CIVIL LAW REV

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PART I INTRODUCTION TO LAW AND BUSINESSLAWDefinition of Law and Business LawSources of Business LawCharacteristics of Business LawPART II OBLIGATIONSIn GeneralDefinition

Sources of ObligationsLaw; Contracts; Quasi-Contracts;Delicts or Crimes; Quasi-DelictsEssential requisites of obligationParties; object; Juridical tie or vinculum jurisPART II OBLIGATIONS

Nature and Effect of Obligation

According to the Object or PrestationObligations to give; Obligations to do;Obligations not to doLiability of DamagesFraud Dolo incidente; Dolo causante

Neglignce Delay Mora solvendi, accipiendi, compensatio moraeContravention of tenor of obligationPART III GENERAL PROVISIONS ON CONTRACTContracts DefinedElements of Contract:Stages of A Contract


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Characteristics of Contracts:Classification of A Contract: (FROM)Contract Binds by Both PartiesCases Where Third person May Be Affected By a ContractForms of ContractsReformation of InstrumentsInterpretation Of ContractsCause of ContractsPART IV DEFECTIVE CONTRACTSRescissible Contracts

Voidable ContractsUnenforceable ContractsVoid or inexistent contractsPART 1 INTRODUCTION TO LAW AND BUSINESS LAW1. Definition of Law and Business Law2. Sources of Business Law3. Characteristics of Business Law

Introduction to LawPreliminariesIn the preliminaries, the sight of a human being in hiseveryday undertaking has to follow some.The instructions that a person will learn, result to thatconsciousness of following the law. As he learns the law, hecan define it, with its characteristics.In Philosophy, the human mind consists principally of twofaculties:1. the Intellect the object of which is the TRUTH.2. the Will the object of which is the GOOD.The infinite truth and infinite good is infinite beauty of God.


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The person was created by God and destined for God, thepeople can attain the final destiny by following the law.The laws that contained the instructions of God given to usare the COMMANDMENTS.LawThe most basic, simple and concise definition of law wasdefined by Sanchez Roman, a Spanish Civilist and he definedLaw as: A RULE OF CONDUCT , JUST AND OBLIGATORYPROMULGATED BY LEGITIMATE AUTHORITY FOR

THE COMMON OBSERVANCE AND BENEFIT.Edgardo Paras defined Law as an ordinance of reasonpromulgated for the common good by Him who is in charge.Characteristics of Law1. A RULE OF CONDUCTMeaning any action, things, dictate of reason if regulated orgathered together could become a conglomeration of rules,

regulations that can create an orderly, peaceful, harmoniousrelations among the people concerned so that in the end

justice will prevail.Characteristics of Law2. PROMULGATED BY LEGITIMATE AUTHORITYThat is, made known to those who are expected to follow it.In a Republican State like the Philippines, we have three

branches of government legislative body (like Congress,Sanggunian) is the law-making body; the executive body isthe implementing body and the judiciary as the enforcing

body.Characteristics of Law


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3. JUST and OBLIGATORYTreatment of Law should be equal, regardless of sex, creed,age and status in life and to follow the law there should beequivalent punishment or penalties to enforce them. Thedictum Justice delayed is Justice denied is commonlyabused term on the relation of a criminally inclined poor

person and a moneyed person on the treatment of theapplication of law. Obligatory means any duty binding partiesto perform their agreement. (Blacks dict. P. 1074).Characteristics of Law

4. FOR THE COMMON OBSERVANCE and BENEFITThe application of law should not be titled or favoring anindividual but by the observance of all and the benefits thatmay be derived from it.Sources of Law1. LEGISLATIVEIt consists of legal rights by a competent authority. In the

Philippines, being a democratic form of government, theLegislative is the law-making body. For national government,Congress comprising the House of Representatives and theSenate. For provinces, the Sangguniang Panlalawigan forevery province. For a town, the Sangguniang Pambayan orthe local Municipal council. For a Barangay level, theSangguniang Pambarangay.Sources of Law2. CONSTITUTIONThe fundamental law that governs a nation in its relation to itscitizens. All laws must conform and comply with the

provisions of the Constitution, otherwise it becomes


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unconstitutional.Sources of Law3. ADMINISTRATIVE OR EXECUTIVE ORDERS,REGULATIONS AND RULINGSThe fundamental law that governs a nation in its relation to itscitizens. All laws must conform and comply with the

provisions of the Constitution, otherwise it becomesunconstitutional.Sources of Law4. JUDICIAL DECISIONS OR JURISPRUDENCE

Judicial decisions or interpreting the laws or the Constitutionshall form a part of the legal system of the Philippines. (Art.8, New Civil Code) Judicial decisions, though, are part of thelegal system in the Philippines still are not laws for if thiswere so, the Courts exists for stating what the law is, but notfor giving it. Judicial decisions, though not law, are evidenceof what the law means. This is why they are part of the legal

system in the Philippines. So, f an interpretation is placed bythe Supreme Court upon a law, it constitute in a way, part ofthe law since the Courts interpretation merely establishes thelegislative intent.Sources of Law4. JUDICIAL DECISIONS OR JURISPRUDENCEThus, our country adhere to the Doctrine of Stare Decisis (Letit Stand), the doctrine which in reality is adherance to

precedents stated that once a case has been decided, thenanother case involving the same point at issue, should bedecided in the same manner. Therefore, if the Supreme Court

being a Court of last resort, has decided that a certain law


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passed by Congress is constitutional, the law becomesbinding and has its full force and effect.Sources of Law5. CUSTOMIt consists of those habits and practices which through longand uninterrupted usage have become acknowledged andapproved by society as binding rule of conduct. Thus, it has

been a custom for a person to enter and exit a door. Once aperson uses the window for his entrance and exit, it runscounter to the custom of use of the door. Even our Lord said

as a good shepherd, if a person does not pass the gate, he is athief for a marauder.Sources of Law6. OTHER SOURCESTo add, the principle of justice and equity, decisions offoreign tribunals, opinions of text writers and even religionmay also be sources of law.

Kinds of Law1. DIVINE LAWIt is formally promulgated by God, revealed or divulged tomankind by means of direct revelation like the TenCommandments.Kinds of Law2. NATURAL LAWPromulgated impliedly in our conscience and body. It is thedivine interpretation in man in the sense of justice, fairness,right and equity by internal dictate of reason on our mind.Like for instance, it is better to do good than to do evil for

being a God-fearing person.


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Kinds of Law3. PHYSICAL LAWRefers to the act of rules governing the action and movementof things like the law on gravity by Newton.4. HUMAN LAWThose promulgated by man to regulate human relations.THIS CAN BE CLASSIFIED INTO:Classification of Human LawA. GENERAL or PUBLIC LAWBody of rules which regulates the rights and duties arising

from the relationship between the State and its inhabitants.It includes the following:1. International Law consists of those rules and principleswhich govern the relations and dealing of nations with eachother.2. Constitutional Law It simply governs the relations betweenthe State and its citizens.

Classification of Human LawGENERAL or PUBLIC LAW3. Administrative Law it fixes the organization anddetermines the competence of the authorities that execute thelaw and indicates to the individual remedies for the violationof his rights.4. Political Law deals with the organization and operationof the governmental organs of the State and defines therelations of the state with the inhabitants of its territory.5. Criminal Law guaranties the coercive power of the lawso that it will be obeyed. Governs the methods of trial and

punishment of crimes.


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Classification of Human LawB. INDIVIDUAL or PRIVATE LAWThose law which govern the private relation person.It includes the following:1. Civil Law branch of law which has for its double purposethe organization of the family and the regulation of property.It is defined as the mass of precepts which determines andregulate the relation of assistance, authority and obedienceamong the members of a society for the protection of privateinterests.

Classification of Human LawINDIVIDUAL or PRIVATE LAW2. Commercial Law defined as a whole body of substantial

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

INDIVIDUAL or PRIVATE LAW3. Procedural Law defined as the branch of law which

prescribes the method of enforcing rights or obtaining redressfor their invasion, Procedural law otherwise known asRemedial Law, as distinguished from Substantive law whichcreates, defines and regulate rights.(Ballantine Law Dict. P. 36)Sources of Philippine Civil Code1. The New Civil Code of the Philippines the collection oflaws which regulates the private relations of the members ofcivil society, determining the defective rights and obligationswith reference to persons, things and civil acts.


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A civil code is a compilation of existing Civil Laws,scientifically arranged into books, titles, chapters andsubheads and promulgated by legitimate authority. (BlackLaw Dict. 334).Sources of Philippine Civil Code2. Special laws or statutes, Presidential decrees and othersocial legislation.3. Jurisprudence there is need to mention that, jurisprudencein our system of government, cannot be considered as anindependent source of law; but the Courts interpretation of a

statute that constitute part of the law as of the date it wasoriginally passed since the Courts construction merelyestablishes contemporaneous legislative intent, that theinterpreted law could take into effect.Sources of Philippine Civil Code4. Customs and Traditions Custom is a judicial rule whichresults from a constant and continuous uniform practice by

the members of a social group.5. The Code Commission itself A Code commission of fivemembers was created by Pres. Manuel Roxas through Exec.Order No. 48 dated Mar. 20,1947 in view of the need ofrevision in keeping with progressive modern legislation. TheCivil Code was finished on Dec. 15, 1947 and Congressapproved the draft on June, 1949.Books of the Civil CodeBook I Person and Family RelationsThis was re-codified as Family Code of the Philippinesembodied in Exec. Order No. 209 as amended by Exec. Order

No. 227. The Family Code effectuates the long-felt reforms


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and changes to the Civil Code provisions on Family relationsconsistent with Filipino values, customs and traditions vis--vis recent developments in the social-cultural scene. (Pineda,Family Code).Books of the Civil CodeBook II Property, Ownership and its modifications.Book III Different Modes of Acquiring Ownership(Succession)Book IV Obligations and ContractsBook V Special contracts

The Civil Code begins with preliminary titles and ends upwith the repealing clause. This module is taken from the CivilCode of the Philippines from Articles 1156 to 1422 inclusive.Concept of Commercial LawThe commercial laws, excepting the Code of Commerce aredesignated by the legislator by any mark or sign, whichdetermines their nature and their commercial function, but

they derive their mercantile character from their subjectmatter or their contents. In order to determine whether a

particular law or provision of law is commercial, it isnecessary to first inquire if its purpose is to govern a relation

pertaining to commercial matters and in this inquiry, the Codeof Commerce should be principally considered, because itdefines the acts and the person having a mercantile character.Generally, all laws referring to merchants and to commercialtransactions are commercial in nature. (Agbayani, Vol. 1 p 2)Code of CommerceThe Code of Commerce is only one of the remaining laws inrelation to business that has been heavily modified and


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repealed by subsequent laws which originally divided intofour books.BOOK ONE - Merchants and Commerce in GeneralBOOK TWO - Special Commercial ContractsBOOK THREE - Maritime CommerceBOOK FOUR - Suspension of payments, Bankruptcy andPrescription of Actions.Subsequent Repealing LegislationThe following are among the important special laws whichrepealed either expressly or impliedly certain portions of the

Code of Commerce.1. The Corporation Code which repealed principally theprovision on sociedad/anonimas on Book Two and theCorporation law;2. The Negotiable Instrument Law which repealed principallythe provisions of Promissory; Notes and Bill of Exchange inBook Two

Subsequent Repealing Legislation3. The Insolvency law, which repealed the provisions onSuspension of payments and Bankruptcy in Book four;4. Insurance Law, which repealed the provisions on Fire andMarine Insurance on books two and three;5. The Securities Act, which repealed the provisions onCommercial Houses in Book Two;Subsequent Repealing Legislation6. The New Civil Code which repealed the provisions onPartnership, Agency, Sales, Loan, Deposit and Guaranty inBook two.7. Other legislation, in addition to the foregoing special laws,


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there wee other laws and now form part of the Commerciallaws of the Philippines: The Warehouse Receipts law; theGeneral Bonded Warehouse Act; the Chattel Mortgage law;the Usury law; the General Banking Act; the Central BankAct; The Rural Act; The Public Service Act; Carriage of Gods

by Sea Act; the Salvage law; the Copyright law; the Patentlaw; the Trade-mark law; the Law on the Use of Duly MarkedBottles, Boxes, Casks, Kegs, Barrels, and other SimilarContainers; the Business Names Law; and the Law onMonopolies and Combinations.

Subsequent Repealing Legislation8. Provisions of the Code of Commerce still in force.a. Those contained in Book one governing merchants andcommerce in general, commercial registries, books and

bookkeeping of commerce and general provisions relating tocommercial contracts, except such portions thereof as have

been repealed or modified by the New Civil Code and other

legislation.b. Those contained in Book Two governing joint accounts,transfers, transfers of non-negotiable credits, commercialcontracts on transportation overland; and letters of credits butnot those relating to partnership, agency, sales, loans, depositSubsequent Repealing Legislation8. Provisions of the Code of Commerce still in force.c. Those contained in Book Three governing maritimecommerce but not those relating to marine insurance whichhave been repealed. All the provisions in Book four are nolonger in force as they have likewise been repealed.(Agbayani, Vol. 1, pp3-4)


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Subsequent Repealing Legislation9. Some provision of the code of Commerce which are

pertinent in our study in business in general:a. MERCHANTS Merchants may be natural or juridical

person:In the case of natural person, he is a merchant:a. If he has legal capacity to engage in commerce; and

b. He habitually engage theretoSubsequent Repealing LegislationA natural person has legal capacity to engage in commerce;

1. If he has reached the age of twenty one years;2. He is not subject to parental authority; and3. He has free disposition of his property.In the case of juridical person, it is a merchant:a. It is a commercial and industrial company;

b. It is organized in accordance with existing legislation andc. Its engaging in commerce is habitual.

Subsequent Repealing Legislationb. Habituality in engaging in commerce Habituality in engaging in commerce is attained when thereexists series of acts of commerce or commercial dealings.There must be continuity of repetition of commercial acts.However, a single act may be deemed habituality in engagingin commerce in the way of the following acts:1. Throwing open to the public a business entity orestablishment;Subsequent Repealing Legislation2. Announcement through circulars, newspaper, handbills,

posters and similar means of the opening of an establishment


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for commercial acts or dealings with the public; or3. Where a foreign corporation appoints an agent as required

by law.4. A series of acts consisting of investigating and preparationsof project studies implying an intention to engage incommerce and comes to reality.Subsequent Repealing Legislationc. Absolute Disqualifications The following may not engagein commerce nor hold office or have any direct administrativeor financial intervention in commercial of industrial

companies:1. Those suffering the penalty of civil interdiction primarilybecause they are deprived of the right to mange and todispose of their properties inter-vivos or during their lifetime;Subsequent Repealing Legislation2. Those judicially declared insolent while they have notobtained their discharge;

3. Those who in account of special laws or provisions cannotengage in commerce like incapacitated persons or employeescovered by the Civil Service law.Subsequent Repealing Legislationd. Relative Disqualifications These are persons who cannotengage in commerce in places where they exercise theirfunctions.1. Justices, judges, and officials of the Prosecutors office inactive service, except Municipal Mayors; municipal judge;municipal prosecuting attorneys and those who temporarilydischarge judicial or prosecuting duties;2. Administrative, economic or military heads of districts,


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provinces or post;Subsequent Repealing Legislation3. Those employed in the collection and administration offunds of the State appointed by the Government except thosewho administer and collect under contract and theirrepresentative.4. Stock and commercial brokers of whatever class;5. Those who under special laws and provisions cannot tradein specified territory.Subsequent Repealing Legislation

e. Commercial RegistryA commercial registry is a public office that takes charge ofthe registration of merchants, business associations, vesselsand documents of commercial importance. The purpose of acommercial registry is to furnish necessary information andreliable data to any interested party so as to promote andfacilitate trade and commercial transaction.

Subsequent Repealing Legislationf. Books of Merchants1. Merchants must keep the following books:a. Book of inventories and balances;

b. A journal;c. A ledger;d. Book or books for copies of letters or telegrams; and other

books that may be required by special laws.Subsequent Repealing Legislationf. Books of Merchants2. Corporation are bound to keep:a. Record of all business transactions;


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b. Minutes of all meetings of directors;c. Minutes of all meetings of stockholders; and Stock andtransfer books.Registration is compulsory:1. In case of vessel of more than three (3) tons gross in use inPhilippine waters;2. In case of partnership whose immovable property iscontributed by any partner to a common fund.3. In case of business names under the Business Names Law.Registration is compulsory:

4. In case of ship agent;5. In case of vehicles with the Land Transportation Office.6. In all other cases required by law.Commercial Registries in the Philippines1. Bureau of Domestic Trade for registration of businessnames and merchants to avoid duplication of trade names.2. Securities and Exchange Commission for registration of

partnership and Corporation.3. Local municipalities, cities or province for local permitsand licenses.4. Office of Register of deeds for registration all transactionaffecting lands, as well as shattel mortgage.Commercial Registries in the Philippines5. The MARINA (Marine Industry Authority) forregistration of vessels and other transaction affecting vessels.6. Intellectual property Office for registration of patents anddesign as well as trade names; trademarks and service marks;7. Land Transportation Office for registration of patents anddesigns as well as trade names; trademarks and service marks;


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Commercial Registries in the Philippines8. Office of Air Transportation Administration for registrationof aircrafts.9. Bureau of Public Library for registration of copyrights;10. Board of investment for registration of pioneer andregistered enterprises and with corporations having foreignentity participation.Kinds of Procedural Law1. Public Remedial Law affords a remedy in favor of theState against the individual, like criminal procedure or in

favor of the individual against the State, like Habeas Corpus.2. Private Remedial Law affords a remedy in favor of anindividual against another individual, like the civil procedure.Philippine Remedial LawPrincipally contained in the Rules of Court, which is acombination of rules promulgated by the Supreme Court forthe easy, orderly, adequate and effective compliance with the

law. The Rules of Court have the force and effect of law.(Alvero V. dela Rosa, 76 Phil 428).COURTS DEFINED It is the entity, body or tribunal vested with a portion of the

judicial power. (Lontok V. Battung 63 Phil 1054)JUDICIAL POWERIncludes the duty of the courts of justice to settle actualcontroversies involving rights which are legally demandableand enforceable, and to determine whether or not there has

been a grave abuse of discretion amounting to lack or excessof jurisdiction on the part of any branch or instrumentality ofthe Government. (Const. Art. VIII, Sec. 1, par.2)


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Different Courts of Justice1. Supreme Court2. Sandigan-bayan3. Court of Appeals4. Regional Trial Court; and5. Metropolitan / Municipal Trial Courts

Lesson 1: General Provisions on ObligationThe definition of obligations establishes the unilateral act ofthe debtor either to give, to do or not to do as a patrimonialobligation. It means that the debtor has the obligation while

the creditor has its rights.On the sources of obligation, the main sources are really Lawand Contracts. The other sources are also established by law.ART. 1156. An obligation is a juridical necessity to give, todo or not to do.OBLIGATIONS as defined by ARIAS RAMOS is a juridicalrelation whereby a person (called the creditor) may demand

from another (called the debtor) the observance of adeterminate conduct, and, in case of breach, may obtainsatisfaction from the assets of the latter. (Approved by Mr.Justice J. B. L. Reyes)The obligations referred to in our manual is a patrimonialobligations that is, those obligations with pecuniary value orassessable in terms of money.Characteristics of patrimonial obligations:They represent an exclusively private interest.They create ties that are by nature transitory.They exist a power to make effective in case of non-


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fulfillment, the economic equivalent obtained at thepatrimony of a debtor.Meaning of Juridical Necessity it means the rights andduties arising from obligation are legally demandable and thecourts of justice may be called upon through proper action toorder the performance.Action means an ordinary suit in court of justice by whichone party prosecutes another for the enforceable or protectionfor a right or a prevention or redress of a wrong ( Sec. 1.Rules of court ).

Example Gaya bought refrigerator from Tito but Gaya did not pay therefrigerator. If after demand, Gaya still did not pay, Tito cansue Gaya in Court either to demand payment or for recoveryof the refrigerator.Essential requisites of an obligation An active subject, who has the power to demand the

prestation, known as the creditor or oblige;A passive subject, who is bound to perform the prestation,known as debtor or obligor.An object or the prestation which may consist in the act ofgiving, doing or not doing something.The vinculum juris or the juridical tie between the twosubjects by reason of which the debtor is bound in favor ofthe creditor to perform the prestation. It is the legal tie whichconstitutes the source of obligationthe coercive force whichmakes the obligation demandable. It is the legal tie whichconstitutes the devise of obligation the coercive forcewhich makes the obligation demandable.


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Juridical TieDebtor To give, to do Creditor Or Obligor or not to do orObligee

Illustration:Gaya enters into a contract of sale with Tito who paid the

purchase of a GE refrigerator. Gaya did not deliver therefrigerator. Gaya is the passive subject or debtor and Tito isthe active subject or creditor. The object or prestation is theGE refrigerator and the obligation to deliver is the legal tie orthe vinculum juris which binds Gaya and Tito.

This is also known as a unilateral obligation, that is, theobligation of the debtor to fulfill or comply his commitment,in this case, the delivery of the refrigerator.On the other hand, if Gaya, delivered the refrigerator and Titodid not pay, then Tito becomes the debtor who is bound to paywhile Gaya is the creditor who has the right to demand the

prestation.

Distinctions between Obligations and Contracts:Contract is the only one of the sources of obligation, whileobligations have other sources like law, quasi-contracts,delicts or quasi-delicts;Contract is a bilateral obligation while obligation is aunilateral obligation;All contracts are obligations while not all obligations arecontracts.Civil obligations as distinguished from Natural obligations Civil obligations derive their binding force from positive law;

Natural Obligation derives their binding effect from equityand natural justice.


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Civil can enforced by court action of the coercive power ofpublic authority;Natural the fulfillment cannot be compelled by court actionbut depends on the good conscience of debtor.ART. 1157. Obligations arise from:Law;Contracts;Quasi-contracts;Acts or omissions punished by law; andQuasi-delicts. (1089a)

ART. 1158. Obligations derived from law are not presumed.Only those expressly determined in this Code or in speciallaws are demandable, and shall be regulated by the preceptsof the law which establishes them; and as to what has not

been foreseen, by the provisions of this Book. (1090)

ART. 1159. Obligations arising from contracts have the forceof law between the contracting parties and should becomplied with in good faith. (1091a)ART. 1160. Obligations derived from quasi-contracts shall besubject to the provisions of Chapter 1, Title XVII, of thisBook.ART. 1161. Civil obligations arising from criminal offensesshall be governed by the penal laws, subject to the provisionsof article 2177, and of the pertinent provisions of Chapter 2,Preliminary Title, on Human Relations, and of Title XVIII of


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this Book, regulating damages. (1092a)ART. 1162. Obligations derived from quasi-delicts shall begoverned by the provisions of Chapter 2, Title XVIII of thisBook, and by special law. (1093a)Source of ObligationsLAW as a source of obligations The provisions of Art. 1158 refers to the legal obligations orobligations imposed by specific provisions of law, which

means that obligations arising form law are not presumed andthat to be demandable must be clearly provided for, expresslyor impliedly in the law.Examples:It is the duty of the Spouses to support each other. (Art. 291,

New Civil Code)And under the National Internal Revenue Code, it is the duty

of every person having an income to pay taxes.Source of ObligationsCONTRACT as a source of obligations Contract as defined in Art. 1305, NCC is the meeting ofminds between two person whereby one binds himself withrespect to the other,Obligations arising from contracts have the force of law

between the contracting parties because that which is agreedupon in the contract by the parties is the law between them,thus, the agreement should be complied with in good faith.(Art. 1159).


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For examples:A contract of lease was executed between Gaya as the lesseeand Tito as the lessor for the rent of an apartment.Although contracts have the force of law, it does not meanthat contract are over and above the law. Contracts are withthe limitations imposed by law in Art. 1306, NCC, it statesthat the contracting parties may establish such stipulations,clauses terms and conditions as, they may deem convenient,

provided that are not contrary to law, morals, good custom,

public order or public policy.Sources of ObligationsQUASI-CONTRACTS as a source of obligationsThe quasi literally means as if.Quasi-contract is the juridical relation resulting from a lawful,voluntary and unilateral act which has for its purpose the

payment of indemnity to the end that no one shall unjustly

enrich or benefited at the expense of another. (Art. 2142,NCC)Contracts and quasi-contracts distinguished:in a contract, consent is essential requirement for its validitywhile in quasi-contract, there is no consent as the same isimplied by law;contract is a civil obligation while quasi-contract is a naturalobligation.2 Kinds of Quasi-contractsSolutio Indebiti (Payment by mistake)It is the juridical relation which arises when a person isobliged to return something received by him through error or


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mistake.Example-Arvin owed Ian the sum of P1, 000.00. By mistake, Arvin

paid P2, 000.00. Ian has the obligation to return the P1,000.00 excess because there was payment by mistake.2. Negotiorum gestio (management of anothers property)It is the voluntary management or administration by a personof the abandoned business or property of another without any

authority or power from the latter. (Art. 2144, NCC)Example-Victor, a wealthy landowner suddenly left for abroad leavinghis livestock farm unattended. Ramon, a neighbor of Victormanaged the farm thereby incurring expenses. When Victorreturns, he has the obligation to reimburse Ramon for theexpenses incurred by him and to pay him for his services. It is

bases on the principle that no one shall enrich himself at theexpense of another.Sources of ObligationsDELICTS or acts or omissions punished by law as a source ofobligations

Acts or omission punished by law is known as Delict orFelony or Crime.While an act or omission is felonious because it is punished

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


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object of the crime to the injured party.Reparation which is the payment by the offender of thevalue of the object of the crime, when such object cannot bereturned to the injured party.Indemnification the consequential damages which includesthe payment of other damages that may have been caused tothe injures party.Illustration:Mario was convicted and sentenced to imprisonment by theCourt for the crime of theft, the gold wrist watch, of Rito. In

addition to whatever penalty that the Court may impose,Mario may also be ordered to return (restitution) the goldwrist watch to Rito. If restitution is no longer possible, forMario to pay the value (reparation) of the gold wrist watch. Inaddition to either restitution or reparation, Mario shall also

pay for damages (indemnification) suffered by Rito.Sources of Obligations

QUASI-DELICTS as a source of obligationsConcepts of Quasi-Delict Quasi-delict is one where whoever by act or omission causesdamage to another, there being fault of negligence, is obligedto pay for the damage done. Such fault of negligence, if thereis no pre-existing contractual relation between the parties.(Art. 2176)Example-If Pedro drives his car negligently and because of hisnegligence hits Jose, who is walking on the sidewalk of thestreet, inflicting upon him physical injuries. Then Pedro

becomes liable for damages based on quasi-delict.


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Sources of ObligationsDELICTS or acts or omissions punished by law as a source ofobligationsActs or omission punished by law is known as Delict orFelony or Crime.While an act or omission is felonious because it is punished

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

object of the crime to the injured party.Reparation which is the payment by the offender of thevalue of the object of the crime, when such object cannot bereturned to the injured party.Requisites of a quasi-delicts -There must be fault of negligence attributable to the offended;There must be damage or injury caused to another;

There is no pre-existing contract.Negligence Defined is the failure to observe for the protection of the interests ofanother person, that degree of care, precaution and vigilancewhich the circumstances justly demand, whereby such other

person suffers injury. (Judge Cooley)Test of Negligence For the existence of negligence, the following are necessary:a duty on a party of the defendant to protect the plaintiff fromthe injury of which the letter complains;a failure to perform that duty; andan injury to the plaintiff through such failure.


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Kinds of NegligenceCulpa Aquiliana, also known as quasi-delict or negligence asa source of obligation.Culpa contractual or negligence in the performance of acontract.An illustration showing this difference is founding Gutierrezvs. Gutierrez , 56 Phil 177-While trying to pass each other on a narrow bridge, a

passenger truck and private automobile collided, and theplaintiff, a passenger in the truck, was injured.

The owner of the passenger truck was made a defendant,although a driver was driving the truck and the owner of thecar was also made a defendant, although he was not in the car

but which was being driven by his 18 year old son and inwhich members of his family were then riding. The courtfound both drivers negligent, basing basing the liability of theowner of the truck to the plaintiff on the contract of carriage;

while the liability of the owner of the car was based on Quasi-delict of the Civil Code. As against the owner of the truck,there was Culpa contractual, while as against the owner of thecar there was culpa Aquiliana.LESSON 2: NATURE AND EFFECT OF OBLIGATIONSART. 1163. Every person obliged to give something is alsoobliged to take care of it with the proper diligence of a goodfather of a family, unless the law or the stipulation of the

parties requires another standard of care. (1904a)ART. 1664. The creditor has a right to the fruits of the thingfrom the time the obligation to deliver it arises. However, heshall acquire no real right over it until the same has been


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delivered to him. (1905)ART. 1165. When what is to be delivered is a determinatething, the creditor, in addition to the right granted him byarticle 1170, may compel the debtor to make the delivery.If the thing is indeterminate or generic, he may ask that theobligation be complied with at the expense of the debtor.If the obligor delays, or has promised to deliver the samething to two or more persons who do not have the sameinterest, he shall be responsible for any fortuitous event untilhe has effected the deliver. (1906)

ART. 1166. The obligation to give a determinate thingincludes that of delivering all its accessions and accessories,even though they may not have been mentioned. (1097a)Obligations of the Debtor To Give a determinate thing-To preserve or take care of the thing with the proper diligenceof a good father of a family. It means the ordinary diligencethat a prudent man would exercise in taking care of his own

property taking into consideration the nature of the obligation,of the time and of the place, like a person who is obliged todeliver a determinate horse to another should, pending itsdelivery, preserve it by taking care of the same as if the horseis his own.Obligations of the Debtor To Give a determinate thing-To deliver the object or thing when the obligation to deliverarises, including:

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

Natural - spontaneous product of the soil; the young and otherproducts of animal. E.g. tress, plants on lands without he


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intervention of man.Industrial - produced by lands of any king through cultivationand labor. E.g. sugar cane, vegetables, rice.Civil - derived by virtue of juridical relations. E.g. rents of a

building; prices of leases of lands and other similar income.Obligations of the Debtor To Give a determinate thing-Accessions and accessories.Accession is the right pertaining to the owner of a thingover its products and whatever is attached thereto eithernaturally or artificially.

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

Obligations of the Debtor To Give a determinate thing-To be liable for damages in case of breach of obligation (Art.1170, NCC)When creditor acquire a right to the thing to be delivered andits fruits-The creditor has a right to the fruits of the thing from the timethe obligation to deliver it arises. However, he shall acquireno real right over it until the same have been delivered to him.(Art. 1164, NCC)Example a binds himself to sell his horse to B for fro P10,000. No date nor condition is stipulated for delivery of thehorse. Later, the horse gave birth to a colt. A has right to the


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colt, if B has not paid the horse. Before delivery, B does notacquire ownership over it.Definition of terms:Determinate thing a thing is determinate when it is

particularly designated or physically segregated from allothers from the same class. (Art. 1460, NCC)Indeterminate or generic thing A thing is generic when itrefers to a class or thing or genus and cannot be designatedwith particularity. (Art. 1460, NCC)Fortuitous Events those events which could not be foreseen

or which though foreseen were inevitable. (Art. 1174, NCC)Art. 1167. If a person obliged to do something fails to do it,the same shall be executed at his cost.This same rule shall be observed if he does it in contraventionof the tenor of the obligation. Furthermore, it may be decreedthat what has been poorly done be undone. ( 1098 )Obligation of the debtor To Do

Being a personal positive obligation, The creditor has theright to secure the services of third person to perform theobligation at the expense of the debtor under the followinginstances:When the debtor fails to do the obligation;When the debtor performs the obligation but contrary to thetenor; orWhen the obligor poorly performs the obligation.ART. 1168. When the obligation consists in not doing, and theobligor does has been forbidden him, it shall also be undoneat his expense, (1099a)Obligation of the Debtor NOT To Do


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This is negative personal obligation which is consisting of anobligation, of not doing something. If the debtor does whathas been forbidden him to do, the obligee can ask the debtorto have it undone. If it is impossible to undo what was done,the remedy of the injured party is for an action of damages.Example-A bought a land from B. It was stipulated that A would notconstruct a fence in a certain portion of his land adjoining thatland sold by B. Should A construct a fence in violation of theagreement, B. can bring an action to have the fence remove at

the expense of A.ART. 1169. Those oblige to deliver or to do something incurindelay from the time the obligee judicially or extra - judiciallydemands from theme the fulfillment of their obligation.However, the demand by the creditor shall not be necessary inorder that delay may exist:

( 1 ) When the obligation or the law expressly declares; or( 2 ) When from the nature and the circumstances of theobligation it appears that the destination of the time when thething is to be delivered or the service is to rendered wascontrolling motive for the establishment of the contract; or( 3 ) When demand would be useless, as when the obligor hasrendered it beyond his power to perform.In reciprocal obligations, neither party incurs in delay if theother does not comply in a proper manner with what isincumbent upon him. From the moment one of the partiesfulfills his obligation, delay by the other begins. ( 1100a )Delay ( Mora )


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means a legal delay or default and it consists of failuredischarge a duty resulting to ones own disadvantaged.The debtor incurred delay if:The debtor fails to perform his obligation when it falls due;andA demand has been made by the creditor judicially or extra

judicially.Example Gaya obliged herself to deliver a determinate horse to Tito onJune 20. this year. Gaya failed to delivered on the agreed date,

Is Gaya already on delay on June 20, only when Tito makes ajudicial or extra-judicial demand and from such date ofdemand when Gaya is on default or delay.However, there are instances when the demand by theCreditor is not necessary to place the debtor on delay:When the obligation expressly so providesThe mere fixing of the period is not sufficient to constitute a

delay. An agreement to the effect that fulfillment orperformance is not made when the obligation becomes due,default or delay by the debtor will automatically arise.When the law so providesThe express provision of law that a debtor is in default. Forinstance, taxes must be paid on the date prescribed by law,and demand is not necessary in order that the taxpayer isliable for penalties.When time is of the essenceBecause time is the essential factor in the fulfillment of theobligation. Example, Gaya binds herself to sew the weddinggown of Maya to be used by the latter on her wedding date.


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Gaya did not deliver the wedding gown on the date agreedupon. Even without demand, Gaya will be in delay becausetime of the essence.When demand would be uselessWhen the debtor cannot comply his obligation as when it is

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

For instance, in a contract of sale, if the seller delivers theobject to the buyer and the buyer does not pay, then delay bythe buyer begins and vice versa, if the buyer pays and theseller did not deliver the object, then the seller is on delay.Kinds of delay Mora solvendi delay on the part of the debtor.Mora accipiendi delay on the part of the creditor, like when

the creditor unjustifiably refused to accept payment at thetime it was due, is in delay.Compensatio morae delay both parties in a reciprocalobligation.ART. 1170. Those who in the performance of their obligationsare guilty of fraud, negligence, or delay, and those whoin anymanner contravene the tenor thereof, are liable for damages.(1101)ART. 1171. Responsibility arising from fraud is demandablein all obligations. Any waiver of an action for future fraud isvoid. (1120a)ART. 1172. Responsibility arising from negligence in the


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performance of every king of obligation is also demandable,but such liability may be regulated by the courts, according tothe circumstances. (1130)ART. 1173. The fault or negligence of the obligor consists inthe omission of that diligence which is required by the natureof the obligation and corresponds with the circumstances ofthe persons, of the time and of the place. When negligenceshows bad faith, the provisions of articles 1171 and 2201,

paragraph 2, shall apply.If the law or contract does not state the diligence of which is

to be observed in the performance, that which is expected of agood father of a family shall be required. (1104a)Sources of liability for damages:Fraud (dolo) is the intentional deception made by one

person resulting in the injury of another.The fraud referred to is incidental fraud , that is, fraudincident to the performance of a pre-existing obligation.

Negligence (culpa) consists in the omission by the obligorof that diligence which is required by the nature of theobligation and corresponds with the circumstances of the

person, of the time and of the place. (Art. 1173, NCC)Sources of liability for damages:Delay (Mora) like when there has been judicial or extra-

judicial demand and the debtor does not comply hisobligation, delay will occur.In contravention of the tenor of the obligation refers to theviolation of the terms and conditions or defects in the

performance of the obligation, like when a landlord fails to


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maintain a legal and peaceful possession of a tenant beingleased by the latter because the landlord was not the ownerand the real owner wants to occupy the land, there iscontravention of the tenor of the obligation.Sources of liability for damages:Delay (Mora) like when there has been judicial or extra-

judicial demand and the debtor does not comply hisobligation, delay will occur.In contravention of the tenor of the obligation refers to theviolation of the terms and conditions or defects in the

performance of the obligation, like when a landlord fails tomaintain a legal and peaceful possession of a tenant beingleased by the latter because the landlord was not the ownerand the real owner wants to occupy the land, there iscontravention of the tenor of the obligation.Other sources of liability for damages Loss of the thing with the fault of debtor.

Deterioration with the fault of debtor. (Art. 1189)Kinds of DamagesMoral damages include physical sufferings, mental anguish,fright, serious anxiety, besmirched reputation, woundedfeeling, moral shock, social humiliation and similar injury.Exemplary damages imposed by way of example orcorrection for the public good.Like in quasi-delicts, if the defendant acted with grossnegligence. (Art. 2231, NCC)Kinds of Damages

Nominal damages are adjudicated in order that a right of theplaintiff, which has been violated by the defendant, may be


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vindicated or recognized and not for the purpose ofindemnifying the plaintiff for any loss suffered by him. (Art.2221, NCC)Temperate or moderate damages are more than nominal butless than compensatory damages may be recovered when thecourts finds that its amount cannot, from the nature of thecase, be proved with certainty. Pecuniary loss means loss ofmoney, or of something by which money or something ofmoney value may be acquired. (Black Law Dict. P. 1131)

Kinds of DamagesActual or compensatory damages except as provided bylaw, or a stipulation, one is entitled to an adequatecompensation only for such pecuniary loss suffered by him ashe has duly proved. (Art. 2199, NCC)Damages may be recovered:For loss or impairment of earning capacity in cases of

temporary or permanent personal injury;For injury, to the plaintiffs business standing or commercialcredit.Kinds of DamagesLiquidated damages are those agreed upon by parties to acontract to be paid in case of breach thereof. (Art. 2226,

NCC)Distinguish Fraud (Dolo) from Negligence (culpa)Dolo there is deliberate intent to cause damage or injury.Culpa ther is no deliberate intent to cause damage.Dolo waiver of liability of future fraud is void.Culpa waiver may in some cases be allowed.


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Dolo fraud must be clearly proved.Culpa presumed from breach of contractual obligation.Dolo liability cannot mitigated by the courts.Culpa may be reduced according to circumstances.ART. 1174. Except in cases expressly specified by the law, orwhen it is otherwise declared by stipulation, or when thenature of the obligation requires the assumption of risk, no

person shall be responsible for those events which could notbe foreseen, or which, though foreseen, were inevitable(1105a)

Fortuitous even is an event which cannot be foreseen whichthough foreseen is inevitable.Fortuitous event proper are acts of God such as volcaniceruption, earthquake, lightning, etc. is now similar with forcemajuere or acts of man such as conflagration, war, robbery,etc.Requisite necessary to constitute fortuitous event

The failure of the debtor to comply with the obligation mustbe independent from the human will;The occurrence makes it impossible for the debtor to fulfillthe obligation on a normal manner, and the obligor did nottake part as to aggravate the injury of the creditor. (Vasquezv.C.A. G.R. 42926)As a general rule, no person shall be held responsible forfortuitous eventsExample Gaya obliged herself to deliver a determine car toTito on Dec. 30, 1998. Before the arrival of the period, the carwas struck by lightning and was totally destroyed. Gayacannot be held responsible for the destruction of the car,


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hence her obligation to deliver is extinguished.Exceptions (when the person is responsible despite thefortuitous even).When the law expressly so provides, such as:The debtor is guilty of fraud, negligence or in contraventionof the tenor of the obligation. (Art, 1170, NCC)The debtor has proved to deliver the same thing to two ormore persons who do not have the same interest. ( Art.1165,NCC )The thing to delivered is generic.

The debtor is guilty of default or delay. ( Art. 1169,NCC )The debtor is guilty of concurrent negligence.When declared by stipulation;When the nature of obligation requires the assumption of risk.An example of this is a contract of insurance.ART. 1175. Usurious transaction shall be governed by speciallaws.

Note: C.B. Circular No. 905 suspends the ceilings in theusury law. Hence, parties can agree as to the rate of interest.Kinds of interest1. Conventional *The rate which is agreed upon by the

parties.2. Legal Interest *The rate which is prescribed by law.3. Lawful Interest *The rate which is agreed upon by the

parties but which rate is within the rate authorized by law.4. Usurious Interest *The rate which is in excess of themaximum rate of interest allowed by law.ART. 1176. The receipt of the principal by the creditorwithout reservation with respect to the interest, shall give rise


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

presumption, whereby one which can be contradicted bypresenting proof to the contrary while a conclusivepresumption does not admit any evidence or proof, hence, it

is considered as a fact.Presumption under this article:Receipt of the principal, without reservation as to the interest,shall give rise to the presumption that the said interest has

been paid.When the creditor issues a receipt of a later installment of adebt without reservation as to prior installment is presumed to

have been paid.ART. 1177. The creditors, after having pursued the propertyin possession of the debtor to satisfy their claims, mayexercise all the rights and bring all the actions of the latter forthe same purpose, save those which are inherent in his person;they may also impugn the acts which the debtor may havedone to defraud them. (1111)Rights of Creditors In order to satisfy their claims against the debtor, creditorshave the following successive rights:to levy by attachment and execution upon all the property ofthe debtor, except such as are exempt by law from execution;


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to exercise all the rights and actions of the debtor, except,such as are inherently personal to him; andto ask for the rescission of the contracts made by the debtor infraud of their rights.ART. 1178. Subject to the laws, all rights acquired in virtue ofan obligation are transmissible, if there has been nostipulation to the contrary. (1112)As a rule, all rights acquired in virtue of an obligation aretransmissible, except in the following cases:When the law so provides.

When the parties stipulate otherwise by agreement ofparties that the rights acquired by them will not be transmittedto any other person.When the obligation is purely personal in nature.LESSON 3: Kinds of ObligationsClassification of Obligations:The Civil Code classifies obligations primarily into: (PU CO

PE ALFA JOS DIP)Pure;Conditional;With a period;Alternative;Facultative;Joint;Solidary or several or in solidum;Divisible;Indivisible;With a penal clause.Other provisions of the Civil Code, however, impliedly admit


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other classes of obligations, to wit:a.) Unilateral and bilateral;

b.) determinate and generic;c.) legal, conventional and penal;d.) real and personalSection I. Pure and Conditional ObligationsART. 1179. Every obligation whose performance does notdepend upon a future or uncertain event, or upon a past eventunknown to the parties, is demandable at once.Every obligation which contains a resolutory condition shall

also be demandable, without prejudice to the effects of thehappening of the event. (1113)Pure Obligation when the obligation contain no term orcondition whatever upon which depends the fulfillment of theobligation contracted by the debtor.It is immediately demandable and there is nothing to exemptthe debtor from compliance therewith.

Example Gaya obliged herself to pay her loan of P1,000 toTito on demand.Instances when obligations immediately demandable:It is a pure obligation;It is subject to a resolutory condition;It is subject to resolutory period.Conditional Obligations one which is subject to a conditionof one whose performance depends upon a future or uncertainevents or upon past event unknown to the parties.ART. 1180. When the debtor binds himself to pay when hismeans permits him to do so, the obligation shall be deemed to

be one with the period, subject to the provisions of article


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1197.(n)Example A promissory note states that This is to acknowledge receiptof sum of One thousand Six Hundred pesos (P1, 600.00) and Iam to pay my debt to Arvin as soon as possible or as soon as Ihave the money. It was held that the conditional obligation isvoid, because the collection would be impossible, the remedyof the creditor is to ask the Court to fix the period of payment,thus, it becomes an obligation with a period.ART. 1181. In conditional obligations, the acquisition of

rights as well as the extinguishment or loss of those alreadyacquired, shall depend upon the happening of the event whichconstitutes the condition. (1114)ART. 1182. When the fulfillment of the condition dependsupon the sole will of the debtor, the conditional obligationshall be void. If it depends upon chance or upon the will of athird person, the obligation shall take effect in conformity

with the provisions of this code. (1115)ART. 1183. Impossible conditions, those contrary to goodcustoms or public policy and those prohibited by law shallannul the obligation which depends upon them. If theobligation is divisible, that part thereof which is not affected

by the impossible or unlawful condition shall be valid,The condition not to do an impossible thing shall beconsidered as not having been agreed upon. (1116a)ART. 1184. The condition that some event happen at adeterminate time shall extinguish the obligation as soon as thetime expires or if it has become indubitable that the event willnot take place. (1117)


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ART. 1185. The condition that some event will not happen ata determinate time shall render the obligation effective fromthe moment the time indicated has elapsed, or if it has

become evident that the event cannot occur.I f not time has been fixed, the condition shall be deemedfulfilled at such time as may have probably beencontemplated, bearing in mind the nature of the obligation.(1118)A R T. 1186. The condition shall be deemed fulfilled when

the obligor voluntarily prevents its fulfillment. (1119)Kinds or classifications of condition:Suspensive and ResolutorySuspensive the happening of the condition gives rise to anobligation.Example:Maya binds herself to deliver a determinate car to Tito if he

marries Gaya. The obligation is only demandable upon thehappening of the condition that is, if Tito marries Gaya. Theobligation is suspended and not yet demandable.Resolutory the happening of the condition extinguishes theobligation already existing.Example:Arvin binds himself to lend his only car to Ian until the latter

passes the CPA Board. The obligation to lend is immediatelydemandable. Ians right over the car is extinguished upon his

passing the CPA board. Ian is now obliged to return the car.Kinds or classifications of condition:


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Potestative, Casual and MixedPotestative is one the fulfillment of which depends upon thesole will of the debtor. This kind of condition is void.Example:Arvin Promise to give his only parcel of land to Maya if hedecides to leave for the United States.Casual is one the fulfillment of which depends upon chance.Example:Mario agrees to give Maria a determinate car if Marias only

racing horse will win the sweepstake race.Mixed is one which depends partly upon the will of thirdperson and partly upon chanceExample:Vincent promise to give Victor a new Toyota Car if Victorwill be able to play with and beat Karpov in a game of chess.This is mixed condition, that is Karpov willingness to play

chess with Victor and the latters winning over Karpov.Kinds or classifications of condition:Possible and ImpossibleImpossible condition is divided into 2:Physical Impossibility the condition imposed is not capableof being performed physically.Example:Grace will give Christine a gold necklace if she swims acrossthe Pacific Ocean.Illegal Impossibility when the condition imposed is contraryto law, good custom or public policy.Example:


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Contrary to law Pedro agrees to give Ernesto P100,000 ifErnesto will kill Mario.Contrary to good custom Santos binds himself to giveMaria a gold wrist watch if she will cohabit with Mr. Reyeswithout benefit of marriage.Contrary to public policy Maria agrees to employ Grace inher company if Grace will not join a labor union.Kinds or classifications of condition:Positive and Negative:A Negative condition is one where some event will not

happen at a determinate time, eithera.) the time indicated has elapsed; orb.) it has become evident that the event cannot occur (Art.1185, NCC)Example:Victor will give Jason a car if he will not marry Helen untilDec. 19, 2001, if Jason has not married Helen until Dec. 19,

2001 or if Helen has died within the prescribed time withouthaving married to Jason, the obligation becomes demandable.If Jason married Helen within the prescribed time, theobligation of Victor is extinguished.Kinds or classifications of condition:Divisible and IndivisibleDivisible that part of obligation which is not affected byimpossible or unlawful condition shall be valid (Art. 1183,

NCC)Example-X promise to pay Y the sum of P1, 000.00 if Y furnishes Xwith information as to the whereabouts of Z and another sum


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of P2, 000.00 if Y kills Z. in the obligation, the first part (topay P1, 000.00) is valid while the second part (P2, 000.00) isvoid because only the latter is affected by the condition.Express and ImpliedART. 1187. The effects of a conditional obligation to give,once the condition has been fulfilled, shall retroact to the dayof the constitution of the obligation. Nevertheless, when theobligation imposes reciprocal prestations upon the parties, thefruits and interests during the pendency of the condition shall

be deemed to have been mutually compensated. If the

obligation is unilateral, the debtor shall appropriate the fruitsand interests received, unless from the nature andcircumstances of the obligation it should be inferred that theintention of the person constituting the same was different.In obligations to do and not to do, the courts shall determine,in each case, the retroactive effect of the condition that has

been complied with. (1120)

Effects of conditional obligation to give:Once the condition is fulfilled, the effects of the conditionalobligations shall retroact to the day of the constitution of theobligation and not on the date when the condition wasfulfilled.Example On Jan. 1, 1999 A agreed to give B a parcel of land if he

passes the May, 1999 CPA exams. If B passes the CPA examsin May, 1999, he is entitled to the land effective Jan. 1, 1999

because Bs right over the land retroacts to the date when theobligation was constituted.


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As to the fruits and interest The effect of conditionalobligation to give, as a rule, do not retroact to the date of theconstitution of the obligation. The following rules shallgovern:In reciprocal obligation (like a contract of sale) - the fruitsand interest during the pendency of the condition shall bedeemed to have been mutually compensated.Example:A agrees to sell and B agrees to buy As parcel of land if B

passes the May, 1999 CPA exams. If B passes the May, 1999

CPA Board, the obligation becomes demandable. B is entitledto all the interests that his money (with which to pay A) mayearn while A is entitled to the fruits which the parcel of landmay have produced during the pendency of the condition.In unilateral obligation the debtor shall appropriate thefruits and interests received during the pendency of thecondition unless a contrary intention appears.

Example X agreed to give Y a parcel of land if Y passes the CPA Boardin May, 1999 exams. Pending the happening of the condition,A is entitled to the fruits which the land may produce, A willdeliver only the parcel of land if the condition is fulfilled,unless a contrary intention appears.ART. 1188. The creditor may, before the fulfillment of thecondition, bring the appropriate actions for the preservation ofhis right.The debtor may recover what during the same time he has

paid by mistake in case of a suspensive condition (1121a)Preservation of Creditors Right


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The action for the preservation of the creditors right mayhave for their objectives:To prevent the loss or deterioration of the things which are theobjects of the obligation by enjoining or restraining acts ofalienation or destruction by the debtor himself or by third

person;Preservation of Creditors Right To prevent concealment of the debtors properties whichconstitute the guaranty in case of non-performance of theobligation;

To demand security if the debtor becomes insolvent;To compel the acknowledgement of the debtors signature ona private document or the execution of proper publicdocument for registration so as to affect third person.Preservation of Creditors Right To register the deeds of sale or mortgages;

To set aside fraudulent alienation made by the debtor;To interrupt the period of prescription by actions againstadverse possessors of the things which are objects of theobligation. (Lawyers journal, 1951, p. 47)Paragraph I of the above article authorizes the creditor to takeany appropriate actions for the preservation of creditors rightduring the pendency of the condition:Example:On Jan. 1, 1999, Raul obliged himself to sell a parcel of landto Dennis if he passes the CPA exams in October, 1999. Fromthe time the obligation was constituted and pending the


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happening of the condition (passing the CPA Exams) Dennismay cause the annotation of the condition in the certificate oftitle in the Register of Deeds where the land is located, to

preserve his right over the parcel of land.Paragraph II in order that debtor may recover what he has

paid by mistake, during the pendency of the condition, thefollowing requisites may be present:The debtor paid the creditor before the fulfillment of thecondition;

Payment made by debtor was through mistake and error;The action to recover what was paid by mistake should bemade before the fulfillment of the condition.Example Pedro obliged himself to pay Santos P20, 000 if a PAL plane

crashes at Cebu before Dec. 30, 1998. After the obligationwas constituted and before Dec. 30, 1998, a plane crushed inCebu. Pedro honestly and believing that the condition wasfulfilled paid the P20, 000 to Santos. It turned out howeverthat it was a Cebu airline that crushed. Thus, Pedro mayrecover the amount paid to Santos by mistake for the reasonthat the condition has not yet been fulfilled.ART. 1189. When the conditions have been imposed with theintention of suspending the efficacy of an obligation to give,the following rules shall be observed in case of theimprovement, loss or deterioration of the thing during the

pendency of the condition:


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If the thing is lost without the fault of the debtor, theobligation shall be extinguished.If the thing is lost through the fault of the debtor, he shall beobliged to pay damages; it is understood that the thing is lostwhen it perishes, or goes out of commerce, or disappears insuch a way that its existence is unknown or it cannot berecovered;When the thing deteriorates without the fault of the debtor,the impairment is to be borne by the creditor;If it deteriorates through the fault of the debtor; the creditor

may choose between the rescission of the obligation and itsfulfillment, with indemnity for damages in either case;If the thing is improved by its nature, or by time, theimprovement shall inure to the benefit of the creditor;If it is improved at the expense of the debtor, he shall have noother right than that granted to the usufructuary.These rules apply only to obligation to give a determinate or

specific thing subject to a suspensive condition in case ofloss, deterioration or improvement of the thing.In case of loss of the thingIf the thing is lost without the fault of the debtor, theobligation shall be extinguished.Example Reyes obliged himself to give Santos a determinate car if he

passes the CPA Exams in Oct. the current year. If during thependency of the condition the car was lost through fortuitousevent without the fault of Reyes, the obligation to deliver thecar is extinguished even if the condition is fulfilled later.If the thing is lost through the fault of the debtor, he shall be


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obliged to pay damages. If in the example above, the specificcar was lost through the fault of Reyes, he shall be liable fordamages upon the fulfillment of the condition.It is understood that the thing is lost:When it perishes (as when a house is burnt to ashes)When it goes out of commerce (as when the object before isunprohibited becomes prohibited)When disappears in such a way that its existence is unknown(as when a particular car has been missing for some time)

When it disappears in such a way that it cannot be recovered(as when a particular diamond ring is dropped in the middleof the Atlantic Ocean).When the thing deteriorates -When the thing deteriorates during the pendency of thecondition, without the fault of the debtor, the impairment is to

be borne by the creditor.

Example Arvin obliged himself to give Ian a determinate Toyota car ifIan passes the October CPA Exams. During the pendency ofthe condition, the car was partially damaged by flood, withoutthe fault on the part of Arvin. If the condition is fulfilled, Ianwill bear the impairment.If the thing deteriorates, during the pendency of the condition,through the fault of the debtor, the creditor may choose, afterthe fulfillment of the condition, between the rescission of theobligation or its fulfillment, with indemnity for damages ineither case.When the thing improved


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If the thing improved during the pendency of the condition,by its nature, or by time, the improvement shall inure to thebenefit of the creditor. The reason for this is to compensatethe creditor who would suffer in case, instead ofimprovement, there would be deterioration without the faultof the debtor.If the thing is improved at the expense of the debtor, he haveno other right than that granted to the usufructuary. By ususufruct is meant the right to enjoy the property of anotherwhich includes the right to enjoy and use the fruits of the

property.ART. 1190. When the conditions have for their purpose theextinguishment of an obligation to give, the parties, upon thefulfillment of said conditions, shall return to each other whatthey have received.In case of the loss, deterioration or improvement of the thing,the provisions which, with respect to the debtor , are laid

down to the preceding article shall be applied to the partywho is bound to return.As for obligations to do or not to do, the provisions of thesecond paragraph of article 1187 shall be observed as regardsthe effect of the extinguishment of the obligation. (1123)Effects When Resolutory Condition is fulfilledThe obligation is extinguished. (Art. 1181, NCC)Because the obligation is extinguished and considered to havehad no effect, the parties should restore to each other whatthey have received.The fruits and interests thereon should also be returned afterdeducting of course the expenses made for the production,


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gathering and preservation, if any.The rules given in Art. 1189, N CC will apply to whoever hasthe duty to return in case of loss, deterioration orimprovement of the thing.The courts are given power to determine the retroactivity ofthe fulfillment of a resolutory conditions.Example :A gave B a parcel of land on condition that B will pass theCPA Exams on May, this year. B did not pass the CPA Exams.The obligation is extinguished and therefore, it is as if there

was never an obligation at all. B will therefore have to returnboth the land and the fruits he had received there from themoment A has given him the land.ART. 1191. The power to rescind obligatios is implied inreciprocal ones, in case one of the obligors should not complywith what is incumbent upon him.The injured party may choose between the fulfillment and the

rescission of the obligation, with the payment of damages ineither case. He may also seek rescission, even after he haschosen fulfillment, if the later should become impossible.The court shall decree the rescission claimed, unless there be

just cause authorizing the fixing of a period.This is understood to be without prejudice to the rights ofthird persons who have acquired the thing, in accordance witharticles 1385 and 1388 and the Mortgage Law.Right to RescindThe right to rescind means the right to cancel or to resolve incase of reciprocal obligation in case of non-fulfillment on the

part of one.


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Example:In a contract of sale, the buyer can rescind if the seller doesnot deliver or te seller can rescind if the buyer does not pay.The power to rescind is given to the injured party and theinjured party has the following alternative remedies:Demand fulfillment of the obligation plus damages; orDemand rescission of the obligation plus damages.ART. 1192. In case both parties have committed a breach ofthe obligation, the liability of the first infractor shall beequitably tempered by the courts. If it cannot be determined

which of the parties first violated the contract, the same shallbe deemed extinguished, and each shall bear his owndamages.Rules if Both Parties Have Committed a BreachThe above rules are deemed just. The first one is fair to both

parties because the second infract or, though they wouldderive some advantage by his own act or neglect. The second

rule is likewise just, because it is presumed that both partiesat about the same time tried to reap some benefits. (Report ofthe Code Commission)Section 2 - Obligations with a period`ART. 1193. Obligations for whose fulfillment a day certainhas been fixed, shall be demandable only when that daycomes.Obligations with a resolutory period take effect at once, butterminate upon arrival of the day certain.A day certain is understood to be that which must necessarilycome, although it may not be known when.


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If the uncertainty consists in whether the day will come ornot, the obligation is conditional, and it shall be regulated bythe rules of the preceding Section.Period Defined A period is a future and certain length of time whichdetermines the effectivity or the extinguished of obligation.Obligation with a period is one whose consequences aresubject in one way or another to the expiration of said periodor term. (8Manresal58)

A day certain is understood to be that which must necessarilycome, although it may not be known when.Period and Condition Distinguished:As to fulfillment - A period is a certain event which musthappen sooner or later while a condition is an uncertain event.As to time a period refers only to the future while acondition may refer to a past unknown event.

As to influence or effect on the obligation the period fixesthe time of the effectivity of the obligation while a conditionmay cause the demandability of the obligation to arise or toterminate.ART. 1194. In case of loss, deterioration or improvement ofthe thing before the arrival of the day certain, the rules inarticle 1189 shall be observed. (n)Effect of loss, deterioration, or improvement before thearrival of period.

Note the cross reference to Art. 1189, NCC.Example:If A is suppose to deliver to B a particular car on Dec. 19,


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1999 by the car was destroyed by fortuitous event in July 1,1999, the obligation is extinguished.ART. 1195. Anything paid or delivered before the arrival ofthe period, the obligor being unaware of the period or

believing that the obligation has become de and demandable,may be recovered, with the fruits and interests. (1126a)Effect Of Payment Before Arrival of PeriodThis article which is similar to Article 1188, NCC, in anobligation to give, allows the recovery of what has been paid

by mistake before the fulfillment of a suspensive condition.Example -E owes G P20, 000.00, which was supposed to be paid onDecember 25 this year. By mistake, E paid his obligation onDecember 25 last year. Assuming that today is only June 30,E can recover the amount plus interest therein. But E cannotrecover, except he interest, if the debt had already matured or

if E had knowledge of the period.ART. 1196. Whenever in an obligation a period is designated,it is presumed to have been established for the benefit of boththe creditor and the debtor, unless from the tenor of the sameor other circumstances it should appear that the period has

been established in favor of one or of the other. (1127)Presumption As to Benefit Of A PeriodThe general rule is that when a period is fixed by the parties ,the period is presumed to be for the benefit of both creditorand debtor.Which means that before the expiration of the period, thedebtor may not fulfill the obligation and neither the creditor


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demand its fulfillment.By way of exceptions, however, if the tenor of the obligationor other circumstances may indicate that a period is have beenestablished for the benefit of either the creditor or debtor:For the benefit of both creditor and debtorExample Gaya obtained a loan of P10, 000 at 12% interest per annumfrom Tito for one year. Gaya has a period of one year withinwhich to use the money, while Tito will benefit from theinterest which the money will earn.

For the benefit of the creditorExample -Gaya executes a promissory note in favor of Tito which reads:I promise to pay Tito or order the amount of P10, 000 ondemand. Thus, Tito can demand payment from Gaya anytime.For the benefit of debtor

Example Gaya executes a promissory note which reads: I promise to

pay Tito r order the amount of P 10,000 or before December31, 2001. Gaya can pay her obligation on or before Dec. 31,2001.ART. 1197. If the obligation does not fix a period, but from itsnature and circumstances it can be inferred that a period wasintended, the courts may fix the duration thereof.The courts shall also fix the duration of the period when itdepends upon the will of the debtor.In every case, the courts shall determine such period as mayunder the circumstance have been probably contemplated by


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the parties. Once by the courts, the period cannot be changedby them. (1128 a)Court Generally is Without Power to Fix a PeriodIf an obligation does not state a judicial period and no periodis intended, the court is not authorized to fix a period. Thecourts have no right to make contracts for the parties.Exceptions to the general ruleIf the obligation does not fix a period but it can be inferredfrom its nature and circumstances that a period is intended.Example:

S sold a parcel of land to B with a right of repurchase. Noterm is specified in the contract for the exercise of the right.Then, the court is authorized to fix the period to repurchase.If the duration of the period depends upon the sole will of thedebtorExample:I will pay you as soon as possible. Here , the period is not

fixed, so the court may fix the same because if this is not sothe obligation may never be complied with by the debtor.ART. 1198. The debtor shall lose every right to make use ofthe period:When after the obligation has been contracted, he becomesinsolvent, unless he gives a guaranty or security for the debt;When he does not furnish to the creditor the guaranties orsecurities which he has promised ;When by his own acts he has impaired said guaranties orsecurities after their establishment, and when through afortuitous event they disappear, unless he immediately givesnew ones equally satisfactory;


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When the debtor violates any undertaking, in consideration ofwhich the creditor agreed to the period;When the debtor attempts to abscond. (1129a)When Debtor Loses The Right to Make Use Of A Period

The general rule is that the obligation is not demandablebefore the lapse of the period. The exceptions are based onthe fact that the debtor might not be able to comply with hisobligation:When debtor becomes insolvent:

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

been contracted.When Debtor Loses The Right to Make Use Of A PeriodWhen debtor does not furnish guaranties or securities

promised:Example:Gaya borrowed loan from Tito which loan was secured by achattel mortgage of Gayas car as a guaranty. After obtainingthe loan, Gaya fails or does not execute a chattel mortgage,the loan becomes demandable or the debtor loses her right tomake use of the period.When by his own acts he has impaired said guaranties orsecurities:Example:Gaya borrowed P50, 000 from Tito which loan was secured


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by a chattel mortgage on Gaya s car. Later, Gayas fault, thecar was damaged or she causes the impairment of the car,Gaya loses her right to make use of the period, unless shegives another one equally satisfactory.When Debtor Loses The Right to Make Use Of A PeriodWhen by fortuitous event, the guaranty or security was lost.Example:Gaya borrowed P50, 000 from Tito which loan was secured

by a chattel mortgage on Gayas car. After obtaining the loan,the car was lost by fortuitous event. Gaya loss her right to

male use of the period unless she gives another guaranty orsecurity equally satisfactory.When debtor violates an undertaking Example:Art secured a loan from Arnold on condition that Art will

paint the house of Arnold. If after the proceeds of the loan

was given to Art, he did not pant the house of Arnold, Artloses his right to make use of the period.When the debtor attempts to abscond.Abscond means a depart or escape from creditors knowledgeto avoid payment of his debt. Mere attempt on the part ofdebtor will entitle the creditor to demand payment of theobligation without waiting for the period to expire.Section 3. Alternative and Facultative obligationsART. 1199. A person alternatively bound by different

prestations shall completely perform one of them.The creditor cannot be compelled to receive part of one and

part of the other undertaking. (1131)


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Meaning of Alternative ObligationIt means an obligation where two or more prestations are due

but the delivery of one is sufficient to extinguish theobligation.Example:Gaya binds herself to give Tito either a determinaterefrigerator or a TV set. If Gaya chooses and delivers the TVset, the obligation is extinguished. Thus, Gaya cannot compelTito to accept part of one and the part of the other prestations.

ART. 1200. The right of choice belongs to the debtor, unless ithas been expressly granted to the creditor.The debtor shall have no right to choose those prestationswhich are impossible, unlawful or which could not have beenthe object of the obligation.Rule on Who Makes the Choice As a general rule, the right of choice or to select the prestation

belongs to the debtor, unless the right to choose is expresslygranted to the creditor. But the right of the debtor is subject tothe following:The debtor cannot choose those prestations which are:Impossible E.g.- Gaya promised to deliver to Tito 100 sacksof rice or a stone from Mars. Gaya cannot chose to deliver thestone coming from Mars as it is physically impossible.Unlawful E.g. Gaya obliged herself to deliver to Tito a kiloof dangerous drug or a parcel of land. Gaya can choose onlythe delivery of parcel of land.Could not have been the object of the obligation - E.g. Gaya

borrowed from Tito P50, 000. It was agreed that Gaya would


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give Tito her horse or her German Piano. Now, Gaya has twohorses, a race horse worth P50, 000 and an ordinary horsewhich is worth for only P5, 000. Gaya cannot chooseOnly one prestation is practicable (Art. 1202) E.g. Gayawill deliver to Tito her carabao, or her horse or herrefrigerator. Through no fault of Gaya, the horse and thecarabao were lost by fortuitous event. Gaya can only deliverythe refrigerator which is the only one practicable.ART. 1201. The choice shall produce no effect except fromthe time it has been communicated. (1133)

Right of Choice Must be Communicated Until the choice is made and communicated, thecommunicated, the obligation remains alternative. Once thenotice to the effect that a choice is made, the obligation ceasesto be alternative and becomes a simple obligation.Where the choice has been expressly given to the creditor,such choice shall likewise produce legal effects upon being

communicated to the debtor. (Art. 1205, par. 1)ART. 1202. The debtor shall lose the right of choice whenamong the prestations whereby he is alternatively bound, onlyone is practicable.ART. 1203. If Through The creditors acts the debtor cannotmake a choice according to the terms of the obligation, thelatter may rescind the contract with damages.When debtor may rescind contractIf through the creditors fault, the debtor cannot made achoice according to the terms of the obligation the debtor isgiven the right to rescind and recover damages.


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Example:Gaya borrowed from Tito P5, 000.00. it was agreed thatinstead of P5, 000, Gaya could deliver a TV set or arefrigerator or a piano. If through the fault of Tito, the TV setwas destroyed, Gaya can rescind the contract if she wants. Incase of rescission, the amount of P 5, 000.00 must be returned

by Gaya with interest. Tito, in turn, must pay Gaya the valueof the TV set plus damages.ART. 1204. The creditor shall have a right to indemnity fordamages when, through the fault of the debtor, all the things

which are alternatively the object of the obligation have beenlost, or the compliance of the obligation has becomeimpossible.The indemnity shall be fixed taking as a basis the value of thelast thing which disappeared, or that of the service which last

became impossible.Damages other than the value of the last thing or service may

also be awarded. (1135a)When right of choice is with debtor and all prestations werelost This article entitles the creditor to indemnity for damageswhen all the alternative objects are lost through the fault ofthe debtor before he has made his choice. The indemnity forwhich the creditor is entitled shall be based on the value ofthe last thing which disappeared or lost or the compliance ofthe obligation has become impossible.ART. 1205. When the choice has been expressly given to thecreditor, the obligation shall cease to be alternative from the


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day when the selection has been communicated to the debtor.Until then the responsibility of the debtor shall be governed

by the following rulesIf one of the things is lost through a fortuitous event, he shall

perform the obligation by delivering that which the creditorshould choose from among the remainder, or that whichremains if only one subsists;If the loss of one of the things occurs through the fault of thedebtor, the creditor may claim any of those subsisting, or the

price of that which, through the fault of the former, has

disappeared, with a right to damagesIf all the things are lost through the fault of the debtor, thechoice by the creditor shall fall upon the price of any one ofthem, also with indemnity for damages.The same rules shall be applied to obligations to do or not todo in case one. Some or all of the prestations should becomeimpossible. (1136a)

When Right of Choice is With Creditor and All PrestationsWere LostThis article provides for the rules to be observed when theright of choice is expressly granted to the creditor, the rulesare as follows:When a thing is los through a fortuitous eventExampleGaya obliged herself to deliver to Tito a TV set, or arefrigerator, or a piano. If the TV set was lost throughfortuitous event, Tito can choose from among the remainderor that which remains if only one subsi

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