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CAVEAT LECTOR: If something is erroneously written, please consult the textbooks written by authorities like Tolentino, De Leon, Jurado and Paras. I created and used this material, and fortunately passed the subject. I found some errors before but was not able to correct them due to the loss of my hardcopy. Use it at your own discretion. a. It must be possible, physically and juridically b. It must be determinate, or, at least, determinable according to pre-established elements or criteria c. It must have a possible equivalent in money Kinds of Prestation: a. Real obligation: The obligation to give Is one in which the prestation consists in delivery of a movable or an immovable thing, in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner. Examples are the obligations to deliver the thing in contracts of sale, deposit, lease, antichresis, pledge, and donation. b. Personal obligation: the obligation to do or not to do 1. Positive personal obligation: - obligation to do - includes all kinds of work or services - in some cases, it may involve some work on the part of the debtor, whether it be physical or mental, such as in contracts of employment or professional services; but in other cases, the essence of the act may not be such, but merely the necessity of concluding a juridical operation, such as, when a person promises to give a bond. 2. Negative personal obligation: - obligation not to do - consists in abstaining from some act, such as the duty of a person not to create a nuisance on his property. - it includes prestation not to give, both being negative obligations. Efficient cause: (vinculum juris or juridical tie) the reason why the obligation exists Creates the obligation itself between debtor and creditor, and define the object/prestation demandable from one another 1. By law: such as relation of husband and wife giving rise to the obligation to support 2. By bilateral acts: such as contracts giving rise to obligations stipulated therein 3. By unilateral acts: such as crimes and quasi-delicts
OBLIGATION Is a juridical necessity to give, to do or not to do. Is a juridical relation whereby a person (creditor) may demand from another (debtor) the observance of a determinate conduct, and, in case of breach, may obtain satisfaction from the assets of the latter. Correlative right: Credit: the right to demand the object of the obligation Debt: the duty to give, to do or not to do Classification of Obligations: 1. Civil Obligations Obligation which if not fulfilled when it becomes due or demandable may be enforced in court through an action. 2. Natural Obligations Obligation which cannot be enforced by court action but which are binding on the party who makes them, in conscience and according to equity and natural justice. i.e. if prescriptive period lapses, the voluntary payment of the debtor and retention of payment by the creditor 3. Moral Obligations Duties of conscience completely outside of the field of law Civil and natural obligations, distinguished: Civil obligations derive their binding force from positive law, while natural obligations derive their binding effect from equity and natural justice. Civil obligations can be enforced by court action or the coercive power of public authority, while the fulfillment of natural obligation cannot be compelled by court action but depends exclusively upon the good conscience of the debtor. Natural obligation distinguished from: Moral obligation: natural obligation produces juridical effects such as the right to retain what has been voluntarily paid by the debtor. Civil obligations: natural obligation does not give rise to an action to compel its performance Obligation enforceable by: Civil: action Moral: conscience Natural: obligation without sanction ELEMENTS/REQUISITES OF CIVIL OBLIGATIONS 1. Subjective Elements: active subject, passive subject 2. Objective Elements: prestation, efficient cause/legal tie or vinculum juris Subjective Elements: 1. Active Subject: who has the power to demand the prestation, known as the obligee or creditor 2. Passive Subject: who is bound to perform the prestation, known as the obligor or debtor Objective Elements: 1. Prestation: the subject matter of the obligation Requisites of Prestation:
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SOURCES OF OBLIGATIONS (efficient cause): 1. Law The law cannot exist as a source of obligations, unless the acts to which its principles may be applied exist. But once those acts or facts exist, the obligations arising therefrom by virtue of express provisions of the law are entirely independent of the agreement of the parties. Such obligations and their correlative rights are governed by the law by which they are created. 2. Contracts Meeting of minds between two parties whereby one is bound to do, to give, not to do or not to give. Created by mutual consents, without such no contract exists. The terms of the contract should not be contrary to law, morals, good customs, public policy, or public order. If the contract does not violate any of the aforementioned limitations, it should be given effect, notwithstanding the absence of any legal provision at the time it was entered into which governs it.
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NATURE AND EFFECT OF OBLIGATIONS Fundamental Rights: No need for statutory law to enforce such right Statutory Rights: Either created by law or recognized by law a. Created by law: duty and obligation of other party is derived from the law itself b. Recognized by law: provisions of law merely supplement the original source of rights such as those conferred by stipulations of contracts Either real rights or personal rights a. Real rights: enforceable and demandable against the whole world the power belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally exercised. b. Personal rights: enforceable and demandable against a particular person the power belonging to one person to demand of another, as a definite passive subject, the fulfillment of a prestation to give, to do or not to do. REAL OBLIGATIONS (to give/deliver) The creditor may demand from the debtor transfer or conveyance of ownership or merely possession of a thing or where the performance of prestation creates real rights or right to return. Need of Tradition or Delivery: From the time the obligation to deliver a determinate thing arises, the creditor has only a personal right to the thing itself and to the fruits thereof. The ownership of things is transferred not by mere agreements but by delivery. The creditor, therefore, does not acquire any real right over the thing except from the time it is delivered to him. Modes of Delivery: 1. Actual Delivery: Physical transfer of the thing from the creditor to the debtor Where physically, the property changes hands 2. Constructive Delivery: Where the physical transfer is implied. a. Symbolic Delivery: as when the keys of the car are given as graduation gift. b. Formal Delivery: execution of public instrument selling land. c. Traditio Longa Manu: delivery by mere consent or pointing out of the object d. Traditio Brevi Manu: delivery by the short hand; the kind of delivery whereby a possessor of a thing not as an owner, becomes as owner
DEFAULT (MORA): Delay in the fulfillment of obligations; it is non-fulfillment with respect to time. There can be delay only in positive obligations; but there can be no delay in negative obligations. Begins from the moment the creditor demands the performance of the obligation
NEGLIGENCE (CULPA): Is simply the absence of due care required by the obligation Negligence as Question of Fact: No fixed standard of diligence applicable to each and every obligation. Each case must be determined upon its particular facts and circumstances, and the degree of diligence required for the performance of an obligation must depend upon the circumstances of the particular obligation. Diligence: Required by the nature of obligation and corresponds with the circumstances of the persons, of the time and of the place. Degrees of Diligence: 1. Extra-ordinary diligence (at most diligence) Applicable to common carriers, commodatum, banks in handling money and property, and public utility such as telecommunications SLIGHT NEGLIGENCE will already result to breach of obligation 2. Ordinary diligence Common standard ORDINARY NEGLIGENCE will result to breach of obligation 3. Simple or slight diligence No provision of law to support such but it can be stipulated EXTRA-ORDINARY NEGLIGENCE will result to breach of obligation Kinds of Negligence: 1. Culpa Contractual Is the fault or negligence of the debtor as an incident to the fulfillment of an existing obligation. Negligence in the performance of pre-existing obligation from a perfected contract. Only the parties of the contract may be liable for negligence Action is purely civil in character If other party is a juridical person, apply the principle of agency, employee is the agent of principal, negligence of the employee is negligence of the principal. Respondiat superior (master servant): negligence of the employer is the negligence of employee since the former has control to the latter. Defense of a good father is not a valid defense. Only proof needed is the breach of contract; the defense of diligence may mitigate 2. Culpa Aquiliana Is the fault or negligence which constitutes an independent source of obligation between parties not previously bound. Quasi-delict founded on negligent act or omission The party who committed the negligent act will be solely and principally liable.
Contracts of Debtor: If the conditional obligation has for its object the delivery of a determinate thing, the debtor cannot, before the happening of the suspensive condition, make contracts disposing of or alienating or encumbering the thing, or otherwise creating a real right over the thing incompatible with the right of the creditor. In case of breach: If he does so, then all such contracts are abrogated and cease to have any effect upon the happening of the suspensive condition. Principle: Because of the retroactivity of the obligation, the creditor retains a superior right. When third person acted in good faith: If the third person with whom the debtor has made a contract pendente conditione acted in good faith, and the thing has been delivered to him, the happening of the suspensive condition will not serve to defeat his right of ownership. Accion reivindicatoria not applicable: When the third person is in good faith, the creditor cannot recover the thing by an accion reivindicatoria, because, there being no delivery to him, he does not have ownership over the thing. The debtor will be liable for damages to the creditor. When third person in bad faith: He may be compelled to deliver the thing to the creditor. Contracts of Creditor: If the creditor, before the happening of the condition, has already disposed of his expected right, such as a mortgage over the property to be delivered to him, the happening of the suspensive condition consolidates or makes effective the act performed pendente conditione. Obligations to Do, Not to Do: Judicial determination: In obligations to do and not to do, the courts based on their sound discretion, shall determine the retroactive effect of fulfillment of the condition. To allow or not: The court may determine to what date the retroactivity shall be allowed, or it may even refuse to permit retroactivity, depending upon the circumstances of each case. The intent of the parties should be taken into account. As To Fruits and Interests: Not required: For reasons of practicability or convenience, the law does not require the delivery or payment of fruits or interests accruing before the happening of the suspensive condition. No retroactivity to right to fruits: The right to the fruits of the thing, therefore, is not within the principle of retroactivity of conditional obligations. When reciprocal obligations: Rule: The fruits and interests pending the happening of the condition are deemed to mutually compensate each other. Example: X agrees to sell his land and Y promises to pay P20,000, and the agreement is subject to a suspensive condition. Upon happening of condition: X will only sell his land (the fruits that X may have received before the happening of the condition will not be delivered) and Y will pay the P20,000 (the interest that could have accrued on the sum of P20,000 is not to be paid) Conclusion: The fruits and the interests are considered as equivalent to and are made to offset each other. When unilateral obligations:
Rights Pending Condition: Between the moment of the creation of the conditional obligation and the fulfillment of the suspensive condition, the creditor cannot enforce the obligation; his right during that period is a mere expectancy. On creditor: The creditor may file action in court to preserve contingent right such as filing an injunctive relief, to enjoin or stop any action of the debtor that will deprive the right of the creditor to the property. On debtor: The debtor may recover whatever he prematurely paid or delivered. Suspensive conditions in reciprocal obligations: In reciprocal obligations, the compliance of respective prestation is the suspensive condition of others performance unless there is stipulation that the performance will be at a specific time. If neither performs, no one can be held liable because they are both guilty. If time of performance is not coincidence with another, then non-performance of one will lead to mora solvendi or accipiendi. POTESTATIVE CONDITION One which depends upon the will of one of the contracting parties. It is one which is in the power of one of the parties to realize or prevent. E.g. I promise to pay P100, if you build a house for me in three months. Other types of conditions: 1. Casual condition: One which depends exclusively upon chance or other factors, and not upon the will of the contracting parties. E.g. I will give you my land if war breaks out next month. A condition dependent upon the will of a third person is also included in this class. E.g. I will give you P500, if I win the case which I have before the Supreme Court. 2. Mixed Condition: One which depends upon the will of one of the contracting parties and other circumstances, including the will of a third person. E.g. I will give you a house, if you marry Maria. Kinds of Potestative Condition 1. Simple Potestative Condition It presupposes not only a manifestation of will but also the realization of an external act, such as if you sell your house.
Void Prestation
(2) If one of the prestations is illegal, the others may be valid and the obligation remains.
Impossibility of Prestation
(3) If it is impossible to give all except one, that last one must still be given.
Right to Choose
ESTOPPEL An admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon (Art. 1431) Concept: A bar which precludes a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as truth, either by the acts of judicial or legislative officers or by his own deed or representation, either expressed or implied. Bars others: It bars not just the person causing estoppel but also successors-in-interest, etc. Binds privies: in blood like heirs, and in estate, like grantees When not applicable: 1. If the act, conduct or representation of the party sought to be estopped is due to ignorance founded on INNOCENT MISTAKE. 2. A party who had NO KNOWLEDGE of nor GAVE CONSENT to a transaction. 3. It is not applicable on ILLEGAL ACTS or those prohibited by law or are against public policy. 4. No estoppel against the government, as the same is not estopped by mistake or error on the part of its officials or agents.
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CHARACTERISTICS OF CONTRACTS Autonomy: Art 1306: The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Validity of Stipulations: The contract is the law between the contracting parties. And where there is nothing in the contract which is contrary to law, morals, good customs, public policy, or public order, the validity of the contracts must be sustained. Qualification of Contract: The law, not the parties, determines the JURIDICAL SITUATION created by the parties through their contract and the rights and obligations arising therefrom. A contract is to be judged by its character, and courts will look to the substance and not to the mere form of the transaction. Example of qualification: It has been held that even when the contract may be in the form of a sale with pacto de retro, if the real agreement of the parties is that of loan with a mortgage, the form of the contract will be disregarded and the contract held to be a mortgage. Limitations on stipulations: An act or contract that is illegal per se is one that by universally recognized standards is inherently or by its very nature, bad, improper, immoral or contrary to good conscience. Obligatory Force: Art. 1159: Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Art. 1315: Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (Consensual contracts) Consensual contracts: Consensual contracts are perfected by mere consent which is the meeting of minds of the parties upon the terms of contract. The consent need not be made expressly. Binding effects of contracts: The binding force of a contract is not limited to what is expressly stipulated, but extends to all consequences which are the natural effect of the contract. Considering its true purpose, the stipulations it contains, and the object involved. Principle: Contracts are not what the parties choose to call them, but what they really are as determined by principles of law.
STAGES IN EXECUTION OF CONTRACTS 1. Preparation, conception, or generation which is the period of negotiation or bargaining. 2. Perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract. After its perfection: OBLIGATION PHASE, includes the performance of the prestation agreed upon. 3. Consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.
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OBJECT / SUBJECT MATTER The object of a contract is its subject matter. It is the thing, right, or service which is the subject matter of the obligation arising from the contract. Requisites of Object: 1. The object must be within the commerce of man. 2. It must be existing at the time of perfection of contract. 3. It must be licit, or not contrary to law, morals, good customs, public policy, or public order. 4. It must be possible. 5. It must be determinate as to its kind. Within Commerce of Man: Art. 1347: All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. (2) No contract may be entered into upon future inheritance except in cases expressly authorized by law. Commerce of man: Including only those things which are not susceptible of appropriation or of private ownership, and which are not transmissible. Things outside the commerce of man: 1. Services which imply an ABSOLUTE SUBMISSION by those who render them, sacrificing their liberty, their independence or beliefs, or disregarding in any manner the equality and dignity of persons, such as perpetual servitude or slavery. 2. PERSONAL RIGHTS, such as patria potestas or marital authority, the status and capacity of persons, and honorary titles and distinctions. 3. Public offices, inherent attributes of the public authority, and political rights of individuals, such as the right of suffrage. 4. Property while they pertain to the public dominion, such as the roads, plazas, squares, and rivers. 5. Sacred things, common things, like the air and the sea, and rea nullius (nobodys property), as long as they have not been appropriated. Must Be Existing: It is essential that the object must be in existence at the time of the perfection of the contract, or that it has the possibility or potentiality of coming into existence at some future time. Thus, future things can be the object of contracts. Future Things as Object: a. Those which do not belong to the obligor at the time the contract is made; they may be made, raised, or acquired by the obligor after the perfection of the contract.
REFORMATION OF INSTRUMENTS Purpose: In order that the true intention of the contracting parties may be expressed. Basis: The action for such relief rests on the theory that the parties came to an understanding, but in reducing it to writing, through mutual mistake, fraud or some other reason, some provision was omitted or mistakenly inserted, and the action is to change the instrument so as to make it conform to the contract agreed upon. Who: Art. 1368. Reformation may be ordered at the instance of either party or his successors in interest, if the mistake was mutual; otherwise, upon petition of the injured party, or his heirs and assigns. Distinguished from annulment: a. The action for reformation of instruments presupposes that there is a valid existing contract between the parties, and only the document or instrument which was drawn up and signed by them does not correctly express the terms of their agreement. b. Annulment involves a complete nullification of the contract, while reformation gives life to it upon certain corrections. Effects of reformation: The general rule is that it relates back to, and takes effect from the time of its original execution, especially as between the parties. Effect on Statute of Frauds: The statute of frauds is no impediment to the reformation of an instrument, whether by way of correcting a description which by mistake includes property other than that intended, or omits the property from the description, or conveys too much. Requisites of Reformation: 1. There must have been a meeting of the minds upon the contract. 2. The instrument or document evidencing the contract does not express the true agreement between the parties, 3. The failure of the instrument to express the agreement must be due to mistake, fraud, inequitable conduct, or accident. When Available: 1. Art. 1361: When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed. (Mutual mistake) Requisites of Mistake: 1. That the mistake is one of fact 2. That it was common to both parties 3. The proof of common mistake must be clear and convincing (more than mere preponderance of evidence) 2. Art. 1362: If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.
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Liability for damages Mutual restitution (status quo ante) It must be contemporaneous restitution. When mutual restitution not applicable: (as only one party will only restitute) a. Annulled contract involving incapacitated b. If the plaintiff lost the object of contract, action is barred c. If the defendant lost the object, he must return the value of the object. d. When there will be unjust enrichment Ratification / Confirmation Definition: It is that act or means by which efficacy is given to a contract or an obligation which suffers from a vice of curable nullity. It extinguishes the action to annul voidable contract. There is no need for juridical action for the same to take effect. Distinguished from acknowledgement: Confirmation or ratification cures a defect of nullity, while acknowledgement remedies deficiency of proof. Requisites of Confirmation: 1. That the contract is voidable or annullable, or one in which the consent of one party is defective, either because of lack of capacity to contract or because of error, fraud, violence, intimidation or undue influence. 2. That the ratification is made with knowledge of the cause for nullity. 3. That at the time the ratification is made, the cause of nullity has already ceased to exist. How Made: Express or Implied 1. Express ratification: a. As to nature: it seems clear that any oral or written manifestation of the person entitled to ask for annulment that he agrees to be bound by the contract or that he will not seek its annulment, would be express ratification. b. As to requisites: They are the same as those for implied ratification it is only in the form that these two kinds of ratification differ. 2. Implied ratification:: It may be implied from the conduct or acts of the party entitled to ask for annulment. Examples:
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VOID / INEXISTENT CONTRACTS It is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or ratification. Distinguished from rescissible contracts: 1. In rescissible contract, the defect is in their effects, either to one of the parties or to a third party; while in void contracts, the defect is inherent in the contract itself. 2. The nullity of the inexistent contract is a matter of law and public interest, while rescission is based on equity and is more a matter of private interest. 3. If no action is taken to set aside a rescissible contract, it remains valid and produces all its effects; in void contracts, there are no legal effects even if no action is taken to set it aside. 4. The action to rescind prescribes while the action to declare the nullity of void contracts never prescribes.
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