Law on Obligations and Contracts

Nature and Effect of Obligations

 Obligations of the Debtor,
Rights of the Creditor

What are the duties of a debtor and the rights of a creditor?

The obligations of the debtor and the rights of the creditor

depend on the type of obligation involved.
 Obligations of the Debtor,
Rights of the Creditor

What are the kinds of obligations according to subject matter?

a. real obligation

b. personal obligation
 Real Obligation

What is a “real obligation”?

A real obligation is an obligation to give or deliver a thing.

It may be sub-classified as “determinate” or “generic”.

 Real Obligation

What is a “determinate obligation”?

A determinate obligation is an obligation to deliver a

determinate/specific thing.
 Real Obligation

What is a “generic obligation”?

A generic obligation is an obligation to deliver a generic thing.

 Determinate Obligation

What is a “specific thing” or “determinate thing”?

“A thing is determinate when it is particularly designated or

physically segregated from all others of the same class.”

- Article 1460, Civil Code

 Determinate Obligation

Example No. 1 of a determinate obligation:

B and C entered into a contract of sale where B agreed to deliver

and transfer ownership of his car with LTO Certificate of
Registration No. 1234567 to C.

For his part, C promised to pay B PhP300,000.00 upon delivery

of the car.
 Determinate Obligation

Example No. 1 of a determinate obligation, continued:

In this case, the obligation of B to deliver the car with LTO

Certificate of Registration No. 1234567 is a determinate
obligation.
 Determinate Obligation

Example No. 2 of a determinate obligation:

D visited the pet store of E and asked if the dog by the store’s
window was for sale. E tried to offer to D the other dogs in his
store, but D insisted on the one he saw by the window.
 Determinate Obligation

Example No. 2 of a determinate obligation, continued:

E agreed to sell the dog pointed out by D. E promised to deliver

the dog on the following day while D promised to pay E
PhP10,000.00 upon delivery of the dog.
 Determinate Obligation

Example No. 2 of a determinate obligation, continued:

In this case, the obligation of E to deliver the dog selected by D is

a determinate obligation.
 Generic Obligation

What is a “generic thing” or “indeterminate thing”?

A thing is generic or indeterminate when it is referred to by its

class or genus only.

A generic or indeterminate thing is not pointed out or segregated

from other things that are of the same kind.
 Generic Obligation

Example No. 1 of a generic obligation:

F and G entered into a contract of sale where F agreed to deliver

and transfer ownership of a black sport utility vehicle to G.

In exchange for the vehicle, G promised to pay F

PhP1,000,000.00 upon its delivery.
 Generic Obligation

Example No. 1 of a generic obligation, continued:

In this case, the obligation of F to deliver a black sport utility

vehicle to G is a generic obligation.
 Generic Obligation

Example No. 2 of a generic obligation:

H and K entered into a contract of sale. H promised to deliver

and transfer ownership of a one-year-old black Labrador retriever
to K.

In exchange for the dog, K agreed to pay H PhP15,000.00.

 Generic Obligation

Example No. 2 of a generic obligation, continued:

In this case, the obligation of H to deliver to K a one-year-old

black Labrador retriever is a generic obligation.
 Generic Obligation

Example No. 2 of a generic obligation, continued:

In this case, the obligation of K to pay H PhP15,000.00 is also a

generic obligation.
 Determinate Obligation

What are the duties of the debtor in a determinate obligation?

The debtor in a determinate obligation must:

1. preserve the determinate thing;

2. deliver the determinate thing;

3. deliver the fruits of the determinate thing;

 Determinate Obligation

What are the duties of the debtor in a determinate obligation?

(continued)

4. deliver the accessions and accessories of the determinate

thing; and

5. pay damages in case of fraud, negligence, delay, or breach of

the obligation.
 Duty to Preserve the Thing

“preserve the determinate thing”

“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.”

- Article 1163, Civil Code

 Duty to Preserve the Thing

What standard of care must the debtor observe in taking care of

the determinate thing?

The debtor must follow the standard required by the law or by the
agreement between him and the creditor, as the case may be.
 Duty to Preserve the Thing

What standard of care must the debtor observe in taking care of

the determinate thing? (continued)

If there is no standard required by law or stipulation, the debtor

must exercise the proper diligence of a good father of a family.
 Duty to Preserve the Thing

What does “diligence of a good father of a family” mean?

“Diligence of a good father of a family” means ordinary care, or

the level of care which a reasonably prudent person would
observe when it comes to his own property.
 Duty to Deliver the Determinate Thing

Can the debtor decide by himself to substitute the determinate

thing with another thing?

“The debtor of a thing cannot compel the creditor to receive a

different one, although the latter may be of the same value as, or
more valuable than that which is due.”

- Article 1244, Civil Code

 Duty to Deliver the Fruits of the Determinate
Thing

“deliver the fruits of the determinate thing”

“The creditor has a right to the fruits of the thing from the time
the obligation to deliver it arises.”

- Article 1164, Civil Code

 Duty to Deliver the Fruits of the Determinate
Thing
What are the “fruits” of the determinate thing?

Articles 441 and 442 of the Civil Code provide for the following
fruits:

a. natural fruits

b. industrial fruits

c. civil fruits
 Duty to Deliver the Fruits of the Determinate
Thing

What are “natural fruits”?

“Natural fruits are spontaneous products of the soil, and the

young and other products of animals.”

- Article 442, Civil Code

 Duty to Deliver the Fruits of the Determinate
Thing

What are “industrial fruits”?

“Industrial fruits are those produced by lands of any kind through

cultivation or labor.”

- Article 442, Civil Code

 Duty to Deliver the Fruits of the Determinate
Thing

What are “civil fruits”?

“Civil fruits are the rents of buildings, the price of leases of lands
and other property and the amount of perpetual or life annuities
or other similar income.”

- Article 442, Civil Code

 Duty to Deliver Accessions and Accessories

“deliver the accessions and accessories of the determinate thing”

“The obligation to give a determinate thing includes that of

delivering all its accessions and accessories, even though they
may not have been mentioned.”

- Article 1166, Civil Code

 Duty to Deliver Accessions and Accessories

What is an “accession”?

An accession is a thing that is produced by the determinate thing,

or something that is incorporated or attached to the determinate
thing, whether naturally or artificially.
 Duty to Deliver Accessions and Accessories

What is an “accession”? (continued)

Examples of accessions:

• tree on a piece of land

• house on a piece of land
• air-conditioner in a car
 Duty to Deliver Accessions and Accessories

What are “accessories”?

Accessories are things that are not incorporated or attached to the

determinate thing but are necessary to use, preserve, or perfect it.
 Duty to Deliver Accessions and Accessories

What are “accessories”? (continued)

Examples of accessories:

• key of a car
• remote control of a smart TV
 Duty to Pay Damages

What is “damages”?

Damages is the monetary compensation to be paid for the injury

suffered by a person whose right was violated.
 Duty to Pay Damages

When is a debtor liable to pay damages?

“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.”

- Article 1170, Civil Code

 Rights of the Creditor in a Determinate Obligation

What are the rights of the creditor in a determinate obligation?

The creditor in a determinate obligation has a right to:

1. demand specific performance and payment of damages;

 Rights of the Creditor in a Determinate Obligation

What are the rights of the creditor in a determinate obligation?

(continued)

2. demand rescission in certain cases and payment of damages;

or

3. demand payment of damages.

 Right to Demand Specific Performance

“demand specific performance and payment of damages”

“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.”

- Article 1165, Civil Code

 Right to Demand Rescission

“demand rescission in certain cases and payment of damages”

“The power to rescind obligations is implied in reciprocal ones,

in case one of the obligors should not comply with what is
incumbent upon him.
 Right to Demand Rescission

“demand rescission in certain cases and payment of damages”

(continued)

The injured party may choose between the fulfilment and the
rescission of the obligation, with the payment of damages in
either case.
 Right to Demand Rescission

“demand rescission in certain cases and payment of damages”

(continued)

He may also seek rescission, even after he has chosen fulfilment,

if the latter should become impossible.”

- Article 1191, Civil Code

 Right to Demand Payment of Damages

“demand payment of damages”

“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.”

- Article 1170, Civil Code

 Duties of the Debtor in a Generic Obligation

What are the duties of the debtor in a generic obligation?

The debtor in a generic obligation must:

1. deliver a thing which is of the quality intended by the parties;

and
 Duties of the Debtor in a Generic Obligation

What are the duties of the debtor in a generic obligation?

(continued)

2. pay damages in case of fraud, negligence, delay, or breach of

the obligation.
 Duty to Deliver Generic Thing

“deliver a thing which is of the quality intended by the parties”

“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.
 Duty to Deliver Generic Thing

“deliver a thing which is of the quality intended by the parties”

(continued)

Neither can the debtor deliver a thing of inferior quality. The

purpose of the obligation and other circumstances shall be taken
into consideration.”

- Article 1246, Civil Code

 Duty to Deliver Generic Thing

Summarizing Article 1246 of the Civil Code, the debtor in a

generic obligation must:

• deliver a generic thing that is of the quality agreed upon; or

• deliver a generic thing which is of neither superior nor inferior

quality, if the quality was not agreed upon.
 Duty to Pay Damages

When is a debtor liable to pay damages?

“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.”

- Article 1170, Civil Code

 Rights of the Creditor in a Generic Obligation

What are the rights of the creditor in a generic obligation?

The creditor in a generic obligation has a right to:

1. ask for the performance of the obligation and payment of

damages;
 Rights of the Creditor in a Generic Obligation

What are the rights of the creditor in a generic obligation?

(continued)

2. ask for compliance with the obligation at the debtor’s

expense and payment of damages; or

3. demand payment of damages.

 Compliance with the Obligation at the Debtor’s
Expense
“ask for compliance with the obligation at the debtor’s expense
and payment of damages”

“If the thing is indeterminate or generic, he may ask that the

obligation be complied with at the expense of the debtor.”

- Article 1165, Civil Code

 Right to Demand Payment of Damages

“demand payment of damages”

“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.”

- Article 1170, Civil Code

 Personal Obligation

What is a “personal obligation”?

A personal obligation is an obligation to do or not to do an act.

It may be sub-classified as “positive” or “negative”.

 Personal Obligation

What is a “positive personal obligation”?

A positive personal obligation is an obligation to do an act or

perform a service.
 Personal Obligation

Example of a positive personal obligation:

L and M entered into a contract where L promised to construct an

office building for M according to M’s specifications.

For his part, M promised to pay L PhP15,000,000.00 upon

completion of the building.
 Personal Obligation

Example of a positive personal obligation, continued:

In this case, the obligation of L to construct an office building is a

positive personal obligation.
 Personal Obligation

What is a “negative personal obligation”?

A negative personal obligation is an obligation not to do a

particular act.
 Personal Obligation

Example No.1 of a negative personal obligation:

N agreed to work as a cook in Q’s restaurant. In his employment

contract, N promised not to make any copy, in printed or any
other form, of the restaurant’s secret recipe for fried chicken.
 Personal Obligation

Example No.1 of a negative personal obligation, continued:

In this case, the obligation of N not to make any copy of the

restaurant’s secret recipe is a negative personal obligation.
 Personal Obligation

Example No.2 of a negative personal obligation:

S and V entered into a contract of lease where S agreed to rent

out his condominium unit to V in exchange for V’s payment of
PhP15,000.00 per month.
 Personal Obligation

Example No.2 of a negative personal obligation, continued:

It was written in the contract of lease they signed that V may not
attach or install any shelf or other fixture to the walls of the
condominium unit.
 Personal Obligation

Example No.2 of a negative personal obligation, continued:

In this case, the obligation of V not to attach or install any fixture

to the walls of the condominium unit is a negative personal
obligation.
 Duties of the Debtor in a Positive Personal
Obligation

What are the duties of the debtor in a positive personal

obligation?

The debtor in a positive personal obligation must:

1. perform the act which is the object of the obligation; and

 Duties of the Debtor in a Positive Personal
Obligation

What are the duties of the debtor in a positive personal

obligation? (continued)

2. pay damages in case of fraud, negligence, delay, or breach of

the obligation.
 Rights of the Creditor in a Positive Personal
Obligation

What are the rights of the creditor in a positive personal

obligation?

The creditor in a positive personal obligation has a right to:

1. have the prestation done by another at the debtor’s expense

and demand payment of damages;
 Rights of the Creditor in a Positive Personal
Obligation

What are the rights of the creditor in a positive personal

obligation? (continued)

2. have the prestation done by another at the debtor’s expense, if

the obligation was performed in breach of its tenor, and
demand payment of damages;
 Rights of the Creditor in a Positive Personal
Obligation

What are the rights of the creditor in a positive personal

obligation? (continued)

3. have what has been poorly done be undone and demand

payment of damages; or

4. demand payment of damages.

 Performance of the Prestation at the Debtor’s
Expense

“have the prestation done by another at the debtor’s expense”

“If a person obliged to do something fails to do it, the same shall

be executed at his cost.
 Performance of the Prestation at the Debtor’s
Expense

“have the prestation done by another at the debtor’s expense”

(continued)

This same rule shall be observed if he does it in contravention of

the tenor of the obligation.”

- Article 1167, Civil Code

 Performance of the Prestation at the Debtor’s
Expense

“have what has been poorly done be undone”

“Furthermore, it may be decreed that what has been poorly done

be undone.”

- Article 1167, Civil Code

 Performance of the Prestation at the Debtor’s
Expense
Can the debtor in a positive personal obligation be compelled to
perform the prestation?

“No involuntary servitude in any form shall exist except as a

punishment for a crime whereof the party shall have been duly
convicted.”

- Article III, Section 18 (2), 1987 Constitution

 Right to Demand Payment of Damages

“demand payment of damages”

“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.”

- Article 1170, Civil Code

 Duties of the Debtor in a Negative Personal
Obligation
What are the duties of the debtor in a negative personal
obligation?

The debtor in a negative personal obligation must:

1. avoid or refrain from doing the forbidden act; and

2. pay damages in case of breach of the obligation.

 Rights of the Creditor in a Negative Personal
Obligation

What are the rights of the creditor in a negative personal

obligation?

The creditor in a negative personal obligation has a right to:

1. have what has been done be undone at the debtor’s expense

and demand payment of damages; or
 Rights of the Creditor in a Negative Personal
Obligation

What are the rights of the creditor in a negative personal

obligation? (continued)

2. demand payment of damages in case of breach of the

obligation.
 Right to Have the Forbidden Act be Undone

“have what has been done be undone at the debtor’s expense”

“When the obligation consists in not doing, and the obligor does
what has been forbidden him, it shall also be undone at his
expense.”

- Article 1168, Civil Code

 Right to Demand Payment of Damages

“demand payment of damages”

“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.”

- Article 1170, Civil Code

 References

De Leon, H. S. & De Leon, H. M. (2014). The Law on

Obligations and Contracts. Manila: Rex Book Store.

Jurado, Desiderio P. (2010). Comments & Jurisprudence on

Obligations and Contracts. Manila: Rex Book Store.
 Assignment

Read the following provisions of law:

Civil Code
Articles 1165, 1169, 1170, 1171, 1172, 1173, 1174, 1176, 1263,
1268, 2179, 2201