Beda Notes Obli Con 2013

8/19/2019 Beda Notes Obli Con 2013

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EXECUTIVE COMMITTEE

IAN MICHEL GEONANGA overallchairperson, JOSE ANGELO DAVIDchairperson for academics, RUTHABIGAIL ACERO chairperson forhotel operations, ALBERTORECALDE, JR. vice-chairperson foroperations, MARIA CARMELAHAUTEA vice-chairperson for

secretariat, MARK EMMANUELABILO vice-chairperson for finance,RYAN LIGGAYU vice-chairpersonfor electronic data processing,JOMARC PHILIP DIMAPILIS vice-chairperson for logistics

SUBJECT COMMITTEE

JHOY PALLONES subject chair, MICAELAKRISTINA GALVEZ assistant subject chair, PIAISABEL CO edp, FRANCIA ROMLINARODRIGUEZ persons and family relations,JENNETH CAE CAINDAY property, IRENEALCOBILLA wills and succession, JOSEAMELITO BELARMINO II and ROWNEYLIN SIAobligations and contracts, SAMANTHA

GRACE MANALO sales and lease, LAURENGAIL DIVINO partnership, agency andtrusts, MABEL BUTED credit transactions,JULIUS CEASAR BALBUENA torts anddamages, KATHLEEN VALERIO land titlesand deeds, ILLAC BOHOL conflict of laws

MEMBERS

Phoebe Alhambra, DianaBartolome, Jesus PaoloBorlagdan, Darniel Bustamante,Jamela Jane Caringal, Ma.Criselda Correa, ReynaldoDalisay, Kristine Lara Defensor,Carel Brendth Dela Cruz, RegineEstillore, Anne Clarisse Guzman,Aziel Guzman, Martin MichaelHatol, Maria Emma GilleMercado, RichmondMontevirgen, Astrid Ong, RuthAnn Ong, Rodel James Pulma,Dan Bernard Sabilala, Jeth LesterTan, Maria Anne Cyra Uy

CIVIL LAW OBLIGATIONS & CONTRACTS

A juridical necessity to give, to do, or not to do(Art. 1156).

A legal relation established between one party andanother whereby the latter is bound to the fulfillment of aprestation which the former may demand of him (8Manresa 13).

Juridical necessity In case of noncompliance, there will be legal sanctions.(Pineda, Ernesto L., Obligations & Contracts, 2000 ed., p.1]).

PrestationNot the thing or object, but the particular conduct of thedebtor which may consist in giving, doing, or not doingsomething.

Elements of Obligation:1.Active Subject -- one who can demand the fulfillment of

the prestation; he who in his favor, the obligation isconstituted or created. He is called the obligee/creditor.

Note: The active subject may be TEMPORARILYindefinite, as in the case of a negotiable instrumentpayable to bearer (Tolentino, Arturo M., Commentariesand Jurisprudence on the Civil Code of the Philippines,1991 ed., Vol. 4, p. 57).

2.Passive Subject -- one bound to perform theprestation. He is called the obligor/debtor.

Note: Subjects pertain to both natural and juridicalpersons. They need not be determined in the actconstituting the obligation, but they MUST bedeterminable in some manner. When either subjectcannot be determined the obligatory tie can have noeffect.

3.Juridical Tie orVinculum Juris -- the efficient causewhich creates the relation between the obligor/debtorand obligee/creditor and is established by:a. Lawb. Bilateral Acts (Contracts giving rise to the obligations

stipulated therein)c. Unilateral Acts (Crimes & Quasi-Delicts)

4. Prestation/ Object – see above definition

Kinds: a. To give -- obligation to deliver a movable or an

immovable thing in order to create a real right, or forthe use of the recipient or for its simple possession(e.g. sale, deposit, pledge, donation)

b. To do -- covers all kinds of works or services whetherphysical or mental. It may involve some work on thepart of the debtor such as in contracts of employmentor professional services, but in other cases, it may bemerely the necessity of concluding a juridicaloperation, such as, when a person promises to give abond.

c. Not to do -- consists in abstaining from doing someact. This obligation includes the obligation “not togive.”

Requisites of Prestation: a. Physically and Juridically possible;b. Determinate or at least determinable according to

pre-established elements or criteria;c. Must be within the commerce of man;d. Must be licit; ande. Possible equivalent in money.

Note: Pecuniary interest need not be for the benefit ofone of the parties, it maybe for the benefit of a 3rd person.

It is a generally established principle that the prestationshould be susceptible of pecuniary appreciation.

However, it need not be of an economic character tohave pecuniary value, because all interests, even moralones in view of the protection given to them by law,

O BLIGATIONS


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CIVIL LAWOBLIGATIONS & CONTRACTS

S AN BEDA C OLLEGE OF LAW2013 C ENTRALIZED BAR O PERATIONS

have some pecuniary value (Tolentino, Arturo M.,Commentaries and Jurisprudence on the Civil Code ofthe Philippines, 1991 ed., Vol. 4, p. 57).

Note: FORM is sometimes added as a sixth requisite butas a general rule however, it cannot be considered asessential. An obligation arising from law can be said tohave no form at all.

Primary Classifications under the New Civil Code:1. Pure & Conditional(Arts. 1179-1192).

a. Pure -- demandable at onceb. Conditional -- fulfillment or extinguishment depends

upon a future and uncertain event

2. With a Period or Term ( Arts. 1193-1198). Its fulfillment or extinguishment depends upon a futureand certain event

3. Alternative & Facultative ( Arts. 1199-1206). a. Alternative -- involves multiple prestations but debtor

will only perform one or some but not all, dependingwhose choice it is

b. Facultative -- multiple prestations with a principalobligation and substitute prestations, choice isgenerally given to the obligor

4. Joint & Solidary ( Arts. 1207-1222). a. Joint -- each can be made to pay only his share in the

obligationb. Solidary -- one can be made to pay for the whole

obligation subject to reimbursement

5. Divisible & Indivisible(Arts. 1223-1225)Performance of the prestation, not to thing, whether itcan be fulfilled in parts of not

6. With a penal clause ( Arts. 1226-1230). Accessory undertaking to assume greater liability incase of a breach.

7. Individual and collective ( Arts. 1207, 1223). a. Individual -- involves only one subjectb. Collective -- involves several subjects

8. Accessory and principal(Arts. 1166, 1226). a. Accessory -- existence depends upon a principal

obligation (e.g. pledge, mortgage)b. Principal -- exist without depending upon another

obligation

Secondary Classifications under the New Civil Code:

1. Legal ( Art. 1158 ) -- arises from Law2. Conventional (Art. 1159)-- arises from Contracts

3. Penal (Art. 1161) -- arises from commission of crime4. Real and Personal ( Art. 1163-1168). 5. Determinate and generic ( Arts.1163-1166). 6. Positive and negative(Arts. 1167-1168). 7. Unilateral and bilateral(Arts. 1169-1191).

a. Unilateral -- only one party is bound to perform anobligation (e.g. simple donation, to give support)

b. Bilateral -- also known as synallagmatic contractswhere two parties are reciprocally bound (e.g.purchase and sale).

Kinds of Obligations: It may also be classified as A. Viewpoint of Sanction

1. Civil Obligations -- an obligation, which if not fulfilledwhen it becomes due and demandable, may beenforced in court through an action.

2. Natural Obligations -- not based on positive law buton equity and natural law; do not grant a right ofaction to enforce their performance, but aftervoluntary fulfillment by the obligor, they authorizeretention of what has been delivered or rendered byreason thereof.

Civil Obligation Natural Obligation Article 1156 Article 1423

Based on positive law Based on equity andnatural lawEnforceable by court

action or coercivepower/authority

Not enforceable by courtaction

3. Moral Obligations -- those that cannot be enforcedby action but which are binding on the party whomakes it in conscience and natural law.

B. Viewpoint of Performance1. Positive Obligation -- to give; to do2. Negative Obligation -- not to do

C. Viewpoint of Subject Matter

1. Personal Obligation -- to do or not to do 2. Real Obligation -- to give a. Determinate or specific -- one that is

individualized and can be identified ordistinguished from others of its kind; its lossextinguishes the obligation

b. Indeterminate or Generic -- indicated merely byits class or genus without being designated ordistinguished from others of the same kind; itsloss does not extinguish the obligation for genusnever perishes (genus nunquam perit).

c. Limited generic thing -- when the generic objectsare confined to a particular class, e.g. anobligation to deliver one of my horses(Tolentino,


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Arturo M., Commentaries and Jurisprudence onthe Civil Code of the Philippines, 1991 e., Vol. 4, p. 91).

D. Viewpoint of Person Obliged1. Unilateral -- only one party is bound2. Bilateral -- both parties are bound

Sources of Obligations (Art 1157):1. Law 2. Contracts3. Quasi-contracts4. Delicts5. Quasi-delicts

Note: The list of sources is EXCLUSIVE (Sagrado Ordenvs. Nacoco, G.R. No. L-3756, June 30, 1952).HOWEVER, Tolentino gives another source: unilateralpromise. It may be based on (1) contract or (2) law. Itmay be said that customs sanction its validity

1. LAW(Ex-Lege) Obligations derived from law are NOT PRESUMED.Only those EXPRESSLY DETERMINED in the NewCivil Code or in Special Laws are DEMANDABLE, andshall be REGULATED by the PRECEPTS OF THELAW which establishes them(Art. 1158).

In case of conflict between NCC and a special law, thelatter prevails unless the contrary has been stipulated.

In obligations arising from law, the law createsobligation and the act upon which it is based is nothingmore than a mere factor for determining the momentwhen it becomes demandable. (Pineda, Ernesto L.,Obligations & Contracts, 1991 ed., p.10).

Note: In the other sources of obligation, there is alwayssome individual act which gives rise to the obligation, thelaw intervenes only to provide a sanction or to prevent

injustice.

To say that the law is an independent source of obligation,it does not mean that law and human acts exclude eachother completely. Once such human acts exist, theobligations arising therefrom by virtue of the expressprovisions of the law are entirely independent of the will ofthe parties.

2. CONTRACTS(Ex-Contractu) Obligations arising from contracts have the FORCE OFLAW between the contracting parties and should be

complied with in GOOD FAITH(Art. 1159).

Contract is the MEETING OF THE MINDS betweenTWO PERSONS whereby one binds himself, withrespect to the other, to give something or to rendersome service (Art. 1305).

Note: Compliance in good faith is performance inaccordance with the stipulation, clauses, terms andconditions of the contract.

The terms of the contract determine the respectiveobligations of the parties thereto. If the terms of acontract are clear and leave no doubt upon thecontracting parties’ intention, such terms should beapplied in their literal meaning(Sps. Dumlao vs. MarlonRealty Corp., G.R. No. 131491, August 17, 2007)

Pre-Contractual Obligations Can damages suffered by a party during the period ofnegotiations be recovered, if the contract is not finallyperfected?Yes. Should the offer be clear and definite and leads theofferee in good faith to incur expenses in the expectationof entering into the contract; and the withdrawal of theoffer is without legitimate cause, if offeror:a. Is guilty of fault or negligence, the liability would be

based on Quasi-Delictb. Is not guilty of fault or negligence but the withdrawal

was based in abuse of right, the liability would bebased on Art. 19 of the NCC

3. QUASI-CONTRACTS(Quasi Ex-Contractual) Juridical relations arising from LAWFUL, VOLUNTARY,UNILATERAL ACTS, by virtue of which the partiesbecome bound to each other, based on the principle thatno one shall be unjustly enriched or benefited at theexpense of another (Art. 2142).

Kinds:a. Negotiorum Gestio (Officious Management)

Whoever voluntarily takes charge of the agency or

management of the business of property of another,WITHOUT ANY POWER from the latter, is OBLIGEDto CONTINUE the same until the TERMINATION ofthe affair and its incidents, or to REQUIRE the personconcerned to SUBSTITUTE him, if the owner is in aposition to do so ( Art. 2144).

Note: This juridical relation DOES NOT arise in eitherof these instances:i. when the property or business is not NEGLECTED

or ABANDONED.ii. if in fact the manager has even TACITLY (implied

from actions or statements) authorized by theowner.


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b.Solutio Indebiti (Payment Not Due)If something is RECEIVED when there is NO RIGHTto DEMAND it, and it was UNDULY delivered throughMISTAKE, the OBLIGATION TO RETURN it arises(Art. 2154).

c.Other Quasi-Contracts (also known as supportgiven by strangers) Articles 2144, 2154, 2167, 2174, 2150, 2164, 2168,2169, 2170, 2171, 2172, 2173, 2174, 2175

Note: A quasi-contract is a UNILATERAL contractcreated by the sole act or acts of the gestor; noexpress consent given by the other party. The consentneeded is provided by LAW through PRESUMPTION(Pineda, Ernesto L., Obligations & Contracts,2000 ed., p.14).

This consent is referred to as presumptive consent. Itgives rise to multiple juridical relations which result inobligations for the delivery of the thing or rendition ofservice (Perez v. Pomar, 2 Phil. 682).

4. DELICT(Ex-Delictu, Culpa Criminal)Civil obligations arising from CRIMINAL OFFENSE shallbe governed by the PENAL LAWS ( Art. 1161).

Every person criminally liable for a felony is also civillyliable(Art. 100, Revised Penal Code).

Civil liability may be in the form of Restitution,Reparation of damage caused, or Indemnification forconsequential damages.

General rule: Civil liability is a NECESSARYCONSEQUENCE of criminal liability.

Reason: The commission of a crime causes not onlymoral evil but also material damage.

Exception: Treason, Rebellion, Gambling

Article 12 of the Revised Penal Code, provides forexempting circumstances and as such the perpetratordo not incur CRIMINAL LIABILITY but is NOT EXEMPTfrom civil liability. These are:1. Imbecile or insane person (unless acting in lucid

interval 2. Person below 18 years old 3. Acting under compulsion of an irresistible force 4. Acting under the impulse of an uncontrollable fear of

an equal or greater injury.

Note: The civil liability for crimes is extinguished by thesame causes provided by the Civil Code for theextinguishment of other obligations. Such liabilitycontinues notwithstanding the fact that the offender hasserved his sentence or has not been required to servethe same by reason of amnesty, pardon etc.

Rule 111 of the Criminal Procedure provides that:“When a criminal action is instituted, the civil action forthe recovery of civil liability arising from the offensecharged shall be DEEMED INSTITUTED with thecriminal action UNLESS the offended party WAIVESTHE CIVIL ACTION, RESERVES THE RIGHT TOINSTITUE IT SEPARATELY or INSTITUTES THE CIVIL ACTION PRIOR THE criminal action.”

5. QUASI-DELICT(Quasi Ex-Delicto) Fault or negligence of a person who by his acts oromissions, connected or unconnected with, butindependent from, any contractual relation, causesdamage to another person. The equivalent of the term“tort” in Anglo-American law.

Whoever by act or omission causes damage to another,there being FAULT or NEGLIGENCE, is OBLIGED topay for the damage done ( Art. 2176).

Art. 2176, where it refers to fault or negligence, coversnot only acts not punished by law but also acts criminalin character, whether intentional or voluntary ornegligent (Elcano vs. Hill, G.R.No. L-24303, May 26,1977).

It is based on the undisputed principle of equity that faultor negligence cannot prejudice anyone else besides itsauthor and in no case should its consequences beborne by him who suffers the harm produced by suchfault or negligence.

Note: It has been ruled that tort liability can exist even if

there are already contractual relations, but this shouldbe interpreted to mean that the tort liability itself doesnot arise because of the contract, but because of someother fact (Paras, Edgardo L., Civil Code of thePhilippines Annotated V, 2008 ed., p.1102).

Fault or NegligenceNegligence is the failure to observe for the protection ofthe interests of another person, that degree of care,precaution and vigilance which the circumstances justlydemand (US vs. Barrias, 23 Phil. 434).

Test of Negligence: Would a prudent man, in theposition of the person to whom negligence is attributed,


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foresee harm to the person injured as a reasonableconsequence of the course about to be pursued? If so,the law imposes a duty upon him to refrain from thatcourse or take precautions, and failure to do soconstitutes negligence.

Elements of Negligence:1.The fault or negligence of the defendant;2.The damage suffered or incurred by the plaintiff; and3.The relation of cause and effect between the fault or

negligence of the defendant and the damage incurredby the plaintiff.

A single act or omission can give rise to different causesof action, subject to the prohibition against doublerecovery under the Rules of Court.

Obligations arising from quasi-delict are demandable notonly from the person directly responsible for the damageincurred, but also against the persons mentioned in Art.2180.

Kinds of Negligence:1. Culpa Aquilana -- quasi-delict; negligence as a

source of obligation 2. Culpa Contractual -- negligence in the performance of

a contract 3. Culpa Criminal -- criminal negligence

Distinctions between Culpa Aquilana & CulpaContractual

Culpa Aquilana Culpa ContractualNegligence as a source ofobligation

Negligence in theperformance of a contract

Fault or negligence whichconstitutes an independentsource of obligationbetween parties notpreviously bound

Fault or negligence of thedebtor as an incident inthe fulfillment of anexisting obligation

Distinction between delict & quasi-delictDelict Quasi-delict

Public Right: wrongagainst the State

Private Right: wrongagainst the individual

Criminal intent isnecessary for theexistence of liability

Criminal intent is notnecessary for it is possiblethat there is NO criminalcharge but only civilliability for damages

Not as broad as quasi-delict, can be punishedonly when there is a penallaw clearly penalizing it

Actionable in any act oromission wherein fault ornegligence intervenes

Form of redress is eitherfine or imprisonment orboth

Either by compensation orindemnification

Must be proven beyondreasonable doubt

Requires preponderanceof evidence

Can never becompromised

Can be compromised asany other civil liability

Employer’s liability issubsidiary. The employeemust have first beenconvicted and sentenced

to pay civil indemnity and itmust be shown that he isinsolvent.

Employer’s liability isprimary can be sueddirectly by the injured partyand may recover from his

employee

Employer is liable onlywhen he is engaged insome kind of business orindustry

All employers whether theyare engaged in someenterprise or not are liable,this includes househelpers.

I. OBLIGATION TO GIVE (REAL)

DETERMINATE OR SPECIFIC THING DUTIES OF THEOBLIGOR

1. Deliver the thing itself

General rule: The debtor of a thing CANNOT COMPELthe creditor to RECEIVE A DIFFERENT ONE, although

the latter may be of the same value as, or morevaluable than which is due(Art. 1244 Par. 1).

N ATURE AND E FFECTS OF

O BLIGATION


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Exceptions:a. By agreement or consent, the debtor may deliver a

different thing or perform a different prestation in lieuof that stipulated (either a Dation in Payment orObjective Novation)

b. Waiver of defect, the creditor with knowledge ofdefect accepts the thing without protest or disposesit.

2. Preserve the thing with due careGeneral rule: Every person obliged to give somethingis also OBLIGED to TAKE CARE of it with the PROPERDILIGENCE OF A GOOD FATHER OF A FAMILY ( Art.1163).

Exception: The LAW or the STIPULATION of theparties requires another standard of care ( Art. 1163).

Basis: Absence of the duty of obligor to take care of thething, the obligation to deliver would be illusory.

Also, failure to preserve the specific thing would giverise to liability for damages unless due to aFORTUITOUS EVENTS/FORCE MAJEURE .

If the law or contract does not state the diligence whichis to be observed in the performance, that which isexpected of a good father of a family shall be required( Art. 1173 Par 2).

Diligence It is the attention and care required of a person in agiven situation and is the opposite of negligence.

Kinds:a. Simple diligenceb. Extraordinary Diligencec. Diligence of a good father of a family/Bonos PaterFamilia -- measure of prudence or activity as is properlyto be expected from, and ordinarily exercised by a

reasonable and prudent man under the particularcircumstances(Black’s Law Dictionary, 6 th Ed., p.457).

3. Deliver the ACCESSIONS and ACCESSORIESGeneral rule: Obligation to give a determinate thingincludes that of DELIVERING ALL its ACCESSIONS & ACCESSORIES, even though they may not have beenmentioned ( Art. 1166).

Exceptions: By contrary intention of the parties

Difference between Accessions and AccessoriesAccessions/ Accession

Continua Accessories

Includes everything which

is produced by a thing, orwhich is incorporated orattached thereto, eithernaturally or artificially.

Destined forembellishment, use orpreservation of anotherthing or have for theirobject the completion ofanother thing

Includes:1. Accesion Natural- e.g.alluvion2. Accesion Industrial- e.g.building, planting

Fault or negligence of thedebtor as an incident inthe fulfillment of anexisting obligation

4. Deliver the fruitsThe creditor has a RIGHT to the FRUITS of the thingfrom the TIME the obligation to deliver it arises.However, there is NO real right UNTIL the same hasbeen delivered to him (Art. 1164 Par. 1).

Note: The ownership of things is transferred not only bymere agreements but by delivery (Non Nudis Pactis,Sed Traditione Domina Rerum Transferentur).

When does the obligor’s obligation to deliver arise? a. If obligation is based on law, quasi-delict, quasi-

contract or crime, the specific provisions of applicable

law shall determine when the delivery shall beeffected.b. If obligation is subject to a suspensive condition, it

arises from the happening of the condition.c. If obligation is subject to a suspensive term or period,

it arises upon the lapse of the term.d. If obligation is not subject to any of the foregoing, it

arises from the constitution or perfection of theobligation.

Principle of Balancing of Equities as Applied inActions for Specific Performance

In specific performance, equity requires that the contractbe just and equitable in its provisions, and that theconsequences of specific performance likewise beequitable and just. The general rule is that this equitablerelief will not be granted if the result of the specificperformance of the contract would be harsh, inequitable,oppressive or result in an unconscionable advantage tothe plaintiff(Agcaoili vs. GSIS, G.R. No. 30056, August30, 1988).

Kinds of Fruits1. Natural -- spontaneous products of the soil, the young

without intervention of human labor.


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2. Industrial -- those produced by lands of any kindthrough cultivation brought by intervention of humanlabor.

3. Civil -- those derived by virtue of juridical relation (e.g.rents of building)

CORRELATIVE RIGHTS OF THE OBLIGEE:1. Right to specific performance2. Right to rescission or resolution3. Right to damages due to the following (DeDeNeFraCo):

a. failure to deliverGeneral rule: If due to fortuitous even, obligor is notliableExceptions:i. Law (e.g. Articles 1942, 2001,2147, 1993) ii. Stipulation to the contraryiii.Nature of the obligation requires assumption of

riskiv.Fraud or malice (bad faith)- such as obligor

delivers to two or more persons having differentinterest ( Art. 1165 Par. 3).

v.Debtor was already in delay when the fortuitouseven took place

b. Delay or defaultc. Negligence in the performance of the obligationd. Fraude. Any manner in contravention of the tenor of obligation

Indeterminate/Generic ThingWhen the obligation consists in the delivery of anINDETERMINATE or GENERIC THING, whose QUALITYand CIRCUMSTANCES have not been STATED, thecreditor cannot DEMAND a thing of SUPERIOR quality.Neither can the debtor deliver a thing of INFERIORquality. The PURPOSE of the obligation and otherCIRCUMSTANCES shall be taken into consideration(Art.1246).

Note: If the debtor can no longer perform the principalobligation, the creditor may ask for compliance by a 3rd

person at the debtor’s expense(Art. 1165).

DUTIES OF THE OBLIGOR:1. To deliver the thing of the quality intended by the

parties, taking into account the purpose of theobligation, intent of the parties and other circumstances;

2. To be liable for damages in case of breach due todelay, fraud, negligence or contravention of the tenorthereof ( Art. 1170).

CORRELATIVE RIGHTS OF THE OBLIGEE:1. Right to ask for rescission

2. Right to damages due to:a. failure to deliver

b. fraudc. negligenced. delaye. any matter in contravention of the tenor of the

obligation

II. OBLIGATION TO DO (PERSONAL)

General rule: In obligations to do or not to do, an ACT orFORBEARANCE CANNOT be SUBSTITUTED by anotheract or forbearance AGAINST the obligee’s will ( Art. 1244Par. 2).

Exception: In facultative obligation where the debtorreserves the right to substitute another prestation.

Note: If a person is obliged to do something and fails todo it, the same shall be EXECUTED at his COST. Thesame rule may be observed if he does it inCONTRAVENTION of the tenor of the obligation.Furthermore, it may be decreed that what has been poorlydone be undone (Art. 1167).

DUTIES OF THE OBLIGOR:1. To do it(Art. 1167). 2. To shoulder the cost if someone else does it(Art.

1167). 3. To undo what has been poorly done ( Art. 1167). 4. To pay damages ( Arts. 1170-1172, 2201-2202).

III. OBLIGATIONS NOT TO DOIn obligations to do or not to do, an ACT orFORBEARANCE CANNOT be SUBSTITUTED by anotheract or forbearance AGAINST the obligee’s will ( Art. 1244Par. 2).

Note: Performance cannot be delegated or be performedby an agent.

No legal accessory obligations arise as compared to

obligation to give.

When the obligation consists in not doing, and the obligordoes what has been forbidden him, it shall also be undoneat his expense ( Art. 1268).

DUTIES OF THE OBLIGOR:1. Not to do what should NOT be done2. To shoulder the cost to UNDO what should not have

been done3. To pay damages


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RIGHTS OF A CREDITOR IN PERSONALOBLIGATIONS: “TO DO OR NOT TO DO” ( Arts. 1167-1168)

Positive PersonalObligations(Art. 1167)

Negative PersonalObligations(Art. 1168)

The obligee can:1. Have the obligation

performed or executedat the expense of theobligor (EXCEPT whenthe prestation consists ofan act where thepersonal and specialqualification of theobligor is the principalmotive for theestablishment of theobligation. In such casethe remedy is an actionfor damages under Art.1170)

2. Ask that what has beenpoorly done be undone

3. Recover damagesbecause of breach of theobligation

If the obligor does whathas been forbidden him,the obligee shall have thefollowing remedies:1. Have it undone at the

expense of the obligor;and

2. To ask for damages

In negative obligations delay ormora is not possible unlikein positive obligations(Jurado, Desiderio, Comments andJurisprudence on Obligations and Contracts,2010 ed., p.55).

Cases Where the Remedy Granted under Article 1168is NOT available:1. Where the effects of the act which is forbidden, are

definite in character - even if it is possible for the obligeeto ask that the act be undone at the expense of theobligor, consequences permanent in character andcontrary to the object of the obligation will be produced

For instance, should a TV star be absolutely prohibitedby his contract with his home station to appear inprograms of other TV stations, the effects of the breachthereof can no longer be undone.

2. Where it is physically or legally impossible to undo whathas been undone because of the very nature of the actitself or of a provision of law, or because of conflictingrights of third persons

Note: In either case, the only feasible remedy isindemnification for damages.

BREACH OF OBLIGATION may be:1. Voluntary -- arises either by fraud, negligence, delay,

and in any manner contravene to the tenor of theobligation ( Art. 1170).

2. Involuntary -- arises due to fortuitous events

OR

1. Substantial -- amount to non-performance which is thebasis for rescission and payment of damages

2. Casual -- a part of the obligation has been performedand gives rise to liability for damages

Note: Rescission will not be permitted for a slight orcausal breach of the contract, but only for such breacheswhich are substantial as to defeat the intention of theparties in making the agreement.

The Supreme Court said that Hawaiian-Philippine Co.does not have the right to rescind the contract. It shouldbe noted that the time of payment stipulated for in thecontract should be treated as of the presence of thecontract. There was only a slight breach of contract whenthe payment was delayed for 20 days after whichHawaiian-Philippine Co. accepted the payment of theoverdue accounts and continued with the contract,waiving its right to rescind the contract. The delay in thepayment of Song Fo & Co. was not such a violation for thecontract. (Song Fo v. Hawaiian Phils, 47 SCRA 821).

Different Modes of BreachThose who in the performance of their obligations areguilty of FRAUD, NEGLIGENCE, or DELAY and thosewho in any manner CONTRAVENE THE TENOR thereof,are liable for damages (Art. 1170).

1. FRAUD (Dolo) -- is the voluntary execution of awrongful act, or a willful omission which prevents thenormal realization of the prestation, knowing, andintending the effects which naturally and necessarily

arise from such act or omission.Implies some kind of malice or dishonesty and cannotcover cases of mistake and errors in judgment made ingood faith. In such case obligor can be held liable fordamages.

Test: The element of INTENT and not the HARM done.

Effect of Fraud: Liability for damages.

Waiver of FraudResponsibility arising from fraud is DEMANDABLE in

ALL OBLIGATIONS. Any waiver of action for FUTUREFRAUD is VOID.


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Note: The law prohibits the renunciation of actionfor damages on the ground of future fraud but it DOESNOT prohibit fraud ALREADY COMMITTED.

Kinds of Fraud:1. Fraud in the performance of the obligation(Art.1171). 2. Fraud in the execution/ creation/ birth of contract

a. Dolo Causante ( Art. 1344). b. Dolo Incidente ( Art. 1338).

2. NEGLIGENCE (Culpa)The fault or negligence of the obligor consists in theOMISSION OF THAT DILIGENCE which is required bythe NATURE of obligation and corresponds with thecircumstances of the persons, of the time and place(Art. 1173 Par 1).

In case of fraud, bad faith, malice or wanton attitude,the obligor shall be responsible for ALL DAMAGESwhich may be REASONABLY ATTRIBUTED to the non-performance of the obligation ( Art. 2201 Par 2).

Negligence Any voluntary act or omission, there being no malice,which prevents the normal fulfillment of an obligation

Effects of Negligence:a. Damages are demandable which the court may

regulate according to circumstances; andb. Invalidates defense of fortuitous event.

Kinds of Negligence:a. Civil Negligence

i. Culpa contractual -- fault or negligence of obligor byvirtue of which he is unable to perform hisobligation arising from a pre-existing contrac

ii. Culpa aquiliana/quasi-delict -- fault or negligence ofa person, whose failure to observe the requireddiligence to the obligation causes damage toanother

The negligence of the defendant in both cases ischaracterized by the omission of that diligence whichis required by the nature of the obligation andcorresponds with the circumstances of the persons, ofthe time and of the place.

b.Culpa Criminal -- fault or negligence which results inthe commission of a crime.

Culpacontractual

Culpaaquiliana

Culpacriminal

Negligence ismerelyincidental to theperformance ofan obligationalready existingbecause of acontract

Negligence is

direct,substantive,andindependent

Negligence

is direct,substantive,andindependent

There is alwaysa pre-existingcontractualrelation

There may ormay not be apre-existingcontractualrelation

No pre-existingcontractualrelation

Source ofobligation:breach ornonfulfillment ofcontract

Source ofobligation:defendant’snegligent actor omission

Source of

obligation:defendant’scriminal act

Requires proofbypreponderanceof evidence

Requires proofbypreponderanceof evidence

Requiresproof beyondreasonabledoubt

Defense of agood father of afamily in theselection andsupervision ofemployees isNOT a proper orcompletedefense, thoughit may mitigatedamages

Defense of agood father ofa family in theselection andsupervision ofemployees is aproper andcompletedefense

Defense of agood fatherof a family inthe selection

andsupervisionofemployees isNOT proper.Theemployee’sguilt isautomaticallytheemployer’sguilt if the

former isinsolvent.

Proof ofexistence of acontract andbreach thereofgives rise to apresumption offault

Plaintiff has toprovenegligence ofthe defendant

Accused ispresumedinnocent untilthe contraryis proved


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Difference between fraud ( dolo) and negligence(culpa)

Fraud (dolo) Negligence (culpa)

Willfulness or deliberateintent to cause damage orinjury to another

Mere want of care ordiligence and not thevoluntariness of act oromission

Liability cannot be mitigatedby courts

Liability may be mitigated bycourts

Waiver for future fraud isVOID

Waiver for future negligenceVALID if SIMPLEVOID if GROSS

Presumed from the breachof a contractual obligation Must be clearly proved

Standard of Diligence RequiredIf law or contract does not state the diligence which is tobe observed in the performance, that which is expectedof a GOOD FATHER OF A FAMILY is required.

Note: When the negligence is so gross that it amountsto wanton attitude on the part of the obligor, the laws incase of fraud shall apply.

If the obligor acted in good faith, he shall be liable onlyfor natural and probable consequences of the breach ofobligation and which the parties have foreseen or couldhave reasonably foreseen at the time the obligation wasconstituted.

If the obligor acted in bad faith, the boundaries betweennegligence and fraud disappear altogether. Obligor canbe held responsible for all damages which may bereasonably attributed to the nonperformance of theobligation. Any waiver or renunciation which is made inanticipation of such liability is null and void.

If there was contributory negligence of the obligee, theeffect is to reduce or mitigate the damages which he canrecover.

If the negligent act or omission of the obligee was theproximate cause of the event which led to damage orinjury complained of, he cannot recover.

Robbery, per se, like carnapping, does NOT foreclosethe possibility of negligence. It is not a fortuitous event(Sicam, et al. vs. Jorge, GR No. 159617, August 8,2007).

3. DELAY (Mora)Those obliged to DELIVER or TO DO something incurDELAY from the time the obligee JUDICIALLY orEXTRAJUDICIALLY DEMANDS from them thefulfillment of their obligation ( Art. 1169).

DelayNon-fulfillment of obligation with respect to time.

Note: There is SIMPLE delay as one fails to perform theobligation and this delay is converted to a LEGALDELAY which arises when the obligee judicially orextrajudicially demands their fulfillment. The delay whichthe law speaks about is one that is LEGAL.

Delay in the performance of the obligation, however,must be either malicious or negligent. If delay is onlydue to inadvertence without any malice or negligence,the obligor cannot be liable under Art. 1170 (RCBC vs.CA, G.R. No. 133107, March 25, 1999).

General rule: There must be demand in order for thedebtor to incur delay.

Exceptions:a. When the obligation or law expressly so declares.b. When from the nature and circumstances of the

obligation it appears that the DESIGNATION OF THETIME when the thing to be delivered or the service isto be rendered was a controlling motive for theestablishment of the contract.

c. When demand would be USELESS:i. Caused by some act or fault of the debtorii. Impossibility caused by fortuitous event

Purpose of the Demand: The presumption of goodfaith.

Note: There can only be delay in obligations “to giveand to do” (positive obligations) and not in obligations

“not to give or not to do” (negative obligations)(Tolentino, Arturo M., Commentaries and Jurisprudenceon the Civil Code of the Philippines, 1991 ed., Vol. 4, p.101).

In RECIPROCAL obligations, neither party incurs delayif the other DOES NOT COMPLY or is NOT READY tocomply in a PROPER MANNER with what isINCUMBENT upon him. From the moment one of theparties fulfills his obligation, delay by the other begins.


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Requisites in order to consider the obligor indefault: (SSS vs. Moonwalk Development and HousingCorpoation, G.R. No. 73345, April 7, 1993)1. Obligation is demandable and already liquidated2. The obligor/debtor delays performance3. The creditor requires performance judicially or extra-

judicially

A grace period is not an obligation of the debtor but aright. It must not be likened to an obligation the non-payment of which under Art. 1169 would generally stillrequire judicial or extrajudicial demand before defaultcan arise. When unconditionally conferred, it is effectivewithout need of demand either for the payment of theobligation or for the honoring of the right(BricktownDev’t. Corp. vs. Amor Tierra Devt. Corp., G.R. No.112182, December 12, 1994).

KINDS OF DELAY:1. Mora Solvendi -- delay on the part of the debtor and

may either be: a. Ex Re -- obligations to giveb. Ex Persona -- obligations to do

Requisites:i. Prestation is demandable and already liquidated

Note: There is no delay in natural obligations forthe performance of such is optional and voluntary.

ii. The debtor is in delay of the performance due tocauses imputable to him and not by acts such asfortuitous events

iii. The creditor requires or demands the performance judicially or extrajudicially.

If extrajudicial: date of demandIf uncertain: date of filing of complaint

Note: A mere reminder cannot be considered ademand for performance, because it must appear that

the tolerance or benevolence of the creditor musthave ended (Tolentino, Arturo M., Commentaries andJurisprudence on the Civil Code of the Philippines,1991 ed., Vol. 4, p 102).

Commencement of a suit is sufficient demand(Palmares vs. CA, G.R. No. 126490, March 31, 1998)

But even without demand, debtor incurs delay if heacknowledges his delay such as requesting for anextension of time for payment.

Effects of Mora Solvendi Debtor is liable for interest in obligations to paymoney, or damages. In the absence of extra-judicialdemand, the interest shall commence from the filingof the complaint.

Interest to be paid as indemnity for damages is basedon what has been agreed upon by the parties, in theabsence thereof, the legal interest(Art. 2209).

Debtor is liable even for fortuitous event when theobligation is to deliver a specific thing. But court mayequitably mitigate damages if debtor proves that theloss would have still resulted even if he had not beenin default.

For generic things, debtor may still be compelled todeliver a thing of the same kind or be held liable fordamages.

2. Mora Accipiendi -- delay in the performance based onthe omission by the creditor of the necessarycooperation, especially acceptance on his part.

Requisites:a. Offer of performance by the debtor who has the

required capacity;b. Offer must be to comply with the prestation as it

should be performed;c. Creditor refuses the performance without just

cause.

Effects of Mora Accipiendi :a. Responsibility of the debtor for the thing is reduced

and limited to fraud and gross negligence.b. Debtor is exempted from the risks of loss of the

thing, which automatically passes to the creditor.c. All expenses incurred by the debtor for the

preservation of the thing after the delay shall bechargeable to the creditor.

d. The creditor becomes liable for damages.e. The debtor may relieve himself of the obligation byconsignation of the thing.

f. If the obligation bears interest, the debtor does nothave to pay from the moment of the mora;

Remedy:a. Consign it in courtb. Keep it to himself (he’s not liable for damages)

3. Compensation Morae -- delay of the parties in areciprocal obligation


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General rule: Parties in a bilateral contract canREGULATE the ORDER in which they shall complywith their reciprocal prestations. Otherwise, thefulfillment must be SIMULTANEOUS andRECIPROCAL.

Exception: Contrary stipulation (e.g. installmentbasis)

Effects of Compensation Morae:a. Delay of the obligor cancels delay of the obligee

and vice versa. b. No actionable default on the part of both parties. c. If delay of one party is followed by that of the other,

the liability of the first infractor shall be equitablybalanced by the courts. If it cannot be determinedwhich of the parties is guilty of delay, the contractshall be deemed extinguished and each shall bearhis own damages ( Art. 1192 ).

Cessation of the Effects of Delay ( mora)The benefits arising from default or delay may ceaseupon (1) renunciation by the creditor, express or impliedand (2) prescription.

4. Contravention of TenorUnder Art. 1170, the phrase “in any manner contravenethe tenor” of the obligation includes not only any illicitact which impairs the strict and faithful fulfillment of theobligation, but also every kind of defectiveperformance.

Unless excused in proper cases by fortuitous event

Note: The following do not excuse fulfillment: a. Increase in cost of performance b. Poverty c. War between the subjects of a neutral country

REMEDIES OF CREDITOR IN CASE OF BREACH

Primary Remedies:1. Action for Performance (Specific Performance orSubstituted Performance)

2. Action for Damages (exclusively or in addition to actionfor performance)

3. Action for Rescission

Subsidiary Remedies:1. Accion Subrogatoria 2. Accion Pauliana 3. Other Specific Remedies

PRIMARY REMEDIES

1. ACTION FOR PERFORMANCE

a. Action for Specific Performance (in obligation togive a determinate thing)When what is to be delivered is a DETERMINATETHING, the creditor, in addition to his right forindemnification of damages, may COMPEL thedebtor to MAKE THE DELIVERY(Art. 1165 Par 1).

Note: This remedy implies that the basis is acontractual relation between the creditor and debtor.

b. Action for Substituted Performance (in obligationto given indeterminate thing)If the thing is indeterminate or generic, he may ASKthe obligation be COMPLIED with at the EXPENSEof the DEBTOR ( Art. 1165 Par. 2 ).

Note: Debtor cannot avoid obligation by payingdamages if the creditor insists on the performance.

c. Action for Substituted Performance or Undoing ofPoor Work (in obligation to do)

If a person obliged to do something fails to do it, theSAME shall be executed at HIS COST. This samerule shall be observed if he does it inCONTRAVENTION OF THE TENOR of theobligation. Furthermore, it may de decreed that whathas been done poorly be UNDONE (Art. 1167).

d. Action for Undoing (in obligation not to do)

General rule: When the obligation consists in NOTDOING, and the obligor does what has beenforbidden him, it shall be UNDONE at his EXPENSE(Art. 1168).

Exceptions: When the only feasible remedy isindemnification for the damages cause by reasonthat:i. it has become impossible to undo the thing

physically or legally.ii. if the act is definite and will not cease even if

undone.

2. ACTION FOR DAMAGESRecoverable damages include ANY and ALL damagesthat a human being may suffer. Responsibility fordamages is INDIVISIBLE.


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3. ACTION FOR RESCISSIONThe POWER to RESCIND obligation is IMPLIED inRECIPROCAL OBLIGATIONS, in case one of theobligors should not comply with what is incumbent uponhim ( Art. 1191).

The injured party may choose between FULFILLMENTand RESCISSION of the obligation, with the payment ofdamages in either case.

Should he choose fulfillment and the same shouldbecome impossible, the injured party may still seek forrescission.

Note: The court SHALL decree the rescission claimedUNLESS there be a just cause authorizing the fixing of theperiod.

BREACH BY BOTH PARTIES:1. If first infractor can be determined, his liability shall be

EQUITABLY TEMPERED by the courts ( Art. 1192 ).2. If the first infractor cannot be determined, the obligation

shall be EXTINGUISHED and EACH shall bear his owndamages ( Art. 1192 ).

Note: The remedy under Art. 1191 is ALTERNATIVE.Party seeking rescission can only elect one betweenfulfillment and rescission. There can be no partialperformance and partial rescission.

The remedy only applies to RECIPROCAL OBLIGATIONSas when there is reciprocity between the parties.

Rescission required JUDICIAL APPROVAL to produceLEGAL EFFECT

Effects of Rescission1. Extinguishes obligatory relation as if it had never been

created; extinction has a retroactive effect.2. Mutual restitution

SUBSIDIARY REMEDIES:1. To exhaust the property in possession of the debtor

generally by attachment, subject to exemptionsprovided by law

Note: Correlate with Art 2236 which states that thedebtor is liable with all his property, present and future,for the fulfillment of his obligations subject toexemptions provided by law.

2. Accion Subrogatoria (Subgratory Action)

Action which the creditor may exercise in place of thenegligent debtor in order to preserve or recover for the

patrimony of the debtor the product of such action, andthen obtain therefrom the satisfaction of his own credit.

Right to be subrogated to all the rights and actions ofthe debtor save those which are inherent in his person.

Note: The creditor is entitled only to so much as isneeded to satisfy his credit and any balance shallpertain to the debtor.

RIGHTS OF THE CREDITOR:a. Levy by attachment and execution upon all the

property of the debtor, except such as exempt by lawfrom execution.

b. Exercise all the rights and action of the debtor, exceptsuch as inherently personal to him.

c. To ask for rescission of the contracts made by thedebtor in fraud of their rights.

Requisites:a. Debtor to whom the right of action properly pertains

must be indebted to the creditor b. Creditor must beprejudiced by the inaction or failure

of the debtor to proceed against the third person c. Creditor must have first pursued orexhausted all the

properties of the debtor which are not exempted forexecution.

There is no change of creditor inaccion subrogatoria.The creditor merely acts in the name and for theaccount of the debtor after exhausting all of the assetsof the latter.

In order to exercise theaccion subrogatoria, a previousapproval of the court is not necessary(Tolentino, ArturoM., Commentaries and Jurisprudence on the Civil Codeof the Philippines,1991 ed., Vol. 4, p.138).

EXCEPTIONS TO ACCION SUBROGATORIA:a. Inherent rights of the debtor

i. Right to existenceii. Rights or relations of a public characteriii. Rights of an honorary characteriv. Rights consisting of powers which have not been

used (i.e., the power to carry out an agency ordeposit)

v. Non-patrimonial rights (i.e., the action for legalseparation or annulment of marriage)

vi. Patrimonial rights not subject to execution (i.e.,right to a government gratuity or pension)

vii.Patrimonial rights inherent in the person of thedebtor (i.e., right to revoke a donation by reason of

ingratitude)


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b. Only those who at the time of the donor’s death havea right to the legitime and their and successors ininterest may ask for the reduction or inofficiousdonations ( Art. 772 ).

3. Accion Pauliana - creditors have the right to set asideor revoke acts which the debtor may have done todrefaud them.

Note: All acts of the debtor which reduce his patrimonyin fraud of his creditors, whether by GRATUITOUS orONEROUS title, can be revoked by this action.

BUTPayments of PRE-EXISTING OBLIGATIONS which arealready DUE, whether NATURAL or CIVIL, cannot beimpugned by this action.

Requisites:a. Creditor has a credit prior to the alienation by the

debtor, although demandable later.b. Debtor has made a subsequent contract , giving

advantage to a 3rd person.c. Creditor has no other remedy but to rescind the

debtor’s contract to the 3rd person.d. Act being impugned is fraudulent.

Note: Presumption of fraud may be found in Art.1387 (gratuitous transfer without leaving sufficientfunds for obligations or gratuitous transfer by judgment debtor).

4. Third person who received the property is anaccomplice in the fraud.

Difference between Accion Subrogatoria & AccionPauliana

Accion Subrogatoria Accion Pauliana

1.Not essential that creditis prior to the acquisitionof debtor’s right.

2. Intent to defraud creditoris not required.

3.No period of prescription.

1.Credit must have existedbefore debtor’sfraudulent act.

2. Intent to defraud creditoris required.

3. Action prescribes withinfour years from thediscovery of the fraud.

New debts contracted by an insolvent debtor are NOTincluded within the scope ofaccion pauliana because only

acts which impair the assets of the debtor are covered bythe provision and those which merely increase his

liabilities are not(4 Tolentino p. 140). Ruggiero, however,maintains that theaccion pauliana covers also acts of thedebtor which tend to make his economic condition moreserious, such as when he contracts new obligations.

Note: 2nd and 3rd remedies are subsidiary to the 1st. It canonly be availed of in the absence of any other legalremedy to obtain reparation for the injury.

Take note of the cases of accion directaunder the CivilCode in which a person may directly sue another even ifthere is no privity of contract between them (Arts. 1652,1608, 1729, 1893)

TRANSMISSIBILITY OF RIGHTS

Transmissibility of Rights Acquired by Virtue of anObligation ( Art. 1178)

General Rule: Rights acquired by virtue of an obligationare transmissible in character.

Exceptions:1. When prohibited by LAW which are purely personal in

character.2. When prohibited by PERSONAL QUALIFICATION or

circumstances of the transferor which is materialingredient attendant in the obligation.

3. When prohibited by STIPULATION of the parties.

EXTINGUISHMENT OF LIABILITY IN CASE OFBREACH DUE TO FORTUITOUS EVENTExcept in cases EXPRESSLY specified by law, or when itis otherwise declared by stipulation, or when the NATUREof the obligation requires the ASSUMPTION OF RISK, NOPERSON shall be RESPONSIBLE for those events whichCOULD NOT be FORESEEN or which, THOUGHforeseen, were INEVITABLE ( Art. 1174).

Fortuitous Event ( Force Majeure/Caso Fortuito )

1. By Nature or Acts of God (i.e., earthquakes, storms,floods etc.) -- absolutely independent of humanintervention.

2. By the act of man or force majeure (i.e., armedinvasion, attack by bandits, robbery etc.) -- an eventwhich arises from legitimate or illegitimate acts ofpersons other than the obligor.

Requisites:1. Event must be independent of the will of the obligor;2. It must be either unforeseeable or inevitable;3. Must be of such a character as to render it impossible

for the obligor to fulfill his obligation in a normal manner;and


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A demand note is subject to neither a suspensivecondition nor a suspensive period. The demand is not acondition precedent, since the effectivity and bindingeffect of the note does not depend upon the making of thedemand. It follows therefore, that a demand note is strictlya pure obligation, and payment therefore is immediatelydemandable in the absence of other restrictions.

Conditional ObligationsObligations in which the ACQUISITION of RIGHTS as wellas the EXTINGUISHMENT or LOSS of those ALREADYacquired, shall DEPEND upon the HAPPENING of theEVENT which constitutes the condition ( Art. 1181).

Characteristics of Conditional Obligations:1. Every future and uncertain event upon which an

obligation or provision is made to depend.2. Even though the event is uncertain, it should be

POSSIBLE.3. The condition must be imposed by the WILL of the party

and NOT a necessary legal requisite.4. Past event but unknown to parties (the knowledge to be

acquired in the future of a past event which at thatmoment is unknown to parties interested - it is only inthat sense that the event is be deemed uncertain).

Note: When the debtor binds himself to pay when hismeans permit him to do so, the obligation shall bedeemed to be one with a period ( Article 1180 ).

In this case, the creditor must first ask the court to fix theperiod, otherwise the action to collect the debt would bepremature.

Effects of Failure to Comply with Condition:1. If condition is imposed on the PERFECTION of a

contract -- results in the failure of the contract2. If condition is imposed on the PERFORMANCE of the

obligation -- gives the other party an option either torefuse to proceed with the compliance of the obligation

or to waive the condition.

Classifications of Conditions:1. As to the effect of obligation

a. Suspensive -- the obligation arises, but if thecondition DOES NOT happen, the obligation does notcome into existence.

Principle of retroactivity in suspensive condition ( Art. 1187) The principle of retroactivity, under Art. 1187, is

limited to the effects of the obligation. The cause ofaction for the enforcement of the obligation accrues

and the prescription of the action must still becomputed from the moment of the happening of thesuspensive condition.

In obligations to giveRatio: the condition is only an accidental element of acontract. An obligation can exist even without beingsubject to a condition

Rule on retroactivity has no application to:i. Real contracts; they are perfected only by delivery

of the object of the obligation; principle only appliesto consensual contract

ii. Contracts in which the obligation arising therefromcan only be realized within successive periods orintervals (e.g. lease, hire of service, life annuity).

Retroactive effect as to the fruits and interests inobligations to give:i. In Reciprocal Obligations: no retroactivity --

mutually compensated (fruits may be natural,industrial or civil

ii. In Unilateral Obligations: no retroactivity, debtorappropriates the fruits and interests receivedbecause it is usually gratuitous unless intentionwas otherwise, as inferred from nature andcircumstances

In obligations to do or not to do (personalobligations): No fixed rule; Courts are empowered todetermine the retroactive effect of the suspensivecondition.

Note: This rule also applies to an obligation w/resolutory condition ( Art. 1190, par. 3).

b. Resolutory - fulfillment of the condition results inextinguishment of rights arising out of the obligation.

2. As to the origin of condition

a. Potestative - one which depends upon the will of oneof the contracting parties; it is in the power of one ofthe parties to realize or to prevent.

Kinds:i. Simple Potestative -- presupposes not only a

manifestation of will but also the realization of anexternal act of a 3rd party.

Note: Does not prevent formation of a validobligation because in part it depends oncontingencies over which the debtor has no

control.


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ii. Purely Potestative -- if it depends solely andexclusively upon the will of the debtor, it is VOIDfor the debtor cannot fulfill an obligation arisingfrom his own choice. BUT It is valid if depends onthe will of the creditor.

Note: Applicable only to suspensive conditionsand not to resolutory. Hence, resolutorypotestative conditions are valid even if made todepend upon the debtor since the obligation isalready in force.

iii. Casual - depends exclusively upon chance, will ofa third person, or partially by chance and partiallyby will of a third person, or other factors and notupon the will of the contracting parties.

iv. Mixed - depends upon the will of one of thecontracting parties and other circumstances,including the will of third persons or chance.

3. As to possibility - impossible conditions, thosecontrary to good customs or public policy and thoseprohibited by law shall ANNUL the obligation whichdepends upon them ( Art. 1183).

a. Impossible - may either be PHYSICAL (contrary tolaw of nature) or LEGAL (contrary to law, morals,public policy, good customs).

Note: The impossible condition must exist at the timeof the creation of the obligation otherwise that wouldfall under Art. 1266 (Subsequent Impossibility).

General rule: Impossible conditions annul theobligations dependent upon them

Exceptions: i. Pre-existing obligationii. Divisible obligation

iii. Negative Impossible Thingsiv. Testamentary deposition

Note: If the obligation is divisible, that part notaffected by the impossible or unlawful condition shallbe VALID.

Principle of Indivisibility of ConditionsThe indivisibility of the condition passes to the heirs ofthe debtor: hence, some heirs cannot demand partialperformance of the obligation by offering to fulfill partof the condition corresponding to them.

Exception: The condition may de divisible:

i. By nature of the conditionii. By stipulationiii. By law

4. As to modea. Positive -- condition that some event happen at a

determinate time shall EXTINGUISH the obligation assoon as the time expires or become indubitable thatthe event will not take place ( Art. 1184).

b. Negative -- the condition that some event WILL NOTHAPPEN at a determinate time shall render theobligation EFFECTIVE from the moment the TIMEhas elapsed of it has become EVIDENT that theevent CANNOT occur ( Art. 1185 ) .

Note: If there is no period fixed in the foregoing, Art.1185 Par. 2 shall apply. Intention of the parties iscontrolling and the time shall be that which the partiesmay have probably contemplated, taking into accountthe nature of the obligation.

Effects of suspensive, resolutory, potestative, mixed,casual condition (Art. 1181-1182):1. Suspensive condition -- obligation shall only be effective

upon the fulfillment of the condition; upon constitution ofobligation, before fulfillment, obligee acquires a merehope or expectancy, protected by law.a. Before fulfillment - Demandability and the acquisition

of the rights arising from the obligation is suspended.Obligation of obligor to comply with the prestation isheld in suspense until fulfillment of condition. Anything paid by mistake during such time may berecovered

b. After the fulfillment - The obligation arises orbecomes effective; obligor can be compelled tocomply with what is incumbent upon him.

If it becomes certain that the condition will not befulfilled, the conditional creditor loses all hope ofbecoming a real creditor, and likewise loses the power

to exercise the actions granted by Art. 1188 for thepreservation of his rights.

2. Resolutory condition – obligation becomes demandableimmediately after its constitution and rights areimmediately vested in the obligee, but such rights arealways subject to the threat or danger of extinction.Principle of retroactivity applies ( Art. 1190 par. 1).a. Before fulfillment - right recognized in Art. 1188, par.

1 in case of a suspensive condition should likewise beavailable in obligations with a resolutory condition.

b. After fulfillment - Whatever may have been paid or

delivered by one or both of the parties upon theconstitution of the obligation shall have to be returned


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upon the fulfillment of the condition. There is a returnto the status quo.

Aside from the actual things received, the fruits or theinterests thereon should also be returned afterdeducting the expenses made for their production,gathering and preservation.

When condition is not fulfilled, rights are consolidatedand they become absolute.

3. Potestative conditiona. When it depends exclusively upon the will of creditor

–- condition and obligation is valid.b. When it depends exclusively upon the will of debtor in

case of a suspensive condition – condition andobligation are void; to allow such condition would beto sanction illusory obligation, in direct contraventionof the principle announced in Art. 1308.

c. When it depends exclusively upon the will of debtor incase of a resolutory condition – condition andobligation is valid; the position of the debtor is exactlythe same as the creditor in a suspensive conditionand does not render the obligation illusory.

Note: If the obligation is a pre-existing one, and doesnot depend for its existence upon the fulfillment by thedebtor of the potestative condition, only the condition isvoid leaving unaffected the obligation itself. Here, thecondition is imposed not on the birth of the obligationbut on its fulfillment (valid obligation).

If condition is declared void but the obligation is stillvalid, in converting the obligation into a pure anddemandable one, an arrangement may be enforcedwhich is not within the contemplation of the parties. Thebest solution is to consider the parties as havingintended a PERIOD within which the valid obligation isto be complied with such that the creditor should ask thecourt to fix a period for compliance. (Patente vs.

Omega, G.R. No. L-4433, May 29, 1953).4. Casual condition - the obligation and condition shalltake effect.

5. Mixed condition - the obligation and condition shall takeeffect.

Effects of impossible conditions ( Art. 1183): 1. Conditional obligation is void -- both obligation and

condition are void.2. Conditional obligation is valid -- if condition is negative,

it is disregarded and obligation is rendered pure andvalid.

3. Only the affected obligation is void -- if the obligation isdivisible, the part not affected by the impossiblecondition shall be valid.

4. Only the condition is void -- if obligation is pre-existing,not depending on fulfillment of the condition which isimpossible for its existence, only the condition is void.

5. Condition considered not imposed - ifimpossible/unlawful condition is attached to a simple orremuneratory donation as well as to a testamentarydisposition, condition is considered not imposed whilethe obligation is valid.

Note: The impossibility of the condition must exist at thetime of the creation of the obligation; a superveningimpossibility does not affect the existence of theobligation.

Effects of positive and negative condition (Art. 1184-1185):In positive condition, obligation is extinguished as soon asthe time expires or if it becomes indubitable that the eventwill not take place.

In negative condition, the obligation is effective from themoment the time indicated has lapsed, or if it has becomeevident that the event cannot occur, although the timeindicated has not yet lapsed.

The intention of the parties, taking into consideration thenature of the obligation, shall govern if no time has beenfixed for the fulfillment of the condition.

Doctrine of constructive fulfillment of suspensivecondition ( Art. 1186)

1. Condition is deemed fulfilled when the obligor actuallyprevented the obligee from complying with thecondition; prevention must have been voluntary or willfulin character.

Reason: One must not profit by his own fault.

2. Doctrine applies only to suspensive condition. It canhave no application to an external contingency which islawfully within the control of the obligor (Taylor vs. UyTieng Pao, GR No. L-16109, October 2, 1922 ).

3. The mere intention of the debtor to prevent itshappening or the mere placing of ineffective obstaclesto its compliance, without actually preventing fulfillmentis not sufficient (Manresa).

Note: When the voluntary act of the debtor did not havefor its purpose the prevention of the fulfillment of the


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condition, it will not fall under constructive fulfillment.The same is true when the debtor acts pursuant to aright (Tolentino, Arturo M., Commentaries andJurisprudence on the Civil Code of the Philippines, Vol.4, p 161 [1991] ).

Requisites of Constructive Fulfillment:1. Condition is suspensive2. Debtor actually prevents the fulfillment of the condition3. He acts voluntarily

Rights of the Creditor before the fulfillment of thecondition:1. The creditor, may, before the fulfillment of the

obligation, bring the appropriate action for thePRESERVATION of his right ( Art. 1188 ).

Note: No preference of credit is granted to the creditor.

Right of the Debtor before the fulfillment of thecondition:1. The debtor may recover what he paid by mistake

BEFORE the happening of the suspensive condition.2. If the payment was for a determinate thing, debtor may

file anaccion reivindicatoria. 3. If the payment was for an indeterminate thing, there is

solution indebiti .4. If payment was made with knowledge of the condition,

debtor impliedly waives the condition and cannotrecover.

5. If payment was with knowledge but the condition did nothappen, the debtor can recover lest the creditor will beunjustly enriched.

Note: Art. 1188 does not provide for recovery of the fruitsor interest by the debtor who has paid before thehappening of the condition. However, the silence of thelaw should not bar the recovery of fruits or interest by thedebtor (Jurado, Desiderio, Comments and Jurisprudenceon Obligations and Contracts [2010] ).

LOSS, DETERIORATION OR IMPROVEMENTPENDING THE HAPPENING OF THE CONDITION

Loss A thing is lost when it: (1) Perishes; (2) Goes out of thecommerce of men; and (3) Disappears in such a way thatits existence is unknown or it cannot be recovered.

Deterioration Any reduction or impairment in the substance or value of athing which does not amount to loss; the thing is less than

when the obligation was constituted.

Improvement Anything added to, incorporated in, or attached to thething that is due.

In Obligations to give:The thing, pending the happening of the condition, in caseof improvement, loss or deterioration, the following rulesshall be observed:1. If loss without fault of debtor, OBLIGATION IS

EXTINGUISHED.2. If loss through the fault of the debtor, OBLIGED TO

PAY DAMAGES.3. If thing deteriorates without fault of the debtor,

IMPAIRMENT TO BE BORNE BY THE CREDITOR.4. If thing deteriorates through the fault of the debtor,

CREDITOR MAY CHOOSE BETWEEN FULFIMMENTOR RESCISSION WITH DAMAGES IN EITHER CASE.

5. If improvement is through the nature or time, INURESTO THE BENEFIT OF CREDITOR

6. If improvement is at the expense of the debtor, RIGHTSSIMILAR TO THAT GRANTED TO THEUSUFRUCTUARY (see Arts. 579 and 580).

Note: Consequently, the debtor cannot askreimbursement for the expenses incurred for usefulimprovements of for improvements for mere pleasure ( Art.579). He can only ask reimbursement for necessaryexpenses ( Art. 546 ).

The above rules apply to the following:1. Determinate things only because the genus of a thing

never perishes (genus nun quam peruit ) 2. Obligation with a period 3. Those who have a duty to return in case of loss,

deterioration or improvement of the thing in anobligation with a resolutory condition ( Art. 1190, par. 2 ).

The happening of a resolutory condition does not ipso jurere-vest ownership in the original debtor; he merelybecomes entitled to the delivery which would give him

ownership anew.

The original debtor merely has a personal right which isenforceable only against his creditor who has become adebtor obliged to make restitution.

Expenses incurred by the person obliged to makerestitution relating to the production, gathering, andpreservation of the fruits should be deducted from thegross value of the fruits to be returned.


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In Obligations to do or not to do:The provision of Art. 1187 Par.2, in which the courts shalldetermine, shall be observed as regards the effect of theextinguishment of the obligation.

RESCISSION OF RECIPROCAL OBLIGATIONS INGENERAL (Art. 1191)

Reciprocal obligationsThose which are created or established at the same time,out of the same cause, and which result in mutualrelationships of creditor and debtor between the parties.

General Rule: If one of the parties fails to comply withwhat is incumbent upon him, there is a right on the part ofthe other to rescind (or resolve) the obligation (tacitresolutory condition).

Implied in reciprocal obligations and is more appropriatelyreferred to as RESOLUTION.

Based on breach of faith, violative of reciprocity betweenthe parties, committed by the person who is supposed tocomply with the obligation as compared to the rescissionreferred to in Art. 1380 which involves damage or lesion,or injury to the economic interest of a person.

Permitted only for such breaches as are substantial andfundamental as to defeat the object of the parties inmaking the agreement (Universal Food Corp. vs. CA, G.R.No. L-29155, May 13, 1970 ).

Can be demanded only if the plaintiff is ready, willing, andable to comply with his own obligation and the other is not(Seva vs. Berwin, G.R. No. L-24321, January 11. 1926 ),and the party who has not performed his part of theagreement is not entitled to sue/ rescind; the right belongsto the injured party.

A right which belongs to the injured party alone (Mateos

vs. Lopez, 6 Phil. 206 ).

Must be invoked judicially UNLESS contract contains afacultative resolutory provision, in which case, judicialpermission to cancel or rescind the contract is no longernecessary – act of rescission must be communicated toother party (Jison vs. CA, G.R. No. L-45349, August 15,1988 ).

Mere failure of a party to comply with what is incumbentupon him does not ipso jure produce the rescission orresolution of the obligation.

Requires restitution or bringing parties back to originalstatus prior to the contract (Unlad Resources Dev. Corp.,et al. vs. Renato Dragon, et al., G.R. No. 149338, July 28,2008 ).

Requisites:1. One of the parties failed to comply with what is

incumbent upon him.2. The injured party chose rescission over fulfillment or

performance is no longer possible.3. The breach is substantial so as to defeat the object of

the parties in making the agreement.

Right to Rescind NOT AbsoluteThe court is given discretionary power to fix a periodwithin which the obligor in default may be permitted tocomply with what is incumbent upon him ( Art. 1191 par.3). But the discretionary power of the court cannot beapplied to reciprocal obligations arising from a contract oflease because they are governed by Art. 1659.

The termination of a contract must not be contrary to law,morals, good customs, public order or public policy.

Waiver of RightThe right to rescind may be waived, expressly or impliedly(Sps. Francisco vs. DEAC Construction, Inc., et al, G.R.No. 171312, February 4, 2008 ).

Effects:1. If there is a stipulation granting the right of rescission on

the part of the aggrieved party and he validly rescindsthe contract pursuant to such express grant, any courtdecision adjudging the propriety of the rescission extrajudicially made is NOT the REVOCATORY act ofrescission but merely DECLARATORY or an affirmationof the revocation (De Luna vs. Abrigo, G.R. No. 57455,January 18, 1990 ).

2. The decree of rescission shall be without prejudice tothe rights of third persons who have acquired the thing

in accordance with Arts. 1385 and 1388 and MortgageLaw ( Art. 1191 par. 4).

Art. 1191 does NOT apply to the following:1. Contracts of partnership where a partner fails to pay the

whole amount which he has bound to contribute to thecommon fund (see Arts. 1786 and 1788 ).

2. Sales of real or personal property by installments. Thefirst being governed by Recto Law while the latter isgoverned by Maceda Law.

3. Action for rescission is not required upon breach ofcompromise agreement; Article 2041 confers upon the

party concerned the authority to regard it as rescindedand to insist upon the original demand.


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Alternative remedies of injured party (Art. 1191, par. 2): 1. Fulfillment of the obligation with damages

Even after the injured party has chosen fulfillment andsuch fulfillment should become impossible, he can stillseek the rescission of the obligation.

2. Rescission of the obligation with damages

Note: An alternative prayer for fulfillment or rescissionin the complaint is not incompatible. The presumptionis that he is leaving the matter to the sound discretion ofthe court.

Effects of Rescission:1. Duty upon the court to require the parties to surrender

whatever they may have received from the other(without prejudice to the obligation of the party who wasnot able to comply with what is incumbent upon him).

2. Can no longer be demanded when he who demands isno longer in the position to return whatever he may beobliged to restore; neither can it be demanded when thething which is the object of the contract is already in thepossession of a third person who obtained it in goodfaith

Remedy: proceed against the party responsible for thetransfer or conveyance for damages.

If the thing is acquired in bad faith, the injured party canstill go after the property.

If the thing can no longer be recovered, the only remedy isto proceed against the third person who acted in bad faithfor damages.

Note: There can be partial rescission or fulfillment under Art. 1191 (Central Bank vs. CA, G.R. No. L-45710,October 3, 1985 ).

Effects of breach by both parties ( Art. 1192): 1. The liability of the first infractor shall be equitablytempered by the courts;

2. If it cannot be determined which of the parties firstviolated the contract, the same shall be deemedextinguished, and each shall bear his own damages.

OBLIGATIONS WITH A PERIODObligations whose fulfillment a DAY CERTAIN has beenfixed, shall be DEMANDABLE only when that dayCOMES. Obligations with a RESOLUTORY PERIODtakes effect at once but terminate upon the ARRIVAL of

the day certain ( Art. 1193).

Note: A DAY CERTAIN is understood to be that whichmust necessarily come, although it may not be knownwhen. If the uncertainty consists in WHETHER THE DAYwill COME or NOT, the obligation is a conditional one.

When the debtor bind himself to pay WHEN his MEANSPERMIT him, the obligation shall be deemed to be onewith a period ( Art. 1180 ).

Term/PeriodInterval of time, which, exerting an influence on anobligation as a consequence of a juridical act, eithersuspends its demandability or produces itsextinguishment.

Requisites :1. Future;2. Certain; and3. Possible, legally and physically.

When the period is too short for the prestation, as when Atoy is to build a ten-story building in 24 hours, theobligation is void (See Tolentino Vol. IV, p 188 ).

Note: What is suspended by the term is not theacquisition of the right or the effectivity of the obligationbut its demandability.

When Period of Prescription BeginsIt commences from the time the term in the obligationarrives, for it is only from that date that it is due anddemandable (Ullman vs. Hernaez, G.R. No. L-9816,March 10, 1915 ).

Term/Period and Condition DistinguishedTerm/Period Condition

Interval of time which isfuture and certain

Fact or event which is futureand uncertain

Must necessarily come,

although it may not beknown when May or may not happen

Exerts an influence upon thetime of demandability orextinguishment of anobligation

Exerts an influence upon thevery existence of theobligation itself

No retroactive effect unlessthere is an agreement to thecontrary

Has retroactive effect

When it is left exclusively tothe will of the debtor, theexistence of the obligation isnot affected; empowers the

When it is left exclusively tothe will of the debtor, thevery existence of theobligation is affected


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4. If the debtor binds himself when his means permit himto do so ( Art. 1180).

Note: The remedy cannot be applied to contract ofservices and pure obligations. The period of employmentis understood to be implicitly fixed, in default of expressstipulation, by the period for the payment of the salary ofthe employee in accordance with customs.

Applies to a lease agreement where a contract of leaseclearly exists.

The fulfillment of the obligation cannot be demanded untilafter the court has fixed the period and such period hasarrived. Such technicality need not be adhered to when aprior and separate action would be a mere formality andwould serve no other purpose than to delay (Borromeo vs.CA, G.R. No. L-22962, September 28, 1972 ).

There can be no possibility of any breach of contract orfailure to perform the obligation unless the period is fixedby courts.

It is NOT necessary that the creditor, in his complaint,must expressly ask the court to fix the duration of the termor period, such may be granted although the complaintdoes not ask for such relief where the essentialallegations of the pleadings describe an obligation with anindefinite period.

Once fixed by court, the period can no longer be judiciallychanged. However, Art. 1197, par. 3 does not prohibitparties to set a different period than that fixed by court.

When Debtor Loses Right to Make Use of Period (Art.1198): 1. He becomes insolvent, unless he gives a guaranty or

security for the debt (the insolvency need not be judicially declared).

2. He does not furnish to the creditor the guaranties or

securities which he has promised.3. If, after their establishment, the guaranty or security isimpaired through the fault of the debtor, he shall losehis right to the benefit of the period; however, if it isimpaired without his fault, he shall retain his right.

Note: Impairment need not be total.

4. If the guaranty or security disappears through anycause, even without the fault of the debtor.

5. He violates any undertaking, in consideration of whichthe creditor agreed to the period (i.e. if an employee

commits a substantial breach of his employmentcontract, the employer may terminate the employment).

6. He attempts to abscond.

It is not essential that there be actual absconding.

Note: If IMPAIRMENT is without the fault of the debtor, heshall retain the right.

When obligations comprehend several objects it maybe:1. Conjunctive - when all the objects or prestations are

demandable at the same time.2. Distributive- when only one is demandable. It may

either be alternative or facultative.

ALTERNATIVE AND FACULTATIVE OBLIGATIONS1. Conjunctive - all prestations must be performed to

extinguish the obligation; or2. Disjunctive - one or some prestations must be

performed to extinguish the obligationa. Alternativeb. Facultative

ALTERNATIVE OBLIGATION:The debtor must perform one of several obligations, thechoice belongs to the debtor UNLESS expressly given tothe creditor ( Art. 1200 ).

Limitation: The debtor shall have NO right to choosethose prestations which are impossible, unlawful or whichcould not have been the object of the obligation ( Art.1200, Par. 2 ).

Note: Grant of choice to creditor cannot be implied. Also,right of choice may be entrusted to a third person.

A person ALTERNATIVELY BOUND by differentprestations shall completely perform one of the ( Art 1199,Par. 1).

Limitation: The creditor cannot be compelled to receive

part of one and part of the other undertaking ( Art. 1199,Par. 2 ).

Effect of Notice of Choice:1. Limits the obligation to the object or prestation selected

with all the consequences which the law provided.2. The obligation is converted to a simple obligation to

perform the prestation chosen.3. Once the selection has been communicated, it becomes

irrevocable.


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When Notice Produces Effect:

The CHOICE shall PRODUCE effect EXCEPT from theTIME it has been COMMUNICATED ( Art. 1201).

Notice of selection may be in any form provided that it issufficient to make the other party know that the electionhas been made. It may be:1. Orally2. In Writing3. Tacitly

a. Performance by the debtor who has the right tochoose or in the acceptance of a prestation by thecreditor when he has a right of selection.

b. When the creditor sues the debtor for theperformance of one of the prestation.

Note: The law does not require the other party to consentto the choice made by the party entitled to chooseUNLESS the debtor has chosen a prestation which couldnot have been the object of the obligation and the creditorconsents thereto which amount to a novation.

The right to choose is not lost by the mere fact that theparty entitled to choose delays in making his selection.

In case the person entitled to choose, does not make hisselection, the other party can ask the court for a 3rd partyto choose.

Effect of Loss or Impossibility of One or AllPrestations:The debtor shall LOSE the RIGHT of CHOICE, whenamong the prestations whereby he is alternatively bound,only one is practicable ( Art. 1202 ).

Note: The obligation then is converted to a SIMPLE andPURE obligation.

If the debtor cannot make a choice according to the terms

of the obligation through the creditor’s act, the former mayrescind the contract with damages ( Art. 1203).

When creditor is entitled to indemnity for damages(Art. 1204):When through the fault of the debtor:1. All the things which are alternatively the object of the

obligation have been lost; OR2. Compliance of the obligation has become impossible

unless due to fortuitous event.

Note: The indemnity shall be fixed based on the value of

the LAST THING which disappeared OR that of the

SERVICE which LAST became IMPOSSIBLE ( Art. 1204,Par. 2 ).

Damages other than the above-mentioned may also berewarded ( Art. 1204, Par. 3).

When Alternative Obligation Cease to be such:When the CHOICE has been EXPRESSLY given to theCREDITOR, the obligation shall CEASE to be alternativefrom the day when the SELECTION has beencommunicated to the debtor ( Art. 1205 Par. 1).

Effects of Loss of Objects of Alternative Obligation( Art. 1204- 1205):

A.When choice belongs to debtor:1. Due to Fortuitous Event

a. All are lost – debtor is released from theobligation

b. Some but not all are lost – deliver that which heshall choose from among the remainder

c. Only one remains – deliver that which remains

2. Debtor’s fault a. All are lost – creditor shall have a right to

indemnity for damages based on the value of thelast thing which disappeared or service whichbecome impossible

b. Some but not all are lost – deliver that which heshall choose from among the remainder withoutdamages

c. Only one – deliver that which remains

B.When choice belongs to creditor:1. Due to Fortuitou

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