OBLIGATIONS and CONTRACTS (OBLICON)

OBLIGATIONS

 An obligation is a juridical necessity to give, to do, or not to do (Art. 1156).

 It is a juridical relation or a juridical necessity whereby a person (creditor) may demand from
another (debtor) the observance of a determinative conduct (giving, doing, or not doing), and in
case of breach, may demand satisfaction from the assets of the latter

(Makati Stock Exchange v. Campos, G.R. No. 138814, April 16, 2009).

 It is a juridical necessity because in case of noncompliance, the courts of justice may be called
upon by the aggrieved party to enforce its fulfillment or, in default thereof, the economic value
that it represents.

 Art. 1156 refers only to civil obligations which are enforceable in court when breached. It does
not cover natural obligations (Arts. 1423 -1430) because the latter are obligations that cannot
be enforced in court on equity and natural law and not on positive law (Pineda, 2000).

 When there is a right, there is a corresponding obligation. Right is the active aspect while
obligation is the passive aspect. Thus, the concepts of credit and debt are two distinct aspects of
unitary concept of obligation (Pineda, 2000).

 GR General Rule:

The law does not require any form in obligations arising from contracts for their
validity or binding force (Art. 1356).

 XPNs Exceptions:

1) When the form is essential to the validity of the contract as required by law (Art. 1346);

2) When the contract is unenforceable unless it is in a certain form, such as those under the Statute of
Frauds as formulated in Art. 1403.

 Obligations arising from other sources (Art. 1157) do not have any form at all (De Leon, 2010).

ELEMENTS OF AN OBLIGATION

 1. Juridical tie or vinculum juris or efficient cause - the efficient cause by virtue of which the
debtor becomes bound to perform the prestation (Pineda, 2000).

NOTE: The vinculum juris is established by:

a. Law; b. Bilateral acts; c. Unilateral acts (Tolentino, 2002).

 2. Active subject [creditor (CR) or obligee] - The person demanding the performance of the
obligation. It is he in whose favor the obligation is constituted, established, or created (Pineda,
2000).
  3. Passive subject [debtor (DR) or obligor] - The person bound to perform the prestation to give,
to do, or not to do (Pineda, 2000).

 4. Object or prestation - The subject matter of the obligation which has a corresponding
economic value or susceptible of pecuniary substitution in case of noncompliance. It is a
conduct that may consist of giving, doing, or not doing something (Pineda, 2000).

 NOTE: In order to be valid, the object or prestation must be:

1. Licit or lawful;

2. Possible, physically, & judicially;

3. Determinate or determinable; and

4. Pecuniary value or possible equivalent in money.

 Absence of any of the first three makes the object void.

 NOTE: Some writers add a fifth one: the form in which the obligation is manifested. This
element, however, cannot be considered as essential. There is no particular form required to
make obligations binding, except in certain rare cases (Tolentino, 1991).

CLASSIFICATION OF OBLIGATIONS
From the viewpoint of:

1. Creation

a. Legal – imposed by law (Art. 1158);

b. Conventional – established by the agreement of the parties (eg. Contracts).

2. Nature

a. Personal – to do; not to do;

b. Real – to give.

3. Object

a. Determinate / specific - particularly designated or physically segregated from all others of the
same class;

b. Generic – designated merely by its class or genus;

c. Limited generic – generic objects confined to a particular class or source (Tolentino, 2002).

(e.g. An obligation to deliver one of my horses)

4. Performance

a. Positive - to give; to do;

b. Negative – not to do (ex. an obligation not to run for an elective post).

5. Person obliged

a. Unilateral – only one party is bound;

b. Bilateral – both parties are bound.

NOTE: A bilateral obligation may be reciprocal or non-reciprocal. Reciprocal obligations are those which
arise from the same cause, wherein each party is a debtor and a creditor of the other, such that the
performance of one is conditioned upon the simultaneous fulfillment of the other.

6. Existence of burden or condition

a. Pure – not burdened with any condition or term. It is immediately demandable (Art.
1179);

b. Conditional – subject to a condition which may be suspensive (happening of which shall

give rise to the obligation) or resolutory (happening of which terminates the obligation)
(NCC. 1181).

7. Character of responsibility or liability

a. Joint – each debtor is liable only for a part of the whole liability and to each creditor
shall belong only a part of the correlative rights (8 Manresa 194 ; NCC. 1207);

b. Solidary – debtor is answerable for the whole of the obligation without prejudice to his
right to collect from his co-debtors the latter’s shares in the obligation (NCC. 1207).

8. Susceptibility of partial fulfillment

a. Divisible – obligation is susceptible of partial performance (NCC. 1223; and 1224);

b. Indivisible – obligation is not susceptible of partial performance (NCC. 1225).

9. Right to choose and substitution

a. Alternative – obligor may choose to completely perform one out of the several prestations
(NCC. 1199);

b. Facultative – only one prestation has been agreed upon, but the obligor may render one in
substitution of the first one (NCC. 1206).

10. Imposition of penalty

a. Simple – there is no penalty imposed for violation of the terms thereof (NCC. 1226);

b. Obligations with a penal clause – obligation which imposes a penalty for violation of the
terms thereof (NCC. 1226; Pineda, 2000).

11. Sanction

a. Civil – gives a right of action to compel their performance;

 b. Natural– not based on positive law, but on equity and natural law; does not grant a right of
action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize
retention of what has been delivered rendered by reason thereof.

Moral – cannot be enforced by action but are binding on the party who makes it in conscience and
natural law.

SOURCES OF OBLIGATIONS

1. Law;

2. Contracts;

3. Quasi-contracts;

4. Delict;

5. Quasi-delict.

 This enumeration is exclusive. No obligation exists if its source is not one of those enumerated
in Art. 1157 of the NCC (Navales v. Rias, G.R. No. L3489, September 7, 1907).

 Note: Actually, there are only two sources (i.e., law and contracts) because obligations arising
from quasi-contracts, delicts, and quasi-delicts are imposed by law (Leung Ben v. O’Brien, 38
Phil. 182).

1. Law. Obligations arise when imposed by the law itself and cannot be presumed. [Art. 1158, CC]

2. Contracts. Obligations arise from the stipulation of the parties; it has the force of law and should
be complied with in good faith. [Art. 1159, CC]

3. Quasi-contracts. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of
another. [Art. 2142, CC]

4. Delicts/ Acts or Omissions Punishable by Law. Responsibility for fault or negligence under a
quasi-delict [Art. 2176, CC] is entirely separate and distinct from the civil liability arising from
negligence under the penal code. But the plaintiff cannot recover damages twice for the same act or
omission of the defendant. [Art. 2177, CC]

5. Quasi-delict. Obligations arise from damages caused to another through an act or omission, there
being fault or negligence but no contractual relations exist between the parties. [Art. 2176, CC]

 Law – from the time designated by the law creating or regulating them;

 Contracts –from the time of the perfection of the contract. e.g. meeting of the minds

 XPNs:

 a. When the parties made a stipulation on the right of the creditor to the fruits of the
thing;
  b. When the obligation is subject to a suspensive condition, from which it arises upon
fulfillment of the condition;

 c. When the obligation is with a period; there is already an existing obligation, but it is
only demandable when the period expires or becomes due.

 Quasi Contracts, delicts, quasi-delicts – from the time designated by the law creating or
regulating them.

OBLIGATION EX LEGE (Legal Obligation)

 Obligations derived from law are not presumed. Only those expressly determined in the Code
or in special laws are demandable and shall be regulated by the precepts of the law which
establishes them and as to what has not been foreseen by the provisions of Book IV of NCC
(NCC, Art. 1158).

 NOTE: If there is conflict between the NCC and a special law, the latter prevails unless the
contrary has been expressly stipulated in the NCC (NCC, Art. 18; Paras, 2008).

Characteristics of a legal obligation

 1. Does not need the consent of the obligor;

 2. Must be expressly set forth in the law creating it and not merely presumed; and

 3. In order that the law may be a source of obligation, it should be the creator of the obligation
itself (NCC, Art. 1158).

a) Arises from law if it establishes obligation;

b) Arises from the act itself if the law merely recognizes the existence of an obligation
generated by an act (Manresa).

 e.g.

 According to Art. 2014 of the NCC, a loser in a game of chance may recover his loss
from the winner, with legal interest from the time he paid the amount lost (Leung Ben
v. O’Brien, G.R. No. L-13602, April 6, 1918);

 The obligation of the spouses to support each other;

 The obligation of the employers under the Worker’s Compensation Act;

 The obligations of the owners of the dominant and servient estates in legal easements
and others scattered in the NCC and in special laws (Jurado, 2009);

 The obligation to pay taxes (Rabuya, 2017).

OBLIGATION EX CONTRACTU (Contractual Obligation)

 Requisites of a contractual obligation

1. It must contain all the essential requisites of a contract (NCC, Art. 1318); and
 2. It must not be contrary to law, morals, good customs, public order, and public policy
(NCC, Art. 1306). Rules governing the obligations arising from contracts

 GR: These obligations arising from contracts shall be governed primarily by the stipulations,
clauses, terms, and conditions of the parties’ agreements.

 XPN: Contracts with prestations that are unconscionable or unreasonable (Pineda, 2009).

Binding force of obligation ex contractu

 Obligations arising from contracts have the force of law between the parties and should be
complied with in good faith (NCC, Art. 1159).

 This is known as the “principle of obligatory force of contracts” (Rabuya, 2017).

 Good faith in performance in accordance with the stipulation, clauses, terms, and conditions of
the contract (Pineda, 2000).

 GR: Neither party may unilaterally evade his obligation in the contract.

 XPNs: Unilateral evasion is allowed when the:

 1. Contract authorizes such evasion; or

2. Other party assents thereto

 Q: FBDC entered into a Trade Contract with MS Maxco Company, Inc. (MS Maxco) for the
execution of the structural and partial architectural works of one of its condominium projects.
The Trade Contract likewise provided that MS Maxco is prohibited from assigning or
transferrings any of its rights, obligations, or liabilities under the said Contract without the
written consent of FBDC. FBDC received a letter from the counsel of Fong informing it that MS
Maxco had already assigned its receivables from FBDC to him. Despite Fong’s repeated requests,
FBDC refused to deliver to Fong the amount assigned by MS Maxco.

 Is FBDC bound by the assignment between MS Maxco and Fong?

 A: No. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith. The Court finds that MS Maxco, as the Trade
Contractor, cannot assign or transfer any of its rights, obligations, or liabilities under the Trade
Contract without the written consent of FBDC

(Fort Bonifacio Development Corporation vs. Valentin L. Fong, G.R. No. 209370, March 25,
2015).

OBLIGATION EX QUASI – CONTRACTU (Quasi-contract)

 A juridical relation arising from lawful, voluntary, and unilateral acts based on the principle that
no one shall be unjustly enriched or benefited at the expense of another (NCC, Art. 2142).

 Distinguished from “implied contracts” An implied contract, in the proper sense, is a contract
which arises when the intention of the parties is not expressed, but an agreement in fact,
 creating an obligation, is implied or presumed from their acts, or where there are circumstances
which show a mutual intent to contract.

 An implied contract requires consent while a quasi-contract, being a unilateral contract, does
not. The basis of an implied contract is the will of the parties while the basis of a quasi-contract
is law, to the end that there be no unjust enrichment (Rabuya, 2017).

 Characteristics of a quasi-contract (LUV)

 1. It must be Lawful;

 2. It must be Unilateral; and

 3. It must be Voluntary (Pineda, 2000).

Presumptive consent

Since a quasi-contract is a unilateral contract created by the sole act(s) of the gestor, there is no express
consent given by the other party. The consent needed in a contract is provided by law through
presumption (Pineda, 2000).

Principal forms of quasi-contracts

 1. Negotiorum gestio (inofficious manager) – Arises when a person voluntarily takes charge of
the management of the business or property of another without any power from the latter
(NCC, Art. 2144);

 2. Solutio indebiti (unjust enrichment) – Takes place when a person received something from
another without any right to demand for it, and the thing was unduly delivered to him through
mistake (NCC, Art. 2154).

 NOTE: The delivery must not be through liberality or some other cause.

Solutio indebiti (SI) v. Accion in rem verso (AIRV)

1. Mistake is an essential element in SI which is not necessary in AIRV;

2. An AIRV is merely an auxilliary action, available only when there is no other remedy on
contract, quasi-contract, crime or quasi-delict (Rabuya, 2017).

 Rule in case of excess of payment of interest

 If the borrower pays interest when there has been no stipulation therefor, the provisions of the
Code concerning solutio indebiti, or natural obligations, shall be applied, as the case may be. If
the payment of interest is made out of mistake, solutio indebiti applies; hence, the amount
must be returned to the debtor. If the payment was made after the obligation to pay interest
has already prescribed, natural obligation applies; hence, the creditor is authorized to retain the
amount paid.

OBLIGATIONS EX DELICTO (Delict)

 Delict An act or omission punishable under the law.

  Basis:

 GR: Art. 100 of the RPC, “Every person criminally liable for a felony is also civilly
liable.”

 XPNs: Crimes of treason, rebellion, espionage, contempt and others wherein no civil liability
arises on the part of the offender either because there are no damages to be compensated or
there is no private person injured by the crime (Reyes, 2008).

Implied institution of the civil action in a criminal case

 GR: When a criminal action is instituted, the civil action for the recovery of the civil liability
arising from the offense charged shall be deemed instituted with the criminal action (Sec. 1,
Rule 111, Rules of Court).

XPNs: When the offended party:

 1. Waives the civil action;

 2. Reserves the right to institute it separately; and

 3. Institutes the civil action prior to the criminal action.

Scope of Civil Liability (IRR)

 1. Restitution;

 2. Reparation for damage caused; and

 3. Indemnity for consequential damages (Art. 104, RPC).

Acquittal in criminal case

GR: The acquittal of the accused in criminal case on the ground of reasonable doubt does not preclude
the filing of a subsequent civil action and only preponderance of evidence is required to prove the
latter.

 XPNs: When the acquittal is on the basis that:

1. The accused did not commit the crime charged; or

2. There is a declaration in the decision of acquittal that no negligence can be attributed to the
accused and that the fact from which the civil action might arise did not exist (NCC, Art. 29).

Q: Petitioner was charged with estafa. Respondent averred that on February 20, 1996, she entrusted
merchandise worth P35,300 to petitioner as evidenced by an acknowledgment receipt. However,
petitioner was only able to remit P3,300 and thereafter, failed to make further remittances and ignored
respondent's demands to remit the proceeds or return the goods.

As a defense, petitioner admitted having previous business dealings with respondent not as an
agent but as a client who used to buy purchase order cards (POCs) and gift checks (GCs) from
respondent on installment basis. The RTC acquitted petitioner of the charge of estafa but held her civilly
liable to pay respondent the amount of P32,000, with interest from the filing of the Information on
March 11,1999 until fully paid, and to pay the costs. The RTC adjudged petitioner civilly liable "having
admitted that she received the [GCs] in the amount of P32,000.“ Should the petitioner be held civilly
liable? If yes, what is the rate of interest?

A: Yes. Respondent was able to prove by preponderance of evidence the fact of the transaction, as
well as petitioner's failure to remit the proceeds of the sale of the merchandise worth P32,000, or to
return the same to respondent in case such merchandise were not sold. This was established through
the presentation of the acknowledgment receipt which, as the document's name connotes, shows that
petitioner acknowledged receipt from respondent of the listed items with their corresponding values,
and assumed the obligation to return the same on March 20, 1996 if not sold.

With the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB
Circular No. 799, series of 2013, there is a need to partially modify the same in that the interest accruing
from the time of the finality of this Decision should be imposed at the lower rate of six percent (6%)
p.a., and not twelve percent (12%) p.a. as imposed by the CA.

(Dolores Diaz v. People, GR No. 208113, December 2, 2015)

OBLIGATIONS EX QUASI – DELICTO (Quasi-delict or Tort)

 An act or omission arising from fault or negligence which causes damage to another, there
being no pre-existing contractual relations between the parties (NCC, Art. 2176).

 NOTE: A single act or omission may give rise to two or more causes of action. Thus, an act or
omission may give rise to an action based on delict, quasi-delict, or contract. In negligence cases,
prior conduct should be examined, that is, conduct prior to the injury that resulted, or in proper
case, the aggravation thereof.

Elements of a quasi-delict

 1. Negligent or wrongful act or omission;

 2. Damage or injury caused to another;

 3. Causal relation between such negligence or fault and damage; and

 4. No pre-existing contractual relationship between the parties (NCC, Art. 2176).

Delict v. Quasi-delict

BASIS DELICT QUASI-DELICT

As to the kind of intent present Presence of criminal or Only negligence

malicious intent or criminal
negligence.
As to the whether private or Concerned with public interest. Concerned with private interest.
public interest is concerned
 As to the kind of liability arises Generally, the act or omission The act or omission gives rise
gives rise to two liabilities: only to a civil liability.
criminal and civil liability.
As to availability of a Criminal liability is not subject The civil liability can be
compromise to a compromise. compromised.
As to the quantum of evidence Guilt must be proved beyond Guilt may be proved by
is required reasonable doubt. preponderance of evidence.
NOTE: Inasmuch as civil liability co-exists with criminal responsibility in negligence cases, the offended
party has the option between an action for enforcement of civil liability based on culpa criminal under
Art. 100 of the RPC and an action for recovery of damages based on culpa aquiliana under NCC, Art.
2177.