OBLIGATIONS

AND
CONTRACT

R.A. No. 386 New Civil Code of

the Philippines
Arts. 1156-1304 (Obligations)
Arts. 1305-1422 (Contracts)
 What makes a society
peaceful, free from chaos
and confusion?
 LAW
The main function is to put society
in order.

As future accountants or
businessmen is understanding of
LAW important?
 What is LAW?
Any rule of conduct, just,
obligatory, promulgated by a
legitimate authority, and of
common observance and
benefit.
What are the SOURCES of LAW?
1. Constitution—fundamental/
supreme law because it is
promulgated by the people
themselves.
2. Legislation– it consists of the
declaration of legal rules by a
competent authority.
3. Administrative rules and
regulations– issued by
administrative authorities
4. Judicial decisions of the Supreme
Court-decisions of the Supreme Court
applying or interpreting the laws or
Constitution
5. Customs- habits and practices
which through long and
uninterrupted usage have become
acknowledged as binding rules of
conduct
One Sunday afternoon, while walking
your dog along the street, you look
at your left and see someone
breaking and entering into your
neighbor’s house whom you believe
is a thief.
What would you do?
1. Stop and try to call the nearest police,
give a description of the assailant and
your testimony and wait until the
authorities show because it is your
moral duty to do so? OR
2. Do you avert your eyes and attention
and pretend that you did not see
anything, continue walking because
you feel that you are not responsible
to alert or tell anyone about what is
happening? Or
3. Do you leave an anonymous
message close by so that you
personally do not become involved?

Why so?
WHAT IS OBLIGATION?
 OBLIGATIONS
Art. 1156. An obligation is a
juridical necessity to give, to do
or not to do.

WHAT IS OBLIGATION?
OBLIGATION ( came from the word
“OBLIGATIO” means “binding”)
OBLIGATION
It is defined as a legal relation
established between one party
(called the creditor) and another
(called the debtor), whereby the
latter is bound to the fulfillment of a
prestation (particular conduct) the
former may demand of him.
OBLIGATION
It is a duty of a person
(debtor/obligor) to satisfy a specific
and demandable claim of another
person (creditor or obligee) which if
breached is enforced in court.
The requirement to do what is
imposed by law, promise, or contract.
What is a RIGHT?
 RIGHT VERSUS OBLIGATION
RIGHT is a claim or title to an interest
in anything whatsoever that is
enforceable by law.

For every right enjoyed by any

person, there is a corresponding
obligation on the part of another
person to respect such right.
 RIGHT VERSUS OBLIGATION
OBLIGATION is something that one
must do, give or not to do because
of law, necessity, duty or
agreement.
It is synonymous to “duty”.
It is a tie which binds us to pay, to
give, to do or not to do something
agreeably to the laws and customs
of the country.
JURIDICAL NECESSITY
A legal relation established between
one party and another whereby the
latter is bound to the fulfillment of a
prestation which the former may
demand of him.
It connotes that in case of non-
compliance, there will be legal
sanctions.
PRESTATION
Not the thing or object, but the
particular conduct of the debtor which
may consist in giving, doing, or not
doing something.

A.TO GIVE (REAL OBLIGATION) –

obligation of the debtor or obligor to
deliver a thing, movable or an
immovable, to the creditor or obligee
for the purpose of ownership or use
Examples:

Obligations to DELIVER the thing in

a CONTRACT OF SALE, CONTRACT
OF LOAN, DEPOSIT, PLEDGE and
DONATION.
B. TO DO – obligation of
debtor/obligor to perform some
work/service in favor of the
creditor/obligee

Examples
Contract for professional services like
painting, modelling, singing;
Contract of labor
C. NOT TO DO – obligation not to
do some act in favor of the creditor/
obligee
It consist in refraining from doing
some acts like producing deafening
noise, offensive odor, smoking, not
doing an act agreed by the parties in a
contract
 ESSENTIAL REQUISITES OF AN
OBLIGATION
1. A passive subject (called debtor or
obligor) or the person who is
bound to the fulfillment of the
obligation; he who has a duty;
2. An active subject (called creditor
or obligee) or the person who is
entitled to demand the fulfillment
of the obligation; he who has a
right;
3 Object or prestation (subject matter of the
.

obligation)
the conduct required to be observed by the
debtor. It may consist in giving, doing, or not
doing. (see Art. 1232.) Without the prestation,
there is nothing to perform.

4. A juridical or legal tie (also called efficient

cause)
that which binds or connects the parties to the
obligation. The tie in an obligation can easily be
determined by knowing the source of the
obligation. (Art. 1157.)
Under a building contract, X bound himself to
construct a house for Y for P1,000,000.00.

X is the _________ subject

Y is the _________ subject
the building of the house is the__________
the agreement or contract, which is the
source of the obligation, is
the________________.
 KINDS OF OBLIGATION

A. ACCORDING TO SUBJECT
MATTER

(1)Real obligation
(obligation to give) or that in
which the subject matter is a
thing which the obligor must
deliver to the obligee;
(2) Personal obligation

(obligation to do or not to do)

or that in which the subject
matter is an act to be done or
not to be done.
There are thus two (2) kinds of
personal obligation:
(a)Positive personal obligation
or obligation to do or to render
service (see Art. 1167.); and

(b)Negative personal
obligation or obligation not to do
(which naturally includes
obligations “not to give”). (see
Art. 1168.)
B. Accroding to judicial enforceability

(1) Civil obligation– It is when the

debtor/ obligor did not fulfill its
obligation to the creditor/ obligee
that can be enforced through a
civil suit or action in court.
Example:
Obligations arising from law, contracts,
quasi-contracts, delicts, and quasi-delicts

Specific Example/Situation
When a debtor fails to pay the loan
amount after a demand has been made
by the creditor for the former to pay the
said amount, the creditor may file a
collection of sum in court.
(2)Natural obligation– It is a special
kind of obligation which cannot be
enforced in court but which
authorizes the retention of the
voluntary payment or performance
made by the debtor.
It depends on the good conscience of
debtor.
Example
Art. 1424. performance after civil
obligation has prescribed
Art. 1425. Reimbursement of third
person for debt that has prescribed
3. Moral Obligation– It is a duty which
one owes, and which he ought to
perform, but not legally bound to
fulfill.
It deals with the spiritual obligation of
a person in relation to his God or
Church.
SOURCES OF OBLIGATIONS
(Art. 1157)
1. Law
Ex. obligation to pay taxes;
obligation to support one’s family
(2) Contracts-- when they arise
from the stipulation of the parties
(Art. 1306)
(3) Quasi-contracts (Art. 2142)
Ex. the obligation to return money paid by
mistake or which is not due

(4) Acts or omissions punished by

law (delict) (Art. 1161.)
Ex. the obligation of a thief to return the
car stolen by him;
duty of a killer to indemnify the heirs of his
victim
(5) Quasi-delicts—(Art. 2176)
when they arise from damage caused
to another through an act or
omission, there being fault or
negligence, but no contractual
relation exists between the parties
What is LAW?
A rule of conduct, just,
obligatory, promulgated
by legitimate authority,
and of common
observance and benefit.
ART. 1158. Obligations derived from law
are not presumed. Xxx
They are not presumed because they are
considered a burden upon the obligor.
To be demandable, they must be clearly
set forth in the law
i.e., the Civil Code or special laws
R.A 9262 (VAWC LAW)—obligation of
father to give support to the child and
wife
Example
A private school has no legal obligation
to provide clothing allowance to its
teachers because there is no law which
imposes this obligation upon schools.

But a person who wins money in

gambling has the duty to return his
winnings to the loser. This obligation is
provided by law. (Civil Code, Art. 2014.)
What is CONTRACT
It is the meeting of the minds between two
persons whereby one binds himself, with
respect to the other, to give something or
to render some service.
Once perfected, valid contracts have the
force of law between the parties who are
bound to comply therewith in good faith,
and neither one may without the consent
of the other, renege therefrom. (Tiu Peck
vs. Court of Appeals, 221 SCRA 618 [1993].)
It says that a Contract has the
FORCE of law and the agreement
contained therein becomes the LAW
between the parties, does it mean
then that we forego or disregard
what our LAWS dictate?
ART. 1159. Obligations arising from
contracts have the force of law
between the contracting parties
and should be complied with in
good faith.
Facts: D borrowed from C money to
be paid within a certain period,
under the agreement that, if D fails
to pay at the expiration of said
period, the house and lot described
in the contract would be considered
sold for the amount of the loan. D
failed to pay as promised. C brought
action for the delivery of the house
and lot.
Issue: Are both contracts valid and,
therefore, should be given effect?
Held: Yes. The fact that the parties have
agreed at the same time, in such a
manner that the fulfillment of the
promise of sale would depend upon the
non-payment or return of the amount
loaned has not produced any change in
the nature and legal conditions of either
contract, or any essential defect which
would nullify them.
Examples of contracts

1. Contract of loan
2. Contract of sale
3. Contract of lease
QUASI-CONTRACTS are LICIT and
PURELY VOLUNTARY and UNILATERAL
acts which create an obligation on the
part of the actor in favor of another
person;

QUASI-CONTRACTS give rise to an

obligation so that no one shall be
unjustly benefited or enriched at the
expense of another.
Contracts and quasi-contracts distinguished:
--in a contract, consent is essential
requirement for its validity while in quasi-
contract, there is no consent as the same is
implied by law (IMPLIED CONTRACT)

--contract is a civil obligation while quasi-

contract is a natural obligation (no prior
obligation to each other)

-- NO TRUE contract but can be presumed by

the Court
KINDS:

1.Negotiorium Gestio-- is the

voluntary management of the
property or affairs of another
without the knowledge or consent
of the latter. (Art. 2144.)
Example:
Thus, if through the efforts of X, a
neighbor, the house of Y was saved
from being burned, Y has the
obligation to reimburse X for the
expenses X incurred although Y did
not actually give his consent to the
act of X in saving his house on the
principle of quasi-contract.
2. Solutio Indebiti– if something is
RECEIVED when there is NO
RIGHT to DEMAND it, and it was
UNDULY delivered through
MISTAKE, the OBLIGATION TO
RETURN it arises
( Art. 2154)
ILLUSTRATIVE CASES:
1. Recovery of taxes paid under a mistake.
Facts: X, a tax-exempt cooperative store,
paid taxes to the City of Manila, believing
that it was liable.
Issue: May X recover the payment?
Held: Yes, as it was made under a mistake.
(UST Cooperative Store vs. City of Manila,
15 SCRA 656 [1965].)
 REMEDY OF THE THIRD PERSON IN COURT

Sue for DAMAGES either FOR:

A. RESTITUTION (reestablish or bring back into existence)–

A remedy in which the amount of recovery is based on
the defendant’s (third person) gain (extent to which he
was unjustly enriched) rather than that the plaintiff’s
(one who acted voluntarily) loss

B. RECOVERY– to get something BACK or REGAIN

In both remedies, the basis in awarding DAMAGES is

based on QUANTUM MERUIT ( as much as he has
deserved)
 Sources of Obligation: OTHER QUASI-CONTRACT

1. When funeral expenses are borne by a third person

without the knowledge of those relatives who were
obliged to give support to the deceased, said relatives
shall reimburse the third person, should the latter
claim reimbursement
2. When in an accident or someone is seriously ill and he
is treated or helped when he is not in a condition to
give consent, he shall be liable to pay for the services
of the physician or other person aiding him unless
such act is out of pure generosity.
WHAT IS DELICT
Acts or omissions punished by law
Civil obligations arising from CRIMINAL
OFFENSE shall be governed by the PENAL
LAWS ( Art. 1161 )
Example:
1. the obligation of a thief to return the
car stolen by him
2. the duty of a killer to indemnify the
heirs of his victim
Every person criminally liable for a felony
is also civilly liable ( Art. 100 RPC )
Scope of Civil liability:
(1)Restitution;
(2)Reparation for the damage caused; and
(3)Indemnification for consequential
damages. (Art. 104, Revised Penal
Code.)
EXAMPLE:
X stole the car of Y. If X is convicted, the
court will order X:
(1)to return the car (or to pay its value if
it was lost or destroyed);
(2)to pay for any damage caused to the
car; and
(3)to pay such other damages suffered by
Y as a consequence of the crime.
WHAT IS QUASI- DELICT (TORT/CULPA-
AQUILIANA)
Art. 2176. Whoever by act or omission
causes damage to another, there being
fault or negligence, is obliged to pay for
the damage done. Such fault or
negligence, if there is no preexisting
contractual relation between the parties,
is called a quasi-delict and is governed
by the provisions of this Chapter.
 Requisites of quasi-delict
(1)There must be an act or omission by
the defendant;
--- the act is NEGLIGENT or there is
FAILURE TO DO SOMETHING, especially
when he/she has the moral or legal
obligation to do

(2) There must be fault (defect) or

negligence of the defendant;
NEGLIGENCE
It is the failure to observe for the
protection of the interests of another
person that degree of care, precaution,
and vigilance which the circumstances
justly demand, whereby such other
person suffers injury.
Simply, it is the conduct that creates
undue risk of harm to others.
(3) There must be damage caused to the
plaintiff;

(4) There must be a direct relation or

connection of cause and effect between the act
or omission and the damage (PROXIMATE
CAUSE); and
-- the negligent act or omission must be the
proximate cause of the damage suffered by him

(5) There is no pre-existing contractual

relation between the parties.
Examples:
1. A, driver, beating the red light, losses
control and hits the car driven by B.
When B avoided the car driven by A
which was coming fast, hits the car
driven by C. C died as a result and
damages to property (cars) were
incurred.

Who is the proximate cause?

2. If Pedro drives his car negligently
and because of his negligence hits
Jose, who is walking on the sidewalk
of the street, inflicting upon him
physical injuries. Then Pedro becomes
liable for damages based on quasi-
delict.
3. The obligation of the head of a
family that lives in a building or a part
thereof to answer for damages caused
by things thrown or falling from the
same (Art. 2193.)

4. The obligation of the possessor of

an animal to pay for the damage which
it may have caused.
(Art. 2183.)
 CHAPTER 2

NATURE AND EFFECT OF OBLIGATION

 NATURE AND EFFECT OF OBLIGATIONS
ART. 1163. Every person obliged to give
something is also obliged to take care of it
with the proper diligence of a good father of
a family, unless the law or the stipulation of
the parties requires another standard of care.
-- THIS REFERS TO AN OBLIGATION TO GIVE A
SPECIFIC OR DETERMINATE THING
 NATURE AND EFFECT OF OBLIGATIONS
SPECIFIC/ DETERMINATE GENERIC /
THING INDETERMINATE THING

DEFINITION it is particularly it refers only to a

designated or class or genus to
physically which it pertains
segregated from all and cannot be
others of the same pointed out with
class particularity.
EXAMPLE The Toyota car with A Toyota car
Plate No. AAV 344
This cavan of rice A cavan of rice
The money I gave The sum of 1,000
you
 SPECIFIC/ DETERMINATE THING GENERIC /
INDETERMINATE THING

Obligations 1.To preserve or take 1.To deliver a

of the care of the thing generic or
debtor in due; indeterminate
real thing which
obligation must be
( TO GIVE) 2. To answer for neither of
damages in case of superior nor
non-fulfillment or inferior
breach of the quality.
obligation. (Art. 1170.) 2.To pay
damages in
case of breach
of the
obligation.
 SPECIFIC/ DETERMINATE THING GENERIC /
INDETERMINATE THING

Obligations 3. To deliver the

of the fruits of the thing
debtor in (Art. 1164.);
real
obligation 4. o deliver its
( TO GIVE) accessions and
accessories (Art.
1166.)
 SPECIFIC/ GENERIC / INDETERMINATE
DETERMINATE THING
THING

Rights of the 1.To compel 1.To ask for

creditor in specific performance of the
real performance obligation
obligation 2.To recover 2.To ask that the
damages in obligation be
case of complied with at the
breach of the expense of the
obligation debtor
3. Right to 3.To recover damages
rescind the in case of breach of
agreement the obligation
Problem:

Mr. A bound himself to deliver to Mr. B one (1) 50-

inch 2022 model Samsung TV and one (1) LG
Refrigerator with motor no. SEBC-123, and to
repair Mr. B’s piano. Mr. A did nothing.
A. May Mr. B compel Mr. A to deliver the TV and
the refrigerator to repair the piano?
B. If the object of the obligation to give (TV and
ref) is destroyed through a fortuitous event, can
the debtor or obligor still be held liable for
damages?
ANSWER:
IT DEPENDS.

Obligation is determinate
GR: The obligor or debtor cannot be held liable for
damages provided there is no delay or fault on the
part of the obligor.
Obligation is indeterminate
Debtor/obligor can still be liable for damages
Reason: Genus numquam peruit (Generic thing
can never perish)
 DILIGENCE
WHAT IS DILIGENCE?
It is the care, caution required of a person in a
given situation

KINDS
1. DUE DILIGENCE
The diligence reasonably expected from and
ordinarily exercised by a person
2. EXTRAORDINARY DILIGENCE
It is the extreme care that a person shall exercise
to secure rights and property
GENERAL
DILIGENCERULE: To takeINcare
REQUIRED REALofOBLIGATION
the thing with
the proper diligence of a good father of a
family.

EXCEPTIONS:
1. The law requires another standard of care.
ex. Art 1755 of NCC –common carrier is bound
to carry passengers with utmost diligence
Bank transactions (R.A 8791 or General
Banking Law of 2000) –because of fiduciary
nature of banking that requires high standards
of integrity and performance
EXCEPTIONS:
DILIGENCE REQUIRED IN REAL OBLIGATION
2. The stipulation of the parties requires
another standard of care
ex. When the parties agree on a higher
standard of care
 NATURE AND EFFECT OF OBLIGATIONS
ART. 1164. The creditor has a right to the fruits of
the thing from the time the obligation to deliver it
arises.
However, he shall acquire no real right over it until
the same has been delivered to him.
 KINDS OF FRUITS

1. Natural Fruits
These are the spontaneous products of the soil,
and the young and other products of animals
2. Industrial Fruits
Are those produced by lands of any kind through
cultivation or labor
3. Civil Fruits
These are rents of buildings, the price of leases of
lands and other property and the amount of life
annuities or other similar income
 KINDS OF DELIVERY
What is ‘delivery’?
The formal act of transferring something such as
deed; the giving possession or control of something to
another.
1. ACTUAL DELIVERY
The act of giving real and immediate possession to
the buyer or the buyer’s agent.

2. CONSTRUCTIVE DELIVERY
An act that amounts to a transfer of title by
operation of law when the actual transfer is
impractical or impossible.
S sold his horse to B for P15,000.00. No date or
condition was stipulated for the delivery of the
horse. While still in the possession of S, the horse
gave birth to a colt.

1. Who has the right to the colt?

2. If the colt was born before the delivery, who
owns it?
Answer:

1. B has the right to the colt (being the offspring—

fruit of the horse) only if the obligation to deliver
it arises- that is- the time when the purchase
price is paid
2. S is still the owner since no delivery that took
place yet
Ben leases his house to Mick monthly for the amount of
P10,000 per contract of lease agreed between them
covering one year period starting February 2022. Both
agreed that the payment of the rent will be monthly.
During the time that Ben expects payment from Mick
monthly is a PERSONAL RIGHT. Upon PAYMENT, real right
attaches- that is the right of possession of the rented
house on the part of Mick)
NATURE AND EFFECT OF OBLIGATIONS

ART. 1166. The obligation to give a

determinate thing includes that of
delivering all its accessions and
accessories, even though they may not
have been mentioned.
 NATURE AND EFFECT OF OBLIGATIONS
Accessions are the fruits of, or additions to, or
improvements upon a thing (the principal),
e.g., house or trees on a land

Accessories are things joined to, or included

with the principal thing for the latter’s
embellishment, better use, or completion
e.g., key of a house; frame of a picture
 NATURE AND EFFECT OF OBLIGATIONS
ART. 1167. If a person obliged to do
something fails to do it, the same shall be
executed at his cost. This same rule shall be
observed if he does it in contravention of the
tenor of the obligation. Furthermore, it may
be decreed that what has been poorly done
be undone.
 Remedies of creditor in positive personal obligation
REMEDIES OF CREDITOR IN CASE OF FAILURE
TO DO OR IN CONTRAVENTION OF TENOR OF
THE OBLIGATION
1. Failure to do
a. to have the obligation performed, at the
debtor’s expense
b. to recover damages

2. Done in contravention of the terms of the

obligations
a. be ordered by the Court to be undone
b. To be done at the expense of debtor
 Negative Personal Obligation

ART. 1168. When the obligation consists in

not doing, and the obligor does what has
been forbidden him, it shall also be undone at
his expense.

Remedy of the obligee/ creditor:

1. undoing of the forbidden thing
2. an action for damages
 Negative Personal Obligation

Example:
In a contract of lease of a condo unit, there is
an agreement that the lessee shall not make
any substantial improvement thereon without
the approval of the lessor. If the lessee makes
a porch or veranda without the prior consent
of the lessor, the improvement (porch) maybe
undone or removed at the expense of the
lessee plus damages in case there are things
destroyed because of such act.
 RIGHT TO DAMAGES
DAMAGES ( civil law )
In law, damages are an award, typically of money, to
be paid to a person as compensation for loss or
injury.

Right to damages due to the ff:

1. Failure to deliver
2. Fraud
3. Negligence
4. Delay
5. In contravention of the tenor of the obligation
Facts:
A delivered to B, a typewriter repairer, a portable
typewriter for routine cleaning and servicing. B
was not able to finish the job after some time
despite repeated reminders made by A. Finally, B
returned the typewriter unrepaired, some of the
parts missing. A had the typewriter repaired by F
Business Machines, and the repair job cost him
P58.75 for labor or service and P31.10 for the
missing parts or a total of P89.85. The lower
court rendered judgment ordering B to pay only
P31.10.
Is B liable also for P58.75, the cost of the service
expended in the repair?
Yes. B contravened the tenor of his
obligation (see Art. 1170.) because he did
not repair the typewriter and returned it
“in shambles.” For such contravention, he
is liable under Article 1167 for the cost of
executing the obligation in a proper
manner, which in the case should be the
cost of the labor or service expended in
its repair, because the obligation or
contract was to repair it
 DIFFERENT MODES OF BREACH
ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene
the tenor thereof, are liable for DAMAGES.

Measure of recoverable damages

Fundamental in the law on damages is that one
injured by a breach of a contract, or by a wrongful
or negligent act or omission shall have a fair and
just compensation commensurate to the loss
sustained as a consequence of the defendant’s
act
 1. FRAUD ( DOLO)
Fraud (deceit or dolo)–It is the voluntary
execution of a wrongful act, or a willful
omission which prevents the normal
realization of the prestation.
As a ground for damages, it implies some
kind of malice, dishonesty or deception
and it cannot cover cases of mistake and
errors of judgment made in good faith.
KINDS:

1. Dolo Causante or Causal Fraud

A deception used by one party PRIOR TO
or SIMULTANEOUS with execution of the
contract, in order TO SECURE THE
CONSENT of the other party. Deceit
employed must be SERIOUS.
It renders the contract voidable.
Example:
Ace sold to Kay a parcel of land representing that
the land was “ absolutely free from liens and
encumbrances”. Kay gave her consent on the faith
of  Ace’s representation. Then when the sale was
consummated and is to be registered at the Registry
of Deeds, it was found out that a lis pendens notice
was annotated in the Certificate of Title of the parcel
of land subject matter of the sale.

In this case, there is bad faith on the part of the seller

having concealed the truth and with intent to deceive
in order to successfully get the consent of the other
party.
KINDS:
1. Dolo Incidente or Incidental Fraud
refers only to some particular or accident of
the obligation or that which is not serious in
character and without which the other party
would have entered into the contract anyway.
Committed in the performance of pre-
existing obligation
Remedy of aggrieved: ask for damages
Example:

Tom enters into a contract to deliver 500 cavans of

rice to Esme with a price per cavan of 1,300 pesos.
Tom delivered 300 cavans but withheld the delivery
of the remaining, stating that the price went up and
increased the price of the rice to 1,600 per cavan
while in truth and in fact, no price increase of rice
that happened.

The fraud here is dolo incidental because it is

committed during the performance of the obligation.
 2. NEGLIGENCE
It is any voluntary act or omission, there
being no malice, which prevents the normal
fulfillment of an obligation.

Kinds of Negligence:
1. Culpa contractual
2. Culpa Aquiliana
3. Culpa Criminal
 KINDS OF NEGLIGENCE
Culpa Contractual
Negligence merely makes
the debtor liable for
damages in view of his
negligence in the
fulfillment of a pre-
existing obligation
resulting in its breach or
non-fulfillment.
Culpa Aquiliana Culpa Criminal
Fault or negligence of a Fault/negligence which
person, whose failure to results in the commission
observe the required of a crime
diligence to the obligation
causes damage to another
( governed by Art. 2176)

Negligence is merely Negligence is direct, Negligence is direct,

incidental to the substantive and substantive and
performance of the independent independent
obligation already existing
because of a contract

There is always an existing There may or may not be a No pre-existing

pre-contractual relation pre-existing contractual contractual relation
relation
Culpa Contractual Culpa Aquiliana Culpa Criminal
Source of obligation: Source of Source of obligation:
breach or obligation: defendant’s criminal act
nonfulfillment of defendant’s (there is malice or intent)
contract negligent act or
omission
Requires proof by Requires proof by Requires proof beyond
preponderance of preponderance of reasonable doubt
evidence evidence
Defense of a good father Defense of a good Defense of a good father of
of family in the selection father of family in the family in the selection and
and supervision of selection and supervision of employee is NOT
employee is NOT PROPER supervision of PROPER DEFENSE.
DEFENSE though it may employee is a PROPER The employee’s guilt is
mitigate damages DEFENSE automatically the employer’s
guilt if the former is insolvent.
Proof of existence of a Plaintiff has to prove Accused is presumed innocent
contract and breach negligence of the until the contrary is proved
thereof gives rise to a defendant
presumption of fault
When a passenger in a taxi was hurt because
of alleged negligence of the driver.
What can you file?

A. Culpa Contractual?
B. Culpa criminal?
C. Culpa Aquilina?
A. Culpa Contractual because there is a contract of
carriage between the passenger and the owner of
the taxi cab. The passenger has not reached his
destination safely.
Breach of contract can be filed but if the
owner/operator can prove that he exercised due
diligence in the selection and supervision of the
driver–
The owner/operator is still liable because of
Respondeat superior (master-servant rule)
although it can be mitigated.

If the driver was previously sued for the injury

sustained by the passenger but later was acquitted
in that criminal case ( culpa criminal), the victim—
passenger can still sue for culpa contractual ( no
need to prove negligence).
B. You can file culpa aquilina against the driver
and the owner/ operator for the alleged
negligence.
The defense of the owner/operator to exonerate
himself is defense of a good father of family in
the selection and supervision of employee

C. You can file culpa criminal against the driver

for the wrong done.
Sue the driver only but the owner/operator
becomes solidarily liable once the driver
becomes insolvent.
A pedestrian was hit by a taxi and suffered
physical injuries. The driver was allegedly
negligent.

What action/s can be filed?

Culpa Aquilina because there is no pre-existing
relation between the driver and the operator and
the victim.
The victim can bring action based on tort against
both hence, if the owner can prove due diligence,
he could not be responsible for the injury.
Culpa Criminal against the negligent driver.
Culpa Contractual ? No because no contractual
relation exists
IF the pedestrian was hurt because of negligence
of a driver and another vehicle.
The liability is solidary.
Rafael Reyes Trucking Corporation versus People (G.R. 129029)
In this case, the Provincial Prosecutor of Isabela filed with the
RTC an amended information charging Romeo Dunca y de
Tumol with reckless imprudence resulting in double homicide
and damage to property (criminal charge)
On arraignment, the offended parties made a reservation to file a
separate civil action against the accused arising from the offense
charged.

Hence, the offended parties filed with RTC a complaint against

the employer of the driver based on quasi-delict (damages- civil
action).

Among the issues was whether or not the Court may award the
damages to the offended parties in the criminal case despite filing
of a civil action against the employer of the truck driver.

What is the ruling of the Supreme Court?

Rafael Reyes Trucking Corporation versus People
(G.R. 129029)

In this case, the Provincial Prosecutor of Isabela filed

with the RTC an amended information charging
Romeo Dunca y de Tumol with reckless imprudence
resulting in double homicide and damage to property
(criminal charge)
On arraignment, the offended parties made a
reservation to file a separate civil action against the
accused arising from the offense charged.

Hence, the offended parties filed with RTC a

complaint against the employer of the driver based
on quasi-delict (damages- civil action).
Among the issues was whether or not the Court may
award the damages to the offended parties in the criminal
case despite filing of a civil action against the employer of
the truck driver.

What is the ruling of the Supreme Court?

The Court ruled that in negligence cases, the aggrieved
party has the choice between:
(1) an action to enforce civil liability arising from crime
under Article 100 of the Revised Penal Code, and
(2) a separate civil action for quasi delict under Article
2176 of the Civil Code.
Once the choice is made, the injured party can not avail
himself of any other remedy because he may not recover
damages twice for the same negligent act or omission of
the accused.
 3. DELAY
DELAY (Art. 1169)
The non-fulfillment of obligation with respect
to time.

SIMPLE DELAY arises when one fails to

perform the obligation without any demand
yet but the debt is already due and
demandable
LEGAL DELAY arises when the obligee
judicially or extrajudicially demands the
fulfillment of the obligation.
 Kinds of delay (mora)
(1)Mora solvendi or the delay on the part of
the debtor to fulfill his obligation (to give or
to do) by reason of a cause imputable to
him;
(2)Mora accipiendi or the delay on the part of
the creditor without justifiable reason to
accept the performance of the obligation;
and
(3)Compensatio morae or the delay of the
obligors in reciprocal obligations (like in
sale), i.e., the delay of the obligor cancels
the delay of the obligee, and vice versa.
Requisites of delay or default by the debtor
(mora solvendi)
(1)failure of the debtor to perform his (positive)
obligation on the date agreed upon;
(2)demand (not mere reminder or notice) made
by the creditor upon the debtor to fulfill,
perform, or comply with his obligation which
demand, may be either judicial (when a
complaint is filed in court) or extra-judicial
(when made outside of court, orally or in
writing); and
(3) failure of the debtor to comply with such
demand.
Example:
S obliged himself to deliver to B a specific
refrigerator on December 10. If S does not
deliver the refrigerator on December 10,
he is only in ordinary delay in the absence
of any demand from B although a period
has been fixed for the fulfillment of the
obligation. The law presumes that B is
giving S an extension of time within which
to deliver the refrigerator. Hence, there is
no breach of the obligation and S is not
liable for damages yet.
If a demand is made upon S by B on December
15 and S fails to deliver the refrigerator, S is
considered in default only from the date. If an
action for specific performance is filed by B on
December 20, the payment of damages for the
default must commence on December 15 when
he made the extra-judicial demand and not on
December 20. In the absence of evidence as to
such extra-judicial demand, the effects of
default arise from the date of the judicial
demand, that is, from the filing of the
complaint.
 Effects of delay

(1)Mora solvendi (default by the debtor)

(a)The debtor is guilty of breach of the obligation;
(b)He is liable for interest in case of obligations to pay
money (Art. 2209.) or damages in other obligations.
(Art. 1170.) In the absence of extrajudicial demand,
the interest shall commence from the filing of the
complaint; and
(c)He is liable even for a fortuitous event when the
obligation is to deliver a determinate thing. (Arts.
1165, 1170.) However, if the debtor can prove that
the loss would have resulted just the same even if he
had not been in default, he is still liable but the court
may equitably mitigate the damages. (Art. 2215[4].)
 (2) Mora accipiendi

(a)The creditor is guilty of breach of obligation;

(b)He is liable for damages suffered, if any, by
the debtor;
(c)He bears the risk of loss of the thing due
(see Art. 1162.);
(d) Where the obligation is to pay money, the
debtor is not liable for interest from the
time of the creditor’s delay; and
(e)The debtor may release himself from the
obligation by the consignation of the thing
or sum due.
 (3) Compensatio morae. —

1. The delay of the obligor cancels out the effects

of the delay of the obligee and vice versa.
2. No actionable default on the part of both
parties, such that as if neither one is guilty of
delay.
3. If the delay of one party is followed by that of
the other, the liability of the first infractor shall
be equitably tempered or balanced by the
courts. If it cannot be determined which of the
parties is guilty of delay, the contract shall be
deemed extinguished and each shall bear his
own damages. (Art. 1192.)
GENERAL RULE: There must be DEMAND in order for
the debtor to incur delay.

Exceptions: (instances when no demand is necessary to

incur delay)
(1)When the obligation or the law expressly so declares;
or
(2)When from the nature and the circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered or the service is to
be rendered was a controlling motive for the
establishment of the contract; or
(3)When demand would be useless, as when the obligor
has rendered it beyond his power to perform.
(1)When the OBLIGATON so provides

D promised to pay C the sum of P20,000.00

on or before November 30 without the
need of any demand. Therefore, if D fails to
pay on November 30, he is automatically in
default. In this case, the parties stipulate to
dispense with the demand.
(2) When the LAW so provides. —
(a)Under the law, taxes should be paid on or
before a specific date; otherwise, penalties
and surcharges are imposed without the
need of demand for payment by the
government.

(b)The partner is liable for the fruits of the thing

he may have promised to contribute to the
partnership from the time they should have
been delivered without the need of any
demand. (Art. 1786; see also Art. 1788.)
(3) When TIME is of the essence. —

A. The delivery of balloons on a particular date

when a children’s party will be held;
B. The making of a wedding dress where the
wedding is scheduled at a certain time;
C. payment of money at a particular time so
that the creditor could pay off certain debts
due on the same date;
D. the delivery of a car to be used in a trip at a
particular time; etc.
(4) When demand would be USELESS—
S obliged himself to deliver a specific horse
to B on December 5. Through S’s
negligence or deliberate act, or by reason
of a fortuitous event for which S has
expressly bound himself responsible, the
horse died on December 2.
Under this situation, any demand for the
delivery of the horse on December 5 would
be useless as S has made it impossible for
him to perform his obligation.
 4. CONTRAVENTION OF TENOR
This is the violation of the terms and
conditions stipulated in the obligation. The
contravention must not be due to a fortuitous
event or force majeure. The unilateral act of
terminating a contract without legal
justification by a party makes him liable for
damages suffered by the other pursuant to
Article 1170.
It does not only include illicit act which impairs
the strict and faithful performance of the
obligation, but also every kind of defective
performance.
 REMEDIES OF CREDITOR IN CASE OF
BREACH OF CONTRACT OR OBLIGATION
A. PRIMARY REMEDIES
1. ACTION FOR PERFORMANCE (SPECIFIC OR
SUBSTITUTED)
A. ACTION FOR SPECIFIC PERFORMANCE
(OBLIGATION TO GIVE SPECIFIC THING)
“When what is to be delivered is a determinate
thing, the creditor, in addition to the right for
indemnification for damages, may compel the debtor to
make the delivery. “ ( Art 1165)
B. ACTION FOR SUBSTITUTED PERFORMANCE
“If the thing is indeterminate or generic, he may ask
that the obligation be complied with at the expense of the
debtor.” ( Art 1165)
2. ACTION FOR DAMAGES ( EXCLUSIVE OR IN ADDITION
TO PERFORMANCE)
Recoverable damages include ANY and All damages
that a human being may suffer.
3. ACTION FOR RESCISSION
The power to rescind obligation is implied in reciprocal
obligations, in case one of the obligors should not
comply with what is incumbent upon him. ( Art 1191).
BREACH BY BOTH PARTIES
1. If first infractor can be determined, his liability shall be
equitably tempered by the courts
2. If the first infractor cannot be determined, the
obligation shall be extinguished and each shall bear his
own damages.
 EFFECTS OF RESCISSION
1. Extinguishes obligatory relation as
if it had never been created;
2.Mutual restitution – means
bringing the parties back to their
original status prior to the
inception (establishment) of the
contract.
 SUBSIDIARY REMEDIES:

1.To exhaust the property in

possession of the debtor generally
by attachment.
Accion Subrogatoria
--an action where the creditor
whose claims had not been fully
satisfied may go after the debtor’s
debtor (3rd person)
--once the creditor has exhausted
the property of the debtor, creditor
can step into the shoes of the
debtor and sue the debtor’s
debtor/s
 Rights of the creditor under Accion
Subrogatoria
1. Levy by attachment and execution upon all
the property of the debtor
Attachment– file a motion asking Court to issue
a Writ or order attaching the property of the
debtor;
it is a PRE-JUDGMENT process in which a Court
orders the attachment or seizure of a property
(prior to outcome of the case) for purposes of
protecting certain rights and interests to realize
the relief sought (satisfaction of a judgment
later on)
 Rights of the creditor under Accion
Subrogatoria
Execution– an order or a writ directing the
sheriff to begin to transfer property as a result
of conclusion of a legal judgment. After-
judgment process to satisfy the judgment
award.
 Rights of the creditor under Accion
Subrogatoria
2. Exercise all the rights and action of the
debtor

3. To ask for rescission

Example:
A and B entered into a contract of loan for the
amount of P2M to be paid on January 30, 2021. B
failed to pay the said loan. A filed a case for collection
of sum and later on, a favorable judgment was
rendered in favor of A. The Court ordered B to pay the
amount of P2M as principal, and P50,000.00 as
earned interest. A writ of execution was issued. After
enforcement of the order/writ for the satisfaction of
the judgment award, the sheriff was only able to
collect P1M having exhausted all the properties of the
debtor. A learned from B that C owes him (B) the
amount of P1M. A, thru motion, filed an accion
subrogatoria against C to collect the debt owing to B
for the satisfaction of B’s debt.
Accion Pauliana----an action where the creditor
files an action in Court for the rescission of acts
or contracts entered into by the debtor
designed to defraud the creditor
REQUISITES:
a. Creditor has a credit prior to the alienation by
the debtor
b. Debtor has made a subsequent contract
giving advantage to a 3rd person
c. Creditor has no other remedy but to rescind
the debtor’s contract to the 3rd person
d. Act being impugned is fraudulent
 EXTINGUISHMENT OF LIABILITY IN CASE OF
BREACH DUE TO FORTUITOUS EVENT

ART. 1174. Except in cases expressly specified

by the law, or when it is otherwise declared by
stipulation, or when the nature of the
obligation requires the assumption of risk, no
person shall be responsible for those events
which could not be foreseen, or which,
though foreseen, were inevitable.
Fortuitous event distinguished from force majeure.
(1)Acts of man. — Strictly speaking, fortuitous
event is an event independent of the will of the
obligor but not of other human wills, e.g., war,
fire, robbery, murder, insurrection, etc.
(2)Acts of God. — They are those events which are
totally independent of the will of every human
being, e.g., earthquake, flood, rain, shipwreck,
lightning, eruption of volcano, etc. They are also
called force majeure. The term generally applies
to a natural accident. In our law, fortuitous
events and force majeure are identical in so far
as they exempt an obligor from liability. Both
are independent of the will of the obligor.
 Requisites of a fortuitous event.
(1)The event must be independent of the
human will or at least of the obligor’s will;
(2)The event could not be foreseen
(unforeseeable), or if it could be foreseen,
must have been impossible to avoid
(unavoidable);
(3)The event must be of such a character as to
render it impossible for the obligor to comply
with his obligation in a normal manner; and
(4)The obligor must be free from any
participation in the aggravation of the injury
to the obligee.
A construction firm built windmills for the
local government. One day, a windmill
collapsed due to “strong wind” and caused
the damage of the said windmill. The
construction firm argued that it is a
fortuitous event, hence it is not liable for the
repair of the same.
Is “strong wind”, in this circumstance, a
fortuitous event?
In Tanguilig vs. Court of Appeals (G.R. No.
117190. January 2, 1997), the Supreme Court
ruled that a “strong wind” causing the collapse of a
windmill cannot be considered fortuitous. On the
contrary, a strong wind should be present in places
where windmills are constructed, otherwise the
windmills will not turn. A “strong wind” that
damages a windmill is neither unforeseen nor
unavoidable, hence the same is not a fortuitous
event that excepts a party from his obligation. In
that case, the contractor who constructed and
installed the windmill was directed to repair the
same
 Liability in case of fortuitous event

General Rule: No liability in case of fortuitous

event

Example:
Gaya obliged herself to deliver a determinate
car to Tito on Dec. 30, 1998. Before the arrival
of the period, the car was struck by lightning
and was totally destroyed. Gaya cannot be held
responsible for the destruction of the car, hence
her obligation to deliver is extinguished.
 EXCEPTIONS:
1. When expressly declared by law
example:
If the obligor delays, or has promised to deliver
the same thing ( specific thing) to two or more
persons who do not have the same interest, he
shall be responsible for any fortuitous event
until he has effected the delivery.
Other examples: Art 552, 1268, 1942…

2. When expressly declared by stipulation

3. When the nature of obligation requires the
assumption of risk.
An example of this is a contract of insurance.
D insured his house against fire for P500,000.00 with
R, an insurance company. Later, the house was
destroyed by accidental fire.
Although the cause of the loss is a fortuitous event,
D may recover the amount of the policy. In a
contract of insurance, the insurer (R), in
consideration of the premium paid by the insured
(D), 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 a fortuitous
event.
 KINDS OF OBLIGATIONS
1. Pure Obligations ( not dependent on
condition)
Obligations whose performance does not
depend upon a future or uncertain event, or
upon a past event unknown to the parties, is
demandable at once.
 KINDS OF OBLIGATIONS
D obliges to pay C P10,000.00. The obligation is
immediately demandable if there is no condition
and no date is mentioned for its fulfillment. Of
course, if the loan has just been contracted by D,
a period must have been intended by the parties
for performance but the duration thereof will
depend upon the nature of the obligation and
the circumstances.
2. Conditional Obligations
One whose consequences are subject in one way
or another to the fulfillment of a condition.

Meaning of Condition
Condition is a future and uncertain event, upon
the happening of which, the effectivity or
extinguishment of an obligation (or rights) subject
to it depends.
uncertain event which constitutes the condition.
Kinds of condition
1. Suspensive condition or one the fulfillment of
which will give rise to an obligation (or right). In
other words, the demandability of the obligation is
suspended until the happening of a future and
uncertain event which constitutes the condition.

Example of Suspensive Condition

Maya binds herself to deliver a determinate car to
Tito if he marries Gaya. The obligation is only
demandable upon the happening of the condition
that is, if Tito marries Gaya. The obligation is
suspended and not yet demandable.
2. Resolutory condition (condition subsequent)
or one the fulfillment/happening of the
condition will extinguish an obligation (or right)
already existing.
Example:
Arvin binds himself to lend his only car to Ian
until the latter passes the CPA Board. The
obligation to lend is immediately demandable.
Ian’s right over the car is extinguished upon his
passing the CPA board. Ian is now obliged to
return the car.
3. Potestative – is one the fulfillment of which
depends upon the sole will of the debtor. This kind
of condition is void.
Example:
Arvin Promises to give his only parcel of land to
Maya if he decides to leave for the United States.

4. Casual – is one the fulfillment of which depends

upon chance.
Example:
Mario agrees to give Maria a determinate car if
Maria’s only racing horse will win the sweepstake
race. 
5. Mixed – is one which depends partly
upon the will of third person and partly
upon chance
Example:
Vincent promises to give Victor a new
Toyota Car if Victor will be able to play
with and beat Karpov in a game of chess.
This is mixed condition, that is Karpov’s
willingness to play chess with Victor and
the latter’s winning over Karpov.
6. Possible
7. Impossible
A. Physical Impossibility– the condition imposed is
not capable of being performed physically. 
Grace will give Christine a gold necklace if she swims
across the Pacific Ocean.
B. Illegal Impossibility – when the condition imposed
is contrary to law, good custom or public policy.
Pedro agrees to give Ernesto P100,000 if Ernesto will
kill Mario. (law)
Maria agrees to employ Grace in her company if
Grace will not join a labor union. (public policy)
Santos binds himself to give Maria a gold wrist watch
if she will cohabit with Mr. Reyes without benefit of
marriage. ( good custom)
8. Positive Condition --- condition that some event
happen at a determinate time shall extinguish the
obligation as soon as the time expires or become
indubitable that the event will not take place
9. Negative condition --- one where some event will
not happen at a determinate time, either a.) the time
indicated has elapsed; or b.) it has become evident
that the event cannot occur (Art. 1185, NCC)
Example:

Victor will give Jason a car if he will not marry

Helen until Dec. 19, 2001, if Jason has not married
Helen until Dec. 19, 2001 or if Helen has died within
the prescribed time without having married to
Jason, the obligation becomes demandable. If Jason
married Helen within the prescribed time, the
obligation of Victor is extinguished.
PRINCIPLE OF RETROACTIVITY IN SUSPENSIVE
CONDITION (Art. 1187)
1. In obligation to give (positive real obligation)
A. Once the condition has been fulfilled, it shall
retroact to the day of the constitution of the
obligation.
B. The obligation becomes effective and
enforceable
C. Debtor/Obligor may be legally compelled to
perform from that moment
Example:
On January 2, 2020, X obliges himself to give his
Vios car 2018 with plate # YAA 2185 to Y if the
latter passes the August 2020 LET exams.
Subsequently, Y passed the LET exams.
By operation of law, as if Y owns the car beginning
January 2, 2020. The obligation of X to give the
determinate thing (VIOS car 2018) becomes
effective and Y can demand the delivery thereof
(specific performance).
Note: Prior to the happening of the condition, X
cannot make contracts alienating or disposing or
encumbering the thing promised to be given.
PRINCIPLE OF RETROACTIVITY IN SUSPENSIVE
CONDITION (Art. 1187)

2. In obligation to do or not to do ( personal

obligation)
The Court is empowered to determine the
retroactive effect of the suspensive condition that
has been complied with.
RULES IN CASE OF LOSS, DETERIORATION, OR
IMPROVEMENT OF THE THING PENDING THE
HAPPENING OF THE CONDITION IN OBLIGATION
TO GIVE (art. 1189)

WHAT IS LOSS? A thing is lost when it:

1. Perishes
2. Goes out of commerce; or
3. Disappears in such a way that its existence is
unknown or it cannot be recovered
RULES IN CASE OF LOSS, DETERIORATION, OR
IMPROVEMENT OF THE THING PENDING THE
HAPPENING OF THE CONDITION IN OBLIGATION TO
GIVE (art. 1189)
1. If the thing is lost without fault of the debtor
Obligation is extinguished.
Example:
X obliged himself to deliver his only bike to Y if the
latter finishes his Doctorate degree. However,
before Y could finish it, said bike was lost through
flood. The lost was through fortuitous event; thus,
X had no fault and the obligation is extinguished.
2. If the thing is lost through the fault of the
debtor
Debtor shall be obliged to pay DAMAGES

X obliged himself to deliver his only motorbike to Y

if the latter finishes his Doctorate degree. However,
before Y could finish it, said motorbike was
destroyed when it fell in the ravine while X was
riding it. Based on police investigation, X was drunk
when the incident happened. X is liable for
damages because drunk-driving is an act of fault or
negligence.
3. When the thing deteriorates without the fault
of the debtor
The impairment is to be borne by the creditor.
Example:
X obliged himself to deliver his only motorbike to Y
if the latter finishes his Doctorate (PHD) degree. Y
successfully finished his PHD degree. Naturally, a
motorbike deteriorates through wear and tear. The
question now is, who will bear the decrease in
value of the motorbike?
Y will bear the decrease in value because the
depreciation is without the fault of X.
4. If it deteriorates through the fault of the debtor
The creditor may choose between the rescission of
the obligation or its fulfillment, with indemnity for
damages in either case.
Example:
X obliged himself to deliver his only motorbike to Y
if the latter finishes his Doctorate (PHD) degree. Y
successfully finished his PHD degree. However,
from February 2020 to April 2020, X used the
motorbike negligently and recklessly. In this case, Y
can choose SPECIFIC PERFORMANCE or, in the
alternative, RESCISSION with indemnity for
DAMAGES in either case.
5. If the thing is improved by its nature or by time
The improvement shall inure to the benefit of the
creditor.
Example:
X obliged himself to deliver his only farmlot to Y if
the latter finishes his Doctorate (PHD) degree. Y
successfully finished his PHD degree. Normally, the
value of land increases through the passage of
time. Thus, the improvement (increase in value)
shall inure to the benefit of Y.
6. If it is improved at the expense of the debtor
The debtor shall have no other right than that
granted to the usufructuary.
Example:
X obliged himself to deliver his only motorbike to Y
if the latter finishes his Doctorate (PHD) degree. Y
successfully finished his PHD degree. However,
from January 1, 2020 up to March 2020, X
introduced improvement on the said motorbike
like repainting of the entire body of the motorbike
because of deterioration, change of the major
parts of its engine because of the leakage of oil,
and putting a pink leather cover in the seats.
In this case, X will exercise the right of
usufructuary; hence, he can remove the leather
cover of the seats. Also, he has the right to be
indemnified on his expenses in the repainting of
the motorbike and the change of the major parts
of the engine as these are necessary expenses.
Corollary, if X made damage to the motobike like
scratches therein, he may set off any of these
damages against the improvements.
C. OBLIGATIONS WITH A PERIOD (Art. 1193)
an obligation whose effects are subjected to the arrival or
expiration of a period; Such period is 'a day certain' which
must necessarily come, although it may not be known
when.
TERM OR PERIOD
A term or period is an interval of time, which, exerting an
influence on an obligation as a consequence of a juridical
act, either suspends its demandability or produces its
extinguishments.
REQUISITES:
1. FUTURE; AND
2. CERTAIN
 PERIOD CONDITION
In terms of fulfillment future and certain event uncertain event
SURELY COME MAY OR MAY NOT
HAPPEN
in terms of time refers only to the future may refer also to the
past
in terms of influence on fixes the time for the causes the existence or
the obligation performance of an the extinguishment of an
obligation. It does obligation
prevent its existence
(suspensive) and
conception in due time
(resolutory).
If left exclusively to the The obligation is still The very VALIDITY of the
will of the debtor VALID obligation is affected
Must be POSSIBLE, Must be POSSIBLE,
otherwise, the otherwise, the
obligation is VOID obligation is VOID
Kinds of Period
a. according to effect:
Suspensive period (ex die) - wherein the
obligation begins only from a day certain or upon
the arrival of the period

Example:
X promised to give Php10,000 to Y on February 14,
2021. Take note that X will be liable upon demand by
Y on February 14, 2021.
Kinds of Period
a. according to effect:

Resolutory period (in diem) - wherein the

obligation is performed only up to a day certain
and terminated upon the arrival of the period

Example:

X promised to give Php10,000 to Y until May 30,

2021. Note that the obligation of X is immediately
demandable. However, X’s liability to Y will be
extinguished on May 30, 2021.
Kinds of Period

b. according to source
 Legal period - when it is provided by law.
 Conventional/Voluntary period - when it is agreed upon by
the parties.
 Judicial period - when it is fixed by the court.

c. according to definiteness:
 Definite period - when it is fixed and its exact date or time is
known.
 Indefinite period - when it is not fixed and its exact date or
time is unknown, but surely happen.

c. according to Expression:
Express- When the period is specifically stated.
Implied- When the period is not specifically stated but it can be
deduced that the parties intended a period just like when the
debtor binds himself to pay when his means permit him to do so.
Effect of Payment before the Period
•A thing or money given before the arrival of the
period may be recovered by the debtor:
 if he is unaware of such period.
 if he mistakenly thought that such period has
arrived.
•The debtor shall have the burden of proof of
either such circumstances, otherwise he is
presumed to be knowledgeable of the period.
•The creditor, for his part, has the obligation to
return the thing or money received under such
circumstances. This obligation arises from solutio
indebiti that prevents unjust enrichment.
Examples
 D is obliged to give C a book on June 30, 2020.
D is unaware of the period and prematurely
give it on May 30, 2020. In this case, D may
recover the cellphone from C who has the duty
to return it.

 D is obliged to pay C Php10,000 on June 30,

2020. D paid the amount to C on June 20,
2020, mistakenly believing that it was already
due. If before June 30, 2020, D may recover the
Php10,000 plus interests. If after June 30,
2020, D may only recover the interests. 
3. ALTERNATIVE and FACULTATIVE OBLIGATIONS

A.ALTERNATIVE OBLIGATION
An obligation which involves multiple prestations
(objects) that are due but the performance of one is
sufficient.

Example:
X obliged himself to give his only cell phone, or his
only laptop, or his only TV to Y on January 30, 2022.
The delivery of either of these objects will extinguish
the obligation of X.
D. ALTERNATIVE and FACULTATIVE OBLIGATIONS

B. FACULTATIVE OBLIGATION
An obligation which involves a principal prestation
and a substitute prestation.

Example:
X promised to give his only parcel of land to Y.
However, as a substitute, he will deliver his only car.
Take note that the parcel of land is the principal
object and the car is the substitute object. Delivery
of any of these objects will extinguish his obligation.
4. JOINT and SOLIDARY OBLIGATIONS

A. JOINT OBLIGATION
where the whole obligation is to be paid or
fulfilled proportionately by the different debtors
and demanded proportionately by the different
creditors. This is the presumption in all collective
obligation unless solidarity is expressly stated.
Example:
Tin, Tina, Mau owed Jun P900,0000. There are 3 debts and 1
credit, In the absence of any agreement, the liability of Tin,
Tina & Mau is only 300K. (Each debtor is liable only for a
proportionate part of the entire debt)
(In this example, the law presumes that they are only jointly
liable in the absence of stipulation that they are solidary
liable)

A and B are joint debtors of C, D, E, and F, who are joint

creditors to the amount of P1,000,000. C may demand only
P500,000 from A, and P500,000 from B. D, E, and F, have the
same rights as C.
EFFECTS OF JOINT OBLIGATION
1. The defect of each obligation arising from the personal defect of a
particular joint debtor or joint creditor does not affect the
obligation or right of the other joint parties.
2. Insolvency of one joint debtor does not make the other joint debtor
or debtors responsible for his proportionate share.
3. The demand by the creditor or creditors on one joint debtor puts
him in delay in case of non-payment while the other joint debtor or
debtors are not liable.
4. The defenses of one joint debtor are not necessarily available to
the other joint debtor or debtors.

OTHER TERMS INTERCHANGEABLY USED WITH JOINT OBLIGATIONS

5. Joint or jointly
6. Conjoint
7. Pro rata obligation or proportionate
B. SOLIDARY OBLIGATION
where each one of the debtors is bound to render, and/or each creditor
has the right to demand from any of the debtors, the entire compliance
with the prestation.

EFFECTS OF SOLIDARY OBLIGATION

1. one of the several debtors can be made liable for the payment or
the performance of the entire obligation. (full payment by any of
the debtor extinguishes the obligation)
2. one of the solidary creditors can demand the payment or
performance of the entire obligation from the debtor or any of the
debtors. (There is mutual representation w/ power to exercise the
rights of others in the same manner as their own rights)
OTHER TERMS INTERCHANGEABLY USED WITH SOLIDARY OBLIGATION
3. “JOINT AND SEVERAL or SEVERAL
4. IN SOLIDUM
5. MANCOMUNADA SOLIDARIA
6. INDIVIDUALLY AND COLLECTIVELY
5. DIVISIBLE and INDIVISIBLE OBLIGATION
DIVISIBLE OBLIGATION
an obligation the object of which is capable of
partial fulfillment

Example:  Obligation to deliver 100 pcs watches

of a particular brand and quality

INDIVISIBLE OBLIGATION
an obligation the object of which is not capable of
partial fulfillment

Example: Obligation to deliver a particular car

JOINT INDIVISIBLE OBLIGATION
The nature of the rights and obligations of the
parties are JOINT and the nature of the object of the
obligation is INDIVISIBLE.

Example:
A and B promise to deliver a specific car to X and Y.
Take note that their agreement is silent as to
whether it is joint or solidary; hence, it is presumed
to be joint. It is worthy to note also that the object is
a car, meaning, it is an indivisible thing that is why all
the debtors should collectively perform their
respective obligations.
6. OBLIGATION WITH A PENAL CLAUSE
an obligation which includes an undertaking to pay
a stipulated indemnity in case of breach of the
principal obligation
• Penalty clause is an accessory obligation or
undertaking attached to a principal obligation,
which imposes an additional liability in case of
breach of the principal obligation, in order to
secure the performance of the principal obligation.
• The penalty imposable is a substitute for the
indemnity for damages and payment of interest in
case of breach of the obligation, unless there is
contrary stipulation, in which case, the additional
damages may further be recovered.
Example:
X promised to repair Y’s building within 3
months. They agreed that if X fails to finish the
repairs in 3 months, X will pay P100,000.00 to
Y. (penalty clause)

Note: “ The nullity of the penal clause does not

carry with it that of the principal obligation. The
nullity of the principal obligation carries with it
that of the penal clause.” (Article 1230 of Civil
Code)
 CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS ( Art. 1231)

(1) By payment or performance
(2) By the loss of the thing due
(3) By the condonation or remission of the debt
(4) By the confusion or merger of the rights of creditor and
debtor
(5) By compensation
PAYMENT (Art. 1232)
It means not only delivery of MONEY but also the
PERFORMANCE, in any other manner, of an obligation.
Hence, if the obligation is to give a specific car, payment is
made by delivering the thing. If the obligation is to repair
a computer, payment is made by performing the service.

PLACE OF PAYMENT
1.At place agreed upon
2.If without agreement
a. Object is indeterminate– paid at domicile of debtor
b. Object is determinate– place of thing at the time of
constitution of obligation
Example:
A promised that he would paint a
portrait of B in exchange of Php 100,000.
A did and delivered the portrait on time.
A's obligation here was extinguished by
performance.
B, in turn, has the obligation to pay the
Php 100,000 fee. He issued a check in
favor of A. A encashed the same. B's
obligation here was extinguished by
payment.
Principle of Integrity (of Payment)
General Rule: A debt shall not be understood to have
been paid unless the thing or service in which the
obligation consists has been delivered or rendered, as
the case may be. (Art. 1233)

Exceptions:
1. if the obligation has been substantially performed in
good faith, the obligor (debtor) may recover as though
there had been a strict and complete fulfillment, less
damages suffered by the obligee(creditor). (this is
referred as substantial payment doctrine)
Example:

In their contract, X obliged himself to manufacture

and deliver 10 chairs for Y at P1,000 per chair.
However, due to lack of lumber because of the
recent ”super” typhoon, X only manufactured 8
chairs and delivered to Y. In this case, X is presumed
to be in good faith; Under the law, X can recover as
though there had been complete delivery less the
price of the 2 chairs, hence, he can recover P8,000
(P1,000 x 8) or (P10,000 (P1,000 x 10)- P2,000
(P1,000 x 2) only.
2. When the obligee (creditor) ACCEPTS the
performance, knowing its incompleteness or
irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied
with. (Art. 1235)

Example:
In their contract, X obliged himself to manufacture
and deliver 10 chairs for Y at P1,000 per chair.
However, X delivered only 9 chairs but it was
accepted by Y knowing it is incomplete. Y paid
P9,000. The obligation of X is extinguished.
Take note:
A creditor is not bound to accept payment from a
third person (not the debtor) who has no interest
in the fulfillment of the obligation unless there is
a contrary stipulation. (Art 1236)
Whoever pays for another may demand from the
debtor what he has paid, EXCEPT that if he paid
WITHOUT the knowledge of the latter.
Example:
X owed Y P10,000. Z, a neighbor, wants to pay
the obligation of X. In this case, Y is not bound to
accept the payment of Z because he has no
interest in the fulfillment of the obligation.
(Note: Z is not a guarantor, a pledgor nor a
mortgagor.) Nonetheless, if Y accepted the
payment of Z, the latter can recover from X with
interest. But if the payment of Z is without the
knowledge of X or against his will, then Z can
recover only the P10,000 based on the principle
of “unjust enrichment.”
Take note:
Whoever pays on behalf of the debtor without the
knowledge or against the will of the latter, cannot
compel the creditor to subrogate him in his
rights, such as those arising from a mortgage,
guaranty, or penalty. (Art. 1237)

X is the debtor of Y in the amount of P100,000.

This is secured by a real estate mortgage over X’s
parcel of land. If Z, a third person, paid the
obligation of X without the latter’s knowledge or
against his will then Z cannot foreclose the
mortgage in case of default of the obligation by X.
Payment made by a third person who does not
intend to be reimbursed by the debtor is deemed a
DONATION, which requires debtor’s consent.
Payment made is valid as to the creditor who has
accepted it. (Art. 1238)

Z, a classmate of X, paid the latter’s obligation to Y in

the amount of P3,000. Z intends that the payment
will be his gift to X by virtue of the latter’s birthday
two days ago. X consented to this donation. In this,
the who has accepted it.
To whom payment be made?
1.Person in whose favor the obligation
has been constituted (creditor or
obligee)
2.His successor in interest; or
3.Any person authorized to receive it.
General Rule:
Payment by an incapacitated person is not
valid. (Art. 1239)
Exception:
A.Payment by minor who has entered into a
contract without the consent of the parents or
guardian voluntarily pays a sum of money or
delivers a fungible thing in fulfillment of the
obligation, there shall be no right to recover the
same from the obligee (creditor) who has spent or
consumed it in good faith. (Art 1427)
B.Payment to a person who is incapacitated to
administer his property if he has kept the thing
delivered, or insofar as the payment has been
beneficial to him. (Art. 1241)
FOUR (4) SPECIAL MODES OF PAYMENT
A. APPLICATION OF PAYMENT (Art. 1252)
B. DATION IN PAYMENT (Art. 1245)
C. PAYMENT BY CESSION (Art. 1255)
D. TENDER OF PAYMENT & CONSIGNATION (Art. 1256)
B. Application of payment is the designation of
the debt to which should be applied the payment
made by a debtor who has various debts of the
same kind in favor of one and the same creditor.
Requisites of application of payments.
(1) There must be one debtor and one creditor;
(2) There must be two or more debts;
(3) The debts must be of the same kind;
(4) The debts to which payment made by the
debtor has been applied must be due; and
(5) The payment made must not be sufficient to
cover all the debts. Application as to debts not yet
due.
THREE (3) RIGHTS TO MAKE APPLICATION OF PAYMENT
1. Right belongs to CREDITOR
2. If debtor does not avail, creditor can give him receipt
designating the debt from which payment will be
applied.
3. If debtor accepts the receipt, he cannot complain unless
THERE IS just cause to invalidate the contract.
DATION IN PAYMENT (Art. 1245)
A property is alienated to the creditor in satisfaction
of a debt in money.
The debtor offers another thing to the creditor
who accepts it as equivalent of payment of an
outstanding debt. It partakes of the nature of sale
whereby property is alienated to the creditor in
satisfaction of a debt in money.
REQUISITES:
1. There must be a performance of the prestation in
lieu of payment which consists in the delivery of a
corporeal thing or real right or a credit against
the third person.
2. There must be some difference between the
prestation due and that which is given in
substitution, and
3. There must be an agreement between the
creditor and debtor that the obligation is
immediately extinguished by reason of the
performance of prestation different from that
due.
ELEMENTS:
1. Existence of a money obligation;
2. The alienation to the creditor of a property by
the debtor with the consent of the former; and
3. Satisfaction of the money obligation of the
debtor
PAYMENT BY CESSION (Art. 1255)
It is the assignment or abandonment of all
the properties of the debtor for the benefit
of his creditors in order that the latter may sell
the same and apply the proceeds thereof to the
satisfaction of their credits.
Requisites:
a) there is plurality of debts;
b) there must be two or more creditors;
c) partial or relative insolvency of the debtor;
d) the assignment must involve all of debtor's
properties;
Example:
Leny is indebted to several creditors in the total
amount of P5 million. Her assets are not sufficient to
pay all her debts.
With the consent of her creditors, Leny may assign
property to them to be sold, to satisfy their credits.
If the net proceeds of the sale amount only to P3
million, Leny is still liable for the balance of P2
million unless there is a stipulation that the
assignment shall be in full satisfaction of all her
debts.
DATION IN PAYMENT versus PAYMENT BY CESSION

1) In dation (see Art. 1245.), there is usually only one

creditor, while in cession, there are several creditors;
(2) Dation does not presuppose the insolvency of the debtor
or a situation of financial difficulties, while in cession, the
debtor is insolvent at the time of assignment;
(3) Dation does not involve all the property of the debtor,
while cession extends to all the property of the debtor
subject to execution;
(4) In dation, the creditor becomes the owner of the thing
given by the debtor, while in cession, the creditors only
acquire the right to sell the thing and apply the proceeds to
their credits pro rata; and
(5) Dation is really an act of novation (replacement of party)
(Art. 1291[1].), while cession is not an act of novation.
4. TENDER OF PAYMENT AND
CONSIGNATION
Tender of Payment
Is the definitive act of OFFERING the creditor
what is due him or her, together with the
demand that the creditor accept the same.

Consignation is the act of depositing the thing

due with the Court or judicial authorities
whenever the creditor cannot accept or refuses
to accept payment, and it generally requires a
prior tender of payment.
Requisites of Consignation
1. There was a debt due
2. The consignation of the obligation had been made
because the creditor to whom tender of payment
was made refused to accept it, or because he/she
was absent or incapacitated, or because several
persons claimed to be entitled to receive the
amount due or because the title to the obligation
had been lost;
3. Previous notice of the consignation had been given
to the person interested in the performance of the
obligation;
4. The amount due was placed at the disposal of the
court; and
5. After the consignation had been made, the person
interested was notified of the action.
LOSS OF THING DUE (Art. 1262)
1. Perishes, or
2. Goes out of commerce or
3. The thing disappears in a way that its existence is
unknown or CANNOT be recovered.

Requisites to free the obligor from liability:

• Obligation is a determinate thing
• Loss is w/o fault of the debtor
• Obligor is NOT in delay
• Obligor is NOT in bad faith
CONDONATION/ REMISSION (Art. 1270)
Condonation or remission is an act of liberality where the creditor gives up
his right against the debtor, either in whole or in part, resulting in the
extinguishment of the latter's obligation. It is essentially gratuitous and
requires the acceptance of the debtor.

REQUISITES OF A VALID CONDONATION/ REMISSION

a) the debt must be existing and demandable;
b) it must be gratuitous;
c) the debtor must accept the remission;
d) it must not be inofficious; and
e) if made expressly, it must conform with the forms of donation.
CONFUSION/ MERGER (Art. 1275)
Confusion or merger is the meeting in one person of the qualities of
creditor and debtor with respect to the same obligation. It takes place
between the principal debtor and creditor and the very same obligation must
be involved.

3 REQUISITES OF A VALID CONFUSION/MERGER

1. The merger of characters of debtor and creditor must be in
same person.
2. Take place between principal debtor and creditor
3. Clear and definite
For example

A executed a promissory note payable to B. B paid his

debt to C using the promissory note executed by A.
Turns out C has an obligation to pay A. C then paid A
the promissory note executed by the latter to B. Here
the obligation is extinguished because it is absurd that
A will enforce the obligation against himself.
COMPENSATION (Art. 1279)
Compensation is defined as a mode of extinguishing obligations whereby two
persons in their capacity as principals are mutual debtors and creditors of
each other with respect to equally liquidated and demandable obligations to
which no retention or controversy has been timely commenced and
communicated by third parties.

6 REQUISITES OF A VALID COMPENSATION

1. Parties both principal debtors and creditors of each other
2. Compensation is not prohibited by law.
3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable
5. 2 debts are liquidated
6. 2 debts both in money/consumable things
A owes B 10M. B on another occasion owes A 15M pesos.
B is liable to A with 5M.