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Obli reviewer - Summary The Law on Obligations and Contracts
Accountancy (BSA)
University of the East (Philippines)
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REVIEWER
TITLE I – OBLIGATIONS
CHAPTER 1
GENERAL PROVISIONS
- An obligation is a juridical necessity to give, to do, or not to do.
JURIDICAL NECESSITY – juridical tie; connotes that in case of noncompliance, there will be legal sanctions.
• An obligation is nothing more than the duty of a person (obligor) to satisfy a specific demandable claim of another person
(obligee) which, if breached, is enforceable in court.
- A contract necessarily gives rise to an obligation but an obligation does not always need to have a contract.
KINDS OF OBLIGATION
A. From the viewpoint of “sanction” -
(a) CIVIL OBLIGATION – that defined in Article 1156; an obligation, if not fulfilled when it becomes due and
demandable, may be enforced in court through action; based on law; the sanction is judicial due process
(b)NATURAL OBLIGATION – defined in Article 1423; a special kind of obligation which cannot be enforced in court
but which authorizes the retention of the voluntary payment or performance made by the debtor; based on equity and natural law. (i. when there is prescription of duty to pay, still, the obligor paid his dues to the obligee – the obligor cannot recover his payment even there is prescription) the sanction is the law, but only conscience had originally motivated the payment. (c) MORAL OBLIGATION – the sanction is conscience or morality, or the law of the church. (Note: If a Catholic promises to hear mass for 10 consecutive Sundays in order to receive P1,000, this obligation becomes a civil one.) B. From the viewpoint of subject matter - (a) REAL OBLIGATION – the obligation to give (b) PERSONAL OBLIGATION – the obligation to do or not to do (e. the duty to paint a house, or to refrain from committing a nuisance) C. From the affirmativeness and negativeness of the obligation - (a) POSITIVE OR AFFIRMATIVE OBLIGATION – the obligation to give or to do (b) NEGATIVE OBLIGATION – the obligation not to do (which naturally inludes not to give) D. From the viewpoint of persons obliged - “sanction” - (a) UNILATERAL – where only one of the parties is bound (e. Plato owes Socrates P1,000. Plato must pay Socrates.) (b) BILATERAL – where both parties are bound (e. In a contract of sale, the buyer is obliged to deliver)
- may be: (b) reciprocal (b) non-reciprocal – where performance by one is non-dependent upon performance by the other
ELEMENTS OF OBLIGATION a) ACTIVE SUBJECT – (Creditor / Obligee) the person who is demanding the performance of the obligation; b) PASSIVE SUBJECT – (Debtor / Obligor) the one bound to perform the prestation or to fulfill the obligation or duty; c) PRESTATION – (to give, to do, or not to do) object; subject matter of the obligation; conduct required to be observed by the debtor; d) EFFICIENT CAUSE – the JURIDICAL TIE which binds the parties to the obligation; source of the obligation.
PRESTATION (Object) 1. TO GIVE – delivery of a thing to the creditor (in sale, deposit, pledge, donation); 2. TO DO – covers all kinds of works or services (contract for professional services); 3. NOT TO DO – consists of refraining from doing some acts (in following rules and regulations).
Requisites of Prestation / Object: 1) licit (if illicit, it is void) 2) possible (if impossible, it is void)
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- determinate or determinable (or else, void)
- pecuniary value
- INJURY – wrongful act or omission which causes loss or harm to another
- DAMAGE – result of injury (loss, hurt, harm)
- Obligation arises from – (1) law; (2) contracts; (3) quasi-contracts; (4) acts or omissions punished by law; (5) quasi-delicts.
(1) LAW (Obligation ex lege) – imposed by law itself; must be expressly or impliedly set forth and cannot be presumed
- [See Article 1158]
(2) CONTRACTS (Obligation ex contractu) – arise from stipulations of the parties: meeting of the minds / formal agreement - must be complied with in good faith because it is the “law” between parties; neither party may unilaterally evade his obligation in the contract, unless: a) contract authorizes it b) other party assents
Note: Parties may freely enter into any stipulations, provided they are not contrary to law, morals, good customs, public order or public policy
- [See Article 1159]
(3) QUASI-CONTRACTS (Obligation ex quasi-contractu) – arise from lawful, voluntary and unilateral acts and which are enforceable to the end that no one shall be unjustly enriched or benefited at the expense of another
- 2 kinds:
a. Negotiorum gestio - unauthorized management; This takes place when a person voluntarily takes charge of
another’s abandoned business or property without the owner’s authority
b. Solutio indebiti - undue payment; This takes place when something is received when there is no right to demand it,
and it was unduly delivered thru mistake
- [See Article 1160]
(4) DELICTS (Obligation ex maleficio or ex delicto) – arise from civil liability which is the consequence of a criminal offense - Governing rules: 1. Pertinent provisions of the RPC and other penal laws subject to Art 2177 Civil Code [Art 100, RPC – Every person criminally liable for a felony is also civilly liable] 2. Chapter 2, Preliminary title, on Human Relations ( Civil Code ) 3. Title 18 of Book IV of the Civil Code – on damages
- [See Article 1161]
(5) QUASI-DELICTS / TORTS (Obligation ex quasi-delicto or ex quasi-maleficio) – arise from damage caused to another through an act or omission, there being no fault or negligence, but no contractual relation exists between the parties
- [See Article 1162]
- Obligations from law are not presumed. Only those (1) expressly determined in this code or (2) in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this code.
- Unless such obligations are EXPRESSLY provided by law, they are not demandable and enforceable, and cannot be presumed to exist.
- The Civil Code can be applicable suppletorily to obligations arising from laws other than the Civil Code itself.
- Special laws – refer to all other laws not contained in the Civil Code.
- Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
CONTRACT – meeting of minds between two persons whereby one binds himself, with respect to the other, to give, to do
REVIEWER
- Obligations derived from quasi-delicts shall be governed by the provisions of chapter 2, title 17 of this book, and by special laws.
QUASI-DELICT (culpa aquiliana) – an act or omission by a person which causes damage to another giving rise to an obligation to pay for the damage done, there being fault or negligence but there is no pre-existing contractual relation between parties. (See Article 2176)
REQUISITES: a. omission b. negligence
c. damage caused to the plaintiff
d. direct relation of omission, being the cause, and the damage, being the effect e. no pre-existing contractual relations between parties
Fault or Negligence – consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person, time, and of the place.
BASIS DELICTS QUASI-DELICTS
- INTENT Criminal / malicious Negligence
- INTEREST Affects PUBLIC interest Affects PRIVATE interest
- LIABILITY Criminal and civil liabilities Civil liability
- PURPOSE Purpose – punishment Indemnification 5 Cannot be compromised Can be compromised
- GUILT Proved beyond reasonable doubt Preponderance of evidence
CHAPTER 2
NATURE AND EFFECT OF OBLIGATIONS
- Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care.
- Speaks of an obligation to care of a DETERMINATE thing (that is one which is specific; a thing identified by its individuality) which an obligor is supposed to deliver to another.
- Reason: the obligor cannot take care of the whole class/genus
DUTIES OF DEBTOR:
- Preserve or take care of the things due.
DILIGENCE OF A GOOD FATHER – a good father does not abandon his family, he is always ready to provide and
protect his family; ordinary care which an average and reasonably prudent man would do.
- Defined in the negative in Article 1173
ANOTHER STANDARD OF CARE – extraordinary diligence provided in the stipulation of parties.
FACTORS TO BE CONSIDERED – diligence depends on the nature of obligation and corresponds with the
circumstances of the person, time, and place.
** Debtor is not liable if his failure to deliver the thing is due to fortuitous events or force majeure... without negligence or fault in his part.
- Deliver the fruits of a thing
- Deliver the accessions/accessories
- Deliver the thing itself
- Answer for damages in case of non-fulfillment or breach
- The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he
REVIEWER
shall acquire no real right over it until the same has been delivered to him.
REAL RIGHT (jus in re) – right pertaining to person over a specific thing, without a passive subject individually determined against whom such right may be personally enforced.
− a right enforceable against the whole world
PERSONAL RIGHT (jus ad rem) – a right pertaining to a person to demand from another, as a definite passive subject, the fulfillment of a prestation to give, to do or not to do.
− a right enforceable only against a definite person or group of persons.
- Before the delivery, the creditor, in obligations to give, has merely a personal right against the debtor – a right to ask for delivery of the thing and the fruits thereof.
- Once the thing and the fruits are delivered, then he acquires a real right over them.
• Ownership is transferred by delivery which could be either actual or constructive. (Art. 1477)
• The remedy of the buyer when there is no delivery despite demand is to file a complaint for “SPECIFIC PERFORMANCE
AND DELIVERY” because he is not yet the owner of the property before the delivery.
� ACTUAL DELIVERY – actual delivery of a thing from the hand of the grantor to the hand of the grantee (presonally), or manifested by certain possessory acts executed by the grantee with the consent of the grantor (realty).
FRUITS: 1. NATURAL – spontaneous products of the soil, the young and other products of animals; 2. INDUSTRIAL – produced by lands of any cultivation or labor; 3. CIVIL – those derived by virtue of juridical relation.
** SEE Article 1164 (retroactivity of the effects of conditional obligation to give once the condition has been fulfilled)
- When what is to be delivered is a determinate thing, the creditor ... may compel the debtor to make delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays or has promised to deliver the same ting to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery.
*This provision applies to an obligation to give.
DETERMINATE THING
something which is susceptible of particular designation or specification;
obligation is extinguished if the thing is lost due to fortuitous events.
Article 1460: a thing is determinate when it is particularly designated and physically segregated from all others of the
same class. INDETERMINATE THING
something that has reference only to a class or genus;
obligation to deliver is not so extinguished by fortuitous events.
REMEDIES FOR FAILURE OF DELIVERY (determinate thing) 1. Complaint for specific performance – an action to compel the fulfillment of the obligation. 2. Complaint for rescission of the obligation – action to rescind 3. Complaint for damages – action to claim for compensation of damages suffered
- As a general rule, “no person shall be responsible for those events which could not be foreseen, or which, though
foreseen, are inevitable, except:
- in cases expressly specified by the law
- when it is stipulated by the parties
- when the nature of the obligation requires assumption of risk
- An indeterminate thing cannot be object of destruction by a fortuitous event because genus never perishes.
REVIEWER
- debtor – liable for damages and interests
- debtor – liable for the loss of a thing due to a fortuitous event
KINDS: 1) mora solvendi ex re – default in real obligations (to give) 2) mora solvendi ex persona – default in personal obligations (to do)
b) MORA ACCIPIENDI – delay on the part of the creditor to accept the performance of the obligation;
Effects:
- creditor – liable for damages
- creditor – bears the risk of loss of the thing
- debtor – not liable for interest from the time of creditor’s delay
- debtor – release himself from the obligation
c) COMPENSATIO MORAE – delay of the obligors in reciprocal obligation.
Effect: the default of one compensates the default of the other; their respective liabilities shall be offset equitable.
Default / Delay in negative obligation is not possible. (In negative obligation, only fulfillment and violation are possible)
- Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
FRAUD (dolo) – deliberate intentional evasion of the faithful fulfillment of an obligation; NEGLIGENCE (culpa or fault) – voluntary act or omission of diligence, there being no malice, which prevents the normal fulfillment of an obligation; DELAY (mora) – default or tardiness in the performance of an obligation after it has been due and demandable; CONTRAVENTION OF TERMS OF OBLIGATION (violation)– violation of terms and conditions stipulated in the obligation; this must not be due to a fortuitous event.
- Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.
- To allow such waiver will necessarily render the obligatory force of contracts illusory.
- The law does not prohibit waiver of an action for damages based on fraud already committed.
- Any deliberate deviation from the normal way of fulfilling the obligation may be a proper basis for claim for damages against the guilty party.
INCIDENTAL FRAUD (applicable provisions are Arts. 1170 & 1344) – committed in the performance of an obligation already existing because of a contract; incidental fraud obliges the person employing it to pay damages. CAUSAL FRAUD – (Art. 1338) employed in the execution of contract in order to secure consent; remedy is annulment because of vitiation of consent.
- Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to circumstances.
Court’s discretion because: (a) negligence depends upon the circumstances of a case – good or bad faith of the obligor may be considered as well as the conduct or misconduct of the obligee; (b) it is not as serious as fraud.
Negligence – lack of foresight or knowledge Imprudence – lack of skill or precaution
TEST OF NEGLIGENCE Did the defendant, in doing the alleged negligent act, use the reasonable care and caution which an ordinary prudent man would have used in the same situation?
REVIEWER
TWO TYPES OF NEGLIGENCE:
Basis 1. Culpa Aquiliana (Quasi-delict)
- Culpa Contractual (Breach of contract) DEFINITION Negligence between parties not so related by pre-existing contract
Negligence in the performance of contractual obligation NATURE OF NEGLIGENCE Direct, substantive and independent Incidental to the performance of the obligation. GOOD FATHER OF THE FAMILY DEFENSE
Complete and proper defense (parents, guardian, employers)
Not complete and proper defense in the selection of employees. PRESUMPTION OF NEGLIGENCE
No presumption – injured party must prove negligence of the defendant.
There is presumption – defendant must prove that there was no negligence in the carrying out of the terms of the contract.
- The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of he time and of the place... If the law or contract does not state the diligence which is to be observed in the performance, that which is expected if a good father of a family shall be required. - This provision provides for a negative definition of “proper diligence of a good father of a family”
FRAUD distinguished from NEGLIGENCE FRAUD NEGLIGENCE There is deliberate intention to cause damage. There is no deliberate intention to cause damage. Liability cannot be mitigated. Liability may be mitigated. Waiver for future fraud is void. Waiver for future negligence may be allowed in certain cases:
DILIGENCE – the attention and care required of a person in a given situation and is opposite of negligence.
NEGLIGENCE – consists in the omission of that diligence which is required by the nature of the particular obligation and corresponds with the circumstances of the persons, of the time, and of the place.
KINDS of DILIGENCE: 1. DILIGENCE OF A GOOD FATHER – a good father does not abandon his family, he is always ready to provide and protect his family; ordinary care which an average and reasonably prudent man would do. 2. Diligence required by the law governing the particular obligation 3. Diligence stipulated by the parties
- Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.
FORTUITOUS EVENT – an occurrence or happening which could not be foreseen or even if foreseen, is inevitable; absolutely independent of human intervention; act of God.
FORCE MAJEURE - an event caused by the legitimate or illegitimate acts of persons other than the obligor; there is human intervention.
REQUISITES OF FORTUITOUS EVENT: [IU-IF]
1. Independent of the human will (or at least of the obligor’s)
2. Unforeseen or unavoidable
3. Of such character as to render it impossible for the obligor to comply with his obligation in a normal manner
4. Obligor – free from any participation/aggravation of the injury to the obligee (no negligence or imprudence)
EXEPTIONS:
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immediately demandable by the creditors and the debtor cannot be excused from not complying with his prestation.
CONDITIONAL OBLIGATION – an obligation which depends upon a future or uncertain event, or upon a past event unknown to the contracting parties.
- an obligation subject to a condition.
a) Suspensive Obligation – its fulfillment gives rise to an obligation; the demandability of the obligation or the
effectivity of the contract can take place only after the condition has been fulfilled.
b) Resolutory Obligation – its happening extinguishes the obligation which is already existing;
- When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197.
PERIOD – a future and certain event upon the arrival of which, the obligation subject to it either arises or is extinguished.
INDICATIONS OF A TERM OR PERIOD: When the debtor binds himself to pay –
- when his means permit him to do so
- little by little
- as soon as possible
- from time to time
- as soon as I have the money
- in partial payment
- when in the position to pay
- 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.
Suspensive Condition – the acquisition of rights by the creditor depends upon the happening of the event which constitutes the condition; if such condition does not take place, it would be as of the conditional obligation had never existed. (e. promise to give a car after graduating from law school as cum laude)
Resolutory Condition – the rights and obligations already existing are under threat of extinction upon the happening or fulfillment of such condition. (e. donation by reason of marriage – the celebration of marriage is a resolutory condition; if the marriage did not push through, the donation may be revoked)
- 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.
- Applies only to suspensive conditions.
3 KINDS OF CONDITIONS UNDER THIS ARTICLE:
1. POTESTATIVE – a suspensive condition which depends upon the will of one of the contracting parties = if at the
sole will of the debtor, it is void; if at the creditor’s, still valid. this is to prevent the establishment of illusory obligations.
2. CASUAL – the condition depends upon chance or the will of a third person;(e. cellphone warranty)
MIXED – the condition depends partly upon the will of the parties and partly upon chance or the will of a third person; (example ni Atty. De Chavez: passing the bar)
Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an impossible thing shall be considered as not having been agreed upon.
POSSIBLE CONDITION – if it is capable of realization or actualization according to nature, law, public policy or good customs.
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2 KINDS OF IMPOSSIBLE CONDITIONS:
- Physically Impossible – cannot exist or cannot be done in its nature;
- Legally Impossible – contrary to law, good customs, or public policy.
Only the affected obligation is void, if the obligation is divisible, and the part thereof not affected by the impossible condition is valid.
Only the condition is void if there is already a pre-existing obligation and it does not depend upon the fulfillment of the condition which is impossible.
- The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place.
Positive condition – refers to the fulfillment of an event or performance of an act
Negative condition – refers to the non-fulfillment or non-performance of an act.
POSITIVE SUSPENSIVE CONDITION The obligation is extinguished: 1. As soon as the TIME EXPIRES without the event taking place; 2. As soon as it has become certain that the EVENT WILL NOT TAKE PLACE although the time specified has not yet expired.
- 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 no 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.
** This is a condition of non-happening of a future event.
The obligation shall become effective and binding: a) From the moment the time indicated has elapsed without the event taking place; b) From the moment it has become evident that the event cannot occur, although the time indicated has not yet elapsed.
1184 -vs- 1185
1184 (POSITIVE SUSPENSIVE)
1185
(NEGATIVE SUSPENSIVE)
Jose obliges himself to give the pregnant woman Maria P if she would give birth on or before December 30.
Jose obliges himself to give the pregnant woman Maria P5000 if she would NOT give birth on December 30. a. Jose is LIABLE if Maria gives birth on or before December 30.
a. Jose is NOT LIABLE if Maria gives birth on December 30.
b. Jose is NOT LIABLE if Maria gives birth after December 30. b. Jose is LIABLE if Maria DID NOT give birth on December 30 – if Maria gives birth BEFORE or AFTER December 30. c. If Maria would have a miscarriage before December 30, the obligation is EXTINGUISHED.
c. If Maria would have a miscarriage before December 30, the obligation is deemed FULFILLED.
- The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
− This provision speaks of the DOCTRINE OF CONSTRUCTIVE FULFILLMENT
− Compare with Art. 1203
- REQUISITES:
- The condition is SUSPENSIVE;
- The obligor ACTUALLY PREVENTS the fulfillment of the condition;
- He acts VOLUNTARILY.
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In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return. As for the obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation.
- Refers to the fulfillment of a resolutory condition.
- When the resolutory condition happened, the obligation is considered as if it did not exist.
- The parties are bound to return or restore whatever they have received from each other – “reciprocal restitution”
- Donation by reason of marriage – if the marriage does not happen, such donation should be returned to the donor.
- Loss, deterioration and improvement – governed by 1189.
- In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with.
- The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
- This remedy should be termed as “resolution,” not rescission (Paras).
- This provision is not applicable to contracts of partnership (governed by Arts. 1786 & 1788), and sales of real and personal properties by installments (governed by Maceda and Recto laws)
RECIPROCAL – each is a debtor and creditor of the other
RESCISSION – resolution or cancellation of the contract - Applies only to reciprocal obligations where two parties are mutually debtor and creditor of each other in the same transaction. The cause must be identical ad the obligations must arise simultaneously. - The party who can demand rescission should be the party who is ready, willing, and able to comply with his own obligations while the other is not capable to perform his own.
REMEDIES: 1. Specific performance or fulfillment of obligation with damages; 2. Rescission of contract with damages.
Effect of rescission: the parties must surrender whatever they have received from the other, and the obligation to pay is extinguished.
If there is an express stipulation of automatic rescission between parties – such resolution shall take place only after the creditor has notified the debtor of his choice of rescission subject to judicial scrutiny.
- In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.
FIRST INFRACTOR KNOWN The liability of the first infractor should be equitably reduced. – equitably offset each other’s damages.
FIRST INFRACTOR CANNOT BE DETERMINED The court shall declare the extinguishment of the obligation and each shall bear his own damages.
Section 2 – Obligations with a Period
- Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.
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A day certain is understood to be that which must necessarily come, although it may not be known when. 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.
PERIOD / TERM – consists in a space or length of time upon the arrival of which, the demandability or the extinguishment of an obligation is determined; it may be definite (exact date or time is known) or indefinite (arrival of date is unknown but sure to come).
- Future + Certain event
GENERAL CLASSIFICATIONS: a) EX DIE / SUSPENSIVE PERIOD – from a day certain give rise to the obligation; suspensive effect. b) IN DIEM / RESOLUTORY PERIOD – arrival of a term certain terminated the obligation; resolutory effect.
Term – length of time sure to come Condition – fact or event uncertain to come
Basis Period/Term Condition
- TIME Always refers to FUTURE Can refer to past events unknown to the parties
- FULFILLMENT Sure to happen at an exact date or indefinite time but sure to come.
May or may not happen.
- INFLUENCE Merely fixes the time for the demandability or performance of obligation.
May cause the arising or cessation of the obligation.
In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Article 1189 shall be observed.
Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests.
If he was not aware of the period or he believes that the obligation has become due and demandable – he can recover what he paid or delivered including fruits and interests; If he was aware and he paid voluntarily – he cannot recover the delivery made; it is deemed a waiver of the benefit of the term and the obligation is considered already matured.
- The presumption is that the debtor knew that the debt was not yet due. He has the burden of proving that he was unaware of the period.
- 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.
PRESUMPTION: Obligation with a period is for the benefit of both the creditor and debtor.
EXCEPTION: when it appears that the period is for the benefit of one or the other
The benefit of the term may be the subject of stipulation of the parties.
1. Term is for the benefit of the debtor alone – he cannot be compelled to pay prematurely, but he can if he
desires to do so.
- Example: A obliges himself to pay B within 5 years. A cannot be compelled to pay prematurely, but he can pay anytime within 5 years (A will benefit because he can pay anytime he wants as long as it is within 5 years; B will not benefit from the interests if A decides to pay early).
2. Term is for the benefit of the creditor – He may demand fulfillment even before the arrival of the term but the
debtor cannot require him to accept payment before the expiration of the stipulated period.
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- A person alternatively bound by different prestations shall completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking.
OBLIGATIONS WITH PLURAL PRESTATIONS: 1. CONJUNCTIVE/COMPOUND OBLIGATION - an obligation where the debtor has to perform ALL the several prestations in the contract to extinguish the obligation. 2. ALTERNATIVE OBLIGATION – an obligation where the debtor is required to fulfill ONLY ONE of the several prestations to extinguish the obligation. 3. FACULTATIVE OBLIGATION – an obligation where the debtor is bound to perform ONLY ONE prestation, with a reserved right to choose another prestation as SUBSTITUTE for the principal.
- The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation.
Implied grant to the creditor is not allowed. If it does not appear on the agreement as to whom among them has the right to choose, it is the debtor who can choose.
- The choice shall produce no effect except from the time it has been communicated.
The choice shall not produce any legal effect until it has been duly communicated to the other party. It can be done in writing, verbally, impliedly, or any unequivocal means. Once the choice has been communicated to the other party:
- The obligation is now LIMITED only to the PRESTATION CHOSEN, with all the natural consequences flowing therefrom;
- The choice is IRREVOCABLE.
- The performance of prestation without announcing the choice to the creditor is NOT BINDING.
- The consent of the other party is NOT REQUIRED in making the choice – that will in effect frustrate the clear intention of the law and the nature of the alternative obligation.
- If there is delay in the making of choice – punish the one who is supposed to exercise the right of choice for the delay he caused – court may order the debtor to make a choice, or creditor to make the choice within certain period, or court makes the choice.
- The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable.
There being but one prestation available, this prestation becomes a simple obligation.
- If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages.
(1) If the debtor could not make a choice due to the creditor’s act of making the prestations impossible, debtor may RESCIND the contract with damages - rescission takes place at the initiative of the debtor. (2) If the debtor is being prevented to choose only a particular prestation, and there are others available, he is free to choose from them, after notifying the creditor of his decision.
- 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.
If the impossibility of all the objects of the alternative obligation is caused by the debtor, the creditor is entitled to
damages.
If such impossibility is caused by a fortuitous event, the obligation is extinguished and the debtor is released from
responsibility, unless the contrary is stipulated by the parties.
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The creditor cannot claim for damages if the debtor can still perform the remaining prestations.
The damages that may be recovered is based on the last thing which disappeared or the service which became
impossible. This last one is converted into a simple obligation.
- 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:
A. only one thing lost – fortuitous event – creditor chooses from the remainder – debtor delivers the choice to creditor;
B. only one remains – debtor delivers the same to the creditor;
C. only one thing lost – fault of the debtor
- creditor may choose any one of the remainders;
- creditor may choose the price or value of the one which was lost;
- may choose 1 or 2 plus damages D. all things lost – fault of the debtor – creditor may choose the price of ANYONE of the things, with damages if warranted.
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.
This article applies only when the right of choice has been expressly granted to the creditor.
- When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative. The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud.
If loss or deterioration happened before substitution is made, obligor is not liable; after substitution is communicated, he
is liable for loss (through delay, negligence or fraud)
Section 4 – Joint and Solidary Obligations
- The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
- In case of concurrence of two or more creditors or two or more debtors in one obligation, the presumption is that the obligation is joint, and not solidary.
INDIVIDUAL OBLIGATION – one debtor and one creditor
COLLECTIVE OBLIGATION – two or more debtors and two or more creditors
1. JOINT – entire obligation is to be paid or performed proportionately by the debtors;
2. SOLIDARY – each one of the debtors are obliged to pay the entire obligation, each one of the creditors has the
right to demand from any of the debtors, the fulfillment of the entire obligation; A. Passive Solidarity – solidarity on the part of the DEBTORS B. Active Solidarity – solidarity on the part of the CREDITORS.
SOLIDARITY SHOULD BE EXPRESSED – law, stipulation, nature of obligation.
When the obligation is ambiguous, it must be considered as joint obligation.
CONSEQUENCES OF SOLIDARITY:
1. Passive Solidarity – full payment made by anyone of the solidary debtors extinguishes the obligation. The one who paid
can claim reimbursement from his co-debtors as regards their corresponding shares in the obligation.
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The interruption of prescription caused by the demand made by one creditor upon one debtor will not benefit the co- creditors; Wittgenstein extended the period in which Tarski should have paid his debt to him. This does not mean that the same extension applies to Tarski's debt to Davidson.
The insolvency of one debtor will not increase the liability of his co-debtors, nor will it allow a creditor to demand anything from the co-creditors. If Husserl and Merleau-Ponty are debtors of Sartre for P1,000,000 and Husserl becomes insolvent, the liability of Merleau- Ponty will only be P500,000 representing his proportional share of ½ in the whole obligation.
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.
JOINT INDIVISIBLE OBLIGATION – an obligation where solidarity is not provided and the prestation or object is not susceptible of division; its fulfillment requires the concurrence of all debtors, while doing each one’s parts.
Batman and Robin jointly obliged themselves to deliver a brand new Toyota Fortuner worth P1,500,000 to Superman. The object, a vehicle, is indivisible. They must deliver the thing jointly. In case of breach, the obligation is converted into monetary obligation for indemnity for damages. Batman and Robin will be liable only for P 750,000 each.
The act of one is not binding (others must concur)
- The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility.
Solidarity is expressed in the stipulations of the party, law governing the obligation, or the nature of the obligation.
INDIVISIBLE OBLIGATION – an obligation where the prestation or object to be delivered cannot be performed by parts without altering its essence or substance.
Basis Indivisibility Solidarity
- Nature Refers to the prestation of the contract Refers to the tie existing between parties of the obligation (who is liable)
- Number of subjects / parties
Does not require plurality of parties Requires plurality of parties
- Effect of breach of obligation
Obligation is converted into monetary obligation for indemnity for damages – each debtor is liable only for his part in the indemnity.
The liability, even if converted into indemnity for damages, remains solidary.
- Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions.
The solidarity of the debtors is not affected even if different terms and conditions are made applicable to them.
Enforcement of the terms and conditions may be made at different times. The obligations which have matured can be
enforced while those still undue will have to be awaited. Enforcement can be made against any one of the solidary debtors although it can happen that a particular obligation chargeable to a particular debtor is not yet due. He will be answerable for all the prestations which fall due although chargeable to the other co-debtors.
Sad Face, Happy, and Fanny got a loan of P150 from Smiley. They signed a promissory note solidarily binding themselves to pay Smiley under the following terms: Sad Face will pay P50 with 3% on December 30, 2006 Happy will pay P50 with 4% on December 30, 2007 Fanny will pay P50 with 5% on December 30, 2008 On December 31, 2006, Smiley can collect his P50 with 3% from any one of the debtors, but not the whole P150 because it is not yet entirely due. The maturity of the other amounts should still be awaited. If maturity comes, Smiley can collect from any of the
REVIEWER
debtors, because they are expressly solidary in liabilities, and not affected by the secondary stipulations.
- 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.
Every solidary creditor is benefited by the useful acts of any one of them.
If a solidary creditor performs an act which is not fair to his co-creditors, the act may have valid legal effects or the
obligation of the debtor due to them may be extinguished, but the performing creditor shall be liable to his co-creditors.
Question: May solidary creditors perform an act that is beneficial to others?
- A solidary creditor cannot assign his rights without the consent of the others.
Assign – transfer of right
The assignee does not become a solidary creditor, and any payment made upon him by the debtor does not extinguish
the obligation. He is considered a STRANGER, and his acts are not binding to the solidarity.
DOCTRINE OF MUTUAL AGENCY - In solidary obligations, the act of one is act of the others.
Exceptions to the doctrine:
- Art. 1212 – a creditor may not perform an act prejudicial to other creditors
2. Art. 1213 – a creditor cannot transfer his right without consent
- The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him.
The debtor can pay any one of the solidary creditors. Such payment when accepted by any of the solidary creditors will
extinguish the obligation.
To avoid confusion on the payment of the obligation, the debtor is required to ay only to the demanding creditor and that
payment is sufficient to effect the extinguishment of the obligation.
In case two or more demands made by the other creditors, the first demand must be given priority.
- 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.
NOVATION – obligations are modified by: 1. Changing their object or principal conditions; 2. Substituting the person of the debtor; and 3. Subrogating (placing) a third person in the rights of the creditor. [Art. 1291]
COMPENSATION – takes place when two persons, in their own right, become creditors and debtors of each other
− the amount of one is covered by the amount of the other
Erap borrowed P100 from Fernando. Fernando borrowed P75 from Erap. Erap’s obligation to Fernando is now P25 only, because the original obligation was offset by Fernando’s supposed-to-be obligation to Erap.
CONFUSION – takes place when the characters of creditor and debtor are merged in the same person. Tito pays his debt to Vic with a check payable to “cash”. Vic paid his debt to Joey with the same check. Joey paid his debt to Tito, with the same check Tito issued to Vic. Tito becomes paid by his own check. He becomes the debtor and the creditor of himself at the same time.
REMISSION – the gratuitous abandonment by the creditor of his right; acceptance of the obligor is necessary.
Obli reviewer - Summary The Law on Obligations and Contracts
Course: Accountancy (BSA)
University: University of the East (Philippines)
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