OBLIGATION AND

CONTRACT
 ARTICLE 1156
An obligation is a juridical necessity to give,
to do or not to do.
ARTICLE 1156
Article 1156 is about defining obligation in which it is a juridical necessity to give, to do, or not to do. It is a
tie of law which a person is bound to render something such as giving a thing, doing a certain act, or not doing a
certain act to another person.

Obligation is a juridical necessity because in case a debtor or obligor will not comply, the courts of justice
may called upon to enforce its fulfillment. This means a debtor must comply his obligation whether he likes it or
not otherwise he will face harmful or undesirable consequences.

There are two (2) nature of obligations under the Civil Code;
1) Civil obligations is an obligation which a creditor or obligee has a right of action under the law to
enforce their performance in courts of justice.
2) Natural obligations is not based on positive law but on equity and natural law.

Obligation has four (4) essential requisites;

1) Passive subject (debtor or obligor) has a duty to give, to do, or not to do and/or bound to fulfill his
obligation.
2) Active subject (creditor or obligee) has a right or entitled to demand the fulfillment of the obligation.
ARTICLE 1156
4) Object or prestation (subject matter) is the conduct required that the debtor needs to be observed. It may
consist in giving, doing, or not doing.
5) Juridical or legal tie (efficient cause) binds or connects the parties to the obligation.

◈ Form of obligation – the manner in which an obligation is manifested or incurred. It can be oral, or writing,
or partly oral, or partly writing.
◈ Obligation – juridical necessity to give, to do, or not to do
◈ Right – power which a person has under the law, to demand from another any prestation
◈ Cause of Action – act or omission which violates a right

Obligations based on subject matter:

1) Real obligation (obligation to give) – wherein subject matter is a thing that an obligor must deliver to the
obligee
2) Personal obligation (obligation to do or not to do) – wherein subject matter is an action that needs to be
done or not to be done.
(a) Positive personal obligation - obligation to do
(b) Negative personal obligation - obligation not to do
 ARTICLE
Obligations arise from:
1157
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
ARTICLE 1157
Under Article 1157, obligation has five (5) sources:
1) Law is imposed by the law itself.
2) Contracts arise from the stipulation of the parties.
3) Quasi-contracts arise from lawful, voluntary and unilateral acts which are enforceable to the end that no
one shall be unjustly enriched or benefited at the expence of another.
4) Crimes or acts or omissions punished by law arise from civil liability which is the consequences of a
criminal offense
5) Quasi-delicts or torts arise from damage caused to another through an act or omission where there’s
being fault or negligence but no contractual relation exists between both parties.

The five (5) sources of obligations are classified as follows:

1) Those emanating from law
2) Those emanating from private acts
(a) licit acts arises in the case of contracts and quasi-contracts
(b) illicit acts arises from either punishable by law in the case of delicts, or not punishable in the case of
quasi-delicts.
 ARTICLE 1158
Obligations derived from law are not
presumed. Only those expressly determined
in this 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 fore- seen, by the
provisions of this Book.
ARTICLE 1158
Under Article 1158, it states that obligations that comes from the law is not presumed because it is
considered as a burden upon the obligor. In order to be presumed or demandable, it must be derived
from Code or special laws.
◈ Special laws talk about the all other laws not contained in the Civil Code such as Corporation Code,
Negotiable Instrument Law, Insurance Code, National Internal Revenue Code, Revised Penal Code,
Labor Code, etc.
Example:
1) An employer has no obligation to furnish free legal assistance to his employees because no law
requires this, and, therefore, an employee may not recover from his employer the amount he may
have paid a lawyer hired by him to recover damages caused to said employee by a stranger or
strangers while in the performance of his duties.
2) A private school has no legal obligation to provide clothing allowance to its teachers because there is
no law which imposes this obligation upon schools. But a person who wins money in gambling has
the duty to return his winnings to the loser. This obligation is provided by law.
 ARTICLE 1159
Obligations arising from contracts have the
force of law between the contracting parties
and should be complied with in good faith.
ARTICLE 1159
The article talks about contractual obligations or obligation arising from contracts or voluntary
agreements between parties. Having a contract means that you entered into a valid and enforceable
obligation.
◈ Contract - meeting of minds between two (2) persons whereby one binds himself, with respect to the
other, to give something or to render some service. It is a formal expression by both parties for their
rights and obligations they have agreed upon as a respect to each other.

1) Binding Force - Obligations arising from contracts have the force of law between the contracting
parties. Both parties are bound to comply in good faith if the contract is valid however, contract
will not be valid if it is against the law.
2) Requirements of a valid contract - A contract is valid if all the essential elements are present.
However, a contract will be invalid or void if it is contrary to law, morals, good customs, public
order, or public policy.
3) Where contract requires approval by the government - A contract can take effect if it is verified
and approved by the government and so validity will be sustained. If there is nothing in it, it will
be contrary to law.
ARTICLE 1159
4) Compliance in good faith – it is about complying or performing in accordance with the
stipulations or terms of the contract or agreement. Sincerity and honesty must be observed in
order to prevent one party from taking unfair advantage over the other. Non-compliance of a
party with his legitimate obligations after receiving the benefits under the contract would
constitute unjust enrichment on the part of another.
5) Liability for breach of contract – When a party fails or refuses to comply with his obligation
under the contract as promised without legal reason or justification its called breach of contract.
A party cannot breach it with impunity since the law on contracts recognizes the principle that
actionable injury inheres in every contractual breach. Interest may, in the discretion of the court,
on equitable grounds, be allowed upon damages awarded for breach of contract.
6) Preservation of interest of promisee - A breach upon the contract confers upon the injured party
a valid cause for recovering that which may have been lost or suffered. The remedy serves to
preserve the interest of the promisee of having the benefit of his bargain, or in being reimbursed
for loss caused by reliance on the contract, or in having restored to him any benefit that he has
conferred on the other party.
 ARTICLE 1160
Obligations derived from quasi-contracts
shall be subject to the provisions of Chapter 1,
Title XVII, of this Book. (n)
ARTICLE 1160
Quasi-contracts or contract implied by law
◈ It is a juridical relation resulting from certain lawful, voluntary and unilateral acts by virtue.
◈ This is not the same as contract because there is no consent but it is same by fiction of law. The law considers
both parties as having entered into a contract even though they have not. This is to prevent injustice or the
unjust enrichment of a person at the expense of another.
Kinds of quasi-contracts
1) Negotiorum gestio arises when person voluntary takes charge the management of another person’s
abandoned business or property without the knowledge or consent of the latter.
2) Solutio indebiti is when something is received and there is no right to demand it and it was unduly delivered
through mistake.
a) No right to receive the thing delivered.
b) The thing was delivered through mistake.
3)Other examples of quasi-contract is provided in Article 2164 to Article 2175 of the Civil Code. Some cases
were classified as quasi-contracts are of infinite variety, and when for some reason recovery cannot be had on a
true contract but recovery may be allowed on the basis of a quasi-contract.
 ARTICLE 1161
Civil obligations arising from criminal
offenses shall be governed by the penal
laws,14 subject to the provisions of Article
2177,15 and of the pertinent provisions of
Chapter 2, Preliminary Title on Human
Relations,16 and of Title XVIII of this Book,
regulating damages.
ARTICLE 1161
Civil liability arising from crimes or delicts
1) The commission of an offense has a two effects; 1) on the public as it breaches the social order
and; 2) the crime cause the victim sufferings or injury. Both are addressed and will imposed
heavier punishment.
2) The commission of a crime causes not only moral evil but also material damage. From this
principle, the rule has been established that “every person criminally liable for a felony is also
civilly liable”. There is no civil liability to be enforced in crimes that cause no material damage
like contempt, insults to person in authority, gambling, violations of traffic regulations, etc.
However, a person that is not criminally responsible may still be liable civilly.

The civil liability arising out of the commission of crime includes:

(1) restitution
(2) reparation of damage caused
(3) indemnification of consequential damages
 ARTICLE 1162
Obligations derived from quasi-delicts shall
be governed by the provisions of Chapter 2,
Title XVII of this Book, and by special laws.
ARTICLE 1162
Quasi-delicts means
◈ When a person causes damage to another in his person, property, or rights he needs to pay for all the
damages done even if it is because of his negligence or fault and no contractual relation between the
parties.

A person can be held liable for quasi-delicts if the following requisites are present:
1) There must be an act or omission by the defendant;
2) There must be fault or negligence of the defendant;
3) There must be damage caused to the plaintiff;
4) There must be a direct relation or connection of cause and effect between the act or omission and
the damage; and
5) There is no pre-existing contractual relation between the parties.
ARTICLE 1162
Crime or Delict Quasi-delict
 there is criminal or malicious intent or criminal
 there is only negligence
negligence
 affects public interest  concerns private interest
 there are generally two liabilities: criminal and
 there is only civil liability
civil
 the purpose is punishment  indemnification of the offended party
 can not be compromised or settled by the parties
 can be compromised as any other civil liability
themselves
 the guilt of the accused must be proved beyond  the fault or negligence of the defendant need
reasonable doubt only be proved by preponderance of evidence
 liability of the person responsible for the author
 liability of the person responsible for the author
of the negligent act or omission it is direct and
of the negligent act or omission is subsidiary
primary
 ARTICLE 1163
Every person obliged to give something is also
obliged to take care of it with the proper
diligence of a good father of a family, unless
the law or the stipulation of the parties
requires another standard of care.
ARTICLE 1163
Article 1163 means that a person who has obligation to give a thing is also obligated to take care of this thing
with proper diligence like a good father of a family. However, it depends on the law or the stipulation of both
parties if they will require another standard of care.
Specific or Determinate Thing Generic or Indeterminate Thing
A thing is said to be specific or determinate particularly A thing is generic or indeterminate when it refers only to
designated or physically segregated others of the same a class or genus to which I pertains and cannot be
class. pointed out with particularity.
A determinate thing is identified by its individuality. The
A generic thing is identified only by its specie. The
debtor cannot substitute it with another although the
debtor can give anything of the same class as long as it is
latter is of the same kind and quality without the consent
of the same kind.
of the creditor.

Duties of debtor in obligation to give a determinate thing. Obligation to take care of the thing due.
(1) To preserve or take care of the thing due; (1) Diligence of a good father of a family.
(2) To deliver the fruits of the thing; (2) Another standard of care.
(3) To deliver its accessions and accessories; (3) Factors to be considered.
(4) To deliver the thing itself (4) Reason for debtor’s obligation.
ARTICLE 1163
Duties of debtor in obligation to deliver a generic thing.
(1) To deliver a thing which is of the quality intended by the parties taking into consideration the purpose of the
obligation and other circumstances; and
(2) To be liable for damages in case of fraud, negligence, or delay, in the performance of his obligation, or
contravention of the tenor thereof.
 ARTICLE 1164
The creditor has a right to the fruits of the
thing from the time the obligation to deliver it
arises. However, he shall acquire no real right
over it until the same has been delivered to
him.
ARTICLE 1164
Article 1164 rule is that the creditor has the right to the fruits of a thing from the time the obligation to deliver the thing itself
arises though ownership or real right will just start when the thing is delivered to him.
Different kinds of fruits.
1) Natural fruits - spontaneous products of the soil, and the young and other products of animals.
Examples: Grass; all trees and plants on lands produced without the intervention of human labor.
2) Industrial fruits - produced by lands of any kind through cultivation or labor.
Examples: Sugar cane; vegetables; rice; and all products of lands brought about by reason of human labor.
3) Civil fruits - derived by virtue of a juridical relation.
Examples: Rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or
other similar income.

Personal Right Real Right

The right or power of a person (creditor) to demand from The right or interest of a person over a specific thing like
another (debtor), as a definite passive subject, the fulfillment ownership, possession, mortgage without a definite passive
of the latter’s obligation to give, to do, or not to do. subject against whom the right may be personally enforced.
Has only a definite active subject without any definite
Has definite active subject and a definite passive subject
passive subject
binding or enforceable only against a particular person directed against the whole world
 ARTICLE 1165
When what is to be delivered is a determinate thing, the creditor, in
addition to the right granted him by Article 1170, may compel the
debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to
two or more persons who do not have the same interest, he shall be
responsible for any fortuitous event until he has effected the
delivery.
ARTICLE 1165
Remedies of creditor in real obligation.
1. In a specific real obligation (obligation to deliver a determinate thing), when a debtor fails to comply on his
obligations, a creditor may use the remedies or rights.
a) Demand a specific performance or fulfillment (if it is still possible) of the obligation with a right to
indemnity for damages
b) Demand a rescission or cancellation (in certain cases) of the obligation also with a right to recover
damages
c) Demand the payment of damages only where it is the only feasible remedy.
2. In a generic real obligation (obligation to deliver a generic thing), this can be performed by a third person
since the object is expressed only according to its family or genus. It is thus not necessary for the creditor to
compel the debtor to make the delivery although he may ask for performance of the obligation. In any case,
the creditor has a right to recover damages under Article 1170 in case of breach of the obligation.
Where debtor delays or has promised delivery to separate creditors.
In Paragraph 3, it gives two instances when a fortuitous event does not exempt the debtor from
responsibility. It likewise refers to a determinate thing. An indeterminate thing cannot be the object of
destruction by a fortuitous event because genus nunquam perit (genus never perishes).
 ARTICLE 1166
The obligation to give a determinate thing
includes that of delivering all its accessions
and accessories, even though they may not
have been mentioned.
ARTICLE 1166
Article 1166 is about when your obligation is giving a specific or determinate thing, you will need to deliver
all this thing its accessions and accessories even if it is not been mentioned.

Article 1166 rule is that all accessions and accessories are considered or automatically included in the
obligation to deliver a determinate thing even though it has not been mentioned.

In order accessions and accessories will be excluded, there must be a stipulation to that effect.

Accessions Accessories
things joined to, or included with, the principal thing
fruits of, or additions to, or improvements upon, a
for the latter’s embellishment, better use, or
thing (the principal)
completion
Examples: Key of a house; frame of a picture;
Examples: House or trees on a land; rents of a
bracelet of a watch; machinery in a factory; bow of a
building; air conditioner in a car; profits or dividends
violin.
accruing from shares of stocks; etc.
 ARTICLE 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 contravention of the tenor of the
obligation. Furthermore, it may be decreed
that what has been poorly done be undone.
ARTICLE 1167
Article 1167 is about a person (debtor) who has an obligation to do , to perform an act or render service but
failed to do what should be done , it lacked or not the way the creditor wants is considered as undone. The
creditor may asked another person to perform the act but the debtor will be the one to pay for the expenses even
if it is for the benefit of the creditor.
Situations contemplated in Article 1167.
1) The debtor fails to perform an obligation to do
2) The debtor performs an obligation to do but contrary to the terms
3) The debtor performs an obligation to do but in a poor manner

Remedies of creditor in positive personal obligation.

4) If the debtor fails to comply with his obligation to do, the creditor has the right:

a) to have the obligation performed by himself, or by another unless personal considerations are involved,
at the debtor’s expense

b) to recover damages
2) In case the obligation is done in contravention of the terms of the same or is poorly done, it may be ordered
(by the court) that it be undone if it is still possible to undo what was done.
 ARTICLE 1168
When the obligation consists in not doing, and
the obligor does what has been forbidden him,
it shall also be undone at his expense.
ARTICLE 1168
Article 1168 is the contrary of Article 1167. This article is about obligation to not do. In this
article, when a person obligation is exceeded or did something that it is forbidden him to do, it
can be undone by the obligee but at the expense of the obligor.
Remedies of creditor in negative personal obligation.
As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages.
However, if it is not possible to undo what was done, either physically or legally, or because
of the rights acquired by third persons who acted in good faith, or for some other reason, his
remedy is an action for paying the damages caused by the debtor’s violation of his obligation.
 ARTICLE 1169
Those obliged to deliver or to do something in- cur in delay from the
time the obligee judicially or extra-judicially demands from them
the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order
that delay may exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
 ARTICLE 1169
delivered or the service is to be rendered was a controlling motive
for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the momentone of the parties
fulfills his obligation, delay by the other begins.
ARTICLE 1169
Delay
In the law, is not to be understood according to its meaning in common parlance. A distinction, therefore,
should be made between ordinary delay and legal delay (default or mora) in the performance of an obligation.
1) Ordinary delay - failure to perform an obligation on time.
2) Legal delay or default or mora - failure to perform an obligation on time which failure, constitutes a
breach of the obligation.

Kinds of delay (mora)

3) Mora solvendi or the delay on the part of the debtor to fulfill his obligation (to give or to do) by reason
of a cause imputable to him;
4) Mora accipiendi or the delay on the part of the creditor without justifiable reason to accept the
performance of the obligation; and
5) Compensatio morae or the delay of the obligors in reciprocal obligations (like in sale), i.e., the delay of
the obligor cancels the delay of the obligee, and vice versa.
No delay in negative personal obligation.
In an obligation not to do, non-fulfillment may take place but delay is impossible for the debtor fulfills by
not doing what has been forbidden him.
ARTICLE 1169
Requisites of delay or default by the debtor
1) failure of the debtor to perform his (positive) obligation on the date agreed upon;
2) demand (not mere reminder or notice) made by the creditor upon the debtor to fulfill, perform, or comply
with his obligation which demand, may be either judicial (when a complaint is fi led in court) or extra-
judicial (when made outside of court, orally or in writing); and
(3) failure of the debtor to comply with such demand
Effects of delay.
(1) Mora solvendi - the effects:
a) The debtor is guilty of breach of the obligation;
b) He is liable for interest in case of obligations to pay money or damages in other obligations. In the
absence of extrajudicial demand, the interest shall commence from the filing of the complaint; and
c) He is liable even for a fortuitous event when the obligation is to deliver a determinate thing. However, if
the debtor can prove that the loss would have resulted just the same even if he had not been in default,
the court may equitably mitigate the damages.
ARTICLE 1169
(2) Mora accipiendi - The effects are as follows:
a) The creditor is guilty of breach of obligation;
b) He is liable for damages suffered, if any, by the debtor;
c) He bears the risk of loss of the thing due;
d) Where the obligation is to pay money, the debtor is not liable for interest from the time of the creditor’s
delay; and
e) The debtor may release himself from the obligation by the consignation of the thing or sum due.
(3) Compensatio morae - The delay of the obligor cancels out the effects of the delay of the obligee and vice
versa. The net result is that there is no actionable default on the part of both parties, such that as if neither one is
guilty of delay.
 ARTICLE 1170
Those who in the performance of their
obligations are guilty of fraud, negligence, or
delay, and those who in any manner
contravene the tenor thereof, are liable for
damages.
ARTICLE 1170
Article 1170 is about a person who’s liable for the damages caused if a person obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor.

Grounds for liability

There are four (4) grounds for liability which may entitle the injured party to damages for all kinds of obligations
regardless of their source, mentioned in Article 1157, whether the obligations are real or personal. (supra.) It contemplates
that the obligation was eventually performed but the obligor is guilty of breach thereof. Here, the breach of the obligation
is voluntary.
1) Fraud (deceit or dolo) - it is the deliberate or intentional evasion of the normal fulfillment of an obligation.
(a) It implies some kind of malice or dishonesty and it cannot cover cases of mistake and errors of judgment made in
good faith. It is synonymous to bad faith in that it involves a design to mislead or deceive another. Moral damages
may be recovered in addition to other damages.
(b) Incidental fraud (dolo incidente) committed in the performance of an obligation already existing because of
contract. It is to be differentiated from causal fraud (dolo causante) or fraud employed in the execution of a
contract, which vitiates consent.
(c) Fraud is employed for the purpose of evading the normal fulfillment of an obligation and its existence merely
results in breach thereof giving rise to a right by the innocent party to recover damages. The Civil Code refers to
civil fraud. Criminal fraud gives rise to criminal liability.
ARTICLE 1170
2) Negligence (fault or culpa) - It is any voluntary act or omission, there being no malice, which prevents the
normal fulfillment of an obligation.
3) Delay (mora) - This has already been discussed under Article 1169 which determines the commencement of
delay.
4) Contravention of the terms of the obligation - This is the violation of the terms and conditions stipulated in the
obligation. The contravention must not be due to a fortuitous event or force majeure.

Fraud Negligence
deliberate intention to cause damage or
no such intention
injury
waiver may, in a certain sense, be allowed in
Waiver of the liability for future fraud is void
negligence
must be clearly proved, mere preponderance of negligence is presumed from the breach of
evidence not being sufficient a contractual obligation
liability may be reduced according to the
liability cannot be mitigated by the courts
circumstances.
 ARTICLE 1171
Responsibility arising from fraud is
demandable in all obligations. Any waiver of
an action for future fraud is void.
ARTICLE 1171
Article 1171 refers the fraud on the fulfillment of an obligation rather than the fraud which is the origin of
the obligation. Committing fraud is demandable in all obligations.

Responsibility arising from fraud demandable

Article 1171 is about incidental fraud which is employed in the fulfillment of an obligation.
Responsibility arising from fraud can be demanded with respect to all kinds of obligation. The court is not
given the power to mitigate or reduce the damages to be awarded. Fraud is a serious matter and evil that its
employment to avoid the fulfillment of one’s obligation should be discouraged.

“Fraud can be past or future. “ – time of commission

A waiver of an action for future fraud is void (no effect, as if there is no waiver) since it is against the law
and public policy.
A past fraud can be the subject of a valid waiver because the waiver can be considered as an act of
generosity and magnanimity on the part of the party who is the victim of the fraud.