Obligations AND Contract - FEU PDF

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OBLIGATION – juridical necessity to give, to do or not to do4 ELEMENTS OF OBLIGATION ACTIVE SUBJECT (creditor/obligee) – whose obligation is constituted PASSIVE SUBJECT (debtor/obligor) – has duty to give, to do or not to do OBJECT/PRESTATION – subject matter JURIDICAL/LEGAL TIE (vinculum/efficient ...

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OBLIGATION – juridical necessity to give, to do or not to do 4 ELEMENTS OF OBLIGATION 1. ACTIVE SUBJECT (creditor/obligee) – whose obligation is constituted 2. PASSIVE SUBJECT (debtor/obligor) – has duty to give, to do or not to do 3. OBJECT/PRESTATION – subject matter 4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) – reason CIVIL OBLIGATION derived from positive law enforceable by court action

NATURAL OBLIGATION derived from equity & justice not enforceable by court action

5 SOURCES OF OBLIGATION 1. LAW 2. CONTRACTS 3. QUASI-CONTRACTS – arise from lawful, voluntary acts; no one shall be unjustly enriched... 2Kinds a. Solutio indebiti – something received (delivered on a mistake), no right to demand it b. Negotiorum gestio – voluntary mgt of property/affairs of another w/o his knowledge/consent 4. QUASI-DELICT/TORTS/CULPA AQUILIANA – arise from damage; fault/negligence 5. CRIMES/ACTS/OMISSIONS punished by law – arise from civil liability that is a consequence of a criminal offense DILIGENCE OF A GOOD FATHER OF A FAMILY - care need to be exercised by a debtor to deliver/give determinate thing Exception: When law/stipulation of parties requires a differnt standard of care (slight/extraordinary diligence). When creditor is entitled to the fruits

Rule: The creditor has personal right (right to ask for delivery) from the time the obligation to deliver arises. But NO real right (right enforceable against the whole world) until it is delivered. 3 KINDS OF FRUITS 1. NATURAL – w/o human intervention 2. INDUSTRIAL – w/ human intervention 3. CIVIL – derived by virtue of juridical relation Creditor’s rights if debtor fails to comply w/ the obligation 1. Determinate a. Performance b. Damages 2. Generic a. Performance b. Damages c. Obligation be complied at debtor’s expense Creditor’s rights if debtor does in contravention 1. Damages 2. Ask it be UNDONE at debtor’s expense FORTUITOUS EVENT – cannot be foreseen, if foreseen, inevitable General Rule: No person liable to fortuitous event. Exceptions: 1. Law states 2. Stipulation/contract states 3. Assumption of risk 4. Delay 5. Debtor promises deliver to 2/more persons who do not have same interest (bad faith) EFFECTS OF FORTUITOUS EVENT to thing to be delivered - extinguish the obligation if determinate; generic does not extinguish the obligation 3 MISCELLANEOUS RULES ON PERFORMANCE OF OBLIGA-TION 1. When to deliver determinate, accessions (additions/ improvements) and accessories(joined/included

with the principal) are INCLUDED even not mentioned. 2. If debtor fails to do, it shall be DONE AT HIS EXPENSE, same with doing the contravention; poorly done be undone. 3. In obligation not to do, and obligor does what is forbidden, shall be UNDONE AT HIS EXPENSE.

a. Culpa aquiliana/Civil negligence – quasidelict/torts b. Culpa contractual/Contractual negligence – breach c. Culpa criminal/Criminal negligence – crime/delict 4. Contrary to the terms of obligation

4 GROUNDS; debtor liable for damages 1. Default/mora 2. Fraud/dolo 3. Negligence/culpa 4. Contrary to terms of obligation 1. DEFAULT/MORA – delay 3kinds a. Mora solvendi – debtor’s delay to give (real ob.), to do (personal ob.) b. Mora accipiende – creditor’s delay to accept c. Compensatio Morae – delay of both in reciprocal obligation CONCEPT OF DELAY General Rule: No demand, No delay Exceptions: 1. Law states 2. Obligation states 3. Time is the essence 4. Demand be useless if delay 5. Debtor guilty of delay EFFECTS OF DELAY 1. Damages 2. When to deliver determinate thing, STILL LIABLE in fortuitous event. 2. FRAUD/DOLO – conscious, deliberate, intentional evasion of fulfillment 2Kinds a. Dolo causante/Causal fraud – fraud in obtaining consent; consent is defective, contract is voidable. Remedy: annulment b. Dolo incidente/Incidental fraud – fraud w/c vitiates consent. Remedy: damages 3. NEGLIGENCE/CULPA – voluntary act/omission; no bad faith intended 3Kinds

2 RULES OF PRINCIPAL & INSTALLMENT 1. Receipt of principal w/o mention of interest, presumed interest is paid also. 2. Receipt of latter installment w/o mention of prior installment, presumed prior installment is paid also. 4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against DEBTOR 1. Exact payment 2. Attach debtor’s properties 3. Accion subrogatoria – exercise rights & actions except inherent in person 4. Accion pauliana – cancel acts/contracts by debtor to defraud creditor TRANSMISSIBILITY OF RIGHTS General Rule: ALL RIGHTS are transmissible. Exceptions: 1. Law states 2. Contract states 3. Obligation is purely personal 10 Kinds of Obligation 1. Pure 2. Conditional 3. Alternative 4. Facultative 5. Joint 6. Solidary 7. Divisible 8. Indivisible 9. Obligation w/ a period 10. Obligation w/ a penal clause 1. PURE OBLIGATION - w/o condition, demandable at once (pure has resolutory condition/period)

2. CONDITIONAL OBLIGATION - there is condition in performance; future & uncertain 2Kinds a. Suspensive condition – happening of condition gives RISE to obligation b. Resolutory condition – happening of condition EXTINGUISHES obligation 6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION 1. Impossible conditions, contrary to law, shall ANNUL obligation. 2. The condition not to do an impossible thing is considered not agreed upon. 3. The condition that happens in determinate time, EXTINGUISHES obligation. 4. The condition that happens in INDETERMINATE time, obligation only effective at arrival. 5. The condition is fulfilled if DEBTOR prevents fulfillment. 6. The effect of conditional obligation, once fulfilled: - to give: retroact to the day of constitution of obligation - has reciprocal prestations: fruits & interests be mutually compensated - has unilateral obligation: debtor shall give fruits & interests RULES in case of Loss, Improvement, or Deterioration of thing during the pendency of condition 1. LOST a. w/ debtor’s fault – damages b. w/o debtor’s fault – extinguishes obligation 2. DETERIORATION a. w/ debtor’s fault - (1) cancel obligation & damages; or (2) fulfill obligation w/ damages b. w/o debtor’s fault – creditor suffer impairment 3. IMPROVEMENT a. By nature/time – benefit to creditor

b. at expense of debtor – debtor no right than that granted to usufructuary (debtor no right to compensate amount for improvement) EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION General Rule: The obligation becomes effective retroactively to the day obligation was constituted. Exceptions: 1. In reciprocal obligation, fruits & interests during pendency of condition shall compensate each other. 2. In unilateral obligation, debtor gets fruits & interests unless there is a contrary intent. 3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION 1. Extinguish obligation. 2. Both parties restore what they received plus fruits & interests. 3. The rule on L, D, or I will apply to person who has to return the thing. When one of debtors in reciprocal obligation does not comply w/ his obligation 1. The right of injured party is (1) cancel contract & damages; or (2) fulfill obligation & damages 3 Kinds of Obligation (Accdng to PERSON OBLIGED) 1. UNILATERAL – only 1 party obliged to comply 2. BILATERAL – both parties; performance not same time 3. RECIPROCAL – both parties; performance same time 3. OBLIGATION W/ A PERIOD - demandability/extinguishment subject to the expiration of period PERIOD – interval of time; either suspends demandability or produces extinguishment DAY CERTAIN – must come, not known when 7 CASES CONSIDERED TO BE “OBLIGATION W/ A PERIOD”

1. Little by little 2. In partial payment 3. Payable ASAP 4. When I can afford it 5. When I have the money 6. When I am able to 7. When my means permit me to do so PERIOD certain future only (*influence upon obligation) only upon its demandability

CONDITION uncertain future/past but unknown (*) on the very existence of obligation itself

FOR WHOSE BENEFIT IS THE PERIOD? General Rule: Both the debtor & creditor. Therefore, NEITHER of them can demand performance of obligation. Exception: If the term of obligation has to favor one of them. 5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE “PERIOD” 1. Debtor is insolvent. 2. Debtor attempts to abscond. 3. Impairment of guarantees/securities. 4. Failure to furnish guarantees/securities promised. 5. Violation of undertaking. 4. ALTERNATIVE OBLIGATION - w/ 2 or more prestations, only 1 is due. 5. FACULTATIVE OBLIGATION - w/ ONLY 1 prestation but can be substituted. ALTERNATIVE prestations LOST w/ debtor’s fault Creditor entitled to damages but needs ff requisites: 1. Debtor can choose. 2. All prestations lost/become impossible due to debtor’s fault. ALTERNATIVE OBLIGATION

FACULTATIVE OBLIGATION

several prestations due, giving one is sufficient right to choose (debtor) unless granted to creditor If 1 of the prestation is illegal, others may be valid, obligation remains loss/impossibility of ALL prestations due, w/o debtor’s fault, extinguishes obligation

one prestation due, but can be subtituted right to choose DEBTOR ONLY nullity of principal carries w/ it nullity of accessory/ substitute loss/impossibility of presta-tion due, w/o debtor’s fault, extinguishes obligation

(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF DEBTOR IN ALTERNATIVE OBLIGATION 1. If 1 of prestations lost through fortuitous event, shall still be perform by choosing (creditor) from the remainder. 2. If 1 of prestations lost through debtor’s fault, creditor may claim any of remainders w/ damages. 3. If ALL prestations lost through debtor’s fault, creditor choose price w/ damages. RULES on LOSS/DETERIORATION of the thing intended as SUBSTITUTE in FACULTATIVE OBLIGATION 1. If there is a loss/deterioration of thing intended as substitute, debtor is NOT liable if NOT HIS FAULT. But if substitution is already made, debtor is liable for loss of substitute when in DELAY, NEGLIGENCE, or FRAUD. 6. JOINT OBLIGATION - obligation is to be paid proportionately by debtors or to be demanded proportionately by creditors 7. SOLIDARY OBLIGATION - each one of debtors has right to render or each one of creditors has right to demand the entire compliance w/ prestation

MAXIMS & SYNONYMS MAXIMS JOINT “To each Obligation his own” SOLIDARY “One for Obligation all, all for one”

SYNONYMS proportionate individually & collectively

(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES 1. Law states 2. Stipulation states 3. Nature of obligation requires 2 PRESUMPTIONS THAT OBLIGATION IS JOINT 1. The debts be divided as many shares as there are debtors/creditors. 2. The debtors/creditors are distinct from one another. 8. DIVISIBLE OBLIGATION - prestation is capable of partial performance

NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE Nullity of principal obligation = nullity of penal clause Nullity of penal clause = NOT nullity of principal obligation 10 MODES OF EXTINGUISHMENT OF OBLIGATIONS 1. Payment or performance 2. Prescription 3. Compensation 4. Confusion/merger 5. Condonation/remission 6. Fulfillment of resolutory condition 7. Annulment 8. Rescission 9. Novation 10. Loss of thing due 1. PAYMENT/PERFORMANCE - Payment means delivery of money & performance of obligation

10. OBLIGATION W/ A PENAL CLAUSE - one w/ accessory undertaking attached to obligation to assume greater liablity in case of breach/non-fulfillment of obligation

2 PLACE OF PAYMENT 1. At place agreed upon 2. If w/o agreement a. Object is indeterminate – paid at domicile of DEBTOR b. Object is determinate – place of thing at the time of constitution of obligation

3 PURPOSES OF PENAL CLAUSE 1. Ensure performance of obligation 2. Substitute for damages & interest in case of noncompli-ance 3. Penalize debtor in case of breach

4 SPECIAL MODES OF PAYMENT a. Application of payment b. Cession c. Tender of payment & consignation d. Dacion in payment

In case obligation has a PENAL CLAUSE General Rule: Penalty takes the place of damages & interest in case of non-compliance. Exceptions: 1. Stipulation states. 2. Debtor refuse to pay penalty. 3. Debtor guilty of fraud in performance of obligation.

a. APPLICATION OF PAYMENT - designation of debt to w/c payment must be applied when debtor has several obligations of same kind in favor of same creditor.

9. INDIVISIBLE OBLIGATION - prestation incapable of partial performance

3 REQUISITES OF APPLICATION OF PAYMENT 1. Only 1 debtor & 1 creditor 2. 2 or more debts, same kind 3. All debts are due 4. Insufficient payment to exinguish ALL debts

3 RIGHTS TO MAKE APPLICATION OF PAYMENT 1. Right belongs to CREDITOR. 2. If debtor does not avail, creditor can give him receipt designating the debt from which payment will be applied. 3. If debtor accepts the receipt, he cannot complain unless THERE IS just cause to invalidate the contract. b. CESSION - debtor abandons ALL his property for creditor’s benefit to obtain payment from proceeds of his property 5 REQUISITES OF VALID CESSION 1. 1 debtor & 2 or more creditors 2. Debtor is in partial/total insolvency. 3. Debtor to deliver ALL his property to creditors 4. Debt is due & demandable. 5. Creditors must sell the properties & apply the proceeds to their respective credits proportionately. c. DACION IN PAYMENT (dacion en pago) - alienation of property to the creditor in satisfaction of debt 3 REQUISITES OF DACION IN PAYMENT 1. Consent of creditor 2. NOT prejudicial to another creditor 3. Debtor not insolvent declared by a judicial decree CESSION all properties require more than 1 creditor NOT act of novation NOT transfer ownership requires partial/total insolvency

DACION IN PAYMENT NOT all properties NOT require all creditors act of novation transfer ownership may happen during solvency of debtor

d. TENDER OF PAYMENT & CONSIGNATION

TENDER OF PAYMENT – act of offering the creditor what is due to him w/ a demand that the creditor accept it CONSIGNATION – act of depositing thing due w/ the court when creditor cannot/refuses acceptance of payment 5 REQUISITES OF CONSIGNATION 1. Debt due. 2. Creditor refused the tender of payment w/o just cause 3. Notice of consignation already given to persons interested in fulfillment of obligation 4. Consignation of thing/amount due 5. Subsequent notice of consignation to interested persons 5 VALID CONSIGNATION W/O PREVIOUS TENDER OF PAYMENT 1. Creditor is absent/unknown. 2. Creditor is incapacitate to receive at time it is due. 3. Creditor refused give a receipt, w/o just cause. 4. 2 or more persons claim the right to collect. 5. Title of obligation lost. 2. LOSS OF THING DUE - perishes, disappears, or goes out of commerce; existence is unknown; cannot be recovered 3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS 1. Determinate thing. 2. W/o debtor’s fault. 3. No delay. 3. CONDONATION/REMISSION - gratuitous abandonment of right by the creditor 3 REQUISITES OF A VALID CONDONATION/REMISSION 1. It must be gratuitous. 2. Accepted by obligor. 3. Obligation is demandable.

4. CONFUSION/MERGER - meeting in 1 person of qualities of debtor & creditor w/ same obligation

b. Subrogation – change of creditor 3. Changing person of the parties & the objects of principal condition. (MIXED NOVATION)

3 REQUISITES OF VALID CONFUSION/MERGER 1. The merger of characters of debtor & creditor must be in same person. 2. Take place between principal debtor & creditor. 3. Clear & definite.

4 REQUISITES OF NOVATION 1. Old valid obligation. 2. Agreement of parties to new obligation. 3. Extinguishment of old obligation. 4. Validity of new obligation.

5. COMPENSATION - 2 persons are debtors & creditors of each other 6 ESSENTIAL REQUISITES OF COMPENSATION 1. Parties both principal debtors & creditors of each other. 2. Compensation is not prohibited by law. 3. No retention/controversy by 3rd person. 4. 2 debts are due & demandable. 5. 2 debts are liquidated. 6. 2 debts both in money/consumable things. (2) CLASSES OF COMPENSATION 1. As to effect a. TOTAL – obligations completely extinguished. b. PARTIAL – a balance remains 2. As to origin or cause a. LEGAL – by law b. VOLUNTARY/CONVENTIONAL – agreement of parties c. JUDICIAL – order from the court d. FACULTATIVE – 1 of parties can choose/oppose claiming compensation

2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR 1. EXPROMISION – w/ consent of creditor, NO consent of old debtor 2REQUISITES a. Initiative of 3rd person. b. Consent of creditor. 2. DELEGACION – all must agree (creditor, old debtor, new debtor) 3REQUISITES a. Initiative from old debtor. b. Consent of debtor. c. Acceptance by creditor. 7. SUBROGATION - change of creditor 2 KINDS OF SUBROGATION 1. CONVENTIONAL – consent of original parties & 3rd person 2. LEGAL – by law a. creditor pays another preferred creditor even w/o debtor’s knowledge b. 3rd person pays the express approval of debtor c. 3rd person pays even w/o knowledge of debtor

6. NOVATION - substitution/change of obligation - substitution of debtor - subrogation of creditor (3) OBLIGATIONS MAY BE MODIFIED BY: 1. Changing object/principal conditions. (REAL NOVATION) 2. Changing the person of debtor/creditor. (PERSONAL NOVATION) a. Substitution – change of debtor

CONTRACT – meeting of minds between 2 persons to give something or to render service. 3 ELEMENTS OF CONTRACT 1. ESSENTIAL – w/o them, contract cannot exist a. CONSENT of contracting parties b. OBJECT CERTAIN – subject matter

c. CAUSE/CONSIDERATION In some contracts, ff are also essential: d. FORM e. DELIVERY

a. NOMINATE – contract given a particular/special name (eg. partnership) b. INNOMINATE – not given special name (eg. I give that you may give)

2. NATURAL – found in certain contract, presumed to exist unless stipulated

7. SUBJECT MATTER a. Contracts involving things b. Contracts involving rights/credits c. Contracts involving services

3. ACCIDENTAL – various particular stipulations that may be agreed upon by contracting parties (7) CLASSIFICATION OF CONTRACTS According to: 1. PERFECTION/FORMATION a. CONSENSUAL – perfected by mere consent b. REAL – perfected by delivery c. FORMAL/SOLEMN – special formalities are essential before perfection of contract 2. PARTIES OBLIGATED a. UNILATERAL – only 1 has obligation b. BILATERAL – both parties require to render reciprocal prestations 3. CAUSE a. ONEROUS – exchange of considerations b. GRATUITOUS – no consideration received in exchange of what is given c. REMUNERATORY – something is given for benefit/service that had been rendered previously 4. RISK OF FULFILLMENT a. COMMUTATIVE – equivalent values are given by both parties b. ALEATORY – fulfillment of contract depends on chance (eg. insurance) 5. IMPORTANCE a. PRINCIPAL – contract may stand alone (eg. sale, partnership) b. ACCESSORY – existence depends on another contract (pledge, guarantee) c. PREPARATORY – contract not an end by itself but a means thru w/c other contracts may be made (eg. agency) 6. NAME

3 STAGES OF CONTRACT 1. PREPARATION/CONCEPTION – preparatory steps to perfect contract 2. PERFECTION/BIRTH – meeting of minds between 2 contracting parties 3. CONSUMMATION/TERMINATION – terms of contract are performed, & contract is fully executed 5 BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT 1. PRINCIPLE OF AUTONOMY (liberty to contract) Provided they are not contrary to: a. Law b. Morals c. Good customs d. Public order e. Public policy 2. MUTUALITY OF CONTRACTS - the contract must bind both parties; its validity/compliance cannot be left to the will of one of them 3. RELATIVITY OF CONTRACTS - Contracts take effect only between the parties, their assigns & heirs except when there are rights & obligations not transmissible: a. by their nature b. by stipulation (stipulation por autri) c. by provision of law 4. CONSENSUALITY OF CONTRACTS - Contracts are perfected by mere consent Exceptions: a. REAL CONTRACTS – perfected by delivery

b. FORMAL/SOLEMN CONTRACTS – special form required for its perfection 5. OBLIGATORINESS OF CONTRACTS - The contract, once perfected, has the force of law between...