OBLIGATIONS

AND CONTRACTS
Atty. Marieglo G. Damocles
 TITLE 1 -
OBLIGATIONS
 GENERAL
PROVISIONS
Concept of Obligations
ARTICLE 1156. An obligation is a juridical necessity to give, to do, or not to do.

Obligations may either civil or natural:

Civil Obligation – one which has a binding force in law, and which gives to the oblige or
creditor the right of enforcing it against the obligor or debtor in a court of justice.

Natural Obligation – one which cannot be enforced by action, but which is binding on the
party who makes it in conscience and according to the natural law.
Most common Natural Obligations
Art. 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription,
the obligor who voluntarily performs the contract cannot recover what he has delivered or the
value of the service he has rendered.
Art. 1429. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding
the value of the property which he received by will or by law of intestacy from the estate of the
deceased, the payment is valid and cannot be rescinded by the payer.
⮚To be voluntary in natural obligations, it means that the debtor or the payor knew that he
cannot be compelled to pay under the law but nonetheless he pay. One good reason why the
debtor pay even if he knew that he cannot be compelled to pay is because of gratitude.
DBP vs. Confessor
In DBP vs Confessor, the obligation was converted into a natural obligation
by prescription whereby Confessor executed another sets of promissory notes
thereby acknowledging the debt. In effect, the natural obligation became a
civil obligation because of novation. In other words, even natural obligation
can be the subject of novation. Thus, it became enforceable against
Confessor.
Requisites of Obligations
1. Juridical tie or legal tie (vinculum juris) – which binds the parties to the obligation, and
which may arise from either bilateral or unilateral acts of persons
2. Active Subject – known as the obligee or creditor, who can demand the fulfillment of the
obligation
3. Passive Subject – known as the obligor or debtor, against whom the obligation is juridically
demandable
4. Object/Prestation – the conduct which has to be observed by the debtor/obligor
Kinds of Obligation as to Prestation

❑To give
❑To do
❑Not to do
Sources of Civil Obligations (Art. 1157)
1. Law
2. Contracts
3. Quasi-contracts – Article 2142 No No one shall unjustly enrich himself at the expense of
another. Basis: Because the parties impliedly bound themselves.
4. Acts or omissions punished by law - not synonymous to felonies. For a civil liability to arise
from this source, there has to be a conviction.
5. Quasi-delicts – the issue goes into the nature of the act which could be the basis of the claim
under quasi-delict because those who would claim must prove the negligent act. It is an
independent source of an obligation and not a negligence in the performance of an obligation
under Art. 1170.
Obligations Arising from Law
Article 1158. Obligations derived from law are not presumed. Only those expressly determined
in this Code or in special laws are demandable, and shall be regulated by the precepts of the
law which establishes them; and as to what has not been foreseen, by the provisions of this
Book.

⮚ Must be expressly or impliedly set forth and cannot be presumed

Example of this is the obligation to pay Taxes. Those which are clearly stipulated in the National
Internal Revenue Code (R.A. 8424) are demandable and those which are not clearly expressed
are not presumed.
Obligations arising from Contracts
Article 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.

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
Obligations Arising from Quasi-Contracts
Article 1160. Obligations derived from quasi-contracts shall be subject to the provisions of
Chapter 1, Title XVII, of this Book.

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
Negotiorum Gestio
- Is the juridical relation which arises whenever a person voluntarily takes charge of the agency
or management of the business or property of another without any power or authority from the
latter.
In this type of quasi-contract, once the gestor or officious manager has assumed the agency or
management of the business or property, he shall be obliged to continue such agency or
management until the termination of the affair and its incidents, exercising such rights and
complying with such obligations as provided for in the code.
Negotiorum Gestio
In negotiorum gestio, the owner of the property has the obligation to indemnify the gestor even
if the owner was not benefited or was not unjustly enriched.
Basis: The owner impliedly gave consent to the person taking charge in the management of the
property.
Example: Juliet left her farm unattended for 1 week because she is having a vacation. Romeo, a
concerned lover in secrecy, noticed that Juliet has not been around and the plants are slowly
dying. Out of affection, Romeo cultivated the land, watered the plants, buy fertilizers and placed
fertilizers to the plants, removed the weeds and do all what a farmer should do. Romeo spent
necessary expenses which needs to be reimbursed in order for Juliet not to unjustly enrich
herself at the expense of Romeo.
Solutio Indebiti
Is the juridical relation which arises whenever a person unduly delivers a thing through mistake
to another who has no right to demand it.
In this type of quasi-contract, once the delivery has been made, the person to whom the delivery
is unduly made shall have the obligation to return the property delivered or the money paid.
Example: Romeo bought goods from Juliet Store. The goods cost $1500. Romeo gave $2000 to
the store cashier and receive a change of $700. Romeo is duty bound to return the excess of
$200 to the store. Otherwise, he will be unjustly enriching himself at the expense of Juliet Store.
Solutio Indebiti
CBK Power vs CIR – CBK claimed that if the gov’t will not issue tax credit certificate in their
favor, the gov’t will unjustly enrich at the expense of CBK. For this juridical relationship to
arise, there are two requirements:

a. A person receives something which he doesn’t have the right to demand

b. Payment must have been made by mistake
Other Quasi-Contracts
Case: The neighbor saved the house from fire- there is no basis for claiming compensation
under negotiorum gestio because saving does not equate to management of the property which
is an element of negotiorum gestio. Another requisites is that the property must have been
neglected or abandoned.
The case abovementioned falls under Art. 2168. When during a fire, flood, storm, or other
calamity, property is saved from destruction by another person without the knowledge of the
owner, the latter is bound to pay the former just compensation.
When a person pays the debt of another, that would result in a quasi-contractual relationship.
Obligations Arising from Criminal Offenses
Article 1161. Civil obligations arising from criminal offenses shall be governed by the penal
laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages.
Governing rules:
1. Pertinent provisions of the RPC and other penal laws subject to Art 2177 Civil Code
 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

Example: Romeo, a horse racing enthusiast, steals the horse of Juliet. Romeo commits the crime
of stealing Juliet's beloved horse. Romeo is criminally liable. In addition, Romeo is also civilly
liable. He is liable to return the horse, paying for its value if he cannot return the horse and
indemnifying Juliet of the consequential damages she had suffered.
Effect of acquittal in criminal case:
❑ when acquittal is due to reasonable doubt – no civil liability
❑ when acquittal is due to exempting circumstances – there is civil liability
❑ when there is preponderance of evidence – there is civil liability
Obligations Arising from Quasi-Delicts
Article 1162. Obligations derived from quasi-delicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by special laws.
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 (proximate cause )
Obligations Arising from Quasi-Delicts
Example: Romeo, a handsome try hard baseball player, was playing baseball outside Juliet's
house. Upon seeing Juliet, Romeo suddenly got excited and hit the ball so hard that it fly
straight to Juliet's window shattering it into pieces and bounce right into Juliet's face injuring her
beloved nose. Though Romeo and Juliet has no contractual relation at all. They are now bound
to each other because of quasi-delict. Because of Romeo's negligence, he will be liable for the
damages to Juliet.
NATURE AND EFFECTS
OF OBLIGATIONS
Effects of Obligations
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
Article 1163. Every person obliged to give something is also obliged to take care of it with the
proper diligence of a good father of a family, unless the law or the stipulation of the parties
requires another standard of care.

Exercise diligence / Preserve the thing

❑standard of care: that of a good father of a family
❑except:
▪ if the law requires a higher degree of diligence
▪ If so stipulated by the parties
Accessory Obligations
Article 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However,
he shall acquire no real right over it until the same has been delivered to him.
Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by
article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same
interest, he shall be responsible for any fortuitous event until he has effected the delivery.
Delivery of Fruits
When 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
Accessory Obligations
Article 1166. The obligation to give a determinate thing includes that of delivering all its accessions and
accessories, even though they may not have been mentioned.
Delivery of accessories & accessions ( obligation to deliver determinate thing, even if the stipulation does
not mention delivery of accessories & accessions)
❑Accessories - those joined to or included with the principal for the latter’s better use, perfection or
enjoyment
❑Accessions – additions to or improvements upon a thing
When does right to fruits arise? – from the time the obligation to deliver arises
a) Conditional – from the moment the condition happens
b) 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
Article 1167. If a person obliged to do something fails to do it, the same shall be executed at
his cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been poorly done be undone.

Article 1168. When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall also be undone at his expense.
Remedies
Three (3) 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
1. Contravention of Tenor (Art. 1167)
2. Delay/Mora - Non performance with respect to time
Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing
is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other
begins.
Irregularity of Performance/Breach
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
Irregularity of Performance/Breach
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
c. resolution (art 1170, in proper cases)
Irregularity of Performance/Breach
3. Fraud/Dolo
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for
damages.
Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of
an action for future fraud is void.
Irregularity of Performance/Breach
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
Irregularity of Performance/Breach
4. Negligence (Culpa) – Absence of due diligence
Article 1172. Responsibility arising from negligence in the performance of every kind of obligation
is also demandable, but such liability may be regulated by the courts, according to the
circumstances. (1103)
Article 1173. The fault or negligence of the obligor consists in the 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. When negligence shows bad faith, the provisions of articles 1171 and
2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.
Irregularity of Performance/Breach
Elements (Negligence):
a) Omission of diligence required
b) Diligence required – per nature of obligation, circumstances of persons, time and place
Fraud Distinguished From Negligence
FRAUD NEGLIGENCE
There is deliberate intention to cause There is no deliberate intention to cause
damage. damage.
Liability cannot be mitigated. Liability may be mitigated
Waiver for future fraud is void. Waiver for future negligence may be allowed
in certain cases:
a) gross – can never be excused in advance;
against public policy
b) simple – may be excused in certain cases
Causes Not Attributable to the 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
Causes Not Attributable to the Debtor
(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

Compensatio morae – both parties are in default (in reciprocal obligations); the effect: is as if
there is no default
Causes Not Attributable to the Debtor
2. Fortuitous Events - event which could not be foreseen, or which though foreseen, were
inevitable
Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be foreseen, or which, though foreseen,
were inevitable.
Causes Not Attributable to the Debtor
REQUIREMENTS (Nakpil & Sons vs. CA):
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
Causes Not Attributable to the Debtor
Rule on Fortuitous Event:
1. General Rule – no liability for fortuitous event
2. Exemption –
❑when expressly declared by law ( bad faith, subject matter is generic, debtor is in delay )
❑when expressly declared by stipulation or contract
❑when nature of obligation requires assumption of risk