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Ust Golden Notes 2011 Obligations and Contracts Libre

The document defines an obligation as a juridical necessity to give, do, or not do something that creates a relationship between a creditor who can demand performance and a debtor who is obligated to perform. It discusses the key elements of an obligation including the active subject (creditor), passive subject (debtor), object (prestation), and cause (juridical tie). Finally, it classifies obligations based on their sanction as civil, natural, or moral and based on required performance as positive (to give/do) or negative (not to do).

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309 views111 pages

Ust Golden Notes 2011 Obligations and Contracts Libre

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Gracious Condes

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OBLIGATIONS

OBLIGATIONS ACTIVE SUBJECT

I. DEFINITION Q: Who is an active subject?

Q: What is an obligation? A: One who is demanding the performance of the
obligation. It is he who in his favor the obligation
A: It is a juridical necessity to give, to do, or not is constituted, established or created. He is called
to do. (Art. 1156, NCC) the creditor (CR) or obligee.
It is a juridical relation whereby a person PASSIVE SUBJECT
(creditor) may demand from another (debtor) the
observance of a determinative conduct (giving, Q: Who is a passive subject?
doing, or not doing), and in case of breach, may
demand satisfaction from the assets of the latter. A: One bound to perform the prestation to give,
(Arias Ramos) to do, or not to do. He is called the debtor (DR)
or obligor. (Pineda, Obligations and Contracts, p.
Note: Art. 1156 refers only to civil obligations which
2, 2000 ed)
are enforceable in court when breached. It does not
cover natural obligations (Arts. 1423‐1430, NCC)
Note: When there is a right there is a corresponding
because these are obligations that cannot be
obligation. Right is the active aspect while obligation
enforced in court being based merely on equity and
is the passive aspect. Thus, it is said that the
natural law and not on positive law. (Pineda,
concepts of credit and debt are two distinct aspects
Obligations and Contracts, 2000 ed, p. 3)
of unitary concept of obligation. (Pineda, Obligations
and Contracts, p. 2, 2000 ed)
II. ELEMENTS OF AN OBLIGATION
OBJECT
Q: What are the elements of an
Q: What are the requisites of a valid
obligation? A: JAPOC
1. Juridical or legal tie – vinculum juris;
object? A: The object must be:
2. Active subject – obligee or creditor;
1. licit or lawful;
3. Passive subject – obligor or debtor;
2. possible, physically & judicially;
4. Object – prestation; and
3. determinate or determinable; and
5. Cause – efficient cause is the same with
4. pecuniary value or possible equivalent
vinculum juris.
in money.
VINCULUM JURIS Note: Absence of either of the first three (licit,
possible and/or determinate) makes the object void.
Q: What is vinculum juris?
Form is not generally considered essential, though
A: It is the efficient cause or juridical tie by virtue sometimes it is added as the 5threquisite.There is no
of which the debtor has become bound to particular form to make obligations binding, except
perform the prestation. in certain rare cases. (Tolentino, Civil Code of the
Philippines, Vol. IV, 2002 ed. p. 57)
Q: How is vinculum juris established?
III. DIFFERENT KINDS OF PRESTATION
A: By:
1. law (i.e. – relation of husband and wife Q: What is prestation?
for support)
2. bilateral acts (i.e. – contracts) A: It is a conduct that may consist of giving,
3. unilateral acts (i.e. – crimes and quasi‐ doing, or not doing something.
delicts)(Tolentino, Civil Code Vol. IV, p.
59, 1999 ed) Note: It is the conduct that must be observed by the
debtor/obligor.

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II S

VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA U NIVERSITY OF S ANTO T OMA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

なばぬ

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: What are the different kinds of prestation?

Distinguish.

なばね
CIVIL LAW TEAM:

A:
OBLIGATION OBLIGATION TO OBLIGATION
TO GIVE DO NOT TO DO
Consists in the Covers all kinds
delivery of a of works or
Consists in
movable or services
refraining from
immovable whether
doing some acts
thing to the physical or
creditor mental
i.e. – Easement
prohibiting
building
proprietor or
i.e. – Contract possessor from
i.e. – Sale,
for professional committing
deposit,
services like nuisance(Art.
pledge,
painting, 682, NCC),
donation,
modeling, restraining order
antichresis
singing, etc. or injunction
(Pineda,
Obligations and
Contracts, p. 3,
2000 ed)

Q: What are the requisites of a valid prestation?

A:
1. Possible, physically and juridically;
2. Determinate, or at least determinable
according to pre‐established elements
or criteria; and
3. Has a possible equivalent in money
(Tolentino, Civil Code Vol. IV, p. 58,
1999 ed).

IV. CLASSIFICATION OF OBLIGATIONS

Q: What are the kinds of

obligation? A: From the viewpoint

of:
1. Sanction
a. Civil – gives a right of action to
compel their performance
b. 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.
c. Moral– cannot be enforced by
action but are binding on the party
who makes it in conscience and
natural law.

VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

2. Performance b. Solidary – a debtor is answerable

a. Positive – to give; to do for the whole of the obligation
b. Negative – not to do without prejudice to his right to

3. Subject matter
a. Personal – to do; not to do
b. Real – to give

4. 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.
c. Limited generic– generic
objects confined to a
particular class (e.g. an
obligation to deliver one of
my horses) (Tolentino, Civil
Code of the Philippines, Vol.
IV, 2002 ed, p. 91)

5. Person obliged
a. Unilateral – only one
party is bound
b. Bilateral – both parties are bound

6. Creation
a. Legal – imposed by law (Art.
1158, NCC)
b. Conventional – established
by the agreement of the
parties like contracts

7. Susceptibility of partial fulfillment

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

8. 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).

9. 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 ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

collect from his co‐debtors the substitution of the first one (Art.
latter’s shares in the obligation 1206, NCC)
(Art. 1207, NCC)
11. Imposition of penalty
10. Right to choose and substitution a. Simple – there is no penalty
a. Alternative – obligor may choose imposed for violation of the terms
to completely perform one out of thereof
the several prestations(Art. 1199, b. Obligation with penalty –
NCC) obligation which imposes a penalty
b. Facultative – only one prestation for violation (Art. 1226, NCC)
has been agreed upon, but the (Pineda, Obligations and Contracts,
obligor may render one in 2000 ed, p. 5‐7)

V. SOURCES OF OBLIGATIONS

Q: What are the sources of obligations? Distinguish.

A: LCQ‐DQ
Sources Obligations Perfection
Law ex lege From the time designated by the law creating or regulating them.
GR: From the time of the perfection of the contract (i.e. meeting
of the minds)

XPNs:
Contracts ex contractu
1. When the parties made stipulation on the right of the creditor
to the fruits of the thing
2. When the obligation is subject to a suspensive condition or
period; arises upon fulfillment of the condition or expiration of
the period.
Quasi‐
ex quasi‐contractu
contracts
ex maleficio or ex From the time designated by the law creating or regulating them.
Delicts
delicto
Quasi‐ ex quasi maleficio or ex
delict quasi‐ delicto

Note: The enumeration is exclusive.

A. OBLIGATION EX LEGE B. OBLIGATION EX CONTRACTU

Q: What are the characteristics of a legal Q: What are the requisites for a contract to give
obligation or an obligation ex lege? rise to obligations ex contractu?

A: A:
1. Does not need the consent of the 1. It must contain all the essential
obligor; requisites of a contract
2. Must be expressly set forth in the law 2. It must not be contrary to law, morals,
creating it and not merely presumed; good customs, public order, and public
and policy
3. In order that the law may be a source
of obligation, it should be the creator of Q: What is “compliance in good faith”?
the obligation itself.
A: It is performance in accordance with the
Q: What governs obligations arising from law? stipulation, clauses, terms and conditions of the
contract.
A: These obligations shall be regulated by the
provisions of the law which establishes them. The Note: The contract is the “law” between the parties.
Civil Code is applicable suppletorily.
S
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

なばの

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: May a party unilaterally evade his obligation

in the contract?

なばは
CIVIL LAW TEAM:

A:
GR:Neither party may unilaterally evade his
obligation in the contract.

XPNs:Unilateral evasion is allowed when the:

1. contract authorizes such evasion
2. other party assents thereto

Q: Is there a limitation on the right of the

parties to freely enter into stipulations?

A: Yes. Parties may freely enter into any

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

Q: What governs obligations arising from

contracts?

A:
GR:These obligations shall be governed
primarily by the stipulations, clauses, terms
and conditions of the parties’ agreements.

XPN: Contracts with prestations that are

unconscionable or unreasonable.

Note: In case of unconscionable penalty for

breach of contract (Art. 1229, NCC), or
liquidated damages (Art. 2226, NCC), the same
may be reduced by the court. (Pineda,
Obligations and Contracts, p.13, 2000 ed)

C. OBLIGATION EX QUASI ‐ CONTRACTU

Q: What is quasi‐contract?

A: 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.

Q: What is presumptive consent?

A: Since a quasi‐contract is a unilateral contract

created by the sole act or acts of the gestor,
there is no express consent given by the other
party. The consent needed in a contract is
provided by law through presumption. (Pineda,
Obligations and Contracts, p. 15, 2000 ed)

Q: What are the principal forms of quasi‐

contracts?

1. Negotiorium gestio gestio(Art. 2144, NCC).Furthermore, B is not

(inofficious manager) – arises liable to A for any fortuitous event because he
when a person voluntarily did not commit any of the instances provided
takes charge of the under Art. 2147 of the Civil Code:
management of the business 1. He did not undertake risky operation
or property of another which the owner was not accustomed to
without any power from the embark upon;
latter. 2. He has not preferred his own interest to
2. Solutio indebiti (unjust that of the owner;
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.

Note: The delivery must not be through

liberality or some other cause.

NEGOTIORUM GESTIO

Q: Upon the declaration of martial

rule in the Philippines, X, together
with his wife and children,
disappeared from his residence along
Ermita, Manila. Years passed without
Y hearing from X and his family. Y
continued taking care of X’s house,
even causing minor repairs to be done
at his house to preserve it. In 1976,
when business began to perk up in the
area, Z, approached Y and proposed
that they build stores at the ground
floor of the house and convert its
second floor into a pension house. Y
agreed to Z’s proposal and together
they spent for the construction of
stores at the ground floor and the
conversion of the second floor into a
pension house. While construction
was going on, fire occurred at a
nearby house. The houses at the
entire block, including X’s, were
burned. After the EDSA revolution in
February 1986, X and his family
returned from the United States
where they took refuge in 1972.

Upon learning of what happened to

his house, X sued Y for damages. Y
pleaded as a defense that he merely
took charge of his house under the
principle of negotiorum gestio. He was
not liable as the burning of the house
is a fortuitous event.

Is Y liable to X for damages under the

foregoing circumstance?

A: No. Y is not liable for damages,

because he is a gestor in negotiorum
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

3. He has not failed to return the property or officers. GSIS sought the restoration of the said
business after demand of the owner; and disallowed benefits but the court ruled that such
4. He has not assumed the management in restoration cannot be enforced against X’s
bad faith. (1993 Bar Question) retirement benefits as this is expressly
prohibited by law under R.A. 8291. Is X obliged
Q: In fear of reprisals from lawless elements to return the benefits improperly received by
besieging his barangay, X abandoned his him under the principle of solutio indebiti?
fishpond, fled to Manila and left for Europe.
Seeking that the fish in the fishpond were ready A: Yes. It cannot be denied that X was a recipient
for harvest, Y, who is in the business of of benefits that were properly disallowed by the
managing fishponds on a commission basis, took COA. These COA disallowances would otherwise
possession of the property, harvested the fish have been deducted from his salaries. The GSIS
and sold the entire harvest to Z. can no longer recover these amounts by any
administrative means due to the specific
Thereafter, Y borrowed money from W and used exemption of retirement benefits from COA
the money to buy new supplies of fish fry and to disallowances. X resultantly retained benefits to
prepare the fishpond for the next crop. which he was not legally entitled which, in turn,
gave rise to an obligation on his part to return
1. What is the juridical relation between the amounts under the principle of solutio
X and Y during X's absence? indebiti. (GSIS v. COA, G.R. No. 138381, Nov.
2. Upon the return of X to the barangay, 10, 2004;
what are the obligations of Y to X as GSIS v. Pineda, et. al., G.R. No. 141625, Nov. 10,
regards the contract with Z? 2004).
3. Upon X's return, what are the
obligations of X as regards Y's contract D. OBLIGATIONS EX DELICTO
with W?
4. What legal effects will result if X Q: What is the basis for civil liability arising from
expressly ratifies Y's management and delicts as according to the penal code?
what would be the obligations of X in
favor of Y? A: Art. 100 of the Revised Penal Code provides
that: “Every person criminally liable for a felony is
Explain all your answers. also civilly liable.”

A: Q: What is delict?
1. The juridical relation is that of the
quasi‐contract of "negotiorum gestio". A: It is an act or omission punished by law.
Y is the "gestor" or "officious”
manager" and X is the "owner" (Art. E. OBLIGATIONS EX QUASI – DELICTO
2144, NCC).
2. Y must render an account of his Q: What is quasi‐delict or tort?
operations and deliver to X the price he
received for the sale of the harvested A: It is an act or omission arising from fault or
fish. (Art. 2145, NCC). negligence which causes damage to another,
3. X must pay the loan obtained by Y from there being no pre‐existing contractual relations
W because X must answer for between the parties.
obligations contracted with third
persons in the interest of the owner Q: What are the elements of a quasi‐delict?
(Art. 2150, NCC).
4. Express ratification by X provides the A:
effects of an express agency and X is 1. Act or omission;
liable to pay the commissions habitually 2. Fault or negligence attributable to the
received by the gestor as manager (Art. person charged;
2149, NCC). (1992 Bar Question) 3. Damage or injury;
4. Direct relation of cause and effect
SOLUTION INDEBITI between the act arising from
fault/negligence and the damage or
X received his full retirement benefits including injury (proximate cause); and
those monetary benefits that were properly 5. No pre‐existing contractual relation
disallowed by COA to be granted to public between the parties.

AVICE CHAIRS
CADEMICS FOR: ALCADEMICS
CHAIR ESTER JAY :AK E. JFOY
AREN
LAN G. SIIABUGO & JOHN HENRY C. MENDOZA
LORES
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

U NIVERSITY OF S ANTO T
OMAS
なばば

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: What is the scope of civil liability? VI. NATURE AND EFFECTS OF OBLIGATIONS

A: RRI A. OBLIGATION TO GIVE

1. Restitution;
2. Reparation for damage caused; and Q: In an obligation to deliver a thing, what are
3. Indemnity for consequential damages. the obligations of the debtor?

F. NATURAL OBLIGATIONS A: It depends upon the kind of obligation.

Q: What are natural obligations?

SPECIFIC GENERIC
A: They are real obligations to which the law Deliver the thing which
Deliver the thing agreed
denies an action, but which the debtor may is neither of superior nor
upon (Art. 1165, NCC)
perform voluntarily. inferior quality
Take care of the thing Specific performance i.e.
Q: What are the instances of natural with the proper diligence delivery of another thing
of a good father of a within the same genus
obligations? A: family unless the law as the thing promised if
1. Performance after the civil obligation requires or parties such thing is damaged
stipulate another due to lack of care or a
has prescribed;
standard of care (Art. general breach is
2. Reimbursement of a third person for a
1163, NCC) committed
debt that has prescribed;
3. Restitution by minor after annulment of If the object is generic,
Deliver all accessions, but the source is
contract;
accessories and fruits of specified or delimited,
4. Delivery by minor of money or fungible
the thing (Art. 1166, the obligation is to
thing in fulfillment of obligation;
NCC) preserve the source
5. Performance after action to enforce
civil obligation has failed; Pay damages in case Pay damages in case of
of breach of obligation breach of obligation by
6. Payment by heir of debt exceeding
by reason of delay, reason of delay, fraud,
value of property inherited; and
fraud, negligence, negligence,
7. Payment of legacy after will has been contravention of the contravention of the
declared void. tenor thereof tenor thereof (Art.
1170)
Q: Distinguish natural from civil obligation.
Obligation is not
Fortuitous event
extinguished (genus
A: extinguishes the
nunquamperuit – genus
obligation
NATURAL OBLIGATION CIVIL OBLIGATION never perishes)
Based from law,
Based on equity and contracts, quasi‐
natural law contracts, delicts,
and
quasi‐delicts
Can be enforced in court
Cannot be enforced
because the obligee has
in court because the
a right of action
obligee has no right
(Pineda,Obligations and
of action to compel
Contracts, 2000 ed, p.
its performance
Q: May natural obligations be converted into
civil obligations?

A: Yes, by way of novation. The natural obligation

becomes a valid cause for a civil obligation after
it has been affirmed or ratified anew by the
debtor. (Pineda, Obligations and Contracts, 2000
ed, p. 634)

なばぱ
CIVIL LAW TEAM:

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: In failing to deliver a thing, what are the Q: What is the principle of “balancing of
remedies of the creditor? equities” as applied in actions for specific
performance?
A:
SPECIFIC OBLIGATION GENERIC OBLIGATION A: In decreeing specific performance, equity
requires not only that the contract be just and
Specific performance
equitable in its provisions, but that the
Specific performance (delivery of any thing
belonging to the consequences of specific performance, is likewise
same species) be just and equitable. The general rule is that this
equitable relief will not be granted if, under the
Rescission (action to Ask that the obligation
circumstances of the case, the result of the
rescind under Art. be complied with at
specific performance of the contract would be
1380, NCC) the debtor’s expense
harsh, inequitable, and oppressive or result in an
Resolution or specific
Resolution (action for unconscionable advantage to the plaintiff
performance, with
cancellation under Art. (Agcaoili v. GSIS, G.R. No. 30056, Aug. 30, 1988).
damages in either case
1191, NCC)
(Art. 1191, NCC)
B. OBLIGATION TO DO OR NOT TO DO
Damages, in both cases (Art. 1170, NCC)
Q: What are the types of personal obligations?
Note:May be exclusive or in addition to the
above‐ mentioned remedies(Pineda, Obligations
and Contracts, 2000 ed, p. 37) A:
1. positive‐ to do
2. negative‐ not to do
Note: In obligation to deliver a specific thing, the
creditor has the right to demand preservation of the
Q: What are the remedies in personal
thing, its accessions, accessories, and the fruits. The
obligations?
creditor is entitled to the fruits and interests from
the time the obligation to deliver the thing arise. A:
Q: What is the nature of the right of the creditor 1. positive personal obligations
with respect to the fruits? a. not purely personal act‐ to
have obligation executed
A: at debtor's expense plus
1. Before delivery – personal right damages
2. After delivery – real right b. purely personal act‐
damages only.
Note: The creditor has a right to the fruits of the
thing from the time the obligation to deliver it Note; same rule applies if obligation is done in
arises. However, he shall acquire no real right over it contravention of the terms of the obligation.
until the same has been delivered to him (Art. 1164,
NCC). 2. Negative personal obligation‐ to have
the prohibited thing undone plus
Q: Distinguish personal right from real right. damages. However, if thing cannot be
physically or legally undone, only
A: damages may be demanded.
PERSONAL REAL
Jus ad rem Jus in re Q: Is specific performance a remedy in personal
Enforceable only against obligations?
Enforceable against the
a definite person/group
whole world A: No. Otherwise this may amount to involuntary
of persons
servitude which is prohibited by the Constitution.
Right to demand from
Right over a specific
another, as a definite
thing, without a Q: When may a thing be ordered undone?
passive subject, the
definite passive subject A:
fulfillment of the
against whom the right 1. if made poorly
prestation to give, to do
may be personally 2. negative personal obligations
or not to do.
enforced.
Has a definite passive No definite passive
subject subject

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
S F a c u l t a d d e De r e c h o C i
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

なばひ

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

C. BREACHES OF OBLIGATIONS

なぱど
CIVIL LAW TEAM:
Q: What are the forms of breach of obligations?

A:
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

Q: What is the concept of a good father of the

family?

A: 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 foresee
it(Picart v. Smith, G.R. No. L‐12406, Mar. 15,
1918).

1. COMPLETE FAILURE TO PERFORM

Q: 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)

Q: What are the instances where the remedy

under Art. 1168 is not available?

A:
1. Where the effects of the act which is
forbidden are definite in character –
even if it is possible for the creditor to
ask that the act be undone at the
expense of the debtor, consequences
contrary to the object of the obligation
will have been produced which are
permanent in character.

2. Where it would be physically in personal obligations (to do)

or legally impossible to undo
what has been undone – 2. Mora accipiendi – default on the part of
because of: the creditor/obligee
a. the very nature of the act itself;
b. a provision of law; or
c. conflicting rights of third persons.

Note: In either case, the remedy is to

seek recovery for damages.

DEFAULT (MORA))

Q: When does delay or default arise?

A: 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)

Q: What are the requisites

of delay? A:
1. Obligation must be due, demandable
and liquidated;
2. Debtor fails to perform his
positive obligation on the
date agreed upon;
3. A judicial or extra‐judicial
demand made by the
creditor upon the debtor to
fulfill, perform or comply
with his obligation; and
4. Failure of the debtor to
comply with such demand.

Note: In reciprocal obligations, the

moment one party is ready to comply
with his obligation, delay by the other
begins. There is no need for demand
from either party.

2. DELAY

Q: What are the kinds of delay

or default? A:
1. Mora solvendi – default on
the part of the
debtor/obligor
a. Ex re – default in real
obligations (to give)
b. Ex personae – default ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

3. Compensatio morae – default on the MORA ACCIPIENDI

part of both the debtor and creditor in
reciprocal obligations Q: What are the requisites of mora accipiendi?

MORA SOLVENDI A:
1. Offer of performance by a capacitated
Q: What are the requisites of mora solvendi? debtor;
2. Offer must be to comply prestation as it
A: should be performed; and
1. Obligation pertains to the debtor; 3. Refusal of the creditor without just
2. Obligation is determinate, due and cause.
demandable, and liquidated;
3. Obligation has not been performed on Q: What are the effects of mora accipiendi?
its maturity date;
4. There is judicial or extrajudicial demand A:
by the creditor; 1. Responsibility of DR is limited to fraud
5. Failure of the debtor to comply with and gross negligence
such demand 2. DR is exempted from risk of loss of
thing; CR bears risk of loss
Q: Does mora solvendi apply in natural 3. Expenses by DR for preservation of
obligations? thing after delay is chargeable to CR
4. If the obligation bears interest, DR does
A: No (Art. 1423, NCC), because performance is not have to pay from time of delay
optional or voluntary on the debtor’s part. 5. CR liable for damages
6. DR may relieve himself of obligation by
Q: Does mora solvendi apply in negative consigning the thing
obligations?
Q: What are the rules on default?
A: No because one can never be late in not giving
or doing something. A:
1. Unilateral obligations
Q: What are the effects of mora solvendi? GR: Default or delay begins from
extrajudicial or judicial demand – mere
A: expiration of the period fixed is not
1. Debtor may be liable for damages or enough in order that DR may incur
interests; and delay.
2. When it has for its object a determinate
thing, debtor may bear the risk of loss XPNs:
of the thing even if the loss is due to a. The obligation or the law expressly
fortuitous event (Art. 1165, NCC). so dictates;
b. Time is of the essence;
Q: May the debtor’s liability be mitigated even if c. Demand would be useless, as DR
he is guilty of delay? has rendered it beyond his power
to perform; or
A: Yes. If the debtor can prove that loss would d. DR has acknowledged that he is in
nevertheless transpire even if he had not been in default.
default, the court may equitably mitigate his
liability. (Art. 2215 (4), NCC; Pineda, Obligations 2. Reciprocal obligations
and Contracts, 2000 ed., p. 47) GR: Fulfillment by both parties should
be simultaneous.

XPN: When different dates for the

performance of obligation is fixed by
the parties.

なぱ
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OM
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C.
MENDOZA AS
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

Q: What are reciprocal obligations? WAIVER OF FUTURE FRAUD

A: These are obligations created and established Q: May an action arising from fraud be waived?
at the same time, out of the same cause and
which results in the mutual relationship between A: With respect to fraud that has already been
the parties. committed, the law does not prohibit
renunciation of the action for damages based on
Q: In reciprocal obligations, when does a the same. However, the law does prohibit any
party incur in delay? waiver of an action for future fraud since the
same is contrary to law and public policy.
A: In reciprocal obligations one party incurs in
delay from the moment the other party fulfills his Note: Waiver of past fraud is valid since such can be
obligation, while he himself does not comply or is deemed an act of generosity. What is renounced is
not ready to comply in a proper manner with the effect of fraud, particularly the right to
what is incumbent upon him. indemnity.

Q: In reciprocal obligations, when is demand Q: What are the kinds of fraud? Distinguish.
necessary in order for a party to incur in delay?
A:
A: Only when the respective obligations are to be FRAUD DURING THE FRAUD DURING THE
performed on separate dates. PERFECTION OF THE PERFORMANCE OF
CONTRACT OR THE OBLIGATION OR
Q: What is the effect of non‐compliance of both CAUSAL FRAUD INCIDENTAL FRAUD
parties in reciprocal obligations? (ART. 1338) (ART. 1344)
When Employed
A: If neither party complies with his prestation, During the performance
Before or during the
default of one compensates for the default of the of a
perfection of a contract
other. pre‐existing obligation
Purpose of Execution
To secure the consent of To evade the normal
Q: What may cause the cessation of the effects
another to enter into the fulfillment of the
of mora?
contract obligation
Resultant Effect
A:
1. Renunciation (express/implied); or Vitiation of consent Breach of an obligation
2. Prescription.
Status of the Contract
3. FRAUD Voidable Valid
Right or Remedy of Aggrieved Party
Q: What is fraud? Right of innocent Right of innocent
party to annul the party/creditor to claim
A: It is an intentional evasion of the faithful contract with damages for damages
performance of the obligation (8 Manresa 72).
Q: What are the remedies of the defrauded
Q: What type of fraud must be present in order party?
that the obligor may be held liable for damages?
A:
A: The fraud must be incidental fraud, or that 1. Specific performance (Art. 1233, NCC)
which is present during the performance of the 2. Resolution of the contract (Art. 1191,
obligation, and not causal fraud, or fraud NCC)
employed in the execution of a contract, which 3. Damages, in either case
vitiates consent.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

なぱに
CIVIL LAW TEAM:

4. NEGLIGENCE relation contractual relation

The source of
Q: Distinguish fraud from negligence. obligation of
The source of
defendant to pay
A: obligation is
damages is the
defendant’s negligence
Fraud Negligence breach or non‐
itself
fulfillment of the
There is no deliberate
There is deliberate contract
intention to cause
intention to cause Proof of the existence
damage or injury even
damage of the contract and of
if the act was done The negligence of the
its breach or non‐
voluntarily defendant must be
fulfillment is sufficient
Liability cannot be Liability may be proved
prima facie to warrant
mitigated mitigated recovery
GR: Waiver for future Proof of diligence in
Proof of diligence in the
negligence may be the selection &
selection & supervision
allowed in certain cases supervision of the
of the employees is a
Waiver for future fraud employees is not an
XPN:Nature of the defense
is void available defense
obligation or public
policy requires Q: What is the degree of diligence required?
extraordinary diligence
(e.g. common carrier) A:
1. That agreed upon
2. In the absence of such, that which is
Note: When negligence is so gross that it amounts required by the law
to wanton attitude on the part of the debtor, the 3. In the absence of the foregoing,
laws in case of fraud shall apply. diligence of a good father of a family –
that reasonable diligence which an
Where negligence shows bad faith (i.e., deliberately ordinary prudent person would have
committed) it is considered equivalent to fraud. Any done under the same circumstances.
waiver of an action for future negligence of this kind XPN:Common carriers requiring
is therefore void. (De Leon, Obligations and extraordinary diligence (Arts. 1998‐
Contract, 2003 ed., p. 57)
2002)
Q: What are the effects of contributory
negligence of the creditor? 5. CONTRAVENTION OF TENOR OF
OBLIGATION (VIOLATIO)
A:
GR:It reduces or mitigates the damages which Q: What is violation of the terms of the
he can recover. contract?

XPN:If the negligent act or omission of the A: It is the act of contravening the tenor or terms
creditor is the proximate cause of the event or conditions of the contract. It is also known as
which led to the damage or injury complained “violatio,”i.e. failure of common carrier to take its
of, he cannot recover. passenger to their destination.(Pineda,
Obligations and Contracts, 2000 ed, p. 50)
Q: Distinguish culpa contractual from culpa
aquiliana. Note: Under Art. 1170, NCC, the phrase “in any
manner contravene the tenor” of the obligation
includes any illicit act which impairs the strict and
A:
faithful fulfillment of the obligation, or every kind of
CULPA defective performance.
CULPA CONTRACTUAL
AQUILIANA(QUASI‐
(CONTRACT)
DELICT)
Negligence is merely
Negligence is
an incident in the
substantive and
performance of an
independent
obligation
There is always a pre‐ There may or may not be
existing contractual a pre‐existing
ACADEMICS CHAIR: LESTERAJDVISER : ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
AY ALAN E. FLORES II
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

U NIVERSITY S ANTO T
なぱぬ
OF
OMAS

6. FORTUITOUS EVENT

なぱね
CIVIL LAW TEAM:
Q: What is fortuitous event?

A: It is an occurrence or happening which could

not be foreseen, or even if foreseen, is inevitable
(Art. 1174, NCC).

Q: What are the requisites of a fortuitous

event? A:
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 manner;
impossibility must be absolute not
partial, otherwise not force majeure;
and
4. Debtor is free from any participation in
the aggravation of the injury to the
creditor.

Note: The fortuitous event must not only be the

proximate cause but it must also be the only and
sole cause. Contributory negligence of the debtor
renders him liable despite the fortuitous event.
(Pineda, Obligations and Contracts, 2000 ed, p. 62)

Q: If the happening of an event is difficult to

foresee, is it a fortuitous event?

A: No. The mere difficulty to foresee the

happening is not impossibility to foresee the
same. (Republic v. Luzon Stevedoring Corp., G.R.
No. L‐21749, Sept. 29, 1967)

Q: Distinguish Act of God from Act of

Man A:
ACT OF GOD ACT OF MAN
Fortuitous event Force majeure
Event caused by the
Event which is
legitimate or
absolutely independent
illegitimate acts of
of human intervention
persons other
than the obligor
i.e. – armed invasion,
i.e. –
robbery, war(Pineda,
earthquakes,
Obligations and
storms, floods,
Note: There is no essential difference between
fortuitous event and force majuere; they both refer
to causes independent of the will of the obligor.
(Tolentino, Civil Code of the Philippines, Vol. IV, 2002
ed, p. 127)

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: Is there liability for loss due to enforce its claim. MIAA filed a comment and
fortuitous event? attributed the delays to its being a government
agency and the Christmas rush. Is the delay of
A: payment a fortuitous event?
GR: There is no liability for loss in case
of fortuitous event. A: No. The act‐of‐God doctrine requires all
human agencies to be excluded from creating
XPNs: LaNS‐PCBaG the cause
1. Law
2. Nature of the obligation
requires the assumption of
risk
3. Stipulation
4. The debtor is guilty of dolo,
malice or bad faith, has
Promised the same thing to
two or more persons who
does not have the same
interest
5. The debtor Contributed to the loss (Tan
v. Inchausti & Co., G.R. No. L‐
6472, Mar. 7, 1912)
6. The possessor is in Bad faith (Art. 552)
7. The obligor is Guilty of fraud,
negligence or delay or if he
contravened the tenor of the
obligation (Juan Nakpil v.
United Construction Co., Inc.
v. CA, G.R. No. L‐ 47851, Apr.
15, 1988)

Q: Philcomsat contends that

expiration of the RP‐US Military Bases
Agreement and non‐ ratification of the
treaty is not a fortuitous event.
Decide.

A: No. The requisites for fortuitous

events are present in the instant case.
Philcomsat and Globe had no control
over the non‐renewal of the term of
the RP‐US Military Bases Agreement
when the same expired in 1991,
because the prerogative to ratify the
treaty belonged to the Senate. Neither
did the parties have control over the
subsequent withdrawal of the US
military forces and personnel from Cubi
Point. The events made impossible the
continuation of the agreement without
fault on the part of either party. Such
fortuitous events rendered Globe
exempt from payment of rentals for
the remainder of the term of the
agreement. (Philippine Communications
Satellite Corp.v.Globe Telecom, Inc.,G.R.
No. 147324, May 25, 2004)

Q: MIAA entered into a compromise

agreement with ALA. MIAA failed to
pay within the period stipulated. Thus,
ALA filed a motion Vfor
ICE Cexecution to : KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
HAIRS FOR ACADEMICS
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

of the mischief. Such doctrine cannot be invoked 2. On generic obligation – the obligation is
to protect a person who has failed to take steps not extinguished (genus nun quam
to forestall the possible adverse consequences of peruit – genus never perishes)
loss or injury. Since the delay in payment in the
present case was partly a result of human Q: AB Corp. entered into a contract with XY
participation ‐ whether from active intervention Corp. whereby the former agreed to construct
or neglect ‐ the whole occurrence was humanized the research and laboratory facilities of the
and was therefore outside the ambit of a caso latter. Under the terms of the contract, AB Corp.
fortuito. agreed to complete the facility in 18 months, at
the total contract price of P10 million. XY Corp.
First, processing claims against the government paid 50% of the total contract price, the balance
are certainly not only foreseeable and to be paid upon completion of the work. The
expectable, but also dependent upon the human work started immediately, but AB Corp. later
will. Second, the Christmas season is not a experienced work slippage because of labor
casofortuito, but a regularly occurring event. unrest in his company. AB Corp.’s employees
Third, the occurrence of the Christmas season claimed that they are not being paid on time;
did not at all render impossible the normal hence, the work slowdown. As of the 17th
fulfillment of the obligation. Fourth, MIAA cannot month, work was only 45% completed. AB Corp.
argue that it is free from any participation in the asked for extension of time, claiming that its
delay. It should have laid out on the compromise labor problems is a case of fortuitous event, but
table the problems that would be caused by a this was denied by XY Corp. When it became
deadline falling during the Christmas season. certain that the construction could not be
Furthermore, it should have explained to ALA the finished on time, XY Corp. sent written notice
process involved for the payment of AL’s claim. cancelling the contract and requiring AB Corp. to
(MIAA v. Ala Industries Corp., G.R. No. 147349, immediately vacate the premises.
Feb. 13, 2004)
Can the labor unrest be considered a fortuitous
Q: JAL cancelled all its flight to Manila due to event?
the Mt. Pinatubo eruption and NAIA's indefinite
closure. The passengers were then forced to pay A: Labor unrest is not a fortuitous event that will
for their accommodations and meal expenses excuse AB Corp. from complying with its
from their personal funds. Thus, they filed an obligation of constructing the research and
action for damages against JAL. Can JAL avoid laboratory facilities of XY Corp. The labor unrest,
liability by invoking that delays were caused by which may even be attributed in large part to AB
force majeure? Corp. itself, is not the direct cause of non‐
compliance by AB Corp. It is independent of its
A: Yes. The Mt. Pinatubo eruption prevented JAL obligation. It is similar to the failure of a DBP
from proceeding to Manila on schedule. Such borrower to pay her loan just because her
event can be considered as "force majeure" since plantation suffered losses due to the cadang‐
the delayed arrival in Manila was not imputable cadang disease. It does not excuse compliance
to JAL. with the obligation (DBP v. Vda. De Moll).

When JAL was prevented from resuming its flight Additional Answer: The labor unrest in this case
to Manila due to the effects of Mt. Pinatubo is not a fortuitous event. The requisites of
eruption, whatever losses or damages in the form fortuitous event are: (1) the event must be
of hotel and meal expenses the stranded independent of human will or at least of the
passengers incurred, cannot be charged to JAL. debtor’s will; (2) the event could not be foreseen,
Indeed, in the absence of bad faith or negligence, or if foreseen is inevitable; (3) the event must
JAL cannot be liable for the amenities of its have rendered impossible debtor’s compliance of
stranded passengers by reason of a fortuitous the obligation in a proper manner; and (4) the
event. (Japan Airlines v. CA, G.R. No. 118664, debtor must not be guilty of concurrent
Aug. 7, 1998). negligence. All the requisites are absent in this
case. AB Corp. could have anticipated the labor
Q: What are the effects of fortuitous event? unrest which was caused by delays in paying the
laborer’s wages. The company could have hired
A: additional laborers to make up for the work
1. On determinate obligation – the slowdown.
obligation is extinguished

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B.SDIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

なぱの

Can XY Corp. unilaterally and immediately

cancel the contract?

なぱは
CIVIL LAW TEAM:

A: No. XY Corp. cannot unilaterally and

immediately cancel the contract because there is
need for a judicial action of rescission. The
provisions of Art. 1191 of the Civil Code providing
for rescission in reciprocal obligations can only be
invoked judicially.

Alternative Answer: Yes, XY Corp. may

unilaterally cancel the obligation but this is
subject to the risk that the cancellation of the
reciprocal obligation being challenged in court
and if AB Corp. succeeds, then XY Corp. will be
declared in default and be liable for damages.

Must AB Corp. return the 50% down payment?

A: No, under the principle of quantum meruit, AB

Corp. had the right to retain payment
corresponding to his percentage of
accomplishment less the amount of damages
suffered by XY Corp. because of the delay or
default. (2008 Bar Question)

D. REMEDIES

Q: What are the remedies that may be availed

of in case of breach?

A:
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

1. SPECIFIC PERFORMANCE

Q: What are the remedies in connection with

specific performance?

A:
1. Exhaustion of the properties of the
debtor (not exempt from attachment
under the law)
2. Accion subrogatoria (subrogatory
action) – an indirect action brought in
the name of the debtor by the creditor
to enforce the former’s rights except:

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

a. personal rights of the debtor contract of sale. At the outset, Salvador’s right
b. rights inherent in the against Francisco and Ramos is only a personal
person of the debtor right to receive payment for the loan; it is not a
c. properties exempt from real right over the lot subject of the deed of sale.
execution (e.g.family
home) The sale was not made in fraud of creditors. Art.
1177 of the Civil Code provides for successive
3. 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.

Presupposes a judgment and

the issuance by the trial court
of a writ of execution for the
satisfaction of the judgment
and the failure of the Sheriff to
enforce and satisfy the
judgment of the court.

Note: Resort to the remedies must be in

the order stated above. (Art. 1177, NCC)

Q: Saturnino was the registered owner

of two parcels of land. The Adorables
were lessees of a portion of Lot No. 1.
Saturnino and his son, Francisco,
obtained a loan from Salvador, in
consideration of which they promised
to transfer the possession and
enjoyment of the fruits of Lot No. 2.
Saturnino sold to Francisco part of Lot
No. 1, which Francisco sold to Jose
Ramos. The portion of land being
rented by Salvador was included in the
portion sold to Ramos. The deeds of
sale evidencing the conveyances were
not registered in the office of the
register of deeds. When Saturnino and
Francisco failed to pay their loan, a
demand letter was sent to Francisco,
but he refused to pay.

When Salvador learned of the sale

made by Francisco to Ramos, Salvador
filed a complaint for the annulment or
rescission of the sale on the ground
that the sale was fraudulently
prepared and executed. Can Salvador
file an action for the rescission or
annulment of the sale?

A: No. As creditor, Salvador does not

have such material interest as to allow
VICE CHAIRS FOR
him to sue for rescission ofACADEMICS
the : KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

measures that must be taken by a creditor before Q: What is substitute performance?

he may bring an action for rescission of an
allegedly fraudulent sale. Without availing of the A: It is a remedy of the creditor in case of non‐
first and second remedies, Salvador simply performance by the debtor; where another party
undertook the third measure and filed an action performs the obligation or the same is performed
for annulment of the sale. This cannot be done. at the expense of the debtor.

An action for rescission is a subsidiary remedy; it Q: When may there be substitute

cannot be instituted except when the party performance? A:
suffering damage has no other legal means to 1. Positive personal obligation:
obtain reparation for the same. Considering a. If not purely personal‐
Article 1380 of the Civil Code, which states that substitute performance; the
contract validly agreed upon may be rescinded in obligation shall be executed
the cases established by law, Salvador, et al. have at debtor’s cost if he fails to
not shown that they have no other means of do it. (Art. 1167, NCC)
enforcing their credit. (Adorable, et. al. v.CA, G.R. b. Purely personal‐ no substitute
No. 119466, Nov. 25, 1999) performance may be
demanded because of the
Q: While the case was pending, Felix donated personal qualifications taken
his of parcels of land in favor of his children. into consideration. The only
Judgment was rendered against Felix. When the remedy is damages.
sheriff, accompanied by counsel of Philam, 2. Real obligation:
sought to enforce the alias writ of execution, a. Generic thing‐ substitute
they discovered that Felix no longer had any performance; delivery may be
property and that he had conveyed the subject made by a person other than
properties to his children. Thus, Philam filed an the debtor since the object is
accionpauliana for rescission of the donations. merely designated by its class
Felix countered that an action for rescission of or genus. The creditor may
the donation had already prescribed since the ask that the obligation be
time of prescription has to run from the date of complied with at the expense
registration. Has the action filed by Philam of the debtor. (1165,NCC)
prescribed? b. Specific thing‐ specific
performance may be
A: No. Philam only learned about the unlawful demanded, that is, the
conveyances made by Felix more than four years creditor may compel the
after the donations were effected, when its debtor to make the delivery.
counsel accompanied the sheriff to Butuan City
to attach the properties. There they found that 2. RESCISSION
he no longer had any properties in his name. It
was only then that Philam's action for rescission Q: What is rescission under Article 1191?
of the deeds of donation accrued because then it
could be said that Philam had exhausted all legal A: It refers to the cancellation of the contract or
means to satisfy the trial court's judgment in its reciprocal obligation in case of breach on the part
favor. Since Philam filed its complaint for accion of one, which breach is violative of the
pauliana against petitioners barely a month from reciprocity between the parties. This is properly
its discovery that Felix had no other property to called resolution.
satisfy the judgment award against him, its action
for rescission of the subject deeds clearly had not Note: The rescission under Art. 1380 is rescission
yet prescribed.(Khe Hong Cheng v. CA,G.R. No. based on lesion or fraud upon creditors.
144169, Mar. 28, 2000)
Q: To what kind of obligation is resolution
Note: The debtor is liable with all his property, available?
present and future, for the fulfillment of his
obligations, subject to the exemptions provided by A: Reciprocal obligation, since resolution is
law (De Leon, Obligations and Contracts, 2003 ed, implied therein.
p.71)

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

なぱば

Q: Who may demand resolution? Q: What is accion directa?

A: Injured party. A: It is the right of the lessor to go directly

against the sublessee for unpaid rents of the
Q: May the injured party demand resolution lessee.
after he elects specific performance?
A: Note: Under Art. 1652 of the Civil Code, the
GR: No. His right is not conjunctive, thus, he may sublessee is subsidiarily liable to the lessor for any
not choose both remedies of resolution and rent due from the lessee.
specific performance.
XPN: Yes, if specific performance should VII. KINDS OF CIVIL OBLIGATIONS
become impossible
Q: What are the kinds of civil obligations?
Q: When does liability for damages arise?
A:
A: Those liable under Art. 1170 shall pay 1. Pure obligations;
damages only if aside from the breach of 2. Conditional obligations;
contract, prejudice or damage was caused. (Berg 3. Obligations with a period or term; and
v. Teus, G.R. No. L‐6450, Oct 30, 1954) 4. Alternative or Facultative obligations

Q: What are the kinds of damages? Q: Differentiate a civil obligation from a natural
A: obligation.
1. Moral A:
2. Exemplary CIVIL OBLIGATION NATURAL OBLIGATION
3. Nominal As to binding force
4. Temperate Arises from equity and
5. Actual Arises from positive law
justice
6. Liquidated As to enforcement in court
Cannot be enforced in
Q: What are the requisites of accion court. It depends
Can be enforced by court
subrogatoria? exclusively upon the
action
good conscience of
A: the
1. The debtor’s assets must be insufficient
A. PURE OBLIGATIONS
to satisfy claims against him
2. The creditor must have pursued all
properties of the debtor subject to Q: What is pure obligation?
execution
3. The right of action must not be purely A: One whose effectivity or extinguishment does
personal not depend upon the fulfillment or non‐
4. The debtor whose right of action is fulfillment of a condition or upon the expiration
exercised must be indebted to the of a period and is demandable at once. (Art.
creditor. 1179, NCC)

Q: What are the requisites of accion pauliana? B. CONDITIONAL OBLIGATIONS

A: Q: What is conditional obligation?

1. Defendant must be indebted to plaintiff
2. The fraudulent act performed by the A: It is an obligation subject to a condition and
debtorsubsequent to the contractgives the effectivity of which is subordinated to the
advantage to another fulfillment or non‐fulfillment of a future and
3. The creditor is prejudiced by such act. uncertain event, or upon a past event unknown
4. The creditor must have pursued to the parties.
all properties of the debtor
subject to execution
5. The creditor has no other legal remedy.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

なぱぱ
CIVIL LAW TEAM:

Q: Ramon, the judicial administrator of the Q: Distinguish suspensive from resolutory

estate of Juan, found out that Rodriguez had conditions.
enlarged the area of the land which he
purchased from Juan before his death. Thus, A:
Ramon demanded Rodriguez to vacate the RESOLUTORY
portion allegedly encroached by him. Rodriguez SUSPENSIVE CONDITION
CONDITION
refused and contested there was indeed a Effect of Fulfillment
conditional sale with the balance of the Obligation arises or Obligation is
purchase price payable within five years from becomes effective extinguished
the execution of the deed of sale. Ramon then Effect of Non‐fulfillment
filed an action for recovery of possession of the If not fulfilled, no
If not fulfilled, juridical
disputed lot. Is the contract of sale a conditional juridical relation is
relation is consolidated
one? created
When Rights are Acquired
A: No. The stipulation that the "payment of the Rights are not yet
Rights are already
full consideration based on a survey shall be due acquired, but there is
acquired, but subject to
and payable in 5 years from the execution of a hope or expectancy
the threat or danger of
formal deed of sale" is not a condition which that
extinction
they will soon be
affects the efficacy of the contract of sale. It
acquired
merely provides the manner by which the full
consideration is to be computed and the time
Q: In cases of obligations with a suspensive
within which the same is to be paid. But it does
condition, what are the effects of loss,
not affect in any manner the effectivity of the
deterioration, and improvements in real
contract. (Heirs of San Andresv.Rodriguez, G.R.
obligations?
No. 135634, May 31, 2000)
A:
Q: Distinguish period from condition.
WITH DR’S FAULT WITHOUT DR’S FAULT
Loss
A:
DR pays damages Obligation extinguished
PERIOD CONDITION Deterioration
As to Time CR‐ choose b/w
May refer to past event rescission of obligation
Refers to the future
unknown to the parties or fulfillment (with Impairment borne by CR
As to Fulfillment indemnity for damages
It will happen at an in
exact date or at an May or may not happen either case)
indefinite time, but is Improvement
sure to arrive 1. By the thing’s nature or by time – inure to the
As to its Influence on the Obligation to be Fulfilled benefit of the CR
or 2. At the debtor’s expense – DR shall have no right
Performed other than that granted to a usufructuary
No effect or influence May give rise to an
upon the existence of obligation (suspensive) Q: What are the requisites for Art.1189 to
the obligation but only or the cessation of
in its demandability or one already existing
apply? A:
1. Must be a real obligation;
2. Object is a specific/determinate thing;
1. SUSPENSIVE CONDITION 3. Obligation is subject to a suspensive
condition;
Q: What is a suspensive condition? 4. The condition is fulfilled; and
5. There is loss, deterioration or
A: A condition the fulfillment of which will give improvement of the thing during the
rise to the acquisition of a right. pendency of the happening of the
condition.

Note: The same conditions apply in case of an

obligor in obligations with a resolutory condition. In
such cases, the third requisite must read, “subject to
a resolutory condition.”

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B.ADCADEMICS CHAIR: LESTER JAY ALAN E. FLORES II
IMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

U NIVERSITY OF S ANTO T
OMAS
なぱひ

Q: GSIS approved the application of Agcaoili for

the purchase of a house and lot in the GSIS

なひど
CIVIL LAW TEAM:
Housing Project; it is subject to the condition
that he should immediately occupy the house.
But he could not because the house was
uninhabitable. He paid the first installment and
other fees but refused to make further payment
until GSIS had made the house habitable. GSIS
refused and opted to cancel the award and
demand the vacation by Agcaoili of the
premises. Can GSIS cancel the contract?

A: No. There was a perfected contract of sale

between the parties; there had been a meeting
of the minds upon the purchase by Agcaoili of a
determinate house and lot at a definite price and
from that moment, the parties acquired the right
to reciprocally demand performance. Based on
their contact, it can only be understood as
imposing on GSIS an obligation to deliver to
Agcaoili a reasonably habitable dwelling in return
for his undertaking to pay the stipulated price.
Since GSIS did not fulfill that obligation, and was
not willing to put the house in habitable state, it
cannot invoke Agcaoili's suspension of payment
of amortizations as cause to cancel the contract
between them.

Note: In reciprocal obligations, neither party incurs

in delay if the other does not comply or is not ready
to comply in a proper manner with what is
incumbent upon him. (Agcaoili v. GSIS, G.R. No. L‐
30056, Aug. 30, 1988)

2. RESOLUTORY CONDITION

Q: What is a resolutory condition?

A: A condition where the rights already

acquired are lost upon fulfillment of the
condition.

Q: What are the effects of fulfillment of

resolutory condition?
A:
1. Real obligations:
a. The parties shall return to
each other what they have
received.
b. Obligation is extinguished.
c. In case of the loss, deterioration
or improvement of the thing, Art.
1189, with respect to the debtor,
shall be applied to the party who
is bound to return.

2. Personal obligations‐ the courts shall

determine, in each case, the
retroactive effect of the condition that
has been complied with.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: X donated a parcel of land to the condition imposed was not a condition precedent
municipality of Tarlac under a or a suspensive condition but a resolutory one. It
condition that a public school shall be is not correct to say that the schoolhouse had to
erected and a public park be made be constructed before the donation became
within 6 months from the date of the effective, that is, before the donee could become
ratification of the donation by the the owner of the land, otherwise, it would be
parties. After the registration of the invading the property rights of the donor. The
said donation, X sold the same land to donation had to be valid before the fulfillment of
Y. Thereafter, Y brought an action
against the Province of Tarlac, alleging
that the conditions of the donation is
a condition precedent, thus, the
municipality of Tarlac did not acquire
ownership over the land when it failed
to comply with the said condition. Is
the contention of Y correct?

A: No. In this case, the condition could

not be complied with except after
giving effect to the donation. The
Municipality of Tarlac could not do any
work on the donated land if the
donation had not really been effected,
because it would be an invasion of
another's title, for the land would have
continued to belong to the donor so
long as the condition imposed was not
complied with. Thus, considering that
the condition itself was for a public
school to be built means that
ownership of the land was already with
the Municipality. (Parks v. Province of
Tarlac, G.R. No. L‐24190, July 13, 1926)

Q: The late Don Lopez, Sr., who was

then a member of the Board of
Trustees of CPU, executed a deed of
donation in favor of the latter of a
parcel of land subject to the condition
that it shall be utilized for the
establishment and use of a medical
college. However, the heirs of Don
Lopez, Sr., filed an action for
annulment of the donation,
reconveyance and damages against
CPU alleging that CPU had not
complied with the conditions of the
donation.

Are the conditions imposed resolutory

or suspensive?

A: Under Art. 1181 of the Civil Code, on

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.
Thus, when a person donates land to
another on the condition that the latter
would build upon the land a school, the
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

the condition. If there was no fulfillment or Q: What are the effects of the fulfillment of a
compliance with the condition, the donation may resolutory condition?
now be revoked and all rights which the donee A:
may have acquired under it shall be deemed lost 1. Real obligations:
and extinguished. (Central Philippine University v. a. obligation is extinguished
CA, G.R. No. 112127, July 17, 1995) b. Parties shall return to each other
what they have received.
Q: What does a constructive fulfillment of a 2. Personal obligations‐ the court
condition entail? determines the retroactive effect of the
condition fulfilled.
A:When the debtor actually prevents the
fulfillment of the condition, then said condition Q: What are the other types of conditions?
shall be deemed fulfilled.
A: CaMP‐NID‐CAPI
2. POTESTATIVE CONDITION 1. Casual – the performance or fulfillment
of the condition depends upon chance
Q: When is a condition said to be potestative? and/or the will of a third person
2. Mixed – the performance or fulfillment
A: When the condition depends upon the will of of the condition depends partly upon
one of the contracting parties. the will of a party to the obligation and
partly upon chance and/or the will of a
Q: Does a condition which depends upon the third person
will of the debtor invalidate both the condition 3. Positive – involves the doing of an act
and the obligation? What about a condition 4. Negative – involves the omission of an
which depends upon the will of the creditor? act
5. Divisible – is susceptible of partial
A: Yes. This is because its validity and compliance performance
is left to the will of the debtor, and cannot 6. Indivisible – is not susceptible of partial
therefore be easily demanded. But if the performance
condition is a pre‐existing one, only the condition 7. Conjunctive – there are several
is void, leaving the obligation itself valid. Further, conditions in an obligation all of which
if the condition is resolutory, it is valid because must be performed
what is left to the sole will of the debtor is not 8. Alternative – there are several
the existence or the fulfillment of the obligation conditions in an obligation but only one
but merely its extinguishment. must be performed
9. Possible – is capable of fulfillment
If the fulfillment depends upon the will of the according to the nature, law, public
creditor, in any case, both the condition and the policy or good customs
obligation are valid. 10. Impossible – is not capable of
fulfillment according to nature, law,
Q: What are the effects of the fulfillment of a public policy or good customs (Art.
suspensive condition? 1183, NCC)
A:
1. Real obligations: Q: What is the effect of an impossible or
GR: Effects retroact to the day of unlawful condition?
constitution of the obligation.
XPN: No retroactivity as to; A:
a. fruits GR: Impossible conditions annul the
b. interests obligation which depends upon the parties
but not of a third person.
XPN to the XPN: There may be
retroactivity as to the fruits and XPNs: PD‐DoNT.
interests in unilateral obligations if such 1. Pre‐existing obligation
intention appears 2. Obligation is Divisible
3. In simple or remuneratory Donations
2. Personal obligations‐ the court 4. In case of conditions Not to do an
determines the retroactive effect of the impossible thing
condition fulfilled. 5. In Testamentary dispositions

S
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

なひな

Note: In the foregoing, the obligations remain Q: For whose benefit is the period constituted?
valid, only the condition is void and deemed to
have not been imposed. It is applicable only to
A:
obligations not to do and gratuitous
GR: When a period has been agreed upon for
obligations.
the performance or fulfillment of an
obligation, it is presumed to have been
Q: When will the effect of fulfillment of a
established for the benefit of both the
condition retroact?
creditor and the debtor.
A:
XPN: When it appears from the tenor of the
1. In an obligation to give – it retroacts to
period or other circumstances that it was
the day of the constitution of the
established for the benefit of one of the
obligation
parties.
2. In an obligation to do or not to do – the
court may determine to what date
Q: What is the effect of the term being for the
retroactivity shall be allowed, or it may
benefit of either the CR or the DR?
even refuse to permit retroactivity
(Tolentino, Civil Code of the Philippines,
A:
Vol. IV, 2002 ed, p.166)
1. When it is for the benefit of the Creditor
–Creditor may demand the
C. OBLIGATIONS WITH A PERIOD performance of the obligation at any
time but the DR cannot compel him to
Q: What is an obligation with a period or a term? accept payment before the expiration
of the period (e.g. “on demand”)
A: It is an obligation whose demandability or 2. When it is for the benefit of the Debtor
extinguishment is subject to the expiration of a –
period or a term. (Art. 1193, NCC) Debtor may oppose any premature
demand on the part of the CR for
Q: What are the requisites of a valid period or performance of the obligation, or if he
term? so desires, he may renounce the
benefit of the period by performing his
A: obligation in advance. (Manresa)
1. Future Q: What is the effect of a fortuitous event in an
2. Certain obligation with a period?
3. Possible, legally and physically
A: It only relieves the contracting parties from
Q: Is the statement of a debtor that he will pay the fulfillment of their respective obligation
when his means permit him to do so relate to a during the term or period.
period or a condition? Is such a statement valid
considering that the same is left to the will of Q: When may the court fix the period?
the debtor?
A:
A: When the debtor binds himself to pay when 1. If the obligation does not fix a period,
his means permit him to do so, the obligation is but from its nature and circumstances
deemed with a period or term. This is valid it can be inferred that a period was
because it is not the payment itself that is intended by the parties
dependent upon the will of the debtor, but the 2. If the duration of the period depends
moment of payment. upon the will of the DR
3. In case of reciprocal obligations, when
As the time of payment is not fixed, the court
there is a just cause for fixing the
must fix the same before any action for collection
period
may be entertained, unless, the prior action of
4. If the DR binds himself when his means
fixing the term or period will only be a formality
permit him to do so
and will serve no purpose but delay.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

なひに
CIVIL LAW TEAM:

Q: When may a debtor lose his right to make use Q: In alternative obligations, when does the
of the period? choice made take effect?

A: A: The choice made takes effect only upon

1. Insolvency of the DR, unless security is communication of the choice to the other party
provided and from such time the obligation ceases to be
2. Did not deliver security promised alternative (Art. 1205, NCC).
3. Impaired security through his own acts
or through fortuitous event, unless he Note: The notice of selection or choice may be in
gives a new security equally satisfactory any form provided it is sufficient to make the other
(if impairment is without the fault of party know that the election has been made.
DR, he shall retain the right) (Tolentino, Civil Code of the Philippines, 2002 ed, p.
4. Violates undertaking in consideration of 205)
extension of period
5. DR attempts to abscond (Art. 1198, Q: Does the choice made by the DR require the
NCC) concurrence of the CR? What happens when
through the CR’s fault, selection is deemed
D. ALTERNATIVE OBLIGATION impossible?

Q: Distinguish facultative from alternative

obligations. A: No. To hold otherwise would destroy the very
nature of the right to select given to the DR.
A: Once a choice is made, it can no longer be
renounced and the parties are bound thereto.
FACULTATIVE ALTERNATIVE
OBLIGATIONS OBLIGATIONS
When choice is rendered impossible through the
Fortuitous loss of all
Fortuitous loss extinguishes CR’s fault, the DR may bring an action to rescind
prestation will not
the obligation
extinguish the obligation
the contract with damages (Art. 1203, NCC).
Culpable loss obliges the
Culpable loss of Q: What are the limitations on the right of
debtor to deliver
any object due will give choice of the debtor?
substitute prestation
rise to liability to debtor
without liability
to debtor A: Debtor cannot choose prestations which are:
GR: Choice pertain to 1. Impossible;
debtor 2. Unlawful; and
Choice pertains only to 3. could not have been the object of the
debtor XPN: Expressly granted obligation.
to creditor or third
person
Q: When is an alternative obligation converted
Only one object is due Several objects are due to a simple obligation?
May be complied with by May be complied with
substitution of one that is by fulfilling any of those A: When:
due alternately due
1. the person who has a right of choice
If principal obligation is If one prestation is void,
has communicated his choice; or
void, the creditor cannot the others free from
2. only one is practicable. (Art. 1202, NCC)
compel delivery of the vices preserve the
substitute validity of the
obligation
If various prestations
If there is impossibility to are impossible to
deliver the principal thing perform except one, this
or prestation, the obligation one must be delivered.
is extinguished, even if the If all prestations are
substitute obligation is valid impossible to perform,
the obligation is
extinguished
Where the choice is
Loss of substitute before
given to the creditor,
the substitution through the
the loss of the
fault of the debtor doesn’t
alternative through the
make him liable

ACADEMICS CHAIR: LESTERAJDVISER

AY ALAN: AE.TTYF.LORES
ELMERII T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

U NIVERSITY OF S ANTO T
OMAS
なひぬ

Q: What are the effects of loss of objects of Q: Distinguish joint from solidary obligation.
alternative obligations?
A:
A:
JOINT OBLIGATION SOLIDARY OBLIGATION
DUE TO Not presumed. Must be
DUE TO
FORTUITOUS expressly stipulated by
DEBTOR’S
EVENT the parties, or when
FAULT
Choice Belongs to Debtor Presumed by law the law or the nature of
CR shall have a right the obligation requires
to indemnify for solidarity. (Art. 1207,
damages based on NCC)
DR released Each debtor is liable only
All are the value of the last Each debtor is obliged to
from the for a proportionate part
lost thing which pay the entire obligation
obligation of the entire debt
disappeared/service
which become Each creditor has the
impossible right to demand from
Each creditor, if there
DR shall deliver DR shall deliver that any of the debtors, the
Some are several, is entitled
that which he which he shall payment or fulfillment
but not only to a proportionate
shall choose choose from among of the entire obligation
all are part of the credit
from among the (Tolentino, Civil CodeVol
lost IV, 1999 ed. p. 217)
the remainder remainder without
damages
Q: What is the rule as regards the joint or
Only
one Deliver that which remains solidary character of an obligation?
remains

Choice Belongs to Creditor

なひね
CIVIL LAW TEAM:
CR may claim the
DR released
All are price/value of any of
from the
lost them with indemnity
obligation
for damages
CR may claim any of
DR shall deliver those subsisting
Some
that which he without a right to
but not
shall choose damages OR
all are
from among price/value of one
lost
the remainder of those lost with
right
to damages
Only Deliver that which remains. In case of

VIII. JOINT AND SOLIDARY OBLIGATIONS

Q: What are joint obligations?

A: It is where the entire obligation is to be paid or

performed proportionately by the debtors (Art.
1208, NCC).

Q: What are solidary obligations?

A: It is where each of the debtors obliges to pay

the entire obligation, and where each one of the
creditors has the right to demand from any of the
debtors, the payment or fulfillment of the entire
obligation (Art. 1207, NCC; Pineda, Obligations
and Contracts, 2000 ed, p. 139).

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

A:
GR: When two or more creditors or
two or more debtors concur in one
and the same obligation, the
presumption is that the obligation
is joint.

XPNs: The obligation shall be solidary when:

ELN‐CJ
1. Expressly stipulated that
there is solidarity;
2. Law requires solidarity;
3. Nature of the obligation
requires solidarity;
4. Charge or condition is
imposed upon heirs or
legatees and the will
expressly makes the charge
or condition in solidum
(Manresa); or
5. solidary responsibility is
imputed by a final Judgment
upon several defendants.
(Gutierrez v. Gutierrez, 56 Phil
177)

Q: Chua bought and imported to the

Philippines dicalcium phosphate.
When the cargo arrived at the Port of
Manila, it was discovered that some
were in apparent bad condition. Thus,
Chua filed with Smith, Bell, and Co.,
Inc., the claim agent of First Insurance
Co., a formal statement of claim for
the loss. No settlement of the claim
having been made, Chua then filed an
action. Is Smith, Bell, and Co.,
solidarily liable upon a marine
insurance policy with its disclosed
foreign principal?

A: No. Article 1207 of the Civil Code clearly 5. Insolvency of a debtor will not increase
provides that "there is a solidary liability only the liability of his co‐debtors;
when the obligation expressly so states, or when 6. Vices of each obligation emanating
the law or the nature of the obligation requires from a particular debtor or creditor will
solidarity." The well‐entrenched rule is that not affect the others; and
solidary obligation cannot lightly be inferred. It 7. In indivisible or joint obligation, the
must be positively and clearly expressed. (Smith, defense of res judicata of one does not
Bell & Co., Inc. v. CA, G.R. No. 110668, Feb. 6, extend to the others.
1997)
B. JOINT INDIVISIBLE OBLIGATIONS
Q: The labor arbiter rendered a decision, the
fallo of which states that the following Q: What are the different permutations of joint
respondents as liable, namely: FCMC, Sicat, indivisible obligations? What are their effects?
Gonzales, Chiu Chin Gin, Lo Kuan Chin, and
INIMACO. INIMACO questions the execution, A:
alleging that the alias writ of execution altered 1. If there are two or more debtors,
and changed the tenor of the decision by compliance with the obligation requires
changing their liability from joint to solidary, by the concurrence of all the debtors,
the insertion of the words "AND/OR". Is the although each for his own share. The
liability of INIMACO pursuant to the decision of obligation can be enforced only by
the labor arbiter solidary or not? preceding against all of the debtors.
2. If there are two or more creditors, the
A: INIMACO's liability is not solidary but merely concurrence or collective act of all the
joint. Well‐entrenched is the rule that solidary creditors, although each of his own
obligation cannot lightly be inferred. There is a share, is also necessary for the
solidary liability only when the obligation enforcement of the obligation.
expressly so states, when the law so provides or 3. Each credit is distinct from one
when the nature of the obligation so requires. In another; therefore a joint debtor
the dispositive portion of the labor arbiter, the cannot be required to pay for the share
word "solidary" does not appear. The said fallo of another with debtor, although he
expressly states the following respondents may pay if he wants to.
therein as liable, namely: Filipinas Carbon Mining 4. In case of insolvency of one of the
Corporation, Sicat, Gonzales, Chiu Chin Gin, Lo debtors, the others shall not be liable
Kuan Chin, and INIMACO. Nor can it be inferred for his shares. To hold otherwise would
therefrom that the liability of the six respondents destroy the joint character of the
in the case below is solidary, thus their liability obligation.
should merely be joint.(INIMACO v. NLRC,G.R. No.
101723, May 11, 2000) Q: What is the effect of breach of a joint
indivisible obligation by one debtor?
A. JOINT OBLIGATIONS
A: If one of the joint debtors fails to comply with
Q: What are the legal consequences if the his undertaking, the obligation can no longer be
obligation is joint? fulfilled or performed. It is the converted into
one of indemnity for damages. Innocent joint DR
A: shall not contribute to the indemnity beyond
1. Each debtor is liable only for a their corresponding share of the obligation.
proportionate part of the entire debt;
2. Each creditor, if there are several, is C. SOLIDARY OBLIGATIONS
entitled only to a proportionate part of
the credit; Q: What is the effect of solidary obligation?
3. The demand made by one creditor
upon one debtor, produces effects of A: Each one of the debtors is obliged to pay the
default only as between them; entire obligation, and each one of the creditors
4. Interruption of prescription caused by has the right to demand from any of the debtors
the demand made by one creditor upon the payment or fulfillment of the entire obligation
one debtor, will NOT benefit the co‐
creditors or the co‐debtors;

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

なひの

Q: Joey, Jovy and Jojo are solidary debtors Q: What are the rules in a solidary obligation?
under a loan obligation of P300, 000.00 which
has fallen due. The creditor has, however, A:
condoned Jojo's entire share in the debt. Since
Jovy has become insolvent, the creditor makes a
1. Anyone of the solidary creditors may
demand on Joey to pay the debt.
collect or demand payment of whole
obligation; there is mutual agency among
1. How much, if any, may Joey be solidary debtors (Arts. 1214, 1215)
compelled to pay?
2. To what extent, if at all, can Jojo be 2. Any of the solidary debtor may be
compelled by Joey to contribute to required to pay the whole obligation; there
such payment? is mutual guaranty among solidary debtors
(Arts. 1216, 1217, 1222)
A:
1. Joey can be compelled to pay only the
3. Each one of solidary creditors may do
remaining balance of P200,000, in view
whatever maybe useful to the others, but
of the remission of Jojo’s share by the
not anything prejudicial to them (Art. 1212);
creditor. (Art. 1219, NCC)
however, any novation, compensation,
2. Jojo can be compelled by Joey to
confusion or remission of debt executed by
contribute P50,000. When one of the
any solidary creditor shall extinguish the
solidary debtors cannot, because of his
obligation without prejudice to his liability
insolvency, reimburse his share to the
for the shares of the other solidary creditors.
debtor paying the obligation, such
share shall be borne by all his co‐
debtors, in proportion to the debt of Q: In cases of solidary creditors, may one act for
all? What are the limitations?
Since each.(par. 3, debtor's share which
the insolvent
Joey paid was Pl00,000, and there are only A: Yes. However, while each one of the solidary
two remaining debtors ‐ namely Joey and creditors may execute acts which may be useful
Jojo ‐ these two shall share equally the or beneficial to the others, he may not do
burden of reimbursement. Jojo may thus be anything which may be prejudicial to them. (Art.
compelled by Joey to contribute P50,000. 1212, NCC)
(1998 Bar Question)
Note: Prejudicial acts may still have valid legal
Q: What are the kinds of solidary obligation? effects, but the performing creditor shall be liable to
his co‐creditors. (Pineda, Obligations and Contracts,
A: 2000 ed, p. 157)
1. Passive – solidarity on the part of the
debtors Q: What are the effects of assignment of rights
2. Active – solidarity on the part of the in a solidary obligation?
creditors
3. Mixed – solidarity on both sides A:

Q: Distinguish solidarity from indivisibility.

なひは
CIVIL LAW TEAM:

A:
INDIVISIBILITY SOLIDARITY
Refers to the vinculum
Refers to the prestation
existing between the
or object of the contract
subjects or parties
Does not require
Requires the plurality of
plurality of subjects
parties or subjects
or
parties
In case of breach, it is
converted to one of In case of breach, the
indemnity for damages liability of the solidary
and the indivisibility of debtors for damages
the obligation is remains solidary

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS
GR: Solidary creditor cannot assign his right
because it is predicated upon
mutual confidence, meaning
personal qualification of each
creditor had been taken into
consideration when the
obligation was constituted. (Art.
1213, NCC)

XPNs:
1. Assignment to co‐creditor; or
2. Assignment is with
consent of co‐ creditor.

Q: To whom must payment be made in a A: It is tantamount to non‐performance. (Pineda,

solidary obligation? Obligations and Contracts, 2000 ed, p. 179)

A: E. OBLIGATIONS WITH A PENAL CLAUSE

GR: To any of the solidary creditors.
Q: What is a penal clause?
XPN: If demand, judicial or extra‐judicial, has
been made by one of them, payment should A: It is an accessory obligation attached to the
be made to him.(Art. 1214, NCC) principal obligation to assure greater
responsibility in case of breach.
D. DIVISIBLE AND INDIVISIBLE OBLIGATIONS
Note: Proof of actual damages suffered by the
Q: What is the primary distinction between creditor is not necessary in order that the penalty
divisible and indivisible obligations? may be demanded. (Art. 1228, NCC)

A: Q: What is the effect of incorporating a penal

DIVISIBLE INDIVISIBLE clause in an obligation?
Non‐susceptibility to be
Susceptibility of an A:
performed partially
obligation to be GR: The penalty fixed by the parties is a
Partial performance is
performed partially tantamount to non‐
compensation or substitute for damages in
performance case of breach.

XPNs: Damages shall still be paid even if there

is a penal clause if:
Q: What is the true test in determining
1. there is a stipulation to the contrary
divisibility?
2. the debtor refuses to pay the agreed
penalty
A: Whether or not the prestation is susceptible of
3. the debtor is guilty of fraud in the
partial performance, not in the sense of
fulfillment of the obligation. (Art. 1126,
performance in separate or divided parts, but in
NCC)
the sense of the possibility of realizing the
purpose which the obligation seeks to obtain. If a
thing could be divided into parts and as divided, Note:The nullity of the penal clause does not carry
its value is impaired disproportionately, that with it that of the principal obligation.
thing is indivisible. (Pineda, Obligations and
Contracts, 2000 ed, p. 174) The nullity of the principal obligation carries with it
that of the penal clause. (Art. 1230, NCC)
Q: When may an obligation to deliver a divisible
thing be considered indivisible? Q: When may penalty be reduced by the courts?

A: A: PIU
1. When the law so provides; or 1. Partial performance of the obligation;
2. By stipulation of the parties.(3rd par., 2. Irregular performance of the obligation;
Art. 1255, NCC) or
3. Penalty is Unconscionable even if there
Q: What is the effect of illegality of a part of a has been no performance.
contract?

A:
1. Divisible contract – illegal part is void
and unenforceable. Legal part is valid
and enforceable. (Art. 1420, NCC)
2. Indivisible contract – entire contract is
indivisible and unenforceable.

Q: What is the effect of partial performance S

in indivisible obligation?

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B.U N I V EII;R S I T Y O F S A N T O T O M A
DIMAFELIX
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

なひば

IX. EXTINGUISHMENT OF OBLIGATIONS Q: Is the creditor bound to accept payment or

performance by a third person?
Q: What are the modes of extinguishment of an A:
obligation? GR: No, the creditor is not.

A: XPNs:
1. Payment or performance 1. When made by a third person who has
2. Loss of the thing due interest in the fulfillment of the
3. Condonation or remission of debt obligation
4. Confusion or merger 2. Contrary stipulation
5. Compensation
6. Novation Q: What are the rights of a third person who
7. Annulment paid the debt?
8. Rescission
9. Fulfillment of a resolutory condition A:
10. Prescription(Art. 1231, NCC) 1. With knowledge and consent of the
debtor:
Note: The enumeration is not exclusive. a. can recover entire amount paid
(absolute reimbursement )
MUTUAL DESISTANCE b. can be subrogated to all rights of
the creditor
Q: If the parties mutually disagree as regards the 2. Without knowledge or against the will
obligation, may it be cancelled? of the debtor – can recover only insofar
as payment has been beneficial to the
A: Yes. That is in the nature of “mutual debtor (right of conditional
desistance” – which is a mode of extinguishing reimbursement )
obligations. It is a concept that derives from the
principle that since mutual agreement can create NOTE: Payment made by a third person who does
a contract, mutual disagreement by the parties not intend to be reimbursed by the debtor is
can cause its extinguishment.(Saura v. deemed to be a donation, which requires the
Development Bank of the Phils., G.R. No. 24968, debtor's consent. But the payment is in any case
Apr. 27, 1972) valid as to the creditor who has accepted it. (Art.
1238, NCC)
A. PAYMENT OR PERFORMANCE
Q: State the requisites of a valid payment.
Q: Is the term “payment,” as used in the Code,
limited to appreciable sums of money? A: CCPAD
1. Capacity of the payor
A:No. Payment may consist not only in the 2. Capacity of the payee
delivery of money but also the giving of a thing 3. Propriety of the time, place, manner of
(other than money), the doing of an act, or not payment
doing of an act. 4. Acceptance by the creditor
5. Delivery of the full amount or the full
Q: What is tender of payment? performance of the prestation

A: Tender of payment is the definitive act of Q: What are the characteristics of payment?
offering the creditor what is due him or her,
together with the demand that the creditor A:
accept the same. 1. Integrity;
2. Identity; and
Note: There must be a fusion of intent, ability and 3. Indivisibility.
capability to make good such offer, which must be
absolute and must cover the amount due. (FEBTC v.
Diaz Realty Inc., G.R. No. 138588, Aug. 23, 2001)

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

なひぱ
CIVIL LAW TEAM:

INTEGRITY Q: Is the acceptance by a creditor of a partial

payment an abandonment of its demand for full
Q: How should performance be made? payment?

A: A: No. When creditors receive partial payment,

GR: Performance should always be in full. they are not ipso facto deemed to have
abandoned their prior demand for full payment.
XPNs:
1. Substantial performance performed in To imply that creditors accept partial payment as
good faith complete performance of their obligation, their
2. Creditor accepts the performance acceptance must be made under circumstances
knowing its incompleteness or that indicate their intention to consider the
irregularity without protest or objection performance complete and to renounce their
3. Debt is partly liquidated and partly claim arising from the defect.
unliquidated, but the liquidated part of
the debt must be paid in full Note: While Article 1248 of the Civil Code states
that creditors cannot be compelled to accept partial
IDENTITY payments, it does not prohibit them from accepting
such payments. (Selegna Management and
Q: What should be given as payment of an Development Corp. v. UCPB, G.R. No. 165662, May
obligation? 30, 2006)

A:
GR: Thing paid must be the very thing due Q: To whom payment should be made?
and cannot be another thing even if of same
quality and value. A: Payment shall be made to the person in whose
favor the obligation has been constituted, or his
XPNs: successor in interest, or any person authorized to
1. Dation in payment receive it. (Art. 1240)
2. Novation of the obligation
3. Obligation is facultative Q: Is payment to an unauthorized person a valid
payment?

INDIVISIBILITY A:
GR: Payment to an unauthorized person is not
Q: Can the debtor or creditor be compelled to a valid payment.
perform/accept partial prestations?
XPNs:
A: 1. Payment to an incapacitated person if:
GR: Debtor cannot be compelled by the a. he kept the thing delivered, or
creditor to perform obligation in parts and b. it has been beneficial to him
neither can the debtor compel the creditor to 2. Payment to a third person insofar as it
accept obligation in parts. redounded to the benefit of the CR
3. Payment in good faith to the possessor
XPNs: When: of credit
1. partial performance has been agreed
upon
2. part of the obligation is liquidated and
part is unliquidated
3. to require the debtor to perform in full
is impractical

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

なひひ

SPECIAL FORMS OF PAYMENT

にどど
CIVIL LAW TEAM:
Q: What are the special forms of payment?

A:
CONCEPT
Dation in Payment
Alienation by the DR of a particular property in
favor of his CR, with the latter’s consent, for the
satisfaction of the former’s money obligation to the
latter, with the effect of extinguishing the said
money obligation (Pineda, Obligations and
Contracts, 2000 ed, p. 212)
Application of Payment
Designation of the particular debt being paid by the
DR who has two or more debts or obligations of the
same kind in favor of the same CR to whom the
payment is made (Pineda, Obligations and
Contracts,
2000 ed, p. 229)
Payment by Cession
DR cedes his property to his CRs so the latter may
sell the same and the proceeds realized applied to
the debts of the DR
Tender of Payment
Voluntary act of the DR whereby he offers to the CR
for acceptance the immediate performance of the
former’s obligation to the latter
Consignation
Act of depositing the object of the obligation with
the court or competent authority after the CR has
unjustifiably refused to accept the same or is not in
a position to accept it due to certain reasons or

1. DATION IN PAYMENT

Q: What does dation in payment or dacion en

pago entail?

A: Dacion en pago is the delivery and

transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent
of the performance of the obligation. The
property given may consist not only of a thing
but also of a real right. (Tolentino, Civil Code of
the Philippines, Vol. IV, 2002 ed, p. 293)

Note: The consent of the creditor is essential.

It is a special mode of payment where the debtor

offers another thing to the creditor who accepts it
as equivalent of payment of an outstanding debt.

The undertaking partakes of the nature of sale, that

is, the creditor is really buying the thing or property
of the debtor, payment for which is to be charged
against the debtor’s debt.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

As such, the essential elements of a construction of a building which, upon the

contract of sale, namely, consent, object termination of the lease or the voluntary
certain, and cause or consideration must surrender of the leased premises before the
be present. expiration of the contract, shall automatically
become the property of the lessor. Meeting
In its modern concept, what actually financial difficulties and incurring an outstanding
takes place in dacion en pago is an balance on the loan, Asiancars conveyed
objective novation of the obligation
ownership of the building on the leased
where the thing offered as an accepted
premises to MBTC, by way of "dacion en
equivalent of the performance of an
obligation is considered as the object of
the contract of sale, while the debt is
considered as the purchase price. In any
case, common consent is an essential
prerequisite, be it sale or novation, to
have the effect of totally extinguishing
the debt or obligation.

Q: Lopez obtained a loan in the

amount of P20,000.00 from the
Prudential Bank. He executed a surety
bond in which he, as principal, and
PHILAMGEN as surety, bound
themselves jointly and severally for
the payment of the sum. He also
executed a deed of assignment of
4,000 shares of the Baguio Military
Institution in favor of PHILAMGEN. Is
the stock assignment made by Lopez
dation in payment or pledge?

A: The stock assignment constitutes a

pledge and not a dacion en pago.
Dation in payment is the delivery and
transmission of ownership of a thing by
the debtor to the creditor as an
accepted equivalent of the
performance of the obligation. Lopez’s
loan has not yet matured when he
"alienated" his 4,000 shares of stock to
Philamgen. Lopez's obligation would
arise only when he would default in the
payment of the principal obligation
which is the loan and Philamgen had to
pay for it. Since it is contrary to the
nature and concept of dation in
payment, the same could not have
been constituted when the stock
assignment was executed. In case of
doubt as to whether a transaction is a
pledge or a dation in payment, the
presumption is in favor of pledge, the
latter being the lesser transmission of
rights and interests. (Lopez v. CA,G.R.
No. L‐33157, June 29, 1982)

Q: Cebu Asiancars Inc., with the

conformity of the lessor, used the
leased premises as a collateral to
secure payment of a loan which
Asiancars may obtain from any bank,
provided that the proceeds of the loan
shall be used solely VICE CHAIRS for
FOR ACADEMICS
the : KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

pago."Is the dacion en pago by Asiancars in Yen and damages for the delay at the rate of 6%
favor of MBTC valid? per annum. Unable to execute the decision in
Japan, Northwest Airlines filed a case to enforce
A: Yes. MBTC was a purchaser in good faith. said foreign judgment with the RTC of Manila.
MBTC had no knowledge of the stipulation in the What is the rate of exchange that should be
lease contract. Although the same lease was applied for the payment of the amount?
registered and duly annotated, MBTC was
charged with constructive knowledge only of the A: The repeal of R.A. 529 by R.A. 8183 has the
fact of lease of the land and not of the specific effect of removing the prohibition on the
provision stipulating transfer of ownership of the stipulation of currency other than Philippine
building to the Jaymes upon termination of the currency, such that obligations or transactions
lease. While the alienation was in violation of the may now be paid in the currency agreed upon by
stipulation in the lease contract between the the parties. Just like R.A. 529, however, the new
Jaymes and Asiancars, MBTC’s own rights could law does not provide for the applicable rate of
not be prejudiced by Asiancars’ actions unknown exchange for the conversion of foreign currency‐
to MBTC. Thus, the transfer of the building in incurred obligations in their peso equivalent. It
favor of MBTC was valid and binding. (Jayme v. follows, therefore, that the jurisprudence
CA, G.R. No. 128669, Oct. 4, 2002) established in R.A. 529 regarding the rate of
conversion remains applicable. Thus, in Asia
2. FORM OF PAYMENT World Recruitment, Inc. v. National Labor
Relations Commission, the SC, applying R.A. 8183,
Q: What are the rules as regards payment in sustained the ruling of the NLRC that obligations
monetary obligations? in foreign currency may be discharged in
Philippine currency based on the prevailing rate
A: at the time of payment. It is just and fair to
1. Payment in cash– all monetary preserve the real value of the foreign exchange‐
obligations shall be settled in the incurred obligation to the date of its payment.
Philippine currency which is legal
tender in the Philippines. However, the If the rate of interest is not stipulated, what
parties may agree that the obligations should be the rate of interest that should apply?
or transactions shall be settled in any When should the interest begin to run?
other currency at the time of payment.
(Sec. 1, R.A. 8183) A: In Eastern Shipping Lines, Inc. v. CA, it was held
that absent any stipulation, the legal rate of
Note: R.A. 8183 amended the first interest in obligations which consists in the
paragraph of Art. 1249 of the Civil Code, payment of a sum of money is 12% per annum to
but the rest of the article remain
be reckoned from the time of filing of the
subsisting. (Pineda, Obligations and
complaint therein until the said foreign judgment
Contracts, 2000 ed, p. 221)
is fully satisfied. (C.F. Sharp & Co., Inc. v.
Northwest Airlines, Inc., G.R. No. 133498, Apr. 18,
2. Payment in check or other negotiable
2002)
instrument – not considered payment,
they are not considered legal tender
PAYMENT BY NEGOTIABLE INSTRUMENT
and may be refused by the creditor
except when:
Q: Diaz & Company obtained a loan from Pacific
a. the document has been cashed; or
Banking Corp which was secured by a real estate
b. it had been impaired through the
mortgage over two parcels of land owned by the
fault of the creditor.
plaintiff Diaz Realty. ABC rented an office space
in the building constructed on the properties
PAYMENT IN CASH
covered by the mortgage contract. The parties
then agreed that the monthly rentals shall be
Q: Northwest Airlines, through its Japan Branch,
paid directly to the mortgagee for the lessor's
entered into an International Passenger Sales
account, either to partly or fully pay off the
Agency Agreement with CF Sharp, authorizing
aforesaid mortgage indebtedness. Thereafter,
the latter to sell its air transport tickets. CF
FEBTC purchased the credit of Diaz & Company
Sharp failed to remit the proceeds of the ticket
in favor of PaBC, but it was only after 2 years
sales, thus, Northwest Airlines filed a collection
that Diaz was informed about it. Diaz asked the
suit before the Tokyo District Court which
FEBTC to make an accounting of the monthly
rendered judgment ordering CF Sharp to pay
83,158,195
S
ACADEMICS CHAIR: LESTERAJDVISER
AY ALAN: AE.TTYF.LORES
ELMERII T. RABUYA; SUBJECT HEAD: ALFREDO B.U N I V EII;R S I T Y O F S A N T O T O M A
DIMAFELIX
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

にどな

rental payments made by Allied Bank. Diaz

tendered to FEBTC the amount of P1,450,000.00

にどに
CIVIL LAW TEAM:
through an Interbank check, in order to prevent
the imposition of additional interests, penalties
and surcharges on its loan but FEBTC did not
accept it as payment, instead, Diaz was asked to
deposit the amount with the FEBTC’s Davao City
Branch Office. Was there a valid tender of
payment?

A: Yes. True, jurisprudence holds that, in general,

a check does not constitute legal tender, and that
a creditor may validly refuse it. It must be
emphasized, however, that this dictum does not
prevent a creditor from accepting a check as
payment. In other words, the creditor has the
option and the discretion of refusing or accepting
it. (FEBTC v. Diaz Realty Inc., G.R. No. 138588,
Aug. 23, 2001)

Q: Who has the burden of proving payment in

an action for sum of money?

A: The party who pleads payment as a defense

has the burden of proving that such payment has,
in fact, been made.

Q: Are receipts the only evidence that can be

presented to prove payment?

A: No. Receipts of payment, although not

exclusive, are deemed the best evidence of the
fact of payment. (Dela Peña and Villareal v. CA
and Rural Bank of Bolinao, Inc., G.R. No. 177828,
Feb. 13, 2009

EXTRAORDINARY INFALTION OR DEFLATION

Q: What is the rule in payment in case of an

extraordinary inflation or deflation?

A: In case an extraordinary inflation or deflation

of the currency stipulated should supervene, the
value of the currency at the time of the
establishment of the obligation shall be the basis
of payment, unless there is an agreement to the
contrary. (Art. 1250, NCC)

Q: Does the exchange rate at the time of the

establishment of the obligation apply in all
cases?

A: No. The rule that the value of the currency at

the time of the establishment of the obligation
shall be the basis of payment finds application
only when there is an official pronouncement or
declaration of the existence of an extraordinary
inflation or deflation.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

4. APPLICATION OF PAYMENTS encumbrance, the debt with a guaranty

is more onerous than that without
Q: What does the concept of security.
application of payments mean? 5. With respect to indemnity for damages,
the debt which is subject to the general
A: It is the designation of the debt to rules on damages is less burdensome
which the payment must be applied
when the debtor has several
obligations of the same kind in favor of
the same creditor.

Q: What are the requisites of

application of payments?

A:
1. One debtor and one creditor
2. Two or more debts of the same kind
3. Amount paid by the debtor
must not be sufficient to
cover all debts
4. Debts are all due
5. Parties have not agreed
previously on the application

Q: What is the governing rule in case

the debtor fails to ascertain which
debt his payment is to be applied?

A: The choice may be transferred to

the creditor as when the debtor makes
payment and does not make
application and debtor accepts a
receipt in which the application is
made. In such a case, the debtor
cannot complain of the application the
creditor has made unless there be a
cause for invalidating the contract.

Q: If both the creditor and the debtor

fail to apply payments, what rule
governs?

A: Legal application of payment

governs wherein the law makes the
application.

The payment should be applied to the

more onerous debts:
1. When a person is bound as
principal in one obligation
and as surety in another, the
former is more onerous.
2. When there are various
debts, the oldest ones are
more burdensome.
3. Where one bears interest
and the other does not, even
if the latter is the older
obligation, the former is
considered more onerous.
4. Where there
VICE CHAIRS Fis an : KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
OR ACADEMICS
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

than that in which there is a penal latter.(Pineda, Obligations and Contracts, 2000
clause. ed, p. 241)
6. The liquidated debt is more
burdensome than the unliquidated one. Tender of payment is the manifestation by
7. An obligation in which the debtor is in debtors of their desire to comply with or to pay
default is more onerous than one in their obligation. (Sps. Benosv.Sps.Lawilao, G.R.
which he is not. (Tolentino, Civil Code of No. 172259, Dec. 5, 2006)
the Philippines, Vol. IV, 2002 ed, p. 314‐
315) Note: If the creditor refuses the tender of payment
without just cause, the debtors are discharged from
Note: If the debts happen to be of same nature and the obligation by the consignation of the sum due.
burden, the payment shall be applied (Sps. Benosv.Sps.Lawilao, G.R. No. 172259, Dec. 5,
proportionately. 2006)

PAYMENT BY CESSION CONSIGNATION

Q: What are the circumstances evidencing Q: What is consignation?

payment by cession?
A: Act of depositing the object of the obligation
A: Debtor abandons all of his property for the with the court or competent authority after the
benefit of his creditors in order that from the CR has unjustifiably refused to accept the same
proceeds thereof, the latter may obtain payment or is not in a position to accept it due to certain
of credits. reasons or circumstances. (Pineda, Obligations
and Contracts, 2000 ed, p. 241)
Note: It presupposes insolvency of the debtor. All
the debtor’s creditors must be involved and the Q: When and where is consignation made?
consent of the latter must be obtained.
A: Consignation is made by depositing the proper
Q: What are the difference between Dation in amount to the judicial authority, before whom
Payment and Payment in Cession? the tender of payment and the announcement of
the consignation shall be proved. (Sps.
A: Benosv.Sps.Lawilao, G.R. No. 172259, Dec. 5,
DATION IN PAYMENT PAYMENT IN CESSION 2006)
Maybe one creditor Plurality of creditors
Not necessarily in state Debtor must be partially Note: Once the consignation has been duly made,
of financial difficulty or relatively insolvent the debtor may ask the judge to order the
Thing delivered is Universality or property cancellation of the obligation.
considered as equivalent of debtor is what is
of performance ceded Q: When will consignation produce effects of
Payment extinguishes payment?
obligation to the extent Merely releases debtor
of the value of the for net proceeds of A:
thing delivered as things ceded or
GR: Consignation shall produce effects of
agreed upon, proved or assigned, unless there is
payment only if there is a valid tender of
implied from the contrary intention
payment.
conduct of the
creditor
Ownership is transferred Ownership is not
XPNs: When: ARTIT
to CR upon delivery transferred 1. Creditor is Absent or unknown,
An act of novation Not an act of novation or doesn’t appear at place of payment
Does not presuppose 2. Creditor Refuses to issue a receipt
Presupposes insolvency without just cause
3. Title of the obligation has been lost
5. TENDER OF PAYMENT
4. Creditor is Incapacitated to
receive payment at the time it is due
Q: What constitutes a valid tender of payment?
5. Two or more persons claim the right to
collect
A: Voluntary act of the debtor whereby he offers
to the creditor for acceptance the immediate
Note: The expenses of consignation, when properly
performance of the former’s obligation to the made, shall be charged against the creditor.
S
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B.U N I V EII;R S I T Y O F S A N T O T O M A
DIMAFELIX
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

にどぬ

Q: What are the requisites of consignation?

にどね
CIVIL LAW TEAM:
A: VP‐CPAS
1. Valid existing debt which is already due;
2. Prior valid tender except when prior
tender of payment is dispensable;
3. Creditor unjustly refuses the tender of
payment;
4. Prior notice of consignation given to
persons interested in the fulfillment of
the obligation;
5. Amount or thing is deposited at the
disposal of judicial authority; and
6. Subsequent notice of the fact of
consignation to persons interested in
the fulfillment of the obligation.

Q: Can the debtor withdraw the thing

deposited?

A:Before the creditor has accepted the

consignation, or before a judicial declaration that
the consignation has been properly made, the
debtor may withdraw the thing or the sum
deposited, allowing the obligation to remain in
force. (Art. 1260, NCC)

NOTE: If, the consignation having been made, the

creditor should authorize the debtor to withdraw
the same, he shall lose every preference which he
may have over the thing. The co‐debtors, guarantors
and sureties shall be released. (Art. 1261, NCC)

Q: Distinguish tender of payment from

consignation.

TENDER OF PAYMENT CONSIGNATION

Nature
Antecedent of Principal or
consignation or consummating act for
preliminary act to the extinguishment of
consignation the obligation
Effect
It does not by It extinguishes the
itself extinguish obligation when declared
the obligation valid
Character
Judicial for it requires
the filing of a complaint
in court (Pineda,
Extrajudicial
Obligations and
Contracts, 2000 ed, p.
242)

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: In an ejectment case, X refused to

vacate the land alleging that Y had
sold to him the additional area, the
payment of which would be effected
five years after the execution of a
formal deed of sale. However, the
parties failed to execute a deed of
sale. During the pendency of the
action, X deposited the payment for
the addition to the lot with the court.
Is there a valid consignation?

A: No. Under Art. 1257 of this Civil

Code, consignation is proper only in
cases where an existing obligation is
due. In this case, the contracting
parties agreed that full payment of
purchase price shall be due and
payable within 5 years from the
execution of a formal deed of sale. At
the time Rodriguez deposited the
amount in court, no formal deed of
sale had yet been executed by the
parties, and, therefore, the 5‐ year
period during which the purchase price
should be paid had not commenced. In
short, the purchase price was not yet
due and payable. (Heirs of San
Andresv.Rodriguez, G.R. No. 135634,
May 31, 2000)

Q: Under a pacto de retro sale, X sold

to Y his lot and the building erected
thereon. They agreed that half of the
consideration shall be paid to the
bank to pay off the loan of X. After
paying the first installment, Y, instead
of paying the loan to the bank,
restructured it twice. Eventually, the
loan became due and demandable.
Thus, X paid the bank. On the same
day, Y also went to the bank and
offered to pay the loan, but the bank
refused to accept the payment.

Y then filed an action for consignation

without notifying X. Is there a valid
consignation by Y of the balance of
the contract price?

A: No. Y filed the petition for

consignation against the bank without
notifying the X, resulting to the
former’s failure to prove the payment
of the balance of the purchase price
and consignation. In fact, even before
the filing of the consignation case, Y
never notified the X of their offer to
pay.(Sps. Benosv. Sps.Lawilao, G.R. No.
172259, Dec. 5, 2006)
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

Q: Because of Ligaya’s refusal to accept several f. When debtor Promised to deliver

tenders of payment and notices of consignation the same thing to two or more
given by OSSA in its desire to comply with its persons who do not have the same
obligation to pay on installments, OSSA brought interest
a complaint for consignation against Ligaya g. When the debt of a certain and
before the RTC. The RTC allowed OSSA, among determinate thing proceeds from a
others, to deposit with it,by way of Criminal offense
consignation, all future quarterly installments h. When the obligation is Generic
without need of formal tenders of payment and
service of notices of consignation. 2. Generic obligation to give:

Ligaya assails the validity of the consignation on GR: The obligation is not extinguished
the ground that there was no notice to her because a generic thing never perishes.
regarding OSSA's consignation of the amounts
corresponding to certain installments. Is Ligaya XPN:In case of generic obligations
correct? whose object is a particular class or
group with specific or determinate
A: No. The motion and the subsequent court qualities (limited generic obligation)
order served on Ligaya in the consignation
proceedings sufficiently served as notice to Ligaya 3. An obligation to do – the obligation is
of OSSA's willingness to pay the quarterly extinguished when the prestation
installments and the consignation of such becomes legally or physically
payments with the court. For reasons of equity, impossible.
the procedural requirements of consignation are
deemed substantially complied with in the Q: Differentiate legal from physical impossibility
present case (De Mesa v. CA, G.R. Nos. 106467‐ to perform an obligation to do.
68, Oct. 19, 1999).
A:
B. LOSS OF THE THING DUE 1. Legal impossibility – act stipulated to be
performed is subsequently prohibited
Q: When is a thing considered by law.
2. Physical impossibility – act stipulated
lost? A: When: DOPE could not be physically performed by
1. It Disappears in such a way that its the obligor due to reasons subsequent
existence is unknown; to the execution of the contract.
2. It goes Out of commerce; (Pineda, Obligations and Contracts,
3. It Perishes; or 2000 ed, p. 261)
4. Its Existence is unknown or if known, it
cannot be recovered. Q: What is the effect of partial loss?

Q: What is the effect of loss of the thing which is A:

the object of the obligation? 1. Due to the fault or negligence of the
debtor – Creditor has the right to
A: If the obligation is a: demand the rescission of the obligation
1. Determinate obligation to give: or to demand specific performance,
plus damages, in either case.
GR:The obligation is extinguished when 2. Due to fortuitous event:
the object of the obligation is lost. a. Substantial loss – obligation is
extinguished.
XPNs: LAS‐CD‐PCG b. Unsubstantial loss – the CR shall
a. Law provides otherwise deliver the thing promised in its
b. Nature of the obligation requires impaired condition.
the Assumption of risk
c. Stipulation to the contrary
d. Debtor Contributed to the loss
e. Loss the of the thing occurs after
the debtor incurred in Delay

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

にどの

Q: What is the effect when the thing is lost in (Pineda, Obligations and Contracts, 2000 ed, p.
the possession of the debtor? 267)
EXPRESS CONDONATION
A:
GR: It is presumed that loss is due to DR’s Q: What are the requisites of condonation?
fault.
A: GAIDE
XPN: Presumption shall not apply in case loss 1. Must be Gratuitous;
is due to earthquake, flood, storm or other 2. Acceptance by the debtor;
natural calamity. 3. Must not be Inofficious;
4. Formalities provided by law on
XPN to the XPN: Debtor still liable even if loss Donations must be complied with if
is due to fortuitous event when: condonation is express; and
1. Debtor incurred in delay; or 5. An Existing demandable debt.
2. Debtor promised to deliver the thing to
two or more persons with different IMPLIED CONDONATION
interests (par. 3, Art. 1165, NCC)
Q: What is the effect of the delivery of a private
Q: What does rebus sic stantibus mean? document evidencing a credit?

A: A principle in international law which means

A:The delivery of a private document evidencing
that an agreement is valid only if the same
a credit, made voluntarily by the creditor to the
conditions prevailing at time of contracting
debtor, implies the renunciation of the action
continue to exist at the time of performance. It is
which the former had against the latter.
the basis of the principle of unforeseen difficulty
of service.
If in order to nullify this waiver it should be
Note: However, this principle cannot be applied claimed to be inofficious, the debtor and his heirs
absolutely in contractual relations since parties are may uphold it by proving that the delivery of the
presumed to have assumed the risk of unfavorable document was made in virtue of payment of the
developments. (Pineda, Obligations and Contracts, debt. (Art. 1271, NCC)
2000 ed, p. 264)
NOTE: Whenever the private document in which the
Q: What are the requisites in order to relieve debt appears is found in the possession of the
the debtor from his obligation, in whole or in debtor, it shall be presumed that the creditor
part, based on unforeseen difficulty of service? delivered it voluntarily, unless the contrary is
proved. (Art. 1272, NCC)
A:
1. Event or change in circumstance could
not have been foreseen at the time of

にどは
CIVIL LAW TEAM:
the execution of the contract;
2. Such event makes the performance
extremely difficult but not impossible;
3. The event must not be due to the act of
any of the parties; and
4. The contract is for a future prestation.
(Tolentino, Civil Code of the Philippines,
Vol. IV, 2002 ed, p. 347)

C. CONDONATION

Q: What is condonation?

A: It is an act of liberality by virtue of which the

creditor, without receiving any price or
equivalent, renounces the enforcement of the
obligation, as a result of which it is extinguished
in its entirety or in that part or aspect of the
same to which the condonation or remission
refers.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS
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.
(Art. 1274, NCC)

Q: What is the effect of inofficious condonation?

A: It may be totally revoked or reduced

depending on whether or not it is
totally or only partly inofficious.
(Pineda, Obligations and Contracts,
2000 ed, p. 268)

Q: Can there be a unilateral condonation?

A: No. Since it is a donation of an

existing credit, considered a property
right, in favor of the debtor, it is
required that the DR gives his consent
thereto by making an acceptance. If
there is no acceptance, there is no
condonation. (Pineda, Obligations and
Contracts, 2000 ed, p. 267)

D. CONFUSION OR MERGER not extinguish the obligation. (Art.

1276, NCC)
Q: When is there a confusion or merger of
rights? Q: In a joint obligation, what is the effect of
confusion or merger in one debtor or creditor?
A: The meeting in one person of the qualities of a
creditor and debtor of the same obligation. A:
GR: Joint obligation is not extinguished since
Q: What are the requisites of confusion of confusion is not definite and complete with
rights? regard to the entire obligation. A part of the
obligation still remains outstanding.
A:
1. Merger in the same person of the XPN: Obligation is extinguished with respect
characters of both a creditor and d only to the share corresponding to the DR or
debtor; CR concerned. In effect, there is only partial
2. Must take place in the persons of a extinguishment of the entire obligation.
principal creditor and a principal (Pineda, Obligations and Contracts, 2000 ed,
debtor; and p. 281)
3. Merger is definite and complete.
E. COMPENSATION
Q: What is the effect of confusion or merger of
rights? Q: What is compensation?

A: The creditor and debtor becomes the same A: It is a mode of extinguishing to the concurrent
person involving the same obligation. Hence, the amount, the obligations of those persons who in
obligation is extinguished. (Art. 1275, NCC) their own right are reciprocally debtors and
creditors of each other (Art. 1232, NCC). It
Q: Can there be partial confusion? involves the simultaneous balancing of two
obligations in order to extinguish them to the
A: Yes. It will be definite and complete up to the extent in which the amount of one is covered by
extent of the concurrent amount or value, but that of the other.
the remaining obligation subsists. (Pineda,
Obligations and Contracts, 2000 ed, p. 278) Q: What are the requisites of compensation?

Q: What is the effect when confusion or merger A:

is revoked? 1. Both parties must be mutually creditors
and debtors in their own right and as
A: If the act which created the confusion is principals;
revoked for some causes such as rescission of 2. Both debts must consist in sum of
contracts, or nullity of the will or contract, the money or if consumable, of the same
confusion or merger is also revoked. The subject kind or quality;
obligation is revived in the same condition as it 3. Both debts are due;
was before the confusion. 4. Both debts are liquidated and
demandable;
Note: During such interregnum, the running of the 5. Neither debt must be retained in a
period of prescription of the obligation is controversy commenced by third
suspended. (Pineda, Obligations and Contracts, 2000 person and communicated with debtor
ed, p. 279) (neither debt is garnished); and
6. Compensation must not be prohibited
Q: What is the effect of confusion or merger in by law.
relation to the guarantors?
Note: When all the requisites mentioned in Art.
A: 1279 of the Civil Code are present, compensation
1. Merger which takes place in the person takes effect by operation of law, even without the
of the principal debtor or principal consent or knowledge of the creditors and debtors.
creditor benefits the guarantors. The
contract of guaranty is extinguished.
2. Confusion which takes place in the
person of any of the guarantors does

ACADEMICS CHAIR: LESTERAJDVISER

U NIVERSITY OF S ANTO T
OMAS
にどば

1. KINDS OF COMPENSATION CONVENTIONAL

Q: What are the kinds of compensation? Q: What is conventional compensation?

A: A: It is one that takes place by agreement of the

1. Legal compensation – by operation of parties.
law
2. Conventional – by agreement of the JUDICIAL COMPENSATION
parties
3. Judicial – by judgment of the court Q: What is judicial compensation?
when there is a counterclaim duly
pleaded, and the compensation A: One made by order of a court based on a
decreed permissive counterclaim. Pleading and proof of
the counterclaim must be made.
LEGAL COMPENSATION
FACULTATIVE COMPENSATION
Q: What are the debts not subject to
compensation?

にどぱ
CIVIL LAW TEAM:

A:
1. Debts arising from contracts of deposit
2. Debts arising from contracts of
commodatum
3. Claims for support due by gratuitous
title
4. Obligations arising from criminal
offenses
5. Certain obligations in favor of
government (e.g. taxes, fees, duties,
and others of a similar nature)

Note: If a person should have against him several

debts which are susceptible of compensation, the
rules on the application of payments shall apply to
the order of the compensation. (Art. 1289, NCC)

Q: De Leon sold and delivered to Silahis various

merchandise. Due to Silahis' default, De Leon
filed a complaint for the collection of said
accounts. Silahis asserts, as affirmative defense,
a debit memo as unrealized profit for a
supposed commission that Silahis should have
received from De Leon. Was there legal
compensation?

A: Silahis admits the validity of its outstanding

accounts with De Leon. But whether De Leon is
liable to pay Silahis a commission on the subject
sale to Dole is disputed. This circumstance
prevents legal compensation from taking place.
(Silahis Marketing Corp. v. IAC, G. R. No. L‐74027,
Dec. 7, 1989)

Note: Compensation is not proper where the claim

of the person asserting the set‐off against the other
is not clear nor liquidated; compensation cannot
extend to unliquidated, disputed claim existing from
breach of contract. (Silahis Marketing Corp. v. IAC,
G. R. No. L‐74027, Dec. 7, 1989)

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: What is facultative compensation?

A: One of the parties has a choice of

claiming or opposing the compensation.

Q: What are the obligations subject

to facultative compensation?

A: When one of the debts arises from:

1. Depositum
2. Obligations of a depositary
3. Obligations in commudatum
4. Claim of support due to gratuitous title
XPN: Future support.
5. Civil liability from a crime

Q: Distinguish compensation
from payment. A:
COMPENSATION PAYMENT
A mode of
extinguishing to the
Payment means not
concurrent amount, the
only delivery of money
obligations of those
but also performance of
persons who in their
an obligation
own right are
reciprocally debtors
and
creditors of each other
Capacity of parties not Debtor must have
necessary capacity to dispose
of the thing paid;
Reason: Compensation creditor must have
operates by law, not capacity to receive
by the act of the payment
parties
There can be partial The performance
extinguishment of must be complete
the unless
obligation waived by the creditor
Legal compensation
takes place by Involves delivery
operation of law or action
without
simultaneous delivery
It is not necessary that
Parties must be
the parties be mutually
mutually debtors and
debtors and creditors
creditors of each other
of
each other

Q: Distinguish compensation from confusion. has been held that the relation existing between
a depositor and a bank is that of creditor and
A: debtor. As a general rule, a bank has a right of set
COMPENSATION CONFUSION off of the deposits in its hands for the payment of
(Arts. 1278‐1279) (Arts. 1275‐1277) any indebtedness to it on the part of a depositor"
Two persons who are One person where (Gullas v. PNB, GR No. L‐43191, November 13,
mutual debtors and qualities of debtor and 1935). Hence, compensation took place between
creditors of each other creditor are merged the mutual obligations of X and Y bank. (1998 Bar
At least two obligations One obligation Question)
Q: Atty. Laquihon, in behalf of Pacweld, filed a
Q: Eduardo was granted a loan by XYZ Bank for
pleading addressed to MPCC titled “motion to
the purpose of improving a building which XYZ
direct payment of attorney's fee”, invoking a
leased from him. Eduardo executed the
decision wherein MPCC was adjudged to pay
promissory note in favor of the bank, with his
Pacweld the sum of P10,000.00 as attorney's
friend Ricardo as cosignatory. In the PN, they
fees. MPCC filed an opposition stating that the
both acknowledged that they are “individually
said amount is set‐off by a like sum of
and collectively” liable and waived the need for
P10,000.00, collectible in its favor from Pacweld
prior demand. To secure the PN, Ricardo
also by way of attorney's fees which MPCC
executed a real estate mortgage on his own
recovered from the same CFI of Manila in
property. When Eduardo defaulted on the PN,
another civil case. Was there legal
XYZ stopped payment of rentals on the building
compensation?
on the ground that legal compensation had set
in. Since there was still a balance due on the PN
A: MPCC and Pacweld were creditors and debtors after applying the rentals, XYZ foreclosed the
of each other, their debts to each other real estate mortgage over Ricardo’s property.
consisting in final and executory judgments of the Ricardo opposed the foreclosure on the ground
CFI in two separate cases. The two obligations, that he is only a co‐signatory; that no demand
therefore, respectively offset each other, was made upon him for payment, and assuming
compensation having taken effect by operation of he is liable, his liability should not go beyond
law and extinguished both debts to the half of the balance of the loan. Further, Ricardo
concurrent amount of P10,000.00, pursuant to said that when the bank invoked compensation
the provisions of Arts. 1278, 1279 and 1290 of between the rentals and the amount of the
the Civil Code, since all the requisites provided in loan, it amounted to a new contract or
Art. 1279 of the said Code for automatic novation, and had the effect of extinguishing the
compensation "even though the creditors and security since he did not give his consent (as
debtors are not aware of the compensation" owner of the property under the real estate
were present. (Mindanao Portland Cement Corp. mortgage) thereto.
v. CA,G.R. No. L‐62169, Feb. 28, 1983)
Can XYZ Bank validly assert legal compensation?
Q: X, who has a savings deposit with Y Bank in
the sum of PI,000,000.00, incurs a loan A: XYZ Bank may validly assert the partial
obligation with the said bank in the sum of compensation of both debts, but is should be
P800,000.00 which has become due. When X facultative compensation because not all of the
tries to withdraw his deposit, Y Bank allows only five requisites of legal compensation are present
P200,000.00 to be withdrawn, less service (Art. 1279, NCC). The payment of the rentals by
charges, claiming that compensation has XYZ Bank is not yet due, but the principal
extinguished its obligation under the savings obligation of loan where both Eduardo and
account to the concurrent amount of X's debt. X Ricardo are bound solidarily and therefore any of
contends that compensation is improper when them is bound principally to pay the entire loan,
one of the debts, as here, arises from a contract is due and demandable without need of demand.
of deposit. Assuming that the promissory note XYZ Bank may declare its obligation to pay rentals
signed by X to evidence the loan does not as already due and demand payment from any of
provide for compensation between said loan the two debtors.
and his savings deposit, who is correct?
Alternative Answer: Legal compensation can be
A: Y bank is correct. All the requisites of Art.
validly asserted between the bank, Eduardo and
1279, Civil Code are present. Compensation shall
Ricardo. This is a case of facultative obligation,
take place when two persons are reciprocally
thus, the bank can assert partial compensation.
creditor and debtor of each other. In this
connection, it
S
ACADEMICS CHAIR: LESTERAJDVISER
AY ALAN: AE.TTYF.LORES
ELMERII T. RABUYA; SUBJECT HEAD: ALFREDO B.U N I V EII;R S I T Y O F S A N T O T O M A
DIMAFELIX
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

にどひ

Banks have an inherent right to set off where in the obligation under Art. 1302, NCC. (2008 Bar
both obligations are due and demandable (Art. Question)
1279, NCC).
F. NOVATION
Can Ricardo’s property be foreclosed to pay the
full balance of the loan?

になど
CIVIL LAW TEAM:

A: No, because there was no prior demand on

Ricardo, depriving him of the right to reasonably
block the foreclosure by payment. The waiver of
prior demand in the PN is against public policy
and violates the right to due process. Without
demand, there is no default and the foreclosure
is null and void. Since the mortgage, insofar as
Ricardo is concerned is not violated, a
requirement under Act 3135 for a valid
foreclosure of real estate mortgage is absent.

In the case of DBP v. Licuanan, it was held that:

“the issue of whether demand was made before
the foreclosure was effected is essential. If
demand was made and duly received by the
respondents and the latter still did not pay, then
they were already in default and foreclosure was
proper. However, if demand was not made, then
the loans had not yet become due and
demandable. This meant that the respondents
had not defaulted in their payment and the
foreclosure was premature.”

Alternative Answer 1:No. Although the principal

obligation of loan is due and demandable without
need of further demand the foreclosure of the
accessory contract of real estate mortgage, there
is a need of notice and demand.

Alternative Answer 2: Yes. Ricardo’s property can

be foreclosed to pay the full balance of the loan.
He is admittedly “individually and collectively”
liable. His liability is solidary. He and Eduardo
have waived notice for a prior demand as
provided in the promissory note.

Does Ricardo have basis under the Civil Code for

claiming that the original contract was novated?

A: None of the three kinds of novation is

applicable. There is no objective novation,
whether express or implied, because there is no
change in the object or principal conditions of the
obligation. There is no substitution of debtors,
either. Compensation is considered as
abbreviated or simplified payment and since
Ricardo bound himself solidarily with Eduardo,
any facultative compensation which occurs does
not result in partial legal subrogation. Neither
Eduardo nor Ricardo is a third person interested

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

by material incompatibility.
Q: What is novation?
There is no doubt that the upgrading was a
A: It is the change of an obligation by novation of the original agreement covering the
another, resulting in its extinguishment
or modification, either by changing the
object or principal conditions, or by
substituting another in the place of the
debtor or by subrogating a third
person to the rights of the creditor.
(Pineda, Obligations and Contracts,
2000 ed, p. 298)

Q: What are the requisites of

novation? A:
1. Previous valid obligation;
2. An agreement by the parties
to create a new one or a
modified version;
3. Extinguishment or
modification of the old
obligation; and
4. Valid new obligation.

Q: Is novation presumed?

A: No. Novation is never presumed, it

must be proven as a fact either by:
1. Explicit declaration – if it be
so declared in unequivocal
terms; or
2. Material incompatibility –
that the old and the new
obligations be on every point
incompatible with each
other. (Art. 1293, NCC)

Q: SDIC issued to Danilo a Diners Card

(credit card) with Jeannete as his
surety. Danilo used this card and
initially paid his obligations to SDIC.
Thereafter, Danilo wrote SDIC a letter
requesting it to upgrade his Regular
Diners Club Card to a Diamond
(Edition) one. As a requirement of
SDIC, Danilo secured from Jeanette
her approval and the latter obliged.
Danilo's request was granted and he
was issued a Diamond (Edition) Diners
Club Card. Danilo had incurred credit
charged plus appropriate interest and
service charge. However, he defaulted
in the payment of this obligation. Was
the upgrading a novation of the
original agreement governing the use
of Danilo Alto's first credit card, as to
extinguish that obligation?

A: Yes. Novation, as a mode of

extinguishing obligations, may be done
in two ways: by explicit
VICEdeclaration, or : KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
CHAIRS FOR ACADEMICS
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

first credit card issued to Danilo Alto, basically b.

if suspensive and it did not occur –
since it was committed with the intent of it is as if there is no obligation;
cancelling and replacing the said card. However, thus, there is nothing to novate
the novation did not serve to release Jeanette Did the assignment amount to payment by
from her surety obligations because in the surety cession?
undertaking she expressly waived discharge in
case of change or novation in the agreement A:No.There was only one creditor, the DBP.
governing the use of the first credit card.(Molino Article 1255 contemplates the existence of two
v. Security Diners International Corp.,G.R. No. or more creditors and involves the assignment of
136780, Aug. 16, 2001) all the debtor's property.

Q: What are the effects of novation? Did the assignment constitute dation in
payment:
A:
1. Extinguishment of principal also A: No. The assignment, being in its essence a
extinguishes the accessory, except: mortgage, was but a security and not a
a. Mortgagor, pledgor, surety or satisfaction of indebtedness. (DBP v. CA, G.R. No.
guarantor agrees to be bound by 118342, Jan. 5, 1998)
the new obligation (Tolentino, Civil
Code of the Philippines, Vol. IV,
1999 ed, p. 395)
b. Stipulation made in favor of a third
person such as stipulation pour
atrui(Art. 1311, NCC), unless
beneficiary consents to the
novation.
2. If the new obligation is:
a. Void – old obligation shall subsist
since there is nothing to novate,
except when the parties intended
that the old obligation be
extinguished in any event.
b. Voidable – novation can take
place, exceptwhen such new
obligation is annulled. In such case,
old obligation shall subsist.
c. Pure obligation – conditions of old
obligation deemed attached to the
new, unless otherwise stipulated
(Tolentino, Civil Code of the
Philippines, Vol. IV, 1999 ed, p.
399)
d. Conditional obligation:
i. if resolutory– valid until
the happening of the
condition
ii. if suspensive and did
not materialize– no
novation, old obligation
is enforced

3. If old obligation is conditional and the

new obligation is pure:
a. if resolutoryand it occurred – old
obligation already extinguished; no
new obligation since nothing to
novate

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II

U NIVERSITY OF S ANTO T OMA
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B.SDIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
OBLIGATIONS

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CONTRACTS Note: We follow the theory of cognition and not the

theory of manifestation. Under our Civil Law, the
Q: What is a contract? offer & acceptance concur only when the offeror
comes to know, and not when the offeree merely
A: It is a meeting of the minds between two or manifests his acceptance.
more persons whereby one binds himself, with
respect to the other, or where both parties bind Q: What are the requisites of a valid consent?
themselves reciprocally in favor of one another,
to fulfill a prestation to give, to do, or not to do. A: It should be:
(Pineda, Obligations and Contracts, 2000 ed, p.
328) 1. Intelligent, or with an exact notion of
the matter to which it refers;
Q: What is the difference between an obligation
and a contract? Note: Intelligence in consent is vitiated by
error; freedom by violence, intimidation
A: While a contract is one of the sources of or undue influence; and spontaneity by
obligations, an obligation is the legal tie or fraud.
relations itself that exists after a contract has
been entered into. 2. Free; and
3. Spontaneous.
Hence, there can be no contract if there is no
obligation. But an obligation may exist without a Q: What is the effect on the validity of a
contract. (De Leon, Obligations and Contracts, contract if consent is reluctant?
2003 ed, p. 283‐284)
A: A contract is valid even though one of the
I. ESSENTIAL REQUISITES OF A CONTRACT parties entered into it against his wishes and
desires or even against his better judgment.
Q: State the essential elements of Contracts are also valid even though they are
entered into by one of the parties without hope
contracts. A: COC of advantage or profit (Martinez v. Hongkong and
1. Consent; Shanghai Banking Corp., GR No. L‐5496, Feb. 19,
2. Object or subject matter; and 1910).
3. Cause or consideration.
Q: What are the kinds of simulation of contract?
Q: State the characteristics of a contract.
A:
A: ROMA
1. Relativity (Art. 1311, NCC)

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CIVIL LAW TEAM:
2. Obligatoriness and consensuality(Art.
1315, NCC)
3. Mutuality (Art. 1308, NCC)
4. Autonomy (Art. 1306, NCC)

CONSENT

Q: What are the elements of consent?

A: LM‐CR
1. Legal capacity of the contracting
parties;
2. Manifestation of the conformity of the
contracting parties;
3. Parties’ Conformity to the object,
cause, terms and condition of the
contract must be intelligent,
spontaneous and free from all vices of
consent; and
4. The conformity must be Real.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

1. Absolute – the contracting parties

do not intend to be bound by the
contract at all, thus the contract is
void.

2. Relative – the real transaction is

hidden; the contracting parties
conceal their true agreement;
binds the parties to their real
agreement when it does not
prejudice third persons or is not
intended for any purpose contrary
to law, morals, etc. If the
concealed contract is lawful, it is
absolutely enforceable, provided
it has all the essential requisites:
consent, object, and cause.

As to third persons without

notice, the apparent contract is
valid for purposes beneficial to
them. As to third persons with
notice of the simulation, they
acquire no better right to the
simulated contract than the
original parties to the same.

Q: Tiro is a holder of an ordinary timber license Q: What are the requisites of a valid offer?
issued by the Bureau of Forestry. He executed a
deed of assignment in favor of the Javiers. At A:
the time the said deed of assignment was 1. Must be certain
executed, Tiro had a pending application for an 2. May be made orally or in writing, unless
additional forest concession. Hence, they the law prescribes a particular form
entered into another agreement.
Q: When does offer become ineffective?
Afterwards, the Javiers, now acting as timber
license holders by virtue of the deed of A:
assignment entered into a forest consolidation 1. Death, civil interdiction, insanity or
agreement with other ordinary timber license insolvency of either party before
holders. For failure of the Javiers to pay the acceptance is conveyed
balance due under the two deeds of assignment,
Tiro filed an action against them. Are the deeds 2. Express or implied revocation of the
of assignment null and void for total absence of offer by the offeree
consideration and non‐fulfillment of the
conditions? 3. Qualified or conditional acceptance of
the offer, which becomes counter‐offer
A: The contemporaneous and subsequent acts of
Tiro and the Javiers reveal that the cause stated 4. Subject matter becomes illegal or
in the first deed of assignment is false. It is impossible before acceptance is
settled that the previous and simultaneous and communicated
subsequent acts of the parties are properly
cognizable indicia of their true intention. Where Q: What is the rule on complex
the parties to a contract have given it a practical
construction by their conduct as by acts in partial offer? A:
performance, such construction may be 1. Offers are interrelated – contract is
considered by the court in construing the perfected if all the offers are accepted
contract, determining its meaning and 2. Offers are not interrelated – single
ascertaining the mutual intention of the parties acceptance of each offer results in a
at the time of contracting. The first deed of perfected contract unless the offeror
assignment is a relatively simulated contract has made it clear that one is dependent
which states a false cause or consideration, or upon the other and acceptance of both
one where the parties conceal their true is necessary.
agreement. A contract with a false consideration
is not null and void per se. Under Article 1346 of Q: What is the rule on advertisements as offers?
the Civil Code, a relatively simulated contract,
when it does not prejudice a third person and is A:
not intended for any purpose contrary to law, 1. Business advertisements –not a definite
morals, good customs, public order or public offer, but mere invitation to make an
policy binds the parties to their real agreement. offer, unless it appears otherwise
(Javier v. CA, G.R. No. L‐48194, Mar. 15, 1990) 2. Advertisement for bidders –
onlyinvitation to make proposals and
Q: What are contracts of adhesion? advertiser is not bound to accept the
highest or lowest bidder, unless it
A: One party has already a prepared form of a appears otherwise.
contract, containing the stipulations he desires,
and he simply asks the other party to agree to Q: What are the effects of an option?
them if he wants to enter into the contract.
A: Option may be withdrawn anytime before
Q: What are the elements of a valid offer and acceptance is communicated but not when
acceptance? supported by a consideration other than
purchase price – option money.
A:
1. Definite – unequivocal
2. Intentional
3. Complete – unconditional

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

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Q: What are the requisites of a valid Note: The most evident and fundamental requisite
acceptance? in order that a thing, right or service may be the
object of a contract, it should be in existence at the
A: moment of the celebration of the contract, or at
1. Must be absolute; a qualified least, it can exist subsequently or in the future.
acceptance constitutes a counter‐offer
2. No specified form but when the offeror Q: What are the things which can be the object
specifies a particular form, such must of contracts?
be complied with
A:
Note: Offer or acceptance, or both, expressed in GR: All things or services may be the object of
electronic form, is valid, unless otherwise agreed by contracts.
the parties (electronic contracts).
Q: What is the period for acceptance? XPNs:
1. Things outside the commerce of men;
A: 2. Intransmissible rights;
1. Stated fixed period in the offer 3. Future inheritance, except in cases
a. Must be made within the period expressly authorized by law;
given by the offeror 4. Services which are contrary to law,
i. As to withdrawal of the offer: morals, good customs, public order or
public policy;
GR: It can be made at any time 5. Impossible things or services; and
before acceptance is made, by 6. Objects which are not possible of
communicating such withdrawal determination as to their kind.
XPN: When the option is founded
Q: A contract of sale of a lot stipulates that the
upon a consideration, as something
"payment of the full consideration based on a
paid or promised since partial
payment of the purchase price is survey shall be due and payable in 5 years from
considered as proof of the the execution of a formal deed of sale". Is this a
perfection of the contract conditional contract of sale?

2. No stated fixed period

a. Offer is made to a person present A: No, it is not. The stipulation is not a condition
– acceptance must be made which affects the efficacy of the contract of sale.
immediately It merely provides the manner by which the full
b. Offer is made to a person absent – consideration is to be computed and the time
acceptance may be made within within which the same is to be paid. But it does
such time that, under normal not affect in any manner the effectivity of the
circumstances, an answer can be contract. (Heirs of San Andresv.Rodriguez, G.R.
received from him No. 135634, May 31, 2000)

Note: Acceptance may be revoked before it comes CAUSE

to the knowledge of the offeror (withdrawal of
offer) Q: What are the requisites of a cause?

OBJECT A: It must:
1. exist
Q: What are the requisites of an object? 2. be true
3. be licit
A:
1. Determinate as to kind (even if not Q: What are the two presumptions in contracts
determinate, provided it is possible to as to cause?
determine the same without the need
of a new contract); A:
2. Existing or the potentiality to exist 1. Every contract is presumed to have a
subsequent to the contract; cause; and
3. Must be licit; 2. The cause is valid.
4. Within the commerce of man; and
5. Transmissible.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

になね CIVIL LAW TEAM:

Q: What are the kinds of causes? c. in cases specified by law

(e.g.contracts entered when ward
A: suffers lesion of more than 25%)
1. Cause of onerous contracts – the
prestation or promise of a thing or II. KINDS OF CONTRACT
service by the other
2. Cause of remuneratory contracts– the Q: What are the kinds of contracts?
service or benefit remunerated
3. Cause of gratuitous contracts – the A:
mere liberality of the donor or 1. Consensual contracts which are
benefactor perfected by the mere meeting of the
4. Accessory – identical with cause of minds of the parties
principal contract, the loan which it
derived its life and existence (e.g.: 2. Real contracts that require delivery for
mortgage or pledge) perfection –creation of real rights over
immovable property must be written
Q: Distinguish cause from motive.
3. Solemn contracts– contracts which
A: must appear in writing, such as:
CAUSE MOTIVE
Direct and most a. Donations of real estate or of
Indirect or remote
proximate reason of movables if the value exceeding
reasons
a P5,000;
contract b. Transfer of large cattle;
Objective and juridical Psychological or purely c. Stipulation to pay interest in loans;
reason of contract personal reason d. Sale of land through an agent;
Legality or illegality of Legality or illegality of e. Partnership to which immovables
cause affects the motive does not affect are contributed;
existence or validity the existence or validity f. Stipulation limiting carrier’s
of of contract
liability to less than extra‐ordinary
the contract
diligence; or
Cause is always the
Motive differs for each g. Contracts of antichresis and sale of
Q: What is the effect of the error of cause on vessels.
contracts?

A: Q: What is the principle of relativity of

1. Absence of cause (want of cause; there contracts?
is total lack or absence of cause) –
Confers no right and produces no legal A:
effect GR: A contract is binding not only between
2. Failure of cause ‐ Does not render the parties but extends to the heirs, successors in
contract void interest, and assignees of the parties,
3. Illegality of cause (the cause is contrary provided that the contract involves
to law, morals, good customs, public transmissible rights by their nature, or by
order and public policy)–Contract is null stipulation or by provision of law.
and void
4. Falsity of cause (the cause is stated but XPNs:
the cause is not true)–Contract is void, 1. Stipulation pour autrui (stipulation in
unless the parties show that there is favor of a third person) – benefits
another cause which is true and lawful deliberately conferred by parties to a
5. Lesion or inadequacy of cause –Does contract upon third persons.
not invalidate the contract, unless:
a. there is fraud, mistake, or undue Requisites:
influence; a. The stipulation must be part, not
b. when the parties intended a whole of the contract;
donation or some other b. Contracting parties must have
contract;or clearly and deliberately conferred
a favor upon third person;

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

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c. Third person must have his debt as soon as he is able, even after 10
communicated his acceptance; and years and that he waives his right to
d. Neither of the contracting parties prescription. What are the effects of said
bears the legal representation of stipulation to the action for collection filed by
the third person. Borromeo?

2. When a third person induces a party to A: None. The rule is that a lawful promise made
violate the contract for a lawful consideration is not invalid merely
because an unlawful promise was made at the
Requisites: same time and for the same consideration. This
a. Existence of a valid contract rule applies although the invalidity is due to
b. Third person has knowledge of violation of a statutory provision, unless the
such contract statute expressly or by necessary implication
c. Third person interferes without declares the entire contract void. Thus, even with
justification such waiver of prescription, considering that it
3. Third persons coming into possession of was the intent of the parties to effectuate the
the object of the contract creating real terms of the promissory note, there is no legal
rights obstacle to the action for collection filed by
Borromeo. (Borromeo v. CA,G.R. No. L‐22962,
4. Contracts entered into in fraud of Sept. 28, 1972)
creditors
Note: Where an agreement founded on a legal
Q: Fieldmen's Insurance issued, in favor of MYT, consideration contains several promises, or a
a common carrier, accident insurance policy. promise to do several things, and a part only of the
50% of the premium was paid by the driver. The things to be done are illegal, the promises which can
policy indicated that the Company will be separated, or the promise, so far as it can be
indemnify the driver of the vehicle or his separated, from the illegality, may be valid.
representatives upon his death. While the policy (Borromeo v. CA,G.R. No. L‐22962, Sept. 28, 1972)
was in force, the taxicab driven by Carlito, met
with an accident. Carlito died. MYT and Carlito's Q: What is the principle of mutuality of
parents filed a complaint against the company contracts?
to collect the proceeds of the policy. Fieldmen’s
admitted the existence thereof, but pleaded lack A: Contract must be binding to both parties and
of cause of action on the part of the parents. its validity and effectivity can never be left to the
Decide. will of one of the parties. (Art. 1308, NCC)

A: Yes. Carlito’s parents‐ who, admittedly, are his Q: What is the principle of autonomy of
sole heirs have a direct cause of action against contracts?
the Company. This is so because pursuant to the
stipulations, the Company will also indemnify A: It is the freedom of the parties to contract and
third parties. The policy under consideration is includes the freedom to stipulate provided the
typical of contracts pour autrui, this character stipulations are not contrary to law, morals, good
being made more manifest by the fact that the customs, public order or public policy. (Art. 1306,
deceased driver paid 50% of the premiums. NCC)
(Coquia v. Fieldmen’s Insurance Co., Inc.,G.R. No.
L‐23276, Nov. 29, 1968)
A. CONSENSUAL CONTRACTS
Q: What is the obligatory force of contracts?

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CIVIL LAW TEAM:
A: The parties are bound not only by what has
been expressly provided for in the contract but
also to the natural consequences that flow out of
such agreement. (Art. 1315, NCC)

Q: Villamor borrowed a large amount from

Borromeo, for which he mortgaged his property
but defaulted.Borromeo pressed him for
settlement. The latter instead offered to execute
a promissory note containing a promise to pay

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

Q: What are consensual contracts?

A: They are contracts perfected by mere consent.

Note: This is only the general rule.

B. REAL CONTRACTS

Q: What are real contracts?

A: They are contracts perfected by delivery

C. FORMAL CONTRACTS 7. Chattel mortgage‐ personal property

must be recorded in the Chattel
Q: What are formal contracts? Mortgage Register

A: Contracts which require a special form for III. FORM OF CONTRACTS

perfection.
Q: What are rules on the form of contracts?
Q: What are the formalities required in the
following contracts? A:
A: 1. Contracts shall be obligatory, in
1. Donations:
whatever form they may have been
a. personal property‐ if value
entered into, provided all essential
exceeds 5000, the donation
requisites for their validity are present.
and acceptance must both be
written. 2. Contracts must be in a certain form –
b. b. real property: when the law requires that a contract
i. donation must be in a public be in some form to be:
instrument, specifying therein the a. valid;
property donated and value of b. enforceable; or
charges which donee must satisfy. c. for the convenience of the parties.
ii. acceptance must be written, either
in the same deed of donation or in 3. The parties may compel each other to
a separate instrument. reduce the verbal agreement into
iii.If acceptance is in a separate writing.
instrument, the donor shall be
notified therof in authentic form, Note:
and this step must be noted in both GR: Form is not required in consensual contracts.
instruments.
Note: The acceptance in a separate XPNs: When the law requires a contract be in
document must be a public instrument. certain for its:
1. validity (formal contracts); or
2. Partnership where real property 2. enforceability (under Statute of Frauds).
contributed:
i. there must be a public instrument Q: What are the acts which must appear in a
regarding the partnership. public document?
ii. the inventory of the realty must be
made, signed by the parties and A:
attached to the public instrument. 1. Donation of real properties (Art. 719);
2. Partnership where immoveable
3. Antichresis‐ the amount of the principal property or real rights are contributed
and interest must be in writing. to the common fund (Arts. 1171 &
1773);
4. Agency to sell real property or an 3. Acts and contracts which have for their
interest therein‐ authority of the agent object the creation, transmission,
must be in writing. modification or extinguishment of real
rights over immovable property; sales
5. Stipulation to charge interest‐ interest of real property or of an interest
must be stipulated in writing. therein is governed by Arts. 1403, No.
2, and 1405 [Art. 1358 (1)];
6. Stipulation limiting common carrier's 4. The cession, repudiation or
duty of extraordinary diligence to renunciation of hereditary rights or of
ordinary diligence: those of the conjugal partnership of
i. must be in writing, signed by gains [Art. 1358 (2)]
shipper or owner 5. The power to administer property or
ii. supported by valuable consideration any other power which has for its
other than the service rendered by object an act appearing or which should
the comon carrier appear in a public document or should
iii.reasonable, just and not contrary to prejudice a third person [Art. 1358 (3)];
public policy.

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

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6. The cession of actions or rights A: It may be ordered at the instance of:

proceeding from an act appearing in a 1. if the mistake is mutual – either party
public document [Art. 1358 (4)]. or his successors in interest; otherwise;
2. upon petition of the injured party; or
Q: What are contracts that must be 3. his heirs and assigns.

registered? A: Note: When one of the parties has brought an

1. Chattel mortgages (Art. 2140) action to enforce the instrument, no subsequent
2. Sale or transfer of large cattle (Cattle reformation can be asked (estoppel).
Registration Act)
Q: In case of reformation of contracts, is the
REFORMATION prescription period in bringing an action for
reformation run from the time the contract
Q: What is reformation of instruments? became disadvantageous to one party?

A: It is a remedy to conform to the real intention A: In reformation of contracts, what is reformed

of the parties due to mistake, fraud, inequitable is not the contract itself, but the instrument
conduct, accident. (Art. 1359) embodying the contract. It follows that whether
the contract is disadvantageous or not is
Note: Reformation is based on justice and equity. irrelevant to reformation and therefore, cannot
be an element in the determination of the period
Q: What are the requisites in reformation of for prescription of the action to reform.
instruments?
IV. DEFECTIVE CONTRACTS
A:
1. Meeting of the minds to the contract Q: What may be the status of
2. True intention is not expressed in the
instrument contracts? A:
3. By reason of MARFI: 1. Valid
a. Mistake, 2. Void
b. Accident, 3. Voidable
c. Relative simulation, 4. Rescissible
d. Fraud, or 5. Unenforceable
e. Inequitable conduct 6. Inexistent
4. Clear and convincing proof of MARFI

Note: When there is no meeting of the minds, the

A. RESCISSIBLE CONTRACTS
Q: What are rescissible contracts?
proper remedy is annulment and not reformation.
A: Those which have caused a particular
Q: In what cases is reformation of instruments economic damage either to one of the parties or
not allowed? to a third person and which may be set aside
even if valid. It may be set aside in whole or in
A: part, to the extent of the damage caused. (Art.
1. Simple, unconditional donations inter 1381, NCC)
vivos
2. Wills Q: Which contracts are rescissible?
3. When the agreement is void
4. When an action to enforce the A:
instrument is filed (estoppel)

Q: What is the prescriptive period in reformation

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of instruments? CIVIL LAW TEAM:

A: 10 years from the date of the execution of the

instrument.

Q: Who may ask for the reformation of an

instrument?

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
CONTRACTS
1. Entered into by persons exercising
fiduciary capacity:
a. Entered into by guardian
whenever ward suffers
damage more than ¼ of
value of property.
b. Agreed upon in
representation of absentees,
if absentee suffers lesion by
more than ¼ of value of
property.

c. Contracts where rescission is Applicability

based on fraud committed on Applies to both unilateral
creditor (accionpauliana) Applies only to reciprocal
and reciprocal
d. Objects of litigation; contract obligations
obligations
entered into by defendant without Person who can Initiate the Action
knowledge or approval of litigants Even third persons
Only the injured party
or judicial authority prejudiced by the
who is a party to the
e. Payment by an insolvent – on contract may bring the
contract
debts which are not yet due; action
prejudices claim of others Fixing of Period by the Court
f. Provided for by law (Arts. 1526, Court may fix a period or
1534, 1538, 1539, 1542, 1556, grant extension of time
1560, 1567 & 1659, NCC) for the fulfillment of the Court cannot
obligation when there is grant extension
2. Payments made in state of insolvency: sufficient reason to of time
justify such extension
a. Plaintiff has no other means to
Purpose
maintain reparation
Reparation for damage
b. Plaintiff must be able to return Cancellation of
or injury, allowing partial
whatever he may be obliged to the contract
rescission of contract
return due to rescission
c. The things must not have been Note: While Article 1191 uses the term “rescission,”
passed to third persons in good the original term which was used in the old Civil
faith Code, from which the article was based, was
d. It must be made within 4 yrs. “resolution.” (Ongv.CA,G.R. No. 97347, July 6, 1999)

Q: What are the requisites before a contract Q: What is the obligation created by the
entered into in fraud of creditors may be rescission of the contract?
rescinded?
A: Mutual restitution of things which are the
A: objects of the contract and their fruits and of the
1. There must be credit existing prior to price with interest.
the celebration of the contract;
2. There must be fraud, or at least, the Q: When is mutual restitution not applicable?
intent to commit fraud to the prejudice
of the creditor seeking rescission; A:
3. The creditor cannot in any legal manner 1. Creditor did not receive anything from
collect his credit (subsidiary character contract; or
of rescission); and 2. Thing already in possession of third
4. The object of the contract must not be persons in good faith; subject to
legally in possession of a third person in indemnity only, if there are two or
good faith. more alienations – liability of first
infractor.

Q: Distinguish rescission from resolution. Note: Rescission is possible only when the person
demanding rescission can return whatever he may
be obliged to restore. A court of equity will not
RESOLUTION RESCISSION rescind a contract unless there is restitution, that is,
(ART. 1191) (ARTICLE 1381) the parties are restored to the status quo ante.
(Article 1385)
Both presuppose contracts validly entered into and
subsisting and both require mutual restitution when
proper Q: Reyes (seller) and Lim (buyer) entered into a
Nature contract to sell of a parcel of land. Harrison
Principal action. Lumber occupied the property as lessee. Reyes
Subsidiary remedy offered to return the P10 million down payment
retaliatory in character
Grounds for Rescission to Lim because Reyes was having problems in
5 grounds under Art. removing the lessee from the property. Lim
Only ground is non‐ 1381. (lesions or fraud of rejected Reyes’ offer. Lim learned that Reyes
performance of creditors) Non‐ had already sold the property to another.
obligation performance is not
important
S
ACADEMICS CHAIR: LESTERAJDVISER
AY ALAN: AE.TTYF.LORES
ELMERII T. RABUYA; SUBJECT HEAD: ALFREDO B.U N I V EII;R S I T Y O F S A N T O T O M A
DIMAFELIX
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
CONTRACTS

になひ

Trial court, in this case, directed Reyes to Q: What are the characteristics of the right to
deposit the P10 million downpayment with the rescind?
clerk of court but Reyes refused. Does Reyes
have the obligation to deposit the P10 million A:
downpayment in the court? 1. Can be demanded only if plaintiff is
ready, willing and able to comply with
A: Yes. There is also no plausible or justifiable his own obligation and defendant is
reason for Reyes to object to the deposit of the not;
P10 million down payment in court. The contract 2. Not absolute;
to sell can no longer be enforced because Reyes 3. Needs judicial approval in the absence
himself subsequently sold the property. Both Lim of a stipulation allowing for extra‐
and Reyes are seeking for rescission of the judicial rescission, in cases of non‐
contract. reciprocal obligations;
4. Subject to judicial review if availed of
By seeking rescission, a seller necessarily offers to extra‐judicially;
return what he has received from the buyer. Such 5. May be waived expressly or impliedly;
a seller may not take back his offer if the court and
deems it equitable, to prevent unjust enrichment 6. Implied to exist in reciprocal obligations
and ensure restitution, to put the money in therefore need not be expressly
judicial deposit. stipulated upon.

Note: In this case, it was just, equitable and proper Q: May an injured party avail of both fulfillment
for the trial court to order the deposit of the down and rescission as remedy?
payment to prevent unjust enrichment by Reyes at
the expense of Lim. Depositing the down payment
A:
in court ensure its restitution to its rightful owner.
GR:The injured party can only choose
Lim, on the other hand, has nothing to refund, as he
has not received anything under the contract to sell. between fulfillment and rescission of
(Reyes v. Lim, Keng and Harrison Lumber, Inc., G.R. the obligation, and cannot have both.
No. 134241, Aug. 11, 2003)
Note: This applies only when the
Q: What are the badges of fraud attending sales, obligation is possible of fulfillment.
as determined by the courts?
XPN: If fulfillment has become
A: impossible, Article 1191, NCC allows the
1. Consideration of the conveyance is injured party to seek rescission even
inadequate or fictitious; after he has chosen fulfillment. (Ayson‐
2. Transfer was made by a DR after a suit Simon v. Adamos,G.R. No. L‐39378,
has been begun and while it is pending Aug. 28 1984)
against him
3. Sale upon credit by an insolvent DR; Q: Vermen and Seneca entered into an
4. The presence of evidence of large "offsetting agreement", where Seneca is obliged
indebtedness or complete insolvency of to deliver construction materials to Vermen,
the debtor; who is obliged to pay Seneca and to deliver
5. Transfer of all his property by a DR possession of 2 condominium units to Seneca
when he is financially embarrassed or upon its completion. Seneca filed a complaint
insolvent; for rescission of the offsetting against Vermen
6. Transfer is made between father and alleging that the latter had stopped issuing
son, where there are present some or purchase orders of construction materials
any of the above circumstances; and without valid reason, thus resulting in the
7. Failure of the vendee to take exclusive stoppage of deliveries of construction materials
possession of the property. on its part, in violation of the Offsetting
Agreement. Can the agreement be rescinded?

A: Yes, because the provisions of the offsetting

agreement are reciprocal in nature. Article 1191
of the Civil Code provides the remedy of
rescission (more appropriately, the term is
"resolution") in case of reciprocal obligations,
where one of the obligors fails to comply with
that is incumbent upon him.
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
CONTRACTS

ににど CIVIL LAW TEAM:

The question of whether a breach of contract is In a contract to sell, the payment of the purchase
substantial depends upon the attendant price is a positive suspensive condition, the failure
circumstances. Seneca did not fail to fulfill its of which is not a breach, casual or serious, but a
obligation in the offsetting agreement. The situation that prevents the obligation of the vendor
discontinuance of delivery of construction to convey title from acquiring an obligatory force.
materials to Vermen stemmed from the failure of (Ongv.CA, G.R. No. 97347, July 6, 1999)
Vermen to send purchase orders to Seneca.
Vermen would never have been able to fulfill its Q: Goldenrod offered to buy a mortgaged
obligation in allowing Seneca to exercise the property owned by Barreto Realty to which it
option to transfer from Phase I to Phase II, as the paid an earnest money amounting to P1 million.
construction of Phase II has ceased and the It was agreed upon that Goldenrod would pay
subject condominium units will never be the outstanding obligations of Barreto Realty
available. The impossibility of fulfillment of the with UCPB. However, Goldenrod did not pay
obligation on the part of Vermen necessitates UCPB because of the banks denial of its request
resolution of the contract, for indeed, the non‐ for the extension to pay the obligation.
fulfillment of the obligation aforementioned Thereafter, Goldenrod, through its brocker,
constitutes substantial breach of the agreement. informed Barreto Realty that it could not go
(Vermen Realty Development Corp. v. CA and through with the purchase of the property and
Seneca Hardware Co., Inc., G.R. No. 101762, July also demanded the refund of the earnest money
6, 1993) it paid. In the absence of a specific stipulation,
may the seller of real estate unilaterally rescind
Q: Ong and spouses Robles executed an the contract and as a consequence keep the
"agreement of purchase and sale" of 2 parcels earnest money to answer for damages in the
of land. Pursuant to the contract they executed, event the sale fails due to the fault of the
Ong partially paid the spouses the by depositing prospective buyer?
it with the bank. Subsequently, Ong deposited
sums of money with the BPI in accordance with A: No. Goldenrod and Barretto Realty did not
their stipulation that Ong pay the loan of the intend that the earnest money or advance
spouse with BPI. To answer for Ong’s balance, payment would be forfeited when the buyer
he issued 4 post‐dated checks which were should fail to pay the balance of the price,
dishonored. Ong failed to replace the checks especially in the absence of a clear and express
and to pay the loan in full. Can the contract agreement thereon.
entered into by Ong and the spouses be
rescinded? Moreover, Goldenrod resorted to extrajudicial
rescission of its agreement with Barretto Realty.
A: No. The agreement of the parties in this case Under Article 1385, NCC, rescission creates the
may be set aside, but not because of a breach on obligation to return the things which were the
the part of Ong for failure to complete payment object of the contract together with their fruits
of the purchase price. Rather, his failure to do so and interest. Therefore, by virtue of the
brought about a situation which prevented the extrajudicial rescission of the contract to sell by
obligation of the spouses to convey title from Goldenrod without opposition from Barretto
acquiring an obligatory force. Realty, which in turn, sold the property to other
persons, Barretto Realty, had the obligation to
The agreement of purchase and sale shows that return the earnest money which formed part of
it is in the nature of a contract to sell. Ong’s the purchase price plus legal interest from the
failure to complete payment of the purchase date it received notice of rescission. It would be
price is a non‐fulfillment of the condition of full most inequitable if Barretto Realty would be
payment which rendered the contract to sell allowed to retain the money at the same time
ineffective and without force and effect. The appropriate the proceeds of the second sale
breach contemplated in Article 1191, NCC is the made to another. (Goldenrod, Inc. v. CA, G.R. No.
obligor’s failure to comply with an obligation. In 126812, Nov. 24, 1998)
this case, Ong’s failure to pay is not even a
breach but merely an event which prevents the
vendor’s obligation to convey title from acquiring
binding force.

Note: The contract entered into by the parties in U NIVERSI

the case at bar does not fall under any of those TY OF SA
mentioned by Article 1381. Consequently, Article
NTO T OM
1383 is inapplicable.
AS
ACADEMICS CHAIR: LESTERAJDVISER
AY ALAN: AE.TTYF.LORES
ELMERII T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
CONTRACTS

ににな

Q: What is the prescriptive period of action for Q: What are the vices of consent?
rescission?
A: MIVUF
A: 1. Mistake – substantial mistake and not
1. Under Art. 1381, no.1 – within 4 years merely an accidental mistake; must
from the time the termination of the refer to the:
incapacity of the ward; a. substance of the thing which is the
2. Under Art. 1381, no. 2‐ within 4 years subject of the contract; or
from the time the domicile of the b. to those conditions which have
absentee is known; or principally moved one or both
3. Under Art. 1381, nos. 3 & 4 & Art. 1382 parties to enter the contract.
– within 4 years from the time of the
discovery of fraud. Note: Mistake as to identity or
qualifications of one of the parties
B. VOIDABLE CONTRACTS will vitiate consent only when such
identity or qualifications have been
Q: What are the characteristics of a voidable the principal cause of the contract.
contract?
A: 2. Intimidation – An internal moral force
1. Effective until set aside; operating in the will and inducing
2. May be assailed or attacked only in an performance of an act.
action for that purpose; 3. Violence – An external, serious or
3. Can be confirmed; and irresistible physical force exerted upon
4. Can be assailed only by the party whose a person to prevent him from doing
consent was defective or his heirs or something or to compel him to do an
assigns. act.
4. Undue influence – Any means employed
Q: When is there a voidable contract? upon a party which, under the
circumstances could not be resisted
A: When: and has the effect of controlling his
1. one of the parties is incapacitated to volition and inducing him to give his
give consent; or consent to the contract, which
2. consent was vitiated. otherwise, he would not have entered
into.
Q: Who are the persons incapacitated to give 5. Fraud – Use of insidious words or
consent? machinations in inducing another party
to enter into the contract, which
A: DIM without them, he would not have
1. Deaf‐mutes who do not know how to agreed.
read and write (illiterates)
2. Insane or demented persons, unless the Q: What are the kinds of mistake?
contract was entered into during a lucid
interval A:
3. Minors except: 1. Mistake of fact– When one or both of
a. Contracts for necessaries the contracting parties believe that a
b. Contracts by guardians or legal fact exists when in reality it does not,
representatives & the court having or that such fact does not exist when in
jurisdiction had approved the same reality it does.
c. When there is active
misrepresentation on the part of 2. Mistake of law– When 1 or both parties
the minor (minor is estopped) arrive at erroneous conclusion or
d. Contracts of deposit with the interpretation of a question of law or
Postal Savings Bank provided that legal effects of a certain act or
the minor is over 7 years of age transaction.
e. Upon reaching age of majority –
they ratify the same Note:
GR: Mistake as a vice of consent refers to
mistake of facts and not of law.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

ににに
CIVIL LAW TEAM:

XPN: When mistake of law involves error as to mental weakness or some other handicap. It
the effect of an agreement when the real contemplates a situation wherein a contract is
purpose of the parties is frustrated (Art. 1334, entered into but the consent of one of the
NCC). contracting parties is vitiated by mistake or fraud
committed by the other.(Leonardo v. CA, G.R. No.
To determine the effect of an alleged error, both the 125485, Sept. 13, 2004)
objective and subjective aspects of the case which is
the intellectual capacity of the person who Q: What are the requisites that ignorance of or
committed the mistake. erroneous interpretation of law (mistake of law)
may vitiate consent?
Q: When will mistake invalidate consent?
A:
A: Mistake, in order to invalidate consent, should 1. Mistake must be with respect to the
refer to the substance of the thing which is the legal effect of the agreement;
object of the contract, or to those conditions 2. It must be mutual; and
which have principally moved one or both parties 3. Real purpose of the parties must have
to enter into the contract.(Leonardo v. CA, G.R. been frustrated.
No. 125485, Sept. 13, 2004)
Q: What are the requisites of
Q: Leonardo is the only legitimate child of the
late spouses Tomasina and Balbino. She only intimidation? A:
finished Grade three and did not understand 1. One of the parties is compelled to give
English. The Sebastians, on the other hand, are his consent by a reasonable and well‐
illegitimate children. She filed an action to grounded fear of an evil;
declare the nullity of the extrajudicial 2. The evil must be imminent and grave;
settlement of the estate of her parents, which 3. It must be unjust; and
she was made to sign without the contents 4. The evil must be the determining cause
thereof, which were in English, explained to her. for the party upon whom it is employed
She claims that her consent was vitiated in entering into the contract.
because she was deceived into signing the
extrajudicial settlement. Is the extra‐judicial Q: What are the requisites of violence?
settlement of estate of Tomasina valid?
A: It must be:
A: No. When one of the parties is unable to read, 1. serious or irresistible; and
or if the contract is in a language not understood 2. the determining cause for the party
by him, and mistake or fraud is alleged, the upon whom it is employed in entering
person enforcing the contract must show that the into the contract.
terms thereof have been fully explained to the
former. (Art. 1332, NCC) Leonardo was not in a Q: What are the kinds of fraud?
position to give her free, voluntary and
spontaneous consent without having the A:
document, which was in English, explained to 1. Fraud in the perfection of the contract
her. Therefore, the consent of Leonardo was a. Causal fraud (dolo causante)
invalidated by a substantial mistake or error, b. Incidental fraud (dolo incidente)
rendering the agreement voidable. The
extrajudicial partition between the Sebastians 2. Fraud in the performance of an
and Leonardo should be annulled and set aside obligation (Art. 1170, NCC)
on the ground of mistake. (Leonardo v. CA, G.R.
No. 125485, Sept. 13, 2004) Requisites:
a. Fraud, insidious words or
Note: Contracts where consent is given by mistake
machinations must have been
or because of violence, intimidation, undue
employed by one of the
influence or fraud are voidable. These circumstances
are defects of the will, the existence of which
contracting parties;
impairs the freedom, intelligence, spontaneity and b. It must have been serious;
voluntariness of the party in giving consent to the c. It induced the other party to enter
agreement. into a contract; and
d. Should not have been employed
Art. 1332 was intended to protect a party to a by both contracting parties or by
contract disadvantaged by illiteracy, ignorance, third persons.
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B.SDIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
CONTRACTS

ににぬ

Q: Distinguish dolo causante from dolo this suspensive condition. (Samson v. CA, G.R. No.
incidente. 108245, Nov. 25, 1994)

A: Q: What are the causes of extinction of action to

DOLOCAUSANTE DOLOINCIDENTE annul?
(ART. 1338) (ART. 1344)
Refers to fraud which is Refers to fraud which is
serious in character not serious in character

ににね
CIVIL LAW TEAM:
It is the cause which It is not the cause
induces the party to which induces the party
enter into a contract to
enter into a contract
Renders the contract Renders the party liable

Note: In contracts, the kind of fraud that will vitiate

consent is one where, through insidious words or
machinations of one of the contracting parties, the
other is induced to enter into a contract which,
without them, he would not have agreed to. This is
known as dolo causante or causal fraud which is
basically a deception employed by one party prior to
or simultaneous to the contract in order to secure
the consent of the other. (Samson v. CA, G.R. No.
108245, Nov. 25, 1994)

Q: Santos’ lease contract was about to expire

but it was extended and he continued to occupy
the leased premises beyond the extended term.
Samson offered to buy Santos’ store and his
right to the lease. Santos stated that the lease
contract between him and the lessor was
impliedly renewed and that formal renewal
thereof would be made upon the arrival of a
certain Tanya Madrigal, based on the letter to
him given by the lessor. When Samson occupied
the premises, he was forced to vacate for
Santos’ failure to renew his lease. He filed an
action for damages against Santos for fraud and
bad faith claiming that the misrepresentation
induced him to purchase the store and the
leasehold right. Decide.

A: No, Santos was not guilty of fraud nor bad

faith in claiming that there was implied renewal
of his contract of lease with his lessor. The letter
given by the lessor led Santos to believe and
conclude that his lease contract was impliedly
renewed and that formal renewal thereof would
be made upon the arrival of Tanya Madrigal.
Thus, from the start, it was known to both parties
that, insofar as the agreement regarding the
transfer of Santos’ leasehold right to Samson was
concerned, the object thereof relates to a future
right. It is a conditional contract, the efficacy of
which depends upon an expectancy the formal
renewal of the lease contract between Santos
and lessor. The efficacy of the contract between
the parties was thus made dependent upon the
happening of

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

A:
1. Prescription – the action
must be commenced within
4 years from the time the:
a. incapacity ends;
guardianship ceases;
b. violence, intimidation
or undue influence
ends; or
c. mistake or fraud is discovered

2. Ratification–cleanses the
contract of its defects from
the moment it was
constituted

Requisites:
a. there must be
knowledge of the
reason which renders
the contract voidable;
b. such reason must have ceased; and
c. the injured party must
have executed an act
which expressly or
impliedly conveys an
intention to waive his
right

3. By loss of the thing which is

the object of the contract
through fraud or fault of the
person who is entitled to
annul the contract

Q: Who may institute action for annulment?

A: By all who are thereby obliged

principally or subsidiarily.
Note: He who has capacity to contract
may not invoke the incapacity of the
party with whom he has contracted.

A third person who is a stranger to the

contract cannot institute an action for
annulment.

Q: What are the effects of

annulment? A:
1. If contract not yet
consummated – parties shall
be released from the
obligations arising therefrom.
2. If contract has already been
consummated – rules
provided in Arts. 1398‐1402,
NCC, shall govern.

Q: What is confirmation? involved, but merely regulates the formalities of

the contract necessary to render it enforceable.
A: It is an act by which a voidable contract is Evidence of the agreement cannot be received
cured of its vice or defect. without the writing or a secondary evidence of its
contents. (Swedish Match, AB v. CA, G.R. No.
Q: What is recognition? 128120, Oct. 20, 2004)

A: It is an act whereby a defect of proof is cured Note: The Statute of Frauds applies only to
such as when an oral contract is put into writing executory contracts, not to those that are partially
or when a private instrument is converted into a or completely fulfilled. Where a contract of sale is
public instrument. alleged to be consummated, it matters not that
neither the receipt for the consideration nor the
Q: What is ratification? sale itself was in writing. Oral evidence of the
alleged consummated sale is not forbidden by the
A:It is an act by which a contract entered into in Statute of Frauds and may not be excluded in court.
behalf of another without or in excess of (Victoriano v. CA, G.R. No. 87550, Feb. 11, 1991)
authority is cured of its defect.
Q: What is the purpose of the Statute of Frauds?
Q: What are the modes of ratification?
A: It is to prevent fraud and perjury in the
A: enforcement of obligations depending for their
1. For contracts infringing the Statute of evidence on the unassisted memory of witnesses,
Frauds: by requiring certain enumerated contracts and
a. expressly transactions to be evidenced by a writing signed
b. impliedly– by failure to object to by the party to be charged. (Swedish Match, AB v.
the presentation of oral evidence CA, G.R. No. 128120, Oct. 20, 2004)
to prove the contract, or by the
acceptance of benefits under the Q: What are the contracts or agreements
contract. covered by the Statute of Frauds?
2. If both parties are incapacitated,
ratification by their parents or guardian
shall validate the contract retroactively A:
1. An agreement that by its terms is not to
C. UNENFORCEABLE CONTRACTS be performed within a year from the
making thereof;
Q: What are unenforceable contracts? 2. A special promise to answer for the
debt, default or miscarriage of another
A: The following contracts are unenforceable 3. An agreement made in consideration of
unless they are ratified: marriage, other than a mutual promise
1. Those entered into without or in excess to marry;
of authority; 4. An agreement for the sale of goods,
2. Those that do not comply with the chattels or things in action, at a price
Statute of Frauds i.e., are not in writing not lower that 500 pesos, unless the
nor subscribed by the party charged or buyer accepts and receives part of such
by his agent; or goods and chattels, or the evidences, or
3. Those where both contracting parties some of them, of such things in action,
are incapable of giving consent. or pay at the time some part of the
entry is made by the auctioneer in his
Q: What is Statute of Frauds? sales book, at the time of the sale, of
the amount and kind of property sold,
A: The Statute of Frauds [Article 1403, (2)] terms of sale, price, names of the
requires certain contracts enumerated therein to purchasers and person on whose
be evidenced by some note or memorandum in account the sale is made, it is a
order to be enforceable. The term "Statute of sufficient memorandum
Frauds" is descriptive of statutes which require 5. An agreement for the leasing for a
certain classes of contracts to be in writing. The longer period than one year, or for the
Statute does not deprive the parties of the right sale of real property or of an interest
to contract with respect to the matters therein therein;

ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA

ににの

6. A representation to the credit of a third D. VOID CONTRACTS

person
Q: What are the kinds of void contracts?
Q: Cenido, as an heir of Aparato and claiming to
be the owner of a house and lot, filed a A:
complaint for ejectment against spouses 1. Those lacking in essential elements:
Apacionado. On the other hand, spouses No consent, no object, no cause – some
Apacionado allege that they are the owners or all elements of a valid contract are
which are unregistered purchased by them from absent
its previous owner, Aparato. Their claim is a. Those which are absolutely simulated
anchored on a 1‐page typewritten document or fictitious: no cause
entitled "Pagpapatunay," executed by Aparato. b. Those whose cause or object did not
Is the “Pagpapatunay” entered into by Bonifacio exist at the time of the transaction:
and spouse Apacionado valid and enforceable? no cause or object
c. Those whose object is outside the
A: It is valid but unenforceable. Generally, commerce of man: no object
contracts are obligatory, in whatever form such d. Those which contemplate an
contracts may have been entered into, provided impossible service: no object
all the essential requisites for their validity are e. Those where the intention of parties
present. When, however, the law requires that a relative to principal object of the
contract be in some form for it to be valid or contract cannot be ascertained
enforceable, that requirement must be complied
with. 2. Contracts prohibited by law
a. Pactum commisorium – the creditor
The sale of real property should be in writing and appropriates to himself the things
subscribed by the party charged for it to be given by way of pledge or mortgage
enforceable. The "Pagpapatunay" is in writing to fulfill the debt
and subscribed by Aparato, hence, it is b. Pactum de non alienando – an
enforceable under the Statute of Frauds. Not agreement prohibiting the owner
having been subscribed and sworn to before a from alienating the mortgaged
notary public, however, the "Pagpapatunay" is immovable
not a public document, and therefore does not c. Pactum leonina – a stipulation in a
comply with par. 1, Art. 1358, NCC. partnership agreement which
Moreover, the requirement of a public document excludes one or more partners from
in Article 1358 is not for the validity of the any share in the profits or losses
instrument but for its efficacy. Although a
conveyance of land is not made in a public 3. Illegal or illicit contracts(e.g. contract to
document, it does not affect the validity of such sell marijuana)
conveyance. The private conveyance of the house
and lot is therefore valid between Aparato and Q: On July 6, 1976, Honorio and Vicente
the spouses. (Cenidov.Spouses Apacionado, G.R. executed a deed of exchange. Under this
No. 132474, Nov. 19, 1999) instrument, Vicente agreed to convey his 64.22‐
square‐meter lot to Honorio, in exchange for a
Q: What are the two ways of ratifying contracts 500‐square‐meter property. The contract was
which infringe the Statute of Frauds? entered into without the consent of Honorio’s
wife. Is the deed of exchange null and void?

A:
にには 1. Failure to object during the trial to the admissibility of parol
evidence to support a contract covered by the Statute of Frauds.
2. Acceptance of benefits – when the contract has been partly
executed because estoppel sets in by accepting performance.

CIVIL LAW TEAM:

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

A ntered into on July 6,

: 1976, while the Family
Code took effect only
T on August 3, 1998.
h Laws should be applied
e prospectively only,
unless a legislative
d intent to give them
e retroactive effect is
e expressly declared or is
d necessarily implied
from the language
i used. Hence, the
s provisions of the Civil
Code, not the Family
v Code are applicable.
a According to Article 166
l of the Civil Code, the
i husband cannot
d alienate or encumber
any real property of the
u conjugal partnership
n without the wife’s
t consent. This provision,
i however, must be
l

a
n
d

u
n
l
e
s
s

a
n
n
u
l
l
e
d
.

T
h
e

d
e
e
d

w
a
s

e VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE F a c u l t a d d e De r e c h o C i
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C.
UST GOLDEN NOTES 2011

read in conjunction with Article 173 of the same in interest not protected
Code. The latter states that an action to annul an by law
alienation or encumbrance may be instituted by Action to annul
the wife during the marriage and within ten years contract prescribes in 4
from the transaction questioned. Hence, the lack Action to declare nullity years (Pineda,
of consent on her part will not make the does not prescribe Obligations and
husband’s alienation or encumbrance of real Contracts, 2000 ed, p.
property of the conjugal partnership void, but 606)
merely voidable. (Villarandav. Villaranda, G.R.
No. 153447, Feb. 23, 2004) Q: Distinguish void contract from rescissible
contract.
Q: Judie sold one‐half of their lot to Guiang
under a deed of transfer of rights without the A:
consent and over the objection of his wife, Gilda VOID RESCISSIBLE
and just after the latter left for abroad. When Defect is inherent Defect is in its effects, either
Gilda returned home and found that only her in the contract against one of the parties or
son, Junie, was staying in their house. She then itself a
gathered her other children, Joji and Harriet and third person
Nullity is a matter
went to stay in their house. For staying in their Based on equity and matter of
of law and public
alleged property, the spouses Guiang private interest
interest
complained before the barangay authorities for
No legal effects Produces legal effects and
trespassing. even if no action is remains valid if no action
filed to set it aside is
Is the deed of transfer of rights executed by filed
Judie Corpuz and the spouses Guiang void or Action to declare Action to rescind prescribes
voidable? its nullity does within 4 years (Art. 1389,
not prescribe (Art. NCC;
A: 1410, NCC) Pineda, Obligations and
It is void. Gilda’s consent to the contract of sale Contracts, 2000 ed, p.
of their conjugal property was totally inexistent 605)
or absent. Thus, said contract properly falls
within the ambit of Article 124 of the FC. Q: Distinguish void contract from inexistent
contract.
The particular provision in the old Civil Code
which provides a remedy for the wife within 10 A:
years during the marriage to annul the VOID CONTRACT INEXISTENT CONTRACT
encumbrance made by the husband was not Those where all the
carried over to the Family Code. It is thus clear requisites of a contract
that any alienation or encumbrance made after are present, but the
Those where one or
the Family Code took effect by the husband of cause, object or
some of the requisites
the conjugal partnership property without the purpose is contrary to
which are essential for
consent of the wife is null and void. (Spouses law, morals, good
validity are absolutely
Guiangv.CA, G.R. No. 125172, June 26, 1998) customs, public order or
lacking
public policy or the
contract itself is
Q: Distinguish void contract from voidable
prohibited or
contract. declared prohibited.
Principle of in pari
A: Principle of in pari
delicto
delicto is applicable.
VOID VOIDABLE isnot applicable.
Consent is vitiated or
Absence of essential
there is incapacity to V. EFFECT OF CONTRACTS
element/s of a contract
give consent
No effect even if not set Valid contract until set Q: Between whom do contracts take effect?
aside aside
Cannot be ratified Can be ratified A: Contracts take effect only between the parties,
Nullity can be set up and their assigns and heirs, the latter being liable
Nullity can be set up
against any person only to the extent of the property received from
only against a party
asserting right the decedent.
thereto
arising
Q: What are the instances when the heirs may
be liable for the obligation contracted by the
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA,
OZAN J. FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
CONTRACTS

decedent?

ににば
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U NIVERSITY OF S ANTO T OMA
S

A: When the rights and obligations arising from

the contract are transmissible:
1. By their nature; or
2. By stipulation; or
3. By provision of law.

Q: What are the requisites in order that a third

person may demand the fulfillment of the
contract?

A:
1. The contracting parties must have
clearly and deliberately conferred a
favor upon the third person;
2. The third person’s interest or benefit in
such fulfillment must not be merely
incidental; and
3. Such third person communicated his
acceptance to the obligor before the
stipulations in his favor are revoke.

ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;

ににぱ
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