Chapter 2 Nature and Effect of Obligations PDF

Preview

Summary

Chapter 2: NATURE AND EFFECT OF OBLIGATIONSART. 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. (1094a)Meaning of specific or de...

Description

LAW 20013: Law on Obligations and Contracts Chapter 2: NATURE AND EFFECT OF OBLIGATIONS

ART. 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. (1094a) Meaning of specific or determinate thing - refers to an obligation to give a specific or determinate thing - A thing is said to be specific or determinate when it is particularly designated or physically segregated from all others of the same class. (Art. 1459.) Examples: (1) The watch I am wearing. (2) The car sold by X. (3) My dog named “Terror.” Meaning of generic or indeterminate thing - A thing is generic or indeterminate when it refers only to a class or genus to which it pertains and cannot be pointed out with particularity. Examples: (1) a Bulova calendar watch. (2) a 2006 model Japanese car. (3) a police dog. Specific thing and generic thing distinguished - Determinate thing is identified by its individuality. The debtor cannot substitute it with another although the latter is of the same kind and quality without the consent of the creditor. (Art. 1244.) - Generic thing is identified only by its specie. The debtor can give anything of the same class as long as it is of the same kind. Duties of debtor in obligation to give a determinate thing They are: (1) To preserve or take care of the thing due; Obligation to take care of the thing due. a. Diligence of a good father of a family. The phrase has been equated with ordinary care or that diligence which an average (a reasonably prudent) person exercises over his own property. b. Another standard of care. However, if the law or the stipulation of the parties provides for another standard of care (slight or extraordinary diligence), said law or stipulation must prevail. (Art. 1163.) c. Factors to be considered. The diligence required depends upon the nature of the obligation and corresponds with the circumstances of the person, of the time, and of the place. (Art. 1173.) d. Reason for debtor’s obligation. The debtor must exercise diligence to insure that the thing to be delivered would subsist in the same condition as it was when the obligation was contracted. (2) To deliver the fruits of the thing (Art. 1164.); (3) To deliver its accessions and accessories (Art. 1166.); (4) To deliver the thing itself (Arts. 1163, 1233, 1244; as to kinds of delivery, Arts. 1497 to 1501.); Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts (5) To answer for damages in case of non-fulfillment or breach. (Art. 1170.) Duties of debtor in obligation to deliver a generic thing They are: (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 (Art. 1246.) (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. (Art. 1170.)

ART. 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. (1095) Different kinds of fruits The fruits mentioned by the law refer to natural, industrial, and civil fruits. (1) Natural fruits - are the spontaneous products of the soil, and the young and other products of animals e.g., grass; all trees and plants on lands produced without the intervention of human labor. (2) Industrial fruits - are those produced by lands of any kind through cultivation or labor e.g., sugar cane; vegetables; rice; and all products of lands brought about by reason of human labor. (3) Civil fruits - are those derived by virtue of a juridical relation e.g., rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or other similar income. Right of creditor to the fruits The creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make delivery of the thing arises. The intention of the law is to protect the interest of the obligee should the obligor commit delay, purposely or otherwise, in the fulfillment of his obligation. When obligation to deliver arises (1) Generally, the obligation to deliver the thing due and, consequently, the fruits thereof, if any, arises from the time of the “perfection of the contract”.  Perfection refers to the birth of the contract or to the meeting of the minds between the parties. (Arts. 1305, 1315, 1319.) (2) If the obligation is subject to a suspensive condition or period (Arts. 1179, 1189, 1193.), it arises upon fulfillment of the condition or arrival of the period. However, the parties may make a stipulation to the contrary as regards the right of the creditor to the fruits of the thing. (3) In a contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid. (4) In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of performance is determined by the specific provisions of law applicable.

Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts Meaning of personal right and real right Personal right - is the right or power of a person (creditor) to demand from another (debtor), as a definite passive subject, the fulfillment of the latter’s obligation to give, to do, or not to do. Real right - is the right or interest of a person over a specific thing (like ownership, possession, mortgage, lease record) without a definite passive subject against whom the right may be personally enforced. Personal right and real right distinguished Personal right There is a definite active subject and a definite passive subject Binding or enforceable only against a particular person

Real right There is only a definite active subject without any definite passive subject Directed against the whole world

Ownership acquired by delivery - Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts by tradition (Art. 712.) or delivery. - “he shall acquire no real right over it until the same has been delivered to him ”  the creditor does not become the owner until the specific thing has been delivered to him.

ART. 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. (1096) Remedies of creditor in real obligation Specific real obligation (obligation to deliver a determinate thing) - the creditor may exercise the following remedies or rights in case the debtor fails to comply with his obligation: (a) demand specific performance or fulfillment of the obligation with a right to indemnity for damages (b) demand rescission or cancellation of the obligation also with a right to recover damages (Art. 1170.) (c) demand the payment of damages only where it is the only feasible remedy. : In an obligation to deliver a determinate thing, the very thing itself must be delivered. Generic real obligation (obligation to deliver a generic thing) - can be performed by a third person since the object is expressed only according to its family or genus.

Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts -

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.

Where debtor delays or has promised delivery to separate creditors - Paragraph 3 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). (Arts. 1174, 1263.)

ART. 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. (1097a) Meaning of accessions and accessories Accessions - are the fruits of, or additions to, or improvements upon, a thing (the principal) e.g., house or trees on a land; rents of a building; airconditioner in a car; profits or dividends accruing from shares of stocks Accessories are things joined to, or included with, the principal thing for the latter’s embellishment, better use, or completion e.g., key of a house; frame of a picture; bracelet of a watch; machinery in a factory; bow of a violin. Accessions are not necessary to the principal thing, the accessory and the principal thing must go together but both accessions and accessories can exist only in relation to the principal. Right of creditor to accessions and accessories - The general rule is that all accessions and accessories are considered included in the obligation to deliver a determinate thing although they may not have been mentioned. - This rule is based on the principle of law that the accessory follows the principal.

ART. 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. (1098) Situations contemplated in Article 1167 - refers to an obligation to do, i.e., to perform an act or render a service. It contemplates three situations: (1) The debtor fails to perform an obligation to do (2) The debtor performs an obligation to do but contrary to the terms thereof (3) The debtor performs an obligation to do but in a poor manner

Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts Remedies of creditor in positive personal obligation (1) 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. (Art. 1170.) (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 b e undone if it is still possible to undo what was done. Performance by a third person - A personal obligation to do, like a real obligation to deliver a generic thing, can be performed by a third person. - While the debtor can be compelled to make the delivery of a specific thing (Art. 1165.), a specific performance cannot be ordered in a personal obligation to do because this may amount to involuntary servitude which, as a rule, is prohibited under our Constitution. (Art. III, Sec. 18[2] thereof.) - Where, however, the personal qualifications of the debtor are the determining motive for the obligation contracted (e.g., to sing in a night club), the performance of the same by another would be impossible or would result to be so different that the obligation could not be considered performed.

ART. 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. (1099a) Remedies of creditor in negative personal obligation - In an obligation not to do, the duty of the obligor is to abstain from an act. - Here, there is no specific performance. - The very obligation is fulfilled in not doing what is forbidden. Hence, in this kind of obligation the debtor cannot be guilty of delay. (Art. 1169.) - As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages. (Art. 1170.)

ART. 1169. Those obliged to deliver or to do something incur 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 (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 delivered or the service is to be rendered was a controlling motive for the establishment of the contract (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 moment one of the parties fulfills his obligation, delay by the other begins. (1100a)

Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts Meaning of delay Delay - as used in the law, is not to be understood according to its meaning in common parlance. (1) Ordinary delay - is merely the failure to perform an obligation on time. (2) Legal delay or default or mora - is the failure to perform an obligation on time which failure, constitutes a breach of the obligation. Kinds of delay (mora) (1) Mora solvendi - 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 (2) Mora accipiendi - the delay on the part of the creditor without justifiable reason to accept the performance of the obligation (3) Compensatio morae - 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. (Art. 1168.) Requisites of delay or default by the debtor Three conditions that must be present before mora solvendi can exist or its effects arise: (1) failure of the debtor to perform his (positive) obligation on the date agreed upon; (2) demand 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 filed in court) or extra-judicial (when made outside of court, orally or in writing) (3) failure of the debtor to comply with such demand Effects of delay (1) Mora solvendi. (a) The debtor is guilty of breach of the obligation (b) He is liable for interest in case of obligations to pay money (Art. 2209.) or damages in other obligations. (Art. 1170.) (c) He is liable even for a fortuitous event when the obligation is to deliver a determinate thing. (Arts. 1165, 1170.) In an obligation to deliver a generic thing, the debtor is not relieved from liability for loss due to a fortuitous event. (2) Mora accipiendi. (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 (Art. 1162.) (d) Where the obligation is to pay money, the debtor is not liable for interest from the time of the creditor’s delay (e) The debtor may release himself from the obligation by the consignation of the thing or sum due. (Art. 1256.)

Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts (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. When demand not necessary to put debtor in delay - The general rule is that delay begins only from the moment the creditor demands, judicially or extrajudicially, the fulfillment of the obligation. - The demand for performance marks the time when the obligor incurs mora or delay and is deemed to have violated his obligation. Exceptions: 1. When the obligation so provides. - The mere fixing of the period is not enough. - The arrival of the period merely makes the obligation demandable. - Before its arrival, the creditor cannot demand performance. 2. When the law so provides. 3. When time is of the essence. - In all the foregoing cases, the debtor is fully aware that the performance of the obligation after the designated time would no longer benefit the creditor. - When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of the contract. 4. When demand would be useless. 5. When there is performance by a party in reciprocal obligations. - In case of reciprocal obligations (Art. 1191.), the performance of one is conditioned upon the simultaneous fulfillment on the part of the other.

ART. 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. (1101) Grounds for liability. - It gives the four grounds for liability which may entitle the injured party to damages (Art. 2197.) for all kinds of obligations regardless of their source, mentioned in Article 1157, whether the obligations are real or personal. - It contemplates that the obligation was eventually performed but the obligor is guilty of breach thereof. (1) Fraud (deceit or dolo). - it is the deliberate or intentional evasion of the normal fulfillment of an obligation. - 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. Incidental fraud (dolo incidente) - Committed in the performance of an obligation already existing because of contract. Causal fraud (dolo causante) - fraud employed in the execution of a contract under Article 1338, which vitiates consent and makes the contract voidable Prepared by: Mark Laurence Zabala / BSA 1-4

LAW 20013: Law on Obligations and Contracts (2) Negligence (fault or culpa) - It is any voluntary act or omission, there being no malice, which prevents the normal fulfillment of an obligation. (Arts. 1173, 1174.) (3) Delay (mora) (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. (Art. 1174.) Fraud and negligence distinguished (1) In fraud, there is deliberate intention to cause damage or injury, while in negligence, there is no such intention (2) Waiver of the liability for future fraud is void (Art. 1171.), while such waiver may, in a certain sense, be allowed in negligence (3) Fraud must be clearly proved, mere preponderance of evidence not being sufficient, while negligence is presumed from the breach of a contractual obligation (4) Lastly, liability for fraud cannot be mitigated by the courts, while liability for negligence may be reduced according to the circumstances. (Art. 1173.)

ART. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. (1102a) Responsibility arising from fraud demandable - refers to incidental fraud which is employed in the fulfillment of an obligation. - arising from fraud can be demanded with respect to all kinds of obligation and unlike in the case of responsibility arising from negligence (Art. 1172.) Waiver of action for future fraud void - waiver of an action for future fraud is void (no effect, as if there is no waiver) as being against the law and public policy. (Art. 1409[1].) Waiver of action for past fraud valid. - 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.