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TITLE I - OBLIGATIONS
CHAPTER 1 GENERAL PROVISIONS
Obligation: Requisites
1. Passive Subject debtor/obligor who is bound to thefulfilment of the obligation
2. Active Subject creditor/obligee who is entitled to demandthe fulfilment of the obligation (natural/juridical persons)
3. Prestation/Object conduct required to be observed by thedebtor
4. Vinculuum Juris juridical/legal tie w/c binds or connects theparties to the obligation; enforceability of the obligation
Object/Prestation: Kinds1. to give delivery of a movable/immovable thing2. to do work/service whether physical or mental3. not to do abstaining from some act
Object/Prestation: Elements1. possible2. determinate/determinable3. susceptible of pecuniary value4. legal/licit
Legal Wrong: Elements1. legal right in favour of the plaintiff2. correlative legal obligation on the part of the defendant3. an act or omission by the defendant in violation of said right
w/ resulting damage to the plaintiff
Obligations: Kinds Accdg. to Subject Matter1. Real Obligation subject matter is a thing w/c the debtor
t d li t th dit
Quasi Contracts: Elements1. lawful2. voluntary3. unilateral
Independent Civil Actions1. obligations not arising from the act/omission claimed to be
criminal2. violations of constitutional rights & liberties of individuals3. defamation, fraud or physical injuries4. refusal/failure of members of a local police force to render
protection to life/property
Civil Liability: Scope1. restitution2. reparation for the damage caused3. indemnification
Quasi Delict: Requisites1. act/omission2. fault/negligence3. damage caused4. direct relation of cause & effect between the act or omission
and the damage5. no pre-existing contractual relation bet. the parties
Test of Negligence1. a duty on the part of the defendant to protect the plaintiff
from the injury of w/c the latter complains
2. a failure to perform that duty3. an injury to the plaintiff through such failureNegligence: Kinds
1. culpa aquilana negligence as a source of obligation2. culpa contractual negligence in the performance of a
contract3. culpa criminal negligence resulting in the commission of a
crime
QUASI-DELICT CONTRACT
The obligation arises only when
there is a breach
There is already an obligation w/c
exists prior to or even w/o abreach
It is the breach itself w/c givesrise to the obligation
The breach of the contract isimmaterial to the legal obligation
Quasi-delict & breach are Contract & breach are separable.
CIVIL OBLIGATIONS NATURAL OBLIGATIONS
Civil obligations are thosewhich give a right of action
to compel their performance
natural obligations are those whichcannot be enforced by court action
but which are binding on the partywho makes them, in conscience andaccording to equity & natural justice
binding force from positivelaw
equity and natural justice
can be enforced by courtaction or the coercive powerof public authority
cannot be compelled by court actionbut depends exclusively upon thegood conscience of the debtor
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DETERMINATE/SPECIFIC INDETERMINATE/GENERIC
- particularly designated- physically segregated fr.others of the same class- individualized
- can be identified ordistinguished from others ofits kind- debtor cannot substitute itw/ another although it is ofthe same kind & quality w/othe consent of the creditor
- refers only to a kind class/genus tow/c it pertains- cannot be pointed w particularity- the object is determinable, but the
moment it is delivered, it becomesdeterminate- debtor can give anything of thesame class of the same kind/quality*Limited Generic when thegeneric objects are confined to aparticular class
Duties of Debtor in Obligation to Give a Determinate Thing1. Preserve the thing diligence of a good father of a family2. deliver the thing itself3. deliver the fruits of the things4. deliver accessions and accessories5. answer for damages in case of non-fulfilllment/breach
Duties of Debtor in Obligation to Give a Generic Thing1. deliver the thing w/c is of the quality intended by the parties2. to be liable for damages in case of fraud, negligence, delay,
or contravention of the tenor the obligation3. in case of fortuitous event, debtor is still liable
Fruits: Kinds1. natural fruits spontaneous products of the soil & the young
& other products of animals
2. industrial fruits produced by lands of any kind throughcultivation of labor
3. civil fruits derived by virtue or juridical relation
PERSONAL RIGHT REAL RIGHT
Right/power of a person to demandfrom another the fulfilment of thelatters obligation
Right/interest of a person overa specific thing w/o a definitepassive subject against whomthe right may be enforced
Definite active subject & definitepassive subject
Definite active subject but nodefinite passive subject
Binding against a particular person Binding against the wholeworld
Creditors Remedies in Specific Real Obligations1. Specific performance/Compliance/Fulfillment performance
of the prestation itself
Liability in case of Breach1. in good faith liable for necessary/normal damages2. in bad faith liable for all kinds of damages, including
nominal, moral & exemplary
Exemption from Liability: Kinds1. a party to a contract is relieved from the effects of his fault or
negligence by a 3rdperson (e.g. insurance)2. one party to a contract renounces in advance the right to
enforce liability arising from the fault/negligence of others
DamagesMoralExemplaryNominalTemperateActual
Liquidated & attorney fees
INCIDENTAL FRAUD(ART. 1171)
CAUSAL FRAUD(ART. 1338)
Malice Deceit
Subsequent fraud Antecedent Fraud
Fraud committed in theperformance of an obligationalready existing
Fraud employed in the execution ofa contract
evades the normal fulfilmentof an obligation
uses insidious words ormachinations to induce another toenter a contract, w/o them, he
would have agreedDoes not vitiate consent Vitiates consent
Obligation/contract is valid Contract is voidable
Creditor has a right todamages because of breach
Creditor may annul the obligation
SIMPLE NEGLIGENCE GROSS NEGLIGENCE
Lack of due diligence So reckless as to amount to fraud
Waiver of future simplenegligence is allowed
Waiver of future gross negligenceis void, as it is tantamount towaiving future fraud
FRAUD NEGLIGENCEDeliberate intention to causedamage or injury
No such intention
Waiver for future fraud void May be allowedMust be clearly proved Presumed from the violation of
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GR: contributory negligence of a creditor reduces/mitigates thedamages w/c he can recoverE: if the negligent act/omission of the creditor is the proximate causeof the event w/c led to the damage/injury complained of, the creditorcannot recover damages
Delay: Kinds1. Ordinary delay failure to perform an obligation on time2. Legal Delay/Default failure to perform an obligation on time
constitutes a breach of the obligation
Default: Kinds1. Mora Solvendi delay on the part of the debtor2. Mora Accipiendi delay on the part of the creditor3. Compensatio Morae delay of obligors in reciprocal
obligations
Mora Solvendi: Requisites1. the obligation is due, demandable & liquidated2. failure of the debtor to perform his positive obligation on the
time agreed upon through his fault/negligence3. creditor makes a judicial/extra-judicial demand upon the
debtor to comply w/his obligation4. failure to comply w/ demand
Mora Solvendi: Effects1. debtor guilty of breach2. debtor is liable to the creditor for interest/damages3. Fortuitous event
a. Determinate thing debtor still liable; but if the debtorcan prove that the loss would have resulted just thesame even if he had not been in default, the court mayequitably mitigate/reduce the damages
b. Indeterminate thing debtor is not relieved from liabilityfor loss & can still be compelled to deliver a thing of thesame kind
GR:Demand is necessary. No demand, no delay.Exceptions:
1. when the obligation so provides2. when the law so provides3. when the nature & circumstances of the obligation provides;
designation of time was the controlling motive4. demand would be useless, as when the obligor has rendered
it beyond his power to perform5. there is express recognition of default by the debtor6 th i f b t i i l bli ti
Cessation of the Effects of Mora1. renunciation by the creditor express/implied2. prescription
FORTUITOUS EVENT FORCE MAJEURE
Acts of man Acts of God
Independent of the will of theobligor but not of other humanwills
Independent of the will of everyman
e.g. war, fire, robbery, murder e.g. earthquake, flood, lightning
Fortuitous Event: Kinds1. ordinary events w/c are common & w/c the contracting
parties could reasonably foresee2. extraordinary uncommon & w/c the parties could not
reasonably foresee
Fortuitous Event: Requisites1. event must be independent of the human will or at least of
the will of the debtor2. even could not be foreseen, if foreseen, inevitable3. event must be of such character as to render it impossible for
the debtor to comply with his obligation in a normal manner4. debtor must be free from any participation in the aggravation
of the injury to the creditor
GR: a person is not liable for loss or damage caused to anotherresulting from a fortuitous eventExceptions:
1. Expressly specified by lawa. Debtor is guilty of fraud, negligence, delay or
contravention of the tenor of the obligationb. Debtor has promised to deliver the same thing to 2 or
more persons who do not have the same interestsc. Obligation to deliver a specific thing arises from a crimed. The thing to be delivered is generic
2. declared by stipulation3. nature of the obligation requires the assumption of risk
Simple Loan/Mutuum: a contract whereby one of the parties deliversto another, money or other consumable thing, upon the condition thatthe same amount of the same kind & quality shall be paid
Interests: income produced by money in relation to the amount &time it cannot be utilized by the owner
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Disputable Presumptions1. Interest bearing debt presumption that interest has been
paid if the principal has been received w/o reservation re:interest
2. Debt payable in instalment presumption that earlierinstalments have been paid if the later instalment has beenreceived w/o reservation re: the previous instalment
When the Presumption Does not Apply1. w/ reservation as to the interest2. receipt w/o indication of particular instalment paid3. payment of taxes4. non-payment has been proven
Creditors Remedies for Satisfaction of their Claims1. Levy & execution of debtors non-exempt property2. Accion subragatoria3.
Accion pauliana4. Accion directa
Accion Subragatoria:the action w/c the creditor may exercise in theplace of his negligent debtor in order to preserve/recover for thepatrimony of the debtor the product of such action & then obtaintherefrom the satisfaction of his own credit; the debtor of my debtor ismy debtor
Accion Subragatoria: Requisites1. Debtor is indebted to the creditor2. Debt is due & demandable3. Failure of debtor to collect his own debt from a 3
rd
personeither through malice or negligence
4. creditor must be prejudiced by the inaction/failure of thedebtor to proceed against the 3rdperson
5. creditor must have pursued 1stor exhausted all the propertiesof the debtor w/ arent exempt from execution
6. debtors assets are insufficient to satisfy his claims7. right of account is not purely personal
Accion Pauliana: right of creditors to rescind alienations by debtorw/c are prejudicial to them to the extent of the prejudice
Accion Pauliana: Requisites1. credit in favour of the plaintiff2. debtor has performed an act subsequent to the contact,
giving advantage to other persons3. creditor is prejudiced by the debtors act w/c are in favour of
3rd & i i ill b fit th dit
CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS
Different Kinds of Obligations1. According to Demandability
a. Pureb. Conditionalc. w/ a term
2. According to Plurality of Objecta. Simpleb. Multiple
i. Alternativeii. facultative
3. According to Plurality of Subjectsa. Singleb. Multiple
i. Jointii. Solidary
4. According to Performancea. Divisibleb. Indivisible
5. According to Sanction for Breacha. No penal Clauseb. w/ penal clause
Section 1 Pure & Conditional Obligations
Pure Obligation: has neither a condition nor a term attached to it; itis subject to no contingency
Obligations Demandable at Once1. pure2. subject to a resolutory condition3. subject to a resolutory period
Condition: Characteristics1. Future & Uncertain2. Past but Unknown
KINDS OF CONDITION
SUSPENSIVE RESOLUTORY
Conditionfulfilled
Obligation arises Obligation extinguished
Does nottake place
Juridical tie doesntappear
Tie of law is consolidated
U til it t k E i t f bli ti i H th ibilit f
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Preservation of Creditors Rights1. To prevent the loss or deterioration of the things which are
the object of the obligations by enjoining or restraining actsof alienation or destruction by the debtor himself or by thirdpersons
2. To prevent concealment of the debtors properties whichconstitute the guarantee in case of non performance of theobligation
3. To demand security if the debtor becomes insolvent4. To compel the acknowledgement of the debtors signature on
a private document or the execution of the proper publicdocuments for registration so as to affect third persons
5. To register the deeds of sale or mortgages evidencing thecontract
6. To set aside fraudulent alienations made by the debtor7. To interrupt the period of prescription, by actions against
adverse possessors of the things which are the objects of theobligation
Resolutory Condition: Effects1. Obligation to give mutual restitution (includes fruits);
return to status quo; return to each other what they received2. Obligation to do/not to do discretion of the courts
Obligation: Kinds Accdg. to Persons Obliged1. Unilateral only 1 party is obliged to comply w/ a prestation2. Bilateral both parties mutually bound to each other; both
are debtors/creditors of each other
Bilateral Obligations: Kinds1. Reciprocal 2 prestations arise from the same cause; each
prestation is designed to be the counterpart of the other;mutual debtor/creditor
2. Non-Reciprocal not arising from the same cause;obligations arent dependent upon each other
Reciprocal Obligations: Remedies1. Specific Performance & Damages2. Resolution & Damages
Summary of Rulings on Resolution1. Right to resolve is inherent in reciprocal obligations2. Breach must be substantial & not slight & there must be proof
thereof3. Right of resolution can be exercised extrajudicially & will take
ff t i t b th d f lti t f th ti f
RESCISSION IN RECIPROCAL OBLIGATIONS
ARTICLE 1191: RESOLUTION ARTICLE 1381: RESCISSION
Principal remedy Subsidiary remedy
Need not show that there is no
other remedy
Must show that there is no other
remedyMay be demanded only by aparty to the contract
May be demanded by a 3rd partyprejudiced by the contract
May be denied by the court whenthere is sufficient reason to
justify extension of time to thedefendant in w/c to perform
Such reason doesnt affect theright to ask for rescission
Non performance is the onlyground for the right to rescission
There are various grounds ofequity provided as grounds forrescission (economic prejudice)
Applies only to reciprocalobligations where 1 party has
not performed
Applies w/n the contract producesunilateral/reciprocal obligations &
even when the contract has beenfully fulfilled
SIMILARITIES1. Both presuppose contracts validly entered into and existing2. both require mutual restitution when declared proper
CONTRACT OF SALE CONTRACT TO SELL
Ownership transferred upondelivery of the thing sold
Ownership reserved in the vendor &does not pass until full payment of thepurchase price
Reciprocal obligations:buyer pay sum of moneyseller deliver the thing,transfer ownership
Separate obligation to do which is toexecute a deed of absolute sale
Remedies:- Specific performance +damages- rescission + damages
Remedies:- restitutionNote: there can be no rescissionbecause obli. to execute a deed of salenever arose; obli. is non-existent
Conditional contract of sale upon fulfilment ofcondition, may compel totransfer ownership
Execution of DOS is another andseparate actionOwnership is retained by vendor
Non-payment of purchaseprice is resolutory condition
Positive suspensive condition nonpayment of the purchase price is not abreach, but an event which preventsthe obli. of vendor to convey title
C diti A d t C /O i i
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Impossible Conditions: Kinds1. Physical cannot exist/cannot be done2. Legal contrary to laws, morals, good customs, public order,
public policy
Effect of Impossible Condition:GR: the whole obligation is voidExceptions:
1. Obligation not to do an impossible thing2. If the obligation is divisible, that part of the obligation not
affected by the impossible condition is valid3. Pre-existing obligation4. Simple/Remuneratory donations5. Testamentary Dispositions
Positive condition to dosomething impossible
Void conditionVoid obligation
Negative condition not todo something impossible Disregard conditionValid obligation
Negative condition not todo something illegal
Valid conditionValid obligation
Other Kinds of Conditions1. Positive - condition involves the performance of an act2. Negative - condition involves the non-performance of an act3. Divisible condition is susceptible of partial realization4. Indivisible condition is not susceptible of partial realization5. Conjunctive there are several conditions, all of w/c must be
realized6. Alternative there are several conditions, only 1 must be
realized7. Express condition is stated expressly8. Implied condition is tacit
Application of 1189: Requisites1. obligation to give2. determinate thing3. suspensive condition4. condition fulfilled5. there is loss, deterioration, improvement of the thing during
pendency of condition
LOSS DETERIORATION IMPROVEMENT
Bydebtor
Liable fordamages to
Creditor maydemand the thing
Usufructuary(Usufruct the
Section 2 Obligations with a Period
Period/Term: length of time which, exerting an influence on anobligation as a consequence of its juridical acts, suspends itsdemandability or determines its extinguishment
Period: Requisites1. Future2. Certain3. Possible
Types of Periods:1. Suspensive (ex die) obligation begins from a day certain,
upon the arrival of the period2. Resolutory (in diem) obligation is valid up to a day certain;
terminates upon arrival of period3. Legal granted by law4. Voluntary stipulated by the parties5. Judicial fixed by the courts6. Express specifically stated7. Tacit when a person undertakes to do some work w/c can
be done only during a particular season8. Original9. Grace an extension fixed by the parties or by the court10. Definite refers to a fixed known date or time11. Indefinite refers to an event w/c will necessarily happen but
the date of its happening is unknown
PERIOD CONDITION
Ful-filment
Certain event which musthappen sooner or later at adate beforehand,
An uncertain event
As toinfluenceon theobligation
Has no effect upon theexistence of obligations butonly their demandability orperformance
Gives rise to anobligation orextinguishes onealready existing
Time Refers only to the future May refer also to a pastevent unknown to theparties
Left to the
will of thedebtor
Depends upon the will of the
debtor court to fix duration
Depends upon the sole
will of the debtor invalidates obligation
Retro-activity ofeffects
Unless there is an agreementto the contrary , arrival ofperiod does not have any
t ti ff t
Happening of conditionhas retroactive effect,
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Debtor Loses Right to Make Use of Period1. debtor becomes insolvent, unless he gives a
guaranty/security for the debt2. debtor doesnt furnish the guaranty/security promised3. debtor by his own acts has impaired the guaranty/security
after their establishment or through a fortuitous event theydisappear, unless he immediately gives a new one equallysatisfactory
4. debtor violates any undertaking in consideration of w/c thecreditor agreed to the period
5. debtor attempts to abscond6. creditor is deceived on the substance/quality of the thing
pledged, the creditor may either claim another thing in itsstead, or demand immediate payment of the principleobligation (Art. 2109)
Steps involved in an Action for Fixing a Period
1.
court should determine that the obligation does NOT fix aperiod but it can be inferred that a period is intended due tothe circumstances OR the period is dependent on the debtorswill
2. court shall decide what period was probably contemplated bythe parties
Instances When Courts Can Fix a Period1. no period fixed but a period was intended2. duration of period depends upon will of the debtor3. debtor binds himself to pay when his means permits him to
do so
4. in reciprocal obligations when theres a just cause for fixing aperiod5. no period for lease, monthly rent paid, and lessee occupies
premises for over a year; if the rent is weekly, the courtsmay determine a longer period after lessees possession forover 6 months; if rent is daily, the courts may fix a longerperiod after lessees possession for over 1 month
GR: if the obligation does not fix a period, but from its nature & thecircumstances it can be inferred that a period is intended, the courtsmay fix the duration thereofExceptions:
1. Lease of rural land (Art. 1682 & 1687, 1stsentence) whenits duration has not been fixed, it shall be for the timenecessary for the gathering of the fruits w/c the whole estatemay yield in 1 year OR w/c it may yield once, although 2 ormore years have to elapse for the purpose
2 P t d t l (A t 1606) i th b f
GR: in alternative obligations, the right of choice belongs to debtorExceptions:
1. When expressly granted to the creditor2. When agreed upon by the parties that a 3rdperson shall
make the choice
Debtors Right of Choice: Limitations1. Debtor cant choose prestations that are impossible, unlawful,
or couldnt have been the object of the obligation2. debtor cant choose part of 1 & part of another prestation3. only 1 is practicable; loss of right of choice
Concentration: the act of making the choice
Notice of Choice: Form1. Orally2. Writing3.
Tacitly/Impliedly4. Other Unequivocal Means
Effect of Notice1. Ceases to be alternative & becomes simple2. choice is irrevocable & cannot be changed by either party w/o
consent of the other
ALTERNATIVE FACULTATIVE
As to thecontent
There are variousprestation all of w/cconstitute parts of the
obligation
Only the principalconstitute the obligation,the accessory being only a
means to facilitate paymentNumber ofprestations
Several are due butcompliance of one issufficient
Only one prestation is duealthough the debtor isallowed to substitute it
Right ofchoice
May be given to thecreditor or third person
Right to make substitutiondebtor only
Loss thru afortuitousevent
Loss of one or more ofthe alternatives doesntextinguish the obligation
Loss of the thing dueextinguishes the obligation
As tonullity
The nullity of oneprestation does not
invalidate the obligation
Nullity of the principalobligation invalidates the
obligation & the creditorcant demand the substituteeven when this is valid
As toeffect ofloss
Only the impossibility ofall the prestation duewithout fault of the
the impossibility of theprincipal prestation issufficient to extinguish the
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RIGHT OF CHOICE: CREDITOR
FAULT LOSS OF ONE/SOME LOSS OF ALL
Debtor Creditor may choose:1. Claim any of those
subsisting2. Price of the thing
which disappeared
Choice by thecreditor shall fallupon the price ofany one of them+ damages
Creditor Deliver remaining Obligation isextinguished
FortuitousEvent
Creditor may choose fromthose subsisting
Obligation isextinguished
Section 4 Joint & Solidary Obligations
Obligations: Kinds Accdg. to # of Parties1. Single/Individual 1 creditor & 1 debtor2. Collective 2 or more debtors and/or 2 or more debtors
a. Joint There are as many obligations as there arecreditors multiplied by as many debtors
b. Solidary any of the debtors can be held liable forthe entire obligation, and any of the creditors isentitled to demand the entire obligation
GR: The obligation is joint since joint obligations are less onerousExceptions(When Solidarity Exists):
1. obligation expressly states2. law requires solidarity3. nature of the obligation4. imposed in a final judgment against several defendants5. a large condition is imposed upon heirs & the testament
expressly makes the condition in solidum6. quasi delicts7. employer-employees8. partners in partnerships9. principal-agent10. 2 bailees in a loan
JOINT SOLIDARY
-mancommunada-mancommunadamente-pro rata-proportionatelywe promise to pay
- solidaria- in solidum-jointly and/or severally- together and/or separately- individually and/or collectively-juntos o seperadamente-I promise to pay & signed by 2 or more
JOINT DIVISIBLE JOINT INDIVISIBLE
Each can demand/is liableonly for proportionate share
Fulfillment requires concurrence of alldebtors, but each for his own shareonly
Cannot act in representationor cannot be compelled toanswer for others
Proceed against all debtors;concurrence of all creditors necessaryfor enforcement of obligation
GR:The debtor may pay any of the solidary creditorsE: If any of the solidary creditors make a demand upon a debtor, thelatter must pay only to the one demanding payment, otherwise it willtreated as payment to a 3rdperson, and the debtor can still be made topay the one who made the demand on him (the debtor can still recoverfrom the paid creditor)
Active Solidarity: Effects1. Since it is a reciprocal agency the death of a solidary creditor
does not transmit the solidarity to each of his heirs but to allof them taken together
2. Each creditor represents the others in the act of receivingpayment and in all other acts which tend to secure the creditor make it more advantageous.a. If he receives only a partial payment he must divide it
among the other creditorsb. He can interrupt the period of prescriptionc. He may render the debtor in default for the benefit of all
other creditorsd. bring suit so the obligation would produce interest
3. One creditor does not represent the others in such acts asnovation, compensation, and remission.
4. The creditor and its benefits are divided equally among thecreditors unless there is an agreement among to dividedifferently
5. The debtor may pay to an solidary creditor, but if a judicialdemand is made he must pay only to the plaintiff
6. Each creditor may renounce his right even against the will ofthe debtor and the layer need not thereafter pay theobligation to the former
Passive Solidarity: Effects1. Each debtor can be required to pay the entire obligation but
after payment he can recover from the co-debtors theirrespective shares
2. The debtor who required to pay may set up by way ofcompensation his own claim against the creditor in this casethe effect is the same as that of payment
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Acts Prejudicial by Solidary Creditor: Effects1. among co-creditors obligation extinguished w/ respect to
debtors, but doesnt prejudice the right of other creditors torecover their shares from the creditor who effected the act
2. among co-debtors co-debtor to whom obligation wasextinguished cant recover from his co-debtors
Payment by a Solidary Debtor: Effects1. bet. solidary debtors & creditors full payment extinguishes
the obligation2. among solidary debtors paying debtor may demand
reimbursement from others for their proportionate share; incase of insolvency of 1, others assume the shareproportionately
3. among solidary creditors receiving creditor is jointly liableto others for their corresponding share
Non-Performance/Loss/Impossibility: Effects1. Loss w/o fault & before delay obligation extinguished2. Loss by fault of 1 of solidary debtors or through FE after
debtor incurred in delay all shall be responsible to thecreditor, for the price & payment of damages & interest w/oprejudice to their action against the guilty debtor
3. No loss but theres breach (delay, fraud, negligence) creditor may recover from any of the solidary debtors; theguilty debtor cannot be made to shoulder the hare of the co-debtors in the original obligation
Defenses Available to Solidary Debtors
1. Real defenses - derived from the nature of the obligation;benefits all the debtors (total)2. Personal defences - personal to, or w/c pertain to the share
of the debtor sued (total/partial)3. defenses personal to other solidary debtors the debtor can
only avail himself of the these defenses only w/ regard to thepart of the debt to w/c his co-debtors are liable for (partial)
PRESCRIPTIVE PERIOD
10years - written contract- obligation created by law- upon a judgment
6years - oral-contact- quasi-contract
4years - inquiry to the rights of the plaintiff- quasi delict
GR:obligations are indivisibleExceptions (divisible obligations):
1. The parties provide otherwise2. The law so provides3. The nature of the obligation necessarily entails the
performance of the obligation in parts; when the obligation
has for its object the:a. execution of a certain number of days of workb. accomplishment of work by metrical unitsc. analogous things w/c are by their nature susceptible
of partial performanceException to the Exception: Even though the object/service may bephysically divided, an obligation is indivisible if:
1. intended by the parties2. so provided by law
Divisible Thing vs. Indivisible Thing
1.
Divisible each 1 of the parts forms a homogenous &analogous object to the other parts as well as the thing itself
2. Indivisible if divided into parts, its value is diminisheddisproportionately; if the object is physically indivisible orservice is not susceptible of partial performance, obligation isalways indivisible
Kinds of Division1. Qualitative2. Quantitative3. Ideal/Intellectual
Kinds of Indivisibility1. Legal2. Conventional3. Natural
DIVISIBLE OBLIGATION INDIVISIBLE OBLIGATION
Capable of partial fulfilment Not capable of partial fulfillment
1.Execution of certain # ofdays of work
2.Expressed by metrical units3.Nature of obli. susceptible of
partial fulfilment
1. To give definite things2. Presumption when theres only1 debtor & 1 creditor3. Provided by law4. Intention of parties
INDIVISIBLE JOINT INDIVISIBLE SOLIDARY
Debtors ready to performtheir part do not becomeliable for more than the
Every debtor liable for losses &damages, but those ready to performmay recover fr. guilty debtor
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Function of Penal Clause1. provide for liquidated damages2. strengthen coercive force
Purpose of Penal Clause1. Reparation - substitutes damages suffered2. Punishment - right to damages besides penalty
Kinds of Penal Clause1. As to its Origin
a. Legalb. Conventional
2. As to its Purposea. Compensatoryb. Punitive
3. As to its Demandability/Effecta. Subsidiary/Alternativeb. Joint/Cumulative
Characteristics of a Penal Clause1. Subsidiary/Alternative
GR: upon breach of the obligation, the creditor must choosewhether to demand principal or penaltyExceptions:- Both the principal obligation & the penalty can bedemanded when the penal clause is joint & cumulative; thisoccurs when the creditor has been clearly granted such rightexpressly/impliedly- creditor has demanded fulfilment of the principal obligation
but it cannot be performed2. ExclusiveGR: penalty clause takes place of other damagesE: Both the penalty & actual damages can be reovered if:- there is an express stipulation- debtor refuses to pay penalty- debtor guilty of fraud
When Courts May Reduce Penalty1. partial/irregular performance2. iniquitous/unconscionable penalty (contrary to good customs)
Principal Obligation vs. Accessory Obligation1. Principal can stand by itself; does not on another obligation
for its validity/existence2. Accessory cannot stand alone; attached to a principal
obligation
OBLIGATIONS W/ APENAL CLAUSE
FACULTATIVEOBLIGATIONS
Payment of the penalty in lieu ofthe principal obligation can bemade only in express stipulation
Power of debtor to makesubstitution is absolute
Creditor may be granted right todemand both prestations
Creditor can never demandboth prestations
OBLIGATIONS W/ APENAL CLAUSE
GUARANTY
Obligation to pay the penalty isdiff. from the principalobligation
Object of the obligations of theprincipal debtor & guarantor isthe same
Principal obligation & penaltycan be assumed by the sameperson
Principal debtor cant be theguarantor of the sameobligation
GR: Penalty extinguished by
nullity of principal obligationE: penal clause assumed by 3rdperson
Guaranty subsists even when
the principal obligation isvoidable/unenforceable or is anatural one
Similarities1. both to insure performance of principal obligation2. both accessory & subsidiary obligationsCHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS
Modes of Extinguishment of Obligations1. payment/performance2.
loss of the thing due3. condonation/remission
4. confusion/merger5. compensation6. novation7. annulment8. rescission9. fulfillment of resolutory condition/period10. prescription11. death of a party in case of personal obligations12. renunciation by the creditor13. mutual desistance/withdrawal14. mutual/unilateral dissents15. change of civil status16. compromise17. impossibility of performance18. happening of fortuitous event19 want of interest
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Manner/Performance
1. IDENTITY the very prestation must be performed; the verything or service due must be delivered
GR: debtor of a (specific) thing cannot compel creditor to receive adifferent one, although the latter may be of the same value as, ormore valuable than that w/c is due
Exceptions the Requirement of Identity:1. when the obligee consents2. in case of waiver3. in facultative obligations debtor is given the right to render
another prestation in substitution4. substitution is allowed by stipulation w/ consent of creditor5. Dacion en Pago6. Novation
Rule of Medium Quality: if the obligation is the delivery of a genericthing, whose quality & circumstances have not been stated:
the creditor cannot demand a thing of superior quality the debtor cannot deliver a thing of inferior quality the court shall take into consideration the purpose & other
circumstances of the obligation
2. INTEGRITY the entire prestation must be performed;completeness
Exceptions to the Requirement of Integrity:
1. Substantial Compliance in Good Faith (POV of Debtor)2. Waiver (POV of Creditor)3. In application of payments, if the debts are equally onerous
Substantial Compliance in Good Faith: Requisites1. there must be substantial compliance
a. deviation is slightb. omission/defect is technical or unimportantc. must not be so material that intention of parties is
not attained2. obligor must be in good faith
a. attempt in good faith to perform w/o wilfull orintentional departure
When it will not apply:1. non-performance of material part of a contract2. when made in bad faith, knowingly & wilfully (Art. 1170)
7. if the work to be delivered partially, the price orcompensation for each part having been fixed
8. in case of several guarantors who demand the right ofdivision
9. in case of impossibility or extreme difficulty of a singleperformance
Who Pays? (PAYOR)
Creditor May be Compelled to Accept Payment From:1. the debtor, his heirs, assigns or agents2. any person who has an interest in the obligation (e.g.
guaranty/surety)3. a 3rdperson who has no interest in the obligation when there
is a stipulation that he can make payment
Donation: no intention of reimbursement & requires acceptance
if by 3rdperson w/o interest cant compel acceptance if debtor did not accept, but creditor accepted, rules of
reimbursement apply
WHO PAYS COMPELLABILITY REIMBURSEMENT
Debtor Can compel receipt No reimbursement
3r Person inInterest
Can compel receipt Reimbursement & subrogation(E: if intended to be a donation)
3rdPersonw/o Interestw/ stipulation
Can compel receipt Reimbursement & subrogation
3rdPerson
w/o Interestw/ostipulation
Cannot compel
receipt; if accepted,obli. extinguished
w/ knowledge & consent:
- reimbursement & subrogationno knowledge & no consent:- beneficial reimbursement only
MINOR EFFECTS
Minor ascreditor
Valid Payment to Incapacitated Person:1. Kept the thing delivered2. Redounded to his benefit
Minor asdebtor
GR: VOID he doesnt have capacity to alienateException: Art. 1427
To Whom? (PAYEE)
To Whom Payment Shall be Made:1. creditor/obligee - the person in whose favor the obligation
was constituted (creditor at the time payment is to be made,
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When Benefit to Creditor need not be Proved:1. subrogation of the payer in the creditors rights2. ratification by the creditor3. estoppel on the part of the creditor
To a 3rdpersonin possession of
credit
Valid if:- payment to debtor was made in good faith- creditor was in possession of the credit & notmerely the evidence of indebtedness*mere possession of the instrument does notentitle the holder to a payment nor does paymentrelease the debtor
When & Where Payment Shall be Made
When?1. payment should be made when it is due2. even if payment is due, the general rule is that demand is
still necessaryWhere?
1. with stipulationat the place designated2. no stipulation & delivery of specific thing place where the
thing was at the perfection of the contracta. exception: when its existence at the place when the
obligation was constituted was temporary, theperformance must be made at the debtors domicile
3. no stipulation & delivery of generic thing domicile of thedebtor & creditor bears expenses in going to the debtorsplace to accept payment
4. obligations of sum of money creditor is obliged to collectfrom the debtor in the debtors domicile
5. if debtor changes his domicile in bad faith or after he hasincurred in delay, additional expenses shall be borne by him
Special Rules on Monetary Obligations
Legal Tender: the currency which a debtor can legally compel acreditor to accept in payment of a debt in money when tendered by thedebtor in the right amount
Legal Tender in the Philippines: all coins & notes issued by theBangko Sentral ng Pilipinas coins are legal tender for amounts not exceeding P50 for
denominations of P0.25 and above those in amounts not exceeding P20 for denominations of
P0 10 or less
Loss of Value: So long as the notes were legal tender at the time theywere paid/delivered, the person accepting them must suffer the loss ifthey become valueless
Inflation: a sharp sudden increase of money/credit w/o a
corresponding increase in business transactions. It causes a drop in thevalue of money, resulting in the rise of the general price level. This isnot based on the exchange rate, but on the Consumer Price Index.
Deflation: reduction in volume & circulation of the available money orcredit, resulting in a decline of the general price level.
Extraordinary Inflation/Deflation: that w/c is unusual or beyondthe common fluctuation in the value of the currency, w/c the partiescould not have reasonably foreseen, or w/c was manifestly beyondtheir contemplation at the time the obligation was made.
GR: Inflation or deflation will not affect the obligation.Exception: in cases of extraordinary inflation or deflation, to bedetermined by the courts.
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SIENNA A.FLORES OBLIGATIONS &CONTRACTS
DACION EN PAGO APPLICATION OF PAYMENTS PAYMENT BY CESSION TENDER OF PAYMENT CONSIGNATION
Definition - Property is alienated by the debtorto the creditor in satisfaction of adebt in money- transmission of the ownership of a
thing by the debtor to the creditor asan accepted equivalent of the
performance of an obligation
The designation of the debt to w/cpayment must be applied when thedebtor has several obligations ofthe same kind in favour of the
same creditor
Assignment/abandonment of all theproperties of the debtor for thebenefit of his creditor in order thatthe latter may sell the same &
apply the proceeds thereof to thesatisfaction of their credits
Manifestation of thedebtor to the creditor ofhis decision to complyimmediately w/ his
obligation**extrajudicial
**preparatory act
deposit of the object of the obligation in acompetent court in accordance w/ the rulesprescribed by law after refusal or inability ofthe creditor to accept the tender of
payment**judicial
**principal act
Requisites Conditions for a Valid Dacion:1. if creditor consents, for a sale
presupposes the consent of bothparties
2. if dacion will not prejudice theother creditors
3. if debtor is not judicially declaredinsolvent
1. one debtor & one creditor2. 2 or more debts3. debts must be of the same kind4. all of the debts must be due5. payment made must not be
sufficient to cover all the debts
Exceptions:Applications as to debts not yet due:
1. parties so stipulate2. made by the party for whose
benefit the period was constituted
1. two or more creditors2. 2 or more debts3. debtor is partially insolvent4. all of the properties of the debtor
are to be aliented5. cession accepted by creditors6. Creditors agree who will be paid
1stor the to the proportioning ofpayment among themselves
1. tender of paymentmust comply w/ the
rules of payment2. lawful currency3. must be unconditional
& for the whole
amount
4. must actually bemade
5. fusion of intent,ability & capability to
make good such offer
1. there is a debt due2. the consignation has been made because
the creditor refused, w/o just cause, toaccept it
3. prior notice of the consignation to theperson interested in the performance of
the obligation
4. actual deposit; amount due was placed atthe disposal of the court
5. subsequent notice was made afterconsignation
**(absence of any requisites - void)
Effects Effect:-extinguishes obligation to the extent
of the value of the thing delivered,unless the parties agree that the
entire obligation is extinguished
Limitations:1. creditor cannot be compelled to
accept partial payment2. if there is only 1 obligation
bearing stipulated interest, hemust 1st apply the payment to
interest before the principal3. debtor cannot apply the payment
to the debt that is not yet
liquidated4. he cannot choose a debt w/ a
period for the benefit of thecreditor, when the period has not
yet arrived
Effects:1. Creditors dont become the
owner, they are merely assigneesw/ authority to sell
2. the debtor is released from hisobligation only up to the net
proceeds of the sale of theproperty assigned
3. the debtor is still liable if there isa balance
4. creditors will collect credits in theorder of preference agreed upon,or in the order ordinarily
established by law
Effects:1. debtor may ask judge to order
cancellation of obligation2. running of interest is suspended3. deterioration, loss of the thing/amount
consigned w/o fault of debtor is borne by
the creditor4. increase in value inures to benefit of
creditor
5. creditor bears expenses of consignation6. before creditor accepts or before judge
declares consignation has been properlymade, obligation remains
OtherNotes
- governed by the law on sales- may be partial or full dation
Traditional view: it is a sale
Modern view: it is a novation
**Does not comply w/ the requisite
of identity.
Rules in application of payment:1. apply accdg. to the agreement2. if there is no agreement, debtor
has the right to apply
3. if the debtor does not choose, thecreditor can choose
4. if the creditor has not also madeapplication, or if application is not
valid, apply to the most onerousdebt (legal application)5. if the debts due are of the same
nature & burden, applyproportionately
More Onerous Obligations:
1.bound as principal than as surety2.solely bound than in solidary ones
3.oldest debt of various debts4.one w/ interest than w/o interest
5.one w/ higher interest rate6. unsecured debt w/ interest than
secured one w/o interest7.liquidated than unliquidated debt8.one w/ a penal clause
9.Secured than one unsecured
2 Kinds of Insolvency:1. Legal judicial, governed by
insolvency law (totalextinguisment)
2. Voluntary agreement ofcreditors (generally liable for the
balance left)
Property Exempt1. debtor must reserve amountneeded for support in case of
donations2. assignment cannot include family
home
**There is no completeness of
performance integrity.
Consignation deemed properly made:1. creditor accepts the thing/sum deposited,
w/o objection, as payment2. creditor questions its validity & the court,
after hearing, declares that it has beenproperly made
3. creditor neither accepts nor questions itsvalidity & the court, after hearing, orders
the cancellation of the obligation**anytime beforehand, debtor maywithdraw
Consignation w/o Prior Tender:
1. creditor absent or unknown/does notappear at the place of payment
2. incapacitated to receive payment at thetime it is due
3. refuses to issue receipt w/o just cause4. 2 or more creditors claiming the same
right to collect5. Title of obligation has been lost
**payment is made not to the creditor but to
the court
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SIENNA A.FLORES OBLIGATIONS &CONTRACTS
LOSS OF THETHING DUE
CONDONATION/REMISSION
CONFUSION/MERGER
COMPENSATION NOVATION
Definitionof Terms
- The thing w/c constitutes theobligation perishes, goes out ofcommerce, or disappears in such a
way that existence is unknown or itcannot be recovered
- impossibility of compliance w/ theobligation through any cause
An act of liberality of the obligee,who w/o receiving any equivalent,renounces the enforcement of the
obligation, as a result of w/c it isextinguished in its entirety or in
part-; gratuitous abandonment bythe creditor of his right
Meeting in one personof the qualities ofcreditor & debtor w/
respect to the sameobligation
Mode of extinguishing in their concurrentamount those obligations of persons whoin their own right are creditors & debtors
of each other
Substitution/change of an obligation byanother, resulting in itsextinguishment/modification, either by
changing its principal conditions, or bysubstituting another in place of the debtor,
or by subrogating a 3rdperson in the rightsof the creditor
Requisites 1. the thing w/c is lost is determinate2. the thing is lost w/o any fault of the
debtor (If lost through fault of
debtor, its becomes an obligation toindemnify the creditor for damages)
3. the thing is lost before the debtorhas incurred in delay
1. debt must be existing2. it must be gratuitous3. must be accepted by the obligor4. parties must have capacity5. must not be inofficious
(infringes on the legitime of the
compulsory heirs)6. formalities of donation are
required in express remission
1. must take place bet.creditor & principaldebtor
2. merger must beclear & definite
3. the very sameobligation must beinvolved
4. confusion must betotal
1. 2 parties, who are principal creditors/debtors of each other in their own right
2. both debts consist in money, or if thethings due are fungibles, they are of thesame kind/quality
3. both debts must be due4. both debts liquidated & demandable5. no retention/controversy commenced by
3rdperson (neither debt is garnished)6. compensation not be prohibited by law
1. previous valid obligation2. agreement of all the parties to the new
contract
3. capacity & intention of the parties tomodify/extinguish the obligation
4. modification or extinguishment of oldobligation
5. new valid obligation
Kinds Physical:the obligor is not physically
capacitated to perform the obligationLegal:obligation is rendered
impossible by provision of law
As to Time:1. Original impossibility already
exited when the contract was made;the result is not extinguishment butinefficacy of the obligation; the
contract is void2. Supervening impossibility must be
subsequent to the execution of thecontract to extinguish the obli.
As to Nature:
1. Objective the act cannot be doneby anyone; extinguishes the
obligation2. Subjective obligation is impossible
only w/ respect to the obligor
As to Form:
1.express donation- Art. 748: movables
- Art. 749: immovables2. implied waiverAs to Extent:
1. total covers entire obligation2. partial does not cover entire
obligation
As to Constitution:
1. inter vivos/agreement takeseffect during lifetime of donor
2. mortis cause/will takes effectupon death of donor
Confusion in Joint
Obligations:- confusion taking
place in the person ofany debtor does not
affect the others
Confusion in SolidaryObligations:- merger in the
person of one of thesolidary debtors shall
extinguish the entireobligation
As to Cause:
1. Legal operation of law; when allrequisites concur
2. Voluntary/Conventional/Contractual agreement of the parties is enough
3. Judicial set off; final judgement ofthe court (e.g. counterclaim)
4. Facultative claimable by only 1 ofthe parties but not of the other
Facultative:1. Commodatum by the bailor2. Depositary by the depositor3. Future support (support in arrears can
be compensated)4. Civil liability fr. a penal offense
offended party
As to Effect:1. Total 2 debts are of the same
amount2. Partial 2 debts are not of the same
amount
As to Essence:
1. objective/real change in the object orprincipal conditions
2. subjective/personal change of thesubjects
a. Subrogation change of creditor-Legal operation of law-Conventional all parties agree
b. Substitution change of debtor-Expromision initiative fr new debtor-Delegacion initiative fr old debtor
3. mixed combination of subjective &objective novation
As to Form/Constitution:1. express declared in unequivocal terms2. tacit the old & new obligation are
incompatible w/ each other
As to Extent/Effect:
1. total obli. extinguished2. partial obli. merely modified
When NotAllowed When Debtor is still liable:1.when by law, the obligor is liable forfortuitous event
2.when by stipulation, the obligor isliable for fortuitous events
3.when the nature of the obligationrequires the assumption of risk
4.when the loss of the thing is duepartly to the fault of the debtor
5.when the loss of thing occurs afterthe debtor has incurred in delay
6.when the debtor promised to deliverthe same thing to 2 or more persons
who dont have the same interest7.when the obligation is generic8.when the obligation to deliver a
specific thing arises from a crime
Inofficious Donation: infringes onthe legitime of the heirs of thedonor. No on can give more than
that which he can give by will.The excess shall be reduced by
the court accordingly.
When Compensation shall not take place:1. the law prohibits it2. debts arising from contracts of
depositum3. debts arising from contracts of
commadatum4. claims for support due by gratuitous title5. obligations arising from criminal
offenses
6. certain obligations in favour of the govt7. there is renunciation of the effects of
compensation8. there is a period w/c has not yet arrived9. there is a suspensive condition w/c has
not yet happened10. obligation cannot be sued upon
(natural obli.)
GR: No novation where new obligation is voidE: parties stipulate to extinguish the old 1 inany event
GR: novation can take place where new
obligation is voidableE: when it is annulled, novation is considered
as not having taken place
Old Obligation has a condition:- resolutory & it occurred: old obligation is
extinguished; no new obligation since theresnothing to novate
- suspensive & it never occurred: noobligation arises; also nothing to novate
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SIENNA A.FLORES OBLIGATIONS &CONTRACTS
LOSS OF THETHING DUE
CONDONATION/REMISSION
CONFUSION/MERGER
COMPENSATION NOVATION
Effects Effect of Impossibility in obli. to do:- debtor is released if impossibility wasnot due to his fault & it took place
before he was in delay (supervening ¬ original impossibility)
Effect of Partial Loss:
- Loss significant: enough to extinguish
the obligation- Loss insignificant: not enough toextinguish obli.
Effect of Loss on Creditors Rights:- creditor shall have all the rights of
action w/c the debtor may haveagainst the 3rdperson by reason of the
loss
Effect of Partial Remission:1. renunciation of the principal
debt shall extinguish the
accessory obligations2. renunciation of the accessory
obligation shall leave theprincipal in force
3. obligation of guarantor isextinguished at the same timeas that of the debtor
4. guarantors are released fromtheir obligation whenever by
some act of the creditor theycannot be subrogated to the
rights of the latter
Effect in the person ofprincipal debtor orcreditor:
- extinguishes theobligation as well as
the accessoryobligation
Effect in the person ofguarantor:- extinguishment of
accessory obligation
doesnt carry w/ itthat of the principal
obligation
1. both debts are extinguished to theconcurrent amount
2. interests stop accruing3. period of prescription stops4. all accessory obligations of the principal
obligation are also extinguished
1. if old obligation has condition, must becompatible w/ new obligation; if new isw/o condition deemed attached to new
2. if new obligation has condition- if resolutory: valid
- if suspensive & didnt materialize, oldobligation is enforced
Effect of Total Subrogation: transfer to thenew creditor the credit & all the rights &actions that could have been exercised by the
former creditor, either against the debtor or
3rdpersons
Effect of Partial Subrogation: the creditor towhom partial payment has been made by the
new creditor remains a creditor to the extentof the balance of the debt
Rules Presumption: then the thing is lost in
the possession of debtor, it is due tohis fault (res perit domino)
E:- natural calamity, earthquake, flood
- debtor not in possession of thing lost
- there is proof to the contrary
GR: debtor still liable for loss ofgeneric thing
E:- delimited generic thing
- the thing becomes illegal
GR: impossibility of performancereleases the obligor
- service has become so difficult as tobe manifestly beyond contemplation of
parties
GR: waivers arent to bepresumed
Presumptions:1. if a private document is found in
the possession of the debtor, it
is presumed that the creditorvoluntarily delivered it to him
2. since the creditor voluntarilydelivered the private document,
then there is a presumption ofremission
3. it is presumed that theaccessory obligation of pledge
has been remitted when thething pledged, after its delivery
to the creditor, is found in thepossession of the debtor, or of
3rdperson who owns the thing
Rules on Assignment of Credit to 3rd
Person:
1. assignment after compensation:- no effect because obligation has already
extinguished
2. assignment before compensation:- w/ consent of debtor: debtor is estoppedunless he reserves his right & gave notice
to assignee- w/ knowledge but w/o consent:
compensation may be set up as to debtsmaturing prior to assignment
- w/o knowledge: compensation may beset-up on all debts prior to his knowledge
GR:Novation is never presumed
E (legal subrogation presumed)1. the creditor pays another creditor who is
preferred, even w/o the debtorsknowledge
2. a 3rd person, not interested in theobligation, pays w/ the express/tacitapproval of debtor
3. w/o knowledge of the debtor, a personinterested in the fulfilment of the
obligation pays, w/o prejudice to theeffects of confusion as the latters share
GR: Extinguishment of the principal carries
w/ it that of accessory obligationsE: those created in favour of a 3rd person
unless the latter gives consent to thenovation; in active subjective novation, the
guarantors/pledgors/mortgagors are notreleased
Other
Notes
Rebus Sic Stantibus/Doctrine of
Extreme Difficulty: agreement is valid
only if the same conditions prevailingat the time of contracting continue to
exist at the time of performance
Requisites:1.the event/change could not have
been foreseen at the time ofexecution of contract
2.performance is extremely difficult,but not impossible
3.event was not due to the act of anyof the parties
4.contract is for a future prestation
**Pledge: a contract where the
debtor delivers to the creditor or
to a 3
rd
person a movable orinstrument evidencing incorporeal
rights for the purpose of securingthe fulfilment of the principal
obligation; the thing deliveredshall be returned w/ all its fruits &
accessions
Usual Causes:
1. succession2.
donation3. negotiation ofnegotiableinstrument
Novation by Substitution:
1.Expromision: a 3
rd
person of his owninitiative & w/o knowledge or against
the will of the old debtor assumes the
latters obli. w/ consent of creditor
- initiative from 3rdperson/new debtor
- w/ consent of creditor & new debtor- w/o knowledge/against will of old debtor
- old debtor released fr. obligation- beneficial reimbursement
- if new debtor is insolvent, not responsiblesince w/o his consent
Novation by Substitution:2. Delegacion: a creditor accepts a 3rdperson
to take the place of the debtor at theinstance of the latter
- initiative/with consent of old debtor- all parties must consent
- reimbursement & subrogation- GR: if new debtor insolvent, old debtor not
responsible because obli. extinguished - E:- insolvency already existing & of public
knowledge or known to him at time ofdelegacion
- new debtor is only secondarily liable- 3rdperson is only an agent of the debtor
- new debtor is bound solidarily w/ old debtor
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TITLE II - CONTRACTS
CHAPTER 1 GENERAL PROVISIONS
Contract: Meeting of the minds between 2 contracting parties w/c
takes place when an offer by one party is accepted by the other. Oneor more persons bind himself/themselves w/ respect to another, orreciprocally, to the fulfilment of a prestation to give, to do or not to do.
Contracts: Essential Elements1. Consent2. Object3. Cause
CONTRACT OBLIGATION
One of the sources ofobligations
The legal tie/relation itself that existsafter a contract has been entered into
There can be no contract ifthere is no obligation
An obligation may exist even w/o acontract
CONTRACT AGREEMENT
Agreementsenforceablethroughproceedings
Agreements which cannot be enforced by actionin the courts of justice are not contracts butmerely moral/socialagreements
Elements:consent, object,cause
An agreement is broader than a contract becausethe former may not have all the elements of acontract
All contractsare agreements Not all agreements are contracts
CONTRACT PROMISE
Establishes & determines theobligations arising therefrom
Tends only to assure and pave theway for the celebration of a contractin the future
Until the contract is actually made, the rights and obligations arenot yet determined. An imperfect promisealso constitutes a mere
unaccepted offer.
Characteristics of Contracts
1. Autonomy - The contracting parties may establish suchstipulations as they may deem convenient, as long as theyare not contrary to law, morals, good customs, public order,or public policy
2. Mutuality contract must be binding upon both contracting
CLASSIFICATION OF CONTRACTS
Degreeof
Depen-dence
Preparatory: its object is theestablishment of a condition in laww/c is necessary as a preliminarystep towards the celebration ofanother subsequent contract
AgencyPartnership
Principal: can subsist independentlyfrom other contracts
Lease,Sale
Accessory: can exist only as aconsequence or, or in relation w/,another prior contract
Pledge,mortgage,Suretyship
PerfectionConsensual: perfected by mereconsent
Purchase, sale
Real: perfected by the delivery of thething
Commo-datum
Form
Common/Informal: does notrequire some particular form
Loan, lease
Special/Formal: requires someparticular form
Donation,chattelmortgage
Purpose
Transfer of Ownership Sale
Conveyance of Use CommodatumDeposit,pledge
Rendition of Service Agency
Subject-Matter
Things Sale, pledge,mortgage
Service Deposit,agency,
Nature ofObligation
Bilateral: gives rise to reciprocalobligations for both parties
Purchase, sale
Unilateral: gives rise to anobligation for only 1 of the parties
Commo-datum,gratuitousdeposit
Cause
Onerous: each of the parties aspiresto procure for himself a benefitthrough the giving of an equivalent
Purchase, sale
Gratuitous: one of the partiesproposes to give to the other a
benefit w/o any equivalent
Commo-datum
Remuneratory: purpose is to rewardthe service that had been previouslyrendered by the party remunerated
Commutative: each of the partiesi i l t f hi
Lease
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Persons Affected by a ContractGR: Principle of Relativity - contracts take effect only bet. the parties,their assigns & heirsException: the contract is effective only between the parties when therights & obligations arising from a contract are not transmissible
1. By their nature (contract involving personal qualifications)2. By stipulation (principle of freedom to contract)3. By provision of law (agency, partnership, commodatum,
when death extinguishes the legal relationships)
Cases when a Stranger/3rdPersons are Affected by a Contract1. Stipulation pour autrui: contracts containing a stipulation in
favour of a 3rdperson2. contracts containing real rights3. contracts entered into to defraud creditors (accion pauliana)4. contracts w/c have been violated at the inducement of a 3 rd
person5. accion directa
Stipulation Pour Autrui: a stipulation in a contract clearly &deliberately conferring a favour upon a 3rdperson who has a right todemand its fulfilment provided he communicates his acceptance to theobligor before its revocation
Stipulation Pour Autrui: Requisites1. a stipulation in favour of a 3rdperson2. which should be a part, not the whole, of the contract3. the contracting parties must have clearly & deliberately
conferred a favour upon a 3rdperson, not a mere incidental
benefit4. the favourable stipulation should not be conditioned orcompensated by any kind of obligation
5. the 3rd person must have communicated his acceptance tothe obligor before its revocation
6. neither of the contracting parties bears the legalrepresentation or authorization of the 3rdparty, otherwise therules on agency will apply
Liability of a 3rdPerson for Breach of Contract: Requisites1. existence of a valid contract2. knowledge of by the 3rd person of the existence of the
contract3. interference by the 3rdperson in the contractual relation w/o
legal justification
Stages in the Life of a Contract1 P ti liti i ti ti ti ti
Offer: unilateral proposition w/c 1 party makes to the other for thecelebration of the contract
Offer: Requisites1. definite2. complete3. intentional
Requisites for Silence to Produce Effect of Tacit Acceptance1. There is a duty or possibility to express oneself2. The manifestation of the will cannot be interpreted in any
other way3. There is a clear identity in the effect of the silence & the
undisclosed will
Acceptance of Offer: Forms1. express oral or written2. implied inferred from act or conduct
Matters That May be Fixed by the Offeror1. time2. place3. manner of acceptance4. terms5. conditions
When Offer becomes Ineffective1. death2. civil interdiction3.
insanity4. insolvency
5. express/implied revocation of the offer by the offeree6. qualified/conditional acceptance of the offer (counter offer)7. subject matter becomes illegal/impossible8. expiration of the period fixed in the offer for acceptance
Rule on Advertisements as Offers1. business advertisements not a definite offer, but a mere
invitation to make an offer unless it appears otherwise2. advertisements for bidders only invitation to make
proposals & advertiser is not bound to accept the highest or
lowest bidder, unless it appears otherwise
Option Contract: giving a person for a consideration a certain periodw/in w/c to accept the offer of the offeror; & binds the person who hasgiven the option not to enter into the principal contract w/ any other
d i th d i t d i d it i ti i ff
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Amplified Acceptance: an acceptance of the original offer, plus anew offer w/c is contained in the amplification
Persons Who Cannot Give Consent1. minors2. insane/demented persons3. deaf/mutes who do now know how to write4. intoxicated5. under hypnotic spell
Special Disqualifications: Incompetents1. persons suffering the accessory penalty civil interdiction2. hospitalized lepers3. prodigals (spendthrifts)4. deaf & dumb who are unable to read and write5. those of unsound mind even though they have lucid intervals6. those who, by reason of age, disease, weak mind and other
similar causes, cannot w/o outside aid, take care ofthemselves & manage their property, becoming thereby aneasy prey for deceit & exploitation
INCAPACITY TO GIVECONSENT
SPECIALDISQUALIFICATIONS
Restriction upon the exercise ofa right
Restriction upon the very rightitself
Renders the contract voidable Makes the contract void
Based upon subjectcircumstances of certain persons
Based upon public policy &morals
Contracts entered into arevoidable
Contracts entered into are void
GR: contracts entered into by incapacitated persons are voidableExceptions:
1. 1. when necessaries such as food, are sold & delivered to aminor or other person w/o capacity to act, he must pay areasonable price therefore
2. a minor 18 years old or above may contract for life, healthand accident insurance, provided the insurance is taken onhis life & the beneficiary appointed is the minors estate or
the minors father, mother, husband, wife, child, brother orsister
3. valid if entered into through a guardian/legal rep.4. valid where minor misrepresented his age & convincingly led
the other party to believe in his legal capacity
UndueInfluence(even ifemployed by3rdperson)
When a person takesimproper advantageof his power over thewill of another,depriving the latter ofa reasonable freedom
of choiceFraud(if employedby 3rdperson,remedy isdamages)
False representationof a material factmade by word orconduct w/knowledge of itsfalsehood or recklessdisregard of its truth,in order to induceanother to execute anact
1.misrepresentation orconcealement2.must be serious3.employed by only 1 of theparties4.made in bad faith or w/intent to deceive5.induced the consent of theother6.resulted in damage/injury7.proved by clear &convincing evidence
CAUSES VITIATING CONSENT CAUSES OF INCAPACITY
Temporary More or less permanent
Refers to the contract itself Refers to the person entering intothe contract
Both make a contract voidable only, and not void
IGNORANCE MISTAKE
Complete absence of any notionabout a particular thing
wrong/false notion about such amatter, a belief in the existence
of some circumstance, fact oreven w/c in reality doesnt exist
There is a lack of full & correct knowledge about the thing
Juridically, they produce the same effect
Mistake of Fact Which Vitiates Consent1. Substance of the thing w/c is the object of the contract2. mistakes re: the nature of the contract, in w/ case is an
essential mistake, because it is one w/c has determininginfluence upon the will of the party
3. principal condition of the thing as its essential/substantialcharacter, w/o w/c the thing ceases to be what it is4. Identity/qualifications of 1 of the parties provided the samewas the principal cause of the contract
Mistake of Fact Which Does NOT Vitiate Consent1 incidents of a thing or accidental qualities not taken as the
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Factors to Determine Degree of Intimidation1. age2. sex3. condition
Undue Influence: Circumstances to be Considered
1. confidential/family/spiritual, & other relations bet. the parties2. mental weakness3. ignorance4. financial distress of the person unduly influenced
Causal Fraud: How Committed1. insidious words or machinations2. concealing/omitting facts where there is a duty to reveal
them, as when the parties are bound by confidential relations3. opinion of an expert & the other party relied on the formers
special knowledge
Requisites for an Opinion to Amount to Fraud1. must be made by an expert2. the other contracting party has relied on the experts opinion3. the opinion turned out to be false/erroneous
FRAUD VIOLENCE/INTIMIDATION
Doesnt annul the contract unless itproduces a substantial mutual mistakeon the part of both contracting parties
Contract is annulled
The party has nothing to do w/ fraud by
a 3rd
person & cannot be blamed for it
Can easily be more
resisted than fraudIt has been advocated that both fraud & violence nullify the
consent, whoever may have employed the same. Where there is thesame necessity, the remedy must likewise be the same.
Simulation of a Contract: The act of deliberately deceiving others, byfeigning or pretending by agreement, the appearance of a contract w/cis neither non-existent or concealed.
Simulation: Kinds1. Absolute/Simulados Void because he contract doesnt really
exist and the parties do not intend to be bound at all
2. Relative/Disimulado - When the contract entered into by theparties is different from their true agreement; The parties arebound by their real agreement provided it does not prejudicea 3rd person and is not intended for a purpose contrary tolaw, morals, good customs, public order or public policy
Objects: Kinds1. things not outside the commerce of man2. rights not intransmissible3. services not contrary to law, morals, good customs, public
order or public policy
Things Which cannot be the Object of the Contract1. things outside the commerce of man2. services w/c are contrary to law, morals, good customs,
public order or public policy3. impossible things/services (original & not supervening)4. objects w/c are not possible of determination as to their kind5. intransmissible rights6. future inheritance
Things Outside the Commerce of Man1. Services w/c imply an absolute submission by those who
render them, sacrificing their liberty, their independence orbeliefs, or disregarding in any manner the equality & dignityof persons (e.g. perpetual servitude/slavery)
2. Personal rights (e.g.patria potestasor marital authority, thestatus & capacity of persons, & honorary titles & distinctions)
3. Public offices, inherent attributes of the public authority, &political rights of individuals (e.g. right of suffrage)
4. Property while they pertain to the public domain (e.g. roads,plazas, squares, & rivers
5. Sacred things, common things (e.g. the air, the sea, and resnullius, as long as they havent been appropriated)
EMPTIO REI SPERETAE EMPTIO SPEIConditional sale; there is asuspensive condition
Sale of hope
If the condition does not comeinto existence, there is notcontract of sale
Even if the future thing does notmaterialize, the buyer must paysince the buyer is taking achance (e.g. sale of lotto ticket)
Impossibility: Kinds1. physical the thing/service in the very nature of things
cannot exist or be performeda. Absolute: the act cannot be done in any case so
that no one can perform it; nullifies the contractb. Relative: it arises from the special circumstances or
special conditions/qualifications of the obligor; iftemporary, it doesnt nullify the contract
2. legal - the thing/service is contrary to law, morals, good
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CAUSE CONSIDERATION
The why of contracts, theessential reason w/c impels thecontracting parties to celebratethe contract
The reason, motive, orinducement, by w/c a man ismoved to bind himself by anagreement
Need not be material at all, &
may consist in a moralsatisfaction of the promissor
Requires a legal detriment to
the promise w/c must be morethan a moral duty
CAUSE MOTIVE
Proximate why Ultimate why
Objective, intrinsic & juridicalreason for the existence of thecontract itself
Psychological, individual orpersonal purpose of a partyto the contract
Essential or more proximatepurpose w/c the contractingparties have in view at the time of
entering into the contract
Purely personal/privatereason which a party has inentering into a contract
The cause of each kind of contractis always the same
Motive differs w/ eachperson
Immediate/direct reason Remote/indirect reason
Always known to the othercontracting party
May be unknown
Essential element of a contract Not an essential element
Its illegality affects the validity ofa contract
Its illegality does not renderthe contract void
Motive Affects the Contract if:1. motive becomes a suspensive condition2. realization of the motive is the cause for the contract & there
is an intervening serious mistake of fact
When Motives of a Party may Affect the Juridical Act1. rescissible when the motive of a debtor in alienating
property is to defraud creditors2. voidable when the motive of a person in giving his consent
is to avoid a threatened injury, (i.e. intimidation),3. voidable when the motive of a person induced him to act on
the basis of fraud or misrepresentation by the other party
Absenceof Cause Void produces no legal effect
Illegalityof Cause
Void produces no legal effect
Falsityf C
Voidable the party must prove that cause isl f l ti f lidit b t b tt bl
CHAPTER 4 REFORMATION OF INSTRUMENTS
Reformation: That remedy by means of w/c a written instrument isamended/rectified so as to express or conform to the realagreement/intention of the parties when by reason of mistake, fraud,inequitable conduct, or accident, the instrument fails to express suchagreement or intention
Effect of Reformation: takes effect from it original execution
Reformation: Requisites1. meeting of the minds of the parties to the contract2. written instrument doesnt express the true agreement/intention
of the parties3. the failure to express the true intention is due to mistake, fraud,
inequitable conduct (i.e. any act/omission w/c is unjust/unfair), oraccident
4.
the facts upon w/c relief by way of reformation of the instrumentis sought are put in issue by the pleadings5. clear & convincing evidence of the mistake, fraud, inequitable
conduct, or accident
REFORMATION ANNULMENT
There has been a meeting of the minds ofthe parties
There has been nomeeting of the minds
A contract exists but the writteninstrument purporting to embody thecontract doesnt express the true intentionof the parties by reason of mistake, fraud,
inequitable conduct or accident
The consent of one ofthe parties wasvitiated by mistake,fraud, violence,
intimidationGives life to it upon certain corrections Complete nullification
of the contract
Cases Where Reformation is Proper1. when mutual mistake of the parties causes the failure of the
instrument to disclose the real agreement2. if one party was mistaken & the other acted fraudulently or
inequitably in such a way that the instrument doesnt showthe true intention
3. when one party was mistaken & the other knew or believedthat the instrument didnt state their real agreement, butconcealed that fact from the former
4. when through the ignorance, lack of skill, negligence or badfaith on the part of the person drafting the instrument or ofthe clerk or typist, the instrument doesnt express the trueintention of the parties
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DEFECTIVE CONTRACTS: MORE NOTES
CHAPTER 6: RESCISSIBLE CONTRACTS
RESCISSION SIMULATION
There is real alienation,but its fraudulent
There is in fact no alienation but a merepretense that one has been made
Can be alleged only bycreditors prior to the act
Can be alleged by all creditors, before orafter the simulation
Impossibility of satisfyingthe plaintiffs claim isrequired
Impossibility of satisfying the plaintiffsclaim is NOT required
Accion pauliana anaction to set aside a validcontract
Does not seek to set aside the simulatedcontract, but merely to declare itsinexistence
Right of Transferee
1. Gratuitous - the creditor will have a better right than the transfereewho has given nothing & would unjustly be enriched at the expense ofthe creditor if the transfer were upheld
A. Good faith:o transferee obliged to restore the thingo but he isnt obliged to pay the fruits received by himo he is entitled to reimbursement for necessary & useful
expenses incurred on the thingo he returns the thing in the condition that it may be foundo he isnt liable for losses or deteriorations, except in cases
in w/c its proved that he has acted w/ fraudulent intentor negligence after judicial summonsB. Bad faith: Transferee isnt entitled to indemnity for damagesfrom the debtor, in the even that rescission is decreed
2. Onerous - the transferee in good faith is protected; as between 2persons who both stand to suffer loss, the possessor of the propertyshould be preferred in that possession, the ownership having beentransferred by delivery
Badges of Fraud:1. consideration of the conveyance is inadequate/fictitious2. transfer was made by a debtor after a suite has begun &while its pending against him3. sale upon credit by an insolvent debtor4. evidence of indebtedness or complete insolvency5. transfer of all his property by a debtor when he is financially
b d i l t
CHAPTER 7 VOIDABLE CONTRACTS
LOSS OF THINGBY PLAINTIFF
LOSS OF THINGBY DEFENDANT
Due to
his Faultor Fraud
he cannot ask for annulment &the action is extinguished, even
if at the time of the loss theplaintiff was still a minor or wasinsane
he must return thefruits received, the
value of the thingat the time of itsloss, w/ interest fr.the same date
Due to aFortui-tousEvent
action for annulment isntextinguished
but the defendant cannot beobliged to make restitution tothe plaintiff
until annulment of the contract,it is valid & produces legaleffect
res perit domino(ownerbears the loss): plaintiff whowas in possession of the objectat the time of its loss, must stillbe considered the ownerthereof & must bear the loss byfortuitous event
Since the plaintiff cannot returnwhat he is bound to restore,the defendant cannot becompelled to make restitution
But if the plaintiff offers to paythe value of the thing as asubstitute for the thing itself,the defendant should beobliged to make restitution,except plaintiff need not payinterest
Action forannulmentcannot beextinguished forany event notimputable to thefault/fraud of theplaintiff
Defendantrequired to paythe value of thething at the timeof the loss byfortuitous event,but w/o interestbecause the losswasnt due to hisfault
Defendant mustsuffer the lossbecause he isstill the owner atthe time of theloss
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SIENNA A.FLORES OBLIGATIONS &CONTRACTS
RESCISSIBLE VOIDABLE UNENFORCEABLE VOID
Defect
Defect consists in injury/damage either to1 of the contracting parties or to 3rdpersons; may be set aside in whole/part, tothe extent of the damage caused
- (defect is in the effects)
Defect consists in the vitiation of consent orin the legal incapacity of 1 of thecontracting parties
Defect consists in the fact that theywere entered into in excess or w/o anyauthority, or they do not comply w/Statute of Frauds, or both contracting
parties are legally incapacitated
All requisites prescribed by law are present, but thecause/object/purpose is contrary to law, morals,good customs, public order or public policy, or areprohibited by law, or are declared by law to be void
- (defect is inherent)
Kinds
1. those entered into by guardianswhenever the wards whom they
represent suffer lesion by more than of the value of the things w/c are the
object thereof2. those agreed upon in representation of
absentees, if the latter suffer the lesionstated in the preceding #
3. those undertaken in fraud of creditorswhen the latter cannot in any othermanner collect the claims due them
4. those w/c refer to things under litigationif they have been entered into by the
defendant w/o the knowledge & approvalof the litigants or of competent judicial
authority5. contracts specifically declared by law to
be subject to rescission6. payments made in a state of insolvency
for obligations whose fulfillment the
debtor could not be compelled at thetime they were effected
Note: No rescission is allowed if the
contract/transaction is approved by thecourt
1. those where 1 of the contracting parties isincapable of giving his consent to a
contracta. minors
b. insane/demented personsc. deaf/mutes who do not know how to
writed. intoxicated
e. under hypnotic spell
2. those where the consent is vitiated bymistake, violence, intimidation, undue
influence or fraud
1. Unauthorized or no sufficientauthority:
a)no authority conferredb)in excess of authority conferred
2. Curable by Acknowledgement:Those that do not comply with the
Statute of Fraudsa) agreement is not to be performed
w/in a year from the making thereof
b) special promise to answer for thedebt/default/miscarriage of another
c) agreement in consideration ofmarriage other than a mutual promise
to marryd)An agreement for the sale of goods,
chattels or things in action, at a pricenot less than P500
e) agreement for leasing for a periodlonger than one year, or for the sale of
real property or of an interest therein
f) representation as to the credit of a3rdperson
3.Curable by ratification: both partiesare incapable of giving consent to a
contract***Statute of Frauds: statute w/c
requires certain classes of contracts tobe in writing to prevent fraud
- applicable only to executorycontracts (wher