Obligation and Contracts
Obligation and Contracts
Obligation and Contracts
physically segregated from all of the case, the result of the specific
other of the same class performance of the contract would
b. Generic – object is designated be harsh, inequitable, oppressive or
merely by its class or genus result in an unconscionable
c. Limited generic thing – when the advantage to the plaintiff. The
generic objects are confined to a courts may adjust the rights of the
particular class, e.g. an parties in accordance with the
obligation to deliver one of my circumstances obtaining at the time
horses (Tolentino, Volume IV, p. of rendition of judgment, when
91). these are significantly different from
those existing at the time of
PERSONAL vs. REAL RIGHT generation of those rights. (Agcaoili
Personal Real vs. GSIS, G.R. No. 30056, August 30,
1. jus ad rem, a 1. jus in re, a right 1988)
right enforceable enforceable against
only against a the whole world Obligations of the debtor
definite person or Determinate Generic
group of persons 1. deliver the thing 1. deliver the thing
2. right pertaining 2. right pertaining which he has which is neither of
to the person to to a person over a obligated himself to superior nor inferior
demand from specific thing, give quality
another, as a without a passive 2. take care of the 2. pay damages in
definite passive subject individually thing with the case of breach of
subject, the determined against proper diligence of the obligation by
fulfillment of a whom such right a good father of a reason of delay,
prestation to give, may be personally family fraud, negligence or
to do or not to do. enforced 3. deliver all contravention of the
accessions and tenor thereof
RIGHTS OF A CREDITOR accessories of the
Determinate Generic thing even though
1. compel specific 1. ask for they may not have
performance performance of the been mentioned
obligation 4. pay damages in
2. recover 2. ask that the case of breach of
damages in case of obligation be the obligation by
breach of the complied with at reason of delay,
obligation, the expense of the fraud, negligence or
exclusive or in debtor contravention of the
addition to tenor thereof
specific
performance Effects of Breach
3. entitlement to 3. recover damages Positive Personal Negative Personal
fruits, interests in case of breach Obligations Obligations
from the time the of the obligation The creditor can: If the obligor does
obligation to 1. have the what has been
deliver arises. obligation performed forbidden him, the
or executed at the creditor can:
Principle of Balancing of Equities as expense of the 1. have it undone at
Applied in Actions for Specific obligor (except in the expense of the
Performance cases where the obligor; and
In decreeing specific performance, personal 2. ask for damages
equity requires not only that the qualifications of the
contract be just and equitable in its debtor are taken into
account in which
provisions, but that the
case the only remedy
consequences of specific is an action for
performance likewise be equitable damages)
and just. The general rule is that 2. ask that what has
this equitable relief will not be been poorly done be
granted if, under the circumstances undone
2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT
CHAIRPERSONS
Maricel Abarentos (Over-all Chairperson), Ronald Jalmanzar (Over-all Vice Chair), Yolanda Tolentino(VC-Acads), Jennifer
Ang(VC- Secretariat), Joy Inductivo (VC-Finance), Elaine Masukat (VC-EDP), Anna Margarita Eres (VC-Logistics). Jonathan
Mangundayao (Political Law), Francis Benedict Reotutar (Labor Law), Romuald Padilla (Civil Law), Charmaine Torres (Taxation Law),
Mark David Martinez (Criminal Law), Garny Luisa Alegre (Commercial Law), Jinky Ann Uy (Remedial Law), Jackie Lou Bautista (Legal
Ethics)
San Beda College of Law 85
3 Kinds:
b. resolutory (in diem) – arrival of 3. If the debtor binds himself when his
day certain terminates the obligation means permit him to do so (Article
2. a. legal – granted by law 1180)
b. conventional – stipulated by
parties NOTE: The only action that can be
c. judicial – fixed by courts maintained is an action to ask the court
3. a. definite – date/time is know to fix the duration of the term or period.
beforehand The fulfillment of the obligation itself
b. indefinite – the date/time of day cannot be demanded until after the
certain is unknown court has fixed the period for
compliance therewith, and such period
TERM CONDITION has arrived. However, such technicality
1. interval of time 1. fact or event w/c need not be adhered to when a prior and
w/c is future & is future and separate action would be a mere
certain uncertain formality and would serve no other
2. interval of time 2. future and purpose than to delay (Borromeo vs. CA,
w/c must uncertain fact or 47 SCRA 65).
necessarily come, event w/c may or
although it may may not happen
not be known when Reason for Fixing the Period (ART 1197)
3.exerts an 3. exerts an There can be no possibility of any
influence upon the influence upon the breach of contract or failure to
time of very existence of the perform the obligation unless the
demandability or obligation itself period is fixed by courts.
extinguishment of
an obligation When debtor loses right to make use of
4. does not have 4. has retroactive period: (IGIVA)
any retroactive effect 1. when after the obligation has
effect unless there
been contracted, he becomes
is an agreement to
the contrary insolvent, unless he gives
5. when it is left 5. when it is left guaranties or securities for the debt
exclusively to the exclusively to the will (the insolvency need not be
will of the debtor, of the debtor, the judicially declared)
the existence of very existence of the 2. when he does not furnish to the
the obligation is obligation is affected creditor the guaranties or securities
not affected he promised
3. when by his own act he has
GENERAL RULE: When a period is impaired said guaranties or
designated for the performance or securities after their establishment,
fulfillment of an obligation, it is and when through fortuitous event
presumed to have been established for they disappear, unless he gives new
the benefit of both creditor and debtor. ones equally satisfactory when
EXCEPTION: When it appears from the debtor violates any undertaking, in
tenor of the obligation or other consideration of which the creditor
circumstances that the period has been agreed to the period or
established in favor of one or of the 4. when debtor attempts to
other. abscond
When penalty may be reduced Persons who may pay the obligation:
1. If the principal obligation has been 1. the debtor himself or his legal
partly complied with; representative
2. If the principal obligation has been 2. any third person
irregularly complied with; and
3. If the penalty is iniquitous or GENERAL RULE: Creditor is not bound to
unconscionable even if there has been accept payment or performance by a
no performance. third person.
EXCEPTIONS:
1. when made by a third person
MODES OF EXTINGUISHMENT OF who has an interest in the
OBLIGATIONS (LFC3NARP2) fulfillment of the obligation;
1. loss of the thing due 2. when there is a stipulation to
2. fulfillment of resolutory condition the contrary.
2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT
CHAIRPERSONS
Maricel Abarentos (Over-all Chairperson), Ronald Jalmanzar (Over-all Vice Chair), Yolanda Tolentino(VC-Acads), Jennifer
Ang(VC- Secretariat), Joy Inductivo (VC-Finance), Elaine Masukat (VC-EDP), Anna Margarita Eres (VC-Logistics). Jonathan
Mangundayao (Political Law), Francis Benedict Reotutar (Labor Law), Romuald Padilla (Civil Law), Charmaine Torres (Taxation Law),
Mark David Martinez (Criminal Law), Garny Luisa Alegre (Commercial Law), Jinky Ann Uy (Remedial Law), Jackie Lou Bautista (Legal
Ethics)
San Beda College of Law 85
the sense that they are estopped profit. (Martinez vs. Hongkong and
subsequently from impugning the Shanghai Bank, 15 Phil. 252)
validity of the contract on the
ground of minority. It is necessary
that the misrepresentation must be Simulation of Contracts
active (e.g. when minors specifically 1. Absolute – when the contracting
stated in a contract that they were parties do not intend to be bound by
of age), not merely constructive. the contract at all. Thus, an
absolutely simulated contract is
VICES OF CONSENT (VIMFU) VOID.
1. Violence - when in order to wrest 2. Relative – when the contracting
consent, serious or irresistible force parties conceal their true
is employed. agreement. A relatively simulate
2. Intimidation - when 1 of the contract binds the parties to their
contracting parties is compelled by real agreement, when it does not
a reasonable & well-grounded fear prejudice a 3rd person and is not
of an imminent & grave evil upon his intended for any purpose contrary to
person or property, or upon the law, morals, good customs, public
person or property of his spouse, order or public policy.
descendants or ascendants, to give
his consent. OBJECT
3. Mistake - should refer to the The thing, right or service which is
substance of the thing which is the the subject matter of the obligation
object of the contract, or to those arising from the contract.
conditions which have principally Requisites:
moved one or both parties to enter a. It must be w/in the commerce of
into the contact. man
Must be mistake of fact and not of b. It must be licit or not contrary
law, except under Article 1334. law, morals, good customs,
Requisites under Article 1334: public order or public policy
a. Mistake must be with respect c. It must be possible
to the legal effect of an d. It must be determinate as to its
agreement kind
b. Mistake must be mutual
c. Real purpose of the parties Things which Cannot be the Object of
must have been frustrated. Contract
4. Fraud - when, through insidious 1. Things which are outside the
words or machinations of 1 of the commerce of men
contracting parties, the other is 2. Intransmissible rights
induced to enter into a contract 3. Future inheritance, except in
which, without them, he would not cases expressly authorized by
have agreed to. law
5. Undue influence - when a person 4. Services which are contrary to
takes improper advantage of his law, morals, good customs,
power over the will of another, public order or public policy
depriving the latter of a reasonable 5. Impossible things or services
freedom of choice. 6. Objects which are not possible of
determination as to their kind
Reluctant Consent
A contract is valid even though one CAUSE
The immediate, direct and most
of the parties entered into it against
proximate reason which explains and
his wishes and desires or even
justifies the creation of obligation.
against his better judgment.
Requisites
Contracts are also valid even though
they are entered into by one of the
parties without hope of advantage or
2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT
CHAIRPERSONS
Maricel Abarentos (Over-all Chairperson), Ronald Jalmanzar (Over-all Vice Chair), Yolanda Tolentino(VC-Acads), Jennifer
Ang(VC- Secretariat), Joy Inductivo (VC-Finance), Elaine Masukat (VC-EDP), Anna Margarita Eres (VC-Logistics). Jonathan
Mangundayao (Political Law), Francis Benedict Reotutar (Labor Law), Romuald Padilla (Civil Law), Charmaine Torres (Taxation Law),
Mark David Martinez (Criminal Law), Garny Luisa Alegre (Commercial Law), Jinky Ann Uy (Remedial Law), Jackie Lou Bautista (Legal
Ethics)
San Beda College of Law 85
3. Action for the Action for annulment or Action for rescission Corresponding action
declaration or nullity defense of annulability may prescribe for recovery, if there
or inexistence or may prescribe was total or partial
defense of nullity or performance of the
inexistence does not unenforceable
prescribe contract under No. 1
or 3 of Article 1403
may prescribe
6. Assailed not only Assailed only by a Assailed not only by a Assailed only by a
by a contracting contracting party contracting party but contracting party
party but even by a even by a third person
third person whose who is prejudiced or
interest is directly damaged by the
affected contract
2. Those whose cause or object did not the other party by reason of the
exist at the time of the transaction. contract.
b. Innocent party may demand for
NOTE: The principle of In Pari Delicto is the return for the return of
applicable only to void contracts and not what he has given.
as to inexistent contracts. 2. Executory Contracts - Neither of the
Principle of In Pari Delicto contracting parties can demand for
GENERAL RULE: When the defect of a the fulfillment of any obligation
void contract consists in the illegality of from the contract nor may be
the cause or object of the contract and compelled to comply with such
both of the parties are at fault or in pari obligation
delicto, the law refuses them every
remedy and leaves them where they are. NATURAL OBLIGATIONS
EXCEPTIONS: They are real obligations to which
1. Payment of usurious interest the law denies an action, but which
2. Payment of money or delivery of the debtor may perform voluntarily.
property for an illegal purpose, It is patrimonial, and presupposes a
where the party who paid or prestation.
delivered repudiates the The binding tie of these obligations
contract before the purpose has is in the conscience of man, for
been accomplished, or before under the law, they do not have the
any damage has been caused to necessary efficacy to give rise to an
a 3rd person. action.
3. Payment of money or delivery of
property made by an Examples of natural obligations
incapacitated person enumerated under the Civil Code:
4. Agreement or contract which is 1. Performance after the civil
not illegal per se & the obligation has prescribed;
prohibition is designed for the 2. Reimbursement of a third person for
protection of the plaintiff a debt that has prescribed;
5. Payment of any amount in excess 3. Restitution by minor after annulment
of the maximum price of any of contract;
article or commodity fixed by 4. Delivery by minor of money or
law or regulation by competent fungible thing in fulfillment of
authority. obligation;
6. Contract whereby a laborer 5. Performance after action to enforce
undertakes to work longer than civil obligation has failed;
the maximum # of hours fixed by 6. Payment by heir of debt exceeding
law. value of property inherited; and
7. Contract whereby a laborer 7. Payment of legacy after will have
accepts a wage lower than the been declared void.
minimum wage fixed by law.
8. One who lost in gambling ESTOPPEL
because of fraudulent schemes A condition or state by virtue of
practiced on him is allowed to which an admission or representation
recover his losses [(Art. 315, 3 is rendered conclusive upon the
(b), RPC] even if gambling is a person making it and cannot be
prohibited one. denied or disproved as against the
person relying thereon.
Rules when only one of the parties is at Kinds:
fault: 1. Estoppel in Pais (by conduct)
1. Executed Contracts: a. Estoppel by silence
a. Guilty party is barred from b. Estoppel by acceptance of
recovering what he has given to benefits
the other party is barred from 2. Technical Estoppel
recovering what he has given to a. Estoppel by deed
b. Estoppel by record
c. Estoppel by judgment
d. Estoppel by laches