OBLIGATIONS

&
CONTRACTS

NOTES FOR REVIEW

(University of Luzon, College of Accountancy)

ATTY. BRYAN JASPER D. SOLIS

(Lecturer)

OBLIGATIONS
Definition.

A juridical necessity to give, to do, or not to do (Article 1156). One

impressed with the character of enforceability.

Elements of an Obligation:

1. Active subject (called the obligee or creditor)—the possessor of a right;

he in whose favor the obligation is constituted.
2. Passive subject (called the obligor or debtor)—he who has the duty of
giving, doing, or not doing;
3. Object or Prestation –the subject matter of the obligation.
4. Efficient Cause (vinculum or juridical tie)—the reason why the
obligation exists.

Sources of Obligation:
1. Law (Obligations ex lege)—like the duty to pay taxes or to support one’s
family.
2. Contracts (Obligations ex contractu)—like the duty to repay the loan by
virtue of an agreement.
3. Quasi-Contracts (Obligations ex quasi-contractu)—like the duty to refund
an over-change of money because of the quasi-contract of solution
indebiti or “undue payment.”
4. Crimes or Acts or Omissions Punished by Law (Obligations ex maleficio
or ex delicto)—like the duty to return a stolen carabao.
5. Quasi-Delicts or Torts (Obligations ex quasi-delicto or ex quasi-
maleficio)—like the duty to indemnify a person who suffered damages
because your acts or negligence, without criminal intent or pre-existing
obligation.

Law as source of obligation.

Obligation derived from law are not presumed. Only those expressly
determined in this code or by special laws are demandable, and shall be regulated by

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precepts of law which established them; and as to what has not been foreseen, by the
provisions of this book.

Contract as source of obligation.

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

Quasi-contract as source of obligation.

It is the is 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

2 kinds:
1. Negotiorum Gestio (unauthorized management)

This takes place when a person voluntarily takes charge of another’s

abandoned business or property without the owner’s authority (Article 2144).
Reimbursement must be made to the gestor for necessary and useful expenses, as
a rule.

2. Solutio Indebiti

This takes place when something is received when there is no right to

demand it, and it was unduly delivered thru mistake. The recipient has the duty to
return it.

Delict as a source of obligation.

Every person criminally liable for a felony is also civilly liable. (Article 100,
Revised Penal Code)

Quasi-delict or culpa aquiliana or tort as a source of obligation.

One which causes damage to another, there being fault or negligence, but there
is no pre-existing contractual relation between the parties.

Classification of Obligations in General

A. From the view point of “sanction”

1. Civil Obligation—that defined in Article 1156. The sanction is

judicial process.
2. Natural Obligation—the duty not to recover what has voluntarily
been paid although payment was no longer required. The sanction
is law but only because conscience had originally motivated the
payment.
3. Moral Obligation—the duty of the Catholic to hear mass on
Sundays and holy days of obligations. The sanction here is
conscience or morality, or the law of the church.
B. From the viewpoint of subject matter
1. Real Obligation—the obligation to give.
2. Personal Obligation—the obligation to do or not to do.
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 C. From the affirmativeness and negativeness of the obligation
1. Positive or Affirmative Obligation—the obligation to give or to do.
2. Negative Obligation—the obligation not to do.
D. From the viewpoint of persons obliged.
a. Unilateral—where only one of the parties is bound.
b. Bilateral—where both parties are bound.

The prestation in an obligation.

1. To give (real obligation)

2. To do (positive personal obligation)
3. Not to do (negative personal obligation)

Obligations of a person obliged to give something.

Referred to as real obligation (“res” or thing), if what is to be given is specific or

particularly designated from all others or the same class, it is real determinate
obligation; if object is designated merely by its class or genus, it is real generic
obligation.

Determinate Generic

a. Deliver the thing which he has 1. Deliver the thing which is

obligated himself to give (Art. neither of superior nor inferior
1165); quality;

b. Take care of the thing with 2. Pay damages in case of breach

proper diligence of a good of the obligation by reason of
father of a family (Art. 1163); delay, fraud, negligence or
contravention of the tenor
c. Deliver all accessions and thereof (Art. 1170);
accessories of the thing even
though they may not have been
mentioned (Art. 1166);

d. Pay damages in case of breach

of the obligation by reason of
delay, fraud, negligence or
contravention of the tenor
thereof (Art. 1170);

Creditor’s right to the fruits of the thing.

The creditor has a right to the fruits of the thing from the time the obligation to
deliver it arises.

Before delivery of fruits After delivery of fruits

The creditor’s right is personal or jus The creditor has now a real right over
in personam, a right which is the fruits from the time of delivery
enforceable only against a definite and becomes enforceable against the
passive subject, the debtor. whole world. In short, it gives a

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 person direct and immediate juridical
power over a thing which can be
exercised not only against a definite
passive subject but against the whole
world. The rights of ownership and
possession are real rights.

Kinds of fruits.

1. Natural fruits—spontaneous products of the soil without the intervention of

human labor, and the young and other product of animals with or without
the intervention of human labor, such as forest products.
2. Industrial fruits—products of the soil through cultivation or human labor,
such as palay and vegetables, planted by farmers.
3. Civil fruits—fruits as a result of civilization or fruits arising out of juridical
relation, such as rent of lands, apartments and buildings.

Accessions and accessories defined and exemplified.

Accessories Accessions

Those which are used for the Include everything which is produced
embellishment, use, or preservation by a thing, incorporated or attached
of another thing of more importance. thereto, either naturally or scientifically.
It includes natural accession, such as
Example: tools and spare parts with alluvion, and industrial accession, such
respect to a machine as building, planting and sowing.

Rights of the creditor in an obligation to do something.

Determinate Generic
a. Compel specific Ask for the performance of the
Performance (Art. 1165) obligation (Art. 1165)
b. Recover damages in case
of breach of the Ask that the obligation be complied
obligation, exclusive or in with at the expense of the debtor (Art.
addition to specific 1165)
performance (Art. 1165)
c. Entitlement to the fruits, Recover damages in case of breach of
interests from the time the obligation (Art. 1170)
the obligation to deliver
arises.

Breach of obligations.

1. Voluntary—Debtor, in the performance of the obligation, is guilty

of:
a. default (mora)

b. fraud (dolo)

c. negligence (culpa)
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 d. contravention of the tenor of the obligation

Debtor is liable for damages.

2. Involuntary—Debtor is unable to comply with his obligation

because of fortuitous event. Debtor is not liable for damages.

Effects of Breach.

Positive Personal Obligation Negative Personal Obligation

The Creditor can: If the obligor does what has been

forbidden him, the creditor can:
a. Have the obligation
performed at the expense a. Have it undone at the
of the obligor (Art. 1167); expense of the obligor (Art.
1168); and
b. Ask that what has been
poorly done be undone (Art. b. Ask for damages (art. 1170)
1167);

c. Recover damages because

of the breach of the
obligation (art. 1170).

Default or Delay (Mora)

Non-fulfilment of the obligation with respect to time, generally after demand to

perform it has been made.

Requisites:

1. Obligation is demandable and already liquidated;

2. The debtor delays performance;

3. The creditor requires performance judicially or extra-

judicially

3 Kinds:
1. Mora Solvendi—delay of the debtor to perform his
obligation. It may be:
a. Ex re—obligation to give;

b. Ex persona—obligation is to do;

2. Mora Accipendi—delay of the creditor to accept the

delivery of the thing which is the object of the obligation

3. Compensatio Morae—delay of the parties or obligors in

reciprocal obligations.

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When delay is incurred.

There must be a demand (judicial or extra-judicial) before delay may be

incurred.

Exceptions:

1. When stipulated by the parties.

2. By provision of law.

3. When time is of the essence of the contract.

4. Demand will be useless.

Fraud (Dolo).

Fraud or dolo consists in the conscious and intentional proposition to evade

normal fulfilment of an obligation.

2 kinds:

1. Fraud in obtaining consent (causal fraud/dolo causante)

2. Fraud in performing a contract (incidental fraud/dolo incidente)

Dolo incidente Dolo causante

a. Present during the Present during the time of birth or
performance of a pre-existing perfection of the obligation.
obligation.

b. Purpose is to evade the Purpose is to secure the consent of

normal fulfilment of the the other to enter into a contract.
obligation.

c. Result in the non-fulfilment Results in the vitiation of consent.

or breach of the obligation.

d. Gives rise to a right of the Gives rise to a right of an innocent

creditor to recover damages party to annul the contract.
from the debtor.

Negligence (Culpa).

Omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place.

Diligence required:

1. That agreed upon by the parties

2. In the absence of stipulation, that required by law in the

particular case

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 3. If both the contract and law are silent, diligence of a good
father of a family

Concept of a Good Father of a Family.

That reasonable diligence which an ordinary prudent person would have done
under the same circumstances. The test of negligence can be determined by this
standard: If defendant, in committing or causing the negligent act, had used
reasonable care and vigilance which a man of ordinary prudence would have employed
under the same situation, he is not guilty of negligence. Otherwise, he is guilty.

Fortuitous Event.

An event which could not be foreseen or which though foreseen was inevitable.

Requisites:

1. Cause is independent of the will of the debtor.

2. The event must be unforeseeable or unavoidable.

3. Occurrence must be such as to render it impossible for the

debtor to fulfil his obligation in a normal manner.

4. Debtor must be free from any participation in.

5. The aggravation of the injury resulting to the creditor.

General Rule: No liability in case of fortuitous events.

Exceptions:

1. When expressly declared by law [e.g. Article 552 (2), 1165 (3),
1268, 1942, 2147, 2148 and 2159 of the Civil Code]

2. When expressly declared by stipulation or contract

3. When the obligor is in default or has promised to deliver the

same thing to 2 or more persons who do not have the same
interest [Article 1165 (3)].

Effect of Fortuitous Event:

Determinate Obligation Generic Obligation

Obligation is extinguished Obligation is not extinguished

based on the rule that genus
never perishes (genus nunquam
peruit)

Remedies of the Creditor to Protect Credit.

1. Exhaustion of debtor’s property

2. Accion subrogatoria to be subrogated to all the rights and actions of

the debtor save those which are inherent in his person.

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 3. Accion pauliana—impugn all the acts which the debtor may have done
to defraud them.

General rule: Rights acquired by virtue of an obligation are transmissible in

character.

Exceptions:

1. When they are not transmissible by their very nature, e.g. personal
right;

2. When there is a stipulation of the parties that they are not

transmissible.

3. Not transmissible by operation of law.

Classification of Obligations.

Primary Secondary

a. Pure and conditional a. Unilateral and bilateral

b. With a period or with a term b. Real and personal
c. Alternative and facultative c. Determinate and indeterminate
d. Joint and solidary d. Positive and negative
e. Divisible and indivisible e. Legal and conventional
f. With a penal clause f. Civil and natural

Pure Obligation.

One whose effectivity or extinguishment does not depend upon the fulfilment or
non-fulfilment of a condition or upon the expiration of a term or period and is
demandable at once.

Conditional Obligation.

One whose effectivity is subordinated to the fulfilment or non-fulfilment of a

future and uncertain fact or event.

Kinds of Conditions:

1. Suspensive—fulfillment of the condition results in the

acquisition of rights arising out of the obligation.

2. Resolutory—fulfillment of the condition results in the

extinguishments of rights arising out of the obligation.

3. Casual—fulfillment of the condition depends upon chance

and/or upon the will of a third person.

4. Possible—condition is capable of realization according to the

nature, law, public policy and good customs.

5. Negative—condition involves the omission of an act.

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 6. Divisible—condition is susceptible to partial realization.

7. Indivisible—condition is not susceptible of partial realization.

8. Conjunctive—where there are several conditions, all of which

must be realized.

9. Alternative—where there are several conditions but only one

must be realized.

Rule in Potestative Conditions.

If the fulfilment of the potestative condition depends upon the sole will of the
debtor, the condition as well as the obligation itself is void. It renders the obligation
illusory (applicable only to a suspensive condition and to an obligation which depends
for its perfection upon the fulfilment of the potestative condition and not to pre-
existing obligation).

If the fulfilment depends exclusively upon the will of the creditor, both the
condition and obligation is valid.

Rule in Impossible Conditions.

General rule: They shall annul the obligation which depends upon them.

Exceptions:

1. Pre-existing obligation

2. If obligation is divisible

3. In simple or renumeratory donations

4. In testamentary disposition

5. In case of conditions not to do an impossible thing.

Effects of Suspensive Condition.

1. Before fulfilment of the condition, the demandability as well as the

acquisition or effectivity of the rights arising from the obligation is
suspended;
2. After the fulfilment of the condition, the obligation arises or becomes
effective;
3. The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation;

4. When the obligation imposes reciprocal prestations upon the parties, the
fruits and interests shall be deemed to have been mutually compensated;

5. If the obligation is unilateral, the debtor shall appropriate the fruits &
interests received, unless from the nature and circumstances it should be
inferred that the intention of the persons constituting the same was
different;

6. In obligations to do or not to do, the court shall determine the retroactive

effect or conditions that have been complied with.

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Effects of Resolutory Condition.

Before the fulfilment of the condition, the right which the creditor has already
acquired by virtue of the obligation is subject to a threat of extinction;

If condition is not fulfilled, rights are consolidated; they become absolute, the
parties shall return to each other what they received including the fruits.

Suspensive Condition Resolutory Condition

a. If fulfilled, obligation arises or If fulfilled, obligation is extinguished;

becomes effective;

b. If not fulfilled, no judicial relation is

created; If not fulfilled, judicial relation is
consolidated;
c. Rights are not yet acquired, but
there is hope or expectancy that Rights are already acquired, but subject to
they will soon be acquired. the threat or danger of extinction.

Effects of Loss, Deterioration and Improvement in Real Obligations (During

the Pendency of the Condition)

A. Loss

Without debtor’s fault—obligation is extinguished

With debtor’s fault—debtor pays damages.

Applies only to determinate thing. A thing is loss when it:

1. Perishes

2. Goes out of commerce

3. Disappears in such a way that its existence is unknown or it

cannot be recovered.

B. Deterioration

Without debtor’s fault, impairment is to be borne by the creditor.

With debtor’s fault, creditor may choose between the rescission of the obligation
and its fulfilment with indemnity for damages in either case.

C. Improvement

If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor.

If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary.

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Obligations with a Period.

Those whose demandability or extinguishment is subject to the expiration of a

term or period.

Requisites:

1. Future
2. Certain
3. Possible, legally and physically.

Classification of Term or Period:

1. Suspensive (Ex die)—obligation becomes demandable only upon

arrival of a day certain.
2. Resolutory (In Diem)—arrival of day certain terminates the
obligation;
3. Legal—granted by law.
4. Conventional—stipulated by parties.
5. Judicial—fixed by courts.
6. Definite—date/time is known beforehand.
7. Indefinite—the date/time of day certain is unknown.

Term Condition

1. Interval of time which is future and Fact or event which is future and certain
certain

2. Interval of time which must Future and uncertain fact or event which
necessarily come, although it may may or may not happen
not be known when.

3. Exerts an influence upon time or Exerts influence upon the very essence of
demandability or extinguishment of the obligation itself.
an obligation.

4. Does not have any retroactive Has retroactive effect.

effect unless there is an agreement
to the contrary.

5. When it is left exclusively to the When it is left exclusively to the will of the
will of the debtor, the existence of debtor, the very existence of the
the obligation is not affected. obligation is affected.

General rule: When a period is designated for the performance or fulfilment of

an obligation, it is presumed to have been established for the benefit of both creditor
and debtor.

Exception: When it appears from the tenor of the obligation or other

circumstances that the period has been established in favor of one or of the other.

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When Court May Fix Period.

1. If the obligation does not fix a period, but from its nature and
circumstances it can be inferred that a period was intended by the
parties;

2. If the duration of the period depends upon the will of the debtor;

3. If the debtor binds himself when his means permit him to do so

(Art. 1180).

Reason for Fixing Period (Art. 1197)

There can be no possibility of any breach of contract or failure to perform the

obligation unless the period is fixed by the courts.

When debtor loses right to make use of period:

1. When after the obligation has been contracted, he becomes

insolvent, unless he gives guaranties or securities for the debt (the
insolvency need not be judicially declared);

2. When he does not furnish to the creditor the guaranties or

securities he promised;

3. When by his own act he has impaired said guaranties or securities

after their establishment, and when through fortuitous event they
disappear, unless he gives new ones equally satisfactory when
debtor violates any undertaking, in consideration of which the
creditor agreed to the period; or

4. When debtor attempts to abscond.

Definition of Alternative Obligation:

Alternative obligation is one where out of two or more prestations which may be
given, only one is due. In short, there are several things due but the delivery of one is
sufficient to extinguish the obligation.

General Rule: Right to choose belongs to the debtor

Exception : Unless given to the creditor

Limitations : The debtor shall have no right to choose those prestations which
are:

1. Impossible
2. Unlawful
3. Those which could not have been the object of the obligation.

Effect of loss of the object of the obligation.

a. If right of choice belongs to debtor:

1. If through fortuitous event, debtor cannot be held liable for

damages;
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 2. If one or more but not all of the things are lost or one or
some but not all of the prestations cannot be performed
due to the fault of the debtor, creditor cannot hold the
debtor liable for damages because the debtor can still
comply with his obligation;

b. If the right of choice belongs to the creditor:

1. If one of the things is lost through a fortuitous event, the

debtor shall perform the obligation by delivering that which
the creditor should choose from among the remainder, or
that which remains if only one subsists;

2. If the loss of one of the things occurs through the fault of

the debtor, the creditor may claim any of those subsisting,
or the price of that which, through the fault of the former,
has disappeared with a right to damages;

3. If all the things are lost through the fault of the debtor, the
choice by the creditor shall fall upon the price of any one of
them, also with indemnity for damages.

Facultative obligation.

It is one where only one prestation has been agreed upon but the debtor may
give another object as substitute.

The effect of the loss of the thing in facultative obligation.

1. Before susbstitution—If the principal thing is lost due to fortuitous event,

obligation is extinguished; if due to debtor’s fault, he is liable for damages.

If the thing intended as a substitute is the one which was lost, with or
without debtor’s fault, the obligation to deliver the substitute is extinguished
because what is to be delivered is the principal object and not the substitute.
The loss of this substitute is immaterial.

2. After substitution—If the principal thing is lost, the debtor is no longer liable
whatever be the cause of the loss, because it is no longer due. If the
substitute is lost due to fortuitous event, obligation is extinguished; if due to
debtors fault, he is liable for damages.

Facultative Alternative

a. Comprehends only one object Comprehends several objects or

or prestation which is due, but prestations which are due but may be
it may be complied with by the complied with by the delivery or
delivery of another object or performance of only one of them;
performance of another
prestation in substitution.

b. Fortuitous loss extinguishes Fortuitous loss of all prestations will

the obligation extinguish the obligation

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 c. Culpable loss obliges the debtor Culpable loss of any object due will give
to deliver substitute prestation rise to liability to debtor
without liability to debtor

d. Choice pertains only to debtor Choice may pertain to creditor or even

third person

Joint Obligation.

It is one where the whole liability is to be paid or fulfilled proportionately by the

different debtors and/or is to be demanded also proportionately by the different
creditors.

Features:

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 demand to all because the
debt of one is distinct from the others.
4. When the creditor interrupts the running of the prescriptive period by
demanding judicially from one, the others are not affected.
5. Defences of one debtor are not necessarily available to the others.

Solidary Obligation.

It is one where each one of the debtors is bound to render compliance of the
entire obligation and/or each one of the creditors has a right to demand entire
compliance of the prestation.

Instances when the law requires solidarity:

1. All the partners are liable solidarily with the partnership if the act
complained of arises from a crime or quasi-delict.
2. In agency, if two or more persons have appointed an agent for a
common transaction, they shall be solidarily liable to the agent for all
the consequences of the agency.
3. The responsibility of two or more persons who are liable for a quasi-
delict is solidary.
4. The responsibility of two or more payees, when there has been
payment of what is not due, is solidary.
5. Legal provisions regarding the obligations of devises and legatees.
6. Liability of principals, accomplices, and accessories of a felony.
7. Bailees in commodatum.

Joint vs. Solitary Obligations

General rule: Obligation is presumed joint if there is concurrence of two or

more debtors and/or creditors.

Exceptions:

1. When expressly stated that there is solidarity;

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 2. When the law requires solidarity;

3. When the nature of the obligation requires solidarity.

Joint Indivisible Obligations

The object or prestation is indivisible, not susceptible of division; while the tie
between the parties is joint, that is, liable only to a proportionate share.

Characteristics:

1. Demand must be made to all the joint debtors.

2. The creditor must proceed against all the joint debtors, because the
compliance of the obligation is possible only if all of the joint debtors
would act together.
3. If one of the debtors is insolvent, the other shall not be liable for his
share.
4. If one of the debtors cannot comply, the obligation is converted into
monetary consideration. One who is ready and willing to comply will pay
his proportionate share, and the other not willing shall pay his share plus
damages when his financial condition will improve.
5. If there are more than one creditor, delivery must be made to all, unless
one is authorized to receive from the others.

Obligations with a Penal Clause.

One to which an accessory undertaking is attached for the purpose of insuring

its performance by virtue of which the obligor is bound to pay a stipulated indemnity
or perform a stipulated prestation in case of breach.

General Rule: The penalty fixed by the parties is a compensation for substitute
for damages in case of breach.

Exceptions:

1. Where there is a stipulation to the contrary;

2. When the debtor is sued for refusal to pay the agreed penalty; and

3. When debtor is guilty of fraud.

The debtor cannot exempt himself from the performance of the principal
obligation by paying the stipulated penalty unless when the right has been expressly
reserved for him.

The creditor cannot demand the fulfilment of the principal obligation and the
satisfaction of the stipulated penalty at the same time unless the right has been clearly
granted him.

When penalty may be reduced.

1. If the principal obligation has been partly complied with;

2. If the principal obligation has been irregularly complied with; and

3. If the penalty is iniquitous or unconscionable even if there has

been no performance;

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Modes of Extinguishment of Obligations

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

In addition:

7. Annulment
8. Rescission
9. Fulfilment of a resolutory condition
10. Prescription
11. Death of a party in case the obligation is personal
12. Mutual desistance
13. Compromise
14. Impossibility of fulfilment
15. Happening of fortuitous event

Payment or Performance

General rule: A debt shall not be understood to have been paid unless the thing
or service in which the obligation in which the obligation consists has been completely
delivered or rendered, as the case may be.

Exceptions:

1. When the obligation has been substantially performed in good

faith;

2. When the obligee accepts performance, knowing its

incompleteness or irregularity & without expressing any protest or
objection;

3. When there is an express stipulation; and

4. When the debt is in part liquidated and in part liquidated.

Persons who may pay the obligation.

1. The debtor himself;

2. Any third person.

General rule: Creditor is not bound to accept payment or performance by a

third person.

Exceptions:

1. When made by a third person who has an interest in the

fulfilment of the obligation;

2. When there is a stipulation to the contrary.

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Rights of a 3rd person who paid the obligation.

If payment was made with knowledge and consent of the debtor:

1. Can recover the entire amount paid;

2. Can be subrogated to all the rights of the creditor.

If payment was made without knowledge or against the will of the debtor, he
can recover only insofar as the payment has been beneficial to the debtor.

To whom payment must be made.

1. The person in whose favour the obligation has been

constituted;

2. His successor in interest; or

3. Any person authorized to receive it.

General rule: If payment is made to a person other than those enumerated, it

shall not be valid.

Exceptions:

1. Payment made to a 3rd person, provided that it has redounded to

the benefit of the creditor;

2. Payment made to the possessor of the credit, provided that it was

made in good faith.

Obligation to deliver generic object.

If the quality and circumstances have not been stated, the creditor cannot
demand a thing of superior quality; neither can the debtor deliver a thing of inferior
quality.

Rules in monetary obligation

1. Payment in cash—must be made in the currency stipulated; if it

is not possible to deliver such currency, then in the currency
which is legal tender in the Philippines;

2. Payment in check or other negotiable instrument—not

considered payment; not considered legal tender and may be
refused by the creditor. It shall only produce the effect of
payment:

a. When it has been encashed; or

b. When it has been impaired throught the fault of the

creditor.

Legal tender.

Such currency which may be used for the payment of all debts, whether in
private or public. The kind of currency which a debtor can legally compel a creditor to
accept in payment of a debt in money when tendered by the debtor in the right
amount.

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 Philippine currency notes have no limit to their legal tender power. However, in
the case of coins in denomination of 1-, 5- and 10-piso they shall be legal tender in
amounts not exceeding Php1,000.00 while coins in denomination of 1-, 5- and 10- and
25-sentimo shall be legal tender in amounts not exceeding Php100.00, pursuant to BSP
Circular No. 537, Series of 2006.

Place of payment.

1. Place stipulated by the parties;

2. No stipulation and the obligation is to deliver a determinate

thing, payment shall be made at the place where the thing
might be at the time;

3. In any other case, the payment shall be made at the domicile of

the debtor.

Special forms of payment.

1. Application of payment;

2. Dation in payment;

3. Payment by cession;

4. Tender of payment and consignation.

Application of payment.

Designation of the debt to which the payment must be applied when the debtor
has several obligations of the same kind in favour of the same creditor.

Requisites:

1. There must be only 1 debtor and only 1 creditor;

2. There must be 2 or more debts of the same kind;

3. All of the debts must be duel except: if there is stipulation to

the contrary; or application of payment is made by the party for
whose benefit the term has been constituted; and

4. Amount paid by the debtor must not be sufficient to cover the

total amount of all debts.

General rule: The right to designate the debt to which the payment shall be
applied primarily belongs to the debtor.

Exception: If the debtor does not avail of such right and he accepts from the
creditor a receipt in which the application is made.

Legal application of payment.

1. If neither the debtor nor the creditor makes any application of

payment, or if it cannot be inferred from other circumstances,
the debt which is most onerous to the debtor, among those
which are due, shall be deemed to have been satisfied;

18
 2. If the debts due are of the same nature and burden, payment
shall be applied to all of them proportionately.

Dation in payment (dacion en pago.)

Delivery and transmission of ownership of a thing by the debtor to the creditor

as an accepted equivalent of the performance of the obligation.

Requisites:

1. Existence of a money obligation;

2. Alienation to the creditor of a property by the debtor with the

consent of the former;

3. Satisfaction of the money obligation of the debtor

Payment by cession.

Debtor abandons all of his property for the benefit of his creditors in order that
from the proceeds thereof, the latter may obtain payment of their credits.

Requisites:

1. Plurality of debts;

2. Partial or relative insolvency of the debtor;

3. Acceptance of the cession by the creditors

Dation in payment Payment by cession

1. One creditor Plurality of creditors

2. Not necessarily in state of financial Debtor must be partially or relatively

difficulty insolvent

3. Thing delivered is considered as Universality of property of debtor is what

equivalent of the performance is ceded

4. Payment extinguishes obligation to Merely releases debtor for the net

the extent of the value of the thing proceeds of things ceded or assigned,
delivered as agreed upon, proved unless there is contrary intention.
or implied from the conduct of the
creditor.

Tender of payment.

Manifestation of the debtor to the creditor of his decision to comply

immediately with his obligation.

It is preparatory act and extrajudicial in character.

Consignation.

Deposit of the object of the obligation in a competent court in accordance with

the rules prescribed by law, after the tender of payment has been refused or because

19
of circumstances which render direct payment to the creditor impossible or
inadvisable.

It is the principal act and judicial in character.

Requisites:

1. The debt sought to be paid must be due;

2. There must be a valid and unconditional tender of payment or any of

the causes stated by law for effective consignation without previous
tender of payment exists;

3. The consignation of the thing due must first be announced to the

persons interested in the fulfilment of the obligation;

4. Consignation shall be made by depositing the things due at the

disposal of judicial authority;

5. The consignation having been made, the interested parties shall also
be notified thereof.

Effects of consignation.
1. If the creditor accepts the thing or amount deposited without
contesting the validity or efficacy of the consignation, the obligation is
extinguished;

2. If the creditor contests the validity or efficacy of the consignation or if

the creditor is not interested or unknown or is absent, the result is
litigation. If the debtor complied with all the requisites, the obligation
is extinguished.

General rule: Consignation shall produce the effects of payment only if there is
a valid tender of payment.

Exceptions:

1. Creditor is absent or unknown or does not appear at the place of the

payment;

2. Creditor incapacitated to receive payment at the time it is due;

3. When two or more persons claim the right to collect;

4. When the title of the obligation has been lost;

5. When without just cause creditor refuses to give receipt.

Loss of the Thing Due.

General rule: (In Determinate Obligations to give) Obligation is extinguished.

Requisites:

1. The thing which is lost is determinate;

2. The thing lost without the fault of the debtor;

3. The thing lost before the debtor has incurred in delay.

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 Exceptions:

1. When by law, obligor is liable for fortuitous event;

2. When by stipulation, obligor is liable even for fortuitous event;

3. When the nature of the obligation requires the assumption of risk;

4. When the loss of the thing occurs after the debtor incurred in delay;

5. When the debtor promised to deliver the same thing to two or more
persons who do not have the same interest;

6. When the debt of a certain and determinate thing proceeds from a

criminal offense.

General Rule: (in generic obligations to give) Obligation is not extinguished

because the genus of a thing cannot perish.

Exception: In case of generic obligations whose object is a particular class or

group with specific or determinate qualities.

General rule (in obligations to do): Obligation is extinguished when prestation

becomes legally or physically impossible.

Effect of relative impossibility or doctrine of unforeseen events.

When the service has become difficult as to be manifestly beyond the

contemplation of the parties, the obligor may also be released therefrom, in whole or
in part.

Requisites:

1. The event or change in circumstances could not have been foreseen

at the time of the execution of the contract;

2. It makes the performance of the contract extremely difficult but not

impossible;

3. The event must not be due to the act of any parties; and

4. The contract is for future prestation.

Condonation or Remission of Debt.

An act of pure liberality by virtue of which the oblige, without receiving any
price or equivalent, renounces the enforcement of the obligation, as a result of which it
is extinguished in its entirety or in part or aspect of the same to which remission
refers.

It is the gratuitous abandonment by the creditor of his right.

Requisites:

1. It must be gratuitous.

2. It must be accepted by the debtor;

3. The obligation must be demandable.

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Confusion or Merger of Rights.

Merger of the characters of the creditor and debtor in one and the same person
by virtue of which the obligation is extinguished.

Requisites:

1. That the characters of creditor & debtor must be in the same person;

2. That it must take place in the person of either the principal creditor or
the principal debtor;

3. It must be complete and definite.

Compensation.

Extinguishment in the concurrent amount of the obligation of those persons

who are reciprocally debtors and creditors to each other.

Requisites:

1. There must be 2 persons who in their own right are principal creditors
and principal debtors of each other;

2. Both debts must consist in money, or if the things due are fungibles,
they must be of the same kind or quality

3. Both debts must be due;

4. Both debts must be liquidated or demandable;

5. There must be no retention or controversy commenced by 3rd persons

over either of the debts communicated in due time to the debtor; and

6. Compensation must not be prohibited by law.

Kinds:

1. Legal—takes effect by operation of law.

2. Voluntary—agreed upon by the parties;

3. Facultative—when it can be claimed by one of the parties who,

however, has the right to object to it;

4. Judicial—takes effect by judicial decree;

5. Facultative—when it can be claimed by one of the parties who,

however, has the right to object to it.

Debts not subject to compensation.

1. Debts arising from contracts of deposit;

2. Debts arising from contracts of commodatum;

3. Claims for support due by gratuitous title;

4. Obligations arising from criminal offenses;

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 5. Certain obligations in favour of government.

Taxes are not subject to set-off or legal compensation because the government
and taxpayers are not mutually creditors and debtors of each other.

Novation.

Substitution or change of an obligation by another, resulting in its

extinguishment or modification, either by changing its object or substituting another
in place of the debtor, or by subrogating a third person in the rights of the creditor.

Requisites:

1. Precious valid obligation;

2. Agreement of the parties to the new obligation;

3. Extinguishment of the old obligation; and

4. Validity of the new obligation.

Kinds:

a. As to its essence

1. Objective/Real—refers to the change either in the

cause, object or principal conditions of the obligations;

2. Subjective/Personal—refers to the substitution of the

person of the debtor or to the subrogation of a 3rd
person in the rights of the creditor;

3. Mixed

b. As to its form/constitution

1. Express—when it is declared in unequivocal terms that

the old obligation is extinguished by new one which
substitutes the same.

2. Implied—when the old and new obligation are

incompatible with each other on every point.

Forms of substitution of debtors.

1. Expromision—effected with the consent of the creditor at the

instance of the new debtor even without the consent or even
against the will of the old debtor;

2. Delegacion—effected with the consent of the creditor at the

instance of the old debtor, with the concurrence of the new
debtor.

Effect of insolvency of new debtor.

1. Expromision—the new debtor’s insolvency or nonfulfillment of

the obligation shall not revive the original debtor’s liability to

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 the creditor whether the substitution is effected with or without
the knowledge or against the will of the original debtor;

2. Delegacion—the credtor can sue the old debtor only when the
insolvency was prior to the delegation and publicly known or
when the old debtor knew of such insolvency at the time he
delegated the obligation.

Kinds of subrogation.

1. Conventional—takes place by agreement of the parties; this

kind of subrogation requires the intervention and consent of 3
persons: the original creditor, the new creditor and the debtor;

2. Legal—takes place without the agreement but by operation of

law because of certain acts.

General rule: Legal subrogation cannot be presumed.

Exceptions:

1. Creditor pays another creditor who is preferred, without

debtor’s knowledge;

2. A third person is not interested in the obligation pays with the

express or tacit approval of the debtor; or

3. Even without the debtor’s knowledge, a person interested in

the fulfilment of the obligation pays without prejudice to the
effects of confusion as to the latter’s share.

CONTRACTS
Definition.

A contract is the meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.

Elements.

a. Essential—those without which there can be no contract.

1. Consent

2. Object or Subject Matter

3. Cause or Consideration

b. Natural—those derived from the nature of the contract and ordinarily

accompany the same.

c. Accidental—those which exist only when the parties expressly provide for them
for the purpose of limiting or modifying the normal effects of the contract.

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Different kinds of contracts.

a. According to perfection
1. Consensual—perfected by mere consent.
2. Real—perfected by the delivery of the object of the contract, such as pledge,
loan and deposit.
b. According to degree of importance
1. Principal—can stand alone, such as sale, barter, deposit or loan.
2. Accessory—its existence and validity is dependent upon another contract,
such as pledge, mortgage and guaranty.
3. Preparatory—contract is not an end by itself, but a means thru which other
contracts may be made.
c. According to subject matter
1. Contracts involving things, such as sale, barter.
2. Contracts involving rights or credits, such as usufruct or assignment of
credit.
3. Contracts involving services, such as agency, lease of service and contract of
carriage.
d. According to name
1. Nominate—Those which have their own distinctive individuality and are
regulated by special provisions of law.
2. Innominate--Those which lack individuality and are not regulated by special
provisions of law but regulated by stipulations of the parties, by general
provisions of the Civil Code on obligations and contracts, by rules governing
the most analogous nominate contracts and by customs of the place.

Kinds:

1. Do ut des—I give that you give;

2. Do ut facias—I give that you do;

3. Facio ut des—I do that you give;

4. Facio ut facias—I do that you do.

e. According to cause
1. Onerous—there is an exchange of consideration such as sale, barter and
lease.
2. Gratuitous—there is no consideration received in exchange for what has
been given, such as donation, remission and condonation.
3. Remuneratory—something is given for a benefit or service performed
without any legal obligation to do so.
f. According to nature of obligation produced or number of parties obligated
1. Unilateral—where only one of the parties is obliged to give or to do
something, such as commodatum, gratuitous deposit, and gratuitous
mutuum.
2. Bilateral—where both parties are obliged to give or to do something, such
as sale, barter and lease.
g. According to risk
1. Commutative—where equivalent values are given by both parties such as
sale, barter or lease.
2. Aleatory—where fulfilment of the contract is dependent upon chance, such
as insurance.
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Characteristics of Contracts.

a. Principle of autonomy of contracts (liberty to contract)

The contracting parties may establish such stipulations, clauses, terms, and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.

b. Principle of Relativity

General rule: Contracts take effect only between parties, their assigns and heirs

Exceptions:

1. Stipulations pour atrui—stipulations in favor of a third person;

2. When a third person induces a party to violate contract;

3. Third persons who come in possession of the object of the contract

creating real rights;

4. Contracts entered into in fraud of creditors.

c. Principle of Obligatory Force and Consensuality

Contracts are perfected by mere consent and from that moment, the parties are
bound not only to the fulfilment of what has been expressly stipulated but also to all
consequences which, according to their nature may be in keeping with good faith,
usage and law.

d. Principle of Mutuality

The contract must bind both parties; its validity or compliance must not be left to
the will of one of them.

The contract cannot have any stipulation authorizing one of the contracting parties
(a) to determine whether or not the contract shall be valid, or (b) to determine whether
or not the contract shall be fulfilled.

e. Principle Autonomy

The parties are free to stipulate anything they deem convenient provided that they
are not contrary to morals, good customs, public order and public policy.

Consent.

Manifested by the concurrence of the offer and acceptance upon the thing and
the cause which are to constitute the contract.

Requisites:

1. Legal Capacity of the contracting parties;

2. Manifestation of the conformity of the contracting parties;

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 3. The parties’conformity to the object, cause, the terms and conditions
of the contract must be intelligent, spontaneous and free from all
vices of consent;

4. The said conformity must be real and not simulated or fictitious.

Offer.

A proposal made by one party to another to enter into a contract. It must be

certain or definite, complete and intentional.

Offer/proposal may be withdrawn so long as the offeror has no knowledge of

acceptance by offeree.

Rule in case of an offer to sell.

When the offerer has allowed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such withdrawal,
except when the option is founded upon a consideration as something paid or
promised.

Option contract—one giving a person a certain period within which to accept the
offer of the offerer.

Option money—money paid or promised to be paid in consideration for the

option.

Acceptance.

1. Manifestation by the offeree of his assent to the terms of the

offer.

2. It must be absolute.

3. A qualified acceptance constitutes counter offer.

Acceptance may be revoked before it comes to the knowledge of the offeror.

Persons incapacitated to give consent.

a. Minors

Exceptions:

1. Contracts where the minor is stopped to false minority as a

defense through his own misrepresentation;

2. Contracts for necessaries;

3. Contracts by guardians or legal representatives;

4. Contracts of life, health or accident insurance taken on the

life of the minor.

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 a. Insane or demented persons, unless the contract was entered into
during lucid interval;

b. Deaf mutes who do not know how to read and write.

Vices of Consent.

1. Violence—when in order to wrest consent, serious or irresistible force is

employed.

2. Intimidation—when one of the contracting parties is compelled by a

reasonable and well-grounded fear of an imminent and grave evil upon
his person or property, or upon the person or property of his spouse,
descendants or ascendants, to give his consent.

3. Mistake—it must be substantial regarding: (a) object of the contract; (b)

conditions which principally moved one or both parties to enter into the
contract; (c) identity or qualification of persons; error must be excusable,
and not caused by negligence; and the error must be a mistake of fact,
and not of law.

4. Fraud—when through insidious words or machinations of one of the

contracting parties, the other is induced to enter into a contract, without
which, he would not have agreed.

5. Undue Influence

Caveat emptor (“let buyers beware”).

The transaction is not fraudulent because this is considered tolerable fraud.

Exaggerations in trade, when the other party had an opportunity to know the facts, are
not in themselves fraudulent. This is otherwise known as “dealer’s talk.” Exception: If
the opinion is made by an expert and the other party has relied on such statement.

Statement of Opinion.

The mere expression of opinion, even if false, does not vitiate consent that will
render the contract voidable unless such opinion is given by an expert and the other
party relied on such opinion.

Simulation of Contracts

Is the declaration of a fictitious intent manifested deliberately and by agreement

by the parties in order to produce, for the purposes of deceiving others, the
appearance of a transaction which does not exist or which is different from their true
agreement.

Kinds:

1. Absolute—when the contracting parties do not intend to be

bound by the contract at all. Thus, an absolutely simulated
contract is VOID.

2. Relative—when the contracting parties conceal their true

agreement. A relatively simulated contract binds the parties to
their real agreement, when it does not prejudice 3rd persons and is
28
 not intended for any purpose contrary to law, morals, good
customs, public order or public policy.

Object of the Contract

The thing, right or service which is the subject matter of the obligation arising
from the contract.

Requisites:

1. It must be within the commerce of man;

2. It must be licit or not contrary to law, morals, good customs,

public order or public policy;

3. It must be possible;

4. It must be determinate as to its kind.

Things which cannot be object of contracts.

1. Things which are outside the commerce of men;

2. Intransmissible rights;

3. Services which are contrary to law, morals, good customs,

public order or public policy;

4. Impossible things or services;

5. Objects which are not possible of determination as to their

kind.

Cause of the Contract

The immediate, direct and most proximate reason which explains and justifies
the creation of obligation.

Requisites:

1. Cause should be in existence at the time of the celebration of

the contract;

2. Cause should be licit and lawful;

3. Cause should be true.

Rules:

1. In onerous contracts, the cause is understood to be, for each

contracting party, the prestation of promise of a thing or
service by the other;

2. In renumenatory contracts, the service or benefit which is

renumerated;

3. In contracts of pure beneficence, the mere liberality of the

donor or benefactor;

29
 4. In accessory contracts, the cause is identical with the cause of
the principal contract, that is, the loan from which it derives its
life and existence.

Form of Contracts

General rule: Contracts shall be obligatory, in whatever form they may have
been entered into, provided all the essential requisites for their validity are present.

Exceptions:

1. When the law requires that a contract be in some form in order

that it may be valid;

2. When the law requires that a contract be in some form in order

that it may be enforceable.

Parties may compel each other to comply with the form required once the
contract has been perfected;

Contracts which are required to be in some specific form is only for the
convenience of parties and does not affect validity and enforceability as between them.

Reformation of instruments:

Requisites:

1. Meeting of the minds to the contract;

2. True intentions is not expressed in the instrument by reason of

mistake, accident, relative simulation, fraud, inequitable
conduct;

3. Clear and convincing proof of mistake, accident, relative

simulation, fraud or inequitable conduct.

When reformation is not proper

1. Simple unconditional donations inter vivos;

2. Wills;

3. When the agreement is void.

Rescissible Contracts

Contracts validly agreed upon byt, by reason of lesion or economic prejudice

may be rescinded in cases established by law.

What contracts are rescissible

1. Those entered into by guardians where the ward suffers lesion

of more than ¼ of the value of the things which are objects
thereof;

2. Those agreed upon in representation of absentees, if the latter

suffer lesion by more than ¼ of the value of the things which
are subject thereof;

30
 3. Those undertaken in fraud of creditors when the latter cannot
in any manner claim what are due them;

4. Those which refer to things under litigation if they have been

entered into by the defendant without the knowledge and
approval of the litigants and the court;

5. All other contracts especially declared by law to be subject to

rescission; and

6. Payments made in a state of insolvency on account of

obligations not yet enforceable;

Voidable Contracts

Those in which all of the essential elements for validity are present, although
the element of consent is vitiated either by lack of capacity of one of the contracting
parties.

What contracts are voidable

1. Those where one of the parties is incapable of giving consent to a

contract;

2. Those where the consent is vitiated by mistake, violence,

intimidation, undue influence, or fraud.

Causes of extinction to annul a voidable contract

1. Prescription—the action must be commenced within 4 years

arising from:

a. The time the incapacity ends;

b. The time the violence, intimidation, or undue influence

ends;

c. The time the mistake or fraud is discovered.

2. Ratification

Requisites:

a. There must be knowledge of the reason which renders the

contract voidable;

b. Such reason must have been ceased and

c. The injured party must have executed an act which

expressly or impliedly conveys an intention to waive his
right;

3. By loss of the thing which is the object of the contract through

fraud or fault of the person who is entitled to annul the contract.

Unenforceable Contracts

Those which cannot be enforced by proper action in court unless ratified.

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What contracts are unenforceable:

1. Those entered into in the name of another by one without

authority or acting in excess of authority;

2. Those where both parties are incapable of giving consent;

3. Those which do not comply with the Statute of Frauds.

Contracts covered by Statutes of Fraud

1. Agreements not be performed within one year from the making

thereof;

2. Special promise to answer for the debt, default or miscarriage of

another;

3. Agreement in consideration of marriage other than a mutual

promise to marry;

4. Agreement for the sale of goods at the price of not less than
P500.00;

5. Contracts of lease for a period longer than one year;

6. Agreements for the sale of real property or interest therein; and

7. Representation as to the credit of a third person.

The contracts/agreements under the Statute of Frauds require that the same be
evidence by some note, memorandum or writing, subscribed by the party charged or
by his agent, otherwise, the said contracts shall be unenforceable.

Ratification of contracts in violation of Statutes of Fraud

1. Failure to object to the presentation of oral evidence to prove

such contracts;

2. Acceptance of benefits under these contracts.

Void Contracts

Those where all of the requisites of a contract are present but the cause, object
or purpose is contrary to law, morals, good customs, public order or public policy, or
contract itself is prohibited or declared void by law.

What contracts are void.

1. Those whose cause, object or purpose is contrary to law, morals,

good customs, public law or public policy;

2. Those whose object is outside the commerce of men;

3. Those which contemplate an impossible service;

4. Those where the intention of the parties relative to the principal

object of the contract cannot be ascertained;

5. Those expressly prohibited or declared void by law.

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Inexistent Contracts

Those where one or some or all of the requisites essential for the validity of the
contract are absolutely lacking.

What contracts are inexistent

1. Those which are absolutely simulated or fictitious; and

2. Those whose cause or object did not exist at the time of the
transaction.

Comparative table of defective contracts

VOID VOIDABLE RESCISSIBLE UNENFORCEABLE

1. Defect is Defect is caused by Defect is caused by Defect is caused by

caused by lack vice of consent injury/damage either lack of form,
of essential to one of the parties authority, or capacity
elements or or to a 3rd person of both parties not
illegality cured by prescription

2. Do not, as a Valid and enforceable Valid and enforceable Cannot be enforced

general rule, until they are until they are by proper action in
produce legal annulled by a rescinded by a court
effects competent court competent court

3. Action for the Action for annulment Action for rescission Corresponding action
declaration of or defense of may prescribe for recovery, if there
nullity or annulability may was total or partial
inexistence prescribe performance of the
does not unenforceable
prescribe contract may
prescribe

4. Not cured by Cured by prescription Cured by prescription Not cured by

prescription prescription

5. Cannot be Can be ratified Need not be ratified Can be ratified

ratified

6. Assailed not Assailed only by a Assailed not only by a Assailed only by a

only by contracting party contracting party but contracting party
contracting even by third person
party but even who is prejudiced or
by a third damaged by the
person whose contract
interest is
directly
affected

7. Assailed Assailed directly or Assailed directly only Assailed directly or

directly or collaterally collateraly
collaterally

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Principle of pare delicto

When the defect of a void contract consists in the illegality of the cause or
object of the contract and both of the parties are at fault or in pari delicto, the law
refuses them every remedy and leaves them where they are.

Exceptions:

1. Payment of usurious interest;

2. Payment of money or delivery of property for an illegal purpose,

where the party who paid or delivered repudiates the contract
before the purpose has been accomplkished, or before any
damage has been caused to a 3rd person;

3. Payment in money or delivery of property made by an

incapacitated person;

4. Agrrement or contract which is not illegal per se and the

prohibition is designed for the protection of the plaintiff;

5. Payment of any amount in excess of the maximum price of any

article or commodity fixed by law or regulation by competent
authority;

6. Contracts whereby a labourer accepts a wage lower than the

maximum number of hours fixed by law;

7. One who lost in gambling because of fraudulent schemes practiced

on him is allowed to recover losses.

Rules when only one of the parties is at fault.

1. Executed contracts:

a. Guilty party is barred from recovering what he has given to

the other party by reason of the contract;

b. Innocent party may demand for the return of what he has

given.

2. Executory contract—neither of the contracting parties can

demand for the fulfilment of any obligation from the contract nor
may be compelled to comply with such obligation.

Natural Obligations

They are real obligations to which the law denies an action, but which the
debtor may perform voluntarily.

Examples:

1. Performance after the civil obligation has prescribed;

2. Reimbursement of a third person for a debt that has prescribed;

34
Estoppel

A condition or state by virtue of which an admission or representation is

rendered conclusive upon the person making it and cannot be denied or disproved as
against a person relying thereon.

Laches or “stale demands”

Failure or neglect, for an unreasonable length of time, to do that which due

diligence, could or should have been done earlier.

Elements:

1. Conduct on part of the defendant or of one under whom he claim,

giving rise to the situation of which complainant is made and of
which the complaint seeks a remedy;

2. Delay in asserting the complaint, rights, the complainant having

knowledge or notice of defendant’s conduct and having been
afforded the opportunity to institute the action;

3. Lack of knowledge or notice on the part of the defendant that the

complainant would assert on the right on which he bases his suit;

4. Injury to the defendant in the event relief is accorded to the

complainant or the suit is not held to be barred.

-END-

There is no substitute for good preparation. GOD bless you future CPAs!!!

--Sir Jasper

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