Lecture in Obligations and CONTRACTS With Jurisprudence PDF

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OBLIGATIONS AND CONTRACTS Chapter 1 GENERAL PROVISIONS Art. 1156 • Definition of Obligation -a juridical necessity to give, to do or not to do. -a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct (the giving...

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OBLIGATIONS AND CONTRACTS Chapter 1 GENERAL PROVISIONS Art. 1156  Definition of Obligation -a juridical necessity to give, to do or not to do. -a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct (the giving, doing, or not doing), and in case of breach, may demand satisfaction from the assets of the latter.” ( Arias Ramos, p. 74)  

“Judicial necessity” because non-compliance can result in judicial or legal sanction. Elements of Obligation: 1) an active subject (obligee or creditor): the possessor of a right; he in whose favor the obligation is constituted; 2) a passive subject (obligor or debtor): he who has the duty of giving, doing or not doing; 3) the object or prestation: the subject matter of the obligation; it may consist of giving a thing, or doing or not doing a certain act; 4) the efficient cause (vinculum or juridical tie): the reason why the obligation exists and 5) Causa (causa debendi/causa obligationes) - why obligation exists Requisites of Object: a. licit - if illicit, it is void b. possible - if impossible, it is void c. determinate or determinable - or else, void d. pecuniary value

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Kinds of Obligations 1) From the viewpoint of sanction a) civil obligation (perfect obligation) : defined in Art. 1156, Civil Code, and sanctioned by judicial process b) natural obligation: the duty not to recover what has voluntarily been paid although payment was no longer required : it is sanctioned by law, but only because conscience had originally motivated the payment Example: Knowing that it already prescribed, a debtor still paid his debt to the creditor. c) moral obligation: sanctioned by conscience or morality, or the laws of the church. Example: the duty of a catholic to hear mass on Sundays 2) From the viewpoint of subject matter a) real obligation: the obligation to give b) personal obligation: to obligation to do or not to do 3) From the affirmativeness and negativeness of the obligation a) positive or affirmative obligation: the obligation to give or to do

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b) negative obligation: the obligation not to give or not to do 4) From the persons obliged a) unilateral: when only one of the parties is bound b) bilateral: where both parties are or may be bound i) reciprocal: the performance of one is dependent upon the performance of the other ii) non-reciprocal: the performance of one is not dependent on the performance by the other

Article 1157, Articles 1158-62 Art. 1157  Sources of Obligation (LCQAQ) 1) Law, (OBLIGATION EX LEGE ) - Must be expressly or impliedly set forth and cannot be presumed 2) Contracts, (OBLIGATION EX CONTRACTU ) - Must be complied with in good faith because it is the “law” between parties; neither party may unilaterally evade his obligation in the contract, unless: a) contract authorizes it b) other party assents Parties may freely enter into any stipulations, provided they are not contrary to law, morals, good customs, public order or public policy 3) Quasi-contracts (OBLIGATION EX QUASI-CONTRACTU ) - That juridical relation resulting from a lawful, voluntary and unilateral act, and which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another 4) Acts or omissions punishable by law/Delicts (OBLIGATION EX MALEFICIO OR EX DELICTO ) and 5) Quasi delicts/Torts ( OBLIGATION EX QUASI-DELICTO or EX QUASI MALEFICIO ) - It is a fault or act of negligence ( or omission of care ) which causes damage to another, there being no pre-existing contractual relations between the parties Art. 1158: law  Obligations derived from law are 1) not presumed but must be expressly determined in this Code or other special laws; 2) regulated by the precepts of law which establishes them; and as to what not has been foreseen, by the provisions of this book. Art. 1159: contracts  Obligations arising from contracts: 1) have the force of law between the parties; and  meaning that neither party may unilaterally and upon his own exclusive volition, escape his obligations under the contract, unless the other party assented thereto, or unless for causes sufficient in law and pronounced adequate by a competent tribunal. (p. 81) 2) should be complied with in good faith.

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“Compliance in good faith” means that we must interpret “not by the letter that killeth but by the spirit that giveth life.” (p. 81) Principle of Privity of Contracts: The terms of the contract cannot be extended to third parties or those not included in the contract.

Article 1160: quasi-contracts  Obligations derived from quasi-contract shall be subject to the provisions of Chapter 1, Title XVII, of this Book.  Definition of Quasi-contract: that juridical relation resulting from a lawful, voluntary, and unilateral act, and which has for its purpose the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another. (Art. 2142, Civil Code)  Kinds of Quasi-contract 1) Negotiorium gestio (unauthorized management): takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority;  Reimbursement should be made to the gestor for necessary and useful expenses. 2) Solutio Indebiti (undue payment) : takes place when something is received when there is no right to demand it, and it was unduly delivered by mistake.  The recipient has the duty to return what was received.

Art. 1161: Ex Delicto or Ex Maleficio  Rules that govern: 1) pertinent provisions of the Revised Penal Code and other penal laws, subject to the provisions of Art. 2177, Civil Code; 2) Chapter 2, Preliminary Title, on Human Relations of the Civil Code; 3) Title 18 of Book IV of the Civil Code (on damages). What civil liability arising from a crime includes: a. restitution b. reparation of damage caused c. indemnity for consequential damages Effect of acquittal in criminal case:  when acquittal is due to reasonable doubt – no civil liability  when acquittal is due to exempting circumstances – there is civil liability  when there is preponderance of evidence – there is civil liability Art. 1162: Ex Quasi-Delicts or Ex Quasi-Maleficio  Rules that govern: 1) Chapter 2, Title 17, Book IV, Civil Code 2) Special laws.  

Definition of Quasi-delict: a fault or act of negligence (or omission of care), which causes damages to another, there being no pre-existing contractual relations between the parties. Definition of Negligence: the omission of that diligence which is required by the circumstances of person, place and time (Art. 1173)

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Requirements before a Person can be held Liable for a Quasi Delict 1) There must be fault or negligence attributable to the person charged; 2) There must be damage or injury; 3) There must be a direct relation of cause and effect between the fault or negligence on the one hand and the damage or injury on the other hand (proximate cause). “Proximate cause” is that adequate and efficient cause, which in the natural order of events, necessarily produces the damages or injury complained of. (p. 102)

In Sagrada v. Naccoco, the Supreme Court held that the sources of obligation in Art 1157 is exclusive. Many commentators believe, however that it should not be. At present, there is one more possible source of obligations - PUBLIC OFFER (Public Offer is in fact a source of obligation in the German Civil Code)

Chapter 2 NATURE AND EFFECT OF OBLIGATIONS EFFECTS OF OBLIGATION 1. Obligation to give - obligation to deliver the thing agreed upon 2. Obligation to do/not to do - obligation to do/not to do the service agreed upon ACCESSORY OBLIGATIONS: 1. Exercise diligence / Preserve the thing (Art. 1163) EDD Art. 1163: The obligation of every person to take care of a DETERMINATE/SPECIFIC THING with proper diligence of a GOOD FATHER OF A FAMILY.  standard of care: that of a good father of a family – unless the law or stipulation requires another standard of care 2. Delivery of fruits (Art. 1164) Art. 1164: Nature of the rights of the creditor

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The creditor has the rights 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.  When does the right begin to exist : from the time to deliver arises a) when there is no term/condition – from the perfection of the contract b) when there is a term/condition – from the moment the term or condition arises 3. Delivery of accessories & accessions ( obligation to deliver determinate thing, even if the stipulation does not mention delivery of accessories & accessions)  Accessories - those joined to or included with the principal for the latter’s better use, perfection or enjoyment  Accessions – additions to or improvements upon a thing When does right to fruits arise? – from the time the obligation to deliver arises a) Conditional – from the moment the condition happens b) With a term/period – upon the expiration of the term/period c) Simple – from the perfection of the contract IT DEPENDS! A. If there is no term or condition, then from the perfection of the contract B. If there is a term or a condition, then from the moment the term arrives or the condition happens. PERSONAL RIGHT – jus in personam or jus ad rem Power demandable by one person of another (obligation to give, to do or not to do) REAL RIGHT – jus in rem A power over a specific thing and it is binding on the whole world. KINDS OF DELIVERY A. ACTUAL OR TRADITION – physically, the property changes hands B. CONSTRUCTIVE DELIVERY – where the physical transfer is implied 1. Traditio Simbolica (symbolical tradition) – as when the keys to the bodega are given 2. Tradition Longa Manu (delivery by mere consent or the pointing out of the object) – like pointing out to the car, which is the object of a sale. 3. Tradition Brevi Manu (delivery by short hand) – a possessor of a thing not as an owner, becomes the possessor as owner – like when a tenant already in possession buys the house he is renting. 4. Tradition Constitutum Possessorium – opposite of Brevi Manu – the delivery whereby a possessor of a thing as an owner retains possession no longer of a thing as an owner but in some other capacity. 5. Tradition by the Execution of Legal Forms and Solemnities – like the execution of a public instrument selling land.

Art. 1165 “DELAY” in this article means LEGAL DELAY or DEFAULT a. ORDINARY DELAY merely the non-performance at the stipulated time

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b. LEGAL DELAY or DEFAULT – that delay which amounts to a virtual nonfulfillment of the obligation. AS A RULE, to put a debtor in default, there must be a JUDICIAL or EXTRAJUDICIAL DEMAND or fulfillment WHEN THE DEBTOR FAILS TO COMPLY WITH HIS OBLIGATION, THE CREDITOR CAN: 1. Demand specific performance or compliance - Specific Performance- performance of the prestation itself - Substitute Performance - someone else performs or something else is performed at the expense of debtor - Equivalent Performance – demand for damages a. If the thing is determinate – compel obligor to deliver the thing b. If the thing is generic – demand obligor to comply with his obligation – you cannot compel him to deliver a specific thing. 2. Demand rescission or cancellation 3. Demand Damages Art. 1166  ACCESSORIES – those joined to or included in the principal for the latter’s better use, perfection or enjoyment. (Example: keys to a house, jack of a car)  ACCESSIONS – additions to improvements upon a thing (Examples: whatever is built, planted or sown on a parcel of land).  If there is a stipulation to said effect, accessions and accessories do not have to be included. Art. 1167: The Obligation TO DO  If DEBTOR fails to Do something, CREDITOR can:  Have the obligation performed by himself or another at the debtor’s expense (only if another can do the performance)  Obtain Damages – only if personal or special, or if others or the creditor can’t do it  Specific performance is not a remedy in personal obligations, otherwise, this may amount to involuntary servitude, which is prohibited under our Constitution  When a Thing May be Ordered Undone:  If poorly made – performance by another and damages may be demanded  If the obligation is a negative one – provided the undoing is possible 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. Table of Remedies in case of FAILURE TO COMPLY WITH PERFORMANCE/REMEDIES:

Remedies SPECIFIC PERFORMANCE

Obligation to give (Real Obligation) Specific Generic X

X

Obligations to do (Personal Obligation) To do Not to do undo the things X already done

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EQUIVALENT PERFORMANCE SUBSTITUTE PERFORMANCE

X

X

Can only be demanded if obligation is not very personal

X

X

X

Undo the things already done at debtor's expense

RESCISSION/ CANCELLATION X X A. CAUSES ATTRIBUTABLE TO DEBTOR

X

1. Contravention of tenor 2. Delay/ Mora - Non performance with respect to time a. Mora solvendi – default on the part of the debtor; 2 kinds: (1) Mora Solvendi Ex re – default in real obligations (2) Mora Solvendi Ex persona – default in personal obligations Elements: (1) The obligation must be due, enforceable and already liquidated or determinate in amount (2) There must be non-performance (1) There must be a demand, unless demand is not required Effects: a. if determinate thing - debtor bears risk of loss (even when there is fortuitous event) b. debtor liable for damages/interest c. resolution (art 1170, in proper cases) b. Mora accepiendi – default on part of creditor; Creditor is guilty of default when he unjustifiably refuses to accept payment or performance at the time payment/performance can be done Effects: (1) responsibility of debtor is reduced to fraud and gross negligence (2) debtor is exempted from risk of loss of thing / creditor bears risk of loss (3) expenses by debtor for preservation of thing after delay is chargeable to creditor (4) if obligation bears interest, debtor does not have to pay from time of delay (5) creditor liable for damages (6) debtor may relieve himself of obligation by consigning the thing c. Compensatio morae – both parties are in default (in reciprocal obligations); the effect: is as if there is no default 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.

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However, the demand from the creditor shall not be necessary in order that delay may exist: a. When the obligation or the law expressly so declares. ONU b. 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 to the service is to be rendered was a controlling motive for the establishment of the contract c. 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.   

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Extra-judicial demands may be written or oral-but best if written because it can be presented as evidence. AS A RULE-to put a debtor in default, DEMAND is needed. Demand is not Needed to Put Debtor in Default When: a. When the law so provides b. When the obligation expressly so provides c. When the fixing of the time was the controlling motive for the establishment of the contract d. When demand would be useless e. When the obligor has expressly acknowledged that he really is in default BUT IN THE PHILIPPINE LAW, THIS IS NO LONGER SO because it is expressly provided that in reciprocal obligations, neither party incurs default if the other does not comply with what is incumbent upon him. Even if there were (written) demands from both sides, there is no default when neither has done his obligation. It is only when one party fulfills his obligation, delay by the other begins (assuming that there is no date set in the contract for his performance). 3. Fraud / Dolo – Voluntary execution of a wrongful act or willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission a. Causante ( causal ) - makes contract voidable b. incidente – ( incidental ) - fraud in performance of obligation; does not affect validity of obligations Remedies of Person in fraud under obligations are: a. insist on specific performance (art 1233) b. resolve contract (art 1191) c. claim damages, in either case

4. Negligence /Culpa - absence of due diligence Elements: a) Omission of diligence required b) Diligence required – per nature of obligation, circumstances of persons, time and place Art 1170

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Those who in the performance of their obligation are guilty of fraud, negligence or delay and those who in any manner contravene the tenor thereof are liable for damages. 

Grounds for Liability in the Performance of Obligations a. Fraud-use of deceit or other machinations to intentionally evade the fulfillment of the obligation -This type of fraud is applicable in obligations only-it is different from CAUSAL OR INCIDENTAL fraud (fraud that exists between parties when there is no preexisting contractual relations or obligations between them). b. Negligence-fault-0no intent c. Default d. Violation of the terms of Obligation (unless excused in proper cases by fortuitous events)

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The Following do not Exempt from the Fulfillment of the Obligation a. Increase in the cost of the performance b. Poverty c. War between the subject of the neutral country and the subject of a country at war, as long as the substantial compliance can still be done.

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Those liable under this Article should pay damages, only if prejudice or damage was caused. Kinds of Damages a. Moral-for moral and physical anguish b. Exemplary-corrective or to set an example c. Nominal-to vindicate a right-when no other kind of damages may be recovered d. Temperate-when the exact amount of damages cannot be determined e. Actual-actual losses as well as unrealized profits f. Liquidated predetermined beforehand by agreement.

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Art 1171 Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. Art 1172 Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. Art 1173 The fault or negligence of the obligor consists in that omission of the 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. When negligence shows bad faith, the provisions of Articles 1171 and 2201 paragraph 2, shall apply.

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Kinds of Diligence Under the Civil Code a. That agreed upon by the parties b. In the absence of that agreed upon by the parties, that required by law c. In the absence of that required by law, that expected of a good father of a family. FRAUD DISTINGUISHED FROM NEGLIGENCE

FRAUD NEGLIGENCE There is deliberate intention to cause There is no deliberate intention to cause damage. damage. Liability cannot be mitigated. Liability may be mitigated. Waiver for future fraud is void. Waiver for future negligence may be allowed in certain cases: a) gross – can never be excused in advance; against public policy b) simple – may be excused in certain cases Art 1174 Concept: Fortuitous Event - event which could not be foreseen, or which though...