CHAPTER 2:

NATURE AND
EFFECT OF
OBLIGATIONS
 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 the stipulation of the parties
requires another standard of care.
 ART. 1664. 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.
 ART. 1165. When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by
article 1170, may compel the debtor to make the delivery.
 If
the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.

 Ifthe 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 deliver.

 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.
 Obligations of the Debtor To Give a
determinate thing
To preserve or take care of the thing with the proper
diligence of a good father of a family. It means the
ordinary diligence that a prudent man would exercise in
taking care of his own property taking into consideration
the nature of the obligation, of the time and of the place,
like a person who is obliged to deliver a determinate
horse to another should, pending its delivery, preserve it
by taking care of the same as if the horse is his own.
 Obligations of the Debtor To Give a
determinate thing
 To deliver the object or thing when the obligation to deliver arises,
including:
Fruits of the thing if any. Kinds of fruits: Natural, industrial or civil.
Natural - spontaneous product of the soil; the young and other
products of animal. E.g. tress, plants on lands without he
intervention of man.
Industrial - produced by lands of any king through cultivation and
labor. E.g. sugar cane, vegetables, rice.
Civil - derived by virtue of juridical relations. E.g. rents of a building;
prices of leases of lands and other similar income.
 Obligations of the Debtor To Give a
determinate thing
Accessions and accessories.
Accession is the right pertaining to the owner of a thing over its
products and whatever is attached thereto either naturally or
artificially.
Accretion which refers to the gradual and addition of sediment to
the shore by action of water.
Accessories are those things which are joined attached to the
principal object as ornament or to render it perfect.
 Obligations of the Debtor To Give a
determinate thing
To be liable for damages in case of breach of obligation .
(Art. 1170, NCC)
When creditor acquire a right to the thing to be delivered
and its fruits
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 have been
delivered to him. (Art. 1164, NCC)
 Definition of terms:

1. Determinate thing – a thing is determinate when it is

particularly designated or physically segregated from all
others from the same class. (Art. 1460, NCC)
2. Indeterminate or generic thing – A thing is generic when it
refers to a class or thing or genus and cannot be designated
with particularity. (Art. 1460, NCC)
3. Fortuitous Events – those events which could not be
foreseen or which though foreseen were inevitable.
(Art. 1174, NCC)
 Art. 1167. If a person obliged to do something fails to do
it, the same shall be executed at his cost.

 This
same rule shall be observed if he does it in
contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been
poorly done be undone.
 Obligation of the Debtor To Do

Being a personal positive obligation, The creditor has the right to

secure the services of third person to perform the obligation at the
expense of the debtor under the following instances:

◦ When the debtor fails to do the obligation;

◦ When the debtor performs the obligation but contrary to the tenor;
or
◦ When the obligor poorly performs the obligation.
ART. 1168. When the obligation consists in not doing, and
the obligor does has been forbidden him, it shall also be
undone at his expense.

Obligation of the Debtor NOT To Do –

This is negative personal obligation which is consisting
of an obligation, of not doing something. If the debtor
does what has been forbidden him to do, the obligee can
ask the debtor to have it undone. If it is impossible to
undo what was done, the remedy of the injured party is
for an action of damages.
 ART. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extra - judicially
demands from theme 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 declares; or

( 2 ) When from the nature and the circumstances of the obligation it appears that the
destination of the time when the thing is to be delivered or the service is to rendered was
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 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 ( Mora )
means a legal delay or default and it consists of failure
discharge a duty resulting to one’s own disadvantage.

The debtor incurred delay if:

I. The debtor fails to perform his obligation when it falls due;
and
II. A demand has been made by the creditor judicially or extra
judicially.
 However, there are instances when the demand by the
Creditor is not necessary to place the debtor on delay:

1. When the obligation expressly so provides

The mere fixing of the period is not sufficient to
constitute a delay. An agreement to the effect that
fulfillment or performance is not made when the
obligation becomes due, default or delay by the debtor will
automatically arise.
2. When the law so provides
The express provision of law that a debtor is in default.
For instance, taxes must be paid on the date prescribed
by law, and demand is not necessary in order that the
taxpayer is liable for penalties.

3. When time is of the essence

Because time is the essential factor in the fulfillment of
the obligation.
4. When demand would be useless
When the debtor cannot comply his obligation as when it is beyond
his power to perform. Like when the object of the obligation is lost
or destroyed through the fault of the debtor, demand is not
necessary.

5. In a reciprocal obligation, from the moment one of the

parties fulfills his obligation, delay to the other begins
For instance, in a contract of sale, if the seller delivers the object to
the buyer and the buyer does not pay, then delay by the buyer
begins and vice versa, if the buyer pays and the seller did not deliver
the object, then the seller is on delay.
 Kinds of delay

 Mora solvendi – delay on the part of the debtor.

 Mora accipiendi – delay on the part of the creditor, like when the
creditor unjustifiably refused to accept payment at the time it was
due, is in delay.

 Compensatio morae – delay by both parties in a reciprocal obligation.

 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.

ART. 1171.Responsibility arising from fraud is demandable in all

obligations. Any waiver of an action for future fraud is void.

ART. 1172. Responsibility arising from negligence in the

performance of every king 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 persons, 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 of

which is to be observed in the performance, that which
is expected of a good father of a family shall be
required.
 Sources of liability for damages:

1. Fraud (dolo) – is the intentional deception made by

one person resulting in the injury of another.
The fraud referred to is incidental fraud, that is, fraud
incident to the performance of a pre-existing obligation.
 

2. Negligence (culpa) – consists in the omission by the

obligor 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. (Art. 1173, NCC)
 Sources of liability for damages:

3. Delay (Mora) – like when there has been judicial or

extra-judicial demand and the debtor does not comply
his obligation, delay will occur.

4. In contravention of the tenor of the obligation – refers

to the violation of the terms and conditions or defects
in the performance of the obligation.
 Other sources of liability for damages

 Loss of the thing with the fault of debtor.

 Deterioration with the fault of debtor.

(Art. 1189)
 Kinds of Damages

1. Moral damages – include physical sufferings, mental

anguish, fright, serious anxiety, besmirched reputation,
wounded feeling, moral shock, social humiliation and
similar injury.
2. Exemplary damages – imposed by way of example or
correction for the public good.
 Kinds of Damages

3. Nominal damages – are adjudicated in order that a right of the

plaintiff, which has been violated by the defendant, may be
vindicated or recognized and not for the purpose of
indemnifying the plaintiff for any loss suffered by him. (Art.
2221, NCC)
 
4. Temperate or moderate damages – are more than nominal but
less than compensatory damages may be recovered when the
courts finds that its amount cannot, from the nature of the
case, be proved with certainty.
 Kinds of Damages

5. Actual or compensatory damages – except as provided by

law, or a stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as
he has duly proved. (Art. 2199, NCC)

Damages may be recovered:

For loss or impairment of earning capacity in cases of temporary or
permanent personal injury;
For injury, to the plaintiff’s business standing or commercial credit.
 Kinds of Damages

6. Liquidated damages – are those agreed upon by parties

to a contract to be paid in case of breach thereof.
(Art. 2226, NCC)
Distinguish Fraud (Dolo) from Negligence (culpa)

1. Dolo – there is deliberate intent to cause damage or injury.

Culpa – there is no deliberate intent to cause damage.

2. Dolo – waiver of liability of future fraud is void.

Culpa – waiver may in some cases be allowed.
3. Dolo – fraud must be clearly proved.
Culpa – presumed from breach of contractual obligation.

4. Dolo – liability cannot mitigated by the courts.

Culpa – may be reduced according to circumstances.
 ART. 1174.
Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption
of risk, no person shall be responsible for those
events which could not be foreseen, or which,
though foreseen, were inevitable (1105a)
 Fortuitous event – is an event which cannot be foreseen which
though foreseen is inevitable.
Fortuitous event proper are acts of God such as volcanic eruption,
earthquake, lightning, etc. is now similar with force majeure or acts
of man such as conflagration, war, robbery, etc.

1. Requisites necessary to constitute fortuitous event

The failure of the debtor to comply with the obligation must be
independent from the human will;
The occurrence makes it impossible for the debtor to fulfill the obligation
on a normal manner, and the obligor did not take part as to aggravate the
injury of the creditor. (Vasquez v.C.A. G.R. 42926)
2. As a general rule, no person shall be held responsible
for fortuitous events

Example – Sara obliged herself to deliver a determine car to

Mark on Dec. 30, 1998. Before the arrival of the period, the
car was struck by lightning and was totally destroyed. Sara
cannot be held responsible for the destruction of the car,
hence her obligation to deliver is extinguished.
 Exceptions (when the person is responsible despite the fortuitous event)

a. When the law expressly so provides, such as:

o The debtor is guilty of fraud, negligence or in contravention of the tenor of the
obligation. (Art, 1170, NCC)
o The debtor has proved to deliver the same thing to two or more persons who
do not have the same interest. ( Art. 1165,NCC )
o The thing to delivered is generic.
o The debtor is guilty of default or delay. ( Art. 1169,NCC )

b. When declared by stipulation;

c. When the nature of obligation requires the assumption of risk.
 ART. 1175. Usurious transaction shall be governed by special laws.
Note: C.B. Circular No. 905 suspends the ceilings in the usury law. Hence,
parties can agree as to the rate of interest.

 Kinds of interest
1. Conventional *The rate which is agreed upon by the parties.
2. Legal Interest *The rate which is prescribed by law.
3. Lawful Interest *The rate which is agreed upon by the parties
but which rate is within the rate authorized by law.
4. Usurious Interest *The rate which is in excess of the maximum
rate of interest allowed by law.
 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. (1110a)

Presumption means
“the inference as to the existence of a certain fact which if not
contradicted is considered as true.”
 The presumption in the above article is a disputable presumption,
whereby one which can be contradicted by presenting proof to
the contrary while a conclusive presumption does not admit any
evidence or proof, hence, it is considered as a fact.

 Presumption under this article:

1. Receipt of the principal, without reservation as to the interest, shall give rise
to the presumption that the said interest has been paid.
2. When the creditor issues a receipt of a later installment of a debt without
reservation as to prior installment is presumed to have been paid.
 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. (1111)

 Rights of Creditors –
In order to satisfy their claims against the debtor, creditors have the following
successive rights:
1. to levy by attachment and execution upon all the property of the debtor, except
such as are exempt by law from execution;
2. to exercise all the rights and actions of the debtor, except, such as are inherently
personal to him; and
3. to ask for the rescission of the contracts made by the debtor in fraud of their
rights.
ART. 1178.
Subject to the laws, all rights acquired in virtue of an
obligation are transmissible, if there has been no stipulation
to the contrary. (1112)

As a rule, all rights acquired in virtue of an obligation are

transmissible, except in the following cases:
1. When the law so provides.
2. When the parties stipulate otherwise – by agreement of parties that
the rights acquired by them will not be transmitted to any other
person.
3. When the obligation is purely personal in nature.