Oblicon Notes 1

SCHOOL OF BUSINESS
Module in Obligation and Contracts
PART I - OBLIGATION - An obligation is a juridical necessity to give, to do or not to do
ELEMENTS:
1. Active subject ( obligee/creditor ) – the one in whose favor the obligation is constituted
2. Passive subject ( obligor/debtor ) – the one who has the duty of giving, doing or not doing
3. Object – prestation; the conduct which has to be observed by the debtor/obligor
4. Juridical tie – the law that binds the parties
5. Cause (causa debendi/causa obligationes) - why obligation exists
REQUISITES OF OBJECT:
a. licit - if illicit, it is void

b. possible - if impossible, it is void
c. determinate or determinable - or else, void
d. pecuniary value
SOURCES OF OBLIGATION:
1. LAW - Must be expressly or impliedly set forth and cannot be presumed
2. CONTRACT - Must be complied with in good faith because it is the “law” between parties;
neither party may unilaterally evade his obligation in the contract, unless:
a) contract authorizes it
b) other party assents
Parties may freely enter into any stipulations, provided they are not contrary to law,
morals, good customs, public order or public policy.
3. QUASI-CONTRACT - That juridical relation resulting from a lawful, voluntary and unilateral
act, and which has for its purpose, the payment of indemnity to the end that no one shall be
unjustly enriched or benefited at the expense of another.
Two Kinds of Quasi-Contract:

a. 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.
b. Solutio indebiti - undue payment ; This takes place when something is received when there is
no right to demand it, and it was unduly delivered thru mistake
4. DELICTS – those resulting from crime
Governing rules:
1. Pertinent provisions of the Revised Penal Code and other penal laws (Art 100, RPC – Every
person criminally liable for a felony is also civilly liable)
2. Chapter 2, Preliminary title, on Human Relations ( Civil Code )
3. Title 18 of Book IV of the Civil Code – on damages
What civil liability arising from a crime includes:

a. restitution
b. reparation of damage caused
c. indemnity for consequential damages
5. QUASI-DELICT/TORTS - It is a fault or act of negligence ( or omission of care ) which

causes damage to another, there being no pre-existing contractual relations between the parties
Elements:
a) There must be fault or negligence attributable to the person charged
b) There must be damage or injury
c) There must be a direct relation of cause and effect between the fault or negligence on the one
hand and the damage or injury on the other hand.
EFFECTS OF OBLIGATION
1. Obligation to give - obligation to deliver the thing agreed upon
2. Obligation to do/not to do - obligation to do/not to do the service agreed upon
ACCESSORY OBLIGATIONS:
1. Exercise diligence / Preserve the thing
– unless the law or stipulation requires
another standard of care.
2. Delivery of fruits
n does the right begin to exist? from the time to deliver arises
a) when there is no term/condition – from the perfection of the contract
b) when there is a term/condition – from the moment the term or condition arises
3. Delivery of accessories & accessions ( obligation to deliver determinate thing, even if the
stipulation does not mention delivery of accessories & accessions)
- those joined to or included with the principal for the latter’s better
use, perfection or enjoyment
– additions to or improvements upon a thing
– from the time the obligation to deliver arises
a) Conditional – from the moment the condition happens
b) With a term/period – upon the expiration of the term/period
c) Simple – from the perfection of the contract.
FAILURE TO COMPLY WITH PERFORMANCE/REMEDIES:

Three Kinds of Performance:
1. SPECIFIC PERFORMANCE - performance of the prestation itself
2. SUBSTITUTE PERFORMANCE - someone else performs or something else is performed at
the expense of debtor
3. EQUIVALENT PERFORMANCE – damages
IRREGULARITY OF PERFORMANCE/BREACH
A. CAUSES ATTRIBUTABLE TO DEBTOR

1. Contravention of tenor
2. Delay/ Mora - Non performance with respect to time
Mora solvendi – default on the part of the debtor; 2 kinds:
(1) Mora Solvendi Ex re – default in real obligations
(2) Mora Solvendi Ex persona – default in personal obligations
Elements:
(1) The obligation must be due, enforceable and already liquidated or determinate in amount
(2) There must be non-performance
(3) There must be a demand, unless demand is not required
When demand is not necessary:

(1) When law declares
(2) When obligation expressly declares
(3) When designation of time of delivery or rendering the service was a controlling motive
(4) When demand would be useless as when debtor has rendered it beyond his powers to perform
Effects:
a. if determinate thing - debtor bears risk of loss (even when there is fortuitous event)
b. debtor liable for damages/interest
3. Fraud / Dolo – Voluntary execution of a wrongful act or willful omission, knowing and
intending the effects which naturally and necessarily arise from such act or omission
a. Causante ( causal ) - makes contract voidable
b. incidente – ( incidental ) - fraud in performance of obligation; does not
affect validity of obligations
Remedies of Person in fraud under obligations are:
a. insist on specific performance (art 1233)
b. resolve contract (art 1191)
c. claim damages, in either case
4. Negligence /Culpa - absence of due diligence

Elements:
a) Omission of diligence required
b) Diligence required – per nature of obligation, circumstances of persons, time and place
B. CAUSES NOT ATTRIBUTABLE TO DEBTOR

1. Delay/ Mora - non fulfillment with respect to time
Mora accepiendi – default on part of creditor; Creditor is guilty of default when
he unjustifiably refuses to accept payment or performance at the time payment/performance can
be done
Effects:
(1) responsibility of debtor is reduced to fraud and gross negligence
(2) debtor is exempted from risk of loss of thing / creditor bears risk of loss
(3) expenses by debtor for preservation of thing after delay is chargeable to
creditor
(4) if obligation bears interest, debtor does not have to pay from time of delay
(5) creditor liable for damages
(6) debtor may relieve himself of obligation by consigning the thing
2. Fortuitous Events - event which could not be foreseen, or which though foreseen, were
inevitable
REQUIREMENTS:
1. The cause of the breach of the obligation must be independent of the will of the debtor
2. The event must be either unforeseeable or unavoidable
3. The event must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner
4. The debtor must be free from any participation in, or aggravation of injury to the creditor
Rule on Fortuitous Event:

1. General Rule – no liability for fortuitous event
2. Exemptions:
a) when expressly declared by law ( bad faith, subject matter is generic,
debtor is in delay )
b) when expressly declared by stipulation or contract
c) when nature of obligation requires assumption of risk
DIFFERENT KINDS OF OBLIGATIONS
CATEGORIES:
a. Demandability - pure, conditional or with a term
b. Plurality of object - simple, alternative or facultative
c. Plurality of subject - simple, joint or solidary
d. Performance - divisible or indivisible
e. Sanctions for breach - with or without a penal clause
(1) Pure – demandable at once, no term, no condition

(2) Conditional - A condition is a FUTURE and an UNCERTAIN event or a past event unknown
to the parties
Kinds:
i. Suspensive – happening of condition gives rise to obligation
Effects:
1. effectivity is retroactive
2. no retroactivity with reference to fruits or interest & prescription
3. creditor may preserve rights
4. debtor – recovery of payment by mistake or even w/o mistake
REQUISITES FOR THE AFOREMENTIONED RULE:

1. There is a suspensive condition
2. There is an obligation to deliver a determinate thing
3. There is loss, deterioration or improvement before the happening of the condition
4. The condition happens
ii. Resolutory – happening of condition extinguishes obligation

Effects:
1. no retroactive effect
2. obligation extinguished
3. restore to each other what was received plus interest/fruits
WHEN DEBTOR LOSES RIGHT TO PERIOD:

a. insolvency of debtor, unless security provided
b. did not deliver security
c. impaired security- thru fault or fortuitous event
d. violate undertaking in consideration of extension of period
e. attempts to abscond
(3). Facultative – only one prestation has been agreed upon but another may be given
in substitution
Effect of loss or deterioration thru negligence, delay or fraud of obligor:
a) of thing intended as substitute - no liability
b) of the substitute after substitution is made – with liability
(4). Alternative – bound by different prestations but only one is due

Right of choice: General rule: right of choice belongs to debtor
(5) Joint – presumption when 2 or more creditors or 2 or more debtors concur in one and the
same obligation
Effects:
a. Demand on one produces delay only with respect to the debt
b. Interruption in payment by one does not benefit or prejudice the other
c. Vices of one debtor to creditor has no effect on the others
d. Insolvency of one debtor does not affect other debtors
(6) Solidary – must be expressed in stipulation or provided by law or by nature of obligation

a. Active – on the part of creditor or obligee
Effects:
1. Death of 1 solidary creditor transmits share to heirs (but collectively)
2. Each creditor represents the other in the act of recovery of payment
3. Credit is divided equally between creditors as among themselves

4. Debtor may pay any of the solidary creditors
b. Passive – on the part of debtors or obligors
Effects:
1. Each debtor may be requested to pay whole obligation with right to recover
from co-debtors
2. Interruption of prescription to one creditor affects all
3. Interest from delay on 1 debtor is borne by all
c. Mixed – on the part of the obligors and obligees, or the part of the debtors and
the creditors
d. Conventional – agreed upon by the parties
e. Legal – imposed by law
Instances where law imposes solidary obligation:

1. obligations arising from tort
2. obligations arising from quasi-contracts
3. legal provisions regrading obligation of devisees and legatees
4. liability of principals, accomplices, and accessories of a felony
5. bailees in commodatum
Effects:
a. payment made before debt is due, no interest can be charged, otherwise –
interest can be charged
b. insolvency of one – others are liable for share pro-rata
c. if different terms & conditions – collect only what is due, later on collect from any
d. no reimbursement if payment is made after prescription or became illegal
d. remission made after payment is made – co-debtor still entitled to reimbursement
e. effect of insolvency or death of co-debtor – still liable for whole amount
f. fault of any debtor – every one is responsible – price, damage & interest
g. complete/ personal defense – total or partial ( up to amount of share only ) if not
personal to him
Effect of loss or impossibility of the prestation:
a. if without fault – no liability
b. if with fault – there is liability (also for damage and interest)
c. loss due to fortuitous event after default – there is liability (because of default)
(7) Divisible – obligation that is capable of partial performance

a. execution of certain no of days work
b. expressed by metrical units
c. nature of obligation – susceptible of partial fulfillment
(8) Indivisible – one not capable of partial performance

a. to give definite things
b. not susceptible of partial performance
c. provided by law
d. intention of parties
(9) With penal clause - an accessory undertaking to assume greater liability in case
of breach;
CHARACTERISTICS OF PENAL CLAUSES

1. Subsidiary - As a general rule, only penalty can be demanded, principal
cannot be demanded, except: Penalty is joint or cumulative
2. Exclusive - takes place of damage, damage can only be demanded in the ff.
cases:
a. Stipulation – granting right
b. refusal to pay penalty
c. with dolo ( not of creditor )
Causes for reduction of penalty:
a. partial/irregular performance
b. penalty provided is iniquitous/unconscionable

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SCHOOL OF BUSINESS

Module in Obligation and Contracts

PART I - OBLIGATION - An obligation is a juridical necessity to give, to do or not to do

a. licit - if illicit, it is void

Two Kinds of Quasi-Contract:

4. DELICTS – those resulting from crime

What civil liability arising from a crime includes:

5. QUASI-DELICT/TORTS - It is a fault or act of negligence ( or omission of care ) which

FAILURE TO COMPLY WITH PERFORMANCE/REMEDIES:

A. CAUSES ATTRIBUTABLE TO DEBTOR

When demand is not necessary:

4. Negligence /Culpa - absence of due diligence

B. CAUSES NOT ATTRIBUTABLE TO DEBTOR

Rule on Fortuitous Event:

DIFFERENT KINDS OF OBLIGATIONS

(1) Pure – demandable at once, no term, no condition

REQUISITES FOR THE AFOREMENTIONED RULE:

ii. Resolutory – happening of condition extinguishes obligation

WHEN DEBTOR LOSES RIGHT TO PERIOD:

(4). Alternative – bound by different prestations but only one is due

(6) Solidary – must be expressed in stipulation or provided by law or by nature of obligation

3. Credit is divided equally between creditors as among themselves

Instances where law imposes solidary obligation:

(7) Divisible – obligation that is capable of partial performance

(8) Indivisible – one not capable of partial performance

CHARACTERISTICS OF PENAL CLAUSES

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