Obli con:

Obligation must be derived from law, contracts, delicts, quasi-delicts, quasi-contracts

Obligation based on law: not presumed.

Obli from contracts: from stipulation either verbal or written

Obli from contracts: force of law between parties – stipulations are binding if not against lampogpp.
Must be complied with in good faith

Obli from quasi-contracts – must be LUV (unilateral, voluntary, lawful) and no one will be unjustly
enriched at the expense of the other

Obli from quasi-delicts – every person criminally liable is also civilly liable. Must have no contractual
relationship but there must be causal connection between act and the injury suffered from. Exception:
contractual tort – she did not say what this is.

Case: Bank’s reliance on the hold out clause- hold out clause (meaning they can restrict
withdrawal from your account) applies only if there is an obligation based on law, contract, delict, QC or
QD. In this case, metrobank issued hold out clause prior to the filing and final judgment in a criminal
case ordering their clients guilty. Thus, metrobank is wrong.

Makati stock exchange v. campos – campos is the chairman in Makati stock exchange. MSE
deprived campos of the right to subscribe stocks first, despite previous company practice giving him
priority to subscribe prior to others. Court said no legal source (l, c, ,d, qd, qc) showed by campos. Court
ruled in favor of MSE.

Bicol medical center v. botor (mayor of naga)– naga sought to compel BMC to open road leading
to hospital. Naga was claiming the road was a public road, thus wanted it to be opened to avoid traffic.
Sc ruled in favor of BMC because there was no support alleged by naga except for customary use by the
public, which is not a legal source of obligation.

Nature and effects of obli:

1. Personal obli – to do
- Obigor obliged to take care of thing with DGFF except when different standard of care
required by law
- If debtor fails to do, it may be executed at his cost, or if it is against the tenor of the creditor,
it may be ordered undone at debtor’s expense.
- Personal obli - Only debtor may do it – and if there is breach = creditor may compel
equivalent performance (damages)
- If not personal – and if there is breach= creditor may require substitute performance
(performed by someone else at the expense of the debtor or creditor may choose payment
of damages which can be a separate cause or in conjunction with performance)
- If what debtor made is not consistent with what was stipulated – creditor may order it be
undone at debtor’s expense
 - Case: collapse of windmill not due to fortuitous event because strong wind is not
unforeseeable or unavoidable. So creditor not in delay for not paying in full. Thus debtor
contractor should repair windmill at his cost.
2. Real obligations – to give – deliver that which has been stipulated

Accessory obligations: obligation to take care, to account, deliver fruits from the time to deliver
it arises (from the moment of perfection of contract unless otherwise stipulated or if dependent on
suspensive condition), with accessions and accessories of the thing if the object is determinate, even
if contract is silent.

Ownership of thing is transferred to creditor only upon delivery of the thing. Right over fruits is
just personal as against the debtor, not against third parties who acted in good faith in acquiring
them.

Debtor bound to deliver accessions and accessories – those objects which go with the thing to
be delivered.

If obligation to give a determinate thing, creditor may demand delivery through action for
specific performance. with damages if with fraud or delay.

If indeterminate or generic – obligation may be demanded to be satisfied at the debtor’s expense.

Breach of obligations – demand must first be made either judicially or extrajudicially to put them in
default (demand-default rule), except:

1. Obligation and law expressly declare

2. Time when thing to be delivered is the controlling motive for establishment of contract
3. Demand is useless because obligor has rendered it to be useless

In reciprocal obligations – one is not required to do if the other has not yet complied

Breach- failure without legal reason to comply with the terms of the contract

Case: transfer to pnb of mortgaged property is not valid because the loan obligation was reciprocal,
meaning simultaneous performance. Since pnb failed to release 39 million to the debtor in accordance
with the loan agreement (which caused non-completion of the condo project of debtor), pnb had no
right to demand from debtor payment. Foreclosure is an accessory contract, secondary to the principal
obligation (in this case loan). Since loan was not validly complied with, foreclosure is invalid.

Breach may be breached by delay, fraud or contravention.

Delay on debtor (mora solvendi)

Delay on creditor (mora accipiendi)

Both (compensatio morae)

Case: debtor liable for interest on the balance based on the compromise agreement since payment was
made after the agreed period of payment (despite no interest being agreed upon).

Demand not necessary in: (delay is automatic)

 1. Stipulation or law expressly states no need for demand -
2. Time controlling motive – time is of the essence
3. Debtor can no longer perform

Effects of delay:

If debtor is in delay – damages in the form of interest on the sum due may be awarded

- Liable even is loss is due to fortuitous event

If creditor is in delay – liable to debtor and bears risk of loss of the thing

If both are in delay- court will determine the first infractor. If undeterminable, contract is deemed
extinguished and each shall bear his own damages

Fraud/ negligence:

Debtor will be liable for damages

- Fraud in the performance difference from fraud at the inception

- Fraud from inception if induced to enter due to fraud – annulment of contract based on
vitiated consent is the remedy
- Fraud in the performance/ incidental fraud – only damages + performance or refuse delivery

Negligence: omission of diligence.

- Depends on circumstances of persons, time or place

- Case: bpi guilty of negligence: issue on terms and conditions on use of credit card. Nowhere
in the terms and conditions does it say that the client needs to submit a form after the
payment of past overdue balances of client to restore credit card privileges. Bpi liable for
damages

Rescission as a remedy for breach: art. 1191 - implied in reciprocal ones if one of the parties does not
comply in what is incumbent upon him.

- May choose fulfillment or rescission + damages in either case

- Rescission may still be chosen if fulfillment becomes impossible by reason of loss of thing or
impossibility of performance
- Law gives discretion to parties to choose
- Slight or casual breach not allowed. Only substantial breach will allow rescission. If breach is
not substantial, court may allow non-fulfilling party additional time to comply with
obligation
- Rescission as a remedy applies only to existing obligations.
- Case: contract to sell- since seller reserves title to the property, rescission is not allowed
since there is still no obligation to transfer title. Cancellation is different from rescission
under 1191. Rescission means mutual restitution as if it was not entered into.
- Case: Are rescissions that are extrajudicial valid? Yes, they are. As a rule, it must be done
judicially. Exception: if contract itself states that violation of the terms would allow
rescission.
Effect or rescission: mutual restitution/ original position/ status quo ante

- Case: even if rescission is not agreed upon in a reciprocal contract, rescission is allowed by
the court because it does not expect the injured party to wait for the resolution of the court
and watch his damage multiply – protection of interest of the other party
- If both parties are guilty of breach – 1192 applies – liability of the first infractor will be
tempered by the court. If non determinable, each shall bear his loss.
- Rescission (1191) v. resolution (1381)– 1191 is a principal action. 1381 is a subsidiary
remedy due to economic prejudice suffered. 1191- only contracting parties may sue for
rescission. 1381- even third party not a party may sue for rescission. 1191 – allows court to
fix longer period to comply with obligation. 1381- no basis for longer period to comply
because inapplicable.
- Case: in case a debtor only paid 8% of contract price, court cannot allow him a longer period
to comply as the breach was substantial and it would be unjust to the other party.
- Nonperformance on either party may claim for damages
- But if not due to delay, negligence or fraud but due to fortuitous event, the party who failed
to perform his obligation is not liable for damages, except (1174)t:
a. Expressly specified by law
b. Stipulated
c. When the nature of obli requires assumption of risk

Fortuitous event:

- Must be impossible to foresee or avoid

- Acts of god, or independent of the will of man, or acts of man, (acts independent of the will
of obligor but not of others, i.e., like war)
- Four requisites:
a. Cause must be independent of human will
b. Such as to render the performance impossible
c. Impossible to foresee
d. Obligor is free from participation

Fortuitous event will not exempt if:

a. Stipulated
b. Involves the assumption of risk (volenti non fit injuria)
c. Law provides

- Case: robbery is not a fortuitous event. Failure to adopt precaution and vigilance to stop
robbery was not shown.

Different kinds of obligations:

1. Pure and conditional

- Pure – performance of which does not depend on a future or uncertain event or a past
event unknown to the parties. Immediate demandability
- Conditional – depends on the happening of a condition
 a. Suspensive – suspends the right of the parties to compel performance. Happening of the
thing gives right to demandability. Fruits and interest received, if reciprocal, law treats
it as mutual compensation. But If obligations is unilateral, debtor shall appropriate that
received unless the intention of parties is different. If loss occurs without fault of
debtor, obli is extinguished. If through fault of debtor, creditor may choose file
damages. If thing is improved by nature or time, creditor will benefit. But if improved
due to debtor, creditor only has a right of usufrustuary, meaning debtor can remove
improvements without causing unnecessary damage. If deterioration or improvement is
caused by time or not by the fault of debtor, creditor bears the loss. If fault of debtor,
rescission or damages or continue contract with damages at the choice of creditor.
b. Resolutory – happening of the condition extinguishes obligations
c. Casual – depends on chance or will of a third person. Can also be mixed
d. Potestative – depends solely on the will of creditor or debtor. But if condition based
solely on will of the debtor – void. If dependent half on the will of debtor and on chance
or will of third party- creditor may choose refuse performance or to waive the condition
- If there is a pre-existing obligation but the potestative condition on the performance is void,
only the condition is void.
- Perfection v. performance: failure to comply with the condition imposed for the perfection
of the contract will result in failure of the contract, but not in the condition of performance
which will allow other party option to refuse performance of the sale or to waive the
condition.
- Case: if the promissory note does not have date of payment is considered a pure obligation
under 1179 thus demandable at once.
2. Obligation with a period – a day certain necessarily will come. If the period is only an esetimate,
and not a day certain will not put the debtor in delay. Period is understood to be for the benefit
of both parties. Cannot compel one to pay or deliver before the arrival of the period. If the other
receives payment, the obligor not knowing of the period, and believing that obligation is due
and demandable, may recover fruits and interest.
- If no period fixed but period was intended, courts may fix it.
- Debtor loses benefit of the period if: so effect is immediately demandable
a. Debtor becomes insolvent
b. He does not furnish guarantee or security he has promised
c. By his own acts, he has impaired the guarantees or securities
d. Violates undertaking
e. Debtor attempts to abscond
3. Alternative and facultative
- Conjunctive obligations: several objects agreed upon and may be fulfilled by delivery of all
- Distributive obli – several objects but debtor may comply with obligation by delivering only
one
- Alternative – performance of only one will fulfill. Debtor has right to choose prestation,
unless expressly granted to creditor. But not allowed to choose unlawful or impossible. If
debtor has right of choice and all things are lost due to his fault, indemnity in favor of
creditor at the value of last thing lost. If choice is with creditor and one of the things is lost
 due to fortuitous event, creditor may choose from remaining. But if loss is due to fault of
debtor, indemnity shall be at the value of any of the things lost, with damages.
- Facultative obligation – single presentation, but debtor has right to render another in
substitution, with choice of debtor. So debtor cannot be liable if he loses, even if deliberate
loss, the thing which is the object of the substitute, since he can still comply with the
original prestation. But once substitution is made is communicated to the creditor, it ceases
to be facultative and is already a simply obligation, which makes the debtor liable for loss of
the substitute.
4. Joint and solidary
- If silent, presumption is only joint liability.
- Solidarity liability if LaStNa: must be positively and clearly expressed
a. Law
b. Stipulated
c. Nature of the obligation requires solidarity
- Solidarity: laws that impose it
a. Article 92 – if conjugal or absolute property is exhausted
b. Article 927 – wills
c. Agency – principal estopped from denying agency if he shows that agent has authority
d. 1915 – appoint an agent for common transaction.
e. 1824- partnership – articles 822 and 823
f. 2146- officious manager in negotiorum gestio. Delegating of two managers
g. 2157 – solution indebiti – when there has been payment which is not due
h. 2194 – liability of joint tortfeasors
- If the obligation is indivisible, the right of creditors may be prejudiced only by their collective
acts and the debt can only be enforced by proceeding against all the debtors.
- Solidary obligation: possible even if solidary debtors are not subject to the same period or
conditions. Only the obligations (like the amount) which have matured can be demanded
from any one of them.
- Any demand to any one of the creditors is demand to all, but payment shall only be made to
the one who made a demand.
- Case: and/or nature of accounts indicate active solidarity and entitled any one of the card
holder’s payment of the time deposits.
- Case: creditor may proceed against the surety even without proceeding to the debtor first.
Surety’s liability is solidary to the debtor. Sureties do not ensure solvency of the debtor but
rather the debt itself.
5. Obligations with a penal clause: intended to serve as a measure of indemnity in case of non-
performance. Similar to liquidated damages. It may be subject to reduction by courts if
excessive. Damages may be awarded on top of penalty if:
a. Fraud in the performance of the obligation
b. Stipulated
c. Debtor refuses to pay penalty
- Debtor cannot exempt himself from fulfillment of the obligation by paying penalty, except if
agreed upon. If performance has become impossible without fault of creditor, then penalty
may still be enforced.
- Proof of actual damages not necessary to impose penalty.
- Penalty may also be invoked in case of irregular or partial performance, not only in case of
non-performance.
- Case: stipulated interest rates of 3% rates or higher per month is iniquitous, such are void.
- Nullity of penal clause does not carry with it the nullity of principal because it is an
accessory contract.