Obligation and

Contracts
Atty. Larry D. Bugaring. LPT
 CHAPTER I – GENERAL PROVISIONS
TITLE I – OBLIGATIONS
Meaning of obligation "obligatio"—tying
or binding
(3) Article 1156 gives the Civil Code
(1) It is a tie of law or a juridical bond by virtue of definition of obligation, in its passive
which one is bound in favor of another to render aspect. Our law merely stresses the
something —and this may consist in giving a thing, duty of the debtor or obligor (he who
doing a certain act, or not doing a certain act has the duty of giving, doing, or not
doing) when it speaks of obligation as
a juridical necessity.
(2) "A legal relation established between one party Obligation is a juridical necessity
and another, whereby the latter is bound to the because in case of non- compliance, the
fulfillment of a prestation which the former may courts of justice may be called upon to
demand of him." (8 Manresa 13.) enforce its fulfillment or, in default
thereof, the economic value that it
represents. If an obligation cannot
be enforced, it may be only a
natural obligation.
CHAPTER I – GENERAL PROVISIONS
TITLE I – OBLIGATIONS
Article 1156
An obligation is a juridical necessity to give, to do, or not to do.

JURIDICAL NECESSITY – juridical tie; connotes that in case of

noncompliance, there will be legal sanctions.

• An obligation is nothing more than the duty of a person (obligor)

to satisfy a specific demandable claim of another person (obligee)
which, if breached, is enforceable in court.

• A contract necessarily gives rise to an obligation, but an obligation

does not always need to have a contract.
 CHAPTER I – GENERAL PROVISIONS
TITLE I – OBLIGATIONS
KINDS OF OBLIGATION
From the viewpoint of “sanction”

a. CIVIL OBLIGATION – that defined in Article 1156; an obligation, if not fulfilled when it
becomes due and demandable, may be enforced in court through action; based on law;
the sanction is judicial due process

b. NATURAL OBLIGATION – a special kind of obligation which cannot be enforced in court,

but which authorizes the retention of the voluntary payment or performance made by the
debtor; based on equity and natural law.

(i.e. when there is prescription of duty to pay, still, the obligor paid his dues to the obligee –
the obligor cannot recover his payment even there is prescription) the sanction is the law,
but only conscience had originally motivated the payment.
 Juan executed a promissory note in favor of
Maria for P 50, 000 due on April 15, 2013.

Court Action
( Article 1144 (3), Civil Code of the
If Juan does not pay on Philippines. Upon a written
due date contract; actions must be brought
withing 10 years from the time the
right of action accrues. )

If Juan pay Maria

CHAPTER I – GENERAL PROVISIONS
TITLE I – OBLIGATIONS
ESSENTIAL REQUISITE OF AN
OBLIGATION

1.ACTIVE SUBJECT – (Creditor / Obligee) the person who is

demanding the performance of the obligation;
2.PASSIVE SUBJECT – (Debtor / Obligor) the one bound to
perform the prestation or to fulfill the obligation or duty;
3.PRESTATION – (to give, to do, or not to do) object;
subject matter of the obligation; conduct required to be
observed by the debtor;
4.EFFICIENT CAUSE – the JURIDICAL TIE which binds the
parties to the obligation; source of the obligation.
 Essential Requisite of an

1. Passive Subject

(Debtor/Obligor) 3. Object or Prestation

(subject matter of
the
obligation)

4. Juridical of Legal Tie

(Efficient Cause)
2. Active Subject

(Creditor/Obligee)
Under a building contract , X bound himself to build
a house for Y for P1,000,000.00

1. Passive Subject Passive

Subject
(Debtor/Obligor) X
2. Active Subject Active Subject
Y
(Creditor/Obligee)
3. Object or Prestation Object or Prestation
(subject matter of Building of House
the
obligation)
4. Juridical or Legal Tie Juridical or Legal Tie
(Efficient Cause) Contract or
agreement
 CHAPTER I – GENERAL PROVISIONS
TITLE I – OBLIGATIONS
KINDS OF OBLIGATION
From the viewpoint of subject matter –

(a) REAL OBLIGATION – the obligation to give

S (seller) binds himself to deliver a piano to B (buyer).

(b) PERSONAL OBLIGATION – the obligation to do or not to do.

1. Positive Personal Obligation (Obligation to do or to render service)

X binds himself to repair the Piano of Y.

2. Negative Personal Obligation (Obligation not to do, which it includes not to give)

X obliges himself not to build a fence on a certain portion of his lot in favor of Y who
is entitled to a right of way over the said lot.
CHAPTER I – GENERAL PROVISIONS
TITLE I – OBLIGATIONS
Article 1157 Obligation arises from –

(1) law;
(2) contracts;
(3) quasi-contracts;
(4) acts or omissions punished by law;
(5) quasi-delicts.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
(1) LAW (Obligation ex lege) – imposed by (3) QUASI-CONTRACTS (Obligation ex
law itself; must be expressly or impliedly set quasi-contractu) – arise from lawful,
forth and cannot be presumed - [See Article voluntary and unilateral acts and which are
1158] enforceable to the end that no one shall be
unjustly enriched or benefited at the
expense of another
(2) CONTRACTS (Obligation ex contractu)
- 2 kinds:
– arise from stipulations of the parties:
a. Negotiorum gestio - unauthorized
meeting of the minds / formal agreement
management; This takes place when a
person voluntarily takes charge of
- must be complied with in good faith
another’s abandoned business or property
because it is the “law” between parties;
without the owner’s authority
neither party may unilaterally evade his
obligation in the contract, unless:
b. Solutio indebiti - undue payment; This
takes place when something is received
a) contract authorizes it
when there is no right to demand it, and it
b) other party assents- [See Article
was unduly delivered thru mistake- [See
1159]
Article 1160]
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
(4) DELICTS (Obligation ex maleficio or (5) QUASI-DELICTS / TORTS (Obligation ex
ex delicto) – arise from civil liability which is quasi-delicto or ex quasi-maleficio) – arise
the consequence of a criminal offense from damage caused to another through an
- Governing rules: act or omission, there being no fault or
1. Pertinent provisions of the RPC and other negligence, but no contractual relation exists
penal laws subject to Art 2177 Civil Code between the parties - [See Article 1162]

[Art 100, RPC – Every person criminally liable

for a felony is also civilly liable]

2. Chapter 2, Preliminary title, on Human

Relations ( Civil Code )

3. Title 18 of Book IV of the Civil Code – on

damages - [See Article 1161]
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS

Article 1158.
Obligations from law are not presumed. Only those (1)
expressly determined in this code or (2) 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 this
code.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
Article 1158 refers to legal
Unless such obligations are EXPRESSLY obligations or obligations arising
provided by law, they are not demandable from law. They are not presumed
and enforceable, and cannot be presumed to because they are considered a burden
exist. upon the obligor. They are the
exception, not the rule. To be
demandable, they must be clearly set
The Civil Code can be applicable suppletory to forth in the law,
obligations arising from laws other than the
Civil Code itself. i.e.,the Civil Code or special laws. Thus:

Special laws – refer to all other laws not An employer has no obligation to furnish
contained in the Civil Code. 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
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
Unless such obligations are EXPRESSLY
provided by law, they are not demandable
A private school has no legal obligation
and enforceable, and cannot be presumed to to provide clothing allowance to its
exist. teachers because there is no law which
imposes this obligation upon schools.
The Civil Code can be applicable suppletory to But a person who wins money in
obligations arising from laws other than the gambling has the duty to return his
Civil Code itself. winnings to the loser. This
obligation is provided by law. (Art.
Special laws – refer to all other laws not 2014.)
contained in the Civil Code.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
Special laws refer to all other laws not
Unless such obligations are EXPRESSLY contained in the Civil Code.
provided by law, they are not demandable
and enforceable, and cannot be presumed to Example of such laws
exist. 1. Corporation Code;
2. Negotiable Instruments:
The Civil Code can be applicable suppletory to 3. Insurance Code;
4. National Internal Revenue Code;
obligations arising from laws other than the
5. Revised Penal Code;
Civil Code itself. 6. Labor Code;
7. Family Code: etc.
Special laws – refer to all other laws not
contained in the Civil Code.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS

Article 1159.
Obligations arising from contracts have the
force of law between the contracting
parties and should be
complied with in good faith.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
CONTRACT – meeting of minds between OBLIGATIONS ARISING FROM CONTRACTS –
two persons whereby one binds himself, primarily governed by the stipulations, clauses,
with respect to the other, to give, to do terms and conditions of their agreements.
something or to render some service; • If a contract’s prestation is unconscionable
governed primarily by the agreement of (unfair) or unreasonable, even if it does not
the contracting parties. violate morals, law, etc., it may not be
enforced totally.
VALID CONTRACT – it should not be • Interpretation of contract involves a question
against the law, contrary to morals, good of law.
customs, public order, and public policy.
COMPLIANCE IN GOOD FAITH – compliance or
In the eyes of law, a void contract does performance in accordance with the stipulations
not exist, and no obligation will arise or terms of the contract or agreement.
from it.
FALSIFICATION OF A VALID CONTRACT – only the
unauthorized insertions will be disregarded; the
original terms and stipulations should be
considered valid and subsisting for the partied to
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS

Article 1160.
Obligations derived from quasi-contracts shall be
subject to the provisions of chapter 1, title 17 of
this book.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
QUASI-CONTRACT – juridical relation resulting from lawful, voluntary and unilateral acts by virtue of
which, both parties become bound to each other, to the end that no one will be unjustly enriched or
benefited at the expense of the other.

There is no consent - consent is PRESUMED.

1) NEGOTIORUM GESTIO – juridical relation which takes place when somebody
voluntarily manages the property affairs of another without the knowledge or
consent of the latter; owner shall reimburse the gestor for necessary and
useful expenses incurred by the latter for the performance of his function as gestor.

X went to Baguio with his family without leaving somebody to look after his house in Manila.
While in Baguio, a big fire broke out near the house of X. Through the effort of Y, a neighbor,
the house of X was saved from being burned. Y, however, incurred expenses.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
QUASI-CONTRACT – juridical relation resulting from lawful, voluntary and unilateral acts by virtue of
which, both parties become bound to each other, to the end that no one will be unjustly enriched or
benefited at the expense of the other.

There is no consent - consent is PRESUMED.

2) SOLUTIO INDEBITI, is the juridical relation which arises whenever a person unduly
delivers a thing through mistake to another who has no right to demand it. In
this type of quasi-contract, once the delivery has been made, the person to whom the
delivery is unduly made shall have the obligation to return the property delivered or the
money paid.

D owes C P1,000.00.

If D paid T believing that T was authorized to received payment for C, the obligation to
return on the part of T arises.

If D paid C P2,000.00 by mistake, C must return the excess of P1,000.00 to D.

CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS

Article1161.
Civil obligations arising from criminal offenses shall
be governed by the penal laws, subject to the
provisions of Article 2177, and of the pertinent
provisions of Chapter 2, Preliminary in Human
Relations, and of Title 18 of this book, regulating
damages.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
CRIMINAL LIABILITY INCLUDES:
a. RESTITUTION – restoration of property
previously taken away; the thing itself shall be
restored, even though it be found in the
possession of a third person who has acquired it
by lawful means, saving to the latter his action
against the proper person who may be liable to
him. X stole the car of Y. If X is convicted,
the court will order X:
b. REPARATION OF THE DAMAGE CAUSED –
court determines the amount of damage: price
1. To return (to pay its value if it was
of a thing, sentimental value, etc. lost or destroyed
2. To pay for any damages such other
c. INDEMNIFICATION FOR CONSEQUENTIAL caused to the car; and
DAMAGES – includes damages suffered by the 3. To pay such other damage suffered
family of the injured party or by a third person by Y as a consequence of the crime.
by reason of the crime.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS

Article 1162.
Obligations derived from quasi-delicts shall be
governed by the provisions of chapter 2, title 17 of
this book, and by special laws.
CHAPTER I - GENERAL PROVISIONS
TITLE I – OBLIGATIONS
QUASI-DELICT (culpa aquiliana) – an act or
omission by a person which causes damage to
another giving rise to an obligation to pay for the
damage done, there being fault or negligence but
there is no pre-existing contractual relation
between parties. (Art. 2176)

REQUISITES:
1. omission
2. negligence
3. damage cause to the plaintiff
4. direct relation of omission, being the cause, and
the damage, being the effect
5. no pre-existing contractual relations between
parties

Fault or Negligence – consists in the omission of

that diligence which is required by the nature of
the obligation and corresponds with the
 Villaroel vs Estrada 71 Phil 140
(1940)
Facts:
On May 9, 1912, Alejandra F. Callao, mother of defendant
Juan F. Villaroel obtain a loan from Mariano and Severina Estrada,
parents of the plaintiff Bernardino Estrada in the amount of
P1,000 payable after 7 years. The original parties to the contract
died leaving the plaintiff and defendant as the sole heirs. On
August 9, 1930, Villaroel signed a document stating that he owed
P1,000 to Estrada, with an interest of 12 percent per year. This
pertains to the original debt of their parents. When the obligation
became due, Villaroel failed to pay, prompting Estrada to file an
action against him before CFI-Laguna. CFI Laguna ordered
Villaroel to pay P1, 000 with interest from August 30, 1930 until
full payment. Villaroel appealed to the Supreme Court.
 Villarroel vs Estrada 71 Phil 140
(1940)
Issue:

Whether or not the moral obligation constitutes a sufficient

cause or consideration to support an onerous contract?

Ruling:

As a general rule, if the debt has already prescribed, it can

no longer be recovered. However, in the case at bar, there was
a novation by the parties, whereby Villarroel agreed to assume
the fulfillment of the obligation. As a prescribed debt
constitutes a moral or natural obligation as such, it can be the
cause or consideration for a new obligation in novation.
 Villarroel vs Estrada 71 Phil 140
(1940)
Ruling:

Prescription must be set up as a defense by the debtor in

the complaint against him if he does not want to be bound
anymore under the obligation. Otherwise, the obligation shall
continue to subsist. The failure to put up prescription as a
defense is equivalent to waiver.

In the case at bar, there was already a novation when

Villarroel agreed to resume the obligation of his mother-in-law.
Hence, he can no longer put-up prescription as a defense.
Barredo v. Garcia, 73 Phil 607
(1942)
Facts:
A head-on collision took place on the road between Malabon and Navotas
between a taxi driven by Pedro Fontanilla and a caratella guided by Pedro
Dimapalis. As a result, the caratella overturned and caused injuries to one of its
passenger, Faustino Garcia, which eventually caused his death. A criminal action
was filed by the Defendants Severino and Timotea Garcia, parents of Faustino,
against Pedro Fontanilla, which was convicted and imprisoned thereafter but was
not sued for civil action.

Eventually, Defendants filed an action against Petitioner Fausto Barredo as

the sole proprietor of the taxicab and employer of Fontanilla. Petitioner raised the
defense that he cannot be sued for damages because his responsibility is merely
subsidiary to that of Fontanilla because the latter’s negligence was punishable by
Penal Code. If at all, Fontanilla was not sued for civil action and his property was
not exhausted.

The Court of First Instance ruled in favor of the Defendants, while the Court
of Appeals also ruled in their favor with modifications.
 Barredo v. Garcia, 73 Phil 607
(1942)
Issue:
Whether or not the Petitioner can be sued for damages under Article 1903

Ruling:

The Court ruled in favor of the Defendants.

There is a distinct and separate individuality between civil action

arising from criminal negligence under the Revised Penal Code and
responsibility for fault or negligence under Articles 1901 to 1910 of the Civil
Code. The same negligent act may produce either civil liability under Art.
365 of the Revised Penal Code or a separate responsibility under the Civil
Code. Nevertheless, it is concrete that the Petitioner is primarily responsible
for damages under Art. 1903 of the Civil Code.
 Barredo v. Garcia, 73 Phil 607
(1942)
Ruling:

If the Court allowed the Petitioner to be subsidiary responsible

in the present case, the Petitioner could simply guise himself from
damages caused by his employees due to the literal wording of the
law (not punishable by law). It would be tantamount to make it
cumbersome for the Defendants to sue Fontanilla for damages
before going after the Petitioner. Workmen and employees
should be carefully chosen and supervised in order to avoid injury
to the public. It is the masters or employers who principally reap
the profits resulting from the services of these servants and
employees. It is but right that they should guarantee the latter’s
careful conduct for the personnel and patrimonial safety of others.
Fisher v. Robb, 69 Phil 101 (1939)
Facts:

John C. Robb met A.O. Fisher in a business trip in Shanghai. The two became
acquainted through friends and exchanged knowledge regarding dog racing. Plaintiff
as manager of a dog racing course, became interested with the business of the
Philippine Greyhound Club, Inc., in Manila and later informed defendant of his
interest to subscribe and be a stockholder of said business.
He sent his first installment via Manila telegram. Later, said business was
later change to The Philippine Racing Club, and upon asking for the second
installment from plaintiff, he said he already did send the second installment. The
defendant endeavored to save the investment of those who had subscribed to the
Philippine Greyhound Club, Inc., by having the Philippine Racing Club acquire the
remaining assets of the Philippine Greyhound Club, Inc. Through exchange of letters,
the plaintiff-appellee wrote the defendant-appellant requiring him to return the entire
amount paid by him to the Philippine Greyhound Club, Inc., Upon receiving this letter,
the defendant-appellant answered the plaintiff-appellee for any loss which he might
have suffered in connection with the Philippine Greyhound Club, Inc., in the same
way that he could not expect anyone to reimburse him for his own losses which were
Fisher v. Robb, 69 Phil 101 (1939)
Issue:

Whether a moral obligation will sustain an express executory promise?

Held:

No. Defendant although was morally responsible because of the failure of the
enterprise, is not the consideration required by article 1261 of the Civil Code as an
essential element for the legal existence of an onerous contract which would bind the
promisor to comply with his promise. Judgment is reversed and the costs to the plaintiff.
Ruling: The first essential requisite, therefore, required by the cited article 1261 of the
Civil Code for the existence of a contract, does not exist. As to the third essential
requisite, namely, "A consideration for the obligation established," article 1274
of the same Code provides In onerous contracts the consideration as to each
of the parties is the delivery or performance or the promise of delivery or
performance of a thing or service by the other party; in remuneratory contracts
the consideration is the service or benefit for which the remuneration is given, and in
contracts of pure beneficence the consideration is the liberality of the benefactors. And
article 1275 of the same Code provides: ART. 1275. Contracts without consideration or
 Mendoza v. Arrieta, 91 SCRA 113
(1975)
Facts:
On October 22, 1969, at around 4pm, a 3-way vehicular accident
occurred along Mac-Arthur Highway Bulacan, involving a Mercedez Benz
owned and driven by petitioner, a private jeep owned and driven by
respondent Salazar and a gravel and sand truck owned by respondent
Timbol and driven by Montoya.
As a consequence, separate information's were filed against
Salazar and Montoya. At the trial, petitioner testified that Salazar
overtook the truck, swerved to the left and hit his car. He further
testified that before impact, Salazar jumped from the jeep not knowing
that Salazar was hit by the truck of Montoya. Montoya affirmed this. On
the other hand, Salazar tried to show that after overtaking the truck, he
flashed a signal showing his intention to turn left but was stopped at by
a policeman directing traffic at the intersection which he contends to be
the time he was hit by the truck causing his jeep to hit petitioner’s car.
Mendoza v. Arrieta, 91 SCRA 113
(1975)
Issues:

(1)Whether or not the damages ensued to the vehicle of

petitioner shall be the liability of the driver of the jeep
or of the truck.

(2) Whether or not the truck’s owner may be held liable

for damages caused by him employee.
 Mendoza v. Arrieta, 91 SCRA 113
(1975)
Held:

Thus, the trial Court absolved jeep-owner-driver Salazar of any liability, civil
and criminal, in view of its findings that the collision between Salazar's jeep and
petitioner's car was the result of the former having been bumped from behind by the
truck driven by Montoya. Neither was petitioner awarded damages as he was not a
complainant against truck-driver Montoya but only against jeep-owner-driver Salazar.
That petitioner's cause of action against Timbol in the civil case is based on
quasi-delict is evident from the recitals in the complaint to wit: that while petitioner
was driving his car along MacArthur Highway at Marilao, Bulacan, a jeep owned and
driven by Salazar suddenly swerved to his (petitioner's) lane and collided with his car
That the sudden swerving of Salazar's jeep was caused either by the negligence and
lack of skill of Freddie Montoya, Timbol's employee, who was then driving a gravel and
sand truck iii the same direction as Salazar's jeep; and that as a consequence of the
collision, petitioner's car suffered extensive damages. Clearly, therefore, the two
factors that a cause of action must consist of, namely: (1) plaintiff's primary right, i.e.,
that he is the owner of aMercedes Benz, and (2) defendant's delict or wrongful act or
omission which violated plaintiff's primary right, i.e., the negligence or lack of skill
either of jeep-owner Salazar or of Timbol's employee, Montoya, in driving the truck,
Mendoza v. Arrieta, 91 SCRA 113
(1975)
Consequently, petitioner's cause of action being based on quasi-
delict, respondent Judge committed reversible error when he dismissed
the civil suit against the truck-owner, as said case may proceed
independently of the criminal proceedings and regardless of the result of
the latter. In view of what has been proven and established during the trial,
accused Freddie Montoya would be held able for having bumped and hit
the rear portion of the jeep driven by the accused Rodolfo Salazar.
Considering that the collision between the jeep driven by Rodolfo Salazar
and the car owned and driven by Edgardo Mendoza was the result of the
hitting on the rear of the jeep by the truck driven by Freddie Montoya, this
Court behaves that accused Rodolfo Salazar cannot be held able for the
damages sustained by Edgardo Mendoza's car.
Cases to be read and Understand
1. Vermen Realty vs. Court of Appeals 224 SCRA 549
2. Crisostomo vs. Court of Appeals 409 SCRA 528
3. National Power Corporation vs. Court of Appeals 211 SCRA 162
4. Cetus Development Corp. vs. Court of Appeals 176 SCRA 72
5. Chavez vs. Gonzales 32 SCRA 547
6. Tanguilig vs. CA 266 SCRA 78
7. Republic vs. Luzon Stevedoring Co., 21 SCRA 279
8. Gaisano Cagayan Inc. vs. Insurance Co. of North American 490
SCRA 286
9. Security Bank vs. RTC of Makati 263 SCRA 453
10.DKC Holdings Corp. vs. CA 329 SCRA 666