THE LAW ON OBLIGATIONS AND CONTRACTS

Chapter I
GENERAL PROVISIONS

ARTICLE 1156. An obligation is a juridical necessity to give, to do or

not to do. (n)
 a tie of law or a juridical bond by virtue of which one is bound in favor of another to
render something
 may consist in giving a thing, doing a certain act, or not doing a certain act.
 a legal relation established between one party and another, whereby the latter is
bound to the fulfillment of a prestation which the former may demand of him.
(Manresa)
 Obligation is a juridical necessity because in case of non-compliance, the courts of
justice may be called upon to enforce its fulfillment or, in default thereof, the
economic value that it represents.
 the debtor may also be made liable for damage

Damages - the sum of money given as a compensation for the injury or harm suffered by the
creditor or obligee (he who has the right to the performance of the obligation) for the violation of
his rights.

 . If obligations were not made enforceable, then people can disregard them with
impunity
 If an obligation cannot be enforced, it may be only a natural obligation
Civil Obligations - Obligations which give to the creditor or obligee a right of actionin courts of
justice to enforce their performance

Essential requisites of an obligation.

(1) A passive subject (called debtor or obligor) or the person who is bound to the
fulfillment of the obligation; he who has a duty;
(2) An active subject (called creditor or obligee) or the person who is entitled to demand
the fulfillment of the obligation; he who has aright;
(3) Object or prestation (subject matter of the obligation) or the conduct required to be
observed by the debtor. It may consist in giving, doing, or not doing. (see Art. 1232.)
Without the prestation, there is nothing to perform. In bilateral obligations (see Art.
1191.), the parties are reciprocally debtors and creditors; and
(4) A juridical or legal tie (also called efficient cause) or that which binds or connects
the parties to the obligation. The tie in an obligation can easily be determined by
knowing the source of the obligation. (Art.1157.)
 THE LAW ON OBLIGATIONS AND CONTRACTS

Form of obligation.
Article 1356. Contracts shall be obligatory, in whatever form they may have been
entered into, provided all the essential requisites for their validity are present. However,
when the law requires that a contract be in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain way, that requirement is absolute
and indispensable. In such cases, the right of the parties stated in the following article
cannot be exercised.

Obligation, right, and wrong (cause of action) distinguished

(1) Obligation is the act or performance which the law will enforce.
(2) Right, on the other hand, is the power which a person has under the law, to demand
from another any prestation.
(3) A wrong (cause of action), according to its legal meaning, is an act or omission of
one party in violation of the legal right or rights of another, causing injury
Injury- the wrongful violation of the legal rights of another.

Essential elements of cause of action.

(a) a legal right in favor of a person (creditor/plaintiff) by whatever means and under
whatever law it arises or is created;
(b) a correlative legal obligation on the part of another(debtor/defendant) to respect or
not to violate said right; and
(c) an act or omission in breach or violation of said right by the defendant with
consequential injury or damage to the plaintiff for which he may maintain an action for
the recovery of damages or other appropriate relief.
(2) If any of these elements is absent, the complaint becomes vulnerable to a motion to
dismiss on the ground of failure to state a cause of action. The presence of a cause of
action rests on the sufficiency, and not on the veracity, of the allegations in the
complaint, which will have to be examined during the trial on the merits.
(3) A cause of action only arises when the last element occurs, i.e.,at the moment a right
has been transgressed.
 THE LAW ON OBLIGATIONS AND CONTRACTS

Kinds of obligation according to subject matter.

(1) Real obligation (obligation to give) or that in which the subject matter is a thing which
the obligor must deliver to the obligee; or
(2) Personal obligation (obligation to do or not to do) or that in which the subject matter
is an act to be done or not to be done.
There are thus two (2) kinds of personal obligation:
(a) Positive personal obligation or obligation to do or to render service (see Art. 1167.);
and
(b) Negative personal obligation or obligation not to do (which naturally includes
obligations “not to give”). (see Art. 1168.)

ART. 1157. Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)

Sources of obligations
(1) Law. — when they are imposed by the law itself, e.g., the obligation to pay taxes; the
obligation to support one’s family (see Art. 195, Family Code.);
(2) Contracts. — when they arise from the stipulation of the parties (Art. 1306.), e.g., the
obligation to repay a loan by virtue of an agreement;
(3) Quasi-contracts. — when they arise from lawful, voluntary and unilateral acts and
which are enforceable to the end that no one shall be unjustly enriched or benefited at
the expense of another (Art. 2142.),e.g., the obligation to return money paid by mistake
or which is not due. (Art. 2154.) In a sense, these obligations may be considered as
arising from law;
(4) Crimes or acts or omissions punished by law. — when they arise from civil liability
which is the consequence of a criminal offense (Art.1161.), e.g., the obligation of a thief
to return the car stolen by him; the duty of a killer to indemnify the heirs of his victim; and
 THE LAW ON OBLIGATIONS AND CONTRACTS

(5) Quasi-delicts or torts. — when they arise from damage caused to another through an
act or omission, there being fault or negligence, but no contractual relation exists
between the parties (Art. 2176.), e.g., the obligation of the head of a family that lives in a
building or a part thereof to answer for damages caused by things thrown or falling from
the same (Art. 2193.); the obligation of the possessor of an animal to pay for the damage
which it may have caused. (Art. 2183.)

Sources classified.
1) Those emanating from law; and
(2) Those emanating from private acts which may be further subdivided into:
(a) those arising from licit acts, in the case of contracts and quasi-contracts; and
(b) those arising from illicit acts, which may be either punishable by law in the case of
delicts, or not punishable in the case of quasi-delicts.
Actually, there are only two (2) sources: law and contracts, because obligations arising
from quasi-contracts, crimes, and quasi-delicts are really imposed by law. (see Leung
Ben vs. O’Brien, 38 Phil. 182 [1918].)Where the source of the obligation is a private act,
the law merely recognizes or acknowledges the existence of the obligation.

ART. 1158. Obligations derived from law are not presumed. Only
those expressly determined in this Code or in special laws are
demandable and shall be regulated by the precepts of the law which
establishes them; and as to what has not been fore-seen, by the
provisions of this Book. (1090)

Legal Obligations.
they are not presumed because they are considered a burden to upon the
obligor. They are the exception, not the rule. To be demandable, they must be
clearly set forth in the law, i.e., the Civil Code or special laws. Thus:
(1) An employer has no obligation to furnish free legal assistance to his
employees because no law requires this, and, therefore, an employee may not
recover from his employer the amount he may have paid a lawyer hired by him to
recover damages caused to said employee by a stranger or strangers while in
the performance of his duties. (De la Cruz vs. Northern Theatrical Enterprises, 95
Phil. 739 [1954].)
 THE LAW ON OBLIGATIONS AND CONTRACTS

ART. 1159. Obligations arising from contracts have the force of

law between the contracting parties and should be complied with in
good faith. (1091a)

Contractual obligations.

 A contract is a meeting of minds between two persons whereby onebinds himself,

with respect to the other, to give something or to rendersome service.
 Binding force – they have same binding effect of obligations imposed by laws. As a
source of enforceable obligation, contract must be valid and it cannot be valid if it is
against the law.
 Requirements of a valid contract – A contract is valid if it is not contrary to law,
morals, good customs, public order, and public policy. It is invalid or void if it’s
contrary to law, morals, good customs, public order, and public policy.
 Breach of Contract – A breach of Contract takes place when a party fails or refuses
to comply without legal reason or justification with his obligation under the contract
as promised.
 Compliance in good faith. — It means compliance or performance in accordance
with the stipulations or terms of the contract or agreement

ART. 1160. Obligations derived from quasi-contracts shall be subject

to the provisions of Chapter 1, Title XVII, of this Book. (n)

 quasi-contract is that juridical relation resulting from certain lawful, voluntary and
unilateral acts by virtue of which the parties become bound to each other to the end
that no one will be unjustly enriched benefited at the expense of another.

 there is no consent but the same is supplied by fiction of law. the law considers the
parties as having entered into a contract, irrespective of their intention, to prevent
injustice or the unjust enrichment of a person at the expense of another.

Kinds of quasi-contracts

Negotiorum gestio is the voluntary management of the property or affairs of another

without the knowledge or consent of the latter

Solutio indebiti is the juridical relation which is created when something is received
when there is no right to demand it and it was unduly delivered through mistake
 THE LAW ON OBLIGATIONS AND CONTRACTS

ART. 1161. Civil obligations arising from criminal offenses shall be

governed by the penal laws,14 subject to the provisions of Article
2177,15 and of the pertinent provisions of Chapter 2,Preliminary Title
on Human Relations,16 and of Title XVIII of this Book, regulating
damages. (1092a)

Civil liability arising from crimes or delicts.

 The rule has been established that every person criminally liable for an act or
omission is also civilly liable for damages.

 But a person not criminally responsible may still be liable civilly, such as
failure to pay a contractual debt; causing damages to another’s property
without malicious or criminal intent or negligence, etc.

Scope of civil liability.

This civil liability includes:
(1) Restitution;
(2) Reparation for the damage caused; and
(3) Indemnification for consequential damages. (Art. 104, Revised Penal Code.)

ART. 1162. Obligations derived from quasi-delicts shall bbe governed

by the provisions of Chapter 2, Title XVII of this Book, and by special
laws. (1093a)

 A quasi-delict is an act or omission by a person (tort feasor) which causes damage

to another in his person, property, or rights giving rise to an obligation to pay for the
damage done, there being fault or negligence but there is no pre-existing contractual
relation between the parties. (Art. 2176.)

Requisites of quasi-delict.
(1) There must be an act or omission by the defendant;
(2) There must be fault or negligence of the defendant;
(3) There must be damage caused to the plaintiff;
(4) There must be a direct relation or connection of cause and effect between the act or
omission and the damage; and
(5) There is no pre-existing contractual relation between the parties.22

Crime distinguished from quasi-delict.

(1) In crime or delict, there is criminal or malicious intent or criminal negligence, while in
quasi-delict, there is only negligence;
(2) Crime affects public interest, while quasi-delict concerns private interest;
 THE LAW ON OBLIGATIONS AND CONTRACTS

(3) In crime, there are generally two liabilities: criminal and civil,23while in quasi-delict,
there is only civil liability;
(4) In crime or delict, the purpose is punishment, while in quasi-delict, indemnify cation24
of the offended party;
(5) Criminal liability can not be compromised or settled by the parties themselves, while
the liability for quasi-delict can be compromised as any other civil liability;
(6) In crime, the guilt of the accused must be proved beyond reasonable doubt, while in
quasi-delict, the fault or negligence of the defendant need only be proved by a
preponderance of evidence; and
(7) In crime, the liability of the person responsible for the author of the negligent act or
omission is subsidiary, while in quasi-delict, it is direct and primary