University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)

TITLE I: OBLIGATIONS be substituted anything of the same

Chapter I: General Provisions with another class as long as it is
I. Concept although the of the same kind.
An obligation is a juridical necessity to give, to do or not to intended
do. Art. 1156, NCC substitute is of Creditor cannot
Elements the same kind demand a thing of
Active subject (obligee/ creditor) and quality. superior quality;
the one in whose favor the obligation is constituted the person neither can the
who is entitled to demand debtor deliver a
Passive subject (obligor / debtor) thing of inferior
the one bound to the fulfillment the person who has the duty
of giving, doing or not doing
quality.
Prestation (object)
the conduct which has to be observed by the *Limited Generic thing – when the generic objects are confined
debtor/obligorduties of the obligor to a particular class, e.g., an obligation to deliver one of my horses
Vinculum (Tolentino)
1. juris
(efficient
2. cause; juridical or legal tie)
– that which binds or connects the parties to the Specific/ Determinate Thing
obligation. This can be easily known by knowing the Duties of the obligor:
sources of obligations. (de Leon  To preserve or take care of the thing due (1163)
*Standard of care:
II. Sources (Art. 1157) that of a good father of a family
Law
3. unless the law or stipulation requires another
Contracts
standard of care
Quasi-contracts
4.
Delicts  To deliver the thing itself (1244)
5.
Quasi-delicts  To deliver the fruits of the thing (Art. 1164, par.
1)
QUASI-CONTRACTS (LUV) *When does the right to the fruits begin to exist?
Definition From the time the duty to deliver arises: when there is
It is the juridical relation resulting from lawful, voluntary, and no term/condition
unilateral acts by virtue of which the parties become bound to – from the perfection of the contract
each other to the end that no one shall be unjustly enriched or when there is a term/condition
benefited at the expense of another (2142) – from the moment the term or condition
Kinds of quasi-contracts arises
1. Negotiorum gestio (unauthorized management)
2. Solutio Indebiti(undue payment)
 To deliver the accessions and accessories of the
thing (Art. 1166)
Negotiorum Gestio *Accessories - those joined to or included with the principal
for the latter’s better use, perfection or enjoyment
This takes place when a person voluntarily takes charge of
another’s abandoned business or property without the owner’s *Accessions – additions to or improvements upon a thing
authority (Article 2144)  To pay for damages in case of breach
This juridical relation does not arise in either of these instances: Generic Thing
1. When the property or business is not neglected or abandoned Duties of the obligor:
2. If in fact the manager has been tacitly authorized by the owner  To deliver a thing which is of the quality intended by the
Solutio Indebiti parties taking into consideration the purpose of the obligation
This takes place when something is received when there is no right and other circumstances (1246)
to demand it, and it was unduly delivered thru mistake (2154)  To be liable for damages in casa of fraud, negligence, or
delay, in the performance of his obligation, or contravention
DELICTS (Obligations Ex Delicto) of the tenor itself (1170)
Governing Rules Personal Right Real Right
Pertinent provisions of the RPC and other penal laws subject to Before delivery After delivery
Art 2177 Civil Code
Jus ad rem/ jus in jus in re – a right
Art. 100, RPC
Every person criminally liable for a felony is also civilly liable
personam – a enforceable
right enforceable against the world.
QUASI-DELICTS(CULPA AQUILANA) only against a
Definition definite passive
An act or omission with fault or negligence causing damage to subject, the
another; not a crime nor contract debtor
Article 2176, New Civil Code Right pertaining to Right pertaining to
Whoever by act or omission causes damage to another, there the person to a person over a
being fault or negligence, is obliged to pay for the damage done.
demand from specific thing,
another, as a without a passive
Chapter II: Effect of Obligations definite passive subject individually
I. KINDS OF PRESTATION subject, the determined against
Obligation to Give fulfillment of a whom such right
Obligation to Do
prestation to give, may be personally
Obligation Not to do
to do or not to do enforced
OBLIGATION TO GIVE:
Specific/
determinate Generic thing (1246) Rights of Creditor
thing
It is identified by It is identified only Specific Generic
its individuality; by its specie. The To compel To ask for
hence, it cannot debtor can give specific performance of the

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University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)

performance obligation obligation

To recover To ask that the Purpose is Purpose is Purpose is
damages in case obligation be to evade the to secure to secure
of breach of the complied with at normal the the consent
obligation, the expense of the fulfillment consent of of the other
exclusive or in debtor of the another to party but
addition to obligation enter into the fraud
specific the was not the
performance contract principal
Entitlement to To recover inducement
fruits, interests damages in case of in making
from the time the breach of the contract
obligation to obligation Results in Results in Does not
deliver arises. the breach vitiation of result in the
of an consent; vitiation of
OBLIGATION TO DO: obligation voidable consent
– To do it (1167) contract
– To shoulder the cost if someone else does it (1167) Gives rise to Gives rise Gives rise
– To undo what has been poorly done (1167) a right in to a right to a right of
– To pay damages (1170-1172, 2201-2202)
If a person obliged to do something fails to do it, the same shall be
favor of the of an an innocent
executed at his cost. creditor to innocent party to
This same rule shall be observed if he does it is in contravention recover party to claim for
of the obligation. Furthermore, it may be decreed that what has damages annul the damages
been poorly done be undone. (1167) contract
*The creditor may demand that the obligation be performed by the
debtor himself or by a third person at the expense of the debtor. NEGLIGENCE (fault or culpa)
However, in cases where the personal qualifications of the It is the absence of due diligence.
debtor are taken into account, the only remedy of the creditor is any voluntary act or omission, there being no malice
an action for damages. In the Balane notes, there is no action for
compliance for an obligation to do because such would be
involuntary servitude which is prohibited by the constitution. Fraud Negligence
OBLIGATION NOT TO DO: There is There is no deliberate
– Not to do what should not be done deliberate intention to cause
– To shoulder the cost to undo what should not have been done intention to damage.
(1168) cause
– To pay damages (1170, 2201-2202)
damage.
*If undoing is not possible, either physically or legally, or because
of rights acquired by third persons who acted in good faith, or for Liability Liability may be
some other reason, his remedy is an action for damages caused cannot be mitigated.
by the debtor’s violation of his obligation. mitigated.
II. BREACH OF OBLIGATION Waiver for Waiver for future
Voluntary - the debtor, in the performance of the obligation is future fraud is negligence may be
guilty of fraud, negligence, delay or contravention of the tenor of void. allowed in certain
the obligation cases:
Involuntary – debtor is unable to comply with his obligation
a) gross – can never
because of a fortuitous event
be excused in
A. MODES OF BREACH (1170) FNDC
Fraud advance; against
Negligence public policy
Delay b) simple – may be
Contravention the tenor thereof excused in certain
FRAUD (Dolo) cases
It is the deliberate or intentional evasion of the normal fulfillment of
an obligation.
Kinds of Culpa
*Waiver of action for future fraud is void for being contrary to law
and public policy (Art. 1171) because the advance renunciation of Culpa Aquiliana (quasi-delict)- fault or negligence, if there is
no pre-existing contractual relation between the parties
the creditor would practically leave the obligation without effect.
*Past fraud can be renounced. The fraud referred to is fraud in Culpa Contractual– wrong or negligence in the performance of
Article 1170, which is the malice or bad faith in the performance an obligation from a contract.
of the obligation. Culpa Criminal - wrong or negligence in the commission of a
Kinds of Fraud crime
DELAY (mora)
Fraud in the Fraud in the Execution in UNILATERAL OBLIGATIONS
Performance
Delay occurs from the time of creditor’s judicial or
(Art. 1170) Causal Incidental extrajudicial demand ("No Demand, No Delay")
Fraud Fraud (dolo Exception: Demand is not necessary to incur in delay
(dolo incidente) when:
causante) (Art. 1344)  obligation or law1 expressly declares
(Art. 1338)  time is a controlling motive
Present Present Present  demand would be useless
during the during the during the It is not enough
performance perfection perfection that there is a
of a pre- of a of a specific date of
existing contract contract performance, the

1
Example is Art 1788 partnership.

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University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)
words “without
the need of
demand” should
appear in the face
of the instrument.
in RECIPROCAL OBLIGATIONS
delay happens from the moment one party fulfills his undertaking.
(1169) If neither party performs his undertaking, neither incurs
delay
KINDS OF DELAY
1. Mora Solvendi
There is a delay on the part of the debtor to fulfill his obligation
(to give or to do)
Mora Solvendi Ex re – default in real obligations
Mora Solvendi Ex persona – default in personal obligations
EFFECTS:
 The creditor may ask for damages/ the debtor is liable
for damages
 The debtor is liable even if the loss is due to fortuitous
events.
 The debtor shall bear the risk of loss.
2. Mora Accipiendi
There is a delay on the part of the creditor to accept the
performance of the obligation
EFFECTS:
 The debtor is exempted from risk of loss of thing or the
creditor bears risk of loss.
 The expenses incurred by the debtor for the
preservation of the thing after the mora shall be
chargeable to the creditor.
 If the obligation bears interest, the debtor does not have
to pay from time of delay.
 The creditor is liable for damages.
 The debtor may relieve himself of obligation by
consigning the thing.
3. Compensatio Morae
It is the delay of the parties or the obligors in reciprocal
obligations. The effect is that it is as if there is no default.
CONTRAVENTION TO THE TENOR OF THE
OBLIGATION
This is the violation of the terms and conditions stipulated in the
obligation. And such contravention must not be due to a fortuitous
event or force majeure.
It is immaterial whether or not the actor is in bad faith or negligent
B. FORTUITOUS EVENTS
Events which could not be foreseen, or which though
foreseen are inevitable. (Article 1174)
Act of God
An act of God is defined as an accident, due directly and
exclusively to natural causes without human intervention, which by
no amount of foresight, pains or care, reasonably to have been
expected, could have been prevented. (Nakpil v. CA)
Act of Man/ force majeure
In contrast, force majeure is a superior or irresistible force, which
is essentially an act of man, such as wars, strikes, riots, acts of
robbers, pirates, and brigands.
*In our law, acts of man and acts of God are identical in so far as
they exempt an obligor from liability because the events happened
independent of the will of the obligor.
(Republic v. Stevedoring Corp., 21 SCRA 279, 1967 and UST
v. Descals, 38 Phil. 287, 1918)
*When a debtor is unable to fulfill his obligation because of
fortuitous events or force majeure, his obligation to
comply is extinguished subject to the following
EXCEPTIONs:
S-declared by stipulation
L-Law provides otherwise
N–nature of the obligation requires the assumption of risk
(1174)
D– when the obligor is in default or has promised to deliver
the same thing to two or more persons who do not
have the same interests. (1165(3))
noteS:
One who negligently creates a dangerous situation cannot escape
liability for the natural and probable consequences thereof
although an act of God intervened to precipitate the loss. There
must be no fraud, negligence, delay or violation or contravention
in any manner of the tenor of the obligation. (Nakpil v. CA)
ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 3 of 14
Failure to act, the whole occurrence is then humanized and
removed from the rules applicable to the acts of God.
(NAPOCORvs.CA,211SCRA162, 1992)
Addt’l Notes:
 The very precautions employed by the obligor implies
knowledge or acceptance of risk, hence NOT a Fortuitous
Event.
 DEFECTIVE BRAKES, TIRE BLOW OUTS, and others
of similar nature (Product Defects that causes
accidents) CANNOT be classified as Fortuitous Events.
The MANUFACTURERS of these defective products are
considered in law as AGENTS of the Common
Carrier.(Necesito vs. Paras 104 Phil 75)
 FE DONOT stop the running of the period in an
obligation.
 CARNAPPING is normal in businesses engaged in car
repairs (NOT a FE) –Supreme Court.
C. REMEDIES OF CREDITORS
 Exact fulfillment – to demand fulfillment of the obligation
or specific performance – either specific, substitute or
equivalent performance
 Pursue the leviable – to attach the properties of the
debtor, except those exempt by law, from execution.
 Accion subrogatoria
 Accion Pauliana
GENERAL RULE
Rights acquired by virtue of an obligation are transmissible
in character.
EXCEPTIONS:
Personal Rights
Stipulated otherwise
Law provides otherwise
Accion Subrogatoria
This involves the right of the creditor to exercise all of the rights
and bring all of the actions which the debtor may have against third
persons. (Stepping into the shoes of others)
Accion Pauliana (Art. 1313)
Rescission, which involves the right of the creditor to attack or
impugn by means of a rescissory action any act of the debtor which
is in fraud and to the prejudice of his rights as creditor.
Requisites
 There is a credit in favor of plaintif/creditor
 debtor has performed an act subsequent to the contract,
giving advantage to other persons
 creditor has no other legal remedy
 debtor's acts are fraudulent
 creditor is prejudiced by the debtor's act which are in
favor of 3rd parties and rescission will benefit the creditor
NOTE: This is different from Accion Directa - the right of a
creditor to sue on a contract entered into by his debtor in Art.
1652, 1608, 1729, 1893. Where the law specifically allow
certain person to sue on contracts entered by another even in
the absence of fraud.
RESCISSION IN ARTICLE 1191
 The power to rescind (IMPLIED IN EVERY
RECIPROCAL OBLIGATIONS)means the right to cancel
or to resolve the contract in case of non-fulfillment
(breach)of the obligation on the part of one of the parties.
 It is not the rescission in 1380 which involves
damage or lesion, or injury to the economic interest of
a person.
 It only exists in reciprocal obligations.It can be
demanded only if the plaintiff is ready, willing and able to
comply with his own obligation and the other is not.(Seva
v. Berwia, 48 Phil. 581)
 Aggrieved party entitled to DAMAGES.
 Judicial approval is necessary for rescission in this
article. EXCEPT IF PARTIES STIPULATES THAT THEY
CAN RESCIND AUTOMATICALLY UPON BREACH
EVEN WITHOUT COURT APPROVAL, in which case,
NO DAMAGES allowed since Article 1191 will not apply
in said case.
Prolem: In a LEASE contract, parties stipulated that Lessor can
rescind the contract even without court approval upon non
payment of rent. Lessee defaulted, then Lessor rescinded the
contract, asked for damages under article 1191. Is he Damages?
NO. Lessor is NOT entitled to damages, article 1191 not
University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)

applicable because the latter applies only in judicial (A.K.A. = “Condition precedent” or “condition antecedent”)
rescission. It suspends the effectivity of obligation/ acquisition of
rights, until the conditions are fulfilled;
Problem. This case shows that one cannot rescind a contract RESOLUTORY CONDITION
on account of one’s own failure to fulfill an obligation. Romero v. 7.
CA
(AKA=”Condition subsequent”)
It causes the extinguishment of obligation or loss of
Chapter III. DIFFERENT KINDS OF rights already acquired upon the fulfillment of the condition.
OBLIGATIONS POTESTATIVE CONDITION
(facultative condition)
PRIMARY CLASSIFICATION
A condition which depends upon the sole will of one of
(PaPA, Just Don’t Preach) the contracting parties.
Note: POTESTATIVE
1. Pure and conditional obligations (1179-
1192) SUSPENSIVE RESOLUTORY

2. Obligations with a Period (1193-1198) NO PRE-EXISTING PRE-EXISTING

3. Alternative obligations (1199-1206) OBLIGATION OBLIGATION ALL
` VALID
4. Joint and solidary obligations (1207-1222)
Both the Only
5. Divisible and indivisible obligations (1223- OBLIGATION the CONDITION
1225) And the CONDITION is VOID
are
6. Obligations with a Penal clause (1226- VOID
1230)
Thus,if the DR binds himself as soon as he decides to pay
SECONDARY CLASSIFICATION (potestative suspensive) a previous indebtedness,
although te condition is Void, the pre existing debt is not
(U R D PoLiCe) affected.
CASUAL CONDITION
1. Unilateral and bilateral The condition depends upon chance or the will of a third
person.
2. Real and personal
MIXED CONDITION
3. Determinate and indeterminate The condition depends partly on the will of a party and
4. Positive and negative partly on chance or the will of a 3rd person.
POSSIBLE CONDITIONS
5. Legal and conventional Condition capable of fulfillment, legally and physically.
IMPOSSIBLE CONDITIONS
6. Civil and natural
Condition not capable of fulfillment, legally or physically.
I. PURE AND CONDITIONAL OBLIGATIONS General Rule
PURE OBLIGATIONS They shall annul the obligation which depends upon them
Obligations which are due and demandable. NOT subject to any Exceptions
term or conditions. OTHERWISE, Conditional obligation.  P-pre-existing obligation
CONDITIONS =Future + Uncertain Event  N-Obligations NOT TO DO an IMPOSSIBLE thing.
TERM/PERIOD=Future + CERTAIN event  D-divisible obligations
Classification of Conditions  S-simple or remuneratory donations
 T-testamentary dispositions
As to effect
Suspensive Problem. The stipulation that the lessee has the right to renew
contract of lease as long as he needs the premises and he can
Resolutory pay for the same is invalid. It would leave the lessee, Dy, the sole
As to form power to determine whether the lease should continue or not. The
Express – the condition is clearly stated lease contract is deemed extinguished at the end of a year, subject
Implied – the condition is merely inferred to renewal by means of a new agreement but since the lessor did
As to possibility not want to renew, there is no more lease. Lao Lim v. CA
Possible POSITIVE CONDITION
Impossible EFFECT:
As to cause or origin The obligation is extinguished as soon as the time expires
Potestative without the event taking place as soon as it has become
indubitable that the event will not take place although the time
Casual
specified has not yet expired (1184)
Mixed NEGATIVE CONDITION
As to mode EFFECT:
Positive – the condition consists in the performance of The obligation becomes effective from the moment the time
an act (1184) indicated has elapsed without the event taking place; or from the
Negative – the condition consists in the omission of an moment it has become evident that the event cannot occur,
act although the time indicated has not yet elapsed (1185)
As to numbers
Conjunctive – there are several conditions and all must
Constructive (Not actual) Fulfillment of
be fulfilled Conditions(1186)How done?
Disjunctive – there are several conditions and only one In cases of Suspensive Conditions – when obligor actually
or some of them must be fulfilled prevents the fulfillment of the condition; and He acts voluntarily.
As to divisibility In cases of Resolutory Conditions –Same as above, as when
the debtor is bound to return what he has received upon fulfillment
Divisible – the condition is susceptible of partial
of the condition and prevents the same voluntarily.
performance
Indivisible – the condition is not susceptible of partial Effects of Fulfillment of Conditions
performance  Once the condition has been fulfilled shall retroact to the
SUSPENSIVE CONDITION day the obligation was constituted
6.

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RETROACIVE EFFECT ON FRUITS AND INTERESTS

 When the obligation imposes reciprocal prestations Art 1180. “when the DR binds himself to pay when his means
upon the parties, the fruits and interests shall be permit him to do so, the obligation shall be deemed to be one
deemed to have been mutually compensated (this with a PERIOD, subject to the provision of Article 1197” (court
assumes a simultaneous performance of prestations). fixing the period).
 In a unilateral obligation, the debtor shall appropriate Problem. “I promise to pay upon arrival of the steamer in the
the fruits and interests received unless the intention port”. Period or Condition? Ans= PERIOD, because thte
constituting such was different. promise is not the fact of arrival, but the date of arrival.
 In obligations to do or not to do, the court shall
determine the retroactive effect of the condition that has The Court May Fix a Period When
been complied with.
 There is no express stipulation, but a period is intended
RIGHTS PENDING FULFILLMENT OF A SUSPENSIVE by the parties as can be inferred from the nature and
CONDITION circumstances of the obligation.
Of the creditor Of the debtor  If the duration of the period depends upon the will of the
He may take or He is entitled to debtor.
 If the debtor promises to pay when his means permit him
bring appropriate recover what he to do so. (1197)
actions for the has paid by General Rule
preservation of his mistake prior to The period attached to the obligation is for the benefit of both
right, as the debtor the happening Of parties. (Both must wait for the period to arrive)
may render the suspensive Exception
nugatory the condition. When it appears from the tenor of the obligation or other
obligation upon the circumstances that the period has been established in favor of one
happening of the or the other subject to an express stipulation of the parties, the
period may be benefit the debtor or the creditor alone.
condition. Period for the benefit of the debtor alone:
LOSS, DETERIORATION OR IMPROVEMENT The debtor cannot be compelled to pay prematurely, however, he
PENDING THE HAPPENING OF THE CONDITION may renounce the benefit of the period by performing his obligation
(1189) in advance. (Manresa)
IMPROVEMEN
DETERIORATION TS A Debtor Loses the Right to Make Use of a Period
LOSS
(when the creditor can demand even when the obligation is
not yet due) (1198) IFIVA
W/O I -When after contracting the obligation, the debtor suffers from
DRS W/O BY NATURE insolvency3, unless he gives guaranties or securities for the debt
FAULT DRS TIME F -When the debtor does not furnish promised guaranties or
FAULT securities he promised
WITH WITH At Expense of I -When by his own act, the debtor has impaired established
DRS DRS DR guaranties or securities and when through a fortuitous event they
FAULT FAULT
disappear, unless he gives new ones equally satisfactory
Ne
Oblig inure to  Problem. If two securities involved like BONDS,
EXTINGUISHED CR impairment of either or both DR losses the benefit
CR SUFFERS over the period. Also, Failure to renew an expired
THE IMPAIRMENT DR shall have security constitutes impairment.
RIGHTS V -when the debtor violates any undertaking in consideration of
DR PAY of USUFRUCTUARY2 which the creditor agreed to the period
DAMAGES A -When the debtor attempts to abscond.

Period for the benefit of the creditor alone:

CR CHOOSE: The creditor may demand fulfillment even before the arrival of the
1. RESCISSION term but the debtor cannot compel him to accept before the
+damages expiration of the period (i.e., “on demand”, “on or before”).
2. FUFILLMENT+damages Note: In case of loss, deterioration or improvement of
the thing before the arrival of the day certain, the rules in
II. OBLIGATIONS WITH A TERM article 1189 shall be observed.
The demandability is suspended by the term, not the
acquisition of the right or the effectivity of the obligation. III. ALTERNATIVE OBLIGATIONS
Fortuitous events doNOT interrupt the running of the Kinds of Obligation according to Object
period. Simple obligation – one where there is only one prestation
Classifications of Term/ Period Compound obligation – one where there are two or more
prestations
According to effect Conjunctive obligation – one where there are several
suspensive period (ex die) – obligation becomes prestations and all of them are due
demandable only upon the arrival of a certain day Distributive obligation – one where one of two or more of
resolutory period (in diem) – obligation is valid up to a the prestations is due
day certain and terminated upon the arrival of period. *A distributive obligation may be
According to source – alternative (1199), or
legal period – provided for by law – facultative (1206)
conventional/ voluntary period – agreed to by the parties Alternative Facultative
judicial period – fixed by the court
Number of
According to definiteness
definite period – fixed or the coming of which is known
Prestations Only one
indefinite period – not fixed or the coming of which is not Several prestation is due
known (usually, the law empowers the courts to fix the prestations are BUT the
period)

2
To Possess( can Lease to others) and Enjoy (fruits) 3
THE WORD “INSOLVENT” DOES NOT REQUIRE A
JUDICIAL DECREE OF INSOLVENCY

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due but debtor is allowed 2. Vitiated consent on the part of one debtor does not
affect the others.
compliance with to substitute 3. Demand made to one of the debtors is not a
one is sufficient another demand to all because the debt of one is distinct from the
others.
Right of choice
May be given to The right to make
JOINT DIVISIBLE OBLIGATION
the creditor or to the substitution is
The juridical relationship of parties is JOINT
a third person given only to the The object /prestation is DIVISIBLE
debtor
Problem. A, B, and C indebted to X, Y, and Z for P9,000.
Rules in Alternative Obligations (LOSS) The debt now due and demandable.
DEBTOR’S CREDITOR’S HOW MANY OBLIGATIONS ARE THERE?
LOSS CHOICE CHOICE Ans: 9
Due to a FORTUITOUS EVENT 1. A to X (1,000),to Y,(1,000),and to Z(1,000)
ALL EXTINGUISH EXTINGUISH 2. B to X (1,000),to Y,(1,000),and to Z(1,000)
SOME 3. C to X (1,000),to Y,(1,000),and to Z(1,000)
DELIVER ANY DELIVER ANY
REMAINING REMAINING Meaning, all creditors should collect INDIVIDUALLY their
CHOOSEN BY respective shares. (1,000 from each debtors)
CREDITOR (NO WHAT IF C, IS INSOLVENT?
DAMAGES) Ans: His co-debtors are not liable for his shares because of
ONLY ONE DELIVER THE principle in Joint Obligations that Debts should be presumed to be
LEFT DELIVER REMAINING(NO divided into as many shares as there are CRS/DRS, each debts
DAMAGES) OR considered DISTINCT from one another (1208)
CR DEMANDS Thus, prescription of one debt will not affect the others.
THE VALUE OF Also, defense of one joint co-debtor (such as Vitiated consent) is
THE THING not available to other co-debtors. Kc nga distinct.
LOST +
DAMAGES JOINT INDIVISIBLE OBLIGATION
DUE TO DEBTOR’S FAULT The object or prestation is indivisible, not susceptible of division;
ALL VALUE OF LAST VALUE OF ANY while the tie between the parties is joint, that is, liable only to a
THING LOST AS THING LOST + proportionate share. (1209) EXAMPLE: A, B, and C to deliver a
DAMAGES DAMAGES CAR to X.
SOME DELIVER ANY VALUE OF THE 1. Demand must be made to all the joint debtors.
REMAINING (NO THING LOST + 2. The creditor must proceed against all the joint debtors,
DAMAGES) DAMAGES, OR because the compliance of the obligation is possible only if all of
DELIVER ANY the joint debtors would act together.
REMAINING, 3. If one of the debtors is insolvent, the other(s) shall not be liable
WITHOUT
for his share.
DAMAGES
ONLY ONE DELIVER (NO VALUE OF THE 4. If one of the debtors cannot comply, the obligation is
LEFT DAMAGES) THING LOST + converted into monetary consideration. One who is ready and
DAMAGES, OR willing to comply will pay his proportionate share, and the other not
willing shall pay his share plus damages when his financial
DELIVER THE
REMAINING, condition improves.
WITHOUT 5. If there is more than one creditor, delivery must be made to
DAMAGES all, unless one is authorized to receive for the others.
6. Gives Rise To Indemnity For Damages: Non-Compliance
With Undertaking
Rules in Facultative Obligations (LOSS) (1224)
Before After Substitution 7. Debtors Ready To Fulfill Shall Not Be Liable (1224)
Substitution SOLIDARY OBLIGATION
Loss of the Principal Obligacion Solidaria
Fortuitous Event The debtor is not It is an obligation where each one of the debtors is bound to
The obligation is liable whatever may render, and/ or each one of the creditors has a right to demand
extinguished be the cause compliance with the prestation. (1207)
Fault of Debtor BY DEFAULT, collective obligations are presumed to be
The debtor is joint if there is concurrence of two or more debtors and/ or
Liable for creditors.
damages Solidarity exists only:
1. When Stipulated by the parties using such words like “jointly
Loss of the Substitute
and severally,” “in solidum,” “I promise to pay” in a note signed
The debtor is not Fortuitous Event by two or more debtors, or similar words. (conventional
Liable whether The obligation Is solidarity),WE promise to pay “individually or collectively”.
the loss is due to extinguished 2. When solidary liability is provided by Law,
the fault of the Fault of Debtor hence, civil liability arising from crimes, negotiorum
debtor or to a The debtor is liable gestio, commodatum or quasi-delict shall be solidary.
fortuitous event. for damages (legal solidarity)
3. When the Nature of the obligation requires solidarity.
4. When a charge or condition is imposed upon heirs or
IV. JOINT AND SOLIDARY OBLIGATIONS legatees, and the Testament expressly makes the charge or
JOINT OBLIGATIONS condition “in solidum”.
(Obligacion Mancomunada) It is an obligation where the whole 5. When a solidary responsibility is imputed by a Final judgment
liability is to be paid or fulfilled proportionately by the different upon several defendants.
debtors; and/or is to be demanded proportionately by the different
creditors. Rules of Payment in Solidary Obligations
Some Features of Joint Liability 1. The creditor may proceed against any one of the solidary
1. Insolvency of one debtor does not make the others debtors or some or all of them as long as the debt has not
liable. been fully collected. (1316)

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2. Payment made by one of the solidary debtors extinguishes VI. OBLIGATIONS WITH A PENAL CLAUSE
the obligation. (1217) A penal clause is an ACCESSORY undertaking to assume
3. If two or more debtors offer to pay, the creditor may choose greater liability in case of breach.
which offer to accept. (1217)
4. Anyone has right to receive the payment; but the
Purposes of Penalty
first one to demand receives the payment. (1214) 1. Funcion coercitiva or de garantia - to ensure performance
5. The paying debtor may ask for reimbursement of the obligation
with interest (IF PAID AFTER DUE DATE)from his co- 2. Funcion liquidatoria - to substitute a penalty for the
debtors. (1217) indemnity of damages and the payment of interest in case of non-
6. The share of the insolvent debtor shall be borne by all his co- compliance.
debtors, pro-rata. (1217) 3. Funcion estrictamente penal - to punish the debtor for the
non-fulfillment of his obligation.
Problem. A,B,and C solidary debtors of X,Y,and Z
solidary creditors for P3,000. If A is INSOLVENT, How GENERAL RULE: The penalty fixed by the parties is a
much can X or any other co-CR collect from B or C? compensation or substitute for damages in case of breach.
Ans: P3,000 EXCEPTIONS
How much can B collect from C if B paid the 1. When there is a stipulation to the contrary
obligation? Ans: P1,500 (His share of P1,000 plus his 2. When the debtor is sued for refusal to pay the agreed penalty.
share on A’s share P500 prorata) On P1,000 share of A, 500 3. When the debtor is guilty of fraud.
borne by B, P500 by C.
Kinds of Penal Clause
7. There shall be no reimbursement if the solidary debtor As to origin
paid AFTER the obligation has prescribed or has Legal penal clause – provided by law Conventional
become illegal. (1218) penal clause – provided for
by stipulation of the parties
REMISSION IN SOLIDARY OBLIGATION As to its purpose
Problem: A, B, and C solidary DRS of X, Y, and Z solidary CRS Compensatory penal clause – the penalty takes the
for P9,000. place of damages
If Y condoned the entire debt to A, what is/are the effect/s? Punitive penal clause – the penalty is imposed merely
Ans: The solidary CR responsible (Y), shall be liable to other as a punishment for breach
solidary Co-CRS for the shares corresponding to them.
As to its dependability or effect
As to the soliday DRs, the entire obligation and juridical
relations Extinguished. Subsidiary or alternative penal clause – only the penalty
The DR who obtained remission(A) is NOT entitled to can be enforced
reimbursement from his co-DRS. Joint or cumulative penal clause – both the principal
What if Y condoned only the Entire SHARE of A only? obligation and the penal clause can be enforced
Ans: He (A) is completely released, HOWEVER, he is still bound (Manresa)
to his co-DRS. Meaning, he must still share in the portion which NOTES:
corresponds to an INSOLVENT co-DR. CAN THE CR DEMAND BOTH THE PRINCIPAL +
What if Y condoned only a PORTION of the SHARE of PENALTY? Yes, if may express stipulation ang parties.
A?
Ans: He (A) is partially released, HOWEVER, he is still bound to The penalty takes the place of Interest only if there is no stipulation
his co-DRS. His character as Solidary Dr is not affected. to the contrary, and even then, DAMAGES may still be collected if
the obligor refuses to pay the penalty OR is guilty of FRAUD.
NOTA BENE: Other Solidary Co-DRS can always avail the
defense of partial remission.
EXAMPLE IN THE ABOVE PROBLEM, HOW MUCH CAN Chapter IV: Extinguishment of
X COLLECT FROM B IF THE SHARE OF A IS Obligations
REMITTED/CONDONED? Ans: P6,000 that is minus the PRIMARY (PaLoCoCoCoNo)
share of A which was remitted. 1. Payment or performance
2. Loss of the thing due
Rights of Solidary Debtor 3. Compensation
1. Set-up all defenses 4. Confusion or Merger
2. Right of action (reimbursement)against solidary co-debtors 5. Condonation or Remission
6. Novation
Set-up Defenses (1222)What defenses can a Solidary Co- SECONDARY (PRAF)
DR set up against solidary crs? 7. Prescription
 Defenses derived from the NATURE of the obligation 8. Rescission
available to all debtors (example : that debt has 9. Annulment
Prescribed)as a defense to compliance with the entire 10. Fulfillment of the Resolutory condition
obligation;
 Defenses PERSONAL TO THE DEBTOR like minority, I. PAYMENT OR PERFORMANCE
insanity, civil interdiction, etc. not available to the other Requisites for Valid Payment
debtors so as to free the latter from their liability for their (With respect to prestation itself)
own shares in the obligation; 1. Identity – payment/performance must be the prestation itself
 Defenses that PERTAIN TO HIS CO-DEBTOR(S), like (ex: if obligation to pay money, then payment should be
the existence of a period or condition available only as payment of money, not other things)
regards the share of such co-debtor(s) for solidarity may 2. integrity or completeness
exist even if the debtors are bound under different 3. indivisibility – NO to partial payment/performance as a Gen
periods or conditions. (Example: defense of Partial Rule
Remission, see above) WHO SHOULD PAY/PERFORM?
PIFO – Person Interested in the Fulfilloment of the obligation
V. DIVISIBLE & INDIVISIBLE ( Debtor,Obligor,his heirs assigns, or any person interested in the
OBLIGATIONS fulfillment…like guarantor etc.)
This refers to the object/prestation not the relation of parties as to RIGHTS OF PIFO:
their liabilities. 1. Full Reimbursement
The indivisibility of an obligation does not necessarily give rise to 2. Right to Subrogate to the rights of Creditor
PNIFO – Person NOT interested in the fulfillment (like a 3rd
solidarity.
Party/Stranger not in any way connected to the parties)
RIGHTS OF PNIFO:

ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 7 of 14

University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)
1. BENEFICIAL REIMBURSEMENT only
(No Right of Subrogation)
Problem: A indebted to B for 1,000. X, a 3rd party to the contract
(PNIFO) paid B 1,500. What are the right of X?
Ans: Can only collect from A, only to the extent that the payment
has been beneficial to debtor A, 1,000. (BENEFICIAL
REIMBURSEMENT). Further, X cannot subrogate into the rights
of A. However he can proceed against B, the creditor for the 500,
on the ground of unjust payment or SOLUTIO INDEBITI.
WHOM TO PAY?
Ans:
1. payee - creditor or obligee or successor in interest of
transferee, or agent
2. anyone in possession of the credit - but will apply only
if debt has not been previously garnished
NOTES:
Payment made to an Incapacitated Person
It is valid when the incapacitated person kept the thing delivered,
or Insofar as the payment has been beneficial To him.
Payment to a 3rd party not authorized, valid if proved &
only to the extent of benefit
Benefit Presumed if:
 After payment, 3rd person acquires the creditor’s
rights
 Creditor ratifies payment to 3rd person
 By creditor’s conduct, debtor has been led to make
the payment (estoppel)
WHERE TO PAY/PERFORM?
1. In the place designated in the obligation
2. If there is no express stipulation and the undertaking is to
deliver a specific thing – at the place where the thing might be
at the moment the obligation was constituted
3. In other cases – in the place of the domicile of the debtor
WHEN TO PAY/PERFORM?
the time stipulated by the parties
WHAT TO PAY?
The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then
in the currency which is legal tender in the Philippines. (1249)
The delivery of promissory notes payable to order, or
bills of exchange or other mercantile documents SUCH
AS CHECKS shall produce the effect of payment only when they
have been cashed, or when through the fault of the creditor they
have been impaired. (1249)
*Impairment contemplates an issuance by a third party, otherwise,
creditor can just ask from creditor again but without interest as
there was no delay. (Jurado, Balane)
IN CASES OF Extraordinary inflation/ deflation. (needs
BSP Declaration) value of the currency at the time of the
establishment of the obligation shall be the basis of payment,
UNLESS there is an agreement to the contrary. (1250)
EXPENSES of payment/performance. Subject to
STIPULATION otherwise, DEBTOR shoulders the expenses.
HOW TO PAY (Manner)?
Ordinary Manner
Special Manner
Special Rules/Forms Of Payment
1. APPLICATION OF PAYMENTS – the designation
of the debt which payment shall be made, out of 2
or more debts owing the same creditor.
Requisites for the Application of payment
Various debts of the same kind
Same debtor
Same creditor
All debts must be due (EXCEPT IF PARTIES STIPULATE
OTHERWISE)
How the application is made:
1. Debtor makes the designation
2. If not, creditor makes it by so stating in the receipt that he
issues, unless there is cause for invalidating the contract
3. If neither the debtor nor creditor has made the application or
if the application is not valid, then application, is made by
operation of law
Who makes the application:
ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 8 of 14
General Rule: Debtor
Exception: Creditor (Expressly/Impliedly stipulated)
In case no application has been made
 Apply payment to the most onerous
MOST ONEROUS
(from most onerous to less onerous)
S – Solidary Oligations
I – Interest bearing debts
S – Secured debts (like mortgage debts)
U – Unsecured debts
 If debts are of the same nature and burden, application
shall be made to all proportionately
2. DACION EN PAGO- debtor alienates in favor of the
creditor property for the satisfaction of monetary debt;
extinguish up to amount of property unless w/ contrary
stipulation.
Governed by Law on Sales
Requisites of a valid Dacion en Pago:
1. Agreement that something will be delivered instead
of money
2. Transfer of Ownership
NOTA BENE: IN PAYMENT or PERFORMANCE in general, Cr
cannot be compelled to accept a thing of INFERIOR/SUPERIOR
quality, but of course he may choose to do otherwise.
3. CESSION/ASSIGNMENT IN FAVOR OF
CREDITORS
The process by which debtor transfer all the properties not subject
to execution in favor of creditors is that the latter may sell them and
thus, apply the proceeds to their credits; extinguish up to amount
of net proceeds ( unless w/ contrary stipulation )
Kinds
Legal – governed by the insolvency law
Voluntary – agreement of creditors
Requisites for voluntary assignment
 More than 1 debt
 More than 1 creditor
 Complete or partial insolvency of debtor
 Abandonment of all debtor’s property not exempt from
execution
 Acceptance or consent on the part of the creditors
Effects
Creditors do not become the owner; they are merely assignees
with authority to sell
Debtor is released up to the amount of the net proceeds of the
sale, unless there is a stipulation to the contrary
Creditors will collect credits in the order of preference agreed
upon, or in default of agreement, in the order ordinarily established
by law
4. CONSIGNATION
Tender -the act of offering the creditor what is due him together
with a demand that the creditor accept the same (When creditor
refuses w/o just cause to accept payment, he becomes in mora
accepiendi & debtor is released from responsibility if he consigns
the thing or sum due)
Consignation – the act of depositing the thing due with the court
or judicial authorities whenever the creditor cannot accept or
refuses to accept payment; generally requires prior tender of
payment
REQUISITES OF VALID CONSIGNATION:
1. Existence of valid debt
2. Consignation was made because of some legal cause -
PREVIOUS VALID TENDER was unjustly refused or under
circumstances making previous tender exempt
PREVIOUS VALID TENDER NOT REQUIRED
WHEN:
a. creditor absent or unknown/ does not
appear at the place of payment
b. incapacitated to receive payment at the
time it is due
c. refuses to issue receipt w/o just cause
d. 2 or more creditor claiming the same right
to collect
e. Title to obligation has been lost.
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3. Prior Notice of Consignation had been given to the
person interested in performance of obligation (1st
notice)
4. Actual deposit/Consignation with proper judicial
authorities
5. Subsequent notice of Consignation (2nd notice)
EFFECTS:
 Debtor may ask judge to order cancellation of
obligation
 Running of interest is suspended
 Before creditor accepts or before judge declares
consignation has been properly made, obligation
remains (debtor bears risk of loss at the meantime,
after acceptance by creditor or after judge declares
that consignation has been properly made – risk of
loss is shifted to creditor)
II. LOSS OF THE THING DUE
1. When the object perishes (PHYSICAL LOSS)
2. When it goes out of commerce (LEGAL LOSS)
3. When it disappears in such a way that its existence is
unknown or it cannot be recovered (CIVIL LOSS)
NOTE: “GENERIC THINGS NEVER PERISH”
Requisites for LOSS to EXTINGUISH an Obligation
D - Determinate thing
W - Thing lost WITHOUT fault of the DR
Otherwise, the obligation transform into an obligation to
indemnify/DAMAGES
B - Thing lost before DR incurred DELAY
III CONDONATION/REMISSION OF
THE DEBT
It is the gratuitous abandonment of the
creditor of his rights.
FORMS:
EXPRESS REMISSION
must comply with formalities required for
donations (art 748,749)
Failure to comply with formalities does not
amount to an Implied Remission
IMPLIED REMISSION (Requisites)
1. Document evidencing credit destroyed
VOLUNTARILY by CR ,or delivered Voluntarily to
the DR.
2. Such Document is PRIVATE DOC
Note: DEBT made to prescribe w/o
demanding By the CR if done Voluntarily is
also an Implied Remission.
2. Both debts consist of Sum of MONEY,
or if Consumables OR Fungibles, must
be same kind or quality;
3. Both debts due
4. Both debts liquidated and demandable
5. Neither debt must be retained in a
controversy commenced by 3rd person
& communicated with debtor (IN
OTHER WORDS NEITHER DEBT IS
GARNISHED)
NOTA BENE: The above requisites are applicable
ONLY to LEGAL COMPENSATION.
KINDS:
LEGAL – by operation of law; as long as 5 requisites
concur- even if unknown to parties & if payable in
diff places; indemnity for expense of exchanges;
even if not equal debts – only up to concurring
amount
CONVENTIONAL – agreement of parties is enough,
forget other requirement as long as both consented
FACULTATIVE – one party has choice of
claiming/opposing – one who has benefit of period may
choose to compensate
JUDICIAL – set off; upon order of the court; needs
pleading & proof; all requirements must concur except
liquidation
TOTAL – when 2 debts are of the same amount
PARTIAL – when 2 debts are not of the same amount
Addt’l Notes:
DEBTS CANNOT BE SUBJECT TO COMPENSATION
1. Debts arising from Contract of DEPOSITUM
2. Debt arising from cont. of COMMODATUM
3. Claims for SUPPORT due by gratuitous title
4. Obligs from CRIMINAL OFFENSE
5. Obligs IN FAVOR OF GOVT like TAXES, FEES, etc.
STOCKHOLDERS as such are NOT creditors of the
Corporation because of the “TRUST FUND DOCTRINE”.
Effect of assignment of credit to 3rd person;
can there still be compensation?
1. if made after compensation took place – no effect;
compensation already perfected
2. if made before compensation took place – depends
a. with consent of debtor – debtor is estopped unless
he reserves his right & gave notice to assignee
b. with knowledge but w/o consent of debtor –
compensation may be set up as to debts
maturing prior to assignment
c. w/o knowledge – compensation may be set-up
on all debts prior to his knowledge

IV. CONFUSION OR MERGER OF RIGHTS VI. NOVATION

merger of the characteristics of the creditor substitution or change of an obligation by another,
and the debtor in one and the same person resulting in its extinguishment or modification, either by
by virtue of which the obligation is changing its object or principal conditions, or by
extinguished. substituting another in place of the debtor, or by
Example: A’s Promissory Note payable to B, B subrogating a 3rd person in the rights of the creditor.
indorsed the same Promissory Note to C, then C
indorsed the same Prom Note back to A. A
becomes the Debtor of himself.
SUBSTITUTION OF PARTIES
REQUISITES:
1. It must take place between the principal debtor &
DR CR
the principal creditor only
2. The merger must be clear & definite
EXPROMISSION DELEGACION SUBROGATION
3. The obligation involved must be the same & identical
– one obligation only
4. Revocable, if for any reason the confusion ceases, the
obligation is revived Initiative Initiative LEGAL CONVENTIONAL
of NEW DR of OLD DR
V. COMPENSATION Consent by Consent by
Extinguishment in the concurrent amount of the obligation CR CR
of those persons who are reciprocally debtors and
creditors of each other. Acceptance
REQUISITES: by NEW DR
1. Both parties mutually principal creditors
and debtors of each other;
Effect of Payment by the New Debtor

ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 9 of 14

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(Apply the rules on PIFO/PNIFO in payment) Mutuality

Obligatory Force and Consensuality
Relativity
EXPROMISSION DELEGACION
If w/o knowledge/consent New DR entitled to AUTONOMY
of OLD DR = Beneficial FULL Reimbursement This is the freedom or liberty to stipulate.
Reimbursement only AND Right of Subrogation General Rule. The parties are free to stipulate anything
they may deem convenient.
If with knowledge/consent Except. stipulation are contrary to:
Law
of OLD DR= FULL
Morals
Reimbursement Good Customs
AND Right of Subrogation Public Order
Public Policy (1306)
Insolvency of the New Debtor
Case:
EXPROMISSION DELEGACION
Old DR’s Liability GR: Old DR’s DAISY B. TIU, G.R.
NOT REVIVED LiabilityNOTRevived
(Implied in Art.1294 that Petitioner,
if substitution was EXCEPT: (REVIVED)
w/o knowledge or i. Insolvency
consent of Old DR- NOT already existing Non-involvement clause / restraint of trade
REVIVED AND of Public
Knowledge @
HW, The law is silent if time of
delegacion MUTUALITY
substUtion
Is with know/consent, Performance or validity of the contract binds both parts
ii. Insolvency
MAJORITY VIEW is that and it cannot be left to the will of one of them. (1308)
already existing
Liability of OLD DR AND KNOWN
NOT revived TO OLD DR @ OBLIGATORY FORCE & CONSENSUALITY
time of Contracts are perfected by mere consent and from that
delegacion
moment, the parties are bound, not only to the fulfillment
Addt’l Notes: of what has been expressly stipulated but also to all the
 EFFECT ON CONDITIONS IN NOVATION. consequences which, according to their nature, may be in
If the original obligation was subject to condition, the keeping with good faith, usage and law.
new obligation shall be under the same condition,
unless it is otherwise stipulated. RELATIVITY
If the new obligation and the old obligation are subject General Rule. Contracts take effect only between
to different conditions: parties, their assigns and their heirs.
o If the conditions are compatible, both Exceptions
must be fulfilled otherwise there is 1. Obligations arising from contract which are not
nothing to novate. transmissible by their nature, stipulation, or provision
o If the conditions are incompatible, the of law.
NEW condition should be fulfilled. 2. Stipulation Pour Autrui – a stipulation in favor of
a third person
 The mere fact that the creditor accepts payments Requisites
from a third person who agreed to assume the a. The stipulation must only be a part of the contract; it must
obligation, when there is NO agreement that the not be the whole of the contract.
first debtor shall be released from the b. The contracting parties clearly and deliberately conferred
responsibility does not constitute Novation. the favor to the third person.
Magdalena Estates, Inc. v. Spouses Rodriguez c. The 3rd person must have communicated his acceptance
 If NEW oblig is void, OIGINAL oblig subsist, Unless the to the obligor before its revocation by the original parties.
d. Neither of the contracting parties bears the legal
parties intended that the former relationship should be
representation or authorization of a 3rd party.
extinguished in any event (1297) e. The favorable stipulation should not be conditioned or
 Original oblig is void, Novation is void except when compensated by any kind of obligation.
annulment may be claimed only by the DR, or when 3. When a third person induces another to violate his
ratification validates acts w/c are voidable.(1298) contract. (1314)
 PERIOD OF PAYMENT 4. Third persons who come into possession of the object
Shorten = may NOVATION of the contact creating real rights (1312)
Extend = NO NOVATION KINDS OF CONTRACTS
 When NEW METHOD OF PAYMENT/ ADDT’L SECURITIES According to perfection
required = NO NOVATION Consensual – a contract that is perfected by
 REDUCTION OF LIABILITY TO LESSER AMOUNT = NO agreement of the parties
NOVATION Real – a contract that is perfected by delivery
Formal/ Solemn – a contract perfected by
conformity to essential formalities, e.g., donation
TITLE II: CONTRACTS According to degree of importance
Chapter I: General Provisions Principal – a contract that can stand
Definition alone
A contract is a meeting of the minds between two persons Accessory – a contract that is dependent upon
whereby one binds himself, with respect to the other, to another contract for its existence and validity
give something or to render some service. (1305) Preparatory – means through which other (future)
Principal Characteristics (AMOR) contracts may be made; not an end in itself, e.g. Agency
Autonomy According to subject matter

ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 10 of 14

University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)
Involving things, such as sale or barter
Involving rights or credits, such as usufruct or
assignment of credits
Involving services such as agency, carriage, etc.
According to name
Nominate – a contract that has its own individuality and
id regulated by a special provision of law, i.e., pledge,
mortgage, etc.
Innominate – a contract that lacks individuality and is
not regulated by a special provision of law
Do ut des – I give that you may give
Do ut facias – I give that you may do
Facio ut des – I do that you may give
Facio ut facias – I do that you may do
*facio/ facias – do
*do – give
According to cause
Onerous – a contract with an exchange of
valuable considerations
Gratuitous – a contract with no consideration
received in exchange for what has been given
Remuneratory – a contract in which something
(a prestation) is given for a benefit or service
performed without any legal obligation to do so
According to nature of obligation produced or
number of parties obligated
Unilateral – a contract with only one party with
an obligation, e.g. Commodatum and Mutuum
Bilateral – a contract in which both parties are
required to render reciprocal prestations
According to risk
Commutative – a contract where equivalent
values are given by both parties, i.e., sale, barter
and lease
Aleatory – a contract where fulfillment is
dependent upon chance, such as insurance
STAGES OF A CONTRACT (PPC)
Preparation or conception – bargaining point,
negotiation
Perfection or birth – the meeting of minds regarding the
subject matter and the cause of the contract.
Consummation or death – parties have performed their
respective obligations and the contract is put to an end.
Chapter II: Essential Requisites
Essential Requisites of a Contract (COC)
Consent of the contracting parties;
Object certain which is the subject matter of the
contract;
Cause of the obligation which is established. (1318)
I. CONSENT
Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer.
(1319)
We follow the theory of cognition and not the theory of
manifestation. Under our civil law, the offer and acceptance concur
only when the offeror comes to know, and not when the offeree
merely manifests his acceptance.
The person making the offer may fix the time, place, and manner
of acceptance, all of which must be complied with. (1321)
An offer made through an agent is accepted from the time
acceptance is communicated to him. (1322)
Withdrawal of Offer (1324)
General Rule: An offer or proposal may be withdrawn as long as
the offeror has no knowledge that the offeree has already accepted
the offer.
Exception: When the option is founded upon a consideration, as
something paid or promised, the offer cannot be
withdrawn.(OPTION PRICE) “Pag may Option Contract where
ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 11 of 14
consideration is option money there is the right of first
refusa”l.
Advertisements as Offers
Business advertisements of things for sale are not definite
offers, but mere invitations to make an offer, unless it appears
otherwise. (1325)
Advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears. (1326)
Revocation of Acceptance: The acceptance by the offeree
may be revoked before reaching the knowledge of the offeror. If it
is revoked, the contract is not perfected if the notice of revocation
reaches the offeror before the letter of acceptance is received.
In unilateral promises, when offer is made to the public, specific
acceptance is not required to bind the obligor.
Persons Who Cannot Give Valid Consent to a
Contract( MIDI)
Minors
Insane or demented persons
Deaf-mutes or illiterates who do not know how to write
Intoxicated persons and hypnotized persons
II. OBJECT
The thing, right or service which is the subject matter of
the obligation arising from the contract.
Requisites (PLDT-Ctc)
1. The prestation must be within the Commerce of man, either
existing or in potency
2. It must be Licit or not contrary to law, morals, good customs,
public order, or public policy.
3. It must be Possible or real.
4. It must be Determinate as to its kind or determinable without
the need to enter into a new contract. (1349)
5. It must be Transmissible.
Those which Cannot be the Object of a Contract
(Fruits In Cream – IOI)
Future inheritance (1347)
Impossible things or services cannot be the object of
contracts. (1348)
Contrary to law morals, good customs, public order, and
public policy.
Indeterminable as to their kind.
Outside the commerce of men
Intransmissible rights
III. CAUSA
It is the “why” of the contract, the essential reason which
impels the parties to enter into the contract.
Chapter III: Form of Contracts
SPIRITUALITY PRINCIPLE
Contracts are valid and enforceable in whatever form, even if orally
entered into, as long as all essential requisites are present. (1356)
When is Form Important
When form is required for Validity
When form is required for Enforceability
When form is required for Convenience
FOR VALIDITY (formal/solemn contracts) samples:
1. Donation of real property must be in a public instrument,
otherwise, void.
2. Donation of personal property exceeding P5,000 must be in
writing, otherwise void.
3. Contribution of a partner of immovable property in a
partnership, must be in writing, otherwise void.
4. Authority of agent to sell land must be in writing, otherwise
sale is void.
5. ANTICHRESIS (ART 2134)
FOR ENFORCEABILITY (Statute of Frauds)
(1403, par. 2, in relation to 1405)
In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same are in writing or some
note or Private Document. Memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:
University of Eastern Philippines - MY BLT Review Companion (Lecture and Guide Notes Series)
Y- 1. An agreement that by its terms is not to be performed within
a year from the making thereof;
A- 2. A special promise to answer for the debt, default, or
miscarriage of another;
M - 3. An agreement made in consideration of marriage, other
than a mutual promise to marry;
S - 4. An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or the
evidences, or some of them, of such things in action or pay at the
time some part of the purchase money; but when a sale is made
by auction and entry is made by the auctioneer in his sales book,
at the time of the sale, of the amount and kind of property sold,
terms of sale, price, names of the purchasers and person on
whose account the sale is made, it is a sufficient memorandum;
L - 5. An agreement of the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
R - 6. A representation as to the credit of a third person.
FOR CONVENIENCE (To bind 3rd persons)
The following must appear in a PUBLIC document: (1358)
1.Real rights over immovable property, sales of real property -
Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest
therein a governed by articles 1403, No. 2, and 1405;
2.Hereditary rights and conjugal property of gains -The cession,
repudiation or renunciation of hereditary rights or of those of the
conjugal partnership of gains
3. Power to administer property, other powers to act, prejudice
3rd persons - The power to administer property, or any other
power which has for its object an act appearing or which should
appear in a public document, or should prejudice a 3 rd person.
4. Cession of actions from public documents. –The cession of
actions or rights proceeding from an act appearing in a public
document.
5. All other contracts where the amount involved exceeds P500.
EXCEPT SALES, of goods, chattels, or things IN ACTION.
REALPROPERTIES/REAL
RIGHTS
 Creation Sale
 Transmission
 Modification
 Extinguishment Must be in writing to be
ENFORCEABLE {ART.1403(2)}
Must be in PUBLIC DOCUMENT
To Bind 3rd persons (For
CONVENIENCE) (Art 1358)
PERSONAL PROPERTIES, CHATTELS,
GOODS, THINGS IN ACTION
ontracts other than SALE SALE (amount is NOT LESS
amount more than P500 than P500
Must be in PUBLIC DOCUMENT Must be in WRITING to be
To BIND 3rd Person (For ENFORCEABLE (ART 1403)
CONVENIENCE (art 1358)
Acts Required FOR THE PERFECTION of Certain Contracts
REGISTRATION
a. Chattel Mortgages (art. 2140)
b. Sales or Transfers of Large Cattle (Cattle Registration act)
DELIVERY OF THE THING (for Realcontracts)
Pledge - In addition to the requisites prescribed in article 2085, it is
necessary, in order to constitute the contract of pledge, that the
thing pledged be placed in the possession of the creditor, or of a
third person by common agreement. (2093)
Deposit- A deposit is constituted from the moment a person receives a
thing belonging to another, with the obligation of safely keeping it
and of returning the same. If the safekeeping of the thing delivered
is not the principal purpose of the contract, there is no deposit but
some other contract. (1962)
ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 12 of 14
Chapter IV: Reformation of Contracts
(Arts.1359-1369)Reformation is that remedy in equity by means
of which a written instrument is made or construed so as to
express or conform to the real intention of the parties when some
error or mistake has been committed.
Requisites for Reformation
1. Meeting of minds.
2. True intention not expressed within the instrument by
reason of Fraud, Accident, Mistake, , Inequitable
conduct.(FAMI)
3. There is clear and convincing proof of mistake,
accident, fraud, simulation or inequitable conduct.
Special Cases
Mutual mistake - When a mutual mistake of the parties causes
the failure of the instrument to disclose their real agreement, said
instrument may be reformed.
Mistaken party, not fraudulent - If one party was mistaken and
the other acted fraudulently or inequitably in such a way that the
instrument does not show their true intention, the former may ask
for the reformation of the instrument.
Mistaken party, other knew of mistake and non-conformity
of instrument – When one party was mistaken and the other knew
or believed that the instrument did not state their real agreement,
but concealed that fact from the former, the instrument may be
reformed.
Ignorance, lack of skill, negligence, or bad faith of drafter,
clerk, typist of instrument
- When through the ignorance, lack of skill, negligence or bad faith
on the part of the person drafting the instrument or of the clerk or
typist, the instrument does not express the true intention of the
parties, the courts may order that the instrument be reformed.
Agreement on pledge or mortgage but with instrument on
sale – If two parties agree upon the mortgage or pledge of real or
personal property, but the instrument states that the property is
sold absolutely or with a right of repurchase, reformation of the
instrument is proper.
Prescriptive period: 10 years from the date of the execution
of the instrument.
WHEN NO REFORMATION IS ALLOWED
(Arts. 1366-1367)
 Simple donations inter vivos wherein no condition is imposed;
 Wills;
 When the real agreement is Void.
 Estoppel – When one of the parties has brought an action to
enforce the instrument, he cannot subsequently ask for its
reformation.
Chapter V: Interpretation of
Contracts
Doubts with regard to incidental circumstances:
When it is absolutely impossible to settle doubts by the
rules established in the preceding articles, and the doubts
refer to incidental circumstances of a gratuitous contract,
the least transmission of rights and interests shall prevail. If
the contract is onerous, the doubt shall be settled in favor of
the greatest reciprocity of interests.
Doubts with regard to principal object:
If the doubts are cast upon the principal object of the contract
in such a way that it cannot be known what may have been
the intention or will of the parties, the contract shall be null
and void.
DEFECTIVE CONTRACTS
1. RESCISSIBLE: Valid until rescinded. All essential requisites of
a contract exist but there is injury or damage to one of the
parties or to third persons – external or extrinsic defect
consisting of an economic damage or lesion.
2. VOIDABLE: Valid until annulled, unless ratified. Defect is more
or less intrinsic, as in the case of vitiated consent.
3. UNENFORCEABLE: Cannot be sued upon or enforced, unless
it is ratified. Intermediate ground between voidable and void
contracts.
4. VOID: No legal effect at all and cannot be ratified or validated.
Rescissible Contracts (ART 1381)
process to render inefficacious a contract validly entered
into.
Art. 1191 – Rescission or Art. 1381 – Rescission by
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Resolution reason of lesion 3. In case of alienation in fraud of creditor, things

Applies only to Does not apply to under litigation and payment of the state of insolvency,
reciprocal obligations, reciprocal obligation, and within 4 yeas from the time of discovery of fraud.
such that a party’s therefore, action is not Exception
breach thereof partakes based on a breach of an In certain contracts of sale which are specially declared by
of a tacit resolutory obligation. law to be rescissible, the period is 6 months or even 40
condition which entitles days, counted from the day of deliver. (1542, 1571, 1577)
the injured party to
rescission. Voidable Contracts
Predicated on breach of Predicated on injury to Grounds
faith. economic interests of the 1. One of the parties is incapable of giving consent to a
party plaintiff/lesion. contract
Principal action that is Subsidiary action. 2. The consent is vitiated by mistake, violence,
retaliatory in character. intimidation, undue influence or fraud (Art 1390)
The reparation of The cause of action is
Contracts are voidable when entered into by:
damages for the breach subordinated to the  Minors ( below 18 )
is purely secondary. existence of an economic  Insane persons unless they acted in lucid
prejudice. Hence, where interval
the defendant makes  Deaf mutes who cannot read or write
good the damages  Persons who are specially disqualified, i.e.,
caused, the action cannot due to civil interdiction
be maintained or  Intoxicated persons
continued.  Hypnotized persons
Grounds for Rescission (1381)
1. Those entered into by Guardians where the ward Causes which Vitiate Freedom to Consent
suffers lesion of more than ¼ of the value of the Fraud
things which are the objects thereof Mistake
2. Those agreed upon in representation of Absentees, Undue Influence
of the latter suffers lesion by more than ¼ of the Intimidation
value of things which are the subject thereof Violence
3. Those undertaken in Fraud of creditors when the
latter cannot in any manner claim what are due them FRAUD
4. Those which refer to things under Litigation if they There is fraud when, through insidious words or
have been entered into by the defendant without the machinations of one of the contracting parties, the other
knowledge and approval of the litigants of the court is induced to enter into a contract which, without them,
5. All other contracts especially declared by law to be he would not have agreed to. (1338) (Dolo Causante)
subject to rescission and payments made in the state MISTAKE
of insolvency. It is not only a wrong conception of the thing but also the
1. Payment made by insolvent lack of knowledge with respect to it. (Manresa)
2. Partition with lesion to heirs by at least ¼ (1098) General Rule
3. Deterioration because suspensive condition debtor’s Mistake does not vitiate consent.
fault
Exception:
4. When the conditions have been
imposed with the intention of Mutual error as to the effect of an agreement when the
5. Unpaid seller may rescind (1534) real purpose of the parties is frustrated.
6. Sale of object which is inferior by more than UNDUE INFLUENCE
10% (1539) There is undue influence when a person takes improper
7. Sale of land for lack of measurement (1542) advantage of his power over the will of another, depriving
8. Sale because of loss of important part through eviction the latter of a reasonable freedom of choice. (Coso
(1556) v.Fernandez Deza, 42 Phil. 595)
9. Sale of animals w/ redhibitory defects warranty vs. INTIMIDATION
Hidden faults & defects (1567)
10. Lease (1659 There is intimidation when one of the contracting parties
is compelled by a reasonable and well-grounded fear of an
Who Can Bring Action for Rescission
imminent and grave evil upon his person or property, or
The INJURED party his heirs; or the CREDITOR if the
upon the person or property of his spouse, descendants
transaction is fraudulent.
or ascendants, to give his consent. (1335)

Badges of Fraud RELUCTANT CONSENT

1. Consideration of the conveyance is inadequate or
fictitious
2. Transfer was made by a debtor after a suit has been
begun and while it is pending against him
3. Sale upon credit by an insolvent debtor
4. Evidence of indebtedness or complete insolvency
5. Transfer of all his property by a debtor when he is
financially embarrassed or insolvent
6. Transfer made between father and son where there is
present any of the above circumstances
7. Failure of the vendee to take exclusive possession of
the property
Prescriptive Period
General Rule
Within four (4) years from the date it was entered into:
1. If the person is under guardianship, within 4 years
from the time the guardianship ceases
2. In case of absentees, within 4 years from the time
domicile is known
A contract is valid even though one of the parties entered
into it against his wishes and desires or even against his
better judgment. Contracts are also valid even though
they are entered into by one of the parties without hope
of advantage or profit. (Martinez v.
Hongkong and Shanhai Bank, 15 Phil 252)
VIOLENCE
There is violence when in order to wrest consent, serious
or irresistible force is employed.
The Person who has the Right to Annul a Voidable
Contract
The party prejudiced has the right to annul a voidable
contract.
PRESCRIPTION
The action must be commenced within 4 years from:
1. the time the incapacity ends
2. the time the violence, intimidation or undue influence
ends

ESTIGOY NOTES/OBLIGATIONS AND CONTRACTS / Page 13 of 14

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3. the time the mistake or fraud is discovered
*The discovery of fraud must be reckoned to have taken
place from the time the document was registered in the
office of the registrar of deeds. Registration constitutes
constructive notice to the whole world. (Carantes v. CA,
76 SCRA 514)
RATIFICATION
Requisites
 The contract should be tainted with a vice
which is susceptible of being cured
 The confirmation should be effected by the
person who is entitled to do so under the law
 The cause of the nullity or defect should have
already disappeared
 It should be effected with the knowledge of
the vice or defect of the contract.
OBLIGATION OF MUTUAL RESTITUTION
*The incapacitated person is not obliged to make
restitution except insofar as he has been benefited by the
thing or price received by him. (1399)
Unenforceable Contracts
Kinds
i. Unauthorized or No sufficient authority – entered
into in the name of another when:
1. No authority conferred
2. In excess of authority conferred (ultra vires)
ii. Curable by Ratification - Both parties incapable of
giving consent -2 minor or 2 insane persons
iii. Curable by Acknowledgment - Failure to comply
with Statute of Frauds
7. Anyone may invoke the nullity of the contract
whenever its juridical effects are asserted against
him
In Pari Delicto Doctrine
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 tehm where they are.
Simulated Contracts
Kinds of Simulated Contracts
1. Absolute – There is no intention on the part of the
contracting parties to be bound by the contract at all.
The contract is merely fictitious making it void from
beginning
2. Relative – There is an intention by the parties to be
bound but they conceal their true agreement
*Relative simulated contracts are binding when:
3. It does not prejudice 3rd persons
4. It is not contrary to law, morals, good customs,
public order or public policy.
-END OF OBLICON-

Curing Unenforceable Contracts

1. Failureof defendant to object in time, to the
presentation of parole evidence in court, the defect
of unenforceability is cured
2. Acceptance of benefits under the contract. If
there is performance in either part and there is
acceptance of performance, it takes it out of
unenforceable contracts; also estoppel sets in by
accepting performance, the defect is waived

Void & Inexistent Contracts

Grounds (Art.1409)

VOID CONTRACTS
1. The cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
(1347 par. 3, 1352)
2. The object is outside the commerce of men; (1347,
par. 1)
3. It contemplates an impossible service; (1348)
4. The intention of the parties relative to the principal
object of the contract cannot be ascertained; (1378)
5. Those expressly prohibited or declared void by law.
(1347, par. 3)

INEXISTENT CONTRACTS
6. It is absolutely simulated or fictitious; (1346)
7. The cause or object did not exist at the time of the
transaction; (1318)

Characteristics
1. It produces no effect whatsoever either against or in
favor of anyone
2. There is no action for annulment necessary as such
is ipso jure. A judicial declaration to that effect is
merely a declaration
3. It cannot be confirmed, ratified or cured.
4. If performed, restoration is in order, except if pari
delicto will apply
5. The right to set up the defense of nullity cannot be
waived
6. Imprescriptible

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