OBLIGATIONS AND CONTRACTS

Quasi-delicts
Essential requisites (POOL)
Acts or omissions that cause damage to another,
1. Active Subject – right to demand performance there being fault or negligence but without pre-
existing contractual relations between the parties.
2. Passive subject – obliged to perform
Ex. Car accident, flower pot.
3. Prestation – subject matter of the obligation consist of doing,
giving, or not doing Nature and effect of obligations

Determinate and generic things

4. Efficient Cause – binds the parties to an obligation
Determinate – particularly designated or physically
OBLIGATION segregated from all others of the same class.
IS A JURIDICAL NECESSITY: E.g. My only

- TO GIVE Generic – not determinate

- TO DO E.g. Car, House

- NOT TO DOOBLIGATION Importance of knowing whether determinate or

generic
Civil obligation
Loss of the thing through a fortuitous event (1262).
Is based on positive law; hence, it is imposable by court action.
Remedies (1165)
Natural obligation Obligations of one obliged to give a determinate thing

Is based on natural law; hence, it is not enforceable by court action. 1. take good care of the thing with the DOGFAF

Obligation exists in equity and moral justice. 2. to deliver the thing

SOURCES (LCQcDQ) 3. to deliver the fruits (NIC)

Law 4. to deliver its accessions (FIA)and accessories (BEP)

even if they have not been mentioned.
Rule of conduct, just and obligatory, laid down by a legitimate
Remedies of the creditor
authority for common observance and benefit.
1. specific performance – obligation to deliver a
Obligation to support between husband and wife und Family Code determinate thing

Contract 2. obligation be complied with at the expense of the

debtor – generic thing
Meeting of the minds between two persons whereby one binds
himself with respect to the other, to give something or to render 3. Execute at the expense of the debtor – obligation
some service to do

4. undone at the debtor’s expense – poor

Quasi-contract
performance, obligation not to do
1. Negotiorum Gestio – Voluntary administration of the property, 5. damages - The harm done and the sum of money
business or affairs of another without his consent. that may be recovered in reparation of the harm
done.
2. Solutio indebiti – payment by mistake
Moral, Exemplary, Nominal, Temperate, Actual,
Delicts
Liquidated (MENTAL)
Crimes or felonies .Any crimes punishable under the Revised Penal
Code and other special penal laws
Grounds for damages (fndc) Potestative vs. casual vs. mixed

Fraud (Dolo) – deliberate or intentional evasion buy the Potestative – depends upon the will of one of the contracting
debtor of the normal compliance of his obligation. (PIC) parties.

Casual – depends upon chance or upon will of a third person.

Negligence (Culpa) – Omission of that diligence which is
require by the nature of the obligation and corresponds Mixed – depends partly upon will of the parties and partly upon
with the circumstance of PTP. (CAC) chance or upon the will of a third person.

Delay (Mora) – non-fulfillment with respect to time (1169). Possible vs. impossible
(SprAC)
POSSIBLE – CAPABLE OF FULFILLMENT IN ITS NATURE OR BY
Contravention of the tenor – any violation on the terms. LAW.

Fortuitous events
IMPOSSIBLE – NOT CAPABLE OF FULFILLMENT DUE TO PHYSICAL
 Rule OR LEGAL IMPOSSIBILITY.
 Exceptions – LSA
POSITIVE VS. NEGATIVE
Kinds of obligations (Dj-paco-fiso)
POSITIVE – CONDITION THAT SOME EVENT HAPPEN AT A
Divisible, Joint, Pure, Alternative, Conditional, Obligation DETERMINATE TIME.
with a period, Facultative, Indivisible, Solidary, Obligation
with a penal clause
NEGATIVE - CONDITION THAT SOME EVENT WILL NOT HAPPEN
PURE AT A DETERMINATE TIME.

One without a term or condition and is demandable at DIVISIBLE VS. INDIVISIBLE

once.
DIVISIBLE – CAPABLE OF PARTIAL PERFORMANCE.
Exception: Negative illegal or impossible condition.

CONDITIONAL INDIVISIBLE – NOT CAPABLE OF PARTIAL PERFORMANCE.

One whose demandability or extinguishment depends upon Duties of the obligor in obligation to do or not to do
the happening of a condition.
1. If a person obliged to do something fails to do it or does it in
Condition – Uncertain event which wields an influence on a contravention of the tenor of the obligation, the same shall be
legal relationship. executed at his cost. (1167)

CLASSIFICATION – SRC-NIDD-CP-PIMP 2. What has been poorly done be undone. (1167)

3. When the obligation consists in not doing, and the obligor

SUSPENSIVE, RESOLUTORY, CASUAL, NEGATIVE,
does what has been forbidden him, it shall also be undone at his
INDIVISIBLE, DIVISIBLE, DISJUNCTIVE, CONJUNCTIVE, expense. (1168)
POTESTATIVE, POSSIBLE, IMPOSSIBLE, MIXED, POSITIVE.
Extinguishment of obligation (1231) - PLC3N
SUSPENSIVE VS. RESOLUTORY
 PAYMENT OR PERFORMANCE
SUSPENSIVE – GIVES RISE TO THE OBLIGATION.  LOSS OF THE THING DUE
 CONDONATION OR REMISSION
RESOLUTORY – EXTINGUISHES THE OBLIGATION.  CONFUSION OR MERGER
 COMPENSATION
 NOVATION
OTHER CAUSES OF EXTINGUISHMENT – AFRP 3. Payment or performance must be complete.

 ANNULMENT Exceptions:
 FULFILLMENT OF RESOLUTORY CONDITION
 RESCISSION 1235. Obligee accepts performance despite its
 PRESCRIPTION incompleteness or irregularity.

PAYMENT OR PERFORMANCE 1248. There is agreement for partial performance.

How payment should be made 1248. Debt is partly liquidated.

1. There must delivery of the thing or rendition of the service THAT PAYMENT OR PERFORMANCE
WAS CONTEMPLATED.
Who must make the payment.
1244 – Debtor cannot compel creditor to accept a different thing
By the Debtor himself:
even if the thing offered is more valuable.
- Free disposal
1246 – Obligation to deliver generic thing, creditor cannot demand
superior thing, debtor cannot deliver inferior thing. - Legal capacity to alienate (incapacity,
garnishment)
1248 – Debtor cannot be compelled to make partial payment.
Creditor cannot be forced to accept partial payment. By third person:

Creditor not bound to accept payment

2. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in Exceptions:
the currency which is legal tender in the Philippines. (1249)
Stipulation
LEGAL TENDER – Central Bank Act as amended by MBR no. 862
3P has interest in the fulfillment of the obligation
a. 1000 for 1, 5, 10 peso coins
Who must make the payment
b. 100 for 1, 5,10, 25 cents coins
By third person:
c. All bills are legal tender up to any amount.
- Rights of 3P who makes payment
Mercantile documents as means of payment (1249)
1. with knowledge and consent of debtor
The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the effect a. Recover what he paid.
of payment only when they have been cashed, or when through
the fault of the creditor they have been impaired. b. Right of subrogation.

In the meantime, the action derived from the original obligation 2. without knowledge or against the will of the debtor.
shall be held in the abeyance.
a. recover only insofar as the payment has
Extraordinary inflation/deflation been beneficial to the debtor.

The value of the currency at the time of the establishment of the -Who does not want to be reimbursed
obligation shall be the basis of payment.
Deemed donation.
Unless there is an agreement to the contrary.
If debtor does not consent, payment is still valid to the
Formula : A = (B / C) x B creditor who has accepted it. (effect same as without
consent/against the will of the debtor)
A = Amt. to be paid at maturity
To whom payment shall be made
B = Amt. of the obligation
1. to the Creditor
C = Value on the date of maturity
Creditor must be capacitated to receive payment for
the payment to be valid.
 SPECIAL FORMS OF PAYMENT
Exceptions:
Payment by Cession
1. if he kept the thing delivered
Abandonment or assignment by the creditor of all his property in
2. Insofar as the payment has been beneficial to favor of his creditors so the latter may sell them and recover their
him claims out of the proceeds.
2. to the Creditor’s successor in interest Debt is extinguished only up to the extent of the net proceeds.
3. to any person authorized to received payment Ownership is not transferred to the creditors.
Rule: Payment to unauthorized third person is not valid. Payment by Cession
Kinds
Exception:
1. voluntary or conventional – agreed upon by the parties.
A. Payment has redounded to the benefit of the creditor.
(Acquisition, Ratification, Estoppel) 2. legal – by operation of law
Where payment should be made Requisites
1. STIPULATION  2 or more creditors
2. IF THERE IS NONE: Debtor is insolvent
DETERMINATE THING – WHERE THE THING MIGHT BE AT Debtor abandons all his properties except those exempted from
THE TIME OF CONSTITUTION. execution
GENERIC – DOMICILE OF THE DEBTOR. Creditors accept abandonment.
SPECIAL FORMS OF PAYMENT (DAPaT) Payment by cession vs dation en pago (PIA-OR)
Dation en pago Tender of payment and consignation
Ownership of property is transferred to his creditor to pay a TOP
debt in money. Governed by law on sales.
- The act of the debtor offering to his creditor what is due him.
APPLICATION OF PAYMENT
Consignation
Designation of the debt to which the payment shall be
applied when the debtor owes several debts in favor of the - Act of depositing the sum or thing due with the judicial
same creditor. authorities whenever the creditor refuses without just cause to
accept the same, or in the case where creditor cannot accept it.
Requisites:
REQUISITES
 2 or more debts
 Same kind 1. Valid TOP
 Same parties
 All debts are due (except: stipulation, benefit of 2. Creditor refuses without just cause
period)
3. Person interested in the fulfillment was notified of the intent to
How application is made deposit

1. debtor has the right of choice. 4. the object is deposited with the judicial authorities

2. creditor will have the right if the debtor does not exercise 5. Person interested in the fulfillment was notified that
it. consignation has been made

3. If both did not choose, operation of law will set in: EFFECT

Most onerous, e.g. interest, collateral. Obligation is extinguished upon acceptance by creditor or
upon declaration by the court.
Same nature and burden, proportionately
Consignation may be withdrawn only with the consent of the Creditor’s right if loss is caused by 3p(1269)
creditor.
Creditor shall have the rights of action which the
When consignation valid even without prior TOP:
debtor may have against the 3p by reason of the
1. Absent loss.
2. Incapacitated Condonation or remission of debt
3. Receipt
The gratuitous abandonment by the creditor of his
4. two or more persons right.
5. title to the obligation is lost Kinds – TPEI
Extinguishment of obligation (1231) - PLC3N
Total
LOSS OF THE THING DUE (1189)
Partial
It perishes;
Express – must comply with formalities of donation
Goes out of commerce;
Implied
Disappears in such a way that its existence is unknown or it
cannot be recovered.
Express Condonation– must comply with formalities
LOSS OF THE THING DUE (1189) of donation
EFFECT OF LOSS ON OBLIGATIONS 1. Donation of Immovables
Loss of Determinate thing
Must be in a public instrument
RULE: Extinguishes the obligation
Acceptance must also be in public instrument
EXCEPTIONS:
2. Donation of Movables
 Fault of the debtor (1262)
 Debtor incurs delay A. More than 5K
 Provided for by law
 Stipulated by parties Remission and acceptance must be in writing
 Assumption of risk
 Proceeds from a criminal offense (1268) B. 5K or less
EFFECT OF LOSS ON OBLIGATIONS
2. LOSS OF GENERIC THING No form required

RULE: “Genus nunquam perit” If made orally – simultaneous delivery

EXCEPTION: “Delimited Generic” Condonation or remission of debt

3. LOSS IN PERSONAL OBLIGATION Presumptions:
Prestation becomes legally or physically impossible without 1272 – Private document evidencing debt is found in
debtor’s fault. (1266) the possession of the debtor, voluntary delivery by
Service becomes so difficult as to be manifestly beyond the the creditor is presumed.
contemplation of parties - release in whole or in part. 1274 – It is presumed that the accessory obligation
(1267) of pledge has been remitted when the thing pledged,
Partial loss (1264) after its delivery to the creditor, is found in the
possession of the debtor, or of a third person who
Courts shall determine if the partial loss of the object is so owns the thing.
important as to extinguish the obligation.
Effect of remission TOTAL
1. Remission of the principal debt extinguishes the Debts are of the same amount. (1281)
accessory obligation.
PARTIAL
2. Remission of the accessory obligation does not carry
with it that of the principal debt. Debts are of different amounts. (1281)

Confusion or merger of rights Effects of assignment on compensation (1285)

The meeting in one person of the qualities or the 1. Assignment was made with consent of debtor
characteristics of creditor and debtor. (1275)
- Debtor cannot set up compensation against assignor unless he reserves
Confusion does not extinguish a joint obligation except his right to compensation.
as regards the share corresponding to the creditor or
debtor in whom the two characters concur. (1277) 2. Assignment was made with knowledge of the debtor but without his
consent.
Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other. - Debtor may set up compensation for debts maturing before the
(1278) assignment.

Kinds of compensation (FPJ-TLC) 3. Assignment was without knowledge of the debtor.

Legal compensation (PS-LDR) - He can set up compensation for all debts maturing before the time he
obtains knowledge of the assignment.
In order that compensation may be proper, it is
necessary: NOVATION

(1) That each one of the obligors be bound principally, The modification or extinguishment of an obligation by another, either
and that he be at the same time a principal creditor of by:
the other;
changing the object or principal condition
(2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, substituting the person of the debtor, or
and also of the same quality if the latter has been
stated; subrogating a third person in the rights of the creditor.

(3) That the two debts be due; Requisites (PAEC)

(4) That they be liquidated and demandable; 1. Previous valid obligation

(5) That over neither of them there be any retention or 2. Agreement to modify (if prestation is to be changed)
controversy, commenced by third persons and
3. Extinguishment of old obligation
communicated in due time to the debtor.
4. Creation of a valid new obligation
FACULTATIVE COMPENSATION
Kinds of novation
-Compensation that may be claimed or opposed by one
of the parties. (not all requisites of legal compensation  REAL OR OBJECTIVE
are present)  PERSONAL OR SUBJECTIVE
 MIXED
-Commodatum,deposit, support, crime.
 EXPRESS
Conventional  IMPLIED
 TOTAL OR EXTINCTIVE
Takes place by agreement of the parties. (1282)  PARTIAL OR MODIFICATORY

Judicial

Compensation ordered by the court. (1283

PERSONAL OR SUBJECTIVE
1. SUBSTITUTION (always with creditor’s consent)

a. Expromission – 3P initiates substitution, without the

consent or against the will of the debtor. (debtor is
released if new debtor is insolvent)

b. Delegacion – debtor initiates substitution. (if new

debtor is insolvent, the original debtor is not revived EXCEPT if the
insolvency of the new debtor is known to the debtor or of public
knowledge at the time of delegation of debt)

2. SUBROGATION

Conventional – change of creditor by agreement of the parties.

Legal – subrogation by operation of law.

 Creditors pay another creditor who is preferred

 3P not interested in the fulfillment pays with the consent
of the debtor
 3P legally interested in the fulfillment pays

Effect of novation on accessory obligation

RULE: Accessory obligation is extinguished.

EXCEPTIONS:
1. Accessory obligation was established for the benefit 3P
who did not give their consent.

2. Stipulation

3. 3P is subrogated to the rights of the creditor.

Effect if the new obligation is void

If the new obligation is void, the original one shall subsist, unless
the parties intended that the former relation should be
extinguished in any event. (1297)

Effect if the original obligation is void/ voidable

Orig. Obligation is void – Novation is void.

Orig. Obligation is voidable – Novation is valid, since it cures the

defects of the Orig. obligation.

Effect if the original obligation is subject to resolutory condition

The new obligation shall be under the same condition , unless it is

otherwise stipulated.