OBLIGATION

S
part 2
FRAUD
 Is the deliberate or intentional evasion by debtor
of the normal compliance of his obligation. Under
Article 1170, this actually refers to the fraud
committed by debtor at the time of performance
of his obligation.
KINDS OF FRAUD
FRAUD IN OBTAINING FRAUD IN PERFORMANCE
CONSENT OF OBLIGATION
 A. CAUSAL FRAUD or Dolo Causante This is deliberate act of evading fulfillment
of an obligation in a normal manner. The
 This refers to fraud without which
consent would not have been given. It fraud here has no effect on the validity of
renders the contract VOIDABLE. the contract since it was employed after
perfection. The party employing it is liable
 B. INCIDENTAL FRAUD or DOLO for damages.
INCIDENTE
 This refers to fraud without which
consent would have still been given but
the person giving it would have agreed
on different terms. The contract is valid
but the party employing it shall be liable
for damages.
Example of Causal Fraud
B bought a ring from S who told him that the ring was embellished with diamond.
However S knew all along that the embellishment was not diamond but ordinary glass. B
here gave his consent because of fraud employed by S. hence the contract is VOIDABLE.

Example of Incidental Fraud

C hired D to teach in the school of C. D placed in his application that he had earned
units in MBA. However, D had actually dropped the subjects for the said units. If C
would have hired D even if D did not complete the said units but he would have given
lower salary to D. The fraud committed by D was only incidental but it would entitle C
to recover damages
Example of Fraud in the
performance of Obligation
B ordered 10 bags of powder soap from S who agreed to
deliver the same after 2 days. On due date, S delivered
110 bags of powder soap which he mixed with chalk.
This is fraud in the performance of an obligation which
entitles B to recover damages. The fraud however, does
not have any effect on the validity of contract.
Fraud According To Type of
Commission

Future Fraud Past Fraud

 Waiver of future fraud is  Waiver of past fraud may
VOID thus the debtor will be made since he
still be liable for damages commission of fraud can
if he commits fraud in the no longer be encouraged.
performance of his Such waiver is an act of
obligation despite any liberality on the part of
waiver made by his creditor.
creditor.
Negligence

 It is that omission of that diligence which is required by the nature of

the obligation and corresponds with the circumstances of the person,
of the time and of the place.
 It is the failure to observe, for thee protection of interest of another
person that degree of care, precaution and vigilance which the
circumstances justly demand whereby such other person suffers
injury.
 It is the omission to do something which a reasonable man guided by
those considerations which ordinarily regulate the conduct of human
affairs, would do or doing of something which a prudent and
reasonable man would not do.
KINDS OF NEGLIGENCE

 A. Culpa Contractual (Contractual Negligence)

 Negligence in the performance of a contract such as negligence
committed by driver of a bus when passenger is hurt during a trip
because there is breach of contract of carriage. Here, master servant
rule applies.

 B. Culpa Aquiliana (Civil Negligence or Tort or Quasi Delict or Culpa

Extra Contractual)
 Acts or omissions that cause damage to another, there being no
contractual relation between parties.
KINDS OF NEGLIGENCE

 C. Culpa Criminal (Criminal Negligence)

 This is negligence that results in the commission
of a crime.
 Defense of a good father of a family is not proper
because the employee’s guilt is automatically the
employer’s guilt if the former is insolvent.
Delay or Default or Mora

 Is the non-fulfillment of an obligation with respect to time.

KINDS:
1. Mora Solvendi- Delay on the part of debtor.
A. Ex Re- Delay in real obligations
B. Ex Persona- Delay in personal obligation
2. Mora Accipiendi- Delay on the part of creditor. This exists when
creditor refuses to accept the thing due without justifiable reason.
3. Compensatio Morae- Delay in reciprocal obligations, both parties are
in default. Here it is as if there is no delay.
When debtor incurs in delay in
obligations to give or to do: REQUISITES
 GENERAL RULE: The debtor incurs in delay from the time
the creditor demands fulfillment of obligation either
judicially or extra-judicially but the debtor fails to comply
with such demand (NO DEMAND NO DELAY AS A GENERAL
RULE)
REQUISITES OF DELAY

 That the obligation be demandable and already liquidated

 The debtor does not perform the obligation
 The creditor demands the performance either judicially or extra-
judicially.
 The debtor fails to comply with such demand.

 Example: D owes C 5,000. The obligation is due on May 15. If D does

not pay on May 15, he is not yet in delay. But if C makes a demand on
him to pay on that date or within a reasonable time thereafter and D
does not comply then D will be in delay.
Instances when DELAY exists even
without DEMAND:
 When the law so provides
 When the obligation expressly so declares
 When the time is of the essence of the contract
 When demand would be useless.
 In reciprocal obligations where the obligations arise out of the same
cause and must be fulfilled at the same time, from the moment one
of the parties fulfills his obligation, delay by other begins
notwithstanding absence of demand.
 Effects of Delay

 A. On part of debtor
 The debtor shall be liable for payment of damages.
 If the obligation consists in delivery of determinate thing he shall be
responsible for any fortuitous event until he has effected the delivery.

 B. On part of creditor.
 He shall bear the risk of loss and shoulder the expenses for the
preservation of the thing.
 The debtor may resort to consignation of the thing due
Fortuitous Event
 Are those events that could not be foreseen or which though
foreseen are inevitable. It is not enough that event should
not been foreseen or anticipated, but it must be one
impossible to foresee or avoid.
ELEMENTS:
 The cause must be independent of debtor’s will.
 There must be impossibility of foreseeing the event.
 The occurrence of the event must be of such character as to
render it impossible for the debtor to perform his obligation
in a normal manner.
 Debtor is free from any participation in the aggravation of the
injury to the creditor.
LIABILITY FOR FORTUITOUS EVENT

 General Rule: No person shall be liable for fortuitous events; his

obligation will be extinguished.
Exception:
A. When the law expressly provides for liability even in case of fortuitous
events.
B. When the debtor delays or has promised to deliver the same thing to
two or more persons who do not have the same interest.
C. When the parties have declared liability in case of fortuitous event.
D. When the nature of the obligation requires the assumption of risk.
Burden of proving loss due to
fortuitous event
 The burden of proving that the loss was due
to fortuitous event rests on him who cause
it. And in order for fortuitous event to
exempt one from liability, it is necessary
that he must have committed no negligence
or misconduct that may have occasioned
the loss.
 Presumptions on receipt of principal or of later
installment (these are disputable presumptions and
evidence may be introduced to the contrary by the
creditor (Art. 1176).
1. The receipt of the principal without reservation as to
interest, shall give rise to the presumption that the
interest has been paid.

2. The receipt of a later installment without reservation as

to prior installments shall give rise to the presumption
that the interests have been paid.
 The above presumptions are disputable; hence,
while uncontroverted they are satisfactory, they
may however be rebutted and overcome by the
creditor with a contrary evidence.
Remedies of creditor to enforce payment of
his claims against debtor (Art. 1177):

1. Pursue the property in the possession of debtor except those

exempt by law (Exact Fulfillment).

Attachment
 The creditor files a court action to exact fulfillment with the
prayer that the court set aside a property belonging to the
debtor.
 If the court decides in favor of the creditor and the debtor does
not pay, the property attached will be ordered sold and the
proceeds thereof be applied to the payment of the obligation.
2. Exercise all the rights and bring all the actions of debtor
except those personal to him (Accion Subrogatoria)

Example: A owes D. D owes C. If C files a court action

against D to collect, he may ask the court to order A not to
pay D, so that in the event that the court rules in favor of C,
A will be required to pay C.
In effect, C is exercising the right to collect from A, which
is a right that belongs to D.
3. Impugn the acts which debtor may have done to
defraud his creditors (Accion Pauliana)

 thisremedy must be of last resort. The creditor

must have taken successively the foregoing
measures before he can bring this action.
Example:

D owes C P50, 000.00. To defraud C, D sells his lot, his only

property to B who knows of the fraudulent intention of D. C
may ask the court to order the rescission of the sale made
by D. Once the sale is rescinded and the lot is returned to D,
C may ask the court to order its attachment and its sale at
public auction, and the proceeds of the sale applied in
payment of his claim.
Note: This remedy is not available if the third person (B in
this illustration) was not aware of the debtor’s fraudulent
intention, i.e. he was in good faith.
Rules on transmissibility of rights

General Rule: All rights acquired in virtue of an obligation

are transmissible. (Thus a creditor may assign his credit to a
third person or such right is transmitted to the heirs upon his
death.)
Exception:
1. If the law prohibits the transmission of the right.
Example: the rights of a general partner in a partnership are
not transmitted to his heirs upon his death as provided by
law.
2. If the parties agreed against transmission.

Thus, the right is not transmitted to an assignee or

to the heirs if there was a stipulation to that effect
between the parties.
3. If the right is by nature not transmissible.

Example: S was granted a scholarship grant by a

school after series of examination and interviews. S
however, dies with two years still remaining before
he finish his studies. The right of S to enjoy the
scholarship grant is not transmitted to his heirs
because it is strictly personal.
DIFFERENT KINDS OF
OBLIGATIONS
1. PURE OBLIGATION

 isone without a term or condition and is

demandable at once.
Example: I promise to give P5000. This is
immediately demandable since there is no
term that must expire or a condition that
must happen for the obligation to be
demandable.
2. Conditional Obligation

- is one whose demandability or

extinguishment depends upon the
happening of a condition.
Condition – an uncertain event
which wields an influence on legal
relationship.
Classification of Conditions:
Suspensive Condition – a condition the happening of
which will give rise to the obligation. This is also called
Condition Antecedent/Condition Precedent. Here the
demandability of the obligation is suspended until
happening of the condition.

Example: I will give you my car if you pass the CPA

Examination. The condition here is suspensive. You may
not demand the delivery of my car until you pass CPA
Examination.
Classification of Conditions

Resolutory Condition (Condition Subsequent)- a

condition the happening of which extinguishes
the obligation. The obligation is demandable at
once but it shall be extinguished upon happening
of the condition.
Example: I will let you use my car until you pass
the CPA board examination. The condition here
is resolutory. You may demand the delivery of
my car now but you must return it to me when
you pass the CPA Examination.
Classification of Conditions

Potestative- a condition that depends upon the will of one

of contracting parties.

A. Potestative on part of debtor:

1. If suspensive- obligation is VOID, even if the condition
is fulfilled, the obligation is not demandable. (Art. 1182)
Example: D is to give C 50,000 if D goes to Baguio.
Classification of Conditions

2. If resolutory- obligation is VALID.

Example: D is to allow the use of his car by C until D
returns from Baguio.
B. Potestative on part of creditor- obligation is valid
whether the condition is suspensive or resolutory.
Example: D is to give C P50, 000.00 if C goes to Baguio.
D is to allow the use of his car by C until C returns
from Baguio.
Classification of Conditions
Casual – a condition that depends upon chance or upon the
will of a third person.
Example: 1. D is to give C 50,000 if D wins the prize in lotto
he placed this morning;
2. D is to give C 50,000 if X (third person) goes to
Baguio.
Mixed – depends partly upon will of one of the parties and
upon chance or upon the will of a third person.
 Example: D is to give C 50,000 if C will marry X.
Classification of Conditions

Possible- one that is capable of fulfillment in its

nature and by law.
Impossible – one that is not capable of fulfillment
in its nature.
Example: If you can swim across the pacific ocean
within 1 day; or due to operation of law, such as
“if you kill x”; in this case, the obligation and the
condition are void.
Classification of Conditions

Positive- this is a condition that some event happen at a

determinate time. Here the obligation is extinguished as
soon as time expires or it has become indubitable that event
will not take place. (Art. 1184)
Example: D is to give C P50, 000.00, if C will marry X on or
before June 30, 2022. The obligation will be extinguished on
July 1, 2022, if C has not yet married X as of June 30, 2022.
If X dies on June 1, 2022 before C has married her, then the
obligation is extinguished on such date because there is no
more doubt that the marriage will not take place.
Classification of Conditions

Negative- a condition that some event will not happen at

determinate time. Here, the obligation becomes effective as
soon as the time indicated has elapsed or it has become
evident that the event will not occur. (Art. 1185)
Example: D is to give C P50, 000.00 if C will not marry X on or
before June 30, 2022. The obligation becomes effective on July
1, 2022 if C has not yet married X as of July 1, 2022.
If X dies on June 1, 2022 before C has married her, then the
obligation becomes effective on such date, because there is no
more doubt that the marriage will not take place.
Divisible- capable of partial performance.

Under Art. 1183, if the obligation is divisible, that part thereof which
is not affected by the impossible or unlawful condition shall be valid.

Example: D is to give C a car if C finishes his law course, and

Php1, 000, 000.00 if C tops the Bar Examination.
If C finishes his law course, he may demand the delivery of the car.
However, he may not demand the payment of Php1, 000, 000.00 if he
does not top the Bar.
D is to give C a car if C finishes his law course, and
Php1, 000, 000.00 if he can get a copy of test questions for
2022 Bar Examination in advance.
Even if both conditions are fulfilled, C can only ask for the
delivery of the car, because the second condition is
unlawful.
Indivisible- not capable of partial performance by its nature
or by law or agreement of parties.

Example: D is to give C Php1, 000, 000.00 if C finishes his

law course and if C tops the Bar Examination.

C must comply both conditions before he can ask for the

delivery of Php1, 000, 000.00.
Effect of Fulfillment of Suspensive
Condition:
 GR: The effect of the fulfillment of suspensive condition retroacts to the day of
the constitution of obligation.
 Exception: There shall be no retroactive effect with respect to fruits and
interests as follows:
 1. In reciprocal obligations, the fruits and interests shall be deemed to have
been mutually compensated. Each party shall keep the fruits and interests
received by him prior to the fulfillment of the condition.
 Example: On May 1, 2011 S agreed to sell his land to B and B agreed to pay the
price of 50,000 if X finishes his Accounting degree on March 15, 2015. X finished
his Accounting degree as stipulated. It was as if S was entitled to the price and B
to the land beginning on May 1, 2011. However S shall keep the fruits on the
land and B the interest on the price during pendency of the condition.
Effect of Fulfillment of Suspensive
Condition:
 2. In unilateral obligations, the debtor keeps the fruits and interests
received before the fulfillment of the condition.
 Example: On May 1, 2012, S promised to give B his land if B passed
the Bar Examination in February 2015. B passed the Bar Examination
as stipulated. It was as if B was entitled to the land beginning May 1,
2012. However S will keep the fruits on the land during the pendency
of condition.
Effect when debtor voluntarily
prevents fulfillment of the condition:
 The condition is deemed fulfilled if debtor voluntarily
prevents its fulfillment hence the obligation becomes
immediately demandable. Here there must be intent on
part of debtor to prevent compliance with the condition
and actually prevents its fulfillment.
Rules in case of loss, deterioration or
improvement of determinate thing before
fulfillment of suspensive condition.
 1. Loss of the thing
 A. Without Debtor’s Fault- Obligation is Extinguished
 B. With Debtor’s Fault- Debtor is obliged to pay damages

LOSS
- a this is considered lost when it perishes or goes out of commerce or
disappears in such a way that its existence is unknown or it cannot be
recovered.
Rules in case of loss, deterioration or
improvement of determinate thing before
fulfillment of suspensive condition.
 2. Deterioration of the thing
 A. Without debtor’s fault – the impairment shall be borne
by the creditor; no liability on part of debtor to pay
damages.
 B. With debtor’s fault – the creditor may choose between:
 1. Rescission + Damages
 2. Fulfillment + Damages
Rules in case of loss, deterioration or
improvement of determinate thing before
fulfillment of suspensive condition.
 3. Improvement of the thing
 A. By nature or by time- the improvement shall inure to
the benefit of creditor.
 B. At the expense of debtor – the debtor will have the
rights granted to a usufructuary, he can have the
enjoyment of the use of the improved thing and its fruits.
Rule in case of Fulfillment of
Resolutory Condition:
 1. Upon fulfillment of resolutory condition, the obligation
is extinguished.
 2. The parties shall return to each other what they have
received.
 3. In case of loss deterioration or improvement of the
thing the provisions in the above rule which pertain to the
debtor shall be applied to the party who is bound to
return.
3. RECIPROCAL OBLIGATION

 Is one that arises from the same cause and in which each
party is a debtor and a creditor of the other such that the
obligation of one is dependent upon the obligation of the
other.
 Are to be performed simultaneously so that performance
of one is conditioned upon the fulfillment of the other.
 Example: S sold his Toyota Car to B for 200,000. The
delivery of the car by S is dependent upon payment of the
price by B and vice versa.
Remedies of Injured Party

 1. Rescission with damages

 2. Fulfillment of obligation with damages

NOTE: The above remedies may be availed of by the injured

party in the alternative. He cannot ask for both. If he has
chosen rescission of the obligation, he can no longer ask for
fulfillment. However, he may also seek rescission even after
he has chosen fulfillment if the latter becomes impossible.
4. OBLIGATION WITH A PERIOD

 Is one whose demandability or extinguishment is subjected to the

expiration of the term which necessarily come. In other words, there
is a day certain when obligation will arise or cease.

PERIOD
 -Space of time which determines the effectivity or extinguishment of
an obligation. Thus a space of time between January 1, 2015 and
January 1, 2016 is a period the lapse of which will cause an obligation
to arise or cease.
 -a day certain is that which must necessarily come although it may
not be known when.
 Condition vs. Period

Condition Period
 May or may not happen  Must necessarily come
 Refer to the future or past event  Always refers to the future
unknown to the parties.  Merely fixes the time for the
 Causes an obligation to arise or to efficaciousness of an obligation
cease  A period that depends upon the
 A condition that depends upon the will of debtor authorizes the court
sole will of debtor shall annul the to fix its duration.
obligation.
Kinds of Period

 Ex Die – period with suspensive effect

 In Diem – period with resolutory effect
 Legal – fixed by law
 Voluntary – fixed by parties
 Judicial – fixed by court
When may court fix the period

 If the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended
 When the duration of the period depends upon the will of the debtor
Example:
1. When my means permit me to do so.
2. Little by little
3. As soon as I have the money
4. As soon as possible
5. In partial payment
Presumption as to who has the benefit
of the period
 Whenever a period is designated in an obligation, it shall be presumed
to have been established for the benefit of both the creditor and
debtor unless from the tenor of the obligation or other circumstances
it should appear that it has been established for the benefit of only
one of the parties.
 Therefore, the debtor cannot be compelled to perform and the
creditor cannot be compelled to accept performance before the term
expires.
Presumption as to who has the benefit
of the period
 Example: D borrowed P10,000 from C on January 1, 2015. The loan
bears interest 10% per annum with both principal and interest being
due on December 31, 2015. Before December 31, 2015, C cannot
compel D to pay and deprive him of the use of the money until the
said date. Neither may D compel C to accept payment before
December 31, 2015 and deprive C of the interest for the remaining
term.
Period for the benefit of one of the
parties
 For the benefit of debtor – He cannot be compelled to
perform his obligation before the expiration of the term
but he may choose to perform before such expiration at
his option.
 Example: D is obliged to pay C P10,000 on or before
December 31, 2015. D cannot be compelled to pay before
December 31, 2015. However he may pay at any time
before December 31, 2015 or on December 31, 2015 at his
option.
Period for the benefit of one of the
parties
 For the benefit of the creditor – He cannot be compelled
to accept performance before the expiration of the term,
but he may choose to demand performance before such
expiration at his option.
 Example: On November 1, 2015, D borrowed from C
P10,000 “collectible” on or before June 30, 2016. C may
demand payment on June 30, 2016 or at any time before
the said date. However D cannot compel him to accept
the payment at any time before June 30, 2016.
Instances when debtor loses his right to make use
of the period if it is for his benefit; the creditor
may demand immediate payment.
 When he becomes insolvent unless he gives a guaranty or security for the
debt.
 When he fails to furnish the guaranties or securities that he has promised.
 When he impairs the said guarantees or securities by his own acts or when
through a fortuitous event they disappear unless he gives new ones equally
satisfactory.
 When he violates any undertaking in consideration of which the creditor agree
to the period.
 When he attempts to abscond.
Kinds of Obligations according to the
number of prestations
 1. Simple- one where there is only one prestation.
 2. Compound- one when there are several prestations.
This may be:
 A. Conjunctive – Here, several prestations are due but ALL
must be performed.
 Example: D is to give C a specific ring, a specific watch
and a specific bracelet to C. D must deliver all items to C.
 B. Distributive or Disjunctive – may either be alternative
or facultative.
4. Alternative Obligation

 Is one where several prestations are due but the complete

performance of one of them is sufficient to extinguish the obligation.

 Example: D is obliged to give a specific ring, specific watch, or

specific bracelet to C. The delivery of ANY of the three articles will
extinguish the obligation.

 RIGHT TO CHOOSE: Belongs to the debtor unless it has been expressly

given to the creditor.
4. Alternative Obligation

 Limitations on Debtor’s right to choose:

 1. The debtor must completely perform the prestation
chosen. He cannot compel the creditor to receive part of
one and part of another undertaking.
 2. He cannot choose those prestations which are
impossible, unlawful or which could not have been the
object of the obligation.
When obligation ceases to be alternative and
becomes a simple obligation:

 When the debtor has communicated his choice to the creditor.

 When among the prestations whereby the debtor is alternatively bound, only
one is practicable.
 When the creditor has communicated his choice to the debtor if the creditor
has been expressly given the right of choice.
Rules in case of loss of things or impossibility
of services which are alternatively the object
of the obligation before the choice is
communicated :
 When the right of choice is with the debtor
 A. If only one or some are lost through fortuitous event or through
debtor’s fault, the debtor may deliver any of the remainder or that
which remains if only one subsists,
 B. If all are lost through fortuitous event, the obligation is
extinguished based on the rule that no person shall be responsible for
fortuitous event.
 C. If all are lost through debtor’s fault, the debtor shall pay the value
of the last thing that was lost plus damages.
Rules in case of loss of things or impossibility of
services which are alternatively the object of the
obligation before the choice is communicated :
 D. If all except one are lost through the debtor’s fault and
the remaining item is subsequently lost through a
fortuitous event then the debtor’s obligation is
extinguished.
 E. If all except one are lost through a fortuitous event,
and the remaining item is subsequently lost through the
debtor’s fault, the debtor shall pay damages.
When the right of choice is expressly
granted to the creditor
 A. If only one or some are lost through a fortuitous event, the debtor shall
deliver that which the creditor should choose among the remainder, or that
which remains if only one subsists.
 B. If all are lost through a fortuitous event, the obligation shall be
extinguished.
 C. If only one or some are lost through the debtor’s fault, the creditor may
claim any of those subsisting or the price of any those which were lost
through the debtor’s fault plus damages.
 D. If all are lost through the debtor’s fault the creditor may claim the price of
any of them plus damages.
5. Facultative Obligation

 Anobligation where only one prestation is due but

the debtor may render another in SUBSTITUTION.
 Example: D is obliged to give a specific ring to C
with the agreement that D may deliver a specific
watch as a SUBSTITUTE.
Rules in case of loss of principal thing
and substitute
 1. Before substitution
 A. Principal Thing
 1. If lost due to fortuitous event, the obligation is extinguished.
 2. If lost due to debtor‘s fault, debtor shall pay damages.
 B. Substitute
 - the loss of substitute whether through a fortuitous event or through the
debtor’s fault imposes no additional obligation on the debtor because it is not
due. The debtor has still to deliver the principal thing. However, the
obligation ceases to be a facultative obligation and becomes a simple
obligation to deliver the principal thing.
Rules in case of loss of principal thing
and substitute
 2. After Substitution
 A. Principal Thing – the loss of the principal thing whether through
fortuitous event or through debtor’s fault imposes no additional
obligation on the debtor because the thing due is already the
SUBSTITUTE. After the substitution has been communicated, the thing
due is the SUBSTITUTE. The obligation also ceases to be facultative
obligation and becomes a simple obligation.
 B. SUBSTITUTE
 1. If lost through a fortuitous event, the obligation is extinguished.
 2. If lost through the debtor’s fault, the debtor shall pay damages.
 ALTERNATIVE OBLIGATION VS.
FACULTATIVE OBLIGATION

ALTERNATIVE OBLIGATION FACULTATIVE OBLIGATION

 Several prestations are due but  Only one prestation, the principal
performance of one extinguishes the obligation is due
obligation.
 If the principal obligation is VOID,
 If there are void prestations the the debtor is not required to give
others may still be valid, hence the substitute.
obligation remains.
 The right of choice belongs to the
 Right of choice is with debtor unless
debtor only
given to creditor.
 If all prestations are impossible
 If the principal obligation is
except one that which is possible impossible the debtor is not
must still be given required to give substitute.