OBLIGATIONS

AND
CONTRACTS

What is an obligation?
It

is a juridical necessity to
give, to do, or not to do. (Art.
1156, NCC)

 It

is a juridical relation whereby a person

(creditor) may demand from another
(debtor) the observance of a
determinative conduct (giving, doing, or
not doing), and in case of breach, may
demand satisfaction from the assets of
the latter.

Elements of an
Obligation

1. Juridical or legal tie

vinculum juris;
2. Active subject obligee or
creditor;
3. Passive subject obligor or
debtor;
4. Object prestation

What is vinculum juris?

It

is the efficient cause or

juridical tie by virtue of which
the debtor has become bound
to perform the prestation.

How is vinculum juris

established?
By:
law

(i.e. relation of husband

and wife for support)
bilateral acts (i.e. contracts)
unilateral acts (i.e. crimes
and quasidelicts)

Who is an active
subject?
One

who is demanding the

performance of the obligation. It is
he who in his favor the obligation
is constituted, established or
created. He is called the creditor
(CR) or obligee.

Who is a passive
subject?
One

bound to perform the

prestation to give, to do, or
not to do. He is called the
debtor (DR) or obligor.

What is prestation?

A: It is a conduct that may

consist of giving, doing, or not
doing something.
Note: It is the conduct that
must be observed by the
debtor/obligor.

What are the kinds of

obligation?

From the viewpoint of:

Sanction
1. Civil gives a right of
action to compel their
performance

2.Natural not based on

positive law but on equity
and natural law; does not
grant a right of action to
enforce their performance,
but after voluntary
fulfillment by the obligor,
they authorize retention of
what has been delivered/
rendered by reason thereof.

3.Moral cannot be
enforced by action but
are binding on the party
who makes it in
conscience and natural
law.

Performance

a.

Positive to give; to do
b. Negative not to do

Subject matter
a.

Personal to do; not to do

b. Real to give

Object
a.

Determinate / specific
particularly designated or
physically segregated from all
others of the same class.
b. Generic is designated merely
by its class or genus.

Person obliged
a.

Unilateral only one party

is bound
b. Bilateral both parties are
bound

Creation
a.

Legal imposed by law

(Art. 1158, NCC)
b. Conventional established
by the agreement of the
parties like contracts

Susceptibility of partial fulfillment

a.

Divisible obligation is
susceptible of partial
performance
b. Indivisible obligation is
not susceptible

Existence of burden or condition

a.

Pure is not burdened with any

condition or term. It is
immediately demandable.
b. Conditional is subject to a
condition which may be
suspensive (happening of which
shall give rise to the obligation) or
resolutory (happening terminates
the obligation).

Character of responsibility or liability

a.

Joint each debtor is liable only

for a part of the whole liability and
to each creditor shall belong only
a part of the correlative rights
b. Solidary a debtor is
answerable for the whole of the
obligation without prejudice to his
right to collect from his codebtors
the latters shares in the obligation
(Art. 1207, NCC)

Right to choose and

substitution
Alternative

obligor may choose to

completely perform one out of the
several prestations(Art. 1199, NCC)
Facultative only one prestation
has been agreed upon, but the
obligor may render one in
substitution of the first one.

Imposition of penalty

Simple

there is no penalty
imposed for violation of the terms
thereof
Obligation with penalty
obligation which imposes a
penalty for violation (Art. 1226,
NCC) (Pineda, Obligations and
Contracts, 2000 ed, p. 57)

What are the sources of

obligation?
LAW
CONTRACTS
QUASI-CONTRACTS
DELICTS
QUASI-DELICTS

What are the characteristics of

an obligation arising from LAW?
Does

not need the consent of the

obligor;
Must be expressly set forth in the
law creating it and not merely
presumed; and
In order that the law may be a
source of obligation, it should be
the creator of the obligation itself.

What are the requisites for a

contract to give rise to an obligation?
It

must contain all the essential

requisites of a contract
It must not be contrary to law,
morals, good customs, public
order, and public policy

What is compliance in
good faith?
A:

It is performance in
accordance with the
stipulation, clauses, terms
and conditions of the
contract.

Is there a limitation on the right of the

parties to freely enter into contract?

Yes.

Parties may freely

enter into any stipulations
provided such are not
contrary to law, morals,
good customs, public order
or public policy

What is quasicontract?
It

is a juridical relation arising

from lawful, voluntary and
unilateral acts based on the
principle that no one should
unjustly enrich himself at the
expense of another.

 Negotiorium

gestio (inofficious
manager) arises when a person
voluntarily takes charge of the
management of the business or
property of another without any
power from the latter.
2. Solutio indebiti (unjust
enrichment)takes place when a
person receives something from
another without any right to
demand for it, and the thing was
unduly delivered to him through
mistake.

Q:

What is quasidelict
or tort?
A: It is an act or omission
arising from fault or
negligence which causes
damage to another, there
being no preexisting
contractual relations
between the parties.

 Q:

What are the elements of a

quasidelict?

A:
Act

or omission;
Fault or negligence attributable to the
person charged;
Damage or injury;
Direct relation of cause and effect
between the act arising from
fault/negligence and the damage or
injury (proximate cause); and
No preexisting contractual relation
between the parties.

Negotiorium

gestio
(inofficious manager)
arises when a person
voluntarily takes charge
of the management of
the business or property
of another without any
power from the latter.

Solutio

indebiti (unjust
enrichment)takes
place when a person
receives something
from another without
any right to demand for
it, and the thing was
unduly delivered to him
through mistake.

 In

fear of reprisals from

lawless elements besieging his
barangay, X abandoned his
fishpond, fled to Manila and
left for Europe. Seeking that
the fish in the fishpond were
ready for harvest, Y, who is in
the business of managing
fishponds on a commission
basis, took possession of the
property, harvested the fish
and sold the entire harvest to
Z.
Thereafter, Y borrowed money
from W and used the money to

What

is the juridical
relation between X and Y
during X's absence?
Upon the return of X to
the barangay, what are the
obligations of Y to X as
regards the contract with
Z?
Upon X's return, what are
the obligations of X as
regards Y's contract with

 The

juridical relation is that of the

quasicontract of "negotiorum
gestio". Y is the "gestor" or
"officious manager" and X is the
"owner" (Art. 2144, NCC).
Y must render an account of his
operations and deliver to X the
price he received for the sale of
the harvested fish. (Art. 2145,
NCC).
X must pay the loan obtained by Y
from W because X must answer for
obligations contracted with third
persons in the interest of the

received his full retirement benefits

including those monetary benefits that
were properly disallowed by COA to be
granted to public officers. GSIS sought the
restoration of the said disallowed benefits
but the court ruled that such restoration
cannot be enforced against Xs retirement
benefits.Is X obliged to return the
benefits improperly received by him under
the principle of solutio indebiti?

 Yes.

It cannot be denied that X was

a recipient of benefits that were
properly disallowed by the COA.
These COA disallowances would
otherwise have been deducted from
his salaries. The GSIS can no longer
recover these amounts by any
administrative means due to the
specific exemption of retirement
benefits from COA disallowances. X
resultantly retained benefits to
which he was not legally entitled
which, in turn, gave rise to an
obligation on his part to return the
amounts under the principle of
solutio indebiti.

What is the basis for civil liability arising

from delicts as according to the penal
code?

A:

Art. 100 of the

Revised Penal Code
provides that: Every
person criminally liable
for a felony is also
civilly liable.

In an obligation to deliver a thing, what are

the obligations of the debtor?
SPECIFIC

GENERIC

Deliver the thing agreed Deliver the thing which

upon (Art. 1165, NCC)
is neither of superior
nor inferior quality
Take care of the thing
with the proper
diligence of a good
father of a family unless
the law requires or
parties stipulate
another standard of
care (Art. 1163, NCC)

Specific performance
i.e. delivery of another
thing within the same
genus as the thing
promised if such thing is
damaged due to lack of
care or a general breach
is committed

Deliver all
accessions,
accessories and
fruits of the
thing (Art.
1166, NCC)

Fortuitous event
extinguishes the
obligation

If the object is
generic, but the
source is
specified or
delimited, the
obligation is to
preserve the
source
Obligation is not
extinguished
(genus
nunquamperuit
genus never
perishes)

In failing to deliver a thing, what

are the remedies of the creditor?
SPECIFIC OBLIGATION

GENERIC OBLIGATION

Specific performance

Specific performance
(delivery of any thing
belonging to the same
species)

Rescission (action to
rescind under Art. 1380,
NCC)

Ask that the obligation be

complied with at the
debtors expense

Damages, in both cases (Art. 1170, NCC)

In

obligation to deliver a
specific thing, the creditor
has the right to demand
preservation of the thing,
its accessions,
accessories, and the fruits.
The creditor is entitled to
the fruits and interests
from the time the
obligation to deliver the
thing arise.

What are the remedies in

personal obligations?
1.

positive personal obligations

a. not purely personal act to have
obligation executed at debtor's
expense plus damages
b. purely personal act damages
only.

Negative

personal
obligation to have the
prohibited thing undone plus
damages. However, if thing
cannot be physically or legally
undone, only damages may
be demanded.

Is specific performance a
remedy in personal obligations?

No.

Otherwise this may

amount to involuntary
servitude which is
prohibited by the
Constitution.

What are the forms of

breach of obligations?
1.

Voluntary debtor is liable

for damages if he is guilty of:
a. default (mora)
b. fraud (dolo)
c. negligence (culpa)
d. breach through
contravention of the tenor
thereof

2. Involuntary debtor is
unable to perform the
obligation due to
fortuitous event thus not
liable for damages

What is the concept of a

good father of the family?
The

Supreme Court described

a good father of a family by
first stating who is not. He is
not and is not supposed to be
omniscient of the future;
rather, he is one who takes
precautions against any harm
when there is something
before him to suggest or warn
him of the danger or to

COMPLETE FAILURE TO
PERFORM
What

are the effects of breach of

obligation?
A: If a person obliged to do something fails to do
it, or if he does it in contravention of the tenor of
the obligation, the same shall be executed at his
cost. And what has been poorly done, be undone.
(Art. 1167, NCC)
When the obligation consists in not doing, and
the obligor does what has been forbidden him, it
shall also be undone at his expense. (Art.1168,
NCC)

When does delay or default

arise?
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.

In

reciprocal obligations,
neither party incurs in
delay if the other does not
comply in a proper manner
with what is incumbent
upon him. From the
moment one of the parties
fulfills his obligations,
delay by the other begins.
(Art. 1169, NCC)

WAIVER OF FUTURE
FRAUD
With respect to fraud
that has already
been committed, the
law does not prohibit
renunciation of the
action for damages
based on the same.

However,

the law
does prohibit any
waiver of an action
for future fraud since
the same is contrary
to law and public
policy.

What are the kinds of

fraud?
CAUSAL FRAUD

INCIDENTAL
FRAUD

Before or during the

perfection of a contract

During the performance

of a
preexisting obligation

To secure the consent of

another to enter into
the contract

To evade the normal

fulfillment of the
obligation

Vitiation of consent

Breach of an obligation

Voidable

Valid

Right of innocent party

to annul the contract
with damages

Right of innocent
party/creditor to claim
for damages

Difference between fraud

and negligence
FRAUD

NEGLIGENCE

There is deliberate
intention to cause
damage

There is no deliberate
intention to cause
damage or injury even if
the act was done
voluntarily

Liability cannot be
mitigated

Liability may be
mitigated

Waiver for future fraud

is void

GR: Waiver for future

negligence may be
allowed in certain cases
XPN:Nature of the
obligation or public
policy requires
extraordinary diligence
(e.g. common carrier)

What are the effects of contributory

negligence of the creditor?

GR: It reduces or
mitigates the
damages which he can
recover.

XPN:If

the negligent act

or omission of the
creditor is the
proximate cause of the
event which led to the
damage or injury
complained of, he
cannot recover.

Distinguish culpa contractual

from culpa aquiliana.
CULPA
CONTRACTUAL
(CONTRACT)

CULPA
AQUILIANA(QUASI
DELICT)

Negligence is merely
an incident in the
performance of an
obligation

Negligence is
substantive and
independent

There is a pre
existing contract

There is no pre
existing contract

The source of
obligation of
defendant to pay
damages is the
breach or non
fulfillment of the
contract

The source of
obligation is
defendants
negligence itself

Proof of the existence The negligence of the

of the contract and of defendant must be
its breach or non
proved
fulfillment is
sufficient prima facie
to warrant recovery
Proof of diligence in
the selection &
supervision of the
employees is not an

Proof of diligence in
the selection &
supervision of the
employees is a

What is the degree of

diligence required?
That

agreed upon
In the absence of such, that which
is required by the law
In the absence of the foregoing,
diligence of a good father of a
family that reasonable diligence
which an ordinary prudent person
would have done under the same
circumstances.
XPN:Common carriers requiring
extraordinary diligence

CONTRAVENTION OF
TENOR OF OBLIGATION
It

is the act of
contravening the
tenor or terms or
conditions of the
contract.

What is fortuitous
event?
It is an occurrence or
happening which could
not be foreseen, or
even if foreseen, is
inevitable (Art. 1174,
NCC).

What are the requisites of

a fortuitous event?
1. Cause is independent of
the will of the debtor
2. The event is
unforeseeable or
unavoidable
3.Occurrence renders it
absolutely impossible for
the debtor to fulfill his
obligation in a normal

4.Debtor is free from

any participation in
the aggravation of the
injury to the creditor.

Distinguish fortuitous
event and force majeure
Fortuitous Event
ACT OF GOD

Force Majeure
ACT OF MAN

Event which is
absolutely
independent of
human
intervention

Event caused by
the legitimate or
illegitimate acts
of persons other
than the obligor

earthquakes,
storms, floods,
epidemics

armed invasion,
robbery, war,
rebellion, lawless
violence

There is no essential
difference between
fortuitous event and
force majeure; they
both refer to causes
independent of the
will of the obligor.

What are the remedies that may be

availed of in case of breach?

1. Specific performance, or
substituted performance by a
third person in case of an
obligation to deliver a generic
thing, and in obligations to do,
unless it is a purely personal
act; or

2. Rescission (or
resolution in reciprocal
obligations);
3. Damages, in any case;
4. Subsidiary remedies
of creditors:
a. Accion subrogatoria
b. Accion pauliana
c. Accion directa

What are the remedies in connection with specific

performance?

1.Exhaustion

of the
properties of the debtor
(not exempt from
attachment under the law)

 Accion

subrogatoria (subrogatory
action) an indirect action
brought in the name of the
debtor by the creditor to enforce
the formers rights except:
a. personal rights of the debtor
b. rights inherent in the person of
the debtor
c. properties exempt from
execution (e.g.family home)

Accion

pauliana
(rescissory action) an
action to impugn or assail
the acts done or contracts
entered into by the debtor
in fraud of his creditor;

Note:

Must be a
remedy of last resort,
availed of only after all
other legal remedies
have been exhausted
and have been proven
futile.

What is substitute
performance?
It

is a remedy of the
creditor in case of non
performance by the debtor;
where another party
performs the obligation or
the same is performed at
the expense of the debtor.

When may there be substitute

performance?
Positive personal
obligation:
a. If not purely personal
substitute performance;
the obligation shall be
executed at debtors cost
if he fails to do it. (Art.
1167, NCC)

b.

Purely personal
no substitute
performance may be
demanded because
of the personal
qualifications taken
into consideration.
The only remedy is
damages.

Real obligation:

a.

Generic thing
substitute performance;
delivery may be made by a
person other than the
debtor since the object is
merely designated by its
class or genus. The
creditor may ask that the
obligation be complied
with at the expense of the
debtor. (1165,NCC)

b.

Specific thing
specific performance
may be demanded, that
is, the creditor may
compel the debtor to
make the delivery.

What is rescission under

Article 1191?
It refers to the cancellation
of the contract or reciprocal
obligation in case of breach
on the part of one, which
breach is violative of the
reciprocity between the
parties. This is properly
called resolution.

To what kind of obligation

is resolution available?
Reciprocal

obligation,
since resolution is implied
therein.

Who may demand

resolution?

Injured

party.

May the injured party demand resolution

after he elects specific performance?

No.

His right is not

conjunctive, thus, he may
not choose both remedies
of resolution and specific
performance.

What are the requisites of

accion subrogatoria?
The

debtors assets must be

insufficient to satisfy claims
against him
The creditor must have
pursued all properties of the
debtor subject to execution

The

right of action
must not be purely
personal
The debtor whose right
of action is exercised
must be indebted to
the creditor.

What are the requisites of

accion pauliana?
Defendant

must be
indebted to plaintiff
The fraudulent act
performed by the debtor
subsequent to the
contract gives advantage
to another
The creditor is prejudiced
by such act.

The

creditor must have

pursued all properties
of the debtor subject to
execution
The creditor has no
other legal remedy.