OUTLINE OF LECTURE IN LAW ON OBLIGATIONS

Obligation is a critical necessity to do or not to do.

Requisites or elements of obligation:

a. Active subject - creditor or oblige
b. Passive subject - debtor or obligor
c. Prestation - the promise or the particular contract to be
observed in
the performance of obligation
d. Efficient cause - legal tie which binds the parties to the
obligation
Juridical tie or vinculum juris

1. Sources of obligation

a. Law
b. Contracts
c. Quasi-contracts
d. Delicts ( act or omission punished by law)
e. Quasi-delicts

Law when imposed by the law itself [not presumed] (ex. Obligation to
pay taxes; obligation to support ones family)

Contracts - arising from the stipulation of the parties (ex. Obligation to

repay a loan by virtue of an agreement)

Quasi-contracts arising from lawful, voluntary and unilateral acts and

which are enforceable to the end that no one shall be unjustly enriched or
benefited at the expense of another (ex. Obligation to return the money
paid by mistake or which is not due)

Delict or act punished by law arising from civil liability which is a

consequence of a criminal offense (ex. Obligation of the thief to return the
car stolen by him)

Quasi-delict, tort or culpa aquiliana arising from the damage caused to

another through an act or omission, there being fault or negligence, but
no contractual relation exists between the parties (ex. Obligation of the
possessor of animal to pay for the damages which it may have caused).

2. Kinds of quasi-contracts
a. Negotiorum Gestio-voluntary administration of the property business or
affairs of a third person without the consent or authority of its owner.

b. Solutio indebiti-payment by mistake of an obligation which was not due

when paid
3. Delict or act punished by law

Any person criminally liable is also civilly liable.

What is included in civil liability?

a. Restitution
b. Reparation
c. Indemnification for consequential damages

Commission of crime does not always make a person civilly liable (ex.
Illegal possession of firearm)

4. Quasi-delict, tort or culpa aquiliana

A wrong committed against a person independent of contract and without

criminal intent. (through fault or negligence)

Requisites or elements of liability:

a. Act or omission complained of is due to the fault or negligence of the

offending party.
b. Act or omission causes damage or injury
c. There is direct relation of cause and effect between (a) and (b)
d. There is no pre-existing relation between the offender and offended
parties

If there is pre-existing relation or contractual relation, there is culpa

contractual negligence in the performance of an obligation.

5. Dolo (Fraud) and Mora (Delay)

Kinds of fraud:

a. Fraud in obtaining consent dolo causanti

b. Fraud in performing a contract dolo incidenti

Kinds of delay:

a. Mora solvendi debtors part

b. Mora accipiendi creditors part
c. Compensatio morae both parties defaulted
 Requisites of mora solvendi:

a. The obligation must be liquidated, due and demandable

b. The debtor is guilty of non-performance
c. There was demand made judicially or extrajudicially

Effects when the elements concur (mora solvendi):

1. The creditor may ask for damages

2. The debtor is liable even if the loss is due to fortuitous event
3. The debtor shall bear the risk of loss

Exceptions to No demand No delay rule:

a. When stipulated by the parties

b. By provision of law
c. When time is of the essence
d. When demand would be useless

Delay in reciprocal obligations: [obligations arising out of the same cause

and are to be fulfilled at the same time] From the time one party fulfills his
obligation, the other party incurs in delay. If neither party performs his
obligation undertaking neither incurs in delay.

6. Ground for liability to pay damages

a. Fraud
b. Negligence
c. Delay
d. Contravention of the term of the agreement

Kinds of damages:

a. Moral
b. Exemplary
c. Nominal
d. Temperate
e. Actual
f. Liquidated

7. Rights and obligations relating to obligation to give, to do or not to

do

Obligation to give:
 a. To preserve and take good care of the thing
b. To deliver the thing including its fruits
c. To deliver the accessions and accessories

Kinds of fruits:

a. Natural spontaneous product of soil without the intervention of

human of labor; and the young and other product of animals.

b. Industrial product of soil through cultivation or labor

c. Civil arising out of juridical relation

Obligation to do (in case of failure to perform an obligation; performance

in contravention of the agreement; obligation poorly done)

Obligation not to do:

a. To be undone at the expense of the debtor

b. Damages for breach of contract

8. Fortuitous event or force majeure

When the debtor is unable to fulfill his obligation because of fortuitous

event or force majeure, his obligation to comply is extinguished subject to
the following exceptions:

a. When stipulated by the parties

b. When the law expressly provides
c. When the nature of the agreement requires the assumption of risk

9. Rights of creditor against the debtor

1. To demand fulfillment of obligation or specific performance

2. To attach the properties of the debtor
3. To exercise all rights of the debtor (accion subrogatoria)
4. To ask for rescission of contract intended to defraud him (accion
pauliana)

- End -
 OUTLINE OF LECTURE IN LAW ON OBLIGATIONS

(Kinds of obligations)

1. Kinds of obligations

Primary classification of obligations:

1. Pure obligation
2. Conditional obligation
3. Obligation with a period
4. Alternative obligation
5. Facultative obligation
6. Joint obligation
7. Solidary obligation
8. Divisible obligation
9. Indivisible obligation
10.Obligation with penal clause

Secondary classification of obligations

1. Unilateral and bilateral

2. Real and personal
3. Determinate and generic
4. Positive and negative
5. Legal conventional and penal
6. Civil and natural

2. Pure and conditional obligations

a. Pure and conditional obligations

Pure obligations is one which is not subject to any condition and no specific
date is mentioned for its fulfillment by the debtor and is, therefore,
immediately demandable by the creditor.

Conditional obligation is one which is subject to a condition. Condition is a

future and uncertain (it may not happen) event upon the happening of which
the effectivity or ineffectivity of the obligation subject to it depends.

b. Kinds of condition

Principal kinds:
 1. Suspensive the fulfillment of which will give rise to obligation.
2. Resolutory the fulfillment of which will extinguish the obligation.

Conditions that annul or invalidate the obligation which depends upon them:

1. Potestative suspensive condition which depends upon the sole will of the
debtor.
When the debtor binds himself to pay when his means permit him to do
so, the obligation shall be deemed to be one with a period.

2. Impossible a condition which cannot, in the nature of things, exist or be

done; or which is contrary to law, morals, good customs, public order or
public policy.

c. Effects of fulfillment of suspensive condition

The obligation becomes effective on the day the obligation is constituted. The
effect is retroactive.

Retroactive effects as the fruits:

1. If unilateral, the debtor as a rule will get the fruits and interest.
2. If reciprocal, the fruits and interest during the pendency of the condition
are deemed mutually compensated although unequal.

d. Rules in case of loss, deterioration or improvement of the thing to be

delivered during the pendency of a suspensive condition

1. If the thins is lost

a. Without the fault of debtor, the obligation is extinguished;

b. With fault of debtor, the latter shall be obliged to pay damages.

A thing is lost when it perishes physical loss, or goes out of commerce

(legal loss), or disappears on such a way that its existence is unknown
or it cannot be recovered (civil loss).
 2. If the thing deteriorates

a. Without the fault of the debtor, the impairment is borne by the

creditor.
b. Through the fault of the debtor, the creditor may choose between
rescission with damages and fulfillment also with damages.

3. If the thing is improved by its nature or by time, the improvements shall

inure to the benefit of the creditor.

4. If the thing is improved at the expense of the debtor the latter has the
same rights as a usufructuary as follows:

a. To remove the improvement should it be possible to do so without

damage to the property, but he shall have no right to be
indemnified therefore.
b. To reimbursed for necessary expenses incurred by him.
c. To set off the improvements he may have made on the property
against any damage to the same.

e. Obligation demandable at once

1. When it is pure
2. Then it is subject to a resolutory condition
3. When it is subject to a resolutory period

3. Obligation with a period

a. Obligation with a period defined

An obligation with a period is one for whose fulfillment a period or term

has been fixed.

A period is certain event upon the arrival of which the obligation

subject to it either arises or is extinguished.

b. Kinds of periods

1. Suspensive (ex die) a day certain the arrival of which makes the
obligation demandable.
2. Resolutory (in diem) a day certain the arrival of which terminates
the obligation.
 c. When the court may fix a period

1. When the obligation does not fix a period but it can be inferred from
its nature and circumstances that a period was intended.
2. When the duration of the period depends upon the will of the
debtor.

In the case of potestative condition, it is actually the fulfillment of the

obligation that depends upon the will of the debtor. The obligation is
void.

4. Alternative and facultative obligations

a. Alternative and facultative obligations defined

An alternative obligation is one where several prestations are due

but the performance of one is sufficient.

A facultative obligation is one where only one prestation has been

agreed upon but the obligor may render another in substitution.

b. Right of choice / effect

The right of choice belongs to the debtor unless it has been

expressly granted to the creditor.

The choice shall produce effect only from the time it has been
communicated to the creditor. Until the election is made and
communicated, the obligation remains alternative.

c. When alternative obligation is converted into a simple obligation

1. When the debtors choice is communicated the creditor.

2. When the creditor communicated his choice the debtor, if given
the right to choose
3. When only one of the prestations due is practicable.

5. Joint and solidary obligations defined

a. Joint and solidary obligations defined

A joint obligation is one where the whole obligation is to be paid or

fulfilled proportionately by the different debtors and / or to be
demanded proportionately by the different creditors

At solidary obligation is one where each of the debtors is bound to

render and / or each of the creditors has a right to demand entire
compliance with the prestation.
 b. Presumption

The obligation is joint

Solidary liability exists when:

1. The obligation expressly so states
2. The law requires solidarity
3. The nature of the obligation requires solidarity

In a solidary obligation, there is only one debt and one credit

regardless of the number of debtors and creditors. A solidary
creditor cannot assign or transfer his rights without the consent of
the others.

c. Features of joint liability

1. Insolvency of one debtor does not make the others liable.

2. Vitiated consent on the part of one debtor does not affect the
others
3. Demand made to one of the debtors is not a demand to all
because the debt of one is distinct from the others.

6. Divisible and indivisible obligations

a. Divisible and indivisible obligations defined

A divisible obligation is one the object of which in its delivery or

performances is capable of fulfillment by parts.

An indivisible obligation is one the object of which in its delivery or

performance is not capable of fulfillment by parts.

b. Test for the distinction

The controlling circumstance is the purpose of the obligation or the

intention of the parties. Hence, even though the obligation or service
may be physically divisible, an obligation is indivisible if so provided by
law or intended by the parties.

However, if the object is not physically divisible or the service is not

susceptible of partial performance, the obligation is always indivisible,
the intention of the parties to the contrary notwithstanding.

c. Joint indivisible obligation

 A joint indivisible obligation is one where the parties are merely
proportionately liable but the object or subject matter thereof is not
physically divisible into different parts.

Obligations deemed indivisible:

1. Obligations to give definite things

2. Obligations which are not susceptible of partial performance
3. Obligations provided by law to be indivisible
4. Obligations intended by the parties to be indivisible

Obligations deemed divisible:

1. Obligations which have for their object the execution of certain

number of days of work
2. Obligations which have for their object the accomplishment of
work by metrical units
3. Obligations which by their nature are susceptible of partial
performance

If the obligation is divisible but only partially performed, the obligor can
enforce his right in proportion the services performed Quantum
meruit principle.

7. Obligation with penal clause

A. Obligation with penal clause defined

An obligation with penal clause is one which contains an accessory

undertaking (penal clause) to pay a previously stipulated indemnity
(penalty) in case of breach.

There is no fundamental difference between a penalty and liquidated

damages.

B. Concept and nature of penalty

In an obligation with a penal clause, the penalty shall substitute the

indemnity for damages and the payment of interest in case of non-
compliance, if there is no stipulation to the contrary. A penal clause is
an accessory undertaking to assume greater liability in case of breach.

C. Damages and interest may be demanded by the creditors

1. When it is stipulated
2. When the debtor is guilty of fraud
3. When the debtor refuses to pay the penalty.
- End -
 (Modes of extinguishing an obligation)

1. Modes of extinguishing an obligation

1. By payment or performance
2. Loss of the thing due
3. Condonation of remission of the debt
4. Confusion or merger
5. Compensation
6. Novation

2. Payment
a. Payment of fulfillment consists in the delivery of a sum of money or a
thing or doing a thing or not doing something.
b. Persons from whom creditors must accept payment.
a. The debtor
b. Person who has an interest in the obligation
c. Person stipulated in the contract to make
c. Persons to whom payment must be made
a. Creditor
b. Successor in interest
c. Person authorized to received payment
d. Payment of person who is incapacitated. As a rule the payment is not
valid,
The creditor cannot be even be completed to accept it.
e. Payment by a third person
a. If made without the consent or against the will of the debtor, the
payor can recover is so far as the payment was beneficial to the
debtor.
b. If made with consent of the debtor, the payor shall have the right
of reimbursement and subrogation that is to recover what he has
paid and to acquire all the rights of the creditor.
c. If made by a third person who does not intended to be
reimbursed, it is deemed to be a donation.
f. Payment to a third person
Payment to a third person is not valid. EXCEPT:
a. When the third person is authorized to receiver it
b. When the payment of the third person has redounded to the benefit
of
the creditor.
c. When the third person is in possession of the credit and the payment
was in good faith.
g. Special modes of payment
a. Application of payment
b. Dation in payment
c. Cession of payment
d. Tender of payment

1. Application of payment it is the designation of the debt to

which should be applied a payment made be a debtor who owes
several debts in favor of the same creditor.

Requisites for application of payment:

1. 2 or more debts
2. Same kind
3. 1 debtor and 1 creditor
4. All debts are due
5. Tendered payment is not sufficient to extinguish all
obligations

Rules if no application of payments is made:

a. Apply to the most onerous, in case the debts are of different
nature
b. If both are if the same nature and burden, apply
proportionately

2. Dation of payment the debtor alienates property in favor of

the creditor for a satisfaction of monetary obligation. (The
obligation is money; the payment is property.)
3. Cession in payment the debtor transfers all the properties
not subject to execution in favor of his creditors so that the
latter may sell them and apply the proceeds to their credits.

Requisites of cession in payment:

1. More than 1 debt
2. More than one creditor
3. Complete or partial insolvency of the debtor
4. Abandonment of all debtors property not exempt from
execution

4. Tender of Payment the act of the debtor of offering to the

creditor the thing due or amount due.
 Consignation the act of depositing the thing or amount due
with the proper court when the creditor does not desire or cannot
receive it, after complying with the formalities required by law.

Requisites of valid consignation:

1. Existence of a valid debt which is due
2. Tender of payment by the debtor and refusal without justifiable
reason by the creditor to accept it
3. Previous notice of consignation to person interested in the
fulfillment of the obligation
4. Consignation of the thing or sum due
5. Subsequent notice of consignation made to the interested
parties

Effects of consignation if properly made:

a. The debtor may ask the judge to order the cancellation of the
obligation.
b. The running of interest is suspended.
c. Before the creditor accepts, or before the judge declares that
the consignation is properly made, the obligation remains to
subsist.

3. Loss of the thing due

a. There is loss when the thing perishes; goes out of commerce; or
when it disappears in such a way that its existence is unknown or cannot be
recovered.
b. Effects of loss
a. If specific or determinate, the obligation is extinguished,
except:
i. When the debtor is at fault
ii. When the debtor is liable, by provision of law, by
contractual stipulation or when the nature of the obligation requires the
assumption of risk
b. If generic, the obligation is not extinguished, except if it is a
delimited generic thing.
4. Condonation or remission
a. Condonation or remission is the gratuitous abandonment by the
creditor of his right.
b. Essential requisites of remission:
1. There must be an agreement
 2. The parties must be capacitated
3. There must be a subject matter
4. The cause or consideration is generosity
5. Obligation is demandable at the time of remission
6. Remission must not be inefficious

5. Merger or confusion
a. Merger or confusion is the meeting in one person the qualities of
creditor and debtor with respect to the same obligation.
b. Requisites for valid merger:
1. Must take place between the principal debtor and creditor
2. Merger must be clear and definite
3. Obligations are the same or incidental

6. Compensation
a. Compensation is the extinguishment to the concurrent amount of
debts or 2 persons who, in their own rights are debtors and creditors of each
other.
b. Requisites of legal compensation:
1. That each of the obligors be bound principally, and that he be
at the same time principal creditor of the other.
2. Both debts consists in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated.
3. 2 debts are due.
4. They be liquidated and demandable.
5. Either debt is not involved in any retention or controversy
commenced by a third person and communicated in due time to the debtor.

The grantor may set up compensation with respect to principal

debt as regards what the creditor owes the principal debtor.

c. When legal compensation cannot take place

a. When one debt arises from depositum in contract of deposit.
b. When one debt arises from the obligation of a bailee in
commodatum.
c. When one debt arises because of a claim for support.
d. When one of the debts consists in civil liability arising from
crime
7. Novation
a. Novation is the extinction of an obligation through the creation of a
new one which substitutes the old one.
b. Obligation may be modified by:
1. Changing the object or principal condition
2. Substituting the person of the debtor
3. Subrogating the third person in the rights of the creditor
c. Requisites of novation
1. Previous valid obligation
2. Capacity and intention of the parties to modify or extinguish
the obligation
3. Modifications or extinguishments of the obligation
4. Creation of a new and valid obligation
d. Expromission takes place when a third person on his own initiative
and without the knowledge or against the will of the original debtor assumes
the obligation.

Requisites of expromission:
1. Initiative of payment comes from the third person
2. Consent of the creditor and the new debtor is required
3. Obligation of the old debtor is absolutely extinguished

e. Delegacion takes place when the creditor accepts a third

person to take the place of the debtor at the instance of the
latter.

Requisites of delegacion:
1. Initiative of payment comes from the debtor.
2. The original debtor, the creditor and the third person, or the new debtor
must consent
3. The obligation of the old debtor is generally extinguished

The insolvency of the new debtor, who has been proposed by the original
debtor and accepted by the creditor, shall not revive the action of the
latter against the original obligor. EXCEPT when said insolvency was
already existing and of public knowledge or known to the debtor when he
delegated his debt.
 f. Subrogation transfer to the third person all the rights appertaining to
the creditor, including the right to proceed against the guarantor,
possessors of mortgages, subject to any legal provision or any
modification that may be agreed upon.

Kinds of subrogation:
1. Conventional takes place by agreement of the original creditor,
the third person substituting the original creditor, and the
debtor.
2. Legal takes place by operation of law.

Legal subrogation presumed:

1. When a creditor pays another creditor who is preferred
even if without the debtors knowledge.
2. When the third person not interested in the obligation
pays with the express or tacit approval of the debtor.
3. When, even without the knowledge of the debtor, a
person interested in the fulfillment of the obligation pays,
without prejudice to the effects of the confusion as to the
latters share.

8. Other modes of extinguishing an obligation

1. Annulment
2. Rescission
3. Fulfillment of resolutory condition
4. Mutual dissent or withdrawal
5. Arrival of resolutory period
6. Impossibility of fulfillment
7. Happening of fortuitous event
8. Renunciation or waiver
9. Prescription

Prescriptive periods:

A mortgage action prescribes after 10 years.

The following actions must be brought within 10 years from the time the right
of action accrues:
a. Upon a written contract
b. Upon an obligation created by law
c. Upon a judgment

The following actions must be commenced within 6 years;

a. Upon an oral contract
b. Upon a quasi-contract
The following actions must be instituted within 4 years:
a. Upon an injury to the rights of the plaintiff
b. Upon a quasi-delict
-END-