Click to edit Master subtitle style Revised By: Atty. Virginio L.

Valle

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Course Outline
PART I – INTRODUCTION TO LAW AND BUSINESS LAW
1) Definition of Law and Business Law 2) Sources of Business Law 3) Characteristics of Business Law

PART II – OBLIGATIONS 1) In General
a) b)

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Definition Sources of Obligations Law; Contracts; Quasi-Contracts; Delicts or Crimes; Quasi-Delicts

PART II – OBLIGATIONS
2) Nature and Effect of Obligation
a)

According to the Object or Prestation Obligations to give; Obligations to do;
Obligations not to do

a)

Liability of Damages Fraud – Dolo incidente; Dolo causante
Neglignce – Delay – Mora solvendi, accipiendi, compensatio morae

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PART III – GENERAL PROVISIONS ON CONTRACT
§ § § § § § § § § § §

Contracts Defined Elements of Contract: Stages of A Contract Characteristics of Contracts: Classification of A Contract: (FROM) Contract Binds by Both Parties Cases Where Third person May Be Affected By a Contract Forms of Contracts Reformation of Instruments Interpretation Of Contracts Cause of Contracts

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PART IV – DEFECTIVE CONTRACTS
§ §
§ §

Rescissible Contracts Voidable Contracts Unenforceable Contracts Void or inexistent contracts

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PART 1 INTRODUCTION TO LAW AND BUSINESS LAW
1. Definition of Law and Business Law 2. Sources of Business Law 3. Characteristics of Business Law

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the sight of a human being in his everyday undertaking has to follow some. result to that consciousness of following the law. The instructions that a person will learn. 5/4/12 . with its characteristics.Introduction to Law  Preliminaries In the preliminaries. he can define it. As he learns the law.

5/4/12 . The laws that contained the instructions of God given to us are the COMMANDMENTS. 2. the human principally of two faculties: mind consists 1. The infinite truth and infinite good is infinite beauty of God.In Philosophy. the Intellect – the object of which is the TRUTH. the Will – the object of which is the GOOD. the people can attain the final destiny by following the law. The person was created by God and destined for God.

” Edgardo Paras defined Law as “an ordinance 5/4/12 of reason promulgated for the common good by Him who is in charge. a Spanish Civilist and he defined Law as: “A RULE OF CONDUCT . simple and concise definition of law was defined by Sanchez Roman.” .Law The most basic. JUST AND OBLIGATORY PROMULGATED BY LEGITIMATE AUTHORITY FOR THE COMMON OBSERVANCE AND BENEFIT.

regulations that can create an orderly. 5/4/12 . dictate of reason if regulated or gathered together could become a conglomeration of rules. A RULE OF CONDUCT  Meaning any action. harmonious relations among the people concerned so that in the end justice will prevail.Characteristics of Law 1. peaceful. things.

PROMULGATED BY LEGITIMATE AUTHORITY That is. Sanggunian) is the law-making body. In a Republican State like the Philippines. the executive body is the implementing body and the judiciary as the enforcing body.Characteristics of Law 2. we have three branches of government – legislative body (like Congress. 5/4/12 . made known to those who are expected to follow it.

creed. Obligatory means any duty binding parties to perform their agreement. 5/4/12 (Black’s dict. . regardless of sex. age and status in life and to follow the law there should be equivalent punishment or penalties to enforce them. P.Characteristics of Law 3. JUST and OBLIGATORY Treatment of Law should be equal. 1074). The dictum “Justice delayed is Justice denied” is commonly abused term on the relation of a criminally inclined poor person and a moneyed person on the treatment of the application of law.

5/4/12 . FOR THE COMMON OBSERVANCE and BENEFIT The application of law should not be titled or favoring an individual but by the observance of all and the benefits that may be derived from it.Characteristics of Law 4.

In the Philippines. the Sangguniang Pambayan or the local Municipal council.Sources of Law 1. LEGISLATIVE consists of legal rights by a competent authority. the Legislative is the lawmaking body. being a democratic form of government. For national government. Congress comprising the House of Representatives and the Senate. For a Barangay level. the Sangguniang Panlalawigan for every province. For a town. the Sangguniang 5/4/12 Pambarangay. It . For provinces.

otherwise it becomes unconstitutional. All laws must conform and comply with the provisions of the Constitution. 5/4/12 .Sources of Law 2. CONSTITUTION The fundamental law that governs a nation in its relation to its citizens.

All laws must conform and comply with the provisions of the Constitution. ADMINISTRATIVE OR EXECUTIVE ORDERS. REGULATIONS AND RULINGS The fundamental law that governs a nation in its relation to its citizens.Sources of Law 3. 5/4/12 . otherwise it becomes unconstitutional.

it constitute in by . but not for giving it. 8. New Civil Code) Judicial decisions. JUDICIAL DECISIONS OR JURISPRUDENCE Judicial decisions or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. are part of the legal system in the Philippines still are not laws for if this were so. though not law. are evidence of what the law means. f an interpretation is placed 5/4/12 the Supreme Court upon a law. the Courts exists for stating what the law is. though. Judicial decisions. This is why they are part of the legal system in the Philippines.Sources of Law 4. (Art. So.

. JUDICIAL DECISIONS OR JURISPRUDENCE Thus. then another case involving the same point at issue. the doctrine which in reality is “adherance to precedents” stated that once a case has been decided. if the Supreme Court being a Court of last resort. has decided that a certain law passed by Congress is constitutional. Therefore. the law becomes binding and has its full force and effect.Sources of Law 4. our country adhere to the Doctrine of 5/4/12 Stare Decisis (Let it Stand). should be decided in the same manner.

he is a thief for a marauder. it has been a custom for a person to enter and exit a door. Thus. . CUSTOM It consists of those habits and practices which 5/4/12 through long and uninterrupted usage have become acknowledged and approved by society as binding rule of conduct. if a person does not pass the gate. Even our Lord said as a good shepherd. Once a person uses the window for his entrance and exit.Sources of Law 5. it runs counter to the custom of use of the door.

Sources of Law 6. opinions of text writers and even religion may also be sources of law. OTHER SOURCES To add. decisions of foreign tribunals. 5/4/12 . the principle of justice and equity.

revealed or divulged to mankind by means of direct revelation like the Ten Commandments.Kinds of Law 1. 5/4/12 . DIVINE LAW  It is formally promulgated by God.

Like for instance. it is better to do good than to do evil for being a God-fearing person. fairness.Kinds of Law 2. 5/4/12 . right and equity by internal dictate of reason on our mind. NATURAL LAW  Promulgated impliedly in our conscience and body. It is the divine interpretation in man in the sense of justice.

PHYSICAL LAW  Refers to the act of rules governing the action and movement of things like the law on gravity by Newton. THIS CAN BE CLASSIFIED INTO: 5/4/12 . HUMAN LAW  Those promulgated by man to regulate human relations.Kinds of Law 3. 4.

International Law – consists of those rules and principles which govern the relations and dealing of nations with each other. GENERAL or PUBLIC LAW  Classification of Human Law Body of rules which regulates the rights and duties arising from the relationship between the State and its inhabitants.A. 5/4/12  2. . Constitutional Law It simply governs the relations between the State and its citizens. It includes the following:  1.

Political Law – deals with the organization and operation of the governmental organs of the State and defines the relations of the state with the inhabitants of its territory. 5/4/12  5. Criminal Law – guaranties the coercive power of the law so that it will be obeyed. Governs the  4.Classification of Human Law GENERAL or PUBLIC LAW  3. Administrative Law – it fixes the organization and determines the competence of the authorities that execute the law and indicates to the individual remedies for the violation of his rights. .

authority and obedience among the members of a society for the protection of private interests. 5/4/12 Civil Law – branch of law which has for its double purpose the organization of the family and the regulation of property. It is defined as the mass of precepts which determines and regulate the relation of assistance. . INDIVIDUAL or PRIVATE LAW  Classification of Human Law Those law which govern the private relation person. It includes the following:  1.B.

trade or mercantile pursuits. (Black’s law dict. Commercial Law – defined as a whole body of substantial jurisprudence applicable to the rights. 338) 5/4/12 .Classification of Human Law INDIVIDUAL or PRIVATE LAW  2. intercourse and relation of persons engaged in commerce.

(Ballantine Law Dict. 5/4/12 . 36)  3. Procedural law otherwise known as Remedial Law. as distinguished from Substantive law which creates.Classification of Human Law INDIVIDUAL or PRIVATE LAW Procedural Law – defined as the branch of law which prescribes the method of enforcing rights or obtaining redress for their invasion. defines and regulate rights. P.

scientifically arranged into books. The New Civil Code of the Philippines – the collection of laws which regulates the private relations of the members of civil society. titles.Sources of Philippine Civil Code 1. determining the defective rights and obligations with reference to persons. 334). 5/4/12 . chapters and subheads and promulgated by legitimate authority. (Black Law Dict.  A civil code is a compilation of existing Civil Laws. things and civil acts.

Special laws or statutes. Presidential decrees and other social legislation. cannot be considered as an independent source of law. jurisprudence in our system of government. Jurisprudence – there is need to mention that. that the interpreted law could take into .Sources of Philippine Civil Code 2. 3. but the Court’s interpretation of a statute that constitute part of the law as of the date it was originally passed since the Court’s construction merely establishes contemporaneous legislative 5/4/12 intent.

Sources of Philippine Civil Code

4. Customs and Traditions – Custom is a

judicial rule which results from a constant and continuous uniform practice by the members of a social group.
5. The Code Commission itself – A Code

commission of five members was created by Pres. Manuel Roxas through Exec. Order No. 48 dated Mar. 20,1947 in view of the need of revision in keeping with progressive modern legislation. The Civil Code was finished on 5/4/12 Dec. 15, 1947 and Congress approved the

Books of the Civil Code
Book I – Person and Family Relations
 This

was re-codified as Family Code of the Philippines embodied in Exec. Order No. 209 as amended by Exec. Order No. 227. The Family Code effectuates the long-felt reforms and changes to the Civil Code provisions on Family relations consistent with Filipino values, customs and traditions vis-à-vis recent developments in the social-cultural scene. (Pineda, Family Code).

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Books of the Civil Code
Book

II – Property, modifications.

Ownership

and

its

Book

III – Different Modes Ownership (Succession)

of

Acquiring

Book IV – Obligations and Contracts Book V – Special contracts
 5/4/12 The Civil Code begins with preliminary titles and ends

Concept of Commercial Law

The commercial laws, excepting the Code of Commerce are designated by the legislator by any mark or sign, which determines their nature and their commercial function, but they derive their mercantile character from their subject matter or their contents. In order to determine whether a particular law or provision of law is commercial, it is necessary to first inquire if its purpose is to govern a relation pertaining to commercial matters and in this inquiry, the Code of Commerce should be principally considered, because it defines the acts and the person having a mercantile 5/4/12

Code of Commerce
The Code of Commerce is only one of the

remaining laws in relation to business that has been heavily modified and repealed by subsequent laws which originally divided into four books.
Merchants and Commerce in General BOOK TWO - Special Commercial Contracts BOOK THREE - Maritime Commerce BOOK FOUR- Suspension of payments, 5/4/12 Bankruptcy and Prescription of
BOOK ONE -

Subsequent Repealing Legislation
The

following are among the important special laws which repealed either expressly or impliedly certain portions of the Code of Commerce.

1. The Corporation Code – which repealed

principally the provision on sociedad/anonimas on Book Two and the Corporation law;
2. The

Negotiable Instrument Law which 5/4/12 repealed principally the provisions of

5/4/12 . Insurance Law. 4. 5. The Insolvency law. which repealed the provisions on Commercial Houses in Book Two.Subsequent Repealing Legislation 3. The Securities Act. which repealed the provisions on Fire and Marine Insurance on books two and three. which repealed the provisions on Suspension of payments and Bankruptcy in Book four.

Sales. the General Banking Act. Other legislation. The Rural 5/4/12 Act. The Public Service Act. there wee other laws and now form part of the Commercial laws of the Philippines: The Warehouse Receipts law. Agency. The New Civil Code which repealed the provisions on Partnership. the General Bonded Warehouse Act. 7. Carriage of Gods by . the Usury law. the Central Bank Act. the Chattel Mortgage law. Loan. Deposit and Guaranty in Book two.Subsequent Repealing Legislation 6. in addition to the foregoing special laws.

transfers.Subsequent Repealing Legislation force. Provisions of the Code of Commerce still in a.  8. Those contained in Book Two governing joint accounts. books and bookkeeping of commerce and general provisions relating to commercial contracts. transfers of non-negotiable 5/4/12 credits. commercial registries. b. commercial contracts on transportation  . Those contained in Book one governing merchants and commerce in general. except such portions thereof as have been repealed or modified by the New Civil Code and other legislation.

1. pp3-4) 5/4/12 . (Agbayani. All the provisions in Book four are no longer in force as they have likewise been repealed. Vol. Provisions of the Code of Commerce still in force.Subsequent Repealing Legislation 8. Those contained in Book Three governing maritime commerce but not those relating to marine insurance which have been repealed.  c.

Subsequent Repealing Legislation 9. If he has legal capacity to engage in commerce. he is a merchant:  a. and  b. MERCHANTS – Merchants may be natural or juridical person:  In the case of natural person. He habitually engage thereto 5/4/12 . Some provision of the code of Commerce which are pertinent in our study in business in general: a.

5/4/12 . If he has reached the age of twenty – one years. In the case of juridical person. He has free disposition of his property. Its engaging in commerce is habitual. and  3.Subsequent Repealing Legislation A natural person has legal capacity to engage in commerce.  1.  2. He is not subject to parental authority. It is a commercial and industrial company. It is organized in accordance with existing legislation and  c.  b. it is a merchant:  a.

However. Throwing open to the public a business entity or establishment. 5/4/12 . a single act may be deemed habituality in engaging in commerce in the way of the following acts: 1. There must be continuity of repetition of commercial acts. Habituality in engaging in commerce – Habituality in engaging in commerce is attained when there exists series of acts of commerce or commercial dealings.Subsequent Repealing Legislation b.

Announcement through circulars. posters and similar means of the opening of an establishment for commercial acts or dealings with the public. 5/4/12 . or 3.Subsequent Repealing Legislation 2. newspaper. A series of acts consisting of investigating and preparations of project studies implying an intention to engage in commerce and comes to reality. handbills. Where a foreign corporation appoints an agent as required by law. 4.

Absolute Disqualifications – The following may not engage in commerce nor hold office or have any direct administrative or financial intervention in commercial of industrial companies: 1. 5/4/12 .Subsequent Repealing Legislation c. Those suffering the penalty of civil interdiction primarily because they are deprived of the right to mange and to dispose of their properties inter-vivos or during their lifetime.

5/4/12 . Those judicially declared insolent while they have not obtained their discharge. 3. Those who in account of special laws or provisions cannot engage in commerce like incapacitated persons or employees covered by the Civil Service law.Subsequent Repealing Legislation 2.

Subsequent Repealing Legislation
d. Relative Disqualifications – These are persons

who cannot engage in commerce in places where they exercise their functions.
1. Justices, judges, and officials of the Prosecutor’s office in active service, except Municipal Mayors; municipal judge; municipal prosecuting attorney’s and those who temporarily discharge judicial or prosecuting duties; Administrative, economic or military heads of districts, provinces or post;

2.
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Subsequent Repealing Legislation
3. Those employed in the collection and administration of funds of the State appointed by the Government except those who administer and collect under contract and their representative.

4.

Stock and commercial brokers of whatever class;

5.

Those who under special laws and provisions cannot trade in specified territory.

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Subsequent Repealing Legislation
e. Commercial Registry

A commercial registry is a public office that takes charge of the registration of merchants, business associations, vessels and documents of commercial importance. The purpose of a commercial registry is to furnish necessary information and reliable data to any interested party so as to promote and facilitate trade and commercial transaction.
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Subsequent Repealing Legislation
f.

Books of Merchants

1. Merchants must keep the following books:

a. b. c. d.
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Book of inventories and balances; A journal; A ledger; Book or books for copies of letters or telegrams; and other books that may be required by special laws.

Subsequent Repealing Legislation
f.

Books of Merchants
Corporation are bound to keep:

2.

a. Record of all business transactions; b. Minutes of all meetings of directors; c. Minutes of all meetings of stockholders; and Stock and transfer books.

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Registration is compulsory:

1. In case of vessel of more than three (3)

tons gross in use in Philippine waters;
2. In case of partnership whose immovable

property is contributed by any partner to a common fund.
3. In case of business names under the

Business

Names Law.

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Registration is compulsory: 4. 5/4/12 . In all other cases required by law. with the Land 6. 5. In case of ship agent. In case of vehicles Transportation Office.

2. cities or province – for local permits and licenses. 5/4/12 . Securities and Exchange Commission – for registration of partnership and Corporation. Local municipalities.Commercial Registries in the Philippines 1. 3. Bureau of Domestic Trade – for registration of business names and merchants to avoid duplication of trade names.

Land Transportation Office for registration of patents and designs as well as trade 5/4/12 names. 6. Intellectual property Office for registration of patents and design as well as trade names. 7. . The MARINA (Marine Industry Authority) – for registration of vessels and other transaction affecting vessels. trademarks and service marks.Commercial Registries in the Philippines 5. trademarks and service marks.

10. 5/4/12 .Commercial Registries in the Philippines 8. Board of investment for registration of pioneer and registered enterprises and with corporations having foreign entity participation. 9. Office of Air Transportation Administration for registration of aircrafts. Bureau of Public Library – for registration of copyrights.

Public Remedial Law – affords a remedy in favor of the State against the individual.Kinds of Procedural Law 1. 5/4/12 . 2. Private Remedial Law – affords a remedy in favor of an individual against another individual. like the civil procedure. like Habeas Corpus. like criminal procedure or in favor of the individual against the State.

Philippine Remedial Law Principally contained in the Rules of Court. dela Rosa. adequate and effective compliance with the law. The Rules of Court have the force and effect of law. 76 Phil 428). (Alvero V. orderly. 5/4/12 . which is a combination of rules promulgated by the Supreme Court for the easy.

par. 1. body or tribunal vested with a portion of the judicial power. Sec. Art. VIII.COURTS DEFINED – It is the entity.2) 5/4/12 . Battung 63 Phil 1054) JUDICIAL POWER Includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable. (Const. (Lontok V. and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

4. 5. Supreme Court Sandigan-bayan Court of Appeals Regional Trial Court. 3. 2. and Metropolitan / Municipal Trial Courts 5/4/12 .Different Courts of Justice 1.

to do or not to do as a patrimonial obligation.The definition of obligations establishes the   unilateral act of the debtor either to give. the main sources   Lesson 1: General Provisions on 5/4/12 are really Law and Contracts. The other sources are also established by law. . It means that the debtor has the obligation while the creditor has its rights. On the sources of obligation.

(Approved by Mr. may obtain satisfaction from the assets of the latter. OBLIGATIONS as defined by ARIAS RAMOS is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct. 1156. B. to do or not to do. and. Reyes) 5/4/12 . in case of breach. L. Justice J. An obligation is a juridical necessity to give.ART.

those obligations with pecuniary value or assessable in terms of money. They create ties that are by nature transitory.   1. 1. Meaning of Juridical Necessity – it means the 5/4/12 rights and duties arising from obligation are . They exist a power to make effective in case of non-fulfillment. the economic equivalent obtained at the patrimony of a debtor.The obligations referred to in our manual is a patrimonial obligations that is. Characteristics of patrimonial obligations: • • • They represent an exclusively private interest.

1. Action means an ordinary suit in court of justice by which one party prosecutes another for the enforceable or protection for a right or a prevention or redress of a wrong ( Sec. Tito can sue Gaya in Court either to demand payment or for recovery of the refrigerator. Example – Gaya bought refrigerator from Tito but Gaya did not pay the refrigerator. Rules of court ). If after demand. 5/4/12 . Gaya still did not pay.

Essential requisites of an obligation – a) An active subject. c) An object or the prestation which may consist in the act of giving. It is the legal tie which constitutes the source of obligation—the coercive force which 5/4/12 makes the obligation demandable. d) The vinculum juris or the juridical tie between the two subjects by reason of which the debtor is bound in favor of the creditor to perform the prestation. known as the creditor or oblige. It is the legal . who is bound to perform the prestation.3. who has the power to demand the prestation. known as debtor or obligor. b) A passive subject. doing or not doing something.

.Juridical Tie   Illustration: Debtor To give. Gaya is the passive subject or debtor and Tito is the active subject or creditor. Gaya did not deliver the refrigerator. The object or prestation is the GE refrigerator and the obligation to deliver is the legal tie or the 5/4/12 vinculum juris which binds Gaya and Tito. to do Creditor Obligor or not to do or Obligee Or Gaya enters into a contract of sale with Tito who paid the purchase of a GE refrigerator.

the obligation of the debtor to fulfill or comply his commitment. This is also known as a unilateral obligation. 4. delivered the refrigerator and Tito did not pay. the delivery of the refrigerator. if Gaya. Distinctions between Obligations and 5/4/12 Contracts:  . then Tito becomes the debtor who is bound to pay while Gaya is the creditor who has the right to demand the prestation. in this case. that is. On the other hand.

Natural Obligation derives their binding effect from equity and natural justice. Civil obligations as distinguished from Natural obligations – Civil obligations derive their binding force from positive law. Civil can enforced by court action of the coercive power of public authority.5. Natural – the fulfillment cannot be compelled by court action but depends on the good conscience of debtor. 5/4/12 .

Obligations derived from law are not presumed. Obligations arise from: Law. and shall be regulated by the precepts of the law which establishes them. 1157. by the provisions of this Book.ART. Quasi-contracts. and Quasi-delicts. . (1089a)   ART. and as to what has not been 5/4/12 foreseen. Contracts. Only those expressly determined in this Code or in special laws are demandable. Acts or omissions punished by law. 1158.

Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1. of this Book. Civil obligations arising from criminal offenses shall be governed by the penal laws. (1092a) 5/4/12   . and of Title XVIII of this Book. 1161. Preliminary Title. Title XVII. regulating damages.ART.   ART. on Human Relations. subject to the provisions of article 2177. and of the pertinent provisions of Chapter 2. 1160.

which means that obligations arising form law are not presumed and that to be demandable must be clearly provided for. it 5/4/12 the duty of every person having an income to is . 1158 refers to the legal obligations or obligations imposed by specific provisions of law.Source of Obligations 1. Examples: It is the duty of the Spouses to support each other. New Civil Code) And under the National Internal Revenue Code. expressly or impliedly in the law. 291. (Art. LAW as a source of obligations – The provisions of Art.

NCC is the meeting of minds between two person whereby one binds himself with respect to the other. (Art.Source of Obligations 2.   Obligations arising from contracts have the force of law between the contracting parties because that which is agreed upon in the contract by the parties is the law between them. 1305. the agreement should be complied with in good faith. 5/4/12   . thus. CONTRACT as a source of obligations – Contract as defined in Art. 1159).

Quasi-contract is the juridical relation resulting from a lawful. (Art. QUASI-CONTRACTS as a source of obligations The ‘quasi’ literally means ‘as if’. . NCC) 5/4/12 . voluntary and unilateral act which has for its purpose the payment of indemnity to the end that no one shall unjustly enrich or benefited at the expense of another.Sources of Obligations 3. 2142.

00. Ian has the obligation to return the P1. 5/4/12 Negotiorum gestio (management of .2 Kinds of Quasi1.00. Solutio Indebiti (Payment by mistake) contracts It is the juridical relation which arises when a person is obliged to return something received by him through error or mistake.   ExampleArvin owed Ian the sum of P1. By mistake.   2. 000. 000. Arvin paid P2.00 excess because there was payment by mistake. 000.

Civil liability arising from delicts:  Restitution – which is the restoration of or 5/4/12 returning the object of the crime to the injured . the criminal act gives rise to civil liability as it caused damage to another.While an act or omission is felonious because it is punished by law.Sources of Obligations 4. DELICTS or acts or omissions punished by law as a source of obligations   Acts or omission punished by law is known as Delict or Felony or Crime.  .

2176) ExampleIf 5/4/12 Pedro drives his car negligently and .Concepts of Quasi-Delict – Quasi-delict is one where whoever by act or omission causes damage to another. is obliged to pay for the damage done. if there is no pre-existing contractual relation between the parties.Sources of Obligations 5. (Art. QUASI-DELICTS as a source of obligations  . there being fault of negligence. Such fault of negligence.

DELICTS or acts or omissions punished by law as a source of obligations Delict or Felony or Crime. 5/4/12  Restitution .   Acts or omission punished by law is known as While an act or omission is felonious because it is punished by law.  Reparation – which is the payment by the offender of the value of the object of the crime.Sources of Obligations 6. Civil liability arising from delicts: – which is the restoration of or returning the object of the crime to the injured party. the criminal act gives rise to civil liability as it caused damage to another.

Requisites of a quasidelicts There must be fault of negligence attributable to the offended. There is no pre-existing contract. There must be damage or injury caused to another. 5/4/12 .

the following are necessary: a duty on a party of the defendant to protect the plaintiff from the injury of which the letter complains. that degree of care. and .Negligence Defined – is the failure to observe for the protection of the interests of another person. 5/4/12 a failure to perform that duty. whereby such other person suffers injury. (Judge Cooley) Test of Negligence – For the existence of negligence. precaution and vigilance which the circumstances justly demand.

Kinds of Negligence Culpa Aquiliana. also known as quasi-delict or negligence as a source of obligation. Culpa contractual or negligence in the performance of a contract. 5/4/12 .

was injured. although he was not in the car but 5/4/12 which was being driven by his 18 year old son and . 56 Phil 177While trying to pass each other on a narrow bridge. Gutierrez. although a driver was driving the truck and the owner of the car was also made a defendant. a passenger truck and private automobile collided.An illustration showing this difference is founding Gutierrez vs. and the plaintiff. The owner of the passenger truck was made a defendant. a passenger in the truck.

(1904a) ART. he shall acquire no real right over it until the same has been delivered to him. Every person obliged to give AND EFFECT something is also obliged to take care of OF OBLIGATIONSa good it with the proper diligence of father of a family.LESSON 2: NATURE ART. 1163. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However. 5/4/12 (1905) . unless the law or the stipulation of the parties requires another standard of care. 1664.

The obligation to give a 5/4/12 determinate thing includes that of . he may ask that the obligation be complied with at the expense of the debtor. he shall be responsible for any fortuitous event until he has effected the deliver. (1906) ART. or has promised to deliver the same thing to two or more persons who do not have the same interest.If the thing is indeterminate or generic. 1166. If the obligor delays.

like a person who is obliged to deliver a determinate horse to another should.Obligations of the Debtor To Give a determinate 1. of the time and of the place. preserve it by taking care of the same as if the horse is his own. pending its delivery. It means the ordinary diligence that a prudent man would exercise in taking care of his own property taking into consideration the nature of the obligation. To preserve or take care of the thing with the thingproper diligence of a good father of a family. 5/4/12 .

vegetables. 5/4/12 E. plants on lands without he intervention of man.g. Industrial . E. industrial or civil.Obligations of the Debtor To Give a determinate thing.produced by lands of any king through cultivation and labor.  Fruits of the thing if any. prices of leases of lands Natural . the .the object or thing when the To deliver obligation to deliver arises.spontaneous product of the soil. rice. including: 1. Civil .derived by virtue of juridical relations. Kinds of fruits: Natural. E. rents of a building. young and other products of animal.g. sugar cane.g. tress.

Accessions and accessories.Obligations of the Debtor To Give a determinate thing2. Accessories – are those things which are joined attached to the principal object as ornament or to render it perfect. ExampleAccretion which refers to the gradual and addition of sediment to the shore by action of water. 5/4/12 . Accession – is the right pertaining to the owner of a thing over its products and whatever is attached thereto either naturally or artificially.

1164. NCC) 5/4/12 Example – a binds himself to sell his horse . he shall acquire no real right over it until the same have been delivered to him. To be liable obligation (Art. However. 1170. (Art. NCC) .Obligations of the Debtor To Give a determinate thing.When creditor acquire a right to the thing to be delivered and its fruitsThe creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.for damages in case of breach of 3.

NCC) 3. Fortuitous Events – those events which could not be foreseen or which though foreseen were inevitable. (Art. 1174. Indeterminate or generic thing – A thing is generic when it refers to a class or thing or genus and cannot be designated with particularity. 1460. 1460. NCC) 2. (Art.Definition of terms: 1. Determinate thing – a thing is determinate when it is particularly designated or physically segregated from all others from the same class. NCC) 5/4/12 . (Art.

Furthermore. the same shall be executed at his cost. 1167. ( 1098 ) 5/4/12 . If a person obliged to do something fails to do it. This same rule shall be observed if he does it in contravention of the tenor of the obligation.Art. it may be decreed that what has been poorly done be undone.

When the debtor performs the obligation but contrary to the tenor. 5/4/12 . or When the obligor poorly performs the obligation.Obligation of the debtor To Do Being a personal positive obligation. The creditor has the right to secure the services of third person to perform the obligation at the expense of the debtor under the following instances: When the debtor fails to do the obligation.

the remedy of the injured party is for an action of damages. If it is impossible to undo what was done. 1168.ART. If the debtor does what has been forbidden him to do. of not doing something. When the obligation consists in not doing. 5/4/12 . the obligee can ask the debtor to have it undone. (1099a) Obligation of the Debtor NOT To Do – This is negative personal obligation which is consisting of an obligation. and the obligor does has been forbidden him. it shall also be undone at his expense.

Those oblige to deliver or to do something incur in delay from the time the obligee judicially or extra . or ( 5/4/122 ) When from the nature and the . the demand by the creditor shall not be necessary in order that delay may exist: ( 1 ) When the obligation or the law expressly declares. However. ART.judicially demands from theme the fulfillment of their obligation. 1169.

The debtor incurred delay if: The debtor fails to perform his obligation when it falls due. Example – Gaya obliged herself to deliver a determinate horse to Tito on June 20. this year.Delay ( Mora ) means a legal delay or default and it consists of failure discharge a duty resulting to one’s own disadvantaged. and A demand has been made by the creditor judicially or extra judicially. Gaya failed to 5/4/12 .

When the obligation expressly so provides The mere fixing of the period is not sufficient to constitute a delay. 5/4/12 . there are instances when the demand by the Creditor is not necessary to place the debtor on delay: 1.However. default or delay by the debtor will automatically arise. An agreement to the effect that fulfillment or performance is not made when the obligation becomes due.

2. Gaya binds herself to sew the wedding gown of Maya to be used by the latter on her wedding date. Even without demand. and demand is not necessary in order that the taxpayer is liable for penalties. For instance. taxes must be paid on the date prescribed by law. Example. Gaya will be in delay because time of the 5/4/12 3. Gaya did not deliver the wedding gown on the date agreed upon. Because time is the essential factor in the fulfillment of the obligation. When the law so provides The express provision of law that a debtor is in default. When time is of the essence .

in a contract of sale. 5/4/12 . if the buyer pays and the seller did not deliver the object. In a reciprocal obligation.4. then the seller is on delay. demand is not necessary. then delay by the buyer begins and vice versa. from the moment one of the parties fulfills his obligation. if the seller delivers the object to the buyer and the buyer does not pay. Like when the object of the obligation is lost or destroyed through the fault of the debtor. 5. When demand would be useless  When the debtor cannot comply his obligation as when it is beyond his power to perform. delay to the other begins  For instance.

like when the creditor unjustifiably refused to accept payment at the time it was due. Compensatio morae – delay both parties in a 5/4/12 reciprocal obligation. is in delay.Kinds of delay – Mora solvendi – delay on the part of the debtor. . Mora accipiendi – delay on the part of the creditor.

negligence. Responsibility arising from fraud is demandable in all obligations. or delay. 1171. Those who in the performance of their obligations are guilty of fraud. (1120a) ART.ART. (1101) ART. 1170. 1172. Any waiver of an action for future fraud is void. Responsibility arising from negligence in the performance of every king of obligation is also 5/4/12 . and those whoin any manner contravene the tenor thereof. are liable for damages.

1173. paragraph 2.ART. the provisions of articles 1171 and 2201. shall apply. If the law or contract does not state the diligence of which is to be observed in the performance. When negligence shows bad faith. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons. 5/4/12 (1104a) . that which is expected of a good father of a family shall be required. of the time and of the place.

that is. fraud incident to the performance of a pre-existing obligation. of the time and of the place. NCC) . The fraud referred to is incidental fraud. 5/4/12 1173.   2. (Art.1. Fraud (dolo) – is the intentional deception Sources of liability for damages: made by one person resulting in the injury of another. Negligence (culpa) – consists in the omission by the obligor of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person.

In contravention of the tenor of the obligation – refers to the violation of the terms and conditions or defects in the performance of the obligation. 4.Sources of liability 3. like when a landlord fails to maintain a legal and peaceful possession of a tenant being leased by the latter because the landlord was not the owner and the real owner wants to occupy the land. there is contravention of the tenor of the obligation.for damages: Delay (Mora) – like when there has been judicial or extra-judicial demand and the debtor does not comply his obligation. 5/4/12 . delay will occur.

Sources of liability 3.for damages: Delay (Mora) – like when there has been judicial
or extra-judicial demand and the debtor does not comply his obligation, delay will occur.
4. In contravention of the tenor of the obligation –

refers to the violation of the terms and conditions or defects in the performance of the obligation, like when a landlord fails to maintain a legal and peaceful possession of a tenant being leased by the latter because the landlord was not the owner and the real owner wants to occupy the land, there is contravention of the tenor of the obligation. 5/4/12

Other sources of liability for damages –
Loss of the thing with the fault of debtor. Deterioration with the fault of debtor. (Art. 1189)

5/4/12

Kinds of Damages
1. Moral damages – include physical sufferings,

mental anguish, fright, serious anxiety, besmirched reputation, wounded feeling, moral shock, social humiliation and similar injury.
2. Exemplary damages – imposed by way of

example or correction for the public good.

Like in quasi-delicts, if the defendant acted with
5/4/12

gross negligence. (Art. 2231, NCC)

Kinds of Damages
3. Nominal damages – are adjudicated in order

that a right of the plaintiff, which has been violated by the defendant, may be vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him. (Art. 2221, NCC)

 
4. Temperate or moderate damages – are more

than nominal but less than compensatory damages may be recovered when the courts finds that its amount cannot, from the nature of the case, be proved with certainty. Pecuniary loss means loss of money, or of something by 5/4/12 which money or something of money value

Kinds of Damages
5. Actual or compensatory damages – except as

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

Damages may be recovered:  For loss or impairment of earning capacity in cases of temporary or permanent personal injury;  For injury, to the plaintiff’s business standing or commercial credit.
5/4/12

Kinds of Damages
6. Liquidated damages – are those agreed upon

by parties to a contract to be paid in case of breach thereof. (Art. 2226, NCC)

5/4/12

Culpa – ther is no deliberate intent to cause damage.Distinguish Fraud (Dolo) from 1. Dolo – there is deliberate intent to cause Negligence (culpa) damage or injury. 2. Culpa – waiver may in some cases be allowed. 5/4/12 Culpa – presumed from breach of . Dolo – fraud must be clearly proved. Dolo – waiver of liability of future fraud is void. 3.

Except in cases expressly specified by the law. no person shall be responsible for those events which could not be foreseen. were inevitable (1105a) 5/4/12 . or which. ART. though foreseen. or when it is otherwise declared by stipulation. 1174. or when the nature of the obligation requires the assumption of risk.

1. robbery. 5/4/12 The occurrence makes it impossible for the debtor The failure of the debtor to comply with the . etc. Fortuitous event proper are acts of God such as volcanic eruption. Requisite necessary to constitute fortuitous event obligation must be independent from the human will. war. is now similar with force majuere or acts of man such as conflagration. lightning. etc.Fortuitous even – is an event which cannot be foreseen which though foreseen is inevitable. earthquake.

hence her obligation to deliver is extinguished.2. 30. As a general rule. no person shall be held responsible for fortuitous events Example – Gaya obliged herself to deliver a determine car to Tito on Dec. 5/4/12 . Before the arrival of the period. the car was struck by lightning and was totally destroyed. 1998. Gaya cannot be held responsible for the destruction of the car.

such as: contravention of the tenor of the obligation.NCC ) The thing to delivered is generic. negligence or in . 1165. The debtor is guilty of default or delay. ( Art. When the law expressly so provides. a.Exceptions (when the person is responsible despite the fortuitous even).NCC ) The debtor is guilty of fraud. 1170. (Art. NCC) The debtor has proved to deliver the same thing to two or more persons who do not have the same interest. ( Art. 5/4/12 1169.

Kinds of interest 1. Circular No. 2. Hence. parties can agree as to the rate of interest.ART. Lawful Interest *The rate which is 5/4/12 agreed upon by the parties but . 3. Note: C. Usurious transaction shall be governed by special laws. Legal Interest *The rate which is prescribed by law. 905 suspends the ceilings in the usury law. Conventional *The rate which is agreed upon by the parties. 1175.B.

The receipt of a later installment of a debt without reservation as to prior installments. The receipt of the principal by the creditor without reservation with respect to the interest. 1176. shall likewise raise the presumption that such installments have been paid.ART. shall give rise to the presumption that said interest has been paid. (1110a) Presumption means “the inference as 5/4/12 to the existence of a certain fact which if not .

it is considered as a fact. Receipt of the principal. Presumption under this article: 1. whereby one which can be contradicted by presenting proof to the contrary while a conclusive presumption does not admit any evidence or proof. without reservation as to the interest. . hence. 2. shall give rise to the presumption that the said interest has been paid. When the creditor issues a receipt of a later installment of a debt without reservation as to 5/4/12 prior installment is presumed to have been paid.The presumption in the above article is a disputable presumption.

save those which are inherent in his person.ART. 1177. may exercise all the rights and bring all the actions of the latter for the same purpose. creditors have the following successive rights: 5/4/12 . after having pursued the property in possession of the debtor to satisfy their claims. they may also impugn the acts which the debtor may have done to defraud them. (1111) Rights of Creditors – In order to satisfy their claims against the debtor. The creditors.

ART. When the obligation is purely personal in nature. all rights acquired in virtue of an obligation are transmissible. 1178. except in the following cases: 1. Subject to the laws. When the law so provides. 3. When the parties stipulate otherwise – by agreement of parties that the rights acquired by them will not be transmitted to any other person. if there has been no stipulation to the contrary. all rights acquired in virtue of an obligation are transmissible. 2. 5/4/12 . (1112) As a rule.

Joint. LESSON 3: Kinds of Obligations . 5. 5/4/12 9. 2. 6. Solidary or several or in solidum. Alternative. With a period. 4. Pure. 8. Indivisible. 7.Classification of Obligations: The Civil Code classifies obligations primarily into: (PU CO PE ALFA JOS DIP) 1. 3. Conditional. Facultative. Divisible.

b.)real and personal 5/4/12 . however. to wit: a. c. impliedly admit other classes of obligations. conventional and penal. d.)Unilateral and bilateral.) legal.)determinate and generic.Other provisions of the Civil Code.

Every obligation whose performance does not depend upon a future or uncertain event. 1179. or upon a past event unknown to the parties. without prejudice to the effects of the happening of the event. is demandable at once. 5/4/12 (1113) .Section I. Every obligation which contains a resolutory condition shall also be demandable. – Pure and Conditional Obligations ART.

1. Example – Gaya obliged herself to pay her loan of P1. 2. 5/4/12 . 3. It is subject to a resolutory condition. It is a pure obligation.  Instances when obligations immediately demandable: 1. It is immediately demandable and there is nothing to exempt the debtor from compliance therewith. It is subject to resolutory period. Pure Obligation – when the obligation contain no term or condition whatever upon which depends the fulfillment of the obligation contracted by the debtor.000 to Tito on demand.

2. the obligation shall be deemed to be one with the period. 600. ART. Conditional Obligations – one which is subject to a condition of one whose performance depends upon a future or uncertain events or upon past event unknown to the parties.00) and I am to pay my . When the debtor binds himself to pay when his means permits him to do so.(n) Example – A promissory note states that “This is to acknowledge receipt of sum of One thousand Six 5/4/12 Hundred pesos (P1. subject to the provisions of article 1197. 1180.

the obligation shall take effect in conformity with the 5/4/12 provisions of this code. the conditional obligation shall be void. 1182. (1115)  . When the fulfillment of the condition depends upon the sole will of the debtor. If it depends upon chance or upon the will of a third person. 1181. shall depend upon the happening of the event which constitutes the condition. (1114) ART. ART. the acquisition of rights as well as the extinguishment or loss of those already acquired. In conditional obligations.

(1117) ART. 1185. 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place.    5/4/12 not time has been fixed. ART. the condition If . or if it has become evident that the event cannot occur. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed.

5/4/12 . if Tito marries Gaya. The obligation is only demandable upon the happening of the condition that is. The obligation is suspended and not yet demandable. Example: Maya binds herself to deliver a determinate car to Tito if he marries Gaya.Kinds or classifications of 1. Suspensive and Resolutory condition: Suspensive – the happening of the condition gives rise to an obligation.

Kinds or classifications of condition: 2. Casual and Mixed Potestative – is one the fulfillment of which depends upon the sole will of the debtor. .   5/4/12 Casual – is one the fulfillment of which depends upon chance. Example: Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United States. Potestative. This kind of condition is void.

Possible and Impossible Impossible condition is divided into 2: a) Physical Impossibility – the condition imposed is not capable of being performed physically.Kinds or classifications of condition: 3. 5/4/12 b) Illegal Impossibility – when the condition imposed is contrary to law. good custom or . Example: Grace will give Christine a gold necklace if she swims across the Pacific Ocean.

Positive condition: and Negative: A Negative condition is one where some event will not happen at a determinate time. NCC) Example: Victor will give Jason a car if he will not 5/4/12 . or b. either a.)the time indicated has elapsed.Kinds or classifications of 4. 1185.)it has become evident that the event cannot occur (Art.

1183. 000.00) is void because . 000. 000.00) is valid while the 5/4/12 second part (P2. 000. in the obligation. affected by impossible or unlawful condition shall be valid (Art.00 if Y kills Z.00 if Y furnishes X with information as to the whereabouts of Z and another sum of P2.Kinds or classifications of 5. Divisiblecondition: and Indivisible Divisible – that part of obligation which is not . NCC) ExampleX promise to pay Y the sum of P1. the first part (to pay P1.

The effects of a conditional obligation to give. Nevertheless. 1187. when the obligation imposes reciprocal prestations upon the parties. once the condition has been fulfilled. ART. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person 5/4/12 . the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral. the debtor shall appropriate the fruits and interests received. shall retroact to the day of the constitution of the obligation.

If B passes the CPA exams in May.Effects of conditional Once the condition is fulfilled. 1999 because B’s right over the land retroacts to the 5/4/12 date when the obligation was constituted. he is entitled to the land effective Jan. 1. 1999 A agreed to give B a parcel of land if he passes the May. . 1999. the effects of obligation to retroact to the conditional obligations shallgive: the day of the constitution of the obligation and not on the date when the condition was fulfilled. 1.   Example – On Jan. 1999 CPA exams.

as a rule.As to the fruits and interest – The effect of conditional obligation to give. Example: A agrees to sell and B agrees to buy A’s parcel of land if B passes the May. 5/4/12 . 1999 CPA exams. The following rules shall govern: 1. If B passes the May. In reciprocal obligation (like a contract of sale) - the fruits and interest during the pendency of the condition shall be deemed to have been mutually compensated. do not retroact to the date of the constitution of the obligation. 1999 CPA Board.

A is entitled to the fruits which the land may produce. In unilateral obligation – the debtor shall appropriate the fruits and interests received during the pendency of the condition unless a contrary intention appears. Example – X agreed to give Y a parcel of land if Y passes the CPA Board in May.2. Pending the happening of the condition. unless a contrary intention appears. A will deliver only the parcel of land if the condition is fulfilled. 1999 exams. 5/4/12 .

The creditor may. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition (1121a) Preservation of Creditor’s Right – The action for the preservation of the creditor’s right may have for their objectives: 5/4/12 1. To prevent the loss or deterioration of the things .ART. before the fulfillment of the condition. bring the appropriate actions for the preservation of his right. 1188.

  3. To prevent concealment of the debtor’s properties which constitute the guaranty in case of non-performance of the obligation. 4. To demand security if the debtor becomes insolvent. . To compel the acknowledgement of the 5/4/12 debtor’s signature on a private document or the execution of proper public document for registration so as to affect third person.Preservation of Creditor’s Right – 2.

(Lawyer’s journal.Preservation of Creditor’s Right – 5. 6. p. To register the deeds of sale or mortgages. 1951. To interrupt the period of prescription by actions against adverse possessors of the things which are objects of the obligation. To set aside fraudulent alienation made by the debtor. 7. 47) 5/4/12 .

1. to 5/4/12 preserve his right over the parcel of land. Raul obliged himself to sell a parcel of land to Dennis if he passes the CPA exams in October. From the time the obligation was constituted and pending the happening of the condition (passing the CPA Exams) Dennis may cause the annotation of the condition in the certificate of title in the Register of Deeds where the land is located. 1999. .  Paragraph I of the above article authorizes the creditor to take any appropriate actions for the preservation of creditor’s right during the pendency of the condition: Example: On Jan. 1999.

2. during the pendency of the condition. Payment made by debtor was through mistake and error. the following requisites may be present:   1. The debtor paid the creditor before the fulfillment of the condition.   1. The action to recover what was paid by mistake should be made before the fulfillment of the condition.   5/4/12 .Paragraph II in order that debtor may recover what he has paid by mistake.

ART. If the thing is lost through the fault of the debtor. the obligation shall be extinguished. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. the following rules shall be observed in case of the improvement. loss or deterioration of the thing during the pendency of the condition: 1) 5/4/12 2) If the thing is lost without the fault of the debtor. he shall be obliged to pay .

Example – Reyes obliged himself to give Santos a determinate car if he passes the CPA Exams in Oct. 1. the current year. deterioration or improvement of the thing. the obligation to deliver the car is extinguished even if the condition is fulfilled 5/4/12 later.These rules apply only to obligation to give a determinate or specific thing subject to a suspensive condition in case of loss. If during the pendency of the condition the car was lost through fortuitous event without the fault of Reyes. the obligation shall be extinguished. a) . In case of loss of the thing If the thing is lost without the fault of the debtor.

It is understood that the thing is lost: a) When it perishes (as when a house is burnt to ashes)   a) When it goes out of commerce (as when the object before is unprohibited becomes prohibited) a) When disappears in such a way that its existence is unknown (as when a particular car has been missing for some time) a) When it disappears in such a way that it cannot be recovered (as when a particular diamond ring 5/4/12 is dropped in the middle of the Atlantic Ocean). .

2. between the rescission of the obligation or its fulfillment. the car was partially damaged by flood. without the fault on the part of Arvin. When the thing deteriorates a) When the thing deteriorates during the pendency of the condition. the creditor may choose. Example – Arvin obliged himself to give Ian a determinate Toyota car if Ian passes the October CPA Exams. If the condition is fulfilled. after the fulfillment of the condition. Ian will bear the impairment. b) 5/4/12 If the thing deteriorates. the impairment is to be borne by the creditor. During the pendency of the condition. without the fault of the debtor. through the fault of the debtor. with indemnity for damages in either . during the pendency of the condition.

he have no other right than that granted to the usufructuary.3. By us usufruct is meant the right to enjoy the property of another which includes the right to enjoy and use the fruits of the property. the improvement shall inure to the benefit of the creditor. there would be deterioration without the fault of the debtor. When the thing improved – a) b) If the thing improved during the pendency of the condition. or by time. If the thing is improved at the expense of the debtor. The reason for this is to compensate the creditor who would suffer in case. by its nature. 5/4/12 . instead of improvement.

upon the fulfillment of said conditions. the parties. are laid down to the preceding article shall be applied to the party who is bound to return. ART. 1190.  5/4/12 . When the conditions have for their purpose the extinguishment of an obligation to give. the provisions which. with respect to the debtor . deterioration or improvement of the thing. In case of the loss. shall return to each other what they have received.

The obligation fulfilled(Art.Effects When Resolutory Condition is is extinguished. Because the obligation is extinguished and considered to have had no effect. NCC) 2. the parties should restore to each other what they have received. 1189. 4. 1181. The rules given in Art. 3. 1. N CC will apply to 5/4/12 . The fruits and interests thereon should also be returned after deducting of course the expenses made for the production. gathering and preservation. if any.

 The court shall decree the rescission claimed. even after he has chosen fulfillment. He may also seek rescission. with the payment of damages in either case.  The injured party may choose between the fulfillment and the rescission of the obligation. in case one of the obligors should not comply with what is incumbent upon him. The power to rescind obligatios is implied in reciprocal ones. . unless there be just cause 5/4/12 authorizing the fixing of a period. ART. if the later should become impossible. 1191.

Example: In a contract of sale. 5/4/12 Demand .Right to Rescind The right to rescind means the right to cancel or to resolve in case of reciprocal obligation in case of non-fulfillment on the part of one. the buyer can rescind if the seller does not deliver or te seller can rescind if the buyer does not pay. The power to rescind is given to the injured party and the injured party has the following alternative remedies: fulfillment of the obligation plus 1.

though they would derive some . The first one is fair to both parties because the second 5/4/12 infract or. Rules if Both Parties Have Committed a Breach The above rules are deemed just. the same shall be deemed extinguished. and each shall bear his own damages.ART. If it cannot be determined which of the parties first violated the contract. In case both parties have committed a breach of the obligation. the liability of the first infractor shall be equitably tempered by the courts. 1192.

 A day certain is understood to be that which must necessarily come. Obligations for whose fulfillment a day certain has been fixed. shall be demandable only when that day comes. although it 5/4/12 .Section 2 .Obligations with a period `  ART. 1193. but terminate upon arrival of the day certain.  Obligations with a resolutory period take effect at once.

(8Manresal58) A day certain is understood to be that which must necessarily come.Period Defined – A period is a future and certain length of time which determines the effectivity or the extinguished of obligation.   Obligation with a period is one whose consequences are subject in one way or another to the expiration of said period or term. although it may not 5/4/12 be known when. .

As to time – a period refers only to the future while a condition may refer to a past unknown event. As to influence or effect on the obligation – the period fixes the time of the effectivity of the obligation while a condition may cause the demandability of the obligation to arise or to terminate.Period and Condition Distinguished: a) a) As to fulfillment . a) 5/4/12 .A period is a certain event which must happen sooner or later while a condition is an uncertain event.

ART.  Effect of loss. 1999. deterioration. NCC. In case of loss. (n) the arrival of period. 1999 by the car was destroyed by fortuitous event in July 1. or improvement before 1189. the rules in article 1189 shall be observed. the obligation is extinguished. deterioration or improvement of the thing before the arrival of the day certain. 1194. 19. 5/4/12 . Note the cross reference to Art. Example: If A is suppose to deliver to B a particular car on Dec.

with the fruits and interests. in an obligation to give.   ART. 1195. may be recovered. NCC. the obligor being unaware of the period or believing that the obligation has become de and demandable. Anything paid or delivered before the arrival of the period. (1126a) Effect Of Payment Before Arrival of Period This article which is similar to Article 1188. 5/4/12 . allows the recovery of what has been paid by mistake before the fulfillment of a suspensive condition.

5/4/12 . it is presumed to have been established for the benefit of both the creditor and the debtor. the period is presumed to be for the benefit of both creditor and debtor. 1196. (1127) Presumption As to Benefit Of A Period The general rule is that when a period is fixed by the parties . Whenever in an obligation a period is designated. unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other.ART.

. 000 on 5/4/12 demand. For the benefit of both creditor and debtor  Example – Gaya obtained a loan of P10. however. 000 at 12% interest per annum from Tito for one year. if the tenor of the obligation or other circumstances may indicate that a period is have been established for the benefit of either the creditor or debtor: 1.By way of exceptions. 2. Gaya has a period of one year within which to use the money. Thus. For the benefit of the creditor  Example Gaya executes a promissory note in favor of Tito which reads: “I promise to pay Tito or order the amount of P10. Tito can demand payment from Gaya anytime. while Tito will benefit from the interest which the money will earn.

ART. the courts shall determine such period as may under the circumstance have been probably contemplated by the parties.  5/4/12 The courts shall also fix the duration of the period when it depends upon the will of the debtor. the courts may fix the duration thereof. 1197. (1128 a) . Once by the courts.  In every case. but from its nature and circumstances it can be inferred that a period was intended. the period cannot be changed by them. If the obligation does not fix a period.

5/4/12 . the court is authorized to fix the period to repurchase. If the obligation does not fix a period but it can be inferred Exceptions to the general rule Example: S sold a parcel of land to B with a right of repurchase. If the duration of the period depends upon the sole will of the debtor Example: I will pay you as soon as possible. No term is specified in the contract for the exercise of the right. Here . from its nature and circumstances that a period is intended.1. 2. so the court may fix the same because if this is not so the obligation may never be complied with by the debtor. the period is not fixed. Then.

The debtor shall lose every right to make use of the period: 1) When after the obligation has been contracted. he becomes insolvent.ART. 1198. 3) When by his own acts he has impaired said guaranties or securities after their establishment. 2) When he does not furnish to the creditor the guaranties or securities which he has promised . unless he gives a guaranty or security for the debt. unless he immediately gives new ones equally satisfactory. and when through a fortuitous event they disappear. 5/4/12 .

It is sufficient that the debtor has less assets than his liabilities or if debtor is unable to pay his debts as they mature. demandable before to Make The exceptions are based on the fact that the Use might not be able to comply with his debtor Of A Period obligation:   1.  When Debtor Loses The general rule is that the obligation is not The Right the lapse of the period. 5/4/12 . It is noted that the insolvency of the debtor must occur after the obligation has been contracted. When debtor becomes insolvent: The insolvency need not be judicially declared.

the loan becomes demandable or the debtor loses her right to make use of the period. When by his own acts he has impaired said . When debtor does not furnish guaranties or securities promised: Example: Gaya borrowed loan from Tito which loan was secured by a chattel mortgage of Gaya’s car as a guaranty.When Debtor Loses The Right to Make Use Of A Period 2. Gaya fails or does not execute a chattel mortgage. After obtaining the loan.   guaranties or securities: 5/4/12 Example: 3.

Example: Gaya borrowed P50.   5. When by security was lost. Gaya loss her right to male use of the period unless she gives another guaranty or security equally satisfactory. the guaranty or A Period 4. When debtor violates an undertaking – 5/4/12 Example: Art secured a loan from Arnold on condition .When Debtor Loses The Right to Make Use Offortuitous event. After obtaining the loan. the car was lost by fortuitous event. 000 from Tito which loan was secured by a chattel mortgage on Gaya’s car.

 Section 3. 1199. Alternative and Facultative obligations ART. (1131)   Meaning of Alternative Obligation It means an obligation where two or more 5/4/12 prestations are due but the delivery of one is .  The creditor cannot be compelled to receive part of one and part of the other undertaking. A person alternatively bound by different prestations shall completely perform one of them.

 5/4/12 . unless it has been expressly granted to the creditor. The debtor shall have no right to choose those prestations which are impossible. 1200. unlawful or which could not have been the object of the obligation.ART. The right of choice belongs to the debtor.

g. Gaya obliged herself to deliver to .. a) Impossible – E.Gaya promised to deliver to Tito 5/4/12 a) Unlawful – E.g. But the right of the debtor is subject to the following: The debtor cannot choose those prestations which are: 100 sacks of rice or a stone from Mars. unless the right to choose is expressly granted to the creditor. the the prestation belongs to the debtor.Rule on Who Makes the Choiceright of choice or to select – As a general rule. Gaya cannot chose to deliver the stone coming from Mars as it is physically impossible.

the obligation ceases to be alternative and becomes a simple obligation. Once the notice to the effect that a choice is made. ART. The choice shall produce no effect except from the time it has been communicated. such choice shall likewise produce legal 5/4/12 effects upon being communicated to the debtor. the obligation remains alternative. (1133) Right of Choice Must be Communicated – Until the choice is made and communicated. the communicated. Where the choice has been expressly given to the creditor. 1201. .

ART. 1202.   When debtor may rescind contract If through the creditor’s fault. If Through The creditor’s acts the debtor cannot make a choice according to the terms of the obligation. and . the latter may rescind the contract with damages.ART. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound. 1203. the debtor cannot made a choice according to the terms of the obligation the debtor is given the right to rescind 5/4/12 recover damages. only one is practicable.

The creditor shall have a right to indemnity for damages when. Damages other than the value of the last 5/4/12 thing or service may also be awarded.ART. through the fault of the debtor. or the compliance of the obligation has become impossible. or that of the service which last became impossible. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared. . all the things which are alternatively the object of the obligation have been lost. 1204.

When the choice has been expressly given to the creditor. 1205. he shall perform the obligation by delivering that which the creditor should choose from among the remainder. Until then the responsibility of the debtor shall be governed by the following rules 1) If one of the things is lost through a fortuitous event.ART. the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. or that which remains if only one 5/4/12 .

(1136a) When Right of Choice is With Creditor and All Prestations Were Lost This article provides for the rules to be observed when the right of choice is expressly granted to the creditor. the rules are as follows: 1.The same rules shall be applied to obligations to do or not to do in case one. Some or all of the prestations should become impossible. When a thing is los through a fortuitous event 5/4/12 Example Gaya obliged herself to deliver to Tito a TV .

Tito may claim the refrigerator or the piano with a right of damages or the price of the TV set with a right of damages. 5/4/12 . then Tito can demand the payment of the price of any one of them with a right to indemnity for damages.2. When a thing is lost through debtor’s fault Example: If the loss of the TV set occurs through the fault of Gaya. 3. When all the things were lost through debtor’s fault Example: If all the items are lost through the fault of Gaya.

the obligation is called facultative. the obligor is liable for the loss of the substitute on account of his delay.ART. negligence or fraud. does not render him liable. When only one prestation has been agreed upon. but the obligor may render another in substitution. 1206. through the negligence of the obligor. But once the substitution has been made. Meaning of Facultative Obligation – A facultative obligation is one where only one 5/4/12 prestation has been agreed upon but the obligor . The loss or deterioration of the thing intended as a substitute.

1) As to validity or nullity – In facultative – if the 5/4/12 . there are several things due but the delivery of one is sufficient.1) Alternative and Facultative As to choice – In facultative – the right for Distinguished – substitution is given only to the debtor in Alternative – the choice may be given either to the debtor or to the creditor. 1) As to things due – In facultative – only the principal obligation is due by may substitute another. in alternative.

(1137a)  ART. 1207. There is a solidary liability only when the obligation requires solidarity. If from the law. or the 5/4/12 nature or the wording of the obligations to . The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand. entire compliance with the prestation. 1208. or that each one of the latter is bound to render.Section 4 – Joint and Solidary Obligations  ART.

There is one debtor and three creditors. The presumption is that A. B. Example of different instances 1) A. C and D P9. 2) A borrowed from B. 000. Each creditor can demand only P3. 5/4/12 A and B are liable to C and D for P9.Joint Obligation – It is an obligation where there is a concurrence of two or more debtors or two or more creditors or of several debtors and creditors. D can demand only P3. 000 for D. There are two 3) . 000. 000. by virtue of which each of the debtors is liable for a proportionate part of the credit. 000 from A. B and C are jointly liable. and C borrowed P9. 000 from each or a total of P9.

or 1) The law requires solidarity or 1) The nature of the obligation requires solidarity. 5/4/12 .SOLIDARY OBLIGATION There are solidary liability when 1) The obligation expressly so states.

where anyone of them can demand the fulfillment of the entire obligation. Active – solidarity on the part of the creditors.Kinds of Solidary Obligation 1. where anyone of them can be made liable for the fulfillment of the entire obligation. Example – A and B are solidary debtors of C in the amount of P 10. 5/4/12 Example – A is liable to B and C for the amount . 000 2. Passive – solidarity on the part of the debtors.

1209. is that it is joint. where there are two or more persons in the same obligation. Solidarity between debtors increases their responsibility while solidarity between creditors presuming that they are bound jointly and not solidarily. The reason is that solidary obligations are very burdensome for they create unusual rights and liabilities. the right of the creditors may be prejudiced only by their collective acts. ART. If the division is impossible. and the debt can be enforced only by 5/4/12 proceeding against all the debtors. If one .Solidarity not presumed The presumption.

000.ART. 5/4/12 . Examples: 1. (n) Indivisibility as Distinguished from Solidarity Indivisibility refers to the subject matter while solidarity refers to the Tie between the parties. 1210. Nor does solidarity of itself imply indivisibility. Joint divisible obligation – A and B are jointly liable to C for P10. The indivisibility of an obligation does not necessarily give rise t solidarity.

Example: 5/4/12 A and B solidarily bound themselves to pay a total of P10. The solidarity is still preserved by recognizing in the creditor the power of claiming from any or all debtors the payment of the entire obligation. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. . The solidary character of the obligation is not destroyed even if the creditors and debtors are bound by different terms and conditions. 1211.ART.

. 1213. A solidary creditor cannot assign his rights without the consent of the others. but not anything which may be prejudicial to the latter. (1141a) ART. Solidary Creditors May Do Useful Act. Each one of the solidary creditors may do whatever may be useful to the others.ART. Not Prejudicial Acts – A solidary creditor may do any act beneficial or useful to the others but he cannot act prejudicial to 5/4/12 them. 1212.

The debtor may pay any one of the solidary creditors but if any demand. But when a demand is made by any of the creditors. judicially or extrajudicially. payment should be made to him. Payment to Any of the Solidary Creditors The rule is that the debtor may pay any one of the creditors.Art. payment should be made to him who made the demand. 1214. A may pay either B or C But if A is . has been made by one of them.  Example 5/4/12liable to B and C P5. 000. judicial or extrajudicial.

compensation. Liability of Solidary Creditor in case of 5/4/12 Novation. 1215. The creditor who may have executed any of these acts. Novation. shall extinguish the obligation. as well as he who collects the debt. Compensation.ART. made by any of the solidary creditors or with any of the solidary debtors. shall be liable to the others for the share in the obligation corresponding to them. without prejudice to the provisions of article 1219. Confusion or . confusion or remission of the debt.

some or all of the solitary creditors 5/4/12 simultaneously so long as it has not been fully .ART. 1216. (1144a) Creditor May Proceed Against Any Solidary Debtor – In a solidary obligation. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. so long as the debt has not been fully collected. the creditor may proceed against any.

1217. 5/4/12 . If the payment is made before the debt is due. If two or more solidary debtors offer to pay the creditor may choose which offer to accept. with the interest for the payment already made. He who made the payment may claim from his co-debtors only the share which corresponds to each. Payment made by one of the soldiery debtors extinguishes the obligation. no interest for the intervening period may be demanded.ART.

000 on Dec. 000 each with 5/4/12 . the obligation is extinguished.Effects of Payment by a Solidary Debtor – Payment is one of the ways by which an obligation is extinguished and consist in the delivery of the thing or the rendition of the service which is the object of the obligation. 000 due on Dec. Example – A. 31. B and C are solidarily liable to D and E in the amount of P9. The payment of A gives him the right of reimbursement from B and C P3. the latter may choose which offer to accept. 31. If A pays the entire amount of P9. 31. If both A and B offer to pay D on Dec.

(n) Effect of Payment After Obligation Has Prescribed or Become Illegal – 1. Payment by a solidary debtor shall not entitle in to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. Prescription – is one where one acquires ownership and other rights through the lapse of time in the manner and under the conditions laid down by law. 1218. 5/4/12Example – A and B are solidarily indebted to C in the  .ART.

1220. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors. in case the debt had been totally paid by anyone of them before the remission was effected. 1219. The remission of the whole obligation obtained by one of the solidary debtors. (1146a) ART. does not entitle him to reimbursement from his co-debtors.ART. Remission by Creditor – 5/4/12 .

the obligation shall be extinguished. for the price and the payment of damages and interest. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. the thing is 5/4/12 lost or the performance has become . If through a fortuitous event. without prejudice to their action against the guilty or negligent debtor.ART. 1221. all shall be responsible to the creditor. If there was fault on the part of any one of them.

the obligation is extinguished. Without any fault on the part of any one of the debtors. Example: A. 5/4/12 . the car was lost through the fortuitous event. If the thing is lost or has become impossible to perform through a fortuitous event without the fault of the debtor. B and C are solidarily bound to deliver a determinate car to D.Rules in Case thing has Been Lost or Prestation Has Become Impossible – 1. The obligation is extinguished.

The solidary debtors are likewise liable even if the thing is lost through fortuitous event if the loss occurs after anyone of the solidary 5/4/12 debtors has been in delay. . anyone of them may be held liable by D for the price of the car plus damages. 3.Rules in Case thing has Been Lost or Prestation Has Become Impossible – 2. If in the preceding paragraph. the car was lost through the fault of anyone of the solidary debtors. The debtors who did not any fault on the lost of the car have the right to recover from the co-debtor who is at fault. The debtors.

A solidary debtor may. 5/4/12 . in actions filed by the creditor. or pertain to his own share. 1222.ART. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. he may avail himself thereof only as regards that part of the debt for which the latter are responsible. With respect to those which personally belong to the others.

Defenses available to a Solidary Debtor – The defenses available to the solidary debtors if the creditor proceeds against him alone for the payment of the entire obligation 1. in an action by C against A. 000. payment or performance. such as fraud prescription. remission illegality or absence of consideration. The defenses derived from the nature of the obligation. The entire debt was paid by d. 5/4/12 the latter can raise the defense of payment by virtue of  . Example A and B are solidarily liable to C in the among to P6.

5/4/12 . insanity and vitiated consent. insanity and vitiated consent. such as minority. such as minority. Defenses which are personal to others.Defenses available to a Solidary Debtor – 2.   3. Defenses personal to him or pertaining to his own share.

1223. (1149) 5/4/12 .Section 5 – Divisible and Indivisible Obligations]  ART. The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this title.

A divisible obligation is one the object of which in its delivery or performance is capable of partial fulfillment. 2. Example: A agreed to pay B P10. 000 in five monthly installment. The obligation of A is divisible because it is payable in partial payments. . An indivisible obligation is one the object which in its delivery or performance is not 5/4/12 capable of partial fulfillment.Definition of Terms – 1.

1225. 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking.ART. obligation to give 5/4/12 definite things and those which are not . For the purposes of the preceding articles. (1150)  ART. The debtors who may been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consist.

However. it shall be indivisible. When the obligation has for its object the execution of a certain number of days of work. even though the object or service may be physically divisible.  5/4/12  In obligations not to do. the accomplishment of work by metrical units. and obligation is Indivisible if so provided by law or intended by the parties. or analogous things which by their nature are susceptible of partial performance. divisibility or .

  2.Obligations Deemed Indivisible – The general rule of determining the divisibility or indivisibility of an obligation depend on the purpose of the obligation. Here the obligation is indivisible because of the nature of the subject matter. Obligations which are not susceptible of 5/4/12 partial performance . 1. Obligation to give definite things Example: To give a particular house.

Obligations Deemed Indivisible Example: 3. Obligations intended by the parties to be indivisible even if thing or service is physically divisible. the amount of tax payable must be delivered in Toto. Obligation provided by law to be indivisible even if thing or service physically divisible. 5/4/12 . Although money is physically divisible. Taxes should be paid within a definite period. not partially. 4.

Obligations Deemed Divisible 1. Obligations which have for their object the execution of a certain number of days of work. Obligations which have for their object the accomplishment of work by metrical units. The obligation is divisible because it will not be finished in one time.   2. 5/4/12 . Example – A obliged himself to paint the house of B to be finished in 10 days.

if there is no stipulation to the contrary. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance. In obligations with a penal clause.Section 6 – Obligations with a Penal Code  ART.  The penalty may be enforced only when it is 5/4/12 demandable in accordance with the . 1226. Nevertheless.

5/4/12 . 1) To substitute for indemnity for damages and the payment of interest in case of noncompliance of the principal obligation.Purpose of a Penal Clause 1) To insure the performance of the obligation. 1) To penalize the obligor in case of breach of the principal obligation.

unless this right has been clearly granted him. The debtor cannot exempt himself from the performance of the obligation by paying the penalty. save in the case where this right has been expressly reserved for him. if after the creditor has decided to require the fulfillment of the obligation. the penalty may be enforced. the performance thereof should become impossible without his 5/4/12 fault. However. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time. . 1227.ART.

the penalty may also be reduced by the courts if it is iniquitous or unconscionable. ART. 1228. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. 1229.ART. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. Even if there has been no performance. (1154a) 5/4/12 .

a) When the obligation has been irregularly complied with by the debtor a) When the penalty is iniquitous or unconscionable.When Penalty May be Reduced by the Court a) When the obligation– has been partly complied with by the debtor. 5/4/12 . even if there has been no performance at all.

(1155)   Effect of Nullity of Penal Clause – The general principle that the accessory follows the principal.ART. The penal clause may be disregarded. the principal obligation remains valid and demandable. 1230. If only the penal clause is void. The nullity of the principal obligation carries with it the penal clause. The nullity of the penal clause does not carry with it that of the principal obligation. 5/4/12 .

Meaning of Loss Of The Thing Due ting which constitutes the object of the  It means that he obligation perishes or goes out of commerce or disappears. th obligation is extinguished and the debtor cannot be held liable. The general rule is that if the thing to be delivered is determinate and it is lost without the fault of the debtor or is lost through fortuitous even pending delivery.  5/4/12 . In such a way that its existence is unknown or it cannot be recovered.

when the indeterminate. if the debtor is at fault. by provision of law. when the nature of the obligation requires the assumption of risk.  3. when the debtor has promised to deliver the same thing 5/4/12 .The exceptions to this rule are: 1.  5.  2. when the debt or a thing certain and determinate proceeds from a crime. by stipulation or agreement of the parties. thing to be delivered is generic or  4.  7.  6.

the loss or destruction of anything of the same kind does not extinguish the obligation. and without prejudice to the provisions of article 1165. In an obligation to deliver a generic thing. Art. it shall be presumed that the loss was due to his fault. the partial loss of the object of the obligation is so important as to extinguish the obligation. 1264. This presumption does not apply in case of earthquake. unless there is proof to the contrary. (1183a)   5/4/12 . storm. Art. Art. 1263. The courts shall determine whether. under the circumstances. 1265. flood. or other natural calamity. Whenever the thing is lost in the possession of the debtor.

flood or other natural calamities. does not apply when the ting is lost due to earthquake. The presumption of fault. the law presumes that he ting was lost through his fault. 5/4/12 . however.Thing Lost In Possession Of Debtor  If the thing is lost while in the possession of the debtor.

When the service has become so difficult as to be manifestly beyond the contemplation of the parties. becomes legally or physically impossible without the fault of the obligor. the latter refused without justification to accept it. When the debt of a thing certain and 5/4/12 . (1185) Art. 1267. (1184a) Art. the debtor shall not be exempted from the payment of its price. 1268. the obligor may also be released therefrom. whatever may be the cause for the loss. unless the thing having been offered by him to the person who should receive it. (n) determinate proceeds from a criminal offense. in whole or in part.

in which case the obligation is extinguished.  The only exception to this rules when the person who should receive the object unjustifiably refused to accept it and the object is subsequently lost due ot fortuitous event. was ordered by the court to return the object to its owner is liable for the payment of its value if such object is lost through whatever case. 5/4/12 .Effect Of Obligation  Obligation From felony or crime if a Arising arising from Felony ofortheft person who was convicted of the crime like .

 Art. 1269. (1186) 5/4/12 . the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. The obligation having been extinguished by the loss of the thing.

5/4/12 .When Creditor Acquires Debtor’s Right Of Action  By reason of the loss of the thing. the creditor acquire all the rights of actions which a debtor may have against at third person.

It may be made expressly or impliedly.Condonation or Remission of the Debt Art. furthermore. Express condonation shall. Condonation or remission is essentially gratuitous. (1187) 5/4/12 . 1270.  One and the other kind shall be subject to the rules which govern inofficious donations.SECTION 3. and requires the acceptance by the obligor. comply with the forms of donation. .

(4 Sanchez Roman 422) 5/4/12 .Condonation or Remission Defined  Remission is an act of liberality by which the obligee. without receiving any price or equivalent. as a result his right against the debtor. renounces the enforcement of the obligation.

it must be accepted by the debtor. it must comply with the forms 5/4/12 .Requisites of Condonations OR Remissions      it must be gratuitous. the parties must have capacity. must not be inofficious. and if made expressly.

Like for example. the excess shall be inofficious and shall be reduced by the Court accordingly. no one can give more than that which he can give by a testamentary will.  5/4/12 . otherwise.Effect of inofficious Remission  While a person may make donations. a part of the testator’s property called legitimate cannot be disposed of because the law has reserved it from certain heirs called the compulsory heirs.

implies the renunciation of the action which the former had against the latter. Whenever the private document in which the debt appears is found in the possession of the debtor. (1188) ART. 1271. made voluntarily by the creditor to the debtor. it shall be presumed that the creditor delivered it voluntarily. ART. 1271. (1189)   5/4/12 . If in order to nullify the waiver it should be claimed to be inofficious. The delivery of a private document evidencing a credit. the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. unless the contrary is proved.

the presumption is that the debt must have been paid by Gaya.   it is known that Gaya has not yet paid Tito. Example. . If the promissory note is voluntarily delivered to Gaya. the presumption is that there was payment by virtue of the payment of the debt. Or it was voluntarily delivered to the debtor. which gives rise to the remission of the obligation.Presumption In Case Document Found In the Possession Of Debtor  If the document is found in the hands of the debtor and it is not known how he came into possession of the same. Suppose it is not known how Gaya came into possession of the promissory note. Gaya owes Tito P10. 000 evidenced by a promissory note. The note as signed by Gaya was given to Tito. it must be presumed that the obligation has been remitted. the presumption is that it was voluntarily delivered by 5/4/12 Tito unless Tito proves to the contrary.

the obligation of Arvin shall remain in force. 000 while the accessory obligation is the guaranty of Gaya. 1273. But if only the guaranty of Gaya is condoned. The accessory cannot exist without the principal obligation. but the waiver of the latter shall leave the former in forc. Arvin owes Tito P10. The renunciation of the principal debt shall extinguish the accessory obligations.  5/4/12 .ART. 000 with Gaya as guarantor. The remission of the debt of Arvin by Tito extinguishes the guaranty of Gaya. Example. (1190). The principal debt here is the P10. Of Effect Renunciation Of the Principal Debt  The above provision follows the rule that the accessory follows the principal.

is found in the possession of the debtor. after its delivery to the creditor.ART. 1274. or of a third person who owns the thing. the thing delivered . Defined  Pledged is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or instrument evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that 5/4/12 when the obligation is fulfilled. (1191a) Pledged. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged.

Presumption In case Thing in Possession of Debtor If the thing pledged is found in the hands of debtor or the third person. only the accessory obligation of pledge is presumed remitted. The obligation is extinguished from the time the characters or creditor and debtor are merged in the same person. – Confusion or Merger of Rights  ART. not the obligation itself. 1275. (1192a) 5/4/12 . Section 4.

Meaning of Confusion or Merger  Confusion is the meeting in one person of the qualities of creditor and debtor with respect to the same obligation. (4Sanchez Roman 421) 5/4/12 .

it must take place in the person of either the principal debtor and principal creditor. it must be complete. Before the maturity of the note. Arvin indorsed it to Mary. Example. 2. 000 in favor of Tito payable 30 days after sight. Gaya issued a promissory note for P10. 5/4/12 . and 4. Tito indorsed it to Arvin.Requisites of A Valid Confusion 1. and 3. the merger of the qualities of creditor and debtor must be in the same person. clear and definite. Mary indorsed it to Gaya. The obligation of Gaya to Tito is extinguished because there is Click to edit Master subtitle style here a merger of the qualities of the debtor and creditor in one and the same person with respect to one and the same obligation cannot demand and collect payment from himself. the very obligation must be the same.

Tito assigned the credit to Mary. the credit was assigned by Tito to Mary and Mary to Arvin. (1193) Effect of Merger   This article reiterates the principles established in Articles 1176. Later. but the extinguishment of the accessory does not extinguish the principal obligation  Example. NCC. The principal debt is extinguished and Arvin is released from his obligation as guarantor. who in turn assigned it to Gaya. 000 loan from Tito which loan was guaranteed by Arvin. Gaya obtains P10. Gaya has now 5/4/12 the obligation to pay Arvin. Confusion which takes place in the person of any of the latter does not extinguish the obligation. that accessory follows the principal. 1274. in this same example. The extinguishment of the principal obligation extinguishes the accessory obligation.ART. 1276. The contract of guaranty is extinguished but the principal obligations remains. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. . If.

it affects only the share corresponding to the creditor or debtor in whom the two characters concur. 000. 000 each.ART. In case there is merger in a joint obligation. Example. Tito assigns his credit to Ian who in turn assigned it to Gaya. Mary and Arvin are jointly indebted to Tito in the amount of P15. The co-debtor will not owe his corresponding share to this former joint co-debtor. There is here a merger between Gaya and Tito but Mary and Arvin would now owe Gaya P5.  5/4/12 . 1277. the debts are distinct and separate from each other. (1194) Effect of Merger in Joint Obligation  In a joint obligation. Gaya. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur.

Compensation shall take place when two persons. in their own right are creditors and debtors of each other. 1278. Compensation  ART.Section 5. (1195) 5/4/12 .

in their own rights are creditors and debtors of each other.Compensation. Compensation Distinguished From Confusion as to number of persons – in compensation there must be two persons.  . there is only one person in whom the quality of creditor and 5/4/12debtor is merged.Defined Compensation shall take place when two persons. in confusion.

5/4/12 . b. Legal – takes effect by operation of law provided all the requisites prescribed by law are present. Partial – the debts are not the same amount hence after compensation. Voluntarily – takes place by virtue of the of the parties. as to effect a. as to cause a. 2. a balance remains outstanding. agreement c.Kinds of Compensation 1. Click – when both debts are completely extinguished Total to edit Master subtitle style because the debt are the same amount b. Judicial – takes place only through court orders.

1279. commenced by 5/4/12 third persons and communicated in due . (4) That they be liquidated and demandable. (2) That both debts consist in a sum of money. and also of the same quality if the latter has been stated. In order that compensation may be proper. (5) That over neither of them there be any retention of controversy.ART. and that he be at the same time a principal creditor of the their. or if the things due are consumable. (3) That the two debts be due. they be the same kind. it is necessary: (1) That each one of the obligors be bound principally.

(5) That over neither of them there be any retention of controversy. (3) That the two debts be due. (4) That they be liquidated and demandable. or if the things due are consumable.ART. it is necessary: (1) That each one of the obligors be bound principally. 1279. they be the same kind. commenced by 5/4/12 third persons and communicated in due . and that he be at the same time a principal creditor of the their. In order that compensation may be proper. (2) That both debts consist in a sum of money. and also of the same quality if the latter has been stated.

Tito. 000 payable also on October 30. 1999. 1999. has an obligation to deliver 100 sacks of rice to Arvin on October 20. Example. Tito on the other hand owes Arvin P10. Gaya owes Maya P10. 1999. 5/4/12 . 1999. both debts consists in a sum of money or of consumable things of the same kind and quality. the two debts are due and demandable. 20. 1999. These two obligation become due on Dec. Arvin obliged himself to deliver to Tito 100 sacks of rice on October 30. 1999. 000 payable on Dec. on the other hand. 30. Arvin owes Tito P10. Maya owes Gaya P10. the parties are principal creditor and principal debtor of each other. 000 payable on October 30. 2. Example. 1999. 1999 compensation takes place because both Arvin and Tito are principal creditor and principal debtor of each other. 000 also due and payable on Dec. 3. Example. 30.Requisites of a Proper Compensation or Legal Compensation 1. There is compensation because they are consisting of consumable things. There is compensation when the obligation becomes due on October 30.

and then compensation can take place. 000 but Arvin credit of P10.the two debts liquidated. 5/4/12 . while the word demandable means when it is due. 4. 5. If she loses. there can be no compensation. If Gaya wins her claim. Any possible compensation is in the meantime suspended. 000 has been garnished by Gaya who claims to be an unpaid creditor of Arvin. 000 and Ian owes Arvin P10. Ian has been duly notified of the controversy. Arvin woes Ian P10. there be no retention or controversy means a third person who is claiming to be a creditor. and The liquidated means that the amount of debt has already been fixed and determined. Example. the controversy is resolved.

000 credit of Arvin as the basis of partial compensation. 000. 5/4/12 . Example. Tito owes Arvin P10. 000. Maya is the guarantor of Arvin.ART. the guarantor may set up compensation as regards what the creditor may owe the principal debtor   Guarantor May Set Up Compensation This is an exception to Article 1279. 000. Notwithstanding the provision of the preceding article. Arvin owes Tito P10. Maya will be liable for only P6. When Tito sues Arvin for P4. part. 1 because the article allows setting up compensation as regard what the creditor may owe to the principal debtor. 000 because he can set the P4. 1280. When Tito sues Arvin and Arvin cannot pay.

19. Compensation may be total or partial. Example. 1281. 19.  5/4/12 .ART. Maya is likewise indebted to Gaya in the amount of P10. Kinds of Compensation  Total compensation is when the amount due are equal or of the same amount. When the two debts are of the same amount. Gaya is indebted to Maya the amount of P10. 000 due on Dec. 000 due on Dec. 1999. hence both debts will be extinguished. 1999. hence both obligations are extinguished. There is here a total compensation. there is a total compensation.

The after may agree upon the compensation of debts which are not yet due. Gaya owes Maya P10. On the other hand. (n) place. Example. 5/4/12 . 19. to edit Master subtitle style Click 2009. there is a balance remains. 000 will remain parties compensation takes ART. Maya owes the due date arrives because a balance of P4. 000 due on Dec.Partial compensation is when the amount are not the same after compensation took place. 1282.

2001 because Maya’s debt is not yet due. 30.1279) Example. 2001. 000 due on Nov. 2001. 19. However. by voluntary agreement between Click to edit Master subtitle style 5/4/12 .(Art. 30. Gaya owes Maya P10.This is a voluntary compensation as an execution to the general rule that only debts which are due and demandable can be compensated. On the other hand Maya owes Gaya P10. 000 due on Dec. Generally compensation the parties there may be compensation cannot take place comes Nov.

X failed to pay. If one of the parties to a suit over an obligation has acclaim for damages against the other. X can set off the obligation of Y to pay him damages in the amount of P800 against his debt of P1.ART. (N) Judicial A judicial compensation is one whereby a money debt of a person may be allowed by the court to be compensated with a claim of damages by another. 000. Example. Y damaged the property of X to the extend of P800. 1283. X owes Y P1. 000. 5/4/12 . In anger. When Y demanded payment. the former may set it off by providing his right to said damages and the amount Compensation thereof.

1284. A is still liable considering compensation had already taken place because the effect of annulment is retroactive. When one or both debts are rescissible or voidable. it is as if there was no compensation. A owes B P 10. Compensation Of Rescissible or Voidable Debts Rescissible and voidable obligations are valid until they are judicially rescinded or avoided and prior rescission or annulment. through fraud was able to make B sign a promissory note that B is indebted to A for the same amount. The debt of A is valid. both debts may be compensated against each other if all the requisites for legal compensation are present. A. 000. Click to edit Master subtitle style If suppose the debt of B is later annulled by the court. 5/4/12 . Example.ART. Subsequently. but that of B is voidable. they may be compensated against each other before they are judicially rescinded or avoided. the debts may be compensated. Before the debt of B is nullified.

he may set up the 5/4/12 compensation of all credits prior to the same and . cannot set up against the assignee the compensation which would pertain to him against the assignor. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. If the creditor communicated the cession to him but the debtor did not consent thereto. If the assignment is made without the knowledge of the debtor. unless the assignor was notified by the debtor at the time he gave his consent.ART. the latter may set up the compensation of debts previous to the cession . but not of subsequent ones. that edit Master subtitle style Click to he reserve his right to the compensation.

Both debtssubtitle style up to amount of Click toAedit owes B P2. A owes B P5. If B assigns his right Master are extinguished P3. latter can collect only P2. if A gave his consent to the assignment before it was made on will be liable to C for P5. 000 but he can still collect the P2. Hence. 000 from A. 000 owed by B. Example.When Compensation Has Taken Place BEFORE Assignment If an extinguished obligation has been assigned by the creditor to third person. 000 due yesterday. However. 000 today. The remedy of the assignee is against the assignor. still to C. 000 due also yesterday. 5/4/12 . It is as if no compensation took place. 000. B owes A P3. the debtor can raise the defense of compensation with respect to the debt.

the assignor. if A while consenting to the assignment. A is still liable to C for P5. 000 debt from B.Where Compensation Has Taken Place AFTER Assignment There are three cases of compensation which take place after an assignment of rights made by the creditor. 000 to C. 000 but he can still collect the P2. 5/4/12 . the assignee. 19. 000 due Dec. he would be liable only P2. A owes B P5. However. 19. They are:  Assignment with consent of debtor Example. reserved his right to the compensation. B assigned his right to C. B owes A P3. 000 due Dec. the compensation which would pertain to him against B.

000. There being partial compensation. If B learned of the assignment after of  Assignment without the knowledge of the debtor . B owes A P2. A assigned his right to C on Dec. 12. 1. The crucial time is when B acquired knowledge of the assignment and not the date 5/4/12the assignment. 10 which was before the cession on Dec. 000 Dec. 000 due Dec. 000 but B cannot raise the defense of compensation with respect to the debt of A due on Dec. 000 to B. A will liable for his debt of P1. In this case. Come Dec. 15 which has not yet matured. how much can C collect from B? B can set up the compensation of debts on Dec. let us suppose that the assignment was made without the knowledge of B who learned of the assignment only on Nov. A owes B P1. on Dec. 15. A owes B P1. B can set up the compensation of credits before and after the assignment. the assignment is valid only up to the amount of P1. in the preceding example. 12. 16. Assignment with the knowledge but without the consent of debtor Example. 10. A notified B but the latter did not give his consent to the assignment. Example. 15. 000 due Dec. B is liable to C for P1. 12. So.

Compensation takes place by operation of law. The indemnity shall be paid by the person who raises the defense of compensation. Once these expenses are liquidated. bu there shall be an indemnity for expenses of exchange or transportation to the place of payment. even thought eh debts may be payable at different places. Example. Gaya owes Maya $1. (1199a) Compensation Where Debts Payable At Different Places This legal compensation does not refer to the difference in the value of the things in their respective places but to the expenses of monetary exchange and expenses of monetary exchange and expenses in transportation. 000(equivalent amount) 5/4/12 payable in Manila. If A claim compensation. he must pay . 1286. 000 payable in New York. Maya owes Gaya P38. the debts also become compensated.ART.

1287. ART. Neither shall there be compensation if one of the debts consists in 5/4/12 civil liability arising from a penal clause. without prejudice to the provision of paragraph 2 of article 301.ART. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depository or of a bailee in commodatum. 1288. .

(1254a) 5/4/12 . A contract is a meeting of minds between two persons whereby one binds himself. public order or public policy.PART III General Provisions on Contracts Learning Objectives: After studying this lesson. The classifications of contracts summarizes those types of contracts that may be freely agreed upon as long as they are not contrary to law. 3. good customs. ART. learn the different classifications of contracts. and 4. with respect to the other. know the elements of contracts. to give something or to render service. you should: 1. that contracts take effect only between parties and its exceptions. know the definition of contract 2. 1305. morals.

5/4/12 . Defined  The above article defines the term Contract. In a contract. one or more persons bind themselves with respect to another or reciprocally. to do or not to do.Contracts. to the fulfillment of a presentation to give.

such as Warranty of hidden defects or eviction in contract of sale. Natural elements – those elements which are found in a contract by its nature and presumed by law to exist. Such accidental elements are 5/4/12 .those which exist by virtue of an agreement for the purpose of expanding. limiting. Accidental elements . Essential elements – those elements without which there can be no valid contract. This element are consent. 3. object or subject matter and cause or consideration 2.Elements of Contract: 1. or modifying a contract.

negotiation to arrive at a define contract. 2. terms and conditions of contract. 3.Stages of A Contract: 1. Consumption or death – which is the fulfillment or performance of the terms and conditions agreed upon in the contract may be said to have been 5/4/12 fully accomplished or executed. cause or consideration. . Perfection or birth – there is now a meeting of minds to arrive at a definite agreement as to the subject matter. Preparatory or conception – process of formation such as bargaining.

Obligatory force – it constitutes the law as between the parties. 4. Relativity – it is binding only upon the parties and their successors.Characteristics of Contracts: 1. Mutuality – its validity and performance cannot 5/4/12 be left to the wil of only one of the parties. . 2. 3. Freedom to contract – they may establish terms and conditions as they may deem convenient.

5/4/12 .  2.Classification of A Contract: (FROM)  1. Accessory – those which are dependent upon another contract. lease. Principal – one which can stand alone. As to dependence to other contract. c. Contract of mortgage. Deposit. Ex. pledge of guaranty. Preparatory – those which is created in order that a future transaction or contract may be entered into by te parties. 1315 b. A contract of sale. Real Contract – perfected by mere consent and by the delivery of the object or subject matter. Consensual – one which is perfected by mere consent (Art. a. b. or commodatum. Ex. Contract of partnership or agency. Ex. pledge. As to perfection a. Ex.

5/4/12 . According to name or designation a. Unilateral – where only one ha an obligation to perform. According to the nature of obligation a. Bilateral – where both parties have reciprocal obligation to perform. Innominate – those without particular name. Contract of donation.  4. Ex. Gratuitous – one which one of the parties does not receive any valuable consideration. such as lease. According to risk involved a. commodation. Ex. mortgage. Aleatory . Commutative .  5. 3. Onerous – one which imposes valuable consideration such as sale. Contract of insurance.  6. b. Nominate – one which has particular name or designation such as sale. According to cause a. b. b. etc. agency. b.one which the fulfillment of the obligation depends upon chance. Sale. such as commodatum.where there is an exchange of values. Ex.

provided they are not contrary to law. terms and conditions as they may deem convenient. 7. good customs. The contracting parties may establish such stipulations. 1306. Written – the agreement which is reduced in writing which may be public or private or private document ART. According to form a. public order. clauses. or public policy. Oral – by word of mouth of the parties b. (1255a) 5/4/12 . morals.

1308. its validity or compliance cannot be left to the will of one of them. The contract must bind both contracting parties. (1256a) 5/4/12 .Contract Binds by Both Parties ART.

This is also known as “mutuality of contract”. its validity or compliance cannot be left to the will of one of them. (11 Manresa 380) Example. This principle is based on the essential equality of the parties. It is elementary rule that no party can renounce or violate the law of the contract without the consent of the other.Contracts entered by and between the parties mush bind both parties in order that it can be enforced against each other. The contract is void because the fulfillment of the condition depends on the will of Gaya. Gaya and Laura entered into a contract to sell whereby Gaya binds herself to sell her only parcel of land to Laura if Gaya decides to leave for States. 5/4/12 . Hence.

1310. In such case. The determination shall not be obligatory if it is evidently inequitable. ART. the courts shall decide what is equitable under the circumstances.  5/4/12 . 1309. The determination of the performance may be left to a third person. whose decision shall not be binding until it has been made known to both contracting parties. ART.

the parties are not bound by the determination if it is evidently inequitable or unjust when the third person acted in bad faith or by mistake. . the court may be called 5/4/12 upon to decide what is equitable. If the decision made by Maya is manifestly inequitable. Example. It was agreed that Maya. fixed the price after considering the factors affecting the value of the land. the courts shall decide what is equitable under the circumstances. then. the determination of its performance may be left to a third person after it has been made known to both contracting parties. However. Maya.Determination of Performance by Third Person compliance with a contract cannot be left As a rule. Gaya sold her parcel of land to Laura. a real estate appraiser would be the one to determine the reasonable price of the land. Provided. and informing both contracting party that the decision is just and suitable. further. to the will of one of the contracting parties.

Contracts take effect only 5/4/12 . stipulation in favor of third person. or by provision of law. The contracting parties must have clearly and deliberately conferred a favor upon a third person.between the parties. their assigns and heirs. A mere incidental benefit or interest of a person is not sufficient. except in case where the rights and obligations arising from the contract are not transmissible by their nature. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. 1311. (1257a) If a contact should contain some ART. The heir is not liable beyond the value of the property he perceived from the decedent. or by stipulation.

Cases Where Third person May Be Affected By a Contract the performance of both parties (Art. 1. In determining 1309).

person (Art. 1311).

2. In contracts containing a stipulation in favor of a third 3. In contracts creating real rights (Art. 1312). 4. In contracts entered into to defraud creditor (Art. 1313).

of the third person (Art. 314).

5. In contracts which have been violated at the inducement Example, Gaya mortgaged her parcel of land in favor of

Laura as collateral for her debt. The mortgage is duly registered. Later on, Gaya sold the same land to Tito. In this case, Tito bought the land subject to the mortgage constituted thereon. 5/4/12 although a stranger in the mortgage, being a real right Tito,

Forms of Contracts
1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a) 5/4/12
Art.

Meaning of Form of Contracts

Forms of a contract refer to the manner in which a contract is executed or manifested

5/4/12

Rules Regarding Form of Contracts
 General Rule – Contracts are binding and

therefore, enforceable reciprocally by the contracting parties, whatever may be the form in which the contact has been entered into to provided all the three essential requisites (consent, object, cause) for their validity are present.

5/4/12

Reformation of Instruments  Art. 1359. When, there having been a

meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or

accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract.
5/4/12

Meaning of Reformation
is that remedy by means of which a written instrument is amended or rectified so as to express or conform to the real agreement or intention of the parties when by reason of mistake, fraud, inequitable conduct, or accident the instrument fails to express such an agreement or intention.
5/4/12

Reformation

2. inequitable conduct or accident. fraud. The written instrument does not express the true agreement or intention of the parties. There is a meeting of the minds of the parties to the contract. 3.Requisites of Reformation 1. The failure to express the true intention is due to mistake. 5/4/12 .

There is clear and convincing evidence of the mistake. inequitable conduct or accident. because there has been a meeting of minds. the remedy is reformation. fraud. Example. However. It was greed that the sale will include all the improvements. Arvin sold his land to Ryan. the contract was signed by the parties. In this case. 5/4/12 . 4. states that the land is being sold excluding the improvements thereon. and 5. The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings.

who accepts it. to take effect after his death.Cases When Reformation Not Allowed 1. Donation is strictly personal andfree act so that if the intend of the donor that the donation will take effect during his lifetime. 5/4/12 . (Art. while the opposite of inter vivos is donation mortis causa which takes effect after the donor’s death. it is a donation inter vivos. Simple donation inter vivos where no condition is imposed – Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another. 2. 725). Wills – A will is an act whereby a person is permitted with a formalities prescribed by law to control to a certain degree the disposition of his estate.

4. he admits its validity and that it expresses the true intention of the parties. When one party ahs brought an action to enforce the instrument – (Art.3. When the real agreement is void – If the real agreement is void. thre is nothing to reform. The bringing of the action is thus inconsistent with reformation 5/4/12 . 1367) When a party brings an action to enforce the contract.

1370. the literal meaning of its stipulations shall control.Interpretation Of Contracts clear and leave no doubt upon the intention of the contracting parties. (1281) 5/4/12 Art. the latter shall prevail over the former. If the terms of a contract are  . If the words appear to be contrary to the evident intention of the parties.

the parties are bound thereby according to the literal sense of their stipulations.word used by the parties in their contact. Example. The terms of the contract are clear and it does not appear that the intention of the parties is contrary to the 5/4/12 Meaning of Interpretation  Interpretation of a contract is the of a contract meaning of the terms of determination of the . a contract was executed by A and B. the contract recites that is a sale of land belongs to A for P500. If the terms of a contract are clear and unequivocal.

Cause of Contracts Art. the service or benefit which is remunerated. (1274) 5/4/12 . 1350. and in contracts of pure beneficence. In onerous contracts the cause is understood to be. the mere liberality of the benefactor. for each contracting party. in remuneratory ones. the prestation or promise of a thing or service by the other.

5/4/12 . (8Manresa697)  It is the Civil Code term for consideration in Anglo American or Common Law.Meaning of Cause Cause is the essential or more proximate purpose which the contracting parties have in view at the time of entering into a contract.

Ex. GRATUTIOUS – the cause which is the mere liberality of the benefactor or giver. The cause is the liberality of X. 2. REMUNERATORY .Classification of Contracts According to Cause 1. the done or benefactor. A rendered service as the lawyer-counsel of B who agreed to pay P10. Sale. Ex. ONEROUS – the cause of which for each contracting parties is the pre-station or promise of a thing or service of the other. 3. 000 for said services. 5/4/12 . X donated a parcel of land to Y.the cause is the service or benefit which is remunerated. Ex. lease of things.

if it should not be proved that they were founded upon another cause which is true and lawful. The statement of a false cause in contracts shall render them void. (1275a) Art. The cause is unlawful if it is contrary to law. Art. good customs. 1353. 1352. (1276) 5/4/12 . public order or public policy. produce no effect whatever. Contracts without cause. morals.or with unlawful cause.

(Art 1353) 5/4/12 . (Art. the time the contract is into.Requisites of Cause 1. 3. it must exist at entered 2. (Ibid) and it must be true or real. 1352) it must be lawful.

for example.Effect of Absence of Cause  A contract without cause or with an unlawful cause. produces no effect whatever. Like. 5/4/12 . an absolutely simulated contract produces no effect because there is no cause at all. according to this article.

1355). Illegality of cause implies that there is a cause but the same is unlawful or illegal. (Art. By falsity of Cause is meant that the contract states a valid consideration but such statement is not true 5/4/12 .Effect of Inadequacy of Cause  Inadequacy of cause does not invalidate a contact.

PART IV DEFECTIVE CONTRACTS There are four kinds of defective contracts: 1. 2. Void or inexistent contracts (Chapter 9) 5/4/12 . 3. Voidable contracts (Chapter 7). Rescissible contracts (Chapter 6). Unenforceable Contracts (Chapter 8). and 4.

Contracts validly agreed upon may be rescinded in the cases established by law. 1380. Art.Rescissible contracts Contracts are valid because all the essential requisites of a contract exist but by reason of injury or damage to one of the parties or to third persons. (1290) 5/4/12 . the contract may be rescinded. such as creditors.

by means of the restoration of things to their condition in which they were prior to the celebration of said contract.Meaning of Rescission Rescission is a remedy granted by law to the contracting parties and sometimes even to third person in order to secure reparation of damages caused them by a valid contract. (8Manresa 748) 5/4/12 .

There must be no other legal remedy 5/4/12 to obtain reparation for the damage. case especially provided by law. The rescission must be based upon a 4. The contract must be validly agreed upon. 2. 3. There must be lesion on pecuniary prejudice to one of the parties or to a third person. .Requisites of Rescission 1.

The object of the contract must not legally be in the possession of third person who did not act in bad faith. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract. 7. The period for filing the action for rescission must not have prescribed 6. 5/4/12 .5.

Art. (1291a) . (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. The following contracts are rescissible: ` (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. 1381. (2) Those agreed upon in representation of absentees. if the latter suffer the lesion stated in the preceding number. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. (5) All other contracts specially declared by law 5/4/12 to be subject to rescission.

The following contracts are voidable or annullable. These contracts are binding. violence. undue influence or fraud. intimidation. They are . even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract. unless they are annulled by a 5/4/12 proper action in court.Voidable Contracts Art. 1390. (2) Those where the consent is vitiated by mistake.

Meaning of Voidable Contracts Voidable or annullable contracts are those which possess all the essential requisites of valid contract but one of the parties is incapable of giving consent. or consent is vitiate by mistake. 5/4/12 . undue influence of fraud. violence. intimidation.

Meaning of Annulment  Annulment is a remedy granted by law. 5/4/12 . for reason of public interest. for the declaration of the inefficacy of a contract based on defect or vice in the consent of one of the contracting parties in order to restore them to their original position in which there were before contract was executed.

2. The contract is susceptible of convalidation by ratification or prescription. The contract is binding until annulled by a competent court. 3. The defect or voidable character of the contract cannot be invoked by third persons. 4.Characteristics of Voidable 1. 5/4/12 . The defect in the contract consists in the vitiation of consent of one of Contracts the contracting parties.

This period shall begin:  In cases of intimidation. And when the action refers to contracts entered into by minors or other incapacitated persons. (1301a)   5/4/12 . The action for annulment shall be brought within four years. from the time the guardianship ceases. violence or undue influence. from the time the defect of the consent ceases.Art. 1391. from the time of the discovery of the same. In case of mistake or fraud.

The time of the discovery of mistake or fraud. The time the intimidation. . and 3. 2. in cases of contracts entered into by 5/4/12 incapacipated persons.Period for Filing Action for Annulment The period within which the action for annulment shall be brought within four(4) years from: 1. violence or undue influence ceases. The time guardianship ceases.

of the agreement cannot be 5/4/12 received without the writing. or some note or memorandum. unless the same. or by his agent. therefore. thereof. of Frauds as set forth in this number. unless they are ratified: are person by one who has been given no authority or legal representation. and subscribed by the party charged. be in writing. 1403. evidence. or a secondary (2) Those that do not comply with the Statute (1) Those entered into in the name of another . In the following cases an agreement hereafter made shall be unenforceable by action. The unenforceable. or who has acted beyond his powers.Unenforceablefollowing contracts Contracts Art.

other than a mutual promise to marry. default. or miscarriage of another.to be performed within a year from the making thereof. 5/4/12 . (a) An agreement that by its terms is not (b) A special promise to answer for the debt. (c) An agreement made in consideration of marriage.

or for the sale of real property or of an interest therein. at the time of the sale. or some of them. (d) An agreement for the sale of goods. at a price not less than five hundred pesos.chattels or things in action. of the amount and kind of property sold. of such things in action or pay at the time some part of the purchase money. names of the purchasers and person on whose account the sale is made. unless the buyer accept and receive part of such goods and chattels. . terms of sale. or the evidences. price.  (f) A representation as to the credit of a third person.  (e) An agreement of the leasing for a longer period than one year. it is a sufficient memorandum. (3) Those where both parties are incapable of 5/4/12 giving consent to a contract. but when a sale is made by auction and entry is made by the auctioneer in his sales book.

Meaning of Unenforceable Contracts cannot be enforced in court or sued upon by reason of defects provide by law until unless they are ratified according to law. Unenforceable contracts are those that without or in excess of authority or do not comply with the statue of frauds or both of the contracting parties do not possess the required legal capacity. 5/4/12 They are contracts either entered into .

incapable of giving consent 5/4/12 . Those where both parties are 2.Classes of Unenforceable Contracts Those entered into the same of another person by one without authority or in excess of his authority. 1. and 3. Those which do not comply with the Statue of Frauds.

2 of Article 1403.  Art. 1404. 1405. are ratified by the failure to object to the presentation of oral evidence to prove the same. 5/4/12 . referred to in No. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book.Art. or by the acceptance of benefit under them. Contracts infringing the Statute of Frauds.

public order or public policy. good customs. 1409. object or purpose is contrary to law.Void or Inexistent Art. The following contracts Contracts from the beginning:are inexistent and void 1) Those whose cause. 2) Those which are absolutely simulated or fictitious. 5/4/12      5) Those which contemplate an impossible . 3) Those whose cause or object did not exist at the time of the transaction. morals. 4) Those whose object is outside the commerce of men.

Art. 5/4/12 .parties relative to the principal object of the contract cannot be ascertained. 1410. 7) Those expressly prohibited or  Those where the intention of the 6) declared void by law. The action or defense for the declaration of the inexistence of a contract does not prescribe. Neither can the right to set up the defense of illegality be waived. These contracts cannot be ratified.

the right to set up the defense of . the defense of illegality is not available to third persons whose interests are not directly affected. (art. the action or defense for the declaration of its inexistence does not prescribed. (Art. and 5. 1410) 4. 1422) 5/4/12 1. it cannot be ratified. 3.Meaning of Void or Inexistent Contracts illegality cannot be waived. it cannot give rise to a valid contract. (Art 1409) 2.

5/4/12 .Instances of Void or Inexistence Contract There is no need for a detail discussion of these different kinds of void inexistent contracts considering that they have been discussed in previous chapters of this book. Mere lapse of time cannot give effect to contracts which are null and void.  Void of inexistent contracts does not prescribe.

When the nullity proceeds from the illegality of the cause or object of the contract. but the innocent one may claim what he has given. and the act constitutes a criminal offense. they shall have no action against each other. both parties being in pari delicto. and both shall be prosecuted. This rule shall be applicable when only one of the parties is guilty. 1411.Art. 5/4/12 and shall not be bound to comply with his . Moreover. the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.

or the parties have no action against each other. The principle of pari delicto. the law refuse them every remedy. 5/4/12 . means that when the defect of avoid contracts consists in the illegality of the cause or object f the contract and both parties are at fault or in a pari delicto.Meaning of Pari Delicto Pari Delicto means both parties are equally at fault or are equally guilty.

the things of the price of the contract. 2.  b. shall be confiscated in favor of the government.Illegal contract with Criminal Offense 1. the parties shall have no action against each other.  The innocent one or less guilty may 5/4/12 claim what he has given and shall not be bound to comply with his promise . both shall be prosecuted. Where only one party is guilty. and  c. When both parties are in pari delicto – Rules  a.

who is not at fault. neither may recover what he has given by virtue of the contract.Art. or ask for the fulfillment of what has been promised him. 1412. may demand the . 5/4/12 The other. the following rules shall be observed: (1) When the fault is on the part of both contracting parties. (2) When only one of the contracting parties is at fault. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. he cannot recover what he has given by reason of the contract. or demand the performance of the other’s undertaking.

1420. the latter may be enforced. if the illegal terms can be separated from the legal ones. 5/4/12 . In case a contract containing an illegal orlegal terms. the law allows the legal terms to be enforced if it can be enforced if it can be separated from the illegal ones.Effect of Illegal Terms in a Contract Art. In case of a divisible contract.

the illegality of a contract maybe set up as a defense only by contracting parties or by parties whose interest are affect by the contracts as a defense 5/4/12 .Persons Entitled to Raise Defense of Illegality or Nullity As general rule. their heirs or assigns. contracts bind only the contracting parties. Corollary to this rule.

Thank you!!!!! 5/4/12 .

Presenters: Marvin Morente Marianita Rachelle Pica 5/4/12 BOA IV-1 .

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