Law on Obligations and Contract (Soriano) Notes PDF

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Obligation – juridical necessity to give, to do or not do. (Art. 1156, Civil Code of the Philippines)

reimburse the gestor for necessary and useful expenses (Art. 2150).  Solutio indebiti – payment by mistake of an obligation which was not due when paid. It creates the obligation to return payment (Art. 2154).  Other quasi-contracts  When, without knowledge of the person obliged to give support, it is given by a stranger, the latter shall have the right to claim the same from the former, unless it appears that he gave it out of piety and without intention of being paid (Art. 2164).

Juridical necessity – the court may be asked to order the performance of an obligation if the debtor does not fulfill it.

Requisites of an obligation 1.

2. 3. 4.

Active subject (creditor/obligee) – party who has the right to demand performance of the obligation. Passive subject (debtor/obligor) – party who is obliged to perform the obligation. Prestation – the object/subject matter of the obligation. Efficient cause – the vinculum or the legal or the juridical tie which binds the parties to an obligation.

Civil obligation vs. natural obligation (page 2)  

Civil obligation (Art. 1156) based on positive law; hence enforceable by court action. Natural obligation – based on natural law, hence is not enforceable by court action. Obligation – in equity and moral justice.

4. 

Acts or omissions punishable by law (page 6) Crimes or felonies

5. 

Quasi-delicts (a.k.a tort or culpa aquiliana) Acts/omissions that cause damage to another, there being fault or negligence but without any pre-existing relation between two parties.

Nature and effects of obligations (page 7) 

Sources of obligation 1.

Law  A rule of conduct, just and obligatory, laid down by legitimate authority for common observance and benefit (Sanchez and Roman).  Obligations are not presumed.  Examples: National Internal Revenue Code – payment of taxes; Anti-Mendicancy Law – prohibits giving of alms to beggars. 

2.

3.

Contracts  A meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305).  Obligations have force of law between the contracting parties and should be complied with in good faith (Art. 1159).  Examples: Contract of lease; contract of sale

Quasi-contracts  A certain lawful, voluntary and unilateral act giving rise to a juridical relation to the end that no one shall be unjustly enriched at the expense of another (Art. 2142).  Examples:

Determinate thing or generic thing 1. Concept  A thing is determinate when it is a particularly designated or physically segregated from all others of the same class.  Otherwise, it is generic. 2. Importance of knowing whether a thing is determinate or generic  The loss of a determinate thing through a fortuitous event extinguishes the obligation. Obligations of one obliged to give a determinate thing 1. To take good care of the thing with the diligence of a good father of a family unless the law or agreement of the parties requires another standard of care (Art. 1163). Diligence of a good father – ordinary care that an average person exercises. 2.

To deliver the thing (Art. 1163) – placing the thing in the possession or control of the creditor either actually or constructively.

3.

To deliver the fruits of the thing (Art. 1164) Kinds of fruits 1) Natural fruits – spontaneous products of the soil and the young and other products of animals (Art. 442).

a.

 Negotiorum gestio – voluntary administration of the property, business or affairs of another without his ocnent or authority. It creates the obligation to

2) Industrial fruits – produced by land of any kind through cultivation or labor (Art. 442).

b.

c.

d.

3) Civil fruits – result of a juridical relation (Art. 442). When the creditor has a right to the fruits of a determinate thing – from the time the obligation to deliver it arises. When obligation to deliver the thing arises 1. If pure obligation (one whose performance is not subject to a suspensive period or condition) – the obligation to deliver arises from perfection. 2. If obligation is subject to a suspensive period or condition – obligation to deliver arises upon the arrival of the term or fulfillment of the condition. Rights of the creditor 1. Personal right (jus in personam/jus ad rem) – right that may be enforced by one person to another. 2. Real right (jus in re) – right/power over a specific thing (possession/ownership)

a. b.

Creditor may demand that what has been done be undone. Demand for damages (Art. 1168).

Ground of liability to pay damages (page 11) 1. 2. 3. 4.

Fraud Negligence Delay Contravention of the tenor of the obligation (Art. 1170)

Damages 

Harm done and the sum of money that may be recovered.

Injury – wrongful, unlawful or tortuous act. Legal wrong to be redressed.

Kinds of damages 4. To deliver it accessions and accessories even if they have not been mentioned (Art. 1166) (page 9) a. Accessions – everything produced by a thing or is incorporated or attached thereto, either naturally or artificially (Art 440).





b. Accessories – joined to or included with the principal thing for the latter’s better use, perfection or enjoyment  Remedies of the creditor 1.

2.

3.

If the debtor fails to perform his obligation to deliver a determinate thing a. To compel the debtor to make the delivery (Art. 1165) b. To demand damages from the debtor (Art. 1170) If the debtor fails to perform his obligation to deliver a generic thing a. To ask that obligation to be complied with at the expense of the debtor (Art. 1165) b. To demand damages from the debtor (Art. 1170) If the debtor fails to perform his obligation in obligations to do a. If the debtor fails to perform the obligation or performs it but contravenes the tenor thereof1) Creditor may have the obligation executed at the expense of the debtor (Art. 1167) 2) He may also demand for damages from the debtor (Art. 1170) b. If the debtor performs the obligation but does it poorly 1) Creditor may have the same be undone at debtor’s expense (Art. 1167).







Actual/compensatory damages – pecuniary loss (loss in business or profession) that may be recovered. Includes the value of the loss suffered and profits not realized (Art. 2199). Moral damages – physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury (Art. 2217). Nominal damage – damages that vindicate a right (Art. 2221). Temperal/moderate damage – more than nominal but less than compensatory damages but may be recovered if the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty (Art. 2224). Liquidated damages – agreed upon by parties to a contract, to be paid in case of breach (Art. 2226). Exemplary/corrective damages – imposed by way of example or correction for public good, in addition to the moral, temperate, liquidated or compensatory damages (Art. 2229).

Proof of pecuniary loss a. b.

Actual damages – proof is required unless provided by law/stipulation (Art. 2199). Other damages – proof is not required in order that moral, nominal, temperate, or liquidated or exemplary damages may be adjudicated.

Fraud (page 13) 

Deliberate/intentional evasion by the debtor of

4.

2) Creditor may demand for damages from the debtor (Art. 1170). If the debtor does what has been forbidden him

the normal compliance of his obligation.

Kinds of fraud a.

According to meaning 1) Fraud in obtaining consent a. Casual fraud (dolo causante) – fraud without which consent would not have been given. (contract voidable) b. Incidental fraud (dolo incidente) – fraud without which consent would have still been given but the person giving it would have agreed on different terms. (contract valid but the party employing it shall be liable for damages). 2) Fraud in the performance of the obligation  Deliberate act of evading fulfillment of an obligation in a normal manner.





When debtor incurs in delay in obligation to give or to do, requisites General rule: The debtor incurs in delay from the time the creditor demands fulfillment of the obligation but the debtor fails to comply with such demand (no demand, no delay). Requisites: a. b.

b. According to time of commission 1) Future fraud – A waiver of an action for future fraud cannot be made. If there is an agreement for its waiver, the same is void (Art. 1171). Thus, the debtor will still be liable for damages if he commits fraud in the performance of its obligation despite the waiver. 2) Past fraud – A waiver of an action for past fraud may be made, since the commission of fraud can no longer be encouraged. Such waiver is an act of liberality on the part of the creditor.

c.

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 the place.

a. b. c. d. e.

a. b.

c.

Culpa contractual (contractual negligence) – negligence in the performance of a contract. Culpa aquilina (civil negligence/quasidelict/tort/culpa extra-contractual) – acts/omissions that cause damage to another, there being no contractual between the parties (Art. 2176). Culpa criminal (criminal negligence) – results in the commission of crime.

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 another begins notwithstanding the absence of demand..

Effects of delay 

Kinds of negligence

The debtor does not perform his obligation on the date it is due. The creditor demands the performance of the obligation. The debtor does not comply with the creditor’s demand.

Exceptions:

Negligence (page 14) 

Mora accipiendi – delay on the part of the creditor. (Creditor refuses to accept the thing due without justifiable reason. Compensatio morae – delay in reciprocal obligation.



The debtor shall be liable for the payment of damages (Art. 1170). If the obligation consists in the delivery of a determinate thing, he shall be responsible for any fortuitous event until he has affected the delivery (Art. 1165).

Fortuitous events (page 19) 

Events that could not be foreseen, or which, though foreseen, are inevitable (Art. 1174).

Delay/default/mora (page 17)

Elements of fortuitous events





Non-fulfillment of an obligation with respect to time.

 Kinds of delay 

Mora solvendi – delay on the part of the debtor. o

Ex re – delay in real obligations (obligations



The cause must be independent of the debtor’s will. There must be impossibility of foreseeing the event or of avoiding it even if it can be foreseen. 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.

o o

Ex re delay in real obligations (obligations to give). Ex persona – delay in personal obligations (obligations to do).

Liability for fortuitous events

General rule: No person shall be liable for fortuitous event. Exceptions:   

When the law expressly provides for liability even in the case of fortuitous event When the parties have declared liability in case of fortuitous event. When the nature of the obligation requires the assumption of risk

Burden of proving loss due to fortuitous event 

Rests on him who invokes it.

Presumptions on receipt of principal or of later installment 1.

2.

The receipt of the principal without reservation as to interest, shall give rise to the presumption that the interest has been paid. The receipt of a later installment without reservation as to prior installments, shall give rise to the presumption that such prior installments have been paid.

Remedies of the creditor to enforce payment of his claims against debtor (Art. 1177) 1. 2. 3.

Pursue the property in the possession of the debtor, except those exempt from law Exercise all the rights and bring all the actions of the debtor except those personal to him Impugn the acts which the debtor may have done to defraud his creditors

Rules in transmissibility of rights and exceptions thereto (Art. 1178) (page 21) General rule: All rights acquired in virtue of an obligation are transmissible

Exceptions:   

If the law prohibits the transmission of the right If the parties agreed against transmission If the right is by nature not transmissible’

agreed upon. demandable.

Different kinds of obligations 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Pure obligation Conditional obligation Obligation with a period Alternative obligation Facultative obligation Joint obligation Solidary obligation Divisible obligation Indivisible obligation Obligation with a penal clause

 Pure obligation  One without a term or condition and is demandable at once.  Demand obligation  One whose demandability or extinguishment depends upon the happening of a condition

Condition 

Uncertain event which wields an influence on a legal relationship.

Classifications a. Suspensive and resolutory 1.

2.

Suspensive (condition antecedent/condition precedent) – a condition the happening of which gives rise to the obligation. Resolutory (condition subsequent) – a condition the happening of which extinguishes the obligation.

b. Potestative, casual and mixed (Page 23) 1.

2. 3.

Protestative – a condition that depends upon the will of one of the parties. a. Potestative on the part of the debtor 1. If suspensive – the obligation is void. 2. If resolutory – the obligation is valid. b. potestative on the part of the creditor – the obligation is valid whether the condition is suspensive or resolutory. Casual – a condition that depends upon the chance or upon the will of a third person. Mixed – a condition that depends upon the will of one of the parties and partly upon chance or upon the will of a third person.

c. Possible and impossible 1. 2.

Possible – one that is capable of fulfillment in its nature and by law. Impossible – one that is not capable of fulfillment in its nature or due to operation of law.

Thus,

it

is

immediately

d. Positive and negative 1.

2.

Positive – condition that some event will happen at a determinate time. (obligation is extinguished as soon as the time expires or it has become indubitable that the event will not take place.) Negative – condition that some event will not happen at a determinate time. (obligation becomes effective as soon as the time indicated has elapsed or it has become evident that the event will not occur).

e. Divisible and indivisible (Page 25) 1. 2.

Divisible – capable of partial performance. Indivisible – not capable of partial performance by its nature or by law or agreement of the parties.

Effect of fulfillment of suspensive condition (Art. 1187) General rule: The effect of the fulfillment of the suspensive condition retroacts to the day of the constitution of the obligation. Exceptions: 1. In reciprocal obligations, the fruits and interests shall be deemed to have been mutually compensated 2. In unilateral obligations, the debtor keeps the fruits and interests received before the fulfillment of the condition.

Rights of the parties before the fulfillment of the condition (Art. 1188) 1. Creditor – bring appropriate actions for the preservation of his right, such as registering his claim with the Register of Deeds, if appropriate, to notify all third persons, or asking the debtor to provide a security if the debtor is about to become insolvent. 2. Debtor – recover what he has paid by mistake.

Effect when the debtor voluntarily prevents fulfillment of the condition (Page 27) 

Deemed fulfilled (Art. 1186). Hence, the obligation becomes immediately demandable.

Rules in case of loss, deterioration or improvement of determinate thing before the fulfillment of the suspensive condition (Art. 1189)

1. Loss of the thing Note: If the condition is not to do an impossible thing, it shall be deemed as not having been

A. Without debtor’s fault – extinguished...