Obligations Powerpoint

Course Outline
PART I INTRODUCTION TO LAW AND BUSINESS

LAW
Definition of Law and Business Law
Sources of Business Law
Characteristics of Business Law
1)
2)
3)
PART II OBLIGATIONS
1) In General
a)
b)
Definition
Sources of Obligations
Law; Contracts; Quasi-Contracts;
Delicts or Crimes; Quasi-Delicts
c)
Essential requisites of obligation

Parties; object; Juridical tie or vinculum juris
PART II OBLIGATIONS
2) Nature and Effect of Obligation
a)
b)
According to the Object or Prestation

Obligations to give; Obligations to do;
Obligations not to do
Liability of Damages
Fraud Dolo incidente; Dolo causante
Neglignce
Delay Mora solvendi, accipiendi, compensatio morae
Contravention of tenor of obligation
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
PART IV DEFECTIVE CONTRACTS
Rescissible Contracts
Voidable Contracts
Unenforceable Contracts
Void or inexistent contracts
PART 1
INTRODUCTION TO LAW AND BUSINESS LAW
1.
2.
3.
Definition of Law and Business Law

Sources of Business Law
Characteristics of Business Law
Introduction to Law
Preliminaries
In the preliminaries, the sight of a human being in his
everyday undertaking has to follow some.
The instructions that a person will learn, result to that
consciousness of following the law. As he learns the law, he
can define it, with its characteristics.
In Philosophy, the human mind consists principally of
two faculties:
1. the Intellect the object of which is the TRUTH.
2. the Will the object of which is the GOOD.
The infinite truth and infinite good is infinite beauty of God.
The person was created by God and destined for God, the people
can attain the final destiny by following the law.
The laws that contained the instructions of God given to us are
the COMMANDMENTS.
Law
The most basic, simple and concise definition of law
was defined by Sanchez Roman, a Spanish Civilist and

he defined Law as:
A RULE OF CONDUCT , JUST AND OBLIGATORY
PROMULGATED BY LEGITIMATE AUTHORITY FOR
THE COMMON OBSERVANCE AND BENEFIT.
Edgardo Paras defined Law as an ordinance of
reason promulgated for the common good by Him

who is in charge.
Characteristics of Law
1.
A RULE OF CONDUCT
Meaning any action, things, dictate of reason if regulated
or gathered together could become a conglomeration of

rules, regulations that can create an orderly, peaceful,
harmonious relations among the people concerned so
that in the end justice will prevail.
2.
PROMULGATED BY LEGITIMATE AUTHORITY
That is, made known to those who are expected to follow
it. In a Republican State like the Philippines, we have

three branches of government legislative body (like
Congress, Sanggunian) is the law-making body; the
executive body is the implementing body and the
judiciary as the enforcing body.
3.
JUST and OBLIGATORY
Treatment of Law should be equal, regardless of sex,
creed, age and status in life and to follow the law there
should be equivalent punishment or penalties to enforce
them. 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. Obligatory means
any duty binding parties to perform their agreement.
(Blacks dict. P. 1074).
4.
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.
Sources of Law
1.
LEGISLATIVE
It consists of legal rights by a competent authority. In
the Philippines, being a democratic form of government,

the Legislative is the law-making body. For national
government, Congress comprising the House of
Representatives and the Senate. For provinces, the
Sangguniang Panlalawigan for every province. For a
town, the Sangguniang Pambayan or the local Municipal
council. For a Barangay level, the Sangguniang
Pambarangay.
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,
otherwise it becomes unconstitutional.
Sources of Law
3.
ADMINISTRATIVE OR EXECUTIVE ORDERS,

REGULATIONS AND RULINGS
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,
otherwise it becomes unconstitutional.
Sources of Law
4.
JUDICIAL DECISIONS OR JURISPRUDENCE
Judicial decisions or interpreting the laws or the Constitution
shall form a part of the legal system of the Philippines. (Art.

8, New Civil Code) Judicial decisions, though, are part of the
legal system in the Philippines still are not laws for if this
were so, the Courts exists for stating what the law is, but not
for giving it. Judicial decisions, though not law, are evidence
of what the law means. This is why they are part of the legal
system in the Philippines. So, f an interpretation is placed by
the Supreme Court upon a law, it constitute in a way, part of
the law since the Courts interpretation merely establishes the
legislative intent.
Sources of Law
4.
JUDICIAL DECISIONS OR JURISPRUDENCE
Thus, our country adhere to the Doctrine of Stare
Decisis (Let it Stand), the doctrine which in reality is

adherance to precedents stated that once a case has
been decided, then another case involving the same
point at issue, should be decided in the same manner.
Therefore, if the Supreme Court being a Court of last
resort, has decided that a certain law passed by Congress
is constitutional, the law becomes binding and has its
full force and effect.
Sources of Law
5.
CUSTOM
It consists of those habits and practices which through
long and uninterrupted usage have become

acknowledged and approved by society as binding rule
of conduct. Thus, it has been a custom for a person to
enter and exit a door. Once a person uses the window
for his entrance and exit, it runs counter to the custom
of use of the door. Even our Lord said as a good
shepherd, if a person does not pass the gate, he is a thief
for a marauder.
Sources of Law
6.
OTHER SOURCES
To add, the principle of justice and equity, decisions of
foreign tribunals, opinions of text writers and even

religion may also be sources of law.
Kinds of Law
1.
DIVINE LAW
It is formally promulgated by God, revealed or divulged to

mankind by means of direct revelation like the Ten
Commandments.
Kinds of Law
2.
NATURAL LAW
Promulgated impliedly in our conscience and body. It is the

divine interpretation in man in the sense of justice, fairness,
right and equity by internal dictate of reason on our mind.
Like for instance, it is better to do good than to do evil for
being a God-fearing person.
Kinds of Law
3.
PHYSICAL LAW
4.
Refers to the act of rules governing the action and movement

of things like the law on gravity by Newton.
HUMAN LAW
Those promulgated by man to regulate human relations.

THIS CAN BE CLASSIFIED INTO:
Classification of Human Law

A.
GENERAL or PUBLIC LAW
Body of rules which regulates the rights and duties arising from
the relationship between the State and its inhabitants.
It includes the following:
1. International Law consists of those rules and principles

which govern the relations and dealing of nations with each
other.
2. Constitutional Law It simply governs the relations between

the State and its citizens.

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.
4. 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. Criminal Law guaranties the coercive power of the law so that

it will be obeyed. Governs the methods of trial and punishment of
crimes.

B.
INDIVIDUAL or PRIVATE LAW
Those law which govern the private relation person.

It includes the following:
1. 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, authority and obedience
among the members of a society for the protection of private
interests.

2. Commercial Law defined as a whole body of substantial

jurisprudence applicable to the rights, intercourse and relation
of persons engaged in commerce, trade or mercantile pursuits.
(Blacks law dict. 338)

3. Procedural Law defined as the branch of law which

prescribes the method of enforcing rights or obtaining redress
for their invasion, Procedural law otherwise known as
Remedial Law, as distinguished from Substantive law which
creates, defines and regulate rights.
(Ballantine Law Dict. P. 36)
Sources of Philippine Civil Code

1.
The New Civil Code of the Philippines the

collection of laws which regulates the private relations
of the members of civil society, determining the
defective rights and obligations with reference to
persons, things and civil acts.
A civil code is a compilation of existing Civil Laws,

scientifically arranged into books, titles, chapters and
subheads and promulgated by legitimate authority. (Black
Law Dict. 334).

2.
Special laws or statutes, Presidential decrees and

other social legislation.
3.
Jurisprudence there is need to mention that,

jurisprudence in our system of government, cannot be
considered as an independent source of law; but the
Courts interpretation of a statute that constitute part
of the law as of the date it was originally passed since
the Courts construction merely establishes
contemporaneous legislative intent, that the
interpreted law could take into effect.

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 Dec. 15, 1947 and Congress approved the
draft on June, 1949.
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-vis recent developments in the social-cultural scene. (Pineda,
Family Code).
Books of the Civil Code

Book II Property, Ownership and its modifications.
Book III Different Modes of Acquiring Ownership
(Succession)
Book IV Obligations and Contracts
Book V Special contracts
The Civil Code begins with preliminary titles and ends up with the
repealing clause. This module is taken from the Civil Code of the
Philippines from Articles 1156 to 1422 inclusive.
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
character. Generally, all laws referring to merchants and to
commercial transactions are commercial in nature.
(Agbayani, Vol. 1 p 2)
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.
BOOK ONE
BOOK TWO
BOOK THREE
BOOK FOUR
Merchants and Commerce in

General
Special Commercial Contracts
Maritime Commerce
Suspension of payments,
Bankruptcy and Prescription of
Actions.
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 repealed

principally the provisions of Promissory; Notes and
Bill of Exchange in Book Two

3.
The Insolvency law, which repealed the provisions

on Suspension of payments and Bankruptcy in Book
four;
4.
Insurance Law, which repealed the provisions on

Fire and Marine Insurance on books two and three;
5.
The Securities Act, which repealed the provisions

on Commercial Houses in Book Two;

6.
The New Civil Code which repealed the provisions on

Partnership, Agency, Sales, Loan, Deposit and Guaranty in Book
two.
7.
Other legislation, in addition to the foregoing special laws,

there wee other laws and now form part of the Commercial laws of
the Philippines: The Warehouse Receipts law; the General Bonded
Warehouse Act; the Chattel Mortgage law; the Usury law; the
General Banking Act; the Central Bank Act; The Rural Act; The
Public Service Act; Carriage of Gods by Sea Act; the Salvage law;
the Copyright law; the Patent law; the Trade-mark law; the Law on
the Use of Duly Marked Bottles, Boxes, Casks, Kegs, Barrels, and
other Similar Containers; the Business Names Law; and the Law
on Monopolies and Combinations.

8.
Provisions of the Code of Commerce still in force.
a. Those contained in Book one governing merchants and

commerce in general, commercial registries, books and
bookkeeping of commerce and general provisions relating to
commercial contracts, except such portions thereof as have
been repealed or modified by the New Civil Code and other
legislation.
b. Those contained in Book Two governing joint accounts,

transfers, transfers of non-negotiable credits, commercial
contracts on transportation overland; and letters of credits but
not those relating to partnership, agency, sales, loans, deposit

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

9.
Some provision of the code of Commerce which

are pertinent in our study in business in general:
a. MERCHANTS Merchants may be natural or juridical
person:
In the case of natural person, he is a merchant:

a. If he has legal capacity to engage in commerce; and
b. He habitually engage thereto
A natural person has legal capacity to engage in commerce;

1. If he has reached the age of twenty one years;
2. He is not subject to parental authority; and
3. He has free disposition of his property.
In the case of juridical person, it is a merchant:
a. It is a commercial and industrial company;
b. It is organized in accordance with existing legislation and
c. Its engaging in commerce is habitual.

b. Habituality in engaging in commerce
Habituality in engaging in commerce is attained when
there exists series of acts of commerce or commercial dealings.
There must be continuity of repetition of commercial acts.
However, a single act may be deemed habituality in engaging
in commerce in the way of the following acts:
1. Throwing open to the public a business entity
establishment;
or

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

c. 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.
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;

2.
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.

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 Prosecutors office in

active service, except Municipal Mayors; municipal judge;
municipal prosecuting attorneys and those who temporarily
discharge judicial or prosecuting duties;
2.
Administrative, economic or military heads of districts,

provinces or post;

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.

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.

f. Books of Merchants
1. Merchants must keep the following books:

a.
b.
c.
d.
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.

f. Books of Merchants
2. Corporation are bound to keep:

a.
b.
c.
Record of all business transactions;

Minutes of all meetings of directors;
Minutes of all meetings of stockholders; and Stock
and transfer books.
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.
Registration is compulsory:
4.
In case of ship agent;
5.
In case of vehicles with the Land Transportation

Office.
6.
In all other cases required by law.
Commercial Registries in the

Philippines
1.
Bureau of Domestic Trade for registration of business

names and merchants to avoid duplication of trade
names.
2. Securities and Exchange Commission for registration of

partnership and Corporation.
3. Local municipalities, cities or province for local permits
and licenses.
4. Office of Register of deeds for registration all
transaction affecting lands, as well as shattel mortgage.

Philippines
5. The MARINA (Marine Industry Authority) for
registration of vessels and other transaction affecting
vessels.
6. Intellectual property Office for registration of patents

and design as well as trade names; trademarks and
service marks;
7. Land Transportation Office for registration of patents
and designs as well as trade names; trademarks and
service marks;

Philippines
8. Office of Air Transportation Administration for
registration of aircrafts.
9. Bureau of Public Library for registration of
copyrights;
10. Board of investment for registration of pioneer and
registered enterprises and with corporations having
foreign entity participation.
Kinds of Procedural Law

1.
Public Remedial Law affords a remedy in favor

of the State against the individual, like criminal
procedure or in favor of the individual against the
State, like Habeas Corpus.
2.
Private Remedial Law affords a remedy in favor

of an individual against another individual, like
the civil procedure.
Philippine Remedial Law

Principally contained in the Rules of Court, which
is a combination of rules promulgated by the Supreme
Court for the easy, orderly, adequate and effective
compliance with the law. The Rules of Court have the
force and effect of law. (Alvero V. dela Rosa, 76 Phil
428).
COURTS DEFINED
It is the entity, body or tribunal vested with a portion of
the judicial power. (Lontok V. 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, 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.
(Const. Art. VIII, Sec. 1, par.2)
Different Courts of Justice

1.
2.
3.
4.
5.
Supreme Court
Sandigan-bayan
Court of Appeals
Regional Trial Court; and
Metropolitan / Municipal Trial Courts
Lesson 1: General Provisions on

Obligation
The definition of obligations establishes the unilateral
act of the debtor either to give, to do or not to do as a

patrimonial obligation. It means that the debtor has
the obligation while the creditor has its rights.
On the sources of obligation, the main sources are
really Law and Contracts. The other sources are also

established by law.
ART. 1156. An obligation is a juridical necessity to
give, to do or not to do.

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, and,
in case of breach, may obtain satisfaction from the
assets of the latter. (Approved by Mr. Justice J. B. L.
Reyes)
The obligations referred to in our manual is a

patrimonial obligations that is, those obligations with
pecuniary value or assessable in terms of money.
Characteristics of patrimonial obligations:
1.
1.
They represent an exclusively private interest.

They create ties that are by nature transitory.
They exist a power to make effective in case of non-fulfillment,
the economic equivalent obtained at the patrimony of a debtor.
Meaning of Juridical Necessity it means the rights and

duties arising from obligation are legally demandable
and the courts of justice may be called upon through
proper action to order the performance.
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. 1. Rules of court ).
Example
Gaya bought refrigerator from Tito but Gaya did not pay
the refrigerator. If after demand, Gaya still did not pay,
Tito can sue Gaya in Court either to demand payment or
for recovery of the refrigerator.
3. Essential requisites of an obligation

An active subject, who has the power to demand the prestation,
known as the creditor or oblige;
b) A passive subject, who is bound to perform the prestation,
known as debtor or obligor.
c) An object or the prestation which may consist in the act of
giving, doing or not doing something.
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. It is the legal tie which constitutes
the source of obligationthe coercive force which makes the
obligation demandable. It is the legal tie which constitutes the
devise of obligation the coercive force which makes the
obligation demandable.
a)
Juridical Tie
Debtor
Or Obligor
To give, to do
or not to do
Creditor
or Obligee
Illustration:
Gaya enters into a contract of sale with Tito who paid

the purchase of a GE refrigerator. Gaya did not deliver
the refrigerator. Gaya is the passive subject or debtor
and Tito is the active subject or creditor. The object or
prestation is the GE refrigerator and the obligation to
deliver is the legal tie or the vinculum juris which
binds Gaya and Tito.
This is also known as a unilateral obligation, that is, the
obligation of the debtor to fulfill or comply his commitment,

in this case, the delivery of the refrigerator.
On the other hand, if Gaya, delivered the refrigerator
and Tito did not pay, then Tito becomes the debtor who is
bound to pay while Gaya is the creditor who has the right to
demand the prestation.
4. Distinctions between Obligations and Contracts:
Contract is the only one of the sources of obligation, while
obligations have other sources like law, quasi-contracts, delicts or

quasi-delicts;
Contract is a bilateral obligation while obligation is a unilateral
obligation;
All contracts are obligations while not all obligations are contracts.
5. Civil obligations as distinguished from Natural

obligations
Civil obligations derive their binding force from positive
law; Natural Obligation derives their binding effect from

equity and natural justice.
Civil can enforced by court action of the coercive power of
public authority;
Natural the fulfillment cannot be compelled by

court action but depends on the good conscience
of debtor.
ART. 1157. Obligations arise from:

Law;
Contracts;
Quasi-contracts;
Acts or omissions punished by law; and
Quasi-delicts.
(1089a)
ART. 1158.
Obligations derived from law are not presumed.

Only those expressly determined in this Code or in special laws
are demandable, and shall be regulated by the precepts of the
law which establishes them; and as to what has not been
foreseen, by the provisions of this Book. (1090)
ART. 1159.
Obligations arising from contracts have the force of

law between the contracting parties and should be complied
with in good faith. (1091a)
ART. 1160.
Obligations derived from quasi-contracts shall

be subject to the provisions of Chapter 1, Title XVII, of this
Book.
ART. 1161.
Civil obligations arising from criminal offenses

shall be governed by the penal laws, subject to the
provisions of article 2177, and of the pertinent provisions of
Chapter 2, Preliminary Title, on Human Relations, and of
Title XVIII of this Book, regulating damages. (1092a)
ART. 1162.
Obligations derived from quasi-delicts shall be

governed by the provisions of Chapter 2, Title XVIII of this
Book, and by special law. (1093a)
Source of Obligations
1. LAW as a source of obligations
The provisions of Art. 1158 refers to the legal

obligations or obligations imposed by specific
provisions of law, which means that obligations
arising form law are not presumed and that to be
demandable must be clearly provided for, expressly or
impliedly in the law.
Examples:
It is the duty of the Spouses to support each other. (Art.
291, New Civil Code)

And under the National Internal Revenue Code, it is the
duty of every person having an income to pay taxes.
Source of Obligations
2.
CONTRACT as a source of obligations
Contract as defined in Art. 1305, NCC is the meeting of minds between two
person whereby one binds himself with respect to the other,
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, thus, the agreement should be complied with in good faith. (Art.
1159).
For examples:
A contract of lease was executed between Gaya as the lessee and Tito as the lessor
for the rent of an apartment.
Although contracts have the force of law, it does not mean that contract are over
and above the law. Contracts are with the limitations imposed by law in Art. 1306,
NCC, it states that the contracting parties may establish such stipulations, clauses
terms and conditions as, they may deem convenient, provided that are not
contrary to law, morals, good custom, public order or public policy.
3.
QUASI-CONTRACTS as a source of obligations

The quasi literally means as if.
Quasi-contract is the juridical relation resulting from a lawful,
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. (Art. 2142, NCC)
Contracts and quasi-contracts distinguished:
in a contract, consent is essential requirement for its validity while in
quasi-contract, there is no consent as the same is implied by law;
contract is a civil obligation while quasi-contract is a natural
obligation.
2 Kinds of Quasi-contracts
1.
Solutio Indebiti (Payment by mistake)

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, 000.00. By mistake, Arvin paid P2, 000.00. Ian has the
obligation to return the P1, 000.00 excess because there was payment by mistake.
2.
Negotiorum gestio (management of anothers property)

It is the voluntary management or administration by a person of the abandoned
business or property of another without any authority or power from the latter. (Art.
2144, NCC)
ExampleVictor, a wealthy landowner suddenly left for abroad leaving his livestock farm
unattended. Ramon, a neighbor of Victor managed the farm thereby incurring expenses.
When Victor returns, he has the obligation to reimburse Ramon for the expenses
incurred by him and to pay him for his services. It is bases on the principle that no one
shall enrich himself at the expense of another.
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.
While an act or omission is felonious because it is punished by law, the criminal act
gives rise to civil liability as it caused damage to another.
Civil liability arising from delicts:
Restitution which is the restoration of or returning the object of the crime to the injured
party.
Reparation which is the payment by the offender of the value of the object of the crime,
when such object cannot be returned to the injured party.
Indemnification the consequential damages which includes the payment of other
damages that may have been caused to the injures party.
Illustration:
Mario was convicted and sentenced to imprisonment by the Court for the crime of
theft, the gold wrist watch, of Rito. In addition to whatever penalty that the Court
may impose, Mario may also be ordered to return (restitution) the gold wrist watch
to Rito. If restitution is no longer possible, for Mario to pay the value (reparation)
of the gold wrist watch. In addition to either restitution or reparation, Mario shall
also pay for damages (indemnification) suffered by Rito.
5.
QUASI-DELICTS as a source of obligations
Concepts of Quasi-Delict
Quasi-delict is one where whoever by act or omission causes

damage to another, there being fault of negligence, is
obliged to pay for the damage done. Such fault of
negligence, if there is no pre-existing contractual relation
between the parties. (Art. 2176)
ExampleIf Pedro drives his car negligently and because of his
negligence hits Jose, who is walking on the sidewalk of the
street, inflicting upon him physical injuries. Then Pedro
becomes liable for damages based on quasi-delict.
6. 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.
While an act or omission is felonious because it is punished by

law, the criminal act gives rise to civil liability as it caused damage
to another.
Civil liability arising from delicts:
Restitution which is the restoration of or returning the

object of the crime to the injured party.
Reparation which is the payment by the offender of the
value of the object of the crime, when such object cannot
be returned to the injured party.
Requisites of a quasi-delicts There must be fault of negligence attributable to the
offended;
There must be damage or injury caused to another;
There is no pre-existing contract.
Negligence Defined
is the failure to observe for the protection of the

interests of another person, that degree of care, precaution
and vigilance which the circumstances justly demand,
whereby such other person suffers injury. (Judge Cooley)
Test of Negligence
For the existence of negligence, the following are
necessary:
a duty on a party of the defendant to protect the plaintiff from
the injury of which the letter complains;

a failure to perform that duty; and
an injury to the plaintiff through such failure.
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.
An illustration showing this difference is founding Gutierrez
vs. Gutierrez, 56 Phil 177-
While trying to pass each other on a narrow bridge, a passenger truck
and private automobile collided, and the plaintiff, a passenger in the

truck, was injured.
The owner of the passenger truck was made a defendant, although a
driver was driving the truck and the owner of the car was also made a
defendant, although he was not in the car but which was being driven
by his 18 year old son and in which members of his family were then
riding. The court found both drivers negligent, basing basing the
liability of the owner of the truck to the plaintiff on the contract of
carriage; while the liability of the owner of the car was based on Quasidelict of the Civil Code. As against the owner of the truck, there was
Culpa contractual, while as against the owner of the car there was
culpa Aquiliana.
LESSON 2: NATURE AND EFFECT

OF OBLIGATIONS
ART. 1163.
Every person obliged to give something is also

obliged to take care of it with the proper diligence of a good
father of a family, unless the law or the stipulation of the
parties requires another standard of care. (1904a)
ART. 1664. The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However,

he shall acquire no real right over it until the same has been
delivered to him. (1905)
ART. 1165.
When what is to be delivered is a determinate

thing, the creditor, in addition to the right granted him by
article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that
the obligation be complied with at the expense of the

debtor.
If the obligor delays, or has promised to deliver the
same thing to two or more persons who do not have the

same interest, he shall be responsible for any fortuitous
event until he has effected the deliver. (1906)
ART. 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and

accessories, even though they may not have been
mentioned. (1097a)
Obligations of the Debtor To Give a

determinate thing1.
To preserve or take care of the thing with the proper

diligence of a good father of a family. 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, of the time and of the place,
like a person who is obliged to deliver a determinate
horse to another should, pending its delivery, preserve it
by taking care of the same as if the horse is his own.

determinate thing To deliver the object or thing when the obligation to
deliver arises, including:

1.
Fruits of the thing if any. Kinds of fruits: Natural;

industrial or civil.
Natural
- spontaneous product of the soil; the young and

other products of animal. E.g. tress, plants on lands without
he intervention of man.
Industrial- produced by lands of any king through cultivation
and labor. E.g. sugar cane, vegetables, rice.
Civil
- derived by virtue of juridical relations. E.g. rents of
a building; prices of leases of lands and other similar income.

determinate thing2.
Accessions and accessories.

Accession is the right pertaining to the owner of a thing
over its products and whatever is attached thereto either

naturally or artificially.
Example Accretion which refers to the gradual and addition of
sediment to the shore by action of water.
Accessories are those things which are joined attached to
the principal object as ornament or to render it perfect.
Example Radio attached to a car; or key to a car.

determinate thing3.
To be liable for damages in case of breach of obligation (Art. 1170,

NCC)
When creditor acquire a right to the thing to be delivered and its fruits-
The creditor has a right to the fruits of the thing from the time
the obligation to deliver it arises. However, he shall acquire no real
right over it until the same have been delivered to him. (Art. 1164, NCC)
Example a binds himself to sell his horse to B for fro P10, 000. No date
nor condition is stipulated for delivery of the horse. Later, the horse
gave birth to a colt. A has right to the colt, if B has not paid the horse.
Before delivery, B does not acquire ownership over it.
Definition of terms:
Determinate thing a thing is determinate when it is
particularly designated or physically segregated from
all others from the same class. (Art. 1460, NCC)
2. Indeterminate or generic thing A thing is generic
when it refers to a class or thing or genus and cannot
be designated with particularity. (Art. 1460, NCC)
3. Fortuitous Events those events which could not be
foreseen or which though foreseen were inevitable.
(Art. 1174, NCC)
1.
Art. 1167. If a person obliged to do something fails to do
it, the same shall be executed at his cost.

This same rule shall be observed if he does it in
contravention of the tenor of the obligation.

Furthermore, it may be decreed that what has been
poorly done be undone. ( 1098 )
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;
When the debtor performs the obligation but contrary
to the tenor; or
When the obligor poorly performs the obligation.
ART. 1168. When the obligation consists in not doing, and the
obligor does has been forbidden him, it shall also be undone

at his expense, (1099a)
Obligation of the Debtor NOT To Do
This is negative personal obligation which is consisting of an

obligation, of not doing something. If the debtor does what has
been forbidden him to do, the obligee can ask the debtor to have it
undone. If it is impossible to undo what was done, the remedy of
the injured party is for an action of damages.
ExampleA bought a land from B. It was stipulated that A would not construct
a fence in a certain portion of his land adjoining that land sold by B.
Should A construct a fence in violation of the agreement, B. can
bring an action to have the fence remove at the expense of A.
ART. 1169. Those oblige to deliver or to do something incur in
delay from the time the obligee judicially or extra - judicially

demands from theme the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
( 1 ) When the obligation or the law expressly declares; or
( 2 ) When from the nature and the circumstances of the
obligation it appears that the destination of the time when the
thing is to be delivered or the service is to rendered was controlling
motive for the establishment of
the contract; or
( 3 ) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other
does not comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his obligation,
delay by the other begins. ( 1100a )
Delay ( Mora )
means a legal delay or default and it consists of failure
discharge a duty resulting to ones own disadvantaged.
The debtor incurred delay if:
The debtor fails to perform his obligation when it falls due; and
A demand has been made by the creditor judicially or extra
judicially.
Example
Gaya obliged herself to deliver a determinate horse to Tito on
June 20. this year. Gaya failed to delivered on the agreed date, Is
Gaya already on delay on June 20, only when Tito makes a
judicial or extra-judicial demand and from such date of
demand when Gaya is on default or delay.
However, there are instances when the demand by the
Creditor is not necessary to place the debtor on delay:

1.
When the obligation expressly so provides
The mere fixing of the period is not sufficient to

constitute a delay. An agreement to the effect that
fulfillment or performance is not made when the
obligation becomes due, default or delay by the debtor
will automatically arise.
2. When the law so provides
The express provision of law that a debtor is in default.

For
instance, taxes must be paid on the date
prescribed by law,
and demand is not necessary in
order that the taxpayer is
liable for penalties.
3.
When time is of the essence

Because time is the essential factor in the fulfillment of
the
obligation. Example, Gaya binds herself to sew
the wedding
gown of Maya to be used by the latter on
her wedding date.
Gaya did not deliver the wedding
gown on the date agreed
upon. Even without
demand, Gaya will be in delay because
time of the
essence.
4. When demand would be useless
When the debtor cannot comply his obligation as when it is

beyond his power to perform. Like when the object of the
obligation is lost or destroyed through the fault of the debtor,
demand is not necessary.
In a reciprocal obligation, from the moment one of

the parties fulfills his obligation, delay to the other
begins
5.
For instance, in a contract of sale, if the seller delivers the object to

the buyer and the buyer does not pay, then delay by the buyer
begins and vice versa, if the buyer pays and the seller did not
deliver the object, then the seller is on delay.
Kinds of delay
Mora solvendi delay on the part of the debtor.
Mora accipiendi delay on the part of the creditor, like
when the creditor unjustifiably refused to accept

payment at the time it was due, is in delay.
Compensatio morae delay both parties in a reciprocal
obligation.
ART. 1170. Those who in the performance of

their obligations are guilty of fraud, negligence, or
delay, and those whoin any manner contravene the
tenor thereof, are liable for damages. (1101)
ART. 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void. (1120a)
ART. 1172. Responsibility arising from
negligence in the performance of every king of
obligation is also demandable, but such liability
may be regulated by the courts, according to the
circumstances. (1130)
ART. 1173. 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,
of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply.
If the law or contract does not state the diligence
of which is to be observed in the performance, that
which is expected of a good father of a family shall be
required. (1104a)
Sources of liability for damages:

1.
Fraud (dolo) is the intentional deception made by one

person resulting in the injury of another.
The fraud referred to is incidental fraud, that is, fraud
incident to the performance of a pre-existing obligation.
2. 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, of the time and of the
place. (Art. 1173, NCC)

3. 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.

3. 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.
Other sources of liability for

damages
Loss of the thing with the fault of debtor.
Deterioration with the fault of debtor. (Art. 1189)
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 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
which money or something of money value may be
acquired. (Black Law Dict. P. 1131)
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 plaintiffs business standing or commercial
credit.
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)
Distinguish Fraud (Dolo) from

Negligence (culpa)
1.
Dolo there is deliberate intent to cause damage or injury.

Culpa ther is no deliberate intent to cause damage.
2.
Dolo waiver of liability of future fraud is void.

Culpa waiver may in some cases be allowed.
3.
Dolo fraud must be clearly proved.

Culpa presumed from breach of contractual obligation.
4. Dolo liability cannot mitigated by the courts.
Culpa may be reduced according to circumstances.
ART. 1174. Except in cases expressly specified

by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall
be responsible for those events which could not
be foreseen, or which, though foreseen, were
inevitable (1105a)
Fortuitous even is an event which cannot be foreseen which
though foreseen is inevitable.

Fortuitous event proper are acts of God such as volcanic
eruption, earthquake, lightning, etc. is now similar with force
majuere or acts of man such as conflagration, war, robbery, etc.
1.
Requisite necessary to constitute fortuitous event

The failure of the debtor to comply with the obligation must be
independent from the human will;

The occurrence makes it impossible for the debtor to fulfill the
obligation on a normal manner, and the obligor did not take part
as to aggravate the injury of the creditor. (Vasquez v.C.A. G.R.
42926)
2. 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. 30, 1998. Before the arrival of the period,

the car was struck by lightning and was totally destroyed.
Gaya cannot be held responsible for the destruction of the
car, hence her obligation to deliver is extinguished.
Exceptions (when the person is responsible despite the
fortuitous even).
When the law expressly so provides, such as:
a.
The debtor is guilty of fraud, negligence or in contravention of the tenor
of the obligation. (Art, 1170, NCC)

The debtor has proved to deliver the same thing to two or more persons
who do not have the same interest. ( Art. 1165,NCC )
The thing to delivered is generic.
The debtor is guilty of default or delay. ( Art. 1169,NCC )
The debtor is guilty of concurrent negligence.
b. When declared by stipulation;

c.
When the nature of obligation requires the assumption of

risk. An example of this is a contract of insurance.
ART. 1175. Usurious transaction shall be governed by special
laws.
Note: C.B. Circular No. 905 suspends the ceilings in the usury law.
Hence, parties can agree as to the rate of interest.
Kinds of interest
1.
Conventional
2.
3.
Legal Interest
Lawful Interest
4.
Usurious Interest
*The rate which is agreed upon by the

parties.
*The rate which is prescribed by law.
*The rate which is agreed upon by the
parties but which rate is within the
rate authorized by law.
*The rate which is in excess of the
maximum rate of interest allowed by
law.
ART. 1176. The receipt of the principal by the

creditor without reservation with respect to the
interest, shall give rise to the presumption that said
interest has been paid.
The receipt of a later installment of a debt
without reservation as to prior installments, shall
likewise raise the presumption that such
installments have been paid. (1110a)
Presumption
means the inference as to the
existence of a certain fact which if not contradicted is
considered as true.
The presumption in the above article is a disputable

presumption, whereby one which can be contradicted by
presenting proof to the contrary while a conclusive
presumption does not admit any evidence or proof,
hence, it is considered as a fact.
Presumption under this article:
1. Receipt of the principal, without reservation as to the
interest, shall give rise to the presumption that the said
interest has been paid.
2. When the creditor issues a receipt of a later installment
of a debt without reservation as to prior installment is
presumed to have been paid.
ART. 1177.
The creditors, after having pursued the property in

possession of the debtor to satisfy their claims, may exercise all the
rights and bring all the actions of the latter for the same purpose,
save those which are inherent in his person; 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, creditors have the
following successive rights:
1.
to levy by attachment and execution upon all the property of the debtor,
except such as are exempt by law from execution;
2.
to exercise all the rights and actions of the debtor, except, such as are
inherently personal to him; and
3.
to ask for the rescission of the contracts made by the debtor in fraud of
their rights.
ART. 1178. Subject to the laws, all rights acquired in
virtue of an obligation are transmissible, if there

has been no stipulation to the contrary. (1112)
As a rule, all rights acquired in virtue of an obligation are
transmissible, except in the following cases:

1. When the law so provides.
2. When the parties stipulate otherwise by agreement of
parties that the rights acquired by them will not be
transmitted to any other person.
3. When the obligation is purely personal in nature.
LESSON 3: Kinds of Obligations

Classification of Obligations:
The Civil Code classifies obligations primarily into: (PU CO
PE ALFA JOS DIP)
1. Pure;
2. Conditional;
3. With a period;
4. Alternative;
5. Facultative;
6. Joint;
7. Solidary or several or in solidum;
8. Divisible;
9. Indivisible;
10. With a penal clause.
Other provisions of the Civil Code, however, impliedly
admit other classes of obligations, to wit:

a.)
b.)
c.)
d.)
Unilateral and bilateral;

determinate and generic;
legal, conventional and penal;
real and personal
Section I. Pure and Conditional Obligations
ART. 1179. Every obligation whose

performance does not depend upon a future or
uncertain event, or upon a past event unknown to
the parties, is demandable at once.
Every obligation which contains a resolutory
condition shall also be demandable, without
prejudice to the effects of the happening of the
event. (1113)
1.
Pure Obligation when the obligation contain no term

or condition whatever upon which depends the
fulfillment of the obligation contracted by the debtor.
It is immediately demandable and there is nothing to
exempt the debtor from compliance therewith.
Example Gaya obliged herself to pay her loan of P1,000 to Tito

on demand.
Instances when obligations immediately demandable:
It is a pure obligation;
2. It is subject to a resolutory condition;
3. It is subject to resolutory period.
1.
2.
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.
ART. 1180. When the debtor binds himself to pay
when his means permits him to do so, the obligation
shall be deemed to be one with the period, subject to the
provisions of article 1197.(n)
Example
A promissory note states that This is to acknowledge receipt
of sum of One thousand Six Hundred pesos (P1, 600.00) and I am to
pay my debt to Arvin as soon as possible or as soon as I have the
money. It was held that the conditional obligation is void, because
the collection would be impossible, the remedy of the creditor is to
ask the Court to fix the period of payment, thus, it becomes an
obligation with a period.
ART. 1181. In conditional obligations, the acquisition of rights as

well as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the
condition. (1114)
ART. 1182. When the fulfillment of the condition depends upon

the sole will of the debtor, the conditional obligation shall be void. If
it depends upon chance or upon the will of a third person, the
obligation shall take effect in conformity with the provisions of this
code. (1115)
ART. 1183. Impossible conditions, those contrary to good

customs or public policy and those prohibited by law shall annul the
obligation which depends upon them. If the obligation is divisible,
that part thereof which is not affected by the impossible or unlawful
condition shall be valid,
The condition not to do an impossible thing shall be considered

as not having been agreed upon. (1116a)
ART. 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. (1117)
ART. 1185. 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, or if it has
become evident that the event cannot occur.
If not time has been fixed, the condition shall be deemed

fulfilled at such time as may have probably been
contemplated, bearing in mind the nature of the obligation.
(1118)
ART. 1186.
The condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment. (1119)
Kinds or classifications of
condition:
1.
Suspensive and Resolutory

Suspensive the happening of the condition gives rise to an obligation.
Example:
Maya binds herself to deliver a determinate car to Tito if he marries Gaya. The
obligation is only demandable upon the happening of the condition that is, if
Tito marries Gaya. The obligation is suspended and not yet demandable.
Resolutory the happening of the condition extinguishes the obligation
already existing.
Example:
Arvin binds himself to lend his only car to Ian until the latter passes the CPA
Board. The obligation to lend is immediately demandable. Ians right over the
car is extinguished upon his passing the CPA board. Ian is now obliged to
return the car.
condition:
2.
Potestative, Casual and Mixed

Potestative is one the fulfillment of which depends upon the sole will of the debtor.
This kind of condition is void.
Example:
Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United
States.
Casual is one the fulfillment of which depends upon chance.
Example:
Mario agrees to give Maria a determinate car if Marias only racing horse will win the
sweepstake race.
Mixed is one which depends partly upon the will of third person and partly upon chance
Example:
Vincent promise to give Victor a new Toyota Car if Victor will be able to play with and
beat Karpov in a game of chess. This is mixed condition, that is Karpov willingness to
play chess with Victor and the latters winning over Karpov.
condition:
3.
Possible and Impossible

Impossible condition is divided into 2:
a)
Physical Impossibility the condition imposed is not capable of being

performed physically.
Example:
Grace will give Christine a gold necklace if she swims across the
Pacific Ocean.
Illegal Impossibility when the condition imposed is contrary to law, good
custom or public policy.
b)
Example:
1.
2.
3.
Contrary to law Pedro agrees to give Ernesto P100,000 if Ernesto will

kill Mario.
Contrary to good custom Santos binds himself to give Maria a gold
wrist watch if she will cohabit with Mr. Reyes without benefit of marriage.
Contrary to public policy Maria agrees to employ Grace in her
company if Grace will not join a labor union.
condition:
4.
Positive and Negative:

A Negative condition is one where some event will not happen at a
determinate time, either
a.)
the time indicated has elapsed; or
b.)
it has become evident that the event cannot occur (Art.
1185, NCC)
Example:
Victor will give Jason a car if he will not marry Helen until Dec.
19, 2001, if Jason has not married Helen until Dec. 19, 2001 or if Helen
has died within the prescribed time without having married to Jason,
the obligation becomes demandable. If Jason married Helen within the
prescribed time, the obligation of Victor is extinguished.
condition:
5.
Divisible and Indivisible
Divisible that part of obligation which is not affected by
impossible or unlawful condition shall be valid (Art. 1183, NCC)

ExampleX promise to pay Y the sum of P1, 000.00 if Y furnishes X with
information as to the whereabouts of Z and another sum of P2,
000.00 if Y kills Z. in the obligation, the first part (to pay P1,
000.00) is valid while the second part
(P2, 000.00) is void
because only the latter is affected by the condition.
6.
Express and Implied
ART. 1187.
The effects of a conditional obligation
to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation.
Nevertheless, when the obligation imposes reciprocal
prestations upon the parties, 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, unless from the nature and
circumstances of the obligation it should be inferred
that the intention of the person constituting the same
was different.
In obligations to do and not to do, the courts shall

determine, in each case, the retroactive effect of the
condition that has been complied with. (1120)
Effects of conditional obligation to

give:
Once the condition is fulfilled, the effects of the
conditional obligations shall retroact to the day of the

constitution of the obligation and not on the date
when the condition was fulfilled.
Example
On Jan. 1, 1999 A agreed to give B a parcel of land if he

passes the May, 1999 CPA exams. If B passes the CPA
exams in May, 1999, he is entitled to the land effective
Jan. 1, 1999 because Bs right over the land retroacts to
the date when the obligation was constituted.
As to the fruits and interest The effect of conditional
obligation to give, as a rule, do not retroact to the date of the

constitution of the obligation. The following rules shall
govern:
1.
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.
Example:
A agrees to sell and B agrees to buy As parcel of
land if B passes the May, 1999 CPA exams. If B passes the
May, 1999 CPA Board, the obligation becomes
demandable. B is entitled to all the interests that his
money (with which to pay A) may earn while A is
entitled to the fruits which the parcel of land may have
produced during the pendency of the condition.
2.
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, 1999 exams.
Pending the happening of the condition, A is
entitled to the fruits which the land may produce,
A will deliver only the parcel of land if the
condition is fulfilled, unless a contrary intention
appears.
ART. 1188.
The creditor may, before the fulfillment of

the condition, bring the appropriate actions for the
preservation of his right.
The debtor may recover what during the same time

he has paid by mistake in case of a suspensive
condition (1121a)
Preservation of Creditors Right
The action for the preservation of the creditors right

may have for their objectives:
1.
To prevent the loss or deterioration of the things which are the

objects of the obligation by enjoining or restraining acts of
alienation or destruction by the debtor himself or by third
person;

2.
To prevent concealment of the debtors properties

which constitute the guaranty in case of nonperformance of the obligation;
3.
To demand security if the debtor becomes insolvent;
4. To compel the acknowledgement of the debtors
signature on a private document or the execution of

proper public document for registration so as to affect
third person.

5.
To register the deeds of sale or mortgages;
6. To set aside fraudulent alienation made by the debtor;

7.
To interrupt the period of prescription by actions

against adverse possessors of the things which are
objects of the obligation. (Lawyers journal, 1951, p.
47)
Paragraph I of the above article authorizes the creditor
to take any appropriate actions for the preservation of

creditors right during the pendency of the condition:
Example:
On Jan. 1, 1999, Raul obliged himself to sell a parcel of land

to Dennis if he passes the CPA exams in October, 1999.
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, to preserve his right over the parcel of land.
Paragraph II in order that debtor may recover what he has paid by
mistake, during the pendency of the condition, the following

requisites may be present:
1.
2.
The debtor paid the creditor before the fulfillment of the condition;
Payment made by debtor was through mistake and error;
1.
The action to recover what was paid by mistake should be made

before the fulfillment of the condition.
Example
Pedro obliged himself to pay Santos P20, 000 if a PAL plane crashes at
Cebu before Dec. 30, 1998. After the obligation was constituted and
before Dec. 30, 1998, a plane crushed in Cebu. Pedro honestly and
believing that the condition was fulfilled paid the P20, 000 to Santos. It
turned out however that it was a Cebu airline that crushed. Thus, Pedro
may recover the amount paid to Santos by mistake for the reason that
the condition has not yet been fulfilled.
ART. 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)
2)
3)
4)
5)
6)
If the thing is lost without the fault of the debtor, the obligation shall
be extinguished.
If the thing is lost through the fault of the debtor, he shall be obliged
to pay damages; it is understood that the thing is lost when it
perishes, or goes out of commerce, or disappears in such a way that its
existence is unknown or it cannot be recovered;
When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
If it deteriorates through the fault of the debtor; the creditor may
choose between the rescission of the obligation and its fulfillment,
with indemnity for damages in either case;
If the thing is improved by its nature, or by time, the improvement
shall inure to the benefit of the creditor;
If it is improved at the expense of the debtor, he shall have no other
right than that granted to the usufructuary.
These rules apply only to obligation to give a determinate or
specific thing subject to a suspensive condition in case of loss,

deterioration or improvement of the thing.
In case of loss of the thing
1.
a)
If the thing is lost without the fault of the debtor, the obligation shall
be extinguished.
Example
Reyes obliged himself to give Santos a determinate car if he
passes the CPA Exams in Oct. the current year. If during the
pendency of the condition the car was lost through fortuitous event
without the fault of Reyes, the obligation to deliver the car is
extinguished even if the condition is fulfilled later.
b)
If the thing is lost through the fault of the debtor, he shall be obliged
to pay damages. If in the example above, the specific car was lost
through the fault of Reyes, he shall be liable for damages upon the
fulfillment of the condition.
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)

b) When disappears in such a way that its existence is
unknown (as when a particular car has been missing for

some time)
c) When it disappears in such a way that it cannot be
recovered (as when a particular diamond ring is dropped

in the middle of the Atlantic Ocean).
When the thing deteriorates -
2.
a)
When the thing deteriorates during the pendency of the condition,

without the fault of the debtor, the impairment is to be borne by
the creditor.
Example
Arvin obliged himself to give Ian a determinate Toyota car if Ian
passes the October CPA Exams. During the pendency of the
condition, the car was partially damaged by flood, without the fault
on the part of Arvin. If the condition is fulfilled, Ian will bear the
impairment.
b)
If the thing deteriorates, during the pendency of the condition,

through the fault of the debtor, the creditor may choose, after the
fulfillment of the condition, between the rescission of the
obligation or its fulfillment, with indemnity for damages in either
case.
When the thing improved
3.
a)
b)
If the thing improved during the pendency of the condition, by

its nature, or by time, the improvement shall inure to the
benefit of the creditor. The reason for this is to compensate the
creditor who would suffer in case, instead of improvement,
there would be deterioration without the fault of the debtor.
If the thing is improved at the expense of the debtor, he have no
other right than that granted to the usufructuary. 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.
ART. 1190. When the conditions have for their

purpose the extinguishment of an obligation to give,
the parties, upon the fulfillment of said conditions,
shall return to each other what they have received.
In case of the loss, deterioration or improvement

of the thing, the provisions which, with respect to the
debtor , are laid down to the preceding article shall be
applied to the party who is bound to return.
As for obligations to do or not to do, the

provisions of the second paragraph of article 1187 shall
be observed as regards the effect of the
extinguishment of the obligation. (1123)
Effects When Resolutory

Condition is fulfilled
1.
2.
3.
4.
5.
The obligation is extinguished. (Art. 1181, NCC)

Because the obligation is extinguished and considered to have had no effect,
the parties should restore to each other what they have received.
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 rules given in Art. 1189, N CC will apply to whoever has the duty to return
in case of loss, deterioration or improvement of the thing.
The courts are given power to determine the retroactivity of the fulfillment of a
resolutory conditions.
Example :
A gave B a parcel of land on condition that B will pass the

CPA Exams on May, this year. B did not pass the CPA Exams. The
obligation is extinguished and therefore, it is as if there was never
an obligation at all. B will therefore have to return both the land and the
fruits he had received there from the moment A has given
him the land.
ART. 1191. The power to rescind obligatios is implied

in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the

fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the
later should become impossible.
The court shall decree the rescission claimed,

unless there be just cause authorizing the fixing of a
period.
This is understood to be without prejudice to the

rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage
Law.
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.
Example:
In a contract of sale, 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:

1.
2.
Demand fulfillment of the obligation plus damages; or

Demand rescission of the obligation plus damages.
ART. 1192. In case both parties have committed a breach
of the obligation, the liability of the first infractor shall

be equitably tempered by the courts. If it cannot be
determined which of the parties first violated the
contract, the same shall be deemed extinguished, and
each shall bear his own damages.
Rules if Both Parties Have Committed a Breach
The above rules are deemed just. The first one is fair to
both parties because the second infract or, though they
would derive some advantage by his own act or neglect.
The second rule is likewise just, because it is presumed
that both parties at about the same time tried to reap
some benefits. (Report of the Code Commission)
Section 2 - Obligations with a period
ART. 1193. Obligations for whose fulfillment a

day certain has been fixed, shall be demandable only
when that day comes.
Obligations with a resolutory period take effect at

once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must

necessarily come, although it may not be known when.
If the uncertainty consists in whether the day will

come or not, the obligation is conditional, and it shall
be regulated by the rules of the preceding Section.
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. (8Manresal58)
A day certain is understood to be that which must
necessarily come, although it may not be known when.
Period and Condition

Distinguished:
a)
As to fulfillment - A period is a certain event which must

happen sooner or later while a condition is an uncertain
event.
b)
As to time a period refers only to the future while a

condition may refer to a past unknown event.
c)
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.
ART. 1194. In case of loss, deterioration or
improvement of the thing before the arrival of the

day certain, the rules in article 1189 shall be
observed. (n)
Effect of loss, deterioration, or improvement before the
arrival of period.
Note the cross reference to Art. 1189, NCC.

Example:
If A is suppose to deliver to B a particular car on Dec.

19, 1999 by the car was destroyed by fortuitous event
in July 1, 1999, the obligation is extinguished.
ART. 1195. Anything paid or delivered before the arrival

of the period, the obligor being unaware of the period or
believing that the obligation has become de and
demandable, may be recovered, with the fruits and interests.
(1126a)
Effect Of Payment Before Arrival of Period
This article which is similar to Article 1188, NCC, in an obligation to

give, allows the recovery of what has been paid by mistake before the
fulfillment of a suspensive condition.
Example E owes G P20, 000.00, which was supposed to be paid on December 25 this
year. By mistake, E paid his obligation on December 25 last year. Assuming
that today is only June 30, E can recover the amount plus interest therein.
But E cannot recover, except he interest, if the debt had already matured or
if E had knowledge of the period.
ART. 1196. Whenever in an obligation a period is
designated, it is presumed to have been established for

the benefit of both the creditor and the debtor, 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. (1127)
Presumption As to Benefit Of A Period
The general rule is that when a period is fixed by the parties , the
period is presumed to be for the benefit of both creditor and
debtor.
Which means that before the expiration of the period, the
debtor may not fulfill the obligation and neither the creditor
demand its fulfillment.
By way of exceptions, however, 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:
For the benefit of both creditor and debtor
1.
Example
Gaya obtained a loan of P10, 000 at 12% interest per annum from Tito for one
year. Gaya has a period of one year within which to use the money, while Tito
will benefit from the interest which the money will earn.
For the benefit of the creditor
2.
Example Gaya executes a promissory note in favor of Tito which reads: I promise to
pay Tito or order the amount of P10, 000 on demand. Thus, Tito can demand
payment from Gaya anytime.
For the benefit of debtor
3.
Example
Gaya executes a promissory note which reads: I promise to pay Tito r order
the amount of P 10,000 or before December 31, 2001. Gaya can pay her
obligation on or before Dec. 31, 2001.
ART. 1197. If the obligation does not fix a period, but
from its nature and circumstances it can be inferred

that a period was intended, the courts may fix the
duration thereof.
The courts shall also fix the duration of the period when
it depends upon the will of the debtor.
In every case, the courts shall determine such period as

may under the circumstance have been probably
contemplated by the parties. Once by the courts, the
period cannot be changed by them. (1128 a)
Court Generally is Without Power to Fix a Period

If an obligation does not state a judicial period and no period is
intended, the court is not authorized to fix a period. The courts
have no right to make contracts for the parties.
Exceptions to the general rule

1.
2.
If the obligation does not fix a period but it can be inferred from its
nature and circumstances that a period is intended.
Example:
S sold a parcel of land to B with a right of repurchase. No term is

specified in the contract for the exercise of the right. Then, the
court is authorized to fix the period to repurchase.
If the duration of the period depends upon the sole will of the
debtor
Example:
I will pay you as soon as possible. Here , the period is not fixed,
so the court may fix the same because if this is not so the
obligation may never be complied with by the debtor.
ART. 1198. The debtor shall lose every right to make use
of the period:
1)
2)
3)
4)
5)
When after the obligation has been contracted, he

becomes insolvent, unless he gives a guaranty or security
for the debt;
When he does not furnish to the creditor the guaranties
or securities which he has promised ;
When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory;
When the debtor violates any undertaking, in
consideration of which the creditor agreed to the period;
When the debtor attempts to abscond. (1129a)
When Debtor Loses The Right to

Make Use Of A Period
The general rule is that the obligation is not
demandable before the lapse of the period. The

exceptions are based on the fact that the debtor might
not be able to comply with his obligation:
1.
When debtor becomes insolvent:

The insolvency need not be judicially declared. It is sufficient
that the debtor has less assets than his liabilities or if debtor is
unable to pay his debts as they mature. It is noted that the
insolvency of the debtor must occur after the obligation has
been contracted.

2.
When debtor does not furnish guaranties or securities promised:

Example:
Gaya borrowed loan from Tito which loan was secured by a chattel
mortgage of Gayas car as a guaranty. After obtaining the loan, Gaya
fails or does not execute a chattel mortgage, the loan becomes
demandable or the debtor loses her right to make use of the period.
3.
When by his own acts he has impaired said guaranties or

securities:
Example:
Gaya borrowed P50, 000 from Tito which loan was secured by a
chattel mortgage on Gaya s car. Later, Gayas fault, the car was
damaged or she causes the impairment of the car, Gaya loses her
right to make use of the period, unless she gives another one
equally satisfactory.

4.
When by fortuitous event, the guaranty or security was lost.

Example:
Gaya borrowed P50, 000 from Tito which loan was secured by a chattel
mortgage on Gayas car. After obtaining the loan, the car was lost by fortuitous
event. Gaya loss her right to male use of the period unless she gives another
guaranty or security equally satisfactory.
5.
When debtor violates an undertaking

Example:
Art secured a loan from Arnold on condition that Art will paint the house of
Arnold. If after the proceeds of the loan was given to Art, he did not pant the
house of Arnold, Art loses his right to make use of the period.
6.
When the debtor attempts to abscond.

Abscond means a depart or escape from creditors knowledge to avoid payment
of his debt. Mere attempt on the part of debtor will entitle the creditor to
demand payment of the obligation without waiting for the period to expire.
Section 3. Alternative and Facultative obligations

ART. 1199. A person alternatively bound by different
prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and
part of the other undertaking. (1131)
Meaning of Alternative Obligation

It means an obligation where two or more prestations are due
but the delivery of one is sufficient to extinguish the obligation.
Example:
Gaya binds herself to give Tito either a determinate refrigerator or a TV
set. If Gaya chooses and delivers the TV set, the obligation is
extinguished. Thus, Gaya cannot compel Tito to accept part of one and
the part of the other prestations.
ART. 1200.
The right of choice belongs to the

debtor, unless it has been expressly granted to the
creditor.
The debtor shall have no right to choose those

prestations which are impossible, unlawful or
which could not have been the object of the
obligation.
Rule on Who Makes the Choice

As a general rule, the right of choice or to select the prestation belongs to the
debtor, unless the right to choose is expressly granted to the creditor. But the right
of the debtor is subject to the following:

The debtor cannot choose those prestations which are:
a)
Impossible E.g.- Gaya promised to deliver to Tito 100 sacks of rice or a stone
from Mars. Gaya cannot chose to deliver the stone coming from Mars as it is
physically impossible.
b)
Unlawful E.g. Gaya obliged herself to deliver to Tito a kilo of dangerous drug or a
parcel of land. Gaya can choose only the delivery of parcel of land.
c)
Could not have been the object of the obligation - E.g. Gaya borrowed from Tito
P50, 000. It was agreed that Gaya would give Tito her horse or her German Piano.
Now, Gaya has two horses, a race horse worth P50, 000 and an ordinary horse
which is worth for only P5, 000. Gaya cannot choose
d)
Only one prestation is practicable (Art. 1202) E.g. Gaya will deliver to Tito her
carabao, or her horse or her refrigerator. Through no fault of Gaya, the horse and
the carabao were lost by fortuitous event. Gaya can only delivery the refrigerator
which is the only one practicable.
ART. 1201. The choice shall produce no effect

except from the time it has been communicated.
(1133)
Right of Choice Must be Communicated

Until the choice is made and communicated, the
communicated, the obligation remains alternative. Once
the notice to the effect that a choice is made, the obligation
ceases to be alternative and becomes a simple obligation.
Where the choice has been expressly given to the creditor,
such choice shall likewise produce legal effects upon being
communicated to the debtor. (Art. 1205, par. 1)
ART. 1202.
The debtor shall lose the right of choice when

among the prestations whereby he is alternatively bound, only
one is practicable.
ART. 1203. If Through The creditors acts the debtor cannot
make a choice according to the terms of the obligation, the
latter may rescind the contract with damages.
When debtor may rescind contract
If through the creditors fault, the debtor cannot made a choice

according to the terms of the obligation the debtor is given the right to
rescind and recover damages.
Example:
Gaya borrowed from Tito P5, 000.00. it was agreed that instead of P5, 000,
Gaya could deliver a TV set or a refrigerator or a piano. If through the fault of
Tito, the TV set was destroyed, Gaya can rescind the contract if she wants. In
case of rescission, the amount of P 5, 000.00 must be returned by Gaya with
interest. Tito, in turn, must pay Gaya the value of the TV set plus damages.
ART. 1204.
The creditor shall have a right to indemnity for

damages when, through the fault of the debtor, all the things which
are alternatively the object of the obligation have been lost, or the
compliance of the obligation has become impossible.
The indemnity shall be fixed taking as a basis the value of the last
thing which disappeared, or that of the service which last became
impossible.
Damages other than the value of the last thing or service may also be
awarded. (1135a)
When right of choice is with debtor and all prestations were lost
This article entitles the creditor to indemnity for damages when all the
alternative objects are lost through the fault of the debtor before he has
made his choice. The indemnity for which the creditor is entitled shall be
based on the value of the last thing which disappeared or lost or the
compliance of the obligation has become impossible.
ART. 1205.
When the choice has been expressly given to the

creditor, the obligation shall cease to be alternative from the
day when the selection has been communicated to the debtor.
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, he shall

perform the obligation by delivering that which the creditor
should choose from among the remainder, or that which
remains if only one subsists;
2)
If the loss of one of the things occurs through the fault of the
debtor, the creditor may claim any of those subsisting, or the
price of that which, through the fault of the former, has
disappeared, with a right to damages
3)
If all the things are lost through the fault of the debtor, the
choice by the creditor shall fall upon the price of any one of
them, also with indemnity for damages.
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. (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.
When a thing is los through a fortuitous event
Example
Gaya obliged herself to deliver to Tito a TV set, or a
refrigerator, or a piano. If the TV set was lost through
fortuitous event, Tito can choose from among the
remainder or that which remains if only one subsists.
2.
When a thing is lost through debtors fault

Example:
If the loss of the TV set occurs through the fault of Gaya, 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.
3.
When all the things were lost through debtors fault

Example:
If all the items are lost through the fault of Gaya, then Tito can
demand the payment of the price of any one of them with a right
to indemnity for damages.
4.
When all the thing are lost through a fortuitous event

Example:
The obligation of Gaya shall be extinguished if all the items
which are alternatively the object of the obligation are lost
through a fortuitous event (Art. 1174 will apply).
ART. 1206. When only one prestation has been agreed
upon, but the obligor may render another in

substitution, the obligation is called facultative.
The loss or deterioration of the thing intended as a
substitute, through the negligence of the obligor, does not

render him liable. But once the substitution has been
made, the obligor is liable for the loss of the substitute on
account of his delay, negligence or fraud.
Meaning of Facultative Obligation

A facultative obligation is one where only one prestation has
been agreed upon but the obligor may render another in
substitution.
Example:
I will give you my piano but I may give my television set as a substitute.
Alternative and Facultative

Distinguished
1)
As to choice In facultative the right for substitution is given

only to the debtor in Alternative the choice may be given
either to the debtor or to the creditor;
2)
As to things due In facultative only the principal obligation

is due by may substitute another; in alternative, there are
several things due but the delivery of one is sufficient;
3)
As to validity or nullity In facultative if the principal thing

is unlawful or impossible, there is no need of delivering the
substitute in alternative if one of the thing is unlawful or
impossible, there is still a need to deliver any of those which
remain valid or the only remaining one is valid.
Section 4 Joint and Solidary Obligations
ART. 1207.
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, or that each one of the latter is bound to render,
entire compliance with the prestation. There is a solidary
liability only when the obligation requires solidarity. (1137a)
ART. 1208.
If from the law, or the nature or the
wording of the obligations to which the preceding article
refers the contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there
are creditors or debtors, the credits or debts being considered
distinct from one another, subject to the Rules of Court
governing the multiplicity of suits. (1138a)
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, by virtue of which each of the
debtors is liable for a proportionate part of the credit.
Example of different instances
1)
A, B, and C borrowed P9, 000 for D. The presumption is that A,
B and C are jointly liable. D can demand only P3, 000 from each
or a total of P9, 000.
2)
A borrowed from B, C and D P9, 000. There is one debtor and
three creditors. Each creditor can demand only P3, 000 from A.
3)
A and B are liable to C and D for P9, 000. There are two debtors
and two creditors. Each creditor can demand only P4, 500 from
each debtor.
SOLIDARY OBLIGATION
There are solidary liability when
1)
The obligation expressly so states, or
2) The law requires solidarity or

3) The nature of the obligation requires solidarity.
Kinds of Solidary Obligation

1.
Passive solidarity on the part of the debtors, 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, 000
2.
Active solidarity on the part of the creditors, where anyone of them

can demand the fulfillment of the entire obligation.
Example A is liable to B and C for the amount of P10, 000. B and C are
solidary creditors.
3.
Mixed Solidarity solidarity on the part of the debtors and creditors

where each one of the debtors is liable to render and each one of the
creditors has a right to demand, entire compliance with the
obligation.
Example A and B are solidarity debtors to C and D, solidary creditors
in the amount of P 10, 000.
Solidarity not presumed

The presumption, where there are two or more persons in the same
obligation, is that it is joint. The reason is that solidary obligations are very
burdensome for they create unusual rights and liabilities. Solidarity
between debtors increases their responsibility while solidarity between
creditors presuming that they are bound jointly and not solidarily.
ART. 1209.
If the division is impossible, the right of the creditors

may be prejudiced only by their collective acts, and the debt can be
enforced only by proceeding against all the debtors. If one of the
latter should be insolvent, the others shall not be liable for his
share.
Indivisible Joint Obligation

The object is indivisible and the T/E between the parties are merely
proportionately liable.
Example
A and B are jointly liable to give C a particular car. The obligation is joint but since
the object is indivisible, the creditor must proceed against al the joint debtor. If any of
the joint debtors be insolvent, the others shall not be liable for others.
ART. 1210. The indivisibility of an obligation does not
necessarily give rise t solidarity. Nor does solidarity of

itself imply indivisibility. (n)
Indivisibility as Distinguished from Solidarity
Indivisibility refers to the subject matter while solidarity

refers to the Tie between the parties.
Examples:
1.
Joint divisible obligation A and B are jointly liable to C for P10, 000.
2.
Joint indivisible obligation A and B are jointly liable to give C their

car.
3.
Solidary divisible obligation A and B are solidarily liable to give C

P10, 000.
4.
Solidary indivisible obligation A and B are solidarily liable to give C

their car.
ART. 1211. 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. 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.
Example:
A and B solidarily bound themselves to pay a total of P10, 000 to C, and
D and E to the following conditions. Cs share will be due at the end of
the year; D will get his share only after he passes the CPA exams and E
will get his share only after he painted the house of C.
ART. 1212.
Each one of the solidary creditors may do whatever may

be useful to the others, but not anything which may be prejudicial to
the latter. (1141a)
ART. 1213.
A solidary creditor cannot assign his rights without the

consent of the others.
Solidary Creditors May Do Useful Act; Not Prejudicial Acts
A solidary creditor may do any act beneficial or useful to the others but
he cannot act prejudicial to them.
Example of Beneficial Acts
To interrupt the running of prescription, the act of one solidary creditor in making a
judicial demand upon any of the solidary debtors is sufficient. (Art. 1155, NCC)
Example of Prejudicial Acts

Should not be performed, otherwise, there will be liability for damages. However, in
the case of remission or condonation, the solidary creditor is allowed to so remit, and
the obligation is extinguished.
Art. 1214.
The debtor may pay any one of the solidary

creditors but if any demand, judicial or extrajudicial, has
been made by one of them, 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.
But when a demand is made by any of the creditors, payment
should be made to him who made the demand, judicially or
extra-judicially.
Example
A is liable to B and C P5, 000. A may pay either B or C But if B made a
demand then payment should only be made to him. If A paid C, B is still
entitled to his share from A in case C does not turn over to B his share.
ART. 1215. Novation, compensation, confusion or
remission of the debt, made by any of the solidary

creditors or with any of the solidary debtors, shall
extinguish the obligation, without prejudice to the
provisions of article 1219.
The creditor who may have executed any of these acts, as
well as he who collects the debt, shall be liable to the others

for the share in the obligation corresponding to them.
Liability of Solidary Creditor in case of Novation,
Compensation, Confusion or Remission
When a creditor who executed any of these acts, it is logical that
he is liable to the other solidary creditors for their corresponding

shares considering that such acts are prejudicial to them. (Art.
1212, NCC)
ART. 1216. 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. (1144a)
Creditor May Proceed Against Any Solidary Debtor

In a solidary obligation, the creditor may proceed against any,
some or all of the solitary creditors simultaneously so long as it
has not been fully collected.
Example
A, B and C solidarily owe D the amount of P9, 000. D can collect from A
or B or C alone or from any two of them or all of them simultaneously. If
demand is made on A, the latter cannot require D to make a demand
also on B and C or to include them as party defendants as D has the right
to proceed against any one of them.
ART. 1217. Payment made by one of the soldiery debtors
extinguishes the obligation. If two or more solidary

debtors offer to pay the creditor may choose which offer
to accept.
He who made the payment may claim from his codebtors only the share which corresponds to each, with
the interest for the payment already made. If the
payment is made before the debt is due, no interest for
the intervening period may be demanded.
When one of the solidary debtors cannot, because of

his insolvency, reimburse his share to the debtor paying
the obligation, such share shall be borne by all his codebtors, in proportion to the debt to each. (1145a)
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.
Example
A, B and C are solidarily liable to D and E in the amount of P9,
000 due on Dec. 31. If both A and B offer to pay D on Dec. 31, the
latter may choose which offer to accept. If A pays the entire
amount of P9, 000 on Dec. 31, the obligation is extinguished.
The payment of A gives him the right of reimbursement from B
and C P3, 000 each with interest from the date of payment.
However, if C is insolvent, both A and B shall bear the
insolvency in proportion to their shares.
ART. 1218.
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. (n)
Effect of Payment After 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.
1.
2.
Example A and B are solidarily indebted to C in the amount of P 10, 000. The debt
prescribed. If A paid the debt, he cannot collect form B his share of the debt. Neither
can A can recover from C.
Becomes Illegal A and B are solidarily bound to deliver medical drugs

to C. the transaction of such medical drugs were later prohibited by law.
Notwithstanding the prohibition, B performed the obligation by
delivering the prohibited drugs. B is not anymore entitled to
reimbursement from A.
ART. 1219.
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. (1146a)
ART. 1220.
The remission of the whole obligation obtained by one of
the solidary debtors, does not entitle him to reimbursement from his codebtors.
Remission by Creditor
1)
If payment if made first, the remission is of no effect. There is no more to

remit.
2)
If remission is made prior to the payment and payment is made, then there is
payment by mistake.
3)
If one of the solidary debtors obtained remission on the whole obligation, he is

not entitled to reimbursement from his co-debtors because remission is
essentially gratuitous.
ART. 1221. If the thing has been lost or if the prestation
has become impossible without the fault of the solidary

debtors, the obligation shall be extinguished.
If there was fault on the part of any one of them, all shall
be responsible to the creditor, for the price and the

payment of damages and interest, without prejudice to
their action against the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or the
performance has become impossible after one of the

solidary debtors has incurred in delay through the
judicial or extrajudicial demand upon him by the
creditor, the provisions of the preceding paragraph shall
apply. (1147a)
Rules in Case thing has Been Lost or

Prestation Has Become Impossible
1.
If the thing is lost or has become impossible to

perform through a fortuitous event without the fault
of the debtor, the obligation is extinguished.
Example:
A, B and C are solidarily bound to deliver a determinate

car to D. Without any fault on the part of any one of the
debtors, the car was lost through the fortuitous event.
The obligation is extinguished.
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, anyone of
them may be held liable by D for the price of the car plus
damages. 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.
3.
The solidary debtors are likewise liable even if the thing

is lost through fortuitous event if the loss occurs after
anyone of the solidary debtors has been in delay. The
debtors, however who were not in delay have the right to
recover from their co-debtors who was responsible due to
his delay.
ART. 1222. A solidary debtor may, in actions filed by
the creditor, avail himself of all defenses which are

derived from the nature of the obligation and of
those which are personal to him, or pertain to his
own share.
With respect to those which personally belong to
the others, he may avail himself thereof only as

regards that part of the debt for which the latter
are responsible.
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
The defenses derived from the nature of the obligation,
such as fraud prescription, remission illegality or absence of
consideration, payment or performance.
1.
Example
A and B are solidarily liable to C in the among to P6, 000. The entire
debt was paid by d. in an action by C against A, the latter can raise
the defense of payment by virtue of which the obligation was
extinguished.
Defenses available to a Solidary

Debtor
2.
Defenses personal to him or pertaining to his own

share, such as minority, insanity and vitiated consent.
3.
Defenses which are personal to others, such as

minority, insanity and vitiated consent.
Section 5 Divisible and Indivisible Obligations]
ART. 1223. 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. (1149)
Definition of Terms
1.
A divisible obligation is one the object of which in its delivery

or performance is capable of partial fulfillment.
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.
2.
An indivisible obligation is one the object which in its delivery

or performance is not capable of partial fulfillment.
Example:
A agreed to deliver a determinate car to B on Dec. 31. This is an

indivisible obligation because it is not subject to partial
performance.
ART. 1224. A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the

debtors does not comply with his undertaking. 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. (1150)
ART. 1225. For the purposes of the preceding

articles, obligation to give definite things and those
which are not susceptible of partial performance
shall be deemed to be indivisible.
When the obligation has for its object the

execution of a certain number of days of work, the
accomplishment of work by metrical units, or
analogous things which by their nature are susceptible
of partial performance, it shall be indivisible.
However, even though the object or service may be

physically divisible, and obligation is Indivisible if so
provided by law or intended by the parties.
In obligations not to do, divisibility or

indivisibility shall be determined by the character of
the prestation in each particular case. (1151a)
Obligations Deemed Indivisible

The general rule of determining the divisibility or
indivisibility of an obligation depend on the purpose of the
obligation.
1. Obligation to give definite things
Example:
To give a particular house. Here the obligation is indivisible because

of the nature of the subject matter.
2.
Obligations which are not susceptible of partial performance

Example:
A is obliged to sing a song. Here the obligation is indivisible by

reason its purpose which requires the performance of all the parts.
Obligations Deemed Indivisible

3.
Obligation provided by law to be indivisible even if thing or service

physically divisible.
Example:
Taxes should be paid within a definite period. Although money is

physically divisible, the amount of tax payable must be delivered in
Toto, not partially.
4.
Obligations intended by the parties to be indivisible even if thing or

service is physically divisible.
Example:
The obligation of A to give P10, 000 to B on a certain date. Money is

physically divisible by the clear intention ere for A to deliver the
amount at on time and as a whole.
Obligations Deemed Divisible

1.
Obligations which have for their object the execution of a certain number of days of
work.
Example
A obliged himself to paint the house of B to be finished in 10 days. The obligation is

divisible because it will not be finished in one time.
2.
Obligations which have for their object the accomplishment of work by metrical units.
Example:
A obliged himself to deliver 25 cubic meter of sand.
3.
Obligations which by their nature are susceptible of partial performance

Example
The obligation of A to pay a debt of P10, 000 to B in ten (10) monthly installments.
Section 6 Obligations with a Penal Code
ART. 1226. In obligations with a penal clause, the

penalty shall substitute the indemnity for damages and
the payment of interests in case of non-compliance, if
there is no stipulation to the contrary. Nevertheless,
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 may be enforced only when it is

demandable in accordance with the provisions of this
Code. (1152a)
Meaning of Penal Clause
An obligation with a penal clause is one which contains an accessory
undertaking to pay a previously stipulated indemnity incase of breach.
It is attached to obligations in order to insure their performance.
Purpose of a Penal Clause

1) To insure the performance of the obligation.
2) To substitute for indemnity for damages and the
payment of interest in case of non-compliance of the

principal obligation.
3) To penalize the obligor in case of breach of the
principal obligation.
ART. 1227.
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.
Neither can the creditor demand the fulfillment of the
obligation and the satisfaction of the penalty at the same

time, unless this right has been clearly granted him. However,
if after the creditor has decided to require the fulfillment of
the obligation, the performance thereof should become
impossible without his fault, the penalty may be enforced.
(1153a)
Debtor Cannot Substitute Penalty For the Principal Obligation
The general rule is that the debtor is not allowed to just pay the penalty
instead of fulfilling the obligation. He can do so if the right has been
expressly reserved. The reason is that if he can just pay, fulfillment of the
obligation will be considered an alternative one. The word expressly means
that any implied reservation is not allowed.
ART. 1228. Proof of actual damages suffered by the
creditor is not necessary in order that the penalty

may be demanded.
ART. 1229. The judge shall equitably reduce the
penalty when the principal obligation has been

partly or irregularly complied with by the debtor.
Even if there has been no performance, the penalty
may also be reduced by the courts if it is iniquitous
or unconscionable. (1154a)
When Penalty May be Reduced by

the Court
a) When the obligation has been partly complied with
by the debtor;
b) When the obligation has been irregularly complied
with by the debtor

c) When the penalty is iniquitous or unconscionable,
even if there has been no performance at all.
ART. 1230.
The nullity of the penal clause does not carry

with it that of the principal obligation.
The nullity of the principal obligation carries with it the
penal clause. (1155)
Effect of Nullity of Penal Clause
The general principle that the accessory follows the

principal. If only the penal clause is void, the principal obligation
remains valid and demandable. The penal clause may be
disregarded.
Example:
A agreed to sell merchandise to B. it is provided in their agreement that in

case of default, A will deliver a prohibited drug as penalty. Here, the
obligation to sell merchandise is valid by the penalty to deliver the
prohibited drug is void. For failure of A to comply with the obligation, B
may recover damages

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Course Outline

PART I INTRODUCTION TO LAW AND BUSINESS

Essential requisites of obligation

According to the Object or Prestation

PART III GENERAL PROVISIONS ON CONTRACT

PART IV DEFECTIVE CONTRACTS

Definition of Law and Business Law

In Philosophy, the human mind consists principally of

was defined by Sanchez Roman, a Spanish Civilist and

Edgardo Paras defined Law as an ordinance of

reason promulgated for the common good by Him

Meaning any action, things, dictate of reason if regulated

or gathered together could become a conglomeration of

PROMULGATED BY LEGITIMATE AUTHORITY

That is, made known to those who are expected to follow

it. In a Republican State like the Philippines, we have

JUST and OBLIGATORY

Treatment of Law should be equal, regardless of sex,

FOR THE COMMON OBSERVANCE and

The application of law should not be titled or favoring

an individual but by the observance of all and the

It consists of legal rights by a competent authority. In

the Philippines, being a democratic form of government,

The fundamental law that governs a nation in its

relation to its citizens. All laws must conform and

ADMINISTRATIVE OR EXECUTIVE ORDERS,

The fundamental law that governs a nation in its

relation to its citizens. All laws must conform and

JUDICIAL DECISIONS OR JURISPRUDENCE

Judicial decisions or interpreting the laws or the Constitution

shall form a part of the legal system of the Philippines. (Art.

JUDICIAL DECISIONS OR JURISPRUDENCE

Thus, our country adhere to the Doctrine of Stare

Decisis (Let it Stand), the doctrine which in reality is

It consists of those habits and practices which through

long and uninterrupted usage have become

To add, the principle of justice and equity, decisions of

foreign tribunals, opinions of text writers and even

It is formally promulgated by God, revealed or divulged to

Promulgated impliedly in our conscience and body. It is the

Refers to the act of rules governing the action and movement

Those promulgated by man to regulate human relations.

Classification of Human Law

GENERAL or PUBLIC LAW

It includes the following:

1. International Law consists of those rules and principles

2. Constitutional Law It simply governs the relations between

Classification of Human Law

3. Administrative Law it fixes the organization and determines

4. Political Law deals with the organization and operation of the

5. Criminal Law guaranties the coercive power of the law so that

Classification of Human Law

INDIVIDUAL or PRIVATE LAW

Those law which govern the private relation person.

Classification of Human Law

2. Commercial Law defined as a whole body of substantial

Classification of Human Law

3. Procedural Law defined as the branch of law which

Sources of Philippine Civil Code

The New Civil Code of the Philippines the

A civil code is a compilation of existing Civil Laws,

Sources of Philippine Civil Code

Special laws or statutes, Presidential decrees and

Jurisprudence there is need to mention that,