action

In a breach of contract, the action can be prosecuted merely by

proving the existence of the contract and the fact that the debtor failed
to comply with his obligation;

In a quasi-delict, the negligence or fault should be clearly

established because it it the basis of the action (Calalas v. Court of
Appeals).
 Basis of Action of Quasi-Delict

The fault or negligence of the defendant, which is the basis of an

action for quasi-delict, should be the proximate cause of the injury
suffered by the plaintiff.
 Proximate Cause

Proximate cause – is that which, in the natural and continuous

sequence, unbroken by any efficient, intervening cause, produces the
injury, and without which the result would not have occurred (Ramos
v. C.O.L. Realty Corporation)
 Quiz No. 2
1. State the dual character of a crime from the standpoint of its effects.
(2 pts. each)
2. What is basis of the civil liability arising from a crime under Art.
100 of the Revised Penal Code? (5 pts.)
3. What is the quantum of proof required in criminal prosecution? (2
pts.)
4. State the three (3) requisites of the doctrine of res ipsa loquitor. (2
pts. Each)
5. State the basis of action in a quasi-delict obligation. (5 pts.)
 Quiz No. 2
6. State the three (3) requisites of Solutio Indebiti. (2 pts. Each)
7. What is the nature of unjust enrichment? (5 pts.)
8. These are acts committed not only by means of deceit but also by
means of fault. ( 2 pt.)
9. Define civil actions. (5 pts.)
10. State the actions that must be brought within six years. (1 pt. each)