Business Law (Obligation & Contract)

ARTICLES 1156-1162

GROUP 1
Ayson, Anne Lorien
Gacillos, Sunshine
Sajol, Leanie
 CHAPTER 1
GENERAL PROVISIONS

ARTICLE 1156
An obligation is a juridical
necessity to give, to do or
not to do. (n)
➢Juridical Necessity
➢To give
➢To do
➢Not to do
• Obligation
➢A legal or moral duty to do or not to do
something.
➢comes from the Latin obligo which means
to bind.

• Juridical necessity
➢A mandatory requirement in law
• Parties to an Obligation
➢The parties to an obligation are the obligee
and the obligor.

1. Obligee ( giver or doer ) - person in favor of

whom the obligation is contracted
2. Obligor ( recipient ) – person who has engaged
to perform something
• Prestation (subject matter of the obligation)

➢Payment of something or the doing of some

service.
➢It is a presting or a payment of money.
 ARTICLE 1157
Obligations arise from:
1. Law;
Example:
1. All Filipinos earning income are required to
pay income tax (Tax Code).
2. Business registration is required (Local
Government Code and Tax Code)
2. Contracts; - stipulation of the parties (Art.
1306)
Example:
• Obligation to repay a loan by virtue of
an agreement
3. Quasi-Contracts; (Art. 2142)
Example:
• The obligation to return money paid by
mistake or which is not due.
4. Acts or omission punished by law; Art. 1161 and ;

Example:
1. The obligation of a thief to return the stolen car
by him
2. The obligation of a convicted criminal to pay
the medical expenses incurred by the victim of
his assault.
5. Quasi-delicts (1089a)

Example:
1. The obligation of the possessor of an animal to
pay for the damage which it may have caused
2. The proprietor of a building or structure is
responsible for the damages resulting from its
total or partial collapse, if it should be due to the
lack of necessary repairs (Article 2190).
• Juridical relationship (efficient cause)
➢ A legal relationship between members of a
potential class section

• Obligation ex-lege
➢ Obligation that arises from the law itself.

• Obligation Ex-contractu
➢ Obligation arising from contracts.
Example of Obligation Ex-contractu:

• Mr. C and Mr. D entered into a loan contract whereby

Mr. D promised to pay his P100,000 debt to Mr. C
within one year.

Obligee + Obligor + Prestation + Juridical Relationship

= Obligation
 ARTICLE 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 foreseen, by the provisions of this
Book. ( 1090)
Examples of Obligations derived from law,
never presumed;

• The obligation of parents to support their

minor (Art, 195 FC)
• Obligation to pay taxes (Internal Revenue
Code)
• Obligation to deliver the presumptive
legitimes of children (Art 51, FC)
 “Existence of law necessary before obligations
may arise from law”

• The existence of law that prohibits an act is

necessary before obligations may arise. Thus,
there is neither crime nor punishment without
law.
 ARTICLE 1159

Obligations arising from contracts

have the force of law between the
contractual parties and shall be
followed with in good faith.
CONTRACTUAL OBLIGATIONS
Contract
- may be verbal or written
- a meeting of minds between two persons whereby
one binds himself, with respect to the other, to give
something or to render some service.
1. Binding force
2. Requirement of a valid contract
3. Breach of contract
1. Binding Force
• Obligations arising from contracts have the
force of law between the contracting parties.
• As a source of enforceable obligation,
contract must be valid, and cannot be valid if
it is against the law
2. Requirement of a valid contract
• Should not be contrary to law, morals, good
customs, public order, and public policy.

3. Breach of contract
• Takes place when a party fails or refuses to
comply, without legal reason or justification.
• Freedom of contract
➢The liberty or ability of a person to enter into agreement
with others.
➢“the basic and fundamental rights reserved to the people”

• Sanctity of contracts in a Civil Code

➢Between the contracting parties, a contract has the
"force and effects of the law". Which means, a contract
is the law between contracting parties, and therefore,
it should be complied with in "good faith"
• “Good Faith”
➢ is the total absence of any intention of a person
to take advantage or deceive another party
➢ an honest and sincere intention to fulfill one’s
obligation

• Compliance in good faith

➢ means compliance or performance in
accordance to the terms and conditions of
the contract or agreement
Example of Compliance in Good faith:

• A client hires a service provider to perform maintenance

and repairs on their equipment. The contract specifies
the scope of work, service levels, and response times.
Both parties are obligated to comply with these terms in
good faith. If the service provider consistently fails to
meet the agreed-upon service levels or intentionally
performs low-quality repairs, they would be breaching
the compliance in good faith requirement.
 ARTICLE 1160

Obligations derived from quasi-contracts

shall be subject to the provisions of Chapter
1, Title XVII of this Book.
• Quasi-contract
➢also known as a contract implied in law or a
constructive contract, is a legal fiction created
by a court to prevent unjust enrichment.
➢arises when one party benefits at the expense
of another, but no formal agreement exists
between them.
 Key Features of Quasi-Contracts
• Absence of Agreement: Unlike traditional
contracts, quasi-contracts don't arise from a
mutual agreement between parties. They are
imposed by the court to correct an unfair situation.
• Implied by Law: The obligation to pay is not based
on the parties' intentions but rather on the court's
interpretation of the law to prevent unjust
enrichment.
• Restitutionary Remedy: The remedy for a
quasi-contract is typically restitution, meaning
the party who unjustly benefited must return
the value of the benefit received. This can take
the form of payment for services rendered or
the return of goods.
Examples of Quasi-Contract Situations

1. Unrequested Services:
• A homeowner unknowingly receives landscaping
services from a neighbor who mistakenly believed
they had hired him. The court might impose a
quasi-contract obligating the homeowner to pay
for the services to prevent the neighbor from
being unjustly enriched.
2. Mistaken Payments:
• A person mistakenly pays a bill twice. The
court might impose a quasi-contract
obligating the recipient to return the
overpayment to prevent unjust enrichment.
• Quasi-contract under the Civil Code
➢The Civil Code of the Philippines
defines a quasi-contract as a juridical
relation that arises from lawful,
voluntary, and unilateral acts to prevent
unjust enrichment.
 Types of Quasi-Contracts

• Negotiorum gestio
➢ This refers to the voluntary management
of another person's property or affairs
without their consent.
• Solutio Indebiti
➢ This refers to the payment of a debt that
is not owed.
 ARTICLE 1161

Civil obligations arising from criminal offenses shall

be governed by the penal laws, subject to the
provisions of article 2177, and of the pertinent
provisions of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book, regulating.
• Laws governing civil obligations from
criminal offenses.
➢ Civil obligations arising from criminal
offenses shall be governed by penal laws,
subject to the provisions of article 2177,
Civil Code, and of the pertinent provisions
of Chapter 2, Book, regulating damages,
Civil Code."
 Key Points of Article 1161
• Civil Liability
➢ This article focuses on the civil aspect of criminal
offenses. It establishes that a person who
commits a crime is civilly liable for the damages
caused to the victim.
• Governing Laws
➢ The civil obligations arising from criminal
offenses are primarily governed by the penal
laws, specifically the Revised Penal Code (RPC).
Scope of Civil Liability
1. Restitution: The perpetrator must return the
property or thing that was taken from the victim.
2. Reparation: The perpetrator must compensate the
victim for any damage caused to their property or
person.
3. Indemnity: The perpetrator must compensate the
victim for any consequential damages, such as lost
income or medical expenses.
Example:
If someone steals a car and causes damage to it during the
theft, they would be civilly liable for:
• Restitution: Returning the stolen car to the owner.
• Reparation: Paying for the damage caused to the car.
• Indemnity: Compensating the owner for any lost income
due to not having the car available
ADDITIONAL NOTE!
• Article 2177
➢ This article, found in the Civil Code's chapter
on quasi-delicts, provides additional rules
regarding civil liability in cases where both a
crime and a quasi-delict are involved.
 Penal laws
➢ are a set of rules that define crimes and their
corresponding punishments.
Examples of Penal Laws:
1. Murder: The unlawful killing of another human being with malice
aforethought.
2. Theft: The unlawful taking of another person's property with the
intent to permanently deprive them of it.
3. Assault: Intentionally causing physical harm to another person.
4. Driving Under the Influence: Operating a motor vehicle while
intoxicated.
 ARTICLE 1162

Obligations derived from quasi-delicts shall be

governed by the provisions of Chapter 2, Title XVII
of this Book, and by special laws. (1093a)
• Quasi-delict
➢ is the fault or negligence of a person which
an act or omission causing damage to
another, there being no pre-accompanies
existing contractual relations between the
parties.
• Laws governing quasi-delicts
➢ Obligations derived from quasi-delicts
shall be governed by the provisions of
Chapter 2, Title XVII of this book, and by
special laws.
THANK YOU!