M

O
D NATURE & EFFECT OF
U OBLIGATIONS (ART. 1163 – 1178)
L EDMAR JAMES I. SEBUA, CPA

E
3

LAW 101 (LAW ON OBLIGATIONS & CONTRACTS)||2022-2023 1ST

SEMESTER
LEARNING OBJECTIVES

At the end of the module, learner must be able to:

 Distinguish a specific thing and a generic thing;

 Elaborate the duties of a debtor in obligation to give a specific and
generic thing;
 Explain the different kinds of fruits; to determine the rights of creditor to
the fruits and when the obligation to deliver fruits arises;
 Determine the meaning of personal right and real right and when
ownership is acquired by delivery;
 Explain the remedies of creditor in real obligations;
 Determine the meaning of accessions and accessories and the creditor’s
rights to it;
 Explain the remedies of creditor in positive personal and negative
personal obligations;
LEARNING OBJECTIVES

At the end of the module, learner must be able to:

 Explain the meaning of Delay and its kinds and its corresponding
effects to obligations;
 Elaborate the grounds for civil liability;
 Explain the responsibilities of the parties in case of fraud and
negligence; meaning of fraud and negligence;
 Explain Fortuitous events and its applicability and effect to
obligations;
 Determine meaning of a simple loan (mutuum), and the requisites
for the recovery of interest;
 Know the meaning of presumptions and its kinds;
 Determine the remedies available to creditors for the satisfaction of
their claims and the transmissibility of rights.
 SPECIFIC THING & GENERIC THING
Provisions of Art. 1163 relates to the degree of diligence that must be exercise when
fulfilling an obligation to give a specific (determinate) thing. Moreover, provisions
for a generic (indeterminate) thing are also discussed.

Specific or determinate thing – a thing which is particularly designated or physically

segregated from others of the same class.
Art. 1163. Every person
Examples: (1) the watch Pres. Duterte wears; (2) the car sold by Mr X; (3) my dog named obliged to give something
“Blakjak”; (4) the house at the corner of South Osmeña St. and Quirino Avenue; is also obliged to take
care of it with the proper
(5) the Honda Beat motorcycle with plate number CPA 010 (2017); etc. diligence of a good father
of a family, unless the law
Generic or indeterminate thing – a thing which refers only to a class and cannot be pointed out or the stipulation of the
with particularity. parties requires another
standard of care.

Examples: (1) a Bulova watch; (2) the sum of P1,000; (3) a dog named “Bantay”; (4) a cavan
of rice; (5) a motorcycle.

A specific thing is identified by its individuality and the debtor CANNOT substitute it with
another without the consent of the creditor while a generic thing is identified only by its specie
or class and the debtor CAN substitute or give anything of the same class as long as it is of the
same kind.
 DUTIES OF DEBTOR IN OBLIGATION
TO GIVE A SPECIFIC OR DETERMINATE THING

Duties of debtor in specific real obligation (obligations to give a specific thing):

1. Preserve the (specific) thing – the obligor has the incidental duty to take care of the thing
with the diligence of a good father of a family pending delivery or while delivery has
not been made.

(a) Diligence of a good father of a family – the phrase has been equated to ordinary
The debtor MUST exercise
care or that diligence of an average/prudent person over his own property. diligence to insure that the
thing to be delivered would
(b) Another standard of care – However, if the law or agreement of the parties subsist or stay in the same
condition as it was when the
provides for another standard of care which is more than ordinary care, then said law or obligation was first
agreement must prevail. contracted. Without such
obligation, the debtor would
Therefore, under the law, for instance, a common carrier (person or a company be negligent and he would
engaged in transportation of people or cargoes) is bound to carry the passengers safely as far not be liable if the property
as human care can provide, using extraordinary diligence of very cautious persons. is lost or destroyed through
his fault.

What factors must be considered? The diligence required necessarily depends upon the:
1) Nature of the obligation 3) Circumstances of time
2) Circumstances of persons 4) Circumstances of place
This factors will be discussed thoroughly in Art. 1173
 DUTIES OF DEBTOR IN OBLIGATION
TO GIVE A SPECIFIC OR DETERMINATE THING

Duties of debtor in specific real obligation (obligations to give a specific thing):

2. Deliver the fruits of the (specific) thing – the debtor is obligated also to deliver the thing’s
fruits. The fruits mentioned by the law refers to natural, industrial, and civil fruits.

(a) Natural fruits – spontaneous products of the soil, and the young and other
products of animals produced without human intervention.
Art. 1164. The creditor
Examples: Grass, Trees and Plants on a land produced without the intervention of has a right to the fruits
of the thing from the
human labor
time the obligation to
deliver it arises.
(b) Industrial fruits – those produced by land of any kind through cultivation or However, he shall
human labor. acquire no real right
over it until the same
Examples: Sugar cane; vegetables; rice; and all products of land brought about by has been delivered to
him
reason of human labor.

(c) Civil fruits – those derived by virtue of a juridical relation.

Examples: Rents of buildings, Price of lease on land and other properties.

 RIGHTS OF THE CREDITOR TO THE FRUITS
& PERSONAL RIGHT vs. REAL RIGHT

What is the right of the creditor to the fruits?

• The creditor is ENTITLED to the fruits of the (specific) thing to be delivered from the
time the obligation to make delivery arises.

When will be time the obligation to make delivery (of the thing and fruits) arises?
• Generally, the obligation to deliver arises from the time of the “perfection (birth) of
the contract/agreement”. Birth of contract = meeting of minds of the parties.
• If obligation is subject to suspensive condition or period (Art. 1179, 1189, 1193), Art. 1164. The creditor
delivery arises upon the fulfillment of condition or arrival of the period/term. has a right to the fruits
of the thing from the
• In a contract of sale, obligation to deliver arises from the perfection of the contract.
time the obligation to
deliver it arises.
Personal right (jus in personam) vs. Real right (jus in re) However, he shall
(1) Personal right – right/power of a person (creditor) to demand from another person (debtor), acquire no real right
as a definite passive subject, the fulfillment of the latter’s (debtor) obligation to give, to do, or over it until the same
not to do. Therefore such right is enforceable against a specific person (debtor) only. has been delivered to
him

(2) Real right – right/power of a person over a specific thing (like ownership or possession),
without a definite passive subject. Therefore such right is enforceable against the whole world.

Therefore, pending delivery of the fruits, the creditor has only a personal right over such fruits.
When delivery has already been made and creditor acquires physical possession, he already has
a real right over such fruits.
 DUTIES OF DEBTOR IN OBLIGATION
TO GIVE A SPECIFIC OR DETERMINATE THING

Duties of debtor in specific real obligation (obligations to give a specific thing):

3. Deliver the accessions and accessories - the debtor is obligated also to deliver the all of the
thing’s accessions and accessories.

(a) Accessions – are the fruits of a thing or additions to or improvements upon a

thing (principal)
Examples: House or trees on a land; rent of a building; air conditioner in a car, etc. Art. 1166. The
obligation to give a
determinate thing
(b) Accessories – things joined to or included with the principal thing for the latter’s
includes that of
(principal thing’s) embellishment, better use, or completion. delivering all its
Examples: key of a house; bracelet of a watch; bow in a violin, etc. accessions and
accessories, even
Note: Accessions are not necessary to the principal thing, while the Accessory and the principal thing must go together. though they may not
have been mentioned.
What is the right of the creditor to the accessions and accessories?
• General rule is that all accessions and accessories are considered included in the
obligation to deliver the principal thing (specific or determinate thing) although they
may not have been mentioned. This rule is based on the principle of law that the
accessory follows the principal.
 DUTIES OF DEBTOR IN OBLIGATION
TO GIVE A SPECIFIC OR DETERMINATE THING

Duties of debtor in specific real obligation (obligations to give a specific thing):

4. Deliver the (specific) thing itself – the primary thing itself should be delivered. Delivery may be actual
(physical) or constructive. (Art. 1477)
 Delivery - Not only a necessary condition for the enjoyment of the thing, but also the mode of
transferring ownership.

Kinds of delivery: (traditio is a Latin term meaning delivery)

1. Actual or real – placing the thing under the control and possession of the buyer (creditor) Specific provisions for
2. Legal or constructive delivery can be found in
a. Legal formalities – delivery by execution of a public instrument (notarized document, ex. Arts. 1163, 1233, 1244;
Deed of sale) and as to the kinds of
b. Traditio symbolica – ex. delivery of the keys of the house. delivery – Arts. 1497 to
c. Traditio longa manu – seller pointing out to the buyer the things which are transferred, 1501)
which at the time must be in sight. (delivery by long hand)
d. Traditio brevi manu - A possessor of a thing not as an owner, becomes the possessor as
owner (i.e. Lessor sells the thing leased to the lessee on a finance lease)
e. Traditio constitutum possessorium - A possessor of a thing as an owner retains
possession no longer as an owner, but in some other capacity. This is the opposite of
traditio brevi manu. (ex. Sale and Leaseback Transaction)

5. Answer for damages in case of non-performance or non-fulfillment of obligation (breach of

contract/agreement) – discussed thoroughly on Art. 1170.
 DUTIES OF DEBTOR IN OBLIGATION
TO GIVE A GENERIC OR INDETERMINATE THING

Duties of debtor in generic real obligation (obligations to give a generic thing):

1. To deliver a thing which is of the quality intended by the parties taking into
consideration the purpose of the obligation and other circumstances; and
 When the obligation consists in the delivery of an indeterminate or generic thing,
whose quality and circumstances have not been stated, the creditor cannot demand
a thing of superior quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of the obligation and other circumstances shall be taken into The benefit of Article
consideration. (Art. 1246) 1246 may be waived by
the creditor or by
accepting a thing of
Example: S promised to deliver to B a horse. B cannot compel S to deliver a price- inferior quality, and by
winning race horse. Neither can S require B to accept an old sickly horse. the debtor by delivering
• If B’s main diversion in life is horse racing and it is known by S, and the price agreed a thing of superior
upon is reasonable price for a race horse, then S must deliver a race horse. quality.
• If B is a calesa driver and the price agreed upon is reasonable price for a horse for calesa,
then that kind of horse may be delivered.
• If B is a veterinary doctor and his purpose in buying a horse is to examine its organs in
connection with his work, then an old sickly horse may be intended by the parties to be
delivered.

2. To be liable for damages in case of fraud, negligence, delay in the performance of

obligation, or contravention of the terms of obligation (Grounds for liability – Art. 1170)
 REMEDIES OF CREDITOR IN REAL OBLIGATION
What are the remedies available to the creditor in case the debtor fails to comply with his obligation to
give a specific thing (specific real obligation)?
1. SPECIFIC PERFORMANCE – the creditor can demand specific fulfillment (if still possible) of
the obligation with a right to indemnity for damages; or
2. RESCISSION/CANCELLATION – the creditor can rescind/cancel the obligation with a right to
indemnity for damages; or
3. EQUIVALENT PERFORMANCE – the creditor can demand payment of damages only, where it
is the only feasible remedy.
Art. 1165 (1st
Example: S sells his gray piano to B for P20,000. S refuses to comply to deliver the piano. What can B paragraph). When
do? what is to be delivered
is a determinate thing,
 B can bring an action for specific fulfillment (demand delivery of piano) with right to receive the creditor, in addition
payment for damages or rescission (cancel the obligation) also with right to receive payment for to the right granted to
damages. In case B chooses rescission, both of them must be able to return to each other, in its him by Art. 1170, may
original good form, what they have received. compel the debtor to
 If specific fulfillment and rescission are not feasible or impossible, B can only demand the make delivery.
payment damages as this is only the possible remedy.
 It must be noted also that the rights to demand fulfillment and rescission with damages in both cases
are ALTERNATIVE REMEDIES, NOT CUMULATIVE, meaning, if B choses specific
fulfillment as remedy, he will not be allowed to use the rescission remedy and vice versa. The
election of one is a waiver to another. (take note the difference of the terms “OR” and “AND” in
law.)
 It should be made clear also that the creditor cannot use force or violence upon the debtor when
exercising such remedies. The creditor must bring the matter to the court and the court will be the one
to take effect the chosen remedy.
 REMEDIES OF CREDITOR IN REAL OBLIGATION
What are the remedies available to the creditor in case the debtor fails to comply with his obligation to
give a generic thing (generic real obligation)?

 It has the same remedies as that of the remedies when a debtor fails to comply with his obligation to
give a specific thing. (i.e. Specific Performance, Rescission, and Payment of Damages).

 What is added to the remedies available for a generic real obligation is SUBSTITUTE
PERFORMANCE. Therefore, a generic real obligation may be done by some else other than the
debtor himself (third person) since the object or thing to be delivered is expressed only according to Art. 1165. (2nd
its family or class. paragraph) If the thing is
indeterminate or generic,
 Therefore it is not necessary for the creditor to COMPEL the debtor to make delivery, although he he may ask that the
may ASK for performance of obligation. In any case either, the creditor has the right to recover obligation be complied
damages in case of breach or violation of the obligation. with at the expense of the
debtor.
{par. 3 to be discussed on
Example: S obliges himself to deliver to B 100 sacks of rice on December 5 for P50,000. S does not
Arts. 1169, 1174, 1263}
comply with the obligation. What can B do?

 B may ask specific performance from S with right to damages in case S still doesn’t make delivery on
December 5; or
 B may rescind/cancel the obligation with right to damages; or
 B can demand damages to S on the ground of breach of contract; or
 B may buy rice from C, a third person. If B paid C P55,000, he may recover (assuming B has not yet
paid S) P5,000 from S.
 REMEDIES OF CREDITOR IN
POSITIVE PERSONAL OBLIGATION

Article 1167 relates to an obligation to do. It signifies three (3) situations:

1. The debtor fails to perform an obligation to do;
2. The debtor performs an obligation to do but contrary to the terms thereof; or
3. The debtor performs an obligation to do but in poor manner.

What are the remedies available to the creditor in case the debtor fails to comply or complies but
contrary or poorly with his obligation to do (positive personal obligation)?
1. If the debtor fails to comply with his obligation to do, the creditor has the right:
 To have the obligation performed by himself (creditor), or by another (third person), at the debtor’s Art. 1167. If a person
expense; and obliged to do something fails
 To recover damages. to do it, the same shall be
executed at his cost.
This same rule shall be
2. In case the obligation is done in contravention of the terms or is poorly done, it may be ordered (by the court observed if he does it in
upon complaint) that it be undone if it is still possible to undo what was done. contravention of the tenor of
 It must be noted that a positive personal obligation, like a generic real obligation, CAN be the obligation. Furthermore,
performed by a THIRD PERSON. While the debtor can be compelled to make delivery of specific it may be decreed that what
has been poorly done be
thing, a specific performance or positive personal obligation cannot be compelled because it would be undone.
tantamount to INVOLUNTARY SERVITUDE which is prohibited under the Constitution. (Art.
III, Sec. 18)

Example:
• X binds himself to construct the house of B. If X does not construct the house, B may construct the
house himself or ask C to construct at the expense of X on both cases.
• If X do construct the house but not according to specifications or poorly done, B can ask to do it
according to the specifications, if X refuses, the obligation may be done by B himself or by C at the
expense of X in both cases.
 REMEDIES OF CREDITOR IN
NEGATIVE PERSONAL OBLIGATION

 Article 1168 relates to an obligation not to do. In negative personal obligation, the duty of the obligor is to
abstain from an act. Hence, there is not specific performance.

 Unlike in real obligations (specific or generic) and positive personal obligation (to do), negative personal
obligation (not to do) doesn’t impose a liability in case the debtor is delay in performing the obligation. No
one can be in delay in performing nothing.

 As a rule, the remedy of the creditor/oblige is the undoing of the forbidden thing/act plus damages.
Art. 1168. When the
However, if it is already impossible to undone what has been done, the remedy is an action for damages
obligation consists in
only caused by the debtor’s violation of his obligation.
not doing, and the
obligor does what has
Example:
been forbidden him, it
B bought a land from S. It was stipulated that S would not construct a fence on a certain portion of his land
shall be undone at this
adjoining that is sold to B. If S constructs a fence, what would be the remedy of B?
expense.
 S violates the agreement, therefore B can bring an action to have the fence removed at the expense of
S.
 If the removal of the fence becomes impossible, B can demand of an action for damages to S.
 DELAY/DEFAULT – CONCEPTS & KINDS
Delay, as used in law, is not to be understood according to its meaning in common parlance. A distinction
should be made between an ordinary delay and a legal delay (as used in law).

(1) Ordinary delay – merely the failure to comply an obligation on time.

(2) Legal delay (default or mora) – the failure to perform an obligation on time which constitutes a breach of
the obligation.

KINDS OF DELAY OR DEFAULT

Art. 1169. (1st
(1) Mora solvendi – delay on the part of the debtor to fulfill his obligation. (to give or to do).
paragraph) Those
(2) Mora accipiendi – delay on the part of the creditor to accept the performance of an obligation; and
obliged to deliver or to
(3) Compensatio morae – both parties (debtor and creditor) are in default (in reciprocal obligations/kaliwaan);
do something incur in
the net effect is that as if there is no delay.
delay from the time the
obligee judicially or
There are three conditions that must be present before mora solvendi (debtor’s delay) can exist or its effect
extra judicially
arise:
demands from them the
(1) Failure on the part of the debtor to perform his obligation (to do) on the date agreed upon;
fulfilment of the
(2) Demand (not mere reminder or notice) was made by the creditor to the debtor to comply in which demand
obligation.
may either be judicial (filed in court) or extrajudicial (made outside of court, orally or in writing); and
(3) Failure of the debtor to comply with such demand.

 The creditor has the burden to prove that demand has been made to put a debtor in delay.
 Also, the debtor also has the duty to prove that the delay was not caused by his fault to relieve
himself from any liability.
 Generally, No demand, No delay rule. Exceptions to the rule are found at Art. 1169 2 nd paragraph.
 DELAY/DEFAULT – EFFECTS
The following are the effects of delay:
1. Mora solvendi (delay on the part of the debtor)
 The debtor is guilty of breach or violation of the obligation;
 The debtor is liable to the creditor for interest (in case of obligation to pay money) or
damages;
 The debtor will be liable for fortuitous events when the obligation is to deliver a determinate
thing (Art. 1165, 1170), but if the debtor can prove that whether he is in delay or not, loss
would occur, the courts may mitigate or reduce his liability for damages;
 The debtor can still be compelled to deliver a generic thing because of the principle that Art. 1169. (3rd paragraph)
generic thing never perishes (genus nunquam perit). In reciprocal obligations,
neither party incurs in
delay if the other does not
2. Mora accipiendi (delay on the part of the creditor)
comply in a proper manner
 The creditor is guilty of breach or violation of the obligation; with what is incumbent
 The creditor is liable to the debtor for damages, if any, and the debtor will not be liable for upon him. From the
interest (in case of obligation to pay money) from the time of creditor’s delay; moment one of the parties
 The creditor will bear the risk of loss of thing due (Art. 1262); fulfils his obligation, delay
 The debtor may release himself of the obligation by consignation or deposit in court of the by the other begins.
thing or sum due (Art. 1256).

3. Compensatio morae (delay on the part of debtor and creditor)

 The delay of the debtor cancels the delay of the creditor and vice versa. Legally speaking,
there is no delay on the part of both parties. In case of reciprocal obligations (kaliwaan), when
one party fulfills his part, delay on the other starts.
 DELAY/DEFAULT – EFFECTS
When demand is not necessary to put debtor in delay?
 General rule, delay by the debtor begins only from the moment of demand, judicial or extrajudicial,
in order for the debtor to fulfill his obligations to the creditor. However, there are instances that
demand is not necessary to put a debtor in delay, meaning, demand, under these circumstances, are
not needed to put debtor in delay:
(1) When the obligation so provides; or
(2) When the law so provides; or Art. 1169. (2nd paragraph)
However, the demand by the
(3) When time is of the essence; or creditor shall not be necessary in
(4) When demand would be useless; or order that delay may exist:
(5) When there is performance by a party in reciprocal obligations. (1) When the obligation or the law
expressly so declares; or
Examples: (2) When from the nature and the
circumstances of the obligation it
(1) D promised to pay C the sum of P30,000 on or before November 30, 2020 without the need of any demand. appears that the designation of the
Therefore, if D fails to pay on Nov. 30, he is automatically in default. time when the thing is to be
(2) Under the law, taxes should be paid on or before a specific date; otherwise, penalties and surcharges are delivered or the service is to be
imposed without the need of demand for payment by the government. rendered was a controlling for the
(3) The obligation to deliver balloons on a particular date when a children’s party will be held or the making of establishment motive of the
contract, or
a wedding dress where the wedding is scheduled at a certain time. (3) When demand would be
(4) S obliged himself to deliver a specific horse to B on September 5. Through S’s negligence or by fortuitous useless, as when the obligor has
event for which S has expressly bound himself responsible, the horse died on September 2. Here, any rendered it beyond his power to
demand for the delivery of the horse on September 5 would be useless as S has made it impossible for him perform.
to perform his obligation.
(5) S agreed to sell to B his TV for P10,000. The obligation of S is to deliver the TV while that of B, to pay
P10,000. Since no date is set for their respective obligations, it is understood to be performed
simultaneously. S cannot demand payment if he cannot deliver the TV and vice versa.
 GROUNDS FOR LIABILITY TO DAMAGES
Article 1170 provides the four (4) ground for liability which may entitle the injured/aggravated party to
damages:
1. FRAUD (deceit or dolo) – is the deliberate or intentional evasion of the normal fulfillment of
the obligation. It implies some kind of malice or dishonesty and it cannot cover cases of mistake
and errors of judgment made in good faith. It is synonymous to bad faith and it involves a design to
mislead or deceive another.
 If the debtor will be found guilty of fraud, he shall be responsible for damages and his
obligation can be demanded with respect to all kinds of obligations. His damages cannot be
mitigated. Waiver of an action for future fraud is void but any waiver of an action for past Art. 1170. Those in the
fraud is valid. (Art. 1171) performance of their
obligations are guilty of
Types of Fraud: fraud, negligence, or
1. Incidental fraud (dolo incidente) – fraud committed in the performance of an obligation delay and those who in
already existing. Article 1170 talks about this type of fraud. any manner contravene
the tenor thereof, are
Example: S obliged himself to deliver to B 20 bottles of wine, of a particular high quality brand. liable for damages.
Subsequently, S delivered 20 bottles knowing that they contain cheaper quality brand wine. S is
guilty of fraud when proven and is liable for damages to B.

2. Causal fraud (dolo causante) – fraud employed in the execution of a contract or at the
start of the life of the contract. Article 1338 talks about this type of fraud (vices of consent).

Example: S offered to sell to B a ring, claiming that the stone on the ring is diamond. S knows
that it is not diamond but ordinary glass. If B buys the ring, relying on the truth of the
representation of S, the sale may be annulled/cancelled on the ground of fraud.
 GROUNDS FOR LIABILITY TO DAMAGES
Article 1170 provides the four (4) ground for liability which may entitle the injured/aggravated party to
damages:
2. NEGLIGENCE (fault or culpa) – is any voluntary act or omission, there being no bad faith or
malice, which prevents the normal fulfillment of an obligation. It is also a failure to observe
that degree of care, precaution, and vigilance which the circumstances justly demand, whereby
such other person suffers injury.
 If the debtor will be found guilty of negligence, he shall be responsible for damages and his
obligation can be demanded with respect to all kinds of obligations. His damages can be
mitigated as being regulated by the courts. Waiver of an action for future negligence is void Art. 1173. (1st paragraph)
IF IT SHOWS BAD FAITH but any waiver of an action for future negligence may be The fault or negligence of the
renounced except in cases where the obligation requires extraordinary diligence. (Art. 1172) obligor consists in the
omission of that diligence
How to determine if a party is guilty of negligence? What factors must be considered? which is required by the
a. Nature of the obligation. Example: Smoking while carrying inflammable materials (e.g. nature of the obligation and
gasoline) constitutes negligence. corresponds with the
circumstances of the person,
of the time and of the place.
b. Circumstances of the person. Example: A security guard, a man in the prime of life, robust
When negligence shows bad
and healthy, sleeping while on duty is guilty of negligence. faith, the provisions of
articles 1171 and 2201,
c. Circumstances of the time. Example: Driving a car without headlights at night is gross paragraph 2, shall apply.
negligence but it does not constitute negligence when driving without headlights during the
day.

d. Circumstances of the place. Example: Driving 100kph on a superhighway may be

permissible but driving 100kph on Bulaong Avenue is gross recklessness and constitutes
negligence.
 GROUNDS FOR LIABILITY TO DAMAGES
Kinds of negligence according to source of obligation:
1. Contractual negligence (culpa contractual) – negligence in contracts resulting in their breach. Art.
1172 refers to culpa contractual. This kind of negligence is not a source of obligation (Art. 1157). It
makes the debtor liable for damages in view of his negligence in performing the obligation.
2. Civil negligence (culpa aquiliana) – negligence made between parties who are not so related before
by any pre-existing contract. This kind of negligence is a source of obligation. It is also called tort or
quasi-delict.
3. Criminal negligence (culpa criminal) – negligence resulting in the commission of a crime. This
kinds of negligence is a source of obligation. It is also called delicts/crimes or acts or omission When the creditor’s own
punished by law. negligence was the cause of
his injury, he cannot
Examples: recover damages. But if his
4. S entered into a contract of sale with B to deliver a specific horse. Subsequently, the horse died negligence was only
through the negligence of S before making any delivery. S is liable for damages to B by virtue of contributory, the main
culpa contractual because of S’s failure to fulfill a pre-existing contract. cause of injury is the
5. S was driving recklessly his car on a rural area at night without turning on his headlights. Later on, debtor’s lack of due care,
he bumped B, a by-walker, who came from his work and who carefully walks on the sideways of the the creditor may recover
road. B is severely injured. S will be liable for damages to B by virtue of culpa aquiliana because of damages but the courts may
the damage done to B even they have no relation with each other through a contract or agreement. mitigate the damages.
6. S was driving recklessly his car on a rural area at night without turning on his headlights. Later on,
he bumped B, a by-walker, who came from his work and who carefully walks on the sideways of the
road. B was killed on the spot. S will be liable for a crime of reckless imprudence resulting to
homicide (criminal liability). Also S will be liable for damages done to the affairs of B, also he will
be liable for damages to the family of B for the lost of the latter. (civil liability). Here, S is criminally
liable with a corresponding civil liability due to culpa criminal.
 GROUNDS FOR LIABILITY TO DAMAGES
What kind of diligence is required?
1. That diligence which is agreed upon by the parties, orally or in writing; or
2. In the absence of agreement, that required by law in the particular cases (like extraordinary diligence required
for common carriers); or
3. If both the agreement and law are silent, then the diligence which is expected of a good father of a family. (Art.
1163 par. 2)

Article 1170 provides the four (4) ground for liability which may entitle the injured/aggravated party to damages:
3. DELAY (mora) – already discussed in Art. 1169
4. CONTRAVENTION OF THE TERMS/TENOR OF OBLIGATION – breach of contract.
Art. 1173. (2nd paragraph)
What are damages? How to measure it?. If the law or contract does
Damages – signify the money compensation awarded to a party for loss or injury resulting from breach of contract not state the diligence
or obligation by the other. As a rule, the purpose of awarding damages is to place the innocent party in the same (not which is to be observed in
better) position he would have occupied if the contract or obligation had been performed according to its terms. the performance, that which
is expected of a good father
KINDS OF DAMAGES (MENTAL) of a family shall be
 MORAL – Include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
required.
moral shock, social humiliation and similar injury.
 EXEMPLARY OR CORRECTIVE – imposed by way of example or correction for the public good. It may be awarded if
the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. (bad faith).
 NOMINAL – Adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Awarded in
every case where any property right has been invaded. (Damages awarded to vindicate a right)
 TEMPERATE – More than nominal but less than actual. Awarded when some pecuniary loss have been suffered but its
amount cannot, from the nature of the case be proved with certainty. (Exact amount of damage cannot be ascertained)
 ACTUAL OR COMPENSATORY – value of loss suffered but also include profits which the creditor failed to obtain.
Pecuniary loss must be duly proved.
 LIQUIDATED – Damage predetermined beforehand.
 FORTUITOUS EVENTS
– CONCEPTS, KINDS, & REQUISITES

Fortuitous event – any event which cannot be foreseen, or which, though foreseen, is inevitable. The essence
of a fortuitous event consists of being happening independent of the will of the debtor and which happening
makes the normal fulfillment of the obligation impossible.

A fortuitous event may either be an act of man or an act of God.

1. Acts of man - ex. War, fire, robbery, murder, etc.
2. Acts of God (force majeure) – totally independent of the human will. Ex. Earthquake, flood, rain,
shipwreck, lightning, volcanic eruption, COVID-19 (under speculation), etc.
Under the law, acts of man and acts of God are identical in so far as they exempt an obligor from Art. 1174. Except in cases
liability. Both are independent of the will of the obligor. expressly specified by the
law, or when it is otherwise
Requisites of a fortuitous event (in order to exempt a debtor from liability): declared by stipulation, or
3. The event must be independent of the human will or at least of the debtor’s will; when the nature of the
4. The event could not be foreseen, or if foreseen, cannot be avoided; obligation requires the
5. The event must be of such nature as to render it impossible for the debtor to comply with his assumption of risk, no person
obligation in a normal manner; and shall be responsible for those
events which could not be
6. The debtor must be free from any participation in the injury to the creditor, that is, there is no
foreseen, or which though
concurrent negligence on his part. foreseen, were inevitable.

The absence of any of the above requisites would prevent the obligor/debtor from being exempt from
liability. Meaning, if any of the above requisites will not be met, the debtor will still be liable to the
creditor for his obligation and damages, if any.
 FORTUITOUS EVENTS – EFFECTS AND RULES
Will a debtor be responsible for loss or damage caused by fortuitous event?
 Generally, a debtor will not be liable. In other words, his obligation is extinguished. This rule,
however, has exceptions (debtor still liable even for fortuitous event).

Exceptions: (debtor still liable even for fortuitous event)

1. When expressly specified by law. In cases below, the special strictness of the law is justified:
a. The debtor is guilty of fraud, negligence, delay, or contravention of the tenor of the
obligation (Art. 1170, 1165 par. 3)
Example: S obliged to deliver a specific horse to B on December 10. S did not deliver the horse Art. 1174. Except in cases
on said date. If on December 11, the horse died because it was hit by lightning, S will not be expressly specified by the
liable if no demand was made by B. His obligation is extinguished (No demand, no delay). law, or when it is otherwise
However, if B made a demand, S will be liable for damages because he is guilty of (legal) delay. declared by stipulation, or
S will still be liable even for a fortuitous event, the horse is lost or destroyed. when the nature of the
obligation requires the
b. The debtor has promised to deliver the same (specific) thing to two (2) or more persons assumption of risk, no person
who do not have the same interest. shall be responsible for those
events which could not be
Example: S sold and promised to deliver the same car to B and C separately, S is liable still even
foreseen, or which though
for a fortuitous event the car will be destroyed. The reason is because it will be impossible for S foreseen, were inevitable.
to comply with his obligation to B and C even without any fortuitous event taking place.

c. The obligation to deliver a specific thing arises from a crime. (Art. 1268)
Example: S stole the carabao of B. S has the obligation to return the carabao because it arises from a
crime. Even if the carabao dies or lost due to fortuitous event, S will still be liable for damages unless B is
in mora accipiendi.
FORTUITOUS EVENTS – EFFECTS AND RULES
d. The thing to be delivered is a generic thing. (Art. 1263)
Example: The loss/destruction of a generic thing like rice, corn, sugar, etc. doesn’t produce the
extinction of obligation because the debtor can still comply with his obligation by delivering
another thing of the same kind in accordance with the principle that “genus never perishes”
(Genus nunquam perit).

2. When declared by stipulation – Such stipulation is usually intended to better protect the interest of
the creditor and procure greater diligence on the part of the debtor to fulfill his obligation. But the
intention to make the debtor liable even in case of a fortuitous event should be clearly expressed. Art. 1174. Except in cases
expressly specified by the
3. When the nature of the obligation requires the assumption of risk – Here, risk of loss or damage law, or when it is otherwise
is an essential element in the obligation. declared by stipulation, or
when the nature of the
Example: B insured his house against fire for P100,000 with C, an insurance company. Later, the obligation requires the
house was destroyed by accidental fire. Although the cause of the loss is a fortuitous event, B assumption of risk, no person
may recover the amount due in the policy. shall be responsible for those
events which could not be
foreseen, or which though
In a contract of insurance, the insurer (C), in consideration of the premium paid by the insured foreseen, were inevitable.
(B), undertakes to indemnify the latter for the loss of the thing insured by reason of the peril insured
against even if the cause of the loss is fortuitous event.
 SIMPLE LOAN OR CONTRACT OF MUTUUM
Simple loan or mutuum – a contract whereby the debtor delivers to another, money or other consumable thing,
upon the condition that the same amount of the same kind and quality shall be paid.

Usury – contracting for or receiving interest IN EXCESS of the amount allowed by law for the loan or use
off money, goods, chattels, or credits.

What are the requisites in order for interest to be recovered?

1. The payment of interest must be expressly stated (Art. 1956);
2. The agreement must be inn writing; and Art. 1175. Usurious
3. The interest must be lawful. (Art. 1957). transactions shall be governed
 A stipulation for payment of usurious interest is VOID. But, by virtue of Central Bank by special laws.
Circular No. 905 issued by the Monetary Board under the authority by Usury Law, the rate of
interest and other charges shall not be subject to any ceiling prescribed under the Usury Conclusive presumption –
Law. Parties are now free to stipulate any amount of interest. It however, does not, give one which cannot be
absolute right to the creditor to charge the debtor interest that is iniquitous or unconscionable. contradicted.

Disputable presumption –
The receipt of the principal (the main amount in a loan/debt) by the creditor, without reservation with
one which can be
respect to the interest, shall give rise to the presumption that said interest has been paid. (Art. 1176 1 st contradicted.
paragraph)
Example: D borrowed from C the amount of P10,000 with interest at 2% a month on January 1, 2020.
The principal amount is repayable on December 31 while the interest is payable monthly. If on
December 31, D pays C a total amount of P11,000, it is presumed that the payment will be applied first
to the interest (P10000 x 2% x 12 = P2,400) then there will be still a balance for the principal in the
amount of P1,400 (P11,000 – 2,400 = P8,600; P10,000 – 8,600 = P1,400). Therefore, presumption is
that the interest will be paid first or it precedes the principal payment.
 SIMPLE LOAN OR CONTRACT OF MUTUUM
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. (Art. 1176 2 nd paragraph)
Example: E is a lessee (the one who rents a long-term asset) in the apartment of R, paying P5,000 rental
a month. E began leasing on January 1. E failed to pay the rent for the months of January and February.
In March, E paid P5,000 and R issued a receipt for the payment is for the month of March. However,
such payment by E will be applied against his January rent first since it is still unpaid. Therefore,
presumption is that the prior installment debts will be paid first before the current installment debt if the
former (prior) are still unpaid.
Art. 1177. The creditors, after
Remedies available to creditors for the satisfaction of their claims. (Art. 1177) having pursued the property
In case the debtor does not comply with his obligation, the creditor may avail himself of the following in possession of the debtor to
remedies to satisfy his claim: satisfy their claims, may
 Exact fulfillment (specific performance) with the right to damages; exercise all the rights and
 Pursue the leviable (which can be taken from the debtor without prohibition from the law) bring all the actions of the
property of the debtor; latter for the same purpose,
 After pursing the leviable property(ies), creditor may exercise all rights to collect from the save those which are inherent
in his person; they may also
debtor except those inherent or personal to the person of the debtor; and
impugn the acts which the
 Ask the court to cancel the contracts which the debtor may have done to defraud the creditor.
debtor may have done to
(But this may be done only after the creditor uses the first 3 remedies and still recovers defraud them.
nothing)

Example: On the due date, D could not pay C his obligation amounting to P400,000. However, D owns
a car worth about P280,000 and X is indebted to D for P40,000. before the due date, D sold his land
worth P200,000 to Y.
Under the law, C has the following rights under the law:
 C may bring an action for the collection of the amount of P400,000 with right to damages.
 SIMPLE LOAN OR CONTRACT OF MUTUUM
 If in spite of the 1st remedy, D still fails to pay, C can ask for the attachment of D’s car so that
the car may be sold and the proceeds from such sale be applied to the debt.

 C may also ask the court to order X not to pay to D so that the payment be made to C.

 C may ask the court to cancel the sale of land made by D to Y on the ground that the
transaction is fraudulent in case C cannot recover in any other manner specified above. (But
this may be done only by C after he uses the first 3 remedies and still recovers nothing).
Art. 1178. Subject to the
Transmissibility of rights laws, all rights acquired in
Generally, all rights acquired in virtue of an obligation are transmissible or assignable. Meaning, virtue of an obligation are
rights acquired in an obligation may be passed or transmitted to another person other than the primary transmissible, if there has
parties involved in an obligation. been no stipulation to the
contrary.
Exceptions (the following rights are not transmissible or assignable):

 Those prohibited by law like those rights in a partnership, contract of agency and contract of
commodatum. (These contracts may be discussed thoroughly in other law areas)

 Those prohibited by stipulation or agreement of the parties.

 SUMMARY
 Specific or determinate thing is a thing which is particularly designated or physically segregated from
others of the same class. Generic or indeterminate thing is a thing which refers only to a class and cannot
be pointed out with particularity.
 Duties of debtor in specific real obligation includes (1) Preserve the (specific) thing with the diligence of a
good father of a family, (2) Deliver the fruits of the (specific) thing (Natural, Industrial, and Civil fruits),
(3) Deliver the accessions and accessories, (4) Deliver the (specific) thing itself, and (5) Answer for
damages in case of non-performance or non-fulfillment of obligation (breach of contract/agreement).
 Duties of debtor in generic real obligation includes (1) To deliver a thing which is of the quality intended
by the parties, and (2) To be liable for damages in case of fraud, negligence, delay in the performance of
obligation, or contravention of the terms of obligation.
 Remedies available to the creditor in case the debtor fails to comply with his obligation to give a specific
thing (specific real obligation) includes SPECIFIC PERFORMANCE, RESCISSION/CANCELLATION,
and EQUIVALENT PERFORMANCE.
 Remedies available to the creditor in case the debtor fails to comply or complies but contrary or poorly
with his obligation to do (positive personal obligation) includes (1) to have the obligation performed by
himself (creditor), or by another (third person), at the debtor’s expense and recover damages and (2) In
case the obligation is done in contravention of the terms or is poorly done, it may be ordered (by the court
upon complaint) that it be undone if it is still possible to undo what was done.
 Legal delay (default or mora) is the failure to perform an obligation on time which constitutes a breach of
the obligation.
 SUMMARY
 KINDS OF DELAY OR DEFAULT includes Mora solvendi, Mora accipiendi, and Compensatio morae.
 Under these circumstances, demand are not needed to put debtor in delay: (1) When the obligation so
provides, (2) When the law so provides, (3) When time is of the essence, (4) When demand would be
useless, and (5) When there is performance by a party in reciprocal obligations.
 Grounds of liability includes (1) FRAUD (deceit or dolo), (2) NEGLIGENCE (fault or culpa), (3) DELAY
(mora), and CONTRAVENTION OF THE TERMS/TENOR OF OBLIGATION.
 Fortuitous event is any event which cannot be foreseen, or which, though foreseen, is inevitable.
 Generally, a debtor will not be liable in case of fortuitous events. In other words, his obligation is
extinguished.
 Usury is contracting for or receiving interest IN EXCESS of the amount allowed by law.
 The receipt of the principal (the main amount in a loan/debt) 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.
 Generally, all rights acquired in virtue of an obligation are transmissible or assignable
END OF MODULE
3
Source: Law on Obligations and Contracts (Author: Hector S. De Leon)