Module in

OBLIGATIONS AND
CONTRACTS
Prepared by:

MARIANNE T. VERGARA-BORAGAY
Professorial Lecturer
 Chapter 1
General Provisions

OBLIGATION, definition

A juridical necessity to give, to do, or not to do (Art.

1156), one impressed with the character of
enforceability.
Requisites: JAPP
a. JURIDICAL or LEGAL TIE, which binds the parties to the obligation, and which
may arise from either bilateral or unilateral acts of persons.
b. ACTIVE SUBJECT known as the obligee or creditor, who can demand the
fulfilment of the obligation.
c. PASSIVE SUBJECT known as the obligor or debtor against whom the
obligation is juridically demandable; and
d. THE FACT, PRESTATION or SERVICE which constitutes the object of the
obligation.
-must be licit
-possible, physically and juridically
-must be determinate or determinable
-must have a possible equivalent in money
Activity 1
1. What is OBLIGATION?
2. Explain according to your understanding by giving practical
examples and be able to identify the requisites present.
SOURCES OF OBLIGATIONS (Art. 1157)
1. LAW (Art. 1158)
- Must not be presumed. Only those expressly determined by the Civil Code or special laws are demandable,
regulated by the precepts of the law which establishes them
2. CONTRACTS (Art. 1159)
- A meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service.
- Perfected by mere consent
3. QUASI-CONTRACTS (Art. 1160)
- Juridical relations arising from lawful, voluntary and unilateral acts, by virtue of which the parties
become bound to each other, based on the principle that no one shall be unjustly enriched or benefited at the
expense of another.
4. DELICTS (Art. 1161)
- Civil obligations arising from criminal offenses
- note however, that as a rule every person liable for a felony is also civilly liable (Criminal and civil aspect
5. QUASI-DELICTS (Art. 1162)
- fault or negligence of a person, who, by his act or omission, connected or unconnected with, but
independent from, any contractual relation causes damage to another person (tort)
Activity 2
You are now expected to have read and understood Article
1157 which is further discussed in Articles 1158 to 1162.
Now, explain the five (5) sources of obligations and give
example for each.
 Chapter 2
NATURE AND EFFECT OF OBLIGATIONS
Nature of Obligations
1. Personal Obligations – obligations to do
a. Positive - obligation to do
b. Negative – obligation not to do
2. Real obligations – obligations to give
a. Determinate or Specific – object is particularly designated or
physically segregated from all other of the same class
b. Generic – object is designated merely by its class or genus
c. Limited generic thing – when the generic objects are confined
to a particular class
RIGHTS OF A CREDITOR
Determinate:
1. Compel specific performance.
2. Recover damages in case of breach of the obligation, exclusive or in
addition to specific performance.
3. Entitlement to fruits, interests from the time the obligation to deliver
arises.
Generic:
4. Ask for performance of the obligation.
5. Ask that the obligation be complied with at the expense of the debtor.
6. Recover damages in case of breach of the obligation.
OBLIGATIONS OF THE DEBTOR (Art. 1163, Art. 1164, Art. 1165, Art. 1166)

Determinate:
1. Deliver the thing which he has obligated himself to give;
2. Take care of the thing with the proper diligence of a good father of a
family;
3. Deliver all accessions and accessories of the thing even though they may
not have been mentioned;
4. Pay damages in case of breach of the obligation by reason of delay, fraud,
negligence or contravention of the tenor thereof.
GENERIC
5. Deliver the thing which is neither of superior nor inferior quality;
6. Pay damages in case of breach of the obligation by reason of delay, fraud,
negligence or contravention of the tenor thereof.
Breach of Obligations, may either be:

1. Voluntary – if the debtor or obligor in the performance of his

obligation is guilty of default (mora), or fraud (dolo), or negligence
(culpa), or in any manner contravenes the tenor thereof.
2. Involuntary – if he is unable to comply with his obligation because
of an event which cannot be foreseen, or which, though foreseen,
was inevitable
 EFFECTS OF BREACH
(Art. 1167, 1168)

Positive Personal Obligation Negative Personal Obligation

1. The creditor can have the 1. If the obligor does what has been
obligation performed or executed at forbidden him; the creditor can have
the expense of the obligor or an it undone at the expense of the
action for damages obligor; and

2. Ask that what has been poorly 2. Ask for damages

done be undone, and to recover
damages
DEFAULT OR DELAY – is the non-fulfilment of the obligation
with respect to time (Art. 1169)

Requisites:
1. The obligation is demandable and already liquidated;
2. The obligor or debtor delays performance;
3. The creditor requires the performance judicially or extrajudicially.
3 kinds of default or mora:
1. Mora solvendi – or the delay of the obligor or debtor to perform his
obligation.
mora solvendi ex re – obligation is to give
more solvendi ex persona – when the obligation is to do
2. Mora accipiendi – or delay of the obligee or creditor to accept the
delivery of the thing which is the object of the obligation.
3. Compensatio morae – or the delay of the parties or obligors in
reciprocal obligations
WHEN IS THERE DELAY?
General Rule: There must be a demand (judicial or extra-judicial)
before delay may be incurred.
Exceptions:
1. Obligation or law expressly provides;
2. Time is of the essence in the contract;
3. Demand is useless as when obligor has rendered beyond his power
to perform;
4. There is acknowledgement of default
Activity 3
1. In what obligation/s will delay set in? In what obligation/s can there
be no delay?
2. When does a party to a reciprocal obligations incur delay? Illustrate
by giving example.
3. When is demand still necessary?
NEGLIGENCE (Art. 1173) – 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
Diligence required:
1. That agreed upon by the parties;
2. In the absence of stipulation, that required by law in the particular case;
3. If both the contract and law are silent, diligence of a good father of a
family
Concept of Diligence of a Good Father of a Family
-That reasonable diligence which an ordinary prudent person would
have done under the same circumstances

Test of Negligence:
If a person, in committing or causing the negligent act, had used
reasonable care and vigilance which a man of ordinary prudence would
have employed under the same situation, he is not guilty of negligence.
Otherwise, he is.
Fortuitous Event (Art. 1174) an event which could not be foreseen or which though foreseen, was
inevitable

Requisites:
1. Cause is independent of the will of the debtor;
2. The event must be unforeseeable or unavoidable;
3. Occurrence must be such as to render it impossible for the debtor
to fulfil his obligation in a normal manner;
4. Debtor must be free from any participation in;
5. The aggravation of the injury resulting to the creditor
Activity 4

Note that the general rule is that, there is no liability in case of

fortuitous event.
Give the exceptions and explain briefly.
USURIOUS TRANSACTIONS (Art. 1175)
Governed by special laws
EXTINGUISHMENT OF INTERESTS and PRIOR INSTALLMENTS
(Art. 1176)

1. Receipt by the creditor of the principal without reservation with

respect to the interest shall give rise to the presumption that the
interests have already been paid;
2. Receipt of a late instalment of a debt without reservation as to prior
instalments shall also give rise to the presumption that prior
instalments have already been paid.

Note:
That subject to the laws, all rights acquired by virtue of an
obligations are transmissible absence any contrary stipulations. (Art.
1178)
 CLASSIFICATIONS OF OBLIGATIONS
1. PURE and CONDITIONAL (Arts. 1179-1192)
2. With a PERIOD (Arts. 1193-1198)
3. ALTERNATIVE and FACULTATIVE (Arts. 1199-1206)
4. JOINT and SOLIDARY (Arts. 1207-1222)
5. DIVISIBLE and INDIVISIBLE (Arts. 1226-1230)
 Chapter 3
DIFFERENT KINDS OF OBLIGATIONS
(Arts. 1179 and 1180)

1. PURE OBLIGATION – one whose effectivity or extinguishment does

not depend upon the fulfilment or non-fulfilment of a condition or
upon the expiration of a term or period and is demandable at once.
2. CONDITIONAL OBLIGATION – one whose effectivity is subordinated
to the fulfilment or non-fulfilment of a future and uncertain fact or
event
 CLASSIFICATION OF CONDITIONS
(Arts. 1179 – 1180)

1 a. Suspensive – when the fulfilment of the condition results in the acquisition of rights arising out
of the obligation
b. Resolutory – When the fulfilment of the condition results in the extinguishment of rights arising
out of the obligation
2 a. Potestative – when the fulfilment of the condition depends upon the will of a party to the
obligation
b. Casual – when the fulfilment of the condition depends upon chance and/or upon the will of a
third person
c. Mixed – when the fulfilment of the condition depends partly upon the will of a party to the
obligation and partly upon chance and/or the will of a third person
3. a. Possible – when the condition is capable of realization according to nature, law, public policy
or good customs
b. Impossible – when the condition is not capable of realization according to nature, law, public
policy or good customs
4. a. Positive – when the condition involves the performance of an act
b. Negative – when the condition involves the omission of an act
5. a. Divisible – when the condition is susceptible of partial realization
b. Indivisible – when the condition is not susceptible of partial realization
6. a. Conjunctive – when there are several conditions, all of which must be realized
b. Alternative – when there are several conditions, but only one must be realized
7. a. Express – when the condition is stated expressly
b. Implied – when the condition is tacit
 SUSPENSIVE CONDITION RESOLUTORY CONDITION

1. If fulfilled, obligation arises or becomes 1. If fulfilled, obligation is extinguished

effective

2. If not fulfilled, no juridical relation is created 2. If not fulfilled, juridical relation is

consolidated

3. Rights are not yet acquired, but there is 3. Rights are already acquired, but subject to
hope or expectancy that they will soon be the threat or danger of extinction
acquired
EFFECT OF POTESTATIVE CONDITIONS:
1. When the fulfilment depends exclusively upon the will of the creditor –
the condition as well as the obligations is VALID
2. When the fulfilment depends exclusively upon the will of the debtor –
not only the condition, but even the obligations itself is VOID
EFFECT OF CASUAL CONDITIONS:
When the fulfilment of the condition depends upon chance and/or will of a
third person, the obligation including such condition shall take effect
EFFECT OF MIXED CONDITIONS:
When the fulfilment of the condition depends partly upon the will of a party to
the obligation and partly upon chance and/or the will of a third person, the
obligation including such condition shall take effect.
(Art. 1182)
RULE IN IMPOSSIBLE CONDITIONS (Art. 1183)
General Rule: They shall annul the obligation which depends upon them.
Exceptions:
1. pre-existing obligation
2. if obligation is divisible
3. in simple or renumeratory donations
4. in testamentary dispositions
5. in case of conditions not to do an impossible thing
EFFECTS OF SUSPENSIVE CONDITION (Arts. 1187 – 1188)
1. Before fulfilment of the condition, the demandability as well as the acquisition
or effectivity of the rights arising from the obligation is suspended;
2. After fulfilment of the condition, the obligation arises or becomes effective;
3. The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation;
4. When the obligation imposes reciprocal prestations upon the parties, the fruits
and interests shall be deemed to have been mutually compensated;
5. If the obligation is unilateral, the debtor shall appropriate the fruits and
interests received, unless from the nature and circumstances it should be
inferred that the intention of the persons constituting the same was different;
6. In obligations to do or not to do, the court shall determine the retroactive effect
or the conditions that has been complied with.
 EFFECTS OF LOSS, DETERIORATION AND IMPROVEMENT IN REAL OBLIGATIONS (DURING THE
PENDENCY OF THE CONDITION)
1. Loss
a. without debtor’s fault – obligation is extinguished
b. with debtor’s fault - debtor pays damages
2. Deterioration
a. without debtor’s fault – impairment to be borne by the creditor
b. with debtor’s fault – creditor may choose between the rescission of the obligation
and its fulfilment with indemnity for damages in either case
3. Improvement
a. by the thing’s nature or by time – improvement shall inure to the benefit of the
creditor
b.at the debtor’s expense – debtor shall have no other right than that granted to a
usufructuary
(Note: This applies only to determinate things) (Art. 1189)(Art. 1194)
A THING IS LOST WHEN:
1. perishes
2. goes out of commerce
3. disappears in such a way that its existence is unknown or it cannot be
recovered
CONCEPT OF RECIPROCAL OBLIGATIONS (Art. 1191)
Those which are created or established at the same time, out of the same
cause, and which result in mutual relationships of creditor and debtor between the
parties.
- the outstanding characteristics is reciprocity arising from identity of cause by
virtue of which one obligation is a correlative of the other.
(Thus, in a contract of sale, the obligation of the vendee to pay the price is a
correlative obligation of the vendor to deliver the thing sold)

TACIT RESOLUTORY CONDITION

If one of the parties fails to comply with what is incumbent upon him, there is a
right on the part of the other to rescind the obligation.
RIGHT TO RESCIND
General Rule: The right to rescind needs judicial approval.
Exceptions:
1. If there is an express stipulation of automatic rescission
2. When the debtor voluntarily returned the thing

Note: The right to rescind belongs exclusively to the injured party.

OBLIGATIONS WITH A PERIOD (Art. 1193)
Those the demandability or extinguishment is subject to the expiration of a
term or period.

Requisites:
1. future
2. certain
3. possible, legally and physically
CLASSIFICATION OF TERM OR PERIOD
1. a. Suspensive – obligation becomes demandable only upon
arrival of a day certain
b. Resolutory – arrival of day certain terminates the obligation
2. a. legal - granted by law
b. conventional – stipulated by parties
c. judicial – fixed by courts
3. a. definite – date/time is known beforehand
b. indefinite – the date/time of day certain is unknown
 TERM CONDITION
1. Interval of time which is future and certain 1. Fact or event which is future and uncertain

2. Interval of time which must necessarily come, 2. Future and uncertain fact or event which may or
although it may not be known when may not happen

3. Exerts an influence upon the time of demandability 3. Exerts an influence upon the very existence of the
or extinguishment of an obligation obligation itself

4. Does not have any retroactive effect unless there is 4. Has retroactive effect
an agreement to the contrary

5. When it is left exclusively to the will of the debtor, 5. When it is left exclusively to the will of the debtor,
the existence of the obligation is not affected the very existence of the obligation is affected
 OBLIGATIONS TO GIVE (Arts. 1194 – 1195)

Effect of Advance Payment or Delivery

If the obligor, being unaware of the period or believing that the
obligation has become due and demandable, paid or delivered
anything before the arrival or the expiration of the period, he may
recover what he has paid or delivered with fruits and interests.
BENEFIT OF TERM OR PERIOD (Art. 1196)
General Rule: When a period is designated for the performance or
fulfilment of an obligation, it is presumed to have been established for the
benefit of both creditor and debtor.
Exception: When it appears from the tenor of the obligation or other
circumstances that the period has been established in favour of one or of the
other.
WHEN COURT MAY FIX A PERIOD (Art. 1197)
1. if the obligation does not fix a period, but from its nature and circumstances it
can be inferred that a period was intended by the parties
2. If the duration of the period depends upon the will of the debtor; and
3. If the debtor binds himself when his means permit him to do so
WHEN DEBTOR LOSES RIGHT TO MAKE USE OF PERIOD (Art. 1198)
1. When after the obligation has been contracted, he becomes insolvent, unless
he gives guaranties or securities for the debt (the insolvency need not be
judicially declared)
2. When he does not furnish to the creditor the guaranties or securities he
promised
3. When by his own act he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he
gives new ones equally satisfactory when debtor violates any undertaking, in
consideration of which the creditor agreed to the period
4. When debtor attempts to abscond
 FACULTATIVE OBLIGATIONS ALTERNATIVE OBLIGATIONS

1. Comprehends only one object or 1.Comprehends several objects or prestations

prestation which is due, but it may be which are due but may be complied with by
complied with by the delivery of another the delivery or performance of only one of
object or performance another prestation in them
substitution

2. Fortuitous loss extinguishes the obligation 2. Fortuitous loss of all prestations will
extinguish the obligation

3. Culpable loss obliges the debtor to deliver 3. Culpable loss of any object due will give
substitute prestation without liability to rise to liability to debtor
debtor

4. Choice pertains only to debtor 4. Choice may pertain to creditor or even

third person

(Arts. 1199-1201) (Art. 1206)

Note that:
1. In alternative obligations, choice takes effect only upon communication of
the choice to the other party and from such time the obligation ceases to be
alternative.
2. The debtor cannot choose those prestations or undertakings which are
impossible, unlawful or which could not have been the object of the obligation.
EFFECT OF LOSS OF OBJECT OF OBLIGATION (Art. 1202 – 1205)
1. If the right of choice belongs to the debtor
a. If through a fortuitous event – debtor cannot be held liable for damages
b. If 1 or more but not all or one or some but not all of the prestations cannot be
performed due to the fault of the debtor, creditor cannot hold the debtor liable
for damages because the debtor can still comply with his obligation
2. If right of choice belongs to the creditor
a. If 1 of the things is lost through a fortuitous event, the debtor shall perform
the obligation by delivering that which the creditor should choose from among
the remainder, or that which remains if only 1 subsists
b. If the loss of 1 of the things occurs through the fault of the debtor, the
creditor may claim any of those subsisting, or the price of that which, through
the fault of the former, has disappeared with a right to damages
c. If all the things are lost though the fault of the debtor, the choice by the
creditor shall fall upon the price of any 1 of them, also with indemnity for
damages
JOINT AND SOLIDARY OBLIGATIONS: (Art. 1207)
General rule: Obligation is presumed joint if there is concurrence of two or more
debtors and/or creditors
Exceptions:
1. when expressly stated that there is solidarity
2. when the law requires solidarity
3. when the nature of the obligation requires solidarity
JOINT OBLIGATION – An obligation where there is a concurrence of
several creditors, or of several debtors, or of several creditors and
debtors, by virtue of which each of the creditors has a right to demand,
and each of the debtors is bound to render, compliance with his
proportionate part of the prestation which constitutes the object of
the obligation.
Thus, each of the creditors is entitled to demand the payment of
only a proportionate part of the credit, while each of the debtors is
liable for the payment of only a proportionate part of the debt.
SOLIDARY OBLIGATION- an obligation where there is a concurrence of several
creditors, or of several debtors, or of several creditors and several debtors, by
virtue of which each of the creditors has a right to demand, and each of the
debtors is bound to render, entire compliance with the prestation which constitutes
the object of the obligation.
Thus, each of the creditors is entitled to demand the payment of the entire
credit, while each of the debtors is liable for the payment of the entire debt.
 JOINT DIVISIBLE OBLIGATIONS
1. Each creditor can demand for the payment of his
proportionate share of the credit, while each debtor
can be held liable only for the payment of his
proportionate share of the debt
2. A joint creditor cannot act in representation of
the other creditors while a joint debtor cannot be
compelled to answer for the acts or liability of the
other debtors
JOINT INDIVISIBLE OBLIGATIONS
1. If there are 2 or more creditors, the fulfilment of
or compliance with the obligation requires the
concurrence of all the debtors, although each for his
own share. Consequently, the obligation can be
enforced only by proceeding against all of the
debtors
2. If there are 2 or more creditors, the concurrence
or collective act of all the creditors, although each
for his own share, is also necessary for the
enforcement of the obligation
EFFECT OF BREACH
If one of the joint debtors fails to comply with his undertaking, the obligation
can no longer be fulfilled or performed. It is converted into one of indemnity for
damages. Innocent joint debtors shall not contribute to the indemnity beyond their
corresponding share of the obligation

EFFECT OF INSOLVENCY OF A DEBTOR

If one of the joint debtors should be insolvent, the others shall not be liable for
his share
To hold otherwise, would destroy the joint character of the obligation
(Art. 1210)

INDIVISIBILITY SOLIDARITY

1. Refers to the prestation which 1. Refers to the legal tie or vinculum juris
constitutes the object of the obligation & consequently to the subjects or parties
of the obligation

2. Plurality of subjects is not required 2. Plurality of subjects is indispensable

3. In case of breach, obligation is 3. When there is liability on the part of

converted into 1 of indemnity for the debtors because of the breach, the
damages because of breach, indivisibility solidarity among the debtors remains
of the obligation is terminated
KINDS OF SOLIDARITY (Art. 1211)
1. Active solidarity
2. Passive solidarity
3. Mixed solidarity
• Solidarity of creditors
• Each creditor is empowered to exercise against
the debtor not only the rights which correspond
to him, but also all the rights which correspond
to the other creditors, with the consequent
obligation to render an accounting of his acts to
such creditors
• Creates a relationship of mutual agency among
solidary creditors
• Solidarity of debtors
• Liability of each debtor for the payment of the
entire obligation, with the consequent right to
demand reimbursement from the others for
their corresponding shares once payment has
been made
* Solidarity among creditors and debtors
CONSEQUENCES/EFFECTS OF ACTS OF SOLIDARY CREDITOR:
Beneficial and Prejudicial Acts – As a consequence of the relationship of mutual
agency existing among the solidary creditors, each one of them may do whatever
may be useful to the latter. Hence, each solidary creditor may demand the payment
or performance of the entire obligation from one, some or all of the debtors. Such
a demand will have the effect of benefiting not only the solidary creditor who made
it, but also the other solidary creditors. (Art. 1212)
Assignment of Rights – if the assignment is made to anyone of the other solidary
creditors, there is no violation because there can be no invasion of the personal or
confidential relationship existing among the solidary creditors.
If made to a third person, there would be a clear violation of the precept, the
other solidary creditors, as well as the debtor or debtors, are not bound to
recognize the validity of efficacy of the assignment. Without prejudice to liability
for damages.
NOVATION, COMPENSATION AND CONFUSION, REMISSION AND PAYMENT BY SOLIDARY DEBTOR (Art.
1215)
Novation – the change or substitution of an obligation by another, resulting in its extinguishment or
modification, either by changing its object or principal condition, or by substituting another in place of
the debtor, or by subrogating a third person in the rights of the creditor
Effect upon solidary obligation –
1. If the novation is prejudicial, the solidary creditor who effected the novation shall reimburse the
others for damages incurred by them
2. If it is beneficial and the creditor who effected the novation is able to secure performance of the
obligation, such creditor shall be liable to the others for the share which corresponds to them, not only in
the obligation, but also in the benefits
3. if the novation is effected by substituting another person in place of the debtor, the solidary creditor
who effected the novation is liable for the acts of the new debtor in case there is deficiency in
performance or in case damages are incurred by the other solidary creditors as a result of the
substitution
4. if the novation is effected by subrogating a third person in the rights of the solidary creditor
responsible for the novation, the relation between the other creditors not substituted and the debtor or
debtors is maintained
Compensation - is a figurative operation of weighing two obligations simultaneously in order to
extinguish them to the extent that the amount of one is covered by the amount of the other
Confusion - refers to the merger of the qualities of creditor and debtor in one and the same
person with respect to one and the same obligation
Effect upon solidary obligation:
1. If partial, the rules regarding application of payment shall apply. This is without prejudice to
the right of other creditors who have not caused the confusion or compensation to be
reimbursed to the extent that their rights are diminished or affected
2. If total, the obligation is extinguished, what is left is the ensuing liability for reimbursement
within each group
a. the creditor causing the confusion or compensation is obliged to reimburse the other
creditors
b. the debtors benefited by the extinguishments of the obligation are obliged to reimburse
the debtor who made the confusion or compensation possible
Remission - an act of pure liberality by virtue of which the creditor, without having
received any compensation or equivalent, renounces his right to enforce the
obligation, thereby extinguishing the same either in its entirety or in the part or
aspect thereof to which the remission refers. It may be total or partial, effected by
one, some but not all, of the solidary creditors in favour of one, some or all of the
debtors.
Effect upon solidary obligation:
1. If the remission covers the entire obligation, the obligation is totally
extinguished and the entire juridical relation among the debtors is extinguished
all together
2. If the remission is for the benefit of one of the debtors and it covers his entire
share in the obligation, he is completely released from the creditors but is still
bound to his co-debtors
3. If the remission is for the benefit of one of the debtors and it covers only a part
of his share in the obligation, his character as a solidary debtor is not affected
Effect of payment by solidary debtor: (Art. 1218)
1. Whole or partial extinguishment of debt
2. Right to recover against co-debtor
3. Right to recover interest from time the obligation becomes due
Effect of payment to a creditor:
4. If one of the solidary creditors is able to collect the entire amount of the debt
from one or some or all of the solidary debtors, the obligations is totally
extinguished
5. There arises a consequent obligation on his part to render an account to his co-
creditors
6. He can be held liable to the others for the share in the obligation corresponding
to him
Effect of demand upon a debtor: (Art. 1216)
1. Shall not be an obstacle to those which may subsequently be directed against
the others so long as the debt has not been fully collected
2. Creditor may proceed against any one of the solidary debtors or against all of
them simultaneously.
Effect of loss or impossibility of performance: (Art. 1221)
3. If it is not due to the fault of the solidary debtors, the obligation is extinguished
4. If due to the fault of one of the solidary debtors or due to a fortuitous event
after one of the solidary debtors had already incurred in delay, the obligation is
converted into an obligation of indemnity for damages but the solidary
character of the obligation remains.
DIVISIBLE AND INDIVISIBLE OBLIGATIONS (Arts. 1223 – 1225)
DIVISIBLE – if the prestation which constitutes the object of the obligation is
susceptible of partial compliance
INDIVISIBLE – not susceptible of partial compliance
Effect of divisible or indivisible obligations:
The creditor cannot be compelled partially to receive the prestation in which the
obligation consists; neither may the debtor be required to make partial payments
Exceptions:
1. when the obligation expressly stipulates the contrary
2. when the different prestations constituting the objects of the obligation are
subject to different terms and conditions
3. when the obligation is in part liquidated and in part unliquidated
OBLIGATIONS WITH A PENAL CLAUSE (Art. 1226)
An accessory undertaking is attached for the purpose of insuring its
performance by virtue of which the obligor bound to pay a stipulated indemnity or
perform a stipulated prestation in case of breach.
The penalty shall substitute the indemnity for damages and the payment of
interests in case of non compliance.
Purpose:
1. To insure the performance of the obligation
2. To liquidate the amount of damages to be awarded to the injured party in case
of breach of the principal obligation (compensatory)
3. In certain exceptional cases, to punish the obligor in case of breach of the
principal obligation (punitive)
Activity 5

1. Give a simple illustration of obligations showing suspensive and

resolutory conditions.
2. Juan borrowed P5,000 from Pedro in 2010 as evidenced by a promissory
note executed by Juan wherein he promised to pay as soon as he has money
or as soon as possible. Repeated demands made by Pedro to ask for payment
remain unheeded by Juan. If Pedro will bring an action against Juan for the
payment of his debt, will the action prosper? Why and why not?
 CHAPTER 4
EXTINGUISHMENT OF OBLIGATIONS
Modes of Extinguishment of Obligations:
1. Loss of the thing due
2. Fulfillment of resolutory condition
3. Compensation
4. Condonation or remission of the debt
5. Confusion or merger of rights of the creditor and debtor
6. Novation
7. Annulment
8. Rescission
9. Prescription
10. Payment or Performance
 TITLE II
CONTRACTS
 GENERAL PROVISIONS
CONTRACT – a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render
some service.
Elements:
1. Essential – without which there can be no contract
a. common (communes) – present in all contracts
i. Consent
ii. Object certain (subject)
iii. Cause of the obligation
b. special (especiales) – present only in certain contracts
i. Delivery in real contracts
ii. Form in solemn ones
c. extraordinary or peculiar (especialisimos) – peculiar to a specific contract
i. price in a contract of sale
2. Natural – derived from the nature of the contract and ordinarily accompany the same
- presumed by the law but can be excluded by the parties if desired
i. warranty against eviction in a contract of sale
3. Accidental – exists only when the parties expressly provide for them for the purpose of limiting or modifying the normal effects of
the contract
i. conditions
ii. Terms
iii. modes
 CHARACTERISTICS OF CONTRACTS
1. Obligatory Force or Character – once contract is perfected, it shall be of
obligatory force upon both of the contracting parties
2. Autonomy of contracts – parties may establish such agreements as they may
deem convenient, provided they are not contrary to law, morals, good customs,
public order or public policy
3. Mutuality of contracts – must be binding upon both of the parties; hence, its
validity or compliance cannot be left to the will of one of them
4. Relativity of contracts – take effect only between the parties, their assigns and
heirs
BREACH OF CONTRACT
-the failure, without legal reason, to comply with the terms of the contract

LIFE OF CONTRACTS (PHASES)

1. GENERATION – preliminary or preparation, conception or generation
- period of negotiation and bargaining, ending at the
moment of agreement of the parties
2. PERFECTION – birth of the contract, moment when the parties come to
agree on the terms of the contract
3. CONSUMMATION – fulfilment or performance of the terms agreed upon
in the contract
CLASSIFICATION OF CONTRACTS
1. According to their relation to other contracts:
a. Preparatory – those which have for their object the establishment of a
condition in law which is necessary as a preliminary step towards the celebration of
another subsequent contract.
eg. Partnership, agency
b. Principal – those which can subsist independently from other contracts and
whose purpose can be fulfilled by themselves.
eg. Sale, lease
c. Accessory – those which can exist only as a consequence of, or in relation
with, another prior contract.
eg. Pledge, mortgage
2. According to their perfection:
a. Consensual – perfected by mere agreement of the parties
eg. Sale, lease
b. Real – those which require not only the consent of the parties for their
perfection, but also the delivery of the object by one party to the other
eg. Commodatum, deposit, pledge
3. According to their form:
a. Common or informal – require no particular form
eg. Loan
b. Special of formal – require some particular form
eg. Donation, chattel mortgage
4. According to their purpose:
a. Transfer of ownership - eg. Sale
b. Conveyance of use – eg. Commodatum
c. Rendition of services – eg. Agency
5. According to their subject matter:
a. Things – eg. Sale, deposit, pledge
b. Services- eg. Agency, lease of services
6. According to the nature of the vinculum which they produce:
a. Unilateral – those which give rise to an obligation for only one of the
parties (eg. Commodatum, gratuitous deposit)
b. Bilateral – those which give rise to reciprocal obligations for both
parties (eg. Sale, lease)
7. According to their cause:
a. Onerous – those in which each of the parties aspires to procure for himself a
benefit through the giving of an equivalent or compensation (eg. Sale)
b. Gratuitous – those in which one of the parties proposes to give to the other a
benefit without any equivalent or compensation (eg. Commodatum)
8. According to the risks involved:
a. Commutative – each of the parties acquires an equivalent of his prestation
and such equivalent is pecuniarily appreciable and already determined from the
moment of the celebration of the contract (eg. Lease)
b. Aleatory – each of the parties has to his account the acquisition of an
equivalent of his prestation, but such equivalent, although pecuniarily appreciable,
is not yet determined at the moment of the celebration of the contract, since it
depends upon the happening of an uncertain event, thus charging the parties with
the risk of loss or gain (eg. Insurance)
9. According to their names or norms regulating them:
a. Nominate – have their own individuality and are regulated by special
provisions of law (eg. Sale, lease)
b. Innominate- lack individuality and are not regulated by special
provisions of law
- shall be regulated by the stipulations of the parties or by the rules
governing the most analogous nominate contracts, and by the customs of
the place
 CHAPTER 2
ESSENTIAL REQUISITES OF CONTRACTS
1. Consent of the contracting parties
2. Object certain which is the subject matter of the contract
3. Cause of the obligation which is established
CONSENT
- manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract.
-the offer must be certain and the acceptance absolute.
- a qualified acceptance constitutes a counter-offer
- acceptance made by letter or telegram does not bind the offerer except from
the time it came to his knowledge, in which case, the contract is presumed to
have been entered into in the place where the offer was made.
Requisites of Consent:
1. Must be manifested by the concurrence of the offer and the
acceptance.
2. Contracting parties must possess the necessary legal capacity.
3. Must be intelligent, free, spontaneous and real
FORM OF ACCEPTANCE
1. EXPRESS
2. IMPLIED

Offer
- A proposal made by one party to another to enter into a contract. 
- It must be certain or definite, complete and intentional
- Offer/proposal may be withdrawn so long as the offeror has no knowledge of
acceptance by offeree
Acceptance
- Manifestation by the offeree of his assent to the terms of the offer.
- It must me absolute.
- A qualified acceptance constitutes counter-offer.
- Acceptance may be revoked before it comes to the knowledge of the offeror.

Amplified Acceptance
- Under certain circumstances, a mere amplification on the offer must be
understood as an acceptance of the original offer, plus a new offer which is
contained in the amplification.
Rule on Complex offers
1.Offers are interrelated contract is perfected if all the offers are accepted.
2. Offers are not interrelated – single acceptance of each offer results in a
perfected contract unless the offeror has made it clear that one is dependent
upon the other and acceptance of both is necessary