BOOK IV – OBLIGATIONS AND CONTRACTS

TITLE 1 – OBLIGATIONS
Chapter 1
General Provisions

ARTICLE 1156. An obligation is a juridical necessity to give, to do or not to do.

Obligation
 Sanchez Roman: “the juridical necessity to comply with a prestation”
 Manresa: “a legal relation established between one person and another, whereby the latter is bound to the fulfillment of a prestation
which the former may demand of him.”
 “our law merely stresses the duty of the debtor or obligor when it speaks of obligation as a juridical necessity” (de leon)

Why is obligation a juridical necessity?

 Because in case of non-compliance, the courts of justice may be called upon to enforce its fulfillment or, in default thereof, the
economic value that it represents

Civil obligation Natural obligation Moral obligation

 one which has a binding force in
law, and which gives the oblige or
creditor the right of enforcing it
against the obligor or debtor in a
court of justice (Art. 1156, CC)
o enforceable in a court of
justice
 based on positive law
 one which cannot be enforced by
action, but which is binding on the
party who makes it in conscience
and according to the natural law
o cannot be enforced
 based on equity and natural law
 The sanction is conscience or
morality, or the law of the church.
Note: if a catholic promises to hear
mass for 10 consecutive Sundays in
order to receive Php1k, this obligation
becomes a civil one

Requisites of an obligation:
 a juridical or legal tie (efficient cause) – binds the parties to the obligation, and which may arise from either bilateral or unilateral
acts of persons
 active subject (obligee or creditor) – one who can demand the fulfillment of the obligation; he who has a right
 passive subject (obligor or debtor) – one against whom the obligation is juridically demandable; he who has a duty
 fact/prestation/service – the object of the obligation; conduct required to be observed by the debtor
o obligation to give – the delivery of a movable or immovable thing to the creditor
o obligation to do – covers all kinds of works or services whether physical or mental
o obligation not to do – consists in refraining from doing some acts like the obligation of a building proprietor to refrain
from committing nuisance through noise; includes the obligation not to deliver
 form (not usually manifested as a requisite because it is only essential in obligations arising from certain contracts)

As a general rule, the law does not require any form in obligations arising from contracts for their validity or binding force (Art. 1356).
 obligations arising from other sources (Art. 1157) do not have any form at all

obligation Right Wrong (cause of action)

The act or performance which the law The power which a person has under An act or omission of one party in
will enforce the law, to demand from another any violation of the legal right or rights of
prestation another, causing injury to the latter

Elements of a cause of action:

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  a legal right in favor of a person (creditor/plaintiff) by whatever means and under whatever law it arises or is created
 a correlative legal obligation on the part of another (debtor/defendant) to respect or not to violate said right
 an act or omission in breach or violation of said right by the defendant with consequential injury or damage to the plaintiff for
which he may maintain an action for the recovery of damages or other appropriate relief
o the absence of any of these elements makes the complaint vulnerable for a motion for dismiss on the ground of failure to
state a cause of action
o the presence of a cause of action rests on the sufficiency, and not on the veracity, of the allegations in the complaint,
which will have to be examined during the trial on the merits
 the test is whether the material allegations of the complaint, assuming to be true, state ultimate facts which
constitutes plaintiff’s cause of action such that plaintiff is entitled to a favorable judgment as a matter of law.
o A cause of action only arises when the last element occurs (at the moment a right has been transgressed)

Action based upon a written contract should be brought within 10 years from the time the right of action accrues (cause of action)
 An action based on a contract accrues only when an actual breach or violation thereof occurs
 The period of prescription commences, not from the date of execution of the contract but from the occurrence of the breach.

injury Damage Damages

 The illegal invasion of a legal right
 The wrongful act or omission which
causes loss or harm to another
 The legal wrong to be redressed
 The loss, hurt, or harm which
results from the injury
 The sum of money recoverable as
amends for the wrongful act or
omission
 The recompense or compensation
awarded or recoverable for the
damage or loss suffered

There may be injury without damage and damage without injury.

 Proof of loss for injury: there must be, in addition to a wrongful violation of one’s legal right, loss or damage caused to him by said
violation. But except for actual or compensatory damages, no pecuniary proof is necessary in order that moral, nominal, temperate,
liquidated, or exemplary damages may be awarded.
 Liability for damages of a person for exercising his legal rights: one who makes use of his legal right does no injury (qui jure suo
utitur mullum damnum facit)
o if damage results from a person’s exercising his legal right, it is damage without injury (damnum absque injuria)

Classifications of obligation:
 pure and conditional (Arts. 1179-1192)
 with a period (Arts. 1193-1198)
 alternative and facultative (Arts. 1199-1206)
 joint and solidary (Arts. 1207-1222)
 divisible and indivisible (Arts. 1223-1225)
 with a penal clause (Arts. 1226-1230)

Classifications of obligations according to Sanchez Roman:

 as to juridical quality
o natural – when the obligation is in accordance with natural law
o civil – when the obligation is in accordance with positive law
o mixed – when the obligation is in accordance with both natural and positive law

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  as to parties
o unilateral – only one party is bound
bilateral (reciprocal) – both parties are mutually or reciprocally bound
o individual – there is only one obligor
collective – there are several obligors
 joint – each obligor is liable only for his proportionate share of the obligation
 solidary – each obligor may be held liable for the entire obligation
 as to objects
o determinate – specific object
indeterminate (generic) – object is designated by its class or genus
o simple – only one undertaking
multiple – several undertakings
 conjunctive – when all of the undertakings are demandable at the same time
 distributive – when only one undertaking out of several is demandable
 alternative – obligor is allowed to choose one out of several obligations which may due or
demandable
 facultative – obligor is allowed to substitute another obligation for one which is due and demandable
o positive – when the obligor is obliged to give or do something (obligation to give/do)
negative – when the obligor must refrain from giving or doing something (obligation not to give/do)
o real – when the obligation consists on giving something
personal – when the obligation consists in doing or not doing something
o possible – when the obligation is capable of fulfillment in nature as well as in law
impossible – when the obligation is not capable of fulfillment either in nature or in law
o divisible – when the obligation is susceptible of partial performance
indivisible – when the obligation is not susceptible of partial performance
o principal – when it is the main undertaking
accessory – when it is merely an undertaking to guarantee the fulfillment of the principal obligation
 as to perfection and extinguishment
o pure – when the obligation is not subject to any condition or term and is immediately demandable
o conditional – when the obligation is subject to a condition which may be suspensive (the happening or fulfillment of the
condition results in the birth of the obligation) or resolutory (the happening or fulfillment of the condition results in the
extinguishment of the obligation)
o with a term or period (a plazo) – when the obligation is subject to a term or period which may be suspensive (from a day
certain; the obligation is demandable only upon the expiration of the term), or resolutory (to a day certain; the obligation
terminates upon the expiration of the term)

ARTICLE 1157. obligations arise from:

1. Law;
2. Contracts;
3. Quasi-contracts;
4. Acts or omissions punished by law; and
5. Quasi-delicts.

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Criticism: the addition of law as a source of obligation
 Quasi-contracts, as well as ex lege, are, in common law system, merged into the category of obligations imposed by law, and all are
denominated implied contracts.
o Planiol: In contracts, the will of the parties is the force that creates the obligation, while the law merely sanctions its
effectiveness and limits its scope. In the absence of a contract, obligation can have no other source but the law
 There are only 2 sources of obligations: law and contracts, because obligations arising from quasi-contacts, crimes and quasi-delicts
are really imposed by law (Leung Ben vs. O’Brien, 38 Phil. 182)

Classification of sources:
 Those emanating from law; and
 Those emanating from private acts
o Those arising from licit acts (contract and quasi-contracts)
o Those arising from illicit acts (punishable by law: delicts/not punishable by law: quasi-delicts)

Enumeration is exclusive (sta. maria)

ARTICLE 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code in special laws are demandable,
and shall be regulated by the precepts of the law which establishes them; and to what has not been foreseen, by the provisions of this Book.

How can we determine whether an obligation arises from law?

 Manresa: when the law establishes the obligation and the act or condition upon which it is based is nothing more than a factor for
determining the moment when it becomes demandable
o Example: the husband’s obligation to support his wife is not anchored on the contract of marriage, but on the law which
dictates it (Art. 195, FC)
From other sources?
 Manresa: When the law merely recognizes or acknowledges the existence of an obligation generated by an act which may constitute
a contract, quasi-contract, criminal offense or quasi-delict and its only purpose is to regulate such obligation, then the act itself is
the source of the obligation and not the law

Why they are not presumed

 Because they are considered a burden upon the obligor. They are the exception, not the rule.
 To be demandable, they must be clearly set forth in the law (i.e. Civil Code)

Examples:
 Obligations of parents to support their minor children (Art. 195, FC)
 Obligation to pay taxes (Internal Revenue Code)

These obligations shall be regulated by the law which establishes them.

 The Civil Code is only suppletory

ARTICLE 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good
faith.

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Contract – meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render
some service.
 Consensual contracts – perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the consequences which according to their nature may be in keeping with good faith,
usage and law
o Once the contract is perfected, the valid contract has the force of law binding the parties to comply therewith in good
faith, where neither one may renege therefrom without consent of the other
 Real contracts – are not perfected until the delivery of the object of the obligation
o i.e. deposit, pledge ad commodatum

Rule: consensual or real, from the moment it is perfected, obligations which may be either reciprocal or unilateral arise.
 The mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.
 A buyer, who has knowledge of the rules and regulations issued by the seller governing the sale, cannot later feign ignorance.
 If it occurs to one of the contracting parties to allege some defect in a contract as a reason for invalidating it, such alleged defect
must be proved by him by convincing evidence since its validity or compliance cannot be left to the will of one of them.
o It behooves any contracting party to learn and know the contents of an instrument before signing and agreeing to it.

Although a contract is the law between the contracting parties, the provisions of positive law which regulate such contracts are deemed
included and shall limit and govern the relations between the parties.

A compromise agreement is immediately executory and not appealable, except for vices of consent (Art. 1330) or forgery.
 Upon the parties, it has the effect and the authority of res judicata, once entered into.
 To have the force of law between the parties, it must comply with the requisites of contracts (Art. 1318)
o It may be either extrajudicial or judicial

The law stresses the obligatory nature of a binding and valid agreement absent any allegation that is contrary to law, morals, good
customs, public order, or public policy.

A contract must be valid and enforceable (Art. 1403).

 It is valid if it is not contrary to law, morals, good customs, public order, and public policy.
 In the eyes of the law, a void contract does not exist (Art. 1409); hence, no obligations

When a contract requires the approval of the government, it becomes the law between the contracting parties only when approved, and
where there is nothing in it which is contrary to law, etc., its validity must be sustained.

“Compliance in good faith”

 Performance in accordance with the stipulations, clauses, terms and conditions of the contract.

Although the contract imposes no penalty for its violation, a party cannot breach it with impunity.
 Interest may, in the discretion of the court, on equitable grounds, be allowed upon damages awarded for breach of contract.
 The remedy serves to preserve the interest of the promises of having the benefit of his bargain, or in being reimbursed for loss
caused by reliance on the contract, or in having restored to him any benefit that he has conferred on the other party.

Exceptions to the rule:

 A contract which provides for unconscionable attorney’s fees may be disregarded by the court
 When liquidated damages have been agreed upon and the same are iniquitous or unconscionable, these liquidated damages may
be reduced
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Provisions inserted without the knowledge of the other party shall be disregarded; the rest of the contract shall continue to be enforced.

ARTICLE 1160. obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book.

Quasi-contracts
 Those juridical relations arising from lawful, voluntary and unilateral acts, by virtue of which the parties become bound to each
other, based on the principle that no one shall be unjustly enriched or benefited at the expense of another.
 Characteristics:
o The act(s) must be lawful to distinguish it from a delict or crime where the acts are unlawful
o The act(s) executed must be voluntary to distinguish it from quasi-delict where the act(s) involved constitute a fault,
negligence or lack of foresight
o The act(s) executed must be unilateral to distinguish it from an ordinary contract

Kinds of quasi-contracts:
 Negotiorum gestio
o Arises whenever a person voluntarily takes charge of the agency or management of the business or property of another
without any power or authority from the latter.
 Solutio indebiti
o Arises whenever a person unduly delivers a thing through mistake to another who has no right to demand it.
o E.g. naligaw na cellphone load

In quasi-contract where no express consent is given by the other party, the consent needed in a contract is provided by law through
presumption (presumptive consent).
 Presumptive consent gives rise to multiple juridical relations in obligations for delivery of the thing and rendering of service.

ARTICLE 1161. Civil obligations arising from criminal offenses are governed by penal laws, subject to the provisions of Article 2177, and to
the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages.

Rule: every person liable for a felony is also civilly liable.

 But a person who is not criminally liable may still be civilly liable.

Pursuant to Sec.2, Rule III of the Revised Rules of Criminal Procedure 2000, except for civil actions provided for in Articles 32, 33, 34 and
2176 of the Civil Code, the civil action which has been reserved cannot be instituted until final judgment has been rendered in the criminal
action.
 The period of prescription if the civil actions under Sec. 3 of the aforementioned rules shall not be suspended because they can be
instituted separately.

Elements of a prejudicial question (Sec. 7 of the Revised Rules of Criminal Procedure 2000):
 The previously instituted civil action which involves an issue similar or intimately related to the issue raised in the subsequent
criminal action; and
 The resolution of such issue determines whether or not the criminal action may proceed.

Changes brought by the Revised Rules of Criminal Procedure:

 Only the civil liability of the offense charged is deemed instituted with the criminal action unless the offended party:
o Waives the civil action;

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 o Reserves the right to institute it separately; or
o Institutes the civil action prior to the criminal action.
 Reservation and waiver refers only to the civil action for the recovery of the civil liability arising from the offense charged.
o This does not include recovery of civil liability under Articles 32, 33, 34 and 2176 of the Civil Code arising from the same
act or omission which may be prosecuted separately even without reservation
 Pleadings allowing a 3rd-party complaint as well as those allowing a counterclaim are no longer allowed.
o Any claim which could have been the subject thereof may be litigated in a separate civil action.
 Circular 57-97 (with regards to the filing of actions for violation of BP 22) were incorporated
o Mandated the inclusion of the corresponding civil action for which the filing fee shall be paid based on the amount of the
check involved.

Effect of acquittal:
 If he was acquitted because his guilt was not proven beyond reasonable doubt:
o The civil action to recover damage based on the same act or omission may still be instituted
o Mere preponderance of evidence shall be sufficient
 If the acquittal was based on the ground that he did not commit the offense charged, or if the acquittal proceeds from a declaration in
a final judgment that the fact from which the civil liability might arise did not exist:
o Subsequent civil actions are no longer possible

Effect of independent civil actions

 By reserving his right to file a separate civil action, then such right shall depend upon the result of the criminal action
 By commencing the civil action ahead of the criminal action, the former shall be suspended once the latter is instituted

Exceptional cases wherein the civil action is entirely separate and independent from the criminal action, although the act or omission
which is the basis thereof may be a criminal offense:
 Where the civil action is based on an obligation not arising from the act or omission complained of as a criminal offense or felony
o The basis of the civil action may be an obligation arising from law, contract, quasi-contract, or quasi-delict
 Where the law grants to the injured party the right to institute a civil action which is entirely separate and distinct from the criminal
action (in addition to Art. 31, NCC)
o Interferences by public officers or employees or by private individuals with civil rights and liberties (Art. 32, NCC)
o Defamation, fraud and physical injuries (Art. 33, NCC)
o Refusal or neglect of a city or municipal police officer to render aid or protection in case of danger to life or property (Art.
34, NCC)

Effect of failure to make the reservation

 The Supreme Court held in the cases of Garcia vs. Florido (52 SCRA 420), Abellana vs. Marabe (57 SCRA 106) and Elcano vs. Hill (77
SCRA 98) that the procedural requirement provided for in Sec. 2 of Rule 111 of the New Rules of Court is not mandatory.
 However, the offended party shall not be allowed to recover damages twice.

What governs the extent of the civil liability arising from crimes?
 Revised Penal Code
 Civil Code

What are these penalties?

 Restitution – to return a thing to its rightful owner

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  Reparation for the damage caused – compensation; redress
 Indemnification for consequential damages

ARTICLE 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by
special laws.

Quasi-delicts
 All of those obligations which do not arise from law, contracts, quasi-contracts, or criminal offenses
 The fault or negligence of a person, who, by his act or omission, connected or unconnected with, but independent from, any
contractual relation, causes damage to another person.
 Include acts which are criminal in character or in violation of the penal law, whether voluntary or negligent (Elcano vs. Hill, G.R. No.
L-24303, May 26, 1977)
 Art. 2176, NCC: an act or omission by a person which causes damage to another in his person, property or right giving rise to an
obligation to pay for the damage done, there being fault or negligence but there is no pre-existing contractual relation between the
parties.

Who are the persons liable?

 See Art. 2180, Civil Code

Requisites for liability:

 The fault or negligence of the defendant;
o Negligence – the want of care as required by the attending circumstances
o Test of negligence (Picart vs. Smith, 37 Phil. 809):
 Would a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the
person injured as a reasonable consequence of the course about to be pursued… reasonable foresight of harm,
followed by the ignoring of the admonition born of this prevision, is the constitutive fact of negligence
 The damage suffered or incurred by the plaintiff; and
 The relation of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff.
o The fault or negligence is the proximate cause of the injury
o Proximate cause
 Such adequate and efficient cause as, in the natural order of events, and under the particular circumstances
surrounding the case, would necessarily produce the event (Urbano vs. IAC, 157 SCRA 1)
 One which in natural sequence, undisturbed by any independent cause, produces the result complained of.

Crimes vs. Quasi-Delicts

Basis Crimes Quasi-delicts

Legal basis of liability No law, no crime As long as there is fault or negligence resulting
in damage or injury to another
Criminal intent Essential Not necessary

Nature of right violated Public Private

Liability for damages Some do not give liability for damages All gives rise to liability for damages
(contempt, rebellion, etc)
Proofs needed (quantum of Beyond reasonable doubt Preponderance of evidence
evience)

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Sanction/penalty Reparation or indemnification Imprisonment and/or fine (sometimes plus
accessories)
Liabilities Criminal Only civil liability
Civil
Can be compromised by the parties No Yes
themselves?
Liability of the person responsible Subsidiary Direct and primary
for the author of the negligent act

Quasi-delicts (culpa aquiliana) vs. culpa contractual

Basis Culpa aquiliana Culpa contractual

Nature of negligence
Defense of ‘good father of a
family’
Presumption of negligence
Direct, substantive, and independent (Rakes vs.
Atlantic, 7 Phil. 395)
A complete defense insofar as parents, guardians
and employers are concerned (Art. 2180, NCC)
None – injured party must prove the negligence of
defendant
Merely incidental to the contractual obligation
Not a complete and proper defense (Cangco vs.
MRC, 38 Phil. 768)
Yes – as long as it can be proved that there was a
breach of the contract (the defendant must
prove the absence of negligence)

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