Documente Academic
Documente Profesional
Documente Cultură
OBLIGATIONS AND
CONTRACTS
BY : Atty. J G PAGDANGANAN
Course Outline
PART II – OBLIGATIONS
4) In General
a) Definition
b) Sources of Obligations
Law; Contracts; Quasi-Contracts;
Delicts or Crimes; Quasi-Delicts
c) Essential requisites of obligation
Parties; object; Juridical tie or vinculum juris
Contracts Defined
Elements of Contract:
Stages of A Contract
Characteristics of Contracts:
Classification of A Contract: (FROM)
Contract Binds by Both Parties
Cases Where Third person May Be Affected By a Contract
Forms of Contracts
Reformation of Instruments
Interpretation Of Contracts
Cause of Contracts
Rescissible Contracts
Voidable Contracts
Unenforceable Contracts
Void or inexistent contracts
Preliminaries
The person was created by God and destined for God, the
people can attain the final destiny by following the law.
1. A RULE OF CONDUCT
2. PROMULGATED BY LEGITIMATE
AUTHORITY
1. LEGISLATIVE
2. CONSTITUTION
3. ADMINISTRATIVE OR EXECUTIVE
ORDERS, REGULATIONS AND
RULINGS
5. CUSTOM
6. OTHER SOURCES
1. DIVINE LAW
2. NATURAL LAW
3. PHYSICAL LAW
▪ Refers to the act of rules governing the action and
movement of things like the law on gravity by Newton.
4. HUMAN LAW
▪ Those promulgated by man to regulate human relations.
▪ 1. Civil Law – branch of law which has for its double purpose the
organization of the family and the regulation of property. It is
defined as the mass of precepts which determines and regulate
the relation of assistance, authority and obedience among the
members of a society for the protection of private interests.
by :Atty. Joeffrey G. Pagdanganan 26
Classification of Human Law
The Civil Code begins with preliminary titles and ends up with the
repealing clause. This module is taken from the Civil Code of the
Philippines from Articles 1156 to 1422 inclusive.
by :Atty. Joeffrey G. Pagdanganan 33
Kinds of Procedural Law
JUDICIAL POWER
Includes the duty of the courts of justice to settle
actual controversies involving rights which are legally
demandable and enforceable, and to determine
whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the
Government. (Const. Art. VIII, Sec. 1, par.2)
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Different Courts of Justice
1. Supreme Court
2. Sandigan-bayan
3. Court of Appeals
4. Regional Trial Court; and
5. Metropolitan / Municipal Trial Courts
Example –
Jojo bought refrigerator from Justine but Jojo
did not pay for the refrigerator. If after
demand, Jojo still refuses to pay, Justine can
sue Jojo in Court either to demand payment or
for recovery of the refrigerator.
by :Atty. Joeffrey G. Pagdanganan 41
3. Essential requisites of an obligation –
On the other hand, if Jun, delivered the refrigerator and Jose did not
pay, then Jose becomes the debtor who is bound to pay while Jun is
the creditor who has the right to demand the prestation.
Contract as defined in Art. 1305, NCC is the meeting of minds between two person whereby
one binds himself with respect to the other,
Obligations arising from contracts have the force of law between the contracting parties
because that which is agreed upon in the contract by the parties is the law between them,
thus, the agreement should be complied with in good faith. (Art. 1159).
For examples:
A contract of lease was executed between Keisha as the lessee and Nathan as the lessor for
the rent of an apartment.
Although contracts have the force of law, it does not mean that contract are over and above
the law. Contracts are with the limitations imposed by law in Art. 1306, NCC, it states that
the contracting parties may establish such stipulations, clauses terms and conditions as,
they may deem convenient, provided that are not contrary to law, morals, good custom,
public order or public policy.
2. Negotiorum gestio (management of another’s property)
It is the voluntary management or administration by a person of the abandoned business or
property of another without any authority or power from the latter. (Art. 2144, NCC)
Example-
Victor, a wealthy landowner suddenly left for abroad leaving his livestock farm unattended.
Ramon, a neighbor of Victor managed the farm thereby incurring expenses. When Victor
returns, he has the obligation to reimburse Ramon for the expenses incurred by him and to
pay him for his services. It is bases on the principle that no one shall enrich himself at the
expense of another.
by :Atty. Joeffrey G. Pagdanganan 51
Sources of Obligations
4. DELICTS or acts or omissions punished by law as a source of obligations
Acts or omission punished by law is known as Delict or Felony or Crime.
While an act or omission is felonious because it is punished by law, the criminal act gives rise to
civil liability as it caused damage to another.
Illustration:
Mario was convicted and sentenced to imprisonment by the Court for the crime of theft, the gold
wrist watch, of Rito. In addition to whatever penalty that the Court may impose, Mario may also
be ordered to return (restitution) the gold wrist watch to Rito. If restitution is no longer possible,
for Mario to pay the value (reparation) of the gold wrist watch. In addition to either restitution or
reparation, Mario shall also pay for damages (indemnification) suffered by Rito.
by :Atty. Joeffrey G. Pagdanganan 52
Sources of Obligations
5. QUASI-DELICTS as a source of obligations
Concepts of Quasi-Delict –
Quasi-delict is one where whoever by act or omission causes
damage to another, there being fault of negligence, is obliged to
pay for the damage done. Such fault of negligence, if there is no
pre-existing contractual relation between the parties. (Art. 2176)
Example-
If Pedro drives his car negligently and because of his negligence
hits Jose, who is walking on the sidewalk of the street, inflicting
upon him physical injuries. Then Pedro becomes liable for
damages based on quasi-delict.
by :Atty. Joeffrey G. Pagdanganan 53
Sources of Obligations
6. DELICTS or acts or omissions punished by law as a source of
obligations
Acts or omission punished by law is known as Delict or Felony
or Crime.
While an act or omission is felonious because it is punished by law,
the criminal act gives rise to civil liability as it caused damage to
another.
Test of Negligence –
For the existence of negligence, the following are necessary:
a duty on a party of the defendant to protect the plaintiff
from the injury of which the letter complains;
a failure to perform that duty; and
an injury to the plaintiff through such failure.
by :Atty. Joeffrey G. Pagdanganan 56
Kinds of Negligence
Culpa criminal ?
While trying to pass each other on a narrow bridge, a passenger truck and
private automobile collided, and the plaintiff, a passenger in the truck, was
injured.
The owner of the passenger truck was made a defendant, although a driver
was driving the truck and the owner of the car was also made a defendant,
although he was not in the car but which was being driven by his 18 year old
son and in which members of his family were then riding. The court found both
drivers negligent, basing the liability of the owner of the truck to the plaintiff
on the contract of carriage; while the liability of the owner of the car was based
on Quasi-delict of the Civil Code. As against the owner of the truck, there was
Culpa contractual, while as against the owner of the car there was culpa
Aquiliana.
by :Atty. Joeffrey G. Pagdanganan 58
LESSON 2: NATURE AND EFFECT OF OBLIGATIONS
ART. 1664. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall
acquire no real right over it until the same has been delivered to
him. (1905)
Example – a binds himself to sell his horse to B for fro P10, 000. No
date nor condition is stipulated for delivery of the horse. Later, the
horse gave birth to a colt. A has right to the colt, if B has not paid the
horse. Before delivery, B does not acquire ownership over it.
by :Atty. Joeffrey G. Pagdanganan 64
Definition of terms:
Example-
A bought a land from B. It was stipulated that A would not construct a
fence in a certain portion of his land adjoining that land sold by B.
Should A construct a fence in violation of the agreement, B. can bring
by :Atty. Joeffrey G. Pagdanganan 68
ART. 1169. Those oblige to deliver or to do something incur in
delay from the time the obligee judicially or extra - judicially demands from theme the
fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
( 2 ) When from the nature and the circumstances of the obligation it appears that the
destination of the time when the thing is to be delivered or the service is to rendered
was controlling motive for the establishment of the contract; or
( 3 ) When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply in a
proper manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins. ( 1100a )
by :Atty. Joeffrey G. Pagdanganan 69
Delay ( Mora )
means a legal delay or default and it consists of failure
discharge a duty resulting to one’s own disadvantaged.
Note: C.B. Circular No. 905 suspends the ceilings in the usury law.
Hence, parties can agree as to the rate of interest.
Kinds of interest
1. Conventional *The rate which is agreed upon by the
parties.
2. Legal Interest *The rate which is prescribed by law.
3. Lawful Interest *The rate which is agreed upon by the
parties but which rate is within the rate authorized by law.
4. Usurious Interest *The rate which is in excess of the
by :Atty. Joeffrey G. Pagdanganan 89
ART. 1176. The receipt of the principal by the creditor
without reservation with respect to the interest, shall
give rise to the presumption that said interest has been
paid.
Rights of Creditors –
In order to satisfy their claims against the debtor, creditors have the following
successive rights:
1. to levy by attachment and execution upon all the property of the debtor, except
such as are exempt by law from execution;
2. to exercise all the rights and actions of the debtor, except, such as are inherently
personal to him; and
3. to ask for the rescission of the contracts made by the debtor in fraud of their
by :Atty. Joeffrey G. Pagdanganan 92
ART. 1178. Subject to the laws, all rights
acquired in virtue of an obligation are
transmissible, if there has been no stipulation to
the contrary. (1112)
Classification of Obligations:
The Civil Code classifies obligations primarily into: (PU CO PE
ALFA JOS DIP)
1. Pure;
2. Conditional;
3. With a period;
4. Alternative;
5. Facultative;
6. Joint;
7. Solidary or several or in solidum;
8. Divisible;
9. Indivisible;
10. With a penal clause.
by :Atty. Joeffrey G. Pagdanganan 94
Other provisions of the Civil Code, however,
impliedly admit other classes of obligations, to
wit:
Example –
A promissory note states that “This is to acknowledge receipt of sum
of One thousand Six Hundred pesos (P1, 600.00) and I am to pay my
debt to Arvin as soon as possible or as soon as I have the money.” It
was held that the conditional obligation is void, because the
collection would be impossible, the remedy of the creditor is to ask
the Court to fix the period of payment, thus, it becomes an obligation
with a period. by :Atty. Joeffrey G. Pagdanganan 98
ART. 1181. In conditional obligations, the acquisition of rights as well
as the extinguishment or loss of those already acquired, shall depend
upon the happening of the event which constitutes the condition. (1114)
ART. 1182. When the fulfillment of the condition depends upon the sole
will of the debtor, the conditional obligation shall be void. If it depends
upon chance or upon the will of a third person, the obligation shall take
effect in conformity with the provisions of this code. (1115)
ART. 1185. The condition that some event will not happen at a
determinate time shall render the obligation effective from the
moment the time indicated has elapsed, or if it has become evident
that the event cannot occur.
If not time has been fixed, the condition shall be deemed fulfilled at
such time as may have probably been contemplated, bearing in mind
the nature of the obligation. (1118)
ART. 1186. The condition shall be deemed fulfilled when the obligor
by :Atty. Joeffrey G. Pagdanganan 100
Kinds or classifications of conditions:
Example:
Maya binds herself to deliver a determinate car to Nathan if he marries Keisha. The
obligation is only demandable upon the happening of the condition that is, if
Nathan marries Keisha. The obligation is suspended and not yet demandable.
Resolutory – the happening of the condition extinguishes the obligation already existing.
Example:
Arvin binds himself to lend his only car to Ian until the latter passes the CPA Board.
The obligation to lend is immediately demandable. Ian’s right over the car is
extinguished upon his passing the CPA board. Ian is now obliged to return the car.
Potestative – is one the fulfillment of which depends upon the sole will of the debtor. This kind of
condition is void.
Example:
Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United
States.
Casual – is one the fulfillment of which depends upon chance.
Example:
Mario agrees to give Maria a determinate car if Maria’s only racing horse will win the
sweepstake race.
Mixed – is one which depends partly upon the will of third person and partly upon chance
Example:
Vincent promise to give Victor a new Toyota Car if Victor will be able to play with and beat
Karpov in a game of chess. This is mixed condition, that is Karpov willingness to play chess
with Victor and the latter’s winning over Karpov.
Example:
Victor will give Jason a car if he will not marry Helen until Dec. 19, 2001, if
Jason has not married Helen until Dec. 19, 2001 or if Helen has died
within the prescribed time without having married to Jason, the
obligation becomes demandable. If Jason married Helen within the
prescribed time, the obligation of Victor is extinguished.
by :Atty. Joeffrey G. Pagdanganan 104
Kinds or classifications of condition:
Example:
A agrees to sell and B agrees to buy A’s parcel of land if B passes
the May, 1999 CPA exams. If B passes the May, 1999 CPA Board,
the obligation becomes demandable. B is entitled to all the
interests that his money (with which to pay A) may earn while A
is entitled to the fruits which the parcel of land may have
produced during the pendency
by :Atty. of the condition.
Joeffrey G. Pagdanganan 108
2. In unilateral obligation – the debtor shall appropriate the
fruits and interests received during the pendency of the
condition unless a contrary intention appears.
Example –
X agreed to give Y a parcel of land if Y passes the
CPA Board in May, 1999 exams. Pending the
happening of the condition, A is entitled to the
fruits which the land may produce, A will deliver
only the parcel of land if the condition is fulfilled,
unless a contrary intention appears.
The debtor may recover what during the same time he has
paid by mistake in case of a suspensive condition (1121a)
Example:
On Jan. 1, 1999, Raul obliged himself to sell a parcel of land to
Dennis if he passes the CPA exams in October, 1999. From the
time the obligation was constituted and pending the
happening of the condition (passing the CPA Exams) Dennis
may cause the annotation of the condition in the certificate of
title in the Register of Deeds where the land is located, to
preserve his right over the parcel of land.
by :Atty. Joeffrey G. Pagdanganan 113
Paragraph II in order that debtor may recover what he has paid by
mistake, during the pendency of the condition, the following requisites
may be present:
1. The debtor paid the creditor before the fulfillment of the condition;
2. Payment made by debtor was through mistake and error;
3. The action to recover what was paid by mistake should be made before the
fulfillment of the condition.
Example –
Pedro obliged himself to pay Santos P20, 000 if a PAL plane crashes at Cebu before
Dec. 30, 1998. After the obligation was constituted and before Dec. 30, 1998, a
plane crushed in Cebu. Pedro honestly and believing that the condition was fulfilled
paid the P20, 000 to Santos. It turned out however that it was a Cebu airline that
crushed. Thus, Pedro may recover the amount paid to Santos by mistake for the
by :Atty. Joeffrey G. Pagdanganan 114
reason that the condition has not yet been fulfilled.
ART. 1189. When the conditions have been imposed with the intention of
suspending the efficacy of an obligation to give, the following rules shall be
observed in case of the improvement, loss or deterioration of the thing during the
pendency of the condition:
1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished.
2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it
is understood that the thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it cannot be recovered;
3) When the thing deteriorates without the fault of the debtor, the impairment is to be
borne by the creditor;
4) If it deteriorates through the fault of the debtor; the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either
case;
5) If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor;
6) If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary.
a) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished.
Example –
Reyes obliged himself to give Santos a determinate car if he passes the CPA
Exams in Oct. the current year. If during the pendency of the condition the car
was lost through fortuitous event without the fault of Reyes, the obligation to
deliver the car is extinguished even if the condition is fulfilled later.
b) If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages. If in the example above, the specific car was lost through the fault
of Reyes, he shallby :Atty. Joeffrey G.
be liable forPagdanganan
damages upon the fulfillment of the condition. 116
It is understood that the thing is lost:
Example :
A gave B a parcel of land on condition that B will pass the CPA Exams on May, this
year. B did not pass the CPA Exams. The obligation is extinguished and therefore, it is
as if there was never an obligation at all. B will therefore have to return both the land
and the fruits he had received there from the moment A has given him the land.
If the uncertainty consists in whether the day will come or not,
the obligation is conditional, and it shall be regulated by the
rules of the preceding Section.
by :Atty. Joeffrey G. Pagdanganan 124
Period Defined –
This article which is similar to Article 1188, NCC, in an obligation to give, allows
the recovery of what has been paid by mistake before the fulfillment of a
suspensive condition.
Example -
E owes G P20, 000.00, which was supposed to be paid on December 25 this year. By
mistake, E paid his obligation on December 25 last year. Assuming that today is only June
30, E can recover the amount plus interest therein. But E cannot recover, except he
interest, if the debt had already matured or if E had knowledge of the period.
by :Atty. Joeffrey G. Pagdanganan 128
ART. 1196. Whenever in an obligation a period is
designated, it is presumed to have been established for the
benefit of both the creditor and the debtor, unless from the
tenor of the same or other circumstances it should appear
that the period has been established in favor of one or of the
other. (1127)
Which means that before the expiration of the period, the debtor may
not fulfill the obligation and neither the creditor demand its fulfillment.
by :Atty. Joeffrey G. Pagdanganan 129
By way of exception, however, if the tenor of the obligation or other
circumstances may indicate that a period is have been established for the
benefit of either the creditor or debtor:
1. For the benefit of both creditor and debtor
Example –
Keisha obtained a loan of P10, 000 at 12% interest per annum from Nathan for one year. Keisha
has a period of one year within which to use the money, while Nathan will benefit from the interest
which the money will earn.
The courts shall also fix the duration of the period when it depends
upon the will of the debtor.
In every case, the courts shall determine such period as may under
the circumstance have been probably contemplated by the parties.
Once by the courts, the period cannot be changed by them. (1128 a)
The creditor cannot be compelled to receive part of one and part of the
other undertaking. (1131)
Meaning of Alternative Obligation
It means an obligation where two or more prestations are due but the
delivery of one is sufficient to extinguish the obligation.
Example:
Keisha binds herself to give Nathan either a determinate refrigerator or a TV set. If
Keisha chooses and delivers the TV set, the obligation is extinguished. Thus, Keisha
by :Atty.
cannot compel Nathan toJoeffrey
accept G. Pagdanganan
part of one and the part of the other prestations. 137
ART. 1200. The right of choice belongs to
the debtor, unless it has been expressly
granted to the creditor.
As a general rule, the right of choice or to select the prestation belongs to the debtor, unless
the right to choose is expressly granted to the creditor. But the right of the debtor is subject
to the following:
The debtor cannot choose those prestations which are:
a) Impossible – E.g.- Keisha promised to deliver to Nathan 100 sacks of rice or a stone from Mars. Keisha
cannot chose to deliver the stone coming from Mars as it is physically impossible.
b) Unlawful – E.g. Keisha obliged herself to deliver to Nathan a kilo of dangerous drug or a parcel of land.
Keisha can choose only the delivery of parcel of land.
c) Could not have been the object of the obligation - E.g. Keisha borrowed from Nathan P50, 000. It was
agreed that Keisha would give Nathan her horse or her German Piano. Now, Keisha has two horses, a
race horse worth P50, 000 and an ordinary horse which is worth for only P5, 000. Keisha cannot choose
d) Only one prestation is practicable (Art. 1202) – E.g. Keisha will deliver to Nathan her carabao, or her
horse or her refrigerator. Through no fault of Keisha, the horse and the carabao were lost by fortuitous
event. Keisha can only delivery the refrigerator which is the only one practicable.
Example:
Keisha borrowed from Nathan P5, 000.00. it was agreed that instead of P5, 000, Keisha could
deliver a TV set or a refrigerator or a piano. If through the fault of Nathan, the TV set was
destroyed, Keisha can rescind the contract if she wants. In case of rescission, the amount of P
5, 000.00 must be returned by Keisha with interest. Nathan, in turn, must pay Keisha the value
of the TV set plus damages.
by :Atty. Joeffrey G. Pagdanganan 141
ART. 1204. The creditor shall have a right to indemnity for damages
when, through the fault of the debtor, all the things which are
alternatively the object of the obligation have been lost, or the
compliance of the obligation has become impossible.
The indemnity shall be fixed taking as a basis the value of the last thing which
disappeared, or that of the service which last became impossible.
Damages other than the value of the last thing or service may also be awarded.
(1135a)
When right of choice is with debtor and all prestations were lost –
This article entitles the creditor to indemnity for damages when all the alternative
objects are lost through the fault of the debtor before he has made his choice. The
indemnity for which the creditor is entitled shall be based on the value of the last
thing which disappeared or lost or the compliance of the obligation has become
impossible. by :Atty. Joeffrey G. Pagdanganan 142
ART. 1205. When the choice has been expressly given to the creditor,
the obligation shall cease to be alternative from the day when the
selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed by the
following rules
1) If one of the things is lost through a fortuitous event, he shall perform the
obligation by delivering that which the creditor should choose from among the
remainder, or that which remains if only one subsists;
2) If the loss of one of the things occurs through the fault of the debtor, the
creditor may claim any of those subsisting, or the price of that which, through
the fault of the former, has disappeared, with a right to damages
3) If all the things are lost through the fault of the debtor, the choice by the
creditor shall fall upon the price of any one of them, also with indemnity for
damages. by :Atty. Joeffrey G. Pagdanganan 143
The same rules shall be applied to obligations to do or not to
do in case one. Some or all of the prestations should
become impossible. (1136a)
ART. 1208. If from the law, or the nature or the wording of the
obligations to which the preceding article refers the contrary does
not appear, the credit or debt shall be presumed to be divided into
as many equal shares as there are creditors or debtors, the credits
or debts being considered distinct from one another, subject to
the Rules of Courtbygoverning the multiplicity of suits. (1138a)
:Atty. Joeffrey G. Pagdanganan 148
Joint Obligation –
It is an obligation where there is a concurrence of two or
more debtors or two or more creditors or of several
debtors and creditors, by virtue of which each of the
debtors is liable for a proportionate part of the credit.
ART. 1209. If the division is impossible, the right of the creditors may be
prejudiced only by their collective acts, and the debt can be enforced only by
proceeding against all the debtors. If one of the latter should be insolvent,
the others shall not be liable for his share.
Example –
A and B are jointly liable to give C a particular car. The obligation is joint but since the object is
indivisible, the creditor must proceed against al the joint debtor. If any of the joint debtors be insolvent,
the others shall not be liable forJoeffrey
by :Atty. others. G. Pagdanganan 152
ART. 1210. The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does solidarity of itself
imply indivisibility. (n)
2. Joint indivisible obligation – A and B are jointly liable to give C their car.
3. Solidary divisible obligation – A and B are solidarily liable to give C P10, 000.
Example:
A and B solidarily bound themselves to pay a total of P10, 000 to C, and D and E to
the following conditions. C’s share will be due at the end of the year; D will get his
share only after he passes the CPA exams and E will get his share only after he
painted the housebyof:Atty.
C. Joeffrey G. Pagdanganan 154
ART. 1212. Each one of the solidary creditors may do whatever may be
useful to the others, but not anything which may be prejudicial to the latter.
(1141a)
ART. 1213. A solidary creditor cannot assign his rights without the consent
of the others.
Example
A is liable to B and C P5, 000. A may pay either B or C But if B made a
demand then payment should only be made to him. If A paid C, B is still
entitled to his share fromG.APagdanganan
by :Atty. Joeffrey in case C does not turn over to B his share. 156
ART. 1215. Novation, compensation, confusion or remission
of the debt, made by any of the solidary creditors or with any
of the solidary debtors, shall extinguish the obligation,
without prejudice to the provisions of article 1219.
The creditor who may have executed any of these acts, as well as he
who collects the debt, shall be liable to the others for the share in
the obligation corresponding to them.
Example
A, B and C solidarily owe D the amount of P9, 000. D can collect from A or B or C alone
or from any two of them or all of them simultaneously. If demand is made on A, the
latter cannot require D to make a demand also on B and C or to include them as party
defendants as D has the right to proceed against any one of them.
by :Atty. Joeffrey G. Pagdanganan 158
ART. 1217. Payment made by one of the solidary debtors
extinguishes the obligation. If two or more solidary debtors
offer to pay the creditor may choose which offer to accept.
1. Prescription – is one where one acquires ownership and other rights through
the lapse of time in the manner and under the conditions laid down by law.
Example – A and B are solidarily indebted to C in the amount of P 10, 000. The debt
prescribed. If A paid the debt, he cannot collect form B his share of the debt. Neither
can A can recover from C.
ART. 1220. The remission of the whole obligation obtained by one of the
solidary debtors, does not entitle him to reimbursement from his co-debtors.
Remission by Creditor –
2) If remission is made prior to the payment and payment is made, then there is payment by
mistake.
3) If one of the solidary debtors obtained remission on the whole obligation, he is not
entitled to reimbursement from his co-debtors because remission is essentially gratuitous.
by :Atty. Joeffrey G. Pagdanganan 162
ART. 1221. If the thing has been lost or if the prestation
has become impossible without the fault of the solidary
debtors, the obligation shall be extinguished.
If there was fault on the part of any one of them, all shall be
responsible to the creditor, for the price and the payment
of damages and interest, without prejudice to their action
against the guilty or negligent debtor.
Example:
A, B and C are solidarily bound to deliver a
determinate car to D. Without any fault on the part of
any one of the debtors, the car was lost through the
fortuitous event. The obligation is extinguished.
by :Atty. Joeffrey G. Pagdanganan 164
Rules in Case thing has Been Lost or Prestation Has Become Impossible –
3. The solidary debtors are likewise liable even if the thing is lost
through fortuitous event if the loss occurs after anyone of the
solidary debtors has been in delay. The debtors, however who
were not in delay have the right to recover from their co-
debtors who was responsible due to his delay.
Example
A and B are solidarily liable to C in the among to P6, 000. The entire
debt was paid by d. in an action by C against A, the latter can raise the
defense of payment by virtue of which the obligation was extinguished.
Example:
A agreed to pay B P10, 000 in five monthly installment. The obligation of
A is divisible because it is payable in partial payments.
Example:
A agreed to deliver a determinate car to B on Dec. 31. This is an indivisible
obligation because it is not subject to partial performance.
by :Atty. Joeffrey G. Pagdanganan 170
ART. 1224. A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the
debtors does not comply with his undertaking. The
debtors who may been ready to fulfill their promises shall
not contribute to the indemnity beyond the
corresponding portion of the price of the thing or of the
value of the service in which the obligation consist. (1150)
Example:
To give a particular house. Here the obligation is indivisible because of the
nature of the subject matter.
2. Obligations which are not susceptible of partial performance
Example:
A is obliged to sing a song. Here the obligation is indivisible by reason its
purpose which requires the performance of all the parts.
by :Atty. Joeffrey G. Pagdanganan 173
Obligations Deemed Indivisible
3. Obligation provided by law to be indivisible even if thing or service
physically divisible.
Example:
Taxes should be paid within a definite period. Although money is physically
divisible, the amount of tax payable must be delivered in Toto, not partially.
Example:
The obligation of A to give P10, 000 to B on a certain date. Money is physically
divisible by the clear intention ere for A to deliver the amount at on time and
as a whole.
by :Atty. Joeffrey G. Pagdanganan 174
Obligations Deemed Divisible
1. Obligations which have for their object the execution of a certain number of days of
work.
Example –
A obliged himself to paint the house of B to be finished in 10 days. The obligation is divisible
because it will not be finished in one time.
2. Obligations which have for their object the accomplishment of work by metrical units.
Example:
A obliged himself to deliver 25 cubic meter of sand.
Example
The obligation of A to pay a debt of P10, 000 to B in ten (10) monthly installments.
Example:
A agreed to sell merchandise to B. it is provided in their agreement that in case of
default, A will deliver a prohibited drug as penalty. Here, the obligation to sell
merchandise is valid by the
by :Atty. penalty
Joeffrey to deliver the prohibited drug is void. For failure of
G. Pagdanganan 181
Payment or Performance - Requisites
Completeness
Indivisibility
Identity
Dation in payment
Payment by cession
Application of Payment
Tender of Payment and Consignation
it must be gratuitous;
ART. 1274. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged, after
its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing. (1191a)
1. the merger of the qualities of creditor and debtor must be in the same person;
2. it must take place in the person of either the principal debtor and principal
creditor; and
3. it must be complete, clear and definite; and
4. the very obligation must be the same.
Example, Keisha issued a promissory note for P10, 000 in
favor of Nathan payable 30 days after sight. Before the maturity of the note,
Nathan indorsed it to Arvin; Arvin indorsed it to Mary; Mary indorsed it to
Keisha. The obligation of Keisha to Nathan is extinguished because there is
here a merger of the qualities of the debtor and creditor in one and the same
person with respect to one and the same obligation cannot demand and
collect payment from himself.
ART. 1276. Merger which takes place in the person of the principal debtor
or creditor benefits the guarantors. Confusion which takes place in the person
Effect of Merger
of any of the latter does not extinguish the obligation. (1193)
Compensation shall take place when two persons, in their own rights are creditors
and debtors of each other.
Compensation Distinguished
From Confusion
as to number of persons – in compensation there must be two
persons; in confusion, there is only one person in whom the quality
of creditor and debtor is merged;
as to number of obligation – in compensation there must be two
obligations; in confusion there is only one obligation.
(1) That each one of the obligors be bound principally, and that he be
at the same time a principal creditor of the their;
(2) That both debts consist in a sum of money, or if the things due
are consumable, they be the same kind, and also of the same quality
if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention of controversy,
commenced by third persons and communicated in due time to the
debtor. (1196)
Example, Arvin woes Ian P10, 000 and Ian owes Arvin P10, 000 but Arvin credit of P10, 000 has been garnished by Keisha who claims to be an unpaid creditor of Arvin.
Ian has been duly notified of the controversy. Any possible compensation is in the meantime suspended. If Keisha wins her claim, there can be no compensation. If she
loses, the controversy is resolved, and then compensation can take place.
Kinds of Compensation
Total compensation is when the amount due are equal or of the same
amount, hence both obligations are extinguished.
Example, Keisha is indebted to Maya the amount of P10, 000 due on Dec.
19, 1999. Maya is likewise indebted to Keisha in the amount of P10, 000 due on
Dec. 19, 1999. There is here a total compensation; hence both debts will be
extinguished.
Example, Keisha owes Maya P10, 000 due on Dec. 19, 2009. On the other hand, Maya owes the due
date arrives because a balance of P4, 000 will remain after compensation takes place.
ART. 1282. The parties may agree upon the compensation of debts
which are not yet due. (n)
Example, Keisha owes Maya P10, 000 due on Nov. 30, 2001. On the
other hand Maya owes Keisha P10, 000 due on Dec. 19, 2001.
Generally compensation the parties there may be compensation
cannot take place comes Nov. 30, 2001 because Maya’s debt is not yet
due. However, by voluntary agreement between
ART. 1283. If one of the parties to a suit over an obligation has a claim for damages against
the other, the former may set it off by providing his right to said damages and the amount
thereof. (N)
Judicial Compensation
A judicial compensation is one whereby a money debt of a person
may be allowed by the court to be compensated with a claim of damages
by another.
Example, X owes Y P1, 000. When Y demanded payment, X failed to
pay. In anger, Y damaged the property of X to the extend of P800. X can
set off the obligation of Y to pay him damages in the amount of P800
against his debt of P1, 000.
If an extinguished obligation has been assigned by the creditor to third person, the debtor can raise the
defense of compensation with respect to the debt. The remedy of the assignee is against the assignor.
Example, A owes B P5, 000 due yesterday. B owes A P3, 000 due also yesterday. Both debts are
extinguished up to amount of P3, 000. Hence, A still owes B P2, 000 today. If B assigns his right to C, latter
can collect only P2, 000 from A. However, if A gave his consent to the assignment before it was made on will
be liable to C for P5, 000 but he can still collect the P2, 000 owed by B. It is as if no compensation took place.
Where Compensation Has Taken Place
AFTER Assignment
Example, Keisha owes Maya $1, 000 payable in New York. Maya
owes Keisha P38, 000(equivalent amount) payable in Manila. If A
claim compensation, he must pay for the expenses of exchange.
Learning Objectives:
1. As to perfection
a. Consensual – one which is perfected by mere consent (Art. 1315
b. Real Contract – perfected by mere consent and by the delivery of
the object or subject matter. Ex. Deposit, pledge, or commodatum.
5. In contracts which have been violated at the inducement of the third
person (Art. 314).
Example, Keisha mortgaged her parcel of land in favor of Laura as
collateral for her debt. The mortgage is duly registered. Later on, Keisha
sold the same land to Nathan. In this case, Nathan bought the land subject
to the mortgage constituted thereon. Nathan, although a stranger in the
mortgage, being a real right follows the property on the right of Laura to the
mortgage.
DEFECTIVE CONTRACTS
(1)
When the fault is on the part of both contracting parties,
neither may recover what he has given by virtue of the contract, or
demand the performance of the other’s undertaking;